The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
U
Annual Report
of the
Secretary of the Treasury
on the
State of the Finances
/
.
-
For the Fiscal Year Ended June 30, 1949
Including Administrative Reports by Bureaus and Offices,
and Exhibits and Tables Relating to Treasury Operations
TREASURY DEPARTMENT
DOCUMENT NO. 3162
Secretary
UNITED STATES GOVERNMENT PRINTING OFFICE, WASHINGTON : 1950
For sale by Superintendent of Documents, U. S. Government Printing Office, Washington 25, D. C.
Price $1.50 (Paper)
CONTENTS
Page
Transmittal and statement by the Secretary of the Treasury
REPORT OF TREASURY ACTIVITIES JUNE 25,1946-OCTOBER
31, 1949
Summary report of Treasury activities June 25, 1946-October 31, 1949
Management of the public debt__
Tax policy
International finance
i
Administrative management of operating b ureaus
.
11
11
20
24
35
REPORT ON OPERATIONS
Summary of fiscal operations-.
:
Budget receipts.
•
Budget expenditures
Trust accounts, etc., receipts and expenditures
General fund
.
Public debt operations arid ownership of Federal securities
Public debt operations
Ownership of Federal securities
Corporations and certain other business-type activities of the Government.
•Securities owned by the Government
International financial and monetary developments
Taxation developments
Estimates of rec.eipts
Estimates of expenditures
61
61
67
68
70
71
73
83
90
91
92
100
101
109
ADMINISTRATIVE REPORTS
General administration
Comptroller of the Currency, Bureau of the
Customs, Bureau of_
;
Engraving and Printing, Bureau of
Federal Supply, Bureau of
Fiscal Service-.-_
Internal Revenue, Bureau of
International Finance, Office of
Legal Division
Mint, Bureau o f t h e - . .
.
Narcotics, Bureau of.^
Practice, Committee on
.
Tax Advisory Staff of the Secretary
Technical Staff, Office of the
.
United States Coast Guard
United States Savings Bonds Division
United States Secret Service.
'
113
114
116
123
126
131
155
160
162
164
167
169
169
171
171
181
182
.
..
_.
1
EXHIBITS
PUBLIC DEBT
1.
2.
3.
4.
Treasury certificates of indebtedness, Treasury notes, and Treasury
bonds
Offeririg of 1J4 percent certificates of Series G-1949
Details of'certificate issues and allotments
.-...
Offering of V/s percent Treasury notes of Series A-1950, and allotments
-.Calls fpr redemption of three issues of Treasury bonds
in
189
190
194
195
IV
CONTENTS
Treasury bills
Page
5. Inviting tenders for Treasury bills dated July 1, 1948
6. Acceptance of tenders for Treasury bills dated July 1, 1948
7. Summary of Treasury bill information contained in press releases
196
197
197
Treasury savings notes, United States savings bonds, and armed
forces leave bonds
8. Offering of Treasury savings notes of Series D
-.
9. Fifth amendment, February 21, 1949, to Department Circular No. 530,
Sixth Revision, prescribing regulations governing United States
savings bonds
10. First amendment, August 6, 1948, to Department Circular No. 793,
Revised, prescribing regulations governing armed forces leave bonds .
200
206
206
OBLIGATIONS GUARANTEED BY THE UNITED STATES
11. Partial redemption, before maturity, of 2% percent war housing
insurance fund debentures. Series H (fourth call)
12. Partial redemption, before maturity, of 2^2 percent war housing
insurance fund debentures. Series H (fifth call)
.
207
210
INTERNATIONAL FINANCIAL AND MONETARY DEVELOPMENTS
13. Report of activities of the National Advisory Council on International
Monetary and Financial Probleras, April 1 to September 30, 1948-.
14. Report of activities of the National Advisory Council on International
Monetary and Financial Problems, October 1, 1948, to March 31,
1949
15. Statement, February 16, 1949, of Secretary of the Treasury Snyder
before the Senate Foreign Relations Committee recommending
financial policies to be followed in the European Recovery Program- 16. Statement, May 23, 1949, of Assistant ^Secretary Martin before the
House Banking and Currency Committee on H. R. 4332, a bill to
permit national banks to deal in securities of the International
Bank for Reconstruction and Development
.
17. Announcement, September 30, 1948, of Secretary of the Treasury
Snyder of the close of activities by the Treasury Department in the
field of controlling foreign assets in the United States
18. Announcement, June 17, 1949, of Secretary of the Treasury Snyder of
the signing of an agreement supplementing the United StatesMexican Stabilization Agreement
19. Letter of Acting Secretary of the Treasury Martin, May.4, 1949, to
the Chairman of the House Banking and Currency Committee
stating the Treasury's objections to S. 13 and S. 286, bills authorizing
the acquisition, trading, and export of gold by the public
211
238
298
303
304
305
305
TAXATION DEVELOPMENTS
20. Statement, April 1, 1949, of Commissioner of Internal Revenue
Schoeneman- before the House Ways and Means Committee on
H. R. 2893, a bill extending the social security coverage..^
'
21. Miscellaneous revenue legislation enacted during the fiscal year 1949--
307
312
STATEMENT AND ADDRESSES
22. Address by Secretary of the Treasury Snyder before the annual .
convention of the National Association of Supervisors of State
Banks, Louisville, Ky., September 22, 1948, on the business outlook314
23. Address by Secretary of the Treasury Snyder before the National
Credit Conference ofthe American Bankers Association, Chicago, 111.,
December 14, 1948, on the cooperative role of the bariking system
and the Treasury in strengthening our economy
.
317
24. Statement by Secretary of the Treasury Snyder before the congressional Joint Committee on the Economic Report, February 10, 1949,
on the state of the finances of the Government
320
CONTENTS
25. Address by Secretary of the Treasury Snyder befoi-e the Executives'
Club of Chicago, Chicago, 111., April 8, 1949, on current business
developments
26. Address by Secretary of the Treasury Snyder before the annual conference of the National Association of Mutual Savings Banks,
Washington, D. C , May 12, 1949, on public debt management in
promoting a stable economy
V
. Page
326
329
ORGANIZATION AND PROCEDURE
27. Treasury Department orders relating to organization and procedure. _
28. Organization of the Treasury Department: Office of the Secretary and
bureaus, divisions, and offices performing chiefly staff and service
functions
.
332
339
MISCELLANEOUS
29. Joint program for improving accounting in the Federal Government. _
30. Supplement No. 5, September 7, 1948, to Department Circular No. 655,
prescribing regulations relating to delivery of checks and warrants
to addresses outside the United States, its Territories, and possessions
.
31. Letter of the Postmaster General to the Secretary of the Treasury
certifying extraordinary expenditures contributing to the deficiencies
of postal revenues for the fiscal year 1949
344
346
347
TABLES
Explanation of bases used in tables
.
Description of accounts through which Treasury operations are effected^.
351
352
FEDERAL FISCAL OPERATIONS
1. Summary of Federal fiscal operations, 1932-49 and monthly 1949
354
RECEIPTS AND EXPENDITURES
2. Receipts and expenditures, 1789-1949
3. Budget receipts and expenditures, in detail, monthly for 1949 and
totals for 1948 and 1949
4. Trust accounts, etc., receipts and expenditures, in detail, monthly
for 1949 and totals for 1948 and 1949
5. Budget receipts and expenditures, by major classifications, 1941-49..
6. Trust accounts, etc., receipts and expenditures, by major classifications, 1941-49
7. Internal revenue collections, by tax sources, 1929-49
8. Custom collections and refunds, 1948 and 1949.
9. Postal receipts and expenditures, 1911-49
10. Amounts deposited by the Federal Reserve Banks in the Treasury as
miscellaneous receipts representing proceeds from interest charges
on Federal Reserve notes, 1947-49
356
362
378
386
388
389
394
395
396
PUBLIC DEBT, GUARANTEED OBLIGATIONS, ETC.
Outstanding public debt, guaranteed obligations, etc.
11.
12.
13.
14.
15.
16.
17.
18.
Principal of the public debt, 1791-1949
Pubhc debt and guaranteed obligations, June 30, 1934-49
Public debt, by security classes, June 30, 1939-49
.
Guaranteed obligations held outside the Treasury, classified by issuing
Government corporations and other business-type activities, June
30, 1939-49
Contingent liabilities, June 30, 1939-49
Summary of public debt and guaranteed obligations, by security
classes, June 30, 1949
Description of public debt issues outstanding June 30, 1949
Description of guaranteed obligations held outside the Treasury,
June 30, 1949
396
399
400
402
403
404
406
422
VI
CONTENTS
Page
19. Description of contingent liabilities outstanding J u n e 30, 1949
. 424
20. Statutory limitation on t h e public debt a n d guaranteed obligations, June 30, 1 9 4 9 . . . . .
425
Operations in the public debt, etc.
21. Public debt receipts and expenditures,'by security classes, rrionthly for
1949 and totals for 1948 and 1 9 4 9 . . .
_...--_
22. Changes in public debt issues, 1949
.
.
23. Issues, maturities, and redemptions of interest-bearing public debt
securities, excluding special issues, J u l y 1948-June 1949_____
24. Public debt increases a n d decreases, a n d balances in general fund,
1916-49
25. Statutory debt retirements, 1918-49
26. Cumulative sinking fund, 1921-49
27. Transactions on account of t h e cumulative sinking fund, 1949
426
434
448'
465
466
467
467
United States savings bonds and Treasury savings note^
28. Summary of sales and redemptions of savings bonds, bv series, 193549 and monthly 1949
.
•
•_
^_-_____•l____
29. Sales and redemptions of Series E, F , a n d G savings bonds, by series,
1941-49 a n d m o n t h l y 1949
i___________
•
30. Sales of Series E, F , a n d G savings bonds, by denominatioris, 1941-49 "
and monthly 1949
'_
31: Redemptions of Series E, F, and G savings bonds, by denominations,
1941-49 and monthly 1949
32. Sales of Series E, F , a n d G savings bonds, b y States, 1949 arid cumulative
_ . _ . . . . ___!____
33. Percent of savings bonds sold in each year redeemed through each
period thereafter, by denominations
34. Sales and redemptions of Treasury notes, tax a n d savings series,
August 1941-June 1949
-___^-.J
468
469
471
473
474
475
479
Interest on public debt and guaranteed obligations
35. Amount of interest-bearing public debt outstanding, t h e computed
annual interest charge, and t h e computed rate of interest, Jurie 30,
1916-49, a n d a t end of each m o n t h during 1949.
......
36. Interest on t h e public debt, payable, paid a n d outstanding unpaid,
by security classes, 1949
__i_.i^
..i
37. Interest paid on t h e public debt, b y issues, 1947-49
i^____._
38. Interest paid on t h e public debt a n d guaranteed obligations, by t a x
status, 1934-49
480
481
482
486
Prices and yields of securities
39. Average vields of long-term Treasury bonds, b y m o n t h s , J a n u a r y
1930-June 1949
_.._____
40. Prices a n d yields of marketable public debt issues, J u n e 30, 1948 a n d
1949, and price ranges since first traded
487
488
GOLD, SILVER, AND GENERAL FUND ASSETS AND LIABILITIES
41. Assets and liabilities of t h e Treasury, J u n e 30, 1948 a n d 1949.J
42. Cash balances held b y t h e various classes of depositaries, J u n e 30, •
1949
..
.___
490
491
TRUST AND SPECIAL FUNDS FOR WHICH INVESTMENTS ARE MADE BY
THE TREASURY DEPARTMENT
43. Holdings of Federal securities by Government agencies a n d accoiints,
J u n e 30, 1939-49__
44. Adjusted service certificate fund
_____L
45. Ainsworth Library fund, Walter Reed General H o s p i t a L
:
46. Alaska Railroad retirement and disability fund _
:____!____.
47. Canal Zone retirement and disability fund
...'^J
492
494
495
. 496
497
CONTENTS
VII
Page
48. Civil service retirement and disability fund
49. District of Columbia teachers' retirement and annuity fund—Assets
held by the Treasury Department
50. District of Columbia water fund—Investments held by the Treasury
Department
51. Assets held by the Treasury Department under relief and rehabilitation. Workmen's Compensation Act within the District of Columbia.
52. Federal old-age and survivors insurance trust fund
.
53. Railroad retirement account. .
,
54. Unemployment trust fund
55. Foreign service retirement and disability fund
:
56. Library of Congress trust fund
^
57. Relief and rehabilitation. Longshoremen's and Harbor Workers'
Compensation Act, as amended—Assets held by the Treasury
Department
58. National Archieves gift fund
59. National Cancer Institute gift fund
.
60. National Institute of Health gift fund
61. National park trust fund
;
62. National service life insurance fund
63. Pershing Hah Memorial fund
64. United States Gpvernment life insurance fund—Investments
65. United States Naval Academy general gift fund
498
500
500
501
501
503
504
507
508
510
510
511
512
513
514
515
516
516
CORPORATIONS AND CERTAIN OTHER BUSINESS-TYPE ACTIVITIES OF
T H E GOVERNMENT
66. Borrowing power and outstanding issues of Government corporations
and certain other business-type activities whose obligations are
guaranteed by the United States' or issued to the Secretary of the
Treasury, June 30, 1949__-___._
67. Treasury holdings of obligations issued by Government corporations
and other business-type activities, June 30, 1939-49
68. Description of Treasury holding of obligations issued by Government
corporations and pther business-type activities, June 30, 1949
6,9. Transactions relating to Treasury holdings of obligations issued by
Government corporations and other business-type activities, 1949_.
70. Net investment pf the United States with respect to Government
corporations and certain other business-type activities, June 30,
1940-49.___._._
_....,
71. Balance sheets of Government corporations and certain other businesstype, activities, June 30, 1949
"
.
72. Income and expense of Government corporations and certain other
business-type activities, 1949
73. Source and application of funds of Government corporations and certain other business-type activities, 1949
74. Commodity Credit Corporation notes paid and canceled through June
30, 1949
.
75., Reconstruction Finance Corporation notes canceled through June 30,
1949, and recoveries during 1949
76. Securities owned by the Government (other than World War I foreign
government obligations), June 30, 1949, and changes during 1949..
77. Capital stock of Federal home loan banks held on June 30, 1948 and
1949,. and repayments and dividends received by the Treasury
during 1 9 4 9 . . - . .
78. Status of securities received ih reorganization of railroads and held by
the Treasury and the Reconstruction Finance Corporation, June 30,
1949
79. Dividends, interest, etc., received by the Treasury from Government
corporations and other enterprises, 1949
517
518
519
521
522
524
528
532
536
536
537
542
542
543
STOCK AND CIRCULATION OF MONEY IN THE UNITED STATES
80. Stock of money, money in the Treasury, in the Federal Reserve Banks,
and in circulation, by kinds, June 30, 1949
81. Stock of money, money in the Treasury, in the Federal Reserve Banks,
and in circulatiori, June 30, 1913-49
544
545
Vni
CONTENTS
Page
82. Stock of money, by kinds, June 30, 1913-49.
83. Money in circulation, by kinds, June 30, 1913-49
84. Paper currency issued and redeemed during 1949, and outstanding
' June 30, 1949, by classes and denominations
546
547
548
CUSTOMS STATISTICS
85. Customs collections and payments, by districts, 1949
86. Summary of customs collections and expenditures, 1949
.
87. Estimated customs duties, value of imports entered for consumption,
and ratio of duties to value of imports, calendar years 1938-47 and
monthly January 1947-May 1949l__.
,_
88. Estimated customs duties, value of dutiable imports, and ratio of duties
to value of imports, by tariff schedules, calendar vears 1938-47 and
monthly January 1947-May 1949_'_.-.
89. Number of entries of merchandise, 1948 and 1949
.
.
90. Vehicles and persons entering the United States, 1948 and 1949
91. Airplanes and airplane passengers entering the United States 1948 and
1949
^
1.
92. Drawback transactions, 1948 and 1949
.
93. Principal commodities on which drawback was paid, 1948 and 1949.94. Seizures for violations of customs laws, 1948 and 1949
95. Seizures for violations of customs laws, by agencies participating, 1949.
96. Investigative and patrol activities, 1948 and 1949
549
551
552
553
557
557
558
559
559
560
561
561
FEDERAL AID TO STATES
97. Expenditures for Federal aid to States, individuals, etc., 1920, 1930,
1940, and 1949
98. Expenditures made by the Government as direct payments to States
under cooperative arrangeriients and expenditures within States
which provided relief and other aid, 1949
562
567
GOVERNMENT LOSSES IN SHIPMENT
99. Status as of June 30, 1949, of the revolving fund established under
authority 'of the Government Losses in Shipment Act.
100. Reported value of shipments made by or for the account of Government departments and agencies under coverage of the Government
Losses in Shipment Act, as amended, 1938-49
101. Estimated amounts of insurance premium savings to the Government on shipments made by or for the account of Government
departments and agencies under coverage of the Government
Losses in Shipment Act, as amended, 1938-49
102. Agreements of indemnity issued by the Treasury under authority of
the Government Losses in Shipment Act, as amended, August 10,
1939-June 30, 1949
103. Number and amount of claims made and settled under authority of
the Government Losses in Shipment Act, as amended, August 15,
1937-June 30, 1949
576
576
577
577
577
INTERNATIONAL CLAIMS
104. Number and amount of awards of the Mixed Claims Commission,
United States and Germany, certified to the Secretary of the
Treasury by the Secretary of State, the amount paid, and balance
due, through June 30, 1949
105. Status of the Mexican claims fund, June 30, 1949
578
580
MISCELLANEOUS
106. Status as of June 30, 1949, of the special trust account for the payment of bonds of the Philippines, its provinces, cities, and municipalities, issued prior to May 1, 1934, under authority of acts of
Congress
107. Status of the war contract settlement program, June 30, 1949
108. Federal fiscal operations and the Nation's financial structure, 1941-49.
580
581
582
CONTENTS
IX
Page
109. Assets and liabilities of the exchange stabilization fund, June 30,
1948 and 1949
110. Approximate dollar value of foreign currency balances in accounts of
the Treasurer of the United States, June 30, 1948 and 1949
111. Indebtedness of foreign governments to the United States arising
from World War I, and payments thereon as of November 15, 1949.
112. World War I indebtedness of Germany to the United States and
amounts paid and not paid, June 30, 1949
113. Accounts receivable under active agreements with foreign governments involving lend-lease articles or services and surplus property,
June 30, 1949 (World War II)
584
586
587
588
589
OWNERSHIP OF GOVERNMENTAL SECURITIES
114. Estimated ownership of all interest-bearing governmental securities
outstanding, classified by type of issuer, June 30, 1937-49
115. Estimated distribution of interest-bearing governmental securities
outstanding June 30, 1937-49, classified by tax status and type of
issuer
116. Summary of Treasury survey of ownership of interest-bearing public
debt and guaranteed obligations, June 30, 1948 and 1949
590
591
593
BUDGET ESTIMATES
117. Budget receipts and expenditures, actual for 1949 and estimated for
1950 and 1951
118. Trust accounts, etc, receipts and expenditures, actual for 1949 and
estimated for 1950 and 1951
119. Effect of financial operation on the public debt, actual for 1949 and
estimated for 1950 and 1951
INDEX
595
599
600
601
NOTE
In tables where figures have been rounded to a specified unit, the components
may not necessarily add to totals. Percentages are calculated on unrounded
figures.
SECRETARIES, UNDER SECRETARIES, AND ASSISTANT SECRETARIES
OF THE TREASURY DEPARTMENT FROM MARCH 4, 1933, TO NOVEMBER 15, 1949,^ AND THE PRESIDENTS UNDER WHOM THEY SERVED
Served Under-
Term of service
Official
Secretary of the Treasury
From-
To—
Mar. 4,1933
Jan, 1,1934
Dec. 31,1933
July 22,1945
William H. Woodin, New York....
Henry Morgenthau, Jr., New York.
July 23,1945
June 25,1946
June 23,1946
Fred M. Vinson, Kentucky.
John W. Snyder, Missouri...
May 19,1933
Nov. 17,1933
May 2,1934
Nov. 16,1933
Dec. 31,1933
Feb. 15,1936
Jan. 29,1937
Nov. 1,1938
Jan. 18,1940
Sept. 15,1938
Dec. 31,1939
Dec, 31,1945
Dean G. Acheson, Maryland..
Henry Morgenthau, Jr,, New York.
Thomas Jefferson Coolidge, Massachusetts.
Roswell Magill, New York
John W. Hanes, North Carolina...
Daniel W. Bell, Illinois.
Mar. 4,1946
Jan. 23,1947
July 15,1948
Jan, 14,1947
July 14,1948
0 . Max Gardner, North Carolina.. Vinson, Snyder.
A. L. M. Wiggins, South Carolina. Snyder
Edward H. Foley, Jr., New York. _ Snyder
Apr.
June
June
Dec,
Feb.
July
June
Feb.
Sept.
Dec,
Nov.
Feb.
Oct,
Dec.
Lawrence W. Robert, Jr., Georgia..
Stephen B. Gibbons, New York...
Thomas Hewes, Connecticut
Josephine Roche, Colorado
Wayne C. Taylor, Illinois
John W. Hanes, North Carolina...
Herbert E, Gaston, New York
President
Secretary ofthe Treasury
Roosevelt.
Roosevelt,
Truman,
Truman.
Truman.
Under Secretary
Woodin.... _Woodin.
Morgenthau.
Roosevelt,
Roosevelt.
Roosevelt.
Morgenthau. _
Morgenthau. _.
Morgenthau, Vinson.,
Roosevelt.
Roosevelt,
Roosevelt,
Truman.
Truman.
Truman.
Truman.
Assistant Secretaries
18,1933
6,1933
12,1933
1,1934
19,1936
1,1938
23.1939
15,1936
30,1939
12,1933
1,1937
28,1939
31,1938
2,1945
Jan. 18,1940
Jan. 24,1945
Nov. 30,1944
May 1,1946
Apr. 15,1946
July 16,1948
Feb. 8,1949
July 14,1948
Woodin, Morgenthau
Woodin, Morgenthau
Woodin
Morgenthau-_
Morgenthau
Morgenthau. _
Morgenthau, Vinson.
John L, Sullivan, New Hampshire. Morgenthau
Harry D. White, Maryland
Morgenthau, Vinson.
Edward H. Foley, Jr., New York.. Vinson, Snyder
John S, Graham,North Carolina_.. Snyder
William McChesney Martin, Jr., Snyder
...
New York,
Roosevelt.
Roosevelt.
Roosevelt.
Roosevelt,
Roosevelt.
Roosevelt.
Roosevelt,
Truman.
Roosevelt.
Roosevelt,
Truman.
Truman.
Truman.
Truman,
Fiscal Assistant Secretary
Mar. 16,1945
Edward F. Bartelt, Illinois
Morgenthau,
Snyder.
Vinson,
Roosevelt,
Truman.
» For officials since 1789 see annual report for 1932, pp. xvii to xxi, and corresponding table In annualreport
for 1933.
XI
PRINCIPAL ADMINISTRATIVE AND STAFF OFFICERS OF THE
TREASURY DEPARTMENT AS OF NOVEMBER 15, 1949
SECRETARY
JOHN W. SNYDER
Edward H. Foley, Jr.
John S. Graham
William McC. Martin, Jr
Thomas J. Lynch
__
Edward F. Bartelt
William W. Parsons
George C. Haas
William J. Brayi
James J. Saxon
A. L. M. Wiggins
Frank A. Southard, Jr
.-.
Under Secretary of the Treasury.
Assistant Secretary of the Treasury.
Assistant Secretary ofthe Treasury.
GeneralCounsel.
Fiscal Assistant Secretary ofthe Treasury.
Admmistrative Assistant to the Secretary.
Director of the Technical Staff.
_ Assistant to the Secretary.
Assistant to the Secretary.
Assistant to the Secretary.
Special Assistant to the Secretary.
^
OFFICE OF T H E U N D E R SECRETARY^ EDWARD H. FOLEY, J R . *
Elmer T. Acken
.
James J. Maloney
Assistant to the Under Secretary.
Chief Coordinator, Treasury Enforcement Agencies.
OFFICE OF ASSISTANT SECRETARY JOHN S. GRAHAM*
Kennedy C. Watkins
Executive Assistant to Assistant Secretary.
OFFICE OF ASSISTANT SECRETARY WILLIAM McC. MARTIN, J R . *
George H. Willis
._
Director, Office of Internationa] Finance.
OFFICE OF T H E GENERAL COUNSEL THOMAS J. LYNCH
Norman 0 . Tietjens
Assistant General Counsel.
Elting Arnold
^
.
Assistant General Counsel.
Philip Nichols, Jr
..'__
Assistant General Counsel.
John K. Carlock
_. Assistant General Counsel.
Vance N. Kirby
Tax Legislative Counsel.
Frederick C. Lusk
Assistant Tax Legislative Counsel.
John J, Boland
_,-.. Assistant Tax Legislative Counsel.
Hugo A. Ranta
Assistant to the General Counsel.
George Bronz
Special Assistant to the General Counsel.
Lawrence Linville
Special Assistant to the General Counsel.
Kenneth S. Harrison
Chief Counsel, U. S. Coast Guard.
John F. Anderson
Chief Counsel, Officeof the Comptroller of the Currency
Robert Chambers
.v
"
.
Chief Counsel, Bureau of Customs.
Charles Oliphant
Chief Counsel, Bureau of Internal Revenue.
Elting Arnold
Chief Counsel, Office of International Finance.
Alfred L. Tennyson
Chief Counsel, Bureau of Narcotics.
Theodore W. Cunningham
Chief Counsel, Bureau of the Public Debt.
OFFICE OF T H E FISCAL ASSISTANT SECRETARY EDWARD F. BARTELT*
William T, Heffelfinger
Edward D. Batchelder
Martin L. Moore...
Frank F. Dietrich
Gilbert L. Cake
. . . . . . Assistant to the Fiscal Assistant Secretary.
Technical Assistant to the Fiscal Assistant Secretary.
Technical Assistant to the Fiscal Assistant Secretary.
Technical Assistant to the Fiscal Assistant Secretary.
Head, Fiscal Service Operations and Methods Staff.
OFFICE OF ADMINISTRATIVE ASSISTANT TO T H E SECRETARY
WILLIAM W, PARSONS
William L, Lynch
_
Willard L. Johnson
George H. Jones
James H. Hard II
James A, Jordan
Paul McDonald
Denzil A, Right
Edward E. Berney
Henry L. Merricks
*See Organizatioo chart,
XII
_
Assistant to the Administrative Assistant.
Budget Officer.
Assistant Budget Officer.
Director of Personnel.
__. Assistant Director of Personnel.
Director of Administrative Services,
Superintendent, Division of Treasury Buildings.
Chief, Division of Treasury Space Control.
Chief, Division of Office Services.
PRINCIPAL ADMINISTRATIVE AND STAFF OFFICERS
XIII
OFFICE OF T H E T E C H N I C A L STAFF
George C. Haas
Edmund M, Daggit
Thomas F. Leahey
Robert P . Mayo
Russell R. Reagh
Sidney G. Tickton
Anna M, Michener
William Mi. Weir__
Isabella S. Diamond
Director of the Technical Staff,
. . . . Assistant Director.
- . . - Assistant Director.
Assistant Director.
Assistant Director (Govemment Actuary).
Assistant Director.
Assistant to the Director.
Administrative Assistant to the Director.
Librarian.
OFFICE OF I N T E R N A T I O N A L FINANCE
George H, Willis
.._..
Charles"Dillon Glendinning
Arthur F . Blaser, Jr
Director, Office of Intemational Finance.
_.__._ Secretarj'-, National Advisory Council.
Acting Chief, British Comrnonwealth and Middle East
Division.
Chief, Commercial Policy and United Nations Division.
Acting Chief, European Division.
Chief, Far Eastern Division.
Chief, Intemational Statistics Division,
Chief, Latin American Division.
Chief, Stabilization Fund, Gold and Silver Division.
Administrative Assistant to the Director,
Budget Officer.
Morris J. Fields
Philip P . Schaffner
Arthur W. Stuart
Paul D. Dickens
John S. deBeers
George A. Eddy
Mary C. Hall
Walter F . White
TAX ADVISORY STAFF OF T H E SECRETARY
Vacant
L. L. Ecker-Racz
F. Newell Campbell
Richard E. Slitor...
Robert B. Bangs
Director.
Associate
Assistant
.._ Assistant
Assistant
Director.
Director.
Director.
Director.
OFFICE OF THE COMPTROLLER OF THE CURRENCY
Preston Delano
J. L. .Robertson
R. B, McCandless
J. W. Hudspeth
W, P, Folger.
Comptroller of the Currency.
First Deputy Comptroller of the Currency.
Second Deputy Comptroller of the Currency,
Third Deputy Comptroller of the Currency.
Chief National Bank Examiner.
i
BUREAU OF CUSTOMS
Frank Dow
D. B. Strubinger
W. R. Johnson.._
Charles Stevenson
E. J. Shamhart
W, H. Ziehl
Commissioner of Customs,
Assistant Commissioner of Customs.
Special Assistant to the Commissioner.
Deputy Commissioner of Appraisement Administration, .
Deputy Commissioner of Investigations.
Administrative Officer, Budget and Management (Acting
Deputy Commissioner),
Chief, Division of Drawbacks, Enforcement, and Quotas.
Chief, Division of Classification, Entry, and Value.
Chief, Division of Marine Administration.
Chief, Division of Laboratories.
-. Chief, Division of Engineering and Weighing,
.,
G. H, Griffith
W. E. Higman
H. E. Sweet
.
J. F . Williams
F . W. Gast
.-
BUREAU OF ENGRAVING AND P R I N T I N G
Alvin W. Hall
Henry J' Holtzclaw
Thomas F . Slattery
Director, Bureau of Engraving and Printing.
Assistant Director.
Assistant Director (Production).
BUREAU OF ACCOUNTS (IN T H E FISCAL SERVICE)
Robert W. Maxwell
Gilbert L. Cake
Paul D . Barming..."
Harold R. Gearhart
Edmund C. Nussear..
Stephen P . Gerardi...
Wallace E, Barker, Jr
George E. Jones
George Friedman
Boyd A. Evans...
,
_.
_.
.-.
Commissioner of Accounts.
Associate Commissioner.
Chief Disbursing Officer, Division of Disbursement.
Deputy Commissioner.
Assistant Deputy Commissioner.
Executive Assistant to the Commissioner.
Administrative Assistant to the Commissioner,
Chief Accountant,
Technical Assistant to the Commissioner.
Special Assistant to the Associate Commissioner.
BUREAU OF T H E PUBLIC D E B T (IN T H E FISCAL SERVICE)
Edwin L. Kilby
Commissioner of the Public Debt.
Donald M. Merritt
Associate Commissioner.
Ross A, Heffelfinger, Jr
Deputy Commissioner in Charge, Washington Office.
Charles D. Peyton
Deputy Commissioner in Charge, Chicago Office.
XIV
PRINCIPAL ADMINISTRATIVE AND STAFF OFFICERS
OFFICE OF T H E TREASURER OF T H E U N I T E D STATES (IN T H E FISCAL SERVICE)
Georgia Neese Clark
Treasurer ofthe United States,
Marion G. Banister
_....'..
Assistant Treasurer.
Michael E. Slindee
Deputy and Acting'Treasurer.
Frederick L. Church..
Assistant Deputy Treasm'er.
Grover C. Emerson
Staff Assistant.
BUREAU OF INTERNAL REVENUE
George J, Schoeneman.
Fred S. Martin..
Daniel A. Bolich
.,
T. C. Atkeson
Eldon P. King.
E. I. McLarney
•
A. H. Cross
,
Victor H. Self
:
Charles J. Valaer
Carroll E! Mealey
Aubrey R. Marrs
'.
William H. Woolf
Henry J, Merry
:..._...
i . . Commissioner of Internal Revenue.
Assistant Commissioner.
Assistant Commissioner.
- Assistant to the Commissioner.
Special Deputy Commissioner.
Deputy Commissioner, Income Tax Unit.
Deputy Commissioner, Accounts and Collections Unit,
- Deputy Commissioner, Employment Tax Unit.
Deputy Commissioner, Misceiianeous Tax Unit,
Deputy Commissioner, Alcohol Tax Unit.
Head, Technical Staff.
Chief, Intelligence Unit.
Chairman, Excess Profits Tax Council.
-
BUREAU OF T H E M I N T
Director of the Mint.
Assistant Director.
BUREAU OF NARCOTICS
Commissioner of Narcotics.
Deputy Commissioner.
Assistant to the Commissioner,
Nellie Tayloe Ross
Leland Howard
Harry J. Anslinger
George W, Cunningham
Malachi L. Harney
U N I T E D STATES COAST GUARD
Admiral Joseph F, Farley..
Commandant, U. S. Coast Guard.
Rear Admiral Merlin O'Neill
Assistant Commandant.
Rear Admiral Ellis Reed-Hill....
Engineer in Chief.
U, S, SAVINGS BONDS DIVISION
National Director.
Director of Sales.
Executive Officer.
Vernon L. Clark
Leon J, Markham...:
Bill McDonald
U. E, Baughman
Carl Dickson
Harry E, Neal
George W. Taylor
U N I T E D STATES SECRET SERVICE
Chief, U, S. Secret Service.
Assistant Chief.
Executive Aide to the Chief.
Administrative Officer.
.'.
STANDING DEPARTMENTAL COMMITTEES
C O M M I T T E E ON E M P L O Y E E AWARDS
James H, Hard II
Willard L. Johnson
Bsrron S. Beall.-..
Fred A, Clark.
Allison Rupert
Harrell T. Vance..-.
Chairman.'
Vice Chairman.
Member.
Member.
Member.
Member.
LOYALTY BOARD
James H. Hard I I .
Norman 0. Tietjens
William T. Heffelfinger
Chairman.
Member.
...Member.
C O M M I T T E E ON PRACTICE
John L. Graves
Hessel E. Yntema
Huntington Cairns
.
Chairman.
Member.
Member.
WAGE BOARD
James H. Hard I I .
Willard L. Johnson
George Billard..
--.-
Chairman.
Member.
Member.
PRINCIPAL ADMINISTRATIVE AND STAFF OFFICERS
TREASURY D E P A R T M E N T M A N A G E M E N T C O M M I T T E E
William W. Parsons
T. C. Atkeson.-:
William T. Heffelfinger
David B. Strubinger
F. Leland Howard.
Norman 0 . Tietjens
Henry J. Holtzclaw
A. C. Richmond
James J. Maloney
Chairman,
Member.
Member.
Member.
Member.
Member.
Member.
.._ Member.
Member.
I N T E R D E P A R T M E N T A L SAVINGS BOND C O M M I T T E E
Edward F. Bartelt
Chairman.
FAIR E M P L O Y M E N T OFFICER
James H. Hard II
XV
DEPARTMENT OF THE TREASURY
November 15,1949
THE SECRETARY
OF THE
TREASURY
THE UNDER SECRETARY
OFTHE
TREASURY
GENERALCOUNSEL
FOR THE
TREASURY
ASSISTANT SECRETARY
ASST TO THE
SECRETARY IN
CHARGE OF U.S.
SAVINGS BONDS
DIVISION
ASSISTANT SECRETARY
DIRECTOR OF
THE TECHNICAL
STAFF
DIRECTOR OF
TAX ADVISORY
STAFF
ENFORCEMENT
Bureau of
Engraving ond
Printing
U.S.savings
Bonds
Division
Office of the
Comptroller ot
ttie Currency
CHART
1.
DIRECTOR OF
THE OFFICE OF
INTERNATIONAL
FINANCE
ADMINISTRATIVE
ASSISTANT TO
THE SECRETARY
ASSISTANTS
TO THE.
SECRETARY
ANNUAL REPORT ON THE FINANCES
TREASURY DEPARTMENT,
Washington, D. C , February 6, 1950.
SIR: I have the honor to report to you on the finances of the Federal
Government for the fiscal year ended June 30, 1949.
During that year, and in the six months which have elapsed since
the close of the fiscal year, our Nation achieved a goal which many
had thought impossible at the end of the war. That goal was a changeover from an economy of shortages to an economy characterized by
ample supplies and competitive business activity, without serious
dislocations in industry and trade.
The importance of this achievement can scarcely be over-emphasized. In our own country, it has furnished renewed evidence of the
solid foundations on which our economy is built. And in the friendly
nations of the world which look to us for leadership, it has been the
source of new faith in the ability of democratic nations everjrwhere
to resist aggression.
The Treasuryis fiscal policies—it is important to note—^have played
a vital part in the smooth functioning of the Nation's business and
financial system during the dtSicult postwar period of reconversion
and readjustment. The separate aimual reports of the Treasury
Department cannot give an adequate picture of policies and programs
extending over a period longer than a single year. At various times
in the past, therefore, the Treasury has included a longer-term review
in its annual report to the Congress, In view of the importance of
Treasury policies and operations in the postwar period, and because
of the considerable discussion which has taken place in recent months
regarding Government reorganization, the present time appears to
be particularly appropriate for again including such a review in the
Treasury's annual report to the Congress. This review, entitled
^'Summary Keport of Treasury Activities June 25, 1946-October 31,
1949'', will be found immediately after this letter of transmittal.
Before going into either of these more detailed discussions, however,
I should like to summarize, first, the economic developments which
have affected the Nation's finances during the past 18 months; and
1
856450—50-
2
REPORT OF THE SECRETARY OF THE TREASURY
second, our public debt position and important aspects of our foreign
financial policy during the fiscal year 1949.
R E C E N T ECONOMIC DEVELOPMENTS
Many changes have taken place in our economy in the year and a
half which has elapsed since June 30, 1948. I n the first half of the
fiscal year 1949—coinciding with the last six months of the calendar
year 1948—the Nation reached new heights of prosperity. Personal
and business incomes continued to expand during that period, and
operations in most branches of industry, agriculture, and trade continued at a very high level. Nevertheless, certain essential supplies,
including some of the basic materials needed in manufacturing, continued to fall short of demand. This situation had characterized our
economy throughout the postwar period. I t was the result, in large
part, of restrictions on production for civilian purposes during the war
years, followed by a period in whicb industry was obliged to convert
its operations from a wartime to a peacetime basis.
Prior to the period of war and postwar shortages, the abundant
resources of our country, together with the skill shown by American
business in developing methods of mass production, had made the
American economy one of plenty, rather than scarcity. Before the
end of 1948, there was growing evidence that a return to normal conditions of plentiful supply was not far oft". , During the calendar year
1949, most shortages did in fact disappear. In nearly all important
markets—primary, wholesale, and retail—the competition for goods
eased off as buyers became convinced that the supplies of things for
sale were no longer apt to run out before new orders could be filled.
In the early months of the calendar year 1949, this situation was
viewed in many quarters as a signal for retrenchment. I n the areas
where a shift from sellers' markets to normal competitive markets
occurred, inventories were reduced and new orders to wholesalers and
manufacturers were cut back in line with expectations of a lower level
of sales. These developments, in turn, led to some slowing down in
the rate of factory output and to some reduction in employment.
As the year progressed, however, it became more and more evident
that the ultimate consumers of the Nation did not take a pessimistic
view of the econoniic outlook. The high volume of retail sales during
1949 was unmistakable evidence of people's confidence in the economic situation and in their own future. Month after month, the
consumers of the Nation showed practically no tendency to curtail
their buying. Before the end of the summer, continued high retail
sales led many businessmen to rebuild their depleted stocks in line
STATEMENT BY THE SECRETARY OF THE
TREASURY
6
with the determination of the Nation's consumers to keep on buying.
This reversal of trend had a stimulating effect on industrial output
after mid-summer. By the end of the calendar. year 1949, it was
generally agreed that business in the Nation as a whole had safely
gone through a readjustment to buyers' markets and had resumed its
long-term economic progress.
The confidence which the people of this country have continued to
show in their economic future and in that of their Nation is significant
because it is based on a realistic appraisal of the elements of strength
in our present situation. During recent years, the ecoriomic environment in which people make their decisions on spending and saving
has changed radically. Most families today act in the knowledge that
incomes are less subject to fluctuation as a result of dislocations in
the economy than ever before. The strength of the Nation's banking
and financial system, which has ministered successfully to the needs
of our economy during every phase of our return to normal peacetime
activity, is a further source of confidence. And, finally, the financial
policies of the United States Government, including the Treasury's
debt management program, have been a bulwark of financial and
economic strength throughout the war and postwar periods.
The confidence of our citizens in the future has been strongly
supported also by the large volume of savings which people have continued to hold. Liquid assets of individuals in the form of cash, banl^
deposits, savings bonds, and other readily available funds stand at the
record level of approximately $200 billion. This large backlog of
savings is evidence of the continued strong cash position of the Nation's
families, despite the heavy outflow of expenditures for housing and
other durable consumer goods which has been going on throughout
the postwar period.
All in all, business records now available for the calendar year 1949
make it clear that the readjustments which took place last year in
various sectors of the economy were accomplished without affecting
adversely the rate of activity in the country as a whole. Certain
industries and localities, of course, felt the impact of the readjustments
more severely than others. New England, for example, with its heavy
output of textiles, machinery, and leather products, was one of those
most seriously affected. In most of these areas, however, the reversal
in the business trend during the latter half of the calendar year
led to an upturn in employment. Figures for the calendar year
1949 show that the broad measures of our national economic welfare, such as incomes, employment, and retail trade, held close to
the high levels of 1948. According to current estimates, personal
incomes last year almost fully equaled incomes in 1948. Total
4
REPORT OF THE SECRETARY OF THE TREASURY
employment in manufacturing, trade, agriculture and other civilian
occupations during the calendar year 1949 averaged less than 2 percent
below the previous year's figure. And the volume of retail sales, when
adjusted for price changes, was actually greater during 1949 than in
the preceding year.
PUBLIC D E B T
On June 30, 1949, the Federal debt amounted to $252.8 billion. In
a prosperous peacetime period such as the fiscal year 1949, our Federal
revenue system should yield enough funds to pay for current expenditures and leave a surplus which could be applied to reducing the debt.
This is the position which I have consistently taken since becoming
Secretary of the Treasury in June 1946. In the fiscal year 1948,1 was
able to report a budget surplus of $8.4 billion—the largest in the
history of the country—following a budget surplus in the previous
year of $.8 billion. In the fiscal year 1949, however, the Nation
incurred a budget deficit of $1.8 billion.
The major reason for the failure of Federal revenues to produce a
budget surplus in 1949 was the tax reduction bill which was passed
over the President's veto by the 80th Congress in April 1948. This
bill resulted in a loss of revenue of approximately $5 billion annually.
The 1948 tax reduction was particularly untimely because of the
large outlays which have continued to be necessary for purposes of
national defense. While we are not now engaged in a war, we cannot
consider the present period a normal peacetime period. Over seventy
percent of the Government's current expenditures, as the President
pointed out in his State of the Union Message on January 4, 1950, is
needed to pay the cost of past wars, to keep the Nation's defenses
strong, and to further the cause of world peace. The fiscal recommendations outlined by the President in the Budget Message which
was presented to the Congress on January 9, 1950, included proposals
for reduced expenditures and some increase in taxation which would—
in the words of the President—^^. . . support the extraordinary
responsibilities of the Federal Government, both at home and abroad,
and at the same time meet our obligation to pursue a policy of financial prudence and restraint. Such a policy," the President continued, /^ must be directed at producing a surplus as soon as possible
under favorable economic conditions."
STATEMENT BY THE SECRETARY OF THE TREASURY
0
While the trend of the debt is determined by the relationship established by the Congress between Federal revenues and Federal expenditures, the Secretary of the Treasury is charged with, the direct
responsibility for maintaining confidence in the credit of the United
States. This responsibility entails managing the public debt in
such a way as to promote the financial health of the Nation's economy.
The Treasury's primary objective in furthering this aim has been
the wide distribution of the debt among the individual citizens and
business concerns of the Nation. With a debt the size that ours is
now, representing more than one-half of all the debt of the country—
both public and private—the policy of widespread ownership of
Federal securities has resulted in large Government security holdings on the part of all the iriajor investor classes.
At the end of the fiscal year 1949, financial corporations—commercial
banks, savings banks, and insurance companies—had from one-fourth
to one-half or more of their assets invested in Federal securities.
Nonfinancial corporations had more than 10 percent of their current
assets in this form. Individuals had Government security holdings
of $69 billion, accounting for approximately one-third of their total
liquid assets of about $200 billion.
These figures make it clear that the Treasury's debt management
policies play a crucial role in the financial and economic life of the
entire country. I n consequence, the Treasury has a definite responsibility for planning its security issues with a view to the particular
investment needs of the various classes of Federal security holders.
This consideration, together with the broader objective of promoting
the financial well-being of the Nation's economy, has governed the
Treasury's course of action throughout the postwar period. Decisions
such as those relating to interest rates and to the marketability and
date of redemption of new Federal issues—as well as policies affecting
the market for outstanding obligations—have all been shaped with
the requirements of the Nation during a period of return to normal
peacetime activity constantly in mind. A comprehensive review of
the specific policies which the Treasury has pursued during the past
three years with respect to both Federal financing and the Government securities market will be found on phages 11 to 20 as a part of
the discussion of Treasury activities between June 25, 1946, and
October 31, 1949, referred to above.
FOREIGN FINANCIAL POLICY
During the fiscal year 1949, the National Advisory Council on
International Monetary and Financial Problems, of which the Secre-
6
REPORT OF THE SECRETARY OF THE TREASURY
tary of the Treasury is Chairman, coordinated the foreign financial
operations of Federal agencies and advised the United States representatives on the International Bank and the International Monetary
Furid on the principal financial problems relating to the policies and
operations of these institutions. The Council also considered the
financial aspects of the program outlined in Point IV of the President's
Inaugural Address of January 20, 1949. This program had as itsgoal the promotion of economic growth in underdeveloped areas
through technical assistance from the United States, through the
fostering of United States private investment, and, when appropriate,
through loans from international and United States Government
agencies. Particular consideration was given to proposals for encouraging private investment in foreign countries. All of these
activities of the Council were in discharge of its statutory responsibilities and obligations.
The first year of the European Recovery Program, for which the
Congress had provided approximately $5 billion, was completed in
April 1949. With American financial assistance to complement their
own individual and cooperative efforts, the participating countries,
in general, achieved substantial gains in productiori. Many of them
also made appreciable progress toward the attainment of internal
financial stability. I t was evident, however, that great difficulties
would still have to be overcome if the objectives of the program were
to be attained. To provide for the continuance of the program, the
Congress authorized a total of approximately $5.6 billion to cover the
needs of the April-June quarter of 1949 and the fiscal year 1950.
In the past fiscal year, the United States carried on a number of
foreign assistance programs other than the European Recovery
Program. From appropriations amounting to $2 billion which had
been voted in June 1948, provision was made for government and
relief in occupied areas, for economic and military assistance to China,
for military aid to Greece and Turkey, and for contributions to the
International Refugee Organization and to the International Children's Emergency Fund.
The International Bank for Reconstruction and Development made
a number of loans for productive projects in Brazil, Mexico, Belgium,
and the Netherlands. The International Monetary Fund continued
work on the monetary and exchange problems, the solution of which
is essential if we are to have a healthy and expanding world trade.
The Export-Import Bank extended credits for development purposes
to Israel, Canada, Finland, Liberia, and ten Latin American countries.
As in the case of the Treasury's debt management policies and
STATEMENT BY T H E SECRETARY OF T H E TREASURY
7
objectives, a review of the Treasury's part in the Nation's foreign
financial programs during the past three years will be found at a later
point in this report (pages 24 to 34).
ORGANIZATIONAL IMPROVEMENTS
A review of the principal administrative advances which have taken
place in the Treasury Department during the past three years is
presented as a part of the longer-term review of Treasury policies and
programs, referred to above, begiiming on page 35 of this report.
J O H N W . SNYDER,
Secreiary oj the Treasury.
To THE SPEAKER OF THE H O U S E OF REPRESENTATIVES.
SUMMARY REPORT OF TREASURY ACTIVITIES
JUNE 25, 1946-OCTOBER 31, 1949
Management of the public debt
Tax policy
International finance
Administrative management of operating bureaus
SUMMARY REPORT OF TREASURY ACTIVITIES JUNE 25, 1946OCTOBER 31, 1949
As has been indicated in the letter transmitting this annual report
to the Congress, it seems appropriate-^in view of the important period
in the country's affairs through which we have just passed, and
because of the considerable interest in. Government reorganization in
recent months—to summarize at this time the activities of the Treasury Department over a longer period of time thau is generally covered
in the separate annual reports.
When Secretary Snyder took office on June 25, 1946, the country
was confronted with momentous problems, both on the domestic
front and in the international area. Many of these problems had a
direct and determinative bearing on the conduct of Treasury affairs.
Because of the preeminent financial position of the United States
Government, the policies and operations of the Treasury Department
were significantly tied in with the solution of the country's problems;
In the period from June 1946 through October 1949, the Nation
enjoyed a remarkable period of prosperity, with the highest levels of
production and employment in its peacetime history—despite the
magnitude of the problems which were encountered. During the first
part of this period, strong inflationary pressures prevailed. More
recently, the country met and safely passed a period of inventory
readjustment, which completed the shift to normal competitive
markets. Now, the economy is on a more even keel than at any time
since the end of the war, with bright prospects for the future.
This report, accordingly, describes the major policy-determining
developments and the principal administrative advances which have
taken place in the Treasury Department since June 25, 1946. The
Secretary of the Treasury has four principal responsibilities: (1)
management of the public debt; (2) tax policy; (3) international
finance; and (4) the administrative management of the various bureaus. The report is divided into four main sections which describe
developments in each of these four areas of responsibility.
MANAGEMENT OF THE PUBLIC D E B T
In June 1946, the country had only started the tremendous task of
converting the economy from a wartime to a peacetime basis. Federal expenditures, which had raised the output of the country to the
highest levels on record during the war years, had been cut back
.
11
12
REPORT OF THE SECRETARY OF THE TREASURY
sharply as soon as the war ended. In the fiscal year 1945, expenditures had been just under $100 billion, and had accounted for nearly
one-half of the gross national product; in the fiscal year ending June
30, 1946, they dropped to a little over $60 billion. This prompt cut
in the expenditures of the Federal Government after the close of the
war was necessary and desirable; but it left the Nation facing the
problem of replacing the production which had gone for war purposes
with civilian production as rapidly as possible. There were many
who felt that the reconversion could be achieved only after the country had experienced serious unemployment and severe economic
dislocation.
POSITION OF THE PUBLIC DEBT IN JUNE 1946
Not the least of the economic factors which were causing concern
was the size of the public debt. As can be seen from chart I, it had
increased more than fivefold during the war years. The size was
unprecedented, both in terms of the dollar amount involved and of
the debt's relation to the economy of the country. The total public
debt outstanding in June 1946 amounted to $270 billion. I t constituted 60 percent of all outstanding debt, public and private, which
totaled $446 billion. At the end of 1939, before t h e U n i t e d States
started its defense and war finance program, the total public debt
I d m i . PRIV/^E^liNbiFEDEI^iaGOlERNM
CHART I.
NOTE—Private debtfiguresestimated subsequent to Dec. 31, 1948.
^Includes State and local debt and Federal agency nonguaranteed debt.
SUMMARY J U N E 2 5 , 1946-OCTOBER
31,
1949
13
had stood at $48 billion—this was only 23 percent of the entire debt
of the country.
The public debt was widely held. The ownership of the debt on
June 30, 1946, is shown in chart I I , in which the debt is classified by
type of holder. This broad ownership made,it possible for the debt
to play its part in the flexible fiscal policy which was necessary to
promote economic stability in the postwar period. The particular
composition of the debt was the result of conscious planning by the
Treasury as a part of its policy of fitting Government securities to
^OWteRSHlFSQf^TBE FEDERAL DE^^^^
Dollars
Billions
$162 Billion
200
270
Government
Investment A c c ' t s ^ ^ W ^ ^
.M
IOO
Mun Sav.
SanAs\.
^\\\\^ ^'^^ffisurance Cos.
Total
Nonbank Investors
CHART
Banks
II.
the needs of various types of investors. Practically all of the securities sold to commercial banks, for example, have been short-term,
in order that bank portfolios would be kept highly liquid. This was
essential if banks were to be in a position to finance reconversion
needs. Business corporations likewise have been provided with shortterm securities for the temporary investment of their reserve funds.
Insurance companies and savings banks, on the other hand, held
longer-term securities—largely with maturities over 10 years. Savings bonds were, of course, the principal type of Government security
held by individuals.
At the same time that broad ownership of the debt contributed to
easing the problems of debt management, it made good debt manage-
14
REPORT OF THE SECRETARY OF THE TREASURY
ment particularly vital, since every segftient of the economy was
affected.
Total Government security holdings of individuals, including marketable as well as nonmarketable issues, amounted to $64 billion on
June 30, 1946—a significant change from thie situation prior to the
war, when individuals owned Only about $10 billion of Governmerit
securities. Over $43 billion of the Government securities held by
individuals were in savings bonds. Other nonbank investors also
held large amounts of Government securities. Financial institutions
had a large proportion of their assets invested in the public debt
issues of the Federal Government. For mutual savings banks, it
amounted to $11}^ billion—about 64 percent of their total assets.
AU insurance companies—^life, casualty, fire, and marine—held
$25}^ billion of Government securities. Life insurance companies
alone had holdings of $22 billion, which was over 46 percent of their
total assets. Federal agencies and trust funds, which are by law
required to invest their accumulated funds in Government securities,
held $29 billion. Other nonbank investors, which include business
corporations, State and local governments, and others, held $32
billion.
The commercial banking system held $108 billion of Government
securities. Commercial banks held $84)^ billion of the total. This
comprised 71 percent of their earning assets. The balance, $23K
billion, was held by the Federal Reserve Banks.
THREE PRINCIPAL OBJECTIVES OF PUBLIC DEBT MANAGEMENT
I t was obvious in June 1946 that the decisions made with respect
to a pubhc debt which amounted to $270 billion, and which was
interwoven in the financial structure of the entire economy, would
significantly affect the economic and financial welfare of the country.
I t was essential, under these circumstances, that debt management be
directed toward promoting and maintaining a stable and smoothly
functioning economy. In the nature of things, it was necessary that
the Federal Governmerit exercise firm control of debt management as
long as the debt remained so large and so important. In the course of
formulating debt management policies, the Secretary of the Treasury
consulted with advisory committees representing a cross section of
American business, for an exchange of views and information. These
consultations have been helpful in determming the soundest possible
debt management policies. In the final analysis, however, the
responsibility for these policies belongs to the Secretary of the Treasury
and cannot be delegated.
The Treasury's debt management program has had three principal
objectives: to maintain confidence in the credit of the United States
SUMMARY J U N E
25,
1946-OCTOBER
31,
15
1949
Government, to reduce the amount of the debt, and to reduce bank
ownership of Federal securities and widen the distribution of.the debt.
1. To maintain confidence in the credit of the United States Government.—^.The Secretary of the Treasury has many responsibilities; but
his primary one is that of maintaining corifidence in the credit of the
United States.
I t is for this reason that the maintenance of stability in the Government bond market has been a continuing policy since the end of the
war. Stabihty in the Government bond market, during the transition
SlREASttRYiBOND PRICESJARflR^TO
1945
Dollars'
1946
N
J
M M
J
1947
S
N
J
M M
1948
1949
J S N J M M J S N^ J
,1 ' ' I ' . • I ' • ' ' ' I ' ' I
M M
J
S
N
i Victory Loan 2l^g's
|B i i - l
100
.- ^
-B.
.. - • • ' •
V
IDOn
Par
'^ii^'ilii
90
|QDOOOD°
^
JDnli
4tfi Liberty Loan 4'/4*s
80
•
N
1918
J
M
M
I
J
S
N
1919
J
M
M
J
S
N
J
1920
CHART
M M
J
1921
S
N
J
M M
J
S
1922
III.
period has been of tremendous importance to the country. I t contributed to the underlying strength of the country's financial system
and eased reconversion, not only for the Government, but also for
industrial and business enterprises. This is in marked contrast to
the situation after the First World War, when the severe decline in
the prices of Government' securities contributed to the business
collapse that occurred within two years after the war's end. Chart I I I
shows the price history of the Victory Loan 2K's since they were
offered in the Victory Loan at the end of 1945, and the price movements
of the 4th Liberty Loan 4K's after World War I.
' In maintaining stability in the Government bond market, it has
been necessary at times to take steps to prevent too sharp a rise in
Government security prices; and, at other times, declining pirices
16
REPORT OF THE SECRETARY OF THE TREASURY
have been halted. Beginning in the spring of 1947, the Treasury
took action to control an incipient boom in the Government bond
market—by selling long-term bonds from some of the Government
investment accounts, by offering the Investment Series of bonds to
institutional investors, and by. increasing short-term interest rates.
All of these operations combined to take upward pressure off the
market. When conditions changed, and a downward pressure on
bond prices developed, the market was stabilized through purchases of
long-term bonds. All of these actions were taken with a view toward
promoting confidence in the Nation's business and financial structure
and maintaining a high level of employment and production in the
economy.
2. To reduce the amount oj the debt.—In the statement which he made
when he took office in June 1946, Secretary Snyder said:
^^ . . It is the responsibility of the Government to reduce its
expenditures in every possible way, to maintain adequate tax rates
during this transition period, and to achieve a balanced budget—or
better—for 1947."
During the fiscal year 1947, the Federal Government operated with
a budget surplus amounting to $754 million. In the following fiscal
year, which ended on June 30, 1948, the Government again operated
with a budget surplus. It amounted to $8,419 million; and was the
largest surplus in the history of the United States Government,
Starting in March 1946, the large cash balances that had remained
after the end of the Victory Loan were applied to the reduction of the
public debt. These balances were largely expended during 1946; and
subsequent debt reduction was effected through pay-offs from the
budget surpluses of the fiscal years 1947 and 1948. Chart IV shows
the course of this debt reduction. At its postwar peak on February 28,
1946, the public debt stood at $280 billion; in June 1949, it reached a
postwar low slightly under $251}^ billion.
Unfortunately, largely because of tax reductions enacted by the
Congress in 1948 over the President's veto, there is no longer a budget
surplus. The fiscal year which ended on June 30, 1949, showed a
budget deficit of $1,811 million; and it is estimated that there will be a
budget deficit of $5.5 billion in the fiscal year 1950. As a result, by the
end'of October 1949, the debt had risen $5}^ billion from the June
low; and stood at $257 billion.
President Truman and Secretary Snyder both have stressed the
importance of continuing debt reduction in years of prosperity such as
have been enjoyed since the end of the war. This was one of the
reasons why the President on three occasions vetoed measures reducing
taxes at a time when the economic conditions of the country permitted
continued retirement of the debt.
SUMMARY J U N E 2 5 ,
1 9 4 6-OCTOBER 3 1 ,
1949
17
GHAWGEIWfHI iiE)iERAlL::[)E:Bt?SlNCE J U N t
CHART I V .
3. To reduce bank oumership oj Federal securities and widen the
distribution oj the debt.—Strong inflationary pressures existed during
most of the postwar period. In order that debt reduction would have
the greatest possible anti-inflationary effect under these circumstances, it was concentrated on debt held by the commercial banking
system. The concentration of debt reduction in bank holdings was
made possible because the Treasury's policy of fitting the debt to the
needs of investors had placed a large volume of short-term debt in the
hands of the banking system. The reduction in the public debt held
by the commercial banking system has been actually greater than the
reduction in the total debt, as is indicated in chart V.
The total public debt was reduced $28}^ billion from its postwar
peak of $280 billion, reached on February 28, 1946, to the postwar
low of $25lH billion in June 1949. During this same period, bankheld debt was reduced by approximately $34 billion. This came
about because the Treasury was able to increase the Government
security holdings of nonbank investors—shown on the lower half of
chart V, Funds from the sale of savings bonds and other nonmarketable issues to nonbanlv investors were available for the retirement of
maturing issues of bank-held debt, in addition to the budget surpluses
in the fiscal years 1947 and 1948.. By the end of October 1949, the
total amount of debt outstanding had risen to $257 billion—an increase
856455—50
3
18
REPORT OF THE SECRETARY OF THE TREASURY
of $5K bilhon from the low point reached in June. During this
period, bank holdings increased approximately $2 billion, so that the
net reduction in these holdings from February 1946 through October
1949 totaled $32 billion.
Because of the social and economic benefits of broad ownership of
public debt securities, maintenance of the widespread distribution
of the debt has been an essential part of the Treasury's postwar
debt management policies. I t has been one of the principal objectives in the continued promotion of savings bond sales by the Savings Bonds Division. Broad ownership of the public debt is good
for the purchasers of Government securities and it is good for the
country.
FEDERAL
vOEBTdwNERSHtPfBANWNDiNOw
Dollars
Billions
>cf. 31,1949
1940
1942
1944
Calendar Years
CHART
1946
1948
V.
Another postwar objective of savings bond sales was to aid in combating the strong inflationary pressures which existed in the economy
during a large part of the postwar period. The sale of savings bonds
was a two-edged weapon against inflation. I t took purchasing power
directly out of the hands of consumers; and the funds obtained from
the sale of savings bonds w:ere available for the retirement of bankheld debt, thereby reducing the money supply to that extent.
The promotion of the sale of savings bonds also has been continued
to encourage thrift. Thrift has played a vital part in the building
SUMMARY JUNE 25, 1946-OCTOBER 3 1 , 1949
19
of our Nation; and, today, it is as important to our well-being as it
has ever been in the past.
The total amount of savings bonds outstanding at the end of October
1949 was more than $56}^ billion, an increase of over $7}^ billion
since June 1946. The success of the postwar savings bond program
is especially notable since it was generally expected that a flood of
savings bond redemptions would be one of the major debt management
problems as soon as the war ended.
The sale of savings bonds has not, however, been at the expense of
other types of savings. Individuals increased their holdings of Series
E savings bonds by 9 percent from the end of 1945 through October
1949. But, in this same period, individuals increased their shareholdings in savings and loan associations by over 60 percent; their life
insurance by 30 percent; their deposits in mutual savings banks by 25
percent; their savings accounts in commercial banks by 15 percent;
their checking accounts by about 10 percent; and their postal savings
accounts by about 10 percent. Of the various forms of liquid savings,
only currency holdings in the hands of individuals declined.
HANDLING THE DEBT IS A DAY-TO-DAY BUSINESS
Achievement of the three specific debt management objectives has
been attained through day-to-day handling of debt operations.
There is, for example, the matter of refunding maturing issues. This
is one of the constantly recurring duties of the Treasury. There is a
Treasury bill maturity each week. There are frequent maturities of
certificates of indebtedness; and, in the past three years, there have been
several note and bond maturities each year. In addition, there are
savings bond and savings note maturities—and redemptions of these
issues before maturity. The volume of refunding carried through each
year has amounted to approximately $50 billion—in itself a task of
considerable magnitude. I t exceeds the total of all security refunding
engaged in by all other borrowers in the country during the past
25 years.
The interest cost of the debt to taxpayers must also be one of the
considerations in debt management policies. I t is estimated that the
interest charge on the public debt during the fiscal year 1950 will be
$5.7 billion. This item represents over 13 percent of the Federal
budget for the year. The cost is likely to grow over a period of time—
in the absence of substantial debt reduction—because the rate of
interest on savings bonds increases as the bonds are held to maturity,
and because an increasingly large proportion of the debt represents the
accumulation of trust funds invested at an average rate which is
higher than the present average interest rate on the total debt.
20
REPORT OF THE SECRETARY OF THE TREASURY
A general rise in interest rates would bring about a further rise
in the budget charge for interest payments. An increase of as little as
K of 1 percent in the average interest paid on the debt would add about
$1}^ billion to this charge. The Treasury was able to finance the last
war at an average borrowing cost of less than one-half the borrowing
cost of World War I. If this had not been done, the interest charge
at the present time would be approximately $11 billion, instead of
$5.7 billion. I t is clearly evident that this $5 billion saving in the
taxpayers' money is a highly important factor in the budget picture
of the Federal Government.
The Treasury must at all times adapt its debt management policies
to changing economic conditions. The flexibility of Treasury policies
is illustrated, first of all, by the actions which were taken in maintaining a stable Government bond market. I t is also illustrated by movements in the short-term interest rate area. Short-term rates were
permitted to rise beginning in mid-1947; when conditions changed,
they were held steady—from the fall of 1948 until the summer of 1949;
when conditions changed again, they were reduced starting in midSeptember of 1949.
Flexibility in adapting Treasury policies to changing econoniic conditions has made it possible for Treasury activities to make a maximum
contribution to economic stability. During the postwar period, the
country has enjoyed a level of prosperity never before achieved in
peacetime. National income has reached the highest level on record,
and has remained near that level. Civilian employment likewise
attained the highest peak in our history during the postwar period;
and throughout 1949, there were nearly 60 million persons employed
at all times. There is no doubt that the successful management of
the public debt and the maintenance of a continued period of stability
in the Government bond market contributed materially to the economic well-being of the country during this period.
T A X POLICY
Treasury tax policy has been designed to promote economic
stability in the country, maintaining full production and employment.
The Treasury has continuously urged the necessity of maintaining
revenues at a high level during a prosperous period such as the country
has enjoyed since the end of the war, in order not only to balance the
budget and to finance necessarily large defense and international
expenditures, but also to provide a substantial surplus for retirement
of the debt. I t was with these objectives in mind that the Treasury
opposed tax reduction legislation in 1947 and 1948, and has given full
support to the President's tax increase proposals.
SUMMARY J U N E 2 5, 1946-OCTOBER
3 1 , 1949
21
TAX REDUCTION
In appearing before the House Committee on Ways and Means and
the Senate Committee on Finance in the spring of 1947—when H. R. 1
was under consideration—after expressing confidence in the economic
outlook for 1947, Secretary Snyder stated:
'^Under the existing high national income, taxes at present levels
can be paid with less hardship and less effect on business than would
be possible under less favorable circumstances. High production was
achieved in 1946 with present tax rates. I believe that we can go
ahead in 1947 with the same general tax rates without any decrease in
production."
^'. . . If we cut taxes too soon we shall probably find it impossible
to reverse our action."
H. R. 1 was subsequently passed by the Congress on June 3, 1947;
but the untimely tax reduction was postponed by the President's
veto of the bill. A similar bill, H. R. 3950, which was passed on
July 13, 1947, also was vetoed.
The Treasury again strongly opposed tax reduction proposals in 1948,
and reiterated the need for sound fiscal policies to cope with inflationary pressures and to reduce the public debt. Despite the opposition
of the Administration, the Revenue Act of 1948, which reduced tax
revenues by approximately $5 billion annually, was passed by the
Congress and enacted over the President's veto.
In January 1949, President Truman proposed a $4 billion tax
increase to the Eighty-first Congress. In his Budget Message, he
stated that:
^
*Tn a period of high prosperity it is not sound public policy for the
Government to operate at a deficit. A Government surplus at this
time is vitaUy important to provide a margin for contingencies, to
permit reduction of the public debt, to provide an adequate base for
the future financing of our present commitments, and to reduce
inflationary pressures. . . ."
The Treasury gave its unqualified support to this recommendation;
and, when the Secretary of the Treasury appeared before the Joint
Committee on the Economic Report in February 1949, he reasserted
the importance of having a substantial Federal budget surplus in
periods of prosperity to permit reduction in the public debt.
IMPROVEMENT IN THE TAX STRUCTURE
The Treasury also has taken the position that general tax reduction
should be a part of a general revision of the tax structure. Intensive
study has been given to ways of improving the tax structure, stressing
the accumulation of inequities and other defects which have gradually
22
REPORT OF THE SECRETARY OF THE TREASURY
worked their way into the tax structure over a long period of years.
At the hearings in connection with the consideration of H. R. 1,
Secretary Snyder stated that:
*^ . . premature reduction of one tax, such as is proposed in
H. R. 1, might make later achievement of a comprehensive revision
of the tax system difficult or impossible."
*'Even if tax reduction were now appropriate, the method of reduction adopted in H. R. 1 would not be equitable. The bill would give
too httle reduction to lower incomes and relatively too much to higher
incomes."
The ultimate goals of the Treasury in the tax field were set forth in
the statement which Secretary Snyder made on May 19, 1947, before
the House Ways and Means Committee, in connection with its hearings on general tax revision. They included: {1\ revenue adequacy;
(2) equitable treatment of different groups; (3) minimum interference
with incentives to work and invest; (4) maintenance of the broad consumer markets essential for high-level production and employment;
(5) ease of administration and compliance; and (6) flexibility in responding to changing economic conditions, combined with structural
stability to facilitate business and Government planning.
I t was recognized that it was highly unlikely that the fiscal and
economic situation would permit enactment of all of the ultimately
desirable legislation at that time, but the need for advance planning
to lay a sound foundation for future legislation was urged.
In 1948, the Treasury took the view that many technical revisions
could be made to improve the tax system and its administration without substantial revenue cost. Certain proposals were made to the
Chairman of the House Ways and Means Committee. A number of
these were incorporated in a bill which passed the House in 1948, but
was not considered by the Senate. Some of the proposals, relating
principally to increasing the administrative efficiency of the Bureau
of Internal Revenue, were resubmitted in 1949 and were enacted by
the Congress. However, most of the technical revisions required in
the tax system still remain to be enacted.
The Treasury also has supported legislation to repeal the tax on
oleomargarine, but this legislation has not yet been enacted.
Detailed research studies on most of the major tax issues have been
prepared in the Treasury Department, and have been made available
to the Congress and the public. These studies are intended to acquaint those concerned with taxation with the varied and difficult
considerations involved in revising the tax structure.
SUMMARY JUNE 2 5, 19 46-OCTOBER 3 1 , 1949
23
SOCIAL SECURITY TAXATION
The Treasury Department has supported the extension of the social
security program and opposed restrictions in the coverage of the
program. I t has given detailed attention to developing plans for
improvement in the techniques of payroll taxation. The Treasury
opposed the legislation adopted by the Eightieth Congress, which
removed certain occupations from social security coverage.
INTERNATIONAL TAX MATTERS
In the field of international taxation, Treasury policy has been
directed toward promoting the Nation's economic interests, while
furthering the broad aims of our foreign policy. The Treasury has
negotiated tax treaties with a number of countries with a view toward
minimizing international double taxation; and treaties with a number
of additional countries are in various stages of negotiation.
The Treasury has participated actively in United Nations' fiscal
matters. The Fiscal Assistant Secretary of the Treasury is the
United States representative on the United Nations Fiscal Commission, and helped to launch the Commission at its first session in
1948.
In connection with the Ninth International Conference of American
States held at Bogota in 1948, the Treasury prepared a document on
taxation which served as instructions for American representatives
at the conference. I t outlined United States tax policy with respect
to income derived abroad, and presented a program for possible
revision. More recently, the Treasury has been actively engaged in
cooperation with the State Department in developing ways and means
of implementing the President's Point IV program by removing tax
deterrents to foreign investments.
FEDERAL-STATE FISCAL COORDINATION
The Treasury Department has assumed an active role in developing
machinery for the coordination of Federal, State, and local fiscal
policies and practices. I t has worked toward the development of a
tax system which would eliminate conflicts, overlapping, and other
faults of present policies. This requires the cooperation not only of
the executive and legislative branches of the Federal Government, but
also of the States and localities.
In April 1949, Secretary Snyder met with representatives of State
and local governments and other Federal officials for the purpose of
exploring some of the current intergovernmental fiscal problems.
The conference discussed several issues of mutual interest. The
Treasury agreed to take responsibility for developing, in cooperation
24
^
REPORT OF THE SECRETARY OF THE TREASURY
with other Federal departments, concrete proposals to implement the
recommendations of the conference with reference to the problems
which it had considered. Arrangements were made for State and local
representatives to be in consultation with the Treasury's technical
tax staff* on a continuing basis.
Under this cooperative arrangement, recommendations are now
being worked out with respect to: (1) a program for payments in lieu
of taxes to State and local governments on federally owned real estate;
(2) the application of State and local taxes to persons and businesses
on Federal reservations; (3) methods for reducing tax administrative
duplication between the States and the Federal Government; and (4)
the coordination of Federal-State-local excise taxes.
INTERNATIONAL FINANCE
In June 1946, the United States faced highly important transition
problems in the international financial field. During the war, it had
supported its Allies on a large scale through lend-lease arrangements;
it had provided civilian relief for liberated areas and for occupied
enemy areas; and it had imported large amounts of goods from friendly
powers in other parts of the world. All these operations provided the
means of paying for large amounts of dollar goods for foreign use.
Lend-lease disbursements alone were running at a level of $14 billion
per year in the latter part of the war. The termination of these wartime financial operations set the stage for a most difficult problem of
international financial readjustment.
Prior to the war, chief reliance had been placed upon private capital
markets for foreign lending. While, in World War I, the United States
Government had financed Allied military operations in large part, and
had rendered some assistance to the reconstruction process, its activities in the immediate postwar period were relatively restricted. After
the Second World War, it became increasingly clear that, in the
situation prevailing, the Government would have to play a more
important role in the reconstruction and development of foreign
countries. Foreign financial policy thus became one of the major
responsibilities of the United States Government in a more direct
sense than ever before.
During.the war, despite the demands of immediate wartime problems, efforts had been iriade to look forward to this postwar problem;
and the Conference at Bretton Woods in 1944 had resulted in an
agreement to set up two international financial institutions, the
International Monetary Fund and the International Bank for Reconstruction and Development. The first annual meeting of the Boards
of Governors of each of these organizatiori^ was held in Washington
SUMMARY JUNE 2 5, 1946-OCTOBER 3 1 , 194 9
25
in September-October 1946. The Secretary of the Treasury, as
United States Governor of the Fund and of the Bank, presided at
these meetings. The Export-Import Bank had received an increase
in its lending authority from $700 million to $3.5 billion to assist in
the postwar program, and beginning in the fiscal year 1946 made some
significant loans to our former Allies. The Anglo-American Financial
Agreement had been approved in 1945; and under this Agreement the
sum of $3,750 million was made available to assist the United Kingdom
through the postwar transition period. Thus, determined and serious
efforts were being made to deal with the problem of restoring a functioning international financial system among the democratic countries.
A principal responsibility of the Secretary of the Treasury in the
international area has been to continue to coordinate and develop our
foreign financial policy in order to deal with a problem which has
proved more difficult than was anticipated,, and which has been vastly
complicated by the widening political gulf between the East and West
with its inevitable world-wide economic repercussions.
SUMMARY OF THE PRINCIPAL RESPONSIBILITIES OF THE
SECRETARY OF THE TREASURY IN THE INTERNATIONAL FIELD
The Secretary of the Treasury, in various capacities, takes a leading
part in the shaping of our foreign financial policy. His functions
include: (a) coordination of United States foreign financial policy,
(b) direct administrative responsibilities, (c) financial advice to other
governmental agencies, and (d) maintaining relations with foreign
financial officials.
(a) Coordination oj United States joreign Jinancial policy.—The
National Advisory Council on International Monetary and Financial
Problems was set up as a statutory body under the Bretton Woods
Agreements Act in 1945, and given the responsibility for coordinating
the various agencies dealing with problems in this field. In addition
to the Secretary of the Treasury as Chairman, the Council membership at present includes the Secretary of State, the Secretary of Commerce, the Chairman of the Board of Governors of the Federal Reserve
System, the Chairman of the Board of Directors of the Export-Import
Bank, and the Administrator for Economic Cooperation. The Council
holds frequent meetings to review and to make decisions on matters
presented to it by the agencies directly responsible. The United
States representatives on the Executive Boards of the International
Monetary Fund and the International Bank regularly attend the meet-,
ings of the Council so as to be continuously informed of the Government's views on questions which may come before the policy boards
of the two international organizations, where they cast the United
States votes.
26
REPORT OF THE SECRETARY OF THE TREASURY
(b) Direct administrative responsibilities.—The Secretary of the
Treasury has direct responsibility for conducting the operations of this
Government under the Gold Reserve Act of 1934. Throughout the past
three years, there have been numerous and varied deinands for manipulation of the dollar in terms of gold. While most of these have never
assumed serious proportions, they have required frequent attention
and have led the Secretary to explain to the public of this country and
to foreign countries the basic principles of our gold policy. Secretary
Snyder has repeatedly affirmed his steadfast adherence to the principle
of a stable value of the United States dollar in terms of gold at $35 per
ounce.
The foreign transactions in gold of the United States Governmerit are
carried out through the United States Stabilization Fund. This Fund
also is used for special bilateral stabilization agreeinents in cases
where the United States has a special concern in assisting in the
stabilization of exchange, as in the case of the present agreement
with Mexico.
The Secretary of the Treasury serves as the United States Governor
on the Boards of Governors of the International Monetary Fund and
of the International Bank for Reconstruction and Development. The
Boards of Governors are vested with the final authority over the policies
of these institutions, subject to the limits imposed by the Articles of
Agreement which have been ratified by the governments of the
members.
The Secretary of the Treasury also has been given direct administrative authority under the Anglo-American Financial Agreement,
which provided for the largest single loan extended by the United
States since the war. This Agreement provides for continuing consultation with the United Kingdom and,sets up certain objectives of international monetary cooperation.
(c) Financial advice to other governmental agencies.—The Secretary
of the Treasury, as chief fiscal officer of the Government, advises the
President and other officials of the Government on international
financial questions. For example, the Treasury has advised the State
Department and what is now the Department of Defense with respect
to technical and operating problems in the former enemy areas of
Germany, Japan, and Austria. The range of financial problems confronted in Germany is illustrative.
At the beginning, detailed arrangements had to be worked out for
a sharing of financial responsibilities ariiong the occupying powers, for
the financing of the occupation costs to be levied upon theGermari
economy, and for governing the financial relationships between occupying personnel and the German population. In view of the scarcity
of foreign-exchange resources to support the divided and truncated
SUMMARY JUNE 2 5, 1946-OCTOBER 3 1 , 19 49
27
German economy, detailed exchange regulations had to be formulated
and carefully administered. A new central banl^ had to be established
to perform the function of issuance of the currency and to serve as
fiscal agent. As the occupation proceeded, it became apparent that a
reform of the currency was required. As a result of this reform, incentives to private effort were restored, black markets were largely
eliriiinated, and hampering controls over prices and distribution of
goods were reduced to a miriimum. I t was then possible to simplify
Gernian exchange procedures.
Unique financial problems arose in Berlin. Wh.en the Western
Allies reformed the currency in their zones of Germany, the Russians
took coordinate action in their zone. Since Berlin was a quadripartite city, specia] financial measures were required. Protracted
negotiations were coriducted with the Russians, and extensive procedures were carried on under the auspices of the United Nations in
an effort to resolve this problem. In addition, the peculiarly distressed position of Berlin, arising chiefly out of the fact that it is no
longer the seat of government and that its population can no longer
be employed in governmental functions and has few other employinent opportunities, has presented continuing financial difficulties of
the most complex nature.
(d) Maintaining relations with joreign Jinancial officials.—In the
course of his duties. Secretary Snyder has maintained close contact
with the Finarice Ministers and heads of central banks in many foreign
countries. This has involved several trips to Latin American and
Western European countries in order to obtain first-hand official
information on their foreign financial problems; and the occasions of
meeting the officials of the foreign governments in Washington have
been used to develop support for the financial and economic objectives
of this Government. In addition to the Secretary's visits abroad and
his contacts through the annual meetings of the Boards of Governors
of the International Monetary Fund and the International Bank, the
Treasury Department is in constant touch with the Finance Ministers of other countries through our diplomatic missions abroad.
These contacts are made closer by the assignment of Treasury representatives to assist the United States missions in major ceriters on
financial iriatters.
In the course pf a survey of Western European countries in July 1949,
; Secretary Snyder met with the British Chancellor of the Excheqiier
arid the Canadian Minister of Finance in London to initiate consultations between the three governments relative to fundamental financial
objectives. These conversations were continued in Washington early
in September. A number of lines of inquiry were developed looking
toward mutual efforts to facilitate progress toward fundamental
28
REPORT OF THE SECRETARY OF THE TREASURY
balance in the relationships of the dollar and sterling areas. These
lines of inquiry are being explored further through normal contacts
of the three governments.
At the same time, there is continuous study and consultation of
world exchange problems in the Board of the International Monetary
Fund. In the International Bank, the varied problems associated
with development and reconstruction are under constant study and
review. The Treasury has given support to the development of these
institutions as international instruments for promoting cooperation
in these fields.
THE TREASURY AND MAJOR DEVELOPMENTS IN
INTERNATIONAL FINANCIAL POLICY, 1946-1949
In June 1946, the Government was terminating its wartime financial arrangements and assisting in the immediate relief problems left
by the conflict. This had involved the termination of lend-lease and
the settlement with Allied governments of mutual claims arising from
the war. The United States had participated in the first relief program under UNRRA, and attention was being focused on reconstruction and the restoration of international financial relationships,
assisted by credits from the United States Government. Special
relief programs were being administered by the Army for Germany,
Japan, and Korea. During the fiscal year 1947, the total assistance
extended by the United States amounted to about $6.2 billion, compared with $5.5 billion in the fiscal year 1946, and $15.6 billion in the
fiscal year 1945. About $2 billion of the $6.2 billion of assistance
extended during the fiscal year 1947 took the form of grants, under
U N R R A programs or relief operations in occupied territory. To
supplement these grants, foreign countries drew upon credits from
the Export-Import Bank in the amount of more than $1 billion, and
very heavy drawings amounting to more than $2 billion were made
on the special loan extended to the United Kingdom. Surplus property credits and other minor prbgrams accounted for the remainder.
During this period, the National Advisory Council also was active
in the problems associated with the organization of the International
Monetary Fund and the Interriational Bank for Reconstruction and
Development as functioning international organizations.
As the year 1947 progressed, however, it became increasingly
apparent that reconstruction and rehabilitation in foreign countries
would require more time and prove costlier than had been hoped
previously. The strain of adjustment was too great for many of the
countries which had suffered from the war, without an additional
breathing space. This was most clearly eviderit in the experience of
SUMMARY JUNE 2 5, 194 6-OCTOBER 3 1 , 1949
29
the United Kingdom, which was forced to use the proceeds of the
Anglo-American Financial Agreement much more rapidly than
anticipated. It became necessary, therefore, to take some action
when the United Kingdom proposed to postpone steps toward the
restoration of sterling as a convertible currency. Since the Secretary
of the Treasury was charged by Congress with the responsibility for
carrying out the provisions of the Agreement, he conferred with
the heads of the British Government as to the measures which they
felt essential to conserve their dollar resources within the framework
of the Agreement.
The United States Government, in consultation with the European
countries, undertook the development of measures to deal with the
immediate crisis of the winter of 1947-48, as well as a re-examination
of the basic problems of postwar recovery.
The initial attack was made through an interim-aid program of
United States relief, and by measures designed to assist in the effective
use of available dollar resources. In this latter connection, the
Treasury assisted in expediting a division of the gold pool held by the
Tripartite Gold Commission among those countries having claims to
part of this pool, which was made up of gold seized from those countries by Germany. The Treasury also initiated the preparation of a
census of the blocked dollar assets of European countries. Information from this census was supplied to governments receiving United
States aid to help them in mobilizing the dollar assets of their nations
as a means of assisting them in meeting their early dollar requirements.
In the meantime, the MarshaU Plan for aiding Western Europe was
being developed. This plan recognized the need for stretching over
a four-year period the adjustments that the rest of the world had to
make to the postwar situation. Its preparation involved the close
cooperation of a number of agencies within the Government, and the
development of a more precise and more detailed statistical prograrii
than had been attempted previously in connection with international
transactions. Discussions in the National Advisory Council resulted
in the development of the financial aspects of the program. For example, the Council reviewed the appropriate relationship between
loans and grants in the program, and also reviewed the procedures
adopted in arriving at the amount of assistance required. Secretary
Snyder appeared before congressional committees early in 1948 to
present the views of the Council on these questions.
International financial operations of the United States Government
in 1946-49 are shown in the material presented in charts VI, VII,
and VIII and tables A and B; in addition, the dollar assistance
30
REPORT OF THE SECRETARY OF THE TREASURY
^iilf EilSMESy^MiiNMENTlTO
Total Utilized, July 1,1945 to June 30,1949
$Bil.
July-Dec.
1945
Credits. __o.6
Grants—-2.0
Jon.-June July-Dec.
-19461.3
2.0
1.3
1.0
Jan.-June July-Dec.
-19472.4
1.8
1.2
0.9
Grants and Credits
BY RECIPIENT
CHART
VI.
Jan.-June July-Dec. Jon.-June
1948
' 1949
1.0
0.6
0.5
1.7
23
2.8
SUMMARY
JUNE
2 5,
1946-OCTOBER
31,
1949
31
ralTfD St/tES G0VER:NiENT4WE|6N^
UTILIZED. BY PROGRAM
Fiscal Years l948-'49
Fiscal Years l946-*47
BILLIONS OF DOLLARS
2
3 0
I
2
71 z i z z :
PROGRAM
UNRRA
Lend Lease.
United Kingdom Loan.
Export-import Bank.
^1948 / I 9 4 9
Civilian Supplies
CGARIOA?etc.).
Surplus Property
Credits—.
Miscellaneous
iCJ]
European Recovery
Program
3 0
I
BILLIONS OF DOLLARS
* Un/fed Nations Relief ond Rehobilitation Administrotion.
• Government and Relief in Occupied Areas.
CHABT
VII.
REPORT OF THE SECRETARY OF THE TREASURY
32
^i5REIGN: AIDMHEiasmALANdEiOF F ^
July U945 to June 30,1949, Semiannually
Tz:
zm
$BiI.
July-Dec.
Jan.-June
July-Dec.
Jan.-June
July-Dec.
Jan.-June
July-Dec.
Jan.-June
*The mearts of financing shown for fhe period July through December 1945, exceed exports by $1,078,000,000.
which represents the net foreign acquisition of dollar assets and purchases ofgold from the United States.
CHART VIII.
rendered to foreign countries by the International Fund and Bank is
shown in table C. The wide variety of operations in this field, and
the number of agencies which have been responsible from time to time
for United States expenditures, indicate the scope of the coordinating
responsibilities of the National Advisory Council.
33
SUMMARY J U N E 2 5, 1 9 4 6 - O C T O B E R 3 1 , 1 9 4 9
T A B L E A.—Summary of IJnited States foreign grants and credits utilized, hy 'program,
and investments in the International Bank and Monetary Fund, fiscal years
1944-49
[In inillions of dollars]
Program
1:
T
f
00
coco
Sell
1°
CO
CO
to
i
CO
h
T
I
CO
Total grants and credits utilized
17, 880 3.380 2,927 2.655 2.734
898
9,980 2.850 2.319 1.797
Grants
Lend-lease
440
707
474
628
Civilian supplies
. 2,916
204
European recovery
3,425 2,028 1,193
16
1,393
UNRRA
2
2
230
66
Post-UNRRA._300
12
522
24
Interim aid
558
Chinese stabilization
32
72
Chinese military assistance104
84
95
1
Chinese aid
180
95
74
Greek-Turkish assistance.
162
186
517
97
59
Philippine rehabilitation _
96
34
347
11
Korean aid
_ _
11
43
35
15
153
56
Refugee assistance
International Children's
16
9
15
18
Emergency Fund
58
2
3
3
3
In ter-A merican aid
18
American Red Cross
Credits
530
7,900
608
858 1.836
Special British loan
300 1,400
3,750
Export-Import B a n k 322
108
107
loans and guaranties
276
1,898
378
European recovery
854
476
867
Surplus property
26
20
213
77
240
16
Lend-lease
_..
2
2
30
291
7
16
3
53
Other credits
Total paid to Fund and Bank. 3,226
Paid to International Monetary Funrl
2,750
Paid to International Bank
476
il
coco
ii
2
C3
a-
1
o
1 1
o
1
CO
CO
3,353 2,831 37, 777 5,462 15,611 16, 704
1,093 1.023 35,140 3,282 15, 277 16,581
31, 973 1,213 14, 340 16, 420
434
233 1,560
684
132
744
624
753 1,267 1,184
83
260
140
29
32
2
2
4
3
120
3
3
11
47
10
130
2,260 1,808 2,637 2,180
1,450
600
553
532
685
558
116
30
111
3,062
415
474
474
160 1,429 1,099
101
49
49
164
159
159
2,745
318
5
159
*
*
159
159
17
110
334
19
110
123
57
70
277
53
*Less than $500 thousand.
1 Estimated.
SOURCE.—Clearing OflEice for Foreign Transactions, U. S. Department of Commerce; International Sta
tistics Division, U. S. Treasury Department.
NOTES.—-
Lend-lease accounts for the bulk of aid rendered during the war and its effect is to bring total aid during
1944-46 to more than twice that of the next three-year period. Lend-lease went principally to European
countries ana China.
Civilian supplies have been administered by the Army and Navy as aid to occupied areas, Germany,
Austria, Italy, Japan, Korea, and the Ryukyus.
UNRRA—th& United States Govemment contribution to UNRRA totaled $2.7 billion out of a total
UNRRA program of $3.9 billion. UNRRA assistance went principally to European countries and China.
Interim aid—administered by the Department of State and the Economic Cooperation Administration
under the act of Dec. 17, 1947 (Public Law 389, 80th Cong.). Assistance was rendered to Austria, France,
and Italy principally during first half of 1948,
China—fho, stabilization grant of $260 million was administered by the Treasury Department under the
act Oi Feb. 7, 1942 (Public Law 442, 77th Cong.). Military aid to China was administered by the Executive Oflfice of the President and terminated in April 1949. Chinese aid consists of grants administered
by the Economic Cooperation Administration under the Economic Cooperation Program for China.
Greek-Turkish assistance under the act of May 22, 1947 (Public Law 75, 80th Cong.), was administered by the Department of State and included civilian as well as military aid.
Philippine rehabilitation—%Qi3.5 million has been authorized for:
(1) War damage compensation (private war damage claims).
(2) Transfer of excess army stocks.
(3) Restoration of public property and essential public services.
The total utilized through June 30, 1949, was $347 million.
Korean aid for economic rehabilitation administered by the Economic Cooperation Administration.
The European Recovery Program (Economic Cooperation .Administration) beginning in the first half of
1948 totaled, through June 1949, $3,425 million in grants and $854 million in credits.
Surplus property includes that aid rendered through the War Assets Administration, the OfRce of Foreign Liquidation Commissioner, and the Maritime Oommission.
Lend-lease credits have resulted from lend-lease settlements including some goods on inventory and billings for some shipments since VJ-day.
Other credits—thosQ granted by Department of Agriculture, the Army, Reconstruction Finance Corporation, and Department of State.
The amounts of counterpart funds made available to and expended by United States disbursing oflficers
under the Chinese aid, the Korean aid, and European Recovery programs are included in the data for
each of these programs as grant aid utilized by foreign countries.
856455—50-
34
REPORT OF T H E SECRETARY OF T H E TREASURY
T A B L E B . — S u m m a r y of United States foreign grants and credits utilized, by principal
administering agencies, fiscal years 1944-49
[In millions of dollars)
00
OJ
<J3 0 5
CO
1 t--
Agency
it
IS
§2
S
oP
a"
CO
CO
Grants
Economic Cooperation
Administration
National Military Establishment
State Department
UNRRA.
Lend-Lease
Treasury. .
Other
Credits
Treasury
Export-Import B a n k loans and guaranties..
Economic Cooperation
Administration.. _
Office of Foreign Liquidation Commissioner,
War Assets, Maritime Commission
Lend-Lease
Other credits
ll
IS
go
go
B^
a
CO
Total grants and credits utilized
^ C O
O
1
V-C3S
CO CO
-<
CO
a*"
a
1
>>
1
CD
CO
CO
17,880 3,380 2,927 2,655 2,734 3,353 2,831 37, 777 5,462 15,611 16,704
9,980 2,850 2,319 1,797
898 1,093 1,023 35,140 3,282 15, 277 16, 581
3,616 2,123 1,288
205
2,925
1,767
1,393
714
863
476
398
16
434
34
624
15
8
1
440
180
628
255
279
107
148
7,900
530
608
3,750
1,898
108
107
854
378
476
867
240
291
26
2
16
20
2
3
132
684
233 1,560
744
17
37
19
47
11
753 1,267 1,184
83
31,973 1,213 14,340 16,420
263
143
120
10
30
10
10
334
123
658
57
70
474
474
415
160 1,429 1,099
49
49
101
277
53
858 1,836 2,260 1,808 2,637 2,180
300 1,400 1,450
600
322
276
553
532
213
16
7
77
30
53
116
30
111
685
SOURCE.—Clearing Office for Foreign Transactions, U. S. Department of Commerce; International
Statistics Division, U.'S. Treasury Department.
Notes.—
Economic Cooperation Administration—Inclxx&^s. the European Recovery Program, Chinese aid program,
and Korean aid program.
National Military Establishmerd-lnclndes the program of civilian supplies to occupied areas and contributions for international refugee assistance.
State Department—ThO) Post-UNRRA and Interim-aid programs are included under the State Departraent in this table although the administration of these two programs was transferred from the State
Department to the Economic Cooperation Administration.
UNRRA—Shown separately, although the United States appropriation was handled through the State
Department.
Lend-Lease—Listed as a separate agency but by Executive orders in September 1943 became a part of
the Foreign Economic Administration; in September 1945 was transferred to the State Department; and
at the end of May 1946 the fiscal operations were transferred to the Treasury Department.
Treasury—Includes the Chinese stabilization program and the War Refugee Board.
Office of Foreign Liquidation Commissioner, War Assets Administration, and the Maritime Commission—Jn
addition to these agencies, $20 million administered by the Army is included.
Other credits—Includes the Reconstruction Finance Corporation, Department of Agriculture, Army, and
the Institute for Inter-American Affairs (State Department).
T A B L E C.—International Monetary F u n d and International Bank dollar assistance
to foreign countries, 1947-49
[In millions of dollars]
1949
1947
1948
Total
1947-49 1-1-49 to 7-1-48 to 1-1-48 to 7-1-47 to 1-1-47 to
6-30-49 12-31-48 6-30-48 12-31-47 6-30-47
Fund sales of dollars to member countries»_
Bank dollar disbursements ^
Total
708.1
519.8
49.7
26.7
42.3
29.0
154.4
164.2
405. 7
207.9
56.0
92.0
1, 227.9
76.4
71.3
318.6
613.6
148.0
1 United States quota $2,750 million, ofwhich $687.5 million was paid in gold and $2,062.6 million in dollars.
2 United States subscription $3,176 million, of which $636 million was paid in dollars, Tbe Intemational
Bank sold $260 million of bonds in the United States.
S U M M A R Y JUNE 2 5, 194 6-OCTOBER 3 1 , 1949
35
ADMINISTRATIVE MANAGEMENT OF OPERATING BUREAUS
.After Secretary Snyder had assumed office in June 1946 he adopted
a program of increasing the efficiency of the working operations of the
Treasury Department.
Management efficiency studies have been carried on within the
Department, and management surveys of several of the bureaus have
been made by private management engineering firms. In addition,
the Treasury has placed considerable emphasis on its cash-awardsfor-employees'-suggestions program and its work simplification
program.
All of these efforts have been directed toward cutting costs, improving efficiency, and renderirig better public service. The latter is of
considerable importance in obtaining maximum compliance with the
laws which the Treasury is required to enforce.
For the period covered by this report, the Treasury has made management savings totaling approximately $56 million. This money,
as indicated in the individual reports following, has been utilized to
meet increased work loads, to reduce requested amounts to be appropriated, to strengthen the enforcement functions of some of the
bureaus, to cover administrative costs of installing new procedures,
and to meet operating contingencies of the bureaus.
INTERNAL REVENUE
During the war the prime mission of the Bureau had been the
collection of taxes to finance the war. When Secretary Snyder assumed office he was confronted with a tremendous organization which
had continued to use prewar methods to do a job which had increased
almost six times in size because of the war.
The problem was two-fold:
(1) Something had to be done to make the job of filing a tax
return simpler for the millions of people who had begun during the
war to pay taxes for the first time. Treasury forms had to be simplified and instructions to taxpayers clarified.
(2) Mass operation techniques had to be adopted by the Bureau.
Before the war the Bureau had processed approximately 18 million
returns and forms each year; after the war it was processing over 100
million returns and forms each year. I t was believed that by modernizing the organization and procedure the work could be done more
cheaply; and the money thus saved could be spent on front-line eriforcement work. More returns could be audited and checked, more
additional assessments could be entered on the books, and the tax
evaders of the war years could be caught and penalized.
Program oj taxpayer assistance.—To make the job bf the taxpayer
easier the BurearU of Internal Revenue undertook a broad program of
B U R E A U OF
36
REPORT OF THE SECRETARY OF THE TREASURY
taxpayer assistance. Its aim was to reduce to the maximum extent
possible the number of returns which were improperly or incompletely
executed, for such returns resulted in costly correspondence, backtracking by the Bureau, delays, and annoyancie to the taxpayer who
sooner or later had to make corrective adjustments in his return.
The principal steps taken to make the taxpayer's job easier were
these:
(1) The Bureau simplified the more important return forms,
and introduced Form 1040A, which is used by almost all taxpayers
whose gross income is less than $5,000 and derived primarily from
salaries or wages subject to withholding.
(2).The Bureau clarified the instructions which accompanied
return forms. These instructions informed the taxpayer not only
what he should report on the return, but what he had a legal right
to deduct or omit from it. This was a new approach, and it has
fostered cooperation and goodwill on the part of taxpayers.
(3) The Bureau completely rewrote the booklet '^ Your Federal
Income Tax'' in order to make it a well-rounded statement of the
individual income tax laws and regulations in nontechnical language.
Formerly, taxpayers, lawyers, bankers, and others had to refer to
unofficial sources for simple explanations of these matters. About
265,000 copies of the revised booklet were sold in 1949, and it was
commented on very favorably by the public and the press.
(4) The Bureau combined the form on which employers are
required to report the social security insurance tax with the form
used by them in reporting their withholding tax, thereby reducing
the work for both the employers and the Bureau.
By these steps the Bureau made a real impact on the difficult
problems confronting the taxpayer. With the new, simpler forms
and the rewritten, easy-to-read instructions the taxpayer is able to
execute a more complete and correct return, and to understand better
his tax obligation to the Government.
Modernization oj organization and procedures.—As the result of a
continuing, well-planned, and determined attack on inefficient operating procedures, obsolete office practices, and outdated theories of
administration, the Bureau has succeeded during the past three
fiscal years in saving a cumulative total of 4,571 man years, or $12.7
million on a recurring basis. During the fiscal year 1950 the Bureau
will save 2,695 man years, or $8.1 million, inclusive of recurring
savings. These funds, totaling $20.8 million, have been used and
will be used to bolster field enforcement. During the four fiscal
years, 1947-50, the new enforcement agents made available through
these funds will have made additional tax assessments totaling about
$450 milhon.
SUMMARY J U N E 2 5, 1946-OCTOBER 3 1 , 1 9 4 9
37
Practically all of the savings have been effected by a continuing,
comprehensive, and aggressive search for more efficient and more
economical ways to perform and discharge major functions. These
savings have not been realized at the expense of service to taxpayers,
or of the Bureau's audit and investigatory work.
The accomplishments in the Bureau fall into five main categories,
as follows:
(1) Mechanization of Collectors' offices.—The processing of
nearly 200 million tax returns, information returns, reports, forms,
and other documents each year is.an operation that necessarily calls
for the use of mass accounting and recording techniques. The
Bureau has accordingly been conducting an energetic and systematic
campaign to mechanize as many as possible of the operations performed in Collectors' offices in connection with these returns, etc.
Included among the modern business machines which are either in
actual use or under test in various offices are tabulating equipment,
high-speed posters, electromatic typewriters, validators, bank proof
machines, microfflming apparatus, and envelope-stuffing machines.
Nearly aU of these machines supplant operations formerly carried
on by hand or by less modern and slower equipment.
(2) General organization and systems improvement.—This program has two purposes: first, to review the need for organizational
changes in all segments of the Bureau's departmental and field structure; and second, to analyze and make necessary revisions in all
major operations of a type to which the mechanization program has
no direct application. Some of the more important accomplishments
effected under this program are: (a) consolidation of the wage tax
and excise tax work in Collectors' offices, with a resultant saving in
personnel and handling costs; (b) beginning January 1, 1950, extension
of the depositary receipt systera of collection to the withholding and
employment taxes, and later to the excise taxes; and (c) adoption of
pre-assembled accounting forms for use in many of the Collectors'
operations, resulting in savings of 25 percent in the costs connected
with such operations.
(3) Work simplification and cash awards programs.—These, in a
very real sense, are the individual employees' own management improvement programs. They represent an effort to train employees in
the principles of work management and simplification so that they can
apply those principles in their own day-to-day work and thus become
active participants in the Bureau's over-all improvement effort. To
date, the work simplification program has yielded 2,080 improvements
which have been accepted and installed.
(4) Decentralization of routine work.^—This program has for one
of its objectives the shifting to the field of routine work being per-
38
REPORT OF THE SECRETARY OF THE TREASURY
formed in Washington. To the extent that the work requires the
same number of man hours in the field as it did in Washington, no
savings result except as to transportation costs and time. Iri a
number of instances, however, it has been found that, once the work
is split up into small segments, the field offices are able to absorb
their share without additional personnel. In other instances, some
duplication of effort was eliminated so that substantial net savings
accrue from the shift. In still other cases, the shifts have had the
effect of reducing time lags which, while not involving measurable
expense, are certain to be costly in the long run either to the Government, to the taxpayer, or to both.
Typical of some of the improvements were the following:
(a) The survey, classification, and retention of all individual
income tax returns are now the responsibility of field offices. The
survey and classification work in connection with approximately
2}i million of these returns was formerly carried on in Washington.
(b) Practically all excise tax returns, numbering over 6 million
per year, are now retained in Collectors' offices where, as a part of the
Collectors' listing process, they receive an examination for correctness,
which was formerly carried on in Washington.
(c) Responsibility for the adjustment of approximately 200,000
claims for refund of employment taxes on wages in excess of $3,000
per year is also being transferred out of Washington to Collectors'
offices.
(5) Audit control program.—The results of this program will
not be apparent for at least another year, but it has potentialities for
effecting substantial economies and better allocation of effort in the
performance of the enforcement phases of the Bureau's work. The
program, which is based on recognized sampling techniques, is designed
to bring to light the most aggravated areas of noncompliance with the
income tax laws, so the Bureau will be in a better position to deploy
more efi'ecfcively and more economically its audit and investigatory
efforts. Also, this prograni should aid materiaUy ia raising the standards of voluntary compliance by taxpayers.
BUREAU
OF CUSTOMS
'
During the war the program of the Bureau of Customs was directed
toward enforcing laws and procedures related to exports, censorship,
and other security measures. There was little opportunity to keep
pace with new methods and techniques. After the war it became necessary to analyze the program and procedures to meet efficiently the
continually changing postwar needs.
In addition to internal measures taken by the Bureau of Customs
and the Treasury Department, Secretary Snyder, in the spring of 1947,
SUMMARY JUNE 2 5, 19 46-OCTOBER 3 1 , 1949
39
asked Congress for authority to use $100,000 of the Customs appropriation to have a private management engineering firm survey the
operations of the entire Bureau. Authority was granted, and this
survey, completed in January 1948, was made the nucleus of a Customs
management improvement program. This program has gained
impetus as it has progressed. Private hidustry, foreign government
representatives, and other Government agencies have been consulted
with regard to improvements in Customs matters.
The *'Steering Committee" directiag this effort is composed of
Customs headquarters and field officials and other Treasury officials.
By bringing their experience to bear on Customs matters, it has been
possible to secure a broader frame of reference for the resolution of
Customs postwar problems.
Increase in work load.—Comphcating this management improvement program was the fact that the work load was not static and
that energy had to be directed to resolving current crises. Important work load components increased sharply between the fiscal years
1947 and 1949. The number of entries, for example, had risen from
3.4 million to 3.9 miUion, an increase of 14 percent. Samples tested
by laboratories had risen 21 percent, invoices processed, 19 percent.
Tabulations revealed that an over-all average increase of major work
load items approximated 10 to 15 percent.
Direction and scope oj program.—The management improvement
program has been directed into five major areas: (1) trade agreement activities; (2) aids to trade; (3) procedure simplification; (4)
public educational aid; and (5) other management control measures.,
So successful has the program been that even though the work
load has increased about 10 percent since 1947, Customs employment
has been reduced by. about a similar percentage during this period.
The ^'savings" under the program include not only savings of cash
but savings of manpower which was transferred elsewhere in the'Bureau to meet the increased work load. Savings are projected from
year to year during the period considered to reflect the cash outlay
which would have been required to operate the Customs program if
these improvements had not been made. The summary figures which
follow, as well as the detaUed data, are on this basis.
In the fiscal year 1948 the Bureau program saved a total of
$472,500. By 1949 the program had gained additional impetus,
and savings totaled $1.1 million. In 1950 the Bureau will record
estimated management savings of $1.6 million. The three-year total
for the program will be approximately $3.2 miUion.
In addition to handling more work at reduced manpower expenditure, service to the public has been improved, with a resiUting im-
40
REPORT OP THE SECRETARY OF THE TREASURY
provement in public relations. The major areas of accomplishment
are discussed in the following paragraphs.
(1) Trade agreement activities.—Customs participated in the
Havana and other trade agreement conferences. Together with other
Government agencies, studies have been made of the commitments
entered into under the International Trade Organization, should we
accept membership, and under the General Agreement on Tariffs and
Trade. Procedural studies have been made to determine the administrative or legislative action needed to live up to these commitments.
Legislation, where indicated, has been drafted. In addition, the preparation of the various trade agreement schedules by Customs has
been a substantial accomplishment.
(2) Aids to trade.—Not only has the Bureau of Customs participated in the work incident to and resulting from the Havana and
other trade agreement conferences, but has participated in discussions
with the representatives of other governments, including the recent
Tripartite talks, with a view to simplifying Customs procedures.
Originatiag in the management hnprovement program were 27
recommendations which would simplify export and import requirements. These covered the entry, inspection, classification, appraisement, sampling, and testing of merchandise; the entry and clearance
of vessels and aircraft, etc.
(3) Procedure simplification .^Because the significant items of
the Customs work load are rising and because present and prospective
budgetary limitations do not provide for adequate staffing at present
import levels, procedure simplification has been imperative. Included
ia the improvements made are the following:
(a) The formulation and use of scientific control weighiag and
testing procedures.—Scientific control weighing methods have been
applied to the three principal revenue-producing commodities handled
by Customs, namely, sugar, wool, and tobacco. While the studies
are not complete, these methods have resulted in large manpower
savings and more expeditious handling of these commodities. Moreover, iadustry is being better served.
(b) Joiat Customs-Immigration preliminary questioning of
pedestrian and vehicular traffic at land border ports.—This program,
providing that a single Government official ask both Customs and
Immigration questions of the traveling public, has been successfully
iastaUed along the Canadian border with savings to both the Customs
and Immigration Services, as well as improved service to the public.
The system is being expanded to include the Mexican border. Customs savings during the fiscal year 1950 alone will total about $137,000.
Smaller savings were recorded in 1949 when the program began.
SUMMARY JUNE 2 5, 1946-OCTOBER 3 1 , 1949
41
(c) Work simplification.—This program, which depends on the
laiowledge of the employees of the Bureau, has been increasingly
successful. The program got under way during the fiscal year 1949,
when savings of $108,100 were reported, and will continue through
the fiscal year 1950 and subsequent years. Savings for 1950 are
estimated at $325,000.
(4) Public educational aids.—Customs is meeting the problem of
creating better public relations by providing Customs information
to the traveling and importing public. A ^'Customs Hints" folder,
in simple, direct language and complete with illustrations, has been
prepared to assist the traveler. In cooperation with other Government agencies. Customs has prepared a brochure for prospective
importers and exporters. In addition. Customs has invited the
public to visit its local offices to present and discuss their problems.
Continuing emphasis is being given to this phase of the program and
press releases are issued when a subject is of interest to the public.
(5) Other management control measures.—In this area, improvements have been made in three principal categories:
(a) Enforcement methods.—Since the end of the war Customs
has re-evaluated its enforcement techniques and has eliminated its
traditional ^'border patrols." Outmoded enforcement techniques
have been replaced by investigation and increased purchase of iaformation. The elimination of the Southwest border patrol alone resulted
in savings of $358,700 ia 1949; future years will show recurring
$438,700 savings.
In addition, the method of port patrol has been changed. Radio
patrol cars now cover almost the same areas as did the traditional
foot patrol, before its reduction in size. Resultant savings amounted
to $472,500 in the fiscal year 1948, $530,300 in 1949, and $530,300
estimated for 1950 and subsequent years.
(b) Delegation of authority.—Other signfficant management control measures which have been instituted are as foUows: appropriate
authority has been delegated to the man with the job; personnel
activities have been decentrahzed to local field offices; fiscal and
budgetary responsibihties have been delegated to the field; and authority to make many technical operating decisions has been given to
district operating officials.
(c) Improved service functions.—Central service functions, such
as payroll and accounting matters, have been centralized in. field
cities so that a single office performs these functions for aU Customs
instaUations in that city. This results in higher-grade work and better
control. Other organizational changes are being studied, including
consohdation of the mail division functions under a single office in
42
REPORT OF T H E SECRETARY OF T H E
TREASURY
field cities, which should result in more efficient service at some reduction in cost. Moreover, under the joint General Accounting
Office-Treasury-Bureau of the Budget accounting program, a
systematic review is being made of all the accounting and auditing
procedures, with a view to streamlining these operations and providing for the elimination of any overlapping or duplication which may
be found to exist.
Many of the changes discussed here will require legislation if they
are to have their full effect. Administrative changes are being made
as rapidly as possible, and the total estimated savings thus far attained iadicate the success of the measures so far undertaken.
BUREAU O F E N G R A V I N G AND PRINTING
The Bureau of Engraving and Printing is not a ^'bureau" in the
ordinary sense. I t is an iadustrial or manufacturing plant that designs,
engraves, and prints currency, bonds, notes, bills, certificates, revenue
and postage stamps, Government checks, postal savings certfficates,
warrants, and many other kinds of documents and forms.
In 1949, for example, the Bureau delivered 746 million sheets
of finished work. This total included 510 million sheets of postage,
revenue, and other stamps with a face value of $42.4 biUion, 140
mUlion sheets of currency aggregating $6.5 bUlion in face value, and
77 million bonds, notes, bills, etc., with a face value of $185.9 billion.
During the war the Bureau of Engraving and Printing, like other
Treasury bureaus, had to meet demands as best it could. Economy
and efficiency were of necessity secondary to the problem of getting
the job done. War had brought many new technical developments but
few of them had been adapted to the Engraving and Printing Bureau,
for the Bureau had been unable to employ technical personnel to
carry on research and experimental work. In 1946 the Bureau was
authorized to undertake an immediate modernization program, which
to date has effected savings of $11.8 million as a result of new and
improved means in handling its work.
Modernization in the postwar period.—The postwar period brought
heavy demands for new currency. The decision to keep paper currency
in circulation for longer periods before replacing it with new money
was helpful for a time, but eventually production had to be increased.
New presses were needed. The Treasury learned that 20 new flat-bed
printing presses equipped with automatic polishers and semiautomatic feeder boards had been built for the Soviet Union, but our
Government had withheld the presses. The Treasury bought these
presses for $250,000.
Subsequently, contracts were awarded for the manufacture of
automatic polishers and semiautomatic feeder boards to equip 150
SUMMARY JUNE 25, 1946-OCTOBER 3 1 , 1949
43
of the old presses in the Bureau. I t is calculated that these modernized
presses will make it possible not only to increase currency production
by approximately 30 percent, but will save about $1.2 million each
year.
Foreign currency production.—Outstanding projects performed for
other agencies included the production of Siamese currency for the
Government of Siam; Korean currency and military certfficates of
four separate issues ordered by the Department of the Army; Cuban
currency ordered by the Cuban Government through the State
Department; and Philippine currency and postage stamps produced
for the Government of the Philippines. I t was necessary to secure
the services of a commercial firm to assist in the offset printing of the
Siamese and Korean currencies and the inilitary certificates.
One of the most iateresting and important projects brought to a
successful conclusion by the Bureau was the production of a special
currency for use in the Western Zone of Germany. As Bureau facilities
were taxed to capacity, it was necessary to use the offset process of
priating and to negotiate for the production of the currency through
commercial facilities. The use of the offset process of printing in the
initial phase of production made it possible to meet the deadlines.
During the three years that special currencies were produced, the
offset process saved the Government almost $8.3 million.
Postal issues.—Since July 1946 the Bureau has produced 59.new
postal issues for the Postal Office Department. The heaviest work
load in the Bureau history occurred during the calendar year 1948
when there were 29 new stamps, the majority of which were issued to
comply with special congressional legislation. This accelerated
program made it necessary to produce a new stamp issue every nine
days, instead of the usual sixty to ninety days. All of the new issues
required preparation of designs, engraving of dies, making of plates,
printing and processing of sheets, and shipping of finished stamps to
post offices throughout the United States. In many instances
overtime work was necessary to supply sufficient quantities of stamps
to the various post offices in time for the designated issue dates.
