Regional President Speech

IT IS A REAL PLEASURE FOR ME TO MEET WITH YOU tEBRASKA BANKERS HERE TODAY IN LINCOLN AND TO SHARE A FEW THOUGHTS ON MATTERS OF MUTUAL INTEREST. THIS J OCCASION IS PART ICULARLY ENJOYABLE BECAUSE THIS IS THE FIRST OPPORTUNITY I'VE HAD TO MEET WITH BANKERS IN r~EBRASKA SINCE BECOMING PRESIDENT OF THE FEDERAL RESERVE BAN K OF KANSAS CITY ON r~ARCH 1. I PLAN TO MEET vlI TH BANKERS AND BUSINESSME IN THE TENTH DISTRICTS AS OFTEN AS POSSIBLE BECAUSE I FIRMLY BELIEVE THAT WE AT THE FEDERAL RESERVE SHOULD STRIVE TO IMPROVE OUR COMMUNICATION WITH ALL SEGMENTS OF THE BANKING AND BUSINESS COMMUNITY-NOT ONLY TO CONVEY OUR IDEAS ON VARIOUS POLICY ISSUES BUT TO SEEK YOUR OPINIONS AND ADVICE ON MATTERS WE MAY J BE CONS IDERING AT THE MOMENT. WE NEED TO CO MUNICATE ITH ONE ANOTHER SO THAT ALL OF US Y BETTER UNDER­ STAND THE CRITICAL ISSUES FACING BANKING. PERHAPS TH IS YEAR) COMMUNICATION IS EVEN MORE IMPORTANT) GIVEN THE ENVIRONMENT OF ONRUSH ING CHANGE IN WHICH YOU ARE OPERATING. WE ALL RECOGNIZE THAT CHANGE IS A POWERFUL FORCE IN ALL FACETS OF OUR PERSONAL AND PROFESS IONAL LIVES. THE PHENOMENON OF CHANGE EFFECTS EVERY DECISION WE MAKE . INTELLIGENT ACCEPTANCE OF CHANGE OFTEN IS THE KEY TO SUCCESSFUL INTEGRA­ TION OF WORTHWHILE NEW ELEMENTS INTO OUR PERSONAL AND PROFESSIONAL EXISTENCE. BANKING HAS CERTAINLY NOT BEEN EXEMPT FROM CHANGE) NOR ARE BANKERS NECESSARILY DEVOTED TO THE STATUS QUO. FOR MANY BANKERS) CHANGE IS THE ONSET OF OPPORTUNITY. -2­ THE MOST OBVIOUS AREAS OF CHANGE AFFECTING FINANCIAL INSTITUTIONS TODAY ARE RELATED TO THE RAPIDLY EVOLVING ELECTRONIC FUNDS TRANSFER TECHNOLOGY AND THE ASSOCIATED COMPETITIVE RESULTS, Two EVENTS HAVE SPURRED THIS FAR-REACHING AND) AS YET) NOT FULLY UNDERSTOOD MEDIUM OF FINANCIAL EXCHANGE, ONE EVENT) OF COURSE) IS THE DRAMATIC IMPROVEMENT IN COMPUTER-BASED SYSTEMS AND THEIR CAPABIL­ ~ ITIES. THE OTHER) AND EQUALLY IMPORTANT PERHAPS) IS RECOGNITION BY BANKERS OF THE MARKET POTENTIAL IN EXPANDED EFT SYSTEMS) WHICH RA~~;~E I N10 F RT~ER J~ . _~-u.. tU~ OPPORTUNITIES TO IMPROVE PUBLIC ACCESS TO BANKING SERVICES I ANY CA E) MANY EFT ) pas OF YOU NOW DISCUSS MATTERS OF ATM' s) CBCT's) A D AS READ ILY AS YOU TALK ABOUT LENDING POLICY OR INVESTMENT STRATEGY. ELECTRONIC BANKING IS HERE AND MANY j OF YOU ALREADY ARE WORKING ON PLANS TO UTI LIZE THE NEW TECHNOLOGY FOR EXPANDED SERVICES FOR YOUR CUSTOMERS AND PERHAPS EVEN PENETRATI ON INTO UNTAPPED MARKETS. AT THE FEDERAL RESERVE BANK OF KANSAS CITY) WE'VE BEEN INTERESTED TO NOTE THAT MANY EFT-RELATED DEVELOPMENTS HAVE ORIGI NATED AND ARE CONTINUING TO OCCUR HERE IN THE TENTH DISTRICT- IN JEBRASKA) KANSAS) AND OKLAHOMA) THE HEARTLAND OF AMER ICA. AND JEBRASKANS HAVE BEEN RI