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V...
Secretary Korgenthau
Mr, Haas
Subject:
Sources cf Funds for K'e&eral borrowing
Calendar fta* 19^3
Introduotion
During the calendar year 19"'3 *&• Treasury will have
to e e l l Ijf b i l l i o n s of s e c u r i t i e s in order to finance
the budget <iefiait end. provide for m t outlays* to Gov^.-rnmen.% corporations?. IMl estimate is fca««4 on ftatfl In tht
19*Ml Budget for toe fi^c-1 ye^ra 19^3 ami 19^*4; no
allowance h&.% been Mftft«9 tevtfir, for llMI new tax revenues
It is of tne at—it l^ptrltiHi U*at t&ll 71 b i l l i o n s
of new s e c u r i t i e s b* .5-t:.gcrfced ty nor*-banking investors ai
far as po e i b l t .
Current y;--rsonal eavinf::s aod corr^orste
accumulations provide by far UM t ^ s t source of funds for
Leral borrc. I .
i amounts of such eravings and
ecounulations ar« txpeot d to aggregate &beut $67 "billions
during 1
, .
I
i out ^5 b i l l i o n s will tee personal
savin .
. H I largt amounts are estimated on the to^sis
that purchasing power to this extent tauet fee i.?-,.<•• M i l l e d
dwr
r If ricea are to reWill s t a b l e .
I t will be noted tiiat current savings and aaeumulations are of a*
' ?-- roxirately tne saie aagnltud@ as tiie amount
of
,1 corrowin . This ia Bet t cuenne r e s u l t
but a require;«a-:nt. TIK- I
tlon of goofig and. services
for UM whole ecofi:
enerates lnopffies tc the full value
ef the t!;cod8 fend eerviees pTi
ft«
If Uia fliiMiwml
. i.
|
If of %h
-.: s e r v i c e s produced tm% taxes
(both p-TBotiHl i .
. s i n e s i ) a b s c r t only | q u a r t e r of tiie
incosrs r«e#l'Wd i then tne c i v i l i , n
r t of the HQBflijf
will ftnve t j i r e e - e u a r t e r s of t;.e UwWMItl produoad but w i l l
b« able to buy only half of 1
services,
fne
Oovfirnrdent w i l l tnan fee?* a d e f i c i t aggragi ting cneouarter cf t o t a l incomes end civili-sna w i l l
?«:.-. - ssurplug ( c u r r e n t savings sad accumulf-tions) cf
tne» same axneunt. Miner adjv
if, cf c o u r s e , I - •- the
two figures from t e i r
i ^olutely I d e n t i c a l .
Secretary Morgentnau ~ 2
Mow should the sights be get in planning • financing
program during the J9*T to absorb current savings and
accumulations? This memortn
Mfc-en written to assist
you in sMkklog your decision. The approach is to exgffiine
recent ex^arlence with respect to ateorbing such savings
and accumul'.tions thrown. Bales of Federal securities, end
to plmA a scries of gGftlf for 19^3 ^° iKrrrove 'progressively
on this
I 'analysis uses ••••7ml tables, and for convenience
trie •xplanatloa cf ta^ll tabl« has been »rrft]lg«4l to appear
next to the table itself I
1.
F a s t -:xperienc@
2.
foals
f c r tfeserfeiAg Carreat .r-vi;: s and
accumulations in the Cal?i:dar
^
3.
Addition;-1 bales of federal iJeeurities
iqulrs4 to Provi i --laceaents to Offset
tions In listing i ortfolios
H.
5«
Gross Sales cf Federal Bt#nri%i#i Hequlred
for isnr Noney and hepltcements
Classification of Hequired Gross Sales to
a-Banking Investor Groups by "Continuing"
and rt^priodio Special l-ffort" Os.tagories
6.
PerSAMtl ;0avin. F Analyzed ty Income Groups
7.
Personal Gavin;s ^Tallabli for Purchasing
H /urmlyze<1 by Ifiooas Groups
CT^fHTI V P
O l U i u l L I U UiiflU
FIRST REVISIOI
Table 1.
Comparison by Investor Groups of Federal Securities Absorbed and Current Savings and Accumulations Received,
By Semi-annual Periods, July I9HI - December
(In billions of dollars)
[ July - December I9UI J January - June I9U2
:
Investor group
. July - December I9U2
ii
1
Securi-: Savi ngs:
Securi-: Savings
;Securi- .Savings
ties
:
re:Percent
1 ties . re- .Percent:
Percent: ties
ceived: 2/
I ab- > ceived . 2/ : ab~ : ceived
2/
: absorbed I l/
I sorbed
: sorbed
1/
!
1
t
'
1
1
1
A. Nonbanking sources:
1. Investors receiving personal
savings!
a. Insurance companies
••••
b. Mutual sanrings banks.........
c. Recipients of debt repayment by individuals...
d. Individuals, partnerships,
and personal trust accounts,..
1.0
.3
2.5
5*6
e. Total
3.8
6.1
1*1
-.2
.9
1.1
2.1
.2
-.3
•7
5.8
l.U
-
59*
5.5
8.6
I.I-
1.2
•3
1A
12.U
0
2. Investors receiving corporate
accumulations:
a. Recipients of debt repayment
by corporations
b. Corporations other than banks
and insurance companies......
2.U
-.7
c. Total
2.1*
-.7
-
-
.9
,j
-11
1.9
-1/
-
M r*
1.9
6.I
6.7
9.5
9.5
3* Other Investors:
a. Tax-exempt institutions......
b. U. S. Government agencies
and trust funds
c. State and local governments, their agencies, and
sinking and trust funds......
d. Total
h+ Total for nonbanking sources.,..
