4. The Federal Reserve in:

Stanyo Dinov

Central Banks as a Bank Supervisor, page 45 - 62

A Comparison of the Function of the Bank of England, the Federal Reserve and the European Central Bank

2. Edition 2018, ISBN print: 978-3-8288-4110-9, ISBN online: 978-3-8288-6962-2,

Series: Wissenschaftliche Beiträge aus dem Tectum Verlag: Rechtswissenschaften, vol. 90

Tectum, Baden-Baden
Bibliographic information
The Federal Reserve Historical background The Fed was established as the result of the Federal Reserve Act (FRA) 1913 after the US financial crisis in 1907. It was created not to be a CB and to have a limited power be‐ tween 12 banks of the most powerful US states.77 The Act enabled Congress to withhold or to restrict actions of the Fed. At the beginning, the Fed's main responsibilities were discounting of commercial paper and acceptances bills as well as promoting effective national payment system. The FRA also gave the Fed authority to "coin money and regu‐ late the value thereof." Financial regulation was usually not a policy applied by the federal government for a long time.78 Thereby, the amendments V (state level) and XIV s 1 (federal level) of the US Constitution does not allow any regulation. The at‐ 4. 4.1. 77 Allan H. Meltzer, A History of the Federal Reserve 1951-1969, The University of Chicago Press, (Chicago and London 2009), 1 f. Despite the proponents yet some of the Founding Fathers were strongly opposite the formation of central banking system as pos‐ sibility of Great Britain tried to place the colonies under the mon‐ etary colony control of the BoE. 78 In this regard, comparison here could be made with the UK, where in the financial system until 1970 s there was not public regulation. 45 tempts to create the Bank of the United States in 179179 and in 1816 were unsuccessful. The regulation in the finan‐ cial sector began later through the case law,80 after many crises and the Great Depression in 1929. The regulation started 1930 s with the F. D. Roosevelt's legislation: Glass- Steagall Act 1933 strictly dividing commercial and invest‐ ment banking in order to prevent bank depositors from additional exposure to risk associated with stock market volatilities.81 It followed the Securities Act 1933, Securities Exchange Act 1934,82 Banking Act 1933 and 1935,83 Com‐ modity Exchange Act 1936 and the 1956 Bank Holding 79 Baker Colleen, Federal reserve as Last Resort, (2012) University of Michigan Journal of Law Reform, 69, 81. A conflict between na‐ tional and states banking interests in the US Congress blocked the proposal for the first Bank of the US. The need after the war in 1812 caused the establishment of the second Bank of the US. The U.S. Subprime Court in Mcculloch v Maryland (1816) decided to settled it constitutionally, but the Congress did nor renewal the charter. 80 Munn v Illinois (1877) where the Subprime Court decided that in some industries the public interest can justify regulation. Later with the case Noble State Bank v Haskell (1911) the court defined that banking can be one of the industries which can be regulated and with the case Nebbia v New York (1934) the regulation in public interest can only be justified, if it is related to a specific area. 81 Ch. s 20 of the Act; Charles A. E. Goodhart and Dimitri P. Tsomo‐ cos (5), 124. The Glass-Steagall Act 1933 also created the Federal Deposit Insurance Corporation (FDIC) with authority to resolve failed banks, but left the authority to close banks with their re‐ spective regulations to the Fed. 82 The SEA requires the Fed to regulate the extension of credit used in connection with the purchase of securities. 83 The BA 1935 shifted power from the Fed to the Board of Gover‐ nors, eliminating the semiautonomous nature of the reserve banks. 4. The Federal Reserve 46 Company Act (BHCA).84 From 1970 s to 1990 s, there was a period of deregulation or the so called "Big Bang"85 char‐ acterised with the movement of the Chicago Law School for a "public choice" and avoiding "regulatory capture".86 The deregulatory measures culminated with the Gramm- Leach-Bliley (GLB) Act 1999 which abolished the Glass- Steagall Act's prohibition of combined investment and commercial banking and the Commodity Futures Mod‐ ernisation Act (CFMA) 2000, which replaced some parts of the Glass-Steagall Act and opened the American deriva‐ tive market. The period from 2000 to 2010 was charac‐ Created was the Federal Open Market Committee to clarified dis‐ agreements between the Board and regional Reserve Banks. 