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a
Annual Report
of the
Secretary of the Treasury
on the
State of the Finances
For the Fiscal Year Ended June 30^ 1955
TREASURY DEPARTMENT
DOCUMENT NO. 3197
Secretary
U N I T E D STATES G O V E R N M E N T P R I N T I N G O F F I C E , WASHINGTON
For sale by the Superintendent of Documents, U. S. Govemment Printing OflSce
Washington 25, D. C. - Price $2.25
:
1956
CONTENTS
Page
Transmittal and statement by the Secretary of the Treasury
1
REVIEW OF FISCAL OPERATIONS
Summary of fiscal operations.
Budget receipts and expenditures^
.
Budget receipts in 1955
Estimates of receipts iii 1956 and 1957
Budget expenditures in 1955
Estimates of expenditures in 1956 and 1957
Trust account and other transactions
Account of the Treasurer of the United States
Public debt operations and ownership of Federal securities
Public debt operations
Ownership of Federal securities
Corporations and certain other business-type activities of the Government.
Securities owned by the United States (Government
Taxation developments
International financial and monetary developments
5
7
7
10
16
18
19
20
21
24
29
34
37
37
48
ADMINISTRATIVE REPORTS
Summary of progress in management improvement
Comptroller of the Currency, Bureau of the
Customs, Bureau of
Engraving and Printing, Bureau of
Fiscal Service
Internal Revenue Service
International Finance, OfRce of
Mint, Bureau of the
Narcotics, Bureau of
Production and Defense Lending, Office of
United States Coast Guard__
\.
United States Savings Bonds Division
United States Secret Service..^
:
.
.,
61
64
67
82
90
114
121
122
125
128
130
145
148
EXHIBITS
PUBLIC DEBT
Offerings and Allotments of Treasury Certificates of Indebtedness, Treasury Notes,
and Treasury Bonds, and Calls for Redemption of Treasury Bonds
Pag©
1.
2.
3.
4.
Treasury certificates of indebtedness
Treasury notes
Treasury bonds
,
Call, August 12, 1954, for redemption on December 15, 1954, of 2 percent Treasury bonds of 1951-55, dated December 15, 1941
5. Call, November 15, 1954, for redemption on March 15, 1955, of 2%
percent Treasury bonds of 1955-60, dated March 15, 1935
155
162
167
173
173
Treasury bills
6. Tenders for Treasury bills invited and accepted
174
United States savings bonds
7. Fourth amendment, November 18, 1954, to Department Circular No.
530, Seventh Revision, regulations governing United States savings
bonds
in
178
rv
CONTENTS
Page
8. Second amendment, November 18, 1954, to Department Circular No.
653, Third Revision, permitting the purchase of Series E savings
bonds by personal trust estates
9. First amendment, November 18, 1954, to Department Circular No.
905, permitting the purchase of Series H savings bonds by personal
trust estates
10. Fifth amendment, February 21, .1955, to Pepartment Circular No.
530, Seventh Revision, terminating acceptance of savings bonds for
safekeeping
...
11. Third amendment, February 21, 1955, to Department Circular No.
653, Third Revision, regulations governing the delivery and safekeeping of Series E savings bonds
12. First amendment, February 21, 1955, to Department Circular No.
654, Third Revision, terminating acceptance of Series F and. G
savings bonds for safekeeping
13. Second amendment, February 21, 1955, to Department Circular No.
905, regulations governing the delivery and safekeeping of Series H
savings bonds
_--_
i.
14. First amendment, February 21, 1955, to Department Circular, No.
906, regulations governing the delivery and safekeeping of Series J .
and K savings bonds
^
-- -
179
180
180
180
181
181
182
OBLIGATIONS GUARANTEED BY THE UNITED STATES
15. Calls for partial redemption, before maturity, of insurance fund
debentures
......
_^^__
•._
182
LEGISLATION AND REGULATIONS
16. Two acts temporarily increasing the public debt limit
17. Removal of restrictions on ownership by commercial banks of certain
Treasury bonds
18. Revision April 1, 1955, of Department Circular No. 300, general
regulations with respect to United States securities
186
186
186
TAXATION DEVELOPMENTS
19. Extract from the Budget Message of the President, January 17, 1955,
on tax policy
^_
^
^^---20. Statement by Secretary of the Treasury ' Humphrey, February 28,
1955, before the Senate Finance Committee urging rejection of the
$20 tax cut proposal
21. Statement by Secretary of the Treasury Humphrey, March 14, 1955,
concerning the tax bill pending in the Senate
22. Statement by Secretary of the Treasury Humphrey, May 11, 1955,
before the Senate Finance Committee urging the repeal of Sections
452 and 462 of the Internal Revenue Code of 1954
,____
23. Letter of Secretary of the Treasury Humphrey, July 26, 1955, to the
Chairman of the House Ways and Means Committee suggesting
changes in the tax treatment of cooperatives and their patrons
24. Statement by Secretary of the Treasury Humphrey, June 27, 1955,
before the House Ways and Means Committee on the Individual
Retirement Act of 1955 (H. R. 10)
25. Letter of Secretary of the Treasury Humphrey, July 27, 1955, to the
Chairman of the House Ways and Means Committee submitting a
suggested draft of legislation relative to the taxation of corporate
business income earned abroad
26. Statement by Secretary of the Treasury Humphrey, July 18, 1955,
before the Subcommittee on Legal and Monetary Affairs of the
House Government Operations Committee on accelerated amortization for certain emergency facilities
27. Letters of Secretary of the Treasury Humphrey, July 7, 1955, to the
Chairman of the House Ways and Means Committee concerning
the taxation of life insurance companies
28. Statement by Secretary of the Treasury Humphrey, July 12, 1955,
before the House Committee on Public Works in support of the
President's road program
225
226
227
227
229
230
231
233
235
237
CONTENTS
V
Page
29. Remarks by Secretary of the Treasury Humphrey, October 1, 1954,
before the Tax Institute of the University of Texas School of Law
on the tax program
'
30. Miscellaneous revenue legislation enacted by the Eighty-fourth Congress, First, Session
239
242
INTERNATIONAL FINANCIAL AND MONETARY DEVELOPMENTS
31. Remarks by Secretary of the Treasury Humphrey, November 23, 1954,
at the meeting of Ministers of Finance and Economy, Rio de Janeiro,
Brazil
:
32. Statement by Secretary of the Treasury Humphrey, March 3, 1955,
before the Senate Finance Committee on the trade agreements
program
•
33. Statement by Secretary of the Treasury Humphrey, July 11, 1955,
before the H6use Committee on Banking and Currency on the
International Finance Corporation
:
34. Statement by Secretary of the Treasury Humphrey as Governor for
the United States, September 12, 1955, at the opening joint session
of the Boards of Governors of the International Bank for Reconstruction and Development and the International Monetary Fund,
Istanbul, Turkey
35. Statement by Under Secretary of the Treasury Burgess, Temporary
Alternate Governor for the United States, September 14, 1955, at
the discussion of the Annual Report of the International Monetary
Fund
.__.__
36. Extracts from remarks by Under Secretary of the Treasury Burgess,
October 9, 1954, before the. Pennsylvania Newspapers Publishers
Association, Harrisburg, Pa
37. Remarks by Assistant Secretary of the Treasury Rose, April 28, 1955,
before the National Council of Anierican Importers, New York,
N. Y
.
38. Statement by Assistant Secretary of the Treasury Rose, July 6, 1955,
before the Senate Finance Committee on customs simplification
39. Statement by Assistant Secretary of the Treasury Overby, July 14,
1954, before the House Banking and Currency Committee concerning the Export-Import Bank
40. Announcement by the Treasury Department, February 16, 1955, of
the signing of an extension of the stabilization agreement between
the United States and Peru
41. Statement by the Department of State and the Treasury Department,
July 1, 1955, concerning the proposed Inter-American Bank for
Economic Development
245
251
252
254
256
257
259
262
267
267
268
ADDRESSES AND STATEMENTS ON GENERAL FISCAL AND OTHER POLICIES
.42. Remarks by Secretary of the Treasury Humphrey, October 19, 1954,
before the American Bankers Association, Atlantic City, N. J_
43. Remarks by Secretary of the Treasury Humphrey, October 21, 1954,
before the Investment Bankers Association, New York, N. Y
44. Memorandum to the Honorable Wright Patman, October 29, 1954,
on the depositary practice of the Treasury Department
45. Statement by Secretary of the Treasury Humphrey, December 7, 1954,
before the Subcommittee on Economic Stabilization of the Joint
Committee on the Economic Report
46. Remarks by Secretary of the Treasury Humphrey, February 16, 1955,
following receipt of an award of the Chamber of Commerce of
Greater Philadelphia, Philadelphia, Pa
47. Remarks by Secretary of the Treasury Humphrey, February 19, 1955,
before the National Canners Association, Chicago, 111
48. Extracts from remarks by Under Secretary of the Treasury Folsom,
December 3, 1954, before the Conference of Mayors, Washington,
D. C____
-_
49. Address by Under Secretary of the Treasury Burgess, June 17, 1955,
before the Graduate School of Banking, American Bankers Association, New Brunswick, N. J_._.-_- — __-
268
271
275
290
291
294
299
300
VI
CONTENTS
Page
50. Address by Under Secretary of the Treasury Burgess, July 2, 1955,
before the National Federation of Business and Professional Women's
Clubs, Louisville, Ky
51. Statement by Under Secretary of the Treasury Burgess, July 13, 1955,
before the Senate Committee on Banking and Currency
52. Address by Assistant Secretary of the Treasury Rose, May 30, 1955,
at the dedication of the U. S. Coast Guard World War II Memorial,
New York, N. Y
303
308
309
ORGANIZATION AND PROCEDURE
53. Treasury Department orders relating to organization and procedure.-
311
REPORTING AND ACCOUNTING CHANGES
54. Treasury Department and General Accounting Office Joint Regulation
No. 4 issued April 29, 1955, under the Budget and Accounting Procedures Act of 1950
55. Statement regarding a system of central accounts for the United
States Government (Department Circular No. 945, Revised April
29, 1955)
56. Regulations governing the purchase, custody, transfer, and sale of
foreign exchange by executive departments and agencies of the
United States (Department Circular No. 930, Supplement December
28, 1954)
57. Regulations for withholding compensation due personnel (Department
Circular No. 871, First Supplement November 12, 1954)
58. Regulations governing the acceptance of conditional gifts of money or
other intangible personal property to further the defense effort
(Department Circular No. 957, February 24, 1955)
326
327
331
332
333
MISCELLANEOUS
59. Letter of the Postmaster General to the Secretary of the Treasury
certifying extraordinary expenditures contributing to the deficiencies
of postal revenue for the fiscal year 1955
335
TABLES
Bases of tables
Description of accounts relating to cash operations
339
341
SUMMARY OF FISCAL OPERATIONS
1. Summary of fiscal operations, fiscal years 1932-55 and monthly 1955.
344
RECEIPTS AND EXPENDITURES
2. Receipts and expenditures, fiscal years 1789-1955
3. Budget receipts and expenditures, monthly for fiscal year 1955 and
totals for 1954 and 1955
4. Public enterprise funds, fiscal years 1954 and 1955
5. Trust account and other transactions, monthly for the fiscal year 1955
and totals for 1954 and 1955
6. Budget receipts and expenditures by major classifications, fiscal years
1948-55
:
7. Trust account and other transactions by major classifications, fiscal
years 1947-55
8. Budget receipts and expenditures, based on existing and proposed
legislation, actual for the fiscal year 1955 and estimated for 1956
and 1957
9. Trust account and other transactions, actual for the fiscal year 1955
and estimated for 1956 and 1957
10. Effect of financial operations on the public debt, actual for the fiscal
year 1955 and estimated for 1956 and 1957
11. Internal revenue collections by tax sources, fiscal years 1929-55
12. Customs collections and refunds, fiscal years 1954 and 1955
13. Postal receipts and expenditures, fiscal years 1911-55
346
352
366
368
378
379
381
384
385
386
392
393
CONTENTS
VII
Page.
14. Deposits by the Federal Reserve Banks representing interest charges
on Federal Reserve notes, fiscal years 1947-55
^
15. Cash income and outgo, fiscal years 1948-55
394
395
PUBLIC DEBT, GUARANTEED OBLIGATIONS, ETC.
I.—Outstanding
16.
17.
18.
19.
20.
21.
22.
23.
24.
25.
26.
27.
Principal of the public debt, 1790-1955
Public debt and guaranteed obligations outstanding June 30, 1934-55..
Public debt outstanding by security classes, June 30, 1945-55
Guaranteed obligations held outside the Treasury classified by issuing
Government corporations and other business-type activities, June 30,
1945-55
Maturity distribution of marketable, interest-bearing public debt and
guaranteed obligations, June 30, 1945-55
Summary of public debt and guaranteed obligations by security
classes, June 30, 1955
Description of public debt issues outstanding June 30, 1955
Description of guaranteed obligations held outside the Treasury, June
30, 1955
-.
Postal Savings Systems' deposits and Federal Reserve notes outstanding June 30, 1945-55
.
Description of Postal Savings Systems' deposits and Federal Reserve
notes outstanding June 30, 1955
Statutory limitation on the public debt and guaranteed obligations,
June 30, 1955
.
Debt outstanding subject to statutory debt limitation as of selected
dates
II.—Operations
28. Public debt receipts and expenditures by security classes, monthly
for fiscal year 1955 and totals for 1954 and 1955
29. Changes in public debt issues, fiscal year 1955
30. Issues, maturities, and redemptions of interest-bearing public debt
securities, excluding special issues, July 1954-June 1955
•...
31. Public debt increases and decreases, and balances in Treasurer's
account, fiscal years 1916-55
i
32. Statutory debt retirements, fiscal years 1918-55
33. Cumulative sinking fund, fiscal years 1921-55
34. Transactions on account of the cumulative sinking fund, fiscai year
1955
35.
36.
37.
38.
39.
40.
41.
III.—United States savings bonds and Treasury savings notes
Summary of sales and redemptions of savings bonds by series, fiscal
years 1935-55 and monthly 1955
Sales and redemptions of Series E through K savings bonds by series,
fiscal years 1941-55 and monthly 1955
Sales of Series E through K savings bonds by denominations, fiscal
years 1941-55 and monthly 1955
Redemption of Series E through K savings bonds by denominations,
fiscal years 1941-55 and monthly 1955
Sales of Series E and H savings bonds by States, fiscal years 1954,
1955, and cumulative
Percent of savings bonds sold in each year redeemed through each
yearly period thereafter, by denominations
Sales and redemptions of Treasury savings notes, August 1941-June
1955
..
IV.—Interest
42. Amount of interest-bearing public debt outstanding, the computed
annual interest charge, and the computed rate of interest, June 30,
1916-55, and at end of each month during 1955
43. Computed annual interest charge and computed annual interest rate
on the public debt by security classes, June 30, 1939-55
403
405
406
408
409
410
411
428
430
431
432
433
434
442
460
480
481
482
482
483
484
488
491
493
494
500
501
502
VIII
CONTENTS
Page
44. Interest payable on the public debt by security classes, fiscal years
1952-55
45. Interest paid on the public debt and guaranteed obligations, fiscal
years 1940-55, classified by tax status
504
V.—Prices and yields of securities
46. Average yields of long-term Treasury bonds by months, January
1930-June 1955..
47. Prices and yields of marketable public debt issues, June 30, 1954 and
1955, and price range since first traded
506
VI.—Ownership of governmental securities
48. Estimated ownership of interest-bearing governmental securities
outstanding June 30, 1941-55, classified by type of issuer..
49. Estimated distribution of interest-bearing governmental securities
outstanding June 30, 1941-55, classified by tax status and type of
issuer
50. Summary of Treasury survey of ownership of interest-bearing public
debt and guaranteed obligations, June 30, 1954 and 1955
505
508
510
512
514
ASSETS AND LIABILITIES IN T H E ACCOUNT OF THE TREASURER OF T H E
UNITED STATES
51. Assets and liabilities in the account of the Treasurer of the United
States, June 30, 1954 and 1955
516
TRUST FUNDS AND CERTAIN OTHER ACCOUNTS OF THE FEDERAL GOVERNMENT
52. Holdings of Federal securities by Government agencies and accounts,
at par value, June 30, 1945-55
53. Adjusted service certificate fund, June 30, 1955
54. Ainsworth Library fund, Walter Reed General Hospital, June 30, 1955.
55. Civil service retirement and disability fund, June 30, 1955
56. District of Columbia teachers' retirement and annuity fund, June
30, 1955---57. District of Columbia water fund—Investments held by the Treasury
Department, June 30, 1955
58. Relief and rehabilitation. Workmen's Compensation Act, within the
District of Columbia—Assets held by the Treasury Department,
June 30, 1955
59. Federal old-age and survivors insurance trust fund, June 30, 1955
60. Foreign service retirement and disability fund, June 30, 1955
61. Library of Congress trust funds, June 30, 1955
62. Relief and rehabilitation. Longshoremen's and Harbor Workers' Com• pensation Act, as amended—Assets held by the Treasury Department, June 30, 1955
63. National Archives gift fund, June 30, 1955
64. National park trust fund, June 30, 1955
65. National service life insurance fund, June 30, 1955
66. Pershing Hall Memorial fund, June 30, 1955....
67. Public Health Service gift funds—Investments held by the Treasury
Department, June 30, 1955
68. Railroad retirement account, June 30, 1955.
69. Unemployment trust fund, June 30, 1955
70. U. S. Government life insurance fund—Investments, June 30, 1955.-.
71. U. S. Naval Academy general gift fund, June 30, 1955
72. Special trust account for the payment of bonds of the Philippines, its
provinces, cities, and municipalities, issued prior to May 1, 1934,
under authority of acts of Congress, status as of June 30, 1955
518
521
522
523
524
525
525
526
527
528
530
531
531
532
533
533
534
535
540
540
541
CORPORATIONS AND CERTAIN OTHER BUSINESS-TYPE ACTIVITIES OF THE UNITED
STATES GOVERNMENT
73. Borrowing power and outstanding issues of Government corporations .
and certain other business-type activities whose obligations are
guaranteed by the United States or issued to the Secretary of the
Treasury, June 30, 1955
542
CONTENTS
IX
Page
74. Treasury holdings of bonds and notes issued by Government corporations and certain other business-type activities, June 30, 1945-55..
75. Description of Treasury holdings of bonds and notes issued by Government corporations and certain other business-type activities,
June 30, 1955
76. Treasury holdings of bonds and notes issued by Government corporations and certain other business-type activities, and related current
year transactions, fiscal year 1955
.
77. Comparative statement of the assets, liabilities, and capital of Government corporations and certain other business-type activities as
of June 30, 1946-55
78. Balance sheets of Government corporations and certain other businesstype activities as of June 30, 1955
79. Income and expense of Government corporations and certain other
business-type activities, fiscal year 1955
80. Source and application of funds of Government corporations and
certain other business-type activities, fiscal year 1955
81. Restoration of amount of capital impairment of the Commodity
Credit Corporation as of June 30, 1955
82. Reconstruction Finance Corporation notes canceled and cash recoveries
made through June 30, 1955
83. Dividends, interest, and similar payments received by the United
States Treasury from Government corporations and certain other
business-type activities, fiscal year 1955
^
544
546
550
552
554
566
576
587
588
589
SECURITIES OWNED BY THE UNITED STATES GOVERNMENT
84. Securities owned by the United States Government (other than
World War I and World War II foreign government obligations),
June 30, 1955, and changes during 1955
590
STOCK AND CIRCULATION OF MONEY IN THE UNITED STATES
85. Stock of money, money in the Treasury, in the Federal Reserve Banks,
and in circulation, by kinds, June 30, 1955
86. Stock of money, money in the Treasury, in the Federal Reserve Banks,
and in circulation, June 30, 1913-1955
87. Stock of money, by kinds, June 30, 1913-55
88. Money in circulation, by kinds, June 30, 1913-55
89. Location of gold, silver bullion at monetary value, and coin held bv
the Treasury on June 30, 1955
1
90. Paper currency issued and redeemed during the fiscal year 1955, and
outstanding June 30, 1955, by classes and denominations
597
599
600
601
602
602
CUSTOMS STATISTICS
91. Summary of customs collections and expenditures, fiscal year 1955
92. Customs collections and payments, by districts, fiscal year 1955
93. Value of dutiable and taxable imports for consumption and estimated
duties and taxes collected by tariff schedules, fiscal years 1954 and
1955
----94. Value of dutiable imports and amounts of duties collected at specific,
ad valorem, and compound rates, fiscal years 1940-55
._
95. Estimated customs duties, value of imports entered for consumption,
and ratio of duties to value of dutiable imports and to value of all
imports, calendar years 1944-54 and monthly January 1954-June
1955...1-96. Estimated customs duties, value of dutiable imports, and ratio of
estimated duties to value of dutiable imports, by tariff schedules,
calendar years 1944^54 and monthly January 1954-June 1955
97. Value of dutiable imports for consumption and estimated duties collected by countries, fiscal years 1954 and 1955
98. Merchandise entries by number, fiscal years 1954 and 1955
99. Vehicles and persons entering the United States bv number, fiscal
years 1954 and 1955
I
--
603
604
606
607
608
609
613
614
615
X
CONTENTS
Page
100. Airplanes a n d airplane passengers entering t h e United States b y
number, fiscal years 1954 and 1955
101. D r a w b a c k transactions, fiscal years 1954 and 1955
102. Principal commodities on which drawback was paid, fiscal years 1954
and 1955
.
103. Seizures for violations of customs laws, fiscal years 1954 and 1955
104. Seizures for violations of customs laws, classified according to agencies
participating, fiscal year 1955
105. Investigative and patrol activities, fiscal years 1954 and 1955
615
616
616
617
618
618
FEDERAL AID TO STATES
106. Expenditures for Federal aid t o States, individuals, etc., fiscal years
1930, 1940, 1950, and 1955
.
107. Expenditures made by t h e Government as direct p a y m e n t s to States
under cooperative arrangements and expenditures within States
which provided relief and other aid, fiscal year 1955
619
626
GOVERNMENT LOSSES IN SHIPMENT
108. Government losses in shipment revolving fund
641
INTERNATIONAL CLAIMS
109. Mexican claims fund, status as of J u n e 30, 1955
110. Awards of t h e Mixed Claims Commission, United States and Germany, certified to t h e Secretary of t h e Treasury by t h e Secretary
of State, through J u n e 30, 1955
._
643
644
GOLD AND CURRENCY TRANSACTIONS AND FOREIGN GOLD AND DOLLAR HOLDINGS
111. United States net gold transactions with foreign countries a n d
international institutions, fiscai years 1951-55
646
112. E s t i m a t e d gold and short-term dollar resources of foreign countries
as of J u n e 30, 1954 and 1955
1.
647
113. Assets and liabilities of t h e exchange stabilization fund as of J u n e 30,
1954 and 1955
649
114. S u m m a r y of foreign currency transactions in Treasury D e p a r t m e n t
accounts of currencies acquired by t h e United States Government
without purchase with dollars, fiscal year 1955
651
115. Foreign currency transactions in Treasury D e p a r t m e n t accounts of
currencies acquired by t h e United States Government without .
purchase with dollars, by disposition and t y p e of currency, fiscal
year 1955
652
116. Foreign currency transactions in Treasury D e p a r t m e n t accounts of
currencies acquired by t h e United States Government without
purchase with dollars, by disposition and source of currency, fiscal
year 1955
657
INDEBTEDNESS OF FOREIGN GOVERNMENTS
117. Indebtedness of foreign governments t o t h e U n i t e d States arising from
World War I, and p a y m e n t s thereon as of J u n e 30, 1955
l i s . World War I indebtedness of Germany to the United States and
a m o u n t s paid and not paid as of J u n e 30, 1955
119. S u m m a r y of a m o u n t s billed, collected, and balances due t h e United
States under lend-lease and surplus property agreements (World
War II) as of J u n e 30, 1955
120. Outstanding indebtedness of foreign countries on United States Government credits as of J u n e 30, 1955, by area, country, and t y p e
660
661
662
665
PERSONNEL
121. N u m b e r of employees in t h e d e p a r t m e n t a l and field services of t h e
Treasury D e p a r t m e n t quarterly from J u n e 30, 1954j to J u n e 30,
1955
667
INDEX
669
.
NOTE
I n tables where figures have been rounded to a specified unit a n d where calculations have been m a d e from unrounded figures, t h e details m a y not check t o t h e
totals shown.
SECRETARY, UNDER SECRETARIES, AND ASSISTANT SECRETARIES
OF THE TREASURY DEPARTMENT FROM JANUARY 21, 1953, TO
NOVEMBER 15, 1955 i
Term of service
From
To
Secretary of the Treasury
Jan. 21, 1953
George M. Humphrey, Ohio
Under Secretaries ^
Jan. 28, 1953
Aug. 3, 1954
Aug. 3, 1955
July 31, 1955
Marion B. Folsom, New York
W. Randolph Burgess, Maryland
H. Chapman Rose, Ohio
Deputy to the Secretary
Jan. 21, 1953
Aug. 2, 1954
W. Randolph Burgess, New York
Assistant Secretaries 2
Jan.
Jan.
Sept.
Aug.
24, 1952
28, 1953
20, 1954
3, 1955
Aug.
2, 1955
Andrew N. Overby, District of Colunabia
H. Chapman Rose, Ohio
Laurence B. Robbins; Illinois
David W. Kendall, Michigan
Fiscal Assistant Secretaries
Mar. 16, 1945
June 19, 1955
June 17, 1955
Edward F. Bartelt, Illinois
William T. Heffelfinger, District of Colunibia
Administrative Assistant Secretary
Aug. 2, 1950
William W. Parsons, California
1 For officials from September 11,1789, through January 20,1953, see exhibit 65, p. 314, in the 1953 annual
report.
^ . -^ j ,
2 The positions of an additional Under Secretary and an additional Assistant Secretary were established
under the provisions of Public Law 516, 83d Congress, approved July 22,1954.
XI
PRINCIPAL ADMINISTRATIVE AND STAFF OFFICERS OF
THE TREASURY DEPARTMENT AS OF NOVEMBER 15, 1955
SECRETARY
GEORGE M. H U M P H R E Y
W. Randolph Burgess
Andrew N. Overby
_
Laurence B. Robbins
Harold T. Mason
Robert C. Maxwell
.-William T. Heffelfinger
Martin L. Moore
Hampton A. Rabon
Boyd A. Evans
Frank F . Dietrich.,_.
_'_
._
George F . Stickney
Robert B. Blyth
Frank A. Southard, Jr
.
H. Chapman Rose.—
David W. Kendall...
James P. Hendrick.
David P. Page
_.
Malachi L, Hamey
Elmer T. Acken
Comdr. Q. R. Walsh, U. S. C. G . . .
William W. Parsons...
Paul McDonald
John D. Larson...
Edward E. Bemey
Robert H. Perry, Jr
Willard L. Johnson.
Howard M. Nelson
S. T. Adams
Nils A. Lennartson
John P . Weitzel
._....
Fred C. Scribner, Jr
Clarence 0 . Tormoen.
Dan Throop Smith
Laurens Williams
Eugene E. Oakes
Robert P. Mayo
Under Secretary.
Assistant Secretary.
Assistant Secretary.
Assistant to the Assistant Secretary.
Assistant to the Assistant Secretary.
Fiscal Assistant Secretary.
Assistant to the Fiscal Assistant Secretary.
Technical Assistant to the Fiscal Assistant Secretary.
Technical Assistant to the Fiscal Assistant Secretary.
Technical Assistant to the Fiscal Assistant Secretary.
Head, Fiscal Service Operations and Methods Staff.
Assistant to the Secretary.
Special Assistant to the Secretary.
Under Secretary.
Assistant Secretary.
Assistant to the Secretary.
Assistant to the Secretary.
Technical Assistant to the Secretary for Enforcement.
Assistant to the Assistant Secretary.
Aide to the Assistant Secretary.
Administrative Assistant Secretary.
Director of Administrative Services.
Assistant Director of Administrative Services.
Chief, Buildiags Surveys Division.
Acting Chief, Office Services Division.
Budget Officer.
Assistant Budget Officer.
Director of Personnel.
Assistant to the Secretary (for public affairs).
Assistant to the Under Secretary.
General Counsel.
Assistant to the Secretary and Personnel Security Officer.
Special Assistant to the Secretary in Charge of Tax Policy.
Assistant to the Secretary (for Tax Legislation).
Chief, Tax Division, Analysis Stafl.
Chief, Debt Division, Analysis Staff.
OFFICE OF T H E GENERAL COUNSEL
Fred C. Scribner, Jr
Elting Arnold
i
John K. Carlock
Charles R. McNeill
_.
John Potts Barnes
Laurens Williams
Raphael Sherfy
Frederick C. Lusk
Robert R. Moodie
Hugo A. Ranta
Lawrence Linville.
Kenneth S. Harrison
Trevor V. Roberts
Robert Chambers
Edwin F. Rains
John Potts Barnes
Elting Arnold
Alfred L. Tennyson
Thomas J. Winston, Jr
George F. Reeves
General Counsel.
Assistant General Counsel.
Assistant General Counsel.
Assistant General Counsel.
Assistant General Counsel.
Head, Legal Advisory Stafl (Assistant to the Secretary).
Associate Head, Legal Advisory Stafl.
Assistant Head, Legal Advisory Stafl.
Assistant Head, Legal Advisory Stafl.
Assistant to the General Counsel.
Special Assistant to the General Counsel.
Chief Counsel, U. S. Coast Guard.
Chief Counsel, Office of the Comptroller of the Currency.
Chief Counsel, Bureau of Customs.
Chief Counsel, Foreign Assets Control.
. . Ohief Counsel, Internal Revenue Service.
Chief Counsel, Office of International Finance.
Chief Counsel, Bm-eau of Narcotics.
Chief Counsel, Bureau of the Public Debt.
Chief Counsel to the Fiscal Assistant Secretary.
OFFICE OF INTERNATIONAL FINANCE
George H. Willis
Charles Dillon Glendinning
Elting Arnold
Director.
Deputy Director and Secretary, National Advisory Council.
Acting Director, Foreign Assets Control.*
OFFICE OF THE COMPTROLLER OF THE CURRENCY
Ray M. Gidney
L. A. Jennings
W. M. Taylor
G. W. Garwood
H. S. Haggard
.
Comptroller ofthe Currency.
First Deputy Comptroller of the Currency.
Second Deputy Comptroller of the Currency.
Third Deputy Comptroller of the Currency.
Chief National Bank Examiner.
Xin
XIV
PRINCIPAL ADMINISTRATIVE AND STAFF OFFICERS
BUREAU OF CUSTOMS
Ralph Kelly
David B. Strubinger
W. R. Johnson
Walter G. Roy
C. A. Emerick
Lawton M. King
B. H. Fliim
W. E. Higman
J. W. Gulick
J. F . Williams
Commissioner of Customs.
Assistant Commissioner of Customs.
Special Assistant to the Commissioner.
Deputy Commissioner of Appraisement Administration.
Deputy Commissioner of Investigations.
Deputy Commissioner of Management and Controls.
._ Chief, Division of Entry, Value and Penalties.
Chief, Division of Classification and Drawbacks.
Chief, Division of Marine Administration.
Chief, Division of Technical Services.
BUREAU OF ENGRAVING AND P R I N T I N G
Henry J. Holtzclaw
Director, Bureau of Engraving and Printing.
BUREAU OF ACCOUNTS (IN T H E FISCAL SERVICE)
Robert W. Maxwell
Gilbert L. Cake
Harold R. Gearhart
Sidney S. Sokol
Samuel J. Elson...:
Edmund C. Nussear
Wallace E. Barker, Jr
Julian F. Cannon
Charles O. Bryant..
Maurace E. Roebuck.
George Friedman
Stephen P. Gerardi
. Commissioner of Accounts.
Associate Commissioner.
_ Deputy Commissioner—Central Accounts.
_-. Deputy Commissioner—Accounting Systems.
Deputy Commissioner—Central Reports.
Deputy Commissioner—Deposits and Investments.
Assistant Commissioner for Administration.
Chief Disbursing Officer.
Assistant Chief Disbursing Officer.
Assistant Chief Disbursing Officer.
Stafl Assistant to the Commissioner.
_.. Executive Assistant to the Commissioner.
BUREAU OF T H E PUBLIC D E B T (IN T H E FISCAL SERVICE)
Edwin L. Kilby
Donald M. Merritt
Ross A. Heffelfinger, Jr
Charles D. Peyton
Commissioner of the Public Debt.
Assistant Commissioner.
Deputy Commissioner in Charge, Washington Office.
Deputy Commissioner in Charge, Chicago Office.
OFFICE OF T H E TREASURER OF T H E U N I T E D STATES (IN T H E FISCAL SERVICE)
Ivy Baker Priest
Edmund Doolan
William T. Howell
Treasurer of the United States.
Deputy and Acting Treasurer.
Assistant Deputy Treasurer.
I N T E R N A L REVENUE SERVICE
Vacancy!
0 . Gordon D e l k . . . .
Harrell T. V a n c e . . . . .
Vernon D. Acree
Harry J. Trainor
Richard W. Nelson
Justin F. Winkle
Leo Speer
John Potts Barnes
George C. Lea
:
Commissioner of Internal Revenue.
Deputy Commissioner.
Assistant Commissioner (Administration).
Acting Assistant Commissioner (Inspection).
Assistant C ommissioner (0 perations).
Acting Assistant Commissioner (Planning).
Assistant Commissioner (Technical).
Technical Advisor to the Commissioner.
Chief Counsel.
Director of Practice.
BUREAU OF T H E M I N T
William H. Brett...
Leland Howard
Director of the Mint.
Assistant Director.
BUREAU OF NARCOTICS
Harry J. Anslinger
George W. Cunningham.
Benjamin T. Mitchell
Commissioner of Narcotics.
Deputy Commissioner.
Assistant to the Commissioner.
U N I T E D STATES COAST GUARD
Vice Admiral Alfred C. Richmond
Commandant, U. S. Coast Guard.
Rear Admiral James A. Hirshfield
Assistant Commandant and Chief of Staff.
Captain L E. Eskridge
Deputy Chief of Staff.
Rear Admiral Kenneth K. Cowart
Engineer in Chief.
Rear Admiral Halert C. Shepheard
Chief, Office of Merchant Marme Safety.
Rear Admiral Henry C. Perkins
Chief, Office of Operations.
Rear Admiral William W. Kenner
Chief, Office of Personnel.
Captain Charles B. Arrington
Comptroller.
! 0 . Gordon Delk served as Acting Commissioner of Internal Revenue from November 1, 1955, to
December 4, 1955. Russell C. Harrington was appointed Commissioner on December 5, 1955.-
PRINCIPAL ADMINISTRATIVE AND STAFF OFFICERS
U N I T E D STATES SAVINGS BONDS DIVISION
Earl 0 . Shreve
Bill McDonald
James J. Newman
Arthur B. Hill.
Mildred C. Ahlgren
National Director.
Assistant National Director.
Assistant to the National Director.
Assistant to the National Director.
Assistant to the National Director.
U N I T E D STATES SECRET SERVICE
U. E. Baughman
Carl Dickson
Harry E. Neal
George W. Taylor
Chief, U. S. Secret Service.
Assistant Chief.
Executive Aide to the Chief.
Administrative Officer.
TREASURY M A N A G E M E N T C O M M I T T E E
William W. Parsons..
John K. Carlock
William T. Heffelfinger.
Gilbert L. Cake
L.A.Jennings
David B. Strubinger
Harrell T. Vance
:
Leland Howard
George W. Cunningham
.
Harold T. Mason
Ross A. Heffelfinger, Jr
William T. Howell
Rear Admiral James A. Hirshfield, U.S.C.G.
Bill McDonald
Harry E. Neal
Frank G. Uhler
Chairman.
Member.
Member.
Meniber.
Member.
Member.
Member.
Member.
Member.
Member.
Member.
Member. ,
Member.
Member.
Member.
Member.
TREASURY AWARDS C O M M I T T E E
James H. Stover
S. T. Adams
Willard L. Johnson
Leland Howard
.
Captain I. E. Eskridge, U. S. C. G
John K. Carlock
Martin L. Moore
Malachi L. Harney
Harrell T. Vance..
Lawton M. King
Vacancy
Chairman.
. . . Vice Chairman.
Member.
Member.
Member.
Member.
Member.
Member.
Member.
Member.
Member.
WAGE BOARD
S. T. Adams
Willard L. Johnson
William T. Heffelfinger..
Chairman.
Member.
Member.
I N T E R D E P A R T M E N T A L SAVINGS BOND C O M M I T T E E
Ivy Baker Priest
Chairman.
E M P L O Y M E N T POLICY OFFICER
Willard E. Scott.
XV
•ORGANIZATION OF THE DEPARTMENT OF THE TREASURY-
January 23.1956
X
CHART
1.
1 The General Counsel serves as legal advisor to the Secretary, his associates, and heads of bureaus.
2 The Technical Assistant for Enforcement coordinates enforcement activities of the U. S. Secret Service, U. S. Coast Guard, Bureau of Customs, Bureau of Narcotics, and Internal Revenue Service.
ANNUAL REPORT ON T H E FINANCES
TREASURY DEPARTMENT,
Washington, D. C , February 29,1956.
SIRS : I have the honor to report to you on the finances of the Federal Government for the fiscal year ended June 30, 1955.
In the early months of the fiscal year the American economy was
still in a period of readjustment. Timely tax cuts, flexible monetary
policies, and legislation helpful to the economy in several areas
were of assistance in avoiding more serious dislocations. As the
economy started moving forward on most fronts to new heights of
personal and national prosperity, the vigor of its resurgence brought
new adjustment problems. Treasury debt management policies were
coordinated with Federal Reserve monetary and credit policies, first
to help avoid deflation and later to help avoid inflation.
The value of the dollar has remained constant. This means that
savings are no longer being dissipated through inflation. I t also
means gains in terms of what our people can actually buy with their
increased incomes. Confidence in the value of the dollar has encouraged the steady flow of investment funds needed to flnance the
power and tools required for rising production with its fruits of more
and better job,s, and increasingly higher standards of living for, our
ever-growing population.
The flnancial principles we have adopted as our guides are simple
but vital ones. They include (1) a Federal budget that is under control, (2) appropriate reductions both in our debts and our tax burden,
but only as they are justifled, and (3) a continued smooth meshing
of the Government's debt management and flexible monetary policies.
A full report on the Treasury's operations during the 1955 flscal
year follows.
G. M.
HUMPHREY,
Secretary oj the Treasury.
To THE PRESIDENT OF THE SENATE.
To
THE
SPEAKER OF THE H O U S E OF REPRESENTATIVES.
356812—56
REVIEW
OF FISCAL
OPERATIONS
Summary of Fiscal Operations
Budget expenditures of the Federal Government in the flscal year
1955 were $4.2 billion more than net budget receipts. This deflcit,
together with a decline in the Treasurer's cash balance of $0.6 billion
and an excess of receipts in trust account and other transactions of
$0.5 billion, resulted in an increase in the public debt of $3.1 billion.
The cash balance in the account of the Treasurer of the United States
on June 30, 1955, amounted to $6.2 billion compared with $6.8 billion
a year earlier. The public debt outstanding on June 30, 1955,
amounted to $274.4 billion .compared with $271.3 billion on June 30,
1954.
Expenditures in 1955 were $3.2 billion less than in 1954 and $9.7
billion less than in 1953. Net receipts in 1955 were $4.3 billion less
than in 1954 when receipts were nearly equal to those of 1953, the
highest on record up to the present time. The revenues of 1953iand
1954 reflected the higher tax rates of those earlier years.
A reconciliation of the budget results and the change in the public
debt for the flscal years 1954 and 1955 is given in the table which
follows.
Budget results:
Netreceipts...
Expenditures..
Budgetdeficit..
Less:
Account of the Treasurer of the United States, increase in balance, or decrease (—)
Trust account and other transactions, excess of receipts (—) i
Equals: Increase in public debt..
*Less than $50 million.
1 Includes net trust account transactions, etc.; net investments of trust accounts and Govemment agencies
in public debt securities; net sales or redemptions of obligations of Government corporations and agencies
in the market; changes in clearing and other accounts necessary to reconcile to Treasury cash; and changes
in amount of cash held outside the Treasury.
For 1956 there are estimated net budget receipts of $64.5 billion
and for 1957, of $66.3 billion, which average a little above the level
in 1953 and 1954. Estimates of expenditures in 1956 and 1957 in the
1957 Budget are $64.3 billion and $65.9 billion, on average slightly
above those in 1955. Thus for both 1956 and 1957 a small budget
surplus is indicated. A summary for 1955, 1956, and 1957 is given
under ^'Budget Receipts and Expenditures," and in table 8. Table
10 shows their impact on the public debt.
5
6
1955 REPORT OP THE SECRETARY OF THE TREASURY
THE BUDGET-
CHART
2.
Budget receipts in the second half of the flscal year 1955 were
approximately 63 percent of the total. Within the second half, the
timing of receipts was shifted somewhat from the third quarter to
the fourth, by the change from March 15 to April 15 as the flnal date
for payment of calendar year 1954 taxes by most individual taxpayers
of income taxes not withheld and for the flrst quarter's payments
under declarations of estimated taxes for calendar 1955.
The disparity between receipts in the two halves of flscal 1955
resulted from several factors. These included in the second half
flnal payments of individual income taxes for 1954, and also the
heavier concentration of corporate tax payments due to the accelerated payment schedule prescribed by the Revenue Act of 1950. The
fiscal year 1955 marked the end of this five-year program by which
tax payments by corporations on a calendar year basis were accelerated gradually in the half year following the close of their taxable
year until in 1955 theyj paid] all] of their 1954 tax liabilities in
January-June 1955.
For 1954 and 1955 the table following shows the distribution of
receipts and expenditures within each year.
REVIEW OF FISCAL OPERATIONS
1964
Net
budget
receipts
Period
Net
budget
expenditures
1955
Budget
s u r p l u s , or
deficit ( - )
Net
budget
receipts
Net
budget
expenditures
Budget
s u r p l u s , or
deficit ( - )
I n billions of dollars
July-September
October-December
T o t a l first half
January-March
April-June.
T o t a l second half
T o t a l fiscal y e a r
..
.
..
13.6
12.1
17.1
17.4
-3.5
-5.2
1L7
10.6
16.6
15.0
—4.9
—4.4
25.8
34.5
-8.7
22.3
31.6
—9 3
21.9
17.0
15.5
17.8
6.4
-.8
19.8
18.3
15.7
17.3
4.2
1.0
38.9
33.3
5.6
38.1
33.0
5.1
64.7
67.8
-3.^1
60.4
64.6
—4.2
Beginning in fiscal 1956, as provided by the Revenue Act of 1954, a
changed payment schedule, to go into effect gradually over a period
of five years, will tend to distribute more evenly within each year
corporate tax payments of more than and exclusive of the first
$100,000. Although this schedule applies to less than 5 percent of
the taxable corporations, it is estimated that it will affect about 85
percent of the total corporate liability. Corporations will file a
declaration of estimated tax and make partial payment in the middle
of the ninth month of the current taxable year and again in the
middle of the last month of the year. This means that calendar year
corporations, under the first year's operation of the law, with regard
to their 1955 income, pay an estimated 5 percent of tax in September,
an estimated 5 percent in December 1955, and about 45 percent each
in March and in June 1956. The five-year schedule provides that in
each year the percent of tax liability due in each installment is shifted
back by 5 percent of the tax over $100,000 from March and 5 percent
from June to September and December, respectively, until for the
1959 income year, the payments due in each quarter become approximately 25 percent of the year's tax liability. As the redistribution
proceeds, it will substantially lessen the Treasury's seasonal borrowing
problem.
BUDGET RECEIPTS AND EXPENDITURES
BUDGET RECEIPTS IN 1955
Net budget receipts (total receipts less transfers to the Federal
old-age and survivors insurance trust fund and the railroad retirement
fund, and refunds of receipts) amounted to $60.4 billion in the fiscal
year 1955, $4.3 billion less than the receipts of $64.7 billion in the
fiscal year 1954.
8
1955 REPORT OF THE SECRETARY OF THE TREASURY
Receipts by major sources in the fiscal years 1954 and 1955 are
compared in the following table.
Increase, or decrease (—)
Source
Amount
Percent
In billions of dollars
Individual income tax
Corporation income and excess profits taxes
Excisetaxes...
Employment taxes.
Estate and gift taxes
Customs..
Intemal revenue not otherwise classified
Miscellaneousreccipts.
,
.
Total budget receipts
Deduct:
Transfer to Federal old-age and survivors insurance trust
fund
Transfer to railroad retirement account
Refunds of receipts,:
Net budget receipts
32.4
21.5
10.0
5.4
.9
.6
(*)
31.7
18.3
9.2
6.2
.6
(*)
-.7
-3.3
(*)
(*)
10.7
69.5
4.5
.6
3.4
64.7
5.0
.6
3.4
60.4
-2.3
-15.1
-8.0
14.6
-.9
7.9
-5.1
(*)
(*)
.5
-4.3
11.1
-.7
L4
-6.6
*Less than $50 million.
The drop in corporation income and excess profits taxes was mainly
responsible for the decrease in receipts in 1955. The other major
sources of receipts, the individual income tax and the excises, also
contributed to the decline. The corporation tax decline was about
equally attributable to lower corporate profits and tax legislation.
Tax reductions were responsible for the decrease in the individual
income tax and excise taxes.
Individual income tax.—Receipts from the individual income tax
amounted to $31,650 million in fiscal 1955. This was a decrease of
$733 million from the $32,383 million received in 1954. The decline
was more than accounted for by the fuU-year effect of the 10 percent
across-the-board rate reductions effective January 1, 1954, and the
reductions under the Internal Revenue Code of 1954. The decrease
would have been greater except for the higher levels of income reflected
in the flscal year 1955 receipts.
Corporation income and excess profits taxes.—Receipts from this
source were $18,265 million in flscal 1955, $3,258 million less than
receipts in 1954. Corporation tax receipts in the flscal year 1955 were
largely determined by proflts in the calendar year 1954, which were
substantially less than in the calendar year 1953. The other major
factors accounting for the decline in receipts in flscal 1955 were the
termination of the excess proflts tax on January 1, 1954, and the initial
impact of the tax reductions provided under the Internal Revenue
Code of 1954.
9
REVIEW OF FISCAL OPERATIONS
Excise taxes.—Receipts from taxes comprising the excise tax
category are shown in the table which follows.
1954
1955
Source
Increase, or
decrease (—)
Amount
In millions of dollars
Alcohol taxes
Tobacco taxes
.. .
Taxes on documents, other instruments, and playing cards
Manufacturers'excise taxes
.
Retailers' excise taxes
Miscellaneous excise taxes
Total
Undistributed depositary receipts and
advance payments of excise taxes
Total excise taxes
unclassified
' 2,798
r 1,581
90
'2,689
438
1,937
2,743
1,571
112
2,876
292
1,501
-55
-9
22
187
-146
-435
' 9, 532
9,096
-436
-4.6
r482
115
-368
-76.2
' 10,014
9,211
-804
-8.0
-2.0
-.6
24.5
7.0
-33.4
-22.5
' Revised.
Excise tax receipts amounted to $9,211 million in the flscal year 1955
and were $804 million less than receipts of the previous year. This
large decrease was caused by the reductions in tax rates made by the
Excise Tax Reduction Act of 1954 (68 Stat. 37-42), approved March
31, 1954, effective April 1, 1954. The rate reductions affected receipts
throughout the fiscal year 1955 but only one month of 1954 because
of the normal lag in receipts behind changes in tax liabilities.
Receipts from alcohol and tobacco taxes fell slightly in 1955. The
decline in alcohol tax receipts was attributable primarily to the taxes
on distilled spirits and on fermented malt liquors. Receipts from the
taxes on wines, a relatively unimportant source, showed a small
increase. The decrease in tobacco tax receipts was due to a decline
in consumption of small cigarettes, the main source of tobacco tax
revenue.
Reflecting a substantial rise in activities in the securities markets,
stamp taxes on issues and transfers of securities increased from $83
million in 1954 to $105 million in 1955.
The effect of changes in consumption and tax rates between 1954
and 1955 is obscured in the manufacturers', retailers', and miscellaneous excise tax groups by a change made on July 1, 1953, in the
reporting of collections for most of the taxes in these groups. Since
then tax returns have been filed quarterly instead of monthly, with
the result that amounts reported for 1954 from individual taxes represent an understatement equivalent to about one month's liabilities.
^ Estate and gift taxes.—Estate and gift taxes amounted to $936
million in the fiscal year 1955, virtually unchanged from receipts in
1954.
10
1955 REPORT OF THE SECRETARY OF THE TREASURY
Employment taxes.—The yield of the various employment taxes is
shown in the table which follows.
1954
1955
Source
Increase, or
deca-ease ( - )
Amount
Pe
In millions of dollars
Federal Insurance Contributions Act
Kailroad Retirement Tax Act
Federal Unemployment Tax Act
4,537
603
285
5,340
600
280
802
-3
-5
17.7
—.5
-1.8
Total employment taxes
Deduct:
Transfer to Federal old-age and survivors insurance trust
fund
Transfer to railroad retirement account
5,425
6,220
794
14.6
4,537
603
5,040
599
502
-4
11.1
-.7
285
581
296
103.8
Net employment taxes..
Receipts from the Federal Insurance Contributions Act increased
in the fiscal year 1955 principally as a result of the fi a j e a r effect of
the increase in tax rates effective January 1, 1954, A S a result of
corrections of previous overappropriations to the Federal old-age and
survivors insurance trust fund, approximately $300 million of the
increase in receipts was carried into net budget receipts. The receipts
from the other employment taxes show slight declines.
Customs.—Customs receipts were $606 million in the fiscal year
1955, an increase of $44 million from receipts of $562 million in the
fiscal year 1954.
Miscellaneous receipts.—Miscellaneous receipts increased by $248
million to $2,559 million in the fiscal year 1955. Most of this increase
arose from rents on the outer continental shelf lands which were first
offered for leasing in 1955, and from higher sales of surplus property,
primarily military.
Rejunds oj receipts.—Refunds of receipts amounted to $3,426 million
in the fiscal year 1955, an increase of $49 million over the refunds of
$3,377 million in the fiscal year 1954.
ESTIMATES OF RECEIPTS IN 1956 AND 1957
The Secretary of the Treasury is required each year to prepare and
submit in his annual report to the Congress estimates of the public
revenue for the current fiscal year and for the fiscal year next ensuing
(act of February 26, 1907 (34 Stat. 949)). The estimates of receipts
from taxes and customs for the current and ensuing fiscal years are
prepared in December of each year by the Treasury Department. In
general, the estimates of miscellaneous receipts are prepared by the
agency depositing the receipts in the Treasury. In accordance with
11
REVIEW OF FISCAL OPERATIONS
the practice of previous years the following discussion deals only with
estimates based on existing legislation. The estimates recognize the
substantial advance in business activity, personal income, and
corporate profits between 1954 and 1955. They assume an additional
rise in activity and personal income in 1956.
Net budget receipts amounted to $60,390 million in the fiscal year
1955. As estimated for the ensuing fiscal years, receipts are expected
to increase to $64,295 million in the fiscal year 1956 and decline
slightly to $64,022 million in 1957. The expected rise in incomes
would, by itself, produce a substantial increase in estimated receipts
in 1956 and an additional rise in 1957. However, the effect of the net
change in incomes between 1955 and 1956 is partially offset by the
virtual termination in 1955 of collections under the excess profits tax
and the completion in that year of the principal effect of the acceleration of corporate tax payments. The 1956 receipts are also reduced
somewhat by the reductions in certain excise rates scheduled under
present law for April 1, 1956.
The relatively small decrease in estimated receipts between 1956
and 1957, which comes in the face of an anticipated continued rise in
business activity, is attributable primarily to the 5-point reduction in
the corporate normal tax rate scheduled for April 1, 1956, and the fullyear effect of the excise rate changes which would occur at the same
time under existing law.
Fiscal year 1956
Actual receipts in the fiscal year 1955 and estimated receipts in the
fiscal year 1956 are compared by major sources in the following table.
1955
actual
1956
estimate
Increase,
or
decrease
Source
(-)
In millions of dollars
Individual income tax
Corporation income tax
Excisetaxes
Employment taxes
Estate and gift taxes
Customs
Internal revenue not otherwise classified
Miscellaneous receipts
.
__.
.
Total budget receipts
Deduct:
Transfer to Federal old-age and survivors insurance trust fund
Transfer to railroad retirement account
Refunds of receipts
.
^
Net budget receipts
31,650
18, 265
9,211
6,220
936
606
7
2,559
33, 555
20, 300
9,689
7,420
1,025
690
6
2, 600
1,905
2,035
478
1,200
89
84
-2
-59
69, 454
75,184
5,730
5,040
599
3,426
6,475
625
3,789
1,435
26
363
60, 390
64, 295
3,905
12
1955 REPORT OF THE SECRETARY OF THE TREASURY
Net budget receipts are expected to advance substantially in the
fiscal year 1956, because of the rise in income levels. The total
increase of $3,905 million is largely attributable to individual and
corporate income taxes, although all other major tax receipts sources
wUl also advance moderately. The general rise will be dampened to
some extent by the small initial effect of excise tax reductions scheduled
under present law on April 1, 1956, and by the fact that the 1955 total
was increased abnormally as a result of corrections of previous overappropriations to the Federal old-age and survivors insurance trust
fund.
Individual income tax.—Receipts from the individual income tax are
estimated to be $33,555 million in the fiscal year 1956, an increase of
$1,905 million over actual receipts of $31,650 million in the fiscal year
1955. The increase is estimated on the basis of the expected rise in
levels of income.
Corporation income tax.—Corporation income tax receipts in the
fiscal year 1956 are estimated to amount to $20,300 million, $2,035
million above the fiscal year 1955 collections. Profits in the calendar
year 1955, which will largely determine receipts in the fiscal year 1956,
are estimated to have increased substantially over earnings in 1954.
The rise in tax revenues accompanying higher earnings, however, will
be substantially offset by two additional factors. The more important
of these is the termination of the increase in fiscal year receipts resulting from year-by-year acceleration of corporation installment payments required under the Revenue Act of 1950. The second offsetting
factor is the virtual absence of any collections in the fiscal year
1956 from the excess profits tax, which was terminated on December
31, 1953; some revenue from this source was received in the fiscal year
1955.
Acceleration of corporate tax payments is continued by the Internal
Revenue Code of 1954, through the declaration and payment of estimated tax on current income. However, in contrast to the 1950
Revenue Act, which for calendar year corporations had the effect of
moving payments forward from one fiscal year to the preceding year,
the acceleration of payments by such corporations under the 1954 act
does not result in the movement of installments from one fiscal year to
another. Since most corporations file calendar year returns, fiscal
year receipts will not be appreciably affected by the current acceleration of payments.
Excise taxes.—Receipts from this source by major groups are listed
in the table which follows.
13
REVIEW OF FISCAL OPERATIONS
1955
actual
1956
estimate
Increase,
or
decrease
Source
(-)
I n millions of dollars .
Alcoholtaxes
T o b a c c o taxes
T a x e s o n d o c u m e n t s , o t h e r i n s t r u m e n t s , a n d p l a y i n g cards
M a n u f a c t u r e r s ' e x c i s e taxes
.. .
R e t a i l e r s ' excise taxes
..
Miscellaneous excise taxes
.
U n d i s t r i b u t e d d e p o s i t a r y receipts a n d unclassified a d v a n c e p a y m e n t s of excise taxes
T o t a l excise taxes
2,819
1,550
107
3,236
316
1,561
76
—21
—5
360
24
60
115
100
-15
9, 211
9,689
478
2,743
1,571
112
2,876
292
1,501
Excise tax receipts are expected to increase from $9,211 million in
the fiscal year 1955 to $9,689 million in the fiscal year 1956. The
increase, reflecting higher levels of business activity and personal
income, would be somewhat larger except for the rate reductions
scheduled under present law effective April 1, 1956. These affect
most of the important sources in the alcohol, tobacco, and manufacturers' excise tax groups.
Virtually all of the individual excise taxes are expected to increase
in 1956; however, about three-fourths of the overall increase occurs
in the manufacturers' excise tax group, principally because of the
large gains estimated in receipts from the various automotive taxes.
Employment taxes.—The yield of the employment taxes is shown in
the following table.
,1955
actual
1956
estimate
Increase,
or
decrease
Source
(-)
I n millions of dollars
6,475
320
625
1,135
40
25
6,220
7,420
1,200
5,040
599
6,475
625
1,435
26
581
320
-261
Federal Insurance Contributions Act . .
F e d e r a l U n e m p l o y m e n t T a x Act
Railroad Retirement Tax Act
5,340
280
600
T o t a l e m p l o y m e n t taxes
. . Deduct:
Transfer to F e d e r a l old-age a n d s u r v i v o r s i n s u r a n c e t r u s t f u n d . .
Transfer to railroad r e t i r e m e n t accouTit. . .
N e t e m p l o y m e n t taxes
The increase in receipts from the Federal Insurance Contributions
Act reflects higher income levels, the increase in coverage, and an
increase in the maximum amounts subject to tax from $3,600 to
$4,200 a year. The increase in receipts from the Federal Unemployment Tax Act arises from the elimination of quarterly installment
payments, resulting in a bunching of receipts in the flscal year 1956.
Estate and gijt taxes.—Receipts from estate and gift taxes are esti-
14
1955 REPORT OF THE SECRETARY OF THE TREASURY
mated to be $1,025 million in the flscal year 1956, an increase of $89
million, reflecting recent increases in security values.
Customs.—Customs receipts are estimated to amount to $690 million
in the flscal year 1956, $84 million above the amount collected in the
flscal year 1955, as an expected result of higher business actiyity.
Miscellaneous receipts.—Receipts from miscellaneous sources are
estimated to be $2,500 million in the flscal year 1956 as compared with
$2,559 million in the fiscal year 1955.
Rejunds oj receipts.—Refunds of receipts are estimated to be $3,789
million in the fiscal year 1956 as compared with $3,426 million in the
fiscal year 1955.
Fiscal year 1957
Estimated receipts in the fiscal years 1956 and 1957 are compared
by major sources in the following table.
1956
estimate
1957
estimate
Increase,
or
decrease
Source
(-)
In millions of dollars
Individual income tax
Corporation income tax..
Excisetaxes
__
Employment taxes
.___...
Estate and gift taxes
Customs
Internal revenue not otherwise classified
Miscellaneous receipts
,
.
Total budget receipts
Deduct*:
Transfer to Federal old-age and sm-vivors insurance trust fund
Transfer to railroad retirement account
Refunds of receipts...
Net budget receipts
33, 555
20,300
9,689
7,420
1,025
690
5
2,500
35,118
19, 080
8,960
7,585
1,120
700
5
2,800
1,663
-1, 220
-729
165
95
.10
75,184
75, 368
184
6,475
625
3,789
6,635
660
4,051
160
35
262
64, 295
64,022
-273
300
Net budget receipts on the basis of present law are estimated to
decline slightly in the fiscal year 1957. Receipts of $64,022 million
for the year are $273 million less than in 1956. Substantial decreases in the corporation income tax and in excise taxes reflecting
rate reductions scheduled under present law for April 1, 1956, are
expected to be largely offset by advances in all other major revenue
sources.
Individual income tax.—Receipts from the individual inconie tax are
estimated to increase to $35,118 million in the flscal year 1957. This
increase of $1,563 million over the estimated receipts of $33,555
million in the flscal year 1956 reflects the expected continued rise in
levels of income.
Corporation income tax.—Receipts from the corporation income tax
are estimated to amount to $19,080 million in the flscal year 1957.
REVIEW OF FISCAL
15
OPERATIONS
This is $1,220 million less than in the flscal year 1956. Under present
law the corporation normal tax is scheduled to be reduced by 5
percentage points, effective April 1, 1956.
Excise taxes.—Receipts from this source by major groups are listed
in the following table.
Source
1956
estimate
1957
estimate
Increase,
or
decrease
(-)
In millions of dollars
Alcohol taxes
Tobacco taxes
.
_ .
Taxes on docu ments, other instruments, and playing cards
Manufacturers' excise taxes...
Retailers' excise taxes
Miscellaneous excise taxes
Undistributed depositary receipts and unclassified advance payments of excise taxes
Total excise taxes
2,819
1,550
107
3,236
316
1,661
2,783
1,448
107
2,583
323
1,616
100
100
9,689
8,960
—36
—102
—653
7
55
—729
Excise tax receipts under present law are estimated to amount
to $8,960 million in 1957. Because of the expected rise in business
activity and personal income, receipts from excise taxes would increase
between the fiscal years 1956 and 1957. However, because of the
full-year effect of the rate reductions scheduled under present law
for April 1, 1956, as compared with the part-year effect of these reductions in the fiscal year 1956, excise tax receipts are estimated to decline
by a net amount of $729 million.
The decreases estimated for the alcohol, tobacco, and manufacturers'
groups reflect the eft'ect of the rate reductions scheduled under present
law on the most important revenue sources in these groups. Increases
are expected in the retailers' excise taxes which are unaffected by rate
changes and in the miscellaneous excise tax group where the effect of
rate changes is of minor signiflcance.
Employment taxes.—^The details of the yield of the employment
taxes are shown in the table which follows.
Source
1956
estimate
1957
estimate
Increase,
or
decrease
(-)
In millions of dollars
Federal Insurance Contributions Act
Federal Unemployment Tax Act
Railroad Retirement Tax Act
,
6,475
320
625
290
660
160
-30
35
Total employment taxes
..
Deduct:
Transfer to Federal old-age and survivors insurance trust fund
Transfer to railroad retirement account
7,420
7,685
165
6,475
625
6,635
660
160
35
320
290
-30
Net employment taxes—
16
1955 REPORT OF THE SECRETARY OF THE TREASURY
The increase in receipts from the Federal Insurance Contributions
Act is based on the estimated continued rise in levels of salaries and
wages subject to tax. Receipts from the Federal Unemployment Tax
Act are estimated to be lower in the flscal year 1957 than in the flscal
year 1956 because of the bunching of receipts in the flscal year 1956
as a result of the elimination of installment payments.
Estate and gijt ^aa;6S.—Receipts from estate and gift taxes, reflecting
current security values, are estimated to be $1,120 million in the
fiscal year 1957, an increase of $95 million.
Customs.—Customs receipts are estimated to increase slightly to
$700 million in the fiscal year 1957.
Miscellaneous receipts.—Receipts from miscellaneous sources are
estimated to increase to $2,800 million in the fiscal year 1957, primarily
as a result of an anticipated repayment of silver bullion advanced to
our allies in World War II.
Rejunds oj receipts.—Refunds of receipts are estimated to amount
to $4,051 million in the fiscal year 1957, an increase of $262 million
above the $3,789 million estimated for the previous year. The largest
portion of the increase results from estimated refunds on floor stocks
under certain excise taxes which are now scheduled to be reduced in
rate on April 1, 1956.
BUDGET EXPENDITURES IN 1955
The total of $64.6 billion of net budget expenditures in the fiscal
year 1955 continued the reductions in expenditures set in motion in
the calendar year 1953. Expenditures were $3.2 billion less than those
in 1954 and $9.7 billion less than the post-World War II peak in fiscal
1953. Annual expenditures beginning with 1948, with the three preKorean action years shown as an average, are given in the foUowing
table. Details of these figures, as well as those for earlier years, are
shown in tables 2, 3, and 6 of the tables section of this report.
Major
national
security i
Fiscal year
International
affairs
and
finance
Interest
Veterans'
services
and
benefits
Other
Adjustment to
daily
Treasury
statement
basis
Total
In billions of dollars
1948-50 average
1951
1952
1953
1954
1955
. -
12.6
22.4
44.0
50.4
46.9
40.6
5.1
3.7
2.8
2.2
1.7
2.2
5.5
5.7
5.9
6.6
6.5
6.4
6.7
5.3
4.9
4.3
4.3
4.5
7.5
7.5
8.7
10.8
. 8.4
10.9
-fO.2
-.7
-.9
37.4
44.1
65.4
74.3
67.8
64.6
NOTE.—The classification in this table is taken from the 1957 Budget document. The figures beginning
with 1953 are on the same reporting basis as the "Monthly Statement of Receipts and Expenditures of the
United States Government." See "Bases of Tables."
1 Includes principally military functions of the Defense Department, military assistance. Atomic Energy
Commission, acquisition of strategic and critical materials under the General Services Administration, and
defense production expansion.
17
REVIEW OF FISCAL OPERATIONS
As throughout the period since the end of the war, both volume and
major changes were centered in outlays for major national security,
which were $6.3 billion below those in 1954 and $9.7 billion below
those in 1953. In 1955 they represented 63 percent of the total compared with 69 percent in 1954 and Q8 percent in 1953. Most of the
1955 reduction was in expenditures for Army military functions,
although expenditures for military assistance and Navy functions also
were substantially lower. Air Force expenditures again increased.
The increase of $449 million in expenditures for international
affairs and finance to a total of $2.2 billion brought such outlays to
a little more than two-fifths of their average in 1948-50. Veterans'
services and benefits payments totaled nearly $4.5 billion, an increase
of $201 million over 1954 following overall decreases in every other
year since 1949. Compensation and pensions increaseci almost $0.2
billion, and readjustment benefits were up substantially to care for
the veteran population which now numbers 22 million. Effective
June 30, 1955, and covering interest expenditures for the full fiscal
year 1955, the accountuig for and reporting of the interest on the
public debt was changed from a due and payable basis to an accrual
basis. Consequently, although the total of $6.4 billion in 1955 was
about the same as that reported in 1954, the figures for the two years
are not exactly comparable.
Expenditures other than those in the four major categories represent
mainly other domestic programs and the regular operating expenses
of the Government. This type of expenditure rose somewhat to meet
pressing domestic needs. Such expenditures are summarized in the
table which follows.
Fiscal year
Labor
and
welfare
Agriculture
j^and agri- Natural Commerce
and
cultural resources housing
resources
General
government
Total
In billions of dollars
1948-50 average
1951
1962
1953
1954
1955
1.6
2.1
2.2
2.4
2.5
2.6
2.0
.6
LO
2.9
2.6
4.4
0.9
1.1
1.3
L4
1.2
1.1
1.9
2.3
2.7
2.6
.9
L6
1.2
1.3
1.5
L5
1.2
1.2
7.6
7.5
8.7
10.8
8.4
10.9
NOTE.—Expenditures are "net," after allowance for reimbursements to appropriations, receipts of
revolving fund appropriations, and receipts credited to disbursing accounts of Government corporations
and agencies having authority to use collections without deposit into Treasury receipts. For reporting
basis, see "Note" to preceding table.
356812—56
18
1955 REPORT OF THE-SECRETARY OF THE TREASUiRY
The largest single increase among the domestic programs was for
agriculture and agricultural resources, which rose from $2.6 billion in
1954 to $4.4 billion in 1955. The increase was more than accounted
for by a rise of $1.9 billion in the net expenditures of the Commodity
Credit Corporation. In the fiscal year 1954 there was reflected the
sale of about $1.1 billion of certificates of interest against a nationwide
pool of crop loans, which increased the participation by banks in the
crop loan program and gave temporary assistance to the Treasury in
staying below the statutory debt limitation. Most of these certificates, which operate to reduce budget expenditures when they are
issued and to increase expenditures when they are redeemed, remained
in the hands of the lending agencies until their maturity early in the
fiscal year 1955. Later in the fiscal year 1955 (in November 1954)
there was a subsequent sale of such certificates, amounting to about
$1.2 billion. The certificates were redeemable on demand, and, with
changing conditions in the money markets the interest rate originally
placed upon the certificates was not sufficiently attractive to cause
them to be held until their maturity early in the fiscal year 1956.
Consequently, large amounts were redeemed prior to June 30, 1955,
which, together with the redemption of the 1954 certificates in the
early part of fiscal 1955, resulted in a doubling up of expenditures in
the latter year.
Operational changes in two agencies in the group relating to commerce and housing resulted in a change from expenditures of $0.9
billion in 1954 to expenditures of $1.6 billion in 1955. The operations
of the Public Housing Administration, whose expenditures are shown
net of receipts, resulted in net receipts in 1955 of less than $0.1 billion
as compared with $0.4 billion in 1954. This was principally the net
result both of smaller purchases and smaller repayments of local
housing authority obligations. Contributing also to the overall
change in 1955 were sizable net purchases of mortgages by the Federal
National Mortgage Association against commitments issued before
its reorganization (under the Housing Act of 1954) covering defense,
military, and disaster housing.
ESTIMATES OF EXPENDITURES IN 1956 AND 1957
Actual expenditures for the fiscal year 1955 and estimates for the
fiscal years 1956 and 1957 are summarized in the following table.
Further details wiU be found in table 8. The estimates are based
upon figures submitted to the Congress in the Budget for 1957.
19
REVIEW OP FISCAL OPERATIONS
Actual hudget expenditures for the fiscal year 1955 and estimated expenditures for
1956 and 1957
[In millions of dollars.
O n basis of 1957 B u d g e t d o c u m e n t ]
1955
actual
Legislative b r a n c h . .
T h e Judiciary
A g r i c u l t u r e D e p a r t m e n t (including C o m m o d i t y C r e d i t C o r p o r a t i o n ) .
A t o m i c E n e r g y Commission
Civil Service Commission
Commerce Department
Defense D e p a r t m e n t :
M i l i t a r y functions
Civil functions
E x p a n s i o n of defense p r o d u c t i o n
E x p o r t - I m p o r t B a n k of W a s h i n g t o n
F a r m Credit Administration
General Services A d m i n i s t r a t i o n
H e a l t h , E d u c a t i o n , a n d Welfare D e p a r t m e n t
._
H o u s i n g a n d H o m e F i n a n c e Agency
Interior D e p a r t m e n t
.
Justice D e p a r t m e n t
'.
Labor Department
M u t u a l security:
M i l i t a r y assistance a n d direct forces s u p p o r t
O t h e r m u t u a l security p r o g r a m s
P o s t Office D e p a r t m e n t
State Department
Tennessee Valley A u t h o r i t y
Treasury Department:
Interest on the public debt
_.
Other
Veterans' Administration
Reserve for contingencies
Allother
N e t budget expenditures..
1956
estimate
1957
estimate
65
30
4,636
1,857
47
1,077
37
3,653
1,715
263
1,298
123
41
, 3, 661
1,946
316
1,428
35, 632
548
142
a 101
66
973
1,993
153
515
182
394
34, 675
602
238
a 86
46
658
2,132
19
667
219
469
35, 547
629
43
a 100
27
556
2,303
a 67
616
218
492
2,292
1,927
356
137
172
2,464
1,726
483
154
39
2,500
1,792
117
167
a 27
382
811
4,732
100
487
7,000
942
4,820
225
661
64, 570
64, 270
66,865
6,370
430
4,405
a Excess of credits ( d e d u c t ) .
TRUST ACCOUNT AND OTHER TRANSACTIONS
Financial transactions of Federal agencies, other than those affecting
budget receipts and expenditures of the Government and those relating
to the public debt, are reported in the Monthly Statement of Receipts
and Expenditures of the United States Government in three separate
tables. Monthly data for each of these classifications, described in
the following paragraphs, for the fiscal year 1955 and comparative
totals for the fiscal years 1954 and 1955 will be found in table 5.
Annual transactions for the fiscal years 1947 through 1955, with net
totals of the three major classifications, are shown in table 7.
Trust accounts, etc.—This table includes transactions in the trust
accounts maintained in the Treasury, pursuant to law, for the benefit
of individuals or classes of individuals. Payments from general fund
appropriations to certain trust accounts are mcluded as receipts under
the respective trust accounts. The receipts and expenditures of the
majority of trust accounts are reported on a gross basis, exclusive of
transactions relating to the purchase or sale of public debt securities
for investment purposes. While the investment transactions of a fund
affect the cash balance thereof, they merely represent an exchange of
assets and are therefore excluded from the operating program of the
20
1955 REPORT OF THE SECRETARY OF THE TREASURY
fund. Transactions in certain trust accounts of a revolving fund or
working fund nature are reported net. Also included in this table,
and reported on a net basis, are deposit fund accounts covering deposits with the Treasurer of the United States subject to refund or
withdrawal by the depositors, and unidentified receipts of Government
agencies held subject to administrative or legal determination as to
their final disposition. During the fiscal year 1955, the trust and
deposit account transactions resulted in an excess of credits or net
receipts in the amount of $882 million.
Sales and redemptions of obligations of Government agencies in market
(net).^—This table shows the net sales or redemptions, by face
amounts, of securities issued by certain Government corporations and
agencies in the market, classified as to securities guaranteed and those
not guaranteed by the United States. As financing operations of the
agency or funds involved, these transactions are excluded from the
figures relating to the programs of the funds. The bulk of the transactions reported in this table are in nonguaranteed obligations. Except
for debentures issued by the Federal Housing Administration, activity
in guaranteed obligations is relatively small. During the fiscal year
1955, transactions reported in this table showed net sales of $881
million.
Investments of Government agencies in public debt securities (net) .^—
This table shows the net investments in public debt securities by
certain Government agencies and funds, by trust accounts, whoUy
owned Government corporations and agencies, and Governmentsponsored corporations. These transactions are also in the nature of
financing operations in that the temporary investment of excess funds
or the redemption of such securities does not affect the budget program
of the fund involved. During the fiscal year 1955, net purchases of
securities araounted to $1,532 million.
ACCOUNT OF THE TREASURER OF THE UNITED STATES
The cash assets held in the account of the Treasurer of the United
States consist of gold, silver, paper currency, coin, unclassified collection items, and balances in Federal Reserve Banks and other depositary banks. The liabilities consist of outstanding Treasurer's checks,
balances to the credit of the Board of Trustees of the Postal Savings
System, and uncollected items, exchanges, etc. The resultant difference between the cash assets and liabilities constitutes the balance
in the account of the Treasurer, sometimes referred to as the '^General
Fund Balance." Details of assets and liabilities are shown under the
caption "Account of the Treasurer of the United States" in the Daily
1 Thefiguresin this table differ from those published in the daily Treasury statement because of differences in the reporting bases. See "Bases of Tables."
REVIEW OF FISCAL OPERATIONS
21
Statement of the United States Treasury. The balance in the Treasurer's account at the close of the fiscal year 1955 amounted to $6,216
million, a decrease of $551 million during the fiscal year.
The net change in the balance in the "Account of the.Treasurer of
the United States" (general fund) during the fiscal year, on the basis
of the Daily Statement of the United States Treasury, is accounted for
as follows:
{In millions of dollars)
Balance June 30, 1954
.__
Add:
Net deposits
67, 769
Certain public debt redemptions included as cash
withdrawals below ^
821
Net increase in gross pubhc debt
3,115
Total
Deduct:
Cash withdrawals
69, 899
Investments of Government agencies in public debt
securities, net
1,570
Sales (—) and redemptions of obligations of Government agencies in market, net
—679
Accrual of discount on savings bonds and Treasury
biUs
.
___- 1, 465
Balance June 30, 1955
6, 766
71,705
78,471
72, 255
6, 216
1 Represents principally discount included tn savings bond redemptions.
A comparative analysis of the assets and liabilities in the accounts
of the Treasurer of the United States as of June 30, 1954, and
June 30, 1955, is shown in table 51.
The balance in the Treasurer's account as of the end of each month
during the fiscal year ranged from a low of $4,224 million on July 31,
1954, to a high of $7,304 million on November 30, 1954.
PUBLIC DEBT OPERATIONS AND OWNERSHIP OF FEDERAL
SECURITIES
At the close of the 1955 fiscal year the public debt stood at $274.4
billion, a net increase of $3.1 billion during the year.
A summary of changes in the debt during the year is shown in the
accompanying table. As will be noted, the public marketable debt
rose by almost $5 billion, while the nonmarketable debt declined by
$3 billion. The net increase in total public issues plus a $1 billion
net increase in special issues to Government investment accounts
(principally the result of increased issues to the Federal old-age and
survivors insurance trust fund) accounted for practically all of the
increase in the debt outstanding. The increase in the public debt
during the past four decades is illustrated in chart 3.
22
1955 REPORT OF THE SECRETARY OF THE TREASURY
Class of d e b t
J u n e 30,1964 J u n e 30,1966
Increase, or
decrease ( - )
I n billions of dollars
Public debt:
Interest-bearmg:
P u b l i c issues:
M arketable
Nonmarketable
T o t a l p u b l i c issues
Special issues to G o v e r n m e n t i n v e s t m e n t accounts
T o t a l interest-bearing p u b l i c d e b t
M a t u r e d d e b t on w h i c h interest has ceased
D e b t bearing n o interest
._.
Total public debt
-.
G u a r a n t e e d obligations n o t held b y t h e T r e a s u r y
160.4
76.3
166.2
73.3
4.9
—3 0
226.7
42.2
228.5
43.3
1 8
1.0
268.9
.4
1.9
271.7
.6
2.0
2 8
.2
.1
271.3
.1
T o t a l p u b l i c d e b t a n d g u a r a n t e e d obligations
271.3
274.4
(*)
274.4
3.1
(*)
3.1
*Less than $50 million.
THE PUBLIC DEBT
CHART
3.
•Excluding Victory Loan proceeds used to repay debt in 1946.
As indicated in the chart, the debt was reduced after World War I
from a peak of $26 billion in 1919 to a low of $16 billion eleven years
later. After World War II the debt decreased during the calendar
year 1946 by around $20 billion as a result of payoffs out of extraordinarily high cash balances following the Victory Loan. However,
budget surpluses in calendar 1947, 1948, and early 1949 brought the
debt down by $8 billion to a postwar low of $25lK billion by April 30,
REVIEW OF FISCAL OPERATIONS
23
1949. Since then the debt has moved up through June 30, 1955, by
$23 billion, although the rise in the past two fiscal years is considerably
less than it would have been without the substantial cuts which have
been made in Federal spending.
The management of such a huge Federal debt is one of the Treasury's greatest responsibilites. The debt currently represents around
40 percent of the total public and private debt outstanding in the
United States. With the Treasury having to refinance about onequarter of the debt each year in addition to whatever new cash
borrowing is necessary, decisions in its management necessarily have
an important impact on the money market and the entire economy.
Debt management objectives
Important features of the Treasury's debt management program
since January 1953 have been efforts toward lengthening the maturity
of the debt to avoid its becoming concentrated'too heavily in shortterm issues, the distribution of the ownership of the debt as widely
as possible among the various investor groups, and coordination of
Treasury financing operations with Federal Reserve monetary and
credit policies. Its goal has been that public debt management
would contribute neither to inflation nor deflation but.be a constructive influence in the growth of the economy.
Progress toward objectives
During the 1955 fiscal year, progress was made toward the Treasury's debt management objectives. The successful placing of almost
$2 billion in 40-year bonds during the February 1955 refunding and
$6% billion in 8-year 8-month bonds during the December 1954
refunding helped to lengthen the average maturity of the whole
marketable debt from 4 years and 3 months at the end of June 1954
to 4 years and 7 months a year later. This marked the second successive year in which the Treasury has been able to extend the debt,
thus ending a steady postwar decline in average maturity. During
fiscal 1955, the volume of marketable debt coming due within one
year was reduced by $12 billion. By the end of June 1955, the
under-one-year debt represented but 33 percent of the total marketable debt, as compared with 42 percent a year earlier, and 52 percent
in June 1953.
The progress that has been made in lengthening the debt is even
more significant in view of the fact that the mere passage of time
serves to bring more and more of the debt into the short-term area.
The structure of the debt at the end of the 1955 fiscal year is shown
in chart 4.
In addition to the progress being made in gradually lengthening out
the marketable debt, the vigorous promotion of savings bonds to small
investors is helping to bring about a widespread distribution of the
24
1955 REPORT OF THE SECRETARY OF THE TREASURY
STRUCTURE OF THE DEBT, JUNE 30,1955
Nonmarketable
Total
$Bil.
Savings Bonds <
139/4' 4t^EandH
•'i9'/2
200
-^Other
EM-
^^Investrnent
Bonds, etc.
TimetoMaturity:'^
^ S p e c i a l Issues
to Trust Funds
IOO
S5l'/4^
^Wittiin t Year
C H A R T 4.
1 Callable bonds to earliest call date.
debt and thus put the debt on a sounder basis. At the same time this
program is building important financial reserves for the future security
and well-being of our citizens and our country. Sales of Series E and
H savings bonds set another alltime postwar record in fiscal 1955,
with sales running well ahead of redemptions. Cash sales amounted
to $5.2 billion as against redemptions of $4.5 billion. At the end of
the year, there was a record total of $39.3 billion in these bonds outstanding (including accrued interest) and the amount is steadily
growing.
An account of the operations in the public debt and changes in the
ownership of Federal securities during the year is given in the pages
immediately following. Further detail on the debt and its ownership
is given in the exhibits and tables sections of the report.
PUBLIC DEBT
OPERATIONS
The most significant debt operation in fiscal 1955 was the issuance
of the 3 percent 40-year bond in February. It represented the first
long-term bond which had been issued since the spring of 1953, and
the longest-term Treasury bond since the Panama Canal 3 percent
50-year bonds were sold in 1911. An additional cash offering of this
bond was made in July 1955 and, together, these offerings served to
shift $2% billion more of the debt into the long-term area.
The Treasury was able to put out this modest issue of long-term
bonds without adversely affecting business recovery. The 1995
25
REVIEW OF FISCAL OPERATIONS
maturity date was chosen to give the bond wide appeal to such longterm investors as pension trusts and insurance companies. It was
designed to supply a real need for a Treasury issue in an area beyond
the primary demand for mortgage funds. Long-term investment
money was available and the economic situation permitted some
long-term refunding consistent with Federal Reserve credit restraint
policy.
During the earlier part of the fiscal year, when the Federal Reserve
was stiU emphasizing its policy of credit ease to smooth the readjustment to lower levels of Government spending, the Treasury purposely
refrained from putting out any long-term issues which might interfere with the flow of long-term money into mortgages, corporate
securities, and State and municipal bonds. Yet through the issuance
of intermediate-term securities, primarily to banks, the Treasury
was able to continue improving the maturity structure of the debt.
In four out of the five major financing operations in fiscal 1955 (other
than seasonal tax borrowings) investors had the opportunity to buy
securities with over one-year maturities. During the year over $20
billion of marketable Federal debt was issued with maturities beyond
the one-year area (issues maturing 15 months or more from issue
date).
The following tables summarize the major financing operations
during the fiscal year and show the results of the public offerings of
marketable bonds, notes, and certificates of indebtedness.
Public offerings of marketable bonds, notes, and certificates of indebtedness, fiscal
year 1955
[In millions of dollars]
Date of
issue
Description of security and maturity date
Issued for
cash
Issued in
exchange
for other
securities
Total
issued
1954
Apr. 1
Aug. 2
Aug. 15
Aug. 16
Oct. 1
Oct. 4
Aug. 15 3
Dec. 16
Dec. 16
l^i% exchange note—Apr. 1, 1969 i
1% certificate (tax anticipation) Mar. 22, 1955.
lW7o certificate—Aug. 16, 1955
2\i,% bond-Nov. 16, 1960
13'^% exchange note—Oct. 1,1969 i
l^yi% note—May 16, 1957
l \ i % certificate-Aug. 15, 1965
1H% certificate—Dec. 16, 1965
2>i% bond-Aug. 15, 1963
3,734
4,156
2 68
3,668
3,806
4,919
6,369
6,766
3,734
3,668
3,806
99
4,155
4,919
5,369
6,756
1955
Feb.
Feb.
Feb.
Apr.
Apr.
May
15
15
15
1
1
17
1 ^ % note—Mar. 15, 1966
2% note—Aug. 15,1957
3% b o n d - F e b . 15, 1995
1^1% certificate (tax anticipation) June 22,1965..
lW7o exchange note—Apr. 1,1960 i
2% note—Aug. 15,1956
..
Total.
8,472
3,792
1,924
3,210
2,532
13,631
17
3,174
8,472
3,792
1,924
3,210
17
5,706
56, 574
1 Issued only on demand of owners, in exchange for 2% percent Treasury Bonds, Investment Series B1975-80.
2 Amount issued subsequent to June 30,1954.
3 Issued Deceinber 15,1964, additional amount of the issue dated August 16,1954.
26
1955 REPORT OF THE SECRETARY OF THE TREASURY
Disposition of matured marketable bonds, notes, and certificates of indebtedness,
fiscal year 1955
[In mUlions of dollars]
Date of
refundmg or
retirement
Called or matm'ing security
Description and maturity date
Issue date
Redeemed
for cash or Exchanged
carried to
for new
matured
security
debt
Total
Percent
exchanged
1954
Aug.
Aug.
Dec.
Dec.
Dec.
15
15
15
15
15
1955
Feb. 15
Feb. 15
Feb. 15
Mar. 22
May 17
June 22
2%% certificate-Aug. 16, 1964...
2^4% certificate—Sept. 15, 1964...
1%% note—Dec. 15, 1964
2% bond—Dec. 16, 1952-64
2% bond—Dec. 16,1961-65, called
Dec. 15, 1954.
Aug.
Sept.
Dec.
Dec.
Dec.
16,1963
15,1963
1,1963
1,1944
15,1941
56
93
43
243
29
2,733
4,631
8,133
8,418
482
2,788
4,724
8,176
8,662
610
98.0
98.0
99.6
97.2
94.4
m % certificate-Feb. 15, 1966—.
m % note—Mar. 16, 1956
2%% bond—Mar. 16, 1956-60,
called Mar. 16, 1965.
1% certificate (tax anticipation)
Mar. 22, 1965.
m % certificate—May 17, 1955...
1^1% certificate (tax anticipation) June 22, 1955.
Feb. 16,1954
Mar. 15,1950
Mar. 16,1935
106
326
364
6,901
6,040
2,247
7,007
6,365
2,611
98.5
93.9
86.0
Aug. 2,1954
3,734
May 17,1964
Apr. 1,1965
712
3,210
3,174
3,886
3,210
8,914
41,769
60,672
Total
3,734
81.7
In addition to its major offerings of marketable securities, the
Treasury continued its regular weekly offerings of the usual 91-day
Treasury bills. About $1.5 billion in these bills were issued each
week during the year and at the end of the year the amount of biUs
outstanding stood at the same level as at the beginning of the year,
$19.5 billion. . (For further detail on the weeldy bill offerings see
exhibit 6.)
The increasing demand for credit as the year wore on, together with
the shift in Federal Reserve credit policy during the year from credit
ease to credit restraint, was reflected in rising borrowing costs for the
Treasury. I t was particularly evident in the increased rates of
discount on Treasury bill issues, which moved up from about y% of
1 percent at the beginning of the fiscal year to around IK percent by
the close of the year, and it continued to rise during the fall of 1955.
The average annual interest rate as computed on the total interestbearing public debt stood at 2.351 percent on June 30, 1955, as compared with 2.342 percent a year earlier. (For further detail on the
computed annual interest charge and computed annual interest rate
by security classes, see table 43.)
As noted earlier, the public marketable debt went up by almost $5
billion during the year, but a decline of $3 billion in the nonmarketable
debt held the net increase in public issues outstanding to less than
$2 billion. The net decline in nonmarketable securities was due to a
sharp decline in the amount of Treasury savings notes outstanding.
The sale of these notes was discontinued in October 1953 and in-
27
REVIEW OF FISCAL OPERATIONS
vestors in these securities, in effect, have shifted into marketable
holdings. At the close of the 1955 fiscal year, there were only $1.9
billion in Treasury savings notes outstanding, as compared with $5.1
billion a year earlier. (Sales, redemptions, and amounts outstanding
of Treasury savings notes of all series from August 1941 through
June 30, 1955, are shown in table 41.)
Also, during fiscal 1955 investors exchanged $0.2 billion of the 2%
percent, nonmarketable investment Series B-1975-80 bonds for the
.marketable 5-year, Iji percent Treasury notes. Changes in the nonmarketable interest-bearing debt during the year, by types of securities, are shown in the following table.
June 30,
1954
Class of security
June 30,
1966
Increase, or
decrease (—)
In billions of dollars
United States savings bonds:
Series E
Series F a n d G
SeriesH
Series J and K
__
Subtotal, savingsbonds
Treasury savings notes
Treasury bonds, investment series...
Depositary bonds
Total interest-bearing nonmarketable issues
..i.
-.
36.5
19.2
1.0
1.4
37.2
16.6
2.1
2.6
0.7
-2.7
1.1
1.2
58.1
5.1
12.8
.4
58.4
1.9
12.6
.4
.3
—3.2
—.2
76.3
73.3.
(*)
—3.0
•Less than $50 mOlion.
The most important segment of the nonmarketable debt picture is,
of cdurse. United States savings bonds. These bonds are one of the
best securities which the Treasury can use to keep the debt widely
distributed and thus on a sounder basis.
As noted earlier, there was a new postwar record in sales of Series
E and H bonds, the heart of the savings bonds program. At the close
of the year there were $39.3 billion in these bonds outstanding, representing an increase of $1.8 billion during the year.
The combined sales of Series F, G, J, and K savings bonds were $0.4
billion higher in fiscal 1955 than in the previous year, but redemptions
exceeded sales with the net result that the amount outstanding showed
a decline for the year. The growth in E and H bonds, however, more
than offset this decline and the total of all series of savings bonds outstanding at the close of the year rose to a new record high of $58K
billion.
A major factor in the continued growth of savings bonds outstanding
is that savings bondholders in general are relatively long-term savers.
These securities were specially designed, of course, to encourage longterm holdings. I t is only when held for long periods that they make
their maximum contribution to effective debt management.
28
1955 REPORT OF THE SECRETARY OF THE TREASURT
E AND H BONDS, FISCALYEARS l950-'55
CHART
5.
In a nationwide program of the magnitude of the E bond program,
the Treasury has had to face the fact that some people are likely to
cash bonds after relatively short periods of holding, and a substantial
portion of E bonds sold (particularly small denomination bonds) are
turned in within the first year or two.
Experience over the 14-year lifetime of the E bond program, however, has indicated that E bondholders are generally long-term savers,
despite the high scale of early redemptions. The average life of E
bonds sold is estimated to be approximately 7K years. Around $14
billion, over a third, of all E bonds outstanding are now in the extension
period.
The redemptions of savings bonds as a percentage of the total sold,
by yearly series, are summarized in the accompanjdng table. Detailed information on savings bonds from March 1935, when this type
of security was first offered, through June 30, 1955, is given in tables
35 through 40.
REVIEW
OF FISCAL
29
OPERATIONS
Percent of Series E , F , G, H , J , and K savings bonds sold in each year redeemed
through each yearly period thereafter ^
[On basis of Public Debt accounts, see "Bases of Tables"]
K e d e e m e d b y e n d of—
Series a n d calendar year
in w h i c h issued
1 1
^
10
CO
11
CO
00
^
0
0
1
>>
i>>
CO
Series E 2
E-1941
E-1942
E-1943
E-1944
E-1946
E-1946
E-1947
E-1948
E-1949
E-1960
E-1961
E-1952
E-1953
E-1954
3
8
15
19
28
23
21
20
22
26
29
29
28
29
. . .
6
15
24
33
38
34
30
30
34
36
38
39
38
14
10
29
21
41
34
47
41
50
45
46
40
43
37
44
39
40 . 44
46
41
48
44
45
18
35
47
52
64
51
47
47
47
48
23
40
51
56
58
54
50
49
60
27
44
65
60
61
66
62
62
30
48
68
62
63
68
65
34
52
61
64
65
60
40
68
66
68
68
62
68
71
73
67
71
75
70
74
72
20
28
33
31
30
33
24
31
36
34
32
27
34
39
36
68
60
68
97
96
98
Series F a n d G
F-1941
F-1942
F-1943
F-1944
F-1945
F-1946
F-1947
F-1948
F-1949
F-1950
F-1961
F-1952
and
and
and
and
and
and
and
and
and
and
and
and
G-1941
G-1942
G-1943
G-1944
G-1946
G-1946
G-1947
G-1948
G-1949
G-1960
G-1951
G-1952
...
..
1
1
2
2
2
3
3
2
3
3
4
6
3
4
6
6
7
7
8
6
9
9
9
12
5
7
10
10
11
12
12
9
13
11
14
16
7
11
14
14
14
16
17
11
17
15
17
10
14
19
18
18
20
21
13
20
16
13
18
22
21
21
23
24
16
23
16
21
26
25
24
27
28
18
18
24
29
28
27
30
31
Series H
H-1962
H-1963
H-1954
_ _
.
3
3
3
8
8
13
Series J
J-1952
J-1963
J-1964..
2
2
3
6
8
.
14
Series K
K-1952
K-1953. _
K-1954.
2
3
1
6
6
9
NOTE.—The percentages shown in this table are proportions of the value of the bonds sold m any calendar
year which are redeemed before July 1 of the next calendar year, and before July 1 of succeedtug calendar
years. Both sales and redemptions are taken at maturity value.
1 Percentages by denominations may be found in table 40.
2 Similar detail for Series A through E savings bonds may be found in the 1952 annual report, p. 77.
OWNERSHIP OF FEDERAL SECURITIES
At the close of the fiscal year 1955 private nonbank investors held
$136.7 billion of Federal securities, or almost 50 percent of the total
debt outstanding. Private nonbank investors include individuals.
30
1955 REPORT OF THE SECRETARY OF THE TREASURY
insurance companies, nonfinancial corporations and associations,
pension funds, foreign accounts, and State and local governments.
The banking system, that is, commercial banks and Federal Reserve
Banks, held $87.1 billion, or 32 percent of the debt. The remainder
of the debt, $50.5 billion, or 18 percent, was held by the Government's
own investment accounts, social security funds, retirement funds, etc.
During the year holdings by private nonbank investors increased
by $3.4 billion, or by more than the $3.1 billion total increase in the
debt. At the close of the year their holdings were at the highest
level for any June 30. Holdings by Federal Government investment
accounts increased by $1.2 billion during the year. There was practically no net change in commercial bank holdings during the year,
while the Federal Reserve portfoho was down by $1.4 billion.
The following table presents figures on bank and nonbank ownership, together with pertinent detail on the holdings of Federal
securities by the various investor classes. Their holdings as of June 30,
1955, are shown in chart 6.
Ownership of Federal securities by investor classes on selected dates, 194-1-55 ^
J u n e 30,
1941
F e b . 28,
1946 2
J u n e 30,
1964
J u n e 30,
1955
Change
durmg
fiscal
year 1965
A m o u n t s in billions of dollars
Estimated ownership b y :
P r i v a t e n o n b a n k investors:
Individuals 3
Insurance companies.. ^
M u t u a l savings b a n k s
Corporations*
S t a t e a n d local g o v e r n m e n t s
Miscellaneous investors * . .
. .
T o t a l p r i v a t e n o n b a n k in v e s t o r s . . . . . . . _
F e d e r a l G o v e m m e n t i n v e s t m e n t accounts
Banks:
Commercial banks
Federal Reserve B a n k s
Totalbanks
T o t a l gross d e b t o u t s t a n d i n g .
.
11.2
7.1
3.4
2.0
.6
.7
64.1
24.4
11.1
19.9
6.7
8.9
65.0
15.3
9.1
16.4
13.9
13.7
65.3
14.8
8.7
18.8
14.7
14.4
.3
—.5
-.3
2.4
.8
.8
25.0
8.5
135.1
28.0
133.3
49.3
136.7
50.5
3.4
1.2
19.7
2.2
93.8
22.9
63.6
26.0
63.6
23.6
-.1
— 1.4
21.8
116.7
88.7
87.1
— 1.6
65.3
279.8
271.3
274.4
3.1
P e r c e n t of total
P e r c e n t owned b y :
P r i v a t e n o n b a n k investors:
Individuals .
.
Other
Total
F e d e r a l G o v e m m e n t i n v e s t m e n t accounts
Commercial banks
Fed p.ral Resp.rvft B a n k s
., ,
T o t a l gross d e b t o u t s t a n d i n g
20
25
23
25
24
25
24
26
45
16
36
4
48
10
34
8
49
18
24
9
60
18
23
9
100
100
100
100
• Gross public debt, and guaranteed obligations of the Federal Govemment held outside the Treasury.
2 Immediate postwar peak of debt.
3 Includes partnerships and personal trust accounts. Nonprofit institutions and corporate pension trust
funds are included under "Miscellaneous investors." .
4 Exclusive of banks and insurance companies.
5 Includes savings and loan associations, nonprofit institutions, corporate pension trust funds, dealers and
brokers, and investments of foreign balances and international accounts in this country.
31
REVIEW OF FISCAL OPERATIONS
Individuals, the largest single investor group in the Federal debt
ownership structure, held $65.3 billion of the Federal debt on June 30,
1955. Savings bonds accounted for over three-fourths of this total,
with an increase of $1.8 billion in Series E and H savings bonds during
the year, which more than offset a decrease in holdings by individuals
of other series of savings bonds. Individuals' holdings of securities
other than savings bonds, principally marketables, decreased $0.4
billion for the year as a whole. These holdings declined by $1.3
billion in the first half of the fiscal year, but showed a net increase of
$0.9 billion in the last half of the year. A part of this increase can
be attributed to individuals' absorption of the 3 percent bonds of 1995
offered in February.
OWNERSHIP OFTHE DEBT, JUNE 30,1955
TOTAL
Gov't. Invest.
Accounts
Nonbank Investors
Bonks
$Bil.
; 50^2;
P
^Individuals
200
Instiiuiions
IOO
Corps ^
^Coml
AllOlher^
'/.6yii
Federol
/Reserve
;23y2;
C H A R T 6.
Federal securities held by insurance companies at the end of the
fiscal year amounted to $14.8 billion, or a decrease of $0.5 billion
during the year. Slightly more than $9 billion of these securities
were held by life insurance companies. Life insurance companies
again reduced their holdings in 1955, continuing the downward trend
32
1955 REPORT OF THE SECRETARY OF THE TREASURY
of the postwar years as new investment opportunities appeared in the
form of an increased supply of mortgages and corporate securities.
However, their liquidation of $0.4 billion in the fiscal year 1955 was
less than for the previous year.
Federal securities held by fire, casualty, and marine insurance
companies of $5.7 billion on June 30 were $0.1 billion lower than a
year earlier. Federal securities held by these insurance companies
are primarily concentrated in issues with a maturity of less than 10
years.
Mutual savings bank holdings of Federal securities at the end of
the fiscal year stood at $8.7 billion. Like the life insurance companies,
mutual savings banks have been increasing their mortgage and corporate security portfolios since the end of World War I I and liquidating a part of their holdings of Federal securities to aid in financing
this expansion. The decline of $0.3 billion iri fiscal 1955, however,
was less than that in the previous year. For both life insurance
companies and mutual savings banks, the investment in the 3 percent
bonds of February 1995 acted to increase the average length of their
portfolios, the first such increas'e in a number of years. In both
classes their portfolios averaged approximately 9K years to first call
or maturity at the close of the year, which was very little different
from their prewar averages.
Holdings of Federal securities by corporations other than banks
and insurance companies increased by $2.4 billion during the fiscal
year, bringing their holdings to $18.8 billion. This was in sharp
contrast to a decrease of $2 billion in the holdings of these investors
in fiscal 1954. The higher level of corporate profits during the fiscal
year 1955 was a contributing factor in the increase in holdings of
Federal securities, together with the increased attractiveness of yields
of Government securities as compared with those in 1954.
Holdings of Federal securities by State and local governments
amounted to $14.7 billion at the end of the fiscal year 1955, an
increase of $0.8 billion over the preceding June. This was the smallest
annual increase in the holdings by these governmental units since 1951
and resulted from several factors. More of the retirement funds of
State and local governments are now being invested in corporate and
State and local securities; in addition, the decline in the rate of
growth may also indicate that some of the funds, representing temporary investments, are being dispersed at a faster rate. About
one-third of the Federal security holdings of these governmental
units are in State and local government employee retirement funds.
REVIEW OF FISCAL OPERATIONS
33
The holdings of all other private nonbank investors amounted to
$14.4 billion on June 30, 1955, an increase of $0.8 billion. The
largest increase in this category, $0.6 billion, came about as a result of
increased investments in Federal securities by foreign balances.
These investment balances made up nearly $7 billion of the total
holdings of miscellaneous investors at the end of the fiscal year.
Corporate pension trusts accounted for $2^ billion of the total. The
remaining investor classes in this group include savings and loan
associations, nonprofit associations, dealers and brokers, and certain
smaller institutional groups.
Government investment accounts increased their holdings of
Federal securities by $1.2 billion during the year. This was a smaller
increase than has characterized other recent years, primarily reflecting
a slower rate of accumulation by the Federal old-age and survivors
insurance trust fund and a net decrease in the investments of the
unemployment trust fund of over $0.5 billion. Of the $50.5 billion
total held by these accounts, $43.3 billion, or approximately 86
percent, was in the form of special issues held only by these accounts.
Details on the ownership of securities by these accounts are shown
in table 52.
Holdings of Federal securities by commercial banks showed a
decrease of only about $0.1 billion for the year and stood at $63.5
billion on June 30, 1955. Although the overall change was small,
there were substantial shifts in the type of Federal issues held. As
mentioned in the preceding public debt operations section, the
Treasury issued a number of intermediate-term securities in the first
half of the year which were largely absorbed by banks. As a result,
the average length of marketable securities by the banks increased
from 3 years, 8 months to 4 years, 4 months in the year ending June
30, 1955.
The net effect of Federal Reserve Bank open market operations
during the year was reflected in a $1.4 billion reduction in holdings of
Treasury bflls, mostly accounted for by liquidation associated with
the reduction of member bank reserve requirements in the summer of
1954. Shifts in holdings among certifica.tes, notes, and bonds reflected
refunding operations on maturing Federal securities.
An analysis of the estiniated changes in bank versus nonbank
ownership of Federal securities during the fiscal year 1955 is shown,
by type of issue, in the following table.
356812—56-
34
1955 REPORT OF THE SECRETARY OF THE TREASURY
Estimated changes in ownership of Federal securities by type ofissue, fiscal year 1955^
[In billions of dollars]
Change accounted for b y Total
changes
Marketable securities:
Treasury bills
Certificates of indebtedness
Treasury notes
Treasury bonds, etc
:
Total marketable
Nonmarketable securities, etc.:
Tlnited States savings bonds
Treasury savuigs notes
Special issues to Government investment accounts
Treasury bonds, investment series
other
Total nonmarketable, etc
Total change
(*)
Private
nonbank
investors
-4.6
8.8
. .6
3.0
-2.3
6.7
-.2
4.8
6.2
.3
-3.2
.3
-3.1
1.0
-.2
.3
-.2
.3
-1.7
-2.7
3.1
3.4
Government investment
accounts
(*)
(*)
Banks
Total
Commer- Federal
Reserve
cial
.1
.2
-3.0
-2.2
3.0
.7
-1.5
-3.9
4.4
1.0
-1.4
1.7
-1.4
—.3
.2
-1.6
-.1
—1.4
(*)
(*)
(*)
(*)
(*)
(*)
(*)
(*)
(*)
1.0
(*)
(*)
1.2
-1.6
1.0
-.1
-1.4
*Less than $60 million.
1 Gross public debt, and guaranteed obligationslof thellFederal Government heldfoutsidejthe Treasury.
CORPORATIONS AND CERTAIN OTHER BUSINESS-TYPE
ACTIVITIES OF THE GOVERNMENT
Corporations and certain other business-type activities of the
Government finance their lending and other operations from borrowings from the Treasury, by appropriations, by sale of obligations to
the public, or by funds obtained through operations. The Secretary
of the Treasury is authorized not only to purchase obligations of
many of the agencies, but he is also, under certain circumstances,
authorized to approve the terms and conditions of such obligations.
A few of the agencies are exempt from the Government Corporation
Control Act (31 U. S. C. 868) with respect to their borroAvings from
the public but are required to secure approval of the Secretary of the
Treasury or to consult with him before issuance of obligations to the
public. Most Government corporations are required to keep their
checking accounts with the Treasurer of the United States, although,
with the approval of the Secretary of the Treasury, such accounts
may be kept with the Federal Reserve Banks or with private banks
designated as depositaries or fiscal-agents of the United States.
Lending authority of the Reconstruction Finance Corporation was
terminated by the act approved July 30, 1953 (67 Stat. 230), effective
September 28, 1953. Since that time the Corporation has been in
liquidation. The Corporation's activities in recent years have been
financed largely by its capital funds and by borrowings from the
Treasury. Some of its activities of a nonlending character involved
REVIEW OF FISCAL OPERATIONS
35
expenditures not fully recoverable for which the Congress authorized
the cancellation of its notes held by the Treasury, such as the programs
for relief and for defense purposes. A statement showing the notes
canceled under such authorizations and the subsequent cash recoveries
for the fiscal year 1955 and cumulative through June 30, 1955, is
contained in table 82.
.
Advances by the Treasury
The Treasury made advances to Government corporations and
agencies, during the fiscal year 1955, amounting to $16,895.2 mfllion.
Repayments and refundings amounted to $13,583.9 mfllion and cancellations to $5.0 mfllion, resulting in net advances by the Treasury
during the fiscal year of $3,306.3 mfllion. Detafled information relating to holdings, advances, repayments, and refundings wfll be found
in table 76.
Interest on advances by the Treasury
Except in cases where interest rates are fixed by statute, the Treasury adjusts the interest rates on advances to corporations and activities from month to month to take into account the cost which the
Treasury must pay to borrow money in the current market, as reflected by prevafling market yields on United States Government
obligations with maturities corresponding to the approximate duration of the advances used by the agencies for their programs.
A description of Treasury holdings of bonds and notes issued by
Government corporations and agencies, together with the rates of
interest applicable thereto, is shown in table 75.
Borrowing authority and obligations outstanding
The gross borrowing authority of agencies authorized to borrow
from the Secretary of the Treasury was increased by $1,813.1 mfllion ^
during 1955. The Commodity Credit Corporation's borrowing authority was increased by $1,500 mfllion under Public Law 754, 83d
Congress, approved August 31, 1954 (68 Stat. 1047). The next
largest increase in borrowing authority was granted to the ExportImport Bank of Washington in the amount of $500 mfllion, pursuant
to Public Law 570, 83d Congress, approved August 9, 1954 (68 Stat.
678). Table 73 shows the maximum borrowing authority of Government corporations and agencies and the outstanding amounts borrowed from the Treasury by such agencies as of June 30, 1955. Unused borrowing authority of the Government corporations and agencies amounted to $16,705.2 mfllion as of June 30, 1955.
Assets, liabilities, and capital of Government corporations, etc.
The Government corporationsand certain other business-type activities submitting reports to the United States Treasury as of June 30,
1 On final basis for 1964 and 1965.
36
1955 REPORT OF THE SECRETARY OF THE TREASURY
1955, had assets amounting to $57,252.1 mfllion, consisting of $35,114.8
mfllion in loans receivable, $3,475.5 mfllion in commodities, supplies,
and materials, $6,693.7 mfllion in investments, including public debt
obligations of the United States, $7,821.3 mfllion in land, structures,
and equipment, and $4,146.9 mfllion in other assets. The liabflities
of these agencies amounted to $21,522.5 mfllion, including bonds,
debentures, and notes payable amounting to $18,066.5 mfllion, of
which $16,172.3 mfllion was held by the Treasury. Accounts payable,
accrued liabflities, trust and deposit liabflities, and all other liabflities
totaled $3,456.0 mfllion. As of June 30, 1955, the total net investment of the United States Government in these agencies amounted
to $35,161.6 mfllion, consisting of paid-in capital, earned surplus or
deficit, and expended appropriations.
Balance sheets submitted by these Government corporations and
business-type activities are published quarterly and their statements
of income and expense, and of source and application of funds semiannually in the Treasury Bulletin. The balance sheets show the
amount and type of assets, liabflities, Government capital, and
capital which is privately owned. Information from the statements
submitted as of June 30, 1955, wfll be found in table 78, of this
report. A comparative statement of the assets, liabflities, and capital of the Government corporations and certain other businesstype activities as of June 30, 1946-55, is shown in table 77. The
income, expense, and changes in unreserved surplus or deficit for the
fiscal year 1955, appear in table 79. A statement pertaining to the
source and application of funds of the Government corporations and
certain other business-type activities during the fiscal year 1955 is
shown in table 80.
Subscriptions to and repayments of capital stock of Government corporations
The Government-owned capital stock of the Federal National
Mortgage Association was increased during the fiscal year 1955, in
the net amount of $72.8 mfllion to reflect transfer of earned and paidin surplus to the capital account, pursuant to the Federal National
Mortgage Association Charter Act, approved August 2, 1954 (68 Stat.
622). During the fiscal year the Federal Savings and Loan Insurance
Corporation deposited into the Treasury $10.2 mfllion as a repayment
of its capital stock. The production credit corporations, through the
Farm Credit Administration, repaid $0.3 mfllion of their capital into
a revolving fund maintained in the Treasury. A statement showing
transactions relating to capital funds of Government corporations
appears in table 84.
