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. • ANNUAL REPORT OF THE
SECRETARY OF THE TREASURY
ON
THE STATE OF THE
FINANCES
FOR THE FISCAL YEAR
ENDED JUNE 30
1927
With Appendices
UNITED STATES
GOVERNMENT PRINTING OFFICE
WASHINGTON
1928
TREASURY DEPARTMENT
Document No. 2985
Secretary
^^^^-^^•'^
CONTENTS
Fag»
Business conditions in the United States arid abroad
Business conditions during the fiscal year
_
Volume of business
Commodity prices
Foreign business conditions
Banking and
finance
Federal reserve banking
_^
The general banking situation
X-,
New security issues
.
' "^
The present situation of business
.
Total volume of business
•.
Commodity prices
^
Agriculture
Credit conditions—
-__
Receipts
Principal sources of revenue in 1927
2
Income taxes
^
Individual income tax-_„
^^
Corporation income tax
^^
Miscellaneous internal revenue
'
^
Expenditures
Increases and decreases in the fiscal year 1927
.
~p.
Percentage distribution of expenditures
Percentage of expenditures attributable to war
^
The surplus
i
Estimates of receipts and expenditures
A
Estimates of previous years
^
Estimates for the fiscal years 1928 and 1929 compared with actua
ss^
amounts for the fiscal year 1927
u- The public debt
_-_.
General review of operations in the fiscal year 1927
Refunding the second Liberty loan
Condition of the Treasury
._
Recommendations for legislation
Revision of the revenue act
Corporation income tax
Surtax rates.
Estate tax
Automobile tax
Admissions tax
Taxes on the income received from bankers' acceptances held
by foreign banks of issue
0
Improved administration of income taxes
.
1
Summary of causes contributing to congestion
Summary of outstanding facts
^
Analysis of the problems
.
^
Summary of outstanding conclusions
^
Detailed recommendations
^
Tax exemption of Federal bonds.___^
=j
Disposition of sequestrated alien i)r.operty and payment of mixed
^
claims
^---__
•-.
Acquisition of land for Federal buUdings in the District of Columbia,
4
Surety bonds
.
.
^^
m
1
2
2
2
3
33
3
4
4
4
4
4
5
6
5
9
10
12
13
16
16
18
19
20
25
25
28
34
34
37
41
43
43
48
50
61
52
54
55
55
56
59
60
61
62
64
67
70
70
IV
CONTENTS
Page
Other subjects of importance
_.
Federal reserve system and gold movements
..
Federal farm loan system
i
Reorganization
Federal land banks
Joint-stock land banks
Receiverships
Federal intermediate credit banks
Cotton situation in 1926-_.Flood situation
.
Federal public buildings program..-_-.
Program for buildings in the District of Columbia
Program for buildings outside the District of Columbia
Revision of paper currency designs
The McFadden Act
Money cost of the World War to the United States Government
Inauguration of the statement of expenditures on the basis of checks
issued
Administration and organization
Changes in Treasury organization
_._ ..
Bureau of Internal Revenue
Present status of the work
Outline of substantial accomplishments
.
Complexities of the work— -_Recent changes in administrative procedure
Personnel
•.Bureau of Customs
Coast Guard
Prohibition law enforcement
Narcotic law enforcement
.
Public Health Service
_.
Bureau of Engraving and Printing
Division of Supply
1
General Supply Committee
War Finance Corporation
71
71
73
74
76
76
77
78
79
80
81
81
83
84
86
88
89
91
91
93
93
101
105
106
112
112
116
117
119
119
120
121
121
122
ADMINISTRATIVE REPORTS OF BUREAUS AND DIVISIONS
Accounts and Deposits, Office of the Commissioner of
Obligations of foreign governments
Receipts from Germany
Army costs
•.
Mixed claims
Railroad obligations
Section 204
Section 209
Section 210
Securities owned by the United States Government
Trust funds administered by the Treasury
Adjusted service certificate fund
:
-_
Civil service retirement and disability fund
District of Columbia teachers' retirement fund
^—
Foreign service retirement and disability fund
Library of Congress trust fund
United States Government life insurance fund
Division of Bookkeeping and Warrants
Summary of receipts and expenditures
.
The general fund
:_.._
Warrants issued during the fiscal year 1927 adjusted to basis of
daily Treasury statements (revised)
District of Columbia account of revenues and expenditures
AUen Property Custodian account
Purchase of farm loan bonds. State bonds and stocks owned by the United States
^
125
125
128
128
129
131
131
132
132
133
134
134
135
136
137
139
140
141
141
142
142
144
144
145
145
CONTENTS
V
Accounts and Deposits, Ofiice of the Commissioner of—Continued.
^^8*
Division of Deposits
146
Amount of deposits
146
Interest on deposits
147
General national-bank depositaries
147
Limited national-bank depositaries—•
_
—
147
Insular depositaries
:
—
148
Foreign depositaries
-148
Special depositaries
-148
Appointments, Division of
149
Employees of the Treasury Department
149
Number
.
149
Retirement
149
Section of surety bonds
150
Budget and Improvement Committee
152
Coast Guard-__154
Protection to navigation
155
Ice patrols
155
Winter cruising
^
156
Removal of derelicts
.
156
Anchorage and movements of vessels
156
Regattas
^^_156
Flood and hurricane service
157
Enforcement of customs and other laws
.
157
Cruises iri northern waters
.
158
Northern Pacific halibut
fishery
158
Communications
158
Telephones and cables
158
Radio coordination representatives
^^
_-159
Equipment
^.^
,
160
Floating equipment-^
^^^-^-.._
^
160
Aviation -__-_i
161
Ordnance
^_
^
161
The academy, stations, repair depot, etc
162
Coast Guard Academy
.,
162
Stations and bases
..^^._-^..^.--^_-__
163
Repair depot.-_--^
.^^
.
163
Personnel _ . . - . _
w..^..
^^_164
Recruiting
-.._
.
_-._
.
164
Welfare.
..--..164
Award of life-saving medals
^^.-^-^--..
165
ComptroUer of the Currency.--..^
-166
National banks organized, consolidated, insolvent, in voluntary liquidation, and in active operation...
...-^
^
166
Condition ..of national banks - _..
..
168
Banks other than national....
>
^
^-_
170
All reporting banks
-__.
:.
..
171
Customs Service
.
_.
..
176
Volume of business.
.
^
..
_._
176
Receipts . . . . . ^ . ^
:
.....
176
Enforcement activities..-.-^
^_
178
Expenditures and statistics.: -.
.
179
Undervaluations
-_
..
179
Rugs
-..---.--.-.---_
179
Leather gloves
.
180
French perfumery
180
Other commodities
180
Classification of wool
180
Chemical laboratory
.
..__-.-181
Trade routes
.
._-__
181
Air ports
__.
.
.
182
Special agency activities..
^
^--.
183
Disbursing clerk_186
Engraving and Printing, Bureau of
^
187
Enrollment and Disbarment of Attorneys and Agents, Committee on
193
VI
CONTENTS Page
Internal Revenue, Bureau of
195
General
.
•
195
Internal revenue receipts- 195
Refunds
.
195
Cost of administration
.
196
Income Tax Unit
196
Revenue agents' service
._
196
Adjustment of claims
197
Additional revenue
.
197
Personnel
^
197
Miscellaneous Tax Unit
.
198
Capital stock tax
198
Estate tax division
198
MisceUaneous taxes
199
Tobacco taxes
199
Accounts and CoUections Unit
199
- Collection accounting division
.
200
CoUectors' personnel, equipment, and space division
201
Disbursement accounting division
.
201
Genera] counsel
_-202
Appeals division
202
Interpretative division I
202
Interpretative division II
.
203
Penal division
203
Civil division
204
Mint Bureau
.
206
Institutions of the mint service
206
General-.-.
.....
206
Deadwood assay office closed
..
206
Gold and silver receipts and transfers
206
Gold operations
206
SUver operations
.
207
Refineries
*.
.
20 7
Coinage
207
Regular domestic coinage
207
Commemorative coins
208
Coinage for foreign governments
208
Expenses, income, etc
.
_-..
208
Gold and silver in the United States
209
Stock of coin and monetary buUion
.
209
Production of gold and silver
210
Industrial consumption of gold and sUver
210
Net export of domestic gold coin
210
Personnel Classification Ofiicer
-^_
.
211
Prohibition, Bureau of
212
Narcotics
214
Public Debt Service
.
215
Division of Loans and Currency
.
215
Issue and retirement of securities
,
215
Individual registered accounts activities
216
Claims
•
,
1-217
Safe-keeping of securities..
217
Mutilated paper and redeemed currency.
218
Publicitv
.
218
Personnel
'
-: 218
Register of the Treasury
_.
—
218
Division of Public Debt Accounts and Audit
-221
Division of Paper Custody
-_
223
Public Health Service
.
224
Division of sanitary reports and statistics
224
Division of foreign and insular quarantine and immigration
226
Quarantine transactions
226
Medical inspection of aliens
228
Examination of alien passengers abroad
" 229
Division of domestic quarantirie
-_—
229
Division of scientific research
231
CONTENTS
Pubhc Health Service—Continued.
Division of marine hospitals and relief
Division of venereal diseases
Division of personnel and accounts
Financial statement
Secret Service Division
Supervising Architect, Office of the
Operations under public buildings construction program
Projects completed^
Projects in course of construction
District of Columbia' building program
Remodeling and enlarging public buildings
War claims
Expenditures, liabilities, and unencumbered, balances
Supply, Division of
.
Expenditures from various appropriations
Purchases and issues of stationery supplies
Shipments and inventories
.
Printing and binding
Postage
_Department advertising
General Supply Committee..
Treasurer of the United States
War Finance Corporation
VII
•
Page
233
235
236
237
238
240
240
241
241
243
244
245
246
248
248
251
252
253
255
255
255
260
265
EXHIBITS
THE PUBLIC DEBT
Financing transactions of December, 1926
Exhibit 1. Offering of certificates of indebtedness, Series TS-1927 (33^ per
cent) (Department Circular No. 373, December 8, 1926)--.
_Exhibit 2. Subscriptions and allotments, certificates of indebtedness, Series
TS-1927 (pressrelease, December 13, 1926)_.
269
270
Financing transactions of March, 1927
Exhibit 3. Offerings of certificates of indebtedness, Series TS2-1927 ( 3 ^
per cent) and Series TM-1928 (33^ per cent) (Department Circular
No. 378, March 7, 1927)
Exhibit 4. Subscriptions and allotments, certificates of indebtedness, Series
TS2-1927 and Series TM-1928 (from press releases, March 10 and
March 12, 1927).--.
.
Exhibit 5. Offering of Treasury notes, Series A-1930-32 (33^ per cent),
in exchange for second Liberty loan bonds (Department Circular
No. 379, March 8, 1927)
Exhibit 6. Exchange subscriptions and allotments, Treasury notes, Series
A-1930-32
271
273
274
276
Financing transactions of June, 1927
Exhibit 7. Notice of call of second Liberty loan bonds (press release,
May 9, li927, with Department Circular No. 381):
Exhibit 8. Off'ering of Treasury bonds of 1943-47 ( 3 ^ per cent) (press
release, May 31, 1927, with Department Circular No. 383)
Exhibit 9. Cash subscriptions and allotments. Treasury bonds of 1943-47
(from press releases, June 10 and June 14, 1927)
Exhibit 10. Time extended for exchange subscriptions for Treasury bonds
of 1943-47 (press release, June 15, 1927)
Exhibit 11. Exchange subscriptions and allotments, Treasury bonds of
1943-47
.
Exhibit 12. Offer to purchase second Libertv loan bonds (press release,
June 16, 1927, with Department Circular No. 384)
Exhibit 13. Purchase of second Liberty loan bonds (press release, June
23, 1927)
_-
276
280
284
284
285
286
287
vm
CONTENTS
Financing transactions of September, 1927
Exhibit 14. Offerings of certificates of indebtedness, Series TM2-1928
(3 per cent), and Treasury notes, Series B-1930-32 (3J^ per cent)
(Department Circulars Nos. 386 and 387, September 6, 1927)__.."._..
Exhibit 15. Cash subscriptions and allotments, certificates of indebtedness. Series TM2-1928, and Treasury notes. Series B-1930-32 (from
press releases, September 9 and September 12, 1927)
Exhibit 16. Exchange subscriptions for Treasury notes. Series B-1930-32
(press release, October 4, 1927)
..-
Page
288
293
294
Octoher and November operations in connection with the retirement of second
Liberty loan bonds
Exhibit 17. Offer to purchase second Liberty loan 4J^ per cent bonds (press
release, October 17, 1927)_.-_
Exhibit 18. Offer to purchase second Liberty loan 434 per cent bonds (press
release, October 24, 1927)
Exhibit 19. Offer to purchase second Liberty- loan bonds (press release,
October 31, 1927)
....
Exhibit 20. Offering of certificates of indebtedness, Series TJ-1928 (3j^
per cent) (press release, November 7, 1927, with Department Circular
No. 389)
1
295
295
295
296
Miscellaneous
Exhibit 21. ''Some Problems in Treasury Financing," an address by
Undersecretary -of the Treasury Mills, June 7, 1927, before the New
York State Bankers' Association, Washington, D. C
^
Exhibit 22. ''United States Treasury. Financing," extracts from an
address by Assistant Secretary of the Treasury Dewey, June 8, 1927,
before the Pennsylvania Bankers' Convention, Pittsburgh, Pa
Exhibit 23. "Treasury Financing," an address by Undersecretary of the
Treasury MiUs, August 10, 1927, at the Institute of PubUc Affairs,
University of Virginia
:
Exhibit 24. Regulations concerning United States Treasury savings
certificates (supplement to Department Circular No. 149, revised
February 1, 1927)
...
.
'!
Exhibit 25. Regulations concerning United States war-savings- certificates
(supplement to Department Circular No. 108, revised February 1,
1927)-.-.
.
298
302
306313
314
OBLIGATIONS OF FOREIGN GOVERNMENTS
Exhibit 26. Statement and letters concerning the payment of $10,000,000
to be made by France on June 15, 1927 (press releases, March 1 and
March 3, 1927)
-.-.
.
Exhibit 27. Payment of Liberia's indebtedness to the United States (press
release, July 6, 1927)
Exhibit 28. Senator Smoot's reply in the United States Senate, December
22, 1926, to the statement of certain professors at Columbia University
concerning foreign debt settlements
-__.
Exhibit 29. Letter of Secretary of the Treasury Mellon to President
Hibben, of Princeton University, March 15, 1927.
Exhibit 30. Note from the British Government, dated May 2, 1927, commenting on letter of the Secretary of the Treasury to President Hibben,
and reply of the Secretary of State thereto
Exhibit 31. Statement of Secretary of the Treasury MeUon commenting
on the British note to the State Department (press release. May 5, 1927)-
315
316
318
320
32&
331
PROHIBITION AND CUSTOMS
Exhibit 32. Letter of the Secretary of the Treasury to the President of
the Senate concerning the denaturization of industrial alcohol, January
11, 1927-Exhibit 33. Organization of the Bureau of Prohibition, (T. D. 1, April 1,
1927)
-,--
337
340
CONTENTS
IX
Page
Exhibit 34. Organization of the Bureau of Customs (T. D. 42102, April
12, 1927)..
^
.
.
Exhibit 35. Organization for preventing'the smuggling of liquor and narcotics. May 18,;i927 (press release. May 22, 1927)--
347
351
MISCELLANEOUS
.Exhibit 36. "Growing Tax-Burdens: Federal, State, and Local," an address by Undersecretary of the Treasury Mills, August 10, 1927, at the
Institute of Pufelic; Affairs, University of Virginia.-Exhibit 37. Analysis of automobile, tobacco, and admission taxes, by
specific cases
i
.
Exhibit 38. Announcement of reduction in size of the currency (press release. May 26, 1927)- —
,
Exhibit 39. Issue, exchange, and redemption of paper currency and coin
(Department Circular No. 55, revised January 26, 1927)
Exhibit 40. Gold status of gold-par currencies
-Exhibit 41. Supervision of bureaus and offices of the Treasury Department and divisions of the Office of the Secretary of the Treasury by the
Undersecretary and the Assistant Secretaries of the Treasurj^^ (Department Circular No. 244, revised June 7, 1927)
Exhibit 42. Supervision of bureaus and offices of the Treasury Department and divisions of the Office of the Secretary of the Treasury by the
Undersecretary and the Assistant Secretaries of the Treasury Department (Department Circular No. 244, revised November 1, 1927)
Exhibit 43. Laws and regulations governing the recognition of attorneys
and agents before the Treasury Department (Department Circular No.
230, revised July 1, 1927)--.
Exhibit 44. Opinion of the Supreme Court of the United States in the
case of Henkels v. Sutherland (271 U. S. 298), decided May 24, 1926-.
Exhibit 45. Opinion of the Attorney General, dated August 25, 1926, relative to the decision in the case of Henkels v. Sutherland
Exhibit 46. Opinion of the Attorney General, dated July 7, 1927, relative
to the claims of Tannwalder Baumwollspinnerei Fabrik
Exhibit 47. Periodical publications of the Treasury Department as of
October 1, 1927
Exhibit 48. Tabular material in the annual reports of the Secretary of the
Treasury from 1914 to 1927
360
366
369
370
376
378
380
381
395
398
399
402
410
TABLES
RECEIPTS AND EXPENDITURES
General tables
^
Table 1. Summary of receipts, expenditures, and balance in the general
fund for the fiscal j^ear 1927 (revised daily statement basis)--_
Table 2. Detailed ordinary receipts for the fiscal year 1927 (revised daily
statement basis)
Table 3. Detailed expenditures chargeable against ordinary receipts for
the fiscal yesir 1927 (checks issued basis)
Table 4. Comparison of detailed receipts for the fiscal years 1927 and 1926
(warrant basis)
.
Table 5. Comparison of detailed expenditures for the fiscal years 1927 and
1926 (warrant basis)
Table 6. Summary of ordinary receipts, expenditures chargeable against
ordinarycreceipts, and surplus or deficit, for the fiscal years 1916 to 1927
(daily statement basis)
^Table 7. Ordinary receipts, expenditures chargeable against ordinary
receipts, and surplus or deficit for the fiscal years 1916 to 1927 (daily
statement basis)
Table 8. Receipts and expenditures for the fiscal years 1791 to 1927 (warrant basis)
-^
Table 9. Summary of ordinary receipts, expenditures chargeable against
ordinary receipts, and excess of receipts or expenditures, by months,
from July 1, 1925, to October 31, 1927. (daily statement basis)
Table 10. Expenditures, by months, classified according to departments
and estaBlishinents, for the fiscal year 1927 (daily statement basis). ,
423
423
425
431
436
445
446
450
462
463
X
CONTENTS
• Specific receipts and expenditures
Page-
Table 11. Comparison of detailed internal revenue receipts for the fiscal
years 1927 and 1926 (collection basis)—
468
Table 12. Internal revenue receipts, by sources, for the fiscal years 1863
to 1927 (collection basis)
___.
470Table 13. Internal revenue receipts, by months, total, and by present
major sources, July, 1918, to September, 1927 (collection basis)
476Table 14. Internal revenue receipts, by States and Territories, for the
fiscal years 1926 and 1927 (coUection basis)
:.
480
Table 15. Customs duties (estimated), value of imports entered;for, con- , .
sumption, and ratio of duties to value of dutiable imports and to value
of all imports, for the years 1867 to 1926 (on basis of reports of the
Bureau of Foreign and Domestic Commerce)
482
Table 16. Customs duties (estimated), and ratio of duties to value of
dutiable imports, by tariff schedules, for the years 1890 to 1926 (on
basis bf reports of the Bureau of Foreign and Domestic Commerce)
484
Table 17. Customs statistics, by districts, for the fiscal year 1927 (collection basis)
490
Table 18. Panama Canal receipts and expenditures for the fiscal years
1903 to 1927 (warrant basis)....
.
.'
494
Estimates of receipts and appropriations
Table 19. Estimated receipts for the fiscal years 1929 and 1928, and
actual receipts for the fiscal year 1927 (on basis of reports from the
Bureau of the Budget)
.
Table 20. Estimates of appropriations' for 1929. compared with appropriations for 1928 (on basis of reports from the Bureau of the Budget).
Table 21. Appropriations for the fiscal years 1914 to 1928, including
estimated permanent and indefinite appropriations and deficiencies
for prior years
Table 22. Appropriations, expenditures, amounts carried to surplus
fund, and unexpended balances for the fiscal years 1911 to 1927
494
496"
498«
501.
PUBLIC DEBT
Public debt outstanding
Table 23. Public debt outstanding June 30, 1927, by issues
Table 24. Description of the public debt issues outstanding June 30,
1927
Table 25. Principal of the public debt outstanding at the end of each
fiscal year from 1853 to 1927
Table 26. Preliminary statement of the public debt outstanding October
31, 1927, by issues (daily statement basis)
Table 27. Interest-bearing bonds, notes, and certificates of indebtedness
outstanding June 30, 1927, by issues and denominations
Table 28. Treasury notes and certificates of indebtedness which matured
during the fiscal year 1927, outstanding June 30, 1927, by issues and
denominations
-_Table 29. Registered interest-bearing bonds outstanding, number of registered accounts, June 30, 1927, amount of interest payable and number
of checks drawn during the fiscal year ended June 30, 1927, classified by
issues
Table 30. Unmatured Liberty bonds, Treasury bonds, and Victory i^otes
outstanding, by months, from January 31, 1925, to June 30, 1927, classified by denomination and form
.
Table 31. Interest-bearing debt outstanding at the end of each month
from February 28, 1917, to June 30, 1927
-
502
505.
514
515'
517'
520'
521
522
523
Transactions in the public debt during ihe fiscal year 1927
Table 32. Summary of transactions in interest-bearing and noninterestbearing securities during the fiscal year ended June 30, 1927
_._
Table 33. Summary of transactions in interest-bearing securities during
the fiscal year ended June 30, 1927-.-.
'----
527
530
CONTENTS
XI
Paga
Table 34. Transactions in interest-bearing pre-war. bonds, by issues, during the fiscal year ended June 30, 1927
Table 35. Transactions in interest-bearing Liberty bonds and Treasury
bonds, by issues, during the fiscal year ended June 30, 1927
Table 36. Transactions in interest-bearing Treasury notes, by issues, during the fiscal year ended June 30, 1927
Table 37. Transactions in interest-bearing certificates of indebtedness, by
issues, during the fiscal year ended June 30, 1927__..
Table 38. Transactions in-Treasury' (war) savings' securities, by issues,
during the fiscal year ended June 30, 1927
Table 39. Transactions in noninterest-bearing securities, by issues, during the fiscal year ended June 30, 1927
Table 40. Treasury bonds. Treasury notes, and certificates of indebtedness issued through each Federal reserve bank and the Treasury
Department during the fiscal year ended June 30, 1927
Table 41. Public debt retirements chargeable against ordinary receipts
during the fiscal year 1927, and cumulative totals to June 30, 1926
and 1927
532'
633
636
637
638
640
643
646
Transactions in public debt securiiies from date of inception
Table 42. Transactions in interest-bearing securities outstanding, by
issues, June 30, 1927, from date of inception, showing reconciliation
of account of the Treasurer of the United, States with security account. _
Table 43. Transactions in first Liberty loan 33^ per cent bonds of 19321947 from date of inception, and outstanding bonds June 30, 1927,
classified by denominations
Table 44. Transactions in first Liberty loan converted 4 per cent bonds of
1932-1947 from date of inception, and outstanding bonds June 30, 1927,
classified by denominations
Table 45. Transactions in first Liberty loan converted 434 per cent bonds
.of 1932-1947 from date of inception, and outstanding bonds June 30,
1927, classified by denominations . Table 46. Transactions in first Liberty loan second converted 43^ per cent
bonds of 1932-1947 from date of inception, and outstanding bonds
June 30, 1927, classified by denominations
Table 47. Recapitulation of transactions in first Liberty loan bonds of
1932-1947 from date of inception, and outstanding bonds June 30, 1927,
• classified by denominations
Table 48. Transactions in second Liberty loan 4 per cent bonds of 19271942 from date of inception, and outstanding bonds June 30, 1927,
classified by denominations
.
Table 49. Transactions in second Liberty loan converted 434 per cent
bonds of 1927-1942 from date of inception, and outstanding bonds
June 30, 1927, classified by denominations
Table 50. Recapitulation of transactions in second Liberty loan bonds of
1927-1942 from date of inception, and outstanding bonds June 30, 1927,
classified by denominations
Table 51. Transactions in third Liberty loan 434 per cent bonds of 1928
from date of inception, and outstanding bonds June 30, 1927, classified
by denominations--'
.__
Table 52. Transactions in fourth Liberty loan 434 per cent bonds of 19331938 from date of inception, and outstanding bonds June 30, 1927,
classified by denominations
Table 53. Transactions J n Victory Liberty loan 4J^ .per cent notes of
1922-1923 from date of inception, and outstanding notes June 30,1927,
classified by denominations
Table 54. Transactions in Victory Liberty loan 3 ^ per cent notes of
1922-1923 from date of inception, and outstanding notes June 30,1927,
classified by denominations
.
Table 55. Recapitulation of transactions in Victory Liberty loan notes of
1922-1923 from date of inception, and outstanding notes June 30, 1927,
classified by denominations
648
652
666
659
662
663
568'>
572
576
580
584
588
594
697
xn
CONTENTS
Transactions in the public debt by years
.
Table 56. Transactions in the public debt for the fiscal years 1917 to 1927.
Table 57. Net increases and net decreases in the public debt, by issues,
for the fiscal years 1918 to 1927 (warrant basis)
_.__:.
Table 58. Public debt retirements, by issues, for the fiscal years 1918 to
1927 (revised daily statement basis)
J.
Table 59. Reconciliation of public debt issues and retirements with
(1) public debt retirements by sources, (2) balance in the general fund,
and (3) outstanding public debt, for the fiscal years 1918 to 1927
(revised daUy statement basis)
^
^.
Table 60. Sources of debt increase and decrease for the fiscal years 1916
to 1927 (daily statement basis)
:
.Page
602
605
611
614
616
Interest on the public debt
Table 61. Interest on the public debt, payable, paid, and outstanding
unpaid for the fiscal year 1927
Table 62. Interest paid on the public debt, bv issues, for the fiscal vears
1918 to 1927 (warrant basis)
.".
1
617
618
CONDITION OF THE TREASURY EXCLUSIVE OF PUBLIC DEBT LIABILITIES
Table 63. Condition of the Treasury at the close of the fiscal years 1927, •
1926, and 1925 (revised daily statement basis)
624
Table 64. Net balance in the general fund at the end of each month,
from July, 1920, to September, 1927 (daUy statement basis)
625
Table 65. Securities owned by the United States Government, June 30,
1927.
.
626
OBLIGATIONS OF FOREIGN GOVERNMENTS
Table 66. Principal amount of obligations of foreign governments originally
acquired under the acts of Congress mentioned and payments on
account of principal thereof; the funded indebtedness with payments on
account of principal thereof and the net principal outstanding as of
November 15, 1927; the acrued and unpaid interest on all such indebtedness as of the last interest period prior to or ending with November 15,
1927; and the total indebtedness as of November 15, 1927
Table 67. Payments made by foreign governments on account of interest
on obligations held by the Treasury
.
Table 68. Statement showing (1) principal of indebtedness of foreign
governments prior to funding; (2) accrued and unpaid interest up to
date of settlement which was funded into principal under debt agreements; (3) principal of total indebtedness.as funded; (4) tptal indebtedness as of date of funding, including accrued and unpaid interest
computed at rates borne by obligations then held (5 and 6 per cent);
(5) present values of payments to be received over 62-year period on
basis of interest rates of 3, 4J^, and 5 per cent, payable semiannuaUy,
together Avith percentages that such present values bear to the total
indebtedness, including accrued and unpaid interest computed at rates
borne by obligations prior to funding; and (6) approximate average
interest rates on (a) indebtedness of each country as funded, and {b)
original principal from date to which interest was last paid prior to
funding to end of funding period
1-.
628
t)29
630
TRANSACTIONS WITH RAILROADS
Table 69. Payments to carriers from July 1, 1926, to June 30, 1927,
inclusive, provided for in section 204 of the transportation act, 1920,
as amended, for reimbursement of deficits' on account of Federal
control
.
Table 70. Obligations of carriers acquired pursuant to section 207 of the
transportation act, 1920, as amended.
Table 71. Payments to carriers from July 1, 1926, to June 30, 1927,
inclusive, under the guaranty provided for in section 209 of the transportation act, 1920, as amended, and payments by carriers to the United
States under the.same section
631
631
632
CONTENTS
xm
Page
Table 72. Loans to carriers under section 210 of the transportation act, 1920,
as amended, and repayments on such loans from July 1,1926, to June 30,
1927, inclusive, with loans outstanding June 30, 1926, and June 30,
1927...
633
STOCK AND CIRCULATION OF MONEY IN THE UNITED STATES
Table 73. Stock of money, classified by kind, at the end of each fiscal
year from 1860 to 1927
.
.
--Table 74. Stock of money ^ money in circulation, and amount of circulation
per capita at the end of each fiscal year from 1860 to 1927
Table 75. Money in circulation, by kind, June 30, 1927, revised from reports received after July 1
.
'.
Table 76. Stock of money, classified by kind, at the end of each fiscal
year from 1916 to 1927, revised for earmarked gold coin and gold held
abroad—
.
Table 77. Stock of money, money in circulation, and amount of circulation per capita at the end of each fiscal year from 1916 to 1927, revised
for earmarked gold coin and gold held abroad
--
634
636
638
639
640
MISCELLANEOUS
Table 78. Money cost of the World War to the United States Government
to June 30, 1927
,
...
Table 79. Insular and District of Coluinbia loans outstanding, and
changes during the fiscal year 1927. Table 80* Estimated amount of wholly tax-exempt securities outstanding,
by months, from December, 1912, to August, 1927, classified by type of
obligor
--_.
Table 81. Partially tax-exempt United States securities outstanding, by
months, from AprU, 1917, to August, 1927
Table 82. Comparison of the number of employees in the departmental
and field services of the Treasury on June 30, 1926 and 1927
Table 83. Number of persons retired or now retained in the departmental
and field services of the Treasury under the civil service retirement act. Table 84. Number of employees in the departmental service of the Treasury in Washington, by months, from June 30,1926, to August 31, 1927_-
642
648
649
658
658
659
660
APPENDIX TO REPORT ON THE FINANCES
REPORT OF THE TREASURER:
Receipts and expenditures for fiscal years 1926 and 1927
Pay warrant transactions
i
Foreign exchange purchased
.
Collection items
-.
Checking accounts
Panama Canal
-_---_
.
Payment of interest on registered securities of the United States
.'
Payment of coupons from United States securities
.
Receipts and expenditures.on account of the Post Office Department.
District of Columbia securities^-District of Columbia teachers' retirement fund
Transactions in the public debt.
...
_-..
^
'.
Statement of the public debt outstanding June 30, 1927
Public debt retirements chargeable against ordinary receipts
Statement of the Treasury, reserve and trust fund
The general fund
--_-.....-.._-.-__.__.-_
Net available cash balance, 1918 to 1927.:.^_
The gold reserve
.
.-.
Gold fund, Federal Reserve Board__._.
._.Gold in the Treasury, 1918 to 1927
----_
.-.
Securities held in trust--.
.
-.
...^
Withdrawal of bonds to secure circulation.-_.---.
Postal savings bonds and investments therein^ .
-__
Special trust funds
-.
_-1__
Depositaries of the United S t a t e s . - - . - . . . . _ _ . . _ . _ . - - . - - -
663
665
665
666
667
667
667
667
667
668
668
669
670
671
671
672
673
673
674
674
674
676
676
677
679
XIV
CONTENTS
R E P O R T O F THE T R E A S U R E R — C o n t i n u e d .
Public moneys in depositary banks
I n t e r e s t on public moneys held by depositary banks
Restoration of depositary balances
Coin shipments
^
Recoinage of gold, silver, a n d minor coins
Shipments of paper currency from W a s h i n g t o n . .
Purchases of gold bullion a t t h e m i n t s a n d assay offices
R e d e m p t i o n of Federal reserve and national currency.
T r u s t fund certificates outstanding
United States notes
Gold certificates
.
Silver certificates
___.
'.
United States paper currency, by denominations, held in reserve
United States paper currency prepared for issue and a m o u n t issued,
by fiscal years, from 1918
United States paper currency issued, by m o n t h s , fiscal years 1926 a n d
1927
United States paper currency redeemed, by m o n t h s , fiscal years 1926
a n d 1927
United States paper currency issued, redeemed, a n d outstanding, fiscal
year 1927
.
United States paper currency outstanding, by m o n t h s , fiscal years
1926 and 1927
R a t i o of smaU denominations t o aU paper currency o u t s t a n d i n g
P a p e r currency, by denominations, o u t s t a n d i n g J u n e 30, 1926 a n d
1927
1-.Stock of metallic money in t h e United States
Legal tender qualities of United States currency
Issue, exchange, a n d redemption of paper currency and coin
General account of the Treasurer of t h e United States
Page
679
679
680
681
681
682
682
683
684
684
684
685
685
685
686
686
687
687
688
688
691
"691
693
698
Tables accompanying the report of the Treasurer
T a b l e 1. General distribution of the assets and liabilities of t h e Treasury,
J u n e 30, 1927
701
Table 2. Available assets and liabilities of t h e Treasury a t t h e close of
June, 1926 and 1927
.
.
702
Table 3. Distribution of t h e General Treasury balance, J u n e 30, 1927
703
Table 4. Assets of t h e Treasury other t h a n gold, silver, notes, and certificates a t t h e end of each m o n t h , from July, 1924
703
Table 5. Assets of t h e Treasury at t h e end of each m o n t h , from July,
1924
---_
.
704
Table 6. Liabilities of t h e Treasury a t t h e end of each m o n t h , from July,
1924___
704
T a b l e 7. United States notes of each denomination issued, redeemed,
and outstanding a t t h e close of t h e fiscal years 1924, 1925, 1926, a n d
1927
_-705
T a b l e 8. Gold certificates of each denomination issued, redeemed, and
outstanding a t t h e close of t h e fiscal years 1924, 1925, 1926, and 1 9 2 7 - - .
706
T a b l e 9. Silver certificates of each denomination issued, redeemed, and
o u t s t a n d i n g a t t h e close of t h e fiscal years 1924, 1925, 1926, and 1927-707
T a b l e 10. Treasury notes of 1890 of each denomination redeemed and outstanding a t t h e close of t h e fiscal years 1924, 1925,, 1926, and 1927
70.8
Table 11. A m o u n t of United States notes, gold and silver certificates and
T r e a s u r y notes of each denomination issued, redeemed, and outstanding
a t t h e close of each fiscal year, from 1924
709
Table 12. Federal reserve and national b a n k s designated depositaries of
public moneys, with t h e balance held J u n e 30, 1927
710
Table 13. Old d e m a n d notes of each denomination issued, redeemed, and
o u t s t a n d i n g J u n e 30, 1927
.
. 711
T a b l e 14. Fractional currencj^ of each denomination issued, redeemed,
. and o u t s t a n d i n g J u n e 30, 1927
---712
Table 15. Compound-interest notes of each denomination issued, redeemed, and o u t s t a n d i n g June 30, 1927
.
712
Table 16. -One and two year notes of each denomination issued, redeemed,
and o u t s t a n d i n g June 30, 1927
____......
712
Table 17. Seven-thirty notes redeemed and outstanding J u n e 30, 1927
712
CONTENTS
XV
Page
'Table 18. Refunding certificates, act of February 26, 1879, redeemed and
outstanding J u n e 30, 1927
Table 19. Public debt obligations retired during fiscal year 1927
Table 20. N u m b e r of banks with semiannual duty levied, by fiscal years,
a n d number of depositaries with bonds as security at close of each fiscal
year from 1918..•
Table 2 1 . Checks issued by t h e Treasurer for interest on registered bonds
during t h e fiscal year 1927
•
Table 22. Coupons from United States bonds and interest on notes paid
during t h e fiscal year 1927, classified by. loans
.
'Table 23. Coupon interest on United States bonds paid by check during
fiscal year 1927
'Table 24. Checks drawn by t h e Secretary and paid by t h e Treasurer for
interest on registered bonds a n d notes of t h e United States during t h e
fiscal year 1927
Table 25. Money deposited in t h e Treasury each m o n t h of t h e fiscal year
1927 for t h e redemption of national-bank notes
Table 26. Amount of currency counted into t h e cash of t h e National Bank
Redemption Agency and redeemed notes delivered, by fiscal years, from
1918 t o 1926, and by m o n t h s during t h e fiscal year 1927
"Table 27. Currency received for redemption by t h e National B a n k Redemption Agency from t h e principal cities and other places, by fiscal
years, from 1918, in thousands of dollars
Table 28. Mode of p a y m e n t for currency redeemed a t t h e National Bank
Redemption Agency, by fiscal years, from 1918
^
"Table 29. Deposits, redemptions, assessments for expenses, and transfers
a n d r e p a y m e n t s on account of t h e 5 per cent redemption fund of national
and Federal resej*ve banks, by fiscal years, from 1918
.
Table 30. Deposits and redemptions on account of t h e retirement of circulation, by fiscal years, from 1918. T a b l e 3 1 . Expenses incurred in t h e redemption of national and Federal
reserve currency, by fiscal years, from 1918
Table 32. Amount of national-bank notes redeemed and assorted during
t h e fiscal year 1927, and t h e assessment for expenses of redemption
Table 33. Amount and number of pieces of Federal reserve notes and
Federal reserve b a n k notes redeemed during t h e fiscal j^ear 1927, and t h e
• ' assessment-for expenses of redemption
1
Table 34. Generahcash account of the National Bank Redemption Agenc}^
for t h e fiscal year 1927, and from July 1, 1874
J
Table 35. Average a m o u n t of national-bank notes outstanding and t h e
redemptions, by fiscal years, from 1875 (the first year of the agency)
Table 36. Federal reserve notes, canceled and uncanceled, forwarded b}^
Federal reserve banks and branches, counted and delivered to the Comptroller of t h e Currency for credit of Federal reserve'agents, b}' fiscal years,
from 1916
Table 37. N u m b e r hf notes of each kind of currency and denomination
redeemed and delivered by t h e National Bank Redemption Agency during t h e fiscal year 1927'Table 38. Amount of money outside of the Treasury, the a m o u n t held by
Federal reserve banks and agents, and the a m o u n t in circulation, etc.,
on t h e first day of each m o n t h from July, 1925
Table 39. Total a m o u n t expended on account of t h e P a n a m a Canal, t h e
receipts covered into t h e Treasury, and t h e proceeds of sales of bonds
to t h e close of the fiscal yesiv 1927
HEPORT
OF T H E D I R E C T O R OF T H E
717
717
718
719
719
719
720
721
721
721
721
722
723
723
724
725
725
726
728
728
MINT:
Operation of t h e mints and assay offices
I n s t i t u t i o n s of t h e m i n t service
Deadwood assay, office
Coinage
..
Gold operations
SUver operations
^
Refineries
:.
' Commemorative coins
.
.Stock of coin a n d monetary buUion in t h e United States
Production of gold and sUver
I n d u s t r i a l consumption of gold and silver
I m p o r t and export of domestic gold coin
Appropriations, expenses, and i n c o m e - _
712
713
-
729
729
729
730
730
730
731
731
731
732
732
732
732
XVI
CONTENTS
REPORT OF THE DIRECTOR OF THE MINT—Continued.
Page
Deposits of gold and silver, income, expenses, and employees, by
institutions, fiscal year 1927.
' 733
Coinage
-^
.,
^.
733
Issue of fine gold bars for gold coin and gold bullion
734
Receipts and disbursements of gold buUion and balances on h a n d . .
735
Purchase of minor-coinage metal for use in domestic coinage
736
Minor-coin distribution costs
_.^
736
Minor coins outstanding
.
-736
Operations of the assay department
--_
.
736
Operations of the melting and refining and of the coining departments,
fiscal year 1927
737
Refining operations
^
739
Ingot melts made
740
Fineness of melts for gold and silver ingots
740
Commercial and certificate bars manufactured
.
. 741
Bullion gains and losses.:
.
742
Wastage and loss on sales of sweeps
742
Engraving department
743
Dies manufactured
.
.
743
Medals sold
.
744
Employees
^
744
Work of the minor assay offices
744
Assays made
745
Gold receipts at Seattle
^
745
Laboratory, Bureau of the Mint
746
Assay commission's annual test of coin
747
Tables from report of Director of the Mint
750
R E P O R T OF T H E COMPTROLLER OF T H E C U R R E N C Y :
Legislation
795
Nine months' operation of the act of February 25, 1927, commonly
known as the McFadden National Bank Act, amending the banking
laws
795
Branch banking
797
Domestic branches of national banks
797
Investment securities
805
National banks in the trust
field
806
Organization and liquidation of national banks
807
National bank failures
'.'._
809
Bank failures other than national
813
National.bank circulation813
Redemption of national and Federal reserve bank circulation..
816
Condition of national banks at date of each report called for during
the year
817
Condition of national banks October 10, 1927
818
National bank liabilities on account of bills payable and rediscounts.822
Loans and discounts of national banks
!.
823
Comparative statement of loans and discounts, including rediscounts,
made by national banks during last three fiscal years
828
Comparative changes in demand and time deposits, loans and discounts, etc
. 828
. United States Government securities held by national banks in
reserve cities and States
829
Investments of national banks
_ - - - _ . .'_ - .^ - _ . 832
Savings depositors and deposits in national b a n k s . . .
..1"..
838
Per capita individual and savings deposits in all reporting banks
840
Earnings, expenses, and dividends of national banks
•
842
National bank examiners
^
858
Convictions of national bank officers and others for violations of the
national banking laws during the year ended October 31,, 1927
863
Federal reserve banks
867
Federal reserve bank discount rates.
.
^
869
Discount rates prevaUing in Federal reserve bank and branch cities..
869
Rates for money in New York ^ „._.•
.
.
• 872
New York clearing house
^ .
875
Clearing-house associations in the 12 Federal reserve bank cities and
elsewhere
.
875
Banks other than national
^_-.
875
CONTENTS
R E P O R T OF T H E COMPTROLLER OF T H E C U R R E N C Y — C o n t i n u e d .
XVII
Page
S t a t e (commercial) b a n k s
.
878
Loan a n d t r u s t companies
__,.._.-.
.
.
879
Principal items of resources a n d liabilities of. loan a n d t r u s t companies
in J u n e of each year, 1914 to 1927
..
._.
...
881
Stock savings banks
_-.
_-,—882
M u t u a l savings banks.—
_
883 '
Depositors a n d deposits in m u t u a l a n d stock savings-banks..
...
885
P r i v a t e banks
:
;,-.
:->_.
888
All reporting bankS' other t h a n nationalL
^
890
Principal items of resources a n d liabilities- of all reporting banks
other t h a n national, on or a b o u t J u n e 30^.1923-1927
.
„
892
Condition of national banks, J u n e 30, 1927
,_..
,-_
, 893
Resources a n d liabilities of all reporting banks.in t h e United. States,
Alaska, a n d t h e insular possessions
.-. ._ _^—.
.-._- _ —
895
S u m m a r y of t h e combined r e t u r n s from all reporting banksr in- t h e
United States, Alaska, a n d insular possessions, J u n e 30^,1927
896
Individual deposits in all reporting b a n k s
- _.
906
Resources a n d liabilities of all reporting bankSj J u n e 3Q,> 1923-1927- 907
Cash in all reporting banks
908
Resources a n d liabilities of all reporting banks, J u n e 30, each fiveyear period- 1890-1925.'...
.--_
-_
908
Money in t h e United States
912
Banks in t h e District of Columbia
915
Earnings, expenses, a n d dividends of b a n k s other t h a n national in
t h e District of Columbia
915
Building a n d loan associations in t h e District of Columbia
916
Building a n d loan associations in t h e United States
917
Mortgage loan investments of building associations
^
919
Failures pf building a n d loan associations, 1920-1926
919
M o n e t a r y stocks in t h e principal countries of t h e world
920
Federal land b a n k s .
921
Joint-stock land banks
922
Federal intermediate credit banks^
* 923
National agricultural credit corporations
924
United States Postal.Savings System
,
925
School savings banking
930
Savings banks in principal countries of t h e world
931
Resources of leading foreign b a n k s of issue
934
Expenses of t h e Currency Bureau
934
R E P O R T O F COMMISSIONER OF I N T E R N A L R E V E N U E :
Collections
Cost of administration
Income T a x U n i t . . .
Audit of returns
Revenue agents' service
^_
Adjustment of claims
Additional revenue
.
Organization changes
Policy a n d procedure changes
.,
Clearing division.
Records division Service section
Rules a n d regulations section
-_
Personnel
'
Surplus property
I m p r o v e m e n t s planned
,
C o m p a r a t i v e s u m m a r y of work accomplished, fiscal years 1 9 2 3 1927....
._
Economies effected.:
Decentralization
Concentration of activities
I m p r o v e d procedure
Reduction in force.
Other economies
Miscellaneous T a x Unit
Personnel a n d p a y roll
^Taxes collected
64761—FI 1927
2
937
939
939
939
940
941
941
944
944
946
946
947
947
948
948
948
949
958
958
959
960
960
961
962
962
963
XVIII
CONTENTS
R E P O R T OF COMMISSIONER O F I N T E R N A L
REVENUE—Continued.
Miscellaneos T a x U n i t — C o n t i n u e d . .
Appeals a n d review section
Capital stock-tax division
E s t a t e t a x division
Miscellaneous division
Tobacco division
.
Accounts a n d Collections Unit
.
Collection accounting division
Collectors' personnel, equipment, a n d space division
Disbursement accounting division
•Office of t h e general counsel
"
Appeals division
I n t e r p r e t a t i v e Division I
I n t e r p r e t a t i v e Division I I
Penal division
Civil division
.
S u m m a r y of suits a n d prosecutions
Administrative division
.
Bureau a n d field personnel
Tables
.
I m p o r t a n t decisions of Federal courts in internal revenue cases
'
Page
963
963
965
966
969
971
972
974
975
976
976
977
978
980
983
985
985
986
987
994
:SECRETARIES
OF THE TREASURY AND PRESIDENTS UNDER WHOM
THEY SERVED
NOTE.—Robert Morris, the first financial officer of the Government, was Superintendent of Finance from
1781 to 1784. Upon the resignation of Morris, thepowers conferred upon hiin were transferred to the " Board
of the Treasury." Those who finally accepted positions on this board were John Lewis Gervais, Samuel
Osgoodj and Walter Livingston. The board served until Hamilton assumed oflQce in 1789.
Term of service
Secretaries of Treasury
FromSept.
Feb.
Jan.
May
Feb.
Oct.
Oct.
-Mar.
Mar.
Aug.
May
:Sept.
-July
Mar.
.Sept.
Mar.
-July
Mar.
Mar.
July
Mar.
Mar.
Dec.
Jan.
11,1789
3,1795
1,1801
14,1801
9,1814
6,1814
22,1816
7,1825
6,1829
8,1831
29,1833
23,1833
1,1834
6,1841
13,1841
8,1843
4,1844
8,1845
8,1849
23,1850
7,1853
7,1867
12,1860
15,1861
Presidents
To—
Jan.
Dec.
May
Feb.
Oct.
Oct.
Mar.
Mar.
June
May
Sept.
June
Mar.
Sept.
Mar.
May
Mar.
Mar.
July
Mar.
Mar.
Dec.
Jan.
Mar.
31,-1795.
31,1800
13,1801
% 1814
5,1814
21,1816
6,1825
6,1829
20,1831
28,1833
22,1833
25,1834
3,1841
11,1841
1,1843
2,1844
7,1845
6,1849
22,1850
6,1853
6,1857
8,1860
14,1861
6,1861
Alexander Hamilton, New York
Oliver Wolcott, Connecticut
Samuel Dexter, Massachusetts
Albert Gallatin, Pennsylvania i
George W. Campbell, Tennessee
Alexander J. Dallas, Pennsylvania...
Wm. H. Crawford, Georgia
Richard Rush, Pennsylvania ^
Samuel D. Ingham, Pennsylvania 3..
Louis McLane, Delaware.
Wm. J. Duane, Pennsylvania
-..
Roger B. Taney, Maryland <
Levi Woodbury, New Hampshire »..
Thomas Ewing, Ohio«
Walter Forward, Pennsylvania'
John C. Spencer, New York 8
Geo. M. Bibb, Kentucky
Robt. J. Walker, Mississippi »_._„_,
Wm. M. Mieredith, Pennsylvania...
Thos. Corwin, Ohio
James Guthrie, Kentucky
Howell Cobb, Georgia i«—
Philip F. Thomas, Maryland
John A. Dix, New York
1..
Washington.
Washington, Adams.
Adams, Jefferson.
Jefferson, Madison.
Madison.
Madison.
Madison, Monroe.
Adams, J. Q.
Jackson.
Jackson.
Jackson.
Jackson.
Jackson, Van Buren.
Harrison, Tyler.
Tyler.
Tyler.
Tyler, Polk.
Polk.
Taylor, Fillmore.
Fillmore.
Pierce.
Buchanan
Buchanan.
Buchanan.
> While holding the oflBce of Secretary of the Treasury, Gallatin was commissioned envoy extraordinary
-and minister plenipotentiary Apr. 17,1813, with John Quincy Adams and James A. Bayard, to negotiate
peace with Great Britain. On Feb. 9, 1814, his seat as Secretary of the Treasury was declared vacant
because of his absence in Europe. William Jones, of Pennsylvania (Secretary of the Navy), acted
'^d interim Secretary[of the Treasury from Apr. 21,1813, to Feb. 9, 1814.
' Rush was nominated Mar. 5, 1825, confirmed and commissioned Mar. 7, 1825, but did not enter upon
the discharge of his duties until Aug. 1,1825. Samuel L. Southard, of New Jersey (Secretary of the Navy),
.served as ad interim Secretary of the Treasury from Mar. 7, to July 31,1825.
3 Asbury Dickens (chief clerk), ad interim Secretary of the Treasury from June 21 to Aug. 7,1831.
* McClintock Young (chief clerk), ad interim Secretary of the Treasury from June 25 to 30, 1834.
» McClintock Young (chief clerk), ad interim Secretary of the Treasury from Mar. 4 to 5,1841.
" McClintock Young (chief clerk), ad interim Secretary of the Treasury Sept. 12,1841.
^ McClintock Young (chief clerk), ad interim Secretary of the Treasury from Mar. 1 to 7, 1843.
* Spencer resigned as Secretary of the'Treasury May 2, 1844; McClintock Young (chief clerk),' ad in^
terim Secretary of the Treasury from May 2 to July 3, 1844.
* McClintock Young (chief clerk), ad interim Secretary of the Treasury from Mar. 6 to 7, 1849.
>" Isaac Toucy, of Connecticut (Secretary of the Navy), acted as Secretary of the Treasury ad interim
ifrom Dec. 10 to 12, 1860.
XIX
XX
SECRETARIES OF T H E TREASURY
. Secretaries of the Treasury and Presidents under whom they served—Continued
Term of service
Secretaries of Treasury
FromMar.
July
Mar.
Mar.
Mar.
June
July
Mar.
Mar
Nov.
Sept.
Oct.
Mar.
Apr.
Mar.
Feb.
Mar.
Mar.
Feb.
Mar.
Mar.
Mar.
Dec.
Feb.
T\Iar.
7,1861
5.1864
9.1865
12,1869
17,1873
4,1874
7,1876
10,1877
8,1881
14,1881
25,1884
31,1884
8,1885
I,1887
7,1889
25,1891
7,1893
6,1897
1,1902
4,1907
8,1909
6,1913
16,1918
2.1920
4.1921
Presidents
To—
June 30,1864
Mar. 3,1865
Mar. 3,1869
Mar. 16,1873
June 3,1874
June 20,1876
Mar. 9,1877
Mar. 3,1881
Nov. 13,1881
Sept 4.1884
Oct, 30,1881
Mar. 7.1885
Mar. 31,1887
Mar. 6,1889
Jan. 29,1891
Mar. 6,1893
Mar. 5,1897
Jan. 31,1902
Mar. 3,1907
Mar. 7,1909
Mar. 5,1913
Dec. 15,1918
Feb. 1.1920
Mar. 3.1921
Salmon P. Chase, Ohio"
Wm. P. Fessenden, Maine "
Hugh McCulloch, Indiana " • "
..
Geo. S. Boutwell, Massachusetts
Wm. A. Richardson, Massachusetts.,
Benj. H. Bristow, Kentucky »»
,
Lot M . Morrill, Maine
,
John Sherman, Ohio '*
Wm. Windom, Minnesota '^
,
Chas. J. Folger, New York "
,
Walter Q. Gresham, Indiana
,
Hugh McCulloch, Indiana "
Daniel Manning, New York
,
Chas. S. Fairchild, New York
Wm. Windom, Minnesota ^^ " . . .
Chas. Foster, Ohio
John G. Carlisle, Kentucky
Lyman J. Gage, Illinois.
L. M. Shaw, Iowa
,
George B. Cortelyou, New York
,
Franklin MacVeagh, Illinois
W. G. McAdoo, New York
Carter Glass, Virginia
David F. Houston, Missouri...
Andrew W. Mellon, Pennsylvania..^-
Lincoln.
Lincoln.
Lincoln, Johnson.
Grant.
Grant.
Grant.
Grant, Hayes.
Hayes.
Garfield, Arthur.
Arthur.
Arthur.
Arthur, Cleveland.
Cleveland.
Cleveland, Harrison.
Harrison.
Harrison, Cleveland.
Cleveland, McKinley.'
McKinley, Roosevelt.
Roosevelt.
Roosevelt.
Taft.
Wilson.
Wilson.
Wilson.
Harding, Coolidge.
11 George Harrington, District of Columbia (Assistant Secretary), ad interim Secretary of the Treasury
from July 1 to 4, 1864.
»2 Oeorge Harrington (Assistant Secretary), ad interim Secretary of the Treasury froni Mar. 4 to 8,1865.
»3 John F. Hartley, of Maine (Assistant Secretary), ad interim Secretary of the Treasury from Mar. 5
to 11, 1869.
I* Hugh McCulloch was Secretary from Mar. 9,1865, to Mar. 3,1869, and also from Oct. 31,1884, to Mar.
7,1885.
18 Charles F. Conant, of New Hampshire ('Assistant Secretary), ad interim Secretary of the Treasury
from June 21 to 30 (July 6), 1876.
i« Henry F . French, of Massachusetts (Assistant Secretary), ad interim Secretary of the Treasury from
Mar. 4 to 7, 1881.
17 William Windom was Secretary from Mar. 8,1881, to Nov. 13,1881, and also from Mar. 7,1889,' to Jan.
29, 1891.
18 Charles E. Coon, of New York (Assistant Secretary), ad interim Secretary of the Treasury from
Sept. 4 to 7, 1884; Henry F. French, of Massachusetts (Assistant Secretary), ad interim Sept. 8 to 14, 1884;
Charles E. Coon ad interim Sept. 15 to 24, 1884.
18 A. B. Nettleton, of Minnesota (Assistant Secretary), ad interim Secretary of the Treasury from Jan.
30 to Feb. 24, 1891.
UNDERSECRETARIES OF THE TREASURY AND PRESIDENTS AND
SECRETARIES UNDER WHOM THEY SERVED '
Term of service
Undersecretaries i
From—
Secretaries
Presidents
To—
July 1,1921 NGV<. 17,1923
Nov. 20,1923 Jan. 31,1927
Mar. 4,1927
S. Parker Gilbert, jr.. New Jersey.
Garrard B. Winston, Illinois
Ogden L. Mills, New York
1 Ofl3ce established act June 16,1921.
Mellon.... Harding, Coolidge.
Mellon.... Coolidge.
Mellon
Coolidge.
ASSISTANT SECRETARIES OE T H E TREASURY
XXI
ASSISTANT SECRETARIES OF THE TREASURY AND PRESIDENTS
AND SECRETARIES UNDER WHOM THEY SERVED
Term of service
Assistant Secretaries i
From—
Mar, 13,1857
Charles B. Penrose, Pennsylvania.
Allen A. Hall, Pennsylvania
Wilham L. Hodge, Tennessee
Peter G. Washington, District of
Columbia.
Jan. 16,1861 Philip Clayton, Georgia
Mar. 13,1861
July 11,1865
Mar. 18,1864
Jui;ie 15,1865
Jan.
Nov. 30,1867
Mar.
Oct.
Nov.
Mar.
12,1849
10,1849
16,1850
14,1853
5,1865
Oct.
Nov.
Mar.
Mar.
9,1849
15,1850
13,1853
12,1857
July 11,1865
May
Dec. 2,1867
Mar. 20,1869
May 31,1868
Mar. 17,1873
Mar. 8,1873
June 11,1874
July
Apr.
1,1874
Secretaries
Presidents
Meredith
Meredith, Corwin.
Corwin, Guthrie..
Guthrie, C o b b . . . .
Taylor.
Taylor, Fillmore.
Fillmore, Pierce.
Pierce, Buchanan.
To-
4,1875
3,1877
Mar. 4,1875 June 30,1876
Aug. 12,1876. Mar. 9,1885
Apr. 3,1877
Dec. 9,1877
Apr. 10,1880
Dec. 8,1877
Mar. 31,1880
Dee. 31,1881
Feb. 28,1882
Apr. 17,1884
Apr. 16,1884
Nov. 10,1885
Mar. 14,1885
Nov. 10,1885
July 12,1886
Apr. .1,1887
June 30,1886
Mar. 12,1889
Apr.
6,1887
Mar. 11,1889
Apr.
Apr.
July
July
1,1889
1,1889
22,1890
23,1890
July
Oct.
Dec.
June
20,1890
31,1890
1,1892
30,1893
Cobb, T h o m a s , Buchanan.
Dix.
George Harrington, District of Chase, Fessenden, Lincoln, Johnson.
McCulloch.
Columbia.2
Maunsell B. Field, New Y o r k . . . Chase, Fessenden, Lincoln, Johnson.
McCulloch.
William E . C h a n d l e r , New Fessenden, Mc- Lincoln, Johnson.
Culloch.
Hampshire.
John F. Hartley'', Maine
McCulloch, Bout- Johnson, Grant.
well, Richardson, Bristow.
Edmund Cooper, Tennessee
McCulloch
Johnson.
William A. Richardson, Massa- Boutwell
Grant.
chusetts.
Frederick A. Sawyer, South Caro- Richardson, Bris- Grant.
tow.
lina.
Charles F. Conant, New Hamp- Bristow, Morrill, Grant, Hayes.
Sherman.
shire:
Curtis F. Burnam, Kentucky
Grant.
Bristow
Henry F. French, Massachusetts- Morrill, Sherman, Grant,
Hayes,
Windom, FolGarfield, Arthur,
Cleveland.
ger, Gresham,
McCulloch,
Manning.
Richard C. McCormick, Arizona. Sherman
Hayes.Shernaan
John B. Hawley, Illinois
Hayes.
J. Kendrick Upton, New Hamp- Sherman,
Win- Hayes, Garfield,
Arthur.
dom, Folger.
shire.
John C. New, Indiana
Folger
Arthur.
Charles E. Coon, New York
Folger, Gresham, Arthur, Cleveland,
McCulloch,
Manning.
CharlesS. Fairchild, New York.. Manning
Cleveland.
William E. Smith, New York.... Manning
Cleveland.
Hugh S. Thompson, South Caro- Manning, Fair- Cleveland, Harrilina.
child, Windom.
son.
Isaac N. Maynard,"New Y o r k . . , Fairchild, Win- Cleveland, Harridom.
son.
Windom.
Harrison.
George H. Tichner, Illinois
Harrison.
George T. Batchelder, New York 3 W^indom
A. B. Nettleton, Minnesota
Windom, Foster.. Harrison.
Oliver L. Spaulding, Michigan... Windom, Foster, Harrison, Cleveland.
Carlisle.
1 Office established act Mar. 3, 1849; appointed by the Secretary. Act Mar. 3, 1857, made the office
presidential.
2 Act Mar. 14, 1864, provides one additional Assistant Secretary.
ASSISTANT SECRETARIES OF T H E TREASURY
XXII
Assistant Secretaries of the Treasury and Presidents and Secretaries under whotr^
they served—Continued
Term of service.
Assistant Secretaries
From—
Apr. ,27,1891
Nov. 22,1892
Dec. 23,1892
Apr. 12,1893
Apr. 13,1893
July
1,1893
Apr.
Apr.
7,1897
7,1897
June 1,1897
Mar. 13,1899
Mar. 6,1901
Mar. 5,1903
May 27,1903
Mar. 5,1905
July
Jan.
Apr.
Mar.
1,1906
22,1907
23,1907
17,1908
Apr. 5,1909
Apr. 19,1909
Nov. 27,1909
June 8,1910
Apr 4,1911
July 20,1912
Mar. 24,1913
Aug. 1,1913
Oct.
Mar.
Aug.
Apr.
June
Oct.
1,1913
24,1914
17,1914
17,1917
22,1917
5,1917
Oct. 30,1917
Secretaries
Presidents
To. . Foster
Harrison.
Oct., 31,1892,. Lorenzo Qrounse, Nebraska
Foster
. . , Harrison.
Mar. 3,1893 John H. Gear, Iowa
Apr. 3,1893 Genio M. Lambertson, Nebraska. Foster, Carlisle... Harrison, Cleveland.
. Apr. 7,1897 Charles S. Hamlin, Massachu- Carlisle, Gage
Cleveland,
Mcsetts.
Kinley.
Mar. 31,1897 William E. Curtis, New York.... Carlisle, Gage
Cleveland,
McKinley.
May 4,1897 Scott Wike, Illinois....^
Carlisle, Gage
Cleveland,
McKinley.
Mar. 10,1899 William B. Howell, New Jersey.. Gage
McKinley.
Mar. 4,1903 Oliver L. Spaulding, Michigan... Gage, Shaw
McKmley, Roosevelt.
Mar. 5,1901 Frank A. Vanderlip, Illinois
Gage
McKinley.
Gage, Shaw
June 3,1906 Horace A. Taylor, Wisconsin
McKinley, Roosevelt.
Gage, Shaw.
Apr. 15,1903 Milton E. Ailes, Ohio
McKinley, Roosevelt.
Shaw..
Mar. 5,1905 Robert B. Armstrong, Iowa
Roosevelt.
Shaw
.
.
.
Jan. 21,1907 Charles H. Keep, New York
Roosevelt.
Nov. 1,1909 James B. Reynolds, Massachu- Shaw, Cortelyou, Roosevelt, Taft.
setts.
MacVeagh.
Mar. 15,1908 John H. Edwards, Ohio
Shaw, Cortelyou.. Roosevelt.
Feb. 28,1907 Arthur F. Statter, Oregon
Shaw
Roosevelt.
Mar. 6,1909 Beekman Winthrop, New York.. Cortelyou
Roosevelt.
Apr. 10,1909 Louis A. Coolidge, Massachusetts Cortelyou, Mac- Roosevelt, Taft.
Veagh.
June 8,1910 Charles D. Norton, Illinois
MacVeagh
Taft.
Apr. 3,1911 Charles D. Hilles, New York
MacVeagh
Taft.
July 31,1913 James F. Curtis, Massachusetts.. MacVeagh, Mc- Taft, Wilson.
Adoo.
July 3,1912 A. Piatt Andrew, Massachusetts. MacVeagh
Taft.
MacVeagh
Mar. 3,1913 Robert 0 . Bailey, Illinois
Taft.
Sept. 30,1913 Sherman P. Allen, Vermont
MacVeagh, Mc- Taft, Wilson..
Adoo.
Feb. 2,1914 John Skelton Williams, Virginia McAdoo
Wilson.
Wilson.
Aug. 9,1914 Charles S. Hamlin, Massachu- McAdoo
setts.
Wilson.
Oct. 1,1917 B3rron R. Newton, New Y o r k . . . McAdoo
Wilson.
Jan. 26,1917 William P. Malburn, Colorado.. McAdoo
'i
Wilson.
Mar. 15,1917 Andrew J. Peters, Massachusetts. McAdoo
Wilson.
Aug. 28,1918 Oscar T. Crosby, Virginia.
McAdoo
Nov. 20,1919. Leo S. Rowe, Pennsylvania...... McAdoo, .Glass... Wilson.
Aug. 26,1921 James H. Moyle, Utah
McAdoo, Glass, Wilson, Harding.
Houston, Mellon.
July 5,1920 Russell C.Leffingwell,< NewYork McAdoo, Glass, Wilson.
Houston.
3 Act July 11,1890, provides for an additional Assistant Secretary.
* Act Oct. 6, 1917, provided for two additional Assistant Secretaries for duration of war and. six months
after*
ASSISTANT SECRETARIES OF T H E TREASURY
xxm
Assistant Secretaries of the Treasury and Presidents and Secretaries under whom
they served—Continued
Term of service
Assistant Secretaries
From—
To-
Dec. 15,1917
Sept. 4,1918
Jan. 31,1919
June 30,1920
Mar.
Nov.
June
July
Dec.
Dec.
5,1919
21,1919
15.1920
6,1920
4,1920
4,1920
Nov.
June
Apr.
June
May
Mar.
15,1920
14,1920
14,1921
30,1921
31,1921
4,1921
Mar.
May
Dec.
Mar.
July
July
Apr.
Dec.
Aug.
Nov.
16,1921
4,1921
23,1921
3,1923
9,1923
1,1924
1,1925
28,1926
1,1927
7,1927
Mar.
July
July
July
Nov.
Nov.
July
31,1925
9,1923
25,1922
13,1926
19,1923
5,1927
31,1927
Presidents
Secretaries
Thomas B. Love, Texas....
Albert Rathbone, New York
McAdoo, G l a s s . . .
. McAdoo, Glass,
Houston.
Glass, Houston....
Jouett Shouse, Kansas
Norman H. Davis, Tennessee..... Glass, Houston...
Houston, Mellon..
Nicholas Kelley, New York
S.Parker Gilbert, jr., New Jersey's Houston, Mellon.
Houston, Mellon.
Ewing Laporte, Missouri
Angus W. McLean, North Caro- Houston
lina.
Eliot Wadsworth, Massachusetts. Mellon
^...
Edward Clifford, Illinois
Mellon
Mellon„
Elmer Dover, Washington
McKenzie Moss, Kentucky
Mellon
Garrard B. Winston, Illinois 8.... Mellon
Mellon
Charles S. Dewey, Illinois
Lincoln C. Andrews, New York.. Mellon
Carl T. Schuneman, Minnesota.. Mellon
Seymour Lowman, New Y o r k . . . Mellon
Henry Herrick Bond, Massachu- Mellon .
. . .
setts.
Wilson.
.Wilson.
Wilson.
Wilson.
Wilson, Harding,
Wilson, Harding.
Wilson, Harding.
Wilson.
Harding, Coolidge.
Harding.
Harding.
Harding, Coolidge*
Harding, Coolidge.
Coolidge.
Coolidge.
Coolidge,
Coolidge.
Coolidge.
» Became Undersecretary July 1,1921.
« Became Undersecretary Nov. 20,1923.
ASSISTANTS TO THE SECRETARY OF THE TREASURY' AND PRESIDENTS AND SECRETARIES UNDER WHOM THEY SERVED
Term of service
From—
Sept. 11,1789
Mar. 6,1917
ToMay 8,1792
Mar. 4,1921
. Assistants to the Secretary
Tench Coxe, Pennsylvania
George R. Cooksey, District of Columbia.
Secretaries
Presidents
Hamilton
McAdoo, Glass,
Houston.
Washington,
Wilson.
1 Office established Sept. 2,1789; abolished act May 8,1792; reestablished act Mar. 3,1917. Appointed
by the Secretary.
xxiv
PRINCIPAL ADMINISTRATIVE AND STAFF. OFFICERS
P B I N C I P A L A D M I N I S T R A T I V E A N D S T A F F OFFICERS OF T H E
T B E A S U R Y D E P A R T M E N T A S O F OCTOBER. 3 1 , 1 9 2 7
OFFICE OF THE SECRETARY
ANDREW W . MELLON
OGDEN L . M I L L S
S e c r e t a r y of. t h e T r e a s u r y .
Undersecretary of t h e T r e a s u r y .
CHARLES S . D E W E Y
CARL T . S C H U N E M A N .
SEYMOUR LOWMAN
Assistant Secretary of t h e Treasury.
__. Assistant Secretary of the Treasiiry.
Assistant Secretary of t h e Treasury.
JOHN KIELEY
W. NORMAN THOMPSON
CHARLES R . SCHOENEMAN
H. R. SHEPPARJ>
L. C. MARTIN
FRANCIS C . R O S E
FRANK A. BIRGFELD
W. H . MORAN
EDWARD F . BARTELT.
.
^,
.
Assistant to t h e Secretary.
^
Assistant to t h e U n d e r s e c r e t a r y .
Assistant to t h e Undersecretary.
Assistant to Assistant Secreton'y.
. Assistant to Assistant Secretary.
Assistant to Assista^it Secretary.
Chief Clerk a n d Sitperintendent.
Chief, Secret Service Division.
Chief, Dimsion of Bookkeeping a n d Warrcmts.
Chief, Division of Appointments.
Chief, Section of S u r e t y Bonds.
CMef, Division of Supply.
Superintendent of Supplies, General Supply
Committee.
J A M E S B . HARPER
T H O M A S L . LAWRENCE
D A N C . VAUGHAN
ROBERT L B FEVRE
J O H N L . SUMMERS
J O S E P H S . MCCOY
Disbursing Clerk.
Government Actuary.
SPECIAL STAFF ASSISTANTS
ELLSWORTH C . ALVORD
DAVID E . F I N L E Y
ALBERT G . REDPATH
EDWARD J . CUNNINGHAM
Special Assistant to
Special Assistant to
Special Assistant to
Member of t h e W a r
t h e Secretary.
t h e Secretary.
t h e Unde^^secretary.
Loan Staff.
CONSULTING ARCHITECTURAL SPECIALISTS
EDWARD H . B E N N E T T , C h a i r m a n .
L O U I S AYRES.
ARTHUR BROWN, J r .
W I L L I A M B . DELANO.
MILTON B . MEDARY, J r .
L o u i s A. SIMON.
PUBLIC DEBT SERVICE
WILLIAM S . BROUGHTON
S.^ R. JACOBS
Commissioner of t h e Public Debt.
Deputy Commissioner.
WALTER O . WOODS
Register of t h e T r e a s u r y .
FRANK A. DEGROOT
CHARLES N . MCGROARTY
MELVIN R . LOAFMAN
.__ Assistant Register
Chief, Division of
CMef, Division of
and Audit.
Chief, Division of
FRANK G . COLLINS
of t h e Treasury.
Loans a n d Currency.
Public Debt Accounts
P a p e r Custody.
OFFICE OF THE COMMISSIONER OF ACCOUNTS AND DEPOSITS
ROBERT G . H A N D
DANIEL W . BELL
1'
.
EDWARD D . BATCHELDER
J O H N F . EBERSOLE
GommAssioner of Accounts a n d Deposits.
D e p u t y Commissioner.
Chief, Division of Deposits.
Chief, Section of Financial a n d Economic
Research.
PRINCIPAL ADMINISTRATIVE AND STAFF OFFICERS
XXV"
OFFICE OF THE COMPTROLLER OF THE CURRENCY
JOSEPH W . MCINTOSH
E. W I L L E Y STEARNS
Comptroller of t h e Currency.
D e p u t y Comptroller.
F. G. AwALT
Deputy Comptroller.
EUGENE H . GOUGH
Deputy Comptroller.
J. W. POLE
ROBERT D . GARRETT
Chief, National B a n k Examiners.
Supervising Receiver, Insolvent NationafB a n k Division.
J O H N G . HERNDON
Chief Clerk.
OFFICE OF THE TREASURER OF THE UNITED STATES
FRANK W H I T E .
FRANK J . F . T H I E L
H. T . TATE
W. F . WARNER
T r e a s u r e r of t h e United States.
. . _ _ . _ Assistant Treasurer.
^ Assistant Treasurer.
Chief Clerk.
OFFICE OF THE COMMISSIONER OF INTERNAL REVENUE
DAVID H . BLAIR
!
Commissioner of I n t e r n a l Revenue.
CHARLES R . N A S H —
Assistant to t h e Commissioner.
H. F . MIRES
R. M. E S T E S
--.^_
—. Deputy Commissioner.
—. Deputy Commissioner.
CHARLES B . ALLEN
CLARENCE M . CHAREST
Deputy Commissioner.
General Counsel.
PROHIBITION SERVICE
J A M E S M . DORAN
Commissioner of Prohibition.
A L F OFTEDAL
J A M E S E . JONES
LEVI G . N U T T
^. Assistant Commissioner of Prohibition.
.-^
Deputy Co7nmissioner of Prohibition.
..
Deputy Commissioner of Prohibition.
CUSTOMS SERVICE
ERNEST W . C A M P
Commissioner of Customs.
FRANK D o w ^.__^_-JOSEPH D . NEVIUS
NATHANIEL G. V A N DOREN_.
T H O M A S B . MCKAIG
Assistant Commissioner of Customs.
Deputy Commissioner of Customs.
Deputy Commissioner of Customs.
Assistant Deputy Commissioner of Customs.
^
MINT BUREAU
ROBERT J . GRANT
_;_____. Director of t h e Mint.
MARY M . O ' R E I L L Y
—_. Assistant Director.
FEDERAL FARM LOAN BUREAU
EUGENE MEYER
F a r m Loan Commissioner.
J O H N J. GUILL
-_-_—._-
LOUIS J. PETTIJOHN
ALBERT C . W I L L I A M S
GEORGE R. COOKSEY.:
FLOYD R . HARRISON
Member.
Member.
_. Member.
- _ . Member.
Member.
:
.
CHESTER MORRILL
:
VINCENT R . M C H A L E
Secretary a n d General Counsel.
Chief E x a m i n e r .
BUREAU OF ENGRAVING AND PRINTING
ALVIN W . H A L L
CLARK R . LONG
J E S S E E. SWIGART
VACANT
,
Director of the B u r e a u of Engraving and
Printing.
Assistant Director {Administrative).
Assistant Director {Production).
. Assistant Director [Service).
XXVI
PRINCIPAL
ADMINISTRATIVE
AND STAFF
PUBLIC H E A L T H
H U G H S. CUMMINQ___
T H O M A S PARRAN, J R
._
:
C. C. PIERCE
A. M. STIMSON
F. C. S M I T H
W. F . DRAPER
.
-...
OFFICERS
SERVICE
S u r g e o n General.
Assistant S u r g e o n General.
Assistant
Assistant
Assistant
Assistant
Surgeon
Siirgeon
Surgeon
Surgeon
General.
General.
General.
General.
FRANCIS A. CARMELIA
RALPH C. WILLIAMS
A s s i s t a n t Surgeon General.
A s s i s t a n t S u r g e o n General.
D. S. MASTERSON
Chief Cle^^k.
U N I T E D STATES COAST GUARD
BEAR ADMIRAL F . C . BILLARD
L I E U T . COMMANDER S . S . YEANDLE
KENDALL J . M I N O T
OLIVER M . MAXAM
Commandant.
Aide to C o m m a n d a n t .
Chief, Division of M a t e r i e l .
Chief, Division of Operations.
OFFICE OF T H E S U P E R V I S I N G A R C H I T E C T
J A M E S A. WETMORE
H E N R Y G . SHERWOOD
GEORGE O . VON NERTA
Actvng Supervising Architect.
E x e c u t i v e Officer.
Technical Officer.
STANDING DEPARTMENTAL
COMMITTEES
Budget and Improvement Committee
D. AV. BELL.
J . H . SCHAEFER.
MARVIN W E S L E Y .
M . E . SLINDEE.
F. G. LAWTON, S e c r e t a r y .
S. R. JACOBS, C h a i r m a n .
W- N. T H O M P S O N .
D. S. B L I S S .
F . A. BIRGFELD.
W. O. WOODS.
L. C. MARTIN.
GoTTumittee on EnroUme^it and Disbarment of Attorneys and Agents
S. R. JACOBS, C h a i r m a n .
J A M E S B . CORRIDON, Vice
H . C. ARMSTRONG.
P . R. BALDRIDGE.
Chairman.
O. V. EMERY.
J . E . HARPER.
LAWRENCE BECKER, A t t o r n e y .
W I L M E R G . PLATT, S e c r e t a r y .
Committee on Personnel
F . A. BIRGFELD, C h a i r m a n .
J . E. HARPER.
S. R. JACOBS.
Gom,mittee on Civil Service Retireminent
F . J. F . T H I E L , C h a i r m a n .
F . A. BIRGFELD.
J . E. HARPER.
E. W. C A M P .
W. N. T H O M P S O N .
Committee on Sirrhplified Office Procedure
F . A. BIRGFELD, C h a i r m a n .
H . T. TATE.
W. T. SHERWOOD.
J . L . NUBER.
ANNUAL REPORT ON THE FINANCES
TREASURY DEPARTMENT,
Washington^ November 19^ 1927.
SIR : I have the honor to make the following report:
In the process of preparing estimates of future revenues and of
carrying on current financing it is necessary for the Treasury to
have at its command all available information concerning business
and financiar conditions.
BUSINESS CONDITIONS IN THE UNITED STATES AND ABROAD
A survey of the available data suggests the following summary
conclusions as to business in the past year:
First. A large volume of business was done simultaneously with
declining commodity prices—an unusual combination of circumstances.
Second. The volume of new construction remained large, ias engineering and industrial and public works projects were in sufficient
volume practically to offset a decline in construction of dw^ellings.
Third. High wages, due to increased average productivity per
worker, and lower living costs, due to declining prices, resulted in a
sustained purchasing power for a large variety of consumers' commodities.
Fourth. Business was free from the accumulation of excessive inventories, advance ordering subject to cancellations, and unreasonable
speculation in commodities, and a spirit of caution prevailed generally among business men.
Fifth. Automobile production continued at a pace somewhat reduced from the year before, and dangers of a serious slump have been
lessened as demands for replacements are now sufficient to absorb
about half of the year's output.
Sixth. Competition became more intense and the la;rgest profits
were made by those concerns capable of introducing economies or
capturing the market by adaptation of their products to the demand.
Seventh. Charges for the use of fixed capital w^ere reduced both
on industrial and Government securities and on farm loans.
Eighth. Banks in tKe United States increased their loans and investments about $2,000,000,000 at the same time that they reduced
somewhat their dependence upon the Federal reserve system, due
mainly to gold imports and a decline in requirements for currency.
2
REPORT ON T H E FINANCES
Business Conditions During the Fiscal Tear
Volume of business.—The volume of business transacted during the
3^ear, when measured by the total money value of check payments
through banks outside New York City or by recognized indexes of
the physical volume of production, was about 3 per cent larger than
during the prior fiscal year and larger than in any preceding year.
There were three principal exceptions to this increase in business
volume—the construction, automobile, and iron and steel industries
did not move in harmony. New construction, measured by the value
of contracts aw^arded, declined very slightly, but the year previous
had registered such large totals that the fact of a decline is not soimportant as the smallness of the decline. Automobile production
declined about 11 per cent and nearly to the level of the fiscal year
1924. The iron and steel industry, drawing its sustenance from many
other sources of demand as well as from construction and automobiles^
showed a gain in ingot production of about 1 per cent over the previous fiscal year. The increase in general business volume was made
with the monthly average of factory emplo3^ment, 2 per cent less
than in the prior year, reflecting a higher degree of industrial
efficiency.
The industrial advance made during the fiscal year just closed was
not uniform. Overproduction occurred in oil, follow^ed by price readjustments and declines in earnings of many oil-producing companies. The cotton textile industry, on the other hand, stimulated
by the low price of cotton, was more active than for some years past..
Other textile industries also reported a generally larger output.
Profits reported by a selected group of 456 corporations for the first,
half of the calendar year 1927 showed gains, as compared with the
first half of 1926, for public utilities, motors aiid accessories, food
and food products, mining and smelting, chemicals, and miscellaneous, but losses for oil, steel, machines and machine manufacturing^
building supplies, and railroads.
Commodity prices.—The prices of all commodities at wholesale
began a decline in 1925, according to the index numbers of the
Bureau of Labor Statistics, which continued throughout the fiscal
years 1926 and 1927. Since May, 1927, there has been some recovery.
The actual decline, in terms of 1926 as a base, was from 104.8 (in
March, 1925) to 93.7 (in June, 1927), or nearly 11 per cent. The
decline in the'fiscal year 1927 alone was 5% per cent.
The prices of agricultural commodities followed much the same
course except that their drop in the past fiscal year was slightly less
than that of nonagricultural products, and their recovery since June
has been vigorous and has accounted for most of the recent increase
in the general average of prices.
SECRETARY OF THE TREASURY
6
Foreign busi/ness conditions.—The past year has, on the whole, been
one of continued improvement in Tthe economic and financial status
of important foreign countries. Legal stabilization of currencies on
a gold basis has been achieved by seven countries during the past
year. With only a few exceptions, the countries whose currencies
remain legally independent of the value of gold are now within
measurable distance of legal stabilization.
Industrial:production in Europe has risen throughout the year.
The volume of exports, as well as the domestic trade, was larger,
and commodity prices have been fairly stable in the last few months.
Unemployment has been declining recently, and, ih general, it may
be said that the position of labor in Europe is better than a year
ago; where wage increases have not occurred, a fall in the cost of
living has brought about the same results. Capital issues were much
larger in many countries, and with few exceptions savings-bank
deposits have increased.
Banking and Finance
Federal reserve bamJcing.—During the past fiscal year there was a
decrease of more than $100,000,000 in the total amount of credit the
Federal reserve banks were called upon to provide, due largely to
gold imports and a decrease in the requirements for currency, reflecting smaller factory pay rolls and probably further economy in
the use of currency by an increase in the use of checks. The decrease
in Federal reserve credit took the form principally of a decrease in
borrowing by member banks, and the banks therefore found themselves at the close of the year in a position to lend somewhat more
freely than a year previous. As a consequence, money conditions
have becoine somewhat easier and money rates slightly lower.
The discount rates of the Federal reserve banks have been unusually
stable during the past two years. The rate at all Federal reserve
banks, except New York, was 4 per cent from November 23, 1925, to
J u l y 28, 1927, inclusive. The New York bank maintained a 4 per
cent rate, except for the period April 23, 1926, to August 12, 1926,
inclusive, when a Zy^ per cent rate was effective. Shortly after the
close of the past fiscal year the discount rates at all Federal reserve
banks were reduced from 4 per cent to 3i^ per cent, the first reduction being made at Kansas City (July 29) and the last at Minneapolis
(September 13).
The general banking situation.—Tot^l loans and investments of all
banks in the country increased during the fiscal year about $2,000,•000,000, or about 4 per cent, an increase not inconsistent with the
usual year-to-year growth in bank credit required by the normal
^increase in the country's trade. An unusually large proportion of
4
REPORT ON T H E FINANCES
this increase in credit took place in bank investments and loans on
securities, accompanying great activity in the security markets.
Nev> secv/rity issues.—The new security issues of domestic borrowers totaled $5,524,189,000 in the fiscal year ended June 30, 1927,
or about 2 per cent above the previous., year, and those of foreign
borrowers totaled $1,319,083,000, .or 13 per cent above the previous
year. The distribution, of this, large volume of securities has-been
facilitated by rising bond prices, the monthly average of bond prices
being about 4 per cent higher than during the previous fiscal year;
and by increased bank loans, based on securities- as collateral and
increased bank investments in securities.
The business effects of this large amount of new financing are to
be seen principally in increases in construction for public utility companies, and of public works and highways.
The present situation of business
Total volume of business.—Business activity began in the spring
months of this year to fall below the totals of last.year. As a result
of this recession business is now being conducted on a basis that conforms more nearly to the normal expectancy as judged from the
regular rate of growth of the country that has prevailed on the
average for some years. While business is not as active as in most
of 1926, it can hardly be said to be subnormal and the underlying
fundamentals appear to be sound.
Cormnodity prices.—Another indication of healthy business conditions is the recent recovery in commodity prices due in the main to
the rise in agricultural prices. The Bureau of Labor Statistics index
of wholesale prices for September was 3 per cent over the low point
of May. The growing stability of prices in Europe moreover is
favorable to our export commodities.
Agriculture.—The crop estimates of the Department of Agriculture now promise larger crops of wheat, corn, barley, flax, and potatoes than were realized last year. Although the cotton crop has
been reduced about a third in quantity, it will probably sell at a price
, sufficiently higher so that the total return from the crop wnll be considerably larger than last year.
Judged from the group price index numbers of the Department of
Labor the purchasing power of farm products, measured in terms of
nonagricultural products, advanced steadily in every month since
March, 1927, and reached a figure in September that was 12 per cent
above that of March, nearly 11 per cent greater than in September
of last year, and higher than in any other month but one since early
in the year 1920.
SECRETARY OF THE TREASURY
,5
Credit conditions.—The peak load of crop financing this year was
handled without strain and the prevailing interest rates eased somewhat in the middle of October. Reporting member banks located in
the larger cities have in general continued to expand their commercial
and collateral loans and holdings of investments; the banks,in. New,
York City having done likewise, except for a reduction in their holdings of investments. The total credit expansion of member banks was
$317,000,000 between the last week of June and the last week of
October, of which sum $55,000,000 is accounted for by banks located
in New York City. New financing, as represented by securities issued,
has continued in very large volume.
RECEIPTS
Principal sources of revenue in 1927
7,000 -j-
6,000
5,000
4,000
ALL OTHER
MISCELLANEOUS
INTERNAL REVENUE
INCOME AND
PROFIT TAXES
1920
1921
1922
1923
1924
1925
1926
19Z7
DIAGR-4M 1.—Principal sources of ordinary receipts for the fiscal years 1920 t o 1927
The fiscal year ended June 30, 1927,'"gij^ the first opportunity for
analyzing the changes in the principal sourc^sa)f revenue and in the
distribution of the burden of internal taxation effected by the revenue
act of 1926, approved February 26, 1926. The increase in the total
ordinary receipts from $3,962,755,690 in 192^6 to $4,129,394,441 in 1927,
or $166,638,751, came mainly from sources other than internal revenue
taxation. The receipts from principal sources as compared with
earlier years are shown in the following table and graphically in
diagram 1, above.
.6
REPORT ON T H E FINANCES
Ordinary receipts, fiscal years 1920 to 1927
[On basis of daily Treasury statements (unrevised) 1
Miscellaneous revenues, including P a n a m a C a n a l
Year ending
J u n e 30—
1920..
1921
1922
1923
1924
1926...
1926
-1927
Customs
$322,902, 650
308, 564,391
356,443, 387
561,928,867
545,637, 504
547, 561, 226
579,430,093
605,499,983
1923 1924
1925
Income and
profits taxes
$3,944,949,288
3,206,046,158
2,068,128.193
1,678,607,428
1,842,144,418
1, 760, 537,823
1,982,040,088
2, 224,992,800
1926
1927
Miscellaneous
i n t e r n a l revenue
$1,460,082, 287
1,390,379,823
1,145,125,064
945,865,333
953,012,618
828,638,068
855, 599, 289
644,421,542
1923
Total
Proceeds
from foreign
obligations
All other
$74, 296,622
114, 821,206
75,222,068
232, 989,156
221, 774,675
183,637, 677
194, 237,957
206,089,173
$892, 334, 542
605,121,383
464,185, 439
587,744,697
. 449,475,487
459,773,890
351,448, 263
448,390,943
1924 1925 1926
$6,694, 565,389
5,624,932,961
4.109,104,151
4,007,135,481
4,012,044,702
3,780,148,684
3,962, 755, 690=
4,129,394,441
1927
•piAGBAM 2.'-^Income t a x collections for t h e fiscal years 1923 to 1927, distributed according
to individual and corporation t a x e s a n d according t o back t a x e s a n d c u r r e n t collections.
(The former distribution was: n o t m a d e u n t i l 1925 a n d t h e l a t t e r until 1924)
Internal revenue collections, which include income taxes, tobacco,
Bnd other miscellaneons internal taxes, increased from $2,837,639,377
to $2,869,414,342, or $31,774,965 over the preceding year; while re•ceipts from customs and such miscellaneous sources as Governmentowned securities, Panama Canal tolls, etc., were $134,863,786 larger
than in 1926, or $1,259,980,099 as compared with $1,125,116,313.
Closer analysis of internal revenue collections shows more definitely that tax changes were responsible for the failure of such
receipts to increase. Income taxes, the most important internal
taxes, yielded $2,224,992,800, or $242,952,712 more than in 1926.
SECRETARY OF THE TREASURY
7
However, larger back tax collections on incomes—$331,476,826
in 1927 as compared with $295,982,056 in 1926—were responsible for
approximately $35,000,000 of this increase. Such collections depend
not upon current tax returns but on the administrative work of completing the audit and closing of returns for former years. The large
volume during the fiscal year 1927 resulted from intensive work on
returns for war years, the majority of which are now closed. Making allowance for receipts from this temporary source, current income tax receipts during 1927 increased about $208,000,000. This is
the increase in collections depending on the new law in which rates
of tax on individual incomes were decreased, and credits and exemptions increased, while rates on corporation incomes were increased.
Income and profits in the calendar years 1925 and 1926 were at an
unusually high level, and collections on these incomes, half of which
came in the fiscal year 1927, were larger in spite of the substantial
reduction in individual income tax rates. Offsetting the additional
current income tax collections of $208,000,000 was a decline of about
$211,000,000 in collections from other, internal taxes. These miscellaneous internal revenue taxes were seriously cut by the 1926 act
from $855,599,289 in 1926 to $644,421,542 in 1927. If, therefore,
allowance is made for collections not affected by the tax revision,
internal revenue collections during 1927 were approximately the
same as during 1926.
Eeceipts other than from internal revenue taxes come from the
tariff and from a variety of other sources not of a taxation nature.
These sources were responsible for the bulk of the increase in total
ordinary receipts of the past year. Customs increased from $579,430,093 to $605,499,983, or $26,069,890, the second successive year
with a big gain, and the first time for customs to pass the $600,000,000
mark. The additional customs accrued during the autumn months.
Diagram 3, page 8, shows customs receipts, monthly, for the fiscal
years 1925 to date. During the first three months of the fiscal year
1927 customs rosd sharply over the same months of the preceding
year until November, then declined rapidly until January, and remained about the same as in former years during the last six months,
to June 30, 1927.
Miscellaneous receipts include a variety of sources, a few yielding
as much as some of the more important miscellaneous internal taxesj
a large number each producing a small amount from year to year.
Among the more important miscellaneous receipts in recent years,
shown separately in the following table, have been the proceeds from
Government-owned securities (including foreign obligations, railroad
securities issued under the transportation act of 1920, and Federal
farm loan and other securities), sales of surplus property, and Panama Canal tolls. Less important individually are the items included
64671—6' 1 9 2 7 — 3
8
REPORT ON THE FINANCES
under " all other "—public domain receipts, profits from coinage and
buUion receipts, fees, fines and penalties, interest on public deposits,
receipts from revenues of the District of Columbia, receipts in administering trust funds, and smaller items. Revenues grouped under
" all other " have not varied much during the last four years, ranging
from $230,000,000 to $272,000,000. There have, however, been wide
fluctuations in the receipts from certain of the more important
sources. Receipts from railroad securities have fluctu3,ted from
$36,700,000 to $143,900,000 and from Federal farm loan and other
securities from $9,600,000 to $63,500,000 during the four-year period.