GHT IN THE FOREFRONT OF INNOVATION. NOT ONLY THAT) THE LEGISLATION YOU CONSIDERED) DEVFLOP ) AND LAST YEAR-AND P~SSED U./ .., t& ~'1f JI! ~ II WHICH BECAME LAW IN JANUARY THIS YEAR-DEMONSTRATES WHAT I ~L MANAGED CHANGE. .:::-==­ ;=:-- IN THIS CASE) MANAGED CHANGE MEANT A BALANCING OF TECHNOLOGICAL) REGULATORY) AND LEGISLATIVE FORCES IN A MANNER WHICH PROVIDES A POTENTIAL LONG-TERM BENEFIT TO THE IEBRASKA PUBLIC. -3­ ,. __ ~ J:J~ /: JJ ,-:ikv L~~~· ivit THE NEBRASKA LEGI SLATION PERMITTING BAN~\TO ESTABLISH AND SHARE REMOTE EFT FACILI TI ES ANYWHERE IN THE STATE IS AN EXCELLENT EXAMPLEJ I BELIEVEJ OF ORDERLY CHANGE BROUGHT ABOUT IN RESPONSE TO MARKET DEVELOPMENTS AND REGULATORY AND LEGISLATI VE DECISIONS . OF COURSEJ .IEBRASKA BANKERS HAD BEEN CONSIDERING EFT MATTERS FOR SOME TIMEJ SO YOU WERE WELL PREPARED FOR EFFORT RE UI RED TO ESTABLISH YOUR EFT ENVIRONMENT. I BELIEVE THAT IEBRASKANS ARE TO BE COMMENDED FOR PRODUCING A LAWWHICH IS EQUITABLEJ REQUIRES A MINIMUM OF REGULATORY INVOLVE­ MENTJ YET WHICH HAS ACHIEVED THE OBJECTIVES OF BOTH BANKERS AND LEGISLATORS BY PERMITTING EXPANDED CUSTOMER SERVICES WHILE THE ESS ENT IAL FEATU RES MAI~TAINING -t~~ ~ d~ OF THE UNIT nANKING CONCEPT. -Al'iIIr JUST LAST WEEKJ THE lETS SYSTH1 BEGAN TO GATHER 1977. ITS RESOURCES TO IMPLEMENT A STATEWIDE ELECTRONIC SWITCH ING MECHANSIM IN THIS CHANGE IN YOUR ENVI RONMENT IS BEING MANAGEDJ IN THE BEST MEANING OF THE TER M. As JEBRASKA BANKS AND CONSUMERS REAP THE ADVANTAGES OF THIS MARRIAGE OF TECHNOLOGY AND MARKET OPPORTUNITYJ AS NEW SERVICES COME ON LINE FOR YOUR CUSTOMERSJ OTHER FUNDAMENTAL ISSUES WILL ARISEJ ISSUES WHICH WILL PUT TO THE TEST YOUR PROCESS OF ORDERLY RESPONSE TO CHANGE. -4­ FOR EXAMPLE~ UNDE R REGULATIO NS NOW IN PLACE~ THE DEMISE OF DEMAND DEPOSITS AS WE KNOW THEM MAY WELL OCCUR WI TH INCREASING SPEED. WITH ELECTRONIC ACCESS TO THEIR VARIOUS ACCOUNTS WITH YOU CONSUMERS MAY WELL TAKE ADVANTAGE OF THE J OPPORTUNITY TO TRANSFER FUNDS FREQUENTLY-EVEN SEVERAL TIMES DAILY-FROM THEIR SAVINGS TO THEIR DEMAND ACCOUNTS FOR BILL PAYING PURPOSES . IN THE LONG RUN J THIS DEVELOPMENT MI GHT REALLY MEAN THAT YOU WILL BE PAYING INTEREST ON WHAT TRADITIONALLY HAVE BEEN DEMAND ACCOUNTS . \ ON'T THAT MEAN A HIGHER COST OF FUNDS How FOR YOU? WILL YOU CONTINUE TO OFFER THE SAME LEVEL OF SERVICE TO YOUR CUSTOMERS AT THE SAME PRICE? WHO WILL PAY YOUR INCREASED COST OF DOING BUS INESS? AT THE HEAR~ OF THE MATTER ~ OF COURSE~ IS THE QUESTION OF WHAT WILL HAP PEN TO YOU R PART ICULARLY DURING THE TRANS ITION TO ELECTRONIC TECHNOLOGY AND EARN INGS~ J THUS YOUR ABILITY TO GENERATE CAPITAL FOR FUTURE GROWTH. J OTHER ISSUES MUST ALSO BE FACED. BECAUSE RESERVE REQUIREMENTS ON SAVINGS fi DEPOSITS ARE LOWER