Other payments to the Treasury by Government corporations, etc.
Interest, dividends, and similar payments received by the Treasury
during the fiscal year 1955 from Government corporations and certain
REVIEW OF FISCAL OPERATIONS
37
other business-type activities amounted to $577.7 mfllion. Simflar
payments during the fiscal year 1954 amounted to $359.6 mfllion.
Table 83 shows detafled information concerning these payments.
Guaranteed obligations of Government corporations, etc.
Outstanding obligations guaranteed by the United States amounted
to $44.1 mfllion as of June 30, 1955. Of this amount, $43.3 mfllion
consisted of unmatured obligations issued by the Federal Housing
Administration, and $0.9 mfllion represents matured obligations
issued by the Federal Farm Mortgage Corporation and the Home
Owners' Loan Corporation. Detailed information on these obligations is found in table 23.
SECURITIES OWNED BY THE UNITED STATES GOVERNMENT
On June 30, 1955, the United States Government owned securities
with a net face value of $26,749.5 million. These securities consisted principally of capital stock, bonds, and notes of Government
corporations and business-type activities; securities evidencing loans
to farmers, foreign governments, home owners, railroads, and others;
and securities evidencing United States subscriptions to the International Bank for Reconstruction and Development and to the International Monetary Fund. A statement showing the securities owned
as of June 30, 1955, other than foreign government obligations of
World War I and World War II, appears in table 84, with an explanation of each net increase or decrease during the fiscal year.
TAXATION DEVELOPMENTS
The fiscal year 1955 was a period of varied and significant tax
developments. The Internal Revenue Code of 1954, a major focus of
the Treasury's tax activity during the preceding year, became law on
August 16, 1954. Many of the tax events of 1955 can best be explained
against the background of this basic legislation.
In presenting the tax revision program which culminated in the 1954
Code, the President reserved a number of broad tax areas for future
consideration, to afford both the Congress and the administration
opportunity for further analysis and study. The Treasury pursued
these investigations during the year and in a number of areas made
substantial progress. A variety of steps were taken also to implement
the 1954 legislation-by administrative action, including close scrutiny
of the operation of the law to insure that it was functioning in conformity with congressional intent and was effective in attaining its
objectives.
Throughout the year tax policy was largely prescribed by budgetary
considerations. AJthough substantial progress was made toward a
balanced budget, partly as a result of large expenditure reductions,
38
1955 REPORT OF THE SECRETARY OF THE TREASURY
the budget remained unbalanced and the fiscal year closed with a
deficit of $4.2 billion. The administration was determined to narrow
further the gap between revenues and expenditures in the interest of
responsible management of the Government's finances. In this situation, a compelling consideration with respect lo all taxation issues
was the effect on the Government's revenues. The largest tax reduction in the Nation's history had been enacted in 1954. Further
substantial cuts would have resulted in heavy deficit financing that
might have revived dangerous inflationary pressures. No tax proposal could|.,be recommended, therefore, which would result in a
significant revenue loss.
Corporate income tax and excise tax rate extensions
To move toward a balanced budget the administration requested
the Congress to extend for one year the rates of the corporate income
tax and certain excises. In the absence of such extension the corporate
normal tax rate would automatically have dropped from 30 percent to
25 percent on April 1, 1955, reducing the combined normal surtax
rates from 52 percent to 47 percent. This would have involved a
revenue loss of about $2 billion for a full year. Similarly, the rates
of a group of excises, including those on alcoholic beverages, cigarettes,
gasoline, and automobiles, would automatically have been reduced on
the same date at a revenue cost of approximately $1 billion. The
President recommended a one-year extension of these rates for the
reason that '^Any other course of action would result in either (1) inadequate expenditures for national security, or (2) inflationary borrowing." (See exhibit 19.)
The Congress gave priority to bifls introduced by the chairman and
ranking minority member of the Committee on Ways and Means to
implement this recommendation. As amended by that committee the
bill also included a $20 per capita cut in the individual income tax.
This would have taken about five mfllion taxpayers completely off the
income tax rolls and resulted in a revenue loss of $2.3 billion in a full
year. A tax cut of this magnitude would have constituted a grave
threat to the administration's pohcy of moving in the direction of a
budgetary balance as expeditiously as circumstances permitted. Accordingly, the Treasury opposed the cut vigorously. The amended
bfll, nonetheless, was passed by the House of Representatives by a
margin of five votes. The Treasury continued its opposition before
the Senate, where the income tax cut amendment ultimately was
ehminated. (See exhibits 20 and 21.) The extension of the corporation income and excise tax rates became law on March 30, 1955
(Public Law 18), and the tax rates enacted in 1951 remained in effect
for another year.
REVIEW OF FISCAL OPERATIONS
39
Changes in the 1954 Code
In tax revision as comprehensive as that undertaken in 1954 some
matters of detail are inevitably overlooked. To uncover these situations the Treasury observed closely the operation of the new code as
its provisions began to be put into actual practice by taxpayers. In
addition it carefully combed the new law for matters that might have
been missed while the legislation was being drafted and worked over
by the Congress. This brought to light a number of technical deficiencies in the language of the new law. I t revealed also that two
provisions, relating to prepaid income and reserves for estimated
expenses, were not operating as had been anticipated.
Prepaid income and reserves jor estimated expenses.—Under the 1939
Code, a number of divergencies existed between income computed for
tax purposes and income computed for business purposes. The principal area of difference lay in different requirements as to the time when
items of income and deductions should be taken into account in
computing income.
Business accounting requires accrual method taxpayers to include
income in the period in-^ whicb earned, which is not necessarfly the
period in which it h received. Tax accounting, however, did not
usually permit the deferral of income beyond the period in which it
was received. Similar differences existed in the timing of deductions.
Accrual method taxpayers are required by sound business accounting
rules to charge the income of a given year with all expenses related to
the production of that income. These expenses include estimates of
amounts which relate to the income of the year but which will not actually be disbursed until a subsequent year, as for example, the estimated future costs of fulfilling guarantees on products sold. One
objective of the 1954 Code was to bring accounting for tax purposes
into better alignment with accepted business accounting.
I t was anticipated that during the transition to the new procedures
some revenue loss would result. Taxpayers who had not been estimating certain expenses but had been deducting them as they were
actually disbursed would in the transition year also take their first
deductions for new expenses accrued during that year. Simflarly,
taxpayers who had been reporting prepaid income as received would
now defer such income untfl it was actually earned. I t soon became
evident, however, that the revenue loss would far exceed expectations.
Many taxpayers indicated an intention to estimate expenses for tax
purposes which they had not previously estimated for financial purposes. An ^^all or nothing" clause in the statute prevented taxpayers
from taking advantage of the benefits of these sections for single items
of income or expense without electing them for all items eligible for the
new treatment. Further, the likelihood of litigation was indicated by
40
195 5 REPORT OF THE SECRETARY OF THE TREASURY
differences between the Treasury and some taxpayers as to the type of
items properly included within the scope of these sections.
It became clear that however desirable the objective of aligning tax
accounting with good commercial accounting practice, the revenue
impact was not compatible with existing budgetary conditions. To
protect the revenues and afford the congressional committees and the
Treasury time to consider alternatives, the Treasury recommended
that Congress repeal Sections 452 and 462 of the 1954 Code. (See
exhibit 22.) The bill H. R. 4725, effecting the retroactive repeal,
became Public Law 74 on June 15, 1955.
Minor dejects.—The detailed scrutiny of the new code conducted in
cooperation with the congressional tax staff also uncovered a number'
of minor defects. A list of suggestions for perfecting the new code was
compfled. Some related to misprints, misspelling, and bad punctuation which had no legal significance. Others would have corrected
ambiguous statutory language. This list was reviewed in consultation
with the congressional tax staff. None of the items was found to have
an important effect on the revenues; a substantial number could be
handled administratively. On the basis of this examination, and after
an exchange of letters between the Secretary of the Treasury and the
chairman of the Committee on Ways and Means, it was decided that
the remaining problems did not warrant the injection of remedial
legislation into a crowded congressional calendar.
Cooperatives
One subject deferred for additional study at the time of the 1954
revenue revision was the taxation of cooperatives. This matter was
known to require attention because legislation enacted in 1951 designed to establish a basic policy had not accomplished its purpose.
The subject was excluded from the 1954 tax recommendations because
of its complexity and because it requhed more congressional attention
than appeared avaflable at the time.
The intent of the 1951 legislation was to make all income of cooperatives taxable in the year earned, either to the cooperative itself or to
its members. The income was to be taxed to the cooperative unless
paid in cash or allocated as patronage refunds to patrons or to members.
In the latter case, it would be taxed to the patron.
However, several courts have held that when allocation certificates
issued to patrons have no fair market value they are not properly includible in the taxable income of the patrons when issued. Under
these decisions cooperatives could take current tax deductions for
certificates which are not taxable to the recipients. This would enable
cooperatives to retain earnings indefinitely without either the cooperative or the patrons incurring income tax liabflity.
REVIEW OF FISCAL OPERATIONS
41
Secretary Humphrey described this situation in a letter to the chairman of the Ways and Means Committee on July 26, 1955, and outlined some remedial measures. (See exhibit 23.) He suggested that
cooperatives might be allowed deductions for (a) cash distributions
and (b) noncash allocations issued in such form as would make them
currently taxable to patron-members receiving them. Under this
approach the amount deductible by the cooperative itself would not
exceed the amount currently taxable to the patrons.
To meet the problem which would arise from requiring patrons to
pay taxes currently on noncash allocations, and in the interest of
effective administration, the Secretary suggested consideration of a
withholding arrangement on a basis comparable to the present withholding of income taxes from wages and salaries. The Department
submitted this plan in the expectation that it would not interfere with
the proper financing of cooperatives and woifld insure that all cooperative income is taxed as it is earned, either to the cooperative or
to the member.
In the expectation that the taxation of cooperatives wfll receive
congressional attention at the next session, the Treasury is continuing
to accumulate factual information on the operations of cooperatives.
Retirement funds for the self-employed
Another area deferred for further study in 1954 was the tax treatment of the savings of self-employed persons for retirement purposes.
The self-employed can now provide for their own retirement only
out of taxed income. Employees of corporations or unincorporated
businesses, on the other hand, are taxed on retirement funds provided
by their employers only when they receive these funds after retirement.
These problems have been under study in the Congress and the
executive branch for several years. In 1955 consideration was given
to the bflls, H. R. 9 and H. R. 10, introduced by members of the
Committee on Ways and Means. They permit self-employed persons
and employees not covered by pension plans to postpone tax on a
part of their earned income set aside in specified ways for retirement
purposes. The amounts so excludable would be limited to 10 percent
of earned income, not to exceed $7,500 a year or $150,000 during a
lifetime.
The Committee on Ways and Means held public hearings on these
bifls, and on June 27, 1955, heard Secretary Humphrey present the
Department's views. He did not favor adoption of plans for this
purpose at that time because the substantial costs involved were
incompatible with the Government's budgetary situation. The
Secretary suggested that relief for the retirement income of the self-
42
1955 REPORT OF THE SECRETARY OF THE TREASURY
employed be reconsidered when the budgetary conditions improve.
(See exhibit 24.0
Later in the session the Committee on Ways and Means tentatively
approved a plan covering only the self-employed. The amount of
income which might be excluded for purposes of retirement was
limited to $5,000 a year and $100,000 during a lifetime. However,
the committee decided to hold this matter in abeyance.
Business income from foreign sources
The President's tax revision program, which culminated in the 1954
Code, contained several recommendations designed to insure that
tax considerations do not deter the fiow of American private capital
to different parts of the free world, where it is needed to speed economic
development, improve living standards, and increase international
trade.
Provisions intended to give effect to this policy were contained in
the tax revision bill of 1954 as reported by the Ways and Means
Committee and voted by the House of Representatives. The
principal provisions were subsequently eliminated largely because of
problems encountered in defining foreign business income. The
problem was to restrict the relief provisions to income earned from
significant business activity actually conducted abroad, and exclude
income derived from products manufactured at home and merely
sold for delivery abroad. As a matter of national policy, it would
not be advisable to subsidize exports by taxing profits from exports
at a lower rate than profits from domestic sales.
In deleting the foreign income provisions from the bill, the Senate
Committee on Finance expressed the hope that further consideration
by the conference committee would develop a satisfactory solution.
This, however, did not materialize.
During the past year the Department gave further study to this
problem and developed a revised draft of the proposed legislation
which would limit the tax relief to income derived from the active
conduct of a trade or business abroad and deny it to export trade.
This draft was transmitted to the Committee on Ways and Means
(exhibit 25) and was subsequently incorporated in a bfll, H. R. 7725,
introduced by the chairman of that committee. I t would grant
United States enterprises engaged in business abroad a 14 percentage
point tax reduction as compared with enterprises engaged in business
at home. The rate reduction is equivalent to that available since
1942 to Western Hemisphere trade corporations but the conditions
under which it would apply are different.
1 For Treasury "Report on Plans to Postpone Tax on Income Set Aside to Provide Income for Self-Employed Persons," see "Hearings before the House Committee on Ways and Means on Individual Retirement Act of 1955" (84th Congress, 1st Session), pp. 7-33.
REVIEW OF FISCAL OPERATIONS
43
Another section of the proposed legislation would postpone the
taxation of earnings from branch operations in a foreign country
untfl the earnings are actually withdrawn from that country. Since,
under present law, income from a foreign subsidiary corporation is
taxed only when received by the domestic parent company, this
provision would place branches of United States corporations in
substantially the same tax position as foreign subsidiaries. The
deferral of tax on foreign income untfl it is repatriated would encourage
foreign investment and provide American enterprise abroad greater
freedom in choosing the form of business organization employed.
During the year the extension of bflateral tax treaties designed to
eliminate double taxation and other tax impediments to the flow of
investment has been pursued. These treaties arrange for the allocation of income between countries, provide for credits for taxes paid
to foreign governments, and establish rules for the taxabflity of
income. They also enable the tax authorities to solve problems
arising out of international differences in tax concepts and administrative practices on a mutually agreeable basis and to the benefit of
the taxpayer.
During the past year there have come into effect income tax treaties
with Japan and Italy, and protocols to the treaties with the United
Kingdom and the Netherlands. Active negotiations were conducted
with Belgium, Mexico, Cuba, and Honduras, and preliminary talks
were held with other countries. Income tax treaties with 19 countries
are now in effect.
An important policy innovation in the tax treaty program was
announced by Secretary Humphrey at the meeting of Finance Ministers at the Inter-American Economic and Social Council in Rio de
Janeiro in November 1954.
An integral part of the United States tax treatmentj^f foreign
income is the tax credit allowed United States taxpayers for foreign
income taxes which provides a necessary safeguard against prohibitive
taxes arising from international double taxation. However, it has
certain undesirable aspects. Thus, it may deprive United States
investors of the benefits of tax concessions granted by foreign countries.
This occurs because a reduction in foreign tax may serve only to
produce a corresponding increase in United States tax. The Secretary
announced at Rio de Janeiro that to remedy this situation the United
States is prepared to consider the use of tax treaties to recognize
tax concessions made by other countries to attract foreign capital.
This policy was reiterated by the President on January 10, 1955, in
his message to the Congress on foreign economic policy in which he
declared: ^'Under proper safeguards, credit coifld be given for foreign
income taxes which are waived for an initial limited period, as we now
44
19 55 REPORT OF THE SECRETARY OF THE TREASURY
grant credit for taxes which are imposed. This would give maximum
effectiveness to foreign tax laws designed to encourage new enterprises."
Special amortization
The liberalized depreciation allowances in the 1954 Code reduce
the need for rapid amortization and during the year the Treasury
reexamined the special amortization program adopted in 1950 in
connection with.the Korean war effort. Avaflable data indicated
that special amortization involved an estimated revenue loss of $880
million for the fiscal year 1956 and a loss of similar dimensions in
fiscal 1957.
The Department's examination indicated also that since the acute
emergency phase of the defense program is substantially completed,
the need for special amortization is less compelling. Moreover,
recent changes in the tax laws substantially altered the tax situation
which existed when accelerated amortization was first adopted. The
excess profits tax with the top rate of 82 percent, which tended to
discourage large expenditures for new plant facflities, had been
repealed as of January 1, 1954. The liberalized depreciation methods
provided under the 1954 Code permit faster capital recovery by all
taxpayers equally and meet the basic needs of the whole economy.
This reduces the need for giving particular taxpayers with particular
facflities more favorable treatment than is accorded taxpayers
generally.
In the Department's view accelerated tax amortization was an
artificial device which served a necessary purpose in the defense
mobilization program but should not be relied upon on a continuing
basis. The country's economic interests would be better served if
future expansion of defense facilities was an integral part of broad,
long-range economic growth and proceeded without benefit of
artificial stimulation.
These views were conveyed by Secretary Humphrey to the Subcommittee on Legal and Monetary Affairs of the House Committee
on Government Operations on July 18, 1955. (See exhibit 26.) He
proposed a reexamination of the special amortization program in the
expectation that it could now be confined to war requirement facflities.
He also pointed out that use of the tax laws to achieve diverse social
purposes indirectly impaired their primary function of raising the
revenues in an equitable manner. Use of tax laws for such anciUary
purposes is appropriate only under emergency conditions, when rigid
restrictions can be imposed for the protection of the public interest.
Life insurance companies
The taxation of life insurance companies has long been governed
by special provisions. From 1921 through 1950, the tax was com-
REVIEW OF FISCAL OPERATIONS
45
puted by applying the regiflar corporate rates to the so-called free
investment income of the company. This is income from investments
minus investment expenses and the allocations made out of the investment income to the reserves of the policyholders. Until 1950 the
determination of free investment income had been made largely on
the basis of an arbitrary assumption as to the rate of earnings on the
policyholders' reserves.
By 1950 it had become evident that this approach was unsatisfactory
and a new formula was adopted for the years 1949 and 1950. Under
this formula free investment income was computed on the basis of
the average experience of the industry in the preceding year. In
1951 another stopgap formula was used which applied a special low
rate tax to the net investment income of the company without adjustment for allocations to policyholders' reserves. This formula was
reenacted in each of the years 1952 through 1954. Time did not
permit the development of a permanent formula as part of the Internal
Revenue Code of 1954. The Ways and Means Committee, however,
created a subcommittee of its own members and instructed it to
develop a permanent plan for the taxation of life insurance companies.
The plan evolved by that subcommittee was embodied in H. R. 7201,
approved by the Ways and Means Committee and passed by the
House on July 18, 1955.
The Treasury kept pace with these developments. It reviewed the
history and problems of taxation of life insurance companies, and
examined the materials developed in the hearings and the studies of
the staff of the subcommittee of the Ways and Means Committee.
On the basis of this review, the Treasury suggested that an attempt be
made to develop a method for taxing life insurance companies in a
manner simflar to other businesses. (See exhibit 27.)
However, the Treasury did not object to the enactment of H. R.
7201 with its application limited to one year and with the understanding that the whole problem would have further study preparatory
to the development of further legislation to be submitted for enactment next year when the Treasury's suggestions would be fully
explored.
The Committee on Finance held public hearings on H. R. 7201 on
July 25, 1955, when a representative of the Treasury presented the
Department's views.^ Subsequently, the committee announced that
legislation was being deferred untfl early next year.
In view of these developments, the Internal Revenue Service extended the time for filing the declaration of estimated tax and for
paying the tax due thereon by life insurance companies untfl March 15,
1 Statement of Laurens Williams, Assistant to the Secretary of the Treasury, before the Senate Finance
Committee on "Tax Formula for Life Insurance Companies" (84th Congress, 1st Session), pp. 16-31.
46
195 5 REPORT OF THE SECRETARY OF THE TREASURY
1956. For the benefit of companies wishing to make estimated payments on account of 1955 income tax liabilities, the Treasury announced the statistical information needed to compute the tax liabflity
under the 1942 law, which technically came into effect in the absence
of new legislation.
Miscellaneous tax legislation
This year, as in other years, a substantial number of tax bills were
introduced and referred to the Committee on Ways and Means. They
pertained to virtually every phase of the Federal tax system, including
income, gift, estate, and excise taxation, as well as administrative
matters. Some would have given retroactive application to provisions
incorporated prospectively in the 1954 Code. Others would have
granted relief in specific situations; some prospectively, some retroactively.
The Committee on Ways and Means considered over one hundred
separate revenue bflls. The Department recommended against the
enactment of many of these because they involved retroactive legislation to which the Pepartment is opposed as a matter of principle. I t
opposed enactment of others, either because they would have involved
a substantial revenue loss or because they were not essential to tax
fairness.
The Committee on Ways and Means reported favorably on over
forty of these bills, which it approved unanimously. Nineteen bflls
were subsequently enacted. (See exhibit 30.) These included bills
extending the retirement income credit to members of the Armed
Forces who retire before the age of 65, exempting from income tax
withholding noncash wages paid to retafl salesmen who ordinarily are
compensated in cash, and removing motorcycles from the excise on
motor vehicles.
Twenty-two additional bflls were passed by the House of Representatives and are now pending in the Senate Committee on Finance.
Included are bflls liberalizing the retirement income credit by bringing
it into alignment with the current social security provisions, providing
a carry-over and carry-back of unused foreign tax credits, extending
the exemption under the excise on transportation of persons to travel
in the Caribbean area, limiting the excise on radios and television to
sets of the entertainment type, and restricting the application of this
excise with respect to replacement parts.
Those bills on which the Committee on Ways and Means was not
unanimously agreed, but which were favored by a committee majority,
were earmarked for an omnibus bfll which came to be called the
''bobtail bill". The measure to provide tax relief for the self-employed
(previously described herein) is in this^'group, as are measures to
REVIEW OF FISCAL OPERATIONS
47
facflitate investment in antiwater-pollution facflities, to eliminate
the corporation tax on the earnings of real estate trusts, to repeal the
transportation tax on coal, and to reduce the tax on air conditioners.
Other fiscal matters
In view of their importance to the Government's finances, the
Department took an active interest in the legislative implementation of
the President's highway and school construction programs. I t cooperated with the Department of Commerce and the Department of
Health, Education, and Welfare which respectively had primary
responsibflity for drafting the legislation to implement the highway
and school construction programs.
The Secretary appeared before the Public Roads Subcommittee of
the Senate Committee on Public Works in support of the Administration's highway program on March 22, 1955, and before a subcommittee
of the House Committee on Public Works in May and on July 12.
(See exhibit 28.) The Secretary supported the financing principle
incorporated in the highway bfll and expressed the view that as nearly
as possible the program should be handled on a pay-as-you-go basis.
He would not object, he said, if the Congress deemed it appropriate to
increase the Federal gasoline tax to finance the program.
The Department participated also in the work of the Commission on
Intergovernmental Relations which filed its report with the President
on June 20, 1955. The Under Secretary of the Treasury, one of the
three Federal members on the Commission, took an active part in the
Commission's deliberations and placed the staff facflities of the Department at the disposal of the Commission. In this connection, the
Department's staff prepared for the use of the Commission an analysis
of overlapping taxes in the United States, materials concerning
Federal payments in lieu of State and local taxes, and data relating to
other aspects of Federal-State fiscal relations.
Social security developments
The Board of Trustees of the Old-Age and Survivors Insurance
Trust Fund, of which the Secretary of the Treasury is Managing
Trustee, met in connection with their annual report for the fiscal year
1954, and proposed a change in the method of computing the interest
rate on investments of the trust fund. Under existing law, the interest
on special obligations issued directly to the fund is the average on the
total interest-bearing public debt. In view of the long-term nature
of the trust fund, the trustees proposed that the rate on these securities
be based on the average interest paid on marketable Treasury bonds
(by definition having a maturity of five years or more at the time of
issue). This ties the earnings of the fund more closely to the market
rate of interest, and places the earnings of the fund on a basis more
48
1955 REPORT OF THE SECRETARY OF THE TREASURY
nearly comparable to those of privately administered trust funds.
The change would mean an increase in the interest earnings of the
fund, based on its present size, of about $44 mfllion annually.
The Treasury, in cooperation with the Department of Health,
Education, and Welfare, also developed a plan for consolidating the
wage reporting under social security with the wage reporting under
the income tax, with substantial economies for taxpayers and the
Government. The plan would eliminate about 12 mfllion quarterly
wage reports a year containing 200 mfllion wage items which are now
required by the system of quarterly wage reports for social security
purposes. The consolidated wage reporting plan also contemplates
the use of wage reports maintained by the Social Security Administration in connection with checking on information submitted for
income tax purposes. Minor modifications in the eligibflity provisions
of the social security program are required under the plan but the
rights of afl individuals would be safeguarded throughout.
The proposal for altering the method of computing the interest
rate on investments of the social security trust fund and the consolidated wage reporting plan were incorporated in the bfll H. R. 7770.
International Financial and Monetary Developments
Fiscal 1955 was a year of further improvement in international
economic and financial relations. Many countries took new steps
toward the dismantling of direct restrictions on trade and payments
although, on the whole, the advance was slower than in the previous
year. The developments included some significant reductions in
discriminations against imports from the dollar area. Progress in
these directions was most marked in the continental countries of
Western Europe where it was facflitated by expanding production,
rising monetary reserves, and growing competitive strength in overseas markets.
In some countries, however, mostly in the category of primary
producers, payments diflBiculties persisted and there was generally
some deterioration rather than improvement in their international
accounts. But in only a few instances did these difl&culties lead to
an increase in import restrictions.
Internal monetary and price stability was achieved or maintained
on a wide scale. The exceptions were mainly the less-developed
countries, where the claims of development programs contributed to
inflationary pressures. With a growing appreciation of the strength
and flexibflity of fiscal and monetary measures, wider use was made of
these, rather than of new trade and exchange restrictions, to promote
internal stabflity and to protect payments positions.
REVIEW OF FISCAL OPERATIONS
49
The United States balance of payments and gold movements
During the fiscal year 1955 the United States exported $21.1 billion
and imported $16.4 billion of goods and services. With a deduction
of $2.5 billion of goods and services exported under military aid programs, the export surplus amounted to $2.2 billion, or $1.2 billion
more than the corresponding surplus of the previous year. In addition to the $16.4 billion supplied for imports of goods and services,
the United States provided the rest of the world, through other transactions (exclusive of military aid) with dollars or their equivalent to
the net amount of $4.0 bfllion. Of the combined total of $20.4
billion, private transactions, including imports of merchandise, travel,
investments, and gifts, accounted for $15.1 bfllion, or 74 percent, and
United States Government transactions, mainly mflitary expenditures
abroad and nonmflitary grants, for the remaining $5.3 billion. The
contribution made through United States Government transactions
to the total net amount of dollars supplied by the United States to
the rest of the world through all transactions, public and private
(i. e., exclusive of mflitary aid grants), has remained nearly constant
for the past four years, after falling from 40 percent in fiscal 1949 and
35 percent in fiscal 1950. The dollars supplied by the United States
through Government transactions fell from $6.9 bfllion in fiscal 1949
to $5.3 billion in fiscal 1955, whfle concurrently the dollars supplied
through private transactions increased from $10.5 bfllion to $15.1
billion.
To finance their fiscal year 1955 imports of goods and services from
the United States, foreigners required, exclusive of military aid, $18.6
bfllion. Since the dollars supplied to them during the year, exclusive
of mflitary aid, amounted to $20.4 billion, the rest of the world (including international organizations) had a net gain from transactions with
the United States of $1.8 billion. Of this gain, $0.3 billion was represented by gold and $1.5 billion by long- and short-term dollar assets.
In fiscal 1954 the outside world made similar gains of $0.5 mfllion
in gold and $1.4 billion in dollar assets.
During the year under review foreign countries (exclusive of the
U. S. S. R.) increased their official gold holdings by an estimated $0.9
billion, about three times the net amount they acquired through gold
transactions with the United States. On June 30, 1955, those countries held gold to the amount of $14.3 billion, as compared with United
States gold holdings of $21.7 billion. The United States share of the
oflicial gold resources of all countries (excluding the U. S. S. R.) was thus
60.4 percent. In the course of the past decade the corresponding proportion, as of June 30 in each year, rose from 60.4 percent in 1945 to
73.1 percent in 1949. By the end of fiscal 1955 the proportion had
again declined to the 1945 level.
356812—56
5
50
195 5 REPORT OF THE SECRETARY OF THE TREASURY
The strength of the outside world's position in relation to dollar
payments is only partly reflected by changes in official gold holdings.
Account must also be taken of changes in short-term dollar holdings,
both official and private. The short-term dollar resources and official
gold holdings of foreign countries increased during the fiscal year by
$1.7 billion to a total of $25.8 billion. Over the six-year period ending
June 30, 1955, the total of these assets rose by $11 billion. Rising
gold and dollar holdings have entered importantly into the considerations which have led many countries to relax restrictions on trade and
foreign exchange maintained for balance of payments reasons.
At the Tenth Annual Meeting of the Board of Governors of the
International Monetary Fund in September 1955, certain countries
again proposed that the United States should raise the price of gold
above its present $35 per ounce. In disagreeing with these proposals
Under Secretary of the Treasury Burgess emphasized that an increase
in the price of gold would be inflationary. I t would also, he pointed
out, be in sharp conflict with the aim of the United States to ''maintain a sound currency as the basis for economic health, not only in the
United States but also wherever the dollar is important". (See
exhibit 35.)
Progress toward convertibility and trade liberalization
While further progress was made during the year under review in
preparing institutional arrangements which would facilitate a move to
convertibility of the major world currencies, the prospects for early
moves to formal convertibflity did not increase. In recognition of the
key position which sterling holds in world-wide trade and payments,
the leading countries of continental Europe have looked .to sterling to
set the pace for further important steps to convertibflity. The policy
of the United Kingdom and the Commonwealth to work for a freer
multflateral pattern of trade and payments has been reiterated. The
British Chancellor of the Exchequer announced, however, that a
period of consolidation to strengthen the economic and financial position of the United Kingdom on the domestic front must precede any
further forward move on the exchange front.
Discussion of changes which the advent of convertibility should
entafl in present institutional arrangements for intra-European trade
and payments continued throughout the year under the auspices of
the Organization for European Economic Cooperation. Two of the
most important issues to be dealt with were: (a) The question of
appropriate provisions for termination of the present European Payments Union at the time of convertibflity; and (b) the problems which
a transition to convertibflity might pose for such European countries
as were not able to make their own currencies convertible.
REVIEW OF FISCAL OPERATIONS
51
At the Ministerial Meeting of the OEEC in Paris, m June 1955,
agreement was reached in principle pn a satisfactory resolution of
these issues and an extension of the European Payinents Union for
another 3^ear. Such extension of the Union was to be subject to a
proviso that it would be terminated at any time prior to June 30, 1956,
if members holding half of the quotas should signify their intent to
terminate the Union and to bring into effect a new European Fund.
This new institution would be empowered to assist member countries
in temporary balance of payments difficulties through gold credits
which would be made on an ad hoc basis and would be repayable in
not less than two years.
I t was also agreed that, as from August 1, 1955, settlements through
the European Paynnents Union would be made 75 percent in gold and
25 percent in credit rather than on the 50-50 basis used during the
previous year. A formal agreement extending the Union on the terms
described above was signed by the member countries on Auo;ust 5,
1955. Formal provisions for establishment of the new European
Fund, in the event of a termination of the Pajrments Union on the
above terms, have been incorporated in a European Monetary Agreement which likewise was signed on August 5, 1955. This Agreement
also contains certain technical provisions which the OEEC countries
have agreed upon relating to the carrying out of settlements among
the European central banks and the extension of certain short-term
credits, under conditions of convertibflity.
The provisions for establishment of the European Fund call for a
capital of $600,000,000, of which $328,425,000 would be contributed
in gold by present members of the Pa3rments Union. The United
States has agreed to permit the transfer to this Fund, when established, of the $271,575,000 still remaining out of its original contribution to the capital of the Payments Union.
Under Secretary of the Treasury Burgess with other officials of the
Government represented the United States in discussions of these
maj/ters by an OEEC Ministerial Examination Group on Convertibflity, which met in July 1954 in London and again in January 1955
in Paris under the chairmanship of the British Chancellor of the
Exchequer, and also at the January 1955 Ministerial Meeting of the
OEEC in Paris. Assistant Secretary of the Treasury Overby simflarly
represented the United States at the OEEC Ministerial Meeting in
June 1955 at which agreement was reached in principle on the arrangements described above.
In addition to the above developments relating to currency convertibflit}^-, the year under review also witnessed continued progress in the
relaxation of discriminatory trade controls and restrictions on international payments by a number of foreign countries. The United
52
195 5 REPORT OF THE SECRETARY OF THE TREASURY
Kingdom removed import restrictions on a further series of commodities and relaxed certain other restrictions, including those on conversion of legacies into dollars. In Continental Europe, West Germany
announced two further lists of items the import of which from the
dollar area is now freed from quantitative restrictions and introduced
a number of modifications in its exchange control regulations, whfle
several other countries, particularly Sweden, Denmark, and Austria,
took their first important steps in liberalizing dollar imports. Several
non-European countries in the sterling area also reduced restrictions
on dollar imports and liberalized certain of their exchange restrictions
during the year, although Australia found it necessary to tighten
restrictions on imports from all sources.
Progress toward trade liberalization was not confined to the reduction or elimination of quantitative import or exchange restrictions.
Some other noteworthy measures were taken. These included: The
enactment by the United States of the Trade Agreements Act,
extending the President's authority to enter into trade agreements
for a period of three years, up to June 1958, the negotiation of trade
agreements under which the United States and Japan made numerous
trade concessions to each other, with the United States also granting
various concessions to third countries in return for concessions which
the latter made to Japan, and a comprehensive review, by the contracting parties, of the General Agreement on Tarift's and Trade
(GATT).
The review of GATT resulted in various revisions of its provisions.
In addition a new agreement was drafted for setting up an international body, to be known as the Organization for Trade Cooperation
(OTC), which would serve as a continuous mechanism for the administration of the GATT. In a message to the Congress on April 14,
1955, the President recommended the enactment of legislation
authorizing United States membership in the Organization. The
recommendation awaits congressional consideration.
International Monetary Fund and exchange stabilization arrangements
The International Monetary Fund, which was established to
promote international cooperation in exchange arrangements and to
foster freedom of exchange transactions, continued through the year
under review its important consultations with the member countries
retaining restrictions. Through these consultations, the Fund has
exerted its influence toward the simplification of international exchange arrangements and the elimination of restrictions. The Fund
also issued a policy decision recording its views on the use of bflateral
arrangements which involve currency restrictions. In accordance
with this decision, the Fund wfll discuss with members which are
REVIEW OF FISCAL OPERATIONS
53
parties to bflateral arrangements the possibilities of their early removal and the ways and means by which the Fund can assist in this
process.
There were some developments in the course of the year with respect
to par values and membership. The Fund agreed to a change in
the par value of the Paraguayan currency from 15 to 21 guaranies
per United States dollar and to a change in the par value of the
Nicaraguan cordoba from 5 to 7 per United States dollar. Israel
became a member and Czechoslovakia's membership was terminated.
With the addition of Afghanistan in July 1955 and Korea in August,
the membership of the Fund (and, correspondingly, of the International Bank) was raised to 58.
During the fiscal year 1955 the International Monetary Fund sold
$58.7 mfllion in dollars to members in exchange for their own currencies, and members of the Fund purchased their currencies from
the Fund with gold and dollars to the amount of $259.1 million.
Since the beginning of its operations, the Fund has sold the equivalent
of $1,213.8 mfllion in currencies and members have repurchased their
currencies in the amount of $716.8 million.
In September 1954 the Fund extended to October 1955 the expiring
standby arrangement made with Mexico in Aprfl 1954. Under this
arrangement, made when the Mexican peso was devalued, Mexico
could purchase up to $50 mfllion from the Fund in exchange for
pesos. The United States-Mexican Stabilization Agreement, made
at the same time as the Fund's standby arrangement, was continued
in force during the fiscal year. Under this agreement Mexico could
purchase for pesos up to $75 mfllion from the United States Exchange
Stabilization Fund, if the occasion for use should arise, for exchange
stabilization operations to aid in preserving Mexico's exchange
system free from restrictions on payments. In April 1954 Mexico
purchased $22.5 million from the Fund under the agreement with the
Fund, and repaid this amount in June 1955. No drawmg was made
under the United States-Mexican Stabilization Agreement in the
course of the year. Meanwhile, the peso has remained freely convertible into dollars.
In February 1955 standby arrangements with Peru were renewed
for an additional year to enable Peru to maintain a foreign exchange
system free of exchange restrictions. Under these arrangements
Peru was authorized to draw up to $12.5 mfllion from the Fund under
a standby arrangement, $12.5 mfllion from the United States Exchange
Stabflization Fund, and $5 million from a New York bank. Peru
has not found it necessary to utilize any part of these credits.
54
195 5 REPORT OF THE SECRETARY OF THE TREASURY
International Bank for Reconstruction and Development
The International Bank made loans aggregating $410 mfllion, an
amount greater than that loaned in any previous fiscal year. The
Bank continued to finance chiefiy basic services which form the
essential foundation for economic development. About two-thirds
of the total lent in 1955 was for transport or power projects. The
rest helped to finance industrial enterprises or related activities and
agriculture. Up to June 30, 1955, the Bank had made loans to 37
countries totaling, net, $2,274 mfllion, of which $497 mfllion represented reconstruction loans made in Western Europe in 1947. The
balance of $1,777 mfllion constituted loans for economic development.
Of this amount 32.6 percent went to Latin America, 24.3 percent to
Europe, 15.5 percent to Asia, 14.6 percent to Australia, and 13.0
percent to Africa.
During the fiscal year 1955, in addition to its regular and continuing
operations, the Bank prepared and presented for the consideration
of its member governments Articles of Agreement for the proposed
International Finance Corporation (IFC).
International Finance Corporation
In August 1955 legislation was enacted authorizing United States
membership in the IFC. This Corporation, which is to be an affiliate
of the International Bank, is designed to encourage the growth of
productive private enterprise, particularly in the less developed areas.
The Corporation wfll have an authorized capital of $100 mfllion, to
which member governments wfll subscribe proportionately to their
subscriptions to the Bank's capital. All subscriptions are payable in
full in gold or doUars. The United States subscription, to be made
as a public debt transaction, wfll be $35,168,000. The Corporation
wfll come into existence when a minimum of $75 million has been
subscribed by at least thirty countries. Up to October 25, 1955,
fifty countries had signified that they favored membership in the I F C
and, of these, twenty had actuaUy signed the Articles of Agreement.
The Corporation wfll invest in productive private enterprise, in
association with private investors and without government guarantee
of repayment, when sufficient private capital is not avaflable on
reasonable terms. Whfle the Corporation will, in essence, supply
venture funds, it wfll not be authorized to hold capital stock. The
Corporation wfll, however, be able to undertake financing not only
by fixed interest obligations.but by obligations bearing a return related to earnings. I t wfll also be able to take obligations convertible
into stock when purchased from it by private investors. As a consequence, the Corporation wfll be able to benefit from the success of an
enterprise in which it has invested, without having the management
REVIEW OF FISCAL OPERATIONS
55
responsibflity which would be involved in the ownership of stock in
the Corporation. In his remarks on the Corporation at the Istanbul
meeting, the Secretary of the Treasury stated that the United States
Government viewed the institution as an experiment, but believed
it to be "a very hopeful experiment in getting private investors to
join as partners in providing an enlarged flow of venture capital to
private enterprises in the member countries." (See exhibit 34.)
Export-Import Bank
Following detailed study by the Senate Committee on Banking and
Currency, under the chairmanship of Senator Capehart, of the operations of the Export-Import Bank and their relationship to the expansion of international trade, Public Law 570 was enacted in August
1954. This law increased the lending authority of the Bank by $500
mfllion, making the loan limit $5 bfllion. The law also provided for
the establishment of a bipartisan Board of Directors, consisting of the
President of the Bank as Chairman, the First Vice President as Vice
Chairman, and three additional members, and for the appointment
by the Board of an Advisory Committee of nine members which
would meet at least once a year to advise with the Bank on its program. In addition, the law restored the statutory representation of
the Bank on the National Advisory Council. This legislation was
enacted after experience with operations under the President's Reorganization Plan No. 5, effective August 1953, which had p u t the
management of the Bank under a single administrator. This experience showed that it would be desirable to have a small working board
of full-time directors, whfle retaining administrative authority in the
chief executive officer of the Bank.
During the year the Bank authorized new credits to a total of
$631.5 million, as compared with authorizations of $250.4 million in
fiscal 1954 and|$571.0 million in fiscal 1953. As of June 30, 1955, the
Bank had credits outstanding and funds committed to the amount
of $3.5 billion, leaving an uncommitted lending power of $1.5 billion.
The Bank's operations in the course of the year extended into every
continent, with the largest share of loan authorizations, by area,
going to Latin America and Asia. Loans for Latin American countries aggregated $284.1 mfllion andjbhose for countries in Asia, $123.9
mfllion. Loans to other countries totaled $80.2 million. The remaining $143.3 mfllion of credits authorized in tiscal 1955 reflected a
notable feature of the Bank's operations. Under procedures developed during the 3'ear, lines of credit to this amount were extended
to American exporters to assist them in financing the sale of capital
goods which could contribute to economic development abroad.
56
1955 REPORT OF THE SECRETARY OF THE TREASURY
Foreign assets control
Foreign Assets Control administers regulations issued under authority of Section 5 (b) of the Trading with the Enemy Act. The
Foreign Assets Control Regulations block property in the United
States in which there is any Communist Chinese or North Korean
interest and prohibit all trade or other financial transactions with those
countries or their nationals. The Control has also blocked under the
regulations foreign bank accounts in the United States which had been
utilized in financing dollar transactions involving a Communist
Chinese interest to the extent that such transactions were involved.
For the purpose of preventing Communist China from obtaining
foreign exchange through the exportation of merchandise to the
United States, the Foreign Assets Control Regulations prohibit the
unlicensed purchase and importation into the United States of Communist Chinese or North Korean merchandise, as well as numerous
other commodities therein specified which are of types that have
historically come from China. The Control does not issue licenses
authorizing importation of Chinese-type merchandise unless satisfactory evidence of their non-Communist Chinese origin is presented.
Importation under general licenses is authorized with respect to
specific shipments of Chinese-type merchandise certified to be of
non-Communist Chinese origin by the government of a foreign
country from which they were directly exported provided that the
country in question has set up procedures for certification pursuant
to standards agreed to by the Treasury Department. The following
Governments have entered into certification agreements: Australia,
the Federal Republic of Germany, France, Hongkong, Israel, Japan,
the Netherlands, the Republic of China, and the Republic of Korea.
A list of the particular commodities for which acceptable certificates
are available and the Governments prepared to issue them are published in the Federal Register. During the year agreements with the
Governments of Australia, Israel, and the Netherlands were made
and a number of additional individual items became available for
certification under existing agreements.
The Control has pursued rigorous enforcement measures, including
successful criminal prosecutions, in dealing with violations of the
regulations. An intensive investigation of bristle importers suspected
of illegally importing Chinese bristles under the guise of being of
European origin resulted in two cases of criminal fines being imposed
and of offers of substantial sums for penalties in lieu of forfeiture in
settlement of in rem Customs proceedings. The Government of
Japan and the Federal Republic of Germany were requested to
suspend the issuance of certificates of origin with respect to hog
REVIEW OF FISCAL OPERATIONS
57
bristles, allegedly of Japanese and German origin, processed and dyed
in those countries and shipped to the United States. This action was
taken on the basis of information indicating that Chinese hog bristles
were being dyed and shipped to the United States from Japan and
Germany under false certificates of origin. The Japanese and German
Governments were asked to conduct full investigations with a view
to the ultimate restitution of the certification procedures under
satisfactory safeguards.
The Foreign Assets Control also administers the Transaction Control
Regulations. Under these regulations, persons in the United States
are prohibited from purchasing or selling or arranging the purchase
or sale, outside the United States for ultimate shipment to the Soviet
bloc, of strategic commodities. These regulations supplement the
export control laws administered by the Department of Commerce.
In addition, the Control has responsibilities with respect to blocked
accounts of approximately $9,000,000 received from the sale of a
Czechoslovak-owned steel mfll pursuant to an order issued by the
Secretary.
ADMINISTRATIVE
REPORTS
Summary of Progress in Management Improvement
The objectives and general plan of the Treasury Department's
management improvement program were outlined in a booklet
entitled Machinery jor Management Improvement issued in December
1954 by the Secretary of the Treasury. The booklet was sent to
bureau heads for distribution to all levels of supervision. I t is
intended as a check list for bureau officials and their staffs in appraising the framework within which their management improvement
programs operate, and as an informational and training document at
lower employment levels.
Revised procedures were issued in December 1954, establishing the
criteria for making awards under the new Government Employees'
Incentive Awards Act of September 1, 1954 (68 Stat 112, 113). A
concerted effort was made by all bureaus to inform employees of the
new procedures and to increase participation in the program. As a
result, more than 4,600 suggestions were received, an increase of 50
percent over last year. A total of 825 suggestions were adopted for
which awards of $26,260 were paid. Performance type awards
increased from 52 in 1954 to 99 during 1955. Savings from all types
of contributions amounted to $940,179, the largest since inception of
the program. One meritorious civihan service honor award was
granted.
Training programs were conducted at the bureau level throughout
the Department, at major field offices, and at special training institutions. These programs include supervisory development and training
conferences, on-the-job training, orientation classes for new employees, correspondence courses, classroom instruction, distribution
of special-purpose training pamphlets and handbooks, and the training
program for internal revenue agents at the Advanced Training Center
at the University of Michigan. Such efforts contribute substantially
to the improvement of management through the improvement of
supervision, leadership, and technical abilities.
The Treasury Department Fire and Safety Council developed two
safety awards: The Secretary's Citation for unusual accomplishment
in the field of accident prevention and the Secretary's Safety Award
for outstanding achievement. On June 7, 1955, the U. S. Coast
Guard Yard received the Secretary's first citation for its excellent
safety record in recent years. Representatives of the Department of
Labor presented an 8-hour office safety training course for over 125
Treasury supervisors in the Washington, D. C , area, and plans have
61
62
195 5 REPORT OF THE SECRETARY OF THE TREASURY
been made to extend this training to the field. The accident frequency rate ^ was 5.1 for the calendar year 1954.
The Internal Revenue Service engaged the firm of Pogson, Peloubet,
and Company to make a study of the audit program in district
directors' offices, including staffing, conference procedure, and training
and supervision of revenue agents. The firm of Ernst and Ernst was
engaged to make an evaluation of the effectiveness of the revenue
accounting system, the present operational cost report, workload
statistics, and other managerial information. Although reports on
each of these studies were not received until^.the end of the fiscal year,
some of the recommendations already have been put into effect; the
others are under study.
The Treasury records management program resulted in the disposal of 168,000 cubic feet of records and the transfer to records
centers and archives of 186,000 cubic feet of records. This resulted
in a reduction of 14 percent in the total volume of records since July 1,
1954.
Annual recurring savings of $7.2 million were reported for improvements adopted during.the year. Some of the more significant projects
in which savings were identifiable are listed below. Numerous other
projects were completed during the year from which benefits were
less tangible but which facilitated more efficient management and
provided better services to the general public.
The Customs Service reduced the backlog of merchandise entries
ready for liquidation by 61 percent by utilizing. such management
techniques as transferring work to other districts where the workload
was more current, and by consohdating activities to obtain better
utilization of employees. This accomplishment was made in the face
of a 4 percent increase in entries received.
Savings in cartage costs of $100,000 annually were realized as the
result of examining many additional types of imports by sample,
rather than transferring the entire shipment to Customs appraisers'
stores for examination.
Reductions in export control operations amounting to $127,000 were
accomplished in certain Customs collection districts through the media
of field office inspections.
In the Bureau of Engraving and Printing, rescheduling of work and
installation of improved procedures resulted in savings of $217,000.
The printing of $50 and $100 United States savings bonds by the
oft'set printing process instead of the more costly intaglio process
resulted in savings of $150,000 annually.
Various procedural changes and minor organizational realignments
in the Bureau of the Public Debt permitted better utilization of
manpower resulting in savings of $390,000.
1 The number of disabling injuries per million man-hours worked.
ADMINISTRATIVE REPORTS
63
Marketable public debt securities which are taken in for denominational exchange or for transfer from one Federal Reserve Bank to
another are now reused instead of being canceled, resulting in savings
of $125,000 annually.
Safekeeping facilities for United States savings bonds were discontinued, except for members of the Armed Forces, resulting in savings
of $133,000.
Further conversion of disbursing accounts, involving the issuance
of 8.5 million checks, from paper to card form resulted in a reduction
of $185,000 in check pa3anent operating costs in the Office of the
Treasurer of the United States.
The closing of four regional accounting and disbursing offices and
organization changes in the Washington Regional Office, Division of
Disbursement, resulted in annual recurring savings of over $235,000.
Savings of $170,000 were realized through the installation of various kinds of iriechanical equipment which permits more economical
handling of Government checks by the Division of Disbursement.
This includes a machine which produces images of returned checks
on sensitized paper for use in notifying administrative agencies; a
thermal process to produce a carbon impression on checks by the application of heat and pressure; and further installation of addressing
equipment of improved design.
The Internal Revenue Service installed a system for correspondence
control which included the use of form letters, reduction of the number of reviews, and installation of appropriate mechanical devices
resulting in savings of $640,000 annually.
The microfilming of internal revenue tax index cards was discontinued when a plan was developed for the maintenance of such cards
in Federal records centers, resulting in savings of $240,000 annually.
Conversion of certain Internal Revenue Service" statistical operations from punch card equipment to high-speed data processing equipment will make information available at a much earlier date and
reduce the cost of compilation by $103,000.
Reducing the supervision exercised by Internal Revenue storekeeper-gaugers over the production and warehousing of distilled spirits
wfll result in savings of $393,000.
Coinage operations were discontinued at the San Francisco Mint
and the Seattle Assa}^ Office was closed. The functions will be performed by other offices at a much lower cost, and savings will approximate $415,000.
The U. S. Coast Gnard made a thorough review of real property
holdings in relation to the needs of the Service. Thirty-seven properties were declared excess and reported to the General Services
Administration for disposal. The fair market value is estimated to
be in excess of $900,000.
64
1955 REPORT OF THE SECRETARY OF THE TREASURY
Three Coast Guard supply depots were moved into space provided
by the Navy Department, thereby realizing annual savings of $86,000
in rental costs and $120,000 in Coast Guard personnel costs.
As a result of reduced Coast Guard operations and change of program, ten vessels were decommissioned at a savings of $1,635,000.
Improvements such as these made significant contributions to the
overall reduction of employees during the year, who on June 30, 1955,
numbered 79,180, a reduction of 1,713 from the total of a year ago.
Military employees in the U. S. Coast Guard numbered 28,607, a
reduction of 547. Total employment reflects a reduction of 2 percent during fiscal 1955, despite the presence on the June 30, 1955,
rolls of 437 employees who were transferred to the Treasury Department during the year to administer certain functions transferred to
the Secretary of the Treasury under the provisions of the Reconstruction Finance Corporation Liquidation Act and Executive Orders
10489 and 10539. (See table 121.)
Bureau of the Comptroller of the Currency ^
The Bureau of the Comptroller of the Currency is responsible for the
execution of laws relating to the supervision of national banking associations. Duties of the office include those incident to the formation
and chartering of new national banking associations, the examination
twice yearly of all national banks, the establishment of branch banks,
the consolidation of banks, the conversion of State banks into national
banks, recapitalization programs, and the issuance of Federal
Reserve notes.
Changes in the condition of active national banks
The total assets of the 4,751 active national banks in the United
States and possessions on June 30, 1955, amounted to $108,059 mfllion,
as compared with the total assets of 4,842 banks amounting to $108,914
mfllion on June 30, 1954, a decrease of $855 mfllion during the year.
The deposits of the banks in 1955 totaled $98,933 mUlion, which was
$712 mfllion less than in 1954. The loans in 1955 were $39,544 mfllion,
exceeding the 1954 figure by $1,762 million. Securities held totaled
$44,021 million, a decrease of $912 million during the year. Capital
funds of $7,734 mUlion were $29 million more than in the preceding
year. All of the preceeding comparisons must be considered in the
light of the fact that two large national banks in the city of New York
with total assets, deposits, loans, securities, and capital funds on
June 30, 1954, of $5,974 miUion, $5,215 mUlion, $2,493 million, $1,911
million, and $438 million, respectively, merged with and into State
chartered institutions during the year.
J More detailed information concerning the Bureau of the Comptroller of the Currency is contained in
the separate annual report of the Comptroller of the Currency.
ADMINISTRATIVE
65
REPORTS
Abstract of reports of condition of active national banks on the date of each report
from J u n e 30, 1954, to J u n e 30, 1955
[In thousands of dollars]
June 30,1954 Oct. 7, 1954 Dec. 31,1954 Apr. 11,1955 June 30,1955
(4,842 banks) (4,827 banks) (4,796 banks) (4,759 banks) (4,751 banks)
ASSETS
Loans and discounts, including overdrafts
U. S. Government securities, direct
obligations. __
Obligations guaranteed by U. S. Government
.
Obligations of States and political subdivisions
Other bonds, notes, and debentures—
Corporate stocks, including stocks of
Federal Reserve Banks
Total loans and securities,.
Cash, balances with other banks, including reserve balances, and cash
items in process of collection..
Bank premises owned, furniture and
fixtm'es
Real estate owned other than bank
premises
Investments and other assets indirectly representing bank premises or
other real estate..
Customers' liability on acceptances
Income accrued but not yet collected..
Otherassets.
..Totalassets
37, 782, 386
37, 446, 012
39,827, 678
37, 779,821
39, 543, 504
35, 835, 931
39,910, 958
39, 500, 738
36, 459, 789
34,778, 270
26, 424
6, 954, 581
1, 905, 204
3,836
7, 339, 866
1, 925,840
6,261
7, 246, 304
1, 956,124
2.473
7,117, 452
2,036, 213
2,755
7,026, 071
2,002, 463
210, 936
215, 636
222, 831
204, 406
211, 795
82, 715, 462
86, 842,148
88, 759, 936
83, 600,154
83, 564, 858
24,699,908
23, 376, 491
25, 721,897
23, 078, 639
22,955, 455
847, 463
868, 437
904,037
896, 278
908, 286
18, 565
16, 775
16, 607
21, 589
18, 249
52, 610
175,054
253,115
151,438
54,190
186,143
249,320
166,306
56,009
291, 881
227, 699
172, 503
59,112
193, 998
237, 969
165,496
67,183
145,901
232,001
167, 414
108,913, 615 111, 759, 810 116,150, 569 108, 253, 235 108, 059, 347
LIABILITIES
Demand deposits of individuals, partnerships, and corporations.
Time deposits of individuals, partnerships, and corporations..
—
Deposits of U. S. Government and
postal savings
Deposits of States and political subdivisions
_
Deposits of banks.
Other deposits (certified and cashiers'
checks, etc.)
_
Total deposits
Demand deposits
Time deposits
Bills payable, rediscounts, and other
liabilities for borrowed money
Mortgages or other liens on bank premises and other real estate
Acceptances outstanding..
Income collected but not yet earned...
Expenses accrued and unpaid
Otherliabilities.
Totaliiabilities
53, 784,450
55,144, 436
59, 005, 232
54, 336,811
63, 711, 457
23, 978,113
24,418, 920
24,676,853
24, 627,252
24,963, 347
3, 627,105
4, 388,001
2,837, 034
2, 984, 669
3,155, 520
7,063, 425
9, 752, 516
6, 480, 477
10,127, 696
7,174, 667
10, 717, 647
6,825, 739
8, 501, 034
7, 287,142
8, 316, 961
1,439,122
1, 320,499
99, 644, 731 101,880,029
73, 280, 391
26, 364, 340
74,996, 033
26, 883,996
1, 734, 380
106,145,813
79, 016, 305
27,129, 508
28, 751
233, 478
11,098
434
182, 799
310;814
407, 537
633, 649
572
191,965
322, 447
560, 738
658,250
563
305,950
323,979
571,189
687, 735
101, 208, 715 103, 847, 479
108,046,327
1,386, 525
1, 498, 499
98, 662,030
98,932,926
71,814, 325
26,847, 705
71, 697,623
27, 235, 303
71,600
464
198,423
345,789
461,849
449,292
494
150, 628
373,487
327,572
468,653
100, 606, 933 100,325,360
CAPITAL ACCOUNTS
Capital stock
Surplus
Undivided profits
Reserves and retirement account for
preferred stock
Total capital accounts
Total liabilities a n d c a p i t a l
accounts..
356812—56-
2, 371,078
3, 645, 330
1, 404, 866
2, 394,486
3, 690,908
1, 540,254
2, 485, 844
3,950, 552
1, 377, 282
2, 393, 027
3, 643, 227
1,341,456
2,423,396
3, 698, 464
1,347,797
283,626
286,683
290, 564
268. 592
264, 330
7, 704, 900
7, 912, 331
8,104, 242
7, 646, 302
7,733,987
108,913, 615
111, 759,810
116,150, 569
108, 253, 235
108,059, 347
66
1955 REPORT OF T H E SECRETARY OF THE TREASURY
Summary of changes in number and capital stock of national banks
The authorized capital stock of the 4,753 national banks in existence
on June 30, 1955, consisted of common stock aggregating $2,420 million, an increase during the year of $53 million, and preferred stock
aggregating $4 million, a decrease during the year of $1 million. The
total net increase of capital stock was $52 million. During the year
charters were issued to 34 national banks having an aggregate of $7
million of common stock and $.2 million of preferred stock. There was
a net decrease of 89 in the number of national banks in the system by
reason of voluntary liquidations, statutory consolidations and mergers,
conversions to and mergers or consolidations with State banks under
the provisions of the act of August 17, 1950 (12 U. S. C. 214), and one
receivership.
More detailed information regarding the changes in the number and
capital stock of national banks in the fiscal year 1955 is shown in the
following table.
Organizations, capital stock changes, and liquidations of national banks, fiscal year
1955
Number
ofbanks
Capital stock
Common
Charters in force June 30,1954, and authorized capital stock i . . .
4,842
Increases:
Charters issued
...'.
Capitalstock:
174 cases by statutory sale
^
369 cases by statutory stock dividends
10 cases by stock dividend under articles of association..
28 cases by statutor y consolidation
7 cases by statutory merger
$4, 791,820
7,315,000
250,000
236, 219, 794
Total increases..
250,000
20, 225,000
425,000
130, 231, 200
25, 000
80,150
30, 397, 625
1,350,000
15,050
357, 500
'724,'400
123
Net change
Charters in force June 30,1955, and authorized capital stock L
$2,366, 769,863
105, 705, 420
102, 562,540
287.050
16,888, 534
3,461, 250
Decreases:
. Voluntary liquidations.
Statutory consolidations
S tatutory mergers
Conversions into State banks
Merged or consolidated with State banks.
Receivership
Capitalstock:
2 cases by statutory redaction
11 cases by statutory consolidation
4 cases by statutory merger
16 cases by retirement
Total decreases..
Preferred
182, 733, 975
53,485,819
4,753
2, 420, 255, 682
1,096, 950
-846, 950
3, 944,870
' These figures differ from those in the preceding table. The figures as of June 30, 1954, include 1 newly
chartered bank not yet open for business; 1 bank in the process of going into voluntary liquidation, and
exclude 2 banks consolidated with other national banks at close of business June 30, 1954, under provisions
of the act of Nov. 7, 1918, as amended (12 U. S. C. 33, 34). The June 30, 1955, figures include 1 bank in the
process of going into voluntary liquidation; 2 banks in the process of merging or consolidating with State
banks under the provisions of the act of Aug. 17, 1950 (12 U. S. C. 214), and exclude 1 bank consolidated
with another national bank at close of business June 30,1955, under the provisions of the act of Nov. 7, 1918,
asamended.
ADMINISTRATIVE REPORTS
67
Bureau of Customs
The principal functions of the Bureau of Customs are the assessment andfcollection of duties and taxes on imported merchandise and
baggage; prevention of smuggling, undervaluations, and frauds on the
customs revenue; apprehension of violators of the customs and navigation laws; entry and clearance of vessels and aircraft; issuance of
documents and signal letters to vessels of the United States; admeasurement of vessels; collection of tonnage taxes on vessels engaged in
foreign commerce; supervision of the discharge of imported cargoes;
inspection of international traffic; control of the customs warehousing of
imports; determination and certification of the payment for the amount
of drawback due upon the exportation of articles produced from dutypaid or tax-paid imports; enforcement of the antidumping and export
control acts; regulation of the movement of merchandise into and out
of foreign trade zones; and enforcement of the laws and regulations of
other Government agencies aft'ecting imports and exports.
Collections by Customs Service
Total revenue collected by Customs in the fiscal year 1955 was
almost $859 million compared with $801 million in 1954, an increase
of 7.2 p e r c e n t . ^ T h e total includes not only customs collections but
certain internal revenue taxes for the Internal Revenue Service and
some collections for the Public Health Service and other governmental
agencies.
Customs collections alone amounted to $611 million, an increase of
7.9 percent over the previous year's total of $567 million. They consisted of collections of duties, tonnage taxes, fees, and fines and
penalties for the violation of customs and navigation laws, etc. The
increase in customs collections in 1955 was accompanied by a corresponding increase in collections by Customs of internal revenue taxes
on imported liquors, wines, perfumes, etc., which amounted to $248
million in 1955, or 5.5 percent more than the $235 million collected in
1954.
Of the customs collections, all but $4% million were derived from
duties (including import taxes) levied on imported merchandise.
The source of duty collections by type of entry is shown in table 12 and
by tariff schedule in table 93. Since the data in the latter are restricted
to commercial importations, the totals shown are somewhat smaller
than the duties collected on all types of dutiable merchandise and
correspond roughly to duties collected on consumption entries and on
warehouse withdrawals.
In 1955, more than one-half of all imports into the United States
were duty free and included some commodities imported free for Gov-emment stockpile pm-poses or authorized by special acts of Congress
for free entry although dutiable under the Tariff Act of 1930, or taxable under the Internal Revenue Code, such as copper and iron and
steel scrap. The 45 percent which was dutiable constituted the basis
of customs duties on imports.
68
195 5 REPORT OF THE SECRETARY OF THE TREASURY
In only four months of the fiscal year 1955, July, September, October, and AprU, were customs duties at a lower level than for the
corresponding months of 1954. The increase in duty collections was
greater percentagewise than the increase in value of dutiable imports
which amounted to $4.7 bUlion in 1955 as compared with $4.6
billion in the previous fiscal year.
Collections by customs districts.—Of the 44 customs districts in which
collections are covered into the Treasury of the United States, 25
reported larger collections of customs than in 1954. The collections
for each customs district are found in table 92.
Collections by commodities.—All but three of the fifteen schedules in
which dutiable commodities are listed in the Tariff Act showed increases in duty collections; the metals, sugar, and agricultural schedules were the only ones to show diminished returns. As in the three
preceding years, imports of metals and metal products were the largest single source of customs revenue, amounting to 21 percent of the
total duty collections in 1955 and 23 percent in the preceding year.
Of the commodities in this schedule, watch movements and parts,
automobiles, and electrical machinery yielded increased revenue while
the revenue from ferric alloys such as tungsten, manganese, etc.,
machinery (other than electrical), aluminum, lead, and zinc was less
than in 1954. The sundries schedule ranked second, the agricultural
schedule third, and the wool schedule fourth as a source of revenue in
1955, the agricultural schedule dropping from second in 1954. Under
the sundries schedule, the chief sources of revenue were laces and
embroideries, precious stones, jewelry, and toys, each of which yielded
more revenue than in 1954.
Table 93 gives the value of and duties collected on dutiable and taxable imports for consumption in the fi^scal years 1954 and 1955.
Tables 95 and 96 show the value of and the duties collected on imports
for consumption in the calendar years 1944 to 1954 and monthly from
January 1954 to June 1955. The trends in value and duty yield for
goods dutiable at specific rates, at ad valorem rates, and at compound
rates are shown in table 94.
Collections by countries oj origin.—The increased value of imports
and the greater yield in duties noted in the commodity groups were
noted also for the leading countries sending imports to the United
States with the single exception of Cuba, the totals for which reflected
the decline in sugar imports and the accompanying decline in duties.
For the fourth successive year, imports from the United Kingdom
were the largest source of customs revenue, while Japan replaced
Canada as the second largest source, with West Germany ranking
fourth.
Table 97 shows the value of imports for consumption and duties
collected thereon by the principal countries for the fiscal years 1954
and 1955.
Extent of operations
Movement oj perspns.—More persons entered the United States in
1955 than in any previous year. For the first time in airplane history,
the number of passengers arriving from abroad exceeded the two
million mark and for the sixth successive year, the largest number of
ADMINISTRATIVE REPORTS
69
passengers arrived at the New York City airports with Miami ranking
second.
Table 99 shows the various t3rpes of vehicles and persons entering
theUnited States duringthe past two fiscal years, and table 100 shows
the number of airplanes and passengers arriving in each of the customs
districts for which this type of travel was important.
Entries oj merchandise.—Reflecting the increase in the value of
dutiable imports and in the amount of duties collected, the number of
the various t3rpes of merchandise entered was larger in almost all
categories than in the previous year. The number of each type of
entry for the past two fiscal years is shown in table 98.
Drawback transactions.—Drawback, which is allowed on the exportation of merchandise manufactured from imported materials and for
certain other export transactions, usually amounts to 99 percent of
the customs duties paid at the time the goods are entered. More than
95 percent of the drawback allowed in 1955 was due to the export of
products manufactured from imported raw materials. The principal
imported materials used in the manufactured exports in 1955 were
railway car parts, watch movements, iron and steel semimanufactures,
tobacco, lead, sugar, aluminum, and petroleum. The year 1955
marked the first time in which railway car parts were imported in
large quantities for the manufacture of railway cars for exportation
with the benefit of drawback.
Tables 101 and 102 show the drawback transactions for the fiscal
years 1954 and 1955. The amount of drawback allowed, as shown in
table 101, does not correspond exactly with the drawback payments
shown in table 102 since not all drawbacks certified for payment are
paid during the same fiscal year.
Appraisement oj merchandise.—The increase in imports of foreign
merchandise was reflected in the number of invoices and in the packages examined at appraisers' stores. There were 1,632 thousand
invoices handled in 1955 as compared with 1,472 thousand in the
previous year. A corresponding increase was noted in the number of
packages examined, from 645 thousand in 1954 to 692 thousand in
1955. The number would have exceeded the 704 thousand examined
in 1953 had it not been for the streamlined procedure used during the
last two years which required fewer examinations. The continuing
upward trend in the volume of business with no rise in staflSng necessitated the introduction of several drastic revisions of procedure to
increase production rates and prevent insurmountable backlogs.
Problems in determining both advisory classification and appraised
value were much less vexing in 1955 than in recent years as shown by
requests by appraising officers for only 420 foreign inquiries which
require an investigation in the country of production in order to obtain the technical information needed, as compared with 968 such
requests in the previous year.
Customs Injormation Exchange.—The activities of the Customs Information Exchange, as shown by the number of reports received and
disseminated to appraising officers continued to decline. Appraisers'
reports of value and classification, covering a cross section of importations of merchandise received at each port, totaled 38 thousand in
1955 as compared with 55 thousand in the previous year.
70
1955 REPORT OF THE SECRETARY OF THE TREASURY
The reduction in the number of such reports was due, in part, to
the continued use of a waiver procedure put in operation at the
beginning of the fiscal year 1954. This procedure provided that, if
no importation of such merchandise was reported at any other port,
a waiver be granted making it unnecessary to send in further reports
of this type of merchandise. Seven thousand such waivers were
granted in 1955 as compared with over 10 thousand in the previous
year. These reports of value or classification indicate the relative
number of commodity items received at any given port for the first
time, as well as regular items received at new prices or subject to
different terms of sale from previous shipments.
Differences in value and classification indicate the number of instances where entries varied at different ports either in value or classification and in which additional study and analysis were required
before establishment of a uniform price or rate. Price changes and
changes in marketing methods were not as numerous as in the previous
year. There were 4,011 reports of value differences in 1955 as compared with 5,232 in the previous year.
The number of classification differences, which indicates the relative
number of new commodities received, totaled 2,886 in 1955 and 3,704
in the previous year.
Antidurnping and countervailing duty.—Fifteen complaints of
dumping under the Antidumping Act were received during the fiscal
year 1955 as compared with fourteen during the previous year, while
seventeen complaints under the countervailing duty statute were
received in 1955 and fourteen in 1954. Nineteen dumping cases and
seventeen countervailing duty cases were pending at the close of the
fiscal year. Of the dumping cases handled in the fiscal year 1955, one
was concluded by a finding of dumping; nineteen were concluded on the
basis of no sales at less than fair value; two were concluded on the basis
of minimal importations; and five were concluded on the basis of no
injury to domestic industry. Of the countervailing duty cases
handled in the fiscal year 1955, one was concluded by the finding that
a grant or bounty had been bestowed or paid; four were concluded
by a finding that importations were insignificant; and seven were
concluded by a finding that no bounty or grant had been bestowed
or paid.
Technical services.—This branch of the Customs Service furnishes
chemical, engineering, and other scientific and technical information;
provides proper weighing and gauging equipment; designs and oversees
the construction of border inspection stations; and directs the field
operations of customs laboratories.
The laboratories analyzed almost 100 thousand samples during
each of the past three fiscal years, approximately one-half of which
consisted of ores and metals, sugar, and wool. The majority of the
samples were ''import" samples of dutiable merchandise analyzed
to develop and report facts needed for tariff purposes.
In addition, the laboratories analyzed 3,200 samples taken from customs seizures, mostly narcotic drugs and other prohibited articles;
260 samples from merchandise to be exported from the United States
upon which claims for drawback are to be compared or verified; 955
ADMINISTRATIVE
71
REPORTS
samples from preshipments (new types of merchandise) analyzed to
develop facts on which to base the tariff classification of such new
goods intended for shipment to the United States; and 2,248 samples
tested on behalf of other Government agencies. The 2,248 samples
included 1,124 of critical and strategic materials representing Government purchases for stockpile purposes to determine whether or not
the materials met contract specifications.
Statistical quality control of sample weighing operations by making
analyses of the cargo sample weighing data to assure that accuracy
and precision were within the control limits was continued at an
accelerated rate in 1955. There were 972 such weighing operations,
including 624 cargoes of raw sugar, 101 of refined sugar, 49 of wool,
37 of rayon, 152 of cigarette tobacco, and 9 of other merchandise.
Export control.—Although fewer employees were used in 1955 in
export control enforcement than during the previous year, an increased
volume of business was transacted. The following table shows the
volume of export control activities during the fiscal years 1954 and
1955.
Activity
Export declarations authenticated
Shipments examined
Number of seizures
_
Value of seizures
E xport control employees
1954
1955
3,933, 597
761,359
484
$359,469
234
4,133,365 •
809,969
438
$467,634
212
Percentage
increase, or
decrease ( - )
6.0
6.4
-9.5
30.1
-9.4
Protests and appeals.—Reversing last year's trend, there was a
pronounced increase in the number of protests filed by importers
against the rate and amount of duty assessed and other decisions
by the collectors. The success of the efforts to reduce the backlog of
protests not yet acted upon is shown by the even sharper increase
ia the number of protests denied by the collectors and forwarded to
the Customs Court. Appeals for reappraisement filed by importers
who did not agree with appraisers as to the value of merchandise
were more than double the number fUed in 1954, reversing the trend
of recent years. This increase was due, in part, to the elimination
of a statutory provision that made the entered value binding on an
importer when that value was higher than the appraised value and
also, in part, to customs administrative changes made in the processing
of so-called duress entries. The following table shows the number
of protests and appeals fUed and acted on dming the fiscal years 1954
and 1955.
Protests and appeals
Protests:
Filed with collectors by importers
._
Allowed by collectors
Denied by collectors and forwarded to customs court.
Appeals for reappraisement filed with collectors..
_.
1954
28,039
2,216
21,248
7,848
1955
31,822
2,279
34, 266
18,818
Percentage
increase
13.4
2.8
61.3
139.8
72
195 5 REPORT OF THE SECRETARY OF THE TREASURY
Marine activities.—The following table shows the number of
entrances and clearances of vessels in 1954 and 1955.
1954
Vessel movements
Entrances:
Direct from foreign ports
Via other domestic ports
Total
.
._ -
_
-
.-
Percentage increase, or decrease ( - )
48,499
32, 576
47, 811
28, 233
-1.4
-13.3
81,075
76,044
-6.2
_
43, 981
27, 076
.43,833
28,426
-.3
5.0
.
71, 057
72, 259
1.7
. .
_
Clearances
Direct to foreign ports
Via other domestic ports
Total.
i.
1955
The Customs Simplification Act of 1954, approved September 1,
1954, made sailing smoother for the man going abroad for pleasure
by exempting undocumented American pleasure vessels and licensed
yachts from the requirements of entry and clearance. Formerly,
only yachts of 15 tons or under were exempt. While simplifying
operations for the yachtsman, the revenue is protected as the vessel's
arrival must be reported and it may be boarded in the discretion of
the collector of customs. Also, the master is required to report any
article obtained abroad that is subject to entry. The master's
report takes the place of the manifest of all dutiable articles which
was previously required.
Commercial shipping benefited from several changes in the regulations during the year. Tbe personal appearance of the master,
licensed deck officer, or purser at the customhouse when a vessel is
being entered or cleared is no longer necessary provided the requisite
oaths, related documents, and other papers have been properly
executed by the master or an authorized officer of the vessel. The
master's personal representative may now deliver the papers in his
stead. The master, moreover, is not now required to forward a
copy of his manifest to the comptroller of customs.
The North Pacific Fisheries Act of 1954 (Pubhc Law 579, 83d
Congress), giving effect to The International Convention for the
High Seas Fisheries of the North Pacific Ocean, was approved on
August 12, 1954. The Bureau participated in discussion of this
legislation and, together with the Fish and Wildlife Service, Department of the Interior, and the United States Coast Guard, is charged
with the enforcement of the Convention and the act relating to
abstention from fishing in certain areas by nationals and vessels
of one or more of the contracting parties.
Upon recommendation of the Department of Defense in the interest
of national defense, comphance with Section 316, Title 46 of the
United States Code, was waived to the extent necessary to permit
the use of Canadian tugs to tow and transport certain equipment
from one point to another in the United States. The equipment was
to be used in the St. Lawrence Seaway Development Project. Compliance with Section 292, Title 46 of the United States Code, was also
waived to the extent necessary to permit any Canadian-built dredge
to be employed in dredging operations on the United States side of
ADMINISTRATIVE
73
REPORTS
the International Boundary in connection with the St. Lawrence
Seaway Project or the St. Lawrence Power Project without being
documented as a vessel of the United States. I t is contemplated
that further waivers will be required as the construction work
progresses.
The so-called '^Oslo rules," the international convention for a
uniform system of tonnage measurement of ships, came into effect
January 1, 1955. The Bureau, pending the conclusion of the study
of the rules of admeasurement of the principal maritime nations, has
tentatively held that the ^'Oslo rules" do not substantially depart
from the rules concerning the measurement for tonnage of vessels
of the United States and has authorized until further notice the
acceptance in United States ports of tonnages derived under the
^^Oslo rules."
Legislation (S. 1790 and H. R. 6246) was again recommended by
the Department to insure a more equitable deduction for propellingmachinery spaces in the case of a vessel with an engineroom aggregating 13 percent or less of its gross tonnage. Similar action is
already in effect in several foreign countries.
The Bureau participated in negotiations looking to the preparation
of a Treaty of Friendship, Commerce, and Navigation with the Federal
Republic of Germany. The treaty would provide for the acceptance
by one party of tonnage certificates issued by the other party and,
in general, provides that the vessels of one party shall have the same
rights as vessels of the other party while in ports of either country,
with the exception of fisheries, coasting trade, and inland navigation.
During the fiscal year, nineteen representatives of foreign govern.ments or foreign shipping interests visited the Bureau to discuss
and study admeasurement practices and procedures.
Documentation work of the Bureau increased in 1955, as it had in
1954. The marine document of a United States vessel engaged in
trade with foreign countries is valid until surrendered. The licenses
of vessels engaged in coastwise trade or fishing must be renewed
each year. The mortgaging or change of ownership of vessels also
requires the certification and issuance of various documents.
The following table shows the volume of marine documentation
activities during the fiscal years 1954 and 1955.
Percentage
increase
Activity
Number of documents issued
Number of licenses renewed
Number of mortgages, bills of sale, and abstracts of title
recorded
Number of abstracts of title issued
Number of navigation fines imposed
13,963
25,424
14, 211
29,086
1.8
14.4
11,075
2,220
1,486
11,460
2,594
1,607
3.5
16.8
8.1
In addition to again saving 90 percent of the 1952 cost of printing
Merchant Vessels oj the United States by use of the offset printing
method, the time necessary to prepare the volume for the printer was
shortened by five weeks.
The act of August 9, 1954 (Public Law 569, 83d Congress), gave to
the Secretary of Commerce during the time of national emergency the
74
195 5 REPORT OF THE SECRETARY OF THE TREASURY
authority to requisition, purchase, or charter foreign merchant vessels
lying idle in United States waters. Regulations to provide for documentation of such vessels haye been placed into effect.
Public Law 753, 83d Congress, approved August 31, 1954 (46
U. S. C. 404) further amended the provisions of Section 4426 of the
Revised Statutes by temporarily relieving owners of certain small
vessels from penalties under or application of the inspection laws
which would otherwise arise because of alterations to the vessels
resulting in increased tonnages. Until June 30, 1956, the vessels
covered by Public Law 753 are not required to undergo inspection
and receive a certificate of inspection before a marine document is
issued. The law will be applicable particularly to party fishing boats.
The foUowing tabulation shows the status of the merchant marine
as of January 1, 1955, for vessels engaged in the foreign trade, vessels
by major rigs, and vessels by the five major services.
1954
1955
Vessels
Number
Total documented vessels (including yachts)
Vessels engaged in foreign trade
Vessels by major rigs (excluding yachts):
Steam
Motor
Sail
Unrigged
^
Vessels by five major services:
Freight
Fishing...
Passenger
Tanker
Towing
.._
Gross tons
Number
Gross tons
4.2, 767
6,807
898,233
983, 878
43,049
6,952
30,090, 789
18,152,963
4,241
27,324
228
7,215
489,085
142,027
46,154
087,021
3,962
27,920
224
7,136
24, 705,913
2,086,334
40,324
3,125, 270
9,998
15, 213
4,811
1,641
4,571
22, 297,962
536,222
740, 283
5, 279,349
500,700
10,189
14,935
4,678
1,743
4,574
22,808, 289
531,599
805,305
5, 519, 776
516,182
Legal problems and proceedings.—Consideration was given by the
Office of the Chief Counsel to a large variety of legal problems relating
to such matters as classification and appraisement of imported merchandise; interpretation of administrative and enforcement provisions
of the customs and navigation laws; rights and duties of customs employees; delegations of authority to customs officers; activities of
customhouse brokers; drafting of proposed legislation; preparation of
reports on pending legislation; the preparation of customs regulations;
and the drafting of legislation to revise certain important features of
the customs administrative laws for submission to the Congress in
the next session.
Special consideration was given to: Preparation and prosecution
before the Office of Alien Property of customs claims for forfeiture and
forfeiture value arising from violation of the customs laws in connection with the importation of property that was later vested by the
Alien Property Custodian; matters relating to an indictment based on
alleged criminal violations of customs laws in the shipment of ^ Vheat
unfit for human consumption" through certain ports in Minnesota;
and legal problems arising urider the new Organic Act for the Virgin
Islands, approved July 22, 1954 (48 U. S. C. 1541-1644).
Other questions considered relateid to the valuation under Section
402 of the Tariff Act of bicycle parts imported from Germany and of a
type of printing calculator from Italy; the reclassification of footwear
with fiber uppers and composition soles, and of twisted jute packing.
ADMINISTRATIVE
75
REPORTS
single strand packing, and twisted plumbers oakum; and the respective
jurisdictions of the Bureau of Customs and other agencies in the
enforcement of certain statutes.
A substantial amount of work was done in cooperation with the
Department of Justice on a number of suits under the Federal Tort
Claims Act, as amended, several of which involve the extent of the
so-called ''customs" exception in the act (28 U. S. C. 2680 (c)) and are
pending in the courts. There was also continued activity in connection with the payment of awards to informers, overtime suits by customs employees, and, in cooperation with the Department of Justice,
in matters relating to offers in compromise and other settlements of
Government claims for customs duties.
Law enjorcement and investigative activities.—The number of investigations conducted b}^ the Customs Agency Service during the fiscal
3^ear was slightly less than during the preceding year, as shown in
table 105. The sharp decrease in touring permit violations was due
to a provision in the Customs Simplification Act of 1953, approved
August 8, 1953, permitting the admission of automobiles as personal
effects of nonresidents when such machines were used solely for touring
purposes in the United States, thus eliminating technical violations of
touring permits. Most of the employees in ''sensitive" positions were
given full security investigations during the fiscal year 1954 and as a
result fewer personnel investigations were required during the past
year. There was a substantial increase in investigations of undervaluation and of drawback applications.
Major enforcement problems, as in the preceding .3^ear, involved the
smuggling into the United States of narcotic drugs, diamonds, watch
movements, and psittacine birds; and the smuggling out of the country
of arms, ammunition, and implements of war.
The increase of approximately 50 percent in the rates of duty applicable to watch movements provided b}^ the President's Proclamation
No. 3062 of July 27, 1954, resulted in renewed attempts to introduce
this merchandise illicitly despite the severe penalties imposed upon
offenders in the previous two years. Attempts to smuggle psittacine
birds continued. The smuggling of narcotics also continued; the
number of seizures was slightly less and the quantity seized was considerably smaUer than in 1954, as follows:
1954
Kmd
Raw opium (ounces)
Smoking opium (ounces)
Heroin (ounces)
___
Other drugs (ounces)
.
Marihuana, bulk (ounces)
Marihuana, cigarettes (number) .
_
_._
_
._ _ _ _
971
671
291
43
24,782
2,391
1955
663
184
254
95
23, 615
3,599
Percentage
increase, or
decrease (—)
-31.7
-72.6
-12.7
120.9
4.7
50.6
Violations of the Mutual Security Act continued to be one of the
major problems for enforcement officers as they have been for the past
several years, although the value of the seizures of such articles was
smaller than in 1954.
One of the new problems encountered on the Mexican border consisted of the smuggling of Mexican cotton which was almost impossible
to identify once it was mingled with domestic cotton. To meet this
76
195 5 REPORT OF THE SECRETARY OF THE TREASURY
situation, fluorescent powder was sprinkled on several large piles of
cotton in Mexico and a subsequent check of the United States cotton
grower's product with an ultra violet black light resulted iri the
seizure and forfeiture of a substantial quantity of cotton.
In addition to seizures made for customs violations, 30,631 seizures
were made for other agencies, of which 30,490 were for the Department
of Agriculture. In addition, 32 persons were apprehended and delivered to the Immigration, Secret Service, narcotic, military, or
municipal authorities. Of the 482 persons arrested for narcotic
violations, 329 convictions were secured with total penalties of 663
years imprisonment and $18 thousand in fines. Seizures for the violation of customs laws are shown in tables 103 and 104.
Foreign trade zones.—Duiing the eighteenth year of its existence,
Foreign Trade Zone No. 1 on Staten Island continued its successful
operation. The number of entries reported was larger than in 1954
and, although the tonnage and value of merchandise received in and
delivered from the zone were less than in the previous year, the duties
and internal revenue taxes collected were almost as much as in 1954.
Forty-one vessels used the zone facilities for either discharge or lading
foreign cargoes, and 58 ships berthed in the zone to lade domestic
ships' stores. Continued improvement in protective facilities by the
zone operator made it possible to reduce still further the reimbursable
payrolls for customs officers.
Operations in Foreign Trade Zone No. 2 in New Orleans were at a
considerably higher level than in 1954. Almost three times as many
entries were filed and nearly three times as much collected in duties
as in the previous year.
Foreign Trade Zone No. 3 at San Francisco again showed a sharp
increase in the volunie of operations. The tonnage received and
delivered was almost double that of 1954 and, although the number
of entries was slightly smaller than in the previous year, duties and
internal revenue tax collections on merchandise entering customs
territory were 75 percent greater than in 1954. Sixty-seven vessels
used the zone facilities during 1955.
Operations at Foreign Trade Zone No. 4 in Los Angeles, on the
other hand, were at a lower level than in 1954, the tonnage passing
through the zone was less than half that of the previous year.
The business at Foreign Trade Zone No. 5 in Seattle continued at
approximately the same level as in 1954, although the collections on
goods entering customs territory were considerably lower.
The following table contains a brief summary of foreign trade zone
operations.
Received in zone
Number
of entries
Trade zone
New York
New Orleans.
San Francisco
Los Angeles
Seattle
.
_. .
_.
6,364
2,233
12, 565
532
262
Long
tons
Value
52,720 $27, 640, 226
27, 291 11,180, 255
69, 374 9,040, 782
1,106, 882
1,805
2, 731, 780
1,403
Delivered from zone Duties and
internal
revenue
Long
taxes
colValue
lected
tons
57,336 $33,050, 277
26,992 12, 999, 728
69, 218 8, 675, 581
2,276
1,316, 937
1,746
2, 328, 596
$3,198,963
546,463
823, 661
116,017
40,076
ADMINISTRATIVE
77
REPORTS
Changes in customs ports and stations.—The port of Craig, Alaska,
and the station of Boundary, Alaska, were abolished during the year,
while a full-time station was established at Fort Pierce, Fla., and
seasonal stations at Chaumont, N. Y.; Cheyboygan, Mich.; and TraU
Creek, Mont. The port of South Bend-Raymond, Wash., was established in lieu of the former port of South Bend, Wash. The ports of
International Falls and Ranier, Minn., and of Saginaw and Bay City,
Mich., were consolidated as International Falls-Ranier and SaginawBay City, respectively. The limits of the ports of Philadelphia, Pa.;
San Francisco-Oakland, Calif.; Seattle and Bellingham, Wash.;
Ketchikan, Alaska; and Detroit and Port Huron, Mich.; were extended to include additional areas where storage, rail, berthing, and
lading and unlading facilities are located. These changes were made
to meet the service requirements of vessel and railroad operators, importers, terminal operators, and other commercial interests. An
order was issued directing that the port of Newark, N. J. (within the
limits of the port of New York), formerly operated as a separate port
of entry, be operated as an integral part of the port of New York in
the interest of a more efficient administration of the customs and
marine business.
Cost of administration
Econo-tny measures resulting from the Customs Simplffication Act
of 1953, and from management improvements, made it possible to
reduce the average number of customs employees by 250 during the
fiscal year 1955 as is shown in the following table.
Operation
Regular custoras operations:
Nonreimbursable
Reimbursable *
1954
._
Total regular customs employment
Export control
_ _
Total employment .
1955
Percentage
decrease
7,511
311
7,302
292
2.8
6.1
7, 822
234
7,594
212
2.9
9.4
8,056
7,806
3.1
1 Salaries reimbursed to the Government by those private firms who received the exclusive services of
these employees.
Customs operating expenses totaled $41,696,924 including, as in
the previous year, export control expenses for which the Bureau was
reimbursed by the Department of Commerce. Such expenses, together with collections by type, are detaUed by collection district in
table 92. This table also shows the cost of collecting $100 of revenue.
A summary of collections and expenditures by branch of service wiU
be found in table 91.
Management improvement program
Promotion oj international trade and travel.—In support of the administration's program to promote international trade and travel.
Customs has taken an active leadership in the formation of advisory
groups at the larger ports to discuss and recommend methods for
facUitating the movement of merchandise and passengers through
customs. These groups are composed of importers, customhouse
78
1955 REPORT OF THE SECRETARY OF THE TREASURY
brokers, representatives of carriers and the Customs Service, and
others interested in foreign trade and travel. The meetings of these
groups have brought about closer cooperation between importing ^
interests and customs, and have been responsible for several important *
improvements in the clearance of passengers and their baggage,
particularly at the port of New York.
Reduction oj liguidation backlogs.—Again in fiscal year 1955, major
efforts under the Customs management improvement program were
directed toward the elimination of the backlogs of customs merchandise
entries ready for the final determinations of their duty and tax status.
As a result of administrative improvements made possible by the
Customs Simplification Act of 1953, the backlogs of these entries
were reduced by 148 thousand in the fiscal year, or approximately
61 percent of the total backlog existing at the beginning of the year.
Entry oj merchandise.—The requirements for certified (consular)
invoices for merchandise valued under $500 were discontinued anci
action has been taken to eliminate the remaining requirements for
these invoices effectiye October 1, 1955.
Formal entries may now be filed in the customhouse for preliminary
processing prior to the arrival of the merchandise within the limits
of the port of entry. This expedites the processing of entry documents and the release of merchandise after it arrives, and results in
better utUization of customs manpower by eliminating to some extent
the "peaks" and "valleys" in entry workloads.
Warehouse ledger sheets, which were being used extensively for
the posting of inventory data relating to the entry and withdrawal
of warehoused merchandise, were eliminated by using existing warehouse entry documents for this purpose.
The entry of American goods returned from abroad has been simplified by giving collectors of customs authority to decide when the
expense of collecting duty equal to the drawback is incommensurate
with the duty to be collected, and by publishing the amounts of duty
that are to be collected on specific articles exported with benefit of
drawback.
Increased examinations of imported merchandise on the piers and
other places of unlading, and examinations by sample, are expediting
the release of merchandise to importers and are saving customs significant amounts in increased cartage costs which would otherwise
be incurred.
Several major improvements were made in informal entry procedures. Shipments of merchandise unconditionally free of duty and
valued at $250 or less may now be entered on a carrier's manifest or
on a new simplified entry form similar to the passenger's baggage
declaration. Shipments of American goods returned from abroad
and valued at $250 or less may be entered on an affidavit form alone
without the additional informal entry documents previously required.
Entry procedure has been made more flexible by permitting informal
entries to be prepared in the customhouse or other convenient place
rather than on the pier or freight terminal where the merchandise
is usually located, and by permitting the informal entry documents
to be forwarded by mafl for execution by importers residing considerable distances from the port of entry. In/ addition, the informal
ADMINISTRATIVE REPORTS
79
entry may now be used instead of a formal entry for merchandise
valued at $250 or less which is released under immediate delivery
procedures.
Travel and air commerce.—At border ports, the requirements governing the preparation of written baggage declarations, when such
declarations are necessary, have been simplffied by eliminating the
necessity for itemizing articles accompanyiag a returning resident
when the articles have a total value of less than $100 when there are
no purchases to follow, and the articles are exempt from duty and tax
under tourist exemptions. Noting the word "various" and the total
value of the articles is sufficient.
At Toronto, Canada, the pre-flight examination of air passengers
destined for the United States has been extended to iaclude all flights
of the two major airlines operating from Toronto to the United States.
Previously, pre-flight examinations were restricted to the passengers
on the flights of one airline. Pre-flight examination at the airport
of last departure for the United States permits passengers to proceed
without further customs formalities upon arrival in the United States.
Consideration is being given to the extension of this practice to flights
from other airports in Canada and from airports in several nearby
foreign countries.
Customs overtime charges to air carriers have been reduced as a
result of the reassignment of tours of duty at the major airports of
entry to conform more closely to the hour-to-hour volume of air
traffic arriving from abroad. The reassignments were made following
a special study for the purpose of providing airlines with better
service at less overtime costs, and without additional expenditures
from the Customs Appropriation. The savings to air carriers are
estimated at $60 thousand annually.
Delegations oj authority.—A considerable number of delegations
of authority to customs field officers were made in the fiscal 3^ear.
Included in these delegations were authorizations for: (1) Collectors
of customs to determine the sufficienc}^ of proof of shortage in individual cases involving duty allowances described in the merchandise
entry but found not to be imported; (2) collectors of customs to
approve applications for permission to file general term bonds for
the entry of merchandise; (3) the collector of customs at the port of
New York to remit or mitigate, with the advice of the Customs
Solicitor at New York, penalties incurred under those sections of the
Tariff Act which do not aggregate over $1,000 to one off'ender in
one case; (4) collectors of customs to act on petitions for relief from
liquidated damages assessed against carriers who permit bonded
merchandise destined for exportation to be released without customs
supervision; (5) collectors of customs to destroy any forfeited article
without referral to the Washington headquarters whenever the}^^ are
of the opinion that the proceeds of the sale would not be sufficient
to cover the costs of the sale; (6) collectors of customs to designate
private (class 2) customs bonded warehouses for the storage of merchandise that has not been entered within five days after arrival;
and (7) principal customs field officers to act with the authority of
the Commissioner of Customs within their functional and geographical areas of jurisdiction if the President of tbe United States should
80
1955 REPORT OF THE SECRETARY OF THE TREASURY
proclaim the existence of a state of civil defense emergency or if an
enemy attack should be made against any point within the continental limits of the United States.
Legislation.—Legislation permitting further simplifications in
customs procedures is contained in Public Law 768, 83d Congress,
approved September 1, 1954. A summary of the principal features
of this legislation is given on page 84 of the Annual Report of the
Secretary of the Treasury for the fiscal year ended June 30, 1954.
On June 22, 1955, the House of Representatives passed the Customs
Simplification BUl of 1955 (H. R. 6040). The bUl was not acted on
by the Senate before adjournment and wUl be before the Senate
Finance Committee for action when the Congress reconvenes in January 1956. The bUl, designed to carry further the process of simplification in which important progress has been made as a result of the
Customs Simplffication Acts-which Congress enacted in 1953 and
1954, is directed mainly to the simplffication of valuation procedures.
Other management improvements.—The use of a common seal for
both Canadian and United States customs purposes on intransit
shipments of merchandise moving between ports of one country via
territory of the other was extended to truckload shipments. This
improvement, an extension of a practice adopted in 1952 for carload
rail shipments, eliminates the time and expense previously involved
in the requirement for these truck shipments to be sealed separately
with the seals of the two countries.
Several changes were made in enforcement methods. Undercover
assignments have been increased and special emphasis has been
placed on the inspection of imported cargoes for the detention of
contraband. In addition, masters of vessels have been formally
reminded of their responsibilities for the actions of their crews,
especially with regard to smuggling. Employees of other Government agencies who work closely with customs have been designated
to act as customs enforcement officers to give them legal authority
to search anyone when there is probable cause to suspect sinuggling.
Through agreements reached in a series of conferences with the
Internal Revenue Service, several changes were made in the procedures governing the importation and exportation of several com-,
modi ties which are subject to Customs and Internal Revenue regulations. These changes have reduced, and in some cases eliminated,
customs examination. They also permit certain customs functions
to be performed by Internal Revenue emplo3^ees, thereby eliminating
duplication of effort.
In connection with reporting requirements, a system for the annual
review of reports has been established to identify and eliminate those
reports not necessary for effective administration. The review made
in the fiscal year 1955 resulted in the elimination of the requirements
for 40 reports in the Customs Service.
Several improvements were made in the handling and preparation
of correspondence. Chief among these were the introduction of a
correspondence control system in the Washington headquarters to
assure prompt handling of incoming mail, the adoption of form
letters to expedite replies to the repetitious types of inquiries, and,
for the Customs Service as a whole, the distribution of instructional
material for the preparation of short and plainly stated letters.
ADMINISTRATIVE REPORTS
81
Improvements in the incentive awards program, made possible
by Public Law 763, 83d Congress, approved September 1, 1954,
brought about a considerable increase in the interest and participation
, of customs employees in the program during the fiscal year. Although
the new provisions were in effect only approximately one-half of the
fiscal year, the number of suggestions submitted increased over the
previous fiscal yesir by 52 percent. Suggestions adopted increased
34 percent, the total amount of cash awards paid increased by 87
percent, and the average amount of award was 30 percent higher
than the average award paid in fiscal year 1954. For the fiscal year
1955, 820 suggestions were submitted and 110 were adopted with
payment of $3,275 in cash awards. The average award paid was $30.
A new comprehensive schedule for the order and manner of disposition of the records of collectors of customs has been accepted by
the congressional co.m.mittee on records disposal. The new schedule
embodies all amendments and new procedures adopted since the
inception of the prograria and completes the order for the disposal of
records in custoriis field offices. Progress in the program in the fiscal
year 1955 resulted in the sale or disposition of 22,364 cubic feet of
records, and the transfer of 24,395 cubic feet of records to Federal
records centers. The disposition of these records released approximately 2,300 file cases, 1,050 transfer cases, and 30,000 square feet of
floor space for reuse.
Basic instructions for the examination of vehicles and baggage
were prepared for the use of inspectional personnel of the Customs
Service and the Immigration and Naturalization Service, who are
engaged in the primary screening of vehicles arriving at border ports
and the processing of private aircraft.
At New York, training courses were held to orient customs employees with the operations of the various divisions of field offices,
and at San Francisco enforcement officers were instructed in courtroom
procedure and the handling of prisoners.
Indoctrination courses, relating to the enforcement of customs laws,
were also held at some ports for persons not connected with customs.
At San Francisco, lectures were given to airline stewardesses on the
physical properties of narcotics of various kinds. At New York, lectures on custcms enforcement were held for the benefit of more than
600 watckmen, gatemen, rounds.men, security officers, and representatives of the United States Coast Guard, Iriiriiigration and Naturalization Service, and the Waterfront Commission.
A manual for the guidance of comptrollers of customs and their
staffs in' the perforriiance of the "on-site" audit progra.m begun in
1954 was prepared and published. The riianual will be followed in
the selection and audit of the accounts, records, and financial
procedures of customs field offices.
New issues of the Customs Regulations and Customs Manual were
prepared which replace the editions originally published in 1943.
The new editions were printed by the offset printing process which
resulted in substantial savings over the typeset method. Additional
savings will be realized in the printing of revised pages which are
issued monthly.
In further compliance with the intent of Congress expressed in
Title V, Independent Offices Appropriation Act, 1952 (5 U. S. C. 140),
356812—56
7
82
195 5 REPORT OF THE SECRETARY OF THE TREASURY
fees have been prescribed for certffications, record-searching, and
record-copying by customs personnel for interested parties.
Bureau of Engraving and Printing
The Bureau of Engraving and Printing designs, engraves, and
prints currency, securities, postage and revenue stamps. Government
checks, military comriaissions and certificates, and other work for the
various Government agencies, the Board of Governors of the Federal
Reserve System, and insular possessions of the United States.
Production
Deliveries of finished work during the fiscal year 1955 totaled
722,071,201 sheets, a decrease of riaore than 2 percent from deliveries
in 1954. Reflected in the net decrease were a decrease in currency
sheets of 34,486,111 or approximately 26 percent, and an increase in
other work of 18,091,255 sheets, or approximately 3 percent. A comparative statement of deliveries of finished work in the fiscal years
1954 and 1955 follows.
Comparative statement of deliveries of finished work, fiscal years 1954 and 1955
Sheets
Class
Currency:
United States notes
Silver certificates
Federal Reserve notes.
Total
Bonds, notes, bills, certificates, and debentures:
Bonds:
Panama Canal, registered
Postal savings
Treasury, standard form
United States savings.
_.
___.
Depositary.Consolidated Federal farm loan for the 12 Federal
intermediate credit banks
Philippine Islands loan of 1929, metropolitan water
district
Specimens-_
_
Notes:
Treasury, modified new design
Treasury, savuigs, 1940 design. Series C
Treasury, registered, special series
Consolidated, Federal home loan banks, bearer
Federal National Mortgage Association
Specimens.-.
Bills:
Treasury:
1940 design
_
1953 design
_-__.
Specimens
_
Certificates:
Indebtedness, new design back
_.
_.
Special series
_
Common stock of the Federal National Mortgage
Association notesInterim transfer, postal savings bonds
Postal savings
Specimens
Face value 1955
2,403,333
82,794, 555
47,470,667
1,360, 667
67,014,000
29,807,777
$121, 560,000
1, 613, 556,000
6, 266,600,000
132,668, 555
18,182,444
8,001,716,000
1,185
9, 285,000
829, 596
95,088,000
458
31, 581,671,000
9,007, 300,000
36,000
84, 885
837,090,000
72
38
42
38,000
18,600
686, 515
46,921, 500,000
1,200
1, 222,860
85,078,000
555,300
107,000
350
29, 500
700
49, 700
20
1,695,000,000
601,125,000
1, 316,700
149,300
1
110,600
593,400
31, 560,000,000
85,325,000,000
788,800
500
424,050
350
43,481,000,000
1,000
1, 278, 650
7
93,800
14
10
6,000
76,810,000
2,400,004,000
ADMINISTRATIVE REPORTS
83
Comparative statement of deliveries of finished work, fiscal years 1954 o,nd 1955—Con.
Sheets
Class •
Face value 1955
1954
B o n d s , notes, bills, certificates, a n d d e b e n t u r e s — C o n .
Debentures:
Collateral t r u s t of t h e C e n t r a l B a n k for CooperativesConsolidated collateral t r u s t for t h e :
12 F e d e r a l i n t e r m e d i a t e credit b a n k s
13 b a n k s for cooperatives
Federal Housing Administration:
W a r h o u s i n g insurance f u n d T i t l e I housing insurance fund
H o u s i n g insurance fund
M i l i t a r y housing insurance fund
N a t i o n a l defense housing insurance fund
M u t u a l mortgage i n s u r a n c e fund
Specimens
D u m m y l a y o u t efface of U . S. savings b o n d s
TotaL
Stamps:
Customs
_
_
Delivered for d e s t r u c t i o n
Internal revenue:
T o offices ofissue
__
D e l i v e r e d for d e s t r u c t i o n
Puerto Rican revenue
_.-.
Vii-gin I s l a n d s r e v e n u e
W a r savings
t J n i t e d States savings
----Postage:
U n i t e d States ( o r d i n a r y ) . .
Specimens, U n i t e d States
Air mail
Certified mail
Commemoratives
Specimens..
Special delivery
.
Special h a n d l i n g
Postage d u e . - C a n a l Zone
__
Air m a i l - .
.
Commemoratives
D i s t r i c t of C o l u m b i a beverage tax p a i d Federal migratory bird hunting
Foreign service fee
___
Slaight lock seals
Total.
Miscellaneous:
Checks
Certificates
.
Commissions
.._
Diplomas
Drafts
.-.G o v e r n m e n t r e q u e s t s for t r a n s p o r t a t i o n . .
M e m o r a n d u m copy
M i l i t a r y p a y m e n t orders
o t h e r miscellaneous
TotalG r a n d total-.
10,860
108,500
86,150
7,350
$1, 250,000,000
118,000,000
7,500
4,500
5,500
8,000
2,000
2,000
2,000
3,000
2,500
61
67, 645, 000
2,487, 500
3, 687, 500
9,995,000
23,822, 500
4, 937, 500
2, 520,000
90, 706,157
98, 082,414
254,978, 936,600
1, 231,000
2, 334,000
40, 254
288, 962, 716
197, 996
1,823,354
288,100, 866
3, 735,042, 569
2,036, 396
620
181,015
667,895
4, 787,010
9. 698, 990
1,000
2,000
14
1,033
818, 656
787, 924,092
906, 500
45, 375
21, 202
40,000
180, 265, 305
18
15, 286, 928
1,053, 700
18, 878, 581
50
1,199, 250
36,346
2, 221, 582
18, 900
23, 900
21, 280
929, 200
46, 725
15, 656
94,000
502,131,162
513,452, 467
4, 713,153, 942
8, 814,151
1,815,197
82, 538
7,568
4,000
248,046
8, 356, 327
1,900, 610
481,980
2,767
171, 357, 385
. 9
7, 988, 837
25, 764, 544
1, 088, 630
27, 576
1, 795, 232
62,150
71,480, 817
7, 902, 750
31, 605,823
11, 977, 865
279, 700
23, 549, 754
196, 700
149, 500
31, 920
4, 701,450
10,466,400.
13, 358, 600
130, 510
1, 640
5,000
1, 983, 683
1,480,042
12,960,183
12,353,876
738,466,057
722, 071, 201
267, 693, 806, 542
84
19 5 5 REPORT OF T H E SECRETARY OF T H E
TREASURY
Finances
The Bureau operations are financed by reimbursements to a working
capital fund authorized by law. A statement of incoriie and expense
for the fiscal year 1955 and comparative balance sheets as of June 30,
1954 and 1955 follow.
Statement of income and expense for the fiscal year 1955
Income:
F r o m sales of printing
$25, 242, 571
F r o m operation and maintenance of incinerator
a n d space utilized by other Treasury activities,
321, 699
F r o m sales of card checks
.
782, 049
F r o m other direct charges for miscellaneous
services
308, 707
Other income
. 115, 983
T o t a l income
Expense:
Cost of goods sold:
Purchases of direct materials
Decrease in inventory of direct m a t e r i a l s . __
Direct materials used
..
Directlabor
Manufacturing expenses (exclusive of
preciation a n d amortization)
Depreciation and amortization
$26, 771, 009
$4, 815, 751
216, 421
5, 032, 172
11, 502, 071
de- .
T o t a l manufacturing costs
Deduct:
Increase in goods in process inventory
Increase in finished goods inventory
7,594,647
1, 484, 295
25, 613, 185
770, 774
40, 989
811, 763
Cost of goods sold
.
Cost of operation a n d maintenance of incinerator
and space utilized by other Treasury activities.
Cost of card checks (purchases and related costs).
Cost of miscellaneous services
Nonoperating expenses:
Loss on disposal of fixed assets
Accelerated depreciation
Loss due t o shortage in shipment of Federal
Reserve notes unaccounted for
T o t a l expense
N e t loss for t h e fiscal year 1955
24, 801, 422
321, 699
782, 049
308, 707
486, 222
105, 074
^ 1, 000
26, 806, 173
2 35^ 154
1 The Bureau paid this amount to the Federal Reserve Bank of Boston in settlement ofan unaccountable
shortage of one "strap" (100 notes) of new $10 Federal Reserve notes in a shipment made to the Bank ou
March 1,1955, by the Comptroller of the Currency.
2 In accordance with the act approved August 4,1950 (31 U. S. C. 181-181e), the net loss will be recovered
from surplus accruing to the fund in a subsequent year before any surplus is deposited into the general fund
of the Treasury as miscellaneous receipts.
ADMINISTRATIVE
85
REPORTS
Comparative balance sheets J u n e 30, 1954 and 1955 ^
J u n e 30, 1954
Assets
Current assets:
Cash with Treasury
• Accounts receivable
Inventories:
Raw materials..Goods in process
Finished goods
Stores..
Prepaid expenses...
....
-
:
Total current assets
Fixed assets: 3
Plant machinery and equipment
Motor vehicles.
_-_
Oflice machines
Furniture and
fixtures
.
Dies, rolls, and plates
Building appurtenances
Fixed assets under construction.
........
...
:..
-
Less portion charged off as depreciation..
Total fixed assets
..-
Deferred charges
Totalassets
_•
Current liabilities:
Accounts payable
Accrued liabilities:
Payroll..
Accrued leave
^
other
Trust and deposit liabilities.
Theft loss
other liabilities
Totaliiabilities.
-
.
..-..
Investment of the United States Government:
Principal of the fund:
Appropriation from United States Treasury
Donated assets, net
.
Total principal...
Earned surplus, or deficit (—) 3
•
Total investment ofthe United States Government
Total liabilities and investment of the United States Government
J u n e 30, 1955
$3, 854,848
1, 626, 259
$5, 058,138
1, 856, 484
1, 037, 677
2, 627, 524
1, 203, 450
1, 273, 010
88, 986
821, 256
3,398, 298
1, 244, 439
1,225,330
61, 906
11, 711, 754
13, 665, 851
15, 538, 684
56, 348
117, 779
478, 236
3, 955, 961
438, 846
289.158
15,194, 666
66,176
126,116
483, 823
3, 955, 961
600, 853
231, 894
20,875,012
3, 328,151
20, 659,489
4, 552,148
17, 546,861
16,107,341
155,129
158, 214
29, 413, 744
29, 931,406
431,417
566, 997
1, 325, 061
1, 617, 636
75,196
638,495
29,060
3,212
1, 789, 259
1, 654, 662
48, 643
654, 368
4,120, 077
4, 715, 640
3, 250,000
22,000, 930
3, 250, 000
22, 000, 930
25, 250, 930
42, 737
25, 250, 930
-35,164
1,711
25, 293, 667
25, 215, 766
29, 413, 744
29, 931, 406
1 Balance sheets as of the close of both fiscal years have been adjusted to reflect in transit items on a basis
consistent with the control accounts maintained by the Bureau of Accounts, Treasury Department.
2 Fixed assets acquired prior to July 1, 1950, are capitalized at appraised values (estiraated replacement
cost as of July 1, 1951, reduced to recognize the depreciated condition of the assets being capitalized);
subsequent additions have been capitalized at cost, except that on and after July 1,1951, all costs of manufacturing dies, rolls, and plates have been charged to current operations.
