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Interstate banking, branch banking,
independent bankers, bank regulators
and future issues affecting banking
were topics of discussion at a recent
conference co-sponsored by the
Federal Reserve Bank of Dallas and
Southern M e tho d ist U niversity.
Speakers representing each of these
areas addressed over 150 of their peers
at the daylong forum.
James Gardner, group chairman at
MCorp, summarized the day’s ac­
tivities by reminding participants that
banking is the same business it has
always been—regardless of current or
proposed changes in legislation. Gard­
ner called banking a cycle of “ survive,
prepare, sell and survive’’ and noted
that surviving is the key.
“ Most people think the way it is now
is how it will always be, but it won’t; it
will change. And, you must survive for
those changes to have meaning,” he
In addition, George Hempel, Cor­
rigan Professor of Finance, School of
Business, SMU, explained that the
state’s banking industry has endured
previous periods of hardships resulting
from economic declines. He com­
mented that 1986 joined 1841, 1873,
1893, 1907, and 1932 as a banner year
for bank failures in Texas. According to
Hempel, current problems were primar­
ily caused by too rapid growth and
Financing by Texas banks is essen­
tial to the state’s economic recovery,
Hempel said. He remarked that recent
legislative changes should encourage
an improvement in the overall net in­

come of the Texas banking industry,
which was negative in 1986.
According to Hempel, state laws
preventing branching and interstate
banking had a negative effect on the
banking community because they
fostered non-economic banking at­
titudes. He added that multi-bank
holding companies were not an effi­
cient organizational structure, further
contributing to current problems in the
In financing the Texas boom, Texas
banks became high return, high risk
banks and concentrated their lending
on energy, agriculture and real estate
ventures, he said. Hempel jokingly
commented that banks later decided to
diversify by making loans to Mexico
and Brazil.
Gardner advised banking officials to
“ pay attention” to liquidity, adding
that “ very few banks close if they have
liquidity.” Previously, he said, five per­
cent was considered adequate liquidi­
ty, but “ today we say that a good
number is anything more than what
you have.”
Capital was also cited as an impor­
tant factor in surviving recent changes
(Continued on page 2)









Bankers discuss issues (Cent.)
and current economic conditions. As
Ken Littlefield, Texas banking commis­
sioner, stated, “ We have interstate
banking in Texas because there is a
shortage of capital due to the quality
of the banks’ assets.”
According to Tom Frost, chairman of
Cullen/Frost Bankers, Inc., of San An­
tonio, bank managements should con­
sider capital a critical issue in their
decision-making processes. “ The
future lies in those managements
which can attract capital. Some of
those insitutions will be big and public
while some will be small and private,”
he said.
“ Management must lie somewhere
between efficient and effective. We
can’t operate like a French restaurant.
We must be somewhere between a
French restaurant and a McDonald’s,”
he continued.

Bankers and regulators showed dif­
fering views, however, on legislative
changes allowing interstate banking in
Texas. C.T. “ Chuck” Doyle, chairman
of Gulf National Bank of Texas City
and president of the Independent
Bankers Association of America,
stated, “ This is the wrong time and the
wrong way to do interstate banking.
You do not do this when you have the
largest number of banks ever with poor
On the other hand, Littlefield noted
the contributions of interstate banking.
“ We have already seen some of the ef­
fects of legislative changes and we will
probably see more throughout the
year. It provides Texas banks the op­
portunity to expand to new markets
and to diversify while providing


shareholders with an increase in the
value of their stocks,” he said.
“Banks with over $1 billion in assets
are the most likely targets of out of
state acquisitions," Littlefield re­
marked. “These acquisitions will result
in a concentration of economic
resources, power and assets in the
banking industry. Is this good or bad? I
have no crystal ball to answer that.”

“ Overall, deregulation makes regula­
tion more difficult since there are so
many different things going on and it's
hard to keep up with everything,” he
According to Frost, branching is a
more timely concern to the state's
banking industry than interstate bank­
ing. “ None of the banks in Texas will
have an out of state merger unless they
actively go out and sell themselves. In­
terstate banking is on down the road,
but the reality of branching is right on
top of us.
“ The Interfirst/Republic merger will
be felt immediately by customers, but
it will be a long time before they feel
the difference with TCB/Chemical. It
will be awhile before the ‘C’ in Com­
merce is replaced with the ‘C’ in
Chemical,” he said.
Gardner encouraged bankers to
become more adept in marketing their
services. “Pick out your niche and do it
well. Learn to live with branching and
interstate banking. Learn how to
package and sell to convince people
about what you have,” he said.

