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The original documents are located in Box B1, folder "American Bankers Association (4)"
of the Arthur F. Burns Papers at the Gerald R. Ford Presidential Library.
Copyright Notice
The copyright law of the United States (Title 17, United States Code) governs the making of
photocopies or other reproductions of copyrighted material. Gerald R. Ford donated to the United
States of America his copyrights in all of his unpublished writings in National Archives collections.
Works prepared by U.S. Government employees as part of their official duties are in the public
domain. The copyrights to materials written by other individuals or organizations are presumed to
remain with them. If you think any of the information displayed in the PDF is subject to a valid
copyright claim, please contact the Gerald R. Ford Presidential Library.
Some items in this folder were not digitized because it contains copyrighted
materials. Please contact the Gerald R. Ford Presidential Library for access to
these materials.
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
Office Correspondence
Date December 6, 1971
To
Chairman Burns
Subject: Luncheon and conference with
Government Relations Council of the
From
George L. Spencer, Jr.
American Bankers Association--Tuesday,
December 7.
As you know, the Government Relations Council of the
American Bankers Association will visit the Board's offices on
Tuesday, December 7, for luncheon in the Staff Dining Room at
1:00 p.m. to be followed by a conference with available Members
of the Board and certain staff.
Attached is a list of the members of the Government
Relations Council who are expected to be in Washington this week.
The American Bankers Association is of the impression that some
of those persons listed may not find it possible to be in the
group that visits the Board on Tuesday, and they probably will
not have final information on that point until sometime that morning.
Those persons who plan to attend the luncheon and con-
ference are requested to gather in the Board Room shortly before
1:00 p.m. to greet the visitors prior to proceeding to the Staff
Dining Room.
Attachment
GERALD FORD CIBRARY
Representatives of the
Government Relations Council of the
American Bankers Association
to attend luncheon/conference on
Tuesday, December 7, 1971
Chairman
Members (cont'd)
Mr. B. Finley Vinson
Mr. Joseph W. Barr, President
Chairman of the Board
American Security and Trust Co.
First National Bank in Little Rock
($807 mil.)
($150 mil.)
Washington, D. C.
Little Rock, Arkansas
Mr. Frank Bauder
Vice Chairman
Chairman and Chief Executive Officer
Central National Bank ($612 mil.)
Mr. George A. LeMaistre
Chicago, Illinois
Chairman and Chief Executive Officer
The City National Bank of Tuscaloosa
Mr. Raymond W. Bauer, President
($63 mil.)
Union County Trust Company ($246 mil.)
Tuscaloosa, Alabama
Elizabeth, New Jersey
Members
Mr. G. Clarke Bean, Chairman
The Arizona Bank ($538 mil.)
Mr. Aubrey E. Austin, Jr., President
Phoenix, Arizona
Santa Monica Bank ($99 mil.)
Santa Monica, California
Mr. Kenneth C. Bonnell
President
Mr. John J. Balles, Senior Vice President
The First National Bank ($40 mil.)
Mellon National Bank & Trust Co.
Roswell, New Mexico
($6 bil.)
Pittsburgh, Pennsylvania
Mr. H. Phelps Brooks, Jr., President
The Peoples National Bank ($8 mil.)
Mr. James S. Barker, Vice Chairman
Chester, South Carolina
Bank of New Hampshire, N.A. ($108 mil.)
Manchester, New Hampshire
Mr. Arthur F. Brown, Jr., President
The Carroll County Trust Co. ($15 mil.)
Mr. Norman Barker, Jr., President
Conway, New Hampshire
United California Bank ($6 bil.)
Los Angeles, California
GERALD FORD LIBRARY
-2ª
Mr. James E. Brown
Mr. T. Crawley Davis, Jr.
Senior Vice President
Senior Vice President
Mercantile Trust Company ($1 bil.)
Bank of Delaware ($330 mil.)
St. Louis, Missouri
Wilmington, Delaware
Mr. Richard P. Brown
Mr. William G. Deathrage, President
Senior Vice President and Executive
Planters Bank & Trust Company
Trust Officer
($56 mil.)
The First National Bank ($677 mil.)
Hopkinsville, Kentucky
Denver, Colorado
Mr. Robert B. Doyle
Mr. A. Dwight Button
Senior Vice President
Chairman of the Board
Hartford National Bank & Trust Co.
The Fourth National Bank & Trust Co.
($1 bil.)
($304 mil.)
Hartford, Connecticut
Wichita, Kansas
Mr. J. Rex Duwe, President
Mr. Charles J. Cassidy
The Farmers State Bank ($3 mil.)
Chairman of the Board and President
Lucas, Kansas
First State Bank and Trust Company
($33 mil.)
Mr. Joseph F. Fahey, Jr.
Bogalusa, Louisiana
Senior Vice President
The State National Bank of Connecticut
Mr. Robert L. Cave, President
($405 mil.)
First City Bank and Trust Company
Bridgeport, Connecticut
($39 mil.)
Hopkinsville, Kentucky
Mr. Robert W. Feagles
Senior Vice President
Mr. Ezra T. Clark, President
First National City Bank ($27 bil.)
Davis County Bank ($9 mil.)
New York, New York
Farmington, Utah
Mr. Joseph B. Foster
Mr. Robert G. Clawson, President
President
The Bank of Hartsville ($18 mil.)
Ann Arbor Bank ($162 mil.)
Hartsville, South Carolina
Ann Arbor, Michigan
Mr. W. T. Cothran, Chairman of the Board
Mr. William W. Foulkes, Jr.
Birmingham Trust National Bank
Senior Vice President
($417 mil.)
The First Jersey National Bank
Birmingham, Alabama
($507 mil.)
Jersey City, New Jersey
Mr. John J. Cummings, Jr., President
Industrial National Bank of R.I.
Mr. Robert W. Franz, President
($1 mil.)
First State Bank of Oregon ($98 mil.)
Providence, Rhode Island
Milwaukie, Oregon
Mr. Russell M. Daane
Mr. Paul W. Gandrud, President
Vice Chairman of the Board
Swift County Bank ($13 mil.)
Fort Wayne National Bank ($190 mil.)
Benson, Minnesota
Fort Wayne, Indiana
GERALD FORD LIBRARY
-3-
Mr. Richard M. Gillett, President
Mr. William H. Kennedy, Jr. President
Old Kent Bank and Trust Company
National Bank of Commerce ($61 mil.)
($691 mil.)
Pine Bluff, Arkansas
Grand Rapids, Michigan
Mr. Donald E. Lasater, Chairman
Mr. Henry Gramann, Jr., President
Mercantile Trust Company ($1 bil.)
Adams State Bank ($2 mil.)
St. Louis, Missouri
Adams, Nebraska
Mr. John P. Laware
Mr. Hubert H. Hauck
Senior Vice President
Chairman of the Board
Chemical Bank ($12 bil.)
Maine National Bank ($223 mil.)
New York, New York
Portland, Maine
Mr. Richard Lothian, President
Mr. Lester W. Herzog, Jr., President
Somerset Trust Company ($92 mil.)
National Commercial Bank & Trust Co.
Somerville, New Jersey
($1 bil.)
Albany, New York
Mr. Richard G. Macgill, President
The New Jersey National Bank ($608 mil.`
Mr. A. Lawrence Higgins
Trenton, New Jersey
Executive Vice President
The Continental Bank & Trust Co.
Mr. Adrian O. McLellan, President
($138 mil.)
First National Bank ($91 mil.)
Salt Lake City, Utah
Great Falls, Montana
Mr. Floyd A. Hines
Mr. William F. Melville, Jr.
Chairman of the Board
Senior Vice President
Fayette Bank and Trust Company ($24 mil.) Maryland National Bank ($1 bil.)
Connersville, Indiana
Baltimore, Maryland
Mr. Lewis R. Holding, President
Mr. Wayne F. Messenger, President
First-Citizens Bank & Trust Co.
First State Bank ($12 mil.)
($788 mil.)
Cody, Wyoming
Raleigh, North Carolina
Mr. Horace G. Moeller, President
Mr. Richard J. Holland, President
Colonial National Bank ($172 mil.)
The Farmers Bank ($12 mil.)
Haddonfield, New Jersey
Windsor, Virginia
Mr. Stephen G. Moore, Vice President
Mr. Walter F. Johnson, President
The Merchants National Bank ($49 mil.)
First National Bank ($81 mil.)
Burlington, Vermont
Abilene, Texas
Mr. Hermann Moyse, Jr.
Mr. S. R. "Buddy" Jones, Jr.
Executive Vice President
President and Chief Executive Officer
City National Bank of Baton Rouge
First Pasadena State Bank ($88 mil.)
($127 mil.)
Pasadena, Texas
Baton Rouge, Louisiana
FORD is LIBRARY GERALD
-4-
Mr. Robert B. Palmer
Mr. Arnold H. Sturtevant
Senior Vice President
President
Philadelphia National Bank ($3 bil.)
Livermore Falls Trust Company
Philadelphia, Pennsylvania
($18 mil.)
Livermore Falls, Maine
Mr. C. L. Priddy, President
The National Bank of McAlester
Mr. Richard H. Swain, President
($34 mil.)
The First National Bank ($29 mil.)
McAlester, Oklahoma
Cape Girardeau, Missouri
Mr. K. A. Randall
Mr. Clifton D. Terry, President
President and Chief Executive Officer
Bank of Hawaii ($815 mil.)
United Virginia Bankshares, Inc.
Honolulu, Hawaii
($1 bil.)
Richmond, Virginia
Mr. James A. Webb, Jr.
Executive Vice President
Mr. J. Fred Risk, Chairman
Third National Bank in Nashville
The Indiana National Bank ($1 bil.)
($634 mil.)
Indianapolis, Indiana
Nashville, Tennessee
Mr. Leo W. Seal, Jr., President
Mr. Williard I. Webb, III, President
Hancock Bank ($115 mil.)
The Ohio Citizens Trust Company
Gulfport, Mississippi
($235 mil.)
Toledo, Ohio
Mr. C. Gale Sellens, President
Lakeside National Bank ($35 mil.)
Mr. J. C. Welman, Jr.
Wheat Ridge, Colorado
Senior Vice President
First National Bank of Minneapolis
Mr. Al K. Simpson, President
($1 bil.)
Merchants National Bank & Trust Co.
Minneapolis, Minnesota
($59 mil.)
Fargo, North Dakota
Mr. John H. Wheeler, President
Mechanics & Farmers Bank ($26 mil.)
Mr. Joe B. Sisler, President
Durham, North Carolina
The Clovis National Bank ($33 mil.)
Clovis, New Mexico
Mr. E. Paul Williams, President
Second National Bank ($59 mil.)
Mr. Virgil E. Solso, President
Ashland, Kentucky
The Oregon Bank ($159 mil.)
Portland, Oregon
Mr. Robert D. Williams, President
First National Bank of Arizona ($ 1 bil.
Mr. Samuel B. Stewart
Phoenix, Arizona
Senior Vice Chairman of the Board
Bank of America, N.T. & S.A. ($32 bil.)
Mr. Charles E. Woodruff
San Francisco, California
Executive Vice President
Manufacturers Hanover Trust Company
Mr. Leon Stone, President
($14 bil.)
The Austin National Bank ($267 mil.)
New York, New York
Austin, Texas
GERALD, FORD LIBRARY
-5-
Mr. Marchant D. Wornom
Mr. Sam I. Yarnell
Executive Vice President - Treasurer
Chairman of the Board
Virginia Bankers Association
American National Bank and Trust Co.
Richmond, Virginia
($291 mil.)
Chattanooga, Tennessee
NOTE: Figures in parentheses represent total resources
FORD & LIBRARY 938870
THE AMERICAN BANKERS ASSOCIATION 1120 CONNECTICUT AVENUE, N.W., WASHINGTON, D.C. 20036
FEDERAL ADMINISTRATIVE ADVISER
WILLIAM T. HEFFELFINGER, CONSULTANT
January 5, 1972
202/467-4200
Mrs. Catherine Mallardi
Board of Governors of the
Federal Reserve System
Washington, D. C. 20551
Dear Mrs. Mallardi:
There is enclosed for Chairman Burns' information
a copy of the agenda for the Government Borrowing Committee's
meeting on January 25-26, 1972. We have scheduled Dr. Burns
to meet with the Committee at 4:00 p.m. If he prefers some
other time the Committee can arrange its schedule to meet his
desire.
Sincerely,
WTH: TB
Enclosure
BERRAD FORD (IBRAF)
AGENDA
GOVERNMENT BORROWING COMMITTEE
The American Bankers Association
January 25-26, 1972
Tuesday, January 25, 1972
9:00 a.m.
Committee meets in Room 4426 of the Treasury
Department for briefing on Federal Financing
Bank
10:00 a.m.
Committee to review slides in Room 2334 of
the Treasury 1/
11:00 a.m.
Committee to meet with Under Secretary for
Monetary Affairs, Mr. Paul Volcker, in Room 4426
of the Treasury Department for backgrounding 1/
12:30 p.m.
Refreshments
1:00 p.m.
Luncheon
Cabinet and Pan American Rooms, Mayflower Hotel
2:30 p.m.
Committee to reconvene in Board Room of The
American Bankers Association, 1120 Connecticut
Avenue, N. W. (7th floor) 2/
Chairman Burns (Federal Reserve Board) will
meet with the Committee at 4:00 p.m.
