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Federal Reserve Bank of Dallas

November 1984

Finance Minister Addresses Directors
Scarce foreign exchange and 100 percent inflation battered
Mexico’s economy in 1982, but this year the picture is
brightening somewhat, according to Mexico’s minister of
finance and public credit, Jesus Silva-Herzog Flores.
Speaking at the Dallas Fed’s Directors’ Luncheon on
November 8, Silva-Herzog predicted inflation would
fall to 55 percent in 1984—down from 80 percent last
year—and the federal deficit would be reduced to 6.5
percent of gross domestic product, as compared to 18
percent of the GDP in 1982.
“ It seems that I have been registered in the Guinness
Book of Records,” Silva-Herzog began, “ because I am
the only finance minister that, in a period of 12
months, had three devaluations of the national
currency, nationalization of the private banking
system, establishment of an exchange control
system, appointment by two presidents and
two surgeries.

Silva-Herzog’s Views
on Other Issues
Has flo ating the peso against
■ the dollar the past few years
worked out and will the 13 centavo
per d ay slide in the peso be
W e feel the daily slippage of 13
. centavos has been working
fine. It has given stability to the ex­
change m arkets. The positive results
of our trade balance and our current
acco unt balance and the overall
behavior of the balance of paym ents,
I think, is the best expression of how
the exchange policy is w orking. W e
intend to m aintain the sam e ex­
change policy in the com ing m onths,
but, of course, we are com pletely
flexible. (We have our) eyes open to
any change in circum stances th at
will (make) a change necessary in the
exchange policy. W hat we are not go­
ing to accept anym ore is the same
m istake that we made a couple of
years ago when we had the peso
overvalued, and when we had a run
ag ainst the peso, and when we had a
situatio n where the cheapest com ­
m odity in M exico was precisely the
U.S. dollar. T h at is not going to hap­
pen because we have too fresh a
m em ory of w hat can happen when
you make th at type of late reaction to
som ething that called for a change in
(Continued on page 4)



“ I am the only finance minister
that, in a period of 12 months, had
three devaluations of the national
currency, nationalization of the
private banking system, establish­
ment of an exchange control system,
appointment by two presidents
and two surgeries.
“ I think that gives you a very clear
picture of what happened in 1982 in
Silva-Herzog said he will never forget
an August 1982 meeting at the Federal
Reserve Bank of New York when Mex­
ico had $120 million in liquid reserves
and had to make payments of $280
million the following Monday.

“ But that didn’t even include the
amount we had to pay on Tuesday,
Wednesday, Thursday...,” Silva-Herzog
In order to bring down expenditures,
Mexico reduced imports—which came
mainly from the U.S.—to $8 billion in
1983 from $24 billion in 1981. SilvaHerzog said that Mexico’s crisis
(Continued on page 4)







Regulation E
The Federal Reserve Board of
Governors has voted to extend
the protection accorded EFT
payments to include all debit
card transactions, even those
that are processed manually. In
amending Regulation E, which
governs electronic funds trans­
fers, the Board also modified its
error resolution requirements
and provided additional flexibility
in the disclosure of charges for
EFT services.
Debit cards are used some­
what like checking accounts: a
consumer can purchase goods or
services and have the amount
automatically debited to his
transaction account. (Debit cards
are distinguished from credit
cards, which result in a promise
by the consumer to pay for a pur­
chase at a future time.) Debit
card transactions are usuallly
conducted at a point-of-sale loca­
tion. If the card is run through an
electronic computer terminal, the
consumer is protected by the
E le c tro n ic Fund T ra n s fe r
Act—Regulation E—which, for
example, limits consumer liabili­
ty for unauthorized transfers.
However, many retailers do not
have computer terminals and pro­
cess the cards manually, using
them to imprint sales slips.
These transactions, which do not
involve electronic terminals, were
not previously covered by Regula­
tion E.
Last year debit cards were
used in over 50 million point-ofsale transactions with a value in
excess of $2.4 billion.

Board Amends Regulation D
Effective January 1, 1985, the
amount of net transaction accounts to
which the lowest reserve requirement
(3 percent) applies will be raised to
$29.8 million from $28.9 million. The
amount of reservable liabilities in
depository institutions that are subject
to a zero percent reserve requirement
also will increase—to $2.4 million from
$2.2 million.
The Federal Reserve Board made
these changes in accordance with the
Monetary Control Act of 1980 and the
Garn-St Germain Depository Institu­
tions Act of 1982. The Monetary Con­
trol Act requires the Board to make
annual amendments to Regulation D—
which governs reserve requirements of
depository institutions—to increase
the amount of transaction accounts

subject to the 3 percent reserve re­
quirement in the next calendar year to
80 percent of the annual percentage in­
crease in transaction accounts held by
all depository institutions. The growth
in total net transaction accounts of all
depository institutions from June 30,
1983, to June 30,1984, was 3.8 percent,
thus requiring an increase of $900
Under the Garn-St Germain Act, the
Board must amend Regulation D to ad­
just the amount exempt from reserve
requirements for the upcoming year by
80 percent of the annual percentage in­
crease in total reservable liabilities.
Growth in total reservable liabilities
was 9.1 percent from June 30, 1983, to
June 30, 1984.