Other speakers agreed that pro­
viding customers with a variety of ser­
vices and marketing those services will

become increasingly important. “ What
we can see coming for banks in Texas
is increased emphasis on people, prof­
its and quality of management,” Dr.
Alan Coleman, president of the
Southwestern Graduate School of
Banking and Caruth Professor of
Financial Management, SMU, said.
L ittlefie ld added, “ Independent
bankers can work harder to provide ser­
vice and maintain that competitive ad­
vantage. Texans like to do business
with Texans.” In addition, Doyle
predicted that consumers are unlikely
to sever their traditional relationships
within the banking community.
Frost concluded that issues other
than legislative changes will influence
the future of the banking industry.
“Private forces of self control are more
important than government regulation.
Regulators and legislators are re­
sponding to the marketplace instead of
forcing changes in banking,” he said.

Paul Jones, executive vice president,
Valley National Corporation, Phoenix,
Ariz., agreed in his closing remarks.
“ The banking industry is badly
fragmented. There are too many finan­
cial institutions.
“ Federal legislation to encourage
geographic and regional consolidation
is an unlikely action at the state level.
We will see it happening through the
courts and aggressive financial institu­
“ Our customers and competitors
can expand anywhere. We can’t. Prod­
uct limitations are also restrictive and
senseless while the economics of
geographic expansion are highly
favorable,” Jones said.

for Texas,

“ We need to recognize that recent
changes in Texas banking laws only
bring banking practice in the state
more in line with that in most other
states,” Robert Boykin, president of
the Dallas Fed, told a group of bankers
at a recent conference on the future of
banking in Texas. “ I am confident that
the new banking legislation provides a
positive framework for banks to
flourish profitably in our state.”
Boykin made the remarks at a day­
long banking seminar at the Edwin L.
Cox School of Business at Southern
Methodist University in Dallas. The
conference, co-sponsored by the
Dallas Fed and SMU, addressed
changes in the state’s banking legisla­
tion which permits interstate banking
and limited branch banking.
According to Boykin, these changes
will usher in a new era for state
bankers. “ The trend toward interstate
banking has been with us for some
time,” he said.
Boykin noted that other changes can
further impact the Texas banking com­
munity. “ There are national proposals
on the table...which are more far
reaching in the implications than
anything that has been envisioned at

the state level.
“ We have already seen limited au­
thority granted to some money center
institutions to engage in underwriting
of commercial paper. There are those
proposing an even greater mixing of
traditional investment banking func­
tions with those performed by commer­
cial banks,” he continued.
In addition, Boykin commented,
“ Many argue that the distinctions be­
tween banks, thrifts and other finan­
cial institutions have broken down, and
that we must accept this reality. Still
others are prepared to go even further
and permit the same firms to engage in
both banking and commerce.”
Boykin cited a difference, however,
between these issues and recent
legislative changes. “ While I view
myself as being somewhat progressive
with regard to many banking issues, I
p a rtic u la rly do not accept the
desirability of breaking down the tradi­
tional barriers between banking and
According to Boykin, the role of the
regulator will be challenging during the
next several years. “ I believe that bank­
ing will continue to require greater
(Continued on page 4)

Enjoying a brief discus­
sion with Robert
Boykin, president of the
Dallas Fed, (right) are
Tom Frost (left) and
Gerald Fronterhouse
(center). Frost is chair­
man of the board of
Cullen/Frost Bankers,
Inc., San Antonio, and
Fronterhouse is chair­
man of the board and
CEO of First RepublicBank Corporation,
Dallas. Each addressed
attendees of the Texas
banking conference at



Boykin (Cont.)

Robert Boykin

“I believe
that banking
will continue
to require
and super­
vision than
we consider
necessary or
desirable for
he said.


regulation and supervision than we
consider necessary or desirable for
business generally,” he said.
Boykin added that regulators will
continue to concentrate on the tradi­
tional elements of capital adequacy, li­
quidity, earnings, management and
asset quality. He also commented that
coordinated efforts between banks
and bank supervisors contribute
favorably to the safety and soundness
of the nation’s financial system. “ The
basics of sound banking have not real­
ly changed,” he said.
Other comments Boykin made on in­
terstate banking included:
► ...against the backdrop of the recent
state legislation, the banking and
financial system (in Texas) will con­
tinue to evolve nationally and interna­
tionally. In the long run, national and
global factors will dominate statebased initiatives.
► To a large extent, interstate banking
is already a reality in this countrycompetition from non-bank depository
institutions, like thrifts and credit
unions, as well as from non-depository
financial and non-financial firms, such
as Sears, General Motors and General
Electric, made interstate banking a
reality long before state legislatures
legalized it for commercial banks. In
this context, the change in the Texas
banking statutes brings us into step
with changes occurring in much of the
rest of the country.
► From a public policy perspective,
the major impact of interstate banking
will be to increase competition in the
state. Competition is promoted by
opening our borders to new entrants.

