Full text of Roundup : July 1982
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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)
