View original document

The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.

DALLAS
Federal Reserve Bank of Dallas

.

%

July 1982

New Procedures To Help Reduce Float
The Dallas Fed has announced new
p ro ce d u re s
in
its
paym ents
mechanism area designed to improve
the Bank’s operations and service, and
to improve the nation’s payments
mechanism. These changes, along
with a planned restructuring of the
Federal Reserve System’s Interdistrict
Transportation Network, will reduce
the amount of time it takes the Fed to
clear checks.
In order to reduce as much as possi­
ble the amount of Federal Reserve
float in the payments mechanism, the
System has a stated objective of
matching credit availability with col­
lection experience. Float occurs when
the Fed gives credit to a depositing in­
stitution before it is able to collect the
funds. Future explicit pricing of
Federal Reserve float is required by the
Monetary Control Act of 1980, and
many of the Fed’s current activities are
designed to minimize the impact of
such explicit pricing.

Wire chargebacks
Beginning July 19, new procedures
for processing interdistrict return
items and cash letter adjustments of
$50,000 and over will be initiated na­
tionwide. Information on such items
will be automatically wired to its
destination using the Federal Reserve
Communications System.
This wire chargeback procedure will
allow a Fed office receiving a large
return item to debit the endorsing in­
stitution’s account on the same day.

Federal Reserve Float • 1981
(m illions of dollars)

Jan.

Feb.

Mar. Apr.

May

June

Month-End

2,280

1,545 3,261

Monthly Average
Of Daily Figures

4,161

3,755 2,925 3,195 3,085 3,474

2,156 2,542 2,506

July

Aug. Sept. Oct.

Nov. Dec.

Month-End

1,251

2,229 2,811 1,690

2,177 1,762

Monthly Average
Of Daily Figures

3,176

2,796 3,206 3.285

3,320 3,608

Presently, interdistrict return items are
accepted for immediate credit even
though they may not be presented to
the endorsing institution for one or two
days.
Interdistrict adjustments will be
handled in a similar manner. A cash
letter adjustment advice will be sent to
an institution the same day the ac­
count is debited or credited. Telephone
notification of adjustments will be
given the same day the transaction is
posted to the account.

City item presentment
Beginning August 1, most Federal
Reserve Banks will adopt a uniform
presentment time of 12 noon for city

items. This step will allow Fed offices
to offer later deposit deadlines and to
collect the majority of city items the
same day they are received.
Federal Reserve offices in the
Eleventh District will advise the af­
fected institutions if changes in cur­
rent conditions require that present­
ments be made as late as 12 noon.

INSIDE
• New Publications
• ACH Growth
• FCA Seminars

Preston Martin Appointed Board Governor
from 1969-72. He served under thenGovernor Ronald Reagan as his first
Savings and Loan Commissioner in
1967-69.
The seven members of the Board of
Governors are appointed by the Presi­
dent and are confirmed by the Senate.
Not more than one member of the
Board may be selected from any one of
the 12 Federal Reserve Districts. Mar­
tin was appointed from the Twelfth
Federal Reserve District (San Fran­
cisco) by President Reagan on January
11 and was confirmed by the Senate
March 30.
Martin, a resident of California,
graduated from the University of
Southern California (B.S., 1947; M.B.A.,
1948) and Indiana University (Ph.D.,
1952). He was appointed to replace
Frederick H. Schultz whose term ex­
pired January 31.

The Board of Governors has a new
member. On March 31, Preston Martin
was sworn into office by Chairman
Paul Volcker. His 14-year term of office
began February 1, 1982, and he will
serve as vice chairman for a term of
four years.
During his career, Martin founded
and organized the Sears affliate,
Seraco Enterprises. Seraco is a
holding company that supplies capital
and management planning for five real
estate and financial subsidiaries. Mar­
tin is currently a member of the board
of directors of Sears Roebuck and Co.
M artin is a member of the
President’s Commission on Housing
and is a former member of the Federal
Home Loan Mortgage Corporation Ad­
visory Committee. He also served as
chairman and chief operating officer of
the Federal Home Loan Bank Board

Penalty Lifted
After Flooding
The Federal Reserve Board of
Governors recently granted a
temporary suspension of the
Regulation Q penalty for early
withdrawal of time deposits. This
action was taken in response to
the flooding that occurred in
W ichita County, Texas. The
Board’s action permits a member
bank, wherever located, to pay a
time deposit before maturity
without imposing a penalty.
However, the depositor must pro­
vide a signed statement fully
describing the property or other
financial loss as a result of the
flooding and the statement must
be approved and certified by an
officer of the bank.
The suspension has been
made retroactive to deposits
withdrawn on or after May 25,
1982, and will remain in effect un­
til 12:00 midnight November 25,
1982.

