The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
Form F.. R. 131 BDARD DF GOVERNORS □ F TH E FEDERAL Office Correspondence o ____ TBrtnlnit._____________________ V II W From — fc jt r iw Q m a w v i r O P f Hr. Thurston.--------------- RESERVE SYSTEM Date Subject:----------------------- Attached ara th« questions provoked by your Cin cinnati spaeoh and briaf answers whioh Dr, Curri* has sug$»(rfe«A* It sae»a to ae that you ought to go orer those fc** for* we atteapt to *i««ograph them. Attachment. Form P . R . 131 BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM Officc Correspondence , Mr. Thurston ____________ ___ From Mr. Currie_____________________ Date M ayi?.} ____ Subject: Answers to Questions Sub-______ mi +.» Mr. Eccles__________________ p0 I am enclosing a revised set of answers to the questions submitted to Chairman Eccles. In one or two places, lines in the answers were not indented but since you expect to have them mimeographed I did not have them done over. 16—852 tateaakk tei&m J toatim 1* Will political groups ever st&no for restriction of credit during periods of prosperity? It in not generally appreciated that there has never bean a numerically significant "cheap money* party in this country except in periods of falling prices and depression# the Reserve Admin istration pursued a restrictive policy in 1925 and again in 1928-1929, and did not meet any significant opposition from any political group* It is not anticipated that the Reserve Administra tion *111 encounter any widespread political objections if it should decide that a restriction of credit is necessary* 2. that can the Federal Reserve System do to put to work the heavy cash reserves on hand throughout the country today? the Federal Reserve System can exert an influence toward the continuance of low interest rates and thus encourage borrowing* It may also encourage long-term borrowing and lending operations by creating assurance that it will work for economic stability and the avoidance of booms and depressions* 5* Please state your reaction to the utterances of Father Coughlin with respect to the privately-owned Federal Reserve banks* Is the Federal Reserve bank a private institution? Father Coughlin* s attacks are based on a misconception of the organisation of the Federal Reserve System* The Board of Governors is the dominant agency in determining the monetary policy of the System and its members are appointed by the President by and with the advice and consent of the Senate* Even the presidents of the reserve banks, five of whoa serve on the Open Market Committee* are appointed subject to the approval of the Board of Governors* Although the stock of the various Federal Reserve banks is owned by member banks, the determination of policy is in no sense in private hands* 4* Did you read the recent article in time regarding the present members of the Federal Reserve, In which it was stated that a large group of opinion feels that you are all that stands between thi country and disaster} Have you any cosuaent on this? the really difficult problem is not only to avoid disastrous inflations but to keep the fluctuations of business activity within tolerable limits, to achieve thi© objective it will be necessary to coordinate both monetary policy and the taxing and spending policies of the Federal Government# 5. Sow does tli* Federal Reserve Bank plan to control •loans by others * in order to avoid such inflationary movements aa the one exper ienced up to 1929? Under the Banking Act of 193$, banks are prohibited from asking loans to brokers on account of others. Tfoder the Securities Exchange Act of 1954 brokers are prohibited fro® borrowing except froa member banks or from non-member banks complying with Fader&l Reserve regulations# 8# 0o you believe that the Federal Reserve System will develop into s central banking system? In essence the Federal Reserve System is a central banking system now insofar as provision has been made for the concentra tion of authority and responsibility for national monetary policies* For other purposes the continuance of the regional system of Federal Reserve banks is desirable in such a large and economically diversi fied country as ours* 7. Can it be said that the Banking Act of 1955, and the *new banking philosophy* has shifted the emphasis fro® the quality of credit to the quantity of credit! The Federal Reserve Administration, particularly in the Federal Reserve banks, is still activity concerned with the quality of bank credit* The Banking Act of 1955 gave the Board of Governors increased authority in determining national monetary policies, ami to this extent it may possibly be said that increased emphasis has been placed on the control of the volume of credit (deposits), 8. During 1928 and 1929 apparently the will of the people end the will of Congress prevented the Federal Reserve Board froa trying to check the speculative trend. With the hugh excess bank reserve®, with the eagerness of the government officials to have larger incomes to tax, do you believe the "will of the people and of Congress* can be resisted by the Reserve Board to curb a speculative boom? Hothing prevented the Federal Reserve Board from trying to check the speculative trend in 1928-29 and it utilised every Instrument it possessed# Its powers then, however, were inadequate# Very few people want a speculative boom - the aftermath