Regional President Speech

SlLAS KEEHN REMARKS YOUNG EXECUTIVES CLUB CHICAGO, ILLINOIS AUGUSl 14, 1984 I. INTRODUCTION - SIGNIFICANT CHALLENGES CURRENTLY FACING THE FEDERAL RESERVE SYSTEM AND FEDERAL RESERVE BANKS A. EACH OF THE MAJOR AREAS OF RESPONSIBILITY UNDERGOING SIGNIFICANT CHANGES 11. DESCRIPTION OF THE FEDERAL HESERVE SYSTEM A. ·rHE DISTRICT BANKS AND BRANCHES - GEOGRAPHICAL AREAS - 12/25/RCPCS (DETROIT, DES MOINES, MILWAUKEE, INDIANAPOLIS) 1. BOARD OF DIRECTORS - 9 A. lHE 3 CLASSES - THE ELECTIVE PROCESS 2. APPOINTING THE DISTRICT PRESIDENT B. BOARD OF GOVERNORS - 7 , . 14 YEAR STAGGERED TERMS 1. APPOINTMENT/CONFIRMATION PROCESS A. CHAIRMAN/VICE CHAIRMAN C. INTERRELATIONSHIP BETWEEN THE BOARD OF GOVERNORS AND BANKS Digitized for FRASER https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 8/14/84 PAGE 2 1. OPERATIONAL AND PROCEDURAL CONTROLS 2. CHECKS AND BALANCES A. lHE EXTREME IMPORTANCE B. ALMOST UNIQUELY EFFECTIVE D. MONETARY POLICY 1. ·1-HE NUMBER ONE RESPONSIBILITY AND·ABSOLUTE OVERRIDING IMPORTANCE A. EVERYTHING ELSE RELATED TO THIS B. AND IN EFFECT SUBSERVIENT TO THIS MAIN RESPONSIBILITY - 2. THE INDEPENDENCE OF THE FED A. CURRENT RISKS B. EXAMPLES THROUGHOUT THE FREE WORLD C. AN ISSUE TO FOLLOW III. DESCRIPTION OF THE FEDERAL RESERVE BANKS BY FUNCTION A. ECONOMIC RESEARCH AND MONETARY POLICY Digitized for FRASER https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 8/14/84 PAGE 3 1. THE RELATIONSHIP OF THE BANKS TO THE FOMC (12 MEMBERS) 2. THE ROLE OF THE PRESIDENTS IN THE FOMC - ELECTIVE VS. APPOINTIVE B. SUPERVISION AND REGULATION 1. REGULATION - THE DEVELOPMENT OF RULES BY WHICH FINANCIAL INSTITUTIONS ARE GOVERNED AND CONTROLLED 2. SUPERVISION - THE ENFORCEMENT OF THOSE REGULATIONS AS THEY RELATE TO THE INSTITUTIONS C. OPERATIONS - PROCESSING OF CHECK ACTIVITY, ETC. 1. lHE ROLE OF THE FEDERAL RESERVE BANKS IN THE PAYMENTS MECHANISM A. PIPELINE 2. MONETARY CONTROL ACT A. THE ENORMOUS PHILOSOPHICAL CHANGE Digitized for FRASER https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 8/14/84 PAGE 4 D. l WILL TOUCH ON EACH OF THESE BASIC AREAS IN SOME DETAIL IV. ECONOMIC RESEARCH AND MONETARY POLICY A. THE BASIC OPERATING CHANGE IN OCTOBER 1979 1. THE THEN ENVIRONMENT - INTOLERABLE HIGH RATES AND INFLATION A. lHE EXPECTATION OF EVEN HIGHER RATES B. CLEARLY THE NUMBER ONE PROBLEM 2. THE VERY SIGNIFICANT GAINS THAT HAVE BEEN ACHIEVED - CURRENT CPI RATES - 3 - 4% A. BUT AT AN ENORMOUS COST, PARTICULARLY IN THE MIDWEST B. A RECESSION THAT HAS HAD A STRUCTURAL IMPACT ON THE OUTLOOK FOR OUR BASIC INDUSTRIES B. OUR BASIC TOOLS FOR MONETARY POLICY - THE AGGREGATES OR THE M'S Digitized for FRASER https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 8/14/84 PAGE 5 1. AND OUR MOST FUNCTIONAL TOOL - M-1 A. HAS UNDERGONE SIGNIFICANT CHANGES 2. INNOVATIONS+ DEREGULATION IN FINANCIAL SERVICES - NOW ACCOUNTS, MMDA'S, ETC. 3. THE CURRENT CHALLENGE A. 10 MAINTAIN THE PROGRAM B. YET BE FLEXIBLE IN THE APPROACH C. CHAIRMAN VOLCKER'S TESTIMONY - 7/25/84 (1). REAFFIRMED THE RANGES FOR 1984 (A). M-1, M-2 (B). M-3/CREDIT (I). GROWTH IN FIRST HALF NOT TO LIKELY REPEAT IN SECOND