SEPT.
DEC.
MAR.
JUNE
DIAGRAM 3.—Customs receipts, by months, for the fiscal years beginning 1925
Miscellaneous receipts, 1920 to 1927
[On basis of daily Treasury statements (unrevised); in millions of dollars]
Proceeds from Governmentowned obligations
Fiscal year
Foreign
1920
1921-1022
1923
1024
1025._
1026
1027
74.3
114.8
75.2
233.0
221.8
183.6
194.2
206.1
Railroad All other
8
94.4
143.9
36.7
89.7
8
8 26.1
46.3
9.6
19.8
34.6
63.5
Sale of
surplus
supplies
309.3
183.7
113.6
91.7
46.8
23.8
25.6
18.1
Panama
Canal All other
tolls
5.6
12.3
11.7
17.3
27.1
23.1
24.7
25.8
2 577.4
2 409.1
312.8
333.1
271.6
249.2
229.9
251.3
Total
966.6
719.9
539.4
820.7
671.3
643.4
545.7
654.5
» Receipts on account of securities other than foreign-owned not shown separately for 1920 and 1921.
»Includes in 1920 $350,000,000 and in 1921 $100,000,000 from'^liquidation of the United States Grain
Corporation.
8 Receipts on account of railroad securities not segregated.
SECRETARY OF THE TREASURY
9
The total received from miscellaneous sources was larger in the
fiscal year 1927 than from either customs receipts or from miscellaneous internal revenue taxes, or $654,480,116 as compared with $605,499,983 and $644,421,542, respectively. The increase over similar
receipts during the preceding year was from $545,686,220 to $654,480,116, or $108,793,896. Government-owned securities other than
foreign securities yielded $153,200,000 in 1927 as compared with
$71,300,000 in 1926, about $82,000,000 of the entire increase in miscellaneous receipts. The principal sources in years of the more immediate future will be foreign obligations owned by the Government,
sale of surplus property other than war property, Panama Canal
tolls, and all other, the total receipts from which varied from about
$460,000,000 to $530,000,000 during the last four years.
Income taxes
The changes in principal sources of receipts reviewed above
show the general effect of the revenue act of 1926 from the point
of view of total revenue for the Government and the productivity
of main revenue producers. During the operation of the law to date
information has become available showing the effect on individual
sources of revenue and individual groups of taxpayers. The most
important information is the compilation of statistics from income
tax returns of corporations and individuals for the calendar year
1925, returns of which were filed during 1926, under the provisions
of the new revenue act. Actual tax collections on these returns were
made during the calendar year 1926, or during the last half of the
fiscal year 1926 and tjhe first half of the fiscal year 1927.
Not only did the 1926 revenue revision change the rates for different
individuals subject to income tax but, through the increase in the
income tax rate on corporations, it adjusted all income taxation
so that corporations, as a group, pay an even larger proportion
of the income taxes than formerly. The following table shows
the percentage distribution of income tax returned by corporations
and individuals for the calendar years 1922-1925:
Corpora- Individtion
ual
1922
1923..
1924
1925
. . .
Per cent
47
59
56
61
Per cent
53
41
44
39
When the excess-profits tax on corporations was removed and surtax rates on individuals reduced in the revenue act of 1921, the
normal rate on corporation income was increased from 10 to 12^2
10
REPORT ON THE FINANCES
per cent. Individual rates were further reduced in the act of 1924,
retroactive on returns for the calendar year 1923, but corporation
rates remained unchanged, and corporations then returned more than
half of the income taxes. The increased proportion of income taxes
returned by corporations for the calendar year 1925 reflects only part
of the last tax revision since the rate was set at 13 per cent for 1925
and at 13i/^ per cent for subsequent years. For the calendar years
1926 and following corporations will be returning well over threefifths of the income taxes.
IndividdDal income tax.—The revenue act of 1926 made sweeping
changes affecting the taxation of individual incomes by increasing
the personal credit exemption for single persons 50 per cent and
that for married persons and heads of families 40 per cent, by increasing the earned income credit and by decreasing the normal and
surtax rates. More than 44 per cent of the individual taxpayers
were relieved from income tax payments. I n 1924, 4,489,698 individuals returned taxable net income, whereas in 1925 the number fell
to 2,501,166, a decrease of almost 2,000,000. Under the new law the
rat^s of normal tax were reduced from 2 per cent, 4 per cent, and 6
iper cent to 1% per cent, 3 per cent, and 5 per cent, respectively.
Surtax rates were cut from a maximum of 40 per cent to a maximum
of 20 per cent. The earned income provision was so extended as to
apply to a maximum of $20,000 of such incomes as compared with
the limit in the former act of $10,000.
I t was very naturally anticipated that these changes would result
in considerable loss of revenue. I n fact, the report of the Ways and
Means Committee submitted to the House estimated a reduction of
$46,000,000 in normal tax paid and a reduction of $98,575,000 in returns from the surtax. As a matter of fact, however, the individual
returns for the calendar year 1925 showed a larger tax than did those
for 1924. The individual income tax returned for 1924 was $704,265,390, and for 1925, $734,555,183, an increase of $30,289,793. As
estimated, there was a very large falling off in the normal tax return.
Before the deduction of earned income and capital loss credits, the
normal tax returns decreased $41,434,565. On the other hand, surtax
returns decreased only $4,687,627, while the capital gains tax
increased $68,967,907. There was a net gain of $22,845,715, to which
must be added $6,067,280, representing a decrease in the earnedincome credit, and $1,376,798, representing a decrease in the capital
loss credit.
The results are attributable to several causes: First and most
important was the increased prosperity of the country as exemplified
by the increased income from certain sources, despite the reduction
in number of returns. The income from dividends returned, which
were $3,250,913,954 in 1924 rose to $3,464,624,648 in 1925 despite
SECRETARY OF THE TREASURY
11
fewer returns and the reduction in total income returned. More
important than any other changes was the enormous increase in
the income reported from the sale of property, both under the capitalgains section and under the general provisions. Income from the
sale of property under the general provision reported for 1924
amounted to $1,124,565,658, while in 1925 this figure had jumped
to $1,991,659,499, an increase of $867,093,841, or 77 per cent. I n addition, income under the capital net gains section increased from
$389,148,434 to $940,569,341, an increase of $551,420,907, or 142 per
cent, and the tax from $48,603,064 in 1924 to $117,570,971 for 1925.
In fact, the increased revenue from the capital gains tax more than
offset the loss of $46,122,192 in normal and surtax returns.
I n the second place, the entire decrease in taxable incomes occurred
in the classes not in excess of $5,000, while for those in excess of $5,000
it materially increased. The number of taxable returns with income
of less than $5,000 decreased 55 per cent, while the number in excess
of $5,000 increased 18 per cent; in excess of $25,000, 32 per cent; in
excess of $100,000, 67 per cent; in excess of $300,000, 104 per cent,
and in excess of $1,000,000, 176 per cent.
The Treasury Department has always contended that in the long
run the taxation of income at moderate rates would be more productive than at very high rates. The soundness of this contention appears to have been amply borne out by the tax returns under the law
of 1926, for both the calendar years 1925 and 1926.
The sources of the income returned for the calendar year 1925
as compared with 1924 clearly illustrate the effect of the new revenue
act. The total national income was undoubtedly greater in 1925 than
in 1924, due to increased prosperity, but the income actually returned
for individual income tax purposes was less, due to the entire exemption of over 40 per cent of the 1924 income tax payers. The income
returned on account of wages and salaries was about $3,875,000,000
less; from individual businesses about $1,100,000,000 less; from rents
and royalties about $538,000,000 less; and from interest and investments about $467,000,000 less. On the other hand, increased income
was returned from dividends and from sale of property. Dividends
increased about $214,000,000, while the gains from the sale of property, including that returned as capital net gains, increased about
$1,418,500,000. The largest reductions in net income reported for
tax purposes, in the incorae from wages and salaries and in the income returned on account of individual business, were in the lower
tax brackets. The reductions in returns from " rents and royalties "
and " interest and investment income " were almost entirely in the
lower brackets. The greatest beneficiaries of the 1926 act were,
therefore, people of small incomes, wage earners, salaried men, and
men operating small individual business enterprises.
12
REPORT ON T H E FINANCES
Paradoxical as it may seem, the average tax paid for 1925 was
$136.83 greater than for 1924, an increase of over 87 per cent, in spite
of lower normal and surtax rates in 1925. This is likewise true of
the rate. I n 1924 the average rate of those returning taxable net
income was 3.62 per cent, while in 192/55 despite all reductions, it
increased to 4.20 per cent. The explanation is found in the elimination of about 2,000,000 of the small taxpayers and in the increase of
the number of taxpayers reporting larger incomes.
Analyses of the returns made under the 1924 and 1926 acts indicate
that the income tax in this country has become a class rather than a
national tax. For the calendar year 1924, 259,808 individuals with
net incomes of $10,000 and over returned about $627,800,000 of income
tax out of a total tax of $704,265,390; 4,229,890 returned the remaining tax of about $76,500,000; about 2,880,000 made returns but paid
no tax; and the balance of our population made no returns whatever. The average rate of tax of all those returning taxable incomes
not in excess of $5,000 was 0.49 of 1 per cent; and for those making
taxable returns in excess of $5,000 and not in excess of $10,000, 0.99
of 1 per cent.
For the calendar year 1925, in contrast, 327,018 individuals with
net income of $10,000 and over returned $701,497,726 out of a total
of $734,555,183, and 2,174,148 individuals returned the remaining
tax, approximately $33,000,000. According to these returns, less
than 0.3 of 1 per cent of our population returned 95% per cent of
our total income tax, about 1,9 per cent returned 414 per cent, and
the remaining 97.8 per cent of the population returned no tax whatever. Furthermore, in returns for 1925 the average tax rate for
those returning taxable net incomes not in excess of $5,000 was 0.29
of 1 per cent, and for those returning taxable income in excess of
$5,000 and not in excess of $10,000, 0.58 of 1 per cent—rates about 40
per cent lower than those under the preceding tax law.
Corporation income td^.—The largest number of corporations
scheduled as making returns for tax prior to 1925 was 417,421. The
returns for 1925, however, numbered 430,072. I n no other year has
this number reached 400,000. I n 1924, of those making returns, only
236,389 reported net income and 181,032 reported no net income.
For 1925, 252,334 corporations returned net income and 177,738
returned no net income. The net income for 1924 was $7,587^000,000,
while for 1925 it was $9,584,000,000, an increase, due to the great
corporate prosperity. For 1917 the net income of the 232,079 corporations making return of income was $10,730,000,000. The net
income returned for 1925, with this exception, was the largest on
record.
The income tax returned by corporations for 1925 amounted to
$1,170,331,206 as compared with $881,549,546 for^1924, an increase of
13
SECRETARY OF T H E TREASURY
about 33 per cent. There were two reasons for this increase in the
tax—the extraordinary prosperity, resulting in larger returns both in
number and amount, and the slight increase made in the tax rate.
The tax for the year 1925 was at the rate of 13 per cent instead of
12y2 per cent as for the years 1922, 1923, and 1924. The tax returned
for 1925, at the rate of 13 per cent, was $1,170,331,206. H a d the rate
been 121^ per cent, the tax would have been about $1,125,318,000, a
difference of about $45,013,000. That is, of the increase in corporate
tax returned for 1925, $45,000,000 was due to the increased rate of
one-half of 1 per cent and about $243,800,000 due to increased prosMILLION
COLLARS
1000 t
900
zo%
19X
U'/^
800
mm-.
700
ALT. OTHER
DISTILLtU
SPIRITS
A D M I S S I O N S A N D DUIlS
DOCUMENTARY STAMPS
iNCLUDlNG l-LAriNG CAUDS
600 j-
ESTATE
500
TAX
AUTOMOBILE
TAXES
400
300
TOLAGCO
200-
14-27.
J3/.|
TAXES
i587o|
100
l9^3
19^4
\dZ7
192.6
19^5
DIAGRAM 4.—Principal sources of miscellaneous internal revenue collections for the fiscal
years 1923,to 1927
#
•
.
,
,
"
,
,
perity. Corporate prosperity was also illustrated by the fact that
the deficit of those returning no net income was collectively less than
for any year since 1919 and about 12 per cent less than for 1924.
Miscellaneous intemal revenue
Eevision in the revenue act of 1926 of internal taxes other than
income taxes reached a wide variety of taxes on people in all economic groups through their manufacture or use of goods and services. The total burden of these levies was reduced about one-fourth.
The effect of the changes on receipts, as compared with preceding
years, is indicated graphically in diagram 4, above, showing collections of miscellaneous internal revenue by principal sources for
14
REPORT ON T H E
FINANCES
the fiscal years 1923 to 1927. During that period miscellaneous
internal revenue collections declined almost one-third, due to tax
reductions in the revenue acts of 1924 and 1926. The loss of revenue
in the latter act was even greater than in the former.
Taxes in each of the major remaining sources were reduced, either
by lower rates, increased exemptions, or omission of certain taxes.
The collections as compared with the fiscal year 1926 were as follows: ^
lln millions of dollars]
Fiscal year Fiscal year Increase or
1927
decrease
1926
Source
Tobacco taxes
Automobile taxes
. .
.
Estate tax
Documentary stamps, including plajdng cards
Admissions and dues
Distilled spirits . . .
..
Another
Total
.
370.7
138.2
116.0
64.0
34.1
26.4
122.6
376.2
66.4
100.3
37.3
28.4
21.2
15.9
+6.0
-71.8
-16.7
—16.7
-5.7
-5.2
-106.6
861.9
646.7
-216.2
1 The figures are based on collectors' reports and give a slightly different total than from the daily
Treasury statements shown above.
Tobacco tax collections, which had increased from $16,000,000 to
$25,000,000 during each of the three preceding years, gained only
$5,500,000 in 1927 over 1926. The loss in revenue from the reduced
rates on cigars and the omission of the special tax on manufacturers
almost offset the gain in collections on small cigarettes. The effect
of the revised tobacco rates on the importance of small cigarettes as
revenue producers is shown in diagram 5, page 15. Collections from
small cigarettes now yield almost three-fourths of all tobacco collections and over 40 per cent of the total miscellaneous internal revenue. The loss of taxes on automobile trucks and autowagons, and on
tires, parts, and accessories, and the reduction of the rates on passenger automobiles from 5 to 3 per cent resulted in a reduction of $71,800,000 in collections on automobiles, the greatest loss in any one
group of taxes with the exception of the capital stock tax. The decline in estate tax collections was not great—$15,700,000—^not because.
the tax was unchanged but because the increased exemptions, reduced
tax rates, and increased credits for State inheritance taxes will not be
fully reflected in collections until the fiscal years 1928 or 1929 and
later. Documentary stamps collections decreased $16,700,000 as a
result of the omission of certain stamp taxes; also admissions and
dues, because of the increased exemption for admission; and distilled
spirits, because of the reduced rates on nonbeverage distilled spirits.
The omission of a number of taxes riot shown separately accounts for
the decline in the " all other " item. Among these are the capital
stock tax, collections on which amounted to $97,400,000 during the
SECRETARY OF THE TREASURY
15
fiscal year 1926; the gift tax, and miscellaneous excise taxes and
occupational taxes.
Miscellaneous internal taxes, which yielded almost a third of the
internal revenue collections in the fiscal year 1925 and about 30 per
cent in the fiscal year 1926, produced less than one-fourth of the total
in 1927, the remaining receipts coming from income taxes. Of the
miscellaneous taxes, those on tobacco products now produce almost
three-fifths (58 per cent) of the total, as compared with about twofifths in 1925 and 1926, and will net an even larger proportion when
500
400
ALL OTHER
LARGE CI CARS
SMOKING AND CHET^NG
TOBACCO
300
2 0 0 -
69%] I 07 I SMALL aOARETTES
657.1
I OF r
1925
1926
100
1920
1921
1922
1923
1924
1927
DIAGRAM 5.—Principal sources of collections on tobacco taxes for t h e fiscal years 1920
to 1927
the revisions in the 1926 law on estates and nonbeverage distilled
spirits are fully reflected in collections. The burden of the tobacco
taxes is, however, widely distributed among the numerous users of
tobacco, particularly cigarette smokers. The other taxpayers benefiting especially by the 1926 act are those formerly paying the tax on
passenger automobiles, trucks, and tires, parts and accessories, and
those paying taxes on estates of decedents when all collections are
made under the new rates. The removal of the capital stock tax
resulted in little actual change in the tax burden of corporations
because of the increased rate on corporate incomes.
16
REPORT ON T H E FINANCES
EXPENDITURES
Increases a/nd decreases iri the fiscal year 1927
During the fiscal year ended June 30, 1927, the ordinary expenditures of the Federal Government decreased $124,000,000, or over 4
per cent, as compared with the preceding year. As a result of this
decrease, coupled with increased receipts, many of them of a temporary character, $258,000,000 more were applied to the reduction
of the public debt than in the previous year.
The expenditures of a government summarize its activities. The
scope and relative importance of the various tasks required of the
Federal Government are shown more clearly by a classification of
its expenditures according to the various functions performed. As
pointed out in my last report, there are several main groups of these
functions. The first in importance at present is the service of the
public debt, which includes debt retirements and interest payments;
second, the military functions, which include aid to war veterans
and the cost of special agencies for strictly military purposes as
well as the military expenditures of the War, Navy, and other departments; third, expenditures for all other purposes from which
must be deducted the amount of refunds, losses, contingencies, payments from trust funds and other nonfunctional miscellaneous disbursements in order to obtain the cost of the ordinary civil activities
of the Federal Government. These ordinary civil expenditures
may be further subdivided into six parts as follows: (a) "General
government," which includes expenditures for Congress, the Executive office, and for administrative operations of a general character,
such as the Treasury fiscal service, the work of the Civil Service Commission, and the maintenance of public buildings; (b) "Internal
security," which includes disbursements for law enforcement, immigration, naturalization, public health, and special relief; (c) " D e velopment and regulation," which includes outlays for education and
research, the promotion or regulation of special groups of industries,
such as, for example, agriculture, banking, commerce, labor, and
railroads; (d) "Public domain, works, and industries," the most
important item of which in recent years is that for the promotion of
good roads; (e) "Local governments and Indians," which covers
costs of the governments in the Territories and the District of Columbia, the subventions to the States, and the cost of the Indian wards
of the Nation; (f) "Foreign relations," which is self-explanatory.
An interesting exhibit showing the relative importance of the
functions of the Federal Government and comparisons between the
last two fiscal years is given in the following table in which expenditures are classified according to the functional groupings above
17
SECRETARY OF THE TREASURY
described. Obviously there are other items included in " ordinary
expenditures" which are nonfunctional in character and therefore
not shown in these groups and not included in the table, such as
repayments of trust funds and refunds of excess collections of taxes.
Comparison of expend)ltures in the fiscal years 1927 and 1926, by fu/nctional
groups
[In millions of dollars]
Increase
in 1927
Total functional expenditures excluding public debt retirements
Ordinary civil functions
General government
Internal security
Development and regulation
Public domain, works, and industries
Local governments and Indians
Foreign relations
Mihtary functions
Publicdebt
Interest
Premium
Statutory retirements
other retirements
Loans
2,640.
646.
101.
75.
124.
274.
53.
16.
1,200.
1,925.
787.
7.
519.
611.
1.
2,647.
631.
102.
74.
109.
274.
66.
15.
1,179.
1, 710.
831.
6.
487.
385.
1-0.
Decrease
in 1927
0.4
1.3
15.4
.1
.7
21.3
215. 3
1.8
32.2
226.1
1.1
2.9
44.9
I Excess of credits, deduct.
From the facts presented in the foregoing table it appears that
the principal saving during the past fiscal year was in expenditures
for interest on the public debt, w^hich decreased nearly $45,000,000.
Increases as compared with the preceding year will be noted of
$21,000,000 in military expenditures and $15,000,000 in expenditures
for development and regulatioUi A steady enlargement is to be
expected in this developmental and regulatory group, as I pointed
out in my last report, because of the rising standards and expanding
sphere of governmental activity. These widespread modern tendencies are caused in turn by the increasing congestion of population
and the ever-widening commercial and humanitarian horizons that are
making apparent in growing numbers the cases in which unsystematic
private agencies are unable to cope adequately with large-scale undertakings of intimate public interest. This group of developmental
and regulatory activities is the only one under ordinary civil functions that shows a material change in the amount spent in 1927 as
compared with 1926. There Avere actual decreases in the expenditures
for General Government and for local governments (including Indian
affairs), and the three other groups show almost insignificant increases. It is interesting to note that the large group of civil expenditures designated "Public domain, works, and industries," remained
practically stationary, showing that the Federal Government has not
been making further invasions into the field of private business.
The net change as compared with the preceding year in the total
for all expenditures, excluding debt retirements and excluding nonfunctional items, was a decrease of $6,400,000.
18
REPORT ON T H E FINANCES
Percentage distribution of expenditures
The relative fiscal importance of the different functions of the
Federal Government in any one year is concisely shown by the percentage of total expenditures which is due to each group. Such a
percentage distribution for the fiscal year 1927, with corresponding
1926 data included for comparison, is given in the accompanying
table. Diagram 6 gives the 1927 data in graphic form.
FOREIGN 0 . 4 3 ^
RELATIONS
DIAGRAM 6.—Functional distribution of expenditures, by percentages, for the fiscal year
1927
Functional distrnbution of expenditures, by percentages, fiscal years 1927 and
1926
O r d i n a r y civil f u n c t i o n s . . General G o v e r n m e n t
I n t e r n a l security
Development and regulation.
P u b l i c d o m a i n , works, a n d
industries
Local g o v e r n m e n t s a n d I n diansForeign relations
1927
1926
Per ct.
17.1
2.7
.2.0
3.3
Perct.
7.3
7.8
1.4
.4
1.6
.4
J Less than one-twentieth of 1 per cent.
.17.9
2.9
2.1
3.1
°
M i l i t a r y functions .
Public debt
Interest
.
.
Premium
statutory retirements
Other retirements
Loans
1927
1926
Per ct,
31.8
51.1
20.9
..2
13.8
16.2
Per ct.
33.6
48.6
23.6
.2
13.8
10.9
(0
(1)
SECRETARY OF THE TREASURY
19
Probably the most striking fact brought out by such a percentage
distribution is the small fiscal importance of ordinary civil expenditures. These are often thought by those who have never looked into
the matter to be typical of practically all the disbursements of the
Government. When the average citizen grumbles over the size of
his income tax payment he often visualizes his hard-earned money
being spent by the Government to compile reports on business or agricultural conditions, or to erect public buildings, send diplomats
abroad, carry on scientific investigations, or make and enforce lawsAs a matter of fact, a small part of the taxpayer's dollar goes into
work of this sort, only about one-sixth being used for all the multitudinous types of ordinary civil functions added together. One-half
of each tax dollar is used for the service of the public debt, the equivalent of 20 cents being required for interest and premium payments
and 30 cents for debt retirement. The remaining one-third of the
taxpayer's dollar is spent on military expenditures for national
defense or payments to military veterans.
Percentage of expenditures attributable to war
I t is well known to students of public finance that the peace-time
budgets of modern occidental nations are largely concerned with the
costs of past and future wars. The question often arises as to the
percentage of Uniteci States Federal expenditures that is attributable
to actual or potential w^ars. Needless to say, many expenditures of
the Government are either always partly military and partly civil
or else are predominately military in war periods but change to a
distinctly civil character in times of extended peace. Any definite
figure of expenditures for war must, therefore, involve many judgments that are far from mathematical certainty. Nevertheless, such
approximations are worth while.. The best-known compilation of
data in readily available form for use in answering this inquiry was
made for the years 1910 to 1920 by the late Edward B. Rosa, of the
United States Bureau of Standards. His classified figures were
later brought up to the year 1924 by the United States Bureau of
Efficiency. I n the accompanying table is shown the percentage of
Federal expenditures attributable to wars, based on these data. A
similar computation that excludes from expenditures for wars the
amount of public debt retired from payments by foreign governments,
and the cost of civil agencies used for war purposes, such as the
United States Emergency Fleet Corporation and the United States
Railroad Administration, is also included in the table for comparative purposes. The period covered by this latter compilation is from
1915 to 1927, inclusive.
20
REPORT ON THE FINANCES
Percentage of net Federal expenditures for wars, past and future
[Source of Rosa's data: Rosa, E. B., Expenditures and Revenues of the Federal Government, opp. p. 12]
Excluding
By Rosa's civil agencies used ;
classification
for war
purposes ^
Fiscal year
1910
1911
1912
1913
1914
1915 1916
1917
1918
Per cent
67.7
68,4
67.8
68.3
69.0
66.0
70.1
81.7
97.4
.
Per cent
62.8
66.7
86.1
90.2
Fiscal year
Excluding
By Rosa's civil agenclassificies used
cation
for war
purposes'
Percent
98.4
93.7
2 87.7
2 87.5
3 86.7
8 89.1
1919..
1920
1921-1922
1923-1924.
1925
1926
1927
Per cent
86.5
70.7
72.6
87.4
83.6
85.0
80.2
81.2
82.0
I E . g., Emergency Fleet Corporation and United States Railroad Administration.
» From data compiled by the United States Bureau of Efficiency.
8 From data compiled by the United States Bureau of Efficiency from Budget estimates sent to Congress, but actual figures for debt retirement have been substituted for Budget figures.
This table shows that in modern times the Federal tax burden of
one generation is largely determined by the military activities of the
preceding one. I n the fiscal year 1927 expenditures for interest
on the public debt exceeded by over $140,000,000 the aggregate
amount of ordinary civil expenditures, while military expenditures
were almost twice civil expenditures, and exceeded the amount of all
retirements of the public debt by nearly $70,000,000.
THE SURPLUS
Since 1920 each fiscal year has shown an excess in the ordinary
receipts of the Government over expenditures chargeable against
those.receipts. This excess, called " t h e surplus," in the eight-year
period since 1920 has totaled $2,692,000^000. For the fiscal year just
passed it amounted to $635,000,000, the largest surplus in any one
year from the operations of this Government. The following table
presents the figures for each year since 1920:
Ordinary receipts and expenditures chargeable against ordinary, receipts, 1920
to 1926.
[On basis of daily Treasury statements
Fiscal year
1920
1921
1922
1923
1924..
1925
1926
1927
(unrevised)]
Total ordinary
receipts
$6,694,665,388
5, 624,932,960
4,109,104,150
4,007,135,480
4, 012,044, 701
3,780,148,684
3, 962, 755,690
4,129,394, 441
Expenditures
chargeable
against ordinary
receipts
$6,482,090,191
6, 538, 209,189
3, 795,302, 499
3,697,478,020
3, 506, 677, 715
3, 629, 643, 446
3,584,987,873
3,493,584, 619
Surplus
r
$212,476,197
86 723
313,
801, 771
651
309. 657,460
505,366, 986
250,505,238
377,767,817
635, 809,922
21
SECRETARY OF THE TREASURY
The surpluses since 1920 have occurred in general because expenditures have been reduced in greater amount than have receipts under
the various revisions in the tax system and because of the gradual
liquidation of assets acquired during the recent war. Although
receipts fell off rapidly during 1921 and 1922 on account of the cut in
taxes in the revenue act of 1921 and the depression of those years,
receipts exceeded expenditures because expenditures were cut in
greater proportion. In 1923 and 1924 total receipts changed little,
but expenditures continued to decline and the surplus increased. In
1925, when expenditures increased slightly and receipts declined, the
surplus of the previous year was cut in half. The increase in surplus
in 1926 over 1925 was due to the large yield of taxation.
In 1927 receipts increased over the preceding year and expenditures decreased, resulting in a large surplus. The increase in total
receipts amounted to $167,000,000. Ordinary expenditures decreased
$124,000,000. Public debt retirements chargeable against ordinary
receipts increased $32,000,000, giving a net decrease in total expenditures chargeable against ordinary receipts of $92,000,000. The principal items of change are shown in the following table:
Principal change in ordinary receipts and expenditures chargeable, against
ordinary receipts in the fiscal year 1927 over 1926
[On basis of daily Treasury statements (unrevised)]
^
Expenditures
. Receipts—Increases
Decreases
Customs
$26,000,000
Internal revenue (largely income taxes)
32,000,000
Foreign repayments
Railroads (primarily
securities sold)
Federal farm l o a n
bonds, etc
Miscellaneous (net)
11,000,000
53,000,000
29,000,000
16,000,000
Interest payments.. $45,000,000
Customs a n d internal r e v e n u e
refunds....
72,000,000
Postal deficiency... 12,000,000
Civil service retire- <^
ment fund..
11,000,000
Other items
16,000,000
Increases
General e x p e n d i tures
_ . . _ . . . . . $31,000,000
Government life insurance fun d J.: - . . ~ 9,000,000
D e b t retirements,
chargeable against
ordinary receipts.. 32,000,000
The surplus of 1927 was an anomaly, resulting from a combination
of unusual and nonrecurring items in both receipts and expenditures.
Almost two-thirds of the surplus of $635,000,000 was due to receipts
on account of the disposal of capital assets, of back collections in
excess of tax refunds, and other items of a fast-disappearing or nonrecurring character.
About $103,000,000 of the surplus consisted of receipt items which
will not occur again. The Federal farm loan bonds owned by the
Government, which contributed $60,000,000 in 1927 in the fprm of
receipts from capital assets, have all been repurchased by the Federal
land banks, so that no further receipts from this source can again
22
REPORT ON THE FINANCES
occur. The War Finance Corporation, accounting for $27,000,000
in the 1927 receipts, has practically completed the liquidation of its
assets. Receipts from minor securities amounted to $3,000,000. The
capital stock tax, which produced $8,000,000 in 1927, has been repealed. The surplus was further increased bj'' $5,000,000 received
from a judgment of the court relating to the naval oil leases.
Among the temporary or fast-disappearing receipts received in
1927 are those on account of railroad securities, which aggregated
about $89,000,000. Railroad securities to the amount of only $230,000,000 were held by the Government at the end of the last fiscal
year. I t is estimated that whereas $169,000,000 will be received on
account of principal and interest on these securities in the fiscal year
1928 the revenue from this source will drop to approximately
$24,000,000 in the fiscal year 1929, and after that little or no revenue
is anticipated under this head. Back income tax collections in 1927
amounted to $331,000,000j which, when reduced by the sum of
$117,000,000 paid in tax refunds, leaves a balance of $214,000,000 in
revenue from this source. The work of the Internal Revenue Bureau
is becoming more nearly current every year, and while some net
receipts on this account will continue to be realized it is expected
that after the fiscal year 1929 the amount will be greatly reduced.
Moreover, tax refun(is in 1927 were $35,000,000 less than Treasury
estimates, due to a change in the application of the revenue law.
This reduction represents merely a postponement of expenditures,
the payment of which will swell expenditures in 1928, thus cutting
down net receipts from back taxes for that year. Receipts from the
sale of surplus war supplies amounted to $8,000,000 in 1927.
Without the nonrecurring and fast-disappearing items listed above,
aggregating about $414,000,000, a surplus of only about $221,000,000
would have resulted. The important part played by these temporary
and nonrecurring receipts in producing the surplus of the last few
years is shown in the table on page 23.
Principal receipt items of a nonrecurring or temporary type increasing the surplus in the fiscal years 1923, 1924, 1925, 1926,^1927, and 1928^
^
M
1924
1923
£
Back income and profits tax collections »
Less internal revenue refunds
•
M
Net
® Railroad securities, less railroad payments
^ Federal farm loan bonds and other minor securities
1 War Finance Corporation assets
Capital stock tax .
1 Sale of surplus war supplies
•*^ Navy oil judgment
Total
.
. . .
.
Surplus
Surplus exclusive of above net receipts
Deficit exclusive of above net receipts
-
1925
1926
1927
$300,000,000
125,000,000
$300,000,000
127,000,000
$276,000,000
147; 000,000
$296,000,000
182,000,000
$331,000,000
117,000, 000
$280,000,000
151,000,000
175, 000,000
314,000, 000
46, 000,000
109,000,000
173, 000,000
58,000,000
9, 000,000
62, 000,000
129,000,000
136,000,000
19,000,000
• 43,000,000
113,000,000
36,000,000
34,000,000
19,000,000
129,000,000
169,000,000
1,600,000
82, 000, 000
44, 000,000
16,000,000
13,000,000
214,000,000
89,000,000
63,000,000
27,000,000
8,000,000
8,000,000
* 6,000,000
398, 000, 000
336, 000,000
343,000,000
215,000,000
414,000,000
318,000,000
505, 000,000
169, 000,000
250,000, 000
377,000, 000
162,000,000
635,000,000
221,000,000
455,000,000
137,000,000
309,000, 000
89, 000,000
'
93, 000, 000
1 Estimated.
2 Back income tax collections for fiscal years 1923 and 1924 are best available estimates. Figures of actual collections were not kept separate for those years.
3 Excess payments.
< Exclusive of amount paid in Liberty bonds aggregating .$5,600,000 principal amount.
19281
5,500,000
13,000,000
Ul
o
tel
o
>
Ul
24
REPORT ON T H E FINANCES
The surpluses since 1920 have been applied to a reduction of the
public debt. Public debt retirements thus made do not occur at the
end of each fiscal year from excess receipts accumulated during the
year, but throughout the year, and especially as a part of Treasury
financing from quarter to quarter. A few weeks prior to the 15th
of each September, December, March, and June the Treasury determines what income it will need to meet the expenditures during the
coming quarter, taking into account on the receipt side the net balance in the general fund and the Government receipts to be expected
and on the expenditures side the amount of cash required to meet
obligations maturing during the quarter and the probable expenses
of the Government during the same period. The estimated excess
of required expenditures over probable receipts during the ensuing
quarter is met by the issue of new securities. If, therefore, receipts
are running ahead of expenditures chargeable against such receipts,
the amount of new securities sold at the quarterly date is less than
the amount of maturing securities.
The following table shows the actual application of the surplus to
public debt retirement, by quarters:
Surplus applied to public debt 7'etirement, by quarters, fiscal year 1927
[On basis of daily Treasury statement (unrevised)] .
Quarters
Sept. 30,19h
Dec. 31, 1926 . . , .
Mar. 31,1927
JuneSO, 1927 ...'.
Total
Amoimt
_
.».
$36,296,262
164,976,466
6,019.100
406,463,720
611,764,538
As a result of the foregoing operations $611,000,000 of the fiscal
year's surplus of $635,000,000 was applied to the retirement of the
public debt during the fiscal year, and the $24,000,000 carried over
as an increase in the net balance in the general fund of the Treasury
at the close of the year over the net balance at the beginning was
immediately used for the same purpose.
The existence of a surplus in any particular year or group of years
is not prima facie evidence that the Government has sources of
revenue in excess of normal needs for the exercise of its functions.
The foregoing analysis of the surplus of 1927 should indicate clearly
that that surplus can not be taken as a criterion of the future. Temporary and nonrecurring revenues must be discounted in estimates
for coming years, the swing of the business pendelum must be taken
into account, normal increases in expenditures must be provided for,
and possible further effects of changes in the revenue act must be
allowed to show themselves before reduction of taxes can be under-
SECRETARY OF THE TREASURY
26
taken. I t is only if genuine surpluses occur after such provision that
taxes can safely be cut to leave in the hands of the people that income
which is unnecessary for the execution of Government activities.
ESTIMATES OF RECEIPTS AND EXPENDITURES
^
Estimates of previous years
Reductions in taxation since the war have been based on estimates
of future receipts and expenditures of the Government, the estimated
tax receipts and certain of the estimated miscellaneous receipts
having been prepared by the Treasury. During the past five fiscal
years two downward revisions of taxation have been made—^in the
revenue acts of 1924 and 1926—and another change is now in prospect. I n making such tax revisions the estimates of Government
income and outgo for coming years are important in determining
how far taxation can be reduced. I n this connection a reasonable
accuracy in estimates of Government tax receipts is particularly
important.
The three diagrams which folloAv on pages 26 and 27 have been
prepared to show the discrepancies that have occurred in preparing
estimates during the past five years, and the allocation of such
amounts among the principal sources of revenue. The estimates
shown are those submitted to Congress seven months before the end
of the particular fiscal year, with the exception of 1926, for which
year estimates are those prepared just after the passage of the revenue act of 1926. The first diagram (diagram No. 7, p. 26) shows
the estimated and actual receipts, expenditures, and surplus during
the five-year period, thus indicating the relation of differences between estimates and actual receipts and expenditures to t h e difference
in the estimated and actual surplus. The two subsequent diagrams
(diagrams 8 and 9, on pp. 26 and 27) show the estimated and actual
. receipts from each of the four gen'eral sources—income taxes, miscellaneous internal taxes, customs, and miscellaneous receipts. Percentages of difference inserted over the bars for each year permit a
comparison of the discrepancies in the various sources.
There are two significant observations to be made from these
diagrams: (1) Discrepancies in estimates of surplus have not resulted entirely from underestimation of receipts. This was especially true of the past fiscal year when expenditures ran 4.3 per cent
below the estimate. (2) The greatest differences in estimated receipts have occurred in income tax receipts and in miscellaneous
receipts. On the whole, the error in estimating miscellaneous receipts
has been larger, both in amount and relative to the importance of
the source, than the error in estimating income tax receipts.
26
REPORT ON T H E FINANCES
BILLIOK
DOLLARS
r5
ORDINARY RECEIPTS
ERROR IN ESTIMATE-PER CENT
-yiA -2.9 - 4 . 7 - a . 4 - 2 . 5
EXPENDITURES CHARCEABLE
AGAINST 0R;D1NARY RECEIPTS
ERROR livr E-aTiriATE - PER CENTT
+ 0.2 +1.7 +0.1 +0.9 +4.3
4
3
3
SURPLUS
1923 1924- 1925 1926 1927
1923 1924 1925 1926 1927
'^^"'^''^ ^
1924 1925 1926 1927
1923
DIAGRAM 7.—Estimated ordinary receipts, expenditures chargeable against ordinary receipts, and surplus or deficit, compared witli actual amounts for the fiscal years 1923
to 1927
MIU-ION
DO-LARS
MILLION
DOLLARS
2500 -
• 2500
INCOME TAXES
ESTIMATED
ACTUAL
niSCELLANEOUS
INTERNAL
REVENUE
1923
1924
1925
1926
1927
1923
1924
1925
1926
1927
DIAGRAM 8.—Estimated receipts from income taxes and miscellaneous internal revenue for
the fiscal years 1923 to 1927 compared with actual receipts
27
SECRETARY OF THE TBEASUEY
The Treasury estimates have been made in the face of a number
of difficulties of no minor importance:
(1) Two thoroughgoing revisions have been made in internal taxa-p
tion and one revision has been made in the tariff. The changes in
internal taxes affected not only exemptions, credits, and tax rates on
individual incomes and the rate on corporation income but also a
large number of miscellaneous internal taxes. The effect of a tax
change on the base of a tax, especially under changing business conditions, can be estimated with only a certain degree of accuracy.
This accounts, in part, for discrepancies in estimates of income taxes
and miscellaneous internal revenue in the fiscal years 1925, 1926, and
1927. The tariff act of 1922, approved September 21, 1922, accounts
for the unusually large error in customs receipts for the fiscal year
1923.
tS^^XI
ESTl HATED
MILLION
DOU-AJIS
MISCELLANEOUS
ERROR IN ESTIMATE - PER CENT
-19.9
+-4'.5
+0.4
-3.9
+-I.9
1923
1924
1925
1926
RECEIPTS
ERROR IN. EST! MATE-PER CENT
-29.3 -19.4
-12.1
+6.3
-8.3
1923
1924
1925
1926
1000
1927
DIAGRAM 9.—Estimated receipts from customs and miscellaneous sources for the fiscal
years 1923 to 1927 compared with actual receipts
(2) The five-year period has been, on the whole, one of unusual
prosperity for the Nation, which it was not possible accurately to
forecast. It is because of such prosperity that incomes of corporations and individuals made a great increase in the calendar year 1923,
sustained a remarkable part of these gains during the recession in
the calendar year 1924, and reached new high levels in the calendar
years 1925 and 1926.
(3) During the same five years the Bureau of Internal Kevenue has
concentrated on a program of disposing of the accumulation of tax
cases outstanding, especially income tax returns of the war years,
and a reorganization of the bureau to promote prompter administration of current returns. The chief result has been large collections on
prior year returns outstanding and therefore much larger back tax
collections than anticipated. The unexpected size of these items has
also added to the discrepancies shown in income tax estimates in the
past three years.
28
REPORT ON T H E FINANCES
(4) Eeceipts from miscellaneous items have been affected by unusual receipts from Government-owned securities, especially the railroad and Federal farm loan securities, due/to favorable financial
conditions. The Treasury has consequently reduced its holdings of
such securities much faster than anticipated, and total receipts from
miscellaneous sources have been much larger than estimated.
Estimkttes for the fiscal years 1928 and 1929, co^mpwed with actual
amiovm^ts for tlie fhscal year 1927
The following table summarizes cash receipts and expenditures
during the fiscal year 1927 and the estimated receipts and expenditures for the fiscal years 1928 and 1929 on the basis of the latest
information received from the Bureau of the Budget:
Summary of receipts a7id expenditures on the basis of daily Treasury statements
{unrevised)
Actual, fiscal
year 1927
Estimated,
fiscal year
1928
Estimated,
fiscal year
1929
Net balance in the general fund at the beginning of fiscal year.
$210,002,027 $234,057,410
$210,002,027
Receipts:
4,129,394,441 4,075,698.091 3,809,497,313
Ordinary
12,756.410,766 3,238,115,237 1,319,176.324
Publicdebt
TotaL.
Expenditures:
Ordinary
Public debt chargeable against ordinary receipts..
Other public debt
•.
Net balance in the general fund at close of fiscal year..
Total.
7,095,807,234 7,547,770,738
6,338,675,664
2,974,029,675 3,085,129,211
619,554,845 636,185,074
»3,368,165,304 3,716, 464,426
234,057,410 210,002,027
3,015,333,637
641,623,394
1,671,716,608
210,002,027
7,095,807,234 7,547,770,738
6,338,675,664
POSTAL SERVICE
Postal receipts
Postal expenditures..
Deficiency in postal receipts '
683,121,989
710,385,180
710,500,000
740,870,400
763,000,000
768,270,042
27,263,191
30,370,400
16,270,042
1 other public debt expenditures and public debt receipts, as shown in this statement, are exclusive of
$2,428,673,500 Treasury certificates issued and retired within the same fiscal year.
» The postal deficiency for 1927 and the estunated postal deficiencies for 1928 and 1929 are included in the
ordinary expenditures shown above and in the general classification of ordinary expenditures and estimated ordinary expenditures on p. 31.
Ordinary receipts, and expenditures chargeable against ordinary
receipts, for the fiscal years 1926 and 1927, on the basis of daily
Treasury statements (unrevised), with corresponding estimates for
the fiscal years 1928 and 1929, are shown in the table on page 30.
Ordinary receipts include all receipts other than those from public
debt transactions. While ordinary expenditures similarly exclude expenditures for the retirement of the public debt, expenditures chargeable against ordinary receipts include, in addition to ordinary
expenditures, the statutory retirements of the public debt from the
SECRETARY OF THE TREASURY
29
sinking fund and from special earmarked receipts, such as repayments of the indebtedness of foreign governments. The estimates
in the table are on the basis of the latest information received from
the Bureau of the Budget.
Public debt expenditures^ and receipts for the fiscal year 1927,
by types of issue, with corresponding estimates for the fiscal years
1928 and 1929, are given in the table on page 33. The figures for
1927 are on the basis of daily Treasury statements (unrevised).
Public debt expenditures and public debt receipts, as shown in this
table, are exclusive of Treasury certificates issued and retired within
the same fiscal year. They include, however, the amount of exchange
transactions in public debt issues.
Receipts and expenditures for the fiscal years 1926 and 1927, and estimated receipts and expenditures for the fiscal years 1928 and 1929, on the
basis of daily Treasury statements {unrevised)
Fiscal year 1926
Fiscal year 1927
Fiscal year 1928
CO
^
Fiscal year 1929
RECEIPTS
Ordinary
Customs
Internal revenue:
Income tax
Miscellaneous internal revenue
Miscellaneous receipts:
Proceeds of Governmentowned securitiesForeign obligationsPrincipal
Interest
Railroad securities
All other securities
Trust fund receipts (reappropriated for investment).
Proceeds sale of surplus property
Panama Canal tolls, etc
Receipts from miscellaneous
sources credited direct to
appropriations
Other miscellaneous
$579.430, 092. 86
$1,982,040,088.58
$605,499, 983. 44
$2, 224, 992,800.25
855, 599,289.26
• 2. 837, 639, 377. 84
1 $602,000,000. 00
$2,165,000,000. 00
644,421, 541. 56
• 2.869,414,341.81
1 $602,000,000.00
$2,065,000,000.00
638,545,000. 00
640,545,000.00
2,803,545,000. 00
O
34,147,271. 62
160,090,685. 53
36, 735,326.87
34, 568,379.41
45,699, 572.81
160,389. 599. 90
89, 737, 958.98
63,474,987.27
160,320,218.00
169,478,876,00
1,141,816.00
38,747,660.00
160,340,908.00
24,090,165.00
1,296,559.00
39, 796,658.07
48,476,630.97
57,532,000.00
47,887,640.00
25, 672,012. 59
24, 648, 668. 58
18.068, 529. 98
25,768,389. 71
10,358,883.00
2,5,000,000.00
9,807,457.00
26,000,000.00
14,361.493.71
188,502,952. 52
8,317,923.00
189,226,336.00
7,653,021.00
186,128,904.00
48,677,039. 00
545,686, 219.44
3,962, 755,690.14
654,480,115.85
670,053,091.00
W
tel
4,129,394,44 LIO
4,075,598,091.00
501,952,314.00
3,809,497,314.00
EXPENDITURES
Ordinary (checks and warrants
paid, etc.)
O
I
.18, 694,008.27
171,433,408.50
Total ordinary receipts
General expenditures: ^
Legislative establishment...
Executive proper
state Department
Treasury Department
War Department
Department of Justice
Post Oflace Department
2,705,545,000.00
15,776,230.41
438, 768. 06
16,521,348.08
136,678, 723. 67
355,072,225.92
23,774,129. 23
98,388.93
19, 678,325.13
612,197.93
16,497, 668. 60
151, 560,333. 78
360,808, 776.71
24,819, 057.70
189,037. 77
17,128,804.00
586,333.00
12,544,029.00
157,866,735.00
392,477,038.00
28,285,484.00
17,290,46L00
420,700.00
13,939,006.00
180,800,335.00
392,506,916.00
26,653,460.00
a
312,743,409.81
301,759,049. 28
155,350,432.49
29,132, 015. 82
8,544,899. 59
404,692,185.22
318,909,096.28
302, 708, 745.19
156, 287,304.95
30, 939, 749.02
9, 921, 644.26
391,470,413.72
367,074,767.00
297,978,599.00
155,442,319.00
37,000,758.00
10,120,573.00
414,169,512.00
371,227.000,00
280,974,343.00
146,593,049.00
37,767,000.00
10,725,840.00
412,652,360.00
32,069,356. 30
34,410,707.45
36,442,771.16
37, 566,620.57
38,429,182.00
39,558,024.00
38,493,436.00
38,860,000.00
Total
._
Deduct unclassified items
1,826,959,870.26
232,946.62
1, 857,409, 642.76
»448,920. 63
1,958,662,157.00
1,968,893,906.00
Total
Interest on public debt.
Refunds of receipts:
Customs
.>
Internal revenue
Postal deficiency..
Panama Canal
Operations in special accounts:
Railroads
War Finance Corporation
Shipping Board.
Alien property funds
Adjusted service certificate fund«.
Civil service retirement and disability fund ^ .
1,826,726,923. 74
< 831,937,700.16
1, 857,858,663.39
787, 019,678.18
1,958,662,157.00
720,000,000.00
1,968,893,905.00
670,000,000.00
27,744, 697. 78
182,220,053. 01
39,506,490. 29
9,017, 719. 00
20,320,524.37
117, 412,172. 61
27, 263,191.12
8,305,345.04
20,010,500.00
151,321,500.00
30,370,400.00
9,515,534.00
19,013,000.00
136,271,500.00
15,270,042.00
9,250,000.00
2,725, 800.85
«19, 691,166.28
23,043. 032. 04
3, 515, 999. 58
120,152, 238.11
1,042,746.21
«27,065, 781. 61
19, Oil, 397.11
5 496,117.92
115, 219,352.30
3,370,000.00
» 2,508,062. 00
26,460,182.00
« 500,000.00
111, 220,000.00
1,033,550.00
6 500,000.00
17,700,000.00
8500,000.00
111,220,000.00
Navy Department
Interior Department
Department of AgricultureDepartment of Commerce
Department of Labor
U. S. Veterans' Bureau 2
Other independent offices
and commissions
District of Columbia
19,500. 000. 00
«425,000.00
» 425,194. 65
10,815, 743.02
1 I n c l u d e s $2,000,000 e s t i m a t e d b y D e p a r t m e n t of C o m m e r c e for t o n n a g e tax, receipts on a c c o u n t of w h i c h are covered i n t o t h e T r e a s u r y as c u s t o m s r e v e n u e .
2 D u r i n g t h e fiscal year 1927 a l l o t m e n t s for v e t e r a n s ' relief h a v e been m a d e to t h e T r e a s u r y D e p a r t m e n t i n t h e a m o u n t of $249,386.20, to t h e W a r D e p a r t m e n t i n t h e a m o u n t
of $4,664,400.36, to t h e N a v y D e p a r t m e n t in t h e a m o u n t of $5,900, a n d to t h e I n t e r i o r D e p a r t m e n t i n t h e a m o u n t of $30,000. Similar a l l o t m e n t s i n t h e fiscal year 1926 to t h e T r e a s u r y D e p a r t m e n t w e r e $372,878.53, t o t h e W a r D e p a r t m e n t $4,933,149.13, t o t h e N a v y D e p a r t m e n t $754,451.62, a n d to t h e I n t e r i o r D e p a r t m e n t i n t h e a m o u n t of $41,000. E x p e n d i t u r e s
u n d e r t h e s e a l l o t m e n t s , however, a p p e a r as e x p e n d i t u r e s of t h e respective d e p a r t m e n t s a n d n o t of t h e V e t e r a n s ' B u r e a u .
3 Add.
* I n c l u d e s $6,821,883.67 for 1926. a n d $2,401,478.49 for 1927:, accrued d i s c o u n t on w a r savings certificates of m a t u r e d series.
5 Excess o f c r e d i t s ( d e d u c t ) .
.
,
. ^
fi F o r details of t h i s a c c o u n t see p . 134. T h e difference b e t w e e n a m o u n t s of above charges a n d t h e a m o u n t s a p p r o p r i a t e d for m v e s t m e n t is d u e t o w o r k i n g b a l a n c e r e q u i r e d
for use of V e t e r a n s ' B u r e a u in m a k i n g a u t h o r i z e d p a y m e n t s from t h e fund.
. .
7 U n d e r provisions of t h e a m e n d m e n t of J u l y 3, 1926. t o t h e act establishing t h e civil service r e t i r e m e n t a n d disability fund a n d regulations issued p u r s u a n t t h e r e t o , b e g i n n i n g
J u l y 1, 1926, e x p e n d i t u r e s for salary, p a y , or c o m p e n s a t i o n of employees e n t i t l e d to t h e benefits of t h e act are a t t h e full a m o u n t d u e . R e t i r e m e n t - f u n d d e d u c t i o n s are deposited
m o n t h l y w i t h t h e T r e a s u r e r for credit to t h e fund. A m o u n t s n o t required for a u t h o r i z e d p a y m e n t s are i n v e s t e d b y t h e T r e a s u r y i n special issues of G o v e r n m e n t obligations
bearing interest a t t h e r a t e of 4 per cent per a n n u m , p a y a b l e on J u n e 30 each year, w h i c h is t h e s a m e r a t e prescribed i n t h e act for earnings on t h e d e d u c t i o n s from salary, p a y , or
c o m p e n s a t i o n . T h e figures for t h e fiscal years 1925 a n d 1926.represent only i n v e s t m e n t s of e m p l o y e e s ' c o n t r i b u t i o n s n o t r e q u i r e d for c u r r e n t e x p e n d i t u r e . F o r a m o r e detailed
e x p l a n a t i o n of t h i s account, see p . 135.
Ul
teJ
•0
>
o
W
^^
>
zn
Hi
CO
Receipts and expenditures for the fiscal years 1926 and 1927, and estimated receipts and expenditures for the fiscal years 1928 and 1929, on the
basis of daily Treasury statements {unrevised]-—Continued
F i s c a l y e a r 1926
I n v e s t m e n t of t r u s t funds:
. G o v e r n m e n t life i n s u r a n c e
fund
D i s t r i c t of C o l u m b i a teachers' r e t i r e m e n t fund
Foreign service r e t i r e m e n t
fund
General railroad c o n t i n g e n t
fund
P u b l i c d e b t r e t i r e m e n t s chargeable against o r d i n a r y receipts:
S i n k i n g fund
P u r c h a s e s from foreign repayments
Received from foreign gove r n m e n t s u n d e r d e b t settlements
P u r c h a s e s from franchise t a x
receipts ( F e d e r a l reserve
b a n k s a n d Federal interm e d i a t e credit b a n k s )
Forfeitures, gifts, e t c
—
Fiscal y e a r 1927
Fiscal year 1928
Fiscal y e a r 1929
$38,290, 345. 65
$47,316,972. 70
$56,567,000. 00
$46,837,640.
297,036. 87
289,980. 43
465,000. 00
550,000.
100,033. 44
87,267. 60
100,000.00
294,000.
1,209,175. 66
870,677.84
500,000. 00
-$3,085,129,211.00
500,000.
3,097, fell, 822.81
-$2,974,029, 674. 62
CO
• $3,015,333,637.00
O
317,091,750. 00
333, 528,400.00
353,221,424.00
369,209,094.
H
4,393, 500. 00
19,254,600.00
22,188,650.00
10,219,300.
O
165, 260, 000. 00
159,961,800.00
159,775,000. 00
160,996,000.00
567,900. 69
62,900. 00
800.000. 00
200,000. 00
1,231,834.78
5, 578,310.00
W
1.000,000.
200,000.
487,376, 050. 69
519,554,844. 78
536,185,074. 00
641,623,394.00
T o t a l e x p e n d i t u r e s chargeable against o r d i n a r y receipts
>
a
3, 584,987,873. 50
3, 493, 584, 519. 40
3,621,314,285.00
3, 556,957,031.00
Ul
Excess of o r d i n a r y receipts over
t o t a l e x p e n d i t u r e s chargeable
against o r d i n a r y receipts
377, 767,816. 64
635,809,921. 70
454,283,806.00
262,640,283.00
Public debt expenditures and receipts for fiscal year 1927 and estimates for fiscal years 1928 and 1929, on the basis of daily Treasury statements
{unrevised)^
Fiscal 7earl927
Fiscal year 1928
Fiscal year 1929
EXPENDITURES
Certificates ofindebtedness
'Treasury notes and certificates ofindebtedness (adjusted service series).
Treasury notes and certificates of indebtedness (civil-service retirement fund series).
Victory notes. . . .
.
.
.
Treasury notes and bonds, and Liberty bonds
Treasury (war) savings securities
_
Loan of 1925..
Retirements of Federal reserve bank notes and national-bank notes...
Olddebtitems
Total public debt expenditures..
Deduct public debt expenditures chargeable against ordinary receipts:
Sinking fund
Purchase of Liberty bonds from foreign repayments
Received from foreign governments under debt settlements
Retirements from Federal reserve bank and Federal intermediate
credit bank franchise tax receipts
Retirements from gifts, forfeitures, etc
$454,493, 600.00
30,400,000.00
$713, 565, 500.00
25,000, 000.00
13,700,000.00
1,284,450.00
3,294,172,950.00
64,162,481. 55
196,200.00
28,060,775.00
1,249,792. 72
16,074,000.00
500,000.00
3,300, 000,000.00
175,000,000. CO
$1,250,000,000.00
25,000,000.00
17,340,000.00
500,000.00
700,000,000.00
100,000,000.00
20,000,000.00
600,000.00
22,000,000.00
500,000.00
2,113, 340,000.00
4,252,639,500.00
3,887,720,149.27
$333,528,400.00
19, 254,600.00
159, 961,800.00
$353, 221, 424.00
22,188, 650.00
159, 775, 000.00
$369, 209,094.00
10,219, 300.00
160,995,000.00
1,231,834.78
5,578,310.00
800,000.00
200,000.00
1, 000,000.00
200,000.00
Total public debt receipts
Excess of public debt retirements over the retirements chargeable
against ordinary receipts due to indicated surplus and decrease in
general fund balance
_
I
>
o
o
519,554,844. 78
536,185, 074.00
541, 623, 394. 00
3,368,165,304.49
3, 716, 454, 426.00
1, 571, 716, 606.00
w
3
CQ
RECEIPTS
Deposits to retire Federal reserve bank notes and national-bank notes.
Treasury savings securities
. _.
..
... . . .
. .
Other new issues of securities, including Treasury notes and certificates.
Ul
o
27,828,137.50
13, 572,408.43
2, 715,010, 220. 00
15, 000,000.00
9,115,237.00
3, 214, 000, 000.00
15,000,000.00
5,176, 323.00
1, 299,000, 000.00
2,756,410,765.93
3,238,115,237.00
1,319,176,323.00
8 478,339,189.00
252,540,283.00
2 611,754, 538. 66
SI
1 Public debt expenditures and public debt receipts, as shown in this statement, are exclusive of Treasury certificates issued and retired within the same fiscal year.
' Surplus, $635,809,921.70. Difierence of $24,065,383.14 carried over as an increase in general fund balance and used for debt retirement in fiscal year 1928.
»Includes $24,055,383 referred to in note 2.
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CO
34
REPqRT ON THE FINANCES
THE PUBLIC DEBT
General review of operations in the fiscal year 1927
During the fiscal year 1927 the gross debt of the United States
was reduced from $19,643,183,079.69 outstanding at the beginning
of the year to $18,510,174,266.10 outstanding at the close. The reduction accordingly was $1,133,008,813.59. This reduction was brought
about (1) through normaL retirements of $519,563,844.78 chargeable
against ordinary receipts in accordance with the established debtpayment program, and (2) through the application of $613,444,968.81
surplus revenue to debt payment.
The changes in the debt outstanding during the fiscal year 1927
are presented graphically in diagrams 10, below, and 11 on page 35.
1919
1020
1023
1924-
1025
1926
1927
DIAGRAM 10.—Gross public debt outstanding and average annual Interest rate from
January, 1919, to October, 1927
Diagram 10 shows the gross public debt outstanding and the average
interest rate since January, 1919. The amount of interest-bearing
debt outstanding at the end of the year, by type of issue, as compared
with preceding years since 1917 is shown in diagram 11.
During the year in regular course five issues of interest-bearing
securities were offered to the public for cash subscription, all on
quarterly tax-payment dates. The issue of September 15, 1926, was
in the form of 3i/^ per cent nine months' Treasury tax certificates
of indebtedness, the amount of the issue being $378,669,500. A similar issue was made on December 15, 1926, the rate, however, being
314 per cent, and the amount of the issue $229,269,500. On March 15,
1927, two series of Treasury tax certificates of indebtedness were
35
SECRETARY OF T H E TREASURY
issued—one with six months' maturity at ^Vs per cent, in amount
$169,888,000, and the other with one year maturity at 3 ^ per cent,
in amount $314,408,000. The rates at which these securities w^re
issued, as compared with rates on similar issues in preceding years
and as compared with the average yield on 4-6 months' certificates
of indebtedness, are shown in diagram 12, page 36. The issue of June
15, 1927, took the form of 16-20 year 3% per cent Treasury bonds,
and through this issue $249,598,300 cash was brought into the Treasury. This issue was also offered in exchange for second Liberty loan
bonds, and exchange subscriptions amounting to $245,256,450 were
received and accepted, making the total of the issue $494,854,750, onl}^
$467,801,650, however, having been issued to June 30, 1927.
BILLION
DOLLARS
30 +
25 +
20
VICTORY LOAN
OTHER.
fCERTIFICATES , OT
[INDEBTEDNESS ( L O A N * T A X )
TREASURY
15
NOTES
TREASURY BONDS
10
4^» LIBERTY LOAN
3"" LIBERTY LOAN.
oJ-
2"'
LIBERTY LOAN
is--^
LIBERTY LOAN
P R E - W A R BONDS
1917
1918
1919
1920 1921
1922 1923 1924 1925 1926 1927
DIAGRAM 11.—Interest-bearing debt outstanding at the end of each fiscal year from 1917
to 1927,. by type of issue
For the necessary financing for the first quarter of the fiscal year
1928 two offerings were made for September 15, 1927, an issue of
Treasury tax certificates of indebtedness, bearing interest at 3 per
cent and maturing in six months, in amount $250,577,500, and an
issue of 3% per cent Treasury notes, maturing in five years but
callable on and after three years from date of issue. This latter was
a combined offer, cash subscriptions and exchange subscriptions
payable in second Liberty loan 4% per cent bonds being invited.
Cash subscriptions amounting to $250,522,600 and exchange subscriptions amounting to $368,973,100 were accepted; the total of the
issue was $619,495,700.
36
REPORT ON T H E FINANCES
I n addition to the five regular issues of interest-bearing securities
in the course of the year, above referred to, an issue of 3^^ per cent
Treasury notes maturing in five years, but callable on and after three
years, was offered on March 15, 1927, in exchange for second Liberty
loan 4^^ per cent bonds. I n response to this offer $1,360,456,450
Treasury notes were issued against the surrender of a like amount
of second Liberty loan 4 ^ per cent bonds. Details regarding the
issue of September 15,1926, may be found in report for the fiscal year
1926. Details concerning the other issues may be found elsewhere
in this report.
1920
1921
1922
1923
1924
1925
192 G
DIAGRAM 12.—Yield on outstanding 4-6 months' certificates of indebtedness and rate of
interest on new issues for the calendar years 1920 to 1927
The effect of the year's operations on the amount of debt maturing
in the near future is indicated graphically in diagram 13, page 37,
which shows the amount of interest-bearing debt outstanding at the
end of 1927, as compared with preceding fiscal years, distributed
according to period before maturity.
The Secretary of the Treasury is required to invest and reinvest
the moneys available on account of the adjusted service certificate
fund, the civil service retirement fund, and the foreign service retirement fund. Investments are made in a special series of Treasury
notes and Treasury certificates of indebtedness bearing interest at
4 per cent.
37
SECRETARY OF THE TREASURY
Refv/nding the second Liberty loan
Early in the present calendar year conditions were such as to
warrant the belief that the Government could sell securities with a
maturity in excess of two or three years at 3^2 per cent. In the
circumstances the desirability of retiring 4% per cent bonds was
obvious. It was also desirable, from a Treasury viewpoint, to make
some rearrangement of maturities in more convenient amounts and
on more convenient dates for serving the permanent debt-payment
program.
There were outstanding, on February 28, 1927, $2,160,006,900 third
Liberty loan 4% per cent bonds due for payment on September 15,
BILLION
DOLLARS
30
25
PERIOD BEFORE MATURITY
20
1
15
•i
LESS THAN ONE
YEAR
ONE TO TWO YEARS
T W O TO THREE YEARS
THREE TO FIVE YEARS
10
OVER
FIVE
YEARS
1919 1920 1921 1922 1923 1924 1925 1926 1927
DUORAM 13.—Interest-hearing debt outstanding at the end of each flscal year from 1919
to 1927, distributed according to the period before maturity
1928, but not callable before that date, and $3,083,671,700 second
Liberty loan converted 4 ^ per cent bonds together with $20,848,350
second Liberty loan 4 per cent bonds, maturing in 1942, and callable,
in whole or in part, on and after November 15, 1927, on six months'
notice. As a practical matter these were the only two issues available for early retirement. Accordingly plans were considered for
effecting a substantial reduction in the amount outstanding of either
or both of these two issues. Both issues commanded substantial
premiums in the market, and it was certain that some inducement
must be offered holders, otherwise exchange offers, at lower interest
rates, would not be availed of in advance of maturity or redemption
date. As between these two issues the situation was more favorable
38
REPORT ON THE FINANCES
with respect to the second's for undertaking refunding operations.
A conclusion was accordingly reached to offer to holders of second
Liberty loan 4% per cent bonds, an issue of 3i^ per cent Treasury
notes, dated March 15, 1927, due in five years, but callable at the
option of the United States on and after three years from date of
issue. These notes were issued only against the surrender of second
Liberty loan 4% per cent bonds, exchange being made at par, but as
an inducement to holders of second Liberty loan 41/4 per cent bonds
to make the exchange, interest on the bonds surrendered was prepaid in full to May 15, 1927. I n response to this offer $1,360,456,450
second Liberty loan 4^4 per cent bonds were exchanged for a like
amount of 3 % P^F cent Treasury notes.
The response to this exchange offer, which reduced the outstanding
second Liberty loan 4^4 per cent bonds from $3,083,000,000 to about
$1,723,000,000, made certain a successful refunding of the entire loan.
Accordingly, on May 9, 1927, by public announcement, and through
the issue of Department Circular No. 381 of the same date, all outstanding second Liberty loan bonds were called for redemption on
November 15,1927, with notice that interest would cease on that date.
Because of the intensive nation-wide campaigns conducted when
the Liberty loans were issued, at which time every available facility
w as used to reach the public and secure subscriptions, which resulted
in unparalleled widespread distribution of the bonds, the Treasury
recognized an obligation to the holders of second Liberty loan bonds
to make every effort through the use of every available facility to
notify them that their bonds were called for redemption. The press,
as usual, responded and carried the announcement widely as a matter
of public concern. Banks and trust companies throughout the country were asked to cooperate and generously gave their assistance.
The cooperation of the Postal Service was whole-heartedly given.
Placards setting forth the call were displayed in practically every
banking ofiice and post office throughout the United States. The
announcement in the form of an advertisement was placed in all
daily, weekly, and semiweeldy general newspapers throughout the
United States which could be reached. For the first time the radio
was used by the Treasury Department as a means of reaching millions of bond holders, the announcement of the call being broadcast
through the courtesy of the National Broadcasting Co., its entire
facilities being placed at the disposal of the Treasury, covering the
country as far as Kansas City. Simultaneously similar broadcasts
were made from Denver and from San Francisco by Treasury
representatives.
At the time of the issue of the call it was intimated that at some
time prior to the redemption date the Treasury might extend to
SECRETARY OF THE TREASURY
39
holders an opportunity to exchange their bonds for other interestbearing securities of the United States. This privilege was extended
in connection with the June 15, 1927, issue of 3 % per cent Treasury
bonds of 1943-1947, limited amounts of which were offered for cash
subscription at 100%, and at the same time offered at par in exchange
for second Liberty loan bonds. I n response to this exchange offer
$2,966,700 second Liberty loan 4 per cent bonds and $242,289,750
second Liberty loan 4%^ per cent bonds were exchanged for like
amounts of the new 3 % per cent Treasury bonds.
As a further step in the refunding, holders of second Liberty loan
4% per cent bonds were offered the privilege of exchanging such
bonds on September 15, 1927, for the identical issue of 3^/2 per cent
Treasury notes, offered for that date for cash subscription. For this
issue of Treasury notes, the terms and conditions of which were
similar to those of the March 15 issue, the price on exchange subscriptions was fixed at 100%. Interest on second Liberty loan 4%
per cent bonds surrendered for exchange was prepaid in full to
November 15, 1927. Under this offer $368,973,100 second Liberty
loan 414 per cent bonds were exchanged for 3 % per cent Treasury
notes.
Meanwhile under authority of section 2 of the act of Congress
approved March 3,1881, purchases of second Liberty loan bonds from
time to time were made from surplus moneys in the Treasury. Such
purchases for the most part were made under established procedure,
authorizations being given the Federal Eeserve Bank of New York
for execution in the New York market, or through other Federal
reserve banks in other markets. This procedure was varied on June
16, 1927, when, through Department Circular No. 384 of that date,
proposals were invited from holders of second Liberty loan bonds for
the sale of such bonds to the Government, the offer providing that
purchases of such bonds would be made at the lowest acceptable
prices offered. Under this offer $324,700 second Liberty loan 4 per
cent bonds were purchased at a total principal cost of $326,010.81,
the average price being 100.40369, and $62,641,550 second Liberty
loan 4% per cent bonds were purchased at a total principal cost of
$62,945,487.09, the average price being 100.4852.
Other purchases from surplus moneys aggregated $182,442,200 par
amount of second Liberty loan 4% per cent bonds, at a total principal
cost of $183,166,231.21, the average price being 100.39686.
Since July 1, 1927, second Liberty loan bonds have, from time to
time, been purchased for the cumulative sinking fund, a total of $126,767,250 par amount having been purchased to October 31, 1927.
Until October 17 purchases were made under usual procedure at the
market. On that date the Treasury, in calling attention to the fact
64761—FI 1927
5
40
REPORT ON T H E FINANCES
that the second Liberty loan had been called for redemption on
November 15, 1927, announced that for the convenience of holders the
Federal reserve banks had been authorized to purchase, at the option
of holders, second Liberty loan 4 % per cent bonds at 1 0 0 ^ and
accrued interest during the week October 17-22. A similar offer was
made for the following week, October 24-29, the principal price for
the week being fixed at 100-^. On October 31, 1927, announcement
was made that purchases would be made at 1 0 0 ^ during the period
October 31 to November 7, and that thereafter until the close of business November 12, both 4's and 414's would be purchased at par and
accrued interest. Under these offers $48,280,800 were purchased ^t
100/^, $24,945,600 at 1 0 0 ^ , $18,028,450 at lOO^V, and $2,314,100
at par.
Through these various operations conducted since March 1, 1927,
the second Liberty loan was reduced from $3,104,520,050 then outstanding to $757,545,500 outstanding on October 31,1927.
Except for such amounts as may have subsequently been retired
through purchases for the cumulative sinking fund, the balance outstanding on October 31, 1927, was the amount outstanding and due
lor payment on November 15, 1927.
The various steps taken to effect the refunding of this loan are
recapitulated in the following table:
Second Liberty loavi
(Second 4's and Second 4%'s combined)
Original issue Nov. 15, 1917
Outstanding Feb. 28, 1927:
Second 4's
Second 4i^'s
$3, 807,865,000
$20,848,350
3, 083, 671, 700
3,104,520,050
Retired Mar. 1 to Oct. 31, 1927:
Mar. 15, exchanged for 3yo per cent Treasury notes, Series
A-1930-1932
J u n e 15, exclianged for 3 % per cent T r e a s u r y bonds 19431947
Sept. 15, exchanged for 3V2 per cent T r e a s u r y notes, Series
B-1930-1932
Purchased for cumulative sinking fund
Purchased from surplus money
Forfeitures, gifts, etc
Total
Outstanding Oct. 31, 1927
1, 360, 456, 450
245, 256, 450
368, 973,100
126, 767,250
245, 408, 450
112,850
2, 346, 974/550
757, 545, 500
41
SECRETARY OF THE TREASURY
From the foregoing it will be observed that since March 1, 1927, to
October 31, 1927, $1,974,686,000 par amount has been refunded into
other^issues, and $372,288,550 par amount has been redeemed. A comparison of the annual interest charges on account of the second
Liberty loan on February 28, 1927, and on October 31, 1927, the
exchange issues being included on the latter date, may be of interest.
I t follows:
Title
Amount .
outstanding
Feb. 28, 1927
$20,848,350
3, 083,671, 700
Second Liberty loan bonds
Do
Interest
rate
4
4 ^
3,104,520,050
Second Liberty loan bonds
Do
Treasury notes, Series A-1930-1932.
Treasury notes, Series B-1930-1932.
Treasury bonds, 1943-1947
Oct. St, 1927
$17,171,100
740,374,400
11,360,456,450
2 368,973,100
2 245,256,450
2,732,231,500
Annual interest
charge
$833,934.00
131,056,047. 25
131,889,981.25
4
4^
3M
33^
686,844.00
31,465,912.00
47,615,975. 75
12,914,058.60
8, 277,405.19
100, 960,195.44
» Amount issued on exchange; $1,300,914,650 outstanding Oct. 31, 1927.
2 Amount issued on exchange.
Eedemptions as of November 15, 1927, of the balance of the second
Liberty loan bonds then outstanding, which will have been, made in
part from remaining proceeds of September 15 issues of 31/2 per
cent Treasury notes and 3 per cent certificates of indebtedness, and
in part from proceeds of 3 % per cent Treasury certificates of indebtedness, issued November 15, 1927, will show a further reduction in
interest charges.
CONDITION OF THE TREASURY
The cash position of the Treasury on June 30, 1927, is set forth
in the following table, which is on the basis of daily Treasury statements, revised on account of reports received after July 1. Assets in
the form of securities held by the United States Government are
shown in Table 65, page 626; and outstanding liabilities in the form
of public debt issues are listed in Tables 23 and 24, pages 502 and 505.
42
REPORT ON THE FINANCES
Condition of the Treasury, June SOf 1927
[Revised figures]
General fund:
In Treasury oflBces—
Gold
standard silver dollars
United States notes
Federal reserve notes
Federal reserve bank notes
National-bank notes
Subsidiary silver coin
_
Minor coin
Silver bullion (at cost)
Unclassified (unassorted currency, etc.)
In Federal reserve banks—
To credit of Treasurer of the United States
In transit
$158,704,029.52
5,179.333.00
3,230,183.00
210,525.00
192.906.00
84,154.50
5,246,728.97
2,885,629.11
6,921,159.42
1,894,701,35.
30,656,042.52
6,330,858.10
In special depositariesAccount of sales of Treasury bonds and certificates ofindebtedness
In national-bank depositaries—
To credit of Treasurer of the United States
To credit of other Government oflBcers
In transit
$7,069,715.69
19,760.536.44
2,353,242.28
1,183,494.41
486,387.66
114.90
In foreign depositaries—
To credit of Treasurer of the United States
To credit of other Government oflBcers
In transit
93,169.46
418,447.98
495.00
National-bank note 5 per cent fund
Less notes in process of redemption
36,986,900.62
198,606,818.09
In treasury of Philippine Islands—
To credit of Treasurer of the United States
In transit
Deduct current liabilitiesFederal reserve note 5 per cent fund (gold)
Less notes in process of redemption
$184,649,349. .87
486,602.56
612.102,43
450,325,167.98
$139,873,094.78
749,035.00
26.299,861.14
18,944,262.00
Treasurer's checks outstanding
Post OflBce Department balance
Board of trustees. Postal Savings System balance
Balance to credit of postmasters, clerks of courts, disbursing officers, etc
Retirement of additional circulating notes, act of May 30, 1908.-Uncollected items, exchanges, etc
139,124,059.78
7,356,699.14
4,197,638.06
8,839,903.94
7,152,609.32
48,695,998.66
2,830.00
2,358,408.71
217,727,047.50
Balance in the Treasury June 30, 1927, according to statement of the public
debt of the United States.
232,598,1^. 48
The following is a summary of the net change in the general fund
balances between June 30, 1926, and June 30, 1927, on the basis of
daily Treasury statements (revised) :
Summary of the net change in the general fund balances between June SO, 1926',
and June 30, 1927, on the basis of daily Treasury statements (revised)
Amount
Qener<il fund balances:
Balance per daily Tre'^siiry statement, June 30,1926
$210,002,026. n
1,126,051. 72
Add e.^cfcss of receipts over expenditures in June reports subsequently received.. . . .
Net balance June 30,1926, according to statement of the public debt of the United
states
:
Excess of ordinary recaipts over expenditures chargeable against ordinary receipts in
the fiscal year 1927
i
Total to be accounted for
Public debt retirements from surplus revenu^f
(This is additional to $519,563,844.78 sinking fund and other debt retirements
chargeable against ordinary leceipts.)
Balance in the Treasury June 30,1927, according to statement of the public debt ofthe
tJnited States
,
Total
211,123,078.43
634,915,010.86
846,013,089.29
613,444,968.81
232,598,120.48
846,043,089.29
SEGRETARYf OF, THE TREASURY
43
The amounts held in currency trust funds for the redemption of
notes and certificates for which they are pledged are shown in the
following table:
Gold coin and bullion. $1, 625,278, 749
Silver dollars
469,599,900
Silver dollars, 1890___
1,326,804
GolQ certificates outstanding
$2,102,989,609
Less amount in the
Treasury
477, 710,860
Net
Silver certificates outstanding
»
Less amount in the
Treasury
1,625,278, 749
Net
Treasury notes (1890)
outstanding
Less amount in the
Treasury
469, 599, 900
Net
Total-
2,096,205,453
Total
472,406, 063
.2, 806,163
1,327,804
1,000
1, 326, 804
2,096,205,453
The gold reserve fund was increased by $1,231,834.78 during the
year, and now amounts to $155,420,720:98. Redemptions of United
States notes (greenbacks) unfit for circulation amounted to $280,500,000 during the year, and an equal amount was issued as required
by law.
RECOMMENDATIONS FOR LEGISLATION
Revision of the revenue act
My statement before the Ways and Means Committee on October
31, 1927, was as follows:
As an essential preliminary to any program of tax reduction, it is
necessary to estimate revenue and expenditures not only for the
present but also for the next fiscal year. I t is further desirable to
ascertain if possible, by eliminating temporary and unusual items,
what the normal revenues of the Government are under existing tax
laws, given average business conditions. Financial policy to be
sound must not be based upon the experience of a single year. We
must not be unduly impressed by the revenue results of a year of
unusual prosperity or a year of large receipts from temporary
sources.
I n cooperation with the Budget Bureau, the Treasury Department
has prepared its estimates, but before presenting them it seems desirable to say a word or two about past estimates, and in order to
avoid similar errors in the future to point out the reasons for such
miscalculations as have occurred in the more immediate past.
The last estimates for the fiscal year 1926 were made just prior to
the passage of the revenue act of 1926. As published in the Congressional Record, they showed total internal revenue collections of
$2,612,500,000, whereas actual collections aggregated $2,835,999,892,
or, in other words, internal revenue collections were underestimated
by $223,499,892. The return from corporation taxes was overesti-
44
REPORT ON T H E FINANCES
mated by $55,000,000, and that from miscellaneous internal revenue
underestimated by approximately $20,000,000. But the two principal items which contributed to this large underestimate of revenue
were individual income taxes, the yield of which was estimated at
$603,800,000, whereas collections aggregated $745,392,481, and back
tax collections which were estimated at $180,000,000 but which
reached the figure of $295,982,056. The revenue act of 1926 eliminated about 2,000,000 individual taxpayers; it increased by 50 per
cent and 40 per cent, respectively, the exemptions for single and for
married persons; it cut the normal tax rates drastically and reduced
maximum surtax rates from 40 per cent to 20 per cent; it doubled
the limit of income to which the earned income provision applied.
I t was very naturally anticipated that these changes would result
in a considerable loss of revenue. I n its report the Ways and Means
Committee estimated a reduction of $46,000,000 in normal tax, over
$98,000,000 in returns from the surtax, and a further loss in revenue
of $42,000,000 due to increased exemptions. As a matter of fact,
however, the individual returns filed for the calendar year 1925
showed a larger tax return than did those for 1924, the total (net
income) tax returned increasing from $704,000,000 to $734,000,000.
The Treasury Department had always contended that lower rates
would be more productive than the very high rates which prevailed,
but neither the Treasury Department nor the Congress had anticipated such an immediate increase, an increase which was, of course,
greatly accelerated by the rising tide of prosperity. Had the reductions contained in the 1926 act been applied to the 1924 returns, the
tax would have been over 30 per cent less than that actually returned
for 1924.
Back tax collections exceeded the estimates by approximately
$116,000,000.
I n October, 1926, after the new act had been in force for about
nine months, the Secretary of the Treasury submitted estimates for
the fiscal year 1927. In these estimates the return from the corporation income tax was estimated at $1,120,000,000. Actual collections
aggregated about $1,125,000,000, or an underestimate of $5,000,000.
Individual income tax returns were estimated at $820,000,000,
whereas actual collections aggregated approximately $763,000,000 or
an overestimate of $57,000,000. Back taxes were estiinated at
$250,000,000; $331,000,000 were actually collected, or an underestimate of $81,000,000. Miscellaneous internal revenue was estimated
at $619,000,000, whereas actual collections aggregated $646,000,000.
The total internal revenue taxes were estimated at $2,809,000,000, and
actually $56,000,000 more than the estimate were collected. But had
there not been such a large increase in back tax collections, the esti. mate would actually have been some $25,000,000 too high.
Turning now to the question of surplus, we find that the surplus
for 1927 exceeded the estimate by $252,000,000. This is accounted
for by an increase of $102,000,000 in total receipts and a decrease
of $150,000,000 in expenditures. On the receipt side, the increase is
accounted for by two items—an increase of $81,000,000 in back tax
collections, and an increase of $57,000,000 in receipts from the railroads on account of the realization of capital assets. The increase in
these two items more than offset an overestimate of current revenue.
SECRETARY OF THE TREASURY
45
If the items going to make up the surplus be analyzed, it will be
found that 65 per cent of the surplus of $635,000,000 is due to receipts
on account of the disposal of capital assets, back income tax collections in excess of internal revenue refunds, and other items of a fast
disappearing or nonrecurring character. Without these special and
nonrecurring items, which ag'gregated $414,000,000, the surplus
would have been $221,000,000. This is likewise true of the fiscal year
1926. The surplus that year was $377,000,000, but exclusive of net
back tax collections and receipts from capital assets of a nonrecurring character, the surplus only amounted to $162,000,000. I n 1926
back tax collections, less revenue refunds, amounted to $113,000,000,
and in 1927 to $214,000,000; receipts from railroad securities
amounted in 1926 to $36,000,000, and in 1927 to $89,000,000;" receipts
from Federal farm loan bonds and other minor securities amounted
to $34,000,000 in 1926 and $63,000,000 in 1927; receipts from the War
Finance Corporation assets amounted to $19,000,000 in 1926 and to
$27,000,000 in 1927; receipts from the capital stock tax, which was
repealed in 1926, amounted in the year 1927 to $8,000,000; receipts
from the sale of surplus war supplies amounted to $13,000,000 in
1926 and to $8,000,000 in 1927; while the surplus was further increased to the extent of $5,000,000 received from a judgment of the
court relating to the naval oil lease.
/, All told, the receipts from these items of a nonrecurring character
amounted in 1926 to $215,000,000 and in 1927 to $414,000,000.
One of the principal items that has caused errors in past estimates
is that of back taxes. I n the fiscal year 1927 back tax collections on
incomes alone were underestimated by $81,000,000, whereas internal
revenue funds were overestimated by $35,000,000, these two items
accounting for an error in the estimates aggregating $116,000,000.
The Treasury Department has made every effort to ascertain pros•peCtiye back tax collections and probable refunds, but there seems to
be no test which will determine accurately future yield. Accordingly,
it seems wiser to segregate back tax collections and internal revenue
refunds and present them in a separate part of the estimate as items
inore or less speculative in character. After the close of the fiscal
year 1929, with the closing of all of the cases arising under the excess
profits and other war taxes, it is reasonably certain that there will be
a falling off in back tax collections.
I n presenting the estimates of probable total revenue, the revenue
from temporary sources that must disappear in the course of the next,
year or tw^o is likewise presented separately. I n this connection it
should be noted that w^hereas $169,000,000 will be received on account
of principal and interest of loans made under sections 207 and 210
of the transportation act in 1928, the revenue from this source will
drop to approximately $24,000,000, or a falling off of $145,000,000, in
the fiscal year 1929, and after that little or no revenue is anticipated
under this head, as only $49,000,000 principal amount of railroad
obligations will be left out of the $230,000,000 held on June 30, 1927.
This item and a difference of $87,000,000 in estimated net back tax
collections more than account for the difference of $181,000,000
between the estimated surplus for 1928 and that for 1929.
I am submitting herewith two tables. The first shows for the fiscal
years 1928 and 1929 estimated current or normal receipts, extraor-
46
REPORT ON THE FINANCES
dinary or temporary items, total receipts exclusive of temporary
items, expenditures as estimated by the, Budget Bureau, estimated
surplus exclusive of extraordinary revenue items, and estimated
actual surplus. The second table shows the principal receipt items
of a temporary character for the fiscal years 1926, 1927^ 1928,
and 1929.
,
Estimated receipts and expenditures, fiscal years 1928 and 1929
1928
Current revenue:
Customs
•--Internal revenue—
Income tax
_
Miscellaneous internal revenue
Miscellaneous receipts
_
Special receipts including total back income tax collections
_. .
Total receipts
Expenditures exclusive of internal revenue refunds
Internal revenue refunds
Total expenditures
1929
$602,000,000
$602,000,000
1,885,000,000
638,000,000
482,000,000
1,885,000,000
640,000,000
468,000,000
3,607,000,000
469,000,000
3,595,000,000
213,000,000
4,076,000,000
3,808,000,000
3,470,000, 000
151,000,000
3,396,000,000
138,000,000
3,621,000,000
3,534,000.000
137,000,000
455,000,000
199,000,000
274,000,000
Surplus of current revenue over expenditures exclusive of internal revenue refunds
_
Surplus of total receipts over total expenditures
Principal receipt items of a nonrecurring type increasing the surplus in the
fiscal years 1926, 1927, 1928, and 1929
1926
Back income tax collections...
Less internal revenue refunds.
$295,000,000
182,000,000
1927
1928
$331,000,000 $280,000,000
117,000,000 151,000,000
$180,000,000
138,000,000
129,000,000
169,000,000
42,000,000
24,000,000
1,600,000
5,000,000
Net
Railroad securities. __
Federal farm loan bonds and other minor
securities
War Finance Corporation assets.._
Capitalstock tax
Sale, surplus war supplies
Navy oil judgment
,
113,000,000
36,000,000
215.000,000
414,000,000
318,000,000
76,000,000
Surplus
Surplus exclusive of above net receipts..
377,000,000
162,000,000
635,000,000
221.000,000
456,000,000
137,000,000
274,000,000
199,000,000
34,000,000
19,000,000
13,000,000
214,000,000
89,000,000
63.000,000
27,000,000
8,000,000
8,000,000
» 6,000,000
5, 500,000
13,000,000
» Exclusive of amount paid in Liberty bonds aggregathig $5,500,000 principal amount.
4,000,000 '
/
Estimated surplus, exclusive of extraordinary revenue items, will
amount to $137,000,000 in the fiscal year 1928 and $199,000,000 in the
fiscal year 1929. Estimated total surplus, including extraordinary
revenue items, will amount to $455,000,000 in the fiscal year 1928 and
$274,000,000 in the fiscal year 1929.
In estimating the amount by which we can safely reduce the tax
revenues in 1928 and 1929, the actual surplus figures are the important ones. But looking to the future, it is essential that Congress
should take into consideration the temporary character of some of our
existing resources.
^
SECRETARY OF THE TREASURY
47
The factor which d'efinitely determines the extent to which we may
reduce taxes is the 1929 surplus. Assuming that a tax revision bill
becomes law prior to March 15 next, the reductions will only affect
the revenue for the last six months of 1928. That is to say, tax
reductions will be only 50 per cent effective during the present fiscal
year. They will, however, apply to the full 12 months in 1929.
Therefore, even leaving out of consideration the fact that the 1928
surplus largely exceeds the prospective surplus for 1929, a reduction
in revenue which would be fully justified if the present year were
considered alone would almost certainly produce a substantial deficit
in the fiscal year 1929.
I t may be urged that the estimated surplus for 1929 is placed at
too low a figure in view of the actual large surplus in 1927 and the
size of the estimated surplus in 1928. The answer is that these surpluses were in the main due to certain resources which can not be
available in 1929, since by that time they will have been exhausted.
I n so far as current revenue is concerned, it should be noted that the
Treasury estimates that substantially the same receipts will be available in 1929 as in 1928 and as were actually collected in 1927. There
is no evidence available to justify the assumption that they will be
larger. There are certain definite indications that they may be
. sn^aller, but the department hopes that these unfavorable factors will
be offset by the normal growth of the country.
For a number of years past the Treasury estimates have undierestimated the revenue which was later realized. I t is not true, however, that this was the result of deliberate intention or policy. Every
effort to avoid a repetition of this result has been made in the preparation of the estimates here presented. I t would be unwarranted and
tinwise to assume that in the present estimates there is any concealed
surplus. I n these figures the Treasury has not consciously nor as a
matter of policy played safe. If tax reductions are made or appropriations voted on the assumption that the present figures understate
probable future receipts, responsibility for such reductions or appropriations must be assumed by those who advocate them. The Treasury has placed the probable receipts at the highest figures compatible
•with the most dependable forecasts and facts which careful and disinterested investigation could secure. As far as expenditures are concerned, the estimates have been furnished by the Bureau of the
Budget. I t should be remembered that estimates do not include any
expenditures that may be incurred by reason of new legislation.
The Treasury believes that tax reduction should not in any event be
ih excess of approxiinately $225,000,000.
I suggest the following:
1. A reduction of the rate of tax on corporate income from 13^^
per cent to 12 per cent. I t is estimated that such a change will result
in a loss in revenue of approximately $135,000,000.
2. Amending those provisions of the law that apply to the tax on
corporate income so as to permit corporations with net income of
$25,000 or less, and with not more than 10 stockholders, to file returns and pay the tax as partnerships at their option. I t is estimated
that such an amendment will result in a loss of from $30,000,000 to
$35,000,000 in revenue.
3. A readjustment of the rates applicable to individual incomes
that fall in the so-called intermediate brackets according to the plan
48
REPORT ON T H E FINANCES
outlined below and the table contained in the" body of this report.
I t is estimated that such a change will result in a loss in revenue of
approximately $50,000,000.
4. Eepeal of the estate tax, resulting in a revenue reducti'on of
$7,000,000.
5. Exemption from taxation of the income derived from American
bankers' acceptances held by foreign central banks of issue.
I shall now discuss these recommendations in greater detail.
Corporation income tax.—Corporations last received relief from
taxation in the revenue act of 1921, which repealed the excess profits
tax, and even then the income tax rate was increased. Since that
time, while other classes of taxpayers have been benefited either by
the repeal of war taxes or the sharp reduction of war-time rates, corporations have continued to bear a heavy burden. The time has come
to revise the corporation tax rates downward. Business conducted
under the corporate form is to-day overtaxed as compared with individual business enterprises and partnerships, a condition which spells
particular hardship to the small corporations with a limited net income
and to the stockholder of limited means, whether he be a stockholder
in a large or a small corporation. Corporations are not only large
contributors to the Federal Treasury but they pay their full share of
the cost of local and State governments.
In the calendar year 1924 all corporations reporting net income
reported a net income, before all taxes, of $8,890,821,499. They paid
in taxes other than income tax $1,304,169,207, and in income tax
$881,549,546 at the then rate of 12% per cent, making a total.of
$2,185,718,753. I n other words, 24.58 per cent of their net incoine
was paid in taxes. In the same year these corporations paid $3,994,990,754 in cash dividends, which was 44.93 per cent of their net
income. For every dollar paid in dividends 54 cents were paid in
taxes.