6:30 p.m.
Cocktails
7:00 p.m.
Dinner
Cabinet and Pan American Rooms, Mayflower Hotel
Wednesday, January 26, 1972
9:15 a.m.
Committee to reconvene in Board Room of The
American Bankers Association, 1120 Connecticut
Avenue, N. W. 2/
10:00 a.m.
Committee to report its recommendations to
Secretary Connally and the Treasury Financing
Group in Room 4426 of the Treasury Department 1/
1/ Treasury will use the regular projection room on the second floor at south-
west corner of building (corner facing the Mall and the White House).
Briefing on Federal Financing Bank and Conference with Under Secretary for
Monetary Affairs and report to the Secretary of the Treasury will be held
in the 4th floor Conference Room on west side of building near the center
elevators opposite the White House.
2/ This location is on Connecticut Avenue opposite the Mayflower Hotel.
BERALD FORD CIBRARY
THE AMERICAN BANKERS ASSOCIATION 1120 CONNECTICUT AVENUE, N. W., WASHINGTON, D.C. 20036
PRESIDENT
ALLEN P. STULTS
AMERICAN NATIONAL BANK AND
TRUST COMPANY
CHICAGO, ILLINOIS 60890
March 6, 1972
The Honorable William Proxmire
Chairman, Joint Economic Committee
United States Senate
Washington, D. C. 20510
BERALD FOND LIBRAPA
Dear Mr. Chairman:
In your letter of February 4, 1972, you invited The American Bankers
Association to submit written comments on the economic issues which concern
the nation and our organization. This letter conveys the official views of
our Association on this important matter.
The American Bankers Association has applauded President Nixon for taking
bold action since August 15, 1971, to stem persisting inflationary pressures
domestically and to reverse the growing deficit in our international balance
of payments. At the same time, the Association has also stressed the need to
complement controls with appropriate fiscal and monetary policy measures, in
order to permit an early phase-out of the temporarily imposed wage-price con-
straints.
Members of the banking and financial community recognize that fiscal and
monetary policy measures must be responsive to the needs of a growing economy.
At the same time, however, it is important to note that a fine line exists
between appropriate stimulation of real economic growth and the rekindling
of inflationary expectations. Clearly, the anticipated 38.8 billion dollar
deficit for this fiscal year -- which would involve an estimated 8 billion
dollar deficit even if the economy were operating at full employment -- could
tip the scales in the direction of renewed inflationary pressures and expecta-
tions. This, in turn, may jeopardize the possibility of achieving non-infla-
tionary growth domestically and an improved trade position internationally, as
envisioned under the President's New Economic Program.
In the area of monetary policy, we note that the Federal Reserve has again
moved to ease monetary conditions substantially, and short-term interest rates
have fallen dramatically. This effort to make credit conditions much easier
as the economy moves upward has certain disturbing implications. The weakness
of the dollar in foreign exchange markets, and continued uneasiness in domestic
money markets, reflect these concerns and bear witness to the persistent un-
certainty which exists about inflation both at home and abroad.
The failure to achieve a steadier pattern in monetary policy also has
important implications for both financial conditions in the short run and the
THE AMERICAN BANKERS ASSOCIATION
CONTINUING OUR LETTER OF March 6, 1972
SHEET No. 2
achievement of sustained economic growth in the long run. To be sure, the
need to finance a substantially enlarged federal deficit, coupled with other
credit demands which can be expected to develop in 1972, only compounds the
difficulties associated with achieving orderly growth in money and credit.
A less expansionary fiscal policy than currently envisioned would moderate
prospective upward pressures on interest rates and be more conducive to an
orderly growth in monetary aggregates. This, in turn, would alleviate the
dangers of seriously disruptive changes in the total flow and allocation of
credit that would accompany the development of excessive upward pressures on
rates of interest.
Improved productivity represents another important ingredient for achieving
non-inflationary growth in our economy. The Association has long supported the
modernization of plant facilities and work rules, and the elimination of numer-
ous rigidities in the economy, as steps toward increasing the growth of pro-
ductivity. Additional attention should be focused on the development of appro-
priate programs and policies in this area.
Finally, the Association wishes to express the uneasiness of the financial
community concerning the implementation of certain aspects of the Phase II
wage-price program. The difficulties experienced by the Wage Board in holding
wage increases to a level consistent with the Price Commission's goals ob-
viously contribute to inequities, and may result in a breakdown of public
support for the program before it has achieved its objectives.
In summary, we strongly recommend that the Administration place greater
emphasis on programs designed to garner the long-term employment benefits of
non-inflationary economic policies. To achieve this, we urge both the Admin-
istration and the Congress to hold the growth of Federal expenditures below
present budget levels during the critical months that lie ahead. This would
permit the monetary authorities to adopt a steadier approach to implementing
monetary policy. In addition, we suggest that the Congress and the Adminis-
tration continue to emphasize the importance of productivity as a basic deter-
minant of compensation levels. Finally, we urge the Wage Board and the Price
Commission to work together more closely in the future to ensure the success
of the President's efforts to curtail inflationary pressures and expectations
in the economy. Hopefully, taken together these measures will enable the Ad-
ministration, at an early date, to remove the restraints temporarily imposed
on wage and price decision-making in the economy.
Sincerely,
allen P.Stulls
Allen P. Stults
President
CC - Hamilton D. Gewehr, Administrative
GERALD FORD LIBRARY
Clerk (30 copies)
THE AMERICAN BANKERS ASSOCIATION 1120 CONNECTICUT AVENUE, N. W., WASHINGTON, D.C. 20036
PRESIDENT
ALLEN P. STULTS
AMERICAN NATIONAL BANK AND
TRUST COMPANY
CHICAGO, ILLINOIS 60690
March 9, 1972
The Honorable Arthur F. Burns
Chairman
Board of Governors of the
Federal Reserve System
Washington, D. C. 20551
Dear Mr. Chairman:
For many years The American Bankers Association, by policy, has
vigorously supported the independence of the Federal Reserve System
within the Government as a prerequisite to effective monetary policy.
The Government Relations Council of our Association during a
recent meeting discussed the Congressional and newspaper comment on
a proposal by the Chairman of the House Committee on Banking and
Currency to subject the Federal Reserve Board and the Federal Reserve
Banks to audit by the Comptroller General of the United States.
They were in complete disagreement with that proposal and the
purpose of this letter is to reiterate emphatically that The American
Bankers Association continues its position in support of the indepen-
dence of the Federal Reserve System, and will oppose any action which
would subject the Federal Reserve Board and the Federal Reserve Banks
to audit by the Comptroller General of the United States, as we believe
this would be a step in weakening such independence.
Sincerely,
allen P.Stulls
Allen P. Stults
GERALD FORD LIBRARY
BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
March 9, 1972
To:
Chairman Burns
From: Charles Molony
Attached are:
(1) A memorandum from Messrs. Holland
and Molony regarding telephoned expression of
intent by Allen P. Stults, President of the
American Bankers Association, to amplify in his
remarks to the Mexican Bankers Association,
March 11, the comments on monetary policy given
in a letter by Mr. Stults for the ABA to
Senator Proxmire, March 6.
(2) Text copy of the March 6 letter by
Mr. Stults to Senator Proxmire.
(3) A New York Journal of Commerce
story, March 8, quoting the March Economic
Letter of the First National City Bank under
headline: "Dollar's Weakness Not Due to Fed
Money Policy."
(4) Text of the relevant portion of the
First National City Bank letter noted above.
(5) Complete copy of the First National
City Bank letter with the portions previously
noted appearing at pages 3, 4, and 5.
FORD is LIBRARY
March 9, 1962
TO:
Chairman Burns
w
FROM: Robert C. Holland and Charles Molony
Mr. Allen P. Stults, President of the American
Bankers Association, has indicated that he intends to
include in his remarks to the Mexican Bankers Association
on March 11, 1972 an amplification along the following
lines of the judgments concerning U. S. monetary policy
which were contained in The American Bankers Association
letter of March 6, 1972 to Senator Proxmire, Chairman of
the Joint Economic Committee of the Congress:
Some press reports on the above letter gave
an unfortunate misemphasis to the weight of our concerns.
While we do have some concern about the abundant volume
of credit and liquidity being made available to the
American economy, by far our greatest concern attaches
to fiscal policy and the possible consequences of the
very large deficits to which our economic system is
being subjected.
FORD
GERALD
LIBRARY
THE AMERICAN BANKERS ASSOCIATION 1120 CONNECTICUT AVENUE, N. W., WASHINGTON, D.C. 20036
PRESIDENT
ALLEN P. STULTS
AMERICAN NATIONAL BANK AND
TRUST COMPANY
CHICAGO, ILLINOIS 60890
March 6, 1972
The Honorable William Proxmire
FORD
Chairman, Joint Economic Committee
United States Senate
GERALD
Washington, D. C. 20510
LIBRARY
Dear Mr. Chairman:
In your letter of February 4, 1972, you invited The American Bankers
Association to submit written comments on the economic issues which concern
the nation and our organization. This letter conveys the official views of
our Association on this important matter.
The American Bankers Association has applauded President Nixon for taking
bold action since August 15, 1971, to stem persisting inflationary pressures
domestically and to reverse the growing deficit in our international balance
of payments. At the same time, the Association has also stressed the need to
complement controls with appropriate fiscal and monetary policy measures, in
order to permit an early phase-out of the temporarily imposed wage-price con-
straints.
Members of the banking and financial community recognize that fiscal and
monetary policy measures must be responsive to the needs of a growing economy.
At the same time, however, it is important to note that a fine line exists
between appropriate stimulation of real economic growth and the rekindling
of inflationary expectations. Clearly, the anticipated 38.8 billion dollar
deficit for this fiscal year -- which would involve an estimated 8 billion
dollar deficit even if the economy were operating at full employment -- could
tip the scales in the direction of renewed inflationary pressures and expecta-
tions. This, in turn, may jeopardize the possibility of achieving non-infla-
tionary growth domestically and an improved trade position internationally, as
envisioned under the President's New Economic Program.
In the area of monetary policy, we note that the Federal Reserve has again
moved to ease monetary conditions substantially, and short-term interest rates
have fallen dramatically. This effort to make credit conditions much easier
as the economy moves upward has certain disturbing implications. The weakness
of the dollar in foreign exchange markets, and continued uneasiness in domestic
money markets, reflect these concerns and bear witness to the persistent un-
certainty which exists about inflation both at home and abroad.
The failure to achieve a steadier pattern in monetary policy also has
important implications for both financial conditions in the short run and the
THE AMERICAN BANKERS ASSOCIATION
CONTINUING OUR LETTER OF March 6, 1972
SHEET No. 2
achievement of sustained economic growth in the long run. To be sure, the
need to finance a substantially enlarged federal deficit, coupled with other
credit demands which can be expected to develop in 1972, only compounds the
difficulties associated with achieving orderly growth in money and credit.
A less expansionary fiscal policy than currently envisioned would moderate
prospective upward pressures on interest rates and be more conducive to an
orderly growth in monetary aggregates. This, in turn, would alleviate the
dangers of seriously disruptive changes in the total flow and allocation of
credit that would accompany the development of excessive upward pressures on
rates of interest.
Improved productivity represents another important ingredient for achieving
non-inflationary growth in our economy. The Association has long supported the
modernization of plant facilities and work rules, and the elimination of numer-
ous rigidities in the economy, as steps toward increasing the growth of pro-
ductivity. Additional attention should be focused on the development of appro-
priate programs and policies in this area.
Finally, the Association wishes to express the uneasiness of the financial
community concerning the implementation of certain aspects of the Phase II
wage-price program. The difficulties experienced by the Wage Board in holding
wage increases to a level consistent with the Price Commission's goals ob-
viously contribute to inequities, and may result in a breakdown of public
support for the program before it has achieved its objectives.
In summary, we strongly recommend that the Administration place greater
emphasis on programs designed to garner the long-term employment benefits of
non-inflationary economic policies. To achieve this, we urge both the Admin-
istration and the Congress to hold the growth of Federal expenditures below
present budget levels during the critical months that lie ahead. This would
permit the monetary authorities to adopt a steadier approach to implementing
monetary policy. In addition, we suggest that the Congress and the Adminis-
tration continue to emphasize the importance of productivity as a basic deter-
minant of compensation levels. Finally, we urge the Wage Board and the Price
Commission to work together more closely in the future to ensure the success
of the President's efforts to curtail inflationary pressures and expectations
in the economy. Hopefully, taken together these measures will enable the Ad-
ministration, at an early date, to remove the restraints temporarily imposed
on wage and price decision-making in the economy.
Sincerely,
allen P.Stults
Allen P. Stults
President
CC - Hamilton D. Gewehr, Administrative
Clerk (30 copies)
R.(FORD, LIBRARY
Chibank says-
MAR 8 - 1972
Dollar's Weakness Not
Due to Fed Money Policy
By PATRICK CONNOR
once thought to be immune to
Journal of Commerce Staff
devaluation and then devalued
Federal Reserve monetary
has changed its status.
policy and low U.S. interest
Foreign criticism of Fed pol-
rates are not the important
icy seems largely beside the
reason for the weakness of the
point."