Effective date



Nonpersonal time deposits2
By original maturity
Less than 1'/> years
1Vi years or more



Eurocurrency liabilities
All types



Type of deposit and deposit interval

Net transaction accounts'
$0-$29.8 million
Over $29.8 million

'Transaction accounts include all deposits on which the account holder is permitted to make
withdrawals by negotiable or transferable instruments, payment orders of withdrawal, and
telephone and preauthorized transfers (in excess of three per month) for the purpose of
making payments to third persons or others. However, MMDAs and sim ilar accounts offered
by institutions not subject to the rules of the Depository Institutions Deregulation Committee
that permit no more than six preauthorized, automatic or other transfers per month of which
no more than three can be checks—are not transaction accounts (such accounts are savings
deposits subject to time deposit reserve requirements).
2ln general, nonpersonal time deposits are time deposits, including savings deposits, that are
not transaction accounts and in which a beneficial interest is held by a depositor that is not a
natural person. Also included are certain transferable time deposits held by natural persons
and certain obligations issued to depository institution offices located outside the United

Holiday Schedule for 1985 Explained
Bank holidays affect everyone—con­
sumers, borrowers, bank employees.
The Dallas Fed does not set banking
holidays. That is done by each of the 50
state legislatures. Because the Dallas
Fed and all its branches in El Paso,
Houston and San Antonio are located
in Texas, we observe the bank holiday
schedule mandated by the Texas
Legislature. The schedule is similar to
other lists of legal and federal
holidays—although not identical (see
Texas banks do have the option to
close on other days as well by follow­
ing a statutory procedure. The bank’s
board of directors must pass a resolu­
tion designating the additional day or
days it will close. The resolution must
be certified by the bank’s president or
cashier. A copy of the resolution must
be posted in a conspicuous place
within the bank at least 15 calendar
days prior to the designated day or
days, and another copy must be filed
with the Commissioner, Department of
Banking, 2601 North Lamar, Austin,
Texas 78705.

Texas banks wishing to close this
year on Monday, December 24, or Mon­
day, December 31, must use this pro­
cedure. If they close on either Monday,
they must be open during normal hours
for all banking services on the Satur­
day succeeding each additional day
Martin Luther King Jr.’s Birthday,
January 15, has been designated by
the United States Congress as a new
federal holiday in 1985 and will be
observed on the third Monday of
January beginning in 1986. The Dallas
Fed will observe this occasion only
when it is designated by the Texas
Legislature as a banking holiday.
Texas banks may observe the day as
an optional holiday in accordance with
the statutory procedure.
Banks in Louisiana and New Mexico
follow the banking holidays set by their
state legislatures. Savings and loan
associations and credit unions in all
three states have no statute specifical­
ly listing holidays they must observe.
If a financial institution in this
District notifies the Dallas office or a
branch office checks department of its

holiday schedule, it will not be charged
for the Fed’s cash letter presented on
the day it is closed and the Dallas Fed
is open. The charge will be made on the
next day both are open. The notice can
be on the Fed’s form TR-385, by letter
or by sending a copy of its board’s

The Federal Reserve Bank of Dallas
and its branches in El Paso, Houston
and San Antonio will observe the
following holidays in 1985 by being
closed on the dates listed below.
January 1
February 18
May 27
July 4
September 2
October 14
November 11
November 28
December 25

In accordance with the Texas statutes relating to
bank holidays, should July 4, November 11 or
December 25 occur on a Saturday, this Bank will
be closed the preceding Friday. Should January 1,
July 4, November 11 or December 25 occur on a
Sunday, this Bank will be closed the following

Landscape Adorns Dallas Fed Lobby
“Silhouetted Trees’’ by Dallas artist
Roger Winter graces the lobby of the
Federal Reserve Bank of Dallas. The
10-by-20-foot landscape, commis­
sioned by the Bank in 1982, depicts a
large cedar elm in the foreground with
smaller mesquite and cedar trees in
the background. Winter uses an
abstract style of brushwork which, at a
distance, forms the trees, grass and
cloud-filled sky.
Winter, a prominent member of the
Dallas art community, is a professor of
art at Southern Methodist University.
Born in 1934 in Denison, Texas, Winter
received a B.F.A. from the University of
Texas at Austin, an M.F.A. from State
University of Iowa in Iowa City and
studied at the Brooklyn Museum
School as a recipient of the Max
Beckmann Memorial Scholarship.

New Year’s Day
Presidents’ Day
Memorial Day
Independence Day
Labor Day
Columbus Day
Veterans Day
Thanksgiving Day
Christmas Day

Directors, continued
should create a greater awareness of
the economic relationship between the
U.S. and Mexico.
“There have been a number of
estimates that that drop in Mexican im­
ports from the United States affected
the unemployment rate in a significant
number of different sectors in the
American economy—a very clear sign
of that high degree of interdependence
th a t e x is ts betw een our two
countries,” Silva-Herzog said.
The finance minister called on the
U.S. to open its borders to more Mex­
ican goods. He noted that despite
being 7,000 miles further away, South
Korea exports to the U.S. three times
what Mexico does.
“The only way that you can pay your
debt is to earn the foreign exchange
that is needed to fulfill your financial
obligation, and the only way you can
do that is to export more,” Herzog said.
“We have a long way to go and a lot
of things to do together.”

Silva-Herzog, continued
H o w do y o u view the current
. im m igration problem?
I think we are going to be faced
. w ith a growing num ber of peo­
ple trying to look for a job across the
border. The other day I w ent to some
of the border tow ns. There is a fence
m ade of steel, and it’s incredible to
see the num ber of holes. (We must)


respond to this problem by improving
the M exican econom y so it is able to
absorb the growing population of the
Does M exico feel threatened
. by the situ atio n in C entral
Am erica?


Not as m uch as you do.

Jesus Silva-Herzog Flores was the guest speaker at the Directors’ Luncheon.


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