US Federal Reserve: summer04 ann

329

Announcements

S

TATEMENT BY

C

HAIRMAN

A

LAN

G

REENSPAN ON

N

OMINATION FOR

F

IFTH

T

ERM

‘‘I am honored to be nominated by President Bushand, if conﬁrmed by the Senate, to continue myservice as Chairman of the Board of Governors of theFederal Reserve System.’’

C

HAIRMAN

G

REENSPAN

T

AKES

O

ATH OF

O

FFICE

Chairman Alan Greenspan on June 19, 2004, took theoath of office as Chairman of the Board of Governorsof the Federal Reserve System for a fifth four-yearterm commencing on June 20, 2004. The oath wasadministered by Vice President Dick Cheney at theColorado home of former President Gerald Ford.Witnesses included President and Mrs. Ford andChairman Greenspan’s wife, Andrea Mitchell.President Bush nominated Dr. Greenspan onMay 18, 2004, and he was confirmed by the Senateon June 17, 2004. He originally took office onAugust 11, 1987.

F

EDERAL

O

PEN

M

ARKET

C

OMMITTEE

S

TATEMENTS

The Federal Open Market Committee decided onMay 4, 2004, to keep its target for the federal fundsrate at 1 percent.The Committee continues to believe that an accommodative stance of monetary policy, coupled withrobust underlying growth in productivity, is providing important ongoing support to economic activity.The evidence accumulated over the intermeetingperiod indicates that output is continuing to expand ata solid rate and hiring appears to have picked up.Although incoming inflation data have moved some-what higher, long-term inflation expectations appearto have remained well contained.The Committee perceives the upside and downsiderisks to the attainment of sustainable growth for thenext few quarters are roughly equal. Similarly, therisks to the goal of price stability have moved intobalance. At this juncture, with inflation low andresource use slack, the Committee believes that pol-icy accommodation can be removed at a pace that islikely to be measured.Voting for the FOMC monetary policy actionwere: Alan Greenspan, Chairman; Timothy F.Geithner, Vice Chairman; Ben S. Bernanke; Susan S.Bies; Roger W. Ferguson, Jr.; Edward M. Gramlich;Thomas M. Hoenig; Donald L. Kohn; Cathy E.Minehan; Mark W. Olson; Sandra Pianalto; andWilliam Poole.The Federal Open Market Committee decided onJune 30, 2004, to raise its target for the federal fundsrate 25 basis points to 1

1

⁄

4

percent.The Committee believes that, even after this action,the stance of monetary policy remains accommodative and, coupled with robust underlying growthin productivity, is providing ongoing support to economic activity. The evidence accumulated over theintermeeting period indicates that output is continuing to expand at a solid pace and labor market conditions have improved. Although incoming inflationdata are somewhat elevated, a portion of the increasein recent months appears to have been due to transitory factors.The Committee perceives the upside and downsiderisks to the attainment of both sustainable growth andprice stability for the next few quarters are roughlyequal. With underlying inflation still expected to berelatively low, the Committee believes that policyaccommodation can be removed at a pace that islikely to be measured. Nonetheless, the Committeewill respond to changes in economic prospects asneeded to fulfill its obligation to maintain pricestability.Voting for the FOMC monetary policy action were:Alan Greenspan, Chairman; Timothy F. Geithner,Vice Chairman; Ben S. Bernanke; Susan S. Bies;Roger W. Ferguson, Jr.; Edward M. Gramlich;Thomas M. Hoenig; Donald L. Kohn; Cathy E.Minehan; Mark W. Olson; Sandra Pianalto; andWilliam Poole.In a related action, the Board of Governorsapproved a 25 basis point increase in the discountrate to 2

1

⁄

4

percent. In taking this action, the Boardapproved the requests submitted by the Boards of Directors of the Federal Reserve Banks of Boston,

330 Federal Reserve Bulletin Summer 2004

New York, Philadelphia, Cleveland, Richmond,Atlanta, Chicago, St. Louis, Minneapolis, KansasCity, Dallas, and San Francisco.