► ...the move to interstate banking will
offer opportunities for additional
capital to be injected into our banking
system. The added capital will make
Texas banks more resilient to any
future economic shocks in our region,
and it will place them in a better posi­
tion to emerge as major competitors in
the developing national financial

► We (regulators) cannot permit banks
to spread their existing capital base
more thinly merely to become players
in the currently fashionable merger
and acquisition game.
► Interstate branching restrictions
have hindered the ability of our
nation’s develop a fullyintegrated, well diversified banking
► The overall impact of the move to in­
terstate banking, here in Texas and
throughout the rest of the country, is
likely to be beneficial.

► If Texas is to remain a competitive
force in the growing internationaliza­
tion of the U.S. economy, as well as
achieve the economic diversity it has
been seeking, it will certainly need the
financial infrastructure that interstate
banking provides.
► The passage of interstate banking
legislation opens up the Texas banking
market to bids at any time. This is like­
ly to raise the average bid on Texas
banks. It is also likely to improve the
stability of the state’s banking system.
In my own mind, the importance of this
point is underscored by the fact that
you cannot have a healthy, growing
regional economy without a strong and
viable regional banking system.
► Although there will be a substantial
amount of consolidation, independent
banks will continue to play an impor­
tant role in Texas. Available evidence
indicates that small independent
banks...are able to compete effectively
with the nation’s largest banks.
► ...the liberalization of banking laws
in Texas should prove beneficial to our
banking industry, including small,
medium, and large-sized banks. It is
also likely to be beneficial to bank
► Problems at individual banks can
occur regardless of bank size, branch­
ing rules or holding company status.
Consequently, the responsibility of ex­
ercising oversight of the banking in­
dustry will remain a primary function of
the Federal Reserve.


Gerald Fronterhouse

Following are excerpts from the
speech delivered by Gerald Fronter­
house at the interstate banking semi­
nar co-sponsored by the Federal
Reserve Bank of Dallas and Southern
Methodist University in April. Fronter­
house is chairman of the board and
chief executive o ffice r of First
RepublicBank Corporation and cur­
rently represents the Eleventh District
on the Federal Advisory Council of the
Federal Reserve System.
► I think we are fortunate in this state
that our banking industry has perform­
ed as well as it has in a period of such
tremendous change in our economic
► It is important to note that when you
add back the extremely heavy loan loss
provisions, which will decline as our
economy recovers, the basic earning
power of the banks remains quite
good. This reflects not only the finan­
cial and management strength of our
large banks, but also the strengths of
this great state in which we live.
► The Texas banking scene will
become increasingly competitive as
more and more people, bankers and
nonbankers alike, implement their
plans to expand in Texas.
► The (banking) industry needs to con­
tinue its efforts to achieve a level play­
ing field in product and service powers,
but it obviously is going to be a tough
fight, especially in the current legisla­
tive environment in Washington.
► It is a fact that the low-cost pro­
ducer has the competitive advantage.
While improvements can always be
made in cost structure, it is imperative
that the quality of service to customers
be maintained, while at the same time
maintaining good controls over the
business. It makes no sense to save
money today at the expense of the
future. The ‘pay me now or pay me
later’ syndrome must be avoided,
because usually the ‘later’ is much

more costly.
► We estimated we saved one-third of
the overhead of one of our banks by
combining it with a larger affiliate in
the same city, and converting the
smaller bank into a facility. The
customer didn’t know the difference
except convenience was improved.
This amount of savings is a bit
unusual, but the savings are real, and it
is why the conversion to branches is a
trend that is expected to continue.
► The era of the ‘super-regional’ has
arrived. Super-regionals are the new
large-scale banks extending their ser­
vices into contiguous states and exert­
ing powerful influences on economic
progress in their parts of the country.
► While Texas participation in this
movement is going to be limited until
earnings and market values rebound,
we believe the benefits of the superregional are afforded in the merger of
RepublicBank with lnterFirst...We
think it is a marvelous opportunity for
our customers, employees and our
shareholders, an opportunity that
would not have been possible a year or
so ago.
► The past growth of the Texas banks
has provided the financial resources to
support the state’s excellent historical
growth, and vice versa. If Texas institu­
tions lose out in this race for regional
strength, our customers, and collec­
tively our state, will not have Texasbased resources needed for growth
and progress to the extent otherwise
► Nineteen eighty-seven will not be an
easy year. But our state has faced
tough economic tests in the past and
have handled them well. Texas’ strong
resources, widely diversified economic
base and its renounced ‘can do’ at­
titude should enable the state to ex­
pand even further this year, but more
importantly to outpace the nation as a
whole in the years beyond.