Experimental work.—The Bureau has carried on an ahnost endless
number of experimental and research projects. As a result of this
work the Bureau has pioneered in the production of a special type of
printing ink to be used with the new rotary press now being developed
to print postage stamps. The higher speed of this press requires an
ink which dries faster than the conventional types.
One of the Bureau's persistent problems has been to lengthen the
life of paper currency. If the period of its use can be extended, the
cost for printing money can be reduced. The Bureau and the manufacturer of the Bureau's currency paper have been working together
44
REPORT OF THE SECRETARY OF THE TREASURY
to produce new internal sizing agents. These new sizing agents are
being used experimentally to see if they will improve the physical
properties of currency paper.
The Bureau is now working on the design and construction of new
equipment to replace worn-out or obsolete equipment used in printing
of currency, bonds, and stamps. Safety, improved quality, decreased
costs, and the conservation of raw materials are important factors in
new designs. Experiments conducted after modffications of existing
equipment are serving as a guide for the design of a new press which is
now under contract. This press will be adaptable for multicolor
priating of postage stamps.
BUREAU OF THE MINT
Wartime developments.—During the war the Mint Service was confronted with enormous problems of work load which stemmed from
two sources. First, domestic coin production had to be increased
until in 1945 more than three times as many coins were delivered to
the public than were required in the prewar years. Secondly, foreign
coin production for the Allied countries and their overseas possessions
devolved upon the Bureau of the Mint when the mints of these countries were put out of operation by enemy action. For a number of
years the mints operated twenty-four hours a day, seven days a week.
As a result of these sustained operations, much of the mints' equipment
suffered severely. Moreover, in its all-out effort to meet tremendous
war production schedules, the Bureau was forced to neglect in many
respects its persomiel problems, safety and industrial hygiene, and
working relations with employees' unions.
Upon assuming office. Secretary Snyder directed that a complete
review be made of all the operating procedures of the Mint Service.
New, modern equipment would soon be available, and the Bureau
should stand ready to take advantage of it as it came on the market.
In September 1946, therefore, a conference of officials representing
the entire Mint Service was held in Washington, D . C . The purpose
of this conference was to obtaia a direct exchange of ideas between
the technicians actually in charge of the manufacturing processes in
the individual field plants. During this conference every technical
manufacturing process of each plant was scrutinized and extensively
discussed along with ideas for improvements; and new or improved
types of equipment were surveyed. More than 100 operating problems, ranging from the pouring of ingots to the shipment of the completed coin, were considered by the assembled officials. The discussions which were held at this conference were recorded and subsequently compUed into a written transcript which, in effect, constituted
a textbook on modernization for the Mint Service.
SUMMARY JUNE.25, 1946-OCTOBER 3 1 , 1949
45
Moreover, the officials who had attended the conference personally
visited outside manufacturing concerns which had metal working
activities in any way simUar to the mint processes. Technical experts
from private industry were induced, as a result of these visits, to lend
their assistance in solving the problems which the war had left.
Working relations with employee unions had to be re-examined in
the light of postwar developments. The Bureau of the Mint established a policy of conducting annual wage surveys in each of the five
mint areas employing per diem workers in order to adjust their rates
of pay to a level comparable to that for similar work in private
industry. Definite procedures were established for resolving union and
employee grievances.
Management savings.—The Mint Service has shown estimated
savings totaling $1.2 million for the fiscal years 1947-49. Additional
savings for 1950 ape estimated at $300,000, making tptal savings of
$1.5 million in the four years.
Some of the major operating improvements in the Mint Service
are described in the following paragraphs:
(1) The development of a water-cooled mold. The Mint in
Philadelphia formerly cast silver ingots by pouring into individual
molds by hand, which made it necessary for the workers to handle
hot molds and hot ingots. The new water-cooled mold, developed for
mechanically casting silver ingots, eliminates the handling of the
mold and ingot.
(2) The development of the universal silver ingot. Formerly the
mints had to cast separate ingots for ten-cent, twenty-five cent, and
fifty-cent pieces. There has now been developed a universal silver
ingot which can be used for all of the silver coins.
(3) Reduction in the number of passes of ingots through rolling
mills. New rolling room equipment has reduced the number of passes
of ingots through the mUls.
Other improvements include increased speed of cutting presses,
the instaUation and adaptation of new annealing equipment, improvement of milling machines, and a change of reviewing procedures.
FISCAL SERVICE
During World War I I , the work in the Fiscal Service increased at
a tremendous rate. Serious problems had arisen because of the
magnitude of centralized operations. In 1946 the Fiscal Service,
therefore, increased the tempo of its decentralization program.
Many of the most important economies realized during the subsequent years resulted from this program.
Three other means used to economize in the Fiscal Service during
the postwar period were the elimination of overlapping and dupli-
46
REPORT OF THE SECRETARY OF THE TREASURY
cation between the bureaus of the Fiscal Service, the mechanization
and improvement of basic procedures, and the adoption of suggestions
received from employees under the Department's work simplification
program.
Shortly after the end of the war, the Secretary of the Treasury
authorized the Fiscal Assistant Secretary to recruit a small staff of
high-grade accountants for over-all management work. Moreover,
the three bureaus in the Fiscal Service were encouraged to strengthen
their technical staffs as well as their executive and key supervisory
personnel. With these technical specialists, the Fiscal Service was
able to review its operations critically and to supply expert assistance
to those responsible for liae operations.
Inasmuch as the Fiscal Service is primarily a service agency for the
Government and the public, the problem was one of speeding up and
reducing the*cost of the service performed. Since the summer of
1946, the Fiscal Service has shown management savings totaling
nearly $10 million. Savings effected apply not only to the year when
the improvements are installed, but also to all future years in which
the operations are performed. Savings for the fiscal year 1950 are
estimated at $6 miUion. Three major improvements which contributed to the $10 million savings are the decentralization of the
Treasurer's savings bond redemption operations to Federal Reserve
Banks, with savings amounting to $680,000; the revision of the procedures for processing reissues and redemptions of savings bonds,
with savings of $1.7 million; and the consolidation of savings bond
operations in parent Federal Reserve Banks, with savings of $2
milhon.
There follows a brief narrative account of the programs in each of
the three units of the Fiscal Service, as well as a review of the Government-wide program to improve Federal accounting and financial
reporting.
Office oj the Treasurer.—Some years ago the payment of checks
drawn on the Treasurer of the United States was largely decentralized
from Washington to the Federal Reserve Banks, thus eliminating one
step in handling the major part of paid checks. This program is a
continuing operation. At the present time approximately threefourths of all checks drawn on the Treasurer of the United States are
paid through the Federal Reserve Banks.
In 1947, the audit of redeemed savings bonds by the Treasurer of
the United States was discontinued; and, in substitution therefor,
improved audit procedures were designed for the Federal Reserve
Banks and the Office of the Register of the Treasury. In the fiscal
year 1949, the issuarice of savings bonds by the Treasurer of the United
SUMMARY JUNE 2 5, 1946-OCTOBER 3 1 , 194 9
47
States in Washington on mail order was decentralized to the Federal
Reserve Banks. During the fiscal year 1950, arrangements have been
made to discontinue the separate examination of paid interest coupons
in the Treasurer's Office after their payment by the Federal Reserve
Banks as fiscal agents of the Treasury and prior to their transmittal
to the Register of the Treasury for final audit. I n lieu of such
examination improved control procedures have been set up in the
Federal Reserve Banks followed by a thorough audit by the Office of
the Register of the Treasury.
The most revealing picture of management improvement in the
Office of the Treasurer is shown by the following comparison of work
load and employment: I n the fiscal year 1947, the office had 2,058
employees and processed 264 million.checks; in 1950, employment
wiU total about 1,500 and 252 million checks wUl be processed. Thus,
in four years, the check work load, the main component of the total
work load, has remained virtuaUy the same while employment has
dropped about 25 percent.
Management savings in the Office of the Treasurer totaled $268,000
in 1947, $310,000 in 1948, $406,000 in 1949, and an estimated $444,000
in 1950.
Bureau oj Accounts.—The program of the Bureau of Accounts, which
includes the Division of Disbursement, has been directed to reduction
of operating costs and at the same time improving service rendered.
Improved procedures have been initiated to speed up the issuance
of duplicate checks in cases where the origiaals have been lost by the
payees. Effective steps have been taken to mechanize operations
wherever possible, and to adopt other improvements, which have
resulted in substantiaUy lower unit costs for issuiag checks.
The effectiveness of management improvement is shown by the
following comparison of work load and employment: In the fiscal
year 1947 the Division of Disbursement had 3,735 employees and wrote
160 million checks; in 1950, employment vidll total about 3,472 and
186 million checks wUl be written. Thus, in four years, employment
will have dropped about 260 and the work load will have increased by
26 million checks.
Management savings in the Bureau of Accounts, including the Division of Disbursement, totaled $550,000 in 1947, $1.3 mUlion in 1948,
$2.1 miUion in 1949, and an estimated $2.4 mUlion m 1950. Nearly
all of this is reflected in reduced appropriations.
. Bureau oj the Public Debt.—The major problems of the Bureau of
the Public Debt in terms of volume of work handled had their inception in the tremendous expansion of the savings bond program during
the war. In recent years it has been necessary to devote considerable
attention to the elimination of. wartime accumulated. backlogs in
48
REPORT OF THE SECRETARY OF THE TREASURY
various savings bond operations, and at the same time to handle a
large volume of current work.
An important phase of this program has been the policy of decentralizing to the Federal Reserve Banks responsibility for the processing
of certain phases of the work incident to the issue and redemption
of savings bonds. This step eliminated much duplication in operations of the Federal Reserve Banks and the Bureau of the Public
Debt. Some of the accomphshments in this field involved the consolidation in Federal Reserve Banks of the work incident to the
redemption of savings bonds and the decentrahzation of the audit
of savings bonds by the Office of the Register of the Treasury. A
revision of procedure for processing reissues and redemptions of
savings bonds, under which Federal Reserve Banks are authorized
to conduct these operations, has not only speeded up service to the
public, but has made it possible to reduce substantially the operating
costs.
Management savings in the Bureau of the Public Debt totaled
$190,000 in 1947, almost $2 mUlion in 1948, $2.8 mUlion in 1949,
and an estimated $2.9 miUion in 1950.
Joint accounting project.—One of the important tasks with which
the Fiscal Service is currently concerned is that of Treasury participation in a continuing. Government-wide program to improve Federal accounting and .financial reporting. The Treasury, the General
Accounting Office, and the Bureau of the Budget, as the three central
fiscal agencies of the Government, are taking the lead in this program, which was announced jointly by the heads of these three
agencies early in 1949. This is the first time since the enactment
of the Budget and Accounting Act of 1921 that the officials of the
tliree agencies have adopted a formal program of cooperation to bring
about improvement in basic accounting systems throughout the
Government.
Under this cooperative program it is hoped Government agencies
will ultimately adopt uniform principles of accounting, giving due
recognition, of course, to the varying needs of different types of
Government activities. Other objectives of the program include the
strengthening of the facilities of the Treasury as the operating center
for current accounting and over-all financial reports; making available more informative financial reports at lower accounting costs;'
improving budgetary processes in line with the improvement of
accounting and financial reporting; improving the Government's
system of audit and control; and establishing a body of accounting
and reporting principles and standards for general observance.
The Treasury, by revising the Coast Guard accounting system to
meet the needs prescribed by sponsors of the joint program, is among
SUMMARY JUNE 25, 1946-OCTOBER 3 1 , 1949
the agencies which
the installation is
will have available
tively the needs of
49
have taken the lead in the new program. When
complete, the management of the Coast Guard
an accounting system which will meet more effecmanagement and fiscal control.
CURRENCY
Measures have been taken by the Office of the Comptroller of the
Currency in the past three years to strengthen its bank examining
function. This Office was hampered by personnel losses during and
immediately after the war. Therefore, every effort has been made to
rebuild the staff to its prewar level. This entailed the raising of
standards and the recruitment of new assistant bank examiners from
university graduates who have specialized in economics and business,
as weU as from men possessing actual banking experience. In addition, an educational program for the entire examining staff has been
inaugurated to supplement the training program which has long been
in operation.
Other steps taken to perfect the bank examining function, and
which have proved beneficial, are: (1) revision of the instructions to
National Bank Examiners; (2) issuance of a '^Digest of Opinions of
the Comptroller of the Currency," with necessary supplements to
keep it current; (3) revision of the compilation of laws affecting
national banks; and (4) revision of examination report forms to bring
them in line with new developments in the banking field.
Moreover, the ComptroUer of the Currency has adopted a policy
of rotating the District Chief National Bank Examiners periodically
among the twelve districts in order to bring about a fresh viewpoint
in each district and to stimulate the chief examiners by the challenge
of new problems.
Through cooperation with other bank supervisory agencies, important revisions have been made in the examination procedures relating
to the classification of assets and appraisal of securities.
The creation of a unit to give specialized direction for the supervision and examination of trust departments of national banks has
contributed to the improvement in operations of the Office of the
Comptroller.
OFFICE O F T H E COMPTROLLER O F T H E
COAST GUARD
On January 1, 1946, the Coast Guard was returned to the jurisdiction
of the Treasury Department, after spending the war years under the
Navy. Thus, when Secretary Snyder assumed office in 1946, he found
the Coast Guard once more in the Treasury Department. During the
ten-month period after VJ-day, the Coast Guard demobUized from a
strength of 172,000 to 22,000 officers and men. At that time the mission of the Coast Guard ia peacetime was uncertain and obscure.
856455—50
5
50
REPORT OF T H E SECRETARY OF T H E
TREASURY
DemobUization had disrupted the orderly procedure of its operations,
•and a host of new duties assumed during the war remained as a continuing responsibility. Moreover, not only the men but also the funds
to do the job were gone: Since then, the peacetime mission of the
Service has been weU defined and has been affirmed by Congress in
legislation. The money and manpower today have been more properly
scaled to fit the size of the job.
Management study.—Recognizing the critical condition of the Coast
Guard in the summer of 1947, the Secretary of the Treasury and Congress made provision for a riiajor business study of the Service to be
conducted by a private firm of consultants.
The firm submitted its report in January 1948 and advanced 193
specific recommendations aimed at furthering improvement in Coast
Guard operation. These proposals became an integral part of a broad
improvement program. To date, action has been completed on 119 of
the recommendations, and the .remaining 74 are in process of implementation or are being given further study.
Achievements.—Major improvements which have been initiated in
the Coast Guard since 1947 are reviewed in the foUowing paragraphs.
(1) Integration of former Lighthouse Service and former Bureau
of Marine Inspection and Navigation.—Although phases of these consolidations were accomplished during the war, much has been achieved
since 1947. Increased economy and efficiency have been attained
through consolidation of facilities, reduction of operating expenses, and
better utilization of personnel assigned to marine inspection and aids
to navigation functions.
(2) Consolidation of districts.—The former Tenth (San Juan)
Coast Guard District was abohshed on April 1, 1948, and merged with
the Seventh (Miami) Coast Guard District, thereby effecting certain
savings and making possible a redistribution of personnel to less adequately manned activities.
(3) Consolidation of facihties.—A special board of officers, convened early in 1949, has recently concluded its mission of investigating
the necessity for operating each lifeboat station, light station, and
lightship. This board, as a part of its study, held public hearings in
the locahties concerned to determine whether the facihty need be continued. The report of this special survey board is currently being reviewed by the Commandant, prior to its formal submission to the
Department.
(4) Improvements in accounting.—A special staff activated in
November 1948 is devising improved accounting organization and
procedures. Improvements so far underway include: (a) decentralization of detailed accounting to districts; (b) centrahzed consohdation
of reports and analyses for management purposes; (c) use of site audits
SUMMARY JUNE 25, 1946-OCTOBER 3 1 , 1949
51
and reduction of departmental post-audits to the iriaximum permissible
extent; and (d) establishment of an adequate system of cost accounting. A pilot organization in the Fifth Coast Guard District is planned
for March 1, 1950, with extension to the other districts as rapidly as
possible. I t is expected that the complete change-over wiU be accomplished by January 1951.
(5) Improvements in supply.—A study of existing supply procedures initiated in February 1949 is progressing toward: (a) more
efficient methods of procurement; (b) better inventory control with
reduced costs; (c) faster filling of supply orders; and (d) improved distribution of stocks. As an initial step, it is intended to utilize existing
sites and facilities to establish a field distribution depot in each district (except the Eleventh and Fourteenth). These district depots
will become satellites of naval supply activities for the distributiori of
general stores to all Coast Guard shore and floating units (except large
cutters) in their respective districts.
(6) Utilization of mechanical devices.—The war-famed Army
^^DUKW" is an excellent example of a recent improvement in equipment for use in assistance, search, and rescue. After some modiflcations and exhaustive tests in 1947, this amphibious-type vehicle has
been added to the allowance hst of many lifeboat stations to replace
older and less adequate types of floating equipment. Some savings
in personnel may accrue for diversion to duty elsewhere. A somewhat
similar situation exists with respect to helicopters. The helicopter
now fllls an important need aboard certain ships by extending the
present radius of search activity. Its use at lifeboat stations is also
under study.
(7) Conversion of manned aids to navigation to unattended
status.—Each year the Coast Guard is able to convert certain aids to
navigation from a manned to an automatic or unattended status. This,
of course, permits the reassignment of personnel elsewhere. The
Coast Guard has also been experimenting with an automatic unmanned hghtship.
(8) Improvement in electronic devices.—^The rapid advances in
the field of electronics during World War I I have enabled the Coast
Guard to adopt electronic improvements. These advancements
improved the quality and quantity of service to the mariner. Types
of equipment which have recently been improved or devised include:
(a) remote control radio„receiver; (b) coastal lookout radar; (c) directreading loran receiver; (d) automatic radio direction finder with visual
presentation; (e) portable radiophone and radiotelegraph; and (f)
ramark and radar reflector equipment.
(9) Mechanization of clerical work.—Extensive study has been
devoted to furthering efficiency through mechanizing manual clerical
52
REPORT OF THE SECRETARY OF THE TREASURY
procedures wherever possible. Of major importance is the mechanization of personnel accounting which was achieved in 1949. Similar
studies are in progress for the mechanization of manual work in other
fields.
(10) Work measurement and personnel utilization programs.—
Although currently hampered by lack of sufficient personnel, intensified programs concerned with the development of a more adequate
work measurement system and the better utilization of personnel are
in progress.
(11) Review of methods and procedures looking toward general
improvement in management practices.—A central management group
now scrutinizes detailed aspects of the management of the Service.
This group is devoting its attention to the general improvement guide
lines established by the consulting management firm.
COORDINATION OF ENFORCEMENT ACTIVITIES
In addition to the law enforcement responsibilities of the Bureau of
Customs, the Bureau of Internal Revenue, and the Coast Guard,
heavy enforcement duties rest with the Secret Service and the Bureau
of Narcotics. Effective cooperation of all of the Treasury law enforcement groups is assured through the work of a Chief Coordinator, who
directs the interchange of ideas and information as well as cooperative
performance in specific enforcement undertakings.
Under the personal leadership of Secretary Snyder, the Treasury
Department's coordinated attack on crime has moved, since 1947, into
its most effective period. The Department has succeeded in utilizing
the benefits of coordinated police work in detecting and convicting
criminals without the high central overhead cost usually associated
with these efforts. Three positive policies have been used as the substitute for more mechanized and costly centralized controls. They
are (1) aggressive and consistent top management support, (2)
respected leadership selected from within the organization, and (3) a
cooperative type of leadership emphasizing the specialized talent of
each enforcement unit, interchange of ideas, training and education,
and practical research.
Another perspective on the accomplishments of enforcement operations is furnished by the growing dollar volume of fraud case taxes
and penalties recommended, and other fines and seizures. Since
July 1946, latest estimates place the total fines, penalties, and value
of seizures in excess of $91 million. In addition, in tax fraud investigations alone, recommended taxes and penalties for the period are
approaching $1,400 million.
Rise in service morale.—Surveys by the Coordinator indicate that
the morale of Treasury enforcement personnel has been raised during
the last few years to its highest level in departmental history.
SUMMARY JUNE 2 5, 1946-OCTOBER 3 1 , 1949
53
The policy of filling the position of Chief Coordinator and those
acting in that capacity from the ranks of career executives within
Treasury enforcement has contributed to the rise in morale. Thus,
when Treasury Department Order 114 appeared on June 1, 1949,
restating the Department's position on promotions of personnel,
the Coordinator was able to report that this policy was fully instaUed
in every branch of law enforcement.
This improved morale has enabled the heads of the enforcement
groups to work together actively in the improvement of departmental
working conditions for enforcement officers. The biggest lift was
provided by the law permitting enforcement agents to retire at the
age of 50 after 20 years' service. This law was put on the books
principally because of the personal efforts of Secretary Snyder. There
is also pending a proposal to add to the salaries of enforcement agents
a 10 percent pay differential for the overtime they must work.
Training and cooperation.—Assisted by the Office of the Coordinator, Treasury agencies have recently made arrarigements whereby
their men may attend certain related training schools conducted by
the Armed Services. The Coordinator's office also participated in
training sessions conducted by the Armed Services, which presented
material on civilian police work.
Treasury cooperation with local authorities is carefully maintained
on an informal basis. The continuing reward for this is the unstinted
cooperation of local authorities, which, in turn, is of material aid
in enabling the several units to maintain their high record of convictions,
SECRET SERVICE
Counterjeiting.—The upsurge in counterfeiting duriag the postwar
period has been one of the most difficult problems of the Secret Service.
A most helpful factor in meetiag this problem was the voluntary
uncomj)ensated overtime work of the men of the Secret Service.
Perhaps the most important single step taken by the Treasury to
combat counterfeitiag was the establishment of a special mobile squad
of fifteen agents assigned to work exclusively on investigations of
major counterfeiting cases. However, the urgent need for these agents
ia the various field districts from which they were temporarily recruited made it necessary to disband the squad and to return the
agents to their permanent posts of duty.
From time to time the Secret Service has assigned agents to conduct
counterfeitiag investigations in foreign countries-. The Secret Service
is in close touch with European authorities endeavoring to coordiaate
efforts to stamp out the foreign counterfeiting of United States money,
and has asked for funds to assign two agents to Europe permanently.
The Treasury has also filed an official request with the Department of
54
REPORT OF THE SECRETARY OF THE TREASURY
State asking for closer cooperation of foreign police agencies in combatiag this problem.
In order to alert the general public against counterfeitiag, it has
been discussed through every conceivable publication medium. There
have been Nation-wide efforts to publicize the method of detecting
counterfeits. Newspapers, magazines, radio, and television have all
been used. This publicity resulted in detection of a counterfeit note
by a theater cashier ia Cleveland. The passer was arrested and furnished iaformation which led to the capture a few months ago of a
counterfeiting plant in Washiagton not far from the Treasury Building.
In that case the Secret Service seized $150,000 ia counterfeit notes and
the counterfeiting plant and makers.
Moreover, displays of genuine and counterfeit notes have been
iastaUed ia banks throughout the country. Ordinary citizens can
usuaUy tell the difference in good and bad money if they can see the
good and the bad side by side. The Secret Service booklet *^Know
Your Money" has also been revised. Bank tellers and cashiers
throughout the coimtry use this book, and it is now frequently iacluded in the course of study in high schools. Copies of the booldet
have even traveled as far as Monrovia where officials are using it to
educate persons who have been victunized by passers of coimterfeit
American money of foreign origin.
A review of the counterfeitiag laws has shown that the Crimiaal
Code is not up to date. The Secret Service, with the assistance of the
General Counsel of the Treasury, has therefore drafted additions and
amendments to the Code in the hope that legislation will be passed
which will modernize obsolete counterfeiting laws and inake enforcement effective.
Thejts, jorgeries, and other problems.—The number of agents of the
Secret Service has not been commensurate with its great work load
since the war. The ever-increasing numbers of stolen and forged
Government bonds and checks have riiade it necessary for the' Secret
Service to take extraordinary steps to prevent the backlog from
mounting. While the requests for funds for more agents have been
debated in Congress, the existing field force has worked overtime
without extra compensation. The extra effort of the Secret Service
has been instrumental ia the closing of 45,384 criminal cases and
1,735 noncriminal cases, a total of 47,119 iavestigations, during the
fiscal year 1949.
BUREAU OF NARCOTICS
Shortly after Secretary Snyder assumed office, the Bureau of
Narcotics,! through the Commissioner, resumed work on the iaternational narcotics problem. Narcotics control, in order to be effective,
SUMMARY JUNE 2 5, 194 6-OCTOBER 3 1 , 1 9 4 9
55
must be an international cooperative venture. AU countries, particularly in the Orient and the Middle East, must work together. The
opportunity for coalescing the enforcement agencies around the world
presented itself through the newly formed United Nations organization. The Commissioner of Narcotics was named the United States
Delegate to the Commission on Narcotic Drugs, and in 1946 he took
the lead in the work of that Commission.
International control.—The war had left a legacy of confusion. It
was the object of the Treasury to- secure firm international control
over aU narcotic drugs. The Commissioner of Narcotics in the fall
Sof 1946 attended the first meeting of the newly formed international
commission, a part of the United Nations, with this basic purpose
in miad.
One of the first achievements of the Commissioner, as United States
Delegate, was to play a prominent part in the adoption of the Protocol
of December 11, 1946. This Protocol transferred to the United
Nations and the World Health Organization the functions previously
vested in the League of Nations under the six existing narcotics agreements, conventions, and protocols. It secured uninterrupted continuity of international cooperation in controlling the traffic in narcotic
drugs on a world-wide basis. This Protocol was ratified by the
United States Senate on June 24, 1947, and was proclaimed by the
President on October 14, 1947.
In the meantime, a number of new drugs—not obtained from the
basic opium or coca leaves—were being developed by the pharmaceutical industry. Although these new drugs were dangerous from the
standpoint of habituation, they were not subject to regulation or control under either the national narcotics laws or the international narcotics agreements and conventions. Legislation was consequently
requested and enacted whereby, upon proclamation by the President
of an appropriate finding, these new habit-forming drugs could be
placed under control of existing narcotics laws. To date, ten new
synthetic drugs have been subjected to the control of Federal narcotics laws by Presidential proclamations.
It was of vital importaiice, however, to secure the adoption of similar
procedure in the international field, so that each of these new synthetic drugs found to be dangerous could be promptly brought under
control of existing regulatory conventions without the delay of drafting
and adopting new[ ones. The United States, through its Delegate,
proposed a plan for covering-in these new synthetic drugs, and this
plan crystallized in a new ''Protocol Bringing Under International
Control Drugs Outside the Scope of the Convention of 13 July 1931".
This Protocol, approved by the General Assembly of the United Na-
56
REPORT OF THE SECRETARY OF THE TREASURY
tions, October 8, 1948, is now before the United States Senate for
ratffication.
I n the meantime the Commissioner continues to assist ia the important preliminary work of revising and modernizing the provisions
of these existing eight international agreements, one of which is
dated as far back as 1912. The Treasury has vigorously sponsored a
project, now agreed to ia principle by the main producing countries
of the world, to limit the production of opium to the medical and
scientffic needs of the world. As a result, a conference of representatives of the principal producing countries, Iridia, Iran, Turkey,
U. S. S. R., and Yugoslavia, will meet in Turkey this year to consider^
methods of limitation.
' The United Nations Economic and Social CouncU has given effect
to a proposal submitted by the United States Delegate to the Commission to have the several nations collaborate in a scientific study of
the identification of opium by physical and chemical means. The
object of the study is to determine if there are distinguishing physical
or chemical qualities for opium produced in certain countries or iri a
specific area of a certain country. The advantages of this identification are obvious. Preliminary experiments made by an expert
American chemist give promise of the development of a scientificaUy
acceptable identification procedure.
At a session of the United Nations Commission on Narcotic Drugs
held in July 1947, the United States Delegate called attention to
large-scale smuggling of narcotics from Mexico into the United States.
I t was estimated that at least one-half of the raw opium produced
in Mexico was processed into morphine or heroin, most of which found
its way into the United States. On motion of the United States
Delegate, the Commission adopted a resolution to ask the Government of Mexico to suppress the illicit cultivation of opium. As a
result, the Mexican representative reported at the session of the Commission held in May 1949 that his Government had instituted a
permanent campaign against illicit production, manufacture, and
traffic; that by 1948, 690,000 square meters of land previously used
for opium poppy growing had been changed over to other crops; that
drastic action had also been taken to destroy poppy fields and plantations of Indian hemp; and that two illicit laboratories engaged in
the production of opium derivatives had been closed.
To facilitate international cooperation, the Treasury has sent a
Narcotics agent to Peru, another to France, and a third to Turkey.
These agents have helped police of those countries break up smuggling
rings and have thus contributed materially to the objectives of the
United States Government and the United Nations Commission.
SUMMARY JUNE 2 5, 194 6-OCTOBER 3 1 , 19 49
57
Domestic operations.—Simultaneously, the Bureau of Narcotics has
been carrying on its regular criminal law enforcement work against
a postwar resurgence of the illicit narcotic traffic. With its average
complement of approximately 175 agents, the Bureau arrested 2,855
narcotics traffickers during the fiscal year 1947. In 1948, arrests increased to 3,180; and in 1949, rose to 4,803. Approximately eight
percent of the total offenders in Federal prisons have been incarcerated
because of the work of the Bureau of Narcotics. This ratio is a firm
testimonial to the effectiveness of these agents.
To afford a more prompt and effective check against diversions,
the reporting procedure of the Bureau of Narcotics was decentralized
in 1949. Manufacturers, wholesalers, and jobbers now report sales
of narcotics directly to district field offices. This wUl be a particularly
valuable procedure in enabling the Bureau to recognize promptly any
trend in addiction to, and abuse of, the newer synthetic drugs, and
to take remedial measures.
OFFICE OF ADMINISTRATIVE SERVICES
Prior to October 1947, service functions in the Office of the Secretary
of the Treasury were widely dispersed. These functions include office
services, record administration, certain building custodial operations
in the District of Columbia, and the coordination of Treasury space
requirements in Department and field offices. The Secretary of the
Treasury on October 1, 1947, by Treasury Department Order No. 93,
directed that aU of them should be brought together in a newly
created Office of Administrative Services and operate under the
supervision of a Director.
Significant saviags have since been accomplished. From the
fiscal year 1947 tlirough 1950, management savings total $3.8 million.
Two of the major components vof this total are attributable to the
records disposal program of the Treasury Department and to the
release of commercial space. The records disposal program has
made approximately $500,000 in records storage equipment available
during each fiscal year. The Treasury's program to release commercial space and make use of federally owned or controlled space
has produced significant savings. In 1947 savings in commercial
rentals totaled $280,000; in 1948, $443,000; in 1949, $561,000; and
in 1950, an estimated $200,000.
BUREAU OF FEDERAL SUPPLY
The Bureau of Federal Supply is no longer under the jurisdiction
of the Secretary of the Treasury. By act of Congress it was transferred on July 1, 1949, to the new General Services Administration,
which was created, on the recommendation of the President, to bring
58
REPORT OF THE SECRETARY OF THE TREASURY
under one control the related service agencies which had previously
been independent or under some other jurisdiction.
Stores program.—During the fiscal year 1947 the Federal Supply
Nation-wide stores program handled a total annual doUar business of
more than $22.9 miUion. Under this program, the Bureau operated
stores which sold supplies to other Government agencies, with the
exception of the military. The stores, of which there are now 12,
are located in strategic cities widely dispersed throughout the country.
The object of the stores program is to bring the merchandise nearer
to the customers, to locations where the customers can see what
they are buying, and to cut the costs of this service operation. Under
the Treasury's direction, this program has graduaUy been accepted
by the other Government agencies, although the agencies were not
required to purchase from these stores.
In 1948, after the stores program had been operating for almost
six years on a cooperative basis, the Secretary of the Treasury approved a Federal Supply directive which made the stores program
mandatory for all Government agencies, except, of course, the Department of Defense. The Bureau was able to demonstrate at that
time that it would be clearly advantageous to the Government to
require the civilian departments and agencies to purchase their
supphes through the 12 regional stores. The dollar volume of the
stores operation had fallen to $22.4 miUion in 1948, but jumped to
$26.9 miUion in 1949.
Strategic and critical materials.—An interesting and important
development in the past three fiscal years was the increase in the
purchase of strategic and critical materials by the Bureau. In 1947
these purchases totaled over $68 million; in 1948, more than $252
miUion; and in 1949, more than $477 million. As purchases increased,
the Treasury also leased the necessary additional warehouse space to
accommodate the vital stockpiles.
R E P O R T ON O P E R A T I O N S
59
SUMMARY OF FISCAL OPERATIONS
Budget expenditures of the United States Government in the fiscal
year 1949 exceeded receipts by $1.8 bUlion. This compares with a
surplus of receipts of $8.4 billion in 1948 and of $0.8 billion in 1947.
Net budget receipts of $38.2 billion were less than in any year since
1943. Budget expenditures of $40.1 billion were higher than in 1947
or 1948; they were $6.3 billion more than in 1948.
The $1.8 bUlion budget deficit, together with an excess of expenditures from trust accounts, etc., of $0.1 biUion, was covered by drawing
down the balance in the general fund by nearly $1.5 billion and by
an increase in the public debt of $0.5 billion. The cash balance in
the general fund decreased during the year from $4.9 bUlion on
June 30, 1948, to $3.5 billion on June 30, 1949. The public debt on
June 30, 1949, stood at $252.8 biUion.
An outline of Federal fiscal operations in the past two years is
shown in the table following. The figures are on the basis of daily
Treasury statements. Annual figures for 1932-49 and monthly for
1949 are contained in table 1 in the tables section in this report.
1949
1948
In billions of dollars
Budget results:
Net receipts...
Expendi tures.-
_
_
Surplus, or deficit (—)
Less:
General fund balance, increase, or decrease (—)
Trust accounts, etc., excess of expenditures * .
Equals: Public debt net decrease, or increase (—)
i42.2
2 33.8
38.2
3 40.1
8.4
1.6
.8
-1 8
-1.6
.1
2.4
-1.3
6.0
- 6
1 Revised. See table 6, footnote 3.
2 Revised. See table 6, footnotes 3 and 13.
3 Includes Foreign Economic Cooperation trust fund expenditures of $3.0 biUion.
< Includes clearing account for outstandihg checks and telegraphic reports from Federal Reserve Banks.
The amounts for the two items, in millions of dollars, were as follows:
ms
1949
Trust accounts, etc., net expenditures
_
294
495
Clearing account net expenditures, or net receipts (—)
_
_
507 —366
801
128
BUDGET RECEIPTS
Net budget receipts, which consist of total receipts less the appropriation to the Federal old-age and survivors insurance trust fund
61
62
REPORT OF THE SECRETARY OF THE TREASURY
and refunds of receipts, amounted to $38.2 bUlion in 1949 and were
nearly $4.0 billion less than in 1948.
Receipts in the fiscal years 1948 and 1949, on the daUy Treasury
statement basis, are compared by major sources in the followiag table.
Chart 2 shows total receipts by major sources for the fiscal years
1943 through 1949.
Decrease
1949
1948
Amount
Source
Percent
In billions of dollars
Individual income tax L
Corporation income and excess profits taxes
21.0
10.2
17.9
11.6
Total income and excess profits taxes
Miscellaneous internal revenue. _.
Employment taxes 2
__.
Customs
Miscellaneous receipts 3
31.2
8.3
2.4
.4
3.8
f 29. 5
''8.3
Total receipts...
Deduct:
(a) Appropriaition to Federal old-age and survivors
infjuranofi tmst fnnd ,
.
^
(b) Refunds of receipts
46.1
Net budget receipts
- .
-3.1
1.4
—14.6
13.6
-1.7
•1
-L7
-5.4
.6
3.8
-8.8
-45.6
42.8-
-3.3
-7:2
1.6
2.3
1.72.8,
.1
.6
4.6
24.9
42.2
38.2,
-4.0
-9.4
<-v2.i:
(*)
(*)
•Less than $50 million.
» See table 117, footnote 2.
' Includes railroad unemployment Insurance contributions for administrative expenses.
^ 3 See table 5, footnote 3.
Decreases in receipts from the iadividual income tax, miscellaneous
receipts, and customs in 1949 as compared with 1948 were partially
offset by increases in receipts from corporation iacome taxes, miscellaneous internal revenue, and employment taxes.
Income and excess profits taxes accounted for slightly more than
two-thirds of total receipts in 1949, about the same proportion as in
1948. Miscellaneous internal revenue accounted for 20 percent of
total receipts ia 1949 as compared with 18 percent in 1948.
Receipts from the individual income tax amounted to $17.9 bUlion
in 1949 and remained the most important source of revenue for the
sixth consecutive year. Corporation income and excess profits tax
collections, which amounted to $11.6 bUlion, continued as the second
most important source of revenue.
63
REPORT ON OPERATIONS
iWiiiiiiMsiii^
DOLIAHS.
Fiscal Years 1943 Through 1949
Individual
Income Tax
^ ^ Corporation
Income Taxes
1943
1944 1945 1946 1947 J948
CHART 2.
1949
64
REPORT OF T H E SECRETARY OF T H E
TREASURY
R E C E I P T S F R O M INCOME AND E X C E S S P R O F I T S
TAXES
Receipts from income and excess profits taxes amounted to $29.5
billion in the fiscal year 1949 as compared to $31.2-billion in 1948.
The decrease resulted from a decline in the individual income tax
which Avas only partially offset by an increase in corporation income
taxes.
Individual income taxes.—The details of the yield of the individual
income tax are shown in the following table.
Decrease
1949
1948
Source
Amount
In millions of dollars
Withheld (daily Treasurv statement basis)
Not withheld (collection basis)
Adjustment to daily Treasury statement basis *
Not withheld (daily Treasury statement basis)
Total individual income taxes
_
11,436
9,842
-1,595
-13.9
9,464
+96
7,996
+91
-1,468
-6
-15.5
9,660
8,087
-1,473
-16.-4
20,997
17,929
-3.068
-14.6
1 See table 117, footnote 2.
Individual income tax receipts were less in the fiscal year 1949
than in 1948 as a result of the provisions in the Revenue Act of 1948,
effective January 1, 1948, for higher exemptions and lower rates, and
the provision permitting married couples to divide their combined
incomes in computing their iacome taxes. The resulting reduction in
income tax liabUity was only partially offset by the higher level of
personal income in the period affecting fiscal year 1949 receipts.
The act, which was passed on April 2, 1948, became effective on May 1,
1948, with respect to the withholding of salaries and wages, and
consequently reduced receipts for the entire 1949 fiscal year.
Collections of income taxes in the fiscal year 1949 refiected also
over-withheld salaries and wages as well as excessive payments on
declarations in the first four months of the calendar year 1948. These
overpayments served to further reduce later payments on calendar
year 1948 liability made on declarations and final returns in the fiscal
year 1949.
Corporation income and excess projits toxes.—Receipts from this
source during the fiscal year 1949 totaled $11,554 million and were
$1,379 million, or 13.6 percent, more than the $10,174 million in 1948.
The increase resulted from rising corporate profits in the years 1946,
1947,--and 1948.
65
REPORT ON OPERATIONS
R E C E I P T S FROM A L L OTHER SOURCES
Miscellaneous internal revenue.—Receipts from the major groups
of taxes included in this category are shown in the following table.
Increase, or
decrease (—)
1949
1948
Source
Amount
Percent
In millions of dollars
9
Estate and gift taxes
_ _ _
Excise taxes:
Liquor taxes
Tobacco taxes
Stamp taxes
Manufacturers' excise taxes L __
Retailers' excise taxes
Miscellaneous excise taxes (including repealed) 2 3___
-11.4
899
797
-103
2,255
1,300
79
1,638
470
1,657
2,211
1,322
73
1,761
449
1, 759
-45
22
-7
123
-21
101
Total miscellaneous internal revenue 13
Adjustment to daily Treasury statement basis *
8,300
8,371
-23
71
-25
.9
+2
Total miscellaneous internal revenue
8,301
8,348
47
.6
'
-2.0
1.7
-8.4
7.5
-4.4
6.1
1 Excludes taxes collected on firearms, shells, and cartridges which are Included. in "Miscellaneous
receints."
2 See table 117, footnote 4.
3 Excludes collections of the hydraulic mining tax, which are included in "Miscellaneous receipts."
< See table 7, "Note."
Estate and gijt taxes.—Estate and gift taxes decreased $103 mUlion
in the fiscal year 1949 and were 11.4 percent less than in 1948. The
decrease resulted from the Revenue Act of 1948, which allowed special
treatment of transfers between spouses for both the estate and gift
taxes.
Excise taxes.—Total collections from excise taxes amounted to
$7,575 million in the fiscal year 1949, representing an increase in
collections of $174 million, or 2.4 percent, over 1948. CoUections
from tobacco taxes, manufacturers' excise taxes, and misceUaneous
excise taxes continued to increase, while receipts from liquor, stamp,
and retaUers' excise taxes decreased.
The greatest increase occurred in collections of manufacturers'
excises, which rose by $123 mUlion, or 7.5 percent, over 1948. This
was mainly the result of extremely high production of the automotive
industry and of the attendant incirease in gasoline consumption.
Collections from the miscellaneous excise tax group rose to $1,759
million, an increase of 6.1 percent over 1948, as a result of continued high demand for soirie of the goods and services in this group,
especially in transportation and communications.
Collections from tobacco increased 1.7 percent, reflecting mainly
the long-term trend in consumption.
CoUections from hquor taxes decreased 2.0 percent, from $2,255
million in 1948 to $2,211 mUlion m 1949. This resulted largely from
856455—50
6
66
REPORT OF THE SECRETARY OF THE TREASURY
the reduced collections from distUled spirits, the primary source of
revenue ia this group. This continues the declining trend which was
begun after 1946, the peak year for this tax. Receipts from the tax
on malt liquors likewise declined, whUe receipits from wine increased.
Receipts from retaUers' excise taxes continued to decrease, primarUy as a result of lower fur sales.
Employment taxes.—The yields of the various employment taxes,
qn the daily Treasury statement basis, are shown in the following
table.
1948
Increase, or
decrease (—) •
1949
Source
Amount
Pere ent
In millions of dollars
Federal Insurance Contributions Act _ . .
Federal Unemplos^nent Tax Act
Railroad Retirement Tax Act .
Railroad unemplosmient insurance contributions for
administrative expenses ^
.._
1,616
208
557
15
Total employment taxes
Deduct: Appropriation to Federal old-age and survivors insurance trust fund .
2,396
1,616
779
Net employment taxes
74
15
7
4.6
7.2
1.2
10
-6
-32.9
2,487
91
3.8
1,690
74
4.6
796
17
2.2
1,690
223
564
.
iNot classified as an employment tax under Internal Revenue Code.
Total receipts from employment taxes amounted to $2,487 million
in the fiscal year 1949 and were $91 million, or 3.8 percent, greater
than in 1948. All taxes except the railroad unemployment insurance
contributions for administrative expenses contributed to the increase,
which established a new high in receipts from employment taxes.
The increase in receipts under the Federal Insurance Contributions
Act and under the Fedferal Unemployment Tax Act resulted from an
increase in taxable salaries and wages. Receipts under the RaUroad
Retirement Tax Act increased as a result of higher tax rates and
larger taxable railroad pay rolls. Receipts in the fiscal year 1949
were based on a tax rate of b^i percent each on employers and employees for the first three quarters and on a tax rate of 6 percent for
the last quarter, whUe in the fiscal year 1948 receipts were based
on a tax rate of 5% percent for the entire year.
The decrease in receipts under the RaUroad Unemployment
Insurance Act was caused by the act of June 23, 1948 (Public Law
744, 80th Congress), which reduced receipts allocable to this account;
for the period under consideration, from % to Ko of one percent of
taxable pay rolls. Although the credit established ia favor of the
railroads at the begianing of the fiscal year 1949 by the retroactive
67
REPORT ON OPERATIONS
feature of the act was suflSicient to offset all payments that otherwise
would have been made in the fiscal year 1949 on account of raUroad
unemployment insurance contributions for administrative expenses,
such offsets were compensated by equivalent transfers from the
railroad unemployment trust fund.
Customs. —Customs receipts in the fiscal year 1949 amounted to
$384 miUion and were $37 million less than receipts in 1948. The
decrease was the result of the rate concessions which were made by
the United States under the General Agreement on Tariffs and Trade
of October 30, 1947. The rate reductions became effective January
1, 1948, and were reflected ia receipts for the entire year 1949 as compared with only one-half of the fiscal year 1948.
Miscellaneous receipts.—Miscellaneous receipts amounted to $2,072
million in the fiscal year 1949, a decline of $1,737 mUlion, or 45.6
percent, as compared with 1948. The decrease was primarily the
result of a decline in the sales of surplus property.
Rejunds oj receipts.—Refunds of receipts increased in the fiscal
year 1949 principally as a result of the Revenue Act of 1948, which
reduced rates and increased exemptions retroactively, causing abnormally large overpayments on calendar year 1948 individual income tax liabilities which were refunded during the fiscal year 1949.
BUDGET EXPENDITURES
Budget expenditures totaled $40.1 bUlion in the fiscal year 1949,
and were $6.3 billion larger than expenditures in 1948. Expenditures
for national defense, international finance and aid, veterans, and
interest on the public debt constituted three-fourths of the total.
Principal purposes for which expenditures were made in the years
1948 and 1949 are shown, on the daily Treasury statement basis, in
the accompanyiag tabulation. Details for these and earlier years
are given ia chart 3, and in tables 2, 3, and 5 in the tables section
in this report.
Year
National
defense
and related
activities
International
finance
and aid
Veterans
Interest
on the
public
debt
Ali:other
Total
In billions of dollars
19481
1949
-
11.4
n.8
4.1
2 6.0
6.6
6.9
5.2
5.3
6.6
10.0
33.8
« 40.1
1 Revised. See table 5.
.
' Includes Foreign Economic Cooperation trust fund expenditures of $3.0 billion.
National defense expenditures were nearly 30 percent of the total
in 1949, and amounted to $11.8 bUlion. This was $0.4 biUion more
than m 1948.
68
REPORT OF THE SECRETARY OF THE TREASURY
Expenditures for international finance and aid were $6.0 billion
in 1949, a net increase of $1.9 billion over those in 1948. Economic
Cooperation Act outlays amounted to more than $4.0 billion (including $3.0 billion expended from the Foreign Economic Cooperation
trust fund). This compared with $134 million in 1948, which represented initial expenditures in the April-June quarter immediately
after the act went into effect. Greek-Turkish assistance and relief in
war devastated countries also increased. Partially offsetting these increases in 1949 were a decrease of $525 million expended through the
Export-Import Bank (excluding expenditures made under the Economic Cooperation Act), and a decline of $1.7 billion resulting from
expiration of the credit to the United Kingdom in 1948.
Payments for veterans increased by $0.4 billion during 1949, but
at nearly $6.9 billion were not so large as the record of $7.3 billion
in 1947. The 1949 total was 17 percent of all budget expenditures.
Interest paid on the public debt amounted to $5.3 billion in 1949
and was 13 percent of the total. Payments were $128 million more
than in 1948.
All other budget expenditures in 1949 amounted to $10.0 billion.
They included expenditures for certain domestic programs, sUch as aid
to agriculture, social security, public works, and atomic energy, which
together amounted to $6.5 billion. The remaining $3.5 billion in all
other budget expenditures were those for the executive departments
not shown elsewhere and the legislative and judicial branches; aids
to education, labor, finance, commerce, and industry; Civil Aeronautics; Government contributions to Federal employees' retirement
funds; and the Post OflBice deficiency. The $10.0 billion total in 1949
represented an increase of $3.4 billion over that of 1948, principally
because of increases of $1.8 bUlion for the Commodity Credit Corporation (under aid to agriculture), of $394 million for public works, of
nearly $200 mUlion in purchases of strategic and critical materials, of
$214 mUlion in the Post Office Department deficiency, and $192
miUion for atomic energy.
TRUST ACCOUNTS, ETC., RECEIPTS AND EXPENDITURES
Trust accounts receipts generally represent moneys received by the
Government for the benefit of individuals or classes of individuals.
Moneys held in trust are payable to or for the use of beneficiaries
only and therefore are not included in budget expenditures of the
Government. Such receipts and expenditures are classified separately
in the daUy Treasury statement under the title ^Trust accounts, etc."
Appropriations made from the general fund to various trust accounts, such as the Government's payment to Federal employees'
retirement funds and the national service life insurance fund, are
69
REPORT ON OPERATIONS
EXitl)iiuIii;i¥:MA
Fiscal Years 1943
Through 1949
National
Defense, etc.
International
Finance
1945
t944
194$ - ^ 4 6
1947
C H A R T 3.
1^48
1949
70
REPORT OF THE SECRETARY OF THE TREASURY
included in budget expenditures and under the various trust account
receipts as transfers from the general fund.
A summary of the net transactions in trust accounts, etc., for the
fiscal years 1932 through 1949 is shown in table 1; and receipts in and
expenditures from trust accounts, etc., by major classifications for
the fiscal years 1941 through 1949 are shown in table 6, and details
by months for the fiscal year 1949 in table 4.
GENERAL FUND
The general fund represents all moneys of the Government deposited
with and held by the Treasurer of the United States.
The assets in the general fund include certain gold, sUver, currency,
coin, and unclassified collection items, etc., and deposits to the credit
of the Treasurer of the United States in Federal Reserve Banks,
special depositaries, national and other bank depositaries, foreign
depositaries, and the treasury of the Philippine Islands.
The liabilities of the general fund include outstanding Treasurer's
checks, deposits of certain Government ofl&cers consisting of balances
to the credit of the Post OflRce Department, the Board of Trustees of
the Postal Savings System, and postmasters' disbursing accounts,
etc., uncollected items, and exchanges.
The difference between total assets and total liabilities is the general
fund balance. On the basis of the daily Treasury statement, the
general fund cash balance at the close of the fiscal year 1949 amounted
to $3,470 mUlion, a decrease of $1,462 mUlion during the year.
The net change in the balance of the general fund during the fiscal
year is accounted for as follows:
Balance June 30, 1948
__.
Add:
Budget receipts, net
Trust accounts, etc., receipts
Net increase in gross public debt
$4, 932, 021, 477. 07
38,245,667,810. 11
5, 714, 426 671. 10
478, 113, 347. 34
Deduct:
Budget expenditures, including wholly owned Government corporations i-__ $40,057,107,857.79
Trust accounts, etc., expenditures
6, 209, 160, 036. 37
Clearing account for outstanding checks and telegraphic reports from Federal Reserve Banks: Excess of receipts..
Balance June 30, 1949
49, 370, 229, 305. 62
46, 266, 267, 894. 16
366; 441, 900. 21 .
45,899,825,993.95
3, 470, 403, 311. 67
1 Includes expenditures ofL$3,000,000,000 [from Foreign Economic Cooperation trust fund. See table 1,
footnote 7.
71
REPORT ON OPERATIONS
A comparative analysis of the assets and liabUities of the general
fund is shown as of June 30, 1948 and 1949, in table 41.
PUBLIC DEBT OPERATIONS AND OWNERSHIP OF FEDERAL
SECURITIES
The pubhc debt amounted to $252.8 billion on June 30, 1949, an
increase of $478 mUlion during the year. On the same date the
guaranteed obligations held by the public totaled $27 mUlion, a
decrease of $46 miUion in the year.
Despite the lack of a budget surplus, the marketable public debt
was reduced by $5.2 bUlion, largely through the use of the net proceeds
of nonmarketable issues sold to the public and of special securities
sold to the Government's trust accounts. This was the third successive year in which nonmarketable securities were the only issues to
raise new money which were offered to the public. As a result of the
year's operations the debt held by commercial banks again declined
whUe the debt held by nonbank investors increased. During the
first few months of the year, interest rates on the Treasury's shortterm securities again were increased moderately, so that at the close
of the fiscal year the average rate on the interest-bearing public debt
was somewhat higher than a year earlier.
Chart 4 shows the public debt and guaranteed obligations outstanding since 1942; and the following table shows the public debt, by
classes of securities, and the guaranteed obligations outstanding on
June 30, 1948 and 1949, and the changes during the year (on the basis
of the daUy Treasury statement). The guaranteed obligations held
by the public on June 30, 1939-49, classified by issuing agencies, are
shown in table 14; and a description of these obligations outstanding
June 30, 1949, is given in table 18.
June 30,
1948
Class of security
'
Public debt:
Interest-bearing:
Public issues:
Marketable
Nonmarketable
June 30,
1949
Increase, or
decrease
(-)
In billions of dollars
.°
_
_
Total public issues
_
Special Issues to Govemment investment accounts..
Total interest-bearing public debt Matured debt on which interest has ceased
Debt bearing no interest
_. .
Total public debt
Guaranteed obligations not held by Treasury_._
Total public debt and guaranteed obligations .
•Less than $60 million.
160.3
59.6
165.1
62.8
-5.2
3.3
219.9
30.2
218.0
32.8
-1.9
2.6
260.1
.3
1.9
250.8
.2
1.8
(*) - . 2
252.3
.1
_.
262.4
.7
252.8
(*)
262.8
.5
(*)
.4
72
REPORT OF THE SECRETARY OF -THE TREASTJRY
l?UBUC*[jiBP^|gO^(5UAR
CHART 4.
REPORT ON
OPERATIONS
Details of public debt operations and changes in ownership of the
debt are given in the two sections which follow.
PUBLIC D E B T
MARKETABLE
OPERATIONS
ISSUES
Net retirement of marketable debt issues in the amount of $5.2
bUlion during the year brought the total marketable debt down to
$155.1 billion. This amount .represents a decrease of $44.7 billion
from the postwar peak on February 28, 1946. The reduction during
the fiscal year 1949 consisted mainly of Treasury notes, biUs, and
bonds. The table following shows the changes in the marketable debt
outstanding.
Increase,
or decrease (—)
Class of security
In billions of dollars
Treasury bills
Certificates of indebtedness
Treasury notes. _
_._
Treasury bonds
Other bonds (postal savings, etc.)
Total marketable
13.8
22.6
11.4
112.6
.2
11.5
29.4
3.6
110.4
.2
160.3
155.1
-2.2
6.8
-7.8
-2.0
(*)
*Less then $50 million.
Bonds, notes, and certijicates oj indebtedness.—A total of $36.0
billion of marketable securities, exclusive of Treasury bills, matured
or were called for redemption during the fiscal year 1949. The
secmities exchanged for new issues totaled $33.0 billion, and approximately $3.0 billion were paid in cash. The cash total included retirements of securities held by the Federal Reserve Banks in the amount
of $0.5 bUlion.
The matured and called securities consisted of ten issues of one-year
certificates of indebtedness, three issues of Treasury notes, and three
issues of Treasury bonds. One issue, the 2)^ percent Treasury bonds
of 1948, which matured on September 15, 1948, and amounted to
$451 miUion, was paid in full in cash. All others were refunded in
operations involving eight new issues of certificates of indebtedness,
totaling $29.4 billion, and one new issue of Treasury notes amounting
to $3.6 billion.
The first of these operations took place on July 1, 1948, with the
maturity of three % percent certificate issues which totaled $6.1
billion. These issues. Series F , G, and H, 1948, carried respective
maturities of one year, 11 months, and 10 months. They were refunded into a new one-year l)i percent Certificate amounting to $5.8
74
REPORT OF THE SECRETARY OF THE TREASURY
biUion. This continued the one-year 1}^ percent rate on certificates
which became effective on January 1, 1948.
On August 9, the Secretary of the Treasury announced as a further
anti-inflationary move that there would be aiiother increase in the
rates on new short-term Government securities. At the same time
the Secretary also said that there would be no change in the Government's pohcy with regard to the long-term Treasury bonds.
Pursuant to this statement, in the September-October refinancing,
an 18K-month 1% percent Treasury note, dated September 15, 1948,
and maturing April 1, 1950, was offered in exchange for the four-andone-half year IK percent Treasury notes which matured on September
15; and a one-year 1% percent certificate was offered in exchange for
the 12}^-month 1 percent Treasury notes due October 1, and also for
two issues of 1 percent certificates due October 1: Series J-1948, a
one-year issue, and Series K-1948, an 11-month issue. The Treasury
notes which matured September 15 amounted to $3.7 bUlion and the
exchanges for the new 1% percent note totaled $3.6 bUlion. The"three
issues maturing October 1 totaled $6.9 billion and exchanges for the
new certificate totaled $6.5 billion.
An announcement by the Secretary on November 16 stated that
holders of the 2 percent Treasury bonds of 1948-50 (dated December
8, 1939), outstanding in the amount of $571 million, would be offered
in exchange a one-year 1% percent certificate dated December 15,
1948. Exchanges amounted to $519 million. The announcement
stated also that a one-year IK percent certificate dated January 1,
1949, would be offered in exchange for holdings of the 13-month 1}^
percent Treasury notes and the one-year lYs percent certificate, both
maturing January 1, and totaling $6.1 billion. Subscriptions to this
new certificate totaled $5.7 billion.
The interest rate oi 1% percent on one-year certificates of indebtedness was reaflBrmed throughout the remainder of the fiscal year with
announcements by the Secretary on January 19, February 9, March 18,
and May 13 of four new 1/^ percent refunding issues in exchange,
respectively, for four one-year 1/^ percent issues, which matured on
the first of February, March, AprU, and June. The four new issues
of certificates of indebtedness, which were offered on the respective
dates of January 19, February 15, March 21, and May 19, were issued
in the foUowing amounts (in billions): Series B-1950, $2.0; Series
C-1950, $2.9; Series D-1950, $1.0; and Series E-1950, $5.0. The
maturing certificates were outstanding at the time of refunding in the
75
REPORT ON OPERATIONS
following amounts (in bUlions): Series B-1949, $2.2; Series C-1949,
$3.6; Series D-1949, $1.1; and Series E-1949, $4.3; and the caUed
Treasury bonds were outstanding in the amount of $1.0 bUlion. The
June 1 issue was offered also in exchange for the caUed 2 percent
Treasury bonds of 1949-51 (dated January 15,1942). In the February 1
financing operation, $88 million of the $196 million cash redemptions
and in the March 1 financing, $400 million of the $632 million cash
redemptions represented holdings of the Federal Reserve System.
The accompanying tables summarize the financing transactions
during the year. Additional detaUs of the operations appear in
exhibits 1 through 4 and in tables 22 and 23.
Public offerings of honds, notes, and certificates of indebtedness, fiscal year 1949 ^
[In millions of dollars]
Julyl
Issued In
exchange
for other •
securities
Total
issued
Marketable issues
1948
iyi% certificatesof indebtedness, Series F-1949,
due July 1,1949.
m % Treasury notes. Series A--1950, due Apr.
1,1950.
1 ^ % certificates of indebtedness:
Series 0-1949, due Oct. 1,1949
Series H-1949, due Dec. 16,1949
Sept. 16
Oct. 1
Dec. 15.
Jan. 1
Feb. 1
Mar. 1.
Apr. 1
Issued for
cash
Description of security
Date of issue
1949
._
.Tnnp, 1
Series
Series
Series
Series
A-1950, due Jan. 1,1950
B-1950, due Feb. 1,1950
C-1950, due Mar. 1,1950
D-1950, due Apr. 1,1960
Sp.ries Ti]-195n, dnp, .Time 1, 19.'i0
Total marketable issues
.
5,783
6,783
3, 596
3,696
6,636
619
6,635
519
5,696
1, 993
2,922
963
6,019
5,696
1,993
2,922
963
6,019
33,024
33,024
Nonmarketable issues
Various
Do
_
Treasury savings notes, Series 0 and D
United States savings bonds:
Series
Series E__
F and G_._
_
3,994
3,994
5,032
2,935
5,032
2,936
Subtotal savings bonds
7,967
7,967
Total nonmarketable issues
11,961
11, 961
Total all issues
11,961
33,024
44,986
» Excludes armed forces leave bonds, depositary bonds, adjusted service bonds, excess profits tax refund
bonds, United States savings stamps, the special series of certificates of indebtedness, and guaranteed obligations.
76
REPORT OF THE SECRETARY OF THE TREASURY
Disposition of maturing or redeemable issues of bonds, notes, and certificates of
indebtedness, fiscal year 1949 ^
[Dollars in millions]
R e d e e m e d for cash b y
D a t e of
refunding
or. retirement
Description of security
Federal
Reserve O t h e r s
Banks 2
Total
Exchanged
for
new
security
Total
Percent
exchanged
2,601
1,079
2,103
2,742
1,127
2,209
461
94.9
95.7
95.2
M a r k e t a b l e issues
1948
H % certificates of i n d e b t e d n e s s :
Julyl
Series F-1948, d u e J u l y 1,1948
Series G-1948, d u e J u l y 1, 1948..
Do
Series H-1948, d u e J u l y 1,1948
Do
S e p t . 1 5 . . . - 2 H % T r e a s u r y b o n d s of 1948, d u e Sept.
15, 1948.
IJ.^% T r e a s u r y notes, Series A-1948, d u e
Do
Sept. 16,1948.
1% T r e a s u r y n o t e s . Series B-1948, d u e
Oct.l.
Oct. 1, 1948.
1% certificates of i n d e b t e d n e s s :
Series J-1948, d u e Oct. 1,1948
Do
Series K-1948, d u e Oct. 1, 1948
Do
2% T r e a s u r y b o n d s of 1948-50 (dated
D e c . 15
D e c . 8, 1939), d u e D e c . 15,1948.
1949
1 H % T r e a s u r y notes, Series A-1949, d u e
J a n . 1, 1949.
m % certificates of m d e b t e d n e s s :
Series A-1949, d u e J a n . 1, 1949
Do . . .
Series B-1949, d u e F e b . 1, 1949
Feb. 1
Series C-1949, d u e M a r . 1,1949
Mar.l
Series D-1949, d u e A p r . 1, 1949
Apr. 1 . . .
Series E-1949, d u e J u n e 1, 1949
June 1
2% T r e a s u r y b o n d s of 1949-51 (dated
Do
J a n . 15, 1942), d u e J u n e 15, 1949.
141
48
106
451
Jan. 1
Total marketable issues..
..
88
400
488
141
48
106
451
162
152
3,696
3,748
96.0
180
180
3,912
4,092
95.6
97
101
52
97
101
52
1,257
1,366
619
1,354
1,467
571
92.8
93.1
90.9
236
236
3,299
3,636
93.3
196
108
232
92
195
101
196
196
632
92
195
101
2,396
1,993
2,922
963
4,106
913
2,592
2,189
3,553
1,066
4,301
1,014
92 4
91.1
82.2
91.3
95.6
90.0
2,488
2,976
33,024
36,000
91 7
N o n m a r k e t a b l e issues
Various
Do
Do
T r e a s u r y t a x a n d savings n o t e s . . . .
3 3, 532 3 3, 532
3 3, 532
U n i t e d States savings b o n d s :
Series A - D
Series E
Series F a n d G . .
703
3,530
835
703
3,630
836
703
3,530
835
S u b t o t a l savings b o n d s
5,067
5,067
5,067
6
6
6
8,604
8,604
8,604
l i , 092
11, 580
2yi% T r e a s u r y b o n d s , i n v e s t m e n t series.
T o t a l n o n m a r k e t a b l e issues
T o t a l all issues
488
33,024
44, 604
» Marketable issues are exclusive of postal savings bonds, and other debt items. Nonmarketable issues
are exclusive of armed forces leave bonds, depositary bonds, adjusted service bonds, excess profits tax refund bonds, United States savings stamps, special notes of the United States, and guaranteed obligations.
* In November 1947, arrangements were made between the Treasury and the Federal Reserve System
whereby all or part of the System's holdings of certain maturing and called securities would be presented
for cash redemption.
»Includes tax and savings notes in amount of $1,453 million surrendered In payment of taxes.
Treasury bills.—Offerings of short-term Treasury bills were made
weekly during the fiscal year 1949. In further pursuance of the
Treasury's policy of retiring debt held by the commercial banking
system, there was a net retirement of bills totaling $2,200 million.
This amount is exclusive of the relatively small remainders of maturing
securities which are turned in for cash redemption, instead of exchange,
when a maturing issue is refunded into a new series of Treasury obligations. The 13 issues outstanding at the end of the fiscal year 1948
77
REPORT ON OPERATIONS
totaled $13,757 million; the 13 issues outstanding at the end of the
fiscal year 1949 totaled $11,536 mUlion.
One-half of the net total retired for cash was retired in the first
11 weeks of the fiscal year by weekly amounts of $100 million each.
From September 16 through October no net retirements were made.
I n November through January, $500 million were retired, in amounts
of $100 million each on November 18 and 26, December 2 and 9,
and January 6. In March and AprU $600 million were retired. I n
March three retirements took place, two of $200 mUlion each on
March 17 and 31, and one of $100 mUlion on March 24. The retirement of $100 mUlion on April 7 was the final net bill retirement
during the year.
In continuation of the rise in the rate on Treasury bills which
began in July 1947, the average rate in the fiscal year 1949 was increased gradually from 0.997 percent in July 1948 to a high of 1.163
percent in February and early March. Thereafter, the average rate
declined to a low of 1.147 percent on May 5. I t increased later,
untU at the end of June it stood at 1.158 percent. Bids on a fixed
price basis averaged about $56 mUlion a week and amounted in the
aggregate to about 6 percent of all bids accepted.
Further information on Treasury bills is contained in exhibits 5
through 7, and in table 23.
NONMARKETABLE ISSUES
Sales of nonmarketable public issues during the fiscal year 1949
totaled $12.2 billion and redemptions, $9.0 billion. The increase of
$3.2 billion in the nonmarketable public securities outstanding was
due almost entirely to United States savings bonds and Treasury
savings notes. Tho table following shows the changes in the amounts
of these two classes outstanding on June 30, 1948 and 1949.
June 30,
1948
Class of security
June 30,
1949
Increase, or
or decrease
(-)
In millions of dollars
United States savings bonds:
Series A-D:
Unmatured
Matured
Series E
Series F and G
.
Total
...
Treasury tax and savings notes:
Unmatured
Matured
Total
Total 2 classes
.
-.
_ ...
.^-
2,543
69
31, 625
19,105
1,927
73
33,127
21,205
-616
14
1,502
2,100
53, 333
56,333
3,000
4,394
36
4,860
32
467
-4
4, 429
4,892
463
67, 762
61,225
3,463
78
REPORT OF THE SECRETARY OF THE TREASURY
United States savings bonds.—Sales of savings bonds (including discount accruals) exceeded redemptions during the year by $3.0 billion.
Sales amounted to $7.1 bUlion, issue price. As of June 30, 1949, the
value of the unmatured bonds outstanding, at current redemption
value, totaled $56.3 bUlion. This amount was 22.3 percent of the
total public debt and guaranteed obligations outstanding, as compared
with 21.2 percent on June 30, 1948. Since their inception in 1935,
savings bonds issued, with accruals added, have totaled $87.0 biUion,
and redemptions have totaled $30.6 billion. As of June 30, 1949, the
redemption value of the outstanding bonds was 65 percent of the
amount issued (including accruals).
Series E bond sales in 1949 reversed the declining trend which
began in the fiscal year 1946. The 1949 sales of $4.3 biUion, issue
price, were $252 mUlion larger than in 1948. Series E sales, issue
price, were 60 percent of all savings bonds sold in 1949.
Two limitations on amounts of savings bond purchases were modified during the year. Individual holders of Series D-1939 savings
bonds, which began maturing January 1, 1949, were perinitted to
reinvest the proceeds of the maturing bonds in Series E savings bonds
currently on sale without regard to the $10,000 annual limitation
(maturity value) on purchases of E bonds, according to an announcement on December 20, 1948. Any part of the proceeds of the maturing Series D-1939 bonds could be reinvested up to such denominational
amounts as the proceeds would fully cover. Earlier, effective for the
period July 1-15, 1948, certain institutional investors were permitted
to purchase Series F and Series G bonds in excess of the $100,000
limitation, up to $1,000,000, issue price, in the aggregate for the
institutions concerned.
Redemptions of savings bonds have declined each year since 1946,
when they reached their peak. This has occurred in spite of the increasing volume of matured bonds included in the total, and the
growing amount of accrued discount which reflects the lengthening
periods in which the bonds have been outstanding. During 1949,
redemptions of all series totaled $5.1 bUlion. Redemptions of Series
A-D, including the matured bonds, amounted to $703 mUlion in 1949.
Redemptions of Series E bonds decreased by $295 million to $3.5
bUlion in 1949. This was the third successive year in which Series E
bond redemptions declined. This decline in 1949 more than offset
the increase of $63 mUlion in the redemptions of Series F and G bonds,
which totaled $835 miUion, and also offset the increase of $187 miUion
in redemptions of Series A-D bonds.
79
REPORT ON OPERATIONS
The redemption experience of savings bonds by yearly series is
summarized in the foUowing table. An analysis of these data by
denominations is shown in table 33.
Percent of savings bonds sold in each year redeemed through each yearly period
thereafter ^
[On basis of P u b l i c D e b t accoimts, see p .351]
R e d e e m e d b y e n d of—
Series a n d calendar year
i n which issued
1 year
2 years 3 years 4 y e a r s 5 years 6 years 7 years 8 years 9 years
Series A t h r o u g h E
5
6
7
6
4
4
3
8
15
19
28
23
21
20
11
12
12
10
9
8
7
15
24
33
38
34
30
16
17
17
15
13
11
10
21
34
41
45
40
20
21
20
18
15
13
13
29
41
47
50
23
24
23
19
17
15
17
35
47
62
26
26
25
21
18
18
21
40
51
28
28
26
22
20
20
25
44
Average, Series A - E
issued t h r o u g h D e c .
31,1941
5
10
14
17
20
22
24
Average, Series E issued from J a n . 1,
1942
19
29
36
42
45
46
44
10
14
19
18
13
18
22
16
21
15
18
A-1935
B-1936
c-1937.
0-1938
D-1939
D-1940
D-1941 a n d E-1941
E-1942
E-1943..
E-1944
E-1945
E-1946
E-1947
E-194S
.
......
•
29
29
27
24
23
22
28
31
30
29
26
26
25
26
28
Series F a n d G
F-1941
F-1942
F-1943
F-1944
F-1945
F-1946
F-1947
F-1948
and
and
and
and
and
and
and
and
G-1941.
G-1942
G-1943
G-1944
G-1945
G-1946
G-1947
G-1948
A v e r a g e , Series F a n d
G issued from M a y
1,1941
1
1
2
2
2
3
3
2
3
4
6
6
7
7
8
5
7
10
10
11
12
2
6
9
7
11
14
14
14
18
'
"""
12
18
18
18
NOTE.—The percentages shown in this table are the proportions of the value of the bonds sold in any
calendar year which are redeemed before July 1 of the next calendar year, and before July 1 of succeeding
calendar years. Both sales and redemptions are taken at maturity value. The average percentages shown
above are simple averages of the percentages for the applicable annual series.
1 Percentages by denominations may be found in table 33.
Detailed information on savings bonds from March 1935, when
savings bonds were first offered, through June 1949, is published in
tables 28 through 33.
Treasury notes, tax and savings series,—Treasury savings notes were
sold during the fiscal year 1949 in the face amount of nearly $4.0
bUlion, over $1.9 biUion more than were sold in 1948. Redemptions,
80
REPORT OF THE SECRETARY OF THE TREASURY
including both tax and savings notes, amounted to $3.5 billion. Of
the redemptions, $1.5 billion were applied in payment for taxes and
$2.1 biUion were paid in cash. On June 30, 1949, there were $4.9
billion of unmatured savings notes outstanding compared with $4.4
biUion a year earlier. (See table 34.)
The sales of Series C savings notes, which began September 14,
1942, was ended at the close of business August 31, 1948, in accordance with an announcement by the Secretary of the Treasury on
August 18. This issue yielded approximately 1.07 percent if held to
maturity- A new issue of Treasury savings notes. Series D, was
announced on August 18, and became available on September 1, 1948.
Series D savings notes under the initial terms were dated as of the
first day of the month in which purchased, mature three years thereafter, and are issued at par. Interest on the notes accrues each
month from month of issue, on a graduated scale, the equivalent yield
if held to maturity being approximately 1.40 percent per annum.
The amount of accrual each month on each $1,000 principal amount
of notes, from month of issue to month of maturity, follows:
Half-year periods after month of issue
First H year.
H to" 1 year..
1 to IH years.
IH to 2 years.
2 to 2H years.
2H to 3 years.
Interest
accrual
each month
per $1,000
$0.80
1.00
1.20
1.30
1.40
1.40
$1,000 principal with
interest
accrual
(cumulative)
to end of
period added
$1,004.80
1,010.80
1,018.00
1,025.80
1,034. 20
1,042.60
Like Series C, the new notes may be presented in payment of
income, estate, and gift taxes, imposed by the Internal Revenue Code,
after two months from the month of issue. Cash redemptions of the
new notes may be made before maturity after four months from the
month of issue, which compares with the six months applied to Series
C notes. DetaUs of the terms of Series D are given in exhibit 8.
Special short-term certijicates oj indebtedness.—Special short-term
certificates of indebtedness were sold on June 15, 1949, directly and
solely to the Federal Reserve Banks in the amount of $220 miUion.
The certificates were issued to cover overdrafts on Treasury balances
at the Federal Reserve Banks in anticipation of the receipt of income
tax payments due June 15. The securities were retired in full on
June 17. Interest was paid to the Federal Reserve Banks at the rate
of one-fourth of 1 percent per annum. This issue was the first of its
kind since March 1945.
81
REPORT ON OPERATIONS
Special issues.—During the fiscal year the Treasury continued to
issue special series of interest-bearing securities for trust and other
funds deposited in the Treasury. Obligations outstanding increased
by $2.6 biUion during 1949 to $32.8 billion as of June 30, 1949. Details appear in table 17.
INTEREST ON THE PUBLIC DEBT
Interest payments on the public debt during the year amounted to
$5,339 miUion, compared with $5,211 million, daUy Treasury statement basis, in 1948. The rise in interest payments during 1949
resulted mainly from higher payments on savings bonds and on
short-term marketable securities. These increases were only partially
offset by decreases in interest payments on marketable bonds, armed
forces leave bonds, and tax and savings notes.
Interest payments by classes of securities on the basis of Public
Debt accounts are summarized in the following table.
1948
1949
Class of security
Increase, or
decrease (—)
In millions of dollars
Marketable:
Treasury bills
Certificates of indebtedness
Treasury notes
Treasury and other bonds
Subtotal
-
132
202
87
2,740
139
230
141
2,597
7
28
53
-143
3,161
3,107
-54
Nonmarketable:
Armed forces leave bonds
United States savings bonds
Treasury tax and savings notes.
Treasury bonds. Investment series
Depositary bonds
Other
-
67
1,160
63
12
6
1
13
1,327
57
24
7
1
-64
177
-6
12
Subtotal
Special issues to Government investment accounts
1,298
728
1,428
818
129
23
6,352
—13
164
5,211
5,339
Total
-„
Adjustment to daily Treasury statement basis
Total
-
(*)
(*)
NOTE.—Only the discount currently accruing on savings bonds is Included in interest payments.
On
the other hand, interest on armed forces leave bonds and savings notes is paid only at time of redemption.
*Less than $500,000.
The computed average rate on the total interest-bearing debt outstanding on June 30, 1949, was 2.236 percent, compared with 2.182
percent a year earlier. TMs increase was due principally to the rise
in rates on short-term securities and the continued issuance of nonmarketable and special issues at higher than average rates.
The yields on marketable Government securities on June 30, 1948
and 1949, are shown in chart 5.
856455—50
82
REPORT OF THE SECRETARY OF THE TREASURY
|fii|iiMWi£f^i#j|s^^
C H A R T 5.
NOTE.—The wholly tax-exempt Panama Canal bonds of 1961, the 2H's of September 15, 1948—the only
partially tax-exempt,fixedmaturity Issue outstanding on either date—and the bank-eligible 2H's of 1967-72
have been omitted from the chart In order to avoid undue complexity.
All bank-restricted issues are callable and all partially tax-exempt issues are bank-eligible.
REPORT ON OPERATIONS
83
CUMULATIVE SINKING FUND
Credits accruing to the sinking fand in 1949 amounted to $620
mUlion which, added to the unexpended balance of $5,969 miUion
brought forward from the previous year, made available $6,589 miUion
for the fiscal year 1949. Of this amount, $7 miUion was used toward
the retirement of the 4% percent Treasury bonds of 1947-52, which
had been called during 1948. The unexpended balance of $6,582
miUion was carried forward to the fiscal year 1950.
Tables 26 and 27 show the transactions on account of this fund
since its inception on July 1, 1920.
STATUTORY LIMITATION
OBLIGATIONS
ON
THE
PUBLIC
DEBT
AND
GUARANTEED
Section 21 of the Second Liberty Bond Act, as amended by the
Public Debt Act of June 26, 1946, limits the amount of obligations
issued under authority of the act to $275 billion outstanding at any
one time. This limitation applies to the public debt and to those
obligations of Government corporations and other business-type
activities which are fuUy guaranteed by the United States (except
such obligations held by the Treasury).
As of June 30, 1949, the unused borrowing authorization was $23
bUlion. An analysis of the public debt and guaranteed obligations
outstanding as affected by the debt limitation is shown in table 20.
OWNERSHIP OF FEDERAL SECURITIES ^
Although the increase in gross Federal debt during the fiscal year
1949 amounted to only $0.4 billion, there was an increase of $4.0
bUlion in the holdings of Federal securities by nonbank investors.
As a result, debt ownership by the banking system—that is, commercial banks and Federal Reserve Banks—continued its steady
decline since the peak of debt reached on February 28, 1946. Since
the peak, outstanding Federal securities decreased by $27.0 billion
through June 30, 1949. The decline in bank holdings of Federal
securities during the same period amounted to $34.3 billion, whUe
nonbank investor holdings increased by $7.3 billion. On June 30,
1949, the banking system held only 33 percent of total debt outstanding, as compared with 42 percent at the peak of debt and 39 percent
on June 30, 1941.
;
The figures on bank and nonbank ownership, along with further
detaU on the holdings of Federal securities by the various investor
classes, are shown in the following table.
» Gross public debt, and guaranteed obligations of Federal Government held outside of Treasury.
84
REPORT OF THE SECRETARY OF THE TREASURY
Ownership of Federal securities, by investor classes for selected dates^ 1941-4^ ^
J u n e 30
Class of i n v e s t o r
J u n e 30,
1941
F e b . 28,
1946 2
1948
1949
A m o u n t s i n billions of dollars
E s t i m a t e d ownership b y :
N o n b a n k investors:
Individuals'
Other n o n b a n k i n v e s t o r s :
Insurance companies
M u t u a l savings b a n k s . . . . . . . . . .
Other corporations a n d associations <
State a n d local g o v e r n m e n t s
_.
Federal G o v e m m e n t i n v e s t m e n t a c c o u n t s . .
T o t a l other n o n b a n k investors.Total n o n b a n k investors . .
Banks:
Commercial b a n k s
Federal R e s e r v e B a n k s .
Totalbanks
T o t a l gross d e b t o u t s t a n d i n g .
11.5
64.6
67.0
68.9
7.1
3.4
2.4
.6
8.5
24.8
11.1
27.9
6.7
28.0
23.2
12.0
20.7
7,8
36.7
20.9
11.6
22.7
8.0
38.3
22.0
98.4
99.4
101.5
33.5
163.1
166.4
170.4
19.7
2.2
93.8
22.9
64.6
21.4
63.0
19.3
21.8
116.7
85.9
82.4
.55.3
279.8
252.4
252.8
P e r c e n t of t o t a l
Percent owned b y :
N o n b a n k investors:
Individuals'..
O t h e r n o n b a n k investors
Total n o n b a n k investors
Banks
•
TotaL gross d e b t o u t s t a n d i n g . _ .
21
40
23
35
27
39
27
40
61
39
58
42
66
34
67
33
100
100
100
100
1 Comprises gross public debt, and guaranteed obligations of Federal Govemment held outside of Treasury.
2 Peak of debt.
3 Includes partnerships and personal trust accounts.
< Includes corporations other than banks and insurance companies, savings and loan associations, dealers
and brokers, and investments of foreign balances and intemational accounts in this country.
Individuals continued during 1949 to add to their holdings of Federal
securities, with net acquisitions during the year of close to $2 billion.
Individuals were, at the close of the year, the largest single investor
group in the entire Federal debt ownership picture. Their holdings of
approximately $69 biUion represented 27 percent of the total debt.
Over $48 billion of individuals' holdings of Federal securities were
savings bonds, with $33 billion in Series E bonds alone. The remaining $21 billion of individuals' holdings were primarily long-term
marketable securities.
Insurance companies held about $21 bUlion of Federal securities
on June 30, 1949, with more than $15 biUion of their holdings in
bank-restricted bonds. Life insurance companies owned $16 billion
of the debt, and fire, casualty, and marine insurance companies,
$5 bUlion. The preference of life insurance companies for predominantly long-term debt is iUustrated by the fact that on June 30,
REPORT ON OPERATIONS
85
1949, their Federal security portfolios had an average length to
first call or maturity of about 14}^ years.
Mutual savings banks' holdings of Federal securities amounted to
$11.6 billion on June 30, 1949, with about $9 billion in bank-restricted
bonds. The average length to first call or maturity of mutual
savings banks' portfolios on June 30, 1949, was approximately 12K
years, or a little less than in the case of life insurance companies.
Holdings of Federal securities by the group of investors entitled
''other corporations and associations" amounted to almost $23
billion on June 30, 1949. Nonfinancial corporations alone held
approximately $15 billion in Federal securities on this date. Of the
remaining $8 bUlion, over one-third was accounted for by holdingsof
securities by the International Bank for Reconstruction and Development and the International Monetary Fund, and by the investment
of foreign balances in the United States. Nonprofit institutions,
including such groups as fraternal benefit associations, credit unions,
endowments, private pension and welfare funds, labor organizations,
etc., are estimated to account for about $2 billion, with the remainder
comprising holdings by dealers and brokers and by savings and loan
associations. For the group of ''other corporations and associations"
as a whole, about $4 billion out of the $23 billion total was invested
in savings notes and nearly $5 billion in savings bonds; about $1
biUion was in noninterest-bearing notes issued to the International
Bank and Monetary Fund; and the remaining $13 billion was in
marketable securities.
State and local governments held Federal securities on June 30,
1949, in the amount of $8 biUion, to a large extent in marketable
securities. Federal Government investment accounts held $38.3
billion of Federal securities, $32.8 billion of which was special issues.
Investments of the old-age and survivors insurance trust fund, the
unemployment trust fund, veterans' life insurance funds, and other
retirement funds accounted for the bulk of these holdings.
Commercial banks held $63 billion of Federal securities at the end of
the fiscal year 1949. About $44 billion was invested in bank-eligible
bonds, 75 percent of which were due or callable within 5 years. Commercial banks also held $16 billion of biUs, certificates, and notes.
The average length, to first call or maturity of securities, held by
commercial banks amounted to slightly over three years as of June
30, 1949, reflecting the policy of maintaining their portfolios of
Government securities in a relatively liquid position. Holdings of
Federal securities by the Federal Reserve Banks amounted to $19.3
bUlion on June 30, 1949. Their portfolios on that date consisted
of $7.8 billion of bonds, $7.2 bUlion of certificates and notes, and
$4.3 bUlion of biUs.
86
REPORT OF THE SECRETARY OF THE TREASURY
Changes in ownership oj Federal securities during 1949.—The Federal
debt increase of $0.4 billion during the fiscal year 1949 reflected the
continued expansion of nonbank investors' holdings during the period
and the further reduction of bank portfolios.
Marketable debt declined during the year by $5.2 billion, threefourths of which was in the holdings of securities by commercial and
Federal Reserve Banks. This decline in bank holdings was almost
evenly divided between the commercial banks and Federal Reserve
Banks. At the same time nonmarketable securities, etc., increased by
$5.6 biUion, with almost 95 percent accounted for by purchases of
nonbank investors.
PracticaUy all of the acquisition of nonmarketable securities by
commercial banks during the year was the result of the special offering
of Series F and G savings bonds during July 1948. The increase in
nonbank investors' holdings of savings bonds accounted for about
half of their $5.3 billion increase in nonmarketable securities etc.,
during the year. The remaining half was accounted for principally
by increases in special issues to Government investment accounts.
The detail on changes in holdings of various types of securities by
nonbank investors, commercial banks, and Federal Reserve Banks
is shown in the following table.
Estimated changes in bank vs. nonbank ownership of Federal securities by type of
issue, fiscal year 1949 ^
[In billions of dollars]
Change accounted for by
Total
change in
Banks
amount
outstand- Nonbank
ing
investors
Federal
Total Commercial
Reserve
Class of security
Marketable securities:
Treasury bills
__
Certificates of indebtedness
Treasury notes
Treasury bonds
^
Total marketable
Nonmarketable securities, etc.:
United States savings bonds
Treasury savings notes
Treasury bonds, investment series..
Armed forces leave bonds .
Special issues to Govemment investment accounts
Notes to Intemational Bank and Monetary
Fund,
-- Other
.
Totai nonmarketable, e t c . . .
Total change
-2.2
6.8
-7.8
-2.1
1.6
3.6
-3.1
-3.3
-3.7
3.2
-4.7
1.2
0.5
1.0
-3.1
-.3
-4.2
2.2
-1.6
1.6
-5.2
-1.3
-3.9
-1.9
-2.0
3.0
.5
2.7
.5
.3
.3
(*)
-.2
(*)
(*)
2.6
2.6
-.1
-.1
-.1
-.1
5.6
6.3
.3
.3
.4
4.0
-3.6
-1.6
. (*)
(*)
* Less than $50 million.
» Gross public debt, and guaranteed obligations of Federal Govemment held outside of Treasury.
-2.0
REPORT ON OPERATIONS
87
Purchases of securities from the Treasury during 1949 amounted
to $14.7 billion. Since there were no offerings of marketables for
new money during theyear^, the purchases represented special issues,
savings bonds and savings notes, and other nonmarketable securities.
As partial offsets to these sales, the Treasury redeemed $9.0 billion of
securities other than marketables during the year. These transactions
affected nonbank investors almost exclusively.
Payments by the Treasury on marketable issues matured or called
during the year amounted to $5.2 biUion. Of this amount, $3.5 bUlion
was paid on securities held by banks, principally Federal Reserve
Banks. Treasury pay-offs therefore account for all but a small part
of the reduction of bank holdings, since purchases of new securities
approximately offset the smiall amount of net market sales made by
the banks during the year..
Commercial bank transactions during the year resulted in net market sales of $1.2 bUlion. They bought about a billion dollars of bonds
and half a billion dollars of bills in the market during the period and
sold over $2/^ bUlion of certificates and notes. During the year the
Federal Reserve Banks acquired a little over $1/2 biUion of bonds and
$1 billion of certificates and notes through market purchases. These
purchases were to a large extent offset by the sale of bills to commercial
banks and to nonbank investors, so that net Federal Reserve Bank
purchases in the market amounted to only $0.7 billion for all securities
combined. The $1/^ billion of Federal Reserve Bank purchases of
bonds during the year represented a net purchase of approximately
$5 bUlion of bonds during the first five months of the year and a net
sale of approximately $3/^ billion during the remainder of the year.
Despite the heavy bond purchases during the early part of the year,
the Federal Reserve Bank total portfolio was $2 billion lower on
June 30, 1949, than it was a year earlier.
Purchases by "other corporations and associations," which were
the principal nonbank buyers of Federal securities in the market on
net balance during the fiscal year 1949, more than offset the liquidation
of $2.4 bUlion of Federal securities by insurance companies. Mutual
savings banks sold about half a billion dollars (net) of Federal securities in the market during the year, an amount just about equal to
net market purchases by individuals.
The figures for transactions in Federal securities for each of the
nonbank investor classes, as well as for commercial banks and the
Federal Reserve Banks, are shown in the following table.
88
REPORT OF T H E SECRETARY OF T H E TREASURY
Estimated transactions in Federal securities by investor classes, fiscal year 1949 ^
[In billions of dollars]
Transactions with
Treasury
Class of Investor
Purchases
Redemptions and
cash maturities
Net •
Total
market
change
in ownertransship
actions
(-)2
Nonbank investors:
Individuals ^
__
_
:
Other nonbank investors:
Insurance companies..
•..Mutual savincfs banks
Other corporations and associations *
state and local governments Federal Govemment investment accounts.. ._
Total other nonbank investors
Total
Banks:
Commercial banks
Federal Reserve Banks
Total banks .
Total all investors
..'
. .
.
_
6.7
-5.3
0.5
1.9
.3
.2
3.7
.6
2.6
-.2
-2.4
-.6
2.8
.1
-2.3
- 3
2.0
2
2.6
(*)
7.4
-4.5
-.6
-.1
-5.3
14.1
-10.6
.5
4.0
.6
-1.2
.7
—1.6
—2 0
.6
-1.0
-2.7
-3.7
-.5
—3 6
14.7
-14.3
(*)
(*)
2.1
4
NOTE.—Special Issues, Treasury bills, and guaranteed securities are included in figures on purchases and
redemptions on basis of net changes in amounts outstanding (rather than gross issuances and retirements).
*Less than $50 million.
'' Gross public debt, and guaranteed obligations of Federal Govemment held outside of Treasury.
2 Net decline in Treasury bills outstanding is allocated to Federal Reserve Banks, with all other changes
in bill holdings considered to represent activity in the market.
3 Includes partnerships and personal trust accounts.
^ Includes corporations other than banks and insurance companies, savings and loan associations, dealers
and brokers, and investments of foreign balances and intemational accounts in this country.
As shown in the preceding table, nonbank investors added $4 biUion
to their holdings of Federal securities during the fiscal year 1949.
There were divergent trends, however, among the major investor
groups. Federal Government investment accounts acquired $2.6
biUion of special issues during 1949, reflecting in large part the continued accumulation of individuals' savings in social insurance funds.
Nonfinancial corporations were significant buyers of Federal securities
during the year and accounted for a large share of the $2 billion increase in the "other corporations and associations" group. This
upward trend in investment in Federal securities represented a reversal of the experience during the preceding three years when this
group of investors liquidated about $10 bUlion of securities, largely
to provide funds for the reconversion period and for early postwar
corporate expansion of plant, equipment, and inventory. Individuals
also added about $2 billion to their holdings of Federal securities
during 1949, mostly because of continued purchases of savings bonds.
Life insurance companies decreased their holdings of Federal securities by close to $3 billion during 1949, following the trend which began
two years ago as new private investment opportunities appeared in
89
REPORT ON OPERATIONS
the form of an increased supply of mortgages and corporate securities.
Within the insurance company total the life insurance liquidation
was partly offset by an addition of $0.5 biUion by the Federal security
portfolios of fire, marine, and casualty insurance companies. Mutual
savings banks reduced their holdings of governments by approximately $0.3 billion during the year while State and local portfolios
rose by about $0.2 biUion.
The decline of $27 billion in the Federal debt from February
1946 through June 1949 compares with an increase of more than twice
that amount in all other debt of the country combined during the
same period. Federal securities now constitute 51 percent of the
total debt of the United States. This compares with 62 percent at
the peak of Federal debt but is more than double the 23 percent ratio
of Federal to total debt in 1939. Federal securities continue to
dominate the investment portfolios of the large financial institutional
groups throughout the country and to-account for a significant portion of individuals' holdings of liquid assets.
The table following summarizes the net changes in ownership of
Federal securities for each of the last 3 years.
Changes in ownership of Federal securities by investor classes, fiscal years 1947-49 *
[In billions of dollarsj
Class of investor
Nonbank investors:
Individuals 2...
Other nonbank Investors:
Insurance companies
. . _
Mutual savings banks
Other corporations and associations 3
State and local governments
Federal Government investment accounts.-
1947
.
. ..
Total other nonbank investors..,
Total nonbank investors
Banks:
Commercial banks...
Federal Reserve Banks
Totalbanks
Total change
j.
1949
1948
3.0
-0.1
1.9
-.2
.7
• -3.0
.6
3.7
-1.8
-.2
-1.5
.7
2.9
—2.'3
-.3
2.0
.2
2.'5
1.8
.1
2.1
4.8
-.1
4.0
-14.4
-1.9
-5.4
-.5
-1.6
—2.0
-16.4
-5.9
—3.6
-11.6
-6.0
.4
NOTE.—For data from 1941 to 1946 see 1948 annual report, p. 39.
1 Comprises gross public debt, and guaranteed obligations of Federal Government held outside of
Treasury.
2 Includes partnerships and personal trust accounts.
3 Includes corporations other than banks and insurance companies, savings and loan associations, dealers
and brokers, and investments of foreign balances and international accounts in this country.
Nonbank investment in Federal securities of $4 billion in the fiscal
year 1949 more than accounted for the entire increase in total liquid
assets of nonbank investors during the year. Savings accounts iii
commercial banks increased $0.5 billion during 1949, but nonbank
90
REPORT OF THE SECRETARY OF THE TREASURY
investors' holdings of currency and checking accounts together
decreased by a bUlion dollars. Expansion in all types of nonbank
holdings of liquid assets in the year ended June 30, 1948, was held to
a low level by the record Treasury surplus of $8.4 bUlion during that
year. With the Federal Government running at a deficit of $1.8
billion during 1949, the dominant factor holding down the expansion
of liquid assets this last year was the fact that there was only a
$1/^ billion increase in private bank credit (commercial bank loans
and holdings of corporate and municipal securities) for the year
as a whole, as compared with an increase of nearly $7 billion in 1948.^
CORPORATIONS AND CERTAIN OTHER BUSINESS-TYPE ACTIVITIES
OF THE GOVERNMENT
During the fiscal year 1949 the Treasury, in accordance with the
President's recommendation in his 1948 Budget Message and certain
provisions of law, continued to adjust the interest rates on advances
to Government corporations and certain agencies to keep such rates
closely in hne with the interest cost to the Treasury on its borrowings.
In most cases the interest rates now in effect are based upon the average
rate on outstanding marketable obligations of the United States. Aa
a matter of general practice the interest rates charged the corporations
and agencies are stated in terms of the nearest one-eighth of 1 percent
under such average rate. On June 30, 1949, the computed average
interest rate on outstanding marketable obligations of the United
States was 2.001 percent, resulting in a rate of 2 percent for the
corporations and agencies involved. In instances where the advances
by the Treasury are of a short-term character or involve special considerations, lower rates have been established to coordinate these rates
with the interest cost to the Treasury of its short-term borrowings.
Table 66 shows, by corporations and agencies, the amounts of
obligations authorized to be outstanding and the amounts actually
outstanding, as of June 30, 1949, separated as to Treasury holdings
and securities held by others.
In order to show the status of the Government's interest in Government corporations and certain other business-type activities, the
Treasury Department compUes balance sheets from reports received
from such corporations and activities which are published quarterly
in the daily Treasury statement. Such balance sheets as of June 30,
1949, wiU be found in table 71 of this report. These balance sheets
show the amount and classification of the assets, liabilities, and net
worth of the various corporations and activities. The net worth is
divided between that owned by the United States Government and
that owned by private sources.
» Table 108 presents data on the relationship between Federalfiscaloperations and the Nation's financial
structure during the years 1941-49.
91
REPORT ON OPERATIONS
A comparative statement of the combined net investment of the
United States with respect to Govermnent corporations and certain
other business-type activities, as of June 30, 1940-49, is given in table
70. Income and expense of individual coiporations and activities in
1949 are shown in table 72. Sources and uses of their funds in 1949
are published in table 73.
The most significant legislative changes during 1949 affecting corporations were certain amendments to the National Housing Act.
By these amendments the amount of mortgages that could be insured
under the National Housing Act was increased from $10.1 bUlion to
$13.2 bUlion as follows:
Title
Act
National Housing Act, as
amended:
June 28, 1941 (Public Law 138, 77th Congress), letter of the
Title I I
President dated Dec. 30,1948.
July 15, 1949, effective June 30, 1949 (Public Law 171, 81st
Congress).
Title VI
- Aug. 10,1948 (Public Law 901,80th Congress)
Letter of the President dated June 22,1949.. _
Aug. 10,1948 (Public Law 901, 80th Congress)
Title VII
Increase (in
millions)
$1,000
Total
1300
400
400
1,000
3,100
1 In addition, authorization could be increased with approval of the President, which approval was given
by letter from the President dated July 25,1949.
In addition, the authorization to incur total liabilities under Title I
for insured renovation and modernization loans was increased from
$165 millions to $200 mUlions in accordance with the act of August
10, 1948. The unused mortgage insurance authorizations at the end
of the fiscal year 1949 amounted to $2,294.3 miUions.
SECURITIES OVi^NED BY THE UNITED STATES GOVERNMENT
Securities owned by the Government on June 30, 1949, consisted
principally of capital stock, bonds, and notes of Government corporations; securities evidencing loans made to farmers, raUroads, home
owners, foreign governments, etc.; and notes evidencing United States
subscriptions to the International Bank for Reconstruction and
Development and to the International Monetary Fund. The net
face value of these securities amounted to $17,003 million, exclusive of
$12,660 million of principal obligations of foreign governments arising
out of World War I.
A statement of the securities owned by the Government on June 30,
1949, other than foreign government obligations of World War I, is
shown in table 76, together with an explanation of the increase or
decrease in these securities during the fiscal year 1949.
92
REPORT OF THE SECRETARY OF THE TREASURY
INTERNATIONAL FINANCIAL AND MONETARY DEVELOPMENTS
EUROPEAN RECOVERY PROGRAM
Operations under the European Recovery Program were the dominant factors in international finance during the fiscal year 1949. By
the Economic Cooperation Act of April 3, 1948 (title I of the Foreign
Assistance Act), and the related appropriation act of June 28, 1948,
funds totaling $5 billion were made available for the first year of the
program. Of this amount $4 billion could be used for either loans
or grants, and $1 billion, to be derived from public debt transactions,
was provided solely for loans and for limited guaranties to United
States investors in approved projects, with the guaranties totaling
not more than $300 million.
The act of April 3,1948 established an Economic Cooperation Administration (ECA) to operate the assistance program. The assistance
was to be furnished to European countries prepared to participate
in a joint recovery program based upon self-help and mutual cooperation. Soon after the act was signed, the participating nations, which
in July 1947 had associated themselves in a Committee for European
Economic Cooperation (CEEC), set up the Organization for European
Economic Cooperation (OEEC) as a continuing body to promote their
own concerted recovery efforts. To assure coordination of the program with the other financial activities and policies of the United
States, the act made the Administrator for Economic Cooperation a
member of the National Advisory Council on International Monetary
and Financial Problems.
Prior to the creation of the Economic Cooperation Administration,
considerable work had been done by the CEEC and by various United
States Government agencies to estimate the relative needs for assistance of the participating countries. Much dUficult work still
xemained, both in Europe and in Washington, to achieve a final allotment of the available funds.
Grants totaling approximately $4 billion were allocated, mainly
as direct grants, but partly in the form of "conditional aid." Conditional aid was given in conjunction with a plan embodied in the
Agreement on Intra-European Payments and Compensations signed
by the participating countries in October 1948. The primary purpose
of the plan was to reduce payments diflSiculties which were hampering
the maintenance and expansion of intra-European trade. The plan
required the participating countries to estimate the surpluses and
deficits of pa3maents they expected to have with each other during a
specified period if trade between them proceeded at a level in keeping
with their recovery plans. For this level of trade to be maintained,
the deficit countries would have to find sufficient means of payment
REPORT ON OPERATIONS
93
acceptable to the surplus countries. As matters stood, Belgium, for
example, was able to export to France goods and services to a value
substantially in excess of the value of the goods and services which
France could export to Belgium. France, however, not holding
suffi-cient Belgian credits and lacking the necessary margin of gold or
dollar reserves, was unable to make the excess purchases from Belgium. Under the payments plan, part of the ECA dollar grants
allotted to Belgium was made conditional upon Belgium's granting
an equivalent amount of aid, called "drawing rights," in Belgian francs
to France. The estimated net payments indebtedness between each
pair of participating countries was thus covered by the extension, in
the creditor's currency, of drawing rights'^ which the debtor country
could utilize to make purchases from its creditor. Each creditor
country was required to extend such drawing rights as a condition
of receiving an equivalent amount of ECA conditional dollar aid
to meet part of its own dollar needs.
Of the $1 billion authorized for loans and investment guaranties,
$27.7 million was set aside for guaranties, leaving the remaining
$972.3 million to be distributed as loans. Loans were allotted only
to those participating countries which were deemed capable of supporting new credit obligations, and the allocation was made in accordance
with an appraisal of each country's long-term capacity to repay dollar
loans and with due regard to the volume and types of grant assistance
furnished it. The loans mature at the end of 1983, with amortization
payments commencing June 30, 1956, and bear interest at 2K percent,
with payments beginning December 31, 1952. I n accordance with
the Economic Cooperation Act, the administrative work in connection with the loans was carried out by the Export-Import Bank.
The act provided for consultation between the Administrator for
Economic Cooperation and the National Advisory Council on the
types of assistance to be extended and the terms to be applied.
Accordingly, the Administrator requested the Council's advice on
these problems. The report of the Council for the period October 1,
1948-March 31, 1949 (exhibit 14, table V), shows the aUocation of
loans, direct grants, and conditional aid made to each country by the
Economic Cooperation Administration after consultation with the
CouncU.
Each country receiving commodities and services financed by ECA
grants was required to deposit in a special account a commensurate
amount of its own currency. Five percent of this local currency
counterpart fund was allocated to the use of the United States Government for administrative expenses and for the purchase of strategic
materials. The other 95 percent was to be held or used within the
depositing country, by agreement between it and the Administrator
94
REPORT OF THE SECRETARY OF THE TREASURY
in consultation wdth the National Advisory Council, for purposes
consistent with the objectives of the act, including internal monetary
and financial stabilization, the stimulation of productive activity, and
the exploration for and development of new sources of wealth.
The plan for counterpart funds was adopted as one means of assisting the recipients of ECA aid in promoting internal financial stabUity
and in facilitating the financing of projects essential to recovery.
During the fiscal year the Administrator consulted with the Council
on the numerous proposals made by the participating countries for
the use of counterpart funds. In each instance the use of the funds
had to be carefully considered in the light of prevailing conditions.
In its report for the period April 1-September 30, 1948 (exhibit 13),
the Council commented on counterpart funds as follows:
"The proper utilization of these funds may contribute to the achievement of a sound fiscal policy and may also finance needed investments.
The use of the local currency counterpart funds is, however, only one
factor in bringing about improvement in European finances and must
be supplemented by other fiscal and monetary measures."
Early in 1949 the ECA, with the concurrence of the National
Advisory Council, submitted to the Congress its request for an appropriation for continuance of its activities. Since the first year of
the program, for which $5 billion had been provided, expired at the
beginning of April 1949, funds were requested for April-June 1949, as
well as for the fiscal year 1950. The Congress authorized $1,150
million for the remaining quarter of 1949 and $4,280 mUlion for the
succeeding fiscal year. Authorization was also given for the use of
funds from public debt transactions to make guaranties up to $150
million less the amount which had been allocated for that purpose prior
to April 3, 1949. Pending the enactment of appropriation legislation,
the Reconstruction Finance Corporation was authorized to advance
up to $1 billion for the purposes of the recovery program.
During the hearings on the extension of the program, the Secretary
of the Treasury as Chairman of the National Advisory Council presented to the appropriate congressional committees a statement of
the Council's recommendations on the financial aspects of the program (exhibit 15). The Secretary stated that, largely as a result of
United States assistance in the period before and since the start of
the European Recovery Program, the participating countries, with
few exceptions, had "reached a level in their production equal to or
above their prewar levels, although, of course, population has increased
in the meanwhUe." He noted, however, that whUe some of the countries participating in the program had "made substantial progress
REPORT ON OPERATIONS
95
toward attaining internal financial stability * * * jj^ others
more effort is needed to increase revenues and to eliminate unnecessary
expenditures * * *. In addition to internal stabilization measures," the Secretary pointed out, "greater efforts must be made by
the European countries in their export efforts so that they can become
self-supporting in their international transactions after 1952."
I n discussing the question of the amount of assistance which might
reasonably be extended in the form of loans, the Secretary as Chairman of the National Advisory Council recommended to the Congress
that the Administrator be authorized, with the advice of the Council,
to determine when aid should be on a loan basis and in what amount.
He pointed out that many of the E R P countries had already contracted substantial amounts of dollar debts; and he indicated that if
the recipient countries had to obligate themselves for too large
amounts of additional loans under the program, the long-term objectives of the program would be in danger. He stated that a prudent
use of discretionary power to extend loans or grants by the Administrator would keep the field open for long-range investment projects
to be financed through the private capital market and permanent
lending agencies.
OTHER FINANCIAL ASSISTANCE PROGRAMS
I n addition to the $5 billion provided for the European Recovery
Program, the Foreign Assistance Act of 1948 and the related appropriation act made available approximately $2 billion for other assistance programs. This included an allotment of $1.3 billion to the
Department of the Army for government and relief in occupied areas
(GARIOA), $400 million for economic and military assistance to
China, and $225 million for special programs of mUitary aid to Greece
and Turkey; the balance was divided between the International
Refugee Organization and the International Children's Emergency
Fund.
Effective January 1, 1949, the President assigned to the Economic
Cooperation Administration the responsibility for administering
economic aid to the newly established Korean Government Prior to
this time assistance had been administered by the Department of the
Army. Unexpended funds from the GARIOA appropriation for
Korea were transferred to the Economic Cooperation Administration.
Korea, like the European countries receiving ECA assistance, was required to make deposits of local currency commensurate with the
dollar cost of supplies and services furnished it on a grant basis.
Of the $400 million appropriated for aid to China, $275 million was
provided for economic aid to be administered in accordance with the
applicable provisions of the Economic Cooperation Act. Military
96
REPORT OF THE SECRETARY OF THE TREASURY
and economic developments during 1949 severely restricted the implementation of the program. The economic situation in Nationalist
China deteriorated rapidly, inflation continued unchecked, and by
the end of the fiscal year the Chinese currency had become worthless.
I n April 1949, Congress extended, from April 2, 1949, to February 15,
1950, the period for which the $275 million previously appropriated
was to provide economic aid. The unutilized balance of this $275
million, as of June 30, 1949, was approximately $108.3 million.
Early in December 1948, the National Advisory Council reviewed
the request, prepared by the Department of the Army, for an appro-:
priation to be used for the economic recovery of Japan. The postwar
Japanese economy had been characterized by acute inflationary conditions, which made economic controls difficult, and contributed to an
iinbalance in and a low level of trade. On the basis of assurances that
economic stabilization would be expedited, the Council offered no
objection to the proposed appropriation request. During. 1948 the
CouncU also reviewed the exchange rate problems of Japan. I n AprU
1949 the Supreme Commander for the Allied Powers (SCAP) in
Tokyo, following consultation with the National Advisory Council,
authorized an exchange rate of 360 yen per dollar.
T H E MILITARY ASSISTANCE PROGRAM
I n March 1949 the Council reviewed, with special reference to the
possible impact on the European Recovery Program, certain of the
financial aspects of the Military Assistance Program which was under
consideration by the Administration. Particular attention was given
to the financial terms of such assistance as might be extended.
GOLD POLICY AND OPERATIONS
During the year the Treasury maintained without change its policy
of standing ready to buy gold at the official price from all legal holders
and to sell gold, freely also at the official price, to foreign governments
and central banks for legitimate monetary purposes. A handling
charge of }i of 1 percent is applied on both types of transactions. The
Treasury also continued to sell gold for legitimate industrial, professional, and artistic purposes.
The total value of foreign gold offered to the Treasury during the
fiscal year 1949 was $1,036 million, and the requests from foreign governments and central banks to purchase gold with dollars, all of which
were carried out, totaled $168 mUlion. This volume of sales of gold
to the United States, both gross and net, was much lower than the
volume during the two preceding fiscal years.
REPORT ON OPERATIONS
97
INTERNATIONAL MONETARY F U N D AND INTERNATIONAL BANK FOR
RECONSTRUCTION AND DEVELOPMENT
The Boards of Governors of the Fund and the Bank held their
third annual meetings in Washington, September 27 to October 1,
1948. The Secretary of the Treasury, as Governor of both institutions, attended. The Boards of Governors reviewed the annual
reports, amended certain bjr-laws of the organizations, and acted on
applications for membership and for adjustments in quotas and
subscriptions.
.
During the year the Fund engaged in several exchange transactions
and concurred in certain par value changes, while the Bank concluded
a number of new loans. The United States Executive Director concerned consulted the National Advisory Council as to his position
on each occasion.
The Fund sold dollars in exchange for the currencies of India,
Brazil, Union of South Africa, Czechoslovakia, Egypt, Costa Rica,
Nicaragua, and Ethiopia. Sales were also made to Norway of Belgian
francs for Norwegian kroner and of United States dollars for gold.
I n M a y 1949 Costa Rica became the first country to repurchase some
of its own currency from the Fund, making payment in dollars and
gold. Changes were effected in the par values of the Colombian peso,
the Djbouti franc of French Somaliland, and the Mexican peso.
Fund approval was also given to an initial par value for the Yugoslav
dinar and the Brazilian cruzeiro. The Fund advised several of its
members as to the policies appropriate for dealing with their foreign
exchange problems.
The Bank made loan commitments of $137.1 million. These
comprised $75 mUlion to finance the expansion of hydroelectric power
and telephone facilities in Brazil, $34.1 million for electric power
development in Mexico, $16 million for the purchase of steel and
electric power equipment by Belgium, and $12 million to Dutch
shipping companies for the purchase of merchant vessels. These
loans raised the Bank's total loan commitments, as of June 30, 1949,
to $650.1 miUion.
In June 1949 legislation was enacted permitting member banks
of the Federal Reserve System to deal in securities issued or guaranteed by the International Banlc. This legislation is expected to
contribute to a broader market in the United States for the Bank's
obligations.
EXPORT-IMPORT BANK OF WASHINGTON
The National Advisory Council has statutory responsibility for
coordinating, in the field of international finance, the policies and
856455—50
8
,.,_..._.
,
98
REPORT OF THE SECRETARY OF THE TREASURY
operations of United States agencies. As the agency of the United
States Government expressly established to make foreign loans, the
Export-Import Bank seeks the advice of the Council on proposed
loans. During the year, the Export-Import Bank authorized new
credits totaling approximately $174 million. This total included
$100 million to the Government of Israel and loans to ten Latin
American Republics, Canada, Finland, and Liberia. Apart from its
loan activities under the Export-Import Bank Act of 1945, the Bank,
as previously noted, was made the administering agency for loans
(as well as guaranties) negotiated on behalf of ECA under the Foreign
Assistance Act of 1948.
UNITED STATES-MEXICAN STABILIZATION AGREEMENT
On June 17, 1949, with the approval of the Council, a United StatesMexican Stabilization Agreement was executed, supplementing the
agreement between the two countries entered into in May 1947.
In July 1948 Mexico had ceased to support its initial par value of 4.855
pesos per dollar, and the Supplemental Stabilization Agreement was
signed following acceptance by the International Monetary Fund of a
new par value of 8.65 pesos to the dollar (see exhibit 18). The 1947
Agreement had made available from the United States Stabilization
Fund $50 million for the purchase of Mexican pesos to stabilize the
United States doUar-Mexican peso rate of exchange. To help maintain the new par rate, the supplemental agreement of June 1949
augmented by $12 million the $13 mUlion remaining under the original
agreement.
T H E PRESIDENT'S PROGRAM FOR UNDERDEVELOPED AREAS
In his inaugural address of January 20, 1949, the President outlined
a program, now known as Point IV, "for making the benefits of our
scientific advances and industrial progress available for the improvement and growth of underdeveloped areas." This program, while recognizing that the greatest contribution to the economic development of
underdeveloped areas would have to be made by the local populations,
called for United States participation in the form of technical assistance, the fostering of United States private investment in these
areas, and, when appropriate, development loans by international
and United. States Government lending agencies. The National
Advisory Council considered the financial aspects of the program and,
particularly, proposals designed to encourage investment in foreign
countries by United States private capital. These proposals contemplated (1) the negotiation of treaties to assure fair treatment
abroad for such investments, (2) United States Government guaranties
REPORT ON OPERATIONS
99
to investors against losses arising out of risks peculiar to foreign investments, such as the inconvertibility of foreign exchange, and,
possibly, the expropriation or nationalization of properties and
international war, and (3) amendments to United States tax laws to
provide additional incentives to investments in foreign countries.
B E R L I N CURRENCY PROBLEM
The United States, the United Kingdom, and France made further
efforts to reach agreement with the Soviet Government for the
establishment of a uniform currency for Berlin. But the negotiations
again faUed, and in March 1949 the Deutsche mark was declared to
be the sole legal tender in the Western sectors of Berlin, although the
Soviet mark was allowed to circulate in those sectors.