P

ROPOSED

A

MENDMENT TO

R

EGULATION

J

The Federal Reserve Board on June 4, 2004, pro-posed amending Regulation J, (Collection of Checksand Other Items by Federal Reserve Banks and FundsTransfers through Fedwire), which governs ReserveBanks

’

collection of checks and other cash items, tocover the entire range of check-processing servicesthat the Reserve Banks plan to offer once the Check Clearing for the 21st Century Act takes effect onOctober 28, 2004.The Check 21 Act permits banks to use substitutechecks in place of original checks in the check collection or return process. The act does not require anybank to accept checks electronically, but facilitatesthe use of electronic transmission between banksthat agree to use that technology. In light of the act

’

sprovisions, the Reserve Banks plan to offer a widerrange of electronic check-processing services. Theproposed amendments would bring electronic itemswithin the scope of Regulation J and would establishnew warranties and an indemnity that would apply toelectronic items for which there is no other warrantyand indemnity protection.

A

MENDMENTS TO

R

EGULATION

V

The Federal Reserve Board on June 8, 2004, issuedamendments to Regulation V (Fair Credit Reporting),which implements the Fair Credit Reporting Act(FCRA), that would add model notices for

ﬁ

nancialinstitutions to use if they furnish negative information to consumer reporting agencies. The amendments also provide guidance to

ﬁ

nancial institutionsregarding the use of the model notices. The Boardis publishing the model notices pursuant to the Fairand Accurate Credit Transactions Act (FACT Act)amendments to the FCRA.The FACT Act provides that if any

ﬁ

nancial institution (1) extends credit and regularly and in theordinary course of business furnishes information toa nationwide consumer reporting agency; and (2) furnishes negative information to such an agency regarding credit extended to a customer, the institution mustprovide a clear and conspicuous notice about furnishing negative information, in writing, to the customer.

Negative information

means information concerning a customer

’

s delinquencies, late payments, insolvency, or any form of default.The FACT Act de

ﬁ

nes the term

ﬁnancial institution

to have the same meaning as in the privacyprovisions of the Gramm

–

Leach

–

Bliley Act. Theterm

ﬁnancial institution

includes not only institutions regulated by the Board and other federal banking agencies, but also includes other

ﬁ

nancial entities, such as merchant creditors that extend creditand report negative information. The Board

’

s modelnotices can be used by all

ﬁ

nancial institutions, asde

ﬁ

ned by the act.The amendments became effective July 16, 2004.

A

MENDMENTS TO

R

EGULATION

CC, A

PPENDIX

A Restructuring of Check-Processing Operationsin the Eleventh, Seventh, Eighth, Fourth, and Fifth Districts

The Federal Reserve Board on May 4, 2004,announced amendments to Appendix A of Regulation CC (Availability of Funds and Collectionof Checks), effective July 10, 2004, that re

ﬂ

ectthe restructuring of the Federal Reserve

’

s check-processing operations in the Eleventh District.On May 17, 2004, the Federal Reserve Boardannounced amendments to Appendix A of Regulation CC, that re

ﬂ

ect the restructuring of the FederalReserve

’

s check-processing operations in the Seventh and Eighth Districts.On June 22, 2004, the Federal Reserve Boardannounced amendments to Appendix A of Regulation CC, that re

ﬂ

ect the restructuring of the FederalReserve

’

s check-processing operations in the Fourth,Fifth, and Eighth Districts.These amendments are part of a series of amendments to appendix A that will take place throughthe end of 2004, associated with the previouslyannounced restructuring of the Reserve Banks

’

check-processing operations.Appendix A provides a routing number guide thathelps depository institutions determine the maximumpermissible hold periods for most deposited checks.As of July 10, 2004, the San Antonio of

ﬁ

ce of theFederal Reserve Bank of Dallas no longer processeschecks, and banks served by that of

ﬁ

ce for check-processing purposes were reassigned to the ReserveBank

’

s head of

ﬁ

ce in Dallas. To re

ﬂ

ect this operational change, the

ﬁ

nal rule deletes the reference inappendix A to the San Antonio of

ﬁ

ce and reassignsthe routing numbers listed thereunder to the ReserveBank

’

s head of

ﬁ

ce.

