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Announcements.

FEDERAL OPEN MARKET COMMITTEE DIRECTIVE AND DISCOUNT RATE ACTION

The Federal Open Market Committee at its meeting on June 27, 2001, decided to lower its target for the federal funds rate by 25 basis points to 3 3/4 percent. In a related action, the Board of Governors approved a 25 basis point reduction in the discount rate to 3 1/4 percent. The action by the FOMC brings the decline in the target federal funds rate since the beginning of the year to 275 basis points.

The patterns evident in recent months--declining profitability and business capital spending, weak expansion of consumption, and slowing growth abroad--continue to weigh on the economy. The associated easing of pressures on labor and product markets is expected to keep inflation contained.

Although continuing favorable trends bolster long-term prospects for productivity growth and the economy, the Committee continues to believe that against the background of its long-run goals of price stability and sustainable economic growth and of the information currently available, the risks are weighted mainly toward conditions that may generate economic weakness in the foreseeable future.

In taking the discount rate action, the Federal Reserve Board approved requests submitted by the boards of directors of the Federal Reserve Banks of Boston, New York, Philadelphia, Atlanta, Chicago, Dallas, and San Francisco.

Subsequently, the Federal Reserve Board approved on June 28, 2001, actions by the boards of directors of the Federal Reserve Banks of Cleveland, Richmond, Minneapolis, and Kansas City, decreasing the discount rate at those banks from 3 1/2 percent to 3 1/4 percent, effective immediately.

The Federal Reserve Board also approved action by the board of directors of the Federal Reserve Bank of St. Louis, decreasing the discount rate at that bank from 3 1/2 percent to 3 1/4 percent, effective Friday, June 29, 2001.

BANKING AGENCIES ISSUE HOST STATE LOAN-TO-DEPOSIT RATIOS

The Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency issued on June 28, 2001, the host state loan-to-deposit ratios that the banking agencies will use to determine compliance with section 109 of the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994. These ratios update data released on March 23, 2000.

In general, section 109 prohibits a bank from establishing or acquiring a branch or branches outside its home state primarily for the purpose of deposit production. Section 109 also prohibits branches of banks controlled by out-of-state bank holding companies from operating primarily for the purpose of deposit production.

Section 109 provides a process to test compliance with the statutory requirements. The first step in the process involves a loan-to-deposit ratio screen that compares a bank's statewide loan-to-deposit ratio with the host state loan-to-deposit ratio for banks in a particular state.

A second step is conducted if a bank's statewide loan-to-deposit ratio is less than one-half of the published ratio for that state or if data are not available at the bank to conduct the first step. The second step requires the appropriate banking agency to determine whether the bank is reasonably helping to meet the credit needs of the communities served by the bank's interstate branches.

A bank that fails both steps is in violation of section 109 and is subject to sanctions by the appropriate banking agency.

JOINT AGENCY LETTER TO SEC ON BROKER-DEALER EXEMPTIONS

The Federal Reserve Board on July 2, 2001, joined the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation in a letter to the Securities and Exchange Commission (SEC) concerning the SEC's interim final rules to implement provisions of the Gramm-Leach-Bliley Act that provide specific exemptions from the broker and dealer definitions that permit banks to continue providing trust and fiduciary, as well as other specified traditional banking, products and services.

FOMC MEETING SCHEDULE FOR 2002

The Federal Open Market Committee announced on July 16, 2001, its tentative meeting schedule for 2002. It is as follows: January 29-30 (Tuesday-Wednesday), March 19 (Tuesday), May 7 (Tuesday), June 25-26 (Tuesday-Wednesday), August 13 (Tuesday), September 24 (Tuesday), November 6 (Wednesday), and December 10 (Tuesday).

ENFORCEMENT ACTIONS

The Federal Reserve Board announced on June 21, 2001, the issuance of an order of prohibition against Nelly Kann de Gouverneur, a former employee and institution-affiliated party of Banco Mercantil, C.A., S.A.C.A., New York Agency, New York.

Ms. Kann, without admitting to any allegations, consented to the issuance of the order based on her alleged violations of law and unsafe and unsound practices in connection with the structuring of deposits of cash and monetary instruments by private banking customers of Mercantil resulting in violations of the Currency and Foreign Transactions Report Act (31 U.S.C. [sections] 5311 et seq.)

The Federal Reserve Board announced on July 2, 2001, the issuance of a cease and desist order against Harvey Plante, a former officer and institution-affiliated party of the Bankers Trust Company, New York, New York.

The Federal Reserve Board announced on July 12, 2001, the issuance of an order to cease and desist against the Bank of Rogers, Rogers, Arkansas.