Hollywood at the Fed

Guard Steve Miller sat at the Akard
Street desk in the Dallas Fed’s lobby
and tried to look nonchalant as a
camera lens zoomed toward his face
like a giant fly coming in for a landing.
“ Look natural,” the director in­
structed, as the cameraman moved in
for a closeup. “ And don’t look at the
camera. Try to pretend we’re not even
Once the scene was over, Miller
relaxed his tense shoulders and joked,
“ To think I’m going to be in the movies
and I didn’t even have time to comb my
Not e xa ctly what you’ d call
“ Hollywood at the Fed," but, for the
employees of the Bank, it was close
And the best part. Employees got to
play themselves. There were no special
parts to memorize, no makeup or ward­
robe changes, no “ Hollywood hype”
you read about in People magazine.
In fact, Scott Sura of AVW Audio
Visual, Inc., a film company in charge
of the production, described “ the
shoot” as “ highly professional.
“ The people at the Fed were great,”
he said. “ Everybody acted like pros.
You’d never know that some of these
people had never been involved in mak­
ing a film before.”
The documentary takes viewers on a
“ walking tour” of Dallas Fed opera­
tions, including the vault and cash/coin
area, treasury securities, check pro­
cessing, electronic funds transfer, pro­
tection, the lobby and other points of
interest at the Bank.


Written and produced by the Bank’s
Public Affairs Department, the video is
the first among the 12 Federal Reserve
Banks based entirely on the tour con­
cept, Drew Hogwood, assistant vice
president of Public Affairs, said.
“ Our tour program is a good way for
us to be accessible to the public and,
at the same time, show people a little
of what the Federal Reserve Bank of
Dallas is all about,” he explained. “ We
wanted to produce this tour video so
we could give people who may not be
able to travel to the Bank or one of its
branches for a personal tour an oppor­
tunity to see the Bank and learn about
Fed operations.

...the video gives the
public a front row seat
to the highly restricted
“ Our district covers 350,000 square
miles, which means there are many
groups that cannot afford the time or
expense of traveling to Dallas for an
hour-and-a-half Bank tour. This video is
designed to show them everything they
would see on an actual walking tour—
and more.”
Unlike a personal tour, the video
gives the public a “ front row seat” to
highly restricted areas, such as the
Bank vault and high-speed currency
counters, he added.
“ Obviously, security prohibits us

It’s showtime! Or so it seemed during the week-ion
describing daily operations of the Dallas Fed. Shoi
are Scott Sura, Tom Popielski and Scogin Mayo of

from taking tour groups to some of the
more interesting areas of the Bank,”
Hogwood said. “ Through the video,
they will see more than they would see
if they were on an actual walking tour.
They also will get a good overview of
the history behind the Dallas Fed and
how it operates.”
Produced primarily for high school
and college groups, the film offers
students a chance to visit the Dallas
Fed without leaving their class­
rooms—an important option in light of
the demands being put on educational
resources. In Texas, for example, re­
cently legislated educational reforms
mandate that economics, including a
section on the Federal Reserve
System, be taught in all secondary
public schools.
“ What this means,” Sue Lynn
Sasser, Dallas Fed economic educa­
tion specialist, said, “ is that teachers
are now somewhat restricted in taking
their students on trips outside of class,

Educational materials developed

filming of a new Bank video
i filming in the Bank’s main vault
VW Audio Visuals, Inc.

such as Bank tours. It also means that
more educational materials on the
Federal Reserve will be needed, since
many teachers will be instructing
students about the Fed for the very
first time.”
The film, approximately 25 minutes
in length, will be available by fall.
‘‘We’ve already started getting re­
quests for the film and it’s not even
available as of yet,” she said. ‘‘This
tells us that the film will be very much
in demand—well worth the effort and
time we put into making it.”
Sasser is convinced the video will be
a valuable educational resource for
economics, government, business and
consumer education courses at all
‘‘We think it’s going to be a very
helpful tool for all types of groups,”
she said, ‘‘especially for high school
and college students who might never
have the chance to see the Bank other­
wise."— Kim Ernst

