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ANNUAL REPORT OF THE

Secretary of the Treasury
ON

THE SPATE OF THE
FINANCES




FOR THE FISCAL YEAR
ENDED JUNE 30

1920

With Appendices

WASHINGTON
GOVERNMENT PRINTING OFFICE
1921




T R E A S U R Y DEPARTMENT,

Document No. .2872.
Secretary.

As~o.

CONTENTS.
REPORT OF THE SECRETARY OF THE TREASURY:

Page.

Introduction
Treasury certificates of-indebtedness.:
Program for retirement of war debt
:
Taxation
Revision without reduction of revenues
Income sm'taxes
Excess-profits tax
,
Excise and luxury taxes
Additional sources of revenue.
Administrative amendments
Tax exemptions of Liberty bonds and Victory notes
Economy
A Budget system
Loans to foreign Governments
:
Interest and sinking fund payments
Foreign obligations received on account of sales of surplus war supplies
and European reHef
Foreign currencies
Expenditures reported by foreign Governments
International financial situation
Foreign trade
• Financing foreign trade.
Suggested international financial conference
Brussels Conference
European relief
Domestic credit situation
.\
Soldiers' bonus
Receipts and expenditures during war period..
Cost of the war
Securities owned by United States Government
Retirements of Liberty bonds and Victory notes
Five per cent bond-purchase fund
Bonds purchased from repayments of foreign loans
Bonds purchased with franchise tax paid by Federal reserve banks...
B.onds retired on account of gifts
Bonds retired on account of forfeitures to the United States
Bonds retired on account of estate and inheritance taxes
Cumulative sinking fund
Proposals for refunding the Liberty loans
Market prices of Liberty bonds and Victory notes
".
Loans on Liberty bonds
Liberty loan transactions
Permanent coupon Liberty bonds
Government savings securities
Savings securities for 1920
Savings securities for 1921
•...
War Finance Corporation
Suspension of active operations
Railroads
Section 204
Section 209
Section 210
Discontinuance of the Subtreasuries
Deposits of Government funds
:
Interest on Government deposits
Special depositaries




III

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IV

CONTENTS.

R E P O R T OF THE SECRETARY OF THE T R E A S U R Y — C o n t i n u e d .

.

Deposits of Government funds—Continued.
Page.
Interest on special deposits
•
174
United States depositaries in foreign countries
175
Collateral security for Government deposits
176
Creation of Division of Deposits
176
I^'raudulent dealings in securities,
177
Gold
180
Production
180
Gold payments
181
Silver
182
Federal farm-loan system
'..
185
Retirement of Government-owned stock
187
Earnings
188
Joint-stock land banks
:.
188
Liquidation of joint-stock land banks
188
Tax exemptions of farm-loan bonds
:
188
Seed-grain loans to farmers
190
Bureau of Internal Revenue
194
Prohibition enforcement
196
War risk insurance
197
Military and naval compensation
198
Military and naval insurance
198
United States Government life insurance
199
Summary of insurance operations
. 199
Military and naval allotments and family allowances
201
Marine and seamen's insurance
201
Medical Division
202
Personnel
203
Enemy or ally of enemy insurance companies and other foreign insurance
companies
203
Soldiers' and sailors' civil relief act and bonds.
:.
204
District of Columbia school-teachers' retirement act
:
204
Hospitalization
:.
205
Hospital construction
209
Public Health
213
Precautions against foreign epidemics
213
Transfer of State quarantine stations
214
National leprosarium
214
National health program
215
Coast Guard
216
Rescue and salvage
217
Ice patrol to promote safety at sea
217
Winter cruising
218
Cruises in northern waters
v
218
Anchorage and movements of vessels
219
International yacht races
219
Coastal communication
220
Aviation
220
Legislation
220
Retention of t h e Coast Guard in t h e Treasury
221
Commissioned personnel
224
Vessels and stations
224
Coast Guard Academy
:
225
Customs
225
Mint Service
226
Proposed new m i n t
227
Bureau of Engraving and Printing
228
Public buildings
229
Suspended building operations
230
National Archives Building
230
Contractors' war claims
231
Supervising Architect
231
Inter-American High Commission
.232
General Supply Committee
.
^
234
Checking accounts of Government corporations and Railroad Administration maintained with Treasurer of t h e United States
236




OOISTTENTS.
R E P O R T OF THE SECRETARY OF THE T R E A S U R Y — C o n t i n u e d .

Handling of Government funds by disbursing officers
:....
..
Provision for Government disbursements in t h e Philippine Islands
' New currency designs.
Treasury organization.
^.......
Commissioner of t h e Public Debt
Commissioner of Accounts and Deposits
Accounting offices
Audit of Army foreign accounts.
-.
Salaries
:
Undersecretary of the Treasury
Activities which should be separated from the Treasury
Personnel
Retirement of civil-service employees.
Space problems of the department'
Panama Canal
FinancesReceipts and disbursements, fiscal year 1920
General fund
Summary of general-fund transactions
Postal Service
United States notes (greenbacks)
Gold reserve fund
Trust funds
Sinkingfund
. Condition of the Treasury June 30, 1920
Cash in the Treasury J u n e 30, 1920....
Comparison of receipts, fiscal years 1920 ahd 1919
Comparison of disbursements, fiscal years 1920 and 1919
Estimates of receipts and expenditures for fiscal years 1921 and 1922
Postal Servdce, estimated revenues and expenditures, 1922
„
Estimates of appropriations, fiscal year 1922, as submitted by the executive departments
Estimates for 1922 and appropriations for 1921
Statement of estimates of appropriations for 1922 compared with appropriations for 1921

V
Page.,

237
238
238
239
240
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276
278
280
280

Exhihitslaccompanyinglthelreportlonlthe finances.
Exhibit 1: Certificates of indebtedness, total issues, and the amount issued.
through each Federal reserve bank from Apr. 6, 1917, to Oct. 31, 1920 . .
Exhibit 2: Certificates of indebtedness, par amount issued, retired, and
outstanding to Oct. 31, 1920
Exliibit.3: Department Circular No. 167, 4^ per cent Treasury certificates
of indebtedness, series T M 3-1920, dated and bearing interest from
Dec. 1, 1919, due Mar. 15, 1920
Exhibit 4: Department Circular No. 168, 4^ per cent Treasury certificates
of indebtedness, series D 1920, dated and bearing interest from Dec. 1,
1919, due Feb. 16, 1920
Exhibit 5: Department Circular No. 174, 4^ per cent Treasury certificates
of indebtedness, series T J-1920, dated and bearing interest from Dec. 15,
1919, due June 15, 1920
Exhibit 6: Department Circular No. 177, 4J per cent Treasury certificates
of indebtedness, series T D-1920, dated and bearing interest from Jan. 2,
1920, due Dec. 15, 1920
Exhibit 7: Department Circular No. 180, 4^ per cent Treasury certificates
of indebtedness, series T M 4-1920, dated and bearing interest from
Feb. 2, 1920, due Mar. 15, 1920
Exhibit 8: Department Circular No. 185, 4J per cent Treasury certificates
of indebtedness, series T M-1921, dated and bearing interest from Mar.
15, 1920, due Mar. 15, 1921
Exhibit 9: Department Circular No. 188, 4 i per cent Treasury certificates
of indebtedness, series E 1920, dated and bearing interest from Apr. 1,
1920, due July 1, 1920
Exhibit 10: Department Circular No. 189, Treasury certificates of indebtedness dated and bearing interest from Apr. 15, 1920, series F 1920,
5 per cent, due July 15,1920, series G 1920, 5J per cent, due Oct. 15,1920.




293
295
296
297
299
300
301
303
304

VI

CONTENTS.

REPORT OP THE SECRETARY OP THE T R E A S U R Y — C o n t i n u e d .

'

Exhibit 11: Department Circular No. 192, 5^ per cent Treasury certificates
of indebtedness, series H 1920, dated and bearing interest from May 17,
1920, due Nov. 15,1920
Exhibit 12: Department Circular No. 193, Treasury certificates of indebtedness dated and bearing interest from June 15, 1920, series A 1921,
5f per cent, due Jan. 3, 1921, series T J-1921, 6 per cent, due June 15,
1921.
E x h i b i t 13: Department Circular No. 199, Treasury certificates of indebtedness dated and bearing interest from July'15, 1920, series B 1921,
5 | per cent, due Jan. 15, 1921, series T M 2-1921, 5f per cent, due Mar.
15, 1921
E x h i b i t 14: Department Circular No. 201, 6 per cent Treasury certificates
of indebtedness, series C 1921, dated and bearing interest from Aug. 16,
1920, due Aug. 16, 1921
E x h i b i t 15: Department Circular No. 204, Treasury certificates of indebtedness dated and bearing interest from Sept. 15, 1920, series T M
3-1921, 5f per cent, due Mar. 15, 1921, series T S-1921, 6 per cent, due
Sept. 15, 1921
Exhibit 16: Department Circular No. 206, 5 | per cent Treasury certificates
of indebtedness, series T M 4-1921, dated and bearing interest from
Oct. 15, 1920, due Mar. 15, 1921
Exhibit 17: Department Circular No. 211, 5 | per cent Treasury certificates of indebtedness, series D 1921, dated and bearing interest from
Nov. 15, 1920, diie May 16,1921
E x h i b i t 18: Offer to redeem before maturity Treasury certificates of indebtedness, series A 1920
E x h i b i t 19: Offer to redeem before maturity Treasury certificates of indebtedness, series B 1920
:
Exhibit 20: Offer to redeem before maturity Treasury certificates of indebtedness, series D 1920
Exhibit 21: Statement of the public debt of the United States, June 30,1920.
E x h i b i t 22: Preliminary statement of the public debt, Oct. 31, 1920
Exhibit 23: Quarterly comparative public debt statement, showing also
figures for Aug. 31, 1919, when war debt was at its peak
Exhibit 24: Statement showing dates and amounts of credits established to
Nov. 15,1920, in favor of foreign Governments under the acts of Apr. 24,
1917, Sept. 24, 1917, Apr. 4, 1918, and July 9, 1918
:
Exhibit 25: Statement shoMdng dates and amounts of cash advances to Nov.
15, 1920, to foreign Governments under the acts of- Apr. 24, 1917, Sept.
24, 1917, Apr. 4, 1918, and July 9, 1918
Exhibit 26: Summary of credits established in favor of foreign Governments,
advances made to them, and expenditures reported b y them for period
Apr. 6, 1917, to Nov. 1, 1920.
Exhibit 27: Summary, b y periods, of credits established in favor of foreign
Governments, advances made to them, and expenditures reported by
them, Apr. 6, 1917, to Nov. 1, 1920
Exhibit 28: Summary of credits established in favor of foreign Governments, advances made to them, and expenditures reported by them for
period Apr. 6, 1917, to Dec. 31,1917
:
Exhibit 29: Summary of credits established i n favor of foreign Governments, advances made to them, and expenditures reported b y them for
period Jan. 1 to June 30, 1918
Exhibit 30: Summary of credits established in favor of foreign Governments, advances made to fliem, and expenditures reported by them for
period J u l y l to Nov. 30, 1918
Exhibit 31: Summary of credits established in favor of foreign Governments, advances made to them, and expenditures reported b y them for
period Dec. 1, 1918, to June 30, 1919
Exhibit 32: Summary of credits,established in favor of foreign Governments, advances made to them, and expenditures reported by them for
period July 1 1919, to Nov. 1, 1920
Exhibit 33: Letter from the Secretary of the Treasury transmitting, i n response to a Senate resolution of Oct. 17, 1919, a statement based on information received by the Treasury showing the financial obligations of
foreign Governments offered in the United States since Aug. 1, 1914
Exhibit 34: Sections 204, 209, and 210 of transportation act, 1920, as
amended
;




Page.

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306

307
309

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311
312
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315
323
324
325
330
338
340
342
343
344
345
347

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355

CONTENTS.
R E P O R T OF THE SECRETARY OF THE T R E A S U R Y — C o n t i n u e d .

Exhibit 35: Statements of D. F . Houston, Secretary of the Treasury, and
R. C. Leffingwell, Assistant Secretary, before Committee on Ways and
Means of House of Representatives, Mar. 11, 1920, on soldiers' bonus
proposal
Exhibit 36: Statement showing the transactions of ,the fiscal year 1920 on
the basis of the daily Treasury statements
Exhibit 37: Table shomng cash expenditures of the Government for the
fiscal years ended June 30,1917, June 30,1918, June 30,1919, and June
30,1920, as published in the daily Treasury statements and classified according to departments and establishments
Exhibit 38: Statement showing classified receipts and disbursements of
the United States Government, exclusive of the principal of the public
debt, by nionths, from Apr. 6, 1917, to Oct. 31, 1920, as^published in
daily Treasury statements
Exhibit 39: Liberty loans, principal payments received b y t h e Treasurer
of the United States, principal retired, and securities outstanding on
June 30, 1920
Exhibit 40: Liberty loans, recapitulation of issues and retirements to June
30,1920
Exhibit 41: First Liberty loan of 1932-1947, recapitulation of transactions
to June 30, 1920
Exhibit 42: Second Liberty loan of 1927-1942, recapitulation of transactions
to June 30, 1920
'
Exhibit 43: Third Liberty loan of 1928, recapitulation of transactions to
June 30, 1920.
Exhibit 44: Fourth Liberty loan of 1933-1938, recapitulation of transactions
to June 30,1920
.^
Exhibit 45: Victory Liberty loan of 1922-23, recapitulation of transactions
to June 30,1920
Exhibit 46: Liberty bonds (including full-paid interim certificates) and Victory notes, securities stock account to June 30, 1920
Exhibit 47: Liberty bonds and Victory notes outstanding by denominations, June 30, 1920
Exhibit 48: Liberty bonds and Victory notes, recapitulation of denominational exchanges showing net increases and decreases
Exhibit 49: Liberty bonds and Victory notes, conversion transactions as of
June 30, 1920
^
Exhibit 50: Final allotment of subscriptions to Liberty loans (corrected to
Oct. 31,1920)
Exhibit 51: Final allotments to the Liberty loans, b y States (corrected to
Oct. 31, 1920)
Exhibit 52: Department Circular No. 183, third Liberty loan subscriptions
in default
Exhibit 53: Department Circular No. 200, fourth Liberty loan subscriptions
in default
Exhibit 54: Department Chcular No. 142, assignments of United States registered bonds and notes for exchange for coupon bonds and notes
Exhibit 55: Department Circular No. 182, assignments of United States registered bonds and notes
:.
Exhibit 56: Supplement to Department Circular No. 141 of Sept. 15, 1919,
supplemental rules and regulations concerning transactions in Liberty
bonds and Victory notes
Exhibit 57: Second supplement to Department Circular No. 141 of Sept.
15, 1919, supplemental rules and regulations concerning transactions in
l i b e r t y bonds and Victory notes
'.
Exhibit 58: United States Government Liberty bonds and Victory notes..
Exhibit 59: Department Circular No. 164, exchanges of temporary 4 per
cent and 4^ per cent coupon Liberty bonds for permanent bonds
Exhibit 60: Supplement to Department Circular No. 164 of Dec. 15, 1919,
exchanges of temporary 4 per cent and 4^ per cent coupon Liberty bonds
for permanent bonds
Exhibit 61: Second supplement to Department Circular No. 164 of Dec. 15,
1919, exchanges of temporary 4 per cent and 4} per cent coupon l i b e r t y
bonds for permanent bonds
Exhibit 62: Request for exchange of temporary coupon Liberty bonds for
permanent bonds (Form L and C 305)




VII
Page.

362
410

412

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419
421
423
425
426
427
428
430
435
437
439
440
441
443
445
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447
449
451
454
460
460
462

VIII

CONTENTS.

REPORT OF THE SECRETARY OF THE T R E A R U R Y — C o n t i n u e d .

Exhibit 63: Application by an incorporated bank or trust company for
coupon Liberty bonds in permanent form for delivery in exchange for
temporary bonds (Form L and C 304)
Exhibit 64: Letter from the Secretary of the Treasury to banks and trust
companies inclosing placard respecting exchange of temporary bonds
for permanent bonds
Exhibit 65: Department Circular No. 170, war-savings certificates and
Treasury savings certificates, series of 1920
Exhibit 66: Department Circular No. 169, further regulations governing
Treasury savings certificates, series of 1919
Exhibit 67: Department Circular No. 171, Treasury savings certificates,
series of 1918
Exhibit 68: Department Circular No. 172, agencies for the distribution and
sale of war-savings certificates and Treasmy sa^dngs certificates, series of
1920
Exhibit 69: Department Circular No. 178, holdings of United States warsavings certificates in excess of legal limit
Exhibit 70: Department Circular No. 181, sales stations for war-savings
certificate stamps, series of 1920, and thrift stamps
Exhibit 71: Supplement to Department Circular No. 172 of Dec. 10, 1919,
agencies for the distribution and sale of war-savings certificates and
Treasury sa^dngs certificates, series of 1920
Exhibit 72: Department Circular No. 173, surrender of war-savings certificates and stamps, series of 1919; Treasury savings certificates, series of
1919; and thrift stamps held by agents and sales stations
Exhibit 73: Department Circular No. 166, redemption of war-savings certificates contributed to religious, philanthropic, or charitable organizations
Exhibit 74: Supplement to Department Circular No. 108 of Jan. 21, 1918,
Treasury regulations further defining rights of holders of war-savings certificates
Exhibit 75: Supplement to Department Circular No. 149, Treasury regulations further defining rights of holders of Treasury savings certificates...
Exhibit 76: War Finance Corporation
Exhibit 77: Department Circular No. 209, discontinuance of United States
Subtreasury at Boston, Mass
Exiiibit 78: Department Circular No. 210, discontinuance of United States
Subtreasury at Chicago, 111
Exhibit 79: Department Circular No. 176, regulations governing deposit of
public moneys and payment of Government warrants and checks
Exhibit 80: Regulations governing sales of silver to the Director of the
Mint under the Pittman Act
Exhibit 81: Supplemental regulations governing sales of silver to the Director of the Mint under the Pittman Act
Exhibit 82: Joint Circular No. 5 (Departments of Treasury and Agriculture), supplemental regulations relative to expenses incurred b y Federal
land banks in administering farmers' seed-gi'ain loans in drouth-stricken
areas
Exhibit 83: Joint Circular No. 6 (Departments of Treasury and Agriculture), regulations relative to release of farmers' seed-grain loans for wheat
planting in drouth-stricken areas
Exhibit 84: Application for release from repayment of seed-grain loan
(Form I B )
Exhibit 85: An act to amend and modify the war-risk insurance act
Exhibit 86: Department Circular No. 190, regulations under act approved
Jan. 15, 1920, for the retirement of public-school teachers in the District
of Columbia
Exhibit 87: Department Circular No. 205, regulations under act approved
Jan. 15,1920, as amended by act approved June 5,1920, for the retirement
of public-school teachers in the District of Columbia
Exhibit 88: Department Circular No. 195, public moneys and official cfiecks
of United States disbursing officers
Exhibit 89: Department Circular No. 194, payment of Government checks
drawn by United States disbursing ofiicers located i n the Philippine
Islands
L
Exhibit 90: Statement showing number of employees in the Treasury Department, by months




Page.

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466
468
476
481
488
502
505
507
507
511
513
514
515
521
522
523
538
543

545
545
547
550
557
559
561
565
568

CONTENTS.
REPORT OF THE SECRETARY OF THE T R E A S U R Y — C o n t i n u e d .

IX
Page.

Exhibit 91: Department Circular No. 197, deductions from appropriations
for salaries, pay, or compensation, for transfer to " T h e Civil Service Re- tirement and Disability Fund "
572
Exhibit 92: Department Circular No. 196, forms of pay rolls for retirement
deductions
577
Abstracts of reports of bureaus and divisions. ^
Treasurer of the United States
District of Columbia
Comptroller of the Currency
Number of national banks, amount of capital stock, etc., June 30,1920.
Comparative statement, number of banks reporting, loans, cash, deposits, and resources, on dates nearest to June 30, 1919 and 1920 . . .
Number of national banks organized, insolvent, in voluntary liquidation, and in existence on June 30, 1920
Banks under State supervision
All banks in United States, national and other
Mint Service
Operations of the niints and assay offices.
Stock of coin and bullion in t h e United States
:
Production of gold and silver
:
Industrial arts
^
Export of gold coin
'
Appropriations, expenses, and income
Deposits, income, expenses, and employees, by institutions, fiscal year
1920
Bureau of Internal Revenue
Cost of administration
Incom.e and profits taxes
Estate tax
Capital stock tax
Child-labor tax law
•Taxes on sales, special and miscellaneous commodities, occupations,
admissions, and dues
National prohibition
Bureau of War Risk Insurance
Insurance Division
Terminsurance applications
Reinstatements
Premium remittances
United States Government life insurance.
Premiums on converted policies
Six plans represented in approved policies
Options for payment of insurance
Compensation and Insurance Claims Division
Insurance claims and their settlement.
Analysis of disallowed insurance claims
Returned insurance award checks
Term insurance premiums compared with awards
United States Government life-insurance premiums compared with
awards
Compensation claims and their settlement
Compensation claims acted upon
Pending compensation claims
Death and disability claims
Active and closed claims
Compensation claims on which payments have been terminated
Active disability claims
Disallowed compensation claims
Compensation payments
•
Compensation checks returned
Allotment and Allowance Division
Marine and Seamen's Division
'.
Medical Division...,.
Legal Division




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586
586
588
589
592
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98
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605
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633

X

CONTENTS.

R E P O R T OF THE SECRETARY OF THE

TREASURY—Continued.

Bureau of War Risk Insurance—Continued.
Page. •
Finance and Administration
635
Administration Division
636
Receipts and Disbursements Division
637
Personnel Division
637
Reduction in number of employees absent
638
Liaison Division
640
District of Columbia school-teachers' retirement
641
Bureau of Engraving and Printing
:
642
Customs
644
Tea inspection.
^ 647
Office of t h e Supervising Architect
651
Buildings
651
Statement of appropriations
:
658
Summary of acts carrjdng appropriations for fiscal year 1920
658
Summary of acts carrying appropriations for t h e fiscal year 1921..
659
Statement of expenditures on account of appropriations for public
buildings, fiscal year 1920
659
Public Health Service
,
661
Division of Scientific Research
661
Division of Interstate Quarantine
667
Division of Foreign and Insular Quarantine and Immigration
669
Division of Sanitary Keports and Statistics
675
Division of Marine Hospitals and Relief
676
Division of Personnel and Accounts
677
Division of Venereal Diseases
679
Inspection Section
679
Education Section
681
Chief clerk's office
682
Purveying depot
683
Recommendations
684
Coast Guard
688
Ice patrol
690
Winter cruising
-.
691
Cruises in northern waters
692
Anchorage and movements of vessels
693
Florida coast patrol
694
Medical aid to deep-sea
fishermen,
694
Coastal communication
694
Aviation
695
Kecruiting
695
Coast Guard Academy
695
Coast Guard repair depot
696
Commissioned personnel
696
Civilian personnel
697
Discipline
697
Vessels
697
Stations
698
New river cutters
698
Derelicts
:
698
Enforcement of customs laws
698
Other activities
699
Repairs, etc
:...
699
Transfer of Coast Guard to the Navy
•.
700
Award of life-saving medals
701
Division of Loans and Currency
704
Interest-bearing debt of the United States—changes during the fiscal
year 1920
704
Interest on registered bonds and notes and registered certificates of indebtedness.
.705
Insular and District of Columbia loans—Changes during year
706
Circulation
,
706
Paper custody
i
707
Custody of Federal reserve notes, series of 1914 and 1918
707




CONTENTS.

XI

R E P O R T OF THE SECRETARY OF THE T R E A S U R Y — C o n t i n u e d .

Division of Loans and Currency—Continued.
Page
Statement of redeemed securities handled, accounted for, and destroyed, fiscal year 1920
:....
708
Liberty bonds and Victory notes
708
War-loan securities account—Deliveries, retirements, and outstanding,
Apr. 6, 1917, to June 30,' 1920:
:.
708
War loan registered issues and interest p a y m e n t s — :
710
Claims on account of lost, stolen, mutilated, or destroyed interestbearing securities, fiscal year 1920
711
T^ivision of Public Moneys
:
'.
712,
Alien Property Custodian account
—
713'
Purchase of farm-loan bonds
'
713
Division of Deposits
:
:
713
Division of Bookeeping and Warrants
715
General fund
716
State bonds and stocks owned by the United States
717
Secret Service Division.
717
Division of Printing and Stationery
718
Printing and binding
718
Stationery
720
Postage and materials for bookbinder
722
Department advertising
722
Office of the disbursing clerk.
723
General Supply Committee
:
724
Tables accompanying the report on the finances.
Table A.—Statement of the outstanding principal of the public debt of
the United States June 30, 1920
Table B.—Statement of the outstanding principal of the public debt of
the United States on July 1 of each year from 1856 to 1920, inclusive
Table C.—Analysis of the principal of the interest-bearing public debt of
the United States from July 1, 1856, to July 1, 1920
Table D.—Statement of the issue and redemption of loans and Treasury
notes and of deposits and redemptions in bank-note account for the fiscal year 1920
Table E.—:Population, ordinary receipts and disbursements of the Government from 1840 to 1920, exclusive of postal, per capita on receipts, and per capita on disbursements
Table F.—Statement shelving ordinary receipts and disbursements of the
Government by months; net gold and available cash in the
Treasury at end of each month; and imports and exports of
gold, from July 1896, to June, 1920, inclusive
Table G.—Statement of the balance in general fund of the Treasury, including gold reserve, by calendar years from 1791 to 1842, and
by fiscal years from 1843 to 1920
Table H.—Receipts and disbursements of the United States
Table 1.—Internal and customs receipts and expenses of collecting, from
1858 to 1920
'
Table J.—Statement of United States bonds and other obligations received
and issued by the Office of the Secretary of the Treasury, from
July 1, 1919, to June 30, 1920
Table K.—Statement of the coin and paper circulation of the United
States, from 1860 to 1920, inclusive, with amount of circulation
per capita
Table L.—Collections, expenses, and average number of persons employed
in the Internal Revenue Service, fiscal year ended June 30,
1920
...:
Table M.—Statement of business of the custoras districts and ports for the
fiscal year ended June 30, 1920
Table N.—Statement, by districts and ports, showing total entries of merchandise, receipts and expenses, for the fiscal year ended June .
30, 1920




731
760
762
764
765

767
776
777
789
791
794
795
797
848

XII

CONTENTS.

R E P O R T O F T H E TREAstiRER:

Receipts.and disbursements for 1919 and 1920
Panama Canal
Extraordinary disbursements
Receipts and disbursements on account of t h e Post Office Department
Transactions in t h e public debt
Net earnings derived from Federal reserve badks
Paynient of obligations of foreign Governments
Currencv issued and redeemed
Public debt 1919 and 1920.
Payment of interest on registered bonds of t h e United States
Reserve and trust funds
Redemption of notes in gold
•
State of t h e Treasury, general fund—cash in t h e vaults
Net available cash balance, 1910 to 192Q
. Gold- in Treasury from. 1910
^
Bonds held as security for bank circulation and deposits
Bonds held as security for postal savings funds
Postal savings bonds and investments therein
Withdrawal of bonds to secure circulation
Depositaries of the United States
Public moneys in depositary banks
:
Interest on public monevs held in depositary banks
Gold settlement fund...!^
Monetary stock, 1919 and 1920
,
Ratio of gold to total stock of money
Money in circulation
Circulation and population
Paper currency issued directly by t h e Government
•
United States notes
:
:
Treasury notes of 1890:
Gold certificates.
Silver certificates
:
'.
Changes in denominations during fiscal year 1920
pieces of United States paper currency outstanding
Cost of paper currency.... —
Average life of paper currency,
Paper currency prepared fbr issue and amount issued
Paper currency held in the reserve v a u l t . . . :
Paper currency redeemed
:
Standard silver dollars
.....:
Subsidiary.silyer coin
'..
!
Minor coin
---.---.
--.
Transfers for deposit in New York—money for moving t h e crops, etc
Deposits of gold bullion at mints and.assay offices, 1918, 1919, and 1920...
Shipments of currency from Washington, 1919 and 1920
Recoinage, 1919 and 1920-...
:---.--.
Redemption of Federal reserve and national currency
Special trust funds and changes therein during the fiscal year
District of Columbia sinking fund
,."
General account of the Treasurer of the United States

Page.

857
858
859
859
860
860
861
861
862
862
863
863
863
865
865
866
867
870
870
871
871
872
872
873
874
874
874
875
875
876
877
877
878
879
879
880
881
882
882
883
885
885
888
889
889
889
890
892
894
894

, Takles accompanying report of the Treasurer.
No.,1..—Assets and liabilities of the Treasury offices, June 30, 1920
No. "2.—Assets of the Treasury in the custody of mints and assav offices,
June 30, 1 9 2 0 . . . . :
:..:
."
No. 3.—General distribution of the assets and liabilities of the Treasury,
. Juhe 30,-1920
:•...:
No. 4.—Available assets and net liabilities of the Treasury at the close of
June, 1919 and 1920
No. 5.—^Assets and liabilities of the Treasury in excess of certificates and
Treasury notes at the close pf June, 1919 and 1920
No. 6.—Distribution of the General Treasury balance, June 30, 1 9 2 0 . . . . .
No. 7.—Receipts ahd disburseinents for service of the Post Office Department for the fiscal year 1920




900
901
901
903
904
904
904

;^

CONTENTS.

REPORT OF THE TREASURER—Continued.

XIII
Page.

No. 8.—Amount of interest collected on balances of public moneys held in
depositaries of the United States from May 30, 1908, to June 30,
1920
905
No. 9.—Estimated stock of gold coin and bullion, the amount in the
Treasury, and the amount in circulation at the end of each
month, from January, 1915
905
No. 10.—Estimated stock of silver coin, the amount in the Treasury, and
the amount in circulation at the end of each month, from
January, 1915. Also silver, other than stock, held in the
Treasury
909
No. 11.—United States notes, Treasury notes, Federal reserve notes, and
national-bank notes outstanding, in the Treasury, and in circulation at t h e end of each month, from January, 1915
913
No. 12.—Gold certificates and silver certificates outstanding, in the
Treasury, and in circulation at. the. end of.each month, from
January, 1915
917
No. 13.—Estimated stock of all kinds of inoney at the end of each month,
from January, 1914.
,.
922
No. 14.—Estimated amount of all kinds of money in circulation at the end
of each month, from January, 1914.
923
No. 15.—Assets of the Treasury other than gold, silver, notes, and certificates at the end of each month, from January, 1914
924
No. 16.—Assets of the Treasurv at the end of each month, from January, '
1914
:
925
• No. 17.—Liabilities of the Treasury at the end of each month, from January,
1914
926
No. 18.—United States notes of each denoniination issued, redeemed, and
outstanding at the close of each fiscal year, from 1913
927
No. 19.—Treasury notes of 1890 of each denomination issued, redeemed,
and outstanding at the close of each fiscal year, from 1914
929
No. 20.—Gold certificates of each denomination issued, redeemed,, and
outstanding at the close of each fiscal year, from 1915
930
No. 21 .-^Silver certificates of each denomination issued, redeemed, and
outstanding at the close of each fiscal year, from 1915
931
No. 22.—Amount of United States notes, Treasury notes, gold and silver
certificates of each denomination issued, redeemed, and outstanding at the close of each fiscal year, from 1913
932
No. 23.—Old demand notes of each denomination issued, redeemed, and
outstanding June 30, 1920
934
No. 24.—Fractional currency of each denomination issued, redeemed, and
outstanding June 30, 1920
934
No. 25.—Compound-interest notes of each denomination issued, redeemed,
and outstanding June 30, 1920
934
No. 26.—One and two year notes of each denomination issued, redeemed,
and outstanding June 30, 1920.
934
No. 27.—United States paper currency of each class, together with one and
two year notes and compound-interest notes issued, redeemed,
and outstanding June 30, 1920 . .
935
No. 28.—United States notes and Treasury notes redeemed in gold, from
1879, and imports and exports of gold during each fiscal year,
from 1901
935
No. 29.—Treasury notes of 1890 retired by redemption in silver dollars,
and. outstanding, together. with the silver in t h e : Treasury
purchased by such notes, for each month, from January,-1914... 936
No. 30.—Transactions between the Subtreasury and clearing house in New
York during each month, from January, 1914
937
No. 31.—Balance in the Treasury, amount in Treasury offices, and amount
in depositary banks, from 1789 to 1920
938
No. 32.—rFederal reserve and national banks designated depositaries of
public moneys, with the balance held June 30, 1920
940
No. 33.—Number of banks with semiannual duty levied, by fiscal years,
and number of depositaries with bonds as security, by fiscal
years.
—
:.
949
No. 34.—United States bonds retired, from May, 1869, to June 30, 1920..
949
No. 35.—Seven-thirty notes issued, redeemed, and outstanding June 30,
1920
:
950




XIV

CONTENTS.

REPORT OF THE TREASURER—Continued.

Page.

No. 36.—Refunding certificates, act of .February 26,1879, issued, redeemed, and outstanding, June 30, 1920
950
No. 37.—Checks issued b y the Treasurer for interest on registered bonds
during the fiscal year 1920
950
No. 38.—Interest on 3.65 per cent bonds of the District of Columbia paid
during the fiscal year 1920..:.
951
No. 39.—Coupons from United States bonds and interest notes paid during
the fiscal year 1920, classified by loans
951
No. 40.—Public debt at the close of June, 1919 and 1920, and changes
during the year
951
No. 41.—Public debt, exclusive of certificates and Treasury notes, at t h e
end of each month, from January, 1914
953 •
No. 42.—Checks drawn b y the Secretary and paid b y the Treasurer for
interest on registered bonds of the United States during the
fiscal year 1920
954
No. 43.—Money deposited in t h e Treasury each month of t h e fiscal year 1920
for the redemption of national-bank notes
954
No. 44.—Amount of currency counted into t h e cash of t h e National Bank
Redemption Agency and redeemed notes delivered, by fiscal
years, from 1900
955
No. 45.- -Currency received for redemption b y t h e National Bank Redemption Agency from t h e principal cities and other places, b y fiscal
'
years from 1900, in thousands of dollars
956
. No. 46.—^Mode of payment for currency redeemed at t h e National Bank
Redemption Agency, by fiscal years, from 1900
956
No. 47.—Deposits, redemptions, assessments for expenses, and transfers
and repayments on account of the 5 per cent redemption fund
of national banks, by fiscal years, from 1900
956
No. 48.—.Deposits, redemptions, and transfers and repayments on account
of the retirement of circulation, by fiscal years, from 1900. . . . .
957
No. 49.—Expenses incurred in the redemption of national and Federal
Teserve currency, b y flscal years, from 1900
958
No. 50.—General cash account of the National Bank Redemption Agency
for the fiscal year 1920 and from July 1, 1874
959
Nfo. 51.—Average amount of national-bank notes outstanding and the
redemption, by fiscal years, from 1875 (the first year of t h e
agency)
".
959
No. 52.—Federal reserve notes, canceled and uncanceled, forwarded by
Federal reserve banks and branches, counted and delivered to
the Comptroller of t h e Currency for credit of Federal reserve
agents
959
No. 53.—Changes during t h e fiscal year 1920 in t h e force employed in the
Treasurer's office
960
R E P O R T OF THE DIRECTOR OF THE M I N T :

Operations of the mints and assay offices
Coin demand
Plant improvements
Silver operations under Pittman Act
Deposits of gold and silver
Refineries
Personnel
Institutions of the Mint Service
Gold operations
Silver operations
Coinage
Stock of coin and bullion in the United States
Production of gold and silver
Industrial arts
Export of gold coin
. Estimates for the fiscal year 1922
Appropriations, expenses, and income
New assay office building at New York
Philadelphia mint improvements
San Francisco mint improvements
Denver mint improvements
Income and expenses of the fiscal year 1920.




:
,

:..

961
961.
961
962
963
963
963
964
964
964
964
965
965
965
965
965
965
966
969
975
976
977

CONTENTS.
R E P O R T OF THE DIRECTOR OF THE MINT—Continued.

Deposits, income, expenses, and employees, b y institutions,, fiscal year
1920
•
:
Coinage
Deposits of foreign gold bullion and coin
Deposits of foreign silver bullion and coin
Issue of fine gold bars for gold coin and gold bullion
Balances, receipts, and disbursements of gold bullion
Purchase of minor coinage metal for use in domestic coinage
Purchase of minor coinage blanks prepared for coinage
Sale of minor coinage metals. ^
:
Distribution of niinor coins
Minor coins outstanding
Operations of t h e assay departments
Proof bullion (1,000
fine)
Operations of the melting and refining and of the coining departments,
fiscal year 1920
Refining operations
Ingot melts made
:
Fineness of melts for gold and silver ingots.
,..
Commercial and certificate,bars manufactured
Melts for fine gold and fine silver
Ingots operated upon b y coining departments and percentage of coin
produced
,
Percentage of good coin produced to pieces struck
Sweep cellar operations
Bullion gains and losses
Wastage and loss on sale of sweeps
Engraving department.'.
Dies manufactured
Medals sold
Progress of the numismatic collection
,
Employees
Visitors
:
Work of t h e minor assay offices.
Ore assays
Gold receipts at S e a t t l e . . . :
Laboratory of the Bureau of t h e Mint
:
,.
Proceedings of t h e Assay Commission, 1920
Assay Commission medal
Tables, Report of Director of t h e Mint

XV
Page.

978
979
980
980'
981
982:
983984
984
984
985
985
.986
- 986
988
989
990
990
990
991
992
992
99^
993994
994
99S
996
996
997
997
997
998
998
999
1002
1004

R E P O R T OF THE R E G I S T E R :

Bonds redeemed
Bonds and notes purchased b y the Secretary.
War-savings certificates redeemed
Treasury certificates of indebtedness redeemed
.
Bonds and notes received on account of estate and inheritance taxes
Paid interest coupons
Total securities paid
Securities received for credit to fiscal agency accounts
Exchange of temporary bonds for permanent bonds
Total securities received for all accounts
Securities in the
files
Improved methods in the public-debt work
Status of work in Register's Office
Recommendation..
Office force
..>^.
Statistical statements
.^.^^
Letter transmitting report for fiscal year 1918
Statistical statements for 1918
Letter transmitting report for fiscal year 1919
Statistical statements tor 1919

1048
1048
1048
1048
1049
1049
1049
1049
105O
1056
1051
1051
105^
1054
1054
1055>
1129
1131
1145»
114S

R E P O R T OF THE COMPTROLLER OF THE CURRENCY:

Submission of report
National banks at highest point
Number of depositors exceeds all records
National bank failures near zero—Immunity unparalleled
Earnings for 1920 far ahead of all former years
Bank resources surpass all previous
figures
13799—FI 1920
II



1171
1171
1171
1172
1172
1172

XVI

CONTENTS.

REPORT OF THE COMPTROLLER OP THE CURRENCY—Continued.

*

Chart showing—
(1) Growth of resources, deposits, capital, surplus and undivided
profits of the national banks in the "United States since 1913,
compared with preceding 50 years
(2) Reduction in bank failures, 1882 to 1920
(3) Net earnings of the national banks in the United States, 50 years,
1870 to 1920
:
Retrospect and outlook at home and abroad
Turn of t h e tide
Vain efforts to maintain excessive profits
Deflation becomes world wide
,
(Shrinkage estimated at twelve to eighteen billions
"Remedies for ills; pathway to prosperity
Inflation m t h reduced production bring hard t i m e s —
'.
T a v i n g the way for a new advance.
'Our banking power now ten tinies as great as in 1890
Banking power of the United States, J u n e 30, 1920
Our huge credit balances abroad
Imports and exports of merchandise, calendar years 1914 to 1920, inclusive.
National bank condition November 15, 1920,,.compared with March 4, 1919,
following the armistice
Loans and discounts, plus United States securities, November 15, 1 9 2 0 —
Total bills pavable and rediscounts, including "United, States deposits,
November 15, 1920.
All deposits, November 15, 1920
Money in the United States
T h e circulating medium—coin and paper currency, July 1, 1920
Circulation statement showing coin and paper currency July 1, 1914
No real inflation in our currency—Proportion of money in circulation to
total bank resources smaller now than before the European War
Stock of money in the United States, in the Treasury, in banks, and in
circulation, 1892 to 1920
'.
World's supply of gold, silver, and paper money
Resources of the central banks in foreign countries
Twenty years of unprecedented growth
Growth of national banks by five-year periods
Comparison of returns from national and State banks
Increase in resources of national and State banks in five-year periods
State bank failures in 1920
Numbers, failures, and liabilities of State banks, savings banks, loan and
trust companies, and private banks, which have failed during the fiscal
year November 1, 1919, to November 1, 1920.National and State banks in six-year period
Seven-year comparison by States.
Classification of certain depositors in and borrowers from national banks
engaged in specified occupations, arranged geographically by reserve
cities and country banks
I
Distribution of loans according to occupation of borrowers
Deposit balances with national banks, of corporations, firms, individuals,
etc., engaged in certain specified kinds of business (Nov. 15, 1920)
Loans and discounts made by national banks to those engaged in certain
specified occupations (Nov. 15,1920)
Earnings of national banks by States and cities
Heavy earnings on national-bank capital in large cities
Abstract of reports of earnings, expenses, and dividends of national banks
for the year ended J u n e 30, 1920
Number of national banks, their capital, surplus, dividends, and net
earnings, yearly, 1870 to 1920
Earnings, expenses, and dividends of national banks for fiscal years 1919
and 1920
Legislation enacted relating to national b a n k s . :
For what demands national-bank notes may be received
•Changes recommended in the bank act
To enable a national bank to obtain relief in emergency by use of
other than eligible paper or U. S. bonds
National-bank officers should not borrow from their own banks.




Page.

1172
1172
1172
1172
1173
1176
1177
1177
1179
1180
1181
1181
1182
1182
1184
1185
1186
1187
1187
1188
1188
1189
1191
1192
1193
1194
1194
1195
1195
1195
1196
1196
1197
1197
1199
1200
1201
1204
1207
1207
1209
1217
1218
1219
1219
1219
1220
1222

CONTENTS.
R E P O R T OF THE COMPTROLLER OF THE CURRENCY—Continued.

Penalties for grafting bank officers
*'Securities companies" as adjuncts to national banks often a menace
Banks exercising trust powers had best avoid hazardous connections
Desirable that active officers of large national banks be not directors in
other corporations.
Salaries of officers of large national banks
Comptroller's recommendations for legislation made in previous years
again urged
"
Form suggested for certain amendments to bank act.
Trust companies and banks in the District of Columbia
Savings banks and loan and trust companies in the District of Columbia..
Duties and liabilities of national-bank directors
Bank officers and employees convicted of criminal violations of law during the year ended October 31, 1920
Digest of court decisions in bank cases
Letters of credit and guaranties connected t h e r e m t h by national b a n k s . . .
Directors personally reimburse $500,000 in ultra vires transaction
Exorbitant interest rates in New York banks.
Recommendation relative thereto
Possible reasons why New York brokers do not resist high money rates
Money rates in Canada much below New York rates.
Conditions under which charters are granted to new national banks
Increase in number of depositors in national banks
Classification and number of deposit accounts in national banks on June 30,
1920, by central reserve, reserve cities, and country banks
Abstract of reports of condition of national baoks at the date of each call
during the report year
Condition of national banks September 8, 1920
Loans and discounts
Overdrafts....Uhited States Government securities owned
Other bonds, securities, etc
Stocks...
Bank premises and other real estate owned
Due from banks
-.
Exchanges for clearing house
Liabilities:
Capital stock, surplus, and undivided profits.
Circulation outstanding
Due to banks
Individual deposits
United States deposits
Bonds and nioney borrowed
Bank acceptances
Total resources and liabilities
Classification and amount of loans by national banks in the central reserve cities, etc., J u n e 30, ].920
Comparative statement of loans by national banks during the past three
years
Rate of interest paid by national banks on deposits and number of banks
reporting each rate on May 4, 1920
Bates of interest charged by national banks on loans and number of banks
reporting each rate^on May 4, 1920
.
Classification ofloans by national banks in the city of New York for five
years, June, 1916, to June, 1920, inclusive.
Paper eligible for rediscount with Federal reserve banks, held b y national
banks, in country and reserve cities, by geographical districts
Statement showing the amount of paper eligible for rediscount with Federal
reserve banks, November 17,1919, as compared m t h June 30,1920, classified by Federal reserve cities and States
Classiflcation of rediscounts, together with the total of loans and discounts,
as shown by the reports of national banks. May 4, June 30, and September 8, 1920
Loans made by national banks for their correspondents, May 4 and June 30,
1920




XVII
Page.

1223
1223
1224
1225
1226
1228
1236
1240
1241
1241
1241
1244
1245
1246
1247
1262
1274
1274
1275
1278
1280
1282
1284
1284
1285
1285
1285
1285
1286
1286
1287
1287
] 287
1287
1288
1288
1288
1289
1289
1289
1290
1291
1296
1300
1300
1301
1304
1312

XVIII

CONTENTS.

R E P O R T OF THE COMPTROLLER OF THE CURRENCY—Continued.

Amount of money loaned by national banks, either by direct loans or
through bought paper, to parties who keep no deposit accounts with the
banks, and number of such loans, February 28, 1920
Rediscounts of national banks with Federal reserve banks, classified b y
States (country banks) and reserve cities, November 17, 1919
Principal items of national-bank resources and liabilities on September 8,
1920, arranged by States
Loans and discounts and investrnents of national banks
Domestic and foreign bonds, securities, etc., owned b y national banks.
May 4, 1920
Classification of foreign Government bonds owned by national banks on
June 30, 1920.
Classification of investments made by national banks
Domestic and foreign securities held by national banks
Balances due national banks from Federal reserve banks
Specie and gold and silver certi flcates in national banks
National-bank charters applied for, granted, and refused
Increases and reductions.of capital stock of national banks
Liquidation of national b a n k s :
Consolidation of national banks
'
National banks consolidated under act of November 7,1918, their capital,
surplus, undivided profits, and aggregate assets, year ended October 31,
1920
•
Growth in number and capital of national banks
^
National banks organized since 1900
i
State banks converted or reorganized into national banldng associations
since 1900
,
:..
Organization and liquidation of national banks
,
Number and authorized capital of national banks organized W d the number
and capital of banks closed in each year ended October 31, since the
establishment of the national banldng system, with the yearly increase
or decrease
:
Number of national banks organized, in liquidation, consolidated under
act of November 7, 1918, insolvent, and in operation, with amount of
bonds on deposit, and circulation issued, redeemed, and outstanding on
October 31, 1920
:
Number of national banks organized, in voluntary liquidation, consolidated
under act of November 7, 1918, insolvent, and number and capital of
associations in active operation on January 1 of each vear from 1864 to
1920
."
National banks chartered during the year ended October 31, 1920
Number of national banks chartered in each month from March 14,1900, to
October 31, 1920
Number of national banks increasing their capital, together with the
amount of increase monthly, January 1, 1916, to October 31, 1920
Number and classification of national banks chartered during the year
ended October 31, 1920
^
Conversions of State banks and primary organizations as national banks
since 1900
Number and capital of State banks converted into national banking associations in each State and Territory from 1863 to October 31, 1920
Capitalization of national banks classified b y States
Summary by States, geographical divisions, and classes of national banks
organized from March 14,1900, to October 31,1920, and the paid-in capital
stock of all reporting national banks on September 8, 1920
Expirations and extensions of charters of national banks
Number of national banks in each State the charters of which were extended
under act of July 12, 1882, to October 31, 1920
,
Reextension of national-bank charters
_
.
-.
Changes in capital stock, of national banks, increases and reductions
Changes in title of national banks
Changes of title incident to consolidations of national banks
Failures and suspensions of national b a n k s . . . . . . . . . . . . .
Causes of national-bank failures
Principal causes of failure of national banks in past 57 years.




Page.

1314
1318
1319
1321
1322
1326
1326
1327
1328
1328
1329
1329
1329
1329
1330
1330
1331
1331
1331

1332

1333

1334
1335
1342
1.342
1342
1343
1343
1343
1344
1345
1345
1346
1346
1347
1348
1348
1351
1351

CONTENTS.

XIX

R E P O R T OF THE COMPTROLLER OF THE CURRENCY—Continued.

Failures and suspensions of national banks—Continued.
National-bank failures since inauguration of the system
National-bank failures b y years, 1864.to 1920, showing each year, number of failures, capital of failed banks, capital and total resources of
all national banks, and percentage of capital of failed banks each
year, to total capital of all national banks
National banks organized,, failed, and reported in voluntary liquidation
during the year ended October 31, 1920
Bank investments i n United States securities
United States bonds eligible as security for national-bank circulation
United States bonds deposited as security for circulation b y banks chartered and b y those increasing their circulatio:a, together with the amount
withdrawn b y banks reducing their circulation, and b y those closed,
during each month, year ended October 31, 1920
Profit on national-bank circulation
• Redemption of national-bank notes
,
Bank currency ;?3ceived for redemption, b y months, from November 1,
1919, to October 31, 1920
:
Principal sources of bank currency received for redemption for the year
ended October 31, 1920
•.
Statement of national-bank currency issued to banks from November 1,
1919, to October 31, 1920
National-bank circulation
•
:
•. . : . . . •
Yearly increase or decrease in national bank circulation from January 14, 1875, to October 31, 1919, and quarterly increase or decrease
for the year ended October 31, 1920
:..
Denominations of national bank circulation
National bank notes outstanding October 31, 1920
Vault account of national bank circulation
Interest-bearing debt of the United States, June 30, 1920
.-...•..
Investment value of United States bonds.
:
United States bond market quotations
:
Federal reserve notes
Weekly statement of Federal reserve notes outstanding (amount issued
b y FederaFf^serve agents to the banks, less " u n f i t " notes returned
for redemption), amount secured b y gold, and amount secured b y
commercial and other eligible paper from December 5, 1919, to
November 26, 1920
.-.
,
Statement of Federal reserve notes, b y denominations, printed,
shipped to Federal reserve agents and United States subtreasuries,
since inauguration of Federal reserve system, and on hand in reserve
vault, October 31, 1920
.J.
Federal reserve notes, b y denominations, issued through the Federal
reserve agents to the banks, since inauguration of Federal reserve
system, also amounts retired and outstanding, October 31, 1920
Mutilated Federal reserve notes, b y denominations, received and
destroyed since organization of banks and on hand in vault, October 31, 1920
Federal reserve bank notes
Issue of $1 and $2 Federal reserve bank notes
Statement showing the total amount of Federal reserve bank notes, b y
. denominations, issued to Federal reserve banks upon the deposit of
securities under the provisions of the act of April 23, 1918
Total amount of Federal reserve bank currency printed b y the Bureau
of Engraving and Printing, issued and on hand, from the inauguration
of the Federal reserve system, to October 31, 1920
Total amount of Federal reserve bank currency issued, redeemed, and
outstanding from the inauguration of the Federal reserve system to
October 31, 1920
:
National, Federal reserve notes, and Federal reserve bank notes, year ended
October 31, 1920..
Ratio of paper secured b y Government war obligations to total bills held by
the Federal reserve banks on the last Friday of each month during 1920..
Federal reserve system
Statement showing the condition of the 12 Federal reserve banks at
the close of each month, from J u n e 29, 1917, to November 27, 1920.
Discount rates of Federal reserve banks




Page.
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1371
1372

XX

CONTENTS.

R E P O R T OF THE COMPTROLLER OF THE CURRENCY—Continued.

Rates for money in New York
:
Range of rates for money in the New York market, year ended October 31,
1920
Changes in the principal items of assets and liabilities of national banks at
the date of each call, November 17, 1919, to September 8, 1920
Relation of capital of national banks to deposits, etc
Percentage of the principal items of assets and liabilities of national b a n k s . •.
Reserve
Reserye required and held b y national banks in reserve cities, etc
Classification of loans made and deposits in national banks as of January 31,
1920, in reserve cities and cities of 50,000 or more population
Classification of loans (including paper bought) made by 595 national
banks in certain cities, as of January 31, 1920, showing separately loans
made to banks and bankers, loans made to borrowers who keep deposit
accounts with the lending banks, loans made to those who keep no
deposit account, and loans placed for account of correspondents
All loans made b y t h e 595 national banks in certain cities, as of January 31,
1920, arranged according to location of borrowers in each geographical
division—Total of loans and discounts
Deposits held January 31, 1920, b y the 595 national banks in certain cities
for the credit of other banks. State and national, and trust companies,
arranged b y geographical divisions—Balances to credit of correspondent
banks
•
Growth of national banks since passage of the Federal reserve act, i n reserve
cities and elsewhere in the country
Principal items of assets and liabilities of national banks, 1913-1920
Domestic branches of national banks
Foreign branches of national banks
Condition of the foreign branches of the National City Bank, New York,
N. Y., and the First National Bank, Boston, Mass., on J u n e 30,1920
Banks other than national
State, savings, private banks, and loan and trust companies
Summary of reports of condition of 22,109 banks other than national,
June 30, 1920
Resources and liabilities b y classes of 22,109 State, savings, and private
banks and loan and trust companies, June 30, 1920
Five-year statement, principal items of assets and liabilities of reporting
banks, other than national
State banks.
Comparison of condition of mutual savings banks in the United States
in June, 1919 and 1920
"
Number of mutual savings banks in each State, number of depositors,
and the average amount due each depositor on June 30,1919 and 1920.
Stock savings banks
Number of stock savings banks, number of depositors, aggregate deposits, and average deposit account, by States, June 30, 1919 and
1920
Mutual and stock savings banks
"Number of savings banks in the United States, number of depositors,
amount of savings deposits, average amount due each depositor in
the years 1820, 1825, 1830, 1835, 1840, 1845, and yearly to 1920, and
average per capita in t h e "United States in the years given
Loan and trust companies
Principal items of resources and liabilities of loan and trust companies,
1914 to 1920
Private banks
Abstract of condition, b y States, all banks other than national, in the
continental United States and island possessions, on or about J u n e
30,1920
Comparative statement of the condition of all reporting national and State
banks in the United States
Principal items of resources and liabilities of the 22,109 reporting banks
other than national in the United States and island possessions, and
8,030 national banks, on June 30, 1920, together with the grand t o t a l . . .
Comparison of t h e principal items of resources and liabilities of national
banks and other reporting State banks for the years 1920 and 1919




Page.

1372
1373
1374
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1377

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1382

1386
1390
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1396
1400
1400
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1408

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1418

CONTENTS.
REPORT OF THE COMPTROLLER OF THE CURRENCY—Continued.

Comparative statement of growth in resources of national and State banking
institutions for 5-year period.
Statement of the principal items of resources and liabilities of reporting
banks, including t h e Federal reserve banks in the United States and
island possessions, June, 1920
Summary of the combined returns from all reporting banks in the United
States and island possessions, June 30, 1920
Assets and liabilities of all reporting banks in each State
Condensed statement, b y States, of assets and liabilities of all reporting
banks in the United States, June, 1920
Statement of resources and liabilities of all reporting banks, 1915-1920
Growth of all reporting banks, 1863 to 1920, inclusive
Individual deposits in all reporting b a n k s .
Cash in all reporting banks
United States Postal Savings System
.'
Postal Savings Bank of Manila, Philippine Islands, condition of, June 30,
1920
Federal farm loan system
Farm loan associations
Joint-stock land banks
Building and loan associations in the United States
Statistics for 1919-20
Building and loan associations in the District of Columbia
Financial institutions in the District of Columbia.
Earnings, expenses, and dividends of savings banks and trust companies i n
the District of Columbia
Savings banks i n the principal countries of the world
i
Sterling exchange
Transactions of clearing-house associations
New York clearing house
Liberty loan bonds. Victory notes, and certificates of indebtedness owned
and held as collateral by national banks for loans, etc., December 31,
1919, and June 30, 1920
Examinations of national bank branches in foreign countries
National bank examiners, list of
Conclusion
Exhibit A—Duties and liabilities of directors of national banks and member
banks of the Federal reserve system

XXI
Page.

1419
1420
1421
1422
1423
1427
1428
1430
1430
1431
1435
1435
1438
1440
1442
1443
1444
1444
1445
1445.
1448
1448
1449
1450
1456
1457
1459
1463

R E P O R T OF THE COMMISSIONER OF INTERNAL R E V E N U E :

Introduction
Collections
Cost of administration
,
Income Tax Unit
:
Eventual decentralization of operations
Personnel of Income Tax Unit
Audit and assessment
Changes in organizatioii during the year
Collections from departing aliens
Audit of technical cases
Committee on Appeals and Review
T h e unit directing t h e administration of the estate, capital-stock, and
child-labor t&,x laws
:
Personnel
Taxes collected
Estate Tax Division
Capital Stock Tax Division
•
Child Labor Tax Division
.
^
^
Sales taxes—Special and miscellaneous commodities—Occupations and
privileges
Tobacco.
01eom.argarine
Adulterated butter
Renovated butter
Mixed
flour
:
Collection fleld service;
^
Reorganization of t h e bureau work relating to receipts and disbursements.




1479
1479
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1481
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1483
1483
1484
1485
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1486
1487
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1493
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1496
1497
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1498
1498
1500

XXII

CONTENTS.

R E P O R T OF THE COMMISSIONER OF INTERNAL R E V E N U E — C o n t i n u e d .

Page.

Enforcement of national prohibition
Organization of Prohibition U n i t
Office of counsel and Legal Division
Prohibition field force
Supervising Federal prohibition agents
Federal prohibition directors
Warehouse agents
Narcotic field force
Division of Technology
Chemical work
Nonbeverage alcohol
Tax-free alcohol
Industrial alcohol and denatured alcohol
. Division of Audit and Statistics
Distilled s p i r i t s . . :
Denatured alcohol
Narcotics
Intoxicating liquors in possession January 17, 1920
Liquor tax assessments
Fermented liquors
Wines and cordials
Executive Division
.
^
Solicitor of Internal Revenue.
Stamps
Bureau and field personnel
Statistical tables
Digest of court decisions
:

1501
1503
1504
1504
1505
1505
1505
1505
1506
1507
1507
1508
1508
1508
1509
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1510
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1517
1518
1520
1527




ANNUAL REPORT ON THE FINANCES.
TKEASURY DEPARTMENT,

Washington^ November ^(?, 19W.
S I R : I have the honor to make the following report:
Transitio:Q and adjustment have marked the course of the country's
business during the last 12 months. Forces of broad sweep and
intensity have operated. They have been world-wide and consequently beyond the possibility of control by any industrial group
or even by nations. During the war forces were set in motion which
no Government could or did controL No Government succeeded,
for instance, in checking the rising tide of costs and prices. After
the armistice, with the return of millions of men to productive activities, with the beginnings of more normal conditions everywhere,
with the restoration of better transportation on land and sea, and
with the fuller contribution of nations once more to the world's
stock of goods, reverse forces were set in operation which no Government can thwart. These forces were the natural aftercurrents of
a World War and resulted in a financial and industrial cycle typical of periods immediately following great struggles, but of unparalleled intensity. They set up very complex problems, which have
sorely taxed the best thought of private and public leaders everywhere; but this Nation faced them with characteristic calmness;
dealt with them for the most part with marked effectiveness; proceeded in orderly fashion; and is now slowly and cautiously, but
confidently, feeling its way to more sound and stable conditions.
That a Nation which so splendidly withstood the greatest financial
strain of history can now satisfactorily cope with the much less
serious situation confronting it and attain its objective would seem
to admit of no reasonable doubt. Its failure to do so would be a
reflection, on the patriotism as well as on the intelligen<ie of its
people. I t emerged from the war incomparably strong. I t has
immense liabilities; it has great debts; but it has enormous resources,
and the only question is whether it will utilize and direct them
wisely. The need of the exercise of plain common sense, of patience,
of the effective realization that burdens of war do not end with the
fighting, of hard work, of thrift and of economy, private and public.
Federal, State, county, and municipal, is so obvious as to render
emphasis and discussion of it unnecessary.
13799—FI 1920



1

1

2

REPORT ON T H E FINANCES.

The industry of this Nation during, the^ period to which reference
has been made parsed through several fairly well-defined stages.
The first, extending through last winter, was marked by a continuance of business and credit expansion, great commercial activity,
high and rising wages and prices, and free and extravagant spending
on the part of many, coupled with general growing restlessness and
anxiety over high prices and the cost of living. Indications of a
change appeared toward the end of February. Hints of a possible
reduction in the volume of business began to be thrown out; recognition of an undue credit expansion was manifested; and there was a
waning of speculation in commodities. This was followed by a few
weeks of hesitation and of lessening extravagance and by a period
of care in buying, of slight declines of prices here and there, of attempts to hold goods for higher prices, of adcjed credit strain resulting in part from efforts to hold goods off the market and intensified
by an exceptional congestion of railroad traffic, and of cancellation
of orders, first for shoes and woolens and later for cotton goods. I n
July these mQvements were very noticeable. I t was a month of
unmistakable transition. Transportation continued to be inadequate, reckless spending decidedly declined, cancellation of orders
increased, further indications of falling prices appeared, a pro- •
nounced check of speculation in financial centers occurred, liquidation of stocks held on a speculative basis proceeded, a number of
manufacturing establishments were closed, some unemployment developed, and a halt had been called to undue credit extension.
These conditions called for care on the part of all financial agencies,
but this was taken and business began to adjust itself to the new
basis and to feel its way with due confidence.
Scarcely had this point been reached when problems, in part, of an
opposite sort were presented for consideration by the Treasury and
the banks of the Nation. The harvest season came on and the Nation
was confronted with the task of marketing one of its record crops
at a time when transportation facilities were still unsettled and when
Europe's demand for food and raw materials was lessened partly
by reason of her own larger self-sufficiency arising from the return
of millions of her people to productive efforts, partly because of the
lack of security and credit in some of her nations, and partly because
of the restoration of more normal conditions in marine transportation and the consequent reappearance of the products of distant
countries in the markets of the world.
The banks of the Nation were called upon to finance the marketing
of crops in a gradual and orderly manner. And more than t h a t :
they and the Treasury were insistently called upon by a considerable
number of individuals to facilitate the holding of commodities off




SECRETARY OF THE TREASURY.

3

the market for an indefinite period so that a predetermined price
might be realized. The latter was impracticable; the former was
feasible, but not easy. I t was rendered difficult by the very abundance of the crop yields, by disturbed conditions existing particularty in Central Europe, by reduced buying power in most parts of
that continent, and by the failure of our people heretofore to develop
more adequate storage facilities for farm products and of the farmers
particularly more satisfactorily to solve their marketing and financial
problems by larger resort to legitimate cooperative undertakings.
The beginning of the crop-moving season found the banks with
credits still largely extended. The expansion of credit which was
marked during the^war did not end with the armistice. When the
fighting ceased, there was a real apprehension everywhere that there
might be industrial stagnation, unemployment, and reduced production. The appeal was that business should go forward. Business
^men and the banks in whose hands the initiative lay responded and
liberal credits were extended. Between the armistice and October 1,
1920, the loans and investments of all banks increased, it is estimated,
more than $7,000,000,000 and Federal reserve notes more than $740,000,000. I n January, 1920, on the recommendation of certain Federal
reserve banks, steps were taken, partly through higher rates, to
control the undue credit expansion; but it persisted. We were threatened with a continuance and extension of the cycle of rising prices, of
demands of labor for additional wages, and with a situation which
might make it difficult for the banks to give adequate aid in emergencies. Further steps were taken and for a few weeks in the early
summer the brakes worked and something like an equilibrium was
established. Still in the period from January 23, 1920, when the
advance was made in the discount rates of the Federal reserve banks
to 6 per cent for commercial paper, to the end of September, the loans
and investments of all the banks in the countr}^ expanded, it is estimated, approximately $1,000,000,000, and the Federal reserve note
circulation $460,000,000. But what is more important is the fact
that accommodations extended to agriculture, industry, and commerce increased, it is estimated, in the same period more than
$3,000,000,000 and possibly nearer $4,000,000,000, this large growth
in the accommodations for agricultural, industrial, and commercial
purposes being made possible by the shifting of funds following the.
reduction of loans on Government paper and against stock and
bond collateral. I n the period from the beginning of the cropmoving season in July of this year to October 16 the bills discounted
and purchased by the Federal reserve banks gained at an average
rate of $22,000,000 a week and the Federal reserve note circulation at
the rate of $20,000,000.




4

REPORT ON T H E FINANCES.

The banks of the Nation generally recognized their obligation to
see that the fundamental activities of their several communities were
supported. As indicated, they.largely increased their accommodation
for agriculture, industry, and commerce. Loans for speculative purposes were discouraged and largely reduced. Where discrimination
had to be exercised loans for essential purposes were given preference ; and Federal reserve banks in the industrial sections rediscounted
in large volumes for those in crop-moving sections. There was not
only no contraction, as was asserted in many quarters, but an actual
considerable expansion of credits. But still, for reasons beyond the
control of banking establishments, or of the Government, prices of
farm products fell, and fell suddenly; and those who were distressed
began to look in other directions for relief.
The first impulse of many who were searching for a wa}^ out was
to turn to the Government, and especially to the Treasury, as the
sole instrumentality for full economic salvation. This disposition,^
well developed before the war, was reinforced during hostilities by
practices of the Government which became necessary for the successful prosecution of the war and for the preservation of national life.
I t is the same disposition which causes resort to the Government for
appropriations for all sorts of enterprises, many even of a purely
local character. I t is this disposition, rather than self-aggrandizing
efforts of Federal departments to extend their functions, which is the
main explanation of mounting Federal budgets and of centralizing
tendencies frequently criticized. If there is a fault, and that there is
one there is little doubt, the blame must rest largely on the public
which remains quiescent while interested groups are clamorous.
When the people appreciate this fact there will be a remedy, and not
until then.
This attitude so extremely manifested is unwholesome and menacing, and it is of the highest importance t h a t individuals and communities return to a normal degree of self-help and self-reliance.
We have demobilized many groups, but we have not demobilized those
whose gaze is concentrated on the Treasur}^ I n the circumstances
producers whose products could not be satisfactorily marketed and
whose prices were falling demanded that the Treasury intervene.
They asked either that it deposit money in certain sections or that the
activities of the War Finance Corporation be resumed.
Neither of these things was feasible. The Treasury had no money
to lend and no money to deposit except for Government purposes. I t
is not in the banking business and should not be. I t is borrowing
money periodically to meet current obligations at a cost of about 6
per cent. On several occasions before the Federal Reserve System
was instituted the Secretary of the Treasury, at a time when the



SECRETARY OF THE TREASURY.

5

Treasur}^ hacl a surplus, did deposit small sums of money in banks in
various sections of the country to meet emergencies; but this necessit}'' is obviated by reason of the existence and practices of the Federal
Eeserve System, and it is interesting to note that during the recent
strain Federal reserve banks in certain sections of the country rediscounted for banks in crop-moving sections approximately six times
as much as was ever deposited for crop-moving purposes by the Secretary of the Treasury.
Furthermore, the War Finance Corporation was a war agency and
was created to help win the war. I t was clearly desirable that war
agencies should cease to function as quickly as possible. The only
power of the corporation which had any possible bearing on the situation is ohe which was inserted after the a:rmistice with a particular
possible state of facts in view. Fearing that with the cessation of
exports for military purposes after the armistice, exports might not
go forward. Congress empowered the corporation, in order to promote commerce with foreign nations, to make advances under certain
conditions. The War Finance Corporation had no money of its own.
I t or the Treasury would have had to borrow the money, and borrow
it at a cost of about 6 per cent. And they were called upon to do
this to stimulate exports which were going forward in such volume
as to continue the already existing derangements of international
exchange. Exports did not decline; they increased at an astounding
rate.
While the prewar exports had risen to about tAvo and one-half
billions of dollars, and while in 1918, the last year of the war, they
' were valued-at $6,000,000,000, they rose in 1919 to 7.9 billions and
are going forward this year at the rate of over 8 billions, and approximately 50 per cent of these consists of agricultural products.
I t is clear that the condition contemplated by the Congress did not
arise. Exports have gone forward in enormous volume and are
being privately financed. Individuals or firms have not been unable
to obtain funds with which to finance exports. But there are limitations imposed by an unfortunate situation. This country has not
yet found itself able to join the other civilized nations of the world
in establishing a prompt peace, upon the full restoration of which,
as the recent Brussels conference correctly stated, improvement of
the financial position of the world largely depends. And, furthermore, as the same body pointed out, borrowing countries of Europe
lack sufficient satisfactory securities. This is the chief obstacle in
the way of their securing credit, and this obstacle the Government
of this country can not remove.
I n the midst of such forces and happenings the Treasury pursued
its course and discharged the duties imposed upon it by law. Tasks




b

REPORT ON T H E FINANCES.

under its care have been heavy, but they have yielded to patient
treatment, and for the most part the various services have developed satisfactorily. The Nation's finances in particular have shown
marked improvement. The total ordinary receipts of $6,694,565,388.88 for the fiscal year 1920, on the basis of the daily Treasury
statements, exceeded those for 1919 by $1,542,308,252.45, while the
total net ordinary expenditures decreased from $18,514,879,955.03 to
$6,403,343,841.21.
The gross public debt, which reached its highest point on August
31, 1919, amounting to $26,596,701,648.01, had dropped on October
31, 1920, to $24,062,509,672.96, on the basis of daily Treasury statements.- Of very particular significance is the marked disappearance
from meinber banks of Government war securities held by them and
the reduction of their loans on such paper. On May 2, 1919, holdings by 771 member banks in selected cities of Government war
securities and loans on such paper, exclusive of rediscounts, aggregated $4,083,193,000, while on October 29, 1920, those of 823 member
banks in the same cities stood at only $1,750,638,000. On May 2,
1919, the bills held by Federal reserve banks secured by Government
war obligations amounted to $1,788,068,000 and all other bills to
$373,999,000, while on October 29, 1920, the former had been reduced
to $1,203,905,000 and the latter had increased to $1,895,767,000. This
fortunate result was brought about in part by the reduction of the
public debt, especially of the floating debt, but more particularly by
the distribution of the securities among permanent investors.
T h e cessation of the Treasury's borrowing, except through shorttime certificates of indebtedness, was also a matter of consequence
to the people of the country as a whole as well as to the holders of
Liberty bonds and Victory notes, and has had an important bearing
on the matter of effective credit control. The year has been characterized by the progressive relative withdrawal of the Treasury from
the domestic credit market and from a position of dominant influence. By the beginning of the fall this withdrawal had reached
the point where the influence of Treasury borrowing was compara-^
tively limited. The future course will necessarily depend upon the
extent to Avhich economies are practiced and the amount of the
burdens placed upon the Treasury, as well as upon the industrial
developments and the maintenance of tax receipts on a sufficiently
high level.
The action of the Treasury Department on matters of importance,
its financial program, and its proposals on the several matters within
its province, are set forth at some detail in the following discussion:




SECRETARY OF T H E TREASURY.

7

TREASURY CERTIFICATES OF INDEBTEDNESS.

The chief financial operations of the Government during the year
have been in Treasury certificates, which were sold to meet in part
the current requirements of the Government. They were either shortterm loan certificates or certificates in anticipation of income and
profits taxes. These certificate operations have been particularly
noteworthy because of the increased interest rates which it became necessary to pay in order to secure the distribution of the securities among real investors and to avoid lodging them in the banks.
Since the Victory loan campaign efforts to procure the distribution
of both tax and loan certificates among investors have been increased
and have had marked success. The banking institutions of the count r y have been asked to buy the certificates and sell them to their
customers; and their efforts to that end have been supplemented by
the Federal reserve banks and by circulars mailed by the Treasury
in connection with each issue to a selected list of taxpayers and bond
subscribers. The success of these efforts is evidenced by the fact that
on October 29, 1920, the 823 reporting member banks of the Federal
Reserve System (which are believed to control about 40 per cent of
the commercial banking resources of the country and to have subscribed in the first instance to nearly 75 per cent of the outstanding
issues of Treasury certificates) held'only $295,000,000 of loan and
tax certificates out of a total of about $2,337,000,000 then outstanding.
On the same date the Federal reserve banks reported only $240,000,000
of Treasury certificates pledged with them to secure loans and discounts, notwithstanding the preferential rates still maintained in
favor of Treasury certificates in some Federal reserve districts.
As the result of the year's operations there was also a marked
decline in the total volume of Treasury certificates outstanding.
On June 30, 1920, there were outstanding loan and tax certificates
unmatured in the amount of $2,485,552,500 as against $3,267,878,500
on June 30, 1919, a reduction of $782,326,000, while on October 31,
1920, there were outstanding $2,337,203,500 as against $3,462,258,000
on October 31, 1919, a decrease of $1,125,054,500 in the 12 months
and of $930,675,000 from June 30, 1919. These reductions were not
effected uniformly; for the course of the floating debt is determined
very largely by the relation between current receipts and current
expenditures, and the Treasury has no control over appropriations
or expenditures, nor, for example, over the salvage operations of
other Government agencies. The reductions have been accomplished
chiefly at the periods of the heavy income and profits tax payments,
and the laxgest decreases coincide roughly with the months in which
the quarterly tax payments are received. As frequently pointed out




8

REPORT ON THE FINANCES.

by the Treasury, and as generally understood in the business and
financial world, it is inevitable, in view of the fact that the large
installments of income and profits taxes are payable quarterly, that
there will be more or less substantial fluctuations in the floating debt
in the intervals between the heavy tax payments. It is the Treasury's
expectation that each quarterly payment of income and profits taxes
henceforth will witness an important progressive decline in the floatirig debt, and that any increases which may occur in the intervals
between quarterly tax payments will be more than overcome each
time by the decrease effected as the result of the quarterly payment.
This has been the history of the floating debt during the fiscal year
1921, as is well illustrated by the following comparative statement by
months from June 30,1920, to September 30,1920:
Date.

June 30,1920
July 31,1920

Loan and tax
certificates
outstanding.
S2,485,552,500
2,433,546,500

Loan and tax
certificates
outstanding.

Date.

Aug. 31, 1920
Sept. 30, 1920..

. .

$2,571,201,000
2,347,791,000

The course of the certificate operations for the period under
review can be shown best by reference to the circular letters and
public statements issued from time to time during the year concerning the Treasury certificate program. The previous annual report of the Secretary of the Treasury covered the situation through
the offering of September 15, 1919, which was described in detail
in the circular letter of September 8, 1919, to banks and trust companies. The success of this issue, to which there were total subscriptions of $758,600,500, coupled with unexpectedly heavy receipts
from salvage, made it possible for the Treasury to postpone the
next offering till late in November, 1919, when two issues, both dated
December 1, 1919, and bearing 4^ per cent interest, were made, one
of loan certificates, maturing in two and one-half months, on February 16, 1920, and the other of tax certificates, maturing in three and
one-half months, bn March 15, 1920. The 4^ per cent interest rate
was the same as the rate on the certificates of six months maturity
which had been sold on September 15, 1919. The situation existing
at the time of this resumption of offerings, and the terms of the
December 1 issue, were described in detail in the following letter to
the banks and trust companies of the country:
WASHINGTON, Novemher 24, 1919.

DEAR SIR : In my letter of September 8, I stated tbat, wliile it could not be
said definitely when semimonthly issues of loan certificates would be resumed^
such issues would certainly not be resumed before October 15. Though most




^

SECRETARY OF THE TREASURY.

9

factors in the general situation since t h a t letter was w r i t t e n have been adverse,
the position of t h e T r e a s u r y h a s developed more favorably t h a n then t h e r e
seemed any reason to hope. T h e great success of t h e issue of t a x certificates
then announced, the reduction in current expenditures, and the increase of receipts, notably from sales of w a r m a t e r i a l s and supplies, have made it possible
to avoid until now the resumption of t h e issue of certificates.
On the basis of T r e a s u r y daily statements, in the month of October the net
current deficit (excess of disbursements over receipts, exclusive of transactions
in the principal of the pubUc debt) w a s $319,239,450.35, t h e lowest figure for any
month since April, 1917, excluding the months in which income and profits taxes
were payable, and for the first half of the month of November the net current
deficit w a s $118,630,787.30, indicating t h e Ukelihood ^ f a further important
reduction for t h a t month.
On t h e basis of T r e a s u r y daily statements the total gross debt, Which on
J u n e 30, 1919, amounted to $25,484,506,160.05 and on August 31, 1919, h a d
reached t h e peak at $26,596,701,648.01, h a d been reduced by September 30 by
more t h a n $400,000,000, and, notwithstanding t h e increase resulting from the
Victory loan installment payments in October and November, when the final
payment w a s made, stood on November 15 a t $26,210,905,795, a net reduction
of about $385,000,000 from the high m a r k at t h e end of August, and a net increase since J u n e 30 of only $726,399,634.95, although in t h a t period only one
q u a r t e r l y income and profits t a x installment h a d been received. T h e total
amount of loan certificates outstanding and u n m a t u r e d , which, on J u n e 30 w a s
$2,478,317,500 and on August 31 $2,012,387,500, w a s reduced in September to
$1,634,671,500, a t which figure it s t a n d s ; while the total amount of t a x certificates outstanding and unmatured, which on J u n e 30 was $789,561,000 and on
August 31 w a s $1,925,837,500, w a s reduced in September to $1,827,586,500, at
w.hich figure it stands. Of the latter, certificates to the amount of $746,869,500
m a t u r e December 15, 1919, and are amply provided for by the income and
profits tax: installment payable on t h a t date.
Very gratifying progress h a s been made in t h e ' absorption by investors of
Government securities. During the period of five months from J u n e 6 (when
holdings of Victory notes were first reported separately) to November 7 (the
last date for, which reports are available) all reporting member b a n k s (about
783 member banks in leading cities, which are believed to control about 40 per
cent of the commercial bank deposits of the country) have, according to Federal Reserve Board reports, reduced their holdings—
Of Liberty bonds from
To

$646, 273, 000
633, 950, 000

Or
Of Victory notes from
To

438, 589, 000
292, 410, 000

$12, 323,000
:

Or
L^_________
-.
146,179, 000
Of United States certificates of indebtedness from— 1, 514, 462, 000
To
^
847, 558, 000
Or

-

-

666, 904, 000

Making a total reduction in all reporting member banks'
holdings of United States w a r securities of
825, 406, 000
. Loans by all reporting member banlis secured by United States w a r securities,
after deducting those rediscounted with F e d e r a l reserve banks, a r e reported a s




10

REPORT ON THE FINANCES.

reduced in the same period by $221,450,000 (from $1,420,581,000 to $1,199,131,000), this reduction being partly offset, however, by increased rediscounts
of such paper with Federal reserve banks.
The long intermission in the issue of certificates of all kinds makes it possible, upon resuming, to issue loan certificates, bearing 4i per cent interest and
having only two and one-half months to run, instead of five months as heretofore, while fixing the maturity one-half month later than that of the last issue
of loan certificates. Along with the issue of these loan certificates it has been
thought wise, in order to make it possible and convenient for taxpayers to
prepare further for the large tax payments which fall due on March 15, 1920,
to offer an issue of 4^ per cent tax certificates of that maturity.
The Treasury again confidently appeals to the banking institutions of the
United States for their continued support and asks them not only to subscribe
liberally to the certificates of one or both issues now offered but also to use
their best efforts to secure the widest possible distribution among investors of
the certificates so subscribed for.
Cordially yours,

CARTER GLASS.

To the PRESIDENT OF THE BANK OR TRUST COMPANY ADDRESSED.

The response was so satisfactory that the subscription books were
closed on the first day for the loan certificates and on the second day
for the tax certificates. The total subscriptions for the tax series
were $250,942,500 and for the loan series $162,178,500. The result
was announced in the following public statement on December 3,
1919:
Secretary Glass announced that subscriptions for the issue of Treasury certificates of indebtedness of. Series T M-3, 1920, dated December 1, 1919. maturing March 15, 1920, closed at the close of business on Tuesday, December 2.
The subscriptions for Treasury certificates of indebtedness of Series D 1920,
dated December 1, 1919, and maturing February 16, 1920, closed at the close
of business on Monday, December 1. Both of these series of certificates bear
interest at the rate of 4^ per cent. No specific amount of certificates of either
series was offered. I t will be noted that the subscription books for the one
series remained open for only one day, and for the other series for only two
days. Final reports of subscriptions have not yet been received, but preliminary reports indicate that the aggregate subscriptions for both series up
to the time of closing exceed $400,000,000, a result very gratifying to the
Treasury.
In response to the continuing demand for tax anticipation certificates, and
in order to make further provision for the payment without inconvenience
of the installment of income and profits taxes due March 15, 1920, the Secretary of the Treasury has authorized the Federal reserve banks, until further
notice, to issue 4^ per cent Treasury certificates of indebtedness of Series T M-3,
1920, at par, with an adjustment of accrued interest, in exchange for Treasury certificates of indebtedness of any issue now outstanding, not overdue,
maturing on or before February 16, 1920, with any unmatured coupons attached.
. Additional certificates of Series T M - 3 , 1920, to the amount of
$9,379,500, were issued on exchange pursuant to this announcement.
The next offering was made in connection with the heavy maturity
of certificates on December 15, 1919, which was also the last quar-




SECRETARY OF THE TREASURY.

11

terly tax payment date for the calendar year 1919. Six months
tax certificates, dated December 15, 1919, maturing J u n e 15, 1920,
bearing interest at 4^ per cent, were offered. They were promptly
subscribed. The books closed on December 19, with total subscriptions of $728,130,000. This issue was closely followed by a
further offering, dated J a n u a r y 2, 1920, made necessary chiefly
by the large maturities of loan certificates on J a n u a r y 2, January 15, February 2, and February 16, 1920. The* J a n u a r y 2 certificates, maturing December 15, 1920, bearing interest at 4 | per
•cent, were also issued in anticipation of taxes. The total subscriptions for this issue were $703,026,000. The following public statement of Dec'ember 30, 1919, announced the offering and explained
the Treasury's plans:
•
^
The Treasury is offering to-day an issue of 4 | per cent tax certificates dated
January 2, 1920, and maturing December 15, 1920. The success of this issue
.should assure the consummation of the Treasury's plan for financing the unfunded portion of the war debt in such a way as to avoid the necessity for
:great refunding operations by spreading maturities and meeting them so far
.as may be out of tax receipts.
The total amount of loan certificates, which on November 24 had been ^reduced to $1,634,671,500, has been further reduced by purchase, exchange and
optional redemption by $236,703,500 net, and on December 24 was as follows:
.Series
'series
Series
-Series

A, due Jan. 2, 1920
B, due Jan. 15, 1920
C, due Feb. 2, 1920
D, due Feb. 16, 1920—
Total

^
^
—

_'
:

$348, 446,.000
4^1,844,500
493,153, 500
104, 524, 000
1, 397,968, 000

Of the $1,397,968,000 loan certificates thus remaining about one-half haye
already been provided for and the success of the issue of tax certificates nowoffered shoukl provide for the retirement of the balance of the loan certificates
and render the issue of any further certificates in January unnecessary, while
leaving an important part of the tax payment due March 15, 1920, available for
•current purposes.
The total amount of tax certificates outstanding December 24, 1919, was
approximately as follows:
Series T-8, T-9, and T M-3, due Mar. 15, 1920
Series T-J, due June 15, 1920
•Series T-10, due Sept. 15, 1920
Total

—

$550,366,000
728,130,000
657, 469, 000
1, 935, 965, 000

On account of the income and profits tax installment paid in this month of
December, the operations of the month produced a net current surplus, excluding
transactions in the principal of the public debt, of $659,080,315.06 for the portion of the month ended December 24, 1919, on the basis of Treasury daily
.statements.
'
The success of these operations placed the Treasury in a .very fort u n a t e position and left it with practically no loan certificates .out-




12

REPORT ON THE FINANCESa

standing not covered by cash on hand. On J a n u a r y 12, 1920, the
Secretary summarized the situation as follows:
It will no doubt be recalled that on September 8, in announcing an issue of
tax certificates, I made certain statements concerning the Government's .financial position and prospects for the balance of the calendar year and said that
the turn of the tide had come. Now.that the figures at the year's end are in
hand it appears that my most sanguine expectations have been more than
realized.
On the basis of Treasury daily statements, the Government's
gross debt on Aug. 30, 1919, was
$26, 596, 701, 648. 01
On Dec. 31 it amounted to
25, 837, 078, 807. 38
A reduction of
Its floating debt (unmatured Treasury certificates of indebtedness) on Aug. 30 was
On Dec. 31 it amounted to___^
A reduction of_^
The portion of the floating debt requiring to be refunded
(so-called *' loan certificates ") on Aug. 30 amounted to__
On Dec. 31 it amounted to
A reduction of

759, 622, 840. 6a
4, 201,139, 050. 39
3, 578,485,800. 37
622, 653, 250. 02
2, 012, 387, 500. 00
1, 326, 661, 000. 00
685, 726, 500. 00

The loan certificates outstanding on December 31 were of issues maturing
January 2, January 15, Februaiy 2, and February 16, 1920, and have been or
will be paid from cash on hand December 31 and from the proceeds of the sal^
of tax certificates thereafter issued, thus consummating the Treasury's plan
for financing the unfunded portion of the war debt in such a way as to avoid
any large funding operations.
As to the future, it may be stated positively that unless Congress should enter
upon new fields of large expenditure not included in the Treasury's estimates
or should make a reduction in the amount of taxes in addition.to the reduction
made a year ago upon the recommendation of Secretary McAdoo from about
$6,000,000,000 to about $4,000,000,000, we may look forward confidently to the
retirement of the floating debt out of the taxes provided by existing law and
miscellaneous receipts coming within the general head of war salvage (although
further issues of tax certificates in diminishing amounts will be necessary from
time to time in the intervals between income and profits tax installmen^t payVments), and to the gradual reduction of the funded war debt through^the operations of the Liberty loan bond purchase fund and sinking fund already created
by law. On the other hand, should Congress embark upon new flelds of large
expenditure or further reduce taxes, it will, as I have already indicated, be
clearly necessary to revise \he Treasury's plans and call upon the country to
finance the resulting deficit by the issue of a new Liberty loan.
To provide for the maturities of loan certificates on February 2
and February 16 it became necessary to offer a further issue of certificates, dated February 2, 1920, maturing March 15, 1920, bearing
interest at 4J per cent. These certificates were to be provided for out
of the installment of income and profits taxes due on March 15. Subscription^, which closed on February 6, aggregated $304,877,000, including $7,477,000 as the result of exchanges of certificates of series




SECRETARY OF T H E TREASURY.

13

T - 9 , which had the same maturity and were accepted in exchange for
the new issue pursuant to the Treasury's announcement on September
8,1919, that if thereafter certificates maturing on or before March 15,
1920, should be issued bearing interest at a higher rate t h a n 4J per
cent, the certificates of series T-9 would be accepted in exchange at
par with an adjustment of accrued interest.
W i t h the maturity of loan certificates on February 16, 1920, the
Treasury found itself in a position where it no longer had any such
certificates outstanding. All the issues remaining matured on income and profits tax installment dates and the amounts of the various maturities in no instance exceeded the estimated amount of income and profits taxes pa^^able on the maturity date. The Secretary,
in a public statement issued under date of February 12,1920, summed
up the situation as follows:
The last issue of the Treasury's " l o a n " certificates of indebtedness matures
on Mdnday. Since the Treasury announced its readiness to redeem these certificates before maturity about $38,000,000 have been redeemed and the am-ount
remaining outstanding last night was only about $60,000,000. The significance
of this very interesting and important fact is not perhaps fully realized. When
these certificates have been paid the Treasury will have outstanding in the
hands of the public no floating debt whatever in the sense of short-term certificates requiring to be refunded at maturity. The amount of tax certificates
outstanding February 10 is approximately as follows:
Series T-S, interest 4^ per cent, dated July 15, 1919, due Mar. 15,
1920
$315, 844, 500
Series T-9, interest 4.1 per cent, dated Sept. 15, 1919, due Mar., 15,
1920
—
74, 295, 500

Series T M-3, 1920, interest 4^ per cent, dated Dec. 1, 1919, due
Mar. 15, 1920
Series T M-4, 1920, interest 4i per cent, dated Feb. 2, 1920, due
Mar. 15, 1920_
1
Series T J-1920, interest 4^ per cent, dated Dec. 15, 1919, due
June 15, .1920
I

152, 307, 500
304, 877, 000
847,324,500
728,130, 000

Series T-10, interest 4i per cent, dated Sept. 15, 1919, due Sept.
15, 1920
,.
^

657, 469, 000

Series T D-1920, interest 4 | per cent, dated Jan. 2, 1920, due
Dec. 15, 1920

703, 026, 000

Total tax certificates outstanding Feb. 10, 1920
2, 935, 949, 500
These certiflcates mature on income and proflts tax installment dates and the
amounts of the various maturities in no instance exceed the estimated amount
of the taxes payable at the maturity date. The tax payments which have thus
been anticipated and which are payable during the calendar year 1920 are payable in respect to the income and proflts of the calendar year 1919, and consequently would not be adversely affected if any recession of business and profits
should take place in 1920. The Treasury is naturally pleased with the success
of the operations initiated last September and now brought to a successful conclusion which have made this splendid achievement possible. It is very grateful
for the patriotic support and assistance of the Federal reserve banks and the



14

REPORT ON THE FINANCES.

Treasury certificate organization and of the banking institutions of the country
which have subscribed for the certificates in the first instance and distributed
them very widely among investors. The rapid reduction of Government expenditure and realization of the surplus stocks accumulated for war purposes have
been important factors in making possible the reduction of the floating debt and
the gross debt of the Government in the past flve months. The result of the
elimination of loan certificates and the great reduction in the floating debt and
gross debt have both been contributed to by the application to the payment of
loan certiflcates of an important part of the balance in the general fund, which
it had been necessary to retain at a high flgure as long as the loan certiflcates
were outstanding in order to provide for these frequent maturities, and which it
was possible to reduce greatly in connection with their retirement.
Although the Treasury will, of course, be obliged to borrow from time to time
to meet the current deflcit (which in January amounted to less than $93,000,000), in the intervals between income and proflts tax installment payments, and
the current requirements of the War Finance Corporation, the fact that the
Treasury has no uncovered maturities is of immense importance. So long as
the Treasury had certiflcates of indebtedness maturing in very large amounts
and on dates when it could only provide the funds to meet them by fresh borrowings, its position might under certain circumstances have become embarrassing (though it never did), and it was consequently impossible for the
Federal Reserve Board to exert any effective control over credit. The .point is
illustrated by the following quotation from the London Economist of January 24:
" Plenty of money and a consequent demand for bills have been the chief
features of the internal history of the money market. The plenty may be_attributed to the fresh creation of ways and means advances, necessitated by the
maturing of more Treasury bills than were applied for. By this process, as we
have frequently pointed out, dealers in and users of credit can now at any time
oblige the Government to create more ' cash at the bank' by the weapon that
they hold in the shape of 1,000 millions odd Treasury bills outstanding. Thus
the powers that be can make money dear by paying more for it, but they can
not make it really scarce until, by taxation or otherwise, they have reduced the
effectiveness of this weapon."
The fact that the Treasury of the United States is no longer in the position
somewhat similar to that described'by the Economist is of immense importance
for the general welfare of the country and incidentally to the holders of Liberty
bonds and Victory notes, since the danger of the Treasury's being obliged toDorrow large sums to meet maturing certiflcates upon disadvantageous termshas been eliminated. The position of the Treasury to-day and the future of the
market for the outstanding issues of Liberty bonds and Victory notes is very
bright. The whole color of the picture would, of course, be changed if Congress
should embark upon new expenditures on a large scale. The whole problem
to-day is that of giving the people time and will to save capital sufiicient toenable them to absorb that part of the war issues which is still owned or loaned
upon by banks and as well the flood of securities which are being pressed upon
our markets from foreign sources in consequence of the extreme depression in*
European exchanges.

Following this announcement came the passage of the transportation act, 1920, approved February 28, 1920, which provided for the
return of the railroads to private control. At the same time, thegrowing scarcity of capital and credit, accompanied by increased.




SECRETARY OF THE TREASURY.

15

Tates of interest and discount, affected not only private borrowings
but the Treasury's current borrowings as well. As early as November, 1919, the Federal reserve banks had taken action to increase discount rates, and by the end of January the rate on paper secured by
Treasury certificates had already been raised to 4f per cent in all of
the Federal reserve districts, and by the end of February to 5 per cent
in most of the districts. This meant, for example, that the February 2,1920, offering of Treasury certificates, bearing 4^ per cent interest, had been sold, largely on account of its short maturity, not only
without a preferential rate of discount but with a differential against
rediscount. On March 15, 1920, in connection with the quarterly
tax payment on that date and the large maturity of certificates, tax
certificates were offered maturing in one year, on March 15,1921, and
bearing interest at 4 | per cent. The subscription books remained
open for almost two weeks after March 15, and the total amount
subscribed was only $201,370,500.
With this relatively light subscription a:nd the increasingly heavy
burdens resulting from payments to the railroads under the transportation act, it soon became evident that the most sanguine expectations of February 12 would not be realized, and that it wa^ necessary,
in order to "meet the enlarged requirements of the Treasury and insure
the absorption of the securities by investors, to diversify maturities,
to introduce loan certificates in moderate amounts, and to offer certificates at rates of interest iii line with the market rates for money.
There followed a succession of loan-certificate offerings, the first on
April 1, 1920, maturing July 1, 1920, bearing interest at 4J per cent,
to which $200,669,500 was subscribed. Then came two series dated
April 15, 1920, one maturing July 15, 1920, and bearing interest at 5
per cent, for which $83,903,000 was subscribed, and the other maturing October 15, 1920, and bearing 5^ per cent interest, for which
$170,633,500 was subscribed. The April 15 offering was accompanied
by the following statement from the Treasury, dated April 12, 1920:
Secretary Houston said that recent changes in the situation, which he had
had the advantage of discussing with the Federal reserve bank governors meeting in Washington during the past week, had led him to the determination that
it would be wise to meet the current requirements of the Government, enlarged
as they are by expenditures in connection with the return of the railroads to
private control, by the issue of Treasury certiflcates of relatively short maturities and bearing interest at higher rates. Accordingly he was announcing an
issue of 5 per cent certiflcates of three months' maturity and 5^ per cent certiflcates of six months' maturity.

Then followed an announcement of $100,000,000, or more, of loan
certificates, dated May 17,1920, maturing November 15,1920, bearing
interest at 5^ per cent, for which subscriptions of $129,749,500 were
received and only $102,865,000 allotted. This was the first issue on




16

REPORT ON THE FINANCES.

which partial allotments were made, only 20 per cent being allotted
on oversubscriptions. By this time the discount rate on paper secured by Treasury certificates had been raised to 5^ per cent in most
of the Federal reserve banks.
The next issue was the usual quarterly operation in connection with
the June 15 payment of income and profits taxes and the heavy Treasury certificate maturities from J u n e 15 to J u l y 15, 1920. Two series,
both dated June 15, one maturing J a n u a r y 3, 1921, and bearing interest at 5 | per cent, and the other; a tax issue maturing in one year,
on June 15, 1921, and bearing interest at 6 per cent, were announced.
The general situation at this time and the terms of the offering are
more fully described in the open letter of J u n e 10, 1920, from the
Secretary of the Treasury to the banking institutions of the country, which is as follows:
WASPIINGTON, June 10, 1920.

DEAR SIR : Treasury certiflcates to the amount of nearly $1,000,000,000 mature
on or before July 15. The greater part of these are provided for by the income
and proflts tax installment payable in June. To refund the balance and provide for current requirements up to July 15, according to the best estimates
now available, it seems desirable at this time to issue Treasury certiflcates to
the amount of $400,000,000, or thereabouts; and accordingly the Treasury is
offering certiflcates in two series, both dated June 15, series A 1921, bearing
interest at 5 | per cent and maturing January 3, 1921, and series T J-1921,
bearing interest at 6 per cent and maturing June 15, 1921, particulars concerning which will be furnished by the Federal reserve banks.
On the basis of Treasury daily statements and excluding transactions in the
principal of the public debt, though the first quarter, ended September 30,
1919, of the present fiscal year ending June 30, 1920, was marked by a deficit
of about $770,000,000, in the second quarter, ended December 31,1919, there was a
surplus of over $150,000,000; in the third quarter, ended March 31, 1920, there
was a surplus of nearly $400,000,000, and the fourth quarter, ending June 30
next, should also show a surplus. The completed fiscal year's operations should
show little, if any, deficit—^the Government having about balanced its budget,
current receipts against current disbursements, for the first full flscal year
after flghting stopped.. '
The total gross debt of the United States, which, on June 30,^1919, on the
basis of Treasury daily statements, amounted to nearly $25,500,000,000, and
on August 31, 1919, to nearly $26,600,000,000, had been reduced on May 31,
1920, to less than $25,000,000,000. The floating debt outstanding (loan and tax
certiflcates), which on June 30, 1919, amounted to over $3,250,000,000, and on
August 31, 1919, to nearly $4,000,000,000, had been reduced on May 31, 1920,
to less than $2,850,000,000. The reduced ordinary and public debt disbursements have made possible a very important reduction in the amount of the
net balance in the general fund, which has been applied to the reduction of
debt. Both gross debt and floating debt will be further greatly reduced by the
operations outlined in the flrst paragraph of this letter.
During the coming flscal year, beginning July 1. 1920, the Treasury expects,
though it is impossible to speak positively, that there will be a further reduction of both gross debt and floating debt in the first two quarters, and, unless
additional burdens should be imposed by future legislation, that there will be
a very important reduction in the last two quarters.



SECRETARY OF THE TREASURY.

17

The period of upward of 12 months since the flotation of the Victory Liberty
loan has witnessed great expansion of commercial credits, but steady liquidation of United States Government war securities. The Federal reserve banks'
combined loans and discounts secured by United States Government war securities have been reduced by more than $400,000,000, though they have increased
their other loans and investments by about $1,200,000,000. All reporting member
banks (about 800 member banks in leading cities which are believed to control
about 40 per cent of the commercial bank deposits of the country) have reduced
their holdings, of and loans upon United States Government war securities by
about $2,000,000,000, but have increased their other loans and investments by
about $4,000,000,000.
The Treasury confldently asks the banking institutions of the country for
their continued support and, in particular, to subscribe liberally for the certifl<;ates now offered and use their best efforts to obtain the widest possible distribution of them among investors.
Cordially yours,
D. F. HOUSTON.
To the PRESIDENT OF THE BANK OR TRUST COMPANY ADDRESSED.

These two offerings met with a quick response and were promptly
absorbed by investors. The sul^scription boo.ks closed on J u n e 16,
the day after the date of issue. The total subscriptions aggregated
$419,121,000, of which $176,604,000 Avere for the J a n u a r y 3 maturity
and $242,517,000 for the June 15 maturity, all which were allotted in
full.
U p to October 31, 1920, four issues of certificates had been made
ih the fiscal year beginning J u l y 1, 1920. The result was a further
reduction in the total amount of outstanding loan and tax certificates, from $2,485,552,500 on J u n e 30,1920, to $2,337,203,500 on October 31, 1920. There has also been a decrease in the amount of loan
certificates, as compared with tax certificates, from $681,170,000 on
J u n e 30, 1920, to $555,163,500 on October 31, 1920. On J u l y 15,
1920, two issues were made, one inaturing J a n u a r y 15, 1921, and
the other, tax certificates, maturing March 15, 1921, both bearing interest at 5 | per cent. The Treasury asked for $200,000,000, or thereabouts. T h e books closed on J u l y 20 with total subscriptions of
$201,061,500, of which $126,783,500 were for the J a n u a r y 15 maturity
and $74,278,000 for the March 15 maturity. The general situation
as it existed after this successful flotation is summa,rized in a statement of the Secretary dated J u l y 26, 1920, which reads as follows:
My letter of June 10, 1920, to banks and trust companies, in connection with
the ofl'ering; of Treasury certiflcates of indebtedness dated June 15, called
attention to die fact that Treasury certiflcates to the amount of nearly
$1,000,000,000 would mature on or before July 15, and stated, first, that the
completed operations for the fiscal year ending June 30, 1920, should show little,
if any, current deficit; and, second, that both gross debt 'and floating debt
would be further greatly reduced by the operations incident to the handling of
the Treasury certiflcate maturities from June 15 to July 15. The results show
that the Treasury's expectations have been realized.
13799—FI 1920
2




18

REPORT ON THE FINANCES.

On the basis of daily Treasury statements, the total ordinary receipts for the
flscal year ended June 30,1920, amounted to $6,694,565,388.88 and current ordinary
disbursements amounted to $6,766,444,461.09, leaving a net current deflcit (excess
of current ordinary disbursements over ordinary receipts) of only $71,879,072.21
for the fiscal year 1920, the flrst full flscal year after hostilities ceased. After
taking into account the special deposit of tiie War Finance Corporation, resulting from its redemption of United States securities (explained on page 2 of
the daily Treasury statement for June 30, 1920), the net ordinary disbursements for the fiscal year 1920 were $6,403,343,841.21, leaving an adjusted
surplus (excess of ordinary receipts over net ordinary disbursements) of
$^91,221,547.67 for the flscal year?
The operations incident to the handling of the maturities of Treasury certiflcates from June 15 to July 15 have now been completed and have resulted
in further reductions in both the gross debt and the floating debt of the United
States. The gross debt on June 30, 1920, on the basis of daily Treasury statements, amounted to $24,299,321,467.07, as against $25,484,506,160.05 at the end
of the previous flscal year on June 30, 1919, and $26,596,701,648.01 on August 31,
1919, when the gross debt was at its peak. In other words, the gross debt on
June 30, 1920, had been reduced by $2,297,380,180.94 from its peak on August 31,
1919, and by $1,185,184,692.98 from the flgure on June 30, 1919. On July 20,
1920, on the basis of daily Treasury statements, the gross debt amounted to
$24,264,309,321.54, showing a further reduction of about $35,000,000 after taking
into account the $201,061,500 face amount of Treasury certiflcates issued under
date of July 15. The floating debt (loan and tax certiflcates unmatured) on
June 30, 1920." amounted .to $2,485,552,500 as against $3,267,878,500 at the close
of the previous flscal year on June 30, 1919, and $3,938,225,000 on August 31,
1919.. On July 20, 1920, the loan and tax certificates outstanding amounted to
$2,453,946,500, showing a further reduction of about $31,000,000 as the result
of the redemption of loan certiflcates since the close of the fiscal year 1920 in
the amount of some $232,000,000 and the issue of loan and tax certificates dated
July 15 in the amount of some $201,000,000.
Further issues of Treasury certificates will be offered as necessary from time
to time to provide for the current requirements of the Government and to
meet maturities of Treasury certificates now outstanding. The amounts of these
issues will depend in large measure upon the extent of the burdens imposed
upon the Treasury by the transportation act, 1920, in connection with the return of the railroads to private control, including particularly the liability on
the guaranty, which is as yet unascertainable. While, as the result of new issues
of Treasury certiflcates in the intervals between the large income and proflts
tax installments, there may be temporary increases in both gross debt and floating debt, the Treasury expects, though it is impossible to speak positively, that
both gross debt and floating debt will, during the first two quarters of the current flscal year, be reduced below the flgures outstanding on tjune 30, 1920,.
and that unless additional burdens should be imposed by legislation there will
be an important further reduction in the last two quarters of the flscal j^ear.

Another offering of loan certificates in the amount of $150,000,000,.
or thereabouts, was announced for August 16,1920, maturing August
16, 1921, and bearing interest at 6 per cent per annum. This was
quickly absorbed and subscriptions closed on the opening day with
an excess of over $50,000,000, the total being $208,347,500: Allotments of only 20 per cent were made on oversubscriptions, making



SECRETARY OF T^HE TREASURY.

19

the total allotted $157,654,500. Then followed the usual quarterly
operation incident to the September J 5 payment of income and profits
taxes and the maturity on September 15 of about $640,000,000 of tax
certificates. Two series of tax certificates dated September 15, 1920,
one maturing March 15, 1921, with interest at 5f per cent per annum,
and the other maturing on September 15, 1921, with interest at 6 per
cent per annum, were offered. The general situation was described at
length in the circular letter of September 7, 1920, from the Secretary
of the Treasury to the banking institutions of the country, which is
as follows:
WASHINGTON, Septeniber 7, 1.920.
DEAR SIR : Treasury certificates Of indebtedness to the amount of about $640,000,000 mature on September 15, 1920, and about $160,000,000 mature on October
15, 1920. The greater part of these $800,000,000 maturing certificates will be
covered by the installment of income and profits taxes payable on September 15.
In order to provide for the balance of the certificates requiring to be refunded
and meet the current requirements of the Government up to October 15, the
Treasury has decided, on the basis of the best estimates available at this time,
to offer Treasury certificates of indebtedness in" the amount of $400,000,000 or
thereabouts, in two series, both dated September 15, 1920, one series designated
T M 3-1921, bearing 5 | per cent interest, maturing March 15, 1921, and the
other series designated T S-1921, bearing 6 per cent interest, and maturing September 15, 1921. Applications for Treasury certiflcates of tbese series will be
received through the several Federal reserve banks, from which full particulars
concerning the offering may be obtained. Treasury certificates of the series maturing September 15,, 1920, and October 15, ,1920, will be accepted at par with
an adjustment of accrued interest in payment for any certificates of the two
series now offered which may be subscribed for and allotted.
On the basis of daily Treasury statements, during the first two months of the
current flscal year, beginning July 1, 1920, the ordinary receipts of the Government amounted to $628,767,191.13, while the ordinary disbursements during the
same period amounted to $754,072,901.76, leaving a net current deflcit (excess of
ordinary disbursements over ordinary receipts) of $125,305,710.63. This net current deficit for the flrst two months of the fiscal year is due chiefly to actual cash
payments, in amount of some $130,000,000, made necessary by the provisions of
the transportation act, 1920, in connection with the return of the railroads to private control. According to the latest estimates, payments on account of the railroads will probably continue on a large scale during the balance of the present
calendar year, and will be relatively heavy during the month of September.
Notwithstanding the net current deficit during the first two months and these
extraordinary payments on- account of the railroads, it is expected that the first
quarter of the fiscal year, ending September 30, :L920, will show a surplus.
The gross debt of the Government on August 31, 1920, on the basis of daily
Treasury statements, amounted to $24,324,672,:I23.79, as against $24,299,321,467.07 at the close of the fiscal year ended June 30, 1920, an increase of only
$25,350,656.72. The floating debt (loan and tax certificates unmatured) on
August 31, 1920, amounted to $2,571:201,000, as against $2,485,552,500 on June
30, 1920. As a result of the operations incident, to the handling of the maturities of Treasury certiflcates on September 15 and October 15, and the payment
of the income and proflts tax installment on September 15, it is expected that
the increases in both gross debt and floating debt which have occurred since



20

REPORT ON THE FINANCES.

June 30 as the result chiefly of the heavy railroad payments will be more than
overcome and that both gross debt and floating debt wiU be materially reduced by September 30 below the amounts outstanding on June 30, 1920. Further issues of Treasury certiflcates during the months of October and November
may subsequently result in temporary increases in both gross debt and floating
debt, but the Treasury confldently expects that by the completion of the second
quarter of the flscal year, on December 31, 1920, any such temporary increases
will have been overcome, and that the gross debt and floating debt on December
31 will have been further reduced below the amounts outstanding on September 30.
The Treasury certificates of the two series now offered, dated September 15,
are exempt from State and local taxes, except inheritance taxes, and from the
normal Federal income'tax and the corporation income tax, and are admissible
assets for the purpose of calculating profits taxes. The certificates are acceptable in payment of Federal income and profits taxes payable at their respective
maturities, and the United States reserves no option to call them for redemption before maturity. These .features, together with the attractive interest rates
and absolute safety of principal and' interest, make the certificates extremely
desirable investments. The Treasury believes, therefore, that banks generally
should feel free to subscribe largely for the certificates with the confident expectation of prompt resale for investment, lln this connection it is interesting
to note that all reporting members banks (about SIS member banks in leading
cities, which are believed to control about 40 per cent of the commercial bank
deposits of the country, and to have subscribed in the first instance for about
75 per cent of the Treasury certificates of indebtedness now outstanding) held
on August 27, 1920, only about $430,000,000 face ampunt of Treasury certificates, notwithstanding the fact that there were outstanding on that date some
$2,571,000,000 face amount of loan and tax certiflcates.
The Treasury again asks the banking institutions of the country for their
continued support and, in particular, to subscribe liberally for the certificates
now offered and use their best efforts to obtain the widest possible distribution
of them among investors.
Cordially yours,
D. F. HOUSTON.
To the PRESIDENT OF THE BANK OR TRUST COMPANY ADDRESSED.

On the September 15 offering the Treasury asked for subscriptions
of $400,000,000, or thereabouts, and, notwithstanding the size of the
issue and the heavy demands for funds for crop-moving purposes,
it was promptly oversubscribed. The books closed on the opening day with a total of $492,262,000. Three of the Federal reserve
districts oversubscribed their quota and, the Treasury allotted
70 per cent of their excess, leaving a total allotment of $448,596,000,
of which $106,626,500 were of the March maturity and $341,969,500
were of the September maturity. The success of these issues placed
the Treasury in a position to meet the extraordinary demands during the month of September and, early October in connection with
loans and guaranty payments to the railroads under the provisions
of the Transportation act, 1920. About $250,000,000 was disbursed
tp the railroads during this period. I t became necessary, therefore,
to make a further issue on October 15, 1920. The October 15 offer-




SECRETARY OF THE TREASURY.

21

ing took the form of five months 5 | per cent tax certificates, dated
October 15, 1920, maturing March 15, 1921, in the amount of $100,000,000, or thereabouts. The announcement was accompanied by
the following public statement, dated October 8, 1920, which summarized the Government's immediate requirements and the terms of
the offering:
Treasury certificates of series G, 1920, to the amount of about $125,000,000
mature on October 15, 1920, and on the same date semiannual interest will be
payable on fourth Liberty loan bonds to the amount of about $125,000,000. The
Treasury is offering for subscription an issue of 5 | per cent five months tax
certificates dated October 15, 1920, maturing March 15, 1921, in the amount of
$100,000,000 or thereabouts. A further reduction in both gross debt and floating
debt may, therefore, be expected in connection with the October 15 offering of
Treasury certiflcates.

Subscriptions for the October 15 issue closed on that day with a
surplus of $85,076,500. Ten of the Federal reserve districts oversubscribed their quota. The totai allotment was $124,252,500.
Another offering in the amount of $200,000,000, or thereabouts,
was made in November in order to meet the current requirements of
the Treasury, including particularly the maturity of nearly $100,000,000 of loan certificates on November 15 and the interest payment on the second Liberty loan on the same date of some $70,000,000. I t took the form of six months 5 | per cent loan certificates
dated November 15, 1920, maturing May 16, 1921. Subscriptions
closed promptly on November 15, and aggregated $292,696,500, the
total amount allotted being $232,124,000. Seven of the Federal reserve districts oversubscribed their quota and 40 per cent allotments
were made on oversubscriptions.
Tables showing in detail all the issues of certificates of indebtedness, from the beginning of the war to October 31, 1920, and a summary thereof are attached as Exhibits 1 and 2, pages 284 and 293.
The official circulars for the various offerings of loan and tax certificates, together with offers to redeem before maturity at the option of
the holders, issued since the Annual Eeport of the Secretary of the
Treasury for 1919, are attached as Exhibits 3 to 20, pages 295 to 314,
The aggregate aniount of certificates issued from the beginning of
the war, to October 31, 1920, was $43,989,326,308.53. Of this total,
$19,839,279,500 represent loan certificates; $9,148,235,000 were sold in
anticipation of income and profits taxes; and $15,001,811,808.53 comprised special issues. The amount of unmatured certificates of all
classes outstanding on October 31, 1920, aggregated $2,629,432,950^
consisting, as shown by the following table, of $1,782,040,000 tax cer»
tificates, $555,163,500 loan certificates, $259,375,000 Pittman Act
certificates, and $32,854,450 other special issues.




22

REPORT ON THE FINANCES.
Statement of Treasury certificates outstanding October 31, 1920.
TAX CERTIFICATES.

TD-1920, interest 4f per cent, dated Jan. 2,1920, due Dec. 15,1920_ $691, 026, 000
TM-1921, interest 4f per cent, dated Mar. 15, 1920, due Mar. 15,
1921
.
_
201, 370, 500
TM2-1921, interest 5$ per cent, dated July 15, 1920, due Mar. 15,
1921
74, 278, 000

TM3-1921, interest 5f per cent, dated Sept. 15, 1920, due Mar. 15,
1921_

106, 626, 500

TM4-1921, interest 5f per cent, dated Oct. 15, 1920, due Mar. 15,
1921
124, 252, 500

Total tax certiflcates due Mar. 15, 1921___
TJ-1921, interest 6 per cent, dated June 15, 1920, due June 15,
1921
TS-1921, interest 6 per cent, dated Sept.. 15, 1920, due Sept. 15,
1921____

506, 527, 500
242, 517, 000
341, 969, 500

LOAN C E R T I F I C A T E S .

H-1920, interest 5i per cent, dated May 17, 1920, due Nov. 15,
1920

'

1

$94,121, 500

A-1921, interest 5f per cent, dated June 15,1920, due Jan. 3, 1921_
176, 604, 000
B-1921, interest 5| per cent, dated July 15, 1920, due Jan. 15,
1921
^
126, 783, 500

C-1921, interest 6 per cent, dated Aug. 16, 1920, due Aug. 16, 1921_
.Total loan certificates series 1921

^___

157,654, 500
461, 042, 000

RECAPITULATION.

