Donald D. Hester

Customer Relationships and Terms of Loans: Evidence from a Pilot Survey: A Note

In August 1972 the Federal Reserve System conducted a test of a proposed questionnaire that was to be used in a subsequent large nationwide business loan survey. The large survey was never undertaken, but the test elicited considerable information about 1a072 loans made by sixty-two banks at the beginning of August 1972. The banks in the sample are distributed approximately evenly across the twelve Federal Reserve districts; they are relatively large banks that report detailed information about their positions each week. Therefore, it is possible to relate information about a bank to information about a loan and a borrower. This paper examines the relationship between loan terms recorded in the test sample and balance sheet, income statement, and other information about the borrower and the bank that was available when the loan was made. In order to distinguish variations in behavior by banks from variations in the way a representative bank evaluates loan applicants all variables are studied in two forms. Mean values of all variables for each of the sixty-two banks are analyzed in the second section of this paper. In the first section all variables are taken as deviations from those individual bank means, and thus exclude additive bank and market effects.

Financial Disintermediation and Policy

THE PRESENT PAPER* attempts to illustrate that intermediation is ubiquitous and heterogeneous. It suggests that much recent theoretical and empirical research on credit flows is likely to prove disappointing because the pervasiveness of intermediation is not explicitly recognized. It argues further that the pervasiveness of intermediation is no guarantee that monetary policy can be applied without serious eiliciency and equity side effects.

An Empirical Analysis of Risk Taking by Firms in the Savings and Loan Industry

Risk-taking by individual firms is difficult to evaluate empirically because risky actions and their outcomes are not reported in firms’ financial statements. An exception exists in the case of financial institutions which are regulated and insured by Government agencies. These agencies collect detailed information about portfolios, earnings, foreclosures, losses, reserves, and write-offs from individual firms.

Reflections on the Discount Window

AMONG THE SERVICE facilities provided by a Federal Reserve Bank, none seems more antiquated than the discount window. On occasion a member bank may, if it has been pursuing a responsible and moral life, temporarily convert some of its prime paper into Federal Reserve Bank deposits. The interest rate charged for this service often varies across Reserve Banks and depends on the asset discounted. Certain individuals, partnerships, and corporations may also avail themselves of this service at slightly higher interest rates if they have the right credentials. The present note suggests that, though antique, the window still has some usefulness and it really is not very disruptive. The note does not emphasize the origins of the window or recent Federal Reserve System reforms of its operation. The first part considers the role of the discount window when authorities are attempting to control a variable like the monetary base, the bill rate, or the stock of money. The second part discusses the desirability of having a discount window in a general equilibrium context; it asks whether in some sense the discount window improves efficiency and equity in the commercial banking industry.

What Should Banks Do

A preheated fuel-air mixture is subjected to the following sequential steps: it is ignited, the flame is scanned, the burning mixture is introduced onto the free upper level of a radiation substance charge which is then passed along first heat exchange surfaces, a glowing flameless combustion zone is produced in said charge; beyond said zone the combustion gases are passed along second heat exchange surfaces of an increased area relative to the first heat exchange surfaces, with changed rate of flow. The apparatus is equipped with an ignition and flame scanning gap above said charge and with heat exchange tubes which are divided into several branches past said glowing combustion zone.