THAN ON DEMAND DEPOSTS-AND QUITE A BIT LOWER FOR1LARGER BANKS­ WHAT WILL BE THE RELATIVE IMPACTS ON BANKS' LENDING OR INVESTMENT CAPACITI ES? A RELATED QUESTION IS CONCERNED WITH THE IMPACT OF SH IFTS FROM DEMAND TO SAVI NGS ACCOUNTS ON THE ABI LITY OF THE FEDERAL RESERVE TO CONDUCT AN EFFECTIVE MONETARY POLICY. POLICY MIGHT BECOME MORE DIFFICULT TO IMPLEMENT IF A SMALLER PROPORTION OF THE NATION'S BANKING RESOURCES IS UNDER DIRECT CONTROL OF THE CENTRAL BANK AS STERI LE RESERVES. -5­ ANOTHER ISSUE IS RELATED TO THE TRADITIONAL PEOPLE-ORIENTED CHARACTER OF BANKING SERVICES. YOUR MARKET ING PLANS GENERALLY HAVE STRESSED THE DEVELOPMENT OF CONTINUING PERSONAL AND BUS INESS RELATIONSH IPS WITH YOUR CUSTOMERS AT MANY POINTS IN YOUR SERVICE STRUCTURE . THE NEW ELECTRONIC BANKI NG TECHNOLOGY) How HOWEVER) IS ESSENTIALLY AN IMPERSONAL ONE . WILL YOU RETAIN THE WARM PER­ SONAL FLAVOR OF BANKING RELATIONSHIPS IN A PUSH-BUTTON ENVIRONMENT? THESE QUESTIONS AND THEIR IMPLICATIONS DESERVE MUCH CAREF UL STUDY. IN NEBRASKA) YOUR DEMONSTRATED DEDICATION TO INNOVATION AND MANAGED CHANGE IN BANKING WI LL UNDOUBTEDLY BE HELPFUL AS THESE ISSUES COME TO THE FORE. ApPLICA­ TION OF THE SAME THOUGHTFUL) ORDERLY APPROACH TO THE NEW AND UNFORSEEN PROBLEMS OF ELECTRONIC BANKING UNDOUBTEDLY WILL HELP SOFTEN SOME OF THE POTENTIALLY TROUBLESOME IMPACTS . -6­ UNFORTUNATELY) WE HAVE NOT WITNESSED THE SAME TYPE OF CAREFUL MANAGEMENT OF CHANGE ON THE NATIONAL SCENE THIS YEAR) AS MATTERS OF FINANCIAL RESTRUCTURING HAVE PROCEEDED IN CONGRESS. IT IS TRUE THAT THE GROUNDWORK FOR THIS CURRENT ATTEMPT AT CHANGE WAS LAID IN THE LATE 1960;s WHEN THE HUNT COMMISSION BEGAN ITS WORK. THE COMMI SSION BROUGHT FORTH A PACKAGE OF FI ANCIAL RESTRUCTURING AFFECTING ALL INSTITUTIONS AND REGULATORS . IT WAS A COMPREHENS IVE SET OF RECOMMENDATIONS CONSIDERED AND DEVELOPED IN A FREE AND OPEN MANNER BY A GROUP OW ING ALLEGIANCE ONLY TO THE PUBLIC INTEREST. FOLLOWpNG THE LEAD OF THE HUNT COMMISSION) THE ADMINISTRATION AND CONGRESS HAD ADOPTED THE DELIBERATE APPROACH TO FINANCIAL RESTRUCTURING IN RECENT YEARS AND IT IS DI FFICULT TO FAULT THEIR PROCEDURES OR INTENTIONS. BUT THE MORE RECENT LEGISLATIVE ACTIONS) ESPECIALLY THE EMPHASIS BY SOME IN CONGRESS ON GETTING SOMETHING PASSED BY MID-1976, LEAVES ME CONCERNED OVER THE KIND OF LEGISLATION THAT EVENTUALLY MAY BE FORTHCOMING. -7­ I#...v- I'~ If THERE IS NO DOUBT IN MY MI ND THAT SIGNIFICANT CHANGE IS WARRANT~~AND THAT TIMING IS ALSO ESSENTIAL IN RESPONDING TO THE MASS IVE MARKET CHANGES OF THE PAST FEWYEARS. HOWEVER THE NATION CAN ILL AFFORD TO SEE SOME SO-CALLED "REFORM" J LEGISLATION RUSHED THROUGH JUST TO MEET AN ARBITRARY DEADLINE. WHILE I DO NOT NECESSARILY CONCUR WITH