Publication Begins in July
For Economic Highlight Series
Starting this month, a series of new
publications will be issued by the
Federal Reserve Bank of Dallas. The
three new releases will deal with
energy, agricultural, and industrial and
financial issues within the Eleventh
Federal Reserve D is tric t. Each
newsletter will be distributed on a
quarterly basis, with one appearing
each month.
The fir s t n e w s le tte r, Energy
Highlights, will be out in July, followed
by Agricultural Highlights in August,
and District Highlights in September.
Energy Highlights will discuss oil
production, refinery capacity, drilling
activity, rig count, and gas production.
Also included will be the Texas Energy
Industry Em ploym ent s ta tis tic s
gathered by the U.S. Bureau of Labor
Statistics. Currently, the Bureau only
publishes the data for the energy in­
dustry as a whole. Energy Highlights
w ill publish data as it relates
specifically to Texas.
Agricultural highlights will incor­

porate data gathered for the “ Quarterly
Survey of Agricultural Credit Condi­
tions.” The newsletter will break down
the general data into 15 specific
regions to offer a more detailed and ac­
curate analysis of each individual
agricultural region.
District Highlights will deal with
issues and topics of concern to the
Eleventh Federal Reserve District. Cur­
rent events, financial data, unemploy­
ment figures, and the labor outlook for
the District will be discussed, as well
as a review of the Consumer Price In­
dex for the U.S., Dallas, and Houston.
The newsletters will follow the basic
format of Roundup—a four page selfmailer. Each will be designed to be
read by anyone with an interest in the
particular topics covered. Statistical
data, charts and tables are planned for
display on the inside pages, with
discussion of current issues on the
front and back pages. Coordination of
all three newsletters will be done by
Senior Economist Leroy Laney.

ACH Witnesses Rapid Growth
The volume of automated clear­
inghouse items processed by the
Federal Reserve System has increased
dramatically over the past several
years. The number of items processed
totaled almost 300 million in 1981, with
approximately 112 million commercial
items and 188 million government
items processed. The volume growth of
ACH items processed since 1977 is
shown in a graph accompanying this
article.
Currently, about 60 percent of all
ACH transactions are originated by the
U.S. Government. This type of ACH
item has been growing at a rate of 15 to
20 percent annually for the past few
years. The other 40 percent of ACH
items are private sector, or commer­
cial, items, with the majority of these
initiated by large insurance firms. Dur­
ing each of the past few years, com­
mercial ACH volume has almost dou­
bled, growing at the rate of 80 to 90 per­
cent per year.
The dollar amount associated with
commercial ACH payments is already
far greater than that associated with
government ACH items. Industry ex­
perts believe that commercial volume
will eventually surpass government
volume as well.
An automated clearinghouse pro­

cesses and delivers electronic debits
and credits which serve as alternatives
to paper checks. The majority of ACH
transactions are recurring payments.
These include automatic credits such
as the direct deposit of payroll
amounts, Social Security payments,
and other government payments, and
a u to m a tic d eb its such as the
automatic payment of utility bills, in­
surance premiums, and mortgage
payments.
Instead of issuing checks or sending
bills, a company using ACH compiles
the necessary payment instructions on
magnetic tapes and delivers these
tapes through its financial institution
to an ACH facility. The ACH makes
new tapes for each financial institution
affected by the transactions and
delivers them so that the proper in­
dividual accounts may be debited or
credited. Settlement takes place in ac­
counts at Federal Reserve Banks.
With one exception, the 32 local
ACHs are operated by Reserve Banks
and administered by local ACH asso­
ciations. The New York ACH is the only
private sector ACH. The ACH concept
developed regionally at first, but the
regional associations were linked later
to establish a nationwide network and
to allow interregional transactions.

