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Federal Reserve Bank of Dallas

s iiis s s

July 1983

Fractional Availability to Begin July 1
Eleventh District Federal Reserve of­
fices will initiate a fractional availabil­
ity method to price interterritory check
float beginning July 1. This new pro­
gram is one step toward implementa­
tion of an overall float reduction and
pricing plan approved by the Board of
Governors in March.
Federal Reserve float is the value of
checks for which the Fed has given
c red it to fin a n c ia l in s titu tio n s
depositing checks for collection, but
for which the Fed has not yet received
payment. Interterritory float occurs
primarily as a result of interdistrict
transportation delays.
To implement fractional availability,
Fed offices in the Eleventh District will
defer partially the availability of credit
for those checks which are drawn on
institutions located in other Federal
Reserve territories. This will involve on­
ly items in mixed or “other Fed” cash
letters. Each office has developed a
fra c tio n or p ercentag e w hich
represents the average on-time perfor­
mance for delivery of checks to other
Federal Reserve offices and which will
be used to determine how much credit
will be deferred. These fractions are 96
percent for the Dallas office, 96 per­
cent for El Paso, 95 percent for
Houston, and 94 percent for San An­
tonio. Nonmachineable items in mixed
and other Fed cash letters will be
deferred two days.
Fractional availability will be applied
in the following manner. An institution
might, for example, deposit a mixed
cash letter at the Houston office con­

taining $10,000 in “ immediate” other
Fed items, $10,000 in “one-day” other
Fed items, and $1,000 in non­
machineable items. That institution
would receive immediate credit for
$9,500 (95 percent) of the immediate
other Fed items and would receive oneday deferred credit for the remaining
$500. The institution would receive
one-day deferred credit for $9,500 of
the one-day other Fed items and would
receive two-day deferred credit for the
remaining $500. The institution would
receive two-day deferred credit for the
$1,000 of nonmachineable items.
Additional Federal Reserve float
reduction or pricing programs are
scheduled to be implemented later in
the year. Availability of credit will be
deferred one day for interterritory
return items beginning in August 1983.
Float arising from midweek closings
and nonstandard holidays will be

reduced or priced in October 1983 by
any of three options approved by the
Board of Governors. These include
deferring credit one additional day,
eliminating the posting of funds on
days an institution is closed, or pricing
float by including its cost in regular
check collection fees. Intraterritory
transportation float and other remain­
ing categories of check float also will
be priced in October by adding their
costs to regular check collection fees.

• Optimistic Outlook
• Unique Department
• Credit Union Speech

Boykin Optimistic About Economy in 1983
The nation has a good chance of at­
taining the kind of economic environ­
ment hoped for since the fight against
inflation began in 1979, Dallas Fed
President Robert H. Boykin said in
remarks to data processing executives
at a June 17 luncheon. He also in­
dicated that a noninflationary U.S.

The main threat to the
U.S. economy is huge
budget deficits.

recovery would go a long way toward
supporting a world-wide economic
Boykin cited ongoing trends sup­
porting the view that the U.S. is in the
initial stage of a long-term recoverygains in production, employment, and
consumer spending. Optimistic about

the outlook for inflation, he noted
stability in both consumer and pro­
ducer price indexes during the first
quarter of 1983.
There is every reason to believe a
relatively inflation-free recovery will
continue through 1983, Boykin said.
Past post-war recovery periods support
the feasibility of this growth pattern.
“The main threat to a strong U.S.
recovery in the coming years is the
possibility that huge budget deficits
w ill encourage an in fla tio n a ry
monetary policy,” according to Boykin.
He sees the chance of a sharp
deterioration in international finance
as a remote possibility since efforts
already are underway to extend and
restructure foreign debt.
Boykin projected an optimistic
economic scenario for the years
following 1983. He said that the
Federal Reserve’s rigorous program to
reduce inflation has made possible a
sustainable growth in real economic

activity over the next three to five
years. Gradual declines in unemploy­
ment and interest rates and further
gains against inflation also represent
realistic expectations.
Regarding the recent and rapid
growth in the U.S. money supply,
Boykin said, for the most part, this

Our rigorous program to
reduce inflation has
made possible a sus­
tainable growth in real
economic activity.
represents a change in the kinds of
assets people are holding as opposed
to a new net flow of money from the
“ It now seems to me,” he concluded,
“that we are in a position to enjoy the
fruits of our labor over the past four

New Method Tested for ACH Trade Payments
A pilot program allowing selected
businesses to make corporate trade
payments electro nically through
automated clearinghouses (ACHs) was
implemented by the Federal Reserve
System in June.
Currently, only a limited number of
corporations are participating in the
program, but the number of originators
and recipients is expected to increase
gradually during the course of the pilot
program. Officials expect the program
to be fully phased in by the end of this
year, at which time the use of ACH for
corporate trade payments will be
available to any company wishing to
use the service.
Until implementation of this new
program, ACH services were used
primarily for consumer payments such
as salaries, insurance premiums, and
mortgage payments.
The interim fee schedule associated
with the pilot program accompanies
this article.