is too painful# that most people want Is widely diffused prosperity and the avoidance of both booms and depressions. Little hindrance to the exercise of policy directed to this end is anticipated from popular opposition# «»3— Banking 9* If a considerable commercial credit expansion should be generated in the neer future, what effect might be produced on the government bond market? Of course, & considerable business expansion can be financed without resort to bank loans, and banks are able to expand loans to a considerable extent without shifting their bond-holdinga to other# — *■ Is it not* nevertheless*, true that a coa&ercl&l credit expansion will weaken the government bond market? A complete answer to this question would entail & forecast of the future tread of interest rates* Authorities are divided on this point, goo® holding that a further expansion of business activity will result in higher long-term interest rates* Others hold that the problem is going to be to find outlets for our large and increas ing annual volume of saving* The latter group believes that we have shifted to a permanently lower long-term interest basis. All, how ever, are agreed that "inflation* would entail higher Interest rates, since It is characterised by an insatiable demand for loans. The danger of inflation appears remote* 10* Would not a better financial situation exist if a greater percent age of long-term government bonds were held by private investors, at good yields to those investors, and a smaller percentage held by "commercial* banks? As of March 4, 1956, member banks held some #5*$ billion of Government bonds maturing in more than five years. Whether this is dangerous depends on the price paid for them and the future trend of interest rates* Judging froa business recoveries in the past, there should be no occasion for banks to dispose of their Government bonds* The Federal Reserve System end the Federal Deposit Insurance Corpora tion are determined to prevent such a period of forced liquidation as occurred from 1931 to 19&3* 11* Will you explain how the excess reserves of the banks are going to be used or dissipated; if by loans to borrowers, either public or private, the money simply returns to the banks and increases deposits* So what? and how? Excess reserves can be absorbed bp an expansion of deposits, which la turn increases reserve reouireaenta. Government borrowing from banks, therefore, tends to decrease rather than increase excess reserves. Expansion of deposits of a magnitude sufficient to absorb present excess reserves, however, would be highly injurious. Reserve requirements can be raised by the Board of Governors, thus extinguish ing much, if not all, of the excess reserves! or they can be taken away frosj banks if the reserve banks sell securities, which are paid for by checks debited to member bank reserves# Xxcmss reserves may also be decreased in other ways. 12* 13 there not a considerable bank credit expansion under way at the present time? la not this credit expansion evidenced by an increase in bank holdings of government bonds on the one hand, and an increase in bank deposits on the othsr hand? la there any essential difference between this sort of bank credit expansion and that which gtght take place through an expansion of bank loans and discounts? from June 50, 1955 to March 4, 195b member banka4 holdings of Government and Qovernaent-guaranteed securities Increased §§J billion. Other loans and investments showed practically no change* Sort-Govemraent adjusted demand deposits increased #7 billion* So far as demand deposits are concerned the contraction of 1929-55 has been more than made good* the main difference between an expansion of commercial loans and an expansion of holdings of Govern ment bonds is that the former is usually a reflection of very prosper ous times, while the latter is in the present circumstances a reflec tion of a continued need for Government borrowing to finance relief and recovery* 15* American bank vaults are said to have a plethora of government bonds •voluntarily* purchased by the banks* How much of a drop in market listing of government bonds can there be before a number of these banks will *go under*? Q Of the $10$ billion of Government bonds held by member banks, nearly #7 billion mature in less than five years. Some of the longerterm bonds were bought at prices considerably wider those now prevail ing, When it is considered that the capital, surplus and undivided gmttfits of member banks is now nearly $5 billion, it becomes obvious that vefcy heavy depreciation would have to be sustained in the banks* holdings of all bonds before their capital woul« be wiped out* Finally, it may be pointed out that many authorities believe that long-term iuterest rates have moved permanently lower* Even in 1929, the average yield onAlong-term Government bonds was 5*6$* 14* If, as you have said, the quantity of money multiplied by the velocity determines the volume of business, then we should have been justified in assuming that Germany at the height of its inflation was doing its maximum of production and of business* Do you think that this belief coincides with the facts? Z intended to say that the quantity of money multiplied by the velocity *measure»* the volume of business* Movements of the volume of business transactions and the volume of physical production would only correspond under