1.0
.1
1.0
.1
1.1
1.2
7*3
6.6
1114
l
••
1.3
1.1
1.0
1.6
.1
.1
2
1.3
1.1
7.7
12.7
1.
61*
17.2
1.3
26.1
B. Banking sources:
1* Commercial banks
2. Federal Reserve Banks. ••
3. Total for banking sources.......
C. Total for all sources..
U.6
1.6
Ik.k
.1
3.5
5-0
1.7
9.0
6.6
12.7
17.9
12.7
Office of the Secretary of the Treasury, Division of Research and Statistics.
35-1
26.1
February 2, I9U3.
1/ Comprises current (l) personal savings, and (2) corporate accumulations.
2/
Computed only for (l) individuals, partnerships, and personal trust accounts, (2) corporations
other than banks and insurance companies, and (3) total for nonbanking sources.
Tentatively assume to be zero for want of adequate information.
Secretary hor^entaau - 3
1.
rast ^x:~rience
Table 1 compares for eaoh of three slx-months1 periods,
running from July 19^1 to December 19^2, current savings
and accumulations received by various investor groups, and
their net absorption of Federal securities.
The first group of investors shown comprises investors
receiving or holding currant personal savings. Insurance
companies and mutual savin s b^nks are thus listed at the
beginning of this group. K##lpl*Htf of debt repayment by
Individuals are than shown separately, but no attempt is
made to follow these debt repayments through to the various
investor k.rours wnich ultimately receive thi funde.
Finally, individuals, partnerships and personal trust
accountB are listed togfther.
lii jroup, of course,
invests directly all fund.® wnich do not go to insurance
companiesf mutual savin.:.s banks or recipients of debt repayments. It will be noted that this ^roxxp invented 4 R percent
of its available funds in Federal securities in the JulyUeoeiaber 19^1 psriod. ^9 percent In Jenuery~<Jxiri<* V)H2,
and 47 percent In July-Deoember 19^2. RMI epurt in the
middle period is v.robably tacplaittfi largely by HliiaitH purchases of gavl%.g toncis early in 19^2, ¥hk% portion of
available funds which was not invested in Federal securities
was Iced alsost 0
tely in currency and bank deposits.
the next grour. of investors taken up in tiie table
corsprises investors receiving ccr:)orate accumulations.
Recipients offiebtrepayment by corporations are listed
first, althoucii no separate figures are presented for tills
group, ths f)t+*p is shown, however, because corporate debt
reduction will probably becoae aors Important in the
calendar ,year 19^3, and full provision siiculd be Bads for
such oebt rename at Is
1 our
l
Corporations other than banks and Insurance oonr-anles
are then listed in the table. The figures for this group
show that in the fir«t period la.rge i>urcb.gs©a of Federal
securities Utri Bad* Although current accumulations were
negative. This Is s^>lalA«4 largely by the faet that tax
notes wer« first nut on sale In this perlc
conversions
of other assets ^ere siads in order to purohaat these
Morgenthau •
securities. In the second period, 4 7 perer-nt of funds
availsbl« w$r® invested in Federal securities while in
tiis third period such investmentsftggTtfl*%#47^ percent.
next groui) of non-banking investors covers
vernment&l agencies and trust fund©. These investors
ae a rule invest approximately the •*•• amount M %h*J
accumulate.
Finally, baftklftj source© ore listed in %h* table
the figure! are broken down between coffli^erolal ban^s and
Federal Reserve Banks, fffei oroporticn of total funds
received frore banking sourcus increa.ec«u greatly during
the sighteen-month oeriod. It stiould "be noted, however,
that in the «/uly-Peeemb'vr 19%2 period the figure of
1 ! billion* bank borrowing Includes tne ncn-reeurring
Lt#9 of fcuildl • the ossh 'balance in order to reduce
the number of r-riodlc offering! of Federal securities.
STRIUTLY CO:iF!OENTiAL
J1RST REVISION
Table 2.
Comparison by Investor Groups of federal Securities Absorbed and Current Savings and Accumulations Received, Calendar Year I9H3
(In billions of dollars)
January-April
group
May-July
Securi- Savings
Securi- Savings
ties
rePercent
rePercent
ties
abceived
ceived
absorbed
sorbed
1/
2/
2/
U
August-October
November-December
Securi- Savings
ties
Percent
reabceived
sorbed
Securi- Savings
reties
Percent
ceived
absorbed
if
1/
2/
i/
Total
Calendar. Year 19UV
Securi- Savings
Percent
reties
ceived
absorbed
2/
A. Nonbanking sources:
1. Investors receiving personal
savings:
a. Insurance companies
b. Mutual savings banks
c. Recipients of debt repayment by individuals
dU Individuals, partnerships, and personal trust
accoTants
•. Total
1.1
5
.8
.k
.8
.U
.6
.3
-
1.1
-
.7
6.1
9.6
8.7
10*6
7.7
11.9
9.9
94
.8
.5
.6
.k
.6
.k
.6
82$
11.3
11.3
12.2
12.6
12.9
.7
-
1.0
3.9
3.9
3*9
M
1(X#
.5
,U
3.3
1.8
2.5
1.5
.3
-
2.7
32.7
38.1
6.6
6.6
1000
7*6
7.8
37.8
UU.g
.7
-
3.0
lU.8
16.3
lU«8
19.3
860
2. Investors receiving corporate accumulations:
a. Recipients of debt repayment by corporations..
b. Corporations other than
banks and insurance
companies
U.5
5.6
c Total
k.$
.6
810
3.8
U.2
910
6.2
3>g
M
-
-
-
-
1.1
1.1
.6
1000
2.6
2.6
1000
2.6
3.3
-
-
-
.1
-
.6
.9
.8
3.3
3.1
910
3* Other investors:
a. Tax-exempt institutions..
b. U. S. Government agencies
and trust funds
c. State and local governments, their agencies,
and sinking and trust
funds
d. Total
.