Total
Total
-- Total
Total

tax certificates
tax certiflcates
tax certificates
tax certiflcates

due Dec.
due Mar.
due .lune
due Sept.

15, 1920
15, 1921
15, 1921
15, 1921

^ $691, 026, 000
' 506, 527, 500
242, 517, 000
341, 969, 500

Total tax certificates
:
.
Loan certificates due Nov. 15, 1920
Loan certificates due Jan. 3, Jan. 15, and Aug. 16, 1921_____
'

Total tax and loan certificates,—
Pittman Act certificates
Other special certificates

1, 782, 040, 000
94,121, 500
461, 042, 000
2, 337, 203, .500
259, 375, 000
—__
32, 854, 450

Total outstanding Oct. 31, 1920
/

2, 629, 432, 950

PROGRAM FOR R E T I R E M E N T OF WAR DEBT.

The maturities of the Liberty loans and the privileges reserved to ^
the Treasury to call the Liberty bonds and Victory notes for redemption prior to maturity give the Treasury adequate control over
the war debt and make it practicable for the Government to follow
an orderly program of debt retirement, provided adequate revenues from taxation are maintained and the Government exercises
rigid economy in its expenditures. As has already been indicated,




SECRETARY OF THE TREASURY.

23

there has been gratifying improvement in the public debt situation. On the basis of the daily Treasury statements, the gross debt
of the United States on August 31, 1919, when it reached the peak,
was, in round figures, $26,596,000,000, of which about $4,000,000,000
represented loan and tax certificates maturing within the year. On
September 30, 1920, the gross debt was $24,087,000,000, a reduction
of over two and one-half billions of dollars, while the floating debt
was $2,347,000,000, or approximately $1,600,000,000 less than on
August 31, 1919. These reductions were effected chiefly by the
application of the proceeds of taxation and salvage and were made
possible to some extep.t by the reductions of Treasury balances resulting from the reduced scale of Governinent expenditures and the retirement of large amounts of outstanding loan certificates. The
gros^ debt on October 31, 1920, amounted to about $24,062,500,000, a
further reduction of about $25,000,000, while the fioating debt was
reduced to about $2,337,000,000. While there may be increases in
both gross debt and floating debt in the month of November as the
result of current operations, the Treasury confidently expects that
by the close of the current quarter on December 31, 1920, there will
be substantial decreases in the public debt more than sufficient to
overcome any such increases, and that both gross debt and floating
debt on December 31, 1920, will be reduced below the amounts.outstanding at the close of the quarter ending September 30, 1920.
The gross debt of $24,087,000,000 on September 30, 1920, included
$15,293,000,000 of Liberty bonds maturing between 1928 and 1947,
about 4J billions of Victory notes maturing May 20, 1923, almost
800 millions of war-savings certificates Eaaturing on January 1, 1923,
and $2,347,000,000 of loan and tax certificates maturing within a
year. Within a period of about two and a half years, ending in
May, 1923, there will thus become payable about 7-| billions of Government war obligations, of which app:i:'oximately 4^ billions repre-.
sent Victory notes. Earlier plans and expectations were disarranged by the unexpectedly large burdens placed upon the Treasury
by the transportation act. According to the estimates, there will
be paid on account of the railroads during the current fiscal year
probably a billion dollars," of which over three hundred millions has
already been called for and paid. Added to these experiditures are
large payments to the railroads on account of the settlement of
matters arising under Federal control. I t is obvious that these payments limit the progress which the Government had expected to
make in the retirement of the floating debt. I t is expected, however, that perhaps the heaviest payments on account of the railroads
will have been completed by the spring of next year, and then for
the remaining months of the fiscal year the Treasury looks forward to a more rapid- reduction of the floating debt. By




24

REPORT ON THE FINANCES.

'

^

the end of the fiscal year, in the absence of unforeseen contingencies, the floating debt should be brought considerably below two
billions, perhaps to as low as a billion and a half. The balance
should be retired during the fiscal year 1922, except such an amount
as it may be necessary to keep outstanding in order to avoid
money strain in« connection with the quarterly payments of income
and profits taxes and to finance the Government's current requirements in the intervals between the heavy 'tax receipts. By the end
of the fiscal year 1922, the Victory loan should also have been reduced
by at least a half billion dollars as a result of sinking-fund operations.
'
The remainder of the Victory loan, perhaps 3f billions, will then
have become substantially floating debt, as it will mature during
the following fiscal year. Provision should be made, therefore, under proper Treasury regulations and, if necessary, by partial calls
for redemption, for the acceptance of Victory notes during the fiscal
year 1923, before maturity, in paj^-ment of income and profits taxes.
Iri this way and through further sinking-fund operations, it. should
be possible to reduce the Victory loan so that at maturity it would
stand at about three billions of dollars. I n the meantime, on J a n u a r y
1, 1923, the unredeemed war-savings certificates of the series of 1918
will mature and must be provided for. The Treasury is committed
to the continuance of the Government savings movement and expects to push the campaign for the sale of savings securities during
the coming year, with the view particularly of assuring the continuity of the savings movement and making provision, so far as
possible, for maturing savings securities out of new sales, to the
extent that maturities are not covered by current receipts and other
current financing.
These measures for the handling of the floating debt and the
retirement of a substantial portion of the Victory loan before
maturity are feasible and necessary. If carried out, they should
make possible the refunding of such part of the Victory loan as
may require to be refunded on terms advantageous to the Government. The program can be accomplished, however, only by strict
econom37^ in Government expenditure and by the maintenance of
adequate revenues from taxation. Sound fiscal policy dictates that
the receipts from taxes and salvage be kept sufficiently high not only
to meet current bills, including* interest and sinking-fund charges,
but also to retire the present floating indebtedness and a considerable
part of the Victory notes before the close of the fiscal year 1923.
The maturities and redemption dates of the war debt maturing
after the Victory loan are so arranged that a substantially similar
program is feasible and should be carried out with resiDect to the several issues of Liberty bonds. The third Liberty loan, for example,



SECRETARY OF THE TREASURY.

25

will mature about five years after the maturity of the Victory loan,
on September 15, 1928, and after the Victory loan has been provided
for, sound fiscal policy would require that the sinking fund and surplus revenues then be applied to the bonds of the third Liberty loan,
and thereafter to the remaining Liberty bonds in the order of their
maturity. The cumulative sinking fund provided by the Victory
Liberty loan act is calculated to retire the funded war debt, less the
amount of foreign Government obligations held by the United States
on July 1, 1920, in about 25 years. By the operation of the sinking
fund and the application to the debt of surplus revenues and any
repayments by foreign Governments of the principal of their obligations, it should be feasible to pay off the whole war debt within a
measurable time. The war debt should be paid, not perpetuated, and
the time to pay it is as soon as possible after the end of the war.
There are attached hereto as Exhibit 21, page 315, a copy, of the
public-debt statement of the United States as of June 30, 1920; as
Exhibit 22, page 323, a preliminary statement of the public debt as of
October 31, 1920', on the basis of the daily Treasury statements; and
as Exhibit 23, page 324, a quarterly comparative public-debt statement on the basis of the daily Treasury statements.
TAXATION.

Fiscal and business conditions indicate the imperative need of
a thorough revision' of the tax law, in order that the more
important changes may, without important retroactive application, be made effective with respect to income and profits for the
calendar year 1921. The business interests of the country have a
right to know in advance the rate of taxation they will be called
upon to pay. The purchaser ..and consumer have an equally vital
interest in the early determination of the tax burden, and unless
the making of returns and the prompt payment of the tax are t o
be obstructed the Bureau of Internal Eevenue must be given a considerable period of time before the first installment pa3^ment in
which to interpret the new law, to study, prepare, and issue regulations, print the requisite forms, and create any new administrative machinery which may be necessary. -For more than 18 months—
since the opening 'of the special session of the Congress which began
May 19, 1919—the President and his chief financial advisers have
repeatedly urged revision of the internal-tax laws. There is pressing need for expedition in this matter by the Congress. Unless the
principal amendments to the income and excess-profits tax law be
adopted in the early months of 1921 they can not, without widespread, confusion, be made to apply to income for the calendar
year 1921.




26

REPORT ON T H E FINANCES.

Revision without reduction of revenues.
While it is highly desirable that the tax law should be revised at
the earliest possible date, it is imperative, in m};^ opinion, that the
revenue from taxation be maintained after this fiscal j^ear on a level
of not less than four billions a year, to the end at least of the fiscal
year 1923. The internal-revenue receipts may not greatly exceed
$4,000,000,000 even in the'fiscal year 1921, on the basis of existing
law. We now have a floating debt (tax and loan certificates maturing within 12 months) of approximately $2,350,000,000. This shorttime debt should not be funded, but should be retired, if possible,
by the end of the fiscal j^ear 1922. On January 1, 1923, war-savings
certificates now amounting to about $800,000,000 falL due, and on
May 20, 1923, Victory notes now amounting to about $4,250,000,000
mature. The retirement of the tax and loan certificates, the reduction of the volume of obligations maturing in 1923, to some extent
by the operations of the sinking fund, and the successful refunding
of the balance of those obligations constitute a colossal task to the
accomplishment of which the whole financial policy of the Government must be shaped. With obligations of approximately $7,500,000,000 maturing in the next two and a half years, it would be unwise,
unless compelled by the severest form of industrial depression, to plan
for aggregate tax receipts after this fiscal year and till at least the
end of the fiscal year 1923, of less than four billions a year. But this,
of course, does not mean that the public will have to pay as large
a tax amount in the aggregate in that period as in the current or the
preceding fiscal year.
Future relations between expenditures and receipts are beset with
great uncertainty. The estimated receipts and expenditures for the
fiscal years 1921 and 1922 are recited on pages 273 to 278 of this report. These estimates of expenditures were prepared by the several
departments and independent establishments and not by the Treasury,
except for the Treasury Department. If rigid economy is practiced
and the estimates .reduced wherever possible, there is some hope that
by the close of the fiscal year 1922 the floating debt may be extinguished, provided, of course, that adequate revenues from taxation
are maintained. There is no certain means, however, of predicting
the course of business or of incomes and profits, and it is a certainty
that tax receipts even under existing law will not keep up to the 1920
level. There are also frequent efforts by extraordinary measures, like
the soldiers' bonus, to bring about a radical increase in expenditures.
I n these circumstances—as was suggested in my letter of May 18,
1920, to the chairman of the Committee on Ways and Means of the
House of Eepresentatives—^the only question Avhich should be considered is whether a due regard for the protection of the Treasury




SECRETARY OF T H E

T:PVEASURY.

27

does not impose upon the Congress a real duty to seek out additional
sources of tax revenue for the next two years. The country at times
is being encouraged to expect a " reduction of taxes." Eevision of
taxes should be effected. There can a:nd should be a better distribution of the tax burden. Unwise taxes should be eliminated.
B u t any scheme which would after this fiscal year yield for several .
years to come less than four billions of dollars would be incompatible
with safety and sound finance. And the country should face the fact
that present taxes even may not in the future be relied upon to yield
the needed revenue. The letter of May 18, 1920, referred to, reads
as follows:
W A S H I N G T O N , May

18,

1920.

DEAR MR. FORDNEY: I received your letter of May 1, with t h e inclosed copies
of bills H. R. 13798, introduced by Mr. Johnson, and R. it. 13799, introduced by
Mr. Rainey, to provide for the payment of ad.1 usted compensation to the vete r a n s of the World War. Both bills impose an 80 per cent war-profits tax.,
T h e m.ost serious aspect of this com-pensation matter, as 1 pointed out when I
had the honor of appearing before the committee, is the proposal greatly to add,
especiaily at this time, to the present grievous burdens resting upon the people
of the Nation and upon the T r e a s u r y . The method of financing the proposal
raises gravo problems, but is secondary., T h e very heavy burdens which will
rest upon t h e Treasury by reason of laws already enacted, including particularly the recent railroad law, which it is estimated will entail an expenditure
of approximately $1,000,000,000, and also by reason of the delay in making provision to realize upon the Government's investments in railroads and ships,
taken in connection with the existing credit situation, suggest the need of grave
consideration of the question whether, quite aside from and in addition to any
taxation which it might be necessary to impose in order to pay a bonus to t h e
soldiers, it may not be necessary to provide for meeting the necessities of the
Government in larger measure from taxation. The total indebtedness of the
Government maturing within three years, represented by T r e a s u r y certificates, war-savings certificates and Victory notes, is in the neighborhood of
$8,000,000,000. I t is no longer possible to flnancvi the current needs of the Gov-'
ernment in p a r t by the issue of T r e a s u r y certificates except on onerous terms
which reflect upon the value of t h e Government's long-time bonds and depreciate them in the market. F u r t h e r m o r e , it would appear to be bad economy and
bad finance for the Government to borrow inoney on short-term certificates of
indebtedness ( m a t u r i n g within three to six months) to be invested for a term*
of years in railroads and ships.
I t is a , m a t t e r of serious concern to have the Government appearing in t h e
m a r k e t every few weeks for loans. Certainly nothing ought to be done to add
to existing credit expansion t h a t can possibly be avoided. T h e result would be
to increase prices and to make a difficult situation less satisfactory. I n t h e
circumstances obviously the Government ought to appear in the m a r k e t for loans
as infrequently as possible and for the lowest sums. Additional t a x e s are also
undesirable, but they may be less undesirable t h a n borrowing. They would a t
least have the effect in p a r t of enforcing economies. T h e first thing to do, I am
s u r e you will agree, is to keep F e d e r a l expenditures down to the minimum and
it is obvious also t h a t other governmental jurisdictions and private individuals
should do likewise.
I beg to submit to .your committee for its serious consideration the question'
whether, all things considered, it would not now be advisable to seek out addi-




28

REPORT^ ON THE FINANCES.

tional sources of revenue to meet the current requirements of the Government,
over and above any additional revenue which would be necessary if the soldier
bonus plan is determined upon, in order to obviate the necessity of continuing
in considerable measure to meet them by borrowing. Having these things in
mind, I hestitate to express an opinion concerning the bills which you have
submitted to me, taken by themselves. There are many grave objections, both
to the proposed new war-profits tax and to the alternative measure, a sales tax,
which I understand your committee is considering. If, in view of the urgent
needs of the Government for money to meet its requirements, your committee
concludes that it will be wise to raise a larger amount by taxation and desires
any suggestions from the Treasury, I shall be glad to have the experts place
themselves at its disposal. In the meantime I refrain from making any further
comment on either proposal.
For the reasons indicated, and for other reasons, I think it would be highly
unfortunate for any new obligations to be placed upon the Treasury through the
enactment of the bonus proposal in any form, however financed.
Very truly yours,
D . F . HousTOis?.
Hon. JOSEPH W . FORDNEY,

Chairman Committee on Ways and Means,
House of Representatives.

This letter voices my deliberate conviction, that " i t would be
highly unfortunate for any new obligations to be placed upon the
Treasury through the enactment of the bonus proposal in any form,
however financed." I repeat the statement with a renewed feeling
of its soundness. I n the form in which it passed the House of Eepresentatives, the bill providing for the soldiers' bonus would involve
new cash expenditures of not less than $1,250,000,000, to be made
during the period in which the Treasury will be most severely t r i e d '
by the burden of meeting heavy maturing obligations. I t would
increase the present tax burden, delay the lightening of that burden,
and dismay taxpayers with its promise or threat of future drafts of
like character upon the public purse. I t would, in short, dominate
the entire program of tax legislation during the next two years or
more. It seems plain that the bonus question must be definitel}^ settled before the larger outlines of the tax program for the next year
can be intelligently determined and that the bonus bill must be disposed of before the general revision of the tax law can proceed. The
Treasury's views with respect to the bonus proposal are set forth
more in detail elsewhere in this report on pages 102 and 103 under the
heading " Soldiers' bonus."
From this letter it will be noted that, in the Treasury's opinionj
there are many grave objections to a sales tax. Further consideration of the subject has convinced me that a general sales or turnover
tax is altogether inexpedient. I t would apply not only to the abso-'
lute necessities of life—the food and clothing of the very poor—^but
it would similarly raise the prices of the materials and equipment
used in agriculture and manufactures. I t would confer, in effect, a




.SECRETARY OF THE TREASURY.

29

substantial bounty upon large corporate combinations' and place at
corresponding disadvantage the smaller, or disassociated industries
which carry on separately the business operations that in many combinations and trusts are united under one ownership. The group of
independent producers would pay several taxes, the combination only
one tax. Finally, it would add a heavy administrative load to the
Bureau of Internal Eevenue which—burdened as it is with the responsibility of enforcing the child-labor tax law, the national prohibition act, the narcotic-drug law, the adulterated butter and mixed
flour tax laws-^is already near the limit of its capacity. Simplification of the tax law and restriction rather than extension of its scope
are as important from the standpoint of successful administration as
from that of the taxpayers' interests. Consumption taxes, if used at
all, should be laid upon other than absolute necessaries and restricted
to a few articles of widespread use, 'so that the administration of the
tax may be concentrated and made relatively simple.
As early as March of this year I pointed out in a letter to the
•chairman of the Committee on Ways and Means the necessity of a
simplification of the tax system and the repeal of the excess-profits
tax, a modification of the income supertaxes, and certain fundamental
administrative changes such as the giving to the Treasury the power
to make final settlement of tax claims and to issue regulations which
should be effective from the date of their approval. The letter in
question is as follows:
WASHINGTON, March 17, 1920.
Hon.

JOSEPH W . FORDNEY,

^

Chairman Committee on Ways and Means,
House of Representatives.
MY DEAR MR. FORDNEY : I am very glad to respond to your threefold request,
<:ommunicated through Dr. Adams, for estimates of the loss in revenue which
may be expected to result from the recent decision of the Supreme Court in the
stock-dividend case, for recommendations concerning a new method of dealing
with personal service corporations; and for definite suggestions looking to the
fundamental simplification of the income and profits taxes, brief enough to receive, but thoroughgoing enough to deserve, careful consideration at a session
of the Congress crowded with other questions of grave importance. To facilitate
their presentation, I may discuss these subjects in the inverse order in which
they have been mentioned above.
SIMPLIFICATION OF THE INCOME AND PROFITS TAXES.

In dealing with this subject I may go at once to what is, in many respects,
its most vital aspect—the question of early action. Public opinion has not yet
awakened to the gravity of the consequences which are likely to follow a failure
to simplify the tax law at this legislative session. Unless the necessary amendments be passed now, they will be delayed in all probability, I understand,
until the autum or mnter of the year 1921, with the result, unless they are
to disrupt the administrative procedure and confuse the necessary calculations
of the taxpayer by being made retroactive, that income and profits taxes must
continue to be collected on the basis of the present law until the close of the



30

'

REPORT ON THE FINANCES.

calendar year 1922, and, in the case of some taxpayers on the so-caUed fiscal
year basis, until the early months of the calendar year.1923. I can not contemplate such delay without the gravest apprehension. An imperfect and uncertain
tax affects the future even more adversely than the present, and for similar
reasons it is costly and unwise to make a beneficent modification of the tax lav/
retroactive or even to delay its adoption and announcement until the time
at which it is to take effect.
It would be manifestly unsafe, in my opinion, to reduce now the income and
profits taxes to be collected in the calendar years 1920. and 1921, but I can see
nothing in the financial prospects for the calendar year 1922 and thereafter
which would make impossible or unwise the very modest reduction involved in
the plan of simplification hereinafter presented; and it should never be forgotten
that the tax system itself is one of the most powerful causal factors affecting
public expenditures. A tax s.ystem yielding, or likely to yield in the future, a
surplus of revenue'over expenditures is an open invitation to public extravagance, whereas an announced resolution to reduce taxes as the occasion which
called them forth recedes into the past is one of the most potent means of insuring economy in public expenditures. The people, therefore, consumers as well
as producers, indirect as well as direct taxpayers, may fairly ask to be told
now the earliest future date at which the most obsolete features of the tax law
are to be repealed.
Complexity in tax laws violates the most fundamental canon of taxation—
that the liability shall be certain and definite. It is not merely a source of
irritation, labor, and expense to the taxpayer; but when conjoined, as it is in
the present law, Avith the heavy rates of taxation which war exigency has forced
upon us, it becomes a major menace, threatening enterprise with heavy but
indefinable future obligations, generating a cloud of old claims and potential
back taxes which fill the taxpayer with dread, ^creating, to be sure," an attractive
source^ of additional revenue, but clogging the administrative machinery and
threatening, indeed, its possible breakdown.
FINAL D E T E R M I N A T I O N AND SETTLEMENT OF TAX CLAIMS AND ASSESSMENTS.

1, I recommend, therefore, as the most urgent and important of the measures
of simplification which could advantageously be put into effect at once, an
amendment authorizing the Commissioner of Internal Revenue, with the consent of the taxpayer and the approval of the Secretary of the Treasury (or
under such other public safeguards as the Congress may prefer), to make a
final determination and settlement of any -tax claim or assessment, which shall
not thereafter be reopened by the Government or modified or set aside by any
officer, employee, or court of the United States, except upon a showing of fraud,
malfeasance, or misrepresentation of fact materially affecting the determination thus made.
This recommendation is of major importance. At present the taxpayer never
knows when he is through. Every time an old ruling is changed by court decision, opinion of the Attorney General, or reconsideration by the department, the
dep££rtment feels bound to apply the new ruling to past transactions. The
necessity of constantly correcting old returns and settlements is as distressing
to the department as it is obnoxious to the taxpayer. But an even more serious
situation arises in connection with the assessment of back taxes. The tax return of a large corporation is likely to be crowded with debatable points whict
the corporation, in the first instance, usually decides in its own favor. The
auditing of these returns has been necessarily delayed by the inability of the
Bureau of Internal Revenue to engage and hold a sufficient force of experts



SECRETARY OF THE TREASURY.

31

to audit promptly the more complex and difficult returns; but when the audit
comes to be made it ordinarily brings to light a large amount of back taxes.
A prompt determination and collection of such back taxes due would probably
bring in additional revenue exceeding $1,000,000,000. On the other hand, this
situation must fill the taxpayers concerned with the gravest apprehension. If
present taxes be continued and a period of industrial depression ensues during
which the department finds the time.and the men with which to clear up both
current and back taxes within the same year the result may be highly disastrous
to business.
The commissioner should be empowered and directed to dispose of these
cases promptly and finally. This proceciure would bring in much additional
revenue, relieve business from grave uncertainty, keep out of the courts many
debatable cases, and help to avert an administrative deadlock.
INTERPRETATIVE REGULATIONS OR TREASURY D E C I S I O N S NOT TO BE RETROACTIVE.

2. As a desirable concomitant of the preceding suggestion and for reasons
stated in explaining that suggestion, I recommend the adoption of an. amendment providing in substance that in case a regulation or Treasury decision made
by the commissioner or the Secretary, or by the commissioner with the approval
of the Secretary, is reversed by the subsequent issue of a similar regulation or
decision, and such reversal is not immediately caused by or based upon an
opinion of the Attorney General or a decision of a court of competent jurisdiction, such new regulation or decision may be made effective from the date
of approval.
^
FIVE-YEAR L I M I T A T I O N ON T I M E FOR BRINGING S U I T FOR COLLECTION OF T A X E S .

3. Section 250 of the revenue act of 1918 now provides, in subdivision (d),
that no suit or proceeding for the collection of any tax shall be begun after the
expiration of five years after the date when the return was due or was made,
except in the case of false or fraudulent returns with intent to evade the tax.
This subdivision has been held to apply only to taxes due under the revenue
act of 1918. I recommend that this time limit be extended to all income and
profits taxes due either under present or prior acts of Congress.
S I M P L I F I C A T I O N OF LIBERTY BOND E X E M P T I O N .

4. The exemptions from income surtaxes authorized by the several Liberty
bond acts are highly complex and responsible for perhaps the most intricate
schedule of the return which the individual taxpayer is required to fill out. My
predecessor in office has recommended a consolidation of these exemptions which,
while not breaking faith with the holders of Liberty bonds, would simplify their
tax returns and operate to strengthen the market standing of such bonds without
in any appreciable amount reducing the public revenue. I heartily indorse this
recommendation, the detailed provisions of which may be found on pages 99
and 100 of the Annual Report of the Secretary of the Treasury for 1919.
C O M P E N S A T I O N FOR P E R S O N A L SERVICE AND G A I N S FROM SALES OR DEALINGS I N
PROPERTY.

5. The heavy surtaxes cause real hardships when income earned over a period
of years is realized or received in one year and taxed as a lump sum' in that
year. I recommend, therefore, that such extraordinary income, when it constitutes a material part of the gross income for that year, be deemed to have ac-




32

REPORT ON THE FINANCES.

crued or been received ratably during the years in which the service was rendered or the property held, and the amount of the extraordinary income so
assigned to any year be subjected to the surtax rates prescribed by law for that
year.
EXCESS-PROFITS

TAX.

6. Provision for the simplification and fundamental modification or repeal of
the excess-profits tax at the earliest possible future date should, in my opinion,
be made now. In explaining this conclusion it is unnecessary to enter into a
discussion of controversial details. Two facts impress me as indisputable and
conclusive: First, the application or calculation of the excess-profits tax is so
complex that it has proved impossible to keep up to date the administrative
work of audit and assessment. New returns are being made faster than old
returns can be audited, resulting in an accumulation of claims and potential
back taxes, the, dangers of which have already been described. Second, the
profits tax is confined to a small fraction (in number) of the business concerns
of the country. Personal-service corporations, partnerships, sole proprietors,
and most forms of trust organizations are exempt from the tax. If the principle
be sound, it should be extended to all forms of business organization, a proposal which administrative considerations alone stamp as impracticable either
in the present or any future period near enough to be worth consideration.
The general course or principle which simplification of this part of the tax
law should follow is, I believe, reasonably clear. The outstanding feature af
tiae present' system of income taxation in its most important application to
business income is the fact that we employ for this, purpose two systems of
taxation which are incommensurate and irreconcilable. Corporations pay the
profits tax and normal income tax wliile their stockholders pay surtaxes on
dividends or distributed profits, but nothing in respect of the undistributed corporate profits. On the other hand, sole proprietors and the members of partnerships pay full income tax, normal tax, and surtaxes upon the entire profits
of their business whether distributed or not, but are exempt from the profits
tax. The profits tax on corporations is evidently meant to be a rough equivalent for the surtaxes levied upon the reinvested or undistributed profits of other
forms of business. But no true equivalence is reached. In 1918 the members
of a well-known partnership paid nearly $1,125,000 more taxes than they would
have paid had their business been organized as a corporation. And the contrary is quite as frequently true.
There should be one system and not two systems of income taxation applicable to persons engaged in business. Substantial uniformity of treatment, or
at least a nearer approach to uniformity of treatment, could be achieved in a
variety of ways, the details of which it is not necessary to discuss here. I outline below one such plan which has many attractive features, the detailed provisions of which I shall be glad to supply upon request. The technical details,
while important, are elastic and susceptible of modification. The essential
thing is to simplify the excess-profits tax and grasp a uniquely opportune
moment to remedy a deeply rooted defect in our system of income taxation by
providing for the' just taxation of the undistributed profits of corporations at a
time when such taxation represents simplification and relief, not further complexity and heavier burdens. Equalization of the tax upon corporate and unincorporated business can be accomplished now with benefit to the corporations,
the Government, and the general public. We should grasp an: opportunity
which may never return. The principal features of the plan referred to above
are as follows:




SECRETARY OF THE TREASURY.

3':'
3;'

(a) This plan is designed, first,, to eliminate from the war-profits and
excess-profits tax^law (except as it is applied to profits derived from the socalled "Wai^ contracts") all reference to or use of " invested . capital," and,
second,'to place the taxation of incorporated and unincorporated business concerns, so far as may be, on substantially the same basis.
(&) The flrst object is accomplished by substituting for the i[ireseiit graduated
rates of 20 and 40 per cent, a flat tax on proflts in excess of^the distributed earn- ..
ings. A rate of 20 per cent has been used as the basis of certain estimates :,
quoted below, but the adoption of the proper rate is, of course, a matter which the
committee will desire to settle for itself. It wonld be possible to adopt adeclining
rate, say, of 25 per cent for the flscal year in which the suggested amendment is
in operation, 20 per cent for the secoiad year, and 15 per cent thereafter. It is
only necessary that the rate should be fixed at one flgure for a particular year.
(c) The second object could be accomplished (although the plan would be
well worth while without this feature) by making it explicit in the law that
corporations have the right to pay dividends in bonds or proraises to pay bearing a fair rate of interest which are taxable to the stockholders as ordinary
dividends, or by authorizing corporations to receive back from their stockholders as "paid-in surplus" cash or other dividends recently distributed.
Under these or analogous procedures a corporation could retain its proflts for
use in the business and yet convert the proflts tax into a genuine income tax.
The excess-proflts tax would thus become a flat tax on undistributed earnings;
" invested capital" would practically disappear; and the corporation, if it desired, could place itself on substantiaUy the same basis as the partnership, the
personal-service, corporation, and the sole proprietor. The principal object of
this suggested amendment is to simplify the tax by removing the greatest source
of inequality and complexity. now found in the tax laws, i. e., the use, of
" invested capital."
(d) Revenue needs make it impracticable, in my opinion, to apply the preceding amendment to.profits for the calendar year 1920, the taxes upon which
will be payable in the calendar year 1921. But it should be put into effect as
soon thereafter as the diminishing expenditures of the Government will permit.
. It is estimated that with a 20 per cent rate and on the basis of present corporate
net income the suggested amendment would reduce the tax revenue by approximately $430,000,000 a year. If, for iastance, the amendment were adopted and
made to apply to income received on and after January 1, 1921, the flrst reduction in the tax collections would occur iin the last half of the fiscal year 1922, and
would amount to^ $215,000,000 for that fiscal year.
(e) However, present corporate conditions can hardly be maintained, * and if
corporate income declines and invested capital ihcreases as rapidly as they
have done in the past 12 months the proposed amendment would probably cause
no reduction in the future revenue. New schemes are constantly being devised
for the purpose of increasing invested capital. It is time to provide for a modification of the excess-proflts tax, not only to relieve the taxpayer, but because of
an approaching decline in its productivity. .
,
REDUCTION

OF SURTAXES

ON I N C O M E

SAVED AND

REINVESTED.

T.tjIn connection with the suggested tax on the undistributed profits of corporations, attention may appropriately be directed to a possible extension of its
application which would go far to rectify one of the most dangerous defects of
the present income tax. Because of possible doubt about the effects of such a
change upon the revenue, and because the details of the proposal as they now
13799—FI 1920^ 3



34.

REPORT ON THE FINANCES..

present themselves to my mind could not accurately be said to simplify the
mere computation of the tax, I do not urge its adoption at this seskon of the
Congress; but I have no hesitation in expressing my personal opinion that, this
or some similar amendment embodying the same Idea could advantageously be
adopted, to take effect at the earliest future date at which, in the opinion of the
Congress, revenue needs and prospects periliit.
While it is vitally important that savirig and reinvestment effected through
the medium of the corporation should not be dealt with more leniently than
similar savings made by the partnership or individual, it is equally important
that the methods of taxation employed should in a i r cases penalize saving and
investment as little as possible. Our present surtaxes offend greatly in this
respect. We attempt to levy surtaxes, rising to 65 per cent upon ordinary
income, while there are thousand's of millions of tax-free securities in the
market, the income from which is practically exempt from all taxation. The
result is to make investment by wealthier taxpayers in the expansion of industry
or foreign trade unattractive and unprofitable. It is obvious that this situation
should be remedied.
The remedy which most commends itself to my judgment at the present time
is to reduce (e. g., by one-fourth) surtaxes attributable to that part of the net
income which is saved and reinvested in business or property yielding taxable
income and at the same time to limit the total amount of such reduced surtaxes t o the same percentage (e. g., 20 per cent) of the reinvested income as
the rate imposed upon the undistributed profits of corporations. The maximum
tax upon such saved income would thus be iapproximately the same, whether
reinvested by the individual, the partnership, or the corporation, and whether
reinvested personally by the stockholders of a corporation or by such corporation for its stockholders. If at any later date the profits of a corporation which
had paid the undistributed profits tax came to be distributed, a credit equal
to the tax already paid by the corporation could, if it were thought wise, be
easily granted to the stockholders.
The revenue lost by such an amendment could, if necessary, be made up by
increasing the normal tax- or that portion of the surtaxes attributable to income
spent for purposes of consumption. But the time is fast approaching when the
adoption of such an amendment would cause little real reduction of the revenue.
We can not long continue to collect surtaxes rising to 65 per cent upon income
from ordinary business and investment while exempt interest at a remunerative
rate can easily be secured from tax-free bonds. AVe must take something less
than 65 per cent or in the end take nothing. On the other hand, no reduction
is urged in respect of income spent for unnecessary or ostentatious consumption. Income saved and reinvested in property or business yielding a taxable
income should be taxed at a lower rate; income spent for consumption or invested in tax-exempt securities should pay at established rates both the normal
tax and surtaxes. To the extent that it falls on savings the income tax should
be reduced; to the extent that it is a tax on waste it should be maintained or
even increased.
PERSONAL-SERVICE CORPORATIONS.

Under the revenue act of 1918 personal-service corporations are treated substantially, as partnerships; i. e., the corporation as such is exempt from incom'e,
proflts, and capital-stock taxes, but stockholders are subject to both normal
income tax and surtaxes upon their full distributive shares in the net income
of the corporation whether such income is actually distributed or not. The
validity of this procedure is involved in the gravest doubt by the. doctrine enunciated in the stock-dividend case, which apparently leads to the conclusion that



SECRETARY 01] T H E TREASURY.

35

a stockholder bf a corporation, particularly a minority stockholder, can not be
. taxed (without apportionment according to population) upon a s h a r e of the corporation's income which h e h a s not actually received. I t is possible, notwithstanding t h e above reasoning, t h a t t h e present s t a t u t o r y method of dealing with
personal-service corporations might be sustained on the ground t h a t it represents
in general, in its effects upon persorial-service corporations and their stockholders a s a class, a relief provision .imposed in lieu of the excess-profits t a x
which is unsuited to personal-service corporations and if .ai)pUed' tb.'them .^gen^.
erally would in many cases work intolerable hardships. B u t this interesting
question need not be discussed here. There is a grave possibility, if not probability, t h a t the stock-dividend decision practically exempts from all income
and profits taxation a group of approximately 2,500 corporations and their stockholders, who would pay under existing law—and should in fairness pay at
least—from five to six million dollars. This possibility with its consequent un
certainties should plainly be removed by the passage of amendatory legislation.
F o r t u n a t e l y it is possible to place personal-service corporations and their
stockholders in nearly the same position t h a t they now occupy—in a manner
wholly consistent With t h e spirit and letter of the ruling of the Supreme Court—
by applying to such corporation and after J a n u a r y 1, 1918, the t a x on undistributed profits recommended above for all corporations on and after J a n u a r y
1, 1921. This t a x would, of course, be in lieu of the war-profits and excessprofits t a x •which, because of its dependence upon " invested capital," can not intelligently be applied, to personalrservice- corporations- in which, by .definition,
" c a p i t a l (whether invested or borrovzed) is n o t a material income-producing
factor." I t is plain also t h a t the law should be so amended as to t a x dividends
received by t h e stockholders of personal-service corporations in the same manner
as other dividends a r e taxed.
I t would be desirable, moreover, in my opinion, to permit personal-service
corporations a t their option to distribute, during the year 1920 cash or other
t a x a b l e dividends to the full exteiat of their profits earned during 1918 and 1919,
but not yet d i s t r i b u t e d ; and such retroactive distributions should be made taxable by the stockholders a t the s u r t a x rates applicable to the years in which the
profits were, accumulated by the corporation. By so doing personal-service cor. porations could, if they desired, place themselves and their stockholders in
nearly t h e same position t h a t they now occupy, i. e., they would pay no proflts
t a x a t all, while the entire corporate income (having been distributed) would
, be t a x a b . e in the* h a n d s *bf the stockholders. Indeed, so closely would the. proposed plan resemble in effect the method of taxing personal-service corporations,
prescribed in the revenue act of 1918 t h a t it would be eminently proper—and
probably a source of great convenience to the t a x p a y e r s concerned—to authorize
personal-service corporations with the written consent of their stockholders to
elect voluntarily to pay taxes for the years 1918 a n d 1919 on the basis pre-,
scribed in the revenue act of 1918.
E S T I M A T E S OF PROBABLE L O S S I N REVENUE RESULTING FROM T H E DECISION I N
EISNER,V. MACOMBEK.

' The loss resulting from this decision falls into two principal classes, t h a t
chargeable to the possible exemption of public-service corporations a n d their
stockholders, and t h a t chargeable to the complete exemption of stock dividends.
T h e r e ' a r e about 2,500 personal-service corporations having net income of
approximately $30,000,000 involved, the taxes upon which, under existing law,
do not exceed $6,000,000 for the year 1918, and a shghtly smaller amount for
t h e year 1919. The aggregate loss for the" two years, 1918 and 1919, would




36

REPORT ON THE FINANCES.

probably be between $10,000,000 and. $12,000,000.. .The need for legislation, in
this connection arises not, so much from the possible loss of revenue as from
the. obvious undesirability of' permitting 2,.500 corporations and their stockholders to escape both the taxes upon corporations and those imposed upon
individuals.
The loss resulting from the exemption^ of stock dividends is very difficult
to estimate, owing to the fact that such dividends have' not in the past been,
separately shown on the returns, while the losses from the exemption of stock
dividends as such will be partially or wholly offset by the heavier taxes resulting from the decision upon any gains realized from subsequent sale of the stock,
and by other offsetting factors which need, not be mentioned in detail. After
consideration of these factors the Actuary of the Treasury Department estimates that t h e n e t loss or refund of taxes already paid—i. e., taxes for the
period ending with the year 1918 will be in the neighborhood of $35,000,000—
and that taxes for the year 1919 (payable in the calendar year of 1920)-will be
reduced by approximately $70,000,000 on this account. These flgures may be
regarded as maxima, and most of the experts of thfe department are of the
opinion that the entire net loss resulting from the exemption of stock dividends
will amount to less than $25,000,000.
The suggestions made above do not comprehend all the changes in the present
law which, in my opinion, could be advantageously adopted at the present session of Congress. I have conflned my suggestions to an irreducible minimum
of measures, looking largely to t h e simpliflcation of the income and profits
taxes, for the consideration of which there still remains time and action upon
which at this session of Congress may reasonably be asked by the taxpaying
public. I shall be glad, upon request, to submit drafts of amendments embodying the suggestions here presented, and to place at your disposal for the work
of tax revision all of the personnel and facilities of the Treasury Department.
Respectfully,
.D. F. HOUSTON, Secretary.

Income surtaxes.
Since the adoption of the heavy war surtaxes in the revenue act
of 1917, the Treasury has repeatedly called attention to the fact that
these surtaxes are excessive; that they have passed the point of miaximum productivity and are rapidly driving the wealthier taxpayers
to transfer their investments into the thousands of millions of taxfree securities which compete so disastrously with the industrial and
railroad securities upon the ready purchase of which the development of industry and the expansion of foreign trade intimately
depend.
I t seems idle to speculate in the abstract as to whether or not a
progressive income-tax schedule rising to rates in excess of 70 per cent
is justifiable. We are confronted with a condition, not a theory.
T h e fact is that such rates can npt be successfully collected. Tax returns and* statistics are demonstrating what it should require no
statistical evidence to prove. F o r the year 1916 net income amounting to $992,972,985 was included in the returns of taxpayers having
net income over $300,000 a year. This aggregate fell to $731,372,153




SECRETARY OF THE TREASURY.

37

for the year 1917 and to $392,247,329 for the year 1918. There is little
reason to believe that the actual income of the richer taxpayers of the
country had fallen in that interval. I t is the taxable iricome which
has been reduced and almost certainly through investment by the
richer taxpayers in tax-exempt properties. Whatever one may believe, therefore, about the abstract propriety of projecting incometax rates to a point above 70 per cent, when the taxpayers affected
are subject also to State and local taxation, the fact remains that
to retain such rates in the. tax law is to cling to a shadow while
relinquishing the substance. The effective way to tax the rich is to
adopt rates that do not force investment in tax-exempt securities.
The simplest remedy for this situation would be a general reduction of the higher surtaxes, accompanied by increases in the
lower surtax rates. I t is suggested that the Congress consider
such a general revision, with a reduction to a maximum rate lower
than that contained in the present law, provided acceptable new
taxes of equal yield can be found. But; if for the immediate
future it is found impracticable to reduce the higher surtaxes to a
level which would induce or make it profitable for wealthier taxpayers to select taxable rather than tax-exempt investments, an
effective remedy might be found in limiting the surtax rates possibly to about 20 per cent on that part of the taxpayer's income which
is saved and reinvested in property or business yielding taxable income (hereinafter referred to as " s a v e d " income), leaving higher,
rates—perhaps the present rates—upon income which is spent or
wasted or invested in tax-free securities.
By adopting this partial abatement, the yield of the surtaxes would
not be as greatly reduced as if the general level of the surtaxes
were lowered, a premium would be placed upon saving and a penalty
upon spending, and a legitimate check would be imposed upon investment in nontaxable's. This policy could be applied in a number of
different ways, which the proper committees of the Congress may
desire to consider in detail. Thus, a reduction on all saved income
could be given by including it in the taxable income at 80 per cent of
the full amount; or the proportionate amount of surtax attributable
to that part of the income which is saved could, for example, be reduced one-fifth, with a provision that such surtax should never exceed
20 per cent of the saved income. But the simplest plan would be to
treat saved income as " at the top " of the taxable income, or, in other
words, as subject to the highest surtax rates, and then limit the tax
on saved income to 20 per cent or whatever other rate was selected
as the proper limit. The last plan would work as follows in the case
of a head of a family Avith no dependents having an income of
$300,000, of which $100,000 is " s a v e d " and $200,000 spent. Under
the present law he would pay $23,680 normal tax and $137,510 surtax,



38

'

' REPORT ON THE FINANCES.

or $161,190 in all. With the limited tax on saved income in the third
form suggested above, the surtax on $200,000 of spent income would
be $77,510; the 20 per cent surtax on $100,000 of saved income would
be $20,000; and the total tax would be $121,190, a reduction of $40,000
from the present tax. I t is important to note not only that the limited
rate of 20 per cent would make a " taxable " investment at 7^ per cent
approximately as attractive, so far as Federal taxation is concerned, as
a tax-free investment at 6 per cent, but.the taxpayer would have the
tax abatement of ^$40,000 to use or iuA^est as additional capital, a consideration which would throw the balance in favor of investment in
industrial or other taxable fields. The maximum loss of revenue
which would result from the limitation of surtaxes on saved income
to 20 per cent is estimated at $230,000,000. This could be made up
by increasing the lower surtaxes, or, if it is thought wise, the normal
tax, or by adopting some of the new taxes later indicated.
I n any revision of the surtaxes, attention should be given to the
serious direct loss involved in our present treatment of income derived from tax-free securities. The Annual Eeport of the Secretar}^
of the Treasury for the year 1919 called attention to the apparent
injustice and unwisdom of the bounty or privilege now accorded
to this class of income. I heartily indorse the remedial recommendations alluded to in the following excerpt from that report:
In that connection I call attention to the urgent necessity of revisipn of the
revenue law so as to require that, for the purpose of ascertaining the amount
of surtax payable by a taxpayer, his.income from State and municipal bonds
shallbe reported and included in his total income^ and the portion of his income
which is subject.to taxation taxed at the rates specifled in the act in respect
to a total income of such amount. The Treasury's recommendations in this
respect have been transmitted to the appropriate committees of Congress in
connection.with the revenue act of 1918, and again in the present calendar year.
Under the present law a person having an income- of, say, $1,000,000 from taxable securities would, upon the sale of half his property and the investment of
the proceeds of that half in State or municipal bonds, not only obtain exemption
for the income derived from such investment in State and municipal bonds, but
greatly reduce the surtaxes payable in respect to his other incoine. It is intolerable that taxpayers should be allowed, by purchase of exempt securities,
not only to obtain exemption with respect to the income derived therefrom, but
to reduce the supertaxes upon their other income, and to have the supertaxes
upon their other income determined upon the assumption, contrary to fact,
that they are not in possession of income derived from State and municipal
bonds.
ExcesS'frofjts tax.

The reasons for the repeal of the excess-profits tax should be convincing even to those who on grounds of theory or general political
philosophy are in favor of taxes of this nature. The tax does
not attain in practice the theoretical end at which it aims.
It
discriminates against conservatively financed corporations and in



SECRETARY OF THE TREASURY.

39

favor of those whose capitalization is exaggerated; indeed, many
overcapitalized corporations escape with unduly small contributions.
I t is exceedingly complex in its application and difficult of administration, despite the fact that it is limited to one class of business concerns—corporations. Moreover, it is rapidly losing its productivity.
The invested capital of the average corporation, earning profits high
enough to subject it to the excess-profit tax, is now estimated to be
increasing at the approximate rate of 12 per cent a year, while the
income of the average corporation is almost certainly declining at
as great a rate. Both movements cut into the productivity of the tax.
If the present changes"in capital and income continue for some time
in the future, as now seems probable, large reduction may be expected in the yield of the excess-profits tax. For the present fiscal
year, the profits tax, with collections of back taxes, is estimated to
yield about $1,250,000,000, and for the fiscal year 1922 about $800,000,000, as against an estimated yield for the .fiscal year 1920 of
slightly over $2,000,000,000.
"
.
The excess-profits tax, however, must be replaced, not merely
repealed, and I believe t h a t it should be replaced in large part by
some form of corporation profits tax. This conclusion is based not
only upon the Government's need for revenue but upon grounds of
equality and justice. So long as taxpayers other than corporations
are subject to a progressive income tax rising now to over .70 per cent,
corporation profits should not be allowed to escape with a single tax
of only 10 per cent. Individuals (and partnerships in effect) pay
normal taxes and surtaxes upon, all net income, whether spent, saved,
or retained in the business of the taxpayer. Corporations pay only
normal tax on such income, although their stockholders pay in addition surtaxes on the profits of the corporation which are distributed
as dividends. But no surtaxes are paid on or with respect to the
profits not distributed. I t seems plain, therefore, that when the
excess-profits tax is repealed some equivalent or compensatory tax
should be placed upon the corporatiori in lieu of the surtax upon reinvested income paid by other taxpayers. Unless this be done, a
heavy premium would be given to the corporate form of business.
If, for example, three equal partners in a business invest capital of
$2,000,000 and make net profits of $600,000, draw out $75,000 as salary
and $75,000 as profits, leaving $450,000 in the business, these partners would together pay iriCo:tne taxes of approximately $279,570.
But if they should incorporate the business, the total income and
-capital-stock taxes on the co:rporation and its three stockholders
would, in case the excess-profits tax were repealed, be only $75,865.
One partial substitute for the excess-profits tax would be a tax on
the undistributed profits of corporations as nearly as possible equal to
the surtax imposed upon the saved income of the individual. If



40

REPORT ON TI-IE ^FINANCES.

individuals doing business in partnership pay 20 per cent on undistributed profits, individuals doing business through the medium
of the corporation should pay 20 per cent. This plan could be
applied in many different ways: (1) The distributed profits of tlie
corporation could be substituted for the so-called excess-profits
credit of the excess^profits tax and the remaining or taxable profits
be taxed at 20 per cent; or (2) a 20 per cent tax on undistributed
profits could be applied as a corporation surtax under Title I I of
the revenue act; or (3) corporations could in form be subjected to
the same progressive surtaxes as individuals—a proposal which
would prove very advantageous to all corporations with small incomes—with a proviso that the total surtax should never exceed an
amount equal to 20 per cent of the undistributed profits. None of
these plans presents any grave administrative diiBculty or involves
any particular complexity of operation.
If an undistributed profits tax be adopted, it should contain provisions expressly recognizing the various devices by which many corporations find it possible to distribute statutory " dividends," while
actually retaining the profits in the business. The object should be
to subject stockholders of corporations to the same tax burdens imposed upon the members of a partnership, and any procedure which
facilitates the attainment of this object should be welcomed. The
stockholders of any corporation should be permitted, for example,
by a unanimous vote to elect to be taxed as the members of a partnership or as the stockholders of a personal-service corporation are now
taxed under existing law. I t would be advisable seriously to consider
the propriety of requiring every corporation, 95 per cent or more of
the stock of which is held by one individual, to be treated as a partnership or„ personal-service corporation. This would go far toward
solving the problem whose solution is now. vainly sought in section
220 of the revenue act of 1918.
The object of these suggestions is to establish so far as possible an
exact equivalence between the taxation of corporation stockholders
and other taxpayers. The undistributed-profits tax appears to be
one practical means of obtaining approximate equality of treatment.
This is not only to satisfy a theoretical sense of justice. I t is, I believe, the course of practical wisdom. At some points the revenue law
as now formulated discriminates unjustifiably against the individual
in favor of the corporation. At others it discriminates unduly against
corporations in favor of the individual.
These discriminations operate to force man}^ business enterprises
into forms of organization not intrinsically the best suited to their
needs. Furthermore, the most troublesome problem of income taxation is the same in case of both corporations and unincorporated
taxpayers, i. e., the repressive effects of heavy rates when applied



SECRETARY OF THE TREASURY.

i

41

.

to income which is saved and reinvested. That and many other
problems of personal and corporation income taxation will best be
decided when linked together. We are now taxing reinvested income of individuals at rates which may exceed 70 per cent. The
error of this treatment 'appears plainly when we attempt to apply
such rates in the case of corporations. I t would be unthinkable to
tax the saved income of corporations at 70 per cent. On the pther
hand the stockholders of corporations are forced to pay through
the corporation a higher normal tax than individuals. They receive no credit against this normal tax for the personal exemptions,
and—under existing law—profits which have paid both the corporation income tax and the heavy excess-profits tax are again subjected,
when distributed as dividends to stockholders, to surtaxes rising in
some cases to 65 per cent. I n the latter instances the discrimination
is against the corporation and its stockholders. Like treatment
should prove in "the long run the surest means of obtaining just and
wholesome treatment. Separate treatment will in the long run conduce to corporation baiting. If corporations insist upon different
treatment, they are in the long run likely to receive worse treatment.
The next revision of the tax law should place the income tax upon
an enduring foundation of sound principle. Lasting solutions and
not temporary makeshifts should be sought.
The tax on undistributed profits has certain obvious disadvantages,
as, in fact, have all tax proposals. I t is widely opposed because it
would, in form, fall on reinvested profits, although the personalincome tax falls also on reinvested profits. I t is believed also by
many honest and able men that, notwithstanding thei fact that it
would reduce the tax burden upon corporations, it would tend to
cause an undue dissemination of corporation profits and subject directors of corporations to a strong temptation to pay out as dividends
profits actually needed in extending or maintaining the business itself.
If,*in the opinion of the Congress, these or other difficulties make
the undistributed-profits tax unavailable, the excess-profits tax might
be replaced, in part at least, by a compensatory corporation tax, or
" corporation surtax," at a flat rate. Such a tax, at any practicable
rate, can not be made the equivalent of the individual or personal
surtaxes on reinvested iricome. I t would leave the corporation tax
less burdensome than the personal tax on some business concerns and
more burdensome than the personal tax on others. The undistributedprofits plan would tax income saved by corporations at the maximum
rate paid bj^ individuals on saved income, while leaving the corporation an option to distribute the profits—eitlier constructively or actually-^and thus subject such profits to taxation in the liands of the
stockholders. But the " corporation surtax " has the great merit of



42

REPORT ON T H E FINANCES.

simplicity, and such a tax has recently blen adopted in the United
Kingdom for precisely the purposes here set forth; that is, to secure
from corporations some contribution in lieu of the surtax collected
from individuals on reinvested income. The discussion of this tax
by the chancellor of the exchequer iri his firiancial statement of April
19^ 1920, is enlightening, arid it is quoted in part below. The italics
are mine:
CORPORATION-PROFITS TAX.

I propose therefore to introduce this year a new tax which, for the time being,
will be levied concurrently With the excess-profits duty, but which, either in the
form in which I propose it or in an amended form, may in the future prove a
substitute for it. The character of the new tax, a permanent tax, has been the subject of most anxious consideration by the Government and myself and, as I have
previously mentioned, I think, in the House last year, I sent out a mission to Canada and the United States to investigate and to study the schemes of profits taxation in force in those countries, and. to see whether we could derive any lessons
of use'to us from their, practice and experience. The results of the inquiry'
and of independent investigation in this country have not served to remove the
difficulties which presented themselves to our first consideration of the proposal
for a taxation of profits in excess of a certain return upon invested capital, and
have not enabled us to see our way to adjust such a tax to existing business
conditions and customs in this country. We, therefore, abandoned the idea of
creating a tax on profits in excess of a fixed standard and we propose to have
recourse to a dift'erent measure. I may describe our proposafas a corporation tax
levied at the rate of 1 shilling in the pound on the profits and income of concerns
with limited liability, engaged in trade or similar transactions. This tax will
run concurrently with excess-profits duty until that duty is repealed. Where a
concern is liable to both taxes, any excess-profits duty payable will be treated
as a working expense in arriving at the profits for the purpose of the new tax.
Both excess-profits duty and corporation tax will be deducted before the
assessment of profits for income tax, and to prevent the new tax constituting too
severe a burden on the ordinary shareholder of existing concerns in which
there are large issues of debenture and preference shares, where a considerable
proportion of the profit has to be allocated to the payment of interest and fixed
dividends thereon, we propose that in no case shall the duty exceed 2 shillings
to the pound on the profits which remain after the payment of .such interest and
Iividends on existing issues of debentures and preference shares. I ^oould remind the committee that under the provisions of the excess-profits duty prosperous concerns with a large prewar profit sta.ndo,rd may escape liability for
the tax because their present profits, thougTi high, are not in excess of their
standard, and, at any rate, they pay a tax on what all of us think an unduly low
scale. Incidentally, the new tax loill do something to correct this anomaly.
But I justify it on much broader grounds. Companies incorporated with alimAted liability enjoy privileges and conveniences by virtue of the laio for ivhich
they m,ay well be asked to pay some acknowledgment. But, more than that,
partners in a private partnership pay supertax not merely on the profits which
they divide, but. also on the undivided profits lohich.they place to reserve.
No such charge falls upon the undivided profits of limited liability companies.
The corporation tax is justified by this distinction of the existing law in favor of
such corporations, and it may be regarded as a composition in lieu of the
liability to supertax.




SECRETARY OF THE TBEASURY.

43

A flat corporation surtax of adequate rate could probably be sub-stituted for the excess-profits tax without serious loss in revenue.
Whether any loss would result by the substitution of an undistributedprofits tax is problematical. The shrinkage in the tax collected from
•corporations as the result of distributed profits would be partially
counterbalanced .by an increase in the taxation of the stockholders of
the corporations involved. Furthermore, the yield of the excessprofits tax is declining and may decline rapidly in the near future.
Two hundred million dollars is probably a maximum allowance for
the loss of revenue that would result in 1922 if the excess-profits tax
were replaced (as of Janiiary 1,1921) by an undistributed-profits tax
of 20 per cent. New taxes capable of yielding approximately this
amourit should be selected from the additional taxes suggested below
or from other sources in case the undistributed-profits tax is adopted.
Excise and luxury taxes.
I n the case of individuals who pay income tax, particularly surtax,
the income tax operates as a ge:Qeral and perhaps the best form of
luxury taxation. But there is luxurious or wasteful consumption
among those persons who do not ordinarily pay income tax, and to
reach this,class of surplus income of taxable capacity excise or sales
taxes—here briefly referred to as "consumption taxes"—must be
employed.
I t is not necessary, however, to tax every luxury. Consumption is
elastic. If the tax is laid upon tobacco and the particular consumer
prefers tobacco to candy he will reduce his consumption of candy in
order to secjire his accustomed supply of tobacco. I t is desirable to
avoid absolute necessaries of life, however, because some individuals
have little or no waste income to be tapped either directly or indirettly. But if the absolute necessaries are avoided, the selection of
other articles of taxation should be controlled by practical considerations of simplicity and convenience. I n appearance consumption
taxes do not conform to the theory of " ability to pay." But when
used as supplementary to a highly progressive income tax they do not
necessarily—if moderate in amount and properly selected—violate
this principle. The system of taxation may conform to this principle,
though each tax may not. The continued use of consumption taxes
in the budgets of the most advanced countries seems to prove that
they have a legitimate though restricted place.
Consumption taxes must be largely justified, if at all, by the practical virtues of certainty, corivenience, productivity, and efficient collection. Some of the excise or consumption taxes at present imposed
by the revenue act of 1918 do not meet these tests. On this account
I recommend the repeal of the taxes upon fountain drinks, ice cream,
and other "similar articles of food-and d r i n k " imposed by section



44

REPORT ON T H E FINANCES. .

630; the excess price or so-called " luxury " taxes imposed by section
904; and the taxes imposed upon medicinal articles by section 907 of
the revenue act of 1918. These taxes are not highly productive
(yielding in the aggregate less than $50,000,000 in the fiscal year
1920); they are ill defined and uncertain; they are vexatious and
expensive to the dealers who pay them; and I am informed by those
in charge of their admiriistration that they are widely evaded and
that such evasion can not be stopped without the employment of a
larger number of agents and measures more drastic than the potential
importance of these taxes would justify. To this last statement there
is one possible exception: The taxes imposed by section 907 apply
not only to patent or proprietary medicinal preparations but to perfumes, toilet waters, cosmetics, and a long list of allied luxuries. The
most striking defects of the present tax affecting these articles would
be remedied by collecting the tax not on the individual sale but from
the manufacturer, producer, or importer; and if the tax seems important enough to retain, it should be changed from the present basis
to that suggested. I t may be added that Canada has just changed
the method of collecting stamp duties on patent and proprietary
medicines and perfumery by having the stamps affixed b}^ the manufacturer or importer and not by the retailer.
Additional sources of revenue.
The loss of revenue which would result from the adoption of the
23receding recommendations, together with the loss to result even
under existing law from the shrinkage of business, would have to
be made up from new sources. For the convenience of thfe committees
of the Congress which will be directly responsible for tax revision, I
set out below a number of new or additional taxes capable of }jielding in the aggregate as much as $2,000,000,000 a year. These estimates are based upon, conditions in the midsummer of 1920, and
changes in the future may affect the revenue yield of the taxes mentioned.
Source.

Tax rate.

E.stimated additional yield
for a 12-month
period.

Increase the 4 and S per cent rates to
iS1.50,940,00(}'
6 and 12 per cent.
Readjusted surtax rates.
2 230,000,000(2)
Corporation income tax.
3 465,000, OOO
Additional 6 ner cent
. Do
58,000, ooa
Abolish S2,000 exemption
l i t is e.stimated that an increase of the 4 and 8 per cent normal income-tax rates to 5 and 10 per cent,
respective l.V, would yield during a 12-month period additional revenue amounting to $75,470,000. Itisalsoestimated that if only the 8 per cent normal income-tax rate is increased to 12 per cent, the additional:
revenue to be derived therefrom during a 12-month period would amount to $103,090,000.
2 The surtax rates, .^hown on pa.ire 45, it is estimated, would yield the same amount, $990,000,000, asthe present surtax rates. Inasmuch as the loss of revenue resulting from the abatement of surtaxes on
saved or reinvested income has been estimated at $230,000,000, only this amount has been included in
the table of suggestions.
3 It is estimated that an increase in the corporation income tax from 10 to 12 per cent w-ould yield during
a 12-month period an additional revenue of $118,800,000.
Normalincome tax.




45

SECRETARY OF T H E TREASURY.

Source.

Estimated additional yield
for a 12-month
period. •

Tax rate.

Corporation undistributed profits tax:
Increase in corporation income tax, estimated at $190,000,000.
Additional revenue from the application ofthe
surtax rates to dividends distributed by corporations to avoid the'20 per cent undistributed profits tax, estimated at $500,000,000.
Stamp taxes, Title XI, act of 1918

20 per cent
Individual surtax rate.

$R90,000,000

Double rates in subdivision 10 and
quadruple rates in subdivisions 1-9
11, and 12.
.
Federal license tax on use of automobiles
50 cents per horsepower
Cigars
, 25 cents per 1,000 additional
Cigarettes, weighing not more than 3 pounds per $2 per 1,000 additional
:
l;000..
Tobacco and snuff
6 (jents per pound additional.
Gasoline
2 cents per gallon
Admissions to theaters
10 per cent additional
Increase rates on following articles specified in 5 per cent additional
section 900 of the revenue act of 1918: Automobiles (other than automobile trucks and wagons) and motor cycles, including automobiles
. and motor-cycle tires, inner tubes, parts, and
accessories (subdivisions 2 and 3).
Musical instruments (subdivision 4)
.do.,
Chewing gum (subdivision 6)
7 per cent additional.
Candy (subdivision 9)
5 per cent additional.
Toilet soap and toilet-soap powders (subdivi- 7 per cent additional.
sion 21).
Jewelry and Articles of precious metal (sec. 905, 5 per cent additional.
revenue act of 1918).
Motion-picture films (sec. 906, revenue act of
do
1918).
Perfumes, cosmetics, and medicinal articles, a 10 per cent
tax upon the sale by the manufacturer, producer, or importer in lieu of the tax imposed
under section 907, revenue act of 1918, of.

I 134,000,000
100,000,000
•5,000,000
70,000,000
8,000,000
90,000,000
70,000,000
100,000,000

13,000,000
2,000,000
20,000,000
4,000,000
25,000,000
4,ooo;000
16,oop; 000

1 If the stamp taxes imposed by Title XI ofthe revenue act of 1918 were doubled the additional yield for
a 12-mont.h period would, it is estimated, be $90,000,000.

The following surtax rates, limited to 20 per cent on saved or
reinvested income, would yield, it is estimated, as much as the present
surtax rates >
.
Surtax rates.
Incomes

$5,000-$6 000
$6,000-$8,000
$8,000-$10,000
$10,000-$15,000
$15,000-$20,000
$20,000-$30,000

Surtax rates.

Saved
income.

Remainder
of income.

Per cent.
2
5
10
12
15
20

Fer cent.

0

2
5
]0
12
15
20

Incomes.

$30 000-$40,000
$40,000-$50,000
$50,00O-$75,000
$75,000-$100,000
Over $100,000

Saved
income.
Fer cent.
20
20
20
20
20

Remainder
of income.
Fer cent.
25
30
35
40
50

These possible sources of revenue are mentioned for the information of the Congress. While I shall not attempt to discuss them in
detail, attention should be called to the new or ad(iitional consumption taxes included. Eeasons have been given above for the belief
that no valid objection exists against the employment of a moderate
number of consumption taxes properly selected; but it would, in my
opinion, be neither wise nor expedient to increase radically the




46

REPORT ON T H E FINANCES.

volume of consumption taxation. During the last .fiscal ^^ear the
taxes on transportation and insurance, beverages, tobacco products,
adinissions, and dues, together with the excise or sales taxes imposed
b.3^ Title IX.of the.revenue.act^^taxes wliix^h ^may be roughly'grouped
as consumption;taxes--yyielded $1,150,386,7^^^^^
^Xper cent of the
total internal taxes. If necessary this amount could be moderately
increased to perhaps 25 or 30 per cent of the total. But I can
see no justification for a general-sales tax designed to substitute indirect taxes falling on the consumer for the income lax which now
furnishes the backbone of the Federal fiscal system, nor even for an
increase in specific sales or consumption taxes which would yield
perhaps two billions in place of the one billion, approximately, now
collected from the consumer.
The j^articular articles included in. the suggested list of additional
consumption taxes have not.been selected because their use is particularly liarm:ful or in any sense less legitimate than the use of
articles not so included. Consumption taxes must be judged by
liractical standards. What should be sought are a few consumption
taxes which will tap the surplus income which is being wasted, not a.
conglomerate multiplication of petty taxes upon every article of
luxurious or unnecessar}'- consumption, which can neither be clearly
defined, cheaply collected, nor administered without widespread
evasion.
Adm/lnistrative amendments.
A number of important technical and administrative amendments
were recommended in my letter of March 17, 1920, to the chairman
of the Committee on Ways and Means, previously quoted. Theserecommendations have been substantially embodied in TI. E. 14197
and H . E. 14198, both of which have already, passed the House of
Eepresentatives. I earnest^ hope that these bills may be promptly
enacted into law.
Tax exemptions of Liberty bonds and Victory notes.
The attention of the Congress is again invited to the recommendation made in the Annual Eeport of the Secretary of the Treasury for1919, on pages 96-100, that legislation be enacted to simplify and
consolidate the limited exemptions of 4 and 4 | joer cent Liberty bonds^
from surtaxes and profits taxes. The existing situation with respect to these exemptions, which were conferred upon Liberty bond holders by legislation enacted from time to time during the war, is fully
set forth in the annual report for 1919. A provision embodying the
Treasury's suggestions as to the simplification of these exemptions.^
was incorporated in H. E. 13355, introduced in the House of Eepre- 


SECRETARY OF TIIE TREASURY.

47

sentatives on March 30, 1920, and referred to the Committee on
Ways and Means, and again in section 6 of H. 3.14198, which passed
the House of Eepresentatives on May 27, 1920, and has been referred
to the .Conimitteerori 'l?inance :of the Senate. I. believe that these
simplified exemptions should be enacted into law and that any slijght
loss of revenue which may result will be more than counterbalanced
by the gain to the Treasur.y which will result from the increased
attractiveness of the taxable issues of Liherty bonds and the conse((iient benefit to the Government's credit, as well as from the simplification of administration in the Bureau of Internal Eevenue.
ECONOMY.

The necessity of rigid econom}'- in Government expenditure, as a
coridition of any sound financial program, has already been emphasized. Government expenditures m u s t be reduced to the minimum
consistent with efficient service and an effective national budget system must be established. Any consideration of the problem of public
econom}^ must take into account, however, the various elements in the
existing situation and the facts as to the nature and distribution
of the expenditures.
Perhaps the most fundamental fact is that, apart from maturities of
the floating debt, the Government of the United States has balanced
its budget and that the current operations of the Treasury are now
showing a surplus. On the basis of daily Treasury statements, the
total ordinary receipts for the fiscaL year ended June 30, 1920,
amounted to $6,694,565,388.88 and current ordinary disbursements
amounted to $6,766,444,461.09, leaving a net current deficit (excess of
current ordinary disbursements, over ordinary receipts) of only
$71,879,072.21 for the fiscal year 1920, the first full fiscal year after hostilities ceased. -After taking into account the special deposit of the
W a r Finance Corporation, resulting from the redemption of its holdings of United States securities, the net ordinary disbursements for
the fiscal year ended June 30, 1920, were $6,403,343,841.21, leaving an
adjusted surplus (excess of ordinary receipts over net ordinary disbursements) of $291,221,547.67 for the fiscal year. For the first quarter of the current fiscal year, through September 30,1920, the total ordinary receipts of the Government, on the basis .of daily Treasury
statements, amounted to $1,540,000,000 as against ordinary disbursements during the same period of $1,251,000,000, resulting in an excess
of ordinary receipts oyer ordinary disbursements of $289,000,000 for
the quarter. The remaining three quarters of the fiscal year, when
completed, should also show a substantial excess of ordinary r„eceipts
over ordinary disbursements, which must be applied to the retirenient
of the floating debt and the operations of the sinking fund. With


48

'

REPORT ON TPIE FINANCES.

'

out substantial reductions in the estimated expenditures for the fiscal
years 1921 and 1922, however, the surplus applicable to the public
debt will not be sufficient unless additional revenues from taxation are
provided.
An analysis of Government expenditures for the fiscal year 1920,
on the basis of daily Treasury statements, develops the striking fact
that of the net ordinary disbursements of $6,403,000,000, about 90
per cent consisted of expenciitures under the following main heads:
Purchase of obligations of foreign Governments.War Department
Navy Department
Shipping Board
Federal control of transportation systems and payments to the
railroads under the transportation act, 1920
Interest on the public debt
—_
. Pensions
:
'.
War-risk insurance
L
Purchase of Federal farm loan bonds
Total—

$421, 000, 000
1, 611, 000, 000
736,000,000
531,000, 000
1, 037, 000, 000
1.020,000,000
213, 000, 000
117, 000,000
30, 000, 000
5, 716, 000, 000

Substantially all the expenditures entering into this total, and a
large share of the expenditures on various minor accounts, represent burdens directly traceable to the war, to past wars, or to preparedness for future wars. These figures serve to indicate the direction which sincere efforts to reduce the cost of the Government must
take.
I n considering governmental economy, one practice of recent origin
must not be overlooked, namely, that of making revolving-fund appropriations and authorizing receipts to be credited as repayments to
appropriations. I t has been frequently objected to by the Treasury
as a peace-time measure. I t s evils were pointed out at length in the
. Annual Eeport of the Secretary of the Treasury for 1919, on pages
126 to 129. A still more questionable tendency has recently shown
itself, notably in the merchant marine act, 1920, in the form of
statutory provisions relieving various interests of profits taxes, thus
diverting monej^ from the Treasury just as truly as if carried as an
appropriation. Practices of this character are destructive of any
program of econoniy and would greatly impair the working of a
budget system. I t is clearly desirable that henceforth no moneys be
taken out of the Treasury except by direct and definite appropriation.
The following table, analyzing appropriations made and expenditures authorized by the Sixty-sixth Congress, second session, strikingly illustrates the extent of the burdens imposed upon the Treasury
this year .by indefinite and indirect appropriations, in addition to the
total appropriations customarily shown as carried by law:




SEORETARY OF THB TREASURY.

49

A p p ^ o p H a t i o n s m a d e and expenditures authorized by the Sixty-sixth Congress,
second session.
DIRECT A P P R O P R I A T I O N S ,

Total appropriations under annual appropriation acts
P e r m a n e n t and indefinite a p p r o p r i a t i o n s .
.
Miscellaneous appropriation acts—'
Deficiencies
„_!
Total
_..-___ .__:
ADDITIONAL

AUTHORIZATIONS.'^

•- $2, 212,084, 098. 78
1,425,407,752.29
' 156, 501, 585. 78
986, 836, 073. 50
4, 780, 829, 510. 35
--.

Additional, expenditures authorized from various balances
of prior appropriations and from receipts
Authorizations for United States Shipping B o a r d :
Estimated
expenditures
authorized
. "
from
the
" Emergency
shipping
fund " during fiscal year 1921, from
the several classes of receipts as
provided in the sundry civil act,
., J u n e ..5, 1920^-_J_____-,__^_:___^_ $250, 000, 000. 00
Unexpended balance on h a n d J u l y 1,
1920, under appropriation *' :EnTergency shipping fund," made available
for expenditure during fiscal year
1921 by same act
62, 671, 670. 34
—
—
•Estimated expenditures authorized under indefinite appropriations provided by t h e transportation act, Feb. 28,,
1920, on account of r e t u r n of railroads to private control—

$210, 937, 608. 07

312,671,670.34

570, 000, 000. 00

Total additional appropriations and authorizations

1, 093, 609, 278. 41

Grand total, appropriations and authorizations—,

5, 874, 438, 788. 76

A BUDGET S Y S T E M .

The creation of a Federal budget system is an urgent necessity.
I t was needed when the expenditures of the Government were relatively small; now that they are vastly greater, it is imperative. The
national finances must be handled on a business basis. They can not
be under the present.arrangements. The Secretary of the Treasury
is now merely the medium through which estimates of appropriations
are transmitted to the Congress. The estimates are not jointly considered by executive agencies. They are made up separately by the
several departments. The country does not get a complete view of
them. Congress considers them piecemeal and without specific reference to income. I t spends much time on details, instead of considering larger matters which really make for effective control
13799—FI 1920




4

50

REPORT ON T H E FINANCES.

of the finances. The system was the subject of criticism and discontent even before the war. I t is now condemned in unmeasured
terms and there has arisen a popular demand for scientific improvement that would seem to impel action.
Private enterprise relates its expenditures and its activities to its
income under the controlling influence of profits., This has resulted
in scientific business management in most of the great industries.
The Government has grown from a relatively small affair to a great
institution. Its management is a business operation which should
be conducted in accordance with enlightened principles. I t has not
the stimulus of profits, as understood in private business, to increase
its efficiency. I t s profits are not expressed in dollars and cents, but
in the benefits to the people of the country and the results achieved.
Its ultimate possible cost is limited only by the ability of the people to
pay under the power of taxation. Financial burdens upon the people
will be needlessly maintained or increased unless the system is reformed. This can be accomplished only by the establishment of an
effective budget system which would point the way to coordination of
the activities of Government and control of the expenditures with
due regard to income.
I n the first place, a budget system should provide for the formulation and submission to the Congress of unified estimates. These
should consist of a well-balanced scheme in which the cost of each
activity would be properly related to the cost of the whole and to
the Nation s income. The responsibility for the preparation of the
budget should be placed upon the President, and, in my judgment,
he should meet it through the Secretary of the Treasury, the chief
fiscal officer of the Governmentr ^I believe that the budget bureau
should be established in the oflice of the Secretary of the Treasury.
He is the officer charged by law to jirovide funds for expenditures.
I t would appear that the preparation of the budget should be the
principal function of the chief' Government finance officer. I t is
indefensible that he should be/charged with the duty of keeping an
adequate balance in the general fund to meet any and all demands
and denied any word with respect to the determination of the expenditures of the Government outsidfrWi gwn department. To place
the budget bureau in the office of the President, as is sometimes
urged, would mean the/creation of an establishment likely to overshadow, or to be overshadowed by, the great departments of the Governihent and, what is more important, would mean a division of responsibility with respect to receipts and expenditures which should
be centralized under on^ control. The Secretary of the Treasury,
acting for the President, should have power to reduce and revise the
estimates. Under his cirection the bureau of the budget should




SECRETARY OF THE TREASURY.

51

make a continuous study of the various Government agencies, with
a view to the elimination of duplicated work and wasted effort.
If this responsibility is placed upon the Treasury, the Bureau of
War Eisk Insurance, the Public Health Service, the Office of the
Supervising Architect, the General Supply Committee, and the prohibition unit of the Bureau of Internal Eevenue simultaneously
should be transferred to the jurisdiction of some other department, as
recommended later in this report.
I n the second place, the budget should receive initial consideration
by the Congress through a single great budget committee for each
House. These committees should consider both the appropriations'
and the ways of raising the revenue to meet them. There should be
a rule that after the committees have made their reports no addition
can be made to any item in the budget except by an unusual vote,
such, for instance, as two-thirds. I t would be an important achievement if the Congress would go further and, as - far as the
budget presented by the President is concerned, impose a limitation
on the right to increase any item either in committee or on the
floor, unless recommended by the Secretary of the Treasury or
approved by two-thirds of the membership of the Congress. The
Congress should, of course, retain the right to reduce itejns in the
budget, but if the President is to be held responsible for a fi:nancial
program it should exercise restraint in increasing the budget as
submitted by him. In order that there may be no interference with
the constitutional right of the Congress to appropriate money apart
from the budget, it appears to nie that such appropriations should
be made in separate bills. These should also provide for the necessary revenue to meet the proposed expenditures in case the estimated
revenues of the Government are not sufficient. A plan of this character would definitely place the responsibility for expenditures
before the people of the country. '
The third step in the formulation of an adequate budget scheme
is the establishment of an effective auHit. At the present time the
auditing force consists of the Comptroller of the Treasury and six
auditors. Their audit of the Government's. accounts is to insure that
expenditures are made in accordance with law. These offices should
be consolidated into one organization and the scope of their worK
anlarged so as to include not only the examiiiation of accounts as to
accurac}?- and legality, but also the desirability of the expenditures
and the adequacy of the results. The head of/this accounting organization and the assistant head, who for convenience may be*called the
Comptroller General of the United States and the Assistant Comptroller General of the United States, shouM be appointed by the
President, by and with the advice and conseint of the Senate. They




&2

REPORT ON TFIE FINANCES

should not be regarded as political appointees and should be free
from partisan considerations. Their terms of office should not be
limited to any specified period of years. They should be permitted
to continue during good behavior and efficient service and be subject
tp removal by the President. I t is not to be supposed that any President, in view of the very nature of the offices, would remove these
officials except in the public interest. The reports of the Comptroller
General should be made to the President and to the Congress.
The Treasury, except as a matter of organization, is not particularly
concerned with the question whether the general accounting office
should be attached to this department, as is the case under the present accounting sj^stem, or established as an independent unit. There
is much to be said, theoretically, for a separate and independent
auditing establishment. I t is sound budget practice. Its advantages, however, are probably more apparent than real. Without
question, the comptroller general must be free and untrammeled in
his decisions and his criticisms. There must be no interference with
him in giving any information he may desire to the President, the
Congress, or the people. As a part of the Treasury, he would have
behind him the support and prestige of this great department, which
would have every reason to uphold his independence, as is the case
under the existing order. I t would appear that his association with
the Treasury would be an asset rather than a liability tb him in the
free exercise of his functions. He probably would be stronger than
if standing alone. Furtherinore, the fiscal operations of the Treasury
and the accounting system are intertwined. For instance, every
warrant signed in the name of the Secretary of the Treasury for the
deposit of funds in the Treasury or the withdrawal of funds from
the Treasui:,y is countersigned in the name of the Comptroller of the
Treasury. This countersignature would probably be continued under a budget system. The operations of the two establishments
would be so closely connected that it would seem that they would
functicm more effectively and easily if they were under the same
head. These observations are presented for consideration. The
Treasury, however, offers no objection to the separation of the accounting system from th^s department, if, in the wisdom of the Congress, such action seeiris desirable in the creation of an effective
budget. If the activities of the Treasury which I propose be transferred to some other department are not transferred, it would appear
that the auditing system should be erected as an independent establishment. .
(
A budget system will, not only be a great step forward in improving the business methods of the executive agencies, but it will also
be one of the best means of giving the people of the country
complete information with respect to the operations of their Govern


SECRETARY. OF THE TREASURY.

'

53

ment, the efficiency of its management, and the results achieved in
relation to the cost of the undertaking. The postponement of this
reform is inconsistent with our conceptions of democracy. The
Congress already has devoted attention to this important question,
having passed a measure which the President returned because of
a constitutional objection. The PCouse passed the bill modified to
meet that objection. I n its revised form, it is believed that the bill,
together with supplementary action already taken by the Congress
in modifying its rules and further steps which may follow, will
provide the foundations of an adequate budget system, although,
of course, experience may point the need of amendment. I t is
earnestly recommended that the Congress give this matter consideration at the present session.
,
LOANS TO FOREIGN G O V E R N M E N T S .

Under the acts of Congress of April 24, 1917, September 24, 1917,
April 4, 1918, and July 9, 1918, the Secretary of the Treasury was
authorized to establish credits in favor of foreign Governments engaged in war with enemies of the United States, and to the extent of
these credits to make advances to such Governments through the
purchase at par of their respective obligations. The amounts appropriated for such loans by the respective acts were as follows:
Act
Act
Act
.\ct
.

Apr. 24, 1917
Sept: 24, 1917
Apr. 4, 1918—
.luly 9, 1918

1

$3,000,000,000
4,000,000,000
1,500,000,000
^— 1, 500, 000, 000

•—.^
^

1

Total

-/

— 10, 000, 000, O O
O

Under this authority loans w^re made during the war and after
the armistice for the purpose ini general of enabling the respectiye
Governments to meet commitments made in the United States in connection with the prosecution of the wa^r. During the past fiscal- year
the Secretary of the Treasury has continued to allow credits and to
make advances only to the extent to wlii^ii he had previously made
commitments. From November 15, 1919,1 to November 15, 1920,
credits were established as follows:
\
Belgium
Czecho-Slovak Republic
Italy

.___
.
,

And advances were made as follows:
Belgium—
Czecho-Slovak Republic
Erance ——
Greece
Italy

:

^
_
^-._.

_V_—
W.
: _f

$6,983, 793. 77
12, 000;000. 00
45, 337, 306. 73

|
jL
|
1
1
I

$10, 469, 467. 89
8, 566, 206. 74
110,000,000. 00
15,000, 000. 00
20, 416,114. 00

No credits were established/under the Victofry Liberty loan act.



/

54

REPORT ON T H E FINANCES.

I n certain instances in which the purpose was accomplished without requiring the total amount of the credit or the advance, the
balance of credit was withdrawn or the unused portion of the advance was repaid. Certain repayments were made in connection
Avith the routine of the accounts. A repayment was made by Cuba
as the first step toward discharging the indebtedness of the Cuban
Government to this Government.
Withdrawals of credits from November 15, 1919, to November 15,
1920, were as follows:
Belgium
Czecho-Slovak Republic

j _ _ _ —

$1, 214, 32.5. 88'
958. 90

Eepayments were made during the same period as follows:
Cuba—
France
1
J
Great Britain
Roumania
_
Serbia —________:_

'_

$500, 000. 00
19, 302, 357. 55
23, 017, 633. 57
_ - i , 794,180. 48
____
605,326. 34

_

There have also been received the following sums, application of
which will be made in due course:
Belgium_
_—
^
France^—_^^___^_^_

.

.

$1, 512, 901. 66
17, 246, 490. 00

From April 24, 1917, up to November 15, 1920, the credits established (after deducting credits which had been withdrawn) and the
cash advances were as follows:
Credits
\
Other charges Balances under
established net. v Cash advanced. agamst credits. established.
credits.

Countries.

'.

$349,214,467.89
10,000,000.00
67,329,041.10
3,047,974,777.24
4,277,000,000.00'
48.236,629/05
1,666,260,1,79.72
5,000,.<500.00
V. 25,oop;000.00
187,729,750.00
; 2^^780,465.56

\$349,214,467.89
10,000,000.00
,/ 61,256,206.74
2,997,477,800.00
4,277,000,000.00
15,000,000.00
1,631,338,986.99
26,000.00
25,000,000.00
187,729,750.00
26,780,465.56

$33,236,629.05

9^10,525,310.56

Belgium
Cuba
Czechoslovakia.
FranCe
Great Britain
Greece
Italy.
Liberia .
Roumania
Russia
Serbia

9,580,823,677.18

33,236,629.05

$6,072,834.36
50,496,977.24

•

34,921,192.73
4,974,000.00

96,465,004.33

Of the foregoing advances there/ have been repaid up to November 15, 1920, by—
British Govermnent
./
$SQ, 181,641.56
French Government
f
3i, 449,357.55
Roumanian Government
Jh.
1,794,180.48
Serbian Government
.¥
605,326.34
Cuban Government
n
500,000.00
Belgian Government
\rl
10,000.00

Detailed statements khowing the dates and amounts of credits and
advances to foreign Glovernments are attached hereto as Exhibits
24 and 25, pages 325 to|337.
No further credits Swill be extended under existing legislation
by the Secretary of th Treasury in favor of any foreign Govern\



SECRETARY OF THE TREASURY.

55

ment, and consequently iio further advknces will be made to. Governments in favor of which there are no existing balances. Present
balances are as follows:
Czeclio^Slovak Republic
France^
^
^__^___
Greece:
Italy
Liberia

'—
_^.
.

^

$6,072, 834. 36
50, 496, 977. 24 .
33, 236, 629. 05
34. 021,192. 73
4, 974, 000. 00

The credit of which a balance remains in favor of the Czechoslovak Eepublic was granted for the purpose of assisting that Government to repatriate its troops from Siberia. The movement of
the troops has been substantially completed and a large part of the
expenses paid. I t is not expected that the remaining liabilities on
this account will require the advance of more than a part of the
balance.
I t is estimated that advances of not more than $21,070,000 will be
required to accomplish the purposes for which the balance in favor
of France was arranged.
The credits in favor of Greece were established pursuant to a special agreement made early in 1918, under which the United States,
Great Britain, and France undertook to lend to the Greek Government for specified purposes, in equal shares in their respective currencies, up to the equivalent of 250,000,000 francs each. Although a
special charge has. been created aga/inst the credits established, by the
United States, th*e advances to be made, and consequently the amount
of the special charge, are limited by the purposes set forth in the
agreement. Further advances b?y the Treasury will probably not
exceed the sum of $28,900,000. /
The balance of credit in favor of Italy was extended for the purpose of enabling the Italian Gcivernment to make certain reimbursements in dollars to the British Government. The amount of these
reimbursements has been determihe^d to be $16,695,063.91. Further
advances to Italy are therefore not ^xpected to exceed this amount.
The British Government has agreed that upon receipt of this amount
from the Italian Government it will paj^ it to the Secretary of the
Treasury to be applied by him upon obli^^ations held by the United
N States Government.
v \
Advances to Liberia will be made only tor specific purposes for
which commitments have heretofore been incurred. I t is not expected that they will exhaust the entire balance of credits in favor of
Liberia.
All balances of credits in excess of the amjount necessary to carry
out the commitments will be withdrawn in dide course.
For these advances, the Treasury holds pbligations in the form
of certificates of indebtedness to the Unitf^d States, payable as to
principal and interest, without deduction [for taxes of the debtor



56

REPORT ON THE l^NANCES.

Government, in gold coin of the United States of the present standard of weight and fineness at the Subtreasury of the United States
in New York or at the Treasury of the United States in Washington. Certain of them, at the option of the holder, are payable in the
money of the debtor country; some at a fixed rate and others at the
buying rate for cable transfers of the currency of the debtor country
in the New York market at noon on the day of demand as determined
by the Federal Eeserve Bank of New York. The certificates of indebtedness are signed in the name of the respective debtor Governments by representatives of such Governments designated to the
Treasury by the Pepartment of State as being authorized to sigOi
them in the name and on behalf of the respective Governments.
The earlier certificates were payable at fixed dates of maturity, aU
which are now past, so that they are now held as demand obligations..
They bore interest at various rates of interest from 3 per cent per
annum upward. Those subsequently taken are payable on demand
and bear interest at the rate of 5 per cent. By arrangement with the
respective Governrnents substantially all the obligations have since
May 19,1918, borne interest at the- M^jp of 5 per cent. The certificatesof indebtedness are receivable in' payinent for bonds of the debtor
Government or else are convertible into bonds in conformity with
the provisions of the various Liberty bond acts in effect at therespective dates of the certificates \pfltidebtedness. All the obligations are of the same general charaC'jter. The following is a skeleton
copy of an obligation received und^r the fourth Liberty bond a c t :
CERTIFICATE OF IN]bEBTEDNESS.

\
$ (amount in figures).
The Government of (name of foreign Government),"for value received, promises to pay to the United States of America, ,or assigns, the sum of (number of
dollars in words) on demand, with interest from date hereof at the rate of
(rate per cent) per cent per annum. Such' principal sum and the interest thereon
will be paid without deduction for anv (name of foreign Government) taxes,
present or future, in gold coin of the.TJnlted\States of America of the presentstandard of weight and fineness at tlie Subtreasurj^f the United States in New
York, or, at the option of the hol/der, at the Treasury^-of the United States in
Washington.
/
This certificate will be converted by the Government of (name of foreign^
Government) if requested by/the Secretary of the Treasury of the United
States of America, at par.witlVan adjustment of accrued interest into an equal
par amount of (rate per cent/} x)e.iicent convertible gold bonds of the Government of .(name of foreign Gcbvernment), conforming to the provisions of actsof Congress of the United Stites known, respectively, as second Liberty bond
act, third Liberty bond act, ?and fourth Liberty bond act. If bonds of the •
United States issued under au^thority.of said acts shall be converted into other,
bonds of the United" States bearing a higher rate of interest than 4 i per cent
per annum, a proportionate paift of the obligations of the Government of (name
of foreign Government) of this) series acquired by the United States under au-




SECRETARY OF THE TREASURY.

57.'

thority of said acts shall, at the request of said Secretary of the Treasury, be>
converted into obligations of said Government of (name of foreign Government), bearing interest at a rate exceeding that previously borne by this obligation by the same amount as the interest rate of the bonds of the United States^
issued upon such conversion exceeds'the interest rate of (rate of this obligation)' per cent, but not less than the highest rate of interest borne by such bonds^
of the United States.
»
(Signature of representative of foreign Government.)

For the Government of (name of foreign Government).
day of
.

Dated the -^

To and including November, 1918, the dates for the collection of"
interest from foreign Governments were May 15 and November 15...
In the spring of 1919 the respective Governments were informed^
that it would be convenient for the Treasury to receive seiniannual.
payments of interest on April 15 and on October 15 on approximately
two-thirds of their respective obligations, and on May 15 and Novem15 on the remainder. The full amount of interest due up to April 15,..
1919, or May 15, 1919, was, except in the case of Eussia, paid :Ln easily:
on all these loans. To the extent that such interest was not paid,
from other resources of the foreign Governments concerned, it was.
paid from the proceeds of loans made by the United States Governr
ment. All interest on the debts of Cuba and Greece was paid as it
became due.
The following is an itemized statement showing the amount of interest heretofore paid by each of the foreign Governments on<i
advances made to it by the United States Treasury:
Belgium
Cuba
Czecho-Slovak Republic
FranceGreat Britain
Greece
Italy
Liberia
Roumania
Russia
Serbia
Total

:

_:
.

$10, 907,^281. 55-.
1,136, 865. 47
304,178. 09 >
128,140, 816. 48
!_ 233, 357,185. 50409,153. 34
57,598,852.62.
161.10263,313. 74.
4, 595,564.15 •636, 059.14.

,

'.
-

,
:
^

-

-

437, 340, 431.18

The amount paid on Eussian obligations represents the interest,
up to November 15,1917, in full, together with a partial payment of
$1,865,925.08 on account of the interest which became due May 15,..
1918, and partial payments of $1,399,877.43 on account of the interest,
which became due November 15, 1918. That paid by the Governments of Greece and Cuba includes interest paid up to October 15,.
1920, and November 15, 1920, respectively. The amount paid by the
French Government includes interest amounting to $1,810,441.50 to -




58

REPORT ON T H E FINANCES.

July 31, 1919, on an obligation dated January 28, 1919, and also
interest accrued after April 15, 1919, on $19,302,357.55 principal
subsequently repaid by the French Government in connection with
the adjustment of accounts^ The sum paid by the British Government includes $2,244,778.59 interest accrued after May 15, 1919, on
$80,181,641.56, principal subsequently repaid by the British Government in connection with the adjustment of accounts and that paid by
Eoumania includes a partial payment of $154,409.63 on account of
interest accrued to October 15, 1919.
The Secretary of the Treasury holds a special fund of $1,808,506,
which is equal to the unpaid balance of the interest which became
due on Eussian obligations on May 15,1918. I t is believed that ultimately this can be applied in discharge of this balance. A similar
fund of $335,095.07 is held which it is believed will be applicable upon
the unpaid balance of the interest which became due November 15,
1918, on the Eussian account. The interest accrued and remaining
unpaid on Eussian obligations, after deducting these special funds,
for the half year ending November.15, 1918, is $2,994,025.10, and for
the half years ending April 15,1919, and May 15,1919, is $4,101,107.50.
The interest accrued and remaining unpaid on obligations of foreign Governments purchased by the Treasury under the Liberty
bond acts for the half years ending respectively October 15,1919 and
November 15,1919, April 15, 1920 and May 15, 1920, and October 15,
1920 and November 15, 1920, is as fOIIOAVS :

. Belgium
Czechoslovakia..
France
Great B r i t a i n . . ,
Italy
Liberia:
Roumania
Russia
Serbia
A d d b a l a n c e (in excess of special funds
above m e n t i o n e d ) of i n t e r e s t accrued
a n d r e m a i n i n g u n p a i d on R u s s i a n obligations for half year e n d i n g N o v . 15,
1918, a n d half years e n d i n g A p r . 15,
1919, a n d May 15, 1919
Total.

Oct. 15 a n d
N o v . 15,1919.

A p r . 15 a n d
M a y 15,1920.

Oct. 15 a n d
N o v . 15,1920.

Total.

S8,330,832.65
1,164,422.14
65,669,500.12
104,741,907.05
39,050,152.83
328.69
382,818.09
4,713,366.30
689,258.13

S8,468,375.00
1,354,134.64
72,218,078. 80
104,920,458.96
40,442,845. 74
640.16
625,000.00
4,685,999.25
669,511.64

$8,539,887.75
1,478,333.35
73,637,124.10
101,920,458.96
40,765,715.11
650.00
597,302.95
4,693,243.75
659,230.96

$25,339,095.40
3,996,890.13
211,524,703.02
314,582,824.97
120,258,713.68
1,618.85
1,605,121.04
14,092,609.30
1,998,000.73

224,722,586.00

Countries.

233,385,044.19

235,291,946.93

693,399,577.12

7,095,132.61
700,494,709.72

The Liberty bond acts which authorized the Secretary of the Treasury to acquire foreign obligations also authorized him to exchange
them into long-time obligations bearing a rate of interest not less than
that borne by the demand instruments. The acts provide that the
former shall be in such form and terms as the Secretary of the
Treasur}^ may prescribe. In the early autumn of 1919, the Treas-




SECRETARY OF THE TREASURY.

59

ur}^ informed the treasuries of the European Governments to which
it had made advances t h a t it was prepared, in case they so desired,
to discuss with them the exchange of the demand notes for longtime obligations, and in that connection the deferring of interest
collection during the reconstruction period of two or three years
from the spring of 1919. Public announcement of the position of
the Treasury was made on September 26, 1919. The considerations
which moved the Treasury with regard to deferring the collection
of interest were set forth in the following letter from the Secretary
of the Treasury to the chairman of the Committee on Ways and
Means of the House of Eepresentatives:
WASHINGTON, December 18, 1919.

MY DEAR CONGRESSMAN : On October the 9th last I sent you a copy of a public
statement made by me on the 26th of September relative to the obligations of
foreign Governments held by the United States Government, and also a copy of
a letter written by me on October 9th to Senator Penrose in reply to a letter
from him requesting information concerning the extension of the interest on such
loans. In that statement and in my letter to Senator Penrose I explained the
policy which the Treasury proposed to adopt in respect to the funding of the
demand obligations of foreign Governments now held by the United States into
long-time obligations, and the funding during the ^reconstruction period of two
or three years of the interest on such obligations. Notwithstanding my public
announcement of September 26 and the controlling reasons which prompted the
Treasury to adopt this policy, it appears from statements which have been made
lately in Congress and elsewhere that there still exists a misunderstanding in
respect to this question. Some of the statements to the effect that it is the duty
of our Government, notwithstanding the present grave derangement of foreign
exchanges, to insist upon immediate payment of interest amounting to about
$475,000,000 a year, indicate a tendency to overlook certain aspects of the question and a failure to grasp the meaning of the present position of the finances
of the world. While the Treasury favors such an arrangement, it does not favor
the cancellation and, indeed, has no power to cancel any portion of the interest
or principal. The collection in dollars of this interest under present circumstances would be no less disastrous to American interests than to the interest of
our debtors.
The loans to foreign Governments were made, as provided by Congress in
April, 1917, for the purpose of assisting them in the prosecution of the war.
Our entry into the war made it necessary for this Government to call upon the
American people for vast sums of money for its own war purposes. In order
to obtain such funds it was necessary substantially to close' our financial
markets to all other borrowings, but, at the same time, it became most important
that our associates in the war should be able to obtain in greater amounts than
theretofore the supplies which they required and which we alone could furnish.
Except for the purpose of meeting commitments for war purposes previously
made with the knowledge of the Treasury, the Treasury has, since last April,
substantially discontinued the establishment of credits in favor of foreign Governments. The program authorized by Congress for foreign loans was therefore
substantially ended eight months ago.
At almost the same time the foreign Governments of their own accord, but
with the hearty approval of the Treasury, ceased the "pegging" of their exchanges.



-60

REPORT ON THE FINANCES. ^

These necessary steps by the United States Treasury and the treasuries of
our associates, in the endeavor to reduce governmental financial activity and to
return trade and finance to normal channels, have been refiected in the gr^afc
drop which has taken place in the foreign exchanges.
With the ending of the war and of the program of our loans to foreign Governments, it was,considered appropriate,.in accordance with.the authority conferred by the Liberty bond acts,.to take up with those Governments the funding;
of 'the demand obligations now held by the United States into long-time obligations ; and in view of the fact that, as indicated by the state of the foreign exchanges, the reconstruction of Europe has not proceeded! to a point whereEurope can even yet pay by exports for its necessary food, it was considered bythe Treasury most expedient that as a part of a general funding arrangement
provision should be made for deferring and spreading over a later period thepayment of interest which would accrue during the next two or three years.
At the time of writing exchanges of the principal Allies are quoted as follows::
Sterling, 3.86, or at a discount of 20.7 per cent.
Francs, 10.23, or at a discount of 49.4 per cent.
Lire, 12.75, or at a discount of 59.4 per cent.
Belgian francs, 9.97, or at a discount of 48 per cent.
Under these circumstances an impenetrable barrier exists which makes ir.
impracticable for those Governments to pay in dollars the amountiof interest
due from them to the United States. This involves no question as 'to the solvency or financial responsibility of those Governments, nor a failure to raise*
funds by loans and taxes from their people and a corresponding burdening of~
our people, but results from the condition of thc foreign exchange market. I f
the Governments of the Allies were to raise immediately by taxes and loans thewhole of their debt to us, those taxes and loans would produce only sterling,.
francs, and lire, and those foreign currencies would not furnish one additional
dollar of dollar exchange because conditions are not such as to permit those currencies now to be converted into dollars. The United States Treasury has no use
at 'the present time for any considerable amounts of these currencies and could
not afford to accumulate large idle foreign balances.
If the Treasury does not defer the collection of interest and thus adds to the
present difficulties in the financial and economic rehabilitation of the world by
demanding' an immediate cash payment of interest before the industry and
trade of Europe has an opportunity to revive, we should not only make it
impossible for Europe to continue needed purchases here and decrease their
ultimate capacity to pay their debt to us, but should hinder rather, than help •
the reconstruction which the world should hasten. A nation can liquidate its foreign debts only by the accumulation of foreign credits, which may beaccomplished through an excess trade balance, invisible exchange items, the creation of credits by loans, or by the export of gold. Until our associates in
the war, whose manufacture and trade suffered so much more than ours,.
have had an opportunity to resume normal industrial and commercial activities, they have not the exports with which to pay the interest due on our obligations and could make such payment only by the shipment of gold or by obtain- ing dollar loans in the United States. The loans which the Allied Governments have so far been able to place in our markets have not been sufficient :
to correct the situation. I can not believe that anyone would consider it
equitable or wise, in the present circumstances,'for us to require payment in .
gold, of which we already have enough, when the' payment of one year's interest
alone would exhaust about 50 per cent of the gold reserves of our debtors...
While I fully realize the desirability of collecting this interest and of decreas--




SECRETARY OF THE TREASURY.

61

Ing at once by a corresponding amount the taxes which we must collect, I
•should be most reluctant, without specific instructions from Congress to the
'Contrary, to demand the immediate payment of interest which would not only
:seriously retard the economic restoration of those countries without which
'they will be unable to pay the interest and principal of their debt to us, but.
which would also destroy their power to make needed purchases in our market.
My advisers are firmly of the opinion that in connection with^and as a part
•of a general funding of the demand obligations into time obligations I am.
'duly authorized under the Liberty loan acts to spread over subsequent years•the interest which would accrue during the reconstruction period of, say, two
•or three years, and to include such amounts in the time obligations. If, how- -ever, the Ways and Means Committee- of the House, which shared with the
•Secretary of the Treasury the initial responsibilty for the Liberty loan acts,
•should question my power so to act, I shall be pleased to have you so inform
•me at once, in order that 1 may lay before your committee a proposal for
further enabling legislation.
Cordially yours,

. •

CARTB:R GLASS.

Hon. JOSEPH W . FORDNEY,

House of Representatives.

The Committee on Ways and Means replied that there T^as.inJts
opinion no legislative bar to the procedure proposed. Negotiations
looking to the exchange and, in that connection, the deferring of interest collection were undertaken in Washington. They were continued in Europe in the fall of 1919 and the spring of 1920 by
Albert Eathbone, then Assistant Secretary of the Treasury, and will
be concluded in Washington. I trust that they will be completed in
the near future. Such an arrangement will involve no present
burden to the debtor nations and would do much in fact to clear the
atmosphere and to improve European credits. The foreign exchanges are now at a greater discount than they were at the time of
the Treasury's original statement. I t would add to the difficulties of
the situation and would not be to the advantage of t h e U n i t e d States
at this time to require cash payment of interest from the debtor
European Governments.
Section 8 of the Victory Liberty loan act provides that obligations
oof foreign Governments acquired by virtue of the provisions of the
first Liberty bond act or through the conversion of short-time notes
acquired under that act shall mature not later than June 15, 1947,
and that all others shall mature not later than October 15, 1938. I
am of the opinion that, if they so desire, the respective foreign Governments should be given the benefit of the full periods thus permitted. The long-time obligations should, I believe, contain a provision for a moderate sinking fund, the first payments on which
should be made at a reasonably early date. The dates on which the
Treasury receives large tax payments, and is itself bound to pay
interest on obligations of the IJnited States, require that interest and




62

REPORT ON T H E FINANCES.

sinking fund payments on the foreign obligations be made in substantially the following proportions and on the dates mentioned :
Ten per cent January 15 and July 15.
Ten per cent February 15 and August 15.
Fifty per cent April 15 and October 15.
Thirty per cent May 15 and November 15.
The following tables show substantially the annual installments of
deferred interest and sinking fund payments which I believe the
long-time obligations should provide for, subject to the necessary
modifications to suit such obligations as in the adjustment may bear
different dates:
Interest and sinking fund payments.
FOR BONDS MATURING JUNE 15, 1947.
Annual
interest Annual
Period (excess to back incovered. sinking
terest.
fund).

Interest and sinking fund payment dates

Oct.
Oct.
Oct.
Oct.
Oct.
Oct.
Oct.

15 1919 to Apr
15, 1922, to Apr.
15 1924 to Apr
15, 1926, to Apr.
15, 1928, to Apr
15, 1930, to Apr.
15, 1934, to Apr

15 1922 both
15, 1924, both
15 1926 both
15, 1928, both
15, 1930 both
15, 1934, both
15 1947, both

inclusive
inclusive
inclusive.. . . .
inclusive
inclusive . . . .
inclusive
inclusive

.
.

Annual
sinking
fund
installment.

Annual
total.

Years. Per cent. Fer cent. Fer cent. Fer cent.
3
5
2
hi
5
1
2
6
5
2
6,
5
1^
5
1
1^
6
5
1
13

f

FOR BONDS MATURING OCT. 15, 1938.

Oct
Oct.
Oct.
Oct
Oct.
Oct.
Oct.

15, 1919 to Apr
15. 1922, to Apr.
15, 1924, to Apr
15, 1926, to Apr.
15, 1928, to Apr.
15, 1930, to Apr.
15, ,1934,.to Apr.

15 1922 both inclusive -. 15, 1924^ both inclusive
15 1926, both inclusive
15, 1928, both inclusive
15, 1930, both inclusive
15, 1934, both inclusive
15, 1938, both inclusive

Years. Per cent. Fer cent. Fer cent. Fer cent.
3
2
5
5
2
' '^
5
2
6J
5
2
5
1^
4
5
4
1

I'

I t may be necessary for certain small payments of principal to be
made at the time the agreements for the exchange are entered into,
in order to bring the principal to round sums. The agreement with^
each Government should give the United States the right to use the
obligations of that Government held by the United States, whether
before or after the exchange, in settlement of war claims hereafter
made by such Government against the United States. The bonds
should provide for accelerating the payment of all deferred interest
whenever the currency of the Government in question over the foreign exchanges reaches a price approximating the gold import point
and while the exchange remains not lower than that figure, and
that, if this should happen before the deferred interest period has
expired, no further interest should be deferred. Both principal
and interest should be payable in gold coin of the United States




SECRETARY OF THE TREASURY.

63

or, at the option of the holder, in the currency of the debtor Government at a fixed rate of exchange (about gold parity), and without deduction for, and exempt from all, taxation by the debtor
Government. The obligations should contain suitable provision for
their conversion into bonds of small denominations or for their
payment, at the option of the obligor, in lieu of such conversion. To
prevent or curtail gold exports from the United States, they should
contain an agreement by the debtor Government to offer demand
drafts payable in its currency at a figure to be fixed (substantially
the gold export point), and to apply the proceeds to deferred interest
and then to principal, current interest to be adjusted accordingly.
Sinking-fund payments should be provided to be made in gold coin"
of the United States or in the currency of the debtor Government
at the par of exchange, if the holder shall so request.
Of the obligations of the British Government held by the United
States^ $122,017,633.57 are regarded as.having been given for purchases of silver uncier the Pittman Act. An agreement has been made
with the British Government for the funding and payment of this
aniount as follows: The sum of $17,633.57 has been paid with interest. As to the remainder, $122,000,000, the British Governinent, on
April 15 and May 15, 1921, respectively, is to pay the interest accrued on 60 per cent from April 15, 1919, and on 40 per cent from
May 15, 1919, at the rate of 5 per cent per annum. On each 15tli of
October, November, April, and May thereafter it is to pay a semiannual installment of interest at the rate of 5 per cent per annum,
which has accrued up to the respective date upon the corresponding
proportion of the part of the principal from time to time remaining
unpaid. The principal is to be paid in equal annual installments in
the years 1921,1922, 1923, and 1924 in the proportions of 60 per cent
on April 15 and 40 per cent on May 15 of each year. Until the
payment in full of the principal with interest, in order to afford
American nationals an opportunity to acquire rupee credits at the
same cost as such credits are offered to British nationals, the British
Government will permit the United States Treasury, through the
Federal Eeserve Bank of New York, on substantially the same terms,
as are open to British nationals, to make tenders to purchase rupee
credits offered by the Indian Government in London or elsewhere
in Great Britain. Payment is to be made in dollars to the agents
in New York of the British Government for the sterling cost of the
rupees at the cable rate for sterling fixed by the Federal Eeserve
Bank of New York at noon of the day of such sterling payment in
London. The British treasury having made the necessary arrangements with the Government of India, upon the request of the Secretary of the Treasury, will, ih addition, place at the disposal of the




64

REPORT. ON T H E FINANCES.

Federal Eeserve Bank of New York rupee credits at the rate of
exchange of 48f cents per rupee in amounts not exceeding 1 crore
in any one month and not exceeding 7 crores in any one year. ForthAvith upon the sale of such credits by the Federal Eeserve Bank of.
New York, payments therefor at the given rate will be made to
agents of the British treasury in New York. Eupee credits thus
acquired may be availed of by cable transfers by the Federal Eeserve
Bank of New York and may be disposed of by that bank, but not
at a lesser price than their actual cost to the bank. The dollar
amounts paid for rupee credits shall be used by the British treasury
to repay the principal of the obligations mentioned in this paragraph,
not previously paid, accrued interest upon the principal sums repaid
to date of payment simultaneously to be paid b}^ the British treasury. All principal amounts so paid in any year shall reduce correspondingly the fixed annual, installments payable in that year, and
.payments of interest thus macJe shall reduce correspondingly the interest payments otherwise due.
The indebtedness incurred by' the United States to make the for-eign loans is not cared for by the sinking fund. Congress contemplated that foreign repayments would provide for that part of our
debt. Of late there has been no little discussion as to how this foreign debt should be treated. Some advance the proposal that it
should be canceled. This is a favorite plan of some Europeans and
some Americans. The suggestion is based first on one ground and
then on another. At one time it is based on sentiment or on considerations of generosity. By some it is based on the contention that
it will promote peace. I t apparently is assumed that antagonisms
will be set up if the nations of Europe are asked to repay the loahs
which they sought and so gladly received. At another time it is
based on consideration for present producing interests. Voices are
heard representing that it will ruin the trade of America if Europe
is to send us her commodities for what she owes us. Apparently
these advocates contend that international trade will be profitable
provided only we give to the world what we produce, declining to
receive any commodities in return. I imagine neither of these suggestions will be received with favor by the American taxpayers.
They will realize that if the debts are canceled they must pay taxes
to meet the interest and to redeem the principal of ten billions of dollars. Another suggestion is that the demand notes now held by the
Government shall be funded into bonds bearing a higher rate of
interest which the debtor nations will consent to exchange for the
outstanding bonds and that a direct relation be set up between those
who consent to receive such bonds in this country and the foreign
debtors, although it is proposed that this Government guarantee the




65

SECRETARY OF THE TREASURY.

bonds. No evidence is furnished that debtor nations would be willing
to assent to the creation of a bonded debt Avitli a higher rate of
interest with obligation for the immediate payment of interest;
and there is nothing in existing law which warrants such a transaction. They should not be charged interest at a rate exceeding the
cost to our Government of the money borrowed from our people to
lend to them. The advances made by the United States to.the Allies
began only at the time of our entry into the war. For substantially
a year we had no considerable military forces in Europe and we
were lending the money needed to supply the part purchased from
our people of the materials necessary for the armies of the Allies,
who were holding the Germans in the meantime. If, in April, 1917,
we had had a vast army in Europe there would have been no considerable loans to the Allies for purchases of war material in this countrj-, since our own armies would have needed all the munitions this
country could have produced. In the circumstances we must deal
with the debts of the allied Governments in a spirit of fairness.
The suggestion that we should throw them upon the niarket appears
to me to be as fatuous and impracticable as either of the other suggestions.
The reasonable and proper course is to proceed under the terms of
existing law, which authorizes the Secretary of the Treasury to
fund the demand notes into obligations with a distant maturity at
a rate of interest at least equivalent to that borne by our own bonds,
coupled with authority for the time being to defer interest payments.
Foreign obligations received on account of sales of surplus loar
supplies and, European relief. . •
Foreign obligations have been received from the Secretary of War
up to November 15, 1920, on account of sale of surplus war supplies,
as follows:
Country.

Principal
amount
payable.

Date.

Maturity.

Interest
runs from—

Interest
payable.

$19,000,000.00 Apr. 10,1919 Apr. 10,1922 June 30,1919 Apr. 10-Oct. 10.
8,392,097.57 Aug. 5,1919 Aug. 5,1922 Aug. 5,1919 Feb. 5-Aug. 5.
196,483.57 Aug. 21,1919 Aug. 21,1922 Aug. 21,1919 Feb. 21-Aug. 21.

Belcium

27,588,581.14
Czechoslovakia

5,000,000.00
5,000,000.00
4,902,994.94
2,464,9'50.38
1,291,903.85
1,962,145.37
20,621,994.54

13799—ri 1920-




May
June
Aug.
Oct.
Feb.
May

29,1919
15,1919
10,1919
14,1919
10,1920
1,1920

June
June
June
Oct.
Jan.
June

30,1922 June 30,1919 June 30~Dec. 30.
30,1923
do
Do.
30,1924
do
Do.
14,1922 Oct. 14,1919 Apr. 14-Oct. 14.
28,1923 Feb. 10,19^0 Jan. 28-July 28.
30,1925 June 30,1920 June 30-Dec. 30.

66

EEPOKT ON T H E FINANCES.
Principal
amount
payable.

Country.

Esthonia

$5,000,000.00
5,000,000.00
2,213,377.88

Date.

Maturity.

June '6,1919 June 30,1922
June 11,1919 June 30,1923
June 29,1919 June 30,1924

Interest
runs from—

Interest
payable.

June 30,1919
do
do

June 30-Dec. 30.
Do.
Do.

12,213,377.88
France

.-

Latvia

. . . 400,000.000.00
-. .

Lithuania
Poland

2,521,869.32
4,159,491.96

Aug. 1,1919 Aug.

1,1929 Aug. 1,1920 Feb. 1-Aug. 1.

June 28,1919 June 30,1922 June 30,1919
do

do

10,000,000.00 June 3,1919
.do
June 30,1923
10,000,000.00
do
10,000,000.00 July 19,1919 June 30,1924
10,000,000.00 July 22,1919
do
8,151,060.52 July 31,1919
do
5,536,867.71 Oct. 1,1919 Oct. 1,1925
3,941,803.61 Oct. 15,1919 Oct. 15,1925

do.......

June 30-Dec. 30.
Do.

Do.
do
June 20^Dec. 20.
do
Do.
do
Dec. 30,1919 June 30-Dec. 30.
Do.
do
Oct. 1,1919 Apr. 1-Oct. 1.
Oct. 15,1919 Apr. 15-Oct. 15.

57,629,731.84
Roumania

5,000,000.00
5,000,000.00
2,913,589.66

June 27,1919
do
Aug. 13,1919

June 30,1922
June 30,1923
June 30,1924

Aug. 8,1919

June 30,1922

June 30,1919
do
do

June 30-Dec. 30.
Do.
Do.

12,913,589.66
Russia
Serbs, Croats, and Slovenes.

406,082.30
5,000,000.00
5,000,000.00
10,000,000.00
50,350.28
281,205.51
4,646,465.20

do
June 13,1919
Aug. 30,1919 June 30,1923
do
June 30,1924
Dec. 20,1919 ..-:-dO
Apr. 15,1920 Apr. 15,1924
Apr. 29,1920 June 30,1925

do
do
Aug. 30,1919
do
June 30,1919
Apr. 15,1920
June 30,1920

Do.
Do.
Do.
Do.
Do.
Apr. 15-Oct. 15.
June 30-Dec. 30.