conditions of stable prices and slack in the productive system* When all the slack has been taken up, as in the German inflation, production cannot increase with an increase in the financial volume of business (sales, etc*) and prices rise* At the present time in this country an increase in the demand for good© in general would be matched by an increase in the supply* JaftEEg&s Jftiag 15* I understand that almost half of the government debt Is repre sented by short-term securities t o t will mature la the next five years. Therefore, the government h*s a big ^t&ke to justify its efforts to keep Interest rates very low* But while the government may be able to do this temporarily tc its advantage, whet about the effects on private industry? Of the $31 billion of Government interest-bearing debt out standing on iareh 1, 1956, approximately half matures in lees than five years* While the Secretary of the Treasury is naturally desirous of securing low rates of interest on Government bonds he must piece the latQre&ta of the economy at large above all other considerations* Moreover, the Board of Governors would not hesitate to take action which would have among its consequences higher yields on Government bonds if in its judgment economic developments called for such action* 16* Do you believe that the pr&sent low rate of interest is an accur ate indicator of over-capitalisation in the United States? X do not believe that the present low ret© of interest is an accurate indicator of over-capi talis&tion* It is a reflection of a greet volume of funds seeking investment, with public bodies being the only important borrowers* With continued, recovery savings will increase and public borrowings will fall off as private borrowings expend* Low interest rates should, therefore, persist for a considerable time* 17* Xou make the statement that the interest rates on the public debt have gone down* Wasn't that just natural or are we to believe that this is aa accomplishment of the present administration? Didn't this occur in spite of the Bfew Beal? The Administration contributed directly toward lower rates of interest in various ways* In the firat place, it aided in Cheeking liquidation and deflation. By revaluing gold it made possible the great inflow of gold which has increased the excess reserve* of member banks* thirdly, by bringing about an expansion of deposits through its borrowings and an Increase in the national income through its relief and recovery expenditures, It has made possible the increase of savings and the present great volume of funds seeking inv«st»c*t. aw@M» 18* budget? Coee anyone else la the administration believe in balancing the fvcry responsible- person in the Administration# from tho £r@«ident down, believes that the budget should he balance with *he oontlnuence of recovery, and further, as recovery proceeds* that substantial annual debt retirement should b<s effected. The principle of asking the Government a compensatory agency requires that public debt should move in & direction counger to private debt, not that the public debt should always increase* 19* Cincinnati1s share of the carrying charges on the national debt is about #8,000,000 a year * which la greater than the opera ting costs of the entire city government* What do you aean thiit a thirty billion dollar actional debt la not excessive? % statement «ms based on the fact that the interest charges of the national debt amount only to a little over 1 percent of our present rational income, and to less than 1 percent of oar national income in 19£9« This can hardly be called excessive# especially when it is considered that interest on the national debt is not paid to foreigners* but to our own dtiaens* 20/ You believe in a balanced budget# and you say we are approaching that goal because tax receipts are increasing rapidly* Published figures froa the government in the jinst few days show that the deficit is increasing over a year ago notwithstanding the larger ‘tax receipts. In other words* spending is growing more rapidly than tax receipts* In the calendar year 1952 federal revenues amounted to #1* 880*000*000* In the calendar year 1955 they amounted to #8*867 *000*000* Moreovor* the current revenue figures have been adversely affooted Irj the loss of the processing taxes* How taxes to take their place have not as yet been enacted, though this is expected to occur shortly* Despite the loss of processing taxes the deficit for the present fiscal yeer to April 27th is over $100 million less than the deficit for the corresponding period in the fiscal year 1935* With the bonus out of the way and new taxes enacted, the favorable trend of revenues relative to expenditures will be accelerated* El* Does the thirty billion dollars Mentioned by you as the total national debt include the various bonds guaranteed by the governaentt Guaranteed bonds saounted to $4*630*000*000 as of February £$# 1936# they were not included because they are secured by corres ponding loans to individuals and institutions* -7- 22, What Is the justification for the •eabalatent* of the national debt In the commercial banks of the cotmtry? In other words, do we now hi.ve l uosBssrcial banking zyatmt Hf»ci the banks not purchased Government boaas they could not hire reported net earnings, and the deflation of deposits that took, place from 19£9 to I9&5 could not have been raade up* Ther® Is