Criticism Voiced
GERALD R FORD VIBRARY
su next page for that of
perfinench part of 1sh national Dity Bank letter
From
FIRST
MONTHLY
NATIONAL
CITY
BANK
ECONOMIC
BANK FIRST QUIT NATIONAL
NEW YORK
LETTER
March
1972
Pp3.4.5
MONEY: International
How long these one-sided expectations about
The failure of speculative funds to flow from
the dollar will persist is by no means clear.
other currencies back into the dollar is blamed
Much depends on how soon the current ac-
on the low level of short-term interest rates in
count of the U.S. balance of payments begins
the
Advance Press Copy-Release
Contents of this copyrighted letter may be
Wednesday A.M., March 8, 1972
quoted in whole or in part with attribution to
First National City Bank.
FIRST
MONTHLY
NATIONAL
CITY
BANK
ECONOMIC
BANK FIRST CITY NATIONAL
NEW
YORK
LETTER
March
1972
General business conditions: still waiting for the spring
nent cure. It is not enough that the economy is
clearly headed in the right direction. What mat-
Some early data raise doubts, but the
economy is headed the right way. And
ters is the speed of its forward progress.
On that issue, the Administration continues
unless forecasts of 5-6% real growth are
to draw more solace from private forecasts and
wide of the mark, breakthroughs will
leading indicators of future economic activity
occur-particularly in retail sales.
than from data on the actual performance of
the economy. Although some forecasters have
scaled their projections down, the consensus
The economic policymakers of the Nixon Ad-
among private and government analysts alike
ministration are caught in a painful squeeze.
continues to point to a 5-6% gain in real out-
The public, after years of exposure to the con-
put-the largest since 1966-accompanied by
fident diagnoses of economists and politicians,
a further slowdown in price inflation. And the
has grown less tolerant of delays in the achieve-
big upward jump in new orders for durable
ment of high employment and the elimination
goods-together with planned increases in
of inflation. But the recovery from the recession
capital spending-lends support to this view.
of 1969-70, like the contraction itself, has been
Developments in the opening weeks of this
protracted.
year neither repudiate nor clearly validate the
President Nixon's spectacular trip to China
prevailing optimism. Retail sales, industrial
BERALD FORD
provided temporary relief for the policymakers'
production, housing starts and employment
discomfiture by diverting attention from the
rose in January, after allowance for normal
domestic economy. But only an acceleration in
seasonal fluctuations. And business inventories
the rate of economic growth and a further slow-
rose in December-the latest month for which
down in the rate of inflation can effect a perma-
data are available-by the largest amount since
Summary
FR 373
BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
March 9
Date
Members of the Board
To
From
Chas. Molony
FORD is ABRARY
Attached is the text
of the ABA letter
excerpted in the Wall
Street Journal story
today on page 8.
ful meeting dianer
april 18
THE AMERICAN BANKERS ASSOCIATION 1120 CONNECTICUT AVENUE, N. W., WASHINGTON, D.C. 20036
PRESIDENT
ALLEN P. STULTS
AMERICAN NATIONAL BANK AND
TRUST COMPANY
CHICAGO, ILLINOIS 80890
March 6, 1972
The Honorable William Proxmire
Chairman, Joint Economic Committee
GERALD FORD LIBRARY
United States Senate
Washington, D. C. 20510
Dear Mr. Chairman:
In your letter of February 4, 1972, you invited The American Bankers
Association to submit written comments on the economic issues which concern
the nation and our organization. This letter conveys the official views of
our Association on this important matter.
The American Bankers Association has applauded President Nixon for taking
bold action since August 15, 1971, to stem persisting inflationary pressures
domestically and to reverse the growing deficit in our international balance
of payments. At the same time, the Association has also stressed the need to
complement controls with appropriate fiscal and monetary policy measures, in
order to permit an early phase-out of the temporarily imposed wage-price con-
straints.
Members of the banking and financial community recognize that fiscal and
monetary policy measures must be responsive to the needs of a growing economy.
At the same time, however, it is important to note that a fine line exists
between appropriate stimulation of real economic growth and the rekindling
of inflationary expectations. Clearly, the anticipated 38.8 billion dollar
deficit for this fiscal year -- which would involve an estimated 8 billion
dollar deficit even if the economy were operating at full employment -- could
tip the scales in the direction of renewed inflationary pressures and expecta-
tions. This, in turn, may jeopardize the possibility of achieving non-infla-
tionary growth domestically and an improved trade position internationally, as
envisioned under the President's New Economic Program.
In the area of monetary policy, we note that the Federal Reserve has again
moved to ease monetary conditions substantially, and short-term interest rates
have fallen dramatically. This effort to make credit conditions much easier
as the economy moves upward has certain disturbing implications. The weakness
of the dollar in foreign exchange markets, and continued uneasiness in domestic
money markets, reflect these concerns and bear witness to the persistent un-
certainty which exists about inflation both at home and abroad.
The failure to achieve a steadier pattern in monetary policy also has
important implications for both financial conditions in the short run and the
THE AMERICAN BANKERS ASSOCIATION
CONTINUING OUR LETTER OF March 6, 1972
SHEET No. 2
achievement of sustained economic growth in the long run. To be sure, the
need to finance a substantially enlarged federal deficit, coupled with other
credit demands which can be expected to develop in 1972, only compounds the
difficulties associated with achieving orderly growth in money and credit.
A less expansionary fiscal policy than currently envisioned would moderate
prospective upward pressures on interest rates and be more conducive to an
orderly growth in monetary aggregates. This, in turn, would alleviate the
dangers of seriously disruptive changes in the total flow and allocation of
credit that would accompany the development of excessive upward pressures on
rates of interest.
Improved productivity represents another important ingredient for achieving
non-inflationary growth in our economy. The Association has long supported the
modernization of plant facilities and work rules, and the elimination of numer-
ous rigidities in the economy, as steps toward increasing the growth of pro-
ductivity. Additional attention should be focused on the development of appro-
priate programs and policies in this area.
Finally, the Association wishes to express the uneasiness of the financial
community concerning the implementation of certain aspects of the Phase II
wage-price program. The difficulties experienced by the Wage Board in holding
wage increases to a level consistent with the Price Commission's goals ob-
viously contribute to inequities, and may result in a breakdown of public
support for the program before it has achieved its objectives.
In summary, we strongly recommend that the Administration place greater
emphasis on programs designed to garner the long-term employment benefits of
non-inflationary economic policies. To achieve this, we urge both the Admin-
istration and the Congress to hold the growth of Federal expenditures below
present budget levels during the critical months that lie ahead. This would
permit the monetary authorities to adopt a steadier approach to implementing
monetary policy. In addition, we suggest that the Congress and the Adminis-
tration continue to emphasize the importance of productivity as a basic deter-
minant of compensation levels. Finally, we urge the Wage Board and the Price
Commission to work together more closely in the future to ensure the success
of the President's efforts to curtail inflationary pressures and expectations
in the economy. Hopefully, taken together these measures will enable the Ad-
ministration, at an early date, to remove the restraints temporarily imposed
on wage and price decision-making in the economy.
Sincerely,
allen P.Stults
Allen P. Stults
President
GERALD FORD LIBRARY
CC - Hamilton D. Gewehr, Administrative
Clerk (30 copies)
[c. 3/72]
SUBJECTS OF INTEREST TO CHAIRMAN BURNS FOR POSSIBLE
COMMENT BY MEMBERS OF THE ABA GOVERNMENT BORROWING COMMITTEE
1.
Prospective loan demand.
2.
The outlook for interest rates, especially long-term rates.
3.
Any suggestions for what the Committee on Interest and Dividends
ought to be doing, currently or in the situation foreseen for the
rest of 1972.
4.
Reactions to the Board's proposed regulatory changes regarding
reserve requirements (Regulation D) and check collection
(Regulation J).
GERALD FORD LIBRARY
THE AMERICAN BANKERS ASSOCIATION 1120 CONNECTICUT AVENUE, N.W., WASHINGTON, D.C. 20036
April 3, 1972
Mrs. Catherine Mallardi
Secretary to Chairman Burns
Board of Governors of the
Federal Reserve System
Washington, D. C. 20551
Dear Mrs. Mallardi:
There is enclosed for your information a copy of the
agenda for the next meeting of the Government Borrowing Committee.
Please call to Chairman Burns' attention that the Committee will
be meeting in our offices at 1120 Connecticut Avenue, N.W. The
building (Bender) has another entrance on L Street, near 18th.
Our board room is on the 7th floor.
The Committee will look forward, as usual, to meeting
with Chairman Burns at 4:00 p.m. on April 25, 1972.
Sincerely yours,
Habalon
H. A. Rabon
Associate Federal Administrative Adviser
Enclosure
HAR (WTH) fv
FORD & 074870 LIBRARY
AGENDA
GOVERNMENT BORROWING COMMITTEE
THE AMERICAN BANKERS ASSOCIATION
April 25-26, 1972
Tuesday, April 25, 1972
9:15 a.m.
Committee meets in Board Room of
The American Bankers Association
1120 Connecticut Avenue, N.W.
(7th Floor)
10:00 a.m.
Committee to review slides in
Room 2334 of the Treasury 2/
11:00 a.m.
Committee to meet with Under
Secretary for Monetary Affairs,
Mr. Paul Volcker, in Room 4125
of the Treasury Department
for backgrounding 3/
12:30 p.m.
Refreshments - Statler-Hilton Hotel,
16th & K Streets, Ohio Room (2nd Floor)
1:00 p.m.
Luncheon - California Room (2nd Floor)
2:30 p.m.
Committee to reconvene in Board
Room of The American Bankers
Association
Chairman Burns (Federal Reserve
Board) will meet with the Committee
at 4:00 p.m.
6:30 p.m.
Cocktails - Chinese Room
7:00 p.m
Dinner
- Chinese Room
Mayflower Hotel
Wednesday, April 26, 1972
9:15 a.m.
Committee to reconvene in Cafeteria
Conference Room 6th Floor of The
American Bankers Association,
1120 Connecticut Avenue, N.W.
10:00 a.m.
Committee to report its recommenda-
tions to Secretary Connally and the
Treasury Financing Group in Room 4125
of the Treasury Department 3/
1/ This location is on Connecticut Avenue across from the Mayflower Hotel.
2/ Treasury will use the regular projection room on the second floor on
southwest corner of building (corner facing the Mall and the White House).
3/ Conference with under Secretary for Monetary Affairs and report to the
Secretary of the Treasury will be held in the 4th floor Conference Room
on north side of building facing Pennsylvania Avenue.
GERALD ORD LIBRARY
March 22, 1972
GOVERNMENT BORROWING COMMITTEE
Chairman: Robert M. Surdam
President and Chief Executive Officer
National Bank of Detroit
RPA Box 116
Detroit, Michigan 48232 (313/965-6000)
A. W. Clausen, President
William M. Jenkins, Chairman
and Chief Executive Officer
Seattle-First National Bank
Bank of America, N. T. & S. A.
P. 0. Box 3586
P. O. Box 37000
Seattle, Washington 98124
San Francisco, Calif. 94137
(415/622-3456)
(206/583-3131)
Richard P. Cooley, President
Russ M. Johnson, Chairman of Bd.
and Chief Executive Officer
and Chief Executive Officer
Wells Fargo Bank, N. A.
Deposit Guaranty National Bank
464 California Street
P. 0. Box 1200
San Francisco, Calif. 94120
Jackson, Mississippi 39205
(415/396-3051)
(601/354-4711)
Thomas O. Cooper, President
Ben F. Love, President
South Des Moines National Bank
Texas Commerce Bank, N.A.
P. O. Box 2630
P. 0. Box 2558
Des Moines, Iowa 50315
Houston, Texas 77001
(515/285-1450)
(713/224-5161)
Gaylord Freeman, Chairman of Bd.
William H. Moore, Chairman of Bd.
The First National Bank
Bankers Trust Company
P. 0. Box A
P. 0. Box 318, Church St. Sta.
Chicago, Illinois 60670
New York, New York 10015
(312/732-4000)
(212/577-2345)
Robert J. Gaddy, Chairman & Pres.
John A. Moorhead, Chairman and
Tower Grove Bank & Trust Company
Chief Executive Officer
3134 S. Grand Boulevard
Northwestern National Bank
St. Louis, Missouri 63118
Minneapolis, Minnesota 55440
(314/664-6222)
(612/372-8123)
Donald M. Graham, Chairman
John A. Oulliber, Chairman of Bd.
and Chief Executive Officer
First National Bank of Commerce
Continental Illinois National Bank
P. 0. Box 60279
and Trust Company
New Orleans, Louisiana 70160
Lock Box H
(504/529-1371)
Chicago, Illinois 60690
(312/828-2306)
GERALD FORD LIBRARY
GOVERNMENT BORROWING COMMITTEE - page two
Herbert P. Patterson, President
James R. Sheridan, Senior Vice President
The Chase Manhattan Bank, N. A.
North Carolina National Bank
One Chase Manahattan Plaza
P. O. Box 120
New York, New York 10015
Charlotte, North Carolina 28201
(212/ 552 - 5936)
(704/ 374 - 5000)
Howard C. Peterson, Chairman of Bd.