84 §§ 1841(a)2Aff BHCA 1956 increased the Bord's power to regu‐ late, to approve or reject applications for new banks. This included imposing capital requirements, inspections and merger and acqui‐ sition approval. The Act assigned to the Fed primary responsibility for supervising and regulating the activities of bank holding com‐ panies. Through the Act, the Congress sought to achieve two basic objectives: (1) to avoid the creation of a monopoly or the restraint of trade in the banking industry through the acquisition of addi‐ tional banks by bank holding companies and (2) to keep banking and commerce separate by restricting the nonbanking activities of bank holding companies. 85 The term is used as a big bang of the old strict regulation sets and proclamation to free market liberalism and self-regulation. 86 The proponents claimed that the regulators are captured, lobed from big industries and they do not act anymore in public interest. The rules were created for strong monopolies and not for small and middle-sized businesses, therefore, pleaded were for more commercial liberty. See George J. Stigler in 1971, The Theory of Economic Regulation, 3, ˂ uivos/regulacao2/stigler-1971.pdf˃ accessed on 27th of June 2015. As a rule, regulation is acquired by the industry and is designed and operated primarily for its benefits. 4.1. Historical background 47 terised with re-regulation measures in particular repre‐ sented with the Emergency Economic Stabilisation Act (EESA) 2008 and the Dodd-Frank Act (DFA) 2010. Even dought, in 2017 the US administration made a statment to abolish the DFA 2010 and so to start new de-re-regulation measures.87 The US financial system and the Federal Reserve Act From its creation, the US financial regulation has been dominated with the parallel split of dual Federal and State system with multiple agency autonomy and regulatory competition. The Federal Reserve System (FRS) or the Fed has both private and public components to serve the inter‐ ests of the public and private banks. The primary motiva‐ tion for creating the FRS was to address banking panics as well as " establish more effective supervision of banking in the US...".88 The Fed is headed by the Board of Gover‐ nors of FRS (FRB),89 consisting of a Chairman and Vice Chairman which are appointed by the President and con‐ firmed by the Senate. The Board's primary responsibility is the formulation of monetary policy. An important body inside the Fed is the Federal Open Market Committee 4.2. 87 See: Trump administration, ´Trump orders Dodd-Frank review in effort to roll back financial regulation´, The Guardian, 3 February 2017, available at: accessed 17 May 2017. 88 FRA 1913, 1. 89 S 714 FRA. 4. The Federal Reserve 48 (FOMC),90 which conducts the money policy and oversees open market operations. The Fed through its Banking Su‐ pervision and Regulation Division oversees the US bank‐ ing system. It has supervisory responsibilities for statechartered banks that are members of the FRS, bank hold‐ ing companies and foreign banks. In addition other regulators of the US financial markets are: the US Security and Exchange Commission (SEC), the Federal Insurance Office as part of the Treasury and the financial authorities of the federal states. To promote con‐ sistency in the examination and supervision of banking or‐ ganizations and for exchanging views on important regula‐ tory issues between state and federal regulatory agencies in 1978, the Congress created the Federal Financial Institu‐ tions Examination Council (FFIEC). The FFIECs’ purpose is to prescribe uniform federal principles and standards amongst the federal agencies that regulate financial institu‐ tions. The FFIEC has to coordinate and harmonise the pol‐ icy between the FRB, the FDIC,91 the Office of the 90 The FOMC is with seat in Washington. It is made up of the presi‐ dent of the Federal Reserve Bank of New York, and presidents of four other Fed Banks, who serve on a rotating basis and seven members of the Board of Governors appointed by the President and confirmed by the Senate. Only twelve of the nineteen people are able to vote. The seven members of the Board of Governors have a permanent vote plus the president of the Fed in New York and four members of rotation from the rest of the members. 91 See The Federal Reserve System, Purposes & Functions, Board of Governors of the Federal Reserve System, Washington D. C. 2005, 5. State banks that are not members of the FRS are supervised by the FDIC. 4.2. The US financial system and the Federal Reserve Act 49 Comptroller of the Currency (OCC),92 the National Credit Union Administration (NCUA),93 the State Liaison Com‐ mittee (SLC)94 and the Consumer Financial Protection Bu‐ reau (CFPB).95 Therefore, along with the Fed in the US federal and state level there are a number of different agencies that su‐ pervise the financial system. The created in 1913 FRA and all subsequent legislation made the Fed independent but with never defined inde‐ pendence.96 Although the Fed is an independent authority, the US government has kept a strong influence on its mon‐ etary policy. During the financial crisis in 2007, the Fed acted as a financing arm of the Treasury.97 Currently the responsibilities of the Fed fall into four general areas: – Regarding the monetary policy the Fed has three key objectives: maximum employment, stable prices, and moderating long-term interest rates; 92 The OCC was created in 1863 as an independent agency within the Treasury. 