J O I N T BRAZIL-UNITED
STATES TECHNICAL
COMMISSION
I n February 1949 a Joint BrazU-United States Technical Commission, which had been engaged since September 1948 in an analysis
of the factors in Brazil which tended to promote or to retard the
economic development of that country, completed its report to the
two governments. The report was subsequently made public. The
creation of such a commission had been agreed upon by the United
States Secretary of the Treasury and the Brazilian President and the
Minister of Finance during the Secretary's visit to Brazil in 1947.
FOREIGN F U N D S CONTROL
During the fiscal year 1949 Foreign Funds Control was liquidated.
Prior to its liquidation it took steps to carry out the program described
on pages 47-50 of the Annual Report of the Secretary of the Treasury
for the fiscal year ended June 30, 1948. The most important of these
steps was a census taken on Form TFR-600 of assets blocked in the
United States as of June 1, 1948. This census revealed that assets
worth approximately a billion dollars were stUl blocked and showed
that of this amount approximately half were held in the names of
nationals of countries receiving aid from the United States pursuant
to the European Recover}^ Prograni. Information with regard to
this latter class of assets was turned over to the appropriate Western
European governments to help them to obtain control over such
assets.
On October 1, 1948, the Attorney General assumed jurisdiction with
respect to assets in the United States remaining blocked as of that
time, and, accordingly, the files and records of Foreign Funds Control
were turned over to the Office of Alien Property, Department of
Justice, on that date.
100
REPORT OF THE SECRETARY OF THE TREASURY
TAXATION DEVELOPMENTS
No major revenue legislation was enacted during the fiscal year
1949. The following section briefly summarizes the revenue programs
suggested to the Congress by the President. Proposed legislation
providing for social security revision, on which the House Ways and
Means Committee held hearings during the year, is summarized in
section II. Miscellaneous revenue legislation taking effect during the
fiscal year is listed in exhibit 21.
I. T H E PRESIDENT'S R E V E N U E PROGRAMS
On July 27, 1948, in his anti-inflation message to the Special
Session of the 80th Congress, President Truinari recommended that
an excess profits tax be re-established in order to provide a Treasury
surplus and act as a brake on inflation. IT. R. 7109, providing for
the reimposition of the excess profits tax, was introduced and referred
to the Committee on Ways and Means on August 4, 1948, but was
not considered by the Congress.
In his Budget Message of January 3, 1949, the President recommended new tax legislation to raise revenues by $4 billion. He said,
" I n a period of high prosperity it is not sound public policy for the
Government to operate at a deficit. A Government surplus at this
time is vitally important to provide a margin for contingencies, to
permit reduction of the public debt, to provide an adequate base for
future financing of our present commitments, and to reduce inflationary pressures."
On January 5, 1949, in his State of the Union Message, and in his
Economic Report submitted to the Congress on January 7, 1949,
the President stated that the principal source of this additional
revenue should be additional taxes on corporate profits. A portion
should come from revised estate and gift taxes, and consideration
should be given to raising personal income tax rates in the middle and
upper brackets. In his Economic Report, he expressed the view
that some additional excise taxes might be desirable, but other excise
taxes, particularly on oleomargarine, should be repealed. . In addition, he recommended an increase in social security contributions
under existing and extended social insurance programs. The President expressed the opinion that this would exert an anti-infiationary
effect in addition to that of the $4 billion increase in taxes he recommended. He also stated that the national tax policy should be flexible
and should be promptly adjusted to the changing needs of business
and consumers in the course of evolving economic events. ,
REPORT ON OPERATIONS
101
Secretary Snyder in his statement before the Joint Committee on
the Economic Report on February 10, 1949, supported the President's
recommendation to increase revenues by $4 billion. He declared
that it is vitally important that the Federal Government have a
substantial surplus in periods of prosperity to permit a reduction in
the public debt. He urged, the Congress to enact a tax program,
as suggested by the President, as soon as possible.
II.
PROPOSED R E V I S I O N OF THE SOCIAL SECURITY A C T
On January 5, 1949/in his Message on the State of the Union, the
President advised the Congress to expand the social security program,
both as to size of benefits and extent of coverage, against the economic
hazards due to unemployment, old age, sickness, and disability. He
said, "The present coverage of the social security laws is altogether
inadequate, and benefit payments are too low. One-third of our
workers are not covered. Those who receive old-age and survivors
insurance benefits receive an average payment of only $25 a month.
Many others who cannot work because they are physically disabled
are left to the mercy of charity."
During the year the House Ways and Means Committee held
public hearings on the Administration's social security program.
Testimony was received on the public assistance and welfare features
of social security from February 28 through March 23, 1949, and on
old-age, survivors, and disability insurance from March 24 through
April 27. Commissioner Schoeneman of the Bureau of Internal
Revenue, who appeared as a witness on April 1, 1949, presented the
Bureau's views concerning the administrative problems involved in
connection with the proposed extension of coverage under the bill
H, R. 2893 (see exhibit 20).
The Ways and Means Committee's draft of a new biU (H. R. 6000)
to extend and improve the Federal old-age and survivors insurance
system and to amend the public assistance and child welfare provisions
of the Social Security Act was introduced by Chairman Doughton on
August 15, 1949.
ESTIMATES OF RECEIPTS
(On the basis of existing legislation)
The Secretary of the Treasury is required each year to prepare and
submit in his annual report to the Congress estimates of the public
revenue for the current fiscal year and for the fiscal year next
102
REPORT OF THE SECRETARY OF THE TREASURY
ensuing (Pubhc No. 129, 59th Congress, February 26, 1907). The
estimates of receipts from taxes and customs are now made by the
Treasury Department in December of each year on the basis of legislation existing at the time of making the estimates. The estimates
of miscellaneous receipts are prepared in general by the agency depositing the receipts in the Treasury.
The detaUs of estimated and actual receipts are shown in table 117,
which includes receipts under proposed legislation. The term "net
budget receipts" as used in this report has the same significance as
the term "budget receipts" used in the Budget document.
TOTAL AND N E T BUDGET R E C E I P T S
Estimated net budget receipts of $37,763.2 mUlion and $37,245.6
mUlion in the fiscal years 1950 and 1951, respectively, continue the
decline in net budget receipts from the postwar peak of $42,210.8
mUlion reached in 1948. The decline of $3,965.1 mUlion in net budget
receipts in 1949 resulted from the tax reductions incorporated in the
Revenue Act of 1948. The relatively small declines of $482.4 mUlion
and $517.6 mUlion estimated for 1950 and 1951 result principally
from an estimated falling off in receipts from corporation income and
excess profits taxes and the continuing decline in miscellaneous receipts.
Total receipts, before deductions for refunds of receipts and the
appropriation to the Federal old-age and survivors insurance trust
fund, are estimated at $42,185.3 mUlion in 1950 and $41,911.7 mUlion
in 1951 as compared with actual total receipts of $42,773.5 mUlion
for 1949. Receipts from the individual income tax and miscellaneous
internal revenue are estimated to remain relatively unchanged in the
three fiscal years. Receipts from corporation income and excess
profits taxes and miscellaneous receipts are estimated to show substantial declines. Employment taxes are estimated to increase in
the fiscal year 1950 as a result of a change in method of coUection
and an increase in tax rate, and in the fiscal year 1951 as a result of a
full year's collection under the higher tax rate.
As is shown in the table that follows the relative importance of the
various tax sources remains stable throughout the period from 1948
through 1951. The most significant change in any tax source is
estimated to occur in employment taxes, which increase from 5.2
•percent of total receipts in 1948 to 8.0 percent in 1951. The nontax
source, miscellaneous receipts, shows a steadv dechne from 8.3 percent
in 1948 to 2.6 percent in 1951.
103
REPORT ON OPERATIONS
Percentage distribution of total receipts, by sources
Actual,
1948
Source
Individual income tax
Corporation income and excess profits taxes
Miscellaneous internal revenue
..
Employment taxes i
Customs
Miscellaneous receipts
Totalreceipts
Actual,
1949
Estimated, Estimated,
1951
1960
45.6
22.1
18.0
5.2
.9
8.3
42.0
27.0
19.6
5.8
.9
4.8
42.6
26.5
19.7
7.2
.9
3.1
43.5
25.1
19.9
8.0
.9
2.6
100.0
100.0
100.0
100.0
1 Includes Railroad Unemployment Insurance Act receipts.
FISCAL YEAR
1950
Actual receipts in the fiscal year 1949 and estimated receipts in
1950 are compared by major sources in the following table.
Actual,
1949
Estimated,
1950
Increase, or
decrease (—)
Source
In millions of dollars
Individual Income tax
Corporation income and excess profits taxes
Miscellaneous internalrevenue
Employment taxes ^
1
Customs
Miscellaneous receipts
17,928.6
11, 553. 7
8,348.0
2,486. 7
384.6
2,072.0
17,971.0
11,175.0
8,328.0
3,047. 7
375.0
1,288. 6
42.4
-378. 7
-20.0
661.0
-9.5
-783.4
Totalreceipts
Deduct:
(a) Appropriation to Federal old-age and survivors insurance trust fund(b) Refunds of receipts
42,773. 5
42,185.3
-688. 2
1,690. 3
2,837.5
2,245.0
2,177:0
654.7
-660. 5
37, 763. 2
-482. 4
Net budget receipts
38,245.7
> Includes Railroad Unemployment Insurance Act receipts.
Net budget receipts in the fiscal year 1950 are estimated to amount
to $37,763.2 mUlion, a decrease of $482.4 million from actual net budget
receipts in 1949. The largest decline is attributable to miscellaneous receipts, which for the most part represent receipts from nontax
sources. Net tax receipts are expected to increase despite the declines
estimated for the corporation income and excess profits taxes, miscellaneous internal revenue, and customs, because of the large decrease
in the deduction item "Refunds of receipts". The large increase estimated in receipts from employment taxes does not affect net budget
receipts significantly as the entire amount collected under the Federal
Insurance Contributions Act, which is responsible for nearly all of the
increase in receipts from employment taxes, is transferred to the Federal old-age and survivors insurance trust fund.
104
REPORT OF THE SECRETARY OF THE TREASURY
Individual income taxes.—The details of the yield of the individual
income tax are shown in the following table.
Estimated,
1950
Actual,
1949
Source
Increase, or
decrease (—)
In millions of dollars
Withheld
Not withheld
•..
Total Individual income tax
-.
9,841.5
8,087.1
9,839.0
8,132.0
-2.5
44.9
17,928.6
17,971.0
42.4
Estimated receipts from the individual income taxes are slightly
higher in the fiscal year 1950 and remain relatively unchanged from
actual receipts in 1949.
Corporation income and excess projits taxes.—The details of the yield
of the taxes from this source are shown in the table following.
Actual,
1949
Source
Estimated,
1960
Decrease
In millions.of dollars
Income tax
Excess profits taxes
.
_
Total corporation income and excess profits taxes
11,342.6
211.0
11,075.0
100.0
—267 6
—111.0
11,653.7
11,176.0
-378.7
Corporation income tax receipts in the fiscal year 1949 reflect incomes of calendar years 1947 and 1948, while receipts in the fiscal
year 1950 reflect incomes of the calendar years 1948 and 1949. Decreased corporation profits in the calendar year 1949 are responsible
for the decline in receipts. Excess profits tax coUections, which in
both 1949 and 1950 almost entirely represent back tax collections, are
expected to decline in the fiscal year 1950.
Miscellaneous internal revenue.—Collections from this source by
major groups are listed in the following table.
Actual,
1949
Source
Estimated,
1950
Increase, or
decrease ( - )
In millions of dollars
Estate and gift taxes
Liquor taxes.
.'
>.
Tobacco taxes
stamp taxes
Manufacturers'excise taxes
Retailers' excise taxes
_ _ .
Miscellaneous excise taxes
_
Adjustment to daily Treasury statement basis
Total miscellaneous internal revenue
.
_.
_._
_.-.
796.6
2,210.6
1,321.9
72.8
1, 761. 2
449. 2
1, 768.9
-23.1
697.0
2,247.0
1,338. 0
71.0
1,793.0
426.0
1, 756.0
—99 6
36.4
16.1
-1.8
31.8
—23 2
—2.9
23.1
8,348.0
8,328.0
-20.0
105
REPORT ON OPERATIONS
Miscellaneous internal revenue receipts are estimated to decrease by
$20.0 miUion in 1950. I n this group the estimated decline of $99:5
million in collections from estate and gift taxes reflects the effects of
the Revenue Act of 1948 which aUows special treatment of transfers
between spouses. CoUections from other major items of this group
show relatively small changes, reflecting current consumption trends.
Collections from the tax on passenger automobiles' are expected to
increase significantly in the fiscal year 1950 as receipts reflect the peak
production months of the calendar year 1949 reached in the latter part
of the year, as well as the high production period of the calendar year
1950 which is expected to be attained early in that year.
Employment taxes,—The yields of the various employment taxes are
as foUows:
Actual,
1949
Source
Estimated,
1960
Increase
In millions of dollars
Federal Insurance Contributions Act
Federal Unemployment Tax Act
Railroad Retirement Tax Act
Railroad Unemployment Insurance Act *
1,690.3
222.8
' 563.8
9.7
2,245.0
223.0
670.0
9.7
654.7
.2
6.2
Total employment taxes.
Deduct: Appropriation to Federal old-age and survivors insurance t r u s t f u n d . . . .
2,486.7
3,047.7
• 661.0
1,690.3
2,246.0
" 654;7
796.4
802.7
6.3
Net employment taxes.
_
1 Not classified as an employment tax imder the Internal Revenue Code.
An increase in tax rate and a changed method of collection are
responsible for most of the increase in receipts from employment
taxes in the fiscal year 1950 as compared with 1949. The tax rate
under the Federal Insurance Contributions Act increased from 1
percent each on employer and employee to IK percent effective
January 1, 1950. Also effective January 1, 1950, collections of this
tax from certain employers are payable on a monthly, instead of a
quarterly, basis. The change in the method of collection results in
estimated receipts in the transition year of 1950 somewhat in excess
of one year's liabUities.
Customs.—Customs receipts are estimated to amount to $375.0
million in the fiscal year 1950, a slight decrease from the $384.5
million of actual receipts for 1949.
Miscellaneous receipts.—Miscellaneous receipts are estimated to
amount to $1,288.6 million in the fiscal year 1950, a decrease of
$783.4 million from actual receipts in 1949. Receipts from sales of
surplus property are expected to decline. I n addition, certain
receipts, notably for the Farmers' Home Administration and public
housing programs, which were formerly deposited to miscellaneous
106
REPORT OF T H E SECRETARY OF T H E TREASURY
receipts, are now deducted from the expenditures of the programs
involved. These accounting changes have no effect on the surplus or
deficit.
Rejunds oj receipts.—Refunds of receipts are estimated to amount to
$2,177.0 mUlion in the fiscal year 1950 as compared with actual refunds
of $2,837.5 mUlion in 1949. Refunds in 1949 were considerably above
what would be expected in the absence of change in revenue law,
principally because of the large overwithholding in the first four
months of the calendar year 1948 prior to the passage of the Revenue
Act of 1948, which decreased rates and increased exemptions retroactively to January 1, 1948.
FISCAL Y E A R
1951
Estimated receipts in the fiscal years 1950 and 1951 are compared
by major sources in the foUowing table.
Estimated,
1950
Source
Estimated,
1951
Increase, or
decrease (—)
In millions of dollars
I n d i v i d u a l income f.KX
Corporation income and excess profits taxes
Miscellaneous Intemal revenue
Employment taxes ^ •.
...___
Customs
Miscellaneous receipts
,
_
.^
,. ,.
.
Totalreceipts
^
Deduct:
(a) Appropriation to Federal old-age and survivors insurance tmst fund
(b) Refunds of receipts . .
Net budget receipts
17,971.0
11,175.0
8,328.0
3,047. 7
376.0
1,288.6
18,246.0
10, 518.0
8,334.0
3,342.9
375.0
1,095.8
275.0
—667.0
6.0
295.2
42,185.3
41,911.7
—273.6
2,246.0
2,177.0
2, 515.0
2,151.1
270.0
—25.9
37,763.2
37,245.6
-617.6
—192.8
»Includes Railroad Unemployment Insurance Act receipts.
Net budget receipts in the fiscalyear 1951 are estimated to amount
to $37,245.6 million, a decrease of $517.6 million from estimated net
budget receipts in 1950. The decrease in receipts from corporation
income and excess profits taxes is the principal factor in this decline.
The decrease estimated for miscellaneous receipts is offset by estimated increases in receipts from individual income taxes and in
receipts from misceUaneous internal revenue. The major portion of
the increase estimated for employment taxes does not affect net
budget receipts.
107
REPORT ON OPERATIONS
Individual income faa:*?^.—The detail of the yield of the individual
income tax is shown in the following table.
Estimated,
1960
Source
Estimated,
1951
Increase
In millions of dollars
Withheld
Not withheld
.
Total individual income tax
9,839.0
8,132.0
10,076.0
8,171.0
236; 0
39.0
17,971.0
18,246.0
276.0
Receipts from income tax withheld are primarUy responsible for
the increase in individual income taxes. Receipts from the individual
income tax not withheld are expected to increase slightly.
Corporation income and excess profits taxes.—The detaUs of the taxes
from this source are shown iia the foUowing table.
Estimated,
1960
Source
Estimated,
1951
Decrease
In millions of dollars
Income tax
Excess profits tax
_
. .
.. -
Total corporation income and excess profits taxes
11,076.0
100.0
10,458.0
60.0
-617.0
—40.0
11,175.0
10,618.0
-667.0
The combined corporation incomes for the calendar years 1949 and
1950, which are reflected in receipts in the fiscal year 1951, are estimated to be less than the combined incomes for thc calendar years
1948 ,and 1949, which are reflected in receipts in the fiscal year 1950,
and corporation income tax receipts are estimated accordingly to be
less in the fiscal year 1951.
Miscellaneous internal revenue.—CoUections from this source by
major groups are shown in the foUowing table.
Estimated,
1950
Source
Estimated,
1951
Increase, or
decrease (—)
In millions of dollars
Estate and gift taxes
Liquor taxes
Tobacco taxes
_
stamp taxes
Manufacturers' excise taxes
Retailers' excisetaxes
Miscellaneous excise taxes
_
_
_
--
Total miscellaneous intemal revenue
_
_
697.0
2,247.0
1,338.0
71.0
1,793.0
426.0
1,766.0
692.0
2,290.0
1,362.0
68.0
1,706.0
431.0
1,796.0
-5.0
43.0
14.0
—3.0
-88.0
6.0
40.0
8,328.0
8,334.0
6.0
108
REPORT OF THE SECRETARY OF THE TREASURY
Miscellaneous internal revenue receipts are estimated to increase
slightly in the fiscal year 1951 as compared with estimated receipts
for 1950. Collections from most of the excise tax groups are expected
to increase in 1951 but are partially offset by a decline in collections
from the tax on passenger automobUes from the abnormally high
level estimated for 1950.
Employment taxes.—Receipts from the various employment taxes
are shown in the following table.
Estimated,
1960
Source
Estimated,
1951
Increase
In millions of dollars
Federal Insurance Contributions A c t . . . :
_..'..:
Federal Unemployment Tax Act
.
Railroad Retirement Tax Act...
......_..:'.._^
Railroad Unemployment Insurance Act *
1
2,246.0
223.0
670.0
9.7
2, 515.0
224.0
9.9
270.0
1.0
24.0
.2
Total employment taxesl
_
Deduct: Appropriation to Federal old-age and survivors insurance trust fund
_.
3,047.7
3,342.9
295.2
2,246.0
2, 515.0
270.0
802.7
827.9
Net employment taxes..
694.0
1 Not classified as an employment tax under the Internal Revenue Code.
Receipts from employment taxes are estimated to increase in the
fiscal year 1951 as compared with the estimated receipts for 1950.
Receipts under the Federal Insurance Contributions Act are responsible for the largest part of the increase. Receipts in the fiscal year
1951 will reflect a full year's liabilities under the higher rate effective January 1, 1950, whereas receipts in the fiscal year 1950 will
reflect only a part year effect. The increase of receipts in t h a fiscal
year 1951 would be greater were it not for the fact that receipts in the
fiscal year 1950 will reflect more than one year's liabilities because of
the changed method of collection effective January 1, 1950.
Customs.—Customs receipts are estimated to be $375.0 mUlion in
the fiscal year 1951, continuing at the same level estimated for 1950.
Miscellaneous receipts.—Miscellaneous receipts, refiecting a continuation of the decline in receipts from sales of surplus property,
are estimated to amount to $1,095.8 million in the fiscal year 1951,
as compared with estimated receipts of $1,288.6 million in 1950.
Rejunds oj receipts.—'Rd.MnAs of receipts in the fiscal year 1951 are
estimated to be slightly less than refunds iri 1950.
109
REPORT ON OPERATIONS
ESTIMATES OF EXPENDITURES
Actual expenditures for the fiscal year 1949 and estimates for the
fiscal years 1950 and 1951 are summarized in the following table.
Further details wiU be found in table 117. The estimates are based
upon figures submitted to the Congress in the Budget for 1951.
Actual budget expenditures for the fiscal year 1949 and estimated expenditures for
1960 and 1951 i
[ I n millions of dollars.
O n basis of 1951 B u d g e t d o c u m e n t ]
Unit
Agriculture D e p a r t m e n t :
Commodity Credit Corporation
Other
Atomic Energy Commission
Civil Service C o m m i s s i o n .
Commerce Department.
Defense D e p a r t m e n t
E c o n o m i c Cooperation A d m i n i s t r a t i o n :
E u r o p e a n recovery
Other
E x p o r t - I m p o r t B a n k of W a s h i n g t o n
.
F e d e r a l Security Agency *
General Services A d m i n i s t r a t i o n
Housing and H o m e Finance Agency
Interior D e p a r t m e n t . .
Labor Department *
U. S. M a r i t i m e C o m m i s s i o n . .
M u t u a l defense assistance
.
P o s t Office D e p a r t m e n t ( g e n e r a l f u n d )
Railroad Retirement Board
Reconstruction Finance Corporation
state Department
Treasury Department:
I n t e r e s t on t h e p u b l i c d e b t
Other
Veterans' Administration..
Miscellaneous foreign aid funds a p p r o p r i a t e d to t h e P r e s i d e n t .
R e s e r v e for contingencies
All other
.
A d j u s t m e n t t o d a i l y T r e a s u r y s t a t e m e n t basis
Total budget expenditures..
Actual,
fiscal y e a r
19492
Estimated,
fiscal year
1960
Estimated,
fiscal y e a r
1951
1,653.0
1,096.5
620.9
243.9
661.8
13,986.1
1, 555. 5
1, 297.8
673.0
325.2
834.3
14,625.8
926.8
1, 489.6
816.8
353.3
877.5
14, 111. 7
4.039.7
131.7
-66.8
1.312.8
607.7
-77.2
484.8
15.3
133.3
3,895.1
181.1
71.4
1, 646.3
797.2
-49.1
637.7
156.8
162.2
160.0
572.8
612.9
1,034.0
358.4
3 3, 250.0
.1
47.8
2, 231.8
920.7
116.6
752.5
229.5
222.3
645.0
163.9
603.5
1,128.5
285.1
5, 725.0
663.3
6, 765. 9
77.9
50.0
667.3
6, 625.0
700.3
6, 989.2
155.0
175.0
622.6
43,296.6
42,438.8
533.6
593.6
356.5
, 316.7
5,352.3
734.1
6, 556.6
589.8
272.4
40,057.1
1 T h e s e figures are t a k e n from t h e 1950 B u d g e t d o c u m e n t . T h e y are based u p o n t h e T r e a s u r y ' s C o m b i n e d
s t a t e m e n t of R e c e i p t s , E x p e n d i t u r e s a n d Balances, a n d therefore differ from figures p u b l i s h e d i n t h e daily
Treasury statement.
2 I n c l u d e s e x p e n d i t u r e s m a d e o u t of F o r e i g n E c o n o m i c Cooperation t r u s t fund p u r s u a n t t o sec. 114 (f) of
t h e E c o n o m i c Cooperation A c t of 1948.
3 I n c l u d e s certain funds for o t h e r foreign-aid p r o g r a m s .
4 T h e B u r e a u of E m p l o y m e n t S e c m i t y w a s transferred from t h e F e d e r a l Security Agency to t h e L a b o r
D e p a r t m e n t , efi'ective i n A u g u s t 1949.
ADMINISTRATIVE REPORTS
111
GENERAL ADMINISTRATION
The general administration of the Treasury Department during
the fiscal year was marked by significant extensions of certain management techniques already in use in the Treasury. At the beginning
of the fiscal year 1948 the Secretary of the Treasury established a
committee to direct management studies of the Bureau of Internal
Revenue, The committee is composed of Department and Bureau
headquarters and field personnel and is charged with the duty of
reviewing and advising the Commissioner of Internal Revenue on the
many-sided management problems of the Bureau of Internal Revenue
and the results of management studies, an all-encompassing project
which wiU extend over a period of several years. The Commissioner
engaged the management firm of Cresap, McCormick & Paget to
conduct an evaluation of the work processes and procedures of Collectors', offices. This was one of the first management studies made in
the Bureau by an outside management firm. Results thus far from
this and other internal studies have been beneficial and it is 'hoped
that within the next fiscal year significant implementation of trie
proposals wUl have been accomplished.
Meanwhile, the Treasury's over-all management program proceeded
'^steadily. The application of the findings of the management studies
of the Bureau of Customs and the United States Coast Guard, conducted by the McKinsey & Co. management firm and Ebasco Services,
Inc., was carried much further. A final evaluation of these studies is
not yet available because of the long-range character of many of the
proposals.
Throughout the year work simplification continued to be emphasized in the priricipal operating bureaus of the Department. This
program was first initiated in. the Bureau of Internal Revenue and has
since been applied to the Fiscal Service (consisting of the Bureaus of
Accounts and Public Debt and the Office of the Treasurer of the
United States), the. Bureau of Federal Supply (since July 1, 1949, a
part of the new General Services Administration), the United States
Secret Service, the Office of Administrative Services, and the Bureau
of Customs. The Bureaus of the Mint and of Engraving and Printing
both have utilized certain parts of the program, although the application is necessarily limited in those bureaus because of the manufacturing characteristics of their operations.
There were also certain steps taken to improve budgeting in the
Office of the Secretary. All of these programs have been in line with
a general management program to simplify organization and streamline operations. One of the more important budget improvements
was the assimilation of the Division of Personnel budget into the Office
of the Secretary budget. This step.brought the Office of Personnel
into the group designated as the Offi ce of the Secretary. The responsibUities of the Director of Personnel were not changed inasmuch as he
continues to advise the Office of the Secretary on personnel policy
and to supervise the. Department's decentralization of personnel
operations which has been under way for some time.
856455—50
9
113
114
REPORT OF THE SECRETARY OF THE TREASURY
In the field of cash awards the Treasury made progress in general
decentralization of the operations of that program. Toward the end
of the fiscal year the regulations governing the cash awards program
were revised in order to decentralize to the bureaus, offices, and divisions the payment of awards of $25 or less for certain types of suggestions. This will imdoubtedly reduce the work load at the departmental and bureau levels and should expedite final action on suggestions at all levels. This program, which was begun in August 1947,
has brought an estimated savings to the Department of about a half
mUlion dollars. To date there have been received 12,034 suggestions
by all committees, of which 8,321 have been forwarded to the departmental committee. Of this number, 7,824 suggestions have been
acted upon by the departmental committee, 1,133 have merited
adoption, and awards have been paid totaling more than $25,000.
BUREAU OF THE COMPTROLLER OF THE CURRENCY i
' The Bureau of the Comptroller of the Currency is responsible for
the execution of laws relating to the supervision of national banking
associations. . Duties of the office include those incident to the
formation and chartering of new national banking associations, the
estabhshment of branch banks, the consolidation of banks, the conversion of State banks into national banks, the issuance and retirement of preferred stock, and the issuance of Federal Reserve notes.
CHANGES IN THE CONDITION OF ACTIVE NATIONAL BANKS
The total assets of the 4,993 active national banks in the United
States and possessions on June 30, 1949, amounted to $85,099 million,
as compared with t h e ' total assets of 5,004 banks amounting to
$85,341 million on June 30, 1948, a decrease of $242 mUlion during the
year. The deposits of the banks in 1949 totaled $78,451 million,
which was $549 miUion less than in 1948. The loans and securities
totaled $63,708 million, a decrease of $136 miUion during the year.
Capital funds of $5,828 million were $282 million more than in the
preceding year.
The assets and liabilities of the active national banks are shown in
the following statement.
Abstract of reports of condition of active national banks on the date of each report
from June SO, 1948, to June 30, 1949
[In thousands of dollars]
Apr. 11,
June 30,
Dec. 31,
June 30,
1948 (5,004 1948 (4,997 1949 (4,996 1949(4,993
banks)
banks)
banks)
banks)
ASSETS
Loans and discounts, including overdrafts
1..
U. S. Government securities, direct obligations
Obligations guaranteed by U. S. Government
Obligations of States and political subdivisions
Other bonds, notes, and debentures
....
Corporate stocks, including stocks of Federal Reserve Banks.
Total loans and securities:.
303,042
226,156
6,251
207,888
943,659
168,271
818,613 22,941,026 22, 578,120
977,410
[34, 682,806 r36,695,411
2,853
L
2,087
190,189 3,289,963 3,410,267
898,185 1,901,718 1,959,419
169,716
162,609
161,062
63,8U, 267 64, i
',866 62,876,575
63,707,913
» More detailed information concerning the Bureau of the Comptroller of the Currency Is contained in
the annual report of the Comptroller.
115
ADMINISTRATIVE REPORTS
Abstract of reports of condition of active national banks on the date of each report
from June SO, 1948, to June 30, 1949—Continued
[In thousands of dollars]
June 30,
Dec. 31,
Apr. 11.
June 30,
1948 (5,004 1948 (4,997 1949 (4,996 1949 (4,993
banks)
banks)
banks)
banks)
ASSETS—Continued
Cash, balances with other banks, including reserve balances,
and cash Items in process of collection
20,465,498 23,024,269 20,855,906 20,376,181
Bank premises owned, furniture and fixtures
553,887
573, 557
684, 507 • 587,617
Real estate owned other than bank premises
8,635
9,559
10,051
12,351
Investments and other assets indirectly representing bank
premises or other real estate
_
_
43, 794
45, 262
45,337
48,414
Customers' liability on acceptances outstanding
112, 554
113,097
89,356
75,325
Interest, commissions, rent, and other income earned or
accrued but not collected
•143,
• 152,578
146,977 . 150,161
Otherassets.
....
171,332
167,164
156,426
141,488
Totalassets..
85,341,112 88,135,052 84, 766,060 86,099,450
LIABILITIES
Demand deposits of individuals, partnerships, and corporations
Time deposits of individuals, partnerships, and corporations
Deposits of U. S. Government and postal savings
Deposits of states and political subdivisions.
Deposits of banks
Other deposits (certified and cashiers' checks, etc.)
Total deposits..
45,203, 667 47,004,636 44,318,284 44,470,804
18,830,881 18,828,056
1,367,862 1,504,408
5,176,811 6, 230, 758
7,305,787 7,843,607
1, 236, 551
1,115,
18,907,230 19,008,719
1,815,957 1,461,478 .
6, 294,587 6,398,970
6,887,424 6,946, 246
887,431 1,175,252
78,999,988 81, 648,016 78,110,913 78,451,468
Demand deposits
Time deposits
Bills payable, rediscounts, and other liabilities for borrowed
money. _.^
Mortgages or other liens on bank premises and other real
estate
Acceptances executed by or for account of reporting banks
and outstanding
Interest, discount, rent, and other income collected but not
eamed
Interest, taxes, and other expenses accrued and unpaid
Other liabilities
.
Totaliiabilities
61, 937,877 58,2h9,770 58,367,215
19,679,256 19, 710,139 19,861, US 20,084,253
42,871
41,330
89, 553
278
291
261
274
125,465
127,337
97,866
83,860
99, 644
207,388
319, 710
• 108,996
216, 222
321, 973
111,109
238,366
339, 598
.116, 661
225,396
379,765
14,123
79, 795,344 82,464,164 78,987, 666 79, 271, 547
CAPITAL ACCOUNTS
Capital stock..
Surplus
Undivided profits
.
Reserves and retirement account for preferred stock.
Total capital accounts
Total liabilities and capital accounts.
1, 907,958
2, 506, 653
1,084, 283
329,009
li 804,803
2,451,488
971,091
318,386
1,828,759
2, 610,495
1,009,365
322, 269
1,905,026
2,478,494
1,068,765
325,119
5,546, 768
5,670,888
5, 777,394 6,827,903
85,341,112
135,052 84,765,060 85,099,450
SUMMARY OF CHANGES IN NUMBER AND CAPITAL STOCK OF
NATIONAL BANKS
The authorized capital stock of the 4,994 natioaal banks ia existence
on June 30, 1949 (including 1 bank chartered duririg the year but not
open for business as of that date), consisted of common stock aggregating $1,885.6 million, an increase during the year of $104.5 million;
and preferred. stock aggregating $22.6 million, a decrease of $1.5
million. The total net increase of capital was approximately $103.0
million. During the year charters were issued to 25 national banks
having an aggregate capital of over $3.8 million. There was a net
decrease of 12 in the nuinber of national banks in the system by
reason of voluntary liquidations and statutory consolidations.
116
REPORT OF THE SECRETARY OF THE TREASURY
More detailed information regarding the changes in the number
and capital stock of national banks in tbe fiscal year 1949 is given in
the following table.
Organizations, capital stock changes, and liquidations of national banks, fiscal
year 1949
Number
of banks
Charters in force June 30, 1948, and authorized capital stock i
6,006
Increases:
Charters issued
Capital stock:
108 cases by statutory sale
145 cases by statutory stock dividend
39 cases by stock dividend under articles of association _
2 cases by conversion of preferred stock
6 cases by statutory consolidation
1 case by increase in par value of stock.
.
Total increases
_..
26
.
.
Common
•..
$1, 781, 086, 357 $24,109,977
3,825,000
25
112, 646, 635
31
6
6,830,000
412, 500
775,000
50,000
• 1, 500,000
588,000
2,138,000
•
.'
""""
3,381,002
300,000
37
8, 017, 500
3, 681, 002
-12
+104, 629,135
- 1 , 543, 002
4,994
1,885, 615, 492
22, 666, 975
Total decreases
Net change
Charters in force June 30, 1949, and authorized capital stock i
Preferred
9,438,930
96,598, 655
932,160
92, 000
1,660,000
_..
Decreases:
Voluntary liquidations
_ . ...
statutory consolidations
Capital stock:
88 cases by retirement ^
6 cases by statutory reduction.
2 cases by statutory consolidation
1 case by decrease in par value of stock
Capital stock
' These figures differ from those shown In the preceding table. June 30,1948, figures include 2 banks that
discontinued business but were hot in formal liquidation on that date. June 30, 1949, figures include 1
bank, with common stock, that was chartered but not open for business on June 30, 1949.
2 Includes preferred stock retired by a few banks on or before June 30, 1949, but not officially reported
until after that date.
BUREAU OF CUSTOIVIS
The principal functions of the Bureau of Customs are to enter and
clear vessels; supervise the discharge of cargo; ascertain the quantities
of imported merchandise, appraise and classify such merchandise, and
assess and collect the duties thereon; control the customs warehousing
of imports; inspect international traffic by vessel, highway, railway,
and air; review protests against the payment of duties; determine and
certify for payment the amount of drawback due upon the exportation
of articles produced from duty-paid or tax-paid imports; prevent
smuggling, undervaluations, and frauds on the customs revenue; issue
documents and signal letters to vessels and prepare publications and
reports in connection therewith; apprehend violators of the customs
and navigation laws; enforce the ^Antidumping Act; and perform
certain duties under the Foreign Trade Zones Act.
REVENUE
COLLECTIONS
The total revenue collected by Customs iri the fiscal year 1949 was
$515,241,518 as compared with $542,078,499 in 1948,'a decrease of
5 percent. These totals include items collected for other governmental
agencies such as internal revenue taxes for the Bureau of Internal
AD]MLKriSTRATIVE REPORTS
117
Revenue and head taxes for the Immigration Service. Actual coUections from duties, fines, penalties, forfeitures, etc., amounted to only
$388,470,747, a decrease of 9 percent from the previous year's total
of $425,825,969. The bulk of customs collections consists of duties
paid by importers at the time of the entry of merchandise or when
withdrawn from warehouse for consumption. The types of collections
during the last two years are shown in table 8.
The decline in collections in the fiscal year 1949 was due chiefiy
•to the reductions in rates of duty pro vided. by the General Agreement
on Tariffs and Trade, most of which bec^ame effective on January 1,
1948. These lower rates affected collections for only the last half of
the fiscal year 1948 but for the full fiscal year 1949. For the first 6
months of 1949, collectioris were almost at the level of those for the
corresponding period of 1948; but for each of the last six months of
1949, collections were weU below the level of those for corresponding
months of 1948.
Although collections declined in 1949, the quantity of imported
merchandise showed an increase of 5 percent over 1948. As an
example, 12,430,000 gallons of distUled liquor were imported in 1948,
and the duties collected amounted to $24,673,000; in 1949 a larger
volume, 13,522,000 gallons, was imported anci the duties collected
were only $20,050,000.
The largest single source of customs revenue in recent years has
been from importations of unmanufactured wool. In 1949 such
unportations totaled 311 million pounds as compared with 457 mUlion
pounds during 1948., with a corresponding reduction in revenue.
Imports of cane sugar, another important source of customs revenue,
exceeded those of 1948 by a small margin, 7,573 mUlion pounds being
imported in 1949 as compared with 7,243 mUlion pounds in 1948.
The 1949 importations, however, included more than 900 million
pounds brought in free from the Philippine Islands as compared with
less than one fifth that amoimt in the previous year. The reduction
in the volume of dutiable sugar together with the decrease of approximately one third in the rates of duty on sugar resulted in a yield in
duties and taxes of only $36,805,000 in 1949 as compared with $47,839,000 for the previous year.
The many changes in commodity classifications and the rates of
duty resulting from the General Agreement on Tariffs and Trade,
with subsequent changes as others of the signatory nations complied
with the terms of the Agreement, have made it impossible to compute
duty collections by tariff schedules and countries for all of the moriths
since January 1, 1948. The tables usually appearing in this report
covering duty collections by country have, therefore, again been
omitted this year and the collections by tariff schedules show only the
months for which computations have been completed. The latter
data appear in table 88.
The largest amoimt of revenue continues to be collected at New
York City where $165 mUlion, or 43 percent of the total collected in
all districts, was turned over to the Treasury. This constitutes a
decrease of almost 8 percent from the total collected at New York
City during the previous year. Most of the districts along the
Canadian border showed a substantial increase in customs collections,
but outside of those districts only 7 customs districts collected more
118
REPORT OF THE SECRETARY OF THE TREASURY
in 1949 than in the previous year. At Boston, where approximately
three fourths of the customs collections are the result of importations
of unmanufactured wool, the 1949 total was only two thirds that of the
previous year. At Philadelphia, also an important wool and sugar
importing district, there was a decrease of more than 13 percent in
collections. Customs collections by customs districts are shown in
table 85.
The decrease in customs collections was accompanied by an increase
in the value of dutiable imports from $2,491 million in 1948 to $2,847 „
mUlion during 1949. This increase in value appears to be due to a
somewhat greater volume of imported commodities rather than to
an increase in unit costs. Normally 70 percent of customs reveriue is
derived from specific duties based on the quantity rather than on the
value of the merchandise, and only 30 percent from goods dutiable at
ad valorem or compound rates, where an increased value might effect
an increase m revenue. The reduction in rates of duty after January
1, 1948, was sufficient, therefore, to more than offset such increase in
the volume of the goods dutiable at specific rates, whUe the increase
in unit costs was insufficient to prevent a decline in revenue on such
imports as carried an ad valorem rate of duty.
MOVEMENT OF PERSONS BY VESSELS, TRAINS, AIRPLANES, AND
AUTOMOTIVE VEHICLES
Almost 84 million persons arrived at this country's seaports and
crossed the land borders during the fiscal year 1949, an increase of
almost 2 million over the previous year. A continued increase in
foreign travel by aircraft prevailed in most of the customs districts,
although more than half of the total arriving in this country arrived
at the airports in Miami, Florida, and New York City. Tables 90
and 91 show the volume of traffic into the United States in 1948 and
1949.
E N T R I E S OF MERCHANDISE
Commercial importations as represented by consumption entries,
warehouse entries, and warehouse withdrawals showed a substantial
increase over the previous fiscal year. The increased volume of
tourist travel was refiected in an increase of 10 percent in the number
of baggage entries filed. Mail importations, on the other hand, declined slightly. Informal entries declined substantially, presumably
because of the increase in the exemption from duties allowed on merchandise purchased abroad by American residents under the act of
May 19, 1948 (62 Stat. 242). Table 89 shows the number of each of
the important types of entries for the fiscal years 1948 and 1949.
DRAWBACK TRANSACTIONS
Drawback, amounting to 99 percent of the customs duties paid at
the time the goods were entered, is allowed on the export of merchandise manufactured from imported materials. The total drawback
allowed in 1949 was $9,378,768 as compared with $10,430,065 in the
previous year, a decrease of 10 percent. One unusual item during
AD]VriNISTRATIVE
119
REPORTS
1949 was the large amount of drawback allowed on imported materials
used in the construction and equipment of vessels built for foreigners.
This item was more than 43 times the drawback allowed for this purpose in 1948. The more important items used in manufacturing
exported products during 1949 were wool, sugar, tobacco, aluminum,
copper, and petroleum, on each of which a smaUer amount of drawback
was paid in 1949 than in the previous year. Tables 92 and 93 show
the drawback transactions for 1948 and 1949.
PROTESTS AND A P P E A L S
The number of protests filed by importers against the rate and
amount of duty assessed or other action by the collectors continued
to increase in 1949. Appeals for reappraisement filed by importers
who did not agree with the appraiser as to the value of merchandise
were more than double 'the number of the previous year. Both increases were presumably due to the system of dual currency invoked
in many countries with resulting confusion as to the true value of the
merchandise for customs purposes. The following table shows t h e
number of protests and appeals filed and acted upon in 1948 and 1949:
Protests and appeals
Protests:
Filed with collectors by importers
Allowed by collectors
_
Denied by collectors and forwarded to customs comt.
Appeals for reappraisement filed with collectors
1948
9,567
422
7,660
5,156
1949
10,636
579
9,563
11,114
Percentage
increase
11.2
37.2
24.8
115.6
APPRAISEMENT OF MERCHANDISE
The increase in the volume of imported merchandise in 1949 resulted
in an increase of approximately 6 percent in the number of packages
examined. The increase in paper work connected with appraisement
was even greater. There were 1,105,646 invoices handled in 1949,
an increase of 9 percent over the previous year and an increase of more
than 25 percent over the pre-war year 1939.
At two ports, Chicago and Baltimore, the handling of foreign mail
packages was transferred from the post office to the appraisers'stores
and a similar move is under consideration at four of the Pacific coast
ports.
CUSTOMS INFORMATION
EXCHANGE
The Customs Information Exchange, located in New York, N . Y.,
is a central clearing house for information with respect to the classification and valuation of merchandise by Customs appraisers. The
reports received and records maintained are designed to provide
uniformity of decision among the various appraisers throughout the
Customs Service. The work of the Customs Information Exchange
was maintained at about the same level as in 1948, as shown in the
following table:
120
REPORT OF T H E
SECRETARY OF THE TREASURY
"1948
Activity
Appraisers' report of value or classiflcation received.
Differences in classification reported
Differences in value reported
Requests for foreign investigations
1949
28, 648 . 31,936
2, 569
2,819
4,118
3,805
629
628
Percentage
increase, or
decrease (—)
11.5
9.7
-7.6
-.2
LABORATORIES
The nine customs laboratories, maintained for the purpose of testing
representative samples of imported merchandise to aid in determinuig
the correct assessment of duties, tested 73,251 samples or practically
the same number as in 1948. There was a sharp increase in the number of samples of ores and naetals tested and a decrease in the number
of samples of sugar and wool. Samples of ore, sugar, and wool constituted 60 percent of the total number analyzed.
During the year the chief chemist of the Boston laboratory developed a new sampling tool which is expected to provide considerable
economies in labor, equipment, and other costs of sampling and testing
wool, one of the largest revenue-producing imported commodities.
L A W ENFORCEMENT
ACTIVITIES
The law enforcement activities of the Customs Service consist of
the seizure of merchandise which has been fraudulently declared or
illegally introduced into this country and of the investigation of violations discovered after the entry of merchandise. Fewer seizures were
made in 1949 than in 1948; and while a smaller value of seizures was
also reported, this resulted largely from the inclusion in the 1948 total
of almost $1,600,000 of seized lottery tickets which intrinsically had
little or no commercial value. The number of automobiles and trucks
seized was approximately the same as in 1948, while twice as many
boats were seized as in the previous year. Seizures of ordinary merchandise, while much fewer in number, were approximately the same
in value as in 1948. Seizures' of narcotics were less numerous and
yielded a smaller quantity of narcotic drugs than in the previous year.
As compared with 4,639 ounces of raw opium seized in 1948, only
1,736 ounces were seized in 1949. This was largely of Turkish,
Indian, and Iranian origin and was most frequently seized at Atlantic
coast ports. The intensive opium poppy destruction campaign conducteci by the Mexican Government resulted in a reduction in seizures
of smoking opium along the Mexican border. Marihuana seizures,
however, showed a sharp increase, over 2,350 pounds having been
seized in 1949, most of it on the Mexican border, as compared with
1,650 pounds in 1948. Indications point to. the abandonment of
opium smuggling by smuggling rings operating on the Mexican border
and to the diversion of their efforts to marihuana smuggling. The
smuggling of distilled liquors also declined in 1949 and the value of
such seizures was only one fifth that of the previous year.
Seizures for violations of customs laws are shown in tables 94 and 95.
ADMINISTRATIVE REPORTS
INVESTIGATIVE AND P A T R O L
121
ACTIVITIES
The investigative arm of the Customs Service, the Customs Agency
Serv^ice, investigates all important criminal cases covering the violations of the customs laws and also conducts many other examinations
where expert investigative ability is needed. A larger number of
investigations were conducted in 1949 than during the previous year,
and- many important recoveries were effected as the result of the investigations. In one case undervaluation to the exterit of approximately 25 percent on importations of Swiss watch movements caused
the shipper or importer to incur penalties amounting to more than
$500 thousand. Three important cases of diamond smuggling, eacli
involving female plane passengers carrying false bottomed baggage,
resulted in the recovery of almost $300 thousand worth of cut diamonds.
Three tubes of toothpaste carried by another plane passenger led to
the discovery of jewelry in the tubes. Difficulty with the* gauge on
one of its alcohol tanks led to the discovery on a trans-oceanic airplane
of lottery tickets having a face value of $3,250 thousand. One case
which started as a routine narcotic smuggling investigation disclosed
a plot to smuggle.a large quantity of firearms and ammunition from
this country to Mexico. In another case a customs officer in the San
Diego district cooperated with the Navy Shore Patrol and other enforcement officers to arrest three armed gunmen guUty of kidnapping
and highway robbery. These are a few of the many activities of the
investigative service.
In the com'se of their regular duties customs personnel often discover
violations of other than customs laws. During 1949, 25,314 seizures
were made for other governmental agencies; 25,243 of which were for
the Department of Agriculture. In addition, 45 persons were apprehended, of whom 22 were for the Immigration and Naturalization
Service.
Table 96 summarizes the investigation activities during the last
2 years.
FOREIGN T R A D E ZONES
Although thje business of Foreign Trade Zone No. 1 in New York
continued at a reasonably high level, a smaller tonnage passed tlirough
the zone than during the previous year. Operations at Foreign Trade
Zone No. 2 in New Orleans continued at a substantial level. For the
first full year of its operations Foreign Trade Zone No. 3, in San
Francisco, which began its operations June 10, 1948, received almost
11,000 tons of goods valued at more than $3,250 thousand despite
the west coast waterfront strike which prevented water-borne arrivals
during the fall of 1948. This zone handles a large variety of commodities and collected more than $150 thousand in duties on goods
brought from the zone for use in the United States. It is expected
that foreign trade zones wUl be established at Los Angeles and Seattle
during 1950.
LEGAL PROBLEMS AND PROCEEDINGS
.
No new problems of unusual interest were involved in the legal
decisions which were considered by the Customs Service during 1949.
The continued expansion of the work of the foreign trade zones led to
122
REPORT OF THE SECRETARY OF THE TREASURY
considerable investigation and advice in this field, especially in the
consideration and recommendations regarding the applications for
new zones on the west coast.
Considerable work was done in collaboration with the Interdepartmental Committee on Overtime Pay for the preparation of a uniform
overtime pay bUl coveruig the inspection activities of aU governmental
agencies.
The continued policy on the part of a number of foreign governments
for the use of two or more currencies caused the issuance of many
instructions for the conversion of currencies for which two or more
^rates of exchange were certified by the Federal Reserve Bank of
New York.
SCIENTIFIC SAMPLE W E I G H I N G PROCEDURE
The Bureau of Customs during May extended its application of
scientific control sampling to the weighing of bulk cargoes of raw
sugar. South American wool, and manufacturers' cigarette tobacco.
Scientific control weighing is designed to permit more effective use
of customs manpower and to expedite unloading of cargQes with.consequent savings of time and money for importers and-vessel operators.
During the war private industry used simUar statistical techniques
in the sampling of ammunition and other material.
The scientific control method of spot-weighing of cargoes is one
of a number of projects in various stages of development in the Bureau which have as their objective greater economy and simplification
in customs operations. Among these experiments are those pertaining to the extension of control weighing techniques to other commodities.
Heretofore, cargoes of the three above-mentioned commodities have
been weighed 100 percent on carefully calibrated Government scales.
Under the new system a predetermined number of sample lots from a
cargo is so weighed and the range of variation from commercial weights
determined. Then by formulas based on complex mathematicahcomputations, customs inspectors can readily determine with extreme
accuracy the total cargo weight on the basis of the relatively few
samples weighed.
Test operations have shown that, in addition to freeing greatly
needed manpower for other essential customs work, the new methods
may speed up unloading of a vessel by as much as half a day, a very
substantial saving in shipping costs.
Experts in the Bureau of Customs had the advice of the Division
of Statistical Standards of the Bureau of the Budget in developing
the new procedure.
MISCELLANEOUS
Changes in customs ports and stations.—Customs ports at Cheboygan, Mich., Arecibo and Arroyo, Puerto Rico, and customs stations
at Halifax, Nova Scotia, Thousand Islands Bridge and Thousands
Islands Park, N . Y., were abolished. A customs port of entry was
established at Cordova, Alaska; and the customs station at Elkin,
N . C , was converted to a port of entry.
Cost oj administration.—During the fiscal year 1949 the Customs
Service incurred expenses of $34,989,685,, for coUecting the revenue
ADINHNISTRATIVE REPORTS
123
and for printing, excluding expenses of enforcing the renewed export
control regulations. This was $2,726,829 more than during the previous year. The increase in expenditures was due to the raise.in pay
authorized by the Eightieth Congress and to the automatic withingrade raises provided by the Meade-Ramspeck law. The expenses,
moreover, do not include salaries paid to customs personnel for overtime and other services authorized by law-for which reimbursement
was made to the appropriation by parties interested. With the increased expenditures and the reduced coUections the cost of collecting $100 of revenue rose from $5.95 in 1948 to $6.79 in 1949. A
summary of the coUections and expenditures for 1949 wiU be found in
table 86.
BUREAU OF ENGRAVING AND PRINTING
The Bureau of Engraving and Printing designs, engraves, and prints
currency, bonds, certificates, stamps, and various other official documents and forms. During the year a change was made in the method
of accounting, and revenue stamps and certain other items are now
recorded on the basis of dehvery sizci sheets instead of printing size
sheets as heretofore. On the old basis of printing size sheets, actual
dehveries of finished work during 1949 were approximately 5 percent
in excess of the quantity delivered during 1948. On the new basis,
deliveries of finished work aggregated 746,199,561 sheets.
A statement of dehveries of finished work in the fiscal years 1948
and 1949 follows. No adjustments have been made in the 1948
figures for the items on which the basis of recording differs from those
for 1949.
Sheets
Face value,
1949
Class
1948
Ourrency:
United States n o t e s . - .
Silver certificates
Federal Reserve notes.
Total.
Bonds, notes, bills, certificates, ahd debentures:
Bonds:
Panama Canal
Postal savings
Treasury
,.
United States savings.
Depositary
Home Owners' Loan Corporation
Insular, Puerto R i c a n — .
_
Notes:
Treasury.
Special United States.
Consolidated Federal home loan banks
Obsolete engraved stock delivered to Destruction
Committee and destroyed:
Commodity Credit Corporation..
-Federal National Mortgage Association...
Reconstruction Finance Corporation
U. S. Housing Authority
Treasury bills
—
Certificates:
Indebtedness
.-.—...
Cuban silver
.—
Military...
Philippine Treasury...
Interim transfer, postal savings bonds
1949
3,605,000
97,895,000
22,919,000
3,610,000
102,390,000
34,220,000
$176,820,000
1, 696,380,000
4,653,120,000
124,419,000
140,220,000
6,526,320,000
500
740
1,003.964
67,862,750
500
635
60
280,900
315
36,950
70,000
238,375
333,333
722,000
1,000
2,000
2,690
217,150
I, 714,000
1, 660
20,000,000
901,000
7,845,051,500
9,887,726,000
250
260,000
808,660
21,437,200,000
"32,"86o' "'"725,"6o6,'6oo
132,620
60,090
100,696
504
468,000
1,170,050
885,300
473,192
2,699,000
1,000
81,430,000,000
63,865,000,000
41,290,800
103,897,600
122,390,000
124
REPORT OF THE SECRETARY OF THE TREASURY
Sheets
Face value,
1949
Class
1948
Bonds, notes, bills, certificates, and debentures—Con.
Debentures:
Consolidated collateral trust for the Federal inter. mediate credit banks
.^.
-..
Federal ship mortgage insurance fund: Obsolete engraved stock delivered to Destruction Committee
and destroyed
Specimens:
Bonds
' Notes
Certificates
Debentures
Proof sheets, military certificates
Total.
50,000
39,500
$470,000,000
2,222
60, 591,929
76, 711, 252 185,948, 705,900
Number of
stamps, etc.,
1949
Stamps:
Customs
Internal revenue:
To offices of issue
.
Specimens
Obsolete delivered to Commissioner of Internal
Revenue for destruction
Puerto Rican revenue:
To offices ofissue
Obsolete delivered to Destruction Committee and
destroyed
Virgin Islands revenue
United States war savings.
Postage:
United States
Specimens
Canal Zone...
Philippine: Obsolete delivered to Destruction Committee and destroyed
Adhesive postal note
Districtof Columbia beverage tax paid
Federal migratory-bird hunting
House trailer permit
Total.
Miscellaneous:
Checks
Warrants...
; Commissions
Certificates:
Postal savings
Other
.
Drafts
Government requests for transportation..
Other miscellaneous
a
Specimens
...^
- Blank paper
.".
176,626
352, 500
3,525,000
164,707,896
97
290,277,017
684
20,683,272,039
. 1,064
2,737,435
847,965
1,390,407
1, 681, 400
103,936,000
51,000
300
465,488
214, 353, 803
214
167,850
5,100,000
30,000
46,818,050
21, 304,162,840
11, 359
9,615,000
103,658
735,928
1,041, 200
36,976
6, 205, 766
73, 692,800
52,060, 000
4,141, 200
375,159,046
610,105,882
42, 363,072, 662
8,253,443
4,166
616,823
9,528,936
47,664,055
'""30i,'548
100
354,333
204,904, 746
66
61,900
699,666
197,925
37,475
376
3,004,000
1,243,887
26,976
378,875
806,852
63
6
3, 302, 700
649, 591
625, 325
285,846
4, 467, 271
11
1,200
Total'..-.-.-
14, 335,090
19,162,427
Grand total.
674, 505,065
746,199, 661
70, 612, 535
188,865
16, 513, 500
618, 265
1,101,675
1,429, 225
9,176, 654
70
76,682,309
ADMINISTRATIVE
REPORTS
125
Orders were received and dies were engraved for new issues of postage stamps as foUows:
Issue
Joel Chandler Harris Commemorative, Series 1948.
':.
Will Rogers Commemorative, Series 1948
Oregon Territory Centennial Commemorative, Series 1948
Century of Friendship between the United States and Canada Commemorative, Series 1948.
William Allen White Commemorative, Series 1948
Salute to Youth Commemorative, Series 1948
_
Indian Centennial Commemorative, Series 1948
_
Palomar Mountain Observatory Commemorative, Series 1948.
..
Volunteer Firemen Commemorative, Series 1948...
Harlan FIske Stone Commemorative, Series 1948
..
Clara Barton Commemorative, Series 1948
Poultry Industry Commemorative, Series 1948
Fort Kearney Commemorative, Series 1948
_.
Rough Riders Commemorative, Series 1948
Fort Bliss Commemorative, Series 1948
.._.„-.
Juliette Low Commemorative, Series 1948
Gettysburg Address Commemorative, Series 1948
Moina Michael Commemorative, Series 1948.
-.
:.
American Turners Society Commemorative, Series 1948.
Air Mail, Golden Anniversary of the City of New York Commemorative, Series 1948
Washington and Lee University Commemorative, Series 1949
_
Minnesota Territorial Commemorative, Series 1949
First Puerto Rico Gubernatorial Election Commemorative, Series 1949
Annapolis, Maryland, Tercentenary Commemorative, Series 1949
Air Mail, Alexandria, Virginia, BicentennialiCommemoratlve, Series 1949
.
Air Mail, Series 1949
.
Canal Zone, Gold Rush Centennial 1849-1949, Series 1949.
Denomination
(cents)
6
6
3,6,12,18
New dies and plates were prepared for various kinds of certificates
and coirimissions, and seals were engraved for several governmental
agencies. The lay-outs for tobacco, cigarette, and other classes of
internal revenue stamps were revised by reducing the margins on
the sheets, thereby making it possible to print the same number of
subjects on sheets of smaller size. This wiU result in a considerable
saving in the quantity and cost of paper.
The printing of the new $20 uniform currency back showing the
revised vignette of the White House was begim in the early part of
July and the first delivery of finished notes carrying the new backs
was made on July 27, 1948.
Under arrangements made through the Department of State
during the previous fiscal year an order for 14,600,000 Cuban sUver
certfficates was completed in August 1948. An additional quantity
of 7,000,000 certfficates was requested on AprU 1949, and the currency
was being processed at the close of the year. Two orders for the
Philippine Treasury totaling 4,920,000 certificates were produced for
the Philippine Government. These currencies were printed from
plates which had been engraved by the Bureau and used for previous
orders.
Twenty flatbed intaglio printing presses, equipped with double
wipers which eliminate the hand polishing of the plates, were purchased and installed. Contracts were awarded for the manufacture
of 150 auxiliary polishing wipers and 176 feed boards for the purpose
of modernizing single-wiper presses now in use. Orders also were
placed for 5 offset printing presses and 4 typographic presses.
126
REPORT OF THE SECRETARY OF THE TREASURY
The total personnel at the beginning of the fiscal year comprised
5,851 employees. There were 856 appointments and 637 employees
were separated from the service, leaving a total of 6,070 employees on
the rolls at the end of the year.
Expenditures amounted to $26,848,412.23, an increase of
$2,759,250.99, or 11.5 percent, above the total expended during the
previous year. The following tabulation shows the appropriations,
reimbursements, and expenditures for the fiscal years 1948 arid 1949.
Class
Appropriations:
Salaries and expenses
Printing and binding..
Reimbursements to appropriations from other bureaus for work completed: i
Salaries and expenses
.
.
Printing and binding
Total
Expenditures:
Salaries and expenses
Printing and binding
Total...-
Increase, or
decrease (—)
1948
_
„.
$13,250,000.00
6,000.00
$16, 660, 000.00 $2,410,000.00
-6,000.00
10, 929,197. 68
6,000.00
11, 223,848.44
294, 650. 76
-6,000.00
24,190,197. 68
26, 883, 848.44
2, 693, 650. 76
24,078, 602.12
10, 559.12
26,848, 412. 23
2, 769, 810.11
-10,659.12
24, 089,161. 24
26, 848,412. 23
2, 769, 250.99
101,036.44
35,436.21
-65, 600. 23
Unexpended balance......
1 Additional amounts totaling $23,287.69 for 1948 and $1,555.66 for 1949 were received for Government
property lost or damaged, ref unds of terminal leave compensation, refunds affecting expired appropriations,
reimbursements for jury service, collections to correct discrepancies in the paper accounts, empty drums
returned by Bureau, and reimbursement on account of default in contract.
BUREAU OF FEDERAL SUPPLY
On July 1, 1949, the Bureau of Federal Supply was abolished by
the Federal Property and Administrative Services Act of 1949, and
its duties, functions, and personnel were transferred to the General
Services Administration.
During the fiscal year 1949 the Bureau of Federal Supply procured
and distributed supplies, materials, equipment, and services for
Federal establishments; stored and inspected the items procured; and
determined the policies, methods, and purchasing standards required
for these procedures.-^ The Bureau maintained facUities for technical
operations allied to supply, such as traffic management and public
UtUities. At the direction of the Munitions Board, the Bureau purchased and inspected strategic and critical materials for inclusion in
the national stock pUe. The Bureau also conducted other special
purchasing programs as directed by Congress.
PROCUREMENT
Specialists in procurement and marketing of the Bureau of Federal
Supply entered into contracts for the purchase of supplies, materials,
and equipment for Federal agencies' departmental and field services
and also performed the same services for special programs. Liaison
was maintained with other Government agencies and, in the case of
» The Bureau's basic authorities derive from Executive Order 6166 and Reorganization Act of 1933 (47
stat. 1617).
ADMINISTRATIVE
127
REPORTS
special programs, through the State Department with officials of
foreign nations.
Contracting and purchasing by the Bureau for regular governmental requirenients were generally effected in accordance with
section 3709 of the Revised Statutes, as amended, requiring advertising'
for bids, public bid openings, and award of contract to lowest
responsible bidders.
Two types of contracts were used: Indefinite quantity (sometimes
called open-end or term), which were made for approximately 40,000
items listed in the Federal Supply Schedule; and definite quantity
contracts, which were made for items not covered by the schedule.
The following table shows by program the net dollar volume of
commodity purchases made by the Bureau of Federal Supply during
the fiscal years 1948 and 1949.
Purpose.
Regular activities
Strategic and critical materials (Public Law 520, July 23,1946)
Special programs
Total
;
Purchases by other agencies from Federal Supply Schedule
1948
1949
$56,778,062
1 252,901,412
21,490,969
$90, 207,489
420, 698, 766
7,126,806
331,170,433
88,926,428
517,932,059
2 90,000,000
1 Total obllgatldns including commodities purchased and all other costs.'
2 Estimated.
GOVERNMENT REQUIREMENTS
The Government Requirements Division coordinated the various
functions of the Bureau of Federal Supply with similar functions in
other Federal agencies. Surveys and studies made by this Division
form the bases upon which procurement policies and methods are
established.
During the fiscal year 1949 the Government .Requirements Division
continueci participation in a Joint Property AccountabUity Survey
Project (with the Bureau of the Budget and the General Accounting
Office), for simplifying and installing more uniformly effective inventory
control and property accountabUity systems in Federal agencies.
This project, begun during the previous fiscal year, was promulgated
during the fiscal year 1949. The Diyision also conducted surveys
and supply management studies in field and departmental offices of
various agencies of the Executive branch, which resulted in a wider
use of the Federal Supply system.
STORES OPERATIONS
The stores operations were conducted on a self-supporting reimbursable basis. The principles of operation are substantially like
those of a private enterprise, except that the objective is to recover
costs as distinguished from the profit motive of commercial concerns.
During the year the Bureau of Federal Supply operated supply
centers in Washington, D. C. (Central Warehouse), Boston (Branch
Center), New York, Cleveland, Chicago, Atlanta, Fort Worth, Kansas
City, Denver, San Francisco, Seattle, and Los Angeles (Branch
Center). These supply centers constituted the Bureau's national
128
REPORT OF THE SECRETARY OF THE TREASURY
system for the procurement, storage, and issue of supplies in common
use by the Federal and District of Columbia Governments.
The stores operations are financed by the general supply fund,
which is a revolving fund established pursuant to the act of February
27, 1929 (45 Stat. 1341), as amended, and is avaUable to finance purchases by the Bureau of Federal Supply of stock, consolidated supplies,
and services. All expenditures are made from the fund and all collections are credited to it. Expenses are recovered by service charges
representing estimated handling costs. When expenses for handling
are less than estimated, surpluses go into the general supply fund, and
after the yearly audit by the General Accounting Office are credited
to miscellaneous receipts of the Treasury.
During the year the total value of warehouse stock issues exclusive
of typewriters was $30,878,743, an increase of $8,524,818 over 1948.
The total sales in all activities of the general supply fund during
the year amounted to $96,041,440, as compared with $63,566,772 for
1948. Percentage-wise, this increase was about the same as the 1948
sales were above those of 1947. For the fisca;l year 1949, the increase
in. sales in the Direct Delivery class, in which deliveries are made
directly to agencies rather than to Bureau supply centers, was due
primarily to the automotive equipment purchase program.
Operating income exceeded operating costs by $68,649.14. This
amounts to only 0.07 percent of sales, and indicates the accuracy
of the plan to recover costs but not to make profits. The excess for
1948 was $186,237, or 0.29 percent of sales. During 1949 the capital
of the general supply fund was $9,520,196.
^
A statement of the assets and liabilities of the general supply
fund as of June 30, 1949, follows:
Assets
Amount
Current assets:
$10, 641,482.09
Cash
'
Accounts receivable. _
8,320,800.87
Postage
9,920.61
6, 666, 802. 69
Inventories (at cost) >.
Total.
.
„ „ _ _ 25, 638,006.16
418, 844. 26
Fixedassets: Equipment..
Amount
Liabilities and capital •
Current liabilities:
Accounts payable
Unearned income
_
..
Total
--
Capital and surplus:
Capital
Donated capital
Donated surplus
Total
L
Reserve for contingencies
Total assets
26,056,860.42
$12,968, 546.11
2,116,177.71
_
Total liabilities and capital
15,084, 722.82
9, 520,196.07
6, 629.00
715,016. 40
10,241,841.47
730, 286.13
26,056,850.42
UTILITY SERVICES
The Public UtUities Divisionof the Bureauof Federal Supply performed the technical work required for efficient procurement of
utility service for Federal agencies in Washington and in the field.
These utUities include electric, gas, steam, telephone, teletypewriter,
telegraph, and cable services. During the fiscal year this Division
intervened in five utilities rate cases on behalf of the Government as a
ADMINISTRATIVE REPORTS
129
consumer. Through the efforts of this Division an annual increase
of approximately $530,000 in the Government utUities bUls was
prevented.
TRAFFIC MANAGEMENT
Liaison was maintained with all agencies, including the National
MUitary Establishment, through the Interdepartmental Traffic Committee, which was created by the Bureau of Federal Supply for the
purpose of conducting continuing studies of transportation rates and
services as they afi'ect the shipment of property on which charges are
paid and borne by the Government. During 1949 the Bureau's
Central Traffic Services Division was instrumental in effecting a
saving in excess of $5,000,000 tlirough reduced rates negotiated by
the Division. The Division furnished Government agencies with
rates and related information requiring nearly 50,000 computations.
STANDARDIZATION
The Bureau of Federal Supply, which is responsible for the standardization of materials, equipment, and supplies used by theFederal
establishments, maintained a Standards Branch, charged specifically
w i t h . t h e identification, classification, and cataloging of items of
supply; with the developmerit of Federal and Bureau of Federal Supply specifications; and with the inspection and testing of supplies
purchased by the Bureau or by other agencies under the Federal
Supply Schedule term contracts.
During the year, the Bureau continued to discharge its basic responsibilities for maintenance of the Federal Standard Stock Catalog and
for the development of the Federal Catalog System. Approximately
40,500 item identffications were prepared; and 102 new. Federal
Specifications were published, 66 were revised, and 77 amended.
About 1,132,000 copies of Federal Specifications were furnished Government and industry; and, in addition, the Government Printing Office
supplied over 1,350,000 copies to the National MUitary Establishment.
The Bureau of Federal Supply maintained in the District of Columbia a service for inspecting and testing incoming warehouse stock,
investigating complaints of receipt of apparently inferior materials
delivered on Bureau contracts, coordinating routine inspection and
testing services in the Federal Government, and inspecting strategic
arid critical materials and materials for relief and assistance to foreign
countries. As an additional service, a display was maintained where
standard samples of articles on purchase under Federal Supply
contracts were available for examination by representatives of Government agencies. During the year samples on display averaged 33,000.
B L I N D - M A D E PRODUCTS
Under the act of June 25, 1938 (41 U. S. C. 46-48), known as the
Wagner-O'Day Act, nonprofit agencies for the blind sold to the
Government during the year $4,290,212 of products made by the
blind. The products sold came from 47 workshops for the blind,
which gave employment to 2,621 blind persons.
856455—50
10
130
REPORT OF THE SECRETARY OF THE TREASURY
FORFEITED, SEIZED, AND ABANDONED PROPERTY
Forfeited, seized, and abandoned property totaling $1,468,676 in
appraised valuation was reported during the year to the Bureau of
Federal Supply, for transfer to other Government agencies or eleemosynary institutions.
STRATEGIC AND CRITICAL MATERIALS
In accordance with the provisions of the Strategic and Critical
Materials Stock PUing Act of July 23, 1946 (Public Law 520, 79th
Congress), the Bureau of Federal Supply, operating under directives
of the Munitions Board, purchases strategic and critical materials
essential in time of national emergency to industrial and mUitary
needs.
Funds in the amount of $477,069,085 were obligated for the acquisition and care of strategic and critical materials during the fiscal
year 1949 including accessorial and administrative costs. I n addition
to the purchases from appropriations, the stock pUe was augmented by
$474,000,000 of strategic and critical materials declared surplus by
the Reconstruction Finance Corporation and other Government
agencies, and by materials acquired through pertinent provisions of
the Economic Cooperation Act. These materials were being moved
into permanent stock pUe locations as rapidly as transportation and
storage facUities perinitted.
SURPLUS PROPERTY
In accordance with the provisions of the act of June 30, 1948
(Public Law 862, 80th Congress), 17,921 declarations, containing
135,457 line items with an acquisition cost of $95,612,007, were reported by Federal agencies to the Bureau of Federal Supply during
1949. The acquisition value of surplus property transferred to other
Federal agencies amounted to $10,405,851, and sales to the public
were $639,408. The balance reverted to declaring agencies for disposal after no interest had been indicated by Government agencies
during the 40-day period in which, declarations were made avaUable
to other Federal agencies.
Under the program for distributing surplus typewriters, as of June
30, 1949, a total of 50,926 typewriters had been declared surplus by
the departments and agencies. Of this total the Bureau reissued
approximately 15,000 to Federal agencies, sold commercially 12,000,
and cleared back 3,000 to the owning agencies for disposal. Approximately 21,000 were on hand and in process of inventorying and
classification on June 30, 1949.
FISCAL OPERATIONS
During the year the Fiscal Branch maintained the accounts, audited
the vouchers for contract payments, and prepared appropriate
financial and statistical reports in the several programs being conducted
by the Bureau of Federal Supply.
Special programs.—As a service agency, the Bureau continued to
procure a limited portion of the supplies required for several of the
Government's programs to give relief and aid to foreign countries.
ADMINISTRATIVE REPORTS
^
131
Purchases in the fiscal year 1949 totaled $7,125,805. The purchases
consisted of Greek-Turkish assistance (Public Law 75, 80th Congress,
May 22, 1947) amounting to $2,175,469; and purchases by the
Economic Cooperation Administration, including purchases for Korea
(Public Law 472, 80th Congress, AprU 3, 1948), of $4,950,336.
FISCAL SERVICE]]
O F F I C E OF THE FISCAL ASSISTANT SECRETARY
The Fiscal Assistant Secretary, under the direction of the Secretary,
supervises the administration of Treasury financing operations and
directs the operations of the three bureaus composing the Fiscal
Service, namely. Bureau ol_ Accounts, Bureau of the Public Debt,
and Office of the Treasurer of the United States. He acts in a
liaison capacity with other agencies of the Government with respect
to their financial operations; directs the performance of fiscal agency
functions of the Federal Reserve Banks; supervises the daUy cash
position of the Treasury, and estimates cash receipts and expenditures
for the Secretary's use in financing operations; prepares calls for the
withdrawal of funds from special depositaries to meet Government
expenditures; directs the transfer of Government funds between the
Federal Reserve Banks; and maintains a continuous study of the
operations and methods in the various units of the Fiscal Service.
A detailed description of the functions of the Fiscal Service appears
on pages 84 to 86 of the annual report for the fiscal year ended June
30, 1948. See also exhibit 28 in this report.
Cash position.—The working cash of the Treasury is held in the form
of (1) balances in the accounts which the Treasurer maintains at each
of the Federal Reserve Banks, (2) balances in the accounts maintained
with commercial banks designated as special depositaries, and (3) the
gold, balance remaining after deducting gold certificates and other'
liabilities from the total gold assets held by the Treasurer, referred to
as the ^^free gold" avaUable for use of the Treasury in meeting Government obligations.
Treasury accounts with the special depositary banks, because of
their origin duruig World War I, have been commonly laiown as war
loan accounts. To indicate their continuing and expanded role since
1945, a new term. Treasury tax and loan accounts, effective January
1, 1950, will be substituted to designate these deposits. The deposits
consist of proceeds from certain sales of Government securities and
withheld income taxes received by the banks. Beginning early in
1950, qualified banks may also credit social security receipts to the
Treasury tax and loan accounts. Specified collateral is required to
secure the deposits placed in these accounts.
The management of the cash position of the Treasury involves the
maintenance of adequate daily balances in the Treasurer's account
with each Federal Reserve Bank, after taking into consideration the
flow of receipts and expenditures through such accounts.
The financial operations of the Treasury are conducted largely
through the twelve Federal Reserve Banks and twenty-four branches.
In order to maintain working balances with the various Reserve Banks
to meet the Government's current obligations, funds are transferred
132
REPORT OF THE SECRETARY OF THE TREASURY
between the Banks through the facilities of the gold certfficate fund
of the Federal Reserve System. When the Treasury balances with
the Federal Reserve Banks need replenishment, funds are withdrawn
from the Treasury accounts with special depositaries and deposited
in the Treasurer's account with the Federal Reserve Banks.
By proper timing of transfers of funds from the special depositaries
to the Treasurer's account with the Federal Reserve Banks, this
method of maintaining the Treasury's cash position with the Federal
ReserveBanks makes it possible to handle Treasury.transactions with
a minimum of disturbance to the money market and to the deposits and
reserves of commercial banks.
The following tables show the changes in the Treasurer's account
with, the Federal Reserve Banks monthly during the fiscal year 1949
and the month-end balance's for the principal items making up the
general fund:
Treasurer's account with Federal Reserve Banks
[In millions of dollars]
Month
1948—July
August
September.
October...
November.
December.
1949—January. __
February..
March
April
May
June
_
Balance
beginning
of m o n t h
Increase,
Funds trans- Treasury Nore t decrease
ferred from operations (—), during
depositaries i
(net)
month
1,666
1,281
683
1,775
1,671
1,188
1,369
184
926
2,290
1,459
1,051
1,928
1,756
1,919
1,664
. 1,608
1,601
1,123
1,514
1,423
1,482
1,226
-1,729
-1,117
-838
-1,831
-1,578
-1,666
-978
-275
-867
- 2 , 546
-2,057
-1,241
-173
164
-265
-56
-7
-478
391
-91
59
-256
-598
-190
Balance
end of
month
1,755
1,919
1,664
1,608
1,601
1,123
1,514
1,423
1,482
1,226
628
438
' R e p r e s e n t s proceeds from sales of p u b l i c d e b t securities a h d deposits on a c c o u n t of w i t h h e l d taxes.
General fund
[In millions of dollars]
Deposits
E n d of m o n t h
Federal
Reserve
Banks
(available
funds)
Special
depositaries
Gold
Other
assets
Total
assets
Total
liabilities
General
fund
balance
1948—July
._.
August
September.
October
November.
December.
1949—January....
February..
March
April
May
June
1,766
1,919
1,664
1,608
1,601
1,123
1,514
1,423
1,482
1,226
628
438
2,081
1,741
2,703
1,976
1, 621
1,909
1,736
2,688
2,924
1,563
1,313
1,771
1,070
1,060
1,068
1,078
1,0761,077
1,046
1,045
1,038
1,033
1,027
1,022
600
509
585
543
514
621
747
563
679
606
569
631
6, 506
5,229
6,020
5,206
4,813
4,630
5,042
5,719
6,123
4,428
3,526
3,862
433
397
437
403
428
422
383
428
357
433
363
392
6,074
4,832
6,583
4,802
4,385
4,208
4,659
5,291
5, 767
3,995
3,163
3,470
M o n t h l y average
1,365
2,002
1,063
688
6,008
406
4,602
133
ADMUSriSTRATIVE REPORTS
On June 15, 1949, the Treasury used its entire balance with the
Federal Reserve Banks and, in addition, borrowed $220 million from
the Federal Reserve Banks to cover expenditures made on that date.
This action was taken in anticipation of the heavy quarterly tax
collections received during the week succeeding June 15. This special
borrowing, which took the form of the sale of special short-term
certificates of indebtedness to the Federal Reserve Banks with interest
at the rate of % of 1 percent per annum, was completely repaid by
June 17. °
Federal intermediate credit banks.—The Government Corporation
Control Act, approved December 6, 1945, provides that the Federal
intermediate credit banks shall consult with the Secretary of the
Treasury with respect to the terms and conditions, etc., of any bonds,
notes, debentures, or other obligations issued to the public, prior to
the issuance of those obligations.
The following consolidated collateral trust debentures were issued
during the year:
N e w issue
Date
T i m e to m a t u r i t y
1948—July 1
August 2
September 1
October 1.
Do
November 1
Do.D e c e m b e r 1 __
Do
1949—January 3
February 1
March 1
April 1
Do .
May 2 . . .
Do..
June 1
. Do
9
9
9
9
.
Maturing security
Interest
r a t e (percent)
Amount
(In millions)
months
months
months
months
1.55
1.56
1.65
1.65
$55
20
38
62
9 months
1.65
56
9 months
5 months
9 months
9 months
9 months
9 months
___
7 months
9 months
7 months
9 months
7 months..
1.60
1.50
1.60
1.66
1.55
1.56
1.50
1.66
1.50
1.66
1.45
32
24
72 "
62
67
58
23
52
26
60
30
Interest
r a t e (percent)
Amount
(in millions)
1.15
1.20
1.26
1.35
1.45
1.55
1.46
1.65
$34
20
38
45
25
58
31
77
i."55"
1.65
1.46
1.65
85
65
53
66
1.66
1.50
1.65
20
24
38
Federal home loan banks.—Under the provisions of the Government
Corporation Control Act aU obligations issued to the public by the
Federal home loan banks must be approved as to terms and conditions, etc., by the Secretary of the Treasury. The following issues of
. consolidated Federal home loan bank notes were made during the year:
M a t u r i n g security
N e w issue
Date
Time to maturity
1948—July 2 2 . .
S e p t e m b e r 16
1949—January 20
.
1 year
1 year
1 year
^
.
Interest
rate
(percent)
1.66
1.75
1.626
Amount
(in millions)
$116
120
43
Interest
rate
(percent)
1.46
1.25
L76
Amount
(in millions)
$50
85
97
Foreign currencies.—The Treasury provides central facUities for the
custody and disposition of excess foreign currencies that have been
acquired by the United States in coimection with sales of surplus
134
REPORT OF THE SECRETARY OF THE TREASURY
property, lend-lease repayments, and other operations in foreign
countries. These currencies are made available to the various Government agencies as required. The total arnount held increased (in
dollar value) from $25,024,118 on June 30, 1948, to $46,785,706 on
June 30, 1949. (See table 110.)
During the fiscal year 1949 the Treasury delivered to the Department of State the currencies of the countries listed below, without
receipt of the equivalent United States dollar value, for purposes
authorized under the provisions of section 32 (b) (2) of the Surplus
Property Act of 1944, as amended, in connection with educational
exchange programs conducted between the United States and the
respective countries:
Country
Belgium
Burma
China
France
Great Britain
Greece
_
Italy
New Zealaijd
—-
Equivalent
value 1
Foreign currency
1,643,631.26 francs
663,500 rupees
_ _
153,881.286,046:66 yuan
6,530,040 francs61,996 pounds
600,250,000 drachmas
28,750,000 lire .
___
38,530 pounds
_
_
_
.__
Total
$37,500.00
200 000 00
364,150.00
19 800 00
260,000.00
50,000.00
.60,000 00
125, 000.00
1,096,450 00
1 On basis of current exchange rate at date of transfer.
Fiscal Service Improvement Committee.—A Fiscal Service Improvement Committee was established to act in an over-all advisory capacity
and appraise the results of and make recommendations on various
procedural changes under consideration or contemplated in the Fiscal
Service. The Committee is composed of the Assistant to the Fiscal
Assistant Secretary (Chairman), the Administrative Assistant to the
Secretary, the Treasury Budget Officer, the Treasurer of the United
States, the Commissiorier of the Public Debt, and the Commissioner of
Accounts. Each member is authorized to designate an alternate.
FISCAL SERVICE—BUREAU OF ACCOUNTS
Receipts and expenditures.—The central accounts of the Government relating to the revenues, appropriations, and expenditures of
departments and establishments are maintained, by law, in the
Bureau of Accounts. • This Bureau prepares annually for the Secretary
the report to the Congress under the act of July 31, 1894, classifying
the receipts wherever practicable by districts. States, and ports of
collection, and the expenditures under each separate head of appropriation. Receipts and expenditures of the Government during the
fiscal year 1949 are shown in the summary of Federal fiscal operations appearing on page 61 of this report, and a more detailed statement is included as table 1 ;
Iinprovement oj accounting procedures.—The Bureau of Accounts,
under Reorganization Plan I I I (Reorganization Act of 1939), renders
technical advice and assistance to other bureaus and offices of the
Treasury Department in the accounting field. The most important
service rendered during the year was in connection with the problems
ADMINISTRATIVE REPORTS
135
arising in the revision of the accounting systems of the Bureau of
Customs and the United States Coast Guard.
The accounting staff of the Bureau of Accounts also is cooperating
with the staffs of the General Accounting Office and the Bureau of the
Budget in the development of principles, standards, and basic requirements that will have application to accounting in the Government
generally and in the rendering of technical assistance to departments
and agencies in the improvement of their accountuig systems. I n
this conriection, the Secretary of the Treasury, the Comptroller
General of the United States, and the Director of the Bureau of the
Budget have established a joint working relationship for the purpose
of revising the accounting and auditing procedures of the Government
in keeping with the needs and interests of all concerned, including the
Congress of the United States, the President, and the heads of the
several departments and agencies. The program has been under
way for sometime and undoubtedly will bring about much better
accounting in the Government. Under this joint undertaking, the
following have been adopted as basic principles:
(1) The maintenance of accounting systems and the producing
of financial reports are and must continue to be functions of
the executive branch.
(2) There must be an audit independent of the executive branch
which will give appropriate recognition to necessary features
of internal audit and control. Properly designed accounting
systems are a vital factor to the effectiveness of such independent audit.
(3) Full opportunity is to be afforded to the executive branch for
participation in the development of accounting systems as
an essential to meeting the needs and responsibilities of both
the legislative and executive branches in the establishment
of accounting and reporting re(iuirements.
Due consideration is being given, under the program, to the development of a system of central accounts in the Treasury Department, on
the basis of sound principles and standards, and to the establishment
of a system of comprehensive financial reports covering the operations of all departments and agencies of the Government. For a
more detailed statement of policies and objectives, see exhibit 29.
Daily Statement oj the United States Treasury.—Throughout the
year the practice was foUowed of excluding from both budget receipts
.and^exp^ditures certain payments_tg Jim,Xrea^^^
whoU^_owned_^gvernnient cprporations, jpr^ retirement^oi _cjjp^l~^
Ttock and for dispositigri^ofj^ixmgs. This practice has no effect on
the budget surplus or deficit as the exclusions on each side of the
budget are always equal.
Effective January 3, 1949, refunds of taxes and duties were reported
as deductions from receipts rather than as expenditures. This
change also did not affect the size of the budget surplus or deficit since
receipts and expenditures are reduced by equal amounts. Interest
paid on certain taxes and refunds continues to be shown as a budget
expenditure.
Prior figures, beginning with 1931, were adjusted to conform with
the above-mentioned changes, so as to provide for comparability.
Commencing with July 1, 1948, through the use of teletype facUities,
136
REPORT OF THE SECRETARY OF THE TREASURY
expenditures of the departments and establishments of the Government serviced by the Division of Disbursement have been reported
in the daily Treasury statement as of the day on which checks are
issued in payment of Government obligations; prior thereto, such
expenditures were reflected in daily Treasury statements as of the
dates reports of checks paid were received in Washington, D. C , by
mail. During the latter part of the fiscal year 1949, procedures were
established whereby expenditures of the Department of the Army
wou'd also be reported through the use of teletype facilities. However, the expenditures of the Department of the Army will not be
included in the daily Treasury statement on the basis of teletype
reports until sometime during the early part of the fiscal year 1950.
Surplus j u n d and certified claims.—The act of July 6, 1949 (Public
Law 159, 81st Congress), amended the provisions of law relating: to
the surplus fund and certified claims. Under the amendment, the
unexpended balances of lapsed annual appropriations, that is, those
which have remained on the books for two fiscal years following the
fiscal year for which appropriated, shall be transferred on July 1 of
each year to a consolidated appropriation account. This consolidated account will be available without limitation as to time for
payment of claims certified by the Comptroller General of the United
States and chargeable to the balance of the respective appropriations
so transferred. Amounts in the consolidated account not required
for payment of certified claims will be parried annuaUy to the surplus
fund.
In accordance with the provisions of this act, unexpended balances
of annual appropriations which lapsed on June 30, 1949, were transferred to a consolidated appropriation account as of that date.
Disbursement activities.—TYIQ Division of Disbursement maintains
regional disbursing offices in the continental United States, and other
facilities in Territories and foreign countries, servicing all executive
departments and agencies except the Post Office Department, United
States marshals, the Panama Canal, the National Military Establishment, and certain Government corporations. The number of payments, collections, and savings bonds issued by the Division of Disbursement during the fiscal years 1948 and 1949 are as follows:
Number
Classification
Payments (cbecks and cash):
Social security . ..:
__ __ __
._
_ _ _
Veterans* benefits
Tax refunds
__ ___ _ _ _
Other
Collection items
. . _ _
Savings bonds Issued to Federal employees in payroll savings plan
Total
i
Fiscal year
1948
___
Fiscal year
1949
24,610,741
79,169,989
31, 589, 622
27,114, 921
6, 813, 240
2, 257,138
28,822, 250
80,137,417
38,407, 651
28,368, 258
5,787, 078
• 2, 402,927
171, 556, 651
183,925, 681
A number of improvements in disbursing practices and procedures
were made during the year. The microfilming of checks for record
purposes obviates the need for carbon copies of checks, and wUl result
ultimately in saving 60,000 square feet of storage space.
ADMUSriSTRATIVE REPORTS
137
The preparation of tax refund checks by what is known as the
^'transfer posting" method proved satisfactory in the experiment in
1948 and ,was adopted generally in 1949. The name and address of
the payee are mechanically transferred to the face of the check from
the refund voucher prepared by the collector of internal revenue.
This method not only facUitates the preparation of the check, but
also reduces the cost of typing and the possibility of errors in transscription.
Effective January 1, 1949, the making of check payments in the
name of the Chief Disbursing Officer was discontinued in all regional
offices except Washington, D . C . As of that date, assistant disbursing
oflicisrs in the several regions commenced making disbursements and
rendering accounts in their own names, as regional disbursing officers.
The change was made in order to facilitate the audit and settlement
of disbursing officers' accounts.
Under authority of the Economic Cooperation Act, and at the
request of the Economic Cooperation Administration, a special
procedure involving the use of drafts was inaugurated for making
disbursements for the Economic Cooperation Administration. These
drafts are drawn on the Administrator for Economic Cooperation by
the participating country concerned, and paid through the Federal
Reserve Bank of New York as fiscal agent of the United States.
Withheld joreign checks.—Regulatioris of the Treasury Department
relating to delivery of Government checks to payees residing in
foreign countries were amended to add Albania to the countries to
which such checks may not be sent. A copy of the amendment
appears as exhibit 30.
Government losses in shipment.—The reported value of shipments
made by Government departments and agencies during the year
under coverage of the Government Losses in Shipment Act, as
amended, amounted to $405,111,163,200 as compared with $403,652,458,719 for the fiscal year 1948. During the year claims totaling
$244,688.71, which includes $238,573.42 on account of United
States savings bonds and armed forces leave bonds redemption
cases, were paid out of the revolving fund established pursuant tc
such act, and recoveries amounting to $135,983.96 were effected
during the year and were deposited to the credit of the fund, leaving
a net expenditure of $108,704.75 for losses. The cumulative amount
of estimated insurance premium savings to the Government from the
date of the inception of the act, based on rates in effect at that time,
totaled $27,916,000 through June 30, 1949. Information concerning
the operation of this self-insur ance plan by the Government will be
found in tables 99 to 103.
Bonding oj Government employees.—A number of bUls have been
introduced in the Congress regarding the bonding of Government
employees. In line with the practice followed in private business,
the Treasury has recommended relieving Government employees of
the personal expense of providing surety bonds, and has suggested
the creation of a self-insurance fund similar to the fund authorized
by the Congress in connection with the shipment of valuables under
the Government Losses in Shipment Act.
As of June 30, 1949, over 554,000 employees of the Government
138
REPORT OF THE SECRETARY OF THE TREASURY
were bonded at an expense to them for annual premiums amounting
to approximately $1,500,000.
Authorized surety companies.—A list of the surety companies
authorized to write bonds in favor of the United States is published
by the Treasury semiannually. The form of this list was revised to
facilitate its preparation and use.
Certificates of authority were issued to two additional companies
qualifying them as sole sureties on bonds in favor of the United
States. A total of 49,344 bonds and consent agreements were approved as to corporate surety.
Depositaries oj public moneys.—The administrative work relating
to the designation of depositaries of public moneys is handled by the
Division of Deposits. Cash balances held by the various classes of
depositaries are shown in table 42.
^Arrangemente have been^ m_ade--with approximately 1 ,i)_00 commercial Banks to furnish draftsjLo^officers ()fJ^ie;Farmers' Home Adminis"~tration7 the Public Housing Administration, and'other agencies for
toinsmitting their collections of Government funds to Federal Reserve
Banks for account of the Treasurjj. These arrangements facilitate
the transmittal and deposit of Government funds at certain points
where volume is small.
During the year, the Bureau of Internal Revenue, in cooperation
with the Fiscal Service, formulated plans under which, effective
^January 1, 1950, tax returns covering withheld taxes and social
:! security taxes will be combined, and employers wiU deposit withheld
i taxes directly with Federal Reserve Banks instead of with commercial
*j banks. Employers may make arrangements with commercial banks,
^" however, to receive such collections, as a service to their customers,
for transmission to the Federal Reserve Banks, without cost= to the
Government. This change in procedure will result in a substantial
saving to the Government.
Investments oj trust junds.—Under various provisions of law, the
Secretary of the Treasury is responsible for investing certain trust
funds. A summary of the various investment accounts for which
he is responsible is shown as table 43.
Assets oj the retirement system oj the Comptroller oj the Currency.—
The act of June 30, 1948 (Pubhc Law 849, 81st Congress), abolished
the separate retirement system for employees of the Bureau of the
Comptroller of the Currency and directed the transfer of its assets
to the civil service retirement and disability fund. Assets transferred
consisted of the following:
Amount
Cash
.
$453,996.45
Securities (at cost):
United States savings bonds, Series D
15, 000. 00
United States savings bonds, Series G
700, 000. 00
2K% Treasury bonds of 1962-67
_-_
300,000. 00
2H% Treasury bonds of 1964-69 (dated Apr. 15, 1943)
100, 000. 00
2^2% Treasury bonds of 1964-69 (dated Sept. 15, 1943)
2, 500, 000. 00
2J^% Treasury bonds of 1966-71
i
825,000. 00
2K% Treasury bonds of 1967-72 (dated June 1, 1945)__-_-__
610, 000. 00
Total securities
Grand total
-_
--_
5,050,000. 00
.
. - - 5,503,996.45
ADMINISTRATIVE REPORTS
139
Interest charged on Federal Reserve notes.—'DnTing the year there
was deposited in miscellaneous receipts in the Treasury $1^7,£20,08L11, representing the proceeds from tKe interest charge levied in
1947 by the Board of Governors of the Federal Reserve System on
Federal Reserve notes in circulation. This compares with deposits
of $99,781,558.87 in 1948. Deposits in 1947 amounted to $15,268,883.47 and consisted of those for the quarter ended March 31, 1947.
The amounts deposited in the Treasury by each Federal Reserve^
Bank for the fiscal years 1947 through 1949 appear in table 10,. ^
Loans and capital subscriptions.—In continuing the policy' of
supplying funds required by Government corporations and agencies
which are authorized to borrow money for operations, the Treasury
made cash advances to Government corporations and agencies
aggregating $7,418,509,378.24. The Treasury received repayments of
$3,286,282,219.11, resulting in net advances of $4,132,227,159.13,
A statement showing obligations of Government corporations and
other agencies held by the Treasury as of June 30, 1949, appears as
table 68.
Under various provisions of law, the Treasury canceled during the
year $70,089,063.83 of its holdings of obligations of Government
corporations and agencies.
The Treasmy's holdings of capital stock in Government corporations decreased by $263,003,806.58 during the fiscal year as a result
of cash payments in the amount of $262,977,089.31, cancellations in
the amount of $2,026,717.27,, and additional subscriptions in the
amount of $2,000,000. Dividends, interest, and like payments
received by the Treasury from Government corporations and other
enterprises in which the Government has a financial interest aggregated $475,612,632.47. Certain transactions of particular interest are
described below, and a tabulation showing dividends, interest, and like
payments received from Government corporations and other enterprises in which the Government has a financial interest appears as
table 79.
Loan to United Nations jor permanent headquarters.—The act of
August 11, 1948 (Public Law 903, 80th Congress), authorized a loan
of $65,000,000 to the United Nations for the purpose of erecting
permanent headquarters in New York City. Under the act, interim
financing of the loan, pending an appropriation, was provided by the
Reconstruction Finance Corporation which advanced $25,000,000
to the State Department from funds borrowed from the Treasury
without interest. The Reconstruction Finance Corporation repaid
the Treasury out of funds derived from the appropriation of $65,000,000 for the United Nations loan contained in the act of June 23, 1949
(Public Law 119, 81st Congress).
Reliej oj Palestine rejugees.—The act of March 24, 1949 (Public
Law 25, 81st Congress), authorized the appropriation of $16,000,000
for a special contribution of the United States to the United Nations for
relief of Palestine refugees. Under the act, $8,000,000 was made
available immediately by the Reconstruction Finance Corporation
which borrowed a like amount from the Treasury without interest for,
that purpose. The Reconstruction Finance Corporation was reim-.
bursed and in turn repaid the Treasury in the fiscal year 1950 out of
140
REPORT OF THE SECRETARY OF THE TREASURY
the appropriation for relief of Palestine refugees contained in the act
of June 23, 1949 (Public Law 119, 81st Congress).
Loans to Administrator jor Economic Cooperation.—Under provisions
of the Economic Cooperation Act of 1948, as amended, the Treasury
accepted notes of the Administrator for Economic Cooperation in the
total amount of $1,000,000,000. As of June 30, 1949, $972,300,000
of the notes were for the purpose of loans to participating countries,
and $27,700,000 of the notes were for the purpose of guaranteeing
investments in private enterprises undertaken in foreign countries as a
part of the Economic Recovery program. The agreement between the
Administrator and the Secretary of the Treasury provides that the
notes constitute allocations against which the Export-Import Bank
of Washington may draw as funds are required. By June 30, 1949,
the Bank had drawn $781,996,988.91 against the loan notes and $12,389.33 against the guaranty notes, leaving undisbursed balances of
$190,303,011.09 and $27,687,610.67, respectively. Of the $12,389.33
drawn against the guaranty notes, $2,255.90 was repaid to the
Treasury.
Pending an appropriation by the Congress, the Treasury advanced
without interest $1,000,000,000 to the Reconstruction Finance Corporation, which amount the Corporation made avaUable to the
Economic Cooperation Administration pursuant to the act of April
19, 1949 (Public Law 47, 81st Congress). Subsequent to June 30,
1949, the Foreign Aid Appropriation Act of 1950, approved October
6, 1949 (Public Law 327, 81st Congress), provided for appropriations
out of which the Reconstruction Finance Corporation was repaid and
in turn repayment was made to the Treasury.
Production credit corporations.—In accordance with the act of June
30, 1948 (Public Law 860, 80th Congress), production credit corporations through the Department of Agriculture returned to the Treasury
$30,000,000, thus reducing to that extent capital stock held by the
Government.
Loans to the Secretary oj the Army.—Under the provisions of the act
of June 29, 1948 (Public Law 820, 80th Congress), the Secretary of
the Treasury was authorized to advance to the Secretary of the
Army $150,000,000 for the establishment of a revolving fund (natural
fibers revolving fund) for the purchase of agricultural commodities
and raw materials to be processed in occupied areas and sold. Under
the authority, the Secretary of the Treasury purchased a note of the
Secretary of the Army in the amount of $100,000,000.
Appraisal oj the assets and liabilities oj the Commodity Credit Corporation.—The appraised value of the assets of the Commodity Credit
Corporation as of June 30, 1948, as determined by the Secretary of the
Treasury under the act of March 8, 1938, as amended, exceeded the
liabUities, the unexpended balance of an appropriation held in reserve
for postwar price support of agriculture, and the capital stock by
$48,943,010.36. This amount was paid into the Treasury on June
30, 1949, making the aggregate repayments to miscellaneous receipts
$138,208,747.19, and leaving the net charge against the Treasury for
the impairment of capital from inception of the Corporation $1,897,367,543.78. A statement showing results of annual appraisals appears in table TjL.
ADMUSriSTRATIVE REPORTS
141
Interest on capital stock, Commodity Credit Corporation.—The Commodity Credit Corporation Charter Act of June 29, 1948 (Public
Law 806, 80th Congress), requires the Commodity Credit Corporation
to pay interest to the United States Treasury on the amount of its
capital stock at such rates as may be determined by the Secretary of
the Treasury to be appropriate. The Corporation paid $1,875,000 in
the fiscal year 1949 as interest at 1% percent on its capital stock under
this requirement.
Cancellation oj notes, Commodity Credit Corporation.—Under the
requirements of the acts of. December 17, 1947 (Public Law 389, 80th
Congress), and December 25, 1947 (Public Law 393, 80th Congress),
notes of the Commodity Credit Corporation held by the Secretary
of the Treasury in the amount of $56,239,432.11 were canceled', representing the amount of losses incurred by the Corporation through
sales of commodities in connection with the foreign-aid program.
Repayment oj capital stocky Reconstruction Finance Corporation.—
In compliance with the act of May 25, 1948 (Public Law 548, 80th
Congress), the Reconstruction Finance Corporation in July 1948
retired all its outstanding capital stock in excess of $100,000,000 by
payment of $225,000,000 to the Treasury as miscellaneous receipts.
Dividends received jrom the Reconstruction Finance Corporation.—
The act of May 25, 1948 (Public Law 548, 80th Congress), requires
an annual payment, between July 1 and December 31, of the amount,
if any, by which the accumulated net income of the Reconstruction
Finance Corporation exceeds $250,000,000. Under this provision,
the Corporation paid into the Treasury on December 31, 1948, as
miscellaneous receipts, a dividend of $307,391,555 on its capital stock.
Cancellation oj notes-l Reconstruction Finance J Corporation.—The.
Treasury canceled notes of the Reconstruction Finance Corporation in
the amount of $12,336,701.48 on account of costs incurred subsequent
to June 30, 1947, for handling, storing, processing, and transporting
critical materials to stock piles, under the act of June 30, 1948 (Public
Law 860, 80th Congress). The Treasury also canceled notes of the
Reconstruction Finance Corporation in the amount of $1,512,930.24,
representing the net investment of Defense Homes Corporation in
two properties known as Lucy Diggs Slowe Hall and George Washington Carver Hall, which were transferred to Howard University, under
the act of June 28, 1948 (Public Law 796, 80th Congress). Recoveries
of national defense, war, and reconversion costs in the amount of^
$100,024,636.84 were deposited in the Treasury as miscellaneous
receipts, as required by the act of June 30, 1948. A statement showing all cancellations and recoveries by the Treasury on Reconstruction Finance Corporation notes is shown as table 75.
Dividends on and repayments oj capital stock oj Federal home loan
banks.—Dividends amounting to $1,442,854.38' on capital stock
holdings of the Government in FederaL home loan banks were deposited
in the Treasury as miscellaneous receipts. The banks also made repayments totaling $17,298,500 on capital stock, of which $3,567,300
was required under section 6 (g) of the Federal Home Loan Bank Act,
as amended, and $13,731,200 was voluntary. A statement showing
dividends and stock repayments by banks appears as table 77.
. Dividends on capital stock ojthe Federal Farm Mortgage Corporation.—
In accordance with the act of June 30, 1948 (Public Law 860, 80th
142
REPORT OF THE SECRETARY OF THE TREASURY
Congress), the Federal Farm Mortgage Corporation paid to the
Treasury as dividends $68,000,000, which sum was deposited as miscellaneous receipts.
Repayment oj capital stock oj the Federal Deposit Insurance Cor por ation.—Under the act of August 5, 1947 (Pubhc Law 363, 80th Congress), the Federal Deposit Insurance Corporation was required to
retire its capital stock of $289,000,000 by paying the amount received
therefor to the Secretary of the Treasury to be covered, into the
Treasury as miscellaneous receipts. Cash payments amounting to
$20,677,589.31 which were received from this source during the year
completed the payments due. In the final settlement, stock in the
amount of $1,926,717.27 was canceled, in accordance with the act of
June 29, 1948 (Public Law 813, 80th Congress), which authorized
cancellation of the stock in an amount equal to the expenditures of the
Corporation in administration of the Federal Credit Union Act.
Inland Waterways Corporation.—The Government Corporations
Appropriation Act, 1949, approved June 30, 1948 (Public Law 860,
80th Congress), appropriated $2,000,000 for purchase of capital stock
of the Inland Waterways Corporation. This amount was paid to
the Corporation for an equivalent amount of capital stock.
Dissolution oj the Regional Agricultural Credit .Corporation oj Washington, D. C—Pursuant to the act of April 6, 1949 (Public Law 38,
81st Congress), which abolished the Regional Agricultural Credit
Corporation of Washington, D. C , its capital stock of $100,000 was
canceled and its assets were transferred to a revolving fund administered
by the Secretary of Agriculture. Under the same act, the Treasury
transferred the balance of $44,400,000 which had been held in the
Regional Agricultural Credit Corporation revolving fund to the disaster loans, etc., revolving fund under the administrative control of
the Secretary of Agriculture.
Federal intermediate credit banks.—In accordance' with the Agricultural Credits Act of 1923, as amended by the Farm Credit Act of
1937, each credit bank, at the end of each fiscal year, is required to
apply its net earnings remaining after all necessary expenses and
costs of operation have been paid or provided for: (1) to making up
any losses in excess of reserves, (2) to the elimination of capital impairment, (3) to the creation of reserves against unforeseen losses,
and (4) to the payment of 25 percent of the amount then remaining
to the United States as a franchise tax. During the fiscal year 1949,
$178,170.76 was deposited into the Treasury.
Panama Railroad Company.—The act of June 29, 1948 (Public
Law 808, 80th Congress), provided a Federal charter for the Panama
Railroad Company. Under the law, the Company deposited $10,000,000 in the Treasury from its reserve funds to be maintained as an
emergency fund available for loans to the Company for limited periods.
Dividends received from the Company during the fisca] year 1949
amounted to $500,000.
Federal savings and loan associations.—The Treasury received
$18,364.15 as dividends on shares of Federal savings and loan associations and $184,300.00 in retirement of such shares. At the close of
the year, the Treasury held $136,600.00 in shares acquired under the
act of June 13, 1933, as amended AprU 27, 1934 (48 Stat. 645).
Obligations oj joreign governments.—The Government of Finland paid
ADMINISTRATIVE REPORTS
143
$424,594.48 during 1949, representing $306,672.30 interest and $117,922.18 principal, on its obligation arising from World War I. Finland
has paid all amounts to date that have been required under its agreements as to World War I indebtedness.
The indebtedness to the United States from foreign governments
arising from World War I amounted to $15,862,387,888.07 as of
November 15, 1949, including $11,434,915,987.42 on account of principal and $4,427,471,900.65 on account of interest.' The principal
figure does not include the World War I indebtedness of Germany
amounting to $1,225,023,750.00 (3,037,500,000 reichsmarks). Tables
111 and 112 show the status of the indebtedness of foreign governments to the United States arising from World War I.
The indebtedness of foreign governments to the United States arising from World War II, representing amounts receivable on lend-lease
settlement agreements, collections on which are being handled by the
Treasury, surplus property sales agreements, and other lend-lease
accounts, amounts to $1,727,912,243.81, details concerning which are
shown in table 113. This amount includes $291,215,172.64 due the
United States for the value of silver transferred to foreign governments under the lend-lease program which is to be repaid in kind.
Final'settlement agreements have not been reached with all foreign
governments.
Lend-lease fiscal operations.—The Treasury continued its work under
Executive Order 9726, dated May 17, 1946, of billing and coUecting
from foreign governments for reimbursable supplies and services
furnished under lend-lease and reciprocal aid agreements. Collections
of $510,856,688.50 have been made by the Treasury ori this account.
Articles and services furnished under agreements to pay cash for
such items as authorized by the Lend-Lease Act were reported in the
amount of $21,615,599.81, bringing the total defense aid provided to
$50,228,768,678.21 between March 11, 1941, and June 30, 1949. The
mcrease in the total defense aid provided was the net result of the
receipt of heretofore unreported charges affecting both reimbursable
and nonreimbursable accounts. Reverse lend-lease, consisting of
articles and services fm-nished by foreign governments to the United
States up to September 2, 1945, amounted to $7,819,322,790.90.
Between March 11, 1941, and June 30, 1949, funds received from foreign governments amounted to $1,731,759,019.96. Of this amount,
$1,255,245,552.88 has been covered into the United States Treasury
as misceUaneous receipts; $222,627,853.06 has been allocated to the
procuring agencies Linder the cash reimbursement program;
$157,924,564.69 has been returned to foreign governments;
$88,299,000.00 was reappropriated to the President by the act of
June 3(), 1944 (Public Law 382, 78th Congress); $1,578,332.85 was
reimbursed to other agencies; and the remainder of $6,083,716.48 is
being held in the Treasury pending settlements of accounts.
Liquidation oj other war agencies.—The liquidation of the residual
affairs of certain war agencies, which were transferred under the several
Executive orders to the Treasury Department, Bureau of Accounts,
for winding up of their fiscal affairs, was practically concluded as of
the close of the fiscal year ended June 30, 1949. The agencies include
the Division of Central Administrative Services of the Office of Emergency Management, Office of CivUian Defense, War Refugee Board,
144
REPORT OF THE SECRETARY OF THE TREASURY
Office of Censorship, Office of War Information, Committee on Fair
Employment Practices, and Price Decontrol Board.
Liquidation oj Tennessee Valley Associated Cooperatives, Inc.—
The Treasury completed as of December 31, 1948, liquidation of the
Tennessee Valley Associated Cooperatives, Inc., which was created in
1934 under a rehef grant of $300,000 by the Federal Emergency
Relief Administration for the purpose of encouraging self-help cooperatives in the Tennessee Valley and contiguous areas. The proceeds of
the liquidation, amounting to $65,475.25, were deposited in the Treasury
as misceUaneous receipts, of which amount $50,000 was deposited in
the fiscal year 1948. Of the receipts in 1949, $1,000 represented
repayment of capital stock. A full report of liquidation activities was
prepared and transmitted to the Congress.
Final liquidation oj securities oj cities and counties received jrom
Reconstruction Finance Corporation under the act oj February 24,1938.—
• The Treasury collected $9,000 principal and $681.63 interest on
securities of cities and counties turned over to the Treasury by the
Reconstruction Finance Corporation in 1938 in connection with the
cancellation of its notes under the act of February 24, 1938. The
securities corisisted of bonds and notes of various cities and counties
purchased by the Reconstruction Finance Corporation under emergency relief legislation. The face amount of the securities received
from the Reconstruction Finance Corporation was $2,800,623, all of
which has now been collected, plus $76,845.95 in interest.
Liquidation oj railroad obligations.—During the fiscal year the
Treasury realized $961,678.05 on account of securities acquired by the
United States in corinection with loans which were made to railroads
under sections 207 and 210 of the Transportation Act of 1920. Of this
amount, $694,567.50 was collected as interest and dividends on
securities of the Seaboard Air Line Railway Company. Of the balance,
$172,750 represents the proceeds of the sale of 13,676 shares of the
coimnon stock of the Minneapolis and St. Louis Railway Company,
$81,122.55 represents the proceeds of the sale of $124,900 face amount
of Alabama, Tennessee and Northern Raihoad Company 4K percent
general mortgage income bonds, and $13,238 represents dividends
and interest earnings on railroad securities owned by the Treasury
other than those held by the Reconstruction Finance Corporation.
A statement concerning the liquidation of railroad obligations appears
as table 78.
Liquidation oj assets oj Prencinradio, Inc.—The Prencinradio, Inc.,
a dissolved corporation, assigned to the Secretary of the Treasury its
remaining assets consisting of obligations from a Mexican motion
picture studio amounting to approximately $8,000. These obligations are collectible through the Bank of Mexico, S. A., trustee under
a trust agreement entered into on March 20, 1943, with respect to
sales of motion picture equipment to motion picture studios in
Mexico and collections of the sales prices.
Bonds oj the Republic oj the Philippines.—The Republic of the
Philippines paid an additional $2,800,000 to the Government of the
United States for deposit to the special trust account which was established in the Treasury for the purpose of paying principal and interest
on pre-1934 Philippine government bonds. The money was invested
ADMINISTRATIVE REPORTS
145
in accordance with the act of August 7, 1939. The amounts of cash
and investments in the special trust account as of June 30, 1949, are
shown in table 106.
Deposits oj the Republic oj the Philippines.—Vndev authority of
the act of June 11, 1934, as amended by the act of August 7, 1946
(Public Law 654, 79th Congress), and agreements with the Republic
of the Philippines, the Treasury maintains two interest-bearing time
deposit accounts for public moneys of the Republic. The authority
to maintain the accounts will expire July 1, 1951. As of June 30,
1949, the accounts consisted of deposits of $55,000,000 at 2 percent
interest and $160,000,000 at 1 percent interest. The Republic of the
Philippines has passed a Central Banking Act, under authority of
which the two accounts were transferred from the control of the
Treasurer of the PhUippines to the Central Bank of the PhUippines.
American-Mexican Claims Commission.—The Treasury received
from the Government of the United States of Mexico $2,500,000 in
November 1948 as an installment on the $40,000,000 which Mexico,
in the Covention of November 19, 1941, agreed to pay in full settlement of the claims of American nationals as adjudicated by the
American-Mexican Claims Commission. The amount enabled a
further distribution of 6.4 percent on the unpaid principal amount of
each award, making a total distribution of 58.9 percent. A statement
of the Mexican claims fund appears as table 105.
Mixed Claims Commission, United States and Germany.—The
Treasury made a further distribution on the awards of the Mixed
Claims Commission out of funds certffied for payment by the Department of Justice, in accordance with the Settlement of War Claims Act
of 1928, as amended by the act of August 6, 1947 (Public Law 375,
80th Congress). The amounts received from the Department of
Justice, which totaled $1,974,246.01, were sufficient to make possible
a distribution of 4 percent on the accrued interest on awards in excess
of $100,000 to American nationals. A statement showing the payments by classes and status of the account is shown as table 104.
FISCAL S E R V I C E — B U R E A U OF THE PUBLIC D E B T
The Bureau of the Public Debt performs, the administrative work in
connection with the management of the public debt, including the
preparation of offering circulars and regulations, issuance of securities
and processing of transactions relating thereto, final audit and custody
of securities retired, keeping of accounts for registered securities, and
drawing of interest checks. A detaUed description of the duties of
the Bureau is contained, in the annual report for 1948, page 85.
A summary of public debt operations handled by the Bureau appears
on pages 73 to 83 of this report, and a series of statistical tables dealing
with the public debt wUlbe found in tables 11 to 27, and 35 to 40.