.9
.6
k. Total for nonbanking sources
13.1
18.7
7
.1
1
.6
2_
.1
700
-_
1.2
1.1
1U.9
18.2
.1
•7
820
-_
.1
6
1.0
.8
11.2
11 .9
17.2
18.*
-
93*
.
3.8
9^0
56.^
k
-
3.1
67.2
—8ty
B. Banking sourcee:
1. Commercial banks
3. Total for banking sources...
C. Total for all sources
6.7
i.k
3.5
.7
1.2
8.1
U.2
Uk
-
18.6
18.k
21.2
18.7
19.1
Office of the Secretary of the Treasury, Division of Research and Statistics.
H.9
2.k
-
.6
-
1^.3
-
11.8
11.9
70.7
.1
.2
18.2
-
•5
67.2
January 30. 19^3.
l] Comprises current (l) personal savings, and (2) corporate accumulations,
2/
Computed only for (l) individuals, partnerships, and personal trust accounts, (2) corporations other than banks and insurance companies, and (3) total
for nonbanking sources.
Morgenthau - J
Goals for /ibecrfcln^ Current
and Aoeuaui&tion'g^ Intn.^yL 1 ' f..\^r '£» -r
In working out goall for tfe* sale of securities to
non*bankiri|i; investors during the calendar y^sr 19^3* * & •
first ittjp 1 B to carry forward t.bt analysis shown in the
table on past experience (T?ble 1 ) . flti corresponding
table for th« calendar year 19^3 ("table 2) ia broken
down Into four periods, as follovss Joivv ry-April, K&yJuly, August-October, and tfcveafeer-December. The first
^ericd of four months was ohos^n because it lias already
been decided- th^*t the next "drive* ie to be fetid in April.
j Treasury casii requirements indicate tliat the
second drive in lf^| will have to be n^de In July, unless
it is aeclue-d to undertake further bank borrowing tc tttftf
July requirement© en?3 postpone the drive for non-banking
funds perhaps until August, Accordingly, a May-July
.*»uot& p'-rlod wse set up. Similarly tlie thlrfl period was
iet as August-October, November andfieeewteerare ehown
to fill out the calendar jesr although it is ccnter^lsted
tiiKt tries® mo n til is .i.i. ht well b% cs.rrle-ii forward into a
drive in January l f W #
in tiie group of lnvestcrc receiving ;>«»rsofial stvin s #
both insuranoe oor^aniee rnd mutual savings banks are
expeated to invest substantially more during trie y%&r UUOI
they receipt in current savings, This i-x/fetation is tased
un trm .rofc'ilility t);-t liquidation cf suoh assets as
State and local securities, real eat&te mortgages, and
other loans will release funds for purchasing federal
sseurlties.
Recipients of debt rsp&ya«at fcj iudiyiduale are
estimated" to receive '.-P.7 tlllione during the year. Bo
att©mot hat betn made to follow throut -i tb??-e funds to
the ultimate Investor group receiving tnem. The asounti
are shown e^^arotely only in order to obtain thu residual
figure of personal SftTiRgS which will be available for
direct Investment by individualst partnerships and -erscnal
trust accounts.
In the ease of such direct investments it w$M
that the amount of absorption in Federal securities may be
Secretary Morgantriau - 6
Increased steadily during the year. It will t-» recalled
t In the July-December X$^2 r^rlod Hui '/•• rc<mt&#e of
absorption was 4/ percent. It it C M re^son^ble that in
tilt first three quota periods of till© jrtaJT this percentage
may be Increased in three steps to 100 percent. On this"
basis individuals, partnerships arid personal trunt accounts
would Invest in Federal securities
arcent of their
funds available in tht January-April period, If percent in
the May-July period, and 100 percent thereafter.' The total
absorption of Federal securities by Individuals, partnerships and personal trust accounts during the year would
thus be almost 133 billions. This would le&v© about
f§ billions of funds which would be pl.-ioed In currency and
deposite.
The realization of this large goal for sales of
securities to individuals will be B&di considerably
by the faot ths.t recipients of debt repayment by Individuals
h&v$ not been scheduled in the table to use any of the
funds they receive from individuals- in dfbt rso&yment in
order to purchase federal securities. Individuals tfttmselves will receive some of these debt repayments so
their funde available- for investment will really be
larger than has been allowed for. This provides &
"kitty* in setting up the £©*!• for absorotion of
sacuritieg by individuals, Moreover# it should be
remembered that the l*rg« volume of currency and demand
deposits already held by individuals also provides a
potential source for absorbing Federal securities, ffhis
will osake it easier to achieve t
I I vhich have been
The next main ^roup of investor© shown in the table
is composed of investors receiving oorporatt accumulations.
Heclplents of debt repayment by corporations are assumed
to receive |J bllliorts from taeiz during the ytmr. This
estimate was based on the assumption that debt rwp&yment
would ta&e up 10 o? rcent of current aceuiaul^tions in the
first quota period, 1
I tent In the lecond period, and
20 pv-rcent taereaft/?r. Recipients of debt repayment by
corporations aave not teen scheduled specifically to purchase Federal securities with the funds received In this
m&nir-'r. AS in toe case of Individuals1 debt repayment,
this provides an extra margin In ^chlevin,: tht goal! for
other abftorDtloa of Federal securities.
leeretary Morgan than - 7
Corporations ether tnan banks and insurance companies
are then taken up in the table. It will be r«oallH that
In the July-December 19;
riod- this group used JX percent
of its available accumulations to absorb Fsders.1 securities.