The act approved August 4, 1950 (31 U. S. C. 181-181e), which established the Bureau of Engraving aud
Printing Fund, specifically excluded from the assets of the fund the land and buildings occupied by the
Bureau. In accordance with the Comptroller General's decision of October 4, 1951 (B-104492), however,
replacements of building facilities and improvements to buildings made on and after July 1,1951, have been
financed by the fund. Such items of significant dollar amounts have been capitalized at cost and appear in
the foregoing balance sheets under the caption "Building appurtenances."
3 Earned surplus or deficit arises through billing for products at unit prices established prior to the development of actual costs. Section 2 (e) of the act of August 4,1950, requires that any surplus accruing to the
revolving fund during any fiscal year be deposited into the general fund of the Treasury as miscellaneous
receipts during the ensuing fiscal year, provided that such surplus may first be applied to offset any deficit
resulting from operations in prior years. Net earned surplus in the amount of $42,737 in fiscal year 1954
was deposited into the general fund during the fiscal year 1955. The deficit of $35,164 which accrued during "
fiscal year 1955 will be offset by the application of a like amount against any surpluses which accrue in
subsequent fiscal years.
86
195 5' REPORT OF THE SECRETARY OF THE TREASURY
Improvements in organization, operations, and management
Organizational changes.—Extensive organizational changes in the
Bureau were accomplished during the fiscal year 1955. These
changes strengthened the organization of the Bureau by providing a
framework within which additional technical assistance would be
provided for putting into operation the second phase of the modernization program, more effective security control could be maintained,
and the internal audit program would be broadened. In the reorganizations, the Director has under his immediate supervision an
Assistant to the Director and eight office chiefs. The management
and operating divisions are grouped under the eight ofiice chiefs.
On July 1, 1954, the disbursement functions were transferred from
the Division of Disbursement, Bureau of Accounts, to the administrative supervision of this Bureau, and placed in a new section under
the Office of the Controller.
Surveys are being conducted to determine the practicability of
creating self-contained operating units in which currency and complementary equipment would be grouped to provide a continuous
process from start to finish within one area. If adopted, these units
would replace the present structure which provides for the transfer
of work from one operating division to another for various stages of
processing. Besides making economies through elimination of many
handling operations, this plan is expected to promote tighter security
in the Bureau.
A contract was awarded to the Methods Engineering Council to
install an industrial engineering function in the Bureau. This will
be a nine-month contract including classrocm instruction, guided
application in methods work, and on-the-job training. This will
result in the establishment of an industrial engineering branch.
Modernization program—Phase I.—Since 1949 an active modernization program has been pursued in the Bureau which has resulted
in substantial savings to the Government. The principal aspects
were described in previous reports and included, among other things,
the introduction of nonoffset green and black ink for the printing of
currency and bonds, the replacement of personnel through the installation of automatic equipment on printing presses, and the printing
of 18-currency subjects to the sheet. Since the inception of this
program the services of over 2,300 employees have been declared
excess to the needs of the operations affected. Accordingly reductions in force were made, or reassignments were made to other areas
where the emplo3^ees were needed.
During the period in question the Bureau has been able to decrease
the cost of currency from an average of $9.43 per thousand notes in
the fiscal year 1949 to $8.33 per thousancJ notes in 1955. This is
indicative of the accomplishments that have been made during this
period. A greater reduction in costs would have been reflected had
it not been for the fact that the 1955 rate includes not only charges
for depreciation, public health service, etc. which were not a part of
the costs in 1949, but also includes substantial increases both in
material prices anci in wages granted to Bureau employees.
Modernization program—Phase II.—The second major phase of the
Bureau's modernization program involves the development and installation of new types of printing presses; the improvement of plant
ADMINISTRATIVE REPORTS
87
layout, building facilities and services, etc.; and organizational
changes. The program was inaugurated in December 1954, concurrently with the receipt of recommendations of the Methods Engineering Council, the management engineering firm which made a
survey of the Bureau in the spring of 1954. At the end of fiscal 1955,
70 of the recommendations contained in the survey report had been
accepted; 18 are being considered; and 15 have been rejected.
One of the initial steps in the second phase of the modernization
program was the awarding of a contract for five new postage stamp
printing presses. The new presses will replace teii of the outmoded
rotary presses now in use. Improved methods are being sought of
wiping, polishing, and measuring gum film thickness on the stamps
to be printed on these presses.
During January 1955, the offers of two foreign firms to bring
experimental sheet-fed rotary currency presses into this Bureau were
accepted. The offers were made by the Giori Organization, and the
Thomas De La Rue Company, Ltd. Each firm agreed to furnish a
press, all accessory equipment, and trained personnel to demonstrate
and operate it. At the present time representatives of these firms
are testing the printing of currency on the models of their presses in
the Bureau to determine the capabilities of their respective presses
for producing high quality printed impressions by the dry intaglio
method.
Mechanical improvements.—The introduction of automatic paper
counting machines, which was started last year, was continued during
1955 with the installation of three counters in the Surface Printing
Division. As a result, two positions were abolished with savings
amounting to $6,500. Four additional machines were ordered for
examining and surface printing operations during the coming fiscal
year.
Approval has been obtained from the Post Office Department for
a proposed new method of packaging postage stamp books. When
completed, this project is expected to result in a reduction in the
number of employees needed to pack the stamps.
During August 1^954, the first converted perforator was equipped
with photo-electric registration equipment for the perforating of
postage sta.mps to be processed into coils. On the basis of an increase
in operational efficiency and elimination of the seldom used end perforated coils, the contract was reduced to cover four rather than five
perforators, as originally planned.
Procedural improvements.—A revised procedure was introduced
during October 1954 for the handling of postage stamp orders. The
essential feature of the new procedure is that this Bureau receives
the original postmasters^ requisitions which are routed singly, rather
than in consolidated form from the Post Office Department. The new
procedure results in quicker deliveries to requisitioning offices, considerable savings to the Post Office Department, and the elimination
of five jobs in this Bureau with savings amounting to $17,000 on an
annual basis.
As a result of the conversion to the offset method of printing revenue
stamps which had formerly been printed by the intaglio method, it
was possible to realize savings on an annual basis amounting to $144,388.
88
195 5 REPORT OF THE SECRETARY OF THE TREASURY
A report of the United States Secret Service on this Bureau's
security procedures, which was mentioned in the annual report for
fiscal year 1954, contained 165 recommendations. During the fiscal
year 1955, 94 recommendations have been put into effect; five were
rejected and two were withdrawn by the United States Secret Service;
the effectuation of 47 was in process, and 17 remained to be considered.
The printing of savings bonds by the offset method, which was
reported in the 1954 annual report for the $25 denomination, was
extended during the current fiscal year to the printing of savings bonds
of the $50 and $100 denominations. Savings will result not only from
the changes in the printing process, but also because the new procedure
allows an increase in the number of subjects per plate and two face
printings in one operation. I t is estimated that there will be annual
savings of $150,000 in addition to the savings of $446,454 reported in
fiscal 1954.
Other procedural improvements resulting in better utilization of
personnel were made in several areas in the Bureau. Consequently, it
was possible to abolish 70 positions with estimated annual savings of
$231,810. These are in addition to the savings resulting fro.m reduced
program requirements or mechanical improvements.
Program reduction in 1955.—The currency requirements for fiscal
1955 were approximately 24 percent below the 1954 level. This
decrease was partially offset by increases in requirements for items
other than currency. The reduction in the overall program, together
with the reduction in costs due to improved methods and procedures,
has resulted in a reduction to $26,806,173 in the total cost of goods
delivered and services rendered during 1955, or.$4,590,571 less than in
1954. This reduction would have been greater had wage increases
not been granted to employees during the year. Some of the items
no longer printed in this Bureau include postal savings certificates.
Government transportation requests, and wine and beer revenue
stamps.
Industrial relations activities
The total number of employees on the rolls at the beginning of
the fiscal year was 4,701. Because of reductions in force which resulted
from operational improvements, better utilization of manpower, and
reduced program requirements for the ensuing year, the number of
employees on the rolls as of June 30, 1955, was reduced to 4,005.
Wage and salary increases for all Bureau employees amounted to
$794,999 on an annual basis. Wage adjustments affecting 2,957
employees in skilled and semiskilled jobs amounted to an annual
increase in costs of $483,377; salary increases for 1,048 employees
in classified positions amounted to $311,622.
Added emphasis was given to the employee awards program during
the year with the result that 463 suggestions were submitted, or 150
more than in 1954. There were 83 suggestions approved by this
Bureau, or 27 more than last year. Savings amounting to $7,827
on an annual basis are expected to result from these suggestions.
Training.—^A policy statement pertaining to the Bureau's training
program was issued in January 1955. In recognition of the fact that
competent supervisors are essential to effective utilization of manpower and to reduction of operating costs, the greatest emphasis
was placed at the coordinating level on training programs for foremen
ADMINISTRATIVE REPORTS
89
and supervisors. However, since training is an inherent and major
part of the foreman or supervisor job, supervisors were charged with
the responsibility for the planning and provision of means to increase
the effectiveness of their employees through training.
. Sajety.—A review of the-Bureau's safety program and its history
resulted in the following actions: The safety policy was restated;
the Executive Safety Council was disbanded and in its place responsibility for developing and administering safety programs was fixed as
a p a r t of the operating supervisor's functions. Since that time, regular
safety meetings have been held at the operating levels, thus bringing
safety consciousness closer to each employee.
Utilization oj manpower.—From the beginning of the modernization
programs in the Bureau reductions in the working force have been
necessary. Insofar as possible, tbe reductions have been made
through normal attrition. Every effort has been made, moreover,
before applying reduction-in-force procedures, to retain the most
satisfactory employees and to release those whose performance was
below standard. The most significant achievement in this area is
the establishment of revised spoilage standards for plate printers
which provide for future reductions in force based, insofar as possible,
on unsatisfactory performance rather than on seniority. These
standards were developed in cooperation with union representatives.
In response to the need of applying more realistic criteria for satisfactory conduct by employees who work with securities, all the procedural means possible were employed of separating those who failed
to measure up to standards.
Long-range research program
Printing 32-currency subjects to a sheet.—Comprehensive engineering
studies have been initiated with respect to all processes associated
with the iDroduction of currency. Particular emphasis is being
directed toward the development of a press of improved design to
allow the printing, by the dry intaglio method, of 32-currency subjects
to the sheet instead of the present 18. I t is anticipated that such a
press would be designed to encompass the most modern features
known to the printing industry and would be capable of producing
work of the same high standard of quality as that which is now being
produced by the wet intaglio method.
Through the successful development of the desired press the Bureau
is certain that in addition to the economies which can accrue through
increasing the number of subjects per sheet, the use of the dry method
for printing securities would also substantially reduce the amount of
spoiled work currently encountered because of the wide dimensional
variations that occur with the use of wet paper.
During M a y 1955, a cooperative program to improve the physical
properties of currency paper was formulated by the National Bureau of
Standards, Crane and Company, Incorporated, and this Bureau.
The underlying objective of this program is to increase the life of
currency while it is in circulation.
Other research projects include the evaluation of new automatic
equipment for processing and packaging stamps in coil form, the
development of automatic equipment to replace defective notes, and
the extension of the use of counting devices.
90
1955 REPORT OF THE SECRETARY OF THE TREASURY
New issues of stamps
Orders were received and dies were engraved for new issues of postage stamps as follows:
Issue
Denomination
(cents)
First Land Grant Colleges, Commemorative, Series 1955
._
_..
50th Anniversary of the Rotary International, (Commemorative, Series 1955
150th Anniversary of the Pennsylvania Academy of the Fine Arts, Commemorative, Series
1955
.
Armed Forces Reserve, Commemorative, Series 1955
The Old Man ofthe Mountains, Commemorative, Series 1955
Soo Locks Centennial, Commemorative, Series 1955
Atoms for Peace, Commemorative, Series 1955
New issues of ordinary postage stamps produced during the year
include the two cent. Series 1954; one cent, Series 1954; five cent, Series
1954; four cent. Series 1954; and the six cent. Series 1955. Other
new issues of stamps include the two-dollar Federal migratory bird
hunting stamp, Series 1955-56; the 15-cent certified mail stamp.
Series 1955; the 20-cent special delivery stamp. Series 1954; and the
four-cent air mail postage stamp. Series 1954, which is" to be used on
postal cards.
Fiscal Service
The Fiscal Service of the Treasury Department is comprised of the
Office of the Fiscal Assistant Secretary, the Bureau of Accounts, the
Bureau of the Public Debt, and the Office of the Treasurer of the
United States. Their operations are under the general supervision
of the Fiscal Assistant Secretary.
The Fiscal Assistant Secretary, under the direction of the Under
Secretaiy, administers the financing operations o f t h e Treasury; prepares estimates of the future cash position of the Treasury for use of
the Department in its financing; dhects the distribution of funds
between the. Federal Keserve Banks and other Government depositaries; prepares calls for the withdrawal of funds from the special
depositaries to meet current expenditures; directs fiscal agency functions in general; and administers the Treasury responsibilities with
respect to the purchase, custody, transfer, and sale of foreign exchange
acquired by the United States under various executive agreements
with foreign governments in connection with United States programs
operated abroad.
In carrying out the responsibilities of the Fiscal Assistant Secretary,
liaison has to be maintained with the other departments, agencies, and
branches of the Government with respect to their financial operations
and the coordination of these operations with those of the Treasury.
The Fiscal Assistant Secretary supervises the administration of accounting functions and related activities of all units of the Treasury
Department through the Commissioner of Accounts; and carries out,
through the Commissioner of Accounts, the Treasury's role in the
joint accounting improvement program of the Secretary of the Treasury, the Director of the Bureau of the Budget, and the Comptroller
General of the United States in accordance with the Budget and
Accounting Procedures Act of 1950.
ADMINISTRATIVE REPORTS
91
The several responsibilities of the Fiscal Assistant Secretary are
indicated more fully in the operations detailed in the following reports
by the Commissioner of Accounts, the Commissioner of the Public
Debt, and the Treasurer of the United States.
BUREAU OF ACCOUNTS
The Bureau of Accounts maintains the central accounts and prepares the central financial statements of receipts and expenditures,
appropriations, funds, foreign currencies held by the Treasury, and
various other fiscal transactions. I t also writes checks to Government creditors covering obligations incurred by agencies of the executive branch of the Governement, except for the military, the Post
Office Department, and a few smaller agencies; pays claims under
interriational agreements; makes investments for certain trust funds;
makes and collects loans to Government corporations and other
agencies; determines the qualifications of companies to write Government fidelity and contract bonds; performs the administrative work
in connection with the designation of Government depositaries; and
performs other similar fiscal activities.
Accounting, Reporting, and Related Matters
Central reporting
Efforts were continued during the fiscal year 1955 to improve the
reporting of receipts and expenditures of the Government, including
the objective of achieving consistency between the reports of Government agencies and the central reports of the Government relating to
receipts and expenditures. The central reports include the Budget
oj the United States Government, prepared in the Bureau of the Budget;
the Monthly Statement oj Receipts and Expenditures oj the United States
Government, the annual Combined Statement oj Receipts, Expenditures
and Balances oj ihe United States Government, and the monthly Treasury
Bulletin which are prepared in the Bureau of Accounts. The Budget
document, the Combined Statement, and the Final Statement oj
Receipts and Expenditures oj the United States Government for the
fiscal 3^ear 1955 were in substantial agreement with respect to amounts
of expenditures and unexpended balances.
Arrangements were made to receive on a continuing basis from all
fiscal officers of the Government, information concerning cash held
outside the account of the Treasurer of the United States and related
items, such as the amount of deferred vouchers, accounts receivable,
and cash advances. Plans were completed for reporting in the
Combined Statement for the fiscal year 1955, an analysis of the
unexpended balance of each appropriation or fund in terms of availability for future obligation or expenditure. This additional information will make the Combined Statement more useful and is a
further step in the integration of agenc3^-Treasur3^ data.
Beginning with the Monthly Statement oj Receipts and Expenditures
oj the United States Government for the month of July 1955, each
department, agency, and other major organizational unit will be
92
195 5 REPORT OF THE SECRETARY OF THE TREASURY
shown separate^, and in the same sequence as shown in the Budget
document. This classification and arrangement facilitate the comparison of actual expenditures with estimates and increases the utility
of the statement.
A draft of a proposed Treasury regulation has been developed
jointly with the Bureau of the Budget and the General Accounting
Office relating to the submission of business-type financial statements by Government corporations, and enterprises operating as
revolving funds. The regulation, which will replace existing instructions, has been coordinated with reporting requirements under the
budget process, and has as one of its purposes the comparison of
financial progress of agency programs throughout the year with
budget estimates.
Central accounting
The central accounting plan, which encompasses the receipts,
expenditures, and cash operations of the Government, was explained
in the Annual Report of the Secretary of the Treasury for the fiscal
year ended June 30, 1954, p. 97, along with a description of the
simplifications and procedures which were established in 1954.
The Secretary of the Treasury and the Comptroller General of the
United States issued a revision of Joint Regulation No. 4 (see exhibit
54) on April 29, 1955, which further modified the requirements of law
concerning warrant procedures and for designated disbursing agencies
discontinued the use of funded checking accounts in the issuance and
payment of checks drawn on the Treasurer of the United States.
On the same date Treasury Department Circular No. 945, Revised,
(see exhibit 55) was issued to give eff'ect to the changes required in
the framework of the system of central accounts as the result of the
elimination of funded checking accounts.
There follows a list of the regulations issued by the Treasury
Department and the General Accounting Office to establish the required changes in procedure according to Treasury Department
Circular No. 945, Revised, and Joint Regulation No. 4, effective July 1,
1955:
^^Supplement No. 1, Treasury Department Circular No. 945,
Revised May 3, 1955, Regulations Governing the Handling of Certificates of Deposit for Credit in the Account of the Treasurer of the
United States";
^'Supplement No. 2, Treasury Department Circular No. 945,
Revised May 3, 1955, Regulations Concerning Certain Procedures for
the Transition from Funded Checking Accounts to Accounts for Cash
Transactions";
^'Supplement No. 3, Treasury Departmerit Circular No. 945,
Revised May 19, 1955, Regulations Concerning the Establishment of
or Transfer Between Appropriations or Other Accounts Including,
Where Applicable, the Funding of Checking Accounts for the Issuance
and Payment of Checks Drawn on the Treasurer of the United
States"; and
''General Accounting Office General Regulations No. 122, May 5,
1955, Rendition of Disbursing Officers' Accounts to the United States
General Accounting Office." This regulation requires disbursing
oflicers to submit a new form, "Statement of Accountability" (account
ADMINISTRATIVE REPORTS
93
current) supported by a statement of classified receipts and disbursements. These statements will be used by the General Accounting
Oflfice in their independent audit and by the Treasury Department in
their accounting and reporting operations.
The fundamental procedural changes under these regulations were
placed in effect July 1, 1955', at the same time the installation of a
comprehensive system of central accounting in the Treasury was
begun. This system will provide the basis for reflecting in the central
accounts the fundamental financial data relating to the cash operations of the Government. These data include, but are not limited to:
Total checks outstanding, i. e., checks issued by all Government disbursing officers which have not been paid by the Treasurer; the
amount of cash held by fiscal officers outside the account of the
Treasurer of the United States; cleposits in transit between Government agencies and Federal depositaries; the various classes of assets
and liabilities of Government disbursing ofRcers and of the Treasurer
of the United States; the public debt; trust and deposit liabilities;
and budget receipts and expenditures and the resulting surplus or
deficit on a cash basis.
Control of foreign currencies
Activity in this field ^ accelerated with the passage of the Agricultural Trade Development and Assistance Act of 1954, approved
July 10, 1954 (68 Stat. 454), which authorizes, under a three-year
program, the sale of surplus agricultural commodities for foreign
currencies. In order to facilitate the accounting for foreign currency
acquisitions under this act. Supplement No. 1 to Treasury Department Circular No. 930 was issued on December 28, 1954, to providethat collections shall be deposited only with United States disbursing ofRcers attached to American embassies (see exhibit 56).
During fiscal 1955, the United States acquired, without purchase with dollars, the equivalent of nearly $565 million in foreign
currencies. Of this amount, together with the balance brought
forward from 1954, the Treasury sold to United States agencies
foreign currencies valued at $321 million which they paid for from
appropriated funds, and gave to agencies, on their requisition, pursuant to specific provisions of law not requiring reimbursement,
the equivalent of nearly $249 million of foreign currencies, leaving
a balance on hand in the Treasury on June 30, 1955, of $164 million
(see table 114). In addition to this amount the Treasury Department
held for account of various Federal agencies, as of June 30, 1955,
unexpended balances amounting to $182 million, representing foreign
currencies which they had requisitioned from the Treasury under
specific provisions of law not requiring reimbursement from applicable
appropriations. Detailed statements showing acquisitions and dispositions for fiscal 1955, according to country and source, respectively,
are given in tables 115 and 116.
Other accounting and procedural matters
Within the Treasury, technical guidance and assistance were given
the individual bureaus on systems, day-to-day accounting, reporting,
and procedural problems. In participation with the General Account1 For basis of control, see the Annual Report for 1954, p. 101.
94
1955 REPORT OF THE SECRETARY OF THE TREASURY
ing Office and the Bureau of the Budget, procedures were developed to
put into eft'ect the Federal Employees' Group Life Insurance Act of
1954, approved August 17, 1954 (68 Stat. 736-743); to extend the
use of the depositary receipt system for the withholding of income
taxes to the Post Office Department, the Military departments, and
Government corporations; to develop further the accounting for
foreign currency transactions; arid to provide a new tabulating card
form of Government transportation request. Also, a joint study
was made of the effect of proposed legislation which would require the
withholding of city income taxes from the compensation of Federal
employees. Assistance was given to the Bureau of the Budget in
establishing improved procedures whereby States and other taxing
jurisdictions are furnished information for income tax purposes on
wages paid to Federal employees.
Internal audit and appraisals
Internal auditing of the Bureau of Accounts' operations was
intensified during the year and formal audit procedure was developed
where possible for use in subsequent audits. The audit included the
examination of the transactions and fiscal procedures of the Federal
old-age and survivors insurance trust fund, the unemployment trust
fund, and the Bureau^s administrative accounts and similar records.
Recommendations by the auditor resulted in improved records,
more concise reports, and the elimination of records no longer needed.
The Bureau also made the annual appraisal of the Commodity
Credit Corporation. Under the act of March 8, 1938, as amended
(15 U. S. C. 713a-l), the Secretary of the Treasury is required to
make an appraisal as of June 30 of each year of the assets and liabilities
of the Commodity Credit Corporation to determine the net worth of
the Corporation. In the event that any such appraisal shall establish
that the net worth of the Corporation is less than $100,000,000 the
Secretary submits an estimate and recommends that the Congress
appropriate the funds necessary to eliminate the capital impairment.
In the event that any appraisal establishes that the net worth of
the Corporation is in excess of $100,000,000 such excess must be
deposited by the Corporation in the Treasury as miscellaneous
receipts. The act of March 20, 1954 (68 Stat. 30), which amended
the act of March 8, 1938, changed the appraisal basis from the lower
of cost or market for the month of June to a cost basis beginning
with the fiscal year ended June 30, 1954. I t was the intent of the
Congress that future appropriations would be reduced by the amount
that the restoration of capital for prior years exceeded realized net
losses for such years.
The appraisal of the Corporation's assets on the new basis as of
June 30, 1954, established that there was a capital impairment of
$588,501,678.00. The estimated appropriation covering this appraisal was reduced by $545,534,182.00, representing the restorations
for prior years in excess of realized riet loss, and $41,332,837.00 which
was recoverable by an appropriation authorized under the act
approved September 30, 1950 (42 U. S. C. 1855). Therefore, the
net amount estimated for an appropriation under the appraisal was
$1,634,659.00 which was included in the Department of Agriculture
and Farm Credit Appropriation Act, 1956, approved May 23, 1955.
ADMINISTRATIVE REPORTS
95
A statement showing the amounts restored to the Corporation for its
capital impairment by appropriations or by cancellation of obligations
of the Corporation covering those 3^ears for which the appraisal determined that the net worth of the Corporation was less than $100,000,000, together with the appraisal dates and amounts of deposits into
the Treasury for those years when the appraisal established that the
net worth of the Corporation was in excess of $100,000,000, appears in
table 81.
Other Bureau Operations and Management
Other operations and management improvements of the Bureau are
summarized as follows:
Federal depositary system
Government depositaries provide the various departments and
agencies with certain banking and financial services other than those
provided by the Office of the Treasurer of the United States and the
Bureau of the Mint. In addition to the Office of the Treasurer of the
United States and the twelve Federal Reserve Banks and their
branches, the depositaries consist of more than 11,000 commercial
banks designated by the Secretary of the Treasury. The supervision
of the depositaries, under the general direction of the Fiscal Assistant
Secretary, is exercised through the Bureau and is administered through
Department regulations governing the authority, qualifications, and
other requirements applicable to the depositaries.
In a letter dated October 29, 1954, the Secretary transmitted to the
Honorable Wright Patman, House of Representatives, a memorandum
giving the history of the depositar}^ practice of the Treasury Department, legislative authority therefor, and other information concerning
the maintenance of deposit accounts by the Government in commercial
banks. The letter and memorandum appear as exhibit .44.
Disbursement operations
The Division of Disbursement makes payment for all departments
and agencies of the executive branch of the Government except for the
Department of Defense, the Post OfRce Department, the United States
marshals, the Panama Canal, and certain corporations, and for certain
agencies where delegations have been made. These disbursements are
made from appropriated, trust, and deposit funds. Also, the Division
issues substitute checks as replacements for checks lost, destroyed,
stolen, or mutilated after their issuance; and issues United States
savings bonds to Federal employees under the payroll savings plan.
The Division, through the use of its mechanical equipment and facilities which produce checks, also prepares payrolls, vouchers, and record
cards for the agencies for which payments are made.
These services are provided b}^ the Division through its 26 regional
disbursing offices, 22 of which are located in the continental United
States, three in Territories and one in the Phihppines, for more than
1,300 separate United States Government offices throughout the
United States and Territories. In addition, the Division of Disbursement serves as the focal point in arranging for foreign disbursing service
for all agencies of the United States Government, except for regular
foreign establishments of the Department of Defense, and exercises
96
195 5 REPORT OF T H E SECRETARY OF T H E TREASURY
technical supervision over the disbursing operations performed under
a delegation of authority from the Chief Disbursing Officer in the case
of: 237 foreign disbursing offices and branches at embassies and consulates in all foreign countries; 106 assistant disbursing officers attached to agencies in the United States, South and Central America,
and other foreign countries; and 865 agent cashiers making on-the-spot
cash payments in the United States, the Territories, and foreign
countries.
Material savings were realized in the fiscal year 1955 through further
improvements in mechanical processes and streamlining procedures
carried out under the management improvement program. Overall
savings in the fiscal year 1955 amounted to $504,333.00. The unit
cost for producing checks was reduced from 4.9 cents per item in the
fiscal year 1954 to 4.6 cents in the fiscal year 1955. Through the
closing of four regional offices during the last month of fiscal 1955
considerable savings in operating costs will be realized in the future.
Legislation was enacted during the year providing for a change in the
rates of pension for veterans and social security annuitants, and in the
salary rates for Federal employees which required changing approximately 10 million plates used in mechanically writing checks to make
these payments. Less than ninety days after enactment of such
legislation, the changes were made in the plates to reflect new rates.
This operation was accomplished without delaying the issuance of
checks to the payees and at the minimum possible effort by the
Government agencies and the Division of Disbursement.
The number of payments, collections, adjustments, and transfers
made, and savings bonds issued by the Division of Disbursement during the fiscal year 1955 compared with those in the preceding year as
follows:
Number
Classification
1954
Payments:
SocialSecurity
V e t e r a n s ' benefits
I n c o m e tax refunds
..
V e t e r a n s — N a t i o n a l service life insurance d i v i d e n d p r o g r a m
other
.- ..- . . .- . . . . . .
Collections
A d j u s t m e n t s a n d transfers
.. ..
.
Savings b o n d s issued t o Federal employees u n d e r t h e payroll savings p l a n . . .
Total
1955
68, 666, 641
. 65,294,935
32,491,827
4,868, 977
'••27,866,226
' 5, 276,825
79, 720,034
59,883,479
33,447,025
4,085,762
32,004,114
(')
844,805
2, 529,027
2, 512, 771
«• 206,978,202
212,514, 246
"• Revised.
1 Collections are required to be deposited directly by agency collection oflicers with designated depositaries under Department Circular No. 937, issued January 18, 1954. Deposits required as the result of
the transfer of funds and adjustments continue to be made by the Treasury Department.
Government losses in shipment claims
By a self-insurance plan the Government assumes the risk on its
shipments of valuables, including money, bullion, and securities, while
in transit between the Treasury, or between officials of the Government departments and agencies, and depositaries. The plan, which
was established by the provisions of the Government Losses in
Shipment Act (5 U. S. C. 134-134h; 31 U. S. C. 757c (i); and 37
ADMINISTRATIVE REPORTS
97
U. S. C. 35 (e)), which supplanted contracts with private insurance
companies, effective July 1, 1937, is administered by the Treasury
Department. The Bureau of Accounts receives from Government
departments and agencies consolidated reports of their shipments
made under coverage of the act, and is responsible for payment of
claims under the act.
Shipments reported under the act in fiscal 1955 were valued at
$591.2 billion as compared with those valued at $561.2 billion in 1954.
During 1955, claims amounting to $21,382 were paid from the revolving fund established under the act. Recoveries amounted to
$1,202 and were deposited to the credit of the fund, making a net
expenditure of $20,180 for losses. The estimated insurance premium
savings accrued to the Government for shipments made during the
year, based on rates of private insurance companies in effect at the
time the fund was established, were $5,366,000.
Surety companies
The Secretary of the Treasury issues certificates of authority to
corporate sureties, making application and qualifying under the act
approved July 30, 1947 (6 U. S. C. 8), to execute bonds in favor of the
United States. Companies currently holding certificates of authority
are listed on Form 356, Revised, which is published annually on or
about May 1 by the Treasury. The Bureau of Accounts examines
the applications of companies requesting authority to write such bonds
and currently reviews the qualifications of the companies so authorized.
I t also has custody of all fidelity bonds in favor of the United States,
except those filed with the Post Office Department and the Federal
courts, and notifies the accounting officers of the receipt and filing of
such bonds. The Bureau of Accounts examines and approves as to
corporate surety all fidelity and surety bonds with the few exceptions
noted.
As of June 30, 1955, there were 150 companies holding certificates
of authority qualifying them as sole sureties on recognizances, stipulations, bonds, and undertakings permitted or required by the laws
of the United States to be given with one or more sureties. There
were also 15 companies holding certificates of authority as acceptable
reinsurers only, issued under Department Circular No. 297, as amended.
During the year certificates of authority were issued to three companies
qualifying them as sole sureties on bonds in favor of the United States
and the certificate of authority of one company was revoked. Certificates of authority were issued to five companies as acceptable reinsurers only, under Department Circular No. 297, as amended.
During the year, 55,619 bonds and consent agreements examined by
the Bureau were approved as to corporate surety.
Withholding of State income taxes
Agreements were made during the year with the States of Idaho,
Maryland, and Montana to withhold State income tax from the
compensation of Federal employees regularly employed in those States,
making a total of nine States and two Territores having such agreements as of June 30, 1955. The agreements were made under the act
of July 17, 1952 (5 U. S. C. 84b, 84c), providing for withholding of
State and Territorial income taxes from such compensation.
356812—56
8
98
195 5 REPORT OF THE SECRETARY OF THE TREASURY
Implementation of new legislation
Procedures were devised for making effective in the Treasury
Department the provisions of Section 1311 of the Supplemental
Appropriation Act, 1955 (68 Stat. 830), defining the types of transactions that will be recognized as valid obligations against appropriations and establishing reporting requirements therefor. Designations
were made of the officers of the Treasury Department authorized to
make the certifications required supporting the reports submitted
under the act (Treasury Department Order No. 177-3, October 26,
1954, exhibit 53).
Regulations and procedures were issued to carry into effect, within
the Treasury Department, the provisions of the act of July 15, 1954
(68 Stat. 482), which authorizes the riBcovery of erroneous payments
from employees through current withholding of compensation (Department Circular No. 871, First Supplement, November 12, 1954,
exhibit 57) and also to supplement the fiscal provisions of the Revised
Organic Act of the Virgin Islands, approved July 22, 1954 (68 Stat.
497).
. . .
The Government Actuary
Actuarial and allied technical analyses are prepared by the Government Actuary, including actuarial estimates for Federal trust funds
as required b}^ statute. The Secretary of the Treasury is charged with
the duty of handling the investments and other operations of most
of these funds.
For the Secretary of the Treasury, there were prepared during 1955
the regular estimates of the annual appropriations required to be
made to the foreign service retirement and disability fund and to the
District of Columbia teachers' retirement and annuity fund. In
addition,, the Government Actuary prepared mathematical and
statistical analyses in connection with certain phases of public debt
operations.
Management improvement
Savings on an annual basis resulting from measures taken under the
management improvement program during 1955 were estimated at
$645,000.00. Contributing to these savings were a reorganization
in field offices involving the closing of four regional offices and realignment of functions in others, simplification of documents supporting payments, extension of mechanization and use of improved
designs of equipment, suggestions received under the cash awards
program, and use of imprest funds to make payment for small purchases.
Employees of the Bureau submitted 165 suggestions under the cash
awards program. Adopted suggestions numbered 66 on which
awards aggregating $1,380 were approved. There were also 21 outstanding and superior work performance awards involving 24 emplo37^ees.
Several manufacturers of electronic equipment have recently
announced the development of high-speed machines adaptable to
the production of checks issued for periodic payments. The use of
such equipment for check-issue operations of the Treasury Department is being studied.
ADMINISTRATIVE REPORTS
99
The management engineering firm which surveyed operations of
the Fiscal Service made 13 recommendations relating to organization and procedures of the Bureau of Accounts. By the close of the
fiscal year 6 of these recommendations had been adopted by the
Treasury. The others are under consideration.
Investments of trust and other funds
The Bureau of Accounts, at the direction of the Secretary of the
Treasur}^^, and in accordance with various provisions of law, is charged
with the investment in United States obligations of (certain trust
and other funds.
Investment accounts of the Government are maintained along
with records of securities held in safekeeping by the Treasurer of the
United States and Federal Reserve Banks subject to the order of the
Secretary. The various investment accounts for which the Secretary
of the Treasury is responsible are shown in a summary in table 52.
The facilities of the Treasury, through the Investments Branch, also
are used for handling investment transactions for other agencies of
the Go viernment, for quasi-governmental funds, and for the Government of the District of Columbia. During the year the rate of interest paid on special obligations issued to the civil service retirement
and disability fund was reduced from 4 percent to 3 percent to correspond with the prevailing yields in the market for outstanding
Government securities.
Treasury Loans, Interest, Dividends, and Various Other Receipts
Among the duties of the Bureau of Accounts are the development
of agreements relating to loans made to Government corporations
and other agencies which are authorized to borrow from the Treasury.
I t also maintains the records relating to such loans and to capital
subscriptions to such agencies, and receives and records interest,
dividends, and certain other special receipts required to be paid into
the Treasury.
Loans
The act of May 13, 1954 (68 Stat. 93), established the Saint Lawrence
Seaway Development Corporation to construct part of the Saint
Lawrence Seaway in United States Territory in the interest of national
security. The act authorized and empowered the Corporation to
issue to the Secretary of the Treasury from time to time, with certain
provisos, its revenue bonds, in an amount not exceeding $105,000,000
outstanding at ariy one time. The act also authorized and directed
the Secretary of the Treasuiy to purchase any of these obligations
of the Corporation. During the fiscal year 1955, the Secretaiy of
the Treasury purchased the first obligations of the Corporation under
this authority in the amount of $2,700,000.
Table 76 shows the advances made on loans by the Treasury to
' other Government corporations and business-type activities, the
repa3^ments, cancellations, and balances for the fiscal year 1955.
Under Section 16 of the Refugee Relief Act of 1953, approved
August 7, 1953 (50 U. S. C. App. 1971n), the Secretary of the Treasury
is authorized and directed to make loans not to exceed $5,000,000 in
the aggregate to public or private agencies of the United States to
100
195 5 REPORT OF THE SECRETARY OF THE TREASURY
finance the transportation of certain persons receiving immigrant
visas under the act from ports of entry to places of their settlement
in the United States. Applications for loans aggregating $179,000
were received under authority of this act, of which $50,000 was disbursed in the fiscal year 1955. There had been received by the
Treasury Department, as of June 30, 1955, twenty-eight letters from
the Department of State certifying that the organizations named
were eligible to make applications for loans.
Deposits of interest charged on Federal Reserve notes
Annual payments of approximately 90 percent of the net earnings
of the Federal Reserve Banks have been made to the United States
Treasury since 1947, pursuant to Section 16 of the Federal Reserve
Act (12 U. S. C. 414), which authorizes the Board of Governors of
the Federal Reserve S37^stem to charge interest on the amount of
outstanding notes which are in excess of the amount of gold certificates held against the notes as collateral.
The amount deposited in the fiscal 3^ear 1955 was $251,226,266 as
contrasted with the deposit of $340,786,022 in 1954. The total
deposits since 1947 have amounted to $f,850,161,480 as shown in
table 14.
Donations and contributions
During the fiscal year 1955, the Treasury Department deposited in
the general fund donations, amounting to $62,712 and so-called '^Conscience fund^' contributions amounting to $63,419. Also $155,933
was deposited in the Library of Congress trust funds, permanent loan
account, of which $48,136 represents sale of securities donated in
prior years.
The act of July 27, 1954 (68 Stat. 566), authorized the acceptance
of conditional gifts to further the defense effort and placed on the
Secretary of the Treasury certain new responsibilities with regard to
gifts of money or other intangible property. The functions of the
Secretary of the Treasury under the act were delegated to the Fiscal
Assistant Secretary by Treasuiy Department Order No. 177-4 of
January 18, 1955 (exhibit 53), and regulations governing the acceptance
of such gifts were promulgated by Treasury Department Chcular No.
957, dated February 24, 1955 (exhibit 58).' The Administrator of the
General Services Administration concurrently issued regulations with
respect to gifts of real or personal property received under the provisions of the act (General Services Administration, General Regulation No. 17, dated April 15, 1955).
Conditional gifts in the amount of $764,841 were received in the
fiscal year 1955 to further the defense effort. As of June 30, 1955,
$763,357 of this amount had been accepted by the Treasury.
International Obligations
World War I indebtedness
The Treasury received payments aggregating $395,999.36 from
Finland, representing installments of principal and interest which
came due in December 1954, and June 1955, under the funding agreement of May 1, 1923, and the moratorium agreements of May 1, 1941,
ADMINISTRATIVE REPORTS
'
101
and October 14, 1943, relating to its indebtedness growing out of
World War I. This amount was made available to the Department
of State for financing educational and scientific studies in Finland and
the United States in accordance with provisions of the act of August
24, 1949 (20 U. S. C. 222).
Tables 117 and 118 show the status of World War I indebtedness
of foreign governments to the United States.
Mixed Claims Commission, United States and Germany
In April 1955 the thhd annual installment in the amount of
$3,000,000 was received from the Federal Republic of Germany, under
the terms of the agreement signed at London on February 27, 1953, in
partial settlement of German debts arising from World War I. A
summary of the terms of this agreement is included in the Annual
Report for 1954, p. 109.
This payment, together with a payment of $701,974.86 received from
the Department of Justice, representing a part of the residue of German
property seized by the Government during World War I, enabled a
further distribution of 6 percent on account of interest accrued on
Class I I I awards (those over $100,000) of the Mixed Claims Commission, United States and Germany.
A statement showing total payments on awards of the Mixed
Claims Commission under the Settlement of War Claims Act of 1928
by classes, and the status of the accounts as of June 30, 1955, is shown
in table 110.
World War II indebtedness
In fiscal 1955 under the lend-lease and surplus property agreements,
the Treasury Department received from debtor governments, payments in United States dollars amounting to $84.7 million; foreign
currencies having a United States dollar equivalent of $24.4 million;
and real property acquisitions and improvements to real property
having a dollar value of $0.7 million, resulting in credits against
receivables totaling $109.8 million. Payments in foreign currency and
real property acquisitions and improvements from inception of the
lend-lease and surplus property programs represent values having a
total United States dollar equivalent of $283.1 million.
The aggregate of dollar receipts and other credits since inception
of the program amounts to $2,444.7 million.
The indebtedness of foreign governments under lend-lease and
surplus property sales agreements is stated in table 119. As of June
30, 1955, the accounts receivable amounted to $2,340.6 million, including $283.2 million for silver transferred under the lend-lease program,
the repayment of which is to be made in silver of a like kind and
quantity.
Credit to the United Kingdom
The fourth annual payment in the amount of $119,336,250.00 on the
loan of $3,750,000,000.00 under the Anglo-American financial agreemerit, dated December 6, 1945, was made by the United Kingdom on
December 31, 1954, of which $72,286,266.82 was apphed to interest,
and the balance of $47,049,983.18 applied to principal. The remaining indebtedness under this loan amounted to $3,567,263,357.32 as of
June 30, 1955.
102
195 5 REPORT OF THE SECRETARY OF THE TREASURY
Agreement with Germany for settlement of postwar economic assistance
Interest payments in the amount of $12,500,000 each were received
from Germany on July 1, 1954, and January 1, 1955, in accordance
with the agreement signed February 27, 1953, by the Federal Republic of Germany and the United States, providing for the settlement of
the claim of the United States Government for postwar (World War
II) economic assistance furnished to Germany. No payment will be
due on the debt principal of $1,000,000,000.00 until July 1, 1958.
Payment of claims against the Yugoslav Government
As of December 30, 1954, the Foreign Claims Settlement Commission (formerly the International Claims Commission of the United
States) completed the adjudication of claims of United States nationals
against the Yugoslav Government arising out of the nationalization
or taking of property by Yugoslavia, and the certification of awards to
the Treasury Department for payment. The total principal of
awards certified to the Treasury Department is $18,817,904.89.
The total amount which will be available for distribution on such
awards is $17,000,000.00 paid for such purpose by Yugoslavia on
August 21, 1948. The total amount disbursed on awards through
June 30,01955, was $9,215,649.12. I t has been necessary to limit
payment on awards o\'er $1,000 to approximately 40 percent pending
the outcome of litigation brought by certain claimants. If the litigation does not change the aggregate amount of awards certified to the
Treasury it will be possible to pay about 90.2 percent of the principal
of awards over $1,000.
Organization for European Economic Cooperation, European Productivity Agency
In the fiscal year 1955 withdrawals were made in the amount of
$250,000.00 from the account for the Organization for European
Economic Cooperation, European Productivity Agency maintained
by the Secretary of the Treasury, as described in the Annual Report
for 1954, p. 111. A total of $750,000 has been disbursed since establishment in 1953 of the account, which had a balance of $1,750,000
as of June 30, 1955.
United Nations Relief and Works Agency for Palestine Refugees in the Near East
During the fiscal year ended June 30, 1955, $16,700,000 was transferred by the Department of State to the Treasury Department account for contributions to The United Nations Relief and Works
Agency for Palestine Refugees in the Near East from appropriations
availalDle for such purpose and $23,500,000 was withdrawn by the
agency from the Treasury Department account. Total transfers to
the Treasury account since inception amount to $51,700,000 of which
$32,000,000"had been withdrawn as of June 30, 1955.
Pre-1934 bonds of the Government of the Republic of the Philippines
The Treasury is servicing paymerit of the principal and interest on
pre-1934 bonds of the Government of the Republic of the Philippines
by use of funds in the special trust account established in the Treasury
under the Philippine Independence Act, approved August 7, 1939 (53
Stat. 1229). The status of the special trust account is shown by table
72.
ADMINISTRATIVE REPORTS
103
American-Mexican Claims Commission
During the fiscal year 1955, the Government of the United Mexican
States made an additional payment of $2,500,000.00 under the Convention of November 19, 1941, whereby Mexico agreed to pay $40
million in full settlement of the claims of American nationals adjudicated by the American-Mexican Claims Commission. This enabled
a further distribution of 6 percent on the principal amount of each
award, making a total distribution of 95.6 percent. A statement of
the Mexican claims fund as of June 30, 1955, appears as table 109.
Withheld foreign checks
Prohibition of the delivery of Government checks to payees residing
in certain foreign areas continued during 1955 under Treasury Department Circular No. 655, dated March 19, 1941, as amended. This
restriction applied to the following areas: Albania, Bulgaria, Communist-controlled China, Czechoslovakia, Estonia, Hungary, Latvia,
Lithuania, Poland, Rumania, the Union of Soviet Socialist Republics,
the Russian Zone of Occupation of Germany, and the Russian Sector
of Occupation of Berlin. In addition, delivery of checks to nationals
of Communist China and North Korea is prohibited by Foreign Assets
Control regulations issued by the Secretary of the Treasury on December 17, 1950, except to the extent that delivery has been authorized
by appropriate license.
BUREAU OF THE PUBLIC DEBT
The Bureau of the Public Debt, in connection with the management
of the public debt, performs the administrative work which includes
the preparation of offering circulars, instructions, and regulations pertaining to each issue, the issuance of securities and the conduct or
direction of transactions in outstanding issues, the final audit and custody of retired securities, the maintenance of the control accounts
covering all public debt issues, and the keeping of individual accounts
with owners of registered securities and the issue of checks in payment
of interest thereon.
Two principal offices are maintained, one in Washington, D. C ,
which issues and conducts the subsequent transactions in outstanding
public debt securities (including governmental agency securities) other
than savings bonds, and audits and maintains custody of these securities as they are retired; the other in Chicago, 111., where the functions
relate to transactions in savings bonds after their issue to the public.
In addition to the two principal offices, three field regional offices,
located in New York, Chicago, and Cincinnati, are maintained for the
purpose of auditing retired savings bonds and preparing records refiecting their retirement.
Bureau administration
Management improvement.—Th.Q Bureau has continued to direct its
effort toward reducing operating costs without impairing its ability to
dispatch its responsibilities properly. Some of the most promising
areas of improvement in the long-range program are indicated in
changes proposed or procedural realignments approved during the
year.
104
195 5 REPORT OF THE SECRETARY OF THE TREASURY
On December 29, 1954, savings bonds of the $50 and $100 denomination were authorized to be printed wholly by the offset process instead
of the intaglio printing process. Offset printing of the $25 denomination had been authorized a 3^ea;r earlier and resulted in appreciable
savings in production costs.
The Treasuiy Department announced on June 17, 1955, that as a
further step in its program to reduce operating expenses, it will reuse
marketable public debt securities in bearer form which are taken in
for denomination exchange or for transfer from one Federal Reserve
Bank to another, and which are not soiled or damaged. It is estimated that over a half-million pieces of marketable bonds, notes,
certificates of indebtedness, and Treasury bills can be reused each
year.
Previously all marketable securities taken in for these purposes have
been canceled and put through the retirement process, and new securities issued. The expense now incurred in printing new securities
and processing the canceled securities required for these transactions
will be eliminated. This saving will be appreciable on an annual
basis.
Effective at the close of business March 31, 1955, the acceptance of
savings bonds for free safekeeping was terminated. Since then, the
Federal Reserve Banks and the Treasurer of the United States have
not accepted additional bonds for safekeeping except from the Armed
Forces of the United States for their members. Savings bonds held
in safekeeping on March 31, 1955, will continue to be so held until
withdrawn.
In the Chicago departmental office an overall evaluation of operating
procedures was completed to determine the effectiveness of current
operations, to develop improvements, and to standardize procedure
manuals. Substantial savings are expected to result from a series of
changes in savings bonds registration stub procedures. The chariges
include modification of the alphabetical film review, simplification of
the method of correcting sequence errors on film, the discontinuance
or simplification of various reports and records, the realignment of
certain organizational functions, and the discotitinuance of the audit
film on Series F and J bond stubs.
During 1955, as a further development in the revised redemption
procedures, the preparation of statements and drafts covering fees ti3
paying agents for redeeming savings bonds and armed forces leave
bonds was centralized in Washington. Redeemed and retired bearer
securities are being microfilmed immediately after audit, and consideration is being given to destro3ang these securities promptly after the
filming instead of storing them for a prescribed retention period.
Claims procedures covering both marketable issues and savings bonds
have been reviewed in the interest of effecting economies in operation.
Forms have been adopted which will be simpler and clearer, and will
expedite the processing of claims.
Among the forward-looking programs of the Bm-eau are two studies
that offer interesting possibilities. An Electronic Committee has been
appointed to study the possible application of electronic machines to
the processes connected with issue and redemption of savings bonds,
which are in sufficient volume to off'er a possible field for the effective
utilization of such equipment. A second study is aimed at revising the
ADMINISTRATIVE
105
REPORTS
public debt accounting system and applying to that system up-to-date
equipment and techniques. Significant developments in both of these
fields are anticipated during the next year.
In addition the Personnel Office has reactivated the formal training
program of. the Bureau. This program, is used for supervisor3^ training
and development, and it also provides a valuable medium, through
which training and program m.aterials of all kinds can be communicated to selected groups of employees.
Participation in the new incentive awards program has been very
satisfactor3^ A total of 190 contributions were received during the
7 months the program was in operation. Cash awards during the
period totaled $4,275. Of these, 31 awards, amounting to $1,830,
were for contributions expected to produce tangible savings of $64,655
during the first year. The other 39 awards, aggregating $2,445, were
for contributions having intangible monetary savings but contributing
to the efl'ectiveness of operations and service to the public.
Bureau operations
The public debt.—A summary of public debt operations handled by
the Bureau appears on pages 24 to 29 of this report, and a series of
statistical tables dealing with tbe public debt will be found in tables
16 to 50.
The public debt of theUnited States falls into two broad categories:
(1) public issues, and (2) special issues. The public issues are classified
as to marketable obligations, consisting chiefly of Treasury bills, certiflcates of indebtedness. Treasury notes, and Treasmy bonds; and nonmarketable obligations, consisting chiefl37" of United. States savings
bonds, Treasuiy bonds of the investment series, and Treasur3^ savings
notes. Special issues are issued by the Treasury directly to various
Government funds and payable only for account of such funds.
During the flscal year 1955 the gross public debt increased by
$3,115million and the guaranteed obligations held outside theTreasury decreased by $37 million. T h e . most signiflcant change in
the composition of the outstanding debt during the 3^ear was the
increase of $4,852 million in m.arketable obligations. Total public
debt issues, including issues in exchange for other securities, am.ounted
to $180,703 m.illion during 1955, and retirements am.ounted to $177,589
million. The following statem.ent gives a comparison of the changes
during the flscal 3^ears 1954 and 1955 in the various classes of public
debt issues.
Increase, or decrease ( - )
(In millions of dollars)
Classification
1954
Interest-bearmg debt:
Treasury bonds, investment series
Treasury savings notes
United States savings bonds.
Marketable obligations
Special issues
._
other
_
_
._
_
Total interest-bearing debt
Matured debt and debt bearing no interest
Total
-
_
.
_.
-
_
._
_. _.
.__
.
1955
-513
626
176
3,020
1,691
-35
-186
-3,166
304
4,852
1,022
6
4,964
225
2,832
283
5,189
3,115
106
195 5 REPORT OF THE SECRETARY OF THE TREASURY
United States savings bonds.—In. terms of volume of work, the issue
and redemption of United States savings bonds represent the largest
administrative problem of this Bureau. Since these bonds are in
registered form and in the hands of millions of people, establishing and
maintaining alphabetical and numerical records of more than 1.7
billion of these bonds, replacing lost, stolen, and destroyed bonds, and
handling and recording retired bonds present administrative tasks of
considerable magnitude.
Receipts from the sales of savings bonds during the year were
$6,473 million and accrued discount charged to the interest account
and credited to the savings bonds principal account amounted to
$1,231 million, a total of $7,704 million. Expenditures for redeeming savings bonds charged to the Treasurer's account during the year,
including matured bonds, amoimted to $7,251 million. The amount
of savings bonds of all series outstanding on June 30, 1955, including
accrued discount and matured bonds, was $58,643 million, an increase
of $454 million over the amount outstanding on June 30, 1954. Detailed information regarding savings bonds will be found in tables
35 to 40, inclusive, of this report.
During the fiscal year 1955, 87.0 million stubs representing issued
bonds of Series E were received for registration, making a total of
1,714.3 million, including reissues, received through June 30, 1955.
These original stubs are flrst arranged alphabetically in semiannual
blocks, by name of owner, and microfilmed. They are then arranged
in numerical sequence of their bond serial number in a full calendar
year file and microfilmed, .after which they are destroyed. The
microfilms serve as permanent registration records. Of the 1,714.3
million Series E bond stubs received as of June 30, 1955, 1,457.8
million have been completely processed and destroyed, leaving a balance of 256.5 million stubs in process at various stages of completion.
The following table shows the processing, by steps, of the registration
stubs of Series E savings bonds.
S t u b s of issued Series E savings b o n d s i n Chicago office ( I n
millions of pieces)
Alphabetically
sorted
Period
Stubs
received
C u m u l a t i v e t h r o u g h J u n e 30, 1950
Fiscal year:
1951
1952
1953—__
1954..-.
1955
Total
Restricted basis
sorti
Alphabetically
filmed
F i n e sort
prior t o
filmmg 2
Numerically
filmed
Destroyed
after
filming
1,314.8
1,301.3
1, 254. 5
1, 223.8
1,218.1
-
65.5
76.0
82.8
88.2
87.0
60.5
72.2
84.0
89.0
88.4
66.2
67.3
59.8
82.099.3
63.8
57.1
62.3
82.2
88.1
41.7
27.5
66.4
72.7
25.7
36.4
32.2
67.9
73.3
.29.9
...
1, 714. 3
1, 695. 4
1, 649. 6
1, 608. 0
1,457.8
1,457. 8
1, 275.0
1 Not in complete alphabetical arrangement but sorted to such a degree that individual stubs can be
located. Includes those stubs fine sorted.
2 Completely sorted.
ADMINISTRATIVE
107
REPORTS
The audit of retired'^.savings bonds'^is'^conductedfjin the regional
offices of the Register of the^jTreasury. There were 99.0 million retired savings bonds of all series received in the regional offices during
the year. Retired bonds are audited and then microfilmed, after
which the bonds may be destroyed. The bonds of all series received
in these offices have been audited, microfilmed, and destroyed to the
extent indicated in the following table.
R e t i r e d savings b o n d s of a l l series i n regional oflices ( I n
millions of pieces)
Period
C u m u l a t i v e t h r o u g h J u n e 30, 1950
Fiscal year:
1951
1952
1953..
1954
1955..
Total
-_
—
Bonds
received
Audited
Microfilmed
Balance
unaudited
Balanee
unfilmed 1
406.4
402.0
376.4
4.4
30.0
317.2
92.1
82.4
88.4
97.3
99.0
94.2
82.8
88.5
96.0
98.1
101.7
85.2
92.1
95.5
• 98.7
2.3
1.9
1.8
3.1
4.0
20.4
17.6
13.9
M.6
4.9
79.2
88.6
111.0
81.6
102.0
2 865. 6
861.6
849.6
4.0
4.9
779.6
Destroyed
«• Revised.
> Beginning Juhe 30, 1954, excludes 9.4 million pieces of unfilmed spoils transferred to permanent storage
and 1.7 million pieces of unissued stock to be destroyed without microfilming.
2 Includes 825.1 mOlion pieces of redeemed Series A-E bonds.
After the retired bonds have been audited in the regional offices,
a listing of the serial numbers is transmitted to the Chicago departmental office where the serial numbers are posted to numerical registers, and the postings are verified. The following statement shows
the status of the posting of all series of retired savings bonds.
R e t i r e d savings b o n d s of all series recorded in Chicago oflice
(In millions of pieces)
Period
C u m u l a t i v e t h r o u g h J u n e 30, 1950
Fiscal year:
1951
1952
1953
1954
1955
Total
.
-
N u m b e r of
retired
bonds
reported
S t a t u s of posting
Posted
Verified i
Unposted
Unverified i
866.7
862.9
857.9
3.8
5.0
89.8
85.5
87.7
94.6
101.3
90.7
88.1
88.0
89.9
102.7
93.4
88.2
87.5
88.7
23.7
2.9
.3
2.3
2.2
2.7
3.9
1, 325. 6
1,322.3
1, 239. 4
3.3
4.7
3.3
1 Since October 1954, only a 7% test verification has been made.
Of the 93.3 million Series A - E savings bonds redeemed prior to
release of registration and received in the regional offices during the
year, 88.8 million, or 95.2 percent, were redeemed by nearly 17,700
paying agents, who were reimbursed for this service in each quarteryear at the rate of 15 cents each for the first 1,000 bonds paid and 10
cents each for all over the first 1,000. The total amount paid to agents
108
1955 REPORT OF THE SECRETARY OF THE TREASURY
on this account during the year was $11,032,937, which was at the
average rate of 12.42 cents per bond.
The following table shows the number of issuing and paying agents
for Series A - E savings bonds, by classes.
J u n e 30
Post
offices
Banks
Building
a n d savings a n d
loan
associations
Credit
unions
Companies
operating
payroll
plans
All
others
Total
I s s u i n g agents
1951-.
1952..
1953-.
1954..
1955..
24, 720
24, 434
24, 415
i 3,198
1 2, 476
15, 276
15, 333
15, 380
15, 607
15, 692
1, 551
1, 559
1,536
1,534
1,555
511
503
464
440
428
3,071
3,090
3.039
2,997
2,942
640
594
591
606
588
45, 769
45, 513
45, 425
24, 382
23, 681
59
57
57
55
56
16,866
17,023
17,143
17, 519
17, 652
P a y i n g agents
1951..
1952..
1953.
1954.
1955.
15, 747
15, 851
15, 906
16, 220
16, 269
922
976
1,042
1,106
1,188
138
139
138
138
139
1 E s t i m a t e d b y t h e P o s t Office D e p a r t m e n t .
During the fiscal year 1955, 7,607,242 interest checks were issued,
on current income type of savings bonds with a value of $414,334,083.
This was a decrease of 426,852 checks from the number issued during
1954, and a decrease of $14,413,656. A total of 331,679 new accounts
was established compared with 245,214 in the previous year. As of
June 30, 1955, there were 2,618,839 active accounts with owners of
this type of savings bonds, a decrease of 23,763 accounts from the
previous year. There was a reduction of 329,277 in accounts of Series
G bonds which have been maturing since May 1, 1953, and an increase
of 242,420 in accounts of Series H bonds, which were first sold on
June 1, 1952, and 63,094 in accounts of Series K bonds which were first
sold on M a y 1, 1952.
There were 48,280 applications during the year for the issue of duplicates of lost, stolen, or destroyed savings bonds, in addition to 1,807
cases on hand at the beginning of the year, making a total of 50,087
cases. In 29,137 cases the bonds were recovered, and in 19,599 cases
the issuance of duplicate securities was authorized. On June 30, 1955,
1,351 cases remained unsettled.
Other United States securities
During the year 23,500 individual accounts covering publicly held
registered securities were opened and 78,000 were closed. This reduced
the total of open accounts on June 30, 1955, to 223,900, covering registered securities in the principal amount of $20.8 billion. There were
444,000 interest checks issued to owners of record during the year, a
decrease of 97,000 from 1954.
ADMINISTRATIVE REPORTS
109
Redeemed and canceled securities received for audit included
4,400,000 bearer-securities and 325,000 registered securities, a total of
4,725,000, as compared with 4,200,000 in 1954; and 15,900,000 coupons
were received, which is 1,100,000 less than in 1954.
OFFICE OF THE TREASURER OF THE UNITED STATES
The Treasurer of the United States is the officer of the Government
charged by law with the receipt, custody, and disbursement upon
proper order of the public moneys. The Treasurer is required to keep
accurate records as to the source, location, and disposition of the funds
and to make periodic reports thereof as required by law and administrative authority.
Although the Treasurer does not maintain branch or field offices,
facilities for certain operations are provided Government offices by
the Federal Reserve Banks, acting as fiscal agents of the United States
and under the supervision of the Treasurer. Through these means
millions of financial transactions involved in the day-to-day business
life of the Nation are handledIjpromptiy and efficiently. The procedures followed by the Banks in the performance of these operations
are essentially the same as those in the Washington office of the
Treasurer.
Specifically, the Treasurer maintains current accounts of all receipts
and expenditures; pays the principal and interest on the public debt;
provides checking account facilities for Government disbursing officers,
corporations and agencies; pays checks drawn on the Treasurer of the
United States; procures, stores^ issues, and redeems United States
currency; audits redeemed Federal Reserve currency; examines and
determines the value of mutilated currency; acts as special agent for
the payment of principal and interest on certain obligations of corporations of the United States Government, Puerto Rico, and the Philippine Islands; and maintains facilities in the Main Treasury building
for (a) the deposit of public moneys by Government officers, (b) the
cashing of United States savings bonds, and checks drawn on the
Treasurer, (c) the receipt of excess and/or unfit currency and coins
from local concerns and banks, and (d) the conduct of certain transactions in public debt securities for the public, including safekeeping of
United States savings bonds.^ The Office of the Treasurer prepares
the Daily Statement ojthe United States Treasury, the monthly ^^Statement of the Public Debt,'^ and the monthly Circulation Statement oj
United States Money.
Under authority delegated by the Comptroller General of the .
United States, the Treasurer processes claims arising from the forgery
of endorsements and other irregularities involving checks paid by the
Treasurer and, in the case of unpaid checks which are lost or destroyed,
instructs the claimants as to the manner of obtaining substitute checks.
1 Discontinued April 1,1955, except from the U, S. Coast Guard for its members. All bonds in safekeeping
on that date will be held until withdrawn.
110
195 5 REPORT OF THE SECRETARY OF THE TREASURY
The Treasurer of the United States is also Treasurer of the Board of
Trustees of the Postal Savings System, and custodian of bonds held
to secure public deposits in commercial banks, bonds held to secure
postal savings on deposit in such banks, and miscellaneous securities
and trust funds.
Management mproz;gmenif.—Although practically all functions of
the Bureau are rigidly prescribed by law and have been performed by
the Office of the Treasurer since 1778, it has been possible by continuous application of management techniques and the adoption of
modern methods and improved equipment to keep pace with the ever
increasing number of financial transactions of the Government. In
order to add still more to the effectiveness of its management improvement program, the Office expanded its management and internal
audit facilities and established a central cost accounting staff during
the fiscal year 1955.
I t was found possible in several instances to improve the efficiency
of the check payment operation both in Washington and the Federal
Reserve Banks. Significant improvements in this area were the
further expansion in the use of punched card checks in lieu of paper
checks and the adoption of more modern equipment for processing
the card checks. Accounts involving a current annual load of S.b
million checks were converted to the use of punched card checks during
the fiscal year 1955. The instaUation of the new equipment reduced
rental costs, permitted personnel savings in the Federal Reserve
Banks, and enabled the processing of an increased check volume.
A new reporting procedure for general depositaries eliminated the
necessity for each depositary to submit daily transcripts to the
Treasurer. In lieu of the previous procedure, transactions are now
reported to the Federal Reserve Banks which in turn combine the
reports and submit consolidated transcripts to the Treasurer.
Effective April 1, 1955, the savings bonds regulations were amended
to withdraw safekeeping privileges previously attached to such bonds.
(See exhibits 10-14.) Thereafter, the Office discontinued the
general acceptance of United States savings bonds for safekeeping
except for enlisted personnel of the Coast Guard. However, bonds on
hand at the opening of business that day are being retained until
withdrawn.
Reports control and a central cost accounting system were added
to the management program, while supervisory training, forms
analysis and control and records management, are all continuing
programs. Under the incentive awards program there were made 44
cash awards for suggestions adopted, 17 awards to individuals for
superior work performance, and one award to a group of 5 employees
during the fiscal year 1955.
Moneys received and disbursed by the Treasurer.—Moneys collected
by Government officers are deposited with the Treasurer at
Washington, in Federal Reserve Banks, and in designated Government depositaries for credit of the account of the Treasurer of the
United States, and all payments are charged against this account.
Total moneys received and disbursed for the fiscal years 1954 and
1955 are shown in the following table on the basis of the Final Statement oj Receipts and Expenditures oj the United States Government
for the fiscal year 1955.
ADMINISTRATIVE
Receipts, e x p e n d i t u r e s , a n d T r e a s u r e r ' s account
1954
Receipts:
B u d g e t a r y (net) '
T r u s t accounts, etc.2 '_
Public debt 3
Subtotal
.
.-
Balance in t h e T r e a s u r e r ' s account b e g m n i n g of year
Total
Expenditures:
Budgetary ^
.
T r u s t accomits, etc.2
I n v e s t m e n t s of G o v e r n m e n t agencies in p u b l i c d e b t securities
(net)
Sales a n d r e d e m p t i o n s of obligations of G o v e r n r a e n t agencies in
m a r k e t (net)
.
C h a n g e s in accounts necessary to reconcile to T r e a s u r y cash
Increase, or decrease (—), in balance of cash held outside t h e T r e a s ury
Public debt 3
Subtotal
B alance in the T r e a s u r e r ' s account a t close of year
:
Total
.
:
111
REPORTS
$64, 655, 386,989
9,155,358, 424
181,979,465,460
. $60, 389, 743, 895
9, 536,495, 512
180, 703,438,047
255, 790, 210, 873
4, 670, 248, 248
250, 629, 677,454
6, 766,455,061
260,460,459,121
257,396.132, 515
67, 772, 353, 245
6, 769,321, 623
64, 569,972,817
8, 654,051,447
2,054,365,867
1, 532, 216, 322
3, 908,850
46, 437, 531
-.881,069, 200
28,974, 896
256, 688,953
176, 790, 927, 991
- 3 1 2 , 493,165
177, 588, 814, 353
253, 694, 004,060
6, 766,455. 061
251,180, 467,470
6, 215, 665,047
260, 460,459,121
257, 396,132, 517
1 T o t a l b u d g e t receipts less a m o u n t s transferred to t h e F e d e r a l old-age a n d survivors insurance t r u s t fund
a n d t h e railroad r e t i r e m e n t a c c o u n t a n d refunds of receipts. F o r details of receipts for 1955, s e e table 3.
2 F o r details for 1955, see table 5.
3 F o r details for 1955, see table 28.
< See t a b l e 1, footnote 3. F o r details for 1955, see table 3.
Assets and liabilities oj the Treasurer's accounts.—The assets of the
Treasurer consist of gold and silver bullion, coin and paper currency,
deposits in Federal Reserve Banks, and deposits in the commercial
banks designated as Government depositaries.
A summary of the assets and liabilities in the Treasurer's accounts
at the close of the fiscal years 1954 and 1955 is shown in table 51.
Gold.—Gold receipts during 1955 amounted to $64.8 million and
disbursements totaled $314.2 million, a net decrease of $249.3 million
based on the daily Treasury statement. This decrease brought the
total gold assets to $21,677.4 million on June 30, 1955. Liabilities
against these assets were $21,028.2 miUion of gold certificates and
credits payable in gold certificates and $156.0 million for gold reserve
against currency. The gold balance in the Treasurer's account on
June 30, 1955, was $493.2 mUlion.
Credits during the year on account of increment resulting from the
reduction in weight of the gold dollar in 1934 amounted to $14,457.17.
This makes a total increment from 1934 through the fiscal year 1955
of $2,819,470,353.06.
Silver.—During the year 23.1 million ounces of silver bullion, which
had been carried in the Treasurer's account at a cost of $20.9 million,
were monetized at a nionetary value of $29.9 million. This $29.9
million increase in silver assets was offset by a decrease of $12.3 million
in holdings of silver dollars, making a net increase of $17.5 million in
assets during the year. As of June 30, 1955, the silver, assets of the
Treasurer (exclusive of subsidiary coin and bullion held in the Treasurer's account at cost) amounted to $2,451.1 million.
Liabilities against silver at the end of the year amounted to $2,409.1
million for silver certificates outstanding and $1.1 million for Treasury
112
195 5 REPORT OF THE SECRETARY OF THE TREASURY
notes of 1890 outstanding, leaving a net balance of $40.9 million in
the Treasurer's account.
The silver bullion held in the Treasurer's account at cost value
(exclusive of the $40.9 million at monetary value) increased from $13.7
million on June 30, 1954, to $18.8 million on June 30, 1955. This
increase of $5.1 miUion is accounted for as follows: $39.5 million net
purchases of silver less $20.9 million of silver monetized and less $13.5
million of silver used for coinage.
Paper currency.—Under the laws of the United States the Treasurer
is the agent for the issue and redemption of United States currency
and coin.
Table 90 shows by class and denomination the value of paper
currency issued and redeemed during the fiscal year 1955, and the
amounts outstanding at the end of the year.
A comparison of the amounts of paper currency of all classes
issued, redeemed, and outstanding, during the fiscal years 1954 and
1955, follows.
1954
Pieces
1955
Amount
3,196, 720,099 $32, 567, 590,057
1, 804, 647,078 9,057, 038, 000
1, 826, 580, 083 9, 220, 725, 519
3,174, 787,094 32, 403, 902, 538
Outstanding at beginning of year
Issues during year
Redemptions during year .
Outstanding at end of year...
Pieces
Amount
3,174, 787,094 $32, 403, 902, 538
1, 735, 912, 346
7, 737,437,000
1, 696, 945, 906
7, 655 Oil 268
3, 213, 753, 534 32,486,328, 270
For further details on stock and circulation of money in the United
„States, see tables 8b to 89.
Depositaries.—The following table shows the number of each class
of depositaries and balances as of June 30, 1955.
Class
to the
Number of Deposits
credit of the
deposiU. S.,
taries 1 Treasmer,
June 30, 1955
Federal Reserve Banks and branches
_._
Other banks in continental United States:
General depoistaries
special depositaries. Treasury tax and loan accounts.
Insular and territorial depositaries
Foreign depositaries 2
Total
$723, 847, 836.38
371,352,287. 72
4,365, 216, 283.90
b2,344,321. 93
76,313,712. 95
12,312
5, 589,074,442. 88
1 Does not include limited depositaries which have been designated for the sole purpose of receiving deposits made by Government oificers for credit in their official checking accounts with such depositaries and
which are not authorized to accept deposits for credit of the Treasurer of the United States.
2 Principally branches of Institutions in the United States.
ADMINISTRATIVE
113
REPORTS
For detaUs on the depositary practice of the Treasuiy Department,
see page 95 and exhibit 44.
Checking accounts oj disbursing oficers and agencies.^—As of June 30,
1955, the Treasurer maintained 3,351 checking accounts of disbursing
officers and Federal agencies. The number of disbursing officers'
accounts by classes as of June 30, 1954 and 1955, and the number of
checks paid during the fiscal 3^ears 1954 and 1955 were as follows:
1954
Disbursing officers
Number of
disbursing
officers'
accounts
1955
Number of
checks paid
Number of
disbursing
officers'
accounts
Number of
checks paid
Treasury...
Army
_
Navy
_
Air Force..
Other
370
440
1,595
362
1,314
203,120,050
34,120,687
35,824,413
19,125,543
28,011,508
340
383
1,315
249
1,064
210,116,076
31,066,830
34,115,425
22,242,237
31,943,936
Total
4,081
320, 202,201
3,351
329,484, 504
Of the 329,484,504 checks paid in the last fiscal year, 267,899,953
were paid by the Federal Reserve Banks and the Manila branch of
the First National City Bank of New York acting as fiscal agents of
the Treasurer and the remaining 61,584,551 checks were paid by the
Treasurer in Washington.
Check claims.—During the fiscal year the Treasurer of the United
States processed to conclusion 95,781 paid check claims. In processing
these claims 22,676 checks totaling $2,011,798 were issued in settlement of forgery claims and 5,063 deposits were made in the amount
of $488,337, which represented moneys recovered for the benefit of
the Government. Claims for the proceeds of 69,959 outstanding
checks were processed, resulting in the issuance of 43,276 substitute
checks totaling $43,533,511 by the Chief Disbursing Officer to replace
checks which had not been received or had been lost or destroyed.
The Treasurer adjudicated 763 forgery claims for the proceeds
of PhUippine war damage and Veterans' Administration depositary
checks payable to residents of the PhUippines in indigenous currency
and certified 687 disbursements totaling 287,932 pesos.
Treasurer's Cash Room.—The commercial checks, drafts, postal
express money orders, etc., deposited by Government officers with the
Treasurer's Cash Room in Washington for collection aggregated
5,276,109 items for the fiscal year 1955, as compared with 4,938,834
items for the fiscal year 1954.
356812—56-
114
195 5 REPORT OF THE SECRETARY OF THE TREASURY
Securities held in custody.—The face value of securities held in the
custody of the Treasurer as of June 30, 1954 and 1955, is shown in
the following table.
June 30—
Purpose for which held
1954
As collateral:
To secure deposits of public moneys tu depositary banks.
To secure postal savings funds
In lieu of sureties
In custody for Government officers:
For the Secretary ofthe Treasury i
For the Board of Trustees, Postal Savings System
_
For the Comptroller of the Currency
For the Federal Deposit Insurance Corporation..
For the Rural Electrification Administration.
For the District of Columbia...
_..
_
For the Commissioner of Indian Affairs
.
Foreign obligations
Other
In safekeeping for Individuals:
United States savings bonds 2
Total
•-..
.
.
1955
$439,809,100
30,911,450
6,854, 700
$444,556,400
30,714,100
6,785,700
5,968,954, 564
1, 703,927,080
10,037,500
1,376,870,000
35, 203,000
33,121,495
31,831,105
.2,001,497,132
135,711,375
19,332,077,467
1, 573,637,000
11, 615,000
1,320,670,000
37,756,000
30,033,620
32,982,335
12,089,997,132
143, 445, 801
44, 276,460
42,433,620
31,819,004,961
35,096,704,175
1 Includes those securities shown in table 84 as in the custody of the Treasury.
2 The acceptance of additional savings bonds for safekeeping was, with certaui exceptions, discontinued
effective April 1,1955.
Servicing oj securities jor Federal agencies and jor certain other
governments.—In accordance with agreements between the Secretary
of the Treasury and various Government corporations and agencies
and Puerto Rico, the Treasurer of the United States acts as special
agent for the payment of principal of and interest on their securities
(including pre-1934 bonds of the Philippine Government). The
amounts of such payments during the fiscal year 1955, on the basis
of the daily Treasury statement, were as follows:
Principal
Federal home loan banks
Federal farm loan bonds. _
__ .
Federal Farm Mortgage Corporation
Federal Housing Administration
Home Owners' Loan Corporation
Philippine Islands.
Puerto Rico
Total.
_.
Interest paid
in cash
Registered
interest
Coupon
interest
$328,120,000
360,467,500
50,100
88,932,350
94,600
121,000
310,500
$1,803,198.46
68,704.14
$919,975.01 $24,083, 647. 01
290. 39
5,013.03
1,068,787. 53 1,090,976. 84
10, 805. 36
105.00
302,347. 50
5,490. 00
322,432. 50
2,760.00
70,625. 00
778,096,050
2,943, 845. 52 2,087,066. 85 24, 724, 245. 40
Internal Revenue Service ^
The Internal Revenue Service is responsible for the collection of the
internal revenue and for the enforcement of the internal revenue laws
and certain other statutes. These other statutes include the Federal
Alcohol Administration Act (27 U. S. C. 201-212); the Liquor Enforcement Act of 1936 (18 U. S. C. 1261, 1262, 3615); the Federal
Firearms Act (15 U. S. C. 901-909); and the National Firearms Act
(26 U. S. C. 2721).
J More detailed information will be found in the separate Annual Revort of ihe Commissioner of Internal
Revenue for the fiscal year 1955.
115
ADMINISTRATIVE REPORTS
Review of operations
Collections.—Internal revenue collections for the fiscal year 1955
totaled $66.3 bUlion, a decrease of $3.6 billion from the 1954 total.
The decrease in corporate profits during 1954, together with the termination of the excess profits tax and the reduction in individual
income tax rates, both effective January 1, 1954, were the principal
factors involved in the decrease.
Collections by tax sources for the fiscal years 1929-55 are shown in
detaU in table 11 in the tables section of this report. A comparison
of collections from the principal sources of tax revenue for the fiscal
years 1954 and 1955 follows.
1954
1955
I n t h o u s a n d s of dollars
I n c o m e a n d profits taxes: •
Corporation
Individual:
W i t h h e l d b y employers ^
other 1
21, 546, 322
18, 264,720
r 22,077,113
10, 736, 578
21, 253, 625
10,396,480
T o t a l i n d i v i d u a l income taxes
r 32,813,691
31,650,106
T o t a l tncome a n d profits taxes
' 54,360,014
49,914,826
r 4,218, 520
283,882
605,221
5,339, 573
279 986
600,106
' 5,107, 623
6,219,665
935,121
' 2, 797,718
' 1, 580, 512
5,153, 992
936, 267
2,742,840
1, 571,213
4,903,881
'•69,934,980
66,288,692
E m p l o y m e n t taxes:
Old-age insurance i
U n e m p l o y m e n t insurance
Carriers taxes—old-age b e n e f i t s . . .
._
Total employment taxes..
E s t a t e a n d gift taxes. . . .
Alcohol taxes 2
Tobacco taxes 2
o t h e r excise taxes
T o t a l collections 2
__
_
NOTE.—Under revised accounting procedures effective July 1,1954, tax payments made to banks, under
the depositary receipt system, are included in internal revenue collections for the month in which the depositary receipts are issued instsad of the month in which tax returns supported by the depositary receipts
are received in internal revenue offices. The revised procedure conforms to the practice followed in other
Treasury Department reports dealing with internal revenue receipts.
•• Revised.
1 Estimated. Collections of individual income tax withheld are not reported separately from old-age
insurance taxes on wages and salaries. Similarly, collections of individual income tax not withheld are not
reported separately from old-age insurance tax on self-employment income. The amount of old-age insurance tax collections shown is based on estimates made by the Secretary of the Treasury pursuant to the
provisions of Sec. 109 (a) (2) of the Social Security Act Amendments of 1950 and includes both classes of
old-age insurance taxes. The estimates shown for the two classes of individual income taxes were derived
by subtracting the old-age insurance tax estimates from the combined totals reported.
2 Included in the 1955 figures and in revised 1954 figures are amounts of taxes collected in Puerto Rico upon
tobacco and liquor manufactures coming into the United States; results for earlier periods are exclusive of
such amounts.
Returns processing.—The workload involved in receivmg and recordmg returns and tax payments continued at the high levels of
recent years as 88.7 mUlion tax returns of all types were filed during
the fiscal year 1955, iri addition to 224 million directly related information documents. The processing operations included the assessment
of the taxes reported, verification of tax credits, and the issuance of
bills for unpaid accounts. In addition, the income tax liability was
computed for 13 million taxpayers filing returns on Form 1040A, and
income tax refunds and credits were scheduled for the more than 30
million individuals whose prepayments exceeded their liabilities.
A simple punch card Form l640A return was adopted, both for the
convenience of wage-earner taxpayers and for the advantages to be
116
195 5 REPORT OF THE SECRETARY OF THE TREASURY
obtained in processing. This card form was used as the basis of an
experimental mechanical processing center at Kansas City, Mo.,
where all Form 1040A returns for the Omaha region were processed.
This Kansas City operation demonstrated the feasibUity of an area
service center into wbich work is fed from several districts. Plans are
being drafted for the extension of this type of operation to other areas.
Verification of the mathematical steps shown, in the taxpayers'
computations on 43,305,000 income tax returns resulted in tax
changes on 1,020,000 returns, with tax increases aggregating
$64,549,000 and tax decreases totaling $19,734,000.
Following the mathematical verification a preliminary inspection
of the returns was made for the purpose of identifying and segregating
the returns which were believed to be most in need of audit attention.
These returns, together with those requiring investigation because of
taxpayers' claims, offers in compromise, or other features which made
examination mandatory, were referred to examining officers for more
thorough consideration.
Enjorcement activities.—^The additional tax, interest, and penalty
resulting from audits and investigations of all classes of returns and
from mathematical verification totaled $1,507,951,000 for the fiscal
year 1955, representing an overall increase of $66 million as compared
with last year's revised total. The amount resulting directly from
audit efforts increased $130 million over last year as a result of steps
taken to strengthen the revenue agents' and special agents' forces,
improve the methods used for selecting and examining returns, and
reduce the time-lag between the submission of examiners' reports and
the settlement of protested cases. The audit coverage of income,
estate, and gift tax returns was increased by 18 percent as compared
with last year and, concurrent with this gain, tliere was a 5 percent
increase in the average amount of additional tax and penalty recommended per revenue agent in income, estate, and gift tax cases disposed of by the audit groups. Partially offsetting the increase in
additional tax resulting from audit were decreases in additional tax
resulting from mathematical verification and in tax reported on
delinquent returns secured by collection officers from taxpayers who
had not filed returns voluntarily. The decrease in mathematical
errors resulted from more effective assistance and instruction provided
taxpayers, while the downward trend in amounts secured from
delinquent returns stems from steps taken to encourage voluntary
filing and to dhect a larger portion of collection officers' efforts to the
collection of past-due accounts. A comparison of enforcement revenue
results for 1954 and 1955 follows.
Additional tax, interest,
and penalty resulting
from enforcement
1954
1955
(In thousancis of dollars)
Additional tax, interest, and penalty resulting from audit
Increase in income tax resulttnc from mathematical verification
Tax, interest, and penalty on delinquent returns
Total
"• Revised.
.. _
r 1, 235,512
78,488
127, 633
1,365,632
64,549
77, 771
r 1,441, 634
1, 507, 951
ADMINISTRATIVE
117
REPORTS
Collections on past-due accounts were increased by $100 million
during 1955 through improved management approaches and new
coUection procedures. The amount coUected on such delinquent
accounts totaled $636,941,000 as compared with $536,331,000 for 1954.
Revision of the revenue accounting system disclosed a large number
of accounts which although past due, were not measured in reports
covering delinquent accounts. These accounts were immediately
given the status of dehnquent accounts. As a result, the official
records of delinquent accounts were current for the first time in
many years.
Fraud investigations completed during 1955 totaled 4,231, including
those racketeer cases in which fraud was suspected. Prosecution
was recommended in 2,253 cases, 1,339 cases were found not to warrant
prosecution, and 639 investigations were discontinued. During the
year indictments were returned against 1,422 defendants. Indictments
were refused in cases involving 29 defendants. In the cases reaching
trial stage 1,339 defendants were convicted or entered pleas of
guilty or nolo contendere. The following table presents the record of
convictions for the years 1951 through 1955, including pleas of guilty
ov" nolo contendere, in cases involving all classes of internal revenue
taxes except alcohol or tobacco taxes.
Number of
individuals
convicted
Fiscal year
1951
1952.
1953 .
1954
1955
..
.
-
.
.
...
:
.
324
563
929
1,291
. 1,839
-
In the alcohol and tobacco tax area, additional benefits and economies were realized from the program initiated in fiscal 1954 for the
revision and modernization of the tax structure. The prime objective
was to develop a system for the execution of administrative tasks on
a basis of regulatory controls for the industry which are realistic and
consistent with modern business requirements. The anticipated economies for the Government and better service to the industry were in
evidence in 1955. The number of storekeeper-gaugers was reduced 17
percent even though the industry's activity decreased only 2 percent.
This saving was utUized principally to strengthen enforcement work
aimed at the iUicit liquor traffic: 11 percent more stills were seized and
13 percent more arrests were made. The foUowing table compares
1955 results with those for 1954 and certain earlier years.
Number of Wine gallons Number of
stills seized of mash seized arrests made'
Fiscal year
1940
1945
1950
1951
1952
1953
1954..
1955
. .
.
...
...
.
10, 663
8,344
10, 030
10,177
10, 269
10, 699
11, 266
12, 509
6,480, 200
2, 945,000
4,892, 600
5, 545, 400
5,700, 600
6,151,100
6, 722, 900
7, 375, 300
25,638
11,104
10,236
10,384
9,851
9, 370
9,344
10, 545
1 Includes arrests for firearms violations and, beginning with 1952, tobacco tax violations. Arrests involving these two classes of violations during 1955 numbered 363 and 30, respectively.
118
195 5 REPORT OF THE SECRETARY OF THE TREASURY
Rejunds.—Refunds of internal revenue taxes and the interest
thereon, as required by law, are paid out of an appropriation separate
from that covering the Internal Revenue Service administrative
expenses. The tota] amount of these payments for the fiscal year
1955 was $3,513,093,000 ^ as compared with $3,468,625,000 ^ in the
preceding year, with individual income tax refunds and excise tax
refunds accounting for the slight increase. Interest payments on
refunds (included in these totals) decreased from $82,631,000 in 1954
to $62,102,000 in 1955.
Reduction oj appellate backlogs.—On.e of the principal accomplishments of the Revenue Service during the year was the continued reduction in the backlog of appellate cases. These are the cases which
cannot be settled at the revenue-agent level and are referred to the
Appellate Division for consideration of taxpayers' protests.
The number of appellate cases not before the Tax Court was reduced
from 13,578 to 9,111 or by nearly one-third, with the result that the
average taxpayer can now expect prompt action on his protest. The
number of cases disposed of totaled 15,075, of which 11,897 cases were
settled and 3,178 cases were appealed to the Tax Court.
The inventory of appellate cases pending before the Tax Court was
reduced from 8,495 to 7,961. Disposals totaled 5,315, consisting of
4,087 cases settled by stipulation, 201 cases closed by dismissal or
default, and 1,027 cases tried on tbeir merits before the Tax Court.
Rulings and pther technical junctions.—The technical functions of
the Internal Revenue Service include the preparation and issuance
of rulings and advisory statements to the public and revenue officials,
the preparation of regulations and other tax guide materials, technical
advice and assistance in the preparation and issuance of tax forms,
and the development of programs for clarification and simplification
of tax rules. Technical assistance also is provided in programs for
legislative revision and in conducting the negotiation of tax treaties.
Development of the regulations implementing the Internal Revenue
Code of 1954 was a task which dwarfed any previous regulations task
undertaken by the Service. Immediately upon enactment of the 1954
Code, it was necessary to issue regulations continuing in effect the
procedures, organization, and existing regulations under the 1939
Code to the extent applicable under the new Code, and, at the same
time, to issue regulations on action required or permitted by the provisions of the new Code which were diff'erent from the 1939 Code.
Although the task is not complete, substantia] progress has been made
during the 1955 fiscal year, including the publication of notices on
such important subjects as corporate reorganizations, depreciation,
and consolidated returns. A related task, revision of vhtually all tax
return forms and instructions to reflect the impact of the new Code,
was accomplished on schedule.
During the year a total of 42,474 requests for rulings and technical
advice were processed, including the issuance of 38,547 rulings to
taxpayers and 3,927 replies to requests of field offices for technical
advice. Temporary restrictions were placed on the issuance of rulings
under the 1954 Code in instances where there had been a change in
1 Figures have not been reduced by amounts of $51,000,000 m 1955 and $40,500,000 in 1954, reimbursed from
the Federal old-age and survivors insurance trust fund. These amounts were covered into the Treasury as
repayments to the account for refunding internal revenue collections.
ADMINISTRATIVE
119
REPORTS
the prior law and new regulations were yet to be published, limiting
such rulings to those cases in which it was shown that extreme hardship would result from the failure to issue a ruling.
In conformity with the policy of giving full publicity to the precedent rulings of the Service, 801 tax rulings were published in the
Internal Revenue Bulletin during 1955, or nearly double the number
published in the preceding year.
Four tax treaties with foreign nations were ratified by the Senate
during fiscal 1955, and four others were referred to the Senate for
consideration.
Personnel.—The employees on Internal Revenue Service rolls at
the close of the year (June 30, 1955) numbered 50,890, consisting of
2,675 employees in the national office and 48,215 in the regional and
district offices. At the close of the preceding year (July 3, 1954),
the number of persons employed totaled 51,411, comprising 2,707
national office employees and 48,704 regional and district office
employees.
The number of employees in the various branches of the Internal
Revenue Service at the close of the fiscal years 1954 and 1955 is shown
in the following table.
Number on payroll at
close of fiscal year
Branch of service
1954
National office
Regional and district offices:
Supervisory personnel.'
Enforcement personnel:
Collection officers
Office auditors
_.
Returns examiners
Revenue agents
Special agents
Alcohol tax inspectors
Alcohol tax investij^ators
Storekeeper-gangers.
..
Total enforcement personnel
...
_
_.
.
. _
_. . .
".
, .
_
_ _
,
Other permanent personnel:
Legal
Other technical .
_ . _ . . _
Glerical (excluding temporary), messengers, and laborers
Total, other permanent personnel
. ..
..
Total, permanent personnel, regional and district offices
Temporary employees
Grand total
. . .
*.
1955
2,707
2,675
479
477
6,877
2,430
1,141
10, 605
1,277
473
824
1,208
5,585
2.135
1,274
11,255
1,559
465
891
1,038
24,835
24,202
270
2,387
20, 679
268
2,657
20,402
23,336
23,327
48, 641
63
48,000
209
51,411
50,890
Cost oj.administration.—The entire cost of Internal Revenue Service
operations during the year, including all items of expense except
amounts refunded to taxpayers, was $278,834,278. This represents
the enthe amount appropriated for administrative expenses, including
additional funds provided to cover the retroactive salary increase
which was effective March 13, 1955, for the Revenue Service, in accordance with the Federal Employees' Salary Increase Act of 1955,
approvedyune 28, 1955.
120
1955 REPORT OF THE SECRETARY OF THE TREASURY
Management improvements
Substantial progress was made in dealing with organizational and
administrative problems during the year. Several of the important
developments in this area are summarized in the following paragraphs:
Realignment oj^ posts-oj-duty.—Following careful analysis, the local
offices at which internal revenue personnel are stationed throughout
the country were realigned to obtain the benefits of mass operations
and closer supervision. This realignment achieved uniformity in
the location of offices among and within regions and districts and provided efficient operating units in logical locations. The number of
local offices was reduced from more than 1,400 to approximately 900.
Advanced Training Center.—Further progress was made in establishing and maintaining a nonpartisan career service with progressively
increasing professional standards. The Advanced Training Center,
which was established for this purpose, graduated 200 agents during
the year. An Executive Development Program also was instituted,
for the selection and training of Service personnel who are judged to
have greatest promise as future executives.
Taxpayer assistance.—In order to minimize the diversion of audit
and collection manpower to taxpayer assistance during the filing
period, emphasis was placed on group instruction and self-help techniques, rather than on individual assistance.
Plan jor improved administration oj payroll taxes.—The Departments
of the Treasury and of Health, Education, and Welfare jointly sponsored the introduction in Congress of a bill providing for simplified
wage reports by employers under income tax withholding and social
security laws.
Beer and wine tax returns.—A system for payment of beer and wine
taxes by return (on a daily basis), rather than by stamp was initiated
under the provisions of the Internal Revenue Code of 1954. Studies
are under way to determine the feasibility of extending the returns
system to all liquor and tobacco taxes.
Internal audit program.-^The internal audit program has played an
important part in bringing about more effective operations tliroughout
the Service by alerting management to needed corrective action in
areas such as informal conference procedures, supervision of audit
activities, and procedures for control of tax returns.
Provisions affecting citizens residing abroad.—Administration of
internal revenue laws governing United States citizens residing abroad
is to be improved by the assignment of personnel to strategic foreign
posts operating under the direction of the International Operations
Division, a newly established division of the Baltimore district office.
Other improvements.—The new revenue accounting system for which
plans were developed last year was installed throughout the Service,
permitting reconciliation of consolidated accounting records with other
Treasury Department reports on a current basis. ^^Grass-roots"
needs were reflected in the formulation of the budget by having the
basic preparation done in the regions and districts. Critical study
of operational reports and reporting practices resulted in general improvements in quality, timeliness, and significance of reports. Streamlined correspondence systems and practices were introduced into the
collection divisions of 20 district offices. A comprehensive property
and equipment inventory provided the basis for a planned replace-
ADMINISTRATIVE REPORTS
121
ment program. In several field office locations more suitable office
space was obtained, permitting the consolidation of all local internal
revenue activities in a single buUding with resulting improvements in
efficiency of operations and convenience to the public.
Office of International Finance
The Office of International Finance assists the officers of the Department in the formulation and execution of policies and programs in
international financial and monetary matters.
By dhection of the Secretary, the responsibilities of the Office of
International Finance include the Treasury's activities in relation to
international financial and monetary problems, covering such matters
as the convertibility of currencies, exchange rates and restrictions, and
the extension of stabUization credits; gold and sUver policy; the
Bretton Woods Agreements Act, and the operations of the International Monetary Fund, the International Bank for Reconstruction and
Development, and the proposed International Finance Corporation;
foreign lending and assistance; the North Atlantic Treaty Organization; the activities of the National Advisory Council on International
Monetary and Financial Problems; the Anglo-American Financial
Agreement; the United States Exchange vStabilization Fund; and the
Foreign Assets Control.
The Office also acts for the Treasury on the financial aspects of
international treaties, agreements, and organizations in which the
United States participates, and it takes part in negotiations with
foreign governments with regard to matters included within its responsibilities. I t assists the Secretary on the international financial
aspects of problems arising in connection with his responsibilities under
the Tariff Act. The Office also represents the Treasury in the work of
the subordinate organs of the National Advisory Council on International Monetary and Financial Problems, of which the Secretary of
the Treasury is chairman.
The Office of International Finance advises Treasury officials and
other departments and agencies of the Government concerning exchange rates and other financial problems encountered in operations
involving foreign currencies. In particular, it advises the State Department and the Department of Defense on financial matters related
to theh normal operations in foreign countries and on the special
financial problems arising from defense preparation and mUitary operations. In conjunction with its other activities, the Office studies
the financial pohcies of foreign countries, exchange rates, balances of
payments, the flow of capital, and other related problems.
The Division of Foreign Assets Control administers certain regulations and orders issued under Section 5 (b) of the Trading with the
Enemy Act. The Foreign Assets Control Regulations block all property in the United States in which any Communist Chinese or North
Korean interest exists and prohibit all trade or other financial transactions with those countries or theh nationals. The Control carries
on licensing activities in connection with transactions otherwise prohibited, takes action to enforce the regulations, and has taken a census
of Chinese and Korean assets located in the United States.
122
195 5 REPORT OF THE SECRETARY OF THE TREASURY
The Control also administers regulations which prohibit persons
in the United States from purchasing, selling, or arranging the
purchase or sale of strategic commodities outside the United States
for ultimate shipment to the Soviet bloc. These latter regulations
supplement the export control laws administered by the Department
of Commerce. In addition, the Control has responsibilities with
respect to blocked accounts of approximately $9,000,000 received from
the sale to Argentine interests of a Czechosloval^-owned steel mUl sold
pursuant to an order issued by the Secretary on March 25, 1954.
Bureau o f t h e Mint^
The principal functions of the Bureau of the Mint include the
manufacture of coin, both domestic and foreign, medals of a national
character, and special medals for other Government agencies; the
distribution of domestic coin, the custody, processing, and movement
of bullion; the administration of the regulations issued under the
Gold Reserve Act of 1934, as amended (31 U. S. C. 440-446), and
Section 5b of the act of October 6, 1917, as amended (12 U. S. C.
95a), including the issuance and denial of licenses, the purchase of
gold, and the sale of gold bullion for industrial use; and the administration of silver regulations issued under the acts of July 6, 1939 (31
U. S. C. 316c), and July 31, 1946 (31 U. S. C. 316d).
Gold, silver, coins, and other values in custody of the Bureau of
the Mint totaled $24 bUlion during the fiscal year 1955. In March
1955 the Seattle Assay Office was closed and its functions were
absorbed by other offices. Also in March, coinage operations were
suspended at the San Francisco Mint, but the institution continued
to operate as a refinery and assay office. Other field offices operating
throughout the year were the coinage mints in PhUadelphia and
Denver; the assay office in New York City with its adjunct, the
sUver bullion depository located in West Point; and the gold bullion
depository in Fort Knox.
Coinage
Over one billion coins were manufactured during the fiscal year
1955, consisting of 936.9 million domestic coins and 69.5 million
foreign coins. Domestic production is summarized in the following
table.
Number of
pieces produced
Denomination
Face value Gross weight!
In millioris
1-cent pieces
5-cent pieces
Dimes
Quarter dollars
Half dollars
Total
__
_ ._
__
.
_._
Short tons
605.1
185.9
95.4
46.1
4.4
$6.1
9.3
9.5
11.5
2.2
2,075
1,024
936.9
38.6
3,741
263
318
61
1 Includes 578 tons of silver; 2,803 tons of copper; 256 tons of nickel; and 104 tons of zinc and tin.
J More detailed information concerning the Bureau of the Mint is contained in the separate Annual
Report of the Director of the Mint.
ADMINISTRATIVE
123
REPORTS
The Philadelphia Mint manufactured 69,530,000 foreign coins for
three other governments during the fiscal year 1955, as follows: For
Costa Rica, 1,028,000 two-colones and 987,000 one-colon pieces of
chrome stainless steel; for the Dominican Republic, 15,000 silver
one-peso and 3,000,000 bronze one-centavo pieces; and for Venezuela,
silver coins in three denominations: 13,500,000 one-bolivar, 15,000,000
half-bolivar, and 36,000,000 fourth-bolivar pieces.
During the fiscal year 1955 the mints sliipped 951 miUion United
States coins to banks of the Federal Reserve System to place in
chculation, as follows:
Number of
pieces
shipped
Denomination
Face value
In millions
Gross weight
Short tons
•
1-centpieces
5-cent pieces
Dimes
Quarter dollars
Half dollars
Silver dollars
. . . .
_
Total 1
___
580.1
113.3
163.6
64.7
17.3
12.1
$5.8
5.7
16.4
16.2
8.6
12.1
1,989
624
451
446
238
355
_ -
951.0
64.7
4,103
._ _
_____
1 Includes 297,177 sets of proof colas sold by the Philadelphia Mint.
The estimated stock of coins in the United States and its possessions,
including coins held in the Treasury, in banks, and in the hands of the
public, is compared at the beginning and close of the fiscal year 1955
in the following statement.
Face value (in millions)
stock of couis
Silver dollars
.
Subsidiary silver coins
Alinor coins
Increase, or
July 1, 1954 June 30,1955 decrease
(-)
_.
..
Total
_
$491.0
1,275.7
434.7
$490.3
1,296.1
449.6
-$0.7
20.5
14.9
2,201.4
2,236.1
34.8
Gold
The amount of gold held b}^ the mint institutions ranged from
626.5 million fine ounces valued at $21,926.9 million at the beginning
of the fiscal year 1955 to 619.4 million fine ounces valued at $21,677.5
million at tlie close of the 3^ear, a net decrease of 7.1 million ounces
valued at $249.4 million. Transactions during the year, excluding
intermint transfers, are summarized in the following table.
124
1955 REPORT OF THE SECRETARY OF THE TREASURY
Gold transactions, excluding intermint transfers
Ounces
Value
In millions
Gold received:
Newly mined domestic gold
Secondary gold from domestic sources
XJnited States coin, foreign deposits, operative recoveries, etc
Total
_
Gold withdrawn:
Sold for domestic industry, profession, or art
Gold bar payment for gold deposits
Withdrawn by the Treasury for monetary purposes
_
_
.
Total
1.3
.3
.3
$44.7
8.8
11.3
1.9
1 64.8
.8
.3
7.9
28.5
10.6
275.1
9.0
314.2
1 Includes $268.96 increment on gold coin and bullion received at $20.67+ per fine ounce.
Silver
The amount of silver bullion held by the mint institutions ranged
from 1,437.4 million fine ounces valued at $1,850.9 million at the
beginning of the fiscal year 1955 to 1,569.7 million fine ounces valued
at $2,016.7 million at the close of the 3^ear, a net increase of 132.3
million ounces valued at $165.8 million. Transactions during the
year, excluding intermint transfers, are summarized in the following
table.
Silver transactions, excluding intermint transfers
Ounces
Value
In millions
Silver received:Newly mined domestic sUver.
Secondary silver from domestic sources
Kecoinage bullion from uncurrent United States coins withdrawn from
circulation
..
__.
Leased Treasury silver returned by other agencies of the Federal Government.
Return of lend-lease silver by the Netherlands Government
. _ _
Foreign deposits, operative recoveries, etc
Seigniorage on bnllion TPvalnerl as security for silver certifinat.ps i
Total
Silver disposed of:
Manufactured into United States subsidiaiy coins . .
Silver bar payment for silver deposits..
...
SoM iri mp.flnls, sweeps, etc
Total
--_
34.7
.5
$31.4
5
2.3
100.7
11.2
.1
32
130.2
80
.1
90
149.6
182.3
16.8
.5
.1
17.3
(*)
16 0
.4
16 5
(*) Less than $50,000.
1 Represents the revaluation of 23,100,000 fine ounces of newlylmined domestic silver received under
act of July 31,1946 (31 U. S. C. 316d).
Revenues deposited by the Bureau of the Mint into the general
fund of the Treasury during the fiscal year, totaling $29.5 mUlion,
were composed principally of seigniorage. Seigniorage on silver
subsidiar}'^ coinage amounted to $7 million, on minor coinage $13
million, and on silver bullion revalued from cost to monetary value
as security for silver certificates, $9 million.
125
ADMINISTRATIVE REPORTS
Management improvement
Changes in organization of the Bureau and various improvements
adopted during the fiscal year 1955 resulted in total estimated annual
savings of $579,200 to Mint operating appropriation and funcis.
Savings to the appropriation are estimated at $426,200, to the Silver
Profit Fund, $125,000, and to reimbursable funds, $28,000. Program
savings are summarized in the following table.
Management improvement program, Bureau of the Mint, fiscal year 1955
Description
San Francisco Mint: Coinage operations suspended
Seattle Assay Oflice: Institution closed
Philadelphia Mint:
Improved system of processing proof coin orders enables a typist to process 600 or
more orders per day compared with former maximum of 90 orders per day
Improved packaging of proof coin sets
1
Adoption of wider silver ingot for silver coins results in increased ratio of good blanks
to ingot weight, and reduces direct labor costs
Purchase of five-cent coin collars with carbide steel inserts. One such collar has
produced over 8 million coins to date with little sign of wear, compared with an
average of less than 300,000 coins per collar of the other type in use
Denver Mint:
Installation of vibratory feeders, new counting machines, and modified stands for
the machines enables an employee to operate two machines instead of one as
formerly, increasing considerably the output per man-hour
Installation of new bridge cranes in rolling, reviewing, and counting sections speeds
up flow of materials and eliminates bottlenecks
Installation of steel chutes from mezzanine floor to coin presses reduces manual
handling of coin blanks tn small lots and reduces considerably the danger of injury
to employees
Shipment of silver coins in sufficient quantities to utilize armored truck service with
rates substantially below those by other means of transportation
Total recurring annual savings to Mint operating appropriation and funds
Estimated
recurring annual savings
$360,000
55,000
20,000
8,000
4,200
1,000
5,000
500
500
125,000
579,200
The estimates of United States gold and silver procJuction and the
issue of gold and silver for domestic industrial, professional, and
artistic use, made annually by the Office of the Director, are on a
calendar year basis. During the calendar year 1954 total United
States gold production amounted to 1,859,000 fine ounces, including
1,430,342 fine ounces received by the Government mints and assay
offices. Total sUver production in 1954 amounted to 35,584,800 fine
ounces, including 33,863,098 fine ounces received by the Government
mints and assay offices.
Gold and sUver issued for industrial, professional, and artistic use
in the United States during the calendar year 1954 amounted to
1,269,800 fine ounces and 86,000,000 fine ounces, respectively.
Included were issues of Government-stamped bars by mints and assay
offices amounting to 845,396 fine ounces of gold and 416,486 fine
ounces of silver.
Bureau of Narcotics ^
The Bureau of Narcotics administers a program designed to deal
with the control of sources of the illicit supply of drugs on international,
national, and local levels.
Nationally, the Bureau is charged with the investigation, detection,
and prevention of violations of the Federal narcotic and marihuana
1 Further information concerning narcotic drugs is available in the separate annual report of the
Commissioner of Narcotics.
126
195 5 REPORT OF THE SECRETARY OF THE TREASURY
laws and of the Opiuin Popp}^ Control Act of 1942, and related
statutes. The scope of the Bureau's operations is enlarging gradually
as additional drugs are made subject to these laws. Opium and coca
leaves and their derivatives have been under national control since
1915; marihuana has been under control since 1937; isonipecaine was
brought under control in 1944; and under the act of March 8, 1946
(26 U. S. C. 4731 (g)), 18 recently developed synthetic narcotics have
been brought under control through findings by the Secretary of the
Treasury, proclaimed by the President, that the drugs possessed
addiction liability similar to morphine.
Internationally, opium, coca leaves, marihuana, and their more
important derivatives have been under control by reason of the
Opium Conventions of 1912, 1925, and 1931. Under Article 11 of the
1931 Convention and the International Protocol of November 19,
1948, two additional opium derivatives and three additional synthetic
drugs were found to have addicting equalities simUar to morphine or
cocaiiie and have been brought under international control during the
fiscal year by a procedure similar to that provided in our national
legislation. The agreement to limit the production of opium to
world medical and scientific needs signed at the United Nations on
June 23, 1953, after forty-four years of effort on the part of the United
States to accomplish such an agreement was approved by the U. S.
Senate on August 20, 1954. When the Protocol is ratified by a
sufficient number of governments and becomes effective there should
be a large reduction in the amount of opium avaUable for the Ulicit
traffic, particularly if production in Turkey and Iran is controlled.
In the United States important and effective aid in discouraging
the Ulicit traffic in narcotics and marihuana continues to be afforded
by the act approved November 2, 1951 (21 U. S. C. 174), and the 1954
Internal Revenue Code (26 U. S. C. 7237 (a)) which provide for mandatory minimum penalties for violation of certain narcotic laws,
particularly for second and t h h d off'enders.
The Bureau directs its principal activities toward the suppression
of the Ulicit traffic in narcotic drugs and marihuana and the control
of the legitimate manufacture and distribution of narcotics through
the customary channels of trade. I t issues permits for import of the
crude narcotic drugs and for export and intransit movements of
narcotic drugs and preparations. The Bureau supervises the manufacture and distribution of narcotic substances within the country
and has authority to issue licenses for the production of opium poppies
to meet the medical needs of the country if and when such production
should become in the public interest. Cooperation is given to States
in local narcotic legislation and enforcement and to the Department
of State in the discharge of the international obligations of the United
States concerning the abuse of narcotic drugs and marihuana.
Although the total number of seizures in the Ulicit traffic in the
United States during the fiscal j e a r 1955 (2,530) was approximately
the same as during 1954 (2,580) the total quantit}?- of narcotics seized
was somewhat less, amounting to 2,310 ounces as compared with
5,109 ounces in 1954, during which year a number of large smoking
opium cases augmented the total quaiitities seized. Seizures of
marihuana during 1955 amounted to 839 pounds bulk, and 5,826
ADMINISTRATIVE
127
REPORTS
cigarettes, as compared with 1,416 pounds bulk and 7,536 cigarettes
in 1954.
Continued progress was made during the year in driving out some
of the bigger racketeers in illicit narcotics. Many principal dealers
in Ulicit drugs were caught and convicted and heavy prison sentences
were imposed under the act of November 2, 1951.
Thefts of narcotics from persons authorized to handle the drugs
increased slightly in number during 1955 and the quantity stolen was
1,730 ounces as compared with 1,764 ounces in 1954.
During the fiscal year there were approximately 300,000 persons
registered with directors of internal revenue under the Federal narcotic
and marihuana laws to engage in legitimate narcotic and marihuana
activities.
The table following shows for the fiscal year the number of violations of the narcotic and marihuana laws b y persons registered to
engage in legitimate narcotic and marihuana activities and by persons
who have not qualified by registration to engage in such activities, as
reported by Federal narcotic enforcement officers.
Number of violations of the narcotic a n d m a r i h u a n a laws reported during the fiscal
year 1955 with their dispositions a n d penalties
M a r i h u a n a laws
N a r c o t i c laws
Registered persons
State
Court
Federal
Court
P e n d i n g J u l y 1, 1954
R e p o r t e d d u r i n g 1955:
Federal i
J o i n t 1.
T o t a l t o b e disposed of..
Nonregistered persons
Federal
Com-t
Nonregistered persons
State
Court
Federal
Court
State
Com-t
163
1,256
352
142
14
1,656
215
454
92
319
3,127
898
1
Convicted:
Federal
Joint Acquitted:
Federal
Joint
Dropped:
Federal
Joint
Compromised: 2
Federal
Joint .
- .