The public debt of the United States faUs into two broad categories:
(1) public issues, and (2) special issues. The public issues are classified as to marketable obligations, consisting mainly of Treasury bUls,
certificates of indebtedness. Treasury notes, and Treasury bonds; and
nonmarketable obligations, consisting mainly of United States sayings
bonds, armed forces leave bonds. Treasury savings notes.
856455—50
11
146
REPORT OF T H E SECRETARY OF T H E TREASURY
During the fiscal year 1949 the public debt increased by $478,113,347
and the guaranteed obligations held outside the Treasury declined
by $46,185,411. The combined total of the public debt and the
guaranteed obligations outstanding on June 30, 1949, was
$252,797,635,268, which compares with a total outstanding of
$252,365,707,331 on June 30, 1948.
Total public debt issues, including issues in exchange for other
securities, amounted to $118,201,295,521 during the fiscal year 1949,
and rethements amounted to $117,723,182,174. A summary showing the effect of Government operations on the public debt wUl be
found on page 61 of this report.
There were no new issues of marketable securities for raising
additional cash during the year, although Treasury bills, certificates
of indebtedness, and notes were issued in coimection with refunding
operations. These operations are set forth in the tables on pages 75
and 76.
On June 30, 1949, there were 5,848 employees on the rolls of the
Bureau of the Public Debt, as compared with 7,990 on June 30,. 1948.
The decrease of more than 2,000 employees was made possible tlirough
a reduced work load and improved operating procedures.
United States savings bonds.—In terms of volume of work, the issue
and redemption of United States savings bonds represents by far the
largest administrative problem of the Bureau. Since these bonds are
in registered form and in the hands of millions of the American people,
the task of maintaining'both alphabetical and numerical records of
over 1.2 billion of these bonds, the replacement of lost or stolen bonds,
and the handling of erroneous redemptions by financial institutions
throughout the country on forged signatures involves an administrative task of considerable magnitude.
Receipts from the sales of savings bonds during the year were
$7,140,994,386 and accrued discount charged to the interest account
and credited to the savings bond principal account amounted to
$926,653,437, a total of $8,067,647,822. Expenditures for redeeming
savings bonds, including matured bonds, amounted to $5,067,374,781.
The amount of savings bonds of all series outstanding on June 30,1949,
including accrued discount, was $56,332,943,555, an increase of
$3,000,273,041 over the amount outstanding on June 30, 1948.
Detailed information regarding savings bonds wUl be found in tables
28 to 33 of this report.
During the fiscal year 1949 approximately 66.2 million stubs
representing issued bonds of Series E were received for registration,
making a total of 1,247 million, including reissues, received through
June 30, 1949. These stubs are sorted in numerical sequence of their
bond serial numbers and microfilmed, and then are sorted alphabetically by name of owner and microfilmed, after which the original
stubs are destroyed. The microfilms serve as permanent registration
records. During the year substantial backlogs in these operations
were eliminated as indicated in the following table, which shows the
processing, at various stages, of the registration stubs of Series E
savings bonds.
147
ADMINISTRATIVE EEPORTS
Alphabetically
sorted
Stubs re- Numerically
ceived
filmed
Period
Restricted
basis
sorti
Fine sort
prior to
filming 2
Alphabetically
filmed
Destroyed
after
filming
In millions of pieces
Cumulative through June 30, 1946
Fiscal year:
1947
1948.
1949
__
___
Total
1,042.3
1,022.1
958.9
535.4
317.9
265.6
76.8
61.7
66.2
76.1
.66.2
58.9
120.4
72.4
58.6
37.9
323.1
290.6
120.1
318.4
382.8
• 152.3
196.-2
447.4
1,247.0 . 1,223.3
1,210.2
1,186.9
1,139.2
1,061.5
1 Not complete alphabetical arrangement but sorted to a degree that Individual stubs can be located.
Includes those, stubs Gne sorted.
2 Completely sorted.
Over 92 million retired savings bonds of all series were received during the year, bringing the total received as of June 30, 1949, to over
784 million. Retired bonds are audited and then microfilmed after
which the bonds may be destroyed. Destruction of bonds will
commence in the fiscal year 1950. The audit is conducted in the
regional offices of the Register of the Treasury, and the bonds of all
series received in these offices have been audited and microfilmed to
the extent indicated in the following table:
Bonds
received
Period
Audited
Microfilmed
Balance
unaudited
Balance
unfilmed
In millions of pieces
Cumulative through June 30,1946
Fiscal year:
1947
1948.
1949
-
_
Total
27.9
19.2
8.7
27.9
113.3
95.1
85.7
118.4
94.6
86.8
51.7
171.4
3.6
4.1
3.0
141.2
184.6
98.9
322. 0
319.0
223.1
3.0
98.9
After the retired bonds have been audited their serial numbers are
posted to numerical registers, and the postings are verffied. ' The following statement shows the status of the posting of all series of retired savings bonds.
Bonds received
Period
Status of posting
Posted
Verified
Unposted
Unverified
In millions of pieces
Cumulative through June 30,1946
Fiscal year:
1947
1948
__
1949
Total
-_
454.2
384.0
313.6
70.2
70.5
137.9
99.6
92.6
195.7
105.2
96.8
256.5
110.8
94.9
12.4
6.7
2.4
9.7
4.1
6.0
784.1
781.7
775.7
2.4
6.6
148
REPORT OF THE SECRETARY OF THE TREASURY
Of the 80.8 million Series A-E savings bonds redeemed prior to release of registration and received in the regional offices during the
year, 76.7 miUion, or 95 percent, were redeemed by over 16,000 paying agents, who were reimbursed for this service at the rate in each
quarter-year of 15 cents each for the first 1,000 bonds paid and 10
cents each for all over the first 1,000. The total amount paid to agents
on this account during the year was $9,500,000, which was at an average rate of 12.38 cents per bond.
The following table shows the number of issuing and paying agents
for Series E savings bonds, by classes.
Post
oflfices
June 30
Banks
Building
and savings and
loan
Credit
unions
Companies
operating
payroll
plans
All
others
Total
Issuing agents
1947_1948
1949
.:
-
_-
25,420
25,179
24,944
15,178
15,178
15,205
1,856
1,706
1,621
719
615
565
2,910
3,289
3,192
1,320
605
596
47,403
46, 572
46,122
63
50
64
16,052
16, 508
16,624
Paying agents
1947
1948
1949
-
—
—
15,176
15, 527
15, 559
683
786
863
140
145
138
During the year, 8,583,153 Series G bond interest checks were issued
with a value of $425,183,680. This is an increase of about 200,000
checks over the number issued during 1948.
There were 36,343 applications during the year for the issue of
duplicates of lost, stolen, or destroyed savings bonds, in addition to
3,047 cases on hand at the beginning of the year, making a total of
39,390 cases, of which 9,378 were credit cases referred to Washington
for settlement. In 9,654 cases the bonds were recovered, and in 18,188
cases the issuance of duplicate securities was authorized. On June 30,
1949, only 2,170 cases remained o n h a n d .
During the year accounting and reporting S37^tems were established
in the Washington and Chicago Offices to provide essential records of
transactions in connection with savings bonds and armed forces leave
bonds subjected to erroneous payment investigation.
Registered accounts jor other than savings bonds.—During the year
17,000 individual accounts covering publicly held registered securities
other than savings bonds were opened and 38,000 were closed, making a
total of 382,000 such accounts open on June 30,1949, covering registered
securities in the principal amount of $15 bUlion. A total of 758,000
interest checks were issued to owners of record during the year, which
was a decrease of 38,000 from 1948.
Armed jorces leave bdnds.—Through June 30, 1949, armed forces
leave bonds aggregating $2,088,525,000 in face value had been issued
and $1,687,936,000 had been redeemed, leaving a balance of $400,589,000 outstanding on that date. The issues and redemptions of armed
forces leave bonds monthly during 1949, on the daily Treasury statement basis, are shown in table 21, and the accumulated issues and
redemptions of the issues outstanding on June 30, 1949, on the Public
149
ADMUSriSTRATIVE REPORTS
Debt accounts basis, are shown in table 17. The following statement
shows the issues, redemptions, and those outstanding for selected
periods:
Period
In thousands of dollars
Oct. 1, 1946, to Apr. 30, 1947..
May 1 to Aug. 31, 1947
Sept. 1 to Oct. 31,. 1947
Nov. 1, 1947, to June 30, 1948.
July 1, 1948, to June 30,1949.
Total
1,721,045
205,557
90,568
63,866
7,490
38,151
23,457
1 1,047,022
408, 252
171,054
2,088, 525
1,687,936
1,682,893
1, 864,993
908, 540
664,153
400,589
. 1 Redemption on and after Sept. 1,1947, at owner's option, was provided in amendment to Armed Force
Leave Act, approved July 26,1947.
The total number of armed forces leave bonds issued, including
reissues, through June 30, 1949, was 10,111,984 and the number
retired was 8,237,976. Of the total bonds issued, 6,927,484 were
issued by the Army, 2,611,617 by the Navy, 415,343 by the Marine
Corps, and 157,540 by the Coast Guard.
Redeemed currency.—On July 1, 1948, the Division of Loans and
Currency (Washington) had on hand 8,248 unaudited bundles (4,000
half-notes each) of United States currency that had been retired from
circulation as unfit. During the year 321,515 bundles were received,
an iricrease of 24,042 bundles over 1948; and 307,515 bundles were
audited, leaving a balance of 22,248 unaudited bundles on hand on
June 30, 1949.
The Destruction Committee supervised the incineration of redeemed canceled currency during the year as follows:
Class of currency
Gold certificates
Silver certificates.
United States notes
Treasury notes of 1890
Federal Reserve notes
^
Federal Reserve Bank notes _
National bahk notes
Fractional currency_._
Total
Pieces
.
___
_
^^_-.
112,853
1,182,931,171
46,076,727
147
429, 533,749
2,341,828
422,445
3,695
1, 661,422,616
Value
$2,622,020
1,709,000,120
187,350,210
700
6,274, 296, 716
44, 766.891
6,523,320
747
7,224,660,723
FISCAL S E R V I C E — O F F I C E OF THE TREASURER OF THE U N I T E D STATES
The Office of the Treasurer of the United States is essentially a
banking facUity of the Government. The responsibUities of the
Treasurer include the receipt of all public moneys; custody, issue,
and redemption of United States currency and coin; payment of
Government checks; custody of securities deposited in the Treasury
as collateral or for safekeeping; and payment of principal and interest
on the public debt. The Office of the Treasurer of the United States
prepares the Daily Statement oj the United States Treasury, which
recapitulates all transactions in the accounts of the Treasurer, and
150
REPORT OF THE SECRETARY OF THE TREASURY
issues monthly statements of the public debt and of currency outstanding.
Money received and disbursed by the Treasurer.—Moneys collected
by Government officers are deposited with the Treasurer at Washington and in Federal Reserve Banks and designated Government
depositaries for credit of the account of the Treasurer of the United
States, and all payments are charged against this account. The
transactions affecting the Treasurer's account are published in the
Daily Statement oj the United States Treasury. Total receipts and
payments during the year, as shown in these statements, compared
with the previous year are as follows:
Receipts:
B u d g e t a r y (net) 2
T r u s t accounts, etc.3
. Public debt <
,
Subtotal
1948 1
1949 1
___.
$42, 210, 770,492. 68
6, 515,230,080. 67
121, 289, 682, 653. 50
$38.245, 667,810.11
5, 714,426, 671.10
118, 201, 295, 520.89
--_.
170,015, 683, 226. 85
3,308,136,929.36
162,161,390,002.10
4,932,021,477.07
173,323,820,156.21
167,093,411,479.17
33,791,300,648.87
6,809,572,742.28
40,057,107,857. 79
6,209,160,036.37
507,106,038.81
127, 283,819,249.18
6 366,441,900. 21
117,723,182,173. 55
_.
168,391,798,679.14
4,932, 021,477. 07
163, 623, 008,167. 50
3,470,403,311. 67
.—.
173,323,820,156. 21
167,093, 411, 479.17
B a l a n c e in general fund beginning of year
.
Total.
.
Expenditures:
B u d g e t a r y (net) ^
_._
T r u s t accounts, etc.3
Clearing a c c o u n t for o u t s t a n d i n g checks a n d
r e p o r t s from F e d e r a l Reserve B a n k s . .
Public debt *
Subtotal
Balance in general fund at close of year
Total
..
telegraphic
1 See t a b l e 1, footnote - 7 . '
2 T o t a l b u d g e t receipts less a m o u n t s a p p r o p r i a t e d to F e d e r a l old-age a n d survivors insurance t r u s t fund
a n d refunds of receipts. See also t a b l e 1, footnote 3. F o r details of receipts for 1949, see table 3 .
3 F o r details for 1949, see table 4.
* F o r details for 1949, see table 21.
« See t a b l e 1, footnotes 3 a n d 4. F o r details for 1949, see table 3.
6 Excess of credits ( d e d u c t ) .
Assets and liabilities oj Treasurer's account.—The assets of the
Treasurer consist of gold and sUver bullion, coin and paper currency,
and deposits in Federal Reserve Banks and commercial banks designated as Government depositaries. A summary of the assets and
liabilities in the Treasurer's account at the close of the fiscal years
1948 and 1949 is shown in table 41.
.Gold.—Gold receipts during 1949 amounted to $1,420 million and
disbursements totaled $486.5 niUlion, a net increase of $933.5 million.
This increase brought the total gold assets to $24,465.9 million on
June 30, 1949. Liabilities against these assets were $23,287.8 million
of gold certificates and credits payable in gold certfficates and $156.0
mUlion for gold reserve against currency. The balance, $1,022.0
million, was in the general fund on June 30, 1949.
Credits during the year to the gold increment account, as a result
of the revaluation of gold in relation to the dollar, amounted to
$105,437.02. This makes a total dollar increment from 1934 through
the fiscal year 1949 of $2,819,139,301.25.
Silver.—During the year 25.9 million ounces of silver bullion, which
had been carried in the general fund at a cost value of $23.4 million,
was monetized at a monetary value of $33.5 mUlion. This $33.5
ADMINISTRATIVE
151
REPORTS
mUlion increase in sUver assets was offset by a decrease of $8.3 million
in holdings of sUver dollars, making a net increase of $25.2 mUIion in
assets during the year. As of June 30, 1949, the sUver assets of the
Treasurer (exclusive of subsidiary coin and bullion held in the general
fund at cost and recoinage value) amounted to $2,314.9 miUion.
Liabilities against sUver at the end of the year amounted to
$2,265.7 million for sUver certificates outstanding and $1.1 mUhon
for Treasury notes of 1890 outstanding, leaving a net balance of
$48.0 million in the general fund. •
The silver bullion held in the general fund at cost value (exclusive
of the $48.0 mUlion at monetary value) decreased from $91.2 mUlion on
June 30, 1948, to $88.3 million on June 30, 1949. This decrease of
$2.9 mUlion is accounted for as follows: $32.9 mUlion net purchases of
silver less $23.4 mUlion of silver monetized and less $12.4 million of
silver used for coinage.
The sUver assets of the Treasurer formerly held by the Defense
Plants Corporation, a Liubsidiary of the Reconstruction Finance
Corporation, have been returned to the Treasury. This silver, which
was converted into bus bars for industrial use in connection with the
prosecution of the war, is now being melted down by the Bureau of
the Mint and reduced to its original form and fineness. The Reconstruction Finance Corporation has arranged that the Treasury will
receive the full 274,294,395.13 ounces due.
Subsidiary silver and minor coins.—Shipments of subsidiary sUver
and minor coins from United States mints during the year for circulation usage amounted to $47,693,386.39 as compared with $53,800,201.82 the year, before. The following table shows the shipments
by denominations:
Denomination
Half dollars
Quarters
Dimes
Nickels _
Cents
1948
;
—
Total..-
1949
$6,181,103.50
13, 259,438. 00
19, 832, 600. 20
7, 743, 200.10
6, 783,860. 02
$5, 660,021. 00
13,799,511.50
14,380,474.50
7, 473,102.15
6,380, 277. 24
53, 800, 201.82
47, 693,386.39
Paper currency.—Under the laws of the United States the Treasurer
is the agent for the issue and redemption of United States currency
and coin.
Table 84 shows by class and denomination the valueof paper currency
issued and redeemed during 1949, and the amounts outstanding atthe
end of the fiscal year.
A comparison of the amounts of paper currency of all classes issued,
redeemed, and outstanding, follows:
Fiscal year 1948
Pieces
O u t s t a n d i n g a t beginning of year
Issues d u r i n g year
_
R e d e m p t i o n s d u r i n g year
O u t s t a n d i n g a t e n d of year
_. _
Amount
2,831, 247,890 $30, 753, 530,863
1, 629,622,410
6,933, 625,000
1,635,673,115
7, 240, 578, 282
2,825,197,186 30,446, 677, 581
Fiscal year 1949
Pieces
2,825,197,185
1,724,113,091
1, 748,990, 571
2,800,319,705
Amount
$30,446,577,581
7, 246,488,000
7,757, 292,946
29,935,772,635
152
REPORT OF THE SECRETARY OF THE TREASURY
For further details on stock and circulation of money in the United
States, see tables 80 to 83.
Depositaries.—The following table shows the number of each class
of depositaries and balances at the end of the year:
Deposits to the
credit of the
Treasurer, U. S.,
June 30, 1949
Class
$541, 262,401.64
Federal Reserve Banks and branches
Other banks in continental United States:
General depositaries
Special depositaries, withheld taxes and sales of United States securities
1
Depositaries for withheld taxes, time deposits
Insular and territorial depositaries
Foreign depositaries
Philippine treasury
203,182,083. 25
1,770,628,117.26
10,209,500.00
24,318,206.67
26,829, 621. 59
19,017,262.43
Total
2,696,447,192.73
For details on the administrative work relating to designation of
depositaries see page 138.
Checking accounts oj^ disbursing officers and agencies.—During the
year the Treasurer maintained 4,465 checking accounts of disbursing
officers and Federal agencies, including those maintained at the Federal
Reserve Banks as fiscal agents of the United States. The number of
disbursing officers' accounts by classes and the number of checks paid
during the fiscal year were as.follows:
1949
1948
Disbursing ofBcers
Treasury
Army _
Navy
Air Force
Other
Total
_
_
_
_
.
Number of
disbursing
oflicers'
accounts
_
_
.
_
Number of
disbursing
officers'
accounts
Number of
checks paid
22,924,634
767
887
1,395
140
1,276
177,886,692
25,136, 684
25,193, 254
4,191,637
23,992, 604
236,227,957
4,465
266,400,871
162, 508, 252
26, 699,008
24,096,163
_
1,017
1,251
1,794
70
1,207
_
6,339
_ __
_
-
Number of
checks paid
Of the 256,400,871 checks paid in the fiscal year 1949, 210,876,422
were in the form of card checks. There were 192,754,007 checks paid
by the Federal Reserve Banks acting as fiscal agents of the Treasurer
and the remaining 63,646,864 were paid by the Treasurer in Washington.
The amount to the credit of checking accounts of disbursing officers
and agencies on the books of the Treasurer of the United States on
June 30, 1949, was $7,135,391,447.41, as compared with $8,466,658,574.14 on June 30, 1948.
Check claims.—During the year the Treasurer of the United States
issued 26,915 checks totaling $1,666,091.91 in settlement of claims for
the proceeds of checks which had been paid bearing forged or unauthorized endorsements. The Chief Disbursing Officer issued 42,843
substitute checks totaling $9,174,915.78 to replace unpaid checks
ADMINISTRATIVE
153
REPORTS
which, it was claimed, had not been received or were lost, destroyed,
etc. Many additional claims were received but not honored because
" they were not well founded. Cases involving forgeries are investigated by the United States Secret Service. For information on check
forgeries see report of the United States Secret Service, page 183.
Use oj outstanding check lists in processing claims.—A new procedure
has been developed whereby the producing of lists of outstanding
checks on a more current basis by the General Accounting Office will
result in improvements in processing check claims. The lists will
reduce materially the searching required to determine whether the
check claiiried not to have been received by the payee has been paid
and will thus result in savings to the Government and prompter
service to the claimant,.
Erroneous negotiation oj checks by persons having same name as
payee.—During the past few years the Treasury has experienced considerable difficulty in (connection with checks negotiated by persons
having the same name as the persons iri whose favor the checks were
drawn. Prior to May 1949 it was the practicecof the Government in
most cases not to make payment to the rightful owner until recovery
could be made on account of the check erroneously paid. The Treasury, in cooperation with the General Accounting Office and Veterans'
Administration, has adopted a new procedure in connection with
Veterans' Administration checks whereby in most cases the rightful
payee can be p'aid as soon as it has been determined that he was not
involved in the erroneous negotiation of the original check. The new
procedure has resulted in economies in the Secret Service Division and
also in the Office of the Treasurer of the United States, since the
Treasury is now relieved of handling about 90 percent of the so-called
*'identical name cases." The same procedure is now being considered
in connection with Internal Revenue refund checks.
Treasurer's Cash Room.—The commercial checks, drafts, postal
express money orders, etc., deposited by Government officers with the
Treasurer's Cash Room, in Washington for collection aggregated 3,327,236 items for the fiscal year 1949, as compared with 3,061,221 items
for the fiscal year 1948.
Treasurer's Securities Division.—The public debt securities and
interest coupons examined by the Division of Securities of the Treasurer's Office are as follows:
Pieces
1948
Marketable securities:
Principal
Interest coupons
Nonmarketable securities:
Armed forces leave bonds ^...
United States savings bonds i
United States savings stamps.
Other...
Total..
1,404, 562
17,985, 111
1,139,876
16,213,801
3,106,926
377,016
5,986
57,310
2,141,780
320,380
22,948,636
19,879,132
1 Armed forces leave bonds and United States savings bonds paid by Federal Reserve Banks are sent
directly to the Register of the Treasury by the Federal Reserve Banks.
154
REPORT OF THE SECRETARY OF THE TREASURY
United States savings bonds.—As of July 1, 1948, the issuance of
savings bonds on maU applications, hitherto handled in Washington by
the Treasrirer of the United States, was decentralized to the FederaL
Reserve Banks, resulting in a reduction of 20 employees in the Office
of the Treasurer. Under this procedure, issues by the Treasurer were
reduced during the year from 282 thousand bonds, in the amount of
$24,916 thousand, to 80 thousand bonds, in the amount of $9,538
thousand.
The Treasurer issued and redeemed the following number and
amount of savings bonds during the fiscal years 1948 and 1949:
1949
19481
Number
Issues: 2
E
F
G
Amount
Number
Amount
.
.
^
274,562
2,148
5,250
$18, 975, 375.00
927,310.00
5, 013,800.00
76, 544
575
2,712
$5, 464, 931. 25
506,012.00
3, 567,100.00
w
281,960
24,916,485. 00
79,831
9, 538,043. 25
9,640^
47,112
2,427
4,690
2,478, 458. 05
2, 697, 276. 47
2, 284, 779.88
4, 643, 258.10
9,555
39,485
2,935
5,335
3,055,132.07
2,345, 555.91
2,111,251.09
5, 202,878.19
63,869
12,103, 772. 50
57,310
12, 714,817. 26
_
Total
_
Redemptions: 2
• A-D
E
F
G_
Total
1 Includes Issues on mail applications.
2 For the most part United States savings bonds are issued and redeemed by issuing and paying agents
throughout the country (see page 148).
Savings bonds placed in safekeeping with the Treasurer and then
withdrawn therefrom are as follows:
N i u r iber
1948
In safekeeping a t beginning of y e a r .
Placed in safekeeping
W i t h d r a w n from safekeeping
I n safekeeping a t end of year
_
_
_
_
'
_
1949
809,694
90,044
740,809
75, 507
899, 738
158,929
816,316
121, 566
740, 809
694,750
Securities held in sajekeeping.—The face value of securities held
by the Treasurer in safekeeping on June 30, 1948, and June 30, 1949, is
shown in the following table:
155
ADMINISTRATIVE REPORTS
Purpose for which held
June 30,1948
To secure deposits of public moneys in depositary banks
To secure deposits of postal savings fimds
For District of Columbia:
Teachers'retirement and annuity fund
.,
Waterfund
___
__.
Other
...
United States savings bonds held for various depositors.:..
For the Board of Trustees, Postal Savings System
_
For the Secretary of the Army
For the Secretary of the Treasury:
Foreign obligations (World War 1).
Obligations on account of sales of surplus property
Capital stock and obligations of Government corporations and
agencies...
Other
.
For Federal Deposit Insurance Corporation - /
^_.......
For Attorney General i
Miscellaneous" .
...
.^„ ...
Total
.
June 30, 1949
$255,118,700
6,510,950
$304,462,200
7,079,800
13,808,850
1,773, doo
17, 586,670
56, 795, 350
2, 498, 624,100
6,895,480
14,902,850
1, 773,000
5, 586,670
54,239,280
2, 358, 542,660
6,895,480
12,072,034,757
46, 737,095
12,071,934,757
46, 737,095
14,795,898,044
11,037,007
806,000,000
21,071,070
131,644,333
9 463 984 645
12,218,987
923,000,000
21,151,134
110,491, 352
30,741, 535,406
25,402,999,910
1 Noninterest-bearing participating certificate for funds deposited ih German special deposit account.
Servicing oj securities jor other Federal agencies.-^In accordance with
agreements between the Secretary of the Treasury and the several
Government corporations and agencies and insular governments, the
Treasurer of the United States acts as special agent for the payment
of principal of and interest on their securities. The amounts of such
payments during the fiscal year 1949, on the basis of the daily Treasury
statement, were as follows:
Principal
Federal home loan banks
Federal farm loan bonds
_
Federal Farm Mortgage Corporation
Federal Housing Administration
Home Owners' Loan Corporation
Public Housing Administration
Philippine Islands
Puerto Rico
_•_„
Total
».
Interest paid Registered
in cash
interest
$300,465,000 $4,098, 642. 37
341,200
1,291.50
549,900
872.89
16,974,150
200,404. 68
737,075
690.00
1,000
14,000
140.00
624, 500
2,192. 60
_
_
. -
318,606,826
Coupon
Interest
$3,156.25
$21,189. 25 10, 278, 397.82
39, 901.39
389, 336. 62
43, 634. 55
163,802. 50
101, 295.00
1,030, 565.00
368,430; 00
4, 304, 233. 94 675, 623. 37 11, 764,085.01
Death oj Mr. Julian.—Mr. WUliam A. Julian, of Ohio, who served as
Treasurer of the United States from June 1, 1933, to May 29, 1949, was
killed in an automobile accident on May 29, 1949. He was succeeded
by Mrs. Georgia Neese Clark, of Richland, Kans., who became the
first woman to hold the Office of Treasurer of theUnited States.
BUREAU OF INTERNAL REVENUE
The Bureau of Internal Revenue is responsible for the assessment
and collection of all taxes imposed by any law providing internal
revenue. It also has responsibilities under statutes which, while not
imposing taxes, relate to internal revenue. Among these are the
Federal Alcohol Administration Act, the Liquor Enforcement Act of
1936, the Federal Firearms Act, and the Stabilization Act of 1942.
156
REPORT OF THE SECRETARY OF THE TREASURY
Certain of the major functions of the Bureau are described herein.
A more detailed description will be found in the Annual Report of the
Commissioner of Internal Revenue for 1949.
COLLECTIONS
Internal revenue collections for the fiscal year 1949 totaled $40,463,119^233, which was 3.3 percent less than the total for the preceding year. The collections in which the principal decreases occurred
were individual income taxes and estate and gift taxes. The principal
increases occurred in collections of corporation income taxes, manufacturers' excise taxes, and emplojmient taxes.
Collections by tax sources for the fiscal years 1929-49 are shown
in table 7 in the tables section of this report. A comparison of collections from the principal sources of tax revenue for the fiscal years
1948 and 1949 follows.
Fiscal year
1948
Fiscal year
1949
Source
In thousands of dollars
Percent increase, or
decrease (—)
Income and profits taxes:
Individual (including withheld)
Corporation
20,997,781
10,174,410
18,051,822
11, 553, 669
-14.0
13.6
Total income and profits taxes
Employment taxes
Estate and gift taxes
Liquor taxes '
Tobacco taxes
Stamp taxes...
Manufacturers' excise taxes
Retailers' excise taxes
Miscellaneous taxes 2
31,172,191
2,381,342
899,345
2, 255,320
1,300, 280
79, 466
1,649, 234
469,923
1,667,434
29, 605,491
2,476,113
796, 538
2,210, 601
1,321, 875
72, 828
1, 771, 533
449, 211
1,758,930
-5.0
4.0
-11.4
-2.0
L7
-8.4
7.4
-4.4
6.1
41,864, i
40,463,119
-3.3
Total collections'
J Excludes collections for credit to trust accounts.
2 Includes repealed taxes.
ENFORCEMENT ACTIVITIES
Additional assessments resulting from enforcement operations in
1949 totaled nearly $1.9 billion which represented a slight decrease
from the preceding year. Distraint warrant collections continued to
increase, however, and reached a total of $347 million for the year.
A comparison of the 1949 totals with earlier years is as follows.
Additional Distraint
assesswarrant colments
lections 1
Fiscal year
Additional Distraint
assess- warrant colments
lections 1
Fiscal year
In thousands of dollars
1942
1943
1944
1945
_.
-
.
.-
438,441
566,058
730,974
922,428
62,672
• 73,127
83,339
166,488
In thousands of dollars
1946
1947.
1948
1949
-.
_....
:
1,280,218
1,928,610
1,897,015
1,891,679
198,731
209,466
. 280,184
346,609
* Distraint warrant collections represent primarily collections of undisputed amounts which taxpayers
have failed to pay when due. Occasionally, it becomes necessary to collect additional assessments by distraint warrant, but these cases represent only a small portion of the total distraint warrant collections.
ADMDQ-ISTRATIVE REPORTS .
157
Audits and investigations of income and profits tax cases accounted
for 90 percent of the additional assessments made in 1949. To a large
extent, these assessments were made as the result of errors and omissions discovered in the routine audit of returns. Not counting special
fraud investigations, 3,073,301 returns of all kinds—including 2,472,030
individual income tax returns and 211,403 corporation income and
profits tax returns—were examined or investigated under procedures
involving direct contact, either personal or by correspondence, with
taxpayers. The number of returns subjected to these enforcement
processes was approximately the same as in the preceding year. Additional tax was assessed in about half of these cases. However, this
proportion would not hold true if all returns were investigated, since
the examined returns were selected by special procedures designed to
segregate the returns most likely to need correction.
There remains a large backlog of returns for the tax year 1946 which
require prompt examination in order that the Government may recover
taxes properly due before statutory limitations intervene. To this
group there have been added many millions of returns relating to the
tax years 1947 and 1948 which, by reason of the continuing high income
levels and high tax rates, are productive of substantial amounts of
revenue upon audit.
In addition to the foregoing examinations, 2,962 fraud investigations were made, resulting in prosecution recommendations against
1,208 individuals. Numerous investigations were made also under the
Federal Alcohol Administration Act and other regulatory statutes.
Cash penalties of a civU nature were assessed in many of the cases
which did not warrant criminal prosecution.
The increase in^ the number of persons convicted on- tax evasion
charges furnishes an additional indication of the effectiveness of enforcement efforts. The record of convictions, beginning with the
fiscal year. 1945, is as follows:
Individuals
convicted
Fiscal year
1946.
1946
1947
1948
1949
__
. . .
-._
-_
_
^
65
149
182
315
346
WORK-LOAD
The work-load of the Bureau in the fiscal year 1949 was greater
than in 1948 in both service and enforcement tasks. More than half
of the Bureau's employees were engaged full time in providing necessary facilities and services for the more than 50 million taxpayers who
settle their accounts voluntarUy. Among the service tasks performed
were (1) receipt, control, and filing of 220 million tax returns and
directly related information documents, (2) assessment of the taxes
reported thereon, and accounting for the funds paid in, (3) computation of income tax liability for more than 19 mUlion individuals
filing returns on Form 1040A, and (4) the scheduling of income tax
refunds for more than 36 mUlion individuals whose prepayments
exceeded their liabilities.
158
REPORT OF THE SECRETARY OF THE TREASURY
The number of returns of all types awaiting action by the enforcement groups at the beginning of the year was 84,650,469. Returns
filed with the Bureau or reopened during the year totaled 88,654,565
(approximately the same number as the preceding year), and the
number of returns disposed of was 94,305,214 (an increase of 14.0
percent over 1948). Thus, there remained a backlog of 78,999,820
returns awaiting action at the close of the year—a decrease of 6.7
percent as compared with the number at the beginning of the year.
All but 425,695 of the returns awaiting action on June 30, 1949, were
income or profits tax cases.
While these statistics give a broad view of the enforcement workload, it must be understood that tax returns vary widely in the amount
of attention they require and that, in fact, many returns are disposed
of after only superficial examination. In many cases the expenditure
of investigative resources would be mieconomical. On the other hand,
a sizeable number of cases, worthy of investigation, cannot be investigated at this time because of the lack of sufficient personnel. Thus,
of the 94,305,214 returns of all types disposed of during the year,
91,231,913 were disposed of without audit or investigation. The
remaining 3,073,301 returns were subjected to audit as described in
the ^^Enforcement Activities" section of this report.
In addition to the large number of returns which must be processed,
the work-load also includes many thousands of claims for adjustments
based on section 722 and the various ''carry-back" provisions of the
Internal Revenue Code. WhUe these cases are not nearly so numerous
as the returns to be processed, their complexity and importance
necessitate the diversion of a large percentage of the best-trained
technicians in the Bureau. Under the provisions of section 722, which
allows relief from excess profits tax for corporations under certain
circumstances, there had been filed as of the close of the year more
than 53,000 applications for excess profits tax reductions totaling
more than $6.2 billion, of which claims 22,000 totaling $4.9 billion
were still pending on June 30, 1949.
'^Carry-back" allowances of $203 million were made during the
year under the ''quick refund" provisions of the Tax Adjustment
Act of 1945.
IMPROVEMENTS IN ORGANIZATION AND PROCEDURES
Throughout the year much attention was given to the development
of organizational and procedural improvements that represent greater
efficiency and economy in the Bureau's operations. The committee
to direct management studies of the Bureau of Internal Revenue,
established by order of the Secretary of the Treasury on July 2, 1948,
afforded valuable consultative assistance to the Commissioner in the
analysis of possible solutions for management problems. A management-engineering firm was employed to make a study of operating
methods in the offices of coUectors of internal revenue; the report of
this firm contained numerous recommendations for changes in procedm-es. Many of these recommendations have been adopted and
installed, and the others are being tested in pilot operations conducted
under the supervision of special task forces.
The Estate and Gift Tax Division was transferred from the Miscel-
159
ADMINISTRATIVE REPORTS
laneous Tax Unit to the Income Tax Unit. Additional decentralization cf administrative services was achieved by the transfer of certain
personnel records to field offices and by greatly enlarging the authority
of field officers to approve personnel actions. Important progress
was made in the mechanizing of operations in collectors' offices,
particularly in the rapid acceleration of the microfilming p:cogram
and the installation of punch-card tabulating equipment and procedures in seven additional collection districts. A more detailed
discussion and additional examples of the Bureau's improvement
program are available in the Aimual Report of the Commissioner of
Internal Revenue for 1949.
PERSONNEL
The number of employees on Bureau rolls at the close of the year
was 52,266 as compared with 52,143 at the beginning of the year.
Changes during the year in the personnel employed in the various
branches of the Internal Revenue Service are shown in the following
table:
Summary of personnel, Bureau of Internal Revenue, June SO, 1948, as compared
with June SO, 1949
Number on pay roll as
of—
Branch of service
June 30,
1948
Departmental service
:
Field service:
OlSces of collectors of intiernal revenue...
. Supervisors of accounts and collections-..
Internal revenue agents' forces:
Income, profits, estate, and gift taxes.
Miscellaneous and sales taxes..
Alcohol Tax Unit:
. OflBces of district supervisors
Field inspection force
Intelligence Unit.
Technical Staff
.
Excess Profits Tax Council
Oflaceofthe Chief Courisel
Processing Division
4,662
June 30,
1949
4,554
Increase, or
decrease
(-)
-108
30,692
71
-784
15
8,398
80
779
6
4,054
14
1,286
528
84
370
1,904
4, 058
15
1,470
607
149
409
1,747
Total field service
47, 481
47, 712
Grand total
52,143
52, 266
4
1
184
79
65
. 39
-157
COST OF ADMINISTRATION
The entire cost of the Bureau's operations during the year, including
salaries, equipment, travel, supplies, etc., but exclusive of amounts
refunded to taxpayers, was $209,205,715. The amount appropriated
for this purpose was $210,859,000; thus, there was an unexpended
balance of $1,653,285. The cost of coUecting $40,463,125,019 during
the year was approximately 52 cents per $100 of revenue, compared
with 44 cents per $100 in the previous year, when collections were
larger and expenditures were lower.
Data on the annual cost of administration, although of interest and
value for certain purposes, can not be relied upon either as a guide to
the proper scale of administrative activity or as a measure of relative
160
REPORT OF THE SECRETARY OF THE TREASURY
efficiency of operation from year to year. An annual ratio of cost to
collections is determined by many factors, most of which have no
relationship to these objectives. To illustrate, one such factor is the
nature of the tax system. The higher the level of tax rates and the
more numerous the levies that are inherently economical to collect
the lower will be the average cost ratio. Another factor is the prevailing level of salaries paid to Bureau personnel. A third factor is the
volume of essential services performed for taxpayers, such as computation of tax liability, and the volume of investigative activity required
with respect to refund claims, both of which have expanded markedly
during recent years.
REFUNDS
Refunds of internal revenue taxes and the interest thereon, as
required by law, are paid out of an appropriation separate from that
covering the Bureau's administrative expenses. The total amount of
these payments for the fiscal year 1949 was $2,902,742,898, as compared with $2,297,542,291 in the preceding year. The increase was
due principally to excessive withholding during the first four months
of the calendar year 1948 before the lower tax rates under the Revenue
Act of 1948 became effective, and to the fact that pajrment of many
individual income tax refunds scheduled during the latter part of the
fiscal year 1948 was deferred until after July 1 because of the exhaustion of the 1948 appropriation for tax refunds. Interest payments on
refunds increased from $56,530,924 in 1948 to $86,346,884 in 1949.
SETTLEMENT OF D I S P U T E S
In a large proportion of the tax disputes arising from the Bureau's
investigative operations, settlements are reached through conferences
with taxpayers, thereby avoiding expensive and time-consuming
litigation. Of 61,175 income, profits, estate, and gift tax returns in
which taxpayers had protested the examiners' findings, 53,954 were
settled by the Bureau and 7,221 were appealed to the Tax Court.
As a result of further hearings conducted by the Bureau in cases pending before the Tax Court, an additional 5,509 returns were settled by
stipulation, thereby reducing substantially the number of cases to
be tried.
OFFICE OF INTERNATIONAL FINANCE
The Office of International Finance, under the general direction of
an Assistant Secretary, advises and assists the Secretary of the Treasury in the formulation and execution of policies and programs in
international financial and monetary matters. The Director of the
Office is assisted by advisers on financial policy and by a staff organized
into divisions corresponding to geographic areas or to the functional
activities of the Office. These divisions are: National Advisory
Council Secretariat; Stabilization Fund, Gold and Silver Division;
International Statistics Division; Commercial Policy and United
Nations Division; European Division; British Commonwealth and
Middle East Division; Latin American Division; and Far Eastern
Division. The Office also maintains Treasury representatives in
several foreign countries.
ADMINISTRATIVE REPORTS
161
By direction of the Secretary, the Office of International Finance
is responsible for the Treasury's activities in matters of international
financial and monetary policy and programs, including international
monetary, and exchange problems and gold and sUver policy; the
Bretton Woods Agreements Act and the operations of the International Monetary Fund and the International Bank for Reconstruction and Development; foreign lending and assistance programs; the
activities of the National Advisory Council on International Monetary
and Financial Problem,s; the Anglo-American Financial Agreement;
and the United States Exchange StabUization Fund.
The Office makes continuing studies of the fiow of capital funds into
and out of the United; States and of the international accounts of
foreign countries with special attention to transactions in gold and
dollars. In carryirig out its functions, the Ofiice also studies the
legislation and policy of foreign countries relating to finance, gold
and silver, exchange rates and exchange controls, and other relevant
matters.
The Office also provides economic analyses of the customs activities
of the Department and advises the Secretary on international financial
aspects of matters arising in connection with his responsibilities under
the Tariff Act. The Office acts for the Treasury on the financial
aspects of international treaties, agreements, and organizations in
which the United States participates. I t also participates in negotiations with foreign governments with regard to matters included within
its responsibilities.
The Office of International Finance represents the Treasury in the
work of the National Advisory Council on International Monetary
and Financial Problems (of which the Secretary of the Treasury is
Chairman) and its subordinate organs. Professional personnel of the
Office perform staff and secretariat functions of the Council. (See
exhibits 13 and 14.)
The Office of International Finance advises Treasury officials and
other departments and agencies of the Government concerning exchange rates and other financial problems encountered in operations
involving foreign currencies. In particular, it advises the State
Department and the National Military Establishment in financial
matters related to their normal operations in foreign countries and
the special financial problems arising from military operations and in
areas occupied by United States forces. The Treasury representatives in foreign countries act as financial advisers to the diplomatic
missions and to the missions of the Economic Cooperation Administration in those countries.
^
FOREIGN F U N D S CONTROL
The liquidation of Foreign Funds Control which commenced
shortly after the end of hostUities was completed during 1948. Pursuant to Executive Order 9989 of August 20, 1948, jurisdiction over
assets blocked in the United States as of October 1, 1948, was^transferred to the Attorney General. This transfer of jurisdiction was
instituted in accordance with a program announced in a letter of
February 2, 1948, to the Chairman of the Foreign Relations Committee of the Senate from the Chairman of the National Advisory
856455—50
12
162
REPORT OF THE SECRETARY OF THE TREASURY
Council (see Annual Report of the Secretary of the Treasury for the
fiscal year 1948, p. 48, and exhibit 22, p. 289).
A further discussion of Foreign Funds Control activities during the
fiscal year will be found on page 99.
LEGAL DIVISION
The General Counsel is by statute the chief law officer of the
Treasury Department. He is directly responsible to the Secretary
for the work of the Legal Division and performs other legal activities
which the Secretary assigns or which are required by law. The
Legal Division consists of the legal staff in the Office of the General
Counsel and the legal staffs of the Bureau of ;the Comptroller of the
Currency, Bureau of Customs, Bureau of Internal Revenue, Office of
International Finance, Bureau of Narcotics, Bure°au of the Public
Debt, United States Coast Guard, and, terminating with the fiscal
year 1949, the Bureau of Federal Supply. The Tax Legislative
Counsel also is under the supervision of the General Counsel. From
July 1, 1947, untU June 30, 1949, the General Counsel was charged
with the functions of the Secretary of the Treasury under the Contract
Settlement Act of 1944.
The Office of the General Counsel advises the branches of the Department not having legal staff's, including the immediate Office of
the Secretary, Bureau of Accounts, Office of Administrative Services,
Bureau of Engraving and Printing, Bureau of the Mint, Committee
on Practice, Office of the Treasurer of the United States, United States
Savings Bonds Division, and United States Secret Service.
The Office of the General Counsel coordinates the legislative work
in the Department and does the related legal work. This includes
appearances before congressional committees, the drafting of legislation, and the preparation of reports to committees of the Congress
and to the Bureau of the Budget. SimUar work is done in connection
with Executive orders and proclamations and departmental rules and
regulations.
Special fields in which the Office operates include gold and silver
transactions and administration of the stabUization fund; Treasury
participation in the activities of the National Advisory Council on
International Monetary and Financial Problems, which coordinates
the foreign financial and lending operations of the United States
Government, including the policies and operations of the United
States representatives on the International Monetary Fund and the
International Banl^ for Reconstruction and Development; payments
of Mexican claims and payments to holders of awards of the Mixed
Claims Commission; compromise settlement of general claims of the
United States; and the handling of railroad securities held by the
vSecretary under the Transportation Act of 1920.
The Office also coordinates the Department's activities and handles
the legal work in respect to a variety of other problems affecting the
Treasury such as the necessary pretrial work in litigation involving
Treasury activities, the settlement of claims under the Federal Tort
Claims Act and other laws, the claims of Treasury employees for
losses sustained in connection with assignments abroad, disclosure of
official information, the patent rights of Treasury employees, the
ADMINISTRATIVE REPORTS
163
employee loyalty program under Executive Order 9835, and the
licensing and disbarment of practitioners before the Department.
In addition to responsibilities in connection with tax legislation,
the General Counsel, through the Tax Legislative Counsel, aids in
the negotiation of' treaties involving taxation; advises the United
States delegate to the United Nations Fiscal Commission regarding
international tax problems; studies proposals for amending the tax
laws; reviews all proposed closing agreements with taxpayers; participates in the periodic revision of forms necessary to the administration
of the revenue laws; and reviews proposed Treasury decisions amending regulations on internal revenue taxation.
The activities of the Legal Division include consideration of the
legal problems relating to broad financial, economic, and social programs, and international cooperation in the monetary and financial
fields. The Division's activities also embrace all legal matters arising
in connection with the duties and functions of the various bureaus,
divisions, and branches of the Department. A more complete description of the scope of these activities is to be found in the administrative reports of the various bureaus and divisions of the Department contained elsewhere in this report.
During the fiscal year 1949, the Legal Division handled a number
of special problems, which are summarized in the paragraphs which
follow. These included legal matters arising in connection with the
National Security Resources Board and the Foreign Trade Zones
Board, of which Boards the Secretary is a member; advice on problems
arising under the antidumping and countervailing duty laws; and the
legal aspects of stockpiling of strategic materials pursuant to the act
approved July 23, 1946 (60 Stat. 596).
In the fields of international finance and aid, the Legal Division
dealt with legal problems arising in connection with the financial,
fiscal, foreign exchange, and stockpiling aspects of the European Recovery Program; assisted in formulating the financial and economic
aspects of the programs and legislation relating to military assistance
and technical assistance to foreign countries; participated in drafting
and negotiating a supplemental stabilization agreement with Mexico;
participated in the meetings of the Contracting Parties to the General
Agreement on Tariff's and Trades; and drafted legislative proposals
to accept membership in the International Trade Organization and
to carry out the obligations so assumed.
Technical assistance was given to congressional committees in connection with the drafting of legislation to implement the President's
taxation and social security programs. The Legal Division studied
proposals for the modification of excise tax laws and studied other
miscellaneous revenue bills; and participated in preparing and issuing
regulations under the Revenue Act of 1948 pertaining to "income
splitting" and "marital deductions." Advice was given in the tax
aspects of the President's program for extension of aid to undeveloped
areas (Point IV of the President's program); and assistance was
given in the negotiation of tax conventions with the Governments
of Norway, Ireland, Greece, Italy, and Belgium.
Other matters handled were the study and preparation of recommendations relating to the financing of the proposed housing legislation; the settlement of terminated war contracts and claims arising
164
REPORT OF THE SECRETARY OF THE TREASURY
therefrom; claims under section 17 of the Contract Settlement Act
of 1944 (defective, informal, and quasi contracts); the termination of
renegotiation rebates; and the licjuidation of the residual affairs of
various war agencies. Aid was given in drafting legislation to bring
about the transfer of the Bureau of Federal Supply from the Treasury
Department to the new General Services Administration as accomplished by the act approved June 30,^ 1949 (Public Law 152, 81st
Cong.).
BUREAU OF THE MINT
The principal functions of the Bureau of the Mint consist of the
manufacture of domestic and foreign coins; the acquisition of gold
and silver, payments for which are made on the basis of mint assays;
the safeguarding of the Government's holdings of the monetary metals,
including coins in processing stages until finished and issued; the
refining of gold and silver; the administration of regulations pertaining
to gold and silver, including the issuance of licenses for the acquisition,
ownership, possession, use, and exportation of gold for industrial,
professional, and artistic purposes; and the production of medals and
other decorations.
The Office of the Director of the Mint in Washington administers
all activities of the Bureau of the Mint. During the fiscal year 1949
seven field institutions were in operation: Coinage mints in PhUadelphia, San Francisco, and Denver; assay offices in New York City
and Seattle; gold bullion depository in Fort Knox, Ky.; and silver
bullion depository in West Point, N . Y., which is an adjunct of the
New York Assay Office. Electrolytic refineries are maintained at the
San Francisco, Denver, and New York City institutions. The Medal
Department is located at the Philadelphia Mint. At the close of the
fiscal year 1949 the number of employees of the departmental and
field institutions totaled 1,272 compared with 1,283 at the beginning
of the year.
The operations of the field institutions during the fiscal year 1949
and the report of this Bureau on the production, and consumption of
gold and silver in the United States during the calendar year 1948
are summarized herein. Further detailed information is contained
in the Annual Report oj the Director oj the Mint, Fiscal Year Ended
June SO, 1949.
OPERATIONS OF THE M I N T S , ASSAY OFFICES, AND BULLION
DEPOSITORIES .
Domestic coinage.—Production of United States coins during the
fiscal year 1949 totaled 911,257,226 pieces, classified as follows:
Denomination
Number of
pieces produced!
Face value
Half dollarsl...
Quarter dollars.
Dimes
5-cent pieces
1-cent pieces
6,782,826
70,402,400
179,925,000
156,347,000
497,800,000
$3,391,413
17,600,600
17,992,500
7,817, 350
4,978,000
Total
911, 257,226
51,779, 863
»Includes 36,012 Booker T. Washington commemorative half dollars.
ADMINISTRATIVE
165
REPORTS
Foreign coinage.—Coins produced for other governments during
the fiscal year were as follows:
Number of
pieces produced
Government
China .
Cuba
.
Dnminicfl.n T?.p.r>nblic
Mexico
.
-
12,360,000
35,000,000
3,000,000
1,250,000
Government
Saudi Arabia
Venezuela
Number of
pieces produced
10,000,000
14,760,000
Total
76,370,000
Issue oj domestic coins.—Over 1 billion United States coins were
issued by the mints during the fiscal year, classffied as follows:
Denomination
silver dollars..
Half dollars....
Quarter dollars
Dimes
5-cent pieces
1-cent pieces
Total
Number of
pieces issued
Face value
8,187,886
11,453,867
54,003,979
143, 813,129
149,064, 640
637,434, 218
$8,187,885.00
5,726,933.50
13, 500,994. 75
14,381,312.90
7,453, 232.00
6,374,342.18
1, 003,957, 718
66,624,700.33
Stock oj coins.—The estimated stock of coins in the United States
as of June 30, 1949, totaled $1,854,268,762, comprising $492,857,480 in
standard silver dollars, $989,455,582 in subsidiary coins, and $371,955,700 in minor coins.
Medals:—The number of service medals and other distinguishing
devices delivered to the National Military Establishment, Maritime
Commission, and other Government departments totaled 430,297
pieces, and other medals sold to the public totaled 15,815 during the
fiscal year.
Bullion deposit transactions.—Bullion deposit transactions at the
mints and assay offices during the fiscal year 1949 totaled 12,618,
including 31 intermint transfers. These transactions required 25,841
assay determinations, including 1,241 determinations for the intermint
transfers.
. Acquisitions oj gold.—^Deposits and purchases of gold during the
fiscal year are sumniarized as follows:
G014
Value
Purchases at $20.67-1- per fine ounce
Increment to $35 per fine ounce
Purchases at $35 per fine ounce.
Domestic coin transferred (melted).
Intermint transfers.
-.-.
$11,328
7 852
1,395,656', 078
179, 620
11, 239,024
Total value at $35 per ounce..
1, 407,093,902
166
REPORT OF THE SECRETARY OF THE TREASURY
Acquisitions oj silver.—During the fiscal year deposits and purchases of sUver total 147,772,022 fine ounces, classified as follows:
Silver
Number of
fine ounces
Newly mined domestic silver
Silver contained in gold deposits, etc
:
Silver received in exchange for Government-stamped bars..
Recoinage bullion from uncurrent subsidiary coin
Recoinage bullion from uncurrent silver dollars
Intermint transfers of silver...
Deposits of silver In trust by foreign governments
Redeposits L..
Total
36,329,086
163,174
189,164
1,411,779
181,481
121,081
15,736,977
93,639,280
147,772,022
1 Consists of Treasury stock previously held by certain agencies of the Federal Govemment.
Refinery production oj gold and silver.—During the fiscal year the
refineries produced 1,686,734 fine ounces of gold and 773,525 fine
ounces of silver by the electrolytic process. In addition, approximately 27 tons of gold and silver were subject to fire process only.
Issue bars manufactured.—The mints and assay offices manufactured 90,724 issue bars containing 31,471,821 fine ounces of gold and
826 issue bars containing 115,023 fine ounces of silver during the fiscal
year.
Stock oj unrefi,ned bullion.—At the close of the fiscal year the stock
of unrefined bullion, in terms of the assayed fine gold and silver content, amounted to 1,542 tons.
Monetization oj silver bullion.—Silver certificates in the amount of
$33,486,868 were issued by the Treasury during the fiscal year against
25,900,000 fine ounces of silver bullion valued at $1.294-per fine
ounce, the statutory monetary value of sUver. The difference between the cost and the monetary value of the silver was $10,046,061,which constituted seigniorage.
Sales dj gold and silver jor industrial use.—Sales of gold bars to
licensed purchasers for use in industry and the arts totaled $44,010,561
during the fiscal year. Sales of silver at $0.91 per fine ounce under the
act of July 31, 1946, amounted to 1,071 fine ounces.
Stock oj monetary bullion.—The United States stock of gold buUion
in custody of mint institutions totaled $24,466,165,743, and the stock
of silver buUi()n amounted to 1,066,860,645 fine ounces on June 30,
1949. In addition, certain other agencies of the Federal Government
held 634,694,180 fine ounces of Treasury silver.
PRODUCTION AND CONSUMPTION OF GOLD AND SILVER IN THE UNITED
STATES
During the calendar year 1948 the production of gold and sUver
refined from ores mined in the several States and Alaska was as
follows: Gold—2,025,480 fine ounces valued at $70,891,800; and
ADMINISTRATIVE REPORTS
167
sUver—39,228,468 fine oimces. Distribution of production according
to State of origin appears in the annual Mint report for the fiscal
year 1949.
Gold issued for use in the industrial arts in the United States
during the calendar year 1948 aggregated $90,128,764, and the
return from mdustrial use of secondary materials including old jewelry,
plate, scrap, etc., amomited to $45,142,764, giving a net consumption
of gold amounting to $44,986,000 during the year.
Silver issued for use in industry and the arts in the United States
during the calendar year 1948 aggregated 129,186,173 fine ounces,
and the return from industrial use of secondary materials including
old sUverware, scrap, etc., amounted to 23,897,173 fine ounces,
giving a net consumption of sUver amounting to 105,289,000 fine
ounces during the year.
.
BUREAU OF NARCOTICS 1
The Bureau of Narcotics is charged with the investigation, detection, and prevention of violations of the Federal narcotic and marihuana laws and of the Opium Poppy Control Act of 1942, and related
statutes. I t issues permits for import of the crude narcotic drugs and
for export and in-transit movements of narcotic drugs and preparations, and has authority to issue licenses, under certain conditions,
for the production of opium poppies and manufacture of opium products therefrom. I t cooperates with the Department of State in the
discharge of the international obligations of the United States concerning the traffic in narcotic drugs and with the several States in
the suppression of the abuse of narcotic drugs and marUiuana in their
respective jurisdictions.
During the fiscal year 1949 the Bureau of Narcotics directed its
activities toward the suppression of the Ulicit traffic in narcotic drugs
and marihuana and the control of the legitimate manufacture and
distribution of narcotics through the customary channels of trade.
The total quantity of narcotic drugs seized in the internal illicit traffic
amounted to 1,726 ounces, in comparison with 844 ounces seized
in 1948. Seizures of marihuana amounted to 707 pounds bulk,
6 pounds seeds, 25,591 cigarettes, and 59 growing plants, as compared
with 964 pounds bulk, 13 pounds seeds, 14,140 cigarettes, and 800
growing plants in 1948.
The table following shows for the fiscal year 1949 the nuniber of
violations of the narcotic and marihuana laws by persons registered
with collectors of internal revenue to engage in legitimate narcotic
and marihuana activities and by persons who have not qualified by
registration to engage in such activities, as reported by Federal
narcotic enforcement officers.
1 Further information concerning narcotic drugs is available in the separate annual report of the Commissioner of Narcotics.
168
REPORT OF THE SECRETARY OF THE TREASURY
Number of violations of the narcotic and marihuana laws reported during the fiscal
year 1949, with their dispositions and the penalties
M a r i h u a n a law i
N a r c o t i c laws
Federal
court
P e n d i n g J u l y 1,1948
R e p o r t e d d u r i n g 1949:
Federal 2
Joint2
T o t a l t o b e disposed of..
Convicted:
Federal
Joint..
Acquitted:
Federal
Joint
Dropped:
Federal
Joint
Compromised: 3
Federal
Joint
...
.'
Federal
court
State
court
State
court
976
323
329
16
2,165
883
736
850
806
4,024
1,909
11
222
3
-
2
1
665
232
905
285
326
428
148
168
15
3
16
5
16
19
9
10
361
76
81
73
136
88
50
30
79
3
387
2, 717
1,428 •
419
1,307
481
Yrs. M o s .
99
8
7
6
107
Total
Fines imposed:
Federal
Joint
Nonregistered persons
461
1
T o t a l disposed of
Sentences i m p o s e d :
Federal . . .
Joint
Federal
court
State
court
61
4
_
P e n d i n g J u n e 80,1949
Total
Nonregistered persons
Registered persons
'
2
Yrs. M o s .
7
1
7
1
Yrs. M o s .
1,300
11
465
1,765
11
Yrs. M o s .
703
7
263
7
967
2
Yrs. M o s .
519
2
515 11
1,035
1
Yrs. M o s .
Ill
2
113
224
$9,560
$23,995
3,813
$4,080
2,593
$5,272
4,864
$2, 367
2,148
9,660
27,808
6,673
10,136
4,515
2
11 case of violation by a registrant under the marihuana law, reported by a Federal oflScer during the
year, resulted in conviction of the offender and a sentence of 6 months.
2 Federal cases afe made by Federal oflfi-cers working independently while joint cases are made by Federal and State officers working in cooperation.
3 Represents 82 cases which were compromised in the sum of $15,505.
The importation, manufacture, and distribution of opium and its
derivatives, as heretofore, were subject to a system of quotas and
allocations designed to secure their proper distribution for medical
needs. Additional quantities of opium were imported during the
year. Coca leaf imports were sufficient for medicinal purposes, and
additional supplies were avaUable for the manufacture of nonnarcotic
flavoring extracts.
Exports of narcotic drugs decreased in comparison with 1948.
Manufacture of opium derivatives continued high to meet export
requirements and the increased medical use of codeine.
Thefts of narcotics materially increased over 1948, both in the
number of thefts and quantities of drugs stolen.
There were approximately 400,000 registrations under the Federal
narcotic and marihuana laws in the fiscal year.
ADMINISTRATIVE REPORTS
169
COMMITTEE ON PRACTICE
The Committee on Practice receives and acts upon applications of
attorneys and agents for admission to practice before the Treasury
Department. I t makes inquiries, holds hearings, and in general acts
as the administrative and advisory agency in all matters pertaining
to practice, makes recommendations to the Secretary of the Treasury,
and performs other duties prescribed by Department Circular 230,
revised May 27, 1947.
The Committee also receives and acts upon applications of individuals, corporations, associations, and partnerships for customhouse
brokers' licenses, issues customhouse brokers' licenses, makes recommendations to the Secretary of the Treasury, and performs other
duties as prescribed by Department Circular 559, revised May 1,
1947.
The following statement summarizes the work of the Committee
for the fiscal year 1949:
Attorneys and agents: - °
^
Number.
Applications for enrollment approyeH
4, 655
Applications for enrollment disapproved
21
Applications withdrawn on advice of Committee
'-.
78
Special enrollment to practice before the Bureau of Internar Revenue:
Applications approved by reason of examination
10
Applications approved pursuant to standards and procedures based
upon former service with the Treasury Department
36
Applications of former employees denied
15
Complaints disposed of pursuant to section 5-B of the Administrative Procedure Act:
Resignations submitted in order to evade proceedings in disbarment
and accepted by the Committee. Names ordered stricken from
the roll
18
Resignations accepted with prejudice
1
Formal complaints against enrolled persons:
—
Pending July 1, 1948
8
Filed during the year
1
Total
Dismissed
9
7
Pending June 30, 1949
Customhouse brokers:
Applications for licenses approved
Applications withdrawn
Licenses canceled
Licenses revoked
2
^
93
6
31
5
Since the organization in 1921 of the Committee on Practice, 87,015
applications for enrollment have been approved and 839 disapproved;
256 practitioners have been disbarred from further practice before the
Treasury Department, 140 have been suspended from practice for
various periods, 184 have been reprimanded, and 37 resignations have
been accepted.
TAX ADVISORY STAFF OF THE SECRETARY
The Tax Advisory Staff of the Secretary was established by Treasmy
Department Order No.. 115, dated Jime 17, 1949, superseding the Division of Tax Research which was abolished. The duties, functions,
and personnel of the former Division were transferred to the new Staff.
170
REPORT OF THE SECRETARY OF THE TREASURY
The Tax Advisory Staff of the Secretary assembles the facts and
prepares the economic, statistical, and technical analyses needed (1) to
aid the Secretary in the formulation of Treasury tax pohcy, and (2) to
provide information on various tax matters, as requested, for the
President, Members of Congress, various Government officials, and
the public. The Staff provides, on behalf of the Secretary, material
to aid the Ways and Means Committee of the House of Representatives, the Finance Committee of the Senate, and the Joint Committee
on Internal Revenue Taxation in their consideration of tax proposals
and legislation. In its work, the Staff consults with the Bureau of
Internal Revenue on administrative matters and with the Tax Legislative Counsel on legal matters.
The Staff's functions include the preparation of basic surveys of the
tax problems of the Federal Government, the devising of alternative
methods of meeting revenue requirements, and the development of
methods of adjusting the tax system to changing economic conditions.
The tax system is analyzed with a view to obtaining revenue yields
large enough to meet prospective revenue requirements and to making
adjustments which will be fair to ta^^payers and will avoid undesirable
economic effects. Individual taxes are studied (1) to determine their
effects on particular groups of taxpayers, (2) to avoid inequity among
taxpayers within a given group, (3) to ascertain and develop methods
of meeting administrative and compliance problems, and (4) to devise
ways of integrating particular taxes with the tax system as a whole.
The interrelationships of Federal, State, and local taxes are studied
with a view to possible improvements in intergovernmental fiscal relations. Specific State and local taxes are also examined to determine
the combined effect of such taxes and Federal taxes and to assure the
Federal Government of the benefit of State and local tax experience.
Likewise, to gain the benefit of foreign experience and to compare
policies, studies are made of foreign taxes.
The Staff is also charged with general responsibility respecting the
assembling and publication of statistics pertaining to Federal taxation.
Correspondence relating to matters of taxation not involving legal
questions is handled by the Staff. The Staff also participates in conferences with taxpayers who call special problems to the attention of
the Treasury Department.
During the fiscal year 1949 the Staff continued to work primarily
on the problems of Federal tax revision. The Staff prepared factual
material and analyzed various proposals for tax revision which were
considered by the Congress. Studies of major tax items were carried
on in the fields of business taxes, individual income taxes, and excise
taxes.
The Staff prepared the documentation for use at the Secretary's
conference with representatives of State and local governments on
intergovernmental fiscal problems, held at the Treasury April 21 and
22, 1949. The Associate Director of the Staff acted as Executive
Secretary of the conference and continues to serve as liaison officer
between the Treasury and State and local representatives in carrying
out the program adopted at the conference.
ADMINISTRATIVE REPORTS
171
OFFICE OF THE TECHNICAL STAFF
The O&ce of the Technical Staff in the Office of the Secretary serves
as a technical staff for the Secretary on matters relating to Treasury
financing, public debt management, and various general economic
problems arising in connection with Treasury activities.
For the use of the Secretary in making his financing decisions and
in 'formulating debt management policies, a variety of analyses is
prepared. The Office draws up alternative plans in detaU for each
financing operation, and analyzes the results of the operation in order
to gauge its effectiveness and secure guidance for future planning.
Estimates of the income and savirigs position of different classes of
investors are prepared, together with information on the amounts of
the outstanding public debt already held by these investors. The
Office analyzes the relative desirabUity of cash pay-offs to and additional borrowing from each class, and the type of security best suited
to the requirements of each class. The outlook for financing requirements during an appropriate period ahead is reviewed and various
financing programs which would take care of these requirements are
suggested. The Office recommends terms for the particular securities
which might be offered, covering such characteristics as rate of
interest, maturity, call period, negotiability, eligibUity as collateral,
redemption privileges accorded to holders, and restrictions as to the
amount of purchases or holdings by different classes of investors.
I t analyzes the relation of these securities to the maturity schedule
and interest costs of the public debt, the effect of their issuance upon
the market prices and ownership distribution of outstanding Government securities, the impact of the Treasury's public debt operations on
the credit structure and general economy of the country, and the longrange effects on the economy of present financing decisions.
I n connection with its work in Treasury financing, the Office is
charged with the duty of keeping the Secretary informed on the outlook
for Federal receipts. In addition, the facilities of the Staff are
utiUzed by the Secretary for the preparation of official estimates of
Government receipts for incorporation in the President's Annual
Budget Message and in intervening budget revisions. Similarly,
estimates of the revenue eff'ects of proposed and pending legislation
are prepared.
•
Technical mathematical analyses needed in connection with financing and public debt problems are also prepared. This work is under
the supervision of the Government Actuary, who is an Assistant
Director of the Office of the Technical Staff. He is responsible for
reports on actuarial matters involved in Treasury operations, and
prepares actuarial estimates required by statute with respect to the
operations of several Government trust funds. The Secretary of the
Treasury is charged with the duty of handling the investments and
other operations for most of these funds.
UNITED STATES COAST GUARD
The operations of the Coast Guard during the fiscal year ended
June 30, 1949, embraced in general terms maritime law enforcement;
saving life and property; providing navigational aids to maritime
commerce and to transoceanic air commerce; promoting the efficiency
172
REPORT OF THE SECRETARY OF THE TREASURY
and safety of the American merchant marine; and military readiness.
In the law approved August 4, 1949 (Public Law 207, 81st Cong.),
which revised, codffied, and enacted into law title 14 of.the United
States Code, there was set forth for the first time a clear, concise
statutory statemerit of the duties and functions of the Coast Guard.
Throughout the year both materiel and personnel resources were
increased. Most of the expansion was in the assumption of operation
of additional ocean weather stations in the Atlantic Ocean to meet
the international obligations of the United States, and the increase
in personnel was largely diverted to this activity. Expansion in the
search and rescue organization as ,well as in the field of electronic
navigational aids to maritime and transoceanic air commerce has
not yet reached a point considered the essential minimum.
Since the termination of World War I I hostUities, the Service has
deferred, as a matter of economy, deshable maintenance needs and
improvements at many shore establishments. The need for housing
facilities for the families of Service personnel has become pressing,
particularly because of the remote and isolated location of many
units. Most of the Service aircraft are fast reaching the point of
obsolescence because of age arid constant use, and their replacement
by new planes has become urgent. Likewise, many patrol boats
which have been in continuous service since 1926, and others of wartime wooden construction, wUl have to be replaced in order to provide
efficient and economical vessel facilities for the proper conduct of
harbor and coastal patrol activities.
One of the largest losses of life—13 enlisted men—suffered by the
Coast Guard in peacetime resulted from the collision in a fog of a
merchant tanker with the cutter Eastwind off the New Jersey coast
on January 19, 1949.,
Plans have been made to reestablish the Seventeenth Coast Guard
District on July 1, 1949, with temporary offices in Seattle, Wash.,
and for the location of permanent headquarters in Juneau, Alaska,
about September 1, 1949. This district embraces all of the Territory
of Alaska and adjacent waters, and its reestablishment increased the
number of administrative districts from 11 to 12.
A survey for recommending to the President specific lifeboat
stations, hght stations, and lightships which could be disestablished
in the interest of economy without increasing maritime hazards was
commenced in February 1949 by a special panel of Coast Guard
officers.
ASSISTANCE OPERATIONS
I n carrying out responsibUities with respect to.search and rescue—
the saving of life and property—the Service maintains an established
organization of inshore and offshore rescue surface vessels, aircraft,
lifeboat stations and radio stations, together with rescue coordination
centers in each Coast Guard district. Assistance rendered by stations, vessels, and aircraft during the year is reflected in the following
statistics:
Number of instances of major assistance
Value of vessels assisted
Value of cargoes of vessels assisted
Lives saved or persons rescued from peril_ .
Number of instances of minor assistance._.
5, 016
$184, 452, 494
$15, 134, 401
5, 423
4, 578
ADMINISTRATIVE REPORTS
173
The term "major assistance" signifies the rescue of persons from
water or from drifting ice, the removal of persons from endangered
vessels, the towing to safety of vessels on which personnel are endangered, and, during floods, the removal of persons to safety when
danger of drowning threatens. When Coast Guard ahcraft are
employed, "major assistance" generally involves open-sea landings
and take-offs under abnormaUy hazardous conditions.
A new program of search and rescue and survival techniques was
begun on both the East and West Coasts, and indoctrination training
therein was afforded to ah-line personnel of the various overseas
companies.
In collaboration with other governmental agencies, the Red Cross,
and local authorities, the Coast Guard rendered extensive assistance
in evacuating citizens and salvaging property during the floods which
occurred in the valleys of the Mississippi, Ohio, and Columbia Rivers.
An extensive revision of the Coast Guard Plan for Flood Relief Operations in the Ohio-Mississippi River Valley was promulgated.
Ice-breaking activities for expediting and permitting the movement
of marine commerce were centered largely in the Great Lakes region
at the beginning and close of the navigation season, where five cutters,
together with a helicopter attached to the Mackinaw, were so engaged.
INTERNATIONAL I C E PATROL
The International Ice Patrol for the season of 1948, which was in
progress at the begiiming of the fiscal year, was discontinued on July
2, 1948. Postseason activities in July and August 1948 included the
detaU of the cutter Evergreen for an oceanographic survey in Davis
Strait and Baffin Bay and the assignment of two ahcraft and the
cutter Ingham for a census of icebergs in Baffin Bay and MelvUle
Sound.
Aerial ice observation flights by long-range aircraft operating from
Argentia, Newfoundland, were inaugurated on February 27, 1949, and
continued untU June 15, 1949, when it was determined no seasonal
menace existed on the United States-Europe trans-Atlantic routes.
An ice patrol by vessels was neither required nor established during
the 1949 season, and it was the first time that aircraft alone conducted
the ice observation service. The oceanographic vessel Evergreen
conducted a program of scientific observations, and plans were made
for a 1949 postseason oceanographic cruise and census of icebergs in
Baffin Bay and Melville Sound.
OCEAN STATIONS
During the year the number of ocean stations maintained was
increased from 3 to 9K in operation on June 30, 1949, 2 in the North
Pacific and 7^ in the North Atlantic (the "K'^ applicable to one station
maintained jointly by the United States and Canada). These
stations, operated and maintained for the purpose of providing search
and rescue, communication, and air navigation facilities, and meteorological services in such ocean areas as are regularly traversed by
ahcraft of the United States, made 47,803 weather reports, had 15,361
airplane radio contacts, and rendered assistance in 27 cases. Seventeen additional vessels were readied for this duty during the year.
174
REPORT OF T H E SECRETARY OF T H E TREASURY
A I D S TO NAVIGATION
On June 30, 1949, 37,309 aids to navigation were maintained in the
navigable waters of the United States, its Territories, and its possessions, and at overseas military bases. These aids consisted of many
different devices, ranging from simple unlighted wooden spar buoys to
light stations, lightships, and.complex Loran (electronic long-range
aids to navigation) networks. During the year, 2,600 new aids were
established and 1,575 aids were discontinued, resulting in an increase
of 1,025 compared with the number maintained on Junp 30, 1948.
This iricrease was due principally to the establishment of aids to
navigation required for the marking of completed rivers and harbors
improvements.
^
In addition to Loran stations in the United States, others are
located in widely separated and isolated localities (Greenland, Labrador, Newfoundland, Alaska, the Philippines, and the islands of the
Pacific) providing navigators traversing the military and civil air and
sea routes of the North Atlantic and Pacific-Oceans with means for
accurate and quick determination of their positions at all times regardless of weather conditions. Coast Guard cutters and aircraft
have been utilized in providing frequent logistic service to these
isolated and distant stations.
Extensive oU drUling operations in the offshore waters of the Gulf
of Mexico presented a problem with respect to the appropriate marking of complicated marine structures with satisfactory aids, the
delineation of vessel routes tlirough the field of operations of these
structures, and the appropriate marking of such routes with aids to
navigation for the safety of marine navigation. A standard uniform
system of markings of the structures by and at the expense of the
owners has been determined and is now in force. Delineation of safe
routes is being studied by the Corps of Engineers, Department of the
Army; and the Coast Guard, upon designation of the routes by the
Corps of Engineers, is prepared to imdertake theh marking with
appropriate aids to navigation.
L A W ENFORCEMENT
The Coast Guard, vested with broad authority for enforcement of
the Federal laws upon the high seas and waters over which the United
States has jurisdiction, enforced those laws and regulations, such as
the navigation and vessel inspection laws, with which it is specffically
charged, arid assisted in the enforcement, as necessary, of the Oil
Pollution Act; anchorage regulations; and the laws relating to internal
revenue, customs, immigration and quarantine, and conservation and
protection of fisheries and wildlife within the jurisdiction of other
Federal agencies but requiring marine or aviation personnel for
effective enforcement. Oil pollution violations, for which 80 reports
were made during the year, were a cause of concern. Improvement
in conditions has been accomplished by cooperation on the part of the
maritime industry and by greater patrol activity. Cooperation has
been extended to aU Federal, State, and municipal law enforcement
agencies.
During the year 13,693 motorboats and yachts were boarded and
examined to insure compliance with the laws and regulations designed
ADMINISTRATIVE REPORTS
175
to promote safety, and 3,030 cases of violations of the navigation and
vessel inspection laws were acted upon.
B E R I N G SEA PATROL
The Bering Sea Patrol was continued this year. The purpose is the
protection of life and property; protection of the seal herds and other
wUd life; law enforcement and transportation of a floating court in the
administration of justice; and the furnishing of medical and dental
assistance to natives and others in remote localities in the areas
contiguous to the Bering Sea and Arctic Ocean. The major part of
this patrol was accomplished by the cutter Northwind,
M A R I N E INSPECTION AND SAFETY M E A S U R E S
Among the duties which the Coast Guard performed in promoting
safety in the merchant marine and on navigable waters were approval
of plans for the construction, repah, and alteration of vessels; approval
of materials, equipment, and appliances; issuance of certificates of
inspection, and of permits indicating approval of vessels for operations
which may be hazardous to life or property; administration of loadline requhements; licensing and certificating of officers, pilots, and
seamen; investigation of marine casualties; enforcement of manning
requhements, citizenship requhements, and requhements for the mustering and drilling of crews; controlof logbooks; shipment, discharge,
protection, and welfare of merchant seamen; promulgation and enforcement of rules for lights, signals, speed, steering, sailing, passing,
anchorage, movement, and towlines of. vessels, and of regulations
governing the transportation of explosives and other dangerous cargoes
aboard vessels; numbering of undocumented vessels; prescription and
enforcement of regulations for outfitting and operation of motorboats;
licensing of motorboat operators; and the regulation of regattas and
marine parades.
A digest of certain phases of the marine inspection activities follows:
Number of
vessels
Annual inspections completed i
6,630
Drydock examinations
5,590
Reinspections
2,880
Special surveys (passenger vessels)
148
Special examinations by traveling inspectors on passenger vessels and ferries
136
Miscellaneous inspections
.
27, 825
Undocumented vessels numbered under.provisions of act
of June 7, 1918, as amended (increase of 12,071 over
previous fiscal year)
446, 108
Gross tonnage
of vessels
18, 934, 559
24, 055, 179
11, 460, 201
._
._
__
1 Includes 394 vessels, totaling 734,771 gross tons, which were conversions or new construction completed
during year.
There were 2,975 marine casualties reported of which 2,405 were
investigated, 16 of these by formal Marine Casualty Investigation
Boards. Only one passenger lost her life as a result of casualties on
inspected and certificated vessels during the year.
Under the provisions of law (46 U. S. C. 369) requhing approval
b y the Commandant of the Coast Guard of all contract plans and
176
REPORT OF THE SECRETARY OF THE TREASURY
specifications for building or altering passenger vessels of the United
States of one hundred gross tons and over, 14,196 vessel plans, together with accompanying specifications, were reviewed and processed.
To, assist in expediting the construction of 6 large passenger liners
placed under contract during the year, special arrangements were put
into effect by the Coast Guard for prompt action upon items requiring
Coast Guard approval. Two of the six liners wUl be used in Mediterranean service, three for round-the-world service, and one superliner for the North Atlantic route.
Completed during the fiscal year was the first major revision of the
Rules for Tank Vessels which has been undertaken since these rules
were first placed in effect in 1936. The changes were developed and
studied in cooperation with a committee representing the American
Petroleum Institute and were adopted after a public hearing in
June 1949.
^
In view of the 1948 International Convention on Safety of Life at
Sea, which will probably become effective on January 1, 1951, plans
are under way for the changes necessary to implement the requirements of this Convention.
MERCHANT M A R I N E PERSONNEL
The licensing and certfficating of merchant marine personnel
required the issuance of 101,830 documents. Of this number 24,692
were issued to men who had not previously served in the merchant
marine, and 1,504 licenses were issued to radio officers pursuant to
the act of M a y 12, 1948 (Public Law 525, 80th Cong.). In the
process of regulating the orderly conversion of the merchant marine
from wartime to peacetime operations, 2,535 waivers of manning
requirements were issued and 1,756 shortage reports were received.
Shipping commissioners supervised the execution of 16,117 sets of
shipment and discharge shipping articles.
Merchant Marine Investigating Units in major domestic ports and
Merchant Marine Details in certain foreign ports continued to operate
in the administration of discipline in the merchant marine as required
by Revised Statute 4450, as amended (46 U. S. C. 239). Merchant
Marine DetaUs in London, Bremerhaven, Naples, Trieste, and
Piraeus operated throughout the year. During the year, 6,931
investigations were made of cases involving negligence, incompetence,
and misconduct. These investigations resulted in the preferment of
charges in 844 cases. Hearings were held on 804 cases by civilian
examiners appointed in compliance with the provisions of the Administrative Procedure Act. A program for the selection, appointment,
and indoctrination of civilian examiners was undertaken at the
beginning of the year and the first hearing under the new system
was held in November 1948. A total of 16 examiners were appointed.
PERSONNEL
On June 30, 1949, the military personnel strength of the Coast
Guard on active duty consisted of 1,984 commissioned officers (1,696
Regular, 236 temporary service, 52 Reserve), 284 chief warrant
officers (214 Regular, 66 temporary, 4 Reserve), 502 warrant officers
(140 Regular, 362 temporary), 294 cadets, and 20,484 enlisted men.
ADMINISTRATIVE REPORTS
177
The authorized force of civUian employees at Coast Guard Headquarters on June 30, 1949, was 740. In the field service there were
1,335 salaried personnel, 2,607 wage board employees, and 700
lamplighters.
On June 3, 1949, 54 cadets graduated, after satisfactorily completing
the 4-year course at the Coast Guard Academy, and were commissioned
as ensigns. In the 1949 Nation-wide competitive examination for
appointment as cadets, 572 candidates from among 939 actual participants received passing grades, from which number it is expected
that 180 wUl be appointed as the class of 1953. The 1949 summer
practice cruise for practical sea training was made aboard the cutters
Campbell and Eagle, and included visits to European and African
ports.
An officer procurement program was inaugurated during the fiscal
year; and regular officers for the Coast Guard are being obtained from
the inactive Coast Guard Reserve, by the selection of chief warrant
and warrant officers or enlisted men in the Coast Guard who formerly
held temporary commissions, and from among qualffied merchant
marine officers.
A comprehensive program of post graduate, specialized, and advanced training was afforded to selected officers for increasing their
value to the Service and for the most efficient conduct of the many
highly specialized and technical phases of Service, operations and
administration.
To meet the increasing need for qualffied men in various ratings, the
courses at the Training Station, Groton, Conn., were augmented d.uring
the year, with an average of 711 men in training per month. Training in special courses was also afforded by Navy schools, and the
correspondence courses of the Coast Guard Institute and the United
vStates Armed Forces Institute were utilized to an increasing extent.
Of the 21,590 men who applied for enhstment in the Coast Guard,
7,154 were enlisted, 5,354 were rejected for physical reasons, 7,425
were rejected for other reasons, and 1,657 were accepted but faUed to
enlist. There were 4,207 recruits received during the year at the
Cape May, N. J., Receiving Center, and beginning in November 1948
the recruit training period was increased from 6 to 8 weeks.
On June 30, 1949, 19 medical officers, 29 dental officers, 8 nurse
officers, and 1 scientist officer of the Public Health Service were detailed to the Coast Guard. Six of the medical officer assignments
were aboard ocean station vessels. Contracts were let for three new
mobUe dental units to provide more adequate dental service to isolated
stations.
COAST GUARD R E S E R V E
Estimates of appropriation were submitted by the President for the
consideration of the Congress to initiate a training program for
Reserve personnel, to enable the Coast Guard, while operating as a
part of the Navy in time of war or national emergency, to perform
those duties which have been delegated to the Service, While no
appropriation had been made by June 30, 1949, Reserve dhectors were
assigned to all district offices with instructions to set up Reserve
records for their districts, establish contact with all Reserve personnel
residing therein, and establish volunteer training units where personnel
856455—50
13
178
REPORT OF THE SECRETARY OF THE TREASURY
and facilities permit. Also where circumstances did not permit of
such units, arrangements were made for members of the Reserve to
take part in Naval Reserve activities, as well as for the opportunity of
taking Naval Reserve correspondence courses. Such training duty,
although without pay as of July 1, 1949, is necessary in order that
Reserve officers can fulfill certain requirements and earn credits under
the provisions of the Army and Air Force Vitalization and Retirenient
Equalization Act of 1948 which is applicable to the Coast Guard
Reserve.
On June 30, 1949, the Reserve numbered 4,098 commissioned and
warrant officers and 252 enlisted men.
COAST GUARD AUXILIARY
The Coast Guard Auxiliary—a nonmUitary organization, was
established to assist the Coast Guard in promoting safety and in
effecting rescues on and over the high seas and on navigable waters; in
promoting efficiency in the operation of motorboats and yachts; in
fostering a wider knowledge of, and better compliance with, the laws,
rules, and regulations governing the operation of motorboats and
yachts; and in facilitating other operations of the Coast G u a r d ^ h a d
a membership of 13,276 on June 30, 1949, with an affiliated ownership
of 5,987 boats, 224 planes, and 185 radio stations. In addition to the
requhements that members maintain a high standard of efficiency in
engineering, safety, riavigation, and operating practices, the members
gave courtesy motorboat inspections and small-boat seamanship
training to nonmembers, provided safety patrols for regattas and
marine parades, and carried on a vigorous program of safety education
and self-help under the general auspices and guidance of the Coast
Guard.
FACILITIES AND EQUIPMENT
Aviation.—During the fiscal year the Coast Guard operated 79
ahcraft from nine air stations, three a h facilities, and five a h detachments. In addition to bases in the United States, aircraft were
operated from Argentia, Newfoundland; Honolulu, T. H.; Guam;
Sangley Point, Philippine Islands; and two bases in Alaska. WhUe
primarily engaged in operations connected with the saving of life
and property, aircraft provided the aerial means necessary in the
conduct of the other functions of the service. Assistance in law
enforcement was provided to the Alcohol Tax Unit and other Federal
agencies through aerial observations, as well as to the United States
Coast and Geodetic Survey in extensive aerial photography in the
United States and Alaska.
A Rotary Wing Development Unit was established at Elizabeth
City, N. C , for evaluating various types of- helicopters for service
use as well as developing certain techniques and equipment to enhance
the helicopter usefulness as a life-saving vehicle. Aii Aircraft Repair
arid Supply Base at Elizabeth City afforded major repahs and modifications of aircraft and aeronautical equipment.
Communications.—In addition to radio stations, an extensive coastal
Coast Guard-owned telephone and submarine cable system was maintained, supplementing commercial facUities as necessary, for pro-
ADMINISTRATIVE REPORTS
179
viding communication service to Coast Guard units, many in isolated
localities.
Floating units.—On June 30, 1949, the floating units in active conimission consisted of 180 cutters of various types, 48 patrol boats,
37 lightships, 39 harbor tugs, and 10 buoy boats.
In addition to the larger floating units, there were 178 motor lifeboats, 1,381 motorboats, and 2,329 nonpowered craft in operation
aboard ships and at shore installations.
*
Shore establishments.—Authorized shore units as of June 30, 1949,
included 9 a h stations, 12 bases, 41 depots, 171 lifeboat stations, 440
manned light stations, 79 light-attendant stations, 32 Loran transmitting stations, 49 marine inspection offices, 11 primary radio stations,
and 2 supply depots.
The Coast Guard Yard, Curtis Bay, Md., was the service's largest
industrial plant, affording major repair and maintenance facUities for
the larger vessels and developing and constructing smaU boats of all
types.
Surplus vessels and property.—During the year surplus vessels with
an acquisition value of $4,802,496 and other surplus property with
an acquisition value of $5,364,961 were disposed of.
CONSTRUCTION AND DEVELOPMENT
In addition to the normal maintenance and repair of vessels, aircraft, and shore instaUations, construction was begun on two new
lightships to replace over-age vessels, and five steam-powered light
ships were converted to Diesel propulsion and modernized. Fifteen
small seaplane tenders, obtained on a loan basis from the Navy, were
converted for ocean station duty.
Construction was started on Scotch Cap Light Station, Aleutian
Islands, to replace the lighthouse destroyed by a tidal wave in AprU
1946. Two Aleutian Loran stations were completed, and construction
of a third station started, the three replacing five teniporary stations.
The Aleutians, Hawaiian, Marshalls, and the East Coast Loran
chains (Loran-navigation stations) were reengineered and are being
relocated for better Loran service and personnel accommodations.
An unattended remote-controlled lighthouse, located on the breakwater at Long Beach Harbor, Calif., was completed and placed in
commission. This aid to navigation provides a 140,000 candlepower
light, a fog signal, and a radio beacon signal.
A continuous program of research and development was carried on
in effecting improvements in buoy design, in life-saving and shipboard
equipment and installations, and of radio equipment on mobile communication trucks; in modernizing and standardizing electronic devices on ocean weather station vessels; in producing new-type small
boats for meeting special and unusual needs of the service; and in
otherwise improving the mechanical and electronic equipment of the
service. The results of tests of three shore radar installations at
coastal lookout points, for increasing the efficiency of lookouts by
providing means of locating vessels and aircraft at night and in poor
weather and for providing contact data for coordinating rescue action,
form the basis for an expanded program for installations of this type
throughout the service.
180
REPORT OF T H E SECRETARY OF T H E TREASURY
The Ship Structure Committee, which represents the joint efforts
of the Army, Navy, Coast Guard, Maritime Commission, and American Bureau of Shipping to obtain stronger and safer welded ships, has
made considerable progress during the year in achieving its objective,
with the assistance and cooperation of the National Academy of
Sciences, the National Bureau of Standards, the American Iron and
Steel Institute, the Welding Research Council, and the British Admiralty Ship Welding Committee.
F U N D S AVAILABLE, OBLIGATIONS, AND BALANCES
During the fiscal year 1949 the sum of $451,500 was expended under
the provisions of the Mustering Out Payment Act of 1944. In settlement of unused leave under the Armed Forces Leave Act of 1946,
$122,079 was paid to 745 claimants.
The foUowing table shows the amounts available for the Coast
Guard during 1949, and the amount of obligations and unobligated
balances:
Funds available
Current operating appropriation:
Salaries, oflB.ce of Commandant
Pay and allowances
Civilian employees (field)
General expenses
Subtotal
-
Retired pay._.:._
_u
Subtotal
1
-
_.
.
..
Miscellaneous funds:
Payments, Armed Forces Leave Act of 1946 (allotment to
Treasury, Coast Guard)
Proceeds of sales of Coast Guard sites, Treasury Department
.
Coast Guard Academy, donations for chapel, Treasury
Department
._
Total miscellaneous funds . ,..
...
.. .
Working funds established by advances from other Government agencies:
National Military Establishment:
Department ofthe Navy.
Department of the Army
Federal Security Agency
.__
Department of State
Department of Commerce
Vftt.eran.s' Administration
Total working funds
Grand total...
_
Unobligated
balances
$2,300, 784
71, 255,154
4, 218,992
39,845,070
$2, 285, 663
70,089,834
4,167,326
39,213,303
$15,121
1,165,320
51, 666
601,767
117,620,000
115,786,126
1,833,874
12,000,000
11,950,061
49,939
Acquisition, construction, and improvements:
11,438,755
Total appropriations, 1949
__.
Prior year unobligated balances:
Acquisition of vessels and shore facilities, Coast Guard.
4,062, 777
Establishing and improving aids to navigation,Coast Guard
. . . 779,702
Special projects, aids to navigation. Coast Guard
164,510
Total appropriated funds
Net total
obligations
9, 364,357
2,074,398
• 408,957
3,653,820
268,517
112,299
611,185
52, 211
16,445,744
10,164,130
6,291,614
146,065,744
137; 890,317
8,176,427
203,374
122,079
81,295
140, 698
123,469
223,445
17, 229
223,445
567, 617
246,548
321, 969
684,169
30,266
361,000
146,612
10,000
6,000
464,633
30,266
361,000
146,612 '
219,636
3,696
io, 000
1,404
1,237,047
1,006,107
230,940
147,870,308
139,141,972
8,728,336
ADMINISTRATIVE REPORTS
181
U N I T E D S T A T E S SAVINGS B O N D S D I V I S I O N
The United States Savings Bonds Division of the Treasury Department is vested with the duty of promoting and effecting the sale of
United States savings bonds.
The Opportunity Drive, running from May 16 through June 30,
1949, was the Division's only major campaign effort during the year.
T h h t y covered wagons, which were used as symbols of the drive,
visited 700 cities to create awareness of the campaign, and were
viewed by tens of millions of people. Every, form of promotional
media was employed, and its effectiveness was attested by the more
than 50,000 different newspaper clippings which were forwarded to
the national office. All this contributed greatly to the success of the
drive, which resulted in sales of $1,216 million in Series E bonds
during the accounting period. The goal was the sale of $1,040 million
in Series E bonds alone.
In the fall of 1948 an intensified effort was exerted to increase"
participation in the payroll savings plan, which provides for regular
investments in savings bonds by salary and wage earners. This
endeavor contributed materially to the extension of the plan during
the year to 2,300 companies with 100 employees .or more. Of the
nearly 800,000 persons employed by these companies, 250,000 were
enlisted in this systematic savings movement.
The Interdepartmental Savings Bonds Committee, allied with the
Federal Payroll Savings Section to promote savings bond sales to
Federal einployees, gained 214,563 participants in 1949, bringing the
grand total to 1,021,509.
The Savings Bonds Division is headed by a National Director,
serving without compensation, who is also an Assistant to the Secretary
of the Treasury. His chief aide is a National Director of Sales under
whom function the following eight divisions: Publicity and Promotion,
Payroll Savings, Banking and Investments, Education, Labor Organizations, Community Activities, Agriculture, and Advertising. Each
of these functions under its own director. The administrative structure is headed by the Executive Officer, while the field organization is
supervised by a small staff of Field Sales Coordinators.
Sales activities of the Division are carried out by a Nation-wide
organization of volunteers, spearheaded by more than twenty national
committees and bulwarked by advisory committees in every State, all
serving without compensation and operating through county and
local committees.
The cost of promoting the savings bonds program is held to a
minimum because of contributions of advertising by radio, newspapers, television, and all other media, as well as by many national
and local advertisers. Advertising and promotion material is prepared and donated by the advertising agencies of The Advertising
Council, Inc., for distribution to media and advertisers.
Gross sales of savings bonds of all series during the fiscal year 1949
amounted to $7,141 mUlion. Details of these sales, as weU as redemptions and amounts outstanding, will be found on pages 78 and 79
and 468 to 478.
182
REPORT OF THE SECRETARY OF THE TREASURY
UNITED STATES SECRET SERVICE
The principal functions of the Secret Service are the protection of
the President of the United States and members of his family, of the
President-elect, of the Treasury Building and other buildings housing
Treasury Department activities, and the protection of the currency
and other obligations and securities of the United States in production, storage, and transit. The Secret Service is also charged with
the suppression of counterfeiting, forging, or alteration of obligations
and securities of the United States and foreign countries, and of
counterfeiting of coins. The Secret Service investigates forged endorsements on, or the fraudulent negotiation of. United States Treasury checks and bonds; loss of valuables in shipments by Government
agencies; violations of the Gold Reserve Act; and applicants for positions in certain agencies of the Treasury Department.
PROTECTIVE AND SECURITY ACTIVITIES
The White House Detail of Secret Service agents was augmented
in various parts of the Nation by agents from field offices during the
President's travels in the summer and fall. Many field agents were,
temporarily assigned to Washington in connection with the inauguration in January 1949.
The Uniformed Force of the Secret Service protected over $183
billion of currency, stamps, and other obligations in transit, and $713
billion of securities in production and storage.
ENFORCEMENT ACTIVITIES
Domestic counterfeiting showed an increase during the year. Secret
Service agents seized $790,764 in domestic counterfeit notes and $8,022
in domestic counterfeit coins in the United States, a total of $798,786
of domestic counterfeits. This compares with $747,434 of domestic
counterfeit notes and coins seized in 1948.
There was an increase of counterfeits of foreign origin passed inthe
United States. Of a total of $158,978 made abroad, $63,496 was
passed on Ariierican storekeepers in 1949, as compared with $42,566
passed in 1948. Seizures of foreign counterfeits in 1948 totaled
$2,346,796, but this total includes an unusually large seizure near
Marseilles, France, of $2,145,200 of notes, none of which had been
placed in circulation.
Of the total seizures of $957,764 in counterfeit notes and coins in
1949, $338,063 represented losses to victims of counterfeit passers.
The balance was captured before it could be placed in circulation.
New counterfeit note issues totaled 51, and there were 62 new variations of known counterfeit notes. Of the new issues, 18 were of
foreign origin. Agents captured 10 plants for the manufacture of
notes.
There were 207 arrests and 136 convictions for violations of the
counterfeiting laws, an increase of 31 percent in arrests compared
with 1948.
Counterfeiting offenders during 1949 included four men and a
woman arrested in Washington, D. C , for manufacturing about
ADMINISTRATIVE REPORTS
183
$150,000 in $20 notes, all of which were captured except $2,000
which the five had passed in various cities.
Three men were arrested in Harrison, N. Y., for possession of
$10,000 in counterfeit $10 and $20 notes and were found to be printing fake lottery tickets at the rate of 4,000 a week. All three were
convicted.
An undercover agent negotiated a purchase of $5,000 in counterfeit
$20 bills from two men who were arrested in New York and subsequently sentenced to prison terms. One man committed suicide in
prison. Another undercover agent bought $11,000 in counterfeit $10
notes from two men who were subsequently.arrested. At the moment
of arrest one man fled and was pursued and captured by an agent.
The second man, attempting to get away in an automobUe, drove the
machine directly at approaching agents and detectives. Blocked by
traffic he drove over the sidewalk at Broadway and Nineteenth
Street in New York City and crashed into a lamppost. He jumped
from the car and ran two blocks before he was captured. A further
example of efficient undercover work resulted in the capture of two
men in Chicago, and the seizure of $100,000 in counterfeit $20 notes.
The undercover agent in the case was promoted for meritorious
service.
For the first time in several years a case developed which involved
counterfeit postage stamps. New York agents arrested 1 woman
and 2 men and seized 105,400 counterfeit 3-cent stamps. Prosecution is pending.
A complete plant for the manufacture of $20 notes was-captured
by Los Angeles agents at Hanford, Calif.; and four men were arrested,
two of whom had been previously convicted as bank robbers. All
four pleaded guUty and were sentenced.
Chicago agents captured a complete plant for the manufacture of
$20 and $50 bUls and arrested four Japanese. The plant was installed
in a Chicago hotel and was seized before any finished counterfeits
could be chculated.
Another plant was seized by agents at Charleston, W. Va., where
two men were arrested with $2,730 in counterfeit $5 notes which they
had manufactured.
Check and bond forgeries continued to be a major enforcement
problem. On June 30, 1948, there were 10,488 forged checks and4,970 forged bonds awaiting investigation, and during the year 34,160
forged checks and 7,312 forged bonds were received for investigation.
Agents completed investigations of 33,427 forged checks totaling
$2,255,829.63 and 9,105 forged bonds with a maturity value of
$617,767.27. As of June 30, 1949, 11,221 forged checks and 3,177
forged bonds were awaiting investigation.
Of the 33,427 check cases closed, 15,730 or 47.1 percent were thefts
from the maUs and involved $1,085,363.17; 10,312 or 30.8 percent
were income tax refund checks; 6,666 or 19.9 percent were veterans'
checks; and 5,578 or 16.7 percent were allotment and allowance
checks.
Arrests for check forgerj^ totaled 1,817, and there were 1,676 convictions. There were 184 persons arrested for bond forgery, and 173
were convicted. Convictions include dispositions on cases pending
from prior years.
184
REPORT OF THE SECRETARY OF THE TREASURY
One case involved the alteration, by the son of the payee, of a
Treasury check drawn for $19,130. The check was issued for the
redemption of savings bonds and was intercepted in Kansas City by
the son, who typed his own name on the check as copayee. Learning
that he was sought by the Secret Service, the son fled to San Antonio,
Tex., where he was promptly arrested by agents. He was sentenced
to 5 years probation and to pay a fine of $2,500.
Investigation of one forged-bond case revealed a murder and resulted in a confession by the murderer. A young man was arrested
by police at Romney, W. Va., for carrying a .32-caliber pistol in his
automobile. He was found to have embezzled $400 from his employers in Arlington, Va., and to have negotiated four savings bonds
by identifying himself as the owner of the car, to whom the bonds
were inscribed. Agents prepared to make a paraffin test to determine
whether or not the man had recently fired the pistol found in the
automobile. He confessed that he had shot the car owner, dragged
his body into the underbrush, and stolen the automobile. The culprit
was subsequently sentenced to life imprisonment.
Arrests for all offenses aggregated 2,346 and convictions for all
offenses totaled 2,125.
The Secret Service closed 45,384 criminal cases and 1,735 nonCriminal cases, a total of 47,119 investigations completed during the
year. Fines in criminal cases totaled $38,343.45 and jail sentences
aggregated about 2,116 years, with additional sentences of 2,333
years suspended or probated.
The following tables' constitute a statistical summary of Secret
Service activities for 1949:
Counterfeit money seized, fiscal years 1948 and 1949
Counterfeit a u d altered notes seized:
After being circulated .
_
Before being circulated
Total
Counterfeit coins seized:
After being circulated
Before being c i r c u l a t e d . . . .
Total
G r a n d total
.
Percentage
increase, or
decrease ( - )
1949
Increase, or
decrease (—)
$137,318.60
_._ 2, 948, 437.85
$331,021.00
618,721.10
$193,702.40
-2,329,716.75
141.1
-79.0
3, 085, 756.45
949, 742.10
-2,136,014.36
—69.2
7,896.31
577. 25
7,041.84
979. 77
-864.47
402.62
-10.8
69.7
1948
8,473.66
8, 021. 61
-461.96
—5 3
3, 094, 230.01
957, 763. 71
- 2 , 1 3 6 , 466. 30
—69.0
185
ADMINISTRATIVE REPORTS
Number of investigations of criminal and noncriminal activities, fiscal years 1948
and 1949
Criminal cases:
Making or passing:
!
Counterfeit notes . . '
. .
Counterfeit coins ,.-J
Altered obligations
Forgery of Government cliecks
stolen or altered bonds.—.:
Protective research cases _
Other criminal cases
Total.
Noncriminal cases
._ _. . .
:.--'
.
Grand total cases closed .
Percentage
Increase, or increase,
or
decrease (—) decrease
(—)
1948
1949
118
49
327
28,004
12,174
2,617
261
•319
63
288
33,427
9,105
1,841
351
201
4
-39
5,423
-3,069
-776
100
170.3
8.2
-11.9
19.4
-25.2
-29.7
39.8
43, 640
2, 081
45, 384
1,735
1,844
-346
4.2
—16.6
45, 621
47,119
1,498
3.3
Number of arrests and cases disposed of, fiscal years 1948 and 1949
i
1948
Arrests for:
Making or passing:
'
Counterfeit notes
Counterfeit coins
Altered obligations 1
Forgery of Governraent checks
Violation of Gold Reserve Act
...
Violation of Farm Loan Act
Stolen, altered, or forged bonds
Protective research cases.'
Stamp and strip stamp cases ._ . .
False claim cases
„
Theft of Treasury Departinent property
Miscellaneous
_
.
Total
-
. . . . ...
.
.'.
Oases disposed of:
Convictions in connectiori with:
C ounterfei t notes
I
Counterfeit coins
'_
Altered obligations ..~
.
Forgery of Government checks
Violation.of Gold Reserve Act
Violation of Farm Loan Act
Stolen, altered, or forged bonds
Protective research cases
False claim cases
' _ .
Theft of Treasury Department property
Miscellaneous
Total
Acquittals
Dismissed, not indicted, or died before trial
Total cases disposed of.'
-
..
Percentage
Increase, or Increase,
or
decrease (—) decrease
(—)
1949
162
45
61
1,817
2
1
19
46
3
-11
85
-6
-1
-48
-7
2
-2
-3
10
39.7
7.1
-15.3
4.9
—75.0
—100.0
-20.7
-11.9
200.0
-100.0
• -75.0
111.1
2,278
. 2,346
68
3.0
52
38
57
1,590
2
3
245
60
2
2
8
2,059
36
133
106
31
73
1, 676
173
51
1
1
13
i
63
-7
16
86
-2
-2
-72
-9
-1
-1
5
101.9
-18.4
28.1
5.4
-100.0
-66.7
'-29.4
-16.0
-60.0
-50.0
62.5
2,126
, 46
131
66
9
-2
-j-3. 2
-f25.0
-1.5
2,228
2,301
73
3.3
,116
42
72
1,732
8
1
232
59
1
24
9
184
52
3
EXHIBITS
187
PUBLIC DEBT
TREASURY CERTIFICATES OF INDEBTEDNESS, TREASURY NOTES, AND TREASURY
BONDS
Exhibit 1.—Offering of 1% percent certificates of Series G-1949 ^
[Department Circular No. 835. Public Debt]
TREASURY
i
DEPARTMENT,
Washington, September 20, 1948.
I. OFFERING OF CERTIFICATES
. 1. The Secretary of the Treasury, pursuant to the authority of the Second
Liberty Bond Act, as amended, invites subscriptions, at par, from the people of
the United States, for'certificates of indebtedness of the United States, designated
1)1 percent Treasury certificates of indebtedness of Series (jr-1949, in exchange for
Treasury certificates of indebtedness of Series J-1948 or Series K-1948, or Treasury notes of Series B-1948, all maturing October 1, 1948.
i
II.
.
•
"
DESCRIPTION OF CERTIFICATES
1. The certificates will be dated October 1, 1948, and will bear interest from
that date at the rate of 1J4 percent per annum, payable with the principal at
maturity on October 1, 1949. They will not be subject to call for redemption
prior to maturity.
2. The income derived from the certificates shall be subject to all taxes now or
hereafter imposed under the Internal Revenue Code, or laws amendatory or supplementary thereto. The certificates shall be subject to es'tate, inheritance, gift
or other excise taxes, Whether Federal or State, but shall be exempt from all
taxation now or hereafter imposed on the principal or interest thereof by any
State, or any of the possessions of the United States, or by any local taxing
authority.
3. The certificates will be acceptable to secure deposits of public moneys.
They will not be acceptable in payment of taxes.
4. Bearer certificates will be issued in denominations of $1,000, $5,000, $10,000,
$100,000 and $1,000,000; The certificates will not be issued in registered form.
5. The certificates will be subject to the general regulations of the Treasury
Department, now or herbafter prescribed, governing United States certificates.
Ill,
SUBSCRIPTION AND ALLOTMENT
1. Subscriptions will be received at the Federal Reserve Banks and branches
and at the Treasury Department, Washington. Banking institutions generally
may submit subscriptions for account of customers, but only the Federal Reserve
Banks and the Treasury Department are authorized to act as official agencies.
2. The Secretary of the Treasury reserves the right to reject any subscription,
in whole or in part, to allot less than the amount of certificates applied for, and
to close the books as to any or all siibscriptions at any time without notice; and
any action he may take: in these respects shall be final. Subject to these reservations, all subscriptions will be allotted in full. Allotment notices will be sent
out promptly upon allotment.
•1 Details of Department Circular No. 829, dated June 21,1948, covering the offering of certificates of Series
F-1949, will be found in 1948 annual report on p. 167; and the exchange of this issue for maturing certiflcates
will be found on p. 170 of that report.
189
190
REPORT OF T H E SECRETARY OF T H E TREASURY
IV.
PAYMENT
1. P a y m e n t a t p a r for certificates allotted hereunder m u s t be m a d e on or
before October 1, 1948, or on later allotment, a n d m a y be m a d e only in Treasury
certificates of indebtedness of Series J-1948 or Series K-1948, or Treasury notes
of Series B-1948, all m a t u r i n g October 1, 1948, which will be accepted a t par,
a n d should accompany t h e subscription. T h e full a m o u n t of interest due on t h e
securities surrendered will be paid to t h e subscriber following acceptance of t h e
securities.
V.
GENERAL
PROVISIONS
1. As fiscal agents of t h e United States, Federal Reserve Banks are authorized
a n d requested to receive subscriptions, t o make allotments on t h e basis a n d
up to t h e a m o u n t s indicated by t h e Secretary of t h e Treasury to t h e Federal
Reserve Banks of t h e respective districts, to issue allotment notices, to receive
p a y m e n t for certificates allotted, to m a k e delivery of certificates on full-paid
subscriptions allotted, a n d t h e y m a y issue interim receipts pending delivery of
t h e definitive certificates.
2. T h e Secretary of t h e Treasury m a y a t any time, or from time to time, prescribe supplemental or a m e n d a t o r y rules a n d regulations governing t h e offering,
which will be communicated p r o m p t l y to t h e Federal Reserve Banks.
JOHN W .
SNYDER,
Secretary of the Treasury.
Exhibit 2.—Details of certificate issues and allotments
Circulars pertaining to issues of Treasury certificates of indebtedness during
t h e fiscal year 1949 are similar in form to t h e circular shown in exhibit 1, a n d
therefore are not reproduced in this report. However, t h e essential details regarding each issue are summarized in t h e following table, a n d t h e final allotments of
new certificates in exchange for m a t u r i n g pr called securities are shown in t h e
succeeding table.
Summary of information contained in circulars pertaining to Treasury certificates of indebtedness issued during the fiscal year 1949
Date
of
circular
Number
of
circular
1948
June 21
829
Sept. 20
835
l}4% Series~Q-1949"
Oct.
1
Oct7 1
Dec. 6
839
I H % Series H-1949
Dec. 16
Dec. 16
1950
._.._
Jan. 1 riH% Treasury notes Series A-1949, due Jan. 1, 1949_-_
U3^% certificates of Indebtedness Series A-1949, due Jan. 1,1949
1H% certificates of indebtedness:
Series B-1949, due Feb. 1,1949
:
Feb. 1
Series C-1949, due Mar. 1,1949*
Mar. 1
Series D-1949, due Apr. 1,1949
Apr. 1
Series E-1949, due June 1,1949
June 1 /12% Treasury
bonds of 1949-51 (dated Jan. 16. 1942), due June 16. 1949 «.
July 1 1H% certificates of indebtedness Series F-1949, due July 1,1949
Certificates of indebtedness
issued
1^-8% Series F-1949.
Date of
issue
Date of
maturity
1948
July 1
1949
July 1
Dec. 15
841
i H % Series A-1950.
1949
Jan. 1
1949
Jan. 19
Feb. 15
Mar. 21
May 19.
June 20
842
843
844
846
847
IH% Series B-1950.
13^% Series O-1950.
1H% Series D-1950
I H % Series E-1950.
1H% Series F-1950.
Feb.
Mar.
Apr.
June
July
1
1
1
1
1
Securities exchanged for new issues
i% certificates of indebtedness:
Series F-1948, due July 1,1948...
Series G-1948, due July 1, 1948
i
Series H-1948, due July 1,1948-_
1%Treasury notestSeries_B-1948, due_Oct. 1,.1948...........
......
1% certificates of indebtedness Series J-1948, due Oct 1, 1948
1% certificates of indebtedness Series K-1948. due Oct. 1, 1948
2% Treasury bonds of 1948-50 (dated Dec. 8, 1939), due Dec. 15, 1948 2.
1 Interest due on securities surrendered was paid to subscriber following acceptance
of securities.
3 Called on Aug. 13, 1948, for redemption on Dec. 15,1948.
3 Payment of final interest due Dec. 15,1948, on bonds surrendered was paid as follows:
On coupon bonds, by payment of Dec. 15, 1948, coupons; and on registered bonds, by
checks drawn in accordance with assignments on bonds surrendered.
< Beginning with November, 1947 operation, arrangements were made between Treasury
and Federal Reserve System whereby all or part of System's holdings of certain maturing
and called securities would be presented for cash redemption.
Date
Allotment
subscrip- payment date
tion
on or before
books
(or on later
closed
allotment)
1948
June 23
1948
1 July 1.
Sept. 22 ^'dct. i.~
Dec.
8
8 Dec. 16.
[Dec. 17
1949
1 Jan. 3.
1949
Jan. 21
Feb. 18
Mar. 24
[May 23
June 23
1 Feb. 1.
1 Mar. 1.
1 Apr. 1.
6 June 1.
1 July 1.
S
5 Called on Feb. 14,1949, for redemption on June 16, 1949.
fl Interest due on certificates surrendered was paid to subscriber following acceptance
of certificates. In case of called bonds in coupon form, payment of accrued interest on
new certificates from June 1 to 15,1949 ($0.47946 per $1,000), was made when subscription
was tendered. In case of called registered bonds, accrued interest was deducted from
amount of check issued in payment of final interest on bonds surrendered. Final Interest
due June 15,1949, on bonds surrendered was paid as follows: On coupon bonds, by payment of June 15,1949, coupons; and on registered bonds, by checks drawn in accordance
with assignments on bonds surrendered.
CO
Treasury certificates of indebtedness issued in exchange for matured or called securities, by Federal Reserve districts, fiscal year 1949 ^
[In thousands of dollars]
1 K % Series G-1949 certificates exchanged for—
1% Series'
1% Series
1% Series
B-1948
J-1948 certifiK-1948 certifi- T r e a s u r y iiotes,
cates, m a t u r i n g cates, m a t u r i n g
maturing
Oct. 1, 1948
Oct. 1,1948 .
Oct. 1, 1948
Federal Reserve district
Boston
NewYork . ..
Philadelphia
Clevieland
. .
Cincinnati
Pittsburgh
Richmond .
Baltimore
Charlotte
Atlanta
Birmingham
Jacksonville
Nashville
N e w Orleans.
Chicago
St. Louis
Little Rock
Louisville . .
Memphis
MinneapolisKansas City.
Dallas
E l Paso Houston.
San Antonio.
SanFrancisco
Los Angeles
Portland
Salt L a k e C i t y
Seattle
Treasury
_
...
. . .
. _
. .
_ _ .
. .
....
..
. . . ....
.
. __
- .
. . .
..
_ .
...l
_
.
._
....
.__
T o t a l a l l o t m e n t s o n exchanges
C a s h r e d e m p t i o n s of m a t u r i n g or called securities:
R e d e e m e d b y F e d e r a l Reserve B a n k s
. ..R e d e e m e d b y others or carried t o m a t u r e d d e b t . .
T o t a l r e d e e m e d for cash
T o t a l m a t u r e d or called security
3,912,067
230,174
3, 438, 282
224, 243
124,113
36, 203
45, 706
61, 883
34,248
20,426
61,197
24, 753
23,440
27,461
63,952
796,943
123, 473
11, 576
64,789
23, 761
213,032
243, 733
77,710
6,928
46, 469
64,001
220,765
204, 878
11,088
6,387
20,094
16,464
6, 636,161
11,960
330,370
6,983
14,199
837
11,631
959
217
420
1,477
155
266
92
623
81, 546
4,824
102
3,225
1,171
7,110
5,354
4,363
109.
