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(New

Issues)

CIRCULAR N O .

349

Federal Reserve Bank of New York
Offering of $ 4 0 0 , 0 0 0 , 0 0 0 (or thereabouts)

United States of America Treasury Certificates of Indebtedness
Dated and bearing Interest from March 15, 1 9 2 1
Series TS 2—1921,5^ Per cent. Due September 15, 1921
Series TM—1922, 5M Per cent. Due March 15, 1922
To all Banks,
and Principal

Trust Companies, Savings Banks, Bankers, Investment
Corporations
in the Second Federal Reserve
District:

Dealers

The Secretary of the Treasury, under the authority of the act approved September 24,
1917, as amended, offers for subscription, at par and accrued interest, through the Federal Reserve
Banks, Treasury certificates of indebtedness, in two series, both dated and bearing interest from
March 15, 1921, the certificates of Series T S 2—1921, being payable on September 15, 1921 with
interest at the rate of five and one-half per cent, per annum semiannually, and the certificates of
Se ies TM—1922, being payable on March 15, 1922, and bearing interest at the rate of five and
three-quarters per cent, per annum payable semiannually.
Applications will be received a t the Federal Reserve Banks.
Bearer certificates will be issued in denominations of $500, $1,000, $5,000, $10,000, and
$100,000. The certificates of Series TS 2—1921 will have one interest coupon attached, payable
September 15, 1921, and the certificates of Series TM—1922 two interest coupons attached payable
September 15, 1921 and March 15,1922.
The certificates of both said series shall be exempt, both as to principal and interest, from all
taxation now or hereafter imposed by the United States, any State, or any of the possessions
of the United States, or by any local taxing authority, except (a) estate or inheritance taxes, and
(b) graduated additional income taxes, commonly known as surtaxes, and excess profits and warprofits taxes, now or hereafter imposed by the United States, upon the income or profits of individuals, partnerships, associations, or corporations. The interest on an amount of bonds and
certificates authorized by said act approved September 24, 1917, and amendments thereto, the
principal of which does not exceed in the aggregate $5,000, owned by any individual, partnership, association or corporation, shall be exempt from the taxes provided for in clause (6) above.
Certificates of these series will be accepted a t par, with an adjustment of accrued interest,
during such time and under such rules and regulations as shall be prescribed or approved by the
Secretary of the Treasury, in payment of income and profits taxes payable at the maturity of the
certificates, respectively. T h e certificates of these series do not bear the circulation privilege.
T h e right is reserved to reject any subscription and to allot less than the amount of certificates of either or both series applied for and to close the subscriptions as to either or both series
a t any time without notice. Payment a t par and accrued interest for certificates allotted must
be made on or before March 15, 1921, or on later allotment. After allotment and upon payment Federal Reserve Banks may issue interim receipts pending delivery of the definitive certificates.
Any qualified depositary will be permitted to make payment by credit for certificates allotted to it for itself and its customers up to any amount for which it shall be qualified
in excess of existing deposits, when so notified by the Federal Reserve Bank of its district. Treasury certificates of indebtedness of Series TM—1921, Series TM 2—1921, Series TM 8—1921, and
Series TM £—1921, all maturing March 15, 1921, and of Series E—1921, maturing April
15,1921,
with any unmatured interest coupons attached, will be accepted at par, with an adjustment of accrued
interest, in payment for any certificates of the series TS 2—1921 or TM—1922 now offered which
shall be subscribed for and allotted.
As fiscal agents of the United States, Federal Reserve Banks are authorized and requested
to receive subscriptions and to make allotment in full in the order of the receipt of applications
up to amounts indicated by the Secretary of the Treasury to the Federal Reserve Banks of the
respective districts.
Yours very truly,
B E N J . STRONG,

New York, March 9, 1921



Governor.

{Reference to letter of the Secretary of the Treasury, next page)

Reprint of Letter from A. W. Mellon, Secretary of the Treasury, to the Presidents
of Incorporated Banks and Trust Companies on the Current ^>}4 and 5 ^
Per Cent. Issues of Treasury Certificates of Indebtedness.

Washington, D. C, March 9, 1921.

Dear Sir: At the outset of my administration
of the Treasury I am addressing this letter to
the banking institutions of the country to
inform them of the state of the Nation's
finances, the probable requirements of the
Treasury for the coming months, and its
financial plans for the immediate future.
About $500,000,000 of Treasury certificates
of indebtedness mature on March 15, 1921,
and about $118,000,000 additional on April
15, 1921. On March 15, 1921 there will
become payable the semiannual interest
on the Third Liberty Loan amounting to
about $75,000,000. The Treasury must also
make large payments under the recent legislation authorizing partial payments on account of the railroad guaranty, which may
amount to as much as $200,000,000 during
the course of the next month. In order to
meet these heavy requirements and at the same
time provide for the current expenses of the
Government, the Treasury relies in large
part upon the quarterly installment of income
and profits taxes due March 15, 1921. Advance payments of March taxes have been
up to expectations, and though it is impossible
to forecast the result with certainty, the
Treasury has good reason to hope that income and profits tax payments during March
will about balance the March 15 maturities
of principal and interest. To provide for its
further requirements, the Treasury has decided, on the basis of the best available estimates, to offer Treasury certificates of indebtedness in the amount of $400,000,000 or thereabouts, in two series, both dated March 15,
1921, one series designated T S 2-1921, bearing
5}/2 per cent, interest, maturing September
15, 1921, and the other series designated
TM-1922, bearing 5 % per cent, interest and
maturing March 15, 1922. Applications for
Treasury certificates of these series will be
received in regular course through the several
Federal Reserve Banks, as fiscal agents of the
United States, from which full particulars
concerning the offering may be obtained.
Treasury certificates of the series which
mature on March 15, 1921, and April 15, 1921,
will be accepted at par with an adjustment
of accrued interest in payment for any cer-