EX OFFICIO
The Fidelity Bank
Broad and Walnut Streets
Eugene H. Adams, President
Philadelphia, Pennsylvania 19109
The First National Bank
(215/ 985 - 8384)
P. O. Box 5808, Terminal Annox
Denver, Colorado 80217
Robert v. Roosa, Partner
(303/ 893 - 2211)
Brown Brothers Harriman & Co.
(President-Elect, ABA)
59 Wall Street
New York, New York 10005
Douglas R. Smith, President and
(212/ 438 - 1818)
Chairman of the Board
National Savings & Trust Company
D. Thomas Triss, Chairman & CEO
Washington, D.C. 20005
National Shawmut Bank of Boston
(202/ 659 - 5201)
P. O. Box 2176
(Chairman, ABA Savings Bonds Comm.)
Boston, Massachusetto 02106
(617/ 742 - 4900)
Clifford C. Sommer, Director
Security Bank & Trust Company
Walter B. Wriston, Chairman
P. O. Box 467
First National City Bank
Owatonna, Minnesota 55060
399 Park Avenue
(612/ 372 - 7538)
New York, New York 10022
(Past President, ABA)
(212/ 559 - 1000)
Allen P. Stults, Chairman and
ADVISORY MIMBERS
Chief Executive Officer
American National Bank & Trust Company
John J. Lorkin, Senior Vice President
P. O. Dox DD
First National City Bank
Chicago, Illinois 60690
P. O. Box 850, Wall Street Sta.
(312/ 661 - 6030)
New York, New York 10015
(212/ 248 - 3824)
Donald C. Miller, Executive Vice Pres.
Continental Illinois National Dank and
Trust Company
William T. Heffelfinger
Lock Box II
A.B.A. Consultant (202/ 467 - 4200)
Chicago, Illinois 60690
(312/ 828 - 4217)
Leland S. Prusoia, Jr., Senior Vice Pres.
Bank of America, N. T. & S. A.
P. O. Box 37003
FORD
San Francisco, California 94137
(415/ 622 - 6893)
GERALD
LIBRARY
K
THE AMERICAN BANKERS ASSOCIATION 1120 CONNECTICUT AVENUE, N.W., WASHINGTON, D.C. 20036
July 11, 1972
Mrs. Catherine Mallardi
Secretary to Chairman Burns
Board of Governors of the
Federal Reserve System
Washington, D. C. 20551
Dear Mrs. Mallardi:
There is enclosed for your information a copy of the
agenda for the next meeting of the Government Borrowing Com-
mittee. Please call to Chairman Burns' attention that the Com-
mittee will be meeting in our offices at 1120 Connecticut Avenue,
N.W. The Building (Bender) has another entrance on L Street,
near 18th. Our board room is on the 7th floor.
The Committee will look forward, as usual, to meet-
ing with Chairman Burns at 4:00 p.m. on Tuesday, July 25, 1972.
Sincerely yours,
Hampton Hampton Salon
Hampton Rabon
Federal Administrative Adviser
Called- An Danne mil attend
Enclosure
Cm
HAR:fv
GERALD FORD LIBRARY
i
FORD
AGENDA
GERALD
GOVERNMENT BORROWING COMMITTEE
LIBRARY
The American Bankers Association
July 25 - 26, 1972
Tuesday, July 25, 1972
9:00 a.m.
Committee meets in Board Room of
The American Bankers Association
1120 Connecticut Avenue, N.W.
(7th Floor)
1/
10:00 a.m.
Committee to review slides in Room 2334
of the Treasury building
2/
11:00 a.m.
Committee to meet with Under Secretary
for Monetary Affairs, Mr. Paul Volcker
in Room 4426 of the Treasury building for
backgrounding 3/
12:30 p.m.
Refreshments
1:00 p.m.
Luncheon
Cabinet and Pan American Rooms, Mayflower Hotel
2:30 p.m.
Committee to reconvene in Board Room of
The American Bankers Association
1120 Connecticut Avenue, N.W. (7th Floor) 1/
Chairman Burns (Federal Reserve Board) will
meet with the Committee at 4:00 p.m.
6:30 p.m.
Cocktails
7:00 p.m.
Dinner
Anderson Room, Metropolitan Club, 17th and H
Streets, N.W. (Courtesy of Chairman Surdam)
Wednesday, July 26, 1972
9:15 a.m.
Committee to reconvene in Board Room of
The American Bankers Association
1120 Connecticut Avenue, N.W.
10:00 a.m.
Committee to report its recommendations to
Secretary Shultz and the Treasury Financing
Group in Room 4426 of the Treasury building
1/ This location is on Connecticut Avenue across from the Mayflower Hotel
2/ Treasury will use the regular projection room on the second floor on southwest
corner of building (corner facing the Mall and the White House)
3/ Conference with under Secretary for Monetary Affairs and report to the Secretary
of the Treasury will be held in the 4th floor Conference Room on west side of build-
ing near the center elevators opposite the White House.
To:
Chairman Burns
July 26, 1972
From: J. Dewey Daane
Jan
I am attaching the recommendations of the ABA Government
Borrowing Committee for this financing.
The SIA recommendations placed the same or even greater
emphasis on the need for debt extension. Specifically, the SIA
recommended the following exchange offering:
1. A 6% Treasury Note maturing August 15, 1976, with a
6% coupon priced at par.
2. A 6-1/4% Treasury Note at par, and
3. A 6-3/8% Treasury Bond of August 15, 1984, at 6-3/8%
coupon discounted to yield 6.45.
The total of the public holders in the SIA package would be
$16.6 billion. The SIA would offer the holders of the August,
September, December 1972 maturities all three of the above issues,
and offer the holders of the August and November 1974 maturities
the two longer prongs.
I think the offering of the SIA would be appropriate. It
would accomplish maximum debt extension at this time, and I do
not think it would disturb the market. The Treasury seems to be
leaning the same way, although Volcker is intrigued with the idea
of the long bond a la ABA. I am too, but would reserve it for
later on and take the SIA package or some variant.
FORD & LIBRARY GERALD
GOVERNMENT BORROWING COMMITTEE
The American Bankers Association
Report to the Secretary of the Treasury
The Honorable George P. Shultz
Washington, D. C.
July 26, 1972
In response to your request, the Committee was pleased to consider the
refinancing of the $1.5 billion 4% Treasury bonds and $2.6 billion Treasury
notes maturing August 15, 1972, of which $2.3 billion are publicly held. The
Committee also considered the advisability of including the refinancing of the
$2.0 billion 2-1/2% bonds maturing September 15, 1972, as well as other nearby
maturities.
The Committee noted the unusual opportunity provided by the relative
stability of the current market for continuing the program of debt lengthening
which the Treasury has pursued from time to time and which this Committee has
consistently recommended. In addition, in contemplation of the probable enactment
of legislation initiating a Federal Financing Bank, the Committee recognized the
particular importance of placing new Treasury issues as bench marks in the longer-
term market.
The Committee emphasizes the need, with respect to the international posi-
tion of the United States, of employing debt restructuring to reinforce other
efforts toward a lessening of inflationary pressures while at the same time
maintaining a reasonably competitive relationship between interest rates in the
United States and those abroad.
Against the above background, the Committee recommends that the Treasury
utilize this opportunity to improve the structure of the public debt through the
following exchange offerings:
GERALD FORD LIBRARY
- 2 -
1. A 5-7/8% Treasury note maturing February 15, 1976,
to be priced at a discount which would provide a
yield of about 6%.
2. A reopening of the outstanding 6-3/8% Treasury bond
maturing February 15, 1982, attractively priced at
a level not higher than par.
The Committee recommends that the foregoing securities be made available
on an exchange basis to the holders of the issues maturing August 15, September
15, November 15, and December 15, 1972, as well as to the holders of the 4-7/8%
and 4-3/4% notes maturing February and May 1973 respectively. The aggregate
outstanding of these issues is $18.9 billion of which $12.3 billion is publicly
held.
The Committee recommends that the Treasury at the same time announce its
intention to offer short-term securities in the near future to deal with impending
cash needs and the August 15 attrition. It is difficult (in a volatile money
market climate and with shifting Treasury cash needs) to recommend the amount
and term of the short-term offering at this time. These factors must be deter-
mined by the Treasury in the market environment as it develops following the
completion of the August refunding.
Because of the importance of reestablishing an active and viable market
for long-term Treasury debt instruments, the Committee recommends that the
exchange offering be followed by an early sale of a modest amount of 20- to
25-year bonds, preferably through the auction technique. This would be a further
extension of a technique which has been successfully used by the Treasury, most
recently in the May 1972 offering of the 6-3/8% Treasury bonds maturing in 1982.
The announcement of this offering should be made after the market has absorbed
the exchange offering of notes and bonds described above.
GERALD FORD LIBRARY
- 3 -
The background briefing by the Treasury staff was most helpful to the
Committee. We hope that our recommendations will be useful to you and your
associates in reaching your decision.
FORD :- LIBRARY 9ERALD
GOVERNMENT RELATIONS
THE AMERICAN BANKERS ASSOCIATION 1120 CONNECTICUT AVENUE, N.W., WASHINGTON, D.C. 20036
EXECUTIVE DIRECTOR
CHARLES R. MONEILL
202/467-4097
December 18, 1972
Mr. John C. Burton
Chief Accountant
Securities and Exchange Commission
500 North Capitol Street
Washington, D. C. 20549
Dear Mr. Burton:
The American Bankers Association endorses the principle of
the Securities and Exchange Commission's new Regulation S-X Rule 5-02-1
to provide the investor more financial information on corporations in
which he holds stock or in which he may invest.
The Commission quite correctly recognizes the difficulties
involved in accurately disclosing compensating balances which is re-
quired as a part of the new Rule. We commend the staff for proposing
an Accounting Series Release to provide guidance on this subject, and
we appreciate the opportunity to comment on it.
Having carefully reviewed the draft guidelines, we can appre-
ciate the problems which gave rise to the broad general approach that
was followed. We believe, however, more certainty is essential and hope
the attached memorandum will be of assistance to you in identifying some
requirements in need of greater clarity. In addition, we offer our
services at any time to meet with the staff to discuss the draft guide-
lines or other proposals in this area.
The information that will be provided the investor depends
on how specifically and precisely the requirements of the Rule and re-
lease can be defined. If requirements are vague or imprecise, the com-
pany will have difficulty deciding what should be disclosed and how.
This will reduce the value of the financial statement, possibly raising
rather than answering questions in the mind of the investor.
Further, vague and imprecise disclosure requirements would be
difficult to reconcile with the absolute liability imposed by Section 11
GERALD FORD JBRARTY
Mr. John C. Burton
12/18/72
Page 2.
of the 1933 Securities Act and the liability imposed by the 1934 Ex-
change Act for the filing of misstatements of material information.
The Association remains concerned that even if all suggested
changes are made, the corporation and its auditor still face an almost
monumental task in translating to the investor through segregation and
footnote disclosure a picture which is factual, understandable, and not
subject to misinterpretation.
One of the principal problems in presenting an accurate pic-
ture is that a corporation usually allocates its needed liquidity (mini-
mum operating balance and cash reserve) among various banks to meet
their compensating balance requirements. Such requirements are almost
always on an average-balance basis so the corporation can freely draw
on any of these accounts to meet its cash needs. Consequently, compen-
sating balance agreements often have no impact on credit costs, and
the funds are, in fact, not subject to any usage or withdrawal re-
strictions even on a long-term basis.
The guidelines relating to compensating balances are important
to the investing public. We believe additional time and study would
lead to the preparation of really workable guidelines that would result
in effective disclosure. Consequently we suggest a postponement of the
effective date of the new Rule for three to six months. This time
would give both the staff and interested parties the opportunity to de-
velop guideline proposals that would better serve the public interest.
Sincerely yours,
Charles R. McNeill
Executive Director
GERALD FORD LIBRARY
December 18, 1972
Comments of
The American Bankers Association
on the draft Accounting Series Release
regarding compensating balances
Reasons for Requirement
The American Bankers Association is greatly concerned and disagrees
with the assumption of both Rule 5-02-1 and the draft guidelines that a com-
pensating balance is always a restriction on usage or withdrawal of funds. A
compensating balance arrangement may be such a restriction if it is legally
binding and it requires the holding of a noninterest-bearing certificate of
deposit during the term of a loan or if it requires the maintenance of a speci-
fic minimum balance or specific average balance expressly subject to sanctions
or penalties in the event the borrower fails to meet the requirement. Other-
wise, a compensating balance arrangement or understanding is not in law or,
in fact, a usage or withdrawal restriction. To say it is goes beyond, if not
contrary to, the facts. The law and custom applicable over scores of years to
the banking business cannot be hidden or obscured by an argument that the Rule
and the proposed guidelines themselves add the necessary substance or sustenance
to any compensating balance to make it a usage restriction. (See Commissioner
V. Acker, 361 U.S. 87 and U.S. V. Calamaro, 354 U.S. 351 regarding efforts to
create facts by regulatory fiat.)
Definitions
The guidelines should make it clear that a compensating balance re-
quires an agreement or a meeting of the minds between the corporation and the
GERALD FORD LIBRARY
- 2 -
bank as to its terms, and the agreement may be oral or in writing. We urge the
definition of compensating balance on page 3 be so amended.