1,931
1,258
21,036
5,613
14
28
150
1,131
519,153
179,983
179,983
4,092,050
377,931
377, 931
6, 913,092
52,278
62, 278
48,741
614, 664
49, 966
14, 618
7,045
11,408
28,856
8,454
• 5,600
16, 281
4,726
3,649
4,483
20,367
182,886
33,050
3,459
11,794
7,162
49,263
67, 370
13,671
2,373
13.320
19, 605
31.321
73, 998
2,705
1,409
5,359
9,116
116,938
2,234,173
135,855
67, 672
22,120
26,098
23,317
21,829
10,847
25,191
13,320
17,024
17,930
24,023
457, 490
60,093
4,961
31, 807
8,673
110, 208
117,215
62, 650
3,686
20,899
23,129
170,228
83,960
6,953
2,111
9,910
1,767
1, 256, 696
1,366, 498
97,370
97,370
1, 363, 966
100, 578
100, 578
1, 467, 076
64, 496
589, 555
38, 422
51,923
7,038
8, 200 .
9,711
3,966
3,979
19, 726
6,707
2,767
6,038
9, 662
166, 667
30,330
3,165
11,188
7,936
63,661
69,148
11, 389
869
11, 260
11, 267
19, 216
46,930
1,430
1,867
4,826
4, 681
J For allotments of Series F-1949 certificates dated July 1, 1948, see 1948 annual report, p. 170.
Total
\ H Series H-1949 1 ^ % Series A-1950 certificates exchanged for—
certificates
exchanged for
1 H % Series
2% Treasury
1 H % Series
A-1949
b o n d s of 1948-60 A-1949
certifi- T r e a s u r y n o t e s ,
Total
( d a t e d D e c . 8,
cates, m a t u r i n g
maturing
. 1939), called for
J a n . 1, 1949
J a n . 1, 1949
r e d e m p t i o n on
D e c . 15, 1948
671, 431
104,086
1,622,327
116; 238
108, 610
15,819
34,876
13, 224
25, 604
9,881
24,748
10,415
7,234
9,381
18, 871
566, 887
51, 691
6,347
16, 282
6,143
104,714
99, 668
26,995
2,412
32, 778
15, 406
94,351
104, 435
11,063
9,748
24, 245
6,133
83, 256
1,140,136
63, 966
46,826
23,693
27,241
16,033
15, 932
11, 052
40,233
7,293
. 4,040
7,332
13, 216
337, 398
66,058
3, 734
35,229
7,317
64,965
• 104,904
27,203
2,127
30, 885
15,768
71, 696
106, 419
2,840
6,010
10,904
2,292
2,395,995
3, 298, 601
187, 340
2, 762, 463
180, 204
165,435
39, 512
62,117
29, 257
41, 536
20,'933
64,981
17, 708
11, 274
16, 713
32, 086
904,285
117, 749
10, 081
50, 611
12,460
169, 679
204, 562
64,198
4, 539
63, 663
31,174
166, 047
210,854
13,903
15, 758
36,149
8,426
6, 694, 596
196,916
195, 916
2, 691,911
236, 217
236, 217
3,534,818
432,133
432,133
6,126, 729
CO
to
Treasury certificates of indebtedness issued i n exchange for matured or called securities, by Federal Reserve districts, fiscal year 1949 ^ -Continued
[In t h o u s a n d s of dollars]
F e d e r a l R e s e r v e district
Ol
Boston
New York
Philadelphia
Cleveland
,
Pittsburgh
Richmond
.
Baltimore
.
Charlotte
.
A t l a n t a . _.
Birmingham
•
Jacksonville
Nashville
N e w Orleans
Chicago
;
St Louis
-_
--Little Rock
Louisville
Memphis
..
Minneapolis
Kansas City
....
Dallas
ElPaso
.
'Houston
San Antonio
S a n Francisco
.:
.
LosAngeles.
Portland
Salt L a k e C i t y
Seattle
Treasury
T o t a l a l l o t m e n t s o n exchanges
C a s h r e d e m p t i o n s of m a t u r i n g or called securities:
R e d e e m e d b y F e d e r a l Reserve B a n k s
R e d e e m e d b y o t h e r s or carried to m a t u r e d
debt
:
-...
T o t a l r e d e e m e d for cash
T o t a l m a t u r e d or called s e c u r i t y
1 K % Series B 1950 certificates
exchanged for
1 H % Series B 1949 certificates,
maturing Feb.
1, 1949
92,702
860,602
87,635
66,172
-13,74713,601
11,043
•
9,030
3,707
23,660
10,089
6,667
7,993
11, 525
230,000
42,064
4,368
25, 653
6,796
56, 607
96, 986
31,233
2,446
11,616
10,919
68,246
96,709
6,866
2,233
89,182
4,255
1, 993,250
88,000
107, 563
195, 563
2,188,813
1 M % Series C 1950 certificates
exchanged for
1 3 ^ % Series C 1949 certificates,
maturing Mar.
1, 1949
92,059
1,699,811
64, 794
48,668
--- 28,03641,289
12,860
9,842
3,870
37, 674
11,807
5,090
9, 690
24,146
306,026
60,630
2,357
42,823
7,819
71,442
93,467
27,013
2,133
18, 439
9,379
94,181
74,683
3,950
3,258
7,846
6,676
2, 921, 636
iViJo Series E 1949 certificates,
maturing June
1, 1949
33,986
450,082
18,410
18,003
_ 10,464
11,618
4,614
6,500
2,649
11, 700
3,865
2,677
6,299
8,397
129,471
27,050
3,172
13,334
3,741
42, 772
60,272
10,394
1,502
16,568
4,465
32, 532
25,028
1,463
2,636
2,342
^ 6,739
962, 544
181,246
2, 402, 726
84,094
76,193
24,444
35, 563
20, 950
21,856
21,250
34,432
10,632
17,202
13,644
13,680
430,588
67, 866
10,168
38, 680
10,495
77,116
116,017
38,326
4,146
29, 937
17,787
192,877
70,283
7,240
7,746
24,098
4,617
4,105,798
92,292
195,319
.195,319
1,054,836
4, 301,117
2% Treasury
bonds (dated
J a n . 15, 1942),
called for redemption on
J u n e 16, 1949
Total
1M% Series F 1950 certificates
exchanged for
1 H % Series F 1949 certificates,
maturing July
1, 1949
62,895
567,562
42,603
6,426
_ _ _5,.336
13,404
4,388
6,715
1,256
7,607
462
1,198
2,713
4,408
91,648
9,059
256
1,668
246
17,009
26,482
2,687
711
2,574
3,230
19,000
16, 550
1,266
274
1,920
2,739
912, 990
234,141
2, 970,288
126, 597
82,618
29,779
48, 967
25,338
28, 670
22, 606
42,039
11,094
18,400
16,357
18,088
622,136
76, 925
10,424
•
40,348
10,741
94,125
• 141,499
40,913
4,857
32, 611
21,017
211,877
86, 833
8,606
8,020
26,018
7,256
5,018,788
82,632
3.881,256
105,130
98,348
17,_617
31,272
18,086
9,263
28, 502
39, 842
10,470
8,440
10,420
32,170
492,737
93,279
4,674 .
31,297
14,864
103,296
150,558
45, 842
2, 710
27, 921
17,636
136, 317
82,069
3,662
4,368
12,158
5,289
5,601,026
101,029
296,348
296, 348
5,315,136
181, 865
6,782, 890
teJ
400,000
231, 620
631, 620
3, 653,156
1 F o r a l l o t m e n t s of Series F-1949 certificates d a t e d J u l y 1,1948, see 1948 a n n u a l r e p o r t , p . 170.
1 / ^ % Series E-1960 certificates exchanged for—
\ } 4 % Series D 1950 certificates
exchanged for
iy&% Series D 1949 certificates,
maturing Apr.
1, 1949
101,029
1,014,019
181,865
CO
CO
194
REPORT OF THE SECRETARY OF THE TREASURT
Exhibit 3.—Offering of 13/8 percent Treasury notes of Series A-1950, and
allotments
[Department Circular No. 834. Public Debt]
TREASUR.Y D E P A R T M E N T ,
Washington, September 1, 1948.
1. O F F E R I N G O F N O T E S
1. T h e Secretary of t h e Treasury, p u r s u a n t t o t h e a u t h o r i t y of t h e Second
Liberty Bond Act, as amended, invites subscriptions, a t par, from t h e people of
the United States for notes of t h e United States, designated V/s percent Treasury
notes of Series A-1950, in exchange for 1)^ percerit Treasury notes of Series
A-1948, m a t u r i n g September 15, 1948:
II.
DESCRIPTION OF N O T E S
1. T h e notes will be dated September 15, 1948, a n d will bear interest from t h a t
d a t e a t t h e r a t e of 1% percent per a n n u m , payable on a semiannual basis on April
1 a n d October 1, 1949, a n d April 1, 1950. They will m a t u r e April 1, 1950, a n d
will not be subject t o call for redemption prior t o m a t u r i t y .
2. T h e income derived from t h e notes shall be subject t o all taxes, now or
hereafter imposed under t h e Internal Revenue Code, or laws a m e n d a t o r y or
supplementary thereto. T h e notes shall be subject t o estate, inheritance, gift
or other excise taxes, whether Federal or State, b u t shall be exempt from all
taxation now or hereafter imposed on t h e principal or interest thereof b y a n y
State, or, a n y of t h e possessions of t h e United States, or b y a n y local taxing
authority.
3. T h e notes will be acceptable t o secure deposits of public moneys. They
will n o t be acceptable in p a y m e n t of taxes.
4. Bearer notes will be issued in denominations of $1,000, $5,000, $10,000,
$100,000 a n d $1,000,000. T h e notes will not be issued in registered form.
5. T h e notes will be subject t o t h e general regulations of t h e Treasury D e p a r t ment, now or hereafter prescribed, governing United States notes.
III.
S U B S C R I P T I O N AND A L L O T M E N T
1. Subscriptions will be'received a t t h e Federal Reserve Banks a n d branches
and a t t h e Treasury D e p a r t m e n t , Washington. Banking institutions generally
m a y submit subscriptions for account of customers, b u t only t h e Federal Reserve
Banks a n d t h e Treasury D e p a r t m e n t are authorized t o act as official agencies.
2. T h e Secretary of t h e Treasury reserves t h e right t o reject a n y subscription,
in whole or in p a r t , t o allot less t h a n t h e a m o u n t of notes applied for, a n d t o
close t h e books as t o a n y or all subscriptions a t a n y time without notice; a n d a n y
action he m a y t a k e in these respects shall be final. Subject t o these reservations,
all subscriptions will be allotted in full. Allotment notices will be sent out
p r o m p t l y upon allotment.
IV.
PAYMENT
1. P a y m e n t a t p a r for notes allotted hereunder m u s t be made on or before
September 15, 1948, or. on later allotment, a n d m a y be made only in Treasury
notes of Series A-1948, m a t u r i n g September 15, 194.8, which will be accepted a t
par, a n d should accompany t h e subscription.
V. G E N E R A L P R O V I S I O N S
1. As fiscal agents of t h e United States, Federal Reserve Banks are authorized
a n d requested t o receive subscriptions, t o make allotments on t h e basis a n d up
t o the a m o u n t s indicated b y t h e Secretary of t h e Treasury t o t h e Federal Reserve
Banks of t h e respective districts, t o issue allotment notices, t o receive p a y m e n t
or notes allotted, t o make delivery of notes on full-paid subscriptions allotted,
and t h e y m a y issue interim receipts pending delivery of t h e definitive notes.
2. T h e Secretary of t h e Treasury m a y a t a n y time, or from time t o time,
prescribe supplemental or a m e n d a t o r y rules a n d regulations governing t h e offering,
which will be communicated p r o m p t l y t o t h e Federal Reserve Banks.
J O H N W . SNYDER,
Secretary of the Treasury.
195
EXHIBITS
2% percent Treasury notes^ of Series A-1950 issued i n exchange for maturing 1}^
percent Treasury notes of Series A-1948, by Federal Reserve districts
I
[In thousands of dollars]
Subscriptions received and
allotted
Federal Reserve district
Boston
NewYork
Philadelphia
Cleveland
Cincinnati...
Pittsburgh...
Richmond..
Baltimore
Charlotte..-.
Atlanta
Birmingham.
Jacksonville..
Nashville
New Orleans.
Chicago
-.
St. Louis
Little Rock..
100,737
1,751,794
148, 036
74,056
27,472
28,316
19, 465
24,657
9,106
54,593
3,976
6,142
5,657
22, 272
580,102
81,779
4,392
Federal Reserve district
Subscriptions, received and
allotted
St. Louis—Continued
Louisville
Memphis
Minneapolis
KansasCity
Dallas
-.
ElPaso
Houston
San Antonio
San Francisco
Los Angeles
Portland-.
SaltLakeCity.:..
Seattle..-Treasury
Total
42,366
12,494
94,326
148, 459
40,633
3,377
12,843
28,587
179,683
69, 867
6,605
2,726
9,223
3,370
3,595,997
Exhibit 4.—Calls for redemption of three issues of Treasury bonds
P R E S S R E L E A S E A U G U S T 13, 1948
T h e Secretary of t h e Treasury announced t o d a y t h a t all outstanding 2 percent
Treasury bonds of 1948-50, d a t e d December 8, 1939, are called for redemption
on December 15, 1948. There are now outstanding $571,431,150 of these bonds.
T h e text of t h e formal notice of call is as follows:
T w o P E R C E N T T R E A S U R Y B O N D S O F 1948-50 ( D A T E D D E C E M B E R 8, 1939)
To Holders of 2 Percent Treasury Bonds of 1948-60 {Dated December 8, 1939), and
Others Concerned:
1. Public notice is hereby given t h a t aU outstanding 2 percent Treasury bonds
of 1948-50, d a t e d December 8, 1939, a r e hereby called for redemption on December 15, 1948, on which date interest on such bonds will cease.
2. Holders of these bonds may, in advance of t h e redemption date, be offered
t h e privilege of exchanging all or a n y p a r t of their called bonds for other interestbearing obligations of t h e United States, in which event public notice will hereafter be given a n d an oflicial circular governing t h e exchange offering will be
issued.
3. Full information regarding t h e presentation a n d surrender of t h e bonds for
cash redemption under this call will be found in D e p a r t m e n t Circular N o . 666,
d a t e d July 21, 1941.
'
J O H N W . SNYDER,
!
Secretary of the Treasury.
P R E S S R E L E A S E F E B R U A R Y 14, 1949
T h e Secretary of t h e Ti-easury announced t o d a y t h a t all outstanding 2 percent
Treasury bonds of 1949-^1, dated J a n u a r y 15, 1942, are called for redemption
on J u n e 15, 1949. T h e r e ' a r e n o w outstanding $1,014,018,900 of these bonds.
T h e text of t h e formal notice of call is as follows:
T w o P E R C E N T T R E A S U R Y B O N D S O F 1949-51 ( D A T E D J A N U A R Y 15, 1942)
To Holders of 2 Percent Treasury Bonds of 1949-61 {Dated J a n u a r y 16, 1942), and
Others Concerned:
1. Public notice is hereby given t h a t all outstanding 2 percent Treasury bonds
of 1949-51, dated J a n u a r y 15, 1942, are hereby called for redemption on J u n e 15,
1949, on which date interest on such bonds will cease.
[Paragraphs 2 a n d 3, omitted here, are similar t o corresponding paragraphs in
t h e first notice of caU.]
^
J O H N W . SNYDER,
Secretary of the Treasury.
196
REPORT OF THE SECRETARY OF THE TREASURY
PRESS RELEASE MAY 13,1949
The Secretary of the Treasury announced today that all outstanding 2 percent
Treasury bonds of 1949-51, dated IMay 15, 1942, are called for redemption on
September 15, 1949. There are now outstanding $1,292,443,600 of these bonds.
The text of the formal notice of call is as follows:
Two
PERCENT TREASURY BONDS OF 1949-51 (DATED MAY 15,
1942)
To Holders of 2 Percent Treasury Bonds of 1949-51 {Dated May 16, 1942), and
Others Concerned:
1. Public notice is hereby given that all outstanding 2 percent Treasury bonds
of 1949-51, dated May 15, 1942, are hereby called for redemption on September
15, 1949, on which date interest on such bonds will cease.
[Paragraphs 2 and 3, omitted here, are similar to corresponding paragraphs in
the first notice of call.].
JOHN W . SNYDER,
Secretary of the Treasury.
TREASURY BILLS
Exhibit 5.—Inviting tenders for Treasury bills dated July 1, 1948 (press release
June 25, 1948)
The Secretary of the Treasury, by this public notice, invites tenders for
$1,100,000,000, or thereabouts, of 91-day Treasury bills, for cash and in exchange
for Treasury bills maturing July 1, 1948, to be issued on a discount basis under
competitive and noncompetitive bidding as hereinafter provided. The bills of
this series will be dated July 1, 1948, and will mature September 30, 1948, when the
face amount will be payable without interest. They will be issued in bearer
form only, and in denominations of $1,000, $5,000, $10,000, $100,000, $500,000,
and $1,000,000 (maturity value).
Tenders will be received at Federal Reserve Banks and branches up to the
closing hour, 2 o'clock p. m., eastern daylight saving time, Monday, June 28,
1948. Tenders will not be received at the Treasury Department, Washington.
Each tender must be for an even multiple of $1,000, and in the case of competitive
tenders the price offered must be expressed on the basis of 100, with not more than
three decimals; e. g., 99.925. Fractions may not be used. It is urged that
tenders be made on the printed forms and forwarded in the special envelopes
which will be supplied by Federal Reserve Banks or branches on application
therefor.
Tenders will be received without deposit from incorporated banks and trust
companies and from responsible and recognized dealers in investment securities.
Tenders from others must be accompanied by payment of 2 percent of the face
amount of Treasury bills applied for, unless the tenders are accompanied by an
express guaranty of payment ^by an incorporated bank or trust company.
Immediately after the closing hour, tenders will be opened at the Federal
Reserve Banks and branches, following which public announcement will be made
by the Secretary of the Treasury of the amount and price range of accepted bids.
Those submitting tenders will he advised of the acceptance or rejection thereof.
The Secretary of the Treasury expressly reserves the right to accept or reject
any or all tenders, in whole or in part, and his action in any such respect shall
be final. Subject to these reservations, noncompetitive tenders for $200,000 or
less without stated price from any one bidder will be accepted in full at the
average price (in three decimals) of accepted competitive bids. Settlement for
accepted tenders in accordance with the bids must be made or completed at
the Federal Reserve Bank on July 1, 1948, in cash or other immediately available
funds or in a like face amount of Treasury bills maturing July 1, 1948. Cash and
exchange tenders will receive equal treatment. Cash adjustments will be made
for differences between the par value of maturing bills accepted in exchange and
the issue price of the new bills.
The income derived from Treasury.bills, whether interest or gain from the sale
or other disposition of the bills, shall not have any exemption, as such, and loss
from the sale or other disposition of Treasury bills shall not have any special
treatment, as such, under the Internar Revenue Code, or laws amendatory oi
197
EXHIBITS
supplementary thereto. The bills shall be subject to estate, inheritance, gift or
other excise taxes, whether Federal or State, but shall be exempt from all taxation
now or hereafter imposed on the principal or interest thereof by any State, or any
of the possessions of the United States, or by any local taxing authority. For
purposes of taxation the amount of discount at which Treasury bills are originally
sold by the United States shall be considered to be interest. Under sections 42
and 117 (a) (1) of the Internal Revenue Code, as amended by .section 115 of the
Revenue Act of 1941, the amount of discount at which bills issu'ed hereunder are
sold shall not be considered to accrue until such bills shall be sold, redeemed or
otherwise disposed of, and such bills are excluded from consideration as capital
assets. Accordingly, the owner of. Treasury bills (other than life insurance
companies) issued hereunder need include in his income tax return only the
difference between the price paid for such bills, whether on original issue or on
subsequent purchase, and the amount actually received either upon sale or
redemption at maturity during the taxable year for which the return is made, as
ordinary gain or loss.
Treasury Department Circular No. 418, as amended, and this notice prescribe
the terms of the Treasury bills and govern the conditions of their issue. Copies
of the circular may be obtained from any Federal Reserve Bank or branch.
Exhibit 6.—Acceptance of tenders for Treasury bills dated July 1, 1948 (press
release June 29, 1948)
The Secretary of the Treasury 'announced last evening that the tenders for
$1,100,000,000, or thereabouts, of 91-day Treasury bills to be dated July 1 and
to mature September 30, 1948, which were offered June 25, 1948, were opened at
the Federal Reserve Banks on June 28.
The details of this issue are as follows:
Total applied for. _ $1,777,999,000.
Total accepted
$1,101,696,000 (includes $29,007,000 entered on a noncompetitive basis and accepted in full at the average
price shown below).
Average price
99.748 equivalent rate of discount approximately
0.997 percent per annum.
Range of accepted competitive bids:
^
High__^
99.752 equivalent rate of discount approximately
0.981 percent per annum.
Low
99.747 equivalent rate of discount approximately
1.001 percent per annum.
(35 percent of the amount bid for at the low price was accepited.)
Federal Reserve district
Boston
...
N e w York
PhiladelphiaCleveland
Richmond
Atlanta
Chicago
S t . Louis
MinneapolisKansas City..
Dallas..
SanFrancisco
Total...
Total applied
for
$21,133,000
,490,783,000
13,775,000
32,020,000
3,325,000
10, 400, 000
129, 064,000
1,340,000
8,610, 000
10, 228,000
3,620,000
53,701,000
1,777,999,000
T o t a l accepted
$20, 808,000
874,618,000
12,410,000
25,620,000
3,325,000
10,400,000
104,819, 000
. 1,015,000
• 7,960,000
9,513,000
3,607,000
27,701,000
1,101,696,000
Exhibit 7.—Summary of Treasury bill information contained in press releases
Press releases pertaining to Treasury bill issues during the fiscal year 1949 were
similar in form to exhibits 5 and 6, and are, therefore, not reproduced here. The
essential details regarding each issue are summarized in the following table.
S u m m a r y of information contained in press releases ^pertaining to Treasury bills issued during the fiscal year 1949
00
Prices a n d r a t e s
A m o u n t s (in t h o u s a n d s )
1948
July
D a y s to
D a t e of
maturity maturity
C o m p e t i t i v e b i d s accepted
T o t a l b i d s accepted
T e n d e r s accepted
Dateof
issue
td
Total
applied
for 2
Amount
Amount
Total
on
on nonaccepted 2 c o m p e t i t i v e c o m p e t i t i v e
basis 2 3
basis 2
F o r cash
In
exchange
Average
price per
hundred
High
E qui valent
average
rate 4
Price per E q u i v a l e n t
rate*
(percent)
hundred
(percent)
Low
o
Price per E q u i v a l e n t
rate*
hundred
(percent)
o
1948
1
8
16
22
29
Aug. 6
12
19
26
Sept. 2
9
16
23
30
S e p t . 30
Oct. 7
14
21
28
Nov. 4
12
18
26
Dec. 2
9
16
23
30
Oct.
Jan.'. 6
13
20
27
Feb. 3
10
•
17
24
Mar. 3
10
17
24
31
91
91
91
91
91
91
92
91
92
91
91
91
91
91
$1,778,199
1,802,699
1,655, 641
1, 725, 053
1,689,397
1, 708,403
1,608,408
1, 447, 752
1,4«3,468
1, 614, 413
1, 597, 589
1, 685, 309
1,397, 986
1,410, 656
$1,101,896
1,102,048
906,059
908,800
909,689
803,692
890,198
• 900, 795
1, 000, 376
1, 000, 750
1,001,528
1,100, 816
1,000, 796
1,102, 406
91
91
91
91
91
90
91
90
91
91
91
91
91
1, 676,128
1, 413, 923
1,601, 746
1, 740, 636
1,312,782
1,361, 283
1,390, 378
1,349,182
1,418,870
1,440, 533
1, 701,146
1,426,856
1,436, 690
1,101, 319
902,136
901,234
901,199
801, 447
901, 433
802,975
900, 224
900, 656
905. 248
1,103,366
1,001, 038
1,101, 660
$1,072.689
1,070, 955
855, 661
863.225
865, 285
760,023
840, 245
848, 611
958, 267
957, 421
958, 089
1, 052, 048
950,416
1,060.345
$29,207
°31,093
60, 608
46, 575
44,404
43, 669
49, 953
52,184
42,109
43, 329
43, 439
48, 768
50, 380
42,060
$461, 076
431, 278
416,342
567,198
561, 745
489, 604
525,873
358, 064
369, 563
341,412
511, 994
716, 603
401, 646
590, 900
$660,820
67p, 770
• 489,717
3<41,602
347, 944
314, 088
364,325
642,731
640,813
659, 338
489. 634
384, 213
699,161
511, 605
99. 748
99. 748
99. 748
99. 748
99. 748
99. 748
99. 745
99. 730
99.726
99.728
99.728
99. 726
99.724
99. 720
0.997
.997
.997
.997
.997
.997
.997
L066
L072
1.075
1.076
L083
L092
1.109
99. 752
99.753
99. 753
99.763
99. 753
99. 760
5 99. 764
99. 750
99. 747
99. 732
6 99. 734
99. 736
99. 730
99. 726
0.981
.977
.977
.977
.977
.949
.963
.989
.990
1.060
1.052
1.048
L068
1.084
1,049, 922
838, 793
837,860
844,333
764,019
833, 682
740, 985
845, 766
• 849,870
861, 633
1,047,372
948.492
1, 062,114
51,397
63, 343
63, 374
56,866
47,428
67,851
61, 990
64,468
60, 786
63, 615
65, 994
52, 646
39, 546
635, 658
498, 330
867, 791
879, 784
716, 884
636, 231
493,870
473,340
525,359
666, 616
702, 212
673, 831
600, 223
465, 661
403, 806
43,443
21, 415
84, 563
366,202
309,105
426,884
375, 297
338,633
401,164
327,207
501, 437
99. 718
99. 717
99.717
99. 717
99. 715
99.716
99. 712
99. 713
99. 709
99.709
99.709
99.708
99. 708
1.114
1.119
1.118
1.120
1.129
1.138
1.140
1.147
1.150
L152
1.153
L166
1.157
99. 724
99. 722
99. 722
99. 722
6 99. 719
99. 720
99. 720
• 99.720
99.72Q
99. 720
99. 724
99. 712
99. 710
L092
1.100
1.100
1.100
1.112
1.120
1.108
1.120
1.108
1.108
1.092
1.139
1.147
99. 747
99.747
99. 747
99. 747
99. 747
99. 747
99. 744
99. 727
99.723
99. 726
99. 726
99. 725
99. 722
99. 717
LOOI
LOOI
1.001
LOOI
LOOI
LOOI
L002
1.080
1.084
1.084
1.084
1.088
1.100
1.120
99.717
99. 717
99.716
99. 715
99. 713
99. 714
99. 710
99. 712
99. 708
99. 708
99.708
99. 707
99.706
L120
1.120
1.124
1.127
1.135
L144
1.147
L152
1.165
1.155
1.166
1.169
1.163
CO
o
pi
>
O
1949
7
14
21
28
Nov. 4
12
• 18
26
Dec.
2
9
16.
23
30
•
•
.
.
1^
td
>
rt
PC
1949
Jan. 6
13
20
27
Feb. 3
10
17
24
Mar. 3
10
17
24
31
Apr.
7
14
21
28
May
6
12
19
26
June 2
9
16
23
30
Apr.
7
14
21
28
May 6
12
19
26
June 2
9
16
23
30
July 7
14
21
28
Aug. 4
11
18
26
Sept. 1.
8
15
22
20
91
91
91
91
91
91
91
91
91
91
91
91
91
91
91
91
91
91
91
. 91
91
91
91
91
91
91
1,964,351
1,000. 982
1,478,930
906,831
L 611,612
904,675
1, 614, 644
902, 624
1,417,262
801,107
1,473, 990
903,191
1.436,367
801, 748
1,460,462
901,180
1, 663,024
906, 874
1, 638, 632
905, 861
1, 661,354
902, 626
1,629,766
907,002
1, 611,150 . 902,860
1,464,337
901,630
902,106
1,717,123
1, 646, 606
903,612
1,637, 588
902, 060
1,623,290
801,987
1, 705, 606
900> 331
1,414, 670
803,023
904, 524
1, 598, 560
1, 660,474
901,161
1, 591,306
904,588
1,658,177
907, 537
1, 507,415
902, 974
1,538. 241
.900,963
946, 768
828, 234
831,426
839, 277
747,897
842, 711
745,337
845, 770
855, 616
847,052
838, 723
852,456
855, 236
848, 869
825, 577
836,894
846,128
734, 936
821, 399
737, 288
849,020
849, 928
841, 733
841,373
842, 050
849, 724
66,214
78,597
73,249
63,347
63,210
60, 480
66, 411
56,410
61,358
68,809
63,903
54, 546
47, 624
52, 761
76, 629
66, 618
55, 932
67,051
78,932
65; 735
56, 504
51, 233
. 62,855
66,164
60, 924
51,239
939, 268
698,864
758,393
732,630
690, 386 .
646, 584
462,155
433, 714
414,456
635, 624
438,495
445,045
437, 658
746, 223
794,209
649, 666
774,358
775,106
880, 846
. 534,244
419,041
348, 538
663, 232
642,485
427, 236
577, 242
61,714
207,977
146,282
169, 994
210, 722
366, 607
349, 693
467,466
492,419
270,237
464,131
461,957
465, 202
155, 407
107,897
263,846
127, 702
26,881
19,486
268, 779
486,483
552, 623
241,356
266.052
475, 738
323, 721
99. 708
99.707
99. 707
99.707
99. 706
99. 706
99. 706
99. 706
99. 706
99.706
.99; 706
99. 706
99. 706
99. 707
99. 709
99.708
99. 708
99, 710
99.710
99.708
99.707
99. 707
99. 707
99. 707
99. 707
99. 707
1.166
1.160
1.160
1.160
1.161
1.163
L163
1.163
1.163
1.162
L162
1.162
1.162
1.160
L163
L167
1.156
L147
1.148
L167
1.169
L169
1.158
1.158
• 1.158
1.158
99.717
99.720
7 99.715
99.712
99.712
99.712
99. 710
99.710
99.712
99.712
99.709
99. 709
99.709
99.709
99. 712
99.711
99.709
99. 712
99. 712
99. 712
99. 712
99.711
99.711
99. 711
99.711
99. 711
1.120
1.108
L127
1.139
1.139
L139
L147
L147
L139
L139
1.161
1.161
1.161
1.151
1.139
1.143
1.151
L139
L139
L139
1.139
L143
L143
L143
1.143
L143
99. 707
99. 706
99. 706
99. 706
99. 706
99. 706
99. 706
99. 705
99.706
99. 706
99. 706
99. 706
99.706
99.706
99.707
99. 707
99. 707
99. 709
99.709
99.706
99. 706
99. 706
99. 707
99.707
99.706
99. 707
1.159
1.163
L163
1.163
1.163
1.167
1.167
1.167
L163
1.163
1.163
L163
L163
LI63
1,159
L159
1.159
1.151
1.151
L163
1.163
1.163
L169
1.169
L163
1.169
h-t
w
NOTE.—Amount of matured issues will be found in table 22.
1 Pressrelease inviting tenders for Treasury bill issue is dated 6 days before date of issue.
Press release announcing acceptance of tenders is dated 2 days before date of Issue. Closing date on which tenders for issue are accepted is 3 days before date of issue.
2 Figures, at maturity value, are final and differ in most cases from those shown in
press releases announcing details of particular issue.
8 Noncompetitive tenders for $200,000 or less without stated price from any one bidder
were accepted in full at average price pf accepted competitive bids.
* Bank discount basis.
« Except for tender of $300,000.
6 Except for tender of $100,000.
7 Except for tender of $200,000
CC
CO
CO
200
REPORT OF THE SECRETARY OF THE TREASURY
TREASURY SAVINGS NOTES, UNITED STATES SAVINGS BONDS, AND ARMED FORCES
LEAVE BONDS
Exhibit 8.—Offering of Treasury savings notes of Series D
[Department Circular No. 833. Public Debt]
TKEASUKY
DEPARTMENT,
Washington, August 17, 1948.
I . O F F E R I N G OF N O T E S
1. T h e Secretary of t h e Treasury, p u r s u a n t to t h e a u t h o r i t y of t h e Second
Liberty Bond Act, as amended, offers for sale t o t h e people of t h e United States,
a t par, an issue of notes of t h e United States, designated Treasury savings notes,
Series D, which notes, if inscribed in t h e n a m e of a Federal taxpayer, will be
receivable as hereinafter provided a t p a r and accrued interest in p a y m e n t of
income, estate a n d gift.taxes imposed by t h e I n t e r n a l Revenue Code, or laws
a m e n d a t o r y or supplementary thereto.
• 2. T h e sale of Treasury savings notes. Series C, issued under D e p a r t m e n t
Circular N o . 696, First Revision, dated November 20, 1943, is hereby t e r m i n a t e d
a t t h e close of business August 31, 1948.
3. T h e sale of notes of Series D offered by this circular will continue until
t e r m i n a t e d by t h e Secretary of t h e Treasury.
II.
D E S C R I P T I O N OF N O T E S
1. General.—Treasury savings notes, Series D , will in each instance be dated as
of t h e first day of t h e m o n t h in which p a y m e n t , a t par, is received a n d credited by
an agent authorized t o issue t h e notes. T h e y will m a t u r e three years from t h a t
date, a n d m a y not be called b y t h e Secretary of t h e Treasury for redemption
before m a t u r i t y . All notes issued during any one calendar year shall constitute a
separate series indicated by t h e letter ' ' D " followed b y t h e year of m a t u r i t y . At
t h e time of issue t h e authorized issuing agent will inscribe on t h e face of each note
t h e n a m e a n d address of t h e owner, will enter t h e date as of which t h e note is
issued a n d will imprint his dating s t a m p (with current date). T h e notes, will be
issued in denominations of $100, $500, $1,000, $5,000, $10,000, $100,000, $500,000
a n d $1,000,000. Exchange of authorized denominations from higher t o lower,
b u t n o t from lower to higher, m a y be arranged a t t h e office of t h e agent t h a t
issued t h e note.
^
^
2. Acceptance for taxes or cash redemption.—If inscribed in t h e n a m e of an
^individual, corporation, or other e n t i t y paying income, estate or gift taxes imposed under t h e I n t e r n a l Revenue Code, or laws a m e n d a t o r y or supplementary
thereto, t h e notes will be receivable, subject t o t h e provisions of section IV of this
circular, a t p a r a n d accrued interest, in p a y m e n t of such income, estate or gift
taxes assessed against t h e ownef or his estate. If n o t presented in p a y m e n t of
taxes, or if not inscribed in t h e n a m e of a t a x p a y e r liable t o t h e above-described
taxes, a n d subject to t h e provisions of section V of this circular, t h e notes will be
payable a t m a t u r i t y , or a t t h e owner's option a n d request t h e y will be redeemable
before m a t u r i t y a t p a r a n d accrued interest.
3. Interest.—Interest on each $1,000 principal a m o u n t of savings notes. Series
D, will accrue each m o n t h from t h e m o n t h of issue, on a g r a d u a t e d scale, as
follows:
^
Each month
First to sixth m o n t h s , inclusive
$0. 80
Seventh to twelfth months, inclusive
- 1. 00
T h i r t e e n t h to eighteenth months, inclusive
1.20
N i n e t e e n t h t o twenty-fourth months, inclusive
1.30
Twenty-fifth to thirty-sixth months, inclusive
1. 40
T h e table appended t o this circular shows for notes of each denomination, for
each consecutive calendar m o n t h from m o n t h of issue t o m o n t h of m a t u r i t y , (a)
t h e a m o u n t of interest accrual, (b) t h e principal a m o u n t of t h e note with accrued
interest (cumulative) added, a n d (c) t h e approximate investment yields. In no
case shall interest accrue beyond t h e m o n t h in which t h e note is presented in
p a y m e n t of taxes, or for redemption before m a t u r i t y as provided in section V of
this circular, or beyond its m a t u r i t y . Interest will be paid only with t h e priricipal
amount.
EXHIBITS
201
4. Forms of inscription.—Treasury savings notes. Series D, may be inscribed in
the name of an individual, corporation, unincorporated association or society, or
a fiduciary (including trustees under a duly established trust where the notes
would not be held as security for the performance of a duty or obligation), whether
or not the inscribed owner is subject to taxation under the Internal Revenue
Code, or laws amendatory or supplementary thereto. They may also be inscribed in the name of a town, city, county or State or other governmental body
and in the name of a partnership, but notes in the name of a partnership are not
acceptable in payment of taxes, since a partnership is not a taxpaying entity
under the Internal Revenue Code. The notes will not be inscribed in the names
of two or more persons as joint owners or coowners; or in the name of a public
officer, whether or not named as trustee, where the notes would in effect be held
as security.
5. Nontransferability.—The notes may not be transferred in ordinary course;
except that (1) if inscribed in the name of a married man they may be reissued in
the name of his wife, or if inscribed in the name of a married woman they may be
reissued in the name of her husband, upon request of the person in whose name
the notes are inscribed and the surrender of the notes to the agent that issued them;
(2) if inscribed in the name of a corporation owning more than 50 percent of the
stock, with voting power, of another corporation, the notes may be reissued in
the name of the subsidiary upon request of the corporation and surrender of the
notes to the agent that issued them; (3) upon the death or disability of an individual inscribed owner or the dissolution, consolidation or merger of a corporation or unincorporated association named as owner, reissue or payment may be
made in accordance with section VI hereof; and (4) payment but not reissue, may
be made as a result of legal proceedings as set forth in said section VI. The notes
may not be hypothecated and no attempted hypothecation or pledge as security
will be recognized by the Treasury Department: Provided, however. That the notes
may be pledged as collateral for loans from banking institutions and if title thereto
is acquired by a bank because of the failure of a loan to be paid, the notes will be
redeemed at par and accrued interest to the month in which acquired on surrender
to the agent who issued them, accompanied by proof of the date of acquisition
and by request of the pledgee under power of attorney given by the pledgor in
. whose name the notes are inscribed. The notes will not be transferred to a pledgee.
The notes will not be acceptable to secure deposits of public moneys.
6. Taxation.—Income derived from the notes shall be subject to all taxes imposed under the Internal Revenue Code or laws amendatory or supplementary
thereto. The notes shall be subject to estate, inheritance, gift or other excise
taxes, whether Federsil or State, but shall be exempt from all taxation now or
hereafter imposed on the principal or interest thereof by any State, or anyjof
the possessions of the United States, or by any local taxing authority.
III.
PURCHASE OF NOTES
1. Ofiicial agencies.—In addition to the Treasury Department, the Federal Re-,
serve Banks and their branches are hereby designated agencies for the issue and
redernption of Treasury savings notes. Series D. The Secretary of the Treasury,
from time to time, in his discretion, may designate other agencies for the issue of
the notes, or for accepting applications therefor, or for making payments on account of the redemption thereof.
2. Applications and payment.—Applications will be received by the Federal
Reserve Banks and branches, and by the Treasurer of the United States, Washington, D. C. Banking institutions and security dealers generally may submit
applications for account of customers, but only the Federal Reserve Banks and
their branches and the Treasury Department are authorized to act as official agencies.
The use of an official application form is desirable but not necessary. Appropriate forms may be obtained on application to any Federal Reserve Bank or
branch, or the Treasurer of the United States, Washington, D. C. Every application must be accompanied by payment in full, at par. Any form of exchange,
including personal checks, will be accepted subject to collection, and should be
drawn tO the order of the Federal Reserve Bank or of the Treasurer of the United
States, as payee, as the case may be. The date funds are made available on
collection of exchange will govern the issue date of the notes. Any depositary,
qualified pursuant to the provisions of Treasury Department Circular No. 92,
Revised, as amended, will ,be permitted to make payment by credit for notes
applied for on behalf of itself or its customers up to any amount for which ii shall
be qualified in excess of existing deposits.
202
REPORT OF THE SECRETARY OF THE TREASURY -
.3. Reservations.—The Secretary of t h e Treasury reserves t h e right t o reject any
application in whole or in part, and to refuse to issue or permit to be issued hereunder any notes in any case or in a n y class or classes of cases if he deems such
action to be iri t h e public interest, a n d his action in any such respect shall be
final.
If an application is rejected, in whole or in part, any p a y m e n t received
therefor will be refunded.
4. Delivery of notes.—Upon acceptance of full-paid applications, notes will be
duly inscribed and, unless delivered in person, will be delivered, a t t h e risk a n d
expense of t h e United States a t t h e address given by t h e purchaser, by mail, b u t
only within t h e United States, its territories and insular possessions and t h e
Canal Zone. No deliveries elsewhere will be made.
IV.
P R E S E N T A T I O N I N P A Y M E N T OF T A X E S
. 1. D a r i n g a n d after t h e second calendar m o n t h after t h e m o n t h of purchase (as
shown by t h e issue date on each note), during such time, a n d under such rules a n d
regulations as t h e Commissioner of I n t e r n a l Revenue, with t h e approval of t h e
Secretary of t h e Treasury, shall prescribe, notes issued hereunder in t h e n a m e of
a t a x p a y e r (individual, corporation, or other entity) m a y be presented a n d surrendered by such taxpayer, his agent, or his estate, to t h e Collector of Internal
Revenue to whom t h e t a x return is made, a n d will be receivable by t h e Collector
a t p a r and accrued interest from t h e m o n t h of issue to t h e m o n t h , inclusive (but
no accrual beyond m a t u r i t y ) , in which presented, in p a y m e n t of any income
(current a n d back personal a n d corporation taxes, a n d excess-profits taxes), or
any estate or gift taxes (current a n d back) imposed by t h e I n t e r n a l Revenue Code,
or laws a m e n d a t o r y or supplementary thereto, assessed against t h e inscribed owner
or his estate. T h e notes m u s t be forwarded to t h e Collector a t t h e risk a n d
expense of t h e owner, and, for t h e owner's protection, should be forwarded by
registered mail, if n o t presented in person.
V.
C A S H R E D E M P T I O N AT OR P R I O R TO
MATURITY
.1. General.—(a) Any Treasury savings note of Series D not presented in p a y ment of taxes will be paid a t m a t u r i t y , or, a t t h e option a n d request of t h e owner
a n d without advance notice, will be redeemed before m a t u r i t y , b u t t h e notes m a y
be redeemed before m a t u r i t y only during a n d after t h e fourth calendar m o n t h
after t h e m o n t h of issue (as shown on t h e face of each n o t e ) . {b) P a y m e n t a t
m a t u r i t y or on redemption before m a t u r i t y will be m a d e a t p a r a n d accrued i n t e r est to t h e m o n t h of p a y m e n t , except, if a note is inscribed in t h e n a m e of a b a n k
t h a t accepts d e m a n d deposits, p a y m e n t a t m a t u r i t y or on redemption before
m a t u r i t y will be m a d e only a t t h e issue price, or par, of t h e note. However, if a
note is acquired b y a n y such b a n k t h r o u g h forfeiture of a loan, p a y m e n t will be
made a t t h e redemption value for t h e m o n t h in which so acquired.
2. Execution of request for payment.—The owner in whose n a m e t h e n o t e is
inscribed m u s t appear before one of t h e officers authorized by t h e Secretary of t h e
Treasury to witness a n d certify requests for pa,yment, establish his identity, a n d
in t h e presence of such officer sign t h e request for p a y m e n t appearing on t h e back
of t h e note, adding t h e address to which check is to be mailed. After t h e request
for p a y m e n t has been so signed, t h e witnessing officer should complete a n d sign
t h e certificate provided for his use.
3. Ofiicers authorized to witness and certify requests for payment.—All officers
authorized to witness and certify requests for p a y m e n t of United States savings
bonds, as set forth in Treasury D e p a r t m e n t Circular N o . 530, Sixth Revision, as
amended, are hereby authorized t o witness a n d certify requests for cash redemption of Treasury notes issued under this circular. Such officers include, among
others. United States postmasters,, certain other post office officials, officers of all
b a n k s a n d t r u s t companies incorporated in t h e United States or its organized
territories, including officers a t branches thereof, a n d commissioned officers of t h e
Army, N a v y , Marine Corps, a n d Coast G u a r d .
4. Presentation and surrender.—ISi otes bearing properly executed requests for
p a y m e n t m u s t be presented a n d surrendered to a n y Federal Reserve Bank or
branch or to t h e Treasury D e p a r t m e n t , Washington, D . C , a t t h e expense a n d
risk of t h e owner. For t h e owner's protection, notes should be forwarded by
registeredjmail, if n o t presented in person.
EXHIBITS
203
5. P a r t i a l redemption.—Partial cash redemption of a note, corresponding to an
authorized denomination, m a y be m a d e in t h e same m a n n e r as for full cash redemption, appropriate changes being m a d e in t h e request for p a y m e n t . I n case
of partial redemption of a note, t h e remainder will be reissued in t h e same n a m e
a n d with t h e same date of issue as t h e note surrendered.
6. P a y m e n t . — P a y m e n t of a n y note, either a t m a t u r i t y or on redemption before
m a t u r i t y , will be m a d e by any Federal Reserve Bank or branch or t h e Treasury
D e p a r t m e n t , following clearance with t h e agent of issue, which will be obtained
by t h e agent t o which t h e note is surrendered. P a y m e n t will be made by check
drawn t o t h e order of t h e owner, a n d mailed to t h e address given in his request for
payment.
VI.
P A Y M E N T OR R E I S S U E TO O T H E R T H A N I N S C R I B E D
OWNER
1. Death or disability.—In case of t h e death or disability of an individual owner
and t h e notes are not to be presented in p a y m e n t of taxes, p a y m e n t will be m a d e
to t h e duly constituted representative of his estate, or they m a y be reissued to
one or more of his heirs or legatees upon satisfactory proof of their right; b u t no
reissue will be made in two names jointly or as coowners.
2. Dissolution or merger of corporations, etc.—If a corporation or unincorporated
body, in whose name notes are inscribed, is dissolved, consolidated, merged or
otherwise changes its organization, t h e notes m a y be paid to, or reissued in t h e
name of, those persons or organizations lawfully entitled t o the assets of such
corporation or body by reason of such changes in organization.
3. Bankruptcy.—If an inscribed owner of notes is declared b a n k r u p t or insolvent, p a y m e n t , b u t not reissue, will be made t o t h e duly qualified trustee, receiver
or similar representative if t h e notes are submitted with satisfactory proof of his
a p p o i n t m e n t and qualification.
4. Creditors' rights.—Payment, b u t not reissue, will be made as a result of
judicial proceedings in a court of competent jurisdiction, if the notes are submitted
with proper proof of such proceedings and their finality.
5. Instructions and information.—Before executing t h e request for p a y m e n t or
submitting t h e notes under t h e provisions of this section, instructions should be
obtained from a Federal Reserve Bank or branch or from t h e Treasury D e p a r t ment, Division of Loans and Currency, Washington 25, D . C.
VII.
GENERAL
PROVISIONS
1. Regulations.—Except as provided in this circular, t h e notes issued hereunder
will be subject to t h e general regulations of t h e Treasury D e p a r t m e n t , now or
hereafter prescribed, governing bonds a n d notes of t h e United States; t h e regulations currently in force are contained in D e p a r t m e n t Circular No. 300, as
amended.
2. Loss, theft or destruction.—In case of t h e loss, theft or destruction of a savings
note immediate notice (which should include a full description of t h e note) should
be given t h e agency which issued t h e note and instructions should be requested
as t o t h e procedure necessary to secure a duplicate.
3. Fiscal agents.—Federal Reserve Banks and their branches, as fiscal agents of
t h e United States, are authorized t o perform such services or acts as m a y be
appropriate a n d necessary under t h e provisions of this circular and under any
instructions given b y the Secretary of t h e Treasury, and t h e y m a y issue interim
receipts pending delivery o'f t h e definitive notes.
4. Amendments.—The Secretary of t h e Treasury m a y a t any time or from time
t o time supplement or amend t h e terms of this circular, or of any amendments or
supplements thereto, and m a y a t any time or from time to time prescribe a m e n d a tory rules a n d regulations governing t h e offering of t h e notes, information as to
which will p r o m p t l y be furnished t o t h e Federal Reserve Banks.
JOHN W .
SNYDER,
'
Secretary of the Treasury..
Treasury savings notes. Series D-—table of tax-payment or redeniption values and investment yields
to
The table below shows for each month from date of issue to date of maturity the amount of interest accrual; the principal amount with accrued interest added, for notes of each
denoinination; the approx'imatei nvestment yield on the par amount from issue date to the beginning of each month following the month of Issue; and the approximate investment yield
n the current redemption value from the beginning of the month indicated to the month of maturity.
Par value (issue prlc« during month of issue)...
$100
Amount of interest accrual each month after
month of issue
Interest accrues at rate of $0.80 per month
$1,000 par amount:
First month
Second month
Third month
Fourth month
.
Fifth month
Sixth monthInterest accrues at rate of $1.00 per month
$1,000 par amount:
Seventh month
.Eighth month
Ninth month
Tenth month
Eleventh month.:.
Twelfth monthInterest accrues at rate of $1.20 per month
$1,000 par amount:
Thirteenth month...
Fourteenth month
.
Fifteenth month
Sixteenth month
Seventeenth month
Eighteenth month
Interest accrues at rate of $1.30 per month
$1,000 par amount:
Nineteenth month
Twentieth month
Twenty-first month
Twenty-second month
Twenty-third month
.
Twenty-fourth month-
$500
$1,000
$5,000
$10,000
$100,000
$500,000
$1,000,000
Tax-payment or redemption values during each monthly period after month of issue i
per
Percent
2 1.40
1.41
1.42
1.43
L45
1.47
L48
$500.40
600.80
. 501.20
601.60
602.00
602.40
$1,000.80
1,001.60
1, 002.40
1, 003.20
1,004.00
1, 004.80
$6,004.00
6,008.00
5,012.00
5,016.00
5,020.00
5,024.00
$10,008
10,016
10,024
10,032
10,040
10, 048
$100, 080
100,160
100, 240
100,320
100, 400
100, 480
$500, 400
500, 800
601, 200
601, 600
602,000
502,400
100.68
100.68
100.78
100.88
100.98
101.08
602.90
503.40
503.90
604.40
604.90
505.40
1,005.80
1, 006.80
1,007.80
1, 008.80
1,009.80
1,010.80
5,029.00
5,034.00
6, 039.00
6,044.00
6,049.00
5,054.00
10,058
10,068
10, 078
10,088
10,098
10,108
100, 680
100, 680
100, 780
100, 880
100, 980
101,080
502, 900
503, 400
603, 900
504, 400
504,900
506, 400
1,005, 800
1, 006, 800
1,007,800
1,008, 800
1,009,800
1,010,800
1.02
1.04
1.06
1.07
1.08
1.49
L50
L51
L63
L64
L65
101.20
101. 32
101.44
101.66
101. 68
101. 80
506.00
506.60
507. 20
607.80
608.40
609.00
1,012.00
1,013.20
1, 014.40
1,015. 60
1,016.80
1,018.00
5,060.00
5,066.00
5,072.00
6,078.00
5,084.00
5,090.00
10,120
10,132
10,144
10,166
10,168
10,180
101, 200
101,320
101,440
101, 660
101, 680
101, 800
606,000
506, 600
507, 200
507, 800
608,400
609,000
L 012,000
1,013,200
1,014,400
1,015,600
1,016,800
1,018, 000
1.10
1.13
1.15
1.16
1.18
1.19
1.56
1.67
L57
L68
L69
1.60
101.93
102.06
102.19
102.32
102.45
102.68
509.65
510.30
610.95
511.60
612. 26
. 512.90
1,019.30
1,020.60
1,021.90
1,023.20
1,024.60
1, 025.80
5,096. 60
6,103.00
5,109.50
5,116.00
5,122. 60
6,129.00
10,193
10, 206
10, 219
10,232
10, 246
10, 268
101,930
102,060
102,190
102, 320
102, 460
102, 680
609,650
610,300
610,950
611,600
612, 250
512, 900
1,019,300
1,020, 600
1,021,900
1.023, 200
1.024, 600
1,026,800
1.21
1.23
1.24
1.25
1.27
1.28
1.60
L61
1.61
L62
L62
1.63
per
$1,000,800
1,001,600
1,002,400
1,003,200
1,004,000
1,004,800
0.96
.96
96
96
td
hj
O
td
B
O
Percent
$100.08
100.16
100.24
100.32
100.40
100.48
per
per
Approximate
Approximate
investment
investment yield
on current
yield on par
or
amount from tax-payment
redemption
issue date to
values from
beginning of
beginning of
each monthly each
period there- periodmonthly
to maafter
turity
o
CO
o
td
td
Hi
o
td
>
td
Interest accrues at rate of $1.40 per month per
$1,000 par amount:
Twenty-fifth month
.,
Twenty-sixth month
Twenty-seventh month
, Twenty-eighth month
Twenty-ninth month
Thirtieth month
_Thirty-first month
Thirty-second month
Thirty-third monthThirty-fourth monthThirty-fifth month
._.Maturity
102.72
102.86
103.00
103.14
103.28
103.42
103.66
103.70
103.84
103.98
104.12
613. 60
614.30
616.00
616.70
616.40
617.10
517.80
518. 50
519.20
519.90
620.60
1,027.20
1,028.60
1,030.00
1,031.40
1,032.80
1,034. 20
1,035.60
1,037.00
1,038.40
1, 039.80
1, 041.20
5,136.00
6,143.00
5,160.00
5,157.00
6,164.00
6,171.00
6,178. 00
•5,185.00
5,192.00
6,199.00
5, 206.00
10, 272
10, 286
10,300
10,314
10,328
10,342
10,356
10,370
10,384
10,398
10, 412
102, 720
102, 860
103,000
103,140
103, 280
103,420
103, 660
103, 700
103,840
103, 980
104,120
513, 600
614,300
515,000
615, 700
516,400
617,100
617, 800
618, 600
619, 200
619, 900
620, 600
1.027, 200
1.028, 600
1, 030, 000
1,031, 400
1,032,800
1, 034, 200
1, 035, 600
1, 037, 000
1,038,400
1,039,800
1, 041, 200
1.29
1.31
1.32
1.33
1.34
1.35
L36
L37
1.37
L38
1.39
104. 26
621.30
1,042. 60
6, 213.00
10,426
104, 260
521,300
1,042, 600
L40
1.63
1.63
L63
L63
1.63
L62
1.62
L62
L62
1.62
L62
^ Not acceptable in payment of taxes until during and after the second calendar month after the month of issue, and not redeemable for cash until during andlafter the fourth
calendar month after the month of issue.
2 Approximate investment yield for entire period from issuance to maturity.
ro
o
206
REPORT OF THE SECRETARY OF THE TREASURY
Exhibit 9.—Fifth amendment, February 21,1949, to Department Circular No. 530,
Sixth Revision, prescribing regulations governing United States savings bonds
TREASURY DEPARTMENT,
Washington, February 21, 1949.
To Owners of United States Savings Bonds and Others Concerned:
Pursuant to section 22 (a) of the Second Liberty Bond Act, as amended (55
Stat. 7, 31 U. S. C. 757c), Department Circular No. 530, Sixth Revision, dated
February 13, 1945 (31 CFR 1945 Supp., 315), as amended, sections 315.9 (d) (4),
315.45 (b) (1), and 315.47 (c) (of Subparts C, L, and N, respectively) are hereby
further amended to read as follows:
Sec. 315.9 (d) (4). With respect to bonds of Series E, those purchased with
the proceeds of matured bonds of Series A, Series C-lSi38 and D-1939, where
such matured bonds are presented by an individual (natural person in his own
right) owner or coowner for that purpose and the Series E bonds are registered
in his name in any form of registration authorized for that series.
Sec. 315.45 (b) (1). If one of the coowners is married after the issue of the bond,
the bond may be reissued in the name of either coowner, alone or with a new
coowner or a beneficiary. Requests for reissue under this provision should be
made on Form PD 1938.
Sec. 315.47 (c) Without administration.—When it appears that no legal representative of the decedent's estate has been or is to be appointed the bond will
be paid to or reissued in the name of the person or persons entitled pursuant to
an agreement and request by all persons entitled to share in the decedent's estate
in accordance with the provisions of the form prescribed by the Treasury Department, which should be duly executed in accordance with the instructions thereon.
A short form for settlement without administration (Form PD 1946) is prescribed
for cases in which the amount of savings bonds belonging to the decedent's estate
is not in excess of $500 (maturity value). A longer form is prescribed for other
cases of settlement without administration. Application for the appropriate
form to be used hereunder may be made to any Federal Reserve Bank or to the
Treasury Department, Division, of Loans and Currency, Merchandise Mart,
Chicago 54, Illinois. The applicant should state whether or not the amount of
savings bonds belonging to the decedent's estate is in excess of $500 (maturity
value). If any of the persons are minors or incompetents, payment or reissue of
the bond will not be permitted without administration, except to them or in their
names unless their interests are otherwise* protected to the satisfaction of the
Secretary of the Treasury.
E. H. FOLEY, Jr.,
Acting Secretary of the Treasury.
Exhibit 10.—First amendment, August 6, 1948, to Department Circular No. 793,
Revised, prescribing regulations governing armed forces leave bonds
TREASURY DEPARTMENT,
Washington, August 6, 1948.
To Members and Former Members of the Armed Forces of the United States and
Others Concerned:
Pursuant to the authority contained in the Armed Forces -Leave Act of 1946,
as amended (60 Stat. 963, 37 U. S. C. 32-37; 61 Stat. 510; Pub. Law 710,-80th
Cong.), and the Second Liberty Bond Act, as amended, section 324.10 and section 324.11 (a) of Department Circular No. 793, Revised, dated August 1, 1947
(31 CFR 1947 Supp., Part 324), are amended and revised to read as follows:
324.10. Right to payment on death of owner.—Upon the death of an owner of
an armed forces leave bond the bond becomes payable only to his survivors in
the following order:
(a) Surviving wife or husband and children, if any, in equal shares;
(b) If such owner leaves no surviving spouse or children, then in equal shares
to such owner's surviving parents, if any;
EXHIBITS
207
(c) If such owner leaves no surviving spouse, child, or parent, then in equal
shares t o such owner's surviving brothers a n d sisters, if a n y ;
(d) If such owner leaves no surviving spouse, child, parent, brother, or sister,
t h e n in equal shares to t h e surviving child or children, if any, of such owner's
deceased brothers a n d sisters. If there are no such survivors t h e bond will be
retired a n d t h e a m o u n t covered into t h e general fund of t h e Treasury. Accordingly, p a y m e n t will n o t be m a d e to an executor or administrator of the estate of
a deceased registered owner, a n d if a bond should come into t h e possession of
such a n executor or administrator, or other person n o t a survivor, following t h e
d e a t h of t h e owner it should immediately be delivered to one of t h e survivors,
if a n y ; otherwise forwarded to t h e Division of Loans a n d Currency, Washington
25, D . C , with a signed s t a t e m e n t t h a t there are no known survivors.
324.11. Payment to survivors.—:* * *
(a) Definition of survivors.—Survivors are defined in t h e act as follows:
(1) ''Spouse" means a lawful wife or h u s b a n d ;
(2) ''Children" include
(a) a legitimate child;
(b) a child legally adopted;
(c) a stepchild, if, a t t h e time of d e a t h of t h e member or former
member of t h e armed forces, such stepchild is a member of t h e deceased's
household;
(d) an illegitimate child, b u t in t h e case of a male member or former
male member of t h e armed forces only if he has been judicially ordered
or decreed t o contribute to such child's support; has been judicially
decreed t o be t h e p u t a t i v e father of such child; or has acknowledged
under oath in writing t h a t he is t h e father of such child; and
(e) a person to whom t h e member or foimer member of t h e armed
forces a t t h e time of death stands in loco parentis and so stood for not
less t h a n twelve m o n t h s prior to t h e date of d e a t h ;
(3) ' ' P a r e n t " includes father and mother, grandfather and grandmother,
stepfather a n d stepmother, father and mother through adoption, and persons
who, for a period of not less t h a n one year prior t o t h e d e a t h of t h e m e m b e r
or former member of t h e armed forces, stood in loco parentis to such member
or former member: Provided, T h a t not more t h a n two parents m a y receive
t h e benefits provided under this act a n d preference shall be given to t h e
p a r e n t or parents, not exceeding two, who actually exercised parental relationship a t t h e time of or most nearly prior to t h e date of t h e death of such
member or former member of t h e armed forces; a n d
(4) " B r o t h e r " and "sister" include brothers and sisters of the half blood
as well as those of t h e whole blood, stepbrothers, and stepsisters, and brothers
a n d sisters through adoption.
JOHN W .
SNYDER,
Secretary of the Treasury.
O B L I G A T I O N S GUARANTEED BY T H E U N I T E D S T A T E S
Exhibit 11.—Partial redemption, before maturity, of 2Vi percent war housing
insurance fund d e b e n t u r e s , Series H (fourth call)
[Department Circular No. 837. Public Debtl
TREASURY
DEPARTMENT,
Washington, October 4, 1948.
To Holders of 2}^ Percent War Housing Insurance F u n d Debentures, Series H
I.
N O T I C E OF F O U R T H C A L L F O R P A R T I A L R E D E M P T I O N , B E F O R E M A T U R I T Y ,
OF 23^ P E R C E N T W A R H O U S I N G I N S U R A N C E F U N D D E B E N T U R E S , S E R I E S H
T h e Federal Housing Commissioner, with the approval of t h e Secretary of the
Treasury, has issued t h e following notice of call for partial redemption a n d offer
to purchase with respect to 2}^ percent war housing insurance- fund debentures,
Series H :
" P u r s u a n t to t h e a u t h o r i t y conferred b y t h e National Housing Act (48 Stat.
1246; U. S. C , title 12, sec. 1701 et seq.) as amended, public notice is hereby given
t h a t 2% percent war housing insurance fund debentures. Series H, of the denominations a n d serial numbers designated below, are hereby called for redemption, a t
208
REPORT OF THE SECRETARY OF THE TREASURY
p a r a n d accrued interest, on J a n u a r y 1, 1949, on which d a t e interest on such
debentures shall cease:
.
2% percent war housing insurance fund debentures. Series H
Serial numbers
Denomination:
(o^^ numbers inclusive)
$50
689 to 3,018
$100
2,713 to 8,049
$500
782 to 4,015
$1,000
- - - 3,662 to 9,073
$5,000
---179 to 1,006
$10,000
--. 2,930 to 5,060
" T h e debentures first issued as determined by t h e serial numbers were selected
for redemption b y t h e Commissioner, Federal Housing Administration, with the
approval of t h e Secretary of t h e Treasury.
" N o transfers or denominational exchanges in debentures covered by t h e
foregoing call will be m a d e on the books maintained b y the Treasury D e p a r t m e n t
on a n d after October 1, 1948. This does not affect t h e right of the holder of a
d e b e n t u r e to sell a n d assign t h e debenture on or after October 1,. 1948, a n d p r o vision will be made for t h e p a y m e n t of final interest due on J a n u a r y 1, 1949, with
the principal thereof to t h e actual owner, as shown by t h e assignments thereon.
" T h e Commissioner of t h e Federal Housing Administration hereby offers to'
purchase any debentures included in this call a t any time from October 1, 1948,
to December 31, 1948, inclusive, a t p a r a n d accrued interest, to date of purchase.
" I n s t r u c t i o n s for t h e presentation a n d surrender of debentures for redemption
on or after J a n u a r y 1, 1949, or for purchase prior to t h a t d a t e will be given by t h e
Secretary of t h e T r e a s u r y . "
II.
TRANSACTIONS-IN FOURTH-CALLED
DEBENTURES
1. T h e debentures included in t h e foregoing notice of call for partial redemption
on J a n u a r y 1, 1949, are hereby designated fourth-called 2)^ percent war housing
insurance fund debentures. Series H , and are hereinafter referred to as fourthcalled debentures.
2. Transfers a n d denominational exchanges in fourth-called debentures will
t e r m i n a t e a t t h e close of business on September 30, 1948.
III.
R E D E M P T I O N OR P U R C H A S E
1. Holders of fourth-called debentures will be entitled to have such debentures
redeemed a n d paid a t p a r on J a n u a r y 1, 1949, with interest in full to t h a t date,
a t t h e r a t e of $12.50 per $1,000, Interest on fourth-called debentures will cease
on J a n u a r y 1, 1949.
2. Holders of fourth-called debentures have t h e privilege of presenting such
debentures a t any time from October 1 t o December 31, 1948, inclusive, for purchase a t p a r and accrued interest, a t t h e rate of $0.067935 per $1,000 per day from
July 1, 1948, t o d a t e of purchase.
IV.
R U L E S AND R E G U L A T I O N S G O V E R N I N G R E D E M P T I O N AND P U R C H A S E
1. T h e United States Treasury D e p a r t m e n t is t h e agent of t h e Federal Housing
Commissioner for t h e redemption and purchase of fourth-called debentures. I n
accordance with regulations adopted by t h e Federal Housing Commissioner and
approved by t h e Secretary of t h e Treasury, t h e assignment, redemption, and
purchase of fourth-called debentures will be governed by t h e general regulations
of t h e Treasury D e p a r t m e n t with respect t o United States bonds a n d notes, so
far as applicable, except as otherwise provided herein.
2. Fourth-called debentures presented for redemption on J a n u a r y 1, 1949, or
for purchase from October 1 to December 31, 1948, inclusive, must be assigned by
t h e registered payee or assignee thereof or by their duly constituted representatives
in t h e form indicated in p a r a g r a p h 3 of this section, and should thereafter be
presented a n d surrendered t o any Federal Reserve Bank or to t h e Division of
Loans a n d Currency, Treasury D e p a r t m e n t , Washington 25, D . C , accompanied
by appropriate written advice. (Use F o r m P D 2174.) T h e debentures must be
delivered a t t h e expense a n d risk of t h e holders. (See p a r a g r a p h 8 of this section.)
I n all cases checks in p a y m e n t of principal and final interest will be mailed to t h e
EXHIBITS
209
address given in t h e form of advice accompanying the debentures whensurrendered.
• ^
3. If t h e registered payee or an assignee holding under proper assignment from
t h e registered payee desires t h a t p a y m e n t be made to him, t h e debentures should
be assigned by such payee or assignee or by a duly constituted representative to
" T h e Federal Housing Commissioner for redemption" or to " T h e Federal Housing
Commissioner for purchase," according to whether t h e debentures are to be
presented for redemption on J a n u a r y 1, 1949, or for purchase prior to t h a t date.
If it is desired for any reason t h a t p a y m e n t be made to some other person without
intermediate assignment, t h e debentures should be assigned to " T h e Federal
Housing Commissioner for redemption (or purchase) for the account of
," inserting t h e name and address of t h e person to whom p a y m e n t
is to be made.
4. An assignment in blank or other assignment having similar effect will be
recognized, b u t in t h a t event p a y m e n t will be made to t h e person surrendering
t h e debenture for redemption or purchase since, under such an assignment, t h e
debenture becomes in effect payable to bearer. Assignments in blank or assignments having similar effect should be avoided, if possible, in order not to lose t h e
protection afforded by registration.
5. Final interest on any fourth-called debentures, whether purchased prior to
or redeemed on or after J a n u a r y 1, 1949, will be paid with the principal in accordance with t h e assignments on t h e debentures surrendered.
6. All assignments m u s t be made on t h e debentures themselves unless otherwise
, directed by the Treasury D e p a r t m e n t . Detached assignments will be recognized
a n d accepted in any particular case in which t h e use of detached assignments is
specifically authorized by t h e Treasury D e p a r t m e n t . Any assignment not made
upon t h e debenture is considered a detached assignment.
7. A fourth-called debenture registered in t h e name of, or assigned to, a corporation, will be paid to such corporation on or after J a n u a r y 1, 1949, upon an appropriate assignment for t h a t purpose executed on behalf of t h e corporation by a
duly authorized officer thereof. An assignment so executed a n d duly a t t e s t e d
in accordance with Treasury D e p a r t m e n t regulations will ordinarily be accepted
without proof of t h e officer's authority. In all cases coming under this provision
p a y m e n t will be made only by check drawn to t h e order of t h e corporation.
Proof of t h e a u t h o r i t y of t h e officer assigning on behalf of a corporation will be
required, in accordance with t h e general regulations of t h e Treasury D e p a r t m e n t ,
in t h e case of assignments for purchase prior to J a n u a r y 1, 1949, and in case of
assignments for redemption on or after J a n u a r y 1, 1949, for t h e account of any
person other t h a n t h e corporation.
8. Debentures presented for redemption or purchase under this circular m u s t
be delivered to a Federal Reserve Bank or to t h e Division of Loans a n d Currency,
Treasury D e p a r t m e n t , Washington 25, D . C , a t t h e expense a n d risk of t h e holder.
Debentures bearing restricted assignments m a y be forwarded by registered mail,
. b u t debentures bearing unrestricted assignments should be forwarded by registered mail insured or by express prepaid.
9. I n order to facilitate t h e redemption of fourth-called debentures on J a n u a r y
1, 1949, any such debenture m a y be presented a n d surrendered in t h e m a n n e r
herein prescribed in advance of t h a t date b u t not before December 1, 1948.
Such early presentation by holders will insure p r o m p t p a y m e n t of principal a n d
interest when due.
V.
GENERAL PROVISIONS
1. Any further information which m a y be desired regarding t h e redemption of
fourth-called debentures under this circular m a y be obtained from any Federal
Reserve Bank or from t h e Division of Loans and Currency, Treasury D e p a r t m e n t ,
Washington 25, D . C , where copies of t h e Treasury D e p a r t m e n t ' s regulations
governing assignments m a y be obtained.
2. As fiscal agents of t h e United States, Federal Reserve Banks.are authorized
a n d requested to perform any necessary acts under this circular. The Secretary
of t h e Treasury rriay a t any time or from time to time prescribe supplemental
a n d a m e n d a t o r y rules a n d regulations governing t h e m a t t e r s covered by this
circular, which will be communicated promptl}^ to t h e registered owners of fourthcalled debentures.
E.
H.
FOLEY,
Jr.,
Acting Secretary of the Treasury.
856455—50^
15
210
REPORT OF THE SECRETARY OF THE TREASURY
'Exhibit 12.—Partial redemption, before maturity, of 2)4 percent war housing
"
insurance fund d e b e n t u r e s . Series H (fifth call)
[Department Circular No. 845. Public Debtl
TREASURY
DEPARTMENT,
Washington, April 5, 1949.
To Holders of 2% Percent War Housing Insurance Fund Debentures, Series H
I.
N O T I C E OF F I F T H C A L L FOR P A R T I A L R E D E M P T I O N , B E F O R E M A T U R I T Y ,
2}4 P E R C E N T W A R H O U S I N G I N S U R A N C E F U N D D E B E N T U R E S , S E R I E S H .
'^^
T h e Federal Housing Commissioner, with t h e approval of t h e Secretary of the
Treasury, has issued t h e following notice of call for partial redemption and offer
. to purchase with respect to 2}^ percent war housing insurance fund debentures.
Series H :
" P u r s u a n t to t h e a u t h o r i t y conferred by t h e National Housing Act (48 Stat.
1246; U. S. C , title 12, sec. 1701 et seq.) as amended, public notice is hereby
given t h a t 2% percent war housing insurance fund debentures. Series H, of t h e
denominations a n d serial numbers designated below, are hereby called for redemption, a t p a r and accrued interest, on July 1, 1949, on which date interest on
such debentures shall cease:
2)i percent war housing insurance fund debentures. Series H
_^
.
.
Serial numbers
Denomination:
(all numbers inclusive)
$50
3,019 to 3,032
$100
8,050 to 8,101
$500
4,016 to 4,035
$1,000
9,074 to 9,129
$5,000
1,009 to 1,023
$10,000
5,061 to 5,101
" T h e debentures first issued as determined by t h e serial numbers were selected
for redemption by t h e Commissioner, Federal Housing Administration, with t h e
approval of t h e Secretary of t h e Treasury.
" N o transfers or denominational exchanges in debentures covered by t h e foregoing call will be made on t h e books maintained by t h e Treasury D e p a r t m e n t on
and after April 1, 1949. This does not affect t h e right of the holder of a debenture
to sell and assign the debenture on or after April 1, 1949, and provision will be
made for t h e p a y m e n t of final interest due on July 1, 1949, with t h e principal
thereof to t h e actual owner, as shown by t h e assignments thereon.
" T h e Commissioner of t h e Federal Housing Admimstration hereby offers to
purchase any debentures included in this call a t any time from April 1, 1949, td
J u n e 30, 1949, inclusive, a t p a r and accrued interest, to date of purchase.
"Instructions for t h e presentation and surrender of debentures for redemption
on or after July 1, 1949, or for purchase prior to t h a t date will be given by t h e
Secretary of t h e T r e a s u r y . "
II.
TRANSACTIONS I N F I F T H - C A L L E D
DEBENTURES
^
1. T h e debentures included in t h e foregoing notice of call for partial redemption
on July 1, 1949, are hereby designated fifth-called 2>4 percent war housing
insurance fund debentures. Series H , and are hereinafter referred to as fifth-called
debentures.
2. Transfers and denominational exchanges in fifth-called debentures will terminate a t t h e close of business on March 31, 1949.
III.
R E D E M P T I O N OR P U R C H A S E
1. Holders of fifth-called debentures will be entitled to have such debentures
redeemed and paid a t p a r on July 1, 1949, with interest in full to t h a t date, a t the
r a t e of $12.50 per $1,000. Interest on fifth-called debentures will cease on July
1, 1949.
2. Holders of fifth-called debentures have t h e privilege of presenting such debentures a t a n y t i m e from April 1 t o J u n e 30, 1949, inclusive, for purchase a t par
a n d accrued interest, a t t h e rate of $0.069061 per $1,000 per day from J a n u a r y 1,
1949, to date of purchase.
[The rules a n d regulations governing redemption a n d purchase (section IV) and
the general provisions (section V), omitted here, are, with t h e exception of the
applicable dates, t h e same as those shown in exhibit 11.]
EXHIBITS
211
INTERNATIONAL FINANCIAL AND MONETARY DEVELOPMENTS
Exhibit 13.—Report of activities of the National Advisory Council on International
Monetary and Financial Problems, April 1 to September 30, 1948]
[House Document No. 120, 81st Congress, 1st sessionl
L E T T E R OF T R A N S M I T T A L
To the Congress oj the United States:
Attached hereto is a report of the National Advisory Council on
International Monetary and Financial Problems covering its operations from April 1, 1948, to September 30, 1948, and describing, in
accordance with section 4 (b) (5) of the Brettoii Woods Agreements
Act, the participation of the United States in the International
Monetary Fund and the International Bank for Reconstruction and
Development for the above period.
Previous reports of the National Advisory Council were transmitted
to the Congress on March 1, 1946, March 8, 1946, January 13, 1947,
June 26, 1947, January 19, 1948, May 17, 1948, and August 3, 1948,
respectively. I n addition to the First Special Report on the Operations and Policies of the International Monetary Fund and the
International Bank for Reconstruction and Development, submitted
on May 17, 1948, previous reports on the participation of the United
States in the International Monetary Fund and the International
Bank were included in the reports, of January 13, 1947, June 26, 1947,
January 19, 1948, and August 3, 1948, respectively.
HARRY S . TRUMAN.
THE WHITE
HOUSE,
March 14, 1949.
R E P O R T OF A C T I V I T I E S OF T H E NATIONAL ADVISORY
COUNCIL ON I N T E R N A T I O N A L M O N E T A R Y A N D F I N A N CIAL P R O B L E M S A P R I L 1 TO S E P T E M B E R 30, 1948
I; O R G A N I Z A T I O N O F T H E C O U N C I L
STATUTORY BASIS
The National Advisor^ Council on International Monetary and
Financial Problems was established by the Congress in the Bretton
Woods Agreements Act (59 Stat. 512, 22 U. S. C. 286b), approved
July 31, 1945. The statute directed, the Council to coordinate the
policies and operations of the representatives of the United States
on the International Monetary Fund and the International Bank for
Reconstruction and Development, the Export-Import Bank of Washington, anci all other agencies of the Government ^^to the extent that
they make or participate in the making of foreign loans or engage in
foreign financial, exchange or monetary transactions.'' ^ The Council
was also directed to adv^ise and consult with the President and the
United States representatives on the Fund and the Bank on major
problems arising in the administration of the Fund and the Bank;
and to recommend to the President general policy directives for the
guidance of the representatives of the United States on the Fund and
212
REPORT OF THE SECRETARY OF THE TREASURY
Bank. The Bretton Woods Agreements Act was amended by section
106 of the Foreign Assistance Act of 1948 (62 Stat. Ch. 169; 22 U. S. C.
286b (a)), approved April 3, 1948, to include the Administrator for
Economic Cooperation as a member of the Council for the duration
of this office. The Council was also given certain additional duties
under the Foreign Assistance Act. The relevant portions of the
Bretton Woods Agreements Act and of the Foreign Assistance Act
of 1948 are presented in appendix A.*
REPORTS
Since its fii-st meeting on August 21, 1945, the Council has submitted
seven formal reports.^ The present report covers the activities of
the Council from April 1, 1948, to September 30, 1948.
MEMBERSHIP
The members of the Council, according to law, during the period
under review, were the following:
The Secretary of the Treasury, John W. Snyder, Chairman.
The Secretary of State, George C. Marshall.
The Secretary of Commerce, Charles Sawyer.
The Chairman of the Board of Governors of the Federal Reserve
System, Thomas B. McCabe.
The Chairman of the Board of Directors of the Export-Import
Bank, William McChesney Martin, Jr.
The Administrator for Economic Cooperation, Paul G. Hoffman.
Three changes in the membership of the Council have occurred
since the previous report. Mr. Charles Sawyer succeeded Mr. W.
Averell Harriman as Secretary of Commerce, Mr. Thomas B. McCabe
succeeded Mr. Marriner S. Eccles as Chairman of the Board of Governors of the Federal Reserve System, and Mr. Paul G. Hoffman, the
Administrator for Economic Cooperation, became a member of the
Council in accordance with the provisions of the Foreign Assistance
Act of 1948.
By agreement, the following served as alternates:
Franl^ A. Southard, Jr., Special Assistant to the Secretary of the
Treasury.
Willard L. Thorp, Assistant Secretary of State for Economic
Affairs.
Thomas C. Blaisdell, Jr., Acting Assistant Secretary of Commerce.
M. S. Szymczak, Member of the Board of Governors of the
Federal Reserve System.
Herbert E. Gaston, Vice Chairman of the Board of Directors of
the Export-Import Bank.
Wajme C. Taylor, Assistant to the Administrator, Economic Co^
operation Administration.
C. Dillon Glendinning is the Acting Secretary of the Council.
1 These reports were transmitted by the President to the Congress on March 1, 1946 (H. Doc. No. 489,
79th Cong., 2d sess.; subsequently included as appendix B to H. Doc. No. 497,79th Cong., 2d sess.), March
8,1946 ( H . DOC. NO. 497, 79th Cong., 2d sess.), January 13,.1947 (H. Doc. No. 53, 80th Cong., 1st sess.), June
26, 1947 ( H . DOC. NO. 365, 80th Cong., 1st sess.), January 19, 1948 (H. Doc. No. 501, 80th Cong., 2d sess.),
May 17, 1948 (H; Doc. No. 656, 80th Cong., 2d sess.), and August 3, 1948 (H. Doc. No. 737, 80th Cong.,
.2d sess.).
* Appendixes omitted in this exhibit.
EXHIBITS
213
The United States Executive Directors on the International Monetary Fund, Andrew N. Overby, and on the International Bank for
Reconstruction and Development, Eugene R. Black, or their alternates
Henry J. Tasca and John S. Hooker, respectively, regularly attended
the meetings of the Council.
PROCEDURE
The Council ordinarily meets each week ajid holds such special
meetings as are required. In discharging its functions, the Council
makes use of the services of the personnel of its member agencies. Its
Staff Committee consists of technical representatives of member
agencies and a representative of the Securities and Exchange Commission. The Alternate United States Executive Directors on the
International Monetary Fund and the International Bank generally
attend meetings of the Staff Committee. Thd : Staff Committee
collects and analyzes infqrmation and prepares reports and recommendations for the Council. This procedure has enabled the Council
to rnaintain, in the most efficient manner, the close interagency liaison
necessary for successful performance of its coordinating functions.
Secretariat functions are performed by personnel of the Treasury
Department.
II.
U N I T E D STATES POSTWAR FOREIGN ASSISTANCE ^
The changing pattern of international financial developments has
required the Council constantly to review and coordinate the policies
of the various United States Government agencies operating in the
foreign financial field. Through congressional authorizations and
appropriations, the United States Government made available,^ from
July 1, 1945, to June 30, 1948, a grand total of 26.2 billion dollars for
the purpose of extending financial assistance to nations throughout
the world. As of June 30, 1948, approximately two-thirds of this sum
had been utilized, leaving an unutilized balance of 9.0 billion dollars.
This latter amount consisted primarily of slightly more than 5.0 billion
doUars appropriated and authorized for the Economic Cooperation
Administration, 1.3 billion dollars of unutilized loanable funds of the
Export-Import Bank of Washington, and 1.5 billion dollars of funds
for government and. relief in occupied areas under the administration
of the National Military Establishment. It was the intent of the
Congress that the major part of these unutilized funds be available for
expenditure after June 30, 1948.
The rate at which funds for foreign assistance were utilized was
fairly steady throughout the 3-year period, except for a peak of
utilized grants and credits of 3.6 billion dollars reached during the
2 A detailed break-down of the statistical Information referred to In this section is given in appendixes C
and D. This information has been prepared for the Council by the Clearing OflQce for Foreign Transactions,
OflBce of Business Economics, Department of Commerce, in consultation with the International Statistics
Division of the OflSce of International Finance, Treasury Department. Charts are also based upon these
appendixes. [Appendixes and charts omitted in this exhibit.]
3 The total available in the period represents the amount utilized in the period plus the unutilized balances
at the end of the period. In general, the term utilized as referred to in this report is comparable to disbursements, shipments or deliveries, while unutilized balance refers to a congressional authorization or
appropriation that has not yet been expended. Thus as of June 30, 1948, part of the unutilized funds were
committed or obligated but not expended. Because of variations in the financial reportuig procedures
of the various Government agencies handling foreign aid, the general terms utilized and unutilized have
been adopted to designate a stage of distribution that is somewhat comparable from agency to agency.
For further definitions of these terms, see the explanatory notes to appendix C [omitted in this exhibit].
214
REPORT OF THE SECRETARY OF THE TREASURY
latter half of fiscal 1947. Assistance on a credit or loan basis tended
to increase moderately up to July 1947, and then to decrease during
fiscal 1948. After January 1948, aid was preponderantly in the
form of grants.' The changing nature of assistance rendered may be
ascribed to the types of aid programs in effect. For example, the
United States contribution to the United Nations Relief and Rehabilitation Administration in the first postwar year, fiscal 1946, was
entirely on a grant basis. The second postwar year, fiscal 1947,
witnessed drawings of over 2,0 billion dollars by the United Kingdom
on the 3.75 billion dollar line of credit extended by the United States.
In the third postwar year, fiscal 1948, United States aid was increased
through the adoption of such measures as interim aid and the Foreign
Assistance Act of 1948, which were primarily on a grant basis.
AGENCIES ADMINISTERING POSTWAR FOREIGN AID
The Congress has designated various agencies for the administration of postwar assistance. The agencies extending loans and credits
have included the Export-Import Bank, the Office of Foreign Liquidation Commissioner, the Treasury Department, the Reconstruction
Finance Corporation, the War Assets Administration, and the United
States Maritime Commission. Some of these agencies were newly
created for specific programs, while others, under increased authority,
carried out functions of the type with which they had had previous
experience. Thus, the Office of Foreign Liquidation Commissiorier
and the War Assets Administration were especially created to deal
with problems of surplus property arising from the war effort. On
the other hand, the Export-Import Bank and the Reconstruction
Finance Corporation had previously been engaged in activities somewhat similar tb their postwar operations, and the lending authority
of the Export-Import Bank was substantially increased. The
Treasury Department's administration of the Anglo-American Financial Agreement was directed by statute. Under the Merchant Ship
Sales Act of 1946 the United States Maritime Commission was
authorized, with certain limitations, to sell war-built vessels to foreign
purchasers on credit terms. This authority expired March 1, 1948.
Grant assistance was provided through the United Nations Relief
and Rehabilitation Administration and, in addition, assistance on
terms of repayment to be determined by later peace settlements
(classified as grants for purpose of statistical summary), was extended
EXHIBITS
215
by the National Mihtary Establishmerit as an incident to military
occupation.
In 1948 the Economic Cooperation Administration was established
to administer a more general program of economic assistance.
G E O G R A P H I C A L DISTRIBUTION OF ASSISTANCE
Charts 2 arid 3* show, for grants and credits, respectively, the dollar
amount of total United States postwar foreign assistance through
June 30, 1948, by recipient area. These charts high light the differences in the grant and credit programs, showing that grant programs
were concentrated on Asia and European Recovery Program countries
other than the United Kingdom, while the largest single recipient of
loan aid was the United Kingdom, primarily under the Anglo-American
Financial Agreement. Of the 4.5 bilhon dollars classified in chart 2*
as Unallocated and Miscellaneous, 3.3 billion dollars consisted of European Recovery Program funds, expected ultimately to be utilized for
the benefit of European Recovery Program countries, including the
United Kingdom. As of June 30, 1948, however, these funds had
not been allocated to specific recipient countries.
Of the grand total of 26.2 billion dollars made available for foreign
assistance, more than two-thirds was designated for those nations
which became participants in the European Recovery Program.
Principal beneficiaries were the United Kingdom, France, western
Germany, arid Italy. Assistance to European countries outside of
what is now construed as E R P Europe was provided on a smaller
scale, and mainly as a result of relief and other grants such as the
original U N R R A program.
The total of 4.5 billion dollars in United States aid made available
to Asia between July 1945 and June 1948 was mainly to Japan and
southern Korea under the military program of relief for occupied
areas, and to China under post-VJ-day lend-lease aid and other
grants. There were, however, property credits and loans to Asiatic
countries, totaling $808,000,000. Aid to other areas included $473,000,000 to Latin America, $41,000,000 to Africa, and about $12,000,000
to Australia and New Zealand.
The following table shows, by country, the utilization of United
States Government foreign assistance from July 1, 1945, to June 30,
1948, unutilized commitments on June 30, 1948, and ECA additional
allotments as of September 30, 1948:
* Omitted in this exhibit.
216
REPORT OF THE SECRETARY OF THE TREASURY
TABLE I.— U. S. Government foreign assistance, July 1, 1945, to June SO, 1948, by
major countries in each area
[In millions of dollars]
Unutilized
Country
Total
E R P Europe:
United Kingdom
_.;
France
Germany (western)
.
Italy
Greece.
Netherlands
'
.-
Austria
Belgium-Luxembourg
Other E R P
.
Other Europe:
U. S. S. R
Poland
Yugoslavia
:
_..
-
.
-
._
Czechoslovakia
Other non-ERP...
Asia:
China
Japan
Philippines _.
_
.
Korea (southern)
Other Asia
Western Hemisphere:
Latin America.
Canada
'
Utilized
ECA
Commit- Additional
ments June .Allotments
30, 1948
Sept. 30,
1948
5,958.
3,374
2,467
4, 790
2,381
L264
159
233
827
1,009
760
376
1,868
942
759
1, 239
664
327
194
148
64
435
130
368
580
356
584
342
243
148
61
194
177
113
242
465
443
299
462
439
299
3
4
213
163
213
141
22
1,898
1,609
507
1, 474
1,017
267
424
592
240
307
218
171
123
136
.95
473
300
283
140
190
160
NOTE.—Table does not include ECA funds which were unallocable by country on Sept. 30, 1948, nor
other agency funds unallocable by country on June 30, 1948.
FOREIGN
GOLD
AND
SHORT-TERM
DOLLAR
RESOURCES
Chart 5* indicates the changes in gold and short-term dollar assets
of foreign countries between June 30, 1945, and June 30, 1948, according to geographical areas. Assistance from the United States Government in the postwar period was accompanied by utilization by foreign
countries of a substantial part of their gold and dollar resources.
Practically all major foreign countries., with the exception of Switzerland, suffered declines of varying magnitudes in their monetary resources. On June 30, 1945, gold and dollar reserves owned by all
foreign countries (excluding the Union of Soviet Socialist Republics)
totaled approximately 20 billion dollars, while 3 years later, on June
30, 1948, these reserves had fallen to 14.6 billion dollars, a decline of
* Omitted In this exhibit.
217
EXHIBITS
slightly more than 27 percent (see appendix B, table 1*). Forthe
countries included in the European Recovery Program, the relative
loss was even greater—from 10.6 billion dollars in 1945 to 7.5 billion
dollars in 1948.
As a result of this depletion, by June 1948 many of the countries
of the world had insufficient gold and dollars to maintain working
balances in foreign exchange and adequate monetary reserves.
T A B L E II.—Estimated gold and short-term dollar balances, by geographical area,
annually, 1946-48
[In millions of dollars]
June 30—
Area
1945
E R P Europe LBritish Commonwealth 2 . _
Latin America
Asia'
-
.
. . .
.
1
.
-
-
1946
7,519
5,657
3,677
2,050
6,889
5,922
3,891
2,114
1947 ^
1948
5,619
4,952
3,331
1,680
5,029
4 109
2,876
1,513
J Excludes sterling area countries and Indonesia, but includes dependencies of E R P countries other than
the Netherlands.
2 Includes all sterling area countries.
8 Excludes sterling area countries.
T A B L E I I I . — E s t i m a t e d gold and short-term dollar balances held by E R P countries^
and the British Commonwealth, as of J u n e SO, 1945, and J u n e SO, 1948
[In millions of dollars]
June 30—
Change
Country or area
1945
Sweden
France
Netherlands
Canada
South Africa
Other
._
Portugal - .
United Kingdom.
Belgium and Luxembourg
Other E R P 3
Switzerland
-_
.'.
.-.
. .
Dollar
Percent
648
2,351
673
123
784
359
-525
-1,567
-314
—81 0
—66 7
—46.7
_..
2,934
1,842
-1,092
—37 2
_..
1,613
884
437
943
382
517
-670
-502
+80
—41 6
—56 8
+18.3
461
2,723
925
821
1,640
302
2,267
803
,803
1,855
-159
-456
-122
-18
+215
—34 5
—16 7
— 13 2
—2 2
+13.1
.:
British Commonwealth 2
1948
1 Includes dependencies of E R P couritries, except for Indonesia.
2 Excludes the United Kingdom, for which data are shown separately.
3 Includes E R P countries each holding less than $400,000,000 in gold and dollar balances on June 30,1945,
except for Iceland and Ireland, which are included in the British Commonwealth.
* Omitted in this exhibit.
218
REPORT OF THE SECRETARY OF THE TREASURY
FOREIGN AID AND THE UNITED STATES BALANCE OF PAYMENTS
TABLE IY.^Foreign aid in the United States balance of payrnents, July 1, 1946, to
June 30, 1948, by semiannual periods
[In millions of dollars]
Items
T o t a l Exports .
M e a n s of financing:
Total imports
U . S. G o v e r n m e n t aid (net)2.
L i q u i d a t i o n of foreign gold
a n d dollars
Miscellaneous.
1945
1946
1947
JulyDecember »
JanuaryJulyDecember
June
JanuaryJune
1948
JanuaryJulyDecember
June
7,200
7,401
7,565
10,093
9,648
8,665
4,143
3,628
3, 416
2, 681
•3,751
2,372
4,171
3, 293
4, 292
2,419
5,087
2,149
> -1,078
507
816
488
1,152
290
2, 341
288
2,173
764
920
509
> The means of financing shown for the period July through December 1945 exceed exports by
$1,078,000,000, which represents the net foreign acquisition of dollar assets and purchases of gold from the
United States.
2 Figures for U. S. Government foreign aid (net) presented in this table and In chart 6 differ somewhat
from those in chart 1 for the following reasons [charts omitted in this exhibit]:
(a) Aid shown in table IV is net of unilateral transfers to the United States, repayments, etc., whereas
gross data appear in chart 1.
(b) Pensions, annuities, claims of individuals, etc., are included in this calculation of net aid, but are
excluded in chait 1.
(c) Included in the calculation of net aid are lend-lease shipments and merchant ship deliveries, whereas
aid appearing in chart 1 is based on lend-lease billings and mortgages signed, both of which lag. As a result
ofthese lags, net aid figures reported for the earlier period in table IV exceed those appearing in chart 1.
As indicated in chart 6, * foreign countries had a demand for American
goods needed for the postwar reconstruction of their economies far in
excess of their ability to pay on the basis of their current sales of
goods and services to the American economy. As previously pointed
out, to a considerable extent they attempted to meet trieir deficit on
current account by the liquidation of gold and dollar balances in the
United States. This depletion Avas approaching a point at which the
financial situation of some countries was critical. At this juncture,
the aid provided by the United States became an important factor in
relieving international financial stress and in assisting recovery in
levels of production and in standards of living.
*Omitted In this exhibit.
EXHIBITS
219
III.
ACTIVITIES OF THE COUNCIL FROM A P R I L 1,1948, TO SEPTEMBER
30, 1948 (OTHER T H A N T H O S E RELATING TO THE INTERNATIONAL
MONETARY FUND AND THE INTERNATIONAL BANK)
EUROPEAN RECOVERY PROGRAM
Financial status oj the European Recovery Program
The Congress appropriated on June 28, 1948, a total of $6,030710,228 for foreign assistance (62 Stat. 512, 22 U. S. C. A. 1501).
The specific appropriations were as follows:
Total Appropriated
$6,030,710,228
European Recovery Program
^
4, 000, 000, 000
National Military Establishment (government and relief in
occupied areas)__
_.___ 1, 300, 000, 000
Assistance to—
China
400,000,000
Economic
(275,000,000)
Military
___.
(125, 000, 000)
Greece and Turkey (military aid)
225, 000, 000
International—
Refugee Organization
:________
70,710,228
Children's Emergency Fund
__.
35, 000, 000
In addition to the 4.0 billion dollars appropriated to carry out the
provisions of the Economic Cooperation Act, there was also made
available the sum of 1 billion dollars to be provided out of public debt
transactions for the purpose of making loans and guaranties, of which
a maximum of 300 million dollars could be used for guaranties. The
appropriation act provided that the entire amount could be obligated
and expended during the period ending April 2, 1949, if the President,
after recommendation by the Administrator, deemed such action
necessary to carry out the purposes of the act.* Thus, the total
amount of funds which may be utilized under the Foreign Assistance
Act of 1948 and the related appropriation act' is $7,030,710,228.
This section of the report, however, will deal only with the amounts
made available for economic recovery in Europe..
For the first 6 months of operations, from April tlirough September
1948, the Economic Cooperation Administration bad allotted assistance to European Recovery Program countries; totaling 4.3 billion
dollars, while actual procurement authorizations amounted to 1.9
billion doUars (table V). The allotments represented amounts that
the foreign countries had been informed they could use during the
period, while the authorizations represented the obligations incurred
by the Economic Cooperation Administration for the procurement of
supplies and services. Since it was contemplated that commitments
under the European Recovery Program would total 5 billion doUars for
the first 12 to 15 months of operations, the rate of progress in extending
assistance for the half-year was comparatively close to that envisaged
* On November 26,1948, the President authorized the Economic Cooperation Administration to use the
fullamount of its appropriation in the 12 months ending April 2,1949.
220
REPORT OF THE SECRETARY OF THE TREASURY
in the Foreign Assistance Act of 1948. In view of the time lag between procurement authorizations and actual delivery of goods to
recipient countries, the major expenditure of appropriated and authorized funds for assistance during the first European Recovery Program
period will occur after October 1, 1948. The following table indicates
that the chief recipients of aid are the United Kingdom, France, Italy,
western Germany, and the Netherlands—the allotment totals for these
countries amounting to 3.6 bUlion dollars out of a total of 4.3 billion
dollars:
TABLE Y.—Distribution of ECA allotments and procurement authorizations, as of
Sept. SO, 1948
[In millions of dollars]
Total Allotments
Country
Total
1. -.
United T^ingdom __
France
Italy
Germany (western)
Netherlands.
Austria .
-
.
_
....
Greece --Belgium and Luxembourg..
Denmark
Norway
Ireland .
Trieste
^.
._--
Sweden. _
Turkey —
Iceland
-
4,346.6
1,930.3
--.
1, 235.0
966.0
541.0
447.9
473. 5
257.9
440.3
411. 0
216.0
260 3
172.8
114 6
162.0
113.0
87.0
91 3
21.8
43.2
72.0
60.0
17.0
38.4
• _. _
-
- . . ._
_
_
^
_.
...-
Procurement
Authorizations
10.0
10.0
6.3
6.3
2.3
Loans and grants
Under the Economic Cooperation Act of 1948, 1 billion dollars of
total European Recovery Program aid was made available solely for
loans and guaranties. The remaining 4 biUion dollars of European
aid may be utilized for either grants or loans as the Administrator for
Economic Cooperation deems appropriate, acting in consultation
with the Council. Determination as to whether assistance shall be
through grants or upon terms of payment—
. . . shall depend upon the character and purpose of the assistance and upon
whether there is reasonable assurance of repayment considering the capacity of
such country to make such payments without jeopardizing the accomplishments
of the purposes of this title (62 Stat. 1054).
Allocation oj loans to specific countries
In allocating funds for loans for the first yearns program, it was
essential to appraise not only the current positions of the several
European countries but also their prospects under the recovery program and later. The extent of physical destruction and disturbance
of their economic systems as a result of the war varied substantially
from country to country. Moreover, a few countries, such as the
United Kingdom and France, had .already contracted heavy foreign
EXHIBITS
221:
indebtedness in connection with their reconstruction efforts. I t was
thus necessary, for the first year, to weigh carefully a wide range of
factors in arriving at an over-all judgment as to the allocation of
loans among the countries.
For the first year it was determined that only Portugal and Switzerland w(3re in a position to pay cash for their imports of goods and
services and that Iceland, Ireland, Sweden, and Turkey should receive
their initial allocations entirely on a loan basis. In the cases of
Austria and Greece, it was decided that United States assistance
should be entirely on a grant basis. For most of the remaining countries, it was agreed that, for the first year, aid should be primarily on
a grant basis but that some portion of the assistance should be on a
loan basis. With respect to the Free Territory of Trieste, it appeared
desirable, until the situation was clarified, to treat any assistance as
a grant. Finally, it was believed that assistance to Germany should
be subject to such terms of payment as may be determined by the
peace settlement.
In accordance with the general principles indicated above, the
contemplated loan program as of September 30, 1948, for the first 9
months of the European Recovery Program, was as follows:
TABLE VI.—Contemplated loan program under the Economic Cooperation Act of
1948, as of Sept.'SO, 1948 •
[In millions of dollars]
Amount
Total Loans.
.
837.3
United Kingdom
France
Netherlands (including Indonesia)
Ireland
Belgium and Luxembourg.
Italy
.
Norway
Turkey
Denmark
Sweden
Iceland
310. 0
170. 0
95. 0
_._
60. 0
50. 0
50.0
i
'__
:___
_.
_._______.
^__^___
35. 0
30.0
25. 0
10. 0
2. 3
Because of the time required to prepare and approve the bilateral
agreements with the participating countries and to negotiate details
of the loan agreements, no loan agreements had been completed as of
September 30, 1948, with the exception of a loan to Iceland. However, at that date, tentative agreement had been reached with various
other participating countries. The terms of the loan bf $2,300,000 to
Iceland were subject to revision in the light of the terms of payment
to be negotiated with the other countries.
Terms oj payment on ECA loans
The Administrator for Economic Cooperation, in accordance with
the act of 1948, requested the advice of the Council as to the terms of
payment on loans to participating countries. In giving its advice,
the Council took into consideration the terms of lend-lease settlements,
war-account settlement arrangements, Export-Import Bank loans, the
222
REPORT OF THE SECRETARY OF THE TREASURY
Anglo-Aiherican Financial Agreement, Office of Foreign Liquidation
Commissioner credits, the Reconstruction Finance Corporation loan
to the Philippines, War Assets Administration credits, and loans by
the International Bank. Important aspects of terms and conditions
of loans include the interest rate, maturities, a ^'period of grace'* for
interest payments and/or amortization of principal, and the possibUity
of a postponement provision.
Since the decision on how to allocate aid as between loans and grants
takes account of the differences in the abUity of various countries to
repay loans, the terms of payment have been placed on a uniform
basis among the borrowing countries, except for some variation in the
schedules of amortization.
The Council was in agreement that the rate of interest should be
sufficient to cover the cost of money to the United States Government.
In view of the broad purpose of the ECA loans, as part of a program
directed toward the long-term economic recovery of Europe, the
Council considered that the loans should have relatively long maturities and low interest rates, so that some portion of the total ECA aid
could be placed on a loan basis without imposing an undue aimual
burden on the borrowers' balances of payments. The Council considered that a 35-year maturity and 2}^-percent interest rate would be
appropriate for loans made during the first year of the program.
The Council felt that there should be a period, probably extending
beyond the end of the proposed European Recovery Program, during
which no payments on principal would be required, in order to allow
the recipient countries to make adjustments necessary to enable them
to begin repaying the loans. The Council therefore recommended
that there should be no amortization of principal for a minimum
period through June 1952 and a maximum period through June 30,
1956. The Council further recommended that no interest be charged
for the period through June 30, 1952. I t also was of the opinion that
provision might be made in the loan contracts for consultation,
between the United States Government and the individual borrowers
during periods of unusual economic stringency, with a view to possible
postponement of dollar payment and the acceptance of local currency.
Local currency accdunts
The Foreign Assistance Act requires that all countries receiving
assistance in the form of dollar grants make special deposits in local
currency commensurate in amount to the grants received. These
funds may be held or used, by agreement between the participating
country and the United States, for purposes of internal monetary
and financial stabilization, stimulation of productive activity, exploration for and development of new sources of wealth and for such other
expenditures as may be consistent with the purposes of the Economic
Cooperation Act, including local currency administrative expenditures
of the United States .incident to operations under the act.^
Local currency receipts under the European Recovery Program in
many countries have been of sizable magnitude relative to government receipts and expenditures and the total money supply. The
proper utilization of these funds may contribute to the achievement
» The appropriation act specifies that not less than 5 percent of each special local currency account shall be
allocated to the use of the U. S. Government for expenditure for strategic materials Where available, or for
other local currency requirements of the United States.
EXHIBITS
223
of a sound fiscal policy and may also finance needed investments.
The use of the local currency counterpart funds is, however, only one
factor in bringing about improvement in European finances and must
be supplemented by other fiscal and monetary measures.
The sale within any participating country of commodities provided
under the assistance program has an initial counterinfiationary effect.
This counterinfiationary effect may be maintained through the local
currency counterpart as long as the funds are immobilized or are used,
under certain circumstances, for a permanent net retirement of the
government debt. However, immobilization of local currency counterpart funds or their use for debt retirement are not in themselves
sufficient to* assure sound fiscal policy. The beneficial effects can be
offset by additional borrowing by the government. Such uses of
counterpart funds are not substitutes for fundamental reforms which
may be required to achieve lasting stability.
.
Although the use of counterpart funds for investment projects tends
generally to offset the immediate counterinfiationary effect of the
deposit, such use in selected fields can nevertheless contribute to
European recovery where it results in increased productive capacity
and more effective utUization of the labor force.
The CouncU has recommended to the Administrator that counterpart funds be released for debt retirement and for investment purposes
only where the governments concerned have recommended such releases in conjunction with a financial program ainied at the achievement of internal monetary and financial stabUity. In several instances
it has been necessary for the Council to recommend approval of these
releases at the outset of a program of reforms. But it has recommended that subsequent releases be made contingent upon a demonstration of effective iinplementation of the reform measures.
The CouncU took the position, consistent with the act, that local
currency proceeds might also %e used to facUitate intra-European
trade and payments ^within the arrangements proposed by the participating countries, designed to facUitate and expand intra-European
trade on a multUateral basis.
In the period under review the CouncU took action with regard to
releases of counterpart funds in the following countries:
France
In September 1948 the French Government requested United States
agreement to periodic releases of the local currency counterpart funds
to assist it in undertaking a newly announced economic and financia;!
program. The Council offered no objection to the Administrator's
giving assurance that, if the economic and financial program proposed
by the French Government were adopted, the United States Government would be favorably disposed to the release of appropriate
amounts of counterpart funds in successive installments and with
adequate safeguards. However, it was recommended that future
releases of such funds should depend upon an evaluation of progress
in the accomplishments of the new French financial program.
During September 1948 agreement was subsequently reached between the United States and French Governments on the release of
45 billion francs of counterpart funds (approximately $150,000,000),
to assist in financing a long-term program of investment and. reequip-
224
REPORT OF THE SECRETARY OF THE TREASURY
ment, chiefly for the expansion of public-utility and transportation
facUities.
United Kingdom
I t has been the policy in the United Kingdom to use local currency
receipts from foreign aid to retire the public debt. Since the United
Kingdom had recently operated on a balanced budget the CouncU
considered that this would be a desirable use of counterpart funds.
Greece
In June 1948 the Greek Government, with the concurrence of the
United States mission, requested permission to use the local currency
counterpart funds for the purpose of meeting a serious budgetary
deficit and to provide means to undertake programs of reconstruction
and rehabilitation.
The Council recommended that if the monetaxy and stabilization
undertakings of the Greek Government were carried out in substance,
the Economic Cooperation Administration consider favorably the
release of appropriate portions of the counterpart funds for the following purposes: to supplement private Greek capital in financing
capital imports; for a refugee, public health and welfare program;
and for a reconstruction and rehabUitation program designed to
stabilize the lev^el of incomes and prices. However, the Council advised that the amount and timing of the expenditures, particularly
for the reconstruction program, should be deterniined in the light of
current inflationary developments.
Trieste
The Council expressed the opinion that the local currency counterpart should be used in connection with a progra'm of expenditures to
stimulate productive activity, particularly in those key industries in
the Allied zone whose economic recbvery would contribute to the
economic recovery of western Europe.
. \,
Plans to jacilitate intra-European trade
Postwar trade among European countries has been carried on in
terms of a network of bilateral payments and clearing agreements,
which resulted, in part, from the inconvertibility of currencies and
the relatively small amount of dollars and gold available for the settlement of international balances. These agreements characteristically
provided for the clearing of transactions between the central banks of
the countries concerned, and for the mutual extension of certain
credit lines to cover net balances resulting from transactions. As this
system developed, some countries found themselves generally in the
position of creditors on payments account, while others were consistently debtors. The exhaustion of credit margins and the necessit}^' of settlement of accounts with dollars or gold has, from time to
time, imposed serious strains on the continuance or expansion of
intra-European trade.
To deal with this problem, various plans were suggested and given
limited trial. I t was found that one of the basic difficulties was that
the countries with a surplus on current account were unable or unwilling to extend further credits against payment in inconvertible
currencies, which could not readily be used to secure necessary goods.
EXHIBITS
225
After a limited experiment based entirely upon the use of European
currencies, an arrangement which in practice proved inadequate, it
was proposed that the aid provided to Europe by the United States
should be used to facUitate the operation of the payments mechanism
for intra-European trade.
The Council considered this proposal and advised the Administrator for Economic Cooperation to agree to a mechanism whereby
part of the dollar aid made available to Europe would be extended as
*'conditioi:ial aid," i. e., a country receiving this aid would make
available Jbo other European countries an equivalent amount of its
own currency to finance adverse balances. Total dollar aid to western
Europe is not increased by this scheme, since a portion of the dollars
supplied to assist the participating countries in covering their dollar
deficits is simply provided on the condition that the receivers will
make equivalent credits in their own currencies available to other
participants. The Council, in giving its approval to this proposal,
called the attention of the Administrator to certain conditions which
indicated that the proposal would not of itself be an entirely adequate
method of dealing with the European trade problem. Thus it emphasized the desirability of funding by the participating countries of
the outstanding clearing debts and the extension of additional credits
to each other as part of a program of facUitating European recovery.
Moreover, it believed that any plan for facilitating intra-European
trade and payments should contain provision for making steady
progress toward complete self-financing of such trade.
Conversion or exchange rates in the ECA program
The Administrator requested the CounciPs advice on the proper
conversion rates to be used for determining the local currency equivalent of United States grants to participating countries and the rates
to be used in administering the guaranty provisions.
In accordance with the bilateral agreements, the rates to be used in
computing the local currency equivalent of grants were to be determined by the United States in agreement with the country concerned.
The Council recommended that these rates should be the par value of
the currency where the country had a par value agreed by the International Monetary Fund. For other countries receiving grants,
special formulas were used, in view of the complexities of their exchange systems.
The Administrator for Economic Cooperation is authorized by section 111 (b) (3) of the Economic Cooperation Act to guarantee the
conversion into dollars of the income of approved new investments in
the participating countries, or of the proceeds of the amortization or
liquidation of such investments. The guaranty to any person, according to the act, shall not exceed the amount of dollars invested, with the
approval of the Administrator, in th^e project. The Council recommended that guaranty contracts should call for payments only when
transfers into dollars, through legal channels, were blocked. Where
the country has a unitary system of exchange rates based upon an
agreed par value, the rate for purposes of the guaranty should be the
seUing rate for United States dollars. In other cases the Council
recommended formulas which took intb consideration the rates applicable to transfers of income arid capital at the time prior to blocking,
856455—50—16
226
REPORT OF THE SECRETARY OF THE TREASURY
I t was agreed that in the application of the formulas there should be
consultation with the Secretary of the Treasury and, in appropriate
cases, with the National Advisory CouncU.
ASSISTANCE FOR ASIA
China
The Foreign Assistance Act of 1948 provides, under title IV, for aid
to China. The act states that the assistance extended shall be subject
to the applicable provisions of the Economic Cooperation Act of 1948.
The Council recommended to the Economic Cooperation Administration, on the basis of a study of China's capacity to repay, that all
aid to China, with the exception of assistance to finance reconstruction
projects, be on a grant basis, and advised that consideration would be
given to the basis for the extension of aid to finance reconstruction
projects when the nature of the projects became known. In view of
the rapid inflation in China, the Council recommended the use of certain special arrangements regarding local currency deposits.
Japan, Korea, and Ryukyu Islands
During the period under survey the Council reviewed a request
for appropriations, prepared by the Department of the Army, to be
used for the economic recovery of Japan, Korea, and the Ryukyu
Islands. Japan's economic position has changed considerably,
viewed against the backdrop of the prewar period. Once able to
balance its foreign trade, Japan now has lost its preferred position
in markets which formerly constituted the yen bloc, and no longer
has access to sources of cheap raw materials and food. Investment
income has disappeared m t h the vesting, by allied and other countries, of Japan's external assets; earnings of the merchant marine,
reduced to about one-fifth of its peak size, cover but a small fraction
of Japan's huge trade deficit. These developments, together with
the sharp postwar inflation, were considered by the CouncU, which
determined that a recovery program would be appropriate, but
expressed the opinion that this program should be accompanied by
measures which would achieve internal economic stability and effectively enforce the economic controls necessary thereto.
With respect to Korea and the Ryukyu Islands, the Council, taking
note of the especially serious internal obstacles to recovery within
the two areas and of the relief character of a substantial portion of
the commodities to be purchased, offered no objection to the requested
appropriation, in view of the special responsibilities of the United
States Government in the two areas.
Consistently with.the purposes of the Foreign Assistance Act of
1948, the Congress appropriated funds for economic rehabilitation
programs in Japan, South Korea, and the Ryukyu Islands.
EXPORT-IMPORT BANK CREDITS
During the period under review the Council continued to work
closely with the Export-Import Bank to facilitate coordination of
the Bank's policies with those of other agencies concerned with
foreign lending. New credits' authorized b y . t h e Bank during this
period totaled $60,300,000.
EXHIBITS
227.
Cotton credit to J a p a n
The Export-Import Bank referred to the Council a proposal for
credits to be participated in by the Bank and American commercial
banks to finance the purchase of United States cotton for manufacture
in Japan. Previously, the Department of the Arriiy had requested
that the Council consider the terms of this proposed credit. The
proposal provided for credits to run for not more than 10 months, to
mature not later than December 31, 1949, and not to exceed $60,000,000 outstanding at any time. These credits would be apportioned
among the Export-Import Bank and four American commercial
banks, a maximum of $29,000,000 to be loaned by the Export-Import
Bank and the remainder by commercial banks. Interest charges on
such credits would vary between 2% and 3}^ percent and there would
be a commission charge of one-fourth of 1 percent of the face amount
of letters of credit to be issued by commercial banks under the proposed plan. Ultimate security for the advances would consist of that
amount of gold and silver held by the Supreme Coriamander for the
Allied Powers, which was in excess of gold and silver restitution claims
against Japan.