34
7
1
2
1,113
90
287
114
322
71
77
16
1
2
34
2
7
4
12
4
5
130
12
2
2
402
32
54
26
85
28
25
11
2
T o t a l disposed of
P e n d i n g J u n e 30, 1955
195
2,165
656
124
962
242
Yrs. M o s .
Sentences i m p o s e d :
Federal
Joint
-_
Total
Fines imposed:
Federal
Joint
Total
84
10
6
8
95
2
$45, 225
1,900
^.^^
Yrs. M o s .
4
Yrs. M o s .
Yrs. M o s .
6
3,927
323
6
1
708
239
6
4,250
7
947
4
Yrs. M o s .
Yrs. M o s .
7
1,066
203
3
8
199
43
9
7
1,269
11
242
9
$250
$135, 610
5,865
$20, 532
3,777
$35, 236
2,127
$1, 524
100
250
141, 475
24, 309
37, 363
1,624
1 Federal cases are made by Federal Jwicers working independently while joint cases are made by Federal
and State officers working in cooperat»..
2 Represents 2 cases which were comjomised in the sum of $2,300.
128
195 5 REPORT OF THE SECRETARY OF THE TREASURY
In foreign countries, investigation, surveUlance, and negotiation are
undertaken to restrict the amount of narcotic drugs entering this
country. Through cooperation with the French and Italian Governments, agents of the Bureau of Narcotics have reduced the quantities
of heroin and opium avaUable to the Ulicit trade in the United States.
The Bureau continues on guard against the large supplies of opium
and heroin which are avaUable in Communist China.
The importation, manufacture, and distribution of opium and its
derivatives are subjected to a system of quotas and allocations designed to secure their proper distribution ifor medical needs. Additional quantities of opium were imported during the year. Coca leaf
imports were sufficient both for medicinal purposes and for the manufacture of nonnarcotic fiavoring extracts.
The quantity of narcotic drugs exported in 1955 was slightly lower
than in 1954. The export total is not significant in comparison with
the quantity used domestically. The manufacture of opium derivatives continued high, principally because of the high medical consumption of codeine and papaverine.
National defense operations have increased the responsibUities of
the Bureau of Narcotics during recent years. The mobilization of
large numbers of troops has resulted in many special requests from
the mUitary forces for aid by the Bureau of Narcotics in dealing with
the traffic in narcotics in the areas near mUitary installations; in
problems incidental to the drafting of addicts; and in cases in which
narcotic addiction has been given falsely as a reason to escape the
draft.
In the field of management improvement an internal audit policy
has been adopted covering all phases of the Bureau's operation, and
several other projects in course of development have already resulted
in improved operations. Two additional projects were initiated during
the year, one a procedure for regulating oral prescriptions under the
permissive function of the Bureau and the other the development, in
cooperation with other organizations, of a procedure for the selection
of international nonproprietary names for new drugs falling within
the narcotic category.
Office of Production and Defense Lending
The Office of Production and Defense Lending was established on
December 7, 1954, by Treasury Department Order No. 181-3 (see
exhibit 53) under the direct supervision of an Assistant Secretary.
There are assigned to the Office of Production and Defense Lending
the functions with which the Secretary of the Treasury was charged
as the result of the adoption of the Reconstruction Finance Corporation Liquidation Act. Specifically, these functions are as follows:
1. Liquidation of the Reconstruction Finance Corporation (Section
10, R F C Act, and Section 102, R F C Licjuidation Act);
2. Administration of Federal FacUities Corporation (Section 107
(a) (1) R F C Liquidation Act, and Executive Order 10539);
3. Lending activities under Section 302, Defense Production Act
(Section 107 (a) (2) R F C Liquidation Ac', and Executive Order
10489); and
ADMINISTRATIVE REPORTS
129
4. Lending activities under Section 409, Federal CiyU Defense Act
(Section 104, R F C Liquidation Act).
Reconstruction Finance Corporation (in liquidation)
The liquidation of the Reconstruction Finance Corporation is being
conducted as expeditiously as possible, but with maximum protection
to the Government and the taxpayer. At the same time, every possible consideration is given to the interests of those indebted to the
Corporation and the communities in which theh businesses are
located.
The authority of the Reconstruction Finance Corporation to make
new loans was terminated effective September 28, 1953. At that time,
Reconstruction Finance Corporation's loans, securities, and commitments amounted to $592,200,000, exclusive of $178,100,000 later
transferred to other Government agencies for liquidation under Reorganization Plan No. 2 of 1954. By July 1, 1954, the loans, securities,
and commitments remaining for liquidation had been reduced to
$284,600,000; further reductions during the fiscal year 1955 brought
the amount remaining to $232,100,000 as of June 30, 1955.
The proceeds realized from liquidation of the Reconstruction Finance Corporation's assets are used to reduce the Government's investment as rapidly as possible. In the fiscal year 1955, there was
paid into the Treasury from cash on hand and amounts realized during
the year a total of $134,288,000.
Federal Facilities Corporation
The Federal FacUities Corporation was created on June 30, 1954,
under the provisions of the Rubber Act of 1948, as amended (50 App.
U. S. C. 1921-1938), and Executive Order 10539. The primary purpose for which the Corporation was formed was to administer the operations of the Government-owned synthetic rubber facUities until
disposal of the properties to private interests was completed as provided by the Rubber Producing FacUities Disposal Act (50 App.
U. S. C. 1941). In addition, the Corporation was designated to
conduct the operation of the Government-owned tin smelter at Texas
City, Tex.
All of the synthetic rubber plants, except one at Baytown, Tex.,
and one at Institute, W. Va., were transferred to private ownership
in AprU 1955. The Baytown plant was transferred in July 1955;
negotiations for the sale of the Institute plant are now in progress,
with consummation of the sale expected early in 1956. There also
remains under Government ownership one alcohol butadiene plant
which has been leased to a private operator for a three-year period.
On June 29, 1955, the Federal Facilities Corporation turned over to
the Treasury the sum of $390,000,000, including $265,156,975 paid in
cash by purchasers of the synthetic rubber plants. The balance of
the $390,000,000 consists of amounts realized from operation of the
synthetic rubber plants under Government ownership.
In the tin program, a total of 23,342 long tons of refined tin was
produced at the Texas City smelter during the fiscal year 1955. The
value of the tin produced was $48,000,000. All tin produced at the
smelter was delivered to the General Services Administration for
stockpUing purposes.
356812—56
10
130
195 5 REPORT OF THE SECRETARY OF THE TREASURY
Plans had been made to discontinue smelter operations at the close
of the fiscal year 1955. However, in Senate Concurrent Resolution
26, 84th Cong., the sense of the Congress was stated to be that the
smelter should be continued in operation beyorid June 30, 1955.
Authority to operate the smelter untU June 30, 1956, is contained in
the joint resolution approved June 28, 1947, as amended (50 U. S. C.
98 note).
Defense Lending Division
The activities of this division are the administration of lending
programs authorized by Section 302 of the Defense Production Act
(50 App. U. S. C. 2092) and Section 409 of the Federal Civil Defense
Act (50 App. U. S. C. 2261). Loans authorized under the Defense
Production Act require the certification of tbe Office of Defense
MobUization, and those authorized for civil defense purposes must be
certified by the Federal Civil Defense Administrator.
Under the requhements of law, loans may be authorized for defense
production and civU defense purposes only in cases where financial
assistance is not otherwise avaUable. Wherever possible, all loans
authorized under these programs are made by private lending institutions under deferred participation arrangements. The only loans
authorized in the fiscal year 1955 were one for defense production
purposes and one for civil defense purposes; both of these loans were
made by banks under deferred participation agreements.
To the extent possible, all loans previously made under these programs are being placed with private investors and lending institutions.
On July 1, 1954, the direct loans and commitments made under
Section 302 of the Defense Production Act amounted to $234,893,000.
By the close of the fiscal year 1955, the amount of such loans and commitments had been reduced to $213,664,000.
The dhect loans and commitments authorized for civil defense
purposes amounted to $5,451,000 on July 1, 1954^ On June 30, 1955,
the amount of such loans and commitments was $4,864,000.
United States Coast Guard
General
The basic duties of the United States Coast Guard, as prescribed
in Title 14 of the United States Code, embrace the following: To
enforce or assist in the enforcement of all applicable Federal laws on
the high seas and waters over which the United States has jurisdiction,
with particular reference to those laws relating to navigation, shipping,
and other maritime activities; to promote the safety and efficiency
of merchant vessels, with the object of preventing avoidable casualties,
through the approval of plans, materials, and equipment used in their
construction, repair, and alteration, the periodic inspection of merchant vessels and the licensing of their crews, and the enforcement of
regulations for operation of motorboats; to develop, establish, maintain, and operate aids to maritime navigation such as lighthouses,
lightships, lights, radiobeacons, loran and radio direction finder stations, buoys and unlighted beacons, as required to serve the needs
of commerce and the armed forces; to perform any and all acts necessary to rescue and aid distressed persons, vessels, and ahcraft, and
to provide maximum protection to life and property on the high seas
ADMINISTRATIVE REPORTS
131
and waters over which the United States has jurisdiction, including
operation of ocean station vessels and the International Ice Patrol;
to maintain a state of readiness to function as a specialized service
in the Navy iri time of war; and to maintain and train an adequate
reserve force.
A primary objective of the Coast Guard is the prevention of loss of
life and property due to illegal or unsafe practices. The maintenance
of safety and" order in maritime activity is not limited to the strict
enforcement of laws, but encompasses a program of education for
ship operators and boatmen, and the enlistment of their cooperation
and self-regula tion toward prevention of marine casualties.
Assistance operations
In discharging its responsibUities for the promotion of marine safety,
the Coast Guard operated rescue facilities which comprised a system
of lifeboat stations, radio stations, bases, aircraft, and fioating units
located at strategic points along the coasts, inland waterways, Alaska,
and Hawaii. I t also operated the ocean station program by locating
Coast Guard cutters at strategic points in the Atlantic and Pacific
Oceans to serve the dual functions of search and rescue and to gather
and disseminate weather data for air and marine commerce.
The Coast Guard also operated the International Ice Patrol in the
North Atlantic Ocean and provided ice breaking services in rivers,
harbors, canals, and on the Great Lakes. Communication centers
were maintained and operated in the several districts within the
-continental United States, Alaska, Puerto Rico, HawaU, Bermuda, and
NewfoundlaDd.
Assistance rendered during the fiscal year 1955 is summarized in the
following statistics.
Number of assistance calls responded to ^
Number of instances of major assistance ^
Number of instances of minor assistance
Value of vessels and aircraft assisted (including cargo)
Lives saved or persons rescued from peril.
Number of vessels towed
Number of vessels refloated
Miles disabled vessels towed
1
19,.045
1,531
11, 586
$194, 404, 230
3, 243
7, 881
•.1,215
83, 358
1 The difference in the number of calls responded to and the number of instances of assistance rendered
represents those cases in which the Coast Guard responded but in which assistance was given by some
other source or was no longer needed or possible.
2 "Major cases" are those wherein immediate danger to mariners, marine and air commerce was involved
and which without Coast Guard assistance probably would have resulted in death, serious injury to persons, aircraft, or vessels, or great financial loss from damage to the craft.
Typical examples of assistance rendered by the Coast Guard during
the year are as follows:
On January 26, 1955,.a mUitary transport ahcraft, when approximately 1,000 mUes east of Bermuda, accidentaUy lost a quantity of
gasoline thus making a safe arrival at an ahport improbable. The
Coast Guard Cutter Coos Bay, occupying Ocean Station ^^Echo,"
received the distress message, effected a rendezvous with the airplane,
and established ditching procedures. The ahplane successfully ditched
just before nightfall, and all 8 survivors were safely remov^ed by the
cutter's lifeboats in spite of 13-foot waves and 40-laiot ^\nnds.
During December 1954, an Itahan D C 6 - B ahliner crashed during
bad weather on an approach to Idlewild International Airport. A
132
195 5 REPORT OF THE SECRETARY OF THE TREASURY
Coast Guard helicopter was on the scene within four minutes and
recovered three survivors and six bodies. Coast Guard surface craft
assisted in recovering sixteen of the thirty-one passengers.
The Coast Guard Lifeboat Station, Chicago, 111., on September 20,
1954, rescued three persons adrift on inner tubes on I^ake Michigan
and, at the same time conducted a land search party and found
another member of the same family who had been presumed drowned
among nearby jetties. Through effective first aid and artificial respiration administered by the Coast Guard station crew, all four were
revived and taken to a nearby hospital.
The Coast Guard ocean-going tug Yocona, during a severe winter
storm at the mouth of the Columbia River, held in tow for two days
a disabled commercial tug with a barge, thereby preventing the destruction of the tug and barge on the rocky Oregon coast. Heavy
seas made the handling of tow cables slow and hazardous.
Many commercial passenger-carrying transoceanic aircraft experiencing engine trouble or failure were intercepted and escorted to safety
by Coast Guard aircraft. The volume of this workload was large,
especially at the main termini and major way-points along the ocean
air routes, such as New York, San Francisco, Honolulu, Bermuda,
and Argentia. These • precautionary intercepts contributed to the
safety of ah commerce.
Marine inspection and safety measures
The duties performed by the Coast Guard in promoting safety of
life and property on vessels subject to navigation and vessel inspection laws of the United States include promulgation and related
enforcement of regulations relating to inspection of vessels and theh
equipment, construction ahd repair of vessels, investigation of marine
casualties, manning and citizenship requirements, mustering and drUling of crews, protection of merchant seamen, licensing of officers and
pilots and certificating of seamen, load line requirements, pilot rules,
transportation of dangerous cargoes on vessels, outfitting and operation of motorboats, licensing of motorboat operators, and regattas
and marine parades.
Some progress was made toward solution of the oil pollution problem
duringfcheyear. Representatives from the Coast Guard attended the
International Conference on Pollution of the Seas and Coasts by Oil
held in London in AprU and May 1954. The Oil Pollution Panel of
the Merchant Marine Council was subsequently established and is
currently functioning as the National Committee on Oil Pollution as
recommended by Resolution 8 of the London Conference. The Panel
cooperated with the United Nations in the fiscal year 1955 in the
preparation, distribution, and collection of data for solutions to the
oil pollution problem.
Effort was directed toward establishing procedures to implement
the provisions of Chapter VI of the International Convention for the
Safety of Life at Sea, 1948, for the inspection and certification of
dangerous cargo loadings on an international basis. If such inspections and certifications had been avaUable at other than United States
ports, several serious maritime accidents resulting from improper
stowage might have been averted. In the United States, the obligations assumed under Chapter VI of the 1948 Safety Convention are
ADMINISTRATIVE REPORTS
133
being discharged through the operation of the National Cargo Bureau,
a nonprofit, private agency financed by inspection fees. This agency
provides a method whereby the services of experts are made available
to certificate ship cargo loadings on foreign and American vessels in
United States ports.
Considerable study was devoted to the problem of inspection and
certification of offshore oU well drilling rigs under authority of the
Outer Continental Shelf Lands Act, enacted by the 83rd Congress,
Fh-st Session. This act gives broad authority to the Coast Guard to
promulgate regulations to promote safety of life and property on such
artificial islands and structures.
During the year, in accordance with the statutory duties of the
Coast Guard, plans and specifications for four large passenger vessels
were reviewed for compliance with maritime safety requirements such
as those relating to watertight subdivision, stability, fire protection,
life saving, and minimum accommodation standards. Bids have been
solicited for construction of these vessels.
Plans for a number of specia] purpose tank vessels and barges capable of carrying corrosives, compressed gases, and other dangerous
industrial liquids in bulk were also reviewed.
As a result of the passage of Public Law 584, 83rd Congress,
approved August 13, 1954, the Coast Guard relinquished to the
Federal Communications Commission the responsibility for issuing
safety radiotelegraphy and safety radiotelephony certificates and
exemption certificates issued in lieu of such certificates under the
International Convention for Safety of Life at Sea, 1948.
On July 15, 1954, the President approved Public Law 500, 83rd
Congress, which provided for the revocation of merchant marine
documents and licenses to holders involved in certain narcotic offenses
or to holders who are users of or addicted to the use of narcotic
drugs, as well as for denying issuance of merchant marine documents
or licenses to persons involved in similar offenses or who are users or
addicted to the use of narcotic drugs. Necessary regulations and
procedures to implement this law were prepared and published
during the year.
New regulations regarding fog gongs were published and are applicable to vessels of over 350 feet in length and operating on international voyages, but not to those vessels operating exclusively on
the Great Lakes and the inland waters of the United States. These
requirements implement the International Regulations for Preventing
Collisions at Sea of 1948, which became effective January 1, 1954.
The requirements for enforcement of the Officers' Competency
Certificates Convention, 1936, were revised to exclude foreign vessels
since it was found that other countries signatory to this Convention
have adequate means for enforcing these requirements.
New specification requirements were adopted for uniceUular plastic
ring life buoys, buoyant cushions for use on uninspected vessels, and
buoyant vests for use on uninspected motorboats.
The Merchant Marine Council held sixteen regular committee
meetings and two public hearings to consider proposed amendments
to regulations and proposed legislation affecting maritime safety.
Specific consideration was given to: The revision of rules and regulations regarding uninspected vessels, tank vessels, passenger vessels,
134
195 5 REPORT OF THE SECRETARY OF THE TREASURY
and cargo and miscellaneous vessels; dangerous cargo regulations;
manning of vessels; boundary lines dividing inland waters from the
high seas for Puerto Rico and the Virgin Islands; and marine engineering regulations and specification requirements for lifesaving equipment,
construction, and materials.
There were 2,483 marine casualties reported, of which 1,938 received detailed investigations. Of the casualties receiving detailed
investigation, 18 were by marine boards of investigation. There
were 391 lives lost in 165 of these casualties. These investigations
were held for determination of the cause and responsibility, and to
institute corrective safety measures where indicated. The most serious marine casualty during the fiscal year 1955 was the sinking of the
cargo steamer Mormackite on October 7, 1954, which foundered with
the loss of 37 crew members, primarUy because of the shifting of ore
cargo. Another serious casualty was the disappearance, with all hands,
of the cargo vessel Southern Districts off the coast of North Carolina
during heavy weather in the first week of December 1954. Four
passengers lost their lives on inspected passenger vessels during'^the
year. One of these persons was in his automobile on a ferry when
the ferry collided, in a thick fog, with another ferry and wreckage
crushed in the top of the passenger automobUe. The other three
passengers lost their lives when a huge swell swamped the inspected
passenger motorboat Liberty whUe crossing the bar in Bodega Bay,
Cahf.
A digest of certain phases of marine inspection activities follows:
Gross tonnage of vessels
Annual inspections completed L
Dry dock examinations
___.
Reinspections
Special examinations by traveling inspectors of passenger, tank, and dry
cargo vessels...
Miscellaneous inspections..
•_
Undocumented vessels numbered under provisions of the act of June 7, 1918,
asamended (46 USC 288)2
Violations ofnavigation and vessel inspection laws..
.Factory inspections 3
...i.
Merchant vessel plans reviewed ^
5,743
4,538
2,519
17,583,700
16,794,052
7,971, 550
227
19, 283
358, 411
6,208
13,055
1 Includes 271 vessels, totaling 317,098 grossjtons, which^were conversions or new construction completed
during the year.
2 The total of vessels numbered is 772 less than that reported for the fiscal year 1954 because of the program
instituted for checking on the accuracy of the numbered motorboat records. Many vessels were found to
have been destroyed, dismantled, etc. It is not possible to estimate, but undoubtedly a large majority of
the vessels reported lost, dismantled, etc. have been out of existence for some years. Actually, therefore,
there was a gain in the number of numbered motorboats because of the record volume of 30,619 motorboats issued certificates of award of number for the first time.
3 There were factory inspections of 514,715 items of equipment.
4 Refers to number of separate plans reviewed, not number of vessels involved.
Merchant marine personnel.—The licensing and certificating of merchant marine personnel included the issuance of 72,155 documents.
Of this number 12,474 were issued to persons without prior sea service
and 1,215 were licenses issued to radio officers under the provisions of
46 U. S. C. 229c. In the interest of national defense 27 individual
waivers of manning requirements for merchant vessels were issued.
Shipping commissioners supervised the execution of 10,674 sets of
shipping articles in connection with the shipment and discharge of
seamen.
ADMINISTRATIVE REPORTS
135
Merchant marine investigating units in major United States ports
and merchant marine detaUs in certain foreign ports continued to
operate in the administration of discipline in the merchant marine in
accordance with the provisions of Section 4450 of the Revised Statutes, as amended (46 U. S. C. 239), and Pubhc Law 500, 83rd Congress, approved July 15, 1954. Merchant marine details in London,
Antwerp, Bremerhaven, Naples, Trieste, Piraeus, and Yokohama
operated throughout the year. During the year a total of 11,801
investigations of cases involving negligence, incompetence, and misconduct were conducted. As a result of these investigations, charges
were preferred and hearings held by civilian examiners on 1,366 cases.
In accordance with Executive Order 10173, as amended by Executive Orders 10277 and 10352, a total of 21,504 persons to be employed
aboard merchant vessels were checked to determine if they were
security risks, and 18,826 merchant mariners' documents bearing
evidence of security clearance were issued to individuals. A total of
122 security appeal hearings were granted to persons who were classed
as poor security risks.
Aids to navigation
On June 30, 1955, there were 38,389 aids to navigation maintained in
the navigable waters of the United States, its Territories and possessions, the Trust Territory of the Pacific Islands, and at overseas mUitary bases, consisting of loran stations, radarbeacon stations, lightships, lighted and unlighted buoys, minor lights, and daybeacons.
During the year, 1,625 new aids to navigation were established and
1,687 aids were discontinued, a decrease of 62. Although a considerable number of aids were established to mark completed river and
. harbor improvements, the overall decrease in the total number of aids
was due, in general, to the program instituted last year to make a critical review of all aids to navigation maintained by the Coast Guard in
order to discontinue nonessential aids and to change or relocate other
aids to effect economies and improve the system.
The w^oiid-wide loran system as of June 30, 1955, comprised 59 stations, of which 49 were operated by the Coast Guard. During the
year, 6 new loran stations, two in Greenland, one on Baffin Island, and
three in the Bahama Islands in the West Indies area, were placed in
service. The Coast Guard also assumed operation of three loran
stations in the Gulf of Mexico which had been operated by the Air
Force.
International Lighthouse Conjerence.—The .United States was represented at the International Conference on Lighthouses and other Aids
to Navigation held at The Hague, May 31 to June 9, 1955, by five
Coast Guard officers. Fourteen papers on the engineering and operational aspects of the aids to navigation system of the United States
were submitted. Following the conference, the United States delegation inspected lighthouses, vessels, and bases, and visited the laboratories of firms manufacturing ligbthouse equipment in France, England, Germany, Netherlands, Denmark, and Sweden to compare techniques and methods of European countries with those employed by
the United States. Many innovations were observed which mil form
the basis for improvements in the design, operation, and management
of aids to navigation in this country.
136
195 5 REPORT OF THE SECRETARY OF THE TREASURY
A summary of aids to navigation, by type, follows:
Total number, June 30—
Type
1954
Loran transmitters
Radiobeacons
Radarbeacons.
Fog signals (except sound buoys)...
Lights (including lightships)
Daybeacons
Buoys, unlighted (including sound)
Buoys, unlighted sound
Buoys, unlighted metal
Buoys, Mississippi River type
Buoys, spar
Total
1955
40
191
8
586
49
189
8
583
10,159
5,045
3,098
10, 215
5,099
3,177
364
12,955
4,588
1,417
377
13,075
. 4, 708
909
38,451
Ocean stations
The Coast Guard maintained four ocean stations in the North
Atlantic Ocean and two in the Pacific throughout the year.
Ocean station vessels provided search and rescue, communications,
air navigation facUities, and meteorological services in the ocean areas
regularly traversed by aircraft of the United States and other cooperating governments. During 1955, Coast Guard vessels transmitted over
30,000 weather reports, made approximately 30,000 radio contacts
with ahcraft, rendered assistance in 38 cases, and cruised approximately 498,000 miles in connection with this program.
International Ice Patrol
The postseason activities of the International*Ice Observation and
Ice Patrol Service in the North Atlantic Ocean for the 1954 season consisted of an oceanographic survey made by the Coast Guard Cutter
Evergreen from August 17 to September 12, 1954, in the area northerly
from the Grand Banks to Cape Farewell, Greenland. Preliminary
aerial ice reconnaissance for 1955 by aircraft operating from Argentia,
Newfoundland, commenced on January 1, 1955, and routine aerial ice
reconnaissance was begun on February 27, 1955. A light ice year was
experienced during 1955 with no menace to ships traveling on effective
United States-European North Atlantic lane routes. I t was not
necessary, therefore, to inaugurate a continuous surface patrol. The
Coast Guard Cutter Evergreen made three cruises carrying out the
program of oceanographic surveys in the vicinity of the Grand Banks
of Newfoundland. Operations for the 1955 season had not been discontinued on June 30, 1955.
Bering Sea Patrol
The Bering Sea Patrol was carried out by the Coast Guard Cutter
Storis from July 1 to September 30, 1954. The purpose of the patrol
was to render aid to distressed persons, vessels, and ahcraft, to carry
out all law enforcement responsibUities within ihe purview of Title 14
of the United States Code and assist other Federal agencies and the
ADMINISTRATIVE REPORTS
137
Territorial Government in law enforcement, to provide logistic service
to outlying Coast Guard units, to perform aids to navigation duties, to
carry out intelligence functions of the Coast Guard, and to cooperate
with other Government agencies as follows: Make a court cruise if
required; render medical and dental assistance to the natives; assist
other Government agencies in transportation of personnel, freight,
equipment, or supplies; carry out military or other Government research projects as practicable, and collect hydrographic, oceanographic,
and meteorological data. During the patrol the Storis cruised 9,170.5
miles, carried nine passengers on missions in the public interest, transported 226 tons of freight, made two court cruises, and rendered
medical treatment to 1,500 persons and dental treatment to 638
persons.
Operational training
In pursuance of the Coast Guard's responsibility to function as a
specialized service in the Navy in time of war, 167 vessels and 41
ahcraft crews participated in Coast Guard or Navy training exercises.
The most adv^anced exercises were those conducted at Navy fleet training commands by the 33 large cutters. These vessels, which train
under the Navy curriculum for similar types, performed very creditably in this training and are generally classified by the Navy as ^¥eady
for fleet operations." The smaller vessels and ahcraft have been
trained to a degree consistent with their peacetime operational duties
in unit exercises such as antisubmarine warfare, gunnery, damage control, search and rescue, and defense against unconventional weapons.
Law enforcement
The port security program conducted under authority of Executive
Order 10173, as amended by Executive Orders 10277 and 10352
implementing provisions in the Espionage Act of June 15, 1917, as
amended (50 U. S. C. 191), continued to consist of the following:
ControUing the entry of merchant vessels into United States ports (ih
this connection during the year the Coast Guard issued regulations
contained in 33 CFR Part 124, requhing all vessels seeking access to
United States ports to signify intent of arrival at least 24 hours ih
advance and patrols were maintained at designated ports to enforce
these measures); supervising the loading of Class A explosives and
administering the regulations relative to dangerous and hazardous
cargoes; screening merchant seamen employed on certain categories
of United States vessels and waterfront workers for admittance to
waterfront facilities under certain specffied conditions; and protecting
selected vessels and waterfront facilities in designated port areas
from the waterside, and, by spot checks, from the shoreside.
In the category of longshoremen, warehousemen, pilots, and other
waterfront workers, durhig the year 30,668 persons were screened,
30,364 port security cards were issued, and 142 hearings were granted
upon appeal by persons who had been found to be poor security risks.
Fifty-two were rejected as poor security risks.
138
195 5 REPORT OF THE SECRETARY OF THE TREASURY
The following statistics reflect the volume of enforcement activity
taken by the Coast Guard dming the year.
Vessels and motorboats boarded
83, 323
Reports of violations of the Motorboat Act, 1940 (46 U. S. C. 526)
6, 166
Reports of violations of the Oil Pollution Act, 1924 (33 U. S. C. 431437)
444
Reports of violations of port security regulations
2, 695
Permits issued to load or discharge explosives
*
1, 473
Total tonnage of explosives covered by above permits
363, 194
Explosive loadings supervised
1, 469
Inspections of other hazardous cargoes
8, 204
Regattas patrolled
801
The Coast Guard also assisted other Federal agencies having
primair}^ responsibUity for the enforcement of the Oil Pollution Act
(33 U. S. C. 431-437), anchorage regulations, laws relating to internal
revenue, customs, immigration, quarantine, and the conservation and
protection of wUdlife and the fisheries.
Facilities, equipment, construction, and development
Floating units.—The larger ships in active commission at the end
of the year consisted of 178 cutters and buoy tenciers of various types,
74 patrol boats, 33 lightships, 39 harbor tugs, and 11 buoy boats.
During the year they cruised 2,794,710 miles as compared with
3,076,650 miles the previous year. Included in the 178 cutters are
two special units, the Coast Guard Cutter Courier and the Coast
Guard Cutter Eagle. The Courier, a 339-foot vessel equipped with
radio broadcasting facilities, is manned and operated by the Coast
Guard for the United States Information Agency. The Eagle, a
295-foot bark is used exclusively for training purposes and is placed in
commission each year for the Coast Guard cadet practice cruise.
Construction of eight new 95-foot patrol boats for the port security
program was authorized in August and is in progress at the Coast
Guard Yard. The first boat of this group was commissioned on
June 13.
Preparations were made and work started on the reactivation and
commissioning of the Owasco. I t is expected that this vessel will be
ready for operation about September 15, 1955.
During the year, a total of nine vessels were inactivated and decommissioned including two 255-foot cutters that were preserved by
dehumidification, a 250-foot cutter, a 114-foot buoy tender, three
lightships and a 72-foot buoy boat that were prepared for short time
storage, and a destroyer escort vessel that was returned to the Navy.
International Lijeboat Conjerence.—K senior Coast Guard officer
attended the International Lifeboat Conference held at Lisbon,
Portugal, June 12-19, 1955, as United States delegate. Five papers
were presented at this conference which covered the design and opera-
ADMINISTRATIVE REPORTS
'
139
tion. of lifeboat equipment used by the Coast Guard at its shore
stations.
Shore establishments.—Shore establishments at the end of the fiscal
year included:
12
2
4
25
23
2
9
4
1
1
1
9
12
1
district offices
46 marine inspection offices
area offices
7 merchant
marine
details
inspection offices
. located in foreign ports
bases
11 examiner offices
depots
33 group offices
supply centers
1 shipyard
supply depots
306 manned light stations
section oflBices
57 hght attendant stations
receiving center
1 fog signal station
training station
3 radio beacon stations
academy
1 electronic engineering station
air stations
29 recruiting stations
air detachments
5 ship training detachments
aircraft repair and supply 10 electronic repair shops
base
1 field testing and development
15 radio stations
unit
143 lifeboat stations
10 moorings
47 loran transmitting stations
Three arctic and three West Indies loran stations were placed in
operation. Also, the operation of three Gulf of Mexico loran stations
was assumed from the U. S. Air Force.
During the year construction projects were completed on St. Johns
Light Station, Fla., on a winterized semipermanent loran chain in the
arctic (Labrador-Greenland) area, on Woods Hole Base, Mass., on
Sault Ste. Marie Base, Mich., on three mobile type loran stations
for the West Indies, and on the rebuilding of the Electronics Repair
Shop at Vhginia Beach, Va.
Construction projects begun during the year and still in progress
included the relocation of Ditch Plain Lifeboat Station, N. Y., the
relocation of Fishers Island Lifeboat Station, Conn., the rebuilding of
the wharf at Ketchikan Base, Alaska, and the construction of a seaplane ramp at the Brooklyn A h Station, N. Y.
Restoration work on all facUities extensively damaged by hurricanes during the year is close to completion.
Aircrajt.—T^lne number of fixed and rotary wing ahcraft operated
by the Coast Guard was maintained at 126 during the year which
included those undergoing overhaul and modification. Six fixed wing
and four rotary whig ahcraft were acquhed for replacement of overage
ahcraft and ahcraft damaged beyond economical repah. The ahcraft were deployed from nine a h stations and twelve air detachments.
140
195 5 REPORT OF THE SECRETARY OF THE TREASURY
Coast Guard aircraft are used primarily for search and rescue purposes. Aircraft are.also used in carrying out the following activities:
International Ice Patrol
Wildlife and fisheries surveys and
Logistic support of isolated Coast
patrols
Guard units
Shipboard operations for ice rePort security and law enforceconnaissance
ment
Cooperation with airlines and
Cooperation m t h the Coast and
military agencies in training in
Geodetic Survey in aerial
search and rescue overwater
photography
emergency procedures
Cooperation with the Bureau of
Internal Revenue in location of
/
illicit distilleries
In carrying out these various duties, 18,354 sorties were flowm for a
total of 44,308 hours. Aircraft flew 689,396 ton-mUes of supplies and
equipment in logistic support of isolated Coast Guard shore units.
Communications.—During the fiscal year ending June 30, 1955, the
Coast Guard completed adjustment of its radio-navigation and radiocommunications frequencies for short and medium range operations
in compliance with international agreements for more efficient spectrum utUization. Adjustment of long-range operations is being made
9,s rapidly as possible avithout jeopardizing communications and is
rapidly nearing completion. Certain communications frequencies
have also been changed to reflect the increasing use of voice communications in lieu of code operations. The latter wiU improve operational
efficiency without increasing tbe number of trained operators required.
Plans have been completed for the installation of communications
facUities for planned port security operations at Charleston, S. C ,
New London, Conn., and San Diego, Calif. In order to provide improved facilities, a survey has been completed for shifting port security operations in the New York and Philadelphia areas to the 150
megacycle band.
A survey of landwire facilities has resulted in a considerable savings
in expenditures for commercial service as well as the further elimination of certain Coast Guard owned pole lines and cables.
New developments.—An improved type of small boat releasing hook
has been evaluated and adopted by the Coast Guard. This release
gear enables quicker and more positive hooking and unhooking action
with less danger of fouling. I t is safer and easier to handle' than the
equipment formerly used. Work is progressing steadily in the development of faster and more efficient boat winches, lighter lines, and
lighter and less troublesome blocks.
A sea-water-activated light has been developed for use during aircraft ditchings and similar emergencies. The light previously used
had an open flame which was dangerous because of the possibility of
fire caused by gasoline from ruptured fuel tanks. The new light contains a small battery which is activated when immersed in sea water.
The Ulumination furnished is adequate to mark a landing lane and the
lights can be retrieved and reused.
A new fog signal utUizing electrical energy directly known as the
electric diaphragm fog signal was developed and is now under evaluation tests. Greater efficienc}^^ in acoustical energy output per unit of
ADMINISTRATIVE REPORTS
141
electrical power consumed wUl result. A new 300-millimeter lens has
been developed which, with its associated apparatus, will give greater
candlepower, or visible light to the mariner, for the same cost in
electrical energy.
High frequency dhection finders covering the marine radio band
recently installed on search and rescue craft have aided searches for
distressed small craft equipped to transmit only in the marine radio
band.
Two new radars are being evaluated in continuance of the Coast
Guard modernization program. One of these is expected to improve
harbor surveUlance from a shore site. The other is expected to provide
a search and piloting aid for small craft. The latter is recommended
primarUy for its small size and light weight, meeting space and weight
limitations of the craft for which intended.
Ship Structure Committee.—The Ship Structure Committee continued its research program to improve the hull structures of ships.
Under the chairmanship of the Engineer-in-Chief of the Coast Guard,
the Committee consists of members of the various agencies principally
concerned with ships, i. e., the Navy Department, Maritime Administration, the American Bureau of Shipping, and the Coast Guard. The
National Academy of Sciences—National Research Council continues
to contribute important technical assistance and advice.
Personnel
On June 30, 1955, the military personnel strength of the Coast
Guard on active duty was 28,607, consisting of 2,654 commissioned
officers, 7.05 commissioned warrant officers, 533 cadets, 161 warrant
officers, and 24,554 enlisted men. The civilian force consisted of
2,171 salaried personnel, 2,409 wage board employees, and 502 lamplighters, exclusive of vacancies.
On May 27, 1955, 76 members of the Class of 1955 were graduated
from the Coast Guard Academy with Bachelor of Science degrees;
74 were commissioned ensigns in the U. S. Coast Guard, 1 was commissioned ensign in the U. S. Coast Guard Reserve, and 1 was not
ph^^sically qualified to receive a commission. There remained on
board in the classes of 1956, 1957, and 1958, a total of 303 cadets.
The commissioned officer strength was decreased by 150 rethements
and resignations and the release of 153 reserve officers to inactive duty.
New appointments consisting of 75 Academy graduates, 11 officers
from the Merchant Marine under authority of the act of August 4,
1949 (14 U. S. C. 225), and 187 graduates of the Officer Candidate
School. The extension of the tour of obligated service of Officer
Candidate School graduates from 24 to 36 months has tended to
stabilize assignments and tours of duty somewhat and to reduce turnover substantially among junior officers.
Throughout the year enlisted reservists without previous active
duty were called to voluntary active duty under the provisions of
Section 4 (c) (2) of the Universal Military Training and Service Act,
as amended (50 App. U. S. C. 451-473). On June 30, 1955, there were
1,994 reserves on active duty.
There were 310 enlisted voluntary retirements during the year. The
minimum service reached was 22 years and 5 months. One hundred
142
195 5 REPORT OF THE SECRETARY OF THE TREASURY
and sixty retirements were effected for statutory reasons, i. e. age,
30 years' service, and physical disabUity.
The competitive examination for appointments to the Coast Guard
Academy was held on February 28 and March 1, 1955, in 110 examining centers within the United States and overseas. A total of 1,629
applicants filed for the examination, 437 achieved passing scores, and
an eligibility list of 409 was established. Appointments were tendered
to 257 candidates, of whom 226 took the oath as cadets on July 1, 1955.
During the fiscal year, three officer procurement programs were
conducted. The largest one was the officer candidate program in
which college graduates with civilian status and enlisted men with the
equivalent of two years of college and two years of active duty were
designated as officer candidates and assigned to a four-month indoctrination program at the Coast Guard Academy to qualify as general
duty officers. One hundred and sixty-five received commissions as
ensigns in the Reserve and were assigned to active duty.
The second source of officers is from licensed officers of the merchant
marine, who participate in a competitive examination annually in
February of each year. Eight of those selected in February 1955 were
appointed in the regular Coast Guard during this fiscal year, three as
lieutenants and five as lieutenants junior grade.
The third source of officer procurement is the direct commissioning
program for the Coast Guard Reserve, either for assignment to reserve training units or for reinstatement of former Coast Guard Reserve officers whose commissions have lapsed. Of the 38 applicants
in this category, nine were selected for appointment.
During the fiscal year, 20,707 men applied for enlistment in the
regular Coast Guard. Of this number 2,259 were rejected for physical
disability, 9,140 were rejected for other reasons, 3,160 failed to complete processing, and 273 applications are stUl pending. The balance
of 5,875 men were enlisted'in the Coast Guard and assigned to active
duty. During the fiscal year, 4,461 recruits completed training at
Receiving Center Cape May and 1,178 completed training at Receiving Center Alameda, representing an increase of 1,927 over 1954.
Retention of experienced enlisted personnel continued to be a major
problem. During the year, 1,634 reenlistments were effected from a
total of 6,906 personnel discharged, representing only 2.7 percent first
reenlistments and 21 percent subsequent reenlistments.
A program of postgraduate training was continued during the year.
This included training in naval architecture, electronic engineering,
nuclear research, command communications, financial administration,
and law. Fifty-five officers were assigned to postgraduate training,
36 completed training and 66 officers remained in training.
Basic flight training and specialized short courses in helicopter
training were continued, with a total of 30 entering flight training,
14 completing it and 32 remaining in training; 24 helicopter pilots
took the 8-week course at Pensacola. Short courses were provided
in operation and maintenance of new aircraft and equipment.
Short refresher courses, made available by the Navy, continued in
use to permit the crews of Coast Guard vessels to maintain the state
of readiness necessary for mobUization. Other short courses were
undertaken in flnance, communications, and other technical fields.
A total of 283 officers completed such training during the fiscal year.
ADMINISTRATIVE REPORTS
143
The petty officer training program was curtailed durhig the year
since qualified personnel were not avaUable to fill assigned quotas.
The total graduated from Coast Guard schools was 1,428, and the
total from Navy, Army, and other schools was 665.
Correspondence com-ses issued by the Coast Guard Institute totaled
11,050 new enrollments with 3,300 graduates. In addition. Coast
Guard personnel participated in the course offered by the United
States Armed Forces Institute, with a total for the first three quarters
of the ^''ear of 1,046 in correspondence courses and 430 in self-teaching
courses.
During the fiscal year many visitors from foreign countries were
extended the use of trainhig and operational facUities of the Coast
Guard. The majority of the visitors came to the United States under
the sponsorship of Foreign Operations Administration. They included officials, technicians, and mUitary personnel from Argentina,
ChUe, Germany, South Africa, Switzerland, Turkey, Brazil, Pakistan,
Thailand, Formosa, China, and Africa. One Haitian Coast Guard
officer attended the 17-week course at the Coast Guard Officer Candidate School. A civil engineer from India and a technician from the
Philippines attended an extended aids to navigation course at Groton
Training Station and observed our aids to navigation program in the
various districts. Three Waterways police officers from Indonesia
visited our port security and law enforcement activities for approximately four months. Two different groups of Greek port officers
each spent six months with the Coast Guard and were shown all
phases of its operational and training facilities.
Public Health Service support.—On June 30, 1955, 37 dental officers,
34 medical officers, 9 nurses, 1 scientist officer, and 1 sanitary engineer
officer were assigned to duty with the Coast Guard. Full-time coverage by medical officers was maintained during the year for ocean
weather station vessels manning stations ^'Bravo" and ^'Coca."
Four full-time medical officers were assigned for the year to the staff
of the Commander, Western Area, for duty on ocean weather stations
in the Pacific Ocean.
Coast Guard Reserve.—The purpose of the Coast Guard Reserve is
to provide a trained force of officers and enlisted personnel to augment
the regular force and enable the Coast Guard to perform its functions
and duties at the time of mobilization. During the past year the
Coast Guard Reserve program continued to the greatest extent possible its progress toward the ultimate goal of procuring and training
this required force.
As of June 30, 1955, the total strength of the Coast Guard Reserve
consisted of 3,499 officers and 20,492 enlisted personnel, representing
an overall increase of 21 percent for the year. Of this number there
were 1,199 officers and 5,300 enlisted men in training units on this
date. There were 98 organized reserve training units in commission
as of June 30, 1955. An extensive program of active duty for training
was carried out during the fiscal year and approximately 3,800 personnel received training.
In the administration of the Reserve program, the Coast Guard
conforms to Department of Defense dhectives implementing the
various laws relative to the Reserve components, thus carrying out
the intent of Congress as expressed in Section 251 of the Armed Forces
144
195 5 REPORT OF THE SECRETARY OF THE TREASURY
Reserve Act of 1952 (50 U. S. C. 901), that the administration of all
the reserve components be as uniform as practicable.
Military justice.—The number of courts-martial cases continued to
decline with a total of 695 records received during the je^ir as against
850 in the previous year. Twenty-one were general courts-martial,
165 were special courts-martial, and 509 were summary courtsmartial. Fourteen general courts-martial and 38 special courts-martial were referred to the Coast Guard Board of Review for appellate
review as required by the Uniform Code of Military Justice. One
case was forwarded to the United States Court of Military Appeals,
which affirmed the decision of the Board of Review. In five other
cases, the accused petitioned the Court of Military Appeals for grant
of review of Board of Review decisions, but no petition was granted.
Personnel safety program.—During the year, 19 fatalities were reported. The Coast Guard had an exposure of 10,326,876 military
man-days and 10,594,827 civilian man-hours with 1,005 disabling injuries; 12,429,060 vehicle miles were reported. There were 1,420
accidents reported.
Administration
Fiscal and supply management.—Improvement in fiscal and supply
administration in the Coast Guard has continued during the past year.
The more important improvements were:
Better use of actual cost accounting data in the preparation of the
budget.
Integration of commuted-ration mess funds under an official
Treasury account instead of a separate quasi-Government fund. This
change provides more effective control over commuted-ration mess
operations.
Extension of the scope of internal audit of military pay and allowances to review on a spot-check basis the propriety of payments to
individuals. This change has brought to light for correction certain
Aveaknesses in the application of payment procedures and in internal
controls.
Reduction in the number of internal subdivisions of funds to
simplify financial responsibilities and strengthen management.
Relocation of the Coast Guard Supply Depot, Seattle from space
rented by the General Services Administration to space in the Naval
Supply Depot, Seattle.
Relocation of stock in the Coast Guard warehouse at Brooklyn,
N. Y., to space in the Naval Supply Activity, Brooklyn and turning
over the Coast Guard property to General Services Administration
for disposal. This is part of an overall move which will provide for
disposal of an additional warehouse in Jersey City, N. J. about
December 1, 1955.
Arrangement of support by Navy depots direct to Coast Guard
consuming units for electronic material, medical supplies, ammunition, ordnance parts, and general stores. This made possible the
elimination from Coast Guard inventories of items which are stocked
by the Navy. Also, this change made possible a reduction in the
time required for supply by eliminating the central headquarters
review of requisitions for ammunition and ordnance parts.
D,isposition of approximately six million dollars of materials which
were excess or obsolete.
ADMINISTRATIVE
145
REPORTS
Coast]GuardJAuxiliary
The primary activity of this voluntary, nonmUitary organization,
which is active in 328 communities is the promotion of safety and
efficiency in the operation of small boats. During the fiscal year the
AuxUiary completed examinations of 25,245 motorboats, patrolled 297
regattas, and answered 2,535 calls for assistance. On June 30, 1955,
the Auxiliary had 12,852 members and 7,363 facUities.
Funds available, obligations, and balances
The following table shows the amount of funds available for the
Coast Guard during the fiscal year 1955, and the amounts of obligations and unobligated balances.
F u n d s available
Appropriated funds:
Operatingexpenses
Reserve trainiag
_
Retired pay
Acquisition, construction, a n d i m p r o v e m e n t s
T o t a l a p p r o p r i a t e d funds
R eimbursements:
Operatingexpenses
Reserve t r a i n i n g
.._.
_._
__._
Total reimbursements
.
W o r k i n g funds established b y a d v a n c e s from other
agencies:
D e p a r t m e n t of Defense:
D e p a r t m e n t o f t h e Air Force
D e p a r t m e n t of t h e N a v y
D e p a r t m e n t of t h e A r m y
D e p a r t m e n t of H e a l t h , E d u c a t i o n , a n d Welfare
I n t e r n a t i o n a l Information A g e n c y
E x e c u t i v e Officeof t h e P r e s i d e n t .
Total working funds.
Grand total
_
Net total
obligations
Unobligated
balances
$166,909,300
2,546,000
20,439,000
2 8,328,168
$155,311,986
2,518,833
20,352,379
7,251,877
1 $1,597,314
1 27,167
1 86,621
1,076,291
188,222,468
185,435,075
2,787,393
17,285,963
62,002
17,285,963
62,002
17,347,965
17,347,965
81,750
1,097,588
91,956
672,450
520,000
670,993
71,515
1,040,883
85,852
659,747
517,334
670,766
10,235
66,705
6,104
12,703
2,666
227
3,134,737
3,046,097
88,640
208,705,170
205,829,137
2,876,033
1 T h e s e balances were transferred on J u n e 30, 1955, in accordance w i t h P u b l i c L a w 123, 84th Congress,
a p p r o v e d J u n e 30, 1955, to other T r e a s u r y D e p a r t m e n t b u r e a u s .
2 F u n d s available u n d e r " A c q u i s i t i o n , c o n s t r u c t i o n , a n d i m p r o v e m e n t s " include u n o b l i g a t e d balances
b r o u g h t forward from prior year a p p r o p r i a t i o n i n t h e a m o u n t of $3,258,168.
United States Savings Bonds Division
The fiscal year 1955 marked the twenty-first year the Treasury has
been continuously offering savings bonds for hivestment, and the
fifteenth year for the Series E bond. The cash value of all series of
these bonds outstanding at the close of the year totaled $58.6 billion,
of which $50.2 bUlion was held by more than forty million persons
and the rest by histitutions and miscellaneous investors.
United States savings bonds are an important part of the Government's program to give America a sound dollar. Selling savings bonds
to individuals is one of the best ways to place more of the debt in the
hands of private, long-term investors. At the close of fiscal 1955
more than 21 percent of the public debt consisted of nonmarketable
savings bonds of all series.
The Savings Bonds Division concentrated its promotional activities
throughout the year on selling more E and H bonds, the two series
356812—56
11
146
1955 REPORT OF THE SECRETARY OF THE TREASURY
which may be purchased only by individuals. This activity is the
core of the Treasury's program to encourage thrift generally, and
especially .to encourage the adoption of systematic habits of savings.
Savings stored up for future needs help to assure the continued growth
and prosperity of our country.
In the second half of fiscal 1955 wider distribution of these securities
among private investors was encouraged by permitting their purchase
by personal trusts. (Trustees of employees' savings plans had been
given this authorization in fiscal 1954.) Effective January 1, 1955,
the governing regulations were amended to make trustees of personal
trusts eligible to purchase Series E and H bonds. Eligible trusts
are those created by individuals for the benefit of themselves or of
other individuals. Thus, the Treasury's action was in keeping with
the basic concept of individuals only being eligible to own Series E
and H bonds.
Promotion had been begun during the second half of fiscal 1954 to
urge buyers of the $25 E bonds to purchase bonds of larger denomination which are less apt to be cashed for minor emergencies. This
program has now been in operation long enough to demonstrate its
worth. For the fiscal year 1955 it is estimated that $20 million or
more of sales that would normally have gone into $25 bonds was
invested in larger denomination bonds.
During January-June 1955 an intensive payroll savings campaign
was conducted among the ^^prime target companies" (those with
10,000 employees or more). As of June, 204 of the some 350 companies in this group had either completed, or made commitments to
conduct, person-to-person canvasses. This represents the greatest
number of such campaigns conducted by major companies during
any comparable period since the end of World War II. With the
passage of pay raise legislation for employees of the Federal Government, plans were set in motion for intensive payroll savings campaigns
in all Federal agencies. At the close of fiscal 1955 it was estimated
that more than 8 million persons employed in industry and Government were enrolled in the payroll savings plan and were buying about
$160 miUion in E bonds each month.
During July-December 1954 heavy emphasis was placed upon
the banking program. Reporting by the Federal Reserve Banks of sales
by banks was introduced in the field and many State bankers' associations used these reports for the purpose of setting sales quotas for
individual banks. Intensive H bond promotion, involving the use
of direct maU, was undertaken by many States with outstanding
results.
The Division made advances during the year in strengthening the
volunteer committee organization in support of the bond program.
Several vacancies in State chairmanships were filled by the appointment of outstanding leaders. I n many States, new appointments
were made to strengthen the committee support of payroll savings
and school savings. Women State chahmen placed special emphasis
on securing local volunteers to help individual schools with the
Treasury-sponsored thrift program. Several national organizations—
the National Congress of Parents and Teachers, the American Legion
Auxihary, the General Federation of Women's Clubs, and the
ADMINISTRATIVE REPORTS
147
Daughters of the American Revolution—pledged support to the
school program.
The National Payroll Savings Advisory Committee was completely
reorganized and 27 prominent executives in American industry were
added. The committee personnel is wholly volunteer.
The National Association of Manufacturers organized a new
''Committee on Cooperation with the Treasury Department," composed of top business executives selected from each NAM Region.
This committee will concentrate its efl'orts on the smaller payroll
savings prospects.
The Division continued to receive excellent support from the
American Bankers Association, and increasing aid from the National
Association of Mutual Savings Banks, the Investment Bankers
Association, and Savings and Loan Organizations. During the last
half of the fiscal year, local clubs or chapters of thirteen men's and
five women's service clubs scheduled a special bond program, with a
banker speaker on the subject: ''Take the Highroad to a Brighter
Future." A special bond promotion program was carried on by the
American National Cattlemen's Association, and another by Home
Demonstration clubs.
The estimated contribution of the advertising industry to the savings
bonds program during fiscal 1955 was again in excess of $50 million.
All media: newspapers, magazines, radio, television, outdoor, and
transit cooperated in the campaign, along with national and local
advertisers and advertising agencies.
In addition to this full-scale advertising campaign, outstanding
support was received from publicity and promotional media, including
motion picture producers and exhibitors, cartoonists, newspaper
carriers, industrial editors, and other groups. Two new records were
set for acceptance of savings bonds editorial features in newspapers.
Several national and regional banking publications carried savings
bonds news and features on a regular basis for the first time.
In 1955, as in former years, it is estimated that the advertising and
promotion program for United States savings bonds wUl equal the
combined total of all other national public service campaigns. I t is
estimated to be the largest of any organization in the country.
During 1955 the Division's field sales staff was reorganized into
six regions similar to the sales staffs of large business corporations.
Each region is headed by a regional sales director with full responsibility for sales results. The objectives were to decentralize authority
in order to improve operations and the effectiveness of personnel
making actual sales and promotional contacts, and to provide closer,
more constructive supervision of field personnel to make use of special
talents. The 51 State sales dhectors now report to the regional sales
directors rather than dhectly to headquarters. However, routine
operational and administrative matters are still handled centrally to
prevent bottlenecks and relieve the regions of these detaUs.
In the course of the year regular meetings of regional sales directors
and their assistants were held in Washington in order to achieve
better coordination between the Washington staff and the field.
Sales training conferences were held in each field region for the purpose
of instructing all promotional personnel in new sales techniques and
148
195 5 REPORT OF THE SECRETARY OF THE TREASURY
to retrain them in meeting the basic problems of savings bonds promotion. In addition indoctrination conferences of new promotional
personnel were held at various times during the year for the purpose
of instructing them in matters of policy, procedure, and sales approach.
United States Secret Service
The major functions of the United States Secret Service, under
direction of the Secretary of the Treasury, are protection of the person
of the President of the United States and members of his immediate
family, of the President-elect, and of the Vice President at his request;
the detection and arrest of persons committing any offenses against the
laws of the United States relating to obligations and securities of the
United States and of foreign governments; and the detection and
arrest of persons violating certain laws relating to the Federal Deposit
Insurance Corporation, Federal land banks, joint-stock land banks,
and national farm loan associations. These and other duties of the
Secret Service are defined in 18 U. S. C. 3056.
Management improvement
The importance of the continuing management improvement
program was stressed during the year in personal discussions by the
Chief and staff members with Secret Service personnel attending
special training schools in Washington.
Groups of special agents in charge of field offices were brought to
headquarters for 10-day orientation conferences to acquaint them with
central administrative procedures and problems at first hand.
For positions of special agents in charge of field offices, an examination was developed to test and rate qualified applicants and it was
given to a number of employees in the field who were considered to
have supervisory potentials. Further studies are being made to
determine if this special examination can be used as part of the selection process for supervisors.
To assist personnel a revised index for the Secret Service Manual
was completed and distributed to all employees of the Service. This
index reflects changes that have occurred in the manual since it was
first published and is of considerable assistance to Secret Service employees in using the manual as a reference source. In addition
existing personnel policies of the Secret Service, together with Civil
Service Commission regulations, are being summarized in a separate
manual for distribution to all offices. The manual will outline
current personnel policies and practices and wUl furnish employees
with information concerning the various aspects of the personnel
management program of the Secret Service.
The safety program of the Secret Service was strongly emphasized
during the year. The importance of safe-driving habits was continually called to the attention of all personnel through a weekly publication The Record, distributed to field offices. A "Safe Driver Award"
was designed for presentation to employees who have driven Government-owned automobiles five, ten, or fifteen years without accident.
An agent-cashier fund for the redemption of mutilated and altered
notes was established in the counterfeit section in August 1954.
This fund enables the Secret Service to redeem such notes immedi-
ADMINISTRATIVE REPORTS
149
ately, thus relieving members of the public of hardships that resulted
from long waiting periods formerly required.
An imprest fund was established in the headquarters office to
expedite small supply purchases. This system has resulted in faster
procurement transactions and more economical processing of vouchers
for smaU purchases.
The continuing inspection system of the Secret Service has proved
to be an exceUent technique for improving efficiency of operations
and achieving the most economical use of manpower and available
resources.
Protective and security activities
At the request of the Secret Service, the Congress enacted Public
Law No, 53, approved June 1^^ 1955, which amended 18 U. S. C. 871
(Threats Against the President) to provide penalties for making
threats against the President-elect and the Vice President, to be
consistent with the Secret Service authority in 18 U. S. C. 3056 to
protect the President, the President-elect, and the Vice President at
his request. Prior to the amendment 18 IJ. S. C. 871 applied only to
threats against the President.
Secret Service agents were sent to Switzerland in June to complete
advance arrangements for the protection of President Eisenhower
during the Conference of Heads of Government, Geneva, Switzerland,
July 18-23, 1955. Agents also made secmity arrangements for the
visit of Vice President Nixon to Central America and were assigned
to protect him throughout the trip.
During the year several ranking police officials of foreign governments, including Indonesia, Thailand, the Philippines, Veneizuela,
and South Africa, visited the Secret Service by arrangement with
the Foreign Operations Administration, to discuss enforcement of
the counterfeiting laws and methods and techniques employed in the
protection of dignitaries.
By direction of the Secretary, Secret Service inspectors made
security inspections of the United States mints and assay offices
during the year. In the Main Treasury BuUding and in the Treasury
Annex the electronic alarm system for the protection of vaults and
certain other space was replaced by more modern and efficient
equipment.
Enforcement activities
Although the representative value of counterfeit money seized
during the year was much greater than in the preceding year, the
amount actually passed on storekeepers and cashiers was comparatively small, primarUy because the Secret Service captured several
counterfeiting plants before their output could be chculated.
The most extensive counterfeiting operation of the year centered
in Los Angeles, Calif., and had ramifications in San Francisco, Chicago,
Dallas, and other cities. In January a Los Angeles Secret Service
agent, working under cover, negotiated with a printer to buy a quantity of counterfeit $20 notes. When the printer made delivery he
was arrested by other agents who captured $135,000 in counterfeit
$20 biUs.
The agents promptly descended upon a Los Angeles theater where
the play, "Charlie's Aunt," was in progress. The leading man was
150
1955 REPORT OF THE SECRETARY OF THE TREASURY
caught backstage attempting to conceal two paper bags holding
$9,060 in counterfeit $20 notes. The publicity man for the theater
was also arrested, and $740 in counterfeits was found in his quarters.
Agents learned that a theater handyman had fied to Chicago after
stealing $160,000 in the counterfeit $20 notes. In Chicago, agents
located the handyman and a friend, placed them under surveUlance,
saw them pass some of the counterfeits, and took them into custody,
recovering about $111,000 in counterfeit $20 notes in their hotel room.
Another Los Angeles man who assisted in manufacturing the notes
was arrested January 12 and surrendered $102,400 in counterfeit $20
notes, together with the plates and negatives used in their manufacture.
Two men were arrested in DaUas, Tex., for passing the counterfeits.
Seven other passers were arrested in San Francisco.
In all, some twenty offenders were arrested in this case, and nearly
$400,000 in counterfeit $20 notes was seized. All defendants were
convicted and sentenced to terms ranging from probation to seven
and one-half years in prison.
In the course of the year. Secret Service agents captured 16 plants
for the manufacture of counterfeit paper money, and $1,021,916
in counterfeit bills. Of that total, only $102,482 was successfully
passed on storekeepers and cashiers. The balance of $919,434 was
captured before it could be put into chculation. The representative
value of counterfeit coins seized was $5,262.76, of which $4,975.32
was successfuUy passed.
There were 124 new counterfeit note issues and variations thereof
during the year, and 186 persons were arrested for violating the
counterfeiting laws, as compared with 210 arrested the previous year.
The following table summarizes seizures of counterfeit money during
the fiscal years 1954 and 1955.
Counterfeit money seized, fiscal years 1954 and 1955
Counterfeit and altered notes:
After being circulated
Before being circulated...
Total...
Counterfeit coins seized:
After being circulated
Before being circulated
Total
Grand total
...
_
i
_
_..._
.
.
Percentage
Increase, or increase,
or
decrease ( - ) decrease
(—)
1964
1965
$140,106.00
208,038.75
$102,482.00
919,434.31
-$37.624.00
711,395.56
348,144.75
1,021,916.31
673,771.56
193.5
6,827. 71
1,326.86
4,975.32
287.44
-852.39
-1,039.42
—14.6
—78.3
—26.9
342.0
7,154. 57
6,262. 76
-1,891.81
—26.4
355,299.32
1,027,179.07
671,879.76
189.1
There were 33,260 forged Government checks received for investigation, an increase of 1,329, and 12,139 were on hand at the beginning
of the year. Agents completed investigations of 30,177 forged checks
worth $2,609,335.91, but on June 30 there was a growhig backlog of
15,222 forged checks awaiting investigation. Agents arrested 2,825
151
ADMINISTRATIVE EEPORTS
persons for forgery of Government checks, as compared with 2,609
arrested the previous year.
The cooperation of the Social Security Administration was requested
and obtained in an effort to facUitate investigations of forged social
security checks. The Social Security Administration agreed to notify
each social security beneficiary, as soon as he becomes eligible to
receive benefits, as to the procedure to be followed to expedite investigation and issuance of duplicate checks in the event original checks
are lost or stolen.
Thieves continued to steal and forge United States savings bonds.
Agents received 5,607 forged bond cases for investigation, and there
were 2,063 such cases awaiting investigation at the beginning of the
year. Agents completed investigations of 4,961 forged bonds worth
$437,103.54 and arrested 86 persons for bond forgery. Many of the
bonds were stolen by burglars from private homes where the bonds
had been concealed in shoe boxes, bureau drawers, and other makeshift
hiding places.
The following table shows the number of criminal and noncriminal
cases completed during the fiscal years 1954 and 1955.
Number of investigations of criminal and noncriminal activities, fiscal years
1954 ctnd 1955
1954
Cases closed
Criminal cases:
Counterfeiting
Forged Government checks
Stolen or forged bonds
Protective research
Miscellaneous
Total
•NTnn ori rn inal
»
-
Grand total
1955
Percentage
Increase, or increase,
or
decrease (—) decrease
(—)
1,277
28,837
3,642
1,020
420
1,245
30,177
4,961
. 1,905
256
-32
1,340
1,419
885
-164
-2.5
4.6
40.1
86.8
—39.0
35,096
2.316
38, 544
2,083
3, 448
-233
9.8
—10.1
37,412
40,627
3,215
8.6
Secret Service agents arrested 172 persons for crimes other than
counterfeiting and forgery, making a total of 3,269 persons arrested,
an increase of 157 or 5.0 percent over the previous year. There were
2,979 convictions, representing 98.1 percent of convictions in all cases
prosecuted, some of which were pending from the previous year.
Prison sentences during the .year totaled 3,159 years, and additional sentences of 2,715 years were suspended or probated. Fines
in criminal cases totaled $61,242.
Cases of all types received for investigation, including counterfeiting and forgery cases, aggregated 43,990, an increase of 2,627
cases or 6.4 percent over the previous year, and 15,222 cases were
pending at the beginning of the year. Although 40,627 cases were
closed during the year, there were 18,585 cases awaiting investigation
and 956 pending prosecution as of June 30.
152
1955 REPORT OF THE SECRETARY OF THE TREASURY
The • following table constitutes a statistical summary of Secret
Service arrests and dispositions for the fiscal years 1954 and 1955.
Number of arrests and cases disposed of, fiscal years 1954 cirid 1955
1954
Arrests for:
Counterfeiting
_
Fnrped Government checks...
Violations of Gold Reserve Act.
stolen or forged bonds
Protective research
Miscellaneous
1955
Percentage
Increase, or increase,
or
decrease ( - ) decrease
(-)
210
2,609
14
84
88
107
186
2,825
12
86
93
. 67
-24
216
-2
2
5
-40
—11.4
8.3
-14.3
2.4
5.7
-37.4
3,112
3,269
157
6.0
_
190
2,434
15
83
80
110
176
2,533
19
76
97
78
-14
99
4
-7
17
-32
—7.4
4.1
26.7
-8.4
21.3
-29.1
Total
.
A cquittals
Dismissed, not indicted or died before t r i a l . . . . .
2,912
40
222
2,979
58
205
67
18
-17
2.3
45.0
-7.7
3,174
3,242
68
2.1
Total
Cases disposed of:
Convictions in connection with:
Countfirfeiting
Fnrged Government checlcs -.
Violations of Gold Reserve Act
stolen or forged bonds
Protective research.. .
Miscellaneous
Total cases disposed of..
_
BXHIBITS
Public Debt Operations
Offerings and Allotments of Treasury Certificates of Indebtedness, Treasury
Notes, and Treasury Bonds, and Calls for Redemption of Treasury Bonds
Exhibit 1.—Treasury certificates of indebtedness
Two Treasury circulars containing representative certificate offerings during
the fiscal year 1955 are reproduced in this exhibit. Circulars pertaining to the
other regular and tax anticipation series during 1955 are similar in form and
therefore are not reproduced in this report. For each issue, however, the essential details are summarized in the first table following the circulars and the final
allotments of new certificates issued for cash or in exchange for maturing or
called securities are shown in the second table.
DEPARTMENT CIRCULAR NO. 950.
PUBLIC DEBT
TREASURY
DEPARTMENT,
Washington, November 22, 1954I. OFFERING OF CERTIFICATES
1. The Secretary of the Treasury, pursuant to the authority of the Second
Liberty Bond Act, as amended, invites subscriptions from the people of the
United States for certificates of indebtedness of the United States, designated
l}i percent Treasury certificates of indebtedness of Series D-1955, in exchange
for which any of the following listed securities, singly or in combinations aggregating $1,000 or multiples thereof, may be tendered:
iy% percent Treasury notes of Series B-1954, maturing December 15, 1954;
2 percent Treasury bonds of 1952-54 (dated December 1, 1944), maturing
December 15, 1954;
2 percent Treasury bonds of 1951-55, called for redemption on December
15, 1954.
Exchanges will be made at par with an adjustment of interest as set forth in
section IV hereof. The amount of the offering under this circular will be limited
to the amount of the eligible securities of the three issues enumerated above
tendered in exchange and accepted. The books will be open only on November 22 through November 24 for the receipt of subscriptions for this issue.
2. In addition to the offering under this circular, holders of the eligible securities
are also offered the privilege of exchanging all or any part of such securities for
l}i percent Treasury certificates of indebtedness of Series Er-1955 or 2H percent
Treasury bonds of 1963, which offerings are set forth in Department Circulars
Nos. 951 and 952, issued simultaneously with this circular.
II. DESCRIPTION OF CERTIFICATES
1. TJie certificates now offered will be an addition to and will form a part of
the series of l}i percent Treasur}^ certificates of indebtedness of Series D-1955
issued pursuant to Department Circular No. 947, dated August 3, 1954, will be
freel}^ interchangeable therewith, are identical in all respects therewith, and
(except that there are hereby authorized additional denominations of $100,000,000
and $500,000,000) are described in the following quotation from Department
Circular No. 947:
''1. The certificates will be dated August 15, 1954, and will bear interest from
that date at the rate of IJ^ percent per annum, payable at the maturity of the
certificates on August 15, 1955. They will not be subject to call for redemption
prior to maturity.
"2. The iucome derived from the certificates shall be subject to all taxes, now
or hereafter imposed under the Internal Revenue Code, or laws amendatory or
supplementary thereto. The certificates shall be subject to estate, inheritance,
gift, or other excise taxes, whether Federal or State, but shall be exempt from
all taxation now or hereafter imposed on the principal or interest thereof by any
155
156
195 5 REPORT OF THE SECRETARY OF THE TREASURY
State, or any of the possessions of the United States, or by any local taxing
authority.
"3. The certificates will be acceptable to secure deposits of public moneys.
They will not be acceptable in payment of taxes.
'*4. Bearer certificates with one interest coupon attached will be issued in
denominations of $1,000, $5,000, $10,000, $100,000, and $1,000,000. The certificates will not be issued in registered form.
"5. The certificates will be subject to the general regulations of the Treasury
Department, now or hereafter prescribed, governing United States certificates."
i n . SUBSCRIPTION AND ALLOTMENT
1. Subscriptions w^ill be received at the Federal Reserve Banks and branches
and at the Office of the Treasurer of the United States, Washington. Banking
institutions generally may submit subscriptions for account of customers, but only
the Federal Reserve Banks and the Treasury Department are authorized to act
as official agencies.
2. The Secretary of the Treasury reserves the right to reject or reduce any
subscription, and to allot less than the amount of certificates applied for; and
any action he may take in these respects shall be final. Subject to these reservations, all subscriptions will be allotted in full. Allotment notices will be sent out
promptly upon allotment.
IV. PAYMENT
1. Payment at par for certificates allotted hereunder must be made on or before
December 15, 1954, or on later allotment, and may be made only in the securities
of the three issues enumerated in section I hereof, which will be accepted at par,
and should accompany the subscription. All bearer securities should be surrendered with December 15, 1954, coupons attached, and subsequent coupons as
well in the case of the Treasury bonds of 1951-55. The full six months* interest
due December 15, 1954, will be credited, and accrued interest from August 15 to
December 15 on the certificates to be issued will be charged, as shown in the
table below. The difference will be paid subscribers, in the case of bearer securities, following their acceptance, and in the case of registered bonds, following
discharge of registration.
Interest adjustments per $1,000
Securities surrendered
V/i percent Treasury notes. Series B-1954
2 percent bonds of 1952-54 (dated December 1,1944)
2 percent bonds of 1951-55
Accrued
interest
tobe
credited
$9.38
10.00
10.00
Accrued
interest
to be
charged
$3.76027
3.76027
3.76027
Net
amount
to be paid
subscribers
$5.61973
6, 23973
6.23973
v . ASSIGNMENT OF REGISTERED BONDS
1. Treasury bonds of the two eligible issues in registered form tendered in payment for certificates offered hereunder should be assigned by the registered payees
or assignees thereof to ''The Secretary pf the Treasury for exchange for \)i percent
certificates of indebtedness of Series D-1955 to be delivered tb
,** in
accordance with the general regulations of the Treasury Department governing
assignments for transfer or exchange, and thereafter should be presented and
surrendered with the subscription to a Federal Reserve Bank or branch or to the
Office of the Treasurer of the United States, Washington. The bonds must be
delivered at the expense and risk of the holders.
VI. GENERAL PROVISIONS
1. As fiscal agents of the United States, Federal Reserve Banks are authorized
and requested to receive subscriptions, to make allotments on the basis and up to
the amounts indicated by the Secretary of the Treasury to the Federal Reserve
Banks of the respective districts, to issue allotment notices, to receive payment
for certificates allotted, to make delivery of certificates on full-paid subscriptions
allotted, and they may issue interim receipts pending delivery of the definitive certificates.
EXHIBITS
157
2. The Secretary of the Treasury may at any time, or from time to time, prescribe supplemental or amendatory rules and regulations governing the offering,
which will be communicated promptly to the Federal Reserve Banks.
M.
B.
FOLSOM,
Acting Secretary of ihe Treasury.
DEPARTMENT CIRCULAR NO. 958.
PUBLIC DEBT
TREASURY
DEPARTMENT,
Washington, March 22, 1955.
I. OFFERING OF CERTIFICATES
1. The Secretary of the Treasury, pursuant to the authority of the Second
Liberty Bond Act, as amended, invites subscriptions from the people of the
United States for tax anticipation certificates of indebtedness of the United
States, designated V/s percent Treasury certificates of indebtedness of Series
F-1955. The amount of the offering is $3,000,000,000, or thereabouts. The
books will be open only on March 22 for the receipt of subscriptions.
II. DESCRIPTION OF CERTIFICATES
1. The certificates will be dated April 1, 1955, and will bear interest from that
date at the rate of 1^ percent per annum, payable with the principal at maturity
on June 22, 1955. They will not be subject to call for redemption prior to
maturity.
2. The income derived from the certificates is subject to all taxes imposed under
the Internal Revenue Code of 1954. The certificates are subject to estate, inheritance, gift, or other excise taxes, whether Federal or State, but are exempt from
all taxation now or hereafter imposed on the principal or interest thereof by any
State, or any of the possessions of the United States, or by any local taxing
authority.
3. The certificates will be acceptable to secure deposits of public moneys.
They will be accepted at par plus accrued interest to maturity in payment of
income and profits taxes due on June 15, 1955.
4. Bearer certificates will be issued in denominations of $1,000, $5,000, $10,000,
$100,000, and $1,000,000. The certificates will not be issued in registered form.
5. The certificates will be subject to the general regulations of the Treasury
Department, now or hereafter prescribed, governing United States certificates.
i l l . SUBSCRIPTION AND ALLOTMENT
1. Subscriptions will be received at the Federal Reserve Banks and branches
and at the Office of the Treasurer of the United States, Washington. Commercial
banks, which for this purpose are defined as banks accepting demand deposits,
may submit subscriptions for account of customers, but only the Federal Reserve
Banks and the Treasury Department are authorized to act as official agencies.
Others than commercial banks will not be permitted to enter subscriptions except
for their own account. Subscriptions from commercial banks for their own
account will be received without deposit, but will be restricted in each case to an
amount not exceeding one-half of the combined capital, surplus and undivided
profits, of the subscribing bank, as of December 31, 1954. Subscriptions from
all others must be accompanied by payment of 5 percent of the amount of certificates applied for, not subject to withdrawal until after allotment. Following
allotment, any portion of the 5 percent payment in excess of 5 percent of the
amount of certificates allotted may be released upon the request of the subscribers.
2. The Secretary of the Treasury reserves the right to reject or reduce any
subscription, and to allot less than the amount of certificates applied for; and anj^
action he may take in these respects shall be final. Allotment notices will be sent
out promptly upon allotment.
158
1955 REPORT OF THE SECRETARY OF THE TREASURY
IV. PAYMENT
1. Payment at par and accrued interest, if any, for certificates allotted hereunder must be made or completed on or before April 1,1955, or on later allotment.
In every case where payment is not so completed, the payment with application
up to 5 percent of the amount of certificates allotted shall, upon declaration made
by the Secretary of the Treasury in his discretion, be forfeited to the United
States. Any qualified depositary will be permitted to make payment by credit
for certificates allotted to it for itself and its customers up to any amount for
which it shall be qualified in excess of existing deposits, when so notified by the
Federal Reserve Bank of its district.
V. GENERAL PROVISIONS
1. As fiscal agents of the United States, Federal Reserve Banks are authorized
and requested to receive subscriptions, to make allotments on the basis and up to
the amounts indicated by the Secretary of the Treasury to the Federal Reserve
Banks of the respective districts, to issue allotment notices, to receive payment
for certificates allotted, to make delivery of certificates on full-paid subscriptions
allotted, and they may issue interim receipts pending delivery of the definitive
certificates.
2. The Secretary of the Treasury may at any time, or from time to time, prescribe supplemental or amendatory rules and regulations governing the offering,
which will be communicated promptly to the Federal Reserve Banks.
G.
M.
HUMPHREY,
SecretaryoftheTreasury.
Summary of information pertaining to Treasury certificates of indebtedness issued during the fiscal year 1955
Department circular
Date of
preliminary announcement
Date
1954
July 16
July 30
1954
July 21
Aug. 3
946
947
Nov. 18
Nov. 22
960
951
952
Nov. 18
Nov. 22
951
950
952
1965
Mar. 18
1955
Mar. 22
958
Concurrent
offering,
Certificates of indebtedness issued for cash or in exchange for maturing or called securities
circular
Number
number
1 percent Series C-1955 (tax anticipation series) issued for cash.
I H percent Series D-1955
,
Exchanged for—
2H percent Series D-1954 certificates maturing Aug. 15, 1954.
2H percent Series E-1954 certificates maturiug Sept. 15, 1954.
IJr^percent Series D-1956 (additionalissue)
Exchanged for—
V/i percent Series B-1954 Treasury notes maturmg Dec. 15, 1954.
2 percent Treasm-y bonds of 1952-54 (dated Dec. 1,1944) maturmg Dec. 15,1964.
2 percent Treasury bonds of 1951-56 called on Dec. 15,1954.
m percent Series E-1956
Exchanged f o r i i i percent Series B-1954 Treasury notes maturing Dec. 15,1954.
2 percent Treasury bonds of 1952-54 (dated Dec. 1, 1944) maturing Dec. 15,1964,
2 percent Treasury bonds of 1961-65 called on Dec. 15,1954.
1 ^ percent Series F-1955 (tax anticipation series) issued for cash
1.Commercial banks were permitted to subscribe for their own account for an
amount not exceeding one-half of the combined capital, surplus, and undivided
profits of the subscribing bank, as of June 30,1954. Qualified depositaries were permitted to make payment for not more than 75 percent of the amount of certificates
allotted to them and their customers by credit in Treasury tax and loan accounts.
2 The full year's interest due on the Series D-1954 certificates was paid to the subscribers following acceptance of the surrendered certificates. On the Series E-1954
certificates surrendered and accepted, the full year's interest was credited, accrued
mterest on the new certificates from Aug. 15 to Sept. 16, 1954, ($0.95548 per $1,000)
was charged, and the difference ($25.29452 per $1,000) was paid to the subscribers.
Allotment
payment
Date sub' date on
Date of Date of scription or before
maturity
issue
books
(or on
closed
later
aUotment)
1954
Aug. 2
Aug. 15
1955
Mar. 22
Aug. 15
1964
1954
July 21 1 Aug. 2
Aug. 5 2 Aug. 16
Aug. 15
Aug. 15
Nov. 24 3 Dec. 15
Dec. 16
Dec. 15
Nov. 24 i Dec. 15
1955
Apr. 1
June 22
1955
Mar. 24
t=l
HH
1955
5 Apr. 1
3 See exhibit 1, section IV, for provisions for payment of mterest.
* Final interest due on December 16 on bearer securities surrendered was paid by
payment of the Dec. 16, 1954, coupons, and on registered bonds by check drawn in
accordance with the assignments on the bonds surrendered or by credit in any account
maintained by a banking institution with the Federal Reserve Bank ofits district.
5 See exhibit 2, sections III and IV, for provision for subscriptions and payment of
interest.
Cn
CO
160
1955 REPORT OF THE SECRETARY OF THE TREASURY
Allotments of Treasury certificates of indebtedness issued
[In thousands
1 ^ percent Series D-1955 certificates'
issued in exchange for—
Federal Reserve district
Boston
New York
Philadelphia
Cleveland. _
Cincinnati
Pittsburgh
Richmond
Baltimore
Charlotte
Atlanta
Birmingham
Jacksonville
Nashville
New Orleans
Chicago
Detroit
St. Louis
Little Rock
Louisville
Memphis
Minneapolis
Kansas City
.Denver
Oklahoma CityOmaha.
Dallas
ElPaso.
Houston..
San Antonio
San Franicisco
LosAngeles
Portland
Salt Lake Gity.Seattle
Treasury
Total certiflcate allotments
Maturing or called securities:
Exchanged in concurrent offerings.
Total exchanged
Redeemed for cash or carried to matured debt.
Total maturing or called securities
1 percent
Series C 1956 certificates (tax 2H percent 2^/i percent
anticipaSeries D - Series E tion) due 1964
1954 certifMar. 22, icatescertifma- icates ma1966, issued Ituring
Aug.
turing
Sept.
for cash i
16, 1954 2 16, 1964 2
Total
160,803
., 640,602
164,740
139,848
30,070
118,270
67,464
27,388
29,677
42,030
14,397
28,213
20,985
22,684
482,693
62,861
76,171
4,128
21,870
11,914
70,020
42,640
14,855
20,244
16,165
63,682
4,743
31, 792
8,252
227,799
85,408
25,601
17,876
48,225
18,282
699, 769
24,265
23,696
7,667
14,138
3,733,710
1,004,687
2,662,967
3,667,644
1,728,048
2,078,436
3,806,484
2,732,735
66,491
4,631,393
92,616
7,364,128
148,107
2,788,226
4,724,009
7,612,235
2,902
3,363
2,542
14,616
2,736
5,693
2,798
6,907
107,600
6,083
16,736
4,137
20,354
2,252
29,190
16,409
12,496
2,172
8,307
5,068
1,026
2,712
1,405
12,264
14,278
2,794
197
6,614
6,643
76,742
1,889,476
37,341
46,125
7,144
9,954
4,591
11,842
7,079
18,441
4,636
2,643
6,298
2,171
146,916
6,511
28,610
1,833
10,144
3,166
20,864
13,079
6,185
5,632
7,723
14,079
346
3,957
11,677
130,283
9,936
3,237
424
4,706
1,469
94,024
2,489,234
61,606
69,720
14,711
24,092
7,493
16,205
9,621
33,057
7,371
8,236
8,096
9,078
264,416
11,694
45,245
5,970
30,498
6,417
• 60,054
29,488
18,681
7,704
16,030
19,147
1,370
6,669
12,982
142,637
24,214
6,031
621
10,320
7,112
1 Subscriptions for amounts up to and including $50,000 were allotted in full, and those for more than
$50,000 were allotted 40 percent but not less than $50,000.
2 Treasury 2H percent bonds of 1960 also offered in exchange for this security; see exhibit 1..
3 Treasury 2 ^ percent bonds of 1963 and IH percent Series E-1966 certificates also offered in exchange for
this security; see exhibit 3 for allotments of the bonds.
4' Treasury 23^ percent bonds of 1963 and lyi percent Series D-1955 certiflcates (additional issue) also offered
in exchange for tnis security see exhibit 3 for allotment of the bonds.
161
EXHIBITS
during the fiscal year 1955, by Federal Reserve districts
of dollars]
\ y i percent Series D-1955 certificates (additional issue) issued in exchange for—
2 percent
2 percent T r e a s u r y
1^^ percent Series Tb roenadssu rofy
b o n d s of
B-1954
1951-55
1952-54
Treasury
(dated
(dated
notes m a D
e c . 15,
D e c . 1,
turing
1941)
1944) m a D e c . 15, t u r i n g D e c . called on
1954 3
D e c . 15,
15, 1954 3
1954 3
989
4,484,541
142
1, 293
378
373,490
2,461
926
10,307
543
436
1,320
516
4,919
10
205
174
107
6,832
143
758
305
11,161
42
91
62
105
310
110
850
228
185
35
331
153
100
465
125
333
158
196
120
3
339
105
200
128
10
60
28
4,497.904
407, 242
13,864
611
610
i77
10
760
4,586
650
1,017
2
628
410
495
15
16
25
200
169
512
ie
83
430
5
12
5
368
22
151
61
25
100
Total
1,672
4,869,192
2,645
2,310
10, 369
1,259
1,046
1,320
599
6,626
20
210
186
872
11, 786
815
1,926
134 percent Series E-1955 certificates issued,
in exchange for—
2 percent 2 percent
y
V/i percent T r e a s u r y Tbroenads su rof
b o n d s of
Series B 1951-55
1952-54
1954 Treas(dated
(dated
u r y notes
D e c . 15,
D e c . 1,
maturing
1941)
1944) m a D e c . 15,
t u r i n g D e c . called on
1954 4
D
e c : 15,
15, 1954 4
1954 4
Total
188
38
18,060
2,884, 556
13, 228
16,684
8,999
22,911
8,582
8,820
3,069
13,140
2,771
2,530
2,149
21,780
107,707
5,765
13,395
2,550
12,716
1,625
21, 869
13,863
4,796
2,941
8,617
9,711
1,823
15,881
2,121
17,247
6,359
2,801
473
4,795
4,286
52, 535
1,023, 297
52,148
27,377
17,480
13,885
9,619
518, 299
7,675
34,204
3,169
13, 573
3,585
10,732
264,806
30,032
23,461
1,674
8,656
2,845
30,076
25,319
18,490
3,884
10,508
9,446
11
1,225
3,522
239,078
17, 204
1,507
. 455
2,358
784
4,919,001
3,288,520
51,982,918
7 6,435, 638
394,108 711,673,696
432
115
1,817
. 743
880
60
408
178
100
665
294
845
183
312
1,873
38,356
3,584
2,238
6,240
1,587
547
1,480
23
342
129
13
38
985
11,352
468
722
65
2,588
4
2,930.
642
496
574
1,608
164
100
428
232
7,212
435
7
21
132
2
87,617
72,468
3,946, 209
68,960
46, 299
32, 718
38,383
18, 748
8 28; 599
10, 767
47, 685
6,069
16,116
5,772
33,497
383,866
36, 265
37, 578
4,289
23,960
4,474
54,875
39,824
23,782
7,399
20,633
19,321
1,934
17,534
5,876
263,536
23,998
4,315
949
7,285
5,072
128,105
1,422,177
117,528
108,362
30,303
138, 211
53, 502
20,039
23,207
27, 539
7,273
23,084
15,303
19, 462
303,070
83,322
46,886
3,033
18,720
14,492
71,777
29,127
10,925
48,466
13,354
72,402
4,874
17,652
7,026
191, 579
65, 294
25,185
10,272
38,474
« 5,359,056
3,210,025
3,634, 666
8 8, Oil, 214
467,871 612,113,750
4,844, 050
8,132,570
42,573
e 8,418,456
243,489
481, 726 617,032,752
314, 748
28,686
8,132, 570
42, 573
6 8,418,456
243,489
481,726 817,032,752
314,748
28,686
8,175,143
8 8,661,941
510,411 817,347,495
8,175,143
8 8,661,941
510,411 817, 347,495
s Includes $1,000 of 2 percent Treasury bonds of 1952-54, dated June 26,1944.
6 Includes $4,000 of 2 percent Treasury bonds of 1952-54, dated June 26, 1944..
7 Includes $3,000 of 2 percent Treasury bonds of 1962-54, dated June 26,1944.
8 Exclusive of $4,000 of 2 percent Treasury bonds of 1952-54, dated June 26, 1944.
356812—56-
-12
1 ^ percent Series F-1955
certificates (tax
anticipation) d u e
J u n e 22,
1955,
issued for
cash 1
162
1955 REPORT OF THE SECRETARY OF THE TREASURY
Exhibit 2.—Treasury notes
A Treasury circular containing a representative note offering during the fiscal
year 1955 is reproduced in this exhibit. Since the other cash and exchange offerings during the year were similar in form to the respective sections of this circular,
they are not reproduced in this report. For each issue, however, the essential
details are summarized in the first table following the circular and the final allotments of the new notes issued for cash and in exchange for maturing or called
securities are shown in the succeeding table.
DEPARTMENT CIRCULAR NO. 960.
PUBLIC DEBT
TREASURY
DEPARTMENT,
Washington, May 3, 1955.
I. O F F E R I N G OF NOTES
1. The Secretary of the Treasury, pursuant to the authority of the Second
Liberty Bond Act, as amended, invites subscriptions, from the people of the
United States for notes of the United States, designated 2 percent Treasury notes
of Series B-1956.
2. Cash offering.—Subscriptions are invited at par and accrued interest. The
amount of the offering is $2,500,000,000, or thereabouts. The books will be open
only on May 3 for the receipt of cash subscriptions.
3. Exchange offering.—Exchange subscriptions are invited, at par, from holders
of lYs percent Treasury certificates of indebtedness of Series B-1955, maturing
May 17, 1955. The books will be open only on May 3 through May 5 for the
receipt of exchange subscriptions for this issue.
II. DESCRIPTION OF NOTES
1. The notes will be dated May 17, 1955, and will bear interest from that date
at the rate of 2 percent per annum, payable on a semiannual basis on February 15
and August 15, 1956. They will mature August 15, 1956, and will not be subject
to call for redemption prior to maturity.
2. The income derived from the notes is subject to all taxes imposed under the
Internal Revenue Code of 1954. The notes are subject to estate, inheritance, gift,
or other excise taxes, whether Federal or State, but are exempt from all taxation
now or hereafter imposed on the principal or interest thereof by any State, or any
of the possessions of the United States, or by any local taxing authority.
3. The notes will be acceptable to secure deposits of public moneys. They will
not be acceptable in payment of taxes.
4. Bearer notes with interest coupons attached will be issued in denominations
of $1,000, $5,000, $10,000, $100,000, $1,000,000, $100,000,000, and $500,000,000.
The notes will not be issued in registered form.
5. The notes will be subject to the general regulations of the Treasury Department as now or hereafter prescribed in Department Circular No. 300, Revised.
H I . SUBSCRIPTION AND ALLOTMENT
1. Subscriptions will be received at the Federal Reserve Banks and branches
and at the Oflice of the Treasurer of the United States, Washington. Only the
Federal Reserve Banks and the Treasury Department are authorized to act as
oflicial agencies.
Cash subscriptions.—Commercial banks, which for this purpose are defined as
banks accepting demand deposits, may submit subscriptions for account of customers. Others than commercial banks will not be permitted to enter cash subscriptions except for their own account. Subscriptions from commercial banks
for their own account will be received without deposit, but will be restricted in
each case to an amount not exceeding one-half of the combined capital, surplus
and undivided profits, of the subscribing bank, as of December 31, 1954. Subscriptions from all others must be accompanied by payment of 10 percent of the
amount of notes applied for, not subject to withdrawal until after allotment.
Following allotment, any portion of the 10 percent payment in excess of 10 percent
of the amount of notes allotted may be released upon the request of the subscribers.
Exchange subscriptions.—Banking institutions generally may submit exchange
subscriptions for account of customers.
EXHIBITS
163
2. The Secretary of the Treasury reserves the right to reject or reduce any
subscription, and to allot less than the amount of notes applied for; and any
action he may take in these respects shall be final. Subject to these reservations,
exchange subscriptions will be allotted in full. Allotment notices will be sent
out promptly upon allotment.
IV. PAYMENT
1. Payment at par and accrued interest, if any, for notes allotted hereunder
must be made or completed on or before May 17, 1955, or on later allotment.
Cash subscriptions.—In every case where payment is not so completed, the
payment with application up to 10 percent of the amount of notes allotted shall,
upon declaration made by the Secretary of the Treasury in his discretion, be
forfeited to the United States. Any qualified depositary will be permitted to
make paynient by credit for notes allotted to it for itself and its customers up to
any amount for which it shall be qualified in excess of existing deposits, when so
notified by the Federal Reserve Bank of its district.
Exchange subscriptions.-—Payment may be made only in Treasury certificates
of indebtedness of Series B-1955, which will be accepted at par, and should
accompany the subscription. Final interest due on May 17 on certificates surrendered will be paid by payment of May 17, 1955, coupons, which should be
detached by holders before presentation of the certificates.
V. GENERAL PROVISIONS
1. As fiscal agents of the United States, Federal Reserve Banks are authorized
and requested to receive subscriptions, to make allotments on the basis and up
to the amounts indicated by the Secretary of the Treasury to the Federal Reserve
Banks of the respective districts, to issue allotment notices, to receive payment for
notes allotted, to make delivery of notes on full-paid subscriptions allotted, and
they may issue interim receipts pending delivery of the definitive notes.
2. The Secretary of the Treasury may at any time, or from time to time, prescribe supplemental or amendatory rules and regulations governing the offering,
which will be communicated promptly to the Federal Reserve Banks.
G. M. HUMPHREY,
Secretary of the Treasury,
Summary of information pertaining to Treasury notes issued during the fiscal year 1955
Department circular
Date of
preliminary announcement
Date
1954
Sept. 20
1954
Sept. 23
1955
Jan. 27
1955
Feb. 1
954
Jan. 27
Feb.
1
955
Apr. 28
May
3
960
Concurrent
offering,
circular
number
Number
949
Treasury notes issued for cash or in exchange for maturing or called securities
I H percent Series A-1956
Exchanged for—
I H percent Series A-1955 certificates maturing Feb. 15,1955.
13^^ percent Series A-1955 Treasury notes matmring Mar. 15,1955.
2}i percent Treasury bonds of 1955-60 called on Mar. 15,1955.
2 percent Series C-1957--.Exchanged for—
IH percent Series A-1955 certificates maturing Feb. 15,1955.
13^ percent Series A-1955 Treasury notes maturing Mar. 15,1955.
2 percent Series B-1956
Issued for cash
Exchanged for 13^ percent Series B-1955 certificates maturing May 17, 1956.
1 Commercial banks were permitted to subscribe for their own account for an
amount not exceeduig one-half of the combiaed capital, surplus, and undivided
profits of the subscribing bank, as of June 30, 1954. Qualified depositaries were permitted to make payment for notes allotted to them and their customers by credit
in Treasury tax and loan accounts.
2 Final interest due on the surrendered securities was paid as follows: On the certificates, by payment of the Feb. 15, 1955, coupons; following acceptance of the surrendered notes, accrued interest from Sept. 15, 1954, to Feb. 16, 1955 C$6.33978 per
Date of
maturity
May 15,1957
1954
Sept. 23
1955
Feb. 15
Mar. 15,1956
1955
1955
Feb. 3 2 Feb. 15
Feb. 15
Aug. 15,1957
Feb. 3
May 17
Aug. 15,1956
1954
Oct. 4
I H percent Series B-1957 issued for cash.
956
Date of
issue
Allotment
Date sub- payment
scription date on
books or before
closed
(or on
later al
lotment)
May
May
3
5
1954
Oct. 4
hd
O
?d
H3
O
Feb. 15
May 17
$1,000), was paid; following acceptance of coupon bonds, and following discharge of
registration in the case of registered bdnds surrendered, accrued interest from Sept.
15, 1954, to Mar. 15, 1955 ($14,375 per $1,000), was credited, accrued interest on the
new notes from Feb. 15 to Mar. 15 ($1.25691 per $1,000) was charged, andthe difference ($13.11809 per $1,000) was paid to the subscribers.
3 See footnote 2 for the payment of interest on the surrendered securities.
4 See Circular 960, sections III and IV, for provisions for subscriptions and payment of interest.
o
>
O
• ^
d
Allotments of Treasury notes issued during the fiscal year 1955, by Federal Reserve districts
[In thousands of dollars]
1^^ percent Series A-1956 notes issued in
exchange for—
Federal Reserve district
Boston
New York
Philadelphia--•Cleveland
Cincinnati
Pittsburgh—
Richmond
Baltimore
Charlotte
Atlanta
Birmingham
Jacksonville
Nashville
New Orleans
Chicago
Detroit
•St. Louis
Little Rock
Louisville
.
Memphis
Minneapolis
Kansas C i t y . . . .
Denver
Oklahoma City
Omaha
Dallas
El Paso
Houston
San Antonio
-.
.-
...
Footnotes at end of table,
2li percent
I H percent
^ percent Treasury
Series B percent 13'
Series Abonds of
1957 notes mSeries
A1955 notes
1955-60
issued for 1955 certif• maturing
(dated
cash 1
icates maMar. 15,
Mar. 15,
turing Feb.
1956 2
1935)
caUed
15, 1955 2
on Mar. 15,
1955 3
181, 589
,658. 598
162,858
124, 955
41, 371
95,876
96, 212
61,855
32,043
53, 455
21, 579
43,869
35, 559
34,849
523,021
73,632
80,483
7,273
19,183
18, 734
87,476
50,892
24,060
26, 948
21,812
87, 554
6,955
40,457
12, 939
51,046
4, 794,984
28,175
46,786
17,988
16,338
4,244
22,802
10, 794
16, 622
5,717
15,830
7,418
39,488
238, 636
25, 260
12, 585
8,580
17, 218
6,532
35, 950
68, 208
18,178
4,224
11,170
9,648
638
5,861
5,599
53,088
1,478,044
47, Oil
84, 788
12,267
18, 397
3,230
5,889
8, 524
47,329
2,989
10,821
6,096
2,152
231,815
73,155
42, 638
654
15,812
1,098
49, 796
14,445
6,888
4,837
11,517
7,647
300
6,591
8,607
15, 577
183, 558
6,300
9,378
1,491
12, 947
2,130
1,412
314
362
172
162
3,191
2,951
27,861
1,862
1,841
679
2,811
41
11, 508
2,336
653
1,542
987
736
573
384
22
Total
119, 711
6, 456, 586
^ , 486
140,952
31, 746
47, 682
9,604
30,103
19, 632
64, 313
8,878
26,813
16, 705
44, 591
498,312
100, 277
57,064
9,913
35.841
7,671
97, 254
84, 989
25, 719
10, 603
23,674
18,031
1,511
12,836
14,128
2 percent Series C-1957 notes issued
in exchange for—
IH percent 13'i percent
Series ASeries A1955 certif- 1955 notes
icates ma- maturing
turing Feb. Mar. 15,
1955 4
15, 1955 4
33,364
438,124
33,839
41, 583
16, 622
12,371
9,646
9,051
2,252
15,411
4,563
8,868
5,995
13,383
193,240
28,118
25,664
5,422
25,413
4,390
49, 984
32,348
15, 341
7,236
19, 595
13,344
2, 756
15, 704
18, 734
91,253
1,085,069
93,689
57, 756
24, 715
16, 669
25,808
33,836
3,687
23, 720
7,111
3,177
13,416
25,164
423, 671
21, 205
82, 629
3,713
32.883
3,762
87, 476
77,175
10, 999
25, 501
18, 321
25,018
2,252
19, 854
26, 269
Total
124, 617
1, 523,193
127, 528
99,339
41, 337
29, 040
35,454
42,887
5,939
39,131
11, 674
12,045
19, 411
38, 547
616, 911
49,323
108, 293
9,135
58, 296
8,152
137,460
109, 523
26, 340
32,737
37, 916
38, 362
6,008
35, 558
45,003
2 percent Series B-1956 notes
issued—
In exchange
for 13.^ percent Series
B-1955
For cash 5 certificates
maturing
May 17,
1955
71, 287
1,060, 725
100, 979
110, 223
24,121
27,400
30, 611
30,179
6,316
20,644
6,301
22,188
12, 701
33, 223
288,154
74, 649
56,058
4,623
4.882
9.524
63, 353
36,442
10, 554
24,809
13,327
99,195
4, 950
9,163
4,310
Total
114,864
43.577
2,397, 559 3, 458, 284
149, 659
48, 680
161,353
51,130
39,659
15, 538
44,915
17, 515
37,462
6,851
32,486
2,307
8,507
2,191
44,023
23,379
12,
721
6,420
25, 452
3,264
14,
796
2,095
56,622
23.399
456,494
168.340
102,364
27, 715
83, 621
27, 563
8,354
3,731
21,211
16,329
13,105
3,581
114, 902
51, 549
65, 508
29,066
19,656
9,102
31,045
6,236
28,186
14,859
111, 752
12, 557
6,054
1,104
15,171
6,008
7,962
3,652
H
Allotments of Treasury notes issued during the fiscal year 1955, by Federal Reserve districts—Continued
[In thousands of dollars]
I H p e r c e n t Series A-1956 n o t e s issued i n
exchange for—
F e d e r a l R e s e r v e district
S a n Francisco
Los Angeles
Portland
Salt L a k e C i t y .
Seattle
Treasury
. . .
Total note allotments
M a t u r i n g o r called securities:
E x c h a n g e d in c o n c u r r e n t offerings
T o t a l exchanged
R e d e e m e d for cash o r carried t o
matured debt
. . . .
T o t a l m a t u r i n g o r called securities
2% percent
I H percent
Treasury
Series B percent
b o n d s of
1957 n o t e s I H percent 13^
Series A Series A issued for
1955-60
1955 certif- 1955 n o t e s
cash 1
(dated
icates m a - m a t u r m g
M
a r . 15,
M
a
r
.
15,
turing F e b .
1935)
called
1955 2
15, 1955 2
on M a r . 15,
1955 3
Total
2,625,984
3,792,028
2, 532, 029
3,174,151
5,706,180
2,413, 563
8,148,765
6, 901,246
5,039,647
11,940,793
3,174,151
795,405
105, 541
325, 631
431,072
711,900
14, 982, 956
7,006,787
5,365,078
12,371,866
3,886,051
8, 471,880
1,166,044
5. 7i5, 670
5, 735,202
2, 246, 758
14,187, 550
325,531
364. 333
5,365,078
2, 611, 090
323,115
6,039,547
105, 541
7,006,787
6, 901, 246
CO
Cl
Ox
hd
O
O
249,242
90,648
26,964
16,460
34,197
2,591
1.923, 642
1,166,044
Total
96,463
36,737
2,257
1,702
9,1,04
2,591
2,413, 563
5, 735, 202
I n exchange
for 13^ percent Series
B-1955
F o r cash e
certificates
maturing
M a y 17,
1956
152,779
53,811
24,697
14, 758
25,093
2,625, 984
4,154,930
96,432
51, 581
1,201
577
6,447
1,000
Total
2 p e r c e n t Series B-1956 notes
issued—
131,646
134,008
18,651
17, 754
9,639
12,171
111, 534
115,950
16,407
3,266
8,065
4,964
218,182
78.200
20,885
7,217
28,078
22, 693
109,771
26, 205
16,384
6,110
9,038
21,175
I H p e r c e n t 13^ p e r c e n t
Series A Series A 1955 certif- 1955 n o t e s
icates m a - m a t u r i n g
t u r i n g F e b . M a r . 15,
1955 4
15, 1955 4
20,112
18,058
2,244
14,488
1,574
7,207
11, 979
414
3,300
530
12, 593
518
225,369
108,967
32, 245
22,347
39,835
80
2 p e r c e n t Series C-1957 n o t e s issued
i n exchange for—
W
Ul
o
o
1 Subscriptions for amounts up to and including $50,000 were allotted in full, and
those for more than $50,000 were allotted 50 percent but not less than $50,000.
2 Series C-1957 Treasury 2 percent notes also offered in exchange for this security.
3 Treasury 3 percent bonds of 1996 also offered in exchange for this security; see
exhibit 3.
4 Series A-1956 Treasury I H percent notes also offered in exchange for this security.
5 Subscriptions for amounts up to and including $100,000 were allotted in full, and
those for more than $100,000 were allotted 62 percent but not less than $100,000.
EXHIBITS
167
Exhibit 3.—Treasury bonds
A Treasury circular containing a representative bond offering during the fiscal
year 1955 is reproduced in this exhibit. The circulars for the other.two bond offerings during the year are not reproduced in this report because they are similar in
form to this circular, except for the optional redemption in the case of a deceased
owner's estate as provided in ]Daragraph 5 of section II of the circular. For each
issue, however, the essential details are summarized in the first table following
the circular and the final allotments of new bonds in exchange for maturing or
called securities are shown in the succeeding table.
DEPARTMENT CIRCULAR NO. 956. PUBLIC DEBT
TREASURY DEPARTMENT,
Washington, February 1, 1955.
I. OFFERING OF BONDS
1. The Secretary of the Treasury, pursuant to the authority of the Second
Liberty Bond Act, as amended, invites subscriptions, at par with an adjustment
of accrued interest as of March 15, 1955, from the people of the United States for
bonds of the United States, designated 3 percent Treasury bonds of 1995, in exchange for 2ys percent Treasury bonds of 1955-60, dated March 15, 1935, due
March 15, 1960, called for redemption on March 15, 1955. The amount of the
offering under this circular will be limited to the amount of Treasury bonds of
1955-60 tendered in exchange and accepted. The books will be open only on
February 1 through February 3 for the receipt of subscriptions for this issue.
II. DESCRIPTION OF BONDS
1. The bonds will be dated February 15, 1955, and will bear interest from that
date at the rate of 3 percent per annum, payable semiannually on August 15, 1955,
and thereafter on February 15 and August 15 in each year until the principal
amount becomes payable. They will mature February 15, 1995, and will not be
subject to call for redemption prior to maturity.
2. The income derived from the bonds is subject to all taxes imposed under the
Internal Revenue Code of 1954. The bonds are subject to estate, inheritance, gift,
or other excise taxes, whether Federal or State, but are exempt from all taxation
now or hereafter imposed on the principal or interest thereof by any State, or any
of the possessions of the United States, or by any local taxing authority.
3. The bonds will be acceptable to secure deposits of public moneys.
4. Bearer bonds with interest coupons attached, and bonds registered as to
principal and interest, will be issued in denominations of $500, $1,000, $5,000,
$10,000, $100,000, and $1,000,000. Provision will be made for the interchange of
bonds of different denominations and of coupon and registered bonds, and for the
transfer of registered bonds, under rules and regulations prescribed by the Secretary
of the Treasury.
5. Any bonds issued hereunder which upon the death of the owner constitute
part of his estate, will be redeemed at the option of the duly constituted representatives of the deceased owner's estate, at par and accrued interest to date of
payment,! provided:
(a) that the bonds were actually owned by the decedent at the time of his
death; and
(6) that the Secretary of the Treasury be authorized to apply the entire proceeds of redemption to the payment of Federal estate taxes.
Registered bonds submitted for redemption hereunder must be duly assigned to
"The Secretary of the Treasury for redemption, the proceeds to be paid to the
District Director of Internal Revenue at
for
credit on Federal estate taxes due from estate of
"
Owing to the periodic closing of the transfer books and the impossibility of stopping
payment of interest to the registered owner during the closed period, registered
bonds received after the closing of the books for payment during such closed
period will be paid only at par with a deduction of interest from the date of pay1 An exact half-year's interest is computed for each full half-year period irrespective of the actual number
of days in the half year. For a fractional part of any half year, computation is on the basis of the actual
number of days in such half year.
168
1955 REPORT OF THE SECRETARY OF THE TREASURY
ment to the next interest payment date; 2 bonds received during the closed period
for payment at a date after the books reopen will be paid at par plus accrued
interest from the reopening of the books tofthe date of payment. In either case
checks for the full^six months' interest due on the last day of the closed period
will be forwarded^to the owner in due course. All bonds submitted must be
accompanied by Form PD 1782,^ properly completed, signed and sworn to, and by
proof of the representatives' authority in the form of a court certificate or a certified
copy of the representatives' letters|of appointment issued by the court. The
certificate, or the certification to the'letters, must be under the seal of the court,
and except in the case of a corporate representative, must contain a statement
that the appointment is in full force and be dated within six months prior to the
submission of the bonds unless the certificate or letters show that the appointment
was made within one year immediately prior to such submission. Upon payment
of the bonds appropriate memorandum receipt will be forwarded to the representatives, which will be followed in due course by formal receipt from the District
Director of Internal Revenue.
6. The bonds will be subject to the gerieral regulations of the Treasury Department, now or hereafter prescribed, governing United States bonds.
III. SUBSCRIPTION AND ALLOTMENT
1. Subscriptions will be received at the Federal Reserve Banks and branches and
at the Office of the Treasurer of the United States, Washington. Banking institutions generally may submit subscriptions for account of customers, but only the
Federal, Reserve Banks and the Treasury Department are authorized to act as
official agencies..
2. The Secretary of the Treasury reserves the right to reject or reduce any subscription, and to allot less than the amount of bonds applied for; and any action
he may take in these respects shall be final. Subject to these reservations, all
subscriptions will be allotted in full. Allotment notices will be sent out promptly
upon allotment.
IV. PAYMENT
1. Payment at par for bonds allotted hereunder must be made on or before
February 15, 1955, or on later allotment, and may be made only in Treasury bonds
of 1955-60, called for redemption March 15, 1955, which will be accepted at par,
and should accompany the subscription. Coupons dated March 15, 1955, and
all subsequent coupons must be attached to such bonds in coupon form when
surrendered. Accrued interest from September 15, 1954, to March 15, 1955
($14,375 per $1,000), will be credited, accrued interest on the new bonds from
February 15 to March 15 ($2.32044 per $1,000) will be charged, and the difference ($12.05456 per $1,000) will be paid to the subscribers following acceptance
of coupon bonds and in the case of registered bonds following discharge of registration.
V. ASSIGNMENT OF REGISTERED BONDS
1. Treasury bonds of 1955-60 in registered form tendered in payment for bonds
offered hereunder should be assigned by the registered payees or assignees thereof,
in accordance with the general regulations of the Treasury Department governing
assignments for transfer or exchange, in one of the forms hereafter set forth, and
thereafter should be presented and surrendered with the subscription to a Federal
Reserve Bank or branch or to the OflSce of the Treasurer of the United States,
Washington. The bonds must be delivered at the expense and risk of the holder.
If the new bonds are desired registered in the same name as the bonds surrendered,
the assignment should be to ''The Secretary of the Treasury for exchange for 3
percent Treasury bonds of 1995"; if the new bonds are desired registered in
another name, the assignment should be to "The Secretary of the Treasury for
exchange for 3 percent Treasury bonds of 1995 in the name of
---";
if new bonds in coupon form are desired, the assignment should be to "The
Secretary of the Treasury for exchange for 3 percent Treasury bonds of 1995 in
coupon form to be delivered to
'^
2 The transfer books are closed from January 16 to February 16, and from July 16 to August 16 (both date
inclusive) in each year.
3 Copies of Form P D 1782 may be obtained from any Federal Reserve Bank or from the Treasury Department, Washington, D. C.