Form of Disclosure
Segregation, if appropriate in any case, would seem to be so only if
the compensating balance arrangement is in writing and requires the holding
of a noninterest-bearing certificate of deposit during the term of a loan or
requires the maintenance of a specific minimum balance expressly subject to
sanctions or penalties should the borrower fail to meet the balance require-
ments such as:
(a) A right in the bank to accelerate the maturity of
any one or more outstanding loans.
(b) A right to cancel a firm agreement, if such there
be, to extend credit.
(c) A right in the bank to increase the interest rate
on any one or more outstanding loans, or to increase
the interest rate on new loans made under the line
of credit.
Should a compensating balance agreement be in writing and require the
maintenance of a specific average balance expressly subject to sanctions or
penalties, it would, nevertheless, seem inappropriate to segregate because the
balance required to meet the agreement cannot be determined for any one day.
In such circumstances a footnote disclosure should be sufficient. Similarly,
footnote disclosure should be sufficient for all other compensating balance
arrangements in writing; that is, those without sanctions or penalties.
GERALD FORD LIBRARY
- 3 -
For compensating balance arrangements or understandings which are
not in writing, footnote disclosure should be sufficient, regardless of their
terms. Compliance rests primarily on a corporation's concern for future availa-
bility of funds, and the guidelines already recognize that, if such concern
is the basis for maintaining totally discretionary balances they are not re-
portable.
With regard to materiality of compensating balances, the Association
urges that cash and its equivalent as shown in the financial statement be con-
sidered as the reference point. We hope that full consideration will be given
to the above suggestions.
Measurement Problems
Turning to the disclosures which must be made, measurement or quan-
tification of a compensating balance at best is going to be difficult and im-
precise. The guidelines set out to obtain uniformity but seem to add to the
problem rather than reduce it.
1. Float
The question of float and its relative impact on the companies' book
balance and the banks' ledger balance both as to outstanding checks and uncol-
lected deposits raises many complexities. Uncollected deposits are of no
economic use to either the bank or the company; therefore they should be dis-
regarded. We urged an amendment which would make it clear that the float which
results from uncollected deposits need not be considered.
FORD is LIBRARY GERALD
- 4 -
2. Compensation for Other Bank Services
Under the guidelines, balances maintained to compensate for bank
services are not to be included in the disclosed compensating balance. How-
ever, if a bank should allow such balance to also serve in connection with
financing, then it would have to be disclosed. This would be inequitable to
the latter corporation. It would be required to segregate or footnote its
cash or cash items when they are subject to no greater, and possibly less, re-
straint than the first corporation's. Also, the latter corporation and its
auditors would be subjected to the additional liability that accompanies dis-
closure.
3. Minimum Operating Balance
The guideline provision on minimum operating balances also seems un-
fair. The corporation should be allowed to subtract this balance plus its cash
reserve from its compensating balances because, whether or not the corporation
has a credit line or a loan, the minimum operating balance and cash reserve
would be on deposit. Where a balance serves an operational purpose for the
company, it is difficult to characterize its simultaneous use as a compensating
balance for credit as anything else but secondary.
If subtraction is not allowed, then the corporation should be allowed
to comment in the footnote on the impact of its minimum operating balance and
cash reserve on its compensating balances.
The guidelines would require that the impact of compensating balances
on the effective cost of bank financing be reflected. The Association believes
the requirements for disclosure where there is dual use and the disregard of
GERALD FORD LIBRARY
- 5 -
minimum operating balances and cash reserves would distort the effective cost
picture and make it appear that the corporation is paying more for its credit
than a fair interpretation would determine.
A11 of the aforementioned problems of measurement coupled with the
fact that most corporations have credit and deposit relationships with more
than one bank cause the difficulties and complexities to multiply. Therefore
we strongly urge consideration of the suggestions we have made.
Responsibilities
The last sentence of the guidelines suggests that the company request
from its banks a reply to a confirmation which sets forth the bases of their
mutual understanding on compensating balances. We suggest this sentence be
struck. The first two sentences of this paragraph assign the responsibilities
under the Rule and guidelines to the company and its auditor, but the last
sentence might be construed in a civil suit, if there is a misstatement of a
compensating balance, to put the bank in the same position as the company.
BERALD FORD LIBRARY
DRAFT 11/24/72
For RELEASE
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
ACCOUNTING SERIES
Release No.
Compensating Balances
Introduction
One of the recent amendments to Regulation S-X, "Form and Content of
Financial Statements" (Accounting Series Release No. 125), called for the
expansion of Rule 5-02-1, which relates to cash and cash items. Since
its issuance questions have been asked about the nature of expected com-
pensating balance disclosure. The purpose of this release is to provide
guidance on this topic.
Reasons for Requirement
Compensating balances are a significant element in lending, banking
and liquidity decisions by management which are reflected in the financial
statements of a firm. Specifically, (1) compensating balances are an
integral part of arrangements for bank financing and therefore are a factor
in measuring the effective cost of financing; (2) because such balances
in effect (if not legally) limit the usage of reported cash balances on
an intermediate or long-term basis, they have different liquidity charac-
teristics than balances not subject to such requirements; and (3) an
appraisal of management's financial policies is assisted by an understand-
ing of compensating balance arrangements.
Unfortunately, despite the importance of compensating balances and
despite the general recognition in the financial community that they exist,
GERMLD FORD LIBRARY
-2-
disclosure of such arrangements in financial statements has been extremely
infrequent. When disclosure has occurred, very few details have been given
so that statement users are unable to deal analytically with the subject.
Lack of disclosure has been justified on the grounds that such arrange-
ments were generally unwritten, informal and not subject to precise quan-
tification. None of these reasons are sufficient to support a policy of
nondisclosure of a phenomenon which is recognized to be both real and
significant. They do, however, support the need for disclosure guidelines
so that reasonably uniform and understood standards can be applied in
determining the form of disclosure that should take place.
Requirement
The formal requirement is now included in Regulation S-X, Rule 5-02-1,
which reads as follows:
"State separately (a) cash on hand and demand deposits; (b) funds
subject to repayment on call or immediately after the date of the
balance sheet required to be filed; (c) time deposits; and (d) other
funds, the amounts of which are known to be subject to withdrawal
or usage restrictions, e.g., as compensating balances or special
purpose funds: The general terms and nature of such repayment pro-
visions and withdrawal or usage restrictions shall be described in
a note referred to herein. Funds subject to withdrawal or usage
restrictions shall not be included under this caption unless they
are reasonably expected to become available for current operations
within one year. [Emphasis added.]
BERMLE FORD LIBRARY
-3-
Definitions
For purposes of this requirement, a compensating balance is defined
as any demand deposit (or any time deposit or certificate of deposit on
which less than the market rate of interest is paid) carried by a corpora-
tion which either formally or informally is related to current borrowing
arrangements by the corporation (or any other party) with a lending insti-
tution. Such arrangements would include both current borrowings and credit
availability at the present time or in the future. Balances carried by
a corporation at its own discretion with the expectation of assuring
future availability of funds would not be included.
Form of Disclosure
The format for disclosure cannot be spelled out with precision since
it will vary according to the factual situation involved. The rule calls
for segregation on the face of the balance sheet, but there are many cir-
cumstances in which this will not be the most meaningful presentation
and footnote disclosure would be preferred.
In general, when the terms of the compensating balance arrangement
are formal and are described in connection with the terms of a particular
lending agreement, balance sheet segregation is appropriate. Examples
of this would include situations where a certificate of deposit must be
held while a loan is outstanding or where a minimum balance must be main-
tained at all times while credit is extended or available. The fact
that balances are legally subject to withdrawal would not be the determin-
ing factor in deciding what disclosure practice should be followed. An
arrangement, however, where the balance required was expressed as an
GERALD FORD LIBRARY
-4-
average might lead to footnote disclosure since the balance sheet date
cash balance might bear no relationship to the requirement. Footnote
disclosure should generally be sufficient when arrangements are informal.
The extent of disclosure required will also depend on the circum-
stances. In most cases, the terms of the arrangement should be described
and the amount of the compensating balance disclosed. This may be expressed
as an average balance and may be presented as a range if a single figure
does not accurately reflect the situation. A general statement that such
arrangements exist will not be satisfactory.
If arrangements during the year were materially different than the
situation at year end, that fact should be disclosed. The impact of the
compensating balance on the effective cost of bank financing should be
reflected. If the compensating balance is maintained for the benefit of
an affiliate, an officer, director or employee, or a third party, that
fact should be disclosed, although no such mention in regard to affiliates
is required in parent company only statements if the affiliate is included
in the consolidated financial statements of the reporting entity.
Where a company is not in compliance with a compensating balance
arrangement, that fact should generally be disclosed. If the arrangement
is informal, however, and the bank has given no indication of applying
sanctions to enforce it, disclosure of lack of compliance would ordinarily
not be necessary.
In determining the materiality of compensating balances, the refer-
ence point should generally be the cash balance shown on the financial
statements. Except in unusual circumstances, if compensating balances in
the aggregate amount to 10 percent or more of that figure they should be
considered material.
FORD & GERALD LIBRARY
-5-
Measurement Problems
A number of problems arise in the process of measuring the amount of
compensating balances. It is recognized that precision of measurement may
not be practical, but that fact should not limit the disclosure of material
arrangements. Since several of the problems of measurement occur frequently,
and since it is- desirable that they be similarly solved to assure uniformity
of practice among companies, the following guidelines have been developed
to assist registrants. It is recognized that every situation cannot be
anticipated, and the need for judgment on the part of registrants and
their auditors cannot and should not be avoided.
1. Float. The balance shown on the bank's ledgers and the company's
books will differ due to delays in presentment of checks and deposits
in transit. The bank ledger balance is generally higher than the book
balance. Since compensating balance arrangements are related to the
bank's ledger balance, any "float" which regularly results should be
deducted (or added) in computing the amount of compensating balance
to be disclosed. Thus, the disclosed amount will relate to the book
figure reported in the financial statements.
2. Compensation for other bank services. Balances are maintained not
only in connection with financing arrangements but also to compensate
the bank for its account handling function and in some cases to pay
for other services such as lock boxes and account reconcilement.
Balances maintained for these purposes should not. be included in the
disclosed compensating balances. If a bank allows balances to serve
both purposes, the balances should be considered as supporting finan-
cing for the purposes of this requirement.
GERALD FORD LIBRARY
-6-
3. Minimum operating balance. -All corporations require some minimum
amount of cash on which to operate. The amount will depend upon the
extent of seasonal and random fluctuation in short term cash demand
as well as management judgment regarding necessary safety factors.
It has been argued that this minimum operating balance should be sub-
tracted from compensating balances since the maintenance of such a
balance has no incremental cost to the borrower. For purposes of
compensating balance disclosure requirements, such a subtraction is
not appropriate. Notonly is the measurement of such minimum operating
balances highly subjective, but the concept of subtraction implies
that the compensating balance is of secondary importance which is by
no means apparent. It would be equally reasonable to say that operat-
ing funds are free of cost because compensating balances must be
maintained.
4. Prior periods. -An attempt should be made to disclose compensating
balances and their effect in the financial statements of the prior
period(s) presented in comparative form. There will be some cases
in which the determination of the existence of a compensating balance
arrangement in a preceding period may not be possible; in such cases,
that fact should be disclosed.
Responsibilities
The registrant is responsible for computing the effect of its compen-
sating balance agreement(s) and and preparing the related financial state-
ment disclosure. The auditor has the responsibility of satisfying himself
that the disclosure is adequate and fairly reflects the arrangements.
GERALD R. FORD LIBRARY
on -7-
When such arrangements exist, the computation would be facilitated and
more readily substantiated if the borrower requests the lender to reply
to a confirmation which sets forth the bases of their mutual understand-
ing.
FORD & 938670 LIBRARY
FEDERAL AGENCY RELATIONS
THE AMERICAN BANKERS ASSOCIATION 1120 CONNECTICUT AVENUE, N.W., WASHINGTON, D.C. 20036
FEDERAL ADMINISTRATIVE ADVISER
HAMPTON A. RABON
202/467-4200
December 21, 1972
Mrs. Catherine Mallardi
Secretary to Chairman Burns
Board of Governors of the
Federal Reserve System
Washington, D.C. 20551
Dear Mrs. Mallardi:
There is enclosed for your information a copy of the agenda
for the next meeting of the Government Borrowing Committee. Please
call to Chairman Burns' attention that the Committee will be meeting
in our offices at 1120 Connecticut Avenue, N.W. The building (Bender)
has another entrance on L Street, near 18th. Our board room is on
the 7th floor.
The Committee will look forward, as usual, to meeting
with Chairman Burns at 4:00 p.m. on Tuesday, January 30, 1973.
I am also enclosing for Chairman Burns' information a
list of the members of the Government Borrowing Committee.
Sincerely yours,
Hampton A. Rabon
1/2/73
im
Encl.
HAR:fmm
FORD 3 LIBRARY 033470
AGENDA
GOVERNMENT BORROWING COMMITTEE
The American Bankers Association
January 30 - 31, 1973
LIBRARY GERALD ? FORD
Tuesday, January 30, 1973 .
9:00 a.m.
Committee meets in Board Room of
The American Bankers Association
1120 Connecticut Avenue, N.W.
(7th Floor)
10:00 a.m.