If all corporations be included—that is to say, corporations reporting a deficit as well as those reporting net income—the percentage of
net income paid in taxes is 36.28 per cent. Including both the Federal and State taxes the percentage of taxes to net income paid in
some of our principal industrial States ranges from 26.25 per cent inMichigan to 41.04 per cent in Connecticut, 47.72 per cent in Minnesota,
and 49.78 per cent in Massachusetts.
Corporation taxes are paid either by the consumers or by the
stockholders. No general rule can be laid down as to the incidence
of -this tax. I t is estimated that there are not less than 3,000,000
individual owners of corporate stock in the United States. There
are probably more. Through the corporation income tax these individuals are taxed at the rate of 13% per cent on their proportionate
share of the income of the corporation, and this irrespective of
whether their individual income is sufficiently great to subject them
to the individual income tax. If we include the tax paid by individuals on the dividends received from corporations, the rate of tax
on net corporate income is 15.27 per cent, whereas had all the corporations been taxed as partnerships the average rate of tax on their
net income would have been 9.1 per cent.
There are only 2,500,000 individuals who return taxable net income,
and the average rate of tax on their income has been reduced to 4.2
SECRETARY OF THE TREASURY
49
per cent, as compared with 3,000,000 stockholders who are virtually
taxed on a part of their income at the rate of 13% per cent. There
are less than 9,000 individual income taxpaj^ers whose average tax as
returned equals or exceeds 13% per cent of their taxable income.
Thus we have a strange and inconsistent situation, in which the
owners of our corporations, some 3,000,000 individuals, are taxed
indirectly, at the rate of 13% per cent on all or part of their income,
whereas under the present individual income tax law this rate oi
13% per cent or more is paid by less than 9,000 individuals, and
these with net incomes in excess of $110,000.
I t is interesting to note that according to the 1925 returns, of
$5,189,000,000 distributed in cash dividends, $1,724,000,000 went to
sources other than individuals making income tax returns. While,
of course, a large part of this was paid to other corporations, it is
certain that a very considerable sum was paid to individuals with
incomes insufficient to require an income tax return. Of the dividends distributed, $740,000,000 were returned by persons with net
incomes of less than $10,000, and the average rate of tax on all
incomes not in excess of $10,000 was 0.26 of 1 per cent.
The Treasury Department made a study of a number of corporations owned by a comparatively few people and with net incomes
moderate in amount. I t found that the chief stockholders in corporations having net incomes of $55,000 or less would, without exception,
have paid a smaller tax to the Federal Government had they done
business as partners rather than as a corporation, whereas in 86 per
cent of the cases where the net income of the corporation was $100,000
and less a similar conclusion was true. Out of 252,334 corporations
reporting net income for the calendar year 1925, no less than 232,346
had incomes of less than $50,000 a year. So that the latest figures
available show that 92 per cent of the corporations reporting net
income paid higher taxes in a given year than they would have had
they been partnerships. The situation is not quite as bad as these
figures would indicate, for whereas the number of corporations with
incomes of less than $50,000 is high, the amount of income reported
by them is comparatively small. One-third of the total corporation
taxes is paid by 196 corporations with net incomes in excess of
$5,000,000; 53 per cent of the corporation income tax is paid by 1,113
corporatioiis with net incomes in excess of $1,000,000; over 70 per
cent is paid by 4,469 corporations with net incomes of over $250,000.
But even so, the discrimination appears to weigh with more than
usual severity on the stockholder in the closely held corporation
whose net income falls in the smaller amounts.
I t may be urged that the owner or owners of a closely held corporation with a limited income are no worse off than the stockholder
of limited means in a very large corporation who is taxed 13% per
cent on his proportionate share of the net income of the corporation,
whereas the tax which the latter might have to pay on that net income were it derived from some other source might not exceed 1%
per cent. While this is apparently true, it is probable that the latter
class of stockholder looks upon his stock purchases as strictly of
an investment character. I n other words, he buys "this share of
stock, just as he would a bond, on the basis of its actual income yield,
and to that extent in making the purchase he has completely dis-
50
REPORT ON THE FINANCES
counted the corporation tax. Therefore, as I see the situation, while
it is desirable to reduce the rate on all corporations, some additional
relief should be granted the stockholders of the small, closely held
corporations, whose situation is substaritially the same as that of a
partnership, though they do business in corporate form.
The Treasury Departnient recommends that the present corporation
rate of 13% per cent be reduced to 12 per cent. This will cause a
loss of revenue of approximately $135,000,000.
I n order to give further relief to the owners of the closely held
corporations with a small net income, the Treasury recommends that
all corporations with a net income of $25,000 or less, and the number
of whose stockholders does not exceed 10, be allowed to file their
income tax returns as if they were a partnership and be taxed- on
the partnership basis. I t is estimated roughly that this will occasion
a loss of revenue of from $30,000,000 to $35,000,000.
Surtax rates.—The revenue act of 1926 reduced the rates of the
normal tax from 2, 4, and 6 per cent to 1%, 3, and 5 per cent, and
cut the maximum surtax rate from 40 per ce,nt to 20 per cent. While
there was a readjustment of the intermediate surtax rates, the effect
of the drastic cut in the maximum surtax rates a;nd the sharp reduction in normal rates was to benefit the small taxpayers and the large
taxpayers somewhat more than those whose taxable income fall in
the brackets running from $18,000 to $70,000. I n view of the above j
I recommend a revision of the rates applicable to the so-called
intermediate brackets.
Under the revenue act of 1926, incomes from $14,000 to $24,000 are
graded by steps of $2,000. That is to say, the income tax rate increases 1 per cent for every additional $2,000 of income. From
$24,000 to $64,000 the brackets are graded by steps of $4,000.
By the simple expedient of adjusting the rate so that it will rise
uniformly, increasing 1 per cent for each additional $4,000 of income
on incomes from $10,000 to $70,000, some reductions will be granted
to all surtax payers, but more particularly to those whose incomes fall
in the intermediate brackets. Thus, under the act of 1926 a 10 per
cent rate applies to incomes ranging from $36,000 to $40,000, whereas
under the proposed plan the 10 per cent rate will apply to incomes
ranging from $46,000 to $50,000; the 15 per cent rate, instead of being
reached a t $56,000, will be reached at $66,000; the 18 per cent rate at
$80,000 instead of $70,000; and the 19 per cent rate at $90,000 instead
of $80,000.
There are attached hereto two tables, the one showing the suggested
changes in surtax rates from those of the 1926 act, and the second
showing the individual income tax upon certain specified taxable net
incomes under the revenue act of 1924, the revenue act of 1926, and
under the suggested rates.
51
SECEETABY OP THE TKEASUBY
Surtax rates—Suggested change in surtax rates from those of the 1926 revenue
act
Proposed plan
1926 r e v e n u e act
$10,000 to $14,000
$14,000 to $16.000..
$16,000 to $18,000.
$18,000 to $20,000.
$20,000 to $22,000
$22,000 to $24,000$24,000 to $28,000 _
$28,000 to $32,000
$32,000 to $36,000
$36,000 to $40,000
$40,000 to $44,000
$44,000 to $48,000
$48,000 to $52,000
$52,000 to $56,000$56,000 to $60,000
$60,000 to $64,000
$64,000 to $70,000
$70,000 to $80,000
$80,000 10 $100,000
Over $100,000
I n c o m e t a x zones
Rates
I n c o m e t a x zones
.•_....
•_
.,
Rates
Per cent
Per cent
1 $10,000 t o $14,000...^ .
$14,000 to $18,000
2
$18,000 to $22,000
3
$22,000 to $26,000
4
6 $26,000 to $30,000
$30,000 to $34,000
6
$34,000 to $38,000...
7
$38,000 to $42,000
8
9 $42,000 to $46,000
10 $46,000 to $50,000
11 $50,000 to $54,000
12 $54,000 to $58,000
13 $58,000 to $62,000
$62,000 to $66,000
14
16 $66,000 to $70,000.-.'.
16 $70,000 to $ 7 6 . 0 0 0 . . . .
17 $75,000 to $80,000
18 1 $80,000 t o $90,000
19 $90,000 to $100,000
Over $100,000
20
i
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
Individual income tax upon certain specified taxa'ble net incomes—Married>
person with two dependents, with no capital gains nor dividends, and with
earned income of $10,000
R e v e n u e a c t 1924
R e v e n u e a c t 1926
Suggested s u r t a x
ratA
Taxable net
income
Normal
tax
$10,000
$12,000
$14.000
$16.000
$18.000
$20,000
$22,000
$24,000:..._
$26.000
$28,000
$30,000
$32,000
$36,000
$40.000
$45,000
$50,000
$55.000
$60,000
$65,000
$70.000
$75.000
$80.000
$90,000
$100.000
$150,000
$200,000
$300,000
$500,000
$1,000,000
$141.00
236.00
355. 00
475.00
595.00
715. 00
^ 835.00
95,5. 00
1,075. 00
1,195. 00
1.315.00
1.435.00
1,675. 00
1,915.00
2,215.00
2.515.00
2.815. 00
3.115.00
3.415.00
3.715.00
4.015.00
4.315.00.
4, 915. 00
5,515. 00
8,615.00
11.515.00
17.515.00
29,515.00
69.616.00
Surtax
T o t a l tax
Normal
tax
$141.00
0
m . 25
$20.00
25.5. 00
143. 25
40.00
395.00
237. 25
80.00
655. 00
3X7. 25
140. 00
437. 25
7:^5. 00
935. 00
220.00
637. 25
320.00
1,155. 00
637. 26
440.00
1,39.5.00
737.26
680.00
1,655.00
837. 25
740. 00
1,935.00
937. 25
920.00
2.2:^5. 00 1,037. 25
1,120. 00
2, 555.00 1,137. 25
1,540.00
3,215.00 1,337.25
2,040.00
3,955. 00 1,537. 25
2,730. 00
4.94.5. 00 1,787. 25
3,540. 00
6,055. 00 2,037. 26
4,470. 00
7,285. OC 2.287. 25
5. 480. 00
8,595. 00 2,537. 25
6.570. 00
9.985.00 2,787. 25
7,780. 00 11,495.00 3,037. 25
9.090. 00 13,105.00 3,287. 25
10,480. 00 14.795.00 3,537.25
13, 540 00 18.455. 00 4,037.25
17.020.00 22.535. 00 4, 637. 26
30,520. 00 39.035. 00 7,037.26
54.020. 00 65,535.00 9,537. 25
92.020. 00 109. 535.00 14.537.25
170.020.00 199, 536.00 24.537.25
370,020.00 429,636.00 49,637.26
Surtax
T o t a l tax
Surtax
T o t a l tax
0
$83.26
0
$83.25
$20.00
163 25
$20 00
163 26
40.00
277.25
40.00
277.25
80.00
417. 25
80.00
417.25
140.00
677.25
120.00
657.25
220.00
757.25
180.00
717.25
320.00
957. 26
240.00
877.26
440.00
1,177. 25
320.00
1,067.25
680. 00
400.00
1,417.25
1,237.25
720. 00
1,657. 25
600.00
1,437.25
880.00
1,917.26
600. 00
1,637.25
1,040.00
2.177. 25
720.00
1,857.25
1,400. 00
2,737.26
980.00
2,317.25
1,800.00
3,337. 26
1.280.00
2,817.25
2,360. 00
4,147.25
1.710.00
3.497.25
2,980. 00
2,200. 00
4,237.25
5,017.25
3.660.00
2,760.00
6,947.25
6,047.25
4,400.00
6.937. 26
3,380.00
6,917.25
6,210.00
7,997.25
4,060.00
6,847.25
6,060.00
4,800.00
9,097.25
7,837.25
6.960.00 10.247.25
6,600. 00
8.887.25
7,860: 00 11,397.25
6,450. 00
9,987.25
9,760.00 13,797.25
8.250.00 12,287.26
11,660.00 16.197.26 10,150.00 14.687.25
21,660.00 28,697.26 20.150.00 27,187.25
31,660.00 41,197.25 30,150.00 39.687.25
51,660.00 66,197.26 60,150.00 64,687.25
91,660.00 116,197.25 90.160.00 114.687.25
191,660.00 241,197.26 190,160.00 239,687.25
Estate tax.—The Treasury Department renews its recommendation
that the Federal estate tax be repealed. By tradition, legal theory,
and revenue necessity this tax belongs to the States. They and not the
Federal Government have developed inheritance taxation in the
52
REPORT ON T H E FINANCES
United States. I t is true that they have made many mistakes, butit is not apparent that the entrance of the Federal Government into
this field has had any beneficial effect. The Federal Government
has only made use of the estate or inheritance tax four times in
its history, and then during war emergencies. As soon as the emergency was past the tax was repealed. There is no occasion to change
this policy. I t is not based on opposition to the inheritance or
estate form of taxation but on the theory that some taxes inhere
to the States and can more properly be levied by them than by the
Federal Government, and that the estate tax is one of these. I t is
beyond dispute that the States need this revenue and that the
Federal Government does not.
Ever since the war Federal revenue needs have steadily diminished as the cost of government was reduced. I t has been found
possible to repeal ipost of the war taxes and to cut rates drastically.
The contrary is true of the States and of their political subdivisions.
Their cost of government continues to mount steadily. Taking
the long point of view, this position, in so far as the Federal Government is concerned, is likely to continue. As the national debt
is paid off the burden of Federal taxes should grow lighter. B u t
it is impossible to foresee the point at which the upward moviement of State and local expenditures will be arrested. Moreover,,
Federal taxes are fairly well diversified and bear some relation
to the taxpayer's ability to pay; State and local taxes rest on. altogether too narrow a base. The Federal Government should, therefore, retire from the inheritance tax field and should definitely
announce the policy not to resort to this form of taxation save in
emergencies.
^
The loss in revenue will be insignificant. Owing to the 80 per cent
credit on the taxes paid the States it is estimated that in five years
the Federal estate tax will not produce more than $20,000,000.
Should it be repealed, the loss in revenue in the fiscal year 1929 will
not exceed $7,000,000.
Automobile tax.-.—Icrealize that great pressure will be brought to
bear on the Congress to repeal the excise tax on the sale of automobiles. I can not agree to the advisability of such a repeal.
The Federal appropriation for good roads in the fiscal year 1928
runs as high at $71,000,000, and in the fiscal year 1929 will be
$75,000,000. These expenditures by the Federal Government are for
the direct and immediate benefit of automobile owners. They should
make some contribution in return.
There is another aspect of this situation deserving consideration
from the standpoint of justice and fairness. The automobile is one
of the railroad's chief competitors. Our railroads are paying heavy
taxes to the United States Government, a part of which is being
used for highway purposes. The revenue act of 1926 materially
reduced the tax on automobiles designed for the transportation of
passengers, and repealed the tax on trucks and accessories. The
latest available figures for railroad corporations having taxable net
income indicate an increase in the income tax paid by them to the
Federal Government from $57,000,000 for the calendar year 1924 to
$94,000,000 for the calendar year 1925. Is it quite fair to ask the
railroads to contribute to the construction and maintenance of the
SECRETARY OF THE TREASURY
53
roads on which their rivals operate while exempting the latter from
any contribution?
The automobile is a semiluxury article of such widespread use that
it furnishes a broad base on which to apply a low tax. The rate
being low, there is no appreciable hardship to the taxpayer; the base
being broad, the tax is a good revenue producer. Unless we are to
rely almost exclusively on direct taxes paid by a few and are prepared to see our National Government supported, not by the entire
body of our citizens, but by a limited class, this is the kind of tax
which should be retained.
The income tax has gradually become so restricted in its application that it is a class rather than a national tax. For the calendar
year 1925, 9,560 taxpayers returned about 49 per cent of the total tax
returned. Three hundred and twenty-seven thousand and eighteen
individuals returned $701,497,726 out of a total of $734,555,183. Out
of our entire population of 114,000,000 only 2,501,166 individuals
returned taxable income, and of these 2,174,148 returned only
$33,000,000 of tax, the balance of $701,000,000 being returned by
327,018 individuals. Accord.ng to these returns, less than threetenths of 1 per cent of our population returned 95.5 per cent of our
total income tax, about 1.9 per cent returned 4.5 per cent, and the
remaining 97.8 per cent of the population returned no tax whatsoever.
Obviously some other taxes should be retained.
Once the automobile tax is repealed, it can not be reimpbsed in
time of peace. This creates a situation which should squarely be
faced at this time. Both the Treasury Department and the Congress
desire to reduce taxes to the greatest possible extent consistent with
the prospective revenue needs of the Government. The reduction
will be made under the reasonable assumption that business conditions will continue to be fairly prosperous. Should this assumption
prove to be false and should there be a falling off in business, with
a consequent immediate reduction in the yield of the corporation and
individual income taxes, or should the day come when taxes as revised
at this session of Congress are inadequate to meet the cost of government, it is obvious that revenue needs will compel an increase in
rates of the taxes then existing. I t is equally obvious that under such
circumstances corporation income tax rates and income tax rates on
individuals will have to be increased to an extent where they will
not only make good the loss of revenue resulting from the reduction
of income returned but will in addition be required to contribute the
$66,000,000, more or less, that the present excise tax on automobile
sales now yields. I n other words, the narrowing of the tax base in
days of prosperity inevitably means that when the time for increased
tax burdens arrives those taxpayers who are unfortunate enough to
remain on the rolls are compelled to pay more than their just share.
Injustices in the field of taxation are inevitably committed under the
pressure of necessity, and the time to preserve the integrity of a wellrounded, well-balanced system is in days of prosperity when rates
can be kept at a minimum and no particular hardship is inflicted on
any one class. Under such circumstances to yield to the temptation
to dispense with a tax which some day may prove to be an essential
part of the tax system is to be guilty of the most short-sighted
54
REPORT ON THE FINANCES
economic error. I t should never be forgotten that in taxation the
ideal to be aimed at is a broad base and low rates.
We have eliminated most of our excise taxes. There remain for
revenue purposes the excise tax on tobacco and automobile sales, the
admissions tax, and a few stamp taxes. All of these should be
retained in the interest of a well-balanced tax system. I have not seen
it suggested that the excise tax on tobacco should be reduced, but
when we consider the burden borne by the users of tobacco, an article
which is likewise of the. semiluxury type—though many would classify it as a necessity-^the 3 per cent automobile sales tax appears
insignificant in character. Because this 3 per cent is levied upon
the factory, or wholesale price, which is much smaller than the retail
price, the automobile .tax amounts to but 2 cents for every, dollar
paid by the ultimate consumer. Contrast this with the fact that for
every dollar spent by our citizens for the articles enumerated, there
is a tax required of 2 cents to 5 cents on cigars, 9 cents on theater and
otlier admissions, 20 cents on playing cards, from 4 cents to 22 cents
on chewing and smoking tobacco, and from 17 cents to 40 cents on
cigarettes.
For the fiscal year 1927 the tobacco taxes yielded $376,170,205.04,
as compared with $66,437,881.32 from automobiles. The use of
tobacco in its various forms is widespread, and the Federal tax on
tobacco no doubt affects a greater number of our citizens than does
any other class of tax. The man who smokes a nickel cigar now pays
one-fifth of 1 cent ih tax to the Government. This is at a rate double
that upon automobiles. The man who smokes an 8-cent cigar pays a
tax of three-tenths of 1 cent to the Government on every cigar that
he smokes. Out of every 15 cents paid for a package of 20 cigarettes,
6 cents, or 40 per cent of the total retail cost, is paid to the Government. Chewing and smoking tobacco is now taxed at the rate of 18
cents per pound. During the fiscal year 1927 it accounted for
$65,070,195.26. That is, chewing and smoking tobacco alone produced practically as much tax as all of the automobiles sold that
year in the United States.
Admissions tax.—The same reasoning applies with equal force to the
tax on admissions. I t is difficult to imagine a more ideal tax than one
on the $40 ringside seats at the recent Tunney-Dempsey fight. Surely
no one will contend that the men and women who were willing to pay
$40 for a seat for 30 minutes of boxing could not well afford to contribute $3.64 to the United States Government. The revenue yield
from that particular fight was $242,065.71. The tax of 60 cents for
a box seat costing $6 for a world-series baseball game and the tax of
30 cents for a $3 box seat at a representative theater is not considered
excessive. The exemption of all admissions of 75 cents or less eliminates the tax on the recreation and amusement of an overwhelming
majority of our citizens. Those who pay more than 75 cents can
well afford to make a contribution to the Government, and such an
excise tax can not be held to be burdensome or to impose a restriction
on legitimate recreation.
Tables showing the exact amounts paid as tax, and the percentage
of the tax to the retail prices, for the various makes of automobiles,
the different kinds and brands of tobacco, and for selected samples
of admissions are submitted in an appendix.
SECRETARY OF THE TREASURY
55
Taxes on the income received froni bctmhers^ acce'ptances held by foreign banks of issue.—Under the provisions of section 230 of the revenue act of 1926 a tax 6f 13% per cent is imposed upon the discount
received b}^ any foreign corporation on American bankers' acceptances. Sections 233 and 217 of that act, however, exempt from taxation any interest on bank deposits received by a foreign corporation
not doing business within the United States and not haying an office
therein. Under the terms of section 236 interest upon obligations of
the United States is not subject to tax.
An increasing number of countries have adopted the gold exchange
standard. This means that banks of issue in those countries must
carry large balances abroad, largely in the American market. Unless
appropriate investments are available, however, these balances will
be lost to London or to some other gold standard country.
Generally speaking, the chief ways in which a foreign bank, especially a foreign bank of issue, employs its surplus funds in this
market are: (1) on deposit, (2) in short-time Government securities,
and (3) in bankers' acceptances. At the present time the law exempts
from taxation income derived from the first two, but taxes the third.
Foreign banks of issue with surplus funds to invest must seek the
most liquid short-time investments available. Many banks of issue
are prohibited by law from investing their funds for longer than
three months. Others are prohibited from investing their funds in
any Government securities which are not issued on a discount basis.
I n such cases as these, where funds can not be invested in Government
securities for one reason or another, a bank of issue must invest its
funds either in bankers' bills, subject to the tax, or else place its
funds on deposit at materially lower rates of interest.
The serious effect of this is the resulting tendency to withdraw
funds from this market for investment either in London or elsewhere.
I n other words, the present law places a serious handicap on the free
development of our dollar acceptance market. I n effect it tends to
keep foreign funds out of our market and to force American merchants to finance their transactions abroad rather than through the
dollar acceptance.
One of the main purposes of the Federal reserve act was to authorize and foster the development of the American acceptance market
as an effective and economical means of financing our foreign trade.
Congress has done its part in aiding this development by a series of
amendments to the Federal reserve act. Undoubtedly, however, the
present provision of the revenue act, which imposes a tax on the
discount earned from our bankers' acceptances, is proving an obstacle
to the full accomplishment of this purpose.
I recommend, therefore, that the revenue act of 1926 be amended
so as to exempt from the income tax income derived from American
bankers' acceptances held by foreign central banks of issue.
^
^
^
^
^
i^
Improved administration of income taxes
iii
^
For the purpose of acquiring exact information upon which to base
recommendations designed to simplify the internal revenue laws, particularly the income tax, and to improve the efficiency of their
64761—n 1927
-6
56
REPORT ON T H E FINANCES
administration, a special administrative committee made a comprehensive survey.
I agree unqualifiedly with the conclusions and recommendations
stated by this committee and published in its report entitled " Survey
of the Administration of Income and Excess-Profits Taxes," which I
transmitted to the chairman of the Joint Committee on Internal
Revenue Taxation.
This is the first comprehensive inventory that has been made of the
work of the Bureau of Internal Revenue since 1923, and portrays
conditions as they existed on June 30, 1927. I t is hoped that this
survey will assist the Joint Committee on Internal Revenue Taxation, the Committee on Ways and Means, the Committee on Finance,
the Members of Congress, and the public in an appreciation of the
task imposed upon the Treasury in the administration of eight recent
and separate acts imposing internal revenue taxes, of the manner in
which that responsibility has been borne, of the unprecedented administrative problems imposed, of the situation as it exists to-day, of
the problems confronting the Treasury and awaiting solution, and of
the soundness of the solutions suggested.
The more important facts, the conclusions, and the recommendations contained in the report follow:
Summary of causes contributing to congestion.
(1)
T H E SIZE OF T H E JOB.
Over $35,000,000,000 were collected and more than 62,000,000 returns were filed for the years 1917 to 1926, inclusive. Little real
progress toward administrative organization could be made during
the war years. Government officials, as well as taxpayers, were confronted with problems never before presented. The intricate facts
surrounding practically every transaction of importance occurring
during this period required ascertainment and analysis and their legal
consequences determined. Principles for the valuation of most of the
assets of the country had to be evolved and the valuation made. The
books of the largest corporations in the world had to be audited.
Methods of accounting adaptable to the determination of tax liability had to be installed. The Government had to develop a system
in the offices of collectors competent to handle a business in tax collections ten times as large as during any previous period of its existence.
The amounts contingent upon intangible theories are staggering. I t ^
is not surprising that attempted solutions have provoked delays and
litigation.
(2)
PERSONNEL.
I t has been impossible to build up and retain an adequate personnel. The Government and the public have a right to demand that
the personnel charged with the administration of the internal revenue
laws possess extensive experience, ability, unquestionable integrity,
and sound judgment. Persons capable of holding important positions have been developed by the Treasuiy, but in many cases it has
been impossible to retain them. The turnover has been and is
devitalizing. Each resignation imposes delay and immediate real
loss to the taxpayer and the Government, for a knowledge of the
SECRETARY OF THE TREASURY
57
cases must be acquired by the successor. But the resulting delay to
individual cases is relatively of minor consequence. The individual
who resigns can not leave with his successor his experience, background, ability, and judgment.
Ability alone is insullicient. An; individual must have had the
necessary experience, that only time can give, to have an adequate insight into the effect of the decisions he is called upon to make. New
men can not be trained rapidly enough to assume the positions of
those who resign. The field from which persons competent to carry
on the work can be selected has been and probably ahvays will be
decidedly limited. I t is only by the retention of persons capable of
holding positions of importance that an adequate personnel will be
obtained.
The bureau loses regularly a large proportion of its ablest employees because it can not meet the terms offered by others. A certain amount of this leakage is inevitable. But the present turnover
is excessive. Surely the bureau should be able to compete for the
services of efficient employees whom it desires to retain with State
tax commissions and business concerns of moderate size. The
bureau should not remain indefinitely a training school in which
young men and women of talent educate themselves and then resign
to find a permanent career outside. The Government should find
means in higher salaries and more attractive tenure to induce a
larger proportion of its ablest employees to stay and find dignified
careers in the public service. If this can not be done, it will be the
body of taxpayers and the Treasury—not the employees of the
bureau—who will suffer most.
The Government can well afford to retain a substantial portion of
the personnel it has developed.
(3)
T H E POLICY TO DECIDE UPON A BASIS OF ABSOLUTE ACCURACY.
The difficulty in the past in closing big cases and in settling cases
without litigation has arisen largely as a result of the attempt of the
bureau to settle with mathematical accuracy and with pure logic
questions which by their nature are not susceptible of w/ithematical
or logical determination. The bureau in the past has attempted to
determine such questions as the valuation of natural resources, the
valuation of intangibles such as patents, the determination of the
amortization of war facilities, and the computation of depreciation
by the use of formulae and with mathematical accuracy. By far the
majority of the questions arising in disputed cases can not be solved
with exact precision, but should be settled by administrative action
within the bureau on the basis of the best judgment of competent
)fficials.
Important questions of law must, of course, be decided finally by
judicial tribunals. But the best interests of the Government and of
the taxpayer will be promoted if the great majority of the disputed
questions involving no important principle are settled by administrative action within the bureau. Even a casual analysis of the
history within the bureau and through the courts of various cases set.
out in this-report will demonstrate that both the Government and the
taxpayer will benefit by such action.
58
REPORT ON T H E FINANCES
The nature of the problems involved in many classes of cases makes;
their solution adaptable to administrative and not judicial action.. I t
is impossible to predict the decision of a judicial body upon such,
questions of fact as valuations of natural resources, patents, or good
will; upon questions presented in an amortization determination;
upon a case involving contemplation of death; upon the propriety of
depreciation allowances; or upon similar questions.
Furthermore, the bureau is not as well prepared as the taxpayer
to litigate with any success these questions of fact and of opinion.
I t does not have, and so far has not been able to secure, sufficient
attorneys to present properly to the Board of Tax Appeals and the
courts the Government's position in these cases. The statistics
show that the bureau has collected through the Board of Tax Appeals only about one-half of the tax claimed by it. I t is apparent
from a study of the board's decisions that the great majority of
the reversals of the bureau have been in cases involving questions of
fact, judgment, and opinion. I t is believed confidently that as much
or more tax can be secured by settling these cases by administrative
action within the bureau than by litigation. But even more important than the tax collected will be the benefit both to the Government
and the taxpayer of disposing of these old matters without protracted controversy.
(4)
THEJ^ATTITUDE OF T H E TAXPAYER.
The taxpayer and his attorney must assume their fair share of the
responsibility for the present situation. If the attitude of t h e
Government is to change, the attitude of the taxpayer and his attorney must change. The taxpayer must be willing to review his^
entire case and to settle upon a basis fair both to the Government and himself. He must abandon his desire to litigate every
doubtful point decided against him and to accept without question
doubtful points decided in his favor. I t is believed that a substantial
majority of taxpayers will alter their attitude to conform to that of
the Government.
I t happens not infrequently that the presentation of the taxpayer's
case to the bureau is insufficient. This fact is attributable to many
causes, among them being the employment of incompetent representatives and the desire to avoid expense necessary to a complete and
proper presentation. Many of the cases in which the bureau is reversed by the board would have been decided by the bureau in
conformity with the board's decision had the taxpayer presented his
case to the bureau in the manner in which it was presented to the
Board of Tax Appeals.
Much of the criticism urged by taxpayers that they are unable to
obtain a decision from the bureau is misleading. What is really
meant is that the taxpayer can not obtain a faw ora b l e decision. The
taxpayer's realization that an unfavorable decision will be forthcoming prompts him to seek delay.
(5)
REOPENING CASES.
Of cases for the years 1917 to 1921, inclusive, 1,109,939 once closed
by the bureau have been reopened. An analysis of the causes occasioning the reopening of cases is given hereinafter. The opportuni-
SECRETARY OF THE TREASURY
59
ties to reopen must be bi'ought to an end if an intolerable situation
is not to continue.
(6)
S H I F T I N G RESPONSIBILITY.
I t is admitted that there has been a failure on the part of t h e personnel of the bureau to assume responsibility in the disposition of
cases. Final decisions have been shifted from place to place in the
bureau and from the bureau to the Board of Tax Appeals. " Passing
the buck " undoubtedly exists. This is, in most instances, merely a
<;pnsequence of the Treasury's inability to retain individuals competent and willing to assume responsibility and to make final decisions.
A changing personnel can not grasp adequately vital and far-reaching
problems of policy and law involved in final decisioiis of tax cases.
An individual who does not possess an adequate appreciation of
the decision he is asked to make can not be criticised for refusing to
assume responsibility.
(7) DETERMINATIONS
LIMITATIONS.
MADE
BECAUSE
OF
THE
RUNNING
OF
THE
STATUTE
OF
I t is admitted that in the past many deficiency letters have been
mailed in order to protect the interests of the Government from the
bar of the statute of limitations. The chart showing the status of
the work of the Board of Tax Appeals reveals an extraordinary increase in the number of petitions docketed immediately following
th6 expiration of the statutory period upon assessments for any particular year. The necessity for this practice in the past is apparent.
There must be a considerable and immediate reduction in the number
of deficiency determinations made in order to prevent the running
of the statute of limitations.
Summary of outstanding facts.
(1) For the first time since the war it can now be said that the
auditing work of the Bureau of Internal Revenue is practically
mi'iirent.
(2) Of the number of old cases still pending in the bureau, an
almost negligible number are awaiting original audit. To a very
large extent they are cases that have been reopened by taxpayers
through the filing of claims for refund.
(3) More than l^^OQQ undecided cases are pending before the
Board of Tax Appeals, involving aggregate deficiencies of approximately $550,000,000. T h e petitions being filed with the Board of
Tax Appeals exceed the number disposed of by more than 200 per
month.
(4) The office of the general counsel is literally swamped with
work.
(5) Although the nature of the problems remains substantially
the same, the burden has been transferred from the Bureau pf Internal Revenue to the general counsel's office and the Board of Tax
Appeals.
^ (6) I n cases before the Board of Tax Appeals involving amounts
of $10,000 or more, the Government has succeeded in sustaining only
about 50 per cent of the deficiencies asserted.
60
REPORT ON THE FINANCES
(7) The period of delay between the date of the bureau's action
and the final decision of the Board of Tax Appeals prevents the
decision from becoming a precedent for the action of the bureau upon
similar points. Taxpayers not involved in the proceedings before
the board can protect their interests. The bureau can protect the
Government's interests in doubtful cases only by deciding against
the taxpayer or, after obtaining waivers, by failing to decide.
(8) There are only eleven attorneys in the office of the general
counsel who have served in the office more than six.years. Since July,
1924, 52 attorneys have resigned from- the general counsel's office.
There have been in the Income Tax Unit alone 1^^727 resignations of
professional and technical officials during the last seven years.
Analysis of the problems.
(1)
RELIEVING T H E PRESENT CONGESTION BEFORE T H E BOARD OF T A X APPEALS.
I t is essential that effective measures be applied in order to relieve
the congestion before the Board of Tax Appeals. There should be
an opportunity to withdraw from the board cases which may be
settled properly by administrative action within the Treasury and
without the necessity of a decision by the board.
The Board of Tax Appeals is functioning at present at as great a
speed as is consistent with sound decision. A material increase in its
production should not be sought or expected. There are, however,
some requirements occasioning unnecessary delays in its proceedings,
and these should be removed.
(2)
PREVENTING FUTURE CONGESTION.
Unless methods are found for more effective and final closing by
administrative action within the Treasury, the accumulation of cases
before the board will increase. Notwithstanding the fact that the
percentage of cases going to the Board of Tax Appeals is extraordinarily small (0.6 per cent of the total cases disposed of by the
bureau), the actuod number of petitions docketed by the board establishes conclusively that administrative settlement is essential in every
case susceptible of administrative settlement.
(3)
E L I M I N A T I N G DELAY I N DECISIONS BY T H E BOARD OF T A X APPEALS.
At the present time the decisions of the Board of Tax Appeals are
frequently handed dowm so long after the action of the bureau that
the decision does not serve as a precedent for the bureau in its action
in similar cases. The bureau can not tie up its cases, postpone its
action, and await final decisions of the board. In the opinion of the
Treasury, one of the most important functions of the Board of Tax
Appeals is to render decisions upon important questions of law expeditiously, so that the decisions will serve as guides for the future
action of both the Government and the taxpayers.
Failure to settle cases within the bureau creates a major problem
which deserves the most careful attention. The problem can best
be stated by an illustration. Take a disputed question such as the
taxation of gain or loss resulting from the sale by a parent corpora-
SECRETARY OF THE TREASURY
61
tion of the stock of an affiliated subsidiary. The bureau holds that
such gain or loss must be recognized. Many corporations take such
losses to their advantage, while the companies with corresponding
gains promptly appeal their cases to the Board of Tax Appeals.
I n any important question of this kind, two or three years are likely
to elapse before the bureau makes a final ruling. After the bureau
rules, two or three years additional are likely to elapse before the
board renders its decision—and the more congested the board's docket,
the longer the delay. After the board decides, tw^o or three years
may be required before the Supreme Court speaks. The interval
elapsing before a point of this importance is finally decided can
hardly be less than six years and may be eight or nine years.
This means that the period of limitations will have expired in
many cases in which the disputed point was decided in the taxpayer'^s
favor.—The bureau—if the Supreme Court reverses its ruling—can
not go back and disallow the losses already allowed in cases barred
by the period of limitation; and the taxpayers who paid taxes on the
gains will have protected themselves by the filing of claims for refund,
while others will have appealed to the board. The period consumed
in appeal exceeds the statute of limitations^ amd this meam^ for the
Treasury—" heads we lose, tails you u n n ^
Whatever the ultimate remedy for this evil may be, the evil is
aggravated by congestion and delay, and may be mitigated by a wider
settlement of cases through administrative action.
The above illustration is typical of a large number of cases, affecting many millions in tax liability, in which the bureau's decision
however made affects adversely one group of taxpayers and is favorable to another group.
(4)
RELIEVING T H E GENERAL COUNSEL'S OFFICE.
Thcoprimary functions of the general counsel's office are to advise
the bureau upon questions of law (with the facts necessary for the
determination of tax liabilities ascertained by the bureau) and to
protect the best interests of the Government in litigation. I t is a
physical impossibility for an attorney responsible for the handling
of from 200 to 600 active cases to represent the Government properly
in each case. He is forced^to assume the defensive and to resort to
every available device and technicality. A substantial step toward
solution will be made if problems (1) and (2) above are solved
satisfactorily.
Summary of outstanding conclusions.
(1) An opportunity to retain trained, experienced, and competent
personnel is essential.
(2) The burden has been transferred to the Board of Tax Appeals
and the general counsel's office, and this burden must be relieved if
their true functions are to be perforrned properly.
(3) The Government is handicapped in litigation. I t can well
afford to settle many more cases without resort to litigation.
(4) Cases must be closed fairly and finally by the bureau. The
shifting of responsibility to the general counsel's office and to the
board and the constant reopening of cases, as a result of decisions of
the courts or the Board of Tax Appeals or a change in regulations,
should be brought to an end.
(5) The Treasury is cognizant of its. fair share of responsibility.
62
REPORT ON T H E FINANCES
(6) Taxpayers should cooperate. They are by no means blameless
for existing difficulties.
I n order to present the situation in broad outline, the above conclusions must be supplemented by three truisms—
(1) At root, the major problem is one of personnel.
(2) All tax cases can not be closed upon a basis of absolute accuracy. To attempt to do so is to sacrifice accomplishment to unattainable ideal. Prompt and final settlement is often more important than
meticulous accuracy.
(3) The collection of revenues is primarily an administrative and
not a judicial problem. As far as the Federal income tax is concerned, a field of administration has been turned into a legal battle
field.
Detailed recommendations.
(1)
PERSONNEL OF T H E OFFICE OF T H E GENERAL COUNSEL.
I t is recommended that—•
{a) The positions of the heads of the six divisions of the general
counsel's office and of the two assistant general counsel should be
classified in grade 7 of the professional service of the classification
act, which specifies a salary of $7,500 a year; and there should be at
least 15 positions classified in professional grade 6, which specifies a
minimum salary of $6,000 a year.
(5) The Commissioner of Internal Revenue, with the approval
of the Secretary of the Treasury, should be authorized to make original appointments in the office of the general counsel in professional
grade 5, which allows an entrance salary of $5,200.
{c) The Commissioner of Internal Revenue, with the approval of
the Secretary of the Treasury, should be authorized to appoint in
)rofessional grade 2 (at an entrance salary of $2,400) graduates of
aw schools, without the professional experience now required.
f
. (2)
PERSONNEL OF T H E BUREAU OF INTERNAL REVENUE.
I t is recommended that—
(a) The Commissioner of Internal Revenue, with the approval of
the Secretary of the Treasury, should be authorized to classify in
grade C A F 14 the positions of three technical advisors to the commissioner, at salaries of $10,000 a year.
(6) The positions of at least 75 technical experts of the Bureau of
Internal Revenue should be classified in the grade C A F 13, which
specifies a minimum salary of $6,000.
{c) The positions of 20 revenue agents in charge should be classified in grade C A F 13, which specifies a minimum salary of $6,000,
and the remaining revenue agents in charge should be classified in
grade C A F 12, which specifies a minimum salary of $5,200..
{d) The positions of the personnel in Washington and in the field
should be reclassified so that their salaries will be increased to accord
with the responsibilities imposed.
(3)
T H E SPECIAL ADVISORY COMMITTEE.
The organization and functions of the special advisory committee
are discussed in detail hereinafter. I t is hoped that the outline of
work to be accomplished by the committee will be approved -and indorsed, and the committee will be accorded fullest cooperation.
SECRETARY OF THE TREASURY
63
Every effort should be made to instill in the committee the spirit
essential to its success.
(4)
C H A N G E I N ATTITUDE TOWARD SETTLEMENT OF CASES.
The change in attitude necessary for the effective closing of cases
by administrative action within the Treasury has been discussed. I t
is appreciated fully that this change can not be accomplished except
gradually. I t is also appreciated fully that the use of sound discretion in the settlement of tax cases can not be expected from any but
the most experienced, trained, and competent men. I t is necessarj
to begin at the top. The authority should not be granted indiscriminately. Responsibility must at all times be fixed definitely. T h e
special advisory committee is an experiment, admittedly. If the
experiment proves successful, in time it may result in a change of
attitude on the part of all concerned and the collection of income
taxes become, a^ it should, an administrative problem rather than a
legal battle.
(5)
CLOSING AGREEMENTS.
The movement already begun to stimulate closing agreements under
section 1106 (b) of the Revenue Act of 1926 should be continued.
Closing agreements offer the greatest opportunity for the final closing
of cases. Section 1106 (b) should be amended, as recommended b j
the Joint Committee on Internal Revenue Taxation, so as to permit
closing agreements (subject to subsequent approval of the Secretary
of the Treasury) whenever the taxpayer and the Government's representative agree upon the tax liability,
(6)
DEFICIENCY DETERMINATIONS.
I t is believed that the bureau is capable of making better determinations of deficiencies in many cases. Soundness of the determinations is far more important than volume of production. Determination should not be postponed so that the running of the statutory
period requires hasty action.
(7)
REVISION OF DEFICIENCY LETTER.
I t is believed that many petitions are filed with the Board of Tax
Appeals because the taxpayer is unable to understand from the deficiency letter the exact decision of the bureau. The proposed
revision of the deficiency letter, so that it will state accumulatively
all prior adjustments and determinations, is indorsed.
(8)
STIPULATIONS.
Although the general counsel's office has disposed, by stipulations,
of more cases pending before the Board of Tax Appeals than the
board has disposed of by decision, it is believed that there is a substantial opportunity for increasing the number of stipulations.
Stipulations of unimportant facts should be encouraged in order to
facilitate proceedings before the board. Whenever the attorney in
charge of the case can enter into stipulations of fact properly, he
should do so. I t should be borne in mind, however, that a proper
personnel is essential before the practice of entering into stipulations
can be increased extensively.
64
(9)
REPORT ON T H E FINANCES
REGULATIONS OF PROSPECTIVE RATHER THAN RETROACTIVE APPLICATION.
Many of the reopenings by the Government can be prevented by
giving, in every instance where sound judgment will permit, only
prospective effect to changes in regulations. The authority granted
in section 1108 (a) of the revenue act of 1926 has been exercised in
several recent instances. I t is recommended that this practice continue. I t should be noted, however, that the power granted by this
section is limited to amendments not occasioned by a court decision.
The application of decisions of courts, decisions of the Board of
Tax Appeals, and decisions of the general counsel's office to cases
already closed by the bureau, or to cases in which a definite decision
upon some particular issue has previously been made, presents an
exceptionally difficult problem. Efforts to find a sound solution
should be continued. There must be some method by which the
practice of constantly reworking cases, after a fair .and satisfactory
decision of one or more of the issues involved have been reached, may
be stopped.
Tax exemption of Federal bonds
As early as 1921 the Treasury favored an amendment to the Constitution permitting the United States to tax incomes derived from
securities issued by the States and their political subdivisions after
the ratification of the amendment, and conversely permitting each
iState to tax the income derived by its residents from securities issued
under the authority of the United States. As recently as 1925 the
Treasury Department has called the attention of the Congress to
the evils arising from the existence of great masses of tax-exempt
securities which offered to the wealthy the means of avoiding the
payment of income taxes to the Federal Government. In the Sixtyseventh Congress a resolution providing for an amendment to the
Constitution along the lines above indicated passed the House, but
was not acted on by the Senate. In the Sixty-eighth Congress a
similar resolution was defeated in the House by 41 votes. No further
action looking to the submission of such an amendment to the States
has been taken.
I t is probable that the time when such an an. shdment could have
been effective has passed. There are now outstanding $15,946,000,000
of wholly tax-exempt securities, of which $11,841,000,000 have been
issued by the States and their political subdivisions, $145,000,000 by
Territories and insular possessions, $2,165,000,000 by the United
States Government, and $1,795,000,000 by the Federal farm loan
system. Since these securities are being issued at the rate of over
a billion a year, it is apparent that so many will be in existence before
the constitutional amendment in question could be submitted and
adopted by the necessary number of States that it would be ineffective. Moreover, the revenue act of 1926 reduced surtax rates to such
an extent that the inducement to avoid them by resort to investment
in tax-exempt securities has to a very large extent disappeared.
SECRETARY OF THE TREASURY
65
T h e Statistics of Income for 1925 show that the total amount, of
tax-exempt securities returned by individuals was $5,041,000,000.
T h e income received from these securities amounted to $230,000,000.
Had these securities been fully taxable, the revenue to the Government would not have been in excess of $11,000,000.
Given all of these circumstances, I have reached the conclusion
that the reasons which led the Treasury to urge the adoption of a
^constitutional amendment relating to tax-exempt securities have been
rso modified by time and subsequent events, including the failure of
two separate Congresses to act in the matter, as to justify a reconsideration of the problem and the following conclusions:
If States and their political subdivisions are to continue to issue
tax-exempt securities at the rate of a billion dollars a year, there is
no logical reason why the Federal Government should continue to
issue its securities under a provision of law which only permits
exemption from the normal tax. This puts the Federal Government
at a serious disadvantage, a disadvantage which is very considerably
mitigated, however, owing to the fact that corporations are subject
only to the normal tax and that United, States securities held by
corporations are therefore tax exempt. On the other hand, this very
situation makes it difficult, if not impossible, for the United States
•Government to sell new issues of its securities to individual investors.
United States securities are sufficiently attractive to corporations so
t h a t the latter are more than wdlling to take the entire block of new
issues offered from time to time. This being the case, the price which
corporations are willing to pay inevitably fixes the price at which
the United States is able to market its securities, and since the corpo' rations are wholly tax exempt on their income from such securities,
whereas the individual income derived from these securities is subject
to the surtax, the former are in a position to pay a price which might
well make the securities unattractive from the standpoint of the
individual investor. Thus, for instance, the Treasury 3 % per cent
bonds were selling on October 4 on a basis to yield 3.25 per cent.
On that basis they would have yielded to a man with an income
of $100,000 from other sources, after tax payment, but 2.60 per cent;
to a man with an income of $50,000, 2.83 per cent; and to a man with
an income of $25,000, 3.02 per cent; whereas the corporation would
get the full yield of 3.25 per cent. Three and one-half per cent
three to five year Treasury notes were selling on October 4 on a basis
to yield 3.51 per cent; they would yield but 2.81, 3.05, and 3.26 to
individual investors with incomes of $100,000, $50,000, and $25,000,
respectively, as compared with a yield of 3.51 to the corporation.
The corporations were thus able to obtain the full advantage of the '
extraordinary quality of a United States security from the standpoint of safety, and, because of this tax-exempt feature, obtain a
66
YJHEPORTIONJICBCE' FTNA^^iCEaa
ireturn equivalent, in so far as t h e 3 % per.ceiit Treasur^^^^^
ebiicerned, to 3*76 per: c^ntbn a.taxable security, and in so faivas
the 3 % per cent Treasury notes are concerned, equivalent to 4.06 on a
taxable security. But this, obviously, is not true of the individujaJ!
investor.
:
.
.
? The Treasury Department is sometimes criticized for not making^
a greater effort to distribute its securities more widely. The situation
above described under which United States securities are wholly
tax exempt when held by corporations, but not wholly tax exempt
when held by individuals, makes it impossible to do so. Such a
situation is undesirable. During the war Government securities
were very widely distributed, as the result of vigorous campaigns
conducted in every community, and which reached almost every home.
At that time it was held, and rightly held, that it w^as desirable, if
Government securities were to be issued in large blocks, that they
should be held by as many separate individuals as possible rather
than in the hands of a few large holders. Such a feeling was sound.
I t is still sound to-day. But under existing circumstances, as the
war loans are gradually .being refunded into securities bearing a
lower rate of interest—and there would be no justification, of course,
for not refunding them—the number of holders of United States
securities tends constantly to become more limited.
How could it be otherwise, when States and municipalities are in
a position to issue their securities free from all taxation? The average rate of interest paid by all States on their total indebtedness
during 1926 was about 4.14. New York City municipal stock with
a life of 30 years sells on a basis to yield 4 per cent to the individual
investor, while the man with an income of $25,000 will receive but a net yield of 3.02 per cent on a 16-20-year'3% per cent United States
Government bond. Moreover, even after Federal taxes, he can receive approximately 4 per cent on the highest grade of public utility
bonds.
•
These figures make it perfectly apparent that in so far as the individual investor is concerned, the United States Government is at a
serious disadvantage to-day in marketing its securities because of the
provisions in the Liberty loan act which limits the tax-exempt privilege to the normal tax.
To be sure the Treasury Department has the authority to issue
notes exempt from surtaxes, but, because of the Treasury's position
on tax-exempt securities, it was not thought advisable to make use
of this authority. Moreover, the individual investor is interested in
bonds rather than in notes and certificates.
SECBETABY 6¥ THE TREASUBY
6'^
Under these circumstances, I believe that the Congress should give
serious consideration to an amendment of the second Liberty loan
bond act, as amended, authorizing the Secretary of the Treasury in
isisuing long-term securities in the future to make them exempt from
the surtax as well as the normal tax.
The enactment of such an amendment would not in any way inter-i
fere with the adoption of an amendment permitting the taxation of
so-called tax-exempt securities, should Congress and the States deem
this to be desirable. But pending its adoption there is no reason why
the Treasury Department should be put at a disadvantage in the
marketing of its securities as compared with States and their subdivisions, or why individual investors who desire to acquire United
States Government securities should be discriminated against. Taking the long-time view of the situation, I believe that the enactment
of such a constitutional amendment is desirable, for I consider it
inconsistent with our principles of democratic government that our
laws be so framed as to permit any class of our citizens to escape
their just tax obligations.
Disposition of sequestrated alien property and payment of mixed
claims
Though the war ended nine years ago, the United States Government is still holding property of the German, Austrian, and Hungarian nationals of a value in excess of $250,000,000. In addition
there are certain claims against the United States Government for
damages arising from acts of the United States during the war.
On the other hand, there are pending and unpaid claims of the
United States Government and its citizens against the German^
Austrian, and Hungarian Governments for damages arising from
the war aggregating many millions of dollars.
The property held by the Alien Property Custodian is property
seized under what is known as the trading with the enemy act,
which provided that it should be held until after the war and disposed of as Congress shall direct. Congress has amended the trading with the enemy act from time to time, and as a result of these
amendments much of the property originally seized has been
returned.
Under the decision of the Supreme Court in the case of United
States V. Chemical Foundation (Inc.) and under the provisions of
the treaties of Berlin, Vienna, and Budapest there seems to be no
doubt that the United States Government has the legal right to confiscate the property held by the Alien Property Custodian and to apply
it to the satisfaction of the claims of American citizens, though it
should be noted that the preamble of our treaty with Germany,
68
REPORT ON T H E FINANCES
known as the treaty of Berlin, includes in full the provision of the
joint resolution of Congress declaring peace, approved July 2, 1921,.
which provided that the property of German nationals held by the
United States Government " shall be retained by the United States of
America and no disposition thereof made, except as shall have been
heretofore or specifically hereafter shall be provided by law until
such time as the Imperial German Government * * * shall have
made suitable provision for the satisfaction of all claims against said
Government * * *." Moreover, a program .of confiscation is
repugnant to the American sense of justice and would constitute a
violation of the sound policy hitherto pursued by our country of
recognizing the inviolability of the property of private citizens in
time of war. There may not be a legal duty to return the property
to the alien owmers, but there is most certainly a moral duty.
There is, however, an even stronger obligation on the part of the
United States Government to protect its own citizens and to see t h a t
their just claims arising from the war are provided for, and inasmuch
as the alien property is held as security for, the payment of these
claims, it should not be returned until suitable provision has been
made for their payment.
Under agreements made with Germany, Austria, and Hungary,
commissions were set up, known as the Mixed Claims Commission and
the Tripartite Claims Commission, the duty of the former being to
determine and to adjudicate all claims of the United States and its
nationals against Germany and its nationals, based on the terms of
existing treaties, and the duty of the latter being to perform a similar
task in respect of all claims against Austria and Hungary and their
nationals. So far as claims against Germany are concerned, the commission has about completed its work, while the Tripartite Commission has reached a point where it is in a position to make a fair
estimate as to what the claims allowed against Austria and Hungary
will amount to.
As compared w^ith the claims against Germany the latter are insignificant in amount. Those against Austria can be met in large measure, if not wholly, by property of the Austrian Government at present
held by the Alien Property Custodian. If this sum is inadequate, it
should be possible to reach some agreement with the Austrian Government which will insure the payment of the claims allowed by the
Tripartite Commission in full. And this is true likewise of Hungary.
Once the Austrian and Hungarian Governments have made such an
agreement and furnished adequate guaranties, there is no reason why
the property of their nationals now held by the Alien Property
Custodian should not be returned to them.
The situation in so far as Germany is concerned is somewhat different. The awards of the Mixed Claims Commission constitute a direct
SECRETARY OF THE TREASURY
69
obligation of the Government of Germany; But Germany has found
herself unable to meet all of her treaty obligations. Accordingly, in
1924 the powers entitled to reparations, but not including the United
States, signed what is known as the London protocol, under the terms
of which the so-called Dawes agreement was adopted. Subsequently,
in January, 1925, the representatives of the powers who had signed
the London protocol and representatives of the United States signed
what is known as the Paris agreement, allocating the Dawes annuities
to the various governments having claims against Germany and
allowing the United States Government, for the purpose of meeting
the awards of the Mixed Claims Commission, an annual payment of
21/4 per cent of the Dawes annuities after certain deductions. Under
the terms of this agreement the United States Government will receive out of the Dawes annuities $11,000,00 a year w^hen the maximum
annuities are reached. But inasmuch as the amounts due American
claimants aggregate over $175,000,000, it is obvious that an annual
payment of $11,000,000 will take many years to extinguish the debt.
I t would be obviously unfair to our own nationals to return all of
the property held by the Alien Property Custodian immediately and
so deprive them of their security while asking them to wait many
years for the ultimate satisfaction of their claims. While this w^ould
be doing justice to the German claimants, it v^ould be doing considerably less than justice to American claimants.
There is a third phase of the problem which must be mentioned.
During the war our Government seized ships, radio stations, and
patents belonging to German nationals. Having received the benefit
of the property taken and used, it is only fair that we should pay
just compensation. But here again the question arises a? to why
German claimants should receive immediate payment while American
citizens should be compelled to accept installments over the period of
a lifetime.
I n March, 1926, the Treasury prepared a comprehensive plan for
the settlement of the existing questions, which embodied all of the
principal matters left over from the war, and would have made provision for the payment of the just claims of all concerned. Serious
opposition developed to this plan and it was accordingly laid aside.
At the last session of Congress the Ways and Means Committee reported a bill which had the approval of both German and American
claimants and which passed the House of Representatives with substantial unanimity. The plan proposed was essentially of a compromise character, but it was a compromise based on equity. Each of the
three groups of claimants were to be asked to make a sacrifice, not a
sacrifice of any part of their claims but a sacrifice entailing a delay
in the payment of part of their claims. Ultimately all would be paid
in full, but all claimants were asked to agree, in the interest of a com-
Ho
'KEPdRT ON' THE PINAjtrCES
moil and ibarly settlement, to extend the payment of a portion of what
is due them over a period of years. If the plan is not an ideal one, it
is at least fair and practicable. If it does not give each man all that
he is entitled to iinmediately, it at least imposes an equal measure of
sacrifice upon all and it does not satisfy the just claims of one group at
the expense of the equally meritorious claims of another.
The Treasury believes that the bill which passed the House during
the Sixty-ninth Congress contains all of the elements necessary for a
fair and lasting solution of this difficult problem, which so seriously
demands an immediate settlement.
Acquisition of land for Federal buildings in the District of Columbia
A bill authorizing the acquisition of all lands within the so-called
triangle area, excepting property owned by the Government or the
District of Columbia, and excepting square 256, was passed by the
Senate December 15, 1926, and passed by the House of Representatives with amendments February 7, 1927. Conditions in the Senate
between that time and the close of the session prevented its consideration of the House amendments and the bill failed of enactment.
It is the recommendation of the Treasury Department that the first
session of the Seventieth Congress authorize the purchase of the
necessary land within the " triangle " as a preliminary to carrying
out the projected scheme for the group of Federal buildings in the
District of Columbia.
Surety bonds
There is a notable increase in the number of bonds that are now
being taken by the various departments and establishments of the
Government with individuals as sureties. Since the department has
no direct supervisory control over the resources of individuals and
is therefore unable to follow their continuing solvency, it is believed
that bonds with such individuals as sureties should not be accepted
in large amounts, if at all. Suitable legislation along this line is
necessary, however. When the original law was enacted in 1894, uncollectible judgments and claims against individual sureties amounted
to $35,000,000. Such a situation should certainly not be allowed to
develop again. In order to accomplish this and other desired results,
however, it will be necessary to amend the existing law on the subject. I, therefore, reiterate my recommendation contained in previous annual reports that there be authorized higher standards of
financial requirements of surety companies writing bonds in favor
of. the United States, adequate and satisfactory control of records
pertaining to claims against them, and the number and character of
obligations which they assume in favor of the United States, and
SECRETARY OF THE TREASURY
71
uniform procedure with respect to the forms of bonds taken by the
various departments and establishments of the Government. I t is
urged that such revisions of the existing law as will meet these
requirements as they exist to-day shall have the careful consideration
of the Congress.
OTHER SUBJECTS OF IMPORTANCE
Federal reserve system and gold movements
I n my annual report a year ago I called attention to the desirability
of an early rechartering of the Federal reserve banks. This end
has now fortunately been achieved by the passage last February of
the McFadden bill, one of the clauses of which provided that the
charters of these banks be indeterminate. The unanimity of public
opinion upon the rechartering provision has indicated general public
appreciation of the value of the reserve system to this country.
This value has again been demonstrated during the past year,
during which Federal reserve policy has contributed largely to the
stability of the domestic money market, and has in addition proved a
powerful force for world stability of monetary affairs and trade.
The present transitional stage through which the nations are passing
in their progress toward the return to a gold basis has placed peculiar
responsibilities on the United States as the custodian of nearly half
of the world's monetary gold. Several of the countries of the world
are once more practically on a full gold standard; others have
adopted various forms of gold exchange standard; and still others
have achieved practical, but not legal, stabilization. This confused
world monetary situation affects our money market in many ways.
Foreign countries have balances here amounting to upward of
$2,000,000,000, which constitute a claim upon our gold reserves which
may be exercised at any time. Foreign loans of many countries and
many kinds are being offered in our market at a rate of over $1,000,000,000 a year. Large movements of gold to and from the United
States have continued. For the present calendar year gold exports
and imports, purchases and sales abroad, and changes under earmark
have already totaled more than half a billion dollars. When gold
is earmarked in the United States, or sales made of gold held for
us in foreign countries, it is equivalent to an export of gold from the
United States. The character of these gold movements is shown in
the following table, which is brought up to November 7, 1927, and
also includes the whole of uncompleted movements under way at
that time.
64761—FI 1927
7
72
REPORT ON T H E FINANCES
Gold exports a n d imports or their equivalent i7i 1927
[In millions of dollars]
Imports or their equivalent:
Imports from—
Canada
England _—
France
Japan
Holland
Australia
Chile
Mexico
Other countries
Purchased abroad
Total
53
39
21
20
15
22
7
5
12
62
Exports or their equivalent:
Exports t o —
BrazU
^
38
Argentina
__'
33
Germany
14
Canada
6
Mexico
6
Other countries
9
Sale of gold held abroad
62
Increase in gold earmarked— 131
Total _r
299
256
The huge movements of gold which have made up these totals
would, in the absence of offsetting influences, have created serious
disturbance in credit conditions in this country. But the reserve
banks, largely by the purchase or sale of securities, have so offset
these gold movements that money rates have been unusually steady
during the year and the money market undisturbed.
Moreover, Federal reserve policy during the j^ear, as during several
preceding years, has been an important influence in avoiding still
heavier gold movements. By their purchase of $62,000,000 of gold
abroad in May the reserve banks without doubt kept that gold from
coming to this country. Later they were able to dispose of the gold
abroad, which would have been difficult had the gold come here. I n
August and September reductions in discount rates relieved somewhat the pressure upon European money markets and probably prevented gold movements to this country, as well as enabled foreign
countries to buy American products more freely.
I n this connection it may be interesting to observe that since the
autumn of 1924, when the Dawes plan went into effect and England
and certain other Euro^Dean countries were preparing to return to a
gold basis and were in a position to use gold, there has been no net
movement of gold either to or from the United States, when account
is taken of changes in gold held under earmark. The country's total
gold stock on October 31, 1927, was $4,548,000,000, compared with
$4,554,000,000 on October 31, 1924. For this result reserve policy
is at least in part responsible, not simply through specific operations designed to deal with gold movements, but principally by
the pursuance of a larger plan, which has had as its objective the
restoration of the gold standard throughout the world and which has
found expression in the granting of credits to a number of the
European banks of issue, and in a discount and open-market policy
which as far as possible has avoided a rate position which would
attract gold to this country and would put a strain on the European
money markets.
SECRETARY OF THE TREASURY
73
I t is indeed fortunate in this disturbed period in monetary
affairs, when so large responsibilities for world stability have been
placed upon this country, that we have had in the Federal reserve
system an agency capable not only of exercising an important influence toward stability in our own money markets, but also of aiding in
financial reconstruction abroad. For financial stability abroad is
almost as important to the American farmer or business man as
stability in our own money market.
The presence of the Federal reserve system as an agency for
dealing with monetary problems relieves the Treasury from a responsibility which in former days frequently fell upon it. I n times of
stress the Treasury frequently had to consider means of relief, such as
advancing the date of payment of interest coupons or the deposit
of gold in the banks. I t is a more wholesome situation to have
responsibilities of this sort borne entirely by an agency independent
of the Treasury and devoted solely to the preservation of sound
monetary conditions.
Federal farm loan system
The unsatisfactory conditions which* developed in some of the
banks of the farm loan system were discussed in my last annual
report. When rumors of these conditions came to my attention it
appeared advisable as chairman ex officio and member of the Farm
Loan Board to report the situation to the full board.
In the fall of 1925, upon the order of the Farm Loan Board, special
examinations were directed to be made of certain of the joint-stock
land banks, and these examinations disclosed improper and unsound
practices as well as apparent violations of the law. These disclosures were brought to the attention of the Department of Justice,
which department took action resulting in the indictment of some of
the officials of three of the banks. Early in 1926 the assistance of
the Bureau of EflBciency was enlisted and, at my request, a survey
was made by that organization of the oflSce operations and procedure
of the Farm Loan Bureau.
These steps developed the fact that the regulations of the Farm
Loan Board were defective in many respects and that the examining
department of the Farm Loan Bureau was inadequate and unable
to cope with this important phase of the situation. The farm loan
act requires that Federal land banks and joint-stock land banks shall
be examined twice a year by examiners appointed by the Farm Loan
Board, and the act creating the Federal intermediate credit banks
provides that they shall be examined and audited at least once a
year. With nearly 80 banks in the system, the board was attempting
to make the required examinations with a force of only five examiners.
,74
REPORT ON THE FINANCES
As a result, some of the banks were not examined for periods ranging
from 12 to 18 months and many of the examinations that were made
were superficial. A number of the national farm-loan associations,
of which there are more than 4,600 and through which the loans
of the Federal land banks are made, had not been examined for
several years and some of them not at all. Furthermore, there
was no adequate analysis of examination reports received by the
bureau, important matters covered by them and requiring attention
were neglected or ignored, and in many instances appropriate
remedial action was not taken to correct abuses which had grown up
in some of the banks over a period of years. The-staff in Washington was insuflicient to properly handle the business of the bureau,
several important phases of the work were not coordinated or systematized, and many of the files and records were in unsatisfactory
condition.
At the instance of the Treasmy, additional funds were made available by the Congress to the Farm Loan Bureau during the latter part
of the fiscal year 1926 and an examining division was organized, with
a chief examiner in charge and an enlarged examining staff. The
rules and regulations of the Farm Loan Board also were revised in
June, 1926, at the instance of the Treasury and other improvements
in practice and procedure were effected.
As the Treasury continued to study the situation, however, it
became more and more apparent that the action taken by it met the
problem only in part. There continued to be lack of harmony in the
board, as well as confusion and indecision in fundamental matters of
policy, and it was clear that the bureau was not organized or equipped
to meet its large administrative and supervisory responsibilities.
At the last session of Congress there was introduced, at the suggestion of the Treasury, a bill proposing certain amendments to the
farm loan act. The bill provided, among other things, for the transfer to the Treasury of the work of examining the banks of the farm
loan system and the handling of accounting matters in connection
therewith. The purpose of this measure was to make more effective
the supervision of the banks of the system. The matter was considered by the Banking and Currency .Committee of the House, but
no action was taken thereon.
Reorganization.—In the early part of May, 1927, three members
of the Farm Loan Board resigned and Messrs. Eugene Meyer, George
R. Cooksey, and Floyd R. Harrison, directors of the War Finance
Corporation, were appointed by the President as their successors,
taking the oath of ofl&ce on May 10, 1927, and Mr. Meyer was
designated by the President as Farm Loan Commissioner. The other
members of the board are Messrs. A. C. Williams, John H. Guill, and
L. J. Pettijohn.
SECRETARY OF THE TREASURY
75
The new members were selected because of their demonstrated
ability and wide experience in the field of agricultural finance gained
largely through the extensive and successful operations of the War
Finance Corporation, which, during the emergency that confronted
agriculture in 1921 and immediately thereafter, made loans aggregating more than $300,000,000 to hundreds of thousands of farmers
through country banks, livestock loan companies, and cooperative
marketing associations. Then* work with the corporation brought
them into contact with agricultural problems throughout the country,
and it was felt that they possessed the special qualifications required
for the task of improving and develaping the administration and
supervision of the farm loan system. Since their appointment, the
board has been functioning harmoniously and the work of the Farm
Loan Bureau has been undergoing a thorough reorganization.
Although much remains to be done, substantial results already have
been accomplished.
With the reorganization of the bureau that is in process, the
Treasury feels that it is not now desirable or necessary to transfer
the examining and accounting functions from the bureau, but the
enactment of some of the other provisions included in the bill proposed by the Treasury at the last session of Congress, which were
designed to clarify or correct defects in the act is, it is believed, very
necessary.
There has been some public discussion about ''Treasury domination'' of the farm loan system. This discussion is undoubtedly due
to a misunderstanding of the situation. When conditions exist in the
Farm Loan Bureau, or any other bureau of the Treasury Department,
which require correction, the Secretary of the Treasury would fail
in his duty if he did not immediately take such steps as lie within his
power to remedy them. The farm loan system has rendered a valuable service to the farmers of the country, and everything possible
should be done to preserve its integrity and to maintain it on a sound
basis. The ability of the system to extend and develop its usefulness
to farmers depends upon its ability to market, in large amounts at
reasonable rates, the bonds of the Federal land banks and joint stock
land banks and the debentures of the Federal intermediate credit
banks, and this in turn depends upon the manner in which the
operations of the system are conducted and the effectiveness of the
supervision exercised by the Farm Loan Board. The only purpose
of the Secretary of the Treasury has. been to improve the administration of the system and to see that adequate safeguards are provided
against the recurrence of the unfortunate conditions which resulted,
in considerable part at least, from the lack of proper supervision,
so that the system may continue to grow and increase its service to
the agricultural interests of the country.
76
REPORT ON T H E FINANCES
Federal land banks.—During the fiscal year ended June 30, 1927,
the Federal land banks closed 40,921 loans, amounting in the aggregate to $147,560,875. Net earnings for the same period amounted to
$9,372,017.80. Against this amount real estate aggregating $4,393,202.08 was charged off, and a portion of the remainder w^as used to
increase reserve and undivided profits accounts from $12,605,498.71
to $13,342,757.14. The net amount of mortgage loans outstanding as
of June 30, 1927, was $1,130,647,908.35. The amount of farm loan
bonds issued by Federal land banks and outstanding as of June 30,
1927, was $1,102,196,980. On May 1, 1927, all the outstanding Federal land bank bonds issued in 1917, 1918, and 1919, aggregating
$92,800,000, bearing interest at the rate of 4% per cent, and dated
May 1 and November 1, 1917, November 1, 1918, and May 1 and
November 1, 1919, were called for redemption, and at the same time
a new issue of $100,650,000, bearing interest at 4i/4 per cent, was
sold for the purpose of refunding the called bonds and providing
additional funds for current requirements. ° During the year the
loan rate of 3 Federal land banks was reduced from 5% per cent
to 5% per cent, of 4 banks from 5% to 5 per cent, and of 1 bank
from 5 ^ per cent to 5 per cent, so that on June 30, 1927, 8 banks
were on a 5 per cent basis, 3 on a 5% per cent basis, and 1 on a 5%
per cent basis.
National farm loan associations increased in number during the
fiscal year from 4,664 to 4,667.
The combined capital stock of all Federal land banks on June 30,
1927, amounted to $60,574,983, of which $59,060,420 w^as owned by
national farm loan associations, $672,555 by individual borrowers,
and $842,008 by the Federal Government. The last named figure
is the balance outstanding of the total of $8,892,130 originally subscribed by the Treasury to the initial capital of the Federal land
banks, which aggregated $9,000,000. Under the law, the capital
provided by the Treasury is retired out of the proceeds of stock
subscriptions by national farm loan associations. On June 30, 1927,
such capital had been retired entirely in eight of the banks.
Joint-stock land banks.—During the fiscal year one joint-stock land
bank was chartered, two were liquidated, one was placed in the
hands of a receiver, and one was being voluntarily liquidated. At
the end of the fiscal year there were 54 joint-stock land banks in
operation, all of the States of the Union being covered by one or
more joint-stock land banks except the New England States, Delaware, Florida, and New Mexico. Since June 30, 1927, two additional banks have been placed in receivership, reducing the number
of going banks to 52.
Loans numbering 6,6.68 were made by joint-stock land banks during the fiscal year in an aggregate amount of $25,725,057.
SECRETARY OF THE TREASURY
77
The combined capital stock of all joint-stock land banks on June
30, 1927, as shown by reports submitted by them to the Farm Loan
Board, was $40,720,485.24; legal reserve, $4,545,538.74; surplus, undivided profits and other net worth accounts, $6,759,392.76. The net
amount of mortgage loans outstanding as of June 30, 1927, was
$607,516,796.92, and the amount of farm loan bonds issued by jointstock land banks and outstanding on June 30, 1927, was $576,531,200.
Receiverships.—Since the close of the fiscal year 1926, three jointstock land banks have been placed in the hands of receivers in order to
conserve their assets and protect the interests of all concerned. A receiver of the Kansas City Joint-Stock Land Bank, with capital stock
of $3,800,000 and outstanding bonds of $44,376,500, was appointed by
the Farm Loan Board on May 4, 1927, and immediately took charge
of its affairs. The bank did not have on hand sufficient funds to meet
the interest due on its bonds on May 1, 1927, and a short time before
the receivership a number of the officers and directors of the bank
were indicted in the Federal court at Kansas City, Mo., for alleged
improper conduct in connection with its operations, involving misapplication of funds of the bank and falsification of its books and
records. The receiver on May 6, 1927, with the approval of the Farm
Loan Board, applied to the United States District Court for the
Western Division of the Western District of Missouri for authority
to issue receiver's certificates, not exceeding $700,000 in the aggregate, for the purpose of meeting the interest due on the bonds of the
bank on May 1 and subsequent dates prior to November 1, 1927.
This authority was granted by the Court on May 9, 1927, and the
receiver issued certificates in the amount of $500,000, all of which
have since been retired. The condition of the bank and its income
did not permit or warrant the receiver to pay the bond interest
falling due on November 1.
- ^
The receiA^er found the affairs of the bank in a chaotic condition;
and relations with subsidiary or affiliated concerns have complicated
the situation greatly, making it exceedingly difficult for the receiver
to trace the various transactions and determine the exact condition
of the bank.
^
The Bankers Joint-Stock Land Bank of Milwaukee, AVis., with
capital stock of $1,200,000 and outstanding bonds of $15,771,600,
failed to pay the interest due on its bonds.on July 1, 1927, and as a
result a receiver was appointed by the Farm Loan Board on that
date to take charge of its affairs. The difficulties of this bank were
due largely to mismanagement.
The Ohio Joint-Stock Land Bank, of Cincinnati, Ohio, defaulted
in the payment of interest due on its bonds on September 1, 1927,
and the Farm Loan Board on that date appointed a receiver to take
charge of its affairs. This bank was one of the smaller institutions
78
REPORT ON T H E FINANCES
of the system. Its capital stock was $250,000, while its outstanding
bonds totaled $1,369,300. I t had issued no bonds since January, 1924,
and had been virtually in liquidation for two or three years.
I n all three cases the receivers have been making every effort to
ascertain the true condition of the banks of which they have charge,
and it is their purpose to make full information available to the
security holders as soon as they are in a position to do so.
Federal intermediate credit banks.—The 12 Federal intermediate
credit banks authorized by the agricultural credits act of March 4,
1923, have been in operation for more than four years. Each bank,
with the exception of that at Columbia, S. C , has a paid-in capital
of $2,000,000, with the right to call upon the Treasury for an additional $3,000,000 of its subscribed capital. I n the case of the Columbia bank, an additional $1,000,000 of capital was paid in by the
Treasury in December, 1926, making its paid-in capital $3,000,000
and the balance of its subscribed capital $2,000,000.
Original advances to cooperative marketing associations from the
beginning of operations to June 30, 1927, aggregated $201,411,957.86,
while renewal notes totaled $132,430,890.89. The amount outstanding
at the close of the fiscal year was $15,520,452.76.
The advances to cooperative marketing associations were distributed by commodities, as follow^s:
Tobacco
.
$62, 614, 909. 50
Cotton
:
83, 721, 406. 85
Raisins
17, 600, 000. 00
Wheat
13, 653, 053. 33
W^ool
6, 095,101. 95
Prunes—1, 956, 800. 00
Canned fruits and vegetables
8, 959, 642. 40
Peanuts
565, 530.00
Rice
4,710,191. 84
Broomcorn
Redtop .seed
Olive oil
Coffee
Hay
Grimm alfalt^a s e e d —
Beans
$335, 447. 60
95,800.00
107,520.00
708, 500. 00
75, 000. 00
163,054.39
50, 000. 00
201, 411, 957. 86
Original rediscounts aggregated $148,022,039.13 and renewals
$64,496,242.51. The amount outstanding at the close of the fiscal
year was $49,530,809.95. The corporations through which these
rediscounts w^ere made are classified as follows:
Agricultural credit corporations
National banks
State banks
Livestock loan companies
__£
Savings banks and t r u s t companies
$96, 323, 406. 84
259, 048. 73
3, 466, 598. 03
47, 278, 234. 46
694, 751.07
148, 022, 039.13
As provided in the law, 50 per cent of the net earnings of these
banks each year must be paid into the Treasury as a franchise tax.
For that part of the year 1923 during which they functioned the
SECRETARY OF THE TREASURY
79
banks paid as a tax $152,271.20; on December 31, 1924, $528,313.30;
at the close of 1925, $508,589.86; and 1926, $413,613.07. The net earnings in these years, based on invested capital, and after providing
substantial reserves, were reported as follows: 1923, 2.7 per cent;
1924, 4.7 per cent; 1925, 4.2 per cent; and 1926, 3.2 per cent. The
decrease in net earnings reported for 1926 was occasioned by losses,
principally by the Columbia bank; by increased reserves amounting
to $377,734.49 set apart by eight other banks; and by the smaller
spread, as compared with previous years, between debenture rates
and rates charged borrowers. Improper conduct on the part of the
officers of a credit corporation for which the Columbia banlc had
discounted a large volume of farmers' notes contributed to the losses
of that bank.
On June 30, 1927, the surplus, reserves, and undivided profits accounts of the 12 banks aggregated $2,280,731.63.
I t is estimated that approximately 141,485 farmers have been
served through the rediscount of their individual. notes and that
995,554 have benefited from the advances made to cooperative marketing associations.
Throughout the fiscal year the interest rate on loans to cooperative
marketing associations continued at 4% per cent and the rate on
rediscounts at 4% per cent. Debentures issued on September 15 w^ere
sold on a 3 % per cent basis, and debentures issued on October 15,
1927, bore interest at the rate of 3 % per cent per annum and were
sold at par, the lowest rate thus far obtained.
Cotton situation in 1926.—Increased acreage, coupled with unusually
favorable weather conditions during the growing season, resulted in
the production in 1926 of the largest crop of cotton ever grown in
this country. Prices declined sharply as the crop moved to market
and in the early part of October, 1926, the President appointed a
committee consisting of the Secretary of the Treasury, the Secretary
of Agriculture, the Secretary of Commerce, Mr. Eugene Meyer,
managing director of the War Finance Corporation; Mr. A. C.
Williams, then Farm Loan Commissioner; and Mr. George R. James,
member of the Federal Reserve Board, to consider the problem with
the view of seeing what assistance could be rendered by the Government. The Farm Loan Board cooperated with the committee and
tendered the facilities of the Federal intermediate credit banks.
Mr. Meyer, as chairman of the committee, and Mr. Williams, of the
Farm Loan Board, visited the principal cotton ^growing States and
held a series of conferences which resulted in action looking toward
the formation of credit corporations, with an aggregate capital of
$16,000,000 and having capacity to borrow from the Federal intermediate credit banks a total of $160,000,000, if necessary, to assist
in financing the storage of the surplus JFor a period of 18 months, or
80
REPORT ON T H E FINANCES
until it could be marketed in an orderly manner. These organizations
were intended to supplement the facilities of the cooperative marketing associations and other agencies and to provide machinery through
which the resources of the intermediate credit banks could be made
available on a larger scale during the emergency than otherwise
would have been possible. Unquestionably the plan for the formation of the credit corporations, and the readiness and ability of the
intermediate credit banks to make advances through them, as well
as through the cooperative marketing associations and other agencies,
running into the hundreds of millions of dollars, were a vital factor in
stabilizing the market and preventiug further demoralization in prices.
The very fact that machinery was being set up to take advantage
of the facilities of the intermediate credit banks in a way and on a
scale that would insure an orderly marketing program changed the
psychology of the situation, stimulated freer advances by banks arid
other lending agencies, encouraged the owners of cotton to-slow up
on selling, which was going on at a panicky rate, gave greater confidence to buyers at home and abroad, as well as to producers, and
steadied conditions generally by providing more time for the absorption and better handling of the crop by the normal agencies. In
fact, many of those familiar with the situation have expressed the
opinion that b u t for the action taken there would have been a further
substantial decline in prices.
Flood situation.—The Federal intermediate credit banks played a
part in helping to meet the problems arising out of the flood conditions in the Mississippi Valley. Following conferences in Washington with representative business men and bankers from the
flooded districts, the intermediate credit banks at St. Louis and
New Orleans, with the approval of the Farm Loan Board, agreed to
make advances to farmers in the affected areas, through special
credit corporations organized by the local interests, to enable them
to replant their crops and continue their operations. Special credit
corporations were formed in Arkansas and Mississippi, each with
$500,000 capital, while in Louisiana plans were formulated to utilize
the facihties of the cotton financtug organization, with a capital of
approximately $750,000, which was created in the fall of 1926 to
assist in stabilizing the cotton situation. Subsequently, at the
request of the President, the United States Chamber of Commerce
undertook to raise among the business men and bankers of the
country outside of the flooded sections sufl&cient funds to match the
capital provided by the local interests and assist in the work of
rehabilitation. The facihties of the intermediate credit banks were
not utihzed to a great extent, but the knowledge that their resources
were available in case of need not only facihtated the operations of
the credit corporations but Helped to maintain confldence generally.
SECRETARY OF THE TREASURY .
81.
I t is expected that these credit corporations will continue to function
next year, and that they may make wider use of the privilege of rediscounting with the intermediate credit banks.
Federal public buildings program
Program for buildings in the District qf Columbia.—In my last report
there was included a statement of some general considerations bearing
on the Federal building program for the District of Columbia. Since
then study has been continued on this great project, which is necessarily of vital importance to thejdevelopment of the National Capital.
From a consideration of the placement for such buildings as the
Federal Government may construct under the present authorization^
it soon became evident that the future expansion of the Government's
housing needs called for a decision as to whether the Government's
policy should be aligned with one or the other of two opposing ideas.
According to one of these. Government buildings should be sepa^
rated by locating them in various parts of the District, each building
treated individually, each creating its own center of actiYities and
personnel, &]}. depending for interdepartmental communication on
the various methods of rapid transit and transportation that play
their part in the equipment of a modern city. Whereas, from the
second point of view, the grouping of new Federal buildings in one
large area under a system of reasonable concentration interspersed
with open spaces would better serve the Government's needs. This
department unhesitatingly recommends the latter plan as the means
of accomplishing certain very^definite objectives which include the
following:
1. With the dominating position which the Capitol Building occupies, and with the White House, the Lincoln Memorial, the Mall,
and the bridge to Arlington in their respective locations, there is set
up a series of isolated focal points of the major plan. In furtherance
of this plan it is proposed to form a connecting link by the establishment of a° group of buildings worked out with due regard to the
maintenance of a proper relationship to the Mall and to the other
focal points of this portion of the city's plan.
2. The grouping of the new buildings places them in such relation
to each other that the transaction of public business is facilitated.
. 3 . In reclaiming the south side of Pennsylvania Avenue, the
opportunity is presented to dignify that thoroughfare as an important
artery between the Capitol and the White House; and by the rehabihtation of B Street, a second important fine of circulation is created
connecting the Capitol with the Lincoln Memorial and the bridge
to Arhngton.
4. The proposed grouping gives recognition to the plan of L'Enfant,
and accords with steps heretofore taken by officiaUy appointed commissions in furtherance of that plan..
82
REPORT ON T H E FINANCES
To give assurance that the solution of the problem in hand would
be conceived with breadth of vision and a thorough recognition of
all the elements involved in it, advantage has been taken of the
provisions of the act of May 25, 1926, permitting the employment
of advisory technical service. Five nationally laiown architects
have been retained to act with the Supervising Architect's Oflice in
giving direction to the problem for Federal buildings in the District
of Columbia. By this means, and wdth a keen appreciation of the
importance of the task which Congress has entrusted to the Treasury
Department in placing this building program under its supervision,
a general plan has been devised for a group of buildings. As now
proposed, it looks to the acquirement by the Federal Government
of the entire triangle of land bounded by Fifteenth, B, and Sixth
Streets and Pennsylvania Avenue. Given the present authorizations for the construction of three buildings for the Department of
Commerce, Internal Revenue, and National Archives, respectively,
and the very obvious necessity for relating these buildings to other
future buildings which are even now needed to efiminate rental
charges and temporary housing of a very unsatisfactory character,
the general plan as developed gives opportunity for the placement
of eight other Federal buildings in an orderly and related way in
addition to the three now authorized.
In the composition of the general layout great care has been exercised to avoid overconcentration in the socalled triangle area. With
a grouping of public buildings which are to be used for the purposes
in view, there is a real problem involved in avoiding congestion of
trafiic incident to the assemblage of the large number of people employed in the buildings and those coming to this area for the transaction of business. The difficulty in question is avoided by introducing into the scheme a large open plaza which not only serves the
purpose of opening up the general plan, but also forms a major point
of interest when treated with planting and framed with monumental
buildings. In further extension of this principle a secondary plaza,
circular in plan, occurs adjoining the first, from which through openings of ample size a vista is obtained between the two open spaces,
bringing into the composition that imaginative element which is so
essential to success in planning a project of this kind. With these
open spaces and a proper treatment of streets and parkways, with
the possibility of subsurface levels for automobile parking, and provisions by which rapid transit facilities and vehicular and pedestrian
traffic may effective!}^ operate, a comprehensive solution of the entire
problem is promised.
In approaching the subject of new Federal buildiugs for Washington the department has not failed to note the opinions of those who
see in such a project a great opportunity for casting aside the estab-
SECRETARY OF THE TREASURY
83
lished precedent in architectural forms and following in the vrhke of
those who see progress only in the employment of new forms and new
relationships of forms; but for the National Capital there are other
considerations involved. The early builders have here set a very
definite stamp on the character of buildings erected for the Federal
Government, and the spirit of this is suflElciently marked to have
become a tradition which may not be lightly disregarded. I t seems
eminently fitting that the United States Government should cherish
its national inheritance and should perpetuate in the National Capital
the general spirit of the architectural character expressed in the best
of the earlier Government buildings in Washington. With this in
view, the new buildings will take on the character of the eighteenth
century adaptation of the classic style, seeking to maintain such a
measure of difference in the treatment of the several buildings as may
be necessary to obtain a unified individuality free from the monotony
of a stereotyped repetition.
In carrying on the work of this program conferences have been
held with the National Commission of Fine Arts and the National
Capitol Park and Planning Commission to avoid the possibility of
conflict with related matters intrusted to those commissions. The
layout as described has received the approval of the Public Buildings
Commission, charged with the duty of designating sites for Federal
buUdings in the District of Columbia, and the approval of space
allotments to the various activities to be carried on therein.
Program for buildings outside the District of Columbia.—The Si.xtyninth Congress during the second session inaugurated a new policy
in respect to public building construction, placing upon the Secretary
of the Treasury and the Postmaster General the duty of ascertaining
construction needs throughout the country and submitting to Congress recommendations for appropriations.
The act, approved May 25, 1926, authorized a total of approximately $165,000,000 to be expended at the rate of not exceeding
$25,000,000 per annum, of which $10,000,000 may be expended in the
District of Columbia.
I n order to ascertain building needs throughout the country surveys have been made of 1,950 places, partly by means of questionnaires and in the most important cases by personal inspection; based
upon which recommendations have been submitted to Congress in a
report which was printed as House Document No. 710, second session.
Sixty-ninth Congress. As the bill in the last session of the Congress
carrying appropriations for public buildings failed of passage in the
Senate, only such projects could be taken up as had been previously
authorized and for which appropriations had been made in whole or
in part.
!S4
REPORT ON THE FINANCES
The act of July 3, 1926, made appropriation for carrying out a
portion of this program involving (under sec. 3) 69 projects previously authorized but for which the limit of cost was insufficient, and
(under sec. 5) 8 additional projects, making a total of 77 projects
exclusive of the District of Columbia. To carry out this worfc it
was necessary to make a large increase in the technical force and a
lesser increase in the clerical force, w^hich was accomplished with the
assistance of the Civil Service Commission within six months. Of the
77 places enumerated in the act, 69 were included in section 3, of which
23 involve the acquisition of sites. As the titles to only 4 have
been secured, 19 projects are necessarily deferred. Of the remaining 50, there are 6 where the limit of cost is still insufficient, so that
there are only 44 workable projects; the working drawings for
most of these have been completed, and on June 30, 1927, 24 were
under contract, involving $4,006,465. I t is expected that the remaining 20 will be placed under contract during the fiscal year 1928,
besides the 19 involving acquisition of sites, provided titles to the
sites are secured in time through the Department of Justice.
Under section 5 eight items are authorized, exclusive of the District of Columbia; three are for the purchase of sites only, which
have been acquired; four projects have been placed under contract
involving $899,636; and the eighth project (Memphis, Tenn.) has
been delayed with the intention of securing amended legislation.
Revision of paper currency designs
In former reports reference has been made to the revision of paper
currency designs, which has been before the department for many
years, and to the reasons which prompted the restudy of the whole
situation wliich was undertaken two years ago. This restudy has
been completed, conclusions have been reached, and new designs are
in process of execution.
The most important of the conclusions reached provides for reduction in size. The present size of currency is 7-rg- by 33^ inches.
The new size wUl be 6 i ^ by 2{i inches. Public announcement of
the reduction in size was made on May 26, 1927. A copy of the
announcement wiU be found on page 369 of this report.
As the reduction in size will require new engraved work throughout,
the elimination of unnecessary designs will be greatly facilitated and
correction of the confusion now existing in outstanding currency
issues wUl be insured. Current issues present a different design for
each face and back of each denomination of each kind of currency.
For the new issues there wUl be uniform characteristic designs for
the face and back, respectively, of each denomination regardless of
the class of currency, with only enough variation in minor detaUs of
the face designs to indicate the class. As an example, the respective
85
SECRETARY OF THE TREASURY
face and back designs of all $10 bUls wUl be substantially uniform,
whether the bUl is a gold certificate or a Federal reserve note, or
any other kind of currency. The finely engraved portraits executed
at the Bureau of Engraving and Printing will continue to be the
outstanding protective feature against counterfeiting, and the definite
assignment of particular portraits as indicative of denomination will
be the outstanding protective feature against raising of denominations.
Reduction in size is the first radical change in design since the
original issue of paper currency by the Government in 1861. This
step will prove of very great practical importance, for apart from
important economies infproduction that wUl be brought about, it
will.insure that existing facUities for producing currency wUl be
able to meet current demands without difficulty, and provide for a
greatly increased output if required.
During the past decade there has been a notable change in the
paper currency outstanding. The normal increase in the population
and wealth of this country has required additions to the circulating
media. At the same time there has been a constant demand for
more bUls of the smaller denominations. The change in the paper
currency outstanding between July 1, 1917, and July 1, 1927, may
be appreciated by reference to the following table:
J u l y 1, 1917
T o t a l gold a n d silver, m o n e y stock
Paper currency outstanding:
Amount
N u m b e r of pieces
_
Average a m o u n t per piece
Average n u m b e r pieces per c a p i t a . . . .
Average a m o u n t per c a p i t a
J u l y 1, 1927
Increase
$3,857,710,653
$5,398,836,963
$1,541,126,310
40
_ $4,212,422,700
536,571,429
$7.85
5.15
$40.44
$5,715,031,422
865,301,312
$6.80
7.40
$48.87
$1,502,608, 722
328,729,883
1 $1.05
2.25
$8.43
35.6
61
1 13.3
43.7
20.8
P e r cent
1 Decrease.
During the fiscal year 1917 the bureau delivered 514,688,180 pieces
of paper currency. During the fiscal year 1927 the bureau delivered
992,339,984 pieces. Deliveries during 1927 were not all utilized for
issue, a portion being set apart as a necessary reserve under an emergency printing program authorized for^the purpose. Accordingly the
currency in circulation was maintained at a standard fixed several
years ago, with the result that a large part of paper currency outstanding is below a standard acceptable by the public only under
protest. The presence in circulation of worn-out bills or bills
approaching that condition is a constant menace to the security of
the currency, facilitating, as it does, the circulation of spurious issues.
Within its facilities the department has been unable to improve this
condition and at the same time meet increased demands and set
apart during the three-year period the equivalent of three months'
reserves of new notes. To meet the situation which has existed for
86
REPORT ON T H E FINANCES
many years and which continues, it became more and more apparent that plans must be considered for increasie in production.
Reduction in size wUl solve all difl&culties in this respect and obviate
the necessity for greatly increased appropriations. Aside from this
practical consideration, however, other benefits w^ill accrue through
reduction in size. Convenience of the public will be served through
the greater facility with which the smaller notes may be handled or
carried. A substantial saving in the cost of production will be
brought about, and at the same time it will be possible to improve
the standard of bills in circulation.
