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, .t\PKS OF . P ,, t\ R. ROPERT , ~t~YO, piRISI1fiff RI£RAL RESERVE Pi\f-.JK OF CH I Cl\C-0 ~.. 1 1 I\T THE fICRUIT GPA.0J~.TICX! IEVIEW NA~AL TR!)I mNG cs\ lrR GREAT lJi ~, 1lllf'.. 1S - I AM JAf JW\R'J 23, 197G HONORED TO BE AS,KED TO ! PARTICI?ATE IN TilE RECRUIT GRADlJl\TION REVIB'l HERE AT 11-fE GREAT LAKES NAVAL TRAINING CENTER, I HAVE THE GREATEST RESPECT FOR THE cor,,NITMENT WHICH YOU AND YOUR COLLEAGUES IN OUR ARf'!ED FORCES HAYE MI\J')E TO OUR SOC! ETY. WITHOUT TdE WI LU NGNESS OF MEN AND 'I/OMEN LI l(E YOU TO Mt\KE Tl-t!\T COM·~ITMENT, WE h'OUlJ) BE l.Nr\DLE TO I V\HITAIN .• OVER TIME , OUR FREE SOCIETY. No ONE CAN ARGUE TI-tAT 11-tERE HASN'T BEEN PUBLIC DISAGREEFErff ON TiiE IMPORTANCE OF TI-IE ROLE TI1l\T YOU PL/W, TlffION WH I C·-1 HAS SI MILAR PROBL8l6, l COMING FROM l\N INSTI- CAN HELL UNDERSTAND lltE FRUSTRATION 11-tAT YOU MUST FEEL AT TIMES HITH PUBLIC MISCONCEPTIONS, Bur I KN(M 11-fAT YOU, LI KE 11 iE FEDERAL RESERVE SYSTE.fl-1 , ACCEPT 11--iE FACT THAT IN A FREE SOCIETY' Pl.BU C QUEST ION I ~lG AND PUBLIC DISAGREEMENT MUST NEVER BE ELIMINATED, HE ONLY ~·HSH TI-t.n.T OUR CRITICS HERE BETTER INFORr'~ED, I OON'T VIEW NM OF YOU AS CRITICS OF TI~E FEDERAL RESERVE SYSTEM Bl.ff I 1HJUGHT W}\T AND 1HOtJG-fT lliAT l 11-iE ROLE IT PLAYS, https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis YOU MIGff STILL BE HffERESTED IN ll1E SYSTEM MIG-IT TAKE A FEW MINlJfES TO TALK ABOUT IT AMD -2LI KE THE MI LL-ARY, THE FEDERAL RESERVE SYSTEM WAS ESTABLISHED lT HAS BY C.0NGRESS AND HAS A PUBLIC RES PONS lB I LI TY, A PUBLIC RESPONSIBILilY TO PROMJTE TI1E NATION'S FIN/\NCIAL AMD ECOf\OMIC GOALS, f.s lHE CENTRAL BANK FOR lrlE llrHTED STATES, IT SEEl<S, THROUGH ITS POWERS AND t'\CTIVITIES, TO INSURE f\ Sf-'tJOTH FLrn·J OF r'ONEY AND CREDIT-- A FLO\>i CONSISTENT WITI-¾ TI-IE NE'.ELS OF A DYNAMIC ECONOMY AND FACILITATING ORDERLY ECONOMIC GRtl-'/TH, HIGH LEVELS OF EJ'1PLOYMENT, AND A STABLE roLLAR rot;ESTICALLY AND INTERNATIONALLY, _; THE FEDERAL RESERVE SYSTEM WAS ESTABLISHED BY CONGRESS IN O 19]3, THAT f'¾KES US A "CREATURE OF WNGRESS h'H I 0-1 CAN AND HAS BEEN tl()DI FIED AS CoNGRESS SEES FIT, WHEN COMPARED 'IHTI1 A GoVERNMENT AGENCY, 1-taF~JEVER, ITS ORGANIZATION AND OPERAT°iON ARE PECULIAR, THE FOU'JDING FATHERS, CONCERNED ABOITT TI-IE CONCENTRL\TION OF FINANCIAL PavER AND OOMI NATION BY Sl-K>RT-RLN POLITI CAL INTERESTS, SET UP Tr'JELVE REGIONAL RESERVE BJ-\NKS, EACH WITH ITS 0//N BOARD OF DIRECTORS COMING FROM BANKING, BUSINESS, AND lHE PUBLIC AND EACH 't!ITH ITS 0/-/N STOCKHOU)ERS--CO~i"ERCIAL BANKS TI1AT "ELECTED" TO BECOME MEMBERS OF 1HE SYSTEM, CoNGRESS ALSO ESTABLISHED A BoARD OF (1.JVERNORS . IN WASHINGTON, CONSISTING OF lHE U,S, 7 MEMBERS SENATE, APPOHffED BY TI1E PR ·SIDENT AND CONFIRM:D BY t.AQ1 Bo.A.RD MEflBER HAS A 14-YEAR TERM, THE BoARD HAS BROAD SUPERVISORY AND REGULATORY RESPONSIBILITIES OVER ACTIVITIES OF C0r'fi1ERCIAL BANKS AND TI1E OPEPATIOMS OF Tt,E REGIONAL RESERVE BANK.S, AS WELL AS RESPONSIBILITIES FOR THE FORMULATION OF t10NETARY POLICYTHOSE AP9IO lS TAKEN TO INFLUENCE n-tE LEVEL OF M)NEY AND CREDIT IN T'rlE ECONOMY, https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis -3- nus THE FEDEPAL RESERVE BANK OF 0--tICAGO, THEN, IS PART OF COM1°LEX ORGANIZJ.\TION, IT HAS A NUMBER OF RESPONSIBILITIES, THE ONE r-'DST PEOPLE KN™ ABOUT IS HANDLING 0-1ECKS--.:..PERHAPS YOU' VE r-OTICED OUR FOOTPRI~rrs ON 17--fE BACK OF YOUR CHECKS, ~'ONEY to HE ALSO LEND cor-t1ERC I AL BANKS UNDER CERTAIN CIRCl115TANCES: HANDLE LJ, S, TREASURY AFFAIRS--TdE IR CHECKS AND BONDS, INCLUDING SAVINGS BONDS; • EYJ\MINE AND SUPERVISE MEMBER Cot"MERCIAL BANKS; PARTICIPATE - IN fvDNETARY POLICY DECISIONS; AND A NlJ1BER OF OTHER ACTIVITIES, YOU'RE INTERESTED, I BROUSHT ALONG YOU MIG-IT TODAY, lT WANT TO PICK tlP ONE OF IF TI-iE BOOKLETS DESCRIBES IN ~'ORE DETAIL 1/IHAT HE 00 AND WHY, TODAY I I mr/T BUT RATI-1ER TO TALK HffEND BRIEFLY TO COVER ALL OF OUR ACTIVITIES AT U-HCl\C:D ABOUT TI1O AREAS TdAT ARE CLOSELY RELATED TO FEDERAL RESERVE SYSTEM ACTIVITIES AND ARE ALSO VERY IMPORTANT TO YOU, THE FIRST CONCERNS TiiE SAFIT( AND SOUNDNESS OF BANKS A"JD THE SECOND THE ECONOMIC PROSPECTS FOR OUR N/\TION, ALL OF YOU ARE Ai'JARE, I PJ,1 SURE, OF RECENT CONCERNS EXPRESSED IN TI-1E PRESS Ai'\JD BY CoNGRESS ~·HTH SOME BANKS IN OUR COUNTRY, THE SAFETY AND SOLM)NESS OF FINANCIAL INSTITLITIONS IS EXCEEDINGLY IMPORTANT TO TI-iE sr1xrrn FUNCTIONING OF OUR ECONOMY, l DJUBT, HOWEVER, TdAT 1HE PUBLIC INTEREST IS SERVED BY TI1E RELEASE OF 11-iIS DATED I NFORML\TION ON INDIVIDU-1\L BANKS. THERE ARE SOME J.lf ,O').J CQ'.1MERCI.t\L BANKS I ALL OF TI1EM ARE BEING \"/AT0-1ED BY AT LEAST ONE OF THREE AGENCIES, THE FED, lHE CoMPTROLLER OF 11-tE CURRENCY, OR n-➔ E FEDERAL DEPOSIT INSURANCE WRPORATION, https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis THAT EXAMINATION PROCESS IS DESIGNED AND HAS FUNCTIONED EFFECTIVELY TO INSURE Tit-'\T DEPOSITORS AND THE PUBLIC LOSE NEITI,ER THEIR DEPOSITS NOR TiiEIR ACCESS TO BA~JKIMG ALTERNATIVES, PUBLIC CRITICISM OF 17-~E TYPE NOrl TAKING PI.J\CE IS COMPLETELY LNv1lARRANTED . CERTAINLY, BANKS trW( HAVE SOME LDANS THAT ARE II~ A SENSE RISKY. Bvr T'do ·nnNGS MUST DE KEPT IN MIND. ARE DESIGNED TO TAKE RISKS OF 1HIS TYPE. WITHOLIT INDIVIDUL\L.S OR INSTITLITI01JS TI-i/\T ACCEPT SOMETHING OTHER 11-iAN 11 SURE BETS", TI-fE FINANCIAL SYSTEM AND THE ECONot-1Y -COULD NOT FU'lCTION, IDENTIFICATION OF lHOSE RISKS OR 11 FmsT, BANKS SECONDLY, PRfJBLEM LOANS" AS THE BANK EXAMINER WOULD DESCRIBE TrlEM OOES NOT MEAN TI-iAT 11-IE BANK ~·HU. LOSE THE WHOLE N-'DUNT--PROBA13LY NOTHING, JUST AN EXTENSIOi,J OF TIME FOR REPAYMEtff.