Volume of ACH Items
Processed by the Federal Reserve System
MILLIONS
OF ITEMS

1977

1978

1979

1980

1981

Board Outlines
Phase-Out of
ACH Subsidy
The Federal Reserve Board has an­
nounced plans to phase out "incen­
tive pricing” of automated clear­
inghouse services by 1985. An­
nouncement of this program came in
a recent letter from Board Governor
Lyle E. Gramley to Senator John H.
Chafee, chairman of the Subcommit­
tee on Consumer Affairs of the
Senate Banking, Housing and Urban
Affairs Committee.
Gramley stated that ACH prices
will be increased in stages to allow
for a smooth transition to full-cost
pricing. New ACH prices to be an­
nounced later in 1982 will be 40 per­
cent of current Fed costs plus a
private sector adjustment factor
which takes into account imputed
taxes and financing costs which
would have been incurred by a private
firm. The ratio of ACH prices to cur­
rent costs will be increased to 60 per­
cent in 1983, 80 percent in 1984, and
100 percent in 1985. The current sub­
sidized ACH prices are one cent for
local items and one and one-half
cents for interregional items.
When the Federal Reserve Board
originally established its ACH prices
following passage of the Monetary
Control Act of 1980, Gramley said,
ACH was still in a developmental
stage and needed to grow. “ Conse­
quently, the Board established an in­
centive pricing policy for ACH opera­
tions to encourage this growth to the
point where economies of scale
could be realized,” Gramley stated.
Gramley said in his letter that the
Board feels the private sector will
benefit from the knowlege of when
the Fed will begin full-cost pricing of
ACH services. The marketplace will
be able to evaluate the costs and
benefits of ACH and whether com­
petitive private sector ACH facilities
are feasible. If so, the Fed’s an­
nouncement w ill allow for the
development of business plans.
The phase-out of ACH incentive
pricing was chosen over an abrupt
change to full-cost pricing so that
ACH users would not revert to paper
checks. “ We believe such an action
would jeopardize the future of a cost
effective and efficient service,”
Gramley said.

Boykin Speaks on Devaluation
As part of the Bank’s continuing ef­
forts to conduct meetings with
business and community groups,
Carlos Zuniga, director of the San An­
tonio Branch, recently hosted the San
Antonio Branch Board of Directors
meeting in Laredo. Robert H. Boykin,
president of the Federal Reserve Bank
of Dallas, was the honored guest and
speaker at the luncheon.

Short-term impact
Boykin addressed the recent
devaluation of the peso and its impact
on trade between the United States
and Mexico, particularly its affect on
this area of the country. In his speech
before leaders of business and in­
dustry in the Laredo area, Boykin
stated that “ the recent peso devalua­
tion had rather dire consequences for
the border cities. Retail establish­
ments on this side of the border suf­
fered drastic reductions in sales, and

ti

=r 0) >

tv 3
»

?

O

&
P
03

CD “
CZ) _

3 - 05

O >

O
O

03
3-

3 3

II

3

£

-> O o

=£ O

S>. 3
CZ) 3

03
03

3

1

o

O

03

c
o

p

3

03

o’

CZ)

TI

cd’
CZ)

c

£2o
3

m

=: o 0

^ o
3 ■g
-h

s<

03

11
o O

03

CZ)
CZ)

E S
ro 03

“ Nevertheless, the Mexican devalua­
tion of the peso was both a necessary
and desirable development for the
longer run. The devaluation was
necessary to keep Mexican goods
competitive in world markets. And, of
course, Mexico’s ‘in bond’ assembly in­
dustry should benefit rather substan­
tially from the devaluation. It will be in
a much better competitive position as
a result of the devaluation.
“ So, while the short-term conse­
quences were rather severe on this
side of the border, in the long run it will
lead to a stronger Mexican economy
which, of course, is in the best interest,
not only of Mexico but the United
States as well.”

The Dallas Fed will conduct eight
functional cost analysis seminars
during July to explain FCA to new
participants and to help institutions
which participated in 1981 under­
stand and interpret their individual
reports. Seminars for new participat­
ing banks will be held as follows:
Lubbock
Wednesday, July 7
El Paso
Thursday, July 8
Houston
Tuesday, July 13
San Antonio Wednesday, July 14
Dallas
Tuesday, July 20
Shreveport
Thursday, July 29
Banks which participated in 1981
may attend one of the above
seminars if they wish.
In addition to the above meetings,
a seminar will be held in Dallas July
21 for 1981 participants, and another
will be held in Dallas July 23 for sav­
ings and loan associations and credit
unions. Additional information may
be obtained by contacting Senior
Technical Assistance Representative
Jerry Bramlett in the Department of
Communications, Financial and
Community Affairs.

CD
Q_

CZ) 3

H. Q.
"O Q.

Long-term effects

FCA Seminars

00 T|
IT
05

3 2

o -*

tourism from Mexico also suffered.
More generally, exports to Mexico have
declined following the devaluation of
the peso.

3
Q.
<z>
03
3

a
>
>
0)