Date: 9/28/99

1000 NAME: Ronald E. Baron

2000 E-MAIL: rbaron@ncounty.net

3000 TITLE: Assistant Vice President & Controller

4000 ORG: Benjamin Franklin Savings Bank

5000 ORG TYPE: Financial Institution & Trade Association
6000 PHONE: 508.528.7000 ext.341

7000 FAX: 508.520.8373

8000 COMMENTS: Benjamin Franklin Savings Bank

SINCE 1871

September 28, 1999

Ms. Cynthia L. Johnson, Director

Cash Management Policy and Planning Division
Financial Management Service

Room 420

401 14th Street, SW

Washington, DC 20227

Dear Ms. Johnson:

The following letter is a response to the proposal published in the Federal
Register, July 30, 1999, regarding changes to the Treasury, Tax & Loan,
Direct and Special Direct Investment Programs. The Bank has been a strong
proponent of these programs in the past and we are interested in providing
our feedback as you are looking at making changes to these programs. The
Bank is not currently a participant in any of the above programs.

A financial analysis conducted earlier this year indicated that the Bank
was actually losing money by being involved in this program. The
information gained from this analysis will form the basis of our
recommendations for your new program. We regret that this letter may be
brief and is coming to you at the [j1lth hour, however, we still feel
compelled to submit our recommendations. Since the letter will be brief, I
expect that you may wish additional information or have questions. Please
feel free to contact me, via e-mail at rbaron@ncounty.net or by phone at
508.528.7000, ext. 341.

Comments about the Treasury Investment Programs

The primary flaw that the Benjamin Franklin Savings Bank discovered in
performing its financial analysis of the Treasury, Tax & Loan (TT&L), and
Special Direct Investment (SDI) Programs was the source used to determine
the interest rate to be charged to the participating banks. The existing
programs (and the new proposed program) use the New York Money Center Bank
Rates to determine what interest rate will be assessed to all banks around
the country. This is where the problem lies for banks that are outside of
New York City area.

From my previous work experience for a bank that solicited savings deposits
from across the country, it is normal for interest rates to vary anywhere


from zero to 30 or 50 basis points from a Libase regionfl. This particular
institution was located in Rhode Island and we considered the entire state
to be our “base regionil. When the Rate Setting Committee met (to set
weekly certificate of deposit rates) we found interest rates differences
for the various markets we were in to be 20 to 50 (or more) basis points
below our base region |. However, we also know that some regions of the
country consistently had higher rates than our Mbase regionl’.

What the Treasury is proposing is to use only New York Money Center rates
for the Treasurylis investment programs. Therefore, this may be of benefit
to banks with liregional.’ interest rates that mirror or are higher the New
York ‘base region: It is unlikely that banks who monitor their local
investment rates will want to participate in the Treasury s programs if
they know the New York area rates are typically higher than their own.

This is especially true where the Treasurylis programs offer only a 25 basis

point spread.

In the April-May 1999 time frame, the Benjamin Franklin Savings Bank
received Special Direct Investment Funds of approximately $18 million. The
interest rate that we were assessed for this interest period versus the
earnings we realized (from overnight investments with Boston-area financial
institutions resulted in a slight loss for the Bank. Not only did the Bank
not realize a 25 basis point spread but we lost money because of the
regional interest rate differentials (Boston-area vs. New York Money
Center). As a result of the above, Benjamin Franklin Savings Bank decided
to terminate its participation in the TT&L and the Special Direct
Investment programs as of the close of business, June 30, 1999.

Recommendation for the New Treasury Programs

The Benjamin Franklin Savings Bank would consider become active
participants in the programs, if we could obtain assurances that the
Treasury Department has made significant changes to the programs with
respect to how interest is calculated to take into account regional
interest rate differences.

Our simplified recommendation would be for the interest calculation to be
based upon the average overnight federal funds investment rate charged by
banks within each of the 12 Federal Reserve Bank Districts less 25 or 30
basis points. For example, Benjamin Franklin Savings Bank (a Boston
District bank) would be charged an interest rate based upon the average
overnight federal funds rate charged by banks within the Boston District
less the margin (25 or 30 BP). The same would hold true for a bank in the
Dallas, Chicago, or San Francisco District, etc.

We realize that the Treasury would have to maintain 12 interest rate-data
gathering operations versus one under the current proposal. With todaylis
electronic data gathering technology, this could be easily achieved. Then,
you may find that more institutions would be attracted to participate in
the programs.

Thank you for the opportunity to offer these comments and recommendations.
If you have any questions, please contact me at the e-mail address and

phone number, mentioned above.

Sincerely,


Ronald E. Baron
Assistant Vice President
And Controller