November

CRA Special Lending Programs Robert B. Avery, Raphael W. Bostic, and Glenn B. Canner The Community Reinvestment Act (CRA) of 1977 encourages federally insured banking institutions to help meet the credit needs of their communities, including those of lower-income areas, in a manner consistent with their safe and sound operation. In responding to the CRA, many banking institutions have sought to expand lending to lower-income populations through special lending programs" that seek out and assist such borrowers in a variety of ways. These programs, many of which include third parties such as government agencies and nonprofit groups, are often an important element of an institution's CRA-related lending. Many institutions have conducted such programs, some for many years. Although the characteristics of these programs and their implementation vary greatly across banking institutions, little systematic information about them has been available. To further the understanding of CRA special lending programs, this article uses data from a recent Federal Reserve Board survey to provide new information on the nature of these programs, their characteristics, and how these characteristics relate to the performance (delinquency and default rates) and profitability of the loans extended through them. Full text (117 KB PDF)

October

Productivity Developments Abroad Christopher Gust and Jaime Marquez This article reviews recent productivity trends in foreign industrial countries. The focus of the analysis is on whether productivity abroad has accelerated to an extent comparable to that observed in the United States. The authors find that foreign labor productivity, unlike that of the United States, has not accelerated in the latter half of the 1990s and discuss the role played by information technology in influencing foreign productivity trends as well as cyclical and methodological factors that are important in the analysis of these trends. Full text (144 KB PDF)

September

Credit Cards: Use and Consumer Attitudes, 1970-2000 Thomas A Durkin From modest origins in the 1950s as a convenient way for the relatively well-to-do to settle restaurant and department store purchases without carrying cash, credit cards have become a ubiquitous financial product held by households in all economic strata. Since the late 1960s, much federal legislation has been enacted to ensure that consumers have the protections and information they need to use this widely available form of open-end credit wisely. Nevertheless, concerns persist about whether consumers fully understand the costs and implications of using credit cards and whether credit cards have encouraged widespread overindebtedness. Drawing on information from commercial banks, credit reporting agencies, and surveys of consumers, this article explores these issues as well as changes over the past three decades in consumer impressions of their card-using experiences and of conditions in the marketplace. Full text (74 KB PDF) Treasury and Federal Reserve Foreign Exchange Operations The dollar ended the second quarter of 2000 little changed against the euro and 3.1 percent stronger against the yen. On a trade-weighted basis, the dollar ended the period modestly stronger, having risen 1.3 percent against the currencies of the major U.S. trading partners. The U.S. monetary authorities did not intervene in the foreign exchange markets during the quarter. Full text (39 KB PDF)

August

Monetary Policy Report to the Congress The impressive performance of the U.S. economy persisted in the first half of 2000 with economic activity expanding at a rapid pace. Overall rates of inflation were noticeably higher, largely as a result of steep increases in energy prices. The remarkable wave of new technologies and the associated surge in capital investment have continued to boost potential supply and to help contain price pressures at high levels of labor resource use. At the same time, rising productivity growth--working through its effects on wealth and consumption, as well as on investment spending--has been one of the important factors contributing to rapid increases in aggregate demand that have exceeded even the stepped-up increases in potential supply. Under such circumstances, and with the pool of available labor already at an unusually low level, the continued expansion of aggregate demand in excess of the growth in potential supply increasingly threatened to set off greater price pressures. Because price stability is essential to achieving maximum sustainable economic growth, heading off these pressures has been critical to extending the extraordinary performance of the U.S. economy. To promote balance between aggregate demand and potential supply and to contain inflation pressures, the Federal Open Market Committee (FOMC) took additional firming actions this year, raising the benchmark federal funds rate 1 percentage point between February and May. Full text (303 KB PDF)

July

The Effects of Recent Mortgage Refinancing Peter J. Brady, Glenn B. Canner, and Dean M. Maki Rising home prices and generally falling interest rates in recent years, together with a desire to convert the accumulated equity in their homes into spendable funds, have prompted many homeowners to refinance their mortgages. In the spring of 1999, the Federal Reserve surveyed consumers to determine the extent of refinancing, the extent to which refinancing homeowners "cashed-out" some of their equity when they refinanced, how much equity they took out, and how they spent the funds. Survey results suggest that cash-out refinancings in 1998 and early 1999 likely boosted consumption spending a bit, may have had a larger effect on home improvement spending, and may have moderated the growth of consumer credit during that period. Full text (70 KB PDF)

June

Profits and Balance Sheet Developments at U.S. Commercial Banks in 1999 William F. Bassett and Egon Zakrajsek The U.S. commercial banking industry posted record earnings in 1999. The industry's return on assets and return on equity both rose above the already high level of recent years. Profitability was concentrated at large banks--particularly among the 100 largest--and was driven upward by a surge in noninterest income and a significant slowdown in the growth of noninterest expense. Other sources of improved profitability were a stabilization of net interest income, which had been weakening in recent years, and lower loan loss provisioning permitted by generally good asset quality. The growth of total bank assets slowed slightly relative to 1998, but loans expanded at about the same brisk pace as last year. Full text (169 KB PDF) Treasury and Federal Reserve Foreign Exchange Operations During the first quarter of 2000, the dollar appreciated 5.4 percent against the euro and 0.4 percent against the yen. The U.S. monetary authorities did not intervene in the foreign exchange markets during the quarter. Full text (34 KB PDF)