EXHIBITS
169
VI. GENERAL PROVISIONS
1. As fiscal agents of the United States, Federal Reserve Banks are authorized
and requested to receive subscriptions, to make allotments on the basis and up
to the amounts indicated by the Secretary of the Treasury to the Federal Reserve
Banks of the respective districts, to issue allotment notices, to receive payment
for bonds allotted, to make delivery of bonds on full-paid subscriptions allotted,
and they may issue interim receipts pending delivery of the definitive bonds.
2. The Secretary of the Treasury may at any time, or from time to time, prescribe supplemental or amendatory rules and regulations governing the offering,
which will be communicated promptly to the Federal Reserve Banks.
G.
M.
HUMPHREY,
Secretary of the Treasury,
Summary of information pertaining to Treasury bonds issued during the fiscal year 1955
O
Date of
preliminary announcement
Department
circular
Date
Concurrent
offermg,
circular
number
Number
Treasury bonds issued in exchange for maturing or called securities
1954
July 30
1954
Aug. 3
948
Nov. 18
Nov. 22
952
960
951
1955
Jan. 27
1956
Feb. 1
23r^ percent of 1960
Exchanged for—
2H percent Series D-1954 certificates maturing Aug. 15, 1954.
2H percent Series E-1954 certificates maturing Sept. 15,1954.
23^ percent of 1963...
Exchanged for—
V^ percent Series B-1954 notes maturing Dec. 15, 1954.
2 percent bonds of 1952-54 (dated Dec. 1, 1944) maturuig Dec. 15, 1954.
2 percent bonds of 1951-55 called on Dec. 15,1954.
956
954
3 percent of 1995...
Exchanged for 2% percent bonds of 1955-60 called on Mar. 15, 1955.
1 Following acceptance of the surrendered Series D-1954 certificates, the full amount
of uiterest due was paid. Following acceptance of the surrendered Series E-1954
certificates, the full amount of mterest due was credited, accrued interest on the bonds
from August 15 to September 15 ($1.79008 per $1,000) was charged, and the difference
($24.45992 per $1,000) was paid to the subscribers.
2 Following acceptance of the surrendered bearer securities, the final mterest due
Date of
issue
Date of
maturity
AUotment
Date sub- payment
date
on
scription or before
books
(or
on
closed
later
allotment)
1954,
Aug. 15
Nov. 16,1960
1954
Aug. 5
1954
I Aug. 16
Dec. 15
Aug. 15,1963
Nov. 24 2 Dec. 15
1956
Feb. 15
Feb. 15,1996
1955
1955
Feb. 3 3 Feb.15
was paid by payment ofthe December 15,1964, coupons. Following acceptance of the
surrendered registered bonds, final interest due on December 15 was paid by check
drawn In accordance with assignments on the surrendered bonds, or by credit in any
account maintained by a banking institution with the Federal Reserve Bank of its
district.
3 See Circular No. 956, section IV, for provisions for payment of interest.
hd
O
o
ZP
o
Kj
o
^^
S3
>
Ul
Allotments of Treasury bonds issued during thefiscal year 1955, by Federal Reserve districts
[In t h o u s a n d s of dollars]
23^ p e r c e n t T r e a s u r y b o n d s of 1960
issued i n exchange for—
F e d e r a l Reserve district
Boston
New YorkPhiladelphia
Cleveland
Cincinnati
Pittsburgh
Richmond
Baltimore
Charlotte
Atlanta
Birmingham
Jacksonville
NashviUe
N e w Orleans
Chicago
Detroit
St. Louis
Little Rock
LouisviUe
Memphis
Minneapolis
Kansas City
Denver...
Oklahoma City
Omaha...
Dallas
El Paso
Houston
. San Antonio
.
.
F o o t n o t e s a t e n d of t a b l e .
2 H percent
2 H percent
Series D-1954 Series E-1964
certificates
certificates
maturing
maturing
S e p t . 15,
A u g . 16,
19541
19641
73,639
616,100
30,453
77.304
18,066
10,413
21,424
4,000
5,822
22,258
4,140
6,854
6,417
19,891
335,484
33,872
63,681
1,323
28,042
17, 938
47,317
48,360
10.305
15,437
9,637
39,446
1,993
15,065
7,003
61, 602
887, 654
86,325
46, 691
25,800
15,881
15, 261
12, 721
10,154
19, 392
2,998
7,457
9,786
27, 511
293, 520
16, 772
54, 265
3,972
12, 482
9,623
60, 859
37, 762
10,202
13, 784
11, 518
29,004
1,479
17,849
24, 562
Total
135,141
1, 503, 754
116,778
123,995
43,865
26,294
36,685
16, 721
15, 976
41, 650
7,138
14, 311
16, 203
47,402
629,004
50,644
117, 946
5,295
40, 524
27,461
108,176
86,122
20, 607
29, 221
21,155
68, 450
3,472
32, 914
31, 565
23^^ p e r c e n t T r e a s u r y b o n d s of 1963
issued i n exchange for—
1% p e r c e n t
Series B-1954
Treasury
notes maturing D e c .
15,1954 2
6,180
137,104
6,735
5,363
3,796
3,880
2,893
2,001
4,845
6,145
3,487
1,202
1,079
8,205
45, 919
2,342
9,909
645
4,387
746
18, 219
15,290
2,150
6,093
5,812
12, 329
504
7,912
2, 880
2 percent
Treasury
b o n d s of
1952-64
(dated Dec.
1, 1944)
maturing
D e c . 15,
19542
205,166
2,618,872
250, 640
4143, 652
87,488
119,778
50, 725
75, 742
7,342
67, 914
10, 207
17,782
29, 285
32,478
833,442
101,300
139,314
10,190
30,838
28,097
164,848
99,359
31,283
39,270
44, 592
78,210
5, 669
45, 993
25, 793
2 percent
Treasury
b o n d s of
1951-55
(dated Dec.
15, 1941)
called o n
D e c . 15,
19542
19,160
140,424
19,080
10,033
14,198
4,930
9,968
2,577
696
1,480
1,578
658
914
2,374
61, 687
1,970
10,099
124
2,624
306
9,243
8,666
2,279
895
2,805
5,332
408
2,214
1,527
Total
229, 506
2,896,400
276,456
4 159,048
105,482
128, 588
63, 586
80,320
12,884
65, 638
15,272
19, 642
31, 278
43,058
941,048
105, 612
159,322
10, 959
37,850
29,149
192,310
123,316
35, 712
46,258
53, 208
96,870
6,580
56,120
30, 200
3 percent
Treasury
b o n d s of
1995 issued
i n exchange
for 2 ^ percent Treasury
b o n d s of
1955-60
( d a t e d Mai*.
16, 1935)
called o n
M a r . 15,
19553
128,264
1,284,018
35,317
55,010
4,244
4,470
10, 616
7,553
1,145
1,056
128
1,405
4,778
1,070
210, 776
17,862
14, 762
292
8,214
580
40,642
29,114
2,897
1,292
3,136
14, 514
82
466
1,385
teJ
Ul
Allotments of Treasury bonds issued during the fiscal year 1955, by Federal Reserve districts—Continued
[In thousands of dollars]
23^ p e r c e n t T r e a s u r y b o n d s of 1960
issued i n exchange for—
F e d e r a l R e s e r v e district
S a n Francisco .
Los Angeles.—
Portland
Salt L a k e C i t y
Seattle _ _. .
Treasury
Total bond aUotments
M a t u r i n g or called securities:
E x c h a n g e d i n c o n c u r r e n t offerings
T o t a l exchanged
R e d e e m e d for cash or carried t o m a t u r e d d e b t
T o t a l m a t u r u i g or called securities
2 ^ percent
2 ^ percent
Series D-1954 Series E-1954
certificates
certiflcates
maturing
maturing
A u g . 15,
Sept. 15,
19541
19541
VA p e r c e n t
Series B-1954
Treasury
notes maturing D e c .
15, 1954 2
2 percent
Treasury
b o n d s of
1952-54
(dated D e c .
1, 1944)
maturing
D e c . 15,
19542
2 percent
Treasury
b o n d s of
1951-55
(dated Dec.
15, 1941)
called o n
D e c . 15,
19542
57,944
69,017
2,871
2,078
2,565
1,990
214,002
26,427
3,240
2,741
2,238
3,002
271,946
95,444
6,111
4,819
4,803
4,992
7,686
7,789
374
557
748
1,940
349,981
227,450
19,824
5,557
33,657
6,560
22,386
16,436
336
204
1,210
1,432
1, 728,048
2,078,436
3,806,484
346,146
4 6,028, 296
380,254
Total
3 percent
Treasury
b o n d s of
1995 issued
i n exchange
for 27^ percent T r e a s u r y
b o n d s of
1955-60
(dated M a r .
15, 1935)
called o n
M a r . 15,
1955 3
380,053
251,675
20, 534
6,318
35, 614
9, 932
4 6, 754, 6^6 .
20 842
9,350
487
318
1,562
5,995
Pi
O
o
Ul
o
pi
1, 923, 642
1,004, 687
2, 552,957
3, 557, 644
7, 786,424
5 2,390,160
101,472
610, 278,056
323,115
2,732, 735
55,491
4, 631,393
92,616
7,364,128
148,107
8,132, 570
42, 573
4 6 8,418,456
243,489
481,726
28,686
4 517,032, 752
314, 748
2, 246, 758
364, 333
2, 788, 226
4, 724,009
7, 512, 235
8,176,143
6 8, 661, 941
510,411
8 17,347, 495
2, 611,090
1 Series D-1955,13^^ percent certificates also offered in exchange for this security; see
exhibit 1.2 Series D-1955,13^^ percent (additional issue) and IH percent Series E-1956 certificates also offered ui exchange for this security; see exhibit 1.
3 Series A-1966, I H percent Treasury notes also offered in exchange for this maturity;
see exhibit 2.
Total
23^ p e r c e n t T r e a s u r y b o n d s of 1963
issued i n exchange for—
Kl
o
4 Includes $3,000 of 2 percent Treasury bonds of 1952-64, dated June 26, 1944.
5 Includes $1,000 of 2 percent Treasury bonds of 1952-64, dated June 26, 1944.
8 Exclusive of $4,000 of 2 percent Treasury bonds of 1962-54, dated June 26, 1954.
>
Ul
a
Kj
EXHIBITS
173
Exhibit 4.—Call, August 12, 1954, for redemption on D e c e m b e r 15, 1954, of 2
percent Treasury b o n d s of 1951-55, dated D e c e m b e r 15, 1941 (press release of
August 12, 1954)
T h e Treasury D e p a r t m e n t t o d a y issued the official notice of call for redemption
on December 15, 1954, of t h e 2 percent Treasury bonds of 1951-55, dated December 15, 1941, d u e December 15, 1955. There a r e now outstanding $510,411,450
of these bonds.
T h e text of t h e formal notice of call is as follows:
T w o P E R C E N T T R E A S U R Y B O N D S O F 1951-55 ( D A T E D D E C E M B E R 15, 1941)
NOTICE OF CALL FOR REDEMPTION
To Holders of 2 Percent Treasury Bonds of 1951-55, and Others Concerned:
1. Public notice is hereby given t h a t all outstanding 2 percent Treasury bonds
of 1951-55, dated December 15, 1941, due December 15, 1955, a r e hereby called
for redemption on December 15, 1954, on which date interest on such bonds will
cease.
2. Holders of these bonds m a y , in advance of t h e redemption date, be offered
t h e privilege of exchanging all or a n y p a r t of their called bonds for other interestbearing obligations of t h e United States, in which event public notice will hereafter
be given a n d a n official circular governing t h e exchange offering will be issued.
3. Full information regarding t h e presentation a n d surrender of t h e bonds for
cash redemption under this call will be found in D e p a r t m e n t Circular N o . 666,
d a t e d July 2 1 , 1941.
G. M . H U M P H R E Y ,
Secretary of the Treasury.
Exhibit 5.—Call, November 15, 1954, for redemption on M a r c h 15, 1955, of 2%
percent Treasury bonds of 1955-60, dated M a r c h 15, 1935 (press r e l e a s e of
November 15, 1954)
T h e Treasury D e p a r t m e n t t o d a y issued t h e official notice of call for redemption
on M a r c h 15, 1955, of t h e 2% percent Treasury bonds of 1955-60, dated March
15, 1935, d u e M a r c h 15, 1960. There a r e now outstanding $2,611,090,500 of
these bonds.
T h e text of t h e formal notice of call is as follows:
Two
AND S E V E N - E I G H T H S
PERCENT
TREASURY
BONDS
O F 1955-60
(DATED
M A R C H 15, 1935)
NOTICE O F GALL F O R REDEMPTION
To Holders of 2y% Percent Treasury Bonds of 1955-60, and Others Concerned:
1. Public notice is hereby given t h a t all outstanding 2% percent Treasury
bonds of 1955-60, dated March 15, 1935, d u e March 15, 1960, a r e hereby called
for redemption on March 15, 1955, on which date interest on such bonds will
cease.
2. Holders of these bonds may, in advance- of t h e redemption date, b e offered
t h e privilege of exchanging all or a n y p a r t of their called bonds for other interestbearing obligations of t h e United States, in which event public notice will hereafter be given a n d a n official circular governing t h e exchange offering will be
issued.
3. Full information regarding t h e presentation a n d surrender of t h e bonds for
cash redemption under this call will be found in D e p a r t m e n t Circular N o . 666,
dated July 21, 1941,
G. M . H U M P H R E Y ,
Secretary of the Treasury.
174
195 5 REPORT OF THE SECRETARY OF THE TREASURY
Treasury Bills
Exhibit 6.—Tenders for Treasury bills invited and accepted
Press releases pertaining to the weekly series of Treasury bill issues during the
fiscal year 1955 were similar in form to the two reproduced in this exhibit. The
other releases are not reproduced in this report but the essential details regarding
each issue are summarized in the table following the press releases.
PRESS RELEASE OF DECEMBER 2, 1954
The Treasury Department, by this public notice, invites tenders for
$1,500,000,000, or thereabouts, of 91-day Treasury bills, for cash and in exchange
for Treasury bills maturing December 9, 1954, in the amount of $1,502,432,000,
to be issued on a discount basis under competitive and noncompetitive bidding as
hereinafter provided. The bills of-this series will be dated December 9, 1954,
and will mature March 10, 1955, when the face amount will be payable without
interest. They will be issued in bearer form only, and in denominations of
$1,000, $5,000, $10,000, $100,000, $500,000, and $1,000,000 (maturity value).
Tenders will be received at Federal Reserve Banks and branches up to the closing
hour, two o'clock p. m., eastern standard time, Monday, December 6, 1954.
Tenders will not be received at the Treasury Department, Washington. Each
tender must be for an even multiple of $1,000, and in the case of competitive
tenders the price offered must be expressed on the basis of 100, with not more than
three decimals, e. g., 99.925. Fractions may not be used. It is urged that tenders
be made on the printed forms and forwarded in the special envelopes which will
be supplied by Federal Reserve Banks or branches on application therefor.
Others than banking institutions will not be permitted to submit tenders except
for their own account. Tenders will be received without deposit from incorporated
banks and trust companies and from responsible and recognized dealers in investment securities. Tenders from others must be accompanied by payment of
2 percent of the face amount of Treasury bills applied for, unless the tenders are
accompanied by an express guaranty of payment by an incorporated bank or
trust company.
Immediately after the closing hour, tenders will be opened at the Federal
Reserve Banks and branches, following which public announcement will be made
by the Treasury Department of the amount and price range of accepted bids.
Those submitting tenders will be advised of the accejDtance or rejection thereof.
The Secretary of the Treasury expressly reserves the right to accept or reject any
or all tenders in whole or in part, and his action in any such respect shall be final.
Subject to these reservations, noncompetitive tenders for $200,000 or less without
stated price from any one bidder will be accepted in full at the average price
(in three decimals) of accepted competitive bids. Settlement for accepted tenders
in accordance witli the bids must be made or completed at the Federal Reserve
Bank on December 9, 1954, in cash or other immediately available funds or in a
like face amount of Treasury bills maturing December 9,1954. Cash and exchange
tenders will receive equal treatment. Cash adjustments will be made for differences between the par value of maturing bills accepted in exchange and the issue
price of the new bills.
Tlie income derived from Treasury bills, whether interest or gain from the sale
or other disposition of the bills, does not have any exemption, as such, and loss
from the sale or other disposition of Treasury bills does not have any special
treatment, as such, under the Internal Revenue Code of 1954. The bills are
subject to estate, inheritance, gift, or other excise taxes, whether Federal or
State, but are exempt from all taxation now or hereafter imposed on the principal
or interest thereof by any State, or any of the possessions of the United States,
or by any local taxing authority. For iDurposes of taxation the amount of discount at which Treasury bills are originally sold by the United States is considered
to be interest. Under Sections 454 (b) and 1221 (5) of the Internal Revenue
Code of 1954 the amount of discount at which bills issued hereunder are sold is
not considered to accrue until such bills are sold, redeemed or otherwise disposed
of, and such bills are excluded from consideration as capital assets. Accordingly,
the owner of Treasury bills (other than life insurance companies) issued hereunder
need include in his income tax return only the difference between the price paid
for such bills, whether on original issue or on subsequent purchase, and the amount
actually received either upon sale or redemption at maturity during the taxable
3^ear for which the return is made, as ordinary gain or loss.
175
EXHIBITS
Treasury Department Circular No. 418, Revised, and this notice, prescribe the
terms of the Treasury bills and govern the conditions of their issue. Copies of
the circular may be obtained from any Federal Reserve Bank or branch.
PRESS RELEASE OF DECEMBER 7, 1954
The Treasury Department announced last evening that the tenders for $1,500,000,000, or thereabouts, of 91-day Treasury bills to be dated December 9, 1954,
and to mature March 10, 1955, which were offered on December 2, were opened
at the Federal Reserve Banks on December 6.
The details of this issue are as follows:
Total applied for
$2, 111, 753, 000
Total accepted .(includes $223,301,000 entered on a noncompetitive basis and accepted in full at the average price
shown below)
$1, 500, 232, 000
Average price equivalent rate of discount approx. 1.087%
per annum
99.725
Range of accepted competitive bids:
High equivalent rate of discount approx. 0.981% per
annum
99. 752
Low equivalent rate of discount approx. 1.108% per
annum
99. 720
(66% of the amount bid for at the low price was accepted)
Federal Reserve district
Total applied
for
Total accepted
Boston..._..
NewYork
Philadelphia..
Cleveland
Richmond
Atlanta
Chicago
St. Louis
MinneapolisKansas City..
Dallas,
San Francisco
$29,960,000
1,511,750,000
34,705,000
36, 797,000
23,635,000
26,624,000
176, 695,000
30, 921,000
15, 775,000
52,098,000
31,755,000
141,037,000
$29,960,000
960,230,000
19, 705,000
36, 797,000
23,635,000
26,624,000
131, 695,000
30, 921,000
15, 775,000
52,098,000
31, 755,000
141, 037,000
Total...
2, 111, 752,000
1,600, 232,000
Summary of information pertaining to weekly series of Treasury bills ^ issued during the fiscal year 1955
a:>.
[Dollar amounts in thousands]
Prices and rates
M a t u r i t y value
Tenders accepted
D a t e of
Issue
1954
July
1
8
15
22
29
Aug. 5
12
19
26
Sept. 2
9
16
23
30
Oct.
7
14
21
28
Nov. 4
12
18
26
Dec. 2
9
16
23
30
1955
Jan.
6
13
20
FRASER 27
Date
of m a turity
1954
S e p t . 30
Oct. 7
14
21
28
Nov. 4
12
18
26
Dec. 2
9
16
23
30
1955
Jan.
6
13
20
27
Feb. 3
10
17
24
Mar. 3
10
17
24
31
Apr.
7
14
21
28
Digitized for
Days
to m a turity
.
Total
applied for
Total
accepted
O n competitive
basis
On noncompetitive
basis 2
T o t a l b i d s accepted
F o r cash
I n exchange
Average
price p e r
hundred
Equivalent
average
rate 3
(percent)
C o m p e t i t i v e b i d s accepted
High
Amount
maturing
o n issue
dateof •
new
offering
Low
P r i c e p e r lEe nq tu ir va tae- 3 P r i c e per E q u i v a h u n d r e d (percent) h u n d r e d lent r a t e 3
(percent)
91
91
91
91
91
91
92
91
92
91
91
91
91
91
$2,275,403
2,199,082
2,290,405
2,288, 243
2,237,285
2,448, 724
2,427, 772
2, 353,457
2, 295, 722
2,347,086
2, 243,072
2, 460, 561
2, 240, 629
2,141,376
$1,500,616
1,500,536
1, 500, 256
1, 500,473
1, 500, 200
1, 500, 909
1, 500,754
1, 500,800
1, 500,969
1, 500, 236
1, 502,432
1, 500, 243
1, 500, 209
1, 501, 873
$1,325,291
1,332,128
1,270,885
1, 285,422
1, 306,825
1, 274,600
1,239,229
1,243,604
1,284,657
1,281,760
1,302,334
1, 216,490
1,221, 573
1, 313,229
$175,325
168,408
229,370
215,051
193,375
226,309
261, 525
257,196
216,312
218,476
200,098
283,753
278, 636
188,644
$1,327, 946
1,309,383
1,421,066
1, 462,421
1,453, 942
1,470, 966
1, 451, 905
1, 464,167
1,295,321
1, 249,373
1,339,277
1,462, 224
1,431, 604
1,344,120
$172,671
191,153
79,189
38,052
46,258
29, 943
48,849
36,633
205,648
250,863
163,155
38,019
68,605
157,753
99.837
99.830
99.823
99.815
99. 798
99. 799
99. 772
99. 773
99.749
99.742
99. 743
99. 741
99.751
99. 751
0.646
0.671
0.701
0.731
0.800
0.797
0.892
0.898
0.983
1.022
1.016
1.024
0.986
0.984
199.846
99.845
99.845
99.835
99.835
« 99.803
99.810
6 99.780
99.783
7 99.754
• 8 99. 750
99. 762
99.754
99. 760
0.613
0.613
0.613
0.653
0.653
0.779
0.743
0.870
0.849
0.973
0.989
0.981
0.973
0.949
99.835
99.828
99.819
99.812
99. 793
99. 795
99. 769
99. 771
99. 745
99.738
99. 741
99.739
99. 749
99. 749
0.653 $1,500,672
0.680 1,499,953
0.716 1, 501, 274
0.744 1, 501,452
0.819 1, 502, 532
0.811 1, 502, 208
0.904 1, 500,849
0.906 1, 501,427
0.998 1, 502, 782
1.036
1,500, 502
1.025
1, 500,190
L033 1, 500, 603
0.993 1, 500,973
0.993 1, 500,616
91
91
91
91
91
90
91
90
91
91
91
91
91
2, 213,343
2,137,108
2,185,113
2,121,499
2,184,716
2, 215,138
2,116,863
2,126, 220
2,142, 543
2,111,482
2, 200,360
2, 385, 912
2, 454, 586
1, 500, 290
1, 500, 014
1, 500, 256
1, 500, 237
1, 500, 936
1, 500, 502
1, 500, 394
1,499,815
1, 500, 391
1,499, 962
1, 500, 623
1, 501, 676
1, 500,859
1,312,401
1, 299,724
1, 255,194
1, 285,864
1, 293, 500
1,251,036
1,252,040
1, 276,051
1, 299,630
1, 276, 931
1, 240,439
1, 231,985
1, 287,984
187,889
200, 290
245,062
214,373
207,436
249,466
248,354
223, 764
200,761
223,031
260,184
269,691
212,875
1,239, 628
1,468, 760
1,375,089
1,364, 474
1,396,162
1,384,172
1,357,988
1,327, 577
1,311, 761
1,359,329
1,362,145
1,302, 627
1,257, 797
260, 662
31,254
125,167
135,763
104,774
116,330
142,406
172,238
188,630
140, 633
138,478
199,049
243,062
99. 756
99.756
99.745
99. 746
99.741
99. 765
99. 765
99. 776
99. 740
99. 725
99. 685
99. 663
99. 703
0.966
0.966
1.009
1.006
1.023
0.940
0.931
0.897
1.029
1.087
L247
L333
1.175
e 99.760
99.767
99.765
99. 756
10 99. 755
99. 770
11 99. 775
99. 782
99. 780
99. 752
99. 750
99. 750
12 99.706
0.949
0.922
0.930
0.965
0.969
0.920
0.890
0.872
0.870
0.981
0.989
0.989
1.163
99.753
99. 754
99. 743
99. 743
99. 739
99. 764
99. 762
99.771
99.735
99.720
99. 680
99. 661
99. 702
0.977
0.973
1.017
1.017
1.033
0.944
0.942
0.916
1.048
1.108
L266
L341
1.179
1, 500, 536
1, 500, 255
1, 500,473
1, 500,200
1, 5Q0,909
1, 500,754
1,500,800
1,500,969
1, 500,236
1, 502,432
1,500,243
1,500,209
1, 501,873
91
91
91
91
2, 326,187
2,356,060
2, 459,473
2, 449,938
1,500,112
1, 500, 630
1, 500, 562
1, 500,199
1,
1,
1,
1,
190, 567
228,012
247,725
240, 537
1,465,452
1,472,337
1,443, 581
1, 227,148
34,660
28,293
56,981
273,051
99.
99.
99.
99.
L049
1.222
1.407
1.349
99. 747
99. 765
13 99. 697
H 99. 671
LOOI
0.930
1.199
1.302
99. 727
99. 684
99. 640
99. 657
L080
1.250
1.424
1.357
1,
1,
1,
1,
309, 545
272, 618
252,837
259, 662
735
691
644
659
.
500,290
500,014
500,256
500,237
5
12
19
26
June 2
9
s
;?
16
00
17
23
30
5
24
I Apr. 31 July 7
14
14
21
21
28
28
M a y 5 Aug. 4
11
12
18
19
25
26
June 2 Sept. 1
8
9
15
16
22
23
29
30
Feb. 3
May
10
17
24
CO Mar. 3
91
91
91
91
91
91
91
91
91
91
91
91
91
91
91
91
. 91
91
91
91
91
91
285, 747
119,208
158, 675
155,873
333,103
010,998
219,911
358, 953
230,064
126,025
125, 491
347,394
623, 624
372, 545
410, 938
361, 747
140, 336
167, 484
996, 310
510, 875
380,009
127, 843
1, 284, 721
1, 500,192
1, 499, 683 1,283, 359
1, 283, 474
1, 500,125
1, 500, 241 1,306,536
1, 500,692 . 1, 301, 792
1, 499, 998 1, 289, 236
1, 268, 556
1, 500,861
1, 501, 724 1,251,397
1, 500, 474 1, 297,848
1,282, 580
1, 501,001
1, 500, 291 1, 276, 703
1, 500, 709 1, 241, 622
1, 277,350
1, 501,086
1, 291, 208
1, 501,077
1,310, 580
1, 502,017
1,304,375
1, 500,393
1,332,019
1, 500,181
1, 500, 614 1,349, 462
1, 500, 455 1, 321,099
1, 296, 668
1, 502.834
1, 503, 268 1, 268, 077
1,316,187
1, 500,043
215, 471
216, 324
216, 651
193, 705
198, 900
210, 762
232, 305
250,327
202, 626
218, 421
223, 588
259,087
223, 736
209,869
191, 437
196,018
168.162
151,152
179, 356
206,166
235,191
183, 856
1,333, 933
1, 392, 282
1, 347,324
1,415,160
1, 371, 671
1,464,071
1,399,196
1,403,133
1,308,164
1, 458, 042
1,427, 331
1, 431,041
1, 250,326
1, 347, 611
1,401, 608
1, 451, 206
1, 420, 447
1, 379, 942
1, 425, 434
1,375,038
1, 387,097
1,320,196
1 T h e u s u a l t i m i n g w i t h respect t o issues of T r e a s u r y bills is: Press release i n v i t i n g
t e n d e r s , 7 d a y s before d a t e of issue; closing d a t e o n w h i c h t e n d e r s are accepted, 3
d a y s before d a t e of issue; a n d press release a n n o u n c i n g acceptance of t e n d e r s , 2 d a y s
before d a t e of issue. F i g u r e s are final a n d differ i n m a n y instances from t h o s e s h o w n
i n press releases a n n o u n c i n g details of a p a r t i c u l a r issue.
2 N o n c o m p e t i t i v e t e n d e r s for $200,000 or less w i t h o u t s t a t e d price from a n y one
b i d d e r were accepted in full a t average price for accepted c o m p e t i t i v e b i d s .
8 B a n k - d i s c o u n t basis.
< E x c e p t $20,000 a t 99.873.
« E x c e p t $205,000 a t 99.825 a n d $600,000 a t 99.810.
6 E x c e p t $150,000 a t 99.795.
7 E x c e p t $100,000 a t 99.783, $400,000 a t 99.780, a n d $235,000 a t 99.760.
166,259
107, 401
152,801
85,081
129,021
35,927
101, 665
98, 591
192, 310
42, 959
72, 960
69, 668
250, 760
153, 466
100, 409
49,187
79, 734
120, 672
75. 021
127, 796
116,171
179,847
99. 713
99. 725
99. 714
99.657
99.642
99. 689
99. 675
99. 655
99. 653
99. 630
99. 582
99. 579
99. 571
99. 589
99. 636
99. 639
99. 628
99. 638
99. 649
99. 617
99.641
99. 646
1.134
1.088
1.130
1.356
1.416
1.231
1.286
1.366
1.374
1.465
1.652
1.664
1.697
1.626
1.440
1.427
1.471
1.434
1.390
1.514
1.420
1.401
99. 727
99. 734
99. 734
99. 731
15 99. 665
99. 697
99. 721
99. 696
18 99. 667
99. 670
99. 662
99. 620
99. 620
17 99. 593
99. 640
99. 646
99. 646
99. 646
99. 663
99. 665
18 99. 644
99. 659
1.080
1.052
1.052
1.064
1.325
L199
1.104
1.203
1.317
1.305
1.337
1.503
1.503
LOIO
1. 424
1.400
1.400
1.400
1.333
1.325
1.408
1.349
99. 708
99.719
99. 709
99. 651
99. 640
99. 681
99. 672
99. 653
99. 648
99. 626
99. 575
99. 576
99. 570
99. 587
99. 634
99. 637
99.623
99. 634
99.636
99. 616
99. 640
99.630
1.155
1.112
1.151
1.381
1.424
1.262
1.298
1.373
L393
1.480
1.681
1.677
1.701
1.634
1.448
1.436
L491
1.448
1.440
1.519
1.424
1.464
8 E x c e p t $100,000 a t 99.760.
0 E x c e p t $570,000 a t 99.770.
10 E x c e p t $50,000 a t 99.946.
11 E x c e p t $150,000 a t 99.785.
12 E x c e p t $482,000 a t 99.715.
13 E x c e p t $50,000 a t 99.750 a n d $150,000 a t 99.715.
H E x c e p t $900,000 a t 99.750.
15 E x c e p t $950,000 a t 99.750 a n d $1,000,000 a t 99.700.
18 E x c e p t $12,000 a t 99.750, $200,000 a t 99.685, a n d $800,000 a t 99.684.
17 E x c e p t $100,000 a t 99.616 a n d $100,000 a t 99.608.
1" E x c e p t $800,000 a t 99.659.
1, 500, 935
1, 500, 502
1, 500, 394
1,499,815
1, 500,391
1,499, 962
1, 500, 623
1, 501,676
1, 500,859
1, 500,112
1, 500,630
1, 500, 562
1, 500,199
1, 500.192
1, 499, 683
1, 500,125
1, 500, 241
1, 500, 692
1,499, 998
1, 500,861
1, 501, 724
1, 500,474
W
Ul
^
^
178
195 5 REPORT OF THE SECRETARY OF THE TREASURY
United S t a t e s Savings Bonds
Exhibit 7.—^Fourth a m e n d m e n t , November 18, 1954, to Department Circular
No. 530, Seventh Revision, regulations governing United States sayings bonds
TREASURY
DEPARTMENT,
Washington, November 18, 1954To Owners of United States Savings Bonds, and Others Concerned:
Section 315.4 (a) a n d Section 315.45 (b) (2) of D e p a r t m e n t Circular N o . 530,
Seventh Revision, dated M a y 21, 1952 (31 C F R , 19^52 Supp., 315), as amended, are
hereby amended, effective J a n u a r y 1, 1955, t o read as follows:
SEC. 315.4 (a). Forms of registration.—Except as provided in subparagraphs
(4), (5), a n d (6) hereof, bonds of Series E a n d H m a y be registered only in t h e
names of individuals (natural persons), whether adults or minors, in their own
right in one of t h e following forms:
(1) O N E P E R S O N : I n t h e name of one person, for example:
" J o h n A. J o n e s / '
(2) T w o P E R S O N S — C O O W N E R S H I P F O R M : I n t h e names of t w o (but n o t m o r e
t h a n two) persons in t h e alternative as coowners, for example:
' ' J o h n A. Jones O R M r s . Ella S. J o n e s . "
No other form of registration establishing coownership is authorized.
(3) T w o P E R S O N S — B E N E F I C I A R Y F O R M : I n t h e n a m e of one ( b u t n o t more
t h a n one) person, paj^able on d e a t h t o one (but not more t h a n one) other person,
for example:
' ' J o h n A. Jones, payable on d e a t h t o Miss M a r y E . J o n e s . "
" P a y a b l e on d e a t h t o " m a y be abbreviated " p . o. d." T h e first person n a m e d
is hereinafter referred t o as t h e owner or registered owner, a n d t h e second person
n a m e d as t h e beneficiary or designated beneficiary.
(4) T R E A S U R E R OF T H E U N I T E D S T A T E S AS C O O W N E R OR B E N E F I C I A R Y : I n t h e
name of t h e owner with t h e Treasurer of t h e United States as coowner or as
beneficiary. A bond so registered m a y n o t be reissued t o eliminate or change t h e
coowner or t h e beneficiary, a n d upon t h e death of t h e owner will become t h e
property of t h e United States.
(5) T R U S T E E S O F AN E M P L O Y E E S ' . S A V I N G S P L A N ( S E R I E S E O N L Y ) : I n t h e n a m e
a n d title of t h e trustee or trustees of a n employees' savings plan or a n y similar
t r u s t for t h e accumulation of employees' savings (see Sec. 316.6a of D e p a r t m e n t
Circular N o . 653, Third Revision, as amended), substantially in accordance with
t h e provisions (^ Sec. 315.5 (b).
(6) T R U S T E E I O F A P E R S O N A L T R U S T E S T A T E : I n t h e n a m e a n d t i t l e of t h e
trustee or trustees of a personal t r u s t estate in a form substantially in accordance
with t h e provisions of Sec. 315.5 (b) (1), insofar as applicable. T h e term "personal
t r u s t e s t a t e " as used herein is defined t o mean, a n d is limited t o , t r u s t estates
established b y individuals, t h a t is, natural persons in their own right, for t h e
benefit of themselves or other such individuals, a n d common t r u s t s comprised in
whole or in p a r t of such t r u s t estates.
SEC. 315.45 (b). Reissue during the lives of both coowners.— * * * (2) If t h e
bond is of a series which m a y be originally issued in t h e name of a trustee, it m a y
be reissued in t h e name of a trustee of a living t r u s t created b y b o t h coowners for
t h e benefit of both, in whole or in part, during their lifetime whether or n o t containing a n absolute power of revocation in the grantors. Requests for reissue
under this provision should be made on Form P D 1851 a n d will n o t be approved
unless both coowners are of full age a n d legally competent.
A. N .
OVERBY,
Acting Secretary of the Treasury.
EXHIBITS
179
Exhibit 8.—^Second amendment, November 18, 1954, to Department Circular
No. 653, Third Revision, permitting the purchase of Series E savings bonds by
personal trust estates
TREASURY
DEPARTMENT,
Washington, November 18, 1954Sections 316.2, 316.6, 316.9, and 316.10 (a) of Department Circular No. 653,
Third Revision (31 CFR, 1952 Supp., 316), as amended, are hereby amended,
effective January 1, 1955, to read as follows:
SEC. 316.2. Description.—Bonds of Series E will be issued only in registered
form. See section 316.6 for information concerning registration. They will be
issued in denominations of $25, $50, $100, $200, $500, $1,000, $10,000, and
$100,000 which is designed primarily for trustees of employees' savings plans under
section 316.6a, but may also be used in connection with authorized reissue transactions. Each bond will bear the facsimile signature of the Secretary of the
Treasury, and will bear an imprint of the Seal of the Treasury Department. At
the time of issue, the issuing agent will inscribe on the face of each bond the
name and address of the owner and the name of the coowner or beneficiary, if
any; will enter the issue date of the bond; and will imprint the agent's dating
stamp (to show the date the bond is actually inscribed). A bond of Series E
shall be valid only if an authorized issuing agent receives payment therefor, duly
inscribes, dates, and stamps the bond, and delivers it to the purchaser or his agent.
SEC. 316.6. Registration.—(a) Authorized forms.—Bonds of Series E may be
registered only in the names of natural persons (that is, individuals), whether
adults or minors, in their own right, as follows: (1) in the name of one person; (2)
in the names of two (but not more than two) persons as coowners; and (3) in the
name of one person payable on death to one (but not more than one) other designated person, except that the Treasurer of the United States may be designated
as coowner or beneficiary, and except further that such bonds may be registered
in the name and title of the trustee or trustees of an employees' savings plan as
provided in section 316.6a and in the name and title of the trustee or trustees of
a personal trust estate. The term "personal trust estate" as used herein is defined
to mean, and is limited to, trust estates established by individuals, that is, natural
persons in their own right, for the benefit of themselves or other such individuals,
and common trusts comprised in whole or in part of such trust estates. Full
information regarding authorized forms of registration and rights thereunder will
be found in the regulations currently in force governing United States savings
bonds.
SEC. 316.9. Issue prices of bonds.—The issue prices of the various denominations
of bonds of Series E follow:
Denomination (maturity value)
•
j^^^g p^^-^^
$25.00
$18.75
$50.00
37. 50
$100.00
75.00
$200.00
150.00
$500.00
375.00
$1,000.00
750.00
$10,000.00
7, 500. 00
$100,000.00 1
75, 000. 00
1 For Hmited use of $100,000 denomination see Sec. 316.2.
SEC. 316.10. Purchase of bonds.— * * * (a) Over-the-counter for cash: (1) F o r
individuals (natural persons) only (i) at such incorporated banks, trust companies
and other agencies as have been duly qualified as issuing agents, and (ii) at
selected United States post offices; and (2) for individuals (natural persons) or
trustees of employees' savings plans (see section 316.6a) and trustees of personal
trust estates (see section 316.6 (a))at Federal Reserve Banks and branches and
at the Treasury Department, Washington 25, D. C.
A. N.
OVERBY,
Acting Secretary of the Treasury.
180
195 5 REPORT OF THE SECRETARY OF THE TREASURY
Exhibit 9.—First a m e n d m e n t , November 18, 1954, to D e p a r t m e n t Circular No.
905, permitting the purchase of Series H savings bonds by personal trust estates
TREASURY DEPARTMENT,
Washington, November 18,1954.
Section 332.6 (a) of D e p a r t m e n t Circular No. 905, dated M a y 21, 1952 (31
C F R , 1952 Supp., 332), is hereby amended, effective J a n u a r y 1, 1955, to read as
follows:
SEC. 332.6. Registration—(a) Authorized forms.—Bonds of Series H m a y be
registered only in t h e names of natural persons (that is, individuals), whether
adults or minors, in their own right, as follows: (1) in t h e name of one person; (2)
in t h e names of two (but not more t h a n two) persons as coowners; a n d (3) in t h e
name of one person payable on d e a t h to one (but not more, t h a n one) other designated person, except t h a t the Treasurer of the United States m a y be designated
as coowner or beneficiary, and except further t h a t such bonds m a y be registered
in t h e name a n d title of t h e trustee or trustees of a personal t r u s t estate. T h e
t e r m "personal t r u s t e s t a t e " as used herein is defined to mean, a n d is limited to,
t r u s t estates established by individuals, t h a t is, n a t u r a l persons in their own right,
for the benefit of themselves or other such individuals, a n d common trusts comprised in whole or in p a r t of such t r u s t estates. Full information regarding
authorized forms of registration a n d rights thereunder will be found in t h e regulations currently in force governing United States savings bonds.
A. N .
OVERBY,
Acting Secretary of the Treasury.
Exhibit 10.—Fifth a m e n d m e n t , F e b r u a r y 2 1 , 1955, to D e p a r t m e n t Circular N o .
530, Seventh Revision, terminating acceptance of savings bonds for safekeeping
TREASURY DEPARTMENT,
Washington, February 21,1955.
To Owners of United States Savings Bonds, and Others Concerned:
Section 315.16 of D e p a r t m e n t Circular No. 530, Seventh Revision, d a t e d M a y
21, 1952 (31 C F R , 1952 Supp., 315), as amended, is hereby amended effective
March 31, 1955, to read as follows:
SEC. 315.16. Safekeeping of bonds.—The existing proyisions of this section
with respect to t h e acceptance of savings bonds for safekeeping are hereby terminated effective a t the close of business March 31, 1955, a n d thereafter the Federal
Reserve Banks as fiscal agents of t h e United States a n d the Treasurer of the United
States will not accept additional bonds for safekeeping, except from the Armed
Forces of t h e United States for their members. Savings bonds held in safekeeping
a t t h a t time b y the Federal Reserve Banks a n d t h e Treasurer of t h e United
States will continue to be so held until withdrawn.
W. R A N D O L P H B U R G E S S ,
Acting Secretary of the Treasury.
Exhibit 11.—Third a m e n d m e n t , F e b r u a r y 2 1 , 1955, to D e p a r t m e n t Circular No.
653, Third Revision, regulations governing the delivery and safekeeping of
Series E savings bonds
TREASURY DEPARTMENT,
Washington, February 2 1 , 1955.
Sections 316.12 and 316.16 of D e p a r t m e n t Circular No. 653, Third Revision,
dated April 29, 1952 (31 C F R , 1952 Supp., 316), as amended, are hereby amended
effective March 3 1 , 1955, to read as follows: ^ .
SEC. 316.12. Delivery of bonds.—Issuing agents are authorized to deliver Series
E bonds by mail a t the risk and expense of the United States, a t the address
given b y t h e purchaser, b u t only within t h e United States, its Territories and
insular possessions and the Canal Zone.^ No mail deliveries elsewhere will be
1 The Department circulars pertaining to savings bonds of Series F, G, H, J, and K and the Department
circular governing savings bonds of all series have been similarly amended.
2 During any war emergency the Treasury may suspend deliveries to be made at its risk and expense
from or to the continental United States and its Territories, insular possessions, and the Canal Zone, or
between any of such places.
EXHIBITS
181
made. If purchased by citizens of the United States temporarily residing abroad,
the bonds will be delivered a t such address in the United States as the purchaser
directs.
SEC. 316.16. Safekeeping.—The existing provisions of this section with respect
to the acceptance of Series E bonds for safekeeping are hereby terminated effective at the close of business March 31, 1955, and thereafter the Federal Reserve
Banks as fiscal agents of t h e United States and the Treasurer of t h e United
States will not accept additional bonds for safekeeping, except from the Armed
Forces of the United States for their members. Series E bonds held in safekeeping a t t h a t time by the Federal Reserve Banks and the Treasurer of the United
States will continue to be so held until withdrawn.
W. R A N D O L P H B U R G E S S ,
Acting Secretary of the Treasury.
Exhibit 12.—^First a m e n d m e n t , February 2 1 , 1955, to D e p a r t m e n t Circular N o .
654, Third Revision, terminating acceptance of Series F and G savings bonds
for safekeeping
TREASURY DEPARTMENT,
Washington, February 2 1 , 1955.
Subsection (b) of Section 318.6 of D e p a r t m e n t Circular No. 654, Third Revision,
dated September 12, 1950 (31 C F R , 1952 Supp., 318), is hereby amended effective
March 31, 1955, to read as follows: i
(b) The existing provisions of this subsection with respect to the acceptance
of savings bonds of Series F and Series G for safekeeping are hereby terminated
effective a t the close of business March 31, 1955, and thereafter the Federal
Reserve Banks as fiscal agents of the United States and the Treasurer of the
United States will not accept additional bonds for safekeeping, except from the
Armed Forces of the United States for their members. Savings bonds of Series
F and Series G held in safekeeping a t t h a t time b y the Federal Reserve Banks
and the Treasurer of t h e United States will continue to be so held until withdrawn
W. R A N D O L P H B U R G E S S ,
Acting Secretary of the Treasury.
Exhibit 13.—Second a m e n d m e n t , February 2 1 , 1955, to Department Circular No.
905, regulations governing the delivery and safekeeping of Series H savings
bonds
TREASURY DEPARTMENT,
Washington, February 2 1 , 1955.
Sections 332.10 and 332.12 of D e p a r t m e n t Circular No. 905, dated M a y 21,
1952 (31 C F R , 1952 Supp., 332), are hereby amended effective March 31, 1955,
to read as follows: 2
S E C . 332.10. Delivery of bonds.—Authorized issuing agencies will deliver bonds
of Series H either in person, or by mail a t t h e risk and expense of the United
States, a t t h e address given by t h e purchaser, b u t only within t h e United States,
its Territories and insular possessions, and t h e Canal Zone.^ No mail deliveries
elsewhere will be made. If purchased by citizens of t h e United States temporarily
residing abroad, t h e bonds will be delivered a t such address in t h e United States
as t h e purchaser directs.
SEC. 332.12. Safekeeping.—The existing provisions of this section with respect
to t h e acceptance of savings bonds of Series H for safekeeping are hereby terminated effective a t t h e close of business March 31, 1955, and thereafter t h e Federal
Reserve Banks as fiscal agents of t h e United States and t h e Treasurer of t h e
United States will not accept additional bonds for safekeeping, except from t h e
Armed Forces of t h e United States for their members. Savings bonds of Series H
1 The Department circulars pertaining to savings bonds of Series E, H, J, and K and the Department
circular governing savings bonds of all series have been similarly amended.
2 The Department circulars pertaining to savings bonds of Series E, F, G, J and K and the Department
circular governing savings bonds of all series have been similarly amended.
3 During any war emergency the Treasury may suspend deliveries to be made at its risk and expense
from or to the continental United States and its Territories, insular possessions, and the Canal Zone, or
between any of such places.
182
195 5 REPORT OF THE SECRETARY OF THE TREASURY
held in safekeeping at that time by the Federal Reserve Banks and the Treasurer
of the United States will continue to be so held until withdrawn.
W.
RANDOLPH BURGESS,
Acting Secretary of the Treasury.
Exhibit 14.—First amendment, February 21, 1955, to Department Circular No.
906, regulations governing the delivery and safekeeping of Series J and K
savings bonds
TREASURY
DEPARTMENT,
Washington, February 21, 1955.
Sections 333.11 and 333.13 of the Department Circular No. 906, dated April
29, 1952 (31 CFR, 1952 Supp., 333), are hereby amended effective March 31,
1955, to read as follows: ^
SEC. 333.11. Delivery of bonds.—Authorized issuing agencies will deliver bonds
of Series J and Series K either in person, or by mail at the risk-and expense of
the United States, at the address given by the purchaser, but only within the
United States, its Territories and insular possessions, and the Canal Zone.^
No mail deliveries elsewhere will be made. If purchased by citizens of the United
States temporarily residing abroad, the bonds will be delivered at such address
in the United States as the purchaser directs.
SEC. 333.13. Safekeeping.—The existing provisions of this section with respect
to the acceptance of savings bonds, of Series J and Series K for safekeeping are
hereby terminated effective at the close of business March 31, 1955, and thereafter
the Federal Reserve Banks as fiscal agents of the United States and the Treasurer
of the United States will not accept additional bonds for safekeeping, except
from the Arnied Forces of the United States for their members. Savings bonds
of Series J and Series K held in safekeeping at that time by the Federal Reserve
Banks and the Treasurer of the United States will continue to be so held until
withdrawn.
W.
RANDOLPH BURGESS,
Acting Secretary of the Treasury.
Obligations Guaranteed by the United States
Exhibit 15.—Calls for partial redemption, before maturity, of insurance fund
debentures
During the fiscal year 1955 there were fifteen calls for partial redemption,
before maturity, of insurance fund debentures, seven dated September 22, 1954,
and eight dated March 22, 1955. The notices of call were published in the
Federal Registers of September 29, 1954, and March 30, 1955. The notice
covering the twelfth call of the 2% percent Series E mutual mortgage insurance
fund debentures is shown in this exhibit. Since the other notices of call are
similar to this exhibit, they have been omitted but the essential details are sum^
marized in the table following the notice of call.
NOTICE OF CALL.
FEDERAL REGISTER OF SEPTEMBER 29, 1954
To Holders of 2% Percent Mutual Mortgage Insurance Fund Debentures, Series E:
NOTICE OF CALL FOR PARTIAL REDEMPTION, BEFORE MATURITY, OF 2 ^ PERCENT
M U T U A L MORTGAGE INSURANCE FUND DEBENTURES, SERIES E (TWELFTH C A L L )
Pursuant to the authority conferred by the National Housing Act (48 Stat.
1246; U. S. C , title 12, sec. 1701 et seq.) as amended, public notice is hereby
given that 2 ^ percent mutual mortgage insurance fund debentures, Series E, of
the denominations and serial numbers designated below, are hereby called for
1 The Department circulars pertaining to savings bonds of Series E, F, G and H and the Department
circular governing savings bonds of all series have been similarly amended.
2 During any war emergency the Treasury may suspend deliveries to be made at its risk and expense
from or to the continental United States and its Territories, insular possessions, and the Canal Zone, or
between any of such places.
EXHIBITS
183
redemption, at par and accrued interest, on January 1, 1955, on which date
interest on such debentures shall cease:
2% percent mutual mortgage insurance fund debentures, Series E
Denomination
$50
$100
$500
$1,000
Serial numbers
{All numbers
inclusive)
935 to 968
1, 533 to 1,712
2, 496 to 2, 596
607 to
635
2, 441 to 2, 554
$5,000
679 to 729"
$10,000
178 to 184
The debentures first issued as determined by the issue dates thereof were
selected for redemption by the Commissioner, Federal Housing Administration,
with the approval of the Secretary of the Treasury.
No transfers or denominational exchanges in debentures covered by the foregoing call will be made on the books maintained by the Treasury Department on
or after October 1, 1954. This does not affect the right of the holder of a debenture
to sell and assign the debenture on or after October 1, 1954, and provision will
be made for the payment of final interest due on January 1, 1955, with the
principal thereof to the actual owner, as shown by the assignments thereon.
The Commissioner of the Federal Housing Administration hereby offers to
purchase any debentures included in this call at any time from October 1, 1954,
to December 31, 1954, inclusive, at par and accrued interest, to date of purchase.
Instructions for the presentation and surrender of debentures for redemption
on or after January 1, 1955, or for purchase prior to that date will be given by
the Secretary of the Treasury.
APPROVED: A. N. OVERBY,
Acting Secretary of the Treasury.
NORMAN P. MASON,
Federal Housing Commissioner.,
Final interest will be paid with principal at the rate of $13.75 per $1,000 on
debentures redeemed on January 1, 1955.
Final interest will be paid with principal at the rate of $0.074728 per $1,000
per day from July 1, 1954, to date of purchase on debentures purchased between
October 1 and December Sl^ 1954.
00
Summary of information contained in the notices of call for partial redemption of insurance fund debentures during the fiscal year 1955
2%
percent
insurance
Series E
mutual
mortgage
fund
debentures.
2^2. p e r c e n t w a r h o u s u i g insurance
fund d e b e n t u r e s . Series H
2\i
percent
insurance
Series K
mutual
mortgage
fund
debentures.
F o u r t h call
Fifth call
CO
2 \ i p e r c e n t T i t l e I h o u s i n g insurance fund d e b e n t u r e s . Series L
T w e l f t h caU
T h i r t e e n t h call
T h i r t e e n t h call
F o u r t e e n t h call
Sept. 22, 1954...
J a n . 1, 1955
M a r . 22, 1955...
J u l y 1, 1955
S e p t . 22, 1954
J a n . 1, 1955..-
M a r . 22, 1955..
J u l y 1, 1955....
Sept. 22,1954.
J a n . 1,1955..-.
M a r . 22, 1955..
J u l y 1, 1955...
Sept. 22, 1954-.
J a n . 1, 1955
M a r . 22, 1955.
J u l y 1, 1955.
935-968
1533-1712, 24962596.
607-635
2441-2554
679-729
178-184
Sept. 30, 1 9 5 4 -
969-1019
1713-1887
3574-3613
660&-6815
3614-3621-.
6816-6862..
31^3...
104-235..
44-72--.
243-343.
4-9---.
14-22..
10-52, 54-115.
23^0.
636-648.652-690
1289-1396
730-804, 807
185-254
M a r . 31, 1955...
2811-2853
6055-6241
2440-2547
22112-24088.-.
Sept. 30, 1954
1410-1420
6242-6281
2549-2556
24125-25266.-..
M a r . 31, 1955..
78-125-180-23829-54--..
126-157
239-378
57-103
28-77
M a r . 31, 1955-.-.
55-56---.
207-2262-A
57-59.
227-250.
5-9.
1.
M a r . 31, 1955.
$13.75 per $1,000.
$13.75 per $1,000. $12.50 per $1,000. $12.50 per $1,000. $12.50 per $1,000- $12.50 per $1,000. $12.50 per $1,000.
Second call
cn
T h i r d call
O
N o t i c e of c a l l - Redemption date
Serial n u m b e r s called b y
denominations:
$50
$100
$500
$1,000
$5,000
$10,000
F i n a l d a t e for transfers or
denominational exchanges
( b u t n o t for sale or assignment) .
R e d e m p t i o n o n call d a t e ,
a m o u n t paid at par with
interest t n full a t r a t e of.
P r e s e n t a t i o n for p u r c h a s e
prior t o call d a t e :
Period
A m o u n t paid at par
a n d accrued interest
a t r a t e of.
O
Sept. 30,1954.
S e p t . 30, 1954—
W
CO
o
$12.50 per $1,000.
Ki
Oct. 1-Dec. 31,
1954.
$0.074728 p e r
$1,000 per d a y
from J u l y 1,
1954, t o d a t e of
purchase.
A p r . 1-June 30,
1955.
$0.075967 p e r
$1,000 per d a y
from J a n . 1,
1955, t o d a t e of
purchase.
Oct. 1-Dec. 31,
1954.
$0.067935 p e r
$1,000 per d a y
from J u l y 1,
1954, t o d a t e of
purchase.
A p r . 1-June 30,
1955
$0.069061 p e r
$1,000 per d a y
from J a n . 1,
1955, t o d a t e of
purchase.
Oct. 1-Dec. 31,
1954.
$0.067935 p e r
$1,000 per d a y
from J u l y 1,
1954, t o d a t e of
purchase.
A p r . 1-June 30,
1955.
$0.069061
per
$1,000 per d a y
fro.m J a n . 1,
1955, t o d a t e of
purchase.
Oct. 1-Dec. 31,
1954.
$0.067935 p e r
$1,000 per d a y
from J u l y 1,
1954, to d a t e of
purchase.
A p r . 1-June 30,
1955.
$0.069061 p e r
$1,000 per d a y
from J a n . 1,
1955, to d a t e of
purchase.
o
d
Summary of information contained in ihe notices of callfor partial redemption of insurance fund debentures during the fiscal year 1955—Con.
21.^ p e r c e n t n a t i o n a l defense housing
i n s u r a n c e fund d e b e n t u r e s . Series P
F i r s t caU
N o t i c e of call
Redemption date
Serial n u m b e r s caUed b y denominations:
$50
$100
$500
$1,000
$5,000
$10,000
F i n a l d a t e for transfers or den o m i n a t i o n a l exchanges ( b u t
n o t for sale or a s s i g n m e n t ) .
Redemption
on call
date,
a m o u n t paid at par with
interest in full a t r a t e of.
P r e s e n t a t i o n for p u r c h a s e prior
t o caU d a t e :
Period.-A m o u n t paid at par and
accrued interest a t r a t e
of.
Second call
2\^ p e r c e n t hous- 2^4 p e r c e n t T i t l e
ing
insurance
I housing insurfund d e b e n t u r e s ,
ance fund deb e n t u r e s . Series
Series Q, second
R , first caU
call
3 percent m u t u a l mortgage insurance
fund d e b e n t u r e s . Series U
F i r s t caU
Second call
2%
percent
national
defense
housing
insurance fund debent u r e s , Series Y,
first call
Sept. 22, 1954-.
J a n . 1, 1955—-
M a r . 22, 1955-.
J u l y 1, 1955...
Sept..22, 1954.
J a n . 1, 1955....
M a r . 22, 1955.
J u l y 1, 1955...
Sept. 22, 1954.
J a n . 1, 1955..-.
M a r . 22, 1955..
J u l y 1, 1955—
37--.
5-8-.
134-36.
4-6 2-6---.
4
39-49-.
1-31--1-4.
1-31-51--1-61-3-.
4-9...
6-35..
2-107-30.
4-17.
9^201S e p t . 30, 1954-.
38^5-.
9-35...
2-10-.
37-58-.
5315-385
M a r . 31, 1955-.
317-342
Sept. 30, 1954-
M a r . 31, 1 9 5 5 . . . .
S e p t . 3 0 , 1954
M a r . 31, 1955..--
18-26.
9-11.
22-24.
6-7.
234-237.
M a r . 31, 1955.
$12.50 per $1,000--
$12.50 per $1,000--
$12.50 per $1,000.
$13.75 per $1,000.
$15.00 per $1,000---
$15.00 per $1,000.
$13.75 per $1,000.
M a r . 22, 1955.
J u l y 1, 1955.
I—I
Ul
Oct. 1-Dec. 31,
1954.
$0.067935 per $1,000
per d a y from
J u l y 1, 1954, to
date
of
pm'chase.
A p r . 1-June 30,
1955
$0.069061 per $1,000
per d a y from
J a n . 1, 1955, to
date
of
purchase.
Oct. 1-Dec. 31,
1954.
$0.067935 per $1,000
per d a y fro.'n
J u l y 1, 1954, to
date
of
purchase.
A p r . 1-June 30,
1955.
$0.075967 per $1,000
per d a y from
J a n . 1, 1955, to
date
of
purchase.
Oct. 1-Dec. 31,
1954.
$0.081522 per $1,000
per d a y from
J u l y 1, 1954, t o
date
of
purchase.
A p r . 1-June 30,
1955.
$0.082873 per $1,000
per d a y from
J a n . 1, 1955, t o
date
of
purchase.
A p r . 1-June 30,
1955.
$0.075967 per $1,000
per
day
from
J a n . 1, 1955, t o
d a t e of p u r c h a s e .
00
186
195 5 REPORT OF T H E SECRETARY OF T H E TREASURY
Legislation and Regulations
Exhibit 16,—^Two acts temporarily increasing the public debt limit
[Pubhc Law 686, 83d Cong., 2d Sess., H. R. 6672]
Be it enacted by the Senate and House of Representatives of the United States of
America in Congress assembled, That during the period beginning on the date of
enactment of this Act and ending on June 30, 1955, the public debt limit set forth
in the first sentence of section 21 of the Second Liberty Bond Act, as amended,
shall be temporarily increased by $6,000,000,000.
Approved August 28, 1954.
[PubHc Law 124, 84th Cong., 1st Sess., H. R. 69921
Be it enacted by the Senate and House of Representatives of the United States of
America in Congress assembled, That the Act entitled ''An Act to provide for a
temporary increase in the public debt limit", approved August 28, 1954 (31
U. S. C , sec. 757b), is hereby amended by striking out "June 30, 1955" and
inserting in lieu thereof "June 30, 1956".
Approved June 30, 1955.
Exhibit 17.—Removal of restrictions on ownership by commercial banks of certain
Treasury bonds
[Department Circular No. 942. Public Debtl
TREASURY
DEPARTMENT,
Washington, December 22, 1954.
I. ENUMERATION OF DEPARTMENT CIRCULARS AND TREASURY BOND ISSUES AFFECTED
1. The Department circulars affected by this circular and the Treasury bonds
which they govern are as follows:
No. 768 2y2 percent Treasury bonds of 1967-72 (dated June 1, 1945)
No. 776 2y2 percent Treasury bonds of 1967-72 (dated Nov. 15, 1945)
II. REMOVAL OF RESTRICTIONS
1. Each of the circulars enumerated in section I hereof provides that the bonds
issued thereunder may not be transferred to or be held by commercial banks,
which were defined for this purpose as banks accepting demand deposits, before
June 15, 1962, and December 15, 1962, respectively, except to the extent and in the
manner set forth in the governing circulars. All restrictions against the ownership
by commercial banks of the bonds issued pursuant to said circulars are hereby
removed, effective January 1, 1955.
G.
M.
HUMPHREY,
Secretary of the Treasury.
Exhibit 18.—Revision, April 1, 1955, of Department Circular No. 300, general
regulations with respect to United States securities
TREASURY
DEPARTMENT,
Washington, April 1, 1955.
To Owners of United States Securities and Others Concerned:
Pursuant to the following Revised Statutes and Statutes at Large, as amended,
and corresponding sections of the United States Code, 1952 edition:
R.S. 161 (5U. S. C. 22).
R. S. 3706 (31 U.S. C. 739).
40 Stat. 288, 290 and 1309 (31 U. S. C. 752, 752a, 753 and 754).
48 Stat. 343 (31 U. S. C. 754a).
50 Stat. 481 (31 U. S. C. 738a).
Department Circular No. 300, dated July 31, 1923, as amended and supplemented
(31 CFR 306), and Department Circular No. 666, dated July 21, 1941 (31 CFR
EXHIBITS
187
307), are hereby revised, consolidated and reissued, effective April 30, 1955, as
Department Circular No. 300, Revised, to read as follows:
SUBPART A—GENERAL INFORMATION
SEC. 306.0. Applicability of regulations.—These regulations, except as otherwise specifically provided herein, apply to all United States transferable securities
heretofore or hereafter issued by the Secretary of the Treasury as evidence of the
public debt of the United States, including (but not limited to) Treasury bonds,
Treasury notes. Treasury certificates of indebtedness, Treasury bills, postal savings bonds, and Panama Canal bonds.i- When other public debt securities are
issued on an optional exchange basis to owners of any outstanding United States
transferable securities, the provisions of these regulations applicable to the
exchange may be supplemented or modified by instructions issued in connection
with the new offering. These regulations also apply to United States nontransferable securities, other than United States savings bonds, to the extent
specified in the offering circulars or special regulations governing such securities.
Their application to outstanding nontransferable securities is expressly set forth
in, or indicated by the context of, each subpart or section.
SEC. 306.1. Official agencies.—Securities subject to these regulations are issued
from time to time, pursuant to public offerings by the Secretary of the Treasury,
through the Federal Reserve Banks, fiscal agents of the United States, and the
Treasurer of the United States, usually for subscription during a specified period.
Banking institutions generally will handle subscriptions for customers, but only
the Federal Reserve Banks and branches and the Treasury Department are
authorized to act as official agencies, and subscriptions may be made direct to
these official agencies. The Secretary of the Treasury, through the Bureau of
the Public Debt, Division of Loans and Currency, Washington 25, D. C , conducts
transactions in securities after issue and answers inquiries concerning such transactions. However, the public will generally find it advantageous to make inquiries of, or submit securities to, the Federal Reserve Banks and branches, which are
offi'cial agencies for the receipt of securities for transactions after issue, and may be
authorized to complete such transactions. The Federal Reserve Banks and
branches are located in the cities indicated by their names, as follows:
Federal Reserve Bank of Boston.
Federal Reserve Bank of St. Louis:
Federal Reserve Bank of New York:
Little Rock branch,
Buffalo branch.
Louisville branch.
Federal Reserve Bank of Philadelphia.
Memphis branch.
Federal Reserve Bank of Cleveland:
Federal Reserve Bank of Minneapolis:
Cincinnati branch,
Helena (Montana) branch.
Pittsburgh branch.
Federal Reserve Bank of Kansas City:
Federal Reserve Bank of Richmond:
Denver branch,
Baltimore branch,
Oklahoma City branch,
Charlotte branch.
Omaha branch.
Federal Reserve Bank of Atlanta:
Federal Reserve Bank of Dallas:
Birmingham branch,
El Paso branch,
Jacksonville branch,
Houston branch,
Nashville branch,
San Antonio branch.
New Orleans branch.
Federal Reserve Bank of San Francisco:
Federal Reserve Bank of Chicago:
Los Angeles branch,
Detroit branch.
Portland (Oregon) branch,
Salt Lake City branch,
Seattle branch.
SEC. 306.2. Definitions.—Certain words and terms, as used in these regulations,
are defined as follows:
(1) ''Treasury bonds" and "Treasury notes," or simply "bonds" and "notes,"
unless otherwise indicated by the context, refer only to transferable bonds or
notes. Transferable Treasury notes are currently issued only in bearer form,
but the provisions of these regulations with respect to transferable registered
i The bonds and other securities issued by certain agencies of the United States, the former government of
Puerto Rico, and the former goverments of the PhUippine Islands for which the United States Treasury
Department acts as transfer agency are subject to these regulations, so far as applicable, under special arrangements with the issuing authorities. Information as to their application to any particular transaction in any
designated agency or insular securities wiU be furnished by the Bureau of the Public Debt, Division of Loa^^
and Ourrency, Washington 25, D. C , upon request^
'
188
195 5 REPORT OF THE SECRETARY OF THE TREASURY
Treasury bonds will apply equally to transferable registered Treasurj'- notes, if
any should be issued.
(2) "Transferable" applies only to securities which are transferable by delivery, or by assignment and delivery, as distinguished from those which by their
terms are not so transferable or are transferable only by operation of law, such
as United States savings bonds, to which these regulations do not apply, and
Treasury savings notes, to which these regulations apply only in part.
(3) "Registered securities" are those which are payable on their face to certain persons whose names and addresses are recorded by the issuing agency.
For other features of registered securities see sec. 306.3 (a).
(4) "Bearer securities" are those which are payable on their face to "bearer"
and the ownership of which is not recorded by the Department. Title to such
securities may pass by delivery without endorsement and without notice to the
Departnient. "Coupon securities" are bearer securities which are issued with
interest coupons attached. For other features of coupon or bearer securities
see sec. 306.3 (b).
(5) "Payment" and "redemption," as applied to securities, unless otherwise
indicated by the context, are used interchangeably to refer to payment at
maturity or payment before maturity pursuant to a call for redemption in
accordance with the terms of the securities.
(6) The words "face maturity", refer to the date of payment specified in the
text of the securities, as distinguished, in the case of securities with a callable
feature, from the date on which they may become redeemable at the option of
the obligor pursuant to a call.
(7) "Redemption-exchange" refers to any authorized redemption of securities for the purpose of applying the proceeds in payment for other securities
offered in exchange.
(8) A "proper court" is one which has jurisdiction over the parties and subject
matter.
(9) The words "assigned in blank" refer to assignments of bonds by or on
behalf of the owner, but without the space provided for the name of the assignee
being filled in. The words "bonds so assigned as to become, in effect, payable
to bearer," refer to bonds assigned in blank or to "bearer" or those on which
the assignment form or forms have been signed by or on behalf of the owner, and
the words "The Secretary of the Treasury for exchange for coupon bonds" (or
substantially similar words), have been inserted in the space provided for the
name of the assignee, without inserting also the name of the person to whom the
coupon bonds are to be delivered.
SEC. 306.3. Distinctive features of registered andbearer securities.—(a) Registered
securities.—Transferable registered bonds are payable, according to their terms,
only to the designated payees or "registered assigns" (including a'fesignees or
successors in title), and are transferable by delivery pursuant to assignments
duly executed by them or their duly authorized representatives. Nontransferable
securities, which are issued only in registered form, are payable according to their
terms to the registered owners or recognized successors in title, but are not transferable by assignment or otherwise, except to the. extent and in the manner provided in the offering circulars or applicable regulations. • The interest due on
registered bonds to which these regulations apply, in whole or in part, including
nontransferable Treasury Bonds, Investment Series A-1965 and B-1975-80, is
paid by checks drawn on the Treasurer of the United States to the order of the
owners of record. Bearer bonds may be exchanged for registered bonds and
holders may wish to take advantage of this privilege for their own protection,
particularly where adequate facilities for safekeeping are not available. Treasury
savings notes are nontransferable and are registered at time of issuance by recordation in the names of the owners by the issuing agency, which may be the
Ofl&ce of the Treasurer of the United States, the Bureau of the Public Debt, or a
Federal Reserve Bank or branch. The interest on such notes is paid onlj^ with
the principal, when presented for payment, in cash or in payment of Federal estate,
income, or gift taxes. Relief may be granted on account of the loss, theft, or
destruction of transferable or nontransferable registered securities upon compliance
with the applicable provisions of subpart L.
(b) Bearer securities.—Bearer securities include bonds, notes, certificates of
indebtedness, and Treasury bills. The interest on bearer bonds (usually referred
to in these regulations as coupon bonds) is ordinarily payable by means of attached
coupons, which may be detached and cashed as they mature. The interest on
some issues of notes and certificates of indebtedness is payable in the same manner;
EXHIBITS
189
the interest on other issues is payable with the principal at maturity, and no
coupons are attached. The interest on Treasury bills, which are sold on a discount basis and are payable at par at maturity, is represented by the difference
between the purchase price and the par. value, and no coupons are attached.
Relief may be granted on account of the loss, theft, or destruction of bearer
securities upon compliance with the applicable provisions of subpart L; but in
case of loss or theft relief may be granted only if the securities were lost or stolen
under such circumstances, and have been missing for such a period of time after
they have matured or become redeemable pursuant to a call for redemption, as
would indicate that they (1) have been destroyed or become irretrievably lost,
(2) are not held by any person as his own property, and (3) will never become the
basis of a valid claim against the United States.
SEC. 306.4. Transportation charges and risks in the shipment of securities.—The
following rules will govern the transportation to, from and between the Treasury
Department and the Federal Reserve Banks and branches of securities issued on
or presented for authorized transactions:
(1) The securities may be presented or received by the owners or their agents
in person.
(2) Securities issued on original issue, unless delivered in person, will be
delivered by registered mail or by other means at the risk and expense of the
United States.
(3) The United States will assume the risk and expense of any transportation
of securities which may be necessary between Federal Reserve Banks and
branches and the Treasury.
(4) Owners of securities to be submitted for any transaction after original
issue, if they do not present their securities in person, must forward them at
their risk and expense, and for their protection they should ordinarily forward
them by registered mail, covered by insurance, or by express prepaid; however,
owners may deem it unnecessary to insure registered securities which have not
been so assigned as to become, in effect, payable to bearer.
(5) Unless delivered in person, bearer securities issued pn transactions other
than original issue will be delivered by registered mail, covered by insurance,
at the owner's risk and expense, and registered securities issued on such transactions will be delivered by registered mail at the risk of, but without expense
to, the registered owner, except that in either case the securities will be delivered
by express collect or by other means if written instructions to such effect are
duly received by the official agency to which the original securities were presented.
Holders of securities should consult with -their banks and trust companies regarding transportation arrangements between the latter and the FederalReserve
Banks.
SUBPART B
REGISTRATION
SEC. 306.10. General.—Except as otherwise specifically provided in these regulations, the registration used must express the actual ownership of the security,
and may not include any restriction on the authority of the owner to dispose of
it in any manner. The Treasury Department reserves the right to treat the
registration as conclusive of ownership. In order to avoid difficulty in assigning
securities or collecting interest thereon, it is very important that requests for
registration be clear, accurate, and complete, that the registration requested
conform substantially with one of the forms set forth in this subpart, and that
the registration of all securities owned by the same person, organization, or
fiduciary estate be uniform. The post office address, which is required for delivery of interest checks, must include, where appropriate, the street and number,
postal zone, rural route, or any other local feature. Individual owners must be
designated by the nanies by which they are ordinarily known or under which
they do business, preferably including at least one full given name. The name
of an individual may be preceded by any applicable title, such as "Dr." or "Rev."
or followed by "M. D.," "D. D." or other sim.ilar designation. "Sr." or "Jr."
must be used when applicable. The nam.e of a woman m.ust be preceded by
"Miss" or "Mrs.," unless some other applicable title or designation is used. A
niarried woman's own given name, not that of her husband, must be used, for
example, "Mrs. Mary A. Jones," NOT "Mrs. Frank B. Jones." The authorizations and restrictions set forth in this subpart with respect to form.s of registration apply to all registered securities issued after the effective date of these regulations, whether on original issue, transfer, or coupon exchange.
190
19 55 REPORT OF THE SECRETARY OF THE TREASURY
SEC. 306.11. Forms of registration for transferable bonds.—The forms of registration described below are authorized for transferable bonds (subject to the
general provisions of section 306.10):
(1) Natural persons in their own right.—A bond may be registered in the
name of a natural person or persons who are not under any legal disability,
in their own right, substantially as follows:
(i) One person.—In the name of one individual, for example:
"John A. Doe"
"Mrs. Mary C. Doe"
"Miss Mary Ann Doe"
If an individual is the sole proprietor of a business conducted under a trade
name, his name may be followed by reference to the trade name, for example,
"John Doe, doing business as Doe's Home Appliance Store."
(ii) Two or more persons with right of survivorship.—In the names of
two or more individuals in such manner as to provide for the right of survivorship, for example:
"John A. Doe or Mrs. Mary C. Doe or the survivor"
"John A. Doe and Mrs. Mary C. Doe or the survivor"
"John A. Doe or Mrs. Mary C. Doe or Miss Mary Ann Doe or the survivors or survivor"
(iii) Two or more persons without right of survivorship.—In the names
of two or more individuals in such manner as to preclude the right of survivorship, for example:
"John A. Doe and William B. Doe as tenants in common"
"John A. Doe or Robert B. Doe without right of survivorship"
For information as to assignments of bonds and endorsements of interest
checks under the examples given, see sees. 306.56 and 306.37 (d), respectively.
Treasury bonds will not be registered in the name of one person payable on
death to another, and cannot be registered in the names of two or more persons
in their own right in any form whereby assignments by less than all the persons
named in the registration (or all the survivors) may be recognized before
maturity or earlier redemption date, pursuant to a call.^
(2) Natural guardians of minors.—A bond may be registered in the name of
a natural guardian of a minor for whose estate no legal guardian or similar
representative has been appointed by a proper court or is otherwise legally
qualified. Either parent with whom the minor resides or, if he does not reside
with either parent, the person who furnishes his chief support, will be recognized as his natural guardian for the purposes of this para,graph, for example:
"John Jones as natural guardian of Henry Jones, a minor"
The person recognized as natural guardian will be considered as a fiduciary.
Registration in the name of a minor himself (as distinguished from registration
in the name of a legal or natural guardian) as owner or coowner is not authorized, except to the extent provided in sec. 306.57 (a) (3).
(3) Incompetents not under guardianship.—Registration in the name of an
incompetent for whose estate no legal guardian has been appointed is not authorized, except to the extent provided in sees. 306.37 (e) and 306.58 (c) (2).
(4) Executors, administrators, guardians and similar fiduciaries or representatives.—A bond may be registered in the names of the executors, administrators,
guardians, conservators or similar fiduciaries, or representatives of a single
estate who have been appointed by a proper court or are otherwise legally
qualified. The names of all the fiduciaries or representatives, in the form shown
in their letters of appointment, must be included in the registration and must
2 WARNING: D I F F E R E N C E B E T W E E N TREASURY BONDS R E G I S T E R E D IN T H E
NAMES OF TWO OR MORE PERSONS AND U N I T E D STATES SAVINGS BONDS IN COOWNERSHIP FORM. Treasury bonds in the names of two or more persons are for many practical
purposes decidedly different from United States savings bonds in coownership form. Owners of Treasm-y
bonds may obtain cash for them before maturity or a call for redemption by the Secretary of the Treasury
before maturity only by selling them. A sale involves an outright transfer of ownership, which may legally
be made only upon assignment by or on behalf of all owners. These regulations, therefore, require such
assignment. United States savings bonds, unlike Treasury bonds, are not transferable securities and are
redeemable before maturity at the option of the owners virtually on demand to the Treasury Department.
Redemption does not involve a transfer of ownership and, therefore, the Secretary of the Treasury has
authority to provide, and has provided, for the redemption of savings bonds in coownership form upon the
request of either of the coowners.
EXHIBITS
191
be followed by an adequate identifying reference to the estate, for example:
"John Smith, executor of the will (or administrator of the estate) of Henry
J. Smith, deceased"
"William C. Jones, guardian (or conservator, etc.) of the estate of James
D. Brown, a minor (or, an incompetent)."
(5) Private trust estates.—A bond may be registered in the name of the trustee
or trustees of a duly constituted private trust estate, followed by the word
"trustee" or "trustees," as the case may be, and by adequate identifying
reference to the authority governing the trust. The names of all the trustees,
in the form used in the trust instrument, must be included in the registration,
except as follows:
(i) If there are several trustees constituting a board, their names
should be omitted and the words "Board of Trustees" should be substituted
for the word "Trustees."
(ii) If there are several trustees who are empowered to act as a unit,
but are not designated as a board of trustees, their names should be omitted,
but the word "trustees" should be retained.
(iii) If there are four or more trustees who do not constitute a board
or otherwise act as a unit, only one should be named, followed by the words
"et al." or "and others."
(iv) If the trustee or trustees are appointed or elected for a limited
period, his or their names may be omitted.
The following examples illustrate the proper forms of registration in typical
cases:
(An individual and a corporation as trustees under the will ofa decedent):
"John Jones and __ Trust Company,. Albany, N. Y., trustees under the will
of Sarah Jones, deceased"
(Two individuals as trustees under an agreement with a third individual):
"John Doe and Richard Doe, trustees under agreement dated 2/9/50 with
Henry Jones"
(Several trustees designated as a board): "Board of Trustees of the _.
Company Retirement Fund under collective bargaining agreement dated
6/30/50"
(Several trustees acting as a unit but not designated as a board): "Trustees of Victory Post No. 1, American Legion, Department of Massachusetts,
under Section 10 of its bylaws"
(Several trustees elected or appointed for a limited period of time):
"Trustees of the Welfare Fund of __ Company under agreement with its
employees, dated 6/10/50."
(6) States, public officers, corporations, or bodies as trustees.—A bond may be
registered in the title of a public officer or in the name of a State or county, a
public corporation or public body acting as trustee under express authority
of law, followed by appropriate reference to the statute creating the trust, for
example:
"State Sinking Fund Commission, trustee of State Highway Certificates
of Indebtedness Sinking Fund, under Section ._, Code of South Carolina"
"Insurance Commissioner of the State of Pennsylvania, trustee for the
benefit of the policyholders of the __ Insurance Co., under Section __.
Penna. Statutes"
(7) Private organizations (corporations, unincorporated associations, and
partnerships).—A bond may be registered in the name of any private corporation, unincorporated association, or partnership. The full legal name bf the
organization, as set forth in its charter, articles of incorporation, constitution,
partnership agreement, or other authority from which its powers are derived,
as the case may be, must be included in the registration, and may be followed,
if desired, by a parenthetical reference to a particular book account or fund
other than a trust fund, in accordance with the rules and examples given
below:
(i) A corporation.—The name of a business, fraternal, religious or
other private corporation must be followed by the words "a corporation,"
unless the fact of incorporation is shown in the name, for example:
"Smith Manufacturing Company, a corporation"
"The Standard Manufacturing Corporation"
"Jones and Brown, Inc."
192
1955 REPORT OF THE SECRETARY OF THE TREASURY
(ii) An unincorporated association.—The name of a lodge, club, labor
union, veterans' organization, religious society, or similar self-governing organization which is not incorporated (whether or not it is chartered by or affiliated
with a parent organization which is incorporated) must be followed by the
words "an unincorporated association," for example:
"American Legion Post No. __, Department of the District of Columbia,
an unincorporated association"
"Local Union No. 100, Brotherhood of Locomotive Engineers, an-unincorporated association."
Bonds should not be registered in the name of an unincorporated association
if the legal title to its property in general, or the legail title to the particular
association funds with which the bonds are to be purchased, is held by trustees.
In any such case the bpnds should be registered in the title of the trustees in
accordance with paragraph (5) of this section. The term "unincorporated association" should not be used to describe a trust fund, a partnership or a business
conducted under a trade name.
(iii) A partnership.—The name of a business partnership must be
followed by the words "a partnership," for example:
"Smith & Brown, a partnership."
"Acme Novelty Company, a partnership,"
The term "partnership" should not be used to describe a business owned by one
person, even though it is conducted under a trade name. Bonds purchased by
the owner of such a business should be registered in his name in accordance with
paragraph (1) (i) of this section.
(8) States, public corporations and bodies and public officers.—A bond purchased with funds owned by any State or county, public corporation (including
a city, town, or school district), or public body established by law (including a
board, commission, administration, authority, or agency) in its own right may
be registered in its name or in the title, without the name, of the officer having
official custody of such funds, for example:
"State of Maine"
"Town of Rye, New York"
"Marvland State Highway Commission"
"Treasurer, City of Springfield, 111."
(See paragraph (6) of this section for the proper registration of bonds held in
trust.)
SEC. 306.12. Forms of registration for nontransferable securities.—The forms of
registration set forth in sec. 306.11 are authorized upon authorized reissue of 2%
percent Treasury Bonds, Investment Series B-1975-80. Those forms of registration are also authorized upon original issue or authorized reissue of Treasury
savings notes, except that registration may not be made in the names of two or
more persons as joint owners or coowners, or in the name of a trustee v/here the
notes would be held as security for the performance of a duty or obligation, or in
the name of a public ofl&cer, whether or not named as trustee, where the notes
would in effect be held as security.
SEC. 306.13. Errors in registration.—In no case should any erasure, alteration, or
correction be made in the inscription on the registered security. If an error has
been made in the inscription, instructions regarding the procedure for correction
of the error will be furnished by the Bureau of the Publie Debt, Division of Loans
and Currency, Washington 25, D. C , or a Federal Reserve Bank. Full particulars
in regard to the error should be set out in the request for instructions.
SUBPART C
TRANSFERS, EXCHANGES, AND REISSUES
SEC. 306.15. General.—Transferable registered bonds are eligible for transfer,
denominational exchange, and exchange for coupon bonds, except that Panama
Canal and postal savings bonds are eligible for transfer and denominational
exchange only. Treasury Bonds, Investment Series B-1975-80, and Treasury
savings notes are eligible for transfer by way of authorized reissue and denominational exchange, except that Treasury savings notes may be exchanged only from
higher to lower denominations. Treasury Bonds, Investment Series B-1975-80,
are eligible for exchange for the current series of IK percent 5-year Treasury notes.
Coupon bonds and other bearer securities, other than postal savings and Panama
Canal bonds, are eligible for denominational exchange, except that Treasury bills
may be exchanged only from higher to lower denominations. Coupon bonds of any
EXHIBITS
193
loan or issue are eligible for exchange for registered bonds. The securities submitted for any transaction must be presented and surrendered to a Federal Reserve
Bank or branch or the Bureau of the Public Debt, Division of Loans and Currency,
Washington 25, D. C. If the securities presented are in order for the transaction
requested, they will be canceled and retired and new securities in a:n equal face
amount in authorized denominations will be issued and delivered. Except as
otherwise specifically provided, the new securities will be of the same loan and
issue as those presented. . Specific instructions for the issuance and delivery of the
new securities, signed by the owner or his authorized representative, must accompany the securities presented. Securities presented for any transaction described
in this section, except denominational exchange, must be received by the agency
authorized to complete the transaction not less than one full nionth before the date
on which the securities mature or become redeemable pursuant to a call for redemption before maturity, and any security so presented which is received too late
to comply with this provision will be accepted for payment only or redemptionexchange if new securities are offered.
SEC. 306.16. Transfers of registered securities.—Registered bonds which are
eligible for transfer from one person to another and presented for that purpose must
be properly assigned in accordance with Subpart F, except that no assignment will
be required for transfer to a succeeding fiduciary or other legal successor,, including
a distributee of a decedent's estate or a trust estate, or a corporation with which
another corporation has merged or consolidated, but satisfactory proof of successorship will be required. Assignments for transfer should be made to the transferee.
Assignments in blank will also be accepted, but should be used with caution; see
sec. 306.42. Specific signed instructions for the issuance and delivery of the new
bonds must accompany the bonds presented. (Form PD 1644 may be used.)
The new bonds will bear interest from the interest payment date next preceding
the date of presentation, except as provided in sec. 306.37 (b).
SEC. 306.17. Denominational exchanges of registered securities.—No assignment
or endorsement will be required for the authorized exchange of registered Treasury
bonds or Treasury savings notes for like securities in the same names in other
authorized denominations, as no change of ownership is involved. Specific
signed instructions for the issuance and delivery of the new bonds or notes must
accompany the securities presented. (Form PD 1827 may be used.)
SEC. 306.18. Registered exchanges (exchanges of registered bonds for coupon
bonds).—Registered bonds eligible for exchange for coupon bonds and presented
for that purpose must be properly assigned in accordance with subpart F. Assignments for registered exchange should be made to "The Secretary of the Treasury
for exchange for coupon bond(s) to be delivered to
," inserting
the name and address of the person to whom delivery of the coupon bond(s) is
to be made. Assignments in blank or for exchange for coupon bond(s), or to
"The Secretary of the Treasury for exchange for coupon bond(s)," will also be
accepted, but should be used with caution; see sec. 306.42. Specific signed
instructions for the issuance and delivery of the coupon bonds must accompany
the bonds presented, unless included in the assignment. (Form PD 1643 may be
used.) The coupon bonds issued upon exchange will have all matured coupons
detached and all unmatured coupons attached. For the effect of the closing of
the transfer books, see sec. 306.37 (b).
SEC. 306.19. Reissue of nontransferable securities.—Nontransferable securities
governed by these regulations may be reissued only in the names of (1) successors
in title, including, but not limited to, succeeding organizations, persons entitled
upon the dissolution of an organization, and succeeding trustees or persons
entitled upon termination of a trust, or (2) persons entitled upon the death of the
owner as legal representatives or distributees of the estate, except that Treasury
savings notes and Treasury Bonds, Investment Series B-1975-80, may also be
reissued as provided below. Treasury Bonds, Investnient Series A-1965, may
be reissued only as provided in Department Circular No. 815.
(1) Treasury savings notes inscribed in the name of a married man may be
reissued in the name of his wife and notes inscribed in the name of a married
woman may be reissued in the name of her husband; and notes inscribed in the
name of a parent corporation (defined as a corporation owning more than 50
percent of the stock, with voting power, of another corporation) may be reissued
in the name of a subsidiary, and notes inscribed in the name of a subsidiary may
be reissued in the name of the parent corporation as so defined. Notes presented for reissue must be accompanied by a request for reissue on Form PD
2483 properly certified in accordance with the instructions thereon.
356812—56
14
194
1955 REPORT OF THE SECRETARY OF THE TREASURY
(2) Treasury Bonds, Investment Series B-1975-80 may be reissued in the
names of State supervisory authorities in pursuance of any pledge required of
the owner under State law, or upon termination of the pledge in the names of
the pledgors or their successors. Bonds presented for reissue must be properly
assigned for that purpose in accordance with subpart F and must be accompanied by specific signed instructions for the issuance and delivery of the new
bonds.
SEC. 306.20. Exchange of Treasury Bonds, Investment Series B-1975-80.—
Bonds of this series presented for exchange for IH percent 5-year Treasury notes
must be properly assigned in accordance with subpart F to "The Secretary of the
Treasury for exchange for the current series of EA or EO Treasury notes to be
delivered to
," and, for the protection of the owner, the name
and address of the person to whom the notes are to be delivered should be inserted.
(If the bonds are owned by an organization as fiduciary or in its own right, see
sec. 306.76 or 306.80, for evidence required to support assignments for exchange
for notes.) The notes will bear the April 1 or October 1 date next preceding the
date the bonds are received by the Bureau of the Public Debt or a Federal Reserve
Bank or branch, properly assigned and accompanied by all required evidence.
If the bonds when received are not properly assigned or are not supported by all
required evidence, the notes when issued will bear the April 1 or October 1 date
next preceding the date on which the proper assignment or evidence is received
by the agency to which the bonds were presented. Interest accrued at the rate
of 2% percent on the bonds surrendered, from the next preceding interest payment
date to the date of exchange, will be credited, and interest at the rate of 1)^
percent on the notes for the same period will be charged, to the owner, and the
difference will be paid to the owner following the exchange.
Sec. 306.21. Coupon exchanges (exchanges of coupon bonds for registered bonds).—
Coupon bonds presented for exchange for registered bonds should have all matured
coupons detached. All unmatured coupons should be attached, except that if
presented when the transfer books are closed (in which case the exchange will be
effected on or after the date on which the books are reopened), the next maturing
coupons should be detached and held for collection in ordinary course when due,
as provided in sec. 306.37 (b). If any coupons which should be attached are
missing, the bonds must be accompanied by a remittance in an amount equal to
the face amount of the missing coupons. Specific signed instructions for the
exchange must accompany the bonds presented. (Form PD 1642 may be used.)
The new registered bonds will bear interest from the interest payment date next
preceding the date on which the exchange is made.
SEC. 306,22. Denominational exchanges of coupon securities.—Coupon securities
presented for denominational exchange should have all matured coupons detached.
All unmatured coupons should be attached, except that unmatured coupons which
would mature before the exchange could be completed (allowing for time in
transit) should also be detached. If any coupons which should be attached are
missing, the securities must be accompanied by a remittance in an amount equal
to the face amount of the missing coupons. Specific signed instructions for the
exchange must accompany the bonds presented. (Form PD 1827 may be used.)
The new coupon securities will have all unmatured coupons attached and all
matured coupons detached.
SUBPART D
REDEMPTION OR PAYMENT
SEC. 306.25. General.—Bonds, notes, certificates of indebtedness, and Treasury
bills, whether in registered or bearer form, are payable in due course at maturity
unless they may be and are called for redemption before maturity, in which case
they will be payable on the redemption date fixed in the call. The Secretary of
the Treasury may provide for the exchange of maturing or called securities for
new securities. Instructions with respect to the presentation and surrender of
the securities, the assignment or request for payment of registered securities, the
adjustment of interest, if necessary, and other details of the transaction will be
set forth in the circular authorizing the exchange. Bonds, which, according to
their terms, are acceptable for redemption at par and application of the proceeds
in payment of Federal estate taxes will be accepted for that purpose upon compliance with the provisions of sec. 306.28.^ Registered bonds to be submitted
3 Treasury savings notes to be presented in payment of Federal income, estate, or gift taxes should be forwarded to the District Director of Internal Revenue or deposited with a Federal Reserve Bank or branch
and a receipt obtained therefor which should be forwarded to the District Director in lieu of the notes.
. EXHIBITS
195
for redemption should be presented and surrendered to a Federal Reserve Bank
or branch or to the Bureau of the Public Debt, Division of Loans and Currency,
Washington 25, D. C. Except as otherwise provided in sec. 306.28, bearer securities should be presented and surrendered to a Federal Reserve Bank or branch
or the Treasurer of the United States, Washington 25, D . C . If a bearer security,
or a registered security assigned to bearer or so assigned as to become, in effect,
payable to bearer, is presented and surrendered for redemption after it has become
overdue, the Secretary of the Treasury may require satisfactory proof of ownership. A security shall be considered overdue within the meaning of the foregoing
provision after the lapse of the following periods of time from its face maturity
date:
(a) One year in the case of bonds.
(b) Six months in the case of Treasury notes and certificates of indebtedness.
(c) Three months in the case of Treasury bills.
SEC. 306.26. Redemption of registered bonds at maturity or upon prior call.—Registered bonds of any loan and issue which have become due and payable,
whether at maturity or pursuant to call for redemption before maturity, are payable in due course upon presentation and surrender, properly assigned in accordance with subpart F. Assignments for this purpose should be made to "The
Secretary of the Treasury for redemption," unless the assignor desires that
payment be made to some other person, in which case assignments should be
made to "The Secretary of the Treasury for redemption for the account
of
," inserting the name and address of the person to whom
payment is to be made. Assignments in blank or other assignments having similar effect will be accepted, but should be used with caution, see sec. 306.42. Specific instructions for the issuance and delivery of the redemption check, signed by
the owner or his authorized representative, must accompany the bonds, unless
included in the assignment. (Form PD 1705 may be used.) Payment will be
made by check drawn on the Treasurer of the United States to the order of the
person entitled and mailed in accordance with the instructions received. Interest
payable on the maturity date, or call redemption date unless otherwise provided
in the notice of call, will be paid with the principal to the person entitled in
accordance with the assignments on the bonds surrendered.
SEC. 306.27. Redemption qf bearer securities at maturity or upon prior call.—All
interest coupons due and payable on or before the date of maturity or date fixed
in the call for redemption before niaturity, as the case may be, should be detached
from coupon securities presented for redemption and should be collected separately
in regular course. All coupons bearing dates subsequent to a date fixed in a call
for redemption should be left attached to the securities, as, if any such coupons
are missing the full face amount thereof will be deducted from the payment to be
made upon redemption unless evidence satisfactory to the Treasury Department is
submitted, establishing that they have been destroyed. Any amounts so deducted will be held in the Treasury to provide for adjustments or refunds in the
event that the missing coupons should be subsequently presented or their destruction is later satisfactorily established. In the absence of other instructions payment of bearer securities will be made by check drawn to the order of the person
presenting and surrendering the securities and mailed to him at his address, as
given in the advice which should accompany the securities. (Form PD 1704
may be used for the advice.) A Federal Reserve Bank, upon appropriate request,
may make payment to a member bank from which bearer securities are received
by crediting the amount in the member bank's account.
SEC. 306.28. Optional redemption of Treasury bonds at par (before maturity or
call redemption date) and application of proceeds in payment of Federal estate
taxes.—(a) General.—Treasury bonds of certain issues are redeemable at par and
accrued interest upon the death of the owner, at the option of the representatives
of, or persons entitled to, his estate, for the purpose of having the proceeds applied
in payment of the Federal estate taxes on the decedent's estate, in accordance
with the terms of the offering circulars cited on the face of the bonds.^ All bonds
to be redeemed for this purpose must be presented and surrendered to a Federal
Reserve Bank or branch or the Bureau of the Public Debt, Division of Loans
and Currency, Washington 25, D. C. They must be accompanied by Form PD
1782, fully completed and duly executed by the representatives of or persons entitled to the estate, and by proof of their appointment or entitlement. Proof of
appointment or entitlement should comply with the provisions of subpart H.
4 A current list of eligible issues may be obtained from any Federal Reserve Bank or branch or the Bureau
of the Public Debt.
196
195 5 REPORT OF THE SECRETARY OF THE TREASURY
Registered bonds must be properly assigned in accordance with subpart F to
"The Secretary of the Treasury for redemption, the proceeds to be paid to the
District Director of Internal Revenue at
for credit on Federal
estate taxes due from the estate of
, deceased." Redemption
will be made at par plus accrued interest from the last preceding interest payment
date to the date of redemption, except that if registered bonds are received by a
Federal Reserve Bank or branch or the Bureau of the Public Debt within one
nionth preceding an interest payment date for redemption before that date a
deduction will be made for interest from the date of redemption to the interest
payment date, and a check for the full 6 months' interest will be paid in due course.
The proceeds of redemption will be deposited to the credit of the District Director
of Internal Revenue designated in Form PD 1782, the representatives of the estate
will be notified of the deposit, and the District^Director will in due course forward
a formal receipt for the payment.
(b) Conditions.—The bonds presented for redemption under this section ihust
have (1) been owned by the decedent at the time of his death and (2) thereupon
constituted part of his estate, as determined by the following rules (which are
established for the purposes of this section) in the case of partnership, coownership
and trust holdings:
(i) Partnership holdings.—Bonds held at the time of the decedent's death
by a partnership in which he had an interest will be deemed to have met the
above conditions to the extent of the fractional share of the bonds so held
proportionate to his interest in the assets of the partnership.
(ii) Coownership holdings.—Bonds held by the decedent at the time of his
death in coownership with another person or persons will be deemed to have
met the above conditions to the extent to which they actually became the
property of the decedent's estate. They will also be deemed to have met
those conditions in an amount not to exceed the aniount of the Federal estate
tax which the surviving coowner or coowners as such are required to pay.
(iii) Trust holdings.—Bonds held in trust at the time of the decedent's
death will be deem.ed to have met the above conditions in an amount not to
exceed: the amount of the Federal estate tax which the trustee as such is
required to pay under the ternis of the trust instrument or otherwise; or, if
the trust actually terminated in favor of the decedent's estate, the amount of
such tax due from the estate.
(c) Restriction on amount redeemable; transactions after death of owner.—The
face amount of the bond or bonds which may be accepted for redemption at par,
plus any accrued interest thereon, may not exceed the amount of the tax due.
The entire proceeds of redemption of bonds at par, including, any accrued interest,
must be applied in payment of the Federal estate tax, but if the bond or bonds
available are in excess of the amount needed in payment of the tax and are not in
the lowest authorized denominations, they m.ay be exchanged for bonds of lower
denominations in accordance with sec. 306.17 or sec. 306.22, as applicable, in
order that the maximum amount may be selected for redemption at par. In
addition to such denominational exchange, other transactions in bonds owned
by the decedent and constituting part of his estate which may be conducted after
the death of the owner without affecting the eligibility of the bonds for redemption
at par, if no change of ownership is involved, include (1) exchange of registered
bonds for coupon bonds, (2) transfer to the names of the representatives of his
estate, and (3) exchange of coupon bonds for bonds registered in the names of
the representatives of the estate, but all such transactions must be explained on
Form PD 1782 or in a supplemental statenient.
SUBPART E—INTEREST
SEC. 306.35. Computation of interest.—(a) Treasury bonds, notes, and certificates
of indebtedness.—The interest on Treasury bonds, Treasur}^ notes, and Treasury
certificates of indebtedness accrues and is payable on a quarterly, semiannual,
or annual basis. Quarterly, semiannual, or annual interest periods of exactly
3, 6, or 12 nionths, as the case may be, are used as the basis for computing the
amount of the interest accruals. The offering circular and the text of the securities
will state on which of these bases the interest accruals on a specific issue are to be
computed. If the period of accrual is an exact 3, 6, or 12 months, the interest
accrual is an exact one-quarter, one-half, or one full year's, interest, without regard
to the number cf days in the period. If the period of accrual is less than an exact
3, 6, or 12 nionths, the accrued interest is computed by determining the daily rate
EXHIBITS
197
of accrual on the basis of the exact number of days in the full interest period, and
m.ultiplying the daily rate by the exact number of days in the fractional period
for whicii interest has actually accrued. A full interest period does not include
the day as of which the securities were issued or the day on which the last preceding interest becam.e due, as the case may be, but does include the day on which
the next succeeding interest paym.ent is due. A fractional part of an interest
period likewise does not include the day as of which the securities were issued or
the day on which the last preceding interest payment became due, but does
include the day as of which the transaction terminating the accrual of interest is
effected. The 29th of February in a leap year is included whenever it falls within
either a full interest period or a fractional part thereof. The Appendix contains
a complete explanation as to the method of computing the interest on Treasury
bonds, notes, and certificates of indebtedness in any given situation, as well as
tables for convenience in making such computations. The Appendix also outlines
the method of computing the discount rate on Treasury bills.
(b) Treasury savings notes.—Interest accrues on Treasury savings notes each
month and is paid with the principal upon redemption. The amount of each
nionthly accrual from the date of issue to maturity is specified in the offering
circular and is printed on the reverse of each note. If redemption prior to maturity is made on an interest accrual date, interest will be paid through that date;
otherwise, interest will be paid to and including the interest accrual date next
preceding the redemption date. If the purchase price of notes is received and
deposited on any day after the issue date, interest on such deferred payment is
collectible from the purchaser for the actual number of days from but not including
the issue date to and including the date the payment is received and deposited.
The amount of interest collectible for each day payment is deferred is determined
by dividing the amount of the initial monthly interest accrual by the number of
days in the initial monthly accrual period, which may be 28, 29, 30, or 31.
SEC. 306.36. Termination of interest.—Securities will cease to bear interest on
the date of their maturity unless they have been called for redemption prior to
maturity in accordance with their terms, in which case they will cease to bear
interest on the date fixed for redemption in the call.
SEC. 306.37. Interest on registered bonds.—(a) Method of payment.—Except as
otherwise provided herein, the interest on registered Treasury bonds is payable
by checks drawn on the Treasurer of the United States to the order of the respective registered owners. Interest checks are prepared by the Department in advance of the interest paj^ment date and are ordinarily mailed in time to reach
the addressee on that date. Upon receipt of notice of the death or incompetency
of a registered owner, the removal, resignation or death of a fiduciary or trustee,
or a change in name or status Of a partnership, corporation (whether as owner,
fiduciary or beneficiary), or unincorporated association, delivery of outstanding
interest checks on all outstanding bonds will be withheld pending receipt and
approval of proper evidence showing who is entitled to receive the interest checks.
To facilitate the delivery and endorsement of checks, reissue of the bonds in the
names of successors in title is strongly urged. In case of a major error in the
inscription of the bonds, delivery of interest checks likewise will be withheld
pending reissue of the bonds in the correct registration. (See sec. 306.13.)
The final installment of interest will be paid with the principal and in the same
manner, at maturity or upon call, unless otherwise provided in the notice of call.
(b) Closing of transfer books.—The transfer books of the Treasury Department
are closed for one full month preceding interest payment dates for the purpose
of preparing interest checks. .If the date set for the closing of the transfer books
falls on Saturday, Sunday, or a legal holiday, the books will be closed at the close of
business on the last business day preceding that date. Interest on outstanding
registered bonds is paid on the interest payment date to the owners of record on
the closing dates. Transactions in registered bonds of the loans involved, other
than denominational exchanges (see sec. 306.17), may not be effected during the
closed period, except that exchanges of 2% percent Treasury Bonds, Investment
Series B-1975-80, for the current series of EA or EO l}i percent 5-year Treasury
notes, as provided in sec. 306.20, or optional redemption of bonds at par as provided in sec. 306.28, may be made at any time. If registered bonds forwarded
for transfer or for exchange for coupon bonds or coupon bonds forwarded for
exchange for registered bonds are actually rece^ived by the Bureau of the Public
Debt after the day fixed for closing the books, the transfer or exchange thereof
will not be made until the first business day following the date on which interest
falls due, when the books are reopened for all purposes.
198
195 5 REPORT OF THE SECRETARY OF THE TREASURY
(c) Change of address.—Notice of a change of address for the mailing of interest
checks may be given on Form PD 345, or, if that form is not available, by letter,
to the Bureau of the Public Debt, Division of Loans and Currency, Washington
25, D. C. In addition to the new address, the notice must contain sufficient
information to identify the account, including the old address, the serial number
and denomination of each bond, the title of the loan or loans (for example, 2}^
percent Treasury bonds of 1967-72, dated October 20, 1941), and the name of
the owner as inscribed on each bond. The notice must be signed by the registered
owner or his recognized representative. In the case of bonds registered in a trade
name under which an individual does business, the notice must be signed by him
in substantially the following form: "Doe's Home Appliance Store, by (signed)
John Doe, sole owner." Notices on behalf-of partnerships must be signed by
general partners, in substantially the following form: "Smith & Brown, a partnership by (signed) Charles J. Smith, a general partner." Notices on behalf of
corporations, unincorporated associations, and corporate fiduciaries must be signed
by authorized officers, in substantially the following forms: "Smith Manufacturing Company, a corporation, by (signed) Charles J. Smith, Vice President";
"Local Union No. 100, Brotherhood of Locomotive Engineers, by (signed) James
W. Henderson, Treasurer"; and "Citizens Trust Company of
,
trustee under the will of Richard Coleman, by (signed) Albert H. Stone, Trust
Officer." Notices by legal representatives of the estates of deceased, incompetent
or minor owners, or by attorneys in fact, must be supported by proof of their
appointment, except in the case of legal representatives of such estates who are
nartied in the registration. (See sees. 306.65, 306.58 (b), 306.57 (d), and 306.59,
respectively.) A registered owner may direct that interest checks be sent in
care of an attorney in fact, at the latter's address, without submitting the power
of attorney to the Department. Notices by testamentary trustees with respect
to bonds registered in the names of decedents must be supported by proof of the
distribution of the bonds to them in the settlement of the decedents' estates.
(See subpart H.) If there are two or more individual coowners, legal representatives, attorneys in fact or fiduciaries, a notice signed by one will be accepted
unless another gives conflicting instructions. Notice should be given as promptly
as possible in order to allow sufficient time for the account to be identified and the
address changed before the next interest checks are prepared. If notice is not
received at least 6 weeks before the interest payment dates, no assurance can be
given that the checks will be mailed to the new address.
(d) Endorsement of interest checks in general.—Interest checks may be collected
upon the endorsement of the payee or his authorized representative, in accordance
with the regulations governing the endorsement and payment of Government warrants and checks, which are contained in Department (Circular No. 21, Revised, as
amended. In the case of checks drawn to the order of two or more persons, if " o r "
is used between the names, provision is made for endorsement by any one payee.
If "and" is used, endorsement must be by or on behalf of all while all are living.
Provision is also made for the acceptance of an endorsement by an attorney in fact
for the payee, upon the guarantee of the presenting bank, without requiring that a
copy of the power of attorney be submitted to the Department. See sec. 306.69
for special provisions applicable to small amounts of interest checks belonging to
the estates of decedents.
(e) Endorsement of interest checks by voluntary guardians of incompetents.—Any
checks drawn to the order of an incompetent (as defined in sec. 306.58 (a)) for
whose estate no legal guardian or similar legal representative has been or is to be
appointed, in payment of interest on bonds registerd in the name of the incompetent, without reference to a voluntary guardian, should be returned to the Bureau of the Public Debt, Division of Loans and Currency, Washington 25, D. C ,
with a full explanation of the circumstances. If the total face amount of United
States bonds registered in the name of the incompetent on which interest is paid
currently does not exceed"$5,000, the relative responsible for the incompetent's
care and support, or some other proper person, may apply on Form PD 1461 for
authorization to collect the interest. To facilitate the collection of future interest
checks, the applicant may also request the reissue of the bonds in the name of the
incompetent, followed by that of the voluntary guardian, in the form "A, an incompetent under voluntary guardianship of B."
(f) Endorsement of interest checks by natural guardians of minors.—Any check in
payment of interest on bonds registered before the effective date of these regula-
EXHIBITS
199
tions in the name of a minor, alone or as coowner, who is not of sufficient age and
competency to understand the act of endorsing and giving receipt may be endorsed
by either parent with whom the minor resides, or, if the minor does not reside with
either parent, by the person who furnishes his chief support. The parent or other
person should present with the check a written statement (1) giving the minor's
age, (2) setting out the fact that the payee resides with the parent or receives his
cliief support from the person endorsing in his behalf, and (3) that the proceeds of
the check will be used for the minor's benefit, as provided in Section 7 (c) of Department Circular No. 21, Revised, as amended.
(g) Nonreceipt, loss, theft or destruction of interest checks.—If an interest check is
not received within a reasonable period after an interest-payment date, or if a
check is lost, stolen, or destroyed after receipt, the fact of nonreceipt, loss, theft,
or destruction should be reported to the Bureau of the Public Debt, Division of
Loans and Currency, Washington 25, D. C. This notification should include a description by loan, issue, serial number, denomination, and inscription of the
securities upon which the interest check was due. If the check is subsequently
received or recovered, advice to that effect should be sent to the Treasurer of the
United States, Washington 25, D. C. Substitutes for lost interest checks may be
obtained upon compliance with the Treasury Department regulations, as set forth
in Department Circular No. 327, Revised.
SEC. 306.38. Interest on bearer securities.—Interest on coupon securities is payable upon presentation and surrender of the interest coupons as they mature.^
Interest on Treasury bills and any other bearer securities which may be issued on a
discount basis is represented by the difference between the issue price and the
maturity value. Interest on other bearer securities is payable with the principal
at maturity, in accordance with the terms of the securities. Interest coupons are
payable at the Office of the Treasurer of the United States at Washington or at any
Federal Reserve Bank or branch. Banking institutions will usually cash interest
coupons without charge as an accommodation to their customers.
SUBPART F—ASSIGNMENTS OF REGISTERED
BONDS—GENERAL
SEC. 306.40. Execution of assignments.—The assignment of a registered bond
must be executed by the owner or his authorized representative in the presence
of an officer authorized to witness the assignment. (See sec. 306.43.) The assignor must establish his identity to the satisfaction bf the witnessing officer.
An assignment by mark (X) must be witnessed not Only by a witnessing ofiScer
but also by at least one other person, who should add an endorsement substantially as follows: "Witness to the above signature by mark," followed by his
signature and address. All assignments must be correctly dated and all signatures must be in ink or indelible pencil.