24,978,020.99
Total

563,032,739.63

The Treasury holds these obligations as custodian and was not concerned in their acquisition. Interest has been paid promptly on the
Belgian and Latvian obligations. The sum of $1,176,454.11 interest
has been received from Poland and has been credited on account o t
payment of interest accrued from December 30, 1919, to June 20, <
>
1920, on obligations dated June 3, 1919, and July 19, 1919, for
$10,000,000 each and on account of interest accrued from December
30,1&19, to June 30,1920, on obligations dated June 3, 1919, and Jul}^
22, 1919, for $10,000,000 each, and on those dated July 31, 1919, for
$8,151,060.52. The sum of $10,179.87 has been received on account
of interest accrued on the Eussian obligation for the period from
June 30, 1919, to December 30, 1919. Since the first interest date of
the French obligations is February 1, 1921, and that of the notes
dated April 29, 1920, for $4,646,465'.20 of the Kingdom of the Serbs,
Croats, and Slovenes is December ,30, 1920, no interest on these notes
is payable until the dates indicated. Interest on the other notes has
not been paid.
Foreiign obligations have been received from the American Eelief
Administration on account of relief rendered pursuant to act ap-




67

SECRETARY OF THE TREASURY.

proved February 25,1919, and are held by the Treasur}^ as custodian,
as follows:

Armenia
Czechoslovakia
Esthonia
Finland

Principal
amount
payable.

Date.

$8,028,412.15
6,348,653.56
1,785,767.72

June 30,1919
do
Aug. 11,1919

3,289,276.98
4,992,649.19

Country.

June 30,1919
June 1,1920

do
do

June 30,1919
June 1,1920

Do.
June 30-Dec. 30.

June 30,1919

do

June 30,1919

June 30.

Maturity.

Interest
runs from—

June 30,1921 June 30,1919
do
June 30,1923
June 30,1921. Aug. 11,1919

Interest
payable.
June 30.
Do.
Do.

8,281,926.17
2,610,417.82

Latvia

822,136.07

Lithuania
Poland...

.

do

10,000,000.00 .
10,000,000.00
31,671,749.36

..do.
do.„
do

do
do
June 30,1922
.June 30,1923

do

Do.

do
do
do

Do.
Do.
Do.

51,671,749.36
xlussia
Total

' 4,465,465.07

July

1,1919

June 30,1921 July

1,1919

Do.

84,014,527.92

No interest has been received on these obligations.
There has been received from the Secretary of the Navy an obligation of the Eepublic of Poland for $2,266,709.66, dated April 22,1920,
maturing March 27, 1926, bearing interest at the rate of 5 per cent
from March 27, 1920, payable annually on the 30tli day of December.
Foreign currencies.
Currencies needed by the United States in France, Great Britain,
and Italy for our Avar expenditures in those countries were provided
by the respective foreign Goyerntaents under an arrangement
whereby the dollar equivalent of the amounts so provided was made
available to the respective foreign Governments for use to meet their
war expenditures in the United States, and thus the needs of these
Governments for advances from the United States were reduced by
a corresponding amount. During the fiscal year ended June 30, 1919,
this plan was also extended to Belgium. A small amount of Belgian currency Avas provided under the arrangement during the fiscal
year ended June 30, 1920. I n view, however, of the condition of the
exchanges and the comparatively small requirements for Belgian
and Italian currencies during the past fiscal year, these, with the
exception of the small amount of Belgian currency, were obtained
by United States disbursing officers by the use of checks in the usual
course. The following tabulation shows the amount of foreign currencies placed at the disposal^ of the United States and the dollar
equivalents paid therefor in the United States for the period from




68

REPORT ON T H E FINANCES.

the beginning of the operation of the arrangement during the month
of January, 1918, up to November 15, 1920:
Country.
Relgium
France
Great Britain
Italy
Total.

Francs.
...

..

12,500,000.00
5,711,941,418.08

Pounds sterling.

100,572,387 13 1

Lire.

97,583,742.51

-Dollar equivalent.
1,197,555.56
1,025,438,235.88
449,496,227.55
14,425,092.25
1,490,557,111.24

As shoAvn by the final report of the United States Liquidation
Commission of the War Department, dated May 31, 1920, a contract
of general settlement was made between the United States War Department and the French GoA^ernment, by the terms of Avhich the
latter acknowledged an indebtedness of $177,149,866.86 and the War
Department an obligation to France of 1,938,604,417.25 francs.
Negotiations between the Treasury and French representatives regarding the manner and form of mutual payments and the rate of
exchange to be applied to the extent that amounts due from the
respective Governments shall be agreed to be set off are not completed.
Negotiations, are also pending between, the various departments of
this Goverhment and various ^foreign Governments concerning mutual claims. Pending final settlement of these matters and for
use in connection therewith and for current necessities, the balances
Avith the Tresor Public, Paris, as a depositary of public moneys of
the United States, to the credit of United States disbursing officers
and of the Treasurer of the United States amounted, according to
latest reports received, to an aggregate of 658,699,767.87 francs,
equiAT-alent at the rate of exchange used for accounting purposes to
^42,927,767.41. . On the basis of the Treasury daily statements, the
total balances of foreign currencies as of November 15,1920, standing
to the credit of disbursing officers of the United States and the
Treasurer of the United States, including the balances Avith the
Tresor Public, were equivalent at the accounting rates of exchange to
$50,189,337.39.
During the fiscal year the Treasury paid off certificates of indebtedness, amounting to 155,000,000 pesetas, issued by it under the
250,000,000 pesetas credit, which had been arranged in August, 1918,
by a representative of the Treasury with a syndicate of SpanisK
banks. This was the only foreign indebtedness incurred by the
United States during the war. At that time Spanish exchange was
at a premium of about 40 per cent. By reason of the drop in the rate
of Spanish exchange resulting, in part, from the arrangement of this
credit, the Treasury was able to obtain in the exchange market at




SECRETARY OF THE TREASURY.

69

par or less the pesetas necessary to be bought in order to pay the
certificates. The transaction gave a substantial profit to the Government.
Expenditures reported by foreign Governments.
Under the Libert}^ loan acts the Treasury Avas authorized for the
. j:)urpose of more effectually providing for the national security and
defense and prosecuting the w^ar, to establish credits for foreign Governments and to purchase their obligations at par. The foreign Governments were therefore required by the Treasury to state the purposes to be served in order to enable the Treasury to determine
Avhether they Avere germane to the purposes indicated by the Liberty
loan acts and whether and in what amount credits should be given.
The Treasury did not, of course, make expenditures for the foreign
Governments. I t paid to them the purchase price of the securities;
and they made the expenditures. After this was done they made
further statements to the Treasury showing the actual application of
the proceeds of the loans.
As the progtam authorized by Congress for foreign loans was substantially closed in April, 1919, and the making of advances for commitments incurred prior to that time is now practically at an end,
statements are attached as Exhibits 26 to 32, pages 338 to 347, showing the amounts advanced to foreign Governments and the expenditures reported by them to November 1, 1920. These have been
tabulated by the following iDcriods, viz:
1.
2.
3.
4.
5.

April 6 to December 31, 1917.
January 1, to June 30, 1918..
July 1 to November 30, 1918.
December 1, 1918, to June 30, 1919.
June 30, 1919, to NoA^ember 1, 1920.

They have also been summarized to show the total advances and
the expenditures reported for the entire period classified by {a) the
five periods above referred to, (b) the individual Governments. They
giA^e total expenditures from April 6,1917, as reported by the British
Government to June 30, 1919, by the French Government to January
31, 1920, by the Italian Government to August 31, 1919, by the Belgian Government to February 28, 1920, and by the Eussian Government to December 31, 1917, and in addition certain specific expenditures as reported up to November 1, 1920.
Under arrangements which were entered into about September 1,
1917, purchases were made by the missions of the various foreign
Governments under the general supervision of a purchasing commission, originally composed of Bernard M. Baruch, Eobert S.
Brookings, and Eobert S. Lovett, established by agreement between
the Secretary of the Treasury and the respective foreign Governments



.70

REPORT ON T H E FINANCES.

for the purpose of coordinating governmental buying in the United
States. Proposed purchases of each Government were considered in
relation to the requirements of the United States and of the allied
Governments before being approved. Purchases of food were made
with the approval of the Food Administration and those of fuel
(coal and oil) with that of the Fuel Administration. On March 4,
1918, by order of the President, the work of the commission was
integrated with that of the W a r Industries Board. Under date of
December 14, 1918, the arrangements between the commission and
the foreign Governments were terminated and the functions of the
former which then remained were taken over by the Treasury Department. These had come substantially to an end by June 30, 1919.
From the inception of the commission the coordination which it was
able to bring about became increasingly effective each month, and on
May 15, 1918, an arrangement was made with the W a r Trade Board,
whereby the issue of export licenses to the foreign Governments Avas
withheld except for purchases which had been approved by the commission. This arrangement continued until the export restrictions
were withdrawn by the W a r Trade Board, in December, 1918.
I n Europe the Interallied Council on W a r Purchases and Finance,
created in the autumn of 1917 with the view of considering and coordinating the demands of the Allies upon the American Treasury,
continued in operation until after the armistice. I n initiating, soon
after America entered the war, the Purchasing Commission in the
United Stajtes and the .Interallied Council on War Purchases and
Finance in Europe, the Treasury broke new ground and took important first steps toward coordination of. the demands of the Allies
upon the American Treasury and the American market with each
other and with the requirements of the United States. Finding their
sanction only in the Treasury's circumscribed activities, they were,
howcA^er, necessarily limited in power and scope, and their functions
to a large extent were properly superseded by other and more comprehensive instrumentalities so soon as the latter were created.
After the signing of the armistice, it was the belief of the Treasury
that its further loans to foreign Governments should be reduced so
far as possible, and that they should finance themselves in our financial markets. Steps were taken as rapidly as possible to relax governmental supervision and to induce the respective Governments to
act independently. The consequence Avas that the Belgian, British,
French, and Italian Governments all found means during the period
to obtain funds here from private lenders, on treasury bills and on
long-time obligations; their transactions with the United States
Treasury formed a smaller proportion of their entire transactions;
and important maturities, including that of the Anglo-French loan
of $500,000,000 on October 15,1920, have been met without the assist


SECRETARY OF THE TREASURY.

71

ance of the United States Treasury. Payments in dollars by various
of our departments to the British Government have amounted since
July 1, 1919, to something like $70,000,000, and are probably not yet
complete; and payments to the British Government for sterling furnished by it for the use of the United States Government in meeting
commitments for ,war expenditures in England amounted during the
year ended November 15,1920, to about $48,000,000.
• I n considering the statements it must be borne in mind that the
amounts shown under the various headings do not for the most part
include expenditures of dollars obtained by foreign Governments
otherwise than frdm the American Government's loans and expenditures in Europe, and therefore do not represent total disbursements.
Furthermore, purchases of commodities here are included in the item
of exchange, particularly for the earlier part of the war. I n the ordinary course of trade, all transactions in these would have been reflected in a net balance of trade which would have been settled
through the importation of gold or the sale of exchange except in so
far as it might have been capitalized through the purchase of American securities held abroad, or of securities of the foreign Governments
offered in the United States or adjusted by transfer of bank balances
or otherwise. I n the early stages of the war, all commodity purchases
by Great Britain were thus merged in exchange except purchases of
munitions and sugar. Therefore, the exchange item in the British
statement of expenditures reflected purchases of wheat, food, cotton,
leather, and oil under Government control, as well as all transactions
of individual buyers in the United States, and the amounts shown
under specific headings included only commodities bought under
Government control after centralized purchases and finance were established. The amount expended by France for exchange was of a
less complex character than the disbursements shoAvn under the same
heading for Great Britain. After March, 1917, imports into France
were in general prohibited until after the armistice. • I n some cases,
however, imports from the United States were authorized and in
such cases the Bank of France undertook to provide funds sufficient
to pay for them. Prior to November .30, 1918, the dollar funds provided by the Bank of France constituted the major part of the French
exchange payments. There are also included under this heading certain sums expended in New York in purchasing drafts on Paris or in
making payments for cotton. Some purchases on French account
were paid for by drafts on London; this being particularly true in
the earlier part of the period. The purchases of these drafts are included in the British item of expenditure and the amount of transactions as estimated from tim.e to time for the French and British
Governments forms part of the reimbursement by the French to the




72

.REPORT ON T H E FINANCES.

British. I t will readily be apparent that completely to analyze the
total purchases of exchange is impossible. I t was consistently the
aim of the Treasuiy Department to have whole classes of transactions,
such as the buying of wheat and food, taken out of the general exchange market, so far as possible, to be provided for by direct payments, and'to determine, as completely as possible, the character of the
remaining exchange transactions. The system of governmental supervision and control Avliich, under the Executive order of January 26,
1918, became effective OA^er exchange transactions on February 16,
1918, and other steps pursued made it possible to exercise a close
scrutiny on items of exchange purchases until the end of June, 1919,
when control of exchange by this Government Avas terminated. I t
will be recalled that the " unpegging" of their exchanges by the
British, French, and Italian GoA^ernments took place in March, 1919.
The items of reimbursements included in the statements of expenditures consist principally of payments by France and Italy to
Great Britain for cereals, sugar, meats, and munitions and for neutral
freights, and other disbursements made to neutrals, and of payments
by Belgium to Great Britain for horses, petrol, oats, flour, and certain
relief supplies furnished by Great Britain out of supplies obtained
actually or constructively from the United States. The expenditures
for silver represent principally sales to the British under the provisions of the Pittman Act for the purpose of strengthening the metallic reserA^e of the currency of India. Such sales were not, howcA^er,
paid for entirely out of United States Treasury adA^ances. The British authorities received $71,353,249.99 for rupees made aA'^ailable to
the Federal Eeserve Bank'of NCAV York, and the sum of $9,999,658.07
in gold Avas shipped to this country from India. The interest item includes, Avith the exception of Cuban and Greek interest and of the partial payments of $3,265,802.51 mentioned on page 57 on account of
Eussian interest, the amount received by the United States on its advances to foreign Governments.. The contributions for relief in the
statements of British, French, and Italian expenditures include an
item of $16,000,000, which each contributed toAA^ard the relief of the
people of Austria. The French expenditures also include part of the
amount provided by the French (jOA^ernment toAvard the relief of the
people of France and Belgium. Almost the whole of the advances to
Eoumania and Serbia, and considerably more than half of those to
Belgium 'and the Czecho-Slovak Eepublic were for relief. The
Treasury's program of advances for relief during the period between
NoA^ember 30, 1918, and June 30,1919, was largely based upon reports
from the American Eelief Administration, which represented that
they Avere necessary as a military measure to prevent the spread of
anarchy; and a considerable part Avere made upon the condition that




SECRETARY OF THE TREASURY.

75

they should be expended through the American Eelief Administration.
'
/ •
The British Governnient made to its allies from August 1, 1914^
to March 31,1920, loans of £1,850,500,000, of Avhich £876,500,000 Avere
lent after April 1, 1917, and the French Government, from August 1^
1914, to December 31, 1919, made loans to its allies of 7,575,000,000
francs.
I n January, 1919, Norman H. DaAds was appointed by the President finance commissioner, representing the Secretary of the Treasury in Europe and acting as financial adviser to the American peace
mission until July, 1919. Early in that year Albert Strauss and
Thomas W. Lament were designated as special representatives of the
Secretary and Avere associated with Mr. Davis as financial advisers
to the peace mission. I n the following fall Albert Eathbone, then
Assistant Secretary, acted on behalf of the Secretary of the Treasury
as financial adviser associated with the Peace Mission, and after the
return of the mission as the United States representative on the committee on organization of the Eeparations Commission. Upon the
organization of the" commission he participated in its deliberations
as the unofficial representative of the United States, being succeeded
by Eoland W. Boyden early in April, 1920.
THE INITJRNATIONAL FINANCIAL SITUATION.

The international financial situation during the year has had
the close attention of the Treasury. At the date of this report
the foreign exchanges are substantially loAver than they Avere a
year ago. As compared with our currency, those of almost all countries are at a discount. This is indicated by the table following showing the discount or premium reached by certain foreign currencies on
the first of each month, beginning with November 1,1919, and ending
with November 1,1920.




N o v . 1,1919, Dec. 1,1919, J a n . 2,1920, F e b . 2,1920, Mar. 1,1920, A p r . 1,1920, M a y 1,1920, J u n e 1,1920, J u l y 1,1920, A u g . 2,1920, S e p t . 1,1920, Oct. 1,1920, N o v . 1,1920
discount
discount
discount
discount
discount
discount
discount
discount
discount
discount
discount
discount
discount
(per c e n t ) . (per c e n t ) . (per c e n t ) . (per c e n t ) . ( p e r c e n t ) . (per c e n t ) . ( p e r c e n t ) . (per c e n t ) . (per c e n t ) . (per c e n t ) . (per c e n t ) . (per c e n t ) . (per c e n t ) .
Great Britain
France
.Belgium
Italy
Germany
Sweden . . .
Norway
Denmark
Holland
Switzerland
Spain.
India
Japan
Brazil
Argentina
Chile
P e r u (cable r a t e s )

14.47
41.55
37.72
52.12
86.30
11.00
15.67
21.08
. 5.94
7.50
.10
1 29. 63
11.81
20.63
.24
M.39
2.19




18.06
47.77
44.97
58.03
89.79
16.79
19.78
25.75
5.15
5.44
11.97
1 39.66
11.41
5.22
11.86
11.76
1.37

22.17
51.92
51.45
60.88
91.39
19.78
24.07
28.73
7.01
7.46
.52
1 42.75
1.90
14.47
11.58
14.41
2.60

29.42
62.33
62.44
67.88
95.21
'
28.54
35.26
41.60
5.77
10.21
6.74
1 29.63
2.11
18.32
1 1.27
1 13. 03
2.60

29.26
63.52
62.07
71.61
95.71
30.97
36.19
44.03
8.58
15.91
10.62
1 41. 98
4.12
21.77
12.17
1 9..04
3.83

19.40
64.61
62.23
74.92
94.03
19.29
27.24
• 31.90
7.64
8.60
8.81
1 43.52
4.62
17.55
11.74
111.70
2.54

1 Premium.

21.30
69.02
66.94
76.68
92.69
20.71
28.54
36.64
9.20
7.98
11.40
1 41.20
.10
19.09
1.45
15.05
12.69

19.40
59.74
57.98
69.38
88.99
19.59
33.02
36.94
8.88
6.99
15.80
1 28. 09
12.91
20.23
.14
13.72
12.69

18.83
56.99
55.13
69.12
88.91
17.91
39.18
39.18
11.84
6.01
14.40
1 18. S3
1 3.17
27.57
1.67
19.73
12.54

23.82
60.57
58.13
72.59
90.38 ,
21.64
41.23'
41.42
15.72
12.18
20.88
1 14.97
12.67
33.27
7.51
6.91
12.54

•

26.80
63.99
61.61
75.70
91.47
25.00
47.01
46.64
20.65
14.77
22.54
15.71
12.67
41.44
10.50
4.89
12.54

28.03
65.03
63.26
78.34
93.07
25.93
47. 95
48.32
22.89
16.84
24.04
1.31
12.91
45.66
15.21
14.89
12.54

29.34
67.25
65.28
81.01
94.58
27. 80
49.74
49.44
24.50
18.81
28.24
11.27
12.16
46.06
17.76
22.87
10.61

O

o
H

SECRETARY OF THE TREASURY.

75

Foreign trade.
The foreign trade of the United States in recent years, measured
in terms of dollars on the basis of prevailing prices over the years
indicated, has shown a vast growth. I n the decade preceding the
war it had shown a steady upward movement, and in 1913, the last
calendar year before the European war, the exports of merchandise
had risen to $2,484,018,292 and the imports Were $1,792,596,480, an
excess of exports of $691,421,812. I n the last year of the Avar the
exports of merchandise were A^alued at $6,149,087,545 and the
imports at $3,031,212,710, resulting in an excess of exports of
$3,117,874,835. I n 1919, the first calendar year after hostilities
ceased, the exports Avere valued at $7,920,425,990 and the imports at
$3,904,364,932, showing an excess of exports of $4,016,061,058. To
the end of September of this calendar year the exports were valued
at $6,080,990,920, or at the rate of nearly eight and one-quarter billions
for the year, and the imports were $4,358,405,643, indicating an excess
of exports for the nine months of $1,722,585,277. The apparent excess
exports for the calendar years 1918 and 1919 and the current year to
the end of September show a value of $8,856,521,170.
I t is notable that approximtately 50 per cent of the'exports of
merchandise for the last calendar year before the war and for the
period indicated since the beginning of 1918 consisted of agricultural
commodities, while a smaller per cent of the imports were of such
commodities. For the fiscal year ended June 30, 1914, of the total
exports of merchandise valued at $2,364,579,148, $1,113,973,635
covered agricultural commodities; while, of the total imports of
$1,893,025,657, $924,246,616 represented agricultural commodities;
and of the latter amount over $231,000,000 were of such noncompetitive products as coffee, tea, tropical fruits and nuts, oils, and cocoa,
and over $101,000,000 were of sugar, of which commodity we produce
only approximately 25 per cent of our needs. I n that year, therefore,
our exports of competitive agricultural products exceeded our imports of such commodities, without including sugar, by over a half
billion of dollars. I n the calendar year 1919, of the total exports of
merchandise of $7,920,425,990, more than half, or slightly^ OA^er
$3,972,000,000, represented agricultural commodities, including approximately $1,000,000,000 of breadstuffs, over $1,100,000,000 of unmanufactured cotton, approximately $1,160,000,000 of meat and dairy
products, and nearly $260,000,000 of tobacco; while these imports
were valued at only slightly over $1,600,000,000 of which more than
$435,000,000 were of noncompetitive products such as coffee, tea,
oocoa, and fruits and nuts, $132,916,292 of oils, and over $394,000,000
of sugar. The excess of agricultural exports for that year was more




76

REPORT 01^ T H E FINANCES.

than $2,300,000,000 and the excess of exports of competitiA^e products^
much larger.
I t need scarcely be added that the increase in the physical volume
of trade for 1919 or the current 3'ear Avas veiy much lower than the
corresponding increase in the value of the trade. The figures during
and since the war reflect the great upward movement of prices. I t
is difficult to indicate the ph^^sical A'olume of trade and its increases.
A surA^ey made in 1919 of domestic exports of certain commodities
constituting a large fraction of our total exports for the 5-yearperiod 1914-1919 on A^alues adjusted to a preAvar basis rcA^eals an
increase of about 23 per cent when compared Avith such exports for
1910-1914, as against an increase of 97 per cent Avith no adjustment
of values. This comparison Avould not apply to the Avhole mass of
exports, for the reason that the percentages of the aggregate values
of the selected articles to the total values of domestic exports for the
fiscal A^ears 1916, 1917, and 1918 are considerably below the aA^erage
percentage shoAvn for the articles selected for the 5-3^ear period preceding the war to the total values of exports for that period. A
more recent and exhaustive survey indicates in an even more striking
manner the Avide difference betAveen prcAvar and postwar A^alues of
commodities exported from this country. The latter survey, using
as a basis 100 commodities ahd the fiscal years 1911-1914, inclusive,
shoAvs an increase of 31 per cent for the fiA^e-year period 1914-1919
on A^alues adjusted to a prcAvar basis, as contrasted Avith an increase
of 217 per cent Avith no such adjustment. I t Avould not be safe to
assume that the stated percentage of increase in physical A^olume is
indicatiA^e of the groAvth in the total physical A^olume; but it affords
evidence that the extraordinary growth in export values of the postAvar period OA^er the prcAvar period is largelj^ the result of the rise in
valuation. Th^e difference betAveen the physical volume of trade
and the A^alue of the trade is frequently OAT^erlooked in discussions of
foreign commerce, but it is eAddently of prime importance and has a
significance in many directions.
Financing foreign trade. ^
From January 1,1919, to September 30,1920, our exports to Europe
amounted to $8,484,433,858 and our imports from Europe to $1,741,114,553, the excess of goods exported being $6,743,319,305. This
surplus appears to have been paid for in part by the great loans
made by the Treasury to foreign Governments pursuant to the
Liberty bond acts; b}^ credits granted by the United States Grain
Corporation, the War Department, and the United States Shipping
Board; by the appropriation by Congress of $100,000,000 for European relief; b}^ loans by the War Finance Corporation to banks and



SECRETARY OF THE TREASURY.

77

-exporters in this countiy to assist in financing exports; and by immigrants' remittances, new loans to Europe, the shipment of gold, the
sale in this market of foreign securities and the repurchase in our
market of American securities formerly held in Europe. Eegarding
such repurchase of securities, the Secretary made the folloAviiig
statenient on February 12, 1920:
'^ * '•' it is interesting to observe that tbe extreme depression in blgligrade investment securities in tbis country at the present time is, to a very
Important extent, the result of heavy selUng of such securities in our markets
from foreign sources. This, as Secretary Glass said in his annual report, is
one of the processes which is stimulated by the very position of the exchanges
which it tends to correct. By absorbing these high-grade investment securities
the American people are furnishing capital to Europe at a time of Europe's
need and are giving this help in just the way thac Europe helped America in
the period of America's growth and of her own monetary troubles. In the days
of the infancy of the Republic, in the days of our Civil War, and of the period
of reconstruction after the Civil War, of the monetary panics which we suffered at frequent intervals until the establishment of our Federal Reserve
System, America suffered greatly for lack of capital and credit and because
of her depreciated currency and later her inelastic currency. In those days
Europe came to America's -aid, not by Government loans, not with any comprehensive plan, but by the investment of private capital upon attractive terms in
American enterprises and in the purchase of American securities at bargain
prices. Europe profited enormously by these investments, and America profited,
too, be^^^ause she obtained the capital she needed at the price that the capital
was worth to her. Honest and energetic business men in both countries Avent
to work in their own way and solved the problem on business terms. Y'^et in
those days Europe was far better able to meet the relatively small demands of
America than is America now, burdened as she is by Government expenditures.
since the beginning of the war to the aggregate amount of about $36,700,000,000,
to meet the stupendous demands of Europe to-day. I am confident that the
:Solution of Europe's problems will be found by the wisdom and courage of
European statesnjen in facing the monetary difiiculties imposed upon them by
the Great War and by the enlightened, sympathetic, and friendly cooperation of
the business men and Avorkmen of America and Europe Avhen peace is restored
and the hope and fear of Government interferences are removed.
Notwithstanding these payments there remained on September 15,
1920, according.to the best available estimates, an unfunded balance
of probably $3,000,000,000 to $3,500,000,000 due from Europe, and
this balance has probably increased since September 15, 1920. Inasmuch as other items probably roughly offset each other, this balance
may fairly be said to represent the goods sent to Europe and the
services furnished by our people in addition to the aid rendered by
the Government itself.
The liquidation of Europe's large indebtedness to this country,
commercial and governmental, will present serious problems, and
t h e liquidation of part of it will extend over many years. I t will
be effected doubtless by the further return of securities, by expenditures of travelers abroad, by payments for serAdces, by in


78

REPORT ON THE FINANCES.

creased foreign investments, and in very large measure, of necessity, by the importation of commodities. Unless our exporters and
bankers can arrange with our investors for the necessary cooperation there should be considered with the utmost care the question how
far it is Avise to continue piling up an export balance which is neither
paid for nor funded. As encouragement to the funding of the export balance, the Treasury favored the passage of the act approved
December 24, 1919, under Avhicli regulations gOA'^erning the organization of corporations to promote foreign trade have been promulgated
by the Federal EeserA^e Board.
I n the changed conditions of the world to-day, it is important that
no step be taken which will interfere with the payment b}^ foreign
nations of their indebtedness to us by sending us commodities. . If
America is to sell her surplus products to the nations of the world,
she must be prepared to accept payment through the shipment of
goods. Anything which obstructs this operation will, in the circumstances, affect the prosperity of this Nation and work injury to
humanity in nia.ny parts.of the world. I n this connection I can do no
better than to quote the folloAving excerpt from the message of the
President to the Congress dated December 2, 1919:
A fundamental change has taken place with reference to the position of
America in the world's alfairs. The pj-ejudice and passions engendered by decades of controA^ersy between two schools of political and economic thought—
the one believers in protection of American industries, the other believers in
tariff for revenue only—must be subordinated to the single consideration of the
public interest in the light of utterly changed conditions. Before the war
America was heavily the debtor of the rest of the Avorld, and the interest payments she had to make to foreign countries on American securities held abroad,
tlie expenditures of American travelers abroad and the ocean freight charges
she had to pay to others about balanced the value of her prewar favorable
balance of trade. During the war America's exports have been greatly stimulated, and increased prices have increased their value. On the other hand, she
has purchased a large proportion of the American securities previously held
abroad, has loaned some $9,000,000,000 to foreign Governments, and has built
her own ships. Our favorable balance of trade has thus been greatly increased
and Europe has been deprived of the means of meeting it heretofore existing.
Europe can have,, only ithree Avays of meeting the favorable balance of trade in
peace times: By imports into this country of gold or of goods, or by establishing
new credits. Europe is in no position at the present time tp ship gold to us, nor
could we contemplate large further imports of gold into this country without
concern. The time has nearly passed for international governmental loans, and
it will take time to develop in this country a market for foreign securities,
xlnything, therefore, which would tend to prevent foreign countries from settling for our exports by shipments of goods into this country could only have
the effect of preventing them from paying for our exports and therefore of
preventing the exports from being made. The productivity of the country
greatly stimulated by the Avar must find an outlet by exports to foreign countries, and any measures taken to prevent imports will inevitably curtail exports,
force curtailment of production, load the banking machinery of the country with



SECRETARY OF THE TREASURY.

79

credits to carry unsold products, and produce industrial stagnation and unemployment. If we A\^ant to sell, we must be prepared to buy. Whatever, therefore, may have been our views during the period of growth of American business concerning tarilf legislation we must now adjust our own economic life to a
changed condition growing out of the fact that American business is full groAvn,
and that America is the greatest capitalist in the world.
No policy of isolation will satisfy the growing needs and opportunities of
America. The provincial standards and policies of the past, which haA^e held
American business as if in a strait-jacket, must yield and give Avay to the needs
and exigencies of the new day in which Ave live, a day full of hope and promise
for American business, if we will but take advantage of the opportunities
that are ours for the asking. The recent war has ended our isolation and
thrown upon us a great duty and responsibility. The United States must share
the expanding world market. The United States desires for itself only equal
opportunity with the other nations of the world, and that through the process
of friendly cooperation and fair competition the legitimate interests of the
nations concerned may be successfully and equitably adjusted.

The position of the Treasury on another important means of financing exports, namely, the sale of foreign securities in this country, was
expressed in the following public statement which was issued by the
Secretary on January 24,1920, in response to an inquiry as to whether
this department exercised any supervision over such issues:
During the war the Capital Issues Committee undertook to determine whether
it was compatible with the national interest that certain, issues should be made.
The Avork of that committee came to an end shortly after the armistice.
During the war, including that portion of the post-armistice period during
which the United States Government was financing the requirements of the
Allies, the Treasury was unwilling that their Governments should compete Avith
it by the issue of securities in our markets. Latterly, the attitude of the Treasury has been favorable to the issue under proper safeguards in our markets of
sound investment securities of foreign Governments, and of States, municipalities, and private borrowers, when emanating from those countries with Avhich
the international exchange is favorable to the United States, and it may be
assumed without inquiry that the Treasury does not object to such issues. But
the elfort must be to sell the securities, and procure the investment in them of
new savings, and not to dislodge United States Government securities by inducing the holders to sell and exchange them.
The principal need of most of the countries of Europe is for capital here^
rather than for bank credit. By maintaining doubtless necessary embargoes on
the export of gold, the principal countries of Europe prevent their people from
making payment in cash of their international debit balance, thus necessitating
the settlement of that balance by investment of American capital in Europe.
In the position of most of the European exchanges, resulting from these gold
embargoes, even transactions which under normal conditions would be regarded
as self-liquidating, and therefore appropriately to be financed by means of bank
credit, will not readily be liquidated in dollars. The requirement of Europe
for credit, therefore, should be met by the sale of capital issues to investors
rather than by the manufacture of bank credit which could only result in unhealthy inflation of our own domestic credit structure.
Neither the Capital Issues Committee nor the Treasury has ever undertaken
to authorize, approve, or pass upon the merits of any issue of securities what-




80

REPORT ON TH:E FINANCES.

•ever, whether of private companies, municipalities, State, or Governments, and
the fact that any such issue was not objected to raust not in any case be construed as carrying authorization, approval, or recommendation. The use of the
name of the United States Government or of any department of the Government
in connection with the issue of any such securities is unauthorized.
An estimate of financial obligations of foreign Governments offered in the United States from August 1, 1914 (as disclosed from
unofficial information in possession of the Treasury Department),
was sent by the Secretary of the Treasury to the President of the
Senate under date of J a n u a r y 27, 1920, in response to Senate resolution No. 214, of October 17, 1919. A copy of this estimate is attached as Exhibit 33, page 349.
Suggested international flnancidl

conference.

I n the latter part of January, 1920, the Secretary receiA'ed a letter
from the Chamber of Commerce of the United States of America
requesting an expression of the • Treasury's opinion on a memorial
signed by 44 prominent American citizens, recommending the holding of an international conference to consider the international
financial situation. The Secretary's reply Avas as folloAvs:
WASH-TKGTON, January 28, 1920.

SIR: I have the honor to acknowledge receipt of the letter of January 22,
1920, signed by yourself and Messrs. A. C. Bedford, John H. Fahey, and Harry A.
Wheeler, to whom, as a committee designated by the Chamber of Commerce of
the United States, was referred a communication transmitting a memorandum
signed by 44 prominent American citizens, addressed to the United States Government, the reparations commission, and the Chamber of Commerce of the
United'States, recommending that the Chamber of Commerce of the United
States designate representatives of commerce and finance to meet with those
of other countries for the purpose of examining'the situation as set out in the
-communication and recommending such action as may be advisable.
In compliance with your request for an expression of opinion from the
Treasury in respect to the observations and recommendations contained in the
memorial, I may first state that the views and policy of the Treasury in respect to the international financial situation are set forth in the inclosed extracts from my annual report (pp. 11 to 14, inclusive).
With much that is contained in the memorial the Treasury is in hearty
.accord. Concerning the need of increased production and decreased consumption, the need of balancing governmental budgets and taking effective measures
to deflate currency and credit, concerning the need of prompt and proper determinations by the reparations commission which will make possible the
resumptioii of industrial Ufe in Germany and the restoration of trade with
Germany, there can be no doubt.
The people of the United States are being called upon by taxes and othervA^se
not only to meet the Government's expenditures, but to reduce the war debt.
:So far as the countries of Europe are concerned, the adoption of similar policies
is a matter for the Governments of those countries and for the reparations
<!ommission.




SECRETARY OE THE TREASURY.

81

In an effort to alleviate the situation the United States Government has done
aU that was considered advisable and practicable. Since the armistice we have
extended to, foreign Governments the foUowing financial assistance:
Direct advances
$2,380, 891,179. 65
Funds made availabls to those Governments through the purchase of their currencies to cover our expenditures in
Europe
736, 481, 586. 76
Army and other governmental supplies sold on credit (approximately)
685, 000, 000. 00
Relief (approximately)
100,000, 000. 00
Unpaid accrued interest up to Jan. 1, 1920, on Allied Government obligations
324, 211, 922. 00
Total

4, 226, 584, 688. 41

The Treasury is opposed to further governmental aid beyond that outlined
in my annual report, and in my recent communication to the Ways and Means
Committee of Congress Avith respect to the extension of interest on the Allied
Government obligations held by the Government of the United States and to
the supplying of relief to certain portions of Europe. The Governments of the
world must now get out of banking and trade. Loans from Government to
Government not only involve additional taxes or borrowings by the lending
Government Avith the inflation attendant thereon, but also a continuance by the
borrowing Government of control over private activities Avhich only postpones
sound solutions of the problems.
The Treasury is opposed to governmental control over foreign trade and
finance and even more opposed to private control. It is convinced that the
credits required for the economic restoration and revival of trade must be
supplied through private channels; that as a necessary contribution to that
end the Governments of the Avorld must assist in the restoration of confidence,
stability, and freedom of commerce by the adoption of sound fiscal policies;
and that the reparations commission must adopt promptly a just and constructive policy.
The memorial which Avas simultaneously circulated in Europe differs in its
scope and character from the one presented in the United States. The European
memorial contains some passages omitted in the American memorial which
apparently advocate further governmental financial assistance, and also requests
the respective Governments to designate representatives to attend the proposed
conference, which would give it an ofiicial character.
The Treasury has not looked with favor upon certain features of the memorial
nor upon the proposed conference, being apprehensive lest the memorial and
such a conferenc'e should serve to cause confusion and revive hopes (Avhich, I
am certain, are doomed to disappointment) that the American people through
their Government will be called upon to assume the burdens of Europe by
United States Government loans. Such matters as the suggestion of further
governmental loans by the United States, the cancellation of some or all of the
obligations of European Governments held by the United States Grovernment
(as contemplated by a passage contained in the European memorial but omitted
from the American memorial), and the deferring of obligations of foreign Governments held by the United States to liens created in favor of logins hereafter
made for reconstruction purposes, are clearly not appropriate for consideration,
in such a conference as is contemplated by'the memorial.
13799—n 1920
6




82

REPORT ON TB:E FINANCES.

The existing world-wide infiation of currency, credit, and prices is a consequence of the fact that for a period of four or five years the peoples of this earth
have been consuming and destroying more than they have produced and saA-ed,
and against the wealth so destroyed the warring nations have been issuing currency and evidence of indebtedness. The consequence of the world's greatest
Avar is profound and inescapable. It has affected all the nations of the civilized
world, as well those who participated actively in the war as those who did not.
The inflation exists in the neutral countries of Europe and in the Orient. It
exists where there was no war debt, whei'e the Avar debt was badly handled,
and to some degree where the war debt was well handled.
The problems to the cure of which the distinguished gentlemen are directing
their attention have been the subject in one form or another of daily study of
the Treasury Department since the outbreak of the war, and especially since the
signing of the armistice. These problems have at all times been complex and .
difficult, and simple solutions haA^e never been possible, because they involve
some factors which are not susceptible of solution by any comprehensive plan.
The process of healiug the wounds inflicted by the war must necessarily be slow
and painful, involving as it does not only, the physical restoration of industry
and agriculture but as well the restoration to habits of industry of masses of
men accustomed by the war to unsettlement. We must necessarily, and to a
great extent, depend upon and encourage the independent activity and resourcefulness of each person affected to repair his own fortunes, with the assistance
of his business connections in other eountries, and also upon each individual to
return to a normal life of industry and economy.
From the moment of the cessation of hostilities the Treasury of the United
States has pursued a policy of looking toward the restoration as promptly as
possible of normal economic conditions, the removal of governmental controls
and interferences, and the restoration of individual initiative and free competition in business. It has insisted upon strict economy in governmental expenditure and upon the maintenance of taxes at a level which, with the salvage of
war materials and supplies, etc., will insure the prompt retirement of the floating debt of the United States and the establishment of a fund adequate for the
retirement of the funded debt in the course of a generation. The Treasury
long since, with the cooperation of the Federal ReserA-e Board, removed the
embargo on the export of gold, thus enabling American citizens and, indeed,
the nations of the world, to the extent that they find credit here, to finance
their purchases throughout the world in cash.
Rightly or wrongly, a different policy has been pursued in Europe. European
Governments have maintained, since the cessation of hostilities, embargoes upon
the export of gold. The rectification of the exchanges noAV adverse to Europe
lies primarily in the hands of European Governments. The normal method of
meeting an adverse international balance is to ship gold. The refusal to ship
gold prevents the rectification of an adverse exchange. The need of gold embargoes lies in the expanded currenc:\' and credit structure of Europe. Relief
would be found in disarmament, resumption of industrial life and activity, and
the imposition of adequate taxes and the issue of adequate domestic loans.
The American people should not, in my opinion, be caiiea apon to finance^
and Avould not, in my opinion, respond to a demand that they finance, the requirements of Europe in so far as they result from the failure to take these
necessary steps for the rehabilitation o< credit.
f?
Such things as international bond issues, international guaranties, and international measures for the stabilization of exchange are utterly, impracticable
so long as there exist inequalities of taxation and domestic financial policies in




SECRETARY OF TPIE TREASURY.

"

. 8 3

the various countries iuA^olved; and wlien these inequalities no longer exist
such devices Avill be unnecessary.
It is unthinkable that the people of a country Avhich has been called upon to
submit to so drastic a program of taxation as. that adopted by the United
States, Avhich called for financing from current taxes a full one-third of the
war expenditures, including loans to the Allies, should undertake to remedy
the inequalities of exchange resulting from a less drastic policy of domestic
taxation adopted by the other Governments of the Avorld. The remedy for the
situation is to be found not in the manufacture of bank credit in the United
States for the movement of exports, a process Avhich has already proceeded too
far, but ill the movement of goods, of investment securities, and, in default of
goods or securities, then of gold into this country from Europe; and in order
that such securities may be absorbed by investors our people must consume
less and save.
The United States could not, if it AVOU d, assume the burdens of all the earth.
It can not undertake to finance the requirements of Europe, because it can not
shape the fiscal policies of the governments of Europe. The Government of the
United States can not tax the American people to meet the deficiencies arising
from the failure of the governments of Europe to balance their budgets, nor
can the Government of the United States tax the iVmerican people to subsidize
the business of our exporters. It can not do so by direct measures of taxation, nor can it look with composure upon the manufacture of bank credit to
finance our exports Avhen the requirements of Europe are for Avorking capital
rather than for bank credit. Lamentable as Avould be the effects upon our
industrial life and upon Europe itself of the continued maintenance of an exchange barrier against the importation into Europe of commodities from the
United States, this country can >not continue to extend credits on a sufficient
scale to coA^er our present SAvol.en trade balance against Europe, AAdiile paying
cash (gold and silver) to the countries of Central and South America and the
Far East AAath which it has an iidverse balance on its OAVU and international
account. The consequence of the maintenance by Europe of this barrier Avill
be to force the United States to do business Avith those countries Avith AAdiich it
is able to do business on a cash basis. The only other policy Avhich the United
States could adopt would be the policy of reestablishing embargoes on goid and
silver and of inflating its OAA'U currency to the same extent that the currencies
of Europe are inflated, Avith a viCAV tO' loAvering its exchange to a parity Avith
theirs. This Avould involve taxing the Avhole people for the benefit of our exporters and the benefit of Europe and submitting to have imposed on the
United States domestic financial policies adopted by Europe but quite contrary to those heretofore adopted by the United States. It Avould mean a
Avorld-Avide inflation, the abandonment of the gold standard, and, ultimately,
chaos.
If the peoples and governments of Europe live Avithin their incomes, increase
their production as much as possible, and limit their imports to actual necessities, foreign credits to cover adverse balances would most probably be supplied
by private investors, and the demand to resort to such impracticable methods
as governnient loans and bank credits Avould cease.
There is no more logical or practical step toward solving their own reconstruction problems than for the AlUes to give value to their indemnity claims
against Germany by reducing those claims to a determinate amount which Germany may be reasonably expected to pay, and then for Germany to issue obligations for such amount and be set free to AA-ork it out. This Avould increase
. Germany's capacity to pay, restore confidence, and improve the trade and com-




84

REPORT ON T H E FINANCES.

merce of the world. T h e maintenance of claims Avhich can not be paid causes
apprehension and serA-es no useful purpose.
•
\
P r i v a t e investors can only make loans to the extent of their savings in excess
of domestic capital requirements, a n d then will only m a k e them to thie extent
t h a t they have confidence in the securities or obligations offered. T h e adoption
of the measures indicated should a d d to the confidence of the private investor.
If the Chamber of Commerce of the United States considers it advisable a n d
desirable to designate representatives to attend an unofficial conference, t h e
T r e a s u r y does not desire to offer any objection, provided the scope a n d character and limitations of such a conference, as Avell a s the impossibility of United
States Government action, a r e clearly understood.
Cordially yours,
HOMER L . FERGUSON,

CARTER GLASS.
Esq.,

President Chamber of Commerce of the 'United States of America,
Washington, D. G.

The Brussels Conference.
Subsequently the suggestion that an international financial conference be convened was addressed to.the Council of the League of
Nations. An invitation to such a conference was extended to the
United States by Sir Eric Drummond, secretary general of the league,
under date of April 15, 1920, as follows:
[Soci6t6 des Nations.

Leagiie of Nations.]

ST;NDERLAND H O U S E , CURZON

STREET,

London, W. I., April 15, 1920.
YOUR EXCELLENCY : T h e council of t h e League of Nations a t i t s meeting held
in London on F e b r u a r y 11-13 passed the folloAving resolution:
"ARTICLE I. T h e League of Nations shall convene an international conference
with a view to studying the financial crisis and to look for the means of remedying it a n d of mitigating the dangerous consequences arising from it.
"ART. I I . A commission composed of members of t h e council nominated by the
president is instructed to summon the States chiefly concerned to this conference
and to convene it a t the earliest possible date."
In accordance with instructions received from the Council of t h e League of
Nations I have the honor to forward to you hereAvith, for transmission to the
United States Government, a note and inclosure containing a n invitation to be
represented a t t h e conference or to be associated with it in i t s Avork.
In view of the urgency of the matter, I am directed to ask you to be good
enough to telegraph t h e substance of this note and inclosure to your Government
with a request t h a t the League of Nations may be informed of the reply a t as
early a date as may be possible.
I have t h e honor to be,
Your obedient servant,
ERIC DRUMMOND,
Secretary General.
H i s Excellency t h e Hon.

J O H N AV. I>AVIS.

etc.,

American Embassy, Grosvenor Gardens, London. S. W.




SECRETARY OF THE TREASURY.

85

INVITATION.

The Council of the League of Nations begs to inform the Government of the
lollowing resolution adopted during the meetings of the council held in London
February 11-13, 1920:
"ARTICLE I. The League of Nations shall convene an international conference,
with a vieAv to studying the financial crisis and to look for the means of remedying it and o^ mitigating the dangerous consequences arising from it.
"ALRTICLE I L A commission composed of members of the council nominated by
the president is instructed to summon the States chiefly concerned to this conference and to convene it at the earliest possible date."
This conference Avill be held at Brussels about the end of May, 1920. The
council invites the follOAving countries to send delegates to this conference:
Argentine Republic.
Australia.
Belgium.
Brazil
Canada.
Chile.
CzechoslOA^akia.
Denmark.
France.
Greece.
Holland.
India. .
Italy.

Japan.
NeAv Zealand.
Norway.
Poland.
Portugal.
Roumania.
3erb-Groat-Slovene State. .
South Africa.
Spain.
Sweden.
Switzerland.
United Kingdom.

"
"
" .

Other States members of the league Avill be invited to send to the council
as soon as possible any proposals Avhich they Avould like to have considered by
the conference. The council of the league is informing the United States Government of the proposed conference and is inviting them to send representatives
to the conference or to be associated with the work of the conference.
The council may invite States not included in the above list to communicate
to the conference full information regarding their financial and economic
situation, and if necessary it Avill decide under Avhat conditions these States
may be heard.
The council therefore has the honor to invite the Government to send to the
conference'not more than three delegates conversant with public finance and
banking as well as with general economic questions. The council requests that
the names of these delegates may be notified to the secretary general of the
League of Nations. The council will nominate the president of the conference
and will supply the necessary personnel for the secretariat. The exact date of
the meeting will be announced by the secretary general.
The council suggests that in order to facilitate the preparations for the
conference the Government should forward to the secretary general as soon as
possible any suggestions for dealing with the present financial difiiculties which
it may desire to submit to the conference, .together with a statement indicating
any steps it may have taken for dealing with the situation.
It is suggested that the general expenses in connection with the organization
of the financial conference should be met by the League of Nations and the
expenses and salaries of the delegations by their respective Governments.




86

REPORT ON THE FINANCES.
,

ACCOMPANYING MEMORANDUM.
T H E LEAGUE OF NATIONS,
SUNDERLAND HOUSE, CURZON STREET,

London, W. A., April 15, 1920.
The secretary general of the League of Nations is instructed by the council
of the League of Nations to communicate to the United States Government the
text of an iUAatation to an international financial conference which the council
o

is addressing to the States members of the League of Nations. The Avorld is at
this moment in a condition of economic and financial disorder Avith results
AAdiich are at present so serious and may in the future become so dangerous that
the League of Nations can not ignore them Avithout failing in its most essential
duties. In taking the initiatiA^e of convening a financial conference to meet at
'Brussels Avithin the next few weeks, the council of the league fully realizes the
difficulty of the problem under consideiation. and it does not ask the conference
for a complete solution. It desires, that the present situation should be discussed from an international point of Alew, and the delegates meeting at Brussels will be invited to conduct the debate on a higher plane than the mere
consideration of the special problems and interests of each State. The purpose
of the conference is not to recast the economic system of the AA^orld, but to
obtain suggestions for its improA^ement by the impartial examination of the
present situation and the formulation of practical conclusions by the best
qualified experts in each country.
Recognizing the economic and financial importance of the United States, the
council of the League of Nations expresses the earnest hope that the United
States Government Avill Avish to avail itself of the opportunity of the United
States being represented at the conference or of being associated with its work.

The following reply was made:
The Government of the United States acknowledges receipt of the text of an
invitation, addressed by the Council of the League of Nations to the States
members of the league, to an international financial conference to be held at
Brussels,' and transmitted to this Government under date of April 20, 1920, by
the secretary general of the League of Nations through the American ambassador to England, expressing the hope that the United States Government
will wish to avail itself of the opportunity of being represented at the conference
or being associated Avith its AA'ork.
The United States is intensely interested in the restoration of stable conditions throughout the Avorld and hopes that an exchange of views and information by experts may assist in the betterment of existing conditions.
It is not clear to this Government Avhether the suggestion as to the United
States taking part in the conference refers to the appointment of an official
delegation representing the Government:, or the appointment of unofficial delegates. This Government Avould not see its Avay to appoint an official delegation, but the Secretary of the Treasury AAdll be glad to designate one or more
unofficial representatives to attend the conference. While these delegates will
not be authorized to bind or commit'tliis Government in any Avay, they will be
authorized to take part in the discussions of the conference, for the purpose
of giving information as to the financial and economic conditions in this country
and for the purpose of obtaining similar information in respect to the other
countries.

The conference was postponed from time to time, but was finally
set for September 24, 1920; Roland W. Boyden, the unofficial repre


SECRETARY OF THE TREASURY.

87

sentative of the United States on the Reparation Commission,, was
designated as the unofficial representative of the Treasury at the
conference. The following is an extract from the cable instructions
sent Mr. Boyden in connection with the conference:
*
*
*
*
*
*
*
I have, Avith consent of Department of State, designated you an unoflBcial
representative to attend the conference and to report concerning the same. You
are authorized to take such part as you may deem advisable in the discussions
of the conference for the purpose of giving information as to the financial and
economic conditions in this country and for the puri)ose of obtaining similar
information in respect to other countries, but you are not authorized to bind or
commit this Government in any Avay.
Replies to a questionnaire and supplementary memorandum issued by the
League of Nations have been sent to the secretariat of the League of Nations
through Departnient of State and embassy in London. Suggest you communicate Avith embassy for purpose of obtaining this material.
Understand committee in charge of conference desires head of each delegation to make brief statement of financial and economic conditions in his country. You are authorized to make such statement on behalf of the United States
in case you consider it advisable to do so.
Understand advisory committee on matters relating to the conference has proposed that questions of reparations and cancellation of Avar debts be not dealt
Avith at the conference except in form of statement from chairman, and that
such statement Avould not be open to discussion. We understand Germans and
Austrians are noAv expected to attend conference, and assume, in view of their
presence, abOA^e-mentioned questions Avill not be brought up. It is view of
United States Treasury that such matters as further governmental loans by
United States, cancellation of some or all of obligations of European Governments
held by United States Government, and deferring of obligations of foreign Governments held by the United States to liens created in favor of loans subsequently
made for reconstruction purposes, are clearly not appropriate for consideration of
conference. You are, therefore, not authorized to enter into discussions regarding the obligations of foreign Governments held by the United States or further
advances by this Government to other Governments. These matters, together
AA^ith the exchange of the demand obligations held by the United States Government for long-time obligations, and the deferring of the collection by the United
States of interest during the reconstruction period, are, in my opinion, matters
resting exclusively betAveen the Treasury of the United States and the treasuries of the respective Governments Avhose obligations we hold.
Referring to proposed agenda, you Avill note that information contained in
replies to questionnaire covers many of the matters referred to. This Government has no external debt. Information concerning currency and external loans
is set forth in replies to questionnaire. Federal taxes imposed by existing legislation are calculated to yield an annual revenue of about $4,000,000,000. It is
the policy of the Treasury that taxes in this amount should continue to be
raised, but that incidence of taxation should be someAvhat changed with view
to acceleration of production and accumulation of capital. AA^ith exception of
tariff of duties upon imports and restrictions upon importation of certain dyestuffs, and with exception also of certain restrictions, upon exchange transactions with territory under control of so-called bolshevik government of Russia,
foreign trade and the exchanges are unrestricted, and it is present policy of this
Government that they should continue unrestricted. It is policy of Treasury
and of existing legislation that Federal Government besrin forthwith paying off



88

REPORT ON THE FINANCES.

its war debts; measures are being taken to halt increase of infiation of credit
and to encourage production and saving.. In opinion of Treasury, these ends
can best be attained in this country by avoiding so far as possible governmental
restriction and control and by leaAlng private enterprise free to produce surplus
necessary for reducing our national debt and for supplying Europe with materials requisite for its reconstruction. Attention should be called to fact that
in addition to taxes imposed by Federal Government, State and local taxation
is estimated to amount to not less than $2,000,000,000 annually. It should be
remembered also that although European Governments are indebted, to this
Government in amount approaching $10,000,000,000 there remains in hands of
Eurojpean holders investment in property in United States amounting to several
billion dollars.

Final reports of the proceedings of the conference liaA^e not been
received at the time this report goes to press. Excerpts from certain
of the resolutions adopted unanimously are as follows:.
FROM R E S O L U T I O N S PROPOSED BY C O M M I T T E E ON P U B L I C

FINANCE.

Thirty-nine nations have in turn placed before the International Financial
Conference a statement of their financial position. The examination of these
statements brings out the extreme gravity of the general situation of public
finance throughout the world, and particularly in Europe. Their import may
be summed up in the statement that 3 out of every 4 of the countries represented at this conference and 11 out of 12 of the European countries anticipate a budget deficit in the present year. Public opinion is largely responsible
for this situation. The close connection between these budget deficits and the
cost of living, Avhich is causing such suffering and unrest throughout the Avorld,.
is far from being grasped. Nearly every Government is being pressed to incur
fresh expenditure, largely on palliatives which aggravate the very evils against,
which they are directed. The first step is to bring public opinion in every
country to realize the essential facts of the situation and particularly the need
of reestablishing public finances on a sound basis as a preliminary to the execution of those social reforms which the world demands.
Public attention should be especially drawn to the fact that the reduction
of prices and the restoration of prosperity is dependent on the increase of production, and that the continual excess of Government expenditure over revenue
represented by budget deficits is one of the most serious obstacles to such increase of production, as it must sooner or later involve the following consequences :
(a) A further inflation of credit and currency.
(b) A further depreciation in the purchasing power of the domestic currency, and a still greater instability of the foreign exchanges.
(c) A further rise in prices and in the cost of living.
The country which, accepts the policy of budget deficits is treading the
slippery path which leads to general ruin; to escape from that path, no sacrifice is too great.
It is, therefore, imperative that every Government should, as the first social
and financial reform, on which all others depend: ,
(a) Restrict its ordinary recurrent expenditure, including the service of the
debt, to such an amount as can be covered by its ordinary revenue.
(&) Rigidly reducing all expenditure on armaments in so far as such reduction is compatible with the preservation of national security.
(0) Abandon all unproductive extraordinary expenditure.



SECRETARY OF THE TREASURY.

89

(d) Restrict even productive extraordinary expenditure to the lowest possible amount.
,
The supreme council of the allied powers in its pronouncement on the 8th
of March declared that "Armies should everyAvhere be reduced to a peace footing ; that armaments should be limited to the lowest possible figure compatible
with national security and that the League of Nations should be invited to
consider, as soon as possible, proposals to this end." The statements presented
to the conference show that, on an average, some 20 per cent of the national
expenditure is still being devoted to the maintenance of armaments and the
preparations for Avar. The conference desires to affirm with the utmost emphasis that the Avorld can not afford this expenditure. Only by a frank policy
of mutual cooperation can the nations hope to regain their old prosperity; and
in order to secure that result the whole resources of each country must be
devoted to strictly productive purposes. The conference accordingly recommends most earnestly to the council of the League of Nations the desirability
of conferring at once Avith the several Governments concerned, with a view
to securing a general and agreed reduction of the crushing burden Avhich, on
their existing scale, armaments still impose on the impoverished peoples of
the world, sapping their resources and imperilling their recovery from the
ravages of war. The conference hopes that the assembly of the league which
is about to meet will take energetic action to this end.
While recognizing the practical difficulties in the way of immediate action,
in all cases, the conference considers that every Government should abandon
at the earliest practicable date all uneconomical and artificial -measures which
conceal from the people the true economic situation. Such measures include:
(a) The artificial cheapening of bread and other foodstuffs, and of coal
and other materials, by selling them below cost price to the public, and the
provision of unemployment doles of such a character as to demoralize instead
of encouraging industry.
(b) The maintenance of railway ^fares, postal rates, and charges for other
Government services on a basis which is insufficient to cover the cost of the
serAdces given, including annual charges on capital account.
In so far as, after every eft'ort has been made, it is impossible to' cut doAA^n
expenditure within the limits of existing revenues, fresh taxation must be imposed to meet the deficit and this process must be ruthlessly continued until
the revenue is at least sufficient to meet the full amount of the recurrent ordinary expenditure. The conference considers that the relative advantages of
the various possible means of increasing the national revenue, Avhether by direct
or indirect taxation or by a capital levy (to be devoted to the repayment of
debt), depend upon the special economic conditions obtaining in each country,
and that in consequence each country must decide for itself on the methods which
are best suited to its OAVU internal economy.
^
If the above principles are accepted and applied, loans will not be required
for recurrent ordinary expenditure; borrowing for that purpose must cease. In
a number of countries, hoAvever, although the ordinary charges can be met from
revenue, heavy extraordinary expenditure must at the present time be undertaken on capital account. This applies more especially in the case of those
countries devastated during the Avar, AA^hose reconstruction charges can not
possibly be met from ordinary receipts. The restoration of the devastated
areas is of capital importance for the reestablishment of normal economic conditions; and loans for this purpose are not only unavoidable but justifiable.
But in vieAv of the shortage of capital it will be difficult to secure the sums
required even for this purpose, and only the most urgent schemes should be
pressed forward immediately.



90

"

REP0.RT ON TFIE FINANCES,

The means by which loans are raised are no less important than the purposes
to which vthey are destined. In future the loans which are required for urgent
capital purposes must be met out of the real savings of the people. But those
savings have, as it Avere, been pledged for many years ahead by the credits
created during the war, and the first step to raising fresh money must be to
fund the undigested fioating obligations Avith which the markets are burdened.
Those principles apply both to internal and to external borrowing, and in regard to the latter, we suggest that it would be in the general interest for the
creditor countries to giA^e such facilities as may be possible to the debtor countries to fund their floating obligations at the earliest possible date.
*

*

M:

*

*

*

*

FROM R E S O L U T I O N S PROPOSED BA^ C O M M I T T E E ON I N T E R N A T I O N A L TRADE.

The International Financial Conference affirms that the first condition for the
resumption of international trade is the restoration of real peace, the conclusion
of the wars which are still being Avaged, and the assured maintenance of peace
for the future. The continuance of the atmosphere of war and of preparations
for Avar is fatal to the development of that mutual trust which is essential to
the resumption of normal trading relations. The security of internal conditions
is scarcely less important, as foreign trade can not prosper in a country whose
internal conditions do not inspire confidence.. The conference trusts that the
League of Nations will lose no opportunity to secure the full restoration and
continued maintenance of peace.
The International Financial Conference affirms that the improvement of the
financial position largely depends on the general restoration as soon as possible
of good Avill between the various nations, and in particular it indorses the
declaration of the supreme council of the 8th March last " t h a t the States
which have been created or enlarged as the^ result of the war should, at
once reestablish full and friendly cooperation and arrange for the unrestricted
interchange of commodities in order that the essential unity of European
economic life may not be impaired by the erection of artificial economic
barriers."
The conference recommends that Avithin such limits and at such time as may
appear possible each country should.aim at the progressive restoration of that/
freedom of commerce which prevailed before the Avar, including the withdraAval
of artificial restrictions on and discriminations of price against external trade.
The International Financial Conference expresses its conviction that the
instability of exchanges constitutes a great hindrance to the resumption of
normal international trade.
The International Financial Conference vi'-ould Avelcome any action which
can be taken by the League of Nations to enable the countries, which under
present conditions can not purchase the necessary supplies for their reconstruction, temporarily to obtain commercial credits on an approved basis for
this purpose.
The International Financial Confei'ence expresses the conviction that the
repair, improvement, and economical u.ye of the transport systems of the Avorld,
and particularly of countries affected by the war, are of vital importance to
the restoration of international trade.
FROM R E S O L U T I O N S PROPOSED BA^ COMAIITTEE ON CURRENCY AND E X C H A N G E .
^^

3|€

5fC

Jj*

s|C

•!»

5jC

1. It is ,of the utmost importance that the growth of inflation should be
stopped. * * *
2. Governments must limit their expenditure to their revenue (we are not
considering here the finance of reconstructing deA^astated areas).



SECRETARY OF TH.E TR.l-^ASURY.

91

3. Banks, and e.specially banks of issue, should be freed from political pressure and should be conducted solely on the lines of prudent finance. * * •
=
'
4. The creation of additional credit should cease, and Governments and
municipalities should not only not increase their floating debts but should
begin to repay or fund them by degrees. ^ * *
=
5. Until credit can be controlled merely by the normal influence .of the rate
of interest it should only be granted for real economic needs. * * ' ='
•
6. Commerce should as soon as possible be freed from .control and impediments to international trade removed, * * *
7. All superfluous expenditure should be avoided. * * *
8. It is highly desirable that the countries Avhich have lapsed from an effective
gold standard should return thereto. '-^ * *
9. It is useless to attempt to fix the ratio of existing fiduciary currencies to
their nominal gold value. ''' * *
10. Defiation, ^f and Avhen undertaken, must be carried out gradually and
Avith great caution. * * *
11. AVe can not recommend any attempt to stabilize the value of gold, and we
gravely doubt Avhether such attempt could succeed. = * *
•
'
12. We believe that neither an international currency nor an international •
unit of account Avould serve any useful purpose. * ^ *
'^
13. We can find no justification for supporting the idea that foreign holders
of bank notes or bank balances should be treated differently to native holders.
14. In countries Avhere there is no central bank of issue one should be established. * - *
^
15. Attempts to limit fluctuations in exchange by imposing artificial control
on exchange operations are futile and mischievous. * * *
16. A committee should be set up both for continuing the collection of -the
valuable financial statistics that have been 'furnished for this conf^^ence and
also for the'further investigation of currency policy.
FROM RESOLUTIONS PROPOSED BY C O M M I T T E E ON I N T E R N A T I O N A L CREDITS.

The committee is of opinion that in principle the resources out of Avhich this
assistance is to be provided should be found from the savings of the lending
countries and raust not result in undue increase of the fiduciary circulation—
that is to say, in the creation or extension of a disproportion betAveen means of
payment and the genuine requirements of business.
The committee believes, on the other hand, that this assistance can only be
effectively accorded to countries Avhich are prepared to assist one another in
the restoration of economic life and to make every effort to bring about within
their OAA-U frontiers the sincere collaboration of all groups of citizens and to
secure conditions Avhich give to work and thrift liberty to produce their full
results.
The committee does not believe that, apMrtfrom particular decisions dictated
by national interests or by considerations of humanity, credits should be
accorded directly by Governments.
It appears to the committee that one of the chief obstacles to the granting
of credits is the absence in borrowing counrries of sufficient security for ultimate
i-epayment. The committee therefore studied Avith attention, in the light of
the general considerations enumerated above, all the proposals presented with
a vieAv to creating guarantees AAliich would provide satisfactory security for
exporters.
The committee has been forced to recognize that no single system could by
itself suffice to provide for the many different needs of the various countries,



92

REPORT ON THE FINANCES.

and that it is necessary to indicate a series of measures sufficiently elastic to
be adapted afterwards tc every variety of circumstances.

EUROPEAN RELIEF.
Although the Treasury s t r o n g ^ held the opinion that this Government should, at the earliest possible moment, discontinue lending
money to other Governments and that the reconstruction of Europe
could not be accomplished by loans from Government to Government,
the department nevertheless was forced to the conclusion that certain
limited measures by this GoA^ernment were necessary for the purpose
of keeping the destitute populations of Europe alive through last
Avinter. The Secretary of the Treasury accordingly vi^rote the chairman of the Committee on Ways and Means of the House of Repre^sentatives as follows, under date of December 18, 1919 :
WASHINGTON, December 18,1919.
MY DEAR CONGRESSMAN : Reports and urgent advices received from reliable
sources as to the shortage and utter lack of food in certain portions of Europe
are so serious that I feel it my duty to lay some of the facts before Congress.
Although the shortage of food in Europe as a Avhole is less this AAdnter than
last, there is in parts of Europe (especially Austria, Poland, and Armenia) a
most dangerous shortage of food, clothing, and fuel. In these places there has
not been sufficient recoA^ery of economic life to enable the people to produce
enough to meet their requirements or to enable them to buy or to borroAv sufficient
food and elothing to keep them alive. In certain sections whole populations are
noAv dangerously Aveak and hopeless from hunger. The death rate caused by
starvation is already increasing to an alarming extent, and unless something
is done great numbers will die from starvation or cold. It is unnecessary to
elaborate the gra\'e effects which this may have on the social order and the
economic fabric, not only in the places where these conditions exist, but in the
AAdiole of Europe and even the Avorld. The British Government has informed
this Government that it is prepared to share Avith us to the extent of its ability
in the relief of Austria, Avhich, according to our information, is in the most
desperate condition.
As you are aAvare, the Treasury has strongly held the opinion that this Government should, at the earliest possible moment, discontinue lending money to
other Governments. I have urged tlnit private initiative should be restored and
that credits for purchases in .the United States should be obtained through
private channels. In discussing in my annual report the international financial
situation I said that " Ave are prone to overlook the A^ast recuperative poAA^er
inherent in any country Avhich, though devastated, has not been depopulated,
and the people of which are not sUi/rved. afterwards.'' I am reluctantly convinced now that in order to meet the urgent necessity of keeping the destitute
populations of Europe alive through this Avinter there must be taken at once
measures for their relief. The resources and efficiency of the private charities
of this country are not adequate to the necessities AA^hich can not in the nature
of tlie case be financed through ordinary private channels. I therefore have the
honor to request that your conimittee afford me the opportunity of laying before
it any information Avhich it may desire and AA^hich I am able to furnish, in order
that appropriate legislation may be considered at once.




SECRETARY OF T H E TREASURY.

93

The emergency is of such magnitude; the dictates of humanity are so pressing ; the possible effects of the present situation upon the social, economic, and
financial rehabilitation of Europe, and consequently upon the trade and prosperity of the Avorld, in Avhich the United States has so great a stake, may be of
such consequence that I do not hesitate from the standpoint of humanity and
public policy to assume the responsibility of appealing to the humane and practical sentiments of the Congress to take immediate steps to furnish from our
surplus the food necessary to save the situation. We can not and must not
noAv fail to supply some food on credit to save human lives and safeguard
civilization, for Avhich we have already expended so many lives and billions
of dollars.
Cordially yours,

CARTER CTLASS.

Hon. JOSEPH W . FORDNEY,

Chairman of Ways and Means Committee,
House of Representatives,
Wasliington, D. G.

January 7, 1920, the Secretary again wrote to the chairman of the
Committee on Ways and MeanSj as follows:
WASHINGTON, January 7, 1920.

MY DEAR CONGRESSMAN : With reference to my letter of December 18 to you,
calling your attention to the desperate situation in certain portions of Europe
Avhere urgent relief is required, and requesting an opportunity to lay before
your committee further information and proposals for legislation Avhlch Avill
enable this GoA^ernment to assist in alleviating that situation, I have the honor
to submit herewith a summary of the many reports and dispatches from various
reliable sources as to the situation in those parts of Europe Avhere relief is so
urgently necessary; namely, Poland, Austria, and Armenia. I also have the
honor to submit a proposed legislative authorization which, in my opinion,
would enable this country to give the assistance which is imperatively required,
Poland.—According to the best information obtainable, the minimum grain
requirement necessary to carry Poland until the next harvest, and which can
not be filled anywhere but in the United States, is 300,000 tons. This deficiency
is due to a partial failure of the wheat crop and to a lack of fuel for thrashing.
Poland is at present living under a hand-to-mouth regime, which can be remedied
only by a steadyfloAvof imports from the only available surplus stocks of food;
namely, those in the United States. The potato crop, Avhich is the staple food
of the poorer classes, has been destroyed by frosts to the extent of 50 per cent
in many districts, as it is impossible properly to care for potatoes in transit
due to delays in transportation. Poland has been.unable to procure clothing
since the beginning of the Avar, and the result is that during the past five years
practically all clothing has been Avorn out and has not yet been replaced.
The food, situation in Poland is so serious that the European Children's
Relief Fund has felt obliged to loan Poland small quantities of flour from
the stocks intended for child feeding. The assistance to the children of Poland
rendered through this fund, Avhich feeds 1,300,000 children daily, is claimed by
its administrators there to have been a powerful means of averting revolutions up to this time, and the failure of the Polish Government properly to
ration its adult population has already caused demon?itrations by the Reds in
WarsaAV. The cost of supplying the 300.000-ton grain minimum would be approximately $50,000,000. It is possible that a portion of this requirement may
be met through private charity and that the British Government raay be able




94

REPORT ON THE FINANCES.

to supply some tonnage for the t^'ansportation of this grain from the United
States. In so far as this outside aid is received, the assistance to be furnished
by the United States would be diminished.
Austria.—In Austria the acute misery and suffering are probably greater
than in Poland. Two-tenths only of the present Austrian State are selfsupporting, in food, and the remaining eight-tenths, even before the war, produced food to supply themselves for six months of the year at most and were
dependent for the remaining six months upon importations. Consequently,
the situation to-day, especially in Vienna, has become exceedingly grave, due
to a shortage of coal and food. There is every indication that unless some
relief is afforded immediately the population can not Avithstand the strain of
conditions that are already well-nigh intolerable. Coal and food rations for
domestic consumption have been reduced below a safety minimum, and it is
only a question of days before existing stocks will be exhausted, AA^hen even
the present reduced rations Avill become impossible unless new supplies are
obtained. Already the forests in the neighborhood of Vienna are being cut
dOAvn for fuel, as are also many of the Avooden dAvellings. Famine riots have
broken out in some Austrian tOAvns during the past months, and although the
population of Vienna has shoAATi admirable patience this city and large parts
of Austria are faced Avith the danger of a complete breakdoAvn, which, according to the chancellor. Dr. Renner, must unavoidably occur by the end of January
unless outside assistance is obtained.
What th^ effect of a general social breakdown in Austria would be can, of
course, only be conjectured. That it Avould be confined to Austria, hoAveA^er,
seems highly improbable, and if it spread to Germany, Poland, and possibly all
of Europe the result would be no less than a general disintegration of political
cohesion in Avestern Europe. Such an event Avould be fraught AAdth the most
serious consequences'for the United States, and Avould certainly leave in its
wake severe suffering and thousands of deaths among the poorer classes of the
people.
The British Government has definitely proposed to join, to the extent of its
ability, Avith the United States Government in furnishing relief to Austria.
The British Government has explained, however, that with the present depreciation in its exchange, it could not supply dollars for the purchase of food
iu the United States, but it can no doubt supply the requisite tonnage and some
relief supplies obtainable in the United Kingdom. The total estimated requirements for Austrian relief are $100,000,000, but the British participation should
reduce the amount of relief to be supplied from the United States to Austria to
about $70,000,000.
Armenia.—Although the population of Armenia is small, the situation there
is desperate, and the winter season Avill see many deaths unless adequate food,
medical supplies, and clothing are received from outside sources. It has been
estimated that a bare minimum program of 7,500 tons of flour, together Avith
other necessities, amounting in all to $500,000 monthly, will be required to meet
the situation, and if deliveries are not maintained after the severe winter
Aveather sets in orphanages Avill close and great numbers of deaths Avill result.
At present there are 700,000 destitute people being kept alive by this program,
and partial aid is being furnished to many others.
As there are private charitable funds available for Armenia, it is probable
that the amount of relief which the United States Government would be called
upon to furnish to Armenia Avould not exceed $1,000,000.
In addition to the three above-mentioned countries or territories where the
requirements are most urgent, it may be necessary to furnish some supplies to




SEGRETARY OF THE TREASURY.

95

Other sections of Europe (outside the boundaries of Germany) where the situation is not now so desperate but where food supplies will be required to carry
them through until the next harvest. It is estimated that ^$25,000,000 Avouldi
suffice for this purpose.
In this summary of conditions no attempt has been made to cover all the
ground or even touch on all the aspects of the situation in the countries mentioned. Data in the form of consular dispatches and telegrams from various
official and unofficial American representatives abroad exist in abundance to
substantiate the foregoing summary of the dire need of the people of these
countries for immediate relief.
In conclusion I may say that Avhile it is impossible now to estimate definitely
just Avhat will be required, I am of the opinion, from the information so far
obtainable, that a minimum of $125,000,000 and a maximum of $200,000,000
Avould suffice to supply "the portion of relief to be assumed by this Government,,
pi-ovided Congress should grant the necessary authorization to participate in
alleviating this serious and desperate situation.
As any relief undertaking, so far as concerns the United States, Avould be
primarily a question of supplying food, and as it is advisable that the purchases of food for Europe should be handled and coordinated in such a manner
as not to increase the prices of food in the United States, I am recommending,
in the proposed legislation that the United States Grain Corporation be empoAvered to purchase, sell, and deliver food and relief supplies for Europe upto the amount of $150,000,000, and that for the supplies so furnished credit
may be extended by the Grain Corporation. If this amount proves insufficient
to meet the minimum requirements, the Treasury Avill again submit the matter
to Congress for such action as it may deem expedient.
If you desire further information than that contained herein. Assistant Secretary Davis and Mr. Hoover, who are most conversant with this situation,,
will be glad to appear before your committee on the 10th instant at 10.30 a. m.
Cordially yours.
CARTER CSTLASS.
Hon.

JOSEPH W . FORDNEY,

Chairman of Ways and Means Committee,
House of RepresentoMves.
S U G G E S T E D D R A F T O F A BILL PROVIDING FOR THE RELIEF OF POPULATIONS IN EUROPE
AND IN COUNTRIES CONTIGUOUS THERETO.

Be it enacted by the Senate and House of Representatives of the United
States of America in Congress assembled. That for the participation of the
Government of the United States in the furnishing of foodstuffs and other
relief supplies and for the transportation thereof to populations in Europe
and countries contiguous thereto, the United States Grain Corporation is authorized, with the approval of the Secretary of the Treasury and to an amount
not exceeding $150,000,000, to buy or contract for the purchase of Avheat of
the crops of 1918-1919 and flour produced therefrom and other food and food
products and relief supplies necessary for the purposes of this act, and to
sell, consign, or contract for the sale, and to deliA^er or contract for the delivery
of the same, for cash or on credit, at such prices and on such terms or conditions
as may be necessary to carry out the purposes of this act and to relieve populations in the countries of Europe or countries contiguous thereto: Provided,
That an audited itemized report of the receipts and expenditures of the United
States Grain Corporation for the purposes authorized by this act shall be submitted to Congress not later than December 31, 1920.




96

REPORT ON THE FINANCES.

The following statute entitled "An act providing, for the relief of
populations in Europe and in countries contiguous thereto suffering
for want of food," was subsequently enacted by the Congress and approA^ed by the President March 30, 1920:
Be it enacted by the Senate and House of Representatives of -the United
States of America in Congress assembled. That, for the participation of the Government of the United States in the furnishing of foodstuffs to populations in
Europe and countries contiguous thereto suffering for the want of food, the
United States Grain Corporation is hereby authorized, with the approval of the
Secretary of fhe Treasury, to sell or dispose of flour now in its possession, not
to exceed five million barrels, for cash or on credit, at such prices and on such
terms or conditions as may be necessary to carry out the purposes of this act
and to relieve populations in the countries of Europe or countries contiguous
thereto suffering for the want of food: Provided, That an audited, itemized
report of the receipts and expenditures of the United States Grain Corporation
for the purposes authorized by this act shall be submitted to Congress not later
than the first Monday in December, 1920.

Under this authority the Grain Corporation, with the approval of
the Secretary of the Treasury, sold flour on credit to the Governments of Armenia, Austria, the Czecho-Slovak Republic, Hungary,
and Poland. At the date of this report the obligations received by
the Grain Corporation from these Governments have not been turned
over to the Treasury. They are understood, however, to aggregate
approximately $57,000,000 in face amount.
T H E DOMESTIC CREDIT S I T U A T I O N .

The efforts of the Federal Reserve Board and the Federal reserve
banks to control credit and avoid undue expansion of loans are
clearly indicated in the statements issued from time to time by the
board. The fundamental fact is that, notwithstanding the increased
rates of discount and the endeavor to discourage the use of credit for
speculative and nonessential purposes, the year has been marked by
an unprecedented Increase in loans at the Federal reserve banks, at
member banks, and banking institutions generally. Instead of a curtailment of credit, there has been a tremendous expansion. The situation was outlined by the Federal Reserve Board in its public statement of October 17,1920, which is as follows:
In vicAv of the representations which have recently been made to the board
as to the unavailability of credit in agricultural sections the board requested
information concerning credit conditions throughout the country from the
chairmen and governors of Federal reserve banks at their usual autumn conference here this week. The board is advised that credit has been steadily available for the successive seasonal requirements of agriculture, as well as for the
needs of commerce and industry, and that there is no ground for expecting that
its availability for these purposes will not continue. The present improved
-^^ffiit situation is due in part to the timely steps taken last spring, following




SECRETARY OF THE TREASURY.

97

conferences betAA^'een the board and governors and directors of Federal reserve
banks to provide credit for crop moving requirements, and in part to the subsequent improvement in transportation reported from all districts except in a
few localities.
Between January 2 and October 1 of the present year about 800 leading
member banks from all sections of the country Avhich report their condition to
th^ board weekly and AAdiich represent approximately 70 per cent of member
bank resources, have incceased their loans for- agricultural, industrial, and commercial purposes by an amount exceeding $1,800,000,000. This great increase, in
the credit extended to their customers has in> the main been made possible by the
accommodation extended member banks by the Federal reserve banks.
During the same period, the 12 Federal reserve banks have increased their
holdings of agriculturtil and commercial paper by more than $500,000,000, and
from January 23 to October 1, 1920, increased their issues of Federal reserve
notes by over $460,000,000. At the same time. Federal reserve banks having
surplus funds' have extended accommodation to Federal reserve banks in agricultural and live-stock districts by means of discounts, aggregating on October
1, over $225,000,000.
The disturbances in price and demand which have recently manifested themselA^es in markets for various agricultural and other commodities, not oniy in
the United States but in other countries as well, are inevitable and unavoidable
consequences of the economic derangements occasioned by the World War. The
United States continue to have a heavy volume of exports although foreign demand for certain agricultural staples has somewhat decreased. But the chief
market for our raAv and manufactured products is at home, and our present huge
crops of immense value may be expected gradually and in regular course to
move from producers to consumers. The recent census, reckoning our population at 105,000,000, emphasizes ancAv our OAVU capacity as consumers irrespective
of the demands of other countries.

I n response to the Senate resolution adopted May 17,1920, the Federal Reserve Board under date of May 25, 1920, made the following
statement of its attitude toward the expansion of credit and the use
of credit for crop-moving purposes:
WASHINGTON, May 25,

1920.

SIR: On May 17, 1920, the Senate adopted the follOAving resolution:
" Resolved, That the Federal Reserve Board be directed to advise the Senate
what steps it purposes to take or to recommend to the member banks of the
Federal Reserve System to meet the existing infiation of currency and credits
and consequent high prices, and Avha.t further steps it purposes to take or
recommend to mobilize credits in order to move the 1920 crop."
In response the board desires to say that it has recognized for many months
past that the expansion of bank credits in this country Avas proceeding at a
rate not warranted by the production and consumption of goods, It has repeatedly admonished the Federal reserve banks that influence should be exerted upon the member banks to induce them to avoid undue expansion of
loans and to keep their volume of outstanding credits within moderate bounds.
Beginning six months ago, the rates of discount on various classes of paper
at the Federal reserve banks were advanced. During the latter part of January the present rates Avere put into effect. These advances, Avhile undoubtedly
checking credit transactions Avhich otherwise would have been made, have not
been ^ entirely effective in bringing about the reduction in loans desired and
which might normally have been expected during the early months of the year.
13799—FI 1920
7



98

REPORT ON THE FINANCES.

Liquidation during these months is entirely natural and healthy, and is necessary in order that the banks may be prepared to meet the demands made upon
them during the crop making and harvesting seasons, but there has been no
such liquidation, and, on the contrary, commercial loans have steadily increased.
Thus it appears that the public has anticipated demands for banking credit
which are usually made later on in the year. The average reserves of the
Federal reserve banks are noAv a little over 42^ per cent, as against 45 per cent
at the beginning of the year and about 51 per cent 12 months ago.
The Federal advisory council, which is composed of one member from each
Federal reserve district, elected annually by the board of directors of the
Federal reserve bank, is required by section 12 of the Federal reserve act to
meet in. Washington at least four times each year. The council is authorized
• " t o confer directly, with the Federal Reserve Board, on general business conditions; to make oral or Avritten representations concerning matters within
the jurisdiction of said board; to call for information and to make recommendations in regard to discount rates, rediscount business, note issues,-resen^e conditions in the A^arious districts, the purchase and sale of gold or securities by
reserve banks, open-market operations by said banks, and the general affairs
of the reserve banking system."
Upon receipt of a notice that the council Avould hold its regular meeting on
May 17, the board, extended an invitation to the three class A directors of
each Federal reserve bank, AVIIO are the representatives of the stockholding
banks, to come to Washington at the same time for conference Avith the Federal Reserve Board and the Federal advisory council. This conference was
held on the 18th instant, and it Avas developed at the meeting that the present
credit expansion is due in great part to the abnormally high prices of goods
and commodities hoAV prevailing throughout the country, and to the congestion
of foodstuffs and essential raw materials at or near points of production because
of lack of transportation facilities.
The board is convinced that if the unsold portions of last year's crops can
be brought to market hefore the new crop matures, the liquidation of credits
which are noAv tied up in carrying the old crops Avill be sufficient to offset to
a considerable degree the credit demands Avhich will be made upon the banks
in moving the crop of 1920.
At the conference above referred to the board's viCAVs Avere outlined by its
governor substantially as folloAvs: The member banks should lean less heavily
upon the Federal reserve banks and rely more upon their OAvn resources, unnecessary and habitual borroAvings should be discouraged, and the liquidation
of long-standing, nonessential loans should proceed. Banks Avere cautioned,
hoAA^ever, that drastic steps should be avoided and that the methods adopted
should be orderly, for gradual liquidation Avill result in permanent improvement,
while too rapid deflation Avould be injurious and should be avoided. The
board pointed out the necessity for extending such credits as may be necessary
to promote essential production, especially of foodstuffs, and that if for any
reason it should prove impracticable to increase essential production, there
should be greater economy in consumption and more moderation in the use of
credit. The problem of the banking system of the country is to check further
expansion and to bring about a normal and healthy liquidation without curtailing essential production and Avithout shock to industry, and,' as far as possible, without disturbance of legitimate commerce and business. In order to
effect this it seems necessary to distinguish betAA^een essential and nonessential
loans; but the Federal Reserve Board feels it Avould be a most difficult task,
Avhich it should not undertake, to. attempt by general rule of country-wide appli-




SECRETARY OF THE TREASURY.

99

cation to make this distinction. During the Avar there was a broad underlying
principle that essentials must be " necessary or contributory to the conduct of
the war," but notAAuthstanding the sharp outline of this principle much difficulty
was experienced by the various Avar boards in defining essentials and nonessentials. All the more difficult would it be for the Federal Reserve Board
to make such a general definition in the present circumstances.
Section 13 of the Federal reserve act defines the eligibility of paper for discount by the Federal reserve banks and lays dOAvn a general rule that any paper
maturing Avithin the time prescribed and " issued or draAvn for agricultural,
industrial, or commercial purposes, or the proceeds of which have been used, or
are to be used, for such purposes " is eligible. No expressed condition is made
regarding the essential or nonessential character of the transactions giving rise
to notes which may be offered for discount ahd the Federal Reserve" Board is
not required, and properly could not be expected, generally to adopt such a
crite^'Aon of eligibility. It is too much a matter of local conditions and local
knowledge to justify at this time any general country-wide ruling by the board
even if such a ruling were deemed helpful.
On the other hand, there is nothing in the Federal reserve act which requires
a Federal reserve bank to make any investment or to rediscount any particular
paper or class of paper. The language of both sections 13 and 14 is permissive
only. Section 4 of the ^Federal reserve act, however, requires the directors of a
Federal reserve bank to administer its affairs " fairly and impartially and
without discrimination in favor of or against any member bank," and subject to
the provisions of law and the orders of the Federal Reserve Board to extend
" to each member bank such discounts, advancements, and accommodations as
may be safely and reasonably made with due regard for the claims and demands
of other member banks." Thus the directors of a Federal reserve bank have
the power to limit the volume and character of loans which in their judgment
may be safely and reasonably made to any member bank.
The recent amendment to paragraph (d) of section 14 distinctly authorizes
each Federal reserve bank on its own account, without reference to action taken
by any other Federal reserve bank, to establish a normal discount or credit line
for each member bank, and permits the imposition of graduated rates on discount lines in excess of the normal line. This amendment, however, does not
repeal or modify sections 4 and 13, and a Federal reserve bank is still free to
decline to discount any paper which in its judgment does not constitute a desirable investment for it or which in its opinion would not constitute a safe and
reasonable investment within the meaning of section 4.
It is the viCAv of the board, however, that while Federal reserve banks may
properly undertake in their transactions Avith member banks to discriminate
between essential and nonessential loans, nevertheless that discrimination might
much better be made at the source by the member banks themselves. The individual banker comes in direct contact with his customers; he is better
qualified than anyone else to advise the customer, because of his familiarity,
not only Avith the customer's business, but with the general business conditions
and needs in his immediate locality. In making loans he is bound by no general
rule of law as to the character of the purpose for which a loan is being asked.
He is entirely free to exercise discretion, and can make one loan and decline
another, as his judgment may dictate. He can estimate with a fair degree of
accuracy the legitimate demands for credit which are liable to be made upon
him, as well as the fluctuations in the volume of his deposits. He knows what
industries sustain his community, and is thus qualified to pass upon the essential or nonessential character of loans offered him. He knows, or should know,




100

REPORT ON TPIE FINANCES.

what rediscount line he may reasonably expect of his Federal reserve bank,
and he ought not to regard this line as a permanent addition to his capital.With knoAvledge of the limitations or penalties put upon his borrowings from
the Federal reserve banks the banker may be depended upon to use a more discriminating judgment in granting credit accommodations to his customers,
and that judgment he must exercise if the present situation is to be remedied
fundamentally.
It is true that under existing conditions the volume of credit required in any
transaction is much greater than Avas the case in prcAvar times; but it is also
true that the resources of the member and nonmember banks Avould be ample
to take care of the essential business of the country, and to a large extent of
nonessentials as Avell, if there Avere a freer fioAv of goods and credit. If '• frozen
loans " Ave>e liquefied, and if commodities Avhich are held back either for speculative purposes or because of lack of transportation facilities should "go to
the markets, and if large stocks of merchandise should be reduced, the resultant release of credits Avould have a most beneficial effect upon the general
situation. In the meantime everything must be done to expedite the release of
these credits and to restrict nonessential credits in future.
While the problem of credit regulation and control is national and even international in its scope, yet in the last analysis it is merely an aggregation of
individual problems, and the proper Avorking out of the situation must depend
upon the'public and upon the banks Avhich deal Avith the public. The public
must be made to realize the necessity of economy in expenditures and in consequent demands for banking • credit. The banks themselves are best able to
impress the importance of this policy upon the public.
For the further information of the Senate the board quotes from the report
of the Federal advisory council made to it on May 18, signed by James B.
Forgan, president.
" The council 'has given consideration to the matters included in your communication of April 17 and begs to reply thereto in the following manner, following the order set out by you:
"(a) Causes of continued expansion of credits and of Federal note issues."
There are many contributing causes, of which the follOAving may be regarded
as paramount:
1. We recognize, of course, that the first cause is the great Avar.
2. Great extravagance, national, municipal, and individual.
3. Inefficiency and indifference of labor, resulting in lessening production.
4. A shortage-of transportation facilities, thus preventing the normal movement of commodities.
>
5. The vicious circle of increasing Avages and prices.
(b) "How can the reserve position of the Federal reserve banks be-materially strengthened before the seasonal demand sets in next fall Avithout undue
disturbance of the processes of production and distribution? "
By urging upon member banks through the Federal reserve banks the Avisdom
of showing borroAA^ers the necessity of the curtailment of general credits, and
especially for nonessential uses, as Avell as continuing to discourage loans for
capital and speculative purposes; by checking excessiA^e borroAvings through
the application of higher rates.
(c) " If steps can not be taken at this time leading to a more normal proportion betAveen the volume of credits and the volume of goods, Avhen can they be
taken?"
In our opinion steps should be taken UOAA^ as outlined in answer to the last
question.




SECRETARY OF THE TREASURY.

101

(cZ) " What is the effect upon the general situation of the increased Treasury
borroAvings and what should be the policy of the Federal reserve banks in
establishing rates of discount on paper secured by certificates of indebtedness?"
It is obvious that the borroAvings of the Treasury have the same effect upon
the general credit situation as those of other borroAA'Crs. The council would
suggest the Avisdom of congressional relief from the burden of Government
financing by a policy of rigid economy; the revision of the tax laAvs fdr the
sake of a more equitable (^listribution of the burden AAdthout reducing the revenue; the enactment of the budget system, the budget to include provision for. the
gradual payment of the short-time obligations of the Treasury. These Avould
of necessity preclude uuAAise appropriations, such as the proposed soldiers'
bonus.
In vicAV of the large volume of Treasury certificates of indebtedness carried
by member banks at the instance of the Treasury Department, Ave believe that
rates established by the Federal reserve banks on paper secured by them should
not be materially greater than the rates borne by the certificaties.
The board feels assured that the banks of the country noAv realize. the
necessity of more conservatism in extending credits and of a reasonable reduction in the volume of credits noAV outstanding. The board will not hesitate, so
far as it may be necessary, to bring to bear all its statutory pOAvers in regulating
the volume of credit, but Avishes to point out that the more vital problems relating to the movement of the 1920 crop are physical rather than financial.
This Avas the unanimous vicAv of those present at the conference on the 18th
instant, at Avhich the folloAving resolution Avas adopted:
" The^Avhole country is suffering from infiation of prices Avith the consequent
infiation of credit. From reports made by the members of this conference, representing every section of the country, it is obvious that great sums are tied up in
products Avhich if marketed Avould relieve necessity, tend to reduce the price
level and relieve the strain on our credit system.
" This congestion of freight is found in practically all of the large railroad
centers and shipping ports. It arises chiefly from inadequate transportation
facilities available at this time, and is seriously crippling business. We are
informed that the per ton-mile of freight increased in three years—1916, 1917,
and 1918—47 per cent, while the freight cars in service during the same period
increased 1.9 per cent.
/'A striking necessity exists Avhich can only be relieved through the. upbuilding of the credit of the railroads. This must come through adequate, and prompt
increase in freight rates. Any delay means the paying of greater cost directly
and indirectly, and places a burden on the credit system Avhich in the approaching time for seasonal expansion may cause abnormal strain. Even under the
load of Avar inflation, high-price ICA^^I, and extravagances the bank reserves
would probably be sufficient if quick transportation could be assured during the
time of the greatest strain.
''Therefore be it resolved. That this conference urge as the most important
remedies that the Interstate Commerce Commission and the United States
Shipping Board give increased rates and adequate facilities such immediate
effect as may be Avarranted under their authority and that a committee of
five, representing the various sections of the country, be appointed by the chairman to present this resolution to the Interstate Coinmerce Commission and
the United States Shipping Board, with such verbal presentation as may seem
appropriate to the committee."
Much Avill depend upon the restoration of the normal efficiency of railroad
and steamship lines. If adequate transportation facilities can be provided, the



102

REPORT ON THE FINANCESo

board sees no occasion for apprehension in connection with the movement of
crops now being grown.
Respectfully,
W. P. G. HARDING, Governor.
The PRESIDENT OF THE SENATE.
SOLDIERS' BONUS.

The Treasury's attitude on the proposed soldiers' bonus has already
been indicated. I t is stated in greater detail in the testimony of
the .Secretary and the Fiscal Assistant Secretary before the Committee on Ways and Means of the House of Representatives on
March 11, 1920. The Secretary's opinion was asked as to the wisdom
of an issue of bonds in an amount of from $1,000,000,000 to $2,000,000,000 in order to pay a bonus, the probable effect it would have
upon prices, upon credit, and upon the issues of bonds and notes now
outstanding. H e expressed his views as follows:
The proposal to expend a sum ranging from $1,000,000,000 to $2,000,000,000
is a very serious one for the people of the Nation at this time, and the proposal
to meet such an expenditure by the sale of bonds presents or suggests very
grave possibilities.
I am not alarmed as to the conditions of the Nation's finances at present. I
^ do not think that the situation is critical. I believe that with economy on the
part of individuals throughout the Nation, Avith the avoidance of waste and
extravagant living, with economy on the part of Congress in making appropriations, and prudence in handling our financial problems, this Nation, in spite of
disturbed European conditions and their effects here, can proceed in an orderly
fashion." I think, however, that to fioat bonds in the amount of $2,000,000,000,
or to meet such an additional expenditure out of taxes, will present very grave
problems and might: bring disaster.
I do not knoAV hoAv we could fioat bonds for $2,000,000,000 at rates of interest
borne by the existing bonds, and I do not knoAv just what Avould happen if we
undertook to float bonds for $2,000,000,000 at a higher rate of interest. I assume
that there would be very great difficulty in floating bonds at existing rates of
interest. I do not know that Ave could sell $2,000,000,000 Avorth of bonds even
at a higher rate of interest. I am confident that if such volume of bonds were
floated it Avould depress the value of the obligations' of the Grovernment now
held by 20,000,000 br 30,000,000 of our citizens; to what point, of course, I can
not say. I think that it Avoiild lead to a further credit expansion, which has
been one of the factors in the upAvard mo^vement of prices. It Avould, therefore,
add to the cost of living of the 110,000,000 people of the Nation; and one of the
many results of.this Avould be that laborers would say, "The cost of living is
rising and Ave must have more wages." The vicious price and Avage" circles
would persist and extend. .
AVe are prudently doing Avhat Ave can to bring about something like a gradual
return toward a stable condition of industry and finance.^ I am not prepared
to say that we shall ever reach the prcAvar normal; but I imagine everybody
wishes the country to return to a stable condition. We are having difficulty
enough at present in effecting this result.
A proposal to fioat bonds as suggested Avould, in my judgment, not only
counteract any effort in that direction, but would produce a very grave situation which I am not sure Ave could handle.



SECRETARY OF THE TREASURY.

103

If the Congress deems it wise to ,extend aid to the soldiers the less harmful
way of meeting the expenditures A\^ould be by increasing taxes. Taxes in themselves tend toward economy if they are properly laid, because they take so
much out of the control of individuals for the time being, and they would not
cause further credit expansion.
But existing taxes are burdensome and in . some cases very disturbing to
industry. Instead of increasing them Ave should survey the present tax system
with a vicAV to its modification or simplification, with a vicAV to raising the
Iiecessary revenue Avith as little inconvenience as possible to taxpayers. If we
have to find ncAv sources of revenue, or if Ave increase present taxes, Ave shall
further burden industry, probably curtail production, and in any event increase
the cost of living.
The proposal Avould mean an addition to the cost of living, Avhatever method
of financing it you employ. I can not escape the conclusion that it would add
to the burden of every man, woman, and child in this Nation if you undertake
to meet the expenditure by taxes; and it will add even more if you undertake
to do so by increasing the credit structure of the Nation.
That, in brief, is the Avay the matter presents itself to my mind. *' * *
In the jam confronting us we ought to be careful, very careful, about adding
.to the burden of the people, about increasing prices, adding to the cost of living
of 110,000,000 of people and depressing the bonds, bought by 20,000,000 people,
arousing apprehension on the part of the holders.

A complete record of the testimony of the Secretary and the
Fiscal Assistant Secretary is annexed hereto as Exhibit 35, page 362.
I n his letter of May 18, 1920, to the chairman of the Committee on
Ways and Means, the Secretary again emphasized the Treasury's
opposition to a soldiers' bonus, however financed. That letter is
quoted on page 27 of this report under the heading of " Taxation."
The military and naval forces of the United States' performed their
duty during the war nobly and well. I n defense of the liberty of
their own land and of free institutions everywhere, they proved themselves worthy followers of the patriots who founded this Nation.
They can never be compensated in money or in any other material
thing. Their reward lies in their knowledge of patriotic duty
rendered, in the glory of achievement, and in the gratitude of all
the people of the Nation. The sick, the wounded, the crippled and
their dependents, and the dependents of the dead, of course, must
be given every necessary attention and generous treatment. That is
the Government's imperative duty; the cost is not to be reckoned.
But the granting of a general indiscriminate bonus would place
such a burden upon the people of this country, including the soldiers
and sailors themselves and their families, that, I am sure, if the
full bearing of the proposal upon the welfare of America were
realized by the members of our heroic Army and Navy, they would be
among the first to discountenance and reject it.




104

REPORT ON THE FINANCES;
RECEIPTS AND E X P E N D I T U R E S D U R I N G T H E WAR PERIOD.

On the basis of the daily Treasury statements, the total expenditures of the GoA^ernment, exclusiA^e of the principal of the public debt
and postal disbursements from postal revenues, for the period from
April 6, 1917, to June 30, 1920, were $38,830,812,895.93. The receipts
during this period from taxes and sources other than borrowed
money were $16,078,844,097.10, or slightly in excess of 41 per cent
of the expenditures, although they do not include the September 15
and December 15, 1920, installments of taxes levied on 1919 incomes
and profits. The expenditures include capital outlays as well as
items which have been permanently absorbed. The receipts also
include certain sums which by law are coA'^ered into the Treasury as
miscellaneous receipts, but which, for statistical purposes, more
properly should be offset against expenditures. No deduction has
been made for loans to foreign Governments or for iuA^estments, such
as ships, stock of the Emergency Fleet Corporation, stock of the
Housing Corporation, and loans to railroads. Foreign loans made
up to June 30, 1920, aggregated $9,523,000,000. Excluding this sum,
the total disbursements of the Government from the beginning of
the war to June 30, 1920, were $29,307,000,000, about 55 per= cent of
which, on the basis of these unadjusted figures, was met out of tax
receipts and revenues other than borrowed money.
Cost of the war.
Since the armistice, particularly in the fiscal year 1920 and in the
current year, large sums Avere, in accordance with law, deposited in
the Treasury as miscellaneous receipts which, for statistical purposes,
should be offset against war expenditures instead of being added to
receipts. To get an accurate Adew of the relation between tax receipts
and expenditures and the net cost of the war, it is necessary to make
certain adjustments in the figures. For example, the proceeds of
sales of surplus war supplies are included in the miscellaneous receipts. They.are not receipts for this purpose. They represent the
return of money already included in expenditures. They should be
deducted from expenditures and thus the net cost to the Government
of the articles covered would be ascertained. Some of the war salvage
receipts were used to augment appropriations under sanction of law,
before the passage of legislation requiring items of this character
to be deposited in the Treasury as miscellaneous receipts. I n these
cases the proceeds from such sales were deposited in the Treasury
and corresponding deductions made from expenditures. During the
fiscal 3^ear 1920 the United States Grain Corporation returned to.the
Treasury $350,000,000 on account of its capital stock. I n the official
figures tliis item appears as having gone out of the Treasury as an
expenditure in the purchase of the stock and as having coine back



SECRETARY OF THE TREASURY.

105

as a miscellaneous receipt upon its payment. The payment should
simply be deducted from expenditures. Certain repayments were
made by foreign Governments on the principal of their obligations
held by the United States, by way of adjustment of accounts. They
should be treated for the purposes of this calculation as a reduction
of the total loans to foreign Governments.
The total miscellaneous receipts, including Panama Canal tolls,
deposited in the Treasury from April 6, 1917, to June 30, 1920, were
$1,950,000,000. If it is assumed that $325,000,000 would have represented the amount of these receipts on a peace basis for this period of
three years and three months, the balance of the miscellaneous receipts would be $1,625,000,000. This should be deducted from total
expenditures and eliminated from miscellaneous receipts. If it is
further assumed that the expenditures on a peace basis during the
fiscal years 1917, 1918, and 1919 would have been at the rate of
$1,000,000,000 a year, and during the fiscal year 1920 at the rate of
$1,500,000,000 a year, the total, on a peace basis from April 6, 1917,
to June 30,1920, would have been $3,750,000,000. Deducting this sum
and the miscellaneous receipts of $1,625,000,000 from the total expenditures, exclusiA^e of the principal of the public debt, we get $33,455,000,000, which would be the approximate net cost of the war, including loans to foreign Cxovernments less repayments. Excluding
such loans, the estimated net cost on this adjusted basis would be
$24,010,000,000.
The receipts require similar adjustment for the purpose of this
analysis. To ascertain the amount received from war taxes, there
must be deducted from the total receipts the proceeds of loans, the
miscellaneous receipts of $1,625,000,000, and the estimated rcA^enues
on a peace-time basis. The remainder, $10,703,000,000, would be the
approximate aniount of war taxes during the period under review.
This amount is 32 per cent of the estimated net expenditures on
account of the war, including the net amount of loans to foreign Governments, and 44.57 per cent exclusive of such loans.
Based on this analysis, the following statement of the net war
expenditures and Avar-tax receipts from the period of April 6, 1917,
to June 30, 1920, is giA^en:
Estimated net loar expenditures, Apr. ^6, 1917, to June SO, 1920 {on basis of
daily Treasury statements).
Total expenditures exclusive of the principal of the pubhc debt- $38, 830, 000,000
Estimated " miscellaneous receipts" which
should be offset against expenditures and
eliminated from receipts
$1,625,000,000
Estimated expenditures on a peace basis
. 3, 750, 000, 000
5, 375, 000, 000
Estimated net war expenditures



33, 455, OOO' 000

106

REPORT ON THE FINANCES.

Estimated net war-tax receipts, Apr. 6, 1917, to June 30, 1920 (on basis of daily
Treasury statements).
Total receipts exclusive of principal of the public debt
'.- $16,078,000,000
Estimated *' miscellaneous receipts" eliminated from receipts and offset against expenditures
'-.-:
$1,625,000,000
Estimated tax receipts on a peace basis—
3, 750, 000, 000
:
5, 375, 000, 000
Estimated net AA^ar-tax receipts

:

10, 703,000, 000

There is attached to this report as Exhibit 36, page 410, a statement
shoAving the receipts and expenditures for the fiscal year 1920 on the
basis of the daily Treasury statements, and also as Exhibit 37, page
412, giving the cash expenditures for the fiscal 3^ears 1917, 1918, 1919,
and 1920, classified according to departments and establishments.
Exhibit 38, page 413, shows classified disbursements and receipts,
exclusive of the principal of the public debt, from April 6, 1917, to
October 31, 1920.
SECURITIES

OAVNED BY T H E

UNITED

STATES

GOA^ERNMENT.

A detailed statement of securities owned by this. Government as
of June 30, 1920, with a face value of $11,101,589,306.30, was published for the first time at the close of the fiscal year and is attached
to this report as Exhibit 21, page 319. I t was compiled on the basis
of the face value of the securities. Some of them are not held in the
custody of the Treasury, and the tabulation, therefore, was made up
in part from reports received from other departments and establishments. These securities are closely related to the public debt, since
they result for the most part from the expenditure of funds obtained
through loans, the ordinary expenditures of the Government during
the period of their acquisition having been in excess of the receipts
tvom all sources other than the principal of the public debt. They
may be classified as follows: (1) Obligations of foreign Governments, (2) capital stock of w^ar emergency corporations, (3) railroad
securities, (4) Federal land bank securities, and (5) miscellaneous.
The first are of three kinds, viz, (a) those acquired by the Treasury, under authority of the Liberty bond acts, in the amount of
$9,445,006,855.18, on the basis of advances, less repayments; (b)
those received from the Secretary of W a r on account of sales of
surplus war supplies, amounting to $563,032,739.63; and (c) those
received from the American Relief Administration on account of
relief, in the amount of $84,014,527.92. The total is $10,092,054,122.73, or approximately 91 per cent of the aggregate securities
..owned.
The holdings of capital stock of war emergency corporations,
which at one time amounted to $1,125,000,000, showed a material
decrease by June 30, 1920, as the result of steps looking to liquida


SECRETARY OF THE TREASURY.

107

tion taken by the Housing Corporation, the Grain Corporation, and
the War Finance Corporation. The total reduction was $734,417,623.43, leaving net investments on this account of $390,582,376.57.
Thei^e has been further liquidation since the close of the fiscal year
by the Grain Corporation, in the amount of $100,000,000.
The railroad securities, aggregating $444,847,105, may be classified as (a) those purchased from the revolving fund appropriation
under authority of section 7 of the Federal control act, approved
March 21, 1918, as amended, in amount of $110,578,755 (not including securities purchased by the Director General of Railroads from
the operating revenues of railroads under the provisions of section
12 of the Federal control act) ; (b) those acquired by the Director
General by way of reimbursement for motive power, cars, and other
equipment ordered for carriers under Federal control, amounting to
$329,203,750; and {c) obligations acquired as the result of new loans
to railroads from the $300,000,000 revolving fund appropriation
under section 210 of the transportation act, 1920, in the sum of
$5,064,600.
The other securities consist of capital stock and bonds of the
Federal land banks, aggregating $174,040,510, and of $65,192 of
bankers acceptances of short maturities received by the Secretary
of War on account of sales of surplus war supplies. F o r the most
part, the securities shown in the statement are held in custody for
the Secretary of the Treasury by the Treasurer of the United States,
the Assistant Treasurers, or the Federal reserve banks. Appropriate
custody accounts and records are kept in the section of investments
under the superAasion of the Coinmissioner of Accounts and Deposits.
The facilities of the Treasury have been extended to other departments and establishments, which have been invited to deposit their
holdings with it, in order to obtain greater safety and to permit the
publication of complete reports. Certain trust funds, such as those
of the Governnient life insurance fund, and of the Alien Property
Custodian, with the iuA^estment of which the Treasury is charged,
are not shoAv^n in the statenient of securities, inasmuch as they are not
beneficially owned b}^ the United States.
R E T I R E M E N T S OF L I B E R T Y BONDS A N D VICTORY N O T E S .

Five per cent bond purchase fund.
Purchases of Liberty bonds and Victory notes for the bond-purchase fund were continued during the fiscal year 1920, but ceased on
June 30,1920. Section 15 of the second Liberty bond act, as amended
by section 6 of the third Liberty bond act and the Victory Liberty
loan act, authorized the Secretary of the Treasury, until the expiration of one year after the termination of the war, to buy an


108

REPORT ON THE FINANCES.

nually bonds and notes issued under authority of the second Liberty
bond act, as amended, including bonds issued upon conversion of
bonds issued under the first Liberty bond act or the second Liberty
bond act, as amended, at such prices and upon such terms and c(^nditions as he might prescribe, up to 5 per cent of the par amount of
bonds or notes of any series outstanding at the beginning of the
bond-purchase fund year. The Treasury's purchases under this
authorization have been made from time to time, at average cost,
through the Federal reserve bank of NeAv York, and from the W a r
Finance Corporation. These agencies in turn made purchases in
the open market, when it Avas deemed necessary, to stabilize market
prices and to protect the Government's credit. These operations undoubtedly sustained and strengthened the market for Liberty bonds
and Victory notes and so redounded to the benefit of all holders of
these issues. The securities bought liaA^e been canceled and retired.
On April 18, 1920, the folloAving statement was issued b}^ the Secret a r y Avitli reference to purchases for the bond-purchase fund to June
30, 1920, and thereafter for the cumulatiA^^e sinking fund:
The authorization conferred upon the Secretary of the Treasury by Congress
to make purchases of Liberty bonds and Victory notes for the r per cent
bond-purchase fund expires one year after the termination of the Avar. The
continuance of a technical state of Avar beyond the period contemplated at the
time the authority was conferred has presented to the Secretary of the
Treasury the practical problem of determining what his future course should
be Avith respect to the bond-purchase fund. Secretary Glass, in his annual
report, said, " Purchases of bonds under authority of section 6 of the act of
April 4, 1918 (bond-purchase fund), are not included as an item of estimated
expenditure (for the fiscal year beginning July 1, 1920) ; this authority expires
one year after the termination of the Avar, and the Secretary reserves decision
with respect to such purchases after July 1, 1920." Congress created in the
Victory Liberty loan act a 2^ per cent sinking fund to commence July 1, 1920;
In viCAv of the fact that on July 1 more than a year Avill have elapsed since
the fiotation of the last Liberty loan and of the further fact that unless Government expenditures should be greatly decreased or taxes increased, continued
purchases for the bond-purchase fund could only be financed by the issue of
additional certificates of indebtedness, thus increasing the floating debt whiledecreasing the funded debt, my present intention is not to treat the t V fundsAO
as- cumulative, but to discontinue purchases for the bond-purchase fund on and
after July 1, 1920, and to make purchases thereafter only for the sinking fundi
created under the Victory Liberty loan act. The approximate amount of thebond-purchase fund quota for the period ending .lune 30, 1920, will be taken
over from the War Finance Corporation or, to a limited extent, purchased in
the market, and in either case canceled and retired.
Hereafter such purchases as the Treasury may have to make for the bondipurchase fund or the sinking fund under the general program above announced Avill be occasional and not habitual. ^
I am confirmed in the determinations above set forth by the fact that the^
natural market in Liberty bonds and Victory notes has UOAV reached such dimensions that the purchases for the bond-purchase fund have ceased to' be a




109

SECRETARY OF THE TREASURY.

•dominating factor. The recent liquidation which has brought the bonds and
notes, to new^ IOAV levels seems to find its chief source in selling by industrial
and other corporations Avhich Avere large purchasers during the Liberty loan
campaigns and Avhich are UOAV under pressure to find funds for their current
husiness, in a period Avhen necessary measures of credit control make further
expansion of,bank loans both difficult and expenslA^e. This offers a unique op-,
'portunity to investors, large and small, the quotations for the bonds and notes
toeing extremely attractive to investing institutions and private investors. I believe that the time has come when the disappearance of the Governni'ent from
the market, except as an occasional purchaser within tlie limitations above outlined, Avill have a beneficial effect upon the rnarket for the bonds and notes, both
by reducing the Treasury's current borrowings on Treasury certificates and
stimulating the interest of investment bankers and the public In the market
for Liberty and Victory securities.

Pursuant to this announcement, no purchases for the 5 per cent
bond-purchase fund have been made since June 30, 1920, and those
made prior to that date, after April 18, 1920, represented chiefly
accumulations taken over from the W a r Finance Corporation.
The aggregate par value of Liberty, bonds and Victory notes
retired by the bond-purchase fund between April 15, 1918, and
June 30, 1920, when purchase ceased, was $1,764,896,150, and the
aggregate paid therefor was $1,677,566,210.26, or, on an average,
•slightly more than 95 per cent of the par value. The following is a
summary of the purchases:
Summary statement of bond purchases to June 30, 1920.
•

Loan.
First Liberty loan converted 4 per cent and 4.1 per cent
bonds, 1932-1947...
.
.
.
Second Liberty loan 4 percent and 4J per cent bonds,
1927-1942
Third Liberty loan 4^ per cent bonds, 1928
Fourth Liberty loan 4^ per cent bonds, 1933-1938
Victory loan,4| per cent and 3 | percent notes,1922-i923.
Total

Par amount
purchased.

Amount paid.

S36,912,000 $34,722,342.29
478,688,000
433,308,100
566,987,050
.249,001,000

Accrued interest paid.