The Federal Reserve Bank of Dallas
is creating three new educational ma­
terials for use in District classrooms,
both at the elementary and secondary
levels. The materials include two new
slide presentations and a video tour of
the Bank. The slide presentations are
now available for distribution, while
the videotape will be ready for use next
One of the slide presentations, en­
titled History of Money in Texas, ex­
plains the different types of monies
that settlers used in the days prior to
statehood. Included is a discussion of
the six different flags which are promi­
nent in Texas’ development and their
influence on the valuables used for
trading. The slides show monies
issued by the Republic of Texas as well
as various gold and silver coins. The
presentation, which consists of 30
slides and a script, provides a supple­
ment to Texas history courses in either
elementary or secondary classrooms.
The presentation is also suitable for
adult education groups.
At the request of educators through­
out the Eleventh District, Today’s Fed,
a series of 22 slides describing the
Federal Reserve System, is now avail­
able for classroom use. It details the
purpose of the Fed, the functions of
the System, and its role in setting
monetary policy. Also included is a
brief discussion of the Fed’s historical
background and enactment of the
Federal Reserve Act.
Today’s Fed is designed to meet the
essential elements related to the Fed
and monetary policy in the Free Enter­
prise course now required of all high
school seniors. It can serve as a sup­
plement to current textbooks or be

used in conjunction with other Fed
In addition, a new videotaped tour of
the Dallas Fed is planned for release
this summer. The video will give
viewers a ‘‘walking tour” of the Bank
and introduce members of the senior
Tour stops include the Bank Lobby,
the check processing operations, the
high-speed currency counters, the
Bank vault and other points of interest
throughout the building. Highlights of
the branch offices are also shown.
Viewers will receive the same hospital­
ity—but greater insight to the highly
restricted cash areas— than ‘‘real”
Bank visitors.
The video will be about 25 minutes in
length. Plans are also underway to
distribute the video on educational
television stations and to produce a
Spanish version.
Both the slide presentation and the
videotape can be used with two Fed
teaching packets: The Fed: Our Central
Bank and Money, Banking, and the
Federal Reserve System.
The slide presentations are available
for free loan or may be purchased for
$10 each. These and other Fed
materials can be obtained by contact­
ing the Public Affairs Department,
FRB-Dallas, Station K, Dallas, TX
75222. Requests for audiovisuals must
be made in writing, along with the
dates materials are needed and the
day phone number and address of the
requestor. A/V orders are filled on a
“ first-come, first-served" basis.
Persons desiring additional informa­
tion on materials available from the
Fed can write to the above address or
call 214-698-4414.


Community Affairs News

Louisiana banks support community development
(Editor’s Note: In response to previous
requests for news on community af­
fairs activities throughout the District,
we received the following report from
Fred C. Dent, Commissioner of Finan­
cial Institutions, State of Louisiana.
Other individuals with news on their
community affairs activities are invited
to write us at the following address:
Community Affairs Office, Federal
Reserve Bank of Dallas, Station K,
Dallas, TX 75222.)
While Louisiana is in the midst of an
economic recession and many of its
banks are struggling to survive, several
institutions have responded to the
crisis by realigning their resources and
readjusting their priorities. Following
are reports on three Louisiana banks
which have contributed funds and staff
to support development in their areas.
Rapides Bank and Trust Co., Alexan­
dria, was the first bank in Louisiana to
enter the mortgage lending field enabl­
ing the development of long-term real
estate projects and residential con­
struction. Rapides is also active in the
Central Louisiana Chamber of Com­
merce and the Economic Development
Board of Central Louisiana.
One of the bank’s most notable proj­
ects was with the Alexandria Museum
for Visual Art, which leased Rapides’
old bank bulding for 25 years at $1.00
per year. The old building, listed in the
National Register of Historic Places,
was donated to the museum before the
lease expired.
Another Louisiana bank committed
to economic development is Pioneer
Bank and Trust of Shreveport. Pioneer
Bank was one of four local banks that
helped secure land for construction of
a new General Motors plant in the
Shreveport-Bossier City area. In addi­