Accordingly, it has been assumed that in tht first three
quota periods of 19^3* this Jl mercer* t may b* increased in
three steps to 100 peyotnt, this will provide p-rcentf
goals cf #1 percent in the January-April period, 91 percent
in the May-July period and 100 T>-rcent thereafter. For
the calendar year the absorption of Federal securities by
corporations would thus be scheduled at almost |15 Millions,
for other investors, almost entirely governmental
a£encieg and trust accounts, the absorption of Federal securities has been estim.-ted almost entirely on tfif> basis of
the accuiruletlon of funds. Extra allowance has b*en marl®
for the faot ttet State ana local ;.;overiiments are accumulating cash in slaking funds which may be partly invested In
federal securities.
The figures for non-banking sources, thus arrived at,
provide an increasing proportion of the total borrowing
required from one quci
riod to the next, Hanke, accordin
gly# :rG scrieduifed to take decreasing amounts of Federal
securities vlth the aggregate for tr*e year running to only
slightly over |l4 billions. It should be remembered %h&t
a considerable part of this jl'-i billions will not be
Inflationary borrovlag since it will be offset hf reductions in otiri^r loans ano investments, and by a portion of
current savings and accumulations which investors deposit
in bank accounts in preference to the purchase of Federal
securities.
TIRST HEVISIOK
•
•
t
'
'
'
Table 3.
Redenptions, Maturities, and Market Sales and Purchases of Federal Securities
"by Investor Grouus, Calendar Year 1943
(In billions of dollars)
;
Jan.Apr.
: May: July
;
A.
s
:
:
Aug.Oct.
j
s
:
:
Kov.Dec.
1
:
:
:
Total
calendar
year
:
1943
Nonbanking source?:
1. Individuals, -oartnerships, and -personal trust accounts:
a. Redemptions of savings bonds:
(1) Series A - E
(2) Series F - G
d. Redemptions of tax notes:
(1) Series A
(2) Series B - C
c. Maturities except bills
d. Market sales (•) or purchases {-)
e. Total
.3
•3
•3
•3
.1
.1
.2
.1
.4
.1
.2
.4
.6
.8
.6
2/4
1.2
.2
1.1
.6
1.1
.4
1.1
1.4
4-5
2.6
1.5
1.7
1.5
2.5
7.2
.4
1.2
.8
2. Corporations other than banks and insurance companies:
a. Redemptions of savings bonds:
(1) Series A - D
(2) Series F - G
b. Redemptions 01 tax notes:
(1) Series A
(2) Series B - C
c. Maturities except bills
d. Market sales ( + ) or purchases (-)
e. Total
3. U. S. Government agencies and trust funds:
a. Maturities except b i l l s (excluding special issues)...
4. Insurance companies:
a. Maturities except b i l l s
b. Market sales (4) or purchases (-)
c. Total
5. Mutual savings banks:
a. Maturities except bills
b. Market sales (4-) or purchases (-)
c. Total'
.1
.1
.1
.1
+ .2
•3
.1
+ .1
.2
.1
4-.1
.1
.1
.2
+.1
•3
.1
+ .1
.2
.1
.1
•5
f.l
.2
+.5
.1
1.0
•3
f.2
.1
•5
6. Tax-exempt institutions:
a. Maturities except bills
7. State and local governments, their agencies, and
sinking and trust funds:
a. Maturities except bills
b. Market sales (•) or purchases (-)
c. Total
8. Total for nonba-nklng sources
B.
Banking sources:
1. Commercial banks:
a. Maturities except b i l l s
b. Market sales (+) or purchases (-)
c. Total
2. Federal Reserve Banks:
a. Maturities except b i l l s
b. Market sales (•) 01* purchases (-)
c. Total
C.
^1
.1
+.1
.1
.2
2.4
2.6
2.9
3.5
11.4
1.0
41.4
1 •9
l .8
4.1
.2
8.8
+2.8
2.4
2.8
2 .1
4.3
11.6
.4
.3
•3
.2
1.2
-1.8
-1 .0
- •7
- .2
-.1
-3.6
-2.4
2.1
1.9
4.2
9.2
-1.4
3. Total for banking sources
1.0
Total for all sources:
1. Redemptions of savings bonds
2. Redemptions of tax notes
3. Maturities except bills
4. Market sales (+) or purchases (-)
5. Total for all sources
.3
1.4
1.7
3.4
Office of the Secretary of the Treasury, Division of Research and Statistics.
.1
+ .1
•3
•3
1.2
3.2
1.2
•3
1.2
3.3
1.2
6.2
5-0
14.4
4.8
7.7
20.6
February 1,
Secretary Morgenthau -
3» M&itlonal pales of Federal
Required to' Provide Replacements to Offset' Depletions
In Existing Portfolios
fable 2 showed tne n t absorption of Federal securities by the various investor groupi calculated for tne
calendar year 19** 3 in oraer to finance tne total deficit.
This msans that the amount of absorption shown, for each
investor group represented a net increase in its combined
portfolio of Federal securities. In planning itn financing
rasa, however, the Treasury must also take into
account the amount of securities vfelftfc must be sold to
provide funds for paying off maturities end redemptions
during the year.
k further allowance will have to be mad© for the
fact that some investor groups, such as insurance companies,
will undoubtedly sell some cf their shorter term securities
in the market «m<3 that these probably will be purchased by
MMiiftial banks, oueii transactions would increase the
ability of insurance oorapanleg to buy securities and thus
reduce tfct amount of r-»auired sales to banXe directly by
tile Treasury.
Tabla 3 shows, for totfe investor group, the amount
of securities which will have to be purchased to take care
of all of these replacements. In tnis table, calendar
year figures are broken
into the same euot?; -rriode
as were used in titbit 2. ^or each investor provp the
amount of re^smt'tions, maturities, an<i
I sales or
are shovm t*par« tely.