It is not possible at this time to state definitely when the reducedsize bills will be issued. The change involves entirely new engraved
work at the bureau and many changes in the mechanical equipment.
The full program will doubtless extend to the close of the fiscal year
1929, and thereafter only bills of the smaller size wUl be produced.
It is now believed that the issue of silver certificates of the $1 denomination in reduced size will be made about October 1, 1928, and t h a t
the issue of all other denominations of all Idnds will be made toward
the close of the fiscal year ending June 30, 1929. The program for
reducing the size at present makes no provision for national-bank
notes. Such provision, however, will be made if later it is determined that national-bank notes shall continue indefinitely after April
1, 1930, as a part of the money circulation of the United States.
The McFadden Act
The legislation, popularly known as the McFadden Banking Act,
became effective on February 25, 1927, three years after its first
introduction in Congress. The bill originated in the Treasury and
its passage was urged by this department throughout its discussion.
The McFadden Act is generally acknowledged as one of the most
significant measures passed during the last session of Congress, and
represents the most important piece of banking legislation enacted
since the passage of the Federal reserve act. I t revises the national
banking act in a number of ways, bringing it into conformity with
administrative rulings and current practice. Its more important
provisions, however, are those increasing the powers of national banks,,
making them commensurate with those of State banks, and t h a t
granting indeterminate charters to the Federal reserve banks. T h e
fundamental purpose of these provisions is to strengthen and perpetuate the Federal reserve and national banking systems, and in
this lies the great importance of the act.
We have in the United States two systems of banks—State and
National—which enter potentially the same field. They serve the
same class of customers and cooperate in the same clearing houses.
WhUe the State banks are invited to join the Federal reserve system,.
SECRETARY OF THE TREASURY
~
87
the national banks are the backbone of the system, since they are
required by law to become members. The perpetuity of the Federal
reserve system, consequently, demands that national banks shall
enjoy charter powers coordinate with those of State banks.
Postwar economic conditions developed many changes in the procedure of corporate financing and in business methods and organization, all of which demanded commensurate adjustments in the field
of banking. The State banks, in many States, secured a broadening
of their charter powers soon after the close of the war, and to some
extent Congress also liberalized the national bank act. But the
disparity bf competitive opportunity between the two institutions
was suflftciently great to cause many national banks, in recent years,
to withdraw from the national system and take State charters.
Although it is yet too early to judge its full effect (only eight months
having elapsed since passage) the passage of the McFadden Act
has been fully justified as the additions to the resources of the national
banking system have more than offset the losses during the three-year
period prior to the enactment of the act.
Because of the controversy aroused, the branch banking proVisions of the McFadden Act, giving to national banks intracity
branch banking privileges commensurate with those of State banks
in the same States, w^ere thrown into great prominence. Now that
the bill has become law and is in actual operation, the branch banking
provisions appear in their proper perspective, and the importance of
other provisions of an equalizing nature has become apparent.
Although the section granting the Federal reserve banks indeterminate charters was added to the original bill as an amendment during
the 1925-26 session of Congress, it is without doubt one of the most
important and significant sections of the act. Coupled with the
similar provision for the perpetuity of national bank charters, it has
placed the entire banking system of the country on a permanent
basis, and outside the field of partisan controversy. With the
charters of the Federal reserve banks now perpetuated indefinitely,
no partisan minority can bring the Federal reserve system to an
end, as might have been possible were renewal legislation necessary.
A majority of both Houses of Congress and the approval of the
President now would be required to terminate the Federal reserve
system, and this could be accomplished only if the country as a whole
were distinctly dissatisfied with the instiUition. This system which
in so short a life, under such trying circumstances, has proved itself
invaluable, both nationally and internationally, richly deserves the
statesmanlike confidence w^hich Congress showed in assuring its continuity, and will inevitably further demonstrate its value in our
increasingly complex financiail world of the future.
64761—FI 1927
8
88
REPORT ON T H E FINANCES
Money cost ofthe World War to the United States Government
The last oflScial statement of the money cost of the World War to
the United States Government was contained in the Annual Report
of the Secretary of the Treasury for the fiscal year ended June 30,
1920. After deducting the amount of loans to foreign governments,
the net cost to that date was estimated at slightly over $24,000,000,000. Since that statement was prepared additional expenditures
have been made on account of the w^ar, which, together with certain
necessary adjustments, have materially increased the amount as estimated up to 1920.
For the purpose of a new estimate of the cost of the war, the
*^war period" has been taken as extending from April 6, 1917, to
June 30, 1921. This is based on a proclamation of the President
dated November 14, 1921, declaring that the state of war between
Germany and the United States officially ended July 2, 1921. It is
not possible to ascertain accurately the exact cost of the war on
account of the fact that it is necessary to deduct from the total
expenditures the estimated normal expenditures of the Government
for the war period, and in some instances it is necessary to estimate the value of the assets on hand. During the past year the
Treasury has, however, made a detailed analysis of the total expenditures of the Government for the war period, as well as of the continuing costs thereafter up to June 30, 1927. As a result of this
analysis it is believed that a conservative estimate of the net cost
of the war to the United States to that date has been ascertained.
This estimate makes allowances for the estimated normal expenditures under the War and Navy Departments on a peace-time basis,
receipts on account of the sale of war supplies and surplus government property, etc., and assets held on June 30, 1921, except the
foreign obligations and the amount due from Germany on account of
reimbursement of the costs of the American Army of Occupation
which are taken as of June 30, 1927. Some of the assets shown as
held on June 30, 1921, have, subsequent to that date, been converted
into cash and covered into the Treasury. The receipts and assets
are credited against the total war expenditures.
It is not believed that the assets representing obligations of foreign
governments and claims against Germany for Army costs should be
listed at their face value, but should be stated at their present value
based upon the average ra*te of interest the United States is paying
on its public debt. This average rate was on June 30, 1927, slightly
under 4 per cent per annum. The payments, therefore, to be received
under the various funding agreements have been discounted so as to
show their present value on a basis of 4 per cent per annum, payable
semiannually. This amounts to approximately $7,440,000,000, or
EEPOBT OF THE SECEETAEY OP THE TEEASUEY
89
about 60 per cent of the value of these foreign debts based on the
terms of the original obligations. Assuming that Austria and Greece
will settle their debts on the same average basis, 60 per cent thereof or
$30,000,000 should be added to the above. On account of the present
oonditions in Armenia and Russia the indebtedness of these governments has been eliminated from the assets. The total assets representing foreign obligations are, therefore, $7,470,000,000.
The amount due from Germany on account of reimbursement of
the costs of the American Army of Occupation was on June 30, 1927,
approximately $225,000,000. The United States is to receive
annually out of the Dawes annuities the sum of 55,000,000 gold marks
until this claim is satisfied. Assuming, therefore, that the United
States will receive on this account the sum of $13,000,000 per annum
for 17 years, the present value of this asset, discounted on the
same basis as the^ foreign obligations, amounts to approximately
$158,000,000.
The continuing costs of the war are the expenses of the Veterans'
Bureau, interest on t h a t part of the pubhc debt of the United States
created as a result of the war, and construction of hospitals for the
care of veterans of the war.
There follows a summary statement showing the net war costs
under the various headings, the details of which will be found in
Table 78, page 642. The war expenditures of the War and Navy
Departments, the United States Shipping Board, and the United
States Railroad Administration, have been submitted to those departments and establishments and have been approved as herein stated
as fairly representing their war expenditures.
Total war costs
Military activities
Naval activities
War emergency corporations
War expenditures under other departments and war agencies
Interest on war debt to June 30,1927
Foreign obligations (June 30,1927)
Veterans' Bureau (continuing costs to
June 30,1927)
Total
:
Receipts
Assets June
30,1921
(partly
estimated)
Net war costs
$16,283, 669,220 $981, 573, 735 $452,401, 819 $14,849,593,666
3,401,342, 951
3, 480, 781, 737
24,438,786
55,000,000
3,007,411,483
4,387,600, 269 487, 728, 506 892,460, 280
3, 541,823, 843 446, 746,177
8,116,343,095
9, 598,236, 575 1, 743,930,407
7, 470, OCO, 000
283, 370,479
2, 811, 707,186
8,116,343,095
384,306,169
47, 957, 272,333 3,684,417,611 9,153, 232, 578
35,119, 622,144
2, 548,917, 595
2, 548,917,696
Inauguration of the statement of expenditures on the basis of checks
issued
I t has been realized for some time that a more accurate method
should be devised for exhibiting the detailed expenditures of the
Government in the annual reports than the one heretofore observed.
90
REPORT ON T H E FINANCES
Except in the case of the daily Treasury statements the detailed expenditures have been exhibited on the basis of warrants issued
against appropriations provided by Congress in accordance with section 305 of the Revised Statutes. Accountable w^arrants, so called
because the disbursing officers must regularly account for expenditures therefrom, are issued to place funds to the credit of disbursing
officers upon the books of the Treasurer of the United States, subject
to their official check for the payment of Government obligations.Settlement Avarrants authorize the Treasurer to make direct payments to claimants upon settlements of the accounting officers.
Funds placed to the credit of disbursing officers by means of
accountable warrants have been exhibited heretofore as expenditures
during the period in which such advances were made. As a matter
of fact, some of the inoney in many instances is not actually spent
until the period following the one in Avhich the advance is made,,
and, to some extent, not at all, the unexpended portion being returned
to the appropriation accounts on the books of the Secretary of the
Treasury in a subsequent period, which operates to reduce expenditures on a warrant basis for that year. The expenditures on a warrant basis, therefore, do not accurately reflect the trend of governmental expenditures since they include unexpended balances remaining to the credit of disbursing officers at the end of the year but not
expenditures from unexpended balances at the beginning of the year.
I t may be stated, however, that the differences between the expenditures on a warrant and check-issue basis are not so material in cases
where the unexpended balances to the credit of disbursing officers
remain more or less constant from year to year.
In the early history of the Government when payments to public
creditors were made by direct Treasury warrant, the warrants issued
during a given flscal year represented the actual expenditures of the
Government. Subsequently, however, as the expenditures increased
with the growth of governmental activities and it was found impractical to make all payments by direct warrants, advances or
credits in round amounts were authorized to be established in favor
of disbursing officers, so that, at the present time the major part of
the general expenditures of the Government are made by means of
disbursing officers' checks from funds advanced to them upon accountable warrants as stated above. The funds thus advanced are
placed to the credit of disbursing officers practical^ as a bookkeeping
expedient, and, to the extent that the unexpended balances of the
funds so advanced vary between the beginning and close of the fiscal
year, the warrant expenditures differ from the actual expenditure?
for that year.
Before the World War these balances averaged about $60,000,000.
On account of the enormously increased expenditures of the war
SECRETARY OF THE TREASURY
91
period, which gradually increased until they reached over $2,000,000,000 a month, the balances of disbursing officers averaged over
$2,000,000,000 for a long period of time. With the decrease in expenditures, these balances have gradually decreased until at present
the active balances are about $300,000,000 and will probably remain
near that figure for some time.
In order to correct the situation described above and exhibit the
•expenditures on the best practicable basis, the several departments
and establishments have cooperated with the Treasury in furnishing
the unexpended balances to the credit of disbursing officers under
their respective jurisdiction at the beginning and end of the fiscal
year 1927, classified by appropriations. These figures, when used in
conjunction with the warrants issued during this year, make it possible to include checks drawn during 1927 against unexpended balanced
of disbursing officers at the beginning of the fiscal year, and to
exclude from expenditures all unexpended balances remaining in
their hands or to their credit at the close of the year. Detailed expenditures on the new basis are shown in Table 3, page 425.
When comparative figures are obtained for expenditures on the
basis of checks issued during the fiscal year 1928, it is contemplated
that the exhibit of expenditures on the basis of warrants issued, as
shown in Table 5, page 436, will be discontinued.
ADMINISTRATION AND ORGANIZATION
Changes in Treasury organization
In my last annual report mention was made of the recommendation
of the Treasury for the enactment of legislation to provide for bureau
organizations for the Customs Service and the Prohibition Unit. The
magnitude of the operations of the Customs Service had long since
called for an organization on a basis comparable to that of other major
branches of the department in order to secure a more effective and
direct supervision of that service. There was equal need for the
creation of a Bureau of Prohibition, with the additional necessity for
granting relief to the Commissioner of Internal Revenue in order that
he might be free to devote his w^hole attention to the vast operations
of the Internal Revenue Service. Jn accordance with the law then
governing, he had exercised dual supervision with the Commissioner
of Prohibition over the operations of the Prohibition Unit. By
legislative enactment of March 3, 1927, authority was granted to
carry out the recommendation of the Treasury for the creation of
these two bureaus and steps were taken for their organization,
orders being issued effective April 1, 1927, to govern their operations. Further reference to the organization of these bureaus will
CO
5ECRETAKY
OF T H E
TREASURY •
UNDERSECRETARY
ASSISTAMT
SECRETARY
IN CHAR&E or
CUSTOMS^ COAST GUARD
AHD
PROHIBITION
CU6TDM& SERVICE
/\
COAST CUAW
ASSISTANT
T H L FISCAL
ASSlSTAirr SECRtTARy
SECRETARY
IN CHAROL OP
PUBUC BI»IU)1H85 AND
MISCtUtANEbOS
INTE.RMAL
EtVESUf
s e nV i c t
TOR.EI0H UQ^>»
/\
Division Ojf ••
BOOKKEtPmo
AND
COMPTftOLLCR
/\
CURRtNCY
BUREAU OP
PUDLIC HEALTH
SERVICE
THE. PlHANCES
COMMISSIONER
CENER.AL
OP T H E
PUBLIC
DEBT
DIVISION OP
POBuc t e v T
A t t o n r r s * AUDIT
/\
/\
TREASURER
o r THE
WITED
3TATO
/\
CHIEF CLERK
/\
T O RAILROADS.
DIAGRAM J3.-^Organiz8tion of the Treasury Department, November 1, 1927
COHWITTEE
/\
A
3UPERVI51N6
ARCHITECTS
OPFICB.
.
APPOIKTMEHTS
SECTION Of
6URETV
BONOS
SECRETARY OF THE TREASURY
93
be found below on pages 113 and 117, and copies of the orders
regulating their operations will be found as Exhibits 33 and 34, pages
340 and 347.
By order of June 3, 1927, the Section of Statistics in the OflBce of
the Secretary (Commissioner of Accounts and Deposits) was changed
to the Section of Financial and Economic Research in order more
clearly to imply the nature of its functions.
By virtue of legislative enactment in the appropriation act of
January 26, 1927, a Division of Supply was established in the Treasury, taking over the functions of the Bureau of Supply and
the Division of Printing, the existence of the latter offices being
terminated.
Following the appointment of new ofl&cials to the oflBces of Undersecretary and Assistant Secretary, reassignments of bureaus and
oflBces and divisions of the Secretary's ofl&ce to the administrative
supervision of the Undersecretary and the Assistant Secretaries
were made on two occasions during the year, as provided in revisions of Department Circular No. 244, of June 7, 1927 (Exhibit 41,
p. 378), and of November 1, 1927 (Exhibit 42, p. 380). Under the
revision of June 7 major changes in assignments were the transfer
from the Assistant Secretary in charge of Internal Revenue and
Miscellaneous to the Undersecretary of supervision over the Intemal
Revenue Service, and of the Federal Farm Loan Bureau from the
Undersecretary to the Fiscal Assistant Secretary. Changes of
simUar importance made under the revision of November 1 were the
transfer from the Undersecretary to the Fiscal Assistant Secretary
of supervision over the Internal Revenue Service; and from the
Fiscal Assistant Secretary to the Undersecretary of the Commissioner of the Public Debt, the Treasurer of the United States, and
the Federal Farm Loan Bureau.
Bureau of Internal Revenue
Previously in this report there have been enumerated certain
recommendations for improving the administration of the income
taxes. The special administrative committee that proposed these
recommendations based them on their findings in a comprehensive
survey of the work of the Bureau of Internal Revenue. Certain
portions of their report on this survey that I desire to bring especially
to your attention are quoted in the following paragraphs:
Present status of the work.
The work of the Bureau of Internal Revenue is practically current to-day; 99.8 per cent of all returns filed for years prior to 1923
have been closed, and 99.5 per cent of all returns filed for years prior
to 1924 have been closed. All the returns filed for 1923 will be closed
by December 31, 1927. According to the present program, the returns for 1924 will be audited by June 30, 1928, and the 1925 returns
94
REPORT ON THE FINAlSrCES
by September 30, 1928. Seventy-six per cent of the 1926 returns
already are accepted and closed, and 87 per cent of the 1926 returns
will be finally closed by the end of this year. Following a practice
which has recently been adopted, each taxpayer w^hose return has
been accepted has been notified by the Commissioner of Internal
Revenue. Stated in numbers of returns, the job before the bureau
with respect to returns filed for j^ears prior to 1926 was, on October
14, 1927, as follows:
Number of i-eturns for years 1917 to 1925, i^iclusive, to be audited as of
October IJ,, 1927
Number
of r e t u r n s
Year
1917
.
1918
3919. .
1920
1921
1922
_
^
512
736
1,035
1,615
1.818
3,662
Number
of r e t u r n
Year
1923
1924
1925
.--Total
.
20,445
81,482
213,824
325,129
There appears in the appendix a tabulation showing the results of
the survey, by internal revenue agents located in offices of collectors
of internal revenue, of returns filed for the calendar year 1926.
I N D I V I D U A L AND CORPOKATION
KETURNS
Number of returns filed for the years 101.7 to 1926, inclusive
The following table gives the number of individual and corporation
returns (partnership, fiduciary, and other information returns are
not included) filed for the years 1917 to 1926, inclusive. I t appears
that the total number of returns has fallen oft rapidly since 1923.
These figures, however, should be examined in connection with the
second following table, w^hich shows that the number of larger returns—those entailing the greater labor of audit and i n t e r p r e t a t i o n has steadily and striking!}'^ increased.
Years
1917
1918
1919
19201921
1922
1923..
1924
1925
1926
Total
.
1040-A
1120
Total
. 432, 602
478, 962
657, 659
784,511
695, 607
730,780
625, 897
697,138
830, 670
1,864,332
3,040, 228
3, 946,152
4. 675,101
7, 253, 272
0,162, 818
6,160,289
7, 327, 551
6, 716, 854
3, 451, 391
2,118,683
351, 426
317,579
320,198
345, 595
356, 397
382, 883
398, 933
417, 421
430, 072
470, 622
3,824,316
4, 742, 693
5, 652, 958
8, 383, 378
7 214 822
7,273, 952
8, 352, 381
7, 831, 413
i , 712,133
4,453, 637
7, 798, 218
50, 852, 339
3,791,126
62,441, 683
1040
All 1917 returns Avere forwarded to Washington. All individual
returns for 1918 to 1922 filed on Form 1040 and showing net income,
and all corporation returns w^ere forwarded to Washington. All
individual returns for 1923 showing gross income in excess of $15,000,
and all corporation returns were forwarded to Washington. All
95
SECRETARY OF T H E TREASURY
individual returns for 1924 and 1925 showing gross income in excess
of $25,000, and all corporation returns were forAvarded to Washington. All individual returns filed on Form 1040 and all corporation
returns for 1926 w^ere surveyed by field forces of Income Tax Unit
under the preliminary audit theory and forwarded to Washington.
There follow^s a tabulation showing the enormous increase in the
number of returns filed by corporations and the larger individual
taxpayers over the five-year period from 1922 "to 1926. A corresponding increase for the future may be expected.
Table showing total number of corporation returns filed in each of the calendar
years 1922-1927, individual returns by size of net income for the same years,
per cent of increase or decrease over the preceding year, and the per cent of
inc7'ease for 1927 over 1922
1
Corporation returns
N e t income
u n d e r $5,000
1
I n c o m e year
C
1
1921__
1922
1923._
1924-1925-1926.
Individual returns
1922
1923
1924
1925
11926
»1927
S?
\H
ca
fl p fl
§|-^
a
N e t i n c o m e N e t i n c o m e N e t income N e t income
$50,000$100,000$300,000
$5,000$300,000
a n d over
$100,000
$50,000
11
P
24
-47
o
"fl ^.
CO
1-2
S-3
356,397
6,136, 570
514, 537
382,883 "7."43 6,193,270 ""5.'92 678,180
398.933 4.19 7,072,424 14.20 609,263
417,421 4.63 6,672,650 - 6 . 6 6 675,607
430,072 3.03 3,340,381 - 4 9 . 94 800,152
442,251 2.83 3,227,674 - 3 . 4 0 817,971
Rateofincreasein
n u m b e r of re- •
t u r n s filed in
1927 1 over 1922,
per cent
o
"fl ^
59
8,717
12^37 12,000
5.38 12,452
10.89 15,816
18.43 20,958
2.22 20,361
2,106
"37."66 3,494
3. 77 3,640
27.02 4,941
32.51 7,982
- 2 . 9 0 7,964
13."^
246
'65.'9i 637 118.29
4.17 542
.93
35.74 774 42.80
61.54 1, 578 ia^.87
- . 2 3 1, 582|
. 25
278
543
» For 1927 the figures represent returns filed up to Aug. 31. When all returns up to Dee. 31, are filed
the small decrea.se, as compared with the calendar year 1926, for tbe income classes $50,000 to $100,000 and
$100,000 to $300,000 will be overcome.
The manner in which the accumulation before the bureau has been
reduced is best shown by study of the followdng tabulation which
indicates the balances on hand at the end of the several fiscal periods
from that ended June 30, 1923, to that ended June 30, 1927:
Balances af returns on hand at end of fiscal periods from 1923 to 1927
June 30, 1923
June 30, 1024
June 30, 1025
June 30, 1020
June 30, 1027
3, 032, 544
2,430,044
2, Oil, 084
742, 740
474, 535
I n the space of five years the bureau had on June 30, 1927, reduced
the accumulation with which it was confronted on June 30,1923, from
3,032,544 cases to 474,535 cases, besides keeping pace with the current
returns as they were filed.
96
REPORT ON THE FINANCES
Statistics of cases remaining open
The following table gives complete statistics for the years 1917 to
1925, both inclusive, of the number of returns audited and the
percentage remaining open:
Percentages of returns for 1917 to 1925 remaining open on June SO, 1927
Total
closed
to d a t e
R e t u r n years
1917
19181919
1920..
1921.
1,312.980
1, 274,134
1,498, 590
1, 642. 268
1,471,218
Percentage
remaining
open J u n e
30,1927
.
0.05
.05
.08
.13
.14
R e t u r n years
1922
1923
1924
1925
Total
closed
to d a t e
1,552,925
1,236,945
1,024,486
673,679
Percentage
remaining
open J u n e
30,1927
0 33
2.77
9.51
33.62
What is meant by " curre7it"
I t might be well at this time to explain what is meant by " current."
I n the opinion of the Treasury, the administration of any particular
year is " current" when all the returns for that year are, or will be,
audited within a reasonable period prior to the expiration of the
period allowed by law for the assessment of additional amounts
lound due or for the refund of amounts overpaid. For example, in
the case of a three-year statute of limitation upon assessments the
audit should be completed within two and one-half years after the
returns were filed. During 1927 it will be possible to complete all
the audits for 1923. This is the first time it has been possible to
complete the audit of any year prior to the running of the statute of
limitations for that year. There are to-day less than 22,000 returns
for 1923 in process of audit, and they will be closed by December 31
of this year, while the applicable statute of limitations will not expire
until March 15, 1928. The Treasury is confident that, if given the
necessary cooperation, the. returns for 1924 and all subsequent years
will be completed a reasonable period prior to the expiration of the
statute of limitations governing.
Final closing of cases the objective
The responsibility of the Treasury does not end until the amount
of tax properly due has been collected. This responsibility for final
closing is one of the important factors prompting this survey. No
case has been closed finally, from the Treasury's point of view, until
the tax has been collected and there is no possible opportunity for
reopening.
The effectiveness of closing by the bureau
The number of cases pending before the Board of Tax Appeals, of
suits pending in the courts, and of claims for refund filed might
well give the impression to persons not familiar wdth all the facts that
in a large percentage of cases taxpayers must appeal from the decision
of the bureau. But the cases before the board or in the courts or the
subject of refund claims now pending represent less than six-tenths
SECRETARY OF THE TREASURY
97
of 1 per cent of the cases closed by the bureau. Closing by the bureau
means a final disposition of the case in 99.4 per cent of the returns—
that is, petitions in only 0.6 per cent of all the eases closed by the
bureau have been filed with the Board of Tax Appeals. It is believed
that this fact is frequently overlooked in the various surveys of the
administration of the internal revenue laws undertaken outside of the
department. During the three-year period ended June 30, 1^27,
'6,289,567 tax-year cases were closed by the Income Tax Unit
alone; 96.5 per cent of these cases were closed prior to the issuance of a deficiency letter. Deficiency letters were issued with
respect to 223,659 tax years (3.5 per cent of the total tax-year
cases). The taxpayers acquiesced with respect to 125,760 tax years
(representing 2 per cent of the total). That is, over 50 per cent of
the cases in which 60-day letters are issued are acquiesced in by the
taxpayers without further action or protest on their part. Agreements in 57,650 tax-year cases were signed and filed by the taxpayers
involved (0.9 per cent of the total tax years). From the standpoint
of cases handled by the Income Tax Unit, 99.4 per cent are closed
without petition to the board.
Considering the cases in respect of which deficiency letters had to
be issued, in more than 81 per cent of the cases handled during the
three-year period the taxes proposed w^ere acquiesced in by the taxpayer. Petitions were filed with the Board of Tax Appeals with
respect to 40,249 of the tax years closed during this three-year period,
or 0.6 per cent of the total years closed. The following tables present
a summary of the above statistics:
(a) Disposition of cases by the bureau
Per cent
Total number of cases closed during 3-year period
6,289, 567
Number closed without mailing deficiency letter
6, 065, 908
No action by taxpayer after maiUng deficiency letter
125,760
Agreements with taxpayer after maiUng deficiency letter
57, 650
Petitions filed with Board of Tax Appeals with respect to—
40, 249
96. 5
2.0
.9
.6
(&) Disposition of cases after mailing of deficiency letters
Number of deficiency letters mailed during 3-year
period—
No action by taxpayer
Protests, but agreements finally signed by taxpayer._
Total acquiesced in by taxpayer
223,659
Per cent
100
125, 760
56
57, 650
25
183,410
81
Petitions filed with the Board of Tax Appeals with respect to__ 40,249
19
The above statistics show conclusively the effectiveness of the
closing of the case by the Bureau of Internal Eevenue. Although the
situation concerning the department in respect of the accumulation
before the Board of Tax Appeals is discussed in detail hereinafter,
it is appropriate to invite attention to the fact that the number of
cases docketed with the Board of Tax Appeals represents only 0.6
per cent of all tax-year cases closed by the Income Tax Unit during
the three-year pediod ending June 30, 1927, and that 81 per cent of
the deficiency letters mailed are accepted without filing a petition
with the Board of Tax Appeals.
98
REPORT ON T H E
FINANCES
Analyses and tabulations of the work of the Board of Tax:
Appeals in respect of the 19 per cent of the deficiency letters in
which petitions to the board have been filed are given in the appendix.
EXCESS PROFITS TAX CASES PENDING
N u m h e r of old cases pending
Statements have been made from time to time to the effect that
there w^ere large numbers of old cases still pending in the bureau;
that taxpayers had found it impossible to close their cases in the
bureau; and that the tremendous burden of the old cases w'as handicapping the bureau se-verely in its work upon current cases. The
statistics should remove this misapprehension. There are in fact but
3,898 cases in process of audit in the bureau for the years 1917 to 1920.
A statement showing the number on hand for each year, as of
October 14, 1927, is as follows:
1917
lOlS
1919
1920
J
^
512
736
1,035
1, 615
Total
3, 898
E s t i m a t e of amounts
involved
An accurate determination of the amounts involved in the old cases
still pending is impossible. I t is estimated, however, that only
$25,000,000 are involved in cases awaiting original audit, that $40,000,000 are involved in cases open because of the filing of claims in
abatement, and that about $100,000,000 are involved in cases open
because of the filing of claims for refund.
Causes for not closing
An analysis has been made in order to determine why these cases^
small as the number is, are still pending. For the purposes of this
analysis an " original case " is considered to be one concerning which
the bureau has at no date in. the past stated a conclusion. All other
cases are "reopened cases," reopened at the instance of the taxpayer
or by the Government. Under this classification also are included
delinquent returns. A detailed discussion of the reopening of cases
is given hereinafter. The following analysis is submitted solely for
the purpose of determining the status of original cases for the years
in question:
^
1917 cases
Total
cases
Field audit review
Consolidated returns
Special adjustment
Total
J
._
.
Original Reopened
cases
cases
126
249
58
0
69
0
12S
180
58
433
69
364
99
SECKETAllY 01<' a'HE TEEASUEY
The 69 cases described as " original cases " are in the consolidated
returns audit division. The following tabulation indicates the rearsons why such cases have not been heretofore closed:
Number held pending determination of afliliations in a single large case
13
Number pending recommendations by the oflice of the general counsel, or
awaiting opinions by the general counsel
10
Number held pending engineer's or revenue agent's reports
11
Number in the 30-day status
9
Number of foreign steamship companies
9
Awaiting information from taxpayer
4
Being transferred to
field
3
Pending review
:_ 6
Awaiting conference with taxpayer
.
1
Memorandum, transferring cases to special assessment being prepared
3
10 IS cases
Total
cases
Field audit review
Consolidated returns division
Special assessment section
Total
__
._
_
.
Original Reopened
cases
cases
234
B23
91
90
172
33
144
151
58
648
295.
353
The 295 cases described as original cases are in the three sections
mentioned above. The following tabulation indicates the reasons
Avhy such cases have not heretofore been closed:
Pending compliance with recommendations by the oflSce of the general
counsel or are awaiting opinions to be submitted by the general
counsel
Held pending engineer's or revenue agent's reports
In 30-day status.
Foreign steamship companies
Held pending determination of affiliations in the case of the M Company.
Audit complete—closing letter being typed
Being reworked in accordance with memorandum from acting deputy commissioner
'.
Heceiving original consideration in consolidated returns audit division.
All cases assigned
Being forwarded to 60-day
file
Awaiting information from taxpayer
Awaiting completion of assembly.
.
Being considered under protest of taxpayer
Pending conference
Being reconsidered in accordance with B. T. A. ruling
.
Statutory invested capital and income being determined prior to transferring case to special assessment
Awaiting receipt of taxpayer's agreement
Awaiting decision of Board of Tax Appeals
Memorandum transferring case to other division being typed
Pending completion of conference report
Closing letter awaiting signature
'.
:__
Pending consideration under section 328, cases unassigned
Awaiting receipt of returns requisitioned from collector.
Letter being prepared allowing special assessment
•.
.__
Claims rejection—letter prepared—ready for review
Awaiting comparatives
Awaiting legal ruling from rules and regulations
In process of review
Cases receiving original consideration under Sections 327 and 328
25
82
36
23
1
13
3
17
16
6
6
2
5
1
1
4
2
2
3
2
15
2
1
1
1
1.
2
22
100-
REPORT ON THE FINANCES
Below is a tabulation of the pending 1919 cases:
1919 cases
Total
cases
Field audit review
Consolidated returns audit division
Special assessment section
l
Total
.
^
..
Original Reopened
cases
cases
278
439
139
115
282
43
163.
157
96
856
440
416.
The 440 cases described as original cases are in the three sections
mentioned above. The following tabulation indicates the reasons
why such cases have not heretofore been closed:
Pending compliance with recommendations by the oflSce of the general
counsel or awaiting opinions to be submitted by the general counsel
25
Held pending engineer's or revenue agent's report
85
In the 3()-day status
. . . 52
Foreign steamship companies
39
In process of audit—cases recently made available as result of receipt of
revenue agent's report, engineer's report or legal rulings
93
Fraud not present—returned to consolidated section for audit
3
Awaiting legal ruling
6
Pending completion of audit of related cases
2
Pending completion of assembly ,
_
9
Being audited under T. D. 4053 recently issued
1
Pending conference
9
Awaiting information from taxpayer
28
Pending review
.
:
13
Closing letter written or mailed
.
— 63
Pending supplementary conference report
3
Receiving original consideration under sections 327 and 328
9
Below is a tabulation of the pending 1920 cases:
1920 cases
Total
cases
Field audit review
Consolidated returns audit division
Special assessment section
Total
^
Original
cases
Reopened
cases
324
740
238
155
516
129
169
224
109
1,302
800
602
The 800 cases described as original cases are in the three sections
mentioned above. The following tabulation indicates the reasons
why such cases have not heretofore been closed:
Pending compliance with recommendations by the oflSce of the general
counsel or awaiting opinions to be submitted by the general counsel
44
Held pending engineer's or revenue agent's report
192
In 30-day status
.
152
Foreign steamship companies
34
Pending review, tj^ing of closing letters, signature, or in 60-day
file
133
Recently made active through receipt of necessary information
95
Held pending settlement of related case.^
10
Awaiting information from taxpayers
.
69
Awaiting revenue agent's audit
24
SECRETARY OF THE TREASURY
101
Pending completion of assembly.
Pending conference of completion of conference reports
Awaiting legal rulings
Pending review
Transferred to other divisions
:
8
23
12
2
2
Outline of substantial accomplishments.
PRODUCTION
The following chart presents in graphic form, for all years subsequent to 1917 for which information is available, the statistics
showing:
(1) The number of returns closed during each year.
(2) The number of returns on hand at the end of each year.
(3) The additional taxes assessed.
(4) The additional taxes collected.
BACK TAXD ON lNC0mL5
Number of Iciums Closed, Number on Hand, Additional Taxea A33cj5ed
ov»a Dock Tfljc Collection, Fiscal Year^ 1 8 2 3 ' 182.7.
C Reports
Ue«Mn4
RdurM Closed
of
Burooy
TKoosdnd
rcluras
|4cao
Relurn5 on H«n<l,
end of H«4r.
of
Internal
Ricvenue)
Million
dotloTd
8001
Million
dollaio
yy<X^
Additional
£a£k
Assessea
TAX C o l l e c t i o n s
( n o detA availabla for 1923
1924- porikj e s H m » t e J )
9M
Jl»e«aYr.l323 m4
Tttx*5
W25 nZb 1927
^ O 1?24 132S t92fc »27
nn
is»
102
BEPORT Q-N T H E FIIsTAlS^CES
T<».ej
n>IUon a m
4000
3000
M u m b , . of R e l u . n ,
Cloecd
d^)r^n^ Y«ar
y\ . : : : : ^
*"*-»*.J
y
1500
X
V"
\
1000
\
BOO
-V^
^ ' x ^
Numbar erf Heiu'flt
Hand A CTvl
on
600
•
^
4-0O
Dack T A J .
Colloctiona.
|s
1
V
-—•—•
^^^
^,
Additv.o».al
Assessed.
T»x.
\hO
COST OF
ADMINISTRATION
The expenditures made for administering the internal revenue laws
for the fiscal year 1927 were $32,967,764.17, not including expenditures for refunding internal revenue collections and taxes illegally
collected, which in no sense are administrative expenses. The aggregate receipts of internal revenue for the fiscal year 1927 were
$2,865,683,129.91. Accordingly, the cost of operation last year was
$1.15 for each $100 collected, as compared with $1.23 for each $100
collected for the fiscal year 1926, or a reduction of 6.5 per cent.
Approximately 40 per cent of the cost of administering internal
revenue tax laAvs during the fiscal year 1927 was expended in the
auditing of back-year returns. I t is not possible for the bureau to
segregate the cost of auditing back-year returns from the cost of
collecting the current year's revenue, as the work is interlocking to
a vast extent, and the attempt to segregate such cost would require
a very extensive as well as an expensive system of cost accounting.
The cost of collecting the internal revenue averaged very close
to $1.80 for each $100 collected for 10 years prior to the World War.
Following is a statement shoAving internal revenue receipts and
expenditures, additional assessments, refunds, and number of emioyees, as well as the relative net cost of collecting each $100 for the
seal years 1917 to 1927, inclusive. The cost of enforcing the narcotic
and national prohibition acts is excluded.
E
103
SECEETARY OF THE TREASURY
I N T L R N A L REVLNUt
BURLAU
NuTTiber 0^ Employees,Total,in Bureau avd in
Fieldiond Cost of Collecting each ^lOO'^pf
licvenue,fiscal Yeara 1921-1927
cJierf.,^
.
^
^^ l o l
"~"
I 30
employee^
~ * — • — ~
Co=\ cACc^Wi
—-.^«_fl?JRev
e^
^-rs-rrT^tl-r.... ....«...y
\ oo
y
.70
X
/
~^
.JO
^^^^^I^
Lmployees m F leia
""—:.. ^
~
""
-
ir/'nu
~
---.^
^"
-~„
^1
1921
Fiscal
Ycara
Table showing for each of the fiscal years 1917-1927, total expenditures, total
internal revenue receipts, additional assessments from office and field investigations, refunds of taxes illegally collected, cost of collecting $100, and nmnber of employees as of June 30
Fiscal year
ended
J u n e 30—
1917
1918
1919
1920
1921
1922
1923
1924
1925
1926
1927
Number
A m o u n t of a d d i A m o u n t of
of emtional assessments refunds of taxes Cost of
collecting
ployees
from office a n d
illegally col$100
as of
field investigalected
J u n e 30
tions
T o t a l expenditures
T o t a l internalrevenue receipts
$7,699,031.08
12.003.214.07
20.573,771. 52
27,037.134.50
33,174,309.17
34,286,651.42
36,501,062.94
34,676,688.11
37,266,573.16
34,948,483.37
32,967,764.17
$809,393,640.44
3,698,955.820. 93
3,850,150.078.56
5,407.580.251.81
4,595,357,061.95
3,197,451,083.00
2,621.745,227.57
2,796,179.257.06
2,584,140.268.24
2,835,999,892.19
2,865,683,129.91
$16,597,255.00
29.984,655.00
123,275.768.00
466,889.359.00
416,483.708.00
266,978.873.00
600.670.632.00
577,710.044.00
312,667.876.00
404,637,468.00
383,965.350.00
$887.127.94
2,088,565.46
8.654.171.21
14,127,098.00
28,656,357.95
48,134,127.83
123,992,820.94
137,006,225.65
151,885,415.60
174,120,177. 74
103,858,687.78
T o t a l - . 311,134,683.51
35,262,635,711.66
3,599,760,988.00
793,410,776.10
—
$0.95
.33
.53
.50
.72
1.07
1.39
1.24
1.44
1.23
1.15
5,053
9.597
14,055
15,848
17,470
17,710
17,613
15,884
15,568
14,333
13,211
The preceding chart presents in graphic form certain of the data
included in the above tabulation; that is, the relation of personnel to
product, and of cost of collection to each $100 of revenue secured.
64761—FI 1927
9
104
KEPORT ON THE EIITANCES
The total amount of additional assessments and collections resulting from office audits and field investigations ($404,537,468) for the
fiscal year 1926 is made up as follows:
Income tax
__._—
Estate tax
Gift tax
Capital-stock tax
Sales tax
.
-—
MisceUaneous tax
Tobacco tax
—
Accounts and coUections unit:
Deputy collectors
Special squads
-
' $285.358,165. 32
20, 540, 328.39
202, 039. 87
7, 800, 434. 54
1,103, 268.89
132,964. 61
195, 663.31
-
^
$78, 500,438.00
10,704,165.00
Total fiscal year 1926
89, 204, 603.00
404, 537,467.93
Similar figures covering the fiscal year 1927 ($383,965,350) are as
follows:
Income tax
Estate tax
Gift tax
Capital-stock t a x .
Sales tax
Miscellaneous tax
Tobacco tax
Accounts and collections unit:
Deputy collectors
Special squads
" $278,095, 961.24
12, 539, 645. 83
396, 777. 72
6,136,335. 72
3,228,900. 60
59,530.34
'99,710. 81
$78, 616,879.00
4,791, 609. 00
83,408,488.00
Total fiscal year 1927
383, 965,350. 26
It is interesting to note that the total amount of refunds of taxes
illegally collected which were made during the past 11 years, namely,
$793,410,776.10, is approximately 22.04 per cent of the total amount
of additional assessments and collections resulting from office audits
and field investigations ($3,599,760,988) which have been made during the same period. The percentage of the total refunds made
during the past 11 years to the total internal-revenue collections made
during the same period ($35,262,635,711.66) is approximately 2.2 per
cent.
S U M M A R Y OF OPERATIONS
'
"
62,441,683 individual and corporation returns have been filed for
the years 1917 to 1926, inclusive.
906,583 taxpayers have been discovered who had failed to file returns, and collections aggregating $45,885,129 have been obtained
from them.
Less than one-fourth of 1 per cent of all returns for 1921 and prior
years remain open.
The audit for years subsequent to 1921 is practically current.
1,343,024 offers in compromise were submitted to the bureau during
the period 1919 to June 30,1927, and all have been adjusted but 1,803.
2,214,472 claims have been received during the years 1917 to 1926,
inclusive, and all but approximately 18,000 have been adjusted.
1 Exclusive of $148,867,165.26 deficiency assessments subject to provisions of sec. 274(d)
of revenue act of 1924, and sees. 279 and 280 of revenue act of 1926 (jeopardy assessments).
2 Exclusive of $32,704,156.33 deficiency assessments subject to provisions of sees. 279
and 280 (jeopardy assessments) of revenue act of 1926.
105
SECRETARY OF THE TREASURY
GROWTH OF THE BXJRElAU OF INTERNAL REVENUE
Prior to the year 1913 the greater part of the revenue of the Government was derived from the tax on distilled spirits, liquors, and
tobacco. The tax collected in 1913 was only $344,424,453.85o
The income tax law was passed in 1913. The provisions were comparatively simple, the amounts involved were not large, and the tax
collected for the next few years averaged $436,137,734 annually. But
when we entered the World War the tax on incomes w^as greatly
extended in order to meet the greatly increased expenditures of the
Government.
The following tabulation is indicative of the increase in the size of
the undertaking::
Returns filed loith and revenue collected by Bureau of Internal Revenue from
1916 to 1920, showing also percentage of increase for years 1917 to 1920 over
1916
••
••
•
••
- p -
Year
1916
1917
1918
1919
1920
Return
filed
778,289
3,824,316
4, 742, 693
5, 652, 958
7,605,539
Percentage
increase
over 1916
Revenue collected
$512,723,287.77
392
809, 393, 640.44
510 3,698.955,820.93
627 3,850,150,07a 56
878 5,407,580,251.81
Percentage
increase
over 1916
58
621
658
956
With the increase in the revenue and the returns shown above went
a corresponding increase in the difficulty and burden of the work to
be performed. To get immediately a sufficient number of men with
the proper qualifications was impossible. Many of the best qualified
men were in the war. The bureau had the keenest competition with
private industry in securing such accountants and engineers as were
not actually in the war. We were unable to meet the salaries that
private concerns could pay. Lastly, there were few whose training
and experience had equipped them to meet the novel, intricate problems presented.
Complexities of the work.
A review of the m()re difficult and technical tasks thrust upon the
bureau in the administration of the internal revenue laws may be
described briefly.
yALUATIONS
The laws require valuations of all natural resources—mines,
minerals, timber, oil, and gas—in this country as of March 1, 1913,
and also as of the date any of the above property was transferred to
a corporation for stock. The valuation of all tangible property as of
the same two dates for invested capital and depreciation purposes
was necessary. Valuation of intangible properties, including patents,
copyrights, good will, procesees and secret formulas (no precedents
for the valuation of which existed), for invested capital and depreciation purposes was also necessary.
106
REPORT ON THE FINANCES
AMORTIZATION
ALLOWANCES
The allowance of a deduction for amortization of war facilities
imposed upon the bureau a unique problem in the determination of
which more than $600,000,000 was involved. This novel allowance
required the determination of such questions as what property is to
be classed as a war facility and the value of the property to the
taxpayer after the war period.
DEPLETION
The allowance for depletion has the appearance of comparative
simplicity. What is actually involved, however, is the valuation as
of March 1, 1913, or some other basic date, of all the natural resources in operation for profit. Practically all the natural resources
in this country have been valued in the short space of five years.
AFFILIATIONS
Some of the most complex problems in the administration of the
revenue laws are involved in the determination of invested capital of
a closely allied, or consolidated, group of corporations.
The proportions which a single case may assume are brought out by
the case of a certain large corporation, where the assessment letter,
merely showing the mathematical adjustments, covered 2,267 pages,
with 317 pages of exhibits. The difficulty of the questions involved
in adjusting cases is shown by the fact thai in 15 recent tax cases
decided by the Supreme Court of the United States 9 have been
decided by a divided court.
A report from several attorneys in the general counsel's office is
included in Chapter V showing the issues involved in the cases pending before them. There will also be found in the appendix illustrations of the problems involved in a few typical cases and of the
procedure preceding settlement of a "case. Undoubtedly, many of
the most aggravating complexities will disappear with the final disposition of the excess-profits tax cases. New and unforeseen problems, however, are constantly arising and will continue to do so. We
have not yet reached the difficulties involved in reorganizations, for
example.
«
*
*
*
*
*
«
Recent changes in administrative pro.cedure.
Numerous changes have been made from time to time directed
toward increasing the efficiency and effectiveness of the work in the
bureau. A few of these changes are described below:
P R E L I M I N A R Y AUDIT
I n section 274 (f) of the revenue act of 1926, there appears the
following language:
SEC 274 (f) * * * If the taxpayer is notified that, on account of a mathematical error appearing upon the face of the return, an amount of tax in excess
of that shown upon the return is due, and that an assessment of the tax has
l»een or will be made on the basis of what would have been the correct amount
ef tax but for the mathematical error, such notice shall not be considered, for
SECRETARY OF THE TREASURY
107
the purposes of this subdivision or of subdivision (a) of this section, or of
subdivision (d) of section 284, as a notice of a deficiency, and the taxpayer
shall have no right to file a petition with the board based on such notice, nor
shall such assessment or collection be prohibited by the provisions of subdivision
(a) of this section. .
The purpose of this legislation w^as to permit the Bureau of
Internal Revenue to correct immediately mathematical errors found
in current year returns. Prior to this enactment no amount of tax
could be assessed in excess of that indi<.ated by the taxpayer, even
though an erroneous amount was plainly indicated, without full
compliance w^ith all of the procedure provided for the assessment of
deficiency taxes.
To obtain the full benefits of this legislation a force of comptometer
operators is assigned to each collector's office to verify the arithmetical accuracy of the returns as submitted. This work is done before
the aniount of tax to be assessed is listed, in order that the correct
charge may be set up against the taxpayer.
This feature of the preliminary audit procedure has saved much
time to the Government and has resulted in a more prompt collection
of many millions of dollars.
The comptometer process is, in fact, the so-called preliminary audit,
but the term "preliminary a u d i t " is directed at this time to a wider
range of effort. To-day it means also ''job selection." This means
that instead of looking upon the job for a current year as an intensive
audit of all returns filed, the appropriate representatives of the unit
(revenue agents) familiar with local conditions, and who in many
instances have conducted investigations of the taxpayers for prior
years, now survey all the returns that are to be forw^arded to AV ashington for the purpose of segregating them into the following classifications: "Accepted," "Office audit," and " Field audit."
A case marked for " Field a u d i t " is one which, based upon the
experience of the agent making the segregation, ought to be carefully
examined at the books of the taxpayer. The previous history of the
case, deductions wdiich are not properly explained, or a tax result not
in harmony wath that which ought to have been reached upon the
basis of the income statement, having in mind the particular territory
and industry involved or other similar circumstances, will determine
Avhether or not a case is to be investigated in the field.
A case marked for " Office a u d i t " is one with respect to which it
appears to the agent that it might be beneficial both to the taxpayer
and the Government to have the taxpayer called at the proper oifiice
and discuss certain features which are not clearly explained upon the,
return.
The value of the office audit work (although considerable revenue
is derived from the work) is educational in that taxpayers with whom
items not sufficiently explained are discussed, will benefit in the
opportunity thus presented to learn the manner in which the items
questioned should be presented in subsequent years. This, of course,
means a saving to the Government in subsequent years' audit.
The " accepted " return is the return which, in the opinion of the
revenue agent, reports the tax result to be logically expected upon
the basis of the income figures.
Approximately 75 per cent of all returns which under the regulations of the department are forwarded to Washington are marked
108
REPORT OK THE FINANCES
" accepted " by revenue agents. I t is reasonable to expect that this
ratio will increase as the laws are simplified and taxpayers become
better acquainted with the laws.
As a consequence of the preliminary audit, the bureau, within a few
months after the returns of the current year have been filed, has
selected as the job of the Income Tax Unit for audit about 25 per cent
of the returns, and 75 per cent have been closed. The confusion incident to an attempt, under the lengthy procedure previously followed,
to handle the great number of returns has been eliminated, and the
job is found to be an intensive audit, not of 1,200,000 returns, but
of 600,000 returns.
During the fiscal year ended June 30, 1927, there were examined
in the field divisions 688,816 tax years. The Bureau of Internal
Revenue should be developed and organized as so to handle within
two years all the audits for the current year.
DECENTRALIZATION
Perhaps the outstanding change in policy from which more benefits
to the bureau were derived and, as a consequence of which more
progress was made upon the audit than from any other, is the change
which definitely established in the field offices the basic audit activity
of the Bureau of Internal Revenue.
For several years the bureau undertook what was called a " desk "
or "correspondence" audit. The results of that audit were never
satisfactory and in practically every case, where a deficiency in tax
was proposed, after the lapse of long periods, it had to be referred to
the fieW. As a consequence of the policy of having the initial
action in all audits taken in the field, the department eliminated the
waste of time that had theretofore resulted.
Decentralization has resulted as well in benefit to taxpayers, particularly in permitting an opportunity to discuss their cases with a
representative of the bureau at their place of business or at their
home. I t has saved both the taxpayer and the Government money
and time. I t has resulted in a better understanding on the part of
the taxj)ayer of the tax laws and of the purposes c>f the audit.
A striking benefit of decentralization of audit is observed in the
savings that have been effected for the Government in the consideration of refund claims filed by taxpayers. I t frequently occurs that
in the course of an examination of the books of the taxpayer and of
the circumstances upon which the taxpayer depended for refund,
compensating changes favorable to the Government have been made,
with the result that the taxpayer, while maintaining the contention
the basis of the claim, is not entitled to a refund. If these claims had
been considered in Washington and no thorough investigation of the
books conducted, they would have been allow^ed. During the fiscal
year ended June 30, 1927, consideration in the field of refund claims
of the face value of $47,600,000 resulted in recommendations for the
rejection of about $28,000,000 and the allow^ance of about $7,600,000.
I t is interesting to note that as a result of these investigations the
bureau also recovered additional taxes aggregating over $11,000,000.
SECRETARY OF THE TREASURY
109
A B O L I S H I N G C L A I M S SECTION
Prior to the year 1922 a section designated the claims section handled the adjustment of all claims. It was separate and distinct from
the audit section and had no direct relation to the audit of returns.
An audit of a case might be under conduct in a separate unit and at
the same time a claim might be on file in the claims section. In January, 1922, the claims section was abolished and the consideration of a
claim became an incident of the audit.
A B O L I S H I N G SPECIALIZATION I N AUDIT
Until March 21,1924, the policy was followed of maintaining audit
units specializing in the audit of cases involving manufacturing, trading, finance, public utilities, etc.
On the date above referred to specialization in audit was abolished
and audit units were developed based upon a geographical outline.
This arrangement was more in harmony with the needs of the public,
and developed a better understanding between the field forces and
the audit units iri Washington.
CONSOLIDATION OF OPERATING U N I T S
A constant and orderly policy has been pursued to eliminate excessive overhead and to bring under one management related undertakings. During the early history of the Income Tax -Unit many independent units were established. It appeared that specialization was
necessary to handle the task. There was an inventory section, an
amortization section, a claims section, an independent review division,
and other special units to handle particular problems. This necessitated a constant transfer of cases, with an accompanying loss of
time and of files. In the rearrangement and reduction of the units
there is a concerted and continued move to correct this unsatisfactory
condition.
SENDING T H E M A N TO T H E J O B
The policy of sending the man to the job is constantly being promoted. In the early years of the bureau's history the effort appeared
to be to move the work to the force. However, it became evident that
if it were possible to move the employees to the work much better
results could be obtained. This has proved to be a very sound policy.
An outpost review has been established. Representatives of the general counsel's office have been placed in the audit units of the Income
Tax Unit. By decentralization of the audit the field forces have
become the fact-finding representatives of the bureau. Formerly it
was customary to attempt to secure all necessary facts by correspondence with the taxpayer.
CLOSINGS UNDER T H E PROVISIONS OF SECTION 1 1 0 6
( B ) OF T H E REVENUE ACT OF 1 9 2 6
Within recent months the bureau has adopted the policy of advocating a closing agreement, under the provisions of section 1106 (b) of
the revenue act of 1926, in cases involving an amount in excess of
$5,000 for any one year.
Cases closed under such an agreement will not be subject to claim
for refund, with consequent reopening and reconsideration. Neither
can it be reopened by the Government.
110
REPORT ON THE FINANCES
The bureau hopes to close with final agreements a large number
of the cases now pending for 1922 and prior years.
During the months of August and September 582 applications
were received. Inasmuch as the average number received per month
is fourteen and one-half times the average per month from November 23, 1921, to June 1, 1927, it is evident that the new procedure
is responsible for the increase in the number of requests received.
PROCEDURE W I T H RESPECT TO JEOPARDY ASSESSMENTS
After the passage of the revenue act of 1926 changes were initiated
in procedure with respect to jeopardy assessments as follows:
(a) No jeopardy assessments are made because of the running of the statute
of limitations.
(b) Jeopardy assessments are made (A) where taxpayers are in bnnkruptcy
or where corporations are in dissolution, and (B) in cases where it is necessary
to prevent taxpayers from disposing of their property in an effort to defeat
the collection of such tax as m;iy be due. Instances of this character would
be where it is known or presumed that a taxp.-iyer was intending to leave the
country or where fraudulent transactions were developed; also where it is
known that the taxpayer is or intends t(» dissipate the assets. Usually jeopnrdy
assessments are made only in cases in which fraud circumstances are developed.
The audit sections work up the case with appropriate schedules,
attaching thereto a memorandum addressed to the head of the unit
explaining fully the circumstances and basis for the assessments.
The case comes to the office of the head of the unit for approval
or disapproval, after which it goes to the proving section for assessment if the jeopardy assessment is approved.
The 60-day letter is held by the proving section for a period of
30 days after the assessment has been made, so that the collector
may advise the head of the unit if his office has secured bonds or
if the taxpayer has made payment of the tax. At the expiration
of the 30-day period the 60-day letter is registered and mailed to the
taxpayer.
As a consequence of this change of procedure the jeopardy assessments for 1927 were $32,704,000, as compared with $148,807,000 for
the previous fiscal year.
The reasons for making these assessments during the fiscal year
ended June 30, 1927, are as follows:
Taxpayers have not sufficient assets
.
25
Under indictment, using mail to defraud
•.
1
Illegal alcohol transactions
21
Convicted of embezzlement
'.
1
Disposing of assets
60
Taxpayer leaving United States
1
3
Property in hands of Alien Property Custodian
1
Serving term in workhouse
1
Proof of claim must be filed at once; estate in process of administration
4
Taxpayers transferring assets
5
Question of priority of tax between New York State and Federal Government
:
1
Concealing assets
4
Offers in compromise
7
Leaving State
4
Address unknown
.
2
' Total
140
SECRETARY OF THE TREASURY
111
SPECIAL ADVISORY C O M M I T T E E
The Treasury's appreciation of the necessity for immediate and
effective relief of the burden now imposed upon the Board of Tax Appeals and the general counsel's office, after a careful analysis of the
cases contributing to the congestion and of the classes of cases capable
of disposition by administrative action within the Treasui-y, led to the
establishment in the office of the Commissioner of Internal Revenue
of an agency known as the special advisory committee. In the opinion
of the Treasury the best interests of the Government, of the Board of
Tax Appeals, and of the public demand that every effort be directed
toward practical and effective solutions of the problem. I t is expected
that the committee will render material assistance in the disposition
of cases within the following classes:
(1) Cases involving deficiencies of less than $1,000 and not involving important principles;
(2) Cases involving difficult or technical questions of fact, such
as valuations, rates,of depreciation, bad debts, reasonable salaries,
etc., but not involving questions of law;
(3) Cases in which the deficiency letters were mailed in order to
protect the interests of the Government from the bar of the statute
of limitations;
(4) Cases involving administrative policies in which the interests
of the Government require a change in the policy in force at the time
the deficiency letter was mailed; and
(5) Cases in w^hich the petition was filed by the taxpayer because
of a misunderstanding of the position of the bureau, or on account
of a clerical error in the bureau's determination.
In the establishment of the committee every effort has been made
to avoid the creation of a new agency to whom the taxpayer may
appeal. If the committee is to function properly, it must do so by
a careful selection of the cases to be considered by them. No taxpayer should, as of right, be given an opportunity to present his case
to the committee. Nevertheless the taxpayer whose case is before
the committee should be given an opportunity to have a hearing
wherever practical before at least one of the persons by whom the
decision will be made.
The committee is organized into divisions, each division consisting
of three members. Conferees are assigned to divisions to assist
in the expeditious preparation of the ease and in hearing and considering the arguments of the taxpayer. Upon the conclusion of
the hearing a memorandum is prepared by the conferees and is
routed, together with the case, to the three members of the division.
Each member of the division passes upon the case individually. If
the recommendations made are concurred in by each of the three
members, or are revised and the revision concurred in by each of
the three members, the case is submitted to the chairman of the board.
If the chairman approves, the case is then transmitted to the Commissioner of Internal Revenue for his approval or disapproval. The
final responsibility for the disposition of the case, therefore, rests
directly upon the commissioner.
The committee has not been operating during a sufficient period of
time to permit an accurate prediction based upon its production
112
REPORT ON THE FINANCES
record. The final settlements effected by it (averaging about 260 a
month) have resulted in a rather substantial reduction in the number
of petitions, which would otherwise have required decisions by the
board. As its experience and personnel permit effective functioning,
the number of cases finally settled without action by the board should
approximate 500 a month. The success of the committee will depend
ultimately upon its ability to bring cases to a settlement promptly,
expeditiously, and satisfactorily, and upon the support and cooperation accorded it.
Personnel.
The bureau has been handicapped severely in its administration by
the constant turnover in personnel, particularly of professional and
technical officials; in the Income Tax Unit alone 11,934 appointments were made during the period from October 1, 1919, to June
30, 1927. There were 11,038 separations, of which 5,178 were highly
trained technical or professional employees.
I t is impossible to ^estimate the cost to the Government resulting
from the loss of experienced and efficient employees. The figure
undoubtedly runs into the millions. Considering the cost of training—about one-half of a year's salary—the turnover in the Income
Tax Unit has cost $13,086,750. And this amount is insignificant in
comparison with the actual cost resulting from the loss of ability,
experience, and judgment.
The cost of collecting internal revenue taxes for the fiscal year 1927
was $32,967,764.17. There was assessed and collected from delinquent
taxpayers alone—that is, those who failed to file returns—-the amount
of $24,568,996. I n other words, the revenue secured as a consequence
of the efforts of the personnel (never more than 1,900) directed
toward discovering delinquent taxpayers covered approximately 75
per cent of the cost of collecting all internal revenue taxes.
Bureau of Gustomhs
Customs receipts have continued to increase under the tariff act of
1922, reflecting not only the productivity of the rates in that act but
also the effect of general business prosperity on the merchandise imports of the country. Receipts from customs and from the tonnage tax,
which are included together under the head " customs receipts," were
$605,672,465 for the fiscal year ended June 30, 1927," about $26,000,000
more than in the preceding fiscal year, and $61,000,000 more than in
the fiscal year 1924. The latter year was the first complete fiscal
year of operation of the new rates.
The growth of customs receipts has accompanied the expanding
importations by the country of both dutiable and free goods. This
is shown by the following table giving for the calendar years 19221926 the value of total merchandise exports and imports, the value of
imports for consumption distributed by those free and dutiable, and
the proportion of imports entered free of d u t y :
113
SECRETARY OF THE TREASURY
[In thousands of dollars]
Imports for consumption
' Calendar year
1922
1923...
924
925
1926
Merchandise
exports
MerchanExcess
dise
exports (+),
imports imports (—)
3,831,777
4,167,493
4,590,984
4,909, 848
4,808,660
+719,030
3,112,747
+375,427
3,792,066
+981,022
3,609,963
4,226, 589 . +683,257
+377, 772
4,430,888
Total
3,073,773
3,731, 770
3,575, 111
4,176, 218
4,408,076
Free of
duty
Dutiable
1,888, 240
2,165,14S
2,118,168
2,708,828
2,908,107
1,185.533
1,566,622
1,456,943
1,467,390
1,499,969
Per cent
free
61.4
58.0
59.3
64.9
66.0
During the five-year period, the value of total merchandise exports
increased from $3,831,777,000 to $4,808,660,000, and of merchandise
imports from $3,112,747,000 to $4,430,888,000. There was a similar
increase in imports for consumption, both in those free of duty and
those dutiable. The increase in imports free of duty has been
slightly greater than in dutiable commodities, and correspondingly,
the percentage of duty-free imports for consumption increased from
61.4 per cent in 1922 to 66 per cent in 1926. While, therefore, the
increasing customs duties have accompanied the development of
foreign trade, they have not grown as rapidly as the free importations
into the country.
The more important commodities, on the basis of value, which the
United States imports are not the important commodities producing
customs revenue under the tariff act of 1922. The ten imports of the
United States having the highest value in the calendar year 1926
were crude rubber, raw silk, coffee, cane sugar, paper except printed
matter, petroleum and its products, paper-base stocks, furs and manufactures, wool and mohair, and tin, totaling almost half the value of
merchandise imports. The imports of crude rubber amounted to
$505,818,000. This represents 75 per cent of the world's total crude
rubber production. Raw silk imports reached the value of $392,760,000, or 77 per cent of the world's total production. The
value of imported coffee w^as $322,746,000, this being 50 per
cent of the world's total production. Only two of the com^
modities listed above, cane sugar and AVOOI and mohair, are
among the leading customs producers. Looking at imports from
the point of view of Government revenue from the tariff, the six
leading customs producers are cane sugar, unmanufactured tobacco,
manufactured wool, unmanufactured wool, manufactures of cotton,
and manufactures of silk. The tariff on these items produced over
half the customs during the calendar year 1926, while the imports of
these commodities were only about 13 per cent of the total imports.
Important changes were made during the year in the organization
of the service for administering the tariff act. Under the act of
March 3,1927, creating a Bureau of Customs in the Treasury Depart-
114
REPORT ON T H E FINANCES
ment, the activities formerly carried on by the division of customs
and the special agency service (customs) were consolidated and
organized into a bureau. On March 19, 1927, the Secretary of the
Treasury issued an order effective April 1, 1927, prescribing the
duties and functions of the Commissioner of Customs. (A revision
of this order, dated April 12, 1927, is included on page 347 of this
report as Exhibit 34.) In addition to the Commissioner of Customs there were appointed an assistant commissioner and tw^o deputy
commissioners. The work of the bureau is divided into eight divisions—four legal divisions, the special agency service, legal digest
and records, personnel, and finance. The assistant commissioner has
immediate supervision of the business administration of the Customs Service; one deputy commissioner has charge of the legal
divisions and the other deputy of the special agency service.
Almost coincident with the organization of the Bureau of Customs,
the department, with the cooperation of the Bureau of Efficiency,
completed an important step in the field organization—the classification of the field service on the basis of comparable positions in
the District of Columbia as graded by the Personnel Classification
Board. The classification of positions in the field service and the
allocation of employees to their respective grades was made by the
Bureau of Efficiency after studying and working on the project
during the greater part of the year.
The increasing work of administering the tariff act is shown in
the following tabulation of the number of entries with the Customs
Service for the past five fiscal years, classified by kind of entry:
Fiscal year ending June 30—
Entries
Consumption:
P'ree
Dutiable
Informal
Mail
Baggaere declarations
Warehouse and rewarehouse
Immediate transportation without
praisement
Transportation and exportation
Warehouse withdrawals:
Duty paid
All other
All other entnes
Drawback notices of intent
Drawback entries
Total
ap-
1923
1924
1925
1926
1927
2C9,778
389,511
145.151
660, 498
284,644
64,100
206.164
416,469
164,102
638,773
339.541
55,129
209,319
428.989
182. 505
742. 917
340. 685
58,983
226.382
459, 726
196,036
768,811
383, 607
60, 235
246, 267
486, 274
209, 002
786. 683
392.128
63,294
116,664
101,196
124,898
103,401
133,164
107,033
144,664
117, 621
148.321
120,417
178,160
38, 232
4.059
66, 004
11,021
205. 807
41,337
7,247
117, 767
13,971
216.957
39, 558
12,457
164.672
21.477
222,097
38.425
27,451
192,070
24,388
249,671
38,677
14,034
220,871
25,230
2,159,018
2,434, 586
2,658,746
2,861, 513
3,000,869
Although the tariff rates apply only to merchandise subject to
duties, all merchandise, whether free or dutiable, must be entered
and cleared through the customs service and subjected to a sufficient
examination to determine its character and customs, classification.
SECRETARY OF THE TREASURY
115
The total entries in the above table show the amount of w^ork involved, the various classifications of merchandise entering the country, and the changes in such work from year to year. The total
entries have increased at the rate of approximately 200,000 a year.
The entries of dutiable imports for consumption have also increased;
from 1926 to 1927 the increase was relatively greater than that for
the total entries. .Other entries of incidental interest are the baggage
declarations, the growth in which reflects the very substantial gain
made in ocean travel, and entries of mail, which are indicative of
the use made of this method of shipping merchandise.
A serious administrative problem which is developing is the
steadily increasing volume of automobile traffic across the northern
border. This traffic consists not only of tourists but also of many
travelers returning from European countries who land at Canadian
seaports and later enter the United States. The facilities for the
inspection of automobiles and baggage are woefully inadequate, such
inspection in many instances having to be made at the side of the
roadway, with no protection from the weather. Such conditions
not only result in great inconvenience to the traveling public but
endanger the revenue. As the Immigration Service has a similar
problem along the border, this department asked the Department of
Labor to have representatives of the Bureau of Immigration cooperate wdth the Bureau of Customs in a study of the situation with a
view to developing plans for a uniform type of building and facilities
for use of Immigration and Customs Services on highways crossing
the international borders. The plan contemplates the provision of
suitable office quarters for both services and facilities for the inspection of automobiles sheltered from the weather and off the main
highway in such a manner as to avoid traffic congestion. Representatives of the respective bureaus concerned are now engaged in
an investigation of the problem.
The agenda for the International Economic Conference held at
Geneva, Switzerland, in May, 1927, included various phases of customs administration and procedure as a subject of major consideration and discussion. An official of the Customs Bureau was designated to represent the Treasury Department as an adviser to the
American delegation. The conference convened on May 4 and concluded its work on May 23. Among other things, the resolutions
adopted by the conference favor the principle of " equality of treatment " and the " unconditional most favored nation clause " in the
levying of import duties. Recognizing that frequent tariff changes
cause uncertainty in trade, the resolutions urge "tariff stability."
The conference w^ent on record in opposition to direct and indirect
subsidies and export duties and restrictions. As the United States
levies no export duties, and as the principle of equality of treatment
116
REPORT ON. THE FINANCES
was strictly followed in the framing of the present tariff law, there
is but little in .the resolution not in harmony with the tariff policies
and administration of the customs laws of this country.
Goa^t Guard.
During the fiscal year 1927, persons saved or rescued from positions of peril numbered 3,313, being 276 in excess of the corresponding number in the preceding fiscal year, 1926, and exceeding all
previous records since the present organization of the "Coast Guard.
The total number of instances of assistance rendered during the
year was 5,508, also the largest in the history of the service, and
exceeding last year's record by 677. The value of vessels assisted,
including their cargoes, was $37,801,357, being $14,783,848 in excess
of last year's figures and largely surpassing the record of any one
year since 1923. There were 14,496 persons on board vessels assisted
as compared with 15,398 for the fiscal year 1926. There were 136
derelicts and other obstructions to navigation removed or destroyed,
exceeding last year's number by 35. Persons in distress cared for .
numbered 899 as against 490 during the fiscal year 1926.
There w^ere 1,788 vessels seized or reported for violations of law
during the year, being 99 less than in the preceding year. I n the
interests of the enforcement of the laws of the United States 68,223
vessels were boarded and examined in the course of the year by the
agencies of the Coast Guard. This exceeds last year's number by
15,143. I t is again gratifying to be able to record that the service
operations against smuggling, heavy and onerous as the duty is,
have in no way diminished, impaired, or disturbed the accustomed
humanitarian work of the Coast Guard.
For many years the Coast Guard has taken an active part in rendering assistance upon occasions of storms and floods in various
parts of the country. The service agencies have gone into the
stricken areas and removed imprisoned dwellers to places of safety,
rescued victims from dangerous situations, furnished food and water
to those threatened with famine, saved household goods, livestock,
and other property from destruction, and rendered countless other
services. Three notable instances of the kind occurred during the
fiscal year 1927. First, the Florida hurricane in September, 1926;
second, the Illinois River Valley flood in October and November,
1926; and, third, the Mississippi Valley flood in the months of April,
May, and June, 1927. The Coast Guard rendered important relief
services in all three of these calamities, and the record of the work
of the officers and men of the service on these occasions forms an
intensely engaging chapter in the history of the Coast Guard. I n
the Mississippi Valley flood, particularly, the work was of immense
SECRETARY OF THE TREASURY
117
magnitude, almost beyond human reckoning, and of the most heroic
order. The Coast Guard threw into the flooded areas 674 officers and
men and 128 vessels and boats, and removed from positions of peril
to places of safety nearly 44,000 persons and saved from drowning
more than 11,000 head of livestock. I t would be almost impossible
to enumerate all the items of service rendered by the Coast Guard
personnel in this overwhelming disaster, or to estimate the value of
the work accomplished. The entire personnel of the Coast Guard
engaged in the relief work on the occasions named deserve the highest
praise.
The enforcement by the Coast Guard of the customs laws of the
country and the laws relating to navigation and motor boats was
attended during the year with satisfactory results. The general enforcement of the customs laws by the service is annually supplemented by the stationing of harbor cutters, or launches, at the principal ports to assist the customs authorities in boarding incoming
vessels and in performing other customs duties. Assistance was also
rendered, as needed, to other branches of the public service in the
enforcement of the Federal laws.
The law-enforcement work of the service has continued to bring
excellent results. The Coast Guard has entirely eliminated the once
notorious rum row. The service continues to give unremitting attention toward preventing the reestablishment of that menace on our
coastal waters, and to those foreign vessels that endeavor to transfer
their cargoes of liquor, many miles at sea, into domestic craft or try
to enter our greater ports with their contraband cargoes, hoping to
escape detection in the large volume of legitimate traffic. The fact
that the Coast Guard must now search diligently to find the rumrunning vessels, a number being undoubtedly engaged in the traffic,
necessitates extensive scouting operations over wide sea areas, which
really occasions a greater burden and responsibility upon personnel
and ships than was the case when rum row existed and the foreign
liquor vessels anchored in groups near our shores.
Prohibition law enforcement
Under the act of March 3, 1927, creating a Bureau of Prohibition
and a Bureau of Customs in the Treasury Department, there nave
been new bureau organizations established in charge of the Commissioner of Prohibition and the Commissioner of Customs, respectively.
The supervision of the Coast Guard, Bureau of Prohibition, and
Bureau of Customs has been retained under one Assistant Secretary
in order to maintain that close coordination between the three services that is essential to effective enforcement of the prohibition laws.
The operation of the division of foreign control has placed at the
disposal of all three services, particularly the Coast Guard, shipping
118
REPORT ON T H E FINANCES
information that has been a major factor in breaking up the so-called
rum fleet on the coast. This division has been very effective in
securing information relative to miscellaneous cargoes, and smuggling
by sea has become expensive and hazardous.
The decentrahzed administration of the enforcement and permissive features of the national prohibition act have been maintained in
the new Bureau of Prohibition and much has been accomplished in
the strengthening of decentralized administration along the lines of
uniformity of practice.
The past year has seen an improvement in the permissive control
of industrial alcohol and other intoxicating liquors and a consequent
tendency to development of the illicit manufacture of liquor. Many
large illicit distilleries, employing grain and corn sugar as raw materials, have been destroyed and the administrative districts are giving
more of their attention to the elimination of these large-scale moonshine operations.
The control of the manufacture and illegal disposal of beer of an
alcoholic content greater than one-half of 1 per cent has greatly
improved through the special attention given by the administrators
to the brewery permit work. There has been a noticeable development, however, of the manufacture of beer from malt sirup and wort
in illicit breweries not covered by a permit of any character. This
illicit so-called alley brewery has como into existence in a manner
somewhat analogous to the moonshine alcohol plant, both characters
of violations following improved control of permit breweries and
alcohol olants.
Each district has formed special conspiracy squads to work on
major conspiracy cases involving violations of the national prohibition act, and many important alcohol and beer cases have been
reported to the Department of Justice during the past year. The
enforcement work of the districts i*^ being continually directed to get
at the sources of supply and the financial backers of these commer- *
cially organized illegal operations.
The following table of seizures under the prohibition act epitomizes
in concrete form the results of improvements in these various lawenforcement activities:
Prohibition seizures
J u n e , J u l y , A u g u s t , 1926
J u n e , J u l y , A u g u s t , 1927
Increase
per c e n t . .
Distilleries
Stills .
2,660
4.029
51
2,291
4,323
88
still
worms
1, 400
2,325
66
Ferm enters
33, 022
52, 792
. 59
Autos
seized
1,694
1,872
10
Arrests
14,328
19, 275
34
SECRETARY OF THE TREASURY
119
Narcotic law enforcement
Enforcement of Federal narcotic laws has vigorously continued.
Special attention was given to the problem of apprehending those
persons engaged in large-scale operations with respect to illicit drugs
with the result that while there has been a decrease in the number of
cases reported for prosecution, a larger proportion of convictions has
been obtained, together with a substantial increase in the total
length of sentences imposed, notwithstanding the decreased number
of cases reported for prosecution. During the latter part of the
fiscal year the United States Supreme Court sustained the constitutionality of one of the enforcement provisions of section 1 of the
Harrison narcotic law, as amended.
A comparatively small quantity of those narcotic drugs lawfully
imported and afterwards manufactured in this country is diverted into
illegitimate channels. Narcotic drugs that are unlawfully introduced into this country form the chief source of supply of the nonmedical addict. The vast and varied commerce through the principal
seaports of our country, particularly along the Atlantic seaboard,
makes possible the clandestine introduction into the United States of
quantities of illicit narcotics under the guise of legal merchandise,
or hidden in personal effects of members of crews.
Public Health Service
Reports to the Surgeon General indicate that health conditions
throughout the country were unusually favorable during the fiscal
year ended June 30, 1927. However, the record for the calendar
year 1926 was not so favorable. The general death rate increased
slightly over that for 1925, and the infant mortality rate also increased. These increases were due, largely, if not entirely, to the
epidemic of influenza which occurred during the winter and spring
of 1926. No human plague occurred in the United States during
the fiscal year ended in 1927.
In addition to the information regarding the prevalence of quarantinable and communicable diseases in the United States which is
required to be given to foreign governments by international agreements, there has been an increasing interchange of sanitary information between the Public Health Service and the Pan American
Sanitary Bureau, the Health Section of the League of Nations, and
the International Office of Public Hygiene.
The experiment of examining prospective immigrants in the country
of origin, which was begun during the preceding fiscal year, continued
during the fiscal year 1927 and apparently proved very successful.
Early in the fiscal year this work was extended to Copenhagen,
Denmark; Berlin, Bremen, Cologne, Hamburg, and Stuttgart,
64761—FI 1927
10
120
REPORT ON THE FINANCES
Germany; and Bergen and Oslo, Norway. Later in the year it was
inaugurated at Goteborg and Stockholm, Sweden; and Warsaw,
Poland. Through representation to the Department of State by the
respective governments, arrangements are being completed to open
new stations at Genoa, Naples, and Palermo, Italy; and Prague,
Czechoslovakia, early in the new fiscal year.
During the time of the Mississippi flood, an officer of the Public
Health Service was detailed to serve at the national disaster rehef
headquarters of the American Red Cross as haison officer between
the Red Cross organization and the national and State public health
oflScials. In this capacity this officer was enabled to secure needed
assistance from the United States Pubhc Health Service and from
State, municipal, and local health departments throughout the
country. From its rural sanitation force the Public Health Service
immediately placed at the service of each of the State health officers
in the flood area a medical ofl&cer thoroughly experienced in public
health emergency work and famihar with the localities affected by
the flood. The value and efficiency, in this emergency, of the officers
trained in the rural sanitation work of the Pubhc Health Service was
sufficient proof of the necessity for continued support of this important
and valuable activity.
"" With the recession of the flood, the problem of providing public
healtb protection for the inhabitants of the devastated areas during
the period of rehabihtation confronted health officials. At a conference called under the auspices of the American Red Cross a plan
for the estabhshment of county health units in afflicted areas was
developed, which was believed to afford the best practical means
for the protection of the flood area against epidemic disease during the
rehabihtation period. In addition, its character was such as to
enable the communities to work out a permanent progratn of health
and sanitation.
Upon the request of the State and local authorities, two medical
ofl&cers and three sanitary engineers were sent to the disaster area
in Florida on September 21 and 23, 1926, to assist in establishing
emergency pubUc health measures. Adequate measures for the
prevention of the spread of smallpox and other epidemic diseases
were effectively carried out through the medium of State and local
health ofl&cials.
Bureau of Engraving and Printing
During the fiscal year ended June 30, 1927, the Bureau of Engraving and Printing printed and delivered greater quantities of work
than ever before in its history. This was accomplished in spite of
decreases in expenditures and in the number of employees as compared with the previous year. At the same time a new low record
--^ SECEETABT OF. THE TREASURY
121
for spoilage in all classes of currency was established. Such laudable accomplishments are numbered among the many demonstrable
results of the iniprovements in adthinistration that were put into
operation during the year. Elsewhere in this volume are enumerated the improvements which contributed to these accomplishments.
Division of Supply
By providing an appropriation for personnel for the Division of
Supply, the Congress, in the act of January 26, 1927 (44 Stat. 1029),
recognized and approved the central purchasing agency in the
Treasury Department, which had been created by Department
Circular 283, of March 28, 1922, and had functioned for five years
as the ''Bureau of Supply.'^ The ''Division of Supply" became a
unit of the office of the Secretary on July 1, 1927, In this division
the purchasing work of the department is cons:lidated and coordinated with the accounting, distribution, and trafl&c duties related
thereto. The chief of the Division of Supply is charged also with
immediate supervision over the work of the General Supply Committee.
Prior to the formation of this central purchasing ofl&ce these duties
were distributed among various bureaus and ofl&ces, in several of
which were distinct organizations doing purchasing work for the
units they served, in most cases without regard to consolidated and
coordinated purchasing power, systematic efforts to effect standardization, or persistent hammering for quantity-purchase or prompt,
payment discounts.
The operations of the division of supply during the fiscal year
1927 are summarized in its report printed elsewhere in this volume.
General Supply Committee.—The General Supply Committee's policy
of contracting for commonly used items in definite quantities each
quarter was described in my last report. This plan of procurement
has developed with such excellent results that it has been extended
to include staple food supplies, making possible not only the purchase of such supplies at lower cost but also the inspection of each
delivery, the latter through the cooperation of the Department of
Agriculture. The inclusion of the purchases of the District of
Columbia under the General Supply Committee contracts (as provided for by section 6 of the act making appropriations for the government of the District of Columbia for the fiscal year 1928) promises, from work already accomplished, to make possible appreciable
savings, both because of the advantage of the larger volume of pur-
122
REPORT ON THE FINANCES
chases and also because it has been possible to combine certain of
the needs of the District of Columbia with similar requirements
existing in the Federal departments and thus to make contracts on a
definite quantity basis.
War Finance Corporation
The War Finance Corporation, which has been in liquidation
since January 1, 1925, continued to make steady progress in winding
up its affairs. Its charter expires by law on April 4, 1928. The
amount advanced for all purposes from its''creation in May, 1918,
to October 15, 1927, w;as $690,278,000, of which $685,759,000 has
been repaid. The amount outstanding on the books of the corporation on October 15, 1927, was $4,407,000. The corporation's personnel and operating expenses are being reduced as rapidly as the
condition of its business permits.
Attention is invited to the attached reports of the various bureaus
and divisions of the Treasury Department and to the exhibits and
tables accompanying the report on the finances.
A.
W.
MELLON,
Secretary of the Treasury.
To the PRESIDENT OF THE SENATE.
ADMINISTEATIVE EEPORTS OF
BUEEAUS AND DIVISIONS
123
/
\
ADMINISTRATIVE REPORTS OF BUREAUS AND DIVISIONS
OFFICE OF THE COMMISSIONER OF ACCOUNTS AND DEPOSITS
Obligations of foreign goverrmients
During the fiscal year ended June 30, 1927, the Treasury received
on account of the indebtedness of foreign governments to the United
States the sum of $206,089,172.71, of which $45,699,572.81 represented
principal and $160,389,599.90 represented interest. Since the close
of the fiscal year up to November 15, 1927, additional payments have
been received amounting to $10,246,564.00, of which $53,424.92 was
on account of,principal and $10,193,139.08 on account of interest.
Pa}mfients were regularly received during the year under the terms
of the various funding agreements except the agreement concluded
with the Government of France. This last-mentioned agreement has
not yet been ratified by either the French Parliament or the Congress of the United States. France has, however, continued to pay
the interest amounting to over $20,000,000 per annum on the obligations now held by the United States, received in connection with the
surplus war material sold on credit. It also paid during the year
$10,000,000 on account of its indebtedness to the United States exclusive of obligations given for surplus war material. The Treasury
applied the amount received as a payment on account of the principal of the demand obligations taken for cash advances under the
Liberty bond acts. This payment, together with the interest payments made during the fiscal year 1927, is practically equal to the
annuity of $30,000,000 that would have been paid under the funding
agreement, if it had been ratified. Copies of press releases embodying correspondence concerning the $10,000,000 payment will be found
as Exhibit 26, page 315.
The following shows the amount of payments received from France
since June 15, 1925, which will be applied toward the annuities due
under the funding agreement upon ratification, and the amounts
specified as payable under that agreement:
Payments
received
Fiscal year
1926
1927...^
Total
. . .
Annuities
under funding
agreement
$20,367, 057. 25
30,367,057. 25
$30,000,000
30,000,000
50, 734,114. 50
60,000,000
The Government of the Republic of Liberia, on July 6, 1927, liquidated its indebtedness in full, amounting to $26,000 principal and
125
126
REPORT ON T H E FINANCES
$9,610.46 accrued interest. This indebtedness was evidenced by demand obligations of that Government which were acquired under
the Liberty bond acts for cash advances. Copy of a press statement
issued July 6, 1927, from the Office of the Liberian Consul General
at Baltimore containing a copy of a letter of the Secretary of the
Treasury to the consul general of Liberia regarding the payment arid
a statement of the consul general will be found as Exhibit 27, page 316.
The Governments of Italy and Latvia delivered to the Treasury
on May 19, 1927, and May 3, 1927, respectively, their new obligations
provided for in the respective funding agreements in exchange for
the old obligations held by the Treasury. Belgium and Czechoslovakia have not exchanged their obhgations, although payments have
been received regularly under the funding agreements. Yugoslavia
has not exchanged its obligations because the funding agreement has
not been formally ratified by the United States. Payments have,
however, been received regularly under this agreement.
All of the funding agreements concluded contain a provision allowing the respective governments to pay either interest or principal
due under the terms thereof in any obligations of the United States
issued since April 6, 1917. The Government of Great Britain is the
only one that has regularly taken advantage of this provision. On
one occasion the Governments of Finland and Italy each paid in
obligations of the United States.
There is set out below a statement showing the total payments
received up to the end of the fiscal year on account of the principal
of the funded indebtedness:
In United States obligation^
Country
Cash
Face amount
Belgium ._
Czechoslovakia
Finland
...
..
Great Britain
Hungary
. . . .
Italy
Lithuania
Rumania
Yugoslavia
Total
^"
...
_
$4,200,000. 00
6,000,000. 00
141,000.00
35. 723. 62
29,920. 50
6, 000,000. 00
92,185. 00
500, 000. 00
400, 000. 00
16,398.829.12
$44,850
94, 742,700
Accrued
interest to
date of
payment
$150.00
221,576.38
5,000,000
99, 787, 550
221, 726. 38
Total
principal
payments
$4,200,000. 00
6,000,000.00
186,000.00
95,000,000.00
29,920. 50
10,000,000.00
92,185.00
500,000.00
400,000.00
116,408,105.50
There is set out below a statement showing the total payments received up to the end of the fiscal year on account of interest due on
the funded indebtedness:
127
SECRETAEY OF THE TREASUEY
In United States obligations
Country
In bonds of
debtor
governments
Belgium
Estonia
Finland .
Great Britain
Hungary
Latvia
Lithuania
Poland .
Total.
$43, 555. 60
224, 775. 00
268,330. 50
Face amount
Accrued
interest to
date of
payment
$154,750
663,704,400
$550. 72
1,939,223.20
563,859,150
1,939,773.92
Cash
$3,740,000.00
175,000.00
1,048, 749. 28
49,761,376.80
161,977.57
95,000. 00
321,978. 39
3,500,000. 00
58,804,082. 04
Total
interest
payments
including
funded
interest
$3,740,000.00
175.000.00
1, 204.050. 00
615,405,000. 00
285, 533. 07
95,000. 00
546, 753. 39
3, 500,000. 00
624,871,336.46
The Treasury recently issued a publication entitled "Combined
Annual Reports of the World War Foreign Debt Coinmission, With
Additional Information Regarding the Foreign Debts Due the
United States." This publication combines all of the annual reports
of the World War Foreign Debt Commission as embodied in the
annual reports of the Secretary of the Treasury for each of the fiscal
years ended June 30, 1922, to June 30, 1926, together with additional
data incident to the settlement of the debts. This publication makes
available in convenient form a complete history of the debt settlements.
During the past year certain unofficial statements were issued relative to foreign debts due the United States. Some of these statements urged reconsideration with a view to granting more lenient
terms; some suggested outright cancellation, and others indorsed the
Government's policy in funding the debts. In this connection there
will be found, as Exhibits 28 to 31, pages 318 to 336, a copy of a
statement made by Senator Smoot in the United States Senate on
December 22, 1926, replying to a statement issued by certain professors of Columbia University asking for a joint conference of
debtor and creditors governments to fix the amount of the debts to be
paid; copy of a letter dated March 15, 1927, from the Secretary of
the Treasury to Mr. John Grier Hibben, president of Princeton University, replying to a press statement issued by certain members of
the faculty of that university, indorsing the statement issued by the
Columbia professors and urging reconsideration of the debt settlements; copy of a note from the British Government commenting
upon the Secretary's letter to President Hibben; and copy of a
reply made by the Secretary of State, together with copy of the
press statement released by the Secretary of the Treasury on May 5,
1927, commenting upon the letter of the British Government.
For a detailed statement of the principal amount of the indebtedness of foreign governments as of November 15, 1927, payments made
on account of the principal thereof, and the interest accrued and
128
REPORT ON THE FINANCES
unpaid thereon as of the last interest payment date prior to or ending
with November 15,1927, see Table 66, page 628.
Statement of the payments made up to November 15, 1927, on account of interest on all obligations of foreign governments held by
the United States, funded and unfunded, appears as Table 67,
page 629.
The "present values" of payments to be received from the several
foreign governments under the respective funding agreements, calculated a differertt rates of interest, are shown in Table 68, page 630.
Receipts from Germany
Under the terms of the agreement providing for the distribution
of the Dawes annuities, signed at Paris on January 14, 1925, the
United States is entitled to receive annually from Germany certain
payments on account of the reimbursement of the costs of the United
States army of occupation and the awards of the Mixed Claims
Commission established in pursuance of the agreement of August
10,1922, between the United States and Germany.
Army costs.—The agreement of January 14, 1925, provides that,
out of the amount received from Germany on account of the Dawes
annuities, there shall be paid to the United States, beginning September 1, 1926, the sum of 55,000,000 gold marks per annum, as reimbursement of the costs of the American army of occupation. This
annual payment constitutes a first charge on cash made available
for transfer by the transfer committee out of the Dawes annuities,
after the provision of the sums necessary for the service of the
800,000,000 gold mark German external loan, 1924, the costs of the
Reparation Commission, the organizations established pursuant to
the Dawes plan, the Interallied Rhineland High Commission, the
Military Control Commissions, and the payment to the Danube
Commission, and for any other prior charges which may hereafter,
with the assent of the United States, be admitted. The annual
amounts are cumulative and any arrears bear interest at 41/2 per
cent from the end of the year in which payable, until satisfied.
The United States is also recognized as having an interest, with
respect to any arrears in the annual amounts due on this account, in
any disposition of railway bonds, industrial debentures, or other
bonds issued under the Dawes plan.
Under this agreement the United States is entitled to receive its
payments at the time any cash is made available for transfer by the
transfer committee. I n order to facilitate the operation of the plan,
an arrangement was made during the third annuity year with the
agent general for reparation payments, under which the United
States received its share in monthly installments. The operation of
this arrangement was entirely satisfactory from the standpoint of
the Treasury, and an arrangement similar in character has been made
SECRETARY OF THE TBEASURY
129
for the fourth annuity year. During the third annuity year, ended
August 31, 1927, the United States received on this account the
55,000,000 gold marks provided for in thei agreement of January
14,1925, or the equivalent of $13,057,939.47. The Army cost account
as of September 1, 1927, stood as follows:
Total Army cost charges (gross), including expenses of Interallied Rhineland High Commission (American department)— $292, 663, 435.79
Credits to Germany:
Armistice funds (cash requisition on German Government)
$37, 509, 605. 97
Provost
fines
159, 033. 64
Abandoned enemy war material—;
5, 240, 759.29
Armistice trucks
1, 532, 088. 34
Spare parts for armistice trucks
355, 546. 73
44, 797, 033. 97
247, 866, 401. 82
Payments received—
Under the Army cost agreement of May 25,
1923, which was superseded by agreement of Jan. 14, 1925
.
$14, 725,154.40
Under Paris agreement of Jan. 14, 1925_— 13,057,939. 47
—
27, 783, 093. 87
Balance due as of Sept. 1, 1927
220,083,307.95
Mixed claims.—The agreement of January 14, 1925, also provides
that, out of the amount received from Germany on account of the
Dawes annuities, there shall be paid to the United States, for the
purpose of satisfying the awards of the Mixed Claim Commission
established in pursuance of the agreement of August 10,1922, between
the United States and Germany, 2 ^ per cent of all such receipts available for distribution as reparations, provided that the annuity resulting from this percentage shall not in any year exceed the sum of 45,000,000 gold marks. The United States is also recognized as having
an interest, proportionate to its 2 ^ per cent share in the part of
the annuities available for reparations, in any disposition of railway bonds, industrial debentures or other bonds issued under the
Dawes plan.