ALL THE FIND INGS OF THE HUNT COMMISSION REPORT I FEEL J THAT ONE OF THE ESSENTIAL ELEMENTS IN THE REPORT WAS THE BREADTH OF THE CHANGE L---SUGGESTE~ HEARI NGS~ AGAIN IN THE FINE A BROAD RANGE OF ISSUES WERE CONSIDERED TOGETHER AS A RESULT OF WHAT I INTERPRETED AS A NECESSARY LINKING OF SOME VERY COMPLEX IS SUES . ... AT THE LAST MINUTE, IT APPEARS THAT THESE ISSUES WERE SEPARATED FOR SIMPLE POLITICAL EXPEDIENCY-TO INCREASE THE LIKELIHOOD OF AT LEAST ONE BI LL PASSING IN , 197 ALL AT ONCE THERE WERE THREE BILLSl THE FINANCIAL INSTITUTIONS ACT, THE I INTERNATIONAL BANKING ACT, AND THE FEDERAL RESERVE REFORM ACT-AND THERE WAS ALMOST NO CONSIDERATION GIVEN TO THE POTENTIAL EFFECTS OF A DIVIDED PIECEMEAL J APPROACH TO PROPOSED REFORM. AGAIN~ THE NEED FOR A THOUGHTFUL~ MANAGED CHANGE IS EVIDENT MORE THAN EVER IF THE RESULT IS TO BE A BALANCING OF TECHNOLOGICAL~ REGULATORY, AND LEGISLATIVE FORCES TO PROVIDE INCREASED SERVICES TO THE PUBLIC IN A RELATI VELY COMPET IT IVE ENVIRONMENT. STABLE~ -8­ ... MANY OF YOU WI LL AGREE THAT THE RECENT PROPOSED CHANGES IN THE FINANCIAL STRUCTURE WERE NOT BEING IlMANAGEDII IN THE SENSE I HAVE OUTLINED. AND MANY OF YOU COMMUNICATED QUITE WELL TO YOUR REPRESENTATIVES IN WASH INGTON THAT THE RECENT ATTEMPT AT REFORM LEGISLATION WAS AN ERRATIC PACKAGE WHICH WOULD BE DETRIMENTAL TO COMMERCIAL BANK ING AND THE INTERESTS OF THE NATION . IT IS IN THE BEST TRADITION OF OUR REPRESENTATIVE POLITICAL PROCESSES THAT MANY OF YOU VOICED YOUR CONCERN THAT THE FINANCIAL REFORM LEGISLATIONJ IF PASSEDJ WOULD HAVE AN ADVERSE IMPACT, UPO THE WHOLE ECONOMYJ WITH PARTICULAR EFFECTS ON .£ ' ""'-<..( CHARGES TO CONSUMERS FORl BANK SERVICES. FURTHERJ MANY OF YOU BELI EVE THAT SUCH LEGISLATION COULD LEAD TO POLITICAL ALLOCATION OF CREDITJ AND YOU SAID SO. ~ As YOU ALL KNOWJ THE FEDERAL RESERVE ALSO HAS BEEN UNDER ATTACK TH IS YEAiR. THESE ATTACKS WERE INCORPORATED RECENTLY INTO THE IIFEDERAL RESERVE REFORM ACTII I NOTED EARLIERJ WHICHJ INCIDENTALLY, AS PASSED IN THE HOUSE LAST WEEK IN A DILUTED FORM. HAD THIS MEASURE PASSED WITH ITS ORIGINAL PROVISIONSJ IT WOULD HAVE STRUCK AT THE VERY HEART OF THE TRAD ITIONAL INDEPENDENCE OF THE FEDERAL RESERVE SYSTEM. SUPPORTERS OF THE LEGISLATION CLAIMED THAT IT WOULD "DEMOCRATIZE" THE SYSTEM. ON THE CONTRARYJ I BELIEVE THAT IT WOULD HAVE "POLITICIZED" THE SYSTEM AND PERHAPS HAVE CREATED AnDANGEROUS SITUATION FOR OUR ECONOMY BY ,~/,C BRINGI NG THE PROCESS OF MONETARY FORMULATION UNDER POLITICAL CONTROL. -9­ ON THIS ISSUE) I THINK IT'S IMPORTANT FOR THE FEDERAL RESERVE 'S POS ITION TO BE CLEARLY UNDERSTOOD. WE ARE) OF COURSE) A PUBLIC INSTITUTION) CREATED BY CONGRESS AND DELEGATED THE IMPORTANT RESPONSIBI LITY OF MANAGING THE