-NC)R OOES IT 11EAN lliAT 1HE BANK ~HLL !3E IN TROUBLE, THE LJ\NGUAGE oF EXAMINERS H/\S A DIFFERENT MEJ\N 1NG. Pusu c MISINTERPRETATION CJ\N BE ALMJST CERTAI NLY FORE DAM1\GING TO THE SAFETY 1 AND sourmNESS OF THE BANK THAN ArN OF n-tE BN1K S ACTIVITIES HIGHLIGHTED BY f~\J EXAMINER'S AaVONITION TO TAl<E SPECIAL C.L\RE ON CERTAIN TRANSACTIONS, BENEFIT, No THE TEST FOR INCREASED DISCLOSURE MUST BE WE PUBLIC PUBLIC BENEFIT IS BEING SERVED AT 11-tE PRESENT TIME. THE 01HER AREA AND ITS PROGRESS. I \~ANT TO TALK ABQITT TODAY IS OUR ECONOMY '.1!E ~t-'\VE RECENTLY PASSED 11--tROUGH THE SHARPEST DECLINE IN REAL ECONOMIC ACTIVITY IN TrlE POST-HORLD HAR Nod II PERIOD. WE ARE IN TI-IE RECOVERY STAGE BlJf ~IE ARE COMING Olff WITH TrlE HIGHEST UNEMPLOYMENT, THE HIGHEST FEDERAL DEFICIT, AND TIIE HIGHEST ' RATE OF INFLATION IN TI-iE POSTWAR PERIOD, https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Mo \'✓ONDER TI--iEN, SO MANY -5ARE STILL UNEASY t Bur 11--tE RECENT EVIDENCE IS BEGrnNING TO PlJf A MU0-1 f ORE 1 FAVORABLE CAST ON THE FUTURE, SINCE THE LOt/. EMPLOYMENT HAS •INCREASED 1 J/2 INTEREST RATES !-'AVE FALLEN DPN'v\TICALLY, PRODLCTION IS REC:AINING LOST GROU~D. MI LU ON INDUSTRIAL RETAIL SALES HAVE SPURTED AHEAD AND SEEM TO BE SLSTAINING TI-tEIR U~<\/ARD PATH, Au_-JN-ALL, THE RECOVERY IS CLEARLY NOT ONLY Lt-JDER't/AY BlJf SOLID. I LOOK FOR THE UPmEND TO CONTINUE 11-IROUGH0UT n~E YEAR, . PROGRESS i<JI LL BE M~DE IN GETT I NG 11-tE UNEMPLOYMENT RATE IlJt'./N ftJ'JD THE RATE OF PRICE INCREASES SHOULD CONTINUE TO DECLINE, ALI... GROlfTii. OF US \-/QUU) PREFER A t'ORE RAP ID RESLMPTION OF OUR ECONOMIC Bur 4 t'ORE ACTIVE ECONOMIC POLICY ACTIONS DESIGNED TO t·'DVE 11-IE ECONOMY AHEAD FASTER WILL HA.VE ~lJE CAN i-1AKE ON I NFLATI ON I SIGNIFICANT IMPACTS ft.ND AS EACH AND EVERYONE OF ON THE PROGRESS us KNO,~S, INFLATION HAS HAD Ar ID CAN HAVE SEVERE REPERCUSSIONS ON ALL OF US 1 AND ON OUR ECONOMY, THE OBJECTIVE, THEN, OF ~'DNETARY POLICY IS TO PROt-OTE AS MLCH ECONOMIC GRO\,-Tm AS IS POSSIBLE \tffrnour CAUSING AN 0UIBREAK OF lHE FIRES OF INFLATION, IF WE ARE NOT THROr"/N OFF COURSE BY EXC~SSIVE DEMANDS FOR CURRENT EXPANSION, i•JE SHOULD BE ABLE TO BANK Trl0SE FI RES • OF INFLATION AND cmITHJUE TO EXPAND EMPLOYMENT AND 0UTPLJf OVER 11-fE fv'O~m-tS AHEAD, https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis
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