During the first two years the bulk of the payments made under
the Dawes plan, except those for the service of the German external
loan, were made in reichs marks within Germany, chiefly for deliveries
in kind and for the costs of the armies of occupation. This appeared
to be in accord wath the intention of the experts sponsoring the
plan, who stated in their report that, in the interest of currency
stability and to aid the successful inauguration of the new Reichsbank, the proceeds of the German external loan should be used
exclusively for financing internal payments, such as deliveries in
kind and that part of the costs of the armies of occupation which
represented expenditures in Germany. In view of the fact that the
United States had no arrangement for accepting payments within
130
REPORT ON THE FINANCES
Germany, its share of the first two annuities was allowed to accumulate to its credit on the books of the agent general for reparation
payments until, on August 25, 1926 (practically the end of the second
annuity year) in connection with a cash transfer, the United States
received 14,858,882.24 gold marks, or $3,523,819. Special arrangements were subsequently made under wdiich the United States received the aggregate of 20,144,639.73 gold marks, or $4,780,952.40.
I n order, however, that the United States might realize currently
upon its 214 per cent share, an arrangement was made about the
middle of the third annuity year with the Government of Germany,
substantially analogous to an agreement for the financing of deliveries in kind. Under this arrangement the agent general for reparation payments, about three days prior to the beginning of each calendar month, advises the finance minister of the Reich of the reichsmark credit held by the agent general for account of the United
States and available for payment during the month in question in
accordance with the program established for that month by the
Reparation Commission after consultation with the transfer committee. Upon receipt of advice from the agent general as to the available credit for the month, the German Government undertakes to
prevail upon German firms delivering goods or rendering services to
the United States to deposit each month to the credit of the agent
general wnth the Federal Reserve Bank of New York, out of the
dollar credits arising from said deliveries and services, an amount
equivalent to the credit specified by the agent general. The agent
general then transfers such dollars to the Government of the United
States as payment on account of the 2^4 per cent share.
Up to the end of the third annuity year the United States received,
through cash transfers and under the arrangements mentioned, the
sum of 58,036,148.82 gold marks, or $13,920,133.66, practically extinguishing the credits due up to that time. Due to the fact that
Congress has as yet enacted no legislation authorizing the payment
of the mixed claims receipts to the claimants, the Secretary of the
Treasury, in order to benefit the fund held for this account, has invested the dollar proceeds in obligations of the United States. As
further payments are received they will likewdse be invested until
Congress disposes of the matter by legislation. The account stood
as of September 1, 1927, as follows:
Total receipts to Aug. 31, 1927
$13,920,133.66
Cost of investments iu 3^/4 per cent Treasury
certificates of indebtedness, series TM-1928,
maturing Mar. 15, 1928
$13,920,084.96
Cost of cable charges
'..
!_
11.25
:
13,920,096.21
Balance held in special deposit account
in Treasury on Sept. 1, 1927 ^—
37.45
SECRETARY OF THE TREASURY
131
Railroad obligations
The total principal amount of railroad obligations held by the
United States on June 30, 1927, was $230,484,076.05. During the
fiscal year payments amounting to $69,708,400.42 were received on
account of principal as follows:
Equipment trust notes
Federal control act, section 7
Transportation act, section 207
Transportation act, section 210
1—
^—
——
$33,600.00
—— 25, 950,000.00
19,359,625.83
24,305,174.59
69,708,400.42
The amounts above set opposite section 7 of the Federal control
act and section 207 of the transportation act are the proceeds of
sales during the year by the Director General of Railroads at par and
accrued interest to the date of sale of obligations acquired under the
respective sections of the acts, except a small amount of payments
due carriers for services rendered, which was withheld by the Comptroller General and applied to the principal under section 207. ^ For
detailed statement see Table 70, page 631. The principal payments
received on account of loans under section 210 of the transportation
act, amounting to $24,365,174.59, represented payments of $1,191,300
on account of maturing obligations and $23,173,874.59 on account of
payments before maturity. The Secretary of the Treasury has no
authority, according to a ruling of the Attorney General, to sell the
obligations acquired under section 210. Most of the obligations,
however, contain a provision which gives the carrier the right to
pay them at any time*before maturity, which has enabled the carriers to take advantage of opportunities to refinance their obligations at lower rates of interest and thereby reduce the indebtedness
of the railroads to the Government.
On the basis of the Daily Treasury statement, the total receipts
on account of railroad, securities for the fiscal year were $89,737,958.98, of which $69,708,400.42 was on account of principal and
$20,029,558.56 on account of interest.
Between July 1 and October 31,1927, receipts on account of obligations of carriers have totaled $83,202,341.71, of which $43,000,000
was a payment of principal before maturity and $17,000,000 was on
account of sales made by the Director General of Railroads of obligations acquired under section 207, $17,327,562.16 represented payments
by the carriers on account of principal of obligations under section
210, and $5,868,500.57 was on account of interest.
Section 20^.—This section provides for reimbursement of deficits
of the so-called " short-line " railroads during Federal control. Payments during the fiscal year on this account aggregated $166,981.57,
making total payments to June 30, 1927, of $10,337,436.84 under this
section. Of this total, $8,418,918.93 was paid to the carriers direct,
132
REPORT ON THAJ FINANCES
and $1,918,517.91 was paid to the Director General of Railroads on
account of amounts certified to be due from the carriers to the
President as operator of the transportation systems under Federal
control. See Table 69, page 631.
Section 209.—This section provides for the guaranty of net railway operating income during the six months' period immediately
following the termination of Federal control on March 1, 1920.
During the fiscal year there was paid to the carriers under the provisions of this section the sum of $605,868.15, making total payments,
to June 30, 1927, of $533,323,567.29. This total includes $3,402,740.52 due from the following carriers.as of June 30, 1927, in cases
where the certificates made by the Interstate Commerce Commission
were in excess of the amounts actually due, resulting in overpayments
under the provisions of paragraphs (g) and (h) of this section:
Buffalo & Susquehanna R. R. Corporation,-...
$21, 749. 31
Chicago, Indianapolis & Louisville Ry. Co
;
198,484.95
Fort Dodge, Des Moines & Southern R. R. Co
69,065. 55
Great Northern Ry. Co _—L_
1, 329, 785.98
Minneapolis & St. Louis Railroad Co., Receiver
292, 022.23
Missouri & North Arkansas R. R. Co., Receiver
41,375.46
Northern Pacific Ry. Co__.
:
1,320,241.73
Oregon Electric Railway Co. (subsidiary Spokane, Portland
& Seattle Ry. Co.)
^
25,741.83
Spokane, Portland & Seattle Ry. Co
104, 273.48
Total
-.
^
—.
3, 402, 740. 52
The carriers in these cases have refused to make payment of the
amounts due to the United States. In some cases the matter is now
in litigation; two cases are in receivership, and in other cases the
carriers have disclaimed any liability in the matter.
For a detailed statement showing payments made during the fiscal
year to carriers under this section and total of all payments and
advances made, see Table 71, page 632.
Since publication of the last annual report the Treasury has been
notified by the Attorney General that no further action can be taken
by the Government to appeal from the judgment of the district
court in iavor of the Interstate Railroad Company.
Section^ 210.—This section established a revolving fund of $300,000,000 to be used for loans to railroads under the conditions set
forth in a certificate of the Interstate Commerce Commission authorizing each loan. As the period during which the carriers could file
application for loans has expired, it is not anticipated that any
further loans will be made. This fund was made available also for
paying judgments, decrees, and awards rendered against the Director
General of Railroads. The expenditures by the Director General
during the fiscal year for this purpose amounted to $749,182.61,
making total net expenditures to June 30, 1927, of $32,683,781.82.
133
SECRETARY OF T H E TREASUR^t
For a statement showing the principal amount of obligations held
as of June 30, 1926 and 1927, on account of loans made, see Table
72, page 633.
The following is a list of the carriers' in default as of June 30,
1927, on account of their obligations given for" loans under this
section:
Principal
Name of carrier
Aransas Harbor Terminal R y . :
Des Moines & Central Iowa R. R
Gainesville & Northwestern R. R. Co
Minneapolis & St. Louis R. R. Co
Missouri & North Arkansas Ry. Co
Salt Lake & Uiah R. R. Co
Virginia Blue Ridge Ry. Co
Virginia Southern R. R. Co
j .
Waterloo, Cedar Falls & Northern Ry. Co.
Wichita Northwestern Ry. Co
Interest
31,400
106,000
$19,005.00
18,000.00
309, 767.00
564, 652. 82
130,892.00
6,360. 00
6,840. 00
415,800. 00
80,167.50
$50,000.00
19,005.00
93,000.00
309, 767.00
564,652.82
162,292.00
112,360.00
6,840.00
415,800.00
80,167.50
262,400
1,551,484.32
1,813,884.32
$50,000
75,000
Total.,
Total
Securities owned by the United States Government
The aggregate amount of securities owned by the Government on
June 30, 1927, as compiled from the latest reports received, was
$11,288,039,038.95, as against $11,037,161,411.66 on June 30, 1926, an
increase of $250,877,627.29. A summary comparison of the holdings
at the end of the last two fiscal years is as follows:
June 30, 1927
Foreign obligations:
Received under debt settlements
All other
„
„
._
_.
Capital stock of war emergency corporations
Railroad obligations.
. . .
Capital stock of Panama Railroad
Capital stock of Inland Waterways Corporation
Federal land bank securities:
Capital stock of Federal land banks
Federal farm loan bonds
_
Capital stock of Federal intermediate credit banks
Miscellaneous securities received by War and Navy Departments and United States Shipping Board
June 30, 1926
$6,818,154,785.43
4,094,393,840.16
$4,725,490,865.00
5,807,062,185. 73
10,912,548,625.59
48,911,396.00
230, 484,076. 05
7,000. 000. 00
4,000,000.00
10, 532, 553,050. 73
53,167,076.17
299,112,850.64
7,000,000. 00
1,500,000.00
842,008.00
25,000,000.00
1,180, 440.00
60,495,000. 00
24,000,000.00
69,252,933.31
68,162,994.12
11,288,039,038.95
11,037,161,411.66
The principal increases are, in round figures, $380,000,000 in for(iign obhgations and $2,500,000 in the capital stock of the Inland
Waterways Corporation. Principal decreases are $69,000,000 in
railroad obligations, $60,495,000 in Federal farm loan bonds, and
$4,000,000 net in the capital stock of war emergency corporations.
The increase in foreign obligations is due to the delivery of bonds
under the funding agreements in exchange for the old obligations
held, which bonds included in their face amount the accrued and
unpaid interest on the old indebtedness to the date of settlement.
134
REPORT ON THE FIN'ANCES
The decrease in railroad obligations is due to sales of such obligations made by the Director General of Railroads and payments
received on account from the carriers. The farm loan bonds purchased by the Secretary of the Treasury under the authority of the
act approved January 18, 1918, as extended by joint resolution approved May 26, 1920, have now all been repurchased by the Federal
land banks at par and accrued interest, as required by law. Treasury
purchases of these bonds under the authority mentioned aggregated
$195,925,000.
A detailed statement of the securities held on June 30, 1927, will
be found as Table 65, page 626.
Trust funds administered by the Treasury
Adjusted service certificate fund.—During the fiscal year the Treasury continued to make investments for the account of the adjusted
service certificate fund in special issues of Treasury notes and certificates of indebtedness bearing interest at the rate of 4 per cent per
annum, in accordance with the procedure outlined in the Annual
Report oi. the Secretary of the Treasury for the fiscal year 1925.
The new investments made during the year were in Treasury notes
and aggregated $123,400,000 face amount. The funds available for
this purpose were an appropriation of $116,000,000 and interest on
investments of $7,400,000, both available on January 1, 1927. Redemptions during the year to provide funds for authorized payments
amounted to $14,400,000 face amount; $23,800,000 face amount of the
one-year certificates of indebtedness held in the investment account
of the fund matured January 1, 1927, and after redemption the
proceeds of the principal amount were reinvested in like obligations
maturing January 1, 1Q28.
A statement of the condition of the fund as of June 30, 1927,
follows:
Adjusted service certificate fund as of June 30, 1927
F U N D ACCOUNT
Appropriations:
To June 30, 1926
Available Jan. 1, 1927
Interest on investments
$220, 000, 000.00
116,000, 000.00
11, 565,172.56
347, 565,172. 56
Checks issued by Veterans' Bureau against credits from fund
and paid by the Treasurer of the United States
Balance in fund June 30, 1927
33,495, 532.13
314,069,640.43
SECRETARY OF T H E TREASURY
135
FUND ASSETS
Investments:
4 per cent Treasury notes—
Dated J a n . 1, 1925, m a t u r i n g J a n . 1, •
1930
$50, 000, 000
Dated J a n . 1, 1926, m a t u r i n g J a n . 1,
1931
53, 500, 000
Dated Mar. 5, 1926, m a t u r i n g J a n . 1,
1931
70, 000, 000
Dated J a n . 1, 1927, m a t u r i n g J a n . 1,
1932
123, 400, 000
4 per cent one-year T r e a s u r y certificates—
Net issues
— $50,000,000
Redemptions to J u n e 30,
1927
34,000,000
16j000,000
$312, 900, 000. 00
Balance to credit of disbursing officer of Veterans' B u r e a u
(includes outstanding checks)
Total fund a s s e t s . ,
_.
1,169,640.43
314, 069, 640.43
Civil service retirement and disability fund.—Investments for
the account of the civil service retirement and disability fund were
made during the fiscal year 1927 in special issues of Treasury notes
bearing interest at the rate of 4 per cent per annum in accordance
with the procedure outlined in the Annual Report of the Secretary
of the Treasury for the fiscal year 1926.
A t the beginning of the fiscal year under review there «was held
in the fund, among other securities, $30,500,000 face amount of
second Liberty loan 4i^ per cent bonds at a principal cost of
$30,656,870.50. I n view of the plan of the Treasury adopted during
the fiscal year for refunding the second Liberty loan bonds outstanding and the market prices of the bonds at that time, it was
decidedly advantageous to the fund to sell the bonds so held and
simultaneously reinvest the proceeds in special issues of 4 per cent
Treasury notes in accordance with the established procedure relative
to investments for account of the fund. The second 4l^'s were therefore sold in the market, the principal proceeds being $30,738,281.25.
This sum plus accrued interest on the sale and a small balance in the
fund was immediately invested in $31,200,000 face amount of 4 i)er
cent special Treasury notes maturing J u n e 30, 1931.
The procedure adopted July 1, 1926, covering the investments for
account of the fund assures the maximum amount of investments at
all times. Investments are made in amounts of $100,000 or multiples
thereof, and as soon as this amount is available it is immediately
invested for account of the fund. The new investments made dur64761—FI 1927
:11
136
REPORT ON THE FINANCES
ing the year in this manner aggregated $14,400,000 face amount 4
per cent special Treasury notes maturing June 30, 1932.
Credits to the fund during the fiscal year aggregated $27,168,463.84,
of which $24,355,882 was on account of deductions from basic compensation ^of employees and service credit payments and $2,812,581.84
representing interest and profits on investments. The expenditures
on account of refunds to employees, annuities, etc., amounted during
the fiscal year to $13,429,092.90 as compared with $10,183,345.27 for
the previous year.
The following statement shows the status of the fund as of June
30, 1927.
Ciinl service retirement and disability fund^ June 30, 1927
Credits:
On account of deductions from basic compensation of employees and service credit payments
$116,274, 888.41
On account of interest and profits on investments
10,162, 899.31
126, 437, 787. 72
Less:
Checks of disbursing officer account of
annuities,and refunds paid by the Treasurer of the United States
$58, 012, 899.14
Settlement warrants paid by Treasurer of
United States
603. 40
58, 013, 502. 54
Balance in the fund June 30, 1927
Assets:
68, 424, 285.18
Principal cost
$22,695,050 face amount fourth Liberty
loan 41^ per cent bonds
$22, 399, 454. 01
31,200, 000 face amount 4 per cent special
Treasury notes, payable
' June 30, 1931
31,200,000.00
14,400, 000 face amount 4 per cent special
Treasury notes, payable
June 30, 1932
14,400,000.00
67, 999, 454. 01
68,295,050
Unexpended balances June 30, 1927^
Total fund assets.—:
424, 831.17
68, 424, 285.18
District of Columbia teachers^ retirement fund.—The total investments made by the Treasurer of the United States for account of
this fund during the fiscal year 1927 consisted entirely of Federal
farm loan bonds and were as follows: $321,100 face amount 4^4 per
cent bonds at a principal cost of $324,198.12, $118,700 face amount
41/2 per cent bonds at a principal cost of $120,173.68, and $47,800
face amount 43^ per cent bonds at a principal cost of $49,323.63.
137
SECRETARY OF THE TREASURY
The second Liberty loan 4l^ per cent bonds held in the investment
account on June 30, 1926, aggregating $202,150 face amount, were
sold on March 16, 1927, in anticipation of the call of these bonds by
the Treasury for payment on November 15, 1927. The price realized
was lOOff and accrued interest. With the proceeds $203,000 face
amount of 4^4= P^^ ^®^^ Federal farm loan bonds were acquired at a
principal cost of $204,776.24. The securities in the investment
account June 30, 1927, were as follows:
Face amount
First Liberty loan i}4 per cent bonds..
Third Liberty loan i}i per cent bonds..
Fourth Liberty loan i}4 per cent bonds
i}i per cent Treasury bonds of 1947-52..
i}4 per cent Federal farm loan bonds...
4H per cent Federal farm loan bonds...
i H per cent Federal farm loan bonds...
$26,850
165,450
735, 750
10,000
321,100
407, 540
47,800
1, 714,490
Principal cost
$27, 529. 64
157, 611. 47
704, 371. 27
10,000.00
324,198.12
415,928. 21
49, 323.63
1, 688,962.34
Foreign service retirement and disability fund.—The foreign
service retirement and disability fund, established by section 18 of the
act of May 24, 1924 (vol. 43, p. 144), is under the administrative
supervision of the Secretary of State, but under the act the Secretary
of the Treasury is directed to make investments from time to time of
such portion of the fund as in his judgment may not be immediately
required for authorized payments, the income derived from such
investments to be credited to the fund as a part thereof.
Section 18 (i) of the act of May 24, 1924, requires that in case an
annuitant dies without having received in annuities an amount equal
to the total amount of his contributions from salary with interest
thereon at 4 per cent per annum compounded annually up to the
time of his death, the excess of the said accumulated contributions
over the annuity payments shall be paid to his legal representatives,
and in case a foreign service ofiicer dies without having reached the
retirement age, the total amount of his contributions with accrued
interest shall be paid to his legal representatives. I n view of this
requirement, the same considerations as to savings and simplified
procedure are applicable tq investments made by the Treasury for
account of this fund as are indicated in connection with investments
for account of the adjusted service certificate fund and the civil
service retirement and disability fund.
The following procedure, therefore, was prescribed effective on
a n d a f t e r July 15, 1927:
(1) Investments for account of the fund will be made in special
issues of Treasury certificates of indebtedness and Treasury notes
bearing interest at the rate of 4 per cent per annum payable on June
138
. REPORT ON THE FINANCES
30 in each fiscal year, or on earlier redemption: Such obligations
to be issued in denominations of $1,000 or multiples thereof, and at
par as of dates of issue.
(2) The Treasurer of the United States will act as disbursing
ofiicer for the investments in the same general manner as at present.
The commissioner of accounts and deposits will be responsible for
the investments from available funds, and the commissioner of the
]Dublic debt for issuance of the securities and safe-keeping thereof in
the same general manner as is done with the adjusted service certificate fund and the civil service retirement and disability fund.
Credits to meet monthly requisitions of the disbursing clerk of the
Department of State for authorized payment will be provided when
necessary through redemption of the special issues.
During the fiscal year 1927 the fund was credited with the sum
of $162,024.98, including $10,007.54 earnings on investments. The
fund was charged with $74,000 on account of advances to the disbursing officer of the State Department for the payment of annuities,
etc., and $87,267.50 on account of investments, leaving an unexpended
balance on June 30, 1927, of $757.48. The total interest and profits
collected on investments to June 30,1927, amounted to $19,805.23.
All of the securities in the investment account of the fund on
June 30, 1927, were held in safe-keeping by the Division of Loans
and Currency of this department and the Federal Reserve Bank of
New York.
The following statement shows the status of the fund as of June
30,1927:
Foreign service retirement and disability fund, June 30, 1927
Credits:
On account of 5 per cent deductions from basic compensation
of employees subject to the foreign service act
!._.._ $446, 094. 97
Interest and profits on investments
19, 805. 23
AU other
2, 673. 38
468, 573. 58
Less net advances to disbursing officer of State Department for the
payment of annuities, etc
197, 946. 25
Balance in the fund June 30, 1927
•
270, 627. 33
Assets:
$79,150 face amount fourth Liberty loan 4^^ per
cent bonds
$81, 069. 85
188, 800 face amount 3 ^ per cent Treasury notes.
Series A—1930-1932
188,800.00
269,869.85
267, 950
'Unexpended balance June 30, 1927
.
757. 48
Total fund assets
270, 627. 33
SECRETARY OF THE TREASURY
'
139
Library of Congress trust fund.—Under provisions of the act approved March 3, 1925, the Library of Congress trust fund board consists of the Secretary of the Treasury, the chairman of the Joint
Committee on the Library, the Librarian of Congress, and two persons appointed by the President. The act authorizes the board to
accept, receive, hold, and administer such gifts or bequests of personal property for the benefit of, or in connection with, the Library,
its collections, or its service as may be approved by the board and by
the Joint Committee on the Library. The moneys or securities given
or bequeathed to the board are required to be receipted for by the
Secretary of the Treasury, who is authorized to invest,' reinvest, or
retain investments, as the board may determine. I n accordance with
the policy adopted by the board, investments and reinvestments of
the principal of trust funds are made in interest-bearing securities of
the highest rating.
The earnings credited to the fund during the fiscal year amounted
to $7,974.7o, making total earnings received to June 30, 1927, of
$8,748.99.
During the fiscal year the board received a donation from Mrs.
Elizabeth Sprague Coolidge of $124,438.20 face amount of securities,
the income from which is to be used according to the terms of the
donation for the purpose of maintaining certain activities in connection with the music division of the Library. A first mortgage note
for $15,000 face amount was paid during the year at a 1 per cent
premium, the proceeds of which were reinvested in $15,400 face
amount of 4% per cent first mortgage bonds of the New England
Telephone & Telegraph Co., making a total face amount of securities
held under this donation of $124,838.20.
The following statement shows the securities received by the board
up to June 30, 1927, including the $15,400 face amount of New
England Telephone & Telegraph Co. bonds purchased by the Secretary of the Treasury under the Coolidge donation. All the securities
are held in safe-keeping by the Treasurer of the United States, subject to the order of the Secretary of the Treasury for account of the
board.
140
REPORT ON THE FINANCES
Library of Congress trust fund board, securities held on June 30, 1927
Face
amount
N a m e of securities
Class of securities
Rate
Elizabeth Sprague Coolidge donation
Central Illinois Public Service Co . . . .
Chicago Railways Go
Great Northern Railway Go
Houston Home Telephone Go..
Potosi & Rio Verde Rv. Go
Public Service Go. of Northern Illinois
Rio Grande Southern R. R. Go
Jacob M. and Tillie Fine and Charles and
Birdie Fine.
Utah Power & Light Go
American Shipbuilding Go
American Telegraph & Telephone Go
American Window Glass Machine Go
_
Board of Trade Building Trust of Boston...
Commonwealth Edison Go.>
Elgin National Watch Go
Mexican Northern Ry. Go
__ .
Public Service Go. of Northern Illinois
New England Telephone & Telegraph Go..
Per cent
6
5
7
5
6
5
1, 000. 00
4
10,000.00
5H
$1,000.00
5,000.00
10,000. 00
100. 00
1, 463. 20
13, 000. 00
10, 000. 00
10, 000. 00
17,100. 00
2, 500. 00
700. 00
12,400.00
9, 375. 00
800. 00
5, 000. 00
15,400. 00
5
...
F i r s t a n d refunding mortgage b o n d s .
F i r s t mortgage b o n d s .
General mortgage b o n d s .
F i r s t mortgage b o n d s .
Do.
F i r s t a n d refunding m o r t g a g e b o n d s .
First mortgage bonds.
Promissory note.
F i r s t mortgage b o n d s .
C o m m o n stock.
1)0.
Do.
Do.
Do.
Do.
Do.
Preferred stock.
iVz First m o r t g a g e b o n d s .
J a m e s B . Wilbur donation i
P u b l i c Service Go. of N o r t h e r n Illinois
100,000. 00
7
Preferred stock.
William E . Benjamin donation
32, 500. 00
S t a n d a r d Oil Co. of Galifornia.
R. l i . Bowker donation 2
Detroit Edison Go
German Government
Japanese Government
Austrian Government
Total
•..
.
5,000. 00
2, 000.00
2, 000. 00
1, 000. 00
C o m m o n stock.
F i r s t mortgage b o n d s .
G e r m a n external loan.
7
63/2 Sinking fund gold b o n d s .
Sinking
fund b o n d s g u a r a n t e e d l o a n .
7
267, 338. 20
/
1 Six-sevenths of income retained for t h e present b y t h e donor.
2 Life interest in six-sevenths of income r e t a i n e d u n d e r t e r m s of d o n a t i o n .
United States Goveimment life insurance fund.—Under the provisions of section 18 of the act approved December 24, 1919, as
amended March 4, 1923, the Secretary of the Treasury is authorized
to invest in interest-bearing obligations of the United States or in
bonds of the Federal land banks all moneys received in payment of
premiums on converted insurance in excess of reserve requirements
and authorized payments. Under this authority investments were
made as and when funds were available upon advice received from
the Director of the United States Veterans' Bureau. However, under the act approved March 3, 1927, the Director of the United
States Veterans' Bureau is authorized to make loans to veterans
upon their adjusted service certificates out of the United States
Government life insurance fund. After the passage of this last
mentioned act, all moneys received for account of the fund in excess
of ordinary requirements were devoted to the making of loans to
veterans. In order to meet the immediate demands of the veterans
for loans, it was necessary to sell $3,000,000 net face amount of the
investments in Government obligations to provide additional funds
for that purpose. Between March 3, 1927, and June 30, 1927, the
141
SECRETARY OF THE TREASURY
director reports loans aggregating $20,818,116.70 made to veterans
under this authority. Until the funds were needed to make loans
to veterans, the Secretary of the Treasury continued to make investments for the fund in Federal farm loan bonds in accordance with
an arrangement between the fiscal agent of the Federal land banks,
the Director of the Bureau, and the Treasury. During this period
$32,550,000 face amount of 4 ^ % bonds of these banks were purchased, making a total face amount of $101,750,000 of all farm loan
bonds now held for account of the fund.
Monthly reports are made by the Treasury to the Veterans' Bureau
of all securities in the fund and the principal cost thereof as the
result of investments made by the Secretary of the Treasury, and
periodic verifications of the security holdings are made through
reports rendered to the director by the safe-keeping offices.
The securities held in the fund on June 30, 1927, were as follows:
Principal cost
Par value
First Liberty loan converted i}4 per cent bonds.
Fourth Liberty loan i}4 per cent bonds
i}i per cent Treasury bonds
$6, 639,900.00
52,103, 650.00
49,173, 200.00
$6,316,209.21
49, 996,971.80
49, 201, 905. 28
Total
i}4 per cent Federal farm loan bonds
4M per cent Federal farm loan bonds
107, 916, 750. 00
69,200,000. 00
32, 550,000. 00
105,515,086.29
69, 742, 644. 40
32,477, 590. 04
Total investments made by Secretary of the Treasury
Loans to veterans as reported by the Director of the United
Veterans' Bureau
209, 666, 750. 00
207,735, 320. 73
Total investments in the fund
20,818,116. 70
20,818,116.70
230,484,866.70
228,563,437.43
Division of Bookkeeping and Warrants
Summary of receipts and expenditures.—^A summary of receipts and
expenditures during the fiscal year ended June 30, 1927, adjusted to
the basis of daily Treasury statements, revised, is set forth in the
following table:
Ordinary receipts
Expenditures chargeable against ordinary receipts
Surplus of ordinary receipts over total expenditures
chargeable against ordinary receipts
Surplus revenues applied to reduction of the public debt, in
addition to $519,563,844.78 debt retirements chargeable
against ordinary receipts
Surplus revenues reflected in increase in balance of general
fund of the Treasury on June 30, 1927, compared with
June 30, 1926
Total surplus revenues accounted for, as above
Public debt • receipts
$4,128, 422,887. 61
3, 493, 507,876. 75
634, 915,010.86
613,444, 968.81
21, 470, 042.05
634, 915, 010.86
5,185, 083,142. 93
142
REPORT ON THE FINANCES
Public debt expenditures, including public debt expenditures
chargeable against ordinary receipts
$6, 318, 091, 956. 52
Excess of total public debt expenditures over public
debt receipts
1,133, 008, 813. 59
Public debt retirements chargeable against ordinary receipts.
Public debt retirements from surplus revenues
519, 563, 844. 78
613,444,968.81
Net reduction in public debt during fiscal year, as
above
±
1,133, 008, 813. 59
Total ordinary and public debt receipts
Total ordinary and public debt expenditures
.^
9, 313, 506, 030. 54
9, 292, 035, 988.49
Excess of all receipts over all expenditures
Balance
ments
Balance
ments
21, 470. 042. 05
in general fund on basis of daily Treasury state(revised) June 30, 1926
in general fund on basis of daily Treasury state(revised) June 30, 1927
.
232,598,120.48
Net increase in balance in general fund June 30, 1927,
over such amount June 30, 1926
21, 470, 042. 05
211,128,078.43
The general fund.—
Balance according to the daily Treasury statement, June 30,
1926 (unrevised)
210, 002, 026. 71
Add net excess of receipts over expenditures in June reports
subsequently received
1,126, 051. 72
211,128,078.43
Increase in book credits of disbursing officers
and agencies with the Treasurer, June 30,
1927, as compared with June 30, 1926
$21, 865, 540. 41
Deduct:
''
Pay warrants issued in excess
of receipts, fiscal year 1927__' $51, 939. 42
Decrease in unpaid warrants
June 30, 1927, as compared
with June 30, 1926
343, 558. 94
395, 498. 36
21, 470, 042. 05
Balance held by the Treasurer of the United States,
June 30, 1927
232, 598,120. 48
Balance held by the Treasurer, according to daily Treasury
statement, June 30, 1927 (unrevised)
Deduct net excess expenditures over receipts in June reports
subsequently received
^-
234,057,409.85
1, 459,289. 37
232, 598,120. 48
Warrants issued during the fiscal year 1927 adjusted to basis of
daily Treasury statements {revised).—The following table shows the
* After adding $29,253.06 for decrease In uncovered moneys and $20 for. relief of John
Burke, former Treasurer United States, under act of June 3, 1922.
143
SECRETARY OF THE TREASURY
total number of warrants issued and the gross amounts involved on
account of the receipts and expenditures recorded during the fiscal
year, adjusted to basis of daily Treasury statements (revised) :
General classes
Receipt w a r r a n t s :
Ordinary
Public debt
Total
.
Number
637
12
1 $4,030,098, 901. 33
5,185,083,142. 93
+$98,323,986.28
$4,128,422,887.61
5,185,606,142.93
_._.
649
9, 215,182,044. 26
+98,323,986.28
9,313,506,030.54
86,800
28
4,032,723,922.11
6,318,165, 590. 52
- 2 1 , 521,961.47
2 4,011,201,960.64
8 6,318,165, 590. 52
86,828
10,350,889, 512. 63
- 2 1 , 521,961.47
10,329,367,551.16
1,060
21
1,135,611,168! 01
73, 634. 00
-98,353,239.34
F a y a n d transfer w a r r a n t s :
Ordinary
Public debt
Total.
A d j u s t e d figures
on basis of daily
T r e a s u r y statem e n t s , revised
i.
.
.
..._-.
W a r r a n t s issued
(amount)
Adjustments to
basis of daily
T r e a s u r y statem e n t , revised, on
account of disb u r s i n g officers'
credits, u n p a i d
warrants, uncovered m o n e y s , a n d
receipts credited
direct t o a p p r o priations
.-
R e p a y a n d counter w a r r a n t s :
Ordinary
*_
Public debt
Total
1,081
P a y w a r r a n t s (net)
G r a n d total of w a r r a n t s issued.
88, 558
1,037,257,928.67
73,634. 00
1,135, 684,802.01
-98,353,239.34
1,037,331,562. 67
9, 215,204,710. 62
+76,831, 277.87
9,292,035,988.49
20,701,756,358.90
1 Includes $6,370,621.39 referred to in note 3, p. 431.
2 Exclusive of $519,563,844.78 public debt expenditures chargeable against ordinary receipts.
8 lacludes $519,563,844.78 public debt expenditures chargeable against ordinary receipts.
Receipt accounts to the number of 1,188, representing receipts from
customs, internal revenue, public lands, miscellaneous sources, Panama Canal tolls', and public debt and appropriation, accounts to the
number of 6,^87, covering expenditures for all executive departments,
other Government establishments, the District of Columbia, and the
public debt, have been credited and charged, respectively, to the
general fund of the Treasury, details of which are exhibited on pages
431 to 444 of this report. Of the total receipts and repayments to
appropriations deposited during the year, aggregating $9,595,514,487.48, no amount reraained uncovered by warrant as of June 30,
1927.
Transfer and counter warrants amounting to $1,510,704,717.58 were
issued for adjustment of appropriation accounts, largely for the
service of the Army and Navy, without affecting the general fund.
Appropriation warrants were issued to the number of 476, crediting detailed appropriation accounts with amounts provided by law
for disbursement and transfer-appropriation and surplus-fund warrants charging and crediting detailed appropriation accounts to the
number of 363, a total of 839.
• On August 8, 1927, this department submitted to the Comptroller
General for his consideration a revised form of covering warrant,
144
REPORT ON T H E FINANCES
together with an outline of procedure in connection with its preparation and posting. Under the proposed plan, in lieu of the present
12 classes of covering warrants, there will be a single series, money
columns being provided in the warrant for (1) revenues, (2) repayments to appropriations, and (3) counter entries in the Treasurer's
revenue account. A column is also provided for departmental designation. The details of deposits will be transferrecl directly from the
certificates of deposits to the warrant, and at the same time there will
be written by machine process not only the necessary number of copies
of the warrant, but the receipts ledger, a fiscal officer's register of
deposits, aind a departmental deposit list. The foregoing plan was
approved by the Comptroller General on October 5, 1927.
District of Golumhia account of revenues\ and expenditures.—The
total charges and credits to the District of Columbia for the fiscal
year ended June 30, 1927, on the basis of warrants issued, as shown
by the District of Columbia ledger of revenues and expenditures
established in accordance with the act of June 29, 1922 (42 Stat.
669), were as follows:
[On basis of w a r r a n t s i ssued, see p. 421]
General funds
Special funds
Trust funds
Total
$10,164,873. 07
Balance June 30, 1926
.--.
Revenues, fiscal year 1927
1 24,859, 514. 55
United States contribution, act Mar.
2, 1927
9,000,000. 00
$244, 705. 59
2, 981, 273. 45
$468, 625. 99 $10,878,204.65
2 2, 670, 766. 74 30, 511,554.74
44,024, 387. 62
__ 1 32, 572,443. 46
3, 225, 979. 04
2,471,417. 04
3,139, 392. 73
2 2, 722, 554. 81
Expenditures fiscal year 1927
Balance June 30, 1927
11,451,944.16
9, 000, 000. 00
754, 562. 00
416,837. 92
•50,389, 759.39
37, 766,415.31
12,623,344.08
1 Exclusive of $468,115.36 general revenues of the District of Columbia covered into the Treasury to credit
of "Policemen and firemen's relief fund (trust fund)" under act of Sept. 1,1916, vol.39,(p.718, sec. 12, tomeet
deficiencies in said fund.
8 Includes $468,115.30 referred tb in note (1).
Alien Property Custodian account.—Under the provisions of the
act of Congress approved October 6, 1917, and the proclamations and
Executive orders issued thereunder by the President, the Secretary
of the Treasury purchased and exchanged during the year for
account of the Alien Property Custodian United States securities of
a par value of $306,475,000. There were on hand on July 1, 1926,
similar securities of a par value of $178,639,500. Securities amounting to $305,246,500 were sold or redeemed during the year, the proceeds being reinvested when not required for disbursement. The
total face amount of such securities carried by the Secretary of the
Treasury in trust for the Alien Property Custodian on June 30, 1927,
was $179,868,000.
Under decision of the Supreme Court of the United States, dated
May 24, 1926, in the case of Max Henkels, appellant, v. Howard
Sutherland, as Alien Property Custodian, and Frank White, as
Treasurer of the United States of America, and opinions of the
145
SECRETARY OF THE TREASURY
Attorney General, dated August 25, 1926, and July 7, 1927, rendered
in connection therewith, there has been paid to eligible claimants to
November 1, 1927, upon certificates of the Alien Property Custodian
the sum of $1,968,041.83, and to the Alien Property Custodian for
administrative expenses the sum of $24,876.36, a total of $1,992,918.19,
representing earnings accrued on investments to March 4, 1923,
$1,710,131.43, and earnings on such earnings, $282,786.76. The Supreme Court decision and opinions of the Attorney General mentioned above are printed as Exhibits 44, 45, and 46, respectively, on
pages 395 to 402 of this report.
The total amount paid during the fiscal year 1927 upon authorizations of the Alien Property Custodian and the Attorney General was
$16,840,260.94.
Purchase of farm loan bonds.—On July 1,1926, there were held by
the Secretary of the Treasury $60,495,000 Federal farm loan bonds,
purchased under the provisions of the act of January 18, 1918, as
amended by the joint resolution dated May 26, 1920. During the
fiscal year 1927 the Secretary made no further purchases, but the
Federal land banks repurchased $60,495,000, thus leaving no bonds
on hand at the close of the fiscal year 1927. The following table
shows face amount of purchases of Federal farm loan bonds made by
the Secretary of the Treasury and repurchases by Federal land
banks:
Fiscal year'"'
1918
1919
1920
1921
1922
1923
1924
1925
1926
1927
Face amount
purchased b y the
Secretary of t h e
T r e a s u r y from
Federal land
banks
Face amount
repurchased b y
Federal land
b a n k s from t h e
Secretary of t h e
Treasury
Face amount
held b y t h e
Secretary of t h e
T r e a s u r y at close
of each fiscal
year
$64,160,000
85,615,000
29, 500,000
16, 650,000
$7,190,000
5,700,000
$56,970,000
136,885,000
166,385,000
183,035,000
138, 635,000
101, 885,000
101,885,000
88, 885,000
60, 495,000
44, 400,000
36. 750, 000
13, 000,000
28, 390, 000
60, 495,000
i
Total
195,925,000
195,925,000
State bonds and stocks owned &2/ the United States.—The following statement shows the nonpaying State bonds and stocks, formerly
in the Indian trust fund, now in the Treasury, belonging to the
United States:
state
Louisiana
N o r t h Carolina
Tennessee
_
Principal
_
..
- --
Total
I n t e r e s t coupons d u e a n d
unpaid
$37, OCO. 00
58,000. CO
335, 666. 66K
$17, 220.00
88,140.00
157, 830. 51
430, 666. 6 6 ^
263, li;0. 51
146
REPORT ON THE FINANCES
A history of these State stocks and bonds is given in House Document No. 263, Fifty-fourth Congress, second session.
Division of Deposits
F o r several years past the Treasurer of the United States, Federal
reserve banks and their branches, special depositaries, foreign depositaries, national-bank depositaries—both general and limited—^and
depositaries in the insular possessions of the United States, have
comprised the depositary system of the Treasury. During the fiscal
year ended June 30, 1927, there were no changes in the system as a
whole, such changes as occurred being confined to the normal readjustment affecting individual depositaries; and the high degree of
efficiency with which the Government's depositary work has been
transacted since the inauguration of the present system was maintained throughout the year. Likewise, there was no modification of
the Treasury's policy with respect to deposits of public moneys with
banks during the year, which, in recent years, has been to maintain
with depositary banks only such deposits as are actually necessary for
the conduct of the Government's business.
Amount of deposits.—Government deposits with banks are divided
into two broad classes: (1) The active working balances of the Treasury maintained with Federal reserve banks, general national-bank
depositaries, and depositaries outside the continental limits of the
United States, and (2) the demand deposits with special depositaries
for replenishment of the working cash balance of the Treasury with
the Federal reserve banks. The following table indicates the distribution of these deposits among the various classes of depositaries
at the close of business June 30, 1927:
Government deposits with banks, June 30, 1927
Type of depositary
Federal reserve banks (including branches)...
Special depositaries..
_
Foreign depositaries:
To credit of Treasurer ofthe United States
:
To credit of other Government officers.National-bank depositaries:
To credit of Treasurer ofthe United States
To credit of other Government officers..
Insular depositaries:
To credit of Treasurer ofthe United States
To credit of other Government officers.Philippine treasury to credit of Treasurer of the United States..
Amount of
deposits
$30, 656,042. 62
198, 606,818. 09
93,159.45
418,447. 98
6,832,264.08
18,549,177. 68
237,451. 61
1,211,358.88
486, 387. 66
257,091,107.83
As stated in the report of last year upon this subject, it is doubtful
if there can be any further material curtailment in these deposits
until such time as the fiscal business of the Government decreases
substantially in volume. This prediction is borne out by a comparison of the average deposits during the past year with those of the
two preceding fiscal years. I t will be noted from the foregoing
SECRETARY OF THE TREASURY
147
table that the actual working balance of the Treasury with
banks (eliminating the official checking accounts of other Government officers) totaled only $38,305,305.32 on June 30, which may be
taken as a fair average for the year. Considering the fact that a
substantial proportion of the total ordinary receipts and disbursements of the Government pass through the Treasury's accounts with
the Federal reserve banks and other depositary banks and, in addition, that the Federal reserve banks perform many fiscal-agency
functions, it is obvious that further reduction in this class of deposits is not desirable if the system is to operate properly. The
deposits held by special depositaries, which comprise by far the
largest part of all Government deposits with banks, are governed,,
first, by the amount of Government securities issued from time to^
time for which payment may be made by credit, and, second, the
extent to which depositaries take advantage of this privilege. Deposits with special depositaries in the future will, therefore, be
determined by these two factors.
Interest on deposits.—All Government depositaries, except Federal reserve banks, are required to pay interest at the rate of 2 per
cent per annum upon daily balances. The interest received upon
deposits with special depositaries during the fiscal year 1927 was
$4,212,265.07, and the total received from this source, from April 24^
1917, to June 30, 1927, was $73,646,000.69. Interest received from,
other depositaries during the year was $520,421.69, and the total
amount received from June 1, 1913, when this requirement became
effective, to June 30, 1927| was $18,930,866.68.
A brief summary of the changes within the depositary system of
the Treasury during the fiscal year ended June 30, 1927, follows:
General national-bank depositaries.—General depositaries are those
which are authorized to carry balances to the credit of the Treasurer
of the United States, such balances being subject to analysis a n d '
adjustment periodically upon the basis of the amount and character
of the essential Government business transacted by such depositaries.
On June 30, 1926, there were 316 general depositaries and on J u n e
30, 1927, 321 national banks held such designation. During the fiscal
year 8 general national-bank depositaries were discontinued and 13
were designated. Adjustments in the fixed balances of 16 general
national-bank depositaries were made during the year. At the close
of the fiscal year 1926 deposits to the credit of the Treasurer
of the United States iri general national-bank depositaries totaled
$6,485,560.61 as against $6,832,264.08 on June 30, 1927.
Limited national-bank depositaries.—Limited national-bank depositaries of public moneys are designated for the sole purpose of receiving up to specified maximum amounts deposits made by postmasters
and United States courts and their officers, for credit in their official
checking accounts, with such depositaries. This class of depositaries
148
REPORT ON THE FINANCES
is not authorized to accept deposits for credit in the account of the
Treasurer of the United States. During the fiscal year ended June
30,1927, the Treasury designated 45 additional limited national-bank
depositaries of public moneys, and 118 limited depositaries qualified
by pledging additional collateral to accept increased amounts of
deposits made by postmasters and United States courts and their
officers for credit in their official checking accounts. During the year
57 limited depositaries Avere discontinued and, as a result of the
withdrawal of collateral, reductions were made in the maximum
qualifications of 74 such depositaries. On June 30, 1927, 960 national
banks held designation as limited depositaries.
Deposits held by general - and limited national-bank depositaries,
to the credit of Government officers other than the Treasurer of the
United States, on June 30, 1926, totaled $20,198,204.33 and on June
.30, 1927, $18,549,177.58.
hisular depositames.—Insular depositaries are maintained upon
substantially the same basis as national-bank depositaries. During
the fiscal year ended June 30, 1927, there were 10 such depositaries,
located in the Canal Zone, Panama, the Philippine Islands, and Porto
Eico. The total Government deposits on June 30, 192C, (vere
$2,176,441.30 and on June 30, 1927, $1,935,198.13.
Foreign depositaries.—During the fiscal year 1927 the Treasury
maintained depositaries of public moneys in foreign countries as
follows: 2 in China, 3 in England, 3 in France, 1 in Haiti, and 1 in
, Italy, with deposits totaling $154,270.12 on June 30, 1926, and
$511,607.43 on June 30, 1927. The increased deposits during the
year were due in a large measure to the increased activity of the
Army and Navy in China.
The total of all Government deposits ca^rried with the foregoing
depositaries averaged $26,021,084.50 during the fiscal year ended
June 30, 1927, as against an average of $25,867,105.50 for the fiscal
''year 1926.
Special depositaries.—Special depositaries of public moneys are
designated under the provisions of the act approved September 24,
1917. as amended and supplemented, and are authorized to participate in deposits of public moneys arising from such sales of bonds,
notes, or Treasury certificates of indebtedness of the United States
offered from time to time, as, under the terms of the official offering,
may be paid for by credit. Any incorporated bank or trust company is eligible for designation as a special depositary. During the
fiscal year ended June 30, 1927, 138 banks were designated and 392
Ibanks were discontinued as special depositaries. At the close of the
iiscal.year 7,224 banks held designation as special depositaries, of
which 3,728 were national banks and 3,496 State banks and trust
.companies. The deposits with special depositaries during the fiscal
year 1927 averaged $210,613,253.50, while such deposits during the
ipreceding fiscal year averaged $196,103,338.
DIVISION OF APPOINTMENTS
Employees of the Treasury Department '
Number.—The departmental service of the Treasury Department
in Washington shows a decrease in personnel of 662 employees from
J u n e 30, 1926, to August 31, 1927. There has been a tendency to
decrease the personnel in the Treasury Department as a whole, nineteen of the offices showing a decrease, nine an increase, while two have
remained the same. The largest reduction occurred in the Internal
Eevenue Bureau, where there, was a decrease of 1,093 employees, but
^44 of these employees were taken over by the Bureau of Prohibition
when it became a separate.bureau on April 1, 1927. The office of the
liegister of the Treasury had the second largest reduction with a decrease of 162 employees, which was largely due to the discontinuing
of the arranging of coupons. An increase of 125 employees occurred
in the Division of Loans and Currency, which was due to the extra
work created by the purchasing and refunding of second and third
Liberty loan bonds and the redemption of Treasury savings certificates. The General Supply Committee and the Public Health Bureau show decreases. A number of employees of these offices were
taken over by the division of supply, for which specific appropriation
was made for the year 1928. The division of printing became a part
of the division of supply on July 1, 1927. The Office of the Supervising Architect shows an increase of 125 employees, which was due
to the extensive building program authorized by Congress. On June
4»0, 1926, there were in the departmental service of the Treasury
14,501 employees, and on August 31, 1927, there were 13,839. The
number of employees in the departmental service of the Treasury
classified according to bureaus and offices at the end of each month
from June, 1926, to August, 1927, is shown in Table 84, page 660 of
this report.
An increase of nearly 2,000 employees in the field service was due
to an increase in the enlisted personnel of the Coast Guard, in connection with the enforcement of the national prohibition law. A
comparison of the number of employees in the departmental and field
services of the Treasury on June 30, 1926, and June 30, 1927, is
contained in Table 82, page 658.
Retirement,—Since the retirement act went into effect on August
20, 1920, 2,452 persons have been retired from the departmental and
field services of the Treasury Department. At the present time
140
150
REPORT ON THE FINANCES
124 persons above the retirement age are retained in the Treasury
Department in Washington and 634 in its field service. Several
classes of employees formerly retirable at 70 years of age have
been placed in the class as retirable at. the age of 65 years
by the Civil Service Coinmission, which accounts for the large number retained. There have been no changes in the retirement law
during the year. The division is of the opinion that a more liberalized enactment would be in the interest of the service.
Table 83, page 659, shows the number of persons retired and the
number retained in the departmental and field services of the Treasy
ury under the provisions of the act of July 3, 1926, amending the
act of May 22, 1920, and the amendments thereto.
Section of surety bonds
On June 30, 1927, 57 insurance corporations held certificates of
authority from the Secretary of the Treasury to write direct or
reinsure bonds in favor of the United States as provided by existing
law, and 28 other insurance companies reported to the department
for reinsurance purposes only.
The combined premium income for these 85 companies reporting to
the Treasury at the close of the year 1926 amounted to $1,049,173,097.
They claimed admitted assets of $1,882,704,299 and showed combined
reserves for liabilities of $1,441,494,195, leaving as surplus to policyholders $441,210,104, divided as to capital $170,306,500 and surplus
over all liabilities of $270,903,604. The Treasury appraises the assets
and liabilities of these companies twice a year for the information
and guidance of all branches of the United States Government taking
bonds with them as corporate sureties.
The companies holding certificates of authority reported in their
annual statements for the year 1926 approximately 6,000 claims in
favor of the United States representing a total gross value of about
$56,000,000. Most of these claims are adjusted through amicable
settlements, it being necessary to resort to litigation in comparatively
few cases where the obligors feel that they have a good defense.
As a result of examinations by the department of the financial
condition and affairs of the companies, some of them during the
past year have reorganized arid increased their finances so that they
might continue business. I n two cases it was necessary to revoke
the certificate of authority issued by the Secretary of the Treasury,
but the same were subsequently reinstated on condition that a satisfactory financial program would be carried out. This is now in
process of completion in both cases.
There is a notable increase in the number of bonds that are now
being taken by the various departments and establishments of the
Government wr':h individuals as sureties. Since the department has
SECRETARY OF THE TREASURY
151
no direct supervisory control over the resources of individuals and
is therefore unable to follow their continuing solvency, it is believed
that bonds with such individuals as sureties should not be accepted
in large amounts, if at all. Suitable legislation along this line is
necessary, however. When the original law was enacted in 1894,
uncollectible judgments and claims against individual sureties
amounted to $35,000,000. Such a situation should certainly not be
allowed to develop again.
I n order to accomplish this and other desired results, however, it
will be necessary to amend the existing law^ on the subject. I n this
connection the recommendations contained in the department's previous annual reports are reiterated. There is urgent need for higher
standards of financial requirements of surety companies writing
bonds in favor of the United States, adequate and satisfactory control of records pertaining to claims against them, and the number and
character of obligations which they assume in favor of the United
States, and uniform procedure with respect to the forms of bonds
taken by the various departments and establishments of the Government. I t is therefore hoped that a revision of the existing law so
as to meet the requirements as they exist to-day will have the careful
consideration of the Congress at its next session.
64761—FI 1927
-12
BUDGET AND IMPROVEMENT COMMITTEE
The budget and improvement committee is responsible, under the
direction of the Undersecretary and budget officer, for the preparation and examination of Treasury estimates of appropriations and
for the improvement of administrative methods and procedure within
the Treasury Department. I n addition to examining all estimates
the committee makes inquiries as to the reserves which may be set up
under the various appropriations and considers other matters affecting expenditures of the department. I t makes inquiries along various lines with the purpose of improving methods and procedure,
and from time to time, under special instructions, makes a detailed
examination of some particular office or service of the department.
Its reports and recommendations thereon are submitted to the Secretary of the Treasury through the budget officer of the department.
For the fiscal year 1929, heads of bureaus and offices submitted
estimates aggregating $1,548,650,143.79, which included $1,211,623,393.53 for interest on and retirement of the public debt, payable
from ordinary receipts; $137,000,000 for refunding internal revenue
taxes illegally collected; $24,929,980 for public buildings construction under the act of May 25, 1926; $8,000,000 for purchase of a
building for appraisers' stores, New^ York; $27,058,580 for permanent and indefinite appropriations and special funds; and $140,038,190.26 for annual appropriations. The President allocated to the
Treasury Department as a tentative maximum amount for annual
appropriations .$135,406,276, or $4,631,914.26 less than the estimates
submitted by heads of bureaus and offices. After careful examination by the committee and on its recommendations the Secretary
made deductions of $278,793 in the estimates for annual appropriations and approved $135,404,283.26 as the regular estimates, and
$4,355,114 as a supplemental statement of the absolutely necessary
requirements of the department under these appropriations.
During the year ending June 30, 1927, supplemental and deficiency
estimates were submitted aggregating $227,124,964.64, of which $175,000,000 was for refunds of internal revenue taxes. After examination by the committee these estimates were revised and reduced to
$227,023,410.94.
At the beginning of the fiscal year 1927, initial general reserves
amounting to $1,047,525 were set aside from appropriations for
that year to meet extraordinary or emergency demands that might
arise. Further reserves amounting to $1,309,009.60 were added
152
SECRETARY OF THE TREASURY
153
on account of the "2 per cent personnel club" for the purpose of
saving not less than 2 per cent of the total amount available for
salaries during the fiscal year 1927, such savings to be accomplished
by omitting to fill current vacancies. This made a total in reserve
of $2,356,534.60. Subsequently additional reserves of $237,100 were
added and reserves amounting to $433,960 were release'^d, leaving
$2,159,674.60 in reserve at the close of the fiscal year. Whenever it
was shown toward the close of the fiscal year that the 2 per cent
saving could not be effected without serious impairment of the
service, the reserve previously set up was released, in whole or in
part. The department ended the year with a saving in expenditures
for personal services of $1,812,797.43, which was well in excess of
the 2 per cent requirements, in addition to which there were substantial savings under other headings of expenditure.
For the fiscal year 1928, heads of bureaus and offices have reported
reserves of $1,120,031. After examination by the committee $290,-554 was added, making a total for the year of $1,410,585.
COAST GUARD
The principal operations of the Coast Guard during the fiscal year
ended June 30, 1927, Avere as follows:
Lives saved or persons rescued from peril
.
Persons on board vessels assisted
Persons in distress cared for
Vessels boarded and papers examined—
Vessels seized or reported for violations of law
Fines and penalties /incurred by vessels reported
Regattas and marine parades patrolled
_
:—
Instances of lives saved and vessels assisted
—
Instances of miscellaneous assistance
.
_
Derelicts and other obstructions to navigation removed or destroyed
Value of vessels assisted (including cargoes):
Value of derelicts recovered and delivered to owners
Persons examined for certificates as lifeboat men
Appropriation for 1927, office of the commandant,
Expended and obligated
Unencumbered balance June 30, 1927
Appropriation for 1927, maintenance of Coast Guard
Expended and obligated
Unencumbered balance
Appropriation for 1927, repairs to cutters
Expended and obligated
Unencumbered balance
^
Appropriation for construction and equipment. Coast Guard
cutter 1925-March 31, 1927:
Unencumbered balance June 30, 1926
.—
Expended and obligated
\
Unencumbered balance Mar. 31, 1927
Appropriation for construction and equipment, Coast Guard
cutters, 1927 and 1928
Expended and oblig£i^ed___
Unencumbered balance June 30, 1927
Appropriation for repair and reconditioning Coast Guard
steamer for ice breaker, 1926-27:
Unencumbered balance June 30, 1926
^
Expended and obligated
Unencumbered balance June 30, 1927
Appropriation for additional vessels. Coast Guard, 1926-Dec.
31, 1926:
Unencumbered balance June 30, 1926—
Expended and obligated-.
Unencumbered balance Dec. 31, 1926
154
3,313
14,496
899
68,223
1, 788
$375, 069
89
2,791
2, 717
136
$37,801,357
$120, 290
4,617
$236, 750.00
$235, 809. 37
$940. 63
$24, 050,187.00
$22, 258, 092. 06
$1, 792, 094. 94
$1,768,410.00
$1, 720, 009.17
$48, 400. 83
$51,851.84
$15,521.71
$36,330.13
$1,000,000.00
$325, 852. 71
$674,147. 29
$100, 000. 00
$86, 558. 00
$13,442.00
$92,257.43
$59,018.48
$33,238.95
SECRETARY OF THE TREASURY
155
Comparisons with the operations of preceding years are important.
The persons saved or rescued from positions of peril numbered
3,313, being 276 in excess of the preceding fiscal year, 1926, a record
never before attained since the present organization of the Coast
Guard. The total number of instances of assistance rendered during
the year was 5,508, also the largest in the history of the service, and
exceeding last year's record by 677. The value of vessels assisted,
including their cargoes, was $37,801,357, being $14,783,848 in excess
of last year's figures and largely surpassing the record of any one
year since 1923. There were 14,496 persons on board vessels assisted
as compared with 15,398 for the fiscal year 1926. There were 136
derelicts and other obstructions to navigation removed or destroyed,
exceeding last year's number by 35. Persons in distress cared for
numbered 899 as against 490 during the fiscal year 1926.
There w^ere 1,788 vessels seized or reported for violations of law
during the year, being 99 less than in the preceding year. I n the
interests of the enforcement of the laws of the United States 68,223
vessels were boarded and examined in the course of the year by the
agencies of the Coast Guard. This exceeds last year's number by
15,143. I t is again gratifying to be able to record that the service
operations against smuggling, heavy and onerous as the duty is,
have in no way diminished, impaired, or disturbed the accustomed
humanitarian work of the Coast Guard.
The foregoing summary does not include the hurricane and flood
relief work afforded by the Coast Guard described in a subsequent
paragraph.
Protection to navigation
Ice pd.trol.—During the season of 1927 the international service
of ice patrol was carried on by the Coast Guard cutters Tampa and
Modoc^ based on Halifax, Nova Scotia, with the Coast Guard cutter
Mojave as the stand-by vessel. The patrol was inaugurated on March
22, 1927, on which date the Tampa sailed from Boston, Mass., on the
duty. The Modoc left Boston in sufficient time to relieve the Tampa
after the latter vessel had been on the patrol for 15 days. Thereafter these two cutters, alternatingly, carried on the patrol throughout the season, one of the cutters being on guard in the ice regions
continuously. The total period the cutters were on duty was 95 days.
There was slightly more ice during the spring of 1927 than occurs
in a normal year. The weather generally was good. Both the
Tampa and the Modoc on their first cruises experienced unusually
fine weather, the opposite of last year, when during the entire first
month of the season the patrol encountered a long, persistent rough
spell.
156
REPORT ON THE FINANCES
About 450 steamships are known to have taken advantage of the
service provided by the patrol during the season, and doubtless many
more listened in for the daily broadcasts from the cutters of ice
conditions.
A commissioned officer of the Coast Guard accompanied the cutters on their patrols throughout the season, as scientific and oceanographic observer, transferring from one cutter to the other as each
took up its work.
The patrol was discontinued for the season on June 25, 1927.
Winter o^ncising.—In order better to safeguard shipping, the President annually designates certain Coast Guard vessels to perform
special cruising upon the coast in the season of severe weather, usually
from December 1 to March 31, to afford such aid to distressed navigators as their circumstances may require. On November 4, 1926,
the President, upon the recommendation of the Secretary of the
Treasury, designated the following-named cutters to perform this
duty for the winter season of 1926-27: Ossipee^ Tampa^ Redwing^
Mojave.) Acushnet^ Tuscarora.^ Seneca.^ Semvnole.^ Gresham.^ Manning.,
Carrabasset.) Modoc, and Yamacraw.
These cutters in the prosecution of their duties cruised nearly
66,000 miles, and afforded assistance to 39 vessels in distress, the
value of which, including their cargoes, was more than six and onehalf million dollars. There w^ere 435 persons on board the vessels
assisted.
The Tannpa and the Modoc were detached from this cruising duty
on March 15 and 18, 1927, respectively, for assignment to the international ice patrol.
Removal of derelicts.—In the course of the year the vessels and
stations of the service removed from the paths of marine commerce
136 derelicts and other floating dangers and obstructions to navigation. The estimated value of property involved, where values are
given,^amounted to $120,290.
Anchorage and movements of vessels.—The utilization of Coast
Guard personnel and equipment in the enforcement of the rules and
regulations governing the anchorage and movements of vessels at
the larger ports and at other places where Federal regulations are
in effect w^as continued throughout the year. There have been no
material changes in the general plan and arrangement during the
year. At the larger ports, especially, this duty is one of great importance to the maritime interests and others concerned.
Regattas.—The Coast Guard vessels and stations patrolled and
supervised during the year 39 regattas, marine parades, and boat
races, and, informally, a number of other events of like character of
local interest.
SECRETARY OF THE TREASURY
157
Flood and hurricane service
For many years the Coast Guard has taken an active part in rendering assistance and giving aid arid succor upon occasions of
storms and floods in various parts of the country. The service agencies have gone into the stricken areas and removed imprisoned
dwellers to places of safety, rescued victims from extremely dangerous situations, furnished food and water to those threatened with
famine, saved household goods, livestock, and other property from
destruction, and rendered countless other services. Three notable
instances of the kind occurred during the fiscal year 1927. First, the
Florida hurricane in September, 1926; second, the Illinois River
Valley flood in October and November, 1926; and, third, the Mississippi Valley flood in the months of April, May, and June, 1927. The
Coast Guard rendered important relief services in all three of these
calamities, and the record of the work of the officers and men of the
service on these occasions forms an intensely engaging chapter in
the history of the Coast Guard. In the Mississippi Valley flood,
particularly, the work was of immense magnitude, almost beyond
human reckoning, and of the most heroic order. The Coast Guard
threw into the flooded areas 674 officers and men and 128 vessels and
boats, and removed from positions of peril to places of safety nearly
44,000 persons and saved from drowning more than 11,000 head of
livestock. I t would be almost impossible to enumerate all the items
of service rendered by the Coast Guard personnel in this overwhelming disaster, or to estimate the value of the work accomplished. The
entire personnel of the Coast Guard engaged in the relief work on
the occasions named ^deserve the highest praise.
Enforcement of customs and other lams
The enforcement by the Coast Guard of the customs laws of the
country and the laws relating to navigation and motor boats was
attended during the year with satisfactory results. The general enforcement of the customs laws by the service is annually supplemented by the stationing of harbor cutters, or launches, at the principal ports to assist the customs authorities in boarding incoming
vessels and in performing other customs duties. Assistance was also
rendered, as needed, to other branches of the public service in the
enforcement of the Federal laws.
The law-enforcement work of the service has continued to bring
excellent results. The Coast Guard has entirely eliminated the once
notorious rum row. The service continues to give unremitting attention toward preventing the reestablishment of that menace on our
coastal waters, and to those foreign vessels that endeavor to transfer
their cargoes of liquor, many miles at sea, into domestic craft or try
158
REPORT ON THE FINANCES
to enter our greater ports with their contraband cargoes, hoping to
escape detection in the large volume of legitimate traffic. The fact
that the Coast Guard must now search diligently to find the rumrunning vessels, a number being undoubtedly engaged in. the traffic,
necessitates extensive scouting operations over wide sea areas, which
really occasions a greater burden and responsibility upon personnel
and ships than was the case when rum row existed and the foreign
liquor vessels anchored in groups near our shores.
Cruises in northern waters.—The regular annual patrol of the
waters of the North Pacific Ocean, Bering Sea, and southeastern
Alaska is for the protection of the fur seal and sea otter, and of
the game, fisheries, and fur-bearing animals of Alaska. The patrol
in progress at the close of last fiscal year was carried on for
the season of 1926 by the Coast Guard cutters Algonquin.^ Bear^
Haida.) Snohomish^ and Unalga. The veteran Bear made her accustomed trip to Arctic waters and visited Point Barrow. She returned to Oakland, Calif., on September 13, 1926, successfully completing her last journey to. the northern country. The record of this
notable 53-year old craft, no longer suitable for the rigors of the
northern service, is remarkably interesting. She is succeeded by the
new cutter Northland. In the performance of their duties the vessels
cruised more than 44,000 miles.
The patrol for the present season of 1927 is in progress and is
being made by the Coast Guard c'utters Algonquin^ Haida.) Unalga.,
Northland.) and Snohomish.
Northern Pacific halibut fishery.—The Coast Guard cutters Unalga
and Snohomish were assigned this year to the duty of patrolling certain waters off the coast of Washington and southeastern Alaska in
the interest of the enforcement of the law with respect to halibut
fishing. This work is performed by the Coast Guard in behalf of the
Bureau of Fisheries, Department of Commerce. The Unalga y^^^
engaged on this patrol from November 10, 1926, to November 17,
1926, and cruised about 1,000 miles. The Snohomish.) on February
14-16, and on February 23-24, 1927, cruised on the halibut banks.
Communications
The communications service is concerned with the provision, construction, operation, and maintenance of all Coast Guard communication facilities of whatever nature, and with the instruction and
training of the personnel connected therewith.
Telephones and cables.—The Coast Guard owns and operates a telephone line system consisting of 183 separate and distinct lines connected with commercial exchanges for local and long distance service.
The total mileage of the lines is approximately 2,650 miles, including
SECRETARY OF THE TREASURY
159
480 miles of subiriarine cable. All Coast Guard stations and a number of other Government agencies are furnished service over these
lines.
During the year additions were made to the coastal communication system by the construction of a telephone line to Poverty and
St. Martins Islands, in Lake Michigan, thus connecting all the outlying islands at the end of the Wisconsin Peninsula, starting at Gills
Rock, Wis., across Porte Des Morts Passage to Plum Island, thence
across Detroit Island Passage to Washington Island, thence to Jackson's Harbor, Rock Island, St. Martins Island and Poverty Island.
This project provides a telephone circuit for all the isolated lighthouses and important lookouts along the dangerous Detroit Island
and Porte Des Morts passages, and is of great value to shipping using
these passages.
The Manitou Island, Mich., line was completely rebuilt during the
year, and the 14 miles of new submarine cable authorized by Congress for connecting the Manitou Islands with the mainland were
laid in the early part of the year.
A cable was laid connecting the coastal telephone lines on Long
Island, N. Y., with the mainland at Bay Shore, N. Y.
The hurricane which swept the coast of Florida in September,
1926, completely demolished the Biscayne Bay station line, the
Fowey Rock Lighthouse line, the Fort Lauderdale station line, the
Mosquito Lagoon line, and several other spur lines on the Florida
Keys. These lines have been rebuilt and telephone service has been
restored.
There is a pressing need of 16 miles of submarine cable to replace
the old and greatly deteriorated cable between Cape Henry and
Cape Charles, Va. Reference to this matter was made in last year's
report. The condition of the present cable does not justify repairs.
This cable is an important connecting link for communications north
and south of Norfolk, Va.
Radio coordination representatives.—^An officer of the Coast Guard
continues to represent the entire Treasury Department on the interdepartmental radio advisory committee, which committee coordinates
certain govermental radio activities and acts in an advisory capacity
to the Secretary of Commerce. An officer of the Coast Guard also
represents the Treasury Department on the interdepartmental electrical communications committee, which committee is advisory to the
State Department on matters affecting electrical communications.
During the year this latter committee was actively engaged in making preparations for the International Radiotelegraph Conference to
be held in Washington in October, 1927, in preparing the proposals
of the United States for revision of the Radiotelegraph Convention
160
REPORT ON THE FINANCES
signed in London in 1912, and in studying the proposals as submitted
by other nations adhering to the convention.
Lieuts. E. M. Webster and R. J . Mauerman, United States Coast
Guard, were appointed by the Secretary of State as technical advisors to the United States delegation at the forthcoming
conference.
^to
Equipment
Floating equipment.—On June 30, 1927, there were in commission
in the-Coast Guard 17 cruising cutters, first class; 16 cruising cutters, o
second class; 25 Coast Guard destroyers; 37 harbor cutters and
launches; thirty-three 125-foot patrol boats; thirteen 100-foot patrol
boats; one hundred ninety-eight 75-foot patrol boats; 7 other
patrol boats, viz, Cook.) Cygan.) Patrol.) Smith.) Swift.) TingoA^d^ and
Vofughan; 73 cabin picket boats and 39 open picket boats. There
were also in commission 16 small craft that have been seized and
forfeited. The foregoing floating equipment, it should be stated, does
not include the primarily life-saving boat equipment attached to
Coast Guard cutters and stations.
The thirty-three 125-foot patrol boats, and the cruising cutter
Northland to replace the Bear.) mentioned in last year's report as
being under construction, were completed during the fiscal year.
The Congress by act approved June 10,, 1926, authorized the construction and equipment of 10 Coast Guard cutters to be designed
and equipped for Coast Guard duties, at a cost not to exceed $9,000,000. I n the second deficiency act, fiscal year 1926, approved July 3,
1926, the sum of $1,000,000 was appropriated to commence the construction of three of these cutters. Subsequently funds were appropriated to complete the three cutters and to commence the construction of two more. The design plans and specifications for
five of the cutters {Nos. Ii.5-.li9) were completed and forwarded to
prospective bidders. Bids for the construction of the hulls of these
cutters and the installation of the machinery were received June 21,
1927. I t is earnestly hoped that funds will be provided at the
earliest possible date to the end that the entire program of 10 cutters authorized by Congress may be brought to completion. This is
a matter of great importance to the service. The additional equipment is urgently needed for the general duties of the Coast Guard.
Three special 34-foot shallow-draft cabin picket boats, from specifications prepared by the Coast Guard, were built for the service
during the year by a private boat builder.
I n addition to the work on vessels at the Coast Guard repair depot,
detailed below, the Kickapoo was converted into an icebreaker, under
contract with a private shipyard. The work of reconditioning the
five 1,000-ton destroyers, under the supervision of Coast Guard
SECRETARY OF THE TREASURY
161
personnel, at the navy yard at Philadelphia Pa., for Coast Guard
duty, was completed early in the fiscal year.
Aviation.—During the year five modern seaplanes of the latest
types in use by the Army and Navy were purchased under Navy
inspection. Three are Loening amphibian planes and two are of
the Voight U O type. An air station with three planes was placed
in operation on Ten Pound Island, off Gloucester, Mass., and operated as an auxiliary of the Coast Guard patrol base at Gloucester.
I n addition to the law-enforcement work of that base, in which seaplanes were used in searching coastal sea areas in cooperation Avith
Coast Guard destroyers and patrol craft, these planes have searched
for missing vessels of New England fishing fleets and for lost transAtlantic aviators.
The naval appropriation act approved August 29, 1916 (39 Stat.
600), provided in part as follows:
* * * That for the purpose of saving life and property along the coasts
of the United States and at sea contiguous thereto, and to assist in the
national defense, the Secretary of the Treasury is authorized to establish,
equip, and maintain aviation stations, not exceeding ten in number, at such
points on the Atlantic and Pacific coasts, the Gulf of Mexico, and the Great
Lakes as he may deem advisable, and to detail for aviation duty in connection
therewith officers and enlisted men of the United States Coast Guard. '^ * *
I n accordance with this intent of Congress, the patrol aircraft
have conducted experiments in the direction of life-saving operations, such as the method of carrying lines to distressed vessels by
means of airplanes.
Operations were started during the year from another air station,
at Cape May, N. J., utilizing existing facilities of the former naval
air station at that place, now occupied by the Coast Guard.
Ordnance.—During the year considerable progress has been made
toward increasing the efficiency of the ordnance equipment in the
Coast Guard. The general condition of the guns of larger caliber
has been materially improved by overhauls at navy yards and by renewing parts. The 3-inch guns of the Ossipee and the Tamacra/u)
have been'replaced by newer ones. A standard fire-control system has
been adopted and installed on all the destroyers and several of the
cutters. I t is hojoed to complete this work during the fiscal year
1928. The plans for new cutters include improvements both in firecontrol sj^stem and in the magazines.
Landing-force equipment as uniform as may be obtained is being
provided all service units. Defective and obsolete small arms are
being replaced as rapidly as funds will permit. I t has been necessary
to dispose of a large quantity of small-arms ammunition, due to
deterioration, and its replacement has been a serious drain on the
appropriation.
162
REPORT ON THE FINANCES
An earnest effort has been made to improve the gunnery training
of personnel. Excellent results are being attained in the Destroyer
Force and, notwithstanding the difficulties involved, more cutters
have held target practice this year. While the number of cutters
firing is still not as great as is desired, it is anticipated that next
year will show a marked increase. I t is hoped that funds may be
had for cash prizes for gun crews, fire-control parties, and shipcontrol parties, as it is believed that the payment of such prizes
would greatl}^ increase the interest in target practice and that a
higher degree of gunnery efficiency would be attained thereby.
All the Coast Guard destroyers and several of the cutters conducted
small-arms target practice.
I n the furnishing of ordnance equipment, and in its maintenance,
the assistance of the Bureau of Ordnance, Navy Department, has
been invaluable. The Coast Guard appreciates this helpful cooperation.
Grateful acknowledgment is also made of the advice and assistance
of the Division of Fleet Training, Office of Naval Operations, in the
preparation of plans for target practice.
The academy.) stations.) repair depot.) etc.
Coast Guard Academy.—There were 47 cadets under instruction
at the Coast Guard Academy, New London, Conn., at the close of the
fiscal year. The resignations of 26 cadets were accepted during the
year. On January 28, 1927, 22 cadets were graduated, and commissions were issued to them as ensigns in March, 1927, three months
before the usual time, owing to the emergent need for additional
commissioned personnel. As a result of the examination held in
June, 1926, 54 cadets were appointed, and 1 cadet who had previously
resigned was reappointed, making a total of 55 appointed during the
year. Entrance examinations were held June 21, 1927, and it is
expected that,appointments will issue to the successful competitors
during August, 1927.
As stated in last year's report, the practice cruise for 1926 of the
Alexander Hamilton was in progress at the close of the fiscal year
1926. The vessel visited Parris Island, S. C.; Hamilton, Bermuda;
Halifax, Nova Scotia; Shelburne, Nova Scotia; Bar Harbor, Me.;
Rockland, Me.; Portland, Me.; Boston, Mass.; Provincetown, Mass.;
New Bedford, Mass.; Newport, R. I.; and New York, N. Y., arriving
at the academy, New London, Conn., on the return voyage August
26, 1926.
The Alexander Hamilton entered upon the practice cruise for 1927,
leaving the academy June 1, 1927. When only a few days out, however, she lost her propeller and had to be towed back to New London.
SECRETARY OF THE TREASURY
163
The Coast Guard cutter Mojave took up the cruise, leaving New
London on June 25. The cruise was in progress at the close of the
fiscal year.
The annual reports for the fiscal years 1924, 1925, and 1926 pointed
' out the extremely unfavorable physical conditions prevailing at the
academy with respect to the inadequacy, unsuitability, and dilapidation of the buildings on the grounds and expressed the hope that
means might be found to remedy the situation. I t is desired again
to invite attention to the matter. I t is important that something be
done to correct these very unsatisfactory and discouraging conditions.
Stations and bases.—OD June 30, 1927, there were 252 Coast Guard
(life-saving) stations in an active status. There were 3 floating
section bases {Colfax^ Pickering^ and Wayanda) ; 1 destroyer floating flag office {Argus); and 18 shore section bases, established for
law-enforcement purposes. The service craft attached to these bases
operate against smuggling activities.
Repairs, improvements, alterations, and additions, more or less
extensive, Avere completed during the year at 33 Coast Guard stations and other shore units. 'Minor repairs were made to the buildings and accessories at 196 Coast Guard stations and 21 other shore
units. Contracts were awarded, or work Avas begun, during the year
in connection with construction projects at seven Coast Guard
stations and one other shore unit.
Attention has been invited in former reports to the need of rebuilding, repairing, and improving existing Coast Guard stations
and for constructing new stations the establishment of which has
been authorized by law. I t is necessary to rebuild some of the
stations and to repair and improve others that have fallen into a
state of dilapidation on account of age and usage. The moneys
appropriated from year to year are not ample to meet the actual
pressing requirements of modernization and sanitation of which
many of the stations are sorely in need. The appeal can not be
too strongly stated, and it is earnestly hoped that means may be
found to correct these very unfavorable conditions.
Repair depot.—^The following-named Coast Guard vessels were
overhauled during the year at the Coast Guard repair depot at
Curtis Bay, Md.: Gresham, Carrabasset, Manhattan, Manrdng,
Kickapoo (outfitted), Seminole, Tuscarora, Apache, and Pequot.
Repairs were also made to harbor cutters and launches of the service.
The boat-building shops at the depot constructed 57 standard boats
for distribution to units of the service. The depot also constructed
six surfboats for power for the Navy Department, ready to receive
the engines which were to be installed by the Navy. The reconditioning of a number of 75-foot patrol boats and the overhauling and
repair of a number of 100-foot patrol boats were also undertaken by
the depot in the course of the year.
164
REPORT ON T H E FINANCES
Pei'sonnel
On June 30, 1927, there were on the active list of the Coast
Guard 287 regular commissioned officers and 72 temporary commissioned officers, 47 cadets, 22 chief warrant officers, 388 regular
warrant officers, 444 temporary warrant officers, 9,924 enlisted men,
and 36 civilian employees in the field.
Recruiting.—The recruiting service of the Coast Guard on J u l y
1, 1926, the beginning of the fiscal year, consisted of 9 main recruiting stations and 28 substations located at suitable strategic points
in the East, South, and Middle West.
During the fiscal year 1927 there Avere 14,773 applicants for enlistment, of which number 3,507 were enlisted, the remainder being
rejected for physical disability and other disabling causes. On December 1, 1926, due to the limited funds available for travel, recruiting at all stations was restricted to the enlistment of ex-service men
only. On March 4, 1927, due to the fact that the funds for travel
of recruits were practically exhausted, and the further fact that the
second deficiency bill, carrying a provision for such funds for the
Coast Guard for the remainder of the fiscal year, failed of passage,
recruiting at all main stations and substations, except in four instances, was suspended. Recruiting at these four stations Avas continued, as the recruits upon enlistment could be transferred to Coast
Guard units near-by without involving cost for travel.
On June 30, 1926, the enlisted personnel of the Coast Guard numbered 8,784. At the close of the fiscal year 1927 there were 9,924
enlisted men in the service, an increase of 1,140.
During the year all recruits Avithout former service in the Coast
Guard or Navy Avere trained at the Coast Guard receiving unit, New
London, Conn., and in order that the recruits might become fully
indoctrinated Avith service routine, methods, and processes, a destroyer Avas utilized as a training ship at that station with excellent
results.
The introduction into the service of patrol boats propelled by
Diesel engines necessitated the training of enlisted personnel in the
operation and care of these engines. Throrigh the courtesy of the
Navy Department, 165 enlisted men Avere so trained during the year
at the Navy submarine base. New London, Conn.
Also, while these engines Avere being assembled at the plant of the
Winton Engine Co., ClcA^eland, Ohio, 48 enlisted men were instructed
in their operation and care, making a total of 213 enlisted men who
were trained for the duty during the year.
Welfare.—Every effort is being made, with the limited funds available, to provide healthful diversion for the enlisted men, as it is
realized that the morale of the service depends in a large degree upon
SECRETARY OF THE TREASURY
165
adequate recreational facilities and opportunities to ameliorate, so
far as possible, the hardships and privations to which the men are
necessarily subjected.
The continued interest of the men iri the training courses is gratifying, and the Coast Guard expresses its great appreciation of the
courtesy of the training division of the Bureau of Navigation, Navy
Department, for making the'educational facilities of that department
available to the service. All means for recreation and education that
have been offered the men have met with hearty response and
appreciation.
Award of life-saming medals
Sixteen life-saving medals of honor, 5 gold and 11 silver, were
awarded by the Secretary of the Treasury during the fiscal year,
under the provisions of law, in recognition of bravery exhibited in
the rescue of persons from drowning in waters over which the United
States has jurisdiction, or upon an American vessel.
COMPTROLLER OF THE CURRENCY
National banks organized, consolidated, insolvent, in voluntary liquidation, and in active operation
From the inauguration of the national banking system in 1863 to
June 30, 1927, charters haA^e been issued to 13,097 national banking
associations, of which 7,844 are in active operation. By reason of
liquidations, consolidations, and failures, 5,253 associations have been
terminated.
The capital of the banks in active operation on June 30, 1927, w^as
$5,481,279,615, an increase during the fiscal year of $61,192,210.
While charters were issued during the year to 145 associations, there
Avas a net decrease of 194 in the number of banks—that is, from 8,038
to 7,844—by reason of voluntary liquidations, receiverships, and
consolidations.
Summaries of operations during the last year, relating to the number and capital of national banks organized, increases and reductions
of capital, Avith number of national banks organized under various
acts of Congress, and number closed for various reasons during the
existence of the system, together Avith the number organized, consolidated, failed, liquidated, and in existence in each State and
geographical division, are shown in the statements folloAving:
Organizations, capital stock changes, and liquidations of nutional banks during
the fiscal year elided June 30, 1927
Total
Number
. of
banks
Capital ' Number
of
banks
Charters granted
Increases of capital (214 banks 1)
Restorations to solvency
145 $47,430,000
69,196,210
3
150,000
A^oluntary liquidations
Receiverships 2
Decreases of capital (16 banks)..
Closed under consolidation act of Nov. 7, 1918, and amount
of capital decrease incident thereto..
.. . _ . ..
175 42, 515,000
142 8,002,000
1,330,000
Net decrease in banks
Net increase in capital
Charters in force June 30,1926, and authorized capital
Charters in force June 30,1927, and authorized capital..
29
4, 337,000
Capital
148,
$116,776, 210
2 346
2 56,184,000
194
8.038
61,192,210
1,420,087,405
7,844
1,481,279,615
»Includes 8 increases aggregating $2,675,000, which were effected as a result of consolidations under the
act of Nov. 7,1918, and 7 increases aggregating $2,910,000, incident to the consolidation of State.banks with
national banks under the act of Feb. 25, 1927, and 69 increases by stock dividends aggregating $7,176,350
2 Includes 4 banks with aggregate capital of $600,000, which had been previously reported in voluntary
liquidation.
166
167
SECRETAEY OF THE TREASURY
Number of national batiks organized since February 25, 1863, number passed
out of the system and number in existence June 30, 1927
Organized under-—
Act Feb. 25, 1863
Act June 8, 1864
Gold currency act, July 12, 1870—
_
Act Mar. 14, 1900
Total number of national banks organized
Voluntary liquidations
v
Expirations of corporate existence
Consolidations under act Nov. 7, 1918
Receiverships, exclusive of those restored to solvency
Total number passed out of the system
Number now in existence
456
8,023
10
• 4,608
;
13,097
3, 774
208
187
1,084
:
5,253
7,844
Number of national banks organized, co7isolidated under act of November 7,
1918, insolvent, in voluntai^if liquidation, and in existence on June SO, 1927^
by States
Organ. ized
State
Maine .
.
New Hampshire
Vermont
^
Massachusetts
R h o d e Island
Connecticut.
.
_ _ .
113
73
76
347
65
118
_
T o t a l N e w E n g l a n d States
New York
N e w Jersey
__
Pennsylvania..
Delaware
. .
.
Maryland
_
District of C o l u m b i a
__..
___.
. ,
. _ ._
.
. _
.
_.
T o t a l E a s t e r n States
Virginia
W e s t Virginia
N o r t h Carolina
.. _ _
S o u t h Carolina
;
Georgia
Florida
_
Alabama. .
_ .
. _
Mississippi...
Louisiana
. .
.
Texas
Arkansas
Kentucky
Tennessee - .
. _ . ...
_ .
.
_
._
_
. . .
_.
T o t a l S o u t h e r n States
Ohio
Indiana....
Illinois
Michigan
Wisconsin
Minnesota
Iowa
Missouri
>
...
,
_ . . - . .
1
-_
_.
Total Middle Western States.
North Dakota
SouthDakota
Nebraska
Kansas
Montana
Wyoming
Colorado-
__ .
_
.
..
Consolidated
under .
act N o v .
7, 1918
Insolvent
I n liquidation
I n existence
1
1
1
7
2
3
4
7
16
1
6
55
13
22
169
49
44
67
55
46
155
13
65
792
15
34
352
391
901
365
1,132
29
127
30
23
8
19
62
10
.51
3
2
4
268
54
190
10
41
10
658
293
872
19
84
13
2,584
53
119
573
1,839
234
163
127
113
167
108
160
67
83
1,036
121
231
193
10
3
2
5
4
2
9
1
5
5
7
6
14
12
18
16
13
3
8
64
14
6
° 11
48
32
34
30
62
27
42
28
41
311
26
78
73
169
122
77
66
83
65
105
36
32
652
80
142
104
2,803
46
192
832
1,733
630
399
702
265
237
442
498
268
15
6
3
2
3
3
3
6
36
21
29
17
13
60
72
16
238
137
179
112
65
96
131
111
341
236
491.
134
156
283
292
135
3,441
40
264
1,069
2,068
242
200
345
433
189
57
204
1
1
1
4
2
56
60
42
43
62
12
28
43
41
147
129
51
15
49
142
98
155
257
74
30
124
3
168
REPORT ON", THE FINANCES
Number of national banks organized, etc.—Continued
Organized
State
New Mexico
Oklahoma
Total Western Staties
Washington, i
Oregon
California
j.
Idaho
Utah
Nevada
. .
Arizona
Total Pacific States
.
'
:
j .
Alaska
The Territory of Hawaii
Porto Rico
78
714
3
2,462
15
200
135
479
106
38
16
29
4
1,003
12
2
18
Insolvent
25
313
29
360
813
1,269^
31
13
22
26
3
2
3
66
27
200
28
13
4
9
100
, 337
54&
1
4
I
4
2
12
13,097
187
In liqui- In existdation
ence
24
48
375
6
6
1
Total Alaska and insular possessions
Total United States..
Consolidated
under
act Nov.
7, 1918
1,084
10{>
9&
245
52
2a
10
17
6
6-
3,982
7,844-
Condition of national banks
The aggregate resources of 7,796 reporting national banks in the
continental United States, Alaska, and Hawaii, June 30, 1927^
amounted to $26,581,943,000, as compared with resources of 7,978
reporting national banks in the sum of $25,315,624,000 on J u n e
30, 1926. The increase in resources for the year amounted to
$1,266,319,000.
Loans and discounts, including rediscounts, were $13,955,696,000
on June 30,1927, an increase of $538,022,000 over June 30, 1926.
United States Government securities owned totaled $2,596,178,000^
which is an increase of $126,910,000 in the year. Other miscellaneous
bonds and securities amounted to $3,797,040,000 and show an increase
of $424,055,000 since June, 1926.
Amounts due reporting banks from other banks and bankers, including lawful reserve with Federal reserve banks, aggregated
$3,374,002,000 and were $9,983,000 more than in June of last year.
Cash in banks, $364,204,000, shows an increase of $4,253,000 in the
year.
Capital stock paid in was $1,474,173,000 and shows an increase of
$61,301,000 since June 30, 1926. Surplus and undivided profits were
$1,765,366,000, as compared with $1,676,486,000 a year ago.
Circulating notes outstanding of $650,946,000 show a decrease of
$209,000 in the 12-month period.
Balances on the books of reporting banks due to correspondent
banks and bankers, including certified checks and cashiers' cheeks
outstanding, aggregated $3,395,927,000, which is a decrease in the
year of $9,321,000.
169
SECRETARY OF THE TREASURY
Total deposits amounted to $21,775,123,000 and were greater by
$1,132,959,000 than in June of 1926. The total deposits include
United States funds of $139,843,000, other demand deposits of
$10,923,729,000, and individual time deposits, including postal savings, in the sum of $7,315,624,000. Total individual deposits, time
and demand, were $18,239,353,000 and show an increase of $1,146,941,000 over June 30, 1926.
Borrowed money amounted to $368,042,000, which is a decrease of
$53,914,000 in the year. The liability for borrowed money was represented by bills payable and rediscounts of $248,018,000 and $120,024,000, respectively.
The percentage of loans and discounts to total deposits was 64.09
on June 30,1927, in comparison with 65 on June 30, 1926.
The resources and liabilities of national banks at the date of each
report since June 30, 1926, are shown in the following statement:
Abstract of reports of condition of national banks at the date of each report
since June 30, 1926
[In thousands of dollars]
June 30,
D e c . 31,
M a r . 23,
J u n e 30,
1926—
1926—
1927—
1927—
7,978 banks 7,912 b a n k s 7,828 b a n k s 7,796 b a n k s
RESOURCES
Loans and discounts (including rediscounts) i
Overdrafts
United States Government securities owned
Other bonds, stocks, securities, etc., owned
Customers' liability account of acceptances
Banking house, furniture and fixtures
Other real estate owned.._
.'.
Lawful reserve with Federal reserve banks
Items with Federal reserve banks in process of collection...
_.
_
_
Cash in vault
Amount due from national banks
Amount due from other banks, bankers, and trust
companiesExchanges for clearing house
Checks on other banks in the same place
Outside checks and other cash items.
Redemption fund and due from United States
Treasurer
~
United States Government securities borrowed
Bonds and securities, other than United States, borrowed
Other assets
TotaL _
13,417,674 13, 573, 275
9,719
9,332
2,469, 268 2, 282, 571
3,372,985
3,507,821
232,460
255, 464
632,842
644,880
115,869
114,108
1,381,171 1,359,386
13,647,640
12,662
2,652,367
3,671,313
246, 250
663,959
117, 571
1,400,317
13,955,696
9,788
2,596,178
3, 797, 040
253,131
680, 218
115, 817
1,406, 052
501,409
359,951
1,080,617
543, 268
352, 709
1,124,188
443,145
373,905
1, 026, 760
496,916
364, 204
1, 044, 653
400,822
899,901
97,179
69,316
423, 766
969, 432
117, 264
72,928
393,174
626, 687
74,304
47,126
426,381
947,946
101, 574
89, 480
33, 023
24,442
32,810
23,787
32, 505
16,986
32, 917
17, 721
3,173
213,803
3,299
273,561
4,646
247,830
3, 826
242,405
25,315,624
25, 683,849
25,699,147
26, 581,943
LIABILITIES
Capital stock paid in
Surplus fund
_
Undivided profits, less expenses and taxes paid
Reserved for taxes, interest, etc., accrued
National-bank notes outstanding
Due to Federal reserve banks
Amount due to national banks
Amount due to other banks, bankers, and trust companies
'.
Certified checks outstanding
Cashiers' checks outstanding
Demand deposits._
Time deposits (including postal savings)
United States deposits
»Includes customers' liability under letters of credit.
1,412,872
1,198, 899
477, 587
64,618
651,155
33, 794
979, 814
1,885,848
217,123
288, 669
10, 778, 603
6,313,809
144, 504
1, 410, 723
1,216, 979
477,217
61,308
646,449
38,179
1, 816,955
219, 759
365, 087
10,768,669
6,533, 442
138, 239
1,460, 491
1,239,810
619, 670
70,409
642, 558
35, 281
1, 474,173
1, 256, 945
508,421'
70,326
650,946
36,379
976,119
1, 764,982
200,381
201,921
10,430,341
7, 056,467
241, 945
1,844,439
223,884
315,106
10,923, 729
7,315, 624
139,843
170
REPORT ON T H E FINANCES
Abstract of I'cports of condition of national banks at the date of each report
since June 30, 1926—Continued
[In thousands of dollars]
Mar. 23,
June 30,
Dec. 31,
June 30,
1927—
1927—
1926—
1926—
7,978 banks 7,912 banks 7,828 banks 7,796 banks
Total deposits.20,642,164
24,442
United States Government securities borrowed.
