Full text of Roundup : March 1985

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DALLAS
Federal Reserve Bank of Dallas

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March 1985

Boykin A ssesses D istrict Economy
Federal Reserve Board Chair
man Paul A. Volcker submitted
the Board of Governors’ semi
annual Monetary Policy Report
to the Senate Banking Commit
tee on February 20. The Federal
Reserve is required by the
Fiumphrey-Fiawkins “ Balanced
Growth and Full Employment
Act of 1978” to submit a written
report twice yearly on the state
of the economy and the course
of monetary policy. Dallas Fed
President Robert H. Boykin
c o m m e n te d on C h a irm a n
V o lc k e r’s rem arks in la s t
m onth’s “ Roundup” . In this
is s u e , P r e s i d e n t B o y k i n
focuses on economic condi
tions in the Eleventh Federal
Reserve District.

Q : Is the District economy doing
well?

Yes, but to a lesser degree than
the nation. The recovery has not been
quite as strong in Texas as it has for
the rest of the country. We still are
recovering from a dependence on the
struggling energy industry. In the past
this area was propped up by energy,
which now is a depressant on the
Texas economy. Also, agriculture is ex
periencing difficulty, though the extent
of the problems here is not as great as
in the Midwest. However,growth in the
Dallas/Fort Worth economy probably is
exceeding that of the nation. In 1984
Dallas/Fort Worth did substantially
better than the nation as a whole.
Q . Last year, you projected a slow,
modest, but steady turnaround for the
energy industry. Has that happened?

The outlook for the energy in
dustry is more in question now. Drilling
activity was up at the end of 1984, but
that is partly seasonal. The recent drop
in oil prices is good news for inflation
but puts strain on some sectors of the
energy industry. Further, the introduc
tion of new and modern refining
capacity abroad has clear implications
for the competitiveness of the refining
industry in the Southwest. The price of
oil is very key, and there is some
speculation as to how far it will fall.
Q . What is the greatest strength of
the District’s economy?

The economic base in the District
is probably broader than has been
recognized. We are a major center for
defense contracting: only two states in
the country have more prime defense
contracts than Texas. High-tech, ser
vice and export industries will play a
prominent part in the economic growth
of our area in the future.

INSIDE________________
■ U.S. COINAGE_______________
■ SEASONAL CREDIT PROGRAM
■ RESPONSE NETWORK
Robert Boykin

gold pieces; dollars, half-dollars,
quarter-dollars, dismes (dimes) and
half-dismes in silver; and copper cents
and half-cents.
During times of economic crisis,
co in s were hoarded and coin
substitutes were created. Merchants’
tokens appeared on a wide scale dur
ing the depression of 1837 and again
during the Civil War. They became
known as “ Hard Times tokens” and
served both as an inexpensive way to
make change and as an advertising
vehicle.

Coins Preserve the Past
During February, 77,564,000 coins—nearly $11 million worth—were dis
bursed to commercial banks and other depositories through the head office of
the Dallas Fed. Though much has been written about the electronic evolution
of the nation’s payments mechanism, coins remain an important medium of
exchange.
The first coins struck in America were “ illegally” authorized by the
Massachusetts Bay Colony and, in 1652, were possibly the colonists’ first act
of defiance against the crown. Hard money was scarce in the New World, with
the balance of trade weighted against the settlers, who imported far more
goods than they exported. While the colonists engaged in barter or traded
Indian wampum, foreign merchants demanded gold and silver, depleting the
economy of British coins.
Among the foreign
coins circulating in the
colonies, a Spanish
dollar minted in Mexico
City was the most com
mon. Valued at eight
reales, this coin was
often cut into eight
slices—each being
known as a “ piece of
eight.” Long after the
United States developed
Eight-real coin (1733).
its own monetary sys
tem, the quarter-dollar
coin was referred to as “ two bits," a vestige of the Spanish influence.
On May 27, 1652, Massachusetts passed a law establishing a mint to
alleviate the money shortage. The coins struck there between 1652 and 1682
all carried the date 1652 to conceal their continuing production from the
British authorities. The first coins struck were silver shillings, six
pence and threepence.
American money was issued in denominations related
to the English system until 1792, when Congress adopted
Thomas Jefferson’s proposals for a decimal monetary
system. The first United States Mint produced tendollar, five-dollar and two-and-one-half dollar

Merchants token (1863).