COUNTRY'S MONEY SUPPLY. BEING A PUBLIC INSTITUTION) WE FULLY RECOGNIZE THAT THE FEDERAL RESE RVE MUST BE RESPONSIVE TO THE WISHES AND LONG-RUN BEST INTERESTS OF THE AMERICAI~ PEOPLE. AND) I BELIEVE) WE HAVE LIVED UP TO THAT RESPONSIBI LITY IN A CREDITABLE MANNER. IN THIS BROAD SENSE) THEREFORE) THE FEDERAL RESERVE HAS BEEN-AND SHOULD CONTI NUE TO BE-RESPONSIVE TO THE POLITICAL PROCESS IN AMERICA. THE BASIC INTENT OF THE EARLY VERSIONS OF THE FEDERAL RESERVE REFORM ACT) I BELIEVE) WAS NOT CONSISTENT WITH THIS BROAD INTERPRETATION OF POLITICAL RESPONSIVE­ NESS . RATHER) IT SEEMS THE INTENT OF THE PROPOSALS WAS TO SUBJECT THE MONETARY POLICY PROCESS TO THE SHORT-RUN INFLUENCE OF PARTISAN POLITICAL PRESSURE. RESPON­ SIVENESS TO THIS TYPE OF POLITICAL PRESSURE IS) OF COURSE) CO NTRARY TO THE OR IG INAL DESIGN OF THE FOUNDERS OF THE FEDERAL RESERVE SYSTEM AND CONTRARY TO THE BEST INTERESTS OF THE AMERICAN PUBLIC. -10­ THE FEDERAL RESERVE SYSTEM~ AS IT WAS ORIGI NALLY DESIGNED AND AS IT HAS EVOLVED OVER THE IS CHARACTERIZED BY TWO KEY ELEMENTS WH ICH HAVE ALLOWED IT YEARS ~ TO CONDUCT MONETARY POLICY INDEPENDENTLY OF PARTISAN POLITICAL CONTROL, ONE IS THAT THE FEDERAL RESERVE ACT SPECIFICALLY ISOLATES THE MONETARY POL ICY PROC ESS FROM POTENTIAL SHORT-RUN POLITICAL INFLUENCES, FOR EXAMPLE~ THE ME MBE RS OF THE BOARD OF GOVERNORS-ALL OF WHOM PARTICIPATE IN MONETARY POLICY DECISIONS-ARE APPOINTED FOR LONG TERMS, SIMILARLY~ THE PRE SID ENTS OF THE TWELVE RESERVE BANKS­ WHO ALSO PARTICIPATE IN MONETARY POLICY-ARE APPOINTED FOR RELATIVELY LONG TERMS AND THEIR APPOINTMENT PROCESS IS CONDUCTED OUTSIDE OF THE POLITICAL ARENA, FURTHER­ MORE~ THE SYSTEM IS BY AND LARGE SELF-FINANCED SO IT DOESN'T HAVE TO COME HAT-IN­ HAND TO CONGRESS EACH YEAR FOR OPE RATI NG FUNDS, -11­ THE SECOND KEY ELEMENT OF THE SYSTEM IS THAT IT IS A DECE NTRALI ZED CENTRAL BANK. THE RESPONSIBILITY FOR FORMULATING AND CONDUCTING MONETARY POLICY IS WIDELY DISPERSED THROUGOUT THE COUNTRY, THE BOARD OF GOVERNORS IN WASHINGTON PLAYS AN IMPORTANT ROLE BUT SO DO THE TWELVE REGI ONAL FEDERAL RESERVE DISTRICT BANKS, SINCE THE PRESIDENTS OF THESE BANKS PARTICI PATE DIRECTLY AS VOT ING MEMBERS OF THE OPEN MARKET COMI~ITTEE~ THE VARY ING NEEDS AND ECONOMIC INTERESTS OF EACH OF THE DIFFERENT REGIONS CAN BE REPRESENTED IN THE POLICY PROCESS. THE DECENTRALIZED SYSTEM ALSO SPECIFICALLY ALLOWS FOR INDEPENDENT VIEWS TO BE BROUGHT TO BEAR. SUCH VIEWS ARE OBTAINED FROM THE BOARDS OF DIRECTORS OF EACH DISTRI CT BANK­ WHO ARE DRAWN FROM WITHIN EACH REGION-FROM INDEPENDENT ECONOMIC RESEARCH) AND FROM DIRECT RESERVE BANK CONTACT WITH LOCAL BANKERS AND BUSI NESSMEN, ~ ~ c.t~ ' •. w -12­ FROM ANALYSES WE MAKE OF INFORMATION WE OBTAIN FROM