St. Louis Fed's The Regional Economist: Major Retailers' Plans To Enter Banking Fuel Debate; Why Do Gasoline Prices React To Things That Have Not Happened?; As Boomers Slow Down, So Might Economy; Community Profile: Conway, Ark.

ST. LOUIS — The July edition of The Regional Economist, the Federal Reserve Bank of St. Louis' quarterly publication of economic and business issues, features the following articles.

• "Major Retailers' Plans To Enter Banking Fuel Debate." A heated debate ensued when large retailers like Wal-Mart and Home Depot tried to get into banking by buying or creating industrial loan companies (ILCs). Economist Michelle Clark Neely looks at the history of ILCs, which have been around for almost a century, and their explosive growth in the last 20 years. She finds that two important features of ILCs—namely, permitted commercial ownership and a lack of consolidated federal supervision—set them apart from commercial banks and have put the ILC industry in the hot seat. She concludes that although the issue is far from settled, ILCs and their parent owners likely can expect to be subjected to far more regulations in the future.
• "Why Do Gasoline Prices React to Things That Have Not Happened?" As gasoline prices continue to rise, many motorists wonder if they're being taken for a ride by the oil companies. Economists William Emmons and Christopher J. Neely the close connection between world oil prices and local gasoline prices. They show how unstable events around the globe, such as a terrorist attack on an oil field in Saudi Arabia or even the expectation of a disruptive event, influence local gas prices. While they concede that no one likes to pay more for gas, allowing market forces to determine gasoline prices can prevent shortages and fosters economic efficiency.
• "As Boomers Slow Down, So Might Economy." On Jan. 1, 2008, the first members of the Baby Boom generation will turn 62, becoming eligible for retirement benefits from the federal government. Although many policymakers and others have focused on what the implications are for Social Security, often overlooked is the potential effect on the U.S. labor market and future growth rates of GDP. Economist Kevin L. Kliesen considers how the boomers' retirement could play out for the U.S. economy. Assuming no change in the growth rate of productivity, he posits that GDP could fall to levels not seen in 25 years. He concludes that whether this occurs will depend on future productivity growth rates and labor force participation rates—the latter including those people who continue working in "retirement."
• "Community Profile: Conway, Ark." Natural gas wells are popping up all over the Fayetteville Shale Play in north-central Arkansas, and the center for the state's energy economy is the Little Rock suburb of Conway, a city long noted for manufacturing and higher education.

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