93 Supervises not-for-profit, cooperative, tax-free organizations. 94 The SLC includes representatives from the Conference of State Bank Supervisors (CSBS), the American Council of State Savings Supervisors (ACSS), and the National Association of State Credit Union Supervisors (NASCUS). 95 The CFPB was created with the DFA in 2010. 96 Cf. Allan H. Meltzer, Book 2, 1970-1986, Who owns the Federal Reserve?, 1255 f. The Board of Governors in the Federal Reserve System has a number of supervisory and regulatory responsibili‐ ties in the US banking system, but not complete responsibility. The Fed is described as "independent within the government" rather than "independent of government". 97 Allan H. Meltzer (96), 1255 f. 4. The Federal Reserve 50 – Since 2009 the Fed is responsible for supervision and regulation of banking institutions in order to ensure the safety and soundness of the financial system and to pro‐ tect the credit rights of consumers; – It conducts macro-prudential oversight in order to maintain the stability of the financial system from sys‐ temic risk; – The Fed has also to provide financial services to deposi‐ tory institutions and to operate the national payments system.98 The Fed's function of banking supervision involves moni‐ toring, inspecting, and examining of banking organiza‐ tions in order to assess their condition and compliance with relevant laws and regulation. The Fed has primary su‐ pervisory authority for state banks. It shares supervisory and regulatory responsibilities for domestic banking insti‐ tutions with the OCC and the FDIC at the federal level,99 and with the banking departments of the various states. This dual federal–state banking system has evolved partly out of the complexity of the US financial system, with its many kinds of depository institutions and numerous char‐ tering authorities. It has also resulted from a wide variety of federal state laws and regulations designed to remedy problems that the US commercial banking system has faced over its history. 98 The Federal Reserve System (91), 1. 99 The Federal Reserve System (91), 12. 4.2. The US financial system and the Federal Reserve Act 51 Gramm-Leach-Bliley Act 1999 The GLB Act was one of the last pieces of legislation aim‐ ing to deregulate the US financial market. It allowed banks, securities firms, and insurance companies to affiliate with each other through financial holding company structure and therefore, abolished the previous Glass-Steagall and Bank Holding Company Acts. To be certificated, financial holding companies have to meet a higher standard.100 The regulation and supervision of financial holding companies (FHCs) differs from that of bank holding companies (BHCs). The law kept in place the existing regulators for financial subsidiaries of FHCs, but gave the Fed a role sim‐ ilar to that of the UK FSA of an “umbrella supervisor,” in order to bring a full financial services integration.101 Through this supervision, the financial institutions become involved in different financial activities. By the supervision, the Fed should relay and work closely with other regulated subsidiaries such as the OCC, FDIC, SEC, and the state in‐ surance supervisors.102 The focus of the umbrella supervi‐ sory role of the Fed endorsed by GLB Act was on risks that could adversely affect the insured depository institution. FHCs, in turn, were subject to only limited Fed regulatory 4.3. 100 The institutions must be well capitalized and well managed in accordance with existing bank regulations, and they must have at least satisfactory ratings under the Community Reinvestment Act. 101 Mark W. Olson, Implementing the Gramm-Leach-Bliley Act: Two Years Later, ˂ eches/2002/20020208/˃, accessed 12 July 2015. 102 Joe Mahon, Financial Services Modernization Act of 1999, com‐ monly called Gramm-Leach-Bliley. 4. The Federal Reserve 52 oversight.103 Fed supervision was focused on the FHC lev‐ el, on those risks that could affect the depository sub‐ sidiaries.104 However, the consequences of the following fi‐ nancial crisis called into question the acts of the reform.105 Commodity Futures Modernisation Act 2000 The following CFMA deregulated the law of the most OTC-derivates transactions. Before the CFMA with the 1982 Shad/Johnson agreement, the regulatory jurisdiction over futures and options was divided between the CFTC and SEC.106 The Act significantly restricted the capacity of the CFTC and SEC directly to intervene in OTC-trading between sophisticated market participants for derivative contracts. It moved the regulation of futures markets away from a purely prescriptive rules-based approach towards a 4.4. 