S532,112.62

452,358,913.01
414,067,698.57
530,548,515.45
245,868,740.94

6,896,021.63
3,679,624.35
6,523,811.37
8,500,393.93

1,764,896,150 1,677,566,210.26

21,131,963.90

•

I n accordance Avitli the requirements of section 6 of the third Liberty bond act, a detailed statement of the complete operations will be
submitted to the Congress in a separate report. Now that operations
have been completed, attention may be called to the reasons which
actuated the Treasury in making its purchases. The bond-purchase
fund was discussed at length by the Secretary of the Treasury in connection with the third Liberty loan and subsequent Liberty loans and
was an important factor in the success of those loans. Of late,
however, there seems to have been some misapprehension on the
subject. The considerations which moved the Treasury in recommending that the bond-purchase fund' authority be granted, and




110

REPORT ON TliE FINANCES.

which guided it in the exercise of the authority, are set forth in
the testimony of the Secretary of the Treasury before the Committee on Ways and Means of the House of Eepresentatives in connection with the third Liberty bond bill, on March 27, 1918, as
follows:
Very careful and earnest attention to the situation which has developed since
the last Liberty loan has convinced me that the United States must do what
each of the warring countries in one form or another does, and prepare itself
to support the market for its bonds. No measure of this sort, hOAvever, can be
of any value unless the fund provided for the purpose is a large one. Every
effort must be made to reach the people who have money to invest or those who
will have and who can be induced to save and pay for the bonds for which they
subscribe. In connection with every issue, hOAvever, it will be found that the
patriotism of some has outrun their ability to pay for the bonds, so that either
those Avho buy them and get tired of holding them do not want to hold them, or
those who from necessity or for other reasons are obliged to sell them, will
offer their bonds in the market; and it puts the Government at a very great
disadvantage if there is no means of sustaining the market to a reasonable
extent so as to steady it * * *. Inevitably during the period of the war,
after each Liberty loan has been closed, we have been forced to face the facts
that there will be more sellers than buyers of the bonds. The present bill
Avould authorize the Treasury to retire the excess. That is, it Avould authorize
through the sinking fund a repurchase ^of such an amount of the bonds as the
sinking fund Avould permit and Avould take up the surplus offerings, and the
amount provided, I think, Avould be sufficient for the purpose. With such a sinking fund and the secondary distribution which the War Finance Corporation can
bring about, there will not be such a desire to sell the bonds, because the very
fact that they can sell them will make people feel more confident about holding
them. There is a curious feeling in the breast of the average man that if he
buys a Government bond, even though he contracts to lend his money to the
Government, nevertheless if he gets tired of his investment and wants to get
his money back, that he ought to be able to sell the bond at par regardless of
the fact that the Government is not under any obligation to redeem that bond
before maturity. It is extraordinary the extent to which that feeling exists.
People would not have that feeling about a corporation which sold its bonds,
or about any indiAddual who gave his note. They would not expect them to be
redeenied at par before maturity. It is a perfectly unreasonable feeling, but
one of the things Ave have got to reckon with. I believe that the provision for
this sinking fund will relieve the situation somewhat. This sinking fund, by
the way, ought not to be a mandatory sinking fund but discretionary; that is,
the Secretary ought to be permitted within the limits of 5 per cent of the bonds
issued to buy back bonds.
it is a most difficult thing, but a thing which we must face, to try to keep
Government bonds measurably around par. We have got to continue Government borroAAdngs at a reasonable rate of interest. I think that some such thing
as this sinking fund will be much cheaper for the Government than to increase
the interest rate; at least Ave Ought to try it. The reason I say it is cheaper is
this: Suppose Ave need three billions, and the sinking fund on the entire outstanding bonds for the year—assuming Ave had ten billions outstanding—at 5
per cent Avotild be $500,000,000. -It only means that we should have to sell a
few more bonds and then buy them back and keep the rate of interest up, and it
does not hurt us any. We are just taking back some of the bonds. * * *
This 5 per cent each year is intended to apply during the war only. * * *




Ill

SECRETARY OF THE TREASURY.

It is also interesting to note, in view of the widespread contention
that purchases should have been made at par rather than at the
market, that this A^ery proposal was rejected by the Committee on
Ways and Means, when the matter of granting the authority was
under consideration. The Secretary of the Treasury in his testimony
before the committee said in this connection:
I do not think it would be a wise thing for us to attempt that—that is to say,
to purchase the bonds at par—because I think if we were to state that we had
$100,000,000 that the Government would invest in these bonds at par, for instance, that Avould be simply an invitation to the people to sell their bonds to
the Government at par and you would exhaust the fund in short order.

Bonds purchased from repayments of foreign- loans.
In accordance with the provisions of section 3 of the first Liberty
bond act, and section 3 of the second Liberty bond act, repayments by
foreign Governments on account of the principal of their obligations
bought under authority of these acts have been applied to the purchase^ and retirement of Liberty bonds. The face A^alue of those secured to November 15, 1920, was $119,109,050. They were bought
for $114,538,818.16, or slightly less than 95 per cent of the par value.
These operations are fully set forth in the separate detailed statement of all expenditures under the Liberty bond acts. The purchases may be summarized as follows:
Bonds purchased as the result of payment of foreign loam^s to Nov.. 15, 1920.

Loan.

Third Liberty loan 4\ per centcoupon bonds
Third Liberty loan 4^ per cent registered bonds
Fourth Liberty loan 4^ per cent coupon bonds
Total

Principal
amount
purchased.

Amount paid.

Amount of
accrued
interest paid.

$80,758,750 $76,472,985.84
8,407,550.00
8,407,550
29,942,750 29,658,282.32

$927,529.20
6,909.62
553,567.76

119,109,050

114,538,818.16

1,488,006.48

Bonds purchased with franchise tax paid by Federal reserve banlcs.
Section 7 of the Federal reserve act provides that the net earnings
derived by the United States from the Federal reserve banl?:s, as
franchise tax, shall in the discretion of the Secretary be used to supplement the gold reserve held against outstanding United States
notes, or applied to the reduction of the outstanding bonded indebtedness. These earnings for the calendar year 1919 have been applied to
the purchase, at the market, of $2,922,450 par amount of second
Liberty loan 4:| per cent bonds, at a cost of $2,703,850.74, with accrued
interest of $20,814.43, the latter amount being chargeable as interest
on the public debt. These bonds have been canceled and retired.




112

REPORT ON THE FINANCES.

Bonds retired on account of gifts.
From time to time various persons, for patriotic or other reasons,
present Liberty bonds and Victory notes to the Government. These
are redeemed at par and retired, and the proceeds are covered into the
Treasury as miscellaneous receipts. The aggregate amount presented
and retired to November 15, 1920, is $12,850, as follows:
Bonds retired account of gifts, November 15, 1920.
Par
amount.

Loan.

First Liberty loan 4J'per cent coupon bonds
Second Liberty loan 4 per cent coupon bonds
Second Liberty loan 4 per cent registered bond
Second Liberty loan 4J per cent coupon bondss
Third Liberty loan 4 | per cent coupon bonds
Third Liberty loan 4J per cent registered bonds
Fourth Liberty loan 4 | per cent coupon bonds

$350.00
700.00
7,000.00
2,150.00
800.00
500.00
1,350.00

Accrued
Accrued
interest
interest
matured. unmatured.
$6.22
2.35
44.59
2.93
5.71
9.81
7.02

$51.00
42.49
40.10
35. 24

5,350.00
7,500.00

Grand total

168.83

24.23
54. 40

12,850.00

Total coupons
Total registered

168.83

^ 78.63

Bonds retired on account of forfeitures to the United States.
WhencA^er Liberty bonds or Victory notes are forfeited to the
United States for any reason and deposited in the Treasury, they
are canceled and retired. Up to November 15, 1920, there have been
retired on this account $3,550 of bonds and notes, as follows:
Bonds i^etired account of forfeitures to the United States to Nov. 15, 1920.
Loan.

Par
amount.

First Liberty loan 3^ per cent coupon bond
"-.
First Liberty loan 4^ per cent conA'erted coupon bond
Third Liberty loan 4^ per cent coupon bonds
Fourth Liberty loan 4^ per cent coupon bonds
Victory Liberty loan 4f per cent coupon notes
Total

$50
50
700
2,650
100
3,550

Bonds retired on account of estate and inheritance taxes.
Under section 14 of the second Liberty bond act, as amended by
the third Liberty bond act and the Victory Liberty loan aet, 4J per
cent Liberty bonds and 4f per cent Victory notes are receivable by
the United States at par and accrued interest in payment of any
estate or inheritance taxes. Such securities are canceled and retired,
and the face amount, with any accrued interest, is covered into the
Treasury as receipts on account of Federal estate (or inheritance)
taxes. The value of those received to November 15,1920, is $9,781,750,
as follows:




113

SECEETARY OF THE TREASURY.

Acceptanoe of Liberty bonds and Victory notes in payment of estate or
inheritance taxes to Nov. 15, 1920. .
Paramount
of bonds.

Loan.

Interest
paid.

Total coupon
Total registered
Grand total

.^

$159,400.00
3,800.00
2,120,950.00
456,700.00
3,477,600.00
613,650.00
2,799,950.00
131,600.00
18,100.00

$1,839.57
31.85
23,144.63
4,180.25
38,512.74
5,676.59
25,633.92
865.27
197.29

8,576,000.00
1,205,750.00

First Liberty loan converted 4^ per cent icoupon bonds
[First Liberty loan converted 4 | per cent registered bonds...
Second Liberty loan converted 4^ per cent coupon bonds...
•Second Liberty loan converted 4^ per cent registered bonds.
Third Liberty loan 4i per cent coupon bonds.
.Third.Liberty loan 4i per cent registered bonds
Fourth Liberty' loan 4^ per cent coupon bonds
Fourth Liberty loan 4^ per cent registered bonds'
Victory Liberty loam 4f per cent coupon notes

89,328.15
10,753.96

19,781,750.00 1100,082.11

1 Subject to adjustment because of items in transit.

^Summary of retirements to Nov. 15, 1920—par amount of bonds or riotes {including cumulative sinking fund).
^ per cent bond purchase fund (to June 30,1920)
Purchases on account of sinking fand
Purchases Avith payments on foreign loans
(Purchases with earnings of Federal reserve banks
'Gifts
1
Forfeited ._^-^---—
^Estate or inheritance t a x e s - —
'
Total

$1, 764, 896,150
15, 040, 2.50
119,109, 050
2,922,450
12, 850
^ 3,550
9, 781, 750
1, 911, 766, 050

CUMULATIAnE S I N K I N G F U N D .

The cumulative sinking fund established by section 6 of the Victory
Liberty loan act approved March 3, 1919, became effective July 1,
1920. The law permanently appropriates, for the current fiscal year
-and for each fiscal year thereafter until the debt is discharged, an
.^amount equal to the sum of "(1) 2^ per centum of the aggregate
amount of such bonds and notes outstanding on July 1, 1920, less
;an amount equal to the par amount of any obligations of foreign
'Governments held by the United States on July 1, 1920, and (2)
i;he interest which wo.uld have been payable during the fiscal year
for which the appropriation is made on the bonds and notes purchased, redeemed, or paid out of the sinking fund during such year
•or in previous years."
On this basis the constant appropriation annually for sinkingrfund purposes is $253,404,864.87, deriAxd as folloAvs:
-Aggregate amount Liberty bonds and Victory notes out^
standiug:July 1, 1 9 2 0 - :
$19, 581, 201, 450. 00
Xess par amount obligations of foreign Governments pur^chased under the several Liberty loan acts and held by
the United States on July 1, 1920
9, 445, 006,855.18
' Difeerence
—
2^ per cent thereof
13799—FI 1920
8



10,136,194, 594. 82
253, 404,864. 87

114

REPORT ON THE FINANCES.

To this sum there will be added each year the interest which would
have been payable on any bonds or notes paid, redeemed, or purchased,
for sinking-fund account during the year or in previous fiscal years..
The cumulatiA^e sinking fund, it is calculated, Avill retire the funded,
war debt of the United States, less the aniount representing the foreign obligations held by the United States on July 1,1920, in about 25years. Under other provisions, of the Liberty loan acts any repayments of the principal of the foreign obligations must be applied to- ,
the retirement of Liberty bonds. The floating debt is not covered
by the sinking fund, but is to be retired out of current revenues. TheprcAvar debt also is not covered, but the only important items .thereare of indeterminate maturities after specified dates, which may beretired after such dates from time to time as the condition of theTreasury may warrant.
The cumulatiA^e sinking fund was created for the retirenient of
the funded war debt in the order of its maturity, a course which,
should in the long run benefit most the holders of all the Liberty
bonds, because of its tendency to proAdde for the earliest maturing
obligations without undue refunding operations and the fact .that,
the earlier maturing obligations are most likely to sell on the highest
interest basis. During the current fiscal year the operation of thesinking-fund proAdsions has been seriously limited by the extraordinary payments required to be made on account of the railroads,,
which, as set forth elsewhere in this report, have likewise limited the
Treasury's progress in the retirement of the floating debt. Substantial sinking-fund purchases during the first part of the fiscal year
would therefore have increased the floating debt or prevented its
reduction, and would thus have tended to substitute floating debt
for funded debt. The market for Liberty bonds and Victory notes,,
moreover, has been in a state of approximate equilibrium since thesinking-fund provisions became operatiA^e, and it has not been neces-^
sary to give support by Government purchases.
U p to November 15,1920, sinking-fund purchases have accordingly
been moderate in amount, as appears from the following table:
July
August
September
October __•_
November 1-15
Total:

,
i—
^.

—

—
-

—

^-.

—- $5, 261, 250
,
-—
—

3, 425, O O
O
6, 354, 000
15, 04.0, 250

I t is hoped, however, that with some relief from the heaviest railroad expenditures and from other extraordinary payments, the Treasury will, during the balance of the fiscal year, and at least after the
beginning of the calendar year 1921, be able to proceed to apply the




SECRETARY OF TFIE TREASURY.

•

115

remainder of the cumulative sinking fund for the current fiscal year
to the retirement of the debt. Purchases for the sinking fund are
made in the open market at the prevailing market prices, chiefly
through the Federal reserve bank of New York, as fiscal agent, and
are therefore reflected in the controlling market prices and redound
to the benefit of all holders of Liberty bonds and Victory notes.
PROPOSALS FOR R E F U N D I N G T H E L I B E R T Y L O A N S .

There has been no little discussion during the year of the necessity
of taking governmental action to improve the market prices of the
outstanding issues of Liberty bonds and Victory notes. Many of the
proposals have been utterly untenable as, for example, that all outstanding issues be given the circulation privilege, or be converted
into interest-bearing currency. I t is unnecessary to do more than
suggest the disastrous possibilities of adding $20,000,000,000 of potential currency to the country's circulation. More insistent suggestions
have been either that the Liberty bonds be conA^erted into tax-exempt
obligations or that they be exchanged for securities bearing a higher
rate of interest. The Treasury has consistently and vigorously declared its opposition to any such schemes. I t opposed on public
grounds the cash bonus proposals for soldiers. I t CA^en more strongly
opposes bonus proposals of this sort for capital. The obligation of
the United States is to pay the principal of the Liberty loans at
maturity and the interest in the meantime. That obligation will be
met. As financial conditions become stabilized, moreover, the market
prices of Liberty bonds and Victory notes should inevitably ap-.
predate without imposing upon the country the additional burden
of higher interest rates on the $20,000,000,000, or thereabouts, of
funded Government obligations. Most competent judges have little
doubt that the outstanding Liberty bonds and Victory* notes will
gradually return toward par in the near future, and that they will
perhaps go to a premium before their maturity. There has, in fact,
been a considerable recovery in the market prices of both Liberty
bonds and Victory notes during the past few months notwithstanding
the general credit stringency and the prevailing scarcity of capital..
The most fundamental objections to the suggestions that the Liberty loans should be refunded at this time in order to improve their
market prices are that the funding is unnecessary, that it would tend
to perpetuate the war debt, and that it would upset the Treasury's
well-considered program of debt reduction. The Liberty bonds and
Victory notes are now funded obligations and do not require to be
refunded at this time. There are many instances of the refunding of
loans at or near maturity, at a lower rate of interest, but there are
few instances of their refunding before maturity at a higher rate



116

REPORT ON TFIE FINANCES.

of interest. Such an operation Avoiild not be a refunding in any
proper sense. T h e maturities of the Liberty bonds and Victory
notes, AAdth the options to the Treasury of redemption prior to
maturity, were carefully arranged Avith a view to give the Treasury adequate control over the debt, and to make it practicable for
the country to fOUOAV an orderly program of retirement. To refund
the Liberty loans noAv into a long-term consolidated loan could only
tend to perpetuate the war debt and relieve the healthy pressure
for its retirement.
The Treasury has from time to time been called upon to express
its views Avith respect to specific refunding proposals, particularly
in connection with the bill introduced by Senator Frelinghuysen to
provide for the exchange of the several issues of Liberty bonds for
fully tax-exempt long-term consolidated bonds bearing interest at
3^ per cent. On April 10, 1920, the Secretary addressed the f OIIOAVing letter to Senator Frelinghuysen in response to his request for a
statement of the Treasury's attitude on the bill:
WASHINGTON, April 10, 1920.

MY DEAR SENATOR: I received your letter of April 6, 1920, hi which you
request a statement of the Treasury's views as to S. 4119, introduced by you
" to authorize an issue of bonds in exchange for bonds of the first, second,
third, and fourth Liberty loan issues." I have carefully examined the bill and
note that AA'^hat you propose is, in substance, the refunding of the Liberty
loans into one consolidated loan, maturing in 50 years, bearing interest at 3^
per cent, and carrying substantially complete exemption from taxation.
It is my considered judgment that the bill which you propose offers no satisfactory solution of the problem of the present depreciation in the market prices
of Liberty bonds, and that it should not be enacted into law.
I should like to call your attention, in the first place, to the fact that Avhile
the bill would authorize an issue of bonds to the amount of $30,000,000,000, the
total face amount of the bonds of the first, second, third, and fourth Liberty
loans outstanding on March 31, 1920 (on the basis of daily Treasury statements), Avas only $15,616,872,038. Inasmuch as the bill provides that the bonds
whicb it authorizes shall be issued solely for the purpose of retiring bonds of
the first, second, third, and fourth Liberty loans, it is obvious that the authority
which it proposes to confer is almost twice as large as would be appropriate
for the purpose.
As to tbe merits of the bill, I feel that from the point of view of the Treasury
it is neither necessary nor desirab/e to attempt to consolidate the outstanding
bonds of the Liberty loans into one loan. In this connection I am inclosing for
your information a copy of Form L. and C. 400, recently issued by the department, which summarizes in convenient form the terms of the several issues of
Liberty bonds, including their exemption from taxation. As you will see upon
examining this summary, the maturities, redemption dates, and interest payment dates for the several issues were determined by the Treasury Avith great
care, in order to spread maturities over a considerable period of years and
provide sufficient redemption privileges in the intervals betAveen maturities to
permit the convenient handling of the retirement or refunding of the several
issues. The interest payment dates, moreover, Avere carefully fixed with a view




SECRETARY OF THE TREASURY.

lit

to spreading the heavy interest payments over the several months of the year.
In my opinion, therefore, no consolidation of tbe Liberty issues is necessary from
the point of view of fiscal convenience; in fact, I believe it would be a serious
mistake to attempt to consolidate the maturities of either principal or interest
into one loan.
The Treasury is also definitely opposed to the issue of further obligations of
the United States bearing full exemptions from taxation for what it regards as
fundamental reasons of social and economic policy. Its position in this respect
was fully set forth in Secretary McAdoo's testimony before the Committee on
Ways and Means of the House of Representatives on August 28-29, 1917, in
connection with the second Liberty bond act. I am inclosing, for your information, a copy of an extract form this testimony. The chief objection to the total
exemption from taxation is that its value depends largely upon the wealth of
the individual investor and is greatest in tbe case of the wealthiest investor.
Such an exemption from taxation, moreover, Avould materially cut down the
revenues of the Government of the United States at a time when it can not
afford to dispense with any of the receix>ts which would otherwise accrue on
account of taxes.
I think that as a practical matter, moreover, the enactment of the bill proposed by you would be without important effect upon the market prices of 4^
per cent Liberty bonds. Fully exempt 3i per cent bonds of the first Liberty loan
are selling in the neighborhood of 97. Fully exempt 3 | per cent Victory notes
are selling in the neighborhood of the same price, and every 4 | per cent Victory note carries with it the continuing right to convert it into a fuhy exempt
3f per cent Victory note; yet on December 31, 1919, of a total issue of about
$4,500,000,000 only $940,000,000 consisted of 3f per cent Victory notes. I should
not expect to see any very large proportion of the 4^ per cent bonds converted
into 3i per cent exempt bonds. I should expect that the passage of your bill
and the carrying out of the plan would reduce the market value of the present
3^ per cent bonds to about the level now established for the 41 per cent bonds
rather than bring up the market price of the 4^ per cent bonds to the level of
that of the 3^ per cent bonds. There are only about a billion and a half dollars
of tax exempt first 3is and there are some fourteen billion dollars of taxable
4|s. If all the holders of 4^ per cent bonds had an option to ^convert them into
3i per cent bonds fully exempt, that option would probably have the effect of
depreciating the price of 3is rather than appreciating the price of 4is. The
number of persons with wealth sufficient to make the value of the total exemption from surtaxes compensate them for the surrender of an amount equal
to three-fourths of 1 per cent per annum is limited. The present market price
of the 3^ per cent bonds is in no small measure due to their relative scarcity.
This scarcity value would, of course, disappear the moment an option to convert
was given to the holders of ten times their amount of 4 | per cent bonds.
The proviso in section 1 of the bill, \Adiich would subject .the proposed bonds
to the normal income tax in the event that the normal tax should be reduced to
the rate in force on January 1, 1914, Avould effect a complete reversal of fhe
Government's established policy. All the Liberty bonds and Victory notes are
now exempt from the normal Federal income tax, and the Treasury believes that
this exemption from normal tax should not be withdrawn, since it is fair to al?
holders, with no undue advantages to large holders, and is an important factor
in maintaining the market prices of all the issues.
I do not believe, therefore, that your bill offers any real solution of the problem
of the market prices of Liberty bonds. As the Treasury views it, the present
depreciation of Liberty bonds on the market is due chiefly to the fact thnt of thp




.118

REPORT ON THE FINANCES.

20,000,000 Americans who putriotically subscribed 'during the period of the war,
large numbers haA^^e not been willing or able to exercise such control over their
personal expenditure as would enable them to retain their bonds after the cessation of hostilities. Liberty bonds, like other bonds, are subject to market influences, including the laAv of supply and demand, and their market quotations
have declined in consequence of the failure of the great investing public to save
in proportion to the enormous expenditure of capital during and since the Avar.
Many patriotic people bought Liberty bonds under the.impulse of patriotism
who have been unwilling since the war was over to continue to lend their money
to the Government and have forced their holdings on the market more rapidly
than others could save funds to invest, with consequent depreciation in market
prices. The remedy for this condition is for the people to work and save, to
keep their holdings of Liberty bonds as investments, and to purchase additional
Government securities with their savings.
The present market prices of Liberty bonds are causing no loss to real
investors who are holding their bonds as permanent investments; they are not
suffering because others see fit to sell their bonds now for less than they are
worth, and neither these investors nor those who wish to sell their bonds have
any ground for expecting a donation from the United States in the form of
additional tax exemptions or other privileges. The United States is under no
obligation to guarantee the holders of Liberty bonds against variations in
monej^-market conditions or to guarantee a market at par for the bonds. To
make valuable gifts to the people who subscribed for their bonds on definite
terms for a definite .period of time AA^ould, in my opinion, be subversive of all
decent principles of Government. The Treasury is as much opposed to a bonus
to bondholders as to a bonus to other special classes in the community.
As you doubtless kiiow, the Government is already doing everything in its
power to protect the market for Liberty bonds and the interests of Liberty
bond holders by means of purchases for the 5 per cent bond-purchase fund provided by existing law. These purchases, Avhich have greatly tended to sustain
and strengthen the market for the bonds, have been made under the authority of
section 15 of the second Liberty bond act, as amended by section 6 of the third
Liberty bond act, which authorized the Secretary of the Treasury to purchase annually until the expiration of one year after the termination of the war up to 5 per
cent of the bonds of each series outstanding at not exceeding par and accrued
interest. To November 30 last, as shown by Secretary Glass's report to Congress, a copy of which is inclosed, $1,043,080,500 principal amount of Liberty
bonds had been purchased, the principal amount paid therefor being $993,363,526.15. The authority thus conferred by Congress has been exercised by
the Treasury for the sole purpose of stabilizing the market, and in my judgment very important results have been achieved, redounding to the benefit of
.all holders of Liberty bonds. The Treasury has not profited by the action of
those Liberty bondholders who have forced their bonds on the market nor by
its purchases of those bonds. It has been obliged to borrow at higher rates of
interest the money to make the purchases which have been forced on it for
tfhe protection of the holders of Liberty bonds and of the Goverjiment's credit.
In this connection, and with particular reference to the provisions of section
2 of S. 4119, I feel that I should call your attention to the provisions of section
6 of the Victory Liberty loan act, approved March 3, 1919, creating a 2^ per
cent cumulative sinking fund which goes into operation on July 1, 1920, and
is. calculated to retire the Liberty bonds and Victory notes outstanding on that
date Avithin approximately 25 years (except for an amount equivalent' to the
obhgations of foreign governments held by the United States on said date).
This cumulative sinking fund was established pursuant to the recommendation




SECRETARY OF THE TREASURY.

119

-of Secretary Glass in his letter of February 10,'1919, to the Committee on
Ways and Means, and received the careful consideration of the Congress in
•connection Avith the Victory Liberty loan act. In view of the provision for the
sinking fund Avhich has already been made, therefore, no necessity exists for
the sinking fund proposed in S. 4119 except, of course, in so far as it might
be designed to retire the new bonds proposed to be issued under the bill. As
t o the Liberty bonds and Victory notes outstanding, the ground has already
*foeen covered.
Very truly yours,
D. F. HOUSTON, -Secretary.
Hon. JOSEPH S. FRELINGHUYSEN,

United States Senate, Washington, D. G.

Many other specific proposals have contemplated the refunding
of the outstanding bonds and notes into obligations bearing a higher
rate of interest. Several bills designed to effect this have been
introduced in the Congress. The following letter, which is typical
of the Treasury's replies to other similar proposals, was sent by the
Secretary of the Treasury under date of April 22, 1920, to a correspondent who suggested this course:
WASHINGTON, April 22, 1920.

DEAR SII* : I received your letter of April 17, 1920, as to the market prices
'Of Liberty bonds. The Treasury is not contemplating the issue at this time of
:any new United States bonds, and you Avere misinformed if you heard that the
United States was about to issue new bonds bearing interest at a higher rate
than the Liberty bonds. There is at the present time no outstanding privilege
•of converting first Liberty loan 3^ per cent bonds into bonds bearing a higher
rate of interest, although first 4's and second 4's are still convertible into 4-^
•per cent bonds pursuant to the extended conversion privilege described in
Treasury Department Circular No. 137, dated March 7, 1919, as amended and
supplemented June 10 and November 1, 1919, copies of which are inclosed.
Your suggestion that Liberty bonds be made legal tender is, in the opinion of
the Treasury, entirely untenable. The currency needs of the country are being
•amply provided for by the operation of the Federal Reserve System, and to
,give Liberty bonds the legal-tender quality Avould make them so much spending
imoney, produce unprecedented inflation of the currency, and fundamentally
upset prices.
• The Treasury is also definitely opposed to the proposal that the Liberty
feonds be exchanged for bonds bearing a higher rate of interest and beliCA^es
that it offers no solution of the problem of the depreciation in the market prices
•of Liberty bonds.
As the Treasury views it, the Liberty bond problem is chiefly one of quantity. Unfortunately, many holders of Liberty bonds who patriotically subscribed for them and held them during the war have since regarded them as
so much spending money and throAvn them on the market more rapidly than
others could save funds to invest, with consequent depreciation in market
prices. People generahy have been spending money freely and saving relatively little, so that there has not been sufficient capital saved to overcome the
pressure upon the market from those who bought bonds as patriots but not as
investors. In these circumstances, to add a fraction to the rate of interest
•home by the bonds would have no important or lasting effect upon their market
prices, while it Avould have an injurious effect upon the Government's credit
and burden the Government and the taxpayers with higher interest charges
•over a long period of years. The Government could not, of course, manufac


120

REPORT ON TFIE FINANCES.

ture savings or create buyers for its securities simply by increasing the interest
rate on the outstanding bonds. The only effect of such a course would be todepreciate all other securities automatically and establish a high-interest level
for many years which Avould be burdensome to the development of the country.
The present market prices of Liberty bonds are causing no loss to real investors who are holding their bonds as permanent investments; they are not
suffering because others see fit to seU their bonds now for less than they are
worth, and neither these investors nor those Avho wish to sell their bonds have
any ground for expecting a donation from the United States in the form of
additional interest on the bonds. The United States is under no obligation to
guarantee the holders of Liberty bonds against variations in money-market
conditions or to guarantee a market at par for the bonds. To make a gift of
a higher rate of interest to the people who subscribed for their bonds on
definite terms for a definite period of time would, in my opinion, be subversive
of all decent principles of Government. To limit such a gift to original subscribers Avould be impracticable; to extend it to market purchasers would be
utterly indefensible. The Treasury would vigorously oppose any donation of
this character.
Very truly yours,
D. F . IBomsT&N, Secretary.
MARKET PRICES OF LIBERTY BONDS AND VICTORY NOTES.

The year under review has been marked by considerable fluctuations in the market prices of Liberty bonds and Victory notes, as
will appear from the following table:
Highest and lowest market prices for Liberty bonds and Victory notes from
Oct.-l, 1919, to Nov. 1, 1920.
F i r s t 3^'s.

• F i r s t 4's

First-second
4Fs.

F i r s t 4Vs.

Second 4's.

1919.
October—High
Low
November—High
L o w . . •.
December—High
Low

SlOO.95-$100. 98 S95. 40-S95. 60 $95.6S-$95. 70 $101. 90-$lO2.00
100.02- 100.08 95.00- 95.20 95. 00- 95.20
100.90
100. 86- 101.00 95. 00- 95. 50 95.00- 95. 20
101.00
99.90- 99.94 93. 90- 94.10 94.10- 94. 20
100.76
99. 84- 100. 00 94.10- 94.30 94.30- 94. 50
101.00
99.00- 99.08 92. 70- 92. 90 93.10- 93. 28
100.96

$94. 20-$94. 26
93.00- 93.16
93.10- 93.18
91.12- 91.16
92.10- 92. 20
91. 20- 91.28

1920.
January—Hieh.
Low
February—High
Low.....
March—High
Low'.
'.
April—High.
Low
".
May—High:
. Low
June—High......
Low.....
July—High
Low....
August—High
Low
'
September—High
Low
October—High
:
L6w
For above period:
High.-..
Low




100.10- 100. 20
98.16- 98.20
98.20- '98.24
94.00- 94. 40
97.60- 97.70
94.48- 94.60
96.90- 97.00
92.30- 92.54
92.50- 92.60
90.00- 90.20
92.18- 92.26
91.00- 91.08
91.50- 91.60
90.80- 90.90
91.02- 91.06
89.80- 89.84
91.14- 91.18
89.88- 89.94
93.18- 93.24
91.14- 91.20

93. 40- 93.50
91. 48- 91. 52
91. 32- 91.36
90. 20- 90. 40
90.80-91.00
89. 90- 90.10
91. 30- 91. 80
8 1 80- 85.00
86. 50- 87.00
83.00- 83.50
86.30- 87.00
85. 20- 85. 70
86.20- 86.50
85.00
85. 40- 85. 80
84. 30- 84. 40
88.00- 90.00
84. 48- 84.56
90.24- 90. 30
87.30

93. 70- 93. 90
91. 48- 91. 52
91. 60- 91. 80
90. 80- 91.00
91. 40- 91. 60
90. 40- 90. 80
91. 40- 91. 70
85. 60- 86. 00
87. 84- 88.00
84.00-85.00
87.04- 87. 60
85. 50- 85. 60
86:30- 86. 50
85. 60- 85. 70
85. 60- 85.80
84. 58- 84. 64
89.00- 89.50
85. 40- 85. 48
90.10- 90.14
88.14- 88. 28

100. 96- 100. 98
89.80- 89.84

95. 40- 95. 60
83.00- 83.50

95. 68- 95. 70
84.00- 85.00

1 Not quoted.

'

101.00
100. 50
99.50
, 99.50
99.50
97.00^ 97.40
98.00- 98.50
97.00
94.96-

1
•
•.
i
!
i
i
1

95.00
91.00
98.00
94.50
96.00
95.60
97.54- 97.90
96.00
97.66- 97. 70
96.00
96.0093.00-

101.90- 102.00
91.00

92. 4690. 2490. 4089. 4689. 8089.0089. 6081. 2086.5081. 7086.0081.0085. 7081.4684. 7084.10-

92.50
90. 28
90. 50
89. 50
90.00
89.10
89. 90
84. 40
87.50
81. 90
86.50
8'1.50
86. 20
84.60
84. 90
84.20
88. 20
84.30- 84:38
89. 20- 89. 80
87.00
94.20- 94.26
81. 70- 81.90

121

SECRETARY OF THE TREASURY.

Highest and lowest market prices for Liberty bonds and,Victory notes from
Oct. 1, 1919, to Nov. 1, 1520—Continued.
Second 4i's.
1919.
October—High
LOWN

'

November—High..,
Low
December—High..
Low
:
1920.
January—High
Low
February—High...
Low
March—High
Low
,

!S94.36-$94.40
93. 02- 93.16
93.22- 93.30
91.44- 91.50
92.90- 93. 00
91.20- 91.22

Third 4i's.

Fourth 4i's. Victory 4|'s. Victory 3t's.

$96.22-$96.26 $94.34-$94.36 $99.90-$99.92
95.14- 95.18 9 3 . 2 4 - 9 3 . 2 8 99.48- 99.50
95.14- 95.20 93.40- 93.46 99.46- 99.50
93.66- 93.70 91. 44- 91.50 99. 00- 99. 04
94.78- 94.86 93. 00- 93.10 99.34- 99.40
93.30- 93.36 91.24- 91.28 98.84- 98.86

April—High
Low
May—High
Low
June—High
Low
July—High
Low
August—High
Low
,
a, e p t e m b e r — H i g h . .
Low
October—High
Low

92.7290.1890. SOSO. 7090.8289.4089.8884.5087.5082.0086.5084.8085.9284.2084.8884. I S SS. 5484. 0889.6687.12-

92.78
90.22
91.00
89.74
90.88
89.44
89.^90
84.70
87.56
82.10
86.60
84.90
86.00
84.26
84.92
84.24
88.60
84.22
89.68
87.24

94.80- 94.86
92.94- 92.98
93.60- 93.70
92.20- 92.24
93.06- 93.10
92.10- 92.16
92.94- 92.98
90. OO- 90.04
OI. 40- 91.56
86.30- 86.36
90.20- 90.30
88.46- 88.56
90. l o - 90.20
s s . 50- 88.56
88.76- 88.80
87.60- 87.70
90.64- 90.67
87.86- 87.98
91. 08- 91.10
88.84-

92.8490.7491.1489.8490.1489.6089.8684.5088.1882.6486.OOSS. 1086.14-.
85. OOSS. 3 0 84.5488.4484. goso. 5286.28-

For above period—High.
Low
,

94.36- 94.40
82.00- 82.10

96. 2 2 - 96.26
86.30- 86.36

94.34- 94.36
82.64- 82.66

92.90
90.78
91.34
89.86
90.20
89.64
90.00
84. 70'
88.20
82.66
87.00
85.20
86.16
85. 04
85L34
84.56
88.50
84.98
89.54
86.76

99.1498.0297. 9697.3497.6497.1697.8496. 0296.5494.8295.969S. 2095.9695.5295.6895.3496.5695.3496.6695.82-

99.18
98.06
98.00
97.36
97.70
97.20
97.90
96.08
96.60
94.86
96.00
95.28
96.00
95.54
95.70
95.38
96.60
95.36
96.70
95.86

99. 90- 99.92
94.82- 94.86

$99:92-$99.96
99.48- 99.50
99.46- 99.50
99.00- 99. 04
99.42- 99.48
98.84- 98.88
99.2098. 0297.9697.3497.5897.1697.8696.0096.3094. 7295.9695.2095.96'95.5295.6895.3496. 5695.3296.ssgs. 8 2 -

99.30
98.06
98.00
97.36
97.60
97.20
97.96
96.06
96.44
94.80
96.00
95.26
95.98
95.54
95.70
95.38
96.58
95.34
96.62
95.89

99.92- 99.96
94. 72- 94.80

These fluctuations have been the subject of considerable public
discussion. They clearly result from the operation of the economic
law of supply and demand. Maiiy persons have disregarded this
fact, and, simply because it was the Government's securities involved,
urged artificial support and devices which would disrupt any sound
financial program. The matter has constantly received the careful thought of the Treasury. I t was a problem even during the
war. The following statement, for example, was made by the Secretary of the Treasury before the Committee on Ways and Means of
the House of Eepresentatives on February 18,1918, at the hearing on
the bill to create the W a r Finance Corporation:
The only sound and sure way to protect the market price of Government bonds
is to teach the people to save, so that they may become true investors in bonds
and not merely subscribers for bonds. Yet there will be on every issue subscribers who find tbemselves unable to pay for their bonds or through necessity,
T^isfortune, or otherwise are obliged to sell them. And there will always be
those, few in. number I am glad to believe, whose patriotism is of the surface
sort and who take the credit of appearing as subscribers but are unwilling to
make the necessary sacrifices to enable them to become permanent investors in
the bonds. Last and least, there are those sympathizers with the enemy who
deliberately sell their bqnds with a view to the injury that they may do to the
credit of the United States. I have studied with interest various measures
Vbich have been introduced in Congress and plans which have been presented
to me for preventing Liberty bonds from going below par. Most of these, I am




122

REPORT ON THE FINANCES.
•

-

^

sorry to say, have been, though very well meant, ill considered and calculated
to destroy the success of the Government's financial plans. Any prohibition
upon the sale of Liberty bonds would restrict subscriptions to such an extent
as td jeopardize the success of future loans, and would be an act of bad faith
toward those who bave subscribed to the past loans and may be unable to hold
their bonds. Any attempt to peg the price of Liberty bonds at par would be
unwise and subject to legitimate criticism as turning the Government's longterm 20 or 25 or 30 year bonds into demand obligations. The only way in
which that could be done would be for the Government to stand ready to redeem
them at par at any time: The purpose of borrowing on time by the Government
is exactly the same purpose which animates the manufacturer or mei;chant to
horrow for a definite period in reference to his needs, with a view to paying
hack the obligation at maturity, and the man who lends the money has no right
to expect a borrower to pay it back in advance upon his demand at any time.
There is always a different reasoning, however, about the Government. Many
people seem to think that if they lend their money to the Government for 10
years and the Government agrees to take it for 10 years and pay the principal
in full upon maturity and interest in the meantime, if they get tired and want
to sell their bondS' the Government ought to stand ready to take them back
immediately; in other words, to stand ready to convert a 10-year obligation
into a demand obligation. They would never think of expecting that of a manufacturer or an individual or a banker who borrowed the money for a definite
length of time. And yet many people have the idea that the Government,
because it borrows their money for 10 or 20 years, or whatever period it may be,
and agrees to pay it back at maturity at par with interest meanwhile at the
•stipulated rate; must stand ready to respond to their demand and redeem the
honds before maturity at par merely because they want it. The great mass of the
•purchasers of Liberty bonds not only are buying them with a view to holding
them primarily because they are a good investment, but also because they
^patriotically want to help the Government; and I must say I have been immensely gratified with the splendid spirit shown by the people throughout the
United States in buying Government bonds. I think I may say that out of
the last two Liberty loans, when we sold over five billion eight hundred million
•dollars of bonds, there probably has not been resold up t o date in the market
•more than one hundred million of these bonds.
If the Government attempted to make only demand loans, it would not be
possible to pay them, and we should put ourselves in position to face some
extraordinary calamity.
If the Government attempted to pay those loans on demand it might be bankrupted. Then, again, I think that if you undertook to peg the market at par
:you would encourage people to turn their bonds back to the Government when
they get a little tired of holding them. Those people are not sufficiently
Informed about the importance of holding on as long as they can, and
if they find that they can turn them back at par they would do so quicker,
whereas if they may be penalized for selling before maturity they may not be
•so anxious to sell. Practically to attempt to maintain Government bonds at
par involves the idea of issuing interest-bearing currency. It is impossible to
peg the price of $6,000,000,000 or $10,000,000,000 of any security. The price of
•Government bonds will fluctuate as the price of other securities fluctuates.
The man who holds on to his bonds and now watches calmly a downward
variation in the price of his bonds will see the time come when the variation
will be the other way and his bonds. wiU sell at a premium. It is highly




SECRETARY OF THE TREASURY.

123

desirable that violent and unnecessary fluctuations in price should be avoided
and that all possible measures should be taken to stabilize the price of Liberty
bonds.
The Treasury's views as to the depreciation in market prices have
been frequently set forth. I n the spring of 1920 the discussion of
t h e question became particularly acute by reason of wide fluctuations
in the prices. People who had no thought of selling their bonds
were disturbed by constant agitation that the bonds be brought back
t o p a r regardless of inexorable economic laws which no artificial
means could control without working greater injury. To clarify the
situation, the position of the Treasury was stated in the following
announcement, dated May 20, 1920:
Liberty bonds and Victory notes are^ selling below par partly because many
of the people who bought them in a spirit of patriotism found themselves after
the war was over unable or unwilling to continue to save and treated them as
spending money. They are selling below par partly because the war and post-,
armistice conditions have resulted in a world-wide shortage of capital and
. credit which has greatly' increased the price of money. The expansion of credits .
and increase in prices and the correlative decrease in the buying power of money
necessarily carry with them a decrease in the market value of the promise to
pay a fixed sum of money at a future date with interest at a fixed rate. This
has nothing at all to do with .the question whether the money will be paid at
that future date or not. No one doubts that it will be. The obligation of the
Government of the United States carries with it no risk whatever. It is c'fertain
of payment. The market price of that obligation is practically an indication
of the pure interest rate at any given time, that is to say, of the present value
of the promise to pay a given sum at a future date with interest in the meanwhile. It is simply an economic law that the decrease in the buying power of
money or, to put it the other way around, the increase in the prices of commodities carries with it necessarily a depreciation in the present value of the
promise to repay money at a future date.
During the past year or more Liberty bonds and Victory notes have been
gradually shifting from the hands of those who borrowed to buy them and were
finable or unwilling to save and pay for them into the hands of permanent investors whose holdings are taken out of the banks and put away .in safe deposit vaults. One evidence of this is the tremendous decrease in banks' holdings
of and loans upon Government war securities during the past year. Another
Indication of the steady absorption which is proceeding is the fact that the
principal of amount of Liberty bonds and Victory notes which are held in
registered form instead of coupon form has increased 55 per cent or 60 per cent
•since original issue ahd is steadily increasing.
From all parts of the country I hear reports from banks that their customers'
purchases of Liberty bonds and Victory notes have, during the past few months,
for the first tim-e exceeded their sales. This indicates that real investors all
over the country are absorbing the securities which are being sold, in consectuence of stringent credit conditions, by corporations and others who purchased
out df patriotism or as a secondary reserve against future requirements.
The necessity of those business companies and business men who are being
forced to sell their securities at bargain prices in the present credit stringency
ts the opportunity of investors.




124

REPORT ON THE FINANCES.

Just as expansion is accompanied by a decrease in the buying power of moneys
and consequently of the value of an obligation to repay money at a future date,„
so deflation will be accompanied by an increase in the buying power of money
and consequently of the promise to pay money at a future date. Dear money
results in part from- the effort to prevent further expansion. Naturally enough,.,
its first effect is to force the best securities in the world on the market becausethey are the easiest to realize upon. As the inevitable deflation takes place and*,
the price of money approaches normal again the market price of Liberty and
Victory securities will, of course, appreciate in accordance with inexorable:
economic laws.
In the long run, therefore, the raising of discount rates in the effort to prevent further inflation will help Liberty bond and Victory note values, although,
the first effect of those steps has been to some extent to force them on themarket out of weak hands. Deflation means increased buying power of money
and of the present value of the promise to pay.money at a future date.
There can be no doubt that Liberty bonds and Victory notes are, as they
always were, the safest investment in the world, and that the present abnormal
o credit position affords a unique opportunity to those who have or can savemoney for investment in these securities.

The Savings Division also has made every effort to assist thepeople to understand the intrinsic value of the securities and the
benefits, both to the Government and to themselves, of holding them..
The following statement issued by it in May, 1920, was given widecirculation:
' '•
0

YOUR LIBERTY BOND.

The United States Government borrowed money from you to finance the war..
You hold the Government's promise to pay you back. This promise is called a.
Liberty bond or Victory note. On this bond is stated the conditions under
which the Government borrowed the money from you.
For instance: If you hold a bond of the third Liberty loan it states that om
April 15 and October 15 of each year until maturity you will receive interest dn»
the amount you paid for the bond. Other issues bear other rates of interest and
other maturity dates, all of which are clearly stated on the bond.
Now, if you keep your bond until the date when the Government pays you in>
full for it, you do not need to worry if, in the meantime, the price is low oneday or high the next. You and Uhcle Sam are living up to your agreement
with.each other and neither will lose by it.
On the other hand, if you sell your Liberty bond now you will find that theman you sell it to wih not give you a dollar for every dollar you paid for it..
The price has been brought down because so many people are offering to sell
their bonds. If the market is flooded with tomatoes you can buy them cheap,,
but if everybody is clamoring for tomatoes and there are few to be had, theprice goes up. The same is true of Liberty bonds. Short-sighted people are
dumping them on the market and wise ones are buying them.
The best advice that can be given to the owner of a Liberty bond is this:
Hold the bond you bought during the war; it is as safe and sound as the UnitedStates Government itself.
Buy as many more at the present low rate as you can afford. If you hold
them to maturity, you are bound to make the difference between what they sell'
at now and their face value. You will also receive good interest on your investment. .
Hold on to your Liberty bonds and buy more.



SECRETARY OF THE TREASURY.

125

Other suggestions for stabilizing market prices of Liberty ahd
Victory notes have been that they be refunded into consolidated
iong-term bonds with full exemption from taxation, or for bonds
ibearing a higher rate of interest (discussed elsewhere in this report),
and t h a t they be accepted in payment of income and profits taxes, or
^that they be drawn by lot for redemption at par.
The Treasury's objections to the use of Liberty bonds in payment
'of income and profits taxes are set out in the letter of the Secretary
t o the chairman of the Committee on Ways and Means of the House
of Eepresentatives, dated May 15, 1920, which is, in part, as follows:
It would, in my judgment, be a mistake to accept Liberty bonds in payment
'Of any part of the present Federal taxes for 1921 (except estate taxes, as authorized under existing law). The Government's necessities are so urgent
t h a t the whole amount of its revenues must be applied to meet its current dis'bursements, including, so far as possible, the reduction of its floating debt.
To accept payment of even 25 per cent of the taxes in Liberty bonds would add
to the Government's financial burdens, and the difference would have to be inade
'Up by an addition to the floating debt, an operation which could not in the end
•benefit the outstanding bonds. After all, the thing which will most benefit the
.market for Liberty bonds., is the retirement of the floating debt. The bill in
•question, however, would'reverse this process and in effect convert funded debt
into floating debt.
It is also important to bear in mind that Liberty bonds are widely distributed
•among persons of small means, who are not themselves heavy taxpayers and are
not so" largely held by corporations and persons of great wealth. A provision at
this time permitting them to be accepted in payment of income and profits taxes
^would, in these circumstances, result in making it possible for corporations ahd
nvealthy persons to reduce the ainount of their taxes by buying Liberty bonds in
t h e market at a discount and turning them in to the Government at a profit.
"The acceptance of Liberty bonds in payment of income and profits taxes would
mot correspondingly benefit the great majority of holders.
The effort in the Liberty loan campaigns and since has been, moreover, to
^ireach the savings of the people and place the Government's war debt in the
/hands of millions of people who would become to that extent capitalists and
spermanent investors. If we are to reach promptly a sound economic position,
the people's taxes and their current outgo should be met out of their current
.^dncbme. To accept the Government's funded war debt in payment of current
taxes would be a step toward further undoing the work of the Liberty loan
organization in seeking out funds for permanent investment from savings. This
•objection does not lie against the acceptance of Liberty bonds in payment of
-estate taxes, which, economically speaking, are capital taxes; but to accept
Liberty bonds, which are or should be capital investments, in payment of an
iincome tax would be a mistake. The depreciation of Liberty bonds in the
.market is due largely to the reaction which the country underwent after
.-armistice day and the tendency to treat them as spending money for current
purposes. This is a tendency w-hich the Government should discourage, not
^encourage.
It is a matter of the utmost importance for our future welfare that the Government should exercise the most rigid economy and retire the war debt with
the utmost rapidity. The proper course to be pursued in that respect is to




126

REPORT ON TFIE FINANCES.

retire first the debt of shor'test maturity. This in the long run will be most
advantageous to the holders of the Liberty bonds of longer maturity, because
they will be relieved to that extent of apprehension of further financing to meet
the floating debt and earlier maturing funded debt. The retirement of the
floating debt and, later on, of a substantial portion of the Victory notes, which
mature in May, 1923, will do more to bring Liberty bonds to par or better than
almost anything else. In the long run Liberty bondholders would only be
injured by the reverse process of diverting to the retirement of the funded debt
the proceeds of income and profits taxes, which should be available for current
expenditures and the retirement of the floating debt.
The objection to the plan of drawing by lot is set forth in the Secretary's letter, dated J u l y 14, 1920, to a correspondent, extracts from
which are quoted:
With respect to the suggestion that the Government make drawings of Liberty bonds by lot for redemption at par, in order to stabilize the market for
such bonds, in my judgment such a ^lan would be neither wise npr administratively feasible. The plan, in effect, introduces the lottery scheme into Government financing. Aside from this objection, it would introduce a speculative
element into the Liberty bond market, since unquestionably many brokers and
others would engage extensively in buying in Liberty bonds between redemption
dates on the chance of being able to sell them to the Government at a profit.
Furthermore, the plan would be likely to have the effect of dislodging bonds in
the hands of investors willing and able to hold them to maturity. It would
introduce the psychology of selling into the Liberty bond market, instead of the
psychology of saving and holding for permanent investment. The securities of
the Government of the United States are premier securities in the world to-day
and should depend for their appeal upon their sound investment value, and not
upon a lottery scheme intended to enlist the temporary interest of the speculative element in the community. * * *
The dissipation of the funds made available from taxes for the retirement of
the public debt by the purchase of the Government's securities from certain
fortunate holders at more than the market prices would result in the exhaustion
of the sinking fund and leave the market unprotected and at the mercy of speculators in the intervals between drawings. It would exhaust the fund for the
benefit of those who were most fortunate in the drawings and would in general
redound to the benefit of speculators in the bonds and notes rather than support
the market for holders in general.
As the Treasury views it, the Liberty-bond problem is chiefly one
of quantity. Unfortunately, many holders of Liberty bonds, who
patriotically subscribed for and held them during the war, have
since regarded them as so much spending money and thrown them
on the market. People generally have been spending money freely
and saving too little, so that there has not been sufficient capital accumulated to overcome the pressure upon the market from those
who bought bonds as patriots but not as investors. The holders of
Liberty bonds who save and hold their bonds as investments will
not, in the opinion of the Treasury, have occasion to regret it, nor
will they suffer by reason of the present depreciation in market
prices.




SECRETARY OF THE TREASURY.

127

, Liberty bonds, like other bonds, are subject to market influences,,
including the law of supply and demand, and their market quotations have declined in consequence of the failure of the great investing public to save in proportion to the enormous expenditure of
capital during and since the war. Many patriotic people bought
Liberty bonds and Victoi'y notes under the impulse of patriotism
who have been unwilling, since the war was over, to continue to lend
their money to the Government and have forced, their holdings on
the market more rapidly than qthers could save funds to invest, with
consequent depreciation in market prices.- The remedy for this condition is for people to work and save, to keep their holdings of Liberty bonds as investments, and to purchase additional Government
securities with their savings.
LOANS ON L I B E R T Y BONDS.

There has been an insistent demand from different sources during
the year that the Treasury take some action to secure loans on easy
terms for holdeirs of Liberty bonds and Victory notes. The Treasury
has consistently taken the position that the problem was a banking
one, to be worked out through the banks and the Federal Eeserve
System. The question was definitely presented from one angle in a
bill (S. 3680) to provide for loans to holders of Liberty bonds through
the postal savings banks. At the request of the Committee on Finance
of the Senate, the Treasury indicated its views on this bill in the following letter to the chairman of the committee:
WASHINGTON, January 17, 1920.

MY DEAR SENATOR : I have the honor to acknowledge receipt of your committee's letter of January 10, 1920, inclosing a copy of S. 3680, a bill to provide for the purchase and redemption of Liberty bonds in the denomination of
$50 and $100, through the postal savings banks, and requesting a statement of
the Treasury's suggestions touching the merits of the bill and the propriety
of its passage. The Treasury definitely feels that the plan proposed by the
bill would be too difficult of administration to be successful, and that even if it
were possible to administer the plan it is open to fundamental objections of
policy.
\
The bill provides for making loans to holders of Liberty bonds through the
postal savings banks at the coupon rate. It makes no discrimination, and it
would not be administratively practicable to discriminate between those holders
who desire loans.for legitimate purposes and those whose need for loans arises
from wasteful, or speculative expenditure. For the Government to go into the
banking business and make loans at less than the current rate on Liberty
bonds would be contrary to every sound principle of economics and finance.
The Government ought not to go into the banking business. If it did, it ought,
not to make loans at less.than the market rate. The Government, moreover,
has no surplus funds to lend, and the funds for inaking any such loans, over
and above available resources of the postal savings system, would have to be
provided by hew Government borrowings in the market.




12'8

REPORT ON THE FINANCES.

The Government is already doing everything in its power to protect the
(market for Liberty bonds and the interests of Liberty bondholders by means
of purchases for the 5 per cent bond-purchase fund provided by existing law.
The .Treasury's purchases of Liberty bonds have been made, as you know,
under the authority of section 15 of the second Liberty bond act as amended
by section 6 of the third Liberty bond act, which authorized the Secretary
of the Treasury to purchase annually up to 5 per cent of the bonds of each
series outstanding at not exceeding par and accrued interest. To November
. 30 last $l,0'43,080-,500 principal amount of Liberty bonds had been purchased,
the principal amount paid therefor being $993,363,526.15. A copy of my
special report of these operations to November 30, 1919, is inclosed herewith.
The authority thus conferred by Congress has been exercised for the purpose
of stabilizing the market, and in my judgment very important results havff been
achieved redounding to the benefit of all holders of Liberty bonds. The effect
of such large purchases obviously would be to sustain and strengthen the
market for the bonds. On the other hand, for the Treasury to pay more than
the market price for its purchases for the 5 per cent bond-purchase fund, or
to use the fund for the purposes of a plan like that proposed, in the bill, would
tend to exhaust the fund for the benefit of those who were most expeditious in
realizing on their holdings, leaving the market otherwise unprotected.
The Treasury's purchases of Liberty bonds have been made to protect the
market for the bonds and the Government's credit. It is unfortunate that so
many of the patriotic subs.cribers to the Liberty loans, who purchased bonds of
maturities extending from io to 30 years, found themselves unable or unwilling
to continue to extend credit to the Government during the life of the bonds and
forced their holdings upon the market after the cessation of hostilities, which
had, of course, increased their intrinsic value. The Treasury has not profited
by their action or by its purchases of these bonds. It has been obliged to borrow
a t higher rates of interest the money, to make the purchases which have been
forced upon it for the protection of the holders of the bonds and of the
'Government's credit.
The whole plan for the stabilization of the market value of Government bonds
through the 5 per cent bond purchase fund was, as you no doubt recall, fully
<iiscussed by Secretary McAdoo before the Committee on Ways and Means, at
the hearings on the third Liberty bond bill and the fact of the creation of the'
fund was advertised in the circulars -describing the bonds of the third, fourth,
and Victory loans and was an important,factor in the su'ccess of those loans.
I think it is also important to note, in connection with the plan proposed by
the bill, that extremely heavy demands have recently forced the Federal reserve
banks to increase their rediscount rates in order to protect the country from
the serious consequences of an overexpanded credit structure. The demand for
capital and credit unfortunately appears to exceed the supply, which can only
be replenished out of the savings of the people. A situation of this sort, under
inexorable economic law, forced higher rates for money and it is impracticable to
discriminate in the matter of rates between those holders of Liberty bonds who
are trying to save and pay off the loans which they made to buy them, and those
who seek to use their bonds as a means of obtaining cheap money for speculative or other wasteful purposes. It is true that subscribers for ^"Liberty bohds
were urged to borrow and buy them; but it is also true that they were urged
to save and pay for them. Those who only obeyed the first injunction—to borrow
and buy, and have neglected the second—to save and pay, have done only a
portion of their duty and have ho claim at this late date to have the Government carry their bonds at a low rate of interest at the expense of the general
welfare.




SECRETARY OF TFIE TREASURY.

.

129

The plan proposed in Senate bill 3680 would have a tendency to convert Liberty
bonds held by small bondholders into ready cash at Government expense, and
thereby discourage thrift, encourage spending, and further increase prices and
the cost of living. The great effort of the Liberty loan campaigns has been to
reach the investor and get him not only to buy Liberty bonds but to save and
keep them as investments. By enabling small bondholders to secure from the
'Government cash up to 90 per cent of the face value of their bonds, the bill
would tend to undo the work of the Liberty loan campaigns. In this connection it is important to note that, as shown in my annual report for the
.year 1919, on pages 72-77, the outstanding bonds of the $50 denomination on
June 30, 1919, amounted to nearly $2,000,000,000 and the outstanding bonds of
the $100 denomination on the same date to about $2,500,000,000. Liberty bonds
of all other denominations, moreover, are exchangeable by the holders without
<2harge for bonds of the $50 and $100 denominations. To the extent that the
plan succeeded, therefore, it would be likely to require the use of a large
volume of Government', funds in order to make the loans on the bonds. . It is,
of course, impossible to forecast what proportions the loans would assume, but
they would doubtless exceed the available funds in the postal savings banks,
whose resources are already largely invested in Liberty bonds, under the supervision of the Board of Postal Savings Trustees. The proposed plan apparently
makes no provision for advancing Government funds, but once initiated the
available resources of the postal savings banks would, no doubt, soon be exhausted, and it would be difficult for the Government to withhold accommodations from' some holders of its bonds which had already been extended to
others.
The use of Goyernment funds for the purpose of making small loans on Liberty bonds would also be essentially class legislation, and by necessitating governmental expenditure, or further Government loans, would impose additional
burdens on the whole community for the benefit of a portion of the community.
The provision that bonds pledged with postal savings banks and not redeemed
within six months be sold at par and accrued interest or retained, by the postal
savings banks in lieu of deposits would, for all practical purposes, be inoperative under present conditions. So long as Liberty bonds are selling at a discount, it would be impossible to dispose of them at par, with the result that
they would be held by the postal savings banks indefinitely, with consequent
depletion of their cash reserves. Apart from this the plan apparently makes
no provision whatever for closing out the borrower's equity in case of default.
From the point of view of administration the plan offers many difiiculties,
.some of which chiefly concern the Post Office Department. While the Treasury, of course, is not in a position to speak for the Ppst Office Department,
one serious objection immediately suggests itself in that post offices generally
do not have sufficient safekeeping facilities to make it feasible for them to hold
and maintain cleposits of Liberty bonds received under the plan. The plan
•directly affects the Postal Savings System and would require careful consideration from that point of view. Many difficulties also arise in connection with
the plan for adjusting interest on the loans by retaining the maturing coupons
on the bonds deposited; this method works only in cases where the loan is both
originally made on an interest date and repaid on an interest payment date.
If the loan is paid on any other date, and is ,not exactly of six months' duration,
the Government would lose the accrued interest represented by the next maturing coupon, which it is proposed to return to the borrower; and from the borrower's point of view, if the loan is originally made between interest dates, the
<JOvernment by retaining and collecting the next maturing coupon may secure
13799—FI 19209




130

o

REPORT ON THE FINANCES.

interest which accrued during a period when the bond was held by the borrower,
with consequent injustice to the borrower.
The Treasury feels that the existing banking and credit machinery of the
country is adequate to provide for loans upon Liberty bonds in small amounts
at reasonable rates without imposing these additional burdens upon the Treasury and the Postal Savings System.
Very truly yours,
CARTER GLASS.
Hon.

BOIES PENROSE,

. Chairman Committee on Finance,
United States Senate,
Washington, D. G.

The agitation for governmental action to secure loans on Liberty
bonds and Victory notes through the Federal Eeserve System at low
rat.es of interest and on easy terms w^as presented to the Treasury in
definite form by the Massachusetts Real Estate Exchange. The
Treasury replied in two letters of July 1, 1920, and Au'gust 28, 1920^
as follows:
WASHINGTON, July 1, 1920.

DEAR SIR : I received your letter of June 28, 1920, regarding market prices of
Liberty bonds and the action of Federal reserve banks in raising discount rates.
The Federal reserve bank discount rates are fixed, not by the Treasury but
by the Federal reserve banks, subject to review and determination by the Federal Reserve Board, and have recently been increased and brought more intoline with prevailing commercial rates, in order, to red^uce speculation and corr
rect our expanded credit situation. The demand for capital and credit unfortunately appears to exceed the supply, which can only be replenished out of the
savings of the people. A situation of this sort, under inexorable economic law,
forces higher rates for money. The United States is under no obligation toguarantee the holders of Liberty- bonds against fluctuations in the market rate
for money or variations in the money market conditions, or to guarantee a
market at par for the bonds. The interest rate and life of the bonds were
fixed in the bonds, but no commitment was made as to the discount rate at the
Federal reserve banks. It would be intolerable if the Federal Reserve System^
should, a year after the Victory Liberty loan was floated, be prevented from
exercising the normal and necessary control over our expanded credit situation by an increase in discount rates, in order to enable those subscribers for
the Liberty loans who have not paid for their bonds, or can not continue to hold
them without borrowing, to carry them indefinitely at the people's expense
through the Federal Reserve System. Such subscribers have no c'.aim at thislate date to have their bonds carried at a low rate of interest at the expense of
the general welfare.
So far as the Treasury is informed, however, there has been no effort by the
Federal Reserve Board or the Federal reserve banks to force liquidation of
loans secured by Liberty bonds or Victory notes, as distinguished from other
loans, and from the Treasury point of view, of course, it is desirable that bondholders should keep their bonds as investments rather than be forced to sell:
them on the market. The Federal reserve banks, moreover, are still maintaining a preferential rate in favor of loans secured by Liberty bonds and
Victory notes. In this connection, I inclose for your information a copy of Gov.
Harding's letter of May 24 to Senator Owen and a copy of the Federal Reserve-




SECRETARY OF THE TREASURY.

131

Board's letter of May 25 to the President of the Senate, which set forth the
general policy of the Federal Reserve Board with reference to the reduction
of loans.
The depreciation in the market prices of Liberty bonds is the result chiefly
of market conditions and does not reflect any change in the intrinsic value of .
the bonds to investors. Liberty bonds, like other bonds, are subject to market
influences, including the law of supply and demand, and their market quotations
have declined in consequence of the great scarcity of capital and credit, and
the failure of the investing public to save in proportion to the enormous expenditure of capital during and since the war. Many patriotic people bought
Liberty bonds and Victory notes under the impulse of patriotism who proved
to be unwilling, once the war was over, to continue to lend their money to the
Government and forced their holdings on the market more rapidly than others
could save funds to invest, with consequent depreciation in market prices.
The remedy for this condition is for people to work and save, to keep their
holdings of Liberty bonds as investments, and to purchase additional Government securities. with their savings to .the utmost of their ability. At current
market prices the outstanding Liberty bonds offer a great opportunity to investors, and there are many indications that their, absorption by real investors
is progressing.
Very truly yours,
.
D. F. HOUSTON, Secretary.
WILLIAM S. FELTON, Esq.,

,

•

President, Massachusetts Real Estate Exchange,
20 Pemberton Square, Boston, Mass.
WASHINGTON, August 28, 1920.

SIR: I have received your letter of July 31 with further reference to the market prices of Liberty bonds and the action of the Federal reserve banks in
raising discount rates.
I note that you agree that the present excess of the demand for capital and
credit over the supply, which can only be replenished out of the savings of the
people, forces higher rates for money and makes necessary a curtailment of nonessential loans; but that you urge that the Federal reserve banks should rediscount loans secured by Liberty bonds at a slightly higher rate than is borne by
the bonds themselves, when such bonds are in the hands, of the; original subscribers and the loans are not new loans, but are renewals of loans made when
the bonds were purchased, provided that such loans be reduced at each maturity
in reasonable amounts, under penalty of a much higher rate of interest.
As stated in the Treasury's letter of July.l, 1920, Federal reserve bank discount rates are fixed not by the Treasury but by the Federal reserve banks,
subject to review and determination by the Federal Reserve Board. In my
judgment, however, it would be neither wise lior administratively feasible for
Federal reserve banks to attempt to make any such discrimination in favor of
loans secured by Liberty bonds in the hands of original subscribers.
It is true that to meet the Government's urgent war necessities subscribers
for Liberty loans were urged to borrow and buy Liberty bonds. It is also true
that they were urged to save and pay for them. The interest rate and life of
the bonds were fixed in the bonds, but no commitment was made as to the rate
of interest at which holders of the bonds might borrow on the security of the
bonds, nor as to the discount rates on such loans at Federal reserve banks.
Those subscribers who obeyed the first injunction—to borrow and buy Liberty
bonds—but have neglected the second—to .save and pay for them—have done
only a part of their duty to the Government. It is now over a year since the




132

REPORT ON THE FINANCES.

Victory Liberty loan was floated, and subscribers to the various Liberty loans
have had ample time to save and pay for their bonds and nbtes. Aside from
the inevitable practical difficulties involved in the administration of the plan
which you suggest, therefore, such s.ubscribers have no claim at this late date
to have their bonds carried at a lower rate of interest than other holders of
Liberty bonds and Victory nptes.
The raising of discount rates and the efforts to curtail nonessential loans
should in the long run help Liberty bond and Victory note values by preventing
further inflation. Deflation means an increase in the buying power of money
and of the present value of the promise to pay money at a future date. As the
inevitable deflation takes place, and the price of'money becomes normal again,
market prices of Liberty bonds and Victory notes should appreciate in accordance with inexorable economic law.
Very truly yours,
^'
D. F. HOUSTON, Secretary.
WILLIAM S. FELTON,

Esq.,

President, Massachusetts Real Estate Exchange,
209 Washington Street, Boston, Mass.
L I B E R T Y LOAN T R A N S A C T I O N S .

From the beginning of the war to June 30, 1920, there had been
issued on account of subscription, conversion, exchange, transfer,
or otherwise. Liberty bonds and Victory notes in the gross amount of
$37,037,928,550. During the same period $17,456,727,100 of Liberty
bonds and Victory notes were retired. This left outstanding on June
30, 1920, bonds and notes of the par value of $19,581,201,450, including delivered and deliverable items. These figures indicate the magnitude of the Treasury's operations in connection with the five great
popular war loans. The vast transactions are summarized in Exhibits
39 to 51, pages 417 to 440. These show the payments of the .^principal of the loans received by the Treasurer, the principal retired,
and the securities outstanding; a summary of all issues and retirements of bonds and notes; recapitulations of the first, second, third,
fourth, and Victory Liberty loan transactions; a statement and
analysis of the war securities account; bonds and notes outstanding by denominations; denominational exchanges; conversion transactions; final allotments of subscriptions; and subscriptions allotted
by States.
Against total subscriptions of $24,072,257,550, bonds and notes
amounting to $21,435,370,600 were allotted. The cash payments
received by the Treasurer on account of allotted subscriptions aggregated $21,432,944,521, including $26,071 representing part payments.
The Treasury had delivered up to June 30, 1920, bonds and notes to
the par amount of $21,432,902,900, leaving an undelivered item against
allotted subscriptions of $15,550 in Victory notes.
Bonds and notes aggregating $4,492,956,200 had beendssued on conversion up to the close of the fiscal year. These included the conversion of $333,421,950 of 4 | per cent Victory notes into 3 | per cent




SECRETARY OF TFIE TREASURY.

138

Victory notes and the conversion of $98,399,400 of 3 | per cent Victory
notes into 4 | per cent Victory notes. The extension of the conversion
privilege accorded 4 per cent bonds of the first Liberty loan converted
and of the second Liberty loan under authority of the Victory Liberty
loan act continues in effect. There were outstanding on June 30,
1920, $65,803,050 of the first 4's out of the total of $568,318,450 originally issued,.and there remain of the second 4's $240,003,250 of an
original issue of $3,807,865,000.
Registered bonds and notes aggregating $1,538,534,900 have been
issued against a corresponding face amount of coupon bonds and
notes surrendered for exchange. Coupon bonds and notes of the aggregate face amount of $345,065,750 have been issued upon exchange
for an equivalent amount of registered bonds and notes. There were
delivered against original subscriptions $2,188,965,350 registered
bonds and notes. On June 30, 1920, there were outstanding $3,515,713,500 of these securities, a net increase of $1,326,748,150. This
gain in the registered issues is gratifying. I t indicates that the
holders of Liberty bonds and Victory notes are realizing the advantages, from the standpoint of safe-keeping, of the registered over the
coupon securities. This is particularly important in view of the great
number of them outstaiiding in the hands of persons unaccustomed
to investments and without available facilities for safe-keeping.
Coupon bonds and notes amounting to $4,192,053,750 have been
presented for denominational exchange. Permanent bonds to the
amount of .$2,627,781,850 had been issued in exchange for temporary
bonds up to June 30, 1920. Transfers of registered, bonds and notes
from one registered holder to another aggregated $187,317,600.
The number of bonds and notes handled by the Treasury indicate
the great volume of these transactions. The Division of Loans and
Currency received into stock a total of 174,553,049 pieces, with an
aggregate value of $54,615,012,100. There have been withdrawn
from stock 147,310,203 worth at par $42,941,154,05,0. There have been
retired 72,816,761 with a face value of $20,567,903,600. There remain
on hand 35,597,662 pieces worth at par $14,696,092,600, of which
27,242,846 pieces, amounting to $11,673,858,050, were in the Treasury
vaults, and 8,354,816 pieces, amounting to $3,022,234,550, on hand in
Federal reserve banks. There were outstanding on June 30, 1920,
66,138,626 pieces in the face amount of $19,351,015,900. Deducting
from this amount an unadjusted item of $850 and adding $230,186,400
of permanent bonds issued in exchange for temporary bonds, but not
yet delivered, brings the total amount of Liberty bonds and Victory
notes outstanding on June 30, 1920, to $19,581,201,450.
The great number of bonds and notes outstanding is an index to
the distribution of the loans. The Treasury's record of denomina-




134

REPORT ON THE FINANCES,

tional exchanges indicates an important movement from the lower
to the higher denominations. This doubtless is due primarily to sales
of the lower denominations and their subsequent surrender to the
Treasury for higher denominations. Notwithstanding the great
amount of the smaller denominations which have been sold, the
aggregate number of $50 and $100 bonds and notes outstanding continues large. On June 30, 1920, 30,456,794 of the $50 denomination
were outstanding, in the aggregate face amount of $1,522,839,700..
On the same date there were 23,436,472 of the $100 denomination outstanding in the total amount of $2,343,647,200. The number of the
$500 Liberty bonds and Victory notes outstanding at the close of the
fiscal year was 3,611,476 in the amount of $1,805,738,000; the number
of the $1,000 denomination, was 8,028,471 of the face value of $8,028,471,000. Since the original deliveries in coupon Liberty bonds and
Victory notes there has been a net decrease of $871,167,000 in the
$50 denomination and a net decrease of $730,386,000 in the $100
denomination through denominational exchanges. On the other
hand, there has been a net increase of $1,681,218,000 in the $1,000
denomination.
The final allotments of subscriptions of Liberty loans by Federal
reserve districts corrected to October 31, 1920, are given in Exhibit
50, page 439. These figures are final with respect to the first, second,
third, and fourth loans. All adjustments for those loans have been
made and incomplete subscriptions and part payments thereon declared in default. The final statistics differ in no important particular from prior allotment statements except for that of the fourth
Liberty loan, which shows a reduction of some $28,000,000 from previous figures. This is caused chiefly by the reduction in the amount
of subscriptions reported by the War Department as made by members of the military forces. The W a r Department has only recently
corrected its reports to the Treasury, and shown that a number of
Army subscriptions previously reported by the W a r Department did
not, as a matter of fact, result in official subscriptions. The annual
report of the Secretaiy of the Treasury for 1919 showed the allotted
subscriptions of Victory notes as of September 30, 1919. The exhibit
referrred to gives the allotments for the Victory loan as of October
31, 1920, when they amounted to $4,497,818,750. The figures are still
subject to minor adjustments.
Because of the public interest in the subscriptions allotted by States
in the several Liberty loans, there is attached a table, which appears
as Exhibit 51, page 440. For the first and second loans, the Federal
reserve bank of Richmond did not maintain records by States.
Allotments for the States in that district consequently are not given
for these two loans. The statement is incomplete for the sixth Federal reserve district for the third loan.



SECRETARY OF THE TREASURY.

135

Pursuant to the provisions of Treasury Department Circular No.
I l l , dated April 6,1918, offering the third Liberty loan for subscription, the Secretary of the Treasury has declared forfeited all delinquent third Liberty loan subscriptions filed with an official agency,
together with all payments made thereon and all right and interest
in the bonds allotted. This forfeiture was declared by Treasury
Department Circular No. 183, dated February 20, 1920, attached
as Exhibit 52, page 441. Accordingly, all forfeited installment
payments are covered into the,Treasury to the credit of miscellaneous
receipts.
Under the provisions of Treasury Department Circular No. 121,
dated September 28, 1918, offering the fourth Liberty loan for subscription, similar action has been taken as to all delinquent subscriptions to the fourth Liberty loan by Treasury Department Circular No. 200, dated J u l y 30, 1920, given as Exhibit 53, page 443.
Delinquent subscriptions to the first and second Liberty loans were
previously declared in default as reported in 1919.'
'
Additional regulations were issued during the year in Department
Circulars Nos. 142 and 182, dated November 15, 1919,.and February
14, 1920, respectively, with respect to assignments of United States
registered bonds and notes and are appended as Exhibits 54 and 55,
pages 445 and 446. The regulations relative to transportation
charges and risks on bonds and notes presented for exchange or
transfer were amplified by Supplement to Department Circular No,
141, dated April 30, 1920, and those with respect to assignments in
case of death by Second Supplement to Department Circular No. 141,
dated October 12,1920, attached as Exhibits 56 and 57, pages 447 arid
449.
For convenience of the public, the department has summarized the
terms and conditions and salient features of the several Liberty loans.
This information is contained in Form L. and C. 400, as revised Juhe
30,1920, is printed as Exhibit 58, page 451.
P E R M A N E N T COUPON LIBERTY BONDS.

With one exception, the issues of coupon Liberty bonds were originally delivered during the war in temporary form with coupons attached covering only four interest payments. The exception was the
issue of 3^ per cent bonds of the first Liberty loan, which were delivered in permanent form with all coupons to maturity. Notes of the
Victory Liberty loan and registered bonds of all of the Liberty loans
also were delivered in permanent form. The expedient of issuing
temporary bonds resulted from the department's experience in the
first Liberty loan. That operation clearly showed that, with the
growing issues of war securitieSj the policy of delivering in the first



136

REPORT ON THE FINANCES.

instance long-term bonds with all coupons attached presented insuperable mechanical difficulties and at the same time involved much
waste owing to subsequent conversions and exchanges.
With the approach of maturities of the last coupons of the temporary bonds it became necessary for the Treasury to take the second and final step and to provide for the exchange of these for
permanent bonds with coupons to maturity. The undertaking was
a great one because of the number of pieces outstanding. Plans
were evolved for the exchange over a period sufficient to permit
the issuing of bonds without inconvenience to the Treasury or to
the holders. Regulations governing the matter are contained in
Department Circular No. 164, dated December 15, 1919, and two supplements, dated March 13 and August 27, 1920 (Exhibits 59, 60, and
61, pp. 454 to 461). The form of application is given in Form L.
and C. 305 (Exhibit 62, p. 462). The folloTying public statement
was published under date of March 23, 1920:
As already announced by the Treasury and the several Federal reserve banks,
exchanges of the temporary 4^ per cent coupon bonds of the third Liberty
loan for permanent bonds with all subsequent coupons attached began on
Monday, March 15, 1920, and are now being carried on, chiefly through the
several Federal reserve banks, as fiscal agents of the United States, with the
cooperation of the banking institutions of the country. Detailed information
concerning the exchanges is given in Treasury Department Circular No. 164,
dated December 15, 1919. The temporary coupon bonds of the third Liberty loan
had no interest coupons attached for interest accruing after March 15, 1920,
arid therefore became exchangeable by their terms on and after that date for
new bonds with all subsequent coupons to- maturity. Full supplies of the
permanent third 4i's are available, and it is hoped that the exchanges will
proceed as promptly as possible, in such a way as to meet the convenience
of holders of temporary bonds and banking institutions as well as the Treasury
Department. The next interest payment on the third Liberty loan does not
occur, however, until September 15, 1920, and it is understood that in the meantime, up to about September 6, 1920, the temporary third 4i's will still be recognized as good deliveries in the market, so that there is no necessity for any
imm^ediate rush by bondholders to exchange their temporary bonds for
permanent bonds.
The Treasury has made ample provision in connection with these exchanges
of temporary for permanent bends whereby recognized banking institutions
in the United States who make no charge for their services may effect exchanges
for themselves and their customers without expense or risk on account of the
transportation of the temporary bonds surj-endered or of the permanent bonds
issued upon exchange. Adequate provision has also been made whereby incorporated banks and trust companies may make over-the-counter exchanges. Pull
information as to these arrangements is available at the respective Federal
reserve banks. In view of the liberal arrangements which have thus been made
for effecting the exchanges, and in view of the fact that no charge for the
exchange is imposed by the United States, the Treasury confidently appeals
to the banking institutions of the country to handle exchanges of temporary
for permanent bonds without expense to the holders, and thus complete their




SECRETARY OF TFIE TREASURY.

137

patriotic service in connection with the war loans by carrying out this last, and
mechanically the largest, operation related to our war financing without imposing charges for their own services. Holders of temporary bonds will, it is
hoped, consult their own banks and avail themselves of their assistance in
effecting the exchanges for permanent borids.
Deliveries of permanent bonds in exchange for temporary bonds will be made
within the United States by the Federal reserve banks and the Treasury De^
partment at the risk and expense of the United States, whether or not submitted through banking institutions, but the arrangements for the transportation of temporary bonds surrendered for exchange at the expense and risk
of the United States are available only when presented through recognized
banking institutions to the Federal reserve banks. In other words, holders of
temporary bonds who surrender their bonds direct to a Federal reserve bank or"
the Treasury Department for exchange will be obliged to make their own
arrangements for the transportation and insurance of the temporary bonds
surrendered.
First Liberty loan converted 4 per cent bonds, second Liberty loan 4 per cent
bonds, first Liberty loan converted 4^ per eent bonds, and second Liberty loan
converted 4^ per cent bonds are all expected to be available in permanent form
for delivery in exchange for temporary bonds within the next month or six
weeks, and exchanges of these bonds will be handled in substantially the same
manner as exchanges of the third Liberty loan bonds. Inasmuch as the temporary first 4^'s and second 4i's have coupons attached covering interest to
June 15 and May 15, 1920, respectively, they need not,be exchanged for permanent bonds until those dates; in fact, before June 15 and May 15, 1920, respectively, the permanent first 4i's and second 4i's are required chiefly for delivery
upon conversion and exchange of temporary first 4's and second 4's, which have
no coupons attached for interest accruing after December 15 and November 15,
1919, respectively, but whose exchange has been postponed awaiting the preparation of the permanent 4i's, in order that both conversion and exchange might
be effected simultaneously. As repeatedly, announced, the first 4's and second
4's are still convertible into 4^ per cent bonds, pursuant to the terms of the extended conversion privilege, and holders of temporary 4 per cent bonds are
therefore urged to submit their bonds for both exchange and conversion. As
already announced, in the absence of written instructions to the contrary,
temporary 4 per cent bonds presented for exchange for permanent bonds will
be deemed to be presented also for conversion into 41 per cent bonds.
The temporary 4^ per cent bonds of the fourth Liberty loan still have one
unmatured coupon attached, due October 15, 1920. Exchanges of temporary
fourth Liberty loan bonds will therefore not begin until approximately October
15, 192^0, when it is expected that adequate stocks of permanent bonds will
be available, so as to permit exchanges to be carried on in substantially the
same manner as exchang-es of third Liberty loan bonds. Temporary first
second 4i's do not become exchangeable until December 15, 1920. The first
3i's and both series of Victory notes were issued originally in permanent form.
All 4 per cent and 4^ per cent registered Liberty bonds are already in permanent form and need not be exchanged for other bonds. Holders of temporary 4 per cent and 41 per cent coupon Liberty bonds are therefore strongly
urged to present their temporary bonds for exchange for registered bonds
instead of for coupon bonds in permanent form, and in that event will promptly
receive registered bonds upon exchange. The exchanges of temporary for registered bonds may be made at any time, and need not await the completion" of
the permanent coupon bonds. Substantially tlie same facilities are available




138

REPORT ON THE FINANCES.

for exchanges of temporary bonds for registered bonds as for exchanges for
permanent coupon bonds, and holders of the temporary bonds should have no
difficulty in arranging with their own banks for exchanges into registered bonds
without expense.

I t was the Treasury's intention to have the permanent bonds ready
for distribution on the date of the maturity of the last coupori of the
temporary bonds, or as early as possible during the six months fol. lowing. This made it possible for holders to make the exchange in
advance of the first interest payment date after the maturity of the
last coupon on temporary bonds. The last coupon of the third Liberty
• loan 4 | per cent bonds matured on March 15,1920. Exchanges began
on that date at the Treasury and at the Federal reserve banks and
have proceeded without interruption.' Deliveries of the first Liberty
loan converted 4 | per cent and second Liberty loan converted 4^ per
cent bonds in permanent form were commenced in the spring, of 1920.
They were available before the interest payment dates on May 15 for
the second loan and June 15 for the first loan. The 4 per cent bonds
of the second Liberty loan and the first Liberty loan converted presented an unusual problem because usually conversion into 4^ per
oent bonds was also involved. As the last coupons of the second
Liberty loan 4 per cent bonds matured on November 15, 1919, and
those of the first Liberty loan converted 4 per cent bonds on December
15, 1919, provision was made to cover the current six months' period
by the delivery of special 4 per cent coupons. The final coupon attached to the temporary bonds of the fourth Liberty loan matured
October 15, 1920, and it is expected that deliveries of the permanent
bonds will commence toward the close of the present calendar year.
Those of the first Liberty loan second converted will be ready for
delivery on December 15, 1920, the date of maturity of the final
coupon attached to the temporary bonds of that loan.
I n these exchanges the Treasury has assumed all expenses and risks
of transportation of temporary bonds surrendered when transactions
are conducted through Federal reserve banks and recognized banking
concerns. The return of all permanent bonds issued upon exchange
for temporary bonds is at Government risk and expense, within the
limits of the United States. To facilitate exchanges, the Treasury
has authorized advance deliveries to incorporated banks and trust
€ompanies. All such consignment stocks have been secured by the
pledge of collateral security with the Federal reserve banks in accordance with Form L. and C. 304 (Exhibit 63, p. 464).
The following table shows the approximate number and amount
of temporary coupon bonds and the number and amount of permanent bonds delivered to October 31,1920:




139

SECRETARY 01^ THE TREASURY.

Temporary coupon bonds. Permanent bonds delivered
, to Oct. 31, 1920.
Number
ol pieces. 1

Amount.^

Number
of pieces.

Amount.

S420,264,500

1,126,478

§268,707,850'

4,610,049
10,125,967

2,025,111,500
2,651,118,150

15,862,494

4,944,937,SOQ

First 4's \
First 4^'s/
First second 4^'s
Second 4's \
Second 4i'sj
Tliird 4i's
Fourth 4.>'s.....

8,622,833
13,246,111
20,901,538

2,442,800
2,730,338,350
2,933,426,850
5,308,266,900

Totai

45,038,640

11,394,739,400

2,258,301
9,857

1 Approximate.

Eliminating the bonds of the fourth loan and of the first second
converted, deliveries of which have not yet commenced, the table
indicates that while something over 81 per cent par amount of the
temporary bonds have been exchanged for permanent bonds, only
about 66 per cent of the number of pieces have been so exchanged.
The Treasury has made every effort to reach holders of temporary
bonds. I n addition to public announcements from the department
and the Federal reserve banks, placards were prepared advising
holders of these securities as to the necessity of exchanging them.
These were transmitted to post offices, other public buildings, and
banks and trust companies for public display. A copy of the placard
and the Treasury's letter to the banks and trust companies dated
August 18,1917, are attached as Exhibit 64, page 466.
Original deliveries of coupon bonds of the several Liberty loans in
temporary form aggregated 81,530,097 pieces, with a value of $17,119,906,500, deliveries against subscriptions and against conversions
being included. Because of conversions, denominational exchanges,
and exchanges of coupon for registered bonds, the number of pieces
in temporarjr form was reduced to about 45,000,000 pieces. Consequently, it will not be necessary to incur the expense of preparing
and delivering approximately 36,500,000 pieces in permanent forni.
• GOVERNMENT SAVINGS S E C U R I T I E S .

The Savings Division has general supervision of a small savings
organization in each of the 12 Federal reserve districts. Its work
and its field service have, during the past year, been along the lines
outlined in the Annual Eeport of the Secretary of the Treasury for
1919, on pages 62 and 63. I n general, the efforts of the Savings
Division have been directed to the following ends: (1) To develop
and protect the secondary market for all war issues of Government
securities. (2) To sell Government savings securities. (3) To make
permanent the habits of regular saving and investment in United
States Government securities. I n the accomplishment of these pur


140

REPORT ON THE FINANCES.

poses, the division has developed its activities along the following
lines:
(1) Schools.—The division is cooperating with leading educators
of the country to the end that instruction in sound economic principles shall become an inherent part of the American school systemI t has received fine support from the schools in promoting thrift,,
saving, and investment in small Government securities. The principles of saving are being taught and thrift stamps and war-savingsstamps are being sold in a large majority of the schools of the
country. Several of the State departments of education have included chapters on saving and investment in their State courses of
study. Many new editions of school textbooks now contain material on Government securities and the practice of sound investment.
At their annual meeting in iSalt Lake City in Julj^-, 1920, the National Education Association appointed a committee of seven State
superintendents to confer with the division with the view o'f shifting
the responsibility of the educational phases of this movement to the
school authorities, and thus relieving the Savings Division of much
of the detail work it has heretofore had to assume. I t is lioped that
by the end of the current fiscal year the active direction of the school
savings work will have been transferred in large measure to the
school authorities.
(2) Industries.—Government savings associations have been organized in various industries throughout, the country. I n many
plants the per capita investment of the employees in savings
stamps has shown a steady increase. The partial paynient plan,
which enables employees to buy Liberty bonds and Victory notes at
the current market prices, is also being widely used. Numerous labor
organizations have passed resolutions presenting to their membership the advantages of Government securities. The resolutions
adopted by the American Federation of Labor, for exairiple, were as
follows:
RESOLUTIONS ADOPTED BY T H E A M E R I C A N FEDERATION OF LABOR.

Whereas wage earners have become familiar with the merits of securities issuecJ
by the United States Government, in denominations small enough for saving^
which are known as savings stamps and Treasury savings certificates; and
Whereas w^age earners should adopt some form of easy saving for their individual benefit as well as the good of the entire country, through a practical
method that is guaranteed to take care of the future and estabhsh regular
and systematic investment of small amounts; and
Whereas wage earners have the opportunity to affihate themselves with the
Government savings associations that are now being formed under the auspices of the Treasury Department: Therefore, be it
Resolved, That the American Federation of Labor in convention assembled,
at Montreal, Canada, June, 1920, reiterate its former indorsement and approval
of the plan of the Savings Division of the United States Treasury Department ^
now being operated in each of the Federal reserve districts; and be it further



SECRETARY OF THE TREASURY.

141

Resolved, That aU the international unions and Federal unions be urged to
advocate thrift stamps. Government savings stamps, and Treasury savings certificates as the best and safest method for saving and investment that their
membership can adopt, as against the schemes of private coi^porations which
are now attempting to take advantage of the Government's savings program and
the saving habit formed during the war by introducing thrift systems in industry through which they will make profit from the savings of the workers; and
be it further
Resolved, That this convention in view of the current lowHiiarket prices of
Liberty bonds and Victory notes advises all international and Federal unions
-as well as State federations of labor and central bodies to urge their respective
memberships to purchase Government securities at current market prices either
for cash or on the installment plan and to hold their bonds until maturity; and
be it further
Resolved, That the members of the various unions be requested to urge their
•employers and local banks to provide partial-payment facilities for the purchase of Government securities at market prices; and be it further
Resolved, TYi^t copies of this resolution be sent to President Woodrow Wilson;
Secretary of the Treasury, Hon. David F. Houston; the other members of the
•Cabinet; United States Senators and Congressmen; governors of the different
States and Territories; and the directors of the Federal reserve districts,, with
the request that steps be taken to extend and advertise the opportunities which
the Government has provided for the practice of thrift and saving on a small,
•easy payment plan for all the people, and especially the wage earners.

(3) ^¥omen'^s organisations.—Women's organizations have cooperated to the same end and have urged the application of the budget
idea to personal and household management. Outlines provided by
the division have been made the basis of economic study by women's
d u b s and are being incorporated in regular club programs.
(4) Publicity,—Information has been furnished to newspapers
and periodicals. Articles have been continuously supplied and
printed in labor papers, trade and technical journals, house organs,
fraternal publications, the religious press, farm journals, educational
papers, and in those reaching Government employees, bankers, and
railroad men. Special appeals have been made to foreign-born
residents. They were issued in more than a dozen languages and reprinted in foreign-language newspapers. Advertising copy, with ac<3ompanying cuts, has been suggested to commercial, banking, and
brokerage firms to bring before the investing public the opportunities'
offered by Government securities. Through publicity a strenuous
campaign has been carried on against promoters of wildcat stocks
and other securities of doubtful or speculative character. I n addition to other publicity, the division has issued monthly a posterette
carrying the calendar of the current month, with appropriate slogans
relative to the wisdom of saving and safe investment. This is furnished to factories and industrial plants for posting in conspicuous
places and occasionally to 35,000 schoolrooms. The normal circula-




142

REPORT ON THE FINANCES.

tion of these posters is 125,000 copies, and they are frequently repro-^
duced in newspapers, house organs, and various trade journals. A
clip sheet carrying a cartoon and news items dealing with savings,,
the dangers of investment in wildcat securities, and the advantages,
of investment in Liberty bonds at present market prices is also issued
monthly to a selected list of about 3,000 publications. Electrotypes
of cartoons showing the dangers of extravagance and the advisability
of investment in Government securities are sent to advertisers and
publishers on request.
Savings secuHties for 1920.
The same types of war-savings securities were issued for 1920 aswere issued in 1919, as follows:
Thrift stamxps, 25 cents, noninterest bearing.
War-savings stamps, $5 maturity value.
War-savings certificates, with spaces for 20 war-savings stamps.
Treasur}^ savings certificates, with maturity value of $100 and
$1,000. ^
A full announcement concerning the 1920 Avar-savings securitieswas made in the Secretary's public statement of December 22, 1919,.
Avliich is as follows:
The Treasury is distributing to-day circulars announcing the issue of the
1920 war-savings securities, which will be on sale by the first of the year at"
post offices and other agencies, consisting principally of incorporated banks
and trust companies. In view, especially, of the gratifying increase in recent
months in the sale of the 1919 securities following the postwar reaction, it isanticipated that during the coming year, the 1920 securities will be purchased
in large volume and that the Government's movement for tlirift, saving, and investment in Government securities will continue to show good results. Fromthe beginning of the movement in December, 1917, up to December 15, 1919,
the Treasury has received from the sale of the war-savings securities a cash'
total of .$1,128,480,731.
The 1920 securities consist of the 25-cent thrift stam.p, which bears no
interest and is used to evidence payments on account of war-savings stampsand certificates, the $5 war-savings stamp, and the registered Treasury savings certificates in denominations of $100 and a $1,000 maturity value. The
issue price of the war-savings stamp is $4.12 in January and increases 1 cent
a month to $4.23 in December. The issue price of the $100 certificate is $82.40^
in January and increases at the rate of 20 cents a month to $84.60 in December.
The $1,000 certificate will be sold for $824 in January, and the price increasesat the rate of $2 a month to $846 in December.
The 1920 securities will be substantially the same in terms and conditions asthose of the 1919 issue, but some alterations have been made in the forms. The
1920 war-savings stamp, for example, will be carmine in color, will bear thehead of George Washington, and the size will approximate the larger stamp <
used in 1918. A change has also been made in the terms of the 1920 Treasury
savings certificates as compared with the 1919 issue, in that the 1920 certificates
are redeemable at the Treasury, beginning with the second calendar month..




SECRETARY OF THE TREASURY.

143

after the month of purchase, without the 10 days' demand required by the terms
of the 1919 Treasury savings certificates. Post offices are not required, however,
to make payment of war-savings certificates until 10 days after receiving written demand for payment.
As in 1919, war-savings certificates of the 1920 series bearing their full complement of 20 war-savings stamps, may be exchanged for registered Treasury
savings certificates, series of 1920, of the $100 denomination, and owners of
war-savings certificates who clesire the protection of registration are urged to
exchange their war-savings certificates for a Treasury savings certificate rather
than to seek registration of the war-savings certificates at a post office. In addition to its other advantages, the Treasury savings certificate gives the benefit of
central registration at the Treasury and the provision for payment by the Treasury itself. The latter provision will be of advantage and facilitate payment in
case of change of residence, since a registered war-savings certificate can be
redeemed only at the post office at which it was registered.
Two other circulars are being distributed which offer, beginning January 2,
1920, a 1918 issue of Treasury savings certificates in the $100 denomination, and
continue after December 31, 1919, the issue of 1919 Treasury savings certificates
in the denominations of $100 and $1,000, in both cases not for cash sale but
only in exchange for 1918 and 1919 war-savings certificates, respectively. It is
anticipated that many holders of the 1918 and 1919 V7ar-savings certificates will
find it advantageous to change their holdings into these Treasury savings certificates, whose terms and conditions are substantially the same as those of the
1920 issue, except for their earlier maturity dates.
In addition to the advantages mentioned above in the case of exchange of
1920 war-savings certificates for Treasury savings certificates, these circulars
offer other inducements in the opportunity for consolidating holdings and also
for changing ownership in the manner provided in the circulars.
Holders of one or more war-savings certificates of the 1918 or 1919 issue
which bear war-savings stamps having a total maturity value of $100 or some
multiple of $100—i. e., $200, $300, $400, etc.—may exchange the certificates for
the same maturity value of Treasury savings certificates of the corresponding
issue. When two or more war-savings certificates are offered for exchange, each
one need not bear its full complement of 20 war-savings stamps, provided the
total value of the stamps aggregates $100 or some multiple of it. In the matter
of ownership the regulations provide in eff'ect that the Treasury savings certificates taken in exchange may be made out in favor of new and different owners,
if the owners of the war-savings certificates so request. The" exchanges may be
made at first and second class post offices or other post offices specially designated by the'Postmaster General, at Federal reserve banks, and at the Division of Loans, and Currency of the Treasury, but not at banks and trust companies generally.

No change was made in 1920 a n the thrift stamps used in 1919;
They are undated and noninterest-bearing securities. The 1920 war
savings stamps and certificates are identical in terms with those of
the 1919 issue, except for the fact that they mature on January
1, 1925, instead of January 1, 1924. The form, however, was
changed. The 1920 stamps are larger in size than the 1919 issue,
red in color, and bear the portrait head of Washington. I n view
of difficulties in the Bureau of Engraving and Printing it became
necessary to issue the $100 denomination of Treasury savings certifi-




144

. REPORT ON T H E FINANCES.

cates, series of 1920, printed in orange instead of carmine, as stated
in the annual report for the year 1919. The terms of the 1920
issue appear in Department Circular No. 170, dated December 10,
1919, attached hereto as Exhibit 65, page 468. Further regulations
governing the issue and sale of war-savings certificates and Treasury
savings certificates during 1920 are contained in Department Circulars Nos. 169, 171, and 172, all dated December 10, 1919; No. 178,
dated January 15, 1920, as to holdings in excess of the lawful limit;
No. 181, dated February 10,1920, as to sales stations; and supplement
to circular No. 172 of December 10, 1919, dated April 10,1920, which
are attached as Exhibits (56 to 71, pages 476 to 507. Those governing
the surrender of 1919 war-savings securities were prescribed in Treasury Department Circular No. 173, dated December 10, 1919 (Exhibil
72, p. 507) ; those relating to redemptions of war-savings certificates contributed to religious, philanthropic, or charitable organizations in Department Circular No. 166, dated November 15, 1920 (Exhibit 73, p. 511) ; and those further defining rights of holders of warsavings certificates and Treasury savings certificates in supplement
to Department Circular No. 108 and in supplement to Department
Circular No. 149, respectively, both dated August 20, 1920 (Exhibits
74 and 75, pp. 513 and 514).
Cash receipts from the sale of stamps and Treasury savings certificates, using the figures in the daily Treasury statement for the last
day of each month from the first month of their issue to October 31,
1920, have been as follows:
1917, December
1918, J a n u a r y
February
.March
AprU
May
JuneJuly
AugustSeptember
October
November
December ..__•
1919, J a n u a r y
February
March
April
May
.June
July
August
September
October




_.
...-

^

.

-

—^

1

-

^

-

$10, 236, 4.5L 32
24, 559, 722.15
41,148, 244. 22
53, 967, 864. 49
60, 972, 984.12
57, 956, 640.12
58, 2.50, 485. 00
211, 417, 942. 61
129, 044, 200. 62
97, 614, 581. 4S
89, 084, 097. 31
73, 689, 846. 00
63, 970, 813. 47
70, 996, 041.14
15, 816, 539. 27
10,143, 081. 68
9, 572, 728. 48
6, 558,198. 33
5, 269, 535. 51
5,176, 865. 12
6, 201,164. 07
6, 111, 944. 78
7, SIQ, 467. 60

SECRETARY OF THE TREASURY.
1919, November
December
1920, January
February .___
March
Aprn
May
1
June
July
1
' August
September
October

145

j
:

;

^
-

—

——

._

Total

$8, 020,436. 67
9,124, 292.13
8, 987, 462. 59
5, 221, 213. 48
6, 063, 359. 22
4, 815, 4.37. 69
8, 552, 962.19
3,107, 909. 72
2, 359, 274. 53
2, 231, 509. 77
1, 814, 705. 89
1,889, 750. 48
1,172, 264, 753. 25

REDEMPTIONS.

Total from beginning of campaign to September 30, 1920
Series as follows:
1918
1919
1920

$372, 287, 319. 61
340; 333, 563. 88
27, 602, 456. 94
4, 351, 298. 79

A copy of the circular letter of March 13, 1920, sent by the Secre-;
tary of the Treasury to the banking institutions of the country to
ask their cooperation in the work of the savings movement and the
sale of savings securities, is as follows:
WASHINGTON, March 13, 1920.

DEAR SIR : The prosperity, progress, and welfare of the American people are
so vitally dependent on thrift, economy, and saving that I deem it highly important and appropriate to address an emphatic appeal to you indorsing and
supporting a recent statement by my predecessor urging the' cooperation of the
banks and trust companies of the country in the Treasury's program for saving
and investment in Government securities. An effective and patriotic service
can be rendered by the banking institutions, with many compensating advan^
tages to themselves, by becoming agents and wholeheartedly promoting the distribution of thrift and savings stamps and Treasury savings certificates.
The Treasury savings movement is on a firm and permanent basis. The sale
of savings securities during the last half of the year 1919 showed encouraging
progress, and redemptions were on a lower level. In view of the exigencies of
the present economic situation it is obvious that the movement is fundamental,
and in order that the fullest measure of success may be obtained the movement
must be assisted directly and actively by the banks and trust companies through
the agency service.
The war has left us with many financial and economic problenas, and the
Treasury savings program can help materially in their solution. Aside frorn
the fact that the proceeds from the sales of the securities will assist in serving
the cash requirements of the Treasury, the movement is of the very essence
of fundamental economics, affording a tangible means of combating high prices
and extravagance and the ills that follow in their train. Economy must be the
watchword of the Government and the people in public and private finance, and
we can not expect the return of a normal healthy condition unless the people
produce more, save more, and spend less. That is the doctrine of the savings
13799—FI 1920
10



146

REPORT ON THE FINANCES.

movement. It can be vitalized and reduced to reality only if all agencies of the
country which are capable of reaching the millions of investors, or those who
should be investors, however small, will lend their cooperation.
The unique position which the banking institutions occupy between the
Treasury on the one hand and the people on the other gives them a strategic
advantage of great importance. Even considerations of self-interest should impel the banking institutions to assume their acknowledged and rightful leadership with sufficient vigor and force to arouse the American people and to turn
them from the perils of heedless extravagance to the habits of saving and thrift
made imperative by this reconstruction period.
With this statement of the situation, it is confidently expected that every
banking institution in the country will qualify at once to handle Government
savings securities. In responding nobly and loyally now as they did during
the war they will serve their country, their community, and themselves. Agency
provisions and application blanks may be obtained from the Government savings organization of the Federal reserve bank in each district.
Cordially yours,
D. F. HOUSTON,

Secretary of the Treasury.
To the PRESIDENT OF THE BANK OR TRUST COMPANY ADDRESSED.

Although sales of savings securities have decreased since the war
because of the lack of the war appeal and the discontinuance of the
spectacular campaigns, the reaction from the habit of saving, and
the natural tendency to turn funds from war-savings securities to
Liberty bonds and Victory notes at the present attractive prices, the
demand for war-savings securities still continues strong in many
parts of the country. While sales have declined, redemptions have
also materially decreased, and the evidence is constantly accumulating that the people appreciate the value of these securities as investments. As the security markets become more settled, there is
every reason to expect that the savings securities, bearing interest at
4 per cent compounded quarterly, exempt from State and local taxes
and from the normal Federal income tax, and redeemable substantially on demand, will prove increasingly attractive. The Treasury
is committed to the continuance of its savings program, and feels
that with the approach of the first large maturity of war-savings
certificates—that of the series of 1918—on January 1, 1923, it is of
real importance that the movement become established on an enduring peace-time basis and that its continuity be assured. There is no
good reason Avhy, as time goes on, this undertaking should not play
an increasingly important part in the current financing of the
Government.
Savings securities for 1921.
The same types of savings securities will be issued for 1921 as
were issued in 1920, with the following additions:
Treasury savings stamp, $1, noninterest bearing.
Treasury savings card for affixing Treasury savings stamps.
Treasury savings certificates with a maturity value of $25.



SECRETARY OF THE TREASURY.

147

The new Treasury savings stamp will be bright red in color, imprinted on green tint, and will bear the portrait head of Hamilton.
The certificate of the maturity value of $25 will be similar in design
to those having a maturity value of $100 and $1,000; each denomination will be of a different color, imprinted on green tint. Both the
stamps and certificates will be identical in terms with those of the
1920 issue, except for the fact that they will mature on January 1^
1926, instead of January 1, 1925. The 1921 war-savings stamp will
be larger in size than the 1920 issue, orange in color, imprinted on
green tint, and will bear the portrait head of Lincoln. No change
will be made in 1921 in the thrift stamps. The terms of the issues
for 1921 will appear in detail in formal Treasury Depattment circulars, to be issued at a later date.
T H E WAR F I N A N C E CORPORATION.

The activities of the W a r Finance Corporation, created to meet
conditions of the war or growing out of the war, are drawing to a
close. By reason of the developments of the past year, the corporation is approaching the period of actual liquidation. I t is already
in process of liquidation. I t long ago ceased making loans under its
original authority for purposes "necessary or contributory to the
prosecution of the war." Such loans stopped after the signing of
the armistice except to make advances to carry out previous commit^
ments and to assist the railroads by reason of the failure of the appropriation for the Eailroad Administration upon the adjournment of
the Congress in March, 1919. The cessation of these activities marked
the close of the corporation's direct war functions, leaving only the
collection of the princiiDal and interest on these loans.
To meet conditions growing out of the war in relation to foreign
trade, and in order to promote commerce with foreign nations, the
corporation was authorized by the Congress, in the Victory loan act,
approved March 3,1919, to make loans to finance exports. This provision of law empowered the corporation to make advances, fully and
adequately secured, to American exporters of domestic products or
to banks 'financing such exports. The maximum maturity of such
loans was five years and the aggregate advances made by the cor:poration for these purposes could not exceed the sum of $1,000,000,000
outstanding at any one time.
The corporation was not called upon to exercise this power until
December, 1919. Previous to that date inquiries and applications,
though man}^ in number, came from concerns which could not offer
adequate security, or proposed terms not contemplated by the law.
In the late autumn of 1919, applications reached the corporation in




148

REPORT ON T H E FINANCES.

increasing numbers in a form which could be considered as coming
within the meaning of the statute. From December 26, 1919, when
the first loan to promote exports was made, to November 15, 1920,
the corporation had made total loans in this connection of
$46,347,654.27, of which $2,855,146.63 had been repaid, leaving outstanding on that date $43,492,507,64.
The following is a summary of the amounts advanced up to November 15, 1920, to assist in the, exportation of domestic products, classified b}^ commodities and countries of destination:
Commodities.

Countries.

Agricultural implements
Condensed milk
Cotton
Electrical equipment and supplies
Grain, flour and foodstuffs..
Locomotives

. .

Amount.

Great Britain, France, and Belgium
England and ^France.'.
"
Czeclio-Slovalcia
.Great Britain. South Africa, Australia,
France, Belgium, and Italy.
Belgium
Poland

$4,000,000.00
5,000,000.00
9,322,117.27
10,796,537.00

Total

12,229,000.00
5,000,000.00
46,347,654.27

Suspension of active operations.
The War Finance Corporation was a war agency. Its general
powers expire six months after the termination of the war. The
special powers conferred upon it under the Victory loan act, authorizing assistance in financing of exports, expire one year after the
termination of the war. These special powers were granted after
the armistice, when business had suffered a recession in consequence
of the cancellation of war orders and when there was a fear that
exports might decline and unemployment exist. The corporation
continued to exercise its special powers in a relatively small way
until there was a certainty that there would be no sudden upsetting
of the business situation of the country by diminishing exports.
On May 10, 1920, at my request, the corporation suspended the
making of further advances in aid of exports except in pursuance
of commitments theretofore made. There has been no change in the
general situation since that date that would justify the resumption
of activities on the part of the corporation. This power was granted
to serve a certain purpose and to be exercised during the period of
readjustment immediately following the armistice. The purpose has
been fulfilled. While a technical state of war exists, a year and
eight months have elapsed since this special and temporary authority
was granted by the Congress. I t was assumed at that time that
peace would have been established long ago and the power terminated. There is no more warrant to resume operations of the
War Finance Corporation than there would have been to continue
its activities at the time they were suspended. The requests for
resumption are discussed in the beginning of this report.



SECRETARY OF THE TREASURY.

149

The following is a copy of the Secretary's public statement,
dated May 10, 1920, announcing the suspension of the corporation's
activities:
At my request the War Finance Corporation has suspended the making of
further advances in aid of exports, except pursuant to commitments heretofore
made. The general powers of the corporation expire six months after the
termination of the war, and the special powers conferred upon it under the
Victory loan act expire one year after the termination of the war. The continuance of a technical state of war long after the time contemplated when
this legislation was enacted and when the conditions which gave rise to it
have ceased to exist has presented a problem of no small concern. The act
creating the corporation was passed during the war. In general terms, it was
Intended that the corporation should assist business and agencies in activities,
for the successful prosecution of the war. After the armistice, when business
had suffered a recession in consequence of the cancellation of war orders, and
when there was a fear that exports might decline and unemployment exist, an
amendment to the act was passed authorizing the corporation to assist in the
financing of exports. Now, more than a year later, and after direct Govern^
ment loans to European Governments have for all practical purposes been discontinued, business is prosperous and involuntary unemployment is negligible.
The export business not only has not declined but has actually increased. Ih
the calendar year 1918 total exports amounted to $6,149,000,000. They rose iri
the calendar year 1919 to $7,922,000,000, and for the first quarter of this year
they greatly exceeded those of the first quarter of last year. Obviously, private interests are not failing to finance exports. In the circumstances it does
not seem necessary now that the Government should continue to intervene to
-stimulate exports, particularly as it is compelled to resort from time to time
to temporary borrowing in part to meet its present obligations.
i
In existing circumstances, it seems clear that the Government should enter
the borrowing field as seldom as possible and then for the lowest possible sumS;
It would be a question whether the Government should continue to aid and
stimulate exports, considering their present volume privately financed, even if
the Treasury had surplus funds. It seems clear to me that it should not continue to do so when the Treasury has to resort to borrowing from time to time,
The entire capital stock of the 'War Finance Corporation, $500,000,000, has been
issued and is held by the Treasury. This and its reserve fund of about
$25,000,000. are invested to the extent of about $422,000,000 in United States
bonds, notes, and certificates of indebtedness, and to the extent of about
$103,000,000 in other loans and investments. Consequently, if the corporation
continues to make loans in aid of exports, it can do so only by calling upon the
Treasury of the United States to redeem securities of the United States in
which the capital furnished by the United States is invested, or by selling bonds
of the War Finance Corporation to the public. These bonds, although not guaranteed by the United States Government, would nevertheless be marketable only
on account of the ownership of the entire capital by the Government.

I n compliance with this request, the directors of the corporation
at a meeting held oh May 10, 1920, adopted the following resolution:
Resolved, That at the request of the Secretary of the Treasury, and pending
further action by this, board, tli,e making by the corporation of further advances
for export purposes, except pursuant to existing commitments, be suspended.




150

REPORT ON THE FINANCES.

The power of the corporation to suspend further loans and other
operations, except as incident to liquidation, wag sustained in the
following opinion from the Attorney General, dated May 10,1920:
WASTii^GTOi^, May 10,1920.
MY DEAR MR. SECRETARY : I beg to acknowledge receipt of your letter of May 6,
1920, in which you request the expression of my opinion upon the following
questions of law:
1. Is the board of directors of the War Finance Corporation vested under
existing law with discretion to suspend further loans and^ other operations except as incidental to liquidation?
2. May the funds of the W^ar Finance Corporation not needed for the payment of its debts, for commitments already made, or for its operating expenses,
be used under existing law to retire a substantial portion of its outstanding
.capital stock?
B. May the Secretary of the Treasury assent to such retirenient?
The War Finance Corporation was created by the act of April 5, 1918 (40
;Stat., 506). By that act the management of the corporation is vested in a board
'Of directors consisting of the Secretary of the Treasury and four other persons
(sec. 3), who are "created a body corporate and politic in deed and in law,"
which shall have succession for a period of 10 years (sec. 1). The corporation
is vested with the powers usually incidental to corporate existence, and the
i board of directors is given the customary powers of appointing and fixing the
compensation of officers and employees necessary for the transaction of its
business, defining their duties, requiring bonds of them, dismissing them at
.pleasure, and prescribing by-laws regulating the manner in which the business
of the corporation shall be conducted (sec. 6).
By sections 7 to 9 the corporation is authorized and empowered, subject to
•certain restrictions, (1) to make advances to any bank, banker, or trust com13any which shall have made after April 6, 1917, and shall have outstanding
any loan to any person conducting a going business in the United Staters whose
operations shall be necessary or contributory to the prosecution of the war or
w-hich shall have rendered financial assistance to any such persons by the pur-'
-chase after April 6, 1917, of his bonds or other obligations; (2) in exceptional
cases to make advances directly to such person, but only for the purpose of conducting such business in the United States and only when, in the opinion of
i t s board of directors, such person is unable to obtain funds upon reasonable
terms through banking channels or through the general public; (3) to make
.advances to any savings bank, banking institution, or trust company which
receives savings deposits or to any building or loan association whenever
the corporation shaU deem such ^advances to be necessary or contributory to
the prosecution of the war or important in the public interest. Loans of this
•character can not be made after the expiration of six months after the termination of the war.
By section 21, added by the amendment of March 3, 1919 (40 Stat., 1309,
1313), the corporation is authorized and empowered, subject to certain restrictions,' to make advances, in order to promote commerce with foreign
^nations through the extension of credits (1) to any person engaged in the
United States in the business of exporting therefrom domestic products to
foreign countries if such person is, in the opinion of the directors, unable
to obtain funds upon reasonable terms through banking channels; (2) to any
t)ank, banker, or trust company in the United .States which, after the taking
<elfect of this section, makes an advance to any such person for the purpose of
.assisting in the exportation of such products. Loans of this character can not
he made after the expiration of one year after the termination of the war.



SECRETARY OF THE TREASURY.