Estimated redemptions of savings bonds Series
are shown at |l#f billions for the year. Redemptions of
Series f ana G arefcttwtt4to be zero, '/tedearptlons of tax
notes are estimated at a total of t,5.0 billions, Kedemptiona of Series A are assumed to be zero for individuals
and t/0.1 billions for corporations. Redemptions of
series B and C are *OttS«4l to be ^0.^ bill long for
individuals and |4.5 billions for corporations.
turities are shown during tne y-.-;r for nach class
of investor ai lftdl«at«4 by the le.teit information on
ownership of r«4«ral eacurltiss, bill maturities are not
secretary Kor&enthau - 9
included because tiiey roll over automatically and their
ownership is not significantly changed a® a result.
Certificate maturities ere included, however, since it
is quite likely taat the ownership of a new certificate
issue will be significantly different tiian t&at of a
maturing issue.
sales by non-banking investors are shown only
for insurance companies, mutual savings banks, and. State
and loc-?;l governmental funds. For insurance companies
and mutual savin s banks, estimated sal^s are -10.5 billion©
and *G.2 billions, resi>ctively, for the year. These
amounts represent approximately 25 percent of Federal security holdings clue or callable within 1-5- years. For State
and local governmental funds the tttittatcd sales of
0,1 billions represent approximately one-fourth of their
holdings of rartially tax-exempt Federal securities. It
le assumed that all of these securities sold in the market
will be purchased by commercial banks.
In the caee of banking Investors a break-down
commercial banks and Federal Reserve Banks Is again shown.
Maturities except bills are shown for both roups of b&nks,
and there are no redemption* since savings bonds and tax
notes are not an important Part of bank.portfolios. It
Is assumed that the Federal Reserve Banks will buy in the
•arfcet all of the securities needed to cover the net increase
in their portfolio shown in Table 2, plus enough to cover
maturities (©xco t bills) shown in fable 3» ^ !•& also
assumed that all securities purchased in the market by the
Federal Reserve Hanks will fee bought from commercial banks.
Such sales by eoam-rei&l banks exceed their purchases from
non-banking investors by 2*g billions during the year.
It should be noted that to tee extent tfea Federal Reserve
System covers its needs by purchasing newly offered securitiesttirottgtlbrokers and dealers, these sources would
also be considered with commercial barifcs in the table.
together the non-baf&lftg, and the bunking
investor groups provides a total amount of replacement
sales of $20,6 billions for tiie year. This consists of
$102 billions of redemption© of savings bonds, ",5.0 billions
of redemptions cf tax notes, and I'i.H billions of maturities
except bills. Market sales ami purchases naturally offeet
tiaemselvas so that for all investor groups together the
amount is zero.
FUST KE7ISI0H
STRICTLY CONFIDENTIAL
Table k.
Constructive Figures for Gross Sales of Federal Securities by Investor Groups
Calendar Te&r I9U3
(In "billions of dollars)
Investor group
A.
2.
3.
U.
7»
8.
C.
Tot&1
:
New
. absorp_
tion
:
:
. Replace- .
ments
Tot&1
:
New
. abBOrp_
tion
Total calendar yeajf
November - December
:
:
. Replace- . T o t a l
ments
:
New
:
, r ^ B O r p - : *«Pl a c «merits
tion
:
New
:
absorp- :
tion
:
:
Total
Total
ment8
Nonbanking sources:
1.
B.
:
New
:
:
: absorp- : Replace- .
mentB
tion
August - October
May - July
January - April
Individuals, partnerships, and
x>ersonal trust accounts
6.1
.U
6.5
8.7
.6
9.3
11.3
.8
12.1
6.6
.6
7.2
32.7
2.U
35.1
Corporations other than banks
and insurance companies
U.5
1.5
6.0
3.8
1.7
5.5
3.9
1.5
5.^
2.6
2.5
5.1
lU.8
7.2
22.0
U. S. Government agencies and
trust funds
.7
-
.7
1.1
-
1.1
.6
.1
.7
.9
-
.9
3.3
.1
3.^
1.1
.3
l.U
.8
.2
1.0
.8
.3
1.1
.6
.2
.8
3.3
1.0
U.3
.^
.1
.5
.5
.2
.7
.u
.1
.5
1.8
.5
2.3
.1
-
.1
.U
.2
.6
Insurance companies
State and local governments,
their agencies, and sinking
and trust funds
Total for nonbanking sources....
.1
.1
.2
.1
-
.1
13*1
2.U
15*5
1^.9
2.6
17.5
3.5
2.8
6.3
.7
-.7
.1
.-
.1
2.9
20.1
1.2
2.1
3.3
.2
-.2
17.2
.1
.1
.2
3.5
1^.7
56.U
11.U
67.8
.5
M
^.s
11.9
11.6
23.5
.1
-.1
.6
U.2
U.8
7.7
19.5
11.2
Banking sources:
1.
Commercial banks
6.7
2.U
9.1
2.
Federal Reserve banks
l.U
-l.U
-
3.
Total for bank sources
8.1
1.0
9*1
U.2
2.1
6.3
1.U
1.9
3.3
21.2
3«^
2U.6
19.1
*+.7
23.8
18.6
h.s
23.U
To-tal for all sources
Office of the Secretary of the Treasury, Division of Research and Statistics.
Note:
Figures for new absorption are taken from Step 1, and for replacements from Step 2.