103 Joe Mahon (n 102). 104 Ibid. 105 Cf. Joe Mahon (n 102), The Act allowed distressed investment banks like Bear Stearns and Merrill Lynch to be acquired by fi‐ nancial holding companies rather than go bankrupt, and ap‐ proved others like Goldman Sachs and Morgan Stanley reorga‐ nized as financial holding companies to improve their market reputations. See the speech of the John Dingell. By the passing of the Bill in the US Congress there was a caution, that the Act cre‐ ated group of institutions which are "too big to fail" and the Fed and the Treasury would have to bail them out. The liabilities of these institutions in one financial area will go to follow the lia‐ bility at the next. Awareness was made also that the Bill limited privacy protections against the sale of private financial informa‐ tion. 106 Mark Jickling, CRS Report for Congress, The Commodity Fu‐ tures Modernization Act (P.L. 106-554) 2003, 5. 4.4. Commodity Futures Modernisation Act 2000 53 system that relies more on compliance with principles.107 The CFMA considered the differences in products and market participants and created a structure that provided a specific intensity of regulatory oversight corresponding with the needs of the markets. The Fed prerogatives were to set margins for futures and stocks and it could delegate this authority to the CFTC and SEC. Furthermore, the Fed was the regulator with systemic responsibilities, the primus inter pares among financial regulators which had the power delegated by Congress with special responsibilities for mortgages and consumer protection.108 Emergency Economic Stabilisation Act 2008 In order to prevent the collapse of the US financial system during the subprime mortgage crisis, the US government published in 2008 the Emergency Economic Stabilisation Act (EESA). The EESA provided up to $700 billion to the Secretary of the Treasury to stabilise the economy. The Act authorised the Secretary of the Treasury to establish the Troubled Asset Relief Program (TARP) and to purchase troubled assets from any financial institution. The EESA created a oversight mechanism, setting up a Financial Sta‐ bility Oversight Board (FSOB),109 and a Congressional Oversight Panel (COP). The FSOB had to review the acts of the Treasury regarding the TARP and makes recom‐ 4.5. 107 The Department of the Treasury Blueprint for a Modernized Fi‐ nancial Regulatory Structure 2008, 49. 108 Alan S. Blinder, Across the Great Divide: New Perspectives on the Financial Crisis (Hoover Institution 2014), 90. 109 S 104 EESA 2008. 4. The Federal Reserve 54 mendations to it. The second body, the COP was expected to review the state of the financial markets and the regula‐ tory system and to submit reports to the US Congress. The EESA gave the Fed increased power over short-term inter‐ est rates and obligated the FRB to disclose certain material information, regarding certain extensions of credit. In ad‐ dition, the FRB had to provide periodic updates at least once every 60 days describing the status of the loan, the value of the collateral, and the cost to taxpayers.110 White Paper on Financial Regulatory Reform 2009 In 2009, the US-government adopted the White Paper Re‐ form Part in order to strengthen the regulation of the fi‐ nancial market. While part of blame of the global financial crisis was thrown on the existing US liberal approach of regulation, the Act brought many proposals for changes. It created a new Financial Services Oversight Council (FSOC) insight the Treasury with members consisting of the chair‐ men and directors of the Fed, and other national supervi‐ sory agencies. The FSOC has to oversee the activities of systemically important firms (referred as tier 1 FHCs), and to coordinate interagency cooperation between the nation‐ al agencies. All systemic important firms have to be re‐ quired to register as FHCs must be subject to consolidated supervision and regulation by the FRB. In this regard, the Act repealed certain limits on the Fed's authority over functionally regulated subsidiaries imposed by the GLB 4.6. 110 Davis Polk & Wardwell, Emergency Economic Stabilisation Act 2008, 2008, 25. 