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VOLUME 83 • NUMBER 12 • DECEMBER 1997 FEDERAL RESERVE BULLETIN BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM, WASHINGTON, D.C. PUBLICATIONS COMMITTEE Joseph R. Coyne, Chairman • S. David Frost • Griffith L. Garwood • Donald L. Kohn • J. Virgil Mattingly, Jr. • Michael J. Prell • Richard Spillenkothen • Edwin M. Truman The Federal Reserve Bulletin is issued monthly under the direction of the staff publications committee. This committee is responsible for opinions expressed except in official statements and signed articles. It is assisted by the Economic Editing Section headed by S. Ellen Dykes, the Graphics Center under the direction of Peter G. Thomas, and Publications Services supervised by Linda C. Kyles. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis Table of Contents 947 TREASURY AND FEDERAL RESERVE OPEN formance can improve investor and counterparty MARKET OPERATIONS decisions, thus improving market discipline on banking organizations and other companies, During the third quarter of 1997, the dollar before the Subcommittee on Capital Markets, appreciated 5.0 percent against the Japanese yen Securities and Government Sponsored Enter- and 0.8 percent against the German mark. On a prises of the House Committee on Banking and trade-weighted basis against other Group of Ten Financial Services, October 1, 1997. currencies, the dollar appreciated 1.4 percent. The U.S. monetary authorities did not undertake 96\ Theodore E. Allison, Assistant to the Board of any intervention in the foreign exchange mar- Governors for Federal Reserve System Affairs, kets during the quarter. reports on the Federal Reserve's plans for deal- ing with some new-design $50 notes that 953 STAFF STUDY SUMMARY were imperfectly printed, including the Federal Reserve's view of the quality and quantity of In The Cost of Implementing Consumer Finan- $50 notes currently being produced by the cial Regulations, the authors present results for Bureau of Engraving and Printing, the options U.S. commercial banks from a 1992-93 Federal the Federal Reserve is looking into for handling Reserve survey of the costs of complying with the imperfect notes, and the steps it is taking the Truth in Savings Act. Besides reporting jointly with the Bureau of Engraving and Print- descriptive data, they discuss the factors shown ing to better ensure satisfaction with notes pro- by statistical analysis to affect costs and look at duced by the Bureau in the future, before the the implications of the findings for policies on Subcommittee on Domestic and International regulatory change. Monetary Policy of the House Committee on Banking and Financial Services, October 1, 954 INDUSTRIAL PRODUCTION AND CAPACITY 1997. UTILIZATION FOR OCTOBER 1997 Industrial production rose 0.5 percent in Octo- 963 Alan Greenspan, Chairman, Board of Gover- ber, to 122.7 percent of its 1992 average, after a nors, discusses the improvement in our fiscal downward revised gain of 0.5 percent in Sep- position, after decades-long deterioration, and tember. The rate of industrial capacity utilization says that if our goals are economic growth and rose to 84.3 percent—its highest rate since rising living standards, fostered by investment March 1995. and price stability, fiscal policy in his judgment will need to be biased toward surpluses in the 957 STATEMENTS TO THE CONGRESS years immediately ahead, especially given the inexorable demographic trends that threaten Susan M. Phillips, member, Board of Gover- huge increases in outlays beyond 2010; he also nors, discusses the Federal Reserve Board's says that we must not squander years of efforts views on proposed accounting standards for de- to balance the budget and the benefits of ideal rivatives and risk-management activities issued economic conditions by failing to address our by the Financial Accounting Standards Board long-term imbalances such as the critical (FASB) and says that the Federal Reserve shares imbalance faced by social security and that the several objectives with the FASB for improving changes that will be required to restore fiscal financial reporting, including the fundamental balance to our social security accounts are sig- objectives of promoting clear and understand- nificant but manageable, before the House Com- able financial reports that increase the transpar- mittee on the Budget, October 8, 1997. ency of companies' activities, and also the view that accounting and disclosure standards that 968 Governor Phillips discusses the Federal Re- faithfully represent financial condition and per- serve's efforts in recent years to strengthen its Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis supervisory processes and also the Board's thrift institutions, with regard to the treatment views about what challenges lie ahead, for both of certain unrealized revaluation gains on the banking system and the supervisory process, equity securities. and says that progress made in recent years to Availability of a