OUR RESEARCH AND OUR WE ARE ABLE TO COMMUNICATE IN POLICY FOR OUR UNDER­ CONTACTS~ FORUMS~ EXAMPLE~ STANDI NG OF THE !EBRASKA ECONOMIC SITUATION. WE ARE AWARE THAT NEBRASKA-AS WELL AS ALL OF THE TENTH DISTR ICT~ FARED RELATI VELY BETTER THAN THE NATION AS A WHOLE DURING THE RECENT RECESS ION. !E' RE AWARE THAT THE DIVERSITY OF YOUR ECONOMY HELPED NEBRAS KA ESCAPE MANY OF THE MOST DEVASTATING EFFECTS OF THE ECONOMIC DOWNTUR N. FOR EXAMPLE~ THE NEBRASKA UNEMPLOYMENT RATE HAS REMAINED WELL BELOW THE NATI ONAL RATE THROUGHOUT THE RECESS IONARY PERI OD AND NOW HOEVERS ABOUT 5 PER CENT. I1H I LE MANUFACTURING AND GOVERNMENT EMPLOYMENT ARE DOWN IN rJEBRAS KA~ CONSTRUCTION EMPLOYMENT-REFLECTING THE STRONG UPTURN IN THE NEBRASKA HOUS ING INDUSTRY-AND EMPLOYMENT IN TRADE AND SERVICES IS UP. WHILE PERSONEL INCOME GROWTH IN JEBRASKA TRAILS THE NATIONAL TREND~ IT CONTINUES TO EXCEED THE GROWTH IN THE CONSUMER PRICED INDEX~ MEANING THAT EBRASKANS HAVE INCREASED PURCHASING POWER TO SUSTAI N THE RECOVERY. WE HAVE NOTED THAT DEPOSITS AT JEBRASKA MEMBER BANKS HAVE $107 DECLINED MILLION IN THE FIRST L~ MONTHS OF 1976~ BUT STRONG GROWTH IN TIME DEPOSITS HAS BEEN A POSITIVE FORCE. TOTAL EARNING ASSETS AT IEBRAS KA MEMBER BANKS ARE UP SLIGHTLY SO FAR THIS YEAR . IN THE AGR ICULTURAL PICTURE~ WH ICH WE ~/ATCH CLOSELY~ WE KNOWTHAT NEBRASKA FARMERS ARE PLANNING TO PLANT b PER CENT MORE COR N THIS AND THAT THEY NOW BELIEVE THAT THEIR WINTER WHEAT CROP IS YEAR~ H1PROVING. FEEDLOTS IN IEBRASKA HAVE 26 PER CENT MORE CATTLE AND CALVES ON FEED THAN A YEAR AGO~ RED MEAT PRODUCTION IN THE STATE WAS UP ll~ PER CENT IN MARCH. IT IS APPARENT THAT rlEBRASKA AGR ICULTURE HAS A MORE OPTIMISTIC TONE. -l~- ~. (},~ IT IS/ THE FAMILIARITY E HAVE WITH ECONOMIC AND FINANCIAL DEVELOPMENT IN OUR AREA) WHICH INCORPORATED INTO THE DECENTRALIZED NATURE OF FEDERAL RESERVE POLICY­ MAKIN G) PROV IDES ONE OF THE SYSTE~1/ S PRIMARY SOURCES OF STRENGTH. IN MY OPI NION., IT HAS ENABLED THE SYSTEM TO BE RESPONSIVE-IN THE MOST DIRECT AND BROADEST SENSE­ TO THE WISHES OF THE AMERICAN PEOPLE OF EVERY REGION. AT THE SAME TIME) IT HAS PREVENTED THE MONETARY POLICY PROCESS FROM BEING CONTROLLED BY A NARROWLY-BASED D.C.) GROUP OF INDIVIDUALS) WHETHER LOCATED IN WASHI NGTON) OR ELSEWHERE . IN OTHER WORDS) THE DECENTRALIZED NATURE OF THE SYSTEM EMBODIES THE TRADITIONAL llKWILLINGNESS OF THE AMERICAN PEOPLE TO TOLERATE ANY UNDUE CONCENTRATION OF ECONOM IC AND FINANCIAL POWER. -14­ THE DISTURBI NG FEATURE OF THE ORIGINAL PROPOSALS IN THE HFEDERAL RESERVE H REFORM ACT IS THAT THEY WOULD HAVE UNDERMINED THE INDEPENDENCE AND THE DECEN­ TRALIZED NATURE OF THE SYSTEM, IF WE WERE TO POLITICIZE THE MONETARY POLICY PROCESS THROUGH SUCH LEGISLATION