11.8
2.U
-2.U
1^.3
9.2
23.5
20.6
91.3
70.7
February 2,
k-m Grose Sales of Federal •j*curities Reou.lr&cS for
fable *i brings togetH^r for the various
groups the figures for 'net new absorption of Federal secu
rities and for rmxL: a extents to effect ueplstions In
Ing portfolios. It will be noted that non-banking
arr foheduled to nurebaae |15*5 "fcilllons gf#
"
January-April T;^-riod while b©nkc are only scher2uled to
ourohaee :$.l billions. In the May-Julj pei'iod nonsources would be increased to 117• 5 billions wltii banking
sources reduoed to ^6.3 billions. In the August-October
period ncn«»b&!&ing sources woulf3 be increased further to
.•-20.1 Dlllloris, with banking sources reduced to only
§3«1 billions. For the year as a whole tot»l glifl sales
of i91.3 billions would toe divide*! between $6fm$ billions
frcn non-banking; sources and |2J»5 billione from banking
sources•
STRICTLY CONFIDENTIAL
Table 5 .
Analysis of Constructive Figures for Gross Sales of Federal Securities, by Nonbankin^ Investor Grouos,
for Calendar Year 19U3, Classified by "Continuing" and "Periodic Special Effort" Categories
(In billions of dollars)
:
1.
Feb.
Mar.
Total
Apr. : ^
May
^months
Total
June \ July ! 3
'.months
Total
' Total
calendar
Nov. 1 Dec. ; 2
/ear
]months
] mo n th s
19*4-3
:
Total
Aug. ' Sept. \ Oct • ; 3
Individuals, partnerships,
and personal trust accounts:
a. Continuing:
( l ) Savings bonds:
(a) Series E
(b) Series F - 0
(2) Tax notes:
(a) Series A
(b) Series C
b. Periodic special effort
c. Total
2.
Jan.
:
•
:
g
•3
a
h
a
n
i
g
1
Corporations other than banks
and insurance companies:
a. Continuing:
(l) Savings bonds:
(a) Series F - G
(2) Tar notes:
(a) Series A
(b) Series C
b. Periodic special effort
c. Total
.7
.7
1.3
.8
2.3
3.2
7
.6
1
6.5
.9
.8
.8
9.0
—
• 7
.1
1
_
1.2
7
.7
6.9
7.7
I
9.3
.8
.6
.1
5.U
9- 9
7
10.
.1
12.1
•J
7.2
D .3
•3
.6
2U.5
35-1
.2
1
.1
.1
c
c
k
. 0
.5
.6
.2
.2
3.9
k.5
6.0
.6
6
.6
5-5
.6
.6
.6
.6
f)
}. 6
2
.5
5.U
fe.5
.5
u.o
15.2
22.0
.6
U.5
• 3
.U
.2
.7
.6
.9
3.U
.8
.8
^•3
R
2.3
5.1
3- U. S. Government agencies
and trust funds:
a. Continuing:
( l ) Increases in amount of special issues outstanding..
b. Periodic special effort
c. Total
.1
.2
.1
•3
.2
.2
.2
.7
.-^
1.1
1 k
l.U
1 0
1.0
a. Periodic SDecial effort
.6
.6
6. Tax-exenrot institutions:
a. Periodic special effort
.1
.1
.2
.2
.1
.2
.2
k. Insurance companies:
a. Periodic special effort
2
2
• 7
1. 1
1.1
7
.7
1
.2
.3
_
5- Mutual savings banks:
7. State and local governments,
their agencies, and sinking
and trust funds:
a. Periodic special effort
s.
Total for nonbanking sources:
a. Continuing:
(l) Public issues:
(a) Savings bonds
(b) Tax notes
(2) Increases in amount of snecifll issues outstanding..
(3) Total
b. Periodic special effort
c. To tal
R
•J
.1
•
1.2
1.3
•5
.S
.6
.2
.1
1.7
2.0
.2
1.6
1.7
2.0
l.o
.1
.8
• 7
.8
• 7
1.5
S.7
1.8
10.2
is.5
1.8
.1
1.8
1.8
.2
1.6
12.3
l?-9
1
.7
.7
•7
•7
.3
Office of the Secret.-ry of the Treasury, Division of Research nnd Statistics.
2.7
.2
.1
.6
.6
•7
.8
.8
7
• 7
.6
1.5
1 U
1.8
1.8
11.1
12.9
»0
17.5
1.6
1.5
17 .0
?0.1
1.8
.6
9-9
7.5
2.7
20.1
U7.7
.U
.2
1.6
.2
1U.7
February 1,
Secretary Korgenth&u - 11
5«
-^Iascifloation of Hsqulre.fl jros s y.a.1 es to
Investor Groups by "Contlnuijtii. and
OpeeUl Effort"
'
Total -rass sales of securities to tne various nontanking Investor group! will V-e partly satisfied by the
sale of securities through efforts conducted continuously
while the remainder will have to be satisfied through the
use of "periodic special efforts'*. The regular GAspalgfi
to sell savings bonds and tax notes will provide sales in
the "continuing** sategor? while periodic drives will provide both additional $ales of savings bonds ami tax notes
and sales of securities offered ttpealallj for the tfdrivett.
fable J analyzes the sales scheduled for the various
investor groups end claseifies thes into these two
categories.