,
Bonds and securities, other than United States, borrowed..
3,173
Agreements to repurchase United States Government
3,489
f or other securities sold
Bills payable (including all obligations representing
borrowed money other than rediscounts)
253,807
Notes and bills rediscounted
168,149
Acceptances of other banks and foreign bills of exchange
100,652
or drafts sold with indorsement
12,880
Letters of credit and travelers' checks outstanding
Acceptances executed for customers and to furnish
221,131
dollar exchange less those purchased or discounted. _.
29,801
Acceptances executed by other banks, _
50,805
Liabilities other than those stated above
Total
25,315,624
20,863,991
23,787
20,912,209
17, Oil
21, 775, SSi
17,746
3,299
4,646
3,826
18,485
4,480
3,529
391,593
138,716
306,203
92,840
248,018
120,024
95,349
7,778
95.035
9,812
111, 010
16,449
250,361
23,268
54,546
242,265
17,636
64,072
248,184
20,353
57,870
25,683,849
25,699,147
26,581,943
Banks other than natio7ial
The aggregate resources of 19,265 reporting banks other than national in the various States, Alaska, and the insular possessions on
June 30, 1927, were $41,550,615,000, and exceeded by $1,972,877,000
the resources of 20,168 associations on June 30, 1926.
Loans and' discounts of $23,314,682,000 were $731,326,000 greater
than in the year previous; investments in United States and other
miscellaneous bonds and securities of $10,861,875,000 showed an increase of $888,987,000; banking house, furniture and fixtures, $899,887,000, were greater by $39,679,000; and other real estate owned,
$283,656,000, was $40,608,000 in excess of this item a year ago.
Amounts due from correspondent banks and bankers, including
lawful reserve with Federal reserve banks and other reserve agents,
amounted to $3,526,400,000 as compared with $3,405,042,000 a year
ago. Checks and other cash items of $869,936,000 were greater by
$110,322,000, while exchanges for clearing house showed a decrease
of $39,320,000. Cash on hand was increased from $636,569,000 to
$643,692,000.
All liability items reported by banks other than national as of
June 30,1927, showed increases over the returns of this class of banks
for June 30,1926, save bills payable and notes and bills rediscounted,
.which were decreased in the year $32,990,000 and $6,730,000,
respectively.
Capital stock paid in aggregated $1,902,325,000; surplus, $2,507,582,000; and undivided profits, $622,785,000.
171
SECRETARY OF THE TREASURY
Individual deposits, including dividends unpaid and postal savings, were $32,893,201,000, an increase of $1,103,317,000; certified
checks and cashiers' checks outstanding, $580,953,000, were greater
by $431,096,000; and United States deposits were $54,181,000, or
$10,858,000 more than on Jime 30 of the preceding year.
Bills payable and notes and bills rediscounted in the current year
aggregated $353,363,000 and $108,103,000, respectively,
Comparison of the resources and liabilities of these banks for
the years ended June 30, 1926 and 1927, is shown in the following
statement:
Resources a^id liabilities of banks other than national June 30, 1927, compared
loith Ju7ie 30, 1926
[In thousands of dollars]
June 30,
1926—
20,168
June 30,
1927—
19,265
Increase
Decrease,.
903 banks
RESOURCES
Loads and discounts..
Overdrafts
Investments (including premiums on bonds)...
Banking house (including furniture and fixtures)
Other real estate owned.._
Due from banks
:
Lawful reserve with Federal reserve banks or other reserve
agent's
Checks and other cash items
Exchanges for clearing house
Cash onhand
Other resources.
Total resources
22, 583,356 23,314, 682
39,751
33, 662
9, 972,888 10, 861, 875
860, 208
899, 887
243,048
283, 656
1,859, 627 1, 999,498
1, 545, 415
759, 614
211, 551
636, 569
865, 711
1, 526, 902
869, 936
172, 231
643,692
944, 594
\ 577, 738 41, 550, 615
731, 326
6,08&
888,
39,
40,
139,
987
679
608
871
18, 51$
110. 322
"39,"320'
7,123
78, 883
1, 972, 877
LIABILITIES
Capital stock paid in
Surplus.
_
Undivided profits (less expenses and taxes paid)
Due to all banks
.'
Certified checks and cashiers' checks
Individual deposits (including dividends unpaid and
postal savings)
United States deposits (exclusive of postal savings)
Notes and bills rediscounted
Bills payable
Other habilities
Totalliabilities.-^
1,902, 325
2, 507, 582
622,785
1, 432,400
680, 953
41,894
234, 513
37, 201
1,251
431,090
31, 789,884 32,893, 201
43,323
64,181
114, 833
108,103
386,353
353,363
943, 255 1,095,722
1,103,317
10,858
39, 677, 738
1, 972,877
1,860,431
.2,273,069
585, 584
1,431,149
149,857
41, 550, 615
6,730
32, 99a
152,467
All reporting banks
[National, State (commercial), savings, and private banks, and loan
and trust companies]
On June 30, 1927, there were 7,796 reporting national banks and
19,265 reporting banks other than national, a total of 27,061 associations, the combined returns of which showed resources aggregating
$68,132,558,000, and exceeded by $3,239,196,000 the resources of all
reporting banks on June 30, 1926.
172
REPORT ON THE FINANCES
Loans and discounts, including rediscounts, amounted to $37,270,378,000, in comparison with $36,233,490,000 on June 30, 1926, an
increase of $1,036,888,000. The current figure also did not include
customers' liability on account of acceptances executed and outstanding, $253,131,000, reported separately by national banks, while a
similar item in the sum of $232,460,000 was included with loans and
discounts of all reporting banks on June 30, 1926. Overdrafts
showed a reduction of $6,020,000. Investments in United States and
other miscellaneous bonds and securities totaled $17,255,093,000, and
exceeded by $1,439,952,000 the amount reported a year ago. Banking
houses, furniture and fixtures, and other real estate owned were
valued at $1,979,578,000, and showed an increase of $127,611,000 in
the year.
Balances due from correspondent banks and bankers, including
lawful reserve with Federal reserve banks, totaled $6,900,402,000, an
increase of $131,341,000; checks and other cash items, including
exchanges for clearing house, $2,181,167,000, were greater by $143,606,000, and cash on hand, $1,007,896,000, was $11,376,000 more
than on June 30, 1926.
The paid-in capital stock aggregated $3,376,498,000, and showed
an increase of $103,195,000; surplus of $3,764,527,000, exceeded the
amount a year ago by $292,559,000, and undivided profits of $1,131,206,000 increased in the sum of $68,035,000.
Total deposit liabilities were $56,735,858,000, or $2,679,481,000
greater than the year previous. With the exception of amounts due
to other banks arid bankers, which declined $41,268,000, each of the
other deposit items showed increases as follows: Individual deposits,
including unpaid dividends and postal savings, $2,250,258,000; certified checks and cashiers' checks outstanding, $464,294,000; and
United States deposits, $6,197,000.
Obligations for money borrowed, $829,508,000, represented by
bills payable of $601,381,000, and rediscounts of $228,127,000 were
less by $194,286,000 than the amount reported a year ago.
The following tables show a comparison of the resources and
liabilities of all reporting banks for the year ended June 30, 1926
and 1927, and similar items on June 30, of each year from 1921 to
1927, inclusive:
173
SECEETARY OF THE TEEASUEY
Resources and UaMlities of all reporting hanks June 30, 1927, compared toith
June 30, 1926
[In thousands of dollars]
June 30,
1926—
2S,146
_
- .
June 30,
1927-27,061
Decrease,
1,086
banks
Increase
RESOURCES
Loans and discounts (including rediscounts)
Overdrafts
Bonds, stocks, and other securities.
Due from other banks and bankers»
Real estate, furniture, etc.^
Checks and other casn items *
Cash on hand
Other resources
Total
136,233,490 37,270,378
43,450
49,470
15,815,141 17,255,093
6, 769,061 6,900,402
1,851,967 1,979, 578
2,037, 561 2,181,167
1,007,896
996,520
1,140,162 11,494,594
1,439,952
131,341
127, 611
. 143,606
11,376
354,442
64,893,362
68,132,558
3,239,196
3,273,
3,471,
1,063,
651,
655,
48,882,
187,
4,330,
2,377,
3,376,498
3, 764, 527
1,131,206
650, 946
1,119,943
51,132,554
194,024
4,289,337
2,473,523
103,195
292, 659
68,035
64,893,362
68,132,668
1,036,888
6,020
LIABILITIES
Capital stock paid in
Surplus fund
Other undivided profits
Circulation (national banks)
Certified checks and cashiers' checks
Individual deposits
Uriited states deposits
Due to other bardrs and banJicers
Other liabilities«
Total
464,294
2,250,258
6,197
96,136
209
41,268
3,239,196
1 Includes acceptances reported by; national banks.
* Includes lawful reserve with Federal reserve banks.
* Includes banking house and other real estate owned.
* Includes exchanges for clearing house.
«Includes bills payable and rediscounts.
The following statement shows the number of national banks,
June 30, 1927, in each State, with the amount of capital and aggregate assets, in comparison with similar information for all reporting
banks:
Number, capital, and assets of national banks, and all exporting banks, June 30,
1927, by Btates
National banks
states, etc.
Maine
New Hampshire
Vermont.
Massachusetts
Rhode Island
Connecticut...
Total New England States..
NewYork
New Jersey
Pennsylvania
Delaware
Maryland.
District of Columbia
Total Eastern S t a t e s . . . . . . . .
Numof
banks
57
66
46
153
13
65
Capital
(000
omitted)
Aggregate
assets (000
omitted)
All banks, including national banks
Numof
banks
Capital
(000
omitted)
Aggregate
assets (000
omitted)
$7,770
6,400
6,110
79,788
4,870
21, 702
$161,719
80,317
72,351
1, 500,182
63,792
312,463
144
123
106
442
37
260
389
124,640
2,190,824
1,101
210,162
7,836,816
654
291
868
19
84
13
278,684
47,037
151,490
1,769
18,409
10,627
6,316, 727
942,119
3,146,453
25,591
312,476
166, 663
1,161
668
1,640
69
244
43
629,386
125,903
349,104
10,607
43,923
24,461
18,894,762
2,619,291
6,612,856
161,230
941,067
316,184
1,829
507,806
10,909,028
3,706
1,183,274
29,434,390
$13,201
6,630
7,976
125,628
14,266
42,662
$466,694
304,088
261,716
4,911,842
671,441
1,320,034
174
REPORT ON THE FINANCES
Number, capital, and assets of national banks, and all reporting banks, June SO,
1927, by States—Continnea
All b a n k s , including national b a n k s
National banks
s t a t e s , etc.
Numof
banks
Capital
(000
omitted)
$671,672
452,494
603,95»
234,841
462,843
662,565
349,241
276,688
629,314
1,314,162
268,903
591,418
626,826
260,181
3, 592,290
6,382
533,757
6,744,825
68, 055
32,445
99, 662
30,416
27,780
36,163
24,065
44,495
900, 513
440, 325
1, 839,001
579, 511
464,838
644, 069
362,755
659, 689
1,067
1,065
1,843
796
973
1,196
1,438
1,439
178,970
80,216
273,232
119,992
64,178
62,686
71,102
. 121,684
3,238,02^
1,200,393
4,617,864
2,267,864
2,052
353,070
5,890,701
9,817
971,960
16.179,29^
141
98
153
257
74
30
124
29
350
6,820
4,645
14,130
18,383
5,380
2,460
12,280
2,035
27,450
90,766
71,857
228,845
261, 226
88,146
43,267
262,349
30, 357
426,592
630
417
1,026
1,180
210
88
297
59
696
12,893
12,047
36,918
43,443
11,736
4,226
18,167
3,218
34,479
165,726^
168,640
541,422
541,466
170,389
68,419'
337,866
41,297
S21,261
1,256
92,483
1,503,405
4,602
177,116
2,546,455
109
96
240
52
20
10
15
18, 601
11.910
94,472
3,635
3,650
1,400
1,525
322,535
218, 741
1, 778,798
56,121
56,217
19, 902
27, 946
368
253
644
144
107
35
46
31,555
20,702
192,209
6,562
11, 598
3,262
6,117
620,146
326,765
3,833,968
97,603
176,89a
46,629
82,804
641
135,193
2,480, 260
1,487
271,006
6,083,68a
4
200
4,841
17
840
13,781
.2
600
10, 594
23
16
12
8,338
7,279
12,768
106,64a
61,676
127,186
.
1,723
340
233
490
134
156
277
287
135
Ohio
Indiana
Blinois
Michigan .
Wisconsin
Minnesota
Iowa
Missouri. .
.
. .
...
.
T o t a l M i d d l e W e s t e r n StatesNorth Dakota
South D a k o t a . . .
Nebraska
Kansas
Montana .
WyomingColorado
..
New Mexico...
Oklahoma
T o t a l W e s t e r n States
Washington.
Oregon
California
Idaho
•
Utah
Nevada
Arizona
_.
. .
. .
T o t a l Pacific States
Alaska ( n o n m e m b e r b a n k s )
...
T h e T e r r i t o r y of H a w a i i (nonmember banks)
P o r t o Rico
Philippines
T o t a l Alaska a n d
possessions
T o t a l U n i t e d States
Aggregate
assets (000
omitted)
$59,048
35,012
38.240
20,016
40,796
36,887
28,098
17,006
33,386
117.606
22,617
43,832
41,216
t o t a l Southern States.
.
Capital
(000
omitted)
497
339
640
281
471
327
356
348
232
1,426
455
690
620
$30,559
13,619
14,838
9,950
17,800
16,790
14,095
5,485
9,075
82, 995
7,115
20, 296
17, 664
- .
Numof
banks
$398,130
206,569
195,917
133,123
273,454
288, 935
204,090
93,189
123, 682
1,016, 777
101, 533
301, 247
255, 744
167
122
77
66
83
62
105
36
32
649
79
142
104
Virginia.
W e s t Virginia
N o r t h Carolina
South Carolina
Georgia
Florida
Alabama
Mississippi
Louisiana
Texas
Arkansas
Kentucky
Tennessee
Aggregate
assets (000
omitted)
*
i, ioo, 626
1,129,048
1,024,005
1,601,48a
insular
6
800
16,436
67
29, 225
308,186
7,796
1,474,173
26,581,943
27,061
3,376,498
68,132,55»
Resources and liabilities of all reporting banks, 1921-1927
[In t h o u s a n d s of dollars]
Classification
1922—30,389
banks
1923—30,178
banks
1924—29,348
banks
1926—28,841
banks
1926—28,146
banks
1 27,860,443
74,600
12,647, 667
6,414,241
1,276, 631
1, 574, 608
829,892
847,386-
1 30,416,577
57,982
13,672, 547
. 5,597,150
1,432,217
1,196,075
797,101
865,262
131,427,717
56,334
14,228,745
6,121,093
1,590,259
1,992,370
911,500
816, 672
'33,883,733
50,259
15,400,113
6,774,392
1,736,585
2,181,137
951,286
1,079,532
1 36,233,490
49,470
15, 815,141
6,769,061
1,851,967
2,037, 561
996,520
1,140,152
37,270,378
43,450
17,255,093
6,900,402
1,979, 678
2,181,167
1,007,896
I 1,494,594
49, 671,390
50,425,367
54,034,911
67,144, e
62,057,037
64,893,362
68,132,558
903, 961
542,032
910, 743
704,147
614,583
34,844,572
390,230
809,414
951,708
2, 943,950
2, 697,409
933,843
725,748
652, 505
37,194, 318
128,887
3, 244, 386
2,004,321
3,052, 367
2,799,494
954,145
720, 001
358,110
40,034,195
238,439
3,610,211
2,267, 949
3,114,203
2,967,359
971,730
729, 686
664,857
42,954,121
152, 302
3,928,292
1,662,140
3,169,711
3,173,334
1,007,439
648,494
698,861
46,765,942
147,220
4,370,909
2,075,127
3.273,303
3,471,968
1,063,171
651,155
655, 649
48,882,296
187,827
4, 330, 605
2,377,388
3,376,498
3,764,527
1,131,206
650, 946
1,119,943
61,132,654
194,024.
4,289, 337
2,473,523
49, 671,390
60,426,367
54,034, 911
57,144, (
62,057,037
64,893,362
68,132,668
1921—30,812
banks
1927—27,061
banks
RESOURCES
OQ
L o a n s a n d d i s c o u n t s (including r e d i s c o u n t s ) .
Overdrafts..
B o n d s , stocks, a n d o t h e r s e c u r i t i e s .
D u e from other b a n k s a n d b a n k e r s 2_
Real estate, furniture, etc.3
C h e c k s a n d other cash i t e m s <
C a s h on h a n d . . !
Other resources
Total
-
-
932,011
81,849
381,923
794,206
147,521
290, 667
946,667
096, 647
tel
H
>
Kl
O
H
LIABILITIES
C a p i t a l stock p a i d i n
S u r p l u s fund
Other u n d i v i d e d profits
Circulation (national b a n k s )
Certified checks a n d cashiers' checks
Individual deposits..
U n i t e d States deposits
D u e t o other b a n k s a n d b a n k e r s
O t h e r liabilities 5
Q
W
tel
Ul
d
Kl
Total
1 I n c l u d e s acceptances r e p o r t e d b y n a t i o n a l b a n k s .
» I n c l u d e s lawful reserve w i t h F e d e r a l reserve b a n k s .
« I n c l u d e s real e s t a t e o w n e d o t h e r t h a n b a n k i n g house.
< I n c l u d e s exchanges for clearing h o u s e .
» I n c l u d e s bills p a y a b l e a n d r e d i s c o u n t s .
-4
CUSTOMS SERVICE
Volumie of business
The comparative statement of entries of merchandise for the fiscal
years 1926 and 1927 printed below shows that the increase in business
reported last year continued during the fiscal year 1927:
Number of entries,
fiscal year—
Class of entries
Consumption:
Free
Dutiable
Informal
Mail..
Baggage declarations
Warehouse and rewarehouse
Immediate transportation without appraisement
Transportation and exportation
Warehouse withdrawals, duty paid
Warehouse withdrawals, all other
All other entries
Drawback notices of intent
Drawback entries..
Total
,
1926
1927
226,382
459,726
196, 036
786,811
383, 607
60, 236
144, 664
117,621
222,097
38,425
27,451
192, 070
24,388
246, 257
486, 274
209,002
786,683
392,128
63,294
148,321
120,417
249,671
2, 861, 513
3, 000, 859-
38, 677
14,034
220, 871
25,230
Receipts
The receipts exceeded all past records, amounting to $25,955,855
more than those for the previous record year of 1926. A total of
$605,672,465 was collected in customs duties and covered into the
Treasury during the fiscal year 1927, compared with $579,716,610
during the fiscal year 1926.
The increase in the net proceeds realized from the customs collections for the year is even greater than indicated by the total
amounts collected, due to a reduction in customs refunds. The total
refunds dropped from $27,811,261 in 1926 to $20,285,317 in 1927.
Comparative figures, showing in detail the total collections, refunds^
and net receipts from all sources for the fiscal years 1926 and 1927,
are listed in the following table:
/
Fiscal year 1926
CoUections:
Duties
Miscellaneous—
Sale of unclaimed merchandise
Sale of abandoned goods
Sale of seizures
Customs fees, etc
Fines
•__ $579, 716, 610
$6,146
6, 062
155,200
70, 873 .
1,167, 781
1,406,062
Total
176
581,122, 672
SECRETARY OF THE TREASURY
Refunds:
Refunds of excessive duties
Drawback payments
.
__'
177
$6, 347, 897
^ — 21,463,864
$27,811,261
Net customs receipts from all sources
553, 311,411
Fiscal year 1927
Collections:
Duties
Miscellaneous—
Sale of unclaimed merchandise
:
Sale of abandoned goods
^
Sale of seizures
Customs fees, etc
Fines
—
^^-—
605, 672, 465
$1, 796
8, 285
100, 450 .
106,140
1, 377,197
1,593,868
Total
607, 266, 338
Refunds:
Refunds of excessive duties—
Drawback payments
$7, 804,035
12,481, 282
20,285,317
Net customs receipts from all sources
..
586,981, 016
Mention should be made of the fact that the proceeds from the
sales of unclaimed and abandoned merchandise and seizures do not
represent the total received from such sales and deposited in the
Treasury. It is the practice to deposit from the proceedis of these
sales as " duties" amounts equal to the duties accruing on the
merchandise. The amounts in the above table, therefore, represent
only the balances remaining from the proceeds of sales after deduction of the accrued duties.
The legislation prescribing the procedure to be followed in connection with the audit by. the General Accounting Office of customs
accouints, referred to in the last Annual Report as pending in the
. CongTCss, failed of passage, as did also a substitute bill. Through
conferences between representatives of the Comptroller General and
the department, however, an understanding was reached for the
making of audits of customs accounts in the field by the General
Accounting Office. Accordingly, auditors from the General Accounting Office during the fiscal year traveled to all the ports in the United
States, and periodically examined the accounts of collectors of customs. The differences and disallowances resulting from these field
audits were negligible, and such as were reported had in practically
every instance been developed by the audit at the seat of government
from papers submitted to the General Accounting Office with the
collectors' accounts in support of expenditures from annual appropriations. It is gratifying to have the thoroughness and efficiency
of the department's administrative examination of customs transactions through the comptrollers of customs thus confirmed.
178
REPORT ON T H E FIITANCES
Enforcement activities
During the year several seizures and recoveries involving large
sums of money were effected. In one case there was collected a forfeiture value amounting to $11,200, and a personal penalty of 100
per cent on certain dialmond rings and other jewelry which a passenger attempted to conceal on landing at New York. In another
€ase a member of the crew of a vessel was apprehended in an effort
to smuggle cut diamonds appraised at $102,285. The diamonds
were sold at auction by the United States marshal for $75,811.25,
which included duty of $15,736.20. The offender was sentenced to a
year and a day in the penitentiary at Atlanta. Four hundred and
forty-one wrist-watch movenaents, appraised at $2,386, were seized
from a member of the crew of another vessel, who pleaded guilty
to a charge of smuggling and was sentenced by the United States
district court to four months' imprisonment.
Large seizures of liquors were made by customs officers at the seacoast ports, as well as by the customs patrols along the international
iDorders. Patrol officers using automobiles- covered in their operations a distance of 2,351,577 miles, at a cost for maintenance and
operation of $0.05 per mile. The automobile patrols made 1,293
seizures during the year, the liquors of which were valued at $259,^67, other commodities and the vehicles used in transporting the
liquors at $664,220, and in connection with which fines amounting
to $34,395 were imposed.
The table below shows in detail the number of seizures and the
appraised values thereof, classified by certain groups of commodities, for the fiscal year ended June 30, 1927, and similar information
for the period from January 1 to June 30, 1926. Similar statistics
were not compiled prior to January 1, 1926, so that comparative
figures for the previous fiscal year are available for only a six-month
period:
Jan. 1 to June 30,
1926
Class of commodities
Beads and beaded articles
Furs
Jewelry and precious stones..
Laces and embroideries
Livestock, farm, dairy, and meat products
Perfumery and toilet articles
Silk, linen, woolen, and cotton goods
All other, except as detailed below
_
Vehicles, etc., used in transporting liquors:
Automobiles
.
Boats
Horses and mules
Horse-drawn vehicles . . . Liquors _
Alcohol
Narcotics
_
Total......
. __
. .
_
_
Appraised
value
Number of
seizures
•
$482
4,229
266,715
3,312 i 2,623
8,629
1, 364
46,902
227,660
_
.. ..
-
-_.
.
183, 446
363,137
1,813
6,430 I 5,697
1,103,118 1
1,379,727
79,024
32,152
151
8,471
July 1, 1926, to
June 30,1927
Number of
seizures
Appraised
value
$1,326
30,144
376,636
11,670
12,230 > 4,350
2,865
174,968
147,907
456,449
. 789,221
• 4,197
4,724
2,012,327 1
3,402,969 1
416,040
161,841
> 14,374
145
1 18,869
SECRETARY OF THE TREASTJRY
179
Expenditures and statistics
Other statistics concerning the volume of customs transactions ini
the various districts,,values of imports and exports, the cost of collection, collections made, etc., are published in Table 17, p. 490
of this report. It is interesting to note that, notwithstanding the
increase of $25,000,000 in collections, the total cost of maintenance
arid operation of the service exceeded that of last year by only
$318,000, amounting to $16,964,000 in 1926, and $17,282,000 in 1927.
The proportionate cost of collection per dollar was reduced frora
$0.0292 to $0.0285.
With the slight increase in the total expenditures, the Customs
Service not only cared for the additional work reflected in the increased receipts, but cared for extraordinary activities at the port
of Philadelphia, Pa., due to the Sesquicentennial International Ex~
position held in that city during the fiscal year. While the duties;
collected on merchandise sold by exhibitors at the exposition
amounted to only approximately $300,000, it was necessary to ex->
amine merchandise and wares assembled from all the markets of thei
world, so varied in character that their classification covered almost
the entire range of the tariff act. Every article was checked against
the exhibitor's invoice, marked for identification purposes, appraised
and classified. Experienced appraising officers and liquidators were
detailed from other ports to assist the regular force at the port of
Philadelphia, which was also augmented by temporary employees
in subordinate positions. The detail of experienced officers greatly
expedited the customs work at the exposition and resulted in a
saving to the Government, as is evidenced by the fact that a special
appropriation for the customs work at the exposition was not neces^
sary, although such appropriations were made to care for the customs
work in connection with similar expositions in the past.
Undervcduations
Rugs.—The values at which imported rugs were entered, while
maintaining a certain uniformity of invoice prices, nevertheless,
raised serious doubt of appraising officers at New York as to whether
the correct dutiable value was indicated. Domestic manufacturers,
also complained that they could not compete with the prices at whick
the imported rugs were sold and intimated that the merchandise wa^
undervalued, although they were unable to submit substantiating:
evidence. An investigation to determine the correct basis for appraisement was accordingly instituted. The uniformity of price:
in the consular invoices, it was developed, was due to an understanding or agreement in the foreign market to control the invoice values;
with the intent to deceive the appraiser and deprive the Uriited States
180
REPORT ON THE FINANCES
of a portion of its lawful revenue. The investigation resulted in
an increase of approximately 60 per cent in the entered values of the
quality of rugs which represent the bulk of importations from Smyrna
and Greece, and at considerably higher prices for other qualities.
In order to meet market value, importers increased by $800,000
the value on their rugs entered at New York during the last seven
months of the fiscal year. This increase, at 55 per cent duty, produced a revenue of $440,000. Rugs are heavily imported at other
ports and it is believed that the total amount of increased revenue
as a result of this investigation is not less than a million dollars. It
is believed further that the recoveries on account of importations
made prior to the beginning of the investigation will approximate
a half million dollars.
Leather gloves.—^A similar inquiry was made into market values
of leather gloves, which resulted in advances by importers of from
8 to 15 per cent in their invoice values. At New York, since the investigation was undertaken, the importers' increases of entered
values amounted to $80,000. In addition, several payments approxiriiating $16,000 have been collected through the special agency
service.
French perfumery.—Early in the fiscal year 1927 appraising officers at-New^ York became convinced that the entered values of
French perfumery did not represent actual market value, in view
of the continued depreciation of the franc, and investigations abroad
confirmed this opinion. Subsequent importations were returned by
the appraiser at a value increased from 100 to 150 per cent. The
increased values amounted, in the case of a single importer, to over
$180,000, on which amount the duty and internal revenue tax will
approximate 100 per cent. In addition, the amount collectible under
section 489 of the tariff act of 1922 will amount to about $400,000.
Other commodities.—Other investigations concerning the market
values resulted in a saving of approximately $100,000 in connection
with importations of Madeira embroideries. Advances were made
in the values of tie silks of from 15 to 60 per cent, the total advances
amounting to $200,000; bismuth metal, 7^/^ per cent; carbonic-acid
gas capsules, 50 per cent; whiting, 10 per cent; artists' colors from
Holland, 30 per cent; and from Germany, 20 per cent.
Classification of wool.—The Supreme Court of the United States
rendered an important decision concerning the classification of wool,
sustaining the Government's contention that long and short staple
wool (combing and carding) both were comnaonly used and known as
"clothing wool." The importers contended that the "clothing
wool" was the short-staple wool, and that the long-staple wool was
provided for as " w^ool of the sheep " under the free paragraph. The
classification of wool had been in litigation since 1921, and the per
SECRETARY OF THE TREASURY
181
sistent efforts of the Government resulted in the- saving of millions
of revenue not only in the duties on raw wool but also on importations of manufactures of such wool.
Che^rnical laboratory
The customs laboratory at the port of New York in connection with
its varied activities accomplished three outstanding results of unusual
interest because of their character and economic importance.
A publication consisting of 200 pages, representing almost five
years of work in establishing coal-tar dye standards and determining
the appraisement basis of every coal-tar dyestuff imported during
that time, has been compiled and is ready for issue. It contains the
names of about 1,100 standards that have been established by the
Secretary of the Treasury, with the other names under which each
standard is known, and an alphabetical index of approximately 3,100
different names (standardized and others) under which dyestuffs
have been imported since 1922, together with their competitive or
noncompetitive status at the present time.
The conclusion of a difficult and lengthy investigation to determine
the presence of foreign aromatic substances in bergamot oil resulted
in establishing the presence of ethyl laurate, an aromatic chemical, in
a number of large importations. The amount of duty involved and
the ethical aspects of the situation commanded much publicity in
this country and abroad. >
Through extensive research work in the laboratory, it was discovered that pure acenaphthene had been added to many large shipments of refined naphthalene, with a solidifying point of more than
79° C, in order to reduce its solidifying point to below 79° C. in an
attempt to secure free entry of a dutiable article.
Trade routes
There has been a decided increase in importations from Europe
through Canada via the St. Lawrence Waterway and the ports of
Montreal, Quebec, and St. John. At the port of Chicago heretofore
the major part of the importations arrived via the port of New York,
and that port still holds the lead in number of importations, but
when measured by tonnage the importations received through Canadian ports exceed those received via New York. It is claimed that
importers have found the new artery of transportation as fast and
more economical than the old route. The dock charges and brokerage fees assessed at New York are practically eliminated at the
Canadian ports,,and the methods of handling cargoes at these ports
for transportation to destination with a minimum of customs formalities, both Canadian and United States, should be given serious
182
REPORT ON THE FINANCES
consideration iri connection with the study arid improvement of the
present system of transporting merchandise in customs custody in
bond. On two cargoes of cast-iron water pipe imported direct from
Brest, France, for the city of Des Moines, it is said that over $25,000
was saved in freight and handling charges.
There is also a gradual increase in the number of foreign vessels
trading at Chicago—British (Canadian) and Norwegian. During
the year 6,740,328 bushels of wheat and 1,908,191 bushels of corn
were exported by vessel from Chicago, of which 5,648,898 bushels of
wheat and 1,190,906 bushels of corn were exported in foreign vessels*
The increase in the use of Canadian ports by tourists returning
from Europe is also quite noticeable, particularly at the ports along
the eastern frontier where the increase in the number of tourists and
baggage from Europe arriving by automobile from Canadian seaports is proportionately greater than the increase in the general
automobile traffic.
I n conjunction with the Bureau of Immigration a system for the
collection of head tax and the accounting for such head tax by collectors of customs along the northern border was worked out during
the year and placed in operation. Head tax was heretofore collected and accounted for through collectors of customs along the
southern border and at all seacoast ports. With the extension of
this cooperative procedure in the collection of head tax on the
northern border, all such collections are now handled through the
Customs Service.
Air ports
The rapid development of foreign air commerce, with an early
promise of further expansion in the transportation of freight and
passengers, indicates the necessity of new regulations to clarify t h e
situation. Under section 58 of the Air Commerce Regulations the
laws of the United States and regulations made thereunder with
respect to the entry and clearance of vessels engaged in foreign commerce are made applicable to aircraft engaged in foreign commerce.
I t is impracticable in many instances for aircraft arriving from contiguous foreign territory to report at the customhouse nearest to
the place where the aircraft crosses the boundary line, as is required
by existing regulations. Many cities adjacent to contiguous foreign
territory have established, or are about to establish, municipal air
ports. A survey and study of the situation with a view to designating convenient places having suitable landing fields as air ports,
under the provisions of section 7 of the air commerce act of 1926, will
probably be found desirable in the very near future.
SECRETARY OF cTHE TREASURY
183
Special agency activities
In accordance with the provisions of the act of March 3, 1927, the
special agency service was reorganized as a division of the Bureau
of Customs, the offices of director and assistant director being abolished, and the duties formerly devolving upon those officers being
now performed by a Deputy Commissioner of Customs, assisted by a
staff of eight. All the accounting work formerly done in this division is now performed in the finance division, Bureau of Customs,
resulting in a reduction of expenses. The number of field districts
was reduced from 17 to 9, each being under the immediate control
of a supervising agent, with enlarged powers, who is required to
visit every suboffice in his district at least once every 90 days. These
changes result in simplified procedure, elimination of duplication
of work, more intensive supervision, economy of administration, and
more efficient methods and better results.
Examination of the books, records, and accounts of collectors and
other officers of customs, for the information of the Commissioner
of Customs and the Secretary of the Treasury, was continued systematically by the special agency service. This work is not confined
to a mere check of the financial transactions, but comprises also a
survey of the administration, organization, personnel, operations, and
efficiency of the customs force in each port and district, and as a
result of the reports of the agents engaged on this class of work
administrative officers of the Treasury Department and Customs
Bureau in Washington are able more esffectively to supervise and
harmonize the functioning of the Customs Service.
The financial portion of the appended tabular statement sets forth
the results of the activities of the special agency service so far as
they can be reduced to dollars and cents, and represents the salvage
of revenue lost to the Government in the regular routine of customs
administration, through fraud or other irregularities. It. should
be borne in mind that this record of tangible accomplishments does
not include the increased duties collected in connection with investigations which have cleaned up bad situations and brought about the
entry of merchandise at its proper value. The customs revenue suffers the greatest loss through the undervaluation of merchandise, and
this class of fraud originates abroad in connection with the preparation of the consular invoices used in the entry of merchandise upon
its arrival in the United States. The department, through the Division of Special Agents of the Customs Service, has continued diligently to make inquiries abroad in the ascertainment and verification
of market values for the purpose of checking up invoiced and entered values, this information also being of value in connection with
the " dumping " of merchandise (i. e., sale at less thati its fair vaJlufe).
A dishonest shipper who defrauds t^he customs revenue by under64761—FI 1927
14
184
REPORT ON :^HE FINANCES
stating the value of his merchandise obtains an advantage over the
honest competitor in his own country, and a dishonest importer who
knowingly makes false declarations as to value at the time of entry
acquires an advantageous position through his saving of duty
whereby he is able to drive out of business the honest importer of
the same class of merchandise. The prevention and detection of this
class of fraud is clearly the paramount duty of the Customs Service,
and a substantial proportion of the force of employees in the special
agency service is engaged in this class of w-ork at home and abroad.
The Treasury Department has maintained customs representatives
abroad for more than 40 years for the purpose of securing necessary
information, as provided by law, and these officers have performed
their difficult and delicate duties in this field with commendable tact
and success, their reports being of value to appraising officers and to
customs agents engaged in domestic investigations, and also being
presented as evidence in reappraisement hearings before the customs
court. Incident to the visit of the commissioner to the international
customs conference, Geneva, Switzerland, in June, 1927, a survey was
made by him of the European stiiff of the special agency service, resulting in the augmentation of the force and the bringing of the
business of the offices up to current investigations.
The detail of a customs attache to the foreign-service school of
the Department of State for the instruction of newly appointed
consular officers in customs law and invoice requirements, mentioned
in the report for 1925, has continued. The result of this instruction
has been a measurable improvement of invoicing, and while the saving effected and iadditional revenue collected due to this arrangement
can not be accurately estimated and stated, the aggregate amount
has not been inconsiderable. The Department of State and consular
officers have been cordially cooperating with the Treasury Departnient in this work.
The actual cash recoveries set forth in the tabulation herewith
take no account of vastly increased sums collected on subsequent
importations of similar merchandise, and likewise do not reflect the
deterrent influence on unscrupulous importers resulting from the
operations of this branch of the Customs Service.
During the fiscal year the Customs Information Exchange continued to function as the clearing house for information respecting
market values and classifications for the entire Customs Service.
In this capacity the following work was done:
Number
Number
Number
Number
Number
Number
of
of
of
of
of
of
appraisers' reports of value received
appraisement appeal reports received
advanced value reports received
changes in value circulated—
requests for investigations abroad
antidumping investigations made
:
;
.
15,695
11, 854
13, 557
5,581
2,108
20
SECRETARY OF THE TREASURY
185
Drawback investigations have been broadened in their scope to
include not only processes of manufacture and the sufficiency of
manufacturing records, but also the verification of kinds and quantities of material, whether or not actually manufactured, and whether
or not really used in the actual exported product. Furthermore,
reinvestigations have been instituted to bring up to date all drawback authorizations heretofore issued, to revoke and discontinue
those not being used, and to revoke any which are found to be used
improperly. More intensive supervision and investigation of all
doubtful claims has been assigned to specially qualified agents of long
experience.
Experience has demonstrated that it is desirable to have all
smuggling conspiracies, including liquor smuggling, investigated by
trained customs officers rather than to treat liquor cases separately.
Arrangements accordingly were made during the last month of the
fiscal year to organize in each special agency district a group of
picked men to handle liquor smuggling conspiracies. These groups
are being assembled and assigned to duty as rapidly as available
funds and other conditions will permit.
A new special agency district, comprising territory in the Dominion
of Canada east of the eighty-ninth meridian of longitude, with
headquarters at Montreal, was instituted May 1, under a supervising
agent, the need for this being recognized as urgent.
The statistical summary of special agency activities follows:
Number of ports examined
37
Number of drawback investigations
'.
978
Number of foreign investigations
~ 2,116
Number of arrests
715
Number of convictions
.
378
Number of acquittals
.
.
98
Failures to indict
86
Indictment cases pending
:
325
Number of seizures made —
1,017
Number of seizures appraised
536
Nmnber of seizures released or pending
27
Appraised value of seized merchandise
$1,104,416.98
Proceeds of sale of seized merchandise
_.
125,475. 77
Merchandise entered free but found dutiable
:
112,861.93
Fines imposed by United States courts
^
406,134.50
Fines, penalties, and forfeitures incurred, exclusive of court fines_ 216,184.63
Bail forfeited
41, 750.00
Amount of increased and additional duties collected
683,502.70
Amount deposited in offers of compromise
994,225.40
DISBURSING CLERK
The following is a summary of the work performed by the office
of the disbursing clerk during the fiscal year ended June 30, 1927:
Number
Disbursements:
C h e c k s (salaries, expenses, supplies, etc.)
C a s h (salaries)
C h e c k s (refunding taxes illegally collected)
Total
Collections on a c c o u n t of r e n t s , sales, etc
Vouchers p a i d
Schedules of claims for tax refunds
Appropriations under which disbursements were made.
Amount
254,645
192,000
269,351
$36,774,902. 2315,167, 417,16.
111,622,418.00'
715, 996
162,554,737.39'
. 3,682
208,154
10, 211
444
408,463.36-
The cash payments and the checks for salaries, expenses, supplies,,
etc., cover disbursements for all bureaus and divisions of the Treasury Department in the District of Columbia (except the Bureau of
Engraving and Printing), and a large portion of the salaries and
expenses outside the District of Columbia under the Public Health.
Service, the Supervising Architect's office, the Bureau of Internal
Revenue, the Bureau of Prohibition, the Federal Farm Loan Boards
the Comptroller of the Currency, the Coast Guard, the Secret Service, the Bureau of Customs, and the Public Debt Service (Divisioni
of Loans and Currency).
Collections represent moneys received and accounted for on account of rents of buildings and sites, sales of public property, etc.,.
under various bureaus and offices of the department.
During the year the Comptroller General adopted the procedure
of sending to the disbursing clerk for payment by check, after audit
by the General Accounting Office, claims and demands by common
carriers covering all classes of service—passenger, Pullman, freight,,
and express. Theretofore these claims had been allowed and paidi
by certificate settlement and warrant.
186
BUREAU OF ENGRAVING AND PRINTING
During the fiscal year ended June 30, 1927, the bureau printed and
delivered greater quantities of work than ever before in its history.
Deliveries for the year reached a total of 490,264,868 sheets as compared with the deliveries for the previous year of 482,307,106 sheets,
an increase over the preceding year of 7,957,762 sheets, or 1.65 per
cent. This net increase is accounted for by an increase of 22,397,061
sheets of currency, bonds, notes, certificates, and miscellaneous work,
and a decrease of 14,439,299 sheets of stamps.
The average number of persons employed in 1927 was 5,097, as
compared with 5,173 in 1926, a decrease of 76 persons, or 1.47 per cent.
There was expended during 1927 a total of $10,415,742.42, as compared with $10,483,647.68 in 1926, a decrease of $67,932.26, or 0.65
per cent.
An analysis of the preceding paragraphs will disclose that while
the sheets delivered for 1927 represent an increase over 1926 of 1.65
per cent, the expenditures were decreased 0.65 per cent, and the
personnel was decreased 1.47 per cent.
The bureau had a balance on June 30, 1927, of 27,913,317 sheets of
currency backs, and 20,945,385 sheets of currency backs and faces,
aggregating 48,858,702 sheets, as compared with 34,102,815 sheets of
backs, and 15,328,655 sheets of backs and faces, aggregating 49,431,470
sheets on June 30, 1926, a net decrease of 572,768 sheets. This
decrease is accounted for by a decrease of 6,189,498 sheets of backs
and an increase of 5,616,730 sheets of backs and faces.
A new low record for spoilage was established when the level of
1.96 per cent for all classes of currency was reached. The total
spoilage for the fiscal year 1926 was 3.7 per cent, or a decrease in 1927
under 1926 of 1.74 per cent. The spoilage for 1927 was less than that
for any previous year for which records are available. The following
is a statement of the percentage of spoilage since 1917:
Year
Percentage
Year
1917
1918
1919
1920
1921—
1922
—
1923
1924
1925
1926
1927
-
3. 81
4. 63
6. 48
5. 44
7. 39
6. 63
Percentage
7.11
12. 69
5. 80
3. 70
1. ^6
The reduction in. the amount of spoilage during the past two years
has been accomplished by the salvaging of parts of sheets in the numbering division, a change in the examination of sheets of currency
187
188
REPORT ON THE FINANCES
backs in the examining division, and adequate seasoning of the paper
prior to the various operations through which it passes.
The audit committee of the Division of Public Debt Accounts and
Audit of the Public Debt Service has continued its periodical count
of securities in process. During the past year the committee conducted approximately 100 audits, and has checked every class and
denomination of securities printed in this bureau as well as proof
impressions made in the engraving division.
The planning unit, headed by an investigator detailed from the
Bureau of Efficiency, has, as a result of its constructive study of
methods and procedure, submitted many valuable recommendations
and suggestions, which were adopted and put into operation.
The installation of the rotary presses having been completed on
June 30,1926, all postage stamps of the denomination of 10 cents and
under w^ere printed by this method during the year. This change
reduced the cost of the production of stamps and resulted in a saving
to the Post Office Department of approximately $210,000 for the yea,r.
The overprinting in the surface-printing division of national-bank
currency in one operation and the elimination of the Treasury serial
number was completed and in full operation during the fiscal year
1927. This change reduced the cost of production of national-bank
currency by $45,000.
Reference w^as made in the annual report for the fiscal year 1926 to
the fact that the examination of silver certificates and United States
notes, following the trimming operation had been discontinued. The
discontinuance of this examination was extended during this year to
other denominations of these classes of currency, and also to gold
certificates, and has effected a saving to the bureau of approximately
$60,000.
'
A more economical use of ink, brought about by cleaning out the ink
fountains with much less frequency and the exercise of greater care
in issuing it to the printers, created a considerable saving in the
quantity of ink used.
The installation of automatic feeders on sizing machines was begun
in the early part of this fiscal year, and w^as completed about the
middle of April. Practically all currency is now being sized in
eight-subject sheets and is being automatically fed into the sizing
machines. The reduction in the cost of sizing during the fiscal
year amounts to approximately $19,000, and thereafter it is hoped
that the savings will reach $25,000 a year.
The discontinuance of the use of woolen blanketing on flat-bed
printing presses which was undertaken last year, and which was
referred to in last year's report, w^as carried to a successful conclusion during the present fiscal year. Rubber drilling and tag board
have been substituted for the woolen blanketing, resulting in an
SECRETARY OF THE TREASURY
189
annual saving of approximately $100,000 on a printing program the
size of the one for this fiscal year.
Electrolytic printing plates are noAV being used in printing approximately 75 per cent of United States currency as compared with
50 per cent during the previous year. The cost of producing these
plates is less than that for producing steel plates and their extended
use resulted in plates now being made to take care of the printing
program 20 per cent in excess of that for 1925, with a smaller total
engraving cost than the cost for 1925.
Through a rearrangement of the flow of work and a revision of
related methods and organization, it was possible to secure an in*
crease in the production in the numbering division where all United
States and Federal reserve notes are numbered and sealed. This
change resulted in a decrease in production cost of approximately
$100,000 a year. Readjustment in rates of pay in this and other
divisions, however, absorbed this amount.
During the year platering (pressing) currency in eight-subject
size instead of four-subject size was undertaken. This change is
being gradually made at the present time. A substantial saving
was effected during 1927, but a greater saving will be realized when
the procedure has been made fully eflective.
The installation of a system for a centralized control in the
accounting division over all stock supplies maintained in the various
storerooms, which was referred to in the annual report for last year,
has been completed. Under this system there is maintained an administrative check on quantities of materials ordered and on all
balances maintained in the stock rooms. Periodically a representative of the accounting division verifies by a physical count the
quantities on hand according to the control records and checks these
amounts with the accounts maintained in the stock rooms.
, Extensive changes have been made in the testing laboratory during
the year. The laboratory has been enlarged . and rearranged and
considerable amount of new equipment has been purchased and
installed. A special room has been built in which all classes of
paper are to be tested. For the purpose of maintaining a uniform
temperature to make th^se tests, humidifying apparatus was purchased and installed.
A new method for maintaining control of proof impressions
printed in the engraving division was adopted and put into operation. Copies of schedules of impressions printed are forwarded
each day to the Division of Public Debt Accounts and Audit of the
Public Debt Service, the accounting division, and the. press register
division of this bureau. At the end of the month all proof impressions which are not required in the operation of the engraving
division are verified by representatives of the three offices heretofore
190
REPORT ON T H E FINANCES
mentioned and then delivered to the destruction committee. The
proofs which have been destroyed are then^ checked from the record
of impressions printed, leaving a balance in the division to be
accounted for. At the end of each year the audit committee from
the Division of Public Debt Accounts and Audit makes a check of the
proof impressions on hand in the engraving division and reconciles
the physical count with the records of the three offices concerned.
During the year a number of experiments Avere conducted with
paper as a wiper on rotary and flat-bed plate printing presses instead of cotton rag. Two kinds of paper were used; one a commercial sulphate paper commonly used as toweling, and the other a paper
made from macerated currency and bonds. The results were very
gratifying, and the experiments are being continued in order to
determine the best finish for the paper. The undertaking has every
indication of proving successful.
A comparative statement of receipts and expenditures for the fiscal
years 1926 and 1927 follows:
Year 1927
Detail
Appropriated by Congress:
Salaries
_
_
..
Compensation of employees
.
Plate printing
.
i
Materials and miscellaneous expenses
New machinery and other equipment, 1925-26-.
Reimbursements to appropriations from other bureaus for work completed:
Comnensation of emnlovees
Plate printing
Materials and miscellaneous expenses L .
Total
-.-
Year 1926
$470,000.00 $460,640.00
3,893,000.00 3,826,083. 00
1,916,900.00 1,955,200.00
1,487,600.00 1,496,327.00
112,622. 07
Increase
$9,460.00
66,917.00
1,742,629.11 1,780,831.99
609,435. 82
660,619.62
997,250.31
1,013,730.51
16,480.20
11,033,195.44 11,189,373. 99
92,857.20
Net decrease
Total 2
...
466,083.19
453,184. 02
5,298,613.16 5, 239,065. 05
2,407,050. 08 2,434,684. 32
2, 244,995. 99 2,305,975. 03
50,766. 26.
11,899.17
69,648.11
10,415,742. 42 10,483,674. 68
71,447. 28
.
38,202.88
61,183.80
249,035. 76
27,634.24
60,979. 04
50,766.26
139,379.64
67,932.26
Unexpended balance:
Salaries
Compensation of employees
Plate printing
Materials and miscellaneous expenses
New machinery and other equipment, 1926-26..
Total
Net decrease
$38,300.00
8,827.00
112,522.07
156,178. 55
Expended:
Salaries
Compensation of employees
Plate printing
Materials and miscellaneous expenses
New machinery and other equipment, 1925-26
Net decrease..
Decrease.
_
4, 916. 81
337, 015. 96
19, 285. 74
256, 234. 52
7,355. 98
367, 849. 94
81,135. 30
187,602. 28
61,755. 81
617,453. 02
705, 699. 31
'
68, 632. 24
68,632. 24
2, 439.17
30,833i 99
61,849.66
61,766. 81
156,878.63
88,246. 29
1 An additional amount of $48,520.58, received, from sale of by-products and useless property, was
deposited to the credit of the Treasurer of the United States as miscellaneous receipts.
* Includes, $281,632.42 and $201,861.05 transferred to retirement fund in the fiscal years 1927 and 1926,
respectively.
191
SECRETARY OF THE TREASURY
A comparative statement of deliveries of finished wbrk in the
fiscal years 1926 and 1927 follows:
Sheets
F a c e value
1927
Classes
1927
1926
Currency:
U n i t e d States notes
Silver certificates
Gold certificates
N a t i o n a l - b a n k currency •.
Federal reserve n o t e s . Total
22, 596,000
141,030,000
12,616,000
13,999,949
_ . 37,325,000
•24,075,000
153, 250,000
13,925,000
14, 24.9,996
42, 585,000
$354,900,000
613,000,000
905,960,000
507,015, 540
1, 564,900,000
227, 566,949
248,084,996
3,945, 775,'540
:
B o n d s , notes, a n d certificates:
Pre-war bonds
Liberty bonds..
.".
Treasury bonds.
Treasury notes..
Certificates of i n d e b t e d n e s s
I n s u l a r bonds—
Porto Rican
. .. .
Philippine
Federal farm loan b o n d s .
.
.
Collateral t r u s t d e b e n t u r e s
P h i l i p p i n e t r e a s u r y certificates
..
P h i l i p p i n e national b a n k circulating n o t e s . . .
I n t e r i m certificates for F e d e r a l reserve b a n k s _ . .
I n t e r i m transfer certificates for postal savings b o n d s _
I n t e r i m certificates for P o r t o R i c a n bonds^__
SpecimensTreasury bonds
_.
Treasury notes.. _
Certificates of indebtiedness
Insular b o n d s Porto Rican
Philippine
Total
.
.
Total
.
.
.
7H
Vl
13/^
4
8,400,000
2,950,000
435, 500, 655
269, 200,000
2, 550,000
IH
IH
2
3
2
2,088,493/^
3,117,889M •
32, 500
65,000
7,920,333,415
1,950,000
87, 307, 52014
67, 519
743, 729
7,828,371,758
8, 752,400
74,372,900
139,392,361
31,166H
549, 870
15 750,849,734
3,420,000
56,067,000
4
155,428, 695
25,166?^
435,502^
39^VT)-
4,284
.
242,600,158^5
.
»
..
.
_
5, 745, 696
1, 600
50,100
72, 331
993,595 350, 485
89, 680
2,384, 875
358,015>^
4
.22
5,000
2
10,051,5053^
.
2,450
3,150
1, 042, 295
31,400
1,020,000
17,972,760
890,990,000
1,396,070,000
2,491, 200,000
2,405,500,000
25,000
1,000
1,770
8,128
85,949,185H
51, 556
673,000
225
Total
G r a n d total
28,115^1
3,860
1,007,840
12, 985
308,000
150,000
4,915
182, 416M
485, 633H
256,'525
61, 325
S u i m s , 1927
Stamps:
Customs..
Internal r e v e n u e U n i t e d Rtatfis (inchidps o p i u m )
Philippine
Porto Rican..
Virgin Islands
SpecimensUnited s t a t e s . . .
PostageU n i t e d S t a t e s . __
•_
U n i t e d States surcharged " C a n a l Z o n e "
Philippine
SpecimensUnited s t a t e s . .
Postal savings
_ .
.
.
Miscellaneous:
Checks...
- -.
Drafts
• Warrants
Commissions
Certificates
'.
T r a n s p o r t a t i o n requests
Passports
Liquor p e r m i t s . . . .
^
Other miscellaneous..
SpecimensChecks
T r a n s p o r t a t i o n requests
Liquor permits
Liquor permits, blank sheets..
o t h e r miscellaneous
4,073
208,233M
309,833J^
1,650
45, 750
.
71TV^
3,621
5,344
362,100
228,160,858^f?^ 23, 724,161, 236
6, 747, 812
13,950
49, 780
93,012
1, 283,083
295, 495
33, 722, 685
31,000
244,400
54,127
3 357 283
1, 477,475
2, 321,929H
96,057
14, 392,100
618 821
6
10, 901,123K
482,307, ^6^U 1 490, 264, 867|4fJ
5
63,897,896
192
REPORT ON T H E FINANCES
The following statement shows total deliveries made, total expenses,
and average number of employees engaged by the bureau since 1878:
Fiscal
year—
1878
1879
1880
1881
1882
1883
1884
1885
1886
1887
1888
1889.
1890
1891
1892
1893
1894
1895
1896
1897
1898
1899
1900
1901
1902
Total number
of sheets de- E x p e n d i t u r e s
livered.
13,098,75G
21,394,030
23,438, 798
26,017, 661
31,112,484
33,330,746
30, 205,865
28, 217,706
26, 655,496
32, 652,207
38,040,984
39, 207,164
36, 512,719
46,390,381
52, 508,438
48,853, 528
55, 516,961
70,886,033
85, 050,595
86,174,766
92,979,478
112,161,122
116,909,423
121, 558, 291
139,167,359
$538, 861. 33
814, 077. 01
883,171. 95
901,165. 26
936, 757. 62
1,104,986. 43
977, 301. 85
965,195. 47
763, 207.84
794,477. 90
948,995.83
932,577.78
1, 012,789.18
1,265, 263. 29
1,316, 585.89
1,238,464.36
1,317,389.61
1,439, 265.94
1,469, 359. 70
1,450,611.86
1, 570,598. 46
1,884,441.39
2, Oil, 702.01
• 2,393,494.26
2, 967, 091. 74
Average
number
of employees
•
522
804
905
958
1,011
1,173
1,193
1,133
886
840
895
917
992
1,161
1,358
1,333
1,380
1,427
1,519
1,605
1,623
1,903
1,999
2,364
2, 672
Fiscal
year—
1903
1904
1905
1906
1907
1908
1909
1910
1911
1912
1913
1914.:
1915
1916
1917
1918
1919
1920
1921
1922
1923
1924
1925
1926
1927
Total number
of sheets de-, E x p e n d i t u r e s
livered
Average
number
of e m ployees "
$3,136,477. 73
3,159, 940. 69
3, 292, 217. 06
3, 355,186. 23
3,849, 064. 39
3.841,173. 60
4, 355, 935. 65
4, 375,365. 57
4,180, 284. 20
4, 319, 246. 57
4,449, 726. 22
4,372.922. 81
5,039, 204.80
5,066, 048. 72
6, 324,118. 70
9,086,303.90
11,571,186.10
11,854,171.45
13,965, 233. 57
10,812,756.38
10,106,320.28
9,401,925.68
10,041,457.46
10,4.83, 674. 68
10,415, 742. 42
2,850
2,928
3,002
3,084
3,437
3,572
3,977
3,964
3,814
3,899
3,920
3,932
4,119
4,048
.4, 221
6, 214
7, 508
6,912
7,097
6,416
5,535
4,980
5,098
5,173
6,097
155, 743, 691
159,918,061
165, 354, 514
180, 289, 766
201,123,528
210, 589,197
239, 405, 723
252,710,864
262,806,113
262, 434, 739
287,192,192
280.272,828
307, 634,334
300,711, 800
343,345,005
396,790,285
447,464,105
402,711,759
438,694,824
416,820,113
411, 546,429
431,868, 658
464,869,695
482,307,106
490, 264,868
COMMITTEE ON ENROLLMENT AND DISBARMENT OF ATTORNEYS
AND AGENTS
The committee on enrollment and disbarment, created by Department Circular No. 230 dated February 15, 1921, is responsible for
the examination of applicants wishing to practice as attorneys and
agents before the Treasury Department, and for the discipline of
those attorneys and agents who violate the regulations. The conclusions of this committee in each case are submitted as recommendations to the Secretary of the Treasury.
Approximately 20,000 attorneys and agents are now enrolled and
engaged in active practice before the Treasury Department. Nineteen thousand, nine hundred and twenty-five applicants have been
enrolled since the organization of the committee in 1921, and applications are being received at the rate of several thousand each year.
Some 8,600 persons were enrolled prior to the organization of the
committee, and many of them are now in active practice.
During the year, 2,557 applications for admission to practice as
attorneys or agents w^ere approved, and 40 were disapproved. In
addition, 95 attorneys and agents Avho were enrolled prior to August
15, 1923, furnished affidavits relative to contingent fees and were
therefore enrolled to continue in practice before the department.
Department Circular No. 230, containing laws and regulations
governing the recognition of attorneys, agents and other persons
representing claimants and others before the Treasury Department
and offices thereof, was revised and reissued July 1, 1927. (Exhibit
43, p. 381.) The principal changes in the revised regulations are
(1) practitioners not attorneys at law are prohibited from preparing
legal instruments affecting or transferring title to property or advising clients as to the sufficiency thereof in connection with Federal
tax matters; (2) requiring that all affidavits, briefs, or statements
of fact filed by a practitioner shall have thereon a statement by the
practitioner showing who'prepared the same and whether cOr not he
knows of his own knowledge that the statements of fact contained
therein are true; (3) the requirement as to filing affidavits relative
to contingent fees is discontinued but the department may at any
time require an attorney or agent to make full disclosure as to how
he procured employment in a particular case and the arrangement
regarding compensation; (4) the causes for rejection of an applicant
for enrollment or for discipline of an enrolled person are more fully
set forth. The following matters, among others, are specifically prohibited in case of any practitioner: (a) Publishing a so-called " tax
193
194
REPORT ON THE FINANCES
service" in connection with his practice before the department; (b)
holding himself out as an attorney at law when not a membei- of
the bar, or as a certified public accountant when not the holder of a
certificate of certified public accountant from a legally constituted
board; {c) sharing fees with an unenrolled person who is not engaged in the practice of law or accountancy; {d) making a false
financial statement for a person, firm, or corporation and certifying
that such statement is true and correct.
The extensive interests involved in tax matters and the large
fees obtainable have attracted some disreputable practitioners and
offered a great temptation for them to adopt unethical and unprofessional methods in procuring employment in tax cases and to
perpetrate frauds upon the Government in their practice, resulting in numerous complaints charging such enrolled attorneys
or agents with violations of the laws or regulations governing practice
before the department. All such complaints are investigated by the
Committee on Enrollment and Disbarment, and whenever deemed
necessary or advisable action has been taken looking to the discipline
of the enrolled attorney or agent charged with such violation. There
were 95 cases unsettled on June 30, 1926, and in addition formal
complaints were filed against 77 individuals during the year, making
a total of 172 complaints before the committee. The answers of
respondents to formal complaints were considered by the committee,
and formal hearings were held when necessary. In each case the
committee reported its findings of fact and recommendations to the
Secretary of the Treasury for his approval, disapproval, or modification. In 19 cases the respondent's answer was accepted as satisfactory without a formal hearing. Sixty-nine formal hearings were
held. In 24 of these qases the complaint was found not proven. In
45 cases the complaint was found proven in whole or in part aiid
the Secretary imposed penalties as follows: 11 were disbarred froiti
further practice before the department, 5 were suspended from practice for various periods, and 28 were reprimanded. One agent was
permitted to resign with prejudice. There were 84 cases pending
on June 30, 1927.
It is the policy of this committee, when deemed advisable, tio
give an attorney or agent opportunity to show cause why formal
disbarment proceedings should not be instituted against him, 15 sucb
cases occurring during the year.
BUREAU OF INTERNAL REVENUE
General
Internal revenue receipts,—Eeceipts from internal revenue taxes
during the fiscal year 1927, compared with 1926, were as follows:
Sources
Income tax: ••
Corporation.
Individual...
Total.
Estates of decedents
Gifts of property
Distilled spirits and alcoholic beverages
Receipts under national prohibition
Tobacco manufactures, etc
.1
Oleomargarine, adulterated and process or renovated butter, filled cheese, and mixed flour
Bonds ofindebtedness, capital stock issues, capital
stock transfers, sales of produce for future delivery, playing cards, etc
Excise taxes, manufacturers', including automobiles, etc.
Other excise taxes (sees. 600, 602, and 604, revenue
flact of 1924)...
' Corporations, on capital stock
Brokers and other occupational taxes (sec. 701,
pars. 1-8, revenue act of 1924)
Use of yachts, pleasure boats, etc
Admissions to theaters and other places of amusement, and club dues
Narcotics: Opium, coca leaves, etc., including spep. cial taxes of importers, manufacturers, and dealers.
Intemal revenue collected through customs offices..
Other miscellaneous receipts <
Total miscellaneous taxes
Total receipts from all sources».
1926
Increase (+)
or decrease (—)
$1,308,012, 632.90 !$1,094,979, 734.17 '+$213,032,798.73
879,124,407.16
911,939,910.82
+32.816, 603.66
,2, 219,952,443.72
1,974,104,141. 33
+245,848, 302.39
100,339,851.96
21,195, 651.96
502,876.72
376,170,205.04
116,041, 036.09
3,175,338.73
26,452,028. 63
416,197. 63
370, 666,438.87
-16, 701,184.13
-3,175,338.73
^5,266,476.67
+86, 679.09
+5,503,766.17
3,186,297.13
3,092,540.42
+92,766.71
37,345,651.43
54.014, 239.36
-16,668,687.93
66,829,031.21
138, 260, 154. 53
-71,431,123.32
2 8,970,230.93
11,938, 011.35
97,385, 755. 61
-11,938,011.36.
-88,415, 624.68
3 7,966.72
4,323, 653.46
223, 324. 75
-4,323, 653.46
-215, 358.03
28,376,667.48
34,054, 516.06
-6,677,867.57
797,825.32
40,302.99
1,969,337.30
646,730,686.19
981, 739.07
55, 065.43
815, 711.88
-183, 913. 76
-14,762.44
+1,153,625.42
861,895,750.86
-216,165.064.67
2,866,683,129.91
2,835,999,892.19
+29. 683,237.72
I Includes income tax on Alaska railroads (act of July 18, 1914) amounting to $18,827.34 for 1927 and
$16,784.13 for 1926.
« Tax due prior to July 1,1926.
3 Tax on foreign-built yachts and boats only, purchased after July 1,1926.
< Includes $1,915,746.36 for 1927 and $803,651.69 for 1926, delinquent taxes collected under repealed laws.
* The figures concerning internal revenue receipts as given in this statement difi'er from such figures
carried in other Treasury statements showing the financial condition of the Government, because the
former represent collections by intemal revenue officers throughout the country, including deposits by
postmasters of amounts received from sale of internal revenue stamps and deposits of intemal revenue
collected through customs offices, while the latter represent the deposits of these collections in the Treasury or depositaries during the fiscal year concerned, the differences being due to the fact that some of the
collections in the latter part of the fiscal year can not be deposited, or are not reported to the Treasury
as deposited until after June 30, thus carrying them into the following fiscal year as recorded in the statements showing the condition of the Treasury.
Refunds.—In the foregoing statement of receipts no deductions
have been made on account of refunds, which during the fiscal year
1927 were made from the several appropriations as follows:
195
196
REPORT ON THE FINANCES
Befunding taxes illegaUy coUected :
1925 and prior years
1926 and prior years—
1
1927 and prior years
1928 and prior years
Net total
i
$63,528.0^
654, 691.3»
34,751,602.80
68,388,865.56
103, 858, 687. 78-
The interest allowed on claims for refunds under provisions of
the revenue acts of 1921, 1924, and 1926, amounting to $21,243,900.53,
is included in the above statement. I n addition to the foregoing
statement of refunds, three schedules containing three claims,
amounting to $11,727.03, were paid from funds provided under the
act of July 27, 1912, which included interest in the amount of
$7,055.96. There were also 1,159 schedules containing 25,480 claims,,
amounting to $3,777,524.15, which were paid from funds provided
under the appropriation for refunding automobile and cigar taxes^
1926 and 1927.
Cost of administration.—The expenditures in administering the
internal revenue tax laws for the fiscal year 1927 were $32,967,764.17^
not including expenditures for refunding internal revenue collections and taxes illegally collected, which are in no sense administrative expenses. The aggregate receipts of internal revenue were
$2,865,683,129.91, which makes the cost of operation, for the fiscal
year 1927, $1.15 for each $100 collected, compared with $1.23 for each
$100 collected for the fiscal year 1926, or a reduction of 6.5 per cent.
Income Tax Unit
The total number of income and excess-profits tax returns audited
during the year was 2,482,021 (1,772,137 individual and partnership
and 709,894 corporation), compared with the production of 2,155,933for the previous fiscal year. This production exceeded that of the
next highest year, 1924, by 152,830 returns.
While keeping current with new work received, particular attention was directed to the completion of the audit of returns for ^.^ior
years. Notwithstanding a large number of such returns were reaudited, as the result of claims filed or under decision by the Board
of Tax Appeals or the United States courts, large reductions were
made in the returns outstanding for the years 1917 to 1924, inclusive.
The net reduction effected in the number of returns outstanding for
all years was 268,215. On June 30, 1927, exclusive of the returns
in the 60-day file, 474,535 returns were under consideration, compared
with 742,740 returns unaudited on June 30, 1926.
Revenue agents'^ service.—The number of reports of field examinations submitted was 688,816 for 1927, compared with 574,246 for
1926, an increase of 20 per cent. The number of returns sent to the
SECRETARY OF THE TREASURY
197
field for examination was 685,715 compared with 830,498 for the
previous fiscal year.
Kecommendations were made by agents conducting examinations
for the closing of 155,227 returns by assessment of additional tax,
of 51,253 returns through the issuance of certificates of overassessment, and of 432,336 returns without change in tax liability.
Adjustment of claims.—The number of claims scheduled as adjusteci during the year was 66,755. I n addition 52,262 certificates
of overassessment were scheduled in cases in which no claims were
filed. Of the claims scheduled, 40,733 were allowed. The total
amount involved, including overassessments in cases in which no
claims were filed, was $303,266,847.42, of which amount $82,614,487.25 was refunded and $221,650,060.17 abated or credited. The
amount of interest paid on amounts refunded or credited was
$21,243,900.53. The number of claims rejected was 25,981 involving
$520,768,614.82.
The number of claims received was 47,808, involving $462,896,449.48, compared with 72,195, involving $1,008,290,704.43, for the
previous year. The number of claims on hand at the end of the
fiscal year 1927 was 17,462, compared with 29,234 at the close of the
fiscal year 1926, or a decrease of 11,772, This reduction in unadjusted
claims is further evidenced by the progress of the Income Tax Unit
in bringing its work to a current basis. The balance of claims outstanding, 17,462, is the lowest the unit has ever had on hand and was
obtained by adjustment of claims as quickly as possible after their
receipts.
Additional revenue.—During the year $276,096,454.33 was assessed
in additional taxes. Included in this sum is an amount of $32,704,156.33, which was assessed without a preliminary hearing before the
bureau, it being felt that collection was in jeopardy. This, however,
did not affect the taxpayer's right of appeal to the Board of Tax
Appeals. During the previous year $148,867,165.26 was entered
under jeopardy assessments.
The great decrease in assessments of this nature during the year
was made possible by provisions contained in sections 274, 277, and
278 of the revenue act of 1926, which allows the extension of the
statute of limitations by the mailing of a 60-day letter to the taxpayer within the statutory period to (1) 120 days from the date of
the 60-day letter if no appeal is filed with the Board of Tax Appeals,
or (2) within 60 days after the final decision of the board where an
appeal has been filed.
Further revenue in the amount of $34,703,663.24 was made possible
of immediate collection through the rejection of claims in abatement
and claims for credit. .
.
P^^OTm^Z.-^Improvements in organization and procedure adopted
during the year permitted the Income Tax Unit materially to reduce
198
REPORT ON THE FINANCES
its force. A reduction of 734 w^as made in the number in the
Washington office. On June 30, 1927, the technical personnel in
Washington was 1,200, anci the number of clerks 1,430, a total of
2,6,30, while on June 30,1926, the technical employees numbered 1,48,9
and the clerical force 1,875.
The field force was increased by 329 technical and clerical employees. There were assigned to the field on June 30, 1927, 2,732
revenue agents and 715 clerks, or a total of 3,447, while at the close
of the previous year there were 2,442 revenue agents and 629 clerks,
or a total of 3,071. Of the additional personnel assigned to the field
146 auditors- and 62 clerks w^ere transferred from the Washington
office.
The net reduction in personnel of 358 employees results in a direct
annual saving in salaries of approximately $450,000.
Miscellaneous Tax Unit
The Miscellaneous Tax Unit is charged with the administration
of all taxes other than income tax. The unit is composed of four
divisions—namely, capital stock tax division (for completion of the
work in connection with the capital stock tax, repeal effective July
1, 1926), the estate tax division, miscellaneous division, tobacco division, and appeals and review section, which is attached to the office
of the deputy commissioner in charge.
Capital stock tax.—Collection of the capital stock tax for the fiscal
year 1927 amounted to $8,970,230.93, compared with $97,385,755.61
for the fiscal year 1926, a decrease of $88,415,524.68. As the capital
stock tax was repealed effective. July 1, 1926, no returns were due
to be filed for the fiscal year 1927.
During the year the personnel was reduced from 86 employees,
with a payo roll of, $169,320, to 29 employees, with a pay roll of
$65,900, a net reduction of $103,420.
Estate tax division.—The estate tax collections aggregated $100,339,851.96, compared with $116,041,036.09 for the fiscal year 1926,
a decrease of $15,701,184.13. The number of estate tax returns
audited was 16,087, compared with 13,912 for the previous year.
There were 895 cases awaiting audit at the close of the fiscal year.
On July 1, 1926, the number of refund claims on hand was 304,
involving $10,459,350.20. There were received during the year 3,460
refund claims, involving $37,287,225.93. The number of refund
claims allowed was 2,810, amounting to $9,304,269.87, including
$502,750.41 interest. The number of refund claims rejected was 567,
involving $25,594,532.67. There were 387 refund claims on hand at
the end of the fiscal year, amounting to $13,350,524.
The number of abatement claims on hand at the beginning of the
fiscal year was 16, involving $293,592.43. The number received dur
SECRETARY OF THE TREASURY
199
ing the year was 398, involving $4,916,222.99, and the number allowed
was 401, the abatements amounting to $5,034,071.12. The number of
abatement claims rejected was 12, involving $171,261.40. There was
one claim for abatement on hand at the end of the fiscal year amounting to $4,482.90.
There w^ere pending at the beginning of the year 107 protest letters,
and during the year 2,054 such letters Avere received. There were
1,794 protest letters disposed of, involving $34,636,661.97, leaving 367
on hand at the close of the fiscal year.
Miscellaneous taxes.—Receipts from admissions, dues, and excise
taxes for the fiscal year 1927 amounted to $95,205,688.69, compared
with $184,252,680.93 for 1926. This decrease is due to changes in tax
legislation provided by the revenue act of 1926. Collections from
miscellaneous stamp and special taxes were $40,538,815.28, compared
with $61,653,757.99 for 1926. Eeceipts under prohibition, narcotic,
and related laws during the last three months of the fiscal year 1927
were $5,040,853.55,
A total of $210,984,285.90, representing 209,815 items, was entered
on the miscellaneous assessment lists approved by the commissioner.
These lists, on which are entered all assessments of taxes administered
by the unit, carried additional assessments amounting to $25,429,294.02 as a result of field investigations and office audit. The amount
of interest paid and assessed aggregated $1,087,071.30.
There w^ere 15,305 offers in compromise, amounting to $527,487.69,
pending in the Miscellaneous Tax Unit on July 1, 1926. There were
30,456 received during the year and 40,022 disposed of, leaving 5,739
pn hand June 30, 1927. Of the 40,022 offers handled, 38,896 were
accepted for amounts aggregating $2,009,805.63.
Tobacco taxes.—Collections from the tobacco taxes were $376,170,205.04, compared with $370,666,438.87 for the fiscal year 1926—an
increase of $5,503,766.17. This increase resulted from the unparalleled receipts from taxes on small cigarettes, which amounted to
$278,928,561,81, an increase of $24,103,753.62 compared with the preceding year, and which represents 74.15 per cent of the total tobacco
collections. The following seven States produced $343,338,781.73, or
91.27 per cent of the total tobacco collections: North Carolina,
$185,941,504.24; Virginia, $57,775,134.62; New York, $26,919,774.26;
New Jersey, $19,956,537.18; Pennsylvania, $17,956,264.47; California,
$12,511,121.61; Ohio, $12,061,905.69; Missouri, $10,216,539.66.
Accounts and CoUections Unit
The Accounts and Collections Unit, which has to do with the
work of the 64 collection districts, is divided into three divisions—
collection accounting division, collectors' personnel, equipment, and
space division, and disbursement accounting division.
64761—FI 1927
15
200
REPORT ON THE FINANCES
Collection accounting division.—There were filed in the various
collectors' offices during the fiscal year 1927 a total of 5,249,543 tax
returns, of which 4,895,071 represented income tax returns of various
classes. During the fiscal year 1926 a total of 7,015,008 tax returns
was filed in collectors' offices, of w^hich 5,185,593 were income tax
returns of all classes. The enactment of the revenue act of 1926
materially reduced the number of taxpayers required to file miscellaneous tax returns.
The Accounts and Collections Unit and Income Tax Unit, working
in cooperation, prepared instructions with reference to preliminary
examination of income tax returns in collectors' offices. All individual returns filed on form 1040 and all corporation returns filed
during the 1927 filing period were examined in collectors' offices for
mathematical errors. The returns were then review^ed by revenue
agents, and a large number of cases were definitely closed within a
few weeks after the returns were filed. As the result of this procedure, taxpayers were notified promptly of corrections in their
returns, and a «jtbstantial amount of revenue was produced.
A total of 7,615,505,838 revenue stamps, valued at $439,166,373.74,
was issued to collectors of internal revenue.
The field work was reorganized. During the year 1 collector's
office, 11 division offices, and 1 stamp office were discontinued, resulting in an annual saving of $60,278 in personnel cost. At the close of
the fiscal year there were 64 collectors' offices, 32 division offices, and
47 stamp offices, 18 of which were operated in conjunction with division offices.
The average revenue production of a zone deputy is approximately
$40,000 a year. Using this figure as a basis, it is expected that as a
result of the discontinuance of the 11 division offices and with the
assignment of the division chiefs to productive work there will be a
substantial increase in the amount of revenue produced, wdthout
additional cost to the Government.
Special attention was given by collector's field forces to the serving
of warrants for distraint, the verification of information returns, the
investigation of returns filed indicating additional tax due, and the
conduct of delinquent drives. I n 1927, 85,097 w^arrants for distraint w^ere served, which resulted in the collection of $54,047,883.
compared with 127,571 w^arrants served and $50,249,181 collected for
the fiscal year 1926. An average of 1,836 deputy collectors made a
total of 367,658 revenue-producing investigations, including the serving of warrants for distraint, compared with 492,367 revenue-produc
ing investigations, including the serving of warrants for distraint,
made by an average of 2,109 deputy collectors for the fiscal 3^ear
1926. The total amount collected and reported for assessment by
deputy collectors during the fiscal year w-as $78,616,879, whereas the
SECRETARY OF THE TREASURY
201
total collections and assessments for the previous fiscal year aggregated $78,500,438. The average number of investigations made per
deputy and the average amount of tax collected and reported for
assessment for the fiscaL year were 200 and $42,820, respectively,
while the average number of investigations made per deputy and
the average amount of tax collected and reported for assessment for
the fiscal year 1926 were 233 and $37,222, respectively.
The special force of internal revenue .agents working under the
direction of the Accounts and Collections Unit collected and reported
for assessment $4,791,609, an average of $116,869 per agent.
The total collected and reported for assessment as a result of the
activities of both the force of field deputy collectors working under
the collectors and the special squads working under supervisors of
accounts and collections amounted to $83,408,488, compared with
$89,204,603 for the fiscal year 1926.
Collectors^ personnel, equipment, and space division.—At the close
of the fiscal year 1927 there was a total authori2:ed force, including collectors, of 5,294 employees, at an annual salary rate of
$10,351,200. During the year there was a net reduction of 721 in
the total number of positions and $1,040,560 in the annual saUiry
rate, or, in other words, the reduction amounted to approximately 11.9
per cent of the total authorized force and 9.1 per cent of the total
annual rate.
A total of $88,520.17 was expended for the employment of temporary help in collectors' offices, compared with $47,688.34 expended
for this purpose during the preceding fiscal year. This increase w^as
due in a large measure to a change in procedure requiring the preliminary examination of income tax returns in collectors' offices and
also to a special drive conducted in the district of Florida to collect
delinquent taxes on real-estate transfers.
On February 1, 1927, the fourth internal revenue collection district
of Michigan, with headquarters at Grand Rapids, was consolidated
with the first Michigan collection district, with headquarters at
Detroit. Much overhead expense has been saved by this action.
From reports received there has been no complaint on the pai t of
taxpaA^ers residing in the former fourth district of the service
rendered under the new arrangement.
Disbursement accounting division.—The disbursement accounting
division administratively examined and recorded 1,443 monthly
accounts of collectors of internal revenue, revenue agents in charge,,
and Federal prohibition administrators, together with 104,206 supporting vouchers, in addition to which 8,929 expense vouchers of
employees and 10,782 vouchers covering transportation and freight^
miscellaneous expenses, special employees, informers, etc., were
audited and passed to the disbursing clerk of the Treasury Depart*
202
REPORT ON THE FINANCES
ment and General Accounting Office for payment. The monthly
pay rolls of the bureau were examined and audited.
With the removal of the prohibition enforcement accounts from
the Bureau, of Internal Revenue to the Bureau of Prohibition April
1, 1927, there has been a reduction in the volume of work and in the
personnel of the disbursement accounting division.
General counsel
The work of the general counsel's office, which embraces the legal
phases of the whole field of Federal taxation, is divided into six
divisions—appeals, interpretative I , interpretative I I , penal, civil,
and administrative.
Appeals division.—The work of the appeals division during the
fiscal year consisted in defending proposed assessments of deficiencies from which taxpayers have appealed to the Board of Tax
Appeals and, in cooperation with the Department of Justice, handling appeals in the circuit courts of appeals or the Court of Appeals
of the District of Columbia from decisions of the board. Special
attention was given to settlement of cases without trials. I n this
regard the division was assisted materially by the 60-day conference
section of the Income Tax Unit. The numbe^^ of cases closed during
the year upon stipulations without trials totaled 2,682.
Thirty-one field trips were made by divisions of the board during
the year. Hearings were held at Portland, Me., St. Paul, Minn.,
Denver, Colo., Des Moines, Iowa, Atlanta, Ga., New Orleans, La.,
New York, N. Y., F o r t Worth, Galveston, and Austin, Tex., Oklahoma City and Tulsa, Okla., Columbus and Cleveland, Ohio, Miami
and Jacksonville, Fla., Kansas City and St. Louis, Mo., Boston,
Mass., Memphis, Tenn., Portland, Oreg., San Francisco and Los
Angeles, Calif., Detroit, Mich., Indianapolis, Ind., Seattle and Spokane, Wash., and Salt Lake City, Utah. From one to five attorneys
from the appeals division accompanied each division of the board
to represent the commissioner at the field hearings. The field hearings were carried on without interruption to the regularly scheduled
hearings before the board and its divisions at Washington.
A special advisory committee was established in the commissioner's office, effective July 1, 1927, to consider settlements of cases
appealed to the board. I t is anticipated that the work of the committee will be effective in bringing about a greater number of settlements of cases without trials within the next year.
Interpretative division I.—This division considers questions relating to the income and excess-profits tax provisions of the several!
revenue acts, as well as those questions of procedure (particularly
in connection with liens and distraints) which arise in connection
SECRETARY OF THE TREASURY
203
with the adnainistration of the internal revenue laws. It also passes
finally upon all matter proposed for publication in the Internal
Revenue Bulletin.
The/ assigpment, of members of the, division to several of the sectiQias of the InconpLe Tax Unit cG>ntinues. This practice has proved
tp be of great, benefit, in the a.udit ^ork of those sections of the In(jprne Tax Unit to which members haye been assigned, as there is at
hand a representative pf the general counsel's office to advise
promptly in ii^iatters cpvered by- positive precedent. Where there is
doubt as to the law in a^ particular case or where a new proposition
pf la:w is advanced, the, questipn is submitted to this office for formal
decision.
Interpretative division^ II.—The work of this division embraces (1)
interpretation of the, prpvisipns of law relating to the following
taxes^-admissions and dues, beyerage, capital stock, gift, estate, excise,, insurance,, legacy, occupatipnal, oleoniargarine special stamp,
telegraph and telephone, tobacco, transportation; (2) preparing and
reviewing regulatipns, treasury decisipns, informal memoranda, and
letters relating tp such taxes; (3) reviewing ancj approving claims
for refund of all taxes;, including income and excess profits taxes,
involving a net refund of $50,000 or inore, and all cases involying
a proposed allpTYanee, including interest, for any year or years
aggregating $75,000, where there is a net refund in any amount;
(4) preparing statements of fact to be submitted to the Joint Committee on Internal Revenue Taxation as required by the first
deficiency act, fiscal yea^r 1927, approved Feb^ru^ry 28, 1927, where
%, claim has been allowed in excess of $75,,00;0; (5) assisting in the
drafting of contemplated revenue, legislation relating to the above
t:aixes; (6) supervising the disposition of real estate acquired by the
Gpyernment under the provisipns of internal reyenue laws and, with
the, approval of the Secretary, authorizing the sale at public vendue
of th^ interest pf the United States in such realty; (7) disppsing
oJ deficiency protests in income and estate tax csbs^es pending June 30,
1926. " In March, 1927, the work of preparing statements of fact to
be submitted to the J[oint Cpmmittee pn Interna^l Revenue Taxatipn,
required by the first deficienpy act, fiscal year 19>27, was given to this
divisipn.
During the year, the divisipn conducted 134 hearings, and from
March 1 tp the e^d of the fispal year prepared statements of fact to
b^^ s;ii-bmitted tp the Joint Corunaittee on Internal Revenue Ta^xatipn
in 188 cases. The followirig regulatipns v^ere considered and reyised;
Rjegulations 59 and Regulations 43, Part IL
Pe^al division.—Cases handled by the penal division are classified
as (1) interpretative and (2) law cases. These are subdivided so
that under each classification there are income tax cases and mis
204
REPORT ON THE FINANCES
cellaneous tax cases, the latter consisting of the large variety of cases
other than those involving income taxes.
At the beginning of the fiscal year there were pending in the penal
division 767 cases. During the year there were received 1,076 new
cases, compared, with a total of 639 cases received during the previous fiscal year. During the year ended June 30, 1927,-there was
a total of 1,843 cases under consideration, while 1,164 cases were
disposed of, leaving 679 cases pending June 30, 1927. There w^as,
therefore, a net decrease in cases pending at the close of the year of
88. Special effort w^as made finally to dispose of the older cases,
not only those wdiich had been in the division long.est but likewise
those involving the earlier tax years. This effort has been quite
successful and a considerable number of the older cases have now
been closed. How^ever, certain cases of this character, such as those
in litigation, can not finally be disposed of until the litigation ends.
An additional attorney attached to the penal division was assigned
to the branch of the general counsel's office in New York City so
that for the greater part of the year there have been two attorneys
in the New York office. Also an attorney was sent from the Washington office to the branch of the general counsel in Chicago as the
general counsel's representative in that .city and an attorney from
the Washington office also was assigned to represent the general
counsel in the Rocky Mountain and Pacific Coast States with headquarters at San Francisco.
Civil division.—The civil division, in cooperation with the Department of Justice and the United States attorneys' offices, handles all
civil internal revenue cases pending in the Federal courts, These
cases include the prosecutions of suits by the United States to recover
unpaid taxes, and the defense of suits brought by taxpayers against
collectors of internal revenue or the United States to recover taxes
alleged to have been erroneously, assessed and collected. While the
United States attorneys are charged with the responsibility for the
conduct of these cases, the attorneys of the civil division assemble
the evidence, prepare and brief the cases for trial both as to the
facts and the law, and an attorney of the civil division is usually
present to assist at the trial. In most instances the trial of the case,
at the suggestion of the United States attorney, is conducted by the
attorney of the civil division. Where cases are appealed the attorneys
of the civil division assist in preparing the record, and a brief
for the appellate court is forwarded to the United States attorney
for printing and filing. Cases in appellate courts are frequently
argued by the attorneys of the civil division. I n appeals to the Supreme Court or petitions for certiorari the petition is prepared in
the civil division and forwarded to the Department of Justice, and a
SECRETARY OF THE TREASURY
205
brief is prepared for the use of the Solicitor General in the argument
of the case.
The principal centers of litigation with reference to the number of
cases pending and the amounts involved are New York, Philadelphia,
Boston, Chicago, Pittsburgh, and San Francisco.
The total number of civil internal revenue tax cases decided by the
Federal courts during the fiscal year 1927 was 306.
The number of civil internal revenue tax cases pending in the Federal courts at the end of the fiscal year 1927 was 2,808, compared with
2,400 on July 1, 1926. During the fiscal year 1927, 1,530 new civil
cases were received and 1,187 civil cases were closed.
MINT BUREAU
Institutions of the mint service
General.—All of the 11 mint service institutions were in operation
during the fiscal year ended June 30, 1927—coinage mints at JPhiladelphia, San Francisco, and Denver; assay office at New York, which
makes large sales of fine gold bars; mints at New Orleans and Carson
City conducted as assay offices; and assay offices at Boise, Helena,
Deadwood, Seattle, and Salt Lake City. The seven last-named
institutions are, in effect, bullion-purchasing agencies for the large
institutions and also serve the public by making assays of ores and
bullion. Electrolytic refineries are operated at the New York,
Denver, and San Francisco institutions.
Deadwood assay office closed.—The Deadwood, S. Dak., assay
office was closed June 30, 1927, the Congress having discontinued the
appropriations for its support. This office was established 30 years
ago under the acts of J u n e 11,1896, and February 19,1897, its natural
and exclusive territory being the Black Hills region of South Dakota.
Its receipts of bullion were never large, except during a period of
about three years (1910-1913) when the Homestake Co., the only
large producer in that territory, was induced to deposit its product
at the Deadwood office; the yearly receipts were then from $6,000,000
to $8,000,000 in value. During five years the deposits amounted to
about $1,000,000 annually, but during most of the life of the office
the values received varied from a few hundred thousand dollars to
a very few thousand dollars in recent years. Only 14 bullion deposits, worth $2,936.52, were received during its last two years of
operation. The principal work of the office during recent years
has been the making of assays of samples of ores for prospectors
and others.
Gold omd silver receipts and tra/nsfers
Gold operations.—Gold acquired by the Government at the several
mint service institutions during the fiscal year 1927 totaled $224,246,630.64. United States gold coin received by the mints for recoinage amounted to $2,704,940.81; transfers of gold between mint
offices totaled $11,821,953.15; the aggregate amount of gold received by the several mint service institutions during the fiscal 3^ear
206
SECRETARY OF THE TREASURY
207
1927 was $238,773,524.60, which compares with $208,493,228.17 during the prior year.
Silver operations,—Receipts of purchased silver during the fiscal
year 1927 totaled 6,747,524.27 fine ounces, the average cost of which
was 59.9 cents per ounce, total cost being $4,041,552.81. Silver received in exchange for bars bearing the Government stamp totaled
992,969.28 fine ounces; United States silver coin received for recoinage totaled 2,630,930.19 fine ounces, the recoinage value being $3,637,021.17; silver deposited in trust by other governments totaled 285,961.04 fine ounces; aiid transfers between mint service offices totaled
969,555.07 fine ounces, making the aggregate quantity of silver received by the several mint service offices during the fiscal year
11,626,939.85 fine ounces, as compared with 13,016,507.07 ounces during the prior year.
Silver dollars remaining to be coined from bullion purchased
under the Pittman Act amounted to about 2,000,000.
The New York market price of silver during the fiscal year ended
June 30, 1927, averaged $0.57672; the lowest price was $0.518125 on
October 19, 1926, and the highest price $0.660625 on July 2 and 3,
1926.
Refineries
The New York and San Francisco refineries were in operation
throughout the year, as usual. The Denver refinery operated only
during the last half of the year, on silver bullion only. The quantity of gold and silver in unrefined bullion on hand was reduced
during the year by about 45 tons, but there is still on hand about
437 tons, approximately 54 per cent of which is gold.
Production of electrolytically refined gold during the fiscal year
ended J u n e 30, 1927, totaled 2,752,093 fine ounces (94.35 tons), as
compared with 3,272,689 fine ounces (112.2 tons) during the prior
fiscal year, and electrolytically refined silver totaled 3,690,118 fine
ounces (126.5 tons), as compared with 4,977,646 fine ounces (170.7
tons) during prior year.
Coinage
RegulctfT dorrtestic coinage,—The domestic coinage executed by the
United States mints during the fiscal year 1927 was greater in value
than that of the priol* fiscal year by about $14,000,000, although the
number of pieces was approximately 61,000,000 fewer. The principal
factors in this result were about $20,000,000 more gpld coin aiid
68,000,000 fewer pieces of minor coin. Th^ total domestic coinage
was 310,960,019 pieces, with value $102,653,129.50, as cPiiipared with
the prior year's 372,171,282 pieces, valued at $88,614,418. The 1927
total consisted of gold, $83,955,000; silver dollars, $4,456,900; sub-
208
REPORT ON T H E FINANCES
sidiary silver, $9,572,659.50; nickel, $2,910,100; and bronze, $1,758,470. As is usual, the Philadelphia Mint made most of the minor and
subsidiary silver coin, as w^ell as some silver dollars and about
$26,000,000 in gold. The San Francisco Mint was principally engaged upon gold coin and silver dollars, while the Denver Mint made
silver dollars and small coin.
Comm^ennorative coins.—Coins of special design, authorized by
Congress, were issued during the fiscal year 1927 as follows:
The Vermont-Bennington half dollar was authorized by act of
Congress approved February 24, 1925, in commemoration of the one
hundred and fiftieth anniversary of the independence of Vermont
and of the battle of Bennington. I t was designed by Charles Keck.