SEC. 306.41. Assignment forms.—Unless otherwise directed by the Treasury
Department or a Federal Reserve Bank, all assignments must be made on the
backs of the bonds. Where all the assignment forms on the back of a bond have
been used or spoiled and further assignment is to be made, a similar form, including the witnessing officer's certificate, may be written, typed, or stamped in any
convenient space on the back of the bond. If there is not sufficient space for an
additional form, in any particular case, instructions may be obtained from the
Bureau of the Public Debt, Division of Loans and Currency, Washington 25, D. C ,
or any Federal Reserve Bank or branch.
SEC. 306.42. Form of assignment.—Assignments of registered bonds may be
made to a specified transferee, to the Secretary of the Treasury for exchange for
coupon bonds, to the Secretary of the Treasury for redemption or for exchange
for other securities offered at maturity or upon call, or in blank, as provided in
subparts C and D. Assignments to "The Secretary of the Treasury," "The Secretary of the Treasury for transfer," or "The Secretary of the Treasury for exchange" will not be accepted, unless supplemented by specific instructions signed
by the assignor. Assignments in blank or to the Secretary of the Treasury for
exchange for coupon bonds which do not restrict delivery of the coupon bonds to
a designated person destroy the protection of registration and should be avoided
unless it is desired to make the registered bonds, in effect, payable to bearer,
whereby title thereto may pass by delivery without further assignment.
5 For information concerning any relief possible on account of the loss, theft, destruction, mutilation, or
defacement of detached interest coupons, see sec. 306.115.
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195 5 REPORT OF THE SECRETARY OF THE TREASURY
SEC. 306.43 Officers authorized to witness assignments.—(a) Officers authorized
generally.—The following oflEicers are authorized to witness assignments:
(1) Certain designated officers of the United States Treasury at Washington,
D. C.
(2) Judges and clerks of United States courts.
(3) United States attorneys, collectors of customs, and regional commissioners and district directors of internal revenue.
(4) Officers of Federal Reserve Banks and their branches. (See sec. 306.1
for locations.)
(5) Officers of Federal land banks. Federal intermediate credit banks, production credit corporations, and banks for cooperatives, all located in Springfield (Mass.), Baltimore, Columbia (S. C ) , Louisville, New Orleans, St. Louis,
St. Paul, Omaha, Wichita, Houston, Berkeley, and Spokane, and the Central
Bank for Cooperatives, Washington, D. C.
(6) Oflficers of Federal Home Loan Banks, located in Boston, New York,
Pittsburgh, Greensboro (N. C ) , Cincinnati, Indianapolis, Chicago, Des Moines,
Little Rock, Topeka, and San Francisco.
(7) Officers of banks and trust companies chartered by or incorporated under
the laws of the United States or those of any State, commonwealth, or Territory
of the United States who have been authorized generally to bind their respective institutions by their acts, and other oflficers of such corporations who may
be specially authorized by their respective institutions to witness such assignments.
If an assignment is witnessed, under the corporate seal of an institution designated
in item (7) above, by the chairman of the board, the president, the assistant to
the president, any vice-president or assistant vice-president, the cashier or any
assistant cashier, the secretary or anj^ assistant secretary, the treasurer or any
assistant treasurer, any trust or assistant trust officer, or the manager or any
assistant manager of a. branch office, it will be presumed that he was acting within
the scope of his authority. If any officer so authorized is not one of those designated in the preceding sentence or does not have access to the seal of the corporation, his signature and authority must be certified to the Treasury Department,
under corporate seal, by the cashier, secretary, or other oflficer having access to
the corporate records and will be recognized until notice is received that his
authority has terminated. (Form PD 835-B may be used.) The term "oflficers"
will not be construed as including employees bearing such titles as "designated
employee," "teller," "accountant" or "bookkeeper."
(b) Officers having limited authority.—The following officers are authorized to
witness assignments to the extent set forth in connection with each class of officers:
(1) Postmasters, acting postmasters, assistant postmasters, and inspectorsin-charge at any post oflice, arid general superintendents of finance, assistant
general superintendents of finance, superintendents of postal finance, and superintendents of money orders at offices designated to receive postal savings deposits
but only for assignments of postal savings bonds for any authorized transaction
and assignments of securities of any class for redemption for the account of the
assignor or for redemption-exchange for securities to be registered in his name.
(2) Notaries public and justices of the peace in the United States, its Territories, or the Commonwealth of Puerto Rico for assignments of securities of
any class for redemption for the account of the assignor or for redemptionexchange for securities to be registered in his name.
(3) Commissioned officers and warrant officers of the Armed Forces of the
United States for assignments of bonds of any class for any authorized transaction, but only with respect to assignments executed by (a) Armed Forces
personnel and civilian field employees, and (b) members of the families of such
personnel or civilian employees.
(4) Officers of Federal Savings and Loan Associations or other organizations
which are members of the Federal Home Loan Bank System who have been
authorized generally to bind their respective organizations by their acts, under
the corporate seal, for assignments by the organizations or any of their regular
customers of bonds of any class for any authorized transaction.
If an assignment is witnessed, under the corporate seal of an organization designated in item (4) above, by the chairman of the board, the president, any vicepresident, the secretary or any assistant secretary, or the treasurer, it will be
presumed he was acting within the scope of his authority.
EXHIBITS
201
(c) Authorized officers in foreign countries.—The following officers are authorized
to witness assignments in foreign countries:
(1) United States diplomatic or consular representatives.
(2) Managers, assistant managers, and other officers of foreign branches of
banks or trust companies chartered by or incorporated under the laws of the
United States.
(3) Notaries public and other officers authorized to administer oaths; the
official position and authority of any such officer must be certified by a United
States diplomatic or consular representative under the seal of his office.
(d) Special provisions for witnessing assignments.—The Commissioner of the
Public Debt, the Chief of the Division bf Loans and Currency, or any Federal
Reserve Bank is authorized to make special provisions for any case in which
none of the officers authorized to witness certain assignments is readily accessible.
SEC. 306.44. Duties of witnessing officers and responsibility for their acts.—
l.'he assignor must appear before the witnessing officer, satisfactorily establish his
identity, execute the assignment, and acknowledge it to be his free act and deed.
The officer must complete the certification provided, by inserting the date, his
signature, and his official title and address, and must impress or imprint the
proper seal or stamp, if any. An officer of a corporation must use the corporate
seal except as provided in sec. 306.43 (a) (7). A clerk or judge of court must use
the seal of the court. The signature of any post office official, other than a postmaster, must be in the following form "John Doe, Postmaster, by Richard Roe,
Superintendent of Money Orders." Any post office official must use the official
stamp of his office. Any other witnessing officer must use his official seal or stamp,
if any, but, if he has neither, his official position and a specimen of his signature
must be certified by some other authorized officer under official seal or stamp or
otherwise proved to the satisfaction of the Treasury Department. No officer of
the United States, except a clerk of a United States court, is authorized to charge
a fee for witnessing an assignment of a United States bond, and banking institutions generally impose no charge for the service. The witnessing officer, and, if
he is an officer of a corporation, the corporation, will be held responsible for any
loss which the United States may suffer as the result of his fault or negligence.
SEC. 306.45. Assignments executed before interested persons.—Neither the assignor, the assignee, nor any other person having an interest in a bond may act
as witnessing officer or as witness to an assignment by mark. For example, the
officer of a bank who assigns in the bank's name may not witness the assignment.
However, a bank officer may witness an assignment to the bank, or an assignment
executed by another officer in its behalf.
SEC. 306.46. Assignments by assignees and other new owners.—The regulations
governing assignments by or in behalf of registered owners, so far as applicable,
shall govern any assignments by their assignees or legal successors.
SEC. 306.47. Alterations and erasures.—No alteration or erasure should be
made in any part of an assignment. If any such alteration or erasure has been
made, an explanation satisfactory to the Treasury Department, usually in the
form of an affidavit by the person responsible, will be required.
SEC. 306.48. Voidance of assignments.—If an assignment tb or for the account
of another person has not been and is not to be completed by delivery of the
security, the assignment may be voided by obtaining a disclaimer of interest from
that person. Unless otherwise directed by the Treasury Department or a Federal
Reserve Bank the disclaimer must be written, typed, or stamped on the back of
the bond; in substantially the following form:
The undersigned as assignee of this bond hereby disclaims any interest
therein.
(Signature)
Personally appeared before me the above-named
,
whose identity is known or proved to me, and signed the above disclaimer of
interest, acknowledging the same to be his free act and deed.
(Signature of witnessing officer)
(SEAL)
(Official designation)
~'
^Ci'ty)"
^(Sta"te)
"(Dat'e)"
In the absence of a disclaimer, affidavits should be submitted explaining why a
disclaimer could not be obtained, setting forth all other material facts and circumstances relating to the transaction, and stating specifically that the bond
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195 5 REPORT OF THE SECRETARY OF THE TREASURY
was not delivered to the person named as assignee and that he acquired no right,
title, or interest in the bond. If an assignment to or for the account of another
person was not properly witnessed or is otherwise imperfect, but has been completed by delivery, it cannot be considered void and must not be altered or erased.
A new assignment must be executed in favor of the same assignee, unless the
assignment can otherwise be perfected as directed bj'- a Federal Reserve Bank or
the Treasury Department.
SEC. 306.49. Discrepancies in names.—(a) Inscription and assignment or supporting evidence.—Where there is a slight discrepancy between the name of the
registered owner as inscribed on the bond and as shown in the assignment or
supporting evidence, the Department may require that it be explained by an
affidavit by another person familiar with the facts, preferably one having no
direct financial interest in the bond. (Fiduciaries may use Form PD 385 for
this purpose and other persons may use it as a guide in preparing their affidavits.)
(b) Signature and supporting evidence.—Where a slight discrepancy exists
between the signature of any person acting in a representative or fiduciary capacity
as it appears in the assignment and his name as it appears in the certificate of
appointment or other evidence of authority, the Department may require that
it be explained by an affidavit by another person familiar with the facts, preferably one having no direct financial interest in the security.
(c) Bonds variously inscribed.—Where the variations in the name of the registered owner, as inscribed on bonds of the same or different issues, are such that
both may properly represent the same person, for example, "J. T. Smith" and
"John T. Smith," no proof of identity will be required if the assignments are
signed exactly as the bonds are inscribed and are duly certified by the same
witnessing oflficer.
SEC. 306.50. Nontransferable securities.—The provisions of this subpart, with
the exception of those of sees. 306.42 and 306.48, shall apply to 2^^ percent
Treasury Bonds, Investment Series B-1975-80, and Treasury savings notes,
provided, that sec. 306.46 shall apply with respect to assignments of the bonds or
requests for payment or reissue of the notes only in the case of legal successors.
In applying these provisions to Treasury savings notes appropriate substitutions
in terms should be made, as follows: "Note(s)" or "Treasury savings note(s)"
for "bond(s)" or "registered bond(s)"; "request(s) for payment or reissue" for
"assignment(s)"; "requestor(s)" for "assignor(s)"; "certify" for "witness"; and
"certifying officer" for "witnessing officer."
SUBPART G
ASSIGNMENTS BY OR IN BEHALF OF INDIVIDUALS
SEC. 306.55. Signature, minor errors, and change of name.—The registered
owner's signature to an assignment should be in the form in which his or her
name has been inscribed on the face of the bond, unless the name as so inscribed
was incorrect or has been changed since the bond was issued. In case of a minor
error in inscription (not sufficient to raise any doubt in the rnind of the witnessing
officer in regard to the identity of the owner), the signature to the assignment
should be in the following form, for example, "John Smythe, erroneously inscribed John Smith." In case of a more serious error in inscription, the procedure prescribed in sec. 306.13 should be followed. In case of a change in name,
the signature to the assignment should show both names and the manner in which
the change was made, for example, "Mrs. Mary Brown, before marriage Miss
Mary Jones," or "John Young, formerly John Jung (changed by court order)."
In all cases involving change of name satisfactory proof of the change will be
required, except that no proof of change of name by marriage will be required if
an authorized officer duly witnesses the assignment, thereby certifying that he is
satisfied the assignor is the registered owner.
SEC. 306.56. Assignment of bonds registered in the names of two or more persons.—
(a) For transfer or exchange.^—The transfer or exchange of bonds registered in
the names of two Or more persons may be made during the lives of all the coowners only upon assignments by all of them or in their behalf by authorized
representatives. Upon proof of the death of one of the coowners, the Treasury
Department will accept an assignment by or in behalf of the survivor or survivors, unless the registration includes words which preclude the right of sur8 It should be kept in mind that, unlike United States savings bonds, which are virtuaUy redeemable on
demand, transferable securities are redeemable only at maturity or upon prior call by the Secretary for
redemption. Before maturity or call for redemption a transferable bond may be "cashed" by sale, either
through a bank or broker or direct to a purchaser. In either case the bond must be assigned in accordance
with these regulations.
EXHIBITS
203
vivorship, or the words "or either of them," in which case, in addition to an assign
ment by or in behalf of the survivor or survivors, an assignment in behalf of the
decedent's estate will be required.
(b) For redemption or redemption-exchange (registration in alternative).—Bonds
registered in the names of two or more persons in the alternative, as for example,
"John Smith or Mrs. Mary Smith," or "John Smith or Mrs. Mary Smith or the
survivor," may be assigned by one coowner, at maturity or upon call, for redemption or redemption-exchange (as defined in sec. 306.2 (7)), for his own account or
otherwise, whether or not the other coowner or coowners are deceased and, if so,
whether or not the Treasury has received notice of their deaths. This provision
also applies to bonds registered in the form "John Smith and Mrs. Mary Smith or
either of them."
(c) For redemption or redemption-exchange (joint registration).—Bonds registered
in the names of two or more persons jointly (as distinguished from bonds registered
in their names in the alternative), as, for example, "John Smith and Mrs. Mary
Smith," "John Smith and Mrs. Mary Smith or the survivor," or "John Smith and
Mrs. Mary Smith as tenants in common," may be assigned by one coowner during
the lives of all only (1) for redemption at maturity or upon call (and then only for
redemption for the account of all coowners) or (2) for exchange for new bonds to be
registered in their names in the same registration if new registered bonds are
offered in exchange for the maturing or called bonds. Upon proof of the death of
one coowner the survivor or survivors may assign bonds so registered for redemption or for redemption-exchange for any account, except that, if the words "as
tenants in common" or other words having the same effect appear in the registration, assignment in behalf of the decedent's estate will also be required.
SEC. 306.57 Minors.—(a) Assignments by natural guardians of bonds registered
in the names of minors.—Bonds erroneously registered after the effective date of
these regulations in the name of a minor (whether alone or followed by the name
of a natural guardian) for whose estate no legal guardian or similar representative
has been appointed by a proper court or is otherwise legally qualified will be reissued in the name of a natural guardian of the minor (see sec. 306.11 (2)), upon the
request of the purchaser or other person responsible for the error. If the requirements to support such reissue are met, but other disposition is desired, actual
reissue will be unnecessary and the bonds may be assigned by the natural guardian
in accordance with the provisions of subsection (b) of this section. Bonds so
registered in the name of a minor before the effective date of these regulations
may be assigned by a natural guardian of the minor only for the purposes and
under the conditions described below:
(1) For exchange or redemption, if the total face amount of the Treasury
bonds so registered does not exceed $1,000, and if satisfactory proof is furnished
that the proceeds of the bonds are necessary and will be used for the support or
education of the minor.
(2) For redemption, if the total face amount of called or matured Treasury
bonds so registered does not exceed $500 and the minor registered owner is not of
sufficient age and competency to sign his name to the assignnients and understand the nature of the transaction.
(3) For redemption for reinvestment in other transferable bonds to be registered in the minor's name, if the total face amount of bonds so registered exceeds
$500 or if such amount does not exceed $500 but the minor is not of sufficient age
and competency to sign his name and understand the nature of the transaction.
For cases arising under (1), (2), or (3) above, Form PD 2481 should be used.
(b) Assignments by natural guardians of bonds registered in their names.—Bonds
registered after the effective date of these regulations in the name of a natural
guardian of a minor may be assigned by the designated natural guardian for any
authorized transaction except one for the apparent benefit of the natural guardian.
The signature to the assignment should be written as the bonds are inscribed,
for example, "John Jones as natural guardian of Henry Jones, a minor." If the
natural guardian in whose name the bonds are registered is deceased or is no
longer qualified to act as natural guardian, the bonds may be assigned by the
person then acting as natural guardian. The assignment by the new natural
guardian must be supported by proof of the death or disqualification of the former
natural guardian and by satisfactory proof of his own status as natural guardian.
Proof of such status may be established through the use of Form PD 2481. No
assignment by a natural guardian will be accepted after receipt of notice of the
minor's attainment of majority or removal of his disability of minority, the dis-
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1955 REPORT OF THE SECRETARY OF THE TREASURY
qualification of the natural guardian to act a;s such, the appointment of a legal
guardian by a proper court, or the death of the minor.
(c) Assignments by minors.—Bonds registered, before the effective date of these
regulations, in the name of a minor for whose estate no guardian or similar representative has been appointed by a proper court or is otherwise legally qualified,
may be assigned by the minor at maturity, or call for redemption, or redemptionexchange, for new bonds to be registered in his name, if the total face amount of
matured or called bonds so registered does not exceed $500, and if the minor, in the
opinion of the witnessing officer, is of sufficient age and competency to sign his
name to the assignments and understand the nature of the transaction. Payment
will be made by check drawn to the order of the minor.
(d) Assignments by legal guardians.—Bonds registered in the name of a minor
(whether alone or with a natural guardian) for whose estate a legal guardian or
similar representative has been appointed by a proper court or is otherwise legally
qualified may be assigned by the representative for any authorized transaction.
The assignment must be supported by a court certificate or a certified copy of the
letters of appointment issued by the court making the appointment, under its seal,
except that an assignment by the representative for his own apparent benefit must
be supported by the evidence required in sec. 306.80. The certificate or certification must be dated not more than one year before the date of the assignment and
must contain a statenient that the appointment is in full force unless (1) it shows
that the appointment was made not more than one year before the date of the
assignment or (2) the representative or a corepresentative is a corporation. All
corepresentatives must join in any assignment, except as provided in sec. 306.79.
An assignment by the representative will not be accepted after receipt of notice of
the termination of the guardianship, except for transfer to the former ward.
SEC. 306.58. Incompetents.—(a) Definition.—For the purposes of this section
an incompetent is defined as a person under any legal disability except minority.
(b) Assignments by legal guardians.—Bonds registered in the name of an incompetent for whose estate a legal guardian or similar representative has been appointed by a proper court or is otherwise legally qualified may be assigned by the
representative for any authorized transaction. The assignment must be supported
by a court certificate or a certified copy of the letters of appointment issued by the
court making the appointment, under its seal, except that an assignment by the
representative for his own apparent benefit must be supported by the evidence
required in sec. 306.80. The certificate or certification must be dated not more
than one year before the date of the assignment and must contain a statement
that the appointment is in full force, unless (1) it shows that the appointment was
made not more than one year before the date of the assignment or (2) the representative or a corepresentative is a corporation. All corepresentatives must join
in any assignment, except as provided in sec. 306.79. An assignment by the
representative will not be accepted after receipt of notice of termination of the
guardianship, except for transfer to the former ward.
(c) Assignments by voluntary guardians.—Bonds registered in the name of an
incompetent for whose estate no legal guardian or similar representative has
been appointed by a proper court or is otherwise legally qualified may be assigned
by the relative responsible for his care and support or some other proper person
as voluntary guardian:
(1) For exchange or redemption if the total face amount of United States
bonds so registered does not exceed $1,000 and the proceeds of the bonds are
necessary and will be used for the care or support of the incompetent or for the
support of his legal dependents; or
(2) For redemption if the bonds are matured or have been called and the
proceeds are to be reinvested in other securities to be registered in the incompetent's name followed by that of his voluntary guardian in the form "A, an
incompetent under voluntary guardianship of B" and if after completion of the
transaction, the total face amount of United States bonds registered in the name
of the incompetent on which interest is paid currently would not exceed $5,000.
An application on Form PD 1461 by the person seeking authority to act as
voluntary guardian will be required.
SEC. 306.59. Attorneys in fact.—Assignments by attorneys in fact for individual
owners or coowners will be recognized if supported by adequate powers of attorney.
The use of Form PD 1001 or 1002 is suggested but any form sufficient in substance may be used. Every power must be executed in the presence of an officer
authorized to witness assignments of the bonds for the desired transactions. A
power may be either general or specific, depending on whether the owner desires to
EXHIBITS
205
authorize execution of assignments of all his bonds assignable under these regulations or to limit the authority to bonds of designated issues or to certain designated
bonds. The original power must be filed with the Treasury Department, except
that a photocopy certified by an officer of a Federal Reserve Bank or branch, or
by an officer of a bank or trust company under its corporate seal, will be accepted,
if the seal on the original power is legible on the copy or is copied by the certifying
officer. An assignment by a substituted attorney in fact must be supported by an
appropriate power of substitution, which must be supported in turn by an appropriate authorizing power of attorney. The use of Form PD 1005, 1006, 1007, or
1008 (the particular form depending on whether the power is to be general or
specific and whether an individual or a corporation is to be named as attorney
in fact) is suggested but any form sufficient in substance may be used. An assignment by an attorney in fact or a substituted attorney in fact for the apparent
benefit of either will be accepted only if expressly authorized'in both the power of
attorney and power of substitution. A power of attorney or of substitution will
be recognized until, but not after (unless the power is coupled with an interest)
the Bureau of the Public Debt, Division of Loans and Currency, Washington 25,
D. C , receives proof of revocation or proof of the grantor's death or incompetency, except that a pending transaction will be temporarily suspended on
receipt of a request from the grantor of the power, by wire or otherwise, and
except further that the Secretary of the Treasury may require evidence in any
case that a power is still in full force at the time the Department is requested to
act under it. If there are two or more joint attorneys in fact or substitutes all
must .unite in the assignment unless the power authorizes less than all to act or
the bond has matured or been called, in which case less than all may assign for
redemption for the account of the bond owner or for redemption and application
of the proceeds in payment for new bonds offered in exchange to be registered in
the name of the owner.
SEC. 306.60. Nontransferable securities.—The provisions of this subpart, except
those of sees. 306.56 (a), 306.57 (a) (1) and 306.58 (c) relating to transfers, shall
apply to 2% percent Treasury Bonds, Investment Series B-1975-80, provided,
that the term "exchange" as used in sees. 306.56 (a), 306.57 (a) (1) and 306.58 (c)
(1) shall be deemed to refer to the exchange of these bonds for the current series
of 1}^ percent 5-year Treasury notes. The provisions of this subpart with respect
to assignments of bonds, except those of sec. 306.56 and those of sees. 306.57
(a) (1) and 306.58 (c) (1) relating to transfers or exchanges shall apply to requests
for payment or reissue of Treasury savings notes, provided, that the term "redemption" as used therein shall refer to redemption at or before maturity and provided further that the term "redemption" as used in sees. 306.57 (a) (2) and
306.58 (c) (2) shall refer to redemption at maturity.
SUBPART H
ASSIGNMENTS IN BEHALF OF ESTATES OF DECEASED
OWNERS
REGISTERED
SEC. 306.65. In course of adininistration.—A bond belonging to the estate of a
decedent which is being administered in a proper court by an executor or general
administrator will be accepted for any authorized transaction upon assignment
by the qualified representative of the estate. (For temporary or special administrators see see. 306.66.) Unless the bond is registered in the name and title of the
representative, the assignment must be supported by a court certificate of his
appointment or a certified copy of the letters of appointment, issued by the court
making the appointment, under its seal, except that an assignment by a representative for his own apparent benefit must be supported by the evidence required
in see. 306.80. The certificate or certification, if required, must be dated not
more than six months before the date of the assignment and must contain a statement that the appointment is in full force, unless (1) it shows that the appointment
was made not more than one year before the date of the assignment.or (2) the
representative or a corepresentative is a corporation. The proper form of signature to an assignment is, for example, "John A. Jones, administrator of the estate
(or, executor of the will) of Henry W. Jones, deceased." ^ All corepresentatives
must unite in any assignment except as provided in sec. 306.79. A bond registered
in the name of an executor or administrator may be reissued in the name of his
successor, upon the request of the designated representative or his successor,
supported by proof of successorship, without assignment.
SEC. 306.66. Temporary and special administrators.—The Treasury Department
will recognize assignments by temporary or special administrators for any author-
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195 5 REPORT OF THE SECRETARY OF THE TREASURY
ized transaction within the scope of their a u t h o r i t y under State law or t h e orders
of t h e court by which t h e y were appointed. If the a m o u n t of bonds presented
for a n y transaction does not exceed $250, the D e p a r t m e n t will presume t h a t it is
within t h e proper scope, a n d t h e assignments need be supported only by evidence
of t h e same n a t u r e as t h a t required in support of assignments by a general
administrator, as set forth in see. 306.65. If t h e a m o u n t of bonds presented
exceeds $250:
(1) Assignments b y a t e m p o r a r y administrator for redemption for his account
in his representative eapacity, or for redemption a n d appiieation of the proceeds
in p a y m e n t for new securities to be registered in his n a m e in his representative
capacity, m u s t be supported by a certificate of court under its seal showing t h a t
the a p p o i n t m e n t was in full force within 30 days preceding t h e date of receipt
of t h e bonds or the certificate, whichever is later, except t h a t , if a corporation
is t h e t e m p o r a r y administrator or coadministrator, a n y aeceptable court
evidence of a p p o i n t m e n t m a y be supplemented by a s t a t e m e n t by the corporation on its letterhead showing t h a t t h e a p p o i n t m e n t was in force within t h e
specified period;
(2) assignments by a t e m p o r a r y administrator for transfer or exchange
(including assignments for redemption for the account of the temporary
administrator individually or t h a t of a n y other person in a n y capacity) m u s t be
supported by a duly certified copy of a special order of court authorizing such
action;
(3) assignments by a special administrator m u s t be supported b y a duly
certified copy of a special order of court authorizing such action, unless it appears
from his letters of a p p o i n t m e n t or t h e s t a t u t e s under which the a p p o i n t m e n t
was made t h a t such action comes within the scope of his a u t h o r i t y , in which ease
it m u s t appear from evidence under the seal of the court, or from such evidence
a n d a supplemental s t a t e m e n t by a corporate administrator on its letterhead,
t h a t t h e a p p o i n t m e n t was in full force within six months preceding the date of
receipt of t h e securities or t h e evidence, whichever is later.
SEC. 306.67. After settlement through court proceedings.—Bonds belonging to t h e
estate of a decedent which has been settled in a proper court will be aceepted for
any authorized transaction upon assignments by the person or persons entitled,
as determined by t h e court. If one person is t h e sole legatee, or if specific bonds are
distributed to any one person, t h e bonds m a y be reissued in t h e n a m e of such
person upon instructions from him without assignment. T h e assignments or
instructions for reissue should be supported by a copy, certified under court seal,
of t h e decree of distribution, t h e representative's final aceount as approved by t h e
court, or similar court records.
S E C . 306.68. Without administration.—When it appears t h a t no legal representative of t h e estate to which bonds belong has been or is to be appointed, t h e
bonds m a y be disposed of in any authorized m a n n e r p u r s u a n t to a n agreement
a n d assignment by all persons entitled to share in t h e bonds under t h e laws of
t h e S t a t e of t h e decedent's domicile. (Use F o r m P D 1646.) All debts of t h e
decedent a n d his estate m u s t be paid or provided for and t h e interests of a n y
minors or incompetents in t h e estate m u s t be adequately protected to t h e satisfaction of t h e Secretary of t h e Treasury.
SEC. 306.69. Special provisions applicable to small amounts of securities, interest
checks, or redemption checks.—The right to, or t h e a u t h o r i t y to dispose of, a small
a m o u n t of publie d e b t securities and checks issued in p a y m e n t thereof or in p a y m e n t of interest thereon, belonging to t h e estate of.a decedent, may be established
t h r o u g h t h e use of certain short forms, according to t h e aggregate a m o u n t of
securities a n d cheeks (excluding checks representing interest on t h e securities)
involved in t h e ease, as indicated by t h e following table:
Amount
(dollars)
25
25
100
250
Circumstances
Estate being administered
No administration
Estate being administered
Estate settled
Form
PD
PD
PD
PD
2488-...
2216
2488---.
2458A...
To be executed b y Executor or administrator.
Heir or legatee who paid burial expenses.
Executor or administrator. •
Former executor or administrator, attorney
or other qualified person.
EXHIBITS
207
SEC. 306.70. Nontransferable securities.—The provisions of this subpart except
those of sec. 306.66 (2) relating to transfer shall apply to 2% percent Treasury
Bonds, Investment Series B-1975-80, provided, that the term "exchange" shall
be deemed to refer to the exchange of these bonds for the current series of IH
percent 5-year Treasury notes. The provisions of this subpart with respect to
assignments of bonds shall apply to requests for payment or reissue of Treasury
savings notes, provided, that the term "redemption", as used in see. 306.66 (1),
shall be deemed to refer to redemption of Treasury savings notes at maturity, and
that the requirements of sec. 306.66 (2) shall apply to requests for redemption of
Treasury savings notes before maturity.
SUBPART I
ASSIGNMENTS BY OR IN BEHALF OF FIDUCIARIES AND LEGAL REPRESENTATIVES
SEC. 306.75. Individual trustees.—Bonds registered in the names and titles of
individual trustees, as, for example, "Mrs. Mary Smith trustee under the will of
John Smith, deceased," or "Henry J. Williams, Edward C. Carter and Charles
Jones, trustees under agreement dated October 12, 1954, with Frank H. Woods,"
will be accepted for any authorized transaction upon assignment by the designated
trustees without further proof of their appointment and qualification, except that
an assignment by a trustee for his own apparent benefit will be accepted only as
provided in sec. 306.80. If one of the designated trustees has died, or resigned, or
is no longer qualified to act as trustee, and a successor has been appointed, the
bonds must be assigned by the surviving or remaining trustee or trustees and the
successor trustee, and proof of the death, resignation, removal, or disqualification
of the former trustee and of the appointment and qualification of the successor
trustee must be furnished. If the appointment of a successor is not required
under the terms of the trust instrument or otherwise and is not contemplated,
assignments by the surviving or remaining trustee or trustees must be supported
by (1) proof of the death, resignation, removal, or disqualification of the former
trustee and (2) satisfactory proof that the surviving or remaining trustee or
trustees are fully qualified to administer the trust, which may be in the form of a
certificate by them showing that the appointment of a successor has not been
applied for, is not contemplated and is not necessary under the terms of the trust
instrument or otherwise. Proof of successorship, but no assignment, will be
required in support of a request for reissue to substitute the name of a succeeding
trustee for that of a former trustee. Assignments of bonds registered in the titles,
without the names of the trustees, as, for example, "Trustees of the GeOrge E.
White Memorial Scholarship Fund under deed of trust dated November 11, 1940,
executed by John W. White," must be supported by satisfactory proof that the
assignors are the qualified and acting trustees of the designated trust estate, unless
the trustees are empowered to act as a unit in which case the provisions of see.
306.76 shall apply. Form PD 2446 may be used to furnish proof of incumbency
of trustees. Assignments by trustees of bonds not registered or assigned in such
manner as to show that they belong to the trust estate for which the assignors are
acting must be supported by satisfactory evidence that the trust estate is entitled
to the bonds under these regulations, in addition to any other required evidence.
All cotrustees must unite in any assignment except as provided in see. 306.79.
S E C . 306.76. Boards of trustees and trustees acting as a unit.—If the trustees of
any organization or trust estate, public or private, constitute a board, committee,
or other body which is empowered to aet as a unit, bonds registered in its name
may be assigned for any authorized transaction by any member, officer or other
person authorized to aet in its behalf. Except as otherwise provided in this
section, the assignments must be supported by a copy of a resolution of the board
or other body, certified under its seal, or, if none, sworn to by an officer having
access to its records. (Form PD 2495 may be used.) If the resolution is authenticated by the officer who assigns the bonds, another officer must join in the
authentication. If the assigning officer is designated in the resolution by title
only, his incumbency must be certified by another officer of the board or other
body under its seal, or, if none, sworn to by him. (Form PD 2446 may be used.)
No evidence will be required in support of an assignment by an officer for redemption for the account of the designated board, committee, or other body, or for
redemption and application of the proceeds in payment for new bonds offered in
exchange to be registered in the same name. If the trustees of any organization
or trust estate are empowered to act as a unit, although not designated as a board.
208
195 5 REPORT OF THE SECRETARY OF THE TREASURY
committee or other body, bonds registered in their names as such trustees, or in
their title as such trustees, without their names, may be assigned by any trustee
authorized by t h e group to act in its behalf. The assignments must be supported
b y a sworn copy of a resolution passed b y the group in accordance with the terms
of the t r u s t instrument, and proof of the authority of the trustees to act as a unit
may be required, except t h a t an assignment by one of the trustees named on the
bonds or b y one for whom appropriate proof of incumbency is furnished, for redemption for the account of the trustees (by cheek drawn substantially as the
bonds are inscribed) or for redemption and appiieation of the proceeds in p a y m e n t
for new bonds offered i n exchange to be registered in the same name, need not be
supported b y any other evidence. As an alternative, in any ease described in
this section, assignments by all the trustees, supported by proof of their incumbency, if not named on the bonds, will be accepted.
SEC. 306.77. Individual guardians.—Bonds registered in the names and titles
of individual legal guardians or similar representatives of the estates of minors
or incompetents, may be assigned by the designated representatives for any
authorized transaction without further proof of their appointment and. qualification, except t h a t an assignment by any such representative for his own apparent
benefit will be aceepted only as provided in sec. 306.80. Assignments of bonds
registered (1) in the titles, without the names, of the representatives, (2) in the
names and titles of representatives who are no longer qualified to act or (3) in the
names of minors or incompetents m u s t be supported by a certificate of appointment for the representatives, or a certified copy of their letters of a p p o i n t m e n t
executed or certified by t h e clerk of t h e court making the appointment, under its
seal. The certificate or certification m u s t be dated not more t h a n one year
before the date of the assignment, and m u s t show t h a t the a p p o i n t m e n t is in full
force unless (1) the certificate or certification shows t h a t t h e a p p o i n t m e n t was
made not more t h a n one year before the d a t e of t h e assignment or (2) the representative or a corepresentative is a corporation. A bond.registered in the name
of a guardian or similar representative m a y be reissued in t h e name of his successor,
upon t h e request of the designated representative or his successor, supported by
proof of successorship, without assignment. All joint guardians m u s t unite in
a n y assignment, except as provided in sec. 306.79.
S E C . 306.78. Corporate representatives and fiduciaries.—An assignment in behalf
of a corporation acting alone or with individuals as executor, general administrator, guardian or similar representative, trustee or attorney in fact, m u s t be
supported by t h e evidence, if au}^, required in support of assignments by corresponding individual representatives or fiduciaries, except t h a t t h e evidence of
a p p o i n t m e n t as executor, administrator, or guardian, if required, need not contain
a s t a t e m e n t t h a t the a p p o i n t m e n t is in full force nor be dated within any particular period of time preceding t h e date of the assignment. Satisfactory evidence
of t h e a u t h o r i t y of the officer who executes t h e assignment in behalf of the eorporation will be required, unless t h e assignment is (1) for redemption for t h e
account of, or for redemption a n d appiieation of t h e proceeds in p a y m e n t for new
bonds offered in exchange to be registered in t h e n a m e of, t h e executors, administrators, guardians, trustees, or grantors, as t h e case may be or (2) for redemption a t p a r before m a t u r i t y , in accordance with sec. 306.28. T h e evidence
of the officer's authority, if required, m u s t be in substantially the same form as
t h a t required in support of an assignment of a bond registered in the name of the
corporation in its own right, as set forth in sec. 306.85, except t h a t the evidence
m u s t refer to bonds held in a representative or fiduciary capaeitv and t h a t reference
should be m a d e to F o r m s P D l O l l and P D 1012 rather t h a n Forms P D 1009 a n d
P D 1010, respectively.
SEC. 306.79. Joint representatives or fiduciaries.—If there are two or more joint
executors, administrators, guardians or similar representatives, or trustees of an
estate, all m u s t unite in t h e assignment of any bonds belonging to the estate, unless
(1) an express s t a t u t e , a decree of court, or t h e instrument under which they
are acting provides otherwise or
(2) the bonds have m a t u r e d or been called, in which case one or more of the
representatives or fiduciaries may assign for redemption for the account of, or
for redemption and appiieation of the proceeds in p a y m e n t for new bonds
offered in exchange to be registered in t h e names of, all acting executors, administrators, guardians or similar representatives, or trustees. For assignments
by joint a t t o r n e y s in fact, see sec. 306.59.
S E C . 306.80. Assignments by representatives or fiduciaries for their own benefit.—
Unless there are two or more representatives or fiduciaries acting a n d all unite in
EXHIBITS
209
the assignment, an assignment by an executor, administrator, guardian or similar
representative, trustee, or other representative or fiduciary for his own apparent
benefit, including an assignment for transfer to himself individually or an assignment for redemption for his individual account, must be supported by one of the
followingl'doeuments, in addition to any other evidence required under these
regulations:
(1) A duly certified copy of an order of a proper court, clearly authorizing
the assignment.
(2) In the case of a fiduciary who is not acting under the supervision of a
court, a duly certified copy of the governing instrument and any other evidence
which may be necessary to show that he is entitled to the bond in his own right.
(3) The consent of all persons having any interest in the bonds, provided
they can be identified and are not under any legal disability.
(4) In the case of an executor, administrator or trustee, a duly certified
statement on Form PD 2480 or in substantially the same form, satisfactorily
establishing that he is entitled to the bond or the proceeds thereof in his own
right.
SEC. 306.81. Attorneys in fact for fiduciaries.—Assignments by attorneys in fact
for legal representatives or fiduciaries must be supported by adequate powers of
attorney in addition to any evidence necessary to support assignments by the
representatives or fiduciaries. Form PD 1002 or PD 1004 may be used, depending
on whether the representative or fiduciary is an individual or a eorporation.
Powers in other fornis may be aceepted, but all powers must be executed in the
presence of an officer authorized to witness assignments of the bonds. Powers
must specifically designate the bonds to be assigned. The original must be filed
with the Department, except that a photocopy certified by an officer of a Federal
Reserve Bank or branch, or by an officer of a bank or trust company under the
corporate seal, will be accepted, if the seal on the original power is legible on the
copy or is copied by the certifying officer. An assignment by a substituted attorney in fact must be supported by an appropriate power of substitution, which
must be supported in turn by an appropriate power of attorney, and by proof of
the representative's or fiduciary's authority, if necessary. Form PD 1006 or
PD 1008, whichever is appropriate, may be used for the appointment of a substitute. An assignment by an attorney in fact or a substituted attorney in fact
for his own apparent benefit will be accepted only if expressly authorized in the
power of attorney or power of substitution, respectively. An assignment by a
substituted attorney in fact for the apparent benefit of the attorney in fact will
be accepted only if expressly authorized in both the power of attorney and the
power of substitution. A power of attorney or a power of substitution will be
recognized until, but not after, the Bureau of the Public Debt, Division of Loans
and Currency, Washington 25, D. C , receives proof of revocation, unless the
power is coupled with an interest, except that a pending transaction will be temporarily suspended on receipt of a request from the grantor of the power, by wire
or otherwise, and except further that the Secretary of the Treasury may require
evidence in any case that a power is still in full force at the time the Department
is requested to act under it.
SEC. 306.82. Nontransferable securities.^The provisions of this subpart with
respect to assignments are applicable to assignments of 2% percent Treasury
Bonds, Investment Series B-1975-80, and to requests for payment or reissue
of Treasury savings notes, except those of see. 306.78 requiring evidence of
authority of the assigning officers to support assignment for an authorized transfer, and as applied to Treasury savings notes relate to requests for redemption
before maturity as well as at maturity.
SUBPART J
ASSIGNMENTS IN BEHALF OF PUBLIC OR PRIVATE
ORGANIZATIONS
SEC. 306.85. Private corporations and unincorporated associations.—Bonds
registered in the name of a private eorporation or unincorporated association in
its own right (not a partnership or a business owned by one individual, whether
or not operated under a trade name, or an activity conducted by a trustee or
trustees) may be assigned in its behalf, for any authorized transaction by any
duly authorized officer or officers. Satisfactory evidence that the assigning
officers were duly authorized to assign and sell or otherwise dispose of the bonds will
be accepted in support of an assignment for any purpose, except that if the
assignment is for their own apparent benefit the evidence must expressly authorize
such disposition. No evidence will be required in support of assignments for
redemption for the account of the corporation or association or for redemption and
356812—56—15
210
1955 REPORT OF THE SECRETARY OF THE TREASURY
application of the proceeds in payment for new bonds offered in exchange to be
registered in the name of the corporation or association. The evidence, if required,
should ordinarily be in the form of a resolution of the governing body (usually,
for a corporation, the board of directors, or for an unincorporated association,
the members or a board of trustees). A resolution adopted by an executive committee or other body which is not obviously the governing body must be supplemented by a duly certified copy of the charter, constitution, or bylaws, or an
extract therefrom, showing the authority of the body to act for the organization.
In any case the resolution may relate to any or all registered bonds owned by the
organization, to bonds of any particular loan or issue, or to a particular bond or
bonds. A copy of a resolution conferring general authority may be furnished
on Form PD 1009, and one conferring limited authority may be furnished on
Form PD 1010, or may be in any substantially similar form. In any case the
copy must be certified or sworn to in accordance with the instruction on the
applicable form. If the officer or officers derive their authority direct from the
charter, constitution, or bylaws, a copy or a pertinent extract therefrom, certified
under the seal of the organization, or, if it has no seal, sworn to by another officer
who has access to its records, will be required in lieu of a resolution. If the
resolution or other supporting document shows only the title of the authorized
officer, without his name, it must be supplemented by a certificate of incumbency
certified under the seal of the organization, or, if it has no seal, sworn to by
another officer who has access to its records. (Form PD 1014 may be used.)
The signature to the assignment must be in the following form, for example:
"The Model Manufacturing Co., a eorporation (or, an unincorporated
association), by (signed) John W. Henderson, Treasurer.^'
The officer in charge of the records and seal of a corporation may properly add
the word "attest," followed by his signature and title and an impression of the
seal, to the left of the corporate signature, when the organization's requirements
so provide, but such endorsement is not required, and will not be accepted in
lieu of an authorized witnessing officer's certificate.
SEC. 306.86. Merger, consolidation, conversion, reincorporation, and change of
name of private organizations.—If a private corporation is succeeded by another
corporation by merger, consolidation, conversion, or reincorporation (which
do not include a general assignment of assets without legal successorship), its
bonds may be assigned for any authorized transaction in behalf of the successor
by an authorized officer in accordance with the provisions of the preceding section,
or may be reissued in the name of the successor without assignment upon such
successor's request and submission of satisfactory evidence of successorship.
The evidence must be in the form of a certificate, under seal, by the public
offieial, board, or commission authorized by law to approve the action, or if none,
by direct proof of compliance with statutory or other legal requirements, usually
in the form of certified copies of resolutions by governing bodies and by stockholders or members, and proof of filing as required by law. The certification of
a resolution must show that due notice of the meeting was given, that a quorum
was present, and that the resolution was adopted by the necessary majority, and
must be signed, under the seal of the corporation, by an officer having access
to its records, or, if it has no seal, must be sworn to by such officer. The signature
to any necessary assignment must be in the following form, for example:
"The Twin Cities Printing Corporation, successor to the St. Paul Printing
Company, a corporation, by (signed) Carl Johansen, President.'^
Similar evidence of the mere change of name of a corporation will be required to
support a request in its behalf for reissue in its new name without assignment or an
assignment in its behalf for any authorized transaction. The signature to an
assignment after change of name should be in the following form, for example:
"The National Bank and Trust Company of
, formerly
the National Bank of
, by (signed) Theodore R.
Stevenson, Vice President.^^
If an unincorporated association changes its name, or is succeeded by another
organization, similar evidence, so far as applicable, will be required in support of a
request for reissue in the new name or in the name of the successor, an assignment
in behalf of the association under its new name, or an assignment by the successor.
If the association (such as a local lodge or chapter) exists by reason of a charter
issued by another organization, a certificate by the officer in charge of the records
of the latter organization, under its seal, to the effect that the subordinate association has reorganized or cnanged its name in accordance with the constitution and
EXHIBITS
211
bylaws of the parent organization, will be accepted in lieu of direct evidence of
such action.
SEC. 306.87. Attorney in fact for a corporation or unincorporated association.—
Bonds registered in the name of a corporation or an unincorporated association
may be assigned in its behalf for any authorized transaction by a duly authorized
person as attorney in fact. Such assignments must be supported by one of the
following documents certified under the seal of the organization, or, if it has no
seal, sworn to by another officer who has access to its records:
(1) A copy of a resolution of its governing body authorizing an officer of the
organization to appoint an attorney in fact to assign and sell or otherwise dispose
of the bonds, as provided in sec. 306.85, and of a general or specific power of
attorney by the officer so authorized, executed in the presence of an officer
authorized to witness assignments of the bonds for the desired transactions, for
which purpose Form PD 1003 or PD 1004 may be used;
(2) A copy of a resolution of its governing body directly appointing an
attorney in fact for this purpose; or
(3) A copy of the charter, constitution, or bylaws, or a pertinent extract
therefrom, showing the authority of an officer to appoint an attorney in fact,
and of a general or specific power of attorney by the officer so authorized, executed as provided in (1) above.
In any case the power may not be broader than the authorizing resolution or other
authority and a general power in behalf of a public corporation will be recognized
only if authorized by statute. If the power or resolution authorizes the attorney
in fact to appoint a substitute attorney in fact, an assignment by the substitute
must be further supported by a power of substitution by the attorney in fact,
executed in the manner prescribed for the execution of the power of attorney.
(Form PD 1005, PD 1006, PD 1007, or PD 1008, whichever is appropriate, may
be used for this purpose.) If the resolution or other supporting document shows
only the title of the authorized officer, without his name, it must be supplemented
by a certificate of incumbency certified under the seal of the organization, or, if
it has no seal, sworn to by another officer who has access to its records. (Form
PD 1014 may be used.)
SEC. 306.88. Political entities and^public corporations.—Bonds registered in the
name of a State, county, or other political entity, or in the name of an incorporated
city, town, village, school district, or other public corporation or body, may be
assigned for any authorized transaction by a duly authorized officer or officers in
accordance with the provisions of sec. 306.85 so far as applicable, except as otherwise provided herein. If evidence of authority derived from a municipal ordinance,
charter of a public corporation, or special act of a State legislature is required, a
copy of the pertinent provision must be certified to the Department by the proper
public officer under official seal. If evidence of authority derived from a State
constitution or from a public law is required, the pertinent provision must be cited.
If a certificate of incumbency is required, it must be executed by the proper public
officer under official seal.
SEC. 306.89. Public officers.—Bonds registered in the title of a public officer
who is the official custodian of public funds, for example, "Treasurer, State of
North Carolina," may be assigned by the designated officer. No evidence will be
required in support of an assignment for redemption for the officer's offieial account or for redemption and application of the proceeds in payment for new bonds
offered in exchange to be registered in his official title or in the name of the political
entity or public corporation for which he is acting. Any other assignment must
be supported by satisfactory evidence that the assignor is the incumbent of the
designated office, except that an assignment for his individual benefit will not be
recognized. The evidence must be in the form of a certificate of incumbency executed by the proper public officer under offieial seal.
SEC. 306.90. Partnerships.—An assignment of a bond registered in the name of
a partnership must be executed by a general partner in the form, for example:
"Smith and Jones, a partnership
by (signed) John Jones, a partner."
An assignment for the benefit of one of the partners individually must be executed
by another partner. Upon the death of a partner and the resulting dissolution of
the partnership, assignment by all the surviving partners and by the persons
entitled to assign in behalf of the decedent's estate will be required, unless the laws
of the particular jurisdiction authorize the surviving partners to assign without
regard to the decedent's estate. Upon voluntary dissolution of a partnership, an
212
1955 REPORT OF THE SECRETARY OF THE TREASURY
assignment by a liquidating partner, as such, must be supported by a duly executed
agreement among the partners appointing the liquidating partner.
SEC. 306.91. Nontransferable securities.—The provisions of this subpart shall
apply to Treasury Bonds, Investment Series B-1975-80, and to requests for payment or reissue of Treasury savings notes, except those of sec. 306.85 requiring
evidence of authority of the assigning officers to support assignment for an authorized transfer, and as applied to Treasury savings notes, relate to requests for
payment before maturity as well as at maturity.
SUBPART K
CONFLICTING CLAIMS
SEC. 306.95. Responsibility of Treasury Department.—(a) General.—The
Treasury Department assumes no responsibility for the protection of the interest
of any person in securities not in his possession, and neither the Department nor
any of its agencies will accept notice of any claini or of pending judicial proceedings
by any such person, except as specifically provided in these regulations. (See
subpart L for information in regard to the conditions under which caveats may be
entered against transactions in securities of certain classes and relief granted on
account of the loss, theft, or destruction thereof.) These limitations are based on
the fact that the ready m.arketability of the securities depends in part upon the
promptness and freedom with which transactions therein may be effected.
(b) Bearer securities.—Bearer securities comprise more than 90 percent of the
outstanding marketable Government obligations, and transactions therein are
concentrated in the twelve Federal Reserve Banks and their branches, and the
Treasury Department. The volume of these transactions is so great that the
necessity of consulting lists of bearer securities against which caveats (stoppages)
may be requested as the result of loss, theft, or destruction before maturity would
cause extensive delaj^s in completing such transactions. Moreover, under
generally recognized principles of law, good title to unmatured bearer securities
will pass by delivery to a purchaser in good faith and for value. Therefore, the
entry of caveats against transactions in these securities, upon receipt of reports of
loss, theft, or destruction, would be wholly without practical benefit.^ As
purchasers of bearer seeurities which have been lost or stolen after face maturity
would not acquire good title thereto as against the true owners, reports of losses
or thefts occurring after face maturity will be recorded and efforts will be made to
detect any such securities upon receipt by the Departnient or a Federal Reserve
Bank, with a view to giving the owner an opportunity to establish his right to
them. However, such efforts may be unsuccessful, on account of circumstances
over which the Departnient has no eontrol, in which case the Department's
responsibility will be limited to notifying the person who reported the loss or
theft of the source from, which the securities were received, in so far as the information is available.
(c) Registered securities.—Both assignment and delivery are necessary to pass
good title to marketable securities in registered form. Therefore, the Department
will afford registered owners appropriate protection against loss through forged
assignments, and so far as possible, against loss through assignnients affected by
fraud. (See sees. 306.98 and 306.99.) Very little protection ean be given owners
who lose possession of their bonds after assigning them in blank or for exchange
for coupon bonds without restrictions on the delivery of the coupon bonds, as
bonds so assigned are, in effect, payable to bearer.
(d) Interest coupons.—Interest coupons are payable to bearer; therefore, the
Department can assume no responsibility whatever with respect to detached
coupons which have been lost, stolen, or destroyed, and will not enter any caveats
(stoppages) against payment thereof or undertake to determine whether any
particular coupons have been paid.
SEC. 306.96. Circumstances under which the ownership of securities payable to
bearer may be questioned.—A bearer security or a registered security sO assigned as
7 On April 27, 1807, the Secretary of the Treasurv issned the foUowing statement:
"In consequence of the increasing trouble, wholly without practical benefit, arisuig from notices which
are constantly receivea at the Department respecting the loss of coupon bonds, which are payable to bearer,
and of Treasury notes issued and remaining in blank at the time of loss, it becomes necessary to give this
public notice, that the Government can hot protect, and wiU not undertake to protect, the owners of such
bonds and notes against.the consequences of their own fault or misfortune.
"Hereafter all bonds, notes, and coupons, payable to bearer, and Treasury notes issued and remaining in
blank, wiU be paid to the party presenting them in pursuance of the regulations of the Department, in the
course of regular business; and no attention wUl be paid to caveats which may be filed for the purpose of
preventing such payment."
EXHIBITS
213
to become, in effect, payable to bearer which has been reported lost or stolen may
be detected by the Treasury Department upon presentation for payment or other
transaction onl}^ as the result of (1) the entry of a caveat, in the case of a security
reported lost or stolen after m.aturity, as provided in sec. 306.108, (2) the requirement of proof of ownership, in the case of a mutilated security or one which is
presented for payment more than a reasonable length of time after maturity, as
provided in sec. 306.25 or (3) presentation by a person claiming to be a finder.
If the security is so detected, the Department will call upon the presenter and the
person who reported the loss or theft to substantiate their respective claims. If
the evidence submitted by|either claimantfestablishes conclusively that he is the
owner of the security, payment will be made to him., except that the Department,
before making payment, may require a bond of indemnity or other security to
protect the United States from any liability to any other person. If payment
may not be m.ade under these conditions, the Department will hold the security
until the ease is settled by agreenient or as the result of judicial proceedings in
accordance with sec. 306.97.
SEC. 306.97. Judicial proceedings.—The Treasury Department will recognize
any valid judicial proceedings in a proper court affecting the ownership of or interest in registered seeurities upon presentation of the seeurities to the Department bearing appropriate assignments and accompanied by satisfactory proof of
the proceedings. If the bonds are registered in the names of two or more persons,
the extent of their respective interests in the bonds must be determined by the
court in proceedings to which they are parties or must otherwise be validly established. The following evidence will be required in the types of cases designated:
(1) Judicial transfers.—An assignment by a transferee through judicial
proceedings, as in the case of a divorce decree awarding to one party to the
proceedings a bond registered in the name of the other, or any ease in whicii a
bond registered in the name of one person is found to be the property of another
person, must be supported by a copy of the final judgment or decree and of
the record of any necessary supplemental proceedings, duly certified by the
clerk of the court under its seal, and, if the judgment or decree was entered
more than 6 nionths prior to the assignment, by a certificate, under court seal,
by the clerk, dated within 6 months of the assignment, showing that the judgment or decree is in full force. The signature to the assignment should be in
the following form:
"
_
by
,
(Registered owner)
person entitled through judicial proceedings."
(2) Sales under court orders.—An assignment by a sheriff, marshal, or other
court officer for the purpose of carrying out a sale ordered by the court to satisfy,
or apply on, a money judgment must be supported by copies of the court order
(writ of execution) and the officer's return thereon, in addition to copies in the
judgment and the record of supplemental proceedings, all certified by the clerk
of the court under its seal. In the case of a security which has matured or
become redeemable pursuant to a call for redemption, in lieu of sale in the usual
manner, the officer to whom the order is directed ma}^ assign the securit}; to
the Secretary of the Treasury for redemption and receive payment thereof in
his offieial capacity. The signature to the assignment should be in the following
form:
'
, a n officer of the
(Signature and official title)
Court of
, in the matter of
."
(County and State)
(3) Bankruptcy proceedings.—An assignment by a trustee in bankruptcy
must be supported by the referee's certificate of the trustee's election and qualification, and the incumbency and signature of the referee must be certified
by the clerk of the court under its seal. The signature to the assignment
should be in the following form:
"
, Trustee in Bankruptcy of the estate of
(4). Receivers.—An assignment of a registered bond by a receiver of the
property of the owner, or by a similar officer, must be supported by a copy of an
order of court certified by the clerk of the court under its seal, authorizing the
assignment and sale or transfer of the bond, except that, in the case of a statutory officer, the assignment must be supported by proof of compliance with the
214
1955 REPORT OF THE SECRETARY OF THE TREASURY
statutory requirements.
following form:
"..._-
The signature to the assignment should be in the
, by
(Registered owner)
Receiver (or other official title), under order of the
Court of
^
,in the matter of
"
(County and State)
The Department will also recognize a determination by a proper court with respect
to the ownership or right to possession of securities in either registered or bearer
form which may be held by the Departnient subject to such determination. The
evidence required will be similar to that prescribed in paragraph (1) of this section.
SEC. 306.98. Assignments affected by fraud.—If a registered bond has been
transferred, exchanged, or redeemed in reliance upon an apparently valid assignment, and a claim that the assignment was obtained by fraud is subsequently
received, the Treasury Department can grant no relief. If a claim of this kind
is received before the bond is transferred, exchanged, or redeemed, the Department
will call upon the registered owner to substantiate his claim, and if he does so
the Department will enter a caveat (stoppage) against the bond. When a bond
against which a caveat has been so entered is received, the Department will call
upon the presenter to explain the circumstances under which he acquired the bond.
If it appears from all the evidence submitted that the presenter acquired the
bond in good faith, for value, without notice or knowledge of the alleged fraud,
the Department will then give the registered owner a reasonable period of time
in which to institute judicial proceedings against the presenter to establish his
right to the bond in accordance with sec. 306.97; if he fails to institute appropriate
proceedings within the prescribed period of time or is not successful, the Department will recognize the assignment. If it does not appear that the presenter
acquired the bond in good faith, for value, without notice or knowledge of the
alleged fraud, the Department will take the position of a stakeholder with respect
to the bond until the case is settled by a disclaimer of interest by one of the parties,
by an agreement between them, or by judicial proceedings between them in
accordance with sec. 306.97. In any case in which the transfer, exchange, or
redemption of a bond is withheld pending the receipt of evidence requested or
the outcome of judicial proceedings, or while the Department is acting as a stakeholder with respect to the bond, any interest to which the presenter might be
entitled will be withheld, and when the case is settled any interest so withheld
will be paid to the person found to be entitled to the bond, unless otherwise
^.determined by agreement of the parties or by the court.
. SEC. 306.99. Forged assignments.—No title can be acquired through a forged
assignment of a registered bond, even by a" purchaser in good faith, for value,
without notice or knowledge of the forgery. An assignment of a registered
bond against which a caveat (stoppage) has been entered in accordance with
sec. 306.108 will not be accepted unless it is deterniined that the assignment is
genuine. If the assignment is found to be a forgery, the Treasury Department
will grant appropriate relief to the true owner. If an assignment has been
honored before the receipt of notice of the loss or theft of the bond, and it is found
upon investigation that the assignment' is a forgery, the Department will grant
appropriate relief to the true owner and proceed against those responsible for
the loss resulting from the first transaction, including (1) the person committing
the forgery, (2) the witnessing officer or the corporation of which he is an officer
(see sec. 306.44) and (3) the person presenting the bond to the Department or a
Federal Reserve Bank for transfer, exchange, or payment, who thereby gives an
implied warranty of title to the United States.
SEC. 306.100. Nontransferable securities.—The provisions of this subpart, with
the exception of those of sees. 306.95, 306.96, and 306.98, shall apply to Treasury
Bonds, Investment Series B-1975-80, provided, that the reference in sec. 306.97
(2) to assignment by a sheriff, marshal, or other court officer, a trustee in bankruptcy or a receiver or similar officer, other than for redemption, shall be deemed
to refer to assignment of the bonds for exchange for IJ^ percent 5-year Treasury
notes of EA or EO series, and that the reference in sec. 306.99 relating to transfer
of title and to an implied warranty of a presenter is not applicable. The provisions of this subpart, with the exception of those of sees. 306.95, 306.96, and
306.98, shall apply to Treasury savings notes, provided, that reference to assignment in sec. 306.97 as used in (1) shall be deemed to refer to a request for payment
or reissue, and as used in (2), (3), and (4) shall be deemed to refer to a request
EXHIBITS
215
for payment only, and that the reference in sec. 306.99 relating to transfer of
title and to an implied warranty of title by the presenter is not applicable.
SUBPART L
RELIEF ON ACCOUNT OF LOSS, THEFT, DESTRUCTION, MUTILATION, OR
DEFACEMENT
SEC. 306.105. Statutory authority and requirements.—Section 8 of the act of
July 8, 1937 (50 Stat. 481), as amended (31 U. S. C. 738a), provides for relief,
under certain conditions, on account of the loss, theft, destruction, mutilation, or
defacement of United States interest-bearing securities. The statute defines
interest-bearing securities as direct obligations of the United States issued
pursuant to law for valuable consideration which by their terms bear interest or
are issued on a discount basis, but includes excess profits tax refund bonds which
bear no interest. To obtain relief the securities must be identified by description
and number, and the pertinent facts must be clearly proved to the satisfaction of
the Secretary of the Treasury. Except in certain specified types of cases or under
certain specified circumstances, the law requires a bond of indemnity in such form
and aniount and with such surety, sureties, or security as the Secretary shall
require. For detailed information concerning bonds of indemnity see sec. 306.113.
If relief is authorized on account of a security which has not matured or become
redeemable pursuant to a call, a substitute security bearing the same issue date,
marked "Duplicate" and showing the serial number of the original security, will
be issued; if relief is authorized on account of a security which has matured or
become redeemable pursuant to a call, payment will be made.
SEC. 306.106. Securities to which this subpart applies.—This subpart applies to
all securities for which relief may be given under authority of the statute cited
in sec. 306.105 (except United States savings bonds, which are governed by
separate regulations) or under the authority of any government or any organization
of the United States for which the Treasury Department acts as transfer agency.
. SEC. 306.107. Reports of disappearance or recovery.—The loss, theft or destruction
of a security should be reported to the Bureau of the Public Debt, Division of
Loans and Currency, Washington 25, D. C , as promptly as possible, except that if
Treasury savings notes are involved the report should be sent to the issuing agency.
The report must include the following information or as much thereof as possible:
(1) the identification of the security by the complete title of the loan including the
interest rate, date of issue and series, and by the serial number and denomination,
and, in the case of registered securities, the exact form of inscription and a full
description of any assignment, endorsement, or other writing thereon; (2) the
name and present address of the owner, and his address at the time the securities
were issued, and, if the report is made by any other person, the capacity in which
he represents the owner; and (3) a brief statement of the circumstances under
which the security disappeared. Upon receipt of the report an appropriate form
for use in applying for relief will be furnished. The receipt of a report of loss,
theft, or destruction of a registered security on which interest is payable periodically
will not affect the payment of the interest. If any report of loss, theft, or destruction is found to have been made in error, or if any security reported as lost or
stolen is recovered before relief has been authorized, the Bureau of the Public
Debt should be notified to that effect, with references to the description of the
security and the date of the original report. If any security for which relief has
been granted is recovered, it must be surrendered as the property of the United
States to the 'Bureau of the Public Debt, Division of Loans and Currency,
Washington 25, D. C.
SEC. 306.108. Caveats (stoppages).—Upon receipt of a report of the loss, theft
or possible destruction of a registered security, a caveat (stoppage) will be entered
to suspend any transaction therein not specifically authorized by the owner,
except in the case of a transferable security which (1) had been assigned to bearer
or so assigned as to become, in effect, payable to bearer (as explained in sec.
306.42) and (2) had been lost, stolen, or possibly destroyed before its face maturity.
In the case of a bearer security or a registered transferable security which had
been assigned to bearer or so assigned as to become, in effect, payable to bearer,
a caveat will be entered only in the event it satisfactorily appears that the loss,
theft, or possible destruction occurred after the face maturity of the security
(see sec. 306.95). However, if Department records show that the security has
already been presented and honored, the owner or his authorized representative
will be 'advised to that effect and furnished such information as may be available
regarding the source of receipt. If, after the receipt of an application for relief
216
1955 REPORT OF THE SECRETARY OF THE TREASURY
on a c c o u n t of t h e loss, theft, or possible destruction of a bearer security, or a
registered security assigned t o bearer or so assigned as to become, in effect,
p a y a b l e to bearer, it is determined t h a t t h e security has been presented and
honored, t h e applicant will be similarly informed.
SEC. 306.109. Destruction or partial destruction of bearer securities.—An application for relief on account of t h e partial or total destruction of a bearer security
should be m a d e on F o r m P D 1022. Any portion or portions not destroyed m u s t
be s u b m i t t e d to t h e Treasury D e p a r t m e n t in support of t h e application; if in a
charred or fragile condition, they should be packed in cotton to prevent further
d a m a g e in transit. When a substitute is issued to replace a coupon security
which has not m a t u r e d or beconie redeemable p u r s u a n t to a call for redemption,
it will be of t h e same loan and d a t e of issue and have a t t a c h e d coupons corresponding with those shown to h a v e been a t t a c h e d to t h e security a t t h e time it was
destroyed or partially destroyed, except t h a t any coupons whicii have m a t u r e d
will be paid by check. When relief is granted on account of a security which has
become redeemable p u r s u a n t to a call, t h e redemption check will not include
p a y m e n t for any coupons d a t e d after t h e redemption date.
S E C . 306.110. Loss or theft (including possible destruction) of bearer securities or
registered securities so assigned as to become, in effect, payable to bearer.—Relief
m a y be granted on account of t h e loss or theft of a bearer security, or of a registered
security assigned to bearer or so assigned as to become, in effect, payable to
bearer, if it was lost or stolen under such eircumstances, a n d has been missing for
such period of time after it m a t u r e d or became redeemable p u r s u a n t to a call for
redemption, as in t h e j u d g m e n t of t h e Secretary of t h e Treasury would indicate
t h a t t h e security (1) has been destroyed or has become irretrievably lost, (2) is
n o t held by any person as his own property, a n d (3) will never become t h e basis
of a valid claim against t h e United States. T h e appiieation for relief should be
m a d e on F o r m P D 1022 in t h e case of bearer securities a n d on F o r m P D 1025 in
t h e case of registered seeurities. If relief is granted t h e redemption cheek will
not include p a y m e n t for any interest eoupons claimed to have been attached to
t h e security.
S E C . 306.111. Loss or theft of registered securities not so assigned as to become, i n
effect, payable to bearer.—An application for relief on account of t h e loss or theft
of a registered security not assigned to bearer or not so assigned as to become, in
effect, p a y a b l e to bearer should be m a d e on F o r m P D 1025. If t h e security was
lost or stolen after it h a d been assigned and delivered by t h e registered owner
to a transferee, t h e application m u s t be executed by t h e transferee a n d m u s t be
supported by an assignment by t h e registered owner. T h e Treasury D e p a r t m e n t
will supply an appropriate form for this purpose. T h e fact t h a t a security
alleged to h a v e been lost or stolen is in t h e possession of a known person who
refuses to surrender it will be eonsidered as evidence t h a t t h e security is held by
such person as his own property. I n t h e case of lost or stolen Treasury savings
notes, which are not assignable, application for relief should be m a d e on F o r m
P D 2382. Relief will not be granted in any ease before t h e expiration of six
m o n t h s from t h e d a t e of loss or theft.
S E C . 306.112. Destruction or partial destruction of registered securities.—An
application for relief on aceount of t h e destruction of a registered security, whether
or not assigned in a n y manner, should be made on F o r m P D 1025. If the security
was destroyed after it h a d been assigned a n d delivered by t h e registered owner to
a transferee, t h e application m u s t be executed by t h e transferee and m u s t be
supported by an assignment by t h e registered owner. T h e Treasury D e p a r t m e n t
will supply an appropriate form for this purpose. In case of partial destruction
t h e portion or portions n o t destroyed m u s t be submitted to t h e D e p a r t m e n t in
support of the appiieation; if in a charred or fragile condition t h e y should be carefully packed in cotton to p r e v e n t further damage in transit. In t h e case of
destroyed Treasury savings notes, which are n o t assignable, application for relief
should be made on Form P D 2382.
S E C . 306.113. Bonds of indemnity.—(a) When required.—A satisfactory bond
of indemnity in .an a m o u n t sufficient t o cover a n y loss which t h e United States
m a y incur as t h e result of granting relief will be required before relief m a y be
granted, except as specifically provided in this section. Upon approval of t h e
application for relief, subject to t h e submission of a bond of indemnity, t h e Treas. u r y D e p a r t m e n t will supply a n appropriate form for this purpose. A bond of
indemnity executed on any other form will not be accepted. I n t h e case of bearer
securities or registered securities assigned to bearer or so assigned as to become, in
effect, p a y a b l e to bearer, t h e destruction of which has not been proved, a n d for
EXHIBITS
217
which relief may be granted under the provisions of sec. 306.110, a bond of indemnity with a corporate surety qualified under the provisions of the aet of July
30, 1947, Chapter 390, Section 1 (61 Stat. 646; 6 U. S. C. 6-13) will be required.
A bond of indemnity with either a corporate surety so qualified or two satisfactory
individual sureties will be required in the case of securities for which relief may be
granted under the provisions of sec. 306.109, 306.111, or 306.112, unless in the
case of unassigned registered securities or destroyed bearer securities the Secretary
of the Treasury is satisfied that the interests of the United States may otherwise
be adequately protected.
(b) When.not required.—A bond of indemnity will not be required in any of the
following classes of cases, unless the Secretary of the Treasury deems it essential
to the public interest in any particular case:
(1) If the Secretary of the Treasury is satisfied that the loss, theft, destruction, mutilation, or defacement, as the case may be, occurred without fault of
the owner and while the security was in the custody or the eontrol of the United
States (not including the Postal Service when acting solely in its capacity as
the public carrier of the mails), or of a person thereunto duly authorized as
lawful agent of the United States, or while it was in the eourse of shipment
effected pursuant to and in accordance with the regulations issued under the
provisions of the Governnient Losses in Shipment Act;
(2) If substantially the entire security is presented and surrendered by the
owner and the Secretary of the Treasury is satisfied as to the identity of the
security presented and that any missing portions are not sufficient to form the
basis of a valid claim against the United States;
(3) If the lost, stolen, destroyed, mutilated, or defaced security is one which
by the provisions of law or by the terms of its issue is transferable only by
operation of law;
(4) If the owner or holder is the United States or an officer or employee
thereof in his offieial capacity, a State, the District of Columbia, a Territory, or
possession of the United States, a municipal corporation or politieal subdivision
of any of the foregoing, a corporation the whole of whose capital is owned by
the United States, a foreign government, or a Federal Reserve Bank.
SEC. 306.114. Mutilated or defaced securities.—If a mutilated or defaced security is presented to the Treasury Departnient for any authorized transaction and
the Secretary of the Treasury is satisfied as to the ownership and identity of the
security and that any missing portions are not sufficient to form the basis of a
valid claim against the United States, its value to the owner will not be considered
as impaired, and it will be honored accordingly. Mutilated or defaced securities
should be forwarded to the Bureau of the Public Debt, Divisiori of Loans and
Currency, Washington 25, D. C. No allowance will be made.fbr missing interest
eoupons. If the security has been mutilated or defaced to the extent that its
value to the owner must be eonsidered impaired, relief may be possible under see.
306.109 or sec. 306.112.
SEC. 306.115. Loss, theft, destruction, mutilation, or defacement of detached
interest coupons.—There is no authority of law for .relief on account of the loss,
theft, or destruction of detached interest coupons. Paid interest coupons are
not assorted or recorded by the serial numbers of the bonds to which they relate.
Accordingly, the Treasury Department can not enter any stoppages against payment of lost, stolen, or destroj^ed detached coupons, and can not undertake to
advise the owner whether any such coupons have been paid. In cases where
interest coupons have been partially destroyed, mutilated, or defaced, but the
remaining portions can be fully identified by loan, interest, due date, and amount,
and the missing fragments eould not by any possibility form the basis of a valid
claim against the United States, relief may be granted upon the surrender of the
remaining portions of the coupons to the Treasurer of the United States, Washington 25, D. C , accompanied by satisfactory proof as to the ownership of the
coupons.
SEC. 306.116. Loss, theft, or destruction of restrictively endorsed bearer securities.—
Relief on account of the loss, theft, or destruction of bearer securities which have
been restrictively endorsed by banks strictly in accordance with the provisions of
the regulations in Department Circular No. 853 » (31 CFR, 1954 Supp., 328) will
be given pursuant to an appiieation therefor on Form PD 2211. Banks, as therein
defined, are authorized to place restrictive endorsements on the face of bearer
securities owned by themselves or their customers but only in connection with the
presentation thereof to a Federal Reserve Bank or the Treasury Department for
8 These regulations have no application whatever to registered securities.
218
195 5 REPORT OF THE SECRETARY OF THE TREASURY
p a y m e n t a t m a t u r i t y or p u r s u a n t to a call for redemption or for exchange p u r s u a n t
to a n optional exchange offering. A bond of indemnity will be required as a condition of relief on account of t h e loss, theft, or destruction of t h e securities, b u t
surety thereon will ordinarily be dispensed with if the bond is executed by t h e
presenting bank.
SEC. 306.117. Nontransferables.—The provisions of this subpart, with t h e exception of those of sees. 306.109, 306.110, 306.115, a n d 306.116, shall apply to
Treasury Bonds, I n v e s t m e n t Series, arid to Treasury savings notes, provided, t h a t
t h e references in sees. 306.111 a n d 306.112 relating to transfer a n d delivery are
not applicable a n d t h e references to assignment as applied to 2}i percent Treasury
Bonds, I n v e s t m e n t Series A-1965, a n d to Treasury savings notes shall be deemed
to refer to a request for p a y m e n t or authorized reissue, a n d provided further,
t h a t sec. 306.113 (b) (3) does not apply to Treasury Bonds, I n v e s t m e n t Series B .
SUBPART M—MISCELLANEOUS PROVISIONS
S E C . 306.120. Additional requirements.—In a n y case arising under these regulations t h e Secretary of t h e Treasury m a y require such proof, additional proof, or
bond of indemnity with satisfactory surety, as m a y in his j u d g m e n t be necessary
for t h e protection of t h e interests of t h e United States.
S E C . 306.121. Waiver of regulations.—The Secretary of t h e Treasury reserves
t h e right, in his discretibn, to waive or modify a n y provision or provisions of these
regulations in a n y particular case or class of cases for t h e convenience of t h e United
States or in order to relieve a n y person or persons of unnecessary hardship, if
such action would not be inconsistent with law, would not impair a n y existing
rights, a n d if he is satisfied t h a t such action would not subject t h e United States
to a n y substantial expense or liability.
S E C . 306.122. Forms.—The forms mentioned in these regulations are those
currently provided for t h e purposes specified. T h e references to certain forms
shall be construed to apply tp a n y forms which m a y hereafter be provided for t h e
same purposes.
S E C . 306.123. Acceptance of securities of the United States as security for public
purposes.—Regulations prescribed p u r s u a n t t o law governing t h e acceptance of
designated classes of securities of t h e United States b y public offi.cers of t h e
United States for certain purposes are set forth in other Treasury D e p a r t m e n t
circulars, as follows:
(1) As security for special deposits of public moneys, in Circular N o . 92
(revised).
(2) As security for deposits of public moneys in general depositaries a n d
limited depositaries, in Circular N o . 176, as amended.
(3) I n lieu of surety or sureties on penal bonds required by t h e laws of t h e
United States, in Circular N o . 154 (revised).
S E C . 306.124. Repeal of previous circulars subject to existing rights.—Treasury
D e p a r t m e n t Circular No. 300, dated July 31, 1923, as amended a n d supplemented,
and D e p a r t m e n t Circular N o . 666, dated July 21, 1941, are hereby repealed a n d
superseded, except t h a t nothing contained in these regulations shall be construed
to limit or restrict a n y existing rights which holders of securities heretofore issued
m a y have acquired under t h e circulars offering such securities for sale or under
the regulations in force a t t h e time of acquisition.
S E C . 306.125. Supplements, amendments, or revisions.—The Secretary of t h e
Treasury m a y a t a n y time, or from time to time prescribe additional, supplemental, amendatory, or revised rules a n d regulations with respect t o United States
securities.
W.
RANDOLPH BURGESS,
Acting Secretary of the Treasury.
A P P E N D I X . — C O M P U T A T I O N O F I N T E R E S T ON T R E A S U R Y
BONDS, TREASURY
N O T E S , AND T R E A S U R Y C E R T I F I C A T E S OF I N D E B T E D N E S S , AND C O M P U T A T I O N
OF D I S C O U N T ON T R E A S U R Y B I L L S
TREASURY BONDS, TREASURY NOTES, AND TREASURY CERTIFICATES O F
INDEBTEDNESS
C o m p u t a t i o n of interest on a n annual basis, one day's interest is 1/365 or 1/366
of 1 year's interest
C o m p u t a t i o n of interest will be m a d e on a n annual basis in all cases where
interest is payable in one a m o u n t for t h e full term of t h e security, unless such
219
EXHIBITS
term is an exact quarter-year (3 months) or an exact half-year (6 months), when
it is provided that interest shall be computed on a quarterly or semiannual basis,
respectively.
If the term of the securities is exactly one year, the interest is computed for the
full period at the specified rate, regardless of the number of days in such period.
If the term of the seeurities is less than one full year, the annual interest period
for purposes of computation is considered to be the full year from but not including
the date of issue to and including the anniversary of such date.
If the term of the securities is more than one full year, computation is made on
the basis of one full annual interest period, ending with the maturity date, and a
fractional part of the preceding full annual interest period.
The computation of interest for any fractional part of an annual interest period
is made on the basis of 365 actual days in any such period, or 366 days if February
29 falls within such annual period.
Computation of interest on a semiannual basis, one day's interest is 1/181, 1/182,
1/183, or 1/184 of 1/2 year's interest
Computation of interest will be made on a semiannual basis in all cases where
interest is payable for one or more full half-year (6 months) periods, or for one
or more full half-year periods and a fracftional part of a half-year period. A semiannual interest period is an exact half-year or 6 rrionths, for computation purposes,
and may comprise 181, 182, 183, or 184 actual days.
An exact half-year's interest at the specified rate is computed for each full
period of exactly 6 months, irrespective of the actual number of days in the
half-year.
If the initial interest covers a fractional part of a half-year, computation is
made bn the basis of the actual number of days in the half-year (exactly 6 months)
ending on the day such initial interest becomes due. If the initial interest covers
a period in excess of 6 months, computation is made on the basis of one full halfyear period, ending with the interest due date, and a fractional part of the preceding full half-year period.
Interest for any fractional part of a full half-year period is computed on the
basis of the exact number of days in the full period, including February 29 whenever it falls within such a period.
The number of days in any half-year period is shown in the following table.
For the half-year
Begmning from the 1st or 15th day of—January __
February
March
AprU
May
June
July
August
September
October
November.December
_.
__
_.
._-
One year (any 2 consecutive half-years)
Enduig on the 1st or 15th day of—
July..:.August
September.
October--November.
December.
January...
February.
March
AprU
May
June
Number of days
Regular
year
181
181
184
183
184
183
184
184
181
182
181
182
Leap year
182
182
184
183
184
183
184
184
182
183
182
183
365
Computation of interest on a quarterly basis, one day's interest is 1/89, 1/90,
1/91, or 1/92 of 1/4 year's interest
Computation of interest will be made on a quarterly basis in all cases where
interest is payable for one or more full quarter-year periods, or for one or more
full quarter-year periods and a fractional part of a quarter-year period.
A quarter-year interest period is an exact quarter-year of three months, and
may comprise 89, 90, 91, or 92 days. An exact quarter-j^ear's interest is computed
220
1955 REPORT OF THE SECRETARY OF T H E TREASURY
for each full quarter-year period irrespective of the actual number of days in the
quarter-year. For a fractional part of any quarter-year, computation is on the
basis of the actual number of days in such quarter-year (February 29 being
included if it falls within any such quarter-year). If the initial interest covers a
fractional part of a quarter-year (preceding a full quarter-year period), computation is on the basis of the actual number of days in the quarter-year (exactly
3 months) ending on the day such initial interest becomes due; if the final interest
covers a fractional part of a quarter-year (following a full quarter-year period),
computation is on the basis of the actual number of days in the quarter-year
beginning on the day such final interest begins to accrue and ending exactly three
months thereafter. The number of days in any quarter-year period is shown in
the following table.
For the quarter-year
Beginning from the
1st or 15th day of—
January _
February
March-.
April
May
June
July
August
September
October
November
December
Number of days
Ending on the
1st or 15th day of—
April .
May.
.'
June
July
August
September
October
November .
December ._
January
February.
March
.
i
One year (any 4 consecutive quarters)...
Regular
year
Leap
year
90
89
92
91
92
92
92
92
91
92
92
90
91
90
92
91
92
92
92
92
91
92
92
91
365
366
USE OF INTEREST TABLES
In the appended tables decimals are set forth for use in computing interest
for fractional parts of interest periods. The decimals cover interest on $1,000
for one day in each possible quarterly (table I), semiannual (table II), and annual
(table III) interest period, at all rates of interest, in steps of Ys percent, from Vs to
6 percent. The amount of interest accruing on any date (for a fractional part of
an interest period) on $1,000 face amount of any issue of Treasury bonds, Treasury
notes, or Treasury certificates of indebtedness may be ascertained in the following
way:
(1) The date of issue, the dates for the payment of interest, the basis (quarterly, semiannual, or annual) upon which interest is computed, and the rate of
interest (percent per annum) may be determined from the text of the security,
or from the official circular governing the issue.
(2) Determine the interest period of which the fraction is a part, and calculate
the number of days in the full period to determine the proper column to be used
in selecting the decimal for one day's interest.
(3) Calculate the actual number of days in the fractional period from but
not including the date of issue or the day on which the last preceding interest
payment was made, to and including the day on which the next succeeding
interest payment is due or the day as of which the transaction which terminates
the accrual of additional interest is effected.
(4) Multiply the appropriate decimal (one day's interest on $1,000) by the
number of days in the fractional part of the interest period. The appropriate
decimal will be found in the appended table for interest payable quarterly,
semiannually, or annually, as the case may be, opposite the rate borne by the
security, and in the column showing the full interest period of which the fractional period is a part. (For interest on any other amount, multiply the amount
of interest, on $1,000 by the other amount expressed as a decimal of $1,000.)
EXHIBITS
221
TREASURY BILLS
The methods of computing discount rates on U. S. Treasury bills are given
below:
Computation will be made on an annual basis in all cases. The annual period for
bank discount is a year of 360 days, and all computations of such discount for a
fractional part of a year will be made on that basis. The annual period for true
discount is one full year from but not including the date of issue to and including
the anniversary of such date. Computation of true discount for a fractional part
of a year will be made on the basis of 365 days in the year, or 366 days if February
29 falls within the year.
Bank discount
The bank discount rate on a Treasury bill may be ascertained by (1) subtracting
the sale price of the bill from its face value to obtain the amount of discount; (2)
dividing the amount of discount by the number of days the bill is to run to obtain
the amount of discount per day; (3) multiplying the amount of discount per day by
360 (the number of days in a commercial year of 12 months of 30 days each) to
obtain the amount of discount per year; and (4) dividing the amount of discount
per year by the face value of the bill to obtain the bank discount rate.
For example:
91-day bill—dated April 1, 1954—due July 1, 1954:
Principal amount—maturity value
$100. 00
Price at issue—amount received
99. 50
Amount of discount
. 50
$ 0 . 5 0 - ^ 9 1 X 3 6 0 H - $ 1 0 0 = 1.978 percent.
True discount
The true discount rate on a Treasury bill may be ascertained by (1 and 2)
obtaining the amount of discount per day by following the first two steps described
under "Bank discount"; (3) multiplying the amount of discount per day by the
actual number of days in the year from date of issue (365 ordinarily, but 366 if
February 29th of a leap year falls within the year from date of issue) to obtain the
amount of discount per year; and (4) dividing the amount of discount per year by
the sale price of the bill to obtain the true discount rate.
For example:
91-day bill—dated April 1, 1954—due July 1, 1954:
Principal amount—maturity value
$100. 00
Price at issue—amount received
99. 50
Amount of discount
$0.50-f-91X365-^$99.50 = 2.016 percent.
. 50
222
1955
REPORT
OF T H E
SECRETARY
OF T H E
TREASURY
T A B L E I.—Decimal for 1 day's interest on $1,000 at various rates of interest, payable
quarterly, or on a quarterly basis, i n regular years of 365 days and i n leap years of
366 days
Interest period ending on the 1st or 15th of-
Rate per annum
Quarter-year
of 92 days
Quarter-year
of 91 days
Quarter-year
of 90 days
Regular year
January
February
June
August
September
October
November
Regular year
July
December
Regular year
March
April
Leap year
March
April
Leap year
May
Quarter-year
of 89 days
Regular year
May
Percent
H
H
H
-.—
}.i
H
H
H
1
-
-—
m
I H —
m.—
m
m
m
i%—2
2H
2K
2H
2]^
2H.-.
2H
2^.
3
3H
SH....
SH
SH
SH
SH
SH
-
.—
.:-..
-
4.
^H
4H
m
m
43/4...
m-.
^ H
5...
5H
5H
5H
5H
5H...5H
5H
6
-•-
--
—
1.003
.006
.010
.013
.016
.020
.023
.027
.030
.033
.037
.040
.044
.047
.050
.054
.057
.061
.064
.067
.071
.074
.078
.081
.084
.088
.091
.095
.098
.101
.105
.108
.112
.115
.118
.122
.125
.129
.132
.135
.139
.142
.146
.149
.152
.156
.159
.163
396
793
190
686
983
380
777
173
570
967
364
760
157
554
951
347
744
141
538
934
331
728
125
521
918
315
711
108
505
902
298
695
092
489
885
282
679
076
472
869
266
663
059
456
853
250
646
043
739 $0.003 434 066 $0.003 472 222
478
.006 868 132
.006 944 444
217
.010 302 198
.010 416 667
957
.013 736 264
.013 888 889
696
.017 170 330
.017 361 111
435
.020 604 396
.020 833 333
174
.024 038 462
.024 305 556
913
.027 472 527
.027 777 778
652
.030 906 593
.031 250 000
391
.034 340 659
.034 722 222
130
.037 774 725
.038 194 444
870
.041 208 791
.041 666 667
609
.044 642 857
.045 138 889
348
.048 076 923
.048 611 111
087
.051 510 989
.052 083 333
826
.054 945 055
.055 555 556
565
.058 379 121
.059 027 778
304
.061 813 187
.062 500 000
043
.065 247 253
.065 972 222
783
.068 681 319
.069 444 444
522
.072 115 385
.072 916 667
261
.075 549 451
.076 388 889
000
.078 983 516
.079 861 111
739
.082 417 582
.083 333 333
478
.085 851 648
.086 805 556
217
.089 285 714
.090 277 778
957
.092 719 780
.093 750 000
696
.096 153 846
.097 222 222
435
.099 587 912
.100 694 444
174
.103 021 978
.104 166 667
913
.106 456 044
.107 638 889
652
.109 890 110
.111 111 111
391
.113 324 176
.114 583 333
130
.116 758 242
.118 055 556
870
.120 192. 308
.121 527 778
609
.123 626 374
.125 000 000
348
.127 060 440
.128 472 222
087
.130 494 505
.131 944 444
826
.133 928 571
.135 416 667
565
.137 362 637
.138 888 889
304
.140 796 703
.142 361 111
043
.144 230 769
.145 833 333
783
.147 664 835
.149 305 556
522
.151 098 901
.152 777 778
261
.154 532 967
.156 250 000
000
.157 967 033
.159 722 222
739
.161 401 099
.163 194 444
478
.164 835 165
.166 666 667
;0.003 511 236
. 007 022 472
.010 533 708
. 014 044 944
. 017 556 180
. 021 067 416
. 024 578 652
. 028 089 888
.031 601 124
.035 112 360
. 038 623 596
.042 134 831
.045 646 067
.049 157 303
. 052 668 539
. 056 179 775
. 059 691 Oil
.063 202 247
. 066 713 483
. 070 224 719
.073 735 955
. 077 247 191
. 080 758 427
. 084 269 663
.087 780 899
. 091 292 135
. 094 803 371
. 098 314 607
. 101 825 843
. 105 337 079
.108 848 315
. 112 359 551
.115 870 787
.119 382 022
. 122 893 258
. 126 404 494
.129 915 730
.133 426 966
.136 938 202
.140 449 438
. 143 960 674
. 147 471 910
. 150 983 146
.154 494 382
.158 005 618
.161 516 854
. 165 028 090
. 168 539 326
223
EXHIBITS
T A B L E II.'—Decimal for 1 day's interest on $1,000 at various rates of interest, payable
semiannually or on a semiannual basis, i n regular years of 365 days and i n leap
years of 366 days
Interest period ending on the 1st or 15th ofHalf-year of
184 days
Half-year of
183 days
Regular year
January
February
September
November
Regular year
October
December
Leap year
AprU
June
Rate per annum
MHH
H
H—.
%
H
1
m-...
IH—
Percent
—
-
-.
--:
.—
—-
—-
1^.
IH
IH
VA
m
-J
2
2H
2H
2H
2H
2H
2%
2H
3
31.^.
SH
SH—
SH
SH
SH
SH
4...
m.
4H
m
m
m
4%
m-5...
^H
bH
5^...
bH
bH
bH
bH
6
—-
J
1
-
.-—
-
—
-
—-
——
$0. 003 396
.006 793
.010 190
.013 586
.016 983
.020 380
.023 777
.027 173
.030 570
.033 967
.037 364
.040 760
.044 157
.047 554
.050 951
.054 347
.057 744
.061 141
.064 538
.067 934
.071 331
.074 728
.078 125
.081 521
.084 918
.088 315
.091 711
.095 108
.098 505
.101 902
.105 298
.108 695
.112 092
.115 489
.118 885
.122 282
.125 679
.129 076
.132 472
.135 869
.139 266
.142 663
.146 059
.149 456
.152 853
.156 250
.159 646
.163 043
739 $0. 003 415
478
.006 830
217
.010 245
957
.013 661
696
.017 076
435
.020 491
174
.023 907
913
.027 322
652
.030 737
391
.034 153
130
.037 568
870
.040 983
609
.044 398
348
.047 814
087' .051 229
826
.054 644
565
.058 060
304
.061 475
043
.064 890
783
.068 306
522
.071 721
261
.075 136
000
.078 551
739
.081 967
478
.085 382
217
.088 797
957
.092 213
696
.095 628
435
.099 043
174
.102 459
913
.105 874
652
.109 289
391
.112 704
130
.116 120
870
.119 535
609
.122 950
348
.126 366
087
.129 781
826
.133 196
565
.136 612
304
.140 027
043
.143 442
783
.146 857
522
.150 273
261
.153 688
000
.157 103
739
.160 519
478
.163 934
Half-year of
182 days
Regular year
April
June
Leap year
March
May
July
August
301 $0.003 434 066
601
.006 868 132
902
.010 302 198
202
.013 736 264
503
.017 170 330
803
.020 604 396
104
.024 038 462
404
.027 472 527
705
.030 906 593
005
.034 340 659
306
.037 774 725
607
.041 208 791
907
.044 642 857
208
.048 076 923
508
.051 510 989
809
.054 945 055
109
.058 379 121
410
.061 813 187
710
.065 247 253
Oil
.068 681 319
311
.072 115 385
612
.075 549 451
913
.078 983 516
213
.082 417 582
514
.085 851 648
814
.089 285 714
115
.092 719 780
415
.096 153 846
716
.099 587 912
016
.103 021 978
317
.106 456 044
617
.109 890 110
918
.113 324 176
219
.116 758 242
519
.120 192 308
820
.123 626 374
120
.127 060 440
421
.130 494 505
721
.133 928 571
022
.137 362 637
322
.140 796 703
623
.144 230 769
923
.147 664 835
224
.151 098 901
525
.154 532 967
825
.157 967 033
126
.161 401 099
426
.164 835 165
Half-year of
181 days
Regular year
March
May
July
August
$0.003 453
.006 906
.010 359
.013 812
.017 265
.020 718
.024 171
.027 624
.031 077
.034 530
.037 983
.041 436
.044 889
.048 342
.051 795
.055 248
.058 701
.062 154
.065 607
.069 060
.072 513
.075 966
.079 419
.082 872
.086 325
.089 779
.093 232
.096 685
.100 138
.103 591
.107 044
.110 497
.113 950
.117 403
.120 856
.124 309
.127 762
.131 215
.134 668
.138 121
.141 574
.145 027
.148 480
.151 933
.155 386
.158 839
.162 292
.165 745
039
077
116
155
193
232
271
309
348
387
425
464
503
541
580
619
657
696
735
773
812
851
890
928
967
006
044
083
122
160
199
238
276
315
354
392
431
470
508
547
586
624
663
702
740
779
818
856
224
1955 REPORT OF THE SECRETARY OF THE TREASURY
T A B L E III.—Decimal for 1 day's interest on $1,000 at various rates of interest,
payable annually or on an annual basis, in regular years of 365 days and in leap
years of 366 days
Rate per annum
H
H
HH
H
Percent
-
H
1.
IH
IH
IH
IH
IH
IH
V4..
2
2H
2H
2H
2H
2H
2H
2H.
3...
SH
SH
SH
SH
35/^
SH
SH
4
4H
4H-.
m
m
iH
m
m
5
bH
bH
bH
bHbH
bH
bH
6
—
-.—•-
H
.
:
_.
-—.
-
-
-^
-.
.-
-
.
_.
.
-.
Regular year, 365
days
$0.003
.006
.010
.013
.017
.020
.023
.027
.030
.034
.037
.041
.044
.047
.051
.054
.058
.061
.065
.068
.071
.075
.078
.082
.085
.089
.092
.095
.099
.102
.106
.109
.113
.116
.119
.123
.126
.130
.133
.136
.140
.143
.147
.150
.154
.157
.160
.164
424 658
849 315
273 973
698 630
123 288
547 945
972 603
397 260
821 918
246 575
671 233
095 890
520 548
945 205
369 863
794 521
219 178
643 836
068 493
493 151
917 808
342 466
767 123
191 781
616 438
041 096
465 753
890 411
315 068
739 726
164 384
589 041
013 699
438 356
863 014
287 671
712 329
136 986
561 644
986 301
410 959
835 616
260 274
684 932
109 589
534 247
958 904
383 562
Leap year, 366
days
.0.003 415 301
. 006 830 601
.010 245 902
.013 661 202
.017 076 503
. 020 491 803
. 023 907 104
. 027 322 404
. 030 737 705
.034 153 005
.037 568 306
. 040 983 607
. 044 398 907
. 047 814 208
.051 229 508
. 054 644 809
.058 060 109
.061 475 410
. 064 890 710
. 068 306 Oil
.071 721 311
. 075 136 612
.078 551 913
.081 967 213
.085 382 514
.088 797 814
.092 213 115
.095 628 415
.099 043 716
.102 459 016
.105 874 317
.109 289 617
. 112 704 918
.116 120 219
.119 535 519
.122 950 820
. 126 366 120
.129 781 421
.133 196 721
.136 612 022
.140 027 322
.143 442 623
.146 857 923
.150 273 224
.153 688 525
.157 103 825
. 160 519 126
.163 934 426
EXHIBITS
225
Taxation Developments
Exhibit 19.—Extract from the Budget Message of the President, January 17,
1955, on tax policy
Last year we made great progress in reducing tax burdens and improving
the tax structure. Total tax reductions of 7.4 billion dollars became effective.
This was the largest tax reduction in any single year in the country's history.
It was made possible only by large cuts in Government expenditures. The
basic tax law was revised to relieve hardships for millions of individuals and to
reduce tax barriers to economic growth.
The budget would have been balanced for the current fiscal year if there had
been no tax cuts. However, it was desirable to share the benefits from the
large expenditure reductions. This enabled the people to have the extra money
to spend for themselves which they retained because of the reduction in their
taxes.
In view of the prospective deficit, we cannot afford to have any further loss
of revenue this year through reductions in taxes. The corporate tax rate would
be automatically reduced under existing legislation from 52 to 47 percent on
April 1 with a revenue loss of about 2 billion dollars for a full year unless extended. Under existing law, the excise taxes on liquor, tobacco, gasoline, and
automobiles would also be automatically reduced on April 1, with a revenue loss
of 1 billion dollars unless appropriate legislation is enacted by the Congress
extending them.
In the fiscal year 1956, there will be an automatic revenue reduction (as compared with 1955) of almost 2 billion dollars under existing law, wholly apart from
any changes in tax rates. The principal reason is the completion of the plan
adopted 5 years ago under which payments of corporate taxes have been moved
forward into earlier fiscal years. Fortunately, this reduction in 1956 will be more
than offset by increases in revenue due to the economic growth of the country.
Because we must keep our existing revenues intact, I have already recommended to the Congress in my State of the Union Message that existing rates
on both excises and corporate incomes be extended for 1 year. Any other course
of action would result in either (1) inadequate expenditures for national security,
or (2) inflationary borrowing.
During the past year the Treasury Department has continued to examine
possible changes in the tax laws concerning which no recommendations were
made in the revision of the tax laws last year. As final conclusions are reached
by the Department they will be sent to the Congress.
I have also directed the Secretary of the Treasury promptly to make recommendations for any other changes in the laws which may be found necessary to
prevent anyone from avoiding his fair share of the tax burden.
The present tax take of nearly one-fourth of our national income is a serious
obstacle to the long-term dynamic growth of the economy which is so necessary
for the future. There must be the means for providing more and better jobs
not only for those who are working today but also for the millions of young people
who will come of working age in future years. The stimulus of further tax
reductions is necessary just as soon as they can properly be made.
We must always make adequate provision for our security and other essential
services, and further tax reductions can only be made as savings in governmental
expenditures or increased revenues resulting from growth in our economy are in
sight.
However, further tax reduction remains a firm goal of this administration,
and our policy is directed to achieving both the savings in elxpenditures and the
economic growth that will make such reductions possible.
I hope that tax reductions will be so justified next year. If so, I shall recommend a reduction in taxes to spread the relief fairly among all taxpayers in a way
which will be the most effective to relieve individual tax burdens and to increase
incentive for effort and investment.
356812—56
226
1955 REPORT OF THE SECRETARY OF THE TREASURY
Exhibit 20.—Statement by Secretary of the Treasury Humphrey, February 28,
1955, before the Senate Finance Committee urging rejection of the $20 tax
cut proposal
I am very glad to appear before your committee on this very important matter.
I have a short statement, and then I will be prepared to try to answer such
questions as may occur to members of the committee.
Your committee has before it this morning a $20 tax cut which was suddenly
sprung on the Ways and Means Committee and hurriedly passed through the
House of Representatives last week by a scant margin of only five votes with only
a limited hearing and no time for thoughtful consideration.
I strongly urge the Senate Finance Committee to reject this proposal as
completely contrary to the public interest.
President Eisenhower asked the Congress to continue responsible financial
management of the Government's affairs by extension of (1) the corporate
income tax rate of 52 percent and (2) the excise taxes on tobacco, liquor, et
cetera, both of which otherwise would go down automatically on April 1. These
two extensions will give the Government $2.8 billion in revenue and will help to
continue the progress toward lower deficit financing and a balanced budget.
The $20 proposal has been hastily tacked on as an amendment to this sound
bill.
This $20 proposal would give every taxpayer a reduction of $20 for himself,
his wife, and each dependent. It would take about 5 million taxpayers completely off the Federal income tax rolls. And it would lose about $2.3 billion of
revenue in a full year.
Now, why is this $20 proposal contrary to the public interest? It is contrary
to the public interest because it means reversing the successful trend during the
past 2 years in cutting deficits and working toward a balanced budget. The
budget deficit for fiscal year 1953 was almost $9K billion and a deficit projected
for fiscal year 1954 was nearly $10 bilhon.
We cut planned spending in fiscal year 1954 by more than $10 billion. We
cut the deficit in fiscal 1954 by more than $6 bilhon and so moved two-thirds
of the way toward a balanced budget. With these spending cuts firmly in sight
we cut taxes by $7.4 billion, the largest single tax cut in history.
This administration advocated further tax cuts but only at such times as we
can see them justified by further cuts in spending and increased revenues from
economic growth that broadens the tax base.
The President said in his State of the Union Message, "I am hopeful that such
reductions can be made next year." Both the President's budget message and
his economic report also expressed hope for a tax reduction next year but only
if expressly justified by spending cuts and increased income from economic
growth.
To vote a $20 tax cut now, before we know we can afford it next year, and
without any indication of where the money is coming from is nothing but an
irresponsible gesture. It is based only on hopes as yet entirely unrealized which
may well turn out to mean heading back into heavy deficit financing, with all the
inflationary dangers that such borrowing means for the American people.
There has been some misleading talk about justifying the $20 proposal on the
ground that the "little folks" have been entirely neglected. Let's look at the
record. The $7.4 billion tax cuts last year included an income tax cut for every
taxpayer in America. The cut averages about 10 percent for all the lower income
taxpayers but was scaled down to only about 2 percent for the highest bracket
incomes. These reductions applied to every single taxpayer in this Nation.
Excise taxes were cut by a billion dollars on goods of everyday use. And
millions upon millions of Americans got tax reductions in relief provisions for
retired people, widows, working parents, and the sick or hospitalized. These
reductions were predominantly in the low-income group.
But even more important is the fact that this administration has been slowly
getting the Government's financial affairs under control to help the economy
expand and so make constantly more and better jobs.
A job is more important than a tax cut.
The investment of money in tools, plants, and equipment which makes jobs
has been stimulated. Confidence has increased in the Government and in the
maintenance of sound policies in the future as well as in the ability of our free
economy under such policies to constantly develop more and better jobs, better
EXHIBITS
227
living, and more security for all. The economic gains we are now enjoying are
firm evidence of the fact that this confidence is justified.
This proposed tax cut is entirely unjustified by* firm evidence at this time. If
it is paid out of borrowed money requiring additional deficit financing, which is
all that is in sight at this moment, it can start us right back on the reckless road
of inflation with all its cruel thievery.
Inflation, rampant for several past years, has been checked. The cost of living
has not increased now for over 2 years as compared with the fact that it almost
doubled in the 15 previous years. This has been worth billions of dollars to
millions of Americans.
This checking of inflation has protected not only the full purchasing value of
peoples' current earnings but has insured the full worth of their savings in savings
accounts, insurance policies, pension funds, et cetera, with which they are trying
to provide for their own and their loved ones' futures.
And let us always remember this: that it is not the rich who need protection
against inflation. It is the little folks who suffer the most when inflation takes
hold in a land.
I hope the committee will vote out a bill excluding the $20 tax cut proposal.
Exhibit 21.—Statement by Secretary ofthe Treasury Humphrey, March 14,1955,
concerning the tax bill pending in the Senate
The United States Senate now appears to have definitely abandoned the original
straight $20 Democratic tax cut plan and I am encouraged to believe that it will
reject the unsound $20-10 compromise tax cut proposed in connection with the
proper extension of the increased corporation and excise taxes.
As Government spending is being reduced, this administration has taken many
steps to help the economy make the transition from high to lower Government
spending. One of the principal ways in which our economy is being helped to
make that transition successfully was the enactment of last year's tax program,
giving tax relief to every taxpayer. We are now on the way up on a broad front.
To repeal, as this quickie compromise now proposes, some of the important tax
changes which have been helping to make new jobs and better times in this
recovery would certainly not be in the best interests of the people.
The American people can be seriously harmed by unwise political tinkering
with a tax program which has helped set the present economic recovery in motion.
It is entirely misleading to argue that this newest proposal which works against
the making of new and better jobs is really in the interests of the "little folks."
Their claims of increased revenue to help to balance this year's budget are
fantastic. You don't help pay your way this year by proposing to collect more
taxes in the future two or three years from now. You don't help to increase the
purchasing power of the "little folks" by repealing the laws which are helping to
make their jobs and then claiming to increase their purchasing power by $10 and
$20 a year tax reductions which they don't even begin to get until nearly a year
from now and then at the rate of but a few cents a week for only part of the
people.
Confidence in the Government's handling of its financial affairs in a sound and
healthy way is far more important to the people, both to the "little people" they
talk so much about and to the great middle class of fine Americans who are the
great majority of our total population, than any political quickie gimmick can
possibly be.
I hope that the administration's request for extension of both increased corporation and excise taxes will be approved without addition of this latest misleading
compromise proposal as a crippling amendment.
Exhibit 22.—Statement by Secretary of the Treasury Humphrey, May 11, 1955,
before the Senate Finance Committee urging the repeal of Sections 452 and
462 of the Internal Revenue Code of 1954
Mr. Chairman and members of the committee, I am here today to urge the
repeal of Sections 452 and 462 of the Internal Revenue Code of 1954.
The original objective of these two sections, which cover prepaid income and
reserves for estimated expenses, was simply to conform tax accounting with
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195 5 REPORT OF THE SECRETARY OF THE TREASURY
business accounting. It was never intended that these provisions would result
in any substantial loss of revenue or result in windfalls to taxpayers. A review
of the eonsideration of this subject by this committee will confirm the impression
held at the time by lawyers, accountants, and businessmen that the basic motive
for these provisions was simplification of tax accounting procedures, and not
radical tax reductions.
This tax law became effective on August 16, 1954. During the fall, as the
knowledge of its provisions increased, there began to be rumors that these particular provisions might not work as originally intended.
Before the end of the year, studies by the Treasury staff, working with the
staff of your committee, were undertaken to see if the threatened situation could
properly and effectively be cured by regulation. Proposed regulations were
issued on January 22. However, until the time came when these provisions
began to be put into actual practice by taxpayers preparing their income tax
returns and the 30 days expired for protests against the proposed regulations,
there was not much reliable information available.
It then developed that there is a sharp difference of opinion between taxpayers
and the Government as to the scope of these sections. The tentative regulations
issued by the Treasury on January 22, in order to carry out the provisions of the
law, have come under strong attack as being too restrictive in limiting the intended
application of the sections. Taxpayers have already served notice that they
intend to litigate this restriction. Should they be successful in the courts, the
revenue loss under the law might be far in excess of anything contemplated by
the Congress. As soon as the checks were sufficiently conclusive to satisfy the
staff that the original objective might not be carried out and that the situation
could not be adequately corrected by regulation, they reported their findings and
we promptly called the matter to the attention of the Congress.
The original estimate for several so-called bookkeeping items, of which Sections 452 and 462 were the principal revenue items, was $47 million. The limited
check that we have made around the country indicates that the loss would be
substantially greater than the original estimates. How much greater it might
be we cannot now say because we simply do not have the information as to what
the bulk of taxpayers concerned might claim should these provisions remain in
the law. And with the litigation that would surely be involved in many cases
should the provisions remain, we might not have the final figures on the loss for
years to come.
Repeal of these two provision will reinstate the legal rights of everyone just
as they were under the old law prior to last August and protect the Government
from revenue loss which was never intended by the Congress.
The. objective of trying to conform tax accounting with business accounting
is still a sound one. In trying to do this, however, a serious mistake was made
in not sufficiently limiting the application of the provisions and restricting the
revenue impact of the changes as enacted. That is why repeal is required rather
than amendment, so as to be sure that in any new approach to the original
objective the revenue is adequately protected.
We have studied many proposals to correct the situation by amendment of the
sections rather than repeal, but we have found no proposal which we can be sure
will accomplish the original objective without giving some taxpayers an unintended advantage or producing very involved technical problems creating
uncertainty and litigation.
The Treasury Departnient is firmly opposed to any tax legislation which gives
any American an unfair advantage over another taxpayer. We will always recommend prompt action be taken to correct any situation which ean result in windfalls to any taxpayer. To firmly follow out our policy of being as fair and just
to all taxpayers as is humanly possible, I am urging outright repeal of the two
sections which would have resulted in some taxpayers getting a break over others.
As the chairman knows, I sent the chairman of the House Ways and Means
Committee last week a letter stating that none of the other approximately 70
suggestions for perfecting the Internal Revenue Code of 1954 require irnmediate
legislation. With this the chairman of the House Ways and Means Committee
agreed in a letter which was made publie last Friday along with my letter to him.
All of the suggestions eonsidered by the staffs of the Joint Committee ori Internal
Revenue Taxation, the Ways and Means Committee, and the Treasury, are
wholly noneontroversial. More than half are clerical errors, such as misprints,
misspelling, bad punctuation, and like errata with no legal significance. Other
suggestions pertain to items on which the Treasury eould issue better regulations
EXHIBITS
229
if somewhat more precise statutorj^ language were adopted. The revenue effect
of the suggestions is insignificant, if indeed they have any overall revenue effect.
That completes my statement, Mr. Chairman, except for one thing. I want
to say that we are continuously studying the effect of this law as it moves into
practice, as the various changes are worked out by the taxpayers in filing their
returns. We are keeping very close track of them. And if and when at any
time if appears that the intent of Congress is not being carried out as orignally
intended, we will be back with suggested amendments.
Exhibit 23.—Letter of Secretary of the Treasury Humphrey, July 26, 1955, to the
Chairman of the House Ways and Means Committee suggesting changes in
the tax treatment of cooperatives and their patrons
MY DEAR M R . CHAIRMAN: Recent court decisions have made it clear that
certain tax legislation which the Congress enacted in 1951 is not working out as
the Congress intended.
Public Law 183, 82d Congress, First Session (now embodied in Sections 521
and 522 of the Internal Revenue Code of 1954) eliminated the tax exemption of
cooperatives which had existed previously. A study of the legislative history
of this law shows that it had the clearly intended objective of taxing all cooperatives' income in the year earned, either to the cooperative or to the individual
member.
Prior law had permitted cooperatives to accumulate necessary reserves tax
free. In the 1951 law the Congress removed the allowance for tax-free reserves
and provided that cooperatives were to be taxed on earnings at the regular corporate rates. However, in computing taxable income they were allowed deductions not only for cash distributions to their patrons but also for allocations made
to patrons of their proportionate shares of the ineome of the cooperative. The
allocations could take any of many forms, including certificates of beneficial
interest, and promissory notes with or without due dates or interest.