tion, it has cosponsored seminars on
economic development with the local
Chamber of Commerce.
Culturally, Pioneer Bank provided
volunteer help and monetary support
to organizations such as the Holiday in
Dixie pageant, the Shreveport Regional
Arts Council, the Boy Scouts, the local
symphony, Junior Achievement, Art
Beat, the Craft Alliance, the renovation
of the Strand Theatre, Junior League,
the Little Theatre, Mothers Against
Drugs, two colleges and one medical
Louisiana Bank of West Monroe also
assists the local economic and
cultural activities in its area. The bank
recently offered a financial package to
the community for a water purification
system to offset an unsanitary drinking
water situation in East Ouachita
Parish. In addition, Louisiana Bank has
been instrumental in cultural activities
ranging from the Twin City Civic Ballet
to the President’s Council on Physical
One of the bank’s most successful
projects is the establishment of the 55
LTD Club, a program for senior citizens
in the area. The club sponsors a variety
of activities for senior citizens, in­
cluding trips to Louisiana Downs for
horse racing, Hodges Gardens and
rides on the Twin City Queen steam­
Dent noted that his report cited only
three Louisiana banks which have met
the challenges in the communities by
supporting special projects to promote
growth and prosperity in their areas.
He commented that financial institu­
tions reflect the interests and con­
cerns of their communities and provide
a sense of security and stability in an
ever-changing economic climate.


BCF loans aid minority businesses
The Community Affairs Office of the
FRB Dallas has learned of a program
that hopes to afford new incentives for
banks to make commercial credit avail­
able to minority business, according to
Andrew W. Hogwood, Jr., community
affairs officer.
The Business Consortium Fund
(BCF) is a program of the National
Minority Supplier Development Coun­
cil (NMSDC) which encourages the in­
volvement of traditional financial in­
stitutions with minority businesses.
BCF loans help minority businesses
obtain working capital at the prime
rate or less. These loans aid minorityowned companies in financing trans­
actions with NMSDC and major cor­

BCF is capitalized through grants
and investments. In turn, BCF lever­
ages these funds with a Certified Bank
Lender (CBL) on a 75/25 percent ratio.
That is, BCF puts up 75 percent of the
loan proceeds while CBLs make up the
remaining 25 percent.
The most recent prime rate is the net
resulting interest rate on a BCF loan. It
blends a rate of up to 130 percent
charged on the CBL’s 25 percent share
with one amounting to up to 90 percent
charged on the BCF’s 75 percent

BCF certifies that the borrowers
represent bona fide minority-owned
and operated businesses. Minority ven­
dors then obtain applications for BCF
loans from CBLs. CBLs accept or re­
ject the loans using their own credit
underwriting criteria and establish
their own repayment schedule.
In addition, normal collection pro­
cedures by CBLs are implemented on
past due loans. Loan losses would be
shared proportionately between BCFs
and CBLs.
According to Alphonso Whitfield Jr.,
president of NMSDC, the first BCF
loans were available in April, 1987,
when the fund reached $5 million.
NMSDC is a nationwide non-profit
minority organization designed to pro­
vide marketing opportunities for
minority business by serving as a

liaison between major corporations
and minority businesses. The New
York-based council is funded by
membership dues from major corpora­
tions and contributions from founda­

Persons desiring additional informa­
tion on BCFs or NMSDC should con­
tact Marcial Robiou at NMSDC, 1412
Broadway, 11th floor, New York, New
York 10018, or call 212-944-2430.

Have you moved? Changed
your name or your title? Or,
perhaps you would like to receive
one or more of the following Fed
Economic Review
District Highlights
Energy Highlights
Agricultural Highlights.
Then, you should contact
Wanda Grogan in the Dallas Fed
Public Affairs Department, at
214-698-4436— or drop her a note
in care of Station K, Dallas, TX

Anti-Drug Act Regs Modified
Regulatory changes requiring finan­
cial institutions to ensure compliance
with the Bank Secrecy Act by develop­
ing written procedures became effec­
tive recently, according to David W.
Dixon, attorney, FRB-Dallas.
The changes, mandated by the AntiDrug Abuse Act of 1986, require institu­
tions to develop formal written pro­
cedures for handling currency transac­
tions in excess of $10,000. Written pro­
cedures should also specify which
bank employee would monitor com­
pliance with the institution’s reporting
requirements pertaining to large dollar

Minimum requirements for installing
a compliance program include:
► providing for a system of internal
controls to ensure ongoing compliance
of reporting requirements;
► providing for independent testing
for compliance, conducted by either
bank personnel or an outside party;
► designating an individual or in­
dividuals who are responsible for coor­
dinating and monitoring day-to-day
compliance; and
► providing training for appropriate
The Anti-Drug Abuse Act of 1986 is
an attempt to deter money laundering
practices. The Act requires financial
regulatory agencies to draft regulatory
provisions requiring financial institu­

tions to ensure compliance with the
recordkeeping and reporting require­
ments of the Bank Secrecy Act.
Currently, the Treasury Department
requires financial institutions to report
transactions for any amount over
$10,000, even if the transactions were
made at different branches in smaller
amounts totaling more than $10,000.
Treasury has proposed the reporting
amount to be lowered to $3,000.

