Federal Reserve Notes

FEDERAL RESERVE BANK op« Federal Notes FEDERAL RESERVE BANK OF SAI^fftif^lSCO • NO. 3, 1980 Serving Alaska, Arizona, California, Hawaii, Idaho, Nevada, Oregon, Utah & Washington S.F. FED SETS UP DEREG COMMITTEE OUTREACH PROGRAM RULES ON NOW RATES The Federal Reserve Bank of San The Depository Institutions Dereg Francisco has developed a number ulation Committee (DIDC) ruled of programs to assist depository that banks and savings institutions institutions in complying with the will be able to pay as much as 5Va new procedures mandated under percent on check-type NOW ac the terms of the Monetary Control counts beginning in 1981, but it left Act. Under the Act, Congress at intact current interest-rate ceilings tempted to improve the effective on regular savings accounts. In ness of monetary policy by apply another key decision, the commit ing new Federal Reserve reserve tee agreed to permit the continued requirements to all depository in use of premiums or gifts that insti stitutions with transaction (check- tutions offer to people who open type) accounts and non-personal new accounts or add to existing time deposits. ones. G. H. Weyerhaeuser To implement this goal, the Act The DIDC ruled that the ceiling rate WEYERHAEUSER HEADS authorized the Federal Reserve to on "negotiable order of with SEATTLE BOARD collect reports from all depository drawal" accounts — NOW ac institutions. And among other key George H. Weyerhaeuser has been counts — will be raised to 51/4 per provisions, the MCA provided non- named Chairman of the Board of cent, effective December 31. The member institutions with access to Directors of the Seattle Branch of rate on "automatic transfer from Federal Reserve borrowing privi the Federal Reserve Bank of San savings" accounts — ATS ac leges and other Fed services, and Francisco. Weyerhaeuser is Presi counts — will remain at 51/4 per required the Federal Reserve to set dent, Chief Executive Officer and cent. Similarly, ceilings were left fees for these services. Director of the Weyerhaeuser Com unchanged on other types of inter pany, a forest-products company est-bearing transaction accounts, Beginning September 22, the Fed with 49,000 employees and $4.5 bil at 51/4 percent for commercial eral Reserve Bank of San Francisco lion in annual revenues. banks and 51/2 percent for thrifts. has organized a series of orienta tion sessions for top executives of The Tacoma executive was ap The committee also said that it in depository institutions located in pointed to the Seattle Board by the tends to raise passbook-account the San Francisco Reserve District Federal Reserve Board of Gover ceiling rates as soon as is "pru — the nine westernmost states (see nors, to fill out an unexpired term dently practicable." It hopes to be list of sites below). These sessions, ending December 1981. He re able to do so before September 30, held in 26 locations throughout the places Lloyd E. Cooney, Seattle 1981, when by law it is required to District, have been designed to pro broadcasting executive, who re vote on raising passbook rates. vide executives with an overview of cently resigned from the board. He On the "freebie" question, the the implementation of the MCA. also replaces Cooney as Seattle DIDC permitted the continued use board chairman, an annual posi In addition to these general orienta of premiums or gifts, but required tion, at the designation of the tion sessions, a series of seminars that the stated cost reflect the com Board of Directors of the San Fran on reporting and reserve account plete cost of the merchandise. cisco Reserve Bank. ing will be held in all Reserve Bank Such costs would include ship offices in the week of October 13. Weyerhaeuser graduated with ping, packaging and other han Later, technical seminars will be honors from Yale University in dling expenses, as well as any (Continued on page 4) (Continued on page 2) (Continued on page 4) FED ATTACKS WEYERHAEUSER PRICING COMMENT CHECK FLOAT (Continued from page 1) SOUGHT BY FED In an effort to tighten its check- 1949, with a degree in industrial The Federal Reserve announced clearing procedures and signifi administration. He has been asso that public comment on its pro cantly reduce "free float," the Fed ciated with the Weyerhaeuser posed pricing schedule for ser eral Reserve has launched a two- Company since 1947, and has been vices ends October 31, with the tiered program involving the President and CEO since 1966. He phase-in of fees due to begin in streamlining of transportation pro holds directorships in a number of January. major companies, including the cedures, electronic clearance of Mandated by the Monetary Control larger checks, and revising of time Boeing Company, the Standard Oil Act of 1980, prices would be based schedules by which depositing Company of California, and the