The Council offered no objection to consideration by the ExportImport Bank of this credit. ^ Prior to September 30, 1948, the ExportImport Bank's participation was reduced to a total of $26,000,000,
increasing the commercial banks' participation to $34,000,000.
Aircrajt credits to Swedish Airlines
An application of Douglas Aircraft Corp. to the Export-Import
Bank for assistance in financing the export sale of aircraft to the
Swedish Airlines was referred to the Council. The Bank was asked
to participate to the extent of $2,125,000 with private commercial
banks and the Douglas Corp. I t was expected that private banks
would participate in the amount of $675,000, with the Douglas Corp.
taking the remaining portion in the amount of $500,000. The total
financing amounted to $3,300,000.
The Council had previously approved, in July 1946 and February
1948, consideration by the Export-Import Bank of credits aggregating
not more than $27,000,000 for financing the purchase of United States
air transportation equipment where private credit for that purpose
was not available. The further increase of $2,125,000 was approved
by the Council in June 1948.
Reconstruction loan to Colombia
During the Inter-American Conference held in Bogotd, a serious
outbreak by revolutionary forces caused considerable destruction in
the city. The American delegation in Bogota transmitted to Washington a request that financial aid be extended to Colombia in order
to provide for reconstruction. The Council was advised of this
request and in April 1948 approved consideration by the ExportImport Bank of a $10,000,000 loan to Colombia for the reconstruction
of Bogotd.
Cotton credit to Finland
The Export-Import Bank brought to the attention of the Council
an application by the Government of Finland for a 15-month credit of
$5,000,000 with a rate of interest of 2}^ percent per annum to finance
228
REPORT OF THE SECRETARY OF THE TREASURY
the purchase of raw cotton in the United States. The Export-Import
Bank, with the approval of the Council, had earmarked $100,000,000
for the extension of cotton credits to European countries. Because the
proposed credit, in addition to outstanding credits, was within the
earmarked $100,000,000 the CouncU did not consider that specific
action was necessary on this proposal, and did not object to the contemplated extension of the credit.
Proposal to increase lending authority oj the Export-Import Bank
Proposals for the creation of an Inter-American Bank were considered by the United States Government during the early part of
1948, and these proposals were presented t'o the Council. The Council was of the view that existing financial organizations, such as the
Export-Import Bank and the International Bank, were appropriate
to handle both short- and long-term foreign loan applications presented
by Latin American countries, but, in view of the relatively small uncommitted resources of the Export-Import Bank at that time, the
Council approved the introduction of legislation in the Congress to
increase the lending authority of the Export-Import Bank by $500,000,000. Hearings were held, but legislation had not been enacted as
of the date of this report.
As of September 30, 1948, the resources of the Export-Import Bank
were distributed as follows:
Total Lending Authority
$3, 500, 000, 000
Loans outstanding
Undisbursed commitments
Uncommitted lending authority
«_ 2, 100, 600, 000
566, 900, 000
832, 500, 000
The following table shows the distribution of net credits authorized
by country and object of financing:
TABLE VII.—Net credits authorized by the Export-Import Bank,^ July 1, 1945, to
Sept. 30, 1948
[In millions of dollars]
Total
Area and country
Reconstruc- Develop- Lend-Lease Cotton PurRequisitions chases 2
tion
ment
Other
Total. All Areas
2,618.6
1,008.6
775.1
655.0
159.0
20.9
Total, Europe
1,996.3
971.9
251.0
655.0
100.0
18.4
1, 200. 0
205.3
132.0
650.0
3 152. 2
45.0
3.1
3 32.0
550.0
50.0
55.0
131.8
90.2
50.2
50.0
25.0
17.0
<4.9
5 10.0
.2
20.0
<2.0
France
Netherlands
Belgium _.. „ .
-..
.
..
Italy.
Finland
Norway
Poland
TurkeyCzechoslovakia
40.0
35.6
22.0
40.0
Denmark
Germany
Greece .
20.0
19.0
14.7
20.0
Austria...
Sweden
Unallotted cotton credits
14.3
2.2
19.0
See footnotes at end of table.
101.9
63.2
35.6
19.0
14.7
13.0
2.2
8 1.3
i9.0
229
EXHIBITS
TABLE VII.—Net credits authorized by the Export-Import Bank,^ July 1, 1946, to
Sept. SO, 1948—Continued
[In millions of dollars]
Total, Latin America
Brazil ._
Mexico
Chile
-
_ . ._
...
Colombia.
Ecuador.Bolivia
Venezuela
Panama Argentina.
Reconstruc- Develop- Lend-Lease Cotton Purtion
Requisitions chases 2
ment
Total
Area and country
.
-
Miscellaneous
Total, Asia and Africa.
207.0
207.0
73.6
57.0
43.7
73.6
67.0
43.7
20.0
3.5
3.3
20.0
3.5
3.3
3.0
2.0
.2
3.0
2.0
.2
.7
.7
112.8
17.1
66.7
26.0
10.0
China
Japan i
Saudi Arabia
7.1
3.0
EgyptEthiopia
North America: Canada
300.0
Miscellaneous
36.7
'
•
c^
'
'
33.7
7.1
•
59.0
33.0
3 6 26. 0
10.0
3.0
Other
.
300.0
2.5
25
1 Cancellations and expirations deducted. Numerous small exporter-Importer loans extended by
tho Bank, July 1, 1945, through Sept. 30, 1948, excluded. Also excluded are Mexican authorizations of
$30,000,000. and a Peruvian authorization of $400,000 approved prior to June 30, 1945, reported on ExportImport Bank books subsequent to June 30,1945.
2 Credits extended by Export-Import Bank under general approval of the Council. Hungarian credit of
$7,000,000 canceled Apr. 2, 1947.
3 Excludes participation by private banks.
* For financing tobacco purchases.
* For financing food purchases.
« Revolving credit (of $1,300,000 shown for Austria, $800,000 is revolving).
SUNDRY FINANCIAL PROBLEMS
Commodity Credit Corporation credits
In June 1948 the Department of Agriculture through the Commodity
Credit Corporation submitted for the consideration of the Council an
agreement with the Indonesian Government under which the Corporation would make available $25,000,000 for the purchase of incentive
goods (textiles, food, household articles, etc.) to be used to stimulate
the production and procurement of copra and palm oil for export.
The agreement would be effective for a 2-year period from the date
of execution, and payments would be made by the Indonesian Government in amounts of $1,500,000 each month for the last 6 months
of the agreement. Any balance due at the end of the agreement
would be paid in full not later than 90 days after termination of the
agreement, while interest would be at the rate of 3 percent per annum.
Ability to repay by the Indonesian Government was based upon
anticipated export proceeds of copra and palm oil in 1948 at the
equivalent of $90,000,000 to $100,000,000.
The Commodity Credit Corporation had extended assistance to
Indonesia in 1946 and the amount made avaUable, $9,400,000, was
used to stimulate the production of copra. This agreement terminated
on December 31, 1947, and the loan was fully repaid.
230
REPORT OF THE SECRETARY OF THE TREASURY
The Council offered no objection to the extension of the $25,000,000
credit by the Commodity Credit Corporation to the Indonesian
Government.
War Assets Administration joreign credits
War Assets Administration credit agreements with foreign governments were inaugurated at a time when the.agency held in its inventory
large amounts of property which it appeared could not then be
absorbed by the national economy. After the adoption of the Economic Cooperation Act of 1948, the question arose as to whether the
War Assets Administration should continue such credits.
I t was concluded that the continuance of the credits would further
the objective of European recovery. Nevertheless, the War Assets
Administration was of the opinion that no new credits to foreign
.governments should be extended and that it might be advisable in
some instances to consider reducing the amounts of existing credit
agreements, since inventories of surplus property available to foreign
governments after prior domestic claims were met had been considerably reduced. The Council concurred in this view, with the reservation that the door should not be closed entirely on War Assets Administration foreign credits, since there might arise exceptional circumstances
under which it would be appropriate to extend small credits to particular countries, especially to those not eligible for assistance under
the Foreign Assistance Act of 1948. The War Assets Administrator
agreed that under such circumstances small additional credits might
be made to countries outside of the European Recovery Program.
During September 1948 the Administrator requested the advice
of the Council as to the desirability of extending six credit agreements
scheduled to expire in the latter part of the year. The Council
approved consideration by the agency of the extension to December
31, 1948, of the credit agreements with the Governments of Finland,
the Philippines, the NetKerlands, Haiti, Norway, and Austria.
T A B L E V I I I . — W a r Assets Administration credit agreements with foreign governments,
- as of Sept. 30, 1948
Country
Total
Total
France Netherlands
Norway
Austria
Finland
Philippines.-^
• Pakistan . .
Haiti .
........
.
.
1
.
.
-
...
Credit
Approvals
Sept, 30, 1948
Unused
Balance
$117,255,000
$20,061,886
$97,193,104
50, 000, 000
15, 000, 000
12, 000, 000
10, 000, 000
. 5, 886, 009
1, 410,025
1, 591,450
3, 823, 665
. 44,113,991
13, 589,975
10,408,540
6,176,335
10, 000, 000
10, 000, 000
10, 000, 000
255, 000
5,235,929
1,923,952
136,704.
54,152
4,764,071
8,076,048
•9, 863,296
200, 848
Certain applications which had been previously approved by the
CouncU had not resulted in credit agreements as of September 30,
1948,
EXHIBITS
231
Joint Brazil- United States Technical Commission
Consultation between representatives of the constituent agencies
of the CouncU and the United States section of the Joint BrazUUnited States Technical Commission took place during August 1948.
This Commission is a product of discussions held between the United
States Secretary of the Treasury and the Brazilian President and
Finance Minister during 1947, at which time it was agreed that a
small group of United States technicians would be sent to BrazU to
work with a similar group of Brazilians in arriving at determinations
as to the most effective utUization of BrazUian resources. Terms of
reference of the Commission as agreed by the two Governments are
as follows:
The Joint Brazil-United States Technical Commission should endeavor to
analyze the factors in Brazil which are tending to promote or to retard the economic development of Brazil. This might involve a broad appraisal of the manner,
directions, and rates of development of the Brazilian economy, looking toward
the most effective and balanced utilization of Brazilian resources. The Commission should give particular attention to the capacity of Brazil for economic
expansion through the maximum use of its internal resources. The Commission
shall not undertalie to appraise the merits of specific projects or to evaluate the
desirability of obtaining foreign financing. The Commission, however, should
consider measures designed to encourage the flow of private capital to Brazil and,
where appropriate, may make broad recommendations relative to measures which
might facilitate economic development in Brazil.
The Commission should direct its attention toward an analysis of (1) Brazil's
natural and capital resources, (2) the supply of labor, particularly skilled labor,
(3) problems in fiscal and banking fields, (4) problems of domestic and international trade, and (5) the position of Brazil in the world economy.
The United States section of the Commission left for Brazil on
August 27, 1948.
United States-Mexican stabilization agreement
During the period under review, Mexico purchased $7,000,000 in
exchange for pesos, following purchases of $30,000,000 in the previous 6-month period. Out of the total of $50^000,000 under the
United States-Mexican Stabilization Agreement - of May 13, 1947,
there remained $13,000,000 potentially available to Mexico as of
September 30, 1948.
A heavy loss of reserves forced Mexico to withdraw support from
the peso on July 22, 1948. As of September 30, 1948, the Mexican
Government had not submitted a new par value to the International
Monetary Fund. Further discussion of Mexico's relations with the
Fund is contained in section IV of this report.
IV.
ACTIVITIES OF THE COUNCIL FROM A P R I L 1 TO SEPTEMBER 30,
1948, RELATING TO THE INTERNATIONAL MONETARY F U N D AND
THE
INTERNATIONAL
BANK
F O R R E C O N S T R U C T I O N . AND D E VELOPMENT
The National Advisory Council, in accordance with statutory
authority, continued to coordinate the activities of the United States
representatives of the Fund and the Bank with thojse of other agencies
of the Government, by consulting and advising with them on major
problems arising in administration of the Fund and the Bank, The
United States Executive Directors of these institutions or their Alter-
232
REPORT OF T H E SECRETARY OP T H E TREASURY
nates, have attended the CounciPs meetings regularly, and have
participated continuously in the work of its Staff Committee.
THIRD ANNUAL MEETINGS OF THE FUND AND THE BANK
The Boards of Governors of the Fund and the Bank held their
third annual meetings in Washington, D. C , September 27 to October
1, 1948. The Secretary of the Treasury, John W. Snyder, as United
States Governor of both institutions, and William L. Clayton, as
Alternate Governor, attended. Andrew N. Overby and Frank A.
Southard, Jr., were appointed temporary United States Alternate
Governors for the purpose of these meetings. The Executive Directors also participated in these meetings, as did representatives
of the constituent agencies of the Council.
At these meetings the application of Siam for membership was
approved, various bylaws of the Organizations were amended, and
the Honduran request for a reduction in its Fund quota was granted.
The Boards of Governors received the annual reports, the reports on
audit, and the 1949 admirtistrative budgets. At the closing session
the Governor of France was elected Chairman for the coming year,
and the Governors of China, India, the United Kingdom, and the
United States were elected Vice Chairmen. I t was decided to hold
the fourth annual meetings in Washington in the month of
September 1949.
MEMBERSHIP CHANGES IN THE FUND AND THE BANK
In the period under review, one new country, Austria, was admitted
to membership in the Fund and the Bank. The Council favored the
approval of the Austrian application. Subsequently, the Boards of
Governors admitted Austria as a member with a quota in the Fund
of $50,000,000, and a like amount as a subscription to the Bank.
Austria formally became the forty-seventh member of the two organizations on August 27, 1948.
On August 6, 1948, the Council advised the United States Governor
and the United States Executive Directors of the. Fund and the Bank
that it favored the approval of the membership application of Siam.
At the third annual meetings in September 1948 the Boards of Governors accepted the Siamese request for membership, providing for a
quota in the Fund of $12,500,000, with a like amount as a subscription
to the Bank. Membership is open to Siam until March 31, 1949.
At the second annual meeting in London, the Boards of Governors
agreed to increase the quota of Iran in the Fund from $25,000,000 to
$35,000,000, conditional upon a proportionate increase in its subscription to the Bank. The increased Bank subscription was received
and accepted on June 28, 1948. The new Iranian quota in the Fund
became effective on July 21, 1948, and payment was received on
August 18, 1948.
On September 30, 1948, 47 countries were members of the Fund
and the Bank. The members, with their quotas and capital subscriptions as of September 30, 1948, are listed in appendix E.*
•Appendixes omitted in this exhibit.
•'
EXHIBITS
233
THE FUND
The International Monetary Fund provides machinery for international consultation and collaboration on international monetary
problems. From time to time, during the period under review,
member countries have consulted the Fund concerning the various
factors affecting their balances of payments and exchange rates, and
the Fund has given advice to its members in connection with such
problems. I t has recognized that questions of foreign exchange
cannot be separated from those of monetary, trade, and fiscal policy.
In the judgment ^of the Council, real progress has been made in
establishing the Fund as a technical advisory and consultative body
on international exchange problems, and in implementing the purposes of the Articles of Agreement. In conformity with its articles,
the Fund also has provided assistance to its members to help meet
their balance-of-payments deficits on current account.
P a r values
On April 23, 1948, the Fund announced that it had accepted a par
value of one United States dollar for the Dominican peso. On July 14,
1948, the Fund also announced that it had agreed to the establishment
of an initial par value of 5.40541 cents for the BrazUian cruzeiro.
The United States Executive Director, acting with the approval of the
Council, supported these decisions.
On July 22, 1948, the Bank of Mexico withdrew its support of the
20.6 cent initial par value of the peso agreed to with the Fund. The
principal reason for this action was a continuous heavy drain on
Mexico's foreign exchange reserves throughout the postwar period,
and especially during the first 7 ^months of 1948. I n accordance
with the United States-Mexican Stabilization Agreement, Mexico
discussed this matter fully with the officials of the United States
Treasury. Representatives of the Treasury and representatives of
the Fund have continued discussions with Mexidan officials on the
problem.
'
Quotas
At the third annual meeting, the Board of Governors agreed to a
request by the Gov.ernment of Honduras for a reduction in its Fund
quota from $2,500,000 to $500,000.
Exchange restrictions
The Fund has continually advised those of its members engaging
in multiple exchange practices of its interest in thei unification of their
exchange rate structures and, during the period under review, some
of these members took steps working toward establishment of a unitary rate. Because of acute balance-of-payments deficits, however,
a number of countries have felt obliged to continue their multiple
exchange practices as well as other restrictions on payments and transfers for current account. In many of these latter cases the Fund recommended fiscal and monetary measures best suited to promote the
establishment of a unitary rate at some future date.
At its meeting, of June 11, 1948, the Executive Directors of the
Fund considered, at the request of the Government of Colombia,
recent revisions in Colombia's foreign-exchange system. , The new
234
REPORT OF T H E
SECRETARY OF THE TREASURY
regulations provided for taxes on imports, as well as premia for exports, designed to alleviate the Colombian exchange difficulties. The
Fund withheld its approval of the proposals, despite their temporary
nature, since they contained features directly in conflict with the
policies of the Fund. However, further consultations continued between representatives of the Fund and the Colombian Government.
On September 7, 1948, the Fund announced that it had been carrying on a series of discussions with the Government of Peru regarding
measures which that Government proposed to take to restore its international payments position. The measures proposed included a surcharge on imports of nonessential and luxury goods)* as well as a higher
return on exports. The Fund emphasized that such exchange measures can be effective only if they are accompanied by determined
efforts of the Government to halt inflation, to secure additional revenue from sources other than exchange taxes, and to limit the expansion of bank credit. The Fund announced that its consultations with
Peru, conducted in a spirit of complete cooperation, were expected to
continue until the desired aims were realized.
Fund exchange transactions
During the 6 months AprU 1 through September 30, 1948, the Fund
sold an equivalent of $39,800,000 to member countries in exchange
for their own currencies. Of this amount, $11,400,000 represented the
dollar equivalent of Belgian francs sold by the Fund to the Netherlands and Norway. These latter transactions constituted the first
sales of Belgian francs made by the Fund to date. The following
table presents a detailed break-down of all Fund currency sales
through September 30, 1948:
T A B L E I X . — C u r r e n c y sales of the International Monetary F u n d M a r . 3 1 , 194'^',
through Sept. 30, 1948
[In millions of United States dollars]
Six-Month Period e n d i n g Total to
Sept.30,
1948
Country
Mar.31.
1948 »
Sept. 30,1948
Sept. 30, 1947
•
United
States
dollars
Total, All Countries..
Total, Europe . .
....
United Kingdom
France
Neth erl and s
Belgium
Denmark
Norway
Czechoslovakia
Turkey
Total, Other Countries
India
Mexico
Chile
Ethiopia.
Pounds
sterling
639.9
28.4
11.4 1
391.1 1
. 203.0
6.0
11.9
11.4
356.8 1
178.0
6.0
6.8
240.0 1
25.0
44.5
33.0
60.0
100.0
18.0
6.0
4.6
6.8
2.5 !
10.2
9.6
6.0
5.0
3.4
2.5
6.0
75.8
. 16.5
44. 2
22.5
8.8
.3
16.2
6.0
.3.
J No other currencies were sold by the Fund during this period.
United
States
dollars
564.1
300.0
125.0
• 75.3
33.0
. . _.
United
States
dollars i
Belgian
francs
1
34.3 1
28.0
.6.3
25.0
22.5
2.5'
EXHIBITS
235
Fund relations with the proposed International Trade Organization
In response to an invitation from the Economic and Social Council
of the tlnited Nations, the Fund participated in the meetings at
which the International Trade Organization Charter was drafted, and
also contributed to the formulation of practicable arrangements for
cooperation between the Fund and the International Trade Organization. Both of these organizations are concerned with the external
economic position of member nations. While the Fund approaches
the problem of achieving and maintaining a sound external economic
position of members primarily from the financial side, the International
Trade Organization approaches this problem from the viewpoint of
commercial policy. This interdependence makes fuU cooperation between the Fund and the International Trade Organization imperative.
Under its charter, the International Trade Organization will seek
agreement with the Fund regarding procedures for consultation on
monetary and related questions: A parallel provision is also contained in the General Agreement on Tariffs and Trade.
Organizational changes
On June 16, 1948, the President of the United States, with the
advice and consent of the United States Senate, appointed Mr.
Henry J. Tasca as United States Alternate Executive Director on
the Fund. Mr. Tasca succeeded Mr. George F . Luthringer, whose
resignation as United States Alternate Executive Director to become
Deputy Director of the Research Department of the Fund became
effective July 2, 1948.
The Fund and the European Recovery Program
The resources of the International Monetary Fund are not intended
to meet the type of financing which the ECA program is designed to
cover. In general, use of the resources of the Fund is limited, in
accordance with its purposes, to giving temporary assistance in
financing balance-of-payments deficits on current account-for monetary
stabilization operations. On April 20, 1948, the Fund issued a policy
statement on this subject which, in part, stated:
For the first year the attitude of the Fund and ERP members should be that
such members should request the purchase of United States dollars from the Fund
only in exceptional or unforeseen cases. The Fund and members participating in
ERP should have as their objective to maintain the resources of the Fund at a
safe and reasonable level during the ERP period in order that at the end of the
period such members will have unencumbered access to the resources of the Fund.
The Council agreed substantially with these views.
THE BANK
Loans and disbursements
On May 25, 1948, a supplemental loan agreement was entered into
between the Bank and the Kingdom of the Netherlands providing for
certain modifications in the loan agreement of August 7, 1947, by
which an amount of $195,000,000 was made avaUable to the Netherlands. These modifications were in the form of a new loan of
17,000,000 Swiss francs (equivalent to $3,955,788), and cancellation
of an equal portion of the original loan. The Swiss francs were
acquired through the sale of International Bank 2}^ percent Swiss
franc serial bonds to the Bank for International Settlements at pa:r
236
REPORT OF T H E SECRETARY OF T H E TREASURY
and accrued interest. The supplemental loan agreement became
effective on June 1, 1948.
The serial bonds, maturing in 1953 and 1954, were the first bonds
to be issued by the Bank in other than dollar denominations.' From
a long-term viewpoint, it is desirable that the Bank supplement its
borrowing in the United States through tapping other sources of
capital, since international capital transactions in currencies other
than dollars may also contribute to the expansion of trade. .
On July 29, 1948, agreements were executed providing for loans
to four of the principal Dutch shipping companies to finance the
entire purchase price of six merchant vessels, each costing $2,000,000,
for the Dutch merchant marine. Each of the six loans was secured
by a Netherlands ship mortgage, and was represented by serial mortgage notes repayable in 20 equal half-yearly maturities of $100,000,
bearing interest at the rate of 2}^ percent per annum. In addition,
the borrowers were to pay to the Bank a commission of 1 percent per
annum and a service charge of one-sixteenth of 1 percent per annum.
Repayments begin on January 15, 1949, with the last installment due
on July 15, 1958. Payment of principal, interest, commission, and ^
service charges is fully guaranteed by the Netherlands Government.
On August 6, 1948, a group of 10 United States commercial and
sayings banks purchased from the International Bank all of the notes
maturing in the first 6 years, and part of those maturing in the
seventh year. These notes were guaranteed by the International
Bank. The remaining $3,900,000 of the notes were retained in its
portfolio.
The Council was in agreement with the Bank as fco the desirability
of making the loans, since the newly acquired vessels may be expected
to save or earn for the Netherlands at least sufficient dollars over the
period of the amortization to meet the whole service of the loans,
entirely apart from the benefits of returns in other currencies. Inasmuch as shipping is the most important balance-of-payments ifcem
outside of exports and imports, a revival of prewar earning power in
sliipping would contribute vitally to the improvement of the Netherlands balance-of-payments position.
From May 9,1947, through September 30,1948, the Bank had made
loan commitments aggregating over half a bUhon doUars. More than
nine-tenths of this amount had been disbursed by September 30, 1948,
as shown in the following table:
TABLE X.—Status of International Bank loans as of Sept. 30, 1948
Loan
Commitment
Borrower
Total, AU Loans
_
.
Credit National (France)
Kingdom of the Netherlands
Kingdom of Denmark
Republic of Chile
*
Grand Duchy of Luxembourg..^
Dutch shipping companies (loan guaranteed by the
Kingdom of the Netherlands)
Unused Balance
Disbursement of
Commitment
$525,000,000
$490,776,505
250,000,000
195,000,000
40,000,000
250,000,000
195,000,000
24, 987, 513
$34,223,495
15,012,487
16,000,000
12,000,000
8, 788,992
16,000,000
3,211,008
12,000,000
12,000,000
237
EXHIBITS
Legislatidn
During the period imder review the Council agreed to support, b^/
appropriate steps, amendment of the Securities Act of 1933 and the
Securities Exchange Act of 1934, so as to exempt securities issued or
guaranteed by the International Bank from those acts, and to support
the amendment of the National Bank Act so as to permit dealing in
these securities by member banks of the Federal Reserve System
(subject to existing limitations on the total amount of securities of
any one obligor that a member bank may hold at any one time).
It was the CouncU's opinion that the Securities Acts had not been
enacted with a view to regulating the issuance of and dealings in the
securities of an international institution such as the. Bank. In the
Eightieth Congress, second session, legislation incorporating these
amendments was favorably reported by the Senate Committee on
Banking and Currency and passed by the Senate subject to a motion
to reconsider. This legislation was. also given a hearing by the
Committee on Interstate and Foreign Commerce of the House of
Representatives but was not reporteci by that comniittee.
Advisory Council
The first annual meeting of the Ba'nk's Advisory Council was held
from July 19 to July 23, 1948, at the principal office of the Bank in
Washington, D. C. This Council, organized in accordance with
article V, section 6, of the Bank's Articles of Agreement, comprises
10 members, 9 selected by the Board of Governors at their second
annual meeting, and a tenth selected by subsequent vote of the Governors completed on April 30, 1948.
Membership and representation on the Advisory Council of the International Bank
for Reconstruction and Development
Nationality
Name
Sir Arthur Salter
Edward E. Brown
Herbert C Hoover
R. Dickson TTarkne.s.s
Leon Jouhaux
Michael Kalecki
Pedro Beltran.
Sir C. V. Raman
Lionel Robbins
S. K. Alfred Sze
United Kmgdom
. UnitedStates
_
do -.
_ ._ __ ._ ._ __
Canada
France
.
Poland
Peru
India
United Kingdom
China.-.
_
..-.
Representation
.
. . .
•
.ii
Chairman.
. Banking.
Commerce.
Industry.
Labor.
Economics.
Agriculture.
Science.
Economics.'
Other activities.
The function of the Advisory Council is to consult with officials of
the Bank on matters comprehending world-wide economic and
financial problems, particularly those confronting member countries.
At its first annual meeting a full exchange of view:s took place with
respect to the more important policies of the Bank. The Advisory
CouncU did not, however, render a formal rep^ort.
Fiscal operations
During the fiscal year ending June 30, 1948, net income of the
International Bank exceeded $4,000,000, sufficient to eliminate by a
considerable margin the $1,000,000 deficit existing on June 30, 1947,
and, in addition, $3,000,000 was placed into the special reserve.
For the 3 months ending September 30, 1948, the Bank reported a
238
REPORT OF THE SECRETARY OF THE TREASURY
net income in excess of $2,300,000, exclusive of over $1,200,000 paid
into its special reserve. Operations for the similar period in 1947
resulted in a net loss of $878,000. As of September 30, 1948, the
Bank had an earned surplus of over $5,300,000, plus nearly $4,300,000
in the special reserve.
Future lending
As of September 30, 1948, the Bank had uncommitted loanable
funds amounting to approximately $475,000,000, and had received
numerous loan requests which were at various stages of investigation
and completion. The Bank is expected to place particular emphasis
on its developmental activities during the next year; and although it
will continue to provide a source of funds for some of the countries
participating in the European Recovery Program, it is not likely that
such assistance will be on a large scale.
JOHN W .
SNYDER,
Secretary oj the Treasury, Chairman oj the National Advisory
Council on International Monetary and Financial Problems.
D E A N ACHESON,
Secretary oj State.
CHARLES SAWYER,
Secretary oj Commerce.
THOMAS B . M C C A B E ,
Chairman oj the Board oj Governors oj the Federal Reserve
System.
H E R B E R T E . GASTON,
Chairman oj the Board oj Directors oj the Export-Import Bank
oj Washington.
P A U L G . HOFFMAN,
Administrator jor Economic Cooperation.
[Omitted from this exhibit are the charts, and also the appendixes which include
sections of the Bretton Woods Agreements Act and of the Foreign Assistance Act
of 1948 relating to the National Advisory Council, tables on United States Government assistance to foreign countries, July 1, 1945, through June 30, 1948, and
membership and quotas in the Intemational Monetary Fund and memlDership and
subscriptions in the International Bank for Reconstruction and Development, September 30, 1948.
In the second National Advisory Council report, covering operations from October 1, 1948, to March 31, 1949, which follows, the appendixes are included except
the sections of legislation, which were printed in the Annual Reports of. the
Secretary of the Treasury for 1945 and 1948.]
Exhibit 14.—rReport of activities ofthe National Advisory Council on International
Monetary and Financial Problems, October 1, 1948, to March 31, 1949
. [House Document No. 250, 81st Congress, 1st session]
L E T T E R OF T R A N S M I T T A L
To the Congress oj the United States:
Attached is a report of the National Advisory Council on International Monetary and Financial Problems covering its operations
from October 1,1948, to March 31,1949, and describing, in accordance
with section 4 (b) (5) of the Bretton Woods Agreements Act, the
EXHIBITS
239
participation of the United States in the International Monetary
Fund and the International Bank for Reconstruction and Development for the above period.
Previous reports of the National Advisory Council were transmitted
to the Congress on March 1, 1946, March^8, 1946, January 13, 1947,
June 26, 1947, January 19, 1948, M a y 17, 1948, August 3, 1948, and
March 14, 1949, respectively. In addition to the First Special Report
on the Operations and Policies of the International Monetary Fund
and the International Bank for Reconstruction and Development,
submitted on May 17, 1948, previous reports on the participation of
the United States in the International Monetary Fund and the
International Bank were included in the reports of January 1.3, 1947,
June 26, 1947, January 19, 1948, August 3, 1948, and March 14,1949,
respectively.
HARRY S . TRUMAN.
T H E WHITE HOUSE,
July 5, 194-9.
R E P O R T OF A C T I V I T I E S OF T H E NATIONAL ADVISORY
C O U N C I L ON I N T E R N A T I O N A L M O N E T A R Y A N D F I N A N CIAL P R O B L E M S OCTOBER 1, 1948, TO MARCH 31, 1949
I. ORGANIZATION OF THE COUNCIL
STATUTORY BASIS
The National Advisory Council on International Monetary and
Financial Problems was established by the Congress in the Brettbn
Woods Agreements Act (59 Stat. 512, 22 U. S. C. 286b), approved
July 31, 1945. The statute directed the Council to coordinate the
policies and operations of the representatives of the United States on
the International Monetary Fund and the International Bank for
Reconstruction and Development, the Export-Import Bank of Washington, and all other agencies of the Government "to the extent that
they make or participate in the making of foreign loans or engage in
foreign financial, exchange or monetary transactions." The CouncU
was also directed to advise and consult with the President and the
United States representatives on the Fund and the Bank on major
problems arising in the administration of the Fund and the Bank; and
to recommend to the President.general policy directives for the guidance of the representatives of the United States on the Fund and Bank.
The Bretton Woods Agreements Act was amended by section 106 of
the Foreign Assistance Act of 1948 (62 Stat. Ch. 169, 22 U. S. C.
286b (a)), approved AprU 3, 1948, to include the Administrator for
Economic Cooperation as a member of the Council for the duration of
this office. The Council was also given certain additional duties
under the Foreign Assistance Act. The relevant portions of the
Bretton Woods Agreements Act and of the Foreign Assistance Act of
1948 are presented in appendix A.
240
REPORT OF T H E SECRETARY OF THE TREASURY
REPORTS
Since its first meeting on August 21, 1945, the Council has submitted eight formal reports.^ The present report covers the activities
of the CouncU from October 1, 1948, to March 31, 1949.
MEMBERSHIP
The members of the Council, according to law, during the period
under review, were the foUowing:
The Secretary of the Treasury, John W. Snyder, Chairman.
The Secretary of State, Dean Acheson.
The Secretary of Commerce, Charles Sawyer.
The Chairman of the Board of Governors of the Federal Reserve
System, Thomas B. McCabe.
The Chairman of the Board of Directors of the Export-Import
Bank, Herbert E. Gaston.
The Administrator for Economic Cooperation, Paul G. Hoffman.
Two changes in the membership of the Couricil have occurred since
the previous report. Mr. Dean Acheson succeeded Mr. George C.
Marshall as Secretary of State, and Mr. Herbert E. Gaston succeeded
Mr. William McChesney Martin, Jr., as Chairman of the Board of
Directors of the Export-Import Bank.
By agreement, the following served as alternates:
William McChesney Martin, Jr., Assistant Secretary of the
Treasury.
.^
Willard L. Thorp, Assistant Secretary of State for Economic
Affairs.
Thomas C. Blaisdell, Jr., Assistant Secretary of Commerce.
M. S. Szymczak, Meinber of the Board of Governors of the Federal Reserve System.
Hawthorne Arey, Vice Chairman of the Board of Directors of the
Export-Import Bank.
Wayne C. Taylor, Assistant to the Administrator, Economic Cooperation Administration.
C. DUlon Glendinning is the Secretary of the Council.
The United States Executive Directors on the International Monetary Fund, Frank A. Southard, Jr., and on the Internatioriai Bank for
Recoristruction and Development, Eugene R. Black, or.their alternates^ Henry J. Tasca and John S. Hooker, respectively, regularly
attended the meetings of the CouncU.
1 These reports were transmitted by the President to the Congress on March 1, 1946 (H. Doc. No. 489,
79th Cong., 2d sess.; subsequently included as appendix B to H. Doc. No. 497, 79th Cong., 2d sess.);March 8,
1946 (H. Doc. No. 497,79th Cong., 2d sess.); January 13,1947 (H. Doc. No. 53,80th Cong., 1st sess.); June 26,
1947 (H. Doc. No. 365, 80th Cong., 1st sess.); January 19,1948 (H. Doc. No. 501, 80th Cong., 2d sess.); May
17,1948 (H. Doc. No. 656, 80th Cong., 2d sess.); August 3,1948 (H. Doc. No. 737, 8dth Cong., 2d sess.); and
March 14,1949 (H. Doc. No. 120,81st Cong., 1st sess.).
EXHIBITS
II.
'
241
U N I T E D STATES POSTWAR F O R E I G N ASSISTANCE V
Throughout the year 1948 the United States continued to provide
foreign countries with substantial assistance both to relieve immediate
economic distress and to aid in longer-run reconstruction efforts. The
year was marked by the inauguration of the European Recovery
Program, in which United States assistance became part of a joint
program of cooperation with participating European countries. By
the end of the year, aid rendered under that program, mainly in
the form of grants, totaled about 1.9 bUlion dollars, of the 5.5 billion
dollars of aid rendered by all agencies to foreign countries in 1948.
In order to meet certain emergency needs prior to the establishment
of the European Recovery Program, assistance to France, Italy, and
Austria had been provided under an interim-aid program. This
program, starting in December 1947, involved about $550,000,000
of aid in the form of grants, concentrated in the first half of 1948.
The major relief-type program of the United States Government,
continuing from previous years, was that of furnishing civilian
supplies to areas occupied by our armed forces. , Initiated in the
war period to prevent civilian disease and unrest prejudicial to
our forces abroad, it accounted for about 1.2 billion dollars of aid
utilized i n 1948. Other aid rendered on a grant basis totaled about
$835,000,000, and included the program started in 1948 for economic
and military assistance to China, as well as programs continued from
the previous year,- such as those for Greek-Turkish assistance, Philippine rehabilitation, the International Refugee Organization, postUNRRA, and the International Children's Emergericy Fund.
Aid on a loan basis in 1948, other than that extended under the
European Recovery Program, totaled about 1.1 , billion dollars.
Export-Import Bank credits utilized were approximately $430,000,000
of this total, and the remainder was made up, for the most part, of
programs that for all practical purposes ended in 1948. The United
Kingdom made its final drawings of credit authorized under the
Anglo-American Financial Agreement of 1945, and by the end of the
year, utilizations under the various property credit, programs such as
surplus property, lend-lease, and merchant ship disposals were coming
to a. close.
During the postwar period, July 1, 1945, through December 31,
1948, the United States Government made available 26.5 billion
dollars for foreign assistance of which 20.1 billion dollars was utilized
or expended, and 6.4 billion dollars remained as an unutilized balance
on December 31, 1948. About one-half of all unutilized funds at
the erid of 1948 were ECA funds, principally earmarked either for
specific purposes or for the aid of specific countries and largely already
committed under contracts for approved purchases. Somewhat less
than a billion dollars represented uncommitted lending authority
of the Export-Import Bank. The amount of aid utilized in 1948
(5.5 bUlion dollars) was approximately equal to that exitended in
1946, but somewhat less than the 1947 total of 6.4 billion dollars. The
increasing momentum of the European Recovery Program during
the latter part of 1948 resulted in increasing the total aid rendered in
» A detailed break-down of the statistical Information referred to in this section appears in appendixes
B and C.
856455—50
17
242
*
REPORT OF T H E SECRETARY OF T H E TREASURY
Chart A
UNlfED SWESiSOVERNMENT i ^
JulylJ945 to December 3 U 9 4 8
TOTAL UTILIZED.
By Semiannual Periods
July-Dec. , Jan.-June July-Dec.
1945
• )946 •
1.3
Credits
0.6
1.3
IO
Grants—2.0
Jan.-June July-Dec.,, Jan.-June July-Dec
JL
•1947•19482.4
1.8
IO
0.6
1.2
0.9
1.7
2.3
TOTAL UTILIZED AND UNUTILIZED
Unutilized
$Bil.^-
(As of Dec. 31.1948)
Credits—2.4
Utilized
(Julyl 1945 to Dec 31.1948)
20 •
;
10 •
.
OK
Grants
4.0
Total
6.4
243
EXHIBITS
the final quarter of 1948 to the average quarterly rate prevaUing
in 1947.
The year 1948 was marked by a larger share of assistance rendered in
the form of grants, including (for statistical purposes) aid for which
terms of repayment had not been determined, as compared with loans
and other credits which call for the repayment of principal and interest,
to the United States. This situation also holds true in the foreign aid
totals for the entire postwar period, during which funds made available
through congressional authorization for grants were 14.5 biUion
dollars, compared to 12.0 billion dollars for credits. Aggregate grant
and credit availabilities from July 1, 1945, through December 31,1948,
distributed by geographical area, are presented in the foUowing table:
TABLE I.:—U. S. Government foreign aid, sum of utilized, July 1, 1946, to Dec. 31,
1948, plus unutilized as of Dec. 31, 1948, by geographical area
[In millions of dollars]
Area
Total
Total, All Areas.-..
Total, Europe
.
E R P Participants
Other Europe.Latin America
Asia Miscellaneous..
_.
_ _ . -
Grants
Credits
26,522
14,507
19,453
10,052
9,401
17,859
1,594
8,944
1,108
8,915
486
515
.4,498
i2,056
33
3,746
676
482
752
1,380
12,015
PROGRAMS OF POSTWAR ASSISTANCE
The changes over the period July 1945 to December 1948 reflect
the shifting importance of loans and grants in the various postwar
programs of foreign assistance. For example, during the 6 months
ending December 1945 grants were the dominant factor as a result of
the aid furnished through direct lend-lease. In the following. year,
grant assistance was supplied chiefly through the United Nations
Relief and RehabUitation Administration, followed in importance by
civUian supplies provided by mUitary agencies to occupied areas.
However, credits became the predominant factor in the foreign
financial program in 1946 as a result of the increased activity of the
Export-Import Bank, surplus property disposals, and the initial
drawings under the Anglo-American Financial Agreement. In 1947
the bulk of the 3.75 biUion doUar loan to the United Kingdom was
UtUized. This utUization not only was responsible for the high level
of foreign assistance rendered during that year, but also had the
effect of enlarging the credit portion of the foreign-aid program. By
1948 only a small portion of the loan to the United Kingdom remained
avaUable for expenditure, with the consequent drop in the proportion
of loans as well as in the total of grants and loans extended. In
addition, Export-Import Bank credit utUizations decreased significantly from the preceding 2 years, whUe at the same time the European
Recovery Program was initiated largely on a grant basis.
244
REPORT OF THE SECRETARY OF THE TREASURY
Chart B ,
tTN If EilSfp^lOWNiilli'ifBE
utilized, Six Month Period. July I, to December 31,1948
Principally aid to Greece and Turkey.
^'Principally aid fo the Philippines and to. China.
RECIPIENTS OF AID
(in Millions of Dollars)
ERP PARTICIPANTS
.
v ~ Misc. $99
Other ERP $199
Austria $100
Nettierlands $120
France $399
United
Kingdom $615
Germany (Western) $492
245
EXHIBITS
FOREIGN AID DURING THE LAST HALF OF 1948
During the. last 6 months of 1948 actual utilization of United
States Government foreign aid was slightly less than 3 billion dollars.
Funds for more than three-fifths of this 3 billion dollars were supplied
through the Economic Cooperation Administration, with another
fifth through the defense agencies, and the balance primarily through
the State Department (for Greek-Turkish aid), the Export-Import
Bank, and' the Philippine War Damage Commission. The share of
aid going to the ERP participants in this'period constituted almost
80 percent of the total, with the United Kingdom, western Germany,
France, Italy, and Greece the chief recipients. Asiatic countries
received slightly less than one-fifth of the total, about the same
percentage that they received for the entire postwar period.
GEOGRAPHICAL DISTRIBUTION OF AID
Approximately two out of every three dollars of expenditures for
United States foreign aid during the entire postwar period were for
countries that are currently participating in the European Recovery
Program, and these countries were also scheduled to receive about
three-fourths of all unutilized funds that had been allocated as of
December 31, 1948. Among the larger European recipients of
utilized aid, credits exceeded grants for the United Kingdom, France,
the Netherlands, and Belgium. Other countries, such as Italy,
Greece, and Austria, relied very heavily on grants. Assistance to
other European countries resulted chiefly from the extension of grant
assistance through UNRRA.
^
Table II, showing a break-down of utilized as well as unutilized
postwar United States Government foreign grants and credits for
each geographical area and recipient country, follows:
TABLE II.— U. S. Government foreign grants and credits, utilized, July 1, 1946, to
Dec. 31, 1948, and unutilized as of Dec. 31, 1948, by area and country
[In millions of doilars]
Utilized
Unutilized
Area or c o u n t r y
Total
Grants
Credits
Total
Grants
Credits
•
T o t a l , All Areas
. .
Total, E R P Participants. United Kingdom
France
G e r m a n y (western)
Italy
Greece.
Netherlands
..
Austria
B elgium a n d L u x e m b o u r g
Other E R P
.
Unallocated E R P . . .
..
See footnotes at end of table.
20,139
10,471
9,668
6,383
4,036
2,347
13,845
5,774
8,071
4,014
3,171
843
5,378
"2, 785
1,781
1.423
773
699
1,556
1, 071
4,605
• 2,086
225
362
578
695
707
477
466
584
688
405
112
111
19
73
841
446
441
•299
730
117
421
108
111
330
19
191
258
359
151
143
234
286
134
103
25
73
17
40
286
164
134
U64
152
413
233
220
51
192
182
\
246
REPORT OF T H E SECRETARY.OF T H E TREASURY
Chart C
UNITEID sSl^S;GOVEWIMEIJT FOREIGN ASSISTANCE
UTILIZED
(July 1.1945 to Dec. 31.1948)
BILLIONS OF DOLLARS
.9
12
1.6
2.0
UNUTILIZED
(As of Dec. 31.1948)
247
EXHIBITS
TABLE II.—U. S. Government foreign grants and credits, utilized, July 1, 1946, to
. Dec. 31, 1948, and unutilized as of Dec. 31, 1948, by area and country—Con.
[In millions of dollarsl
*
Utilized
Unutilized
Area or country
Total
Other Europe
Total, Asia
_
_•
China.....
Japan
Philippines...
Korea (southern).-
_.
Grants
Credits
Total
Grants
Credits
1,562
1,108
454
'32
3,629
2,957
672
869
789
80
1.643
1,242
365
214
1,416
1,026
285
189
227
216
79
25
249
331
169
86
232
312
160
86
17
19
9
32
165
41
124
35
International Organizations 2
520
517
3
131
68
62
Latin America
317
29
288
199
5
194
Miscellaneous and Unallocated
267
88
180
1,139
3
3 1,136
Other Asia
35
» Principally shipments to France, Germany, and the Low Countries under joint military-civilian supply
operations with the United Kingdom and Canada.
* Represents U. S. Government contributions to UNRRA (not allocated by country), and a loan to the
United Nations. U. S. Government paymeats to the lateraatioaal Baak and the Iaternational Moaetary
Fuad are not iacluded ia this table.
»lacludes $967,000,000 represeating the uncommitted leadlag authority of the Export-Import Baak,
and $150,000,000 representing the uncommitted commodity-program credit authority of the Departmeat of
the Army oa Dec. 31, 1948.
NOTE.—
(a) Componeats will not necessarily add to totals because of rounding.
(6) A detailed aa.alysis |of data appearing ia this table, as well as a deflaltioa of terms, may be fouad
in appeadix C.
(c) Graats to E R P Participants iaclude conditioaal aid.
^
Source: Cleariag Oflace for Foreign Traasactioas, Oflace of Busiaess Ecoaomics, Departmeat of Commerce.
Total credits utUized by all ERP countries in the postwar period
exceeded grants, while total grants utUized by the Asiatic countries
were more than four times their total credits. China received 1.6
billion dollars and Japan 1.2 billion dollars of the 3.6 biUion dollars of
total postwar assistance rendered by the United States to Asia, with
the PhUippines and Korea receiving most of the remainder.
FOREIGN AID AND THE UNITED STATES POSTWAR BALANCE OF
PAYMENTS
Total exports of goods and services of the United States amounted
to 58.7 billion dollars between July 1945 and December 1948. The
United States received 30.3 billion dollars in foreign goods and services,
leaving a difference of 28!4 billion dollars to be financed from other
sources. To cover their deficit with the United States in the 3K-year
period, foreign countries drew a total of 6.3 bUlion doUars from their
gold and dollar assets, and received about 19.0 billion dollars in net
United States Government aid. Other elements included assistance
from international financial institutions and private financing.
W^lt^.
248
REPORT OF T H E SECRETARY OF T H E
TREASURY
Chart D
FOREiNPi[ffiitiiliti;§^^
July 1,1945 to Dec. 31,1948, Semiannually
/.:
2ZZ
vjrr^^.t*'^^/
^ Ij'i-^'^k.^',.^ V^l^/l
$Bil
Wsmm
Total
Exports of
Goods and
Services
July-Dec
1945
Jon-June July-Dec Jon-June July-Dec
JL
-1946-1947-
Jon-June July-Dec
-1948-
* TTie means of financing shown fpr the period July through December 1945. exceed exports by $1,076,000,000.
which represents thenet foreign acquisition o f dollar assets and purchases oftgold from the United States
3/2 Year Period.July 1,1945 to Dec.31,1948
(BILLIONS OF DOLLARS)
^ f^iscellaneous
3.1
k g Liquidation of Foreign
>P Go/d and Do/far
Assets
6.3
\
m^U.S. Government
^
Aid(Net)19.0
\ Imports of Goods
' and Services
30.3
EXPORTS
(Goods and Services)
MEANS OF
FINANCING
249
EXHIBITS
TABLE IH.—Foreign aid in the United States balance of payments, July 1, 1946, to
Dec. 31, 1948, by semiannual periods .
[In millions of dollars]
Means of financing
Period
Total, 31/2 Years
Total
exports
Total
imports
58,698
LiquidaU. S. Gov- tion
gold
ernment and of
dollar
aid (net)i
assets 2
Other
3,133
19,051
i 54^—July-December.
7,200
' 4,143
3,628
3-1,078
154ff—January-June..
. July-December.
7,401
7,565
3,416
3, 7.51
2,681
2, 372
816
1,152
1547—January-June..
July-December.
10,093
9, 648
4,171.
4,292
3,293
2, 419'
2,340
2,173
289.
764
/P45—January-June..
July-December.
8,644
8,147
5,057
5,424
2,130
2,528
-891
-34
566
229
507
1 Data on U. S. Government foreign aid (net) presented in this table and chart D difler from those In chart
A and the statistical appendix for the following reasons:.
(0) Aid shown in the above table Is net of unilateral transfers to the United States, repayments, etc.,
whereas gross data appear in chart A.
(6) Pensions, annuities, claims of individuals, etc., are Included in this calculation of net aid, but are
excluded in chart A.
(c) Included in the calculation of net aid are lend-lease shipments and merchant ship deliveries, whereas
aid appearing in chart A is based on lend-lease billings and mortgages signed, both of which lag. As a result
of these lags, net aid figures reported for the earlier period in the above table exceed those appearing in chart A.
' Figures in this table differ from those which could be derived from table IV principally because this
table includes gold sold out of current production, as well as liquidation of existing holdings.
3 The means of financing shown for the period July through December 1945 exceed exports by $1,078,000000, which represents the net foreign acquisition of dollar assets and purchases of gold from the United
States.
Source: International Economics Division, Office of Busmess Economics, Department of Commerce.
From chart D and table III it may be observed that United States
exports increased from the latter part of 1945 'through the first half
of 1947. There followed a moderate decline from the high level of
exports reached during the first half of 1947 while imports rose.
Exports have increased both in value and physical terms in comparison
with the prewar period.
Changes in the United States balance of payments during 1948,
compared with 1946 and 1947, were the result of two major developments. The first of these was the continued progress of recovery
and production in foreign countries which enabled them to supply a
larger portion of their own needs and to increase their exports to
the United States. A second major factor in reducing the United
States export surplus was the increasing difficulty of countries in
making dollar payments. This difficulty appeared acute during 1947
and has continued, with varying degrees of intensity in different
couritries, throughout 1948.
CHANGES IN FOREIGN GOLD AND^DOLLAR RESERVES
Countries which had.borne the brunt of the war effort and had not
accumulated large reserves have had difficulty since, the end of the
war in financing their import requirements. By 1948 most of the
countries which had built up their reserves during the war had used
the bulk of such accumulations, and the shortage of gold and dbllars
250
REPORT OF THE SECRETARY OF THE TREASURY
becanae widespread. The reserves of most countries, furthermore,
were at levels so low as seriously to impair their ability to meet
contingencies in international payments. The reserves of many
countries were far below the levels that would be requisite to the
reestablishment of multilateral trade and the relaxation of foreign
exchange controls.
TABLE IV.—Estimated foreign gold and short-term dollar balances, June 30,1945, to
. Dec. 31,/1948^
[In millions of dollars]
June 30,
1945
Area
Total. All Areas
-
KRP countries and dependencies
Other Emope 2
Asia and Oceania. _
Latin America.
Allother
_
.
....
.
.
.
Dec.31—
1946
1947
1948
19.684
19,292
15.136
14.863
10,473
1,029
9,967
1,104
7, 762
1,043
7,804
840
1,980
3,625
2,577
1, 994
3,642
2,585
1,832.
2,877
1,622
1,969
2,744
1, 506
J Excludes holdings of the International Monetary Fund, the International Bank, and other international
organizations; also excludes U. S. S. R, gold holdings.
2 Includes gold held by TripartitiB Commission for the Restitution of Monetary Gold.
Somxe: Treasury Department and Board of Governors of the Federal Reserve System.
A decline in total foreign gold ^ and short-term dollar balances of
about 4.5 billion dollars between June 30, 1945, and December 31,
1947, is reflected in table IV. I n 1948 the decline amounted to only
about $273,000,000 for the year. The over-all decline of 4.8 biUion
dollars between July 1945 and December 1948 was accounted for
chiefly by a reductiori in the balances of E R P countries of 2.7 billion
dollars and a decline in Latin-American balances of about $900,000,000.
I t should be noted that these figures represent net declines after taking
into consideration foreign gold production^ in the neighborhood of
2.5 biUion dollars during the 3K-year period.
The E R P countries, in particular, suffered losses in their monetary
reserves during the early postwar years in their efforts to meet the
over-all deficit in their balance of payments. The dollar needs of the
recipient countries have been greatly in excess of the goods and
services supplied by these countries to the United States. Direct
United States aid has made possible European dollar payments to
other areas of the world, as weU as purchases from the United States.
I I I . ACTIVITIES OF THE COUNCIL F R O M OCTOBER 1, 1948, TO M A R C H
31, 1949 (OTHER T H A N T H O S E RELATING TO THE INTERNATIONAL
MONETARY F U N D AND THE INTERNATIONAL B A N K )
EUROPEAN RECOVERY PROGRAM
The jirst year oj E R P
Many of the participating countries made substantial progress during the first year of the recovery program in accomplishing some of
the initial objectives of expanding production and facUitating trade
I Excluding U. S. S. R.
251
EXHIBITS
and in attaining internal financial stabUity. Notable signs of financial
improvement were reflected in balanced budgets and fairly stable price
levels in a number of countries.,
In conformity with the Economic Cooperation Act of 1948, the
CouncU worked closely with ECA on the financial problems of the
recovery, program, and made recommendations on the division of aid
by type, i. e., grants (direct or conditional) and loans. The foUowing
table summarizes the allotments by country and type of aid for the
first year of the program:
T A B L E V.—ECA allotments to participating countries, April 1948-March 19491 by
type of aid i
[In millions of dollars]
Grants
Total allotments
Country
Loans
Direct
All ERP Countries
United Kingdom
France...
Italy
.
. ...
Germany (western)
Netherlands _
.
Austria.
'
_
. ...
.
. . .
_.
B elgium-Luxembourg
Greece
Denmark
_.
Ireland
Norway
Turkey
^
Sweden
Trieste
Iceland..
.. .
_.
.
.
.
.
.
.
. . . . .
•.
_.
Conditional
aid
4.953.0
972.3
3,449.4
531 3
1, 316.0
1,061.6
585.9
313.0
172.0
67.0
773.8
882.5
490.8
229 2
7.1
28.1
507.0
473.9
228.7
146.7
437.8
323.1
228.7
69.2
4.1
3.0
176.8
68,2
146.3
37.0
10.8
8.7
206.7
176.8
103.0
57.4
. 88.3
• 82.8
46.7
88.3
35.0
38.0
40.4
13.8
10.0
2L6
3L0
2.3
13.8
2.5
3.8
18.8
5.2
1 Represents, together with $27,700,000 set aside for guaranties, complete assignment to countries of loan
funds available from the 1 billion dollar public debt transaction.
Source: Hearings on Foreign Aid Appropriation Bill for 1950, before subcommittee of Committee on
Appropriations, House of Representatives, .81st Cong,, 1st sess., p. 638.
As shown by this table, practically the entire amount of the 5
billion dollar ECA appropriation and authorization had been allotted
by the end of the first year of operation. In general, distributiori of
funds between recipient countries, and determination of the type of
assistance, were based upon such factors as the recovery needs of individual nations, prospective balance-of-payments deficits with the
Western Hemisphere, and relative abihty to service loans. The conditional aid indicated in column (4) of the table was extended to those
countries which anticipated export surpluses in their trade with other
participants. (Conditional aid is discussed more fully later in this
report.)
Appropriation request jor second year program oj ERP
The Council concurred in the ECA appropriation request for the
April-June quarter of 1949, and for the fiscal year 1949-50. After
252
REPORT OF THE SECRETARY OF THE TREASURY
review by the Congress, funds were authorized in the following
ainounts (Public Law 47, ch. 77, 81st Cong., 1st sess.):
[In millions of dollars]
Total EGA Funds Authorized
April-June 1949
Fiscalyear 1949-50
Guaranties
.___
_.-_--
.
.
:r__
_
-
- $5, 580
1, 150
4,280
150
The authorization for. guaranties is made under section 6 (6) of
Public Law 47—
^less any amount allocated prior to April 3, 1949, for such purpose, until all liabilities arising under guaranties made pursuant to this authorization have expired or
been discharged.
Prior to AprU 3, 1949, $27,700,000 had been aUocated to guaranties.
Pending the passage of legislation appropriating funds to the ECA.
for the fiscal year 1950, the Reconstruction Finance Corporation was
authorized and directed to make advances not to exceed in the aggregate 1 billion dollars to carry out the provisions of the Economic
Cooperation Act.
Financial aspects oj European recovery
During November and December 1948, the CouncU took occasion
to review the financial problems raised by E R P during the year and
related these problems to the anticipated program for the next fiscal
period. In particular, problems relating to the future loan policy of
ECA, the use of local currency counterpart funds, ECA guaranties,
exchange rates, gold and dollar requirements, and blocked assets were
considered.
In its consideration of these problems, the Council recognized the
changes taking place in the internal financial situations of the recipient
countries. Inflationary rises in prices had been checked in several
countries and the monetary authorities of the various governments were
in process of carrying out programs of credit restriction. The
governments had, to a considerable extent, reduced the rate of inflationary borrowing from the central banks or from other sources by
bringing their budgets closer to balance. Furthermore, the fact that
there was a greater availability of goods aiso had the effect of arresting
price increases. Difficulties in the future, however, might be faced
by those countries which were experiencing ^^suppressed'' inflation—
i. e., countries in which expendable income had increased more than
proportionately to the supply of goods but in which price rises had
been prevented or minimized by such devices as price controls, rationing, and subsidies. In some instances budgets had been balanced, or
budgetary surpluses achieved, but in other cases where budgetary
deficits were causing inflationary difficulties more effort was needed,
in the Councirs opinion, to increase domestic revenues and to eliminate unnecessary expenditures.
Exchange rates
The Council has given continual attention to the problem of the
exchange rates of the participating countries. I t concluded that in
1948 a general revaluation of the European exchange rates was inadvisable in view of the possible internal repercussions of devaluation
on the participating coimtries in a period when their economies stUl
EXHIBITS
253
exhibited serious inflationar}'- tendencies, while their levels of production were not adequate to maintain an expanded volume of international trade. I n many of the participating countries these conditions
no longer obtain, since substantial progress has been made toward
recovery in their levels of production. The Council recognizes that
if viability of the European economies is to be attained by 1952, greater
progress must be made by the European countries in redressing their
balance-of-payments position with respect to the Western Hemisphere,
and iri attracting private foreign investment. I t is the CounciPs
opinion that in some cases the revaluation of currencies may constitute
an important means of bringing about the desired expansion of exports
to the dollar area which, along with other appropriate measures, wUl
contribute to more normal methods of financing after 1952. While
fully aware of.the difficulties involved in exchange rate adjustments,
the Council believes that the problem should be explored with some of
the European countries. Where adjustments of exchange rates are
indicated, it is expected that member countries wUl make appropriate proposals to the International Monetary Fund.
Loan policy
Certain European countries have accumulated a substantial indebtedness to the United States, including debts arising from war-account
settlements, postwar credits, and loans extended by ECA during its
first year of operations. A further large mortgage upon future dollar
receipts would in all probability be a deterrent to the objectives of
the recovery program. The imposition of further claims against
European dollar earnings by the United States Government would
lead to a smaller margin of flexibility in the international accounts of
the debtor countries, thereby necessitating disproportionate adjustments in vital imports as earnings fluctuate. The probable effect
would be to reduce to a corresponding extent the capacity of participating countries to service additional financing which they may require
and to pay earnings on direct investments. Therefore, any substantial
increases in dollar service charges resulting from the assumption of
increased obligations to the United States Government would be
scrutinized with particular concern by international lending agencies
and private investors.
The Council consequently recommended that the Administrator for
Economic Cooperation be authorized, in consultation with the Council,
to determine when aid for tlfe fiscal year 1949-50 should be on a loan
basis and in what amount. Prudent use of this discretionary power
would keep the field open for long-range investment prospects for
private capital, for Export-Import Bank financing, and for International Bank loans.
Foreign gold and dollar balances
Prior to the start of E R P , many nations throughout western Europe
had drawn down their gold and dollar reserves in order to purchase
essential goods from the. United States. When the recovery program
began, consideration was given to the problem of whether further
reduction in such reserves should be made a requisite to receiving
continued United States assistance. The Council considered that such
depletion of reserves should not be required, but that ECA allocations
254
REPORT OF T H E SECRETARY OF T H E TREASURY
should not be made for the specific purpose of buUding up foreignexchange reserves.
Blocked assets
In conjunction with the initial presentation of the European Recovery Program to the Congress, the Council outlined a program to provide to recipient countries information which would enable them to
secure control over the blocked dollar assets of their citizens. (See
Report of Council activities for the period October 1947-A/[arch 1948.)
Accordingly, a census was taken of all assets which remained blocked
in this country as of June 1948. By the end of December appropriate
information disclosed by the census with'respect to property worth
approximately one-half billion dollars was placed in the hands of the
countries to which the United States was extending assistance. In
this way, detailed information concerning a considerable portion of the
assets was made available to the appropriate governments for the first
time. On October 1, 1948, jurisdiction over assets remaining blocked
was transferred to the Oflice of Alien Property in the Department of
Justice from Foreign Funds Control of the Treasury Department.
Local currency junds
The Economic Cooperation Act and the bilateral agreements negotiated under the JEconomic Cooperation Act provide that 95 percent
of the local currency counterpart funds resulting from United States
assistance furnished on a grant basis shall be held or used in agreement
with the United States Government. The policies involved in the use
of these funds have been formulated by the ECA in consultation with
the CouncU. In accordance with the terms of the act, local currency
funds are available for the reduction of public debt, expenditures for
capital reconstruction, and for other purposes conducive to attaining
the purposes of the act. The status of counterpart funds under the
Foreign Assistance Act of 1948 as of April 2, 1949, is shown in the
following table:
TABLE VI.—Status of European -local currency counterpart accounts under the
Foreign Assistance Act of 1948, as of Apr. 2, 1949
[Dollar equivalents o f the local currency, in millions of dollars ^
Total
currency
deposited
Countries receiving grants
All ERP Countries
France
United Kingdom
Italy
Austria
Bizone (Germany)...
Netherlands
Greece...
Norway
French Zone (Germany) •
Denmark--.
Trieste
Belgium
. ...
For use by recipient country (95
percent)
| For use by
United
Approved
States
WithBalances
for pro'gram drawals
(5
percent)
on deposit
use
1,733.2 1
1,318.4
828.1
818.5
86 6
540.7 1
484.4
163.9
143.8
^ 103.2
94.7
88.4
45.0
25.5
32.8
7.8
3.0
288.7
435.0
2 434. 8
12.5
.8
288. 7
433. 2
Mn.5
22.2
63.9
22.2
225.0 1
27.0
155.7
124.1
97.2
90.0
20.1
20.6
24.2
3L2
.6
2.8
27.0
24.2
8,2
7.2
5.2
4.7
4.4
2.2
1.3
1.6
•4
.2
(3)
2 12. 9
12.5
.8
(3)
6.8
» Dollar equivalents are computed at the actual rates which were used by the respective governments in
agreement with the Economic Cooperation Admimstration in making commensurate deposits of local
currency.
2 Includes programs approved in advance of deposits of counterpart funds.
8 Less than $50,000.
Source: Economic Cooperation Administration.
255
EXHIBITS
Five percent of the counterpart funds deposited by the European
Recovery Program participants is allotted to the use of the United
States within the foreign country for the procurement of strategic
materials and the payment of local currency expenses of the United
States Government, particularly administrative expenses in connection with the program. These allotted funds are subsequently transferred from the deposits of the foreign country to a separate United
States account. The difference between the funds transferred to the
United States account and 5 percent of the grants reported represents
a claim of the United States Government on the foreign government.
The status of these funds as of April 2, 1949, is shown by country in
table VII:
TABLE VII.—Status of the United States portion (6 percent) of counterpart funds
under the Foreign Assistance Act of 1948, by country, as of Apr. 2, 1949
[Dollar equivalents of the local currency, in thousands of dollars 1]
Countries receiving grants
All ERP Countries.
France
United Kingdom.
Italy
Austria
Bizone (Germany).
Netherlands
. Greece
Norway...
Denmark.,
French Zone (Germany).
Trieste
Belgium
Five percent of
actual deposits by
foreign
country
Expenditures
Transferred
Administo United
states ac- trative and Strategic
other excounts
materials
. penses
86,659
32,789
27,034
24,220
8,196
, 3,984
• 17, 212
8,196
1,200
135
254
1,000
130
172
52
392
62
7,190
5,160
4,734
4,419.
2,251
1,638
1,275
392
150
6,639
. 2 2,150
272
2,627
471
93
93
685
69
110
12
57
Balance in
United
States
accounts
16,758
9,392
3 139
16,619
1,695
321
5, 569
729
42
161
3i5
• 61
62
52
380
5
> See footnote 1, table VI.
2 Includes $1,566,000 for expenses of the Office of Special Representative.
3 Represents advance for the development of mining facilities in French Africa to be repaid by the delivery
of lead and zinc.
Source: Economic Cooperation Administration.
Neither the Council nor ECA considered that a policy of uniform
treatment of the local currency accounts was advisable in view of the
great differences in progress made by individual countries, differences
in financial structure, and differences in economic policy. Therefore,
the Council has acted on a country by country basis in its review of
the use of local currency counterpart funds for the various participating
countries. .
•
The previous Report of the Council dealt with releases of counterpart
funds in France, the United Kingdom, Greece, and Trieste. In
general, these releases were made for purposes of financing investment
and reequipment of public utilities; to stimulate economic activities
in inciustrial and agricultural enterprises and so contribute to the
econobaic recovery of western Europe; for refugee, public health and
welfare programs; and to retire the public debt where the country
receiving such aid had progressed toward budgetary eiquilibrium.
During the period under review, the Council considered questions of
policy concerning the release of counterpart funds in Austria, Italy,
and Norway.
256
REPORT OF THE SECRETARY OF THE TREASURY
Austria
The Council advised the ECA that it had no objection to the release
of 330.5 million schillings from the Austrian counterpart funds to
finance expenditures in the last half of 1948 designed to stimulate
productive activity through the rehabilitation of basic Austrian
utilities.- The Council further advised that additional releases be
considered only after review of the Austrian financiial situation and
receipt of evidence that adequate efforts had been made by the
Austrian Government to achieve financial stability.
A second request for the release of counterpart funds from ECA
and other sources, iricluding GARIOA ^(Government and Relief in
Occupied Areas), was also reviewed by the Council, providing for
1,450 million schillings to retire government debt held by the central
bank, 50 million schillings for housing, and 7.58 million schillings for
other purposes. The additional program was recommended after
extensive review of the new industrial restoration program undertaken
by the Austrian Government.
Italy
The Council advised that it had no objection to the Italian Government's proceeding with plans for a broad development program«
invoiying the use of counterpart funds up to 250 billion lire. The
Councir recommended that the Italian Government be advised that
approval by the United States of actual releases from counterpart
funds would be decided upon after review of the program and of the
degree of financial and monetar}^ stability attained. I t was anticipated
that the use of the funds would be directed toward agricultural
rehabilitation, public works construction, expansion of the merchant
maririe, and improvements to the transportation system.
Norway
The Council advised ECA .that the local currency counterpart of
ECA assistance during the first year of the program might appropriately be used by the Norwegian Government for the reduction of debt
to the Bank of Norway. Norway's primary problem has been one of
suppressed inflation. Steps have been taken to offset inflationary
pressures through direct controls and gradually to work off excess
purchasing power through fiscal measures. In view of this program,
the use of counterpart funds for the purpose indicated above appeared
wholly consistent with the ECA Act.
Conditional aid
ECA allots funds to certain countries on the condition that they
grant to other participating countries equivalent amounts in their own
currencies (called drawing rights). These allotments are called conditional aid. During the first year of E R P , conditional aid amounting
to $531,300,000 was allotted to correspond to drawing rights established by participating countries within the intra-European payments
plan. In general, the United Kingdom and Belgium received the
larger portion of conditional aid while France received a large portion
of the corresponding drawing rights.
In the operation of this program, the Council recommended to
ECA that no deposit to the special local currency account be required
from the country receiving the conditional aid, but that the country
EXHIBITS
257
receiving the drawing rights make a commensurate deposit in a special
local currency account to be administered under section 115 (b) (6) of
the Foreign Assistance Act of 1948, 5 percent of which would be
allotted to the United States for its use under the terms of title I of
the Foreign Aid Appropriations Act of 1949. Since a country utilizing
drawing rights in effect obtains assistance indirectly from the United
States, it is reasonable to require that deposits be made on the same
conditions as apply to local currency deposits made against direct
grants.
ECA guaranty program
The Economic Cooperation Act of 1948 provided a statutory limit
of $300,000,000 for guaranties of industrial and informational media
investments in connection with prdj ects approved by the Administrator. This limit was reduced by $150,000,000 under Public Law 47,
Eighty-first Congress, which amended the Economic Cooperation
Act. During the first year of its operations, $27,700,000 was allocated
to the ECA guaranty program, and actual guaranties authorized
amounted to $3,587,814.
By arrangement with the Administrator for Economic Cooperation,
the Export-Import Bank acts as his agent for the issuance of industrial
guaranties, while the informational media guaranties are issued by the
Administrator.
ASSISTANCE FOR ASIA
China • ^
Since the date of the last Council report, further deterioration in the
economic and political situation of China necessitated adjustment in
the United States Government's program of assistance to that country.
During November 1948, therefore, ECA requested the advice of the
CouncU on the use of local currency counterpart funds for emergency
purposes consistent with the objectives of the China Aid Act of 1948,
and the Council saw no objection to the extension of discretionary
authority to the Chief of .the ECA China Mission to agree with the
Chinese Government regarding the use of these funds.
Japan
'
The Japanese postwar economy has been characterized by acute
inflationary conditions which made difficult effective economic control, and resulted in budgetary imbalarice and a low level of trade, both
domestic and foreign. The United States authorities recognized the
need for more adequate internal stabilization in Japan, and in July
1948, urged upon the Japanese Government a program of more effective controls which was adopted only in part.
Early in December 1948, an appropriation request for economic rehabilitation, prepared by the Department of the Army, was submitted
to the CouncU for consideration. The Council offered no objection
to the proposed appropriation, on the basis of assurances from the
State Department and the Department of the Army that economic
stabilization in Japan would be expedited.
On December 17, 1948, a directive was issued by SCAP to the
Japanese Government to carry out an effective economic stabilization
program calculated to achieve fiscal, monetary, price, and wage
stability in Japan as rapidly as possible, as well as to maximize pro856455—50
IS
258
REPORT OF THE SECRETARY OF THE TREASURY
duction for export.
a s :
•
• •
The specific objectives of the program were listed
.
.
•
•
(1) Balancing the budget at the earliest possible date by
stringent curtailing of expenditures and maximum expansion in
revenues.
(2) Strengthening the program of tax collection.
(3) Limiting credit extension to projects contributing to economic recovery,
(4) StabUizing wages.
(5) Strengthening price controls.
(6) Improving foreign trade and foreign-exchange controls.
(7) Improving the allocation and rationing system.
(8) Increasing production.
(9) Improving efficiency of the food-collection program.
In conjunction with the announcement of the program, it was stated
that—
Improvements in the Japanese standard of living wiU be contingent on the
degree to which the Japanese give wholehearted support to the achievement of
economic stabilization and recovery. Their performance in carrying out their
program will be weighed in connection with future requests for appropriated
funds for Japan.
During 1948, a United States mission conducted a survey of the
exchange rate situation in Japan, and recommended that a. single rate
for the yen be established as soon as practicable. The December
directive, referred to above, also indicated that the program would
be developed to pave the way for the early establishment of such a
rate. In March 1949 the Supreme Commander for the Allied Powers
requested authorization to establish a general commercial exchange
rate for the Japanese yen on AprU 1, 1949, or as soon thereafter as
practicable. The CouncU concurred in the proposal and recommended
that consideration be given to fixing a rate up tp 360 yen per dollar.^
Ryukyu Islands
The Council gave favorable consideration to the Department ofthe Army's appropriation request for the Ryukyu Islands for the fiscal
year 1950. This program is designed to assist in restoring wardamaged industry, to achieve more efficient utUization of indigenous
resources, and to improve existing facUities for power and transportation, and thereby to reduce the amount of funds which would otherwise be required for relief purposes from United States appropriated
funds.
Korea
The United States authorities in Korea have been confronted,
since the end of the war, with difficulties by reason of currency inflation, the excess of expenses over incomes, tax-collection problems,
and disruption of normal economic relations between North Korea
and South Korea. An ECA appropriation request for the fiscal year
1950 was presented to the Council for consideration, and the Council
I On April 22,1949, the Supreme Commander for the Allied Powers in Tokyo fixed the official exchange
rate at 360 Japanese yen to the dollar, eflective April 25. The rate applied to all permissible foreign trade
and exchange transactions, including those for which the military conversion rate had been applicable.
Exchange rates of the yen with other currencies were based on the official parities of those currencies with
the dollar agreed with the Intemational Monetary Fund. The action did not change existing restrictions
on conversion of yen to foreign currencies or on the holding of foreign currencies.
EXHIBITS
259:
gave favorable consideration to this request, in view of. the special
responsibUities ofHhe United States Government in South Korea.
This program wUl continue and extend programs previously administered by the Department of the Army.
EXPORT-IMPORT BANK CREDITS
During. the period under review the CouncU continued to work
closely with the Export-Import Bank to facUitate coordination of the
Bank's operations with those of other agencies concerned with foreign
lending. New credits authorized by the Bank during this period
totaled $148,390,560.
Wood processing industry in Finland
The CouncU approved consideration by the Export-Import Bank
of a loan to Finland in an amount not to exceed $10,000,000 for the
import of essential equipment and raw materials for the woodworking
industry in order to promote a substantial increase in the export of
pulp, paper, and other essential wood products to the Western Hemisphere and to ERP countries. The credit, unconditionally guaranteed
by the Government of Finland, was established in favor of the Bank
of Finland, which undertook to control and supervise the allocation
of credits among Finnish firms to assure that they would be used for
the specific purpose of bringing about further recovery in Finnish
exports of wood products. This credit is avaUable until December
31, 1949, bears interest at 3K percent per annum, and is to be repaid
in 6 years after January 1, 1953.
Power development in Brazil
The' Council approved consideration by the Export-Import Bank
of a loan of $8,278,000 to 12 of the operating subsidiaries of the
American & Foreign Power Co. under guaranty of the BrazUian
Electric Power Co., its Brazilian holding company, to finance the
expansion of power production and related distribution facUities in
BrazU. The obligation is evidenced by notes bearing interest at
4K percent per annum and maturing in 20 semiannual installments
beginning in March 1950. The companies had invested $25,000,000
in the construction of new facUities during the period 1945-47 and
the current loan was designed to cover a portion of the external
costs of that part of an additional program of expansion which would
be completeci in 1949. The Brazilian borrowing companies had
demonstrated high earning capacity as a group, and had secured from
the Brazilian exchange control authority a registration for priority
of the exchange required for the service of the credit.
Another expansion program in Brazil, that of the Brazilian Traction
Light & Power Co., Ltd., for a credit of $75,000,000 to expand power
production and telephone facUities, is discussed in the section of this
report dealing with the International Bank.
Agricultural development in Haiti
The Council approved consideration by the Export-Import Bank
of a credit not to exceed $4,000,000 to the Republic of Haiti for
financing the development of the Artibonite Valley. Terms of the
credit provide for repayment in 30 approximately equal semiannual
260
REPORT OF THE SECRETARY OF THE TREASURY
installments, commencing 3 years after the date of the first advance
of funds for the project.
^
The funds obtained from this loan will be used to assist in financing
the construction of flood-control, irrigation and drainage works, as
well as settlement and agricultural development of the approximately
62,500 acres of lands to be irrigated. The credits wUl be used to
finance the purchase of United States equipment, materials, and
services required for construction in an amount not in excess of
$3,200,000, and to finance the purchase of up to $800,000 of other
United States equipment required in the settlement and development
of the irrigated area.
Steel expansion in Chile
The Council approved consideration by the Export-Import Bank
of a credit of $20,000,000, with a maturity of 20 years, to Corporacion
de Fomento de la Produccion of Chile, to supplement the existing
credit of the Bank for financing construction of an integrated steel
mill at Concepcion, Chile. The initial credit of $28,000,000, was
established by the Bank in September 1945.
. .
A rise in prices and necessary modifications in plans since the
project was first submitted resulted in a substantial upward revision
in estimated total cost, from $56,000,000 to about $83,000,000.
Of this total $48,000,000 wiU be covered by Export-Import Bank
financing, $4,000,000 by credits obtained from United States suppliers,
and the balance of $31,000,000 will be supplied by ChUe.
Economic development oj I s r a d
The Council approved consideration by the Export-Import Bank
of credits of $100,000,000 to the State of Israel to finance projects
contributing to the balanced economic development of the country.
In January 1949 the Export-Import Bank announced the authorization of a credit of $35,000,000 to assist in the financing of agricultural
projects, and the earmarking of $65,000,000, to be avaUable uritU
December 31, 1949, for credits to finance projects in the fields of
transportation and communication, manufacturing, housing, and
public works. These various projects are part of the over-all program
of the State of Israel designed to establish a self-sustaining economy.
The State of Israel expects to finance this total investment program
in large part from local savings, Jewish contributions from various
parts of the world, and private foreign capital investment.
During March 1949 the Export-Import Bank announced allocations
from the $65,000,000 of $16,000,000 for buses and trucks, materials
arid equipment for developing low-cost housing, and telecommunications equipment.
The Israeli credits carry a rate of interest of 3K percent per annum
and are to be amortized over a period of 15 years.
Highway construction in Bolivia
The Council approved consideration by the Export-Import Bank
of a credit to Bolivia not to exceed $16,000,000 with a maturity of
about 20 years and an interest rate of not more than 4 percent per
annum to assist in financing the completion of the CochabambaSanta Cruz highway. The proposed credit would be supplementary
to an earlier credit of $10,000,000 extended in March 1942.
261
EXHIBITS
Other credits
In addition to the credits specified above, the Export-Import Bank,
during the period under review, extended other credits in small
amounts, including credits for certain projects in the Latin American
Republics and for the development of iron-ore deposits in Canada.
The Export-Import Bank also acts as the loan adininistering agency
for" loan agreements negotiated on behalf of ECA under the Foreign
Assistance Act of 1948. Loans to participants in the European
Recovery Program have been considered earlier in this Report.
As of March 31, 1949, the resources of the Export-Import Bank
were distributed as follows:
[In millions of dollars]
,
Total L e n d i n g Authority
3, 500. 0
Loans o u t s t a n d i n g
Undisbursed c o m m i t m e n t s
Uncommitted, lending a u t h o r i t y
.
2, 144. 7
425. 9
929. 4
The following table shows the distribution of net credits authorized
by country and object of financing. Actual utilization of ExportImport Bank credits by country, through December 31, 1948, may
be found in appendix C.
T A B L E V I I I . — N e t credits authorized by the Export-Import Bank,^ J u l y 1, 1946, to
M a r . 3 1 , 1949
[In millions of dollarsl
•
Total, All Areas
Total, Europe
,
France
Netherlands
Belgium
Italy .Flnland
Norway .
1...
Poland.
Turkey
Czechoslovakia
Denmark
Germany
.
Greece
Reconstruction
Total
Area and country
-__._
Austria
Sweden..
Unallotted cotton credits
Develop- Lend-Lease Cotton purment
requisitions chases 2
1,008.6
754.6
655.0
159.0
20.1
971.9
261.0
655.0
100.0
17.6
1, 200.0
. 205.3
132.0
650.0
3 152. 2
45.0
3.1
'32.0
550.0
50.0
55,0
25.0
17.0
«4.9
•« 10.0
, 20.0
< 2.0
131.8
100.2
50.2
40,0
35.6
22.0
20.0
19.0
14.7
13.5
2.2
19.0
50.0
40.0
101.9
73.2
35.6
20.0
14.7
13.0
2.2
231.5
'73.6
57.0
63.7
Colombia
Haiti
Ecuador
20.1
4.0
3.8
20.1
4.0
3.8
3.3
3.0
2.0
3.3
3.0
2.0
.2
.1
.7
.2
.1
.7
. _.
Argentina
Uruguay
Other Latin America
See footnotes at end of table.
.2
19.0
73.6
57.0
63.7
. _
•
2,005.5
231.5
Bolivia.
Venezuela..
Panama
•
2,597.3
Brazil
Mexico
Chile'
Total, Latin America
Other
.5
19.0
'
•
_
262
REPORT OF THE SECRETARY OF THE TREASURY
TABLE VIII.—Net credits authorized by the Export-Import Bank,^ July 1, 1946, to
• Mar. 31, 1.949—Continued
[In millions of dollars]
Total
Area and country
212.8
Total, Asia and Africa
100.0
66.7
26.0
Israel
China
Japan
10.0
7.1
3.0
Saudi Arabia .. _>.
Egypt
Ethiopia
145.0
Canada
Reconstruc- Develop- Lend-Lease Cotton purtion
ment
requisitions chases 2
36.7• 33. 7
3.0
117.1
59.0
100.0
10.0
7.1
33.0
3fl26.0
,•
-
145.0
2.5
Other
Other
2.5
1 Cancellations and expirations deducted. Numerous small exporter-importer loans extended by the
Bank, July 1,1945, through Mar. 31,1949, excluded. Also excluded are Mexican authorizations of $30,000,000
• and a Peruvian authorization of $400,000 approved prior to June 30,1945, but recorded on the Bank's books
subsequent to June 30, 1945.
2 Credits extended by Export-Import Bank under general approval of the Council. Hungarian credit
of $7,000,000 canceled Apr. 2, 1947.
.
» Excludes participation by private banks.
< For financing tobacco purchases.
.» For flnancing food purchases.
«Revolving credits.
Source: Export-Import Bank.
S U N D R Y FINANCIAL P R O B L E M S
War Assets Administration joreign credits
As indicated in the previous Report of the Council, War Assets
Administration credit agreements with foreign governments were
originally inaugurated at a time when the agency held in its inventory
large amounts of property which it appeared could not then be absorbed by the national economy. Thereafter, when certain of the
credit agreements were scheduled to expire, the. Administrator of
WAA requested the advice of the Council as to the desirability of
extending them and the Council approved consideration of their
extension untU December 31, 1948.
TABLE IX.—War Assets Administration credit agreements with foreign governments,
as of Feb. 28, 1949
Country
Total credit
agreements
Credit approv- Unused balals Feb. 28,
ances Feb. 28,
1949
1949
$117,255,000
$19,849,383
France
Netherlands
Norway
Austria
50,000,000
15,000,000
12,000,000
10,000,000
6, 972,390
969, 997
631,443
3,346, 778
43,027,609
14,030,003
11,368, 557
6,653,222
Finland
Philipphies.
Pakistan
HaitL
10,000.000
10,000,000
10,000,000
255,000
6,565, 756
1,074,633
1136,464
161,922
3,434,244
8,925,367
9,863, 536
103,078
Total
$97,405,616
» Paid In full with interest on Nov. 10,1948.
NOTE.—The purchasing period uuder the Pakistan agreement expired on Apr. 14,1949. No further purchases have been made under the agreement. The purchasing period under the other agreements expired on
Feb. 28,1949.
Source: War Assets Admimstration.
EXHIBITS
'
,
263
In December 1948, War Assets Administration brought to the attention of the Council the fact that certain credit agreements would expire
before February 28, 1949, the scheduled date for the liquidatiori of
WAA, and requested the advice^of the Council as to the desirability
of renewing untU this date these credit agreements upon application.
Since there was no material change in factors considered at the time
of the earlier requests, the Council approved consideration by WAA
of the renewal to February 28, 1949, of credit agreements with the
Governments of Finland, the Philippines, the Netherlands, Haiti,
Norway, Austria, and France upon receipt of applications from these
governments.
President's program jor underdeveloped areas
In his inaugural address before the Congress on January 20, 1949,
the President stated that—
We must embark on a bold new program for making the benefits of our scientific
advances and industrial progress available for the improvement and growth of
underdeveloped areas.
-
The Point IV program, outlined by the.President, called for United
States Government participation in the form of technical assistance,
development loans by United States Government and international
lending agencies, and the fostering of United States private investment abroad.
The Point IV program is broadly economic in nature. I t recognizes
that the greatest contribution to the economic development of underdeveloped areas will have to come from within such territories. By
sharing their knowledge and skills, the nations engaged in this joint
effort would promote and encourage foreign investments and international trade.
The financial problems relative to the Point IV program have been
under consideration by the Council. In particular, the relatipriship
between the capital-investment aspects of this program and methods
of developing technicalcooperation between nations have been studied.
Proposals designed to encourage the flow of private investment capital abroad, particularly relating to (1) the negotiation of treaty
provisions covering protection of United States foreign investment,
(2) Government guaranties to investors against certain risks, and
(3) tax incentives, have received attention during this initial stage of
exploration into the possibilities of implementing the program. The
President's Committee for Financing Foreign Trade, imder the chairmanship of Mr. Winthrop W. Aldrich, has consulted with the Council
on those aspects of the program in which there is mutual interest. •
Financial aspects oj military assistance
In March 1949 the Council reviewed, with particular reference
to the possible impact on the European Recovery Program, certain
of the financial aspects of the military-assistance program which
was under consideration by the Executive Branch of the United
States Government.
Joint Brazil-United States Technical Commission
As indicated in the previous Report of the Council, the Joirit
Brazil-United States Technical Commission was created under the
authority of President Truman and President Dutra pursuant to the
264
REPORT OF T H E SECRETARY OF T H E TREASURY
request of Brazil that technicians of the United States Government
collaborate with technicians of the Brazilian Government in ari
analysis of the factors in Brazil which tended to promote or to retard
the economic development of the country. The Commission, engaged
in this task since September 1948, completed and submitted its
report to the two Governments in February 1949. The report
was subsequently made public. Terms of reference to guide the
Commission in its study were cited in the preceding Report of tlie
CouncU.
IV. ACTIVITIES OF THE COUNCIL FROM OCTOBER 1, 1948, TO M A R C H
31, 1949, RELATING TO THE INTERNATIONAL MONETARY F U N D AND
THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT
The National Advisory Council, in accordance with statutory
authority, continued to coordinate the activities of the United States
representatives of the Fund and the Bank with those of other agencies
of the Government, by consulting and advising with them on major
problems arisirig in administration of the Fund and the Bank. The
United States Executive Directors of these institutions, or their
Alternates, have attended the CounciPs meetings regularly, and have
participated continuously in the work of its Staff Committee.
MEMBERSHIP CHANGES IN THE FUND AND THE BANK
During the period under review no new countries were admitted
to membership in the Fund or the Bank. In October 1948 the
Governors of both institutions considered the membership application
of Liberia and, without meeting, voted to accept the Liberian application, providing for a quota in the Fund of $500,000 and a like
amount as a subscription to the Bank. As of March 31, 1949,
Liberia had not yet accepted membership in ,either the Fund or the
Bank.
On March 31, 1949, 47 countries were members of the Fund and
the Banli. The members, with their quotas and capital subscriptions
as of March 31, 1949, are listed in appendix D .
ORGANIZATIONAL CHANGES
On October 30, 1948, the Fund announced the appointment of Mr.
Andrew N. Overby to the position of Deputy Managing Director of
the Fund. Mr. Overby subsequently resigned as United States
Executive Director, and assumed his new duties on February 9, 1949.
On February 8, 1949, the President of the United States, with the
advice and consent of the United States Senate, appointed Mr. Frank
A. Southard, Jr., as United States Executive Director of the Fund.
Mr. Southard took office on March 1, 1949.
'
T H E FUND
During the period under review, the Fund not only provided
assistance to its members in appropriate instances to meet balance-ofpayments deficits on current account, but also utilized extensively
the technical skUls of its personnel in the solution of complex exchange
EXHiiBITS
265
problems. Thus, further progress was made in establishing the Fund
as the international organization for technical consultation and
advice on foreign-exchange problems.
Par values
On December 17, 1948, the Fund announced a change in the par
value of the Colombian peso from approximately 1.75 pesos to the
Uriited States dollar, to approximately 1.95 pesos to the United States
dollar. On March 22, 1949, the Fund also announced that it had
concurred in a proposal by the Government of France to change the
par value of the currency of French Somaliland from 126 Djibouti
francs per United States dollar, to 214.392 Djibouti francs per United
States dollar.^ The United States Executive Director, acting with
the approval of the Council, supported these decisions.
Exchange restrictions
France
On October 16, 1948, the Fund reported the results of consultations
with the French Government relating to changes in the French exchange system in order to reduce the multiplicity of exchange rates
and to unify the procedure applicable to commercial transactions.
Under the agreed proposals, exchange rates for trade transactions are
based on the effective rate for the dollar, with cross rates for currencies of other members conforming closely to the accepted Fund parities.
Differential rates continue only for nontrade transactions in dollars,
Swiss francs, and escudos.
Colombia
The change in par value of the Colombian peso in December 1948
was accompanied by certain modifications in the country's .existing'
multiple-currency system. These measures were concurred in by the
Fund, which stated that they were an improvement upon the system
which Colombia introduced in June 1948, and should have the effect
of curbing imports, thereby tending to lessen the drain on Colombia's
foreign-exchange resources. ' The measures were designed to assist in
the solution of Colombia's balance-of-payments problem and to remove some of the features of the existing system considered to be in
conflict with Fund policies. The new measures provided, among
other things, for the abolition of exchange premia for certain major
exports, for reducing the exchange surcharges on two of the three
categories of private imports, for the provision of exchange for official
imports at the parity rate, and for the maintenance of exchange licensing and certain quantitative import controls. Colombia and the
Fund have continued consultations with a view to the adoption of
measures in the financial and monetary field designed to lead toward
further unification, simplification, and strengthening of the Colombian
exchange system.
Peru
^ .
On December 10, 1948, the Fund approved further changes in
Peru's exchange system which were intended to encourage exports
and reduce import demand so as to achieve a better balance in Peru's
> The par value initially agreed with the Fund of 70 Djibouti francs.per United States dollar, had been
changed to 126 francs to the dollar when the Govemment of France instituted its new exchange system on
January 25,1948.
266
REPORT OF T H E SECRETARY OFCTHE TREASURY
international payments. At the same time, the Fund urged Peru to
study policies looking toward greater unification of its exchange
system.
Union of South Africa
In order to meet a serious drain on its convertible eixchange reserves,
the Union of South Africa, in November 1948, put into force restrictions on exchange for imports from countries outside the sterling
area. In January 1949, after considering the substance of the measures and the circumstances of the member,' the Fund agreed to
approve the imposition of the restrictions and authorized their
maintenance and adaptation to chp^nging circumstances as long as the
Fund remains satisfied that they are necessary to safeguard South
Africa's external financial position. In its action the Fund gave
particular attention to certain discriminatory aspects involved in
the South African measures, and is keeping the questions under
constant review. In respect to the South African import restrictions
imposed in November 1948, the Fund has been in consultation with
the Contracting Parties under the General Agreement on Tariffs and
Trade (GATT).
Gold sales at premium prices
In February 1949, the Government of South Africa announced
that it had contracted to sell abroad 100,000 ounces of semiprocessed
gold for industrial purposes at a price in excess of $35 an ounce. The
Fund's policy on such transactions has been that external sales are
aUowable only if adequate safeguards exist to ensure that the gold
is, in fact, used for bona fide and customary artistic, industrial, or
professional purposes, and not for speculation and hoarding, and
that it is imported in accordance with the gold or exchange laws
of the countries concerned. The Fund emphasized that there had
been no change in this established policy.
The Fund noted that it had advised South Africa in October 1948
of the desirabUity of instituting safeguards on external gold sales,
simUar to those employed by the United States and the United
Kingdom. The United States regulations, for example, require that
the exporter furnish complete information on the bona fide disposition
of the gold, and further, that the proposed importation and payment
are in conformity with the laws of the importing country.
During the remainder of the period under review, discussions
continued between Fund and South African officials in an attempt to
work out a mutually satisfactory solution to this problem.
During the past year, the Fund also consulted with the United Kingdom, which has accepted the Fund Agreement in respect of Southern
Rhodesia, regarding a gold-subsidy arrangement which had been established by the territorial government. It was agreed that the arrangement was inconsistent with the Fund's policy, and the Fund
267
EXHIBITS
was informed in October 1948 that Southern Rhodesia would undertake to modify its legislation to conform with the Fund's principles.
During the period under review, various other members consulted
with the Fund regarding steps'" which might be taken internally to
alleviate the difficulties faced by gold producers, without infringing
upon the basic policy respecting international transactions in gold at
premium prices.
Fund exchange transactions
During the 6 months, October 1, 1948, through March 31, 1949,
the Fund sold $73,700,000 to five of its member countries. Of the
aggregate amount, $6,100,000 represented a sale to Norway of United
States dollars for gold. This was the first time a member country had
used the Fund's facilities for the purpose of exchanging gold for
another member's currency.
The following table presents a detailed break-down of all Fund currency sales through March 31, 1949:
TABLE X.—Currency sales of the International Monetary Fund from Mar. 31,1947,
through Mar.31, 1949
[In millioos of United states dollars]
Total, All Countries....
713.6
Total, Europe
570.2
.
United Kingdom
France
:...
Netherlands
"Relginm,
Norway
DenmarkCzechoslovakia
Turkey .
6-month period e n d i n g -
Total to
Mar.31.
1949
Country
_
_.
Total. Other Countries
India
Mexico. Union of South Africa...
ChileEthiopia
CostaRica
Nicaragua
Mar. 31,
1949
1
Sept. 30,
1948
Mar. 31,
1948 .
73.7
39.8
391.1
309.0
6.1
23.3
356.8
184.0
»6.8
240.0
25.0
44.5
33.0
60.0
100.0
>24.0
300.0
125.0
75.3
33.0
15.7
10.2
6.0
6.0
»6.1.
4 7.1
3.4
6.0
2.5
6.8
143.4
• 67.6
16.5
34.3
65.9
16.2
28.0
100.1 \ ^
22.6
10.0
8.8
io.6
•.3
L2
.5
Sept. 30,
1947
i.2
.5
6.0
6.3
25.0
22.5
2.6
.3
1 Sale of Belgian francs.
2 Includes $6,000,000 of pounds sterling.
3 United States dollars sold for an equivalent in gold.
< Includes $4,600,000 of Belgian francs.
NOTE.—Except where otherwise indicated, all sales were of United States dollars in exchange for the
currency of the purchasing country.
Source: International Monetary Fund.
268
REPORT OF THE SECRETARY OF THE TREASURY
THE BANK
.
I n furtherance of its pririiary functiori of facUitating the flow of
international investment funds, the ^International Bank has done
iriuch, during the period under review, to assist members to draw up
practical long-range programs adapted to their needs, as well as to
suggest measures for improving their credit standing and financial
stability.
Loans and disbursements
On January 6, 1949, the Bank granted two loans totaling $34,100,000 for electric power development in Mexico. The joint borrowers
in each case were the Comision Federal de Electricidad (Federal
Electricity Commission) and Nacional Financiera, and both loans
were guaranteed by the Mexican Government. The larger loan of
$24,100,000, to be used directly by the Federal Electricity Commission, is for a term of 25 years at ari interest rate of Sji percent, plus a 1
percent annual commission charge to be set aside in the Bank's special
reserve fund in accordance with its Articles of Agreement. Amortization payments, calculated to retire the loan by maturity, will begin in
the fifth year. The smaller loan, $10,000,000, was to be re-lent to
the Mexican Light & Power Co., Ltd. Due to ari impending reorganization of the Light & Power Co., this loan is expected to cover expenditures for company expansion plans only to December 31, 1949, and
is due for repayment on that date. As in the case of the larger loan,
it carries an interest rate of 3K percent, plus the usual 1 percent commission charge. The Bank stated that, should the reorganization be
satisfactorily completed in 1949, and other conditions waj-rant, it would
consider negotiating a long-term loan to finance the remainder of the
foreign-exchange costs of the program and refunding the short-term
credit.
.
,
On January 27, 1949, the Bank announced a loan of $75,000,000
'to the Brazilian Traction, Light & Power Co., Ltd., a Canadian
corporation, to assist in financing the expansion of hydroelectric
power and telephone facilities in Brazil. The total cost of the expansion program is estimated at about the equivalent of $195,000,000
over the next 4 or 5 years, of which it is anticipated that approximately $120,000,000, principally local currency costs, will be financed
from the company's own resources. The loan, guaranteed by the
United States of Brazil, is for a term of 25 years, and carries an interest
rate of 3K percent, plus a commission of 1 percent. Amortization of
principal will begin on July 1, 1953, and is calculated to retire the
loan by maturity. . In cdnnection with this loan, the Canadian
Government gave its consent to the use of an amount not exceeding
8 million Canadian dollars out of Canada's subscription to the Bank's
capital,- and the Government of the United Kingdom gave its consentto the use of an amount not exceeding £500,000 out of the United
Kingdom's subscription. The Bank expects to disburse these sums
for purchases made by the Company in Canada and the United
269
EXHIBITS
Kingdom, respectively. The Brazilian Traction loan became effective
on May 9, 1949, subsequent to ratification by the Brazilian Government.
On February 28, 1949, the Bank granted a loan of $16,000,000 to
the Kingdom of Belgium for the purchase of steel and electric-power
equipment. This loan will be used to finance the foreign-exchange
costs for the construction of steel-mill facilities and the erection of a
power plant in the Liege industrial district. The loan is for a term
of 20 years, and carries an interest rate of 3% percent, plus 1 percent
commission. Amortization payments, calculated to retire the loan
by maturity, start in the fifth year. The Bank pointed out that the
extension of this loan was in conformity with its policy of supplementing the European Recovery Program by financing permanent
additions to European productive capacity reflected in projects
affording reasonable prospects of repayment.
From May 9, 1947, when the Bank made its first loan, through
March 31, 1949, loan commitments of the International Bank aggregated slightly over $650,000,000. As shown in the following
tabulation, more than two-thirds of this amount had been disbursed '
by March 31, 1949:
TABLE XI.—Status of International Bank loans as of Mar. 31, 1949
Borrower
Loan commitment
balance
Disbursement Unused
of commitment
$650.100,000
$508,342,928
Credit National (France)
Kirigflom of the Netherlands
Brazilian Traction, Light & Power Co., L t d . ' . . . . . .
250,000,000
195,000,000
75,000,000
250,000, 000
195,000,000
Kingdom of Denmark.. .
Financiera and Comision (Mexico) 2
......
Kingdom of Belgium
Corporacion de Fomento (Republic of Chile) ^... .
Grand Duchy of Luxembourg
Netherlands shipping companies *
40,000,000
34,100,000
16,000,000
40,000,000
1,832,818
16,000,000
12,000,000
12,000,000
9, 510,110
12,000,000
Total, All Loans.
$141,757,072
75,000,000
32, 267,182
16, 000,000
16,000,000
2,489,890
1 Loan guaranteed by the United States of Brazil, and effective May 9, 1949, after ratification by the
Brazilian Govemment.
2 Loans guaranteed by the Government of Mexico. Nacional Financiera and Comision Federal de
Electricidad are joint borrowers.
3 Effective Apr. 7, 1949, after ratification by the Chilean Govemment.
* Loans guaranteed by the Kingdom of the Netherlands.
Source: International Bank for Reconstruction and Development.
Sales oj guaranteed obligations
In January 1949, the Bank announced the private sale with its
guaranty of $2,200,000 in 2K percent serial mortgage notes which had
been held in its portfolio since August 1948, when a $12,000,000 loan
was made to four Netherlands shipping companies; Of the latter
amount, $8,100,000 of guaranteed notes had been purchased froiri
the Bank immediately by a group of 10 United States commercial
and savings banks. A simUar transaction occurred on March 28,
270
REPORT OF THE.SECRETARY OF THE TREASURY
1949, when the Bank guaranteed and sold to private investors the
$16,000,000 of 3 percent bonds of the Kingdom of Belgium, which
it had received in connection with the loan to Belgium. In accordance with the Articles of Agreement, all of these guaranteed obligations were sold in the United States only after obtaining the consent
of the United States Government.
In view of the fact that the $12,000,000 loan to the Netherlands
shipping companies was made out of the 18 percent United States
capital subscription, a further United States consent was required.
In response to a request from the Bank, the United States Government informed the Bank that it would interpose no objection to the
use by the Bank in making loans with all or any part of the proceeds
of the guaranteed securities arising from this transaction. The
United States, however, expressed its desire to be consulted in the,
future before the Bank relends any of the funds originally derived
from the 18 percent subscription of the United States and recovered
by the Bank through the sale of other securities.
Repayments
On January 15, 1949, four Netherlands shipping companies made a
payment of $600,000 to the banks holding the 2}^ percent guaranteed
serial mortgage notes which had been received by the International
Bank in connection with the loans made to these companies, and which
were subsequently sold with the Bank's guaranty. This represents
the first repayment of principal by a borrower under one of the Bank's
loan contracts.
Legislation
As previously reported, the CouncU agreed to support, by appropriate steps, amendment of the Securities Act of 1933 and the Securities Exchange Act of 1934, so as to exempt securities issued or
guaranteed by the International Bank from those acts, and to support
the amendment of the National Bank Act so as to permit dealing
in these securities by member banks of the Federal Reserve System
(subject to existing limitations on the total amount of securities of
any one obligor that a member bank may hold at any one time).
Bills tb accomplish this purpose were introduced in the Eighty-first
Congress.
Fiscal operations
For the 9 months' period ending March 31j 1949, the Bank reported
a net income of approximately $7,400,000 plus $3,700,000 placed
into the special reserve. During the comparable period ending
March 31, 1948, the Bank's net income was $2,200,000 exclusive of
$2,000,000 set aside in the special reserve. As of March 31, 1949,
EXHIBITS
271
the Bank had an earned surplus of over $10,400,000, and nearly
$6,800,000 in its special reserve.
Future lending
As of March 31, 1949, the Bank had uncommitted loanable dollar
funds amounting to approximately $385,000,000, and had on hand
numerous loan requests at various stages of investigation and completion. As evidenced by its activities during the period under
review, the Bank now has progressed welLinto the developmental
phase of its lending program. Additional use also has been made of
the Bank's guaranty power, which serves the same purpose as would
an increase^ in avaUable loan funds. The Banl^ may be expected,
in the future, to assume an increasingly greater share of the financial
burden of world-wide developmental and modernization programs.
JOHN W . SNYDER,
Secretary oj the Treasury, Chairman oj the National Advisory
Council on International Monetary and Financial Problems.
D E A N ACHESON,
Secretary oj State.
CHARLES SAWYER,
Secretary oj Commerce.
THOMAS B. M C C A B E ,
Chairman ojthe Board oj Governors oj the Federal Reserve System.
HERBERT E .
GASTON,
Chairman oj the Board oj Directors oj the Export-Import Ba,nk
oj Washington.
PAUL G .
HOFFMAN,
Administrator jor Economic Cooperation.
APPENDIX
A
S E C T I O N S OF T H E B R E T T O N W O O D S A G R E E M E N T S A C T R E L A T I N G TO T H E N A T I O N A L
ADVISORY C O U N C I L
(59 Stat. 512; 22 U. S. C. 286b)
[For sections 4 and 14 of t h e act, omitted here, see t h e full text of t h e act in t h e
Annual R e p o r t of t h e Secretary of t h e Treasury for 1945,, beginning on page 382.]
S E C T I O N S OF T H E F O R E I G N ASSISTANCE A C T O F 1948
ADVISORY C O U N C I L
R E L A T I N G TO T H E N A T I O N A L
(62 Stat. 169; 22 U. S. C. 286b (a), 1509, 1513)
[For sections 106, 111 (c) (1) and (2), a n d 115 (b) (6) of t h e act, see t h e Annual
Report of t h e Secretary of t h e Treasury for 1948, beginning on page 262.]
272
REPORT OF T H E SECRETARY OF T H E TREASURY
APPENDIX
B
T A B L E XII.—Estimated gold and short-term dollar resources of foreign countries, as
of D e c . 3 1 , 1948
fin millions of dollarsj
Area and country
Short-term
dollar balr
. ances
Gold»
Total
14,863
9,049
5,814
Total, Europe (excluding sterling area)
_
6,196
4,214
1,982
Total, ERP Participants (excluding sterling a r e a ) . . . . .
_
5,355
3,535
i;820
49
647
32
12
174
45
Total, All Areas 2
_...._
Austria
:
Belgium, Luxembourg, and Belgian Congo
Denmark
_
France and dependencies
.. —
(France)
(Dependencies)»__
Germany
Greece
Italy.
._
^
L
^_.
-
'.
_
_
Turkey....
._
...
792
(744)
(48)
179
21
326
361
130
285
214
52
238
147
78
47
_.
130
1,886
4
81
1,387
49
499
4
1
180
162
18
679
162
26
46
25
25
17
6
1
29
19
36
71
223
35
60
216
:
Bulgaria
Czechoslovakia
Finland
Hungary
Poland
Rumania
:
.-.
Spain and dependencies
Union of Soviet Sociahst Republics
, Yugoslavia
125
21
45
Other Europe and unidentified ^
4.090
Sterling area countries In E R P
2
23
2,136
United Kingdom
70
United Kingdom dependencies
See footnotes at end of table.
.
_
1
11
7
14
21
20
25
184
39
2,574
1,516
u
1, 590
(0
:,
6291
12
546
70:
562
110
•86
22
1
1
308
3
28
256
23
52
3
5
24
199
14
183
10
16
1,187
410
777
672
Other sterling area.
'
111
.1, 602
*.
Australia
Burma..
Ceylon
India...
Iraq
_
New Zealand..:..
Pakistan
_
Unionof South Africa
Canada and Newfoundland...
(<)
_
Total, British Commonwealth (including other sterling area)
Iceland.
Ireland
221
(193)
(28)
571
. (551)
(20)
6
96
_
Total, Other Europe
61
821
77
179
27
422
.-
Netherlands, Netherlands West Indies, and Surinam,__
Norway
Portugal and dependencies.
_._
Sweden
• Switzerland
Trieste..
.
108
1
1
0)
273
BXHIBITS
TABLE XII.—Estimated gold and short-term dollar resources of foreign countries, as
of Dec. 31, 1948—Continned
[In millions of dollars]
Area and country
Total
55
47
81
4
17
63
2
28
2
17
1,715
719
996
41
218
163
37
177
140
4
41
23
16
82
25
102
Total, Africa e...
Egypt and Anglo-Egyptian Sudan...^
Ethiopia.-..
Tangier
Total, Asia'e._
Afghanistan . . _
Indonesia
Iran
_.
_.
Short-term
dollar balances
Gold 1
1
Israel
Japan
Korea (southern)..
_
16
288
25
(*)
7 206
^')
Palestine (Arabian)
Philippine Republic
SaudiArabia
_
2
489
17
(9
Siam
Other Asia and unidentified _—
_
Argentina
Bolivia
Brazil _
__
._.
. .
Dominican Republic
Ecuador
El Salvador
Guatemala
»
Honduras...
Panama
.
Paraguay
Peru...
Uruguay..
.
.
'
.
_
.
-
_
.
. _ .
.'..._
Venezuela
Other Latin America and unidentified
Unidentified, All Areas
2
488
17
34
124
60
238
2,744'' 1
1,487
1,257
357 1
40
441
141
23
317
216
17
124
99
105
508
43
51
289
56
54
219
• 40
31
34
4
21
15
36
10
19
55
4
72
27
28
4
72
94
362
Total, Latin America *__
Chile
Colombia
Cuba
1
^
....
3
73
202
20
164
444
236 1
322
50
16
(0
.
3
53
38
122
186
16
» Official gold holdings: For countries whose current holdings have not been published, available estimates have been used, or the figures previously published or estimated have been carried forward.
a Excludes holdings of the International Monetary Fund, the International Bank for Reconstruction
and Development, and other international organizations. Total gold and short-term dollar balances of
international organizations on this date were $3,376,000,000, consisting of $1,472,000,000 in gold and $1,904,000,000 in short-term dollar balances. Also excludes gold holdings of the U. S. S. R.
»French Indo-China is included under French dependencies.
* No estimate made.
»Includes gold to be distributed by the Tripartite Commission for the Restitution of Monetary Gold to
claimant countries, including European Recovery Program countries, in accordance with the Paris Reparations Agreement.
«Excludes sterling-area countries and dependencies of European countries.
' Includes approximately $82,000,000 in gold which other countries clauii Japan'held on earmark for them.
NOTE.—Oold: Data represent totai holdings of governments, central banks, and other official Institutions
without regard to location of holdings.
Short-term dollar balances: Composed principally of deposits in United States banks and holdings of U. S.
Government Treasury bills and certificates.
Source: Treasury Department and Board of Governors of the Federal Reserve System.
856455—50-
-19
274
REPORT OF THE SECRETARY OF THE TREASURY.
TABLE XIII.—Gold '!transactions between the United States and other countries,
Jan. 1, 1946, through Dec. 31, 1948
[+ equals net purchases; i — equals net sales ^j
^[In millions of dollars at $35 per fine troy ounce]
Net total
4 years
Area and country
Total, All Areas
-
Year ending Dec. 31—
1948
1947
1945
1946
+4,642.8
+1,510.0
+2,864.4
+721.3
—452.9
+2,651.5
+926.8
+1,475.6
+81.6
+167.5
+1.141. 2
+558. 9
+321. 2
+734. 3
+15.8
+3.0
+406.9
+264. 6
+238.0
-f 337.9
+171. 5
+121.1
+69.8
+40.7
+63.0
+222. 8
+130. 8
+116.0
+14. 2
-10.0
Turkey
U. S. S. R.
Poland
+49.6
+35.8
+28. 4
+10.4
+56.2
+1.0
+27.4
-7.0
+35.8
Norway.Denmark
Czechoslovakia
+20.7
+3.0
-2.1
Total, Europe
J
United Kingdom
France
Sweden
.
Belgium
Netherlands
Portugal
Greece
Vatican City
Switzerland
-. _ -
..
-4.1
-14.9
-112.3
. . . .
.
Other Europe
Total, Latin] America.
Argentina
Mexico
Colombia
Chile . . .
Brazil
Uruguay
- .
. . 1.
Venezuela
Cuba
Other Latin America
.
Total, Asia and Oceania
Afghanistan
China .
Other Asia and Oceania
. . .
+3.6
i})
+.2
-5.6
+.1
-.6
+10.0
-.2
—10.0
+3.0
-2.1
-4.4
-12.1
-29. 9
-2.2
—86 8
-4.2
-5.8
-.2
+81.2
+808.4
+171.0
-472.5
+769.9
+120.1
+52.8
+114.1
+61.6
+15.5
+727. 5
+45.4
+60.0
+153. 2
+36. 9
-5.2
—224 9
-23.8
—17.5
+25.2
-34.8
-7.0
+.3
+10. 7
+18.4
-10.0
-4.9
—2 2
—24.9
-37.9
-194.0
-190.0
+45.9
-108.0
-10.0
. -3.0
+8.7
+.1
+25.1
-3.7
-65.0
+10.3
-9.2
-30.0
+21.8
-73.1
—85.0
+16.8
-177.6
-4.1
+1.1
+13.7
-.7
+1.8
-2.0
-.5
+16.2
-^16.0
—185. 3
+13:0
+311.2
+337.9
+36.8
+256.0
+94.3
-4.1
+1.8
+685.9
+848.9
+498.6
+18.8
+1.2
+1.5
+16.1
+27.2
+6.3
+10.4
+6.8
(?)
1 By the United States.
> Less than $50,000.
NOTE.—Figures will not necessarily add to totals because of rounding.
Source: Office of International Finance, Treasiury Department.
-47 9
+588.1
-18.0
-186. 5
+26.9.
..
+31 1
+17.1
Africa: Union of Sou th Africa
Unallocated .
+278. 5
+80.2
North America: Canada
International Bank
(2)
(2)
.
-188.3
+3.7
EXHIBITS
275
APPENDIX C
STATISTICAL TABLES ON UNITED STATES GOVERNMENT POSTWAR FOREIGN LOANS
AND OTHER CREDITS, AND GRANTS
EXPLANATORY NOTE
The data in this appendix relate to loans and other credits and to grants provided by the United States Government to foreign governments and entities frpm
July 1, 1945, through December 31, 1948. Because there were some credits and
grants of a peacetime character between July 1, 1945, and VJ-day, and data are
readily available only on a quarterly basis, a beginning date of July 1, 1945 (except
for lend-lease data, which have a beginning date of September 2, 1945), has been
adopted for the postwar period.
The statistical tables presented in this appendix and this explanatory note were
prepared by the Clearing Office for Foreign Transactions, OfRce of Business
Economics, Department of Commerce, in consultation with the International
Statistics Division, Office of International Finance, Treasury Department, on the
basis of the latest information available from Government agencies reporting to
the Clearing Ofiice.
Items which are necessarily based on estimates, particularly all lend-lease grants
and some lend-lease and surplus-property credits, have been adjusted or qualified
on the basis of information received to the date of preparation of these tables, and
are subject to future adjustments.