plenty of money evaliable for comsierci&l borrowers when they need it* The mor& important function of the banks is to supply the circulating medium of th« country in the form of deposits subject to check. If this cannot b& supplied by the making of commercial loans it must be supplied in other ways# £5* If, as you say, the increase in debt it# so insignificant why do so many per3ns high in the administration auvocate higher tAxesf The increase in the national debt is ©mall compared with our national debt-paying ability# X was, in this connection, speaking of the burden of the debt. There are other considerations, how*v*»r, such as the relation of a further increase of the debt to beak deposits, which suggest that the budget should be balanced &3 soon as th« recovery movenant becomes firmly established snd independent of further Government assistance* JM&Baii 24* What ie your definition of inflation* we have Inflation of a kind to be fearedt How far can wit go before I define inflation in general as a condition arising when tho demand for gooda is outstripping the production of goods* This would occur after the alack in our productive organisation had been taken up* Under this definition we would have to have full recovery before we could havw inflation* A danger point would begin to rise when we approached rale;lively full employ— ttt.« 25« What would be the result if the government printed money and paid the W* P, A* workers with it instead of selling bonds to banks and using the proceeds to pay the workera, the object being to save the government cost of Interest? If peper money were printed and issued it would flow back to the banks and would increase excsss reserves to nearly a corres ponding degree* This would give rise to grave problems of credit control In the future* When the Government borrows from banks, deposits and hence reserve (requirements increase and excess reserves ere diminished* The interest cost is a minor item and is bo rely sufficient to compensate the banfcs for the cost- of handling the additional deposits# £6. If prices should begin to rise sharply, what should be dots© to control them! If the eause of a sharp rise is speculative inventory buying* such as occurred in the spring of 1953, it will quickly burn itself out* If the cause is a continuing excess of ceaaand for goods over the orodaction of goods, the reserve administration can raise reserve requirements and sell securities. These actions fore# interest rates higher, discourage long-*term borrowing and construe** bion* this, in turn, leads to a decline in incosea and buying* The Government can ftid in this s*roeess by* iia.>oxaicii.ng cash or by increasing taxes* 27* ®hy will not father Gougnlia1® ^laa of having the government issue its ov*» MOAfiy do to a large measure what you have suggested? 6©e answer to question &o* £8, Jtre we going to have currency inflation! If you thiak not, how are we going to pay the debts which the federal government* the states, municipal* tties and thi?ir ^subdivisions have piled up ia the last six years? I do aot think we are going to have currency infla tion * The debts of public bodies will toe serviced ami ia part retired by taxes peid out of future incomes, increased as a reeult of continued recovery* £9* Do you consider that we aow have inflation in the U. S.? If nof whea in your opinion did it begin to Manifest itself and do you feel that inflation will develoo further! Giving consideration to inflation, how should iavestaeat funds fee handled- that is, whet sort of lave«tmsm.i& should bo coneldered? See answer to question 24* Sine© I consider inflation to be a remote possibility it would follow that investment funds should bo hanuled as always by coiapromieiag between yield and safety of priacipalf depending on the circumstances of the invesstflfir. fiexaaaaaLjflaa&ya. SO* Do you believe we can cast aside all fundament®! economic laws and legislate ourselves a sound business recovejy by issuing bonds and spending the money at a faster rate then tax income? How long can we continue this procedure? Since wh^a is it a ^fundamental economic law* that public expenditures should contract when private expenditures contract aad thus intensify the process of deflation? The Blftw* that the buying power of the cornualty must be sustained if proauction and. -9- employment are to be su#tained is surely more fundamental than the *law* that the Federal Government must never borrow, regard* less of eircumstsncea, the Government should contribute to the increase in the national buying posrar until such time a* the increase in business disbursements of all kinds makes this unnecessary. Thar* are nov/ signs tbfet private capital expenditure# are getting under way* 51* We all agree that proper governmental relief is nec*a*ary» But did we not asXc a sntiafacto y recovery from the 1395 depression without great governmental borrowing and sp ending? In 1395 we were much more of a rural and agricultural oeuntry than we are toda$ and in that year we produced tho largest wheat end cotton croua in our history, shich, because of crop failures abroad, m sold at good prices to Europe, The recent depression ■sag unique in its severity and worldwide character# Sot only is agriculture lags important economically than formerly, but our difficulties wereintensified by agricultural depression* Mover before had we had such an excess of