THI S YEAR OR ANY YEAR~ I BELIEVE THE DANGERS As TO OUR ECONOMY WOULD BE EXTREMELY SERIOUS, AN EXAMPLE~ THE EARLY PROPOSALS IN THIS RECENT LEGISLATION WOULD HAVE PROVIDED FOR THE APPOI NTMENT OF RESERVE BANK PRESIDENTS BY THE PRES IDENT OF THE UNITED STATES SUBJ ECT TO SENATE CONFIRMATION, J THE PROPOSAL ALSO WOULD HAVE REMOVED THE CURRENT RESERVE BANK PRESIDENTS AS VOTING MEMBERS OF THE OPEN MARKET COMMI TTEE UNTIL PRESIDENTIAL REAPPOI NTMENT~ WHI CH 1981, WOULD NOT HAVE OCCURRED UNTIL SUCH ACTION TAKEN ANYTIME WOULD SERIOUSLY UNDERMINE THE REPRESENTATIVE AND INDEPENDENT NATURE OF THE MONETARY POLICY PROCESS, IF THIS LEGISLATION HAD BECOME REALITY~ AND RESERVE BANK PRESIDENTS BECAME DIRECTLY RESPONSIBLE TO MEMBERS OF CONGRESS~ THE EXCLUSIVE FRANCHISE TO CREATE MONEY BESTED IN THE INDEPENDENT FEDERAL RESERVE SYSTEM WOULD BE EFFECTIVELY PASSED INTO THE HANDS OF THOSE WHO ALSO HAVE THE AUTHORITY TO SPEND MONEY, ECONOMIC HISTORY IS REPLETE WITH CLEAR LESSONS OF WHAT HAPPENS WHEN THE "MONEY CREATING" PROCESS IN A NATION IS TAKEN OVER BY POLITICAL FORCES , INITIALLY, MORE MONEY IS CREATED TO FINANCE POLITICALLY DESIRABLE PROJECTS; THEN INFLATION TAKES OVER; FOLLOWED BY THE PRINTI NG OF MORE MONEY, INEVITABLY~ RAMPANT INFLATION SO WEA KENS THE FINANCIAL STRUCTURE THAT THE ECONOMY AND VE RY OFTEN SO COLLAPSES~ DOES THE POLITI CAL STRUCTURE AS WELL , -15­ FOR THIS REASON J I WAS NOT IN FAVOR OF SO-CALLED "REFORM" PROPOSALS EMBODIED IN THE RECENT LEG ISLATION. THIS IS NOT TO SAYJ HOWEVERJ THAT CHANGES IN THE SYSTEM SHOULD NOT BE EXPLORED AND ADOPTED. THE FEDERAL RESERVE MUST ALWAYS BE RECEPTIVE TO CHANGES THAT WOULD IMPROVE ITS ORGANI ZATIONAL STRUCTUREJ WIDEN ITS PERSPECTIVE J AND ALLOW IT TO CONTINUE TO BE RESPONSIVE TO THE BROAD WISHES OF THE AMERICAN PEOPL E. FOR EX AMPL EJ I WOULD ENCOURAGE FULL AND OPEN DEBATE ABOUT THE FEDERAL RESERVE'S ROLE AS A BANK REGULATORJ OR ABOUT ITS FUNCTION IN THE DEVELOPING EFT STRUCTU RE. HOW EVER J I BELIEVE THAT ANY CHANGES THAT WOULD JEOPARDIZE THE INDEPEN­ DENCE OF THE SYSTEM IN ITS CONDUCT OF MONETARY POLICYJ OR WOULD WEAKEN THE REGIONAL AND ~ECENTRALIZED NATURE OF THE Sy TEMJ WOULD BE ECONOMICALLY UNSOUND AND ACCORDINGLY NOT IN THE BEST INTERESTS OF THE AMERICAN PUBLIC. AND JUST AS I BELIEVE THAT CHANGE IN BANKING MUST BE MANAGED IN A CLEAR AND GOAL-ORIENTED MANNERJ I ALSO BELI EVE THAT CHANGE PROPOSED FOR THE FEDERAL RESERVE MUST REFLECT THE SAME THOUGHTFULJ MANAGED CHARACTER IF THE FEDERAL RESERVE SYSTEM IS TO CONTINUE TO BE EFFECTIVE AS AN ESSENTIAL INSTITUTION IN AMERICAN SOCIETY. EVEN IFJ IN MY OPINIONJ LOGIC PREVAILS IN 1976 AND THE ERRATIC LEGISLATIVE J PROPOSALS AFFECTING FINANCIAL INSTITUTIONS AND THE FEDERAL RESERVE ARE