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The Federal Open Market Committee decided on June 26, 2002, to keep its target for the federal funds rate unchanged at 1 3/4 percent.

The information that has become available since the last meeting of the Committee confirms that economic activity is continuing to increase. However, both the upward impetus from the swing in inventory investment and the growth in final demand appear to have moderated. The Committee expects the rate of increase of final demand to pick up over coming quarters, supported in part by robust underlying growth in productivity, but the degree of the strengthening remains uncertain.

In these circumstances, although the stance of monetary policy is currently accommodative, the Committee believes that, for the foreseeable future, against the background of its long run goals of price stability and sustainable economic growth and of the information currently available, the risks are balanced with respect to the prospects for both goals.

Voting for the FOMC monetary policy action were Alan Greenspan, Chairman; William J. McDonough, Vice Chairman; Susan S. Bies; Roger W. Ferguson, Jr.; Edward M. Gramlich; Jerry L. Jordan; Robert D. McTeer, Jr.; Mark W. Olson; Anthony M. Santomero; and Gary H. Stern. Voting against the action: none.


The Federal Reserve Board announced on June 17, 2002, that it is seeking nominations for appointments to its Consumer Advisory Council.

The Council advises the Board on the exercise of its responsibilities under the Consumer Credit Protection Act and on other matters on which the Board seeks advice. The group meets in Washington, D.C., three times a year.

Ten new members will be appointed to serve three-year terms beginning in January 2003. Nominations should include a resume and the following information about nominees:

* Complete name, title, address, telephone, e-mail address, and fax numbers

* Organization's name, brief description of organization, address, telephone and fax numbers

* Past and present positions

* Knowledge, interests, or experience related to community reinvestment, consumer protection regulations, consumer credit, or other consumer financial services

* Positions held in community and banking associations, councils, and boards.

Nominations should also include the complete name, organization name, title, address, telephone, e-mail address, and fax numbers for the nominator.

Letters of nomination with complete information, including a resume for each nominee, must be received by August 19, 2002. Electronic nominations are preferred. The appropriate form can be accessed at cacnominationform.cfm.

The Federal Reserve Board announced on June 3, 2002, that the Consumer Advisory Council would hold its next meeting on Thursday, June 27.


The Federal Reserve Board published on June 21, 2002, revisions to its Regulation C, which implements the Home Mortgage Disclosure Act.

Data collected under Regulation C are used to help determine whether financial institutions are serving the housing needs of their communities and to assist in enforcing the fair lending laws.

The amendments do the following:

* Set the thresholds for determining the loans for which financial institutions must report loan pricing data, as required under a final rule approved on January 23, 2002. Institutions will report the rate spread (between the annual percentage rate on a loan and the yield on comparable Treasury securities) if the spread equals or exceeds 3 percentage points for first-lien loans and 5 percentage points for subordinate-lien loans.

* Require lenders to report the lien status of applications and originated loans.

* Require lenders to ask applicants their ethnicity, race, and sex in applications taken by telephone.

Compliance with the amendments relating to the thresholds and lien status is mandatory on January 1, 2004. The amendment requiring lenders to ask telephone applicants for monitoring information is effective for applications taken beginning January 1, 2003, through a technical amendment to the current regulations also published on June 21, 2002.


The Federal Deposit Insurance Corporation, the Board of Governors of the Federal Reserve System, and the Office of the Comptroller of the Currency issued on June 5, 2002, final regulations amending their rules that currently prohibit interstate branches from being used primarily for deposit production.

The Riegle-Neal Interstate Banking and Branching Efficiency Act prohibits any bank from establishing or acquiring a branch outside its home state primarily for the purpose of deposit production. Section 106 of the Gramm-Leach-Bliley Act expands this prohibition to include any branch of a bank controlled by an out-of-state bank holding company. To conform their regulations to this statutory change, the agencies have amended their rules so that the prohibition against deposit production offices also applies to any bank or branch of a bank controlled by an out-of-state bank holding company.