In addition, the Board of Governors
amended Regulation H (Membership of
State Banking Institutions in the
Federal Reserve System) in concert
with Treasury Department’s announce­
ment of tighter controls on large dollar
While the Federal Reserve system
has been working on suggested pro­
cedures for state member banks, other
financial regulatory agencies have
been or will be developing similar
guidelines for other financial institu­
tions, Dixon said.
Persons with general questions on
the Act can call the Dallas Fed’s Legal
Department at 214-651-6228. Those in­
dividuals desiring more information on
specific guidelines for state member
banks should call Linda Myers or Gary
Krumm at 214-651 -6670 or 214-651 -6671.
Both Myers and Krumm are in the
Supervision and Regulation Depart­
ment of the Dallas Fed.


El Paso
New VP
in Charge

Photos by Greg Garcia

Local business and community leaders,
members of the El Paso Branch Board
of Directors and representatives from
FRB-Dallas joined El Paso Bank
employees last month at a gala recep­
tion to welcome Sammie Clay as the
vice president in charge of that city’s
Fed. Clay moved to El Paso from the
Houston Fed in January as successor to
Joel Koonce, who transferred to Dallas.


NOW AVAILABLE_________________________________________________________________
Summer 1987

Following is a listing of recent System speeches and statements,
Eleventh District circulars, and pamphlets and brochures which
currently are available from the Federal Reserve Bank of Dallas.
To place an order please circle the number of the item you wish
to receive, fill out the address information at the bottom of the
page, enclose a check or money order if applicable, and mail the en­
tire page to:
Public Affairs Department
Federal Reserve Bank of Dallas
Station K
Dallas, Texas 75222
System Speeches and Statements

1. Statement by Manuel H. Johnson, Jr., before the Committee on
Banking, Housing and Urban Affairs, U.S. Senate, Washington,
D.C. May 21, 1987.
2. Remarks by Martha R. Seger before the 23rd Annual Conference
on Bank Structure and Competition sponsored by the Federal
Reserve Bank Chicago, Chicago, Illinois. May 7, 1987.
3. Statement by Wayne D. Angell before the Subcommittee on
Domestic Monetary Policy of the Committee on Banking,
Finance and Urban Affairs, U.S. House of Representatives,
Washington, D.C. May 6, 1987.
4. Statement by Martha R. Seger before the Subcommittee on
Financial Institutions Supervision, Regulation and Insurance of
the Committee on Banking, Finance and Urban Affairs, U.S.
House of Representatives, Washington, D.C. May 6, 1987.
5. Statement by Paul A. Volcker before the Subcommittee on
General Oversight and Investigations of the Committee on
Banking, Finance and Urban Affairs, U.S. House of Represen­
tatives. April 30, 1987.
6. “Reflections on the Current International Debt Situation.”
Remarks by Manuel H. Johnson at the XXIV Meeting of Gover­

nors of Central Banks of the American Continent, Bridgetown,
Barbados. April 27, 1987.
7. Statement by Martha R. Seger before the Subcommittee on
Consumer Affairs of the Committee on Banking, Housing and
Urban Affairs, U.S. Senate, Washington, D.C. April 21, 1987.
8. “The Outlook for the U.S. Economy.” Remarks by H. Robert
Heller at the Chapman College Economic Forum, Orange,
California. April 8, 1987.
9. Testimony by Paul A. Volcker before the Subcommittee on Inter­
national Finance and Monetary Policy of the Committee on
Banking, Housing and Urban Affairs, U.S. Senate, Washington,
D.C. April 7, 1987.
10. “A Double Umbrella for the Banking System.” Remarks by H.
Robert Heller at the Bank and Financial Analysts Association’s
17th Annual Conference on Banking, New York, New York.
March 26, 1987.

Federal Reserve Bank of Dallas

Eleventh District Circulars

11. The Dallas Fed distributed a revised listing of the firms owned
or controlled by the South African government to replace the
list originally distributed with Circular 87-32. 87-36. May 29,

12. The Board of Governors of the Federal Reserve System revised
the list of over-the-counter (OTC) stocks that are subject to its
margin requirement. 87-34. May 14, 1987.
13. The Board of Governors adopted a policy statement on the
responsibility of bank holding companies to act as sources of
financial and managerial strength to their subsidiary banks.