151

It is Obvious that, within the time limitations imposed by these provisions,
the determination of the question whether the conditions justifying the exercise
of these powers still exist, and, furthermore, whether, assuming their existence,
these powers should continae to be exercised is a matter which is left to tlie
decision of the board of directors. I have no doubt, therefore, that they have
the power l o determine at any time to suspend further loans and operations.
Your first question must therefore be answered in the affirmative.
But I am also of the opinion that the War Finance Corporation has no power
to use funds on hand, even though they are not needed for the payment of
debts of the corporation, for commitments already made or for its operating
expenses, to retire a part of its outstanding capital stock. It is true that corporations have, in the absence of constitutional or statutory prohibition, inherent power to buy, to sell, or to retire their oAvn stock (Johnson County v.
Thayer, 94 U. S., 631, 643; Allen i;. Francisco Sugar Co., 193 Fed., 825; Sanford v. First National Bank of Marysville, Kans., 238 Fed,, 298; First Trust
Co. V. 111. Central R. R. Co., 256 Fed., 830, and many other cases).
But I believe that the act creating the War Finance Corporation contains
certain provisions which are inconsistent with the existence of any such power
in it. Section 15 provides that "all the net earnings of the corporation not
required for its operations.sTiaZJ be accumulated as a reserve fund until such
time as the corporation liquidates * * *. Such reserve fund shall, upon the
direction of the board of directors, with the approval of the Secretary of the
Treasury, be invested in bonds' and obligations of the United States issued or
converted after September 24, 1917, or, upon like direction and approval, may
be deposited in member banks of the Federal Reserve System or in any of the
Federal reserve banks, or be used from time to time, as well as any other funds
of the corporation, in the purchase or redemption of any bonds issued by the
corporation."
It seems to me clear that under this section the War Finance Corporation
can use its net earnings for the purposes enumerated and no other, and it does
not seem to me reasonable to suppose that Congress intended that the corporation should have power to use its capital for a purpose for which it could not
use its reserve fund or surplus.
But there is a further and even stronger objection to the retirement of the
stock in the way suggested. It is self-evident that a corporation can not buy
its own stock for the purpose of retiring it without the consent of the stockholders from whom it is bought. In this case the United States is the owner
of all the stock of the corporation, and it has not consented to sell its stock nor
authorized the Secretary of the Treasury to do so in its behalf. It is true that
by the act of April 5, 1918, he is given certain broad powers of supervision over
the conduct of the business of the corporation. Thus the board of directors can
not make calls on the United States to pay its stock subscriptions (sec. 2), nor
pass by-laws (sec. 6), nor buy, sell, or deal in bonds or other obligations of the
United States (sec. 11), nor fix the rate of interest which its own bonds shall
bear or the terms on which they shall be sold (sec. 12), nor the manner io
which the reserve fund shall be invested without the approval of the Secretary
of the Treasury (sec. 15). But no inference can be drawn from the bestowal
of these powers on him that he is authorized to consent to the sale to the corporation of the, stock owned by the United States. Y\uir second and third questions must, therefore, be ansAvered in the negative.
Respectfully,
.\. MITCHELL PALMER.

Att01 "ney Geneiat.
I'he

SECRKTXVRY OF THE TREASURY,




Washington. D.C.

152

REPORT ON THE FINANCES.

The corporation immediately advised all applicants having no
definite commitments that there had been a change in policy and
that their • applications could not be given further consideration.
Some applicants voluntarily waived part of advances to which the
corporation had been committed, while proposed loans to others to
whom commitments had been made contingent upon the fulfillment
of certain conditions as to time, etc., were canceled because the applicants did not meet the conditions. This resulted in a reduction of
the tptal amount of commitments from $69,201,920 to $48,149,574.27.
Of the latter sum $46,347,654.27 had been advanced up to November
15, 1920. The remainder is awaiting the perfection of documents
and must be advanced, if at all, not later than March 1, 1921. Of
the total advances there has been repaid to November 15, 1920, the
sum of.$2,855,146.63; $13,644,045.64 will be due prior to July 1,1921;
$10,051,925 will be due between July 1,1921, and September 15,1922;
$9,000,000 will be due in the calendar year 1923,- and $10,796,537 will
be due during the calendar year 1925; total, $46,347,65°4.27.
U p to April 16, 1920, when, as stated elsewhere in this report, the
Secretary announced that the purchases on account of the bond-purchase fund would cease after June 30, 1920, the W a r Finance Corporation was the chief agency from which the Treasury purchased
Liberty bonds and Victory notes for the bond-purchase fund. The
corporation terminated its relation with the Treasury in this connection at the close of the fiscal year, when $65,849,650 par value of
Liberty bonds and Victory notes were sold by the corporation to the
Treasury at average cost for the purposes of the bond-purchase fund.
With the cessation of the corporation's active operations in aid of
financing exports, it had no further use for the greater part of its
funds. I t needed funds only for the payment of its debts, commitments, and operating expenses. The Treasury felt that it would be
desirable, in these circumstances, for the corporation to consider the
retirement of a substantial part of its capital stock, all of which is
owned by the United States, if that were permissible under the law.
The opinion of the Attorney General of May 10, 1920, quoted above,
however, held that under existing law the stock could not be retired
in this manner. Most of the funds of the corporation, however,
were invested in Government securities. I t seemed unnecessary for
the Treasury to continue to pay interest on such securities to a Government corporation which was now largety inactive as far as the em-.
ployment of its funds was concerned. As it was not possible to retire
the stock, the Treasury requested the corporation to present its Government securities for payment and cancellation and to accept in
return a cash credit on the books of the Treasurer. To this the corporation assented, and on June 30, 1920, sold to the Secretary of the




SECRETARY OF THE TREASURY.

153

Treasuiy at par and accrued interest $301,204,000 of certificates of
indebtedness and the Liberty bonds and Victory notes above described
at average cost with interest. For these securities the corporation
received a credit on the books of the Treasurer of $363,100,619;88 ori
account of principal and $2,333,944.06 on account of accrued interest;
or a total of $365,434,563.94.
I n accordance with the mandatory provisions of the urgent de-^
ficiency act approved May 8, 1920, the corporation purchased from
the United States Eailroad Administration at par and accrued interest $43,270,100 i^rincipal aniount of Liberty bonds and Victory notes,
of which $35,835,350 has since been purchased by tlie Treasury
from receipts on account of repayments of loans by foreign Governments. Of the proceeds of such sale, amounting to $36,344,136.81,
including principal and accrued interest, the corporation invested on
account of its reserve fund $32,854,450 in a special Treasury certificate of indebtedness. For the remainder, the Treasury gave the corporation a credit on the books of the Treasurer.
On November 15, 1920, the corporation owned the following Government securities:
Second 4^ per cent Liberty loan bonds, par value
^^$95,100. 0()
Third 4i per cent Liberty loan bond®, par value
1, 964, 350. 00
Victory 3 | per cent Liberty loan notes, par value
1,100. 00
Victory 4 | per cent Liberty loan notes, par value
:
5, 374, 200. 00
United States certificates of indebtedness, 6 per cent due Sept.
22, 1921
..__ 32, 854, 450. 00
Total

40; 289, 200. 00

The $200,000,000 of one-year 5 per cent bonds of the corporation
dated April 1, 1919, matured April 1, 1920. All of these bonds have
been paid except $126,000, which were outstanding on November 15.
1920, awaiting 'presentation for redemption.
Every effort is bein,g made to liquidate the outstanding loans of the
corporation as rapidly as possible. The subjoined statement shows
the condition of the corporation as of November 15,1920:
Statement of condition of the War Finance Corporation at the close of business
Nov. 15, 1920.
ASSETS.

Current assets:
Due from the Treasurer of the United States'
Loans:

Public utilities
Railroads—
Industrial corporations
Cattle loans
Export loans




$372, 718, 417. 76

Balance
ontstanding.

$21,132,995.52
52,828,210.00
973, 594. 58
803, 757. 95
43,492,507.64
119,231.065.69

154

REPORT ON T H E FINANCES.

Bond investments:
4 i per cent Second Liberty loan bonds'___
4 i per cent T h i r d Liberty loan bonds '
3f per cent Victory Liberty loan notes *
.
4 | p e r cent Victory Liberty loan notes '

$95,100. 00
1, 964, 350. O
Q
1,100. 00
5, 374, 200. 00
$7^ 434, 750. 00

Reserve fund i n v e s t m e n t s :
United States certificate of indebtedness
Other assets:.
Accrued interest receivable on loans
Accrued interest receivable on loans {past
due)
Accrued interest receivable on reservefund investment
Accrued interest receivable on Liberty
loan bonds and Victory notes
Public-utihty bonds ( p a r value $292,000)
Fixed assets:
Furniture and equipment
Less allowance for depreciation—
To Dec. 31, 1919
„ _ — _ $736.94
Jan. 1 to Nov. 15, 1920
775. 36

32, 854, 450. 00
1, 623, 621. 74
2, 383, 410. 72
297, 040. 23
122, 819.12
4, 426, 891. 81
58,-400.00
8, 861.^32 .

1, 512. 30
7, 349. 02
Total assets

536, 731, 324. 28
LIABILITIES.

Capital and s u r p l u s :
Capital stock (authorized and o u t s t a n d i n g ) .
$500,000,000.00
Net earnings (surplus 1918-19)
$20,376,643.07
Current year's earnings to Nov. 15. 1920— 16, 214, 272. 88
36, 590, 915. 95
Current liabilities:
1-year 5 per cent gold bonds, series A
(matured)
' 126,000.00
Coupons on 1-year 5 per cent gold bonds.
outstanding
6, 450. 00
Accrued rent and sundry expenses unpaid
,
(estimated)
l—
7, 958. 33
140, 408. 33
Total

--—

536, 731, 324. 28

NOTES.—The item of " Current assets " amounting to .$372,718,417.76, representing current cash due from T r e a s u r e r United States, includes the proceeds
of the sale of Government obligations to the Secretary of the Treasury.
All of the earnings of the corporation constitute a reserve fund (in accordance
with section 15 of the W a r Finance Corporation a c t ) , therefore no reserves are
set up against contingencies.
1 Purchased at par from the United States Railroad Administration by direction of
act of Congress.




SECRETARY OF THE TREASURY.

'

155

During the year numerous changes occurred in the organization of
the corporation. The chairman was changed by the resignation of
Secretary Glass and the appointment of the present incumbent.
Eugene Meyer, jr., resigned as managing director on May 31, 1920.
and was succeeded in the position of managing director by Director
Angus W. McLean. On February 2, 1920, George E. Cooksey was
appointed a director to fill out the unexpired term of Director
Leonard, resigned. Upon the expiration of his term, on May 17,
1920, Mr. Cooksey was reappointed. W. P . G. Harding resigned as a
director on March 8,1920, and was succeeded on that date by Franklin
W. M. Cutcheon. Mr. Cutcheon retired as a director on May 17.
1920, when his term expired. I n view of the fact that the making of
further loans was suspended, it has not been necessary to fill the two
vacancies on the board of directors, the present three directors conrstituting a quorum. There has been considerable reduction of the
staff of the corporation, which has never exceeded 45 persons. Exclusive of the directors, the present personnel is 18, which number
will be reduced to 14 on or before December 31. Since April 1, 1920.
the staff's monthly salary roll has been reduced from $8,575.61 to
$4,538.61, which amount by the end of the calendar year will be
further reduced to approximately $3,700.
There is attached as Exhibit 76, page 515, a- statement showing in
detail all of the outstanding loans of the War Finance Corporation.
RAILROADS.

Under the transportation act, 1920, approved February 28, 1920,
as amended, the Secretary of the Treasury is required to make payments to carriers as defined in the act upon receiving proper certificates from the Interstate Commerce Commission {a) under section 204, for the reimbursement of deficits during Federal control:
(b) under section 209, to make good the guaranty therein provided:
and (c) under section 210, for loans from the revolving fund of
$300,000,000 therein provided. Copies of said sections of the act, as
amended, are attached as Exhibit 34, page 355.
Section 20J^.
I n response to a requesj: of the Treasury for an estimate, the Inter:state Commerce Commission has stated that in its opinion the total
amount of payments to be made under section 204 will not exceeci
:$10,000,000. The following certificates have been received from the
commission in connection with section 204 of the act, and the
amounts, less those certified, to be due from the respective carriers




156

REPORT ON T H E FINANCES.

to the President (as operator of the transportation systems under
Federal control) have been paid up to November 15, 1920:
Date of
certificate.
1920.
Apr. 6
30
May 20
June 3
10
12
17
17
25
28
28
July 1
2
7
9
16
23
26
Sept. 18

Gross amount
certified.

Carrier.

§40,000.00
5,000.00
2,500.00
29,189. 21
60,000.00
60,699.52
36,708.25
000.00
. 25,
9,540.33
7,100.34
33,364.56
18,214.06
23,501.20
17,546.73
58,769. 67
26,279.10
5,187.38
21,751.06
39,073. 32

§40,000.005,000.00
2,500.0020,000.00'
52,949.05
50,000.00
36,000.0025,000.008,282.31
6,500.00'
27,670.13
7,500.0023,501. 20' •
14,428.8*
22,917.21
8,822.82:
5,187.384,488.87
32,150. 62

519,424.73

Midland Ry
Randolph & Cumberland R. R. Co —
Liberty White R. R. Co
Nevada, California & Oregon Ry. Co. Jefferson & Northwestern Ry. Co
New Mexico Central Ry. Co
Electric Short Line Ry. Co
Georgia, Florida & Alabama Ry. Co...
Shearwood Ry. Co
:
Gainesville & Northwestern R. R. Co.
Wisconsin & Michigan R. R. Co
Randolph & Cumberland R. R. Co
Montana Western Ry. Co
:
Bartlett Western Ry
Midland Ry
Ocilla Southern R. R. Co
Lorain & Southern R. R. Co
Franklin & Pittsylvania R. R. C o . . . . .
Little Cottonwood Transportation Co.
Total

Amount
paid.

392,898.43;

.-

There were received from the Interstate Commerce Commission^
in connection with section 204, further certificates similar iri tenor
(except that relating to Little Cottonwood Transportation Co.), but
by reason of • the qualification contained in such certificates t h e
Comptroller of the Treasury, whose decisions relating to expenditures under appropriations are binding on 'the Secretary of t h e
Treasury, decided that the Secretary was not authorized to draw
warrants in payment thereof. The comptroller's decision is as follows:
W A S H I N G T O N , Oetober 22, 1920.
T h e H o n o r a b l e T h e SECRETARY o r T H E TREASURY.

SIR : I have your letter of October 11 requesting decision whether you a r e
authorized under t h e pi'ovisions of p a r a g r a p h (g) of section 204 of t h e t r a n s portation a c t of F e b r u a r y 28, 1920 (41 S t a t , 461), to make payment on &
certificate t r a n s m i t t e d to you by t h e Secretary of t h e I n t e r s t a t e Commerce
Commission in t h e following f o r m :
INTERSTATE COMMERCE COMMISSION,

Washington.
(Certificate No. B-27.)
CERTIFICATE OF REIMBURSEMENT OF DEFICIT UNDER FEDERAL CONTROL, SECTION
204 ( g ) , T R A N S P O R T A T I O N ACT, 192 0.

.

To t h e SECRETARY OF T H E TREASURY OF T H E UNITED STATES :

P u r s u a n t to section 204 of t h e T r a n s p o r t a t i o n Act, 1920, t h e I n t e r s t a t e Commerce Commission lias ascertained from a n n u a l a n d special reports made to it '
by t h e Knoxville, Sevierville & E a s t e r n Railway Co., a carrier as defined in
section 204, t h a t t h e Knoxville, Sevierville & E a s t e r n Railway Co., during t h e
period; of F e d e r a l control, taken a s a whole, sustained a railway operating




SiECRETARY OF THE TREASURY.

157

<ieficit, and hereby certifies that under the provisions of paragraphs (f) and
(g) of said section 204 there is payable to the said Knoxville, Sevierville &
Eastern Railway Co. the sum of twenty-nine thousand seven hundred and fiftymne dollars and eighty-four cents ($29,759.84).
The commission also hereby certifies that the amount due from the said
Knoxville, Sevierville & Eastern Railway Co. to the President (as operator pf
the transportation systems under Federal control) on account of traffic balances
and other indebtedness is nine thousand five hundred and forty dollars and
•eighty-seven cents ($9,540.87).
•
This certification is made subject to the proviso that the commission may
certify to the Secretary of the Treasury of the United States such other additional amounts as it .may determine to be payable to the said Knoxville, Sevierville & Eastern Railway Co. in accordance with the provisions of section 204
of said act.
Dated this 8th day of October, 1920.'
By the commission, Division 4.
®

GEORGE B . MCGINTY, Secretary.

Paragraph (c) of section 204 of the Transportation Act, 1920, provides:
"(c) As soon as practicable after March 1, 1920, the commission shall ascertain for every carrier, for every month of the period of Federal control during
which its railroad or system of transportation was not under Federal operation,
its deficit in railway operating income, if any, and its railway operating in'Come, if any (hereinafter called 'Federal control r e t u r n ' ) , and the average
of its deficit in railway operating income, if any, and of its railway operating
income, if any,- for the three corresponding months of the test period taken
together (hereinafter called 'test-period return') * * *."
Paragraphs (d) and (e) of said section direct the commission to state an
account of the monthly credits due to the carrier or the United States, as the
case may be, based upon a comparison of the Federal control return with the
test-period return as ascertained under the provisions of paragraph (c).
Paragraph (f) provides that if the sum of the amounts credited to the carrier
exceeds the sum of the amounts credited to the United States the difference
shall be payable to the carrier. ^
From the provisions of these paragraphs it \yill be seen that while credit is to
be given to the carrier or the United States on the basis of the return for each
month of the Federal control period, taken separately, the amount payable to
the carrier, if any, embraces the whole period and is based on the difference
between the sum of the monthly credits to the carrier and the sum of the
monthly, credits to the United States. It would seem clear, therefore, that ho
amount is payable to the carrier under the provisions of this section until the
difference between the sum of the credits to the carrier and the sum of the
credits to the United States has been ascertained by the commission.
With reference to the case of the carrier who operated its railroad or system
of transportation for less than a year during, or for none of, the test period,
paragraph (f) provides that there shall be payable to such carrier its deficit in
railway operating income for that portion (as a whole) of the period of Federal
control during which it operated its own railroad or system of transportation.
Manifestly nothing is payable under this provision until the amount of the
deficit for the whole period has been determined by the commission.
Paragraph (g) of said section 204 provides:
" ( g ) The commission shall promptly certify to the Secretary of the Treasury
the several amounts payable to carriers under paragraph (f). The Secretary of
the Treasurv is hereby authorized and directed thereupon to draw warrants in




158

REPORT ON TFIE FINANCES.

favor of each such carrier upon the Treasury of the United States for the
amount shown in such certificate as payable thereto. Ah amount sufficient to
pay such warrants is hereby appropriated out of any money in the Treasury
not otherwise appropriated."
The act of May 8, 1920, 41 Stat., 590, provides:
" The Interstate Commerce Commission in certifying to the Secretary of the
Treasury the amount payable to any carrier under paragraphs (f) and (g) of
section 204 of the transportation act, 1920, also shall certify to the Secretary of
the Treasury such sums, if any, as may be due from such carrier to the President (as operator of transportation systems under Federal control) on account
of traffic balances or other indebtedness. The amount so certified to be due
the President, upon his request, shall bc deducted by the Secretary of the
Treasury from the amount so certified to be due such carrier and thereupon
.shall be transferred from the appropriation made in paragraph (g) of the said
section 20^ and credited by him to the appropriation made in section 202 of the
transportation act, 1920. Such deductions shall be consider^ as a payment
pro tanto of such indebtedness to the Government.*'
Paragraph 1 of the certificate now under consideration is not in the language
of the law and probably was written with the intention that it should not be
taken as an ascertainment by the commission of the aniount due. It might be
construed as a sufficient authority for payment by you if it stood alone and
was not qualified by the provisions of paragraph 3. But you are not authorized, however, under the lav/ to accept a qualified certificate. At^hen the
commission certifies to you under authority of paragraph (g) of section 204
that an amount set forth in the certificate is payable to a carrier under paragraph (f) you are justified in assuming that the amount so certified has been
ascertained in accordance with the provisions of paragraphs (c), (d), (e), and
(f), but such certificate must be unqualified and without reference to any
future certification of additional amounts, for paragraph (g) does not authorize such procedure.
The specific question submitted by you is answered in the negative, and in
no case are you authorized to make payment under the provisions of paragraph
(g) of section 204 of the act in the absence of an unqualified certificate from
the commission that the amount of the proposed payment is payable under
paragraph (f).
The certificate and accompanying 'papers are returned herewith.
Respectfully,
^ W. W. WARWICK, Comptroller.

Section 209.
I n response to a request of the Treasury for an estimate, the Interstate Commerce Commission has stated that in its opinion, based upon
the sworn monthly reports of Class I carriers, the total amount necessary to make good the guaranty provided by section 209 will aggregate approximately $600,000,000. Under the provisions of paragraphs (h) and (i) of this section, by which the commission is
authorized to certify advances to be made to the carriers on account
of the sum estimated to be necessary to make good the guaranty
if the carriers should apply for such advances during the guaranty
period of six months from March 1, 1920, the Treasury has received




SECRETARY OF THE TREASURY.

159

from the commission up to NoA^ember 15, 1920, certificates for advances-as follows:
Date of
certificate.

Carrier.

Mar. 26,1920
Do
Apr. 1,1920
Apr. 8,1920
Do..,
Apr. 12,1920
Apr. 13,1920
ADP. 17,1920
Apr. 20,1920
Do
,
Apr. 26,1920
Do
,
Apr. 27,1920
Apr. 28,1920
May 4,1920
Do
Do
,
Do
May 10,1920
Do
,
Do..
Do
Do
Do

Buffalo, Rochester & Pittsburgh Ry. Co
Atlanta & St. Andrews Bay Ry. Co
Denver & Salt Lake R. R. Co., W. R. Freeman ahd C. Boettcher, receivers.
Kansas City, Mexico & Orient Ry. Co. of Texas
Kansas City, Mexico & Orient R. R. Co., W. T. Kemper, receiver
International & Great Northern Ry. Co., James A. Baker, receiver
Gulf, Florida & Alabama Ry. Co., John T. Steele, receiver
Electric Short Line Ry. Co
Missouri & North Arkansas R. R. Co., C. A. Phelan, receiver
Wicliita Northwestern Ry. Co
Lehigh Valley Railroad Co
Pittsburgh & West Virginia Ry. Co
Wabash Ry. Co
Delaware & Hudson Co
Central New England Ry. Co
•
Minneapolis & St. Louis R. R. Co
'..
New York. New Haven & Hartford R. R. Co
Seaboard Air Line Ry. Co
Aransas Harbor Terminal Ry
Atlanta, Bilmingham & Atlantic Ry. Co
Bullfrog Goldfield R. R Co
Delaware & Northern R. R. Co. 1
1
Detroit,, Bay City & Western R. R. Co
Georgia & Florida Ry., W. R. Sullivan, L. M. Williams, and J. F. Lewis,
receivers.;
Memphis, Dallas & Gulf R. R. Co
-.
Midland Ry
,
Central Vermont Ry. Co
RutlJmd R. R. Co
Chicago,' Milwaukee & St. Paul Ry. Co
°.
Lehigh Valley R. R. Co
Fort Dodge, Des Moines & Southern R. R. Co.
Nevada Copper Belt R. R. Co
Ann Arbor R. R. Co
Gulf, Texas & Western Ry. Co
Moble& OhioR. R. Co
Cumberland & Manchester R. R. Co
New York, New Haven & Hartford R. R. Co
Fort Dodge, Des Moines & Southern R. R. Co
Central New England Ry. Co
Georgia, Florida & Alabama Ry. Co
Minneapolis & St. Louis R, R. Co
"
Wichita Northwestern Ry. Co
Trinity & Brazos Valley Ry. Co., John A. Hulen, receiver
Denver & Salt Lake R. R. Co., W. R. Freeman and C. Boettcher, receivers .
Gulf, Florida & Alabama Ry. Co., John T. Steele, receiver
Atlanta, Birmingham & Atlantic Ry. Co
Chicago, Milwaukee & Gary Ry. Co
Memphis, Dallas & Gulf R. R. Co
Pemisylvania R. R. Co
Delaware & Hudson Co
Kansas City, Mexico & Orient Ry. Co. of Texas
Kansas City, Mexico & Orient R. R. Co., W. T. Kemper, receiver
Brooklyn Eastern District Terminal
Chicago Junction Ry, Co
Delaware. Lackawanna & Western R. R. Co
Detroit, Bay City & Western R. R. Co
Chicago, Peoria & St. Louis R. R. Co., B. Wilson and W. Cotter, receivers.
Electric Short Line Ry. Co
Waterloo, Cedar Falls & Northern Ry. Co
•.
Winston-Salem Southbound Ry. Co
Chicago. Milwaukee & St. Paul Ry. Co
Maine Central R. R. Co
Randolph & Cumberland Ry. Co
AtlEintic & Western R. R. Co.
Great Northern Ry. Co
Rutland R. R. Co
•
Shearwood Ry. Co
Chicago & Erie R. R. Co
Erie R . R . Co
....p
Delaware & Hudson Co
Gulf, Mobile & Northern R. R. Co
Seaboard Air Line Ry. Co
Gulf, Florida & Alabama Ry. Co., John T. Steele, receiver
Lehigh Valley R. R. Co
Marion & Rye VaUey Ry. Co
Nevada Copper Belt R. R. Co
Rapid City, Black Hills & Western R. R. Co

May 11,1920
• May 14,1920
May 20,1920
Do
May 21,1920
Do
,
May 22,1920
May 24,1920
May 26,1920
Do
Do
Do
May 28,1920
May 29,1920
June 4,1920
Do
Do
,
Do
June 5,1920
June 8,1920
Do.......
June 10,1920
Do.!
Do
Do
June 12,1920
Do
Do
June 17,1920
Do
,
Do
,
Do
June 19,1920
June 21,1920
Do
,
Do
June^4,1920
Do
Do
June 26,1920
Do
Do
Do.......
June 28,1920
Do
June 29,1920
Do
Do
July 1,1920
Do
Do
Do
Do




$766,000'
30,000
215,000'
89,000
120,000365,00b
75,000
25,000v
200.000
ISAOOO
500,000
100,000
1,000,000^
750,000'
457,000'
250,000'
923,0001,200,000
12,000'
150,000
2,500'
3,500'
25,000'
145,000'
50,000
20,000'
100,000'
125,000
2,265,000'
1,500,000
75,000'
10,000'
100,000'
45,000
550, ood'
8,000
2,504,000
62,500t
416,000
50,000'
300,000
5,000
205,000
160,000'
25,000
200,000'
28,534
25,000
8,000,000
630,000
154,000
126,000'
100,000
250,000
1,142,000
25,000
76,000
20,000
85,000
30,000
4,340,000
1,000,000
7,500
7,000
3,000,000
125,000
1,500
485,000
3,615,000
815,000
100,000
750,000
75,000
1,500,000
5,250
10,000
12,000

160
D a t e of
certificate.

REPORT ON T H E FINANCES.

Carrier.

W a b a s h R y . Co
W i c h i t a N o r t h w e s t e r n R y . Co
Gainesville M i d l a n d R y
C e n t r a l R . R . Co. of N e w Jersey
M i n n e a p o l i s & S t . L o u i s R . R . Co
'...
Ocilla S o u t h e r n R . R . ' C o . , J. A . J. H e n d e r s o n , M. W . G a r b u t t , a n d J. F .
Grey, receivers
V i r g i n i a S o u t h e r n R . R . Co
Do
July
8,1920 Carrollton & W o r t h v i l l e R . R . Co
J u l y 9,1920 Chicago, M i l w a u k e e & St. P a u l R y . Co
Bullfrog Goldfield R . R . Co
Do
:
J u l y 10,1920 Gulf, T e x a s & W e s t e r n R y . Co
J u l y 13,1920 C e n t r a l V e r m o n t R y . Co
Chicago J u n c t i o n R y . Co
'Do
Shearwood R y . Co
Do
J u l y 15,1920 D e l a w a r e , L a c k a w a n n a & W e s t e r n R . R . Co
.do.
Do
F o u r c h e R i v e r Valley & I n d i a n T e r r i t o r y R y . Co
Do
Minneapolis, St. P a u l & Sault Ste. Marie R y . Co
Do
M t . J e w e t t , K i n z u a & Rit,erville R . R . Co
Do
J u l y 17,1920 D e t r o i t , B a y City & W e s t e r n R . R . C o . . - D e t r o i t T e r m i n a l R . R . Co
Do
Macon, D u b l i n & S a v a n n a h R . R . Co
Do
Norfolk & W e s t e r n R y . Co
:
Do
,
J u l y 19,1920 .Brooklyn E a s t e r n D i s t r i c t T e r m i n a l
J u l y 20,1920 .Franklin & P i t t s y l v a n i a R . R . Co
Norfolk S o u t h e r n R . R . Co
-•
Do
J u l y 21,1920 P e n n s y l v a n i a R . R . Co
J u l y 22,1920 E r i e R . R . Co
F e r n w o o d , C o l u m b i a & Gulf R . R . Co
Do-Monson R . R . Co
Do
J u l y 23,1920 Buffalo, Rochester & P i t t s b u r g h R y . Co
Chicago, Milwaukee & S t . P a u l R y . Co
Do
Seaboard A i r L i n e R y . Co
Do
J u l y 24,1920 Chicago Great W e s t e r n R . R . Co
Do
Delaware & N o r t h e r n R . R . Co:
J u l y 26,1920 Chesapeake W e s t e r n R y
J u l y 27,1920 B o y n e City, Gaylord & A l p e n a R . R . Co
^
J u l y 28,1920 Georgia & F l o r i d a R y . , W . R . S u l l i v a n , L . M . W i l l i a m s , a n d J . F . L e w i s ,
receivers
J u l y 29,1920 Gulf, Mobile & N o r t h e r n R . R . Co
Do
Gulf, T e x a s & W e s t e r n R y . Co
J u l y 30,1920 Jefferson & N o r t h w e s t e r n R y . Co
M e m p h i s , Dallas & Gulf R . R . Co
:
Do
Missouri Pacific R . R . Co
Do
;..:..-...
J u l y 31,1920 B i r m i n g h a m & N o r t h w e s t e r n R y . Co
Chicago, Milwaukee & G a r y R y . Co
Do
Aug. 3,1920 Chesapeake W e s t e r n R y
Wilkes-Barre & E a s t e r n , R - R . Co
Do
A u g . 4 1920 Carrollton & W o r t h v i l l e R . R . Co
K a n s a s City, Mexico & Orient R y . Co. of T e x a s
Do..
N e w Y o r k , S u s q u e h a n n a & W e s t e r n R . R . Co
.•
Do
Norfolk & W e s t e r n R y . Co
•.
- Do
,
Aug. 6,1920 N e w Y o r k , N e w H a v e n & Hartford R . R . Co
Aug. 7,1920 Gulf, Mobile & N o r t h e r n R . R . Co
D o . . . . . . . .Mobile & Ohio R . R . Co
Muscatine, BurlingtOQ & S o u t h e r n R . .R. Co
Do
N e v a d a Copper .Belt R . R . Co
'
Do
P a r i s & M o u n t P l e a s a n t R . R . C o . , R . W . W o r t h a m , receiver
Do
R a n d o l p h & C u m b e r l a n d R y . Co
Do
W i c h i t a Falls & N o r t h w e s t e r n R y . Co., C. E . Schaff, receiver
:
Do
A u g . 10,1920 A d i r o n d a c k & St. L a w r e n c e R . R . Co
Chicago, Milwaukee & St. P a u l Ry*. Co
!
Do
Chicago R i v e r & I n d i a n a R . R . Co
Do
D o . : . . . . . Gulf, F l o r i d a & A l a b a m a R y . Co., J o h n T . Steele, receiver
Missouri & N o r t h A r k a n s a s R . R . Co., C. A . P h e l a n , receiver.
Do
A u g . 12,1920 .Birmingham & N o r t h w e s t e r n R y . Co
Central N e w E n g l a n d R y . C o . . 1
Do
Maine Central R . R . Co
:
Do
N a s h r i l l e , Chattanooga & S t . Louis R y
,.
Do
Norfolk S o u t h e r n R . R . Co
Do
P e m i s y l v a n i a R . R . Co
Do
Peoria & P e k i n U n i o n R y . Co
Do.
Aug. 13,1920 N e w Orleans, T e x a s & Mexico R y . Co
W i c h i t a F a l l s &. N o r t h w e s t e r n R y . Co., C. E . Schaff, receiver
Do
Aug. 14,1920 A t l a n t a , B i r m i n g h a m & A t l a n t i c R y . Co
Central R . R . Co. of N e w Jersey
Do
Chicago J u n c t i o n R y . Co
Do
C i n c i n n a t i , I n d i a n a p o l i s & W e s t e r n R . R , Co
Do
F e r n w o o d , C o l u m b i a & Gulf R . R . Co
Do.
H u n t i n g d o n & B r o a d T o p M o u n t a i n R . R . & Coal Co
Do
Missouri, K a n s a s & T e x a s R y . Co., C h a s . E . Schaff, receiver
Do
:
• D o . . . . . . . Mt. J e w e t t , K i n z u a & Riterville R . R . Co
N o r t h e r n Pacific'Ry. Co
Do
T e r m i n a l R. R . Association of S t . L o u i s
Do

J u l y 1,1920
Do
. -Do
July
6,1920
Do
Do




Amount.
$2,000,000
5,000
4,300
1,330,000,
150,000
8,000
4,500
2,500
493,000
» 5,000
20,000
150,000
250,000
1,000
1,172,500
110,000
12,000
1,000,000
4,500
15,000
100,000
50,000
1,000,000
100,000
5,000
310,000
6,600;000
1,150,000
15,000
3,000
300,000
728,245
1,000,000
1,200,000
15,000
5,000
30,000
150,000
100,000
30,000
15,000
15,000 ,
1,383,000
20,000
28,163
5,000
40,000
4,000
110,000
300,000
1,000,000
771,200
141,000
400,000
36,000
5,000
50,000
2,500
138,000
4,929
4,935,457
75,000
25,000
100,000
(8^000
128,000
750,000
300,000
240,000
30,000,000
225,000
500,000
74,800 •
100,000
1,816,411
500,000
50,000
10,000
82,715
700,000
1,500
5,000,000.
1.000,000

161

SECRETAEY OF THE TKEASUKY.
Date of
certificate.

Carrier.

Aug. 18,1920
Do
Do
Do
Aug. 19,1920
Do
Do
Do
Do
Aug. 20,1920
Do
Do.
Do
Do
Do
Do
Aug. 21,1920
Do
Do
Aug. 23,1920

Ann Arbor R. R. Co
Boston & Maine R . R
Chicago Great Western R. R. Co
Wichita Northwestern Ry. Co
Baltimore & OhioR. R. Co
Chicago, Indianapolis & Louisville Ry. Co
Fourche River Valley & Indian Territory Ry. Co
Gainesville & Northwestern R. R. Co
Minneapolis & St. Louis R. R. Co
Illinois Central R. R. Co
Midland Ry
Norfolk & Western Ry. Co
Pittsburgh, Cincinnati, Chicago & St. Louis R. R. Co
St. Louis-San Francisco Ry. Co
Nashville, Chattanooga & St. Louis Ry
Seaboard Air Line Ry. Co
Gulf, Mobile & Northern R. R. Co
Meridian & Memphis Ry. Co
:
Chicago. St. Paul, Minneapolis & Omaha Ry. Co
Philadelphia & Reading Ry. Co
Wichita FaUs & Northwestern Ry. Co., C, E. Schaff, receiver.
Central of Georgia Ry. Co
1
Central Vermont Ry. Co
.do.
HawkiusviUe & Florida Southern Ry. ^o., R. B. Pegram, receiver
,
lUinois Central R. R. Co
,
International & Great Northern Ry. Co., Jas. A. Baker, receiver
Kansas City, Mexico & Orient R. R. Co., W. T. Kemper, receiver
Kansas Cit)'-, Mexico & Orient Ry. Co. of Texas
,
Kansas City Southern Ry. Co
,
Missouri, Kansas & Texas Ry. Co. of Texas, C. E. Schaff, receiver
Missouri Pacific R. R. Co
St. Jcseph & Grand Island Ry. Co
Charleston & Western Carolina Ry. Co
,
Wabash Ry. Co
Minneapolis, St. Paul & Sault Ste Marie Ry. Co
Atlantic & Western R. R. Co
;
,
Bangor & Aroostook R. R. Co
Chicago, Milwaukee & St. PaulRy. Co
Pennsylvania R. R. Co
New York, Now Haven & Hartford R. R. Co
American Railway Express Co
Atlantic Coast Line R. R. Co
,
Baltimore, Chesapeake & Atlantic Ry. Co
Chesapeake & Ohio Ry. Co.
Delaware, Lackawanna & Western R. R. Co
New York, Philadelphia & Norfolk R. R. Co
Pittsburgh & West Virginia Ry. Co
Chicago & Erie R. R. Co
Maryland, Delaware & Virginia Ry. Co
New York, Susquehanna & Western R. R. Co
Western Maryland, Ry. Co
Atlanta^ Birmingham & Atlantic Ry. Co
Atlanta & St. Andrews Bay Ry. Co.
Birmingham & Northwestern Ry. Co
CarroUton & WorthviUe R. R. Co
Central New England Ry. Co
Chicago & Alton R. R. Co
Chicago & Eastera lUinois R. R. Co., Wm. J. Jackson, receiver
Chicago, Milwaukee & Gary Ry. Co
:
Chicago, Peoria & St. .Louis R . R . Co., B. Wilson and W. Cotter, receivers. -.
Cincinnati, Indianapolis & Western R. R. Co
:
Denver & Salt Lake R. R. Co^ W. R. Freeman and C. Boettcher, receivers..
Detroit, Bay City & Western R. R. Co
Duluth, South Shore & Atlantic Ry. Co
Erie R. R. Co
Fernwood, Columbia & Gulf R. R. Co
:
Georgia & Florida Ry., W. R. Sullivan, L. M. Williams, ahd J. F . Lewis,
receivers
Georgia, Florida & Alabama Ry. Co
do.
Great Northern Ry. Co
Gulf, Mobile & Northern R. R. Co
Gulf & Ship Island R. R. Co
Kansas, Oklahoma & Gulf Ry. Co
Louisville & Nashville R. R. Co
Lehigh Valley R. R. Co
Maxton, Alma & South Bound R. R. Co
Nevada Copper Belt R. R. Co
New York, New Haven & Hartford R. R. Co
Norfolk & Portsmouth Belt Line R. R. Co
Norfolk Southern R. R. Co
Seaboard Air Line Ry. Co
Trinity & Brazos Valley Ry. Co., Jno. A. Hulen, receiver.

0- D o . .
Aug. 24,1920
Aug. 25,1920

Do
Do
Do
Do
Do
Do
Do
Do
Do
Do
. Do
Do
Aug. 26,1920
Aug. 27,1920
Do...:...
Do
Do
Do
Aug. 28,1920
Do
Do.......
Do
Do
Do
Do
Aug. 30,1920
Do
Do
Do
Aug. 31,1920
Do
Do
Do
Do
Do
Do
Do
Do
Do
Do
Do
Do
Do
Do
Do
Do.
Do.
Do.
Do.
Do.
Do.
DoDo.
Do.
Do.
Do.
Do.
Do..
Do..
Do..

13799—FI 1920



11

Amount.
$140,000
4,000,000
500,000
5,000
6,500,000
350,000
4,500
4.500
850,000
3,000,000
10,000
4,000,000
6,100,000
3,000,000
900,000
3,500,000
112,000
20,000
900,000

2,500,000
75,000
1,750,000
50,000'
475,000
65,000
5,000,000
1,000,000
50,000
117,000
,

600,000
2,870,000

7,100,000
220,000
220,000
1,577,000
2,135,000
8,000
284,000
1,536,000
8,400,000
4,000,000
19,700,000
2,500,000
159,300
1,640,000
2,000,000
256,000
75,000
450,000
85,000

250,000
500,000
100,000
15,000
5,000
3,000
531,670
700,000
1,500,000
35,000
162,000
100,000
50,000
25,000
281,500
5,500,000
10,000
100,000
20,000
20,000
2,000,000
75,000
245,000
100,000
2,000,000
2,000,000
3,000
5,000
2,366,000
30,000

75,000
75,000
75,000'

162

REPORT ON THE FINANCES.

D a t e of
certificate.

Carrier.

A u g . 31,1920 W h e e l i n g & L a k e E r i e R y . Co
Do
W i l k e s - B a r r e & E a s t e r n R . R . Co
Oct. 9,1920 Chesapeake & Ohio R y . Co '.
Do
Norfolk S o u t h e r n R . R . Co
Oct. 11,1920 Central of G eorgia R y . Co
Do
S p o k a n e , P o r t l a n d & Seattle R y . Co
Do
Mineral R a n g e R . R . Co
Do
W e s t e r n M a r y l a n d R y . Co
Oct. 12,1920 F r a n k l i n & P i t t s y l v a n i a R . R . Co
Do
R a n d o l p h & C u m b e r l a n d R y . Co
Do
D e l a w a r e , L a c k a w a n n a & W e s t e r n R . R . Co
Do
M u s c a t i n e , B u r l i n g t o n & S o u t h e r n R . R . Co
Do
Gainesville & N o r t h w e s t e r n R . R . Co
Do
H o u s t o n & Brazos Valley R . R . C o ^ Geo. C. Morris, receiver
Oct. 13,1920 Chicago, I n d i a n a p o U s & Louisville R y . Co
Do
Carrollton & W o r t h v i l l p R . R . Co
Oct. 15,1920 Central R . R . Co. of N e w .lersey
:
Oct. 19,1920 A t l a n t a , B i r m i n g h a m & A t l a n t i c R y . Co. - D o . - . . - . - B a l t i m o r e & Ohio R . R . Co
Do
Peoria & P e k i n U n i o n R y . Co
Oct. 21,1920 K a n s a s City, Mexico & Orient R . R . Co., W . T . K e m p e r , r e c e i v e r . . .
Oct. 23,1920 U n i o n Stock Y a r d s Co. of O m a h a ( L t d . )
Oct. 25,1920 Maine Central R . R . Co
Do..
Minneapolis & St. L o u i s R . R . C o . . . ,
Do
Mt. J e w e t t , K i n z u a & R i t e r v i l l e R . R . Co
Do
Central V e r m o n t R y . Co
• Do
I n t e r n a t i o n a l & Great N o r t h e r n R y . Co., J a m e s A . B a k e r , r e c e i v e r .
Oct. 27,1920 W a b a s l ] R y . Co
N o v . 1,1920 Gainesville M i d l a n d R y
N o v . 4,1920 Jefferson & N o r t h w e s t e r n R y . Co
Do
P h i l a d e l p h i a & R e a d i n g R y . Co
Do
L e h i g h VaUey R . R . Co
Do
San A n t o n i o , U v a l d e & Gulf R . R . Co., A . R . P o n d e r , receiver
Do
Great N o r t h e r n R y . Co.
Do
Brooklyn Eastern'District Terminal
•
N o v . 9,1920 C i n c h m a t i , I n d i a n a p o l i s & W e s t e r n R . R . Co
Do
K a n s a s , O k l a h o m a & Gulf R y . Co
.'
N o v . 13,1920 E r i e R . R . Co
^
Do
Chicago & E r i e R . R . Co
Total..

Amount.

$500,000
100,000
1,060,000
75,000
700,000
200,000
70,000
500,000
6,000
5,000
700,000
10,000
3,900
37,000
150,000
1,500
2,000,000
206,000
7,500,000
20,500
150,006
65,000
550,000
200,000
3,000
200,000
450,000
500,000
7,000
15,000
2,000,000
1,500,000
25,000
1,500,000
20,000
50,00042,000
2,000,000
200,000
256,524,874

Payments under these certijScates have been made by the Treasury
up to November 20, 1920, in the aggregate amount of $250,485,374.
Up to that date the Treasury had not received frorri the Interstate
Commerce Commission any certificate certifying the total amount
necessary to make good to a carrier the guaranty provided by section
209. The commission did, however, certify a partial paj^^ment to a
carrier which had not during the guaranty period applied for an
advance under paragraph ( h ) . The Comptroller of the Treasury
decided that the Secretary of the Treasury is not authorized, except
in accordance with the provisions of paragraph ( h ) , to issue a
Avarrant for a partial payment on account of the amount necessary
to make good the guaranty to a carrier. The decision is as follows:
WAS.HINGTON, Octobcr 7, 1920.
The Honorable Tbe SECRETARY OF THE TREASURY.

SIR: I have your letter of September 27 transmitting two certificates which
have been submitted to you by Mr. B. H. Meyer, as chairman, Division 4, of
the Interstate Commerce Commission.
My decision is requested whether you are autliorized under tlie provisiohs of
paragraph (g) of section 209 of the act of February 28, 1920 (41 Stat., 466), to
make payment on^ the certificates as submitted.




SECRETARY OF THE TREASURY.

163

.. The act in question provides, among other tilings, for the termination of
federal control of railroads and systems of transportation on March 1, 1920.
Section 209 of the act provides for certain guaranties to the carriers for a
period of six months after terniination" of Federal control. With reference
to said guaranties paragraphs (g) and (h) of the section provide:
**(g) The commission shall, as soon as practicable after the expiration of
the guaranty period, ascertain and certify to the Secretary of the Treasury the
several amounts necessary to make good the foregoing guaranty to each
carrier. The Secretary of the Treasury is hereby authorized and directed
thereupon to draw warrants in favor of each such carrier upon the Treasury
of the United States for the amount shown in such certificate as necessary to
make good sucli guaranty. An amount sufficient to pay such warrants is hereby
appropriated out of any money in the Treasury not otherwise appropriated.
"(h) Upon application of any carrier to the commission, asking that during
the guaranty period there may be advanced to it from time to time such sums,
not in excess of the estiinated amount necessary to make good the guaranty,
as are necessary to enable it to meet its fixed charges and operating expenses,
the commission may certify to the Secretary of the Treasury the amount of
and times at which such advances, if any, shy 1 be made. The Secretary of the
1
Treasury, on receipt of such certificate, is authorized and directed to make the
advances in the amounts and at the times specified in the certificate upon the
execution by the carrier of a contract, secured in such manner as the Secretary
may determine, that upon final determination of the amount of the guaranty
provided for by this section such carrier will repay to the United States any
amounts which it has received from such advances in excess of the guaranty,
with interest at the rate of 6 per centum per annum from the time such excess
was paid. There is hereby appropriated out of any money in the Treasury
not otherwise appropriated a. sum sufficient to enable the Secretary of the
Treasury to make the advances referred to in this subdivision."
One of the certificates submitted, No. A-246, is as follows:
" Interstate Commerce Commission, Washington. Certificate No. A-246.
Certificate of Interstate Commerce Commission under section 209 (g), transportation act, 1920.
''To the Secretary of the Treasury of the United States:
" 1. The Interstate Com'mercc Commission, hereinafter called the commission,
hereby certifies that the Grand Trunk V/estern Railway Company, a corporation of the States of Michigan and Indiana, hereinafter called the carrier, is
a carrier as defined in paragraph (a) of section 209 of the transportation act,
1920; that the carrier filed with the commission on or before March 15, 1920,
a written statement that it accepted all of the provisions of the said section 209.
" 2. The cominission has ascertained and hereby certifies to the Secretary
of the Treasury that the amount of five hundred thousand dollars ($500,000)
is necessary to make good to said carrier the guaranty provided by section 209
of the transportation act, 1920.
" 3. This certification is made subject to the proviso that the commission may
hereafter certify to the Secretary of the Treasury such additional amounts as
m^ay be necessary to make good to the carrier the guaranty of said section 209
of the transportation act, 1920.
" Dated this 25th day of September, 1920.
" By the commission, Division 4.




"(Signed)

GEORGE B. MCGINTY, ^ecre^to-ri/."

164

REPORT ON THE FINANCES.

The other certificate, No. A-247, is identical with this except that it relates
to the Detroit, Grand Haven & Milwaukee Railroad Co. and is for $250,000.
Your doubt as to the sufficiency of this certificate arises from the fact that
paragraph 2 thereof does not state that $500,000 is the amount necessary to
make good the guaranty. It is merely to the effect that said amount is necessary to make good the guaranty and it is qualified by paragraph 3, which reserves to the commission the right thereafter to certify " such additional amounts
as may be necessary to make good to the carrier the guaranty."
Considering the form in which this certificate is made and the amount stated
therein it is apparent that said amount is not the amount ascertained by the
commission to be necessary to make good the guaranty to this carrier, but is,
in fact, only an amount estimated to be within the amount necessary to make
good said guaranty. In other words, it is to be regarded as an advance or
partial payment or payment on account on the carrier's claim under the
guaranty. This raises the question whether the provisions of paragraph (g)
authorize such advances or partial payments or payments on account.
The direction in the statute is that the commission shall, as soon as practicable after the expiration of the guaranty period, ascertain and certify the
several amounts necessary to make good the guaranty to each carrier, and that
the Secretary of the Treasury shall draw warrants " for the amount shown in
such certificate as necessary to make good such guaranty." From this language it would appear to be clear that paragraph (g) contemplates and authorizes only one payment in each case, said payment to be made after the commission shall have ascertained and certified the amount necessary to make
good the guaranty. That such was the intent and purpose of this paragraph
is further indicated by the fact that in the succeeding paragraph provision was
made for advances during the guaranty period of such sums, not in excess of
the estimated amount necessary to make good the guaranty, .as are necessary
to enable the carrier to meet its fixed charges and operating expenses. Having
thus provided for the fixed charges and operating expenses during the period
of six months after termination of Federal control and having by release
from Federal control and by authorizing increased rates enabled the carrier
to make its own provision for caring for its financial obligations after the six
months' guaranty period, I think it is but reasonable to assume that Congress
intended that the payments authorized under paragraph (g) should be made
only after a carrier had submitted its entire claim under the guaranty and
the commission had ascertained the amount due thereon. The law providing'
for the guaranty was enacted before the beginning of the guaranty period, and
it must be assumed that all carriers affected thereby were aware of its provisions at the time it was passed. Therefore if any carrier neglected during the
guaranty period to avail itself of the provisions of paragraph (h) or to have
its records and evidence in proper shape for the presentation of its entire claim
under paragraph (g) within a reasonable time after the termination of the
guaranty period, the responsibility for delay in receiving final payment under
the guaranty must rest with the carrier and not the Government.
It is noted that, notwithstanding the fact that the advances authorized under
paragraph (h) are in no case to be in excess of the estimated amount necessary to make good the guaranty, provision is made in said paragraph for securing the United States against the contingency of such advances being in excess
of the amount of the guaranty as finally determined by the commission. Since
it was deemed necessary to provide against overpayments resulting from erroneous estimates during the guaranty period, it must be assumed that similar
provision would have been made in paragraph (g) if said paragraph had been




SECRETARY OF THE TREASURY.

165

intended to authorize payments based on estimates. No such provision having
been made, the only logical inference is that payments on estimates are not
authorized under said paragraph.
Reading paragraph (g) in the light of the other provisions of section 209
and considering the number of debit and credit items which may be involved
in the determination of the amount payable upon final settlement under the
guaranty, I am of opinion that the making of advances or partial payments
undur said paragraph (g) is not within either the letter or the spirit of the law.
I can find nothing in the law to justify a conclusion to the effect that said
paragraph (g) authorizes any payment to a carrier before the amount due
under the guaranty.has been ascertained by the commission. I think it is
quite clear that the law does not give to the carrier the right to file its claim
piecemeal and to have certificates for paj^ment made by the commission without limit as to number or time.
If payment is authorized upon certificates made in the form hereinbefore set
forth, then there is no legal requirement that any settlement made uncier the
provisions of paragraph (g) be regarded as final, and there would be no end
to the work of the commission in examining and reexamining the accounts of
the carriers, as new items of claim might be presented for years to come. I
can not believe that such was the intent or purpose of the law. I think the
law contemplated the adjudication and final settlement of these claims as
soon after the expiration of the guaranty period as practicable.
The needs of certain carriers for funds is recognized, but this office may not
construe the law to authorize the payment of public money except in such
amounts and at such times as Congress has authorized by law, no matter how
urgent the needs of claimants.
Answering your question specifically, I have to advise that you are not
authorized to issue a warrant upon a certificate in the form submitted in this
case or upon any other certificate which does not show that the amount stated
therein has been ascertained and' certified by the commission as the amount
necessary to make good the guaranty.
You ask also whether you are now authorized to make advances under paragraph (h) in cases in which application therefor was filed with the commission
on August 31.
In reply to this question you are advised that you are authorized to make
advances under paragraph (h) on all applications filed with the commission
prior to September 1, 1920, subject, of course, to all the conditions and requirements of said paragraph, one of which is that the advance must be necessary
to enable the carrier to meet its fixed charges and operating expenses during
the guaranty period.
The carrier having applied in time is not responsible for such delay as may
be necessary in action by the Interstate Commerce Commission or the Treasury
Department.
The certificates and accompanying papers are returned herewith.
Respectfully,
<
•
W. W. WARWICK, Comptroller.

Section 210.
As originally enacted, section 210 placed upon the Secretary of the
Treasury the duty of prescribing the time, not exceeding five years
from the making thereof, within which loans certified by the Interstate
Commerce Commission should be repaid by the carriers, the security




166

REPORT ON T H E FINANCES.

to be taken therefor, the terms and conditions of the loan and the
form of the obligation to be entered into. By section 5 of the sundr}'^
civil appropriation act, approved June 5, 1920, section 210 was
amended so as to provide that the time, not exceeding fifteen years
from the making thereof, within which a loan is to be repaid, the
security which is to be taken therefor and the terms and conditions
of the loan shall be in accordance with the findings and certificate of
the commission, which shall certif}^, among other things, that the
applicant, in the opinion of the commission, is unable to provide
itself from other sources with the funds necessary for the purposes
mentioned. Up to November 15, 1920, the Treasury had received
from the commission, in connection with section 210, certificates for
loans,as follows:

1920.
May 21
May 24
July
July
July 14
July 19
Ju y 21
Aulg. 5
Aug. 25
Aug. 27
Sept. 10
Sept. 15
Sept. 23
Sept. 30
Oct. 1
Oct. 6
Oct. 7
Oct. 8
Do....
Oct. 9
Do....
Oct. 11
Do....
Oct. 12
Do....
Do....
Oct. 19
Do....
Oct. 22
^Do:...
Oct. 27
Nov. 2
Nov. 4
Nov. 9
Do-...

Boston & Maine R . R
Salt Lake and Utah R. R. Co
Carolina, Clinchfjeld and Ohio Ry
Bangor and Aroostook R. R. Co
Salt Lake and Utah .R. R. Co
Atlanta, Birmingham and .^Vtlantic Ry. Co
Central of Georgia R y. Co
*
Western Maryland Ry. Co
Erie R. R. Co
.'
Great Northern Ry. Co
Chicago and Western Indiana R. R. Co
Seaboard Air Line Ry. Co
Terminal Railroad Association of St. Louis
The Chicago, Rock Island and Pacific Ry. Co
Baltim.ore and Ohio R. R. Co
Carolina, Clinchfield and Ohio Ry
Chicago Great Western. R. R. Co
Illinois Central R. R. Co
The Virginian Ry. Co
,
Maine Central R. R. Co
do
Missouri Pacific R. R. Co '.
Kansas City, Mexico and Orient R. R. Co., W. T. Kemper, receiver
The Wheeling and Lake Erie Ry. Co
do
Long Island R. R. Co
Central New England R;y. Co
Chicago, Indianapolis &'.Louisville Ry. Co
Erie R . R . Co...
Pennsylvania R. R. Co
Northern Pacific Ry. Co
Delaware & Hud.son Co
:
Rutland R. R. Co
Shearwood Ry. Co
Chicago, Rock Island & Pacific .Ry. Co
Total

S5,000,000
64,600
2,000,000
200,000
235,400
200,000
815,000
300,000
8,000,000
17,910,000
8,000,000
6,073,400
89.6,925
2,000,000
3,000,000
1,000,000
276,000
4,440,000
2,000,000
653,000
1,000,000
8,871,760
2,500,000
1,460,000
1,000,000
719,000
300,000
200,000
1,840,700
6,780,000
6,000,000
1,125,000
61,000
29,000
7,862,000
102,812,785

Up to November 15, 1920, loans aggregating $81,621,085 have been
made by the Treasury pursuant to these certificates.
Under paragraph (d) of section 210, the Secretary of the Treasury
is authorized to call upon the Federal Eeserve Board for advice and
assistance with respect to any application or loan. The Secretary
has availed himself of this privilege and has had great assistance




SECRETARY OF T H E TREASURY.

16.7

from the board. The latter created a committee known as the Eailway Loan Advisory Committee to the Federal Eeserve Board. This
committee has made recommendations to the board with respect to
the form of obligation to be taken for each loan. At the request of
the Secretary of the Treasury, it has also examined the various applications for advances under paragraph (h) of section 209, and has
given the Secretary the benefit of its recommendations with respect
to the security to be taken in connection with each advance. The
committee and its secretary have also rendered invaluable assistance
to the Secretary of the Treasury generally in the performance of the
duties imposed upon him by the transportation act, 1920.
D I S C O N T I N U A N C E OF T H E SUBTREASURIES.

As a result of recent legislation, a Treasury organization of much
historic interest will soon disappear. An act approved May 29, 1920,
authorized the Secretary of the Treasury to discontinue the subtreasuries and to transfer any or all of their duties to the Treasurer
of the United States, or to the mints or assay offices, or to the Federal
reserve banks.
The Independent Treasury was established by the act of August 6,
1846, after the short-lived subtreasury system of 1840-1841, as the
outgrowth of the unsatisfactory fiscal and financial conditions then
existing. The Second United States Bank had finally closed its doors
in 1841, and the methods of the State banks which were being used as
Government depositaries were considered unsound. The intent of
the law was to effect a complete.divorce between the Government's
finances and the banks. I t provided for the establishment of subtreasuries at Philadelphia, New York, New Orleans, Boston, Charleston, and St. Louis. Later the Charleston subtreasury was discontinued and additional subtreasuries were established at Baltimore,
Chicago, Cincinnati, and San Francisco. These nine subtreasuries
have continued in operation until the present time. The necessity
for their existence, however, has steadily diminished as the relations
betAveen the Government and the banks of the country have become
closer, and has finally disappeared with the establishment and development of the Federal Eeserve System.
Until the Civil War, the subtreasury system maintained a strict
independence. Government securities were marketed independently
of the banks and no banks were used as depositaries. The Government was practically its own banker and was expected to keep its
own money and have no connection with banking institutions. With
the establishment of the national banking system in 1863, however,
and the unprecedented fiscal operations incident to the Civil W a r ,
this independence gradually began to disappear and national banks




168

•

REPORT ON THE FINANCES.

became depositaries of public mone^^s and financial agents of the
Government. This change in the relations of the Government and
the banks and in the position of the Independent Treasury developed
in the intervening years and culminated with the passage of the
Federal reserve act in 1913, under which the Federal reserve banks
were established and • authorized to act as depositaries and fiscal
agents of the United States. Since that time, the Federal Eeserve
System has become so thoroughly established that not only are the
subtreasuries no longer needed by the Treasury in connection with
the fiscal operations of the Government or the collection and disbursement of the public moneys, but the Federal reserve banks are already
performing many of the functions and duties previously performed
only by the subtreasuries,
The functions and duties performed by the subtreasuries have been,
in general, as follows:
The acceptance of gold coin and standard silver dollars for exchange.
The acceptance of United States notes. Treasury notes, gold and
silver certificates and subsidiary and minor silver coins for redemption.
The issue of gold order certificates on gold deposits.
The exchange of various kinds of money for other kinds of money.
The cancellation and shipment to Washington of unfit currency
and the laundering of unfit currency which permits of this process.
The receipt from United States depositary banks of their surplus
deposits of internal revenue, customs, money order, postal, and other
Government funds.
The receipt of deposits of postal savings funds, post-office funds,
money-order funds, deposits on account of the 5 per cent fund for
the redemption of national-bank notes, deposits of interest on public
deposits, and deposits of fuiids by Government disbursing officers.
The payment of United States coupons.
The encashment of checks and warrants drawn against the Treasurer of the United States.
The receipts of funds for transfer to some other point through
another subtreasury there located.
The keeping in custody of reserve and trust funds consisting of
gold coin and bullion and standard silver dollars securing gold and
silver certificates and United States notes.
Believing that the work of the subtre.asuries could be performed
more efficiently and economically by the Treasurer of the United
States, the mints and assay offices, and the Federal reserve banks,
the Secretary of the Treasury on April 18, 1919, designated a committee composed of representatives of the Treasury and the Federal




SECRETARY OF THE TREASURY.

169

Eeserve Board, including C. S. Hamlin, of the Federal Eeserve
Board, as chairman, the Comptroller of the Treasury, the Assistant
Treasurer of the United States, the Chief of the Division of Loans
and Currency, and the Chief of the Division of Public Moneys, to
consider and report to the Secretary upon the question of the advisability of discontinuing any or all of the subtreasuries and the
transfer of any or all of their duties and functions to the Treasurer
of the United States, the Federal reserve banks, or other agencies.
After'an exhaustive study of the duties performed b y t h e several subtreasuries and their relations to the Treasury Department, the banks,,
and the public, and careful consideration of the extent to which the
Federal reserve banks could assume the subtreasury functions, the
committee submitted a report to the Secretary of the Treasury in the
form of a tentative draft of a bill to provide for the discontinuance
of the subtreasuries and the transfer of their duties and functions.
After further investigation and deliberation, the Secretary recommended to the Congress that the nine existing subtreasuries be abolished and that provision be made to transfer their duties and functions to the Treasurer of the United States, the United States mints
and assay offices, and the Federal reserve banks. I n accordance
with that recommendation the following authority was incorporated
in the legislative, executive, and judicial appropriation act, approved
May 29, 1920:
"
.
I N D E P E N D E N T TREASURY.

Section 3595 of the Revised Statutes of the United States, as amended, providing for the appointment of an Assistant Treasurer of the United States at
Boston, New York, Philadelphia, Baltimore, New Orleans, St. Louis, San Francisco, Cincinnati, and Chicago, and all laws or parts of laws so far as they authorize the establishment oc maintenance of ofiices of such Assistant Treasurers
or of Subtreasuries of the United States are hereby repealed from and after
July 1, 1921; and the Secretary of the Treasury is authorized and directed to
discontinue from and after such date or at such earlier date or dates as he may
deem advisable, such subtreasuries and the exercise of all duties and functions
by such Assistant Treasurers or their offices. The office of each Assistant Treasurer specified above and the services of any officers or other employees assigned
to duty at his office shall terminate upon the discontinuance of the functions
of that office by the Secretary of the Treasury.
The Secretary of the Treasury is hereby authorized, in his discretion, ta
transfer any or all of the duties and functions performed or authorized to be
performed by the Assistant Treasurers above enumerated, or their offices, to the
Treasurer of the United States or the mints or assay offices of the United States,
under such rules and regulations as he may prescribe, or to utilize any of the
Federal. reserve banks acting as depositaries or fiscal agents of the United
States, for the purpose of performing any or all of such duties and functidns,
notwithstanding the limitations of section 15 of the Federal reserve act, as
amended, or any other provisions of law: Provided, That if any moneys or
bullion, constituting part of the trust funds or other speciaj funds heretofore




170

REPORT ON TFIE FINANCES.

required by law to be kept in Treasury offices, shall be deposited with any
Federal reserve bank, then such moneys or bullion shall by such bank be kept
separate and distinct from the assets, funds, and securities of the Federal reserve bank and be held in the joint custody of the Federal reserve agent and
the Federal reserve bank: Provided further, That nothing in this section shall
be construed to deny the right of the Secretary of the Treasury to use member
banks as depositaries as heretofore authorized by law.
The Secretary of the Treasury is hereby authorized to assign any or all the
rooms, vaults, equipment, and safes or space in the buildings used by the subtreasuries to any Federal reserve bank acting as fiscal agent of the United
States.
All employees in the subtreasuries in the classified civil service of the United
States, who may so desire, shall be eligible for transfer to classified civil-service
.positions under the control of the Treasury Department, or if their services
are not required in such department they may be transferred to fill vacancies
in any other executive department with the consent of such departraent. To
the extent that such employees possess required qualifications, they shall be
given preference over new appointments in the classified" civil service under
the control of the Treasury Department in the cities in which they are now
^employed.

. Acting under the authority conferred by this act, the Secretary on
August 2, 1920, appointed a Treasury committee to consider the discontinuance of the subtreasuries and the transfer of their duties and
functions, with particular reference to the individual problems presented by each of these institutions. On August 30, 1920, the Secretary promulgated, regulations with respect to the exchange, replacement, and redemption of United States paper currency through the
Federal reserve banks, which had been prepared by a Treasury committee on currency appointed in June. Eegulations were issued on
October 19, 1920, with respect to the exchange and redemption of
United States coin and the performance by Federal resexve banks
of other duties and functions heretofore performed by the subtreasuries. Circular letters under date of October 20® and October
21, 1920, have also provided, respectively, for the making of deposits for the 5 per cent redemption fund and for the transfers
of excess balances by national-bank depositaries. I n accordance
with the act, the Secretary has also taken steps to provide, so far as
possible, for the employees of the subtreasuries. Every effort is being
made to find employment in other Treasury offices in Washington or
in the field for subtreasury employees not taken over by the Federal
reserve banks. So far as possible, the custody of gold and silver
coin and bullion in the trust funds and of reserve stocks of currency
and coin formerly held by the subtreasuries is being transferred to
the Treasurer of the United States and the mints and assay offices.
Since it is necessary that the assets of each subtreasury be checked,
examined, and transferred separately, the nine subtreasuries are being •
discontinued in order. By Treasury Department Circular No. 209,




SEGRETARY OF THE TREASURY.

,171

dated October 23,1920 (Exhibit 77, p. 521), the subtreasury at Boston
was discontinued at the close of business on October 25, 1920. By
Treasury Departnient Circular No. 210, dated October 27, 1920 (Exhibit 78, p. 522), the subtreasury at Chicago was discontinued at the
close of business November 3, 1920. The subtreasury at New York
is the next to be discontinued, probably about December 1, 1920.
The remaining subtreasuries will be closed as rapidly as possible.
I t is expected that all will have been discontinued by shortly after
J a n u a r y 1, 1921.
The closing, of the subtreasuries, with the transfer of their duties
and functions, is being effected without interruption to busi^
ness and without interference with the financial operations of the
Governnient. I t is believed that the change will result in substantial
benefit to the banks and the general public and that a considerable
saving will be effected to the Government, chiefly as the result of the
greater econoniy in the use of Government balances and the reduction in operating expenses effected by abolishing the subtreasury
establishments. I n this connection it is of particular interest to note
the following description of the system of Government depositaries
as it stands with the subtreasuries eliminated.
DEPOSITS OF GOVERNMENT F U N D S .

The fiscal year 1920 witnessed important changes in the Treasury's
policies regarding the establishment and maintenance of depositaries
of public moneys. Starting in 1864 with 204 national-bank depositaries, with total deposits at the end of that fiscal year of
$39,980,756.34, the number and classes of Government depositaries
have gradually increased. On June 30, 1920, there were 587 general
national-bank depositaries, 116 limited national-bank depositaries,
9,475 special depositaries, 12 Federal reserve banks with 21 branches,
12 Federal land banks, 17 foreign depositaries, and 6 insular depositaries, with combined total deposits on that date of $358,391,340.97.
With this marked growth in the number and classes of depositary
banks, which were of great service to the Treasury during the war
period, it became of prime importance as a measure of administrative
economy strictly to regulate and closely to supervise the deposits.
With the Government borrowing money to meet its current disbursements by the sale of Treasury certificates of indebtedness at
rates of interest running as high as 6 per cent, the ordinary principles
of business administration required the elimination of all idle or
excessive balances which the Treasury might have with any of its
various depositaries.
A careful survey of the situation showed that no excessive or idle
balances were being kept with Federal reserve banks and their




172

REPORT ON THE FINANCES.

branches, or with foreign or insular depositaries. Deposits with
special depositaries under the Liberty loan acts were, by their nature,
self-limiting, and those with Federal land banks were temporary only. The situation as to balances with national bank depositaries, however, was different. Some of these balances had been
established at a time when the Government's receipts exceeded its
disbursements and deposits had been made to avoid a money stringency. .Others, had been established to enable the particular banks
to transact Government business which they were no longer transacting. During the war period, additional general depositaries had
been created for the purpose of supplying cash to disbursing officers of the Army and Navy and other disbursing officers connected with war activities. The fixed balances maintained with
other general depositaries were considerably increased to care for
Government business of a like nature. As we drew away from the
period of the war, many of these activities were discontinued.
The necessity for some depositaries ceased to exist. Large balances
with others on account of war activities were ho longer necessary.
Furthermore, with the establishment and growth of the Federal 'reserve system and the utilization of the Federal reserve banks and
their branches as depositaries and fiscal agents of the Government,
it has gradually developed that the greater part of the Government's
disbursements are now made through the Federal.reserve banks and
their branches. The practice of permitting the larger part of the
revenues of the Government to be deposited with national banks
delayed to a considerable extent the receipt of those revenues at the
Federal reserve banks and branches for disbursement. I n addition, t h a t practice necessitated the tying up of considerable amounts
of Government funds in the form of stationary balances with national bank depositaries as a basis for their handling the Government's receipts. The Treasury undertook, therefore, during the
fiscal year a concerted effort to reduce its balances carried with
national bank depositaries, both for the purpose of cashing checks
knd as a basis for handling receipts, to the minimum amounts absolutely necessary for the transaction of essential Government business.
To that end the Secretary formulated and announced in Treasury
Department Circular No. 176, dated December 31, 1919 (Exhibit 79,
p. 523), definite regulations-governing deposits of public moneys.
The terms of that circular require that beginning March 1, 1920, all
checks, including bank drafts, received by collectors of internal revenue, collectors of customs, depository postmasters, and other depositors of public moneys, shall be forwarded for deposit each day
to the Federal reserve bank of the district in which the depositor's




SECRETARY OF THE TREASURY.

173

head office is located (or in case the head office is located in the same
'city with a branch Federal reserve bank to such branch Federal
reserye bank). Cash receipts only may be deposited with natiolialbank depositaries. The operation of this regulation made possible
substantial reductions in balances carried with depositaries which
had theretofore received revenues, and, in fact, the total elimination
of some of them. I t was announced in this circular also that the
Treasury would designate and maintain balances with national banks
only at points where necessary to meet the requirements of Government officers for cash for pay-roll or other official purposes, and then
only if there is no Federal reserve bank or branch located at or near
the point,.
Immediately upon the adoption of these definite policies the Government's account with each national bank depositary was subjected
to a careful and thorough examination. The Government balance
with each was adjusted in the light of these policies. As a result
the Treasury was able during the fiscal year to discontinue 628
national-bank depositaries, including 566 which transacted no Government business whatever and carried a fixed balance of $1,000 each,
and to reduce the total amount held by national-bank depositaries to
the credit of the Treasurer of the United States from $45,492,512.64,
as shown on the daily Treasury statement of June 30, 1919, to
$12,644,214.62, as shown on the daily Treasurj^ statement of June 30,
1920. This reduction ahd withdrawal, amounting to over $30,000,000,
made no disturbance whatever in the money market. Whenever requested to do so, the Treasury permitted depositaries affected by this
action to repay the funds withdrawn to the Treasury in installments.
At a time when the Treasury was borrowing money to meet its current
disbursements at rates of interest running as high as 6 per cent, as
before stated, the return of these balances to the Treasury was an important measure of administrative economy.
I n conjunction with the adoption of these new policies the Secretary established a class of limited national-bank depositaries, for the
sole purpose of receiving deposits made by United States courts and
their officers,bypostmasters, orby other duly authorized Government
officers for credit to their official disbursing accounts. These are
not authorized to accept any other deposit, and they hold no
funds to the credit of the Treasurer of the United States. One hun
dred and sixteen limited depositaries were established during the
fiscal year. On June 30, 1920, the amount held by them and general
depositaries to the credit of Government officers other than the Treasurer of the United States was $11,567,054.19.
/
/




174

REPORT ON T H E FINANCES.

Interest on Government deposits.
Since June 1, 1913, Governmerit depositaries have been required to
pay interest at the rate of 2 per cent per annum on daily balances.
The amounts received from this source, exclusive of special depositaries under the Liberty loan acts, for the past eight fiscal years
are as follows:
1913
1914
1915 ^
1916
1917
1918
1919
1920

',_
;
1

-

^ .
v

$122, 218. 89
1, 409, 426. 07
1, 222, 706. 93
791, 671. 45
703, 771. 76
1,134, 569. 09
5, 507, 742. 43
2, 658, 768. 71

Special depositaries.
The Treasury's valuable special depositary system was maintained throughout the fiscal year, in order to permit banking institutions purchasing Government securities, as offered from time to time,
to make payment for them by credit, thereby retaining the proceeds of such sales in the form of depdsits until withdrawn from
time to time as needed to meet current disbursements of the Government. Any incorporated bank or trust company is eligible for designation as such special depositary, in accordance with the provisions
of Departnient Circular No. 92, as amended and supplemented, dated
April 17, 1919. At the close of the fiscal year 1920 there were 9,475
special depositaries, of which 4,527 were national banks and 4,948
were State banks and trust companies, holding Government deposits
amounting to $273,355,000.
Interest on special deposits.
In accordance with the department's regulations, the special depositaries also paid interest on Government deposits at the rate of 2
per cent per annum. The interest received from these during
the fiscal year was $11,431,460.31. The total amount received from
April 24, 1917, to June 30, 1920, was $43,352,542.13, as indicated, by
semiannual periods and Federal reserve districts, in the following
statement:




175

SEOKETAEY OF THE TEEASURY.

Interest collected to June 30, 1920, by Federal reserve districts, on deposits in
special depositaries on account of sales of Liherty bonds. Victory notes, and
certiflcates of indebtedness, and income and profits tax payments, under acts of
Apr. 2Ii, 1917, Sept. 24, 1917, Apr. Jt, 1918, Sept. 2J,, 1918, July 9, 1918, and
Mar. 3, 1919.
F e d e r a l reserve district.

Boston
New York
Philadelphia
Cleveland
„
Richmond
\
Atlanta
Chicago
St. L o u i s
Minneapolis...,
Kansas City
Dallas
S a n Francisco
N e w Orleans b r a n c h .
Total

Julv 1 to
Jan. 1 to
A p r . 24 t o
July 1 to
J u n e 30, 1917. D e c . 31, 1917. J u n e 30,1918. .Dec. 31,1918.
.?5,340.47
338,480.60
1,044.64
252.06
9,023.53

1,353.62
2,726.51
358,221.43

F e d e r a l reserve district.

S495, 044.28
2,418, 335. 72
200, 276.04
290, 482.56
81, 252.94
28, 189.21
300, 428.59
56, 412.34
32, 520.68
39, 634.27
35, 888.58
137 996.92
26', 332.71

S757,345.98 SI; 138,
915.47
2,486j301.63
6,720,162.97
557,068.79
1,059,668.15.
803,219.84
872,392.10128,860.72
109,503.64
96,086.74
144,165.99
658,048.19
974,334.63
268,726. 24
403,488.76
168,309. 21
164,790. 29
150,897.61
332,145.49
80,191.52
268,329.88
486.34
377, 421.12
320.38
79,005.33

4,142,794.84 6,423,863.19

July Tto .
Jan. 1 to
Jan. 1 to
J u n e 30,1919. D e c . 31,1919. J u n e 30,1920.

12,644,323.82

Total.

Total

S733, 867.20
2,968, 858.77
596,- 436.23
693, 750.48
242, 735.18
203; 550.98
1,10?; 399.81
369, 776.91
311, 793.53
309, 106.79
132, 651.09
590, 811.02
88; .140.55

$563,524.88
3,336,357.90
529,102.81
530,146.39
555,390.68
153;908.04
817; 172.84
264,058.53
171,863.85
159,047.57
182,127.50
246 486.13
4o;666.90

$254,689.51
1,887,688.21
171,509.48
352,082.30
140,635.35
82,811.99
355,685.31
100,947.90
104,223.41
95,489.75
118,843.58
176,914.98
40,084.52

S3,948,727.79
20,156.185.803,115,106.14
3,515,073.67
1,258,378.51
708,965.01
4,222,092.9a
1,463,410.68
953,500.97
1,086 321.48
819i 385.77
1,740,843.02
334,550.39

8,351,878.54

Boston
.,
New York.,
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
.'...
s t Louis..
Minneapolis
Kansas City
Dallas
:...
San Francisco
N e w Orleans b r a n c h

7,549,854.02 3,881,606.29

43,352,542. la

United States de2')0sitaries in foreign countries.
The Treasury continued to maintain depositaries in France, Great
Britain, Italy, Spain, Belgium, and Canada for the use of disbursing
officers of the Government, especially of the Army and Navy, to
facilitate payments in foreign countries. These were designated
under the authority vested in the Secretary of the Treasury by
section 8 of the act of September 24, 1917, as amended and supplemented. The authority granted by this section, however, is restricted. The depositaries which may be designated thereunder
are such as are necessar}^ to provide for current disbursements
only. The act of September 24, 1918, authorizes the designation
of depositaries in foreign countries with which may be deposited
all or any part of the avails of any foreign credits or foreign currencies. The authority given by the first-named act expires six
•months after the termination of the war between the United States
and Germany. The authority of the last-named act is limited to
the period of the war and two years after its termination. The



176

REPORT ON THE FINANCES.

experience of the Treasury has been that it is not only convenient but
practically necessary that there be Government depositaries in foreign countries and in the dependencies and insular possessions of the
United States to furnish United States disbursing officers with adequate financial facilities, both as to disbursements and deposits. If
the existing restricted authority is permitted to expire by limitation,
without additional authority having been granted, imuch inconvenience and perhaps loss may be incurred. These contingencies may
be provided for by the enactment of a statutory provision reading
substantially as follows:
The Secretary of the Treasury may designate such depositaries of public
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 terms and conditions as to 'security and otherwise as he
may from time to time prescribe.

I trust that the Congress will give this matter its immediate consideration.
CoUateral security for Government deposits.
New regulations with respect to collateral security fpr deposits
with national-bank depositaries were incorporated in Department
Circular No. 176 (Exhibit 79, p. 523). I t was provided that on and
after December 31, 1919, and until further notice, the following
securities aiid no others will be accepted as security for deposits, of
public moneys with national-bank depositaries:
{a) Bonds, notes, and Treasury certificates of indebtedness of the
United States, of any issue, including outstanding interim certificates or receipts for payments therefor; all at par.
(&) Bonds of the Federal land banks, bynds of the War Finance
Corporation, bonds of Porto Eico and the District of Columbia, and
bonds and certificates of indebtedness of the Philippine Islands; all
at par.
(c) The 3^ per cent bonds of the Territory of Hawaii at 90 per
cent of market value; and other bonds of said Territory at market
value, not to exceed par.
These institutions were required on or before June 30, 1920, to substitute securities of these classes for all others placed with the Treasurer as security for public deposits. This ruling affected $1,774,000
State, county, city, and other securities held by the Treasurer on
December 31, 1919.
Creation of Division of Deposits.
To administer these definite policies as to Government depositaries,
and to secure a closer, more economical, and more effective supervision, a division known as the Division of Deposits was established in



SECRETARY OF THE TREASURY.

177

the Secretary's office oh Ma*y 19, 1920. The order creating it was as
follows:
There is hereby created and estabUshed in the office of the Secretary a
division to be known as the Division of Deposits.
The Division of Deposits is assigned to the general supervision of the
Assistant Secretary in charge of fiscal offices, and will be charged with the
administration of all matters pertaining to the designation of Government depositaries and the deposit of Government funds in Federal reserve banks,
national banks, special depositaries under the Liberty loan acts, -foreign
depositaries. Federal land banks, and the Philippine treasury. This division
will also be charged with the duty of the supervision of all depositaries and of
obtaining proper security for all Government deposits. It will also issue
directions to all public officers as to the deposit of all public moneys collected
by them, and will be charged generally with the administration of all matters
pertaining to the foregoing.
All previous orders inconsistent herewith are hereby revoked.
F R A U D U L E N T DEALINGS I N

SECURITIES.

The attention of the Congress has several times been called to the
necessity of enacting legislation to protect the people of the United
States from grave injury growing out of the issue of securities of
doubtful worth and in many cases of fraudulent character. The
Treasury has during the year received numerous complaints that
unscrupulous promoters are inducing patriotic subscribers to the
war obligations of the Government, particularly those unaccustomed to investments, to exchange Liberty bonds and Victory notes
for worthless or speculative securities, with consequent financial loss
to many holders and prejudice to the national finances by the dislodging of Grovernment securities from the hands of investors.
The Treasury Department has done its utmost under existing law
to combat this evil and has waged through its Savings Division and
many voluntary local and national organizations a campaign to educate the Liberty bond holders to the value of their bonds and the
danger of dealing with irresponsible and wildcat concerns. On
November 28, 1919, for example, the Secretary of the Treasury
issued the following statement warning owners of Liberty bonds
agairist unscrupulous stock promoters:
The. Treasury again warns owners of Liberty boiids against stock promoters
who are trying to persuade them to exchange their Government securities for
stock in fraudulent ventures. Information which comes to the Treasury indicates that, particularly in sections of the country where new enterprises are
being floated, a surprisingly large number of people are allowing themselves
to be made the dupes of swindlers. It is a principle of investment that safety,
goes normally with a relatively low rate of return, and the suggested high
returns upon stocks which are being offered is enough to create suspicion.
Where Liberty bond holders are urged to give up their securities fpr stocks of
speculative character, good sense suggests the presumption that the offer Is
13^799—FI 1920
12



178

REPORT ON THE FINANCES.

made because Liberty bonds are worth decidedly more than the stock. Experience in a great nuinber of cases shows that the stock is worthless, and the
bond owner who makes the exchange is simply another victim to the army of
sharpers who find easy booty in these days of reckless speculation.
Self-interest and good business judgment should decide in favor of the holding
of Liberty bonds, which are declared by those most experienced in investment
to be the world's best security. The bond owner who continues his partnership
with the- Government has the added satisfaction of knowing that by helping
to maintain the urgently needed capital resources of the'country he is making
his contribution to the solution of the reconstruction problem in which the
Nation's welfare is as vitally concerned as by the war. It is the duty of citizens in every community to sound the warning against fraudulent operators in
Government securities at this time, when we can ill afford to dissipate our
resources for the profit of the unscrupulous few.
Some progress has also been made by criminal prosecutions against
persons dealing illegally in war-savings certificates, though as to
Liberty bonds and Victory notes there has been no Federal legislation to give any basis for effective action. The consideration by the
Congress of this matter is respectfully urged. by the Treasury.
Action should be taken, it is believed, along the lines indicated in
the letter of February 11,-1919, from the Secretary of the Treasury
to the chairman of the Committee on Ways and Means of the House
of Eepresentatives, and the exhibit attached, Avliich appears in the
rej)ort of the Secretary of the Treasury for 1919 as Exhibit 69, page
426. There is much to be said also for the ena'ctment of legislation
to make it a Federal crime to induce or solicit holders of Government
securities to part with them by means of fraudulent" rejiresenta tions.
The views of the department are further expressed in the following
letter, dated J a n u a r y 10, 1920, to the chairman of the Committee on
the Judiciary of the House of Eepresentatives:
WASHINGTON, Ja,nuary 10, 1920.
MY DEAR MR. VOLSTEAD :

I am very much impressed by the importance of some sort of legislation on
the lines proposed by the Capital Issues Committee to prevent or control
fraudulent issues and prospectuses. The dissipation and freezing of capital in
worthless or highly speculative enterprises has proceeded to such an extent
that money can not be had for sound investment bonds at reasonable rates nor
for foreign financing, and the Government's Liberty bonds are depreciated to
an entirely unjustified extent.
On February 11, 1919, I addressed a letter to Hon.- Claude Kitchin, chairman
of the Ways and Means Committee, with which I inclosed a draft of a proposed
law to be known as the Federal stock publicity act. This letter will be found
in my annual report for the fiscal year 1919 at page 426. Also in my annual
report, at page 95, I referred to the bili.
The President, in his address to Congress on " The cost of living," delivered
August 8,1919, said with reference to this legislation :
"• May I not add that there is a bill now pending before the Congress which,
if passed, would do much to stop speculation and -to prevent the fraudulent
methods of promotion by which our people are annually fleeced of many
millions of hard-earned money? I refer to the measure proposed by the Capital



SECRETARY OF THE TREASURY.

179

Issues Committee for the. control of security issues. It is a measure formulated by men who know the actual conditions of business, and its adoption would
serve a great and beneficent purpose."
In a letter addressed to the Hon. William M. Calder, United States Senate,
dated March 31, 1919, contained in my annual report for 1919, at page 46, I use
the following language:
" The oversold condition of the market for Liberty bonds thus created was
i,C( e:it:!ated * * * by the wicked devices of bond sharps and swindlers who
iGoiv :'.dvantage of the inexperience of many small investors in Liberty bonds
whom the Treasury was, failing the necessary legislation, powerless to protect."
The report on business conditions made by the Federal reserve agent at New
York, in the second Federal reserve district, dated December 20, 1919, contains
the following significant language:
"The operations of dealers in poor or worthless stocks are particularly serious
at a time of great expansion such as the present, not only because of the
waste of capital involved, but because fraudulent issues are lost sight of in the
general outpouring. Reports from the banks in certain parts of the district
indicate that a large amount of Liberty bonds have been secured in exchange by
promoters, who promise quick and rich returns in place of the interest carried
by the bonds. Many sales for cash- are reported also, particularly to wage
earners. An estimate of the amount of dubious issues on sale, secured from a
source specializing in such miatters, puts the total at 'hundreds of millions.'
" As usual, the victims of such transactions are those who are in the worst
position from knowledge or experience to measure the worth of securities.
Methods of sale include not only newspaper advertisements and offers through
the mails, but solicitation by a highly organi.'ied corps of canvassers. In a
number of cases the name of the Federal reserve bank is reported to have been
used for the purpose of convincing prospective purchasers of the value of the
stock offered. Usually the argument has been that the bank whose stock the
canvasser is selling will become a member of the Federal reserve system, or
that the paper to be handled by the newly organized ' finance corporation' will
be discounted by the Federal reserve bank. Such statements should be sifted,
with the greatest care, but usually the man approached by the canvasser is in
no position to know the limitations set by law, both on Federal reserve membership and^ discounts.
" Certain cases of apparently fraudulent intent have already been brought to
the attention of the Federal or local prosecutors, but in the past most prosecutions have succeeded only when the fraud has been completed and the investor
has lost his money. It is, therefore, essential that individuals buy only after
seeking advice from trusted bankers or others who are equipped with sound
information and gQOd sense on financial matters. In a number of progressive
conmiunities the newspapers not only refuse to take dubious financial advertising, but have undertaken to warn their readers against unscrupulous vendors of
stocks. Officers of banks can carry this public service further by giving advice
to all inquirers, whether they are customers or not. Many bankers are already
doing work of that sort."
The proposed draft of the Federal stock publicity act, above referred to, was
introduced as Ei. R. 188, and is now, I understand, before your committee.
I beg to impress upon you the desirability of enacting legislation along the
lines indicated in this bill. The situation is a grave one and needs remedial
legislation.
In the bill, as originally transmitted by me, the Treasury Department was
given general jurisdiction over the subject matter, and the Secretary was au-




180

REPORT ON THE FINANCES.

thorized to create a new bureau for the enforcement of the act. Upon reflection,
however, I have reached the conclusion that it will probably be wiser to give
jurisdiction over the matter to the Federal Trade Commission, especially in
view of the fact that this commission has already taken jurisdiction, under its
existing powers, over some important phases of this subject matter.
As stated in my letter to Mr. Kitchin, above referred to, I approve the general
plan of the proposed bill. Doubtless some amendments are necessary, but your
committee will quickly be able to decide just what amendments or changes
should be made.
I gladly tender the assistance of all Tireasury officials to your committee, and
beg to state that several gentlemen of expert knowledge and long experience
in these matters have tendered their services to the Treasury gratuitously.
I shall be very glad, indeed, to arrange to have these gentlemen also place their
services at your disposal in working out legislation so vital to the interests of
the Government and to the whole people of the United States.
Very sincerely yours,
CARTER GLASS.
Hon. ANDREW J. VOLSTEAD,

.

,

Chairman Committee on the Judiciary,
,
House of Representatives, Washington, D. G.
GOLD.

The monetary stock of gold in the United States, including coin
and bullion, was estimated at $2,739,043,566 on November 1, 1920,
a decrease of $133,481,500 as compared with November 1, 1919,
and an increase of $851,772,902 as compared with August 1, 1914,
at the beginning of the war in Europe. This represents a reduction
of $352,994,133 from the estimated stock of June 1, 1919, one of the
highest points. Somewhat less than one-third of the world's gold
monetary stock, according to the estimates, is now held in the United
States.
Monthly estimates of the United States stock of gold, from November 1,1919, to November 1,1920, follow:
Nov. 1,
Dec. 1,
Jan. 1,
Feb. 1,
Mar. 1,
Apr. 1,
M a y 1,

1919
19191920
1920
1920
1920
1920

'

.

$2, 872, 525, 066 June 1, 1920
2,833,221,135 July 1, 1920
Aug. 1, 1920
, 2, 787, 714, 306
2, 762, 905, 481 Sept. 1, 1920
2, 720, 767, 606 Oct. 1, 1920
2, 662, 284, 553 Nov. 1, 1920_
2, 646, 615, 750

$2, 663, 730, 358
2, 687, 512, 862
2, 695, 337, 608
2, 688, 744,140
^— 2,704,672,504
2,739,043,566

Production,
High production costs in connection with a fixed sale value have
continued to influence unfavorably the mining and reduction of gold,
as evidenced by the continued decrease of output in practically all
parts of the world. The United States stock has been affected in
recent years, however, much more by withdrawals for export in settle-,
ment of trade balances than by decreased production of new gold.




SECRETARY OF TFIE TREASURY.

181

The full report by the committee appointed by the Secretary of the
Treasury to investigate and consider the subject of the production of
goid, rendered February 11, 1919, appears on pages 108-110 of the
annual report for 1919. During the past year there has been further
discussion of the problem, and a bill, H. E. 13201, has been introduced^
in the House of Eepresentatives—
To provide for the protection of the monetary gold reserve by the maintenance of the normal gold production of the United States to satisfy the
requirements of the arts and trades, by imposing an excise upon all gold used
for other than monetary purposes, and the payment of a premium to the producers of newly mined gold, and providing penalties for the violation thereof.

The Treasury is opposed to this bill, believing that the conclusions
of the gold committee are sound and that it would be improper to
subsidize the gold-mining industry. The producers of gold will, in
the long run, benefit with the rest of the community from the ability
of the country to maintain itself on a gold basis and, as the purchasing power of the dollar increases, it is to be expected that the production of gold will become more. remunerative and that the problem
will tend to solve itself.
The consumption of gold in the arts and industries in the United
States materially increased in the calendar year 1919,^ the amount of
new gold used, $56,135,951, being not far below the amount of the
domestic production of the year, $60,333,400.
Gold payments.
Since the beginning of the war it has been the policy of the
Treasury to conserve gold and discourage its circulation; and
this policy has not changed with the cessation of hostilities or
the removal of the embargo on the exportation of gold. I t is just
as important as ever that gold, which is the foundation of our reserves and the backbone of all credit transactions, should be concentrated in the Federal reserve banks as reserve and for use in the
settlement of balances growing out of international transactions. I t
is the desire of the Treasury that^ the conservation of gold should continue and that there should be no revival of the use of gold coin or
gold certificates for pay rolls and everyday transactions generally,
in which it serves no useful purpose. The circulation of gold coin
and gold certificates tends to dissipate the reserves. The circulation
of gold coin involves a considerable loss due to abrasion, which is
avoided by having the gold carried in the vaults of the Federal
reserve banks and the Treasury.
I n accordance with this policy, persons requesting gold arie invited
to accept other currency instead, but gold has not been, and will not




182

REPORT ON TFIE FINANCES.

^
be, refused to persons who, after giving consideration to the Treasury's policy, demand it and are entitled to receive it by reason of
the presentation and surrender of gold obligations. Wherever gold
is demanded it is furthermore the Treasury's policy to pay out available, but not new, gold coin in the denomination of $20 and gold
certificates of large denominations, and to avoid so far as possible the
use of gold coin in denominations of $5 and $10 and gold certificates
in the denomination of $10, though such denominations will not be
refused if demanded. Payments of $2.50 gold pieces, however, will
not be made, inasmuch as no gold has been coined in this denomination for many years, and there is no available supply in Treasury
offices. I t is the view of the Treasury that the demands for gold
coin for domestic use or for export should be satisfied by the issue of
double eagles, of which an ample supply has been and will be maintained.
Gold certificates.
By the act approved December 24, 1,919, gold certificates were made
legal tender in payment of all debts and dues, public and private.
SILVER.

The year just passed has been characterized by extraordinary
fluctuations in the price of silver. I n November, 1919, even United
States subsidiary silver coin reached the melting point, while less
than six months later, in May, 1920, the price declined tp a point
where the repurchase provision of the Pittman Act became operative
and the Director of the Mint began to make purchases of domestic
silver at the fixed price of $1 per ounce. ,
The price of silver rose with considerable regularity after the beginning of the fiscal year 1920, until a price surpassing all definitely
known records was reached in New York on November 25, 1919,
the rise being from $1.08 to $1.38|. The maximum price in London,
89^ pence, was attained on February 11, 1920, and it is understood
that sales were made as high as $1.42 per ounce in San Francisco.
The coining value of silver for United States dollars is $1.29+ per
ounce, and for United States subsidiary silver coins $1.38+ per
ounce. For a time, therefore, the price of silver was sufficiently high
to menace the silver circulation. At about this time the Treasury,
acting in cooperation with the Federal Eeserve Board and the Fed'eral reserve banks, arranged to release free standard silver dollars
to be employed in regulating our exchanges with countries having
silver monetary standards, and pursuant to these arrangenients about
13,000,000 of silver dollars went to the Orient, in addition to some
16,000,000 silver dollars which A.ent tjirough other sources between




^

SECRETARY OF THE TREASURY.

183

November, 1919, and May, 1920. A copy of the public announcement
issued by the Federal Eeserve Board in this connection under date
of December 6,1919, appears on page 596 of this report.
The price of silver remained above the melting point for dollars until
early in March, 1920, when it gradually began to recede until in May
it went below the price of $1 fixed in the Pittman Act for the purchase
of silver bullion to replace the standard silver dollars melted under
that act. I n connection with the melting of standard silver dollars
under the Pittman Act the Director of the Mint had received standing
orders from the Secretary of the Treasury to bu}^ silver at the fixed
price of $1 per oifnce 1,000 fine within the conditions and limitations
fixed under the act, which included the requirement that the silver
purchased must be the product both of mines situated in the United
States and of reduction works so located. Prompt action was taken
as soon as the price fell below $1 per ounce, and all purchases of silver
by the Director of the Mint under the Pittman Act have been made
with strict regard for the statutory requirement, in order to make
certain that the benefits of the act inure to American producers, as
contemplated by the Congress. With this in view, the Director of
the Mint has insisted from the outset upon satisfactory proof of the
domestic production and of settlement with the miner on the basis
of $1 per ounce 1,000 fine. Purchases under the Pittman Act by the
end of October had reached a total of about 22,000,000 fine ounces.
Formal regulations governing sales of silver to the Director of
the Mint under the Pittman Act were prescribed under date of August
30,1920. Copies of these regulations, together with the supplemental
regulations of October 6,1920, are attached to this report as Exhibits
80 and 81, pages 538 and 543. I t will be noted that the regulations,
of August 30 include as exhibits the public statements issued by
the Director of the Mint on May 17, 1920, and June 18, 1920, announcing his readiness to purchase silver under the Pittman Act,
and prescribing the preliminary forms for proof that the silver
tendered satisfied the statutory requirement that the silver purchased
must be the product both of mines situated in the United States and
of reduction works so located. An additional 10,000,000 of standard
silver dollars were melted during the year under the Pittman Act to
provide metal for domestic subsidiary silver coinage.
The following tables show various operations under the Pittman
Act relating to the melting of silver dollars from April 23, 1918, the
date of its passage, to October 31, 1920:
TABLE I.—Silver doUars melted.
Silver dollars melted, of which $3,177,554 represented dollars in
Treasury, and the balance was made available by the retirement of silver certificates (of the total dollars melted 11,000,000
were for use in manufacturing subsidiary silver coin, 1,000,000
m fiscal year 1919)
$270,121,554



184

REPORT ON THE FINANCES.
TABLE II.—Silver certificates toithdrawn from circulation and retired.

Denominations:
$1
$2
_
$5
_
$10
_
$20
$50 (issues in excess of retirements)
$100
^
$500
,
$1,000

,
.
;

^

Total face value-

:

Amount.
$172, 870, 717
38, 935, 078
78,906,185
817,470
7, 583, 700
734,150
39,500
2,000
1,000'
298,421, 500

TABLE III.—Federal reserve bank notes issued from Apr. 30,1918, to Oct. 31,1920..
Denominations:
$1
$2
$5
_$10
$20
^
$50

'.

,

Net issue.
$160,489,136
40, 024, 364
29, 280, 735
net decrease—
854,890
do
665,100
195, 600

Total
Less notes redeemed but not assorted by denominations
Notes outstanding Oct. 31, 1920

228, 469, 845
1, 610, 900
226, 858, 945

The Federal reserve bank notes which have been issued, as stated
in Table I I I , are secured as follows:
United States loan of 1925, 4 per cent
United States consols of 1930, 2 per cent
United States Panama loan, 1916-36, 2 per cent
United States Panama loan, 1918-38, 2 per cent
Special certificates of indebtedness, 2 per cent__
Total

L

$2, 593, O O
O
13, 888, 400
383, 500
—
285, 300
259, 375, O O
O
276, 525, 200

As stated in the annual report for 1919, the announcement of May
6, 1919, coupled with the removal on that day of all restrictions onexport of si!lver, had the effect of freeing the silver market from the
control of war prices. As the result of the repurchase provisions of
the Pittman Act, however, the price of silver which is the product,
of domestic mines and reduction works has become stabilized at about
$1 per fine ounce, the fixed price provided for purchases by the mint,,
and a separate price has become established for foreign silver, so
long as the world price does not exceed $1 per ounce. The maximum^
and minimum prices of silver, by months, from May, 1919, t o
October, 1920 (for other than domestic product of the United States,.
after May, 1920), were as follows:




185

SECRETAEY OF THE TREASUEY.
Date.
May
June
July
August
September
October
November
Deceniber

1919,

...

Maximum. Minimum.
$1. 215
1.1425
1.09375
1;1675
1.2125
1.2575
1.3825
1.3525

Date.

$1.0125
January
1.085
' February
March
1.035
April
1.0825
May
1.12
1.1725' June
July
1.23625
August.'
1.305
September
October

1920.
,

..,
,
,

Maximum. Minimum.

SI.37875
1.35875
1.33
1.28125
1.11625
1.005
.9575
1.0225
.955
.9225

SI.3075
1.30
1.1825
1.12
1.0025
.815
.90125
.935
.9225
.76876

Silver purchases, by months, under the terms of the Pittman Act,
approved April 23, 1918, have been as follows:
1920:
May
June
July
August
September
October

^
'
1

Total-

Fine ounces.
332, 088
6,168, 505
3, 288,856
__^__ 3,429,277
___.._ 3, 815, 733
4, 634, 860
21, 669, 319

Standard silver dollar transactions from April 23, 1918, to June
30,1920, have been as follows:
Dollars melted, Apr. 23, 1918, to June 30, 1920
270,121, 554
Dollars transferred to Federal reserve bank of New York for credit
in Treasurer's account
.
55,000,000
DoUars exported, Nov. 25, 1919, to May 11, 1920
29, 287,142
Probable additional export of dollars, which were
separately reported only during the above-mentioned period; at other times included with subsidiary silver coin
1, 506, 387
30,793,529
Net number of dollars released from Treasury stock, Apr.
23, 1918, to June 30, 1920 (on basis of daily statements)— 355,915,083
Net withdrawal of silver certificates, Apr. 23, 1918, to June 30,
1920 (on basis of daily statements)
'
$329, 612, 722
Net reduction of reserve for Treasury notes of 1890
'.
213,024
Net reduction of free stock of dollars (in general fund)
26,089,337
Total

355, 915, 083
T H E FEDERAL F A R M LOAN S Y S T E M .

The Federal farm loan system, under the direction of the Federal
Farm Loan Board, functioned normally for the first half of the
fiscal year. Thereafter the pending suit challenging the constitutionality of the Federal farm loan act had its effect upon the lending
operations of the banks as usually conducted and it was necessary to




186

REPORT ON THE FINANCES.

adopt special means to meet the situation. The 12 Federal land
banks made loans to 19,659 farmers in the aggregate sum of $61,961,980 during the six months ended December 31, 1919. The loans by
Federal land bank districts for this period were as follows:
Loans closed by Federal land banks during the six months ended Dec. 31, 1919.
District.

-Federal l a n d b a n k .

N u m b e r of A m o u n t of
loans.
loans.

Springfield, Mass
Baltimore, M d . . .
Columbia, S. C . .
Louisville, K y . . .
N e w Orleans, L a
St. L o u i s , Mo
St. P a u l , M i n n . Omaha, N e b r . . .
Wichita, K a n s . . .
Houston, T e x . , .
B e r k e l e y , Calif..
Spokane, W a s h . .

1,002
1,218
1,388
1,536
' 2,050
2,001
2,549
878
1,234
2,462
896
2,445

$3,225,800
3,288,300
3,651,445
5,521,700
4,189,125
4,942,615
9,500,000
5,072,100
4,132,900
8,002,015
3,172,100
7,263,880

Total

19,659

61,961,980

The funds for lending operations covering the six months' period
^ended December 31, 1919, had been procured by an advance sale of
farm-loan bonds in the preceding June following tbe conclusion of
the Victory Liberty loan campaign.
The suit challenging the constitutionalitj^ of the Federal farmloan act was instituted in July, 1919, in the United States district
court in the western district of Missouri; The case was heard before
the judge of that district on October 30,1919, and an immediate decision rendered sustaining the act in its entirety. ^From that decision
appeal was taken to the United States Supreme Court, before which
the case was argued January 6, 1920. On April 30, 1920, the
Supreme Court ordered a reargument of the case and set that argument for October 11, 1920. On October 14, 1920, the case was
reargued and finally submitted to the Supreme Court, and now awaits
t h e decision of that tribunal.
The Federal land banks have no funds beyond their capital with
which to make farm loans except such as they derive from the sale of
farm-loan bonds. The natural and inevitable effect of the pendency
of litigation challenging the validity of the act, and especially the
tax-exemption feature of the bonds, was to depress the market for
such bonds below a price at which they could be sold and permit continued lending* operations.
As early as February, 1920, the Federal F a r m Loan Board directed
that all applications for loans be taken subject to a favorable decision
of the pending litigation. I n the initial process of receiving applications for loans and carrying them through to completion, there is
of necessity a large volume always in hand, and notwithstanding




SECRETABY OE THE TREASURY.

187'

the precaution of taking applications subject to the decision of the
court the Federal land banks found themselves, when the reargument of the test case was ordered, with a very large volume of
applications in hand which had been carried to the point of appraisal and actual approval by the executive committees of the
several banks. These amounted to bona fide commitments on behalf
of the banks.
I n addition, many of the banks had used their comniercial credit
practically to the limit in an effort to meet the normal dem'ands of
their borrowing constituencies. The continuance of the case from
April 30 to October 11 made it apparent that those applications which
had bee.n approved could not be closed for a period of six or eight
months and that short-time obligations of the banks could not be
met by the sale of bonds.
Believing that this situation justified public intervention. Congress
by the joint resolution approved May e26, 1920, authorized the purchase by the Treasury of a limited amount of farm-loan bonds to
meet the emergency confronting the S3i^stem. Previous sales of bonds
by the Federal land banks had been at the rate of 4^ per cent, but
as the Treasury was paying in excess of 5 per cent for the money at
the time the joint resolution became operative, it was deemed proper
that the bonds should bear the maximum interest rate payable under
the Federal farm loan act, namely, 5 per cent.
Pursuant to the resolution, the Secretary of the Treasury has authorized purchases and the Treasury has purchased 5 per cent bonds
of the several Federal land banks in the aggregate sum of $39,450,000,
and the same are now held in the Treasury. The effect of these purchases by the Treasury v^as to enable the banks to close all of their
more pressing commitments and liquidate their own short-time
paper.
The absolute integrity of the security on which loans had been
made under the farm-loa,n system is fully borne, out by another 3^ear's
experience, and the fi.nancial solidity of the banks has been made
more manifest. Each of the banks has liquidated its initial operating
deficit and has a substantial surplus.
RetiremeM of Government-owned stoch.
On November 15, 1919, the aniount of stock of the Federal land
banks Owned by the Government, as the result of original subscriptions, was $7,693,240. During the following 12 months the baiiks retired this stock in the aggregate amount of $860,560, reducing that
in the several Federal land banks held b}^ the Government on November 15, 1920, to $6,832,680.




188

REPORT ON THE FINANCES.

Earnings.
From Noveniber 1, 1919, to October 31, 1920, the net earnings of the 12 Federal land banks amounted to $2,753,717.74, of
which $564,725 had been carried to reserve account, $803,846.68
distributed in dividends paid by 10 of the banks upon stock owned
by farm-loan associations and individuals, $106,346.18 carried to
suspense account, and $1,278,799.88 carried to undivided profits.
Joint-stock land banhs.
No joint-stock land banks have been chartered since the date covered by the last annual report. These banks were affected in the
same way as the Federal land banks by the pendency of the litigation challenging the constitutionality of the act, and their lending
operations have been practically suspended since the beginning of
the present calendar year.
During the year, 27 joint-stock land banks were in more or less
active operation, making loans in the aggregate of $29,262,470 to
3,148 borrowers.
Liquidation of joint-stoch land banks.
Under an amendment to the Federal farm loan act approved May
29, 1920, provision was made for the voluntary liquidation of jointstock land banks, and in certain cases for the acquisition of their assets and the assumption of their liabilities by Federal land banks.
Pursuant to this law three joint-stock land banks have gone into voluntary liquidation: The Colonial Joint Stock Land Bank of Norfolk, Va., and the Union Joint Stock Land Bank of Eichmond, Va.,
each pf which was organized to do business in the States of Virginia
and North Carolina. Neither of these banks had made bond issues
and neither had outstanding liabilities. Their assets, in the form of
farm mortgages, were acquired—those in Virginia by the Federal
Land Bank of Baltimore and those in North Carolina by the Federal
Land Bank of Columbia. The Guaranty Joint Stock Land Bank of
Wichita similarly went into voluntary liquidation, its assets being
acquired and its outstanding bonds being assumed by the Federal
Land Bank of Wichita, with the approval of the Federal Farm Loan
Board.
Tax exemptions of farm-loan bonds.
I recommend that the exemptions from taxation be withdrawn
from farm-loan bonds issued bj^ joint-stock land banks in the future.
These banks are organizations of private capital for commercial pur-




SECRETARY OF THE TREASURY.

189

poses in which the profits accrue to the benefit of investing stockholders, as distinguished from the Federal land, banks, which are
mutual institutions, in which borrowing farmers are virtually the
only stockholders receiving diyidends, and, in the contemplation of
the act, will be ultimately the only stockholders.
Tax exemptions in the case of joint-stock land banks amount to
a gift at the expense of the Government and the taxpayers generally,
and the privilege should not be continued with respect to these private-mortgage companies, organized for private profit. This fact is
emphasized in this period of high taxes when the Government has
established the policy of subjecting its own securities to partial taxation and when the Treasury can not afford to dispense with any of
the receipts which otherwise would accrue on account of taxes.
I t may be contended that the joint-stock land banks may make
larger loans than the Federal land banks, under the provisions of
the law, and that in this particular they occupy a field peculiar to
themselves. I t is sometimes further contended that the joint-stock
land banks may make loans for purposes and to persons beyond the
power of the Federal land banks. Obviously the latter banks may
make these loans if the Congress grants the necessary authority. I n
other words, the Federal land banks, owned by borrowing farmers,
who are the beneficiaries of their profits, can, if authorized by the
Congress, make any loan which the joint-stock land banlcs are now
permitted to negotiate. Consequently, if the withdrawal of the taxexemption feature from farm-loan bonds issued by joint-stock land
banks in the future were accompanied by an increase in the powers
of the Federal land banks to make any loan which is now authorized
by joint-stock land banks, there would be no curtailment of the financial benefits to agriculture provided by the act.
I n view of the absence of compensating benefits for the loss in revenue resulting from the extension of the tax-exemption privilege to
securities issued by institutions organized on an investment basis by
private capital for private gain, I think it is clear that section 26 of
the Federal farm-loan act should be amended so as to withdraw the
tax-exemption privilege from farm-loan bonds issued by joint-stock
land banks. I n this connection it should be borne in mind, however,
that the joint-stock land banks now in operation were organized
under sanction of law and with the approval of the Government. I n
any legislation withdrawing the tax-exemption feature from farmloan bonds issued by joint-stock land banks, it would appear to be
necessary, however, to make provision to safeguard joint-stock land
bank bonds already issued as well as the interests of existing jointstock land banks.




190

'

REPORT ON THE FINANCES.
SEED-GRAIN LOANS TO F A R M E R S .

During the past year the administration of the seed-grain loans
made during 1918 and 1919, as the result of war conditions, to farmers in certain drouth-stricken areas bf the West has advanced steadily under, the joint direction of the Treasury. Department and the
Department of Agriculture. These loans were made through the
Federal land banks of Wichita, St. Paul, and Spokane, as financial
agents of the Government, acting under the supervision of the Federal F a r m Loan Board, pursuant to joint circulars issued from" time
to time by the Treasury Department and the Department of Agriculture. ^ The creation and scope of the plan under which these loans
were made and the progress in administering them during 1918 and
1919 are set forth in detail in the annual reports of the Secretary of
the Treasury for those years.
Loans vvere made in certain sections of the West to about 15,000
farmers who were without means of obtaining commercial credit to
enable them to obtain seed grain for planting. If this aid had not
been extended, some farms would probably have been abandoned
and others lain idle, to the prejudice of the food, supply of the
Nation and the national securit}^ and defense in time of war. There
were three distinct plantings covered by these loans: (1) The
first fall planting in 1918; (2) the second fall planting in 1918
(restricted, however, to farmers whose first fall planting had
failed) ; and (3) the spring planting in 1919. Upon obtaining a
loan from the United States for any of these three plantings, the
borrower was required to execute a guaranty fund agreement under
the terms of which those farmers whose crops proved successful, as
defined therein, were required to contribute to a guaranty fund. The
proceeds from the guaranty funds were to be applied, under the direction of the F a r m Loan Board, on the loans of those farmers whose
crops had proved failures and who, therefore, Avould be unable to
repay their loans from the proceeds of the crops. I n this way a cooperative fund was created in connection with each of the three
classes of loans for the mutual benefit and protection of the unsuccessful farmers and the United States. Loans for fall planting were
made in the Wichita, St. Paul, and Spokane districts; second fall
planting loans were made only in the Wichita district; and spring
planting loans were made only in the St. Paul and Spokane districts.
As the appropriation under which these loans were extended expired June 30, 1919, all the loans under the plan adopted were closed
by that time. There remained, however, the arduous task of collecting the principal and interest from the individual farmers as the
loans matured, together with the contributions to the guaranty funds




SECRETARY OF THE TREASURV.

191

in accordance with the ternis of the guaranty fund agreements. I t
was mainly with these features of the seed-grain loans that the Treasury has been concerned during the past year. In view of the large number of loans made and the evident difficulties incident to collecting
them, it may fairly be said that the work has progressed even more
satisfactorily than could have been anticipated, and with a fair
prospect of completion in the near future. While the auiounts contributed to the guaranty funds have not yet been applied upon the
indebtedness of those borrowers whose crops proved failures, the
preliminary arrangements are progressing steadily, and it is hoped
that a final settlement may be reached and the loans closed within
the next few months. The prompt and satisfactory manner in which
this large undertaking has been carried on by the Federal land banksconcerned, as well as the effective cooperation of the Federal Farm
Loan Board in supervising the activities of the land banks, has gone
far to insure early completion of the operation and is a substantial
testimonial to the efficiency of the farm loan organization.
As repayments of these loans began to come in, it was necessary,,
because of the large number involved, to institute some uniform
method of accounting for the receipts. On September 18, 1919,
letters were sent to the Federal land banks of Wichita, St.
Paul, and Spokane prescribing a method of accounting for the receipts in payment of these loans and for depositing them with the
Federal reserve banks of Kansas City, Minneapolis, and the Spokane
branch of the Federal reserve bank of San Francisco, respectively,,
as depositaries of the Government. Under date of September 2,
1919, Joint Circular No. 5 (Exhibit 82, p. 545) was issued by the
Treasury Department and the Department of Agriculture supplementing previous regulations relative to expenses incurred by Federalland banks in the administration of these loans.
As stated in the previous annual report, it developed during the
summer of 1919 that, where the yield per acre would not exceed 4
bushels, it would barely pay the reasonable cost of harvesting and
marketing, leaving no return to the farmer for his labor, and that
the destitute farmer would probabty abandon his farm and go elsewhere to labor for wages, unless he was permitted to retain the
proceeds for the immediate needs of himself and his family. By
letters dated August 13, 1919, to the Federal land bank of Spokane,,
and Septeniber 10, 1919, to the Federal land banks of St. Paul and
Wichita, signed by the Secretary of the Treasury and the Secretary
of Agriculture, the Federal land banks were authorized in "such
cases to release the Government's lien upon the receipt of a certificate from an agent of the Department of Agriculture. Pursuant to
these letters the Federal land banks have executed releases of the



192

REPORT ON THE FINANCES.

mortgages held by the United States covering the crops planted by
virtue of these loans, as follows:

Bank.

Wichita

Spokane

State.