on all direct and indirect, long-run banks receive credit for funds they Safeco Insurance Company. costs incurred for the various ser deposit. Weyerhaeuser is a trustee of the vices, plus a 12 percent "markup" Currently, average daily float is Rand Corporation, the Charles that takes into account the financ running at about $5 billion. The Fed Wright Academy, the Taft School, ing and tax costs that a private firm hopes the new procedures will re and the Weyerhaeuser Company would encounter if it offered simi duce float to a daily average of Foundation. He is a member of the lar services. The same prices would about $2 billion. Based on an aver Advisory Board of the University of apply to all depository institutions. age federal-funds rate of 11.2 per Washington's School of Business Federal Reserve services to be Administration, and of the Board of cent last year, Fed economists esti covered under the proposed pric Visitors of the University of Puget mate the Fed could have earned ing schedule include check-clear $650 million from float and, in Sound Law School. ing, currency and coin, wire trans directly, saved taxpayers that The Tacoma executive is also fers, automated clearinghouse ser amount by following its usual noted for his memberships in a vices (ACH), settlement services policy of turning over most of its numberof major national and inter affecting accounts held by the Fed revenues to the U.S. Treasury. national organizations. These in eral Reserve, securities safekeep Float occurs in the Fed's check- clude the Council on Foreign Rela ing, noncash collection and Fed clearing operations when the sys tions, the Emergency Committee eral Reserve float. for American Trade, the Japan- tem credits one bank's account for The Fed plans to publish final California Association, the Busi a check drawn on another bank be pricing regulations in January. fore it debits the other bank's ac ness Council, and the Business Pricing of wire transfer and net count. In the interim, both banks Roundtable. ^ settlements, which are wire trans have use of the funds so that, in sion in banking laws, Congress fers done by privately owned effect, the Fed is extending an directed the Fed to eliminate check groups, should begin during Jan interest-free loan to one of the two float or start charging institutions uary. Pricing of checks and ACH banks. for it, because float could be re services is scheduled for April. Under the plan adopted by the garded as a government subsidy to They could range from a fraction of Board of Governors, the interdis- the private banking industry. The a cent a check to seven cents a trict transportation system for law also required the Fed to impose check, depending on distance, de moving checks is being upgraded charges on services, such as gree of computerization and other to provide for a quicker return of check-clearing, that it previously factors. The pricing of currency checks among banks using the Fed provided free. and coin would follow in July, and service. Also, the Fed is examining securities and noncash collection As a result of the congressional ways to clear checks for large in October. order, the Fed said it would try to amounts electronically, rather than eliminate nearly all free float from Charges for float (the interest on waiting for the checks to be re its check-clearing operations by items credited by the Fed to one turned physically to the regional the middle of 1982. Some float is depository institution before being Fed bank for the institution on expected to remain beyond that collected from another) won't be which the checks are drawn. date, and the Fed has proposed to instituted until mid-1982. Mean In addition, the Fed has proposed start charging institutions explicit while, the Fed has announced a to slow the schedule by which the ly for this remaining float. Interest two-step program to reduce float depositing banks receive credit for on float would be charged at the by improving its interdistrict trans funds they deposit. The new sched prevailing market rate for federal portation system for moving ule, expected to be put into effect funds — the unused reserves lent checks, and by modifying its time in September 1981, would be by depository institutions to one schedules, beginning in Septem- based on the actual time it takes to another. clear checks. (Continued on page 4) At present, the Fed clears about 44 Last spring as part of a major revi- percent of all the nation's checks. W FED OUTLINES BORROWING, RESERVES PLANS In carrying out provisions of the years or more will be zero percent. institutions, mostly credit unions, Monetary Control Act (MCA) of Eurocurrency liabilities will have with total deposits below $1 million 1980, the Federal Reserve has re reserve requirements of 3 percent.

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