The Federal Reserve Board and the New York State Banking Department announced on July 13, 2001, the joint issuance of a combined consent order to cease and desist and an assessment of a civil money penalty and monetary payment against U.S. Trust Corporation, a bank holding company, and its subsidiary, the United States Trust Company of New York, a state-chartered bank.

U.S. Trust Corporation and the United States Trust Company of New York, without admitting to any allegations, consented to the issuance of the order in connection with alleged violations and deficiencies relating to the lack of internal controls and procedures and inadequate compliance with the Bank Secrecy Act and relating to the failure to maintain accurate and complete books and records in connection with the operations and activities of the Strategic Trading Group of the bank.

U.S. Trust Corporation and the United States Trust Company of New York are paying to the Board a civil money penalty in the amount of $5 million and are making a $5 million monetary payment to the state of New York.

PUBLICATION OF THE ANNUAL REPORT AND BUDGET REVIEW

The 87th Annual Report, 2000, of the Board of Governors of the Federal Reserve System, covering operations for the calendar year 2000, is now available from Publications Services, Mail Stop 127, Board of Governors of the Federal Reserve System, Washington, DC 20551, or phone 202-452-3244 or 3245. Also available from Publications Services is a separately printed companion document, Annual Report: Budget Review, 2001, which describes the budgeted expenses of the Federal Reserve Banks for 2001, the 2001 phase of the Board's current two-year (2000-01) budget, and income and expenses for 1999 and 2000. This year's report includes a chapter on the modernization of the Banks' check-processing system. Both reports are also available on the Federal Reserve Board's web site: http:// www.federalreserve.gov.

CHANGES IN BOARD STAFF

The Federal Reserve Board announced on June 11, 2001, the appointments of Donald Kohn as Adviser to the Board for Monetary Policy in the Office of Board Members, Vincent Reinhart as Director of the Division of Monetary Affairs, and Brian Madigan as Deputy Director of the Division of Monetary Affairs, all effective July 2, 2001.

Mr. Kohn will continue as Secretary of the Federal Open Market Committee, with responsibility for briefing the Committee and for its announcements, minutes, and transcripts. Mr. Kohn has been the Director of the Division of Monetary Affairs since 1987 but is relinquishing management of the division and will focus on issues related to monetary policy.

Mr. Reinhart joined the Federal Reserve Bank of New York in 1983 and moved to the Division of Monetary Affairs at the Board in 1988. He was named an officer of the Board in 1994 and was named deputy associate director in 1998. In 1999, Mr. Reinhart transferred to the Division of International Finance where, as deputy director, he had responsibility for the sections for International Banking, Financial Markets, International Financial Transactions, and Trade and Quantitative Studies.

Mr. Madigan joined the Board' s staff in 1979 as an economist in the Division of Research and Statistics. He was promoted to senior economist in 1984 and became chief of the banking section in 1985. In 1987, he was named an officer of the Board. In 1988, Mr. Madigan joined the Division of Monetary Affairs and was promoted to associate director in 1993.

The Federal Reserve Board announced on June 18, 2001, the following official staff promotion and appointment, effective August 6, 2001.

* The promotion of Robert deVere Frierson to Deputy Secretary of the Board

* The appointment of Margaret McCloskey Shanks as Assistant Secretary of the Board, replacing Barbara R. Lowrey, Associate Secretary of the Board, upon her retirement.

Mr. Frierson will oversee all the functions in the office and directly supervise preparing the Board's minutes, distributing information to and from the Board, publishing the Federal Reserve Regulatory Service and associated manuals, and providing general administrative support. He joined the Office of the Secretary in 1998 as an associate secretary after eleven years in the Legal Division, where he attained the position of assistant general counsel.

Ms. Shanks will supervise managing the Board's records, responding to requests under the Freedom of Information Act, providing conference planning and other visitor services, overseeing the appointment of Federal Reserve Bank and Branch directors, and providing temporary executive secretarial services. She joined the Board in 1991 as a senior attorney in the Legal Division. Ms. Shanks received her undergraduate degree from DePaul University and her J.D. degree from Loyola University.
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Title Annotation:United States Federal Reserve Board - policy decisions, personnel changes, disciplinary actions
Publication:Federal Reserve Bulletin
Article Type:Statistical Data Included
Geographic Code:1USA
Date:Aug 1, 2001
Words:1615
Previous Article:Testimony of Federal Reserve Officials.
Next Article:Minutes of the Meeting of the Federal Open Market Committee Held on May 15, 2001.
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