I n addition to the legends and inscriptions required by basic law, the
obverse of the coin bears a likeness of I r a Allen with his name as
founder of Vermont. The reverse carries a figure of a catamount, the
name and date of the battle of Bennington, which occurred August
16, 1777, also the year of the coin's issue, 1927, and the words " H a l f
dollar."
The Oregon Trail half dollar is a special-design coin authorized by
act of Congress May 17, 1926, to commemorate the heroism of the
pioneers who traveled to the far West and to aid in erection of suitable monuments to commemorate the tragic events associated with
that emigration, w^hich resulted in adding new States to the Union.
The obverse of the coin bears a likeness of an old-time Conestoga
wagon drawn by oxen over the brow of a hill and toward the setting
sun. The phrase " Oregon TrailMemorial " appears, as well as other
inscriptions required by law. On the reverse of the coin appears the
full-length figure of an Indian with typical headdress, blanket, and
bow. The left hand of the Indian is raised as if in warning to those
of t h e East. The Oregon Trail is traced across a map of the United
States as a background on this side of the coin, which was designed
by Mrs. Laura G. Frazer.
Coinage for foreign g.ovemments.—Coinage for foreign governments was made during the past fiscal year only at the Philadelphia
Mint. The total was 7,099,000 pieces, which compares with 16,676,000
pieces during the prior year. For Guatemala 90,000 gold pieces were
made, for Venezuela 1,545,000 silver pieces and 2,800,000 nickel pieces,
for Peru 620,000 silver pieces and 1,194,000 jiickel pieces, and for
Nicaragua, 500,000 silver pieces, 100,000 nickel pieces, and 250,000
bronze pieces.
The 1927 combined total of domestic and foreign pieces, 318,059,019,
compares with last year's 388,847,282 pieces.
Expenses, income, etc.
Appropriations available for mint service during the fiscal year
1927 totaled $1,684,750, and reimbursements to appropriations for
209
SECRETARY OF THE TREASURY
services rendered amounted to $58,023.03, making a total of
$1,742,773.03.
Expenses amounted to $1,668,244.53, of which $1,606,311.35 was
chargeable to appropriations and $61,933.18 chargeable to income.
The income realized by the Treasury from the mint service aggregated $9,416,010.56, of wdiich $8,842,025.89 was seigniorage. The
seigniorage included $1,009,519.98 on the coinage of silver dollars,
which amount offsets an equal loss which was incurred when the
silver dollars were melted and sold under terms of the Pittman Act.
The seigniorage on subsidiary silver coin was $3,848,205.08, on nickel
coin $2,443,230.81, and on bronze coin $1,541,070.02.
Swnmary of appropriations, expenses, and balances, fiscal year 1927
Item
Appropriations
E a r n i n g s credited a p p r o p r i a t i o n s . . .
T o t a l available
Expenses
U n e x p e n d e d balances
.
Salaries a n d
wages
Contingent
expenses
Freight
on bullion
$1, 358, 250.00
45,380. 73
$319,000. 00
12, 642. 30
$7, 500.00
$1, 684, 750. 00
58, 023. 03
1, 403. 630. 73
1, 324, 700. 73
331. 642. 30
277, 278. 82
7, 500. 00
4, 331. 80
1, 742. 773. 03
1, 606, 311. 35
78, 930. 00
54,363. 48
3,168. 20
136,461. 68
Total
The number and value of deposits, transfers, gross income, and
expenses for the fiscal year 1927 and the number of employees on
June 30, 1927, at each institution are shown in the following table:
Deposits of gold and silver, income, expenses, and employees, by institutions
Institutions
Number of
deposits
of gold
and
silver
Philadelphia
10,360
San F r a n c i s c o . - - . . . . 11,351
2,631
Denver
New York.
14,754
434
N e w Orleans
173
Carson C i t y
376
Boise
272
Helena
8
Deadwood
.
. .
1,497
Seattle
64
Salt L a k e C i t y
Total
A^int B u r e a u
G r a n d total
Fiscal year 1926
Number of
mint
service
transfers
Excess of income ( + ) or of
expenses ( - )
Employees
June
30, 1927
787 $21,007,010. 92 $6,706,419. 76 $740, 546. 49 +$5,965,873. 27
+861,543. 74
290,447. 81
1,195 101,900,272. 00 1,151,991.55
196,943. 49 -+-1,038,930. 53
308 17,390,671.99 1, 235, 874. 02
-16,286.22
331,944.45
315, 658. 23
586 107,532,026.46
-12,035.39
1,084. 49
13,119.88
1,178,910. 87
-5,722.47
6,038.17
315. 70„
167, 557. 80
- 6 , 1 4 4 . 78
1,124. 27
7, 269. 05
144,456.15
-6,017.76
655. 73
6,673. 49
295, 207. 73
- 4 , 9 3 9 . 73
472. 57
5,412. 30
1,137. 06
- 2 4 , 269. 04
2,017.10
26,286.14
6,223,120. 78
- 3 , 798. 35
397.14
4,195. 49
27,304. 91
310
124
80
124
7
3
4
3
3
11
2
Coining value
of gold a n d
Gross income
silver received 1
Gross
expense
41,920
2,876 255,867,676. 67
9,416,010. 56 1,628,876. 76
39,367. 77
+7,787,133. 80
- 3 9 , 3 6 7 . 77
671
14
41,920
2,876 255,867, 676. 67
9,416,010. 56 1,668,244. 53
-f 7,747,766. 03
685
41,530
5,207 192,609, 510. 97 10,400,989. 25 1, 800,042. 69
+8,600,946. 56
719
J Gold valued at $20.67+ per fine ounce, silver for standard dollars valued at $1.29+ per fine ounce, and
silver for subsidiary coin at $1.38+ per fine ounce.
Gold and silver in the United States
Stock of coin and monetary bullion.—On June 30, 1927, the estimated stock of domestic coin in the United States was $2,138,004,166,
210
REPORT' ON THE FINANCES
of which $1,304,469,861 was gold, $537,944,446 standai^d silver dollars,
and $295,589,859 subsidiary silver coin.
The stock of gold bullion iii the mints, assay offices, and Federal
reserve banks on the same date was valued at $3,260,628,275, a decrease during the year of $8,105,370; the stock of silver bullion was
9,068,349.88 fine ounces, a reduction of 1,005,387.72 fine ounces.
Production of gold and siVver.-^DomestiQ gold production dnriiig
the calendar year 1926 was $48,269,600, as compared with $49,860,200
in 1925. The output has declined to under 48 per cent of that for the
record year 1915, when the total was $101,035,700.
Silver of domestic prPductioh during 1926 totaled 62,718,746
ounces, valued at $39^36,497; this compares with 66,155,424 ounces,
valued at $45,911,864, for 1925, and with the record production of
1915, 74,961,075 fine ounces, valued at $37,397,300.
Industrial consumption of gold and silver.—Gold consumption in
the industrial arts during the calendar year 1926 is estimated at
$74,333,684, of which $43,268,236 was new material.
Silver used in the arts is estimated at 39,408,393 fine ounceSj of
which 29,407,601 fine ounces was hew material.
As compared with the prior year, silver consumption was abolit
the same and gold consumption increased about $8,400,000.
Net export of domestic gold coin.—The net export of domestic
gold coin during the fiscal year ended June 30, 1927, was $5,500,953;
during the prior fiscal year there was net export of $46,614,511.
During tlie 13fiscalyears 1915-1927, since the beginning of the World
War, there has been a net export of domestic gold coin of $941,219,179,
although the net balance of imports and exports of both gold coin
and bullion was an impoi't of apjproximately $2,000,000,000 during the
same period. Since 1870 the net export of domestic gold coin has
been $1,818,868,243.
PERSONNEL CLASSIFICATION OFFICER
A total of 276 appeals from classification allocations which had
been presented to the Personnel Classification Board prior to July
1, 1926, were still receiving consideration by said board. During
the first five months of the fiscal year these appeals were disposed
of as follows: Approved as recommended, 201; disapproved, 63;
withdrawn or canceled, 12.
Between July 1, 1926, and June 30, 1927, 657 appeals were presented to the department and transferred to the Personnel Classification Board for appropriate action. Of this number 608 appeals
were approved by the classification officer and 49 disapproved as
being without merit. The Personnel Classification Board approved
194 appeals out of the 657 presented and disapproved 264, leaving at
the close of the fiscal year 199 cases still pending.
In addition to the foregoing an appeal was presented by an employee in one of the large activities of the department on behalf
of a group of 833 persons doing the same class of work. This appeal
was disapproved by the Personnel Classification Board and immediately affected 833 jobs.
In addition to the large number of appeals requiring study and
investigation by the classification officer to enable appropriate recommendation to be made from the department, an unusually large
number of classification sheets were handled through the department
because of certain reorganization in forces, as well as a large turnover in personnel.
During the year considerable was accomplished looking to a uniform procedure within the activities of the department in connection
with the handling of efficiency ratings. The annual ratings for the
period ended May 15,1927, were more satisfactory than any previous
ratings prepared pursuant to the requireihents of law and regulation^
211
BUREAU OF PROHIBITION
The act of March 3, 1927, creating a Bureau of Prohibition in the
Treasury DeiDartment became effective April 1, 1927, on which date
the w^orking organization of the Prohibition Unit of the Bureau of
Internal Revenue was transferred to the Bureau of Prohibition.
During the year several changes were made in districts with the
view to better organizing the forces of the bureau to meet local conditions and to centralizing authority over territory where the problems
are similar. The district of Florida w^as abolished and a new district
created consisting of South Carolina, Georgia, and Florida, with
headquarters at Savannah, Ga. The State of West Virginia was
combined with the western. Pennsylvania district, w'ith headquarters
at Pittsburgh. The State of North Carolina was attached to the
Virginia district, with headquarters at Richmond. The State of
Delaware was transferred from the Maryland district to the eastern
Pennsylvania district, with headquarters at Philadelphia. The State
of New Jersey was detached from the eastern Pennsylvania district
and made into a separate district, with headquarters at Newark. The
middle judicial district of Pennsylvania was attached to the eastern
administrative district.
The policy of decentralizing the operations of the Prohibition
Service during the past two years has proved to be of material benefit.
The control of permits within their districts has given the administrators a larger appreciation of their responsibilities.
Further decentralization of the bureau w^as accomplished by
abolishing the offices of the supervisor of alcohol and brew^ery control and the supervisor of wine control, the employees of these organizations having been transferred to other agencies in the field. The
office of the chief investigator was discontinued and there was created
in its stead the office of chief special agent. The chief special agent
of the bureau supervises and„directs the activities of approximately
120 trained investigators known as special agents. They operate at
all times as specifically assigned by the commissioner and frequently
assume full responsibility for the investigation of difficult and complicated cases, including interdistrict and nation-wide conspiracies
to violate the law. In certain border districts these special agents
act as a coordinating agency of the department in the investigation
of cases involving major smuggling operations. To accomplish the
212
SECRETARY OF THE TREASURY
213
desired results in that connection, they are empowered to utilize to
the best possible advantage the information and evidence that is being
gathered from time to time by the Coast Guard, Customs, and
Prohibition Services.
Prohibition agents made 64,986 arrests during the year ended June
30, 1927, and seized 7,137 automobiles, valued at $3,529,296.70, and
353 boats, valued at $316,323. As a result of the work of such agents,
51,945 prohibition cases against individuals were handled in Federal
courts and 36,546 persons were convicted, of which number 11,818
were given jail sentences.
The Federal courts imposed sentences aggregating 4,477 years for
violation of the national prohibition laws. I n addition, as shown by
the records of the Solicitor of the Treasury Department, there were
certain collections through the Federal courts, such as fines and forfeitures, incident to enforcing the national prohibition act, amounting to $4,143,040.02, compared with $5,231,130.90 for the fiscal year
1926.
During the year 2,832 compromise cases involving civil liabilities
under the prohibition law were examined and determined, 2,221 of
which were favorably acted upon and 611 rejected, the total amount
accepted being $1,018,969.71.
I n the course of the year 322 applications for pardon for persons
serving sentences for violation of the national prohibition act were
considered, 22 of which were recommended for approval, 217 recommended for rejection, 61 returned to the Department of Justice with,out recommendation, and 22 referred to other departments.
A total of 995 applications for parole of persons serving sentences
for violation of the national prohibition act were considered, 13 of
which were recommended for approval, 767 for rejection, 140 were
returned to the Department of Justice without recommendation, and
75 referred to other departments.
The technical division conducts the chemical work of the Bureau
of Prohibition as well as w^ork of this character for the Bureau of
Internal Revenue in Washington. I t supervises generally the activities of the chemical laboratories of the Bureau of Prohibition
in the field. The laboratory at Washington made 20,835 analyses
during the year and 93,323 analyses w^ere made in the field
laboratories.
During the fiscal year ended June 30, 1927, 2 concentration warehouses, 2 distillery warehouses, and 2 special bonded warehouses
were closed out, and 1 concentration warehouse was established.
At present there are 28 concentration warehouses containing 22,053,141.8 gallons of distilled spirits. There are 8 distillery warehouses
and 2 general bonded warehouses containing 1,465,820.1 gallons of
distilled spirits which have not as yet been concentrated, owing
214
REPORT ON T H E FINANCES
to the fact that the security, storage, and bottling facilities are
adequate, and as most of them are contiguous to a distillery, industrial alcohol plant or industrial alcohol bonded warehouse where
Government ofiicers are maintained, no additional expense for supervision is incurred by the Government.
At the close of the fiscal year there were 337 permanent and 7
temporary employees on the bureau roll, and 3,932 permanent and
10 temporary employees on the field rolls, making a total of 4,269
permanent and 17 temporary employees on the rolls of the Bureau
of Prohibition on June 30, 1927. The personnel on June 30, 1926,
consisted of 3,570 permanent and 19 temporary employees.
Narcotics
On June 30, 1927, 306 persons were registered under the Harrison
narcotic law, as amended, as importers and manufacturers, 1,778 as
wholesale dealers, 48,523 as retail dealers, 144,056 as practitioners,
and 120,699 as dealers in and manufacturers of untaxed narcotic
preparations, the latter number including registrants not required
to pay special tax by reason of paying another tax under the act, or
a total of 315,362 registrants.
A total of 4,469 convictions under the Harrison and sirioking opium
acts was had, for which the courts imposed sentences aggregating
7.088 years 10 months and 1 day and fines amounting to $175,127.90.
A total of 2,083 cases was compromised, the aggregate amount collected being $104,166.64. During the year ended June 30, 1926, a
total of 10,342 cases of criminal character was reported, whereas
during the last fiscal year 8,851 such cases were reported. A decrease of 1,491 cases over the previous year is to be noted. This
however, does not indicate less activity or less effective operation of
ihe field force, as more effort was concentrated on the larger illicit
purveyors of drugs which is reflected by the increase of 290 years
10 months and 21 days in sentences over the sentences imposed for
the year ended June 30, 1926. Sentences for the past year totaled
7,088 years 10 months and 1 day, whereas the aggregate for the
preceding year was only 6,797 years 11 months and 10 days.
PUBLIC DEBT SERVICE
Division of Loans amd Gv/rrency
This division is the active agent of the Secretary for the issue of
all public debt obligations of the United States and for conducting
transactions in such obligations after issue. It is also charged with
the issue of bonds or other obligations of the governments of Porto
Rico and the Philippine Islands as to which the Treasury Department acts as fiscal agent. The division undertakes the safe-keeping
of public debt and insular loan securities for certain government
offices, and counts and delivers to the destruction committee United
States currency canceled as unfit, and mutilated paper (spoilage,
etc.) received from the Division of Paper Custody and the Bureau
of Engraving and Printing.
Issue and retirement of securities.—The following is a resume of
the activities in connection with the issue and retirement of
securities:
Registered
Nonregistered
Total
ISSUES
Stock shipments to Federal reserve banks:'
For exchange transactions
,
Allotment for original issue
,
Original issue by the division.
Securities issued on exchange.
Total securities issued and shipped.
$2,159,557, 450. 00 $2,159,657,450.00
1 $150.00 3,659,366,250.00
3, 659,366,400. 00
150. 00 5,818,923,700.00
2 2, 245,498,110. 00
39, 839,110. 00
430, 036, 785. 00
49, 206, 650. 00
5, 818,923,850. 00
2, 285, 337, 220. 00
479, 243,435.00
2, 675, 535, 045. 00 5,907,969,460. 00
8,583,504,505.00
RETIREMENTS
Securities retired on exchange
180, 546,165. 00
Securities retired for redemption
2 2, 307, 396,394. 25
Other securities retired (i, e., claims, credit, and
exchange authorization retirements)
421,439,900. 00
Total securities retired
298, 697, 270. 00
202,684. 80
479, 243,435.00
2,307,599,079.05
17,430. 00
421,457,330.00
2,909,382,459.25
298,917,384.80
3,208, 299,844.05
2,561,845,840.00
6,875,793,760.00
9,437,639,600.00
STOCK ACTIVITIES
Securities received from Bureau of Engraving and
Printings
Securities restored to stock by Federal reserve
bank's. _
Securities canceled and delivered to Register of
Treasury
-
2,995,600.00
• 21,345,000.00
21,345,000.00
909,283,300.00
912,278,900.00
1 Deliveries to the Treasury cash room as an allotment.
«Includes $2,016,000,000 special, one-day certificates of indebtedness.
» Does not include standard, full paid interim certificates issued by Federal reserve banks at a value
of $4,823,500.
64761—FI 1927-
-16
215
216
REPORT ON THE FINANCES
The detail of transactions in public debt securities is presented in
formal statements elsewhere in the report but of special note are the
following data regarding new issues and retirements, covering transactions handled by the division and not including transactions
conducted by the Federal reserve banks.
New issues by the division consisted of 3 % per cent Treasury
bonds of 1943-1947 amounting to $23,942,950, of which $21,492,750
were in registered form; 2i^ per cent postal savings bonds (thirtyfirst and thirty-second series) amounting to- $689,620, of which
$650,860 were in registered form; bearer Treasury notes. Series
A-1930-1932, amounting to $35,600,150; and registered 4 per cent
Treasury notes amounting to $169,000,000 and registered 4 per cent
certificates of indebtedness amounting to $37,500,000 for the World
War adjusted service certificate fund and the United States civil
service retirement and disability fund. I n addition, original issues
of Philippine Islands and Porto Rican securities were made in total
amount of $2,604,500.
During the fiscal year two exchange offerings were made in bonnection with the redeniption of the second Liberty loans which resulted in the retirenient of second loan registered bonds to the amount
of $164,776,200. There were also retired second loan registered bonds
. amounting to $4,751,200 purchased with surplus money in the Treasury. On December 15, 1926, Treasurj'' savings certificates began to
mature (five years from date of sale), resulting in a great increase
ih the volume of retirements of public debt securities for redemption.
The redemption value of Treasury savings certificates retired during
the fiscal year amounted to $64,298,414.25, and of War, Treasury
saving, and thrift stamps to $125,584.80. Other retirements for redemption amounted in the aggregate to $57,647,680 with the exception of the special one-day certificates of indebtedness.
Individual registered accounts activities.—In connection with public debt registered issues, individual registered accounts are maintained and interest is paid periodically in the form of checks.
'The interest-bearing accounts open June 30, 1927, w^ere as follows:
Number of
accounts
Pre-war loans
Liberty and Treasury loans
Treasury notes and certificates of indebtedness (i. e., special fund accounts)..
Principal
12,725
629,127
6
$743, 801, 830
3, 409, 286,900
368,600,000
1,641,858
4,511,587,730
During the year the amount of Liberty bonds. Victory notes, and
Treasury bonds in registered form decreased from $3,735,249,500 to
$3,409,586,850, a loss of $325,662,650, and the individual accounts
maintained for these bonds and notes decreased from 1^760,378 to
217
SECRETARY OF THE TREASURY
1,630,443, a loss of 129,935 accounts. A considerable reduction in
second Liberty loan registered accounts was evidenced due to the
refunding w^hich started in March. From February 28 to July 31
the registered second loan bonds outstanding were reduced by 150,701
pieces, amounting to $314,726,700, while the individual accounts were
reduced approximately 20 per cent, from 314,456 to 252,825. There
was a net gain in the registered principal of unmatured pre-war loans
of $1,245,530 but a loss of approximately 336 accounts. There were
206,137 individual accounts for registered Liberty bonds. Victory
notes, and Treasury bonds closed and 28,237 accounts decreased, representing the retirement of securities amounting to $716,355,250 par
value. I n connection with the same loans, 76,202 new accounts
amounting to $390,692,600 principal were opened. • Forty-eight thousand, seven hundred and eighty-nine changes in address for the
mailing of interest checks Avere made on the registered accounts
during the year.
Interest on registered Liberty and Treasury bonds was paid on due
dates in the form of 3,417,696 checks amounting to $150,611,884.06,
and on registered securities of the pre-war loans in the form of 45,747
checks, amounting to $15,486,946.30. Interest on registered Treasury notes of the adjusted service and civil service retirement and
disability series w^as paid in the form of four checks aggregating
$6,825,983.54. There were received from the Bureau of Engraving
and Printing 3,383,335 checks and there w^ere canceled and delivered
to the destruction committee 84,355 checks.
Claims.—Claims for relief on account of lost, stolen, destroyed,
and mutilated securities handled by the division during the fiscal
year were as follows:
Claims
Pieces
Amount
Received
3,402
12,833
$2,102,098. 50
Settled:
By reissue or redemption of securities,
By recovery of securities
By disallowance of claims
By allowance of credit
2,174
975
123
2
6,467
2,204
783, 632. 00
771,075. 00
32, 570. 00
2,500.00
3,274
9,986
1, 589, 777. 00
Total
Safe-keeping of securities.—At the beginning of the year there
were securities amounting to $381,174,475 in safe-keeping for various
Government offices, against which formal, audited receipts were outstanding. Throughout the year securities amounting to $245,098,150
were received for safe-keeping and receipts therefor issued and securities amounting to $130,218,850 were delivered from safe-keeping
upon the surrender of outstanding receipts, leaving a balance of
securities amounting to $496,053,775 in safe-keeping June 30, 1927.
218
REPORT ON THE FINANCES
Mutilated paper and redeemed currency.—Mutilated paper verified
and delivered to the destruction committee consisted in total of
22,679,258 and 2869/3400 sheets, of w^hich 22,632,407 and 1169/3400
were received from the Bureau of Engraving and Printing and
46,851% from the Division of Paper Custody. Redeemed currency
counted and delivered to the destruction committee which was destroyed during the year amounted to 636,043,979 pieces, representing
$1,518,482,117.94.
Publicity.—The division maintains a mailing list, in additipn to
its list of holders of registered bonds, for the purpose of placing new
public debt offerings and such matters before the public. Approximately 2,554,939 circulars were distributed during the year by this
means.
Personnel.—For the conduct of the foregoing work there were on
the 'rolls of the division at the beginning of the year 993 employees.
During the year there were 13 employees transferred to other bureaus,
72 resigned, and 2 retired, while there were 20 employees appointed,
92 transferred from other bureaus, and 46 reinstated. A net increase
in force of 71 employees thus resulted, leaving a personnel of 1,064
employees on the rolls at the end of the fiscal year 1927.
Register of the Treasury
The Register of the Treasury performs the final audit of all retired
Federal securities that evidence debt principal or bearer interest,
and is charged with the custody of these documents. I t is the duty
of the register to determine the credits to which the Treasurer of
the United States is entitled on account of the redemption of such
securities, and to which the Division of Loans and Currency and
the Federal reserve banks are entitled on account of such securities
retired otherwise than through redemption.
During the fiscal year 1927, 50,467,077 security documents, with a
face value of $11,243,181,277.38, were functioned in the register's
office. Of that number there were 39,469,076 that represented cash
redemptions aggregating $6,852,438,058.87; 2,958,680, aggregating
$2,734,325,525 in face value, were surrendered in exchange for other
securities, and 8,039,321, aggregating $1,656,417,693.51 in face value,
represented canceled securities surrendered because they were no
longer appropriate for issue. Of the securities redeemed from the
holders for cash, 37,201,801 were interest coupons that aggregated
$561,272,713.54.
The personnel of the register's office was reduced during the fiscal
year from 568 employees to 429. The reduced number would probably have proved to be sufficient properly to carry on the work of the
office but for added clerical effort made necessary by the unanticipated offer made by the department March 8 to holders of part of
SECRETARY OF T H E
219
TREASURY
the second Liberty loan bonds to exchange them for Treasury notes.
The acceptance of the offer by many of the holders so increased the
volume of securities transmitted to the register's office for audit that
the number of employees was found to be insufficient to prevent
certain portions of the work from falling in arrears.
The total expenditures made from funds available for the conduct
of the register's office during the fiscal year 1927 aggregated
$745,905.26. That amount includes the salaries and the rent paid
and the equipment, maintenance, and supplies that were purchased
foi* the use of the office.
The following statement sets forth by class, pieces, and amount
the securities received, examined, and filed during the fiscal years
1926 and 1927, respectively:
Summary of securities received, examined, and filed'in the register's office
during the fiscal years ended June 30, 1926 and 1.927
1927
1926
Class of security
Pieces
Amount
Pieces
Amount
• REDEEMED
Bearer
United States securities:
132
12 64,633 1 » $11.851,680.00
Pre-war loans.
loans
598,159
Liberty
393.044, 200.00
100,776
1,480
Treasury bonds
1,000.00
1
317,114
Treasury notes
930, 485, 300.00
182,615
54,705
Certificates of indebtedness
784,042, 500.00
67,884
735,674
Treasury (war) savings securities...
1,916,840
6,480,196.93
3 -41,445,842 3 638,089,246.55 * 37,201, 801
Interest coupons
S'ecurities not afiecting public debt:
4
1 5 3,300.00
District of Columbia loans
»53
District of Columbia interest cou8 74
6
8166.07
pons
Total
$50,610.00
1, 992,946. 200.00
10,000,000.00
1,119,511,900.00
859,354,000.00
1, 765. 206. 31
* 561,272,713. 54
1,100.00
^
54.75
2,740,287, 629. 55
38,909,075
4. 544, 901,784.60
134,432, 240.00
15, 544
18, 714,850.00
14, 680
680 1. 665,700,000.00
33.321,809.33
1,126,485
47.81
9
75
58, 420
584
500,913
9
162, 630.00
174, 711,350.00
2,067,900,000.00
64,762,180.63
113.64
43.649,396
Registered
Uriitfed states securities:
Pre-war loans - .
.
Liberty loans
Certificates of indebtedness
Treasury (war) savings securities...
Interest checks (Liberty loans)
Total
Total redeemed
1,157,298
1, 852,168, 947.14
560,001
2,307, 536, 274.27
44.806,694
4, 592,456, 576. 69
39,469,076
6,852,438,058. 87
RETIRED ON ACCOUNT OF EXCHANGES
FOR OTHER SECURITIES, ETC.
Bearer
Uhitfed States securities:
379, 330. 00
813
594, 670J 00
Pre-war loans...
695
2,364,378 • 909, 020,550 00
Libeirty loans
987,960,250.00
2, 495, 641
213, 624,900.00
Treasury bonds
269, 687,300. 00
67,554
85, 563
433,793,950.00
68, 049
529,739,600.00
Treasury notes
98,350
» Deduct.
' In adjustment of previousfiguresa transfer from redeemed to canceled is made.
» The audit figure is used instead of received figures for the May and June settlement months which
were in process of audit at release oif last report.
* Includes leceivedfiguresfor May and June settlement months which are in process of audit.
«In adjustment of previousfiguresa transfer from canceled to redeemed is made.
® 1926fiscalyearfiguresreceived after report was submitted.
220
REPORT ON THE FINANCES
Summary of securities received, examined, and filed in the register's office
during the fiscal years ended Juiie 30, 1926 and 1927—Continued
1927
1926
Class of security
Pieces
Amount
Amount
i-ieces
R E T I R E D ON ACCOUNT OF EXCHANOES
FOR OTHER SECURITIES, E T C — C O U t d .
Nearer—Continued
U n i t e d S t a t e s securities—Continued.
F i r s t 33^ per cent L i b e r t y loan interim certificates
s t a n d a r d full-paid i n t e r i m certificates
Certificates of i n d e b t e d n e s s
T r e a s u r y (war) savings securities
Securities not afi'ecting p u b l i c d e b t :
I n s u l a r pos.sessions loans
..
150
62,167
1257
2,293
2,744,602
Total
$41, 600.00
474,116, 500. 00
1 1, 261. 25
2, 293, 000. 00
2.264,216,318.75
95
$13, 600. 00
10
58,078
4, 823, 500. 00
569, 842, 500.00
727
727, 000. 00
2, 559, 704
2,132, 440, 670. 00
Pegistered
U n i t e d States securities:
Pre-war l o a n s _ .
L i b e r t y loans
.
.
Treasury bonds
T r e a s u r y (war) savings s e c u r i t i e s . . .
Securities not affecting p u b l i c d e b t :
I n s u l a r possessions loans
Total
T o t a l retired account exchanges,
etc
11,058
391, 480
3,976
194, 402
59,963, 940. 00
400. 962, 800. 00
15, 025,100. 00
2, 370. 675. 00
9,992 '
374, 206
4,863
7,315
52, 720, 890. 00
509,874, 400. 00
31, 769, 500. 00
1, 474, 565. 00
2,837
4, 698, 000. 00
2, 600
6, 045, 500. 00
603. 753
483, 020, 515. 00
398, 976
601,884,855. 00
3, 348,355
2,747, 236,833. 75
2,958, 680
2,734,325, 525. 00
52,192
1, 834, 609
24
274,327
45, 301
7, 284
5,935; 990
11,943,190.00
169,857,300. 00
121, 900. 00
617, 831,200. 00
310,388,000.00
36, 420. 00
329, 874, 722. 75
8,062
911,428
179
114, 930
119,564
39
6, 836,293
17,890,000. 00
197, 800,600. 00
306,400. 00
323,680,300. 00
691,832, 500. 00
203. 00
377,354,065.61
3
3,000. 00
UNISSUED STOCK R E T I R E D
Bearer
U n i t e d States securities:
Pre-war l o a n s . .
. . .
..
L i b e r t v loans
Treasury bonds.
T r e a s u r y notes
Certificates of Indebtedness
T r e a s u r y (war) savings s e c u r i t i e s . . .
I n t e r e s t coupons .
Securities not afifecting p u b l i c d e b t :
I n s u l a r possessions l o a n s . .
District of C o l u m b i a loans
Total
«7
8 3, 565. 55
8,149, 734
1,340.056,232.75
7,990,498
1, 508, 867, 088. 51
22, 610
350
15
1,184,130. 00
581, 600. 00
22, 000.00
24,094
221
8
2
63,190,250. 00
2,809, 550. 00
18, 500. 00
N o value.
1
9,433
N o . value.
1,706,650.00
2,101
2,137,000. 00
Registered
U n i t e d States securities:
Pre-war loans
^
Liberty loans.
Treasury bonds
Treasurj'^ notes
Certificates o f i n d e b t e d n e s s
T r e a s u r y (war) savings s e c u r i t i e s . . .
Securities not affecting p u b l i c d e b t :
I n s u l a r possessions loans
. .
Railroad loans
Cherokee certificates of i n d e b t e d ness
D i s t r i c t of C o l u m b i a loans
Total
T o t a l u n i s s u e d stock retired
26
1,325.00
12,811
8.840
31,339,000.00
42,449,000. 00
550
2,271
5, 500,000. 00
2, 243,000. 00
34, 510
5,631,380.00
48.823
147, 550, 625. 00
8.184,244
1, 345, 687,612. 75
8, 039,321
1, 656, 417, 693. 51
»Deduct.
» In adjustment of previous figures a transfer-from canceled to redeemed is made.
221
SECRETARY OF THE TREASURY
Summary of securities received, examined, and filed in the register's office
during the fiscal years ended June 30, 1926 and 1927—Continued
1927
1926
Class of security
Pieces
Aniount
Pieces
Amount
RECAPITULATION
Bearer
United States securities:
Pre-war loans
loans
. _.
Liberty
Treasury bonds
Treasury notes
First 33^ per cent Liberty loan interim certificates
standard full-paid interim certificates
Certificates of indebtedness
Treasury (war) savings securities...
Interest coupons
'
Securities not affecting public debt:
Insular possessions loans
District of Columbia loans . .
District of Columbia interest
coupons
Total
1«11, 746
> $470,840.00
4,431,026 1,650,861, 750. 00
85, 588
269,810, 200.00
655, 292 1,978,056,100.00
41,600.00
150
9,007
3,873,965
69, 213
500,093
0
$18,535, 280.00
3, 099, 767, 350.00
223, 931, 300. 00
1, 876, 986,150. 00
13, 600.00
4,823, 500. 00
10
232,347 2, 021,029, 000. 00
175,352 1, 568, 647, 000. 00
1, 765, 409. 31
735, 713
1, 923, 867
6, 515, 355. 68
47, 381, 832 » 967,963,969. 30 < 44, 038, 094 * 938, 626, 779.05
730,000. 00
1,100.00
2,293
4
2, 293, 000. 00
200. 00
6 74
6 166. 07
6
64. 76
54, 543, 732 6,344,560,181. 05
49, 469, 277
8,186, 209, 623.11
730
4
Registered
United States securities:
Pre-war loans .
.
.
Liberty loans __
Treasury bonds. ._
Treasury notes
Certificates of indebtedness _ _
Treasury (war) savings securities...
Interest checks (Liberty loans)
Securities not afiecting public debt:
Insular possessions loans.
Railroad loans _
Cherokee certificates of indebtedness,.
District of Columbia loans . .
Total
49, 212
406, 510
3,991
195,580,310. 00
420, 259, 250. 00
15,047,100. 00
581 1, 665, 700, 000. 00
1,330,320
37, 399,134. 33
9
47.81
4,938
6,835,000. 00
1, 795, 561 2, 340, 820, 842.14
66,339,293 i 8.fiS.'i..381. 02.^ 19
Grand total
'
34,161
432,847
4,871
2
684
508, 254
9
116,073, 770. 00
687,395,300.00
31, 788, 000. 00
No value.
2,067,900,000. 00
66, 238,070. 63
113. 64
15,411
8,840
37,384, 500.00
42,449, 000. 00
550
2,271
6, 500,000.00
2. 243. nno. 00
1, 007, 800
3, 066,971, 764. 27
50,467, 077 11, 243,181, 277. 38
' '
1 Deduct.
8 In adjustment of previous figures a transfer from redeemed to canceled is made.
8 The audit figure is used instead of received figures for the May and June settlement months which
were in process of audit at release of last report.
< Includes received figures for May and June settlement months which are in process of audit.
61926 fiscal year figures received after report was submitted.
Division of Public Debt Accounts and Audit
During the fiscal year this division continued to maintain its administrative control accounts over all official transactions in public
debt securities of all issues conducted by the several Treasury ofiices
and the Federal reserve banks as fiscal agents of the United States,
and over all transactions involving the receipt, custody, and issue
of distinctive silk fiber and nondistinctive paper used for printing
public debt securities. United States currency, national-bank notes.
Federal reserve notes, United States postage stamps, internal revenue
stamps, and other miscellaneous securities and documents.
The division has also continuously conducted administrative physical audits of distinctive and nondistinctive paper in the custody of
222
REPORT ON THE FINANCES
the Bureau of Engraving and Printing, and of securities in other
Treasury offices held as stock or in safe-keeping, unclaimed securities,
surrendered securities canceled and retired or in process of retirement; of registered interest checks in stock, held as unclaimed, or
canceled and delivered for destruction; of registered bondholders'
accounts; of numerical registers reflecting the issues and retirements
of public debt securities and those outstanding; and of various accounting records relating to security and security-paper transactions.
The following is a summary of the physical audits conducted by the
division during the fiscal year:
Physical audits, fiscal year 1927
Description
Pieces, etc.
Value
In Division of Loans and Currency:
Securities, unissued stock
1 9,726,929 $9,383,622,040.00
Securities in safe-keeping
604,688,625.00
Unclaimed securities
.,
16, 677.98
Surrendered securities in process of retirement
._
19,258,148. 75
interest checks, unissued stock
738,144
Void interest checks held for reference
_.
125,901
Interest checks held for destruction
84,366
Unclaimed interest checks
'.
349,638
1,067,851.67
464,667
Registered bondholders' accounts
1,342,413,300.00
1,447,681
Numerical records of registered notes and certificates-entries examined
1,124
Treasury savings certificate stubs
108,125.00
In office of Register of the Treasury:
Retired Treasury savings certificates
488,740
62,592,175.00
Specimen securities.380
Numerical records of coupon bonds, notes and certificates-entries
examined-_
92,926,159
In Division of Paper Custody:
Distinctive silk fiber and nondistinctive paper, unissued stock-sheets.
3,247,877
Distinctive silk fiber paper, unissued stock-rolls
3
In office of Commissioner of the Public Debt: Specimen securities
1,007
In Bureau of Engraving and Printing: Distinctive silk fiber and nondistinctive paper, printed or in process of printing-sheets
2 101,136,291
1 Includes 4,319,641 pieces package counted.
2 Includes 30,908,755 sheets package counted.
Detail of audits of distinctive silk fiber and nondistinctive paper in the Bureau
of Engraving amd Printing
Sheets audited in various divisions
Class of paper
Number of
audits Wetting
Currency
..
Bonds, certificates, e t c . . .
Postage
. .
Revenue
Miscellaneous
Total
Postage
Orders
35 8,622,109 50,267,449
423,880 3,036,300
134,006 5,803,304
124,308
46
4,829,372
38,000
34
51
64,935
25,180,899
41
97,576
2,044 2,621,113
12
250
4
227
87
62
332
Examining
Surface
printing
Numbering
185 8,882,243 50,403, 533 33, 929,196 3,036,300 4,884,307
Total
sheets
62,349,742
6,061,846
4,867,493
26,333,472
2,623,739
712 101,136,291
NOTE.—Fractional sheets disregarded in obtaining aggregate totals. Sheets counted in each audit were
found in agreement with bureau records and reconciled with controlling accounts in Division of Public
Debt Accounts and Audit.
223
SECRETARY OF THE TREASURY
Division of paper custody
Kind
On hand
July 1,
1926
Received
from contractors
On h a n d
J u n e 30,
1927
Issued to
bureau
Distinctive paper for United Stfites currency, FedSheets
Sheets
Sheets
eral reserve notes, Federal reserve and national36,453,160 1 247,462,250 2 253,482,458
bank currency.87,839, 600
3 82,275, 200
23,481,207
Intemal revenue paper
* 1,009,363
8 2,989,619
Postage stamp paper
„^.-. 5, 764,488
6 4, 221, 010
7 3,238,249
Check paper
361,977
8 4, 670, 701
9 2,199, 940
United States bond paper
3,459,186
Parchment, artificial parchment, and parchment
214, 853
259, 991
199,148
deed paper
2, 008, 722
2,473, 594
2,446,641
Miscellaneous paper
Philippine Islands paper:
Distinctive paper for silver certificates, na10 1,848,020
1, 993, 550
322,837
tional-bank and Treasury notes
50,000
51, 491
24, 029
Postal card
101,154
11 72, 613
82,948
Internal revenue
_
196,453
12 266,227
70,318
Porto Rican internal revenue paper
Total
Sheets
30,432, 952
29,045,607
3, 784,232
1,344, 738
6,829,947
154,010
1,981, 769
468,367
22, 538
111, 489
544
72, 665, 939
349, 667, 656
349,157,402
73,176,193
1,110
152
3
8,901
13 583
8,385
"511
1,626
224
3
Rolls postage stamp paper.Rolls internal revenue paper..
Rolls United States security paper
1 Includes 69 sheets net overs, 119,000 sheets exchange paper, 2,191 sheets replacement paper, and 52,000
sheets Special A, B, and C.
8 Includes 409,000 sheets issued for exchange, 3,492 portions and 8,249 damaged sheets delivered to Division of Loans and Currency, 2,191 sheets shipped to mill for replacement, and 6,000 sheets special paper
issued.
8 Includes 1,663,800 sheets of rejected paper, returned to mill, and 4,709 sheets destroyed.
* Includes 10,000 sheets received in case labeled 2 0 ^ by 37.
«Includes 5,621 sheets destroyed.
«Includes 359 sheets net overs.
7 Includes 206 sheets destroyed, 7 sheets for samples, and 36 sheets for test.
«Includes 101 sheets net overs.
• Includes 45 portions delivered to Division of Loans and Currency.
10 Includes 20 portions delivered to Division of Loans and Currency.
" Include^ 188 sheets destroyed.
"Includes 224 sheets destroyed.
»a Includes 98 rolls for replacement.
H Includes 98 rolls returned to contractor.
Custody of Federal reserve notes, series 191J/. and 1918
Federal reserve bank
On hand July
1, 1926
Boston
New York
Philadelphia..
Cleveland
Richmond-...
Atlanta
Chicago
St. Louis
Minneapolis..
Kansas City..
Dallas
San Francisco.
$162,800,000
194,240,000
205, 700,000
137,100,000
107,320/000
35,280,000
158, 900,000
63,860, 000
40,980,000
48,000,000
46,340, 000
105,800,000
Total--.
1,306,320, 000
Received
$108, 000,000
485,300, 000
99,000,000
. 150,000,000
.63.000,000
130, 000, 000
281, 000,000
14,000, 000
23, 000, 000
39,000, 000
30, 600, 000
152, 000,000
Issued
$130,000,000
404,100, 000
125,440, 000
165,440,000
41,840,000
84,220, 000
229,800,000
25, 680,000
29,360,000
39,040,000
37,300,000
133, 540, 000
1, 564, 900, OOP 1,445,760,000
On hand June
30,1927
$140,800,000
275,440.000
179,260,000
121,660,000
118,480,000
81,060,000
210.100,000
52,180,000
34, 620,000
47,960,000
39, 640,000
124,260,000
1, 425, 460,000
PUBLIC HEALTH SERVICE
The activities of the Public Health Service during the fiscal year
ended June 30, 1927, are summarized by Nthe Surgeon General as
follows:
Division^ of sanitary reports and statistics
Reports of the prevalence of diseases dangerous to the public
health were received throughout the fiscal year hy telegraph and mail
from all parts of the United States and from foreign countries.
They came from officers of the Public Health Service, American
consuls. State and local health officers, foreign governments, the
health section of the secretariat of the League of Nations, the International Office of Public Hygiene at Paris, the P a n American Sanitary Bureau, and other sources.
Some of the telegraphic reports were summarized and mimeographed copies sent to State health officers. I n this way early
notice was given of the prevalence of diseases which must be especially guarded against.
The data generally are tabulated, comparisons are made with preceding years, and the resulting statistics are published in the weekly
Public Health Reports or in supplements issued from time to time.
The reports from the United States of the prevalence of diseases
dangerous to the public health are not as complete or accurate
as they can be made. The establishment of definite standards of reporting and the inclusion in a registration area of all States and
cities which reach these standards would do much to increase our
knowledge of the prevalence of communicable diseases in the United
States.
The weekly Public Health Report was issued regularly during
the fiscal year. This publication is now in its forty-second year.
The obligations imposed upon our Government by sanitary conventions to notify foreign governments of the appearance of quarantinable diseases and the prevalence of certain communicable diseases were met during the fiscal year, and sanitary information was
exchanged between the Public Health Service and the Pan American
Sanitary Bureau, the health section of the League of Nations, and
the International Office of Public Hygiene at Paris.
Another volume was added to the series of annual compilations of
Federal and State laws and regulations pertaining to public health.
224
SECRETARY OF THE TREASURY
225
Laws and regulations pertaining to smallpox vaccination were collected, compiled, analyzed, and published, together with abstracts
of all (iecisions on this subject by courts of last resort in the United
States.
Many requests were received for information as to the laws and
regulations on subjects pertaining to health. These requests were
complied with as far as possible.
The dissemination of health information of a popular nature by
radio was continued by the Public Health Service throughout the
fiscal year. Two broadcasts were sent out each month through 49
cooperating stations.
Reports to the Surgeon General indicate that health conditions
throughout the country were unusually favorable during the fiscal
year. During the first three months of 1927, although there was a
widespread epidemic of influenza in Europe, the United States was
fortunate in having comparatively few cases of this disease, and these
were generally mild, with few cases in which pneumonia developed.
The record for the calendar year 1926 is not so favorable. The
general death rate increased slightly over that for 1925, and the infant
mortality rate also increased. These increases were due, largely, if
not entirely, to the epidemic of influenza which occurred during the
winter and spring of 1926. Measles was unusually prevalent at the
same time.
There was a continuation of the reduction in the death rate
from tuberculosis, although the difference between the rates for
1925 and 1926 was small.
I n 1925 the death rate from typhoid fever showed a reaction from
the steady decline which had been observed for three decades at
least. In 1926, however, the typhoid fever death rate in 40 States
was 6.7 per hundred thousand, as compared with 8.3 in 1925.
The case and death rates for diphtheria for the year 1926 were
the lowest ever recorded in the United States, but during the first
six months of 1927 the incidence of this disease increased, although
the .numbers of cases and deaths were much smaller than those reported
a few years ago.
During the fiscal 3^ear there was not much change in the number
of ports reporting cases of quarantinable diseases. Plague and
typhus fever were widespread and cholera was confined to Asia, but
appeared to be spreading at the close of the fiscal year. Yellow
fever has been eliminated from many places where it was formerly
a, scourge, but it still exists in parts of Africa and occasional cases
appear in South America.
Plague was reported from nearly all parts of the world with which
we carry on commerce. I t appeared in Asia, Africa, Europe, and
South America. Sporadic or imported cases, reported from ports
226
BEPQR.T ON THE FINANCES
where the disease is unusjial, emphasize(i the necessity for (constant
vigilance. Although the numb.er of cases decreased in countries
where the disease is usually prevalent, there was little, if ainy, decrease in the number of potts in which plague appeared.
The number of cases qf plague reported in India was less than
the number reporte(i for the preceding fiiscal year. Inciia is the prin-:
cipal center of infection for this disease. The incicienGe of plague
also decreased in Siam, French Indo-China, and Java.
T h e Japanese steamship Manila Maru, from Pacific ports and ports
in South America, arrived at New Orleans on Ocjtqber 24 with twQ
human cases of bubonic plague. The cases were removed in quarajiitine, where one patient subsequently clied. Diagnosis in both cases
was confirmee! clinically and b.acteriologically. Repeated cyani.de
fumigations were made during the (iischarge of ca,rgo under supervision into barges alongside. After complete discharge the Yessel
was given thorough fumigation throughout and was then surveyed to
locate the breeciing places of rats on the ship an(i perinanently to
eliminate all these in so far as possible. The vessel left New Orleans
on November 17, 1926, bound for Cristobal, Canal Zone; San Pe(iro,
Calif.; Honolulu, H a w a i i ; and Japan.
Cholera was prevalent during the fiscal year in In(iia, Siam, French
Indo-China, China, Manchuria, and Korea. There was a s<evere
epidemic during the summer of 1926 in Shanghai. Just after the
close of the fiscal year the disease spread to ports in the Persian Gulf,
Iraq, and Persia.
There has been a decrease in the number of cases of typhus fever
since shortly after the close of the World War, but the disease is
still a serious problem in the IJkraine, Russia, Poland, Rumania, and
other parts of Eastern Europe and Asia. The disease is prevalent
in Mexico and along the western coast of South America. Cases were
reported in the Irish Free State.
Yellow fever was reported at Bahia, Brazil, early in the fiscal year.
The only other cases of this disease reported were in Africa—Liberia,
the Gold Coast, Togoland, Dahomey, Nigeria, and French West
Africa. I n some parts of this territory the disease was more prevalent than it has been for several years.
Smallpox was reported from Europe, Africa, Asia, North and
South America, and many isolated ports.
Division of foreign and insular quarantine and immig^'ation
Quarantine transactions.—Duving the fiscal year 29,229 vessels and
3,054,594 persons were inspected by quarantine officers. Of these,
20,284 vessels, 820,793 passengers, and 1,140,922 seamen were inspected upon arrival at stations in the continental United States;
SECRETARY O^F THE TREASURY
227
2,991 vessels, 169,461 passengers, and 226,373 seamen were inspected
at insular stations; and 5,954 vessels, 424,172 passengers, and 272,873
seamen were inspected at foreign ports prior to embarkation for the
United States.
Of the passengers who embarked at European ports 60,774 were
vaccinated and 62,995 were deloused under the supervision of medical
officers of the sfetvice. Their clothing aiid baggage, amounting to
63,472 pieces, were disinfected.
A total of 7,116 vessels were fumigated either because of the
occurrence of disease on board or for the destruction of rodents,
31j073 rats Were recovered, of which nuinber 18,334 were examined
for plague infection.
The efforts of the service to exclude quarantinable disease from
the United States and its possessions wer^ successful. During the
year 17 cases of smallpox, 2 of leprosy, and 2 of human plague reached
our quarantine stations. No case of yellow fever, typhus, or cholera
arrived at quarantine. The prophylactic measures applied by Public
Health Service officers at foreign ports of departure undoubtedly
contributed to this result.
During the past year quarantine officers were authorized to stccept
as competent evidence, fumigation certificates properly visaed by a
United States consul, provided the certificate contains the same, or
substantially the same, information as Certificates of Fumigation of
the United States Public Health Service, and, in addition, indicates
the treatment of substantially all parts of the vessel, and if, after
a thorough inspection of the vessel the medical officer accepting the
certificate is satisfied that the fumigation has been performed in accordance with the requirements of the United States Public Health
Service, and the vessel shows a satisfactory freedom from rat infestation.
I n view of the fact that the yield of rats after fumigation of oil
fcanl5:ers is relatively low, the extension of the period between fumigation of such vessels has been authorized^ provided, upon actual detailed inspection they show no evidence of rat infestation. The necessity for fumigating tankers is now based upon the presence or
absence of observed rat infestation and iiot upon previous ports of
call or time elapsed since last acceptable fuiiiigation. If, after inspection, tankers are not free of rats, they will be fumigated. I t
is expected that this procedure will materially diminish the nuniber
of tankers fumigated.
I n November of the past fiscal year medical officers of qtiarantine
stations were authorized to begiii the use of Zykloii-B in the fuinigation of ships. Fumigation with this H C N material not only greatly
reduces the amount of equipment necessary, as compared with other
228
REPORT ON THE FINANCES
fumigants, but allows the work to be done with much less personnel
and will reduce the cost of fumigation.
I n conformity with the P a n American Sanitary Code, the Public
Health Service has now printed and is now using the form of bill
of health set forth in the appendix of said code and adopted as the
standard bill of health.
During the past year a great deal of consideration has been given
to the possible exemption from fumigation of ships from noninfected
ports, provided they show no rat infestation and very slight rat
harborage under a careful inspection of all parts of a vessel. I n
order to maintain a vessel in a rat-free condition, or at least to have
the rat population reduced to an unimportant number, fumigation
is necessary at least every six months or the vessel must be relatively
rat-proof, and a great many steamship companies have come to
realize in the past year the importance and economic value of ratproofing their vessels.
i n accordance with article 28, International Sanitary Convention
of Paris, 1926, a combined form of deratization or deratization
exemption certificate was drawn up and was submitted at the last
meeting of the Office International in April of this year. This
certificate was received very favorably and is now in use at a number
of the quarantine stations of the Public Health Service for recording
results of inspections for rat infestation and rat harborage.
At the meeting of the First Pan American Conference of Directors
of Health, which met in Washington, September 27-29, 1926, a committee was appointed to formulate a program for the investigation of
plague. This committee consisted of Dr. Lucas Sierra, of Chile; Dr.
Pablo A. Suarez, of Ecuador; and Dr. S. B. Grubbs, United States
Public Health Service. This committee recommended that the Pan
American Sanitary Bureau request each of its signatory powers to
begin in one or more places, preferably ports, a plague survey of
rats and fleas. Some of this work has now been started and reports
of these surveys are being received, particularly from Ecuador. Ratflea surveys are now being conducted in New York; San Juan, P . R.;
Savannah, Ga.; and Norfolk and Newport News, Va.
Medical inspection of aliens.—There were 881,699 alien passengers
and 996,198 alien seamen examined by medical officers at the various
stations. Of this number 24,292 passengers and 3,117 seamen were
"certified " in accordance with the act of Congress approved February 5, 1917.
The most important causes of certification of alien passengers were
trachoma, 412; tuberculosis, 213; feeble-mindedness, 168; insanity,.
87; syphilis, 96; and gonorrhea, 354.
Of the alien seamen certified 112 were for trachoma, 44 for tuber-^
culosis, 420 for syphilis, 428 for chancroid, and 915 for gonorrhea.
SECRETARY OF THE TREASURY
229
Examination of alien passengers abroad.—There were 148,539
applicants for immigration visas examined by medical officers abroad.
Of this number, 1,502 were reported to the consular officers as afflicted with one or more of the diseases listed in class A as mandatorily excludable; 11,485 were reported as afflicted with a disease
or condition listed in class B as liable to affect their ability to earn
their own living; 1,496 of the applicants reported in class A and
5,084 of those reported in class B were refused immigration visas by
the consular officers because of the result of the medical examination.
Of 141,959 aliens who had been given a preliminary medical examination abroad and to whom visas had been issued, only a total
of 9 were certified upon arrival at a United States port as being
afflicted with class A diseases, resulting in mandatory deportation.
Division of domestic quarantine
Public health problems resulting from the Mississippi flood were
immediately met by the detail of Public Health Service officers to
work in cooperation with the American Red Cross headquarters and
with the State health officers in the flood area. Through the Public
Health Service public health personnel for the affected area was
secured not only from the Federal Government but from State and
local health organizations throughout the country. I n addition to
trained personnel, biologic products such as smallpox vaccine, antityphoid vaccine, and the like were obtained from State and municipal agencies in the large quantities required. Response to the appeals
for assistance were so prompt and generous that all needs were supplied within a few days from the beginning of the flood.
Upon the return of the people in the flooded area to their homes
a comprehensive plan of county health work was developed; which,
in the opinion of Federal and State health officials. Red Cross representatives, and representatives of the Rockefeller Foundation,
will meet the needs during the rehabilitation period, and afford a
foundation for the development of permanent health service. This
plan was developed at a conference of public health officials and
others held in New Orleans, La., on June 5,1927.
As presented to the department and approved, the plan provides
for the establishment of county health units in the affected counties
to be conducted under the immediate direction of the State boards
of health and county authorities and made possible through the
financial cooperation of the United States Public Health Service
and the Rockefeller Foundation. I t is proposed that this arrangement continue for a period of 18 months from the time
of its establishment, when it is believed that the States and communities will be in position to assume a much larger proportion of the
expense, and that a reorganization of the plan will be in order.
230
REPORT ON THE FINANCES
Ninety counties in 7 States (Kentucky, Tennessee, Mississippi,
Missouri, Louisiana, Illinois, and Arkansas) are iiicluded in the
plan: During the fiscal year 1928, the cost of the work to the several
agencies is estimated as follows:
State departments of health.Counties
United States Public Health Service.
Rockefeller Foundation
,
$198,245
365, 390
262, 000
:__ 130,000
955, 635
Through its participation in the plan as indicated, the United
States Public Health Service will be enabled to prevent the spread
of smallpox, trachomaj and typhoid fever within the flooded areas
and to other States, and to meet any emergencies due to other
epidemic diseases that may arise. ' T h r o u g h the program of work
thus promptly inaugurated, grave apprehension on the part of the
people in the flooded region as to the likelihood of widespread occurrence of pestilential disease followirig the flood has been allayed and
confidence in health protection and conservation is being restored.
A serious epidemic of typhoid fever, resulting in approximately
5,000 cases of that disease and 500 deaths, developed in Montreal,
Canada, beginning about March 1, 1927. The problems in connection with the prevention of the spread of the disease to the United
States became so acute that a board of commissioned officers was
detailed to make a survey of the typhoid fever situation in Montreal,
permission having been granted by Canadian health officials. I t
was ascertained that the cause of the epidemic was infected milk,
and the conclusions of the board were to the effect that Montreal for
the time being was not a comparatively safe place for visitors. - I n
addition health authorities of the States receiving shipments of milk
and cream from Canada were strongly advised to see that all such
products were pasteurized or otherwise processed under official supervision, so as to be rendered free from typhoid, tuberculosis, or any
other infection liable to endanger human health.
Immediately upon notification of the hurricane disaster in Florida
two medical officers and three sanitary engineers were dispatched to
the disaster area for the purpose of aiding State and local health
authorities in emergency measures for the protection of the public
health. Smallpox vaccine and other biologic products were made
available, and advice and assistance were given in the safeguarding
of water supplies, sanitary disposal of wastes, and prevention of
mosquito breeding.
No human plague has occurred in the United States during the
current fiscal year. Plague in ground squirrels continues to exist
over a large section of California and is a continuous public health
SECRETARY OF THE TREASURY
231
menace. Present methods of operation are not sufficiently intensive
to eradicate ground-squirrel plague.
Hospitals for the eradication of trachoma, conducted in cooperation
with State and local authorities, were operated at Rolla, Mo.; Knoxville, Tenn.; RussellviUe, Ark.; and Richmond, Ky.
Activities pertaiiiing to the certification of water supplies used on
trains and vessels engaged in interstate traffic were conducted as
heretofore, as were activities relating to the sanitary control of shellfish and to sanitation in national parks.
The Twenty-fifth Annual Conference of State and Territorial
Health Authorities with the Public Health Service was held on May
20 and 21,1927.
Division of scientific research
Although the intensive student of public health is constantly
observing the humanitarian and economic benefits which accrue from
the application of scientific research in his subject, these benefits are
often less apparent to those immersed in other affairs and to the
public, unless some large emergency brings them conspicuously to
light. During the past year the great emergency precipitated by the
Mississippi floods gave opportunity for the application on a large
scale of methods which had been developed in the kind of researches
carried out by the Public Health Service and here briefly summarized.
The malaria researches developed methods of screening the ill-constructed cabins commonly encountered in certain malarious regions,
so that a great measure of protection against the mosquito carriers
of the disease was afforded at moderate costs. The nutrition
researches have ascertained the pellagra-preventing properties of
many common foodstuffs, so that it is possible to select a dietary
calculated to prevent pellagra. Aside from certain diseases, the
method of prevention of which was already known, malaria and
pellagra were the most serious menaces to the flood-stricken populations, and these researches have furnished the most practicable and
economic means for minimizing the danger.
The stream-pollution studies have furnished during the year
additional instances of the value of resorting to scientific inquiry
rather than to legal controversy in the settlement of sanitary questions arising from the pollution of interstate waterways, as well as
of the indispensable nature of fundamental studies which made
these inquiries possible.
The areas in which,Rocky Mountain spotted fever is prevalent
are becoming opened up more and more to tourist and commercial
invasion, thus magnifying the danger of increasing the number of
infections with this often fatal malady. The administration of a
vaccine devised and prepared by research workers of this service
64761—FI 1927
17
232
REPORT ON T H E FINANCES
appears to have greatly reduced the number of infections and
absolutely prevented fatal outcomes for the exposed persons who
received it.
Diversified studies in pressing health problems encountered in
industry have continued to furnish reliable and up-to-date information of value both to employers and employed. The studies of certain aspects of child hygiene have been continued with satisfactory
progress. The sanitary studies of milk supplies have been of noteworthy benefit in the places where they have been carried out,
resulting not only in improving to a marked degree the safety of
milk from a health standpoint, but in actually increasing the total
supply of market milk, while the administrative difficulties of health
officials have been reduced and the producers encouraged to improve
their methods. I n view of the disasters which can be caused by
improperly controlled milk, as illustrated during the year in a large
Canadian city, the importance of these studies is self-evident.
The survey of the salt-marsh mosquito menace completed its first
full season with several reassuring developments. The problem,
which is serious enough from an economic standpoint, appears, however, not to have the stupendous scope which was assumed from a
preliminary study of the maps. The immense potential mosquitobreeding area appears to be producing only in certain spots, and it
is believed that sufficiently cheap methods of eradication may be
developed greatly to ameliorate conditions.
At the Hygienic Laboratory studies of great diversity have been
prosecuted, ranging from those in the underlying sciences on which
modern health practice is founded to investigations of acute practical
problems demanding early solution. Among the latter is the somewhat disturbing increased prevalence of typhus fever in this country,
which offers some unexplained differences from the accepted conception of European typhus, although evidently due to an identical ultimate agent.
Among other studies in which satisfactory progress has been
made are those of leprosy, goiter, infiuenza, Malta fever, and trachoma. I n the case of tularaemia, accumulating evidence shows this
disease, discovered during researches conducted by the service, is
widespread throughout many parts of the country, although the
actual number of .human infections has fortunately been relatively
Small. The means of avoiding this infection having been shown,
it is hoped that still fewer cases will be encountered in the future.
I t is apparent that no matter how much knowledge may be avail.able regarding the means of avoiding disease and improving health
^ these ends will not be achieved unless the knowledge becomes applied.
* For this reason the Public Plealth Service attempts to bring this
knowledge to the attention of health officials, physicians, and the
233
SECRETARY OF THE TREASURY
general public by all available measures. Among these perhaps none
is more helpful than the publishing of the results of surveys of health
administration in States and cities. During the past year the assembled surveys of the 100 largest cities of the United States were published by the service, thus enabling health officials to become acquainted with current practice in many places and to profit in their
own jurisdiction by the advances or the mistakes which were being
made elsewhere.
Division of 7narine hospitals and o^elief
The American merchant marine, which in 1789 carried only
201,562 tons of cargo, now carries more than 17,000,000 tons annually
and employs nearly a quarter of a million seamen. The medical care
and treatment of merchant seamen was undertaken by the Federal
Government in 1798 and has been continued, without interruption,
as a tangible contribution to the effort to keep the merchant flag
on the seas. Many merchant seamen are still living who contributed
to the Marine Hospital fund directly from their wages according to
laAvs existing previous to 1884, Avhen direct levies Avere discontinued
and the tonnage tax on vessels was imposed. Among these seamen and some others there is a widespread belief that sums greatly
in excess of expenditures were thus collected by the Government
between 1798 and 1884. This fallacy has sometimes resulted in
criticism of the Federal Government and merits a correction. All
collections from seamen from 1799 to 1884, inclusive, aggregated
$15,794,807.63, the amounts collected from each seaman by the
customs officers being 20 cents per month from 1799 to 1870, and 40
cents per month from that time until 1884.
Cost of cooistruction, repairs, and maintenance of mai^ine hospitals, fiscal years
1798-188J^, inclusive
Fiscal year
1798-1877
1878
1879
1880
1881
Cost of construction,
repairs, etc.
Cost of maintenance
$3,304,704.80
8,140. 01
5, 051.17
12,050. 74
2,042.76
$13,302, 667. 06
367,950. 32
375,164.01
402,185.49
400,404.46
Fiscal year
1882
1883 .
1884
Total
Cost of construction,
repairs, etc.
$54,192.02
45,138.16
37,460. 08
3,468,779. 73
Cost of maintenance
$413, 928.14
434,525. 29?
456,767. 37
16,153,592.14
I t is evident from the above statement that the sums collected
from seamen did not equal the expenditures for the period, which
aggregated for maintenance and construction purposes $19,622,371.8Tc.
During the fiscal year ended June 30, 1927, approximately 300,000
beneficiaries applied at the 25 United States marine hospitals and 12S
other relief stations of the Public Health Service, of whoin 41,951
were treated in hospitals, 210,252 in out-patient offices, and 62,008
234
REPORT ON THE FINANCES
were given physical examinations not related to treatment and requiring a written report to the master of an American vessel or some
requesting agency of the Federal Government. Civilian seamen from
American merchant vessels continued to be the principal beneficiaries,
a complete list of which follows:
Seamen, American merchant marine.
Oflacers and enUsted men, United States Coast Guard.
Officers and seamen, United States Coast and Geodetic Survey.
Keepers and assistant keepers, United States Lighthouse Service.
Seamen, vessels of the United States Army (Engineer Corps and Army
Transports).
Seamen, Mississippi River Commission.
Patients of the United States Employees' Compensation Commission.
Lepers.
PAY PATIENTS
Patients of the United States Veterans' Bureau.
Personnel of the Army, Navy, and Marine Corps.
Foreign seamen and nonbeneficiary seamen.
Immigrants.
PHYSICAL EXAMINATIONS ONLY
Civil service applicants and employees.
Civil service employees for retirenient.
Civil service employees suspected of having tuberculosis or other communicable disease.
Applicants for pilot's license.
Able-bodied seamen, for rating.
Applicants for military pensions.
Applicants for Officers' Reserve Corps, United States Army.
Applicants for citizens' military training camps.
Food handlers on vessels engaged in interstate trade.
Applicants for aviator's license to the Department of Commerce.
Medical officers on duty at marine hospitals and relief stations, in
addition to their other duties, instruct and examine all ships' officers
for American vessels in first aid; give medical advice by radio to
inquiring ships at sea; issue permits to ships for medicinal liquor and
narcotics and bills of health to outbound vessels; make special investigations of claims for compensation for injury for the Employees'
Compensation Commission and for the Committee on Claims, House
of Representatives; vaccinate Government employees engaged in
handling mail or in interstate or foreign travel; inspect immigrants;
treat sick immigrants and detained Federal prisoners; and serve on
all Coast Guard boards for admission, promotion, and retirement.
Twenty-four medical and dental officers are detailed to the commandant. United States Coast Guard, for duty aboard cruising cutters and
elsewhere, and 99 contract physicians provide emergency medical care
for small Coast Guard stations remote from marine hospitals and
other regular relief stations. Medical supplies are furnished to all ves-
SECRETARY OF THE TREASURY
235
sels and shore stations of the Coast Guard and vessels of the Lighthouse Service. The personnel of the Coast Guard now numbers
10,984 officers and men, an increase of 11.62 per cent for the year,
and furnish approximately 14 per cent of the hospital and out-patient
clientele.
The number of physical examinations has increased rapidly within
recent years, particularly among civil service applicants and postoffice employees, and it was not possible to comply with all requests,
although a careful physical examination by an impartial medical
officer is of great value in determining fitness for specified duties, in
preventing sickness and disability, and to safeguard against fraudulent claims for compensation.. I t is of much greater value than what
President Harding termed " the friendly certificate of the family
physician." The secretary of the Civil Service Commission, in a letter
dated June 27, 1927, states that because of recent legislation enlarging the benefits to employees under the retirement and the employees'
compensation statutes an increasing number of physical examinations will be required. The chairman of the Employees' Compensation Commission, in a letter dated June 21,1927, has also requested a
much larger amount of service than that previously rendered because
of the longshoremen's and harbor workers' compensation act, affecting approximately 400,000 longshoremen and harbor workers and
requiring examinations involving a very special degree of care,
amounting often to complete medical surveys. The Post Office
Department, in a letter dated June 22, 1927, requests additional services involved in the physical examination of post-office employees
to determine fitness for certain duties and for first aid in the large
establishments. To comply with the above requests it will be necessary
to increase the appropriations to augment the personnel at the relief
stations concerned, and estimates to the desired end have accordingly
been made by the Surgeon General.
Division of venereal diseases
Various phases of research in connection with venereal diseases
were undertaken during the year. One of the most important of
these has been the effort to determine the prevalence of these diseases
in the general population, which has been carried out in a number
of cities and rural districts. As a result of these studies it has been
found that on an average 1.5 per cent of the population of the cities
studied are constantly under treatment for gonorrhea or syphilis.
The venereal-disease clinic at the Hot Springs National Park has
been continued, 3,682 patients receiving 58,489 treatments during the
year. This clinic serves as a laboratory in which various practical
phases of venereal-disease control can b„e investigated. Attention
236
REPORT ON THE FINANCES
was given to the prevention of venereal diseases among beneficiaries
of the service by the utilization of the facilities offered in certain of
the marine hospitals for study of more effective measures of prevention and treatment. A publication was issued which was designed
primarily for merchant seamen giving the facts concerning venereal
diseases and their prevention. During the year studies were undertaken to determine the value of nonspecific methods of therapy in
syphilis, to investigate the immunity which is developed during the
course of this disease, and to investigate certain bacteriological problems in gonorrhea.
Although no money has been appropriated since 1925 for allotment to States for venereal-disease control, active cooperation of the
States has been maintained, and reports are being received regularly
from nearly- 500 venereal-disease clinics in which 107,688 patients
were given 1,964,233 treatments during t h e year.
Educational work consisted of informing the public through bulletins, pamphlets, and motion pictures of the importance of the venereal diseases, in furnishing material to more than 200 summer schools
upon which they based courses in sex education, and a study of
methods being employed in the high schools of the country in connection with sex hygiene and venereal-disease control. This study
initiated such a large volume of requests for information from school
authorities that a symposium on sex education was issued and is
being distributed to them.
Division of personnel and accounts
At the close of the fiscal year the regular commissioned officers
of the service numbered 228, which included the Surgeon General, 3
assistant surgeons general at large, 21 senior surgeons, 135 surgeons,
21 passed assistant surgeons, and 47 assistant surgeons. Eighteen
officers were on waiting orders. Four resignations and four deaths
occurred in the regular commissioned corps during the year.
Seventy-two reserve officers were on active duty July 1, 1927, including 1 assistant surgeon general, 1 senior dental surgeon- 6 surgeons, 3 dental surgeons, 9 passed assistant surgeons, 16 passed assistant dental surgeons, 31 assistant surgeons, and 5 assistant dental
surgeons.
The following list shows the total personnel on duty July 1, 1927:
Commissioned medical officers, regular corps
Commissioned officers. Reserve Corps
Acting assistant surgeons
Attending specialists and consultants
Contract dental surgeons
:
Internes
Scientific personnel, general
:
228
72
496
224
. 34
18
24
SECRETARY OF T H E
237
TREASTJRY
Pharmacists
35
Administrative assistants
Druggists
:—
Nurses
Aides
Dietitians
Uaboratorians
Scientific^—Hygienic L a b o r a t o r y . . .
Pilots
M a r i n e engineers
Olerks
All other employees
Total
-
16
11
342
35
21
26
_ —
26
—
36
36
414
•- 2,305
2.
^
—
—
-—.
-—
- —
- —
4, 399
This total does not include 4,418 persons appointed, at nominal
compensation, to assist in the collection of epidemiologic data. They
are fbr the most part officers or employees of State and local health
organizations who transmit to the service reports of disease preva-,
ience gathered by those agencies.
Financial statement
A statement of appropriations and expenditures for the fiscal year
1927 follows:
Appropriation title
Appropriated
Public Health Service proper: .^
Salaries, oflQce of Surgeon General
Pay, etc., commissioned oflBcers and pharmacists
Pay of acting assistant surgeons
.
Pay of other employees
Freight, transportation, etc
Maintenance, Hygienic Laboratory
_._.
Preparation and transportation of remains of officers
Books
-.
Pay of personnel and maintenance of hospitals
Quarantine service
1.
Preventing the spread of epidemic diseases
Field investigations of public health
Interstate quarantine service.
Studies of rural sanitation.
.
..-_
Control of biologic products..
•. ExpenseSi-division'of;venereal diseases
Survey of salt-marsh areas. South Atlantic and Gulf States
$101,000.00
1,175,000.00
300, 000.00
Total, Public Health Service proper
Expended
1,000,000.00
25,000.00
43,000. 00
1,500.00
500. 00
5,517,966.31
460,000. 00
430,000.00
280,000.00
69,000.00
75,000.00
45,000.00
75.000. 00
25,000. 00
$98,982. 30
1,171,648. 83
292,065. 67
977,113.74
24,696.30
42,495,86
348,00
498. 96
6,4.76,377. 94
455,846.16
229,126. 79
273,825. 20
64, 859. 61
70,562.18
44, 468.99
74,749.37
18,474.04
9, 622. 966. 31
9,316,139. 94
2 262,895. 40
262,895.40
Allotments from U. S. Veterans* Bureau:
Medical and hospital service. Veterans Bureau
Total, U. S. Veterans'Bureau funds
Grand total
262, 895. 40
262,895.40
9, 885,861. 71
9,579,035.34
1 Includes $267,966.31 reimbursement for care and treatment of U. S. Veterans' Bureau patients and
miscellaneous.
2 Includes $13,695.40 obligations not yet reimbursed.
r
SECRET SERVICE
DIVISION
On charges involving counterfeiting and forgery, as well as miscellaneous offenses against Federal statutes relating to the Treasury
Department and its several branches, 722 persons were arrested by
agents of the service or by their direction during the fiscal year
ended June 30, 1927. Of the total number apprehended, 331 were
note counterfeiters, passers of counterfeit notes, or engaged in raising and passing altered currency; 62 coin counterfeiters; and 249
check and bond forgers and passers.
Twenty-nine new counterfeit note issues made their appearance
duruig the year, several productions being expertly made and
widely circulated, although for the most part the specimens were
crudely executed and quickly detected. The greater volume of
counterfeit notes made and circulated during the year centered in
and around New York City. An aggregate of $239,326.90 in counterfeit notes, including fractional currency, was captured or seized during the year by agents of this service, and counterfeit coins, aggregating $16,729.71, were also confiscated in connection with raids and
arrests. Agents also seized or captured 309 plates for printing
counterfeit obligations and securities, 43 molds for counterfeiting
coins, 1 die, together with a large amount of miscellaneous materials
and apparatus, including printing presses, plating outfits, ladles,
melting pots, inks, cameras, files, crucibles, etc. A large number of
stolen Treasury checks, either in blank or fraudulently prepared for '
negotiation, were recovered during the year.
Of the persons arrested for the offenses of which this service takes
cognizance, 355 were convicted and sentenced, 226 are awaiting court
action, and 37 were acquitted. The others were variously disposed
of, some being committed to insane asylums, others turned over to
military or police authorities, and four died while awaiting trial.
Agents during the year investigated 1,166 forged-check cases and
116 bond cases, as well as a number of miscellaneous matters affecting the several branches of the Treasury Department involving
frauds and irregularities.
Cases involving altered adjusted service certificates, representing
violations of section 704 of the World War adjusted compensation act,
with the investigation of which this service is charged, are being
received in this office in steadily increasing volume. In order to
carry on more expediently and efficiently the work,of the service,
238
SECRETARY OF THE TREASURY
239
with its added duties imposed by law in enforcing the World War
adjusted compensation act, Federal farm loan act, and investigation of
counterfeiting and forgery of transportation requests, it will be necesary to increase the personnel of the field force. New districts and
divisions of established districts have been planned with a view to
securing a wider distribution of agents, thereby enabling the division
to handle more thoroughly and effectively the increasing volume of
work.
Kepresenting the Treasury Department, the chief of the Secret
Service Division attended meetings of a mixed committee of experts
in Geneva June 23-28 to consider the subject of suppressing counterfeiting. As a result of the committee's, deliberations, recommendations for the establishment of central bur-eaus, uniform laws, and
procedure were agreed upon to form the basis of a draft convention
to be submitted to the interested Governments for ratification and
approval. More or less extensive circulation in Europe of counterfeit United States currency, including altered notes, influenced the
Treasury Department in sending a representative to this conference,
and it is believed that the establishment of these central bureaus,
charged with the specific duty of suppressing counterfeiting and providing for the direct interchange of information and records between
these bureaus, will be a distinct advantage to the participating Governments having agencies engaged in stamping out counterfeiting.
OFFICE OF THE SUPERVISING ARCHITECT
Operations under public buildings construction program
The Sixty-ninth Congress during the second session inaugurated a
new policy in respect to public-building construction, placing upon
the Secretary of the Treasury and the Postmaster General the duty
of ascertaining construction needs throughout the country and submitting to Congress recommendations for appropriations.
The act, approved May 25, 1926, authorized a total of approximately $165,000,000 to be expended at the rate of not exceeding
$25,000,000 per annum, of which $10,000,000 may be expended in the
District of Columbia.
I n order to ascertain building needs throughout the country, surveys have been made of 1,950'places, partly by means of questionnaires and in the most important cases by personal inspection; based
upon which recommendations have been submitted to Congress.
The act of July 3, 1926, made appropriation for carrying out a
portion of this program involving (under sec. 3) 69 projects previously authorized but for which the limit of cost was insufficient, and
(under sec. 5) 8 additional projects, making a total of 77 projects
exclusive of the District of Columbia. To carry out this work it
Avas necessary to make a large increase in the technical force and a
lesser increase in the clerical force, Avhich was accomplished with
the assistance of the Civil Service within six months. Of the 77
places enumerated in the act, 69 were included in section 3, of Avhich
23 involve the acquisition of sites. As the titles to only 4 have
been secured, 19 projects are necessarily deferred. Of the remaining 50, there are 6 where the limit of cost is still insufficient, so that
there are only 44 workable projects; the working drawings for
most of these have been completed, and on June 30, 1927, 24 were
under contract, involving $4,006,465. I t is expected that the remaining 20 will be placed under contract during the fiscal year 1928,
besides the 19 involving acquisition of sites, provided titles to the
sites are secured in time through the Department of Justice.
Under section 5 eight items are authorized, exclusive of the District of Columbia; three are for the purchase of sites only, which
have been acquired; four projects have been placed under contract
involving $899^636; and the eighth project (Memphis, Tenn.) has
been delayed with the intention of securing amended legislation.
240
SECRETARY OF THE TREASURY
241
Statement of post offices, customhouses, courthouses, marine hospitals, quarantine stations, sanatoriums, and miscellaneous ivork for the year ending June
30, 1927
Number of buildings completed (occupied or ready for occupancy)
at the end of the fiscal year 1926, exclusive of marine hospitals
and quarantine stations
1, 313
New buildings completed during the fiscal year ending June 30,
1927, exclusive of marine hospitals and quarantine stations
8
1, 321
Buildings placed under contract during the fiscal year ending
June 30, 1927, exclusive of hospitals
.
Total buildings completed and in course of erection June 30, 1927,
exclusive of marine hospitals and quarantine stations
Buildings authorized under acts of May 25 and July 3, 1926, and
all previous acts not under contract June 30, 1927, exclusive of
marine hospitals, quarantine stations, and extensions
Total buildings, miscellaneous projects, etc., completed, in
course of erection, or authorized, not including extensions.
Marine hospitals and quarantine stations:
Number of marine hospitals and quarantine stations (both include a number of buildings each) ; new quarantine station,
Mobile, Ala. (Sand Point), completed during fiscal year
1927 (old quarantine station abandoned)
Public building acts approved May 25 and July 3, 1926, and
previous acts provided for additional hospitals, two of them
on new sites to take the place of old ones at present in service and two additional buildings on present sites.
24
1, 345
47
1, 392
57
^
Projects completed.—During the fiscal year 1927 eight Federal
buildings were completed at Cheboygan, Mich., Comanche, Tex.,
Fairmont, Minn., Prescott, Ark., Sandusky, Ohio, Tullahoma, Tenn.,
Walden, N.^ Y., and Vineland, N. J . ; also an additional story at
Sandusky, Ohio, and betterments at Prescott, Ariz.
Eighteen major miscellaneous, projects were completed, with a
total expenditure of $267,522.68, and one quarantine station at
Mobile (Sand Point), Ala.
Projects in cou/rse of constructioiv.—On June 30, 1927, 24 Federal
buildings were in course of construction at Athens, Term., Bayonne,
N. J., Branford, Conn., Buffalo, Wyo., Central City, Nebr., Chamberlain, S. Dak., Cody, Wyo., East Las. Vegas, N. Mex., Lancaster,
S. C , Leominster, Mass., Lewistown, Pa., Madison, Wis., Marianna,
Fla., McKees Eocks, Pa., Montclair, N. J., Montevideo, Minn., Mount
Carmel, 111., Newburyport, Mass., Eed Bluff, Calif., Sandpoint,
Idaho, Shelbyville, Ky., Syracuse, N. Y., Winchester, Mass., and
Yonkers, N. Y., at a cost of approximately $4,006,465. Also first
extension at Missoula, Mont.: additional story at Paris, Tex.; additional story at Birmingham, Ala.; and medical officers' quarters,
attendants' quarters, and rehabilitation of the hospital building and
242
REPORT ON THE FINANCES
extension to the power house, marine hospital, Chicago, 111., totaling
approximately $912,326, making a grand total of $4,918,791.
The office is called upon to make examinations of the structural
safety of the various buildings in Washington, D. C , under the control of the Treasury Department, as well as other departments, and
also give expert technical advice to various departments, which
includes the preparation of drawings and specifications.
Under authority of the acts of June 7, 1924, and of July 2,
1926, the construction of 15 buildings, including water supply, sewage-disposal plant, and other utilities, aggregating. in cost nearly
$1,000,000, were completed at the Federal Industrial Institution for
Women, Alderson, W. Va. The institution is now in operation with
a limited number of inmates. Plans were completed and contracts
awarded for 17 additional buildings, in amount $662,242.15. This
fulfills the requirements of the acts to provide an institution for 500
inmates.
Under authority of the act of March 4, 1924, the construction of
a hospital for disabled volunteer soldiers at Sawtelle (Santa Monica),
Calif., was completed at a cost of nearly $1,200,000, giving a bed
capacity of 525.
Buildings authorized in public building acts approved May 25, 1926, and July S,
^
1926, and all previous acts
NOT UNDER CONTRACT J U N E 3 0 ,
Alaska: Juneau (post oflace, etc.).
Arizona: Globe.
California: San Pedro.
Colorado: Durango.
Connecticut: Putnam.
District of Columbia:
Archives Building.
Department of Commerce.
Internal Revenue Building.
Agricultural Department—
Extensible building.
Central part Administration
Building.
Government Printing Oflace.
Liberty Loan Building.
Georgia: West Point.
Idaho: Coeur d'Alene.
Illinois:
Batavia.
Metropolis.
Paxton.
Iowa: Des Moines, courthouse, etc.
Kentucky: Winchester.
1927
Maine:
Caribou.
Fort Fairfield.
Massachusetts:
Maiden.
Southbridge.
Waltham.
Michigan: Wyandotte.
Missouri: St. Louis, Federal building.
Montana: Missoula, second extension.
Nevada:
FaUon.
Goldfield.
New Jersey:
East Orange.
MiUville.
Newark.
New York:
Fort Plain.
Long Island City.
Utica.
North Carolina: Wilson.
North Dakota: Jamestown.
SECRETARY OF THE TREASURY
Ohio:
Akron.
Fremont.
Wilmington.
Pennsylvania:
Donora.
Olyphant.
Sayre.
"
I Pennsylvania^Continued.
Tamaqua.
Tarentum.
Waynesburg.
Tennessee: Memphis, sub post ofl5ce.
Washington: Seattle.
West Virginia: Williamson.
' Wisconsin: Tomah.
E X T E N S I O N S AND E N L A R G E M E N T S COMPLETED DURING T H E F I S C A L YEAR
Sandusky, Ohio: Additional story.
1927
| Prescott, Ariz.: Betterments.
I N COURSE OF CONSTRUCTION J U N E 3 0 ,
Missoula, Mont.: First extension.
Paris, Tex.: Additional story.
243
1927
Birmingham, Ala.: Additional story.
M A R I N E H O S P I T A L S , E X T E N S I O N S , ETC.
Chicago, 111.:
Construction medical ofiicer's and
attendants' quarters.
Rehabilitation of hospital buildings and extension to power
house (under contract June 30,
1927).
Savannah, Ga.: Medical oflScer's quarters.
Detroit, Mich.: New hospital.
Cleveland, Ohio: New hospital.
District of Columbia building progra^m
A t the present time the preliminary drawings for the Department
of Commerce Building are approaching completion, and their approval in the near future will be followed by the development of the
actual working drawings and preparation of the specifications. As
the site for this building is now owned by the Government, it may
be possible to enter into a contract for general excavation for the
new building before January 1 and to proceed with the main contracts for the construction work before the end of the fiscal year. I n
the meantime a contract is to be awarded for the demolition of existing buildings on the site.
Preliminary draAvings for the Internal Eevenue Building, revised
to conform to the new grouping for buildings in the triangle area, are
about completed. The site for the Internal Eevenue Building, lying
between B and C and Tenth and Twelfth Streets, includes square
350, which the Government is seeking to acquire by condemnation^
and an award is promised in the very near future. Pending the
entire removal of the farmers' market, with the cooperation of the
District Commissioners, arrangements are being made to vacate the
western half of that space, and this will enable the Treasury Department to proceed with the construction of at least one-half of the
Internal Eevenue Building as soon as the necessary drawings and
244
REPORT ON T H E FINANCES
specifications are completed. Indications are that the first contract
for excavation should be in force about the end of the present calendar year and that contracts for the remainder and for the construction of the building proper will follow in proper sequence.
Under the authorization for additional buildings for the Department of Agriculture, drawings are in preparation for a central
wing to connect the two existing wings of the main Agriculture
Department Building, and it is hoped to have the draAvings ready for
the solicitation of proposals in March next. Drawings are nearly
completed for a large office and laboratory building to be constructed
on square 264. This building is so designed as to permit future
expansion to squares 296 and 263. Condemnation proceedings are
necessary to acquire square 264, and this matter is now in the hands
of the Department of Justice.
I n connection with the proposed archives building a very careful
study is being made as to the requirements of the building as affected
by the amount and character of the files in the various executive
departments and independent establishments. The detail involved
in this procedure is considerable and must be completed before any
steps can be taken other than the making of preliminary studies
which have been prepared for this building.
Remodeling and enlarging public buildings
There was an appropriation of $600,000 for the fiscal year 1927 for
remodeling and enlarging public buildings. The limit of expenditure for any one building under this appropriation was $20,000.
Under this authority 107 buildings received attention. In 51 of these
the contracts ranged from $1,190 to $19,867, totaling $598,453.95.
Location
Aberdeen, S. Dak., post olTice
Adrian, Midi., post office-Amarillo, Tex., post office and courthouse
Americus, Ga., post office-•_ — . . 1 . . .
-.
Annapolis, Md:, post office
Ann Arbor, Mich., post oflQce-Bristol, Conn., post office -.
Brownsville, Tex., courthouse, customhouse, and
post oflice.
.•
Chicago, 111., post office, and courthouse
Des Moines, Towaj post office and courthouse
Durham, N. C , post office
_
Eau Claire, Wis., post office
Erie, Pa., post office.
-.Eugene, Oreg., post office
,
Evanston, 111., post office
Evansville, Ind., post office and customhouse
Grand Haven, Mich., post office and customhouse
Greenville, S. C , post office and courthouse
Hamilton, Ohio, post office
Hazelton, Pa., post office
Janesville, Wis., post office
-
Worlc
Extension..
Changes. _.
Extension..
.....do
do
do
do
Changes.-.
do
do
Extension.,
.doChanges
Extension..
Mezzanine.
Changes.-.
Extension..
Changes. __
do
Extension..
Changes---
Amount of
contract
Space
gained in
square
feet
$17, 507.00
2,750. 00
19,867. 00
• 10,584. 00
19,327. 00
18,895.00
. 17,487.00
. 1, 240. 00
2,100
50
1,880
616
1,360
1,100
1,240
200-
1,240. 00
4, 500. 00
16,088. 80
12,434.10
7,942.80
13, 042. 00
6,111.00
4,092. 00
15,778.00
1, 250. 00
2,169. 00
16,588. 00
3,268.00
200
750
1,600
730
800
1,650
500
600
960
200
300
1,215
500
245
SECRETARY OF THE TREASUEY
Location
Work
Kewanee, 111., post office...
Logansport, Ind., post office
Louisville, Ky., post office and courthouse
McKeesport, Pa., post office
Marshalltown, Iowa, post office
Middletown, N. Y., post office
Milwaukee, Wis., post office
Mishawaka, Ind., post office
Nashua, N. H., post office
New Bedford, Mass., post office and customhouse
(old).
New Orleans, La.:
Mint..
Customhouse
Newport, Ky., post office
Newport News, Va., customhouse and post office
New York, N. Y., marine hospital
Northampton, Mass., post office
-..
Clean, N. Y., post office
Orlando, Fla., post office
Oswego, N. Y., post oflBce
Petersburg, Va., post office
Philadelphia, Pa., post office...
Plattsburg, N. Y., post office and customhouse
Portland, Me., marine hospital
Pottsville, Pa., post ofBce
Providence,"R. I., post office and courthouse
•Quincy, Mass., post office
Rome, N. Y., post office
i^aginaw, Mich., post office
Santa Barbara, Calif., post office
Spokane, Wash., post office
Stevens Point, Wis., post office
St. Augustine, Fla., post office
St. Joseph, Mo., post office and courthouse
Washington, D. C., customhouse
-..
Zanesville, Ohio, post office
Freeport, 111., post office (contract revoked)
Extension
-.
do
Changes
do
Extension
do...
Changes
Extension
do
Extensive alterationsRemodeling..
Extension
do
do
Changes
— ..do
Extension
--.do
Changes
Extension
do
do
do
Changes
do
,
do
Extension
Changes
do
do
Extension
Changes
do
do..
-.
Extension
Total..
Miscellaneous and minor items
Major items...Total amount obligated...
.-
-
Total space gained under above contracts (51 buildings)
Total space gained under minor contracts (56 buildings)
Total space gained
,.
Rate per square foot of space gained for 107 buildings is slightly over $8.
Space
gained in
square
feet
Amount of
contract
$16,626.00
17,466.00
1,190.00
3,283.00
19,729.00
19,484.50
4,250.00
16,525.00
12,431.78
9,665.25
1,800
1,650
200
445
1,900
1,300
700
2,794
1,260
1,600
11,771.37
19,734.05
19,273.00
19,646.75
1,680.00
8,647.00
18,158.00
19,544.58
1,547.50
17,604. 90
12,618.00
14,997. 00
18,300.00
1,800.00
6,091.00
1,320.00
15,247.10
4,877.40
2,553.00
1,429.00
17,262.40
3,988.65
1,450.30
3,018.00
19,583. 72
3,500.00
2,000
11,700
2,200
1,880
450
285
1,900
2,000
200
1,500
516
1,580
3,000
300
598,453.95
73,761
900
200
1,675
1,870
1,900
568
1,680
600
231
500
1,926
$1,546.05
698,463.95
600,000.00
Square feet
73,761
1,000
74,761
War claimis
Under the acts of August 25, 1919, March 6, 1920, and January 22,
1926, which permitted the filing of claims for relief to contractors,
subcontractors, and others for reimbursement for losses alleged to
have been due to war conditions, 193 claims including all special
claims were paid up to July 1,1926, and the balance paid on a special
claim up to July 1, 1927, making a total payment of $2,640,244.52.
Total amount appropriated by Congress, $2,650,000; balance,
$9,755.48.
There are still pending 57 claims awaiting audit, and 2 claims
awaiting court decision. The status of war* claims at the close of
business June 30,1927, is shown in the following table:
246
REPORT ON THE FINANCES
340 claims filed, original amount.
Special filed March, 1926—^
$3, 202,113. 29
90, 718. 50
3, 292, 831.79
193 claims paid up to July 1, 1927
2, 625, 029.55
Balance paid on special, Dec. 11, 1926, Mahoney Construction Co.
15, 214. 97
2, 640, 244. 52
2, 650, 000. 00
Total amount of appropriation
Balance
-
9, 755.48
91 claims disallowed July 1, 1927
Amount disallowed July 1, 1927, Mahoney Construction Co
501, 813. 94
28, 034. 94
Total amount claims paid
529, 848.88
2,640,244.52
Total amount claims paid, disallowed, or withdrawn
3,170, 093.40
57 claims awaiting audit (this amount may be more or less in
final settlement)
2 claims audited but awaiting court decision
.