Announcements

331

As of July 24, 2004, the Little Rock of

ﬁ

ce of theFederal Reserve Bank of St. Louis no longer processes checks, and banks served by that of

ﬁ

ce forcheck-processing purposes have been reassigned tothe Reserve Bank

’

s Memphis of

ﬁ

ce.As of August 7, 2004, the Milwaukee of

ﬁ

ce of theFederal Reserve Bank of Chicago no longer processes checks, and banks served by that of

ﬁ

ce havebeen reassigned to the Reserve Bank

’

s head of

ﬁ

ce.To re

ﬂ

ect these operational changes, the

ﬁ

nal rule(1) deletes the reference in appendix A to theSt. Louis Reserve Bank

’

s Little Rock of

ﬁ

ce andreassigns the routing numbers listed thereunder to theReserve Bank

’

s Memphis of

ﬁ

ce, effective July 24,2004, and (2) deletes the reference in appendix A tothe Chicago Reserve Bank

’

s Milwaukee of

ﬁ

ce andreassigns the routing numbers listed thereunder to theReserve Bank

’

s head of

ﬁ

ce, effective August 7, 2004.As of August 28, 2004, the Columbia of

ﬁ

ce of theFederal Reserve Bank of Richmond no longer processes checks, and banks served by that of

ﬁ

ce havebeen reassigned to that Reserve Bank

’

s Charlotteof

ﬁ

ce.Also as of August 28, 2004, the Louisville of

ﬁ

ceof the Federal Reserve Bank of St. Louis no longerprocesses checks, and banks served by that of

ﬁ

ce forcheck-processing purposes have been reassigned tothe Cincinnati of

ﬁ

ce of the Federal Reserve Bank of Cleveland.To re

ﬂ

ect these operational changes, the

ﬁ

nal rule(1) deletes the reference in appendix A to the Richmond Reserve Bank

’

s Columbia of

ﬁ

ce and reassignsthe routing numbers listed thereunder to that ReserveBank

’

s Charlotte of

ﬁ

ce, and (2) deletes the referencein appendix A to the St. Louis Reserve Bank

’

s Louisville of

ﬁ

ce and reassigns the routing numbers listedthereunder to the Cleveland Reserve Bank

’

s Cincinnati of

ﬁ

ce. To coincide with the effective date of theunderlying check-processing changes, the amendments were effective August 28, 2004.As a result of these changes, some checks deposited in the affected regions that were nonlocal checkshave become local checks that are subject to shorterpermissible hold periods.

F

INAL

A

MENDMENTS TO

R

EGULATION

CC

AND ITS

C

OMMENTARY TO

I

MPLEMENT

C

HECK

21 A

CT

The Federal Reserve Board on July 26, 2004,released

ﬁ

nal amendments to Regulation CC and itscommentary to implement the Check Clearing for the21st Century Act (Check 21 Act), which was enactedon October 28, 2003, and becomes effective on October 28, 2004.To facilitate check truncation and electronic check exchange, the Check 21 Act authorizes a new negotiable instrument called a

substitute check

. A substitute check is a paper reproduction of the originalcheck that contains an image of the front and back of the original check and can be processed just likethe original check. The Check 21 Act providesthat a properly prepared substitute check is the legalequivalent of the original check for all purposes. TheCheck 21 Act does not require any bank to createsubstitute checks or to accept checks electronically.The Check 21 Act includes new warranties, anindemnity, and expedited re-credit procedures thatprotect substitute check recipients.The Board

’

s amendments: (1) set forth the requirements of the Check 21 Act that apply to banks;(2) provide a model disclosure and model noticesrelating to substitute checks; and (3) set forth bank endorsement and identi

ﬁ

cation requirements for substitute checks. The amendments also clarify someexisting provisions of the rule and commentary.

P

ROPOSED

A

MENDMENTS

P

UBLISHED TO

R

EGULATION

DD

The Federal Reserve Board on May 28, 2004, published proposed amendments to Regulation DD(Truth in Savings), which implements the Truth inSavings Act, and the regulation

’

sof

ﬁ

cial staff commentary to address concerns about the uniformityand adequacy of information provided to consumerswhen they overdraw their accounts. The proposedamendments, in part, address a speci

ﬁ

c serviceoffered by depository institutions, commonly referredto as

bounced-check protection

or

courtesy overdraft protection

.Depository institutions sometimes offer courtesyoverdraft protection to deposit account customers asan alternative to a traditional overdraft line of credit.To address concerns about the marketing of thisservice, a proposed revision to the regulation wouldexpand the prohibition against misleading advertisements to cover communications with current customers about existing accounts. The staff commentarywould provide examples. Other proposed revisions toRegulation DD would require additional fee and otherdisclosures about courtesy overdraft services, including in advertisements.The Board is also proposing amendments of general applicability that would require institutions toprovide more uniform disclosures about overdraftand returned-item fees.

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