4.6. White Paper on Financial Regulatory Reform 2009 55 Act. The White Paper proposes to amend Section 13(3) FRA in order to allow the Fed to provide liquidity to nonbanks after the approval of the Secretary of the Treasury. Moreover, the Act suggested a new regime for the resolu‐ tion of failing BHCs and FHCs, which would have serious adverse effects on the financial system. Through initiative by the Fed, Treasury, SEC or FDIC financial firms could be put into special resolution process. Ultimately, the Trea‐ sury in consultation with other agencies will decide whether to put any firm into resolution.111 The Fed had been given a responsibility for the oversight of systemically important payment, clearing and settlement systems in‐ cluding through provision of access to its discount window. The Fed had used this power on a number of occasions during the crisis, but it had in each case to wait prior Trea‐ sury approval. The amendment simply formalises this rela‐ tionship. In this regard, the Reform Act simplified the complexity of the US financial system.112 Dodd-Frank Act 2010 In 2010, the US legislature passed the Dodd-Frank Wall Street Reform and Consumer Protection Act (DFA). The Act increased the powers of the Fed as a banking supervi‐ 4.7. 111 Allen & Overy, ʻThe Obama Administration today published Fi‐ nancial Regulatory Reform’ 2009. 112 “Complexity has led to cracks in system” Financial Times (12 June 2009) 6. 4. The Federal Reserve 56 sor.113 The DFA gave the Fed primary responsibilities for supervising all firms that could create a threat to financial stability in addition to its responsibilities for monitoring fi‐ nancial institutions and protecting consumers.114 The main task of the Act was to create a body responsible for macroprudential supervision. Therefore, accordingly the White Paper Reform proposal created by the Treasury was the Fi‐ nancial Stability Oversight Council (FSOC)115 in order to identify, monitor and manage systemic risk.116 The FSOC brought together under the Treasury several financial mar‐ ket agencies. The Fed becomes a member of the Council performing the task of regulatory coordination.117 The FSOC has to decide if large complex systemically financial institutions (SIFIs) are adequately regulated or financial market utilities (FMUs) like stock exchanges will come un‐ der the supervision of the Fed.118 The Fed must conduct macro-prudential oversight over large SIFIs with consoli‐ dated assets of $ 50 billion or more whereas other institu‐ tions will be supervised by the FSOC.119 However, through 113 Lucia Dalla Pellegrina, et al., ‘New Advantages of tying One's Hands: Banking Supervision, Monetary Policy and Central Bank Independenceʼ, 208. 114 Pierre C. Boyer and Jorge Ponce, ‘Central Banks and Banking Supervision Reformʼ, (2010) SSRN 158. 115 S 111 DFA 2010. 116 As the White Paper Reform Act called the body Financial Ser‐ vices Oversight Council in the DFA it is renamed as a Financial Stability Oversight Council. 117 Ben S. Bernanke (7), 118 f. 118 Ibid. 119. The SIFIs and FMUs are tasked with submitting reso‐ lution plans to the Fed and the FDIC. 119 Consolidated Supervision Framework for Large Financial Insti‐ tutions, Board of Governors of FRS. 4.7. Dodd-Frank Act 2010 57 the Council as part of the Treasury, the Fed becomes not the only responsible financial regulator. The DFA created a "last resort" role for the Fed. By providing a liquidity assis‐ tance, according s 13(3) FRA, the Fed should consult with the Treasury finding that the financial market utility is not able to secure adequate credit accommodation and in par‐ ticular circumstances the Fed can act as LLR-authority. The Act gave the FDIC the right in short procedure to shut down failed banks and protect depositors. Neverthe‐ less, apart from using the instrument of higher capital re‐ quirements there was a failure in mitigating systemic risk ex-ante.120 Created inside the Fed was a Consumer Finan‐ cial Protection Bureau (CFPB). However, similar to the UK-FCA, the CFPB-functions overlap with the Commodi‐ ty Futures Trading Commission (CFTC) and SEC.121 With the creation of the three new bodies: the FSOC, CFPB and the Office of National Insurance, the legislative failure to adopt any structural reform reducing the various regu‐ lation bodies.122 The merger of the Office of Thrift Supervi‐ sion (OTC)123 into the Office of the Comptroller of the Currency (OCC) was a welcome but minor reform.124 Nonetheless, the Act implemented significant changes af‐ fecting the oversight and supervision of financial institu‐ tions and systemically important financial companies. It 120 Hal S. Scott, ʻA general evaluation of the Dodd-Frank US finan‐ cial reform legislationʼ, 2010 Journal of International Banking Law and Regulation, 478. 121 Ibid. 122 Hal S. Scott, (n 120), 479. 123 Was chartered to oversee all federally state-chartered savings banks. 124 Hal S. Scott, (n 120), 479. 