The regulations, published in the Federal Register, are effective October 1, 2002.


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 24, 2002, 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 in June 2001.

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. As further discussed in the attachment, 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 to 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.


In keeping with their strategy of maintaining the security of Federal Reserve notes by enhancing the design of U.S. currency every seven to ten years, the Department of the Treasury's Bureau of Engraving and Printing (Bureau) and the Federal Reserve Board announced on June 20, 2002, plans to release the next generation of redesigned notes, with improved security features to deter counterfeiting.

The new design, referred to as NexGen, affects the $100, $50, and $20 notes. Circulation of the NexGen series could begin as early as fall 2003 with the introduction of the redesigned $20 note. The $100 and $50 notes will follow in twelve to eighteen months. Consistent with past design changes, the NexGen notes will remain the same size and use similar portraits and historical images to maintain an American appearance. The NexGen designs will include the introduction of subtle background colors. While color is not in itself a security feature, the use of color provides the opportunity to add additional features that could assist in deterring counterfeiting. The introduction of additional colors will also help consumers to identify the different denominations.

The new series will retain current security features, including watermarks similar to the portrait and visible when held up to a light, enhanced security threads that glow under ultraviolet light, microprinting, and color-shifting ink that changes color when the note is tilted.

The purpose of the currency redesign is to stay ahead of advanced computer technologies used for some types of counterfeiting. According to the U.S. Secret Service, $47.5 million in counterfeit money entered into circulation in fiscal year 2001. Of this amount, 39 percent was computer generated, compared with only 0.5 percent in 1995.

The redesign of $10 and $5 notes is still under consideration, but a redesign of the $2 and $1 notes is not included in the plans for the NexGen series. Release of NexGen notes will have no effect on money already in circulation. These notes will co-circulate with older series notes. The U.S. government has never recalled or devalued its currency.

As part of the introduction of NexGen currency, the Bureau and the Federal Reserve System are planning an extensive public education effort aimed at informing target groups--such as financial institutions, law enforcement, and retail and vending industries--and the general public about the new designs. This effort will encourage people who use U.S. currency to familiarize themselves with the redesigned money so they can easily authenticate currency as genuine.

The first initiative of the public education effort is already under way. The Bureau is working with manufacturers of currency-accepting machinery to expedite the development of software and other devices, so vending machines and similar equipment accept NexGen notes. The cooperative effort allows a smooth transition for vending machine owners, mass transit agencies, the gaming industry, and other proprietors that rely on currency-accepting machinery to conduct business transactions.

The redesigned currency program is a partnership among the Federal Reserve System, the Department of the Treasury, the Bureau of Engraving and Printing, and the United States Secret Service. The Secretary of the Treasury establishes the design and appearance of U.S. currency.

Information about the previous redesigned 1996 notes and the history of U.S. currency is available at the Bureau's web site at


The Federal Reserve Board launched on June 3, 2002, a new addition to the Board's web site, "Touring the Board." The site provides information about visiting the Federal Reserve in person and includes a "virtual tour" offering photos of the Board's buildings and art collection, as well as an architectural history of the Board's Eccles Building.

This site gives the public a chance to tour the Board from the comfort of home or office. Since public tours of many federal buildings have been limited since September 11, the virtual tour is an opportunity to see where our nation's central bankers work each day. Touring the Board can be viewed at virtualtour/.


The Federal Reserve Board announced on June 28, 2002, the execution of a written agreement by and between the Madison Bank, Blue Bell, Pennsylvania, and the Federal Reserve Bank of Philadelphia.

The Federal Reserve Board announced on June 10, 2002, the termination of the following enforcement action: Bank of New York, New York, New York. Written Agreement dated February 8, 2000. Terminated June 3, 2002.
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Title Annotation:miscellaneous brief articles on federal policies
Publication:Federal Reserve Bulletin
Geographic Code:1USA
Date:Aug 1, 2002
Previous Article:The use of checks and other noncash payment instruments in the United States.
Next Article:Final rule--amendment to Regulation C. (Legal Developments).

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