productive capacity in every field relative to current demand. The demand for goods had to he increased until a part of this excess was absorbed before we could have a more "normal* recovery movement characterised by increasing private expenditures on plant and buildings# 32* If the •priming tho pump theory* is correct why does the Federal Government have to continue the process, despite a thirty percent lacrease in the various business indicest X e n H the answer to this question the fact that the benefits of government spending stop as soon as the mon«y is spent and are not rec^trring as is the case of privet- spending? Tho Government had to continue the process because industry would not zxpmd until more if its excels capacity was utilised and people would not build houses until rents roee in relation to costs# With regard to the second question, a business m u does not distinguish between a demand for his product* arising from Government spending and one arising from the spending of other business m m . Ho m k e s goods in both os sea to meet the demand# The aoB the President of General SSotors has Inveighed against the recovery program, the more cars he h*a sold. The additional money spent for wages and materials is avail/* bio for responding, regard less of its original source* §5# If spending create* wealth, as you suggest, why shoul&nH we all advocate that the government spend SO or even 50 billion dollars a year? Or wby shouldn11 we all stop working in order to spend more rapidly? After all, does not your argument support the Toimsend Flan? —10— Ail increase of public spending so far as It lead® to an incr*5ase<l demand for goods, which in turn leads to greater production of rood®, lakes the n«n*unlty better off. Too much spending would lead no*: to greater production of goods but to e rapid rise of prices* There are, moreover, other aspects to be considered, such as the relation of Ckyvcsroaent financing to the expansion of bank deposits* Because a certsin amount of fooo is beneficial it does not follow that a person should eat all of the tisie* The Townsend Plan entsils a hngh transference of Income from the younger to the older peool* in the community* There is nothing in jay argument that suoports this elan* 54. Is it not naive to conclude that because there has been recovery It 1ms necessarily been caused by government spending? How e-bout recovery la other countries and in this country after other depressions? On the contrary, it is naive to assume that the receat depression differed in no essential degree froa previous depressions in this country, or from the depression in other counties* In the nineteenth Century the bulk of the people were on the land anti were more self-sufficing* Industry w a composed of smller unit# and was more flexible* In 19£1 and 192£ there was a groat volume of residential construction* From 1951 on, ottr condition sore nearly resembled a breakdown than a depression* In 1952-1855 there was practically no private building or construction of any kind* Bxeees capacity prevailed in ev^ry industry except brewing and distilling, in which building actually took piece* Much of our agriculture hea c e e c e M » be eelf-siiffieing end h&d, in addition, lost foreign markets* A large prrt of our po n&atlo* was in cities and was completely dependent upon industry for its income* In the absence of Govtjrnia<>nt spending It is difficult to see wh$t would have given the impetus to increased business disbursements, or what types of businesses would have expanded plant end equipment on a large scale* fcfc. Is the business recovery of this country due to government spending a "false recovery0 and not due to natural economic laws? Will such a period of recovery extend over a period longer than the federal expenditures? I would not cell tha recovery the initial increase in demanti for spending rather th&a private plant «Juet as soon as part of the excess a "false* one merely because goods arose from Government and equipment expenditures* productive capacity has been «*n» taken up through the demand generated by Government spending, industry will begin to m k e larger expenditures for maintenance and extensions, and this type of expenditure is self-generating# The Qovernment contribution can then be reduced and the recovery will assume sore of the characteristics of a *normal* recovery* Taxation 96* In upholding your concept of the government as a "compensatory agency*, would you have maintained taxes at a high level during the period 1920-1950 and used the proceeds of those high taxes to reduce the national debt still further than it was actually reduced! Bo you think that the policy of reducing taxes during that period was a mistake! Ify answer is yes to both questions* with the qualification thst X would shorten the period to 192E-19E9* Ihen recovery is achieved X think we should retain taxes and reduce the national debt sub stantially. 