Coins have changed many times
since the Coinage Act of 1792.
Denominations in use today are the
dollar, half-dollar, quarter, dime, nickel
and penny. These coins, with the ex
ception of the nickel and penny,
originally contained 90 percent silver.
Due to a growing worldwide silver
shortage, the silver content of coins
was eliminated by 1971. In 1981 Con
gress authorized a change in the com
position of the Lincoln cent (adopted in
1909), abandoning the 95 percent cop
per and 5 percent zinc alloy used for
decades, in favor of a copper-plated
zinc alloy. The new cent is 97.6 percent
zinc and 2.4 percent copper. The Jeffer
son nickel, adopted in 1938, is made of
an alloy of 75 percent copper and 25
percent nickel.

Large cent (1805). Copper large cents were
used as good luck charms, gun sights,
gears and weights to hold shut
corpses’ eyes.

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Ten- and twenty-dollar notes issued by
the Republic of Texas (1835-1845). Once
redeemed, the notes were canceled with
knife cuts.

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TREAST

DEPARTZ ^vz,.

Seasonal Credit Program Modified
The Federal Reserve Board has
made two m o d ificatio n s to its
seasonal credit program, liberalizing
the amounts available for borrowing
and adding a temporary, simplified,
alternative program. The seasonal
credit program provides access to dis
count window borrowing for institu
tions that demonstrate recurring
financing needs related to seasonal
fluctuations in their deposit flows and
loan demands.
The changes are designed to ensure
th a t sm a ll- and m edium -sized
agricultural banks can meet temporary
liquidity requirements that might arise
in accommodating the needs of farm
borrowers over the forthcoming plant
ing and production cycle. The modified
program to meet seasonal liquidity
needs complements loan guarantee
actions taken by the administration to
help assure a necessary flow of credit
to agriculture.
The Board reduced the amount of a
bank’s net need for funds (computed
from past and projected patterns of
deposit and loan variations) that must
come from the institution’s own
resources. This deductible has been
changed from 4 to 2 percent of the first

$100 million in deposits and from 7 to 6
percent of the second $100 million in
deposits, while remaining at 10 percent
of deposits over $200 million. This
change will allow a borrowing institu
tion, especially a smaller one, to obtain
a greater portion of its seasonal needs
for funds from the Federal Reserve.
In addition, discount officers will be
taking a more flexible approach to the
administration of the seasonal credit
program, particularly in judging
whether there are special factors under
current circumstances in the farm
economy that would modify evaluation
of seasonal swings based on historical
data.
An alternative, simplified program
will be available through September to
smaller banks that are actively en
gaged in agricultural lending and have
limited or no access to the national
money market. Such banks generally
would have less than $200 million in
deposits and a ratio of farm loans to
total loans greater than 17 percent.
Banks with loan-to-deposit ratios of 60
percent or more would be eligible.
For banks that qualify for the tem
porary program, credit at the discount
window would be available to fund one-

The following rates with respect to discounts and advances under the Federal
Reserve Act and Regulation A are effective March 8, 1985, at the Federal Reserve
Bank of Dallas:
Rates on Discounts and Advances_______

Per Annum
Basic rate: short-term adjustment credit and regular seasonal credit' ............ 8%
Temporary seasonal c re d it ...................................................................... 8Vi%
Other extended credit (special circumstances credit and credit
for institutions under sustained liquidity pressuresf
First 60 d a y s ....................................................................................... go/0
Next 90 d a y s ...................................................................................... go/0
Thereafter...........................................................
'This is also the discount rate for 90-day commercial paper and other paper eligible for discount.
2At the discretion of the Federal Reserve Bank of Dallas, in cases where credit is anticipated to
be outstanding for prolonged periods and in relatively large amounts, the time period for each
rate in the extended credit rate structure may be shortened. This Bank also may apply a flexible
rate that takes into account rates on market sources of funds. The flexible rate will not be lower
than the basic rate plus one percentage point.