Kansas
Oklahoma
Texas
New Mexico
Montana
Washington

Amount
of note
secured byNumber.
the
mortgage
released.
642
68
16
1
876
16

$168,126
12,909
3,281
120
270,768
5,585

I t should be remembered that the release of these mortgages did
not relieve the borrowers from their obligation to pay the principal
and interest of their notes. The Secretary had no authority to discharge the borrowers ^from this obligation as distinguished from the
lien on the crops planted. The Congress only could grant such
release.
Since it appeared that many farmers who had sustained crop failures, as defined in the joint circulars, would be unable to pay their
notes in whole or in part and that the continued obligation to do so
might cause severe hardship, the Congress authorized the cancellation of the indebtedness in such cases by the following provision of
law, which was incorporated in the Agricultural appropriation act
for 1921, approved May 31, 1920:
That a yield of 5 bushels or less per acre of wheat on lands owned by those
in the drought-stricken regions who borrowed money from the Government of
the United States for the purchase of wheat for seed be, and the same is hereby,
declared to be a failure, and the borrower whose yield was 5 bushels or less
per acre be, and he is hereby, released from repayment of the amount borrowed
by him from the Government: Provided, That nothing herein shall release the
borrower who signed a guaranty fund agreement and whose crpp was not a
failure, from making the contribution provided for in such agreement, but said
guaranty fund shall be used as stipulated in the agreement to the settlement of
the loans to those whose crop was a failure.

The act authorizes the discharge of loans only for wheat planting,
so that loans made to farmers for the planting of rye or other grains
are not released, and as the act makes no provision for refunding
payments made prior to the date on which the law became effective
by borrowers whose crops had failed, such borrowers will be unable
to obtain any benefits from the present legislation.
Pursuant to the provisions of this act, a circular entitled " Joint
Circular No. 6," dated August 10, 1920, prescribing " Eegulations
relative to release of farmers' seed-grain loans for wheat planting in
drought-stritken areas " (Exhibit 83, p. 545), was issued by the Treasury Department and the Department of Agriculture. Under the



193

SECREI:ARY OF T H E TREASURY.

terms of this circular applications for release of seed-grain loans for
wheat planting may be filed with the Federal land bank from which
the loan was received. These applications will be examined and, if
the statements therein contained are true, will be approved and certified by the Federal land bank and forwarded to the F a r m Loan Board
which, in turn, will examine the application and transmit it, with its
recommendation thereon, to the Treasury Department for approval.
A copy of the form prepared by the Treasury Department to be used
in making these applications for release is appended as Exhibit 84,
page 547. Upon approval of the application, the Federal land bank
will forthwith be authorized to cancel and deliver up the borrower's
note and deliver a release of the mortgage given as security for the
note. I t is provided in the joint circular that the release of the mortgage shall not operate to waive the right of any insurance company
to any lien thereunder which it may have acquired by virtue of any
policy of insurance taken out by any of the Federal land banks pursuant to Joint Circular No. 4. No refunds of payments made prior
to May 31, 1920, are authorized under the circular. Pursuant to this
circular the notes of those borrowers who have ° sustained a crop
failure as defined in the agricultural appropriation act for 1921,
and whose obligations remain unpaid are being canceled and the
mortgages on their crops held by the banks as financial agents of the
Government are being released.
While it is too early as yet to determine finally the exact amount
which the United States will realize as repayments on these loans, the
collections to date, including the collections covering the principal
and interest of the notes and the contributions to the guaranty funds,
probably approximate the total amount which the Government may
expect to receive. The following table shows the total disbursements
made through the Federal land banks of Wichita, St. Paul, and Spokane in the form of loans to farmers, together with the amount^ received up to October 20, 1920, as collections in payment of the loans,
including the contributions to the guaranty funds:
Table showing disbursements and receipts covering seed-grain loans to farmers.

Disbursements in
form of
loans.

Bank.

Receipts in payment
ofloans.

"
^

13799—FI 1920

13




Contributions to
guaranty
funds.

$1,341,630
66,823
9,780

$72,235
1,746
469

$243,456
443
24

$1,657,321
69,012
10,273

4,110,454

Total

Interest
on note.

$1,801,955
358,370
1,950,129

Wichita
St. Paul
Spokane

Principal
of note.

1,418,233

74,450

243,923

1,736,606

Total.

Wi•ij
194

^

.

REPORT ON THE FINANCES.

As this table indicates, the majority of farmers in the Wichita
district, i. e., Oklahoma, Texas, and a portion of Kansas, were
favored with full harvests and were, therefore, able to pay not only
their individual indebtedness, but also to make substantial contributions to the respective guaranty funds. I n the St. Paul and Spokane
districts, particularly the latter, unprecedented drouths, however,
resulted in almost complete failures in these sections. I t is for this
reason that the collections made in these districts compare rather
unfavorably with the amounts collected by the Wichita bank.
Under the terms of the guaranty-fund agreements, the contributions to the respective funds are to be applied in the first instance
in payment of the obligations of those borrowers whose crops have
proved to be failures. As the contributions to the guaranty funds
will be insufficient to meet the total amount still due on the notes of
those borrowers whose crops have proved unsuccessful, the contributions to the guaranty funds collected eventually will be received by
the Government on the administration of these funds. I t may be
said, therefore, that of loans approximating in all slightly over
$4,000,000 the Government may expect to realize in return a little
less than $2,000,000. I n view of the widespread assistance which
these loans gave to the farmers in the sections involved, and
the encouragement which they furnished to the communities as a
whole through the realization that the Federal Government was interested in and desirous of assisting them to meet the problems growing out of war-time conditions, it may fairly be said that the cost
to the United States is insignificant and is amply justified as a war
emergency action.
B U R E A U O F INTERNAL REVENUE.^

Internal-revenue collections for the fiscal year ended June 30,1920,.
aggregated $5,407,580,251.81, as compared with $3,850,150,078.56 for
the preceding fiscal year, an increase of $1,557,430,173.25. This increase in collections is due principally to an increase of $1,356,152,100.90 in the collections of income and profits taxes, which aggregate for the.fiscal year 1920, $3,956,936,003.60, as compared withi
$2,600,783,902.70 for the fiscal year 1919.
The larger collections of income and profits taxes is due, in part,,
to the, fact that the provisions contained in the revenue act pf 1918
1 The figures concerning Internal-revenue receipts as given in this chapter differ fromsuch figures carried in* other Treasury statements showing the financial condition of the
Government, because the former represent collections by internal-revenue oflacers throughout the country, including deposits by postoaasters of amounts received from sale of
internal-revenue documentary stamps, while the latter represent the deposits of these
collections in the Treasury or depositaries during the flscal year concerned, the differences,
being due to the fact that some of the collections in the latter part of the flscal year
can not be deposited or are not reported to the Treasury as deposited until after June 30,.
thus carrying them into the following flscal year as recorded in the statements showing:
the condition of the Treasury.



SECRETARY OF' T H E TREASURY.

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195

for installment payments of income and profits taxes thrcAv forward from the fiscal year 1919 to the fiscal year 1920 the collections of the third and fourth installments of those taxes arising out
of income in the calendar year 1918. A considerable part of the
increase, however, is due to the assessment throughout the year of
additional income and profits taxes on the basis of the audit and
verification of returns for 1918 and prior years. As a result of this
work an aggregate of $376,977,667.49 was actually assessed during
the fiscal year 1920.
Satisfactory progress has been made in auditing the large accumulation of income and profits tax returns for 1918 and prior years. Of
the 1918 returns about 3,500,000, or more than 80 per cent of the
total number, were examined in the offices of the 64 collectors of internal revenue. Returns of income of $5,000 or more are forwarded
to Washington for audit and verification by the bureau. The force
engaged on this work is organized as the income tax unit of the
bureau, the personnel of which was increased during the year from
2,672 to 4,317. The output of completed cases for each employee has
also increased. Special attention is now being paid to the claims of
taxpayers for refund of income and profits taxes erroneously assessed,
and the time required to consider and finally adjudicate such claims
is being gradually reduced.
The administration of the income and profits tax law has been
facilitated by the greater proficiency which officers and employees
of the bureau have acquired by experience and through special
courses of training organized and conducted by the bureau. Taxpayers have been aided in familiarizing themselves with the requirements of the law by the issuance of a regular service of information
containing the decisions and rulings of the department arising out
of the settlement of specific cases.
, The appellate function in income and profits tax cases, formerly
discharged by the Advisory Tax Board, which was discontinued
as announced in the last annual report, has been performed during
the last year by a group of expert internal-revenue officers. The
functioning of this committee in the careful consideration of difficult
cases has tended to prevent unnecessary litigation and is believed
to have impressed taxpayers with the avowed policy of the bureau
to act in an open-minded and fair manner in determining tax
liability in every case.
I n the. offices of the collectors of internal revenue a program of
reorganization has been consummated, involving the establishment
of branch offices in the principal cities and towns throughout the
country, where taxpayers may secure such assistance in the transaction of their tax business as has heretofore been available only at
the offices of collectors of internal revenue. At the end of the fiscal



196

REPORT ON T H E F1NAN(JKS.

year there were 318 such offices open for the convenience of taxpayers.
In order to make these offices of practical value to the public, special
effort has been made to improve the general efficiency of the field
personnel. A correspondence study department, with over 3,000
emplo3^ees regularly enrolled, has been engaged in the instruction of
these student workers in the many subjects concerning which deputy
collectors and other field employees should have complete knowledge.
The added efficiency of this important branch of the service is
reflected in the fact that a t o t a r of $42,213,889 in delinquent and
additional taxes was collected during the year as compared with
corresponding collections of $20,560,334 during the preceding fiscal
year. This amount is independent of the large additional assessments
based on the office audit of income-tax returns.
PROHIBITION ENFORCEMENT.

The obligations imposed upon all citizens by the national prohibition act, approved October 28,1919, have been respected in large measure, and the far-reaching economic and social changes"sought by that
legislation are now in progress. The opportunity for individuals to
obtain intoxicating liquors has been removed from the course of
public and lawful business to the clandestine, criminal activities of
a prohibited traffic.
The activities of the Bureau of Internal Eevenue, which was
charged with the duty of adininistering the national prohibition act,
have beeri directed primarily toward the encouragement by educational methods of this general observance of the law. The act has
been carefully studied. Interpretative regulations and general information have been issued as quickly as possible and given the most
effective distribution. The cooperation of moral agencies of all
kinds has been sought in order that correct public opinion on the
subject might be stimulated. In States where prohibition laws are
in effect and the local officials cooperate with the Federal officers the
enforcement of the national prohibition act is not difficult and is a
complete success. However, there are some States which have
no prohibition laws, and in some of these there is but little cooperation on the part of local officials. I n such instances the Bureau of
Internal Eevenue encounters many difficulties.
More definite activities of the bureau, ancillary to this general purpose, have been the organization and management of a force of investigators, who have been engaged in cooperation with State and
local authorities in the detection of violations and the prosecution
of offenders. I n the brief time which has elapsed since the law went
into effect this work has developed into considerable proportions,
with 12 field^ departments and 948 investigators at the close of the
year. This force will be augmented as may be necessary and under



SECRETARY OF THE TREASURY.

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197

such appropriations as Congress may provide for the purpose. I t is
obvious, however, that crimes and misdemeanors under this legislation do not differ essentially from those offenses which it is the
province of State and municipal officers of peace and justice to detect and discourage by punishment. I t is to be expected, moreover,
that as all citizens become more and more'accustomed to the restrictions and obligations imposed by the law the temptation to violate its
provisions will diminish. Certainly with the passing of the generation familiar with the public and habitual use of intoxicating beverages the demand for this illicit commodity will be abated.
Eecognition of the increasing importance of alcohol in industry,
science, and the arts, as well as of the legitimate use of alcoholic preparations for other essential purposes, led to the inclusion in the national prohibition act of permissive provisions under which such
commodities may be manufactured, distributed, and used, subject to
control and regulation. The administration of these provisions of the
law has been most difficult. The bureau has sought to interpose no
unnecessary obstacle to lawful activities, economic or social, involving the manufacture and use of alcohol and has desired especially
to encourage the manufacture of industrial alcohol.
On tihe other hand, it is through the abuse of permits issued by
the bureau under the provisions.of th^e act that many violations of
the law, serious and difficult of detection, are consummated or
attempted. Despite all safeguards with which the bureau has been
able to surround the issuance of these permits, the aggregate volume
of alcohol and intoxicating liquors withdrawn from bond indicates
by comparison with recognized degitimate requirements that considerable quantities have been diverted to illicit purposes. The
development of the bureau's organization and procedure and closer
cooperation with the legitimate permittees should result in a modification of the present necessarily restrictive regulations affecting
these important American industries without endangering in any
way the enforcement of the prohibitive features of the law. I t m^y
confidently be expected that the same effective control which was
exercised for the purpose of revenue over the manufacture and sale
of beverage alcohol for many years before the national prohibition
act became law will be brought about for the higher purpose of law
enforcement and the moral and economic welfare of the people
within a reasonable time.
WAR-RISK INSURANCE.

Much progress was made during the fiscal year in improving the
executive, administrative, and clerical organization of the Bureau
of W a r Eisk Insurance and the service rendered* by it to its great
number^ of beneficiaries. The organization was divided into 10



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REPORT ON THE FINANCES.

major administrative units, as follows: Insurance, compensation
and insurance claims, niarine and seamen, allotment and allowance, medical, legal, finance and administrative, liaison, school
teachers' retirement, and personnel. These divisions-functioned with
continuing improvement.
Within the director's immediate staff a statistical unit was established for the purpose of creating and maintaining administrative
control records of every activity of the bureau. These records iridicate accurately the bureau's progress froiA day to day and clearly
point out weak spots requiring immediate attention. T7ith the assistance of daily control records it has been possible to coordinate the
various activities of the bureau, consolidate many of its functions,
and avoid duplication of effort.
, Military and naval compensation.
The military and naval compensation cases considered during the
year related mainly to disability claims, rather than death claims,
as during the previpus year. The war-risk insurance .a^ct was
amended by the act approved December 24,. 1919 (Exhibit 85, p. 550),
which greatly increased the amount of compensation payable for
disability. The amendment necessitated the readjustment of virtually all disability claims. ^
Under the law, only men who are compensable—that is, whose
disability is 10 per cent or greater—are entitled to medical care
and treatment. Experience has shown that this works a hardship
upon man}^ men who were disabled by reason of their military
service but whose disabilitiies have not been rated as high as 10 per
cent. These men are nevertheless in need of medical care not only to
relieve their present condition but to prevent their disabilities from
becoming aggravated. The attention of the Congress is drawn to
this situation.
The bureau has approved a total of 44,546 claims for compensation
on account of death resulting from service and 184,405 claims for
compensation on account of disabilities incident to service. During
the month of June, 1920, payments were made by the bureau in this
connection as follows:
,
42,945 death awards
134,408 disability awards—^
Accrued awards
For medical care
And in payment of burial awards

.,
L
_,

Making a total of

$1, 395, 588. 49
8,152, 361. 70
5, 675. 96
375, 896. 02
—
32, 749.18
9, 962, 271. 35

Military and naval insurance.
Much progress was made during the year in perfecting the
organization of the Insurance Division and in placing its work upon



SECRETARY OF THE TREASURY.

199

a plane of efficiency equal to that of modern commercial institutions.
This result has been attained by systematizing and simplifying procedure and by the use of many labor-saving devices and office appliances. Duplication has been eliminated and the former volume of
work has been maintained, and even increased, with a concurrent re•duction in personnel of more than 50 per cent.
The amendatory act of December 24, 1919, increased the classes of
beneficiaries of war-risk insurance by adding uncles, aunts, nephews,
-nieces, brothers-in-law, sisters-in-law, and persons who have stood in
loco parentis to the insured for a period of one year or more prior to
his enlistment or induction into the service.
United States Govermnent life insurance.
The first permanent United States Goverriment life insurance
policies, representing conversions of term insurance policies, were
issued and delivered on May 1, 1920. During the year 152,979
applications for United States Government life (converted) insur-ance wxre approved for an aggregate amount of $511,821,500 of in•surance. A total of 540,458 premium paynients (including monthly,
•quarterly, semiannual, and annual) were received, aggregating
:$10,047,463.61. Liberty bonds aggregating $19,921,100 were held on
-JSTovember 15,1920, as investments for the United States Governihent
-Life Insurance Fund.
The amendment of December 24, 1919, provided that United States
-Government life (converted) insurance might be paid at maturity in
^one lump sum or in 36 or more monthly installments, at the option
of the insured. This option was not extended to the war-risk term
insurance.
Summary of insurance operations.
The Bureau has written—
4,631,993 war-risk term policies covering insurance to the
amount of (including some duplicate applications)
$40,284,892,500.00
The gross premium remittances on war-risk term policies
from all sources approximating
;
298, 864, 307. 07
128,300 claims for insurance on account of death are represented by insurance to the amount of
1,141,818,133.48
While 3,257 claims for insurance on account of permanent
and total disability involve insurance to the amount of—
28, 536, 540.00
During the month of June, 1920, the total disbursements on
, insurance claims amounted t o — :
7, 670,084. 56

I n spite of the efforts of the bureau to reach all of the more than
4,000,000 discharged soldiers, sailors, and marines to advise them of
their insurance rights and privileges under the war-risJi insurance




200

REPORT ON THE FINANCES.

act and the steps necessary to reinstate or convert their original
insurance—
The war-risk term insurance in force on June 30, 1920,
amounted to,
$3,472, 624, 000
The United States Government life insurance (converted policy) in force on the same date amounted to
511, 821, 500
Making an approximate total liability of

3, 984, 445, 500

With the exception of those whose health will not permit reinstatement under the regulations, the total original amount of warrisk term insurance, being approximately $40,284,892,500 on June
30, 1920, may be regarded as a remote potential liability. I t can
scarcely be regarded as a probable or prospective liability.
The ex-service men and women are reinstating their insurance at
the rate of approximately $100,000,000 a month. If reinstatements
continue at this rate, and should ex-service men and women be
allowed the privilege of reinstating during the next five years, there
would be, in addition to the present war-risk term ' insurance of
$3,472,624,000, approximately $6,000,000,000, making a total of about
$9,472,624,000..
The average policy of United States Government life insurance
(converted term insurance) amounts to $3,345.70. Assuming that
reinstatements of term insurance and conversions thereof will continue at the present rate, the amount of permanent United States
Gbvernment life insurance in force at the expiration of five years
would be approximately $3,643,347,850. This amount represents, in
the circumstances stated, the theoretical prospective insurance liability under converted policies five years hence.
Of the $40,284,892,500 war-risk term insurance written, there is a
definite liability due to death and disability claims of $1,170,354,673.48 to be paid in installments over a period of 240 months, o.r in
the case of total and permanent disability during the lifetime of the
insured. The sum of $298,864,307.07 has been collected in war-risk
term insurance premiums. This leaves a net current liability over
premium payments of $871,112,366.41. .
I n times of peace, premiums for term insurance ordinarily would
be sufficient to pay all normal claims; but in the case of war-risk
insurance it is to be remembered that many who are retaining their
term policies are not normal risks, and also, that the war-risk term
insurance, as well as United States Government life (converted) insurance, provides for permanent and total disability without additional premiums. Therefore it is unlikely, that the term insurance
premiums collected will, in fact, be sufficient to cover the actual liabilities.




SECRETARY OF THE TREASURY.

201

I t is believed that.premiums collected on converted policies (the
United States Government life insurance) will be sufficient to pay
all claims.
Military and naval allotments and family aUowances.
Amendments of original awards of allotments and allowances
constituted one of the most important problems of this feature of
the bureau's work during the year. Adjustments of the claims of
enlisted men who had been discharged from the service involved
much correspondence, which is now decreasing as the allotment and
allowance work approaches an end.
Applications and aioards for family aUowances for the period Oct. 6, 1917, to
June 30, 1920.
Applications received
Number of awards made for men having dependents
Number of exemption cases submitted

,
-

Amount of allotments paid
Amount of allowances paid^

4, 473, 700
2,090, 893
111, 903
$288, 704, 689. 73
265, 986, 936. 52

Total disbursements

554, 691, 626. 25

The current work of this division has greatly decreased since the
armistice, but it is still of considerable volume.
Payments for the month of June, 1920, amounted to—
Allotments.
Allowances
Total

^

^
'
:_i

. $1, 027,166'. 29
1, 334, 491. 43
2, 361, 657. 72

Marine and seamen''s insurance.
As insurance' provided for American vessels and their cargoes and
for masters and crews of American vessels covered war risks only, it
was possible to terminate these features of the Bureau's work soon
after the signing of the armistice. The rates for both types of insurance were withdrawn on January 4, 1919.
From September 2, 1914, when the Bureau was created, to June
30, 1920, the marine section wrote insurance on American hulls and
cargoes aggregating $2,067,291,993. The net premiums received
amounted to $46,741,508.96 and salvage $63,734.88. The net profit
of these operations, representing the excess of premiums and salvage
over expenses and paid and estimated losses was $17,030,197.11.
The seamen section, from its beginning on June 12,1917, to June 30,
1920, wrote insurance on the lives of masters, officers, and crews of
American vessels aggregating $322,782,391.82. The amount of net




202

REPORT ON THE FINANCES.

premiums received was $843,563.49. The net profit on the policies
covering these risks, representing the excess of premiums over expenses and paid and estimated losses, was $470,700.81.
Medical Division.
The work of the Medical Division has greatl}^ increased during the
fiscal year. To keep abreast of the work it has been necessary to
augment both the professional and the clerical personnel. At the be- "
ginning of the fiscal j^ear there were 35 medical officers and 196 clerical employees, and at the close there vfere 72 medical officers and 478
employees. At the beginning of the fiscal year there was an arrearage of approximately 39,000 cases awaiting action; on June 30, 1920,
the arrearage was only 4,444 cases, less than one average day's work.
At the beginniiig of the fiscal year the average output of cases per
diem was approximately 1,000; at the end of the fiscal year it was
5,257.
The Medical Division acted upon 1,088,201 cases during the fiscal
yeaf. These figures do not indicate the total number of men whose
cases were acted upon, but the number of times that cases received
attention. Out of the 3,800 men suffering major amputations during
the war, 3,616 have already been supplied with artificial limbs. Of
these 1,249 were arms and 2,367,were legs.
The number of patients in hosjoitals increased from 3,279 on June
30, 1919, to 17,471 at the close of the fiscal year. During that period
there were admitted to hospitals 48,983 patients, of whom 34,791 were
discharged. Analyzing these figures, it is found that at the beginning of the fiscal year of the patients in hospitals, 864 were general,
1,362 were tuberculous, and 1,053 were neuro-psychiatric. At the
close of the fiscal year, 6,411 were general patients, 6,018 were tuberculous, and 5,042 were nervous and mental patients. Of the clainis
made during the year 66.65 per cent were rated as temporary partial
disability, 20.87 per cent as temporary total, 3.72 per cent as permanent partial, and 1.97 per cent as permanent total. Ninety-three and
twenty one-hundredths per cent of the total number of cases were
rated at 10 per cent of disability or greater; that is, were com-'
pensable; and 6.29 per cent at less than 10 per cent of disability; that
is, noncompensable. 'Of the total number of claimants of the bureau,
2,629 have died during the year.
By an understanding with ^ the Federal Board for Vocational
Education an interchange of physical examination reports was
arranged. This materially'assisted the bureau in the speedy adjudication of claims and proved of great benefit to the claimants themselves, in that they were obliged to make only one contract to secure




SECRETARY OF THE TREASURY.

203

a medical examination either for the purposes of the Bureau of
W a r Eisk Insurance or those of the Federal Board for Vocational Education. Every endeavor was made to provide physical
examinations' and medical treatment based upon the latest and
best medical records, and arrangements were perfected whereby
examinations and treatment were provided for claimants with the
minimum of annoyance and disturbance of their personal affairs.
The Medical Division has! maintained arrangements with the
medical departments of the Army and Navy, whereby patients
requiring further treatment when discharged from the service are
immediately transferred from the Army or Navy ,hospital to a hospital for patients of the Bureau of W a r Eisk Insurance.
I n the fulfillment of its medical responsibilities to its claimants
the Bureau of W a r Eisk Insurance has maintained constantly a
-sympathetic attitude toward the claimant and his dependent relatives
-and has at all times endeavored to administer its several functions
with justice both to the claimant and to the Government.
Personnel.
The bureau has made marked progress during tho fiscal year in
•solving its difficult and extensive personnel problems. The force has
"been greatly reduced, placed upon a permanent civil-service basis, and
mobilized to meet the needs of the bureau.
The maximum number of persons employed at any one time during
t h e fiscal year was 15,480 and the minimum number was 7,862, the
latter being the total on June 30, 1920. The output of work, nevertheless, increased. The volume during the last quarter of the fiscal
year was very much greater than in any preceding quarter and the
bureau was on a more current basis.
The total number of employees of the bureau on Noveniber 1,
1920, was 6,833, including the field force and additional medical
personnel. The personnel program of the director contemplates a
reduction in force to approximately 6,000 by January 1, 1921.
•

.

•

\i

E N E M Y OR A L L Y OF E N E M Y I N S U R A N C E C O M P A N I E S A N D O T H E R FOREIGN
INSURANCE COMPANIES.

Federal supervision and. regulation of foreign insurance companies
doing business in the United States was continued throughout the
year. I t was performed through the Bureau of W a r IRisk Insurance under authority of an Executive order issued under the trading
with the enemy act. During the year applications of 12 companies
to do business in the United States were approved and the necessary
.licenses issued.




204

REPORT ON T H E FINANCES.
S O L D I E R S ' A N D S A I L O R S ' CIVIL RELIEF ACT AND BONDS.^

The department continued the administration of Article I V of
the act approved March 8, 1918, generally known as the soldiers' and
sailors' civil relief act. Under this law, the Government undertakes
to protect payments of premiums in commercial companies on certain policies on the lives of men in the military and naval services
to the extent of $5,000 insurance on any one life. Premiums due
life insurance companies in such instances are certified by the Bureau
of W a r Eisk Insurance to the Secretary of the Treasury, and, to
secure the payment of such premiums, the Secretary issues bonds of
the United States registered in the names of the respective insurers.
To June 30,1920, the Bureau of War Eisk Insurance approved 7,745
applications for benefits under this law. These approved applications protected $12,526,956.29 of insurance in private companies and
societies on the HA^CS of men in the military and naval services. The
amount of premiums guaranteed was $362,399.50. Some of the premiums were paid by the insured, and to the extent of such aggregate
payments it was unnecessary to issue bonds as a guaranty.
To October 31,1920, $195,400 of bonds had been issued to guarantee
the payment of such premiums, of which $29,400 had been canceled
and $166,000 were outstanding on that date.
DISTRICT OF COLUMBIA SCHOOL-TEACIIERS' RETIREMENT ACT.

The administration of certain provisions of the act approved January 15, 1920, providing retirement for the school-teachers of the
District of Columbia, was vested in the Secretary of the Treasury.
The law provided for the deduction and withholding. from the basic
salaries of every teacher in the public schools of the District of an
amount sufficient, with interest thereon at 4 per cent per annum, compounded annualiy, to purchase an annuity under the provisions of the
act. I t also authorized the investment of the fund arising from such
deductions. By Treasury Department Circular No. 190, dated May
25,1920 (Exhi|bit 86, p. 557), the Director of the Bureau bf War Eisk
Insurance was authorized to administer, under the direction of the
Secretary of the Treasury, the duties conferred upon the Secretary
by the retirement act, except those relating to the investment of the
fund created thereunder. The commissioner of the public debt was
authorized by the circular to perform, under the direction of the
Secretary of the Treasury, the duties conferred upon the Secretary
with respect to the investment of the fund. These arrangements continued until June 30, 1920, when, in accordance with the terms of
the act approved June 5, 1920, the administration of the law was
transferred to the Commissioners of the District of Columbia. the°




SECRETARY OF THE TREASURY.

205

duties with respect to investments being transferred to the Treasurer
of the United States. Such transfer and the future investment of
the fund were covered in Treasury Department Circular No. 205,
dated July 6, 1920 (Exhibit 87, p. 559).
Liberty bonds aggregating $48,350 on Noveniber 15, 1920, were
held, as investments for the District of Columbia Teachers' Eetirement Fund.
HOSPITALIZATION.

The signing of the armistice, with the resulting rapid demobilization of the military forces, threw an extraordinary burden upon the
hospital facilities of the United States to provide medical care and
treatmicnt for beneficiaries of the Bureau of W a r Eisk Insurance.
The United States Public Health Service constituted, with a few
minor exceptions, the only civil agency of the Federal Government
operating a general medical service. The Secretar}^ of the Treasury
consequently designated the service as the principal instrumentality
for the performance of the hospitalization work of the Bureau of
War Eisk Insurance. This arrangement was confirmed by the Congress in the act of March 3, 1919, which authorized additional hospital facilities for the care of the beneficiaries of the Public Health
Service and added to these beneficiaries patients of the Bureau of
War Eisk Insurance; and by the provisions of the sundry civil appropriatiori act for the fiscal year ending June 30, 1921, making appropriation for the care and treatment of patients of the War Eisk
Insurance Bureau.
Under the direction of the Secretary of the Treasury, on October
6, 1919, the War Bisk Insurance Bureau and the Public Health
Service prepared an estimate of the urgent hospital needs and a program to supply adequate hospital facilities to meet these needs. The
estimate disclosed that there was an immediate need of 7,700 beds
for war-risk insurance patients in addition to the other patients of
the Public Health Service. Acting as the medical agency of the
War Eisk Insurance Bureau, the Public Health Service adopted as
temporary expedients the following:
1. The expansion of existing facilities by such alterations, additions, or modifications as were immediately feasible.
2. The acquirement through congressional action of certain base
hospitals at Army camps which were capable of utilization.
3. The transfer to the Public Health Service of certain hospitals
leased by the W a r and Navy Departments.
4.. The purchase, lease, and remodeling of other institutions.
6. The making of contracts for the treatment of patients in nongovernmental hospitals.




206

REPORT ON THE FINANCES.

From October, 1919, the number of patients requiring hospital
care increased with great rapidity, until on June 30, 1920, it reached
a total of approximately 20,000, without any prospect apparent of an
abatement of increasing demands.
To meet this situation the Public Health Service had to find not
only sufficient hospital facilities, already greatly overtaxed in
this country prior to the war, and to find, and in many cases traiuo.
the professional personnel needed to man these hospitals, but it
also had to develop the administrative machinery required, tohandle this large and growing organization and to make contact with
sick and disabled former service men and women for the purpose of
securing the medical examinations necessary to ascertain the cliar-^
acter of treatment needed, to distribute them to hospitals, and for
the other manifold purposes to which this task gave rise. For
reasons of administration, the United States was divided by the
Public Health Service into 14 districts, in each of which it opened an
office and placed a district supervisor. The creation of this extensivemachinery to permit the Public Health Service to reach the disabled
soldiers and sailors and provide them with the care and treatment of
which they stood in need required time. The expansion of the field
agencies of the service went on rapidly, and Avas supplemented in its
early stages, particularly in sparsely settled portions of the country.,
by physicians retained on a fee basis directly by the Bureau of W a r
Eisk Insurance. As the organization was developed the services of
these physicians were made available to the Public Health Service in
an effort to coordinate their activities under the supervision of that
service.
Since the inception of this work, approximately 130,000 patients
entitled to treatment under the war-risk insurance act have been
cared for in hospitals, making a total of nearly 5,000,000 hospital
relief days, the unit of computation. Over 500,000 out-patient treatments have been furnished^—that is, treatment of cases not requiring
confinement in a hospital. About 500;000 medical examinations have
been completed. I n addition, special services and attentions of
various kinds have been afforded. For example, about 22,000 patients
have been given dental treatment. At the present time over 2,000
patients are being given occupational therapy and over 3,000 physiotherapy each week. Thousands of patients have been furnished prosthetic appliances of many different kinds.
To carry on this work the Public Health Service has necessarily
assembled a large personnel. The medical force (exclusive of designated examiners who act on a fee basis) now numbers approximately
2,700. A dental corps has been organized, comprising about 130
officers. There is in the service a corps of approximately 1,200




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207

female nurses. A reconstruction service has been formed, and there
are now in the employment of the service about 400 reconstruction
aids. A dietetic service has been provided which includes 125 trained
dietitians.
An inspection service has been instituted for general supervision
of the field activities of the service, and a number of officers are kept
constantly in the field investigating complaints and making reports.
This inspectJLon service covers not .only the hospitals operated directly
by the Public Health Service, but also civilian institutions receiving
patients under contract with that service, so that the department may
endeavor to see that the care and treatment furnished in such hospitals do not fall below the proper standard. I n cooperation with
the American Eed Cross, which has devoted itself to the work with
great zeal, there has been organized an extensive and effective medical
social service, ministering to the needs of the discharged disabled
soldier and sailor in many ways. The Public Health Service has
^siipplied the Federal Board for Vocational Education with the medical personnel necessary to carry on the medical functions of the
board, and, up to a short time ago, supplied the Bureau of W a r Eisk
Insurance with similar personnel to constitute the Medical Division
of the bureau for the execution of the medical functions of the warrisk insurance act carried on in the bureau.
I n order to assist the Public Health Service to meet the tremendous
task suddenly placed upon it by the demobilization of the armed
forces of the Nation following the cessation of hostilities, the Congress in the sundry civil appropriation act for the present fiscal year
authorized the utilization by the Director of the Bureau of War Eisk
Insurance of such governmental facilities as might be made available,
beginning July 1, 1920, in hospitals of the Army and Navy and in
the National Homes for Disabled Volunteer Soldiers. I n pursuance
of this authorization there have been made available about 1,600 beds
in hospitals of the Army, about 1,600 beds in hospitals of the Navy,
and about 1,000 beds' in the soldiers' homes. I t is estimated by the
Director of the W a r Eisk Insurance Bureau that by January 1, 1921,
there will be available in the soldiers' homes approximately 4,000
beds. This includes a hospital of 1,000 beds at Johnson City, Tenn.,
for tuberculous patients, and another of 1,000 beds at Marion, Ind.,
for patients suffering from mental and nervous disorders.
The work of making these beds available in the hospitals of the
Army and Navy arid in the National Homes for Disabled Volunteer
Soldiers was intrusted by the Congress to the Bureau of W a r Eisk
Insurance, and has been performed by the Medical Division of that
bureau in conjunction with the agencies of the Public Health Service, including the district supervisors of that service. The Chief




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REPORT ON T H E FINANCES.

of the Medical Division of the Bureau of War Eisk Insurance is a
member of the hospital board of the Public Health Service. Under
regulations approved by the Secretary of the Treasury, the Surgeon
General of the Public Health Service and the Director of the Bureau of War Eisk Insurance, acting conjointly, assemble through
their respective organizations the data as to beds made available in
hospitals operated by, controlled by, or under contract with the
Public Health Service, in Army and Navy hospitals, and in soldiers'
homes, and transfer this information at frequent intervals to the
offices of the district supervisors of the Public Health Service who
are charged with the distribution of patients. I n addition to its
duties in this connection, the Medical Division of the Bureau of War
Eisk Insurance transmits to district supervisors requests for medical examinations required in connection with claims for compensation and insurance under the war-risk insurance act, receives and
reviews the reports of such examinations, and makes an advisory
determination for the Director of the Bureau of War Eisk Insurance
of the extent of disability found, which is based upon a table of
ratings established under the war-risk insurance act for that purpose.
Such ratings are transmitted to the Compensation and Insurance
Claims Division, and when confirmed or modified by the director of
the bureau determine the payment of insurance or the amount of
compensation due.
Every effort has been made to coordinate closely the work of the
Medical Division of the Bureau of War Eisk Insurance and the
work of the Public Health Service. I t was recently decided by the
Secretary that the medical work in the Brireau of War Eisk Insurance
should be performed through a medical personnel, appointed in that
bureau. The reorganization of the Medical Division of the bureau
in accordance with this plan is now actively in hand and is nearing
completion. I n undertaking this task, the force was recruited in
large part from the medical personnel assembled and trained by the
Public Health Service and assigned to duty in the Bureau of War
Eisk Insurance. The personnel thus taken over continued the exercise of their functions without interruption or material change.
In carrying out this emergency hospitalization program it has been
necessary to utilize many temporary facilities and to adopt many
temporaiy expedients, which will be discontinued as rapidly as they
can be replaced by measures of a more desirable and permanent nature.
I t has been necessary to act expeditiously and to organize on a constantly expanding scale. I t is estimated that within the course of
another year approximately 30,000 patients will require hospitalization, and to meet this immense increase in the number of patients
within a period so short requires the unremitting efforts of every




SECRETARY OF THE TREASURY.

209

person engaged in the task. According to the best estimates available, it will cost approximately $50,000,000 to carry on this hospital
program during the coming fiscal year for patients of the Bureau
of War Eisk Insurance.
J

HOSPITAL CONSTRUCTION.

The Public Health Service now has in buildings either owned or
leased by the service over 12,500 available hospital beds. Under commitments already made it is expected in the course of the next few
months that this available bed capacity will be increased to a number
in excess of 15,000. In addition there will be added to the permanent
bed capacity of the Government 1,000 beds for neuropsychiatric
patients in the soldiers' home at Marion, Ind., and 1,000 beds for
tuberculous patients in the soldiers' home at Johnson City, Tenn.
These two homes have. been converted into hospitals exclusively.
This will make a total of 17,000 Government beds in the near future.
There are also at other soldiers' homes, either now available or shortly
to be made available, approximately 2,000 bed^; in Army and Navy
hospitals there have been reported as available a total of-3,270 beds.
The use of beds in hospitals of the Army and Navy has been adopted
as a temporary expedient until more satisfactory facilities can be
constructed. The use of beds in soldiers' homes should be of a more
pernianent nature, provided patients in these homes are kept entirely
separate and are separately treated from persons who seek these
homes for domiciliary purposes.
I should point out with respect to the hospitals operated directly
by the Public Health Service that some are Government buildings
on leased grounds transferred to the service by the Army or Navy;
some are institutions leased by the Army and Navy and turned over
to the Treasury Departnient by transfer of lease; some are buildings
of temporary construction hastily put up by the Army at the beginning of the war; some are priv.ate institutions leased by the Public
' Health Service direct under the act of March 3, 1919; and others are
hospitals bought or constructed especially for the service. The
leases in some cases will expire after certain fixed periods following
the declaration of peace, and are not renewable by their terms. The
buildings of many of the hospitals are far from satisfactory for the
use to which they are being put, and should be either substantially
altered and repaired or abandoned as soon as more satisfactory institutions become available. Some of the leases carry a purchase
clause, in pursuance of which the buildings may be bought if of a
character desirable for permanent acquisition, provided the Congress
sees fit to make the appropriations necessary.
13799—FI 1920



14

210

REPORT ON THE FINANCES.

The hospital facilities which the department now has are not so
distributed geographically as to meet desirably the needs of the
patients of the Bureau of War Eisk Insurance. I t is obvious that
the supply of beds must be sufficient in number, of the requisite
character, properly maintained, and so distributed throughout the
country as to permit of their use in the various sections.of the United
States.' I n meeting the future needs for hospital facilities, the
correct policy, in my judgment, is to hospitalize all patients, as far
as practicable, in Government hospitals and that beds be provided accordingly. This policy is clearly indicated by the experience of the department with regard to the character of service
afforded patients in Government-operated hospitals and hospitals
treating patients under contract with the Public Health Service:
Should this policy be adopted by the Congress, it will be necessary
not only to supply the number of beds necessary to equal the difference between the number of patients now iri hospitals and the beds
now available in Government-operated hospitals, but it will be necessary, in addition, to.increase the figure in order to provide such distribution of beds as will correct the present inconvenient geographical
distribution and to provide for growing demands.
I t will be readily appreciated that it is injurious to the patients in
many instances, as well as expensive to the Government, to have to
move them great distances in order to provide the character of
care and treatment required in the individual case. Further than
this, it will be necessary to increase the number, as rapidly as
practicable, by the number of beds required to replace those in leased
hospitals of the Public Health Service, the leases of which are not
renewable, and in those hospitals which are of an undesirable character and the use of which should, therefore, be discontinued as
speedily as possible.
As previously stated, there are at the present time approximately
20,000 patients now undergoing hospital treatment provided by the
Treasury Department. After careful consideration of (1) the number ,
of patients of the Bureau of W a r Eisk Insurance and the Public Health
Service now in hospitals; (2) the present Government hospital facilities; (3) the imminent necessity of replacing some of the undesirable hospitals; (4) the increase in the number of patients within the
past year giving further support to the estimate that 30,000 hospital
beds will be needed by the end of the next .12 months; and (5) the
geographical distribution of the ex-service population of the country,
it is believed that there is immediate and urgent need for 4,800 additional beds for tuberculous patients, 4,500 additional beds for patients
suffering from mental and nervous disorders, and 900 additional beds
for general medical and surgical patients. I n round numbers, 10,000




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SECRETARY OF THE TREASURY.

i

•

,

•

.

211

•

additional beds are almost immediately required. At an estimated
cost o'f $3,000 per bed for construction and $500 per bed for equipment, jan appropriation of $35,000,000 for this purpose would be
requirjcd at this time.
Sho|uld the Congress decide further to utilize buildings already
owned by the Government and erected on the grounds of soldiers'
homes in different sections of the country, the amount of this appropriation could be reduced accordingly. There are highly desirable
grounds surrounding and belonging to soldiers' homes in different
sections qf the United States upon which hospitals could be erected if
these j properties were made available for the purpose, thus reducing the expense of purchasing grounds for the erection of hospital jbuildings. Furthermore, if the Congress should see fit to
authorize the extension of the privilege of existing Army and Navy
hospitals for the use of W a r Eisk Insurance patients, the total of the
appropriation above suggested could be further reduced. The requisition of Army and Navy hospitals for this purpose is inadvisable
•except as to such as are both new and desirable.
Another matter which should be taken into consideration in connection with the hospital construction program is the possibility which
has recently developed by the passage by the New York State Legislature of ari act to provide for the construction of a 1,000-bed hospital
for neuropsychiatric patients of the Bureau of War Eisk Insurance,
to be ileased to the Government for 10 years at an annual rental of
one-tenth of the entire cost, but containing a limitation to the effect
that only patients who are citizens of New York State shall be admitted to the hospital. If this act of the New York State Legislature
should be amended by removing this limitation and by adding the
usual I purchase clauses which would admit of the application of rent
payments or a percentage thereof toward the purchase of the institution, jthe program for hospital needs for neuropsychiatric patients
.couldjbe modified substantially. I should present for the consideration (If the Congress the advisability of encouraging other States to
construct hospitals at their own cost to be leased upon completion to
the Government for the care and treatment of these patients, with
the provision that the United States would have the privilege of
buying the hospitals and of being credited in the purchase price with
sums Ipaid in rentals. I n this way the Government could purchase
such hospitals as, in the light of experience, might be needed permanently, and could release to the States for their use such hospitals
as maiy prove to be needed only for a period of years.
The 20,000 patients now receiving hospital care may be classified,
roughly, as one-third tuberculous, one-third suffering from mental
and nervous disorders, and one-third general medical and surgical




212

REPORT ON T H E FINANCES.

cases. An analysis of the character and distribution of the present
bed supply shows that the general medical and surgical cases are provided for in a reasonably satisfactory way, and it is believed that
such cases, if necessary, can in great part be cared for adequately under contract in civilian institutions, since their ailments do not ordinarily require prolonged hospitalization. On the other hand, the
care and treatment of tuberculous and neuropsychiatric cases constitute the more permanent phases of the hospital construction pro-,
gram. I t is not possible, upon the basis of present knowledge and
experience, to state when the maximum number of neuropsychiatric
and tuberculous cases will be reached. The indications are that this
may not occur in the near future. I t will be affected by possible
future legislation, such, for instance, as the pending proposal to
extend the privilege to claim compensation payments under the warrisk insurance act beyond the time now fixed in that act. Such an
extension would serve to admit a greatly increased number of
patients to care and treatment by the Government.
I t has been estimated by the Director of the Bureau of War Eisk
Insurance that the maximum will not^be reached for these classes of
patients until the years 1927 to 1929'. I n addition to the immediate
construction program involving an appropriation of approximately
$35,000,000, the Government must make provision for the care of these
two groups of patients in the years to come. I t is my belief that in
appropriating funds to care for the patients of these two services it
would be wise to frame the authorization in a broad and general way,
since this is an undertaking in a new and uncharted field which has,
in the few months since its inception, afforded but very limited experience by which the Government may be guided. The legislation should
authorize the use of funds for building units or additions of wards to
existing State or private institutions, and should contain provision
for the conclusion of long leases with such institutions as meet the required standard. The appropriation should, therefore, in my judg- .
ment be so framed as to provide additional hospital facilities (1) by
purchase, gift, or lease of existing plants or parts of plants; (2) by
construction on sites now owned by the Government or on sites
acquired by purchase, condemnation, gift, or otherwise; and (3) by
remodeling or extension of existing plants and their equipment,
owned or to be acquired by the United States,
I n summarizing the need for the construction of hospitals to meet
the requirements of ill and disabled ex soldiers and sailors, to whom
the country owes so much, I should point out that, according to the
best estimates obtainable, there will probably be need for a total of
something like 30,000 permanent beds in the United States. I t seems
fitting in every sense that the National Government should adequately
provide for the needs of these men, and I know of no way in which



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SECRETARY OF THE TREASURY.

213

this' c|an be° done except by the construction of permanent, suitable institutions, particularly for those who suffer from tuberculosis or
nervojus and mental disorders. The Nation earnestly desires that the
medical and hospital needs of her heroic sons be met in a manner that
will show America's appreciation of the glorious service they rendered to their country. I am satisfied that this need can not be met
unless adequate provision be made in permanent governmental institutions.
The estimates which are being submitted to the Congress contemplate an expenditure of approximately $35,000,000 for the construction of hospitals to meet the imperative demands of the situation, and in miy judgment this sum is by no means excessive to care
for this real emergency and immediate obligation of the Federal Government. I earnestly urge that the Congress appropriate the necessary funds for this purpose at the earliest practicable moment.
PUBLIC HEALTH.

In addition to the extensive and important work conducted for the
patients of the Bureau of War Eisk Insurance, as previously discussed, the Public Health Service continued to perform, with unremitting care throughout the year, its usual functions in the interest
of th^ health of the people. These included the protection of the
Natiolii against the introduction of epidemic diseases from foreign
countries and the spread of sickness from State to State, as well as
the continuation of scientific studies of medical treatment, diseases,
sanitation, etc. The service pursued its customary activities in cooperaltion with the State and local health authorities of the country.
I

Precautions against foreign epidemics.

With the resumption of maritime intercourse among the nations
of the world following the war, the prevention of the introduction
of pestilential diseases into the United States from foreign countries
becarae a problem for serious consideration by the Public Health
Service. Devasted and famine conditions in many parts of Europe
furnished fruitful soil for the propagation and spread of diseases
throughout Europe and their introduction into this country unless
strict precautionary measures were taken at ports of departure
or entry of vessels engaged in trade with America. Officers of the
Public Health Service were detailed during the fiscal year in increased numbers for duty in foreign countries to detect outbreaks of
diseases, in order that proper quarantine restrictions might be exercised. The officers stationed in foreign ports are rendering valuable
reports. Up to the present time, the service has been eminently successful in preventing the introduction of disease into the United
Irritates.
i
'
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'



214

REPORT ON THE FINANCES.

Transfer of State quarantine stations.
I t was a fortunate coincidence that, with the increasing menace of
disease conditions abroad, the three remaining States under which
estate quarantine stations were maintained transferred their quarantine facilities to the Public Health Service. During the fiscal
year ended June 30, 1920, Congress appropriated funds for the payment for the quarantine stations at New York City, Baltimore, Md.,.
and those in the State of Texas, and the necessary legal steps are
now being taken to effect the transfer of these properties from State
to Federal jurisdiction. This is a move of much importance in the
direction of safeguarding the health of the country. I t enables
trie quarantine procedure now being carried out at other stations
to be made applicable at these places. This action now makes possible uniform practice at all the quarantine stations of the United
states, with a resultant increase in quarantine efficiency and a decreased burden on maritime coinmerce.
National leprosarium,
Eealizing the menace which existed in the presence and migration of persons afflicted with leprosy in various States throughout
trie country, the Congress, on February 3,1917, appropriated $250,000
tor the establishment of a national leprosarium to be maintained
under the jurisdiction of the Public Health Service and granted autriority for the erection of suitable buildings to carry out the purposes
ot trie act.
bince the date of the passage of the law repeated efforts were made
to obtain a suitable site for the institution. A number.of satisfactory
locations were given serious consideration, but local opposition to
the establishment of a leprosarium finally resulted in the abandonment of these projects. Within the last few months, however,
arrangements have been perfected and necessary legislation enacted
by the Legislature of the State of Louisiana, whereby its leper colony
located at Carville, in that State, has been turned over to the Public
Health Service to be operated as a national leprosarium. Final
steps are being taken to consummate this transfer and to open the
institution under Federal control.
Heretofore persons afflicted with leprosy frequently have become
charges of States of which they were not legal residents. I t is manifestly unfair to such communities that they should be charged with
the expense and care of these patients and be subjected to the risk of
the spread of the disease among their people. With the establishment of this Federal home, however, it is believed much can be done
to relieve the States of this unjust burden.




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SECRETARY OF THE TREASURY.

215

I n connection with the treatment of lepers it should be riientioned
that as a result of investigations of leprosy the Public Health Service
hasi developed a method for the treatment of the disease which gives
extremely encouraging results. Should further observations of this
treatment bear out present indications the Federal home for lepers
will not only be the means of segregating persons suffering from one
of the diseases most dreaded by man, but will also hold out in cases
which have not advanced too far a very material hope for recovery.
National health program.
The efficient formulation and effective execution of an adequate
national health program is of vital importance to the happiness and
prcjgress of the people of the United States. I n the previous annual
repjort of the Secretary of the Treasury attention was invited to the
nedessity of the development of a comprehensive plan to meet the
urgent after-the-war health needs. I t has been possible to make but
little progress in this direction because of the lack of the necessary
appropriations. Nevertheless, the Public Health Service already has
made a beginning along certain lines and has employed the limited
funds placed at its disposal by the Congress to the very best advantage practicable in developing the contemplated program.
For exam.ple, an appropriation of $50,000 to enable the service to
codperate with the States in studies in and demonstrations of rural
hygiene has been used to such advantage that, instead of the expenditure by States of an equivalent sum, such expenditures have been five
times the amount contributed to the work by the Federal Government; that is to say, $250,000. That does not include much larger
•sums for the same purpose expended by municipalities and private
•corporations which have authorized the issuance of bonds or directly
expended sums in the neighborhood of $800,000. I n view of the encouraging results which have followed these very moderate expenditures, it is felt that a substantial increase, should be made in these
funds which go far toward making rural life more attractive and
healthful.
The service has not been able to undertake its work in child hygiene
along the extensive lines that are desirable. I t has used the money
appropriated, however, in intensive studies of the conditions of
-child hygiene in such a manner as to demonstrate the unusual value
t o ithe country of health work in this field. As a result, three States
are now establishing departments of child hygiene along lines recommended by the Public Health Service. These investigations have
shoAvn so many adverse conditions which are easily preventable affecting the health of children that there can be no question as to the
necessity for the Public Health Service continuing the work in a
larger way.




216

REPORT ON THE FINANCES.

In organizing its work on industrial hygiene the service has made
intensive.studies of many occupations, but what is of larger interest
in this field is the fact that it has assumed sponsorship for a national
code of industrial hygiene whereby minimum standards for the protection of the health of workers will be established.
I t appears quite essential that the Public Health Service should be
provided with adequate funds with which to support and conduct investigations. I n this connection the Surgeon General calls attention
to the fact that one-fifth of all deaths take place in children less than
5 years of age, that pneumonia is annually the cause of one-tenth of
all deaths in the United States, that tuberculosis claims 150,000
persons annually, that 7,000,000 or 8,000,000 cases of malaria occur
yearly with an estimated economic loss ranging from $800,000,000 t o '
$1,000,000,000, and that the recent epidemic of influenza carried off in
the space of six weeks some 500,000 lives.
Plague has made its appearance in the United States, and these
outbreaks are drawn to the attention of the Congress in the hope t h a t
additional appropriations will be granted to the Public Health Service for combating the disease. The service is also in need of additional funds for the purpose of collecting information with respect,
to the presence of disease in the United States. I t is important t h a t
a'Central national agency assemble this very important ^information
ctirrently and distribute it to State and local authorities for the purpose of taking the necessary steps to prevent the scourge of interstate
epideriiics. The attention of the Congress is further invited to the
request of the Surgeon General for adequate appropriation and
authority to publish and distribute additional health material for
the use of the public.
COAST GUARD.

After distinguished service as a part of the Navy, to which it
was temporarily transferred in accordance with law during.the war,,
the Coast Guard has operated under the direction of the Treasury
since August 28, 1919, pursuant to Executive order of that date. I t
is gratifying to record that the department's expectations with respect to the loyal, effective, and courageous performance of war-time
duties by this historic service were fully realized. Its integrity, efficiency, and best traditions were sustained in a marked degree, and
the record is a creditable one, of which officers and men may well be
proud.
.
The Secretary of the Navy, in his annual report for the fiscal year
ended June 30, 1919, had the following to say with regard to t h e
operations of the Coast Guard as a part of the Navy during the war:..
* * * Its vessels and personnel made a valuable addition to our forcesafloat and its experienced ofiicers and men proved .their v/orth in service with*
those of the regular Navy and Naval Reserve Force.




SECRETARY OF TFIE TREASURY.

217

I n I speaking of the performances, of the Coast Guard cutters in
European waters the Secretary of the Navy also said:
SixjCoast Guard cutters were employed, in convoy and escort duty in European
waters, the Ossipee, Seneca, Yamacrato, Algonquin, Manning, and Tampa forming a ipart of our forces based on Gibraltar, which escorted hundreds of vessels
between the Mediterranean and Great Britain. It was while engaged in this
duty that the Tampa was lost, with all her gallant oflicers and.men, sunk at
night in the English Channel by mine or torpedo. Only a short time before
Rear Admiral Niblack had commended the Tampa in the warmest terms, recalling that it had steamed an average of 3,566 miles a month, being under way
more than 50 per cent of the time; had escorted 18 convoys, and had been kept
in a state of high efficiency with an excellent ship spirit. This was typical of the
serviqe of the Coast Guard cutters in the war zone and of the excellent record
made I by the Coast Guard wliile operating with the Navy. I wish to express
my appreciation of the hearty cooperation of its officers and men and of the
way in which experience demonstrated the wisdom of the legislation which
in time of war makes available the addition of this branch to our fighting
forces.

I t is my pleasure and privilege to express the Treasury's grateful
appreciation of the achievements-of the service during the war and
to commend the officers and men for the splendid record they have
written into the Nation's history.
Rescue and salvage.
Like other branches of the public service affected by postwar conditions, the Coast Guard has been compelled to do its work during
the past year with a personnel far short of actual requirements
Nevertheless, the aid given to shipping in the face of these difficulties,
and others, among which may be mentioned a winter season of more
than ordinary severity, has far exceeded that of any former 3^ear in
the history of the establishment. The value of the vessels (including
cargoes) assisted by service stations and.cutters during any former
year did not exceed $20,000,000; the value of such property aided
during 1920 was somewhat in excess of $65,000,000. The instances
of service performed within the same period were approximately
2,700 and the number of lives saved or persons rescued from peril
was 2,417. There was not a single day during the year in which
service of some sort vv^as not performed having for its object the saving of life or property or the relief of human distress.
Ice patrol to promote safety at sea.
The patrol of the ice regions in the North Atlantic Ocean, in accordance with the terms of the International Convention for Safety
at Sea, which was temporarily suspended for the seasons of 1917 and
1918 on account of military exigencies, was resumed during the past
year. The service was rendered by the Coast Guard cutters Seneca.,




218

REPORT ON T H E FINANCES.

Ossipee., and Androscoggin^ principally off the Grand Banks and
along the trans-Atlantic steamship lane, where, during certain periods,
the low visibility, due to rain,, fog, and mist, renders floating icebergs
a constant menace to navigation. Through the protective work of
the cutters, daily reports were made to the B[ydrographic Office of
the Navy and warnings circulated by wireless for the information
of shipping.
Winter cruising.
Winter cruising for the purpose of rendering aid to distressed
navigators upon dangerous or storm-swept coasts of the United
States, which was omitted for the season of 1918-19 on account of
international conditions, was resumed during the year upon order
of the President, designating the Ossipee, Androscoggin, Gresham,
Acushnet, Seneca, Manning, Apache, Pamlico, Seminole, Itasca, and
Yamacraw for the duty. These vessels, individually and collectively,
made a commendable record, the number of persons rescued from
peril in the course of the fleet's operations reaching nearly a thousand
and the value of property saved (ships and cargoes) reaching far
into the millions of dollars. This record was made in spite of a
seriously crippled personnel, the cutters having been frequently undermanned, due to the inability of the service to offer attractive inducements for enlistment.
Cruises in northern waters.
During the year an arrangement was entered into between this
department, the Navy Department, and the Department of Commerce whereby each department was to assign vessels to perform
jointly the customary annual patrol of the waters of the North
Pacific Ocean, Bering Sea, and Southeastern Alaska. Four vessels
of the Coast Guard (the Bear, Unalga, Algonquin, and Bothwell),
three vessels pf the Navy, and four of the Department of Commerce (contributed by the Coast and Geodetic Survey), were assigned
to this duty.
The cruise conducted last year in Alaskan Avaters was made by the
Coast Guard cutters Unalga and Bear. The first-named vessel sailed
in April and the other in May of 1919, and the cruise continued for
several months. A notable feature of this cruise was a six weeks'
fight riiade by officers and crew of the Unalga in combating a
virulent epidemic of the Spanish influenza among the natives at
Unalaska, in the Nushagak Eiver district, and elsewhere. I n the
prosecution of this work the personnel of the Unalga were called
upon to sacrifice every personal comfort, to risk health, and even seriously to hazard their lives. But for their self-sacrificing endeavors
the native population in several localities would practically have
been wiped out.




SECRETARY OF THE TREASURY.

219

Anchorage and movements of vessels.
I n accordance with Title I I of the act approved June 15,1917, proTiding, in part, that—
Whenever the President by proclamation or Executive order declares a national emergency to exist by reason of actual or threatened war, insurrection,
or invasion, or disturbance of the international relations of the United States,
the Secretary of the Treasury may make, subject to the approval of the Presi•dent, rules and regulations governing the anchorage and movement of any
vessel, foreign or domestic, in the territorial waters of the United States, may
inspect such vessel at any time—

the Secretary of the Treasury continued to exercise jurisdiction over
the anchorage and movements of vessels in the harbor of New York
and vicinity, in Hampton Eoads and the harbors of Norfolk and Newport News, in that portion of the Delaware Eiver lying between the
northerly limits of Philadelphia Harbor and the southerly limits of
Newcastle, Del., and in the waters of St. Marys Eiver from Point
Iroquois on Lake Superior to Point Detour ori Lake Huron, except
those waters included in the St. Marys Falls Canals, at all of which
places rules and regulations had been previously promulgated under
authority of the above-mentioned act. With the resumption of peacetime commerce, it has been found necessary to amend the regulations
a.t the various ports to meet the new conditions. The Board on Anchorage and Movements of Vessels, consisting of representatives of
the Treasury, War, and Navy Departments, held public hearings at
New York, Philadelphia, and Norfolk- in order to determine what
m.odifications of the rules and regulations in effect at the respective
ports were deemed advisable, and, as a result of these hearings, the
regulations have been amended to meet most effectively and satisfactorily the present needs and requirements regarding the anchorage and movements of vessels. The personnel and equipment of the
Ooast Guard were utilized in the enforcement of the rules and regulations, officers of that service being detailed as captains of the port
a t New York, Philadelphia, Norfolk, and Sault Ste. Marie.
International yacht races.
Beginning July 15 and concluding July 27, 1920, there were held
off the entrance to New York Bay, under the auspices of the New
York Yacht Club, the international yacht races in which the British
yacht Shamroch I V competed with the American yacht Resolute
for the America'^s cup, the possession of which carries 'with it the
yachting supremacy of the world. Similar races have been held in
previous years in the same locality and under the same auspices.
These events are of world-wide interest, and to witness them there
invariably assembles a large fleet of vessels, bearing thousands of



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REPORT ON T H E FINANCES.

spectators. Under authority of law the Secretary of Commerceissues suitable regulations to promote the safety of life on navigable
waters during regattas and, under the same authority, requests theservices of vessels of the Coast Guard to enforce these regulations.
Accordingly, at the request of the Secretary of Commerce, therewas assembled a fleet of eight Coast Guard vessels to patrol theinternational yacht races of 1920. This duty imposed great responsibilities upon the Coast Guard patrol force. They were required
to regulate the movements of the numerous vessels of every size and^
description that gathered to witness each race, so as to prevent accidents that might imperil the lives of the thousands of spectatorsafloat, and also to regulate those movements so that the coriipeting
yachts might have an unobstructed course and that the spectatorsmight receive every proper consideration in their desire to obtain a
good view of this important sporting event. I t readily will be understood that this task called for excellent organizatioii and the exercise
of the best of judgment. The work of the Coast Guard patrol force
was performed with entire success and won the commendation o f
those under whose arrangements the international yacht races o f
1920 were conducted.
Coastal communication.
The coastal telephone system has been improved and extended during the year, as the exigencies of the service have required. Theutility of this activity of the Coast Guard for the peace-time dutiesof the service long ago became an established fact, and it more than.
justified the anticipated advantages to be derived from it as a protective agency of the Government along our coasts during the war.
Aviation.
A ' Coast Guard aviation station has been located at Morehead'
City, N. C. The establishment of this station has been accomplished'
at practically no expense to this department. The buildings a n d
equipnient were turned over to the Coast Guard by the Navy Department. The aircraft in use are the Navy H-S flying boats. T h e
application of these aircraft to the problems of saving life and property along the seacoasts and in locating floating derelicts off the
coasts is now possible, and experiments to demonstrate further t h e
effectiveness of aircraft for these purposes have been outlined for the
ehiployment of this station* I t is proposed to establish similar stations as funds become available.
Legislation.
During the year considerable beneficial and constructive legislation affecting the Coast Guard was enacted by Congress, perhaps t h e



bECRETARY OF THJ-: TREASURY.

221

joiost far-reaching beirig that contained in the act of May 18, 1920,
^entitled, "An act to increase the efficiency of the commissioned and
-enlisted personnel of the Army, Navy, Marine Corps, Coast Guard,
Coast and Geodetic Survey, and Public Health Service," providing
for increases in pay. I t hardly could be expected that the service
would immediately reap the benefits afforded by this legislation, but
i t is hoped that, as industrial and economic conditions throughout the
-country resume a more normal state, the advantages offered may
result in stimulated recruiting.
Retention of the Coast Guard in the Treasury.
The transfer of the Coast Guard from the jurisdiction of the
Treasury to the jurisdiction of the Navy has been periodically agitated for many years. The proposal was revived shortly before the
Coast Guard was returned to the Treasury under the Executive order
•of August 28, 1919, and its consideration has been continued since.
I n the past the Treasury has opposed almost uniformly the enactment
oi legislation for this purpose and the Congress always has refused
to sanction the proposal. I n the present consideration of the matter,
the views of the Treasury have been made known to the appropriate
committees of the Congress. Eecent discussions of the subject have
brought forth no new material facts which in ariy way would warr a n t the Treasury in departing from its position. After very careful consideration of the matter, I am of the firm opinion that the
Coast Guard in time of peace has no relation to the Navy and should
^ot be transferred to the Navy, but should remain in the Treasury.
The department is attached to this historic service which hag
come down through the years with fine traditions and achievements.
I t has made a noble record under the Treasury. The department's
position in this matter, however, is not based upon any selfish reluctance to be relieved of duties it has performed and powers it has
^exercised for so many years, for, as pointed out elsewhere in this
report, the Secretary is willing that services that have no direct relat i o n to the Treasury be released from the department and transferred
to ©ther jurisdictions. I t is based, on.the contrary, upon what is
'believed to be the best interests of the public service as well as of
t h e Coast Guard.
A brief discussion^of the origin and activities of the Coast Guard
may serve to show why this establishment should not be transferred
to the Navy. The Coast Guard is a consolidation of the old EevenueCutter and Life-Saving Services, and as the successor to the EevenueCutter Service is older than the Navy and almost as old as the Government itself. I t was created in 1790 at the second session of the
First Congress, upon the recommendation of Alexander Hamilton,,
the first Secretary of the Treasury, as the result of the need for the



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REPORT ON T H E FINANCES.

.

services of a coast patrol for the enforcement of the customs laws^
and as an organized armed force for the protection of the seacoast..
During its life of 130 years its functions have been increased, and
to-day they may be summarized as follows:
1. Protection of the customs revenue.
'
.
2. Assistance to customs officers in the performance of their duties.
3. Aid to vessels in distress and the saving of life and property.
4. Destruction or removal of wrecks, derelicts, and other floating:
dangers to navigation.
5. Medical aid to American vessels engaged in deep-sea fisheries.
6. Enforcement of laws and regulations governing anchorage of
vessels in navigable waters.
7. Enforcement of laws relating to quarantine and neutrality.
8. Suppression of mutinies on merchant vessels.
9. Enforcement of navigation and other laws governing merchant
vessels and motorboats.
10. Enforcement of law to provide for safety of life on navigable
waters during regattas and marine parades.
11. Protection of game and the seal and other fisheries in Alaska^
etc.
.
12. Enforcement of the sponge-fishing law.
13. International ice patrol off the Grand Banks,
14. Service as a part of the Navy in time of war or when the
President shall direct.
Many additional tasks fall to the Coast Guard, and it is generally
recognized that all departments may call upon it for any special work
of a maritime nature which is not specifically assigned or for which
resources are not elsewhere obtainable.
From the beginning the Coast Guard has been an invaluable p a r t
of the Treasury organization in connection with the collection of
the customs revenue and in the administration of the Customs Service.
Apart from the humanitarian nature of other important duties of
the Coast Guard, it may be stated that the Customs Service has at
least an indirect interest in the relief of distressed vessels laden with
importations for the United States. Furthermore, it should be said
that while nowadays there is little or no smuggling in large cargo
lots, it is believed that the very existence of the Coast Guard prevents
such smuggling. With the advent of prohibition, it has been found
necessary for the Coast Guard to be very vigilant in connection with
smuggling by means of small boats. If this service is withdrawn
from the Treasury and placed under the xontrol of another jurisdiction where it may disappear as a separate unit or not always be
subject to the request of the Treasury for specialized service, it is
possible that smuggling might be resumed on a large scale, thereby
causing loss to the revenue. I n that event it is also likely that



, SECRETARY OF THE TREASURY.

223

smugglers might be particularly active with respect to violations of
the prohibition act, the enforcement of which is imposed upon the
Treasury.
I t is true that some of the functions of the Coast Guard have no
direct relation to the Treasury, but it is also true that such functions
have no relation to the Navy. The Coast Guard is not a naval service
in any sense, except in time of war, when properly the law provides
that it shall be transferred to the jurisdiction of the Secretary of
the Navy. The functions of the Coast Guard and those of the Navy
normally are fundamentally different. The similarity ends when it
is stated that the Navy is a fleet under military discipline and the
Coast Guard possesses a fleet under military discipline. The question
must be determined, not by the fact that both are floating services, but
by the character of their duties. I n the judgment of the Treasury
there is no more reason to transfer the Coast Guard to the Navy in
, time of peace than there is to transfer the merchant marine to the
Navy in time of peace.
The Coast Guard is an intensive organization and, particularly in
its work relating to the conservation of life and property from the
perils of the sea, demands special equipment, special trainingv, and
special qualifications. Its duties are not of an occasional nature, but
call for vigorous prosecution at all times. I believe that they are of
such character as to dictate that they remain under the supervision
of a civilian department. I t is very greatly to be feared that the
absorption of the Coast Guard by the Navy in all probability would
result eventually in the extinction of essential Coast Guard duties, to
the great disadvantage and loss to the Government and the maritime
interests of the Nation. I t is obvious that the Navy does not need the
Coast Guard in time of peace; it is equally obvious that the Treasury
does need it. in the performance of duties vested in this department by law. I t seems clear that the permanent union of the two
services would be an anomaly. The Congress is earnestly requested to
withhold approval of any legislation designed to effect such a transfer.
I n submitting this recommendation, I desire to enter an urgent
plea that the Congress grant the authority and appropriations
which are necessary to increase the efficiency and to extend the usefulness of the service. I t appears to be felt by some proponents of
the transfer that the Coast Guard would fare better at the hands of
the Congress if placed within the jurisdiction of the Navy Department
instead of the Treasury Department. I do not entertain that notion
in any degree. I do not believe that the Congress would look with
any more favor upon requests for appropriations coming from the
Coast Guard as a part of the Navy than from the Coast Guard as a
unit in the Treasury. I n this spirit I invite attention in the following
paragraphs to imperative needs of the service, with the confident



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REPORT ON T H E FINANCES.

hope of favorable action. The Coast Guard contributes most
essential and important service to the welfare of the Nation,
accentuated and increased in value at the present time by the
great growth of our commerce and merchant marine. Unless its
obvious requirements are met in the near future, it can not be expected
to fulfill its mission with the same degree of efficiency and effectiveness that has characterized its performances in the past. Its
pressing needs consist of suitable recognition of the personnel, appropriations to keep the vessels in perfect condition, provision for
additional ships to replace those not worth repairing, and adequate
funds for the Coast Guard Academy. The service must be made
attractive to men of courage and skill and its vessels and stations
must be kept in perfect condition to meet every call of distress from
the sea, and it should be noted that its vessels are compelled to go to
sea in weather conditions that cause other vessels to seek port. I t is
an arduous and hazardous service.
Commissioned personnel.
The limited opportunity for advancement in the commissioned personnel grades, due to the comparatively small number of officers in
the service, the absence of the higher grades which officers of long
years of experience should attain, and the fact that promotions can
be made only upon the occurrence of vacancies on the active list, are
matters of serious concern. They have a direct bearing on the efficiency of the Coast Guard. These limitations can not fail to arouse
some sense of injustice among fine and experienced officers of long
service, and they operate especially to the disadvantage of younger
men, who are prevented from reaching command rank until well
along in life. Provision should be made for adequate periodical
advancement in grade regardless of vacancies. This is a matter of
the first importance. I earnestly hope that the Congress will recognize this serious obstacle to the improvement of the Coast Guard, and
by appropriate legislation provide for promotion among the commissioned grades along lines more nearly parallel to those in the Navy.
Vessels and stations.
. I t is essential that early steps be taken to provide at least four or
five additional vessels of such type and size as will best meet the
present and future requirements of the service in rendering aid and
protection to the increased and increasing marine commerce of the
country. Five vessels are now under contract, and there is promise
of their delivery within the next few months, but even these will
not supply the deficiency which before long will result from the withdrawal of some of the older vessels from the heavy work of the service
for lighter duty. The Bear, for example, which has done excellent



SECRETARY OF THE TREASURY.

225

service in the Arctic for many years, is very old and should be replaced by a modern vessel better adapted to the present needs and
conditions. The physical condition and the equipment of some of
the vessels are not satisfactory. These conditions are due to the lack
of sufficient funds to keep the vessels in a state of good repair and
to provide them with all requisite facilities.
During the past year or so the Coast Guard has been able to obtain
from the Navy a number of vessels of the Eagle and subchaser type,
but these are not wholly suited to the needs of the service. Vessels
adapted to the special work the Coast Guard is called upon to perform
should be provided. I n some instances they should be larger
than the present class of vessels and have greater speed and more
comfortable quarters.
Many of the shore stations of the service have reached a state of
dilapidation. Eepairs of considerable magnitude are absolutely essential in some cases and in others the station buildings will have to be
replaced by new ones. I t is earnestly hoped that the Congress will
make the appropriations needed to relieve these condixions and, in
addition, to establish a number of new stations authorized by law
but deferred on account of the lack of fund-s.
Coast Guard Academy. .
Steps should be taken without delay to improve conditions at the
Coast Guard Academy. A board was recently convened to canvass
this matter. I t was instructed to present a carefully considered plan
for the improvement of buildings and grounds and to suggest the
necessary additions to equipment. This academy need not be large
but it should be a model of its kind.
CUSTOMS.

Customs receipts largely increased during the fiscal year. They
aggregated $328,633,392, or $142,391,956 more than in the preceding
fiscal year, and $29,720,157 more than in the fiscal 3^ear ended June 30,
1914, immediately prior to the outbreak of the war in Europe. Collections from duties and tonnage, covered into the Treasury, which
represent the " official customs receipts" for 1920, amounted to
$323,536,559. This was only $10,146,886 less than the " official customs receipts" of 1910, the largest collections in any fiscal year in
the history of the service.
The number of vessels which entered and cleared foreign was
89,115, as compared with 83,874 during 1919; the entries of
merchandise during 1920 numbered 6,061,369, as against 5,061,450
for the preceding fiscal year; and the drawback paid increased
13799—FI 1920




15

226

REPORT ON T H E FINANCES.

$12,474,815 during the s^ame period. The removal of many of the
war restrictions that had been placed upon transoceanic travel
also resulted in a large increase in the number of passengers arriving
in the United States as evidenced by 201,038 baggage declarations
and $2,456,565 in head-tax collections, as compared with 95,063 baggage declarations and $877,776 head tax co.llected in 1919. The value
of imports for 1920, inclusive of Porto Eico, amounted to $5,238,621,668, an increase of $2,142,901,600 over that of 1919, while the
value of exports, inclusive of Porto Eico, amounted to $8,111,039,733,
an increase of $878,757,047 over that of 1919. Notwithstanding the
large increase in the volume of business transacted, the total expense
of conducting the service was $10,098,808 or $48,768 less than that of
1919.
By reason of the large collections and the econoniic administration
of the service, the cost of collecting $1 decreased from $0.0579 for 1919
to $0.0307. The enormous volume of business was transacted with a
steadily, decreasing force of emplo3^ees. On J a n e 30, 1920, there
were 6,633 employees, a reduction of 1,427 from the number employed
in 1910, the highest point in the customs business in the history of
the Government in the amount of duties collected and, up to that
time, in the volume and value of imports.
The enforcement of the Federal prohibition law along the seaboard
and the Mexican and Canadian borders imposed an added burden.
The service was obliged to handle this burden without sufficient
funds. A large number of seizures, arrests, and prosecutions were
made in connection with attempts to smuggle intoxicating liquors
into this country, and every possible means was taken to stamp out
violations of this character; but with the limited force available for
searching vessels and patrol work along the seacoast and frontiers
it is safe to assume that the quantity of liquors seized is sniall in
comparison with the quantity smuggled into the country. Moreover,
the increase in the volume of customs business necessitated the return
of a considerable number of employees whose services had been
largely devoted to prohibition enforcement work to their regular
customs assignment. The need for a larger force and' a more adequate equipment for the customs enforcement of the prohibition act
is even more urgent than it was last year, and it probably will be
necessary to provide for* increased' customs force throughout the
country.
THE MINT SERVICE.

The demands of the country for coins were very great during the
fiscal year and imposed a large burden upon the Mint Service. The
number of pieces coined is the most accurate measure of its accomplishment. I n 1915, when the mints were operated upon the normal




SECRETARY OF THE TREASURY.

227

basis of an eight-hour day, the coinage aniounted to 148,000,000
pieces; during the year under review the mints made 810,000,000
pieces.
The funds at the disposal of the department for new equipment
for the mints have been advantageously utilized: Every modern
device available for efficient work has been installed in the coinage
mints. This constructive advance has been met by the interested
and skillful efforts of the officers and men. A year of creditable
service has resulted.
The newly finished building for the New York Assay Office was
damaged by an explosion on September 16, 1920. Emergency repairs, immediately made, permitted the business of the office to proceed with but little interruption. As a result of the presence of mind
and discipline of the men and the heads of the departments d u r i n g
the crisis of the disaster, no loss of the precious metals stored in the
assay office or in process was sustained by the Government. The
building was not injured structurally, the damage being confined to
the exterior stone facing, ornamental iron grilles, metal window sash,
skjdights, metal screens, marble finish of lobby, interior doors, and
plaster, throughout the building. The work of restoration will probably take from four to five months and will cost, it is estimated,
$75,000.
Proposed neio mint.
I t is recommended that the Congress consider the advisability of
establishing a coinage mint in Chicago. A mint in that city would
better adjust the facilities of coinage to present business conditions
in tlie country;, assist in meeting the demand for coinage, particularly in the Middle West and South; facilitate the^distribution of
coins to those points; reduce the expense of shipping, the cost-of
which is now burdensome to the Government and to banks by reason
of the remoteness of existing mints from new business centers; and
relax the present excessive pressure on the existing mints.
There are three coinage mints, located at Philadelphia, San Francisco, and Denver, the last to be established being that at Denver.
The first coiiiage^ was issued from the Denver Mint in 1906. The
following shows the coinage at that time as compared with the
present:
Coinage of three mints in 1906
Coinage of the same three mints in 1920—

Pieces.
.— 174,000,000'
.810, 000, 000

To produce the latter amount of coin it was necessary to operate
the three mints on an overtime basis the greater part of the year.
This condition has prevailed for the past three years. Overtime
operations and every available improvement in the equipment of



228

REPORT ON T H E

FINANCES.

the mints have not kept pace with the increased demands for coinage^
It is physically impossible to extend to present business conditions the
facilities that were provided 15 years ago. The process of expandT
ing the output of the present mints has reached the utmost limits of
safety. Neither men nor' machinery can sustain greater pressure.
The output of the Philadelphia Mint, even .upon an overtime basis
much of the year, could readily be absorbed by neighborhood transactions. During the year just closed it has been necessary for the
Government to pay the cost of shipping coins from San Francisco
and Denver to New York and other eastern ^Doints. Should Congress authorize the establishment of a mint at Chicago, the business
interests of the entire country would be served. I t is further suggested that the vaults of a mint at Chicago could be used for the
storage of Government funds previously in the custody of the subtreasury now discontinued.
BUREAU OF ENGRAVING A N D P R I N T I N G .

The bureau^delivered 402,711,759 sheets of finished work during
the year, embracing currency, permanent Victory Liberty loan
gold notes and bonds, certificates of indebtedness, farm-loan bonds,
war-savings stamps and thrift stamps, and postage and internalrevenue stamps. The value of the delivered, sheets expressed in
mone}^ aggregated the remarkable sum of $27,738,032,147.91. The
work of the bureau has been carried on under extreme pressure, and it
has been with difficulty, owing to the large demands, that the currency
and bond requirements of the Government have been met. The work
of supplying permanent Liberty loan bonds of the various issues has
now progressed to the stage that only the fourth Liberty. loan issue
is to be replaced, and the work on this issue is well under way and.
will be finished during the fiscal year 1921. The replacement issue
of bonds for which the temporary bonds are being exchanged is
necessarily slow, owing to the fact that only one bond is secured from
a plate printed impression. During the present fiscal year 17,760,682
sheets of these large permanent bonds were produced, 8,000 sheets of
2 per cent and 4 per cent United States registered bonds, and
1,889,997 sheets of Victory Liberty loan gold notes. I t has been
necessary to operate three shifts of employees throughout the entire
year.
I t became necessary during the year to install an electrolytic plant
in the engraving division in order to supply enough engraved plates
to keep the plate-printing division in steady operation. The engraving division produced 10,367 engraved plates during the year by the
usual methods. The installation of this plant was made under the
supervision and direction of representatives of the Bureau of Stand-




SECRETARY OF THE TREASURY.

229

ards. A maximum output of 20 plates in a given day has been
reached. At the present time one of the power-press sections of the
Lareau consisting of 27 presses is equipped and supplied with plates
made by the method of electro deposition, and the results obtained
meet fully all expectations. The impressions from these plates are
found to be superior in beauty and finish to that of the regular transferred steel plates, and the life of the plate compares favorably with
that of the older method. The photolithographic section has been
enlarged and reorganized with better equipment and a much improved service, and modern lithographic presses have been installed
and the output increased without a large corresponding increase in
cost.
• ''
PUBLIC

BUILDINGS.

The first so-called omnibus public-building act of any magnitude
was enacted into law in 1902, and contained a section authorizing the
remodeling, enlargement, and extension of certain specified Federal
buildings which had become congested by reason of the growth of
the public service, and from other causes. Each succeeding publicbuilding act has contained a similar section. There has been
no general public-building legislation since 1913, the act which
passed the House of Eepresentatives in 1916 having failed of passag'e in the Senate, and during this interval there has been jio possibility of affording relief from congestion in public buildings, although there has been a wonderful growth in the public business
and a corresponding increase in the number of employees to handle it.
I n the post-office workrooms an average per emplo3^ee of 100 square
feet, or a space 10 feet square, to accommodate the employee and his
furniture, including aisle space, is considered ideal. The Postmaster
General has reported that where this space is reduced below 60 square
feet per emploj^ee there is a resulting loss in efficiency which increases
in proportion as the space is diminished. There is a large number of
'post-office workrooms in Federal, buildings in which the space per
employee is less than 60 square feet; in some of them as small as 24
square feet per employee. These conditions have been brought to the
attention-of the proper committees.
Because-of the congestion in public buildings it is not uncommon to
find branches of the public service occupying rented quarters in cities
in which there are large Federal buildings. Quite independently of
the action Congress ma}^ conclude to take with respect to authorizing
the construction of additional Federal buildings, steps should, be
taken to protect the present investment of the Government in its
Federal buildings by im.prov]ng and adapting the buildings to the
increased activities of. the public service. I therefore add my




"
^
^

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REPORT ON T H E FINANCES.

recommendation to that of the Postmaster (xeneral that legislation
be enacted Avhich will furnish such relief as the exigencies of the
situation may require.
Suspended building operaMons.
TVitli the view of conserving the Government's resources, this
department ordered the jDostponement during the war of the letting
of contracts for the construction of public buildings in all but very
urgent cases. About 150 buildings were affected by this order. I t
was intended to resume building operations as soon as hostilities
ceased. The order for the resumption of building operations was
given within a few days after the armistice was signed, but it was
found Avlien bids were taken that construct.ion costs had increased
meanwhile to such an extent,that the buildings could not be constructed within the respective limits of cost therefor fixed by the Congress. Sites have been acquired, plans prepared, and appropriations made in full or in part for most of the buildings referred to,
' but there.the matter rests until the Congress increases the limits of
costs for such of the buildings as it desires to have constructed.
National archives building.
For several successive years my predecessors have brought to the
attention of the Congress the need for a national archives building.
This need is emphasized more than ever now that records of the
war have been brought to this city from overseas and from various
points in this country, and added to the vast accumulation of papers
of permanent or historical value now insecurely cared for by the
several executive departments and independent establishments of
the Government. While there appears to be an abundance of space
for office purposes in temporary buildings constructed by the Government to meet war-time conditions, no fireproof space is available
for the care of records, the destruction of which would cause great <
loss to tile Government and much embarrassment and delay to all
concerned in the transaction of the public business.
Confronted on the one hand by the great need for a. national
archives building and on the other hand with the abnormally high
cost of construction, this department submitted to the Congress during the period covered by this report for an appropriation sufficient to
a,cquire a site and construct so much only of the contemplated building as Avoiild be used for storage purposes. I t is proposed to construct this portion of reinforced concrete, and to leave its exterior
facing to be placed when building costs reach a lower level and demands upon the Government's resources have become less pressing.




SEGRETARY OF THE .TREASURY.

231

Contractors'^ war claims.
The legislation which was enacted in the fall of 1919 for the relief
of contractors and subcontractors for the construction, etc., of Federal buildings, whose contracts were based on bids submitted prior to
the entrance of the United States into the war, but completed after
April 6, 1917, restricted the claims which might be presented to those
arising from three causes, viz, increased cost of labor and materials
due to war conditions, losses due to delays caused b}^ the United
States Priority Board or other governmental activities, and to commandeering by the United States Government of plants or materials.
The scope of the relief afforded by this act was enlarged by amendatory legislation contained in the deficiency appropriation act of
March 6, 1920, so as to include any and all loss (exclusive of profits)
sustained by contractors and subcontractors in fulfilling their contracts due, in the opinion of the Secretary of the Treasur^^, to war
conditions.
'
The settlement of these claims is progressing as rapidly as the
nature of the examinations required and the sufficiency of the sustaining proofs will permit.
Supervising Architect.
The work of the Supervising Architect is chiefly administrative
in character. His office supervises not only the professional and
technical work involved in the drawing of plans for the construction," repair, and remodeling of public buildings and the overseeing
of such construction work, but also the maintenance and operation
of the great public building system of the United States. The personnel of the office should include men of high attainments in the
architectural, engineering, and related professional fields. I t should
be coordinated and organized under the leadership of a trained
executive in the person of the head of the office. The present title
of the chief seems to suggest that the occupant must be an architect
and to indicate that professional skill is the exclusive requirement;
but the fact is that primarily and essentially the position demands
executive ability of high order. The office is now vacant and the
acting head, who is not an architect and who for several years has
efficiently and effectively performed the necessary duties, would have
been appointed Supervising Architect long ago had it not been that
such appointment did not seem to be consistent with the title of the
office. I n view of the nature of the functions and responsibilities of
the Supervising Architect, it is believed that the title of the office
should be changed to that of Commissioner of Public Buildings.
Such change would not prevent the appointment of an architect or
a man trained in another profession, on the one hand, and would not



232

'

REPORT ON T H E FINANCES.

restrict it to any one technical class, on the other. I t is respectfully
recommended that the title of the office be changed accordingly.
THE INTER-AMERICAN HIGH COMMISSION.

The Second Pan American Financial Conference was held in
Washington from January 19 to 24, 1920. Upon invitation of the
President, the ministers of finance and other representatives of
Mexico and the Central and South American countries attended the
conference to discuss with the Secretary of the Treasury the financial
and commercial problems of the American Eepublics. The International High Commission was charged with the preparation of the
plans and arrangements for the conference. A staff of legal and
economic experts collected and analyzed material of interest to the
delegates and prepared reports on the financial and economic conditions and the public debt of the Latin-American Eepublics, as
well .as reports on maritime and land transportation and cable and
radiotelegraphic communication between those countries and the
United States. The material thus compiled served as a basis for
authoritative information during the conference for the use of the
official representatives and 300 financial and industrial leaders of
the United States invited to confer with the foreign delegates. A
review of the purposes and achievements of the Second P a n American
Financial Conference is contained in my report to the President.
I n order more definitely to indicate the constituency and sphere of
work of the International High Commission, the Second Pan American Financial Conference changed, by resolution adopted on January
23,1920, the name of the commission to " Inter-American High Commission." I n public act 238 of the Sixty-sixth Congress the recommendation of the change of name was given effect in the United
States, beginning July 1,1920.
Although the executive council of the commission and the staff
of the United States section were for the greater part of the year
engaged in the preparations for the financial conference, careful attention was given to the ordinary tasks of the commission. One of the
most important matters with which the commission has had to deal
is the adoption of the International Trade-Mark Convention of
1910 and the establishment of two registration bureaus provided
for by the convention—one bureau at Havana and the other at Eio
de Janeiro. The bureau at Havana was opened in August, 1919, and
is in actual operation? The Congress, by the act approved March 19,
1920, has given effect to certain provisions of the convention enabling
the Commissioner of Patents to open a register for trade-marks
transmitted to him by the Havana bureau. Efforts are being made
by the commission to secure the ratification by the requisite number




SECRETARY OF T H E TREyiSURY.

233

of countries of the southern group in order to establish the bureau at
Eio de Janeiro. Meanwhile arrangements have been made whereby
all the ratifying countries may be served by the Havana bureau.
The successful realization of the purposes of the convention will confer exclusive benefits on all the industries of this country which have
occasion to protect their good will.
Another matter which engaged the commission's attention during
the past year was the ratification of the commercial travelers' convention proposed at Buenos Aires in 1916. The convention contemplates the substitution of a national fee for all local license fees
paid in the Provinces of some American countries. I t further provides for the free admission of samples without value, and for the
admission of those with value under bond for payment of dut}^ in
case tliey^ are not withdrawn. The convention has been ratified by
Uruguay, Guatemala, Salvador, Panama, Venezuela, and Paraguay,
and has been signed by Ecuador, Nicaragua, and Argentina. Other
countries have approved the treaty in principle.
The principle of arbitration of commercial disputes between citizens of the United States and citizens of other American countries
has made progress. I t has occupied a prominent and permanent
place in the program of the commission. The purpose is to facilitate
the settlement, on a basis which would inspire complete confidence
in our manufacturers and merchants, of any commercial disputes
which might arise between them and their customers in Latin American countries. The first agreement of this character was entered into
between the United States Chamber of Commerce and the National
Chamber of Commerce of Argentina on April 10, 1916, and similar
agreements have since been made between the United States Chamber
of Commerce and the National Chambers of Commerce of Uruguay,
Ecuador, Panama, Guatemala, Paraguay, Peru, Venezuela, and
Brazil.
/
The commission has continued its interest in the subject of greater
uniformity of the classification of merchandise for statistical purposes to permit of more accurate comparison of statistics of export
and import trade. The basis of this classification is the Brussels convention of 1913 on the uniforniit37^ of classification which was adopted
b}^ the commission at Buenos Aires in 1916. The uniform system has
been adopted by Salvador, Guatemala, Honduras, Bolivia, Panama,
Paraguay, and Peru, and is favorably considered b}^ several other
countries.
I n the field of uniformity of law, the efforts to diminish the diversity between our legislation and that of the several Latin American
Eepublics with respect to checks and bills of exchange have met with .
considerable success. The basis for uniformity on this point are The




234

REPORT ON T.HE FINANCES.

. Hague rules adopted at the international convention at The Hague in
1912, which were modified at the meeting of the commission at Buenos
Aires. Venezuela embodied in its new commercial code the modified
form of the uniform rules on bills of exchange, and the legislatures
of four other countries have before them, in various stages of progress,
analogous revisions of their commercial code.
The executive council intends to direct its efforts to secure the
adoption of uniform warehouse receipts, conditional sales and bills
of lading acts. I n the uniform fiscal and customs regulations a
number of minor changes have been made, the cumulative effect
of which is the facilitation of the course of international commerce.
As more maritime transportation facilities are made available for
the growing volume of our trade with Central and South America
and the West Indies, the significance of these modifications will be
discernible in increasing degree by each commercial community.
In addition to dealing with the subjects designated by the First
Pan American Financial Conference for special treatment, and the
execution of the program adopted at the Buenos Aires meeting,
the commission has been charged by the Second P a n American
Financial Conference with the investigation of new questions, including an analysis of the laws and regulations governing the organization of corporations and the treatment of foreign corporations in
the various American Eepublics, the study of methods of avoiding
the simultaneous double taxation of individuals and corporations
in the various American countries, and the consideration of the
creation of an inter-American tribunal for the adjustment of questions of a commercial or financial nature involving two or more
countries.
I n view of the growing importance of the commission's work, it is
recommended that the sum of $25,000 heretofore appropriated for the
expenses of the United States section be increased to $30,000 for the
next fiscal year.
GENERAL SUPPLY COMMITTEE.

During the past year the General Supply Committee has rendered
an important service, not only in contracting for supplies but also in
the handling of all surplus materials and equipment falling jnto
disuse in the District of Columbia, as well as maintaining a record
of, and acting in an informative capacity with reference to, surplus
articles located throughout the country.
Experience has demonstrated that the functions of the General
Supply Committee should be expanded so as to include the purchase,
storage, and distribution by the committee of all common supplies
used by two or more executive departments or independent establish-




SECRETARY OF THE TREASURY.

235

ments of the Government in the District of Columbia. I t would seem
proper to make the committee a central bureau in some department
other than the Treasury, as suggested elsewhere in this report. Such
bureau should consist of three divisions: (1) The division of contract, to handle the present contract duties of the General Supply
Committee; (2) the division of purchase; (3) the division of stores,
which would include the present division of property transfer of the
committee. A bureau of this character would be able to buy at the
most opportune time direct from manufacturers, and in quantities
which Avould insure minimum prices. Competition would be broadened by the consolidation of quantities and the submission ,of proposals for specified quantities for delivery at a given time ihstead of
a great number of individual orders for indefinite quantities covering
a stated period. A suitable warehouse should be prpvided, stocked
with all articles in common use for distribution to the Government
service in the District of Columbia and to such points outside of the
District of Columbia for use by the various field services desiring to
obtain their supplies from the bureau. The creation of a central
warehouse from which common supplies could be promptly furnished
the services would, obviate the necessity for open-market and exigency
purchases, which, in the aggregate, are large and nearly alwa3^s at
prices much higher than if secured by a central agency.
The records of the Contracting Division of the General Supply
Committee for the fiscal year 1920 show that the reported purchases
made by executive departments and independent establishments of
the Government under contracts negotiated by the Secretary of the
Treasurj^ through the committee amounted to $7,627,064.82. Because
certain establishments are not required by iaw to report purchases
and others have failed to report fully, the total aniount of purchases
for the year probably exceeded $10,000,000.
^The Division of Property Transfer of the committee, under the
provisions of the Executive order of December' 3, 1918-, and the act
of February 25,1919, serves as a clearing house for surplus articles of
the Government agencies in the District of Columbia. I t takes over
all surplus material, supi^lies, and equipment; classifies, warehouses,
repairs, and reissues them from time to time to the Federal Goviernmeiit service and the municipal government of the District of Columbia as their needs arise. The division received during the fiscal year
materials to the value of $1,339,759.60 and had on hand July 1, 1919,
materials valued at $476,753.20. The amount issued during the year
was $760,355.74. This includes $133,913.72, or I7f per cent, as discounts allowed for usage. The invoice value of material, supplies, and
equipment condemned as unserviceable and unfit for further Government use was $36,026.20. The total net proceeds from the sale




236

^ REPORT ON T H E FINANCES.

of this material at public auction amounted to $17,928.37. The
invoice value of unissued supplies was $1,020,130.86 on June 30, 1920.
In order that the executive agencies of the Government might
utilize existing surplus materials, supplies, and'equipment fa.lling
into disuse throughout the United States, as Avell as in the District
of Columbia, because of the cessation of war activities, Corigress, by
section 5 of the deficiency act approved July 11, 1919, required the
heads of such agencies to ascertain whether such surplus existed before purchases were made from commercial dealers. On August 27,
1919, the President issued an Executive order which designated the
General Supply Committee as the central agehcy of information, for
this jourpose, simplif3dng the procedure and consolidating the data
for the service of administrative officers. Eeports of surplus are submitted to the General Supply Committee by the various departments.
This inforniation is compiled on card records and made instantly
available for reference. Under the Executive order administrative
officers, before making purchase, are required to consult the General
Suppl3^ Committee, which immediately furnishes information as to
the location of existing surplus. At the date of this report the
records of the Division of Property Transfer of the committee show
19,427 separate items listed. The quantities of individual items reported surplus are in many cases ver3^ large.
The temporar3^ isolated buildings used for the storage of surplus
property received under the provisions of the Executive order of December 3, 1918, are flimsy of construction, and a dangerous risk from
fire and theft. Economical and efficient administration is rendered
difficult. Eapid deterioration of these structures add to the present
cost of operation, and will render them unfit for the housing of valuable Government property unless considerable sums are expended
from time to time. The committee is greatly in need of suitable
warehouse facilities.
CHECKING

ACCOUNTS

ADMINISTRATION

OF

GOVERNMENT

MAINTAINED

WITH.

CORPORATIONS
TREASUI^ER

OF

AND
THE

RiilLRCAD
UNITED

STATES.

The United States Shipping Board Emergency Fleet Corpora-,
tion, the United States Housing Corporation, the War Finance Corporation, the United States Grain Corporation, the Eussian Bureau
of the War Trade Board, the several Federal land banks, and the
Eailroad Administration have maintained checking balances with
the Treasurer of the United States in the manner outlined in previous
annual reports of the Secretary of the Treasur3^
The following table shows the amount of checks drawn by these
agencies and paid by the Treasurer from the dates of the estab-




SECRETARY OF T H E

237

TREASURY.

lishment of the accounts to October 31, 1920, and the balances on
deposit with the Treasurer on the latter date:
;

•

Checks paid by the
Treasurer of "the
ignited States.
Eraergencj'- Fleet Corporation
United States Housin,8; Corporation..
War Finance Corporation
Uniteci States Grain Corporation.
Russian Bureau of the War Trade
Board
Federal land banks
•.
Railroad Administration

Dates.
From—

To-

2«,1918
27,1918
2,1918
31,1918

Oct. 31,1920
do
do
do

13,333,773.99 Nov. 30,1918
15,313,261.31- June 2,1920
1,811,786,554.72 Apr. 13,1918

Sept. ,28,1920
Oct. 31,1920
do

S5,964,931,879.22
135,282,058.24
2,997,964,687.63
901,967,229.41

Feb.
Tulv
Jurie
Oct.

Balances with
the Treasu]-er of
the United
States
Oct. 31,1920.
383,939,466.33
2,9.19,446.39
371,809,520.05
32,000,000.00

0)

1,359,950.61
28,774,524.79
o

1 Closed Sept. 28, 1920.

At the request of the Director General of Eailroads, the Treasurer
of the United States was designated as his agency for the payment
of the principal and interest of certain certificates of indebtedness
issued in connection with Federal control of the roads described in
the annual report for 1919. The Treasurer has paid these directly
and through the Federal reserve banks. The Eailroad Administration established a credit of $288,526,150.13 with the Treasurer. Payments amounted to §^288,399,222.46. The balance, $126,927.67, was
returned to the Director General on February 19, 1920. .
The total payments made by the Treasurer for these Government
corporations and the Eailroad Adniinistration to October 31, 1920,
were $12,128,978,666.98.
The plans evolved by the Treasury for handling the accounts
and disbursements of these agencies have been operated to the entire
satisfaction of all concerned. The funds have been assured absolute
security, and appropriated moneys running into large amounts have
not been withdraivn from the Treasury until needed to pa3^ obligations of the Government, thus reducing the amount of Government
borrowings, with the consequent saving in interest charges.
H A N D L I N G OF GOVERNMENT F U N D S BY DISBURSING OFFICERS.

The exigencies growing out of the enormous payments which the
Government has been required to make on account of the war have
necessitated revision of some of the regulations of long standing
relative to the handling of public funds by Government disbursing
agents. With a view to meet this situation Department Circular
No. 195 (Exhibit 88, p. 561) was issued on June 18, 1920, superseding Department; Circular No. 102, dated December 7, 1906, as
amended. I t was the aim of the department in promulgating this
circular to throw the proper safeguards around the handling of
public moneys by Government agents and to prevent excessive




238

"

REPORT ON T H E FINANCES.

holdings of cash by disbursing officers. As the Treasury has been
a heavy borrower of funds to meet its current needs, the loss on
account of interest on idle funds is obvious. On the other hand^ it
bp; been necessary to keep in mind the requirements of all departments and to insure the prompt payment of public creditors. I t is
believed that Treasury Department Circular No. 195 establishes a
liberal poli.C3^ in matters of detail and at the same time safeguards and
reduces to a minimum the amount of public moneys in the hands of
disbursing agents.
,
.
PROVISION FOR GOVERNMENT D I S B U R S E M E N T S I N T H E P H I L I P P I N E I S L A N D S .
o

Under the provisions of Treasury Department Circular 194, dated
June 18, 1920 (Exhibit 89, p. 565), all balances standing on the
books of the treasury of the Philippine Islands at the close of business on September 30, 1920, to the credit of United States disbursing
officers were transferred to the official credit of such disbursing officers with the Treasurer of the United States. Disbursing officers sta-.
tioned in the Philippine Islands were directed, beginning October 1,
1920, to draw checks on the Trieasurer of the United States for disbursements in the Philippine Islands, the checks to bear the restriction :
In current fnhcls, a t par, but only at t.he treasury of the Philippine Islands,
Manila, P. I.

This plan is in accordance with the scheme under which Government disbursing officers in the continental United States carry their
balances with the Treasurer of the United States, instead of with
local depositaries. I t obviates the necessity of maintaining large cash
balances with the treasury of the Philippine Islands for the credit
of each disbursing officer. I t is now necessary to maintain only a
cash balance in the Treasiirer's a-ccount sufficient to meet the checks
of disbursing officers drawn on the Treasurer of the United \ States
which are being presented for payment. Arrangements have been
made whereby the treasury of the Philippine Islands can secure
restoration of the Treasurer's balance by cable when additional funds
are needed to meet current payments. The reduction in the cash balance maintained with the treasury of the Philippine Islands serves
to reduce the aggregate amount of Governnient balances with depositaries, with a consequent saving in interest.
o
N E W C U R R E N C Y DESIGNS.

The Congress was advised in the Annual Eeport of the Secretary
of the Treasury for 1919 of the adoption of a distinctive characteristic for each denomination of all forms of paper currenci^ De-




SECRETARY OF THE TREASURY.

^

"239

nominational portraits were prescribed for this purpose. I n February, 1920, it was decided, to revise other features of the designs
in order to insure the highest possible degree of safety in the issues
and to promote economy in printing. The latter consideration is
quite important, not onl3^ from the standpoint of expense, but also
from that of production. The greatl3^ increased demands for currency.have throAvn an unprecedented strain upon the Bureau of Engraving and Printing. I t has not been possible to produce currency
in sufficient quantities to supply the demand and the result is that
the condition of the currency in circulation is not satisfactory. A
committee, consisting of the Commissioner of the Public Debt, the
Chief of the Secret Service, and the Chief of the Engraving Division
of the Bureau of Engraving and Printing, was appointed to stud3^
the subject. The committee will consider designs submitted by the
Director of the Bureau of Engraving and Printing and will give
particular attention to the protective features of such designs and
of distinctive paper. While the committee has not yet presented
its report, it may be stated that the new designs will include the
denominational portraits adopted a year ago and, in addition, distinctive backs for each denomination of all issues. The legends required b3^ law are to be placed on the face of the notes and not
on the back. I n addition to the usual safeguards in the way of
denominational marks, latlie and other engraved work, denominations will be indicated in large colored numerals.
TREASURY ORGANIZATION.

The Treasury has endeavored to perfect its scheme of organization
during the year by such changes and improvements as were possible
under existing law. The Bureau of Internal Eevenue, the Bureau of
War Eisk Insurance, the Public Plealth Service, and other individual
units have been organized or reorganized to meet added responsibilities. During the fiscal year efforts were made to meet the situation in
the fiscal bureaus and divisions where the work has so greatly increased
and where it was apparent that the prewar machinery was not entirely
adequate for permanent purposes. The great growth of these activities required the creation of. additional coordinating and supervisory
organization. This was brought about by the establishment of the
offices of Commissioner of the Public Debt and Commissioner of Accounts and Deposits, and the coordination and supervision of the
activities of the several auditors under the administrative control of
the Comptroller of the Treasury. These three supervisory officers
function under the immediate direction of the fiscal Assistant Secretary. They are the supervisory intermediaries between the fiscal
Assistant Secretar3'^ and the bureaus and divisions concerned. The




240

REPORT ON THE .FI.NANCES.

ariiangement has not only relieved the fiscal ilssistant Secretar3^ of
many details and left him free to devote more time to the larger jiroblems of administration, but it has also accomplished a logical coordination of related activities and the elimination of duplicated work.
This reorganization concerns three fundamental operations of the fiscal service: (1) Transactions in the public debt, including the issue,
exchange, conversion, and redemption of securities; (2) the receipts
and disbursements of the Government, including the issue of warrants, the payment of warrants and checks, and the deposits of the
public funds; and (3) the auditing of accounts.
Commissioner of the Public Debt.
In the very beginning of the war the Secretary of the Treasur3^
realized that the public-debt operations of the Government would be
of such magnitude that it would be utterly impossible to handle the
entire matter from Washington. I t was necessary that the machinery be decentralized as far as practicable. To prevent inevitable
congestion in the Treasuiy the 12 Federal reserve banks, as fiscal
agents of the Government, were made the headquarters of their re- •
spective districts for the handling of subscriptions to the severa]
loans* the delivery of securities against payments, and the conduct
of transactions in securities subsequent to their original delivery.
Each bank constructed the requisite machinery to handle these operations throughout its district. This use of the Federal reserve
banks as fiscal agents removed from the Treasur3^ direct connection
with original subscriptions, changed the procedure with respe:t to
subsequent transactions, and eliminated much of the established
routine. An efi"ectiye field macliiner3^ to conduct these operations
was thus created.
After the completion of the Victory Liberty loan, the last of the
great popular war loans, the department gave its attention to the
perfection of the pernianent organization in Washington to handle
transactions in the public debt.' The branches.of the.Treasury immediately concerned in the issue, exchange, conversion, and redemption of Government securities and the payment of interest, together
with the large bookkeeping operations connected with these activities,
are the Division of Loans and Currency and the Office of the Eegister. The war has thrown a great burden upon these agencies. The
public debt has increased from the neighborhood of $1,000,000,000 to
more than $24,000,000,000, and at one period during the war it exceeded $26,000,000,000. The number of employees in the Division
of Loans and Currency before the war was 84; the number on Sexitember 30, 1920, was 2,275. The number of employees iri the Beg-




SECRETARY OF THE . TREASURY*.

241

ister's Office before the war was 2 1 ; the number on September 30,
1920, was 962. The increase in the public debt and the increase in
the personnel serve to indicate the growth of the undertaking and
the magnitude of the work involved.
The two offices mentioned, by mutual agreement and with the Secretary's approval, had consolidated much procedure and eliminated
much duplication during the war. The Division of Loans and Currency controlled the issues of securities, although their distribution
to subscribers and ma,n3^ subsequent transactions were made at the
Federal reserve banks. Eetired securities were received by the division and subjected to examination before being delivered to the register. A section of accounts in the division reflected the transactions
in the public debt. The register's contact with transactions, was
remote, but canceled securities finally reached him. I t was clear
that the existing organization could not continue permanently.
To insure appropriate controls over issues and retirements, to avoid
duplication in effort, and to provide for proper administration of the
public-debt service the office of Comniissioner of the Public Debt was
created and a commissioner appointed in November, 1919. He was
giveii administrative supervision, under the general direction of the
Fiscal Assistant Secretary, of all transactions affecting the public debt.
He was charged with the coordination and supervision of the Division
of Loans and Currency, the Office of the Eegister of the Treasury,
and the Division of Public Debt Accounts and Audit', which was
created in January, 1920, as a result of this reorganization. Subsequentl3^ the audit section of the Division of Loans and Currency was
transferred to and consolidated Avith the register's force. The unit
in the register's office conducting the examination of registered bonds
and notes issued by the Division of Loans and Currency was transferred to the Division of Loans and Currency and established as a
final examination unit. The same check over registered issues remains.
The Division of Loans and Currency is now charged with all issues
of securities, whether against paid subscriptions or against other
securities surrendered. The Eegister of the Treasury is charged with
the receipt from the Division of Loans and Currency, the Federal
reserve banks, the Treasurer of the United States, and the Postmaster
General of all securities canceled for any purpose whatever. The
Division of Public Debt Accounts and Audit is charged with the controlling accounts of all public-debt transactions performed by the
Division of Loans and Currency, the Eegister of the Treasury, and
the Federal reserve banks, as well as those performed by the Treasurer
of the United States and the Postmaster General. An administrative
13799—FI 1920




16

242

REPORT ON THE FINANCES.

audit has been established under the Commissioner of the Public
Debt to insure accurac3^ of operations and the proper accounting for
securities.
A complete organization has thus been erected with proper checks
and safeguards in the Division of Loans and Currency for handling
issues, maintaining registered accounts, and paying the interest
thereon; in the office of the register for receiving and verifying paid
and otherwise canceled securities, including interest coupons; and
in the Division of PubJic Debt" Accounts and Audit for recording
public-debt transactions and bringing the various operating agencies
into proper relation.
This new plan of organization has resulted in economy and in
increasing the efficiency of the services concerned. The Commissioner of the Public Debt, b3^ having supervision over these related
activities, has eliminated much duplication of work in the publicdebt transactions. To insure the permanence of this reorganization
of the public-debt work the office of the Eegister of the Treasury,
now established by law as a bureau, should be changed, to a division
in the Secretary's office. The' annual estimates submitted for the next
fiscal year contemplate the continuance of this new plan to meet
greatly increased duties and responsibilities. I t is hoped that it
will receive the sanction of the Congress.
Commissioner of Accounts and Deposits.
The Office of Commissioner of Accounts and Deposits was created
in Januar37, 1920, on account of the large increase in the accounting
transactions of the Treasury in connection with receipts and expenditures and the deposit of public funds throughout the country. The
commissioner, under the Fiscal Assistant Secretary, was given administrative supervision over the Division of Bookkeeping and Warrants and the Division of Public Moneys and their relations to the
office of the Treasurer of the United States. He was later given
supervisory direction over the Division of Deposits which was created on May 19, 1920, as a part of this reorganization. The commissioner likewise was given control of all accounts of investments of
the Government and was made responsible for the proper custody
with the Treasurer of the United States, the Assistant Treasurers of
the United States, and the Federal reserve banks of all investments
and securities for which the Secretary is responsible, other than those
related to the public-debt operations. On August 27, 1920, the work
formerly performed in the Division of Public Moneys relating to the
covering of moneys into the Treasury was transferred to the Division,
of Bookkeeping and Warrants, and the employees engaged upon
these duties were detailed to the latter division. This eliminated



SECRETARY OF THE TREASURY.

243

duplication of work and coordinated all aspects of this particular
activity within the Division of Bookkeeping and Warrants.
The commissioner has made much progress in coordinating, simplif3nng, and expediting the interrelated work of the divisions under
his supervision. I n the absence of a budget S3^stem the Treasur3^ has
been handicapped, parti cula rl3^ during the war and since, b3^ the lack
of information with respect to prospective Government expenditures.
I t has been necessar}^ for the department to make the shrewdest guess
possible in the circumstances and to formulate plans a.ccordin2:ly.
The coordination of these accounting and bookkeeping offices dealing with receipts and disbursements has made it possible for the
Treasur3^ to assemble the most trustworthy data obtainable upon
which to base its estimates.
The accounting offices.
I n order to obtain more expeditious auditing results and to co(/rdinate the work of the accounting offices as far as possible under
existing law, the Secretar37, on October 25, 1918, placed all of the
anditing offvces under the administrative supervision and direction
of the Comptroller of the Treasitr3^ The comptroller is the chief
accounting officer of the Government and has the power to i*evise
any settlement made b3'' an auditor. The auditors must construe
the statutes in the first instance and then apph' that construction
which is approved by the comptroller. The latter may direct an
officer forthwith to settle an3^ account pending before the auditor, but
with this statutory power over the settlement of accounts, the comptroller, previous to the order of the Secretaiy mentioned, had no
administrative control over the auditing offices. The war greatly
increased the work of these offices and it was necessar37 to coordinate
their activities under the control of a responsible accounting officer.
This was as far as the department was able to go without additional
authorit37 of law. In exercising this administrative power the comptroller has accomplished definite results in the way of expediting
much important work and simplifying complicated methods.
The present organization consists of six se^iiregated auditing burt'aus. unrelated one to the other except by such coordination as the .
comptroller has been able to bring about under the Secretar3''s order.
There is no question as to the pressing need of remodeling the organization and by law placing the direct administrative supervision over
all accounting offices in the hands of one central authority. This requires the consolidation of the accounting offices into a single unit.
I t would be accomplished under the budget scheme. If unfortunately there should be any delay in the creation of a budgetary
system, there should be no postponement of the reorganization of




244

REPORT ON TFIE FINANCES.

the accounting offices.
authorize this reform.

I t is sincerely hoped that the Congress will

Audit of Army foreign accounts.
Under the plan of administrative control at present exercised b3'^
the Comptroller of the Treasury, the audit of the foreign-service
accounts of the Arm3r has been completed for the pay periods prior
to March 1, 1920, embracing such accounts as were rendered to the
Treasuiy prior to July 1, 1920. Accounts arising and received since
those dates will be absorbed in the routine work of the office of
Auditor for the War Department, the Foreign Service Division of
that office having been abolished on October 1, 1920. The supervision which brought this result was begun July 1, 1920. During the
following three months 1,749 accounts were examined and disposed
of, as against 5,864 for the three prior fiscal 37ears, covering a working period of 30 months. The relative accomplishment is thus
seen to be in the proportion of 1,749 to 586, the latter being the average
number of accounts settled in previous periods of equal length. The
total achievement in the audit of foreign accounts by working periods,
number of accounts received and settled, and amounts involved in settlements, is shown by the following figures:
Accounts Accounts
received. settled.

W o r k i n g period.

]918
1919
1920
J u l y , Ausjust, a n d S e p t e m b e r , 1920
Total

Amounts
audited.

1,058
2,594
3,889
72

S7,385,032.94
341,450,613.15
843,895,962.51
483,852,862.87

7,613

-

184
2,240
3,440
1,749
7,613

1,676,584,471.47

SALARIES.

The attention of the Congress is invited to the pressing need of
the readjustment of the salaries of Government officers and employees. The great business of the Federal Government has grown
in magnitude through increased and increasing activities, particularly as a result of the war. No one will dispute the fact that the
Government should pa3^ a living wage to every employee and that
the amount should be in due relation to the value of the services
rendered. If»the business of the departments is to proceed along
efficient and economical lines the salaries in the public service and
the opportunities for promotion must be sufficient to offer a career
to men and women of ability. In many of the supervisory grades
particularly, the compensation paid is unattractive and far below the
standards of private enterprise. I t is of the highest importance that
the Government secure and retain in certain positions of great re


SECRETARY OF TFIE TREASURY.