tificates of the two series now offered which
may be subscribed for and allotted.
On the^basis of the Treasury daily statements, the current operations of the Government during the first eight months of the
fiscal year through February 28, 1921 show a
net current surplus (excess of ordinary receipts over ordinary disbursements) amounting
to $186,115,505.53. This showing is particularly encouraging in view ofithe fact that
during these eight months there have been
extraordinarily heavy expenditures but only
two quarterly payments of income and {profits
taxes. Ordinary receipts up to February
28, 1921 have amounted to $3,433,411,141.36,
as against ordinary disbursements during the
same period of $3,247,295,635.83 (or at the
rate of almost 5 billions a year). Of these
disbursements about $750,000,000 have represented expenditures of the War Department, about $450,000,000 expenditures of the
N a v y Department, about $475,000,000 payments to the railroads under the Transportation Act, 1920, and about $550,000,000 payments of interest on the public debt—a total
of about $2,225,000,000 under these four main
headings. In the four months which remain
of the fiscal year there will be two further
quarterly payments of income and profits
taxes, both based on the business of the
calendar year 1920. While it is impossible
to estimate these tax payments with accuracy
and the prospects are t h a t expenditures will
continue heavy for some time to come, the
Treasury expects t h a t the operations of the
first three quarters of the year, through March
31, 1921, as well as t h e completed year's
operation, will show some surplus of receipts
over expenditures.
T h e gross debt of the Government on February 28, 1921, amounted to $24,051,684,728.28, on the basis of Treasury daily statements, while on the same date the floating
debt (loan and tax certificates unmatured)
amounted to $2,484,032,000. These figures
contrast with a gross debt on December 31,
1920 of $23,982,224,168.16 and a floating
debt on the same date of $2,300,656,000. As a
result of the Treasury's operations on March

^

15, 1921, these increases in gross debt and
floating debt (which are to be expected in the
odd months when no quarterly income and
profits tax payments are made) should be
largely offset and possibly overcome. The
progress to be made during the balance of
the current year in the retirement of gross
debt and floating debt will depend, of course,
upon the extent of the demands made upon
the Treasury and the volume of its receipts
from taxes and salvage. This progress is
likely to be thereby limited by reason of the
heavy railroad payments to be expected
during the next two or three months.
These figures as to the public debt and the
current operations of the Treasury show that
the country's finances are sound, but that the
situation calls for the utmost economy. The
Nation cannot afford extravagance, and so
far as possible it must avoid entering upon
new fields of expenditures. The heavy requirements of the Government on account
of necessary expenditures including interest
and sinking fund on the public debt, and the
maturity of 7 ^ billions of short-dated
debt within the next two years or thereabouts
make it imperative that the greatest care
and economy be exercised in matters affecting
Government expenditures.
The people generally must become more
interested in saving the Government's money
than in spending it. A thorough going national
budget system must be established, and the
Government's expenses brought into relation
to its income. The period which has elapsed
since the last quarterly installment of income
and profits taxes has been marked by important
developments in the market for Treasury
certificates of indebtedness. On January 15,
1921, the Treasury successfully sold an offering of three-months 5}/£ per cent, certificates
and nine-months 5% per cent, certificates.
On February 15, 1921, an offering of
five-months 5 ^ per cent, certificates was
likewise promptly oversubscribed. Treasury
certificates of indebtedness now enjoy a broad
and active market, on a straight investment




basis and all issues now outstanding are
quoted in the open market either at par or
at a premium. The last three months have
also been marked by still further distribution
of Treasury certificates among investors and a
reduction in holdings of Treasury certificates
by banks. The reporting member banks of
the Federal Reserve System (about 825 banks
in leading cities, which are believed to control
about 40 per cent, of the commercial bank
resources of the country and to have subscribed in the first instance for about 75 percent, of the Treasury certificates of indebtedness now outstanding) held on February
25, 1921, only about $235,000,000 of Treasury
certificates as compared with reported holdings on November 26, 1920, of about $313,000,000 and on February 27, 1920, of about
$673,000,000. On March 4, 1921, the Federal Reserve Board reported that there were
pledged with the Federal Reserve Banks only
about $110,000,000 of Treasury certificates
to secure loans and discounts, or less than
5 per cent, of the aggregate amount of loan
and tax certificates then outstanding. The
figures strikingly show the success of the
efforts which have been made for the past
year or more to secure distribution of Treasury
certificates among real investors, and to keep
them out of the banks. The two series of
six months and twelve months certificates
now offered are both acceptable in payment
of income and profits taxes, and should prove
peculiarly attractive to taxpayers as well
as to persons having idle funds awaiting
investment.
I know that I can count, like my predecessors
in office, on your hearty co-operation in the
distribution and sale of Treasury certificates,
and hope that, as in the past, you will subscribe
liberally in the first instance for the certificates
and use your best efforts to resell them to
investors.
Cordially yours,
A. W. MELLON,
Secretary of the Treasury.


Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102