87. lou state that revenue has been increased without an increase in taxation* D o n H you consider the excise taxes as taxation which without a doubt has been responsible to some extent for en increase in revenue— not direct but through higher incomes to the farmer! Excise taxes generally are paid by the poor, and represent money that would otherwise have been spent* Thus, the raising and spending of excise taxes represents more of a transfer of buying power than an actual increase* Si* 1111 not the increased taxation brought about by increased government ^pending adversely affect the ability of the United States to compete in world markets! The trend is toward increased taxes on incomes rather than on goods* Taxes on incomes would not affect our ability to compete in the world’s markets* Others 59* A corporation, like a person, must have a fund for a rainy day* What principle can be used to decide when a fund passes from proper reserve to parsimonious pinching! If we force corporations to distribute all of their earned incase during the year in which it is made to avoid excessive taxation what will happen when the next depression comes along and there is no corporate surplus to fall back upon! fill it mean wholesale bankruptcy! The analogy of the assets of the Individual to the bookkeeping surplus of the corporation is mot a close one* The analogy of the net worth of the individual to the net worth of the corporation is closer, though even it leaves something to be desired* Bo long as an individual's assets in relation to his liabilities are satisfactory and his borrowing capacity is good, he does not need to hold cash for a rainy day. ifeither does a corporation* Ion-financial corporations* holdings of cash and tax exempts declined by only $2 billion froa 1929 to 198$, while their other inve. t— aents increased by nearly $5 billion* the decline of U S billion la their surplus account did not represent an entrenchment upon a •fund*, but Merely represented charge** offs and write-downs and depreciation allowances not covered by earnings. Such charges sight have been aade against capital built up by new stock Issues as wall as agaiftst surplus built up froa retained earnings* Xn either case, the net bo&k worth of the stockholders would decline* 40# Private borrowing will not become very prevalent until vicious legislation in Congress is abated* If it is important that reemployment be effected by putting idle deposits to work, then why does not the administration renew the *breathing spent* Sid private borrowing decline froa 1929 to 1955 because of vicious legislation? 41* Business generally showed a vast iaprovem nt in 1935 over the previous year* Larger profits were the rule* let Just as many people, if not more, are out of work right now. How do you account for thisft I&ieaployment does mot diminish correspondingly with the increase in production for three reasons* (1) The number of people of working age is steadily increasing* (£) There are more people seeking work because of exhaustion of savings* unemployment of the normal breadwinner, etc* (&) People who wero ^employed*, but only working one or two days a week now enjoy a fuller work week* »B#ployment*, in the sense of total man hours worked, has undoubtedly increased much more tham •unemployment1, in the sense of people totally out of work# has diminished. There is, of course, also continued unemploy ment arising from excessive lengthening of hours in some trades and technologl al unemployment due to the introduction of labor* saving machinery. -IS— 42* If *government Intervention was absolutely necessary* bow do you explain the fact that the bottom of the stock market occurred in June, 1952 and business had shown substantial improvement up to Hovember, 19321 I would not undertake to explain the stock market recovery in 1952* The improvement of business from July to October, 1932*could hardly be called substantial. The index of production rose fro* 50 to 67. The index of construction arose froa 27 to 29* The index of factory employment arose from 59 to SI* Considering the absence of any increase in building or mew capital issues, I should characterise the slight upturn in 1952 as being attributable to increased inventories and therefore temporary in nature* 48* Are your views on government competition in private business held by any other *e»bers of the Administration? St Is my understanding that the President does not believe In competition with private industry as a general principle but only In eases where he feels there is monopoly that cannot be restrained otherwise, or that private industry cannot or will not undertake something that should be done* 44* itself! So you consider "bigness* in corporations to be an evil ia I would distinguish between "bigness* that is economically desirable and attributable to efficiency and the mature of the business, and bigness which is mot due to efficiency but rather to urn* restrained and unregulated monopoly practices* The latter type, 1 think, Is an evil* 45* If our system «* •economic* - was so bad* how did we get so far In such a short space of tl&e! Sow did we manage to evolve the highest standard of living in the world! Bow will our children and our grandchildren fare as the result of present government borrowing! t was at pains in my address to point out that the dis astrous forces I was discussing are not necessary elements of capitalism and that they only developed in the 20* s* It is to be hoped that the Federal debt incurred recently will be paid off before our children or grandchildren replace us* If not* some of the children and grandchildren will pay interest on the Government bonds held by other children and grandchildren* Insofar as taxes are levied to pay Interest on and reduce the public debt the community will receive back as Interest and principal what It pays in taxes*