245

sponsibility individuals of the highest integrity, of wide experience,
and of exceptionally ability. The public business in higher degree
even than private enterprise needs the service of persons of talent. If
it is not available the people's interests will suffer. The Government
need not pay salaries as high as those given in many industrial establishments, but it should pay enough to retain able and experienced
servants. I t should pay enough to enable them to live decently, to
save something, and to work without undue apprehension as to
the future of their families. Democracy for us is the best form of government, but it is a difficult one: Its performance will depend in no
small measure on the quality of its administrators. If these are
mediocre our democracy, it is true, is not likely to fail, but its performances will probably be below the high standard to which it
aspires and which it should set.
The question of the readjustment of salaries and the reclassification of positions is a very large one. I t involves the corisideration
of the Government service as a whole, as well as the standards^of pay
in private life. I n the circumstances the Treasury, of course, has
been unable to make an3^ special study of the matter and has no concrete suggestions to offer. I t has cooperated with the Joint Commission on the Eeclassification of Salaries, created by the Congress,
in rendering such assistance as was possible. I n response to the
request of the Chief of the Bureau of Efficiency, it has likewise
placed information respecting salaries and employments in this department at the disposal of that bureau.
I n the estimates submitted for the next fiscal year the department has not undertaken to make a general revision of the salary
scale. That matter already is under consideration by the Congress. Eecommendations have been submitted, however, for increases in some salaries where it was thought such increases were
imperatively necessary. I t ma3^ be that in any general readjustment
of salaries these increases should be greater. Unquestionabl3^ there
are other salaries which should be increased, but the determination
of the amount, it was felt, should await the standardization and reclassification that the Congress plans to make. The present pay
rolls are haphazard and clearly need revision. That is particularly
true of many statutory salaries. I t is earnestly recommended that
the Congress act upon this important question at the present session.
UNDERSECRETARY OF THE TREASURY.

Two additional Assistant Secretaries of the Treasury, of temporary
tenure, were authorized in the urgent deficiency act approved October
6, 1917. These positions will continue until the close of the war
and six months thereafter. I t is respectfully recommended that.



246

REPORT ON T H E FINANCES.

in lieu of the two additional Assistant Secretaries, there be created,
beginning July 1, 1921, the position of Undersecretary of the Treasury, at $10,060 per annum.
The duties and responsibilities,of the Treasuiy have been increased manyfold as a result of the war. This department is chief
heir to the burdens growing out of the war. Taxes are greater than
ever before, and the public debt is more than 24 times the debt
before the war. Every function and activit3^ of the Treasury has
grown in magnitude; and in importance. To perform the duties
effectively and efficiently the Secretary of the Treasury must have
the help of men who are executives of exceptional ability. I t is
believed that after the close of the current fiscal 3^ear it will be
possible for the Secretary adequately to supervise the bureaus and
the divisions of the department through three Assistant Secretaries,
provided the office of Undersecretar3^ is created. The number of
Assistant Secretaries may be decreased by one if the Congress authorizes the transfer of the Bureau of W a r Eisk Insurance, Public
Health Service, the Office of the Supervising Architect, the General
Supply Committee, and the Prohibition Unit from the Treasury as
recommended below.
The functions of an Undersecretary of the Treasury, who should
be appointed by the President, by and with the advice and consent of
the Senate, would be to serve as chief adviser to the Secretar3^ in
matters of fiscal policy and to assume supervision of the budget if
that function is committed to the Treasury. The Secretary of the
Treasury will need the services of an assistant who will specialize
in matters of financial policy and who will be able to devote his
undivided time to such questions uninterrupted by administrative
control of present bureaus and divisions. The supervision of the
latter is likewise a matter of very great importance and requires men
of large ability in the capacity of Assistant Secretaries. Eecommendation for this new position is incorporated in the estimates for
the fiscal year 1922 and it is hoped that it will receive the approval
of the^ Congress. There can be nothing of greater concern to the
people of America than the efficient management of the public
Treasuiy which can not be accomplished without a competent staff
to assist the head of the department.
The estimates also include recommendations for increases in the
salary of the assistant secretaries and the assistant to the Secretaiy
from $5,000 to $7,500 per annum. The figure mentioned is far
below the value of the services rendered in these positions. I t is not
made higher because it was believed that the Congress would not
grant a greater increase in advance of the general standardization
and reclassification of salaries. These positions demand men of execu-




SECRETARY OF THE TREASURY.

247

tive skill and great ability and it is urgently recommended that at
least this increase in salary be granted.
ACTIVITIES W H I C H SHOULD BE SEPARATED FROM T H E TREASURY.

There are some activities of the Treasury having little or no relation to the fiscal operations of the Government which could appropriately be transferred elsewhere, relieving this department of large
administrative burdens. These are the Bureau of War Eisk Insurance, the Public Health Service, the Office of the Supervising Architect, the General Supply Committee, and the prohibition unit of
the Bureau of Internal Eevenue,
The Bureau of War Eisk Insurance and the Public PIea:lth Service
are associated in serving the former service men who are beneficiaries
of the war-risk insurance act. These t^vo services and closely related activities should be placed in one department under the immediate supervision of the same assistant secretary. This department
is glad to have been connected with the service which they are rendering; but it has no relation, however, to the financial operations
of the Government. I n the interest of good organization, it would
appear that both bureaus should be transferred to another department.
The Bureau of War Eisk Insurance is an outgrowth of the war.
I t was established, on the recommendation of the Secretary of the
Treasur3^, when the war broke out in Europe in 1914, to grant insurance on American vessels and cargoes for protection against^ the
risks of war. I t was originall5^ placed under the Treasuiy because
it was a temporary operation and the customs service of this department was available to act as its field force. I n June, 1917, its
powers were enlarged to include the granting of insurance on the
lives of masters, officers, and crews of American vessels against the
hazards of war. These functions are now ended. While the activities of the bureau in these directions involved large aggregate
amounts, their administration w^as a simple process. The act of October 6, 1917, however, granting allotments and allowances, compensation, insurance and medical care and treatment to members of the
military and naval forces, greatl3^ expanded the functions of the
bureau and. made it the largest single administrative unit in the
service of this Government and probably of any other. Its operations will continue for many years to come. As the bureau has no
connection with the fiscal affairs of the Treasuiy, it could properly
be transferred to another jurisdiction.
The Public Health Service is an ancient institution in the Treasuiy, vvhere it has been located from the date of its creation. It had
its origin in the old Marine-Hospital Service which was authorized




248

REPORT ON T H E FINANCES.

by the act approved July 16, 1798. In 1902 its name Avas changed
to the Public Health and Marine-Hospital Service, and by the act
approved October 14, 1912, it became known as the Public Health.
Service. During its life of 122 years, the service has grown from a
small institution designed to furnish medical care to sick and disabled seamen of the American merchant marine to a great national
health agency, operating the maritime quarantine stations of the
United States, protecting the Nation against foreign epidemics, preventing the interstate spread of disease, cooperating with State and
local health authorities in the .control of sickness and the improvement of the health of the people, and, under recent authority,'giving
medical care and treatment to disabled ex-service men and women
who are beneficiaries of the war-risk insurance act. I n suggesting
the association ^of the Bureau of War Eisk Insurance and the Public
Health Service in the manner mentioned above, it is not meant to
imply that their work is on a comparable basis, except in so far as it
relates to the care of ex-service men and women. This function in
the Public Health Service forms only a part of its important duties.
Backed by fine traditions and a proud record, it operates a general
medical and surgical service that is nation wide in scope. Its supervision is an administrative problem of large proportions and obviously has no relation to the fiscal functions of the Government. The
Treasury should relinquish control.
The Office of the Supervising Architect likewise has always been
in the Treasury. I t was provided for by section 235 of the Eevised
Statutes. The office is charged with the construction, repair, furnishing, equipment, and maintenance of public buildings, including
post offices, courthouses, customhouses, assay offices, subtreasuries,
marine hospital, and quarantine stations, in which quarters are provided for the several branches of the public service located outside
of Washington. The extent of its operation is reflected in the statement that the number of completed and occupied public buildings
at this time is approximately 1,200 and their total cost, including
sites, was over $323,000,000. The Office of the Supervising Architect
performs an essential and important function, but it has no relation
to distinctly Treasury work. Fpr that reason it should be transferred to' another department.
The General Supply Committee is of more recent origin. I t is' an
important activity and performs an essential service. The work,
however, has no relation to the fiscal service and could with propriety be transferred from the Treasury.
The national prohibition act is a penal statute and relates only
indirectly to taxes. When this responsibility was placed upon the




SEGRETARY OF TFIE TREASURV.

249

Commissioner of Internal Eevenue he already was carrying a heavy
and unusual burden. This will be increased if the revenue act is
revised. The dut3^ of searching out and prosecuting offenders under
the prohibition law should not be imposed upon an agency that
should devote its attention exclusively, as far as possible, to the collection of taxes. If that part of the work which relates to the de-.
tection and prosecution of crime should be transferred to some other
department, the features of the laAv which relate to taxes and penalties, as distinguished from fines arid punishment AA^hich may be imposed through the courts, could be left with the Treasury.
I t is perhaps seldom that departments voluntarily suggest that
they be relieved of large powers they are exercising and interesting
and important duties they are performing. I t is natural that they
should cling to their responsibilities. I t is hoped that this recommendation will have all the more force because it is unusual. Officials of the Treasury concerned Avith the superAdsion of the activities mentioned above are interested in the work and realize
its tremendous value to the Nation; and the bureaus and offices
themselves are strongly attached to this department. These are
considerations of sentiment which I likewise entertain. Very
grave problems, however, face the Treasur3^, and matters of this
kind must be decided by the requirements of proper and logical
organization. Burdens growing out of the war naturally have fallen
principally upon this department. They Avill continue and will not
end until the war debt has been redeemed. The groAvth of the fiscal
work of the Treasury has been unprecedented. The department
should be given the opportunity of centering its attention upon its
primary functions and should not be encumbered with large activities
unrelated to fiscal operations. That is the basis for these proposals.
They are offered particularly in contemplation of the establishment
of a budget system. If the budget bureau is placed in the Treasury,
which I believe is clearly the correct policy, it would seem to be
extremely important that this department be relieved of administrative burdens involved in the supervision of the spending services
herein discussed. I t is hoped that the Congress will give the question
serious consideration. If the transfers are made, it will be possible
to eliminate one Assistant Secretary from the Treasuiy organization
suggested in this report.
PERSONNEL.

The magnitude of the burdens imposed upon the Treasuiy during
and since the war is reflected in the growth of its personnel. Every
war activity found its reflex in this department. The Treasury
touched every operation of war. Here the money was provided to




250

REPORT ON T H E FINANCES.

meet any and all demands, and here the bills were paid and the
accounts audited. Every, increase in appropriations meant more
work for the Treasuiy, and every added expenditure augmented the
burden. The groAA th of the work was due to the incAntable expansion of fiscaL operations, and also to ncAv activities assigned to the
department, such, for instance, as the Bureau of War Eisk Insurance.
When war was declared on April 6, 1917, the number pf employees
in the Treasury Department' in Washington Avas 8,138. On December 31, 1917, the force had^groAvn to 13,182; to 20,080 on June 30,
1918; to 29,526 on December 31, 1918; to 32,246 on" June 30, 1919;
and to 35,267 on October 31, 1919, when the highest point was
reached. The number has since gradually decreased, until on September 30, 1920, the total was 29,955. In the 11 months from October 31, 1919, to September 30, 1920, there was an aggregate reduction
of 8,402, and an aggregate increase of 3,090, making a net reduction of 5,312 in the personnel of the department at Washington.^
EverA^ effort has been made to reduce the force as rapidly as the
work would permit, and this program of retrenchment Avill continue.
Much of the temporary Avar work of the Treasury continued after
the signing of the armistice. That has now disappeared, or will
soon do so, but the war placed upon the TreasurA^ duties and responsibilities that will last for many 3^ears to comie. For that reason the
personnel in certain of the department's activities will continue
relatively large as compared Avith prewar standards. That is particularl3^ true with respect to the Bureau of Internal Eevenue, the
Division of Loans and Currency, the Eegister's Office, the Public
Health Service, and the Bureau of War Eisk Insurance.
The Bureau of War Eisk Insurance, at the outbreak of the war on
April 6, 1917, had 23 people on its rolls. The act of October 6, 1917,
enlarging the functions of the bureau., necessitated an unprecedented
enlargement in the force. As the work poured in, the number rose in
rapid strides. The inaximum of 17,336 was reached on March. 6,
1919. That was more than twice the total number of employees for
the entire Treasuiy Department in Washington at the outbreak of
the Avar. There has since been a rapid reduction in the force of the
bureau. On September 30, 1920, the number employed was 7,059. a
decrease of 10,277 from the peak on March 6, 1919.
• The Washington force of the Public Health Service consisted of
45 employees at the outbreak of the Avar, while on September 30,
1920, the number was .565. This increase was due to the added responsibilities of the Public Health Service in rendering medical care
and treatment to patients of the Bureau of War Eisk Insurance.
The Bureau of Engraving and Printing, charged with the duty of
printing and engraving the securities of the GoA^ernment, almost




SECRETARY OF THE TREASURY.

251

doubled its force daring the Avar. I n the beginning, the bureau had
4,411 people on its rolls. The number was raised until on October
31, 1918, it reached 8,402. Since that date the force has been considerably reduced, and on September 30, 1920, the total nuniber of
eniplo3^ees Avas 6,874, a decrease of 1,528 persons.
The great transactions in the public debt have necessaril3^ caused
large additions to the personnel of the Division of Loans and Currency and the Office of the Eegister of the Treasury. The force in
the Division of Loans and Currency rose from 84 at the beginning
of the Avar to 2,930 on February 29, 1920, the largest number reached
at any time. On Septeniber 30, 1920, the number had been reduced
to 2,275. At the outbreak of the war, the force of the Eegister of
the Treasury consisted of 21 employees. The tremendous expansion
of the/work of the office necessitated a gradual increase in the personnel until on March 31, 1920, the number reached 1,140. Since that
date the force has been reduced, the number on September 30, 1920,
being 962.
The Avork of the Treasurer's office in connection Avith the receipts
and expenditures of the Government Avas likewise greatly augmented.
The force Avas increased from 562 in the beginning to 1,341 on November 30, 1919. On September 30, 1920, the number employed in that
office Avas 1,286.
To collect the great amount of taxes imposed in recent years the
force of the Bureau of Internal Eevenue has necessarily been greatly
extended. In addition to the collection of taxes, the bureau Has
been charged with the enforcement of the prohibition act. That
has further increased its personnel. On September 30, 1920, the
bureau's employees in Washington numbered 6,301, as compared Avith
604 at t h e outbreak of the war.
These statements cover the personnel in Washington. At the beginning of the Avar the field force of the several Treasur3^ services numbered approximately 30,000. On September 30, 1920, it had been
raised to about 45,000. These figures cl^o not include the enlisted
men in the Coast Guard, who on September 30,1920, numbered 3,562.
The increase in the field force occurred chiefly in the services of
the Bureau of Internal Eevenue ^and-the Public Health Bureau. On
April 6, 1917, the Bureau of Internal Eevenue had approximately
4,500 employees in the field service, while on September 30,1920, the
field force reached 13,067. On April 6, 1917, there were 2,044 employees in the field service of the Public Health Bureau; on September 30, 1920, the .number Avas approximately 18,250, of which number
about 1,500 are surgeons and consultants Avho are part-time emplovees.
The following table indicates the offices in which the larger 'increases in the Washington force occurred and shows the number of



252

REPORT ON T H E

FINANCJES.

emplo3^ees at the beginning of the war, the greatest num.ber reached,
and the number employed on September 30, 1920:
Treasury Department, Washington.

Bm'eau or office.

Loans and Currencj'Register of Treasury
Treasurer ofthe United States.
Engraving and Printing
Internal Kevenue
AA'ar Risk Insurance
Chief cleric
Auditor for War Department..
Auditor for N a w Department
Public Health

Largest numl^er emNumber
pl05'"ed.
employed
at boginning
Date.
of war. .Number.
84
21
564
4,502
607
23
335
207
100
45

2,930
i; 140
1.341
8;402
6,301
. 17,336
1,084
1,072
318
565

Feb. 29, .1920
Mar. 31,1920
Nov. 30, 1919
Oct. 31,1918
Sept. 30,1920
Mar. 6,1919
Mar. 31,1920
Jan. 31,1920
Sept. 30,1920
.....do

Nuiliber
emDecrease
ployed
from
Sept. 30,
peak.
1920.
2,275
962
1,280
6,874
6,301
7,059
1,055
982
. 318
565

655
178
55
1,528
10,277
29
90

A table shoAving the number of employees in the Treasury Department in Washington, by months, from January, 1917, to September.
1920, is attached to this report as Exhibit 90, page 6^S.
R E T I R E M E N T OF CIVIL-SERVICE E M P L O Y E E S .

Under the provisions of the act a|)proved May 22, 1920, providing
for the retirement of employees in the classified ciAdl service, 236
employees of the department in Washington were retired, with annuity, under the age limitations, and 11 retired without annuity.
The total compensation of those retired, excluding piece-rate workers, amounted to $295,635.51. Four hundred and twenty-nine emplo3'^ees of the various field services of the department were retired
with annuity and 24 field employees were retired without annuity.
The total amount of compensation of retired field employees was
$443,795. Two hundred and six emplo37'ees of the departmental service and 371 employees of the field service of the department, who had
reached the retirement age were retained for a period not to exceed
two years. The average age of the retired employees in the department was 75 years, while the average age of those retained for tAvo
years was 71 years. The average age of field employees retired was
76, while that of the field emplo3^ees retained was 73 years.
Employees throughout the department who had reached the age of
retirement did not generally avail themselves of the provisions of
the act as readily as had been expected. This, no doubt, was due to
the fact that the annuity granted by the act was so low that the
average employee could not comfortably maintain himself upon the
amount. Employees who had worked for years to secure a retirement lav7 were unwilling in many cases to accept its provisions.
i n dealing with retirement cases a policy was adopted throughout the department to make the good of the service the real test as



SECRETARY OF THE TREASURY.

253

to whether an employee who had reached the retirement age should
be retired or retained. A committee was selected to work out the
details connected Avith this undertaking. An exhaustive study Avas
made of each case and decision Avas based upon the merits as shown
by the facts presented. The committee recommended that the best
interests of the service would be subserved by retiring all employees
who had reached the age of 80 years. Their recommendation in this
regard was approved and retirements were made accordingly. I n
exercising the discretion allowed by the statute, every effort was
made in each indiAddual case to carry out the intent of the law with
respect to both retirements and retentions.
The retirement act required the Secretary of the Treasury to make
deductions from appropriations for salaries, pa3^, or compensation
for transfer to the " Civil service retirement and disability fund."
The regulations covering such deductions were issued in Department
Circular No. 197, dated June 25, 1920 (Exhibit 91, p. 572.) Department Circular No. 196, dated June 25, 1920 (Exhibit 92, p. 577),
covered the question of forms of pay rolls and retirement deductions.
SPACE PROBLEMS OF T H E

DEPARTMENT.

One of the pressing problems confronting the Treasury is the imperative need of adequate and safe housing facilities for its manifold
activities. Before the war the department had become greatly congested. The sudden expansion due to war-time activities created an
unprecedentedly acute situation, and buildings of all kinds were utilized to provide shelter for many new functions. The offices of the
Treasury were strewn over the city of Washington. With the cessation of hostilities the condition somewhat improved, but man37' of
the new tasks are permanent in their nature, as the aftermath of the
war falls chiefly on the Treasury. Some activities are still expanding, and may continue heavy for years to come. These include, for
example, the collection of taxes by the Internal Eevenue Bureau;
the enforcement of national prohibition; the extensive work of the
Division of Loans and Currency, the office of the Eegister of the
Treasury and the Bureau of Engraving and Printing in connection
with the public debt, and particularly the war debt; and the storage
and custod3^ of supplies transferred to the General Supply Committee under Executive order of December 3, 1918. A securities
building fitted to house the public-debt service and other Treasury
offices dealing with' securities is particularly necessary.
The Bureau of Internal Eevenue is housed in six separate buildings and the DiAQsion of Loans and Currency in five widely separated buildings. Many of these are wholly unsuited for office work
and are of nonfireproof construction. The supplies in the custody




254

REPORT ON T H E FINANCES.

of the General Supply Committee, valued at about $1,750,000, are
stored in 51 barracks buildings in Potomac Park. They are of flimsy
construction, and in the event of fire the entire group would be
endangered.^ Valuable documents and papers in the custody of the
Treasury are housed in temporary v^ooden structures erected during
the period of actiA^e warfare for the housing of temporar3'' war-time
organizations. These records are irreplaceable.
The Treasury has also repeatedly called, the attention of the Congress to the necessity of a modern Treasur3^ vault in Washington,
originally estimated to cost in the neighborhood of $1,250,000, to
replace the antiquated AMults UOAV used, to safeguard the GoA'ernment's reserA^es and securities. The Treasury's appeals for new
vault facilities-were renewed and given additional emphasis in connection with the recent legislation authorizing the discontinuance of
the subtreasuries. I t is of the first importance that an appropriation
for this purpose be made at this session of Congress, in order that
construction of the vault may proceed without further delaA^
The problem of adequate space to meet the needs of the department
has demancied almost constant attention. A recent surA''e3^ indicates
that, exclusiA^e of the Bureau of EngraAnng and Printing and the
Hygienic Laborator3'', the office and filing space of the permanent
buildings occupied b3^ the department aggregates only 1.039,037
square feet, while the requirements are 2,107,400 square feet, leavinir
a deficiency of more than 1,000,000 square feet. In other Avords, tho
permanent buildings occupied b ^ the TreasurA?' meet less than 50 per
A
cent of the permanent space requirements. The erection of permanent fireproof structures for the accommodation of these important agencies is an imperative necessit3^, and it is hoped that the
matter will have the immediate consideration of the Congress.
PANAMA

CANAL.

The general fund of the Treasuiy was charged during the fiscal
A^ear 1920 Avith $9,465,056.54 on account of the Panama Canal, including $6.,031,463.72 for maintenance and construction work and
$3,433,592.82 for fortifications and miscellaneous expenditures. The
general fund Avas credited during the 3^ear with $9,039,670.95 receipts
from tolls, etc., making a net expenditure for the A^ear of $425,385.59.
The total amount expended for canal construction, fortifications,
maintenance, etc., from the general fund to June 30, 1920, exclusiA^e
of reimbursements from sales of. bonds, was $322,939,563.56, wdiile
the amounts received from Panama Canal bonds, including premiums thereon, issued in 1907, 1908, 1909, 1911, and 1912, was
$138,600,869.02, making the total expenditures on account of the
Panama Canal to the close of the fiscal year 1920 $461,540,432.58.




SECRETARY OF T H E TREASURY.

255

FINANCES.

The folloAving statements showing receipts, disbursements, estimates, and the condition of the Treasury are submitted:
E E C E I P T S AND DISBURSEMENTS.^

Fiscal year 1920.
The receipts and disbursements of the Government during the fiscal
year ended June 30, 1920, AA^ere as follows:
(See details on pages 262 to 272.)
G E N E R A L "FUND.

Receipts into the general fund, including trust-fund receipts, but
excluding postal rcA^enues:
Customs
Internal revenue—
Income and excess-profits taxes
$3, 956,936,003. 60
Miscellaneous.
1, 442, 213, 241. 46
Sales of public lands
Miscellaneous.Panama Canal tolls, etc

•

•

5,399,149,245.06
1, 910,140. 20
971,409,074. 63
= -.
.
9,039, 670. 95
6,705,044,690.09
'
. 630, 252. 46

Deduct difference arising in adjustment of receipt accounts.
Total ordinary receipts
Disbursements,^ from the general fund for current expenses and capital outlays, including
trust-fund disbursements, but excluding
Postal Service paid from postal revenues:
For ciAdl establishment—
Legislative establishment
Executive proper, including Tariff
Commission and Alien Property
Custodian
State DepartmentTreasury Department proper
. Bureau of War Risk Insurance
Public buildings, construction, sites,
equipment, and maintenance
War Department proper
Department of Justice
Post Office Department proper
Additional compensation, Postal Service
:
,
Navy Department proper

$323, 536, 559. 25.

6, 704,414, 437. 63

^19, 739, 707. 70

1, 603, 633. 41
13, 590, 288. 51
149, 413, 542. 85
^ 74^ ggg, 559. 30
14; 027, 068. 17
8, 734, 269. 52
18, 667, 245. 63
2, 680, 470. 81
35,698,400. 00
2,797,152.07

1 "Disbursement's," as used in the following table.s, in addition to actual expenditures, Include unexpended balances to the credit of disbursing officers,
o
2 Exclusive of allotments of pay.




256

REPORT ON T H E FINANCES.

Disbursements, etc.—Continued.
For civil establishment—Continued.
Interior Department proper
Department of Agriculture
Department of Commerce
Department of Labor
United States Shipping Board
Federal control of transportation systems, and transportation act, 1920..
Federal control of telegraph a n d telephone systems
War Finance Corporation.
Food and Fuel Administrations
Council of National Defense
Housing Corporation
European food relief
Wheat guarantee fund
State, War , and Navy Department
buildings
Interdepartmental Social Hygiene
Board
Interstate Commerce Commission
Federal Trade Commission
Federal Board for Vocational Education.. . . . . . ^
;
Employees' Compensation Commission.
•
Smithsonian Institution and National
Museum
,
Other independent offices
Purchase of obligation? of foreign Governments
Purchase of farm-loan bonds
Expenses of loans
District of Columbia

$28,199,495. 23
66, 611,066. 69
35, 765, 045. 92
6,125, 231.15
469, 094,549. 35
1,038, 614, 901.18
12,018, 557. 68
150,000,000. 00
^ 1 , 633, 859.11
107, 758. 20
^ 2,038, 712. 77
93, 236,117. 80
350,000. 000. 00
2, 483, 462. 33
1., 791, 071. 03
5, 847, 961. 96
1, 021, 653. 58
34, 984, 423. 90
2,239,80L95
797, 017. 44
3, 237,498. 91
421, 337, 028. 09
26, 887, 356. 25
22,122, 776. 85
20, 413, 421.77

13,131,103, % \ 35
For War Department—
For Military Establisliment, as follows—
Support of the Army, $770,793,635.70; Military Academy, $1,071,370.05; fortiRcations, $231,402,870.28; arsenals, $1,016,429.18; registration and selection for
military service, $2,877,182.21;.
military posts and miscellaneous,
$19,163,460.59
1, 027, 225, 248. 01
For rivers and harbors
49, 873, 930. 42
For war miscellaneous, civil, including national homes, $6,091,465.63;
soldiers' deposit fund, $4,940,741.34;
cemeteries, parks, claims, etc.. $6,702,816.83...
17,735,023.80
. . , _ 2 j ^ 094, 834, 202. 23
L
For Panania Canal
6, 031,463. 72
1 Excess of repayments.




2 includes allotments of pay.

SECRETARY OF THE TREASURY.

257

£)i8bursement8, etc.—Continued.
For .\aval Establishment, including construction oi" new vessels, machinery, armament, equipment, improvement at
navy yards, aud miscellaneous.
^ $629, 893,115. 87
For Indian Service
40,516,831.94
Forpensions
213,344,204.11
For interest on the public debt
1,024,024,440. 02
6,139, 748, 22L 24
Add difference arising in adjustment of miscellaneous accounts
Total ordinary disbursements

6,141, 745, 240. 08

Excess of ordinary receipts

562, 669,197. 55

Publicdebt—receipts and deposits:
First Liberty loan
2 |23o. 00
Second Liberty loan
2 920. 00
Third Liberty loan
498,492.50
Fourth Liberty loan
5,078,726.00
Victory Liberty loan
1,027,542,058.-23
War-savings certificates
73, 240,467. 03
-Certificates of indebtedness
14,728,725,- 968. 53
Deposits to retire Federal reserve bank
notes and national bank notes.
17,071, 987. 50
Deposits for postal-savings bonds
189, 400. 00
Total public-debt receipts.

1 997,018.84

"'
;^

15,852, 345,949. 79

'Public debt—redemptions and purchases:
First Liberty loan, converted at 4 per cent.
14,862,000.00
First Liberty loan, converted at 4J per
cent
17, 475, 700. 00
.
Second Liberty loan
10,007, 700. 00
Second Liberty loan, converted a t 4 i per
cent
231,142, 700. 00
Third Liberty loan
296,338, 250. 00
Fourth Liberty loan.
405, 221,500. 00
Victory Liberty loan notes
249,006, 500. 00
Loan of 1908-1918
416,140. 00
War-savings certificates
'...
199,818,880. 44
Certificates of indebtedness
15, 588,704,458. 53
Federal reserve bank notes and national
bank notes retired
23,424,164. 50
Miscellaneous redemptions, public d e b t . .
26, 277. 78
Total public-debt disbursements

17,036, 444,271. 25

Excess of public-debt disbursements over public-debt receipts.
1,184,098,321. 46
Excess of total disbursements over total receipts.
1 Includes allotments of pay.

13799—FI 1920




17

. .621,429,123. 91

2 Deduct, counter entry. ^.

258

REPOET ON THE FINANCES.
SUMMARY O^ GENERAL FUND TRANSACTIONS,

Fiscal year ended June 30, 1920.
Receipts.

Disbursements

Ordinary receipts, .including trust-fund receipts, but excluding postal revenues
$6,704,414,437. 63
Disbursements ^ for current expenses and capital outlays, including trust-fund disbursements, but excluding postal service paid
from postal revenues.
$6,141,745,240.08
Public debt—receipts and deposits
15,852,345,949. 79
Public debt—redemptions and purchases
17,036,444,271. 25
Total receipts into the general fund
22,556, 760, 387. 42
Excess of disbursements over receipts.
621,429,123. 91
Grand totals

23,178,189,51L 33 23,178,189, 511. 33

General-fund balances:
Balance per Daily Treasury Statement June 30, 1919
1, 251, 664,827. 54
Deduct net excess of disbursements over receipts in June
reports subsequently received
25,499, 892. 28
1, 226,164, 935. 26
Pay warrants issued in excess of receipts,
fiscal year 1920.
, $621,429,123. 91
Less excess of unpaid warrants June 30,
1920, over such amount on June 30,1919.
9,556, 884. 62
611, 872, 239. 29
Decrease in book credits of disbursing
officers' and agencies with Treasurer,
June 30, 1920, OA'^er such amount on
June 30, 1919.

254, 345, 675. 64
•

866, 217, 914. 93

Balance held by the Treasurer of the United States June
30,1920

359,947,020.33

POSTAL SERVICE.

'

[Exclusive of Post Office Department proper, which is included in "civil establishment."]

Postal-revenue receipts
:.:......
Postal service paid from postal revenues ^
Excessof receipts.....

$437,150,212. 33
418, 722, 295. 05
18,427,917.28

. UNITED STATES NOTES (GREENBACKS).

Issues to replace worn and mutilated notes
:
$319, 836,000. 00
Worn and mutilated notes retired
'.
319,836,000. 00
The redemptions during the year of the notes unfit for circulation necessitated the
issue of a like amount thereof to maintain the outstanding aggregate of the notes as requiriBd by law.
1."Disbursements," as here used, in addition to actual expenditures, include unexpended balances
to the credit of disbursing officers.
'
2 Exclusive of $35,698,400 paid for additional compensation, Postal Service, from the Treasury.




259

SECRETARY OF T H E TREASURY.
GOLD R E S E R V E F U N D .

Balance in reserve fund June 30, 1919
Balance in reserve fund June 30, 1920.

$152, 979, 025. 63
152, 979,025. 63

The redemptions of notes for gold from the reserve fund during the year were:
United. States notes, $3,585,390.
As the redeemed notes were exchanged each day for gold in the general fund, the
reserve was maintained at the fixed sum required b y law, including $2,979,025.63
tax on additional circulation received under act of May 30, 1908.
TRUST FUNDS.

(Held for the redemption of the notes and certificates for which they are respectively
pledged.)
Gold coin and bullion
Silver dollars.
„
Silver dollars, 1890,. „

$584,723, 645
118,257,883
1,656,227

Gold certificates
outstanding.
$1, 375,659,569
Less amount in the
Treasury
790,935,924

Net.

584,723, 645

Silver certificates outstanding.
Less amount in t h e
Treasury.
Net

;.„

124,240,400
5, 982,517
118,257,883

Treasury notes (1890)
outstanding.
. Less amount in the
Treasury
Net.

. ,
1,659,000
2,773
1,656,227
704, 637, 755

704, 637, 755
GOLD SETTLEMENT FUND, FEDERAL RESERVE BOARD.
Goldcoin

,

$1,184,275,551.87

SINKING FUND.

There were no transactions during the fiscal year 1920 on account
of the sinking fund created by the act of February 25, 1862, which
was repealed by the act of March 3, 1919, section 6. The same
section created a cumulative sinking fund beginning with the fiscal
year 1921.




260

REPORT ON T H E FINANCES.
CONDITION OF THE TREASURY J U N E 30,

1920.

The public debt of the United States at the close of the fiscal year
1920 is set forth in detail, as follows:
Interest-bearing debt:
Loan of 1925, 4 per cent
Consols of 1930, 2 per c e n t .
Panama Canal loan, 2 per cent
Panama Canal loan, 3 per cent
?
Postal savings bonds, 2^ per cent
Conversion bonds, 3 per cent
Certificates of indebtedness
War savings certificates
First Liberty loan, 3^ per cent
First Liberty loan converted, 4 per c e n t . .
First Liberty loan converted, 4 i per c e n t . .
First Liberty loan second converted, 4^
percent
Second Liberty loan, 4 per cent
Second Liberty loan converted, 4^ per cent
Third Liberty loan, 4^ per cent.
Fourth Liberty loan, 4J per cent
Victory Liberty loan, 3i and 4 i per c e n t . .
Debt on which interest has ceased:
Funded loan of 1891
Loan of 1904
Funded loan of 1907
Loan of 1908-1918
.'
Refunding certificates Olddebt
Certificates of indebtedness, m a t u r e d . . . .

$118,489,900. 00
599,724,050. 00
74,901,580. 00
50,000,000. 00
11,539,360. 00
28,894,500. 00
2,768,925,500. 00
827,419,021. 36
1,410,074,400. 00
65,803,050. 00
473,089,200. 00
3,492,150.00
240,003, 250. 00
^
3,085,303,750. 00
3,662,715,800. 00
6,394,354,500. 00
4,246,365,350. 00
,. $24,061,095,36L 36
20,800. 00
13,050. 00
384,400. 00
519,860.00
10,410. 00
898,680.26
4,900,500.00
6,747,700.26

Debt bearing no interest:
United States notes (greenbacks), less gold
reserve
Bank notes, redemption account
Old demand notes
Fractional currency

193,701,990.37
29,478,280.00
53,012. 50
6,842,067. 04
230,075, 349. 91

Total interest and noninterest bearing debt, exclusive of
certificates and notes offset b y coin and bullion (gross
debt)
CASH IN THE TREASURY J U N E 30,

24,297,918,411.53

1920.

[From revised statements.!
Reserve fund:
Gold coin and bullion

152,979,025. 63

Trust funds:
Gold coin and bulHon
Silver dollars
Silver dollars of 1890..

584,723,645. 00
118,257,883. 00
1,656,227.00




704, 637, 755. 00

SECRETARY or THE TREASURY.
Gold settlement fund, Federal Reserve Board:
Gold coin and bullion
General fimd:
In Treasury offices—
Goldcoin
Standard silver dollars
United Statesnotes....,
Federal reserve notes.
Federal reserve bank notes
National-bank notes
Certified checks on banks
Subsidiary silyer coin
Minorcoin
Silver bullion (at cost)
Unclassified (unassorted currency,
etc.)
Public debt paid, awaitiug reimbursement

261
$1,184, 275,551.87

$249,981,700.36
14, 935, 674. 00
9,567,164.00
27, 622, 296. 00
353,402. 00
1,629, 666. 80
475, 834. 81
6, 605, 093. 65
1,076,790.26
19, 516, 565.10
5,833,638.84
1,242,633.03
.

In Federal land banks
In Federal reserve banks.
In transit

338,840,458.85
5, 950,000.00

30,483,519.22
8, 545,005. 29
39,028, 524. 51

In special depositaries—
Account of sales of certificates of indebtedness:.....
In national-bank depositaries—
To credit of Treasurer of the United
States
To credit of other Government officers.
In transit
In treasury of Philippine Islands—
To credit of Treasurer of the United
States
To credit of other Government officers.

273,428,577.33
11,863,207.11
15,138,161. 88
11, 598,446. 06
38, 599, 815. 05
1 1,986,669.06
2,785,579. 60

In foreign depositaries—
To credit of Treasurer of the United
States

798, 910. 54
8,301,507.40
704, 947, 793. 68

Deduct current liabilities—
National-bank note 5
per cent fund
$21,332, 789.12
Less notes in process
of redemption
21, 332, 789.12
Treasurer's checks outstanding
Post Office Department balance.......
Board of trustees, Postal Savuigs System balance..
Balance to credit of postmasters,
clerks of court, etc.".




I Credit balance.

466, 273. 36
35, 838, 627. 79
7,791,054.64
33, 974,101.19

262

REPORT ON T H E

FINANCES.

General fund—Continued.
Deduct current liabilities—Continued.
Undistributed
assets of insolvent
national banks
Deposits for—

$1,168, 284. 92

Redemption of Federal reserve
notes (5 per cent fund, g o l d ) . . .
Redemption of Federal reserve
bank notes (5 per cent fund)
Retirement of additional circulating notes, act of May 30,1908.
Miscellaneous
redemption
accounts

237,195, 574. 39
9,449, 759. 00
138, 860. 00
18, 978, 238. 06
$345, 000, 773. 35

Balance in t h e Treasury, J u n e 30, 1920, as
per Financial Statement of t h e United
States Government

359, 947,020.33

Comparison of receipts, fiscal years 1920 and 1919.
1920
Customs
$323,536,559.25
Internal revenue:
Income and excess proflts
taxes
3,956,936,003.60
Miscellaneous
1,442,213,241.46
Sales of public lands
1,910,140.20
Consular fees
1,671,174.00
Profits on coinage, bullion dePosits, etc
12,369,612.23
Payment of interest by Pacific railways
8,016.58
Tax on circulation of national
banks
4,468,704.85
Interest on obligations of
3,751,433.43
t* Iforeign Governments
"
Principal payments on for71,045,188.47
r^;eign loans
16,656,276.09
Interest on public deposits...
Premium on .war-risk insur10,427,122.66
ance
290.98
Night services, custom service
Customs fees, fines, penalties,
' 1,095,786.26
etc
nterest on loans to ..railroad
2,963,873.33
companies
Sale of war supplies, War De300,285,959.76
partment
Payment by German Government under terms of
3,346,675.40
armistice
Sale of German war supplies..
Emergency shipping fund,
'construction of barges, e t c . .
Interest on advance pay2,498,022.36
ments to contractors
Donation of royalty on ma1,304.61
chine guns
Decrease of capital stock
United States Grain Cor350,000,000.00
poration
From operations and disposal
of properties, United States
3,419,235.54
Housing Corporation
Sale of explosive plant, Nitro,
1,400,000.00
W.Va
Forest Service, cooperative
2,044,592.13
fund
,
Proceeds of militia property
14,687.05
lost or destroyed
641,584.90
Earnings of radio service —




1919

f .Increase, 1920.

8183,428,624.78

$140,107,934.47

2,^600,762,734.84
1,239,468,260.01
1,404,703.12
1,159,144.69

;1,356,173,268.76
202,744,981.45
505,435.08
512,029.31

11,963,244.27

Decrease, 1920.

406,367.96

9,148.03
3,806,646.42

$1,131.45
662,058.43
318,410,794.61

322,162,228.04
7,570,000.00
23,709,714.84

63,475,188.47

4,225,398.48
286,929.93

6,201,724.18

7,053,438.7
286,638.9£
249,901.63

1,345,687.89
2,871,584.86

92,288.47

13,802,217.12

286,483,742.64
14,777,254.41
3,910,175.75

18,123,929.81
3,910,175.75

3,860,000.00

3,860,000.00
1,973,541.14

524,481.22
715,580.14

716>884.75
350,000,000.00
3,419,235.54
1,400,000.00
2,044,592.13
28,917.69
221,131.19

14,230.64
.420,453.71

263

SECRETARY OF T H E TREASURY.
Comparison of receipts, fiscal gears 1920 /md 1919—Continued.
1919

1920
•Navy hospital and clothing
funds, fines, forfeitures, etc..
Sales of ordnance materials,
etc
Land fees
......
Sales of war supplies, Navy
Department
Sales of naval vessels
Revenues of national parks...
Fees on letters patent
Depredations on publiclands.
Deposits for surveying public
lands
Oregon and California landgrant fund
Proceeds of town sites, etc.,
Reclamation Service
Foresi-reserve fund
Immigrant fund
Naturalization fees
Proceeds of seal and fox skins.
Ala.ska fund
!
Judicial fees, fines, penalties,
etc
Suri)lus postal revenues,
prior years
Estimated increased postage.
Sales of Government i)roperty
Rent of public buildings,
• grounds, etc
Sales of lands and buildings..
Sales to Indians
Franchise tax (surplus earnings of Federal reserve
banks)
'
District of Columbia, general
receipts
Funds contributed for river
and harbor improvements..
Reimbursements on account
of expenditures made for
Indian tribes..issessments on Federal rereserve banks, for salaries,
etc
AsseSvSments on national
banks for expenses of examiners
Liquidation of capital stock,
Federal land banks
Discount on bonds purchased.
Sale of farm loan bonds
Interest on farm loan bonds..
Miscellaneous
Panama Canal tolls, etc

Decrease, 1920,

Increase, 1920.

$942,099.42

$741,465.47

$200,633.95

1,233,013.96
1,609,351.29

4,162,016.20
1,196,570.93

412,780.36

8,986,649.41
3,009,737.54
219,320.55
2,605,780.80
94,376.62

133,815.41
2,022,770.99
57,061.77

8,986,649.41
3,009,737.54
85,505.14
5&3,009.81
37,314.85

101,213.16

41,092.16

60,121.00

245,737. 73

155,217.64

90,520.09

77,15^.19
4,871,877.84
2,919,245.. 55
491,538.50
1,241,648.25
213,121.83

• 55,362.49
4,512,173.93
1,175,293.49
387,795. 50
309,803 ..35
.. 247,943.63

21,792.70
359,703.91
1,743.952.06
103; 743.00
931,844.90

.3,077,945.57

1,731,360.05

1,346,585.52

300,000.00
4,913,000.00
12,647,092.24

18,000,000.00
71,906,000.00
15,477,857.80

429,751.42
347,986.96
226,362. 65

'

3,639,.063. 52
238,935.00
241,577.85

2,703,893.63

$2,929,002.24

34,821.80

17,700,000.00
66,993,000.00
2,830,765.56
3,209,312.10

109,051.96
i5,'2i5.'26
2,703,893.63

11,446,050.58

10,661,285.44

784,765.14

2,428,920.65

2,282,588.00

146,332.65

77,077. 70

303,624.07

3,229,366.98

2,614,778.42

614,588.56

1,181,196.05

1,065,121.65

116,074.40

610,299.00
66,461.707.27

626,321.00
22,878,516.48
6,345,000.00
3,619,992.25
4,775,111.21
6,777,046.55

6,159,825.00
6,762,636.10
9,039,670.95

226,546.37

16,022.00
43,583,190.79
6,345,000.00
2,539,832.75
1,987,524.89
2,262,624.40

TRUST FIINDS.

Department of State:
Miscellaneous trust funds.
War Department:
' Army deposit funds
Soldiers' Home permanent fund
' Miscellaneous trust funds
Navy Department:
Navy deposit fund
Marine Corps deposit
fund
Interior Department:
Proceeds bf Indian lands.
Indian moneys, proceeds
of labor
Miscellaneous trustfunds.
Personal funds of patients, St. Elizabeths
Hospital
Pension money, St. Elizabeths. Hospital
Navy pension fund...




10,971.93

16,239.94

1,634,119.85

839,641.16

408,576.66
2,040.00

714,009.89

5,268.01
794,478.69
305,433.23
2,040.00

'62,065.19

47,029.60

78,140.67

99,696.77

2,416,492.24

2,275,347.37

141,144.87

24,633.828.12
813,152.76

13,972,533.67
56,280.92

10,661,294.45
756,871.84

236,806.73

77,917.51

158,889.22

67,607.77
1.993.52

75,824.80
2,009.09

15,035.59
21,566.10

I

•8.217.03
15 57

264'

REPORT ON. THE FINANCES.
Comparison of receipts, fiscal years 1920 and 1919—Continued.
1920 •

District of Columbia:
Miscellaneous trust fund
deposits.
Wasnington redemption
fund
Police and firemen's relieffund
Other trust funds
Total
Deduct—
Moneys covered by warrant in year subsequent
to the deposit thereof...
AddMoneys received in fiscal
year b u t not covered
by warrant.
Ordinary receipts

1919

Increase, 1920.

$674,542.12

$545,242.44

$129,299.68

' 199,945.20

196,231.96

3,713.25

166,325.98
27,946.82

165,533.49
7,241.93

792.49
20,703.89

6,705,044,690.09.

4,654,284.192.43

2,500,679,819.20

Decrease, 1920.

$449,919,321.54

1,735,493.29

1,638,786.71

96,706.58

6,703,309,196.80

4,652,645,405.72

2,500,583,112.62

449,919,321.54^

2,500,583.112.62

450,549,574.00'

1,105," 240.83

1,735,493.^9

6,704,414,437.63

4,654,380,899.01

630,252.46-

Public debt:
, 1230.00
First Liberty loan
8,485.38
Second Liberty l o a n . . . . .
1920.00
2,404.00
Third Liberty loan
498,492.50
932,106,419.03
Fourth Liberty loan
5,078,726.00 6,959,504,587.00
Victory Liberty loan
1^027,542,058.23 3,467,844,971.77
Certificates of indebted14,728>-725,968.53 • 16,955,327,890.00
ness
73,240,467.03
War-savings certificates
738,247,741.07
189,400.00
Postal savings bonds
289,260.00
17,071,987.50
22,644,757.50
Bank-note fund. .
Public debt receipts.... 15,852,345,949.79 29,075,976,515.75

8,715.38
3,324.00931,607,926.53
6,954,425,861.002,440,302,913.54
2,226,601,921.47
665,007,274.04
99,860.00
5,572,770.00'
13,223,630,565.96

Total receipts, exclusive of postal
Postal revenues

22,556,760,387.42
437,150,212.33

33,730,357,414.76
364,847,126.20

2,500,583,112.62
72,303,086.13

13,674,180,139.96

Total receipts, including nostaf

22,993,910,599.75

34,095,204,540.96

2,572,886,198.75

13,674,180,139.96

1 Counter entries.
Comparison of disbursements,^ fiscal years 1920 and 1919.
1920

1919

Increase, 1920.

Decrease, 1920.

ClYlL ESTABLISHMENT.

Legislative:
House of Representatives.
Legislative, miscellaneous
Public Printer
Library of Qongress
B o t a n i c GardPTi

Total legislative
xecutive proper:
Salaries and expenses
Rehef, etc., American
citizens in Europe
European food relief
United States Tariff
Temporary government
National security and defense, executive

$2,587,742.45
7,059,051.93
222,937.77
8,918,954.07
877,159.04
73,862.44

$2,034,463.06
5,303,885.99
232,614.23
8,232,838.68
743,153 .31
59,880.88

$553,279.39
1,755,165.94

19,739,707.70

16,605,836.15

3,143,548.01

239,357.80

220,053.26

19,304.54

8 5,466.80
93,236,117.80

79 581 58
47,097.37

269,394.89

199,578.35

200,000.00

7,703,083.69

93,18^,420.43

$9,676.4e

9,676.46

85,048.38

69,.S16.54

200,000.00

8 23,298.38

6S6,"ii5'.39*
135,005.73
,13,981.56

7,726,382.07

3 "Disbursements," as used in these tables, in addition to actual expenditures, include unexpended
balances to the credit of disbursing officers.
8 Excess of repayments.




•SECRETARY OF THE TREASURY.

265

Com.parison of disbursements,''• fiscal years 1920 and 1919—Continued.
1920

1919

$152,907.92
554,453.63

$104,555.04
715,954.04

Increase, 1920.

Decrease, 1920.

CIVIL ESTABLISHMENT—con.

Executive proper—Contd.
Bureau of Efficiency
Civil Service Commission
Expenses, trading with
the enemy act
War Trade Board
War Industries Board
Committee on Public
Information
Alien Property Custodian
Wheat guarantee fund...
Bituminous Coal Commission
Total executive proper.

2 1.47
2 273,875.82
16,669.66
2 351,711.76
803,945.08
350,000,000.00

2,739,340.03
1,179,018.29

$161,500.41
1.47
6,643,547.17
1,922,471.71

6,369,671.35
1,939,141.37

3,091,052.39
375,073.21
350,000,000.00
21,258.66

21,258.66
444,839,751.21

$48,352.88

21,497,674.97

443,347,153.05

Department of State:
Salaries and expenses
Foreign intercourseDiplomatic salaries..
Consular salEiries
Contingent expenses
of foreign missions
Post allowances
Contingencies of consulates
Emergencies arising
in the Diplomatic
and Consular Service
Relief of American
citizens in Mexico
and Germany
Representation of interests of foreign'^
govern ments.
Rehef of Americai
seamen
Payment to Panam;
National security an
defense ..
Miscellaneous items
Trust funds .

2 6,621.00

19,218.84

177,278.74
250,000.00

113,470.11
250,000.00

63,808.63

2,698,516.97
692,409.21
4,838.35

11,358,857.41
550,337.31
13,247.11

142,07L90

Total Departmen
of State
.

13,590,288.51

20,248,594.49

2,436,107.88

20,005,076.81

1,417,142.61

1,036,168.73

380,973.88

1,389,459.79
2,382,926.36

1,282,029.96
2,196,842.98

107,429.83
186,083.38

1,648,211.58
569,633.31

1,170,698.47
772,388.27

477,513.11

. 932,436.30

1,099,458.45

1,350,666.49

272,439.34

83,389.80

113,437.51

202,754.96
167,022.15

1,078,227.15
30,047.71
25,839.84

8,660,340.44
8,408.76
9,094,413.86

Treasury Department:
Salaries, Secretary's ofiic
636,256.89
1,564,355.97
928,099.08
and divisions thereof
.J
Contingent fund for Sec
1,560.67
retary
5,235.42
3,674.75
International High Com
4,990.27
mission...
17,992.16
22,982.43
Contingent expenses (
371,881.72
department
497,215.19
869,096.91
Second Pan America;
43,922.05
43,922.05
Finance Conference..
Customs ServiceCollecting custom
151,08L30
revenues
10,174,397.04
10,023,315.74
Refunding excess (
3,273,608.04
deposits.
4,059,021.46
7,332,629.50
Debentures or drav
11,882,019.22
backs
7,953,233.41
19,835,252.63
Compensation in lie
2,105.60
6,355.00
8,460.60
of moieties
Miscellaneous refun s
57,605.39
8,336.76
49,268.63
Internal Revenue Ser^
ice—
Expenses of collec •
7,217,128.29
ing
.
27,367,040.12
20,149,911.83
8,657,206.41
9,997,134.91
Refunds an d reliefs
18,654,341.32
279,190.62
Miscellaneous
.. .
299,415.18
20,224.56
Enforcement of n •
tional prohibitic .
2,065,603.38
acts
, .
2,065,603.38
» "Disbarsements," as u; > in these tables, in addition to actual expenditures, include unexpended
d
balances to the credit of d .bursing officers.
2 Excess of repayments.




266

REPORT ON THB FINANCES.
Comparison of disbursements,^fi,scalyears 1920 and 1919—Continued.
1920

1919

Increase, 1920.

Decrease, 1920.

CIVIL ESTABLISHMENT—con.

Treasury Department—Con.
Suppressing counterfeiting and other crimes...
Accounting oflSices
Miscellaneous ofiices
Public Health Service
Epidemic diseases
Promoting health of militai-y forces
War Risk InsurancesSalaries and expenses.
Losses
Military and naval
compensation
Military and naval
family allowance...
Military and naval
insurance
National
security
and defense
Grovernment life insurance fund
Federal Farm
Loan
Board—
Salari es and expenses.
Engraving and printing..
Paper, etc., for United
States securities
Preparation and issue of
F'ederal reserve notes...
Expenses of loans
Charges on bullion sold...
Loss on silver dollars
melted or broken u p . . .
Coast Guard
Revenue vessels
Independent Treasury...
Mints and assay offices...
Public buildings—
Sites, construction,
and equipment
Current maintenance.
Expositions
Salaries and expenses, national-bank examiners..
National security and defense
Increase of compensation.
Miscellaneous items
Special f u n d s Philippine
special
funds
Night services, Customs Service
Porto Rico special
funds
Total Treasury Department
War Department:
Salaries and expenses
Additional employees
Pubhc buildings and
grounds
Iricrease of compensation.
Total War Department
Navy Department:
Salaries and expenses
Additional employees
Temporary office buildings
Increase of compensation.
Total Navy
ment

$301,082.64
3,171,624.62
1,989,771.68
21,421,519.61
495,792.75
2 5^ 762.58

$292,381.11
2,908,621.96
1,249,764.27
6,286,720.75
183,554.30

$8,701.53
263,002.66
740,007.41
15,134,798.86
312,238.45

47,153.43

$52,916.01

15,472,890.11
521,790.82

12,872,729.78
7,499,346.96

2,600,160.33

103,278,296.60

11,493,837.10

91,784,459.50

30,594,051.37

193,444,460.92

2 85,090,030. 27

2 126,430,622.28

2 32,262. 21

6,977,556.14

3,063,940.79

10,182,404.13

162,850,409.55
41,340,592.01
3,096,203.00
10,182,404.13

.196,046.01
5,779,500.57

212,673.00
5,326,285.79

453,214.78

690,712.35

662,659. 53

28,052.82

92,261.08
22,122,776.85
25,479.63

291,522.71
28,594,377.10
497,290.09

199,261.63
6,471,600.25
471,810.46

10,236,301.63
88,638.71
635,326.64
1,545,234.77

43,850,645.28
11,207,131.15
289,023.95
636,253.40
1,552,793.67

43,850,645.28
970,829.52
200,385.24
926.76
7,558.90

6,918,375.13
7,108,693.04
48.57

10,184,242. 67
6,672,167.18

436,525.86
48.57

16,626.99

3,265,867.54

1,339,669.41

1,031,356.85

308,312.56

2 295,744.87
12,215,722.78
405,687.70

5,259,195. 75
3,747,009.01
638,010.58

8,468,713.77

856,380.07

1,016,86L61

160,481.54

33,098.28

284,986.04

251,887.76

286,503.53

953,521. 03

667,017.50

260,451,047.17

289,914,682.25

2,541,022.83
3,960,223.77

3,481,678.48
14,951,889.70

681,565.72
1,551,457. 20

682,674. 03
1,046,262. 29

505,194. 91

8,734,269.52

20,162,504. 50

505,194. 91

939,970.35
1,000,454.41

1,682,03180
1,102,402. 48

208,222. 08
648,505. 23

6,844,007.03
144,936. 73

503,568. 50

2,797,152. 07

9,773,378.04

503,568.50

206,266,784.41

5,554,940.62
'232,'322."88

235,729,519.49
940,655. 65 '
10,991,665.93
1,108. 31
11,933,429.89
742,061.45
101,948.08
6,635,784.95

Depart7,479,794. 47

1 "Disbarsements," as used in these tables, in addition to actual expenditures, include unexpended
balances to the credit of disbursing officers.
2 Excessof repayments.
8 Exclusive of allotments of pay.




ISECRETARY OF THE TREASURY.

267

Comparison of \ lisbursenients} fiscal years 1920 and 191.9—Continued.
1920

1919

Increase, 1920.

Decrease, 1920.

CIVIL ESTABLISHMENT—con.

interior Department:
Salaries and expenses^.
office of Secretary
:
General Land Offlce
PubHc Lands Service...
Payment of unpaid taxes
on lands involved in;
O r e g o n & Californisj
R. R. forfeiture suit...'
National security andi
defense
Indian Offlce
Pension Offlce.
Patent Offlce
;
Bureau of Education
Colleges for agriculturo
and the mechanic arts^
Geological Survey. 1
Bureau of Mines
'
Fuel yards, District oi
Columbia
,
Offlce of Superintendenj
of Capitol Building am:
Grounds
..,.
National parks
;.
Territorial governments!.
St. Elizabeths Hospital..:.
Other beneficiaries..'... .
, Construction, etc., of rail
roads in Alaska
: .
Increase of compensatioi .
Miscellaneous items
; ,
Special f u n d s Reclamation fund.. .
Five, three, and twi >
per cent fimds,sal(31
of lands
i.
Proceeds, town sites,
Alaska
j.
Revenues of nationi^ I
parks a n d Hd;
Springs, .A.rk
;,
Deposits for surve:y •
ing public lands. J .
Public schools, Ala! •
ka fund
,.
Miscellaneoas trust fund !
Total Interior Deparl ment

$28,569. 90
3,203. 77

$1, 111, 137.12
673,251. 40
3,049,492.10

$1,139,707.02
676,455.17
2,421,560.86

25,234.81

25, 234.81

55 921. 29
3oo; 975.13
1,277, 559. 32
1,643, 383. 75
496, 569. 60

396,921.80
297,068. 98
1,302,962. 94
1,505,618.40
383,648.83

341,000.51
137,765.35
112,920.77

2,500, 000.00
1,442, 446.04
2,704, 282. 23

2,500,000.00
1,292,711.19
1,582,573.27

149,734.85
1,121, 708. 96

2 213,900. 20

1,077,409.22

895,237.48
977,549.34
28,472.37
1,085,952.72
345,201.29

1,042,117.89
765,481. 46
103,568.75
694,351.38
. 292,227.71

6,240,053.20
2,086,548.36
346,697.20

5,284,698.43
1,046,571.90
652,798.91

764,538.02

4,209,530.59

3,444,992.57

85,073.42

85,073.42

24,008.87

24,008.87

$627,931. 24

3,906. 15

25,403. 62

1,291,309.42
146,880.41
212,067.88
391,601.34
52,973.58

75,09t). V
.

955,354.77
1,039,976.46
306,101.71

23,308.12

83,985.67

128,362.16

63,064.24

65,297.92

48,592.13
187,865.06

49,667.14
121,842.67

66,022.39

1,075.01

28,199,495.23

29,120,861.52

4,937,261.66

5,858,627.95

1,777,469.72

1,763,754.67

13,715.05

114,854.21
320,886.80
467,260.08

343,511.15
151,718.46
146,960.83

169,168.34
320,299.25

Post Office Department:
Salaries and expenses....
Deficiency in postal revi nues
i..
Increase of compensatio i.
Miscellaneous i t e m s . . . . . .
Additional compensatio i.
Postal Service
,..

35,698,400.00

Total Post Office D i
partment
,.

38,378,870.81

Federal control of telegra]] i
and telephone systems. ."\..

12,018,557.68

60,677.55

228,656.94

35,698,400.00
2,405,945.11

36,201,582.64

228,656.94

12,018,557.68

Department of Agriculture
Salaries and miscellaij 31,038,012.63
6,643,142.93
ous
I ..
7,681,155.56
Animal Industry, e c450,820.27
3,164,127.56
3,614,947.83
penses
; ..
Meat inspection, Anin' il
283,915.56
3; 470,027.85
3,753,943.41
Industry
,.
300.006.86
1,194,978.60
Entomology, expenses^..
894,971. 74
1,072.94
366,917.23
Soils, expenses
J,..
367,990.17
""248,'94i."66'
1,868,541.18
Markets, expenses
J,.
1,619,599.58
337,355.36
2,502,460.62
Plant Industry, expens )s.
2,165,105. 26
1 "Disbarsements," as u\ ed in these tables, in addition to actual expenditures, include unexpended
balances to the credit of d sbursing officers.
2 Excess of repayments. ]
.
•




268

REPORT ON THE FINANCES.
Comparison of disbursements,^ fiscal years 1920 and 1919—Contiaued.
1920

1919

Increase, 1920.

Decrease, 1920.

CIVIL ESTABLISHMENT—contd.

Department of AgricultureContinued.
Purchase of seeds
Biological Survey, expen.ses
Crop Estimates, expenses.
Proouring, etc., nitrate of
soda
.Public Roads, expenses..
Stimulating agriculture
and facilitating distribution of products
Forest Service
Acquisition of lands for
protection of watersheds, navigable
streams
Cooperative construction,
rural post roads, etc.
National security and defense
Bureau of Chemistry
States Relations Service,
expenses
Cooperative
extension
work
Weather Bureau, expenses...
'
Increase of compensation.
Cooperative work, .Forest
Service
Special f u n d s Payments to States
and T e r r i t o r i e s
. from National Forests fund
Roads and trails for
States
Miscellaneous special
funds
Total Department
of Agriculture
Department of Commerce:
Salaries and expenses
Bureau of Standards
Census Office
Foreign and Domestic
Commerce
Coast and Geodetic Survey
Lighthouse
Estabhshment
Bureau of Fisheries
Bureau of Navigation
National security and
defense
Increase of compensation.
Fish hatcheries.. •.
Steamboat - Inspection
Service
Miscellaneous items
Total Department of
Commerce

$348,930.18

$235,991.89

$112,944,29

649,680. 20
223,136.96

501,639.72
222,944.42

1-48,040.48
192. 54

2 5,085,659.49
402,091.52

2 10,834,014.49
435,522.06

5,748,955.00

1,199,286.09
6,554,915.39

8,377,361.94
3,296,563.89

$33,430.54
7,178,075.853,258,351.50
487,897.97

663,271.43

1,151,169.40

24,555,179.83

3,665,693.92

20,889,485.91

119,229.30
893,745.66

872,868.68
818,474.74

75,270.92

3,057,075.57

2,916,336.05

140, 739. 52

4,471,593.71

2,568,066.29

1,903,527. 42

1,512,657.06
2,812,614.59

1,523,035.18
1,164,160.68

1,648,453.91

. 1,635,903.65

753,639.38-

10,378.12.1,214,633.79

876,334.39

193,552.49

465,828.06

280,459.13

185,368.93

78,749.67

70,128.44

8,62L23

66,611,066.69

36,888,371.28

38,187,190.21

375,495.14
1,736,478.76
13,667,102.58

370,786.74
1,593,100.15
1,121,351.36

4,708.40
143,378.61
12,545,751.22
355,371.36

1,0

860,273.94

504,902.58

1,820,607.18

1,002,802.93

817,804.25

8,896,988.95
1,354,342.31
257,587.30
3,563,705.59
2,213,087.16
38,200.29

6,662,179.05
1,029,189.00
216,820.83
1,734,705.08
635,372.69
10,412.97

2,234,809.90
325,153.31
40,766.47
1,829,000.51
1,577,714.47
27,787.32

969,643.68
11,533.04

782,795.45
4,115.31

186,848.23
7,417.73

35,765,045.92

15,668,534.14

8,464,494.80-

20,096,511.78

Department of Labor:
400,080.70
Salaries and expenses
•225,838.78
174,241.92
Bureau of Labor Sta117,493.64
419,242.89
301,749.25
tistics
108,919.63
720,243.45
611,323.82
Bureau of Naturalization,
132,984.13
133,748.28
266,732.41
Bureau of Immigration...
19,223.14
2,550,117.13
2,530,893.99
Regulating immigration.
96,918.03
231,918.03
135,000.00
Immigrant stations
52,077.60'
318,435.87
"266,358.27
Children's Bureau
1 ''Disbursements," as used in these tables, in addition to actual expenditures, include unexpended
balances to the credit of disbursing officers.
•'' Excess of repayments.




SECRETARY OF T H E TREASURY.

269

Comparison of isbursements,^ fiscal years 1920 and .ZPiP—Continued.
1919

Increase, 1920.

Decrease, 1920.

CIVIL ESTABLISHMENT—con.

Department of Labor—Con.
Employment Service
National Security and|
Defense
War Emergency Em-|
ployment Service
War Labor Administration
I
Increase of compensation
Miscellaneous
J
Total Department oi
Labor
j
Department of Justice:
Salaries and expenses.. J.
Salaries of justices, assist/
ant attorneys, etc
I.
Court of Claims
|.
National security and de
fense
I.
Salaries, fees, etc.,
marshals
,
Fees of witnesses
Salaries and fees, distric
attorneys
Fees of jurors
Fees of clerks
Fees of commissioners.
Support of prisoners..
Pay of bailiffs
Miscellaneous expensed,
United States courts. .
Detection and proseci •
tion of crimes
J..
Penitentiaries
J..
Increase of compensatio i.
Miscellaneous items... J..
Total Department
Justice

$390,485.02

$390,485. 02

144,023.89

$1,968,708.53

$1,824,684.64

290,130.24

5,480,201.23

5,190,070.99

190,371.27
618,415.57
79,666.72

1,022,474.06
220,020.26
306. 25

298,395.31
79,360.47

6,125,231.15

13,290,490.61

1,076,231.00

1,058,250.93

905,910.27
1,896,459.41
^
71,555.70

8,241,490.46

152,340.66

3,365,206.95
78,143.02

832,102.79

1,468,747.54
6,587.32

38,325.82

1,435,210.38

2,216,195. 85
1,176,202.12

1,728,284.20
1,160,475.50

487,911.65
15,726.62

886,500.60
1,229,347.15
124,604.89
280,850.20
1,431,777.82
231,493.06

690,227.42
1,191,395.76
315,112.37
284,435.85
706,970.56
244,127.65

196,273.18
37,951.39

556,822.03'

467,801.94

89,020.09

2,681,574.64
2,141,156.97
762,752.88
408,040.70

2,000,836.07
1,520,697.93
309,423.65
287,100.77

680,738.57
620,459.04
453,329.23
120,939.93

18,667,245.63

15,216,025.43

5,054,832.48

1,396,884.56

724,807.26

^190,507.48
^ 3,585.65
12,634.59

1,603,612.28

.Independent bureaus an 1
offices:
I
Interstate
Conimer( e
Commission..
..
159,310.58
5,688,651.38
5,847,961.96
Federal control of tran i689,376,515.97
portation systems, aii i
349,238,385.21
1,038,614,901.18
transportation
ac
1920.
197,419.22
72,293.55
269,712.77
Smithsonian Institutio]
359,233.70
47,976.03
407,209.73
National Museum.. \
Rock Creek Parkwf
231,059.22
231,059.22
Commission
I ..
8,079.80
120,094.94
Zoological Park...^
| ..
112,015.14
Salaries,etc., FederalE i276,624.23
2,331,760.03
2,608,384.26
serve Board
I ..
Council of National E j 446,281.23
554,039.43
107,758.20
fense
! ..
295,000,000.00
150,000,000.00
145,000,000.00
War Finance Corporati )n
Board of Mediation ai d
26,116.85
Conciliation
J,..
26,116.85
2 4.460 00
Capital Issues Committ ?-e.
142,402.31
146,862.31
Advisory Committee i )r
1,388.31
229,886.11
Aeronautics
J...
228,497.80
U n i t e d States Eiiployees' Compensate m
1,536,434.80
703,367.15
Commission
J...
2,239,801.95
Board for Vocational Ii i3,549,442.64
31,434,981.26
ucation
\...
34,984,423.90
United States Shippi ig
Board—
I
797,280.67
334,369.57
462,911.10
Salaries and expen es.
Emergency shippj .ig
1,865,715,419.34
1,398,477,282.75
467,238,136.59
fund
1...
National security a,nd
3,295,375.84
4,688,877.50
defense
1,393,501.66
^ ''Disbursements," as used in these tables, in addition to actual expenditures, include unexpended
balances to the credit of disbursing officers.
2Excess of repayments.




270

REPORT ON THE FINANCES.
Cohiparison of disbursements,^ fiscal years 1920 and 1919—Continued.
1920

1919

Increase, 1920.

Decrease, 1920.

CIVIL ESTABLISHMENT—con.

Independent bureaus and
offices—Continued.
Food and Fuel AdministrationsSalaries and expenses.
Control of food and
fuel
. National security and
defense
'...
Bureau of Industrial
Housing and Transportation
Interdepartmental Social
Hygiene Board
Federal Trade Commission.'
State, War, and Navy
Department Buildings.
Special fund, Alaskan relief
Other independent offices
Total independent bureaus and offices
District of Columbia:
Salaries and expenses
Special funds—
"V^^ater department...
Washington Aqueduct
Miscellaneous special
funds
Trust f u n d s Miscellaneous trustfund deposits
Washington redemption fund
Pohce and firemen's
relief fund
Other trust funds

$120,127.41

$7,133,467.03

$7,013,339.62'

100,000,000.00

100,000,000. oa

2 1,753,986.52

10,511,117.05

2 2,038,712.77

70,483,879.32

1,791,071.03

1,720,122.93

12,265,103. 57
72,522,592. 09"
$70,948.10

1,021,653.58

1,595,737.29

2,483,462.33

1,662,668.93

820,793.40

18,753.95
266,310.05

3,841.47

1,706,547,527.95

2,723,531,915.72

723,233,293.92

18,547,698.98

14,745,056.78

3,802,642.20

710,488.48

558,680.17

161,808.31

149,499.86

233,028.18

83,528.32-

9,403.21

53,471.15

44,067.94

22,595.42
123,917.05

/

574,083. 71

142,393.001,740,217,68L6&

644,771.98

601,673.35

194,721.37

201,473.05

6,751.6&

147,143.92
9,693.97

164,736.57
7,314.49

• 2,379.48

17,592.6&

20,413,42L77

16,565,433.74

3,999,928.62

151,940.5»

Total civil establishment . .
8 2,682,879,579.01

3 230 890 247 95

1 ROI nf;5 9(^1 « i

2,049,063,920.75

Total District of
Columbia

43,098.63

WAR DEPARTMENT.

Military EstabUshment.
Quartermaster Corps
Pay, etc., of the Army •
>
Medical Department
Ordnance Department
Engineer Department
Signal Service
Aviation
Military Academy
Mihtary posts
National Guard
Civilian mihtary training
camps
Registration and selection for
mihtary service
Increase of compensation
Miscellaneous items
Special fund; ordnance material, powder, etc
Panama Canal, fortifications,
etc
'.
Total Mihtary Establishment

3,903,234,343.87
1,126,870,539. 38.
178,173,480.19
2,103, 790,245. 93
311,956,142.39
59,103,102. 61
503,637,960.31
462,718.11
2,346,525.32

314,446,879.73
360,210,631.87
9,330,216.38
286,506,697. 68
43,304,345.72
8,035,732. 05
2 24,356,590.23
1,971,370.05
991,295. 09
1,675,918. 61

4,217,681,223.60
1,487,081,171.25
187,503,697.17
2,390,296,943. 61
355,260,488.11
67,138,834. 66
479,281,370.08
2,434,088.16
3,337,820.41
2 3,980,711.08

172,007.59

1,104,902. 84

932,895. 25

2,877,482.21
16,067,158. 45
2,555,889.33

15,037,579.62
3,828,656.97
2. 542,109. 76

12,160,097. 41

2,620. 66

2 23,895. 87

3,433,592.82
1,027,225,248.01

5,656,629. 69

1

12,238,501. 48
13,779. 57
26,516. 53
3,433,592. 82

9,208,524,279.29

21,369,020.09

8,202,668,05L 37

1 "Disbursements," as used in these tables, in addition to actual expenditures, include unexpended
balances to the credit of disbursing officers.
2 Excess of repayments.
« Exclusive of purchase of obhgations of foreign governments aud purchase of farm-loan bond«, heretofore classed as "special."
' • Includes payment of allotments by Bureau of War Risk Insurance.
*
5 Included in Panama Canal disbursements in 1919.




SECRETA.RY OF THE TREASURY.

271

Comparison of disbursements,^ fiscal years 1920 and 1919—Continued.
Increase, 1920.

1919

1920

Decrease, 1920.

•WAR DEPARTMENT—con.

War, miscellaneous, civil.
National cemeteries
National parks
National homes for disabled
soldiers
State homes for disabled soldiers
Soldiers' Home interest account
Monuments
Bridge across Potomac River,
Georgetown, D . C
'.
Judgments of courts
War claims and rehef acts
Miscellaneous items
Increase of compensation
Special funds:
W a g o n r o a d s , etc.,
Alaska fund
Miscellaneous s p e c i a 1
funds
.'
Trust funds:
Pay of the Army, deposit.
fund
.'
Soldiers' Home permanent.fund
Miscellaneous trust funds;.
Total war, miscellaneous, civil...,

$2,840,840.96
150,217.48

$3,074,749.07
203,910.09

4,996,881.19

3,870,724.52

1,094,584.44

590,398.28

504,186.16

102,566.77
4,809.07

101,274.66
23,300.00

1,292.11

440,000.00
369,442.48
618,092.25
331,539.19
817,618.93

467,000.00
1,021,486.51
60,782.31
346,765.38
341,032.36

•- 85,916.67

32,506.42

53,410.15

92,660.62

740.97

91,919.65

755,658.91

4,185,082.43

566,160.96
308.40

282,451.55
191. 60

17,735,023.80

11,456,798.84

7,278,586.83

34,800,217.64
12,860,335.75

25,451,141.49
5,765,018.33

9,349,076.15
7,095,317.42

2,213,377.03

1,862,146.50

351,230.53

4,940,74L34
848,612.51
500.00

•

$233,908.11
53,692. 61
$1,126,156. 67

18,490.93
27,000.00
652,044.03
557,309.94

15,226.19
"'"476," 586." 57"

1,000,361.87

Rivers and harbors.
Improving rivers
„
Improving harbors
Special funds for rivers and
harbors
Total rivers and harbors
,

49,873,930.42

33,078,306.32

16,795,624.10

Total War Department

1,094,834,202.23

9,253,059,384.45

45,443,23L02

8,203,668,413.24

NAVY DEPARTMENT.

Naval Establishment.
220,214,251.18
463,584,589.89
Increase of the Navy
•.
243,370,338.71
50,105,032.19
96,239,138.34
. 46,134,106.15
Bureau of Yards and Docks..
2,315,284.65
20,863,626.52
18,548,341.87
Bureau of Navigation
,
Bureau of Construction anil
51,816,086.16
68,374,542.27
Repair
16,558,456.11
139,299,134.86
221,043,0.17.51
81,743,882.65
Bureau of Ordnance
,
34,763,520.53
24,811,485.39
59,575,005.92
Bureau of Steam Engineering
Bureau of Supplies and A(;138,094,561.95
194,594,135.00
counts
56,499,573.05
Bureau of Medicine and SUJ:7,054,459.83
15,859,690.25
8,805,230.42
gery
30,238,637.36
8 73,018,960.12
Marine Corps
3 42,780,322.76
2,273,014.11
4,553,839.87
Naval Academy
2,275,825.76
108,248,238.66
3 297,601,541.65
Pay of the Navy
3 189,353,302.99
62,720,345.84
Aviation
38,935,299.94
101,655,645.78
200,366.27
125,815.57
Judgments, Court of Claima.
74,550.70
363,623,257.42
General account of advances.
2 140,050,309.08
503,673,566.50
301,528.61
Miscellaneous items
„.
521,395.40
*2i9,"866.'79
National security and de52,965.47
626,275.44
573,309.97
fense.
,..
644,731.53
Increase of compensation
4,207,810.15
3,563,078.62
Special funds:
2,336,276.96
2 1,159,746.99
1,176,529.97
Naval hospital fund
8,599.10
171,118.58
Fines and forfeitures
179,717.68
34,207,982.08
27,836,529.17
Clothing fund
2 6,371,452.91
Trust funds:
Pay, Marine Corps, de11,078.20
posit fund
72,739.67
83,817.87
1 "Disbursements," as used in these tables, in addition to actual expenditures, include unexpended,
balances to the credit of disbursing officers.
2 Excess of repayments.
3 Includes payments of allotments by the Bureau of War Risk Insurance.




272

REPORT OlsT T H E

FINANCES.

Comparison of disbursements,^ fiscal years 1920 and 1919—Continued,
1920

1919

I n c r e a s e , 1920.

Decrease, 1920.
1

NAVY DEPARTMENT—con.
Naval Establishment—Con.
Trust funds—Continued.
P a y o f t h e N a v y , deposit
fund
Prize m o n e y

$87,048.93
138.52

$55,317.00
11.21

$31,731.93
127.31

Total N a v a l E s t a b l i s h ment. ..

629,893,115. 87

2,009,272,388. 53

6,234,231.41

1,360,574.47
624,044.20
729,921.66

1,131,820. .36
630,110. S3
758,574.20

228,754.11

1,290,781.27
4,373,455.28
5,061,970.89
27,076,084.17

1,272,809.45
4,105,871..56
4,269,161.52
22,424,908. 77

17,971.82
267,583.72
792,809.37
4,651,175.40

/

40,516,831.94

34,593,256.69

5,958,294. 42

34,719.17

$1,385,613,504.07

INDIAN SERVICE.
C u r r e n t a n d c o n t i n g e n t expenses
Fulfilling t r e a t v s t i p u l a t i o n s .
Miscellaneous supports
I n t e r e s t on I n d i a n trust-fund
accounts
S u p p o r t of I n d i a n schools
Miscellaneous expenses
T r u s t funds .
Total Indian Service...
P u r c h a s e of obligations of
foreign G o v e r n m e n t s . .
Purchase of farm loan b o n d s .
P a n a m a Canal
Pensions
Interest on t h e p u b l i c d e b t . . .

,

421,337,028.09
26,887,356.25
6,031,463.72
213,344,204.11
1,024,024,440. 02
6,139,748,221.24

Deduct r e p a y m e n t s received
i n fiscal y e a r b u t n o t covered b y w a r r a n t

3,477,850,265.56
96,662,398. 59
12,265,775.08
221,614,781.44
615,867,337.32
18,952,075,835.61

Add r e p a y m e n t s covered b y
v / a r r a n t i n year s u b s e q u e n t
t o t h e d e p o s i t thereof
...
Total ordinary
b u r s e m e n t s 2.

1,449,091.98

18,948,629,724.79

3,446,110.82

18,952,141,180.99

408,157,102. 70
1,966,846, m . 36

14,779,173,725. 73

1,966,846,111.36

14,777,176,706.89

3 511,456.20

6,141,745,240.08

3,050,513,237.47
69,775,042.34
6,234,311.36
S, 270,577.33

3,446,110. 82

6,138,299,129.26

6,066.63
28,652. 54

1,997,018.84

65,345.38

dis-

P u b h c debt:
F i r s t L i b e r t y loan, con14,862,000.00
v e r t e d a t 4 p e r cent
F i r s t L i b e r t y loan, con4,003,050.00
17,475,700. 00.
verted at 4\ per c e n t . . .
8,000,000.00
10,007,700.00
Second L i b e r t y loan
Second L i b e r t y loan, con172,357,600.00
231,142,700.00
verted at 4J per c e n t .
201,660,500.00
296,338,250.00
T h i r d L i b e r t y loan
165,000.000.00
405,221,500.00,
F o u r t h L i b e r t y loan
249,006,500.00
Victory L i b e r t y loan
416,140.00
63,009,460.00
L o a n of 1908-1918...
Certificates of i n d e b t e d 15,58cS,704,458.53 15,046,532,900.00
ness, various r a t e s . .
199,818,880.44
134,047,603.63
W a r saving's certificates
1-year T r e a s u r y note^, 3
19,150,000.00
p e r cent .
23,424,164. 50
23,717,892.50
Bank-note fund -,
80,550.00
22,950.00
. F u n d e d loan of 1907
Miscellaneous
redemp6,453.00
3,327.78
tions
T o t a l p u b l i c d e b t disbursements

17,036,444,27L 25

Total
disbursements,
exclusive of p o s t a l . . . . 23,178,189,51L 33
P o s t a l Service, p a y a b l e from
418,722,295.05
postal r e v e n u e s . . .
. .
Total
disbursements,
i n c l u d i n g postal

23,596; 911,806.38

1,966,846,111.36

14,777,242,052.27

14,862,000.00
13,472,650.00
2,007,700.00
58,785,100.00
94,677,750.00
240,221,500.00
249,006,500.00
62,593,320.00
542, .171,558. 53
65,771,276.81
19,150,000.00
293,728.00
57,600.00
3,125. 22

15,837,566,009.13

1,280,976,035.34

82,097,773. 22

34,789,707,190.12

3,247,822,146.70

14,859,339,825. 49

362,504,274. 24

56,218,020.81

35,152,2.11,464.36

3,304,040,167.51

14,859,339,825.49

1 "Disb!irsern.3ats," as used in these tables, in addition to actual expenditures, include unexpended
balaaces to the credit of the disbursing oificers.
2 Exclusive of principal of the public debt and Postal Service.




SECRETARY OF THE TREASURY.

273

The followmg tabulation summarizes the estimated receipts and
expenditures for the fiscal year 1921 and, on the basis of the latest
information received from the various departments, shows the estimated results at the close of the year:
FISCAL Y E A R 1921.

Balance in the Treasury June 30, 1920
Estimated receipts:
Ordinary
$5,739, 565,000
Publicdebt
60,193,375

$359, 947, 020. 33

Total
$5, 799,758,375
Estimated expenditures:
Ordinary
4, 851, 298, 931
Public debt (including
$2,509,550,500 certificates of
irid^btedness': outistanding
June 30,' 1920, maturing
within the year, but not
including Pittman. Act certificates)
3,063,443, 584 •
Total

7,914, 742, 515

Excess of estimated expenditures over estimated receipts

2,114,984,140.00

Estimated deficit in the general fund June 30, 1921
,
1, 755,037,119. 67
Estimated amount necessary for balance in the general fund
June 30, 1921
250,000,000. 00
Estimated gross deficiency June 30,1921

2,005,037,119. 67

The following is a summary of the estimated receipts and expenditures for the fiscal year 1922 and, on the basis of the latest information from the various departments, shows the estimated results at
the close of the year:
FISCAL Y E A R 1922.

Estimated deficit in general fund June 30, 1921 (as above)
Estimated receipts:
Ordinary
$4, 859,530,000
Public debt.
,
60, 200,000
Total
13799—FI 1920




:
18

.$1,755,037,. 119. 67

$4,919,730,000

274

REPORT ON TFIE FINANCES.

Estimated expenditures:
Ordinary (exclusive of expenditures on account of increased
compensation of Government employees, of expenditures on account of additional compensation in the
Postal Ser\dce, and of expenditures on account of new
construction in the Navy). . $3, 897, 419, 227
Publicdebt
465,854,865
Total

$4,363,274,092

Excess of estimated receipts over estimated expenditures

$556,455, 908; 00

Estimated deficit in the general fund June 30, 1922
1,198, 581, 211. 67
Estimated amount necessary for balance in the general fund
June 30, 1922.
250, 000, 000. 00
Estimated gross deficiency June 30, 1922.

1, 448, 581, 211. 67

The estimates of receipts and expenditures for,the two fiscal yc^.nrp
are given in further detail in the following.tables. It is obvious t h a t
the hope, expressed earlier in this report, of a more favorable outcome on June 30, 1922, can be realized only if the appropriations
and expenditures are reduced substantially below the estimates
given in the tables.
NOTE.—The estimates do not include possible miscellaneous receipts on account of further reduction of
capital stock of the United States Grain Corporation or reduction of capital stock of the War Finance
Corporation, inasmuch as payments on these accounts would be made principally from deposits carried
to the credit of said corporations with the Treasurer of the United States.

Fiscal year 1921.
RECEIPTS.

Ordinary receipts:
From customs
From internal revenue—
Income and profits tax
Miscellaneous

$350,000,000
$3, 200,000,000
1,500,000,000
4, 700,000, 000
2,000,000
676,000, 000
11, 565, 000

From sales of public lands
Froba iniscellaneous sources
From Panama Canal tolls, etc.
Total estimated receipts, exclusive of public
debt
Public debt:
Liberty bonds and Victory notete
War-savings securities
Deposits to retire Federal reserve bank notes and
national-banknotes
Postal-savings bonds
Total estimated public debt receipts
Grand total estimated receipts




5,739,565,000
20, 575
50,000,000
10,000,000
172, 800
60,193, 375
5, 799, 758, 375

SECRETAIIY OF THE TREASURY.

275

EXPENDITURES.

For civil establishment:
'
Legislative establishment
Executive proper, including Tariff Commission and Alien
Property Custodian•.
State Department
Treasury Department proper
Public buildings, construction, sites, equipment, and
maintenance.
,
War-risk insurance, $307,763,638, less premium credits
$110,000,000..........
War Department proper
Department of Justice
Post Office Department proper.
:
Postal deficiency.
:..
Navy Department proper
Interior Department proper.
Department of Agriculture
Department of Commerce
Department of Labor.
Shipping Board
European food relief
Cduiicil of National Defense.
Federal control of transportation systems, and Transportation
Act, 1920
:
Housing Corporation
.'.
State, War, and Navy Department buildings
Federal Board for Vocational Education
Interdepartmental Social Hygiene Board
Federal Trade Commission
Employees' Compensation Commission
Interstate Commerce Commission
Railroad Labor Board
Federal control of telegraph and telephone systems.
Other independent offices.
Expenses of loans.
Increase of compensation, all departments
Purchase of obligations of foreign Governments
Purchase of farm loan bonds
Investments of Government life insurance fund
District of Columbia
Total civil establishment.
For War Department:
Military Establishment.
Rivers and harbors
Miscellaneous—War, Civil..
For Panama Canal.
For Navy Department:
Naval Estabhshment, exclusive of building program
N a v y building program.




$18,861, 774
2,110, 730
10, 207, 950
145,587,641
16,300,000
197, 763, 638
5,788,000
16, 000, 000
2, 097, 220
36, 895, 000
2, 500, 000
41,000,000
80, 000, 000
24, 399, 000
5, 075, 531
63,130, 000
1,758,830
• 149, 500
1,078,505.007
1,065,000
2, 031, 548
94, 614, 200
1, 377, 595
1, 019, 000
2, 394, 000
4, 620,114
450, 000
980, 000
1, 915,182
12,399, 559
35, 000, 000
132, 703, 326
15,000, 000
16, 948, 969
21,659,766
2, 092, 308, 080

$725,742, 000
52,000, 000
40, 000, 000
817, 742, 000
13, 526, 851

430,535,000
218,187,000
648, 722, 000

276

REPORT ON THE FINANCES..

For Indian Service
For pensions
For interest on the pubhc debt

$32,000,000
272,000,000
975^ O O 000
Q,

.'
»

Total estimated ordinary expenditures
Public debt:
War savings securities
Certificates of indebtedness outstanding
June 30, 1920, exclusive of Pittman Act
certificates.......
..,
'.
Retirement of bank notes
Sinkingfund.........
.
Purchase of bonds and notes from net
earnings of Federal reserve banks
Purchase of Liberty bonds from repayments of foreign loans
Redeinption of bonds and notes received
for estate and inheritance taxes.'.
Miscellaneous redemptions of the debt

4,851,298,931
$150,000,000
2,509, 550, 500
15,000,000
253,404,865
55,000,000

.

70,138, 219
10,000,000
350,000

Total estimated public debt expenditures

..

3,063,443,584

Grand total estimated expenditures

7,914, 742,, 515

Estimated excess of receipts over expenditures, exclusive of public
debt, fiscal year, 1921
Estimated excess of total expenditures over total receipts, fiscal
year, 1921

888,266,069
2,114, 984, HO

Postal Service.
The Post Office Department estimates that the postal revenues for
the fiscal year 1921 will be $467,500,000, with expenditures for the
Postal Service for the same period of $504,395,000, an estimated
deficiency of $36,895,000.
Fiscalyear 1922.
RECEIPTS.

Ordinary receipts:
From customs
From internal revenue—
Income and profits taxes
Miscellaneous

'

$350, OOO; 000
$2, 625,000,000
1,375,000,000

From sales of public lands
From iniscellaneous sources.
From Panama Canal tolls, etc
Total estimated receipts, exclusive of public debt
Publicdebt:
War-savings securities
^
50,000,000
Deposits to retire Federal reserve bank
notes and national-bank notes
10,000,000
Postal savings bonds
200,000
Total estimated public-debt receipts
Grand total estimated receipts




'

4,000,000,000
2,000,000
493,000,000
14, 530,000
4,859, 530,000

60, 200j 000
4,919,730,000

SECRETARY OF THE TREASURY.

277

EXPENDITURES.^

For civil establishment:
Legislative establishment
Executive proper, including Tariff Commission and AUen
Property Custodian
State Department.
Treasury Department proper.
Public buildings, construction, sites, equipment, and
maintenance
War-risk insurance, $297,184,788, less premium credits,
$90,000,000
War Departinent proper
Department of Justice
Post Office Department proper
Postal deficiency.
Navy Department proper
Interior Department proper
Department of Agriculture
Department of Commerce
Department of Labor
Shipping Board..
Council of National Defense
Housing Corporation
Federal Board for Vocational Education
Interdepartmental Social Hygiene Board.. °.
Federal Trade Commission
Railroad Labor Board.
Employees Compensation Cominission
Interstate Commerce Commission
State, War, and Navy Department buildings
Other ihdependent offices
District of Columbia
Expenses of loans.
Investment of Government life insurance fund
Total civil establishment»
For War Department:
Military Establishment
Rivers and harbors
Miscellaneous—War, Civil
For the Panama Canal.
For Navy Department:^
Naval Esiablishmeht, exclusive of building program............
Navy building program
,

$18,494,381
2, 762, 713
12,664,819
223,599,707
18,971,100
207,184,788
6,968,000
18,000,000
2,327,020
68,500,000
2,860,000
65,000,000
100,000,000
25,170,000
10, 762,163
140, 692, 500
224, 500
1, 240,403
83,345,200
2, 242, 924
1,030,000
511,000
2,821,000
5, 504,000
2,132,830
- 2,178, 570
23, 650, 525
7, 250,000
20,909,314
. 1,076, 997,457

$810, 000,000
75,000,000
40,000,000
925,000,000
15,875, 770
483,896,000
172,000,000

I Do not include any estimated expenditure on account of increased compensation of Government
employees, nor on account of additional compensation in the Postal Service.
8 The Secretary of the Navy states that this estimate does not include any estimated expenditures for
new construction.




278

REPORT ON THE FINANCES.

For Indian Service
:..!
For pensions
For interest on the.public debt'
Total estimated ordinary expenditures
Public debt:
Sinking fund
War-savings securities
Retirement of Federal Reserve bank notes
and national-bank notes
Purchase of bonds and notes from net earnings of Federal Reserve banks
Redemption of bonds and notes received
for estate and inheritance taxes...
.
Miscellaneous redemptions of the debt

$36,000,000.00
265,000,000.00
922, 650,000.00

'.

3,897, 419, 227.00
$265,754, 865.00
125,000,000.00
15,000,000.00
50,000,000.00
10,000,000.00
100,000.00

Total estimated public debt expenditures

465, 854,865.00

Grand total estimated expenditures

4, 363, 274,092.00

Estimated excess of receipts over expenditures, exclusive of
public debt, fiscal year 1922.
962,110,773.00
Estimated excess of total receipts over total expenditures, fiscal
year 1922, without taking into account estimated gross deficiency, June 30, 1921
556, 455, 908.00
Estimated gross deficiency, fiscal year 1 9 2 1 . . . . . .
2, 005,037,119. 67
Estimated gross deficiency, fiscal year 1922
1, 448, 581, 211. 67
Postal Service:.
The Post Office Department estimates t h a t the postal revenues for
the fiscal year 1922 will amount to $495,500,000, with expenditures
for the Postal Service for the same period of $564,000,000, an estimated deficiency of $68,500,000.
Estimates of appropriations,^ fiscal year 1922.
The estimates of appropriations for the fiscal year 1922, as submitted by the Government departments and offices, are as follows:
Legislative establishment..
Executive establishment:
Executive proper
Department of State.
Treasury Department
War Department proper
State, War, and Navy Department Buildings, expenses.. . . i
Navy Department proper
Department of Interior
Post-office: D e p a r t m e n t . . . . . . . . . . . . . . . . . .
Department of A g r i c u l t u r e . . . . . . . . . . . . . . .
Department of Commerce......
......
Department of Labor
Department of Justice

$9,324,040. 75
$1,347,279.90
1,593, 680.00
89, 931,244.32
6,968,592.00
2,719,168.00
3,050,340.00
7,724,305.00
2,399,020.00
41,989,38400
6,862,880.,00
1,976,430.00
875,440.00

...

167, 437, 763. 22
» These estimates of appropriations do not include^ any estimates for the following: The Railroad Administration; increased compensation of Government employees; newconstruction program in the Navy.



SECRETARY OF THE TREASURY.
Judicial establishment
Foreign intercourse
Military establishment:
Support of the Army
Military Academy
National Guard

.-

279
$1, 680,215.00
11, 983, 848. 94

$618, 003,070.20
6,464,432. 73
74,808,000. 00°

699,275,502.93
Naval Establishment, includingincrease ofthe Navy, $184,000,000.
658, 522,231.47
I n d i a n Affairs.
11, 989, 703. 67
Pensions
265,190,000.00
Public Works:
Treasury Department, public buildings
and works
$6, 650, 731. 29
War Department—=
Mihtary—
Fortifications....
35,676,533.66
Arsenals
8, 283, 623. 00
Military posts...
71,476, 981. 67
Rivers and harbors..
68,097,865. 00
Other : ci^dl public
works
1,599,925.00
—^
185,134, 928. 33
Panama Canal.
16,187,255.40
Navy Department
20, 993,500. 00
Department of Interior, including reclamation fund
28, 704, 284. 50
Department of Commerce
7,875, 250.00
Department of Labor
829, 500.00
Department of Justice
740,000.00
—
267,115, 449. 52
Postal Service, payable from postal revenues
585,406, 902. 00
(Deficiencies payable from general fund.)
Miscellaneous:
^
Legislative9,967, 593. 20
Executive
1,102,182.00
Treasury Department
305,429,854. 50
War Department
36, 351, 644. 00
Department cf Interior.
17,026,220.25
Department of Commerce
15,235, 351.00
Department of Labor
,
8,029,635.75
Department of Justice
15,135, 637. 30
District of Columbia
25,039,044.99
United States Shipping Board
147, 898, 520.00
United States Employees' Compensation
Commission..
2,926,840.00
., \ .
Council of National Defense.
225, 000.00 '
: ,
National Advisory Committee for Aero>
^
nantics
489,906.00
Smithsonian Institution and National Museum..
•.::
. .<^
813,42Q,00 Interstate Commerce Commission...
5, 574j 500. 00
Board of Mediation and Conciliation
35,000. 00
Federal Trade Commission
1,055,000.00'
Interdepartmental Social Hygiene Board..
2,246,924. 00




280

REPORT ON T H E FINANCES.

Miscellaneous—Continued.'
Federal Board for Vocational E d u c a t i o n . .
United States Housing Corporation
Rock Creek and Potomac Parkway Commission
Railroad Labor Board
Federal Power Commission

$78, 000,000. 00
1, 240,403. 00
"
^

300, 000. 00
550,000. 00
482,065. 00
$675,154,740.99

Permanent annual appropriations:
Interest on public debt
Refunds—
Customs and internal revenue
Other refunds
Sinking fund
Miscellaneous

922, 650, 000. 00
31, 997,000. 00
9, 818,400. 00
265, 754, 864. 87
70, 556, 096. 00
•
'

Total estimated appropriations for 1922
Deduct:
Postal Service payable frorn postal revenues
(Deficiencies payable from general fund.)
Total estimated appropriations ior 1922, to become a charge
upon the general fund

1,300,776,360.87
4, 653,856, 759. 36
. 585,406, 902. 00

4, 068, 449, 857. 36

ESTIMATES FOR 1922 AND APPROPRIATIONS FOR 1921.

Comparison of the estimates for 1922 with the appropriations for
1921 shows an increase in the 1922 estimates of $855,407,372.68,
as exhibited in the table following, without, however, including in
the figures for 1921 the railroad guaranty, repayments under revolving-fund appropriations, repayments to appropriations, and appropriations of unexpended balances, the efl^ect of which on the appropriations for that year is shown on pages 47 to 49 of this report.
Statement of estimates of appropriations for 1922 compared with appropriations for 1921.
[Excluding postal service payable from the postal revenue.]

Departments, etc.

Legislative '.
Executive:
Executive proper
Ahen Property Custodian
Tariff Commission
Civil Service Commission
Pepartment of State:
Department of State proper
Foreign intercourse.
Treasury Department:
Treasury Department, exclusive of public
buildmgs
<^....
Public buildings construction
War-risk insurance.
,




1921 appropria1922 estimates,
Including perma- tioiis, mcluding
permaii'ent
nent annual.
annual.

Increase, 1922
estimates over
1921 appropriations (+);'decrease (—).
-f S3,055,532.00

819,292,433.95

$16,236,901.95

436,800.00
564,582.00
500,000.00
948,079.90

701,320.00
455,000.00
300,000.00
597,475.00

1,593,680.00
12,089,848.94

1,100,160.00
9,399,-5.37.91

-t493,520.00
^- 2,690,311.03

249,635,048.82
6,650,731.29
172,543,050.00

125,381,876.13
5,616,071.00
181,324,400.00

-fl24,253,172.69
-I- 1,034,660.29
- 8,781,350.00

-f
-I-f

264,520.00
109,582.00
200,000.00
350,604.90

281

SECRETARY OF THE TREASURY.

Statement of estimates of appropriations for 1922 compared ivith appropriations for
79:^7—Continued.

Departments, etc.

War Department:
War Department proner
Military Establishment—
(Estimates for Mihtary Establishment
for 1922, S814,787,641.26; appropriations
for 1921, $419,881,986.37.)
Army
Military Academy
National Guard
Fortifications
,
Arsenals
Military posts and miscellaneous
,
Rivers and harbors
Miscellaneous war, civil items
,
Navy Department:
Navy Department proper
,
Naval Estabhshment—
(Estimates for Naval Establishment
for 1922, $692,713,427.47; appropriations
for 1921, $437,302 564.40.)
Naval Establishment,, exclusive of
building program
Navy building program
Department of the Interior:
Department of the Interior, exclusive of
Indians and pensions
Pensions
Indians
Post Office Department:
Post Office Department, exclusive of Postal
Service
Department of Agriculture
Department of Commerce
Department of Labor
Department of Justice
Independent offices:
Smithsonian Institution and National
Museum
Interstate Commerce Commission
Federal Trade Commission
United States Shipping Board
Housing Corporation
Interdepartmental Social Hygiene Board...
Council of National Defense
Federal Board for Vocational Education
National Advisory Committee for Aeronautics
Board of Mediation and Conciliation
Railroad Labor Board
Federal Power Commission
Pilgrim Tercentenary Commission
V Emplovees Compensation Commission
Rock Creek and Potomac Parkway Commission
State, War, and Navy Department Buildinjis.:
:
Indigent in. Alaska rehef fund
District ofColumbia
Interest on the pubhc debt
Expenses ofloans
Increase of compensation, estimated
Panama Canal
Sinking fund
Total ordinary.




1922 estimates, 1921 appropriaincluding' prema- tions,including
, permanent
nent annual.
annual.

Increase, 1922
estimates over
1921 appropriations (+);. decrease (—).

$6,968,592.00

$5,760,020.00

+ $1,208,572.00

638,078, 070.20
6,464, 432.73
54,808, 000.00
35,676, 533.66
8,283, 623.00
71,476,981.67
75,342, 465.00
41,128, 869.00

368,633,165.00
2,142,212.70
28,000,200.00
18,833,442.00
2,258,800.00
14,166.67
26,197,300.00
32,600,128.83

4-269,444 905.20
-f- 4,322 220.03
4- 26,807,800.00
-f 16,843 091.66
+ 6,024,823.00
+ 71,462,815.00
+ 49,145,165.00
4- 8,528, 740.17

3,050,340.00

2,824,430.00

225,910.00

508,713,427.47
184,000,000.00

333,302,564.40
104,000,000.00

4-175,410,863.07
4- 80,000,000.00

65,650,809.75
265,190,000.00
35,464,703.67

32,816,586.58
279,150,000.00
33,814,722.22

4- 32,834,223.17
- 13,960,000.00
4- 1,649,981.45

2,399,020.00
53,739,384.00
29,976,481.00
10,835,565.75
18,606,792.30

2,206,329.24
144,748,294.00
19,942,528.80
4,912,430.00
15,288,786.55

+
-f
+
+

873,420.00
6,574,500.00
1,055,000.00
147,898,520.00
1,240,403.00
2,246,924.00
225,000.00
83,438,000.00

810,820.00
4,693,100.00
955,000.00
442,600.00
1,065,000.00
1,015,000.00
75,000.00
94,707,000.00

44-

62,600.00
881,400.00

+

100,000.00

489,906.00
35,000.00
550,000.00
482,065.00

200,000.00
35,000.00
450,000.00
125,000.00
.400,000.00
2,654,940.00

2,926,840.00

192,690.76
91,008,910.00
10,033,952.20
.5,923,135.76
3,318,005.76

-M47,456,020.00
4175,403.00
4- 1,231,924.00
-I150,000.00
- 11,269,000.00
4-

289,906.00

4+
4-

100,000.00
357,066.00
400,000.00
271,900.00

300,000. 00

200,000.00

+

100,000. 00

2,719,168.00
25,000.00
26,419,644.99
922,650,000.00
7,250,000.00
16,187,255.40
265,754,864.87

1,965,772.00
25,000.00
• 19,478,604.87
975,000,000.00
12,499,182.96
35,000,000.00
9,281,851.00
2.53,404,864.87

4

753,396.00

+ 6,941,040.12
- 52,3.50,000.00
- 5,249,182.96
- 35,000,000.00
+ 6,905,404.40
+ 12,350,000.00

4,088,449,8.57.36 3,213,042,484.68

4-855,407,372.68

282

REPORT ON THE FINANCES.
Exhibit of appropriations for 1921.

Appropriations made for the fiscal year 1921 and for prior years
during the second session of the Sixty-sixth Congress, including
revised estimated permanent and indefinite appropriations, and
appropriations for the Postal Service payable from postal
revenues
|4, 704,277, 558.18
Deduct:
Postal Service for 1921 payable from the
postal re venues...:
$504,399,000.00
Postal deficiencies of prior years, payable
from postal revenues..
.,.
19,069,269.65
Deficiencies and supplementals for prior
years
967,766,803.85
1,491,235,073.50
Total appropriations for 1921, exclusive of deficiencies
and Postal Service payable from postal revenues, and
excluding also the railroad guaranty, repayments
under revolving fund appropriations, repayments to
appropriations, and appropriations of unexpended
balances, the effect of which on the appropriations
for 1921 is shown on pages 47 to 49 of this report.... 3, 213, 042, 484. 68
I take very special pleasure in caUing attention to the attached
condensed annual reports of the various bureaus and divisions of
the Treasury Department and to the tables accompanying the report
on the finances.
D. F . HOUSTON,

Secretary.
T O the SPEAKER OF THE H O U S E OF REPRESENTATIVES.




I
.EXHIBITS ACCOMPANYING THE REPORT ON THE FINANCES.




283

EXHIBITS.

to
00

EXHIBIT 1.
CERTIFICATES O F INDEBTEDISTESS, TOTAL I S S U E S AND T H E AMOUNT I S S U E D THROUGH EACH F E D E R A L
R E S E R V E BANK FROM A P R . 6, 1 9 1 7 , TO OCT. 3 1 , 1920.
Federal reserve district.
Authorizing act and series.

Date of issue.

Date of
maturity.

Rate.

Total amount.
Boston.

Issued in anticipation of the first
Libertv loan:
. Apr." 24, 1917
Do
Do
Do

Apr. 25,1917
May 10,1917
May 25,1917
June 8,1917

June 30,1917
July 17,1917
July 30,1917
do

Total..




Cleveland.

Richmond.

Atlanta,

§208,205.000
200.000,000
200,000,000
. 200,000,000

815,800.000
12,167,000
11,200,000
18,200,000

$136,150,000
98,512,000
125,300,000
100,500,000

§14,000,000
10,000.000
9,000,000
10,400,000

S14,000,000
15,000,000
10,800,000
19,100,000

S5,350,000
2,753,000
2,000,000
3,600.000

§8,000,000
2,605,000
1,700,000
1,000,000

57,367,000

460,462,000

43,400,000

58,900.000

13,703,000

O

13,305,000

o
H

W

Aug.
Aug.
Sept.
Sept.
Oct.
Oct.

9.1917
28,1917
17,1917
26,1917
18,1917
24,1917

Nov. 15,1917
Nov. 30,1917
Dec. 15,1917
do
Nov. 22,1917
Dec. 15,1917

300,000,000
250,000,000
300,000,000
400,000,000
38.5,197,000
685,296,000
2,320,493,000

Total.
Issued in anticipation of the third
Liberty loan:
Sept. 24,1917
Do
Do
Do
Do
Sept. 24, 1917, as amended Apr. 4,
1918

Philadelphia.

868,205,000

Total.
Issued in anticipation of the second
Libertv loan:
Apr.2-!, 1917
Do
Do
Sept. 24,1917
Do
Do

New York.

Jan.
Feb.
Feb.
Mar.
Apr.

22,1918
8,1918
27,1918
20,1918
10,1918

Apr. 22,1918
May 9,1918
May 28,1918
June 18,1918
July 9,1918

Apr. 22,1918. July 18,1918

400,000,000
500,000,000
500,000,000
543,032,500
551,226,500
517,826,500
3,012,085,500

175,000,000
162,938,000
204,347,000
212,100.000
179,475,000
543,683,000

12,800,000
9,882,000
8.830,000
20,000,000
24,000,000
13,600.000

33,700,000
24,157,000
25,113,000
34,209,000
38,863,000
26,471,000

2,800,000
7,235,000
3,180,000
7,004;000
8,323,000
11,472,000

4,300,000
4,848,000
2,280,000
8,289.000
6,535,000
5,883,000

1^

132,044,000 1,467,543,000

89,132,000

182,513,000

40,014,000

32,135,000

Ul

22,500,000
30,000,000
33,000,000
38,000,000
38,000,000

26,000,000
34,000,000
44,500,000
48,400,000
46,000,000

7,000,000
12,131,000
18,148,000
16,234,500
11,219,000

9,507,000
12,391,000
14,814,000
14,557,000
17,095,000

19.400.000
15,140,000
12,171,000
22,174,000
30,149,000
33.010,000

20,025,000
29,134,000
35,369,000
53,690,000
39,731,000

209,685,000
241,322,000
172,666,500
193,709,500
215,448,000

36,468,000

222,486,000

35,000,000

39,133,500

11,097,000

11,209,000

214,417,000 1,255,308,000

196,500,000

238,033,500

75,829,500

79,573,000

>

o

Issued in anticipation of the fourth
Liberty loan:
t^
Sept. 24, 1917, as amended
Apr. 4,1918—
Series IV-A.
Series IV-B
Series IV-C
SeriesIV-D
Series IV-E
SeriesIV-F
Series IV-G.,.

June
July
July
Aug.
Sept.
Sept.
Oct.

25,1918 Oct. 24,1918
9,1918 Nov. 7,1918
23,1918 Nov. 21,1918
6,1918 Dec. 5,1918
3,1918 Jan. 2,1919
17,1918 Jan. 16,1919
1,1918 Jan. 30,1919

839,646,500
753,938,000
584,750,500
575,706,500
639,493,000
625,216,500
641,069,000
4,659,820,000

Total.,
Issued in anticipation of the Vic=
tory Liberty loan:
V Sept. 24, 1917, as amended
Apr. 4,1918—
Series V-A
Series V-B
Series V-C
Series V-D
Series V-E
Series V-F
1
Series V-G
Sept. 24, 1917, as amended
Apr. 4, 1918, and Mar. 3,
1919—
Series V-H
SeriesV-J
Series V-K

Total..




53,000,000
53,100,000
36,872,500
38,400,000
42,061,000
45,778,000
46,808,500

80,000,000
66,550,000
55,927,000
52,500,000
74,088,000
59,321,500
52,182,500

19,013,000
15,073,500
16,886,000
14,397,000
18,957,000
18,449,000
15,208,000

17,233,500
16,021,500
13,168,500
14,968,500
16,205,500
15,872,000
21,387,500

381,152,500 1,680,989,000

316,020,000

440,569,000

117,983,500

114,857,000

i
Dec.
Dec.
Jan.
Jan.
Jan.
Feb.
Feb.

5,1918
19,1918
2,1919
16,1919
30,1919
13,1919
27,1919

Mar. 13,1919
Apr. 10,1919
May 1,1919

6,1919
20,1919
3,1919
17,1919
1,1919
15,1919
29,1919

613,438,000
572,494,000
751,684,500
600,101,500
687,381,500
620,578,500
532,381,500

47,901,000
45,010,500
60,154,500
49,090,500
48,800,000
48,421,500
41,909,000

222,830,000
199,117,000
300,977,500
203,609,500
265,844,500
217,497,500
174,501,500

44,128,000
40,409,500
53,300,000
43,533,500
46,173,000
43,323,500
38,247,000

50,700,000
52,000,000
66,250,000
50,400,000
60,786,500
59,100,000
51,225,000

17,963,500
20,552,000
19,571,000
18,753,500
20,836,500
18,977,500
17,501,000

11,600,000
16,349,500
15,265,500
12,288,000
16,262,500
15,482,000
14,977,500

Aug. 12,1919
Sept. 9,1919
Oct. 7,1919

542,197,000
646,025,000
591,308,000

48,454,000
43,705,000
42,346,500

183,111,500
275,355,000
212,301,000

36,758,000
39,160,500
35,301,500

53,300,000
•62,000,000
49,000,000

15,764,500
18,843,500
18,734,000

13,175,500
13,274,500
14,636,500

475,792,500 12,255,145,000

420,334,500

554,761,500

187,497,000

143,311,500

May
May
June
June
July
July
July

6,157,589,500

TotaL.
Loan certificates of 1920:
Sept. 24, 1917, as amended
Apr. 4, 1918, and Mar. 3,
1919—
Series A, 1920
SeriesB,1920
Series C, 1920
Series D, 1920
SeriesE, 1920
SeriesF, 1920
Series G, 1920
Series H, 1920

312,844,500
273,219,500
211,714,000
207,287,000
210,068,500
216,264,500
249,591,000

64,590,
56,273,
48,267,
49,509,
57,424,
54,710,
50,378,

Aug. 1,1919 Jan. 2,1920
Aug. 15,1919 Jan. 15,1920
Sept. 2,1919 Feb. 2,1920
Dec. 1,1919 Feb. 16,1920
Apr. 1,1920 July 1,1920
Apr. 15,1920 July 15,1920
Oct. 15,1920
do.
May 17,1920 Nov. 15,1920

4
f

533,801,500
532,152,000
573,841,500
162,178,500
200,669,500
83,903,000
170,633,500
102,865,000

41,935,500
43,855,500
45,765,500
14,535,500
11,253,500
6,615,500
15,496,500
8,718,000

192,326,000
201,904,600
252,679,000
43,165,000
104,682,000
33,039,500
94,127,600
37,239,000

36,264,500
36,276,000
27,155,000
11,601,000
13,500,000
3,744,000
9,756,000
7,248,000

45,330,000
45,319,000
39,088,500
7,978,500
13,348,500
5,500,000
7,100,000
10,814,000

9,790,500
8,951,000
10,493,500
7,193,500
3,127,000
1,650,000
4,693,000
2,965,500

14,858,000
15,427,500
19,312,000
9,272,500
4,101,000
2,271,000
5,123,000
2,063,000

2,360,044,500

188,175,500

959,162,500

145,544,500

174,478,500

48,864,000

O

I
w

i

72,428,000

>
Ul

d

00

Certificates of indebtedness, total issues and the amount issued through each Federal reserve banh from Apr. 6, 1917, to Oct. 31, 1920—Continued.

00

F e d e r a l reserve district.
A u t h o r i z i n g act a n d series.

D a t e of
maturity.

D a t e of issue.

Rate.

Total amount.
Boston.

L o a n certificates of 1921:
Series A , 1921
Series B , 1921
Series C, 1921

•.

55i6

Total
Issued i n a n t i c i p a t i o n of income
a n d profits t a x e s , 1918:
Sept. 24, 1917..
Do
'.
Do
Do
Sept. 24, 1917, as a m e n d e d
A p r . 4, 1918 . .
Do

Total.




§12,470,000
8,852,000
14,042,000

§81,370,500
55,808,500
57,704,500

§5,300,000
9,742,000
12,426,000

§14,624,000
7,990,000
15,057,500

§2,382,000
1,550,000
5,567,000

§2,981.500
1,485,000
4,262,500

35,364,000

194,883,500

27,468,000

37,671,500

9,499,000

8,729,000

Philadelphia.

Cleveland.

Richmond.

Atlanta.