87-33. May 6, 1987.
14. The Office of Foreign Assets Control of the U.S. Department of
the Treasury requested the assistance of the Federal Reserve in
informing all member banks of the prohibition under the Com­
prehensive Anti-Apartheid Act of 1986. 87-32. May 1, 1987.
15. The Board of Governors adopted final changes to the official
staff commentaries for Regulations B, E, and Z. 87-29. April 16,

16. The Dallas Fed announced the appointment of a new member to
the Advisory Council of Financial Institutions. 87-25. March 26,
17. The Board of Governors published amendments to the Official
Staff Commentary on Regulation E. 87-23. March 27, 1987.
18. The Board of Governors published amendments to the Staff
Guidelines on Regulation AA, Subpart B. 87-22. March 24, 1987.
19. The Board of Governors adopted an amendment to Regulation
H. 87-21. March 19, 1987.
20. The Dallas Fed announced a change in its official staff. 87-20.
March 18, 1987.
Pamphlets, Brochures and Reports
21. Monetary Policy Objectives for 1987: Summary Report of the
Federal Reserve Board. Semiannual. February 19, 1987.
22. Monetary Policy Objectives for 1987: Testimony of Paul A.
Volcker, Chairman. Semiannual. February 19, 1987.
23. Selected Interest Rates. 86/87 updates of weekly, monthly and

annual interest rate histories of Treasury bill auctions, Treasury
constant maturities, Fed funds, and prime.
24. Energy and Southwest Economy. Proceedings of the 1985 Con­
ference on Energy and the Southwest Economy. 313 pp.
25. Trade-Weighted Value of the Dollar. Monthly statistical release
of the X-131 Nominal Dollar Exchange Rate Index and the X-101
Real Dollar Index recently established by the Federal Reserve
Bank of Dallas. The X-131 compares the value of the dollar to all
131 U.S. trading partners. The RX-101 compares the purchasing
power of the dollar to the 101 U.S. trading partners who have
consumer price indexes. $48/annual subscription.
26. Truth in Lending, Regulation Z, Annual Percentage Rate Tables
and Factor Tables for Irregular Transactions. $4/Two-volume


Address_____________________________________________________________________________ ___
City, State________________________________________________________________________ Zip Code


News Briefs
Kelley confirmed
by Senate
Edward W. Kelley, Jr., of Houston
has been named to fill an unexpired
term on the Board of Governors. Kelley
succeeds Emmett J. Rice, who re­
signed last year for health reasons.
Kelley was recently nominated by
President Reagan and confirmed by
the Senate. His term expires in
February, 1990.
Since 1971, Kelley has been chair­
man of the board for Investment
Advisors Incorporated in Houston. In
addition, he is currently chairman of
the board of the Shoreline Companies,
Inc., and director of Texas Industries,
Inc. Previously, he was president and
CEO of Kelley Industries, Inc. Kelley
has served as a director of the follow­
ing banks: Southern National Bank,
1961-1972; Westwood Commerce Bank,
1974-1982; and West Belt National
Bank, 1982-1984.
Kelley graduated from Rice Universi­
ty with a BA in 1954 and from Harvard
Business School with an MBA in 1959.

Greenspan named
Alan Greenspan, a New York
economist, has been named to suc­
ceed Paul Volcker as chairman on the
Board of Governors. President Reagan
made the selection after Volcker
declined to serve a third, four-year
Reagan commented that he ac­
cepted Volcker’s decision “ with great
reluctance and regret” .
Af t er
Senat e
c o n f i r ma t i o n ,
Greenspan will assume the post on
August 6 when Volcker’s term expires.
Greenspan said he accepted the posi­
tion within “ milliseconds” of the Presi­
dent’s offer.
Greenspan was chairman of a
presidential commission on the Social
Security System and served on the
President’s Foreign Intelligence Ad­
visory Board under Reagan. In addi­
tion, Greenspan was chairman of the
Council of Economic Advisers in the
Ford administration.
Volcker praised Greenspan as “ a
man with stature to carry on the Fed’s
policies of fighting inflation while pro­
tecting the recovery” .

Presenting Robert Boykin, Dallas Fed
president, with an award for the Bank’s
participation in the 1986 Savings Bond
program is Bill Bell of the U.S. Treasury

Roundup is published monthly by the Federal Reserve Bank of Dallas and its Branches at El Paso, Houston, and San
Antonio. Additional copies of most issues and subscription information are available from the Public Affairs Department.
Editor: Sue Lynn Sasser