Intra - ACH
Debits originated
Credits received
Each addenda record
after the first 15

New York Intra- ACH

Effective June 2, 1983



New York Inter - ACH

Inter - ACH
Debits originated
Credits received
Each addenda record
after the first 15

Debits originated
Credits received


Debits originated
Credits received
Each addenda record
after the first 15


Department Focuses on Automation
separate stati° ^ J ^ u v S s ^ y Account and by
The need to develop mor ^ e n j use o ^ ^
puter and communicatio

yearg throughout

creasing rapidly ° ver
m In response to this
the Federal Res®rve 7 ,
was created by the
need, a special departm
Uon and CornSystem’ s Committee, on
^ DaUas Fed First

balance. In additton’ ^ t o meate a completely
will eliminate the ne
ng transfer. This

munication Servl“ ^ H Waiiace. The departVice President
e problenis associated
ment is designed to ad^
tion networks
r ^ r r L b e a p p lt e d o n a







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Dallas Fed and
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^ have an Automa-

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tion Program Offic &nd the Board of
11 Federal Reserve
the coordination of
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between the Re®e^V®
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An Integrated Ac
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Automated C l e a r in g h o u s e ^ ^ ^

research and devel0P
rocedures throughout
uniform and consis
^ K Mast, senior
the System. Ac0” dl 6 department, APO person-

additional new app 1
funds in a financial
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S J S T S S ^ c o n s u l t a n t s >to the
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such projects as ^ f ^ a r e in the Federal
hardware and ope^
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systems and P ^ ^ t i l l allow all
known as B^
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System-wide ba^
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and Treasury securities,
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company information, an
basis. This
statistical releases on
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the Federal Reser

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als0 w ill receive

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project, the Fu
pfflcient funds transfer
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capability. The e y B te m ^ era ttie ^
dependent transaction
& slngle financial
connection. For exa™P departments could perinstitution, two sep
and pe treated as
form separate transactions and

financial institutions conBventually, thos
Dallas Fed s
nected to FRCS-80 through ^
Unked to the
RESPONSE network
ApQ 0n.line service
systems Prop° !|
!7 qE includes connection to the
through RESPON
computers, dedicated comFed through pers
lines, -

links depending P
volume of transactions.


Credit Union Service New to Fed
“An important change took place in
our relationship to the financial in­
dustry with the passage of the
Monetary Control Act in 1980,” stated
Dallas Fed First Vice President William
H. Wallace in an address before the
Louisiana Credit Union League in
Shreveport on June 17. Under this law,
all financial institutions offering trans­
action type accounts were required to
hold reserves with the Fed, and access
to Fed services was broadened to en­
compass those institutions.

New service aspect
The MCA thrust the Fed into a promi­
nent service role. Not only was the Fed
to implement priced services, but
those services were to be fully com­
petitive with private sector providers of
the same services. “ It was clearly the
intent of Congress,” Wallace com­
mented, “that our services be given a

fair market test, and that we remain in
those areas of service in which our
presence serves the public interest and
in which we recover our costs.”

Benefits of MCA
“Although the MCA did place some
rather restrictive provisions upon us,
we view it as a very good piece of
legislation,” said Wallace. The Federal
Reserve System was given more effec­
tive control over the flow of money and
credit through the new reserve re­
quirements. “Secondly,” he added, “ it
was a significant step in the direction
of deregulation, and this we felt was
needed because the financial industry
for years has been an over-regulated in­
dustry.” Wallace also said that, to a
degree, the law placed financial in­
stitutions on a more level playing field
in that it opened up the full realm of
competition for financial services to all

types of institutions.

Service adaptations
Wallace stated that the Federal
Reserve Bank of Dallas already is do­
ing business with credit unions in the
Eleventh District and is experiencing a
good reception. Some Fed services
have been specifically tailored to meet
the needs of relatively small institu­
tions—-services such as a mixed cash
letter deposit option, dial-up terminals
to access wire and se cu ritie s
transfers, a coin wrapping service, the
anticipated reduction of minimum
order requirements for currency and
coin, and acceptance of unencoded
items in check operations.
“Other options are under considera­
tion,” concluded Wallace. “We believe
that we can fulfill one of our primary
objectives which is to improve the effi­
ciency of the U.S. payments system.”

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