In taking this action in 1951, the Congress apparently relied on rulings of the
Internal Revenue Service that patronage allocations were taxable to patrons
when made, regardless of their form. Accordingly, the 1951 act made no specific
reference to the taxability of refunds in the hands of patrons. Congress apparently assumed that the rulings of the Internal Revenue Service were valid,
that cash refunds would be taxable currently to the patrons in full, and that
noncash allocations, in whatever form, also would be taxable currently to the
patrons at face amounts.
It thus was intended in 1951 that the cooperative ineome should be taxable
as it was earned either to the cooperative itself, or to its members. Such income
was to be taxable to the cooperative as a eorporation unless paid in cash or
otherwise allocated as patronage refunds, in which eases it was assumed to be
taxable to the patrons or members.
However, several courts now have held that when allocation certificates issued
to patron-members have no fair market value, they are not properly includible
in the taxable ineome of the patron-members when issued. Notwithstanding
the nontaxability of these allocations to the members, they remain currently
deductible by the cooperative under the clear terms of the 1951 act. It therefore
is possible for cooperatives to take current tax deductions for certificates which
are nontransferable, nonredeemable, and noninterest bearing, and not taxable to
anyone. Cooperatives thereby may retain earnings, for indefinite periods of
time, with no liability for ineome tax by either the cooperative or its members.
Thus, the 1951 aet has failed to accomplish its purpose and, contrary to congressional intent, in at least some instances cooperatives may retain earnings with
no tax imposed either on them or their members.
The general plan of the 1951 legislation, to tax all income from cooperatives'
operations as it is earned either to the cooperative or to its patron-members,
might now be made effective by appropriate action of Congress in the following
manner.
It could be provided that cooperatives could take deductions in computing
their taxable income only for (a) cash distributions and (b) noncash allocations
issued in such form or under such circumstances as would make then currently
taxable to the patron-members receiving them, and (e) the amount deductible
by the cooperative itself should not exceed the amount sp currently taxable to
patron-members.
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195 5 REPORT OF THE SECRETARY OF THE TREASURY
This would not interfere with the proper function or financing of cooperatives,
but would make it certain that all income is taxed in one place or the other as
it is earned. The traditional handling of cooperative affairs would not be impeded.
Some difficulties are involved in requiring patron-members to pay tax currently
on noncash allocations. Where the patron-member gets no cash distribution, he
may not have funds to pay.the tax. The Internal Revenue Service has received
numerous complaints from individual patron-members who object to paying tax
on noncash allocations. Many people naturally consider only cash receipts and
expenditures in making their income tax returns.
' These difficulties can be ehminated by the adoption of a withholding system
comparable to that on wages and salaries. The tax could be withheld at the
bottom rate for individuals (now 20 percent). As in the case of wages and
salaries, refunds automatically would be made to those entitled to them and
additional taxes paid by those subject to higher tax rates. Withholding-at-source
would help both patron-members in payment of their taxes and the Treasury in
its enforcement and administration problems.
The preceding changes would implement the intent and purposes of the act of
1951. They would make it sure that noncash allocations would be taxable, and
that tax would actually be paid on behalf of the recipients. Further wholly
tax-free additions to the capital of cooperatives would be prevented.
Cooperatives still would be able to retain for their business use the entire
amount of their earnings, subject only to the 20 percent withheld and paid on the
tax liabilities of patron-members, by allocating all earnings to their patronmembers in the form of taxable certificates. At some appropriate time your
committee may desire to undertake a careful study to determine whether or not
this result is in the public interest, in view of the alleged competitive situation
existing between cooperatives in competition with corporate businesses which can
expand their activities by retained earnings only after paying tax at the full
corporate rate, or by sale of securities to the investing public.
The Treasury Department will be glad to be of such assistance as we can to
you and your staffs in any consideration that you may give to the various aspects
of this subject.
Sincerely,
G. M.
HUMPHREY,
Secretary of the Treasury.
Exhibit 24.—Statement by Secretary of the Treasury Humphrey, June 27, 1955,
before the House Ways and Means Committee on the Individual Retirement
Act of 1955 (H. R. 10)
Mr. Chairman, I am pleased to accept your invitation to discuss the proposals
to allow self-employed people to postpone payment of income tax on a part of their
current earnings which they set aside to provide retirement income in later years.
The purpose of such a tax allowance would be to give the self-employed opportunities to build up retirement incomes somewhat comparable to those which
employees can now receive through pension plans, financed in whole or in part
by their employers. Employee pension plans, if arranged on a nondiscriminatory
basis, now receive favorable tax treatment.
The Treasury Department has made an extended study of various proposals
for special tax treatment of savings by self-employed people to provide themselves with retirement income. We have prepared a report covering what we
deem to be the major problems involved in these proposals, and an analysis of
their potential effects on the revenue, which Mr. Williams will present to you.
This report summarizes our views and suggestions.^
In view of the difference of treatment under the present law between selfemployed individuals and employees, the Department would be sympathetic to a
limited form of special allowances when general tax relief is possible in the future.
The self-employed who might qualify for such treatment would be necessarily
limited and might well be defined as those who are then covered on a mandatory
basis under the social security system. Self-employed groups who are now excluded from social security should have the opportunity to come under the
system at the same time as tax provisions for retirement income of self-employment are established.
1 This report appears in gearings before the House Committee on Ways and Means, Individual Retirement Act of 1955, 84th Congress, 1st session, pp. 7-33.
EXHIBITS
231
As you will see from the analysis of the problems which will be given to you
by Mr. Williams, there are many important points to be considered and resolved
before any practicable plan can be evolved. We will welcome the opportunity
to assist your committee in its further studies of the subject.
However, in view of the revenue loss involved in even a restricted plan, the
Treasury Department does not now favor the adoption this year of any plan
giving tax exclusions for savings for retirement income to self-employed
people.
At this point, I would like to ask Mr. Williams to take up his detailed study
and present it to you.
Exhibit 25.—Letter of Secretary of the Treasury Humphrey, July 27, 1955, to the
Chairman of the House Ways and Means Committee submitting a suggested
draft of legislation relative to the taxation of corporate business income earned
abroad
MY DEAR MR. CHAIRMAN: Last year, your committee and the House of Representatives included as part of the tax revision bill new provisions giving a lower
rate of tax on corporate business income earned abroad, somewhat similar to
that available since 1942 to income earned in the Western Hemisphere. Provision also was made for postponement of taxes on the income of foreign branches
until it was removed from the country where it was earned, a treatment somewhat comparable to that now given to the income of foreign subsidiaries. These
sections were omitted from the bill as reported by the Senate Finance Committee, but the report of that committee stated the hope that provisions along
these lines might be developed in the conference between the House and the
Senate before final passage of the tax bill. This was not done. The Treasury
Department has continued to examine the problem since that time.
I now submit to you a suggested draft of legislation designed to secure the
results which were sought and apparently desired last year.^ This is in accord
with the President's recommendation in 1954, which was reaffirmed in his message on foreign economic policy on January 10 of this year.
The purpose of this recommended legislation is to facilitate the investment
abroad of capital from this country. At present, our business firms are at a disadvantage in countries with lower taxes than our own when they have to compete with local capital, or capital from countries which impose lower taxes on
foreign income than we do. Foreign countries are also under an incentive to
increase taxes on United States enterprises up to the level of United States tax
rates.
Capital investment will aid in the economic development of foreign countries.
Participation by United States enterprises will encourage development along the
lines we have followed in this country which are especially helpful in raising
living standards, through high wages and mass markets, and which will promote
the flow of international trade with the United States.
The Treasury staffs and I will be glad to be of such assistance as we can to
you, your committee, and your staffs in any consideration which you may wish
to give to the taxation of foreign business income. A memorandum explaining
our analysis of three of the problems we have considered in this area is enclosed.
Sincerely,
G. M . HUMPHREY,
Secretary of the Treasury,
MEMORANDUM ON PROBLEMS IN TAXATION OF FOREIGN INCOME
The principal problem in developing recommendations for new legislation on
taxation of income from foreign sources has been in the definition of foreign
business income. Some argue for a broad definition, which would include not
only income earned from significant business activity actually conducted abroad
but also income from products made here and merely sold for delivery abroad.
Others favor a definition related to a "permanent establishment" abroad, or to
the existence of a business activity subject to taxation in the country where it
is conducted. Still others prefer a specific listing of designated activities which
1 The draft of suggested legislation is omitted from this exhibit. The suggestions are contained in the
biU H.-'R. 7725 introduced in the House of Representatives, July 29, 1955, by Mr. Cooper, Chairman of
the Committee on Ways and Means.
232
1955 REPORT OF THE SECRETARY OF THE TREASURY
are deemed to be of particularlimportance. Naturally, the representatives of
almost every particular industry or activity argue that they should not be left
out of any group which receives favorable tax treatment.
fear In our analysis of the problems of definition, the following principles have
seemed important: (1) As a matter of national policy, it would not be desirable
or wise for this country to subsidize exports by taxing profits from exports at a
lower rate than profits from domestic sales. For this reason, a definition based
on ultimate destination, or place of delivery of goods produced, would not be
satisfactory. (2) Small business should have the same potential advantages as
larger businesses. (3) The standard selected should not be subject to manipulation by arrangements, for example, to rent an office or pay a small tax abroad to
qualify for a substantial tax advantage at home.
The definition of foreign income suggested in the attached draft legislation
revolves around the active conduct of a trade or business abroad, with the exception of export trade. It is a broad concept, related to economic activities
which often involve capital investment and. typically involve full participation
and integration in the economy of the country where it is carried on. To avoid
any tax motivation for companies to shift to foreign countries their production
of goods intended for our own home market, the importation to the United
States of any substantial part of the products manufactured abroad would
disqualify a company for the special tax treatment.
Inevitably there will be difficulties in administering this or any other definition
of foreign income. In some instances it will be difficult to draw the dividing line.
between manufacturing which would qualify for the lower tax and minor assembly
or repackaging which would not qualify. Such difficulties, however, should not
stand in the way of an attempt to foster economic development through private
capital investment.
Two problems, of more limited scope, exist in connection with the postponement
of tax on ineome earned by foreign branches.
First, under present law the income from a foreign subsidiary corporation is
not taxed until it is received by the domestic parent company. There is no legal
basis for taxation by this country of such ineome so long as it is held abroad by
the foreign subsidiary, regardless of how it is reinvested or shifted from the country
where it is earned to other foreign countries. It has been proposed that foreign
branches of United States corporations be given similar latitude to shift funds
between countries with no intervening tax imposed by the United States until
foreign income is finally repatriated.
A deferral of tax on foreign income until it is repatriated would give the maximum encouragement to foreign investment. However, such a provision would
be subject to abuse. There could be indefinite postponement of tax by shifting
profits earned in high-risk areas to low-risk investments in other places. The
diversification and growth of foreign investment among firms already operating
profitably abroad would receive greater benefit than that of firms presently
operating solely in the United States. It therefore seems preferable to adopt
deferral of tax on branch income on a limited basis, at least in the first instance.
The second problem concerns the simultaneous allowance of both a deduction
and a credit for foreign taxes on ineome received through foreign subsidiaries.
At present the earnings of a foreign subsidiary corporation, when received as
dividends by the parent corporation here, are subject to the regular United
States corporation ineome tax, but a credit is allowed against the United States
tax for any foreign ineome tax paid by the subsidiary. The United States tax
is imposed only on the subsidiary's net earnings after payment of the foreign
income tax. The combined effect of the eredit and deduction (under some combinations of rates) is a somewhat lower total tax, foreign and domestic, than the
United States tax would be by itself. For example, when the foreign corporate
tax rate is one-half our rate (26 percent against our 52 percent), the combined
effective tax on the foreign income (foreign and domestic) works out to only a
little over 45 percent. This feature of the foreign tax credit was adopted in the
Revenue Act of 1918. No recommendation has been made to change it, presumably because it has not seemed desirable to increase, directly or through technical
changes, the present tax on foreign business income.
A similar treatment of foreign income taxes is suggested in the proposed taxation of income from foreign branches. This is not a necessary or essential
part of the program, and is included only to secure similarity with the taxation
of income from subsidiaries, along the lines established by the 1918 Revenue
Act.
EXHIBITS
233
Exhibit 26.—Statement by Secretary of the Treasury Humphrey, July 18, 1955,
before the Subcommittee on Legal and Monetary Affairs of the House Government Operations Committee on accelerated amortization for certain emergency
facilities
I welcome this opportunity to appear before you and to express the point of
view of the Treasury Department on the provisions in our tax laws which allow
accelerated amortization for income tax purposes of the cost of certain "emergency
facihties."
I want to make it clear that I am not urging repeal. Final decisions on the
scope of the program should not be made until the studies now being made by
the Defense Mobilization Board have been completed. I wish at this time
simply to make certain suggestions which I believe should be carefully considered
in any study of the matter.
The "crash" defense program which was initiated in connection with the
Korean War has been substantially completed.
Emergency amortization served a useful purpose during the early phases of
rebuilding and expanding defense plant capacity to meet that emergency. However, the accelerated tax writeoff is an artificial stimulus of a dangerous type.
Its indefinite continuance involves the very real danger that interests receiving
the benefits of it come to rely upon it to the detriment of others who are not so
favored. A defense mobilization program on a substantial scale may be essential
for years to eome. Expansion of our defense facilities should be an integral part
of our broad, orderly, long-range, natural economic growth. Our basic defense
capacity cannot soundly be separated from the broad base of productive capacity
in general on which our Nation rehes for its economic strength. Artificial stimulants may well become artificial controls. Because this one is not of universal
application but is bestowed only upon some who especially qualify as against
others who do not, it could become a hindrance to sound, balanced, vigorous
growth of our whole free economy. It is not the American way.
Moreover, I think it important to remember, in any consideration of the problem, that several recent changes in the tax laws have substantially altered the tax
picture which existed when accelerated amortization of emergency facilities was
first adopted. Then we had an excess profits tax which took up to 82 percent
of the profits from corporate business, and thereby tended to discourage large
expenditures for new plant facilities. That tax was repealed as of January 1,
1954. The new liberalized depreciation methods under the 1954 Internal Revenue
Code now permit faster capital recovery by all taxpayers equally and meet the basic
needs of the whole economy. This reduces the need for singling out particular
taxpayers or particular facilities for more favorable treatment than others receive.
A highly selective program may well have merit if it is strictly limited to very
special cases: where there is present and pressing need for goods that would be a
"must" in time of war and which cannot be met by present facilities and where
Government contribution is necessary to meet those goals. I suggest, however,
that the broader the program, the more it extends into areas other than the direct
production of goods that are directly needed for war, the more difficult it becomes
to administer wisely, without essentially arbitrary or discriminatory results.
Indeed, the very existence of such a program may lead some taxpayers to construct facilities deliberately colored to meet supposed defense needs. The tax
benefits often could more than absorb the waste and extra expense to the taxpayer, but it hardly would be good for the economy.
The revenue effects of the program are significant. I shall present three statistical tables to the committee. They have been prepared by the Treasury staffs.
These tables will give you the facts, and our estimates of the direct dollar impact
of the present program on the revenue. You will note that the estimated revenue
loss this fiscal year will be 880 million dollars. With our budget not in balance,
this figure gives us serious concern. Extension of the program well may stand in
in the way of future more general tax reductions for all taxpayers which would be
of important assistance to all business and to our continued economic growth and
expansion.
Finally, I should like to speak very frankly about this use of the tax laws to
further special programs and accomplish purposes other than simply the collecting
of taxes. The power to tax is the power to destroy and revenue laws should be
used only to equitably raise revenue, not for other indirect purposes. It is
dangerous to use the tax laws for social purposes, to favor one citizen or group of
citizens over others, to exercise economic controls, or to indirectly subsidize any
segment of our economy.
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1955 REPORT OF THE SECRETARY OF THE TREASURY
If,^ in the wisdom of the Congress, such subsidies or assistance to special communities or for special purposes are desired, then appropriations should be made
for the purpose which can be submitted to the Congress through regular channels
where the amounts will be well known and where the Congress specifically
can vote in favor of or in opposition to special treatment for any group. Under
this program of tax reduction in special cases, our net revenues can be reduced
and our deficits increased without formal action or appropriations by the Congress. This use of the tax laws, where the stimulants are applied by men, not by
law, is appropriate only in an emergency or under special conditions under rigid
restrictions when usual procedures are inadequate for our protection.
Rapid amortization unquestionably was of real assistance in expediting preparation for the war and still ean be useful if limited strictly and exclusively to
that end. It induced the investment of large sums of private means for production that was made available under private management far better and far quicker
than otherwise would have been obtained. It kept the investment of public
funds to a minimum and it left no great burden of public properties to be disposed
of when their war purposes had been served.
The Office of Defense Mobilization has recently requested the agencies that
make reeommendations to it such as the Departments of Commerce and Interior
and the Defense Transport Administration, to review all existing expansion goals
with the following points in mind:
1. Evaluate goals on the basis of defense need. The need for additional expansion shall be quantitatively measured in terms of wartime supply and
requirements.
2. Expansion goals shall be based upon shortages which, in the judgment of the
delegate agency, will not be overcome without the incentive of tax amortization.
When the Defense Mobilization Board has completed its review of the program
in the light of these criteria, and made its recommendations to the Director of
Defense Mobilization, it is expected that the program for the future will be on a
proper basis.
This is not critical of the past. Nor is it thought best to abandon the practice
entirely. But its usefulness in the future will be greatest for the good of the
Nation as a whole if from now on it is used only sparingly and very rigidly and
strictly confined to direct war-requirements applications.
Effect of allowance of emergency amortization certificates: based on certificates of
$30,521 million issued through June 29, 1955
[In miUions of dollars]
Excess of accelerated amortization
Normal depreciation 2
Calendar
year
1950
1951
1952
1953
1954
1955
1956
1957
1958
1959
1960
1961
1962
1963
1964
:_
Value of
completed
projects I
Amount
subject
to accelerated
amortization
straight
line
Declining
balance
700
4,167
9,683
16,000
22,000
26, 594
28,244
29,479
30, 521
30, 521
30, 521
30, 521
30, 521
30, 521
30,521
420
2,500
5,810
9,600
13,200
15,956
16,946
17,687
18,313
18,313
18,313
18,313
18,313
18,313
18,313
6
87
249
463
684
875
987
1,038
1,079
1,098
1,098
1,098
1,098
1,098
1,098
6
87
249
463
787
1,132
1,279
1,289
1,279
1,228
1,146
1,080
1,037
1,000
967
Accelerated
amortization
21
292
831
1,541
2, 280
2,895
2,999
2,633
2,060
1,383
743
372
200
63
straightline
depreciation
Decliningbalance
depreciation
15
205
582
1,078
1,596
2,020
2,012
1,595
981
285
-355
-726
-898
-1,035
-1,098
15
205
582
1,078
1,493
1,763
1,720
1,344
781
155
-403
-708
-837
-937
-967
D e c r e a s e in t a x
liabilities u n d e r
accelerated amortization 3 as compared to
straightline
depreciation
7
113
308
593
798
1,010
931
718
441
128
-160
-327
-404
-466
-494
Decliningbalance
depreciation
7
113
308
593
747
882
796
605
351
70
-181
-319
-377
-422
-435
1 End of year. These estimates are based on the 0 . D. M. reported figures, but are modified in order to
reconcile with corporate amortization deductions for 1951 and 1952.
2 Straight-line depreciation rate assumed is 6 percent. Amounts sjiown for declining-balance depreciation
assume that aU certificate holders use this method for assets acquired after January 1, 1954, switching to
straight-line when it becomes advantageous.
«IComputations based (on effective tax rates reflecting rate decrease pn]AprU 1,1956, scheduled under present (law. .Minus figures indicate tax liabiUty increase.
235
EXHIBITS
Effect of allowance of emergency amortization certificates
[In mUlions of doUars]
Decrease i n
tax coUections I
Fiscal year
1951
1952 . . .
1953
1954 .
1955
1956
1957
1958..
.
Decrease in
tax collections!
Fiscal year
4
77
266
569
776
880
810
625
1959
1960
1961
1962
1963..1964
1965..
370
87
-167
—310
-374
-420
—434
._
1 Assumes certificate holders use declining-balance method for assets acquired after January 1, 1954.
Minus figures indicate tax collection increases.
Tax amortization applications and certifications
[Money figures in miUions of dollars]
A p p h c a t i o n s filed
d u r i n g period 2
Certificates issued (net)
d u r i n g period 2 3
Certificates o u t s t a n d i n g
a t e n d of period 3
Period i
Number
Value
Number
Value
41,330
< 3,040
4 3,135
41,805
4 2,124
12,649
937
2,322
4,089
. 5,471
4 4,370
4 7, 505
4 9,310
11,434
3,267
3,350
1,913
1,014
3,617
* 5,375
< 4,225
41,825
41,224
4,942
8,738
12,088
14,001
15, 015
4 16,809
4 21,034
4 22,859
24,083
1,355
1,844
1,503
1,063
2, 643
1,176
1,235
681
525
756
1,599
1,627
830
886
635
16,191
17,426
18,107
18,632
25, 682
27,309
28,139
29,025
374
434
375
317
736
609
917
381
359
-107
282
222
477
-568
678
48
18,991
18,884
19,166
19,388
29, 502
28,934
29, 612
29,660
370
660
920
3,012
223
350
372
489
19, 611
19,961
30,032
30, 521
1,014
3,923
149
< 1,330
1951
15,909
23,161
5,322
10,104
6,941
4,030
2,853
2,085
7,036
12,695
5,566
2,628
2,272
8,101
788
1,385
1,767
1,382
9,544
1953
2,517
1,802
1,417
1,300
3,426
2,924
2,073
1,559
1,545
5,765
1st q u a r t e r
2d q u a r t e r
3d q u a r t e r
4th q u a r t e r
1954
1,022
1,108
664
632
1,500
1st q u a r t e r
2d q u a r t e r
3d q u a r t e r
4th q u a r t e r
_.
1st q u a r t e r . .
2d q u a r t e r
3d q u a r t e r
4th q u a r t e r .
.
Value
149
1950
1st q u a r t e r
2d q u a r t e r
3d q u a r t e r
4th q u a r t e r
1952
. _
Number
1955:
1st q u a r t e r .
2d q u a r t e r
. .
SOURCE.—Office of Defense MobiUzation.
1 Based on biweekly progress reports that may not coincide exactly with calendar years or calendar-year
quarters.
2 Derived from cumulative data which refiect revisions, adjustments, and amendments; decumulated
data for certain periods may reflect revisions pertaining to other periods.
3 Data reflect the net effect of certificates issued and canceled; cumulative data reflect revisions, adjustments, and amendments.
4 Rough approximations.
Exhibit 27.—Letters of Secretary of the Treasury Humphrey, July 7, 1955, to the
Chairman of the House Ways and Means Committee concerning the taxation
of life insurance companies
MY DEAR MR. CHAIRMAN: I attach a copy of the letter which we originally had
intended to send to you on the proposed bill on taxation of life insurance companies. Since the letter was prepared, the bill has been limited to one year only
and I have discussed it with Mr. Mills and Mr. Curtis who assure me of their
236
195 5 REPORT OF THE SECRETARY OF THE TREASURY
concurrence with our view that the whole problem should have further study,
and that further legislation should be developed for enactment next year,
Sinee the bill contains substantial improvements over the law in effect last year
and since the suggestions embodied in the attached letter will have your careful
study in connection with next year's legislation, we withdraw our objection to
H. R. 7201 and approve its enactment.
Sincerely yours,
G. M.
HUMPHREY,
Secretary of the Treasury.
The letter which was attached to that letter and went to the Chairman of the
Ways and Means Committee with it is as follows:
MY DEAR MR. CHAIRMAN : I regret that the Treasury Department cannot unqualifiedly endorse H. R. 7201, which provides a new method for the taxation of
life insurance companies, even though it will be effective only for the years 1955
and 1956.
The bill would make desirable improvements in the definition of income. It
would limit abuses by investment companies which do a small amount of insurance business, and by certain casualty companies which inflate their life insurance
business by means of policy loans, to qualify for favorable tax treatment. The
bill would be fairer than the present law because it would treat the group annuity
business of the life insurance companies more like tax-exempt qualifled pension
trusts with which they compete. It also properly would eliminate duplication of
the 85 percent intercorporate dividend credit and the proposed 85 and other percentage credits for reserve and other policy interest. The proposed segregation
and separate taxation of their cancellable health and accident business, on a basis
comparable to mutual fire and casualty companies in the same line of business,
seems sound, though the wisdom of not taxing substantial amounts of the profits
of some of the companies should have further study.
However, the proposed exclusion from the tax base of a flat 85 percent of
investment income' for ordinary life insurance business does not appear to be
justified. The resulting tax currently seems inadequate.
Our estimates indicate that, on the basis of present earnings and contracts with
policyholders, the life insurance companies will need only slightly over 75 percent
of their 1955 investment income to meet their required reserve and policy interest,
as compared with the 85 percent allowance in the bill. On these facts, it does
not seem fair to the Government to adopt a formula which will permit the companies to go untaxed on investment ineome which is not needed under ..their
contracts with their own policyholders. The total annual investment ineome
of life insurance companies now exceeds $3 billion. The corporate tax on almost
10 percent of that total is a very large sum.
Sinee 1921, life insurance companies have been taxed only on their free investment income, that is, their investment ineome in excess of the amounts they were
committed or required to set aside as reserves under their policy contracts. Their
income from other sources has gone untaxed.
The 1942 law assumed that the companies would be required to earn 3J^ percent
on a major part of their investments to meet their policy requirements, and
determined their taxable free investment income on that assumption. As the
companies wrote policies on the basis of lower interest rates, this high assumption
of required earnings was so unrealistic that the companies would not have been
required to pay any tax at all for several years, even though they actually had
very substantial investment income over their contractual needs.
In 1950 a taxing method was adopted under which the tax was based on the
actual free investment income for each year. Though probably not ideal (other
income continued untaxed; the individual companies were taxed on an industry
average of their investment ineome), this method at least provided a logical basis
for taxation. The life insurance industry accepted this method, and even urged
its adoption on a long-range basis.
In 1951 the policy requirements were about 87)^ percent of actual earnings,
which left a free investment income of 12^ percent. The 52 percent corporate
tax on 12H percent of earnings was about equal to 6J^ percent on the entire investment income. A 6^^ percent tax was imposed on all investment income, and was
successively extended through 1954. This taxing method had no logical basis of
its own, other than as a short-cut method of computation.
In the years since 1951 the companies' actual free investment income has increased steadily. It is estimated that for 195.5 they need only 75.5 percent of
EXHIBITS
237
their investment income to meet their policy requirements. If determined in the
same way as was done in 1951, the comparable tax rate on all investment income
would have to be almost doubled (increased to 12.7 percent) in 1955.
The Treasury Department has reviewed carefully the history and problems of
taxation of life insurance companies. The valuable material in the hearings and
the staff studies of the subcommittee of the Ways and Means Committee, published last year and earlier this year, has been examined.. On the basis of our
review and examination, I suggest that an attempt be made to develop a method of
taxing life insurance companies like other business, on the basis of their entire
income from all sources, with appropriate deductions for their expenses and additions to their reserves against their policy contracts. The reliance on free investment income alone ignores income and losses from mortality experience, the
relation between loading charges and operating costs, and capital gains—which
may be quite substantial.
Life insurance companies were taxed like other corporations on the basis of their
entire net income until 1921, when the tax base was confined to free investment
income. At that time, ineome taxation was still so new and undeveloped that it
was found to be extremely difficult to deal adequately with the specialized problems of the life insurance industry. Substantial advances ha,ve been made since
that time in tax administration, and the methods and techniques of income
measurement. It should now be possible to develop a fairer basis for taxation
which will include all of the ineome and deduction items which properly reflect
the earnings position of a life insurance company.^
The development of a satisfactory formula for taxing insurance companies on a
comprehensive concept of income will take time. In the meantime, the 1950
formula (taxation of actual free investment income) ^ives a logical standard for
measuring free investment income and the industries' capacity to pay. We estimate that this formula for taxing insurance companies would produce revenue of
$368 million for this year, as against $189 million under the 6}i percent rate in
effect from 1951 through 1954, and $215 million under H. R. 7201. In the absence of any legislation this year, the 1942 formula will become applicable again
and produce revenue estimated at $274 million, as compared to $215 million under
H. R. 7201 and $368 million under the 1950 formula.
The Treasury is impressed with the need for a fair and sound approach to the
taxation of life insurance companies. A satisfactory solution must recognize the
special situation of the life insurance industry and its responsibilities to policyholders. At the same time, it should impose a tax which is fairly distributed
among the companies and fair in relation to the tax burdens of other savings
institutions and taxpayers generally.
I and the Treasury Department staffs will be glad to be of such assistance as
we can to your committee and staffs in any further examination of this subject
which you ehoose to undertake.
Sincerely yours,
G.
M.
HUMPHREY,
Secretary of the Treasury.
Exhibit 28,—Statement by Secretary ofthe Treasury Humphrey, July 12, 1955,
before the House Committee on Public Works in support of the President's
road program
I am pleased to appear before you today in suppdrt of the President' s road
program and to discuss means and methods of financing that program.
When I previously appeared on the same subject', first before the Senate Committee on Public Works and then before your committee, I strongly recommended
the creation of a governmental authority with power to issue revenue bonds to
finance the highway expenditures which would be paid, both principal and
interest, from a dedication of gasoline and diesel fuel taxes over a period of years.
I still favor that proposal over any other that has been presented.
You have asked me today to discuss a plan that has recently been proposed
for your consideration, suggesting in lieu of the governmental authority and the
revenue bonds that certain taxes be increased which, together with certain existing
similar taxes, would provide funds to pay the cost of highway construction as
currently incurred.
This proposal plans for a Federal expenditure for highways, both for the interstate system and matching funds for local roads, totaling approximately $37
billion over 15 years.
238
1955 REPORT OF THE SECRETARY OF THE TREASURY
The taxes suggested include additional gas, diesel fuel, tire, tube, and truck
taxes.
It is estimated that, taking into account the growth in the need for and use of
highways by automobile and truck traffic, this combination of taxes will produce
approximately $33 billion in revenue and will be available, generally speaking,
to pay for the proposed highway expenditures approximately as currently made.
I do not think that the general revenues of the Government, outside of the
amounts to be raised by the specific taxes previously listed, should be depleted
and used for the construction of this highway system. The Treasury must oppose
any plan to the extent that the taxes levied by it are insufficient to pay for the
expenditures authorized, unless a governmental authority is created to provide
for any deficiency in the necessary funds by an issue of bonds.
However, as I testified in my previous appearances both before the Senate
and House Committees, the Treasury cannot object to any equally effective program which the Congress sees fit to adopt for the construction of highways with
sufficient additional taxes levied to pay as we go.
I would point out most emphatically, however, that when the President presented his plan to Congress he had in mind the need of the States for revenue and
the fact that the Governors' Conference had approved and urged his financing
plan, which holds the Federal tax take at the present levels and leaves the field
thereafter open to the States.
The Federal Government is^ vitally concerned with the interstate system of
roads, and equally concerned that the States should have sufficient ability to
provide increased and improved primary and secondary road systems for greater
safety and dispatch for both interurban and farm market needs. The President's
proposal continues to provide the Federal aid system at an alltime high level and,
practically speaking, takes the States out of the interstate program, relieving
them of great expense in that field. This would enable the States to devote
greater attention to their own road programs with their tax field unimpaired.
Improved highway transportation is one of the great necessities of Our times.
A .large part of our commerce and industry depends upon it. Our farms require
it. The jobs of millions of men and women in this country depend upon it,
in going to and from their work. The further growth of the great automotive
industry and all its^ramifications in the use of steel, fuel, rubber, and thousands
of products from hundreds of sources cannot continue to develop at its present
pace unless our highway systems concurrently develop proportionately. This
is a case where time is of the essence. We are already lacking in adequate facil-^ ities and further rapid improvement should not be postponed.
These important considerations were all pointed out by the President when he
submitted his proposal for your consideration, and in conclusion he said:
"A sound Federal highway program, I believe, can and should stand on its own
feet, with highway users providing the total dollars necessary for improvement
and new construction. Financing of interstate and Federal-aid systems should
be based on the planned use of increasing revenues from present gas and diesel
oil taxes, augmented in limited instances with tolls.
"I am inclined to the view that it is sounder to finance this program by special
bond issues, to be paid off by the above-mentioned revenues which will be collected during the useful life of the roads and pledged to this purpose, rather than
by an increase in general revenue obligations.
"At this time, I am forwarding for use by the Congress in its deliberations the
report to the President made by the President's Advisory Committee on a National Highway Program. This study of the entire highway traffic problem and
presentation of a detailed solution for its remedy is an analytical review of the
major elements in a most complex situation. In addition, the Congress will
have available the study made by the Bureau of Public Roads at the direction of
the 83d Congress.
"These two documents together constitute a most exhaustive examination
of the national highway system, its problems and their remedies. Inescapably,
the vastness of the highway enterprise fosters varieties of proposals which must
be resolved into a national highway pattern. The two reports, however, should
generate recognition of the urgency that presses upon us; approval of a general
program that will, give us a modern safe highway system; realization of the rewards for prompt and comprehensive action. They provide a solid foundation
for a sound program."
Everyone wants roads, more and better roads. And it is for the Congress
to say how the Federal Government will participate, how rapidly Federai roads
EXHIBITS
239
should be constructed, and how they should be paid for. The President's original
program is effective and sufficient to accomplish the purpose proposed. It is
not the only way that the very desirable road construction can be accomplished
but after the most thorough and extensive study of the entire subject by large
groups of competent people, it still offers the best method for quickest construction
of the greatest mileage of necessary and desirable highways throughout the entire
country.
Exhibit 29.—Remarks by Secretary of the Treasury Humphrey, October 1, 1954,
before the Tax Institute of the University of Texas School of Law on the tax
program
Tax program benefits every American
I am very happy to be a part of this four-day institute given over to study of
the tax revision law passed by the last Congress and signed into law by President
Eisenhower in August.
In addition to the privilege of being in the great State of Texas, I always consider it a privilege to talk about anything as important and vital to our Nation as
I think this tax revision law is.
I realize that most of you people here tonight are experts or near-experts on
the tax laws of our country. But notwithstanding your special knowledge in
this field, I hope you will bear with me if I do not try to get too technical but
merely give you some of the basic philosophy which is back of this vital piece of
legislation.
The tax revision law, or the Internal Revenue Code of 1954, is one of the most
important of our time because it sets a trend that will lead to greater economic
progress for the country as well as bring relief to millions of individuals who have
suffered specific hardships under the old tax code.
As you people well know, this is the first time in some 75 years that there has
been a major revision of the whole Federal tax structure. In addition to reducing
restraints on business and removing hardships on individuals, this revision has
attempted to make the tax laws more simple and certain and also to close loopholes under which some persons could have avoided their fair share of the tax
burden.
The provisions in the law which remove hardships from individuals provide
direct benefits which our citizens will note as they come to pay their, income taxes
next spring. Incidentally, they also will notice the benefits of the rest of the
administration's tax program, which in this calendar year has made effective tax
cuts totaling $7.4 billion, the largest dollar tax cut in the history ofthis or any
other country. But from the new Internal Revenue Code specifically, tax pressures will be eased where they have hurt millions of taxpayers severely in bygone
years. Among those who will benefit are working mothers; parents of children
who are helping to pay their way through school; retired policemen, firemen,
teachers, and their widows; families with heavy medical expenses; farmers who
want to buy new equipment; people with sick and accident policies; taxpayers
with nonrelative dependents; farmers doing soil and water conservation; and
many, many others.
And in connection with these individual changes, you people here tonight
probably already are aware of the work that the Treasury and the Internal
Revenue Service are doing to acquaint the taxpayer with his rights under the
new law. Big and numerous as the changes are, we expect that many citizens
will have to keep going to the Internal Revenue offices for help in large numbers
in the year ahead. Regulations are being rewritten and simplified and forces
are being prepared and trained to help.
Helpful as these direct benefits are, they can in no way compare in my mind
with the indirect benefits which will flow from the tax revision law. By removing
restraints, this new law will release new energies throughout our economy. These
energies work quietly but steadily to create new enterprises, more and better
jobs, new productive efficiencies, larger payrolls, and rising standards of living
for all the 160 milhon people of this Nation. It is these indirect but dynamic
benefits which I should like to talk about mainly tonight.
First, however, I would like to say a word about the background of the new
law and about the work that went into revising it.
The tax structure that we found on coming to Washington had grown up
haphazardly and illogically. In the past 20 years, most of the changes in the tax
240
195 5 REPORT OF THE SECRETARY OF THE TREASURY
laws were p u t into effect under t h e pressure of crisis of war or depression. T h e
Congress reached for income where it could find it. I n t h e process of imposing
new taxes to meet new emergencies, stifling burdens were placed upon those very
p a r t s of t h e Nation which provide for progress.
T h e main purpose of t h e tax revision bill is to rearrange t h e t a x burden to make
it easier for the economy to move forward.
For years America's economy was stimulated by war and inflation, stimulants
which concealed the deadening features of our tax structure. Thoughtful people
were predicting t h a t such restrictions would rise to plague us as t h e artificial
stimulants were withdrawn. And for ten years or more, congressional committees, including b o t h Democrats and Republicans alike, urged revision of our
cumbersome tax structure so as to free normal incentives to business progress.
In addition to t h e congressional committees, such groups as taxpayer organizations, bar associations, farm associations, labor unions, small businessmen,
accountants, a n d m a n y more m a d e demands for t a x revision. Among t h e m a n y
reeommendations made, there was wide agreement, b u t little happened. Tax
revision became like t h e weather, which everybody talked about b u t nobody did
anything about.
When this administration came in office, we were told t h a t getting a major
tax revision bill adopted early in our administration was simply impossible. T h e
experts said it was so technically difficult and cumbersome t h a t we had better
not set our hopes too high.
B u t President Eisenhower himself had become deeply convinced of t h e need
of tax reform. Also, President Eisenhower has a very deep suspicion about t h e
word "impossible." Very soon after taking office, he instructed t h e Treasury
to proceed with the basic job of recommending tax revision, and he always helped
when t h e going was tough. Last March, in a nationwide television broadcast,
he described his tax proposals as " t h e cornerstone" of t h e administration's entire
effort. This appeal contributed mightily to final congressional approval of the
t a x revision bih.
I n the Treasury proper, t h e work of producing tax revision recommendations
was headed by Under Secretary Marion. Folsom, a m a n of wide experience in
business and tax matters, who brought to work with him two other outstanding
tax authorities—Dan Throop Smith, Professor of Finance a t H a r v a r d ; and
K e n n e t h Gemmill, a Philadelphia t a x attorney.
Tax revision was also lucky in t h e leadership on Capitol Hill. Russell Train,
t h e able Clerk of t h e House Ways and Means Committee, told you on Wednesday of this week of t h e progress of t h e tax revision bill through t h e Congress.
As most of you know, a most vital force back of t h e drive to get tax reform was
Chairman D a n Reed of t h e Ways and Means Committee, an ardent and courageous leader in t h e tax field. In t h e Senate, likewise, tax revision came under the
wise handling of Eugene Millikin, Chairman of t h e Senate Finance Committee.
Both t h e House and t h e Senate committees, of course, had superb technical
assistance from t h e staff headed by Colin F . Stam, a Government tax m a n who
has been giving expert guidance in this field since t h e 1920's.
As you gentlemen well know, t h e tax reform law was a result of very intensive
s t u d y a n d hearings conducted for almost a year and a half. More t h a n five
thousand pages of testimony were taken, and hundreds and hundreds of witnesses
were listened to. T h e n their suggestions were gone over by t e a m s of experts
from b o t h t h e congressional and t h e Treasury-Internal Revenue staffs.
T h r o u g h o u t all of this, we tried to keep focused on one basic premise: Are we
changing t h e law so as to help the economy to grow and so create more and better
jobs and better living for everyone?
I n addition, of course, we tried to see if we couldn't p u t more certainty into
t h e law. Economic progress a n d clarity do have a real connection. As you
gentlemen also know, m a n y of our tax laws have been vague and ambiguous.
This m e a n t t h a t an individual considering a new venture could not figure for sure
just w h a t his tax liability would be. Likewise, because of vagueness, the tax
liabihty might be changed, subject to the personal j u d g m e n t of a tax offieial.
We feel t h a t more certainty is going t o permit hundreds of new ideas to be p u t
into actual business practice.
Most significant are substantive changes which we have made in t h e Internal
Revenue Code designed to restore more of t h e normal incentives to business and
individual progress. Probably t h e most controversial of these has been t h e
provision which partially eases t h e double taxation of dividend income. Despite
EXHIBITS
241
the political heat which has been kindled by the opposition on this point, it is
my sincere opinion that the whole country will benefit from this provision.
Risk capital has made possible the phenomenal growth of our Nation, and
dividends are the incentives which make people take risks with their capital.
Without this risk capital we never could have developed the wildernesses as we
have done. We couldn't have developed the mines, drilled for the oil, built the
factories, and done all the things which over the years have led to more and
better jobs and higher wages.
During the New Deal of the midthirties the provision for double taxation of
dividend income crept into the tax law. Thus the citizen who provided risk
capital was tapped twice for taxes. The company earnings bore the full brunt
of the corporate income tax and when what was left reached the individual as
dividends, it was subject to a second tax, this time the full personal income tax.
Without thinking of the personal injustice of this, let's take a quick look at
the effect on the economy. It takes a good deal of money to make a job. A
recent survey of one hundred of the largest manufacturing corporations in the
United States showed an average of nearly $15,000 of risk capital back of each
job. In the development of most of our natural resources it can be much more.
The double taxation of dividends has made it increasingly difficult to attract
risk capital to make these jobs. So, more of our business capital has come from
borrowing rather than from sale of stock. Companies which are heavy with
bonded debt have to move more slowly and carefully than a company which is
financed with risk capital, and in times of economic decline companies with a
heavy debt burden are less likely to keep their heads above water.
Another most noteworthy change is the provision which provides more flexible
allowance for depreciation. Some 600,000 corporations and nearly 10 milhon
individuals, especially farmers and small businessmen, will benefit from this.
But the greatest long-term benefit will be to the whole Nation by the stimulation of plant expansion, the buying of more efficient machinery, all-around
modernization, and so cheaper products and more and better jobs.
While tax experts talk about "depreciation," I like to think of it more as amortization. Under the new law, a man pays the same total tax but he can get his
equipment paid for more quickly. Then he is in a position to look about for
something newer and better and the quicker writeoff helps him to finance his
new purchase of better, more modern equipment. In other words, the impulse is
forward. This is certainly in the best interests of all Americans.
In many other ways the new tax revision law encourages enterprise to go ahead.
By removing barriers, it permits greater rewards for successful inventions and for
those who develop them. It provides more liberal treatment for research and
development expenditures to create new, better, and cheaper products for everyone to enjoy. It gives more leeway to small companies which want to retain
earnings for future expansion, which would create new jobs and better things for
better living. This removal of barriers to incentive pervades the whole new law,
even down to such things as encouraging youngsters who forward their own
education by outside work.
The tax reform law does one other thing which is generally overlooked by our
critics. It helps the security of our Nation against any potential aggressor.
It does this by helping the modernization of our industrial base, upon which all
our military strength ultimately rests. This is particularly true in this day when
new weapons and techniques are developed with amazing speed. We have no
way of knowing what the decisive weapons may be a few years from now. But
we have to make sure that our industrial strength is modern and ready to keep
abreast.
The tax revision law is not perfect. In spite of all the care, we know that as
time goes by we are bound to discover errors and better ways of doing things.
There are also additional items in the code which must be the subject of further
study before we can come forward with recommendations.
The new law is only a great first step.
But moving beyond the tax revision law itself, I would be the first to admit
that there is much left to be done in the whole tax field. Our tax rates are too
high. But they must remain relatively high as long as so much of our ineome
has to go for the protection of our Nation against a possible enemy. We will,
however, continue to pass on to the taxpayer promptly the benefits of any
spending reductions which can be achieved while always giving first priority to
our national security.
356812—56
17
242
1955 REPORT OF THE SECRETARY OF THE TREASURY
Before closing I would like to say something about "who has benefited most"
from the whole tax program of this administration.
There has been a good deal of nonsense and misinformation in recent weeks
falsely suggesting that the administration's tax program might not be in the best
interest of all of our citizens. Such nonsense seems to increase in inaccuracy the
closer we get to November.
I would like to explain why this program is in the best interest of every
American:
First, every taxpayer in America has benefited directly from the tax cuts
totaling $7.4 billion, the largest dollar tax cut in any year in the Nation's history,
and possible only because of cuts in spending made by this administration.
Second, 62 cents of each dollar of the $7.4 billion goes to individuals—and
almost 25 cents of each dollar to taxpayers with income of less than $5,000 a
year. This leaves 38 cents of each dollar tax cut going to corporations.
Third, there is nothing un-American about helping the economy make more
and better jobs, which is what our whole tax program is doing. As we cut
Government spending by more than $10 billion, we had to help the private economy make jobs for people who used to get their living from Government spending.
The tax reductions and the tax revision bill, about which we have been talking,
are removing the barriers to business expansion, the starting of new businesses,
and so the creation of new and cheaper products and more and better jobs.
What is important is that this administration's tax program has and will
continue to help bridge the transition from high to lower Government spending
by helping the economy make new jobs.
American citizens are hkely to understand that a program which helps make
jobs is a program they should support. Despite the erroneous arithmetic of our
critics, the average American, who is a very intelligent person, is likely to realize
that more jobs and better jobs are more important to him and his family than any
amount of political oratory and promises. This is the philosophy that this administration has operated on. It is the philosophy back of the tax revision law
and our whole tax program. It is the philosophy which we must continue to
follow to help promote ever-increasing propserity for all.
The administration's tax program, with the tax revision law as one of its vital
parts, is a mighty effort to bring our tax laws closer to the needs of a modern
America. These tax efforts will help foster and maintain a high level of economic
activity in this country; activity which means so much in the way of prosperity
for all, as well as greater security for our country and peace in the world.
Exhibit 30.—Miscellaneous revenue legislation enacted by the Eighty-fourth
Congress, First Session
Pubhc Law 1, January 20, 1955, amends Section 7237 of the Internal Revenue
Code of 1954 by correcting a technical error made in the drafting of the 1954
Code, relating to penalties for violation of the narcotics laws.
Public Law 9, March 2, 1955, amends Section 7443 (c) of the Internal Revenue
Code of 1954 by increasing the salaries of Tax Court judges from $15,000 to
$22,500.
Public Law 66, June 8, 1955, continues until June 30, 1956, the suspension of
duties and import taxes on metal scrap.
Pubhc Law 91, June 21, 1955, continues until June 30, 1958, the suspension of
certain import taxes on copper.
Public Law 216, August 3, 1955, extends the Renegotiation Act of 1951 for
two years to December 31, 1956. This law also directs the Joint Committee on
Internal Revenue Taxation to make a study as to the necessity of extending the
act beyond December 31, 1956, and to make a report of the results of such study
to the Congress not later than May 31, 1956.
Public Law 299, August 9, 1955, amends Section 37 (f) of the Internal Revenue
Code of 1954 by extending the retirement income tax credit to members of the
Armed Forces who retire before the age of 65.
Pubhc Law 303, August 9, 1955, amends Section 3416 (a) (2) ofthe 1.939 Code
by extending from August 1, 1954, to October 8, 1955, the period for filing claims
for floor stocks refunds on refrigerators, quick-freeze units, and electric, gas, and
oil household apphances authorized by the Excise Tax Reduction Act of 1954.
Public Law 306, August 9, 1955, amends Section 3402 of the Internal Revenue
Code of 1954 to provide that an employer shall not be required to deduct or
EXHIBITS
243
withhold taxes on noncash remuneration paid retail salesmen who ordinarily are
paid for their services by way of cash commissions. This amendment is applicable to remuneration paid after August 9, 1955, the date of enactment of this
act.
Public Law 310, August 9, 1955, provides that if refund or credit of an overpayment resulting from the apphcation of Section 345 of the Revenue Act of 1951
(relating to abatement of tax on certain trusts for members of the Armed Forces
dying in service during the period December 7, 1941, to January 1, 1948) was
barred by the operation of any law or rule of law (other than a closing agreement
or compromise), credit or refund is nevertheless to be allowed if the claim is filed
within one year after the date of enactment of this act. No interest is to be allowed or paid on such refunds or credits. Under the 1951 act such refunds or
credits could not be granted if barred by the expiration of the period of limitations, by prior court decisions, or for other similar reasons.
Pubhc Law 317, August 9, 1955, amends Sections 4216 and 4217 of the Internal
Revenue Code of 1954 to provide that the maximum tax imposed on the leasing
of certain passenger automobile trailers and semitrailers is to be an amount equal
to the applicable tax rate multiplied by the fair market value of the trailer at the
time of the initial lease. The taxpayer is given the option to pay the tax in full
at the time of the initial lease or to spread the tax payments over the period of
the lease payments. Prior to this change, if a manufacturer leased articles
subject to a manufacturers' excise tax, such tax applied to the amount of each
lease payment on the same basis as if it were a sale.
Publie Law 321, August 9, 1955, amends Section 3401 of the Internal Revenue
Code of 1954 to provide that an employer (other than the United States Government) need not withhold income tax on remuneration paid to a United States
citizen for services performed in a possession of the United States if the employer
is required by the law of any foreign country or possession of the United States
to withhold income tax on the remuneration. Under the law prior to this amendment, the wages of a United States citizen employed in a possession of the United
States might, for example, be subject to withholding for both the income tax of
the possession and the Federal income' tax.
Pubhc Law 333, August 9, 1955, amends Section 25 (b) (3) of the Internal
Revenue Code of 1939 to permit a taxpayer to claim as a dependent a child born
to him, or legally adopted by him, in the Philippine Islands if the child is a resident
of the Phihppines and the taxpayer was a member of the United States Armed
Forces a;t the time the child was born or legally adopted. This provision applies
to all taxable years beginning after December 31, 1946, to which the 1939 Code
applies. However, the amendment does not open up years for which the statute
of limitations has run. Public Law 333 also amends Section 152 (b) (3) of the
1954 Code to permit a taxpayer to claim as a dependent a child born to him, or
legally adopted by him, in the Phihppine Islands before January 1, 1956, rather
than July 5, 1946. This amendment applies for taxable years beginning after
December 31, 1953, and ending after August 16, 1954.
Public Law 354, August 11, 1955, amends Section 4233 (a) of the Internal
Revenue Code of 1954 to exempt from the admissions tax admissions to athletic
events conducted by the United States Olympic Association, or authorized in
advance by such association to be conducted for its benefit, if all the proceeds
inure exclusively to the benefit of the association. This exemption applies to
amounts paid on or after September 1, 1955, for admissions on or after that date.
Pubhc Law 355, August 11. 1955, amends Sections 4091 and 4092 ofthe Internal
Revenue Code of 1954 to provide a tax of 3 cents a gallon on cutting oils, effective
October 1, 1955. Prior thereto the tax was 6 cents a gallon but not more than
10 percent of the manufacturer's sale price. The act also defines cutting oils as
"oils sold for use" in cutting and machining operations on metals rather than as
oils "used primarily" in cutting and machining operations. Public Law 355 adds
a new subparagraph (I) to Section 6416(b)(2) of the 1954 Code, providing for a
credit or refund not to exceed 3 cents a gallon in the case of lubricating oil on which
a tax of 6 cents a gallon was paid if such oil was used or resold as cutting oil on or
after Oetober 1, 1955.
Public Law 363, August 11, 1955, provides for a refund or credit to distillers,
winemakers, or rectifiers for the amount of excise tax and customs duties paid on
distilled spirits and wines lost, rendered unmarketable, or condemned by a duly
authorized health official by reason of the hurricanes of 1954.
Public Law 366, August 11, 1955, adds a new Section 1304 to the Internal
Revenue Code of 1954 and renumbers the former Section 1304 as Section 1305.
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195 5 REPORT OF THE SECRETARY OF THE TREASURY
This new section provides that the tax attributable to the inclusion in gross
income of an amount which represents compensatory damages received or accrued
as a result of a judgment for infringement of a United States patent shall not be
greater than the aggregate of the increases in taxes which would have resulted if
such amount had been included in gross income in equal instahments for each
month during which the infringement occurred. The aro.endment is applicable
to taxable years ending after August 11, 1955, but only with respect to amounts
received or accrued after that date as the result of awards made after that date.
Public Law 367, August 11, 1955, amends the Internal Revenue Code of 1954
as follows:
(1) The first section of this aet amends Sections 4063(b), 4112, 4113, 4218(a)(1)
and (b), and 4220, to provide for tax-free sales of automotive parts or accessories,
refrigerator components, radio and television components, and camera lenses subject to manufacturers' excise taxes if sold to a manufacturer for incorporation in
other articles, regardless of whether such other articles are taxable. Section
6416(b)(3)(B) is amended to provide a credit or refund of any tax paid on such
com.ponents to a manufacturer who purchased and used them in the manufacture
of, or as component parts of any article.
(2) Section 2 of the aet amends Section 4141 to limit the excise tax on radio and
television receiving sets, automobile radio or television sets, phonographs, and
combinations of any of these, to entertainment-type sets. The special exemption
in Section 4143 and the special eredit or refund in Section 6416(b)(2)(G) for communication, detection, and navigation receivers sold to the United States Government are repealed.
The amendments made by the first and second sections of this act generally
take effect on September 1, 1955.
(3) Section 4 of Public Law 367 am.ends Section 354 to make the rule for shifting
the burden of proof in cases involving the penalty tax on corporations improperly
accumulating surpluses applicable to cases governed by the 1939 Code which are
tried on the merits after August 11,. 1955.
Public Law 370, August 11, 1955, amends Section 223 of the Revenue Act of
1950 by extending the exclusion from personal holding company income of rents
received for use of eorporation property by shareholders in certain business operations to taxable years ending after 1945 and before January 1, 1954. Prior to this
amendment, the exclusion applied to taxable years ending after 1945 and before
January 1, 1950.
. Pubhc Law 379, August 12, 1955, am.ends Section 4061(a)(2) of the Internal
Revenue Code of 1954 to repeal the excise tax on motorcycles and on parts and
accessories therefor, effective September 1, 1955.
Pubhc Law 383, .August 12, 1955, amends the Railroad Retirement Act of 1937
and the Railroad Unem.ployment Insurance Act to restore retroactively the exem.ption of railroad retirement and raiboad unemployment insurance benefits
against attachment or other legal process in connection with the collection of
Federal taxes. This exero.ption had been eliminated when the Internal Revenue
Code of 1954 was enacted.
Public Law 384, August 12, 1955, amends Section 112 (n) (8) of the Internal
Revenue Code of 1939 to remove a diserim.ination against those in the Armed
Forces of the United States who sold or exchanged their residences before 1954.
For such persons, but not for those who have sold such residences sinee that
time, the suspension of tim.e restrictions for replacing the residences without tax
consequences ended as of December 31, 1953. The new law provides that the
replacement period under the 1939 Code, as is presently provided under the 1954
Code, is to be available to those on active duty with the Armed Forces during
a period when an induction law is in effect but not for more than 4 years.
This act also adds to the 1954 Code a new section, Section 1342 which provides
that where a taxpayer recovers in a fraud case involving patent infringement an
amount of $3,000 or more, the tax for the year of recovery shall be the lesser of:
(1) The tax computed by including the recovered item in the income of the recovery year; or (2) the tax computed by excluding the recovered item from the
recovery year's ineome and adding to the tax so computed the increase in tax
(including interest) of the prior year resulting from the restoration of the amount
deducted in the prior year.
Pubhc Law 385, August 12, 1955, amends the Internal Revenue Code of 1954
by making Section 542 (a) (2), which provides for treating as "individuals"
certain charitable foundations or trusts in applying the stock ownership test for
personal holding companies, inapplicable to long-established charitable founda-
EXHIBITS
246
tions meeting certain conditions so that they may retain the tax status under
which they have operated for many years.
Publie Law 385 also amends Section 1233 of the 1954 Code relating to gains
and losses from short sales. The amendment m.akes the short sales rules of subsection (b) (2) of Section 1233 inapplicable in certain arbitrage transactions.
International Financial and Monetary^Developments
Exhibit 31.—Remarks by Secretary of the Treasury Humphrey, November 23,
1954, at the meeting of Ministers of Finance and Economy, Rio de Janeiro,
Brazil
I am happy to participate in this meeting of Ministers of Finance and Economy.
Many of us have met on other occasions, most recently at the annual meetings
of the International Bank and International Monetary Fund two months ago.
I am delighted to extend my acquaintance with you and to meet with you here.
Just before leaving Washington we discussed with President Eisenhower the
views of the United States delegation on the problenis we shall discuss here.
He emphasized to us his deep interest in this historic meeting and asked that we
convey a personal message to our colleagues here. With your kind permission
I shall read it:
'T am very pleased to send greetings and best wishes to the meeting of Ministers
of Finance and Economy of the American family of nations, convened in Rio de
Janeiro, the capital of our great sister nation, Brazil. I am happy to send this
message through our Secretary of the Treasury, Mr. Humphrey, who, as Chairman
of the United States delegation, speaks for our Nation and will authoritatively
present our policies.
'T am confident that this conference will advance still further the unique
relationships which have developed among the peoples and nations of this hemisphere. As those relationships evolved and grew, the people of the United States
learned to call their own attitude toward their sister nations the policy of the
good neighbor. Today, the bonds which unite us as sovereign equals who are
working side by side for the betterment of all of us, nations and citizens, have
elevated this neighborly relationship to one of genuine partnership.
"No longer is it sufficient to maintain the mutual respect and cordiality of
neighbors, useful and pleasant as that is. In the world of today, the well-being
and the economic development, as well as the security, of all peace-loving nations
are so closely interrelated that we must be partners. If this is true in the larger
context, it is especially true among the American republics where we share the
same traditions and many of the same favorable circumstances for progress.
"As the conference discusses a wide variety of measures for economic and
financial cooperation in this hemisphere, and endorses those that are sound and
durable, I earnestly hope that the meeting as a whole may join with the delegation
of the United States in common dedication to the policy of the good partner.
"To this may I add my best wishes for the success of the conference and warm
personal greetings to each of its menibers."
Let me say that every member of the United States delegation shares those
convictions.
While this gathering was called in response to a resolution of the Tenth InterAmerican Conference held in Caracas earlier this year, this conference is in reality
the realization of a desire expressed repeatedly throughout the rise and development of the inter-American system. It is the desire to strengthen the continental
economy so as to benefit all the nations that share the hemisphere.
That desire was first manifested in the act of the.United States Congress that
convened the first Pan American Conference in Washington 65 years ago. The
same desire created the Pan American Union, which has now become the Organization of American States. Today it finds expression in the statutes of the InterAmerican Economic and Social Council which provide that it shall "promote the
economic and social welfare of the American nations through effective cooperation
among them for the best utilization of their natural resources."
We are not gathered here, then, because of an emergency situation, nor is this
meeting an impulse of the moment. It is not an isolated or disconnected event
in inter-American relations; but it is a new endeavor, one more step in the search
for economic cooperation and solidarity toward which your countries and mine
will continually strive.
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1955 REPORT OF THE SECRETARY OF THE TREASURY
We have come here with the same spirit of cordial solidarity with which the
delegates of our nations arrived in this city of proverbial hospitahty for the
Third Pan American Conference. To describe it I shall borrow the eloquence of
a great fellow countryman, Elihu Root, at that time Secretary of State, who said:
"I bring from my country a special greeting to her elder sisters in the civilization
of America . . . there is not one of all our countries that cannot benefit the others;
there is not one that cannot receive benefit from the others; there is npt one that
will not gain by the prosperity, the peace, and happiness of all."
And so it is today. Our country is part of the inter-American system; our
Secretary of State, John Foster Dulles, recently affirmed that this is the cornerstone of our foreign policy.
We take our places with pride in this association of States which has established the complete equality of all members, has consecrated the principle of
nonintervention, and has built a juridical system that has put an end to war
among American nations.
We have bound ourselves, moreover, by pacts that stipulate that an attack on
one American nation is an attack on all of them, and that any threat to the
political integrity of one is a threat to all.
" Our presence here at this conference is a declaration that we also consider
economic sohdarity as part of the common defense.
None of us expects that we can at this meeting solve all of the economic problems of a hemisphere. But we can confidently expect that 21 nations, each motivated by a deep and brotherly interest in the welfare of every other, can accomplish enough here to convince us all that our efforts were richly rewarded, that our
accomplishments justify our looking forward to future meetings.
We all have our own ideas as to how the economic interests of the entire continent could be promoted. We in the United States naturally subscribe to those
principles that in our own country have proved effective in raising the living
standards of the people and promoting the prosperity of the Nation. We shall
present them here with the same friendly frankness with which we are ready to
listen to the opinions of other delegations.
No one of us alone has the wisdom and experience necessary to solve all our
problems. That.is what this conference is for; to exchange ideas, to draw closer
together, to arrive at a promising and practical basis for cooperation and to pave
the way for constructive steps toward our goals.
It is with that spirit that my country's delegation has come to this conference.
We look forward with great interest to hearing your views and we welcome the
opportunity to lay before you our ideas on the problems that now engage our
mutual attention.
But we shall never lose from sight the hemispheric interest, the welfare of the
American family of nations, the need to fortify the inter-American system that
past generations have bequeathed to us and that it is our duty to pass on, intact
and improved, to future generations. When we shall have finished our work
here it should be possible to speak of this meeting in the same words as those used
by a great American, the Baron of Rio Branco in commenting on the Third Pan
American conference, when he said:
"Here concessions represent conquests of reason, amicable compromises, or
compensations counselled by reciprocal interests."
We would first hope for a clear definition of the economic goals toward which
we shall press. We are profoundly aware that we are here not so much as representatives of politieal entities; instead we are here as the spokesmen for 330
millions of men, women, and children whose problems, whose sufferings, and
whose aspirations must constantly be present in our thoughts and in our deliberations. When we speak of economic development, international trade, and the
other subjects of our agenda, we must be mindful that each is signifieant only in
so far as it has a direct relation to our peoples, to their families, to their homes,
and to their work.
I believe that we are capable of putting into words here at this meeting just
what it is that our people would have us accomplish, and I believe that we can
adopt that definition as our goal. It seems to us that the men and women of
the Americas, living as they do among our mountains, on our plains, and along
our sea coasts are united and clear in their aspirations. They do not ask the
impossible, but they do demand of us, who as Government officials are their
servants, that we promote those conditions which will give maximum assurance
that everywhere in our Americas man has an opportunity to better himself, give
his children even greater opportunities, and enjoy meanwhile those freedoms
EXHIBITS
247
which we have achieved in the Americas and which are denied to so many millions
elsewhere in the world.
I believe that we must face another problem in which our people are vitally
interested. All of us are exposed to an insidious disease that stealthily robs us of
our strength. It is the evil of inflation which makes the prices of food, of clothing,
of all the necessities of life climb upward in a grim spiral which again and again
snatches away the benefits of progress.
Our goal must be twofold: To unite our efforts to achieve the kind of economic
development that means higher living standards for our people, and to take those
wise and prudent measures which will avoid the evil of inflation. If here we make
progress toward these goals, we shall have earned the gratitude of our people.
This is a goal that is achievable in the Americas. God has endowed this hemisphere with abundant and varied natural resources, with vast and fertile lands that
are capable of affording an ever better life to our rapidly multiplying peoples;
there is peace throughout our hemisphere. In a troubled world ours is a situation so privileged, so favorable that it becomes our duty to examine critically the
responsibilities that must accompany such advantages. Each of us singly and
all of us jointly must strive to accomplish those things which will best and most
effectively employ these lands and those resources to benefit our peoples.
Our agenda is admirably fashioned to help us appraise not only our place today
on the road which has already brought us so far toward our goal, but also the
measures which we can take jointly and severally to hasten our progress on that
road. It is our conviction that to accomplish this purpose two basic principles
should underlie ah our thinking. The first is our belief that the road which will
lead most surely and most directly to the goals which we seek is that of the
vigorous, free enterprise system. This" system in its modern form builds new
industries, new enterprises, and opens new areas to development. And it does
all these things without endangering those free institutions which are the very
foundation of the social and human progress which we have achieved in this
hemisphere.
The other is our belief that we as governments should reduce to a minimum
the scope and the duration of our own intervention in the fields of commerce and
industry. We best serve our people when we encourage them to produce the
goods and services required for our progress, when we stimulate them to bring
new regions and new resources into productive use, rather than when we compete with them or otherwise take over the functions of private enterprise. Government intervention deprives the people of the full benefits of their earnings.
Experience has demonstrated that almost without exception, in my own country
and elsewhere, such intervention lowers production and raises costs.
We shall support and defend the right of every state to define its own economic
course. Our own belief in the principles I have stated derives from the fact that
wherever they have been applied in the Americas and elsewhere in the world they
have brought improvement in the lives of our peoples, improvement that can be
measured in terms of lower costs, greater per capita income, higher production,
improvement that is visible in new factories, industries, and increased agricultural production and intensified conversion of idle and undeveloped natural
resources into jobs and usable wealth. These are the marks of vigorous, expanding, and self-reliant economies. These are the economic ends that we pursue.
The detailed discussion of eaeh agenda item is the function of our committees.
I would like, however, to say a word or two regarding our views on some of the
more vital ones.
The first is international trade. We intend to the utmost of our ability to
maintain a strong, healthy economy in the United States. This will insure a
growing volume of trade with your countries at a steadily increasing level of
demand. This will help sustain a high level of demand for the world's goods
and so foster, trade on a mutually beneficial basis. My Government is convinced
that a strong, stable, and expanding international trade is the best single guarantee of economic strength in our hemisphere.
We are happy to see that our trade with each other is a most important and
growing factor in the international commerce of every American state. It is
in the interest of each of us that this wholesome interchange be strengthened and
expanded. For your economic development you count heavily upon markets in
the United States for your products. We value just as highly the strong markets
which you afford for our own agricultural and manufactured exports. We hope
to see our inter-American trade which has increased so greatly in recent years,
further expanded, and the markets available to producers in all our countries
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195 5 REPORT OF THE SECRETARY OF THE TREASURY
strengthened by the gradual elimination of those artificial barriers that hinder
access to them. Such a trade policy will increase mutually beneficial trade.
This emphasis on expanding trade opportunities continues to be a fundamental
part of President Eisenhower's foreign economic program, which it is his announced intention to press in the forthcoming session of the Congress in January.
Our tariffs on imports from Latin America are low. Two-thirds of all our
imports from this area are on the free list and tariffs on the remaining third are
among the lowest in the world.
We have also made marked progress in freeing imports into the United States
from unnecessary and cumbersome customs requirements. Our Congress passed
Customs Simplification Acts in 1953 and again in 1954. The first authorized
the Treasury to eliminate many technical requirements which were a burden on
imports. The aet passed this year continued this program and also directed the
Tariff Commission to undertake a study of our ^complicated tariff classification
structure with a view to its clarification.
These eongressional steps have been accompanied by an intensive management improvement program and by administrative simplification within the
framework of existing law, both contributing to speedier customs action. We
are continuing our efforts along these lines and plan to submit to the next Congress further legislative proposals consistent with the President's program of
last March. As an example of the progress we are making, just a few weeks ago
we announced a further relaxation of requirements for consular invoices, an
action made possible by the 1953 Simplification Act.
The problem of international trade is closely related to that of prices. We
are aware of your intense and very understandable interest in this probleni as it
relates to the prices for your products sold in world markets. We share that
interest, not only because of the importance to you of adequate and stable prices,
but also because our own producers suffer when the prices of their exports fiuctuate widely.
Our experience convinces us that if we as governments follow policies which
wih give our producers everywhere maximum assurance that consumption of
their products will enjoy a steady and healthy growth and that their access to
international markets will be facilitated, then we will have gone far toward solving this basic problem of prices which so concerns us all.
The subject of financing for economic development is one of the most important which we shall consider. My Government has devoted much study to its
policies in this field and within the framework of the general principles to which
I have referred, has reached certain decisions of whose nature you are already
aware and whose effect we believe will prove to be far reaching.
When we speak of the great need for economic development financing in this
hemisphere, what we are really saying is that throughout our countries there are
profitable and attractive opportunities for the establishment of productive
enterprises that will provide steady employment to our people; that will provide
more of the goods and services which we need for higher standards of living and
that will diversif}^ our economies. These opportunities cannot be converted
into realities without capital, technical knowledge, and experience. As governments, we owe it to our people to promote those conditions which will help make
available the capital and technical knowledge required.
I think that every one of us here can agree that in this field our greatest opportunity and our greatest responsibility lie in creating in our several countries
those conditions which will give maximum access to the great reserves of private
investment capital that are available throughout the world. The reason is
obvious. The aggregate amount of private capital that is available today in
your countries, in mine, and in the rest of the world is many times greater than
any that we as governments could possibly provide. Economic development in
those countries which have successfully established access to the world's supplies
of private capital is going ahead with a rapidity that is astonishing.
We all recognize that the movement of private capital cannot be forced; that
private investors of all nationalities enter only where the circumstances are
attractive. So numerous are the investment opportunities throughout the free
world today that he who seeks investment capital must compete for it. But
here again the position of Latin America is privileged and fortunate. Throughout
your countries there are challenging and attractive opportunities for new investments such as are found only in young and rapidly developing economies. These
factors give you very real advantages in competing for investment eapital.
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249
It is easy to understand, therefore, why the American states whose governments have estabhshed those conditions which have always proven attractive
to private investors everywhere in the world have experienced little difficulty
in finding ample supphes of capital, both domestic and foreign. This has been
demonstrated so dramatically that there can be no longer any doubt but that in
this favored area of the world, where nature has done its part so well, each government can, if it will, attract a volume of private investment that will compare
most favorably with that of any other area of the world.
One of the things which our governments must do to encourage free enterprise
is to insure that those projects necessary for economic development, but for which
private capital is not reasonably available, are adequately supported by publie
investment. We view this as a necessary support to an economy which relies
principally upon private enterprise as supplementing and encouraging, rather
than as displacing free enterprise. I am sure that each government will shoulder
as much of their burden as it reasonably can, but we agree with you that substantial foreign lending will be necessary if we are to achieve our goals in this
hemisphere. We shall do our part generously and loyally in meeting that need.
To that end we have reviewed the whole scope of our public lending policies
and have arrived at certain changes which we consider significant.
The first relates to the United States Export-Import Bank whose activities
are to be intensified and expanded.
This past summer, the Congress of the United States by specific legislation
increased the lending authority of the bank from $4.5 to $5 bihion, in anticipation of its increased lending activity. In his report to the Senate on this legislation. Senator Capehart, Chairman of the Banking and Currency Committee,
stated:
"The Export-Import Bank has played an iniportant role in our foreign economic
policy and must continue to do so on an activated scale. Promotion of trade
among the free nations of the world, and in particular, with the nations of the
western hemisphere, is of utmost importance to the common welfare, the common
defense, and the solidarity of the free world."
Within the last few months the Export-Import Bank has authorized loans
of $.130 million to nations in this hemisphere and other important loans are
under consideration. The loans which have been authorized will help two
important Latin American cities develop municipal waterwork systems and will
make possible the development of one of the world's largest copper deposits.
The bank has made loans to finance the sale in Latin America of machine tools,
of aircraft, of electric equipment, of textile equipment, and of wheat. It has
facilitated the development of sulphur production. The range of its aetivities
has been as wide and varied as the production process itself, from the extraction
of basic materials to the fabrication of complex industrial products. Since its
organization the Export-Import Bank has authorized loans in excess of $2 and
y^, bihion to Latin America.
Within the past few weeks, the Export-Import Bank has opened up new sources
of credit for the countries of Latin America that wish to import equipment from
the United States. With the assistance of lines of credit from the ExportImport Bank, United States exporters wih be able to offer medium-term credit
on equipment of a productive nature. This program will be in addition to
long-term capital and should help to accelerate the flow of trade and ease temporary credit problems.
In addition, a large New York bank announced last week that it proposes to
form a multimillion dollar export financing company. The Export-Import Bank
will also participate in this new venture. This enterprise will add further to the
supphes of medium-term credit available to Latin American importers of capital
goods.
In the field of economic development, of course, the International Bank has a
primary role to play in helping to promote the economic growth of the American
republics. Most of the countries represented here were founding fathers of the
International Bank. Your countries and my own participated in its establishment
and we have contributed irriportantly to its personnel and capital. The International Bank is our common institution. It was established to carry the major
burden of financing reconstruction and development loans at a governmental
level. While the International Bank in the early postwar years was primarily
concerned with reconstruction, it has accelerated the tempo of its operations and
has, more recently, concentrated its major efforts on economic development. The
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1955 REPORT OF THE SECRETARY OF THE TREASURY
International Bank has financed a steady succession of high priority development
projects in Latin America. The total now exceeds $500,000,000 for the last five
years. Its first development loan was in Latin America, and today its investment
in this hemisphere is greater than in any other developing area. Its loans have
been made primarily for basic facilities and public works on which further fruitful
investment depends: for electric power, for transportation, and for communication facilities. The loans of the International Bank are important not only in
themselves but in their secondary effects. Electric power installations, new road
and communication systems, new port facilities, all have encouraged new industries and lowered costs. Development is a cumulative process, setting in motion
innumerable individual efforts with multiplying effect.
In his report to the conference, Eugene Black, President of the Bank, states:
"It is my personal judgment that, given a continuance of present trends in
Latin America, there is every reason to expect expanded lending activity by the
bank in that area during the period which lies ahead. The bank has the resources
to do so and it has the will to do so. The extent to which it may be able to translate
its will into action depends largely on conditions within the control of the Latin
American countries themselves."
At the meeting of the Board of Governors of the International Bank last
September, representatives from many of the American republics strongly urged
support for the establishment of an international finance corporation to encourage
private investment. The subject has been under study for several years.
The matter has been given most careful consideration by the United States
Government, and we are going to ask the Congress to support United States
participation in such a corporation. We have in mind an institution organized as
an affiliate of the International Bank, with an authorized capital of $100 million
to be contributed by those members of the International Bank who wish to
subscribe.
The corporation would be able to make loans without the guarantee of member
governments. It would not directly provide equity financing. It would, however,
be empowered to hold securities bearing interest payable only if earned, as well as
debentures convertible into stock when purchased from the corporation by private
investors. In that way it would operate in the area of venture capital without
holding equity right of control. It would not compete with the International
Bank, or the Export-Import bank and indeed it would facilitate private investment.
If the international finance corporation is established, we shall then have three
major financial institutions to help promote economic development. We shall
have the Export-Import bank that has had a long history of useful work in Latin
America and whose activities are to be intensified. We shall have the International
Bank, in which we are partners, to help^ finance basic resource development. We
shall have an international finance corporation in which we would work together
to assist and encourage private enterprise.
In the spirit of the resolution on private investment and taxation adopted at
the Caracas conference, the United States continues to explore feasible measures
to remove tax impediments to increased foreign investments. The administration
and the Congress, as weh as numerous private groups in the United States, have
given the matter intensive study. This has disclosed the complexity of the. problems involved. In the hght of this experience, the administration will again submit
to the Congress proposals with respect to the reduction of taxation of foreign
income along the general lines recommended by the President last year. We trust
these proposals will find acceptance by the Congress.
We desire to complement these unilateral legislative steps with bilateral tax
treaties. To that end, we are prepared to explore with individual countries the
possibilities of the tax treaty as a medium for creating a more favorable tax
climate for international trade and investment. For example, one of the matters which might be considered in treaty discussions is how the United States
might give recognition to tax concessions made to foreign capital by the country
where the investment is to be made. Under proper safeguards, we would be
prepared to recommend giving credit for general foreign income taxes which are
waived for an initial limited period as we now grant credit for taxes which are
imposed. Such a measure as this will give maximum effectiveness to your own
laws designed to encourage new enterprises.
Our agenda includes the subject of programming. Individual nations will
no doubt continue to develop their overall approaches to their own economic
development problems. If any such nations wish to exchange views on their
EXHIBITS
251
plans with other nations undertaking similar development plans, it may well be
that this organization can provide such a meeting place.
We recommend that each of us expand and further diversify our joint activities in the vital field of technical cooperation. The interchange of people under
this program draws us closer together and provides a better understanding of
each other's problems. Through technical cooperation we pool our accumulated
experience and knowledge to utilize the human and natural resources available
to us as we seek to match resources against our needs. The enormous mutual
benefits already produced by our efforts in this field justify our confidence in its
future expansion.
We approach our talks here together with a sense of mission, which I am sure
is common to us all. The challenge of the years ahead is a tremendous one.
How we meet it may determine our place in history. We have great faith and
confidence in the peoples and the lands that share this hemisphere. The human
and physical resources are here out of which to build a glorious future.
The President of my country has very rightly called us partners in this great
enterprise. He has declared the policy of our Government to be that of the
good partner.
I know that the American states can be good partners, determined to work for
the betterment of all our people. If we are energetic and practical, I am confident that we stand on the threshold of a great tomorrow. As good partners we
can make this coming together at Rio a momentous one in the bright and
lengthening record of inter-Ameri can relations.
Exhibit 32.—Statement by Secretary of the Treasury Humphrey, March 3, 1955,
before the Senate Finance Committee on the trade agreements program
In my contacts over the past two years with foreign financial officials I have
been impressed with two major principles in our economic relations.
First, the importance of keeping our own economy strong and dynamic and
sound. Our policies are directed toward economic strength and growth, toward
greater freedom from governmental interference and control. Our policies aim
at encouraging initiative and freedom and maintaining economic progress and a
high level of economic activity at relatively stable prices. Such a condition helps
international trade in both directions. A strong internal economy helps to keep
us competitive and makes our goods attractive to foreign buyers. It also promotes a high level demand for imports. With high levels of business activity
the capacity of our economy to absorb imports is enormous, particularly irnports
of raw materials.
Maintaining the strength and value of the United States dollar is a vital part
of our contribution to international monetary stabihty, for the United States
dollar is the yardstick for all of the currencies of the free world. The free world's
vigorous economic growth must rest on a sound financial basis. What is essential
for our own strength at home is equally essential for the other free nations of the
world. Many countires, I am glad to say, are appreciating the importance of
keeping their financial houses in order not only to strengthen their internal
economies but also to keep their foreign payments and reeeipts in balance. I am
encouraged by the progress many of these nations have made toward more
internal stability and toward convertibility of their currencies.
Convertibility will be encouraged by a balanced development of world trade;
and, in turn, will contribute to such a development. Progress toward convertibility means and is measured by progress in removing trade and exchange
restrictions.
The second point which has impressed me in my contacts abroad is the concern
of foreign countries with the broad direction of our commercial policy. Foreign
countries do not expect us to lower our tariffs drastically. They want to have,
however, assurance of continuity in our policies and they watch for moderate
steps in the direction of our objectives. This suggests the desirability of a
three-year extension of the Trade Agreements Program. A three-year period
would provide reasonable assurance of such continuity.
The bill before you is moderate. It preserves all existing safeguards for our
domestic producers. It does not contemplate any drastic changes which would
adversely affect sizeable groups of our citizens.
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195 5 REPORT OF THE SECRETARY OF THE TREASURY
I would like to mention one other broad principle in connection with the bill.
From the budgetary viewpoint, the President's trade program should help to
reduce Government expenditures for foreign aid over a period of time. I believe
it is best, where possible, for foreign countries to earn their way, rather than
receive aid from the United States Treasury. This bill is a further step in that
direction.
The Treasury Department is actively working on other aspects of the President's program to promote foreign trade and investment. Among these is a
proposal revising somewhat earlier Treasury reeommendations which have previously been presented to the Congress and which have not been finally considered
because of the lack of time.
The proposal will provide for the amendment of the standards governing the
valuation of imported articles, for the conversion of currency into dollars for
customs valuation, and for the repeal of certain obsolete provisions in the customs
laws. The revision of the complex valuation provisions of the present law to
make the process of appraisal more prompt and efficient as well as more commercially realistic is particularly important.
Our program for customs simplification and management improvement, begun
by the Customs Simplification Acts of 1953 and 1954, will continue. We expect
to have some additional proposals for administrative improvement to make to
the Congress during the present session.
In the field of taxation consideration is again being given to certain changes
m the revenue laws with respect to taxation of ineome earned abroad, so as to
tax corporate business ineome from foreign subsidiaries or branches at a rate 14
percentage points lower than the rate on corporate domestic income, and to defer
tax on foreign branch income until it is removed from the country where earned.
This rate is already effective for Western Hemisphere trade corporations.
These proposals are not large or costly but are designed to encourage sound
private United States investment abroad.
Another important part of the administration'^ program on which the Treasury
is working is the proposal for an International Finance Corporation to be established as an affiliate of the International Bank for Reconstruction and Development. The purpose of the Corporation will be to stimulate private investment
in underdeveloped eountries by providing venture capital through loans without
government guarantees, thus filhng a need which is not being met by any existing
organization. The preparation of a charter for the Corporation is proceeding
steadily in the International Bank.
While all of these proposals are important, the Reciprocal Trade Agreements
legislation now before you is desirable because its enactment will permit the
United States to follow a sound trade policy consistent with both our domestic
and our international needs.
In conclusion, I cannot emphasize too strongly the importance of maintaining
a high level of employment and economic activity right here in the United States
upon which the whole world depends. Serious reversals here would have serious
unfortunate effects throughout the entire world.
Exhibit 33.—Statement by Secretary of the Treasury Humphrey July 11, 1955,
before the House Committee on Banking and Currency on the International
Finance Corporation
President Eisenhower on May 2 recommended action by the Congress to
authorize United States membership in the proposed International Finance
Corporation. I am here this morning to support the President's recommendation. Appropriate bihs, H. R. 6228 and H. R. 6229, have been introduced in
the House and are pending before your committee. A similar bih, S. 1894,
recently passed the Senate.
As you know, the IFC will be an international effort to cooperate with private
capital in both the capital exporting and the capital importing countries to set
up new enterprises, or in some cases expand or modernize existing enterprises,
particularly in the less developed countries of the world.
In recent years there has been a great deal of discussion here and abroad about
the need for more investment in such countries. They are anxious to secure
capital, to build up their economic development, and to raise the standards of
living of their people. This is an objective with which the United States Gov-
EXHIBITS
253
ernment has always had great sympathy. Increased capital investment will
aid the growth of world trade, and thus be beneficial to us as well as other
countries.
Private American investors are today placing new capital abroad and reinvesting their earnings from previous investments abroad at about twice the rate of
loans made by the International Bank and the Export-Import Bank. This private investment, however, has been largely concentrated in a few lines: 00,
mines, and to a lesser extent various manufacturing and merchandising enterprises. It has also been pretty heavily centered in Canada and some countries
in Latin America and in the Middle East. These investments have played an
important part in developing the countries involved. But a more diversified
form of investment would contribute significantly to the progress of the less
developed eountries.
The International Finance Corporation has been proposed as one way of encouraging new foreign private investment. The IFC is to serve as a catalyst in
stimulating private investment. It is not another type of government-to-government aid. Instead, by assisting private ventures on a business basis, the IFC
will give concrete expression to the basic American conviction that economic
development is best achieved through the growth of private enterprise.
The IFC will, we hope, generate an increased flow of private eapital not merely
by providing financial support but also by giving additional confidence to American and other firms that are interested in going abroad but are deterred by lack
of knowledge and experience. I am convinced that there are many companies,
mostly middle-sized and small firms, that will engage in overseas operations if
they can get IFC participation, but which would not do so solely on their own.
I also beheve that the proposed clearing-house function of the IFC, bringing investment opportunities in capital importing countries to the attention of potential investors in the more advanced countries, may prove to be a very important
service.
The Corporation will perform a different job from that now being done so
well by the Export-Import Bank and the International Bank in financing trade
and economic development. The two banks do not advance venture capital.
They make loans at fixed rates of interest and agreed schedules of amortization.
Before the banks make loans they must have reasonable assurance of repayment.
Moreover, in the case of the International Bank the guarantee of the government
of the country concerned is required for each loan. The IFC, on the other hand,
will provide venture capital on flexible terms and will operate without government guarantee.
The IFC will not compete with private capital. Its job will be to join with
private partners in financing productive enterprises. These partners may be
local firms or they may be foreign investors, or both. The private interests will
supply the nianagement and the bulk of the capital for eaeh enterprise, whhe the
Corporation. will furnish only the margin needed to complete the financing.
Where private capital can do the whole job, the Corporation will not enter into
the financing at all.
When the IFC project was first talked about, investment in equities was one
of the proposed methods of operations. We in the Treasury did not think it
would be desirable or feasible for an international governmental corporation to
invest in common stock and to take the management responsibility which stock
ownership entails. The present plan has eliminated the equity investment
and management feature. The administration beheves this is a great improvement and supports the project fully in its present form.
Although the Corporation will not hold stock, it will advance capital in various
forms appropriate to new enterprises. Its investments in some instances may
^ake the form of obligations with set interest rates, and in others with income
dependent upon the earnings of the local concern. This may mean, sometimes,
that securities will bear interest only to the extent that the local concern earns
enough to pay, and in other instances it may mean that the Corporation will
participate in additional earnings over and above a fixed rate. It may also take
obligations which could be converted into stock when sold to private investors
by the IFC. The particular form of securities will have to be tailored to the
special problems of the particular investment. In all cases it will be expected
that private investors will provide the major share of the capital as well as take
management responsibility.
Moreover, the IFC is not intended to be an international holding company.
When an enterprise gets on its feet and the Corporation finds that it ean advan-
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1955 REPORT OF THE SECRETARY OF THE TREASURY
tageously sell off its investment, it will do so. It will use the proceeds for investment in new enterprises. In this way a capital of $100 million, which the governments are now asked to provide, will be turned over, we hope, many times in the
course of the coming years.
The Corporation will come into existence after 30 countries, with subscriptions
of at least $75 million, have accepted membership. All subscriptions will be
paid in full in gold or dollars. The United States subscription is slightly over
$35 million. This amount has been included in the President's budget. Fortytwo. countries have informed the International Bank of their intention to initiate
the necessary steps to become members, and 15 of these have already signed the
Articles of Agreement, subject to legislative approval.
The IFC, though financially independent of the International Bank, will be
affihated with it. The Bank's Board of Directors will serve as the Board of
Directors of the Corporation. The Bank's President will be the Corporation's
chairman. Thus the Corporation will have the benefit of the experience and sound
judgment which have distinguished the management of the Bank. Operating
economy will also be assured.
The provisions of the Corporation's Articles of Agreement are based largely
on the relevant provisions of the Bank's Articles. The legislation proposed for
United States membership follows substantially the provisions of the Bretton
Woods Agreements Act, which were worked out ten years ago in this Committee.
The Corporation is not an answer to allthe problems facing the private investor
going abroad. Much will depend upon the attitudes of the host countries to new
private investment. We hope the Corporation will be able to influence these
countries to take favorable attitudes toward investors. While no governmental
guarantee of its investments is desirable or will be requested, the Corporation
obviously can operate in any country only if the government is favorable to its
activities and to other private investments. In substance it will operate under
the same eonditions as private investors do in these- counries.
In the present state of international affairs, it is vital that the United
States and the other capital exporting countries maintain good economic relations
throughout the free world. This should be done as far as possible by the investment of private capital. While the International Finance Corporation is
an experiment, it offers a worthwhile chance to increase the role of private investment. I hope that this committee will give favorable consideration to the
proposed legislation.
Exhibit 34.—Statement by Secretary of the Treasury Humphrey as Governor for
the United States, September 12,1955, at the opening joint session ofthe Boards
of Governors of the International Bank for Reconstruction and Development
and the International Monetary Fund, Istanbul, Turkey
On behalf of the United States delegation I should like to express our great
pleasure at being in this vigorous and interesting country with its roots deep in
history and its sturdy people building for an even brighter future. We are
sincerely grateful to the Turkish Government for inviting the Bank and Fund to
Istanbul for this tenth annual meeting. We are also indebted to the Rector
and the faculties of the University for the arrangements they have made for us.
This tenth annual meeting to which we are pleased to welcome Afghanistan
and the Republic of Korea as new members provides a suitable opportunity
for reviewing the work and accomplishments of the Fund and the Bank, and for
considering the problems that lie ahead. Both institutions have come to occupy
an increasingly significant role in the world. They have played an important
part in facilitating investment of capital in sound reconstruction and development^
and in fostering a more realistic and freer system of international payments and
mutually beneficial trade.
The Bank has steadily increased its lending activities, attracted a growing
volume of priyate capital participation, and provided valuable technical assistance and advice to its members. With the past record year during which
$410,000,000 of loans were authorized, the Bank's total loan commitments for
the reconstruction and the economic development of its members for higher
standards of living have reached more than $2,300,000,000. While the major
responsibility for economic development necessarily rests with the member
countries,, the Bank's lending and advisory activities have supplemented and
stimulated a great volume of constructive and balanced investment in better
EXHIBITS
255
hving for hundreds of millions of people. The Directors and management of the
Bank are to be congratulated for their successful work of the past and we offer
them our best wishes for the future.
Perhaps the most interesting development in this year of the Bank's history
has been the drafting and submission to governments of the Articles of Agreement for the proposed International Finance Corporation When this project
. was first broached a few years ago, my Government entertained doubts about
some aspects of the proposal then being discussed, particularly the suggestion
that the Corporation be authorized to invest in stocks and possibly to manage
enterprises. With the amendments to the proposal which were suggested last
fall to eliminate these stock and management features, my Government was
happily able to resolve its doubts and lend its support to the drafting of the
Articles of Agreement.
The President and Executive Directors have since produced a charter which
offers a workable scheme by which private investment in productive private
enterprises can be stimulated, particularly in the less developed eountries, in a
way which can be beneficial to all concerned. Although we view the International Finance Corporation as an experiment, we believe it is a very hopeful
experiment in getting private investors, to join as partners in providing an enlarged flow of venture capital to private enterprises in the member countries.
I am very happy to report that the United States Government has completed
all the steps necessary to authorize its acceptance of the Articles of Agreement
and membership in the International Finance Corporation. It is our hope that
other member countries of the Bank will take action as soon as possible so that
the Corporation can begin its useful work within the next few months.
Significant progress has also been made during these last ten years, and during
this last year, toward the objectives of the International Monetary Fund. The
period since World War II has not been an easy one. We have had our ups and
downs. But anyone looking objectively at present conditions must be impressed
with what has been achieved in these ten years. Business activity is at record
levels throughout most of the world. World trade is at a high and healthier
volume. Prices are more stable. The gold and dollar assets of other countries
are substantially higher. Currencies of the world have become stronger. With
the quiet and effective work of the Fund in its annual consultations with members,
there has been a sharp reduction in governmentally imposed barriers to financial
and trade transactions. Genuine progress has thus been made during these ten
years toward the Fund's objectives of strengthening economies, removing restrictions, and promoting a more realistic and freer system of healthy exchange and
trade.
The past year has been marked by further progress. We all have our problems
and it is natural we should all proceed with prudence and with due regard for our
individual domestic interests. But progress has been made and the momentum
carries forward. In the United States we have enacted a three-year extension of
the Reciprocal Trade Agreements Program, permitting a gradual and realistic
approach to increasing mutually beneficial trade. Further steps to reduce unnecessary restrictions have been taken in our customs practices. Most important
of all, we have strengthened and increased the high level of economic activity in
the United States and thus provided an increased and high level of demand for
the world's goods.
Thus, the value of our total imports of goods in 1954 was more than 60 percent
above the 1947-49 level, and in 1955 our imports are still higher. The proportion
of our total imports represented by finished manufactures has been rising in
each year since 1950. Moreover, the overall supply of dollars to foreign countries
from our imports of goods and services, capital exports and remittances, and
United States Government transactions amounted to nearly $20 billion in 1954.
This supply of dollars has for six years exceeded the spending of dollars by foreign
countries, permitting them to build up their gold and dollar assets by very large
amounts. During the last year, for example, the increase in these assets from
transactions with the United States was $1.7 billion. In short, the United States
has been paying out large net amounts of dollars in addition to the aid which we
have supplied in the form of goods. With continuing United States Government
expenditures abroad and high and growing levels of activity in our economy providing a rising demand for foreign goods, the overall prospect is that the dollars
available to foreign .countries should provide a basis for a continued growth in
mutually beneficial international trade. It is the policy of the United States
Government to further the healthy development of trade in every reasonable way.
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195 5 REPORT OF THE SECRETARY OF THE TREASURY
We look forward to the further steps which the other nations of the free world
take toward currency convertibility and the freer system of payments and trade
which are the aims of the Fund. During the past year many restrictions have
been removed and discrimination has been reduced. The further steps may be
gradual as they have been to date. But we are confident of the determination of
the leadership in all our countries to continue to strengthen their economies and
to make further progress in removing governmental' controls and restrictions as
rapidly as their own conditions permxit.
Again let me say how pleased we are to be here as guests in this dynamic
country. Our deliberations in the coming meetings and the opportunity to extend acquaintance and renew old friendships will be most beneficial in creating
better understanding of eaeh other's problems for the benefit of all. We are
looking forward to the next few days together with enthusiasm.
Exhibit 35.—Statement by Under Secretary of the Treasury Burgess, Temporary
Alternate Governor for the United States, September 14, 1955, at the discussion
of the Annual Report of the International Monetary Fund
In reflecting on the annual report and the wise remarks of our distinguished
chairman, and of the managing director, it seems to me that this year might be
characterized as a year of increasing understanding. Certainly it has been a
period of active negotiation. In the Monetary Fund there have been long and
earnest sessions, in which the representatives of various countries have reached
more and more understanding of each other's problems and a clearer concept of
what, as a practical matter, can and cannot be done. They have achieved useful
results and provide a backdrop for many decisions by individual countries.
The free world as a whole has made progress in production and trade in the
last year. Indeed, in several areas, the problem has been to keep the boom under
control and to avoid inflation.
In the United States, we are currently enjoying what promises to be our most
prosperous year in history. We not only met successfully the readjustment last
year to lower levels of Government spending, as well as an inventory adjustment,
but our economy has been moving forward on a broad front.
Our gross national product reached a new high annual rate' of $385 billion in
the second quarter of 1955, up $27 bilhon above the low second quarter of last
year. Personal income of $300 billion is $14 billion higher than a year earlier.
This current prosperity in the United States represents growth in real terms,
as the purchasing power of our dollar has remained virtually unchanged for
three years.
Recently we, as well as other countries, have been concerned with pressures
toward inflation, and our monetary authorities have been moving to keep the
use of credit within healthy hmits.
Contributing also to the stability of the dollar is progress in getting the Federal
budget under eontrol. The estimated Federal deficit of $1.7 billion, or less than
3 percent, in the current fiscal year is the lowest in five years. In view of the
place of the dollar in the world economy, we think soundness in the dohar's value,
based on a strong and growing economy, is perhaps the greatest long-run contribution we can make to world economic stabihty and growth.
It was, perhaps, to be expected that continued economic growth in many countries in 1954-55 would be accompanied by growing optimism, some speculation,
and imbalances, and that this would lead to precautionary steps by many countries
in fiscal and monetary policy. This is encouraging and demonstrates the awareness of the corrosive internal and the throttling external effects of inflation and
of the suprenie importance of deahng with inflationary threats before they become serious.
In this light, I should like to comment briefly on proposals which have been
made that the IJnited States should pay a higher price for gold. The United States
cannot agree with these proposals. We continue to beheve that a change in the
par value of the dollar, or in the offieial dollar price which we pay for gold, would
be inflationary. Moreover, an increase in the price of gold would be in sharp
conflict with our objective which is to maintain a sound currency as the basis
for economic health, not only in the United States but also, wherever the dollar
is important.
EXHIBITS
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From a long-range point of view, as many countries have strengthened their
economies and as the flood tide of inflations of the earlier postwar years receded,
the financial grounds for trade and exchange restrictions have tended to disappear.
The gold and dollar reseryes of the countries other than the United States have
continued to improve, and a vast redistribution of the world's liquid reserves has
taken place. In the six years sinee June 1949, countries other than the United
States have added $11 bihion to their gold and dollar holdings, both official and
private. In the year ended June 30, 1955, they added $1.7 billion. Conversely,
the net reserves of the United States have been substantially reduced. Much the
larger part of this redistribution in reserves has gone to Western Europe. These
gains in reserves will not serve their purpose if they do not lead the accumulating
countries to expand their trade by reducing restrictions, particularly discriminatory restrictions.
It is encouraging that the Fund has been able to report considerable progress
toward de facto convertibihty during the past year. The recent shift to harder
gold payments in the European Payments Union is an evidence of progress and
should open the door to further opportunities for trade with the dollar area.
We are glad to note that the Fund has devoted much of its energy during the
year to various aspects of convertibility and the reduction in discrimination,
which still constitute a major, task in the field of international finance. Let me
enumerate the activities in this field which have impressed me particularly.
First, the Fund has continued its quiet consultations with members respecting
exchange restrictions and ways of achieving or maintaining the domestic monetary
stability which is essential to stable and convertible currencies. The Fund is
precluded from directing much pubhc attention to these consultations, but I
believe sincerely that, over a period of years, they are of great benefit to member
countries.
Second, the Fund has considered the problem of bilateralism and has taken a
decision which usefully focuses attention on the importance of dihgent efforts
by all members to reduce discriminatory arrangements. We believe effective
convertibihty, as it comes, ought to bring with it the end of discrimination.
Third, the Fund is currently engaged in an examination of policy respecting
Articles VIII and XIV. It would be premature to anticipate the outcome of
this examination. But it is encouraging to know that the close relationship
between convertibility of currency and appropriate policy respecting these important Articles is fully recognized. Eaeh passing year makes it more essential
to arrive at a procedure to bring to an end the so-called postwar transitional
period under Article XIV.
Fourth, the annual report contains a careful and agreed statement on policy
relating to the use of the Fund's resources which should enable members to
judge the circumstances under which they may expect to draw on the Fund.
The International Monetary Fund works in an immensely difficult field.
Its Articles embody a code of fair practice which is not easy for the members fully
to observe. The advice which the Fund must give to its members is often severe
and not very palatable. But, after ten years of persistent work, the Fund has
established a sure place for itself.
We have only to look back ten years to realize the great progress from the dislocations and distress of a decade ago. This should give us courage to look
forward with faith.
Exhibit 36.—Extracts from remarks by Under Secretary of the Treasury Burgess,
October 9, 1954, before the Pennsylvania Newspaper Publishers Association,
Harrisburg, Pa.
In the past year and nine months the rate of Government expenditures has
been cut by 10 billion dollars, the annual tax take from the people has been
reduced by 7.5 bihion dollars. The Federal Reserve System has been freed to
devote its energies wholly to its lawful purpose of giving the people honest money,
and avoiding inflation and deflation. The national debt has been managed for
the same purpose.
In these few words the financial aims and acts of this administration may be
summarized. They are substantial accomplishments in themselves, but they
add up to a change in the principles of government.
The need for strong central government in time of war, threat of war, and
great economic changes led in this and other countries to a greater rehance on
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1955 REPORT OF THE SECRETARY OF THE TREASURY
government and a tendency to distrust the forces of private enterprise. Unhappily, also a tinge of the philosophy of Karl Marx had spread far beyond the
confines of the Communist states.
For twenty years our National Government grew bigger and bigger and moved
into more and more areas of the country's economic and social life. Some of these
extensions of function have proved proper and useful, but the trend towards
centralization of power got out of hand. It brought us mounting expenditures,
higher taxes, and larger deficits, and inflation.
The present Government has turned against this trend. The reduction in
Government spending and in taxes is an evidence of this change. It is not a
change in the sense of responsibility of the Government for the people's welfare.
It is rather a difference in method and approach. The objective is a dynamic,
vigorous, and growing economic life and rising living standards. The function
of government is conceived as not so much to supply benefits directly to its
citizens as to ensure the opportunity for them to achieve them by their own
effort.
The philosophy of the present Government is that our citizens individually
and in association with others, if freed from undue restrictions, and excessive
taxation, if given opportunity, do create the jobs which yield continuing and growing high employment. Prosperity does not depend on steadily increasing Government spending or inflation. As President Eisenhower said recently, "We
flatly reject the idea that, for America to stay prosperous, we must constantly
run an economic fever. We flatly reject the idea that, for America to stay
prosperous, the Government must always spend more than it has."
In this country we are now in the midst of a test which will give some evidence
whether this belief will work. It is a difficult test for it follows 20 years of intermittent inflation which has cut the value of the dollar in half, twenty years in
which the people have been taught to lean more and more on their Government.
To change the trend is not easy. The evidence today is encouraging that the
turn is being made successfuhy. For example, personal income, after taxes, is
today above the new high record set last year.
One essential part of the philosophy of economic freedom is that sound and
honest money is a basic necessity for the healthy growth of enterprise. Money
that can be trusted is one of the keys to national prosperity.
Equally, a healthy world trade requires good international money. That is.
one reason why so much interest attaches to the recent meeting of the Monetary
Fund and the International Bank in Washington.
It had been hoped by some that this meeting might signalize a major step on
the part of some of the European countries to more fully convertible currencies.
Convertibility will be a stimulus to world trade; when the step can be taken with
assurance of success.
No such major step was made or revealed at the Washington meeting, but on
the other hand, the meeting brought into clearer view a very encouraging develment which had been happening so quietly as to escape some people's attention.
That is the many shorter steps Europe has been taking towards convertible
currencies, and the firm resolve expressed that these moves would be continued.
A partial list oi steps taken in 1953 and 1954 is as follows:
1953
January—UK Government restored trade in many important products from
state to private hands. London Metal Exchange resumed operations in zinc on
liberalized basis.
March—UK relaxed restrictions on the use of blocked sterling accounts.
May—UK permitted private importers to import wheat from any source.
Eight European countries permitted the resumption of private arbitrage among
their respective currencies.
August—UK permitted international copper trading on liberalized basis.
1954
January—South Africa announced end of trade and exchange discrimination.
February—Germany liberalized about 40 percent of its dollar imports on private aceount.
March—London gold market reopened for nonresidents of sterling area.
UK simplified^and reduced exchange controls on use of transferable sterling.
EXHIBITS
259
April—Germany released blocked DM balances accrued to March 31 and
permitted transfer to nearly all nondollar countries.
May—Benelux countries announced extensive lists of items which could be
imported freely from the dollar area. Liverpool futures market opened for
American cotton.
June—UK announced adoption of more liberal policy in approving dollar
machinery imports.
July—UK permitted importers to import sugar from any source.
August—Italy further liberalized private imports from the dollar area.
September—Germany announced extension of list of items which could be
imported freely from dollar area. Germany also released blocked DM balances
accrued since March 31, 1954, and extended the investment uses in Germany of
these funds. UK permitted importers to import cotton from any source.
October—Sweden liberalized a long list of items, including many consumer
goods, for import from dollar area. UK.doubled its tourist allowance for travelers
outside the dollar area.
Clearly, if the Western countries press forward with more of these short steps
it will not be long before the free world finds its currencies convertible de facto.
Convertibility will perhaps come not so much by a great leap as by many shorter
steps. Though at the end some leaping will be necessary, some definite commitment which will call for both faith and international cooperation.
There is a link between the movements of the free world toward convertible
money and the principles of government which we are following today in the
United States.
In both cases we are moving toward greater freedom and away from detailed
government control over the lives of its citizens. The purpose of the move towards
freedom is to allow the energy and enterprise and ingenuity of each citizen to
bring him and his fellows a fuller and more satisfying life.
Exhibit 37.—Remarks by Assistant Secretary ofthe Treasury Rose, April 28, 1955,
before the National Council of American Importers, New York, N. Y.
I would like to speak to you today about a phase of the President's foreign
trade program that has, I am convinced, received less emphasis than it deserves.
The President as an important part of his far reaching economic program has
asked for the three-year extension of the Trade Agreements Act as the cornerstone of his effort to develop a high and expanding level of international trade,
and of course it is. The enactment of this bill will give to the world the assurance
that it wants and vitally needs of the continuity, stability, and direction of the
foreign trade policy of the United States.
This measure, however, needs no analysis or discussion from me. It has been
on all the front pages for months; and many of you here know as much as I do,
or more, about its vital significance in the world trade picture.
Instead of adding one more to the list of speeches about the Trade Agreements
Act, I should like to discuss here today accomplishments, which I believe also
deserve to be called vitally important, in a much less publicized area, the simphfication and better administration of our customs laws.
The longer I have worked in this field, the more convinced I have become that
good administration of the customs laws is of critical importance to the maintenance of a high level of world trade.
Good administration means three things: Speed, certainty, and fairness. I do
not think it is going too far to say that the assurance of these three things is of the
highest importance to many people who want to ship goods to this country.
Let me give you an example of what the financial consequences may sometimes
be of a lack of speed, certainty, or fairness in the administration of the customs
laws. I came upon a case the other day where, after merchandise had been entering
for some time at one rate of duty, a proposed reclassification would have changed
that rate by almost 500 percent, and increased the duty-paid cost of the goods
by almost 300 percent. All of you have heard of cases like this, and so, unfortunately, have many exporters in foreign lands.
I do not have to emphasize to you how big an investment a foreign manufacturer
usually must contemplate in order to break into the American market. An advertising budget of five percent of sales is not unusual among American companies;
and frequently a foreign manufacturer must contemplate an even larger proportionate outlay in order to enter this fiercely competitive arena. Yet, if he en-
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1955 REPORT OF THE SECRETARY OF THE TREASURY
counters an unanticipated problem with the American customs, and some of them
have been well publicized over the last few years, he can stand to lose this entire
sales investment. This does not have to happen to many people before many
more decide that.they simply will not take the risk.
I should like today, therefore, to emphasize the achievements of the last two
years in improving speed, certainty, and fairness as a contribution of vital importance to a high level of world trade.
Speed
When this administration came into office, the backlog of customs entries
awaiting liquidation was about 700,000. It had been rising steadily ever since
the war from a low point of 275,000 in 1947; and it continued to rise until September of 1953, when it reached the alltime high of 900,000. That was a backlog
of one year's work at the then rate of liquidation. That meant that many an
importer waited a year or more after paying his estimated duties before he could
be sure that his customs liability was finally fixed.
I have just received figures which indicate that at the end of March this situation had been vastly improved. The backlog of unliquidated entries had been
reduced by nearly one-third, to 655,000. Whhe the number of entries filed continues at peak levels, the quarterly rate of liquidation has been raised from 225,000
(where it stood in September of 1953) to 322,000 in the first quarter of this year
and is continuing its rapid rate of rise.
Now, how was this brought about? Not by the employment of more people,
for Customs now employs about 7 percent fewer people than it did two years ago
and about 15 percent less than in 1947. Not by reason of a decrease in imports;
they have more than doubled since 1947 and are now at levels near or above the
postwar high. No, this was done by unremitting attention to improving the
details of administration, and to the changes in legislation needed to make this
possible. By the Customs Simplification Acts of 1953 and of 1954, an important
part of the President's program in this field, the Congress freed us from many
archaic procedural requirements, such as the 100 percent audit of transactions by
the Comptrollers of Customs, which wasted manpower by preventing the introduction of modern methods of auditing. With this new freedoni, and by making
better use of the management freedom we already had, we were able to do more
work with fewer people. We employed management techniques that are familiar
in business, such as developing and applying standards of output per man and
other statistical controls, and using manpower not fully employed at one port of
entry to handle an overload at another. There was no luck and no trick in the
way it was done; and by the same token there is no reason why the present rate
of improvement should not continue, and put us presently upon a fairly current
basis.
In the New York area I am happy to report improvements in the handling of
•passengers' baggage and of cargo. At the present time, passengers are being
processed at Idlewild in less time than ever before in the history of Customs.
We are giving much better service on the docks too.
For example, the average time for the clearance of passengers on the large
liners, such as the United States or the Queen Mary, has been reduced from about
four hours to around two and one-half hours. At Idlewild, it is now a routine
matter for express and cargo shipments arriving in the morning to be cleared
through customs the same day. We also sample and examine greater quantities
of merchandise on the docks so as to speed up the release of vessel cargoes.
I would like at this time to single out for credit Bob Dill, our New York colleetor, and Al Couri, our appraiser, for forming a port advisory committee to help
Customs identify and solve these and other bothersome problems. Much credit
is also due the splendid representation of the many trade, shipping, and travel
organizations working with them.
We are seeking constantly for new ways of eliminating useless steps that add
up to paper work and delay. Only yesterday, as many of you saw, we published
a notice of our proposal to abohsh the requirement of certification of consular
invoices, which has long been criticized as a useless burden. Our purpose in all
of this is, while retaining all proper safeguards to the revenue, to eliminate the
delay which has been a curse of many transactions with the Customs in the past.