Committee to review slides in Room 2334
of the Treasury building
2/
11:00 a.m.
Committee to meet with Under Secretary
for Monetary Affairs, Mr. Paul Volcker
in Room 4426 of the Treasury building for
backgrounding.
3/
12:30 p.m.
Refreshments
1:00 p.m.
Luncheon
Cabinet & Pan American Rooms, Mayflower Hotel
2:30 p.m.
Committee to reconvene in Board Room of
The American Bankers Association
1120 Connecticut Avenue, N.W. (7th Floor) 1/
Chairman Burns (Federal Reserve Board) will
meet with the Committee at 4:00 p.m.
6:30 p.m.
Cocktails
7:00 p.m.
Dinner
Chinese Room, Mayflower Hotel
Wednesday, January 31, 1973
9:15 a.m.
Committee to reconvene in Board Room of
The American Bankers Association
1120 Connecticut Avenue, N.W.
1/
10:00 a.m.
Committee to report its recommendations to
Secretary Shultz and the Treasury Financing
Group in Room 4426 of the Treasury building 3/
1/ This location is on Connecticut Avenue across from the Mayflower Hotel
2/ Treasury will use the regular projection room on the second floor on southwest
corner of building (corner facing the Mall and the White House)
3/ Conference with under Secretary for Monetary Affairs and report to the Secretary
of the Treasury will be held in the 4th floor Conference Room on west side of build-
ing near the center elevators opposite the White House.
GOVERNMENT BORROWING COMMITTEE
Chairman:
Robert M. Surdam
Chairman and Chief Executive Officer
National Bank of Detroit
RPA Box 116
Detroit, Michigan 48232
Alfred Brittain III
Donald M. Graham
President
Chairman and Chief Executive Officer
Bankers Trust Company
Continental Illinois National Bank
P. O. Box 318, Church Street Station
and Trust Company
New York, New York 10015
Lock Box H
Chicago, Illinois 60690
Robert E. Bryans
William M. Jenkins
President
Chairman
First National Bank of Casper
Seattle-First National Bank
P. O. Box 40
P. O. Box 3586
Casper, Wyoming 82601
Seattle, Washington 98124
Willard C. Butcher
Ben F. Love
President
Chairman and Chief Executive Officer
The Chase Manhattan Bank, N.A.
Texas Commerce Bank, N.A.
One Chase Manhattan Plaza
P. O. Box 2558
New York, New York 10015
Houston, Texas 77001
A. W. Clausen
John A. Moorhead
President and Chief Executive Officer
Chairman and Chief Executive Officer
Bank of America, N. T. & S. A.
Northwestern National Bank
P. O. Box 37000
Seventh and Marquette
San Francisco, California 94137
Minneapolis, Minnesota 55440
Richard P. Cooley
John A. Oulliber
President and Chief Executive Officer
Chairman of the Board
Wells Fargo Bank, N.A.
First National Bank of Commerce
464 California Street
P. O. Box 60279
San Francisco, California 94120
New Orleans, Louisiana 70160
Gaylord Freeman
Howard C. Petersen
Chairman of the Board
Chairman of the Board
The First National Bank
The Fidelity Bank
P. O. Box A
Broad and Walnut Streets
Chicago, Illinois 60670
Philadelphia, Pennsylvania 19109
Robert J. Gaddy
Robert V. Roosa
Chairman and President
Partner
Tower Grove Bank and Trust Company
Brown Brothers Harriman & Company
3134 S. Grand Boulevard
59 Wall Street
St. Louis, Missouri 63118
New York, New York 10005
GERALD FORD LIBRARY
Government Borrowing Committee - page two
Thomas I. Storrs
EX OFFICIO
President
North Carolina National Bank
Eugene H. Adams
P.O. Box 120
President
Charlotte, North Carolina 28201
The First National Bank
P.O. Box 5808, Terminal Annex
D. Thomas Trigg
Denver, Colorado 80217
Chairman and Chief Executive Officer
(President, ABA)
National Shawmut Bank of Boston
P.O. Box 2176
Willis W. Alexander
Boston, Massachusetts 02106
Executive Vice President
The American Bankers Association
Walter B. Wriston
1120 Connecticut Avenue, N.W.
Chairman
Washington, D.C. 20036
First National City Bank
399 Park Avenue
Rex J. Morthland
New York, New York 10022
Chairman of the Board
The Peoples Bank and Trust Company
of Selma
ADVISORY MEMBERS
P.O. Box 799
Selma, Alabama 36701
John J. Larkin
(President-Elect, ABA)
Senior Vice President
First National City Bank
Douglas R. Smith
P.O. Box 850, Wall Street Station
President and Chairman of the Board
New York, New York 10015
National Savings & Trust Company
Washington, D.C. 20005
Donald C. Miller
(Chairman, ABA Savings Bond Committee)
Executive Vice President
Continental Illinois National Bank
Allen P. Stults
and Trust Company
Chairman and Chief Executive Officer
Lock Box H
American National Bank & Trust Company
Chicago, Illinois 60690
P.O. Box DD
Chicago, Illinois 60690
Leland S. Prussia, Jr.
(Past President, ABA)
Senior Vice President
Bank of America, N.T. & S.A.
P.O. Box 37003
San Francisco, California 94137
Hampton A. Rabon
A.B.A. Director (202/467-4200)
James R. Sheridan
Senior Vice President
North Carolina National Bank
P.O. Box 120
Charlotte, North Carolina 28201
January 1973
GERALD FORD LIBRARIA
THE AMERICAN BANKERS ASSOCIATION 1120 CONNECTICUT AVENUE, N.W., WASHINGTON, D.C. 20036
FEDERAL ADMINISTRATIVE ADVISER
WILLIAM T. HEFFELFINGER, CONSULTANT
October 5, 1971
202/467-4200
Mrs. Catherine Mallardi
Secretary to Chairman Burns
Board of Governors of the
Federal Reserve System
Washington, D. C. 20551
Dear Mrs. Mallardi:
There is enclosed a copy of the agenda for the
October 26-27, 1971, meeting of the Government Borrowing Com-
mittee. You will note we will expect Governor Burns at
4:00 p.m.
Sincerely,
W. T. Heffelfinger
WTH: TB
Enclosure
FORD & 03RALD LIBRARY
AGENDA
GOVERNMENT BORROWING COMMITTEE
THE AMERICAN BANKERS ASSOCIATION
October 26-27, 1971
Tuesday, October 26, 1971
9:15 a.m.
NOTE
Committee meets in Board Room of
The American Bankers Association
1120 Connecticut Avenue, N. W.
(7th Floor) 2/
10:00 a.m.
Committee to review slides in
Room 2334 of the Treasury 1/
11:00 a.m.
Committee to meet with Under
Secretary for Monetary Affairs,
Mr. Paul Volcker, in Room 4426
of the Treasury Department
for backgrounding 1/
12:30 p.m.
Refreshments - Mayflower Hotel
Maryland Room (2nd Floor)
1:00 p.m.
Luncheon - Mayflower Hotel
Pennsylvania Room (2nd Floor)
2:30 p.m.
Committee to reconvene in Board
Room of The American Bankers
Association
Chairman Burns (Federal Reserve
Board) will meet with the Com-
mittee at 4:00 p.m.
6:30 p.m.
Cocktails - Maryland Room
7:00 p.m.
Dinner - Pennsylvania Room
Mayflower Hotel
Wednesday, October 27, 1971
8:30 a.m.
Committee to reconvene in Board
Room of The American Bankers
Association, 1120 Connecticut
Avenue, N. W.
9:15 a.m.
Committee to report its recom-
mendations to Secretary Connally
and the Treasury Financing Group
in Room 4426 of the Treasury
Department 1/
1/ Treasury will use the regular projection room on the second floor on
southwest corner of building (corner facing the Mall and the White House).
Conference with Under Secretary for Monetary Affairs and report to the
Secretary of the Treasury will be held in the 4th floor Conference Room
on west side of building near the center elevators opposite the White House.
2/ This location is on Connecticut Avenue across from the Mayflower Hotel.
FORD & LIBRARY GERALD
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
Office Correspondence
29
Date April 30, 1971
To
Chairman Burns
Subject: Meeting of the International
From
Andrew W. Hogwood, Jr.
Banking Committee of the A.B.A.--May 3, 1971
On Monday, May 3, 1971 at 4:30 p.m., there will be a meeting
in the Board Room of the International Banking Committee of The American
Bankers Association with available members of the Board and certain
staff. You are invited to attend this meeting and we would appreciate
your letting us know (Ext. 3326) whether or not you plan to attend.
There is attached, for your information, a public relations
release from the A.B.A. concerning the International Banking Committee,
as well as a separate list of the Committee members.
Attachments
FORD j LIBRARY 938470
THE AMERI
BANKERS ASSOCIATION
PUBLIC RELATIONS DEPART
of
85 CONNECTICUT AVENUE, N.W., WASHINGTON, D.C. 20008
FORD
GERALD LISRARY
CONTACT: Pat Kane
RELEASE FOR A.M.'s
(202) 298-9090
Friday, February 26, 1971
A.B.A. NAMES INTERNATIONAL BANKING COMMITTEE
WASHINGTON, D.C., Feb. 26 -- The American Bankers Association has
formed an International Banking Committee to help its member banks deal with
increasing activity in world-wide financial matters. The 12-member committee
will be chaired by Stephen C. Eyre, senior vice president of the First National
City Bank, New York.
Announcing formation of the committee, A.B.A. President Clifford C.
Sommer said that such a committee is needed because increasing numbers of
1971
American banks are becoming "substantially and significantly involved in
international banking."
"There is a definite need for the Association to have a standing
committee of experienced bankers who can speak out on issues that importantly
affect the ability of the banks to operate in this field," Sommer said. "The
committee will be a small working group dealing with the ever-increasing problems
affecting today's international scene, particularly in the political and
legislative spheres."
The committee will be responsible for the operations of the new
International Banking School, planned for August 1-14 at the University of
Colorado, Boulder.
Members of the International Banking Committee are:
Arthur Bardenhagen Irving Trust Company, New York; Joseph A. Carrera,
Bank of America, San Francisco; Roger N. Christiansen, Seattle-First National
Bank; Richard H. Cummings, National Bank of Detroit; Larry V. DeBell, First
(More)
A.B.A. NAMES INTERNATIONAL BANKING COMMITTEE
2.
National Bank, Denver; Robert C. Howard, First City National Bank, Houston;
Alfred F. Miossi, Continental Illinois National Bank and Trust Company, Chicago;
Charles H. Murray, Mercantile Trust Company, St. Louis; James W. Oliphant Jr.,
The Merchants National Bank, Mobile; Robert B. Palmer, Philadelphia National
Bank and I. Barry Thompson, Central National Bank, Cleveland.
Roger B. Hawkins of the A.B.A. staff will serve as director of the
committee.
#
GERALD
FORD LIBRARY
(Revised attachment to memo of April 29, 1971 on meeting of the International
Banking Committee of the A.B.A.)
INTERNATIONAL BANKING COMMITTEE
OF
AMERICAN BANKERS ASSOCIATION
Chairman
Stephen C. Eyre
Senior Vice President
First National City Bank
New York City
Arthur Bardenhagen
Alfred F. Miossi
Vice President
Senior Vice President
International Division
International Banking Department
Irving Trust Company
Continental Illinois National
New York City
Bank and Trust Company
Chicago
Joseph A. Carrera
Senior Vice President
Charles H. Murray
International
Vice President
Bank of America
International Banking
San Francisco
Mercantile Trust Company
St. Louis
Roger N. Christiansen
Vice President
James W. Oliphant, Jr.
Seattle-First National Bank
Vice President
Seattle
Foreign Department
The Merchants National Bank
Richard H. Cummings
Mobile
Senior Vice President
National Bank of Detroit
Robert B. Palmer
Detroit
Vice President and Manager
International Banking Division
Larry V. DeBelle
Philadelphia National Bank
Senior Vice President and
Philadelphia
Director of Personnel
First National Bank
I. Barry Thompson
Denver
Vice President and Manager
International Division
Robert C. Howard
Central National Bank
Senior Vice President
Cleveland
First City National Bank
Houston
Roger B. Hawkins of the ABA staff will serve as director
of the committee.
FORD
GERALD
LIBRARY
THE AMERICAN BANKERS ASSOCIATION 815 CONNECTICUT AVENUE, N. W., WASHINGTON, D.C. 20006
WILLIS W. ALEXANDER
EXECUTIVE VICE PRESIDENT
February 11, 1971
Dear Dr. Burns,
On behalf of the officers of The American Bankers Association, it
is my pleasure to invite you to attend the annual Spring Meeting
of our Executive Council at The Greenbrier, White Sulphur Springs,
West Virginia, on April 21 - 24, 1971.
An official announcement of this meeting, together with an appli-
cation for hotel accommodations, is enclosed.
Please let me know if you will be able to attend our meeting.
Sincerely yours,
Will alymal
The Honorable Arthur F. Burns, Chairman
Board of Governors of the Federal Reserve System
21st Street and Constitution Avenue, N.W.