May

U.S. International Transactions in 1999 Francis E. Warnock The U.S. current account deficit increased substantially in 1999 as the balances on goods and services, investment income, and unilateral transfers all became more negative. The remarkable strength of the U.S. economy contributed significantly to a marked decrease in the balance on goods and services; to a lesser extent, previous declines in U.S. price competitiveness also played a role. The balance on investment income decreased because of the additional net income payments on the growing U.S. external indebtedness. In 2000, domestic spending may well continue to outstrip domestic production and increase the current account deficit. But adjustments that should slow the process are also at work. Full text (95 KB PDF)

April

The Federal Reserve Banks as Fiscal Agents and Depositories of the United States Paula V. Hillery and Stephen E. Thompson The Federal Reserve, the nation's central bank, is also the U.S. government's bank. As fiscal agents of the United States, the Federal Reserve Banks provide the Department of the Treasury with services related to the federal debt—receiving bids for auction of Treasury securities and processing securities transactions. As depositories, the Federal Reserve Banks provide payment-related services to the Treasury and other government agencies—handling the government's account by accepting deposits and clearing payments. This article describes the nature of the primary fiscal agency and depository services required by the United States, explains how the Reserve Banks meet those requirements, and discusses the reimbursement for these services. Full text (46 KB PDF)

March

Monetary Policy Report to the Congress The U.S. economy posted another exceptional performance in 1999. The ongoing expansion appears to have maintained strength into early 2000 as it set a record for longevity, and—aside from the direct effects of higher crude oil prices—inflation has remained subdued, in marked contrast to the typical experience during previous expansions. The past year brought additional evidence that productivity growth has improved substantially since the mid-1990s, boosting living standards while helping to hold down increases in costs and prices despite very tight labor markets. To maintain the low inflation environment that has been so important to the sustained health of the current expansion, the Federal Open Market Committee has implemented four quarter-point increases in the intended federal funds rate since mid-1999; the most recent of these came at the beginning of February 2000. In total, the federal funds rate has been raised 1 percentage point, although, at 5 ¾ percent, it stands only ¼ point above its level just before the autumn 1998 financial market turmoil. At its most recent meeting, the FOMC indicated that risks appear to remain on the side of heightened inflation pressures, so it will need to remain especially attentive to developments in this regard. Full text (214 KB PDF) Industrial Production and Capacity Utilization: Recent Developments and the 1999 Revision Charles Gilbert, Norman Morin, and Richard Raddock In late 1999, the Federal Reserve published revised measures of industrial production, capacity, and capacity utilization for the period January 1992 through October 1999. The updated measures reflect both the incorporation of newly available, more comprehensive source data typical of annual revisions and the introduction of improved methods for compiling a few series, including computer and office equipment and motor vehicles. The new source data are for recent years, primarily from 1997 on, and the modified methods affect data beginning in 1992. The production index for the third quarter of 1999 is at 137.7 percent of output in 1992, compared with 135.2 percent reported before the annual revision, and the capacity index is 170.7 percent of output in 1992, compared with 167.9 percent reported previously. As a result, the rate of industrial capacity utilization was revised up 0.1 percentage point, to 80.7 percent for the third quarter of 1999. Full text (106 KB PDF) Treasury and Federal Reserve Foreign Exchange Operations During the fourth quarter of 1999, the dollar depreciated 3.7 percent against the yen and appreciated 6.2 percent against the euro. On an effective trade-weighted basis, the dollar appreciated 0.8 percent. The U.S. monetary authorities did not intervene in the foreign exchange markets during the quarter. Full text (42 KB PDF)

February

U.S. Bank Exposure to Emerging-Market Countries during Recent Financial Crises David E. Palmer Global financial markets have experienced significant volatility in recent years, including financial crises in Asia in 1997 and in Russia in 1998. Emerging-market countries, in particular, were subject to sharp downward market moves. U.S. banking supervisors monitored these events carefully to determine the potential effect on U.S. banking organizations and paid particular attention to U.S. bank claims on emerging-market counterparties. Monitoring claims on emerging-market counterparties allows supervisors to identify any developing concentrations of risk that might warrant supervisory action and, if necessary, to assess the effect that a potential emerging-market crisis might have on U.S. banks. This article focuses on the claims U.S. banks held on emerging-market counterparties during the two-year period from June 1997 to June 1999 and discusses the different ways that emerging-market claims can be analyzed. In addition, the article provides a short analysis of the claims held by other developed-country banks on emerging-market countries to show the relative size of U.S. bank claims. Finally, the data from the 1997-99 period are discussed in the broader historical context of U.S. banks' country exposure dating back to 1982. Full text (84 KB PDF)

January

Recent Changes in U.S. Family Finances: Results from the 1998 Survey of Consumer Finances Arthur B. Kennickell, Martha Starr-McCluer, and Brian Surette Using data from the Federal Reserve Board's two most recent Surveys of Consumer Finances, this article provides a detailed picture of changes in the financial condition of U.S. families between 1995 and 1998. The financial situation of families changed notably in the three-year period. While income continued a moderate upward trend, net worth grew strongly, and the increase in net worth was broadly shared by different demographic groups. A booming stock market accounts for a substantial part of the rise in net worth, but the data also suggest that improvements in financial circumstances extended to many families that did not own stocks. The indebtedness of families grew, but less rapidly than their assets. Nonetheless, compared with 1995, debt repayments in 1998 accounted for a larger share of the income of the typical family with debt, and the proportion of debtors who were late with their payments by sixty days or more in the year preceding the survey was also higher. Full text (144 KB PDF)

Articles from the Federal Reserve Bulletin