report on the payments system focus examinations on the areas of highest risk forums held by the Federal Reserve earlier this at banking organizations places the Federal year. Reserve in a better position to identify problems early, control systemic risk, and maintain finan- Availability of revised lists of over-the-counter cial stability, although implementing the risk- stocks and of foreign stocks subject to margin focused approach has not been an easy task, regulations. before the Subcommittee on Financial Institu- tions and Consumer Credit of the House Com- 981 MINUTES OF THE FEDERAL OPEN mittee on Banking and Financial Services, Octo- MARKET COMMITTEE MEETING ber 8, 1997. HELD ON AUGUST 19, 1997 974 Theodore E. Allison comments on H.R.2637, At its meeting on August 19, 1997, the Com- the United States $1 Coin Act of 1997, which mittee adopted a directive that called for main- proposes that the dollar coin be made gold in taining conditions in reserve markets that were color and given a distinctive rim, that it retain consistent with an unchanged federal funds the dimension of the Susan B. Anthony dollar rate of about 5V2 percent. The Committee coin, and that the dollar note remain in circula- decided that a somewhat higher federal funds tion, and says that the Federal Reserve believes rate would be acceptable or a slightly lower that the proposed bill achieves a good balance federal funds rate might be acceptable during among the issues involved in the dollar-coin- the intermeeting period. versus-dollar-note debate and supports its pas- sage, before the Subcommittee on Domestic and International Monetary Policy of the House 987 LEGAL DEVELOPMENTS Committee on Banking and Financial Services, Various bank holding company, bank service October 21, 1997. corporation, and bank merger orders; and pend- 975 Chairman Greenspan addresses the turbulence ing cases. in world financial markets and says that the financial disturbances that have afflicted a num- 1037 MEMBERSHIP OF THE BOARD OF ber of currencies in Asia do not at this point GOVERNORS OF THE FEDERAL RESERVE threaten prosperity in this country but that we SYSTEM, 1913-97 need to work closely with their leaders and the international financial community to ensure that List of appointive and ex officio members. their situations stabilize, before the Joint Eco- nomic Committee of the U.S. Congress, Octo- A1 FINANCIAL AND BUSINESS STATISTICS ber 29, 1997. These tables reflect data available as of October 29, 1997. 978 ANNOUNCEMENTS A3 GUIDE TO TABULAR PRESENTATION Appointment of Edward M. Gramlich as a mem- ber of the Board of Governors. A4 Domestic Financial Statistics A42 Domestic Nonfinancial Statistics Appointment of Roger W. Ferguson, Jr., as a A50 International Statistics member of the Board of Governors. Meeting of the Consumer Advisory Council. A63 GUIDE TO STATISTICAL RELEASES AND SPECIAL TABLES Amendments to Regulation D. Proposal by the banking supervisory agencies to A64 INDEX TO STATISTICAL TABLES amend their respective risk-based capital stan- dards for banks, bank holding companies, and A66 BOARD OF GOVERNORS AND STAFF Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis A68 FEDERAL OPEN MARKET COMMITTEE AND A74 MAPS OF THE FEDERAL RESERVE SYSTEM STAFF; ADVISORY COUNCILS A76 FEDERAL RESERVE BANKS, BRANCHES, A70 FEDERAL RESERVE BOARD PUBLICATIONS AND OFFICES A72 SCHEDULE OF RELEASE DATES FOR A77 INDEX TO VOLUME 83 PERIODIC RELEASES Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis Treasury and Federal Reserve Foreign Exchange Operations This quarterly report describes U.S. Treasury and 0.6 percent in the third quarter of 1996. Implied System foreign exchange operations for the period volatility on one-month dollar-mark options rose to from July through September 1997. It was presented its highest levels this year, peaking in late August by Peter R. Fisher, Executive Vice President, Federal after the dollar reached eight-year highs against Reserve Bank of New York, and Manager, System the mark. One-month dollar-yen implied volatility Open Market Account. Andrew Jewell was primarily moved higher over the quarter, but fell short of this responsible for preparation of the report. year's peak levels established in May. During the third quarter of 1997, the dollar appreci- ated 5.0 percent against the Japanese yen and 0.8 per- 1. Spot exchange rate of the dollar against the German mark cent against the German mark. On a trade-weighted and volatility implied by option prices, 1997:Q2-Q3 basis against other Group of Ten (G-10) currencies, the dollar appreciated 1.4 percent.1 The dollar German marks per U.S. dollar Percent per year reached eight-year highs against the mark in early 115 1 on M rl/ August, driven by market perceptions that the Euro- One-month volatilities hi W110 pean Economic and Monetary Union (EMU) would 1.85 — | i i\ Nr vi a 105 include a broad group of countries and result in a I fl JV/v VV k — IO.O "weak" single currency.
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