half of their total loan growth in excess
of 2 percent from a base level—either
the average for February or for the two
weeks just prior to submission of an
application. Credit under this program
would not exceed 5 percent of a bank’s
deposits and would be repaid before
March 1986.
Exceptions under the program may
be made at the discretion of a Reserve
Bank for banks that are particularly af
fected by agricultural credit conditions
and that lack ready access to national
money markets.
Banks may borrow under either the
regular or the temporary seasonal pro
gram. They may shift between pro
grams, but may not borrow under both
at the same time.
The Board stressed that the dis
count window would be available on a
regular adjustment or extended credit
basis where unusual demands
developed in local areas as a result of
the agricultural credit situation.

Performance Report
Being Distributed
The September 1984 Uniform Bank
Performance Report is now being
distributed to all insured commercial
banks and is available for sale to the
public. Designed for use by bank ex
aminers, financial analysts and bank
managers, the quarterly report permits
both summary and in-depth analysis of
a com m ercial bank’ s fin a n c ia l
performance.
Copies of individual bank UBPRs
may be obtained for $25 each. Quantity
discounts are available. The cost to
jgo/o
banks requesting additional copies of
their UBPRs is $6 per copy. The UBPR
User’s Guide, revised during 1984, is
available for $6. The September 1984
Peer Group Report and the State
Average Report are $25 each.
All orders must be sent to UBPR,
Department 4320, Chicago, II. 60673.
Please call (202) 389-4131 for ordering
assistance.

RESPONSE Changes Benefit Users
The Federal Reserve Bank of Dallas
plans several modifications to the dial
up portion of its RESPONSE com
munications network in 1985. These
changes, which are part of the nation
wide Federal Reserve automation pro
gram, will be implemented in four
phases.
In phase one, financial institutions
must replace the modems currently in
use with ones offering doubled
throughput. The new modems, which
can be leased or purchased, should be
ordered through AT&T Information
Systems.
Phase two is the implementation of
a new access control system designed
to increase data security. Training
financial institution personnel is ex
pected to be accomplished through
printed materials and through keying
transactions in a test environment; it
will not be necessary to attend training
sessions at the Dallas Fed. There is no
cost to users for phase two, which will
begin during the second quarter of
1985.

In phase three, a data encryption
capability will be added to all personal
computers accessing the RESPONSE
network. Institutions need to complete
implementation of the AT&T Informa
tion Systems modem (phase one) as a
prerequisite to phase three.
The final phase is the introduction of
new applications software. Institutions
must have completed phase three
before implementing phase four, which
begins in mid-1985.
Benefits of the program to financial
institutions include increased reliabil
ity of data transmission, increased
functions with new applications soft
ware and a greater level of data secur
ity through the new access control
system and data encryption capability.
The Federal Reserve Bank of Dallas
will implement these modifications
with the smallest possible amount of
cost and operational impact to finan
cial institutions.

Consumer Week
“ Consumers Should Know’’ is the
slogan for National Consumers Week,
which begins April 22.
In designating the week, President
Reagan said that buyers and sellers
should recognize the basic rights of
consumers—which include choice
among products, information to make
sound purchases, healthful and safe
products, and being heard when pro
ducts do not meet standards. Schools,
com m unity organizations, labor
unions, businesses and the media are
urged to help further public awareness
of consumer issues and services.
A new pamphlet entitled “ Consumer
Handbook on Adjustable Rate Mort
gages,” which has been published
jointly by the Federal Reserve Board
and the Federal Home Loan Bank
Board, is now available at the Dallas
Fed. Free copies may be obtained by
writing Public Affairs, Federal Reserve
Bank of Dallas, Station K, Dallas, Tx.
75222.

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Full text of Roundup : March 1985

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