Foreign aid has in some instances been extended subject to future settlement
which may or may not ultimately result in repayments. Aid rendered on this
basis is included with grants in this appendix, and constitutes approximately half
of the total grants during the postwar period.
The following credits are excluded from the data in the tables: short-term credits
(less than 6 months for credits of the Office of the Foreign Liquidation Commissioner and the War Assets Administration: and 90 days or less for all other
agencies), the revolving special exporter-importer credits of the Export-Import
Bank, and advance payments on commodity-procurement contracts. Also excluded are several operations of the United States Government abroad which are
sometimes called grants, including the waiver to France of vessels intended as
reparations to the United States from Germany, the return of reparation vessels
to Italy, payments to the joint commission fighting foot-and-mouth disease in
Mexico, and payments abroad of pensions, annuities, dependency allotments, and
certain claims.
Transactions Covered
^
The following types of United States Government transactions are included in
this appendix:
1. Credits.—These include:
(a) Loans.—These (except for loans extended by the Economic Cooperation
Administration) represent cash loans to foreign governments, and to private
entities in foreign countries, which result in debtor-creditor relationships, anticipating repayments of principal and usually payments of interest. Direct loans
by the Export-Import Bank and other Government agencies and disbursements
of agent banks on loans fully guaranteed by the Export-Import Bank are included.
In the case of the Economic Cooperation Administration, loans represent the aid
extended to European Recovery Program participants on a credit basis.
Loans of the Economic Cooperation Administration originate in commitments
made by the Administrator but the loans are made by the Export-Import Bank
as agent for the Economic Cooperation Administration.
Jjoans of the Exp ort-Imp ort Bank originate in commitments or authorizations
resulting from approval, of loans by the Board of Directors. These included, as
of December 31, 1948, certain loans which had not been formalized by executed
276
REPORT OF THE SECRETARY OF THE TREASURY
contracts or agreements. These commitments, included in the appendix tables,
are as follows:
TotaL-.
_._.
$131,668,076
E R P Countries:
Turkey
10, 152, 507
Unallotted European cotton credits
19, 402, 969
Latin America:
Brazil
.
27,396,000
Chile
21, 575, 000
HaitL.
4, 000, 000
Mexico
Venezuela
Uruguay
.
.__
_._..
..
24, 000, 000
2,337,697
141,600
Unallotted Latin America
_ 22, 662, 303
(6) Property cr edits.-^-These represent credits extended abroad in the disposal
of surplus property, including merchant ships, and in the settlement for lendlease articles and services. These extensions of credit result in debtor-creditor
relationships, anticipating payments of principal and, in most cases, of interest.
In analyzing surplus-property and lend-lease credits, consideration should be
given to the Special Notes on Property Credits which appear subsequently in
this Explanatory Note.
Certain property-credit settlements and agreements provide for undertakings
by the foreign government, other than in the form of payment of United States
dollars, which, when completed will constitute a discharge of the whole or a part
of its obligation to the United States Government. Provisions governing the
collection of principal and interest vary and may call for payment in the form of
different combinations of United States dollars, real property, improvements to
real property, services, and foreign currencies. Collections shown in the tables do
not include the undertakings of foreign governments, except to the extent that
they have been reported as completed. Reporting usually lags behind actual
deliveries of real property and foreign currencies.
(c) Commodity programs.—These are included with property credits and represent credits resulting from commodity shipments by the United States Government to the military governmejits for western Germany and Japan. The major
commodity advanced to Germany and the only commodity advanced to Japan
under thesle programs was raw cotton, made available by the Commodity Credit
Corporation of the Agriculture Department through the U. S. Commercial
Company, a subsidiary of the Reconstruction Finance Corporation. The final
shipments were made to Germany in July 1947 and to Japan in January 1948.
In December 1947 the programs were transferred from the U. S. Commercial
Company to the Army Department. As of December 31, 1948, payment in full
for all shipments, handling charges, and administrative expenses had been reported.
A commodity program, intended to replace the programs described above, was
authorized in Public Law 820, approved June 29, 1948. This act authorized a
revolving fund of $150,000,000 for the Army Department, as a public debt transaction, for the purchase of. natural fibers (and materials used in processing and
finishing such fibers) to be processed in occupied areas and sold. Through
March 31, 1949, no commitments had been made under this congressional
authorization.
2. Grants,—These represent aid by the United States. Government to foreign
governments or other entities for which no repayment is expected or for which
repayment terms are currently indeterminate. Supplies furnished to foreign
governments or entities* are shown at actual or estimated landed cost abroad,
which is defined to include all costs chargeable to the United States Government
for delivery at the end of ship's tackle at the port of final debarkation. Services
generally are reported at the estimated cost. Specifically, the grants included
in this appendix are the following:
(a) Economic cooperation.—These represent aid provided by the Economic Cooperation Administration, on other than a credit basis, furnished under title I and
section 404 (a) of title IV of the Foreign Assistance Act of 1948. Title.I of this
EXPHBITS
277-
act. Public Law 472, authorizes the European Recovery Program, and title TV is
the authority for the Chinese assistance program.. Where goods have been shipped to a dependent area, the aid has been shown as rendered to the parent country.
The amount shown as utilized for Unallocated E R P represents the dollar administrative expenses of the ECA.
(b) Relief (other than civilian supplies).—These represent grants furnished by
the United States Government for relief abroad directly to a Tecipient area or to
international or national agencies (in particular to UNRRA, the International
Children's Emergency Fund, the Intergovernmental Cornmittee on Refugees, the
International Refugee Organization, and the American Red Cross).
The data included as relief and rehabilitation provided through UNRRA cover
only those goods, services, and funds provided by the United States Government.
In most cases UNRRA shipments were destined for the country where they were
to be used, and data are reported accordingly. In some instances, however, goods
were later transshipped and the country of destination, which is reported in these
tables, was not the country actually utilizing the supplies. The dollar value of
supplies, as transshipped, is small relative to the total. Included in Unallocated,
International Organizations in the tables, is the .aggregate of approximately
$365,000,000, representing the administrative costs and unclassified shipments of
UNRRA plus the contributions in dollars given UNRRA for use wherever needed.
The State Department administers contributions to the International Children's
Emergency Fund, authorized under Public Law 84 and title II of Public Law 472.
Appropriations and President's Emergency Fund allocations have been available
to the State Department for transfer to the Intergovernmental Committee on
Refugees, and appropriations have been made for participation in the International
Refugee Organization. These are shown in the tables as Unallocated, International Organizations.
The data included for American Red Cross cover only supplies provided by
United States Government procuring agencies with appropriated funds. Included also in relief are data on the post-UNRRA relief programs authorized by
Public Law 84, approved May 31, 1947, and on the interim-aid program authorized by Public Law 389, approved December 17, 1947. Terminal administration
of these two programs is under the Economic Cooperation Administration. In
the appendix tables, $2,000,000 of the $10,000,000 total American Red Cross aid,
and $3,000,000 of the total $278,000,000 post-UNRRA relief is shown as Unallocated, All Areas. These represent undistributable American Red Cross aid,
administrative expenses of the post-UNRRA program, and reimbursements under
the post-UNRRA program to American voluntary relief organizations for ocean
freight expenditures incurred in sending aid abroad. Goods, services, and funds
provided by private persons or organizations, even thotigh furnished through
Government-approved organizations, are excluded from these data.
(c) Civilian supplies.—These represent principally supplies furnished by the
United States Army for civilian use abroad to prevent disease and unrest in
occupied areas; issues of supplies by the Navy Department on the Pacific Islands;
and supplies financed out of lend-lease appropriations and furnished to the Army
Department for Italian relief.
Army Department data include all reported shipments of civilian supplies
plus net diversions abroad ffom military stocks. Also included is the value of
incentive materials provided Germany and Japan. Services rendered to civilians
are not included because of the infeasibility of segregating the cost of such services
from the cost of regular military operations. Shipments have been shown by
individual country, except for the United States and British zones of the European
theater, which have been shown in the appendix tables as Unallocated ERP.
Navy Department figures show deliveries of civilian supplies to reported areas.
An adjustment of these figures has been made by the Navy Department to cover
diversions to or from other stocks.
To assist the United States Army in furnishing relief and rehabilitation supplies
for Italy, $100,000,000 of lend-lease funds was made available in 1945. Since
Italy had not been designated as eligible for lend-lease aid, these supplies were
turned over to the Army as an intermediary in distribution. To pay for the
transportation of these lend-lease financed supplies, an additional $40,000,000
was earmarked from lend-lease funds. Data have been adjusted to exclude
these transactions from lend-lease, and include them under civilian supplies.
(d) Lend-lease.—The figures in this appendix for lend-lease aid represent the
estimated value of such aid furnished on a grant basis (often referred to as
278
REPORT OF THE SECRETARY OF THE TREASURY
"straight" lend-lease) during the period September 2, 1945, to March 31, 1948.
(Lend-lease data as of March 31,j 1948, were the most recent available at the time
of compilation of these appendix tables.) Lend-lease grants are broken down by
requisitioning governments and are shown only against the United Kingdom for
the British Commonwealth, against France for all French areas, etc.
Although governments of other nations provided some aid in the postwar
period to the United States in the form of reverse lend-lease, such assistance
received has not been offset against the assistance furnished because complete
reverse lend-lease data are not available.
The amount shown as Unallocated, All Areas, represents principally losses on
inventories and facilities, and miscellaneous charges, including administrative
expenses.
(e) Other grants.—The remaining other grants include—
1. Aid in cultural and economic programs for the American Republics,
representing principally programs instituted by agencies whose functions
have been consolidated in the Institute of Inter-Ameri can Affairs in the
State Department.
2. Financial aid to China under Public Law 442, approved February 7,
1942, which directed that $500,000,000 be provided to China to assist in
prosecuting the war against Japan and in stabilizing the Chinese economy.
This program was administered by the Treasury Department and approximately $120,000,000 of aid was provided in the postwar period.
3. Aid to China under section 404 (b) of Public Law 472, approved April 3,
1948, which authorized the President to provide $125,000,000 in military aid
to China.
4. Military and economic^aid''to'Greece''and military aid"!to Turkey under
Public Law 75, approved May 22, ,1947, and military aid to both countries
under title III of Public Law 472, approved April 3, 1948.
5. Aid to the Philippines under the first three titles of the Philippine Rehabilitation Act of 1946, which authorizes disbursements for compensation
for private war-damage claims under title I, surplus-property transfers under
title II, and disbursements for the restoration and improvement of public
property and essential public service under title III.
Definitions
Because of the wide variety of transactions and differences in the accounting
procedures of the various Government agencies, it is not possible to prepare simple
definitions applicable to all cases, but the classifications used are as consistent in
principle as could be achieved;
1. f/^i/ized represents "for—
(a)
LOANS:
1. Economic Cooperation Administration.—The amount of aid extended on a
credit basis, based upon calculations by the Economic Cooperation Administration.
This aid, except to Iceland, was extended originally on an indeterminate basis out
of appropriated funds. While the utilization shown does not represent either
(1) disbursements out of public debt funds (except in the case of Iceland), as
reported by the Export-Import Bank, or (2) reimbursements of advances froni
appropriated funds, as reported by the Economic Cooperation Administration,
it is eventually incorporated into the fiscal records of both agencies by the disbursement of public debt funds and the reimbursement of appropriated funds.
Subsequent to December 31, 1948, the allocations between loan and grant utilizations, particularly in the case of Belgium, were subject to minor adjustments, due
to pending amendatory loan agreements.
2. All other agencies.—The amounts disbursed under the terms of the agreements.
( 6 ) P R O P E R T Y CREDITS, INCLUDING COMMODITY P R O G R A M S :
1. Lend-lease.—The inventories of lend-lease goods in the hands of civilian
agencies of recipient governments at VJ-day and billings to foreign governments
for post-VJ-day shipments under pipe-line agreements. In many cases these
amounts have been determined by war-account settlement agreements. In the
case of Liberia, utilization represents expenditures reported by the Navy Department to the Treasury Department.
2. Office of the Foreign Liquidation Commissioner surplus-property cr edits.-^The
full amount of bulk-sale credit agreements plus the amounts involved in sales
contracts signed under other credit agreements, regardless of the time of delivery
EXHIBITS
279
of the property. In most cases, however, these amounts are subject to adjustment
upon final delivery of the property and final documentation and accounting.
3. Maritime Commission ship-sale cr edits.•—The principal amount of mortgages
received by the Commission from foreign purchasers of merchant ships.
4. War Assets Administration surplus-property credits.—The amounts involved
in sales contracts signed under credit agreements, regardless of the time of delivery
of the property. In some cases, these amounts are subject to adjustment, pending
final delivery and accounting.
5. Commodity programs for Germany (western) and Japan.—The value of the
raw materials shipped, plus shipping costs, handhng charges, and administrative
expenses.
(c) GRANTS:
1. Economic Cooperation Administration.—Shipments in the case of United
States Government procurement, and expenditures in the case of cash reimbursements to foreign countries or to United States banks extending credits to
foreign countries under an ECA letter of commitment.
2. Other grants.—Shipments in the case of United States Government procurement, and expenditures in the case of cash disbursements to foreign countries.
2. Unutilized represents for—
( a ) LOANS AND OTHER CREDITS:
The difference between net agency authorizations (cumulative gross authorizations less cumulative expirations and cancellations) and the amount utilized. In
addition, there is included, as unallocated on a country basis, for the—
1. Economic Cooperation Administration.—The uncommitted loan and guaranty
authority. This is the difference between the $1,000,000,000 authorized by title I
of the Foreign Assistance Act of 1948 (Public Law 472) as a public debt transaction and the loans authorized or committed by the Economic Cooperation
Administration. This $1,000,000,000 (authorized for the purpose of extending
assistance to European Recovery Program participating countries on a credit
basis and of making guaranties) has been considered as the amount available for
credits. Of the amount shown as unallocated at December 31, 1948, there is
included a maximum contingent liability of $1,259,800 on guaranty contracts
signed.
2. Export-Import Bank.'—The uncommitted lending authority, i. e., the difference between the statutory lending authority of the Bank, and the sum of the
outstanding indebtedness to the Bank plus the unutilized authorizations of the
Bank.
3. Army Department.-—The uncommitted commodity-program credit authority.
(6)
GRANTS:
1. Civilian supplies.—An estimate based on the unexpended appropriation
programmed for this purpose.
2. Post-UNRRA program.—The unexpended obligation for ocean transportation of supplies donated to or purchased by American voluntary relief agencies.
3. Interim-aid program.—The $1,000,000 known to have been transferred
between December 31, 1948, and March 31, 1949, to augment the economic
cooperation program for Trieste.
4. Institute of Inter-American Affairs.—The difference between the agreed aid
arid the amount utilized (agreements have been signed to provide specific amounts
of aid).
5. Other active programs.—The difference between the appropriation and the
amount utilized. In the case of the Economic Cooperation Administration, the
$4,000,000,000 appropriated in Public Law 793 for the purpose of extending assistance to European Recovery Program participating countries on a grant or (under
certain conditions) credit basis has been considered as the amount available for
grants. In those instances where programs have been obviously completed,
although the recorded grants utilized are short of the final total, the computed
unutilized amount has been adjusted to zero.
3. Outstanding indebtedness represents the net of credits utilized less repaid.
The data necessarily include the results of transactions taking place before July 1,
1945. Indebtedness arising out of World War I, however, is excluded.
4. Authorized represents, for the period July 1, 1945, through December 31,
1948, the gross amount of loaris and other credits authorized or committed, as well
as any increase in prior authorizations or commitments. This includes all loans
280
REPORT OF THE SECRETARY OF THE TREASURY
and other credits approved by the responsible officials of Government agencies
from available funds even if they had not been formalized by signed credit agreements. Because the lack of formal agreement may become important in some
instances, the amounts in this category as of December 31, 1948, included in table
XIX are tabulated under Transactions Covered of this Explanatory Note. Included
also in authorized are (1) the increase between July 1, 1945, and December 31,
1948, in the uncommitted lending authority of the Export-Import Bank, (2) the
uncommitted loan and guaranty authority of the Economic Cooperation Administration at December 31, 1948, and (3) the uncommitted commodity-program credit
authority of the Army Department at December 31, 1948.
5. Expired a n d canceled represents all expirations and cancellations of authorizations or commitments occurring during the period from July 1, 1945, through
December 31, 1948, regardless of whether the loan or other credit was authorized
prior or subsequent to July 1, 1945.
.
6. Repaid represents payments on principal only, including repayments on loans
and other credits utilized prior to July 1, 1945, but excluding repayments on debts
arising out of World War I.
Special Notes on Property Credits
As previously pointed out, the data presented in the tables under surplus-property and lend-lease credits are subject to the following qualifications for individual
countries:
1. Belgium.—The final amount of the Foreign Liquidation Commissioner credit
will depend on the proceeds received from the resale of surplus property by the
Belgian Government. The figures shown for credit committed and utilized
($49,000,000) are based upon original estimates. These figures may ultimately be
revised downward by approximately $10,000,000, based on current estimates of
the proceeds from resale of United States surplus property by the Belgian Government for the joint account of the two countries.
2. France.—The $420,000,000 credit, assignable to lend-lease under the waraccount settlement agreement of May 28, 1946, was not a fixed amount but was
an estimate subject to later adjustment pending final determination of the
amount of goods delivered. The utilization shown in the tables ($370,705,946)
represents the net billings to December 31, 1948, under the agreement of May
28, 1946. A final determination was subsequently made in the agreement signed
March 14, 1949, which fixed the obligation of France assignable to lend-lease at
$353,300,000.
3. Germany (western).—The Foreign Liquidation Commissioner credit of
$183,750,000 for bizonal Germany shown as committed and utilized will ultimately be adjusted downward due to a substantial deficiency of deliverable property under the bulk-sale agreement, dated January 23, 1948. This deficiency is
due in a large degree to the withdrawal of property previously declared surplus
by the Army because of a reclassification of arms, ammunition, and implements
of war in Presidential Proclamation 2776, effective April 15, 1948. Tables have
not been adjusted to reflect the current estimate of total utilization under this
bulk sale which is approximately $85,000,000, subject to further revision in final
accounting.
4. Italy.—The Foreign Liquidation Commissioner credit to Italy shown as
committed and utilized in the amount of $178,000,000 will ultimately be adjusted
downward due to a deficiency in deliveries under the first bulk-sale agreement
($160,000,000), dated September 9, 1946. The current estimate of total utilization on both bulk sales is approximately $141,000,000. Tables have not been adjusted accordingly.
5. Netherlands.—Lend-lease credits committed and utilized are stated in the
amount of $48,000,000, the agreed net indebtedness established by the waraccount settlement with the Netherlands dated May 28, 1947. This includes
$840,000 due for surplus property sold by the Foreign Liquidation Commissioner
in January 1947. The difference between the $65,000,000 unutilized lend-lease
credit reported as of June 30, 1945, and the $48,000,000 war-account settlement
credit, has been shown as a cancellation of credit commitments.
6. United Kingdom.—The lend-lease credit commitment shown in the amount
of $590,000,000 represents the amount assigned to lend-lease in the war-account
EXHIBITS
•
281
settlement agreements with the United Kingdom dated December 6, 1945, and
March 27, 1946. This amount was composed of $472,000,000, regarded as the
"fixed" amount, and $118,000,000, subject to future accounting adjustments
representing the net estimated amount of the lend-lease and reverse lend-lease
pipe lines, less the net claims.
A later agreement with the United Kingdom, signed July 12, 1948, set $90,446,911
as the amourit to be paid to the United States Government to replace the previous
estimated amount of $118,000,000. This reduction of $27,553,089 has been shown
as a cancellation of the original commitment.
7. U. S. S. R.—The gross lend-lease comrditment represents the original estimated
value of articles and services on order and not transferred as of VJ-day, which
were designated for transfer on a credit basis; the cancellation represents a downward revision in the original estimate.
8. China.—The gross lend-lease commitment represents the original estimated
value of lend-lease articles and services on order and not transferred as of VJ-day,
which were designated for transfer on a credit basis; the cancellation represents a
downward revision in the original estimate.
The $20,000,000 shown as a credit for the Army Department represents the
estimated amount of surplus property delivered to China by the Army subject to
future settlement.
9. India.—The exact amount of the Foreign Liquidation Commissioner credit
will depend on the proceeds received from the resale of surplus property by the
Government of India for the joint account of the United States and India. -The
'figures shown for credit commitment and utilization are based on the latest
estimates.
10. Latin America.—Lend-lease mutual-aid agreements were signed with all the
American Republics except Argentina and Panama. Combined data for these
lend-lease credits are shown in Unallocated, Latin America.
Presentation of Data in Tables
The presentation of the data for foreign credits and grants of the United States
Government in the tables of this appendix, while not identical with that in
previous Reports of the National Advisory Council, is similar and comparable.
Table XIV shows foreign credits and grants utilized in the 3H-year postwar
period in various combinations with amounts unutilized as of the end of the period.
Table XV is a summary of the status of foreign credits as of June 30, 1945, and
as of December 31, 1948, and of the activity during the intervening 3)^-year period.
Table XVI is in three parts and presents, by type or program, grants (1) utilized
in the 3}^-year postwar period, (2) utilized in the 6-month period ended December
31, 1948, and (3) unutilized as of December 31, 1948.. Tables XVII, XVIII,
XIX, XX, XXI, and XXIII present a break-down by credit-extending agency
of the credit data (as of December 31, 1948, and during the 3}^-year period),
summarized in table XV. Table XXII shows a break-down by credit-extending
agency of the credits utilized iri the 6-month period from July 1, 1948, through
December 31,1948. All tables present the data by geographical area and country.
The figures in each of the tables are rounded to whole millions of dollars; components will not necessarily add to totals because of rounding. In the E R P
Participants area, each country having any data has been shown individually.
In all other areas, any couritry whose total or largest dollar amount cannot be
rounded to more than $5,000,000 has been combined with other couritries in that
area whose dollar amounts cannot be rounded to more than $5,000,000 and the
total has been rounded and shown as Other. In determining whether a country
should be shown individually or in combination with other countries in an area,
each table has been treated separately.
Whenever the country detail to be shown for an area is one item only (one
country or, in accordance with the above, exclusively Other), only the area
total appears. For each item shown (area, country, other, or unallocated), the
figures for that item in any column are presented, even though the figure is
$5,000,000 or less.
The unallocated items are aid or potential aid that cannot be. allocated by
country. In most instances such items have been allocated by area. The composition of the unallocated items is covered either elsewhere in this Explanatory
Note or in footnotes to the tables.
282
REPORT OF T H E SECRETARY OF T H E TREASURY
T A B L E XIV.—Sumrnary of U. S. Government foreign credits and grants: utilized,
J u l y 1, 1946, to Dec. S i , 1948; and unutilized as of Dec. 3 1 , 1948, by area and
country ^
[In millions of dollars]
Credits Plus Grants
Utilized P l u s Unutilized
Grand
Total
Area a n d c o u n t r y
Utilized
Unutilized
Property
credits
Loans
Grants
T o t a l , All Areas
26,522 1
20,139
6,383 1
8,628
3.387
14,507
Total, Europe
19,453 1
15,407
4,046 1
6,796
2,605
10,052
Total, E R P Participants
Austria
Belgium a n d L u x e m b o u r g
Denmark
17,859
591
442
133
13,845
441
299
56
4.014
161
143
77
6,633
14
182
46
2,282
22
49
10
8,944
566
211
78
3,481
2,785
1, 781
.841
696
707
258
1,370
24
16
827
221
121
1,284
2,243
964
2
1,423
4
77
477
2
60
181
243
4
17
1,476
806
181
36
446
102
4
359
79
31
300
86
12
, 103
47
2
28
237
2
21
99
• 7
138
66
16
6,956
397
5,378
164
4,095
182
622
1 238
215
1,594 1
20
213
140
1,562
32
163
323
20
213
111
28
22
101
8
36
1,108
20
183
2
18
442
458
]
40
16
38
224
2
365
236
1
299
438
• 19
97
82
44
33
2
5
4
37
10
14
1
--
1
France
G e r m a n y (western)
Greece
Iceland
Ireland Italy
6
77
1,901
^-----
-
Netherlands
Norway
Sweden
Switzerland
Trieste
Turkey
2,487
1,100
'
.
United Kingdom
Unallocated E R P
Total, Other Europe
Albania
Czechoslovakia
Finland
---.
Hungary
Poland
U . S. S. R
_
18
443
460
(2)
,
578
233
Yugoslavia.
300
300
T o t a l , L a t i n America
BolIvia---i
Brazil . . . . _
Chile
515
21'
118.
86
317
18
82
39
199
39
19
11
7
20
16
7
138
8
2
89
8
10
10
10
Colombia
Cuba
Ecuador
Haiti
Mexico
Peru
—.
-
_
Uruguay.
Venezuela
O t h e r L a t i n America
T o t a l , Asia '.
China.
India...-.
ludonesia..,,. . ,
Iran
.
.
Japan
^
Korea (southern)
Pakistan
Philippines
Ryukyti Islands.
Saudi A r a b i a
Siam
Other A s i a . . .
....
See footnotes at end of table.
49
1
23
24 '
4,498
1,892
15
67
3.629
1.643
15
67
869
249
39
1,573
299
21
1,242
214
18
331
86
4 .
1
io
169
4
205
99
26
70
10
^1
3
1
(2)
2
(2)
2
6
2
5
21
365
35
14
6
7
2
28
165
(2)
(2)
8.
(»)
403
- 49
23
16
4
132
7
5 3
5
'.•
9
1
3
3
.45 1
Unallocated L a t i n America
3
36
47
•
(2)
•
2
1
1
6
19
2
547
146
15
63
3,746
1,648
(2)
39
208
25
10
18
2
10
11
4
1,338
274
445
35
- 2
(»)
283
EXHIBITS
TABLE XIV.—Summary of U. S. Government foreign credits and grants: utilized,
July 1, 1946, to Dec. 31, 1948; and unutilized as of Dec, 31, 1948, by area and
country ^—Continued
[In millions of dollars] .
Credits Plus Grants
Utilized
Canada
5
145
28
11
10
28
18
16
6
13
12
3
5
4
2
7
11
16
2
17
17
13
8
9
8
9
8
4
_
650
1,204
Unallocated. All Areas
Grants
140
.
Unallocated, I n t e r n a t i o n a l O r g a n i zations
Property
credits
Loans
39
Egypt
- - Liberia
O t h e r Africa
Australia....
Other Oceania...
Unutilized
145
Total, Africa....
Total, Oceania
Utilized P l u s U n u t i l i z e d
Grand
Total
Area a n d c o u n t r y
1 •
3
520
131
65
82
1,123
970
1
(2)
(2)
5
(?)
4
585
85
150
» For imporant qualifications affecting this table and for definitions of terms, see the Explanatory Note.
»Less than $500,000.
TABLE "KY.—Summary of U. S. Government foreign credits, July 1, 1946, to Dec.
31, 1948, by area and country ^
[In millions of dollars]
D e c . 31, 1948
Activity J u l y 1, 1945, to D e c. 31, 1948
Outstanding indebtedness
Unutilized
credits
T o t a l , All Areas
9,331
2,347
12,239
934
Total, Europe
8,502
875
9,594
368
Total, E R P Participants...
8,046
843
8,990
241
8,071
19
17
37
1
19
179
38
40
17
231
55
55
191
38
12
2,042
184
106
111
19
25
• 2,246
•252
147
49
8
11
2,086
225
111
44
41
6
2
3
352
' 29
43
20
330
84
2
16
3
26
4,605
4
142
Area a n d c o u n t r y
Austria _
Belgium a n d Luxembourg.
Denmark.
France.
G e r m a n y (western)
Greece
••-
323
1
60
73
3
60
428
Netherlands
Norway
Sweden...
314
81
2
73
48.
10
381
142
12
22
4,735
56
113
182
82
4,710
205
22
_.
Turkey
United Kingdom
Unallocated E R P
Repaid
Out• standing indebtedness
9,668
893
556
710
8,525
322
299
174
298
272
166
Author- Expired
a n d can- Utilized
ized
celed
Iceland
Ireland
Italy
J u n e 3C . 1945 »
(8)
Unutilized
credits
.
65
2
^
65
11
35
Total, Other Europe
456
32
604
127
454
25
27
9
Czechoslovakia!
Finland....
^
TTnngary
23
117
14
28
72
136
30
42
8
14
30
109
16
7
16
2
24
9
Poland
U . S. S. R
Other
79
222
1
1
2
90
276
1
.12
61
77
222
1
1
3
See footnotes at end of table.
1
272
===== 1
= =
284
REPORT OF THE SECRETARY OF THE TREASURY
TABLE XV.—Summary of U. S. Government foreign credits, July 1,1946, to Dec. 31,
1948, by area and country ^—Continued
[In millions of dollars]
Activity July 1,1945, to Dec . 31. 1948
Dec. 31, 1948
Outstanding indebtedness
Unutilized
credits
364
194
353
17
112
33
3
35
46
3
111
69
21
7
11
20
16
Ecuador
Haiti
Mexico
9
6
70
9
4
48
5'
4
91
Peru
Uruguay
Other Latin America...
5
15
12
1
" 6
7
3
8
Area and country
Total, Latin America.......
Bolivia
Brazil
Chile
Colombia
Costa Rica
Cuba
_..
.....
Unallocated Latin America
Total. Asia...
B ahrein Islands
China
India
:
Indonesia
Iran
Japan
2
56
14
16
28
13
8
10
7
3
(3)
18
1
(3)
10
7
1
.(3)
2
1
3
25
6
(3)
84
6
9
4
(3)
8
26
18
2
5
9
11
23
(3)
18
10
(3)
49
1
1
8
7
16
25
25
3
118
20
18
44
125
183
672
313
65
32
16
.77
2
16
49
32
199
13
17
235
15
22
227
15
63
13
23
18
19
200
40
234
137
1
63
21
216
25
10
89
6
Unallocated, All Areas
26
1
23
17
36
4
3
Unallocated, International
Organizations
337
16
79
36
903
11
6
6
Australia
New Zealand.
183
23
Saudi Arabia....
Siam...
Other Asia
..
Total. Oceania
107
80
66
..
288
45.
10
9
Egypt
_
Liberia
Other Africa
Unutilized
credits
425
25
Total, Africa
Outstanding indebtedness
208
(3)
Korea (southern) .
Pakistan
Philippines .
Canada and Newfoundland
Expired
Author- and
can- Utilized Repaid
ized
celed •
June 30, 1945»
(3)
8
192
25
(3)
(3)
1
79
32
10
12
20
5
311
166
12
6
7
140
19
11
31
3
3
13
3
5
4
2
18
7
6
13
8
4'
3
(3)
1
(3)
13
1
(3)
2
140
7
27
10
2
2
1
13
12
3
10
14
1
13
8
6
1
8
4
62
65
1.120
968
(3)
11
2
(3)
11
(3)
3
5
U56
1 For Important qualifications affecting this table and for definitions of terms, see the Explanatory Note.
For agency break-down of the first 6 columns of this table and for footnotes, see tables XVII, XVIII, XIX,
XX, XXI, and XXIII. Outstanding indebtedness at Dec. 31,1948, is equivalent to the sum of outstanding
indebtedness at June 30,1945, plus the difference between the amount utilized and the amount repaid during the period July 1,1945, to Dec. 31, 1948. Unutilized credits at Dec. 31,1948, are equivalent to the sum
of unutilized credits at June 30, 1945, and the amount authorized during the period July 1,1945, to Dec.
31,1948, less the sum of the amount expired and canceled and the amount utilized during the period July 1,
1945, to Dec. 31,1948.
2 Most items in the 2 columns as of June 30, 1945, relate to loans by the Export-Import Bank. Major
other agency credits are as follows: Belgium, $55,000,000 unutilized lend-lease property credit; Netherlands,
$65,000,000 unutilized lend-lease property credit; United Kingdom, $272,000,000 outstanding and $35,000,000
unutilized loan by the Reconstruction Fmance Corporation; Unallocated Latin America, $44,000,000 outstandmg and $52,000,000 unutilized lend-lease property credits; Bahrein Islands, $16,000,000 outstanding loan
by the Reconstruction Finance Corporation; Canada and Newfoundland, $7,000,000 outstanding loan by the
Reconstruction Finance Corporation; Liberia, $2,000,000 outstanding and $11,000,000 unutilized lend-lease
property credit.
3 Less than $600,000.
* Uncommitted lendingjauthorlty of the Export-Import Bank.
285
EXHIBITS
TABLE XVI.— U. S. Government foreign grants: utilized July 1, 1946, to Dec. 31,
1948, and July 1, 1948, to Dec. 31, 1948; and unutilized as of Dec. 31, 1948, by
area, country, and type *
[In millions of dollars]
Amounts Utilized July 1,1945, to Dec. 31, 1948
Economiccoopera- '
tion
Total
Area arid country
Civilian
supplies
Relief
Other
Lend^.
lease
. grants
10,471
1,481
3,596
3,219
1,285
890
Total. Europe.
6,882
1,385
2,659
1,934
482
422
Total. E R P Participants
5,774
1,385
1,598
1,934
434
422
421
108
18
99
47
18
228
1
94
699
1,556
730
319
118
58
Total. All Areas .
Austria
Belgium and Luxembourg
Denmark
France _
Germany (western)
Greece .
Iceland. .
Ireland... . . .
Italy
(2)
(2)
Netherlands
Norway..
Sweden
(2)
117
18
2
87
17
1
702
2
1
1
6
2
12
485
5
8
1,108
1,060
Albania
Czechoslovakia
Poland
20
183
365
20
183
365
U. S. S. R
Yugoslavia
Other.
236
299
4
188
299
4
Total, Other Europe . . . .
29
Latin America
Total, Asia
China
Japan . . . . . .
Korea (southern)
Philippines...
Ryukyu Islands
Other Asia
96
414
1,416
1,026
189
96
406
Africa
1
Oceanla.-
5
Unallocated, International Organizations
Unallocated, All Areas
244
28
3
73
279
158
(2)
48
(2)
48
1,281
1,026
188
1
_
349
6
2
27
724
441
722
192
(2)
2,957
285
36
6
. .
61
1,434
0)
125
773
164
United Kingdom .
Unallocated E R P
60
320
4
317
1,071
221
73
Switzerland.... .
Trieste.
Turkey
(')
28
35
4
8
(2)
(2)
249
2
1
4
(2)
517
517
82
5
77
Amounts Utilized July 1, 1948, to Dec. 31, 1948
Total, All Areas...
See footnotes at end of table.
1
Civilian
supplies
Relief
Other
grants
1,276
69
622
333
1,741
1,181
23
374
162
94
47
17
91
47
17
3
2,301
.
Total, ERP Participants
Austria
Belgium and Luxembourg
Denmark..
_
Economic
cooperation
Total
Area and country
'
«
286
REPORT OF T H E SECRETARY OF T H E TREASURY
TABLE XVI.— U. S. Government foreign grants: utilized July 1, 1946, to Dec. 31,
1948, and July 1, 1948, to Dec. 31, .1948; and unutilized as of Dec. 31, 1948, by
area, country, and type *—Continued
[In millions of dollars]
Amounts Utilized July 1. 1948, to D e c . 31.1948
•9
• Area and country .
ERP Participants—Continued
France
Germany (westem). . . ,
Greece
',
Iceland...
Italy...
Netherlands
. . .
Turkey
United Kingdom
Unallocated E R P
Latin America...
129
72
i
(2)
Civilian
supplies
Relief
261
118
46
8
116
72
13
17
1
6
.17
1
6
35
383
5
.383
6
Other
grants
374-
127
'
35
(?)
3
3
511
Total. Asia
China
Japan
Korea (southern)
Philippines
Other Asia..
269
492
174
, .
(2)
Norway
Sweden
Trieste
1
Economic
cooperation
Total
. _
. .
1
167
202
43
.
95
95
Unallocated, International Organizations.
Unallocated, All Areas
72
. 202
43.
96
4
.
163
248
96
4
45
45
2
2
Unutilized Balances Dec. 31,1948
4,036
Total, All Areas
Total. ERP Participants
Austria. .•._..
Belgium and Luxembourg
Denmark
_
France
Germany (western)
Greece
' Iceland
Ireland
Italy....
--.
Netherlands
Norway
Sweden
_
Trieste
Turkey
United Kingdom
Unallocated E R P
.:
. —...
Latin America
Total. Asia
72
740
420
2,624
1
342
203
134
103
60
684
688
234
131
103
60
584
. 348
113
17
405
286
30
21
7
82
466
61
3
17
405
286
30
21
6
3
340
_ ..
Unallocated, International Organizations.
789 1
232
312
86
160
121
1
82
466
51
(2)
5
China
Japan
Korea (southern)
Philippines
Unallocated, All Areas
2,803
, 3.171 1
5
179
398
179
212
53
312
86
160
68
68
3
3
» F o r i m p o r t a n t qualifications affecting t h i s table a n d for deflnitions of t e r m s , see t h e E x p l a n a t o r y N o t e
» L e s s t h a n $600,000.
287
EXHIBITS
TABLE XVII.—Outstanding indebtedness ^ of foreign countries on U. S. Government credits, as of Dec. 31, 1948, by area, country, and agency
[In millions of dollars]
Loans
Total 2
Area a n d c o u n t r y
ExportImport
Bank 2
Property Credits
Economic
Cooperation Administration
Foreign
MariLiquidaL e n d - tion Comtime
Lease
C
o
mmismission
sioner 2
Other
loans a n d
property
credits 2
. 9,331
2,145
486
1,314
1,180
212
3,995
Total, Europe
8.502
1,768
486
1,205
958
182
3,904
Total. E R P Participants
8,046
1,617
486
982
881
181
3,899
19
179
38
7
123
20
10
17
2,042
184
106
1,159
128
T o t a l , All A r e a s
Austria
Belgium and L u x e m b o u r g .
Denmark....
France
G e r m a n y (western)
Greece
Iceland.
Italy...
Netherlands—.
Norway..
Sweden
Turkey _
United Kingdom .
8
46
1
328
184
65
371
15
2
323
314
47
190
81
2
22
42
2
12
48"
12
6
232
4, 735
(<)
2
38
48
61
10
4
16
6
6
54
77
1
5
8
18
14
1
35
Czechoslovakia
Finland
.
Hungary
23
117
14
15
93
Poland..
U . S . S. R
Other.
79
222
1
42
364
298
17
112
33
16
7 100
33
Colombia
Costa Rica
Cuba..
21
7
11
20
7
11
.(*)
Ecuador
Haiti..
Mexico
9
6
70
9
6
70
(*)
Uruguay.
O t h e r L a t i n America
Unallocated Latin America
15
17
46
13
12
See footnotes at end of table.
3 1
223
151
_
(3 4)
557
456
Bohvia
Brazil
Chile
M
63
36
177
18
Total, O t h e r Europe
T o t a l , L a t i n America
«3
»3,891
37
222
1
,8
45
1
12
81
6
(4 6)
(4 6)
(4 6)
(3 4)
(4 8)
1
46
6
2
4
288
REPORT OF T H E SECRETARY OF T H E TREASURY
TABLE XVII.—Outstanding indebtedness^ of foreign countries on U. S. Government
credits, as of Dec. 31, 1948, by area, country, and agency—Continued
[In millions of dollars]
Loans
TotaP
Area and country
425
Total, Asia
China
India
Indonesia
199
13
63
Iran
Japan
,
Korea (southern)
13
23
• 25
66
11
6
Philippines-_,•-.._..
Saudi Arabia
Siam
Other Asia
Other
Foreign
loans and
MariLiquidaproperty
Lend- tion Com- time
Lease
Commis- credits'
mission
sioner 2
Economic
Export- CooperaImport tion AdBank 2 ministration
77
50
199
18
81
• ^^
47
2
59
11
63
16
•20
1
13
13
25
2
10 61
io
3
2
6
9
6
6
Canada and Newfoundland
6
Total. Africa
19
Liberia
Other Africa
13
6
Total. Oceania
Australia
Other Oceania.-
Property Credits
. .
Unallocated. International Organizations
. . -.
13
8• 4
3
66
1 ^
3
1
13
13
3
3
1
12
1
8
4
n3
1 For important qualifications affecting this table and for definitions of terms, see the Explanatory Note.
' 2 Includes $3,980,268 of loans and property credits due and unpaid for 90 days or more, as follows: (a)
Export-Import Bank, $429,465 in the following countries: Poland, $3,492; Brazil, $142,980; Uruguay, $51,488;
Other Latin America (Venezuela), $200,000; Other Africa (Angola), $31,505; (6) Reconstruction Finance
Corporation, $1,092,517 m the following countries: Bolivia, $1,032,816; Brazil, $30,613; Colombia, $28,170;
Ecuador, $918; and (c) Office ofthe Foreign Liguidation Commissiojner, $2,468,276 In the following countries:
Ecuador, $96,855; Other Latin America (Peru), $106,094; Iran, $64,473; Siam, $619,328; Other Asia (Burma),
$500,000; Other Africa, $1,071,626 (Egypt, $858,588 and Ethiopia, $212,938).
« Property credits by the War Assets Administration.
* Less than $500,000.
»Loans: $3,750,000,000 by the Treasury Department, and $141,000,000 by the Reconstruction Finance
Corporation.
«Loans by the Reconstruction Finance Corporation.
7 Includes $7,000,000 participation by another agency in loans of the Export-Import Bank to Brazil.
8 Loan by the State Department (Institute of Inter-American Affairs).
» Property credit by the Army Department.
»o Loan of $60,000,000 by the Reconstruction Finance Corporation, and property credit of $1,000,000 by
the War Assets Administration.
» Loan to the United Nations by the State Department.
~
289
EXHIBITS
TABLE XVIII.— Unutilized balances^ of^U.S. Government foreign credits, as of
Dec. Sl, 1948, by area, country, and agency
[In millions of dollars]
Loans
Total'
Area and country
Property Credits
Economic
Export- CooperaImport tion AdBank ministration
Other
Foreign
loans and
Liquida- Mariproperty
Lend- tion
time
Com- Commis- credits
Lease
mission
sioner
2,347
1,361
514
7
114
(2)
351
875
153
514
2
86
120
1.
843
134
514
(')
(»)
Austria
Belgium and Luxembourg.
Denmark
_
17
40
17
6
Total, All Areas..
. .
Total, Europe
Total, ERP Participants
France..
Germany (western)
Greece
111
19
25
Iceland
Ireland
Italy
1
60
73
Netherlands
Norway..
Sweden
73
» 48
10
56
112
182
. .
Turkey...
United Kingdom
Unallocated E R P
Total. Other Europe
Finland
Other
.
_
-
. ...
Total, Latin America
Brazil
Chile.
Colombia
-
•
Ecuador. _
Mexico
Other Latin America
Unallocated Latin America.
80
40
8
22
0)
(2)
60
12
8
47
23
10
11
6
30
78
fil63
4
19
«
32
18
28
4
17
1
2
194
193
1
35
46
20
35
46
20
9
48
13
9
48
12
2
23
23
80
33
(2)
China
Iran
Japan
17
18
19
17
(2)
._
Pakistan.
Philippines.
Other Asia
Canada
.
. ._.
-
Africa
Unallocated. International Organizations
Unallocated, All Areas
5
6
35
(2)
7
19
18
3
7
5
8 10
39
4
«62
62
1,120
6
28
10
9
7
5
*35
1
16
11
«15
3 11
(2 3)
Total, Asia .
.
3 46
26
60
.22
37
9
42
19
114
4
7970
8 150
» For important qualifications affecting this table and for definitions of terms, see the Explanatory Note.
2 Less than $500,000.
3 Property credits by the War Assets Administration.
< Loan by the Reconstruction Finance Corporation.
8 Uncommitted loan and guaranty authority of the Economic Cooperation Administration.
» Loan to the United Nations by the State Department.
^ Includes the $967,000,000 uncommitted lending authority of the Export-Import Bank.
»Uncommitted commodity-program credit authority of the Army Department.
856455—50-
-20
290
REPORT OF THE SECRETARY OF THE TREASURY
TABLE XIX.—Authorizations ^ of U. S. Government foreign credits, July 1, 1946, to
Dec. 31, 1948, by area, country, and agency
[In millions of dollars]
Property Credits
Loans
Area and country
Other
loans and
Foreign
Mariproperty
LiquidaLend- tion Com- time
Commis- credits
Lease
mission
sioner
Economic
Export- CooperaImport tion AdministraBank
tion
Total
4,421
12.239 1
3,697
1,000 1 1.406
1,453
262
Total, Europe
9,594 1
2,051
1,000 1 .1,292
1,129
220 1
3,902
Total. E R P Participants..
8,990 1
1,889
1.000 1 1.016
974
219
3,892
Total, All Areas
Austria
.
Belgium and Luxembourg. .
Denmark
France
Germany (western)
Greece
Iceland
Ireland
Italy
Netherlands.
Norway
Sweden
Turkey
United Kingdom .
Unallocated E R P
Total, Other Europe
Czechoslovakia
Finland
Hungary
2,246
252
147
1,200
24
25
3
60
428
134
2
60
60
178
66
381
142
12
210
50
2
95
35 r ; " " 6 ' j
10
30
10
21
29
82
4,710
205
36
30
310 '""690"
.«163
10
60
6
1
155
1
10
60
25
30
1
2i5
1 ^^
162
72 1
136
30
Poland
U. S. S. R
Other
40
353
284
111
69
16
92
69
16
Mexico ..
Peru
.
Other Latin America
_
91 1
7
. 23
89
Unallocated Latin America
'37
Brazil
Chile
Colombia
.
. .
Total, Asia
China
India
Indonesia
903
. .
Iran . .
. .
Japan
Korea (southern)
236
16
200
.
.
40
234
25
Pakistan
Philippines
Saudi Arabia . .
10
89
32
Siam
Other Asia
10
12
See footnotes at end of table.
60
26
420
170
(*)
350
184
80
66
42
250
345
(«)
276
22
100
90
275
1
Total; Latin America..
• 210
14
132
20
604
. . .
1
12
49
10
37
231
65
.
275
1 .
37
«3, 750
50
12
18
2
8
9
T2
1
1
2
19
2 25
212
0 ^)
2
2
0 8) '
37
223
67
70
30
23
302
•20
69
2
70
13
•100
19
9
31
16
25
1
6
2
3
ioo
26
285
10
12
10 192
2 10
"80
291
EXHIBITS
TABLE XIX.^—Authorizations ^ of U. S. Government foreign credits, July 1, 1946, to
Dec. 31, 1948, by area, country, and agency—Continued .
[In millions of dollars]
Loans
Area, and country
Canada
Total. Africa
Egypt
Liberia
Other Africa
....
. . .
Total. Oceania
Australia
New Zealand.Unallocated, International Organizations
.
.
.
Unallocated. All Areas
Economic
Export- CooperaImport tion AdBank
ministration
Total
.
311
311
31
10
18
7
6
7
3
Property Credits
Other
Foreign
loans and
MariLiquidaproperty
Lend- tion Com- time
Commis- credits
Lease
mission
sioner
7
7
14
11
3
14
1
13
8
6
1
8
6
65
968
12 65
13 818
1*150
1 For important qualifications affecting this, table and for deflnitions of terms, see the Explanatory Note.
2 Property credits by the War Assets Administration.
3 Property credits (coinmodity programs) by the Agriculture Department of $34,000,000, and by the Reoonstruction Finance Corporation of $11,000,000.
* Less than $500,000.
3 Loan by the Treasury Department.
« Uncommitted loan and guaranty authority of the Economic Cooperation Administration.
7 Loans by the Reconstruction Finance Corporation.
8 Loans by the State Department (Institute of Inter-American Aflairs) and the Reconstruction Finance
Corporation, and property credits by the War Assets Administration.
» Property credit by the Army Department.
10 Property credits (commodity programs) by the Agriculture Department of $180,000,000, and by the Reconstruction Fuiance Corporation of $12,000,000.
11 Loan of $70,000,000 by the Reconstruction Finance Corporation, and property credit of $10,000,000 by
the War Assets Administration.
12 Loan to the United Nations by the State Department.
13 Includes increase of $811,000,000 in the uncommitted lending authority of the Export-Import Bank.
i< UnoommittM commodity-program credit authority of the Army Department.
292
REPORT OF THE SECRETARY OF THE TREASURY
TABLE XX.—Expirations and cancellations ^ of U. S. Government foreign credits,
July 1, 1946, to Dec: 31, 1948, by area, country, and agency
[In millions of dollars]
Property credits
Loans
Total
Area a n d c o u n t r y
ExportImport
Bank
T o t a l . All A r e a s . -
934
Total. Europe
368
Total, E R P Participants
241
Austria
Belgium a n d L u x e m b o u r g
France
G e r m a n y (western)
Greece
Italy
1
65
49
, ,.
_
._
.-
Netherlands
Norway.Turkey
..
Poland
U . S. S. R
:
18
22
• 18
22
18
149
(2)
43
20
11
(2)
(2)
17
22
1 ^
51
69
^%
(2)
14
•
12
.61
71
131
26
7
•8
23
7
6
(2)
Peru
Uruguay
Other L a t i n America
26
18
5
26
,18
. 4
(2)
(2)
(2)
China.Indonesia
Saudi Arabia
_
Other Asia
118
48
183
120
22
137
20
.
(2)
42
208
Unallocated L a t i n America
(2)
6
1
Africa
Oceania.-
2
,
9
49
5
9
11
37
2
3
Unallocated, All Areas
1 1
.6 1
(2 »)
71
100
20
1
^
166
166
3
(2)
3
•
Canada
(V)
28
Brazil
Cuba
Mexico
T o t a l . Asia
MO
• 11
10.
(2)
(2)
42
8
14
.
38
16
3
12
61
Total, Latin America..
33
69
55
8
11
3
127
Czechoslovakia
Finland
Hungary
121
200
•49
28
22
Total. Other Europe
281
1
(2)
United K i n g d o m . .
Unallocated E R P . . _
LendLease
481 1
60
52 1
1
1
Other
loans
and
property
credits
Foreign
MarlLlqultime
datloff
CommisCommission
. sioner
2
(2)
1
1
5
1 For important qualifications affecting this table and for definitions of terms, see the Explanatory Note.
2 Less than $500,000.
3 Property credits (commodity programs) by the Reconstruction Finance Corporation.
< Property credit by the War Assets Administration.
» Loan by the State Department (Institute of Inter-American Affairs).
293
EXHIBITS
TABLE XXI.— Utilizations^ of U. S. Government foreign credits, July 1, 1946,
to Dec. 31, 1948, by area, country, and agency
[In millions of dollars]
Loans
Total
Area a n d c o u n t r y
ExportImport
Bank
Property Credits
Economic
Cooperation Administration
Foreign
MariLend- Liquidatime
tion ComLease
Commismission
sioner
Other
loans a n d
property
credits
T o t a l , All A r e a s . .
9.668
2,348
486
1,301
1,217
229
4.088
Total, E u r o p e . .
8,525
1,859
486
1,210
974
198
3,799
486
987
894
197
3,794
..
8,071
1,713
Austria
Belgium and Luxembourg..
Denmark
19
• 191
38
7
132
20
France
__
... _
G e r m a n y (western)
Greece
-.-.
2,086
225
111
1,200
6
15
2
352
330
72
205
Total. E R P Participants
Iceland
Italy...
Netherlands
Norway
Sweden
Turkey
84
2
26
42
2
14
4,606
, 454
145
Czechoslovakia
Finland
Hungary
.
30
109
16
22
84
Poland... -.:
U . S. S. R
Other
77
222
1
39
288
244
16
79
36
16
62
36
18
10
6
17
10
6
84
6
9
84
Total, Latin America..
B Olivia
Brazil..
Chile
_•_
Colombia
Cuba
Ecuador
Mexico
Peru
Uruguay
_.
..
O t h e r L a t i n America
Unallocated L a t i n America
.
Total, Asia..
China
India
Indonesia
'
Iran
Japan
K o r e a (southern)
Philippines
Saudi Arabia
Siam
O t h e r Asia
See footnotes a t e n d of t a b l e .
10
17
128
2
38
48
12
232
United Kingdom
T o t a l , O t h e r Europe
9
49
1
371
328
184
55
(*)
.".""Is"
6
23
24
337
56
41
178
19
65
10
4
19
6
6
(2 4)
»1
662
60
223
80
1
5
8
19
16
1
25
3 3,760
.38
222
1
11
18
12
2
(4 6)
8
(4 6)
1
(4 6)
0)
(*)
82
6
1
4
2
(4 7)
(2 4 6)
(0
5
20
4
2
18
672
102
61
207
18
283
227
15
63
81
60
2
69
13
63
16
•20
9
. _
21
216
25
10
13
13
25
79
12
6
10
6
2
6
8
7
•192
2
1071
(2 4)
294
REPORT OF T H E SECRETARY OF T H E TREASURY
TABLE XXI.— Utilizations^ of U. S. Government foreign credits, July 1, 1946, to
Dec. 31, 1948, by area, country, and agency—Continued
[In millions of dollars]
Loans
Area and country
Economic
Export- CooperaImport tion AdBank ministration
Total
Canada-— .
140
140
Total. Africa
27
3
13
12
3
2
Egypt
Liberia
Other Africa
Total, Oceania
Australia...
Other Oceania
Unallocated. I n t e r n a t i o n a l
Organizations
i
i
Property Credits
Other
Foreign
loansand
MariLiquidaproperty
Lend- tion Com- time
Commis- credits
Lease
mission
sioner
12
i2
13
11
2
13
1,
12
8
1
8
4
41
3
1
11 3
1 For important qualifications affecting this table and for definitions of terms, see the Explanatory Note.
2 Property credits by the War Assets Administration.
3 Property credits (commodity programs) by the Agriculture Department of $34,000,000, and by the
Reconstruction Finance Corporation of $3,000,000.
< Less than $500,000.
3 Loan by the Treasury Department.
6 Loans by the Reconstruction Finance Corporation.
» Loan by the State Department (Institute of Inter-American Affairs).
8 Property credit by the Army Department.
« Property credits (commodity programs) by the Agriculture Department of $180,000,000, and by the
Reconstruction Finance Corporation of $12,000,000.
10 Loan of $70,000,000 by the Reconstruction Finance Corporation, and property credit of $1,000,000 by
the War Assets Administration.
11 Loan to the United Nations by the State Department.
295
EXHIBITS
TABLE XXII.— Utilizations ^ of U. S. Government foreign credits, July 1, 1948, to
Dec. 31, 1948, by area, country, and agency
[In millions of dollars]
Loans
Area a n d c o u n t r y
Total
T o t a l , All Areas
T o t a l , Europe
. . .
Total, E R P Participants
Austria
Belgium a n d Luxembourg.
Denmark
_
France
Iceland
Italy
. .
Netherlands
Norway
Sweden..
Turkey...
...—
United Kingdom
T o t a l , o t h e r Europe
Finland
Other
..
T o t a l , L a t i n America
Chile
Mexico
.^
O t h e r L a t i n America
ExportImport
Bank
Property C r e d i t s
Economic
Cooperation A d ministration
Foreign
MariLiquidaL e n d - tion
time
ComLease
C
o
mmismission
sioner
Other
loans a n d
property
credits
617
- 107
486
2
11
4
7
555
63
486
1
1
1
4
542
52
• 486
1
1
6
10
17
6
10
17
130
2
55
17
48
35
2
22
2
5
232
6
12
10
8
4
7
3
31
31
13
7
11
13
7
11
3
(2 3)
(2)
128
2
38
(2)
(2)
48
12
(2)
(2)
32
1
(2 3)
232
1
1
3 1
1
V)
0)
(2 J)
•^
Unallocated L a t i n A m e r i c a .
25
Total, Asia..
Iran.
Japan
O t h e r Asia
Africa
Oceania..
(2)
(2)
.
Unallocated, I n t e r n a t i o n a l O r ganizations
12
8
10
6
10
2
2
2
9
(')
3
(2 8)
(2)
1
3
3
8
1
•
«3
1 For important qualiflcations affecting this table and for deflnitions of terms, see the Explanatory Note.
2 Less than $500,000.
3 Property credits by the War Assets Administration.
* Loan to the United Nations by the State Department.
296
REPORT OF T H E SECRETARY OF T H E TREASURY
TABLE X.X111.—Repayments^ on U. S. Government for eign.credits, July 1, 1946, to
Dec. 31, 1948, by area, country, and agency
[In millions of dollars]
Property credits
Loans
Area and country
Total. All Areas
Tota
.
Total, Europe
Total, ERP Participants
. ..
Austria...
Belgium and Tiuxembourg.
France.
Germany (western)
Greece...!
Italy
:
ExportImport
Bank.
893
416
322 1
118
298
(2)
....
J...
Netherlands
Norway
Turkey...
.41
41
6
29
25
142
Total, Other Europe
. 25
Czechoslovakia
Finland
Other
Total, Latin America
~ Brazil
Chile
Colombia
Japan..
Philippines.
Other Asia
..
Egypt
Other Africa
16
2
22
7
16
.2
1
107
1
7 .-__-
(2)
15
84
(2 3)
11
73
192
13
6
(2)
'» 8 131
3
(2)
(2)
1
2
(2)
(2 3)
M
1
(2)
1
fi2
"
(2)
3
„ 8
(2 3)
(2 3)
3
2
1
(2)
8
(2)
(2 8)
7 9 2
1
219
'•
(2)
(2)
8 16
(2)
3
5.
i
140
6
4
3
1 ^^
74
16
77
8
140
10192
11 10
(2 3)
(2 5)
10
(2)
10
(2)
168
(2 3)
2 •
6 .
1 ^
313
10
16 1
(2)
16
Total, Africa
13
*37
25
14
2
Canada and Newfoundlands
• 168
1
1
25
17
18
_.
390
-16 1
(2)
.._'
.
17
16
3
1917
7
Total, Asia
37
« 3
23
17
8
Co
Bahrein Islands
China
Iran
^'
5
..
:
Mexico
_
Other Latin America....
Unallocated Latin America
33
5
16
3
4
United Kingdom
LendLease
1
1 ^^ I
12
44
Other
loans
Foreign
Mariand
Liquitime
.
property
dation Commis- credits
Commission
sioner
10
(2)
(2)
1 For Important qualifications affecting this table and for definitions of terms, see the Explanatory Note.
2 Less than $500,000.
3 Property credits by the War Assets Administration.
< Property credits (commodity programs): $34,000,000 paid to the Agricultm-e Department, and $3,000,000
to the Reconstruction Finance Corporation.
3 Loans by the Reconstruction Finance Corporation.
3 Does not Include $6,936,333 held in a sinking fund for payment of principal.
^ Iiicludes portions of loans to individuals charged ofl as uncollectible by the Reconstruction Finance •
Corporation, as follows: Total, Latin America, $1,321,301; Bolivia, $888,987; British Honduras, $430,835;
Ecuador, $1,479.
8 Loans by the State Department (Institute of Inter-American Affairs).
8 Loans by the Reconstruction Finance Corporation, $1,553,176; loan of the State Department (Institute of
Inter-American Affairs), $30,000.
10 Property credits (commodity programs): $180,000,000 paid to the Agriculture Department, and $12,000,000 to the Reconstruction Finance Corporation.
11 Loan by the Reconstruction Finance Corporation, $10,000,000; property credit by the War Assets Administration, $67,884.
297
EXHIBITS
APPENDIX
D
TABLE XXIV.—Membership and quotas in the International Monetary Fund, and
membership and subscriptions in the International Bank for Reconstruction and
Development, as of Mar. 31, 1949
[In millions of dollars]
Fund
quota
Member.
Bank
subscription
8,034.0
8,336.0
Australia
Austria
Belgium
200.0
60.0
226.0
200.0
60.0
225.0
Bolivia
Brazil
Canada.
10.0
150.0
300.0
7.0
105.0
325.0
Chile
China
Colombia
60.0
550.0
50.0
35.0
600.0
35.0
5.0
50.0
126.0
2.0
36.0
125.0
Denmark...
Dominican Republic.
Ecuador
68.0
6.0
6.0
68.0
2.0
3.2
Egypt
ElSalvador
Ethiopia
60.0
2.5
6.0
63.3
LO
3.0
38.0
625.0
40.0
38.0
625.0
25.0
6.0
.6
LO
2.0
LO
LO
Total..._-
^..
.
CostaRica
Cuba
Czechoslovakia
Finland
France
Greece....
Guatemala
Honduras
Iceland.-.-
•_.
1..
Fund
quota
Member
India.
Iran
Iraq
Bank
subscription
400.0
35.0
8.0
400.0
33.6
6.0
Italy
Lebanon
Luxembourg
180.0
4.6
10.0
180.0
4.6
10.0
Mexico
Netherlands
Nicaragua
90.0
276.0
2.0
65.0
276.0
60.0
.6
3.5
60.0
.2
L4
Peru
Philippines
Poland
26.0
.15.0
125.0
17.6
15.0
125.0
Syria
.
Turkey
Union of South Africa
6.5
43.0
100.0
6.6
43.0
100.0
United Kingdom.....
UnitedStates
Uruguay
1, 300. 0
2,760.0
16.0
1,300.0
3,175.0
10.5
16.0
60.0
10.6
40.0
_
Norway
Panama
Paraguay
Venezuela
Yugoslavia
298
REPORT OF THE SECRETARY OF THE TREASURY
Exhibit 15.—Statement, February 16, 1949, of Secretary of the Treasury Snyder
before the Senate Foreign Relations Committee recommending financial policies
to be followed in the European Recovery Program ^
Last February I appeared before this committee to present the recommendations of the National Advisory Council on International Monetary and Financial
Problems relating to the financial aspects of the European Recovery Program.
Those recommendations, as you know, were with some modifications incorporated
into the legislation.
IVIy purpose in coming before you today is to review what has been accomplished
under those provisions and to recommend the policies which, in the opinion of
the Council, the United States Government should follow with regard to these
matters in the course of the coming year. Ambassador Harriman and the Chiefs
of the ECA missions have reported to you at considerable length on the conditions
prevailing in the various countries. Accordingly, I shall not attempt a general
review of the situation in the participating countries. I shall emphasize, however, a few points which are particularly significant for the more strictly financial
aspects of the program.
We are convinced that the success of the program will depend, in very large
measure, on the attainment of internal financial stability in the participating
countries. Without financial stability, participating countries will be unable
in 1952 to balance their accounts without dependence upon extraordinary United
States assistance. The various financial aspects of the program are mutually
related. Thus the establishment of valid exchange rates is contingent, in large
part, on the establishment of internal monetary and financial equilibrium and,
conversely, internal financial equilibrium can greatly be facilitated by a system
of appropriate exchange rates.
Some of the countries participating in the program have made substantial
progress toward attaining internal financial stability. Inflationary rises in prices
have been arrested—not in all cases, but in many. In several of the countries,
notably Italy, the monetary authorities have carried out a program of restricting
bank credit through limiting the total amount of credit which the banks may
advance to their customers, thus requiring the rationing of available funds. The
governments have, to a considerable extent, reduced the rate of inflationary
borrowing from the central banks, or otherwise, by bringing their budgets closer
to balance. Both of these measures have the effect of keeping down the supply
of money and so tend to keep prices in line with the available supplies of goods.
Of course, the mere fact of greater availability of goods also has had the effect
of checking price rises. Progress in this area has been considerable. There may
be difficulties in the future, however, in the case of countries whose situation is
usually characterized as ''suppressed inflation." In these countries expendable
income has increased more than proportionately to the supply of goods, but the
rise in prices has been prevented by rationing, price controls, and subsidies to
consumer goods or imported items. The result has been an excess of idle funds
which, though less dangerous than open inflationary pressures, has reduced incentives and distorted production and trade. In the past year a notable effort
has been made by several countries to reduce this excess either by a surplus in
the budget (as in the United Kingdom) or by monetary conversions (as in Germany and Austria).
To combat inflation, it is necessary for the governments to balance their
budgets, or to achieve budgetary surpluses. This has been done in some instances. In others more effort is needed to increase revenues and to eliminate
unnecessary expenditures. Tt is recognized that it may be difficult to' cut expenditures, particularly at times when governmental assistance is required for
reconstruction. .Practically^ alio of the "^countriesjhavejformulated^ programs for
increasing their revenues by the adoption of new taxes, or increasing the rates.of
old taxes, and improving administration.. Unfortunately, in a few instances
these programs have not gotten beyond the,project stage. We are proposing to
finance this program in the United States within a balanced budget. We may
reasonably expect that the recipient countries will at least make greater efforts
to put their financial houses in order. T do not mean to say that they should adopt
the precise tax measures which we use in this country. It is reasonable, however,
to expect that the countries which are receiving aid from us should use their own
taxing powers to the fullest practical extent.
' iThe Secretary^ made a similar^statement beforelthe House'(Committee on] Foreign Affairs on]Feb.
17,1949.
EXHIBITS
299^
Closely connected with the problem of inflation is the use of the local currency
counterpart of United States assistance made available on a grant basis. In
accordance with the Economic Cooperation Act, each recipient country has
established an account with local currency equivalent to the amount of grants
received. The law and the bilateral agreements, which we have made with each
of the countries, provide that these moneys may be spent only with the approval
of the United States Government, and in each case the policies involved in this
expenditure have been reviewed by the Economic Cooperation Administration
and the National Advisory Council.
In accordance with the terms of the act, the local currency funds are available
for the reduction of public debt, expenditure for capital reconstruction, and other
purposes conducive to attaining the purposes of the act. This is broad authority,
which should be used to aid in the process of financial stabilization. Impounding
these funds in the special account has a certain counterinfiationary effect by
withdrawing money from circulation. This may be offset, however, by other
inflationary tendencies in the economy. Thus it would be of no avail if the
funds were used for the retirement of the public debt, if at the same time new
public debt obligations are sold. Where, as in the case of Britain, there is a
budgetary surplus, it is appropriate to use the local currency proceeds to reduce
the government's debt. On the other hand, the beneficial effects of debt retirement are nullified if a country is suffering from inflation and this inflation is
continued through governmental borrowing, or if the private purchasers of the
goods received as aid get their funds by borrowing from commercial banks. In
fairness, I should note that where an inflationary situation of this sort continues,
little could be gained by withholding these funds from the government unless it
is possible to avoid borrowing an equal amount. The use of local currency to
finance projects of capital development is also inflationary, to an extent, but may
be justified if other counterinfiationary measures are taken, or where the effect
of the capital construction will be to relieve bottlenecks in the economy, or to
provide other capital facilities which will increase production more than proportionally to the amount expended.
The use of the counterpart funds in each case must be carefully considered in
the light of prevailing conditions. In some cases partial release of these funds
has been practically necessary to forestall worse fiscal and pohtical difficulties.
Moreover, by permitting the use of the counterpart funds, we can induce partici_pating governments to direct their expenditures into the proper channels, even
"though we are not able to bring into effect the full counterinfiationary impact.
In the opinion of the Council no change is necessary in the legislation covering
the use of counterpart funds. It is expected that in the coming year they will
be utilized with increasing effectiveness, and, as conditions in the European
countries improve, they may serve as a very real factor in bringing about ultimate stabilization. To be effective, however, the local currency account must
be used in conjunction with other measures for attaining fiscal and monetary
equilibrium.
In addition to internal stabilization measures, greater efforts must be made by
the European countries in their export efforts so that they can become self-supporting in their international transactions after 1952. We all recognize, Mr. Chairman, that this is a problem of both production and international trade. With
only a few exceptions, the ERP countries have reached a level in their production
equal to or above their prewar levels, although, of course, population has increased
in the meanwhile. To a considerable extent this improvement has been the
consequence of United States assistance in the period before and since the start
of ERP. Production targets for 1952 should be reached if we continue aid at the
decreasing scales which we anticipate for the fiscal years 1951 and 1952.
But, to repeat, this will solve only part of the problem. The other part is
how these countries can obtain enough dollars after 1952 to pay for the volume
of imports from the dollar area that will be essential to maintain their levels of
production and standards of living. They will not be able to do this without
extraordinary assistance from this Government unless they sell a greater volume
of goods and services to the Western Hemisphere and unless American investors
are willing to invest in European securities, or to invest new capital in productive
plants there. Prior to the war the European countries regularly had a moderate
deficit in their bilateral balances of payments with the United States. They
bought from us more than they sold to us, and they made up the difference, in
part by receipts from investments here, and in part by sale of goods to Latin
American, African, and Asiatic countries, which had a current surplus of dollars
300
REPORT OF THE SECRETARY OF TBE TREASURY
and gold. To a considerable extent this triangular settlement of balances will
again play an important role. We will probably continue to buy more from Brazil
than we sell to Brazil. We will continue to purchase rubber and tin and copra
from the East. To an increasing extent we may buy petroleum, wood pulp, and
iron ore abroad. The European countries will be able to cover part of their
defi.cit with the United States by earning some of these dollars, but the basic
task will still be to increase sales to this country and to Canada, Latin America,
and other countries.
This brings us, Mr. Chairman, directly to the question of exchange rates.
Since the war some of the European countries have restored their prewar levels,
of exports. The total value of exports has increased, in many cases, over the
prewar level, even after making due allowance for the increase in prices which
has taken place. But not all countries have accomplished this. In several
countries the ratio of exports to total national income is considerably lower today
than it was in 1937 or 1938. These countries have chosen to use a larger part
of the resources available to them for more rapid domestic reconstruction, and
less to regain their foreign markets. To a certain extent, however, there has been
a misdirection of trade. A relatively larger percentage of exports has moved to
other European countries and their overseas territories, rather than to the dollar
area.^ This results, in part, from traditional methods of doing business, from the
adaption of products to the European market and from the existence of bilateral
trade and payments agreements. Moreover, American exports of the type of
goods formerly exported by Europeans have increased.
In some quarters it is believed that the problem of the Western Hemisphere
deficit could be solved simply by the reduction of exchange rates against the
dollar. The argument runs that European currencies are overvalued with respect
to the dollar, and that an adjustment of the exchange rate would of itself be
sufficient to bring about equilibrium. While undoubtedly exchange rate modifications may be in order for some of the ERP countries in the near future, the
problem can readily be oversimplified, if the exchange rate is regarded independently of all the other factors which make up the international balance of
payments.
The question of deciding what is the appropriate exchange rate for a particular
country is a very difficult matter. Some people have looked at the black market
rates for the dollar either in the country concerned, or,, say, the rate for a given
currency in the free markets of Switzerland. It has been suggested that if the .
countries devalued to levels corresponding to these black market rates, exchange
rates would be at the proper level. This is a misconception. Black market
rates are "bootleg" rates appljang principally to transa.ctions in currency notes.
This currency may be used for travel expenditures, or it may be used for illicit
operations by way of capital transfer or of imports contrary to regulations.
These, obviously, are not fair measures of the value of a currency. To a certain
extent these rates may merely indicate that a country has an effective system of
controlling the movement of currency into its territory, which serves to increase
the discount at which people are willing to sell it illegally.
Others have talked about exchange rates in terms of the purchasing power of
currencies or the relative levels of prices. In 1946, in terms of relative prices,
many European currencies were overvalued. The situation has changed considerably with the rise in prices in the United States so that some currencies, which
appeared grossly overvalued in 1946, appear to be somewhat less overvalued
today, while other currencies might even be regarded as undervalued in terms
of their purchasing power, in comparison with the purchasing power of the dollar.
It is, as a matter of statistics, difficult to compare the purchasing power of various
currencies at a given point of time. Even if one could make a satisfactory
statistical comparison, it would by no means determine what the appropriate
rate of exchange is. A comparison of purchasing powers is significant mainly
as an indication of the relative ability of countries to export. Undoubtedly, an
overvalued currency provides an incentive for imports and discourages exports.
It would be a tragic mistake to act on the assumption that at the present
time devaluation would, of itself, solve the problem of Europe. As an abstract
theoretical proposition, one might argue that the exchange rate adjustment can
bring about an equilibrium in the balance of payments of a country. But through
this process imports would be prohibitively expensive, while exports could probably be sold here in larger volume. This could not be done, however, for most
of these countries, and still maintain a tolerable standard of living. The effect
EXHIBITS
• 301
would be to impoverish and starve their peoples and to reduce them to levels
which would be destructive of economic recovery and would imperil political
stability. Obviously, this is not the purpose of the program, which aims at
restoring the economic life of these countries to a point where they are able to
play their part in a peaceful democratic world.
When I discussed the exchange rate question with this committee a year ago,
I pointed out to the committee that the modification of exchange rates may have
serious repercussions on the domestic economy of the country concerned. Devaluation implies a rise in prices of imported foods and raw materials unless the
difference is made up by subsidies. Premature devaluation may thus have the.
effect of increasing inflationary pressures and may, therefore, give only a temporary stimulus to exports. Since devaluation may have adverse internal'political
consequences, governments are reluctant to change their rates until the need is
clearly demonstrated. Consequently, the exchange rate must be considered along
with the other measures of internal financial stabilization.
The National Advisory Council has studied this question from time to time
over the last year, and we did not conclude that the time was ripe for widespread
exchange rate adjustments. This does not mean that we will hold to the same
views in 1949. In 1948, levels of productioQ in some of the European countries
were still low. They have improved considerably, but it appears to us that soon
these countries must take greater efforts to balance their accounts. The Council
believes that the exchange rate question should be reviewed with a number of the
European countries in the course of the next year. The objective will be to
explore with these countries the extent to which they can improve their balanceof-payments position with the Western Hemisphere, and whether or not changing
the par values of their currencies will be conducive to this result. We recognize
that this is an extraordinarily difficult problem which will require the most
careful consideration, and the utmost secrecy in discussion. In years gone by,
the United States Government generally took the position that the rate at w-hich
a country bought and sold dollars was primarily its concern. Now, however,
when we are contributing billions of dollars to build up the European economies,
it becomes a matter of grave, direct concern to us insofar as the exchange policies
which a country may be pursuing tend to retard its exports or misdirect its trade
aud increase its Western Hemisphere deficit, and thus indirectly increase its calls
upon the United States for assistance. Where an exchange rate adjustment is
indicated, a member country will be expected to propose a new par value to the
International Monetary Fund.
The problem of balancing their international accounts leads to the question of
the extent to which the participating countries should be required to repay the
United.States for the assistance granted. A year ago it was agreed in the discussion with this committee that the loans to the European countries should be
good loans that could be repaid. In view of all of the uncertainties of the situation,
we were hesitant to give a very precise estimate of the amount of the assistance
to be provided which could be repaid without interfering with the objectives of
the program. At the time it was estimated that about 20 percent of the aid could
be extended on a loan basis. With, a year's experience of the program behind us,
these prospects have been re-examined in the ligh^ of the changing world situation.
As the legislation came from the Congress, a billion dollars was specifically
authorized to finance loans and^guaranties. As you know, it is of great importance
that the countries of Western Europe should, at the end of the program, be in a
position to finance their further economic development by attracting private
capital from this country, or by borrowing on a sound basis from international or
other lending agencies. To the extent that these countries emerge from the
program with a burden of fixed annual charges on existing dollar indebtedness,
their ability to attract private capital will be reduced. Many of these countries
have already contracted substantial dollar debts in connection with their earlier
reconstruction expenditures. If these countries had to obligate themselves for
too large an amount of additional loans under this program, it is clear that the
longer-term objectives of the program would be endangered! The transition from
government financing to private investment to supply the dollar needs of the
European countries after 1952 will not be easily made, and we should not make it
more difficult by imposing rigid charges for each year of the E R P program.
Moreover, the burden of additional debt payments would aggravate greatly the
international repercussions of an economic recession here or abroad.
302'
REPORT OF THE SECRETARY OF THE TREASURY
We fully recognize, however, that some countries will be in a better position to
repay than others. The effect of the war on the balances of payments of tbe
participating countries has varied greatly. Some of them have already attained
a high level of production, and some of them are in a better international situation
than others, in the sense that their international accounts more closely approach
the balance which we expect for all countries in the years after 1952.
For these reasons the National Advisory Council is of the opinion that the
authorizing legislation for fiscal 1949-50 should not earmark a specific portion of
the total aid for loans. We believe it would be better policy for the Congress to
make the total available in the form of an appropriation. The Administrator for
Economic Cooperation should be authorized, with the advice of the National
Advisory Council, to determine when aid should be on a loan basis and in what
amount. Aid for the regular ERP program would be extended on a loan, or partloan, basis to some countries which, in the long run, will have greater ability to
earn dollars and other foreign exchange and do not at present have heavy debt
charges. A prudent use of the discretionary power requested by the Administrator and the (Council will keep the field open for long-range investment projects by
the private capital market, the Export-Import Bank, and the International Bank.
These institutions can supply capital needs of the tyi)e that constitute good international investments. Some of these projects can be undertaken before 1952,
and it is important that our policy should not hinder the renewal of sound international investment after the European Recovery Program ends.
Last year I advised this committee that it was the belief of the Council tha,,t we
should provide to the countries receiving aid under the European Recovery Program information which would enable them to secure control over the blocked
dollar assets of their Citizens. You will recall that, notwithstanding the fact that
the certification procedure then in effect channeled to the recipient countries
information with respect to certain blocked assets, many citizens of those countries
were able to maintain concealed blocked assets in the United States. The proposal of the Council which I outlined to this committee has been put into execution. A census was taken of all assets which remained blocked in this country as
of June 1, 1948, and by the end of September appropriate information with respect
to property worth approximately half a billion dollars and disclosed by the census
was placed in the hands of cbuntries to which we are extending assistance. In this
way information about a considerable portion of the assets was made available for
the first time. On October 1, jurisdiction over assets remaining blocked was transferred to the Office of Alien Property in the Department of Justice and that Office
is now in the process of dealing with them.
We have also given further study to the gold and. dollar balances of the countries receiving aid. In our resurvey we have concluded that none of the countries
receiving grants has gold and dollar balances in excess of its requirements for
normal trade and monetary reserves. While a few countries have increased their
reserves by a small amount in the last year,^the E R P countries and their dependencies as a whole appear to have drawn down their balances, about $364 million
between March 31 and September 30, 1948, despite the amount of aid given. To
some extent these'^.balances will^'be restored by the ultimate settlement of the
ECA accounts. . It is clear that allocations of assistance in excess of balance-ofpayments requirements should not be made to the recipient countries. for the
purpose of building up. their foreign-exchange reserve positions. At the end of
the program, when we expect trade to return to normaPchannels without further
United States assistance, reasonable reserves of gold and dollars will be indispensable for ordinary trade and commerce.
As we review the experience of the past year, certain things stand out and furnish a basis for judgment as to future prospects. There have been notable signs
of improvement in the financial situation in Europe. Some countries have reached
a reasonable degree of internal financial stability with balanced budgets, adequate
taxes, and fairly stable price levels. In other countries these results are antici-.
pated for the future. Although appropriate financial measures have not yet in
all oases been put into execution, they are receiving consideration and we are
looking forward to the implementation of adequate financial programs in the
course of the coming year. It is my belief that.except for the intervention of
some unforeseen drastic deterioration of the international situation, we can look
forward to a period of reasonable financial stability by 1952.
EXHIBITS
303
Exhibit 16.—Statement, May 23, 1949, of Assistant Secretary Martin before the
House Banking and Currency Committee on H. R. 4332, a bill to permit national
banks to deal in securities of the International Bank for Reconstruction and
Development
I am appearing before your committee on behalf of the National Advisory
Council on International Monetary and Financial Problems to present its views
on H. R. 4332, which the committee is about to consider. The bill would amend
the National Bank Act to permit national banks to deal in the bonds of the
International Bank, and would, by amendment to the Bretton Woods Agreements
Act, exempt securities issued or guaranteed by the International Bank from the
provisions of the Securities Acts. The National Advisory Council has given
serious consideration to the proposed legislation and believes that It should be
enacted.
With your permission, I would like to address myself to the policy considerations underlying the National Advisory Councirs support of the pending legislation. In the opinion of the National Advisory Council, the International Bank
for Reconstruction and Development will have an increasingly important role in
the future development* of the international capital market. It seems clear that,
to the extent that economic and political conditions abroad permit the Bank to
assume greater responsibility in financing reconstruction and development, it is
in the interest of the United States to encourage the Bank to assume that
responsibility.
During the next few years, it is hoped that many more nations will be in a
position to apply for loans to finance projects and programs consistent with the
purposes of the Bank. The continued effectiveness of the Internatipnal Bank
will depend upon its ability to meet these requests. To do this, the Bank will
have to^raise additional funds in the securities market of the United States.
It is the opinion of the National Advisory Council that the enactment of H . R .
4332 would facilitate the widespread distribution in the United States of securities
issued or guaranteed by the International Bank. For a detailed analysis of the
structure and operations of the International Bank, particularly with respect to
the effect that the proposed legislation would have on its inarketing operations,
I will defer to the representatives of the Bank who will appear before you.
However, if I may, I would like to touch briefly upon one of the principal
problems which will be remedied if the proposed legislation is enacted."
At the present time, although national banks may invest in securities issued by
the International Bank, they are not authorized under the National Bank Act
to deal in such securities. The proposed legislation would remove this legal disability by amending the National Bank Act to permit national banks to deal in
securities issued by the International Bank.
Both the International Bank and the National Advisory Council believe that
in order that this permission may be really effective in broadening the market for
the Bank's securities they should be exempted from the Securities Acts. The
reason is that the whole marketing system of national banks is geared to deal
only in securities which are exempt from the Federal Securities Acts, mainly
Federal, State, and municipal securities; and it is not adapted to meet the various
requirements pertaining to securities subject to those acts. The proposed legislation would meet this practical difficulty by amending the Bretton Woods Agreements Act to make the securities issued or guaranteed by the International Bank
exempt securities under the Securities Acts.
In connection with the enactment of the proposed legislation, careful thought
has been given to the position of investors in the United States. I believe that
the unique characteristics of the securities of the International Bank and the nature
of the safeguards provided in the proposed legislation constitute ample protection.
It should be noted that by virtue of the large subscription of the United States
in the shares of the International Bank, there is a correspondingly large oflScial
participation by the United States in the direction of the Bank. Under the
guidance of the National Advisory Council, the United States Executive Director,
who holds approximately one-third of the total votes of the Bank's Executive
Board, directs his activities to effectuating the United States policy of making
the Bank a sound, strong, effective instrumentality for financing appropriate
projects for reconstruction and development. In this connection,.it may be noted
that the International Bank may not sell its securities in this country without
obtaining the prior consent of the National Advisory Council; nor can the Bank
buy or deal in its securities without that consent.
304
REPORT OF THE SECRETARY OF TB-E TREASURY
It should also be borne in mind that the securities of the International Bank
are backed by the joint obligation of some 48 nations, each of which is severally
liable up to the full amount of its subscription. A nation which might otherwise
be tempted to default on a particular foreign obligation might well be deterred
from such action by the knowledge that a default to the International Bank is
simultaneously a default with respect to 47 other nations upon whom the burden
of meeting prorated subscription calls would fall.
Adverting to -the protection the United States investor enjoys with respect to
foreign securities which are not exempted from the Securities Acts, it may be appropriate to note that the essence of this protection is the requirement for full
and fair disclosure of pertinent information. The Securities and Exchange Commission does not make a determination as to the worth of a security offered for
saile. It is not the function of the Commission to approve or disapprove any sale
of securities so long ais the facts concerning the securities are fully stated.
With respect to the International Bank, it may be stated that through its
quarterly and annual reports and other statements, it makes a full disclosure to
the public of all its activities. Moreover, under the proposed legislation, the Bank
would be required to file with the Securities and Exchange Commission such annual
and other reports with regard to its securities as the Commission shall determine
to be appropriate. Finally, if the Securities and Exchange Commission should
at any time be of the opinion that the interest of the United States investor
requires that the securities in the International Bank be subjected to the Securities
Acts, the Commission may, in consultation with the National Advisory Council,
suspend the exemption granted under the proposed legislation.
In my opinion, the enactment of the proposed legislation will further the interest
the United States has in the continued effective ope^ration of the International
Bank without prejudicing the rights of United States investors. I, therefore,
recommend favorable action on the bill under consideration.
''
Exhibit 17.—Announcement, September 30, 1948, of Secretary of the Treasury
Snyder of the close of activities by the Treasury Department in the field of
controlling foreign assets in the United States
Secretary Snyder today announced the close of more than eight years of activity
by the Treasury in the field of controlling foreign assets in the United States.
The program started by the Treasury Department almost a decade ago is to be
carried through to its ultimate liquidation by the Department of Justice pursuant
to a Presidential transfer of jurisdiction.
Plans for this transfer, which is effective as of midnight, September 30, were
made by the interested departments in February and were at that time approved
by the National Advisory Council and communicated to the Congress. Accordingly, the Treasury Department regulations setting forth the organization and
procedures of Foreign Funds Control, and other related regulations promulgated
in 1942, are being revoked. These regulations are being superseded by new
regulations similar in scope issued by the Department of Justice.
Treasury participation in this field began with the freezing order of April 1940,
issued at the time of the German invasion of Norway and Denmark. The scope
of the order was gradually expanded until by 1941 it covered China and Japan
as well as all the countries of continental Europe, except Turkey. A 1941 census
revealed that the Treasury Department was then controlling foreign assets in
the United States worth more than eight billion dollars.
A primary aim of the freezing control was to prevent nationals of the invaded
countries of Europe from being despoiled and forced under duress to transfer to
the Axis powers their clairns to American assets. The freezing controls also
served in many ways as a weapon of economic warfare to hamper the financial
and commercial activities of our World War II enemies.
The elimination of restrictions on transactions and the gradual unblocking of
foreign assets began shortly after the end of actual hostilities. The elimination
of these controls has been handled so as to maintain the.maijor objectives for
which they were instituted. Unblocking of property has proceeded on a basis
which has preserved the ability of the United States to vest assets actually
belonging to enemies. The procedures now in effect for unblocking foreign
assets in the United States have also been developed with a view toward assisting
in the implementation of the European Recovery Program.
EXHIBITS
305
Exhibit 18.—Announcement, June 17, 1949, of Secretary ofthe Treasury Snyder
of the signing of an agreement supplementing the United States-Mexican
Stabilization Agreement
Secretary Snyder today announced the signing of an agreement supplementing
the United States-Mexican Stabilization Agreement entered into in May 1947.
This new agreement increases to $25 million the balance available from the
United States stabilization fund for the purchase of Mexican pesos to. stabilize the
United States dollar-Mexican peso rate of exchange. The agreement was signed
following acceptance by the International Monetary Fund of a new par value of
8.65 Mexican pesos per dollar, and after several weeks of study of the Mexican
financial situation by oflBcials of the United States Treasury Department, of the
Bahk of Mexico, and of the Mexican Ministry of Finance.
.
Secretary Snyder noted, with .satisfaction that the Mexican Government has
indicated its determination to continue and intensify its efforts, in pursuance of
sound fiscal and financial policies, to insure the stability of the exchange rate.
Secretary Snyder stated that any operations under the agreement with Mexico
will be closely coordinated with the activities of the International Monetary
Fund in order to contribute to the efforts of the Fund to stabilize the exchange
rate .structure of its members.
Exhibit 19.—Letter of Acting Secretary of the Treasury Martin, May 4, 1949, to
the Chairman of the House Banking and Currency Committee, stating the
Treasury's objections to S. 13 and S. 286, bills authorizing the acquisition,
trading, and export of gold by the public
TREASURY DEPARTMENT,
Washington, May 4, 1949.
MY DEAR MR. CHAIRMAN: This is in further reply to your letters of April 25,
1949, stating that your committee intends to begin hearings on S. 13 and S. 286
on Ma,y 5 and requesting the report of the Department on these bills prior to the
date of the hearing.
Both bills specifically authorize the acquisition, trading, and export by members of the public of any gold minedin the United States or imported into the United
States after their enactment. S. 286 would also repeal sections 3 and 4 of the
Gold Reserve Act of 1934. Since these sections contain the authority to regulate
transactions in gold in the United States, their repeal would permit a free market
for all gold. In substance, S. 13 would also result in a free market for all gold
since it would not be possible to distinguish newly mined or imported gold from
other gold.
The Treasury is strongly opposed to the enactment of these bills. They
would create serious risks to our national monetary and banking structure and
would result in a weakening of the present strong and stable position of the dollar
in its relation to gold. At the same time, the advantages expected by their
advocates appear to be based on misunderstandings ahd illusory hopes.
1. Enactment of either S. 13 or S. 286 would amount to a reversal of the decision
made by the Congress in the Gold Reserve Act of 1934, that gold should be held
by the Government as a monetary reserve and that it should not be available
for private use for other than legitimate industrial, professional, or artistic purposes. We believe that the United States should continue to follow the principle
that the most important use of gold is for the domestic and international monetary
functions of the Government and that gold should not be held by private individuals as a store of wealth.
2. The existence of a free market for gold in the United States with a fluctuating
price determined by private demand and supply would have exceedingly unfortunate consequences for our domestic economy. In fact, the Secretary of the
Treasury is required by statute to maintain all forms of United States money at
a parity with the gold dollar. Since the gold dollar contains one thirty-fifth of
an ounce of gold, this means that the Treasury should maintain the price of gold
at $35 an ounce in legal gold markets in the United States. Therefore, the
Treasury would hardly have any alternative if the proposed bills were enacted
other than to sell gold to the extent necessary to maintain the market price at
$35 an ounce. Thus, the rise in the price of gold.which appears to be contemplated by the proponents of these bills would not take place.
856455—50——21
306
REPORT OF THE SECRETARY OF THE TREASURY
If t h e Treasury did Jiot t a k e measures to stabilize t h e m a r k e t a t $35, t h e
shifting of t h e price.of gold could not fail to confuse a n d disturb t h e public. The
common interpretation of such fluctuations would be t h a t something was wrong
with t h e dollar and t h a t t h e value of t h e dollar a n d all savings stated in dollars
were going u p a n d down w i t h each
fluctuation.
Such prices for gold, however, would probably be t h e result of a relatively
trifling volume of transactions. No significant determination of t h e value of
t h e whole world supply of. gold could be made with t h e United States Treasury,
which is the main factor in.the gold market, left out of t h e balance. Because of
popular misconceptions, prices determined by an insignificant volume of transactions would be interpreted as applying to ail gold, including t h e 24.3 billion dollars
in golH held by t h e United States Treasury. Thus, t h e public misinterpretation
of t h e quotations in t h e so-called free m a r k e t might cause a loss of confidence in
'the dollar a n d be extremely damaging to our economic welfare.
If t h e Treasury let t h e price of gold in t h e United States fluctuate, it would be
defeating t h e very purposes which h a v e led us to acquire over 24 billion dollars
worth of gold. T h e Treasury has paid out those billions of dollars for gold in
order to keep stable t h e relation between gold a n d dollars. There would be no
clear reason why we should have, bought this gold in t h e past or should continue
in t h e future to buy gold a t $35 an ounce if we were not also to be ready to sell it
at t h e same price for any legitimate purpose in order to maintain t h e stability.
I t would be exceedingly improvident for t h e United States to sell gold a t $35
an ounce to foreign governments if such goid or other gold could be resold in t h e
United States a t premium prices. On t h e other hand, the Treasury believes it to
be of t h e highest monetary importance to t h e United States t h a t it continue to
sell gold to foreign governments and central banks a t $35 an ounce whenever t h e
balance of international p a y m e n t s t u r n s in their favor a n d they ask for s e t t l e m e n t '
in gold. To .refuse to make such sales a t $35 would be equivalent to a devaluation
of t h e dollar a n d an a b a n d o n m e n t of our adherence to a gold standard. Moreover, if t h e United States should not continue to buy and sell gold freely for
international settlements a t $35 an ounce, we could n o t meet our obligations to
t h e International M o n e t a r y F u n d without adopting a system of exchange controls t o prevent transactions in foreign currencies in t h e United States a t other
t h a n official rates.
.
I t should not be assumed, however, t h a t it is a t all certain t h a t the proposed
free m a r k e t in gold would result in a m a r k e d rise in t h e price of gold for any extended period even if t h e Treasury should not stabilize the m a r k e t at $35. Expectations of substantial increases in price are based on widespread exaggeration of
the significance of various p r e m i u m quotations abroad and inadequate appreciation of the degree to which prices of gold everywhere depend on the readiness of
the United States to b u y at $35 virtually all gold which is offered to t h e T r e a s u r y .
There is also inadequate appreciation of t h e extent to which gold imports .and
trading are restricted in every i m p o r t a n t country in t h e world and the valid
reasons for such restrictions.
3. T h e international m o n e t a r y relations and obligations of the- United States
would also be prejudiced if gold were authorized to be exported a n d imported
freely. One of t h e dangers of permitting exportations of gold from the United
States without restriction is t h a t m u c h of t h e gold would flow to black m a r k e t s
abroad. In some countries t h e gold m a r k e t s are illegal; in others, gold imports
or dollar p a y m e n t s for gold are prohibited. These restrictions are designed to
conserve urgently needed dollars to finance essential imports. P e r m i t t i n g gold
exports to tbese m a r k e t s would work directly against our efforts to restore Europe
to financial solvency t h r o u g h t h e European Recovery Program.
I n this connection, t h e I n t e r n a t i o n a l Monetary' F u n d has expressed its concern
t h a t international gold transactions a t premium prices t e n d to divert gold from
central reserves into private hoards. The F u n d has asked its members to t a k e
effective action to prevent premium price transactions in gold with other countries
or with the nationals of other countries. The existence of a free m a r k e t in the
United States with a fluctuating price for gold, coupled with the repeal of a u t h o r i t y
to control t h e export of gold, would m a k e it impossible for the United States t o
cooperate with t h e F u n d in achieving this objective.
4. T r e a s u r y sales of gold to the extent necessary to maintain a $35 price in a
free m a r k e t created by t h e e n a c t m e n t of either of these bills would, in effect,
mean t h a t any holder of dollars or dollar obligations would be able to convert
t h e m into gold. While this would be preferable t o an erratic m o v e m e n t in gold
EXHIBITS
307
prices in t h e United States, it would force this Government to a course of action
which might, have extremely serious consequences.
I n t e r n a l gold convertibility is likely to exert critical pressure a t t h e most
dangerous a n d damaging times a n d to do little good a t other times. I t threatened
t h e foundations of our financial structure during t h e depression and it might have
done so again during t h e last war, yet it has proven of no use either to prevent
inflationary booms or serve other desirable purposes a t other times. When left
in a centralized reserve, our gold stock gives impregnable international strength
to t h e dollar. If our gold stock, on t h e other hand, were dissipated into immobilized private holdings, our power to maintain t h e position of t h e dollaT might be
critically weakened.
T h e problems of financing t h e last war would have been tremendously magnified
if private citizens had been free to draw down our gold reserves. The prosecution
of t h e war, for example, would have been critically hampered if Government a n d
business borrowing had been limited because gold hoarders had left no excess
reserves in t h e banking system.
Even our 24 billion dollars of gold holdings would be completely inadequate to
meet a serious run on gold from t h e 27 billion dollars of United States currency in
circulation, over 140 billion dollars of bank deposits, a n d scores of billions of
dollars of Government securities, not to mention other relatively liquid assets.
Conversion of around five or six percent of these Government a n d b a n k obligations
would be enough to bring t h e Federal Reserve Banks below their legal minimum
gold reserve.
Even in a letter of this length it is not possible to state all t h e considerations
which cause t h e Treasury to oppose these bills. We belieye, however, t h a t t h e
foregoing will give you a general indication of t h e difficulties a n d problems which
the Treasury considers would arise from t h e e n a c t m e n t of either of t h e m .
T h e Bureau of t h e Budget has advised t h a t there would be no objection to t h e
submission of this report to your Committee since t h e proposed legislation is not
in accord with t h e program of t h e President.
Very truly yours,
WM. M C C . MARTIN,
Jr.,
Acting Secretary of the Treasury.
Honorable BURNET R .
MAYBANK,
Chairman, Committee on Banking and Currency,
United States Senate, Washington, D . C .
TAXATION D E V E L O P M E N T S
Exhibit 20.—Statement, April 1, 1949, of Commissioner of Internal Revenue
Schoeneman before the H o u s e Ways and M e a n s Committee on H . R. 2893,
a bill extending t h e social security coverage
Mr. Chairman, I appreciate t h e opportunity which you have given me to
present t h e views of t h e Bureau of I n t e r n a l Revenue concerning t h e a m e n d m e n t s
to t h e I n t e r n a l Revenue Code in connection with t h e proposed extension of
social security coverage under H . R. 2893 insofar as they affect t h e Bureau of
InternaL Revenue. I shall a t t e m p t in my s t a t e m e n t to bring out certain factors
which I believe will be of interest in connection with t h e legislation under consideration. Before beginning t h a t discussion I would like to emphasize t h a t we
in t h e Bureau of I n t e r n a l Revenue believe t h a t we can adequately a n d satisfactorily administer t h e provisions of H . R. 2893, if enacted into law.
T h e responsibility of t h e Bureau of I n t e r n a l Revenue under t h e existing social
security program is to (a) maintain appropriate registers of employers; (6) as a
convenience to t h e employers a n d as an aid to enforcement, distribute quarterly
t h e necessar}^ return blanks; (c) receive and account for t h e returns and taxes
voluntarily reported; (d). enforce t h e collection in the case of delinquent taxpayers; and (e) forward t h e wage reports submitted as a p a r t of t h e returns to t h e
Social Security Administration for its use in compiling t h e wage records of individual employees.
•
When t h e existing system was inaugurated, some 12 years ago, there were
m a n y who felt t h a t t h e administrative problems which would arise in connection
with it would be insuperable. On t h e whole, I think t h a t notwithstanding t h e
308
REPORT OF THE SECRETARY OF THE TREASURY
problems that have arisen-in connection with it, and I do not wish to imply
that they have not been real, all will agree that the program has been satisfactorily
administered.
.
Much has been learned from the experiences in the last 12 years, and niany
improvements in the collection system have been adopted from time to time.
You may recall that in the early days the employers were required to report on
a monthly basis. After a short while of experimentation with this system, it
was found that a quarterly return was feasible and resulted in considerably less
effort on the part of both the employers and the Government. Therefore, such
a plan was adopted early after, the inauguration of the S3^stem. More recently
the Bureau has been experimenting with the possible combination of the employer's tax return under the Federal Insurance Contributions Act and the .
withholding-tax return for income tax purposes. This experiment is now going
on in the collection district of Maryland and so far has proved very satisfactory.
It is hoped that we will be able to extend this improved form to the entire country
before the end of the year.
I cite these developments only to assure you that, once a program is adopted
by the Congress, we on the administrative level will continuously seek every
possible improvement which will ease the work load of the taxpayers and the
Government.
As to H. R. 2893, we feel that, in general, an additional administrative task
is being given to the Bureau of Internal Revenue which is not basically unlike
some.we now have. Certainly, additional oflfice space, printing, and personnel
are involved in any undertaking of-this type. However, I should like to point
out five factors which I think have a bearing on the administrative phase of the
program under consideration, and which to my mind demonstrate its feasibility.
These factors are as follows:
Mass enforcement methods: Since 1942 the Bureau of Internal Revenue has
been engaged in tax collection on a mass basis. It. has developed, and is now
further developing, modern management techniques to meet broad-scale tax
enforcement problems. These techniques involve the adaptation of newly
developed mechanical devices and the sampling approach to enforcement efforts.
As for example, an audit-control prograin based on sampling techniques has been
developed for the tax year 1948 in respect to the 55,000,000 individual income tax
returns for the purpose of high lighting those specific areas in which additional
effort is needed to insure better over-all compliance. In principle, the extension
of coverage proposed in H. R. 2893 presents problems no different from those that
are now being met.
Experience in Government reporting: In view of the lowered individual income
tax exemptions and other types Of Government reporting required during the war,
which had never theretofore been required, those affected by the bill have generally
become accustomed and well qualified to make reasonably satisfactory comphance
with the requirements of the type contemplated by the provisions of H. R. 2893.
Employees' interest should aid enforcement: The incentive feature, on the part
of the individuals covered, is to a certain extent a self-policing factor which we
do not have in many areas of tax returns today, and which factor should assist to
some extent in the enforcement problem.
Operating improvements based on experience: Continued experimentation will
be made with the administrative features of any program which the Congress
adopts with the definite objective always in mind of making the system so simple,
and so well understood by the public, that the work load of the public and the
administrative agencies will be reduced to a minimum. In reaching this objective,
the Federal Security Agency and the Treasury Department will collaborate on
every phase falling within the jurisdiction of each.
Taxpayer education: One of the most complete and far-reaching educational
programs will precede the circulation of any tax return forms or other devices
which may be necessary in the collection of the tax.
On the basis of the above five factors, I feel confident in stating that, given the
necessary personnel and facilities, the program proposed is administratively ^
feasible. To insure feasibility it is highly important that the collection methods
be flexible insofar as the specific requirements of the law are concerned. There is
ample precedent for this in the present law which has been extremely helpful in
permitting administrative adjustment from one type of collection approach to
another without awaiting changes in basic law.
In the remainder of my statement I should hke to (1) point out three technical
changes.which I believe should be made; (2) indicate briefly certain of our present
EXHIBITS
,
309
procedures pertinent to the employer's tax return under the Federal Insurance
Contributions Act; (3) describe plans under consideration for the administrative
management of the proposed program relating to agricultural and domestic employees; (4) outline, a plan for the administrative management. of the program
relating to the self-employed; and (5) furnish you with a brief summary statement.
(1) TECHNICAL CHANGES
In line with this arrangement, I am setting out below certain of the technical
changes which I believe should be made in the bill.
Raising of filing level for self-employment tax to conform with present income
tax filing level: The first of these recommendations is that the filing level for the
self-employ ment tax be raised from $500 of gross income to $600. The present
provisions of the bill would require individuals, having at least $200 of selfemployment income but not subject to income tax because they have less than
$600 of gross income, to file, a self-employ ment return if they have as much as
$500 gross income. The administrative diflficulties in connection with this lowincome group are apparent since tbese individuals will not have prepared and
filed an income tax return. This recommendation should not be considered as
seeking permanently to tie in the self-employment filing level with the income tax
filing level which may undergo changes from time to time. It does seem important, however, in order to avoid confusion and to assist in a broader public under-,
standing, to have the filing levels the same at the beginning of this part of the
program.
Elimination of provisions of bill earmarking collections and requiring special
accounting: The bill designates the taxes as ''contributions," provides that they
are levied for the purpose of paying benefits, and eliminates the existing provision
that they shall be paid into the Treasury as internal revenue collections. It further provides that the ''contributions" shall be paid directly into the trust fund.
These provisions would encumber internal revenue office and field procedures and
forms, and would require 'separate accounting by collectors. Even though not
insurmountable, these difl&culties. are real, and to overcome them would add significantly to our costs of administration. It is recommended (1) that the taxes
be called "taxes," and (2) that collectors be permitted to deposit them in the
banks and account for them as internal revenue collections. The segregation for
accounting purposes would occur at a later stage as under present law.
Exclusion from taxable wages in certain cases of remuneration paid in calendar
quarter if less than $25: This exclusion in the bill deals with agricultural labor,
domestic service, and service not in the course of the employer's trade or business.
We recommend that the test be geared to cash remuneration only, rather than all
remuneration including reniuneration other than cash.
This is highly important in alleviating record keeping ahd reporting burdens in
the field of agricultural labor and domestic service. Under the bill no tax would
be payable on remuneration paid during a calendar quarter by an employer to an
employee in such fields if the remuneration is less than $25, nor would such
remuneration be creditable toward benefits. This provision eliminates from coverage and reporting most of the occasional and temporary farm and household employees. It is believed that the cash test would be better understood and prove
to be more easily administered.
(2) BRIEF DESCRIPTION OF CERTAIN OF OUR PRESENT
PROCEDURES
In order that we may have before us an outline of the administrative procedures involved in the present system which in principle are not unlike those
involved in respect to the extended coverage proposed for agricultural and domestic employees, I should like to list briefiy the major steps under the present
system. It should be understood, however, that in this description I am not
suggesting at this time that these precise methods must necessarily be applied
to the new areas of coverage. The present method comprises seven major procedural operations; each of these appear below..
(a) Employment tax blanks are delivered to employers each quarter- for the
reporting of taxes due under the Federal Insurance Contributions Act, the wages
on which such taxes are based, and the employees to whom the wages were paid.
Addressograph machines are used for mailing the forms each quarter. The mail-
310
REPORT OF THE SECRETARY OF THE TREASURY
ing of blank forms to t h e employers is a convenience to t h e employers a n d serves
• as a reminder t h a t t h e r e t u r n m u s t be prepared a n d the t a x paid.
. (6) The returns when received by the collectors from the employers are checked
for completeness, and schedules A (the information portion showing the names
of employees and wages paid) are separated from the r e t u r n and forwarded to the
Social Security Administration for the purpose of posting wage credits.
(c) The returns are listed for assessment.
(d) An oflfice verification is made of the returns in order to verify the computation of the tax a n d to make a comparison of the a m o u n t of the wages paid,
as shown on the tax portion of the return, with the total wages reported on
schedule A.
(e) A delinquency check is made after each quarter to see t h a t all employers
listed on the master list have filed their returns. I n an average quarter, approximately 10 percent of the employers listed on the master list fail to file timely.
Letters are addressed to these employers to procure either the r e t u r n or an explanation as to why one was n o t filed. From 2 to 3 percent of t h e names on the m a s t e r
list are deleted each quarter and approximately the same number of new names are
added.
(/) Where employee account numbers are n o t shown for the employees on
schedule A as required by the Social Security Administration, the collectors
a t t e m p t to obtain such numbers.
(g) In those cases where the employers do not respond to the letters, field
d e p u t y collectors are assigned to obtain the necessary information, returns, and
tax.
(3) P L A N S U N D E R C O N S I D E R A T I O N F O R T H E A D M I N I S T R A T I V E
M A N A G E M E N T OF T H E P R O P O S E D P R O G R A M R E L A T I N G T O
A G R I C U L T U R A L A N D D O M E S T I C EMPLOY^EES
Turning now to the third item which I mentioned a t the outset, namely, a
description of the systems under consideration for-the administrative manage-,
m e n t of the proposed program relating to agricultural a n d domestic employees,
I should like to refer to a Treasury D e p a r t m e n t s t a t e m e n t released during December 1947 in respect to alternative methods of administering a broader social
security system. While there are a n u m b e r of methods of extending coverage
to the agricultural "and domestic employees, three of which were outlined in t h a t
release, subsequent consideration leads me to conclude t h a t the field should be
narrowed down to two of the plans which were discussed in t h a t release, namely,
the s t a m p sj^stem, and the r e t u r n system. A brief outline of these plans follow:
S t a m p s y s t e m : Under this systeni the social security tax would be paid through
the purchase of stamps by the employer a n d his affixing t h e m to the employee's
s t a m p book. The stamps accumulated in this book would constitute the employee's working record during the period the book is valid. When paying wages,
the employer would withhold the employee's tax and aflfix and cancel stamps in
the appropriate a m o u n t .
Each agricultural a n d domestic employee would obtain a social security account
n u m b e r a n d a s t a m p book from the Social Security Administration. The s t a m p
books, valid for 6 months, would be presented, to the employer for affixing the
appropriate stamps a t the time wages are paid. Each s t a m p book would contain'
a detachable form to be mailed by the employees to the SociarSecurity Administration shortly before the end of the 6-month period, applying for new books
and listing their current addresses. I t would also contain space on which an
employee would enter the name a n d address of a n y employer who failed to affix
stamps, together with the a m o u n t a n d date of wage p a y m e n t s . Upon receipt
of the employee's application a new book would be issued. At the close of •
each 6-month period, the employee would send in his old book for posting a n d
other processing by the Social Security Administration.
T h e Post Oflfice D e p a r t m e n t , it is understood, would participate to a considerable extent in certain of t h e above-described operations.
On presentation of completed application forms, employers would purchase
social security stamps, available in suitable denominations, from post offices,
rural carriers, and collectors of internal revenue. Whenever employees fail to
present their s t a m p books, employers would be required to report on prescribed
forms t h e employees' account numbers, names and wages, and to aflfix t h e necessary stamps to t h a t form.
EXHIBITS
311
R e t u r n system: Under this system every employer and employee is assigned
an identification n u m b e r by t h e Social Security Administration. E a c h calendar
quarter t h e employer files with t h e collector of internal revenue a return which
reports t h e employer's name and identifying number, each employee's account
number, name, and quarterly earnings, and t h e computation of t a x liability.
T h e employer withholds t h e employee's tax from his wage payment, keeps records
of b o t h wages a n d tax, a n d each q u a r t e r remits both t h e employees' and employers' t a x with his return. Periodically or on termination of employment t h e
employer furnishes each employee a s t a t e m e n t showing his wages and employees'
tax.
T h e collector detaches t h e schedule of employee wage information from t h e
r e t u r n and t r a n s m i t s it t o t h e Social Security Administration where t h e a m o u n t
of each employee's wages is posted to his social security account.
This, you will recall, is somewhat similar to the system which I have previously
outlined as existing procedure. There is, however, one notable difference which
is being given consideration in connection with t h e r e t u r n system, namely, t h a t
of providing a separate return form for employers of agricultural and domestic
workers. This separate return form is much more easily understood and is simplex
t h a n t h e form now in use by employers of nonagricultural and nondomestic
workers. I n principle, t h e distinction between the present form and t h e proposed simplified form is closely analogous to t h e distinction between t h e present
two types of individual income t a x returns, namely, t h e F o r m 1040'for t h e businessm a n and upper income salaried person, while t h e F o r m 1040A is provided for t h e
salaried person in t h e lower brackets.
(4) O U T L I N E O F P L A N F O R T H E A D M I N I S T R A T I V E M A N A G E M E N T
O F T H E P R O G R A M R E L A T I N G T O T H E SELF-EMPLOY^ED
We come now to t h e fourth topic which I indicated t h a t I would like to discuss,
namely, t h e m a n a g e m e n t of t h e program relating to the self-employed.
T h e plan for t h e coverage of t h e self-employed calls for t h e imposition of.a tax
on self-employed individuals measured by selected items of income reported for
income t a x purposes. I t provides for the segregation of t h a t p a r t of total income
which is most nearly comparable to wage income and analogous to earned income.
Individuals affected, limited to those whose self-employ ment income for t h e
taxable year exceeds exemption, will file an annual self-employment tax return
and pay a self-employment t a x a t t h e same time, as they file their income tax
return a n d - p a y their income tax. T h e self-employment t a x return will be made
on t h e basis of either t h e fiscal year or t h e calendar year in conformity with t h e
method used in filing the individual income tax return. T h e base of t h e proposed
self-employment ta5c would be derived from items of income t a x reported on the
income tax r e t u r n a n d this would facilitate appreciably t a x administration and
t a x p a y e r compliance.
Specifically, t h e plan would provide for transferring from t h e income t a x form
and using as t h e basis of self-employment income t h e a m o u n t s reported in t h e
appropriate schedules of t h e individual income tax return. F o r m 1040J which
represent income, from a business or profession a n d income from partnerships;
Interest and dividends would be excluded from t h e proposed tax base because normally they constitute investment income. To t h e extent, however, t h a t interest'
or dividends represent t r a d e or business income, provision would be made for
including such income in t h e self-employment tax base. iEloyalty incbme would
receive similar t r e a t m e n t , t h a t is, to t h e extent t h a t such income is derived from
a t r a d e or business, it would be included in t h e tax base. Income from rents
would be included only to t h e extent t h a t it represents rentals received in t h e
course of the individual's t r a d e or business as a real-estate dealer, or from t h e
operation of a rooming house or hotel operated primarily for t h e production of
income.
All capital gains and losses would be excluded from t h e tax base since this item
is clearly not earned income. Likewise, gains a n d losses from t h e sale or exchange of property, other t h a n capital assets, which is used in t h e taxpayer's t r a d e
or business, are to be excluded from t h e tax base.
Income derived by an individual from t h e performance of services as an employee, a n d t h e income derived by a duly ordained, commissioned, or licensed
minister of a church in t h e exercise of his ministry, or by a member of a religious
order in t h e exercise of duties required by such order, are specifically excluded
from t h e tax base.
312
REPORT OF THE SECRETARY OF THE TREASURY
A return would be required of every individual deriving income during the taxable year from a business or profession carried on by such individual in the United
States if he had taxable self-employment income of $200 or more and gross income from all sources of $500 or more. In my statement in respect to certain
technical changes, I recommended that the $500 filing requirement be raised to
$600.
The maximum amount of taxable self-employment income for the calendar
year 1949 and for fiscal years beginning in 1949 would be $3,000, less such amounts
of wages as have been subject to social security tax withholding by the employer.
For taxable years beginning after December 31, 1949, the $3,000 limitation would
be raised to $4,800.
Copies of all tentative return forms to which reference has been made are available for your inspection.
(5) SUMMARY
In conclusion, I should like to summarize the Bureau's position in respect to
the bill before you. The program embraced in H. R-. 2893 is feasible if we are
given-the necessary equipment, personnel, and space to carry it through. Its
feasibility is primarily due to the fact that the present income tax coverage and
other governmental forms, to which the individuals in these areas have now become accustomed, have provided them with the necessary experience to satisfactorily comply with the provisions of the bill.