Washington, D. C. 20551
, no
Callen
FORD & LIBRARY GERALD
an
FROM
PLEASE TYPE OR PRINT
TITLE
BANK
CITY
STATE
do
I
plan to attend the Spring Meeting.
do not
will
My wife
accompany me.
will not
My first name as it
should appear on badge:
Wife's first name as it
should appear on badge:
Please check if you think your wife will
participate in:
Ladies' Golf Tournament
Ladies' Putting Contest
is LIBRARY BERALD
Ladies' Bridge and Canasta
******
In order for us to print special badges and include
names in the registration list, this card must be
returned prior to March 15, 1971.
5c
U.S. POSTAGE
Mr. Robert Cotton
The American Bankers Association
1120 Connecticut Avenue, N.W.
Washington, D. C. 20036
THE AMERICAN BANKERS ASSOCIATION 1120 CONNECTICUT AVENUE, N.W., WASHINGTON, D.C. 20036
WILLIS W. ALEXANDER
February 11, 1971
Called EXECUTIVE VICE PRESIDENT
ANNOUNCEMENT OF THE SPRING MEETING OF THE
am
A.B.A. EXECUTIVE COUNCIL AND OTHER DESIGNATED COMMITTEES
This is the official notice of the Spring Meeting of the Executive Council and
other designated committees of The American Bankers Association which will be
held at The Greenbrier, White Sulphur Springs, West Virginia, Wednesday, April 21
through Saturday, April 24. Since this is a closed meeting, notice is being sent
to you as a member of the Executive Council, Administrative Committee, Management
Committee, or one of the following groups which will be meeting during the Spring
Meeting:
Banking Education Committee
Organization Committee - Regional
Credit Policy Committee
Vice Presidents
Economic Policy Committee
Retirement Committee
Federal Legislative Committee
State Association Section
Foundation for Education in
State Bank Division Executive Committee
Economics - Board of Trustees
State Legislative Committee
MAPS Planning Committee
Steering Committee for Strengthening
Marketing/Savings Division Executive
State Banking Law and Supervision
Committee
Task Force on A.B.A. Organization
National Bank Division Executive
Trust Division Executive Committee
Committee
Urban Affairs Committee
The Spring Meeting begins officially on Wednesday, April 21. The committees
listed above, except for the Federal Legislative Committee, will meet in after-
noon sessions on Wednesday and/or Thursday. You will receive a special notification
from the staff directors of your committees as to the time and place if you are
expected to attend any of these meetings.
The Federal Legislative Committee will meet in all day session on Friday, April 23.
Three sessions of the Executive Council will be held on the mornings of Wednesday,
Thursday, and Saturday, April 21, 22 and 24. Everyone at the Spring Meeting is
expected to attend both the Executive Council and the Federal Legislative Committee
meetings.
Hotel Reservations
Your hotel reservation should be made directly with the hotel as soon as possible,
but not later than March 15, on the enclosed Application for Hotel Accommodations.
The daily rates at The Greenbrier for the meeting are listed on this form. If you
are willing to share a twin-bedded room with some other member, it will be appre-
ciated by the hotel. It is the hotel's policy to refrain from arbitrarily assigning
guests to share a room.
GERALD FORD LIBRARY
Hotel Reservations (continued)
Authorized Expense Allowance (continued)
We regret that it is necessary to ask you not to invite family or guests to
accompany you to the Spring Meeting if they require a separate bedroom, since
of committees meeting on Wednesday, Thursday, and Friday, and a maximum of four
our Spring Meeting taxes the capacity of The Greenbrier to house those who are
days if a member only of the Executive Council.
eligible to attend. The hotel, of course, will place a cot in a bedroom for
an immediate family member.
All claims must be submitted within sixty days following the meeting in order
to be honored. An expense report form will be included in the registration kit.
To permit utilization of all available space, it is of utmost importance that
the hotel be informed immediately of cancellations and changes in arrival time
1. Transportation
and departure. Without such notification, availability of rooms on arrival
cannot be assured. Reservations for rooms not occupied on dates specified are
Direct route commercial airplane fare
automatically cancelled.
a. To Roanoke airport, plus hotel bus or small plane fare
Registration
between Roanoke airport and White Sulphur Springs.
The A.B.A. meeting registration desk will be located on the lower lobby floor
b. To Charleston airport, plus small plane fare (no bus
of The Greenbrier near the hotel registration desk. You may pick up your
available) between Charleston Airport and White Sulphur
badge and program at this desk.
Springs.
Transportation
C. Commercial airplane fare to Greenbrier Valley Airport.
No special trains for the meeting will go to or return from White Sulphur Springs,
Direct route railroad fare. If Pullman space is used for part of
nor are Pullman cars available. There is only coach service on the regular trains.
the trip, this portion of the fare should not exceed the cost of
Members coming from the West will have to go to St. Louis or Cincinnati to make
roomette accommodations.
train connections to White Sulphur Springs.
Auto travel, which will be reimbursed as follows:
The new Greenbrier Valley Airport is now in operation. It is approximately
fourteen miles from White Sulphur Springs and is serviced by Piedmont Airlines
a. For trips exceeding one day's driving (more than 500 miles) to
on a regular schedule. Airport Limousine service is provided to the hotel.
or from destination -- an amount equal to the cost of either
direct air or direct rail fare, whichever is lower.
If the time schedule is not satisfactory, you can get to White Sulphur Springs
by flying to Roanoke or Charleston. Air-taxis operated by Greenbrier Airlines
b. For trips not exceeding one day's driving (500 miles or less)
fly during daylight hours between these airports and the hotel. (Mr. Charles
to and from destination -- 10¢ per mile plus tolls.
O. Tate, Jr., P. O. Box G, White Sulphur Springs, West Virginia 24986, or
phone 304-536-1234.)
C. For driving to and from air or rail connections -- 10¢ per mile
plus tolls and parking.
The hotel does not send limousines or buses to meet planes at the Charleston
Airport.
2. Allowance for expenses en route: $10 per day if by air or rail; $10 each
way by auto.
Those interested in ground transportation service from/to the Roanoke Airport
should complete and return the enclosed questionnaire to the hotel with your
3. Hotel allowance: $42.50 per day for hotel expenses not exceeding five days
request for hotel accommodations. Changes in flight arrivals cannot be accom-
-- for members of Administrative Committee; four days -- for members of
modated by the hotel if received later than April 10.
committees which are meeting at The Greenbrier; and four days -- if member
only of Executive Council, provided members have attended meetings on all
It is suggested that those who do not plan to drive make their transportation
days claimed.
reservations as soon as possible. Consult your local airline or railroad repre-
sentative for full information.
Any other expenses are to be borne by the member himself. The Association
will not reimburse him for any expenses incurred by or for his wife.
Authorized Expense Allowance
Claims for expenses should be presented only by those who have attended all
meetings of the Executive Council and meetings of committees of which claimant
is a member. A maximum of five days will be allowed for those invited to attend
the April 20 Administrative Committee meeting, four days for those who are members
Meeting
Management Committee
Monday
Dinner
Administrative Committee
Tuesday
All Day
All other committees
Wednesday and
Afternoon
(except Federal Legislative)
Thursday
Federal Legislative Committee
Friday
All Day
Executive Council
Wednesday,
Morning
Thursday, and
Saturday
Entertainment
Ladies' Bridge and Canasta Party
Wednesday
Afternoon
Ladies' Putting Contest
Thursday
Afternoon
Men's Golf Tournament
Thursday
Afternoon
President's Reception
Thursday
Evening
Ladies' Golf Tournament
Friday
Morning
Men and women interested in playing tennis should register their names at the
Tennis Club after arrival at the hotel. Games will be arranged by the Tennis
Pro.
Please complete the enclosed and return as soon as possible.
We look forward to having you with us at The Greenbrier.
Cordially,
Will
Encl. (4)
Hotel Request
Transportation Request
Card
Ladies' Program
SPRING MEETING OF THE A.B.A. EXECUTIVE COUNCIL
AND OTHER DESIGNATED COMMITTEES
April 21-24, 1971
Transportation for Air Travelers
Transportation from and to Airports
FROM CHARLESTON: The Charleston Airport is too far away for the Hotel to
conveniently provide ground transportation. However, Greenbrier Airlines air-taxi
service has flights available during daylight hours between Charleston and The
Greenbrier. Contact the Airline direct for reservations. (Greenbrier Airlines
phone: 304-536-1234)
FROM ROANOKE: Greenbrier Airlines air-taxi service may also be used from and to
the Roanoke Airport. The hotel will provide ground transportation from this
Airport if the form below is returned with your application for hotel accommodations.
Because of the complexities involved in meeting persons arriving on various flights,
the hotel must have at least ten days' notice should it become necessary to change
your arrival time. The hotel will not be able to arrange to meet you if specific
flight arrival information is not received by April 10.
FROM GREENBRIER VALLEY AIRPORT: This Airport is approximately fourteen miles from
the Hotel. Airport limousine service is available to the hotel.
(RETURN TO HOTEL IF GROUND TRANSPORTATION FROM AND TO ROANOKE AIRPORT IS DESIRED)
TO: Reservation Manager
The Greenbrier
White Sulphur Springs, West Virginia 24986
SPRING MEETING OF THE A.B.A. EXECUTIVE COUNCIL - April 21 24, 1971
I would be interested in ground transportation to The Greenbrier from the Roanoke
Airport for myself ( ), my wife and myself ( ), arriving at Roanoke Airport
on
(a.m.)(p.m.). Flight #
Airline
,
.
I ( ) We ( ) would also like ground transportation back to the Roanoke Airport
on
Flight #
Airline
.
,
leaving at
(a.m.) (p.m.).
NAME
TITLE
(Indicate "Mr. and Mrs. 11 if wife is accompanying you)
BANK
P. O. BOX
CITY
STATE
ZIP CODE
FORD LISTABLE
APPLICATION FOR HOTEL ACCOMMODATIONS
Please fill out this application form completely and mail, prior to March 15, to:
Reservation Manager
The Greenbrier
White Sulphur Springs, West Virginia 24986
I am authorized to and shall attend the Spring Meeting of the Executive Council of The American Bankers
Association, April 21 - 24, 1971. Please enter my application for the following:
Wife
TWIN-BEDDED ROOM AND BATH FOR DOUBLE OCCUPANCY - $75. Will share with
Committeeman
DOUBLE ROOM AND BATH FOR SINGLE OCCUPANCY - $50.
named below*
SINGLE ROOM AND BATH - $37.50 (Limited number available.)
SUITE (Parlor, Twin-Bedded Room and Bath) $
. Parlors are $20, and $30, in addition to the
above twin-bedded room rate. (*See below.)
SUITE (Parlor, Two Twin-Bedded Rooms and Two Baths) $
.
Parlors are $20, $30, and $35, in
addition to the above rate per two twin-bedded rooms. (*See below.)
COTTAGE (A limited number available, accommodating from 4 to 8 persons.) Rates upon request.
(*See below.)
Above rates are quoted on a daily basis, American Plan, including three meals.
Please indicate:
BEFORE
AFTER
AFTER
AFTER
DATE
BREAKFAST
BREAKFAST
LUNCH
DINNER
ARRIVAL
DEPARTURE
WILL ARRIVE BY:
TRAIN
AUTO
PLANE
* Above accommodations
to be shared with
(Please indicate if
arrival and depart-
ure times differ.)
NAME
TITLE
(PLEASE PRINT OR TYPE. INDICATE "MR. & MRS." IF WIFE IS ACCOMPANYING YOU.)
BANK
ADDRESS
P.O. BOX NO.
CITY
STATE
ZIP CODE
1971
FORD VIBRARY
INFORMATION FOR
LADIES ATTENDING SPRING MEETING
The Greenbrier
White Sulphur Springs, West Virginia
We invite you to join in any and all of the following events which
are being planned for your stay at The Greenbrier during the Executive
Council Spring Meeting, April 21 - 24, 1971.
WEDNESDAY, APRIL 21
2:30 p.m.
Bridge and Canasta Party - Plan to make up your own table or
the Committee will be glad to assist
you. Table and door prizes will be
awarded.
THURSDAY, APRIL 22
9:30 a.m.
Golf Get Together - Stop in for a cup of coffee and talk over
plans with the Ladies' Golf Committee.
2:30 p.m.
Putting Contest Putting Green - - don't forget, golf or walking
shoes must be worn.
FRIDAY, APRIL 23
9:00 a.m.
Golf Tournament - The Ladies' Golf Committee will handle arrangements
for the tournament. Upon your arrival in
White Sulphur Springs, please furnish the
information requested on the card in your
folder and return to the A.B.A. Office, or
bring it along to the Golf Get Together on
Thursday morning.
PORD LIBRARY is 976839
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
Office Correspondence
Date April 22, 1971
To Chairman Burns
Subject: Treasury May Financing
From Government Finance Section
On April 28, the Treasury will announce the details of its May
financing operations. In addition to refunding $5.8 billion of publicly
held maturing issues, the Treasury is expected to announce at least the
dimensions of its near-term new money requirements. Board staff estimates
indicate that these requirements may total $2 to $3 billion over and above
any funds needed to cover attrition in the refinancing. Even with sizeable
attrition, payment on the cash operation will probably not be needed until
late May or early June. Thereafter, unless the critical April income tax
payments (now in process of collection) fall short of estimates, or unless
spending runs higher than presently anticipated in the closing weeks of
the fiscal year, no further Treasury cash financing is likely to be needed
until July.