As soon as we have achieved our goal of putting customs transactions on a
fairly current basis, we shall find, I am sure, that we have thereby removed some
of the worst consequences of the lack of certainty which is now so often emphasized as a deterrent to international trade. When a liquidation backlog has piled
EXHIBITS
261
up, many problems, such, for example, as those in the field of classifieation and
dumping, may involve highly unfair retroactive aspects. Putting customs transactions on a current basis will automatically solve many collateral problems.
Certainty
The area in whicii lack of certainty has plagued us most has been the classifieation of articles for customs purposes. You are all familiar with what happens:
A new article is first entered at one port and given a certain classification. Then,
weeks, months, or years later, it comes in at another port which gives it a different
classification; or a question is raised as to the original classification. Reconsideration then takes place; and if a different and higher classification is found to be
proper, a thriving business may be ruined which had been built on the assumption
that the original classification was correct, or, if there is a backlog of unliquidated
entries, the new classification may in some cases have a highly unfair retroactive
application. Cases of this kind are the subject, I think, of more business between
my office and the commercial counsellors of the Embassies in Washington than
any other one topic.
Part of our problem here is one of publie relations. In the past Customs has
pubhshed only those reclassifications which raised the duty, and not those which
lowered it. This was because the law required pubhcation only of those decisions
which increased a rate pf duty. As a result, however, I found that it was widely
assumed that this was a one-way street, and that all reclassifications resulted in
higher duties. When this problem was sharply pinpointed, we had a survey
made covering the last five years and found 50 published reclassifications which
raised duties, while approximately 120 classifieation actions lowered them. We
are continuing our efforts to publicize this information and thus dispel the impression widely held abroad that reclassification was just a protectionist device
to frustrate the successful importer.
But of course the problem goes much deeper than mere public relations. Part
of it arises from the fact that the commodity descriptions in the Tariff Act are
now 25 years old, and that whole families of products, as in the electronic and
synthetic chemical fields, have come into being that were not even dreamed of
when the words under which they must be classified were enacted into law." In
the Customs Simplification Act of 1954 Congress recognized the need for modernizing and simphfying our Tariff Act descriptions, and authorized the Tariff
Commission to undertake a two-year project which ought to go far to eliminate
the problems arising from the obsolescence of some of our Tariff Act descriptions.
Another part of the problem of certainty in classification is the familiar one of
seeking uniformity in all parts of a farflung field operation without at the same
time so bottleneeking the process by referring decisions to Washington as to produce unbearable delay. This problem, which is faced in various forms by many
Government agencies, such as the Internal Revenue Service, is peculiarly acute
in Customs, because a change in classification, and therefore in the amount of
duty payable on a product, affects the gross receipts rather than the net profits
of a business and can thus have a far more drastic effect. In the past this problem
has had, we believe, insufficient attention in the Customs, and we are currently
hard at work on it.
Fairness
A basic principle in our administration of the Tariff Act has been that it must
be enforced as written. Administration of the act cannot be slanted or deflected
to effectuate either domestic or foreign policy; to do so would violate the will of
Congress. Changes for these purposes must be made legislatively and not
administratively. The sole function of the Customs Service is to enforce the law
as it stands. If an impression is allowed to arise that interpretation of the
Tariff Act is the servant of domestic policy, no importer will dare rely upon the
stability of the rate of duty; and, conversely, no domestic manufacturer will
feel sure of whatever protection the law is intended to give to the domestic
production of his commodity. How difficult it is to make this clear is illustrated by the recent controversy over our upjeweling decision, where some persons on both sides of the controversy have insisted that the Customs decision
was intended to effectuate national policy. It was not so intended nor so arrived
at. In such situations. Customs must and wih confine itself to interpreting the
Tariff Act as it stands, leaving policy to the Congress.
These are some of the ways in which we have sought to achieve greater speed,
certainty, and fairness in administration of the Tariff Act. They are not dra-
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1955 REPORT OF THE SECRETARY OF THE TREASURY
matic"in themselves; but, taken together, they constitute in my judgment a
substantial advance in a direction which can contribute importantly to an expanding level of world trade. Decisions to enter new markets must be made
at long range and must risk substantial sums. Men will not risk far ahead the
substantial sums that are necessary unless they can be assured of stability,
speed, and certainty in administration, and a fair and judicial determination of
questions if they arise.
By what I have said, I do not intend to imply in any way that the job is done.
It never will be completely done. We must be eternally vigilant to search out
new methods which will improve administration, reduce delay, and increase
certainty. Even now, we know of substantial areas where much remains to be
done. In the field of valuation, the elimination of foreign market value would
be another important step forward, which would reduce time-consuming and
frequently unnecessary foreign inquiries. We must eliminate too the eccentricities which have been built into the statutory valuation language so as to
return our valuation formula to commercial realism and eliminate the surprises
which so often result from the present rules. We intend to renew to the Congress
almost immediately important proposals to these two ends.
What has been accomplished under the President's leadership to date in legislation in the customs field, together with what is now pending, marks progress
unprecedented in any similar period of the Nation's history in improving this
vital area of trade between nations.
It is right and proper that we should keep our eyes ahead, that we should avoid
complacency, and that we should concentrate on improvements remaining to
be made. But sometimes, in the discussions of foreign trade policy to which I
have listened in the past two years, it has occurred to me that we may have
tended to be over-modest about what has already been done to foster a high and
expanding level of foreign trade.
I say that not because I favor boastfulness for its own sake. But, in this field
as in so many others, confidence in the future, in stability, in safe reliance on
forward planning, is a most vital ingredient. We must never lose perspective
lest we damage the confidence that must underly the President's goal of a high
and expanding level of world trade that can be the foundation of a peaceful world.
Exhibit 38.—Statement by Assistant Secretary ofthe Treasury Rose, July 6, 1955,
before the Senate Finance Committee on customs simplification
I very much appreciate this opportunity to appear before your Committee
to testify on H. R. 6040, the Customs Simplification Act of 1955. You will
recall that I have appeared before your committee in executive session with respect to the Customs Simphfication Acts of 1953 and 1954. The Customs Simplification Act of 1953 provided for the elimination of many procedural impediments to trade, authorized the modernization of administrative procedures, and
eliminated a number of inequities that had developed in the operation of the
customs law. The Customs Simplification Act of 1954 directed the Tariff Commission to undertake a study looking towards the modernization of the classification descriptions in the Tariff Act of 1930 and the elimination of certain
anomalies and difficulties in existing tariff descriptions. This act also made
certain changes in the Antidumping Act ofal921 and in other administrative
provisions of the tariff laws.
We in the Treasury are very grateful to the Congress for the assistance that
these acts have given the Treasury Department and the Customs Service, The
authority granted by these laws, together with new administrative procedures
which have been adopted in Customs, have greatly changed the current workload picture. In September of 1953, at about the time the Customs Simplification Act of 1953 became effective, the backlog of unliquidated customs entries
had reached an alltime high of 900,000. This meant that at the then current
rate of liquidation it would have taken the Customs Service one year to dispose
of the backlog without handling any current work. This backlog of customs
entries awaiting liquidation had risen steadily ever since the war from a low point
of 275,000 in 1947 to 700,000 when this administration took office, and then to
900,000 in September 1953. As of the end of the first quarter of this year, this
backlog had been reduced by nearly one-third, to 655,000. The volume of
imports continues at peak levels but our rate of liquidation has been raised from
EXHIBITS
263
225,000 a quarter in September 1953 to 322,000 in the first quarter of this year,
and we expect the rate of liquidation to continue to rise.
I know you will agree with me that this record of progress is heartening, but
more still needs to be done. The modernization and simplification of customs
procedures cannot be accomplished merely by the enactment of two or three
statutes or by two or three years' intensive effort. It is a continuing problem
which requires the constant attention of all customs management and personnel
and the continued support of the Congress through the enactment of further
revisions in the customs laws when their need becomes apparent.
At the present time the one area of customs administration which most urgently needs revision and simplification is that relating to the procedures for the
valuation of imports. No matter how efficient the liquidation procedures in the
collector's office may be, the collector's final determination of duty must await,
in the case of ad valorem duty imports, a valuation decision by the appraiser.
As of March 31, 1955, 150,182 entries were in the hands of the appraisers awaiting
valuation for more than thirty days. Thirty-eight thousand, eight hundred and
seventy of these entries were delayed because foreign value investigation had
been found necessary.
Section 2 of H. R. 6040, which we belieye is the most important part of this
bill, is intended to revise and simplify the valuation provisions so that this backlog
of unappraised entires in the hands of the appraisers for more than thirty days
may be reduced, primarily by eliminating the necessity for a great number of
investigations in foreign countries. Section 2 is also intended to make valuations
more predictable and certain for all persons concerned with international trade
and to make valuations approach more closely the commercially realistic prices
for the wholesale trade with the United States.
Valuation of merchandise for customs purposes is necessary only in connection
with those imports which are assessed duties on the basis of a percentage of their
value. Such duties are called ad valorem duties. Under existing law, the appraiser is required to determine both the foreign value, which is the going wholesale price in the country of origin for domestic consumption, and the export
value, which is the going wholesale price in the country of origin for export to
the United States. After both of these values have been determined, the appraiser is required to use the higher of the two. The first change which H. R.
6'040 would make is to eliminate foreign value as a basis of appraisement and make
export value the single primary basis of valuation. This elimination of foreign
value would, of course, permit the Treasury greatly to reduce any future accumulations such as the more than thirty-eight thousand entries which are now
being held up because a foreign value investigation is needed.
The second substantial change made by this biU is to redefine a number of
terms contained in the valuation provisions. The value to be used under the
present law is stated to be the price at which "such or similar merchandise is
freely offered for sale to all purchasers in usual wholesale quantities and in the
ordinary course of trade" in the principal markets in question. These words,
with the judicial interpretations that have been placed upon them, have been
responsible for a number of results which are inconsistent with normal trading
practices. Consequently, the valuations arrived at are often surprising to
businessmen not experienced with import practices. Thus, for example, the
courts, have held that in determining wholesale value the price at which the
largest number of transactions occur must be used rather than the price at which
the largest quantity of goods is moved. Court decisions have prohibited the use
of a wholesale priee which is freely offered to wholesalers but not to retailers
who purchase in the same wholesale quantities. They have also prohibited the
use of a wholesale price if the seller, pursuant to a frequent business practice,
selects his customers and is willing, for example, to sell to only one customer in
each town. The second important change which this bill makes in present valuation methods is to define these terms so as to permit the more frequent use of
the actual going wholesale price when it is commercially realistic to do so.
The third important change relates to amendments to the secondary methods
of valuation which are to be used in case export value cannot be determined.
These secondary methods of valuation are basically the same as they are under
existing law. The first method of valuation which is resorted to if export value
cannot be determined is United States value which, broadly speaking, is the
going wholesale price at which the imported merchandise is sold in the United
States less the cost of getting it here and selling it. At present, the deductions
permitted for general expenses and profit are hmited by the statute to a fixed
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1955 REPORT OF THE SECRETARY OF THE TREASURY
percentage of the price. Under H. R. 6040 actual expenses and profits would be
permitted to be deducted. The final method of valuation, if all else fafls, is to
construct a value out of the costs of materials and labor and expenses going into
the product plus an amount for profit. This method of valuation formerly called
"cost of production" has been retitled "constructed value," H, R. 6040 will
also revise the determination of constructed value by permitting actual expenses
and profit to be used when they are less than the fixed minimum percentages now
required by law.
In redrafting the valuation standards, we have sought to make the secondary
standards of valuation (United States value and constructed value) as nearly
comparable as possible to an export value if one had existed. By doing so, we
hope to discourage the practice which is sometimes resorted to now, of creating
artificial conditions in the trade in. a particular product so as to shift the valuation
basis to a more favorable standard.
Some imports, particularly certain coal-tar products and rubber-soled footwear,
are valued on the basis ofthe American selhng price. This bill leaves the American selling price applicable to all such imports as well as to any imports to which
the American sehing price may be made apphcable in the future.
H. R. 6040 differs in three substantive respects from the valuation provisions
in bills H. R. 6584 and H, R. 5877 of the 83d Congress which were before your
committee in 1953,
(1) Those bills contained an additional valuation standard, "comparative
value," whicii was intended to be used, if possible, before resorting to the complicated determination of constructed value. This proposal was deleted from the
present bill because our valuation survey, which I shall describe to you in more
detail later, indicated that comparative value would have been used in less than
one-half of one percent of the cases which were examined in that survey.
(2) For the purpose of determining the commission usually paid or agreed to
be paid under United States value or in determining the various elements of constructed value, situations may exist where under the former language consideration
would have had to have been given to transactions between related companies
which would be unreliable bases for valuation. A new Subsection (g) has therefore been inserted in amended Section 402 to provide that related company
transactions may be disregarded in those circumstances and to authorize determination of the amounts required to be considered from the best evidence
available.
(3) Subsection (e) has been added to make it clear that if any reduction in the
level of tariff protection results or is likely to result, from the change in valuation,
that reduction shall be given full consideration by the Tariff Commission and all
executive officers in connection with any tariff adjustment.
Hearings before the Ways and Means Committee of the House of Representatives and debate on H. R. 6040 on the floor of the House have disclosed that one
of the principal objections raised to H. R. 6040 is the allegation that it is a tariff
reduction measure rather than a customs simplification proposal. That is not
the purpose of this bill. Of course, there is bound to be some reduction in the
valuation of imported merchandise resulting from a change from the use of a
"whichever is higher" of two standards to the use of just one of those standards.
In order to obtain as accurate an indication as possible of the probable results of
all proposed changes on the level of valuations, the Bureau of Customs conducted
a very extensive sample survey of imports made during the fiscal year 1954.
In that survey, the appraised value of imports was recalculated to determine
what the valuation would have been if the proposed methods of valuation had
then been in effect. We sought to obtain as fair a random sample as possible
of all imports into the United States. For this purpose we selected New York
as representative of the Atlantic seaboard and Laredo as representative of Mexican
trade, and selected every twentieth entry at those ports for reappraisal. Detroit
and Buffalo were chosen as representative for the Canadian border trade, Los
Angeles and San Francisco for the Pacific coast, and New Orleans and Houston
for the Gulf trade. Every fortieth entry at these ports was reappraised. According to 1954 statistics, about 70 percent by value of all imports subject to ad
valorem duties were appraised at these eight ports, and about 75 percent of ah
ad valorem duties were collected there.
A total of 19,908 recomputations of dutiable value were made, covering more
than $42 million of goods. 59.12 percent of these 19,908 entries were appraised
on the basis of export value under existing law. That means that for slightly over
59 percent of these entries, export value had been determined to be the same or
EXHIBITS
265
higher t h a n foreign value. I n 29.07 percent of t h e entries, appraisement was
made on t h e basis of foreign value. United States value, cost of production and
American selling priee accounted for t h e remaining 11.81 percent of t h e sample.
Total imports for t h e period of our survey were 10.491 bilhon dollars. Of t h a t
a m o u n t , 5.822 bhlion dollars were nondutiable, and therefore not affected by t h e
provisions of this bill. An additional a m o u n t of 3.258 billion dohars of imports
were dutiable without regard to t h e valuation of t h e product and therefore would
not be affected by this bill. T h e t o t a l value of iraports whicii would be affected
b}^ t h e bill, those subject to ad valorem rates of duty, was 1.411 bilhon dollars.
Projecting our sample study to total imports indicates t h a t under t h e provisions
of tiiis bill they would have been valued at 1.376 bilhon dollars, or a total decrease
in valuation of 2.5 percent.
We also determined w h a t t h e effect would have been on duties paid, again
based upon t h e projection of t h e customs study to total customs revenue for 1954.
During t h a t fiscal year, t h e Customs Service collected a total of 545.7 mihion
dollars, of which 286.1 million dohars was derived froin specific duties. The ad
valorem component of the duties cohected was 259.6 mihion dollars, which
according to t h e projection from t h e sample s t u d y would have been reduced to
254.5 milhon dollars, a 2 percent decrease if t h e provisions of H . R. 6040 h a d then
been in effect.
I t is true, however, t h a t an average decrease in value of 2.5 percent, or in d u t y
p a y m e n t s of 2 percent, may mean t h a t par.ticular commodities are being affected
to a greater extent. To determine t h e variations between commodity groups we
compiled information from t h e sample survey according to t h e Schedule A commodity classifieation of t h e Bureau of Census. As to only eight groups is t h e
indicated percentage decrease in appraised value greater t h a n 8 percent, a n d all
commodity groups for which the decrease is over 4 percent represent only 19.5
percent of t h e total of ad valorem imports.
This indicated reduction in valuation is not t h e same as a reduction in t h e rate
of d u t y or in tariff protection. T h e reduction in tariff protection is determined by
multiplying the change in value by the tariff rate applicable to t h e commodity.
Thus, if there is a change in value of 5 percent as to a product dutiable at 20 percent, t h e loss in tariff protection is only 1 percent. I n only four commodity groups
is t h e decrease in tariff protection more t h a n 2 percent and the average reduction
for all groups is only one-half of 1 percent.
Finally, we eonsidered an i m p o r t a n t test of t h e proposed valuation methods
would be their relation to the a m o u n t s actually paid for t h e imports as shown
by t h e invoice value. The recomputations made in t h e sample survey reduced
valuations of 9.8 mhlion dollars to 8.8 milhon dollars. However, the actual total
invoice value of these imports aniounted to only 8.7 mihion dollars. This is an
indication t h a t t h e valuation proposals in H . R. 6040 more nearly reflect commercially realistic valuations.
We believe t h a t t h e results of this survey establish as definitely as possible
t h a t while some reductions in valuation will result from t h e changes proposed in
this bill, such valuation changes are quite small and t h e loss in revenue protection
is not significant as to any eommodity group. Moreover, the provisions of new
subsection (e) make it clear t h a t any possible loss in valuation resulting from this
bill will be t a k e n into full account in connection with any Tariff Commission or
executive consideration of a tariff adjustment, including possible relief through
escape clause action.
T h e other principal objection raised against the valuation proposals is t h a t
they would interfere with or infringe upon t h e protection afforded doniestic
industry by the countervailing d u t y provisions of Section 303 of the Tariff" Act
and by the Antidumping Aet of 1921. To avoid any possible question of repeal
or modification of the Antidumping Act of 1921, t h e Committee on Ways and
Means, a t the suggestion of the Treasury, inserted a new Section 5 in the bill.
This section specificall}^ provides that nothing in t h e aet shall be considered in
any way to modify t h e provisions of the Antidumping Aet of 1921.
Moreover, I can assure your committee t h a t the Treasury will continue to
require on customs invoices t h e foreign value inforniation necessary to permit
enforcenient of the provisions of t h e antidumping laws. We will obtain this
inforniation and record it for antidumping purposes but still obtain a considerable
saving in customs operations. At t h e present time, appraisers are required to
make a determination of foreign value in t h e case of every ad valorem import.
Under this bill, this investigation and verification of t h e information on foreign
266
1955 REPORT OF THE SECRETARY OF THE TREASURY
value contained on the customs invoice would not have to be made unless the
difference between that value and the price charged the United States importer
indicated a likelihood of dumping. This procedure" would permit a substantial
reduction in the number of foreign value inquiries and permit more effective
concentration by the available customs overseas staff on prompt investigation of
suspected dumping cases.
Countervailing duties would be wholly unaffected by the enactment of this
bill. Countervailing duties are assessed in an amount equal to the amount of
any bounty or grant paid or bestowed in connection with the manufacture or
exportation of any product to the United States. This duty does not depend in
any way upon the valuation of the imported merchandise either in this country
or in the home market. Consequently, the provisions of this bill relating to
valuation standards have no relation to the countervailing duty law.
Active enforcement of both the countervailing duty law and the antidumping
law will not be affected by the enactment of this bill and will continue to be a
discouragement to the dumping of foreign merchandise in this country.
Section 3 of H. R. 6040 provides for more efficient administrative procedures in
converting foreign currencies into dollars for the purpose of customs valuation.
A proposal to accomplish this purpose was also contained in H. R. 6584 and H. R.
5877 of the 83d Congress.
Whenever the value of an imported commodity is stated in a foreign currency,
it is necessary to convert that value into dollars for the purpose of determining
the amount of an ad valorem duty. Under existing law, the Treasury uses the
gold coin parity proclaimed quarterly by the Secretary of the Treasury, unless
the commercial buying rate for the currency in the New York market as determined and certified by the Federal Reserve Bank of New York differs by 5 percent
or more from this proclaimed coinage parity. If as is true in the great majority
of cases, this certified rate varies by 5 percent or more, the rate certified by the
Federal Reserve Bank is used by the Customs Service.
One of the difficulties with the administration of this law is that rates of currencies vary by fractional amounts from day to day. Thus, although the change
is usually so insignificant as to have no practical significance in determining
the duty to be paid, each colleetor is required to maintain a daily record of
certified rates in order to apply the correct daily rate.
The proposal in the 1953 bills would have authorized the Secretary of the
Treasury to proclaim the par values maintained by foreign countries, which would
normally have been used for currency conversion purposes. Specific legislative
direction would also have been given as to the procedure for handling currencies
where there is more than one effective rate. You may recall that this proposal
caused some members of your committee concern because of the possibility that
it might affect the domestic and international monetary policies of this
Government.
This bill would maintain without change all of the existing procedures for currency conversion but superimpose upon them one additional authority to ease
the customs administrative task. The new authority would permit the Secretary
of the Treasury to provide by regulation that the rate first certified in a quarter
by the Federal Reserve Bank of New York could continue to be used for customs
purposes throughout that quarter unless the rate on a particular day changed by
5 percent or more from the first certified rate. This procedure would permit
individual collectors to use one rate for each currency for a three-month period
unless notice was received from the Bureau of Customs that on a particular day
the certified commercial rate differed by 5 percent or more from that first certified
rate. In that case, the daily rate would be used.
The Treasury expects that this authority to maintain the same rate for a quarter
would be used only for those principal trading countries from which imports
arrive each day and for which the Federal Reserve Bank now certifies daily
rates.
The bill also makes other minor changes suggested by the Federal Reserve
Bank of New York to assist it in making its certification of daily commercial
rates, particularly when there is no market in the United States for the currency
in question.
Section 4 is a cleanup provision repealing a number of obsolete sections of the
tariff laws. These proposed repeals do not affect any present operations, duties,
or obligations of the Customs Bureau.
EXHIBITS
267
Exhibit 39.—Statement by Assistant Secretary of the Treasury Overby, July 14,
1954, before the House Banking and Currency Committee concerning the
Export-Import Bank
On behalf of the Treasury, I am glad to appear before this committee in support of H. R. 9523 and H. R. 9524, which have been introduced by Chairman
Wolcott and Representative Spence. A bill along similar lines has been introduced by Representative Brown.
The passage by the Congress of this proposal will constitute public notice
that the Export-Import Bank is prepared to carry forward actively and vigorously its purposes of facilitating trade both in this heniisphere and other world
areas.
One provision of the proposal increases the lending power of the Bank by $500
million, to $5 billion. While the Bank now has considerable unused lending
power, something over $1 billion, this addition to its potential resources enables
it to plan its future operations with greater confidence.
In practice, the real limitation on lending by this institution is not in its legal
authority. The limitations are rather in the quality of the loans, to make sure
that they are in the interests of both the American exporter or importer and the
foreign borrower. Since the war, for example, many countries in Latin America
and elsewhere have been swept by a wave of inflation which has created great
economic uncertainties, and in some countries political conditions have been
unstable.
The statutes of the Bank provide that the Bank in the exercise of its functions
should supplement and encourage and not compete with private capital, and that
its loans shall offer reasonable assurance of repayment. There has been no suggestion for any change in these provisions. There is no lasting advantage in
making dubious loans. The success of the Bank will also be measured by the
extent to which its operations encourage and pave the way for private financing.
It is our present hope that the sound fiscal and monetary policies which a
number of countries in Latin America and elsewhere are endeavoring to follow
will provide the basis for additional lending by the Export-Import Bank, and by
private business and banks, to finance further economic progress and stimulate
growing trade to our mutual advantage.
Another section provides for a working Board of Directors of five members,
who will give all their time to the work of the Bank. This is a change from the
reorganization plan of a year ago, which put the Bank under a single administrator, follbwing a pattern of reorganization which was applied to a number of
Government agencies with the aim of simplifying their operations.
A year's experience with operations under this plan has provided evidence
of the desirability in the case of this Bank of having a small working Board of
fulltime directors. The making of loans in foreign countries which will, offer
reasonable assurance of repayment, and which will further the purpose of increasing foreign trade, involves exacting and difficult decisions. It involves
travel and intimate acquaintance with the operations and the people financed.
It is desirable that the head of the Bank should share this responsibility with a
working Board of Directors.
As President Eisenhower pointed out in his announcement on June 10th, the
coordination of the lending policies of the Export-Import Bank and those of
other Government foreign lending, agencies will continue to be the responsibihty
of the National Advisory Council, composed of Cabinet members and others who
have responsibility in this field. Under these bills, the President of the ExportImport Bank is restored to membership on this Council.
The bills before you have had the careful consideration of executive departments and, in behalf of the Treasury, I recommend enactment of H. R. 9523.
Exhibit 40.—Announcement by the Treasury Department, February 16, 1955, of
the signing of an extension of the stabilization agreement between the United
States and Peru
The Treasury Department today announced the signing of an agreement
extending, for a period of one year, the 1954 stabilization agreement between the
United States and Peru. The agreement was signed by W. Randolph Burgess,
Under Secretary of the Treasury for Monetary Affairs, on behalf of the United
268
195 5 REPORT OF THE SECRETARY OF THE TREASURY
States, and by Ambassador Berckemeyer on behalf of the Government of Peru
and the Central Reserve Bank of Peru.
Under the terms of the agreement, the United States Exchange Stabilization
Fund undertakes to purchase Peruvian soles up to an amount equivalent to
$12.5 million if the occasion for such a purchase should arise. The agreement is
designed to assist in maintaining trade and payments between the two countries
substantially free from governmental restrictions and avoiding unnecessary
fluctuations in the rate of exchange.
The International Monetary Fund has also announced today the extension of
its standby arrangement with Peru under which the Monetary Fund agrees to
make available up to $12.5 million. The two agreements, therefore, can provide
a total of $25 milhon in standby resources.
Peru's currency is freely convertible into dollars at a market rate of exchange.
In 1954 balance was achieved in Peru's commodity trade with other countries,
and foreign exchange reserves increased in the last half of the year.
Ambassador Berckemeyer stated that his Government intended to continue
the sound monetary and fiscal policies which have contributed to this improved
international position.
Exhibit 41.—Statement by the Department of State and the Treasury Department,
July 1, 1955, concerning the proposed Inter-American Bank for Economic
Development
The Department of State and the Treasury Department, in reply to inquiries
from the Press, issued the following statement, concerning the proposed InterAmerican Bank for Econoniic Development.
"The proposal for the estabhshment of an Inter-American Bank was made by
a committee of experts consisting of representatives of nine Latin Anierican
central banks and the Secretariat of the Economic Commission for Latin America.
This committee was established by a resolution of the Meeting of Ministers of
Finance or Econoniy in the Fourth Extraordinary Session of the Inter-American
Economic and Social Council held at Rio de Janeiro, Brazil, in NovemberDecember, 1954, to make specific plans for an inter-American financing institution.
"The United States delegation at that meeting abstained from voting on the
resolution, stating that the United States had giveii a great deal of thought to the
problem of Latin American needs for credit and investment facilities, and had
concluded that in its opinion the facilities available through the International
Bank for Reconstruction and Development, the Export-Import Bank, the proposed International Finance Corporation, and private organizations, will be
adequate to meet all demands for sound purposes. It also indicated that if we
find at some later date that this program is not achieving the results which we
believe it can, we shall be glad to discuss other solutions. The United States
delegation therefore expressed its regret that it could not at that time join in the
proposed inter-American regional financing institution, and indicated it would
abstain from participating in drafting specific plans for it. There have been no
developments which would justify a change in the position expressed by the
United States delegation at that time."
Addresses and Statements on General Fiscal and Other Policies
Exhibit 42.—Remarks by Secretary of the Treasury Humphrey, October 19, 1954,
before the American Bankers Association, Atlantic City, N. J.
All Americans can welcome the fact that this Nation is making the shift from
high to lower Government spending without more strain on the economy.
Hundreds of thousands of our people have successfully changed from making
things for killing to niaking things for living. This has involved temporary
hardships in some individual cases but this great shift is being made without a
great economic upheaval.
Industrial activity and total employment have held remarkably well throughout
recent nionths. The fourth quarter of this year is already even brighter both
industrially and commercially.
EXHIBITS
269
The number of unemployed is currently decreasing. We have had more
people working during this year than in any other year in the Nation's peacetime
history. Unemployment is a matter of the greatest concern to everyone in this
administration. We are working and planning in every way to reach the day
when every man looking for work can find a job. We have shaped our entire
economic program in the way best calculated to bring that happy day at the
earliest possible time.
^
This Nation has not always been able to make the transition from war to
peacetime spending without major economic upsets. American history shows
that we have had severe economic adjustments following all great wars. This
was true after the War of 1812, the Civil War, and World War I.
As you all know, one of the causes of postwar depressions is the fact that when
our Nation goes to war it postpones for the time being the production of all sorts
of peacetime goods. Once war ends, we turn to satisfying the backlog demands
which built up while the war was on.
It is wholly human, even if unwise, for such reconstruction booms to be overdone and for speculative eredit structures to come into being. Soon the Nation
finds itself with surpluses instead of shortages and an inventory readjustment is
required. Using up these surpluses and the resulting readjustment of manpower
and resources to the invention, production, and distribution of more new and
different products and services has often in the past been a long, slow, painful
process.
Study of past depressions makes clear some of the things that ought to be
done. It also makes clear some of the things that ought not to be done. Many
of the things in both categories concern monetary policy, with which you as
bankers are • intimately famihar.
So that if the record tells us anything, it says that the most dangerous thing is
to permit the erection of a great collapsible structure of speculative credit. When
such structures finally topple, they set off a spiral of liquidation which ean quickly
descend into widespread depression throughout the economy. We should note
that there is all the difference in the world,between the systematic and orderly
liquidation of inventories that have simply become too large, and liquidation
forced by fear for loans that are in danger of going "under water." History
records dramatically the "race for liquidity" and the disaster that it caused in
the early 1930's.
We have been most fortunate that no such fear caused any similar race for
hquidity in the past year and a half. It must not occur in the future.
There are other lessons from the past which were apphed to our economic
situation over the past year and a half. It was clear that the Government's
policies during all the 1930's were wrong and worked badly. They were designed
to solve unemployment; 3^et there were still nine million unemployed in 1939.
These unemployed only got back to work after "war broke out in Europe. I
know of no one who thinks that war is the right way to cure unemployment.
Jobs are created, and only honestly created in our free competitive price
economy, by people using their money to expand existing businesses or start
new businesses in the hope of making a profit. If any Government pohcy is
such as to make a profit unlikely or very diffieult, people simply aren't going to
launch the new ventures from which new jobs grow. New ventures are discouraged by Government controls of materials, labor or prices or by uncertainty
of labor and other costs or by the threat or actual practice of Government competing with private enterprise.
Limitations on incentives or freedom of legitimate activity in any way have a
deadening effect. This administration's fiscal policies are shaped about the
reduction of Government spending as an absolute requirement for the reduction
of incentive-destroying taxation. The reduction of Government spending and
lower taxes wih help to avoid the inflation which destroys confldence and ultimately any nation's economy. The handout principle of deficits and resulting
debts of the 1930's was a temporary expedient that assisted nothing fundamental.
It actually deterred individual risk taking in competition with the free money that
was being passed around and finally became a means of destroying the soundness
of the dollar.
A primary responsibility of government must, of course, be to relieve human
suffering and destitution which cannot be taken care of by the individuals themselves when overtaken by adversity. But this must be done in the proper ways
which this administration has already improved and enlarged.
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1955 REPORT OF THE SECRETARY OF THE TREASURY
We seek the multiplication of production and income, not simply a new division
of a stagnant pool.
Most of you are well familiar by now with the major accomplishments of this
administration during the past 20 months. You know how spending and spending
programs have been cut by billions of dollars. You know how taxes have been
cut by the largest a-mount in any year in the Nation's history. You know
how waste and extravagance have been stopped in many areas of government.
You know how these and other policies have been successful in creating a remarkably constant value of the dollar during the past year and a half while the
cost of ordinary living has shown a slight decline.
You know what efforts we have been making to reconstruct the debt. I
would like to give you today an analysis of what we have done in the past 20
months, which shows that we have already made steady, if not spectacular,
progress in this vital field.
President Eisenhower, in his first State of the Union Message in February
1953, said, in his discussion of fiscal policy, that "too great a part of the national
debt comes due in too short a time." The President said that the Treasury
would undertake at suitable times a program of extending part of the debt over
longer periods and gradually placing greater amounts in the hands of longer
term investors.
Our determination to do this at suitable times was based, of course, on the
knowledge that too much short-term debt is infiationary. Handling of the debt
by previous administrations had contributed substantially and deliberately to
the inflation which robbed the dollar of almost half of its purchasing power
from 1939 to January 1953.
Every month the debt gets closer to maturity simply as a result of the passage
of time. Like the Red Queen, we have to run fast just to stand still. Our
immediate job has been to stop the debt from getting shorter and then to start
lengthening it gradually.
This we have done during the last 20 months.
In nine of the eleven major financings of the last 20 months, the debt was
lengthened by offering investors securities other than one-year certificates.
This is quite a contrast to the 20 months prior to January 1953, when on only
two occasions out of 13 was longer term debt offered.
The major debt lengthening in the last 20 months has been a reduction in the
amount of very short-term debt. The amount of marketable debt maturing in
less than one year was cut down by over $11 billion.
The amount of marketable debt running more than five years was increased
by about $8>^ bilhon.
We have made progress, too, in placing greater amounts of the debt in the
hands of longer term individual savers, largely as a result of the highest level of
E and H savings bonds sales since World War II. Individual investors altogether
hold more than $66 billion of Government securities at the present time.
We are continuing to work to further the objective of reconstructing the
debt. But we will continue also to operate with extreme care because, as you so
well know, our economy is a sensitive mechanism that can be seriously upset by
hasty or ill-considered action. We repeat that our goals can be clear— our start
toward them can be immediate—but action must be gradual. Progress has been
made and will continue to be made. But we will continue also to make every
effort not to act so as to upset the sensitive mechanism of our economy.
The Government must borrow the money it needs so as not to interfere with
the needs of other governmental units or private enterprise for any money they
may need. The Government should not borrow large amounts of long-term money
at times when it would seriously interfere with the supply of that money to finance
the building of schools, hospitals, or highways by local or State governments or
the expansion of power plants or building of new factories or other industrial
enterprises by private business. What we are trying to do at this particular
time is to have the Government borrow its money in such a way as to avoid the
possibility of interfering with the expansion of our economy and the making of
more and better jobs.
Every program that the Eisenhower administration undertakes, every problem
that we inherited, we look at with one thought in mind: Is it necessary for the
good of most of our people ? If so, we try to make sure that it is done in the most
economical way. We are now definitely getting more and better defense for
less money. There are many other examples of how we are getting better government at less cost and so helping the economy to become healthier.
EXHIBITS
271
There is nothing to fear about the long future of this economy or this Nation,
If we keep doing the things we ought to do and this administration can continue
to put its sound fiscal and economic policies' into effect, the years ahead will
see greater prosperity and more jobs for more people making more, new, better,
and cheaper things for better, fuller living for us all, than any of us have ever
dreamed.
Exhibit 43.—Remarks by[Secretary of the TreasuryrHumphrey, October 21,1954,
before the Investment Bankers_Association, New York, N. Y.
It is an often neglected fact that within the last half century this Nation has
gone through an economic evolution that makes pale any other in the long history
of man's efforts to achieve a better life.
The result is, and. the public's huge investment in savings bonds underscores
it, that this Nation is today a Nation made up of small to medium savers and
investors.
This means that today this is a Nation of "haves," and not a Nation of "havenots."
We have been in a tremendous and beneficial evolution, peacefully bettering
the lives of most of us.
We in this administration have hitched our wagon to this rising star of a "have"
Nation to make sure of its continued rise—to keep making "have-nots" into
"haves."
We are admirers of, and believers in, what has been this uniquely American
growth and progress.
But on coming into office we found that this great day-to-day American evolution from the bottom up was in danger. In fact, we found that it had not even
been properly recognized by economic policy makers of the past two decades.
They were too busy fighting the frightening ghosts of a "have-not" Nation, a
Nation that had even then already ceased to exist.
As a result, we found the economy blown up with the hot air of inflation, to a
point where there was real danger that it might burst, letting us all down with a
crash that would have maimed us as a Nation, and dropped the free world's
defenses invitingly low.
We found the economy's growth hampered and hobbled by a tangle of successive
layers of regulations, controls, subsidies, and taxes imposed in past emergencies.
The economy was being twisted into the shape of things past, when it should have
been reaching freely for its rightful future.
In addition, we found defense spending being used partly to buy defense, and
partly as a crutch to support an unsound economy, thereby endangering both
defense and the economy.
In other words, we found an economy going stale, out of step with the times and
out of step with the Nation it had to serve, an economy fearful of the ghosts of
bygone crises, living precariously on the treacherous dodges of inflation, subsidy,
and excessive crash-and-crisis Government spending.
We have been reshaping this Government's economic policies into the policies
required for a strong and forward-looking nation, its economy firmly footed and
self-supporting; an economy that will pump a continuous new flow of nourishment
into the day-to-day American evolution of self-betterment; an economy that
will constantly generate new and better paying jobs for an ever-growing population» At the same time our economy must provide an ever-higher standard of
living, plus the social services the people want and need, as well as the men and
the weapons the Nation must have for its defense.
Now, let's look at what you millions of American citizens have been making
of our economy, how you have been creating the world's most successful and
beneficial economy, and what we in the Government are now doing to see that
you have every possible opportunity to press forward and continue making a
better life for all.
All hands in our Nation: Labor unions and the employer, the rich and the poor,
both major parties, the farmer and the city man, the woman at home, and the
man at his job—all have had a part in making our new productive way of life.
The point now is that this peaceful evolution has resulted in a tremendous
upheaval of this Nation's whole economy that really has created a different kind
of Nation, a unique Nation of "haves" that needs an up-to-date way of thinking
about itself, and up-to-date policies, in keeping with its strength and growth
potential.
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195 5 REPORT OF THE SECRETARY OF THE TREASURY
Let's look back to the t u r n of the century and see w h a t has. been happening,
economically, since then. Only by making such a comparison can you realize
how outmoded a line of thought, only a few years old, can be when apphed to our
economy, a n d how alert we m u s t be not to let out-of-date t h o u g h t and practices
tie MS down while opportunity passes us by.
Our total national production of goods and services this year will come to about
355 billion dollars. T h a t is 17 tinies as much as our national o u t p u t in 1900.
Whftn you make allowance for priee rises sinee the t u r n of t h e century, today's
national production is still six times w h a t it was in 1900. Our population has
more t h a n doubled since 1900, b u t our national o u t p u t per capita (production
per man, woman, and child in t h e Nation) is three times w h a t it was then.
Our national income this year will be about 300 billion dollars. After ahowance again for price changes, this is six times what it was in 1900. And our
ineome per man, woman, and child in t h e whole population is, like production,
three times as big as in 1900.
Here is the i m p o r t a n t thing about t h a t income change since 1900. The lower
and middle inconie groups have received the greatest share of our increased income. Early in t h e century, only 10 out of every 100 Anierican families earned
as much as $4,000 a year in terms of t o d a y ' s prices. Now 55 out of every 100
families earn more t h a n $4,000 a year. Those with inadequate incomes for a
decent hving are becoming fewer and fewer, and more and more of t h e m are
becoming "haves"—people who have enough money not only to live adequately,
b u t to save besides. T h a t is the basic economic development in this country
which we are trying most fervently to keep going, and to continually improve.
Let's see just how widespread and i m p o r t a n t this fiow of purchasing power
to t h e broad base of our economy has been and will continue to be.
One of the most common methods of saving is the purchase of insurance. At
the t u r n of t h e century, people in this country had t a k e n , o u t 14 million life
insurance policies. Today, with the population only slightly more t h a n doubled,
a n d with m a n y people owning several policies, the n u m b e r of life insurance policies has increased nearly 18 times, to 250 milhon.
Ownership of individuals in their life insurance has increased from under 2 billion dollars in 1900 to 80 billion dollars today.
Small investors' holdings in United States savings bonds total the huge a m o u n t
of nearly 50 billion dollars. No such investment existed in 1900.
Let's see some other ways in which t h e average m a n on the street in this Nation
has been making himself over Into a real investor—a m a n with a real financial
stake in the future such as no other average citizen anywhere ever had before.
Nearly 10 percent of all American families today own stock in American
corporations. At t h e t u r n of the century, this was just getting underway.
In 1900, individuals had liquid savings of all types amounting to less t h a n 10
billion dollars. Now such savings of individuals in this country total more t h a n
225 billion dollars.
Last year alone, Americans bought equipment for themselves and their homes
of approximately 30 billion dollars. This included things unknown to the homeowner of 1900, like 8 milhon radios, 7 million television sets, nearly 4 million
refrigerators, about 3}^ million washing machines, and a million air conditioners.
These are mass investments in a better life only a nation of " h a v e s " eould make.
About 25 million families own their own homes today, comparied with only
7 million homeowners half a century ago, while population has only a little more
t h a n doubled in t h a t time. About 55 percent of our families now live in homes of
their own. Nearly all the others w a n t to. And ways and means of helping t h e m
to do so are of greatest concern in present Government policy.
Labor unions to which m a n y American workmen pay dues, are also investors.
Not so m a n y years ago, union treasuries were low. Today m a n y of t h e m bulge
with huge sums. They own banks and buildings, bonds and stocks, and investments of m a n y kinds.
Today nearly 15 million Americans have more t h a n 25 bilhon dollars invested
in pension and retirenient t r u s t funds. This represents an investment of more
t h a n $1,500 per worker. These retirement plans V e r e practically unknown in
1900.
You can see from those few examples w h a t has been happening to the individual
and the family in our wonderland economy. We need a completely new set of
s t a n d a r d s in thinking about ourselves. We are a Nation of " h a v e s , " not of
" h a v e - n o t s . " This Nation's economy has grown right over, and has left behind
in the dust both socialism and communism.
EXHIBITS
273
The consequence of this brilliant human achievement in our Nation is that
the basic interests of the man in the bungalow are today the same as the basic
interests of the man in the penthouse.
Business long ago recognized this fact, and centered its attention on the wants
and needs of the man in the bungalow. Tt is time that we all caught up with the
facts of life in this Nation.
Let's see how the man in the bungalow and the man in the penthouse today
have the same basic interests and what that revolutionary fact means to the whole
econoniy.
Both men have current earnings and probably savings in one form or another.
That means that both are interested in seeing the dollar keep its purchasing power.
To the extent that inflation develops, both men are robbed.
If you had $1,000 saved up in 1939, which you did not draw out to use unth
1953, you really took a beating. Inflation had sneaked into your savings during
those years and made off with $478. How? Because inflationary price rises
during that-time cut the purchasing .value of the dollars you were saving, every
minute of every day. When you drew out your $1,000 savings, inflation had
stolen away with all but $522 of the purchasing power your dollars had when you
put them aside in 1939.
This is a terrible thing to happen to a Nation of people who are working and
sweating and scrimping to put aside money for the education of their children,
the purchase of a home, or to provide for their old age.
The man in the bungalow often tries, by purchasing insurance, to build up some
security to leave to his wife and children in the event of his untimely death.
It is a terrible thing to have the purchasing power of his insurance—the time that
it will pay the rent and set the table for those that are left—cut nearly in half
in the short period of just 15 years.
It is a heartless thing for a man and woman who put aside savings in a pension
or retirement trust fund as they work during their lifetime to find on retirement
that inflation has robbed them of nearly half of what they had invested to live
on in their declining years.
We in the Eisenhower administration have made halting inflation one of the
principal goals of our administration. In the last 20 nionths, the value of the
dollar has changed only one-half of one cent. This means that we have kept
inflation's hand out of your savings almost entirely. We want to keep inflation
locked out, so that when you save by putting money in the bank, by buying a
savings bond, by buying insurance, by contributing either work or money to a
pension fund or fraternal order or in any other way, you will get from your investment the same value that you toil now to put into it.
The man in the bungalow and the man in the penthouse have at least an equal
interest in this fight. But, if there is any difference between them, it is the man
in the bungalow who most needs protection. He ean less afford to lose.
Now, it is the vast sum of the many smaller savings of the man in the bungalow
on which our industrial and commercial system depends for its financing. The
sum of all the little savings is tunneled mainly into big investments by the savings
banks, the building and loan associations, the insurance companies, investment
trusts, pension funds, union and fraternal organizations, and others handling
the savings of the man in the bungalow.
Business in this country is pouring nearly 27 billion dollars of new investment
into its plants and equipment this year. That tremendous amount must come
from somebody's savings. Without it, the future's new jobs will never be born,
nor will we get tomorrow's increase in productivity, as the result of new and better
tools of production, bought by new investment.
Saving is important to the Nation, and must be encouraged, not discouraged,
because it strongly influences the security of the job you have, and your hopes
for ever-better pay through continued increase in your productivity. Thus you
can see how inflation can rob you not only of your personal savings but, in addition, steal away your pay increases and perhaps even your job.
We must have policies that put solid ground under our day-to-day evolution
of continual betterment from the bottom up. Such policies must aim at everyone, spreading the riches throughout the land. There is only one way to have
everyone have more. The Nation's treasures of goods and services must constantly increase, by continually increasing individual productivity, so that they •
can be spread ever deeper and broader throughout the whole economy.
Our pohcies must result in giving the man in the bungalow ever more and more
of the same things which the man in the penthouse also wants to have. And
356812—56
19
274
1955 REPORT OF THE SECRETARY OF THE TREASURY
that can only be accomplished by an economy that constantly produces more of
the comforts, conveniences, and necessities of life. Such an economy will not
only be of direct benefit here at home, but will also be a beacon of progress in
the whole free world, a sharp, attractive contrast to the smouldering darkness
behind the Iron Curtain.
Our strong economy must and can carry the costs of fully adequate defense
and of indispensable pubhc services, and at the same time continue its healthy
growth. But it will only be able to do so if we balance the load correctly, so
that it can be carried, and carried indefinitely, without a breakdown.
We have devised policies to fit our new situation and have begun to balance
the load.
We are not the slave of any particular aspect of our flexible policies. We
regard inflation as a public enemy of the worst type. But we have not hesitated,
either, to ease or restrict the basis of credit when need was indicated. Under
the new cooperation that exists in this administration between the Treasury and
the Federal Reserve, the full force of monetary policy has been made effective
more promptly than ever before in the Nation's history to better respond to
natural demands.
We found when we came to office an overblown economy. It was harnessed
with all sorts of artificial controls, dangerously dependent upon the uncertainties
of defense spending and inflationary pressures. It was borrowing from tomorrow's
production and income at a prodigious rate, with unsound confiscatory taxation
that still failed to provide for the profligate spending. This resulted in huge
deficits that were passing the heavy burden of our excesses on for our children
and grandchildren to bear. And sooner or later it was sure to result in complete
downfall.
Correction of that situation has been well started. The whole economy, the
livelihood of all the people, has been made more safe. This has been done by
the timely use of monetary policy and credit in response to actual demand; by
the return to the public of purchasing power through the biggest tax cut in the
history of the Nation, by cutting unjustified amounts from Government spending;
and at the same time by timely encouragement to construction, home building,
and needed improvements. By the prompt and vigorous use of all these measures
we have made the difficult and delicate change from a dangerously artificial
economy to a healthy one, with every, effort exerted to the utmost to involve
the very minimum of cost in terms of unemployment meanwhile.
In turning our faces resolutely from inflation, and unreahstic spending, what
have we turned toward ?
We have turned to you, to the 160 million people of America.
We have turned with full confidence to a people that have demonstrated that
you are industrious, saving, inventive, daring, progressive, and self-reliant to an
unprecedented degree'. We believe in your capacity to go on providing yourselves
with an ever better life, if we in Government support your efforts where the
general welfare calls for such support, and do not load you with unnecessary
burdens, or take from you by excessive taxation the increase in your income that
you might otherwise earn and save.
Realistic economic policies that take account of the true nature of our economy
and the burdens it must bear, will bear big fruit.
We will not be rising on the hot, uncertain air of inflation. Nor will we be
wearing the false, rose-colored glasses of a prosperity based on unwise and dangerous Government deflcit spending, treacherous alike to the Nation's security
and its economic health./
We will be rising on the solid ground of these things:
Savings protected against shrinkage by a stable dollar;
Increased production and increased wages and earnings made possible by the
investment of those savings in more, new, and better tools of production;
Wide use, by Americans who are both workers and investors, of these tools of
production for the creation of more jobs and new, better, and cheaper goods,
with ever-widening distribution among an ever-growing number of consumers as
their earning power increases and the cost of the goods declines;
Use of the increased income from this increased production of the things you
want—not to pay the bill for unneeded or unwise Government spending, or as
tribute to inflation, but for the creation of a better life for all.
We have turned our backs on artificial stimulants. We have turned our faces
confidently to practical, natural methods for the creation of a better life for all
of us, firm in the belief that continuation of the process of the American evolution
of self-betterment from the bottom up is second nature to our whole people.
EXHIBITS
275
Exhibit 44.—Memorandum to the Honorable Wright Patman, October 29, 1954,
on the depositary practice of the Treasury Department
DEAR MR. PATMAN: In response to your letter of September 3, which I acknowledged on September 13, I am enclosing herewith a memorandum giving you the
history of the depositary practice of the Treasury Department, legislative authority therefor, and other information concerning the maintenance of deposit accounts
by the Government in commercial banks.
I trust that this memorandum will furnish the information you desire.
Very truly yours,
G. M. HUMPHREY,
Secretary of the Treasury.
HONORABLE WRIGHT PATMAN,
House of Representatives, Washington 25, D. C.
WHY THE FEDERAL GOVERNMENT KEEPS FUNDS IN COMMERCIAL
BANKS
This memorandum has been prepared in response to Congressman Patman's
letter to the Secretary of the Treasury, dated September 3, 1954, regarding the
practice of the Federal Government in keeping funds in the commercial banks of
the Nation. The memorandum presents the following information requested by
Congressman Patman:
1. History of depositary practice of the Treasury Department.
2. Legislative authority.
3. Complete and definitive statement explaining the operations of, and
reasons for, this practice.
4. Specific terms on which banks accept these deposits.
5. Precisely how decisions are arrived at as to leaving funds on deposit
and to transferring them.
6. Why these funds are not transferred to the Federal Reserve Banks
immediately upon receipt.
7. What the high, low, and the average balance carried in commercial
depositaries has been during the fiscal year ending June 30, 1954.
8. Same information for each of the twelve Federal Reserve districts.
1. History of depositary practice of the Treasury Department
Except for brief intervals the United States Government has throughout its
history followed a practice of depositing its public funds in the banks of the
Nation. Among the first acts of Alexander Hamilton as Secretary of the Treasury
was the designation of the Bank of North America and the banks of New York,
Massachusetts, and Maryland as depositaries of Government funds.
The First Bank of the United States, chartered in 1791, served as a Government
depositary and fiscal agerit. When the Bank, was not rechartered, the Government funds were transferred to State banks. The act authorizing the chartering
of the Second Bank of the United States in 1816 specifically authorized the Secretary of the Treasury to deposit Government funds "in places in which the said
bank and branches thereof may be established." When the Second Bank ceased
functioning as a national institution in 1836, the Government again relied upon
State banks to act as depositaries.
Ih 1846 a system was set up to separate, as completely as possible, the Government's financing operations from the money market. Congress passed a law
establishing the Independent Treasury System, and the Government became its
own banker. This act created four subtreasuries, located in New York, Boston,
Charleston, and St. Louis. Their duties were to receive deposits of publie moneys,
. to make disbursements, and to transfer money from one point to another, functions theretofore performed by commercial banks.
The financial history of the ensuing years proved the inadequacy of the Independent Treasury System to meet the needs of a growing country. This System
received a serious setback at the beginning of the Civil War when the attempt to
collect in specie the money whicb the Treasury needed to finance the war forced
the suspension of specie payments. The result was the establishment in 1863 of
the National Banking System, which provided for the designation of these banks
as depositaries of public funds.
One of the disadvantages of the Independent Treasury System, not fully met
by the National Banking System, was its inability to supply business with suflS-
276
195 5 REPORT OF THE SECRETARY OF THE TREASURY
cient note circulation when needed and to avoid overexpansion when speculation
reached the danger point. It was not capable of keeping pace with the growth of
business in the United States and had become obsolete by the time the Federal
Reserve System was established in 1914.
The Federal Reserve Act contained authority for the Federal Reserve Banks to
act as fiscal agents for the United States Government and to hold deposits of
Federal funds. In order to give the Federal Reserve Banks time to become
organized, the Treasury did not appoint them as fiscal agents until January 1,
1916. The Independent Treasury System was abolished by act of Congress,,
approved in May of 1920, when the remaining duties of the subtreasuries were
taken over by the Federal Reserve Banks. However, it was necessary for the
Treasur}^ to continue to utilize commercial banks as depositaries in those principal
cities which did not include Federal Reserve Banks or branches.
In the Second Liberty Bond Act of 1917, the Congress provided for the establishment of Treasury war loan accounts to take care of the financing of the Liberty
loans. These accounts were originally established to enable the banks to retain,
until withdrawn by the Treasury, the proceeds arising from sale of Liberty bonds
to such banks or their customers. Later authority for use of these accounts was
extended to the sale of other Government securities, including United States
savings bonds and Treasury savings notes. Under the Current Tax Payment Act
of 1943, and later legislation, withheld ineome taxes, certain quarterly income and
profit tax payments, sociah security taxes, and excise taxes are deposited in these
accounts which have become known as tax and loan accounts.
2. Legislative authority
The legislative authority for deposit of Government funds in commercial banks
is provided under several basic acts of Congress. Citations of these acts and the
pertinent provisions are as follows:
(1) Revised Statutes, Section 5153, derived from the act of June 3, 1864 (13
Stat. 113, as amended), relating to the designation of National Bank Associations
as depositaries of public moneys:
"All national banking associations, designated for that purpose by the Secretary
of the Treasury, shall be depositaries of public money, under such regulations as
may be prescribed b)'' the Secretary; and they may also be employed as financial
agents of the Government; and they shall perform such reasonable duties, as
depositaries of public money and financial agents of the Government, as may be
required of them. The Secretary of the Treasury shall require the associations
thus designated to give satisfactory security, h j the deposit of United States
bonds and otherwise, of the safe-keeping and prompt paynient of the public
money deposited with them, and for the faithful performance of their duties as
financial agents of the Governnient: * * *" (12 U. S. C. 90)
(2) The Federal Reserve Act of December 23, 1913 (38 Stat. 259) as amended
on May 7, 1928 (45 Stat. 492), relating to the designation of member banks as
depositaries:
"All banks or trust companies incorporated by special law or organized under
the general laws of any State, which are members of the Federal Reserve System,
when designated for that purpose by the Secretary of the Treasury, shall be depositaries of public money, under such regulations as may be prescribed by the Secretary. * * *" (12 U. S. C. 332)
(3) The act of September 24, 1917, with regard to authority to deposit the
proceeds of sales of bonds, certificates of indebtedness, and war savings eertificates
(40 Stat. 291, as amended):
. '"'The Secretary of the Treasury, in his discretion, is authorized to deposit, in
such incorporated banks and trust companies as he may designate, the proceedfe,
or any part thereof, arising from the sale of the bonds and certificates of indebtedness. Treasury bills, and war-savings certificates * * * and arising from the
payment of internal revenue taxes, * * *" (31 U. S. C. 771)
(4) Act of June 19, 1922 (42 Stat. 662), relating to depositaries in foreign countries. Territories, and insular possessions:
"The Secretary of the Treasury may designate such depositaries of pubhc
moneys in foreign countries and in the territories and insular possessions of the
United States as may be necessary for the transaction of the Government's
business, under such ternis and conditions as to security and otherwise, as he may
from time to time prescribe: Provided, That in designating such depositaries
American financial institutions shah be given preference wherever, in the judg-
EXHIBITS
277
ment of the Secretary of the Treasury, such institution is safe and able to render
the service required." (31 U. S. C. 473)
(5) Act of June 11, 1942 (56 Stat. 356), relating to insured banks:
"All insured banks designated for that purpose by the Secretary of the Treasurj^
shall be depositaries of public moneys of the United States * * * and the Secretary is hereby authorized to deposit public nioney in such depositaries, under such
regulations as may be prescribed by the Secretary; and they may also be employed
as financial agents of the Government; and they shall perform all such reasonable
duties, as depositaries of public nioney and financial agents of the Government as
nisbj be required of them. The Secretary of the Treasurj^ shall require of tbe
insured banks thus designated satisfactory security by the deposit of United
States bonds or otherwise, for the safekeeping and prompt paynient of publie
money deposited with them and for the faithful performance of their duties as
financial agents of the Government. * * *" (12 U. S. C. 265)
(6) The Current Tax Payment Aet of 1943 (57 Stat. 126) with respect to the
designation of depositaries for withheld taxes:
"The Secretary may authorize the incorporated banks or trust companies
which are depositaries or financial agents of the United States to receive any taxes
under this chapter in such manner, at such times, and under such conditions as he
may prescribe; and he shall prescribe the manner, times, and conditions under
which the receipt of such taxes by such depositaries and financial agents is to be
treated as paynient of such taxes to the collectors." (26 U. S. C. 1631)
(7) Sec. 6302 (e) of the Internal Revenue Code of 1954 (derived from the act
of August 27, 1949, 63 Stat. 668), with respect to depositaries for collections:
"Use of Government Depositaries.—The Secretary or his delegate may authorize
Federal Reserve Banks, and incorporated banks or trust companies which are
depositaries or financial agents of the United States, to receive any tax imposed
under the internal revenue laws, in such manner, at such times, and under such
conditions as he may prescribe * * *."
3. Complete and definitive statement explaining the operations of, and reasons for,
this practice
The Congress has vested in the Secretary of the Treasury authority to utilize
the services of the Federal Reserve Banks and the commercial banks of the country
as depositaries and fiscal agents of the Government. Not only has the Congress
granted authority to the Secretary to utilize the services of banks but it has also
established, by law, the basic procedures for handling the receipts and expenditures of the Government.
The twelve Federal Reserve Banks are now the principal fiscal agents.of the
United States Government. Each Reserve Bank maintains an account in the
name of the Treasurer of the United States. Into these accounts virtually all
Government reeeipts eventually are credited, and from them nearly all payments
are made.
Implementing the Treasurer's accounts at the Federal Reserve Banks is a
nationwide network of deposit, accounts in commercial banks. Most of the
money collected by the Government feeds into the U. S. Treasurer's accounts at
the Reserve Banks through the banking systern of the country. Any incorporated
bank is'eligible to qualify as a Governnient depositary. All Government deposits
in banks must be secured by a pledge of collateral security, this collateral usually
being in the form of United States Government securities.
(a) Operation of special depositaries (tax and loan accounts)
The system of "Special depositaries" originated during World War I. The
first Liberty Loan Act of 1917 provided that banks purchasing securities issued
under terms of the act, for their own accounts or for the accounts of their customers,
could deposit the proceeds from such purchases into special accounts known as
"War Loan Accounts." Until 1935, deposits in these accounts were not subject
to reserve requirements. Originallj^ the banks were required to pay 2 percent
interest on such deposits. However, this was' considerably below prevafling
interest rates at that time. In the early 1930's, this interest rate was lowered and
then eliminated entirely along with interest payments on other demand deposits
in keeping with the provisions of the Banking Aet of lt)33.
During the 1930's, receipts from the sale of Government securities were relatively small and comparatively little use was made of the war loan accounts.
278
1955 REPORT OF THE SECRETARY OF THE TREASURY
The heavy borrowing requirements of the Federal Government accompanying
World War II provided a need for the Treasury to utilize more fully the war loan
accounts. The act of Aprfl 13, 1943 (57 Stat. 65) suspended, for the duration of
hostilities plus 6 months, against balances in these accounts, all reserve requirements and Federal deposit insurance assessments. The reserve and insurance
requirements were reimposed after June 30, 1947.
Following World War II, the Congress provided for wider use of these accounts
by authorizing the Treasury to use them for processing certain tax receipts.
Beginning with March 1948, the banks were permitted to credit to these accounts
their receipts of withheld income taxes, which previously had been turned over to
the Federal Reserve Banks monthly or more frequently. On January 1, 1950, the
Treasury revised the system for deposit of withheld ineome taxes and extended
the provisions for deposit to war loan accounts to include deposits of payroll taxes
from the old age insurance program. The war loan accounts were renamed
"Tax and Loan Accounts" on January 1, 1950.
Other appropriate taxes have since been made eligible for deposit in these
accounts. Under a special arrangement, large quarterly payments (cheeks of
$10,000 or more) of income and profits taxes, may be deposited in tax and loan
accounts, when, and to the extent that, the funds are not immediately needed by
the Treasury. This arrangement was first provided for quarterly tax payments
of March 1951.
Beginning in July 1951, railroad retirement taxes became eligible for deposit
to these accounts. In July 1953, certain excise tax paynients became eligible.
It. must be borne in mind that deposits are not made by the Treasury into these
accounts. Deposits to the tax and loan accounts occur in the normal course of
business under a uniform procedure applicable to all banks whereby customers
of banks deposit tax payments and funds for purchase of Government seeurities.
In most cases the transaction involves merely the transfer of money from a customer's aceount to the Government's account in the same bank. On occasions,
to the extent authorized by the Treasury, banks are permitted to deposit in these .
accounts proceeds from subscriptions entered for their own aceount as well as for
the account of their customers.
The working cash of the Treasury is held mainly in the Federal Reserve Banks
and branches. The Treasury draws upon these balances for its daily disbursements. As these balances become depleted they are restored in part through
various receipts deposited directly to the Treasurer's account at the Federal
Reserve Banks. However, the larger part of receipts to these accounts is derived
by calling in funds from the tax and loan accounts. Well over half of the Government receipts now flow through tax and loan accounts.
In order to reduce the administrative cost to the Treasury by avoiding making
frequent withdrawals from small accounts. Treasury has classified special depositaries into Group A and Group B. The present classification places in Group A
those banks whose Treasury tax and loan aceount balance as of February 16,
1954, was less than $150,000. Banks with balances in excess of this amount on
that date are classified in Group B. Banks are regrouped at least once a year.
Still another classifieation in use is what is known as " X " balances. These are
the balances derived from deposit of large quarterly payments of income and
profits taxes. These balances are usually depleted more rapidly than those of
the A and B accounts. These " X " balances may be held by banks of both Group
A and Group B.
Calls for withdrawals from Group B depositaries and on " X " balances are
usually announced on Monday or Thursday and payments scheduled for several
working days subsequent thereto. Withdrawals from Group A depositaries are
made less frequently, usually only once a "month.
The tax and loan accounts are very active, and the .flow of deposits and
withdrawals is rapid and continuous. As a result of the uneven flow of the Government's receipts and expenditures the balances fluctuate considerably. Using
end of the month figures, the balances in these accounts fluctuated during the
fiscal year 1954 from $6,690,000,000 on July 31, 1953, to $2,406,000,000 on January
31, 1954. The volatility of these accounts is indicated- by the frequency and size
of withdrawals made against uncalled balances in the Group B accounts (see
attachment 3). Withdrawals from these larger accounts are usually made twice
weekly and frequently reach 25 to 50 percent of the balance in the account as of a
particular date. The single monthly withdrawals on the smaller accounts usually
equal or exceed 50 percent of the balances.
279
EXHIBITS
The volume of receipts and disbursements fiowiug through the tax and loan
accounts has increased almost steadily during the past 7 years as follows:
[In millions of dollars]
Fiscal year
1948
1949___
_
---
1950
1951..
1952
1953
1954
Receipts
JL
..
..
_
—
8,575
15,231
16,876
24,128
36,492
41, 267
41,645
Withdrawals
7,765
15,233
15,380
21,716
37,066
43, 302
39,880
Out of approximately 14,500 ehgible banks in the United States nearly 11,000
have qualified as tax and loan depositaries.
(b) Operation of other depositaries
While the principal balances are held in the tax and loan accounts of special
depositaries, relatively small amounts (aggregating about $500 million) are held
in other types of depositaries whicii are designated by the Treasury to hold balances
of Government funds and to perform certain services for the Government. It
is the policy of the Treasury to utilize the facilities of the Federal Reserve Banks
and branches to the fullest extent possible for these services. However, as these
facilities are available at only 36 points in the United States, it has been necessary
to supplement them by designating banking institutions as depositaries at other
points when justified by the volume and character of essential Government
business. These depositaries, which extend to all areas of the United States,
our Territories and insular possessions, and foreign countries, are briefly described
as follows:
General depositaries.—There are approximately 1,420 general depositaries
which hold about $400 million of Government deposits exclusive of balances they
may have in tax and loan accounts. This type of depositary is authorized to
maintain on its books an account in the name of the Treasurer of the United
States. It is maintained only at points where there is a necessity to meet cash
requirements of Government officers for payrolls or other expenditures, or to
receive deposits of cash from depositors of public moneys. General depositaries
are given a stated balance which is fixed in relation to the volume of business in
the Treasurer's account and which may be retained until the need therefor no
longer exists. All moneys received in excess of the authorized amount must
immediately be remitted to the Federal Reserve Bank of the district.
Limited depositaries.—Limited depositaries are designated at such points as
are required to receive up to specified maximum amounts deposits made by postmasters, officers of U. S. courts, and other officers in special cases for credit in
their official checking accounts with the depositary. As a general rule, no Treasurer's balances are maintained in limited depositaries for this purpose.
Bank draft depositaries.—These depositaries are designated by the Treasury
to issue bank drafts to Government officers in exchange for funds received by
the officer for the account of the United States. These designations are made
when the volume of business does not justify a general depositary. Small Treas^
urer's. balances are maintained in these depositaries. The balances are fixed
in relation to volume of business handled.
Depositaries for State unemployment compensation accounts (social security) and
veterans unemployment compensation benefit payment accounts.—Depositaries for
State unemployment compensation accounts are designated for the purpose of
handling receipts and payments for social security unemployment compensation
under arrangements with the Social Security Board. Likewise, depositaries
for veterans unemployment compensation are those designated to handle the
receipt of Government funds and the payment of unemployment compensation
to veterans under arrangements with the Veterans Administration. In both
instances payments are made by checks signed by State officials. Treasurer's
balances are maintained in these depositaries.
Banking facilities.—Banking facilities are those offices provided by commercial
banks, primarily at military posts, to render certain necessary banking services
to the post and its personnel. These services include cashing Government checks,
furnishing cash for payrolls, receiving deposits of Government funds, and similar
280
195 5 REPORT OF THE SECRETARY OF THE TREASURY
services. The facflities are located at Army posts. Air Corps installations, naval
stations, military and veterans hospitals, Atomic Energy Commission plants, and
other Government establishments where regular banking services are not readily
available. Treasurer's balances are maintained with the banks designated to
operate banking facilities.
Check-cashing facilities.—Because of the large concentration of Government
employees in the District of Columbia and adjoining area, certain banks have been
designated for cashing of Government payroll checks for noncustomers. Treasurer's balances are maintained with these banks.
Territorial and insular depositaries.—These may be either general or limited
depositaries located in the Territories or insular possessions of the United States.
Foreign depositaries. —Banks in foreign countries may be designated as general.
depositaries, limited depositaries, or depositaries of foreign currency. Substantial
amounts of foreign currency are acquired from foreign governments without
payment of dollars in connection with various economic, technical, and military
foreign aid programs, as well as in settlement for lend-lease, surplus property, etc.
Foreign branches of American banks are given preference when available and
able to render the service required.
As a basis of offsetting expenses incurred by the banks in handling Government
business of this nature the Government has long followed a practice of maintaining
Treasurer's balances with the depositaries, or, as with limited depositaries,
authorizing Government officers to maintain minimum operating balances in their
official checking accounts.
Briefly, the procedure followed in establishing these depositaries and in determining the balances to be authorized for handling Government business is as
follows:
The request to establish a particular depositary is generally initiated b}^ a
Government officer in the field, who presents to his administrative officer in
Washington the reasons for needing a Government depositary in the particular
area. ^ An estimate is made of the amount of business the depositary would be
called upon to perform. If the Washington headquarters of the agency agrees
with its field officer that a depositary is necessary, the agency requests the
Treasury to designate such depositary. In addition to considering the volume
of business to be transacted and the possibility of utihzing other depositary
facilities already established, the Treasury will usually estimate, or call upon the
banks under consideration for designation to estimate, the cost of performing
such service. Any possible earnings accruing to the bank as a result of serving
as a Government depositary must be shown as an offset against cost.
If, in view of all factors concerned, it is believed to be in^the^best (interests of
the Government to establish a depositary, the Treasury will issue the necessary
designation. A Government deposit will be made to the depositary in an amount
sufficient to offset the expenses incurred by the bank for servicing the Government. The initial allotment of a Treasury balanee to a depositary must be based
upon an estimate. Each depositary is advised that the initial allotment will be
subject to adjustment upon the basis of the volume and character of the Government business actually handled. Depositaries submit monthly analyses of business handled and their costs. Due to differences in the size and location of banks,
nature and volume of business handled, etc., it is not practicable to adopt uniform
standards which may be applied to all banks. However, based upon experience
gained in reviewing analyses submitted by banks throughout the Nation, and even
in foreign countries, and a day-to-day review of cost studies made by banking
associations and individual banks, certain guides have been estabhshed for use in
determining reasonableness of bank costs.
Treasury balances maintained with these depositaries are generally time
deposits. They are subject to both reserve requirements and Federal deposit
insurance assessments. Depositaries at present are required to compute the
earning value of the average daily loanable balanee in the Treasurer's aceount
at the rate of 2 percent per annum for analysis purposes. Depositaries may, if
they so desire, purchase 2 percent depositary bonds, in amounts equal to their
authorized Treasury balances. The depositary bonds are held as collateral
security for the Treasury balance. If the depositaries do not purchase depositary
bonds, they must pledge other aeceptable collateral.
(c) Reasons for this practice
The Treasury uses commercial banks as depositaries of Government funds for
two reasons: (a) The system provides the most efficient and most economical
EXHIBITS
281
way of transacting the Government's business and (b) it reduces to a minimum
the effect of Treasury financial operations on the economic stability of the country. These advantages will be discussed in turn.
There have already been described these services which are performed for the
Government by the commercial banks and for which the Treasury authorizes
maintenance of Government balances as an offset to bank costs. In addition,
the banks incur expenses in rendering a number of other iniportant services for
whicii no reimbursenient is made.
One of the most important public services the banks render is the sale and
issuance of United States savings bonds, either by direct cash sales or through
the servicing of payroll savings plans. They do this work without charge to the
Treasury, notwithstanding the fact that in many cases it is necessary to employ
full-time employees on the work. The banks distribute announcements and
receive subscriptions for the purchase of marketable seeurities, and they handle
matured marketable securities for redeniption or for exchange into new issues,
all without reimbursement by the Government.
Commercial banks render considerable assistance to the Treasury in the weekly
sale and distribution of Treasury bills. Treasury bills are usually issued with
maturities of 91 days, with an issue maturing each week for thirteen consecutive
weeks. The proceeds of these bills are not deposited in tax and loan accounts.
Ill bidding for Treasury bills, many subscribers submit their tenders through
commercial banks. The banks check with dealers on possible bid ranges and
enter their customer's bid for the aniount requested. This work is done without
compensation to the banks.
In World War I and again in World War II the banks played a major role in
the success of the war-loan drives. Three-quarters of the dollar volume of warloan campaign sales were made through commercial banks.
Banks handle without charge to the Government remittances from employers
inconnection with the deposit of withheld income and social security taxes. As
a means of assisting the Treasury in preventing or reducing tax evasion, banks
furnish the Internal Revenue Service, without charge, information regarding
large currency transactions. They report to the Internal Revenue Service
interest paid on savings accounts and the payment of dividends where banks act
as financial agents for corporations. They cooperate with the Government's
foreigii funds eontrol activity in order to prevent leakage of Anierican assets into
certain foreign hands, requiring the keeping of supplemental records and the
filing of many reports with the Treasury.
There are only a comparatively few areas where banks receive fees for services
such as the redemption of savings bonds and the servicing of Commodity Credit
Corporation crop loans. These services entail risks of loss as well as expense
which the Government could hardly expect the banks to assume without reimbursement. For instance, when a bank redeems a United States savings bond,,
it is hable for any loss resulting from an error in identification.
Thus, the banks perform for the Government, and particularly for the Treasury,
a nuniber of indispensable services. Most of these services are perfornied free of
charge, either as a public service or in the interest of fostering good customer
relations. Without such services a large increase in the number of Federal
employees would be necessary and a large expense to the Government would be
entailed. Even though the Government did perform these services itself, and at a
great eost, it could not provide many of these services as expeditiously and as
conveniently for the public as can the banking systeni. By having the commercial
banks perform certain fiscal agency functions of the Federal Government in
conjunction with serving the regular business needs of their customers these
functions ean be handled most efficiently and most economically for the Government. This arrangement works to the mutual advantage of the Government,
the public, and the banking systeni.
The second reason for depositing Government funds in the commercial banks
of the Nation is that this practice provides the most effective method yet devised
for maintaining a smooth flow of funds from the banking system.into the Treasury
and back again into the channels of trade through Government disbursements.
Nearly all Government disbursements are made from funds held on deposit in
the Federal Reserve Banks. This means that virtually all funds, both receipts
and expenditures, sooner or later, flow through the Treasurer's accounts with the
twelve Federal Reserve Banks. When checks drawn on the 'commercial banking
system for payment of taxes or purchase of Government securities are deposited
282
1955 REPORT OF THE SECRETARY OF THE TREASURY
in the Treasurer's accounts at the Federal Reserve Banks, there is an equivalent
drain on^member bank reserves, sinee the member banks pay the cheeks by drawing
the amounts from their reserve balances held in the Federal Reserve Banks.
Each payment from the public intp a Federal Reserve account involves a corresponding reduction in bank reserves. Each disbursement by the Treasury from a
Federal Reserve aceount causes an equal increase in member bank reserves. The
impact of these money flows could be held to a minimum if each day's inflow of
funds into the Federal Reserve accounts were approximately offset by a corresponding amount of disbursements. Obviously it is not possible for the Government to time its borrowing operations and to make its tax collections in such a
manner that daily receipts will equal the Government's daily disbursements.
The uneven flow of Government receipts and expenditures and the need for
spacing cash borrowing operations make such perfect balancing impossible.
However, the likelihood of abrupt changes resulting in intense stringency in the
money market can be lessened immeasurably by Treasury's practice of initially
funneling a considerable part of its reeeipts from borrowing and taxation into its
deposit accounts at the commercial banks. In this manner, reserves are not
withdrawn from the banking system until such time as they can be returned by
Treasury disbursements. Through the utilization of its tax and loan accounts
^the Treasury ean largely neutralize the money market impact of the flow of funds
through its accounts and can so regulate the impact of Treasury financing operations on the money market as to avoid disruption to the market.
If the special depositary system did not exist there would be heavy drains on
bank reserves during periods of heavy tax payments or of large-scale borrowing
operations. The banks would have to draw down their reserves to transfer funds
to the Treasurer's accounts at the Federal Reserve Banks. In order to meet this
drain on their reserves the banks would have to liquidate Government seeurities
previously purchased, restrict normal extension of credit to their customers, or
obtain credit from the Federal Reserve System. As the balances built up in the
Federal Reserve Banks were disbursed by the Government they would be deposited
by the customers of the commercial banks and bank reserves would be built up
again. The Federal Reserve System would then have to absorb the resulting
excess reserves. These fiuctuations in bank reserves would have an extremely
disrupting effect on the money market and the Nation's business.
Not only does the system of tB,x and loan.accounts make it possible to leave
funds in the bankmg system until such time as they are required for Government
disbursement, but it also permits such funds to be retained in the communities
from which they come. For example, assume that a commercial bank in
Panhandle, Tex., sells $100,000 of savings bonds to its customers. This nioney
is left on deposit in Panhandle until such time as it is needed to pay the Government's bills. If this money should be immediately deposited in the Federal
Reserve Bank before it can be returned to channels of trade through Government
disbursement, the money in the community of Panhandle would be transferred to
Dallas. Without the tax and loan accounts there would be during periods of
heavy tax payments or during borrowing operations tremendous shifting of funds
between banks and communities.
f On occasion, the Treasury, in anticipation of heavy tax receipts during heavy
j tax months, will, under statutory authority, replenish balances at Federal Reserve
' Banks by borrowing directly from such banks through the issuance of special
i certificates of indebtedness, rather than withdrawing funds from Treasury tax and
• loan accounts.. These^funds are borrowed for only a few days and enable the
Treasury temporarily to make disbursements in excess of its current receipts thus
providing the banks with additional reserves in advance of a later unavoidable
drain. Such an operation is, of eourse, consistent with the overah policy of
smoothing out the effects on bank reserves of the Government's financing
operations.
The tremendous growth of the Federal Government budget and of the pubhc
debt in recent years has made Treasury operations the largest and most important
single influence on the flow of funds through the money market. Federal fiscal
operations growing out of an annual budget of more than $60 billion and a public
debt of more than $275 billion also underscores the importance of the Treasury
maintaining a sufficiently large cash operating balance to be able to meet any
unusually heavy drains upon the Treasury. The Federal Government, like any
private corporation or business, cannot be prudently managed if its cash operating
EXHIBITS
283
margin is so close that every time unexpected bills come in, it has to rush out
and borrow the money to cover them.
In the case of the Federal Government it seems reasonable to carry an operating
reserve at least equal to a month's expenditures. Not only are there great fluctuations in the Government's receipts and expenditures within the year, but, in
addition, there is a huge volume of demand debt outstanding, such as savings
bonds, which adds to both real and potential demands on the Treasury. Many
of these fluctuations are predictable and cash can be built up ahead of time. But
the timing of many of the demands cannot be anticipated exactly and the Treasury
has to be prepared to meet them. By providing an effective mechanism for
smoothing out the impact of the Government's financial operations on the banking
syslem~anBr the, ecoriomy, the Treasury tax and loan accounts render a service
of Jnestimable value,
4. Specific terms on which banks accept deposits
Specific terms on which banks accept deposits are spelled out in Treasury
circulars, the more important of which are Circulars 92 and 176. (See the 1943
annual report, p. 368, and the 1954 annual report, p, 398.) However, for the
major types of depositaries the most important terms are: (1) The banks must
be designated by the Treasury subject to qualifications set by the Treasury, (2)
the banks must pledge collateral at least equal to deposits, (3) deposits may not
exceed limitations set by the Treasury, (4) deposits are subject to reserve requirements and Federal deposit insurance assessments, (5) the banks must perform
the services stipulated in the designation and submit such reports as prescribed
by the Treasury. All deposits to tax and loan depositaries are of a demand nature
and can be called by the Treasury at any moment.
5. Precisely how decisions are arrived at as to leaving funds on deposit and to
transferring them
Treasury's calls for withdrawals of funds are based upon its cash requirements.
Balances with the Federal Reserve Banks are maintained at a fairly constant
level adequate to cover expected daily cash needs and to provide for a proper
regional distribution of funds. A day-to-day analysis is made of these balances,
of anticipated direct deposits to the Federal Reserve accounts, and of estimated
disbursements. Calls for withdrawals are issued on tax and loan accounts to the
extent that additional funds will be required to meet Treasury's daily cash
requirements.
As pointed out earlier the calls generally provide that payments be made
several days subsequent to date of call. The calls provide for withdrawal of a
specified percentage of the balance within the account. Ah accounts are treated
uniformly except that withdrawals from banks holding balances in excess of
$150,000 are made more frequently than from banks holding balances in smaller
amounts. The Treasury does not take money from one bank to put into another.
It draws out money as needed for Government expenditures.
6. Why these funds are not transferred to Federal Reserve Banks immediately
upon receipt
There are two principal reasons why funds are not transferred to Federal
Reserve Banks immediately upon receipt. The most important one is that such
a procedure would have damaging effects on the economy of the country. The
second reason is that it would result in no financial gain to the Treasury—on
the contrary, it could easily result in increased overall costs of Government
financing.
As discussed at considerable length earlier in this memorandum, the immediate
transfer of Government funds from commercial bank accounts to Federal Reserve
accounts would disrupt the even fiow of money and the Nation's system of bank
reserves. Serious dislocations would occur if the Government receipts should be
transferred immediately from local communities to the Federal Reserve Banks,
perhaps long before the money is returned to channels of trade by Government
disbursements. This action would, in fact, remove the economic stability advantages now derived from the use of tax and loan accounts.
There would be no financial gain to be derived from such action inasmuch
as it does not cost the Treasury any more to keep the money on deposit in com-
284
195 5 REPORT OF THE SECRETARY OF THE TREASURY
mercial banks than in the Federal Reserve Banks.
While no interest is received
from the commercial banks on their Government deposits, neither would interest
be received if the money were immediately deposited in the Federal Reserve
Banks. M^iepy_er,. .all .Governrnent deposits in Treasury tax and loan accounts
are.fully protected JDy coilateraLpledged by the commercial banks.
On the other hand, such action would likely result in substantially increasing
the Government's general financing costs. The transfer of the funds immediately
to Federal Reserve Banks might affect commercial banks' decisions to buy
Government securities and banks might feel that they should be reimbursed for
the numerous services the Treasury now receives free of charge, such as issuance
of savings bonds and assistance in the sale of marketable issues.
7. What the high, low, and the average balance carried in commercial depositaries
has been during the fiscal year ending June 30, 1954
The high, low, and average balances in the tax and loan accounts by months
for fiscal year 1954 are shown in the following table:
Tax and loan balances fiscal year 1954
[In millions of dollars]
High
1953—July
August
September.
October....
November.
December.
1954—January...
February..
March
April
May
June
7,493
6,448
5,642
5,164
5.177
4,194
3,114
3,659
4,546
4,727
4,574
4,836
Low
1,649
5,758
3,984
2, 812
2,573
2,302
2,081
2,507
2,450
2,698
1,902
1, 722
4,944
6,095
4,957
3,698
4,268
3,223
2,536
3,129
3,450
3,541
3,303
3,297
The tremendous fluctuations occurring in these balances is well illustrated for
the month of July 1953, when the balance ranged from a high of $7,493 million
down to $1,649 million.
The above figures do not include balances in general and limited depositaries.
These balances are fairly consistent running usually slightly below $500 mihion
(see attachment 4). If balances in these depositaries exceed certain stated
maxima the excess is immediately sent to the Federal Reserve Banks.
An important yardstick in assessing whether Treasury tax and loan balances
appear to be unduly high or dangerously low is to measure the Government's cash
operating balance (which is made up primarily of tax and loan balances but also
includes our deposits in Federal Reserve Banks and gold in the general fund) in
terms of average monthly budget expenditures. As pointed out previously, to be
on the safe side this operating reserve ought to be at least equal to one month's
operating expenditures. For the 1954 fiscal year as a whole, for example, budget
expenditures averaged $5.6 billion a month and the end of month cash operating
balances averaged about $5.4 billion—less than a month's expenditures. Furthermore, the fiscal year average hides the fact that there were many times during the
year when the balance was under $3M billion, or less than two-thirds of a month's
outgo.
Viewed historically^ the Treasury's cash balance margin in relation to budget
expenditures has been much smaller recently than earlier years. Obviously, it
was necessary to carry unusually high balances during World War II, but even in
the 1930's the average balance was well over double the average monthly expenditures. (See attachment 5 for table and chart showing Federal expenditures and
the operating cash balance fpr fiscal years 1932-54.)
285
EXHIBITS
8. Same information for each of the twelve Federal Reserve districts
Tax and loan balances fiscal year 1954, ^V Federal Resei-ve districts
[In thousands of dollars]
Federal
High balance
Reserve district
Boston
New York
Philadelphia..
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis.Kansas City..
Dallas
San Francisco.
Low balance
Date
Date
286,805
2, 905,084
322,799
543,362
282, 285
310, 802
1, 231,064
228,094
, 197,628
232, 659
179, 397
840,138
July 16, 1953
July 16, 1953
Aug. 24, 1953
July 17-18-19,1953.
July 16„ 1953
July 17, 1953
July 21-22-23, 1953.
July 17-18-19, 1953.
July 16, 1953
July 17-18-19, 1953.
July 16, 1953July 18-19, 1953..-
June
June
July
May
July
July
June
July
Jan.
July
July
July
15,1954
15,1954
14,1954
12,1954
14,1953
14.1953
15.1954
14.1953
11.1954
14,1953
14,1953
10,1953
Average
balance
91,024
182,961
407, 287 1, 219, 953
88, 265
204,344
135, 992
325,170
77, 253
160, 855
59,499
156, 795
744, 767
344,189
137, 914
64,721
102,020
57, 467
152,002
68, 502
114,557
56, 693
370,189
166,437
ATTACHMENT 1.—Treasury tax and loan accounts—deposits, withdrawals, and
balances in A, B, and X accounts
[In millions of dollars]
Balance 3 (at end of period)
Fiscal year or month
Deposits 1
1941
.
1942
1943
1944
1945
1946
1947
1948
1949
1950
1951
1952...
1953
1954
1954—July
August--September
October..-.
November.
DecemberJanuary. _.
February..
March
April
May
June
767
6,902
33,231
54,018
50,102
27,007
7,430
8,575
15,231
16,876
• 24,128
36,492
41,267
41,645
7,336
2,545
3,110
1,969
4,404
2,339
1,349
2,369
4,607
2,494
4,486
4,636
Withdrawals 2
911
5,884
27,243
43,678
45.487
36,609
19.488
7,765
15,233
15,380
21,716
37,066
43,302
39,880
3,718
3,410
3,681
4,331
2,752
3,526
2,301
1,316
3,685
3,601
3,656
3,903
Group A
banks
Group B
banks
661
1,679
5 7, 667
fi 18,007
5 22,622
575
12,447
231
731
272
1,501
160
1,611
347
2,921
285
2,404
327 I
1,915
217
1,527
553 I
1,944
422
6,268
324
5,501
476
4,779
368 I
2,524
461
4,084
428
2,930
382 I
2,024
391
3,067
264
2,321
336
2,936
652
3,451
553
1,944
accounts *
2,991
2,865
1,328
2,339
1,794
'2,'339'
Total
661
1,679
7,667
18,007
22,622
5 13,020
962
1,772
1,774
3,270
5,680
5,106
3,071
4,836
6,690
5,825
5,255
. 2,893
4,545
3,358
2,406
3,458
4,379
3,273
4,103
4,836
1 Deposits consist of proceeds from sales of securities, deposits on account of withheld taxes, beginning
March 22, 1948, deposits on account of taxes withheld under the Federal Insurance Contributions Act,
beginning Jan. 1,1950, deposits on account of railroad retirement taxes, beginning July 1,1951, and deposits
on account of excise taxes, beginning July 1, 1953.
2 Includes calls by Treasury and voluntary prepayments accepted by Treasury.
3 Effective May 11,1943, Federal Reserve Banks were instructed to establish subsidiary controls so as to
classify war loan depositaries in their districts into two groups. Group A including all depositaries having
balances of $300,000 or less and Group B those having balances of more than $300,000. Various amendments
have since been made to the original disposition, the current dividing line being $150,000.
^ Represents income taxes deposited under a special procedure, first adopted in March 1951, for crediting in
tax and loan accounts the proceeds of checks of $10,000 or more. This procedure is usually followed in quarterly tax payment periods.
fi Breakdown into A and B banks not available.
8 Does not agree with daily Treasury statement.- Breakdown based on telegraphic reports for last day 0'
fiscal year which was a Saturday.
286
1955 REPORT OF THE SECRETARY OF THE TREASURY
ATTACHMENT 2.—Treasury tax and loan accounts—analysis of deposits, withdrawals,
and balances
[In millions of dollars]
Credits to tax and loan accounts
Fiscal year or month
Proceeds from sales of
securities
Savings
bonds
1941
1942
1943
1944
1945
1946
1947
1948
1949
1950
1951
1952
1953-.1954
1954r—July
August
September
October
Noveinber
December
January
February
March
April
May
June
Savings
notes
Other
Taxes
Income
taxes
not
Other 2
withheld!
Balance
With- at end
drawals
of
Total
period
credits
767
6,902
33, 231
(Breakdown noi avauaoie;
54,018
50,102
27,007
4 2,937
7,430
4 4,493
4 2,024
804
1,820
4 3,931
8,575
6,473 15,231
3,878
4,879
7,287
5,834
3,755
16, 876
3,437
3,390
6,971 10,331 24,128
2,227
4,678 "2^738" 13,270 13, 581 36,492
2,667
2,231 10,285 10, 227 15,858 41,267
3,457
2.333 11,164 4,791 19,899 41,645
708 7,336
378 5,874
240
136
1,971
363
211
2,545
1,988
211
911
3,110
1,066
222
1,970
681
2,046
4,404
2,150
208
2,077
2,339
263
961 1,349
389
2,029
339
2,369
2,076
2,134
396
4,606
969 2,494
349
996
180
2,043
300
2,144
4,486
330
"2^341' 1,966
4,636
911
661
5,884
1,679
27,243
7,667
43,678 18,007
45.487 22, 622
36,609 13,020
962
19.488
7,765 1,772
15,233 1,774
3,270
15,380
21, 716 5,680
5,106
37,066
43,302 , 3,071
4,836
39,880
6,690
3,718
5,825
3,410
5,255
3,681
4,331 2,893
4,545
2,752
3,526 3,358
2,406
2,301
3,458
1,317
3,685 4,379
3,273
3,601
3,656 4,103
3,903 4,836
Outstanding calls
atend
of
period
[ (3)
2,103
291
796
804
310
1,400
1,475
934
1,233
938
1,825
1,728
888
1,782
1,261
345
1,501
1,101
1,487
1,688
1,233
1 Represents income taxes deposited under a special procedure, first adopted in March 1951, for crediting
in tax and loan accounts the proceeds of checks of $10,000 or more. This procedure is usually followed in
quarterly tax payment periods.
2 Represents withheld income taxes, beginning March 22,1948; taxes withheld under the Federal Insurance
Contributions Act, beginning January 1,1950; railroad retirement taxes, beginning July 1,1951: and excise
taxes, beginning July 1,1953.
3 Not available.
4 Partly estimated.
287
EXHIBITS
A T T A C H M E N T 3.—Calls on Treasury tax and loan accounts, fiscal year 1954
[Dollars in millions]
Date
" A " accounts i
*'B" accounts 2
" X " accounts 3
Calls
Calls
Calls
Uncalled
balance
Uncalled
balance
1965
July:
2
6.
__.
9-.
13
16 . 20
23
27
30
August:
3
6
10
13
17
20
24
27
31
September:
3
10
14
21
24
28
October:
1_
5
8
13.
15
19
22
26
29 _
November:
2
5
_.
9
-.
12
16—.
19
23...
25
30
December:
3 ..
7
10.
2228
30
1954
January:
4 21.
25
28-.February:
1...
4
11
15
18
23
25
50
60
$133
245
50
50
50
60
50
230
177
219
202
206
Footnotes at end of "table.
10
22
22
$161
387
413
$1,450
1,211
916
8
4
5
5
10
541
278
336
325
613
6,214
6,136
5,967
5,698
5,181
6
6
9
4
313
350
501
216
5,016
4,981
4,554
4,518
9
6
16
16
496
352
928
897
6,019
5,369
4,355
4,498
7
16
6
6
6
13
3,580
365
3,258
694 '
3,102
254
3,924
251
280 " 4,135
3,927
648
18
6
24
13
8
8
8
14
12
860
283
993
480
268
251
220
370
298
3,271
3,241
2,574
2,221
2,106
2,133
2,149
1,925
1,819
6
9
8
10
5
8
9
18
18
161
211
197
441
217
364
427
812
76U
1,811
1,886
1,902
3,559
3,483
3,821
3,731
3,093
2,437
19
10
15
10
12
. 24
723
360
398
274
358
702
2,049
1,923
1,662
2,465
2,348
1,730
20
15
6
5
587
321
133
101
1,288
1,821
1,769
1,786
12
4
4
6
15
6
27
243
99
93
144
429
199
871
1,679
•2, 033
2,224
2,168
2,287
2,545
. 1,870
$133
245
"
230
177
219
202
206
Uncalled
balance
Percent Amount
Percent Amount
Percent Amount
(')
$424
(')
106
288
195 5 REPORT OF THE SECRETARY OF THE TREASURY
ATTACHMENT 3.—Calls on Treasury tax and loan accounts, fiscal year 1954—Con.
[Dollars in millions]
Date
" A " accounts J
" B " accounts 2
" X " accounts 3
Calls
Calls
Calls
Uncalled
balance
Uncalled
balance
Percent Amount
P e r c e n t •Amount
1954
March:
1
4
11
15
38
25
29
April:
1
5
8
12
15
19
22
26
29-.May:
3
6
10
13-..17
- .
20
24
27
June:
1 3
7
10
14
- 17
75
50
-
188
313
14
15
$429
400
$1, 666
1,650
55
i,08i
884
21
580
2,183
no
' 259
122
246
722
1,001
2,090
2,055
1,962
1,316
1, 311
•206
274
487
150
281
563
158
845
1,250
1,274
864
861
766
2,834
2,946
2,331
380
386
430
979
221
196
2,068
1,891
1,673
844
725
890
$121
$363
-
50
Uncalled
balance
Percent A m o u n t
188
'
313
5
10
30
33
7
32
24
10
18
15
4
24
11
12
15
40
10
15
'
25
14
16
$115
226
294
$343
1,391
1,318
45
30
807
569
692
226
237
56
(«)
(«)
71
NOTE.—Banks are segregated into Groups A and B in the interest of economy. Calls are made, usually
twice a week, upon the Group B banks (the larger banks but smaller in number) and about once or twice a
month on the Group A banks.
1 Accounts with balances of $150,000 and under (approximately 8,000 banks).
2 Accounts with balances over $150,000 (approximately 2,500 banks).
3 These accounts are used during heavy tax payment periods to avoid excessive strain on bank reserves
Income tax checks of $10,000 and over are deposited in them.
4100% of uncalled balances.
fi 100% of remaining balances.
« 80% of uncalled balances.
^ Includes $8.7 million special call of 28% on New Orleans district only to adjust for error made by that
bank on previous " B " call.
8100% of remaining balances. .
289
EXHIBITS
A T T A C H M E N T 4,—Deposits i n banks
[End of month figures in millions of dollars.*
On basis of daily Treasury statements]
Commercial b a n k s
E n d of m o n t h or fiscal year
Federal
Reserve
Banks
(available)
General
depositaries
Special
depositaries
(tax a n d
loan accounts) 2
Foreign
depositaries
1,024
603
1,038
1,442
1,500
1,006
1,202
1,928
438
950
338
333
132
63
69
228
235
225
227
215
213
238
270
319
397
413
661
1,679
7,667
18,007
22, 622
12, 993
962
1,773
1,771
3,268
5,680
6,106
3,071
53
51
12
16
5
14
20
27
33
37
52
49
724
1,801
7,946
18, 254
22, 863
13, 225
1,191
2,006
2,036
3,571
6,036
5, 555
3,533
1,748
2,404
8,984
19, 696
24,363
14, 231
2,393
3,934
2,474
4,521
6,374
5,888
3,665
548
496
642
662
451
346
404
548
722
679
422
875
423
420
466
440
420
409
484
422
459
427
426
433
6,690
5,825
5,255
2,892
4,545
3,368
2,406
3,458
4,379
3,273
4,095
4,836
102
102
119
121
122
89
86
89
87
91
88
88
7, 215
6,347
6,840
3,463
5,087
3,856
2,976
3,969
4,925
3,791
4,609
6,357
7,763
6,843
6,482
4,115
5,538
4, 202
3,380
4, 517
5,647
4, 370
5,031
6,232
727
511
704
480
399
416
2,638
4,078
3,469
88
86
89
3,106
4,563
3,974
3,833
5,074
4,678
Total
deposits
Total
June
1941
.1942
1943
1944
1945
1946
1947....
1948
1949
1950
1951
1952
1953
..
.
.
....
-Fiscal year 1954
..-
J u l y 1953—
August
September
October
November..
December
J a n u a r y 1954..
February
March
April
May .
June
.
...
...
.
. .
Fiscal year 1955
J u l y 1954.
August
September
October
November
December
.
NOTE.—There are approximately 14,600 banks eligible to hold Government deposits. As of August 31,
1954, there were 1,422 general depositaries; 11,113 special depositaries; ana 34 foreign depositaries.
' These figures do not incluae Saturday transactions when Saturday falls on last day of reporting period.
2 Prior to January 1, 1950, these accounts were designated as war loan accounts.
ATTACHMENT 5,—Treasury operating cash balance a n d average Federal budget
expenditures, fiscal years 1932-1954
[In billions of dollars]
Fiscal year
1932
1933
1934
1935
1936
1937
1938
1939
1940
1941
1942
1943
.o
Average
operating cash
balance i
---
- --.
Average
monthly
budget
expenditures
0.4
.6
2.1
2.4
1.8
1.6
2.3
2.3
1.7
1.6
2.3
6.8
I 13-month average of end of month figures.
356812—56
20
0.4
.4'
.6
.5
.7
.6
.6
.7
.8
1.1
2.8
6.6
Average
Average m o n t h l y
operatbudget
ing cash
expendibalance i
tm-es
Fiscal year
1944
1945
1946
1947
1948
1949I960
1951
1952
1953
1964
-
---..
.
12.9
16.0
20.1
7.2
3.9
4.4
4.5
5.3
5.2
5.7
5.4
7.9
8.2
5.1
3.3
2.8
3.3
3.3
3.7
5.5
6.2
5.6
290
1955 REPORT OF THE SECRETARY OF THE TREASURY
FEDERAL EXPENDITURES AND OPERATING CASH BALANCE.
4
$Bil.
*•
80
/ 1
15
/
^mage ^ /
Cosh Balance \
\
(Bid ef Month)
\
\0
:
1
'
I H B
Jlyeroge Monthly
/ H g
\
Expenditures V M [ H H |
5
KnB MH B H
yjB H M ^SJ BB
—
,....*....
p^
\
^''•*Si&*nS9R
••*******BS | ^ 9 ^ ^
•^illl '^—'nBI!
^s••......^^^p^^g
^
. ^ ^ ^ S H ^ ^ggggggg
^H^HH^
^1^2*'"™""""^^"^^"^^^^^
I
—„,_..,
., r i e / ^ n l V f l n r e
^
Exhibit 45.—Statement by Secretary of the Treasury Humphrey, December 7,
1954, before the Subcommittee on Economic Stabilization of the Joint Committee on the Economic Report
We welcome tills opportunity to appear before your subcommittee to review
the fiscal and debt management policies of the Treasury from the point of view
of their economic influence.
At the outset and before considering in detail the activities of the Treasury
during the past two years, I want to make a few general comments on the direction
of our entire fiscal program as well as the principles guiding us in the management
of the public debt.
The administration's budgetary and tax policies, along with its debt management policies, have all been designed to promote high employment, rising production, and a stable dollar.
We have in fact been following the policies advocated by your predecessor
subcommittees that, as stated in the Douglas report of January, 1950, in language
reaffirmed in the Patman report of June, 1952, ''appropriate, vigorous, and
coordinated monetary, credit, and fiscal policies" should "constitute the Government's primary and principal method" of promoting the purposes of the
Employment Act, and further, their recommendation "that Federal fiscal policies
be such as not only to avoid aggravating economic instability but also to make a
positive and important contribution to stabilization, at the same time promoting
equity and incentives in taxation and economy in expenditures."
Government spending programs have been cut by billions of dollars. Waste
and extravagance have been eliminated in many areas. Economy in Government
and efforts to get the Federal budget under even better control are continuing
without letup. These efforts are of great importance to the future of our country
and are fundamental in the administration's honest money program.
IVTajor tax reductions and comprehensive tax revisions, along with the ending
of price and wage controls, are removing barriers to economic growth and restoring
individual initiative and enterprise. Savings in Government spending which have
been returned to the people in the form of tax cuts are helping sustain the economy,
increase employment and production.
Progress is being made toward getting our huge public debt in better shape, so
that its maturities can be handled more easily and' debt operations will not
stimulate either inflation or deflation. Treasury financings have been designed
EXHIBITS
291
to tie in with action taken by the Federal Reserve System to keep the supply of
money and credit in line with the needs of the country.
The principles we have been following in the management of the large public
debt are not new. They are, likewise, principles that have been laid down by
your predecessor subcommittees after extensive study and careful consideration
of the fundamental role they can play in effective monetary policy.
The first principle is that monetary and debt management policies should be
flexible. To be effective they must lean against inflation as-^well as deflation. As
put by the Douglas subcommittee^and reaffirmed by the Patman subcommittee:
"Timely flexibility toward easy credit at some times and credit restriction at
other times is an essential characteristic of a monetary policy that will promote
economic stability rather, than instability."
The second principle is that Treasury debt management operations should be
consistent with current monetary.and credit control policies of the Federal Reserve,
This means close cooperation at all times between the Federal Reserve and the
Treasury. As Representative Patman's Subcommittee reported in 1952: "Neither
the problems of monetary policy nor those of debt management can be solved in
isolation from the other. We recommend that the Treasury and the Federal
Reserve should continue to endeavor to flnd by mutual discussion the solutions
most in the public interest for their common problems. . . . "
The answers which we have already submitted to your subcommittee's questions
detail the actions we have taken in cooperation with the Federal Reserve during
the past two years in carrying out these principles. They show the manner in
which our debt operations have been designed to complement monetary action
taken by the Federal Reserve to promote economic stability, ^rst by helping to
restrain inflation and then later by helping to avoid deflation.
The record has not always been as impressive. As you know, at the time of
the earlier congressional hearings on monetary policy and debt management,
the economy had been under strong inflationary pressures. IMonetary policy
had been largely ineffectual in helping to control inflation because of the previous
administration's policy of selling mostly short-term securities and using the
powers of the Federal Reserve System to hold down interest rates artificially,
A fundamental conclusion of both of your predecessor subcommittees was that
such action was not in the best interests of the Nation. This was their considered judgment in language used by the Douglas Subcommittee and reaffirmed
by the Patman Subcommittee: " , . , we believe that the advantages of avoiding inflation are so great and that a restrictive monetary policy can contribute so
much to this end that the freedom of the Federal Reserve to restrict credit and
raise interest rates for general stabilization purposes should be restored even if
the cost should prove to be a significant increase in service charges on the Federal debt and a greater inconvenience to the Treasury in its sale of securities for
new financing and refunding purposes,"
This administration has followed these principles because we believe them to
be fundamental principles of good government. We believe the record of the
past two years has indicated their effectiveness in giving us honest money and
laying a firm foundation for the sound growth and prosperity of our country.
Exhibit 46.—Remarks by Secretary of the Treasury Humphrey, February 16,
1955, following receipt of an award of the Chamber of Commerce of Greater
Philadelphia, Philadelphia, Pa.
I am deeply honored to receive the 1954 William Penn Award of the Chamber
of Commerce of Greater Philadelphia. It is a great privilege for me to receive
this honor as a member of President Eisenhower's administration.
I am going to talk to you tonight not as Secretary of the Treasury, not as a
Cabinet officer, or even as a businessman who is now a bureaucrat. I will talk
rather as a friend and fellow citizen and a taxpayer who shares with you the
responsibility of good government, of keeping America the land of opportunity,
the land where the economy of today must build for the economy of tomorrow
by its wisdom, its soundness, and its farsightedness. We must build a world
with more and better opportunities for our children and our children's children
and not a world that will take opportunity away froni them.
The problems and accomplishments I speak of tonight are the problems of
every citizen, and the accomplishments are the work of all who, by their own
efforts, have helped to build soundness and opportunity by hard work and honest
endeavor.
292
195 5 REPORT OF THE SECRETARY OF THE TREASURY
I am going to talk to you tonight not of headlines, controversy, and crises,
but of the quiet, undramatic, progressive developments that are going on all
around us in America. There have been no headlines to tell you that more than
60 million Americans are working at jobs of their own choosing, jobs that they
are free to leave or change if and whenever they so desire. There are no headlines to tell you that about 55 percent of the 47 millions of families in America
own their own homes, that Araericans have savings of $80 billion in life insurance
policies; almost $50 bilhon in United States savings bonds; and $25 billion in
retirement pension funds. There are no headlines to remind you that stringent
wartime Government controls no longer hamper or restrict the individual or
the businessman. And there are no headlines to herald the stirring return of
confidence of Americans in their Government, in each other, and in our abihty
and strength to do whatever may be required of us in any emergency.
I am even more encouraged to talk about these simple principles that have
made our country great when I read over the list of names of those who have
been previous recipients of the William Penn Award, showing that the Philadelphia Chamber of Commerce over the years has been honoring men who stand
for the same principles of free competitive enterprise and initiative which we now
believe are basic to our American way of life, the way of life which has yet to be
surpassed anywhere in this world of ours.
It has been a dedicated goal of the Eisenhower administration to keep alive
and vigorous the priceless principles of free, competitive enterprise and initiative.
But we must do more than keep them alive and vigorous. We must keep them
growing and always developing the new things and the better ways of doing
things which have made this Nation great.
What has been done in encouraging initiative and enterprise has not been
sensational or dramatic. But it has been important to every American in his
daily life. It is important to the standard of living of every American worker
and his loved ones. And it is vitally important to the defense of all Americans
against any possible enemy attack, for the power and strength of American
industrial capacity are the very foundation of our security.
It is often true that "good news" is "no news" to attract public attention in
the daily news outlets of press, radio, and TV. Yet the quiet, undramatic,
progressive developments that are going on in America, without making sensational
news, are important for the present and future of our people.
I have no quarrel with wliat makes news. I make these observations only as
a reason for talking a little tonight about some of the constructive things that
have been done during the past two years—important things which are worth
mentioning because they do not draw the attention that controversy and
violence do.
What are some of these unspectacular things that this administration has been
helping to accomplish during the past two j^ears?
The undramatic but steady and healthy progress which has been going on in
this country has increased the confidence of all Americans in the possibilities of
our future. This increasing confidence is the most important stimulant to the
development of the strength of our Nation's economy, with the careful and
quiet assistance of an administration which knows that government can do
relatively little except to help to properly set a stage upon which free vigorous
Americans can perform.
Our Nation has made the transition from a wartime high to a lower level of
Government spending without a major economic upset. This transition was
helped substantially by heavy tax cuts and other moves stimulating confidence.
While there is still high tension in many places, there is no armed warfare
between major powers at any point on the globe as of this moment. There is
peace, uneasy as it is, as far as American fighting men are concerned. War in
Korea has halted. War in Indo-China has ceased.
The present improved relationships in many places throughout the world have
been achieved by ceaseless and dedicated pursuit of solutions for the vexing and
serious widespread international problems. It is a treacherous path. Bold
risks must sometimes be taken, but success to date is high proof of the competence and wisdom of the policies which have been adopted in wrestling with this
problem of preserving the peace and making it more secure.
Inflation has been stopped. In the past two years the value of the dollar has
changed only one-fifth of one cent. This compares with a drop in the value of
the dollar from 100 cents in 1939 to only 52 cents ih January 1953, All departments and many people in Government have been working hard for, and
EXHIBITS
293
insisting upon getting, our Federal spending under control. Deficits which lead
to more borrowing and so to inflation, have been cut substantially.
The Federal Reserve System has acted promptly, courageously, and wisely to
adopt monetary and credit policies which have met the needs of the economy
while walking the fine line between deflation and inflation. And the Treasury
has done its bit in halting inflation and avoiding deflation by doing its borrowing
so as to be as careful as possible concerning its effect upon the constructive course
of the economy.
This is well illustrated by the issue and highly successful placement only a few
days ago of nearly two billion dollars in 40-year 3 percent bonds. They are the
longest bonds that have been sold by the Government since an issue to help
pay for the Panama Canal in 1911,
There is nothing academic about the importance of keeping inflation locked out.
The value of earnings and savings can be protected in no other way. Just realize
that 55 out of every 100 families in America now earn more than $4,000 a year as
compared with only 10 out of 100 earning $4,000 a year early in the century in
terms of today's prices. And recall the millions of owners of their homes, accounts
in savings banks, savings bonds, insurance policies, and pensions, of which I
spoke just a moment ago. Because this Nation has quietly become a Nation of
"haves" rather than "have nots," inflation must stay checked to protect the
earnings and savings of millions of Americans.
We had a cash balance between money collected from the public and money
paid out by the Government last year. Although we will not have a cash balance
this year, we are estimating a small surplus in the fiscal year ahead. The total
debt has continued to grow because of the large deficit we inherited in our first
year in office and the subsequent deficits, even though they have been much
smaller. But the inflatio
@FedFRASER