4. The Federal Reserve 58 introduced more stringent regulatory capital requirements, and set forth significant changes in the regulation of the securitization market. Assessment The US financial regulation involves a large number of agencies at a federal and state level with distinct roles and very functions. An advantage of this system is that the fi‐ nancial and credit institutions are oversight from many bodies under different angle. However, disadvantages are: compliance with different requirements for the financial institutions; conflicts of interest and power between the authorities as well as "failure to act in a timely fashion."125 The complexity of the system results in collision of laws and regulations making the Fed's dual responsibility to 4.8. 125 Cf. Charles Goodhart, (n 2) 74, J. H. Kareken, Deregulation Commercial Banks: The Watchword Should Be Caution, 1981 Federal Reserve bank of Minneapolis Quarterly Review, 4. See also C. J. Benston, Deposit Insurance and Bank Failures, 1983 Federal Reserve Bank of Atlanta Economic Review 14ff. Also J. R. S. Revell, Solvency and Regulation of Banks, 1975 Bangor Oc‐ casional papers in Economics No. 5, 37. The main criticisms of the American system of prudential regulation is the multiplicity of supervisory agencies, everyone with its own methods. The only way to avoid multiple agency is they amalgamation. The conflict between FCC Commodity Futures Trading Commission (CFTC) and the Options Clearing Corporation (OCC) about who is going to regulate the derivative market is an example, where the agencies finally, came to the agreement, that futures contract will be regulated by the CFTC and the options through the OCC. 4.8. Assessment 59 protect public as well as private bank's interest more diffi‐ cult. The GLB Act authorised the Fed with umbrella super‐ vision via CFTC and SEC similar to the BoE for the whole financial sector. Nevertheless, the Fed should relay on the oversight of other regulators such as the OCC, FDIC and SEC and after DFA it share its macro-prudential function with the FSOC. In addition, the acts of the Fed could be re‐ viewed by the Treasury and Congress. In this regard, al‐ though the Fed is an independent authority, the US gov‐ ernment through the Treasury still has a strong influence on its monetary policy, comparable with the position of the BoE. The specificity of the US financial regulation, particu‐ larly its duality on federal and state level, its multitudinous from agencies and the Fed's obligation to share its supervi‐ sory and regulatory functions with other authorities. Another distinctive feature of the system is that, the Fed oversights' functions are transferred to other regula‐ tory bodies. For instance, the FFIEC, has to prescribe uni‐ form principles and standards among the financial institu‐ tions; the FSOC inside the Treasury, has to oversee the ac‐ tivities of SIFIs, to coordinate the interagency between state authorities and to monitor and manage potential threats of systemic risk activities. A disadvantage is that the supervision is fragmented between many agencies which do not have the option institutionally to be coordi‐ nated under the head one authority. In comparison with the UK regulatory system, where the macro-prudential oversight is by the FPC, inside the BoE, in the US, after the DFA, this function is performed 4. The Federal Reserve 60 by the FSOC as a department of the Treasury, which un‐ dermines the Fed's role as a primary supervisor.126 Therefore, despite the placard US functional approach of financial regulation there is still need for some kind in‐ stitutional consolidations in the US supervisory system.127 126 Hal S. Scott, (n 120), 479. 127 Cf. Charles Goodhart, (2) 74; C. J. Benston (n 125) 37; Hal S. Scott, ibid. 4.8. Assessment 61

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Stanyo Dinov analyses and compares the three most advanced and most influential financial systems in the world, their structure, models of regulation and their actual financial legislation against the background of the global financial crisis in 2007. After a brief introduction, the first chapter is devoted to the function of the Central Banks and the two main divisions theories about the role of the CBs, namely their responsibility for monetary policy, or for monetary policy and banking supervision. The work also displays the four existing regulative approaches to financial supervision: the Institutional, the Functional, the Integrated and the Twin Peaks. The main part represents and compares the Central Banks and their regulatory structure, starting with the oldest one, the BoE. The benefits and the drawbacks of the one or the other system are outlined. In the conclusion, the most important results are presented and an ideal modal solution is suggested.