In deciding the terms of its May financings the Treasury must
consider its plans in the larger context of overall borrowing requirements
during the rest of the calendar year. These requirements will be unusually
heavy, representing in addition to the refunding of about $7.8 billion of
publicly held maturing coupon issues the need to raise an expected $23
billion of new money.
Basic issue
The basic question facing the Treasury with regard to the upcoming
May financing is whether it can afford to seek significant debt lengthening
QERALD FORD LIBRARY
Chairman Burns
- 2 -
at this juncture, given the still fragile state of the economic recovery,
balance of payments difficulties and the recent general weakness of note
and bond markets. Understandably, the Treasury would like to take advantage
of its new leeway to issue long-term debt as soon as the time is propitious.
This desire stems both from the persistent shortening of the average
maturity of the marketable debt in recent years and from the massive deficit
financing job that lies ahead.
Against this essentially housekeeping desire for debt lengthening,
however, one must balance the associated risks of encouraging further un-
desired shifts in the structure of interest rates. With note and bond
yields having recently risen in response to the firming of business news
and money market conditions, any offering of long-term debt at this time
of heavy continuing corporate and municipal bond calendars would obviously
risk an accentuation of the recent advance in long-term rates, with possible
negative consequences for capital spending. At the same time, such debt
funding would tend to exert downward pressure on Treasury bill rates,
possibly reversing some of the recent narrowing of spreads between U. S.
and foreign short-term rates, with consequent marginal detriment to U. S.
balance of payments goals.
Alternative financing approaches
With the announcement of terms on the May refinancing only a
week away, the range of ideas among debt management experts as to the
appropriate Treasury strategy is unusually wide. To some extent this
diversity appears to reflect differing judgements as to the degree of
GERALD FORD LIBRARY
FORD & LIBRARY GERALD
Chairman Burns
- 3 -
fragility still remaining in current market conditions, and the extent to
which note and bond yields may already be reaching a new relatively
stable equilibrium at their current higher levels. While virtually all
experts recommend that the Treasury exercise considerable caution in under-
taking debt extension at this time -- and hence have ruled out the idea of
an advance refunding -- some still believe that there is leeway for
lengthening, even beyond the seven year maturity range; whereas others
would restrict new debt offerings entirely to relatively short maturities.
Because of the greater than usual diversity of opinion about the
appropriate course for Treasury action, no market consensus has as yet
crystallized on any particular refinancing approach. Among the various
possibilities that have been suggested, the following are illustrative
of the range of thinking.
(1) Among the experts seeking some modest use of the Treasury's
new leeway to issue long-term debt, one suggested approach is a "rights-
cash" strategy. Holders of the maturing May issues would be given the
option to exchange into either a 10 to 12 year bond or a 3 to 5 year note.
The bond would be priced with a view to limiting its size to about $750
million in order to minimize competitive pressures on other capital markets.
The "rights" exchange would then be followed in the latter part of May with
a cash auction of a short-term note designed to cover attrition in the
refunding and (depending on the size of the attrition) to pick-up the bulk
of the $2 to $3 billion of remaining net new money needs.
1/ A more cautious alternative, also designed to use the new Treasury lee-
way, would offer a 10-15 year bond and an 18-month note as exchange
options in the refunding and later raise needed cash in the bill market.
Chairman Burns
- 4 -
(2) An alternative strategy at the opposite end of the opinion
spectrum would limit the "rights" exchange to a single 21 month note and
cover subsequent cash needs entirely in the Treasury bill market, presumably
through a September or December tax bill supplemented by additions to
regular bills (possibly another strip). The objective of this approach
would be to minimize upward pressures on longer-term interest rates while
tending to bolster short-term rates.
(3) A third strategy would fall between the first two. It
would avoid new debt in both the over 7 year maturity range and the 6 to
7 year maturity range that has been regularly tapped in recent refinancings.
It would offer some debt extension, however, through a two-pronged "rights"
exchange -- say an 18 month note as an anchor issue and an intermediate
term note around the 4 year maturity area. Sebsequent cash needs would
be met largely in the bill market.
Comment on alternatives
The first of the above alternatives would clearly create the
greatest risk of aggravating the rise in long-term rates. Although this
alternative is advanced as a relatively modest approach to debt lengthening,
only an intermediate and long-term issue would be offered in the exchange.
Consequently, unless cash redemptions were very large, the degree of debt
extension accomplished would be substantial. Since the Treasury could be
expected to price the new issues to obtain a creditable exchange, the odds
seem rather high that this financing approach would extend rate advances
significantly further in the Government securities market and possibly
FORD & LIBRARY GERALD
Chairman Burns
- 5 -
in the corporate and municipal markets as well. To risk such rate develop-
ments at this stage of the economic recovery seems unjustified.
Offering of a 10-12 year bond at this juncture would create an
especially difficult pricing problem for the Treasury in any event. Over
and above the pricing complications arising from the half decade absence
of any Treasury debt offerings with maturities beyond 7 years, the desire
to insure that exchanges into any long-term offering would be quite modest
could be accomplished only through delicate pricing -- given the "rights"
form of the refinancing.
In view of the high policy priority now being accorded the avoid-
ance of both higher long-term rates and lower short-term rates, there is
much to be said for electing approach two above -- i. e. offering a single
new short-term note issue in a "rights" exchange. From a debt housekeeping
standpoint, however, such an approach would have its drawbacks. The new
issue would be large and possibly create debt refinancing problems for the
future, although at the 21 month maturity slot no other issues are presently
outstanding (as the attached table shows). Moreover, adoption of this
approach would do very little to stretch out existing marketable debt in
advance of the period of massive deficit financing that lies ahead. And
cash redemptions might be higher than in the case where "rights" holders
could choose between two exchange options. Higher attrition could have
effects on very short-term interest rates as redeemed funds were re-inacted
at least tenuously in money market instruments.
A refinancing approach along the lines of the third alternative
noted above might represent a reasonable compromise between the objectives FORD
GERALD LIBRARY
Chairman Burns
- 6 -
of alternatives one and two. Offering of.new exchange options in the
18 month and 4 year maturity slots would accomplish some modest
debt lengthening, but the average maturity of the new issues would probably
be short enough to avoid serious competition with funds flowing into
longer-term debt markets. In fact, announcement of a refunding package
along the lines proposed in alternative three (and even moreso under
alternative two) might very well be followed by some decline of yields on
longer-maturity Treasury issues.
A "rights" exchange even one which stresses short-term offerings,
might generate some temporary downward pressure on Treasury bill rates --
on swaps by investors not wanting the new issues -- at a time when other
seasonal influences were also exerting similar pressures. Early announce-
ment of Treasury plans to cover its late May cash needs in the Treasury
bill market might, therefore, be helpful in moderating the extent of any
further bill rate declines.
Adoption of the alternative three approach would not rule out
the possibility of a Treasury offering of long-term bonds at a later date.
While the interest cost of a later long-term offering might very well be
higher than now, this is not wholly clear; bond markets have been especially
sensitive recently, but the atmosphere could calm at a later point as heavy
corporate bond offerings moderate. One alternative the Treasury might
wish to consider in offering long-term bonds is a series of modest-sized,
cash auctions using the Dutch technique (i.e. all bids would be allotted
at the stop-out price in order to encourage wider participation by non-
professionals). Such auctions could become a regular debt-lengthening
feature of Treasury financing operations.
FORD & LIBRARY GERALD
Chairman Burns
- 7 -
Recommendation of
Government Finance Section
The Government Finance Section recommends against the adoption
of any debt refinancing approach seeking the degree of debt extension
involved in alternative one above. It would prefer to stay short, as in
either alternative two or three, but believes that the amount of debt
extension involved in alternative three would not be too risky -- if the
Treasury sees the need to meet at least a part of its debt housekeeping
objectives at this time. In view of the recent unsettled state of the
Government securities market, it is too early to suggest any precise
pricing specifications for a Treasury operation of the alternative three
type.
Chairman Burns
Table 1
Treasury Securities Maturing
At Quarterly Refunding Periods
As of February 28, 1971
(In millions of dollars)
Held by Public
1971 - May
5,810
Aug.
4,190
Nov.
3,688
1972 - Feb.
4,796
May
5,337
Aug.
3,872
Nov.
(2,328) due in Dec.
1973 - Feb.
--
May
3,198
Aug.
4,879
Nov.
3,846
1974 - Feb.
5,519
May
6,568
Aug.
4,816
Nov.
4,046
1975 - Feb.
3,490
May
2,309
Aug.
5,471
Nov.
--
1976 - Feb.
882
May
1,973
Aug.
2,727
Nov.
--
1977 - Feb.
2,356
May
--
Aug.
1,634
Nov.
--
1978 - Feb.
5,407
--
is
FORD
May
Note: Issues maturing between refunding dates are entered at
nearest preceding quarterly date.
GERALD
LIBRARY
Chairman Burns
Table 2
Ownership of Maturing Treasury Securities
As of February 28, 1971
(In millions of dollars)
Total
Held by
Comm.
Savings
Insurance
All
Public
banks
instits.
Companies
Other 1/
5-1/4 of 5/15/71
4,265
2,370
1,160
78
54
1,078
8 of 5/15/71
4,176
3,440
1,663
81
79
1,617
1/ Reporting business corporations, which account for around 50 per cent of
total corporate holdings, held 44 of the 5-1/4's and 18 of the 8's.
NOTE: numbers for commercial banks and insurance companies have been blown-
up to represent full coverage.
FORD LIBRARY is
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
Office Correspondence
Date April 26, 1971
To
Chairman Burns
Subject: ABA Visit of April 27.
From
John Rippey off
One of the purposes of the visit by a delegation representing
the American Bankers Association to see you is to discuss in general
terms the draft of a proposed bill to regulate billing practices of
credit card issuers. The draft has been prepared by a special
working group within ABA as an alternative to S. 652, a bill intro-
duced early this year by Sen. Proxmire. The Proxmire bill, like
ABA's, would cover all credit card issuers retailers, oil companies,
etc. --as well as banks. It is ABA's view that S. 652 would be
unnecessarily restrictive and would be particularly burdensome
to banks because of the special nature of the bank credit card
industry.
Like Proxmire's, the bill drafted by ABA would rely to a
considerable degree on the willingness of the Federal Reserve
Board to take on the additional burden of administering regula-
tions under the bill. In several instances, the explanation
accompanying the draft notes that a particularly knotty problem
can be resolved by allowing the Board the latitude to prescribe
suitable regulations. Under either bill, millions of transactions
across the country would be subject to regulation. A huge amount
of mail would be generated and an enormous amount of staff time
would be required to get the regulations underway. The underlying
reason for making the Board the administrator, according to the
explanation, seems to be that bank credit cards represent the
vanguard of a new payments mechanism, replacing cash and
checks. The cards are only secondarily a means of extending
credit.
The draft also argues that it would be wrong for regulation
of bank cards to be splintered between banking and non-banking
(read Federal Trade Commission) agencies. In point of fact, both
the ABA draft and the Proxmire bill would give rule-writing
authority to the Board. The rationale for this grant in the Proxmire
bill is simply that the purview of the Senator's subcommittee extends
GERALD FORD LIBRARY
Chairman Burns
-2-
only as far as the financial supervisory agencies. A bill along
the lines of S. 652, but giving rule-writing authority to FTC,
would probably be referred to the Senate Commerce Committee,
away from Proxmire's grasp.
The Board has been asked to report on S. 652, and the staff
is now working up a draft for consideration by the Board. It is
probably fair to say that, by and large, the staff's suggestions
for modifications of S. 652 would not be greatly different from
the alternatives set forth in the ABA draft. The Board has not
been asked by Sen. Proxmire to comment on the ABA draft, and,
in fact, no bill embodying the draft has been introduced.
S. 652 is a much more extreme bill than one which
Sen Proxmire introduced last year. The reason for this
radical turn may be that he is feeling the effects of competi-
tion from FTC and the House Small Business Committee.
Both had credit cards under study last year, and, toward the
end of the year, FTC had proposed stiff rules for credit card
issuers as a new trade practice rule. This rule would have
applied to bank credit cards, at least arguably, and bankers
were very much disturbed by this incursion into heretofore
exempt territory. Thus the bankers are looking to Sen Proxmire
to pass a bill which will clearly indicate that the Board--and not
FTC has power to regulate bank credit cards.
FTC announced in January that it was withdrawing its
proposed trade rule pending the outcome of Congressional
action on S. 652.
FORD i LIBRARY OTVUED
April 27, 1971
TO:
Chairman Burns
FROM: Robert C. Holland
Following are clues just relayed to me by Paul Wren
of the ABA Government Borrowing Committee with whom you will
be meeting at 4:00 p.m. this afternoon, concerning the key
questions they are likely to raise for discussion with you.
1) Current interest rate trends, including particularly
the recent prime rate increase (Treasury spokesmen have been
quite critical of this in private conversations with this group;
the bankers feel the Treasury is being a little hard on them,
are quite conscious of the fact that the Federal Reserve has made
no statement and are wondering how you feel about the prime rate
increase.).
2) Federal Reserve policy--specifically, is the recent
rate of growth in M₁ too high?
3) Concern with the state of our balance of payments
(They will want to express concern, and will be interested in
your feeling.).
GERALD FORD LIBRARY