It is not my purpose to minimize the task that would be placed in the hands of
the Bureau of Internal Revenue by the enactment of this bill. Obviously that
task is a big one, requiring careful planning and additional personnel, equipment,
and space. However, because of our experience, we are in a better position today
to meet the problems entailed in this new coverage than we were 12 years ago to
meet the problems which confronted us under the initial coverage.
As to the method to be employed in the collection of the tax under the proposed
legislation involving agricultural and domestic workers, I might state that the
Bureau of Internal Revenue believes at this time that the return method is more
effective from the viewpoint of the protection of the Government revenues as
well as the employees' interest. On the other hand, in my opinion, the stamp
, plan, is also feasible from an administrative standpoint.
In respect to the method to be employed in the collection of the tax under the
proposed legislation involving the self-employed, we feel confident that the
approach which we have suggested by tying it in with the business and partnership schedules on the individual income tax return is the best method.
Therefore, in order to aid us. in reaching the best procedural approach, after
appropriate experimentation, the Bureau should be permitted some flexibility in
the matter of the type of collection system to be used, with- the understanding
that every effort will be made by careful study within the Bureau, as well as
through consultation with the Federal Security Agency and representatives of
the various taxpayer groups affected, to develop the most workable plan.
With full knowledge of the many problems posed by H. R. 2893, I wish to
assure you that our objective, will be to administer the provisions of the law
which you may enact in a manner designed to best achieve its purpose.
Exhibit 21.^—Miscellarieous revenue legislation enacted during the fiscal year 1949
EIGHTIETH CONGRESS, SECOND SESSION
PubHc Law 869, July 1, 1948, amended section 812 (e) (1) (G) of the Internal
Revenue Code, relating to the marital deduction under the estate tax, to provide
that the proceeds of a life insurance, endowment, or annuity contract will quahfy
for such deduction if the proceeds are to be held by the insurer under an agreement to pay them in installments or to pay interest thereon, annually or more
frequently, if the surviving spouse is entitled to all such payments during her
lifetime and has the power to appoint the proceeds to herself or the power to
appoint to her estate all amounts payable after her death, and if no person other
than the surviving spouse has a power to appoint the proceeds in favor of anyone
other than such spouse.
Pubhc Law 899,. July 3, 1948, amended section 3154 of the Internal Revenue
Code, relating to refunds and credits to brewers, to require the Commissioner to
-
.-EXHIBITS
313
make refund or allow credit to a brewer in the amount of the tax paid by such
brewer on any fermented malt liquor manufactured by him which was lost in the
botthng house through breakage or leakage or in the process of filling, capping,
pasteurizing, or labehng, limiting the losses allowable to 2;^ percent of the tax
paid. Section 3404 (d) of the Internal Revenue Code, relating to manufacturers'
excise tax on musical instruments, was also amended to exempt from the tax
imposed thereunder musical instruments sold for the use of any religious or nonprofit educational institution for exclusively rehgious or educational purposes.
EIGHTY-FIRST CONGRESS, FIRST SESSION
Pubhc Law 2, January 19, 1949, provided for the payment of tax-exempt
expense allowances of $50,000 to the President, $10,000 to the Vice President,
and $10,000 to the Speaker of the House of Representatives, to assist in defraying
expenses relating to or resulting from the discharge of their oflficial duties.
Pubhc Law 4, February 3, 1949, amended Pubhc Law 769, 80th Congress, to
extend through June 30, 1949, the time during which any articles certified by the
Secretary of State as being donated in promotion of international good will by
the people oi' Government of the Republic of France, for sale for charitable purposes in the United States, may be imported free of customs duties, fees, or
charges and internal revenue taxes.
Public Law 33, March 31, 1949, provided that the import tax imposed under
section 3425 ofthe Internal Revenue Code upon copper shall not apply with respect
to articles (other than copper sulfate and certain composition metal) imported
during the period beginning April 1, 1949, and ending with the close of June 30,
1950.
Pubhc Law 35, March 31, 1949, amended section 3469 (a) of the Internal
Revenue Code, relating to the tax on transportation of persons, to provide that
on and after April 1, 1949, a port or station within Newfoundland (which on
April 1, 1949, became a part of Canada) shall not be considered a port or station
within Canada in applying the provision of that section that, with respect to
transportation any part of which is outside the northern portion of the Western
Hemisphere, the tax shall apply only to any part of such transportation which is
between ports or stations within the United States, Canada, or Mexico.
Pubhc Law 50, April 20, 1949, amended section 5 of Pubhc Law 384, Eightieth
Congress, to provide that March 31, 1951, shall be considered the termination
date of the war for the purposes of the proviso of section 511 (h) oif the Merchant
Marine Act of 1936 which authorizes the Maritime Commission to grant special
extensions of time, ending not later than six months after the termination of the
war, for the performance of qertain acts with respect to ship construction reserve
funds, required for the enjoyment of certain special tax treatment for such
reserve funds.
Public Law 72, May 24, 1949, contains a provision amending section 2411 of
the Judicial Code to restore the provisions of section 177 of the former Judicial
Code for the payment of interest on judgments for tax refunds at the rate of 6
percent rather than the 4 percent generally payable on judgments rendered
against the United States. Other provisions of the act amend section 1346 (a)
(1) of the Judicial Code so as to clarify that subsection with respect to district
court jurisdiction over suits involving tax claims where the amount involved is
less than $10,000, and section 1141 (a) of the Internal Revenue Code to conform
it with the style of nomenclature adopted in the revised Judicial Code.
Pubhc Law 137, June 28, 1949, amended sections 403 (d) (3) and 452 (c) of the
Revenue Act of 1942 to extend through June 30, 1950, the period within which
the release, or the possession at death without exercise, of a power of appointment
created on or before October 21, 1942, will not be subject to.estate or gift tax.
The act also amended subsection (j) of the Renegotiation Act to extend through
June 30, 1950, the period within which persons may serve in certain executive
departments and agencies (including the Treasury Department) without, after
separation from the service, being prohibited from acting as counsel, agent, or
attorney for prosecuting claims against the United States by reason of having so
served. The effect of the amendment is to continue, with respect to such persons,
earlier suspensions of section 190 of the Revised Statutes, which inhibits such
activity withiii two years next following termination of such employment.
314
REPORT OF T H E SECRETARY OF T H E TREASURY
S T A T E M E N T ! AND A D D R E S S E S
Exhibit 22.—Address by Secretary of the Treasury Snyder before the annual convention of the National Association of Supervisors of State Banks, Louisville,
Ky., September 22, 1948, on the business outlook
I t is a real pleasure to be here with t h e State Bank Supervisors today. We meet
on a common ground—a genuine interest in t h e protection, development, and bett e r m e n t of our banking system.
I have been associated for m a n y years with bank supervision under all sorts of
economic conditions. I spent years adjusting t h e affairs of banks which h a d
become involved in serious insolvency; I have been an active participant, both as
principal and as supervisor, in t h e making of m a n y Government loans—some in
cooperation with banks and some for t h e purpose of enabling banks to reestablish
themselves; and I have had general direction in recent years over t h e supervision
of t h e banks of t h e national banking system. On t h e other hand, I h a v e also been
on the receiving side of bank supervision during t h e time I served as a bank officer.
N o one knows better t h a n bank supervisors.of t h e vast changes which have t a k e n
place in our banking system during t h e past quarter-century, and we all know t h e
extent to which those changes were beneficially influenced by bank supervisors.
You are to be commended for the job yOu have done, and are doing.
I n my experience in banking and connection with banking supervision, I have
acquired a very strong conviction in which I believe all of you will join. This
relates to t h e importance to successful banking of an understariding of national
and world economic trends. To a large extent, within our generation, t h e
extremes of weak and strong banking have resulted from t h e foresight, or t h e
lack of it, of the banking fraternity and of bank supervision. For this reason, no
subject should be of greater significance to bank supervisors t h a n t h e underlying
forces and trends of t h e general economic picture.
Discussion of the economic situation as it looks today, recalls a talk t h a t I gave
before the Economic Club of New York nearly two years ago, in November 1946.
At t h a t time there was great uncertainty over the business prospect. The stock
m a r k e t had broken badly in September, which led many to believe t h a t a business
decline would shortly follow. Business observers feared a repetition of t h e 1920
crash. This fear was reinforced by a great rise in business inventories, which
h a d increased more t h a n $6 billion in four months.
I n the fall of 1946, t h e production of both manufactured goods and farm
products was far above any previous peacetime level. Industrial production
was 80 percent above the 5-3^ear prewar average, and farm production exceeded
the prewar level by fully one-third. Civilian employment was at an all-time
record.
a
" H o w long can it l a s t ? " was t h e big question a t t h a t time. A survey of the
opinions of economists, bankers, and other business observers showed a widely
held belief t h a t business would reach a top within a few months, and t h a t by
the following summer it would s t a r t a substantial decline. B u t I saw no reason
t o accept t h a t opinion. For with all t h e enormous resources of our country,
with our huge unfilled demand for goods, and with certain safeguards t h a t had
been installed by the Government during recent years to protect our econom}^
m a n y of us did not believe t h a t a postwar recession was inevitable just because
one occurred after World War I.
I n m y talk t o t h e Economic Club, I pointed out some of the important
differences between t h e postwar situation of 1920 and t h a t of 1946, and stated
t h a t , in view of these differences, I could not see how a fair appraisal of "America,.
T o d a y " could justify the feeling t h a t a material recession in "America Tomorrow"
was inevitable. T h e events of the past two years have borne out this belief.
F a r from suffering t h e recession t h a t m a n y h a d predicted, our national production and consumption have pushed forward to new records.
The industrial production index is now about 190, as compared with 180 in the
fall of 1946. E m p l o y m e n t has reached new high records, with more t h a n 61
million persons now in civilian jobs. This does not include t h e armed forces.
Agricultural production is close t o t h e wartime peak. Cash farm income in t h e
first 8 m o n t h s of 1948 was 4 percent higher t h a n in the same period last year.
Our material well-being has improved substantially as more and more consumer
goods have become available.
1 other statements will be found as exhibits 15, 16, and 20.
EXHIBITS
315
It is important however that we distinguish between a high-level economy and
the boom stage in the so-called "business cycle". For herein, as I see-it, lies the
essential difference between the present economic situation and those periods of
the twenties. A high-level economy with widespread prosperity, such as we
have today, does not necessarily imply that the foundation must be unsound.
It may well be based on sound conditions which could be prolonged indefinitely,
provided an unbalanced situation were not allowed to develop. Let me repeat
this—for I think it touches the heart of the whole, situation. Our prosperity
can be continued and spread to raore and more of our people—as it should—
provided we do not allow an unbalanced condition to develop.
Let me point 'out some of the factors which could be dangerous. A typical
boom stage in the business cycle can only be temporary, because it is built on an
unbalanced foundation, generally characterized by excessive speculation. The
booms of the twenties, for example, were fed by widespread speculation in
commodities and in rural or urban real estate, much of which was financed with
borrowed money. The boom which ended in 1929 was unbalanced by Nationwide stock market speculation which was also largely financed with borrowed
money.
Today it seems quite clear that neither production nor prices are ^being supported "by a rising tide of speculation, such as characterized the 1920.booms.
The speculative interest in the commodity markets is proportionately normal.
Speculation in the stock market has remained rational. Businessmen generally
have been cautious about expanding their inventories. We owe this continued
well-balanced situation, in large part, to the good sense of the American people
aided by various actions and timely warning signals from the Government.
We must be constantly alert, however, to the potential dangers that ha.ve
threatened through growing inflationary pressures. The outstanding need of our
economy is to counteract these pressures. The Government has only limited
weapons for this purpose, but the Government is vigorous in using those that it
has. Let no one have any doubt about this. One of these weapons has been the
policy of directing debt management to a rapid reduction of the Federal debt,
particularly that held by banks.
Budget surpluses, enabling debt reduction during the past two years, have
been aimed at reducing inflationary pressures. I stated when I assumed oflfice
as Secretary of the Treasury in June 1946 that it was the responsibility of the
Government to reduce its expenditures in every possible way, and to achieve a
balanced budget, or better. Both President Truman and I have continued to
emphasize the imperative necessity of reducing our debt burden during this period
of great prosperity.
It was most gratifying to be able to announce at the end of the fiscal year just
passed that we had completed two years of budget surpluses. In the 1948 fiscal
year, we achieved by far the largest surplus in our history—^$8,419 million. But,
unfortunately, the record of these two years of surpluses will not be repeated
during the present fiscal year. And that is due to the ill-timed and ill-conceived
tax bill passed in the last Congress..
In carrying out the Treasury's debt management policy, the debt held by the
commercial banking system has been reduced by $30 billion since February 1946,
or $3 billion more than the reduction in the total debt. There has been an actual
increase during this period of $3 billion in Federal debt held by nonbank investors.
This increase reflects principally the increased amount of securities held by
Government trust funds and the vigorous sales campaigns for savings bonds conducted during the period.
As part of the Treasury program to reduce inflationary pressures, credit has
been tightened by a gradual increase in interest rates on short-term Treasury
securities, and by a sharp reduction in premiums on long-term issues. Indicating
the effectiveness of these actions, it is encouraging to note that the money supply
has lately declined. At the end of July, the currency outside of banks plus adjusted demand deposits was $4.6 billion less than the all-time peak of $113.6
billion reached at the end of last December. This was partly seasonal, but last
year the reduction during the same period was only $1.0 billion.
But perhaps the most significant factor in the business structure of the Natron
is the fact that both individuals and corporations have built up assets of sufficient
volume to maintain a highly liquid financial position. The liquid assets of individuals are now estimated at approximately $200 billion, of which more than
$140 billion has been accumulated since 1939. Net working capital of corporations has increased by $38 bilhon since 1939, reaching a recent total of $62 bilhon.
?^16
REPORT OF THE SECRETARY OF THE TREASURY
Corporate holdings of cash and Government securities have increased $22 billion
since 1939.
And the strong financial position in agriculture is well illustrated by the situation
in farm real estate. While prices of farms have advanced even more rapidly in
recent years than during the comparable period of World War I, the rise has not
been* financed by borrowing. On the contrary, it has been accompanied by a decrease of about 30 percent in farm mortgage debt, in contrast to an increase of
160 percent during the speculative land boom of World War I. The total farm
mortgage debt of $4% billion at the end of 1947 was less than 8 percent of the
value of all farm lands and buildings. In this, and in other respects, agriculture
stands today on a much firmer foundation than it did in the twenties.
In any appraisal of the strength of our economy now as contrasted with the
situation in the twenties, full regard must be given to the safeguards and supports
which have been provided since the early 1930's by a government acting with
vision and dispatch in response to a nation's awakened sense of social responsibility. Today, under the provisions of social security legislation, we have federally sponsored State unemployment insurance which would aid materially in
maintaining purchasing power should there ever develop a serious business set-back.
. Today the position of agriculture is bolstered not only by the strong financial
condition of farmers, but also by measures to insure proper returns to the farmers
for their farm products. The Administration's program for protecting the rights
of labor, which has broadened the use of collective bargaining in wage negotiations,
has served to strengthen and stabilize the entire wage structure. .Under the protective operations of the Securities and Exchange Commission, investors in securities are enabled to obtain full and accurate information concerning the'registered
issues. Restrictions on the use of credit in stock market trading, administered
by the Federal Reserve Board, have done much to prevent excessive speculation
in that field. - The Federal Deposit Insurance legislation protects the savings of
depositors, and the stability of the banking structure is thereby immensely
improved.
. When all of these factors are summarized, they indicate without question that
the national economy today is much healthier and stronger than it was in the
twenties. We must concentrate on those features of our present situation that
have enabled us to maintain a basically sound high-level economy, and we must
be alert for any developing evidence of unbalance that might cause an unnecessary
break-down.
The present picture is a reassuring one; but there are a few unhealthy symptoms
in addition to the inflationary pressures which I have mentioned. One is the
extent of real estate speculation and another is the rapid rise in consumer credit,
now at record levels. This type of credit expansion not only contributes to, in^
flationary pressure now, but will be strongly deflationary later. The banking
fraternity has made a valuable and significant contribution toward stabilizing
our economy through the voluntary program for credit control which the American Bankers' Association has so aggressively sponsored. A more careful screening
of loan applications brought visible results during the first half of this year in
holding down bank credit. This action has contributed substantially toward
preserving a well-balanced economy.
Since the Treasury, in this fiscal year, will no longer be able to contribute
substantially to inflation control by an excess of receipts over expenditures, an
. even greater responsibility will be placed on the men who determine loan policies
in the Nation's 15,000 banks. A liberal uncoordinated credit policy contributed
to the short-lived speculative boom after the First World War, the liquidation of
which brought heavy losses to lenders as well as borrowers. We have too much at
stake to risk a repetition of that experience. All types of loans should be kept on
a sound basis. Speculative buying should be held to a proper minimum. And
consumer credit should not be allowed to become over-extended. A greater and
even more prosperous future faces this Nation if we are wise.
The Nation is faced with a heavy unfilled demand for houses, for automobiles,
farm machinery,-freight cars, steel, electrical capacity, new schools, and highways.
Our population is growing, and a still greater expansion in these facilities may well
be called for in the future. Electronic devices, plastics, and other new inventions
are attracting an increasing public demand. We have only begun to tap the
billions of savings built up during the war years. All of these facts testify to the
powerful reserve strength in our national economy.
For with our eyes ever toward the future—with alertness to detect and forestall
any threat to our economic stability—we have every reason to hope for continued
prosperity in the years to come, and for an even greater and better America.
EXHIBITS
317
Exhibit 23.—Address by Secretary of the Treasury Snyder before the National
Credit Conference ofthe American Bankers Association, Chicago, 111., December
14, 1948, on the cooperative role of the banking system and the Treasury in
strengthening our economy
-^^
I am particularly glad to" have the opportunity of speaking to you pn the
occasion of this National Credit Conference. Your group holds. a strategic
position in shaping policies of credit right at the borrower's level, where the
effect on the welfare of not only the borrower but of the nation is direct and
immediate. In the past, you have demonstrated many times your ability to
make these policies effective. We expect the programs you are considering at
this meeting to have a wholesome and salutary effect upon present and future
policies.
In certain respects, 1948 has been a critical one in the credit picture. But I am
glad to say that bank loans during this year have been carefully screened, resulting
in a total increase of much less than last year. Total loans of the weekly reporting
member banks expanded only $1.8 billion through December 1, 1948, as compared
with a rise of $3.8 billion in the same period of 1947.
This satisfactory showing is attributable in very large measure to the credit
control program of the American Bankers Association. Through this voluntary
program, the bankers of the country have rendered an important service by
adhering to a more than, usually cautious loan policy in this critical inflationary'
period.
Your willingness to forego immediate banking profits in the interest of a stable
national economy is sound and farsighted banking practice.
I am today firmly convinced that the banking fraternity must conscientiously
work toward effective leadership in an ever broadening financial field. Your
recent action through the A. B. A. anti-inflation program has shown a bold and
aggressive inclination and ability to step out as leaders and to take an active
part in shaping our present and future economy.
This has not been an easy task. It has required a high degree of flexibility.
But in the interest of the national economy, bankers riiust maintain this position
and make ready to meet inflationary pressures with, self-imposed restraint, or to
step in with a sound loan policy in times when the demand for bank credit is
wholesome.
At this time it would be well to take stock of the Nation's present economic
position, and to calculate what may lie ahead. I should like particularly to discuss the cooperative role of the banking system and the Treasury Department in
dealing with our most important national economic problem—that of strengthening our economy at the present high level of prosperity.
The achievements of this country in the three years since VJ-day have been, to
say the least, remarkable.. The reconversion from war to peacetime production
was accomplished with amazing speed and efficiency. During these years, while
substantially meeting our own current needs, we have also provided relief,
rehabilitation, and reconstruction to a large part of the war-torn areas of the
world.
We have now reached a stage where wartime accumulation of demand for many
products is becoming more nearly satisfied. But let me remind you that severe
shortages still exist in lines such as steel and other metals, and in their products..
Labor shortages remain a problem. Many new products and new demands for
service await only a more adequate supply of basic materials and labor.
The demand for these new items should serve to replace any significant deflationary reduction in demand that might follow the .filling up of wartime shortages. In fact, such a replacement process has already been going on for some
time, and corrective adjustments have occurred in various industries without
appreciably affecting the over-all business level.
In certain respects, the present business picture resembles that of the mid1920's. Although the economic levels then were lower, that period was also
one of high prosperity. National income had reached the highest level in history
up to that time; labor was practically fully employed; and business was highly
prosperous.
The maintenance of that high-level prosperity over an extended period can be
attributed to the fact that, until the stock market got out of hand in 1928, there
was no hazardous volume of speculative excesses in the economy—no over-buying, over-borrowing, nor over-expansion. It is true that speculation in city real
estate was overdone—and there are some signs of this today—but the impact was
318
REPORT OF THE SECRETARY OF THE TREASU ?:iY
. not of sufficient force to unsettle the economic levels. With economic conditions
continuing on an even keel, the volume of industrial production became e s t a b lished on a generally stable b u t gradually rising t r e n d for t h e 5-year period from
1923 through 1927.
In t h e interest of our country's future, we must not fail to heed the lesson of
t h e 1920's. We m u s t do all in our power to perpetuate a stable business trend,
and make every effort to heed any signals of a business collapse similar to t h a t of
1929.
•
To this end, you bankers play a most i m p o r t a n t role. One of your first responsibilities is to closely examine each loan application from t h e viewpoint of its
voffect on t h e national econom}';. For obviously, loans t h a t are not made for a
sound productive purpose mortgage future income to increase present demand.^
Such loans are not only inflationary t o d a y — t h e y are distinct contributions to-a"^
boom and bust cycle.
Our economy is a t present in a basically sound condition, and shows encouraging signs of stability in t h e vicinity of t h e present high levels. There is t o d a y no
strong evidence of over-buying by consumers, nor of over-expansion by industry.
And consumer demand on t h e whole is still, for these times, healthily unsatisfied,
a n d capacity in m a n y lines is still inadequate.
T h e fact t h a t our present economic levels are m u c h higher t h a n before t h e war
is no reason for doubting t h a t the}^ can be maintained. T h e new record levels
estabhshed in the mid-twenties, -exceeding t h e peaks reached in World War I, '
unquestionably seemed excessive to many a t t h e ,time. Now we have .25 million
more people t h a n we had in 1929. We are definitely in a growing economy, and
previous standards cannot be used to measure our present prospects.
T h e people of all t h e democratic countries of t h e world look on t h e United
States as a bulwark of economic a n d financial strength. To justify this confidence, it is essential t h a t we recognize our joint responsibility to maintain an ever
constant watch for any influence by which our own strength might be undermined.
Achievement and maintenance of national economic stability depend upon m a n y
factors, of which one of the most elemental is confidence in the Government's
credit.
The Treasury's first objective is to conduct fiscal policy in such a manner as to
promote full confidence in the credit of t h e United States Government—and
stability of the Government bond m a r k e t is essential to this achievement.
I came to t h e Treasury in June of 1946, when we were in the process of transition
from war to peace. The country was faced with numerous and varied economic
problems. N o t the least of these a t t h a t time was t h e unprecedented size of our
public debt—a public debt without parallel both in terms of its dollar total a n d
in its relation to t h e economy of t h e country.
Confidence in t h e stability of the Government bond m a r k e t h a d to be assured
to maintain t h e underlying strength of t h e national financial system. I t would
ease reconversion problems for industry, business, and Government. I t would
encourage t h e capital expansion so necessary for maximum production in peacetime.
'
Therefore, during my tenure of oflfice, t h e Treasury, in cooperation with t h e
Federal Reserve Board, has directed its efforts toward maintaining this confidence
•in t h e .stability of the Government bond market. Such efforts have contributed
materiaUy toward p r o m o t i n g business confidence and toward attaining t h e fullest
economic activity in our peacetime history.
I t is to be emphasized, however, t h a t t h e desirability of continued stability in
t h e Government bond m a r k e t a n d confidence in t h e Government's credit has great
implications beyond t h e domestic business picture alone. The present international situation makes it particularly imperative t h a t United States financial
strength and integrity remain unquestioned.
T h e Treasury and Federal Reserve have directed their efforts toward maintaining bond m a r k e t stability in both directions—toward keeping bond prices
from going up too high and too fast, and toward keeping t h e m from going down
too sharply. Begimiing in t h e spring of 1947 we took action to control an incipient
boom in t h e bond m a r k e t — b y selling long-term bonds from some of t h e Governm e n t investment accounts, by offering t h e I n v e s t m e n t Series of bonds to institutional investors, and by increasing short-term rates. All of these operations
combined to t a k e upward pressure off the market.
When conditions changed, and a downward pressure on bond prices developed,
we stabilized the bond m a r k e t through purchases of long-term bonds. .All of our
EXHIBITS
319
actions have been t a k e n with a view toward promoting business confidence and
of attaining a high level of employment and production.
These reasons in themselves should be enough. B u t there are further i m p o r t a n t
reasons for maintaining stability in t h e Government bond market.
A public debt of the magnitude of $250 billion is unknown to any past period
of our economy. T h e uncompromising war-time demands, however, forced a
revision of our entire financial and fiscal thinking. One of the important decisions made early in the war was to sell as m a n y securities as possible to nonbarik
purchasers. This decision had tremendous implications for the future of our
debt m a n a g e m e n t policies. This was particularly significant with respect to t h e
sale of Government securities to tens of millions of purchasers, who now hold $55
billion of nontransferable savings bonds.
Another i m p o r t a n t factor for consideration is t h a t t h e budgetary cost of servicing t h e public debt would be increased by any significant decline in bond prices.
The interest cost is already $5.3 billion a year. A further rise in t h e budget
charge for interest p a y m e n t s Would be of Nation-wide importance, a n d it would
affect every taxpayer. A rise in t h e average interest rate of t h e public debt by
as little as }^ of 1 percent would cost t h e American, taxpayers approximately
$1,250 million a year.
T h e Treasury was able to finance the last war a t an average interest rate of
less t h a n one-half t h e interest rate of World War I. If this had not been done,
t h e present interest charge would have been more t h a n $10 billion a year iristead
of $5 bihion.
I t has been argued t h a t support of t h e m a r k e t is infiationary, because of t h e
large sales of Government securities to t h e Federal Reserve, and t h a t we are paying too high a price in order t o gain t h e benefits of bond market stability which
I^have outlined. Actually, there has been no net increase in Federal Reserve
holdings of Government securities attributable to t h e support program. Since
this program was initiated in November 1947, Federal Reserve holdings have
increased by some $950 million. Much more t h a n this, however, is directly a t tributable to t h e $2 billion increase in reserve requirements last September.
Furthermore, if t h e bond m a r k e t were allowed to get out of control, there is a
real possibility t h a t we would h a v e more inflation to contend with, r a t h e r t h a n
less inflation. T h e removal of confidence in t h e stability of t h e bond market,
and a consequent impairment of confidence in our financial situation, might well
h a v e serious consequences in this country a n d cause a weakening of confidence in
our financial stability throughout t h e world.
Despite t h e continued strength in our national economy, t h e r e is some feeling
of apprehension in business circles.
I t might almost seem t h a t this business apprenhension is getting to be a seasonal affair. In t h e fall of 1945 there was a general fear of widespread unemployment because of reconversion from t h e war effort. I n the fall of 1946 a
business scare developed over t h e severe stock m a r k e t break'in September of t h a t
year. Last fall t h e r e was fear of unfavorable effects from t h e credit restriction
program.
•
None of these business fears were realized. B u t unwarranted as t h e y were,
they h a v e had t h e beneficial result of p u t t i n g a damper on various speculative
projects, which would in any case have been of questionable economic benefit.
I d o u b t t h a t any sound expansion plan, for which a real need existed, has been
affected.
I see no reason to beheve t h a t t h e present business apprehension rests on any
more substantial basis t h a n t h e earlier ones. On t h e contrary, t h e prospect of a
continuation of t h e policies of recent years should give t h e Nation increased
confidence in t h e stability of present high business levels. T h e President has
made very clear in his statements to Congress and to t h e Nation t h a t a major
objective of his administrative program has always been, and will continue to
be, a well-maintained high-level economy, and, within this framework, to provide
for a balanced budget and progressive debt reduction.
An extended prosperity can only be achieved by a policy of moderation—by
encouraging a healthy business development while restraining t h e excesses of
over-buyirig, over-borrowing, a n d over-expansion which inevitably would bring
on a business depression. This policy of moderation has been a n d will continue
t o be t h e Administration's program.
T h e Nation has a huge task before it. We must meet the normal demands of
a growing population with high living standards. We m u s t provide productive
machinery to replace t h a t worn out during t h e war. We must build new homes,
320
REPORT OF THE SECRETARY OF THE TREASURY
new hospitals, new churches and schools, and new municipal facilities. We must
rebuild thousands of miles of highways. In addition to all this, we must do our
part in the great task of world reconstruction, and we must build a powerful
defense establishment, to the end that normal international relationships, free
from the threat of war, may become re-established throughout the world.
This is a large order. It is, a sobering prospect. In the years ahead, our
major task will be to protect this American economy from the mistakes of the
past—not only to insure that a serious business depression, shall not happen,
but to be certain that we maintain our present course of national economic
progress.
Exhibit 24.—Statement by Secretary of the Treasury Snyder before the congressional Joint Committee on the Economic Report, February 10, 1949, on the
state of the finances of the Government
Mr. Chairman and members of the Committee: I appreciate your invitation
to appear before this Committee to discuss the state of the finances of the Government of the United States.
As you know, the Secretary of the Treasury since the creation of the Department
has been submitting to the Congress at its opening session each year an annual
report on the state of the finances of the Federal Government for the preceding
fiscal year. I submitted such a report for the fiscal year 1948 a few weeks ago.
I should like at this time to present what might be termed an interim report,
and to discuss in some detail the outlook for the Federal fiscaT position for the
calendar year 1949.
In the 2}^ years that I have been in the Treasury, my first objective has been
the sound financial position of the United States Government. This period has
been a particularly critical one in our economic life. It has covered in major
part the reconversion to a peacetime economy, the restocking of war-depleted
inventories, the easing of accumulated shortages, and, to a considerable extent,
the transition back to an economy of buyers' markets and normal competition.
The speed of reconversion is a tribute to American management, technical skiU .
and good will on the part of labor, management, and the consuming public.
The contrast with the experiences after World War I is sharp. That war was
followed by a period of rapid inflation, speculation in commodities and inventories,
foUowed by a sharp crisis and depression. The coUapse of the speculative boom,
after World War I also broke the market for Government bonds, and in this way
helped to undermine confidence in the stability of our economy.
This time, we have been able to avoid these disasters. Our Nation today is
in a far stronger financial, position. There is no evidence of more than normal
speculative holdings of commodities. In fact, speculation recentl.v, both in
commodities and in the stock market, has not been cause for concern, inventories
in most lines have been kept low by cautious inventory policies, and by continuing
shortages of many types of goods.
Economic stability at the present high levels of employment and production
depends to a great degree on continued confidence in the Government's credit.
The importance of confidence in the financial soundness of national governments, as a powerful economic factor, is clearly evident among the countries of
the world today, when even moderate differences in national credit confidence
are plainly reflected in differences in the rate of economic progress.
The objective of sustaining the sound financial position of the United States
Government has involved two separate lines of action. The first has been to
develop a sound fiscal policy, which must be based on a revenue system that will
not only meet the cost of prescribed Government functions, but which will
yield a surplus for a gradual retirement of the public debt.
The second line of action has been to manage our public debt in such a way as
not only to assure confidence in the Government's credit, but to promote economic
stability.
The accumulation of a large public debt is inevitable in war time and the cost
of the last war was so great that the public debt of the United States reached
unprecedented levels. Fortunately, the economy of this country expanded
during the war period so that this huge public debt did not constitute too great
a burden" on the national income of the people. Nevertheless it represents a
serious annual cost, and the existence of a large debt requires careful management
so that it can contribute to economic stability rather than stimulate speculation
on the one hand, or precipitate financial stringency on the other.
EXHIBITS
321
When I came to the Treasury in June 1946 I felt that stability in the markets
for Government securities would encourage business confidence and would aid
materially in promoting our. industrial development.
Therefore, in coopera,tion with the Federal Reserve System, the Treasury has
sought to maintain the stability of the bond market in both directions. It has
been our objective to keep bond prices from going up too rapidly or going down too
sharply. In the spring of 1947 we took steps to arrest a boom in Government
bonds. When conditions were reversed and selling pressure on the Government
bond market developed, we changed our practice and purchased bonds. In recent
months there has again been upward pressure on the bond market and we are
again selling to stabilize prices. Such actions are important not merely from the
standpoint of Government finance and role of Government debt in the monetary
system, they are important for the whole level of the security markets, since the
prices of other bonds are, to a large degree, influenced by the prices of United
States securities.
Our aim has.been to use fiscal policy as a stabilizer to the economy of the Nation.
While this is important at all times, it is imperative at the present time when the^
United States is undertaking such an important role in promoting international
economic cooperation and reconstruction.
The law vests responsibility for the management of the public debt in the
Secretary of the Treasury, who must, with the approval of the President, make
the decisions of policy involved. Therefore, I wish to discuss the Treasury's
debt policy, particularly the budget position of the Government as it affects the
cash position of the Treasury, and the effect of our policy actions on the various
classes of investors. To facilitate the presentation, there is a booklet ^ of charts to
which I will refer from time to time to make some of the points clearer.
The basic factor influencing the Treasury's financing outlook is the budget
picture. The chart which appears on page 1 of the booklet covers the budget
situation for 1949 and 1950, and makes a comparison with previous years. As.
you know, the budget forecasts a deficit for 1949 and 1950, despite the fact that
economic activity is high and is likely to continue so for some time.
Expenditures reached a peak of $99 bUlion for 1945, dropped to a low of $34
biUion in 1948, and are estimaied in the President's budget at $40.2 bUhon for
1949 and $41.9 biUion for 1950.
Receipts rose to a peak of $45 biUion in 1945, and are estimated at $39.6 billion
for 1949 and $41 billion for 1950. Both the receipt and expenditure figures are
on the new basis of Federal financial reporting, whereby tax refunds are deducted
from the total revenues during the year, instead of being included in the expenditure totals.
The budget surplus or deficit of the Federal Government is represented by the
difference between the receipt and the expenditure figures on the chart. As you
know, a budget deficit was incurred during each year from 1931 up through 1946.
In 1947 there was a surplus of three-quarters of a billion dollars. In 1948 there
was a surplus of over $8 billion. . The President's budget indicates that, because
of tax reduction and in the absence of new tax legislation, deficits will occur in
both 1949 and 1950—in the amounts of approximately $600 million and $900
million, respectively.
The President said in his Budget Message that it was not sound public policy
for the Government to operate at a deficit in times of high prosperity. I have,
as you know, always taken this view; and I feel that I cannot emphasize its importance too strongly. It is vitally important tha't the Federal Government have
a substantial surplus in periods of prosperity to permit a reduction in the public
debt. I feel it to be essential that a tax program, as suggested by the Presiderit,
be enacted by the Congress as soon as possible.
The development of tax legislation, as you know, is within the jurisdictiouo of
the House Ways and Means Committee and the Senate Finance Committee.
The Treasury has been working with these committees. The objective of the
Administration is to increase revenues by $4 billion; and the need for these additional revenues for the Federal Government is imperative. We must have a
surplus during times of prosperity with which to reduce the debt; for if we do not,
we shall never be able to reduce the debt in the manner which I feel is necessary
and desirable.
In considering the Treasury's financing outlook, it is necessary to examine the
budget figures with a view toward determining their effect on the Treasury's
1 Omitted here.
856455—50
22
322
REPORT OF THE SECRETARY OF THE TREASURY
cash balance. The Treasury cash balance is not only affected by t h e b u d g e t
surplus or deficit, b u t also by additional items which bring cash into t h e Treasury.
The cash operating surplus is typically higher t h a n t h e budget surplus, as shown
in t h e chart on page 2 [of t h e booklet]. This is primarily because of t h e money
flowing into t r u s t accounts which is then invested in Government securities.
The. cash operating surplus stood a t $6.7 biUion in 1947 and $8.9 billion in
1948. I t wiU drop to $2.8 billion in 1949, and to $1.5 biUion in 1950. There are
a number of items in the reconciliatiori between t h e budget surplus and t h e cash
operating surplus for t h e flscal years 1947 to 1950; a n d these are shown in t h e
table on page 3 [of the booklet].
The top line of this table, which shows the budget surplus, corresponds to t h e
bars on the left-hand side, of the preceding chart. The b o t t o m line of this table,
showing the cash Operating surplus, corresponds to the right-hand side of t h e
preceding chart. I n the center of the table, we have set forth t h e major items
which have to be considered in reconciling the two concepts.
• T h e most i m p o r t a n t item on this chart for 1949 and 1950 is " t r u s t fund inv e s t m e n t s " . This represents the money flowing into the t r u s t funds. T h e
Treasury invests this money in Government securities. T h e a m o u n t involved
is approximately $3 billion for the fiscal years 1947, 1948, and 1949.
For 1.950 the figure is $2 billion. I t would have been higher except for the fact
t h a t there is likely to be a-large outflow during the fiscal year 1950 from one of t h e
t r u s t funds, the national service life insurance fund. This is a result of a cash
dividend of about $2 billion to be paid to veterans.
Among the other reconciliation items are the savings bond interest accruals,
.which are a budget expenditure b u t which require cash from the Treasury only
when savings bonds are redeemed for cash, or mature.
Also in the reconciliation are items referring to the notes issued to the M o n e t a r y
F u n d and International. Bank, and the bonds issued in connection with the Armed
Forces Leave Act. In both cases, the items were budget charges when t h e notes
and bonds were issued. They affect the cash balance only on occasion of their
redemption. There were large redemptions in 1948. Redemptions in 1949 and
1950 are expected to be relatively small.
^
There are some other minor items in reconciling the two concepts; b u t I ha,ve
discussed the principal ones. . T h e net of the situation is t h a t there will be a cash
surplus during the fiscal years 1949 and 1950-, notwithstanding the fact t h a t there
is a budget deficit during those years.
This net addition to cash will not permit us, however, actually to reduce t h e
public debt—which, as I mentioned a few minutes ago, is of most iniportance a t
this time. This, cash will represent increases in t h e Government's liabUities,
on one account or another. T h a t is, we issue public debt obligations to our t r u s t
funds when money is paid into t h e m ; and our liability on the savings bonds outstanding grows as their value increases through interest • accruals. The cash
operating surplus comes about, therefore, primarily because the G o v e r n m e n t ' s
liability is increasing through a series of public d e b t programs already in operation.
Besides the cash operating surplus, the Government receives money from t h e
sale of savings bonds and notes. In the next chart—on page 4 [of the booklet]—
the amo.unt estimated to be received is added for 1949 and 1950.
You are all familiar with t h e savings bond program. I t has been a program
of tremendous importance a n d significance for m a n y years. Receipts from cash
sales from savings bonds and notes will a m o u n t to $2.5 billion in 1949 a n d $1.5
billion in 1950; and these a m o u n t s , when added to the cash operating surplus,
represent t h e aggregate a m o u n t of cash inflow which the Treasury will have
available.
I should like to mention a t this point t h a t t h e reductioii in t h e a m o u n t s likely
to "be received from t h e cash sales of savings bonds a n d notes in 1949 and 1950
.does not represent any change in the promotion aspects of t h e program during
these two years. The difference represents the a m o u n t received from t h e special
offering of F and G bonds to institutional investors, which was made during the
first p a r t of July 1948 a n d which is a p a r t of the figures for the fiscal year 1949.
Special offerings are made to facilitate the investment of funds by some of t h e
large institutional purchasers of Governnient securities when conditions w a r r a n t ;
a n d it is too. early to determine Avhether there will be a need for an offering of .this
t y p e during t h e next fiscal year.
In order to summarize the cash position for t h e calendar year 1949, I should
like to direct attention for a m o m e n t to t h e table on page 5 [of t h e booklet,]
EXHIBITS
323
which segregates the cash inflow into t h e Treasury for the fiscal years 1949 and
1950 by shorter time periods.
I n t h e July-September quarter of the fiscal year 1949, the Treasury h a d a cash
inflow of $2.7 billion.
In the October-December quarter of the fiscal year, there was a cash outflow
of %Y2 biUion.
In the J a n u a r y - M a r c h quarter of this fiscal y e a r — t h a t is, t h e quarter in which
we are how operating—the Treasury will. have a cash infiow of approximately
$4 biUion.
In t h e April-June quarter, there will be a cash outflow of $900 million; a n d in
the six m o n t h s July-December, which is t h e first p a r t of the fiscal year 1950,
there will be a cash outflow of $1.4 bUlion.
We have classified the cash inflow by periods shorter t h a n the fiscal 3^ear, so t h a t
I could describe for you the fiscal situation in the calendar 3^ear 1949, a period
which overlaps t h e two fiscal years for which estimates are in the budget.
The chart on page 6 [of t h e booklet] m a y be helpful, in this connection. I t
shows, t h e efl'ect of t h e Treasury operations on our cash balance during t h e calendar year 1949. T h e Treasury's cash balance was $4.2 biUion on December 31,
1948. To this will be added the $4.0 billion cash inflow, which will occur during
t h e current quarter. During the remainder of this calendar year, there will be a
cash outflow. Also, t h e tail-ends of maturing securities will have to be paid off
during t h e calendar year. These transactions will reduce the balance to $3.2
billion b y December 31, 1949.
The tail-ends of m a t u r i n g securities to which I refer represent t h e relatively
small a m o u n t s of each m a t u r i n g issue which are t u r n e d in for cash redemption
instead of exchange when a maturing issue is refunded into a new series of Treasury
obligations. Our experience is t h a t only a small percentage of a maturing issue
is held out for casli redemption; and our estimates assume a continuation of t h e
present trend.
This picture of how the various operations affect t h e cash balance during t h e
calendar year 1949 is one t h a t I have before me daily as I consider t h e various
policy decisions which have to be made in connection with the management o f t h e
public debt. If everything works out exactly as we now estimate, the balance
"would r u n down t o $3.2 biUion by next December 31. There are, however, a
n u m b e r of factors which could have an i m p o r t a n t influence on t h e picture, which
have not been t a k e n account of.
There is, first, t h e possibility^ t h a t expenditures might t u r n out to be higher
t h a n t h e budget. For example, there is the possibUity of expenditures for t h e
security of the N o r t h Atlantic area. The President mentioned this possibility
in his Budget Message, b u t he did not include any a m o u n t in his budget because
he wasn't sure w h a t the a m o u n t is likely to be. If Congress should permit such
expenditures during the calendar year 1949, they would have the effect of reducing
t h e December 31 cash balance figure of $3.2 biUion by a commensurate a m o u n t .
There is also, as you know, t h e possibility t h a t revenues might vary from t h e
a m o u n t shown in t h e President's Budget. Revenues have been estimated on t h e
assumption of high business activity and full employment. . If unemployment
should develop during the year a n d business should drop to a lower level t h a n we
now enjoy, revenues would.be smaller. If, on the other hand, the business levels
should advance, revenues would be higher.
New tax legislation m a y also affect the cash balance during the last p a r t of
t h e calendar year 1949. The effect would depend upon t h e t y p e of tax legislation enacted, however. M a n y tj^pes of taxes applicable to 1949 would not be
paid into t h e Treasury until the first p a r t of the calendar year 1950. They
would have no substantial effect on the cash balance picture during the calendar
year.
Another factor affecting our cash position is t h e possibility t h a t t h e dividend
to be paid b.y the national service life insurance fund in the f alb m a y be delayed
in p a r t by t h e m a n y mechanical difficulties connected with t h e operation. There
are some 16 million policies involved; and it m a y be t h a t p a y m e n t s m a y run
behind schedule and not be completed by t h e end of 1949. If this should happen,
t h e cash balance would be higher temporarily by a commensurate amount.
With all these factors in mind, however, and on t h e basis of t h e necessary assumptions, this is about as realistic a projection as we can make for operating
purposes a t this time of t h e Treasury's cash outlook.
T h e movement of t h e cash balance from $4.2 biUion on December 31, 1948,
to $3.2 biUion on December 31, 1949, will involve some sharp rises and falls, as
324
REPORT OF THE SECRETARY OF THE TREASURY
shown in the chart on page 7 [of the booklet]. This will be in a manner similar
to that experienced in previous years. The cash balance will probably reach a
peak in March; but the level will drop rapidly.
A cash balance figure of $3.2 bUlion on December 31, 1949, would be about as
low as we should prudently drop the Treasury cash balance at the end of a year
when the annual expenditure budget was running in the neighborhood of $40
biUion. Please note that we have been discussing cash balances arid not surplus
balances.
In addition to taking care of our cash requirements, the Treasury will have a
large amount of refunding to do as issues mature. I should now like to spend
a moment on the important Treasury maturities during the next few years. The
chart on page 8 [of the booklet] covers the bond, note, and certificate maturities
in 1949. ~ They total $37 biUion. In addition, there are $12 billion of Treasury
bills outstanding which mature at the rate of approximately $900 million a week.
Because it is unlikely that there wiU be any significant volume of debt reduction
during the year 1949 on these maturities—except for the tail-ends of maturing
securities not turned in for refunding—the entire $49 billion on net balance is
likely to be refunded into securities maturing in the future; and the maturities
which are alread}^ scheduled for 1950 and subsequent years, as shown in the
chart on page 9 [of the booklet] will, thereby be increased by the amount carried
over from 1949.
The Treasury will thus have, as is evident, a substantial refunding problem
this year, next year, and for many years to come. It wUl be expanded in the
early 1950's by the maturity of the wartime issues of savings bonds. A positive
refunding prograni on that account will have to be undertaken in 1951 and
thereafter.
The decision on each issue as it matures is, as you know, a specialized problem,
and will have to be handled separately; but this projection gives you a general
outline of our position.
The maturities that I have been discussing are at the short end of the Federal
debt structure. Most of the issues involved are owned by banks for the investment of their deposits and by industrial, commercial, and mercantile corporations
for the investment of their short-term balances. Our financing activities and
debt management operations are conducted with the objective of providing the
various investor classes with the types of securities and the maturities which
best suit their particular needs. This helps us in our objective of spreading the
ownership of the debt as broadly as possible.
Some reflection of the extent to which this goal has been accomplished is indicated in the table on page 10 [of the booklet]. Two-thirds of the Federal debt,
that is some $167 billion, is now held outside of the banking system. Over a
quarter of the public debt, some $68 billion, is held by individuals alone. Insurance com]ianies hold $21}f biUion of Federal securities, mutual savings banks
have $11J^ billion, and corporations other than banks and insurance companies
hold $13 billion. Government investment accounts—largel.y individuals' savings
which are reinvested in the form of social security and military insurance funds—
account for $37H billion of the debt. State and local governments own $8 bUlion
and nonproflt institutions and miscellaneous investors another $7}^ biUion. The
remaining $86 billion is held in the banking system—that is, commercial banks .
and Federal Reserve Banks.
The Federal debt at $253 billion represents more than one-half of the total debt
of the country at the present time, as shown inthe chart on page 11 [of the booklet].
Before the war the Federal debt was less than a quarter of the total debt of the
country. As the result of the tremendous growth in the Federal, debt during
the war the Federal debt has taken a new place of importance in our economy.
Accordingly, anything that happens to the Federal debt is an important factor
with respect to the whole credit picture of the country. On the other hand,
whatever happens with respect to the Nation's private debt and the position of
the various investor classes is rather intimately connected with the management
of the public debt, too. We, of necessity, must keep close watch on the various
developments in the flnancial world, and I should like to discuss some of them as
they affect the position of the important investor classes.
One important class of investors in Governnient securities is insurance companies. Life insurance companies have been liquidating a small proportion of
their Government security holdings since the erid of the war as new investment
opportunities unfolded, as shown on the chart on page 1^ [of the booklet].
Present holdings of 49 leading companies, which hold 90 percent of life insurance
EXHIBITS
325
assets in the. country, have declined from $19 billion to $15 billion since the end
of 1945. During this period- these same companies were, on the other hand,
expanding their holdings of corporate securities and their holdings of mortgage
loans. Expansion along these lines was to.be expected as insurance companies
entered actively in providing funds for postwar development of private industry.
. Mutual savings banks also sold some Go vernment • securities in 1948 in the
process of meeting private demands for capital, as shown in the chart on page
13 [of the booklet], but they still hold more Federal securities now than they did
at the end of the war. In fact, mutual savings banks have 50 percent more of
their funds invested in Federal securities than in all other types of loans and
securities combined.
Holdings of Government securities by insured savings and loan associations
have shown some decline since the end of the war as residential mortgages expanded, as shown in the chart on page 14 [of the booklet].^ As contrasted with
insurance companies and savings banks, however, most of the decline took place
in 1946 and 1947, rather than in 1948. A large part of these holdings are in
long-term bank-restricted bonds. It is interesting to note that the holdings of
these associations are still in excess of $1 billion, as compared to holdings of only
about $50 million before the war.
During 1946, corporations other than banks and insurance companies liquidated
about $6 billion of Federal securities in order to facilitate their early postwar
expansion, as is shown in the chart on page 15 [of the booklet]. Since the end of
1946 there has been little change in the holdings of Government securities by
these corporations. Corporate holdings of currency and bank deposits show
an unusually stable leveh throughout the last three years. At the same time
other current assets of corporations, principally inventories and receivables, have
shown a significant increase.
Holdings of Federal securities by individuals are now at an all-time high of
$68 billion. The fact that individuals' holdings have actually increased since the
end of the war, as shown in the chart on page 16 [of the booklet], represents a
trend that most of us would have guessed incorrectly three years ago. Savings
bonds alone account for two-thirds of individual holdings of Federal securities.
The savings bond picture is most encouraging. More than $32 billion of E bonds
alone are outstanding—an amount you will be interested to know is more than
$1 billion higher than at the end of our last wartime drive.
Savings accounts have also increased during the last three years. Currency
and checking accounts, after early postwar increases, have recently shown some
slight decline.
Our debt management activities since the end of the war have been directed
toward the objective of increasing nonbank holdings of the public debt. We were
able to pay off part of the^debt, as you know; partly from cash balances available
at the end of the war and partly from the budget surplus during the past two
fiscal years. In managing these debt pay-offs, we have been successful in concentrating them entirely on the bank-held portion of the debt, as shown in the chart
on page 17 [of the booklet].
The debt has declined from a peak of $280 billion, on February 28, 1946, to a
current level of $253 billion. This is a decline of $27 billion. At the same time
there has been a decline of $31 billion in holdings of Federal securities by the
banking system—a decline greater than the reduction in the total debt.
The reduction in the bank-held debt for the period up through December 31,
1948, is attributable entirely to a reduction in the holdings of Government securities by the commercial banks of the country. Holdings by the Federal Reserve
Banks were, on net balance, practically unchanged between February 1946, the
peak of the debt, and December 31, 1948. Since December 31, 1948, Federal
Reserve holdings of Government securities have declined.
The Government's debt management policy since the end of the war, it is
obvious, has not resulted in an expansion of Federal Reserve holdings of Government securities. All purchases of long-term bonds have been more than offset by
the liquidation of short-term issues.
As bank-held debt declined in the period since the end of the war, nonbank
holdings expanded in the aggregate, .notwithstanding the sale of some Goverment
securities by some of the investor classes. Government security holdings by individuals increased. This was also true of fire, casualty, and marine insurance
companies, and of the trust and investment funds of State and local governments.
Another important reason why nonbank ownership has increased has been the
326
REPORT OF THE SECRETARY OF THE TREASURY
continued investment of t h e savings of individuals accumulating in Federal
Government social insurance furids.
T h e b a r a t t h e right-hand side of t h e chart on page 17 [of t h e booklet] sets forth
. my estimate of where the .public debt will stand a t t h e end of the calendar year
1949. T h e level is t h e same as it was on December 31, 1948, and is arrived at on
t h e basis of t h e budget, which forecasts a deficit for t h e fiscal year 1949 and
another deficit for thefiscal year 1950. T h e main thing wrong with t h a t bar, ^ s
shown in t h e chart, is that' it is too high. I t should be lower, and t h e only way
t h a t it could be lowered is for t h e Government to achieve a surplus of receipts
over expenditures during this calendar year. T h e President has stated t h a t new
taxes will be needed, and m u s t be enacted if t h e surplus is to be achieved. I
strongly urge this course of action.
Exhibit 25.—Address by Secretary of the Treasury Snyder before the Executives'
Club of Chicago, Chicago, 111., April 8,1949, on current business developments
I n peacetime as well as in war, t h e United States m u s t act to keep our defenses
strong. We m u s t be strong on all fronts. We m u s t have t h e power behind us to.
maintain and strengthen our confidence in t h e future, in the security of our jobs,
and in t h e soundness of our country's whole ecoriomic and financial structure.
I believe t h a t we are moving ahead on all of these fronts. And I believe we will
continue to progress, step by step, if we continue to be guided by American
tradition and by American experience.
Our country has seen vast changes in t h e past fifty years. We have passed
from a predominantly rural and small-town econoniy to a highly complex u r b a n
and industrial civilization. We have lived through two great wars.
These happenings have brought with t h e m m a n y new problems and new strains.
E a c h one has been a challenge to our energy, our determination, and to our purpose. We have moved cautiously to solve each problem. B u t we have riiaintained an unswerving confidence in our ability as American citizens t o lead our
country forward with ever-increasing social and material health.
This confidence in t h e future is a most i m p o r t a n t asset. B u t it cannot be t a k e n
for granted. We m u s t not allow our coming of age as a nation to bring with it a
tired refusal to meet t h e challenge of our growth and progress.
There is evidence t h a t we are entering today on a new period of reappraisal in
our domestic economy. If we are worthy of our traditions—so splendidly
portrayed in the history of your own city—we will look on this period as one of
unprecedented opportunity. We will find in it ain opportunity to build t h e foundations of our prosperity stronger a n d deeper t h a n has ever been possible before.
We have had, up to now, little t i m e for appraisal. Our productive machinery
was converted, almost overnight, to meet t h e vast requirements of war. Almost
as quickly, we t u r n e d to peace, and to the need of satisfaction of t h e p e n t - u p
d e m a n d for civUian products which had backlogged during t h e war.
Now, t h e urgent replacement demand has slackened. The scramble for things
is over. American business has invested more t h a n $75 billion in new plant a n d
equipment since the end of the war to maintain and expand production of goods—
an annual r a t e of investnient approxiniately twice t h e peak of any former year.
Since VJ-day, Americans have bought 12 million new cars and trucks, 28 million
new refrigerators, vacuum cleaners, and washing machines, and something like
50 million new radios and television sets. Now t h a t these and other, accumulated
d e m a n d s are more nearly satisfied, our economy is becoming readjusted to normal
buyers' m a r k e t s and competitive conditions. I need hardly remind you t h a t
our traditional t y p e of American enterprise flourishes best in a competitive
environment. We know how to achieve when we have to work at selling.
Moreover, we are starting off this time from a position of financial and economic
strength unexampled in our history. Liquid assets of individuals are a t t h e highest figure on record, totaling over $2.00 bUlion. Net working capital of corporations has been steadily increasing since 1939, a n d now stands a t a record level of,
a b o u t $65 billion. E m p l o y m e n t and incomes, and corporation profits are, likewise, a t or around record levels. Our position has not been undermined, a s it
h a s been a t various times in t h e past, by speculative operations in real estate or
on the stock and commodity exchanges.
Above all, t h e financial soundness of t h e United States' Government—which
is t o d a y t h e fulcrum of world stability ahd world peace—is beyond question.
T h e Treasury'^ major objective has been t o maintain t h a t soundness through
EXHIBITS
327
fiscal policies and debt management operations designed to promote confidence
in the Government's credit and in the financial stability of the country. And I
believe that the steps taken toward maintaining that confidence have contributed
to the maintenance of our present unparalleled economic position.
A sound fiscal policy must, of course, be based on a revenue system that will
meet the cost of prescribed Government functions and provide for reducing the
Government debt. Since February 28, 1946, when the Federal debt reached the
peak of $280 billion, there has been a decline of over $28 billion in the outstanding
obligations of the Federal Government. Moreover, there has been an even
greater decline—$32 billion—in holdings of Federal securities by, the banking
system. This reduction in the bank-held debt has been one of the objectives of
postwar debt management and has been brought about, in part, by vigorouspromotion of sales of savings bonds and other securities to individuals during
the postwar period. I beheve that we can all take pride in the fact that holdings
of savings bonds by individuals are actually at a higher level today than they were
at the end of the war, when it was predicted that they would be widely redeenied
as soon as goods in short supply were once more available. You will be interested
to know that individuals now hold over $47)4 billion of savings bonds, almost $5
billion more than they held at the end of December 1945.
A second major objective of Treasury fiscal policy in the interest of financial
confidence has been the maintenance of stability in the Government bond market.
With a national debt today of $252 billion, the maintenance of stable conditions
in the market for Government obligations is essential.
The Treasury bond stabilization program, carried out during the past several
years in cooperation with the Federal Reserve, has restrained undue advances
and undue declines in prices of Treasury bonds. It has given an important
element of strength and stabilitj^ to bond prices generally, and to our entire financial structure.
If we had not taken measures to maintain confidence in the stability of the bond
market—if, for example, the market for Government obligations had experienced
the gyrations which followed the First World War—there would undoubtedly have
been an impairment of confidence in our financial situation which would have had
serious consequences, not only in this country, but throughout the world.
Our position of world leadership has brought with it serious new responsibilities.
We must follow a firm course in maintaining our strength, and in maintaining,
unimpaired, the confidence now felt throughout the world in the credit of the United
States Government.
All in aU, our experience since the war has been evidence of.a remarkable basic
confidence throughout this Nation. Now, when readjustments to a more normal
peacetime econoniy are taking place, we have no reason to be apprehensive, in
view of the factors in the present situation which give assurance of a continued
prosperity.
The readjustments which are now taking place are both helpful and healthy.
We must remember that for the last three years it has been our aim and goal to
halt inflation and to adjust prices. We have had periodic first-of-the year adjustments in 1946, in 1947, and again in 1948. Now, we are experiencing some additional ones. Each of these readjustments has tended to cause us to stop, look, and
listen. Each one has reminded us of the necessity for caution, for taking stock of
the situation, in order that we may make sure that we are pursuing the course best
adapted to promote an orderly progress toward the stabilization of our economy
on a high-production, high-employment level.
^
When we do pause and try to get a little perspective on our present position,
it is reassuring to discover how greatly the opportunities of the future loom up.
I mentioned e'arlier the great changes which have occurred in our econoniy during
the past fifty years. It is enlightening, when we try to assess our present situatiori, to remind ourselves that a half century ago the most forward-looking
citizens of this country would not have dreamed of the changes which have
already taken place. Fifty years ago, the illuminating gas companies, the carriage
factories, the interurban lines, were thriving industries, seemingly here to stay.
Who would have taken too seriously the flight of a plane heavier than air, the
flrst experiments with moving pictures, the demonstrations of the earliest autor
mobiles?
The development of electricity, alone, should give us pause. Fifty years ago,
the gas mantle was a new invention. Electric lights were a rarity; experiments
which later led to the tungsten lamp were still going on. . No one could have
328
REPORT OF THE SECRETARY OF THE TREASURY
foreseen, for example, our great aluminum industry, depending at every stage on
electric power.
Fifty years ago, we may also recall, an American farmer produced only enough
to supply eight persons. Now, one farmer supplies 15 people with a year-round
array of farm products beyond the reach of a millionaire a half century ago.
The reason is, in part, that as late a s l 910 one-fourth of farm acreage was devoted
to the production of feed for 28 million horses and mules. With the coming of
the tractor, most of this acreage—and the labor that was applied to it—has
been freed for the fulfillment of human requirements.
Undoubtedly there will be even greater changes during the half century ahead
of us. Atomic energy, alone, may transform our lives. And if we set our sights
firmly on the opportunities opening up before us, I believe that we will not be
deterred long, or often, by the difficulties of charting our economic course.
Unfortunately there are some today who apparently have little faith in the
Nation's^ ability to maintain prosperous levels of employment and incomes.
But the United States has been built up through its long history by confidence
and vision. There have always been a few who took a gloomy view of the future,
and distrusted the Nation's abUity to surmount the obstacles that lay ahead.
However, the main trend of our national progress has been fashioned by those
who saw beyorid the teniporary obstacles.
The factors today supporting a continued high level of business remain unusually strong. The satisfying of accumulated consumer demands has not
caused a drawing down of individuals' savings. On the contrary, liquid assets
of individuals, as I have said, are at the highest levels on record, and the recent
expansion of plant and equipment by corporations has not brought a reduction
in working capital.
With the return to normal buyers' markets, I believe that we may look forward
to one of the greatest periods of business development in our history. In the few
years that have elapsed since the war, we have made only a limited start toward
developing new products, based on the wartime discoveries in new materials, new
manufacturing techniques, and new types of equipment. Our factories have been
so occupied in supplying the quickest available goods to fill accumulated demands
that the introduction of many new products has had to be postponed.
Our new economy is beginning to get under way. Factories have gone through
an extensive remodelling and expansion program in preparation for turnirig out
new and improved products. We have made a start in television, but even there
the mass production stage has not yet been reached, and the widespread application of television to industrial and commercial uses is still in the future.
In the field of metallurgy, the use of light metals and their alloys, with new
techniques in handling, is growing in importance.
New developments in home construction, in methods of heating, arid in major
household appliances have opened new fields of consumer demand.
Farmers are offered new chemicals for control of weeds, insects, and plant diseases, and we are continually developing more efficient types of farm implements.
These have reduced farm production costs, and have lightened the farmers'
work load.
Atomic energy offers the prospect of revolutionary changes in our economic life
within the relatively few years. Our national atomic energy program is being
pushed with greatest vigor. Today nearly 70,000 people are employed in the
atomic energy program. Last year, when the full program of long-range development got under way, $525 million was spent by the Government on this program,
and by 1950 the expenditures are expected to reach $725 million. The advances
in industry, in medicine and biology, and in chemical and physical research which
will be made possible through this program, will justify our referring to this new
era as the Atomic Age.
We might also call it the Plastics Age, or the Age of Synthetic Materials, so great
has been the advance in new types of plastics, and of many types of synthetics
which are just coming into use. They are made into laminated products and in
sheets, rods, and molded products. They are used in home construction, and in
the automobile, furniture, and household^ appliance industries, for adhesives and
for food packaging. The development of new types of synthetic rubber for special
purposes offers new possibilities to an older industry.
These new developments mark the beginning of a new era of research and discovery initiated by the concentrated effort of our scientists during the war years,
particularly in electronics and chemistry^ Each new scientific discovery opens a
new field, and provides the basis for further discoveries.
EXHIBITS'
329
In speaking of the country as a whole, it is fair to say that we have made only
a start on major long-term projects. We have just begun to extend and modernize
the Nation's highway system under a master program agreed upon by Federal,
State, and local governments. On the basis of a continuing traffic survey, plans
have been made for express highway systems to channel congested traffic through
large cities, and for rebuilding worn-out rural roads to meet modern traffic needs.
About 1,500 miles of the new 40,000 mUe National Interstate Highway System
have so far been completed.
The long-deferred needs of towns and cities for new sewage and water systems,
for public utility services, for schools and hospitals have just begun to be met.
Other municipal facilities to take care of the great shifts of population to new
areas during the war years must algo be provided. In that connection, it is
important to remember the 17 miUion people who have been added to our population in the decade since the war began.
To reap the greatest benefit from the opportunities that lie ahead, two precautions are necessary: First, we must continue on the alert to maintain our
economic security—to guard against undue credit expansion, speculative buying,
or other excesses that might precipitate a business recession. Secondly, we must
provide complete opportunity for the Nation's economy to develop. This means
that we must make full use of our resources, and we must prevent bottlenecks
at any stage in production or distribution.
Looking toward the future—and I include the nearby future—we have every
reason to be confident. Our economy has the basic strength to meet the current
readjustment to normal peacetime markets. The discoveries and industrial
developments of recent years provide a springboard for a new era of progress.
With this outlook before us, we may well expect that the years ahead will
offer fully as great opportunities as the years just past; and if we heed the lessons
of the past, they should offer much greater economic security.
Exhibit 26.—Address by Secretary of the Treasury Snyder before the annual
conference of the National Association of Mutual Savings Banks, Washington,
D. C , May 12,1949, on public debt management in promoting a stable economy
This annual conference of the National Association of Mutual Savings Banks
is the first to be held in Washington since 1931. The eighteen years that have
elapsed since your last meeting here are years in which broad and far-reaching
social and economic changes have taken place in our country.
In 1931, the economic outlook was dark. And we know now that the natural
forces of recovery were helpless to operate in the environment which had been
created by the speculative excesses of the boom period. It is startling to recall
today that the interest rate on call money went as high as 20 percent in the stock
market in 1929; and that brokers' loans during that year reached a figure of over
Sy2 billion dollars. Today, the comparable figure is less than yi bUlion doUars.
Even more incredible, in our present-day view, is the fact that such a small
portion of the brokers' loans came from banks. At the height of stock market
speculation in 1929, some three-fourths of it was attributable to other l e n d e r s individuals, business corporations, trading companies, and investment trusts.
The shaky foundations of the speculative structure of 1929 were soon revealed.
Looking back, we can see that speculation was more decisive than any other single
factor in impairing the economic health of the Nation.
Today, in contrast, our position is exceptionally strong; and we can look to the
future with the confidence of experience in our abUity to maintain that strength.
Speculation has been virtually absent during our years of postwar prosperity.
Each of the recessions in our business history has been featured bj^ heavj^
liquidation of speculative accounts; and the absence of this feature today is,
to my mind, the most striking element of contrast with previous periods.
A second factor today, which is in almost equally sharp contrast to the past,
is the gradual process of the postwar adjustments to normal competitive conditions. Business recessions in the past were largely unforeseen. They owed their
severity to a simultaneous readjustment of many phases of the economy.
But the situation is different now.
Adjustments to a more riormal competitive economy have actually been going
on since the very close of the war. Many have been practicaUy completed.
Some luxury industries were affected in 1946. Machine tools, auto tires, radios,
and others foUowed in 1947. TextUes, shoes, auto trucks, furniture, household
330
REPORT OF THE SECRETARY OF THE TREASURY
equipment, a n d various other industries started their adjustment in t h e spring
and summer of 1948. Others, such as rayon and crude petroleum, have more
recently fallen into line.
T h e factors which I have just cited—the absence of speculation and t h e gradual
readjustments which have taken place in t h e economy—^are only two of the m a n y
elements of strength in our present situation.
I t is extremely reassuring to note t h a t consumer buying, for example, is being
supported by continuing high income levels and by a backlog of savings whicli
has reached an all-time high. Personal incomes in March of this year—the latest
figure available—were a t an annual r a t e of $214 billion, a little below t h e all-time
peak of last December, b u t well above t h e level of a year ago. Liquid assets of
individuals—whicii is just another name for stored-up purchasing power—amount
t o $200 billion a t t h e present time.
I could cite more statistics. B u t all point in one direction: There are powerful
factors in our present situation making for stabUity and progress on a high-income,
high-employment level.
And there are evidences other t h a n statistics.
We are only a t the beginning of our peacetime growth. We have made a start
only toward developing new products based on t h e wartime discoveries in new
materials, new manufacturing techniques, a n d new types of equipment.
One wartime development alone—atomic energy—could revolutionize our
economic life within a relatively few years. The use of light metals and their
alloys is growing in importance. The field of synthetics affords unlimited possibilities for new products. Developments in home construction and home equipm e n t offer tremendous opportunities for new consumer markets. More efficient
farm machinery is being developed constantly a n d new fertilizers and chemicals
for farm use are coming on the market.
Up to now, our factories have been so busy supplying the goods which could be
most quickly produced, in order to fill accumulated demands, t h a t t h e y have not
had an opportunity to re-gear their machinery to t h e manufacture of new products.
With t h e r e t u r n t o normal buyers' markets, our producers are beginning t o use
t h e new processes available to them. The opportunities are enormous. The
discoveries a n d industrial developments of recent years provide a springboard for
a new era of progress.
When I spoke to you a t Atlantic City last year, I reviewed our public debt
management operations during t h e postwar period to show you how our fiscal
and monetary policies were directed toward achieving stabUity in t h e economy.
Our debt m a n a g e m e n t operations in t h e past year have been a continuation of
our program of maintaining confidence in t h e credit of t h e United States b}^
promoting stable financial conditions and a stable economy.
I t has been our aim to keep our policies flexible so as to be in a position to
deal rapidly with changes in the financial picture. The desirability of such
flexibility has been forcibl}^ demonstrated in t h e year t h a t has elapsed since your
last annual conference. During t h e early p a r t of t h e last half of 1948 there were
large m a r k e t sales of Government securities. I n this situation we moved to
prevent t h e prices of Government securities from faUing sharply by open-market
purchases. The situation has been reversed. Since t h e beginning of t h e year.
Government securities have been sold by t h e Federal Reserve in order to keep
Government bond prices from going up too sharply.
T h e need of flexibility is i m p o r t a n t in public finance, as it is in private finance.
The fiscal problenis of t h e N a t i o n have changed greatly from period to period,
. as have t h e problems of private enterprise. ' The fiscal tools of one period have
generally proved unsuited to a subsequent period.
I have just said t h a t our most i m p o r t a n t objective during t h e postwar period
has been to maintain confidence in t h e credit of t h e United States. One hundred
and fifty years ago t h e main financial problem of the newly born Nation was to
establish t h a t credit. T h e history of savings banks is almost as long as t h a t of
t h e N a t i o n — t h e first savings bank was established in 1816—and in m a n y respects,
t h e problenis of your institutions have paralleled t h e fiscal problems of your
country. You were a t t e m p t i n g to build up confidence in your newly founded
institutions a t nearly the same time t h a t the Nation faced t h e ' s a m e problem.
We have been able in our recent debt operations to keep our policies flexible
because t h e structure of t h e debt has been adaptable to flexibility. This is not
accidental. To a large extent it is t h e result of forethought—the result of planning Government issues to meet t h e present and future needs of t h e various
investor classes. .
EXHIBITS
331
T h e existence of a large volume of short-term debt, with t h e necessity of refunding some $50 billion of maturing Government securities, each year, has been one
of the debt nianagement problems faced by t h e Treasury since the end of the war.
B u t t h e very existence of a large volume of issues maturing each year has m a d e
possible a flexible debt policy. During t h e two years in which we h a d Federal
budget surpluses* we were able to select for retirement those portions of m a t u r i n g
debt, t h e retirement of which would make the maximum contribution in stabilizing
the ecoriomy. During the past year, although we have not had a budget surplus,
we have nonetheless been able to retire portions of maturing marketable issuers
from t h e proceeds of the sale of nonmarketable debt issues.
D u e to t h e change in the budget picture this past year, we have not been able
to continue t h e debt reduction program t h a t I outlined to you a t your last a n n u a l
meeting. T h e total a m o u n t of debt outstanding has been reduced by only
$750 million since last year. During this period, however, we have continued
t o widen t h e distribution of the public debt. There has been an increase of over
$2 billion in t h e a m o u n t of Government securities held by n o n b a n k investors.
One of t h e principal sources of funds for effecting t h e switch of Government
securities from b a n k to nonbank investors has been an increase of about $1}^
billion in t h e a m o u n t of Governmerit securities held by individuals. Most of this
increase has been in holdings of savings bonds, a n d we have had to do a selling
job to achieve this success.
When I spoke to you last year I asked your cooperation in t h e Security Loan
Drive—a savings bond selling effort which we were undertaking a t t h a t time.
Now, I should like t o ask for your continued cooperation in t h e Savings Bonds
O p p o r t u n i t y Drive which will s t a r t next Monday. Our savings bond program
is i m p o r t a n t to the successful continuation of our public debt m a n a g e m e n t program. I t is an i m p o r t a n t tool which we have for use in maintaining a flexible
debt policy.
B u t our savings bond campaigns not only sell savings bonds, t h e y sell something
else which is of direct a n d i m p o r t a n t significance to you. T h a t is the habit of
thrift. Our savings bond program, year after year, has been carrying on t h e
most extensive campaign for savings t h a t has ever been known. Savings b o n d
advertising reaches into every city a n d village. I t searches out remote farms.
I t goes into homes a n d factories. I t is-in the newspapers a n d magazines, on t h e
radio, a n d on television.
You m u s t have been struck, as I have been, by t h e interesting a n d persuasive
angles which have been used to present the case for savings. Regular savings
have been urged to provide for t h e future. T h a t is the theme of all the advertisements, a n d t h e carefully chosen keynote of t h e advertising campaigns. And, all
of t h e advertising is freely contributed.
'
]
Our advertising complements, rather t h a n detracts from, t h e promotional
campaigns which savings banks a n d other financial institut.ions carry on. Your
group recently released a film short "as p a r t of a program to improve public
understanding of t h e function of a savings bank in its c o m m u n i t y " which is
entitled, " A " for "Achievement". I beheve t h a t our savings bond program
rates an " A " for "Achievement" in promoting thrift.
As I told you last year, it does not seem to me t h a t we are selling savings bonds
a t t h e expense of other savings institutions. I believe t h a t t h e Treasury's continued campaign during t h e years since t h e end of the war has brought far greater
gains in all major categories of individual savings t h a n wOuld otherwise h a v e
been realized. Sales of savings bonds have been m u c h better t h a n we h a d reason
to expect after the war ended.
B u t other types of savings have done even better.
Let us look a t t h e figures for other types of liquid assets held by individuals.
I n 1948, it is estimated t h a t total holdings of liquid assets held by individuals
rose by approximately $1 billion, and a t t h e end of the year stood a t an all-time
high.
When we look into t h e actual savings operations which went to make up this
total, and carry t h e figures back over t h e three-year period following t h e end of
t h e war, some interesting developments become apparent.
Holdings of Government . securities by individuals rose nearly 4>^ percent.
B u t individuals increased their share holdings in savings and loan associations
by a b o u t 48 percent, t h e largest gain of any t y p e of savings. Their deposits in
m u t u a l savings b a n k s increased 20 percent. Savings accounts in commercial banks
were up 18 percent. Postal savings accounts showed an increase of nearly 14
percent. Checking accounts of individuals gained 11 percent. Of t h e various
332
REPORT OF THE SECRETARY OF THE TREASURY
forms of liquid assets, only currency holdings in t h e h a n d s of individuals fell.off.
T h e savings record which I have been citing is one which I know is familiar t o
all of you here. In my belief, however, its significance can h a r d l y . b e overemphasized.
Americans are saving for t h e future, They have confidence in w h a t t h e future
will bring—for themselves, and for their children. The m u t u a l savings banks,
with more t h a n 19 million depositors, have been a powerful factor in molding t h e
thrift habits of t h e Nation. The savings drives of the war years, as well as those
^ n c e , have benefited immeasurably from t h e backlog of good will which has
come from your long history as a trusted guardian of t h e people's savings.
I n closing, I should like to t h a n k you, in particular, for t h e constructive assistance which you have given t h e Government a t all times during t h e eighteen years
since your conference last assembled here in Washington. I have welcomed your
interest in fiscal affairs since I came to t h e Treasury a n d have found your advice
of inestimable value. Your record during these years is ample evidence t h a t '
you will continue t o be. a bulwark of financial strength in t h e Nation now and in
t h e generations ahead.
^
O R G A N I Z A T I O N AND P R O C E D U R E
Exhibit 27.—Treasury D e p a r t m e n t orders relating to organization and procedure
N o . 100, J U L Y 16, 1948, T E N T A T I V E A S S I G N M E N T O F B U R E A U S , E T C . ,
TO T H E SUPERVISION OF U N D E R S E C R E T A R Y FOLEY
Effective immediately Mr. E d w a r d H . Foley, Jr., Uhder Secretary of t h e
Treasury, will tentatively continue to supervise the following bureaus, offices, and
divisions of t h e Treasury D e p a r t m e n t which were previously assigned t o him as
Assistant Secretary:
1. United States Coast Guard
2. United States Secret Service
3. Bureau of Federal Supply
4. Bureau of the Mint
5. Bureau of Engraving and Printing
6. Bureau of Narcotics
7. Chief Coordinator, Treasury Enforcement Agencies
8. Comptroller of t h e Currency
9. Committee on Practice
D e p a r t m e n t Circular No. 244, Revised, dated February 16, 1948, is hereby
aniended accordingly, a n d all previous orders regarding t h e assignment of these
bureaus, offices, a n d divisions are superseded by this order.
J O H N W . SNYDER,
Secretary of the Treasury.
N o . 101, J U L Y 16, 1948, T E N T A T I V E A S S I G N M E N T O F B U R E A U S , E T C . ,
TO T H E SUPERVISION OF ASSISTANT S E C R E T A R Y G R A H A M
Effectiye immediately t h e following bureaus, oflfice, a n d divisions of t h e Treasury D e p a r t m e n t are tentatively assigned to t h e supervision of Mr. John S. Graham,
Assistant Secretary of t h e Treasury:
1. Bureau.of Customs
2. Office of t h e Technical Staff i
3. Division of Tax Research 2
4. United States Savings Bonds Division
D e p a r t m e n t Circular No. 244, Revised, dated February 16, 1948, is hereby
amended accordingly, a n d all previous orders regarding t h e assignment of these
bureaus, oflfice, a n d divisions are superseded by this order.
JOHN W .
SNYDER,
Secretary of the Treasury.
1 Amended, see Order No. 105.
2 Amended, see Order No. 115.
EXHIBITS
333
N O . 102, J U L Y 29, 1948, D E S I G N A T I O N O F T H E F A I R E M P L O Y M E N T
OFFICER
1. In compliance with t h e requirements of Executive Order 9980, d a t e d July
26, 1948, James H . H a r d , Director of Personnel, is hereby designated Fair E m p l o y m e n t Officer.
2. A copy of Executive Order 9980 is attached.
JOHN W .
SNYDER,
Secretary of the Treasury.
E X E C U T I V E O R D E R 9980, R E G U L A T I O N S G O V E R N I N G F A I R E M P L O Y M E N T P R A C T I C E S
W I T H I N THE FEDERAL ESTABLISHMENT
W H E R E A S t h e principles on which our Government is based require a policy of ,
fair employment throughout t h e Federal establishment, without discrimination
because of race, color, religion, or national origin; a n d
W H E R E A S it is desirable a n d in t h e public interest t h a t all steps be taken
necessary t o insure t h a t this long-established policy shall be more effectively
carried o u t :
N O W , T H E R E F O R E , by virtue of t h e a u t h o r i t y vested in me as President
of t h e United States, by t h e Constitution a n d the laws of t h e United States, it is
hereby ordered as follows:
1. All personnel actions t a k e n by Federal appointing officers shall be based
solely on merit a n d fitness; a n d such oflficers are authorized a n d directed to t a k e
a p p r o p r i a t e steps to insure t h a t in all such actions there shall be no discrimination
because of race, color, religion, or national origin.
2. T h e head of each d e p a r t m e n t in t h e executive branch of t h e Government
shall be personally responsible for an effective program to insure t h a t fair ernploym e n t policies are fully observed in all personnel actions within his department.
3. T h e head of each d e p a r t m e n t shall designate an official thereof as Fair
E m p l o y m e n t Oflficer. Such Officer shall be given full operating responsibility,
under t h e immediate supervision of t h e d e p a r t m e n t head, for carrying out t h e fair
e m p l o y m e n t policy herein stated. Notice of t h e a p p o i n t m e n t of such Oflficer shall
be given to all oflficers a n d employees of t h e department. T h e Fair E m p l o y m e n t
Oflficer shall, among other things—
(a) Appraise t h e personnel actions of t h e d e p a r t m e n t a t regular intervals to
determine their conformity to t h e fair employment policy expressed in this order.
. (Jb) Receive complaints or appeals concerning personnel actions t a k e n in t h e
d e p a r t m e n t on grounds of alleged discrimination because of race, color, religion,
or national origin.
(c) Appoint such central or regional deputies, committees, or hearing boards,
from among t h e oflficers or employees of t h e department; as he m a y find necessary
or desirable on a t e m p o r a r y or p e r m a n e n t basis to investigate, or to receive, complaints of discrimination.
(d) T a k e necessary corrective or disciplinary action, in consultation with, or
on t h e basis of delegated a u t h o r i t y from, t h e head of t h e department.
4. T h e findings or action of t h e Fair E m p l o y m e n t Oflficer shall be subject t o
direct appeal to t h e head of t h e department. T h e decision of t h e head of t h e
d e p a r t m e n t on such appeal shall be subject to appeal to t h e Fair E m p l o y m e n t
Board of t h e Civil Service Commission, hereinafter provided for.
5. There shall be established in t h e Civil Service Commission a Fair E m p l o y m e n t Board (hereinafter referred to as t h e Board) of not less t h a n seven persons,
t h e members of which .shall be officers or employees of t h e Commission. T h e
Board shall—
(a) H a v e a u t h o r i t y t o review decisions m a d e by t h e head of any d e p a r t m e n t
which are appealed p u r s u a n t to t h e provisions of this order, or referred to t h e
Board by t h e head of t h e departrnent for advice, and to make recommendations
to such head. I n any instance in which t h e recommendation of t h e Board is not
promptly a n d fully carried out t h e case shaU be reported by t h e Board to t h e "
President, for such action as he finds necessary.
(b) Make rules a n d regulations, in consultation with t h e Civil Service Commission, deemed necessary to carry out t h e Board's duties and responsibilities
under this order.
334
REPORT OF THE SECRETARY OF THE TREASURY
(c) Advise all d e p a r t m e n t s on problems a n d policies relating t o fair employment.
(d) Disseminate information pertinent to fair employment programs.
(e) Coordinate t h e fair employment policies a n d procedures of t h e several
departments.
(/) Make reports and submit recommendations to t h e Civil Service Commission for t r a n s m i t t a l to t h e President from time to time, as m a y be necessary t o
t h e maintenance of t h e fair employment program.
6. All d e p a r t m e n t s are directed to furnish to t h e Board all information needed
for t h e review of personnel actions or for t h e compilation of reports.
7. T h e t e r m " d e p a r t m e n t " as used herein shall refer to all departments and
agencies of t h e executive branch of t h e Government, including t h e Civil Service
Commission. T h e t e r m "personnel action," as used herein, shall include failure
to act. Persons failing of appointment who allege a grievance relating to discrimination shall be entitled to t h e remedies herein provided.
8. T h e means of relief provided by this order shall be supplemental t o those
provided by existing statutes. Executive orders, and regulations. T h e Civil
Service Commission shall have authority, in consultation with t h e Board, to make
such additional regulations, and to amend existing regulations, in such m a n n e r as
m a y be found necessary or desirable t o carry out t h e purposes of this order.
HARRY S. TRUMAN.
T H E W H I T E H O U S E , J u l y 26,
1948.
N O . 103, A U G U S T 13, 1948, A P P O I N T M E N T O F S P E C I A L A S S I S T A N T
TO T H E S E C R E T A R Y AND T E N T A T I V E ASSIGNMENT OF OFFICE
OF I N T E R N A T I O N A L F I N A N C E TO H I S SUPERVISION
1. Mr. F r a n k A. Southard, Jr., is hereby appointed a Special Assistant t o t h e
Secretary.. I n this capacity, reporting directly t o t h e Secretary, Mr. Southard
shall perform such functions and duties as m a y be assigned from time t o time,
and, in addition, temporarily shall supervise t h e Office of .International Finance.
2. This order temporarily amends paragraph 1 of Treasury D e p a r t m e n t Order
N o . 86, dated July 10, 1947, a n d paragraph 2 of Treasury D e p a r t m e n t Circular
No. 244, Revised, dated February 16, 1948, t o provide t h a t t h e Director, Office of
International Finance, shall report t o a Special Assistant to t h e Secretary ^
rather t h a n directly t o t h e Secretary of t h e Treasury. P a r a g r a p h 1 of Treasury
D e p a r t m e n t Circular N o . 244, Revised, is also temporarily amended t o provide
t h a t a Special Assistant to t h e Secretary shall supervise the. Oflfice of International
Finance.
3. T h e provisions of this order shall be effective August 16, 1948.
J O H N W . SNYDER,
Secretary of the Treasury.
N O . 104, A U G U S T 18, 1948, D E L E G A T I O N O F A U T H O R I T Y T O A U T H O R IZE T H E PUBLICATION OF A D V E R T I S E M E N T S , NOTICES, OR PROPOSALS I N C I D E N T T O T H E SALE O F G O V E R N M E N T - O W N E D
PROPERTY
P u r s u a n t t o sectioii 12 of Public L a w 600, 79th Congress, which provides i n
p a r t t h a t " t h e head of a n y d e p a r t m e n t ma}^ delegate 'to subordinate officials
* * * t h e a u t h o r i t y vested in him b y section 3828 Revised S t a t u t e s . (44
U. S. C. 324), to authorize t h e publication of advertisements, notices or proposals,"
the Commissioner of I n t e r n a l Revenue, t h e D e p u t y Commissioners of intelligence
a n d Alcohol T a x Units a n d District Supervisors a n d Investigators in Charge of
• t h e A l c o h o l ' T a x Unit are hereby delegated authority, p u r s u a n t to t h e abovementioned act, to. authorize t h e publication of advertisements, notices or p r o posals incident to the sale of Government-owned property.
JOHN W .
SNYDER,
Secretary of the Treasury.
1 Revoked, see Order No. 109.
EXHIBITS
335
N O . 105, S E P T E M B E R 14, 1948, D I R E C T O R OF T H E T E C H N I C A L S T A F F
TO R E P O R T D I R E C T L Y TO T H E S E C R E T A R Y OF T H E T R E A S U R Y
Effective immediately the Director of t h e Technical Staff, who has supervision
of t h e Office of t h e Technical Staff, shall report directly to t h e Secretary of t h e
Treasury.
D e p a r t m e n t Circular N o . 244, Revised, dated F e b r u a r y 16, 1948, a n d Treasury
D e p a r t m e n t Order N o . 101, dated July 16, 1948, are hereby amended accordingly,
a n d all previous orders regarding this assignment are superseded by this order.
JOHN W .
SNYDER,
Secretary of the Treasury.
NO. 106, O C T O B E R 22, 1948, D E L E G A T I O N OF A U T H O R I T Y I N R E S P E C T
TO C O N T R A C T S A W A R D E D BY T H E B U R E A U OF F E D E R A L SUPP L Y INVOLVING E M E R G E N C Y P U R C H A S E S OF WAR MATERIALS
ABROAD
By virtue of t h e a u t h o r i t y conferred on me by section 3 of Executive Order
9177, dated M a y 30, 1942, I hereby authorize t h e Director, Bureau of Federal
Supply, a n d t h e Assistant Director, Strategic a n d Critical Materials, Bureau of
Federal Supply, a n d each of them, in respect t o contracts awarded or t o be
awarded by t h e Bureau of Federal Supply involving emergency purchases of war
materials abroad, to exercise t h e authority conferred on me by such Executive
order, including t h e a u t h o r i t y to execute t h e certificate required by section 2 of
said Executive order.
T h e a u t h o r i t y herein conferred, in t h e discretion a n d by t h e direction of t h e
Director, Bureau of Federal Supply, m a y be exercised also by a n d through any
other oflficer of t h e Bureau of Federal Supply who m a y be designated by him for
such purposes.
Treasury D e p a r t m e n t order of October 26, 1942, delegating authority under
Executive Order 9177 t o officials of t h e Procurement Division is hereby revoked.
^
E.
H.
FOLEY,
Jr.,
Acting Secretary of the Treasury.
N O . 107, D E C E M B E R 30, 1948, A U T H O R I Z I N G C E R T A I N O F F I C E R S
T O A F F I X T H E SEAL O F T H E T R E A S U R Y D E P A R T M E N T T O
DOCUMENTS, ETC.
By virtue of t h e a u t h o r i t y vested in me as Secretary of t h e Treasury, including
t h a t a u t h o r i t y conferred" by section 161 of t h e Revised Statutes, it is hereby
ordered:
1. T h e following ofRcers are authorized to affix t h e Seal of t h e Treasury D e p a r t m e n t in t h e authentication of originals a n d copies of books, records, papers,
writings, a n d documents of t h e D e p a r t m e n t , for, among others, t h e purposes
authorized by 28 U. S. C. 1733 (b):
(a) In t h e Office of Administrative Services:
(1) Director of Administrative Services.
(2) Chief, Division of Office Services.
(3) Records Administration Oflficer, Division of OflSce Services.
(b) I n t h e Bureau of Internal R e v e n u e :
(1) Commissioner of I n t e r n a l Revenue.
(2) D e p u t y Commissioner, a n d Assistant D e p u t y Commissioner, Income Tax
Unit.
(3) Head, a n d Assistant Head, Records Division, Income T a x Unit.
(4) Chief, R e t u r n s Inspection a n d Withholding R e t u r n s Section, Records
Division, Income Tax Unit.
2. Procurement of a second die of t h e Treasury Seal, in addition to t h e die
already in t h e possession of t h e Treasury D e p a r t m e n t , is hereby authorized, a n d
custody of t h e respective dies is hereb}^ vested in t h e Director of Administrative
Services a n d t h e Commissioner of I n t e r n a l Revenue.
'
3. Treasury D e p a r t m e n t Order No. 96, dated J a n u a r y 29, 1948, is hereby
superseded a n d revoked, effective as of t h e date of this order.
JOHN W .
SNYDER,
Secretary of the Treasury.
336
REPORT OF THE SECRETARY OF THE TREASURY
NO. 108, FEBRUARY 2, 1949, DELEGATION OF AUTHORITY TO RECOMMEND APPROVAL OF EMPLOYEE APPLICATIONS FOR
RETIREMENT
1. Pursuant to requirements of Public Law No. 879, 80th Congress, authority
to recommend approval of applications for retirement is delegated as foUows:
(a) To heads of bureaus, oflfices, and divisions for applications submitted by
employees occupying positions within the scope of standards furnished to the
Civil Service Commission.
(b) To the Director of Personnel for other applications.
2. Each recommendation will include the following statement: "The Secretary
of the Treasury recommends approval of the retirement of this employee in
accordance with the provisions of the act of July 2, 1948 (Public Law 879, 80th
Cong.)."
3. The Director of Personnel will issue such instructions as may be necessary.
JOHN W . SNYDER,
Secretary of the Treasury.
NO. 109, FEBRUARY 8, 1949, ASSIGNMENT OF OFFICE OF INTERNATIONAL FINANCE TO THE SUPERVISION OF ASSISTANT
SECRETARY MARTIN
1. It is hereby directed that among other duties, Mr. William McChesney
Martin, Assistant Secretary of the Treasury, shall supervise the Oflfice of International Finance.
2. This order amends Treasury Department Order No. 86,-dated July 10, 1947,
and Treasury Department Circular No. 244, Revised, dated February 16, 1948,
to provide that the Director, Office of International Finance, shall report to an
Assistant Secretary of the Treasury rather than directly to the Secretary of the
Treasury. It also revokes Treasury Department Order No. 103, dated August
13, 1948, with reference to the supervision of the Oflfice of International Finance
by a Special Assistant to the Secretary.
3. This order shall be effective immediately.
JOHN W . SNYDER,
Secretary of the Treasury.
No. 110, FEBRUARY 17, 1949, MODIFYING THE METHOD OF SEALING
NEW PAPER CURRENCY PACKAGES TO BE SHIPPED BY REGISTERED MAIL
Treasury Department Order dated August 21, 1924,. provided for the substitution of paper seals in place of wax seals on packages of new paper currency and
other securities to be prepared for shipment by registered mail. As the result of
this order, the'Bureau of Engraving and Printing has followed the practice of
applying five paper seals on each wrapped package of currency, two of the seals
are on each end and one is placed over the fold in the center of the package.
It is hereby ordered that.the method of sealing be modified and that hereafter
only one paper seal be applied to each package of new currency. This seal shall
be placed on the bottom of the package so as to overlap the fold in the wrapper.
The cancellation of the seal by a rubber stamp with fugitive ink will be continued.
E. H. FOLEY, Jr.,
Acting Secretary of the Treasury.
No. Ill, FEBRUARY 17,1949, DELEGATION OF AUTHORITY TO AWARD
AND EXECUTE CONTRACTS, ETC., IN THE BUREAU OF FEDERAL
SUPPLY
The following officers .and employees of the Bureau of Federal Supply are hereby
authorized to award and execute contracts and agreements necessary or appropriate to oarry out the functions of the Bureau of Federal Supply:
Director.
Assistant Director, Operations.
Deputy Director, Purchase and Stores Branch.
EXHIBITS
337
D e p u t y Director, Strategic and Critical Materials Branch.^
Special Assistant to the D e p u t y Director, Purchase and Stores Branch.
Managers, in foreign areas.
Mr. J o h n L. Kirby, Attorney, OfRce of the Chief Counsel, Bureau of Federal
Supply, is hereby authorized to act as Contracting Officer under Contract D A Tps-17000 with E. B. Badger & Sons Co. Under this a u t h o r i t y Mr. Kirby wiU
perform all of t h e duties of Contracting Officer described in the contract and
required for t h e final settlement thereof.
•
Subject to such limitations as m a y be prescribed by t h e Director, Bureau of
Federal Supply, t h e following officers a n d employees of the Bureau of Federal
Supply are hereby authorized to award a n d execute contracts a n d agreements
necessary or appropriate to carry out the functions of the Bureau of F e d e r a l
Supply:
D e p a r t m e n t a l Service:
Chief, Purchase Division.
Chiefs, Purchase Sections.
Assistant Chiefs, Purchase Sections.
Chiefs, Purchase Subsections.
Chief, Surplus Property Program.^
Field Service:
Managers of Supply Centers.
Managers of Branch Supply Centers.
Chiefs, Purchase a n d Stores Divisions.
Assistant Chiefs, Purchase a n d Stores Divisions.
Chiefs, Purchase Divisions.
Assistant Chiefs,.Purchase Divisions.
Chiefs, Purchase Sections.
Purchasing Officers.
This order is effective immediately. T h e order of t h e Secretary of t h e Treasury,
dated March 8, 1946, delegating a u t h o r i t y to award a n d execute such contracts
a n d agreements, a n d all a m e n d m e n t s thereto are hereby rescinded'. Nothing
contained herein shall affect orders of t h e Secretary of t h e Treasury relating to
t h e so-called R o y a l t y Adjustment Act, title I I of t h e First War Powers Act,
1941, or t h e Renegotiation Act, as amended.
E.. H .
F O L E Y , Jr.,
Acting Secretary of the Treasury.
N O . 112, M A R C H 11, 1949, D E L E G A T I O N O F A U T H O R I T Y T O A U T H O R IZE T H E P U B L I C A T I O N OF A D V E R T I S E M E N T S , NOTICES, OR
P R O P O S A L S I N C I D E N T T O T H E F O R F E I T U R E OR SALE OF GOVERNMENT-OWNED PROPERTY
P u r s u a n t to section 12 of t h e act of August 2, 1946 (5 U. S. C. 22a), a n d confirming a n d supplementing article 4 of Narcotic Regulations No. 6 (26 C F R , 1939
Supp. 153.4), t h e Commissioner a n d D e p u t y Commissioner of Narcotics, and t h e
District Supervisors of t h e Bureau of Narcotics, are hereby delegated authority,
p u r s u a n t t o t h e above mentioned act, t o authorize t h e publication of advertisements, notices or proposals incident to t h e forfeiture or sale of Government-owned
property.
E.
H.
FOLEY,
Jr.,
Acting Secretary of the Treasury.
N O . 113, A P R I L 22, 1949, A P P O I N T M E N T O F T H E D E P U T Y D I R E C T O R
OF CONTRACT S E T T L E M E N T
P u r s u a n t to Reorganization Plan No. 1 of 1947 a n d section 4 (d) of t h e Cont r a c t Settlement Act of 1944 (58 Stat. 651; 41 U. S. C. 104), I hereby appoint
Philip Nichols, Jr., as D e p u t y Director of C o n t r a c t Settlement, effective AprU
25, 1949.
Treasury D e p a r t m e n t Order No. 91 dated August 29, 1947, is hereby revoked.
J O H N W . SNYDER,
Secretary of the Treasury.
1 As amended in Supplement 1, May 9,1949.
856455—-50'
23
338
REPORT OF THE SECRETARY OF THE TREASURY
NO. 114, JUNE 1, 1949, RESTATING THE OVER-ALL PROMOTION
POLICY OF THE TREASURY DEPARTMENT AND REQUIRING
EACH BUREAU, ETC., TO ISSUE ITS OWN STATEMENT OF POLICY
IN LINE WITH THE OVER-ALL POLICY
1. Purpose.—The purpose of this order is to restate the over-all promotion
policy of the Treasury Department and to establish the requirement that each
bureau, oflfice, and division issue its own statement of promotion policy in line
with the provisions hereinafter stated.
2. Policy.—It is the policy of the Treasury Department normally to fill vacant
positions above the customary recruiting levels iri each bureau, office, and division by the promotion from within of qualified employees whose abilities have
been demonstrated and who have .the capacity to undertake more advanced work.
Promotions will be based solely on merit. There will be no discrimination because
of race, color, creed, or for any other reason. Preference will be given to seniority
only when other qualifications are equal.
3. Planning.—The aims of Treasury promotion policy will be to provide for
replacements with well-qualified persons and to progressively improve the competence of the organization. If the^e ends are to be achieved the problem of
filling positions requires continuing study of the abilities of employees instead
of consideration of a limited group when a vacancy is imminent or after it occurs.
In many cases the vacancies will be due to prospective retirement. In such cases
it shall be the responsibihty of the supervisory oflficial to train subordinate personnel to meet the needs of the position by the time the incumbent retires.
Employees will be advanced through the ranks with this premise firmly in mind.
4. Objectives.—The major objectives of this promotion policy are to:
(1) Fill each position with the person best qualified for the job.
(2) Utilize to the fullest possible extent the experience, training, and capacities
of Treasury employees.
(3) Stimulate high standards of performance and employee development.
(4) Encourage the development of a recognized career system with clear lines
of promotion, thus making it possible to attract better qualified persons for
entrance positions.
(5) Increase employee morale and job satisfaction.
5. Essential features.-^ViomoWon policy statements issued under this order
should include:
(1) A requirement that standards for promotion be developed in terms of
qualifications, efficiency ratings, examinations, training, and fitness for added
responsibility. Emphasis should be given to an employee's adjudged capacity
to successfully perform the duties of -the higher grade position, as well as his past
performance.
(2) A requirement that all eligible employees be considered for any promotion,
including those occupying routine positions.
(3) Provision for the release of employees to accept promotional opportunities.
(4) An outline of the responsibilities of supervisors, personnel workers, and
other employees whose opinions, judgment, and decisions affect the possibility of
promotion.
(5) A requirement that supervisory officials review the practices of bureaus,
offices, and divisions to see that promotion policy is being carried out.
6. Recruitment and training.—The successful adoption of this promotion-fromwithin policy will require the recruitment of persons at the normal recruiting
levels who will ultimately be qualified for advancement to higher positions within
each bureau, office, and division. The standards for recruitment must therefore
be kept high. Adequate opportunities must be given employees to prepare them
for positions of greater responsibility. Employees should be encouraged to avail
themselves of opportunities to increase their potential ability through night school^
home study, correspondence work, and in all other ways which may be open to
the employee.
7. Information.—Statements issued pursuant to this order should be cleared
with the Director of Personnel.
JOHN W . SNYDER,
Secretary of the Treasury.
EXHIBITS
339
NO. 115, JUNE 17, 1949, ESTABLISHING THE TAX ADVISORY STAFF
OF THE SECRETARY
By virtue of the authority vested in me as Secretary of the Treasury, including
the authority conferred by section 161 of the Revised Statutes, it is hereby ordered:
(1) The Division of Tax Research is hereby abolished.
(2) There is established in the Office of the Secretary the Tax Advisory Staff
of the Secretary.
(3) The duties, functions and responsibUities of the Division of Tax Research
are herewith transferred to the Tax Advisory Staff, of the Secretary.
(4) All personnel now employed in the Division of Tax Research are transferred to the newly organized Tax Advisory Staff of the Secretary. •
(5) Treasury Department Order No. 101, dated July 16, 1948, is hereby amended
by deleting " 3 . Division of Tax Research" and by adding " 3 . Tax Advisory Staff
of the Secretary."
(6) This order becomes effective immediately.
JOHN W . SNYDER,
Secretary of the Treasury.
NO. 116, JUNE 16,1949, PAYMENT OF INDEBTEDNESS BY EMPLOYEES
It shall be the policy of the Treasury Department to require employees to
handle their just personal obligations in such a way that these obligations will
not be brought to the attention of the Department. This includes indebtedness
to the Federal, State, and local governments, as well as to private concerns and
individuals.
Any violation of this policy shall subject the employee to disciplinary action
and continued violation or persistent refusal to pay jiist debts shall subject the
offender to dismissal.
It will be the responsibility of the Administrative Assistant to the Secretary to
see that such detailed instructions as may be necessary are issued to effectuate
the policy set forth herein.
E. H. FOLEY, Jr.,
Acting Secretary of the Treasury.
Exhibit 28.—Organization of the Treasury Department: OflSce of the Secretary
and bureaus, divisions, and oflSces performing chiefly staff and service functions
The statements with respect to the organization of the Office of the Secretary
and bureaus, divisions, and offices performing chiefly staff and service functions
are revised to read as follows:
SEC. 1. Secretary of the Treasury, (a) The Secretary of the Treasury,
appointed by the President by and with the advice and consent of the Senate, is
the head of the Department of the Treasury, which carries out the varied duties
and responsibilities imposed upon him. The Department was established by the
Act of September 2, 1789 (1 Stat. 65; 5 U. S. C. 241-242), which concluded a
description of the duties of the Secretary by providing that he should "perform
all such services relative to the flnances, as he shall be directed to perform".
(b) The immediate staff of the Secretary includes the Under Secretary, two
Assistant Secretaries, the Fiscal Assistant Secretary, the General Counsel, the
Administrative Assistant to the Secretary, the Director of the Technical Staff,
and a varying number of Assistants and Special Assistants to the Secretary.
(c) The Secretary of the Treasury serves as a member of various boards, committees, and other organizations. He is Chairman of the National Advisory
Council on International Monetary and Financial Problems, which includes as
its other members the Secretary of State, the Secretary of Commerce, the Chairman of the Board of Governors of the Federal Reserve System, the Chairman of
the Board of Directors of the Export-Import Bank of Washington, and the Administrator for Economic Cooperation. The purpose of the Council is to coordinate the policies and operations of the representatives of the United States on the
International Monetary Fund and the International Bank for Reconstruction
and Development and of all agencies of the Government to the extent that they
340
REPORT OF THE SECRETARY OF THE TREASURY
make or participate in making foreign loans or engage in foreign financial, exchange
or monetary transactions.
(d) The Secretary is the Managing Trustee of the Board of Trustees of the
Federal Old-Age and Survivors Insurance Trust Fund, composed of the Secretaries of Treasury and of Labor and the Federal Security Administrator. This
fund results from the extensive contributions and collections from which Social
Security benefits are paid. The duties of the Managing Trustee include the
investment in interest-bearing obligations of the United States or obligations
guaranteed as to both principal and interest by the Unijied States of such portion
of the fund as is not, in his judgment,required to meet current withdrawals; the
sale at.the market prices of any obligations.acquired by the fund, except special
obligations issued exclusively to the fund (which may be redeemed at par plus
accrued interest); and the payment into the Treasury from the trust fund of
amounts estimated to be adequate to reimburse for a 3-month period the expenditures incurred in connection with the administration of certain provisions of the
Social Security Act. The annual report of the Board of Trustees of the Federal
Old-Age and Survivors Insurance Trust Fund, reporting the status of the Fund,
is submitted to the Congress on the first day of each regular session.
(e) The Secretary of the Treasury is also United States Governor of the International Bank for Reconstruction and Development and of the International
Monetary Fund; Chairman, Library of Congress Trust Fund Board; member,
Advisory Board of the Export-Import Bank of Washington; National Sejcurity
Resources Board; National Munitions Control Board; Foreign-Trade Zones
Board; Joint Committee on Reduction of Non-essential Federal Expenditures;
Executive Committee of the Federal-State Committee on Fiscal Policies of the
Council of State Governments; Board of Trustees of the Postal Savings System;
Smithsonian Institution; National Park Trust Fund Board; Foreign Service
Buildings Commission; Board of Trustees of the National Gallery of Art; National
Archives Council; and Trustee, Franklin D. Roosevelt Library. The Secretary
is honorary Treasurer, and Chairman of the Board of Trustees of the Endowment
Fund, of the American National Red Cross.
SEC. 2. • Under Secretary. Except for the Secretary, the Under Secretary is the
chief officer of the Treasury, and is the first officer of the Department to act as
Secretary in case of the absence or sickness of the Secretary himself. By statute
he is directed to perform such duties in the Office of the Secretary as may be prescribed by the Secretary or by law. There have been assigned to his supervision
the United States Coast Guard, Bureau of the Mint, Bureau of Engraving and
Printing, Bureau of Narcotics, Comptroller of the Currency, United States Secret
Service, Chief Coordinator of Treasury Enforcemerit Agencies, and Committee on
Practice. The Under Secretary is usually designated by the President as a member of the Board of Governors of the American National Red Cross and acts as
its treasurer.
SEC. 3. Assistant Secretaries, (a) Two Assistant Secretaries are provided for
the Department by statute, and they are required to perform such duties as may
be prescribed by the Secretary or by law. They are authorized to act as Secretary
of the Treasury in certairi instances of absence or sickness of the Secretar.y and the
Under Secretary.
(b) There is assigned to one Assistant Secretary the supervision of the Bureau
of Customs, the Tax Advisory Staff of the Secretary, and the United States
Savings Bonds Division. This Assistant Secretary also supervises certain administrative matters pertaining to the Bureau of Internal Revenue, although the
Commissioner of Internal Revenue reports directly to the Secretary of the Treasury
on various matters involving questions of policy.
(c) One Assistant Secretary, among other duties, supervises the Office of
International Finance.
SEC. 4. General Counsel, (a) The General Counsel is by statute the chief law
officer of the Department. He is directly responsible to the Secretary for the
supervision and coordination of the work of the Legal Division, and performs such
other duties as are assigned to him by the Secretary or required by law. The
Legal Division is composed of the legal staff in the Office of the General Counsel",
and the legal staffs in the Bureaus of Internal Revenue, Customs, Narcotics, and
Public Debt, the Office of International Finance, Office of the Comptroller of the
Currency, and the United States Coast. Guard. The Office of the General
Counsel performs the legal services required in connection with the work of other
bureaus, divisions, and offices of the Department not having legal staffs. Included among these are the Office of the Secretary, Office of Administrative Serv-
EXHIBITS
341
ices. Office of the Treasurer of the United States, Bureau of Accounts, Bureau of
the Mint, Bureau of Engraving and Printing, United States Secret Service,
United States Savings Bonds Division, and Committee on Practice.
(b) The activities of the Legal Division embrace all legal questions arising in
connection with the administration of the duties and functions of the ^various
bureaus, divisions, and other branches of the Department.
(c) Subordinate to the General Counsel are six Assistants General Counsel,
among whom is divided the supervision of all the legal work for the various
bureaus, divisions, and offices of the Department. One of these, the Assistant
Gerieral Counsel for the Bureau of Internal Revenue, has the operating title of
"Chief Counsel" of that Bureau.
(d) In case of absence or sickness of the Secretary, the Under Secretary and the
Assistant Secretaries, the General Counsel is authorized to act as Secretary of
the Treasury.
(e) The General Counsel has supervision over the Tax Legislative Counsel
and advises the Secretary on technical and legal aspects of tax policy and tax
legislation. The Tax Legislative Counsel assists in the formulation of the Secretary's tax recommendations to the Congress and represents the Department
before committees of Congress with respect to iriternal revenue legislation considered by them. The Office of the Tax Legislative Counsel assists in drafting
tax legislation; p^repares or reviews departmental reports to Congress on tax
legislative matters; studies proposals for amending the tax laws; represents the
Department in the negotiation of treaties involving taxation; advises the United
States delegate to the United Nations Fiscal Commission regarding international
tax problems; renders advice on the legal aspects of Federal-State tax relations;
and reviews internal revenue regulations and rulings prepared by the Bureau
of Internal Revenue and proposed closing agreements with taxpayers.
(f) In addition to tax legislative matters, the General Counsel is responsible
for all other legislation of interest to the Department. This includes the drafting
of legislation for the improvement of the administration of the Department and
the preparation of reports to- Congress on legislation affecting the Department.
SEC. 5. Fiscal Assistant Secretary, (a) The Fiscal Service, the head of which
is the Fiscal Assistant Secretary, includes the Office of the Treasurer of the United
States, the Bureau of Accounts, and the Bureau of the Public Debt.
(b) The Fiscal Assistant Secretary, under the direction of the Secretary, is.
responsible for the administration of financing operations; the supervision of the
functions and activities of the bureaus and offices composing the Fiscal Service;
and the supervision of the administration of the accounting functions and activities in the Treasury Department and all its bureaus and offices, the last-named
function being exercised through the Commissioner of Accounts. He has general
authority over matters relating to the Fiscal Service which are not required by
law to be personally exercised by the Secretary (including the waiver in certain
cases of relevant Treasury regulations), and performs such other duties as the
Secretary directs.
(c) The Fiscal Assistant Secretary directs the performance of the fiscal agency
functions of - the. Federal Reserve Banks; exercises supervision over the current
cash position of th» Treasury; prepares calls for the withdrawal of funds from
special depositaries to meet current expenditures; and directs the transfer of
Government funds between Federal Reserve Banks.
(d) Under appointment by the President of the United States, confirmed by
the Senate, the Fiscal Assistant Secretary serves as United States delegate to
the Fiscal Commission of the Economic and Social Council of the United Nations.
(e) In case of the absence or sickness of the Fiscal Assistant Secretary, or a
vacancy in that office, the Under Secretary will act as Fiscal Assistant Secretary,
In case of the absence or sickness of both the Under Secretary and the Fiscal
Assistant Secretary, or of vacancies in those offices, the senior Assistant Secretary
present will act as Fiscal Assistant Secretary.
SEC. 6. Assistants and Special Assistants to the Secretary. There are in the
Office of the Secretary a varying number of Assistants and Special Assistants to
the Secretary who perform such functions and duties as may be assigned from
time to time. One Assistant to the Secretary supervises all information and press
matters in the Department. Another Assistant to the Secretary is National
Director of the United States Savings Bonds Division.
SEC. 7. Administrative Assistant to the Secretary. (a) The Administrative
Assistant to the Secretary exercises supervision over all administrative matters
in the Department, including budgetary, organization and methods personnel
342
REPORT OF THE SECRETARY OF THE TREASURY
. \
.
matters, and supervision of the Office of Budget, Office of Personnel, and Office
of Administrative Services.
(b) Office of Budget. The Office of Budget, headed by the Budget Officer who
is under the direction of the Administrative Assistant to the Secretary, is responsible for the presentation and justification of estimates of appropriations necessary
for the department's operations. The Budget Officer directs and coordinates
the budgetary program and appears before the Bureau of the Budget and congressional appropriations committees on appropriation and related matters.
(c) Office of Personnel, (a) The Office of Personnel, headed by a Director who
is under the direction of the Administrative Assistant, to the Secretar.y, plans and
supervises the personnel management program of the Department. This program, which is administered by the heads of bureaus, offices, and divisions, includes
recruitment, appointment, training, transfers, promotions, separations, efficiency
ratings, safety, health, discipline, grievances, working conditions, wage administration, and position classification. The Office represents the Department in its
relations with employee organizations, the Civil Service Commission, the Council
of Personnel Administration, and with' ,other [agencies fdealing with personnel
matters. The Director of Personnel also' serves as Chairman of the Department
Loyalty Board.
(d) Office of Administrative Services. The. Office of Administrative Services,
headed by a Director who reports to the Administrative Assistant to the Secretary, is composed of the following three Divisions:'
(1) The Division of Treasury Space Control, which manages and coordinates
the leasing, assignment, and utilization of space occupied by Treasury organizations in Washington and the field.
(2) The Division of Treasury Buildings, which maintains-and operates certain Treasury buUdings in the District of Columbia.
(3) The Division of Office Services, which operates central administrative
services for the Department, including administration of funds for miscellaneous
expenses and for several pay rolls, commuriications services, supply, duplicating,
mail, motor messenger, and records administration. .
SEC. 8. Office of the Technical Staff, (a) The Office of the Technical Staff is
headed by a Director who reports directly to the Secretary of the Treasury.
(b) The Director of the Technical Staff has the responsibility of providing
technical assistance on matters relating to Treasury financing, public debt management, and other Treasury matters, including the following:
(1) Developments in the outlook for the fiscal and budgetary position of the
Treasury, and proposals concerning the size and character of Treasury borrowing
operations, both cash and refundings.
(2) The impact of Treasury financing and public debt operations on the credit
structure and general economy of the country, and the developm
@FedFRASER