HALF (II). HIGHER TARGETS IMPROPER (2). PRELIMINARY ESTIMATES OF THE RANGES FOR 1985 Digitized for FRASER https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 8/14/84 PAGE 6 (A). CONTINUATION OF THE LONGER RANGE PROGRAM (3). THE CHALLENGE TO MAINTAIN THE APPROPRIATE BALANCE AND FLEXIBILITY (A). YET CONTINUE TOWARD FUNDAMENTAL OBJECTIVE - PRICE STABILITY V. SUPERVISION AND REGULATION - THE FINANCIAL SERVICE INDUSTRY IS UNDERGOING ENVIRONMENTAL CHANGES A. SIGNIFICANT CHANGES ON A DE FACTO BASIS - FAR AHEAD OF THE DE JURE CHANGES 1. EXAMPLE OF OTHER INDUSTRIES THAT HAVE GONE THROUGH DEREGULATION - BROKERAGE/AIRLINES/TRUCKING 2. BANKING WILL BE NO DIFFERENT 3. THE EARLY SIGNS ARE APPARENT Digitized for FRASER https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 8/14/84 PAGE 7 B. INDUSTRY HAS EXPERIENCED A SIGNIFICANT NUMBER OF FAILURES 1. COMBINATION OF REASONS 2. lHE CONTINENTAL PROBLEM A. NOT CAUSED BY DEREGULATION - QUITE THE OPPOSITE B. AN EXAMPLE OF PROBLEMS THAT THE SUPERVISION IS AND WILL BE DEALING WITH 3. THE OVER-CAPACITY CONCEPT A. REGULATION SUPPORTED GREATER INSTITUTIONS THAN MARKET FORCES CAN DEAL WITH B. DEREGULATION MUST RESULT IN CONSOLIDATION AND FEWER NUMBERS OF INSTITUTIONS C. WHICH COULD BE A RUGGED PROCESS D. ONE IN WHICH THE SAFETY AND SOUNDNESS ISSUE WILL BECOME CRITICAL Digitized for FRASER https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 8/14/84 PAGE 8 VI. OPERATIONS - PAYMENTS MECHANISM A. MCA - BASIC DESCRIPTION 1. SHIFT FROM BENIGN SUPPLIER OF SERVICES 2. TO A COMPETITIVE INTERRELATIONSHIP IN A HIGHLY COMPETITIVE MARKET 3. THE RESERVE BANKS HAVE MADE THIS CONVERSION B. OUR ROLE MISUNDERSTOOD BY THE PRIVATE SECTOR 1. GOVERNMENT ENTITY COMPETING WITH PRIVATE SECTOR 2. THE MARKET WILL DETERMINE OUR APPROPRIATE ROLE 3. lHE RISKS ARE SIGNIFICANT 4. IF WE ARE NOT SUCCESSFUL, OUR ROLE IN THE PAYMENTS MECHANISM WILL NOT BE VIABLE A. IMPORTANT FOR FED TO BE ACTIVE PARTICIPANT IN THE "PIPELINE" C. ADMIT THE CONTRADICTION Digitized for FRASER https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 8/14/84 PAGE 9 1. BUT THE LAW HAS SPECIFIED IN PLACING US IN A CONTRADICTORY ROLE A. IMPROVE EFFICIENCY OF PAYMENTS MECHANISM VII. CONCLUSION A. WE HAVE COME THROUGH A DIFFICULT PERIOD WITH GREAT SUCCESS 1. THE CHALLENGES CONTAINED B. OUR CONTINUED SUCCESS HAS MAJOR IMPLICATIONS FOR VIRTUALLY EVERYONE 1. lHERE IS A GREAT DEAL AT STAKE 2. WE Will BE SUCCESSFUL C. THE MAJOR CHALLENGE - THE FISCAL DEFICIT 1. NOT JUST AN ECONOMIC OR MONETARY POLICY ISSUE 2. DEEP SOCIAL AND PHILOSOPHICAL ISSUE * * * * * Digitized for FRASER https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis

Silas Keehn (1984, August 13). Regional President Speech. Speeches, Federal Reserve. https://whenthefedspeaks.com/doc/regional_speeche_19840814_silas_keehn

@misc{wtfs_regional_speeche_19840814_silas_keehn,
  author = {Silas Keehn},
  title = {Regional President Speech},
  year = {1984},
  month = {Aug},
  howpublished = {Speeches, Federal Reserve},
  url = {https://whenthefedspeaks.com/doc/regional_speeche_19840814_silas_keehn},
  note = {Retrieved via When the Fed Speaks corpus}
}