Gross sales of ifttlAgi bonds are eetlrastetl at 1$*$
billions for the calendar year vith $9.0 billions in
lee B. The other |0»f billion? conelets of sales of
-if.s ;: and (1 bonds in January and February, It if assumed
in tb« table that the sale of Series V and 9 bonds will be
discontinued as of the end of February, with some earlier
announcement to this effect.
ilross sales cf tax notes are esticaatec3 *t -7»5 billions
for tiie year, ten* lit lag of $0»«l billions of Series & notes
and J7#X billions of 3eriea C notes.
t tiaiates of the sales of savintes bonds and tax
notes represent assumptions of what say be expected on the
basis of the present outlook
.ithout a significant
change In the selling effort, l^e amount of §*!•! of *avings bond© and tax notes in the various aeries is allocated
to individuals ami to corporations ether than bai&9 s;.nd
insurance companies on th« basis of pAit ex^
He,ving thus estimated the amount of sales which
be expected in the ••ontlnuing* category, the rasialnder of
the scheduled requirements is allotted to the "periodic
erecial effort** category. For example, in the first quota
period individuals, partnerships and p-rsonal trust accounts
are scheduled to make gross purchases of Fedc?rtl securities
in the amount of |£.5 billions. (See tafol*fc*|Monthly
l
of the sales of savin^^g boftdi and ta.x not#e
Secretary Morgenthau - 12
indicate tfeftt trie continuing effort will provide Jl.2 billions in January, -jfl.J billions in February, and $0*6 billions in March. This will leave a total reouireiaent for
rll of I3«fl billions. Of this amount -"0.9 billions
would be provided by continuing sales, leaving a total of
#2.3 billions to be rrovl^ed by the aperiodic special
effort**.
similar analysis for corporation® other than banks
arid insurance companies indicates that total April sales
would, have to be J^o billions of which !}•$ billions would
represent the "periodic special effort".
In the case of government agencies and trust funds
total scheduled sales for the first quota period, would be
broken down into (f0.[> billions of "continuing effort1*
(special issues) ami -0.2 billions of market securities
in the "periodic gpeci&l effort*. For the remaining nonbanking Investor groups, the entire scheduled s*l+S during
the quota period are assumed to be satisfied in the
"periodic special effort**.
Tiie recapitulation at t&* bottom of Table J| indicates
that total aales of securities in April would be set at
110.P billions with |f«f billions classified under
"periodic specie! effort" and ,;l.p billions under "continuing*
effort. It will be remembered thai total sales of securities in December &.
te<3 1- .9 billions Including the
1
"continuing * Ofttej cry as well ss the special "drive*, the
amount of securities estimated to have been purchased by
non-banking investor© in December wag approximately
7 billions.* Thus, the schedule fcr the month of April
for non-banking investors would represent an ineress? of
about 13 billions over December.
ills the figures fcr the April ATITS v^ould thus
exceed December totals for non-banking investors, the projected July drive would be on an even larger scale. The
M
pericdic special effortM called for would be 112,3 billions,
with sales of ftXl securities in the njonth eet at I1J.9 billions. In the October drive total sales for the month
would be H7#0 billion© with the Rperri#41tt spsslal effort11
calling for |15»6 billions. For the entire calender year
total sales of securities to non-banking investors art
seneduled at ttij,i billlone. Continuing; gales at |20,l
billions Mould amount to lsSS tnan & third of this total.
Sales through the Hp-rlo<31c special effortM woul^l amount
to l%7,7 billione.
#
Ebceluding dealers and brokers.
VERY PRELIMINARY.
SUBJECT TO REVISION
'
T
7
•
Teble 6.
«
Analysis of Personal Incomes by Size Clrsses
Calendar Year 19*4-3
Distribution by net Income groups 1/
Total
o- $1,000-
;
2,000
1,000
I.
II.
Equals disposable income
Less:
Consumer spendings
Equals personal savings
III.
3.6
9.2
27.9
25.8
.9
Personal taxes 2/
$^,0005,000
and over
1.6
1.6
S.6
21.3
Aggregates (in billions of dollars)
G-ross Incomes (total income payments)..
Less:
$^,0004,000
Number of Income recipients 2/
19.6
Millions of persons
$2,0003,000
13
6
2. 9
1 .8
1. 5
1 .0
5.6
119
1*.k
0
2k .0
13. 2
7 .6
15. 7
7^
15.1
7
1? •5
6.2
.1
-.7
13-3
10.
7.1
5.
10.2
Average per recipient (in dollars)
055
5, 362
13,321
10l+
195
4oi
612
3,512
735
1,579
2 ,610
3,
K 750
9.S69
Consumer spendlngs
771
l,101
1 ,^75
1, 705
1,962
3,^6
Equals personal savings....
-36
14-73
1,136
1,9^9
Less:
Personal taxes
Squale disposable Income...
Less:
763
1,652
2S
CVJ
,306
Gross income
Office of the Secretary of the Treasury, Division of Research and Statistics.
Note:
1/
2/
V
Figures do not add up to totals because of rounding.
Classifications of gross income by net Income classes naturally result In some
average incomes exceeding the upper limit of the income bracket.
Excluding young people under IS reauired to report incomes as part of their
parents1 returns.
Stete and local as well as Federal.
6,^-23
February 6, 19V*.
Secretary korgenthau - 13
6.
Personal Saving a Anelvgecl. by
Income? Groups
In an earlier stage in this analysis scheduled sales
of Federal securities to individuals, partnerships, and trust
accounts were placed at an aggregate of almost 533 billions
for t&fl calendar ye&T 19^3 (^eble 2), This figure represents
the amount® of sale® to Individuals, partnerships and personal
trust accounts scheduled t« absorb personal savings during
the year and does not Include replacements to ta&ke ur- d«plt~
tions in the existing portfolios of these investors.
In order to work out a detailed campaign to realize the
objective of absorbing personal savings direct from individuals
to the extent of $33 billions during the year, ths
tlon is
Immediately raised as to the distribution of personal savings
by income groups. If meet of these savings are In the lower
income groups, a different type of campaign will doubtless be
called for than If the BaTlagS are located largely in the
I
. rouus.
Accordingly, an attempt has been made in Table 6 to break
down personal income figures by net income classes. Gross
*'sonal incomes (income payments) of IIJS billlcns for the
year are classified, by |lf000 bracket© up to net incomes of
411 incomes over f$f000 are lumped together.