O

N o v . 30,1917 J u n e 25,1918
Jan.
2,1918
do
F e b . 15,1918
do
Mar. 1.5,1918 . . . - , d o

4
4
4
4

691,872,000
491,822,500
= 74,100,000
110,962,000

20,921,000
16,16.3,500
8,790,500
6,735,500

494,070,500
239,954,000
14,007,500
10, 252, .500

11,492,000
34,796,000
4,680,000
10,474,500

115,230,500
70,059,500
15,402,500
55,615,500

2,415,000
8,948,500
1,917,000
2,725,500

1,555,000
.5,551,000
1,269,000
826,000

A p r . 15,1918
M a y 15,1918

4
4

71,880,000
183,767,000

6,071,500
24,578,000

12,000,500
61,188,000

14,511,500
19,583,000

10,587,000
18,547,500

2,049,000
2,767,000

2,749,500
1,055,500

H

1,624,403,500

83,260,000

831,47.3,000

9.5,537,000

285,452, .500

20.822,000

13,006,000

w

157,552,500
794,172,500
392,381,000

12,025,500
88,728,000
36.276,500

44,766,000
350,847,500
165,622,000

10,523,500
29,283,500
19,744,000

29,968,500
112,500,000
78,641,.50e

4,205,000
12,4.58,000
10,652,000

3,412,000
11,487,000
6,533,500

407,918,500
526,139,500
238,711,500
326,468,000
511,444,000

^,015,000
32,21.5,500
8,924,500
14,188,000
35,538,500

227,964,000
212, ,337,000
78,557,500
129,2.54; 000
242,504,000

18.874,000
18; 680,500
8,031,000
14,730,000
21,129,000

46,187,000
62,280,000
33,894,000
30,551,000
41,418,500

8,&31,500
23,208,000
8,264,000
10,7.53,000
14,147,500

3,920,000
13,228,000
6,984,000
15,152,000
10,697,500

256,911,500 1,451,852,000

141,001,.500

435,440,500

92,519,000

71,414,000

do
:.
do-.......

Total
Issued in a n t i c i p a t i o n of Income
a n d profits t a x e s , 1919:
Sept. 24, 1917, as a m e n d e d
A p r . 4,1918—
T a x series, 1919 . .
Series T
'
Series T - 2
S e p t . 24, 1917, as a m e n d e d
A p r . 4, 1918, a n d Mar. 3,
1919—
Series T - 3 .
Series T - 4
Series T - 5
Series T-n
Scries T - 7

§176,604,000
126,783,500
157,654,500
461,042,000

Jan.
3,1921
J a n . 15,1921
Aug. 16,1921

J u n e 15,1920
J u l y 15,1920
A u g . 16,1920

New York.

Aug. 20,1918
N o v . 7,1918
J a n . 16,1919

J u l y 15,1919
Mar. 15,1919
J u n e 17,1919

4
4^

Mar. 15,1919
J u n e 3,1919
do
J u l y 1,1919
do

June
Sept.
Dec.
Sept.
Dec.

4^

-

1

16,1919
15,1919
15.1919
15,1919
15,1919

t
4i
4i

3,354,787,500

O

>
o
Ul

Issued i n a n t i c i p a t i o n of i n c o m e
a n d profits t a x e s , 1920:
Sept. 24,1917, as a m e n d e d —
Series T - 8 .
Series T - 9
Series T-10
Series TM3-1920
Series TJ-1920
Series TD-1920
Series TM4-1920

/^ J u l y 15,1919 Mar. 15,1920
Sept. 15,1919 - - - . : d o
do
Sept. 15,1920
Dec. 1,1919 Mar. 15,1920
Dec. 15,1919 J u n e 15,1920
Jan.
2,1920 Dec. 15,1920
F e b . 2,1920 Mar. 15,1920

4^
4i

^
1
4|
4*

323,074,500
101,131,500
657,469,000
260,322,000
728,130,000
703,026,000
304,877,000
3,078,030,000

Total
Issued i n a n t i c i p a t i o n of i n c o m e
a n d profits t a x e s , 1921:
Sept. 24, 1917, as a m e n d e d —
Series TM-1921
... .
Series TJ-1921
.'
Series TM2-1921
Serias TM3-1921
Series TS-1921
Series TM4-1921
Total
Special issues t o secure F e d e r a l
reserve b a n k n o t e s :
S e p t . 24, 1917, as a m e n d e d
A p r . 4, 1918 a n d A p r . 23,
1918
Special issue, p a y a b l e i n foreign
currency:
Sept. • 24, 1917, as a m e n d e d
A p r . 4,1918, J u l y 9,1918, a n d
S e n t 24 1918
Special s h o r t - t e r m issues:
Sept. 24, 1917, as a m e n d e d
A p r . 4,1918, a n d Mar. 3,1919.

12,369,500
5,563,000
• 54,586,500
10,482,000
50,222,500
48,300,000
lO;416,000

29,070,000
8,788,000
53,802,000
22,544,000
58,000.000
46,119,500
28,013,500

7,394; 000
2,999,500
10,339,500
9,196,500
15,379,500
11,858,000
7,093,500

12,441,.500
3,706,000
.5,618,000
11,221,000
22,256,500
14,600,500
9,276,000

187,623,500 1,358,566,000

191,939,500

246,367,000

64,260,500

79,119,500

Ul
Mar. 15,1921
J u n e 15,1921
Mar. 15,1921
do
Sept. 15,1921
Mar. 15,1921

C)

(2)

ll
6
5|

2

201,370,500
242,517,000
74,278,000
106,626,500
341,969,500
124,252,500

10,202,000
18,475,000
3,786,500
5,424,000
21,329,500
10,059,000

59,982,000
93,629,500
34,583,000
60,233,500
181,370,500
40,566,500

5,131,500
23,200.000
4,508,000
6,138,500
26,936,000
13,822,500

17,420,500
25,132,500
6,164,500
9,831,000
29,205,000
14,393,000

5,981,.500
7,064,000
2,195,000
1,884,000
9,138,500
4,204,000

2,582,500
4,498,000
1,726,000
1,092,500
4,537,500
2,227,500

o

1,091,014,000

Mar. 15,1920
J u n e 15.1920
J u l y 15,1920
Sept. 15,1920
. do
Oct. 15,1920

69,276,000

470,365,000

79,736,500

102,146,500

30,467,000

16,664,000

o

259,375,000

21,436,000

59,276,000

30,280,000

23,299,000

12,260,000

15,664, oon

pi

w
H

>

5 112,091,700

}. «

1 Various, begiiming Aug. 20,1918.
2 One year from date of issue.




116,450,500
25,582,500
412,319,000
90,410,000
281,882,500
324,189,000
107,732,500

13,446,000
5,704,000
" 31,752,000
18,521,500
47,722,000
52,782,500
17,695,500

( 2,2^.4,
44, 4i,
I 5,5*, 6.

Ul
ll4,630,345,108.53

450,000,000 9,291,500,000

3 Various, beginning Nov. 27, 1918.
4 VariouSj beginning Feb. 25, 1919.

242,000,000

856,000,000

136,000,000

38,000,000

d

pi

6 Pesetas 543,900,000.
8 Various.

fcO

00

-a

Certificates of indebtedness, total issues and the amount issued through each Federal reserve banl from Apr. 6, 1917, to Oct. SI, 75^0—Continued.
Federal reserve district.
Authorizing act and series.

Date of issue.

Date of
maturity.

Total.
Issued in anticipation ofthe second
Liberty loan:
Apr.24,1917
Aug. 9,1917 Nov. 15,1917
Do.
Aug. 28,1917 Nov. 30,1917
Do
Sept. 17,1917 Dec. 15,1917
Sept. 24,1917
Sept. 26,1917 . . . . d o
Do
Oct. 18,1917 Nov. 22,1917
Do
Oct. 24,1917 Dec. 15,1917
Total.
Issued in anticipation of the third
Liberty loan:
Sept. 24, 1917
Jan.
Do
Feb.
Do
Feb.
Do
Mar.
Do
Apr.
Sept. 24, 1917, as amended
Apr. 4, 1918
.Apr.

22,1918
8,1918
27,1918
20,1918
10,1918

Apr.
May
May
June
July

22,1918
9,1918
28,1918
18,1918
9.1918

22,1918

July 18,1918

Dallas.

§16,400,000
24,893,000
16,600,000
19,800,000

§10,400,000
7,045,000
7,200,000
8,100,000

§2,500,000
4,500,000
2,400,000
5,200,000

§8,000,000
9,500,000
7,200,000
5,600,000

§7,000,000
5,525,000
2,400,000
3,300,000

§20,000,000
7,500,000
4,200,000
5,200,000

32,745,000

14,600,000

30,300,000

18,225,000

36,900,000

15,600,000
15,095,000
21,169,000
35,629,000
32,963,000
18,141,000

7,900,000
4,188,000
4,874,000
11,000,000
12,710,000
5,028,000

3,700,000
2,025,000
2,000,000
7,000,000
9,541,000
5,205,000

4,700,000
7,100,000
4,542,000 ' 2,430,000
4,619,000
2,367,000
9,000,000
10,595,000
10,600,000
12,038,000
2,178,000 I
7,217,000

13,000,000
7,520,000
9,030,000
23,000,000
20,000,000
13,408,000

45,700,000

29,471,000

38,0a9,000 I 39,347,000

85,958,000

30,359,000
42,352,000
59,168,000
64,414,000
65,850,000

18,090,000
20,064,000
25,709,000
22,842,000
21,181,000

10,750,000
15,000,000
17,000,000
16,000,000
15,600,000

12,000,000
21,411,000
23,736,500
26,116,500
25,000,000

Treasury
Department.

21,000,000
25,000,000
33,500,000
30,250,000
39,500,000

13,084,000
14,076,000
19,000,000
15,000,000
16,602,500

June
July
July
Aug.

25,1918
9,1918
23,1918
6,1918

Oct.
Nov.
Nov.
Dec.

24,1918
7,1918
21,1918
5,1918

63,212,000

25,698,500

15,000,000

20,260,500

13,162,500

23,540,500

1,559,000

325,355,000

Total..




St. Louis.

138,597,000

25,1917 June 30,1917
10.1917 July 17,1917
25,1917 July 30,1917
8,1917
de

Minneapolis. Kansas City.

San
Francisco.

Cliicago.

77,693,000

Issued in anticipation of the first
Liberty loan:
Apr.24,1917
Apr.
Do
May
Do
May
Do
June

Issued in anticipation of the fourth
Liberty loan:
Sept. 24, 1917,
amended
Apr. 4, 1918—
Series IV-A.
Series IV-B.
Series IV-C.
Series JV-D.

Rate.

133,584,500

9,350,000

128,524,500

90,925,000

172,790,500

11,895,000

131,481,500
101,203,000
83,310,500
87,292,500

34,654,000
31,280,500
25,9.52,500
24,056,000

20,000,000
22,100.000
16,800,000
12,260,000

28,410,500
30,031,500
23,369,000
25,126,000

18,481,500
14,452,000
10,156,000
7,579,500

48,000,000
39,000,000
38,000,000
37,750,000

11,938,000
35,653,000
4,327,000
4,581,000

00
00

Series I V - E .
Series I V - F .
Series" I V - G .

Jan. 2,1919
Jan. 16,1919
Jan. 30,1919




305,020,000

65,316,000

21,115,000
20,778,500
19,050,500
18,403,500
20,000,000
18,500,000
20,040,000

8,833,500
7,363,000
5,714,000
8,043,000
5,951,500
10,939,000
13,106,000

42,400,000
40,000,000
45,000,000
40,000,000
45,400,000
40,000,000
35,800,000

18,000,000
18,310,000
14,615,500

16,750,000
13,000,000
20,107,500

14,358,000
12,879,000
14,359,000

35,450,000
27,850,000
38,575,000

"4," 666* 666

245,288,000

218,880,^500

187,745,000

101,546,000

390,475,000

23,397,500

79,723,000
70,582,000
63,193,500
15,238,000
18,359,000
6,313,500
11,086,000
14,080,000

21,700,000
20,569,000
17,975,500
8,728,000
4,277,500
3,135,500
4,11.5,500
4,237,000

17,514,000
17,300,000
16,000, boo
8,300,000
6,265,000
3,979,500
2,413,500
1,341,000

20,000,000
20,238,500
16,000,000
10,000,000
5,929,000
1,948,000
3,451,000
4,309,000

16,185,000
14,429,000
23,179,000
11,916.500
4,986; 000
3,092,000
1,836,000
2,014,500

38,175,000
37,300,000
43,000,000
14,250,000
9,841,000
6,214,500
11,435,500
7,836,000

84,738,000

73,113,000

81,875,500

77,638,000

8,052,000

7,400,000

25,132,000
10,044,500
20,250,500

5,625.000
3,702; 500
6,285,500

2,214,500
721,500
2,093,000

5,187,500
5; 795,000
6,000,000

2.567.000
1; 192; 500
2,544, O'OO

16,750,000
7,900,000
11,422,000

12,000,000

55,427,000

15,613,000

5,029,000

16,982,500

6,303,500

36,072,000

12,000,000

17,200,000
17,700,000
21,500,000

25,913,000
22,816,000
21,200,000

663,204,000

186,963,000

127,560,000

176,866,000

6,1919
20,1919
3,1919
17,1919
1,1919
15,1919
29,1919

97,235,500
83,189,500
108,647,000
97,774,500
103,048,500
91,677,500
82,044,000

24,231,500
21,319,500.
30,927,000
26,445,500
29,678,500
27,405,000
.21,225,500

24,500,000
22,265,000
26,500,000
27,760,000
24,600,000
23,610,000
18,720,000

A u g . 12,1919
S e p t . 9,1919
O c t . 7,1919

82,656,500
99,886,000
107,256,500

22,219,000
21,761,500
20,075,000

953,415,500

May
May
June
June
July
July
July

A u g . 1,1919
A u g . 15.1919
S e p t . 2,1919
Dec. 1.1919
A p r . 1.1920
A p r . 15.1920
-do..
May 17,1920

J u n e 15,1920
J u l y 15,1920
A u g . 16,1920

4,140,000
327,500
4,000,000

i

5,645,000.
3,085,000

Q

Jan.
Jan.
Feb.
Feb.
July
July
Oct.
Nov.

2,1920
15,1920
2,1920
16,1920
1,1920
15,1920
15,1920
15,1920

Total.

Total.

83,320,000

25,501,500
24,178,500
21,360,000

Total..

L o a n certificates of 1921:
Series A, 1921
- Series B , 1 9 2 1 . .
Series C, 1921

3,000,000
3,000,000
2,817,000

88,279,000
88,878,500
82,759,000

Total.,
Issued i n a n t i c i p a t i o n of t h e V i c t o r y L i b e r t y loan:
S e p t . 24, 1917, as a m e n d e d
A p r . 4,1918—
Series V - A
Dec.
5,1918
Series V - B
, Dec. 19,1918
Series V - C
, J a n . 2,1919
SeriesV-D
J a n . 16,1919
Series V - E
J a n . 30,1919
Series V - F
F e b . 13,1919
Series V - G
F e b . 27,1919
S e p t . 24, 1917, as a m e n d e d
A p r . 4, 1918, a n d M a r . 3,
1919—
SeriesV-H
M a r . 13,1919
Series V - J
A p r . 10,1919
SeriesV-K
M a y 1,1919

L o a n certificates of 1920:
S e p t . 24, 1917, as a m e n d e d
A p r . 4, 1918, a n d M a r . 3,
1919—
Series A , 1 9 2 0 . . .
Series B , 1920.
Series C, 1920
Series D , 1920
S e r i e s E , 1920
S e r i e s F , 1920
Series G, 1920
•Series 11,1920

11,295,500 I 49,500,000
46,350,000
11,898,500
46,420,000
9,457,000

278,575,000

Sept. 3,1918
Sept. 17,1918
Oct. 1,1918

Jan. 3.1921
Jan. 15; 1921
Aug. 16,1921

2,200,000

O

H
W

^

•

1,000,000
6,400,000
.........

>

c^
n
pi
K!

to
00
CD

Certificates of indebtedness, total issues and the amount issued throng leach Federal reserve bank from Apr. 6, 1917, to Oct. 31, 1920—Continued.

to
CD

O
F e d e r a l reserve district.
A u t h o r i z i n g a c t a n d series.

D a t e of issue.

D a t e of
maturity.

Rate.
Chicago.

Issued i n a n t i c i p a t i o n of income
a n d profits t a x e s , 1918:
S e p t . 24, 1917
Do
Do
'.
Do
S e p t . 24, 1917, as a m e n d e d
A p r . 4, 1918
Do

N o v . 30,1917 J u n e 25,1918
Jan. 2,1918
do
Feb. 15,1918
do
Mar. 15,1918,
dn
A p r . 15,1918
M a y 15,1918

.do-,
-dc.

S t . Louis.

K a n s a s City.

Dallas.

San
Francisco.

§30,139,500
48,054,500
15,709,000
13,286.500

§3,833,000
11.168,500
1,661,500
2,063,500

§1,743,000
5,2.30,000
1,255,000
720,000

§1,072,000
17,075,000
49S, 500
824,500

§5.388,500
15; 180,000
1,505,500
1,022,000

§4,012,000
19,632,000
7,404,000
6,416. 000

15.742,OGO
40;002;500

901,500
3,075,000

850.090
1,600:000

1,028,000
538,500

1,092,000
4,762,500

4,297,500
6,069,500

21,036,500 j

28,950,500

47,831,000

Total.
Issued In a n t i c i p a t i o n of i n c o m e
a n d profits t a x e s , 1919:
S e p t . 24, 1917, as a m e n d e d
A p r . 4,1918—
T a x series, 1919
Series T
Series T - 2
Sept. 24, 1917, as arriended
A p r . 4, 1918, a n d M a r . 3,
1919SeriesT-3
.'.
Series T - 4
:
.".
Series T - 5
Series T - 6
Series T - 7
,

Minneapolis.

Treasury
Department.

11,398,000

O

Aug. 20.1918
N o v . 7,1918
J a n . 16.1919

J u l y 1.5,1919
Mar. 15,1919
J u n e 17,1919

Mar. 15,1919
J u n e 3,1919
...-do
J u l y 1,1919
....'do.

June
Sept.
Dec.
Sept.
Dec.

22,003,000
103,828,000
42,045,000

4,712,000
17,109,500
4,335,500

1,829,000
10,229; 500
3,030,000

3,662,500
7,443,500
4,101,000

4,173,000
12.103,000
4,350,000

48,301,500
79,163.000
63,326;500
46.516,000
58;624,000

6,437,000
12,854,500
6,906.500
11.203.500
11;963; 500

3,502,000
10,468,500
2,600,600
10,000.000
10,000;GOO

1,820,000
7,681,500
2,502. ."iOO
8,222,000
6,551,500

3,417,500
15,815,500
3,0.36,000
6,221,500
12,823, .500

9,649,000
30,201,500
1.5,684,500
12,134,000
27,001,000

463,807,000

75,522,OOU

51,650,500

41,984,500

61,940,000

w

16,272,500
38,164,000
17,050,000

166,166,500

H
»=J
M

16,1919
15,1919
15,1919
15,1919
15,1919

§8,666,666

g

i7,'543,'666

CQ

19,045,500
Total.,

44,588,500
Issued i n a n t i c i p a t i o n of income
a n d profits t a x e s , 1920:
Sept. 24, 1917, as a m e n d e d —
Series T - S - :
'.
Series T - 9
Series T-10
Series TM3-1920
Series TJ-,1920




J u l v 15,1919
S e p t . 15,1919
do
Dec.
1,1919
Dec. 15,1919

Mar.
Mar.
Sept.
Mar.
Jime

15.1920
15; 1920
15,1920
15,1920
15,1920

65,290, .500
24,097,500
35,172,000
42,493,500
100,789,000

11,198,500
3,614,500
12,232, .500
9,191,500
29,692,500

8,866,500
4,750,000
7,750,000
5,133,000
12,803,.500

7,670,000
2,835,000
4,165,000
6,264,500
20,025,000

8,681,000
3,491,500
8,232,500
13,088,500
31,803,000

24,651,500
10,000,000
21,500,000
21,776,000
57, .554,000

5,645,000

2,1920
2,1920

D e c . 15,1920
Mar. 15,1920

M a r . 15,1920 M a r . 15,1921
J i m e 15,1920 J u n e 15,1921
J u l y 15,1920 M a r . 15,1921
S e p t . 15,1920 . . . - . d o
do
S e p t . 15,1921
Oct. 1.5,1920 M a r . 15,1921

S e p t . 24, 1917, as a m e n d e d
A p r . 4,1918, a n d Mar. 3, 1919..

15,515,000
8,959,500

13.036,500
16,000,000

8, .506,500
14,868,50p

38,400,OOC
25,250,000

29,000,000

98,685.000

63,787,500

69,996,000

88,671,500

199,031,500

34,645,000

21,926,000
27,433,000
8,177,000
9,330,500
24,459,500
15,234,000

6.806,000
9,793,500
2,300,000
1,046,500
9,900,500
4,621,000

3,257,500
2,278,500
l,032..50f
1,864,50C
3.986,500
2,050,000

7,235,500
11,412,500
2,210, .500
1,686,500
9,313,500
4,744,500

4,719,500
4,000, .50.0
496,000
1,945,000
2.692,500
3;008,500

16,063,000
15,600,000
7,100,000
6,150,000
19,100,000
9,322,000

40,063,000

106,560,000

34,467,500

14,469,500

36,603,000

16,861,000

73,335,000

40,063,000

4f
6

tl
6

55

Total
Special issues t o secure Federal
reserve b a n k n o t e s :
S e p t . 24, 1917, as a m e n d e d
A p r . 4, 1918, a n d A p r . 23,
. 1918
Special issues p a y a b l e in foreign
currency:
SeDt. 24, 1917, as a m e n d e d
• A p r . 4, 1918, .Tuly 9, 1918
a n d S e p t . 24 1918 .
Special s h o r t t e r r h issues:

23,234,000
9,421,500

4!
4^

Total
Issued i n a n t i c i p a t i o n of i n c o m e
a n d profits t a x e s , 1921:
S e p t . 24,1917, as a m e n d e d —
Series TM-1921
Series TJ-1921
Spripc; TM*? 1Q91
Series TM3-1Q21
Series TS-1921
Series T M 4 1921 .

77,484,500
50,110,500
395,437,500

Jan.
Feb.

Series TD-1920
Sprips TM4—1920

V

Ul

o
0)

2

39,612,000

17,068,000

8,480,000

12,820,000

8,300,000

pi

10,880,000

>
5 112,091,700.00

}

I 2,2^,4,
4 | , 4^, ll,511,000,000

(..

90,000,000

192,500,000

120,000,000

195,000,000

472,000,000 1,036,345,108.-53

I 5,5^,6.
RECAPITULATION.
Ul

L o a n certificates:
I n a n t i c i p a t i o n of t h e first L i b e r t y l o a n
I n a n t i c i p a t i o n of t h e second L i b e r t y loan
I n a n t i c i p a t i o n of t h e t h i r d L i b e r t y loan
I n a n t i c i p a t i o n of t h e fourth L i b e r t y l o a n . . .
• I n a n t i c i p a t i o n of t h e V i c t o r y L i b e r t y loan
Series of 1920
Series of 1921. . . .

. . .

T o t a l loan certificates... .

1 Various, beginning Aug. 20, 1918.
2 One year from date of issue.




NewYork.

Cleveland.

Richmond.

Atlanta.

Total amount.

Issues.

Boston.

§868,205,000.00
2,320,493,000.00
3,012,085,500.00
4,659,820,000.00
6,157,589,500-00
2,360,044,500.00
. 461,042,000.00

§57,367,000
132,044,000
214,417,000
381,162,500
475,792,500
188,175,500
35,364,000

§460,462,000
1,467,643,000
1,255,308,000
1,680,989,000
2,256,145,000
959;162,500
194,883, .500

§43,400,000
89,132,000
198,500,000
316,020,000
420,334,500
145,544,500
27,468,000

§58,900,000
182,513,000
238,033,500
440,569,000
654,761,500
1.74,478,500
37,671,500

§13.703,000
40;014,000
75,829,500
117,983,600
187,497,000
48,864,000
9,499,000

§13,305,000
32,136,000
79,673,000
114,857,000
143,311,600
72,428,000
8,729.000

19,839,279,500.00

1,484,312,500

8,273,493,000

1,238,399,000

1,686,927,000

493,390,000

464,338,600

3 Various, beginning Nov. 27,1918.
< Various, beginning Feb. 25, 1919.

Philadelphia.

5 Pesetas 543,900,000.
6 Various.

to
CD

Certificates of indebtedness, total issues and ihe amount issued through each Federal reserve banlc from Apr. 6, 19t7, to Oct. 31, 1920—Continued.
RECAPITULATION-Continued.
Total a m o u n t .

T a x certificates:
I n anticipation
I n anticipation
I n anticipation
I n anticipation

of
of
of
of

and
and
and
and

profits
profits
profits
profits

taxes,
taxes,
taxes,
taxes,

1918
1919
1920
1921

T o t a l t a x certificates

G r a n d t o t a l , all issues

first L i b e r t y l o a n
•.
second L i b e r t y loan
third Liberty loan
fourth L i b e r t y l o a n
V i c t o r y L i b e r t y loan

T o t a l l o a n certificates . . .
T a x certificates:
I n anticipation
I n anticipation
I n anticipation
I n anticipation

of i n c o m e
of i n c o m e
of i n c o m e
of i n c o m e

T o t a l t a x certifioates

and
and
and
and




§83,260,000
256,911,500
187,623,600
69,276,000

§831,473,000
1,451,852,000
1,358,566,000
470,365,000

§95,537,000
141,001,600
191,939,600
79,736,500

§285,452,500
435,440,500
246,367,000
102,146,500

§20,822,000
92,519,000
64,260,600
ao, 467,000

§13,006,000
71,414,000
79,119,500
16,664,000

597,071,000

4,112,256,000

508,214,600

1,059,406,600

208,068,500

180,203,500

259,375,000.00
112,091,700.00
14,630,345,108.63

21,436,000

59,276,000

30,280,000

23,299,000

12,260,000

15,664,000

450,666,666

9,291,500,000

242,000,000

856,000,000

136,000,000

38,000,000

2,552,819,600

21,736,525,000

2,018,893,500

3,635,632,500

849,718,600

698,208,COO

profits
profits
profits
profits

taxes,
taxes,
taxes,
taxes,

1918
1919
1920
1921

;

Cleveland.

Richmond.

Atlanta.

Treasury
Department.

Minneapolis.

Kansas City.

§32,745,000
45,700,000
133,584,500
186,963,000
245,288,000
84,738,000
15,613,000

§14,600,000
29,471,000
89,350,000
127,560,000
218,880,500
73,113,000
5,029,000

§30,300,000
38,039,000
128,524,500
176,866,000
187,745,000
81,875,500
16,982,600

§18,225,000
39,347,000
90,925,000
83,320,000
101,546,000
77,638,000
6,303,600

$36,900,000
85,968,000
172,790,500
305,020,000
390,475,000
168,052,000
36,072,000

§10,605,000.00

744,631,500

568,003,500

660,332,500

417,304,600

1,195,267,600

130,613,500.00

162,934,000
463,807,000
395,437,500
106,560,000

22,703,000
75,622,000
98,585,000
34,467,500

11,398,000
51,650,500
63,787,600
14,469,500

21,036,500
41,984,500
69,996,000
36,603,000

28,950,500
61,940,000
88,671,500
16,861,000

47,831,000
166,1.56,500
199,031,500
73,335,000

44,688,600.00
34,645,000.00
40,063,000.00

1,128,738,500

231,277,500

141,305,500

169,620,000

196,423,000

486,354,000

119,296,600.00

39,612,000

17,068,000

8,480,000

12,820,000

8,300,000

10,880,000

1,511,000,000

90,000,000

192,500,000

120,000,000

196,000,000

472,000,000

112,091,700.00
1,036,346,108.63

5,171,617,000

i . n s 2 977 nnn

9nn 289.nnn

9fi2 772 .^(V)

817 n27 .5nn

2.164.501..500

1..39S ,34fi SnS .(^.^

St. L o u i s .

§77,693,000
138,697,000
325,355,000
663,204,000
953,415,500
278,575,000
- 55,427,000

•

2,492,266,500

Special issues t o secure F e d e r a l reserve b a n k n o t e s
Special issues p a y a b l e i n foreign c u r r e n c y
Special sihort t e r m issues
G r a n d t o t a l , all issues

§1,624,403,500.00
3,354,787,500.00
3,078,030,000.00
1,091,014,000.00

Chicago.

Issues.

the
the
the
the
the

New York.

43,989,326,308.63

income
income
income
income

Special issues t o secure F e d e r a l reserve b a n k n o t e s
Special issues p a y a b l e i n foreign c u r r e n c y
Special s h o r t t e r m issues

L o a n certificates:
I n a n t i c i p a t i o n of
I n a n t i c i p a t i o n of
I n a n t i c i p a t i o n of
I n a n t i c i p a t i o n of
I n a n t i c i p a t i o n of
Series of 1920
Series of 1921 . .

Philadelphia.

Boston.

9,148,235,000.00

Issues^.

to
CD-

'

'

'

'

'

Dallas.

'

'

S a n Francisco,

O .

o

tei

11,895,000.00
65,316,000.00
23,397,500.00
7,400,000.00
12,000,000.00
Ul

293

SECRETARY OF THE TREASURY.
E X H I B I T 2.

CERTIFICATES OF INDEBTEDNESS, PAR AMOUNT IS SUED,RETIRED,
AND OUTSTANDING TO OCT. 3 1 , 1920.
D a t e of issue.

D a t e of
maturity.

L o a n certificates:
A p r . 25, 1917.
M a y 10,1917.
M a v 25, 1917:
J u n e 8,1917..
A u g . 9,1917-.
A u g . 28,1917.
Sept. 17,1917.
Sept. 26,1917.
Oct. 18,1917..
Oct 24,1917...
J a n . 22,1918..
F e b . 8,1918....
F e b . 27,1918..
Mar. 20,1918..
A p r . 10,1918..
A p r . 22,1918..
J u n e 25,1918J u l y 9,1918. - .Tuly 23,1918. A u g . 6,1918-.
Sept. 3,1918.Sept. 17,1918Oct. 1.1918...
Dec. 5,1918...
Dec. 19,1918..
Jan. 2,1919...
J a n . 16,1919..
J a n . 30,1919..
F e b . 13,1919..
F e b . 27,1919..
Mar. 13,1919..
A p r . 10,1919..
May 1,1919...
A u g . 1,1919..
A u g . 15,1919.
Sept. 2,1919-Dec. 1,1919...
A p r . 1,1920...
A p r . 15,1920..
Do
May 17,1920. .Tmiel5,1920J u l v 15,1920.A u g . 16,1920.

J u n e 30,1917
J u l y 17,1917
J u l y 30,1917
do
N o v . 15,1917
N o v . 30,1917
Dec. 15,1917
do
N o v . 22,1917
Dec. 15,1917
A p r . 22,1918
M a y 9,1918
M a y 28,1918
J u n e 18,1918
J u l y 9,1918
^
J u l' y 18,1918
Oct. 24,1918
N o v . 7,1918
N o v . 21.1918
Dec.
5.1918
Jan.
2.1919
J a n . 16.1919
J a n . 30,1919
M a y 6,1919
M a y 20,1919
J i m e 3,1919
J u n e 17,1919
Julv
1,1919
J u l v 15,1919
J u l y 29,1919
A u g . 12.1919
Sept. 9,1919
Oct. 7.1919
Jan.
2.1920
J a n . 15.1920
Feb.
2,1920
F e b . 16,1920
J u l y 1.1920
J u l y 15,1920
Oct. 16,1920
N o v . 15.1920
J a n . 3.1921
J a n . 15.1921
Aug. 16,1921

Series.

IVrA..
IV-B..

rv-c...
IV-D..
IV-T^] - . ,
IV-F. .
IV-G..
V-A.-.
V - B . ..
V-C...
V-D - - V - E . ..
V-F...
V-G....
V-H...
V-J....
V-K...
A-1920B-1920C-1920-.
D-1920.
E-1920.
r-1920G-1920H-1920.
A-1921 B-1921.
C-1921.,

Total

Issued.

Retired.

Outstanding
Oct. 31,1920.

§258,205.000.00 §268,205, 000,00
200,ooo; 000. OOl 200,000, 000.00
200,000, 000.00
200,000, 000.00
200,000, 000.00
200,000, 000.00
000,00
300,000, 000.00
300,000,
250,000, 000. G
O
250,000, 000. GO
300,000, 000, G
O
300,000, 000.00
400,000, 000. G
O
400,000, 000,00
000.00
385,197, 000.00
385,197,
685,296, 000. G
O
685,296, 000.00
400,000, 000.00
400,000, 000.00
500,000, 000. G
O
500,000, 000.00
500,000, 000.00
500,000, 000.00
543, 032; 000.GO
1 §500. 00
543,032, 500.00
O
110,000.00
551,226, 500. OOl 551,216, 500. G
517,826, 500.00| 517,826, 500.00
839,646, 000. G
O
1 500.00
839,646, 500. GO
753,925 000. G
O
1 13,000.00
753,938, 000.00
500.00
584,745; 000. G
O
1 5, 500.00
584,750,
575,698, 000.00
1 8,500.00
575,706, 500. GO
1 2,000.00
639,493, 000. OOI 639,491, 000,00
625,216, 500.GO
625,216, 500. GO
000.00
641.069 000. G
O
641,069,
613;435 500.GO
1 2,500.00
613,438, 000. GO
572,492; 500.GO
11,500.00
572,494, 000.00
751,684, 500.00
751,684, 500.GO
600,100, 000. G
O
11,500.00
600,101, 500. GO
687,381 500.00
687,381, 500.00
500. GO
620,577: 500.GO
11,000.00
620,578,
532,376: 000.00
15,500.00
532,381, 500. GO
000. GO
542,197; 000. G
O
542,197,
646,025, 000.00
646,025, 000. GO
591,308 000. G
O
591,308, 000.00
533,799; 000, G
O
12,500.00
533,801, 500. GO
000.GO
532,145 000. G
O
1 7,000. 00
532,152.
573,824; 000,00
117,500.00
573,84i; 500. GO
1 2,000.00
162,178, 500. OOl 162,176, 500.00
O
1 27,500.00
200,669, 500. OOi 200,642, 000. G
83,889, 000.00
1 14,000.00
83,903, 000. ooi
167,965, 000. G 1 2,668, 500.00
O
170,633, 500, OOi
9,032, 000.00 93,833,000.00
102,865, 000.00
176,604,000.00
176,604, 000. G
O
126,783,500.00
126,783, 500. G
O
157,654, 500. G
O
157,654.500.00
19,839,279,500. 00 19,281,613,500.00 557,666,000.00

T a x certificates:
N o v . 30, 1917. J u n e 25, 1918
J a n . 2,-1918...
do..
F e b . 15,1918..
do..
Mar. 15,1918..
do.A p r . 16,1918..
do-M a y 16,1918. - . . . . . d o . .
A u g . 20, 1918. J u l y 15, 1919
N o v . 7, 1918-. Mar. 15, 1919
J a n . 16, 1919.. J m i e 17, 1919
Mar. 15,1919.. J u n e 16, 1919
J u n e 3. 1919-. Sept. 15, 1919
Dec. 15, 1919
Do
Sept. 15, 1919
J u l y l , 1919..
Dec. 15, 1919
Do
J u l y 15, 1919.. Mar. 15, 1920
Sept. 15, 1919-, . . . - d o - Sept. 16, '1920'
Do
Dec 1, 1 9 1 9 . . , Mar, 16, 1920
Dec. 15,1919.-, J u n e 16, 1920




Rate

Tax
T-l
T-2
T-3
T-4
T--5
T-6
T-7
T-8
T-9
T-10
TM3-1920TJ-1920.--

691, ,872,000.00
491: ,822.500.00
74: 100,000. OOi
110: 962,000.00
71; 880,000.00
183, 767,000.00
157 552,500.00,
794; 172,500. GO
392 381,000. G
O
407: 918,500.00
526; 139,500.00
238, 711,500.00
326, 468,000.00[
511, 444,000.00
323, 074,500.00
101 131,500.00
657; 469,000.00
260, 322,000.00
728, 130,000.00

1 I s s u e s on w h i c h i n t e r e s t h a s ceased.

691,872, ,000.00
491,8I9; 500.00
13,000.00
74,100; 000.00
110,962, 000.00
71,880, 000. G
O
183,767, 000.00
157,524, 000.00
128,500,00
794,172, 500.GO
392,353, 500.00
""1'27," 566." 66
407,918, 500.00
526,139, 500.00
238,707, 500.GO
14,000.00
326,468, 000.00
511,444, 000.00
323,043, 500. G
O
131,000.00
101,129, 000.00
12,500.00
656,300, 500.00 11,168,500.00
260,315, 500.00
16,500,00
727,961, 500. OOl
1168,500.00

294

REPORT ON T H E EUsTANCES.

Certificates of indebtedness, par amount issued, retired, and outstanding to Oct. 31,1920—
Continued.
Date of issue.

Date of
maturity.

Series.

Tax certificatesContinued.
Jan. 2,1920-...
Feb. 2, 1920...
Mar. 15,1920...
June 15,1920
July 15,1920...
' Sept. 15,1920..
Do
Oct. 15, 1920 .

Dec. 15,1920
Mar. 15,1920
Mar. 15,1921
.Tune 15,1921
Mar. 15,1921
do
Sept. 15,1921
Mar, 15,1921

TD-1920....
TM4-1920--TM-1921....
T.T-1921
T-M-2-1921.
T-M-3-1921.
T-S-1921....
T-M-4-1921 -

Rate.

4?
6
5i
6
5f

Issued,

Retired.

§703,026,000.00
304,877,000.00
201,370,500.00
242,517,000.00
74,278,000.00
106,626,500.00
341,969,500.00
124,252,500.00

Outstanding
Oct. 31, 1920.

§12,000,000.00 §691,026,000.00
112,500.00
304,864,500.00
201,370,500.00
242,517,000.00
74,278,000.00
106,626,500.00
341,969,500.00
124,252,500.00

9,148,235,000.00 7,364,742,500.00 1,783,492,500,00

Total
Special issues to
secure Federal
reserve b a n k
notes:
Various dates Various
Special issues payable, in foreign
currency:
Various dates . . . . d o
Short-term specials:
do
Various dates.

2

259,375,000.00

112,091,700.00

259,375,000.00

112,091,700.00

Vari- 14,630,345,108.53 14,597,490,658.53
ous.

32,854,450.00

1 Issues on which interest has ceased.
RECAPITULATION.
Certificates.
Loan issues
Tax issues
To secure Federal reserve bank notes
Special issues payable in foreign currency
Snort-term specials
Total




.Issues.

Retirements.

Outstanding
Oct. 31, 1920.

§19,839,279,500.00 §19,281,613,500.00
§567,666,000.00
' 9,148,235,000.00 7,364,742,500.00 1,783,492,500.00
259,375,000.00
259,375,000.00
112,091,700.00
ii2,661,700.66
14,630,345,108.53 14,697,490,658.53
32,854,450.00
43,989,326,308.53 41,355,938,358.53 2,633,387,950.00

SECRETARY OE THE TREASURY.
EXHIBIT

295

3.

[Department Circular No. 167. Loans and Currency.1
U N I T E D STATES OF AMERICA—FOUR AND ONE-QUARTER P E R
CENT 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 , S E R I E S
T M 3-1920. DATED AND BEARING INTEREST FROM DECEMBER
1, 1 9 1 9 . D U E M A R C H 15^ 1 9 2 0 .

The vSecretary of the Treasury-; under the authority of. the actapproved September 24, 1917; as amended; offers for subscription;
at par and accrued interest; through the Federal Reserve Banks,
Treasur}^ certificates of indebtedness; Series T M 3-1920; dated and
bearing interest from December 1, 1919; payable March 15; 1920,
with interest at the rate of four and one-quarter per cent per annum.
Applications will be received at the Federal Reserve Banks.
Bearer certificates with one interest coupon attached will be issued
in denominations of $500, $1;000; $5;000; $10;000; and $100;000.
Said certificates shall be exempt; both as to principal and interest,
from all taxation now or hereafter imposed b}^ the United States;
any StatC; or any of the possessions of the United StateS; or by an}^
local taxing authority; except (a) estate or inheritance taxes, and (6)
graduated additional income taxes, commonl}^ known as surtaxes,
and excess-profits and war-profits taxes, now or hereafter imposed
by the United States, upon the income or profits of individuals,
partnerships, associations, or corporations. The interest on an
amount of bonds and certificates authorized by said act approved
September 24, 1917, and amendments thereto, the principal of which
does not exceed in the aggregate $5,000, owned by any individual,
partnership, association; or corporation; shall be exempt- from the
• taxes provided for in clause (b) above.
Certificates of this series will be accepted at par; with an adjustment of accrued interest; during such time and under such rules and
regulations as shall be prescribed or approved by the Secretary of
the Treasury; in payment of income and profits taxes payable at the
maturity of the certificates. The certificates of this series do not
bear the circulation privilege.
The right is reserved to reject any subscriptions and to allot less
than the amount of certificates applied for and to close the subscriptions a;t any time without notice. Payment at par and accrued
interest for certificates allotted must be made on or before December
1, 1919; or on later allotment. After allotment and upon payment
Federal Reserve Banks will issue interim receipts pending delivery
of the definitive certificates. Qualified depositaries will be permitted to make payment b}^ credit for certificates allotted to them
for themselves and their customers up to an amount for which 'each
shall have qualified in excess of existing deposits when so notified
by Federal Reserve Banks. Treasury certificates of indebtedness
of any and all series now outstanding and not overdue; maturing
on or before February 2, 1920 (with any unmatured coupons at-




296

REPORT ON T H E FINANCES.

tached); will, be accepted at par with an adjustment of accrued
interest in pa3^ment for any certificates of the Series T M 3-1920
now offered which shall be subscribed for and allotted.
As fiscal agents of the United States, Federal Reserve Banks are
authorized and requested to receive subscriptions and to make
allotment in full in the order of the receipt of applications up to
amounts indicated by the Secretary of the Treasur}^ to the Federal
Reserve Banks of the respective districts.
CARTER GLASS,

Secretary of tlie Treasury.
TREASURY DEPARTMENT
OFFICE OF THE SSCRITARY;

Novemher 24, 1919.
To

THE

INVESTOR:

Almost any banking institution in the United States will handle your subscription
for you, or you may make subscription direct to the Federal Reserve Bank of your
district.
•ExfllBIT 4.
[Department Circular No. 168. Loans and Currency.]
U N I T E D STATES OF AMERICA—FOUR AND ONE-QUARTER P E R
CENT 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 , S E R I E S
D 1920. DATED AND BEARING I N T E R E S T FROM DECEMBER
1, 1 9 1 9 . D U E F E B R U A R Y 1 6 , 1 9 2 0 .

The Secretary of the Treasury, under the authority of the act
approved September 24, 1917, as amended, offers for subscription,
at par and accrued interest, through the Federal Reserve Banks,
Treasury certificates of indebtedness. Series D 1920, dated and
bearing interest from December 1, 1919, payable February 16, 1920,
with interest at the rate of four and one-quarter per cent per annum.
Applications will be received at the Feaeral Reserve Banks.
Bearer certificates, without coupons, will be issued in' denominations of $500, $1,000, $5,000, $10,000, and $100,000.
Said certificates shall be exempt, both as to principal and interest,
from all taxation now or hereaiter imposed by the United States,
any State, or any of the possessions of the United States, or by any
local taxing authority, except {a) estate or inheritance taxes, and
(6) graduated additional income taxes, commonly known as surtaxes, and excess-profits and war-profits taxes, now or hereafter
imposed by the United States, upon the income or profits of individuals, partnerships; associations, or corporations. The intere.st on
an amount of bonds and certificates authorized by said act approved
September 24, 1917, and amendments thereto, the principal of
which does not exceed in the aggregate $5,000, owned by any individual, partnership, association, or corporation, shall be exempt
from the taxes provided for in clause (Jb) above.
If any notes should be offered for subscription by the United
States after the offering and before the m.aturity of such certificates,
and the subscription price of such notes or the first installment
thereof be payable on a date occurring at or before the maturity of
such certificates, then on aiid after such, date (a) such certificates
will be accepted at par with an adjustment of accrued interest in
payment on the subscription price, v/hen payable, at or before the




SECRETARY OF THE TREASURY.

297

maturity or redemption of such certificates, of any such notes
subscribed for by and allotted to holders of such certificates; and
(6) upon ten days' public notice given in such manner as may be
determined by the Secretary of the Treasury the certificates of this
series may be redeemed as a whole at par and accrued interest.
The certificates of this series do not bear the circulation privilege
and will not be accepted in payment of taxes.
The right is reserved to reject any subscription and to allot less
than the amount of certificates applied for and to close the subscriptions at any time without notice. Payment at par and accrued
interest for certificates allotted must be made on or before December
1, 1919, or on later allotment. After allotment and upon payment
Federal Reserve Banks may issue interim receipts pending delivery
of the definitive certificates. Any qualified depositary will be
)ermitted to make payment by credit for certificates allotted to it
or 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. Treasury certificates of
indebtedness of any and all series now outstanding and not overdue,
maturing on or before February 2, 1920 (with any unmatured
interest, coupons attached), will be accepted at par with an adjustment of accrued interest in payment for any certificates of the
Series D 1920 now offered which shall be subscribed for and allotted.
• As fiscal agents of the United States, Federal Reserve Banks are
authorized and requested to receive subscriptions and to make
allotment in full in the order of the receipt, of applications up to
amounts indicated by the Secretary of the Treasury to the Federal
Reserve Banks of the respective districts.

f

CARTER GLASS,

Secretary ofthe Treasury.
TREASURY DEPARTMENT,
OFFICE OF THE SECRETARY,

•

November 24, 1919.
To

THE

INVESTOR:

Almost any banking institution in the United States will handle your subscription
for you, or you may make subscription direct to the Federal Reserve Bank of your
district.
EXHIBIT

5.

[Department Circular No. 174. Loans and Currency.]

UNITED STATES OF AMERICA—FOUR AND ONE-HALF P E R CENT
TREASURY CERTIFICATES OF INDEBTEDNESS, SERIES T J - 1 9 2 0 .
DATED AND BEARJNG INTEREST FROM DECEMBER 15, 1919.
DUE JUNE 15, 1920.

The Secretary of the Treasury, under the authority pf the act approved Septem.ber 24, 1917, as amended, offers for subscription, at
par and accrued interest, through the Federal Reserve Banks,
Treasury certificates of indebtedness. Series T J-1920, dated and
bearing interest from December 15, 1919, payable June 15; 1920;
with interest at the rate of four and one-half per cent per annum,
semiannually.
Applications will be received at the Federal Reserve Banks.
Bearer certificates with one interest coupon attached will be issued
in denominations of $500, $1,000, $5,000, $10,000, and $100,000.




298

REPORT ON THE FINANCES.

Said certificates shall be exempt, both as to principal and interest,
from all taxation now or hereaiter imposed by the United States,
any State, or any of the possessions of the United States, or by any
local taxing authority; except (a) estate or inheritance taxes, and (b)
graduated additional income taxes, commonly known as surtaxes,
and excess-profits and war-profits taxes, now or hereafter imposed
by the United States, upon the income or profits of individuals,
partnerships, associations, or corporations. The interest on an
amount of bonds and certificates authorized h j said act approved
September; 24, 1917, and amendments thereto, the principal of which
does not exceed in the aggregate $5;000, owned by any individual,
partnership, association, or corporation, shall be exempt from the
taxes provided for in clause (b) above.
Certificates of this series will be accepted at par; with an adjustment of accrued interest; during such time and under such rules and
regulations as shall be prescribed or approved by the Secretary of
the Treasury; in payment of income and profits taxes payable at the
maturity of the certificates. The certificates of this series do not
bear the circulation privilege.
The right is reserved to reject any subscription and to allot less
than the amount of certificates applied for and to close the subscriptions at any time without notice. Payment at par and accrued interest for certificates allotted must be made on or before December
15; 1919; or on later allotment. After allotment and upon payment
Federal Reserve Banks will issue interim receipts pending delivery
of the definitive certificates, xiny 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 have
qualified in excess of existing deposits, when so notified by the Federal Reserve Bank of its district. Treasury certificates of indebtedness of any and all series now outstanding and not overdue, maturing
on or before March 15, 1920 (with any unmatured coupons attached),
will be accepted at par with an adjustment of accrued interest in
payment for any certificates of the Series T J-1920 now offered
which shall be subscribed for and allotted.
As fiscal agents.of the United StateS; Federal Reserve Banks are
authorized and requested to receive subscriptions and to make allotment in full in the order of the receipt of applications up to amounts
indicated by the Secretary of the Treasury to the Federal Reserve
Banks of the respective districts.
CARTER GLASS,

Secretary of the Treasury.
TREASURY DEPARTMENT,
O F F I C E OF THE SECRETARY;

December 8, 1919.
To

THE

INVESTOR:

Almost any banking institution in the United States will handle your subscription
for you, or you may make subscription direct to the Federal Reserve Bank of your
di.strict.




SECRETARY OF T H E TREASURY.
EXHIBIT

299

6.

[Department Circular No. 177. Loans and Currency.]
U T N I T B D STATES OF AMERICA—FOUR AND T H R E E - Q U A R T E R S
P E R CENT T R E A S U R Y CERTIFICATES OF I N D E B T E D N E S S , S E R I E S
T D-1920. DATED AND BEARING INTEREST FROM JANUARY
2, 1920. DUE D E C E M B E R 15, 1920.

The Secretary of the Treasury, under the authorit}^^ of the act
approved September 24, 1917, as amended, oft'ers for subscription,
at par and accrued interest, through the Federal Reserve Banks,
Treasury certificates of indebtedness, Series T D-1920, dated and
bearing interest from January 2, 1920, payable Deceniber 15, 1920,
with interest at the rate of four and three-quarters per cent per
annum.
Applications will be received at the Federal Reserve Banks.
Bearer certificates will be issued in denominations of $500, $1,000,
$5,000, $10,000; and $100,000. The certificates will have two interest
coupons attached; payable June 15 and December 15, 1920.
Said certificates shall be exempt, both as to principal and interest,
from all taxation now or hereafter imposed by the United States,
aiw State, or any of the possessions of the United States, or by any
local taxing authorit}^, except (a) estate or inheritance taxes, and
(b) graduated additional income taxes, commonly known as surtaxes,
and excess-profits and war-profits taxes, now or hereafter imposed
by the United States, upon the income or profits of individuals,
partnerships, associations, or coiporations. The interest on an
amount of bonds and certificates authorized by said act approved
September 24, 1917, and amendments thereto, the principal ofwhich
does not exceed in the aggregate $5,000, owned by any individual,
partnership, association; or corporation; shall be exempt from the
taxes provided for in clause (b) above.
Certificates of this series will be accepted at par. with au adjustment of accrued interest; during such time and under such, rules and
regulations as shall be prescribed or approved by the Secretary ol
the Treasury; in payment of income and profits taxes payable at the
maturity of the certificates. The certificates of this series do not
bear the circulation privilege.;
The right is reserved to reject any subscription and to allot less
than the amount of certificates applied for and to close the subscriptions at any time without notice. Payment at par and accrued
interest for certificates allotted must be made on or before Januar}^
2, 1920, or on later allotment. After allotment and upon payment
Federal Reserve Banks may issue interim receipts pending delivery
of the definitive certificates. Any qualified depositary will be permitted to make payment by credit for certificates allotted to it for
itself and its customers up to any ampunt for which it shall be qualified in excess of existing deposits, when so notified by the Federal
Reserve Bank of its district. Treasury certificates of indebtedness
of any and all series now outstanding and not overdue, maturing on
or before February 2, 1920, will be accepted at par with an adjustment of accrued interest in pa3^ment for any certificates of the Series
T D-1920 now offered which shall be subscribed for and allotted.




300

REPORT ON THE FINANCES.

As fiscal agents of the United States, Federal Reserve Banks are
authorized and requested to receive subscriptions and to make allotment in full in the order of the receipt of applications up to amounts
indicated by the Secretary of the Treasury to the Federal Reserve
Banks of the respective districts.
CARTER GLASS,

Secretary ofthe Treasury.
TREASURY DEPARTMENT,
O F F I C E OF THE SECRETARY,

December 29, 1919.
To

THE

INVESTOR:

Almost any banking institution in the United States will handle your subscription
for you, or you may make subscription direct to the Federal .Reserve Bank of your
district.
^
• '
EXHIBIT

7.

[Department Circular No, 180. Loans and Currency.]

UNITED STATES OF AMERICA—FOUR AND ONE-HALF P E R CENT
TREASURY CERTIFICATES OF INDEBTEDNESS, SERIES T M 4—
1920. DATED AND BEARING INTEREST FROM FEBRUARY 2 ,
1920. DUE MARCH 15, 1920.

The Secretary of the Treasury, under the authority of the act
approved September 24, 1917, as amended, offers for subscription,
at par and accrued interest, through the Federal Reserve Banks,
Treasury certificates of indebtedness. Series T M 4-1920, dated and
bearing interest from February, 2, 1920, payable March 15, 1920,
with interest at the rate of four and one-half per cent per annum.
Applications will be received at the Federal Reserve Banks.
Bearer certificates with one interest coupon attached will be issued
in denominations of $500, $1,000, $5,000, $;L0,000, and $100,000.
Said certificates shall be exempt, both as to principal and interest,
from all taxation now or hereafter imposed by the United States,
any State, or any of the possessions of the United States, or by any
local taxing authority, except {a) estate or inheritance taxes, and
(b) graduated additional income taxes, commonly known as surtaxes,
and excess-profits and war-profits taxes, now or hereafter imposed
by the United States, upon the income or profits of individuals,
partnerships, associations, or corporations. The interest on an
amount of bonds and certificates authorized by said act approved
September 24, 1917, and amendments thereto, the principal of
which does not exceed in the aggregate $5,000, owned by any individual, partnership, association, or corporation, shall be exempt from
the taxes provided for in clause (&) above.
Certificates of this series will be accepted at par, with an adjustment
of accrued interest, during such time and under such ri;iles and regulations as shall be prescribed or approved by the Secretary of the
Treasury, in pa37'ment of income and profits taxes payable at the
maturity of the certificates. The certificates of this series do not
bear the circulation privilege.
The right is reserved to reject any subscription and to allot less
than the amount of certificates applied for and to close the subscriptions at any time without notice. Payment at par and accrued inter
est for certificates allotted must be made on or before February 2,
1920, or on later allotment. After allotment and upon payment Fed


SECRETARY OF THE TREASURY.

801

eral Reserve Banks may issue interim receipts pending delivery of
the definitive certificates. Any qualified depositary willbe 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. Treasury certificates of indebtedness of Series
C 1920, maturing February 2, 1920, Series D 1920, maturing February
16, 1920, and Series T9, maturing March 15, 1920 (with any unmatured coupons attached), will be accepted at par with an adjustment
of accrued interest in payment for any certificates of the Series
T M 4—1920, now offered which shall be subscribed for and allotted.
As fiscal agents of the United States, Federal Reserve Banks are
authorized and requested to receive subscriptions and to make allotment in full in the order of the receipt of applications up to amounts
indicated by the Secretary of the Treasury to the Federal Reserve
Banks of the respective districts.
CARTER

GLASS,

Secretary ofthe Treasury.
TREASURY DEPARTMENT,
O F F I C E OF THE SECRETARY,

January 26, 1920.
To THE INVESTOR:

Almost any banking institution in the United States will handle your subscription
for you, or you may make subscription direct to the Federal Reserve Bank of your
district.
EXHIBIT

8.

[Department Circular No. 185. Loans and Currency.]

UNITED STATES OF AMERICA—FOUR AND THREE-QUARTERS
P E R CENT TREASURY CERTIFIC ATE S OF INDEBTEDNESS, SERIES
T M-1921. DATED AND BEARING INTEREST FROM MARCH 15,
1920. DUE MARCH 15, 1921.

The Secretary of the Treasury, under the authority of the act
approved September 24, 1917, as amended, offers for subscription, at
par and accrued interest, through the Federal Reserve Banks,
Treasury certificates of indebtedness. Series T M-1921, dated and
bearing interest from March 15, 1920, payable March 15, 1921, with
interest at the rate of four and three-quarters per cent per annum,
payable semiannually.
Applications will be received at the Federal Reserve Banks.
Bearer certificates will be issued in denominations of $500, $1,000,
$5,000, $10,000, and $100,000. The certificates will have two interest coupons attached, payable September 15, 1920, and March
15, 1921.
Said certificates shall be exempt, both as to priacipal and interest,
from all taxation now or hereafter imposed by the United States, any
State, or any of the possessions of the United States, or by any local
taxing authority, except (a) estate or inheritance taxes, and (b) graduated additional income taxes, commonly known as surtaxes, and
excess-profits and war-profits taxes, now or hereafter imposed by
the United States, upon the income or profits of individuals, partnerships, associations, or corporations. The interest on an amount of
bonds and certificates authorized by said act approved September



302

REPORT ON THE FINANCES.

24, 1917; and amendments theretO; the principal of which does n o t
exceed in the aggregate $5,000, owned by any individual, partnership, association, or corporation, shall be exempt from the taxes
provided for in clause (b) above.
Certificates of this series will be accepted at par, with an adjust- .
ment of accrued interest, during such time and under such rules and
regulations as shall be prescribed or approved b}^ the Secretary of
the Treasury, in payment of income and profits taxes payable at
the maturit}^ of the certificates. The certificates of this series do
not bear the circulation privilege.
The right is reserved to reject any subscription and to allot less
than the amount of certificates applied for and to close the subscriptions at any time without notice. Payment at par and accrued
interest for certificates allotted must be made on or before March 15,
1920; or on later allotment. After allotment and upon payment
Federal Reserve Banks may issue interim receipts pending delivery
of the definitive certificates. Any qualified depositary will be permitted to make payment by credit ior 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. Treasury certificates of indebtedness of any
and all series maturing on March 15, 1920, and, pursuant to an
arrangement between the Treasury and the War Finance Corporation,
bonds of that Corporation maturing April 1, 1920, with unmatured
coupons attached; will be accepted at par with an adjustment of
accrued interest in payment for any certificates of the series T M-1921
now offered which shall be subscribed for and allotted.
As fiscal agents of the United States, Federal Reserve Banks are
authorized and requested to receive subscriptions and to make
allotment in full in the order of the receipt of applications up to
amounts mdicated 'by the Secretary of the Treasury to the Federal
Reserve Banks of the respective districts.
D. F.

HOUSTON,

Secretary ofthe Treasury.
TREASURY DEPARTMENT,
O F F I C E OF THE SECRETARY,

March 10, 1920.
To

THE

INVESTOR:

Almost any banking institution in the United States will handle your subscription
for you, or you may make subscription direct to the Federal Reserve Bank of your
district. Treasury certificates are being offered for subscription in decreasing amounts
and at, increasing intervals. If in the intervals between pubhc offerings you desire
to'purchase certificates of any outstanding issue, you should make apphcation to your
own bank'or, if it can not obtain them for you, to the Federal Reserve Bank of your
district. Other issues of Treasury certificates now outstanding are as follows:
Series T J 1920, 4^ per cent, due June 15, 1920.
Series T 10, 4J per cent, due September 15, 1920.
Series T U 1920, 4 | per cent, due December 15, 1920.




SECRETARY OF T H E TREASURY.
EXHIBIT

303

9.

[Department Circular No. 188. Loans and Currency.]

UNITED STATES OF AMERICA—FOUR AND THREE-QUARTERS
P E R CENT TREASURY CERTIFICATES OF INDEBTEDNESS,
SERIES E 1920. DATED AND BEARING INTEREST FROM APRIL
1, 1920. DUE JULY 1, 1920.

The vSecretary of the Treasury, under the authority of the act
approved September 24, 1917, as amended, offers for subscription,
at par and accrued interest, through the Federal Reserve Banks,
Treasury certificates of indebtedness. Series E 1920, dated and
bearing interest from April 1, 1920, payable July 1, 1920, with
interest at the rate of four and three-quarters per cent per annum.
Applications will be received at the Federal Keserve Banks.
Bearer certificates, without coupons, will be issued in denominations of $500, $1,000, $5,000, $10,000, and $100,000.
Said certificates shall be exempt, both as to principal and interest,
from all taxation now or hereafter imposed by the United States,
any State, or any of the possessions of the United States, or by any
local taxing authority, except (a) estate or inheritance taxeS; and
(b) graduated additional income taxeS; commonly known as surtaxes,
and excess-profits and war-profits taxes, now or hereafter imposed by
the United States, upon the income or profits of individuals, partnerships, associations, or corporations. The interest on an amount of
bonds and certificates authorized b}^ said act approved September 24,
1917, and amendments thereto, the principal ofwhich does not exceed
in the aggregate $5,000; owned by any individual; partnership, association, or corporation, shall be exempt from the taxes provided for in
clause (b) above.
The certificates of this series do not bear the circulation privilege
and will not be accepted in payment of taxes.
The right is reserved to reject any subscription and to allot less than
the amount of certificates applied for and to close the subscriptions at
any time without notice. Payment at par and accrued interest for
certificates allotted must be made on or before April 1, 1920, or on
later allotment. After allotment and upon payment Federal Reserve
Banks may issue interim receipts pending delivery of the definitive certificates. 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 b}^ the Federal Reserve Bank of its district. Pursuant to an arrangement between the Treasury and the War Finance
Corporation, bonds of that corporation, dated April 1, 1919, due April
1, 1920, will be accepted at par in payment for any certificates of the
Series E 1920 now offered which shall be subscribed for and allotted.
As fiscal agents of the United States, Federal Reserve Banks are
authorized and requested to receive subscriptions and to make allotment in full in the order of the receipt of applications up to amounts
indicated b}^ the Secretary of the Treasury to the Federal Reserve
Banks of the respective districts.
Secretary ofthe. Treasury.

TREASURY DEPARTMENT,
OFFICE OF THE SECRETARY,




March 29, 1920.

304
To

THE

REPORT ON THE FINANCES.
INVESTOR:

Almost any banking institution in the United States will handle your subscription
for you, or you may make subscription direct to the Federal Reserve Bank of your
district.
EXHIBIT

10.

[Department Circular No. 189. Loans and Currency.]

UNITED STATES OF AMERICA—TREASURY CERTIFICATES OF
INDEBTEDNESS. DATED AND BEARING INTEREST FROM A P R I L
15, 1920. SERIES F 1920, 5 P E R CENT, DUE JULY 15, 1920.
SERIES G 1920, 5i P E R CENT, DUE OCTOBER 16, 1920.

The Secretary of the Treasury, under the authority of the act
approved September 24, 1917; as amended, ofl'ers for subscription,
at par and accrued interest, through the Federal Reserve Banks,
Treasury certificates of indebtedness, in two series, both dated and
bearing interest from April 15, 1920, the certificates of Series F 1920
being payable on July 15, 1920, with interest at the rate of five per
cent per annum, and the certificates of Series G 1920 being payable
on October 15, 1920, with interest at the rate of five and one-quarter
per cent per annum semiannually.
Applications will be received at the Federal Reserve Banks.
Bearer certificates without coupons will be issued in denominations of $500, $1,000, $5,000, $10,000, and $100,000.
The certificates of said series shallbe exempt, both as to principal
and interest, from all taxation now or hereafter imposed by the
United States,, any State, or any of the possessions of the United
States, or by any local taxing authority, except (a) estate or inheritance taxes, and (b) graduated additional income taxes, commonly
known as surtaxes, and excess-profits and war-profits taxes, now or
hereafter imposed by the United States, upon the income or profits
of individuals, partnerships, associations, or corporations. The
interest on an amount of bonds and certificates authorized by said
act approved September 24, 1917, and amendments thereto, tfie
principal of which does not exceed in the aggregate $5,000, owned
by any individual, partnership, association, or corporation; shall be
exempt from the taxes provided for in clause (b) above.
The certificates of these series do not bear the circulation privilege, and will not be accepted in payment of taxes.
The right is reserved to reject any subscription and to allot less
than the amount of certificates of either or both series applied for
and to close the subscriptions as to either or both series at any time
without notice. Payment at par and accrued interest for certificates allotted must be made on or before April 15, 1920, or on later
allotment. After allotment and upon payment Federal Reserve
Banks may issue interim receipts pending delivery of the definitive
certificates. 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.
As fiscal agents of the United States, Federal Reserve Banks are
authorized and requested to receive subscriptions and to make allotment in full in the order of the receipt of applications up to amounts



SECRETARY OF THE TREASURY.

305

indicated by the Secretary of the Treasury to the Federal Reserve
Banks of the respective districts.
D. F. HOUSTON,

Secretary ofthe Treasury.
TREASURY DEPARTMENT,
OFFICE OF THE SECRETARY,

April 12, 1920.
To

THE

INVESTOR:

Almost any banking institution in the United States will handle your subscription
for you, or you may make subscription direct to the Federal Reserve Bank of your
district.
EXHIBIT

11.

[Department Circular No. 192. Loans and Currency.]

UNITED STATES OF AMERICA—FIVE AND ONE-HALF P E R CENT
TREASURY CERTIFICATES OF INDEBTEDNESS, SERIES H 1920.
DATED AND BEARING INTEREST FROM MAY 17, 1920. DUF}
NOVEMBER 15, 1920.

The Secretary of the Treasury, under the authority of the act
approved September 24, 1917, as amended; offers for subscription,
at par and accrued interest, through the Federal Reserve Banks,
Treasury certificates of indebtedness. Series PI 1920, dated and
bearing interest from May 17, 1920, payable November 15, 1920,
with interest at the rate of five and one-half per cent per annum.
> Applications will be received at the Federal Reserve Banks.
Bearer certificates, without coupons, will be issued in denominations of $500, $1,000, $5,000; $10,000; and $100;000. '
Said certificates shall be exempt; both as to principal and interest,
from all taxation now or hereafter imposed by the United States,
any State, or any of the possessions of the United States, or by any
local taxing authority; except (a) estate or inheritance taxeS; and
(b) graduated additional income taxes, commonly known as surtaxes, and excess-profits and war-profits taxes, now or hereafter
imposed by the United States, upon the income or profit of individuals; partnerships, associations, or corporations. The interest on
an amount of bonds and certificates authorized by said act approved
September 24, 1917; and amendments theretO; the principal of which
does not exceed in the aggregate $5,000, owned by any individual,
partnership, association, or corporation, shall be exempt from the
taxes provided for in clause (b) above.
The certificates of this series do not bear the circulation privilege
and. will not be accepted in payment of taxes.
The right is reserved to reject any subscription and to alldt l^ss
than the amount of certificates applied for and to close the subscr.iptions at any time without notice. Payment at par and accrued
interest for certificates allotted must be made on or before May 17,
1920, or on later allotment. After allotment and upon payment
Federal Reserve Banks may issue interim receipts pending delivery
of the definitive certificates. 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.
13799—FI 1920



20

306

REPORT ON T H E FINANCES.

As fiscal agents of the United States, Federal Reserve Banks are
authorized and requested to receive subscriptions and to make allotment in full in the order of the receipt of applications up to amounts
indicated by the Secretary of the Treasury to the Federal Reserve
Banks of the respective districts.
D.

F.

HOUSTON,

Secretary of the Treasury.
TREASURY DEPARTMENT,
OFFICE OF THE SECRETARY,

May 12, 1920.
To

THE

INVESTOR:

Almost any banking institution in the United States will handle your subscription
far you, or you may make subscription direct to the Federal Reserve Bank of your
district.
E X H I B I T 12.
[Departraent Circular No. 193. Loans and Currency.]
U N I T E D S T A T E S OF A M E R I C A — T R E A S U R Y C E R T I F I C A T E S OF
INDEBTEDNESS. DATED AND BEARING INTEREST FROM JUNE
1 5 , 1 9 2 0 . S E R I E S A 1 9 2 1 , 5f P E R C E N T , D U E J A N U A R Y 3 , 1 9 2 1 .
SERIES T J-1921, 6 P E R CENT, DUE JUNE 15, 1921.

The Secretary of the Treasury, under ^ the authority, of the act
approved September 24, 1917, as amended, offers for subscription,
at par and accrued interest, through the Federal Reserve Banks,
Treasury certificates of indebtedness, in two series, both dated and
bearing interest from June 15, 1920, the certificates of Series A 1921
being payable on January 3, 1921, with interest at the rate of five
and three-quarters per cent per annum, and the certificates of Series
T J-1921 being payable on June 15, 1921, and bearing inteiest at
the rate of six per cent per annum payable semiannually.
Applications will be received at the Federal Reserve Banks.
Bearer certificates will be issued in denominations of $500, $1,000,
$5,000, $10,000,^ and $100,000. The certificates of Series A 1921
will be issued without coupons. The certificates of Series T J-1921
will have two interest coupons attached, payable December 15, 1920,
and June 15? 1921.
The certificates of both said series shall be exempt; both as to
principal and interest; from all taxation now or hereafter imposed
oy the United StateS; any State, or any of the possessions of the
United States^ or by any local taxing authority, except (a) estate or
inheritance taxes, and (b) graduated additional income taxes, commonly known as surtaxes, and excess-profits and war-profits taxes,
now or hereafter imposed by the United States, upon the income or
profits of individuals, partnerships, associations, or corporations.
The interest on an amount of bonds and certificates authorized by
said act approved September 24, 1917, and amendments thereto, the
principal of which does not exceed in the aggregate $5,000, owned by
any individual, partnership, association, or corporation, shall be
exempt from the taxes provided for in clause (b) above.
The certificates of these series do not bear the circulation privilege.
The certificates of Series A 1921 will not be accepted in payment of
taxes. The certificates of Series T J-1921 will be accepted at par,
with an adjustment of accrued interest, during such time and under
such rules and regulations as shall be prescribed or approved by the



SECRETARY OF THE TREASURY.

307

Secretar}^ of the Treasury, in payment of income and profits taxes
payable at the maturity of the certifLcates.
The right is reserved to reject any subscription and to allot less
than the amount of certificates of either or both series applied for and
to close the subscriptions as to either or both series at any time without notice. Payment at par and accrued interest for certificates
allotted must be made on or before June 15, 1920, or on later allotment. After allotment and upon payment Federal Reserve Banks
may issue interim receipts pending delivery of the definitive certifiicates. Aii}^ 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.
Treasury certificates of indebtedness di Series T J-1920, maturing
June 15; 1920; of Series E 1920; maturing Jiily 1; 1920; and of Series F
1920, maturing July 15, 1920, will be accepted at par, with an adjustment of accrued interest, in payment for any certificates of the
Series A 1921 or T J-1921 now offered which shall be subscribed for
and allotted.
'As fiscal agents of the United States, Federal Reserve Banks are
authorized and requested to receive subscriptions and to make allotment in full in the order of the receipt of applications up to amounts
indicated by the Secretary of the Treasury to the Federal Reserve
Banks of the respective districts.
D. F. HOUSTON,

Secretary ofthe Treasury.
TREASURY DEPARTMENT,
O F F I C E OF THE SECRETARY,

June 10, 1920.
To

THE

INVESTOR:

Almost any banking institution in the United States will handle your subscription
for you, or you may make subscription direct to the Federal Reserve Bank of your
district. If you desire to purchase certificates of the above issues after the subscriptions close, or certificates of any outstanding issue, you should make application to
your own bank, or if it can not obtain them for you, to the Federal Reserve Bank of
your district.
E X H I B I T 13.
[Department Circular No. 199. Loans and Currency.]

UNITED STATES OF AMERICA—TREASURY CERTIFICATES OF
INDEBTEDNESS. DATED AND BEARING INTEREST FROM JULY
15, 1920. SERIES B 1921, 5f P E R CENT, DUE JANUARY 15, 1921.
SERIES T M 2 - 1 9 2 1 , 5f P E R CENT, DUE MARCH 15, 1921.

The vSecretary of the Treasury, under the authority of the act
approved September 24, 1917, as amended, offers for subscription; at
par and accrued interest; through the Federal Reserve Banks, Treasury certificates of indebtedness, in two series, both dated and bearing
interest from July 15, 1920, the certificates of Series B 1921 being
payable on January 15, 1921; with interest at the rate of five and threequarters per cent per annum payable semiannually; and the certificates of Series T M 2-1921 being payable on March 15, 1921, and
bearing interest at the rate of five and three-quarters per cent per
annum.
Applications will be received at the FederaL Reserve Banks.



308

. REPORT ON THE FINANCES.

Bearer certificates will be issued in denominations of $500, $1,000,
$5,000, $10,000, and $100,000. The certificates of Series B 1921 will
be issued without coupons. The certificates of Series T M 2-1921
will have one interest coupon attached, payable March 15, 1921.
The certificates of both said series shall be exempt, both as to
principal and interest, from all taxation now or hereafter imposed by
-the United States, any State, or any of the possessions of the United
StateS; or by any local taxing authority, except (a) estate or inheritance taxes, and. (6) graduated additional income taxes, commonly
known as surtaxes, and excess-profits and war-profits taxes, now or
hereafter imposed by the United States, upon the income or profits of
individuals, partnerships, associations, or corporations. The interest
on an amount of bonds and certificates authorized by said act approved
September 24, 1917, and amendments thereto, the principal of which
does not exceed in the aggregate $5,000, owned by any individual,
partnership, association, or corporation, shall be exempt from the
taxes provided for in clause (b) above.
The certificates of these series do not bear the circulation, privilege.
The certificates of Series B 1921 will not be accepted in payment of
taxes. The certificates of Series T M 2-1921 will be accepted at par,
with an adjustment of accrued interest, during such time and under
such rules and regulations as shall be prescribed or approved
by the Secretary of the Treasury, in payment of income and profits
taxes payable at the maturity of the certificates.
The right is reserved to reject any subscription and to allot less than
the amount of certificates of either or both series applied for and to
close the subscriptions as to either or both series at any time without
notice. Payment at par and accrued interest for certificates allotted
must be made oil or before July 15, 1920, or on later allotment. After
allotment and upon payment Federal Reserve Banks may issue
interim receipts pending delivery of the definitive certificates. 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. Treasury certificates of indebtedness of Series F 1920, maturing July 15, 1920, will
be accepted at par, with an adjustment of accrued interest, in payment for any certificates of the Series B 1921 or T M 2-1921 now
oft'ered w.hich shall be subscribed for and allotted.
As fiscal agents of the United States, Federal Reserve Banks are
authorized and requested to receive subscriptions and t o m a k e allotment in full in the order of the receipt of applications up to amounts
indicated by the Secretary of the Treasury to the Federal Reserve
Banks of the respective districts.
D. F. HOUSTON,

Secretary ofthe Treasury.
TREASURY DEPARTMENT,
OFFICE OF THE SECRETARY,

July 9, 1920.
To

THE

INVESTOR:

Almost any banking institution in the United States will handle your subscription
for you, or you may make subscription direct to the Federal Reserve Bank of your
district. If you desire to purchase certificates of the above issues after the subscriptions
close, or certificates of any outstanding issue, you should make apphcation to your own
bank, or if it can not obtain them for you, to the Federal Reserve Bank of your district.




•'

SECRETARY OF T H E TREASURY.

309

•U.

EXHIBIT

14.

[Department Circular No. 201. Loans and Currency.]

UNITED STATES OF AMERICA—SIX P E R CENT TREASURY CERTIFICATES OF INDEBTEDNESS, SERIES C 1921. DATED AND BEARING INTEREST FROM AUGUST 16, 1920. DUE AUGUST 16, 1921.

The Secretary of the, Treasury,. under the authority of the act
approved September 24, 1917, as amended, offers for subscription,
at par and accrued interest, through the Federal'Reserve Banks,
Treasury ^certificates of indebtedness. Series C 1921, dated and
bearing interest from August. 16, 1920, payable August .16, .1921,
with interest at the rate of six per cent per annum payable semiannually. . •
Applications will be received at the.FederalReserve Banks.
Bearer certificates will be issued in denominations of $500, $1,000,
$5,000, $10,000, and $100,000. The certificates will have two interest
coupons attached, payable February 16, 1921, and August 16, 1921.
Said certificates shall be exempt, both as to principal and interest,,
from all taxation now or hereafter imposed by the United States, any
State, or any of the possessions of the United States, or by any local
taxing authority-; except (a) estate or inheritance taxes, and (&)
. graduated additional income taxes, commonly known as surtaxes,
and excess-profits and war-profits taxes, now or hereafter imposed
by the United States, upon the income or profits of individuals,
partnerships, associations, or corporations. The interest on an
amount of bonds and certificates authorized by said act approved
September 24, 1917, and amendments thereto, the principal ofwhich
does not exceed in the aggregate $5,000, owned by any individual,
partnership, association, or corporation, shall be exempt from the
taxes provided for in clause (b) above.
The certificates of this series dp not bear the circulation privilege
and will not be accepted in payment of taxes.
The right is. reserved to reject any subscription and to allot less
than the ainount of certificates applied for and to close the subscriptions at any time without notice. Payment at par and accrued
interest for certificates allotted rnust be made on or before August 16,
1920, or on later allotmerit. After allotment and.upon payment
Federal Reserve Banks may issue interim receipts pending delivery
of the definitive certificates. .Any qualified depositary wfll be permitted to make payment by credit tor certificates allotted to it for
itself and its customers up to a-ny amount for which it.shall be
ualified in excess of existing deposits, when so notified by the Federal
..eserve Bank of its district,
As .fiscaf agents of the Uiiited States, Federal Reserve Banks are
authorized and requested to receive subscriptions and to make
allotment in full in the order of the receipt of applications up to
amounts indicated.by the Secretary of the Treasury to the Federal
Reserve Banks of the respective districts.

S

'

/

.

D.

,

F.

HOUSTON,

Secretary of the Treasury. ^

TREASIIRY DEPARTMENT,
O F F I C E OF THE SECRETARY,




• August 9, 1920.

. "

'

'

!

310

REPORT ON T H E FINANCES.

To THB INVESTOR:

Almost any banking institution in the United States will handle your subscription
for you, or you may make subscription direct to the Federal Reserve Bank of your
district. If you desire to purchase certificates of the above issue after the subscriptions
close, or certificates of any outstanding issue, you should make apphcation to your
own bank, or if it can not obtain them for you, to the Federal Reserve Bank of your
district.
EXHIBIT

15,

[Department Circular No. 204. Loans and Currency.]
UNITED STATES OP AMERICA—TREASURY CERTIFICATES OF
INDEBTEDNESS. DATED AND BEARING INTEREST FROM SEPTEMBER 16, 1920. SERIES T M 3-1921, 5 | P E R CENT, DUE MARCH
16, 1921. SERIES T S-1921, 6 P E R CENT, DUE SEPTEMBER 16,
1921.

#

The Secretary of the Treasury, under the authority of the act
approved September 24, 1917, as amended, offers for subscription
at par and accrued interest, through the Federal Reserve Banks,
Treasur}^ certificates of indebtedness, in two series, both dated and
bearing interest from September 15, 1920, the certificates of Series
T M 3-1921 being payable on March 15, 1921, with interest at the
rate of five and three-C[uarter& per cent per annum, and the certificates
of Series T S-192^1 being payable on September 15, 1921, and bearing
interest at the rate of six per cent per annum, payable semiannually.
Applications will be received at the Federal Reserve Banks.
Bearer certificates will be issued in denominations of $500, $1,000,
$5,000, $10,000, and $100,000. The certificates of Series T M 3-1921
will have one interest coupon attached payable March 15, 1921, and
the certificates of Series T S-1921 two interest coupons attached,
payable March 15 and September 15, 1921.
The certificates of both said series shall be exempt, both as to
rincipal and interest, from all taxation now or hereafter imposed
y the United States, any State, or any of the possessions of the
United States, or by any local taxing authority, except (a) estate or
inheritance taxes, and (&) graduated additional income taxes, commonly known as surtaxes, and excess-profits and war-profits taxes,
now or hereafter imposed by the United States, upon the incoine or
rofits of individuals, partnerships, associations, or corporations,
'he interest on an amomit of bonds and certiftcates authorized by
said act approved September 24, 1917, and amendments thereto,
the principal of which does not exceed in the aggregate $5,000,
owned by any individual, partnership, association, or corporation,
shall be exempt from the taxes provided for in clause (&) above.
Certificates of these series wiil be accepted at par, with an adjustment of accrued interest, during such time and under such rules and
regulations as shall be prescribed or approved by the Secretary of the
Treasury, in payment of income and profits taxes payable at the
maturity of the certificates, respectively. The certincates of these
series do not bear the circulation privilege.
The right is reserved to reject any subscription and to allot less
than the amount of certificates of either or both series applied for and
to close the subscriptions as to either or both series at any time without notice. Pajnuent at par and accrued interest for certificates
alloted must be made on or before September 15, 1920, or on later
allotment. After allotment and upon payment Federal Reserve

E

P




SECRETARY OF THE TREASURY.

311

Banks ma}^ issue interim receipts pending delivery of the definitive
certificates. Any qualified depositary wfll 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. Treasury certificates of indebtedness of Series T 10,
maturing September 15, 1920, and of Series G 1920, maturing October
15, 1920, will be accepted at par, with an adjustment of accrued
interest, in payment for any certificates of thc Series T M 3-1921 or
T S-1921 now oft'ered which shall be subscribed for and allotted.
As fiscal agents of the United States, Federal Reserve Banks are
authorized and requested to receive subscriptions and to make allotment in full in the order of the receipt of applications up to amounts
indicated by the Secretary of the Treasuiy to the Federal Reserve
Banks of the respective districts.
D. F.

HOUSTON,

Secretary of the Treasury,. '
TREASURY DEPARTMENT,
OFFICE OF THE SECRETARY,

September J , 1920.
To

THE INVESTOR:

Almost any banking institution in the United States will handle your subscription
for you, or you may make subscription direct to the Federal Reserve Bank of your
district. If. you desire to purchase certificates of the above issues after the subscriptions close, or certificates of any outstanding issue, you should make application to
your own bank, or if it can not obtain them for you, to the Federal Reserve, Bank of
your district.
EXHIBIT

16.

[Department Circular No. 206. Loans and Currency.]

UNITED STATES OF AMERICA—FIVE AND THREE-QUARTERS P E R
CENT TREASURY CERTIFICATES OF INDEBTEDNESS, SERIES
T M . 4 - 1 9 2 1 . DATED AND BEARING INTEREST FROM OCTOBER
1 6 , 1 9 2 0 . DUE MARCH 16, 1921.

The Secretary of the Treasury, under the authority of the act
approved September 24, 1917, as amended, ofl"ers for subscription, at
ar and accrued interest, through the Federal Reserve Banks,
'reasury certificates of indebtedness, Series T M 4-1921, dated and
bearing interest from October 15, 1920, payable March 15, 1921, with
interest at the rate of five and three-quarters per cent per annum.
Applications will be received at the Federal Reserve Banks.
Bearer certificates will be issued in denominations of $500, $1,000,
$5,000, $10,000, and $100,000. The certificates will have one interest
coupon attached payable Ma;rch 15, 1921,
Said certificates shall be exempt, both as to principal and interest,
from all taxation now or hereafter imposed by tne United States, any
State, or any of.the possessions of the United States, or by any
local taxing authority, ^except (a) estate or inheritance taxes, and
(&) graduated additional income taxes, commonly known as surtaxes,
and excess-profits and war-profits taxes, now or hereafter imposed
by the United States, upon the income or profits of individuals,
partnerships, associations, or corporations. The interest on an
amount oi bonds and certificates authorized by said act approved
September 24, 1917, and amendments thereto, the principal ofwhich

?




312

REPORT ON THE FINANCES.

does not exceed in the aggregate $5,000, owned by any individual,
partnership, association, or corporation, shall be exempt from the
taxes provided for in clause (6) above.
Certificates of this series will be accepted at par, with an adjustment of accrued interest, during such time and under such rules and
regulations as shall be prescribed or approved by the Secretary of the
Treasury, in payment of income and profits taxes payable at the
maturity of the certificates. The certificates of this series do not
bear the circulation privilege.
The right is reserved to reject any subscription and to allot less
than the amount of certificates applied for and to close the subscriptions at any time without notice. Payment at par and .accrued
interest for certificates allotted must be made on or before October 15,
1920, or on later allotment. After allotment and upon payment
Federal Reserve Banks may issue interim receipts pending delivery
of the definitive certificates. 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. Treasury certificates of indebtedness
of Series G 1920, maturing October 15, 1920, and of Series H 1920,
maturing November 15, 1920, will be accepted at par, with an adjustment of accrued interest, in payment tor any certificates of the
Series T M 4-1921 now offered which shall be subscribed for and
allotted.
As fiscal agents of the United States, Federal Reserve Banks are
authorized and requested to receive subscriptions and to make allotment in full in the order of the receipt of applications up to amounts
indicated by the Secretary of the Treasury to the Federal Reserve
Banks of the respective districts.
D.

F.

HOUSTON,

Secretary of the Treasury:
TREASURY DEPARTMENT,
O F F I C E OF THE SECRETARY,

October 8, 1920.
To THE INVESTOR:

Almost any banking institution in the United States will handle your subscription
for you, or you may make subscription direct to the Federal Reserve Bank of your
district. If you desire to purchase certificates of the above issue after the subscriptions close, or certificates of any outstanding issue, you should make application to
your own bank, or if it can not obtain them for you, to the Federal Reserve Bank of
your district.
EXHIBIT

17.
o

[Department Circular No. 211. Loans and Currency.]

UNITED STATES OF AMERICA—FIVE AND THREE-QUARTERS P E R
CENT TREASURY CERTIFICATES OF INDEBTEDNESS, SERIES
D 1921. DATED AND BEARING INTEREST FROM NOVEMBER 16,
1920. DUE MAY 16, 1921.

The Secretary pf the Treasury, under the authority of the act approved September 24, 1917, as amended, offers for subscription, at
par and accrued interest, through the Federal Reserve Banks,
Treasury certificates of indebtedness. Series D 1921, dated and bearing interest from November 15, 1920, payable May 16, 1921, with
interest at the rate of five and three-quarters per' cent per annum
semiannually.



SECRETARY OF THE TREASURY.

313

Applications will be received at the Federal Reserve Banks.
Bearer certificates will be issued in denominations of $500, $1,000,
$5,000, $10,000, and $100,000. The certificates will have one interest coupon attached, payable May 16, 1921.
Said certificates shall be exempt, both as to principal and interest,
from all taxation now or hereafter imposed by the United States, any
State, or any of the possessipns of the United States, or by any local
taxing authority, except (a) estate or inheritance taxes, and (b)
graduated additional income taxes, commonly known as surtaxes,
and excess-profits and war-profits taxes, now or hereafter imposed
by the United States, upon the income or profits of individuals,
partnerships, associations, or corporations. The interest on an
amount of bonds and certificates authorized by said act approved
September 24, 1917, and amendments thereto, the. principal of
which does not exceed in the aggregate $5,000, owned by any individual, partnership, association, or corporation, shall be exempt from
the taxes provided for in clause (b) above.
The certificates of this series do not bear the circulation privilege
aiid will not be accepted in payment of taxes.
The right is reserved to reject any subscription and to allot less
than the amount of certificates applied for and to close the subscriptions at any time without notice. Payment at par and accrued
interest for certificates allotted must be made on or Def ore November
15, 1920, or on later allotment. After allotment and upon payment
Federal Reserve Banks may issue interim receipts pending delivery
of the definitive certificates. Any qualified depositary will be permitted to make payment b}^ 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. Treasury certificates of indebtedness
of Series H 1920, maturing November 15, 1920, will be accepted at
par, with an adjustment oi accrued interest, in payment for any certificates of the Series D 1921 now offered which shall be subscribed
for and allotted.
As fiscal agents of the United States, Federal Reserve Banks are
authorized and requested to receive subscriptions and to make
allotment in full in the order of the receipt of applications up to
amounts indicated by the Secretary of the Treasury to the Federal
Reserve Banks of the respective districts.
D.

F.

HOUSTON,

Secretary of the Treasury.
TREASURY DEPARTMENT,
O F F I C E OF THE SECRETARY,

November 8, 1920.
To THE INVESTOR:

Almost any banking institution in the United States will handle your subscription
for you, or you may make subscription direct to the Federal^ Reserve Bank of your
district. Special attention is invited to the terms of subscription as stated above.
If you desire to purchase certificates of the above issue after the subscriptions close, or
certificates of any outstanding issue, you should make application to your own bank,
or if it can not obtain them for you, to the Federal Reserve Bank of your district.




314

REPORT ON T H E FINANCES..
EXHIBIT

18.

O F F E R TO R E D E E M B E F O R E MATURITY, T R E A SURY 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 , S E R I E S A 1920.

WASHINGTON, December 10, 1919.
STATEMENT BY SECRETARY GLASS.

The Secretary of the Treasury has authorized the Federal Reserve
Banks, on and after Monday, December 15, and until further notice,
to redeem in cash before January 2, 1920, at the holder's option, a i
par and accrued interest to the date of such optional redemption,
Treasury certificates of indebtedness of Series A 1920, maturing
January 2, 1920.
EXHIBIT

19.

OFFERTO REDEEM BEFORE MATURITY, TREASURY CERTIFICATES
OF I N D E B T E D N E S S , S E R I E S B 1920.

WASHINGTON, December 30, 1919.
STATEMENT BY SECRETARY GLASS.

The Secretary of the Treasury has authorized the Federal Reserve
Banks, on and after Friday, January 2, 1920, and. until further notice,
to redeem in cash before January 15, 1920, at the holder's option, at
par and accrued interest to the date of such optional redemption.
Treasury certificates of indebtedness of Series B 1920, maturing
January 15, 1920.
EXHIBIT

20.

O F F E R T O R E D E E M BEFORE MATURITY, T R E A SURY CERTIFICATES
OF I N D E B T E D N E S S , S E R I E S D 1920.

WASHINGTON, February ly 1920.
STATEMENT BY SECRETAEY HOUSTONo

The Secretary of the Treasury has authorized the Federal Reserve
Banks, on and after Saturday,. February 7, 1920, and until further
notice, to redeem in cash before February 16, 1920, at the holder's
option, at par and accrued interest to the date of such optional
redemption. Treasury certificates of indebtedness of Series D 1920,
maturing February 16, 1920.




EXHIBIT

21.

STATEMENT OF THE PUBLIC DEBT OF THE UNITED STATES, JUNE 30, 1920.
Amountissued.
INTEREST-BEARING DEBT.
Bonds:
2 % consols of 1930
4 % l o a n of 1925
2 % P a n a m a s of 1916-36
2 % P a n a m a s of 1918-38
'.
3 % P a n a m a s of 1961
A
3 % c o n v e r s i o n b o n d s of 1946-47
2^'% postal savings b o n d s (1st t o 18th series)

Amount retired.

!S646,250,150.00
162,315,400.00
54,631,980.00
30,000,000.00
50,000,000.00
28,894,500.00
11,539,360.00

S46,526,100. 00
43,825,500.00
5,677,800. 00
4,052,600.00

1,989,455,550.00

Amount outstanding.

36,996,750.00

S599,724,050.00
118,489,900.00
48,954,180.00
25,947,400.00
50,000,000.00
28,894,500.00
11,539,360.00

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S883,549,390.00

First Liberty loan
Z \ % b o n d s of 1932-47
C o n v e r t e d 4 % b o n d s of 1932-47
C o n v e r t e d 4 ^ % b o n d s of 1932-47
Second c o n v e r t e d 4 ^ % b o n d s of 1932-47.

%

$1,410,074,400.00
65,803,050.00
473,089,200.00
3,492,150.00

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1,952,458,800.00

Second Liberty loan
4 % b o n d s of 1927-42
C o n v e r t e d 4 ^ % b o n d s of 1927-42.

3,807,865,000.00

482,558,000.00
240,003,250.00
3,085,303,750.00
3,325,307,000.00

T h i r d L i b e r t y loan—
4 i % b o n d s of 1 9 2 8 . . . ,
F o u r t h L i b e r t y loan—
4 i % b o n d s of 1933-38.

4,175,650,050.00

512,934,250. 00

3,662,715,800.00

6,984,576,000.00

570,221, 500.00

6,394,354,500.00

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15,334,836,100.00
Notes:
Victory Liberty loan
4 ^ % n o t e s of 1922-23..
3f% n o t e s of 1922-23..

14,495,371,850.00

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249,006,500.00

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13,427,969,700.00
818,395,650.00
1 4,246,365,350. 00

Certificates of i n d e b t e d n e s s :
TaxSeries T-10
Series TD-1920
Series TM-1921
..
Series TJ-1921
LoanSeries E-1920.
Series F-1920.




657,469,000.00
703,026,000.00
201,370,500.00
242,517,000.00

657,469,000.00
703,026,000.00
201,370,500. 00
242,517,000.00

1,804,382,600.00
200,669,500. 00
83,903,000.00

47,019,500.00
4,887,500.00

153,650,000.00
79,015,500.00

I I n c l u d e s n o t e s deliverable a m o u n t i n g t o S15,550; does n o t i n c l u d e p a r t i a l pa3^ments received a m o u n t i n g t o S15,180.

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Statement of the Public Debt of the United States, June 30, 1920—Continued.
Amountissued.
Certificates of indebtedness—Continued.
Loan—Continued.
Series G-1920
Series H-1920
SeriesA-1921
Pittman Act.
Special
War sa\dngs secm-ities: 2
War sa\dngs certificates, series 1918
War savings certificates, series 1919 and 1920.

§170,633,500.00
102,865,000.00
176,604,000.00

Amount retired.

§1,600,000.00

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Amount outstanding.

S169,033,500.00
102,865,000. 00
176,604,000. 00

$681,168,000.00259,375,000.00
24,000,000.00

259,375,000.00
24,000,000.00

$2,768,925,500.00
996,858,184.83
167,399,288.40

688,126,780.24
139,292,241.12

308,731,404.59
28,107,047.28

827,419,021.36

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M A T U R E D D E B T ON W H I C H I N T E R E S T HAS CEASED—PAYABLE ON P R E S E N T A T I O N .

Funded loan of 1891, continued at 2%, called for redemption May 18,1900, interest ceased
Aug. 18, 1900
:
Funded loan of 1891, matured Sept. 2,1891
Loan of 1904, matured Feb. 2,1904
'
Funded loan of 1907, matured July 2, 1907
,
Refunding certificates, matured July 1,1907
Old debt matmed at various dates prior to Jan. 1,1891, and otheritems of debt matured
at various dates subsequent to Jan. 1,1861
Certificates of indebtedness, at various interest rates, matured
Loan of 1908-18

1,000.00
19,800.00
13,050.00
384,400. 00
10,410.00
898,680.26
4,900,500.00
519,860.00

c
6,747,700.26

Total matured debt outstanding on which interest has ceased
D E B T B E A R I N G N O I N T E R E S T — P A Y A B L E ON P R E S E N T A T I O N .

Obligations required to be reissued when redeemed:
IJnited States notes
Less gold reser\ e
Obligations that will be retired on^presentatipn;.
Old demandno'tes.
National-bank notes and Federalreserve bank notes assumed by the United States
on deposit of lawful money for their retirement
Fractional currency
Total debt bearing no intisrest outstanding.
Total gross debt ?




O

24,061,095,361.36

Total interest-bearing debt outstanding

346,681,016.00
152,979,025.63

193,701,990.37
53,012. 50
29,478,280.00
6,842,067. 04
. 230,075,349. 91
24,297,918,411.53

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Matured interest obligations, etc.:
Matured interest obligations outstanding ^
Discount accrued (partly estimated) on war savings securities, series of 1918 &.
Discount accrued (partly estimated) on war savings securities, series of 1919 s.
Treasury warrants outstanding
Disbursing officers' checks outstanding

Balance held by the Treasurer of the United States as per Daily Treasury Statement for
June 30, 1920
Add:
Net excess of receipts over disbursements in June reports subsequently received..
Net debt, including matured interest obligations, etc.

84,141,024.03
70,869,628.84
3,880,485.52
16,756,579.65
217,270,621.96

392,918,340.00
24,690,836,751.53

357,701,682.23
2,245,338.10

359/947,020.33
24,330,889,731.20

2 On basis of cash receipts and repayments by the Treasm-er ofthe United States, and include thrift stamps.
3 The total gross debt June 30, 1920, on the basis of daily Treasmy statements was $24,299,321,467.07 and the net amount of public debt redemptions and receipts in transit, etc.,
June 30, 1920, was $1,403,055.54.
* The unpaid interest due on Liberty loans is estimated in ca.ses where complete reports have not been received.
5 Accrued discount calculated on basis of exact accrual at rate of 4 per cent per annum compounded quarterly, with due allowance for cash redemptions to date.
6 No deduction is made on account of obligations of foreign Governments or other investments.
Issues of soldiers' and sailors' civil relief bonds not included in the above: Total issue to June 30," 1920, was 1195,400, of which $600 had been retired.




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Detail of outstanding interest-bearing issues as shown above.

00
Authorizing act.

Title.
Bonds:
Consols of 1930..
Loan of 1925....

Rate of
interest.

Date of issue.

Mar. 14, 1900.
Jan. 14, 1875.-

2%..
4%..

Apr. 1, 1900
Feb. 1, 1895

Panama Canal loan of 1916-1936.

June 28, 1902, and Dec. 21, 1905..

2%--

Aug. 1, 1906

Panama Canal loan of 1918-1938.
Panama Canal loan of 1961

.do.
Aug. 5,1909, Feb. 4,1910, and Mar. 2,
1911.
Dec. 23, 1913
June 25, 1910

2%.-.
3%...

Nov. 1, 1908
J u n e l , 1911

Conversion bonds
Postal Savings bonds (1st to 18th
series).
First Liberty loan—
3^% bonds of 1932-47
Converted 4% bonds of 193247.
Converted 4i% bonds of 193247.
Second converted 4i% bonds
of 1932-47.
Second Liberty loan—
4% bonds of 1927-42
Converted 4i% bonds of 192742.
Third Liberty loan—
4i% bonds of 1928
Fourth Liberty loan—
4i% bonds of 1933-38
Notes:
Victory Liberty loan—
4i% notes of 1922-23.
31% notes of 1922-23.
Certificates of indebtedness:
Series T-10
Series TD-1920
Series TM-1921
Series TJ-192i
LoanSeries E-1920
Series F-1920




3%-..

Payable after Apr. 1,1930.
Payable after Feb. 1,1925.
/Redeemable after Aug. 1, 1916..
\Payable Aug. 1, 1936
/Redeemable after Nov. 1, 1918..
\Payable Nov. 1, 1938
Payable June 1,1961

Interest payable.

Jan. 1, Apr. 1, July 1, Oct. 1.
Feb. 1, May 1, Aug. 1,
Nov. 1.
y Do.

Do.
Mar. 1, June 1, Sept. 1,
Dec. 1.
Jan. 1, 1916-17
-... Payable 30 years from date of issue... Jan. 1, Apr. 1, July 1, Oct. I.
Jan. 1, July 1,1911-20 /Redeemable 1 year from date of issue. J a n . 1, July 1.
\Payable 20 years from issue

31%.
4%-.

June 15, 1917.
Nov. 15, 1917.

4i%-.

May 9, 1918..

4i%.

Sept. 24, 1917
Sept. 24, 1917, as amended.

4i%-

Nov. 15, 1917May 9, 1918...

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4i%-.

.-..do

Redeemable dn or after June 15,1932. June 15, Dec. 15.
Payable June 15, 1947

Redeemable on or after Nov. 15,1927. JMay 15, Nov. 15.
Payable Nov. 15, 1942
Payable Sept. 15, 1928

Mar. 15, Sept. 15.

.do..

4i%.

Oct. 24, 1918..

/Redeemable on or after Oct. 15,1933. JApr. 15, Oct. 15.
\Payable Oct. 15, 1938

.do.,
-do..

4|%31%.

May 20, 1919.
do

Redeemable June 15 or Dec. 15,1922.. ijune 15,
Dec. 15.
Payable May 20, 1923
:........

Sept. 15, 1919..
Jan. 2, 1920-..Mar. 15,1920..
June 15, 1920..

Sept. 15, 1920-.
Dec. 15, 1920..
Mar. 15, 1921..
June 15, 1921..

Mar: 15, Sept. 15.
June 15, Dec. 15.
Sept. 15, Mar. 15.
Dec. 15, June 15.

A p r . l , 1920..
Apr. 15, 1920.

J u l y l , 1920..
July 15, 1920,

At maturity.
Do,

Sept. 24, 1917, as amended.
do
....do-...
-...do
Sept. 24, 1917, as amended.
..--dQ

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Oct. 24, 1918-.

Apr.24, 1917
Apr. 24, 1917; Sept. 24, 1917.
Apr. 24, 1917; Sept. 24, 1917, as
amended.
....do

-do-,

When redeemable or payable.

tf%..
4f%-.
5%...

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• Series G-1920.
Series H-1920.,
Series A-1921.
Pittman Act
Special.
War savings securities

do...
May 17,1920
June 15,1920
Various dates, 1918-19.

.do.,
-do..
.doSept. 24,1917, as amended, and Apr.
23, 1918.
Sept. 24, 1917, as amended
:.

Various... Various dates, 1919

....do

4%i.,

Jan. 2, 1918
Jan. 2, 1919
Jan. 2, 1920

3i%-.

J u l y l , 1918

Soldiers' and sailors' civil rehef bonds. Mar. 8, 1918.

5i%
5i%
51%
2%

Do.
Oct. 15, 1920
Do.Nov. 15, 1920..
Do.
Jan. 3,1921
One year from date of issue or re- Jan. 1, July 1.
newal.
At maturity.
At maturity
[Redeemable on or 10 days after demand.
Payable Jan. 1,1923
;
Do.
Payable Jan. 1, 1924.
[Payable Jan. 1,1925
Mature July 1, 1928; may be called Jan. 1, July 1.
1 year after termination of war.

1 If held to maturity war savings securities yield interest at 4 per cent per annum compounded quarterly for the average period to maturity on the average issue price.
Stamps do not bear mterest.

Thrift

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Securities owned by the United States Government.
[Compiled from latest reports received by the Treasury.]
June 30,1920.
Obligations of foreign Governments, under authority of acts approved Apr, 24,1917, and Sept. 24, 1917, as amended (on basis of cash advances, less repajnnents of
principal):
Italv
$1,631,338,986.99
Belgium
$338,735,000.00
Liberia
26,000.00
Cuba
9,500,000.00
Roumania
23,205,819.52
Czechoslovakia
59,524,041.10
Russia
187,729,750.00
France
2,945,330,800.00
Great Britain
,
4,212,835,992.01
Serbia
26,780,465.56
Greece
10,000,000.00
Total
:
Foreign obligations received from the Secretary of War on account of sale of surplus war supplies:
Belgium.
$4,159,491.96
$27,588,581.14
Lithuania
Czechoslovakia..
20,621,994.54
57,629,731.84
Poland
12,213,377.88
12,913,589.66
Esthonia
Roumania
400,000,000.00
406,082.30
France
Russia
2,521,869.32
24,978,020.99
Latvia
Serbs, Croats, and Slovenes.
Total..
Foreign obligations received from the American Relief Administration on account of relief, pm'suant to act approved Feb. 25,1919:
Armenia
$8,028,412.15
Latvia
Czechoslovakia
6,348,653.56
Lithuania
Esthonia
:
1,785,767.72
Poland
Finland
8,281,926.17
Russia
Total..




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563,032,739.63
$2,610,417.82
822,136.07
51,671,749.36
4,465,465.07
84,014,527.92

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C a p i t a l stock of W a r E m e r g e n c y C o r p o r a t i o n s :
Capitalstock ofthe Emergency Fleet Corporation.
C a p i t a l stock of t h e H o u s i n g Corporation, i s s u e d . . .
Less a m o u n t retired

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$50,000,000.00
$70,000,000.00
3,500,000.00

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66,500,000-,(M)
5, ooo; OOt 8>

C a p i t a l stock of t h e Sugar E q u a l i z a t i o n B o a r d
C a p i t a l s t o c k of t h e U n i t e d S t a t e s G r a i n Corporation, a u t h o r i z e d a n d issued.Less a m o u n t r e t i r e d

$500,000,000.00
350,000,000.00

C a p i t a l s t o c k of t h e W a r F i n a n c e Corporation, a u t h o r i z e d a n d issued
Less c a s h deposited w i t h t h e T r e a s u r e r U . S, to credit of W a r F i n a n c e Corporation.

$500,000,000.00
380,917,623.43

150,000,000.00

Obligations of carriers a c q u i r e d u n d e r section 7 o f t h e F e d e r a l c o n t r o l act, a p p r o v e d M a r c h 21,1918, as a m e n d e d : i
$26,948,000.00
Missouri Pacific R a i l r o a d C o m p a n y
'
Boston & Maine Railroad .
750,000.00
New York Central Railroad Company
Chesapeake & Ohio R a i l w a y C o m p a n y
200,000. 00
Chicago J u n c t i o n R a i l w a y C o m p a n y
New York, New H a v e n & Hartford Railroad Company
50,250. 00
Pennsylvania Railroad Company
Chicago, T e r r e H a u t e & S o u t h e a s t e r n R a i l w a y C o m p a n y .
3,000,000. 00
Pittsburgh & Lake Erie Railroad Company
The Erie Railroad Company
Pittsburgh & S h a w m u t Railroad Company
Hudson & Manhattan Railroad Company
1,000,000. 00
S e a b o a r d A i r L i n e Railroad C o m p a n y
."
International Great Northern Railway Company, The
1,400,000.00
W a s h i n g t o n , B r a n d y w i n e & P o i n t L o o k o u t R a i l r o a d ComReceiver of t h e
750,000. 00
pany
Minneapolis & S t . Louis R a i l r o a d C o m p a n y

119,082,376.57
$1,200,000.00
6,500,000.00
46,026,500.00
20,000,000. 00
500,000. 00
354,005.00
1,850,000.00

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50,000. 00

Total
, E q u i p m e n t t r u s t 6 per c e n t gold n o t e s , a c q u i r e d b y Director G e n e r a l of R a i l r o a d s p u r s u a n t t o F e d e r a l c o n t r o l a c t of March 21, 1918, as a m e n d e d , a n d a c t
a p p r o v e d N o v e m b e r 19,1919, t o p r o v i d e for t h e r e i m b u r s e m e n t of t h e U n i t e d S t a t e s for m o t i v e p o w e r , c a r s , a n d other e q u i p m e n t ordered for carriers u n d e r
Federal control: 2
$165,000
Indiana Harbor Belt Railroad Company
$565,500
Alabama Great Southern Railroad
786,000
K a n a v / h a & Michigan R a i l w a y C o m p a n y
1,023,000
A n n Arbor Railroad Company
6,075,000
954,000
K a n s a s City S o u t h e r n R a i l w a y C o m p a n y
Atchison, Topeka & Santa Fe Railway Company
958,500
187,500
Atlanta, Birmingham & Atlantic Railway Company
K a n s a s City T e r m i n a l R a i l w a y C o m p a n y
6,379,500
640,500
A t l a n t i c Coast L i n e R a i l r o a d C o m p a n y
Lake Erie & Western Railroad Company
Louisville & N a s h v i l l e R a i l r o a d C o m p a n y
A t l a n t i c Coast L i n e R a i l r o a d C o m p a n y a n d t h e L o u i s 10,468,500
Maine Central Railroad Company
\dlle & N a s h v i l l e R a i l r o a d C o m p a n y , j o i n t lessees of t h e
1,203,000
1,183,500
Georgia R a i l r o a d C o m p a n y
,
Michigan C e n t r a l R a i l r o a d C o m p a n y
5,118,000
17,578,500
B a l t i m o r e & Ohio R a i l r o a d C o m p a n y
....
Minneapolis & St. Louis R a i h o a d Company
817,500
5,329,500
Missouri, K a n s a s & T e x a s R a i l w a y C o m p a n y
1,261,500
B o s t o n & M a i n e R a i l r o a d '.
2,004,000
Missouri Pacific R a i l r o a d C o m p a n y
8,847,000
Buffalo, R o c h e s t e r & P i t t s b u r g h R a i l w a y C o m p a n y
6,043,500
Mobile & 0 hio R a i l r o a d C o m p a n y
579,000
Carolina, CUnchfield & Ohio R a i l w a y C o m p a n y
3,495,000
Monongahela Railway Company
493,500
Central R a i l r o a d C o m p a n y of N e w .Jersey
2,505,000
817,500
Morgantown & Kingwood Railroad Company
Charleston & W e s t e r n Carolina Railway, C o m p a n y
11,205,000
N a s h v i l l e , C h a t t a n o o g a & S t . Louis R a i l w a y C o m p a n y .
1,297,500
Chesapeake & Ohio R a i l w a y C o m p a n y
New York Central Railroad Company
."..
1,816,500
13,674,000
Chicago & A l t o n R a i l r o a d C o m p a n y
N e w Y o r k , Nevij H a v e n & H a r t f o r d R a i l r o a d C o m p a n y .
4,306,500
6,060,000
Chicago, B u r l i n g t o n & Q u i n c y R a i l r o a d C o m p a n y
Norfolk S o u t h e r n R a i l r o a d C o m p a n y .
'..
741,000
132,000
Cliicago & E a s t e r n I l h n o i s R a i l r o a d C o m p a n y
Norfolk & W e s t e r n R a i l w a y C o i n p a n y
1,039,500
6,885,000
Chicago, I n d i a n a p o l i s & Louisville R a i l w a y C o m p a n y . . .
N o r t h w e s t e r n Pacific R a i l r o a d C o m p a n y
Chicago G r e a t W e s t e r n R a i l r o a d C o m p a n y
651,000
271,500
442,500
P e n n s y l v a n i a R a i l r o a d Co
52,012,000
Chicago J u n c t i o n R a i l w a y C o m p a n y




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cliicago, Milwaukee & St. Paul Railway Company
Chicago & Northwestern Railway Company
Chicago, Rock Island & Pacific Railway Company
Cliicago, St. Paul, Minneapolis & Omaha Railway Company
Chicago & Western Indiana Railroad Company
Cincinnati, New Orleans & Texas Pacific Railway Company
Cleveland, Cincinnati, Chicago & St. Louis Railway
Company
Colorado & Southern Railway Company
Delaware & Hudson Company Detroit, Toledo & Ironton Railroad Company
Detroit & Toledo Shore Line Railroad Company.
Erie Railroad Company
Forth Worth & Denver City Railway Company..
Grand Trunk Railway of Canada
Grand Trunk Western Railway Company
Great Northern Railway Company;
Hocking Valley Railway Company.
Illinois Central Railroad Company

16,444,500
9,973,500
8,117,250
2,352,000
279,000
957,000
5,130,000
1,050,000
3,912,000
817,500
501,000
4,501,500
258,000
898,500
3,027,000
4,294,500
2,811,000
9,117,000

S,li7,505
582,000

Pere Mai'quette Railway Company.
,
Pittsburgh & Lake Erie Railroad Company
,
Pittsburgh, McKeesport & Youghiogheny Railroad Company
Richmond, Fredericksburg & Potomac Railroad Company..
Rutland Railroad Company
Seaboard Air Line Railway Company.
Southern Pacific Company..
~.
Southern Railway Company
Spokane, Portland & Seattle Railway Company
St. Louis-San Francisco Railway Company. -.".
Terminal Railroad Association of St. Louis
Texas & Pacific Railway Company
Toledo & Ohio Central Railway Company
Toledo, St. Louis & AVestern Railroad Company
Virginian Railway Company
Wabash Railroad Company
Washington Southern Railway Company
Washington Terminal Company
Western Maryland Railway Company
Wheeling & Lake Erie Railway Company

2,800,500
984,000
370,500
1,650,000
2,814,000
10,293,000
817,500
14,029,500
315,000
2,392,500
2,146,500
1,125,500
1,630,500
11,122,500
421,500
94,500
844,500
4,587,000

H

>

5,064,600.00

Total
:
Bankers' acceptances, received by the Secretary of War on account of sales of surplus war supplies
Grand, total

Pi

O

$5,000,000.00
64,600.00

St. Paul .Minn..
Omaha, Nebr...
Wichita, Kans..
Houston, Tex...
Berkeley, Calif..
Spokane, Wash.

Total
Federal farm loan bonds, acquired pursuant to act approved Jan. 18, 1918, as extended by joint resolution approA'^ed May 26, 1920:
Federal farm loan 4^ per cent bonds
1
Federal farm loan 5 per cent bonds

:

fe
o
pi
fe
329,203,750.00

Total
Obligations of carriers acquired pursuant to section 210 ofthe transportation act approved Feb. 28, 1920, as amended:
Boston & Maine Railroad
Salt Lake & Utah Railroad Company
Total
Capital stock of Federal land banks, on basis of purchases, less repayments to date:
Sprtagfield, Mass
$739,925.00
Baltimore, Md
741,485.00
Columbia, S.C
712,270.00
Louisville, Ky
693,515.00
New Orleans. La
697,880.00
St. Louis, Mo
,
:
659,060.00

Ul

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$498,215.00
485,845.00
637,980.00
561,550.00
744,010.00
483,775.00

Ul

7,655,510.00

d

$136,885,000.00
29,500,000.00
.'

166,385,000.00
65,192.00
11,101,589,306.30^

—

^ » ^

1 This amount does not include securities purchased by the Director General of Railroads under the provisions of section 12 of the Federal control act, apprbved Mar. 21, l i ' ^ ; 3 In each case there are 15 notes of equal amount, Nos. 1 to 15, inclusive, all dated Jan. 15, 1920, and due, respectively, on the 15th day of January, 1921 to 1935, inclusive.




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MEMORANDUM.

Amount due the United States from the Central Branch ofthe Union Pacific Railroad on account of bonds issued (Pacific Raikoad aid bonds, act