DEFEATEDJ DILUTEDJ OR DELAYEDJ WE MUST BE VIGILANT NEXT YEARJ AND THE NEXTJ SO LONG AS FORCES ARE AT WORK WH ICH WOULD BYPASS THE MORE DELIBERATE EVOLUTIONARY PROCESS REPRES ENTED IN THE PRINCIPLE OF MANAGED CHANGE. -lG- As THE ISSUES OF CHANGE IN OUR FINANCIAL STRUCTURE-AND THE INSEPARABLE ISSUE OF TECHNOLOGICAL IMPACTS-ARE DISCUSSED IN THE NATIONAL FORUMS IN COMI NG MONTHS AND YEAR~ I KNOW THAT KNOWLEDGABLE BANKERS WI LL CONTINUE TO DRAW UPON THEIR EXPERIENCE TO COUNSEL THEIR LAWMAKERS AND REGULATORS. I~ FOR ONE~ AM HOPEFUL THAT OUR LEGI SLATORS WILL CONSIDER THE TRADITIONAL PRINCIPLES OF FULL~ ,~ FREE ENTERPRISE IN THEIR DECISIONMAKING. LET ESTABLISH A FINANC~ STRUCTURE WHERE ALL LIKE INSTITUTIONS CAN COMPETE EQUITABLY. LET PROVI~~ REASONABLE EQUITY IN REQUIREMENTS FOR CAP ITAL~ FO R LIQU IDITY~ FOR TAXATION . LET THE MARKETPLACE DECIDE WHAT I NSTITUTIONS SHOULD PROVIDE WHAT SERVICES AND AT WHAT PRI CES. I AM CONFIDENT THAT AMERICA'S BANKERS WOULD WELCOME THE OPPORTUNITY TO PLACE THEIR WIDE EXPERI ENCE AND COMMITMENT TO PUBLIC SERVICE ON THE LINE AND TAKE THEIR CHANCES AGAINST ALL COMERS IN THE COMPETITIVE ARENA. As YOU KNOW~ THE GENERAL PUBLIC HAS A GREAT DEAL AT STAKE IN FINANCIAL RESTRUCTURING. WHI LE CENTRAL BANKERS CAN TALK TO OTHER CENTRAL BANKERS ABOUT THESE AND THE BANKERS CAN TALK TO BANKERS ABOUT COMPETITI ON AND EQUITY ISSUES~ 1 IT IS ESSENTIAL THAT THE AVERAGE CITI ZEN BE REMI NDED THAT HIS INTERESTS ARE SERVED BY A STRONG~ COMPETIT IVE~ FREE ENTERPRISE SYSTEM. I PLAN TO EMPHASI ZE TH IS MESSAGE WHENEVER I CAN~ AND I HOPE THAT YOU WILL TAKE EVERY OPPORTUNITY-AS LEADERS IN YOUR OWN COMMUN ITIES-TO SPEAK OUT ABOUT WHAT YOU BELIEVE . • -17­ IN CLOSING I WANT TO SAY THAT AS INEVITABLE CHANGE DOES OCCUR IN BANKING J J WE AT THE FEDERAL RESERVE BANK OF KANSAS CITY INTEND TO WORK WITH YOU TO ACCOMMODATE THESE CHANGES) TO MANAGE THEM FOR THE PRESERVATION OF THE FINEST As FI NANC IAL SYSTEM IN THE WORLD. WE CONSIDER THESE MATTERS) AND AS WE DELIBERATE ABOUT MONETARY POLI CY AND OTHER POLICI ES AFFECTING BANI(ING) BUSINESS) AND THE PUBLIC) I KNOW THAT I-LI KE MY PREDECESSOR GEORGE CLAY-WI LL BE ABLE TO CALL UPON OUR NEBRASKA FRI ENDS FOR ADVICE) ASSISTANCE) AND SUPPORT. # # #

J. Roger Guffey (1976, May 18). Regional President Speech. Speeches, Federal Reserve. https://whenthefedspeaks.com/doc/regional_speeche_19760519_j_roger_guffey

@misc{wtfs_regional_speeche_19760519_j_roger_guffey,
  author = {J. Roger Guffey},
  title = {Regional President Speech},
  year = {1976},
  month = {May},
  howpublished = {Speeches, Federal Reserve},
  url = {https://whenthefedspeaks.com/doc/regional_speeche_19760519_j_roger_guffey},
  note = {Retrieved via When the Fed Speaks corpus}
}