#OC0 s year.
The table shows first of all %ht number of Income
recipients in each inco.e class. About 90 percent of the
total of 63 million income recipients fall in the br&okets
below ,3,000 1 year. Of the remaining 10 percent, or about,
7 million persons, less ttall one-fourth receive net incomes*
of -5,000 ft y#ar or more.
II of tne table shows first of ell total gross
incomes (incc.:- oayaients} by income classes. Next, personal
taxes are deducted from gFOSS Inooaes,fcracK^tby bracket,
leaving disposable incomes, -..stlraatee of consumers1 spendings
in eacli Incouie bracket are then subtracted froai the corresponding figure for dispas&ble incoses, leaving i rrsidual
amount of personal savings In esch tf the nix ineoise classes,
A very large part of personal savings Is found in the lower
income groups, but this stems frost the fact that these groups
receive an even larger proportion of the total ^ross incomes.
Secretary Korgtfithittt -
In part H I of %h§ tafels »a«te figure shown In p*rt II
is divided by trie number of Income recipients in the
designated class, average gross Income in eseh Income group
say thus be examined in relation to average Sptadings and
average
g a v i n • I n t.r.
••••.
In UtttrprttlAf the high savings figures shown in the
lower income brackets, it should be remembered that the
figures relate to lndlYldoals $.a& not to family units* Many
families, particularly In these feMttotlg now hava more than
one person working. Pftail; suiters who are new earner© are
able to- save unusually l*Tgt amounts of their Ineosips. Substantial savings In the lower income groups also result from
the fast that m&ny persons art benefiting from wage lricr«asts
which have raised taalr U l M i l well <bov@ what they formerly
epent for consumption, although Ui&nj things which they would
like to buy are now unavailable.
It should b@ ea*phisl2ed that all figures shown In Table 6
are very rough *&d they should be read only as clues oonosrning
the whereabouts of total personal savings. The ntxt table
pursues this cues'tion further.
VERY PRELI1IINARY,
SUBJECT TO REVISION
• 8I««« M»
,m
•
Table 7.
Analysis of Personal Savings by Categories
Calendar Yerr 194j,
Distribution by n?t income groups
Total
I.
Savings absorbed by life Insurance,
mutual savings banks and debt
repayment
*
01 ,000
$ 1 ,0002 ,000
-.4
-.4 1/
IO.I
Total personal savings
-.7
13.3
114
Remainder available for absorption
of Federal securities
10.
.9
.7
6.2
9.6
7.1
4.5
10.2
-36
473
206
2*4-2
281
40S
929
1,707
2,507
6,01^
1,136
1,949
Office of the Secretary of the Treasury, Division of Research and Statistics.
Figures do not add up to totals because of rounding.
On assumption that this group will absorb $.2 billions in Federal securities,
but will draw down currency and deposits by $.6 billions.
4,000
$5,000
and over
Average per recipient (in dollars)
Savings absorbed by life insurance,
mutual savings banks and debt
repayment
Note:
1/
$^,0005,000
?,ooo
1.9
Remainder available for absorption
of Federal securities
Total personal savings
3 ,000
Aggregates (in billions of dollars)
6.7
II.
s<?2 ,000-
:
6,42;
February 6, 19
Secretary ^crgenthau m %§
7.
Personal Uavln^a Available for * •ur
F
Securities Analyzed by
Income Group's'
In Table 6 personal savings were analyzed by income
groups. Seme of these savings, however, are not available
for tHi purchase of Federal securities because they are
invested In life insurance! mutual savings banks and debt
repayment. In Table 2 -euch deductions were listed and the
residual amount which will be available for the purchase of
Federal securities was estimated at JJIS billions for the
calendar year. Of this total, it was assumed that about -33
billions would be invested In Federal securities VltJl the
remainder placed In bank deposits and currency, fht total
of Iji billions is the reservoir from which Federal securities
are purchased and the objective is to obtain as much absorption
as possible, thereby limiting the ^ortion going into currency
and bank deposits.
Table 7 iMPWdtl down by income classes the total fund®
available for investment In Federal securities. Part I of
the table shows the aggregate amounts by inco&e groups for
total personal savings, Investments in life insurance, mutual
savings tanks an>5 debt repayment combined, and, the residual
amount of savings avails!!® for the purchase of Federal
securities. Fart II of the table shows the same figures ^ag
averages p-r income recipient. As in the case of Table ot the
figures in fable 7 **• rcu^h and. should be interpreted as a
reflection of general magnitudes rather than exact values.
It will be noted tnat the total amount of personal
savings available for tns purchase of Federal securities Is
divided about equally between income groups receiving less
than l3«00Q p%r year and income groups receiviiig more than
that amount. It was noted previously that 90 percent of the
number of Inmost recipients received less than |jf000 p?r
year and only 10 percent received more than thie amount.
Three-quarters of %h* total amount of personal savings
available for the purchase of Federal securities is held by
the income groups under
, 0, Table 6 chows that there
are approximately 6l million persons in thsee groups. This
would appear to be the area wher® mass 1
igne will be
needed to obtain the absorption of savin ;s into Federal securities.
Secretary Horgenthau - 16
5, level there is about one-fourth of
the §5,000
total personal savings available for the pttTtthatfl of federal
securities. Asproxisifctely I million persons are in this
grour. fhi srour: IF, of course, vilely diverse. 8 m of
the parsons .in it ttrs extremely v-e<hy while others are
salaried persons who have little more ability to nurchas©
securities than the people in the income groups under #5,000.
In order to obtain the investment of savings of peraons receiving more than ...,^00, it will probably "be neo@B®@ry to
have a highly pertoriallzc?d ecuspaH
ith soae divereificsation
In the securities offered.
@FedFRASER