109, 359. 53
22, 931. 51
Expenditwes, liabilities, and unencumfbbered balcmces
The expenditures from July 1, 1926, to June 30, 1927, contract
liabilities charged against appropriations, and unencumbered balances
were as follows:
Expenditures
S t a t u t o r v roll
Sites a n d additional l a n d
C o n s t r u c t i o n of n e w b u i l d i n g s
_
E x t e n s i o n s to b u i l d i n g s
Misc5ellaneous special i t e m s .„
R e n t of b u i l d i n g s . V e t e r a n s ' hospitals
R e m o d e l i n g a n d enlarging p u b l i c buildings
«.
Relief of contractors, etc., for p u b l i c buildings u n d e r T r e a s ury_
Hospital construction, Public Health Service...
H o s p i t a l facilities, etc., for w a r p a t i e n t s
L a n d s a n d other p r o p e r t y of t h e U n i t e d S t a t e s .
Repairs a n d preservation
Mechanical equipment
Vaults a n d safes
O p e r a t i n g supplies
General expenses
F u r n i t u r e a n d repairs
O p e r a t i n g force:.
A d d i t i o n a l lock-box e q u i p m e n t
—
R e n t of t e m p o r a r y q u a r t e r s
O u t s i d e professional services
,
Total.
1 Includes $5,000 reserve 1927.
» I n c l u d e s $20,000 reserve 1926; $5,000 reserve 1927.
8 Includes $5,000 reserve 1926; $21,849.80 reserve 1927.
< Includes $5,000 reserve 1926; $5,000 reserve 1927.
C o n t r a c t liaUnencumbilities charged
bered
against a p p r o - balances,
priations
J u n e 30,1927
$333,906, 86
6,406, 326. 82
885,941. 07
462,494. 49
69, 418.35
$296, 706. 76
4, 662,179.17
626,080.47
25, 401. 50
871,855.45
i9,452.17
15, 214.97
6, 681. 48
45,862. 54
1, 677. 88
938, 540. 77
559,382.18
78, 028. 34
2,809, 287. 96
797, 301. 03
669, 330. 46
6, 441, 751. 04
11, 091. 08
11, 61L 43
1,442. 09
21,407,146.29
16,932. 25
1, 371. 78
127.17
151,955. 83
93, 744. 06
49, 078. 44
311, 721. 59
56, 958. 00
136,700.54
547, 653. 69
8,342. 57
48, 000. 00
7,092,406. c
$37, 813.14
1, 728, 200. 00
11, 834,421. 99
1,098,464. 06
67,488.46
30,000. 00
1,446. 26
9, 755. 48
16,196. 08
23, 298. 76
794. 95
19, 769. 83
19, 777. 53
110,450. 95
« 622, 987. 04
« 455, 778. 44
* 93, 507. 97
22,143. 87
531. 93
155,046. 00
100, 657. 91
16, 348,429. 66
247
SECRETARY OF T H E TREASUEY
Classification of public buildings under control of the T7^easury Department, by
titles, showing expenditures in each class, prepared pursuant to act approved
Ju7ie 6, 1900 {31 Stat. 592)
Extensions,
alterations,
and special
items
Construction
Annual
repairs
Total expenditures, June 30,
1927
Post office, courthouse, customhouse
$103,054,324.27 $16,259,317. 08 $16,714,273.02 $136,027,914.37
buildings, etc
666,359.89
42,223.99
272,677. 89
Courthouse buildings
350,658.01
28,735,072. 38
3,373, 580.37
2,249,250.41
Customhouse buildings
23,112,241. 60
3. 031,610. 71
2,948,072. 48
10.162,712. 03
Marine hospital buildings
4,183, 028. 84
3,941,086. 24
8,760,351. 03
Post office buildings
, 84,184,006. 93
96 n85,444.20
2,282, 569.47
1,339,132. 22
6, 664,944. 56
Quarantine station buildings
3,043.242. 87
369,076. 62
104,010.20
966,442.19
Veterans' hospital buildings
,
493.355. 47
3,990, 671. 76
6,281,996.62
40,769,656. 73
MisceUaneous buildings
31,497, 089. 45
Total
249,917,847. 44
33,290,036.14
Cost of sites
Post office, courthouse, customhouse buildings, etc
$20,183, 571. 07
Courthouse buildings
173,334.69
Customhouse buildings
3,783,322.33
Marine hospital buildings
665, 243. 78
Post office buildings
28,976,096.85
Quarantine station buildings
248, 091. 60
Veterans' hospital buildings
Miscellaneous buildings
9, 040,812.44
TotaL.
64761—n 1 9 2 7 — 1 8
63,070,472. 76
37,669,662.77
320,877,546.35
Outstanding liabilities
chargeable against approUnencumpriations
bered balances
of appropriations
Buildings
Sites
$66,000.00
$1,284,824.10
6,'040.'00"
$931,841.78
126,183.69
33, 826.00
869,777.40
4,399,603.98
91,472.99
46,965. 76
112,500.00
72,251. 00
309,395.36
3, 805, 529.62
44,656.27
160,923. 56
8,306,868.77
296,706. 76
5,610,367.90
14, 768,674. 51
DIVISION OF SUPPLY
The Division of Supply (which was known as the Bureau of Supply
prior to July 1,1927), was recognized by Congress as a division of the
office of the Secretary of the Treasury in the act of January 26, 1927
(44 Stat. 1029), which provided an appropriation for its personnel.
I n anticipation of this action on the part of Congress, the former
division of printing was transferred to and consolidated with the
Division of Supply during the fiscal year 1927, and consequently appropriations for the division of printing as a separate office of the
department ceased with that fiscal year.
The Division of Supply is the central procuring or purchasing
agency of the Treasury Department, and as such it does the purchasing for all local and field activities, with the exception of those from
appropriations for the Bureau of Engraving and Printing (which
are exempted by law), the Coast Guard, and to some extent the
Bureau of the Mint. I t is charged also with certain duties closely
related to i^upchasing, such as accounting for funds appropriated or
allotted to it; supervision over printing and binding for the Treasury
Department and engraving work by the Bureau of Engraving and
Printing for all departments and establishments, unless money, bonds,
or stamps are involved; control over newspaper and periodical advertising for the department; routing of all freight, express, and parcelpost shipments; and warehousing and distribution of stationery and
miscellaneous supplies, including blank bookstand forms, to Washington and field offices of the Treasury Department. The appropriations to the department for purchases of stationery, for printing and
binding, and for postage are under its administrative control, and it
exercises immediate supervision over the work of the General Supply
Committee.
Expenditures from various appropriations
The following table gives the total cost of purchases made by the
Division of Supply during each of the past five fiscal years from specified appropriations from which allotments were made to the division
to cover expenditures made by it, and also purchases chargeable to
appropriations from which no allotments were made:
248
SECRETARY OF THE TREASURY
249
Expenditures by Division of Supply, fiscal years 1923-1927, by appropriations
B u r e a u s a n d offices, a n d titles of
appropriations
•Chief clerk a n d s u p e r i n t e n d e n t :
C o n t i n g e n t expenses. T r e a s u r y D,epartment—
C a r p e t s a n d repairs
File holders a n d cases
F r e i g h t , telegrams, e t c . . .
F u e l , etc
F u r n i t u r e , etc
F u r n i t u r e , 1924-25
Gas, etc
M o t o r vehicles
Aliscellaneous i t e m s
N e w s p a p e r clippings a n d b o o k s . . . ,
Rent..
.
Labor-saving m a c h i n e s . T r e a s u r y D e • partment....
operating expensesT r e a s u r y D e p a r t m e n t Annex
Annex Building, F o u r t e e n t h a n d
B Streets N W
D a r b y Building
•.
,
Library, Treasury Department
Total.
D i v i s i o n of S u p p l y :
stationery. Treasury Department
P r i n t i n g a n d binding, T r e a s u r y D e partment
Postage, T r e a s u r y . D e p a r t m e n t
M a t e r i a l s for bookbinder. T r e a s u r y
Department
General S u p p l y C o m m i t t e e Transfer of office material, s u p plies, a n d e q u i p m e n t
Salaries, General S u p p l y C o m m i t tee
Salaries a n d expenses. General
Supply Committee
.,
Total.
Division of B o o k k e e p i n g a n d W a r r a n t s :
C o n t i n g e n t expenses, public m o n e y s
B u r e a u of C u s t o m s : Collecting t h e reven u e from customs
1924
$351. 86
4,968.15
10,008.08
29,973. 70
4,873.60
$490.171
4,943. 55
10, 230.05
24,924. 57
4,901.43
24, 873. 34
4, 733. OOl
15, 819. 58
489. 60
16, 850.00
23,167.95
4, 730.17
14,345. 77
493. 83
14,650.00
1925
1926
1927
$494.02
3.979. 501
9, 886. 60
19, 663. 581
4, 422. 57
1,991. 841
20, 859. 45
7, 496. 24
13, 220. 33
483. 53
14, 649.92
$498.93
3,996. 87
9, 856. 30
18,396. 30
4,480. 25
$496. 57
4,974. 21
9,904. 21
18,002.16
7,462. 68
18,144. 52
6,976.421
12, 769. 81
• 985. ]6|
14, 650.00
18,392.51
9, 351. 86
11, 439. 41
997. 28
12, 500.00
4, 587.43
5, 694. 85
19,909. 58
13, 799. 36
13,924.13
13,469. 54
13,949. 21
12,935. 35I
11, 988. 56
11, 877. 40
36,156. 77
3, 783.97
33, 053. 86
3,981.04|
3, 820. 51
3, 560.03
3, 824. 36
1, 999. 75
133, 812. 92
120,102. 51
125,146. 53
342,952. 44j
368,948.86|
170,938. 62
379, 725.06|
C)
C)
246. 841
118, 506.98|
i})
319,045. 61
(0
0)
247. 491
(0
0)
249. 84!
111, 436. 681 105,606. 551
0)
(0
0)
458, 556. 57
i})
2 788,641.70
1,000.00
(?)
(^)
41, 339. 73|
77,188. 71
115, 683. 58
498,478. 88
1, 493. 60
430, 729. 78
448,808.83
487,477. 30 1,363,88 L 85
3,193.67
1, 269.92
2, 643.23
46,117. 78
233, 483. 02
271,195. 76
P u b l i c H e a l t h Service:
P a y of personnel a n d m a i n t e n a n c e of
hospitals
_.
1,631,791.15 1, 568,170. 65 1, 736, 689. 68 1, 632,874.
1, 570,880.71
Q u a r a n t i n e service
•.
348, 693.98 303,170.57^ 311,462. 22 296,458. 24I 311,630.66
I n t e r s t a t e q u a r a n t i n e service
610. 69
363. 47
204.92
474.99
5, 247.36
I n t e r s t a t e q u a r a n t i n e service, 1925-26..
7,115.34
1,989.661
• M a i n t e n a n c e of hygienic l a b o r a t o r y . . . .
27,302. 51
33,831.94
33,959.64
33,815.11
33, 589. 88
Field investigations
14,861. 521 12,369.701
17, 624. 65| 15, 600. 72| 20, 901.09
P r e v e n t i n g t h e spread of epidemic diseases
20, 450.15
23, 470. 53
37, 496. 77
21, 704.931 33,845.45
P r e v e n t i n g t h e spread of epidemic diseases, 1925-26
7, 200.62
25,165.13
Expenses, division of venereal diseases
2.951. 72
4, 541.80
4,423. 69
2, 302.06
4, 572. 22
Control of biologic p r o d u c t s
19, 759.90| 26, 658. 36
26, 452.97
22, 671. 28
18,087. 66
Books
:
212.61
494. 25
499.93
493. 24
448. 24
s t u d i e s of r u r a l s a n i t a t i o n
388. 231
130.12
200. OOl
40.00
Boston (Mass.) Q u a r a n t i n e Station
2, 402.00
3,110.00
708.00
I n v e s t i g a t i o n ^of U n i t e d States Coal
Commission
10. 56
M a r i n e hospital. S a v a n n a h , G a .
4, 811. 76
7, 059.74
7, 641.33
M a r i n e hospital, B a l t i m o r e , M d
5,395. 29
M a r i n e hospital. N e w Orleans, L a
885. 26
S u r v e y of salt m a r s h areas. S o u t h A t lantic and Gulf s t a t e s
1, 610. 29
TotaL.
2,069, 435.02 1,983,116.44 2,188,128.86 2,067,386.85 2,000,813. 66
J A p p r o p r i a t i o n accounting not d o n e b y D i v i s i o n of S u p p l y .
» I n c l u d e s $43,573.86 received from sales of c u s t o m s forms a n d r e i m b u r s e d to t h e a p p r o p r i a t i o n , a n d
$30,495.85 paid from a p p r o p r i a t i o n s other t h a n p r i n t i n g a n d b i n d i n g .
« I n c l u d e d i n a p p r o p r i a t i o n for p r i n t i n g a n d b i n d i n g .
• T h e p u r c h a s e a n d accounting for supplies for t h e B u r e a u of C u s t o m s a s s u m e d A p r . 1,1924.
250
REPORT OK . THE FIISTAKCES
Expenditures by Division of Supply, fiscal years 1923-1927, by appropriationsContinued
B u r e a u s a n d offices, a n d titles of
appropriations
Supervising A r c h i t e c t :
R e p a i r s a n d preservation of p u b l i c
buildings
_.
M e c h a n i c a l e q u i p m e n t for p u b l i c
buildings ,
..
V a u l t s a n d safes for p u b l i c b u i l d i n g s . . .
General expenses of p u b l i c b u i l d i n g s . . .
F u r n i t u r e a n d repairs of s a m e for p u b l i c
buildings.
..
...
O p e r a t i n g supplies for p u b l i c b u i l d i n g s .
Total
.:
B u r e a u of I n t e r n a l R e v e n u e : Collecting
the internal revenue
B u r e a u of P r o h i b i t i o n : E n f o r c e m e n t of narcotic a n d n a t i o n a l p r o h i b i t i o n acts«
P u b l i c D e b t Service:
E x p e n s e s of loans (act S e p t . 24,1917, as
a m e n d e d a n d e.xtended)
Salaries a n d expenses i n c i d e n t to foreign loans a n d t r a n s p o r a t i o n acts
P u b l i c D e b t Service
Total
Treasurer, of t h e U n i t e d S t a t e s :
R e p a i r s to canceling a n d c u t t i n g m a chines
_
Labor-saving a n d ffiing devices
Total
1923
1924
1925
1926
1927
$61,842.31 $107,466.18 $102,176. 61 $101,089. 89 $109,039.01
50,046.00
37, 626. 28
4, 510.37
95, 259.00
63, 925.18
7,128.17
87,493.86
59, 971. 69
12, 981. 63
96,140. 22
70, 980. 62
13, 667. 59
91, 730. 90
49,196.71
27, 625. 6ft
279,846.16 441,397. 27 556, 379.79 654, 955. 76 534, 303.43
334, 548.33 1, 219, 901.83 1, 212,801.10 1,161, 803.45 1,100, 269. 29«768, 419.45 1,925, 066. 63|2,031, 804. 68 1, 998, 637. 52 1, 912,164.90396,824.27
311,279.34
369, 278. 26
194,899.85
194,086.16-
131,407. 63
124, 974.85
174,135. 48
133,092. 76
212,828.37
23, 646. 60
20, 825.18
3,940.36
7, 214.13
3, 632.6&
20.47
39, 457.82
3.60
62,073. 71
4.'i. 699. R.'S
33, 521. 26
36, 506.44
63,124. 79
72,902.39
49, 640.01
40,735.39
40,139.12
164.48
3,777.96
141.77
67.95
3,942. 44
141.77
67.95
T o t a l a p p r o p r i a t i o n s a n d allotments
4,104,064. 50 5,057,085.10 5, 677, 763. 24 6, 276,986.12 6,122,899. 48
P u r c h a s e s from a p p r o p r i a t i o n s from w h i c h
no a l l o t m e n t s w e r e m a d e ^
41, 269. 2a
165,942.19
88, 953. 96
68,980.00 132,147.66
G r a n d total
4, 270, 006. 69 5,146,039.06 5, 646, 743. 24 5,409,132. 78 6,164,168.74
« Purchasing for Supervising Architect transferred to Division of Supply on Oct. 17,1922.
« Under supervision of Commissioner of Internal Revenue prior to fiscal year 1927.
^ Appropriation accounting for these purchases was done by bureaus and offices for which the purchases
were made.
The expenditures detailed in the foregoing table involved the examination and audit for settlement through the disbursing clerk of
the Treasury Departinent of 87,982 vouchers in 1927 and 84,465 in
1926, an increase of 3,517.
The possible cash discounts for prompt payments of bills aggregated $12,377.65 and $11,153.86 in 1927 and 1926, respectively, of
which only $234.71 in 1927 and $296.99 in 1926 were lost, due generally to failure of vouchers requiring certifications of field officers
to reach the division for settlement within the limited periods for
discounts.
During the fiscal year 1927 the purchasing work of the division
required the preparation and issue of 38,886 formal purchase orders,
an increase of 3,929 over the number for 1926, which was 34,957.
Open-market purchases by the division required the preparation
and circulation among' approximately 95,000 prospective bidders of
7,025 sets of specifications and invitations for proposals in 1927,
251
SECRETAR:^ OF THE TREASDEY
compared with 5,993 sets in 1926, an increase of 1,032, or more than
17 per cent.
In February, 1923, the department adopted the policy of carefully routing every freight and express shipment made by its several
bureaus and offices, with the view of getting the benefit of the most
economical transportation. This work has been done vigilantly
during the past year, with considerable savings to the department's
appropriations.
Purchases aoid issues of stationery supplies
The appropriation to the department for stationery for the fiscal
year 1927 was $480,000, of which $443,446.53 was expended, leaving
a balance of $36,553.47 to revert to the Treasury. In addition,
$15,110.04 was expended for stationery from other available appropriations, making a total of $458,556.57 expended in 1927, compared with $436,405.17 in the preceding fiscal year, or an increase
of $22,151.40.
The following statement summarizes the appropriations, reimbursements, and expenditures for articles of stationery for the past
five years:
Appropriations, reimburseme^its, and expenditures for s'tationet^y, fiscal years
1923-1927
1923
Appropriation
Reimbursements
1924
1925
1926
$388,450.00 $349,816.00 $350,000.00 $437,760.00 $480,000.00
125,298.60 122,719.08 83,332.86
67,440. 62
15,110.04
613,748. 60 472, 534.08 433,332. 86 606,200.52
Available credits
Transferred to Department of Cominerce..
2,400.00
Total expenditures
Balance
1927
511,348. 60 472,634.08 433,332.85 505, 200. 52
605,023. 66 441, 764. 69 426,286. 29 436,406.17
6,324.94
30,769.39
.7,047.66
68,795.35
495,110.04
495,110.04
458,656.67
36,653.47
The issues of stationery items, as distinguished from expenditures
therefor, during the fiscal year 1927 totaled $463,666.67, which were
$10,442.43 in excess of the issues for the preceding fiscal year, when
they totaled $453,224.24. Of the total issues, $448,556.63 in 1927 and
$385,783.72 in 1926 were chargeable to the departmental appropriation for stationery, while $15,110.04 in 1927 and $67,440.52 in 1926
were reimbursed from various other available appropriations.
The value of stationery articles issued in 1927 was $5,110.10 in
excess of expenditures therefor, but both a cancellation of this deficiency and a further addition to the inventory value of stock on
hand resulted from surrenders of surplus stock from some of the
bureaus of the department.
252
REPORT ON" THE FINANCES
The following table shows the value of stationery supphes issued
to each bureau, office, and serAdce of the department during each .of
the last five fiscal years:
Issues of stationery supplies to biireaus, offices, aiid services of the Treastiry
Department, fiscal years 1923-1927
B u r e a u , office, or service
1927
1923
Secretary, U n d e r s e c r e t a r y , a n d A s s i s t a n t s .
$937. 27
$1, 805. 31
Appointment division....
827. 08
347.16
B o a r d of T a x Appeals
864.74
694. 88
Division of Bookkeeping a n d W a r r a n t s
5, 595. 07
B u r e a u of E n g r a v i n g a n d P r i n t i n g
6, 829. 47
1, 352. 60
B u r e a u of t h e B u d g e t
1,211.01
1, 415. 52
Division of S u p p l y
8, 660. 67
4, 756. 39
General S u p p l y C o m m i t t e e
1, 793. 90
1,114.06
1, 201. 68
Chief clerk a n d s u p e r i n t e n d e n t . - - 107.16
98.68
Commissioner of A c c o u n t s a n d D e p o s i t s 8,175.43
13,879. 61
Comptroller of t h e C u r r e n c y
-..
608. 59
618. 52
C o n t i n g e n t expenses, national c u r r e n c y
1, 486. 85
2, 075. 81
C u s t o d i a n s of p u b l i c b u i l d i n g s . .
62,191. 43
77, 574. 73
C u s t o m s Service
I
1,101. 09
903. 68
D i s b u r s i n g clerk
168. 88
147. 63
Division of Deposits
1, 926. 08
3,125. 70
Federal F a r m L o a n B o a r d
._
3, 934. 31
4, 634. 57
Federal Reserve B o a r d
54. 27
21.15
Government actuary
55. 94
446. 43
I n s o l v e n t n a t i o n a l - b a n k fund
249, 492. 68 205, 677. 23
Internal Revenue Bureau
1,682.72
2, 027. 76
M i n t Bureau
4,899. 58
4, 659. 48
N a t i o n a l b a n k examiners
2, 374. 30
2, 823. 34
N a t i o n a l b a n k r e d e m p t i o n agency
783. 51
233. 27
P r i n t i n g division
45, 539. 86
71, 734. 94
Prohibition Bureau
35, 756. 47
P u b l i c D e b t Service
.".. 65,884.37
38, 023. 66 17, 453.17
P u b l i c H e a l t h Service.—
64.21
49.34
Second P a n - A m e r i c a n conference..
1, 255. 41
1, 067. 73
Secret S e r v i c e . .
3,805. 80
3, 724. 91
Supervising A r c h i t e c t . _
11, 211. 29
10, 250. 82
T r e a s u r e r of t h e U n i t e d States
15, 353. 69
7, 098. 52
Coast G u a r d - 250. 92
W a r F i n a n c e Corporation
44.90
E x p e n d e d for t r a n s p o r t a t i o n ( p a r t l y estimated)
TotaLR e i m b u r s e d from other a p p r o p r i a t i o n s T o t a l charged to s t a t i o n e r y a p p r o priation.
_
$1, 617. 03675. 52
3,452. 37
814. 77
8, 227. 46
543. 20
2,358. 03
707. 75
1, 629. 29
543. 24
8, 541. 22
36.56
1, 732. 77
63,138. 35
723. 51
476. 21
6,192. 02
679. 55
2, 783. 81
4, 235. 52
1, 057. 99
99.93
7, 961. 47
334. 23
2, 048. 75
67, 686. 75
675. 00
119. 69
2, 610. 35
5, 000. 57
5.86
920. 97
202,179, 89
943. 22
2, 065. 72
2, 004. 71
128. 47
47, 911. 64
23, 545. 90
15,327.47
$1, 630. 22
474.80
5, 209. 33
481. 67
7, 863. 68
667. 36
2,914. 29
936. 56
1,364.34.
117. 29
7, 821. 33
50.33
2, 031. 57
67, 099. 34
551.19
155. 36
2, 282. 42
3, 547. 07
9.58
. 919.66
233, 878. 04
1, 284. 48
1, 414. 68
1,689.97
177. 79
27, 738. 50
23, 508.17
16, 443. 31
845. 54
4, 002. 54
8, 304. 21
24, 520. 08
7L40
588. 82
4, 755. 34
10, 395. 03
25,172. 03
50.-69
823. 51
7, 425. 29
8, 791. 39
26,909. 04
5.00
$1, 575. 06
941. 49
2,422.03
4, 209. 53
15.38
1,017. 80
203, 234. 04
962,96
1, 737. 42
1, 688, 13
(9
48, 058. 81
25, 683. 17
16, 344.10
20, 000. 00
533, 935.14
125, 298. 50
492, 032. 09
122, 719. 08
437, 256. 01
83, 332. 85
453, 224. 24
67, 440. 52
463, 666. 67
15,110. 04
408, 636. 64
369, 313. 01
353, 923.16
5, 783. 72
448, 556. 63
^ I n c l u d e d in Division of S u p p l y in 1927.
Shiprnents and inventoines
Warehouse shipments of stationery and miscellaneous supplies by
the Division of Supply from Washington to field offices totaled 14,849
packages, boxes, etc., weighing 629 tons, in 1927, compared with
12,604 packages, etc., weighing 598 tons, in 1926. The shipments in
1927 were made up of 4,597 franked parcels, weighing 13,791 pounds;
1,784 parcel-post packages, weighing 21,560 pounds, and costing
$1,132.69 in postage; and 8,468 express and freight boxes, crates,
etc., weighing 1,223,738 pounds (of which only 6,732 pounds were
shipped by express). The freight and express shipments involved
the use of 2,911 Government bills, of lading in 1927^ against 2,346
in 1926.
253
SECRETARY OF THE TREASURY
Shipments by mail of blank forms in 1927 aggregated 7,725 sacks,
containing 254,750 packages, weighing 545,000 pounds, or 272 tons.
Thus, the total of warehouse shipments to field offices was 901
tons, or about. 3 tons for each working day. The increased weight
of the shipments over those of 1926 was approximately 28 tons.
A summary of conditions portrayed by the annual inventory of the
stock of stationery supplies is shown in the following table:
1924
1923
O n h a n d at beginning of fiscal year
P u r c h a s e s d u r i n g year
.
O n h a n d at e n d of year
I n v e n t o r y value J u n e 30
I n v e n t o r y value J u l y 1 . -
$167,399. 28
458, 556. 57
581, 575. 66
17,983. 72
9, 851.13
17,385.40
738,404. 91
657,206. 91
599, 559.38
608,326. 56
633,341, 25
. . 738,404. 91
533; 935.14
652,318. 98
492,032. 09
599, 559. 38
437,256. 01
604,807.48
453,224. 24
633,341.25
463,666. 67
204,469. 77
160,286. 89
162,303.37
151,583, 24
169,674. 58
204,469. 77
215,442. 22
160,286. 89
155,290. 37
162,303. 37
162,070. 26
161, 583. 24
157,399. 28 •
169,674. 58
162,367.96
59,904. 08
4, 887. 93
598, 475. 43
1927
657, 206. 91
678, 500. 83
Less v a l u e of s t a t i o n e r y articles transferred
to General S u p p l y C o m m i t t e e as surplus
.
1926
$173,477. 27 $215,442. 22 $155, 290.37 $162,070.26
. . 505,023. 56 441,764. 69 426, 285. 29 436,405.17
Total
A d d value of s t a t i o n e r y articles received
from various divisions as s u r p l u s for
reissue
V a l u e available for issue
Issued d u r i n g t h e y e a r . .
1925
615,955. 85
3, 519.08
The July 1, 1927, inventory revealed a stock of 32,239,145 blank
books and forms valued at $121,665, compared with 37,285,575,
valued at $135,905.56, a year ago. This is exclusive of internal revenue and prohibition forms, the stock of which is held by the Bureau
of Internal Kevenue.
Printing and binding
A most gratifying decrease is reported in expenditures for printing
and binding during the fiscal year 1927 compared with 1926, this
making possible a return to the Treasury of an unexpended balance
of $120,428 from the appropriation for this service. The total
expenditures were $884,275.95 in 1926 and $788,641.70 in 1927.
Expenditures for printing and binding, by bureaus, offices, and
services, for each of the last five fiscal years are shown in the following table:
App7'opriations, expeiiditures, and reimbursemefits for printing and binding,
fiscal years 1923-1927'
SUMMARY
1923
Appropriation, printing and binding.
Treasury Department
R e i m b u r s e m e n t s from sales of customs
forms
-E x p e n d e d from other a p p r o p r i a t i o n s .
T o t a l available
Total- expenditures
Balance
.
.
.
$500,000.00
1924
1925
1926
1927
$930,000,00 $850,000. 00 2 $834, 750.00 2 $836,000.00
37,595.20
537,879.09
39,054. 56
90,998.49
39,159. 52
31,873. 03
42,616. 51
36,129.43
43, 673. 85
30,495.86
1,075,474.29
1,013,111.40
1,060,052.96
969, 207. 21
921,032. 55
912,817. 43
913,495.94
884,275.95
909,069.'70
788,641.70
62,362.89
90,846.74
8,215.12
29, 219. 99
120,428.00
•
I Figures subject to slight variations, due to necessary delays in receiving bills from the Public Printer
for certain items until pending work is completed after the close of each fiscal year.
Exclusive of $82,500, available for 1926-27 (44 Stat. 868), which was not expended
254
REPORT
ON" T H E
FIlSrANCES
Appropriations, expenditures, and reimbursements for printing and binding,
fiscal years 1923-1927 '—Continued
E X P E N D I T U R E S PROM A P P R O P R I A T I O N F O R P R I N T I N G AND BINDING. BY
B U R E A U S . O F F I C E S . AND D I V I S I O N S
1923
Secretary, U n d e r s e c r e t a r y , a n d A s sistant Secretaries
A p p o i n t m e n t division
Bookkeeping a n d W a r r a n t s D i v i s i o n .
B u r e a u of E n g r a v i n g a n d P r i n t i n g . . . .
B u r e a u of Prohibition ' . J
,
Division of S u p p l y
General S u p p l y C o m m i t t e e
B u r e a u of t h e B u d g e t
Chief clerk a n d s u p e r i n t e n d e n t
Commissioner of A c c o u n t s a n d D e posits
_
C o m m i t t e e o n enrollment a n d disbarment
Comptroller of t h e C u r r e n c y
.
C u s t o d i a n s of p u b l i c b u i l d i n g s
Customs:
Bureau
Service
special agency
D i s b u r s i n g clerk _.
Division of D e p o s i t s
Federal F a r m Loan B u r e a u . .
Government actuary
I n t e r n a l revenue:
Bureau
P r o h i b i t i o n enforcement
Service
L o a n s a n d C u r r e n c y Division <_:
Mint:
Bureau
Service
N a t i o n a l - b a n k depositaries
P r i n t i n g division
P u b l i c D e b t Service *
Public Health:
Bureau
Service
.. ..
Register of t h e T r e a s u r y <
Secret Service
_ _.
Supervising Architect
T a x simplification board
T r e a s u r e r of t h e U n i t e d States
Coast Guard:
Bureau
Service
M a t e r i a l s for b o o k b i n d e r
Miscellaneous
_
Total
1925
1926
1927
$7,60O 76
1,194. 94
14, 418.16
9,110 12
$8,863. 32
944. 22
10,172, 77
6,741.10
$6,938. 77
1, 293. 68
17,144. 45
7,50017
$10,084, 21
674. 29'
8,957. 94
5,454. 77
2,193. 26
23,801. 89
2, 643,15
18, 313, 45
25,827.11
2,083. 00
3,998. 46
23,424. 38
4, 618, 44
27,147. 50
$12,964.76
1,457:94
18,919. 53
7,186. 81
69,277.14
7, 728.87
29,886.11
1, 623.94
1,382, 57
1,331.46
119.19
183. 34
6L31
123.39
27,787. 29
3.006. 65
156. 05
18,778.13
1,603. 62
30 61
23,618. 36
2,306.81
49.16
24, 356. 31
1, 259. 27
2 8 , 9 2 i 67
1,806.13
68,783. 61
64,015. 73
946. 50
14.75
2,962. 24
1,239. 65
622. 56
46.44
5,043. 67
1,426. 23
5,486. 27
35,598.33
830 15
804.17
6L59
3,132. 43
1, 776. 89
6,481.10
42, 563. 90
839.81
712. 29
44.48
6,531.28
34,089.02
1,389.86
630 36
29.96
1,719.19
1,670.86
33,830 92
62,978. 04
386,836. 61
2,232.90
04, 794. 81
64,241, 58
341,676. 22
2,436.43
65,991 04
179,002.79
2,640.68
3,416.34
2,159.41
2,817. 27
202.92
22,127.79
3,406. 92
2, 684. 86
3,273. 00
616. 39
20,361.39
3,337.25
2, 616.82
2,120.98
180.22
24,036.20
2,536. 52
7L64
98,826.30
468,006. 66
2,418. 64
.2,504.41
6,416.38
6, 787.12
2,487. 96
496.31
2,824.33
325. 92
26,366.97
• 89,595.16
93,099.49
628.06
724. 31
1,868.68
88,387. 01
2,432.16
679.48
406. 61
2,371.11
76,854.90
4,359. 27
713. 08
295. 33
2,765. 24
103,650.62
4,182.11
684. 66
288. 47
3, 767. 86
5.06
12,030 70
10,576.71
13,020. 72
11,167. 76
11,908.81
16,101.84
24,230.46
11,407.51
19,610 64
14, 677.24
18,477.33
39,061.92
34,813.40
61,226. 74
11,986. 41
22,160 93
256.48
46,374.47
62,902.63
437, 637.11
839,164.26
841,784,88
, .806,530. 01
714,672. 00
REIMBURSED
Agricultural C r e d i t Corporation
B u r e a u of E n g r a v i n g a n d P r i n t i n g . . .
B u r e a u of t h e B u d e e t
.
Chief Coordinator
C o n s u l t a n t s on hospitalization
C o n t i n g e n t expenses, n a t i o n a l currency
C u s t o m s Service b l a n k forms ^
Expenses of loans (act Sept, 24, 1917,
as a m e n d e d a n d extended)
F e d e r a l farm loan b a n k s
F e d e r a l F a r m L o a n B u r e a u , miscellaneous expenses
-
1924
(3)
(*)
327. 96
6,876. 49
(»)
EXPENDITURES
$898. 47
$724. 21
$20 65
2,803. 68
m o 06
542.14
37, 595. 20
558.49
39.054. 56
869.44
39,169. 62
749.14
42,616. 51
1,254.69
43,573.86
498. 01
138. 64
252. 68
671. 59
6.828.91
687.32
3,734.37
2,737.36
$340 99
834, 78
5,733. 59
88.81
1.127. 61
» Figures subject to slight variations, due to necessary delays in receiving bills from the Public Printer
for certain items until pending work is completed after the close of each fiscal year.
»Included under Bureau of Internal Revenue prior to 1927. The full fiscal year 1927 charged to newly
created Bureau of Prohibition.
« Public Debt Service includes Register of the Treasury for 1927, and the greater part of loans and currency
printing for all years.'
• Not separately shown for 1927; included in Division of Supply.
• Reimbursed to printing and, binding appropriation.
255
SECEETARY OF THE TEEASUBY
App7^opriations, expenditures, and reimbursements for printi^ig and binding,
fiscal years 1923-1927 '—Continued
REIMBURSED EXPENDITURES—Continued
1923
General Supply Committee
.
Insolvent national bank fund.
Internal Revenue Bureau
National bank examiners
National Bank Redemption Agency.
National Sesquicentennial Exhibition
Public Debt Service
Public Health Service
World War Foreign Debt Commission
Total
$91. 84
684.50
377,23L 13
11,978. 55
.4,249. 98
133,990 76
320 66
1924
$1,651. 83
9,469. 58
9,816. 99
68,349. 09
60 00
1925
$2,595.45
7,729. 73
12,190 48
3,994.06
3,359.5i
1926
1927
$2,247.05
$3,156. 02
12,404.44
11,202. 82
1,629. 61
10,337.13
2, 520 42
20 00
265. 74
155. 30
157. 97
666. 08
3,614. 05
675,474. 29
130,052. 95
71,032. 55
78,745. 94
74,069. 70
» Figures subject to slight variations, due to necessary delays in receiving bills from the Public Printer
for certain items until pending work is completed after the close of eachfiscalyear.
Postage
The expenditures for postage for the fiscal year 1927 to prepay
matter addressed to Postal Union countries and for postage for the
Treasury Department were as follows: For postage stamps for department use, $804.34; for transmission of matter addressed to Postal
Union countries through the Bureau of International Exchanges,
$153.95; for publications mailed by the Superintendent of Docu^ments for the department, $41.71; a total of $1,000, corresponding
with the exact amount of the appropriation for the purposes described. The expenditures for 1927 were $3.72 in excess of those
for 1926, when $996.28 was expended from a like appropriation.
Department advertising
Authorizations to publish advertisements were issued to 2,543
newspapers and periodicals in the fiscal year 1927, an increase of
118 over 1926, when the number was 2,425, while the expenditures
thus authorized increased from $17,473.26 in 1926 to $23,062.39 in
1927, the actual increase being $5,589.13.
General Supply Committee
Purchases made under General Supply Committee contracts during the fiscal year 1927 show an increase Q£ $781,323.06 over those
fpr 1926. Reported purchases, which aggregate $7,506,923.41, represent increased consumption of practically all classes of commodities, as there was no general increase in cost.
There was a material reduction in the amount obtained from the
disposition of surplus property, caused by both lower prices and
smaller quantities. There was realized from public and contract
sales $144,449.05, and receipts from transfers to Government activi-"
256
REPORT OK T H E FINAN-CES
ties amounted to $33,085.62, making a total of $177,534.67 deposited
in the Treasury from this source. This is a reduction of $85,155.56
from the amount derived from the disposition of surplus during
1926, which was $262,690.23.
The following statement summarizes these transactions for the
fiscal years 1925, 1926, and 1927:
1925
Purchases from General S u p p l y
contractors
. . .
1927
1926
Increase (-f)
or
decrease (—)
Committee
$6, 645,195. 64 $6, 725, 600. 35 $7,506,923. 41
Receipts from disposition of s u r p l u s p r o p e r t y :
Auction sales
C o n t r a c t sales
. . . .
Transfers to G o v e r n m e n t activities
63,112.81
165, 972. 77
78, 028. 61
Total
G r a n d total
83, 310. 32
130, 929. 07
48, 450.84
65, 258.13
79,190 92
33, 085. 62
+$781,323. 06
-18,052.19
- 5 1 , 738.15
-15,365.22
307,114.19
262, 690.23
177, 534. 67
-85,155.66
0, 952, 309. 83
6, 988, 290. 58
7,684,458.08
-4-696.167.60
The general activities of the General Supply Committee are summarized in the followino^ tables:
Value of purchases i^ejwrted by executive departments under contracts negotiated
by the Secretary of the Treasury through the Oeneral Supply Committee,
fiscal years ended J u n e 30, 1918-1927, by classes
1918
1919
$2,096,321. 53
113,616.94
196,087. 94
77,760 43
60,625. 93
230,721. 80
97,432. 97
85,216. 89
1,423,139.12
242,403. 59
41,360 20
101,381. 81
12,831.02
175,893.08
2,867,123. 80
1,955.99
26, 615. 00
$2,103,974.31
138,763. 59
78,288. 54
. 102,438.75
54, 671. 79
174, 502. 43
31, 253. 09
100,930. 01
1,429, 884. 65
171, 593. 89
188,363. 21
121,814. 71
5,262.73
3, 234. 22
2,530,664. 35
. 3,m.64N o purchases.
Class No.i
1.
2-.
34
6
6.7
8.
9
10
11. .
12
13.
14
15 "
16
17
18
19
20
.
'.
.
.
-
.
.
.
.
-
.
.TotaL-.
-
1, 592, 225. 85
280, 811.04
456,496. 38
•
-
10,180,021. 31
1 Footnote at end of table.
1,088, 558. 88
509,022. 68
1,485,154. 81
10,321,438.18 •
1920
1921
475,466. 85
486,719. 30
795,689. 76
$2,149,091, 04
181,574. 90
206,681.43
96,875. 48
83,308. 28
183, 775. 30
48,126. 03
149,400.10
809,858.98
407, 640. 98
128, 896. 65
148,757. 20
20,692. 25
45,583.09
1,314,772. 50
4,444. 08'
Not advertised.
223,516. 45
486, 263. 77
634,976. 99
7, 627,064, 82
7,324,145. 40
$1,641,112.03
97,032. 92
262,145. 21
163,939.37
63,63L37
158,241, 44
142,954. 84
116,397.28
999, 664. 35
458,324.05
207,816. 93
161,280 90
21,269. 65
38,297. 73
1,326,218. 87
•
3,282.69
7,579.38
1922
$1,371,88L92.
87,847. 50
190,714.63
179, 357. 34
64,064.59
112,954. 79
124, 815. 24
204,822. 37
615,965. 55
345,089.87
99,050 86
237,055.16
11,289. 56
32,451. 41
1,167,779.99
1, 504, 57
50,473.15
189,413. 01
464, OOO 10
541,393. 94
6,091,925.54
257
SECEETARY OF THE TREASUEY
Valus of purchases i^epoi^ted by executive departments under contracts 7iegotiated
by the Secretary of the 'Treasury through the Oenet^al Supply C07nmittee,
fiscal years ended June 30, 1918-1927, by classes—Continuecl
Class No.i
1923
1
2
3
4
5
• $1,396,355.96
88,299. 77
187,917.10
111,762.45
98,682. 99
191,409.05
183.059. 86
192,563.04
724,315.31
382,231. 21
.104,535. 44
240,303,40
7,003.15
22,444.69
858,537.47
3,018. 71
76,772. 58
382,308. 85
487,259. 89
486,180. 97
<7) .. .. .
S
.9....
10
11
12..
13 - 14
15 .
16
17
18
19
20 . . .
-
Total
".....
.
. .
.
6, 223,961. 89
1924
1925
• $1,419,197. 94
$869,003.38
113,113. 63
98,555. 86 245,870. 79
233,839. 35
105,523.
69
89,481. 42
111,470 86
80,007,80
194,093.
22
203,468. 87
230,667. 23
179,341.14
159,860.70
190,733. 65
859,060, 67
669,787.33
445, 897. 01
408, 683. 87
121,599. 64
108,753.32
259,412. 90
243,486.19
3,719. 91
3,863. 47
14,730 42:
16,784. 68
823,920. 75
805,073, 74
. 1,510 05
1, 546. 47
96, 633. 21
151,972. 75
662,764. 81
969,308. 68
512,363.95
488,564. 46
457,633. 39
492, 507. 67
6,498, 619. 23
1927
1926
.
6, 645,195. 64
$860,650. 96
134,354. 67
314, 542. 71
106,719. 49
118,689.42
185,063. 60
233, 224.35
233,751. 49
764, 243. 55
575,135. 43
124, 608.39
254,731. 02
4,312. 42
20,649. 20
718,717. 03
1,513. 03
485,911. 78
665,294, 70
463,593. 34
459, 893. 87
6, 725, 60O 35
-
$1,061,239.13
159,282.15
227,621.29
82,147.46
82,866. 60
245,273.92
319,628.68
2.58,115.26
985, 528.50
518, 6S0. 39
119,322, 63
324,734, 73
3,946. 56
17,198. 46
742, 568. 22
1,698. 92
485,966. 53
930,583.00
462,719. 56
477,801. 43
7 506,923.41
1 Class No.—
1. Stationery, paper articles, and drafting supplies.
2. Hardware, metals, leather and leather goods.
3. Dry goods, clothing, boots and shoes, flags, wearing apparel, window shades, and cordage.
4. Drugs and medicines, and chemicals.
5. Laboratory apparatus, and hospital appliances and surgical instruments.
0. Electrical, engihecring, and plUL bing supplies.
7. Lumber, millv/ork, excelsior, sawdust, packing boxes, building materials, and asphalt, oil, and
tar for road building.
Brushes, glass, lubricants, fuel oils, and paints and painters' supplies.
Furniture and floor coverings.
Groceries and provisions, cleaner, polish, floor wax and polishing compounds, scouring compound, soap and soap dispensers, meat, fish, lard, eleomargarine, and household supplies.
Forage, flour, and seed.
Photographic supplies, meteorological instruments, apparatus, and towers, and meat-inspection
supplies.
Engraving, printing, and lithographic supplies (excluding supplies for the Government Printing
Office and the Bureau of Engraving and Printing).
14. Ice.
15. Incandescent electric lamps.
16. Incandescent gas-lamp supplies.
17. Motor trucks, tireSj tubes, and accessories.
.18. Computing, addressing, dictating, duplicating, folding, sealing, and typewriting machines;
labor-saving devices; typewriter exchange allowances, repair parts, and equipment.
19. Electric service.
20. Telephone service.
NOTE.-- Total purchases, all classes, for the fiscal year 1913 were $2,728,767.64; 1914, $2,382,203.52; 1915,
$2,557,497,,54; 1916, $2,714,883.17; and 1917, $3,734,923.85.
Receipts from surplus and.salvaged-rnaterials. disposed of by Oeneral Supply
Commiittee, fiscal years 1921-1927 •
Auction sales C o n t r a c t sales
1921
1922'.
1923
1924
1925
1926-."-.-.-•
1927
_
-
$20,186.32
79,595. 35
114,492. 74
179,613.00
63,112. 81
83,310. 32
65,258.13
$3,230.46
1138,129.25
1130,390 40
1166,972. 77
1130,929.07
179,190 92
^ Includes estimated amounts of $75,000 in 1923 and
actual amounts of $50,633.58 in 1926 and $29,704.41 in
waste paper from the various departments, t h e receipts
t h e General Supply Committee but a r e paid direct to t h e
t h e Treasury by them.
Transfers
$989,234.26
686,097.36
324,376. 77
150,002. 96
78,028. 61
48,450. 84
33,085. 62
Total
$1,009,420 67
767,923.15
676,998. 76
460,006.36
307,114.19
262,690.23
177,534. 67
1924, and $80,000 in 1925, and
1927, received from the sale of
for which do not pass through
selling services and deposited in
258
REPORT ON THE FINANCES
Number of specifications mailed by the Oeneral Supply Committee, bids received^
contracts entered into, items on which awards and no awards were made, and
samples received and retained, fiscal year ended June 30, 1927
Sets of
specificaBids
tions
received
mailed
Class No. 1
1
2
3
4
6
6
7
8
9
10
11
12
13
14
16
16
17
18
19
20
-
Total
Contracts
Samples
received
8,796
902
8,411
608
436
623
300
8,486
604
9,948
300
228
120
17
54
10
626
204
380
82
151
69
89
71
29
70
72
364
30
41
8
2
5
1
80
41
1
1
6,989
648
1,672
66
1,242
460
117
678
669
1,720
42
80
63
41,384
1,687
14,691
Award
items
Number
326
61
Noaward
items
Samples
retained
240
42
107
47
48
47
23
49
37
190
23
38
72
5
1
31
36
1
1
3,890
2,173
1,411
1,073
1,078
1,236
700
636
1,460
826
288
1,636
67
29
118
71
816
1,194
44
122
1,174
233
312
16
309
148
40
94
364
310
10
41
27
816227
21&
60
164
190
I4a
67
121
12a
61
19»
IS
1
73
20
i
€0
9
975
18,867
3,170
I,944r
^ See titles of classes on preceding page.
Statement of surplus property received and issued by the Oeneral SuppVy
Committee, fiscal year ending June 30, 1927, by departments and establishments
Departments and establishments
Agriculture, Department of,
-...
Alien Property Custodian
American Battle Monuments Commission
Columbia Institute for Deaf
Commerce, Department of
Commission of Fine Arts
District of Columbia.
Federal Board for Vocational Education
Federal Trade Commission
General Accounting Office
Government Printing Office
House of Representatives
Interior, Department of-Interstate Commerce Commissions^
Justice, Department of
Labor, Department of
National Advisory Committee for Aeronautics
National Home for Disabled Volunteer Soldiers
National Capital Park and Planning Commission.
National Training School for Boys
Navy Department
Panama Canal.Pan American Union
Post Office Department
Public Buildings and Parks of National Capital- —
Reclaimed salvage
Smithsonian Institution
State Department
Treasury Department
U. S. Board of Education
U. S. Railroad Administration
U. S. Bureau of Efficiency...
U. S. Tariff Commission..
U. S. Veterans' Bureau..
U. S. Shipping Board
War Department
White House
Total.
1 Original cost of surplus property as shown by transfer invoices.
> Net amount of vouchers.
Receipts
(invoice
price)
$113.04
734.89
Issues
Costi
Charge«
$2,179. 75
20.03
1.80
.72
2,353,17
.96
5,657,50
40.58
2.88
3,30
113. 96
188.00
2,050 99
1,724.67
6,015.01
1,100.87
54.00
30.00
30.00
214. 50
296.14
1,578.86
110 00
652. 98
$l,939.0e
20.03
1.80
.72
2,207.30
64.07
46.76
1.73
2,830.65
6,268.56
43.50
2.55
1.73
2,786.80
6,007.77
25,950 63
8,142.48
151,110.22
7.80
162.30
218.79
758.42
.90
7.80
162.80
218.79
758.42
.90
273,913.31
34,769.94
33,085.62
12,100,76
779.19
'ilb'.OQ
22,102.84
1,645.00
38.00
28,612. 96
1,024,90
3,392,73
603.14
13.96
1,090 27
2,944.33
11,304.38
2,069.60
.96
5,404.76
86,58
2.88
8.30
&4.08
144.00
2,042,65
1,362.14
5,981.26
1,080.46
45.60
30.00
22.50
213.37
292.89
1,664.11
82.49
497.48
34.60
2.55
SECRETARY OF THE TREASURY
259
Recapitulation of surplus property stores account of Oeneral Supply Committee,
July 1, 1926, to June 30, 1927
Balance of stores as of June 30, 1926
Transferred to the General Supply Committee during fiscal year
1927
-.
Total
273, 913. 31
543, 583. 00
is^et sales
33, 085. 62
Discounts allowed on above
1,684.32
Net proceeds from auction sales
65, 258.13
Difference between invoiced value and proceeds from auction sales. 402, 906. 05
Balance on hand June 30, 1927
40, 648.88
Total
Net decrease in stores during fiscal year 1927
543, 583. 00
:
233, 264. 43
TREASURER OF THE UNITED STATES
During the fiscal year 1927 the total ordinary receipts from all
sources (exclusive of postal revenues) on the basis of daily Treasury
statements revised were $4,128,422,887.61, an increase of $165,451,322.64 as compared with those for the fiscal year 1926. The cash
expenditures chargeable against ordinary receipts amounted to
$3,493,507,876.75. The net result for the fiscal year was an excess
of ordinary receipts over total expenditures chargeable against ordinary receipts of $634,915,010.86. The postal revenues deposited in
the Treasury and credited to the account of the Post Office Department during the fiscal year 1927 amounted to $683,754,924.75.
Eeceipts from tolls, etc., for movement of tonnage through the
Panama Canal during the fiscal year 1927 were $25,544,701.45, as
compared with $23,941,917.87 for the previous fiscal year. Disbursements made on account of the canal, exclusive of fortifications, on
the basis of warrants drawn (not cash expenditures), were $7,613,376.03 for the fiscal year 1927, as against $8,419,333.57 for the fiscal
year 1926.
The receipts and expenditures on account of the principal of the
public debt during the fiscal year 1927 are shown in the following
statement:
Receipts on account of—
„ Certificates of indebtedness
$3,108, 235, 000. 00
Treasury notes and certificates of indebtedness (adjusted
service series)
147, 200, 000. 00
Treasury notes and certificates of indebtedness (civil
service retirement fund series)
59, 300, 000. 00
Treasury notes
1, 360, 456, 450. 00
Treasury bonds
467, 801, 650. 00
Treasury savings securities
13, 572, 408. 43
Postal Savings bonds
1
689, 620. 00
Deposits for retirement of national-bank notes and
Federal reserve bank notes
27, 828,137. 50
Total
—^ 5,185, 083, 265.93
Expenditures on account of—
Certificates of indebtedness
2, 875,354, 000. 00
Treasury notes and certificates ofindebtedness (adjusted
service series)
38, 200, 000. OO
Treasury notes and certificates of indebtedness (civil
service retirement fund series)
13, 700, 000. 00
Treasury notes
^
1^119, 511, 900. 00
Treasury bonds__
10, 000, 000.00
260
SECRETARY OF THE TREASURY
261
Expenditures on account of—Continued.
W a r savings securities
$99, 765. 75
Treasury savings securities
64, 062,196. 05
F i r s t Liberty bonds
54,100. 00
Second Liberty bonds
—
1, 798,148, 050. 00
Third Liberty bonds
340, 607, 600. 00
F o u r t h Liberty bonds
27, 585, 500. 00
Victory notes
_•
,
1, 282, 300. 00
Loan of 1925
—196,100. 00
Other debt items
1, 249, 792. 72
National-bank notes and Federal reserve bank notes
28, 060, 775. 00
Total
Excess of expenditures
-
6, 318, 092, 079. 52
1,133., 008, 813. 59
The retirements of the debt were effected as follows:
" From—
•=*
Cumulative sinking fund
Purchases and retirements from foreign repayments
Received from foreign governments under debt settlements
Purchases and retirements from franchise t a x receipts
(Federal reserve and Federal hitermediate credit
banks)
Forfeitures, gifts, etc
Total
Surplus of ordinary receipts applied to public debt retirements
Total
$333, 528,400. 00
19, 254, 500. 00
159, 961, 800. 00
1, 231, 834. 78
5, 587, 310. 00
519, 563, 844. 78
613, 444, 968. 81
1,133,008, 813. 59
There was a slight decline in the gold holdings of the Treasury
during the fiscal year. The amount on June 30, 1926, as shown by
daily Treasury statements, .was $3,713,832,294.02, and on June 30,
1927, $3,651,406,435.42, a net decrease of $62,425,858.60. The imports
of gold during the fiscal year were $251,756,,004 and the exports
$103,843,669. Set apart for the respective uses, the gold was held on
the following accounts:
F o r redemption of gold certificates outstanding
Gold fund, Federal Reserve Board
Gold reserve
General fund
Total___
$1, 625, 278, 749. 00
1, 712, 002, 935.92
155, 420, 720. 98
158, 704, 029. 52
3, 651, 406, 435. 42
The balance in the gold fund of the Federal Reserve Board at the
close of the fiscal year 1926 was $1,717,348,235.12. During the fiscal
year 1927 deposits were made therein aggregating $1,267,151,059.74,
and withdrawals therefrom amounted to $1,272,496,358.94, leaving a
balance on June 30, 1927, of $1,712,002,935.92.
The gold reserve received an increase during the fiscal year of
$1,231,834.78 on account of franchise tax receipts. The Secretary of
262
REPORT Q-R THE FINANCES
the Treasury, exercising the discretion given him under provisions of
existing law, directed that the aggregate amount of franchise tax
receipts paid into the Treasury by the Federal reserve banks and
Federal intermediate credit banks on account of earnings for the
calendar year 1926 be applied to supplement the gold reserve against
United States notes and Treasury notes of 1890 established by the act
of March 14, 1900.
Of the amount shown in the general fund $139,873,094.78 was held
for the redemption of Federal reserve notes.
Public moneys on deposit in designated Government depositaries,
exclusive of items in transit, on June 30, 1927, amounted to $257,091,107.83, distributed as follows:
Depositaries:
In Federal reserve bankS-_
In special depositaries
In foreign depositaries
In national-bank depositaries
In insular depositaries
In Philippine treasury
Total
$30,656,042 52
198,606, 818.09
511,607.43
25.381,441.66
1,448,810.47
486,387. 66
:-__ 257, 091,107. 83
During the fiscal year 1927 interest accrued on balances held by
general and limited national-bank, foreign, and insular depositaries
amounting to $520,421.69, and on balances arising from the sales of
bonds, notes, and certificates of indebtedness, amounting to
$4,212,265.07, making a total of $4,732,686.76.
Funds aggregating $121,539,768 were transferred by wire through
the Federal reserve banks and branches to national-bank and insular
depositaries and the Philippine treasury to restore balances depleted
by cashing Government checks and warrants during the fiscal year
1927, as against $122,519,401 during the fiscal year 1926.
United States bonds to the amount of $666,991,130 pledged to
secure national-bank note circulation were in the custody of the
Treasurer at the close of the fiscal year 1927. United States bonds
and other securities held to secure public deposits in national banks
amounted to $46,741,500 and securities held for the safe-keeping of
postal deposits in postal savings depositaries amounted to $165,485,622.
Under provisions of law or by direction of the Secretary of the
Treasury the Treasurer of the United States is custodian of several
special trusts consisting of bonds and other obligations to the amount
of $11,452,641,497.44%. The aggregate amount of the trust accounts
is $12,331,859,749.44%.
The proceeds of currency counted into its cash by the National
Bank Redemption Agency during the fiscal year amounted to
$522,596,266.57. Of this sum $503,680,969.50 was in national-bank
notes, $917,073 in Federal reserve bank notes, $17,828,962.50 in Fed-
SECRETARY OF THE TREASURY
,263
eral reserve notes, and $169,261.57 in United States currency. Canceled and uncanceled Federal reserve notes amounting to $1,370,635,100 were received from Federal reserve banks and branch Federal
reserve banks for credit of Federal reserve agents. Such notes are
settled for between the Federal reserve banks and the Federal reserve
agents either direct or by adjustments in their redemption funds,
and are therefore not taken into the cash accounts of the National
Bank Redemption Agency. The number of notes counted, sorted,
and delivered by the agency during the fiscal year was 211,056,618.
The number of pieces of paper currency issued directly by the Government (gold certificates, silver certificates, and United States notes)
during the fiscal year 1927 was 634,132,800, with a valuation of
$1,406,168,000, as against 646,267,503 pieces, with a valuation of
$1,575,650,000, for the fiscal year 1926, a decrease of 12,134,703 in
the number of pieces and $169,482,000 in the amount.
The gold certificates outstanding decreased $65,895,350 and the
Treasury notes of 1890, $32,000, while the silver certificates increased
$12,065,700 and the United States notes remained the same. Treasury
notes are no longer issued, and the amount outstanding is gradually
being redeemed. Under the provisions of the act of May 31, 1878,
United States notes are issued and redeemed in the same amount,
and the amount outstanding does not change.
The shipments of United States paper currency from the Treasury
in Washington to Treasury offices, Federal reserve banks, and others
during the fiscal year 1927 amounted to $1,345,635,218, as against
$1,522,778,857 for the previous fiscal year.
During the current fiscal year the Treasurer's office authorized and
directed shipments of current gold, silver, and minor coins between
the Treasury, mints, assay office. New York, and Federal reserve
banks and branches for use in public disbursements and exchanges
and for special purposes to an aggregate amount of $41,710,429.50.
Shipments of uncurrent coins to the mints from the Treasury and
Federal reserve banks and branches were authorized in the amount
of $8,900,132.01. Transfers of gold bars were also authorized from
the assay office. New York, to the Federal Reserve Bank of New York,
amounting to $190,027,308.94.
During the fiscal year 1927 funds requisitioned and advanced to
United States disbursing officers by accountable warrants aggregated
$2,387,473,404 and Treasurer's checks issued on settlement warrants
in payment of claims settled by the Comptroller General of the
United States, General Accounting Office, aggregated $93,577,522.85,
which latter amount includes claims settled in foreign currencies
by drafts purchased at a total cost of $63,331.93. Drafts in foreign
currencies were also purchased for other departments and bureaus at a cost of $40,733.92. Accountable warrants aggregating
64761—FI 1927
19
264
REPORT ON" T H E FINANCES
$7,114,486,226.99 were also issued increasing the gold reserve and
reiinbursing the Treasurer for public debt principal and interest
payments.
Checks drawn on this office by Government disbursing officers were
paid during the fiscal year 1927 to the number of 32,741,718, an
increase over the previous fiscal year of 2,433,095 checks. Balances
to the credit of disbursing officers and Government agencies in 3,334
accounts on June 30, 1927, amounted to $396,903,153.36, an increase
of $15,778,259.26 over the total o^f such balances in 3,382 accounts on
June 30, 1926.
WAR FINANCE CORPORATION
The War Finance Corporation, which has been in liquidation since
January 1, 1925, continued to make steady progress in winding up
its affairs. The last annual report indicated the status of the corporation's business on October 15, 1926. From that date until October 15, 1927, the expense advances made by the corporation aggregated $237,000. During the same period the repayments on account
of the corporation's agricultural and livestock loans, including
$243,000 on account of expense advances, totaled $5,057,000. Of this
amount, $1,588,000 was repaid by banking institutions, $3,174,000 by
livestock loan companies, and $295,000 by cooperative marketing
associations, while $16,545,000 was repaid on the corporation's war
loans, making the total repayments for the year $21,602,000.
The amount advanced by the corporation for all purposes, from its
creation in May, 1918, to October 15, 1927, was $690,278,000, of which
$685,759,000 has been repaid. The amount outstanding on the corporation's books on October 15, 1927, was $4,407,000, of which
$200,000 represented war loans and $4,207,000 agricultural and livestock loans (including expenses advances of $25,000).
The corporation's personnel and operating expenses, both in Washington and in the field, were greatly reduced during the year, and
further reductions are being made as rapidly as the condition of its
business permits.
The charter of the corporation expires by law on April 4, 1928.
265
EXHIBITS
267
EXHIBITS
THE PUBLIC DEBT
Financing transactions of December, 1926
EXHIBIT
1
Offervng of certificates of indebtedness. Series TS-1927 {Sy^ per
cent) {DepofrPm^nt Circular No, 878, December 8, 1926)
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 resesrve banks. Treasury certificates of indebtedness of Series TS-1927, dated and bearing
interest from December 15, 1926, payable September 15, 1927, with
interest, at the rate of three and one-quarter per cent per annum,
payable on a semiannual basis.
Applications will be received at the Federal reserve banks.
Bearer certificates will be issued in denominations of $500, $1,000,
$5,000, $10,000, and $100,000. The certificates will have two interest
coupons attached, payable March 15,1927, and September 15,1927.
The certificates of 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 Uriited
States, or by any local taxing authority, except {a) estate or inheritance taxes, and (&) graduated additional income taxes, commonly
known as surtaxes, and excess-profits and war-profits taxes, now or
hereafter imposed by the United States, upon the income or profits
of individuals, partnerships, associations, or corporations. The
interest on an amount of bonds and certificates authorized by said
act approved September 24,1917, and amendments thereto, the principal 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.
The certificates of this series will be accepted at par, with an
adjustment of accrued interest, during such time and under such
rules and regulations as shall be prescribed or approved by the
Secretary of the Treasury, in payment of income and profits taxes
payable at the maturity of the certificates. The certificates of this
series will be acceptable to secure deposits of public moneys, but will
not bear the circulation privilege.
The right is reserved to reject any subscription and to allot less
than the amount of certificates applied for and to close the subscriptions at any time without notice. The Secretary of the Treasury
also reserves the right to make allotment in full upon applications
for smaller amounts, and to make reduced allotments upon, or to
reject, applications for larger amounts, and to make classified allot-
269
270
° REPORT ON THE FINANCES
ments and allotments upon a graduated scale; and his action in these
respects will be final. Allotment notices will be sent out promptly
upon allotment, and the basis of the allotment will be publicly
announced.
Payment at par and accrued interest for certificates allotted must
be made on or before December 15,1926, 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 TD-1926, maturing December 15,
1926, will be accepted at par, in payment for any certificates of the
series now offered which shall be subscribed for and allotted, with
an adjustment of the interest accrued, if any, on the certificates of
the series so paid for.
As fiscal agents of the United States, Federal reserve banks are
authorized and requested to receive subscriptions and to make allotments on the basis and up to the amounts indicated by the Secretary
of the Treasury to the Federal reserve banks of the respective
districts.
A. W.
MELLON,
Secretary of the Treasury.
TREASURY DEPARTMENT,
OFFICE OF THE SECRETARY,
Decembers, 1926.
To the investor:
Almost any banking institution in the United States will handle your subscription for you, or you may make subscription direct to the Federal reserve
bank of your district. Your special attention is invited to the terms of subscription and allotment as stated above. If you desire to purchase, at the
inarket price, certificates of the above issue after the subscriptions close, or
certificates of any outstanding issue, you should apply to your own bank, or,
If it can not obtain them for you, to the Federal reserve bank of your district,
which will then endeavor to fill your order in the market.
EXHIBIT 2
Subscriptio'tis and alloiments, certificates of indebtedness. Series T S 1927 {press release, Decerriber 18, 1926)
Secretary Mellon today announced that the total amount of subscriptions received for the issue of 3^4 per cent Treasury certificates
of indebtedness. Series TS-1927, dated December 15, 1926, maturing
September 15, 1927, aggregated some $1,096,000,000, and that the
total amount of subscriptions allotted was $229,269,500.^ As previously announced, holders of Treasury certificates. Series TD-I9265
maturing December 15, 1926, were permitted to subscribe to the new
issue to the extent of 50 per cent of their holdings of the maturing
certificates and of these exchange subscriptions $103,888,000 were
received and allotted. All cash subscriptions in amounts not'ex* Revised fisrures.
271
SECRETARY OF THE TREASURY
ceeding $1,000 were allotted 50 per cent, but not less than $500 on any
one subscription; while allotments on subscriptions in amounts over
$1,000 were allotted 10 per cent, but not less than $500 on any one
subscription.
The subscriptions and allotments were divided among the several
Federal reserve districts as follows:
Total cash
subscriptions
. Federal reserve district
Boston. __
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco
.'
Total
.
_
...
.
. . . .
«
J
Total exchange subscriptions
Total subscriptions
allotted
$102,191,000
356,427,000
104,696,000
58,961, 500
40, 289,000
55,066,000
102,446,000
26, 014, 500
11, 654,000
13, 690,000
25, 311, 500
95, 422,000
$1, 208,500
89, 264, 500
73, 500
1,169, 500
639,000
100,500
6,411,000
798,000
883, 500
1,080,000
1,015,000
1,245,000
$13,293,600
»126,060,000
19, 378,000
9,064, 500
6,295,000
9,356,000
18,040,000
5,319, 600
2, 898,000
2, 772, 500
4, 367, 500
13, 425,000
992,168, 500
103,888,000
i 229, 269,500
^ Revised figures.
Financing transactions of March, 1927
EXHIBIT 3
Offerings of certificates of indebtedness. Series TS2-1927 (^Vs V ^
cent) and Series TM-1928 (<^^ per cent) {Department Circulofr
No. 878, March 7,1927)
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, 1927, the certificates of Series TS2-1927
being payable bn September 15,1927, with interest at the rate of three
and one-eighth per cent per annum, payable on a semiannual basis,
and the certificates of Series TM-1928 being payable on March 15,
1928, with interest at the rate of three and one-quarter per cent per
annum, payable semiannually.
Applications will be received at the Federal reserve banks.
Bearer certificates will be issued in denominations of $500, $1,000.
$5,000, $10,000, and $100,000. The certificates of Series TS2-1927
will have one interest coupon attached, payable September 15, 1927,
and the certificates of Series TM-1928 two interest coupons attached,
payable September 15, 1927, and March 15, 1928.
The certificates of 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 (&) graduated additional income taxes, commonly
known as surtaxes, and excess-profits and war-profits taxes, now or
hereafter imposed by the United States, upon the income or profits
272
REPOiRT ON THE FINANCES
of iiidividuals, partnerships, associations, or corporations. The interest on an amount of bonds and certificates authorized by said act
ai)proved September 24,1917, and amendments thereto, the principal
of which does not exceed in the aggregate $5,000, owned by any individual, partnership, association, or corporation, shall be exempt from
the taxes provided for in clause {b) above. The certificates of these
series will be accepted at par, with an adjustment of accrued interest,
during such time and under such rules and regulations as shall be
prescribed or approved by the Secretary of the Treasury, in payment
of income and profits taxes payable at the maturity of the certificates.
The certificates of these series will be acceptable to secure deposits of
public moneys, but do not bear the circulation privilege.
The right is reserved to reject any subscription and to allot less
than the amount of certificates of either or both series applied for
and to close the subscriptions as to either or both series at any time
without notice. The Secretary of the Treasury also reserves the right
to make allotment in full upon applications for sinaller amounts, and
to make reduced allotments upon, or to reject, applications for larger
amounts, and to make classified allotments and allotments upon a
graduated scale; and his action in these respects will be final. Allotment notices will be sent out promptly upon allotment, and the basis
of allotment will be publicly announced.
Payment at par and accrued interest for certificates allotted must
be made on or before March 15, 1927, or on later allotment. After
allotment and upon payment Federal reserve banks may issue interim
certificates 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 notes
of Series B-1927, maturing March 15, 1927, will be accepted at par
in payment for any certificates of the series now offered which shall
be subscribed for and allotted, with an adjustment of the interest
accrued, if any, on the certificates of the series so paid for.
As fiscal agents of the United States, Federal reserve banks are
authorized and requested to receive subscriptions and to make allotments on the basis and up to the amounts indicated by the Secretary
of the Treasury to the Federal reserve banks of the respective districts.
A. W.
MELLON,
Secretary of the Treasury,
TREASURY DEPARTMENT,
Ofiice of the Secretary,
March 7,1927.
To the investor:
Almost any banking institution in the United States will handle your subscription for you, or you may make subscription direct to the Federal reserve bank
of your district. Your special attention is invited to the terms of subscription
and allotment as stated above. If you desire to purchase, at the market price,
certificates of the above issues after the subscriptions close, or certificates of any
outstanding issue, you should apply to your own bank, or, if it can not obtain
them for you, to the Federal reserve bank of your district, which will then
endeavor to fill your order in the market.
273
SECRETARY OF THE TREASURY
EXHIBIT 4
Subscriptions and allotments^ certificates of indebtedness, Series T S 2 1927 and Series TM-1928 {from press releases, Ma)rch 10 ofnd
March 12,1927)
Secretary Mellon announced that subscriptions for the two issues
of Treasury certificates of indebtedness. Series TS2-1927, 31/3 per
cent, dated March 15, 1927, maturing September 15, 1927, and Serie?
TM-1928, 3l^ per cent, dated March 15, 1927, maturing March 15.
1928, closed at the close of business on March 8, 1927. Holders of
434 per cent Treasury notes. Series B-1927, maturing March 15,
1927, were permitted to subscribe to the new issues to the extent of
50 per cent of their holdings of the maturing notes, and on these ex. change subscriptions about $24,000,000 have been allotted. Allotments
on the other subscriptions for both the 31/8 per cent and the 3^4 per
cent series were made as follows: All subscriptions in amounts not exceeding $1,000 for any one subscriber were allotted 50 per cent, but
not less than $500 on any one subscription; subscriptions in amounts
over $1,000 but not exceeding $1,000,000 for any one subscriber were
allotted 40 per cent but not less than $500 on any one subscription;
and subscriptions in amounts over $1,000,000 were allotted 30 per
cent, but not less than $400,000 on any one subscription.
The total amount of subscriptions received for the two issues of
Treasury certificates of indebtedness. Series TS2-1927 and Series
TM-1928, was $1,255,082,500. The total amount of subscriptions
allotted was $484,296,000, of which $24,416,000 represents allotments
on subscriptions for which Treasury notes of Series B-1927, maturing March 15,1927, were tendered in payment. All of such exchange
subscriptions were allotted 50 per cent. Allotments on other subscriptions were made on a graduated scale on the basis already
announced.
The subscriptions and allotments were divided among the several
Federal reserve districts as follows:
Federal reserve district
Total subscriptions
received
Total subscriptions
allotted
Total
Total subscriptions
received
Total subscriptions
allotted
$62,660,500
271,960,000
104,930,600
64, 686,000
35,093,000
35,024,000
94,320,000
23,491,000
7,786,600
14,101,600
25,766,000
76,715,000
$24,292,000
92,799,500
46,808,600
21,622,000
13,702,600
14,880,000
38,879,000
11,168,000
3,300,600
6,144,600
10,770,600
30,041,000
806,412,000
314,408,000
SERIES TM-1928
SERIES TS2-1927
Boston
NewYork
Philadelphia
Cleveland-.-. . .
Richmond
Atlanta
Chicago... ...
St. Louis
Minneapolis..
Kansas City
Dallas
San Francisco..
Federal reserve district
$51,102,000 $20,454,000
164,334, 600 62,426.000
46,939,600 20,603,000
9,670,000
25,076,000
7,186,000
18,148,600
12,186,000
28,763,000
16,667,000
41,323,500
4,999,000
11,647,000
3,136,600
7,302,000
1,067,500
2,464,600
4,656,600
11,244, 600
17,037,600
41,326,600
449,670, 500 169,888,000
Total subscriptions, both seriesTotal allotments, both series
Boston
NewYork
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis..
Kansas City
Dallas
San Francisco
Total
- -
$1,266,082,600
484,296,000
274
REPORT ON T H E FINANCES
EXHIBIT 5
Offering of Treasury notes, Series A-1980-82 {8y2 per cent)^ m
exchange for second Liberty loan bonds {Department Circular No.
879, March 8,1927)
TREASURY DEPARTMENT,
OFFICE OF THE SECRETARY,
Washington, March 8, 1927.
To holders of second Liberty loan converted I^X/^ per cent bonds of
1927-42:
1. Second Liberty loan converted 4^4 per cent b^nds of 1927-42
are callable for redemption, in whole or in part^ on and after
November 15, 1927.
2. The Secretary of the Treasury offers for subscription, at par,
through the Federal reserve banks, in exchange for second Liberty
loan converted 4^4: per cent bonds of 1927-42 (hereinafter referred to
as second 4%'s), Treasury notes of Series A-1930-32 of an issue of
gold notes of the United States authorized by the act of Congress
approved September 24, 1917, as amended. The amount of the issue
will be limited to the amount of second 414's tendered and accepted.
The notes will be dated March 15, 1927, and will bear interest from
that date at the rate of 3i^ per cent per annum payable semiannually
on March 15 and September 15 in each year until the principal
amount becomes payable. The notes will mature March 15, 1932,
but may be redeemed at the option of'the United States on and after
March 15, 1930, in whole or in part, on any interest day or days, on
six months' notice of redemption given in such manner as the
Secretary of the Treasury may prescribe. I n case of partial redempr
tion the notes to be redeemed will be determined by such method as
may be prescribed by the Secretary of the Treasury. From the date
of redemption designated in any such notice, interest on the notes
called for redemption shall cease. The principal and interest of the
notes will be payable in United States gold coin of the present standard of value.
3. Bearer notes with interest coupons attached will be issued in
denominations of $50, $100, $500, $1,000, $5,000, $10,000, and $100,000.
The notes will ^ot be issued in registered form. The notes will be
acceptable to secure deposits of public moneys, but will not bear the
circulation privilege.
4. Applications will be received at the Federal reserve banks.
Payment for any such notes subscribed for may be made only through
the surrender of a like principal amount of second 414's. Interest
on any such second 4 ^ ' s so surrendered and accepted will be paid in
full to May 15, 1927.
5. The notes of this 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 (&) graduated additional income taxes, commonly known as surtaxes, and excess-profits and war-profits taxes,
now or hereafter imposed by the United States, upon the income or
profits of individuals, partnerships, associations, or corporations.
SECRETARY OF THE TREASURY
275
6. The notes of this series will be accepted at par, with an adjustment of accrued interest, during such time and under such rules and
regulations as shall be prescribed or approved by the Secretary of the
Treasury, in payment of income and profits taxes payable at the
maturity of the notes, and, with respect to any such notes that may be
called tor prior redemption, will be receivable in like manner and
for the same purpose at the redemption date fixed^
7. The right is reserved to reject any subscription, in whole or in part,
and to allot less than the amount of" notes applied for, and to close
the subscriptions at any time without notice, and the act of the Secretary of the Treasury in these respects will be final. Payment for
notes subscribed for should be made when the subscription is tendered, and may be made only in second 4i/4's, which will be accepted
at par. If any subscription is rejected in whole or in part, any bonds
which may have been tendered and not accepted will be returned to
the subscriber.
8. Surrender of coupon bonds.—Second 4i/4's in coupon forni tendered for exchange for Treasury notes issued hereunder should be
presented and surrendered to a Federal reserve bank. The bonds
must be delivered at the expense and risk of the holder. Facilities
for transportation of bonds by registered mail insured may be arranged between incorporated banks and trust companies and the
Federal reserve banks, and holders may take advantage of such
arrangements when available, utilizing such incorporated banks and
trust companies as their agents. Incorporated banks and trust companies are not agents of the United States under this circular.
Coupons dated May 15, 1927, and all coupons bearing dates subsequent thereto, must be attached to such coupon bonds when presented.
At the time of delivery of the Treasury notes of Series A-1930-32
(or interim certificates) upon allotted subscriptions. Federal reserve
banks will pay to the subscriber or his authorized agent the interest
from November 15,1926, to May 15, 1927, on the coupon second 4l^'s
surrendered in exchange.
9. Surrender of registered bonds.—Second 4i/4's in registered form,
tendered for exchange for Treasury notes issued hereunder, should
be assigned by the registered payee or assigns thereof to " The Secretary of the Treasury for redemption," in accordance with the general
regulations of the cTreasury Department governing assignments for
transfer or exchange into coupon bonds, and thereafter should be presented and surrendered to a Federal reserve bank. The bonds must
be delivered at the expense and risk of the holder. A t the time of
delivery of the Treasury notes of Series A-1930-32 (or interim certificates) upon allotted subscriptions. Federal reserve banks will pay
to the subscriber or his authorized a^ent the interest from November
15, 1926, to May 15, 1927, on the registered second 414's surrendered
in exchange.
10. The Federal reserve banks, as fiscal agents of the United States,
are hereby authorized and requested to receive subscriptions for
Treasury notes hereunder, to receive second 4%'s tendered in exchange, to make allotments of subscriptions on the basis and up to
the amounts indicated to them by the Secretary of the Treasury, and
t o make delivery of Treasury notes on full-paid subscriptions allotted,
and, pending delivery of definitive notes, to issue interim certificates.
276
REPORT ON T H E FINANCES
1. Any further information which may be desired as to the exchange of second 4 ^ ' s for Treasury notes under the provisions of
this circular may be obtained upon application to a Federal reserve
bank. The Secretary of the Treasury may at any time, or from time
to time, prescribe supplemental or amendatory rules and regulations
governing the exchange, and may terminate the offer at any time in
his discretion..
A. W.
MELLON,
Secretary of the Treasury.
EXHIBIT 6
Exchamge subscriptions
and allotments, Treasujry
A-1980-S2
notes.j Series
Subscription books on the offering of 31/2 per cent Treasury notes
of Series A-193(>-32 in exchange for second Liberty loan 4 % per
cent bonds closed at the close of business March 22. The total amount
of subscriptions received was $1,360,456,450.
The allotments, by Federal reserve districts, are set forth below.
F e d e r a l reserve d i s t r i c t :
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Total amount of
allotments
$72,925,450
756,318, 650
69, 338, 450
68, 530,550
30, 819, 500
4, 452, 700
157,132,300
44,919,100
F e d e r a l reserve d i s t r i c t :
Minneapolis
K a n s a s City
Dallas
San Francisco
Treasury
Total
Total amount of
allotments
$22, 916, 700
28, 557, 300
15, 479, 250
53,466,350
35, 600,150
1,360,456,450
F i n a n c i n g t r a n s a c t i o n s of J u n e , 1927
EXHIBIT 7
Notice of call of second Liberty loan bonds {press release, May P,,
1927, with Department Circular No. 881)
oSecretary of the Treasury Mellon announces that, in accordance
with the terms of the second Liberty loan bonds, requiring six
months' notice of call, he is, on Monday, May 9, 1927, calling for
payment on November 15, 1927, all outstanding second Liberty loan
4 per cent bonds and second Libeity loan converted 4l^ per cent
bonds. Interest on«these bonds will cease on November 15, 1927.
While the bonds will be paid on November 15, 1927, the Secretary
said that it is quite probable that some time prior to that date the
Treasury will extend to the holders of second Liberty loan bonds an
opportunity to exchange them for other Government securities. The
Secretary explained that this call does not mean that the bonds will
be paid at the present time but merely places the holders on notice
that their bonds will be redeemed on November 15 next and will cease
to bear interest on that date. If holders of second Liberty loan
SECRETARY; OF T H E TREASURY
277
bonds desire to have their bonds redeenled, they should present them
for payment any time after October 15 and prior to November 15,
1927;' but if they desire other Government obligations in place of
their seconds, they should await a further announcement and notify
their bank to keep them informed of any exchange offering that may
later be made.by the Treasury.
The Secretary recalled that when the Government was selling bonds
of the several Liberty loans, an intensive nation-wide campaign was'
conducted, every available facility being used to reach the public
and to sell the bonds. Under the circumstances the Treasury Department recognizes its obligation to the holders of second Liberty loan
bonds to make every effort to notify them that their bonds are called
for redemption. While such an elaborate canvass as took place in
1917 is out of the question, the Treasury nevertheless is making a
special effort to reach individual bondholders. Banks and trust companies throughout the country have been asked to cooperate with
the Government in spreading the news of this call for redemption and
in advising the holders of bonds that the Treasury may offer new
securities in exchange. At the request of the Treasury, banking
institutions generally will display in their banking offices placards
announcing the call for redemption. I n addition, through the cooperation of the Postmaster General, a placard setting forth the call for
redemption will be displayed in every post-office station and branch,
including all contract stations, throughout the United States.
The announcement in the form of an advertisement will be carried
on Monday, May 9, in every daily paper printed in the American
language throughout the United States and in many of the foreignlanguage newspapers. This same announcement will be carried during the week beginning May 9 in every weekly and semiweekly
newspaper throughout the United States.
' For the first time the radio will be used by the Treasury Department as a means of reaching millions of bondholders. On Tuesday
next, through the courtesy of the National Broadcasting Co., Assistant
Secretary of the Treasury Dewey will broadcast the announcement
of the call from station W E A F and associated stations. The company has placed its entire facilities at the disposal of the Treasury,
and the hook-up will include both its " red " and " blue " networks,
extending as far west as Kansas City. Simultaneously, a similar
broadcast will be made from San Francisco, to include the stations
on the Pacific coast.
The importance of acquainting bondholders with the fact that
their bonds have been called is emphasized by the Treasury records
of previous calls for redemption or exchange. These records show
that there are still outstanding at the present time in the hands of
the public about $30,000,000 in Government securities on which
interest has ceased. I t is for this reason that the Treasury Department is making a special effort to see that the present announcement
reaches as many second Liberty loan bondholders as possible, through
the press, the radio, and the post offices and banks of the country.
The second Liberty loan was offered for subscription on October 1,
1917. Subscriptions amounting to $4,617,532,300 were received from
9,400,000 subscribers. A total of $3,807,865,000 was alloted. The bonds
issued were dated November 15, 1917, bore interest at 4 per cent, were
278
REPORT ON THE FINANCES
payable 25 years after date of issue, but were subject to redemption
on and after 10 years after date of issue at the option of the United
States. These bonds carried a conversion privilege which might be
exercised in the contingency of the first subsequent issue of bonds at
a higher rate. This contingency arose when the third Liberty loan
was issued on May 9, 1918, and thereafter $3,707,933,850 of the 4
per cent bonds were converted into 414 per cent bonds. The terms of
the 414 per cent bonds were identical with those of ihe 4 per cent
bonds except for the interest rate.
Of the original issue of $3,807,865,000 about $750,000,000 have been
redeemed on various accounts, and about $1,360,000,000 have been
refunded into 3i/^ per cent Treasury notes of 1930-32. A balance of
nearly $1,700,000,000 is now outstanding and the bonds representing
this amount are now called for redemption on November 15, 1927, the
tenth anniversary of the issue.
A copy of the official circular is attached.
[Department Circular No. 381]
TREASURY DEPARTMENT,
OFFICE OF THE SECRETARY,
Washvngton, May 9,1927.
To holders of second Liberty loam bonds and others concerned:
1. Call for redemption.—All outstanding second Liberty loan
bonds, otherwise known as second Liberty loan 4 per cent bonds of
1927-1942 (hereinafter referred to as second 4's) and second Liberty
loan converted 4% per cent bonds of 1927-1942 (hereinafter referred
to as second 4%^'s), are hereby called for redemption on November 15,
1927, pursuant to the provisions for redemption contained in the
bonds and in Treasury Department Circular No. 90, dated October 1,
1917, and Treasury Department Circular No. 114, dated May 9, 1918.
Interest on all second 4's and second 4%^'s will cease on said redemption date, November 15, 1927.
2. Payment or exchange.—Holders of second 4's and second 414's
will be entitled to have the bonds redeemed and paid at par on November 15, 1927. Such holders may, however, in advance of November 15, 1927, be offered the privilege of exchanging all or part of
their bonds for other interest-bearing obligations of the United States.
Holders who desire to avail themselves of the exchange privilege, if
and when announced, should request their bank or trust company to
notify them when information regarding the exchange offering is
received.
3. Presentation and sun^ender of coupon &^n^5.—Second 4's and
second 4%'s in coupon form should be presented and surrendered to
any Federal reserve bank or branch, or to the Treasurer of the United
States, at Washington, for redemption on November 15, 1927.
(NoTE.-T-If to be presented for exchange, see subsequent announcements.) The bonds must be delivered at the expense and risk of the
holder, and should be accompanied by appropriate written advice.
Facilities for transportation of bonds by registered mail insured may
be arranged between incorporated banks and trust companies and the
Federal reserve banks, and holders may take advantage of such ar-
SECRETARY OF THE TREASURY
279
rangements when available, utilizing such incorporated banks and
trust companies as their agents. Incorporated banks and trust companies are not agents of the United States under this circular.
Coupons dated November 15, 1927, which become payable on that
date, should be detached from any second 4's or second 4 ^ ' s presented
for redemption on November 15, 1^27, and such coupons should be
collected by the holders thereof in regular course. All coupons bearing dates subsequent to November 15, 1927, must be attached to any
such bonds when presented for redemption on November 15,, 1927,
provided, however, if any such coupons are missing from bonds presented for redemption, the bonds will nevertheless be redeemed, but
the full face amount of any such missing coupons will be deducted
from the payment to be made on account of such redemption, and any
amounts so deducted will be held in the Treasury to provide for the
redemption of such missing coupons as may subsequently be presented.
4. Presentation and surrender of registered bonds.—Second 4's and
second 4 ^ ' s in registered form presented and surrendered for redemption must be assigned by the registered payees or assigns thereof,
or by their duly constituted representatives, to " The Secretary of the
Treasury for redemption," in accordance with the general regulations
of the Treasury Department governing such assignments, and thereafter should be presented and surrendered to any Federal Reserve
Bank or branch, or to the Treasury Department, Division of Loans
and Currency, Washington, for redemption on November 15, 1927.
(NOTE.—If to be presented for exchange, see subsequent announcements.) The bonds must be delivered at the expense and risk of the
holder, and should be accompanied by appropriate written advice.
If assignment for redemption is made by the registered holder of
record, payment of principal and interest will be made to the registered holder at his last address of record, unless written instructions
to the contrary are received from such registered holder. If assignment for redemption is made by an assignee holding under proper
assignment from the registered holder of record, or by a duly constituted representative.of such registered holder or assignee, payment
of principal and interest will be made to such assignee or representative, at the address specified in the form of advice. 'Assignment in
blank, or other assignment having similar effect, will be recognized,
and in that event payment of principal and interest will be made to
the person surrendering the bonds for redemption, since under such
assignments the bonds become in effect payable to bearer. I n case it is
desired to have payment of the registered bonds made to some one
other than the registered holder of record, without intermediate
assignment, the bonds may be assigned to " T h e Secretary of the
Treasury for redemption for account of
55.
(Here insert name and address of payee desired)
but assignments in this form must be completed before acknowledgment and not left in blank. Assignments in blank, or assignments
having similar effect, should be avoided, if possible, in order not to
lose the protection afforded by registration.
The transfer books for registered bonds of the second Liberty loan
will not close prior to November 15, 1927. Final interest due on that
date will not be paid by interest checks in regular course but will be
64761—FI 1927
20
280
REPORT ON THE FINANCES
covered by payments to be made simultaneously with the payments
on account of principal.
5. Presentation prior to November 15^ 1927.—In order to facilitate
the redemption of second 4's and second 41^4's on November 15, 1927,
any such bonds may be presented and surrendered in the manner
. herein prescribed, at any time after October 15, 1927, for redemption
on November 15, 1927. Such early presentation by holders, in advance of November 15, 1927, will insure prompt payment of principal and interest when due on November 15, 1927. This is particularly important with respect to registered bonds, for payment can
not be made until registration shall have been discharged at the
Treasury Department. I t will expedite redemption if bonds are
presented to Federal reserve banks or branches.
6. Further im^formation.—Any further information which may be
desired as to the redemption of second 4's and second 4%'s under this
circular may be obtained from any Federal reserve bank or branch,
or from the Commissioner of the Public Debt, Treasury Department,
Washington, where copies of the Treasury Department regulations
governing assignments also may be obtained. The Secretary of the
Treasury may at any time, or from time to tirrie, prescribe supplemental or amendatory rules and regulations governing the matters
covered by this circular.
A. W. MELLON,
Secretary of the Treasury.
EXHIBIT 8
Offering of Treasury bonds of 19Ji3-Jf7 {8 8/8 per cent) (press release,
May 81, 1927^ with Depmrtmlent Circular No. 888)
The Treasury announces an offering of Treasury bonds of 1943-47,
dated June 15, 1927, bearing interest .at 3 % per cent, maturing June
15, 1947, and callable on four months' notice, in whole or in part, on
and after June 15, 1943. The offering will be a combined offering
for cash and in exchange for outstanding second Liberty loan bonds.
Cash subscriptions are invited at IOOI/2 and accrued interest. The
iimount of the cash offering will be $200,000,000, or thereabouts.
On exchange subscriptions second Liberty loan bonds and the new
Treasury bonds of 1943^7 will be exchanged at par for each, and in
addition interest from May 15 to June 15 on second Liberty loan
bonds accepted in exchange will be paid in cash. The amount of
the exchange offering will be limited by the amount of second Liberty
loan bonds tendered and accepted.
I t will be remembered that the second Liberty loan bonds are called
for redemption on November 15, 1927, and that interest theireon
ceases on that date. The present exchange offering gives holders of
second Liberty loan bonds an opportunity to secure a long-term
Government bond in place of those they now hold. The exchange
offering will in all probability be kept open until June 15, 1927, but
the Secretary of the Treasury reserves the right to close the exchange
offering, as well as the cash offering, at any time without notice.
A copy of the official circular is attached.
SECRETARY OF T H E TREASURY
281
[Department Circular No. 383]
TPtEAsuRY D E P A R T M E N T ,
OFFICE OF THE SECRETARY,
Washington, May 81,1927^
The Secretary of the Treasury invites subscriptions, from the people o f t h e United States, for 3 % per cent Treasury bonds of 194347, of an issue of gold bonds of the United States authorized by the
act of Congress approved September 24, 1917, as amended.
Cash subscriptions are invited, at 100l^ and accrued interest. The
amount of the issue for cash will be $200,000,000, or thereabouts.
Exchange subscriptions, in payment of which only second Liberty
loan converted 414 per cent bonds of 1927-1942 (hereinafter referred
to as second 4i/j|^'s) or second Liberty loan 4 per cent bonds of 19271942 (hereinafter referred to as second 4's) may be tendered, are
invited, at par with an adjustment of accrued interest as of June 15,
1927. The amount of the issue upon exchange subscriptions will be
limited to the amount of second 4%'s or second 4's tendered and
accepted.
DESCRIPTION OF BONDS
The bonds will be dated June 15, 1927, and will bear interest from
that date at the rate of 3 % per cent per annumipayable semiannually
on June 15 and December 15 in each year until the principal amount
becomes payable. The bonds will mature June 15, 1947, but may be
redeemed at the option of the United States on and after June 15,
1943, in whole or in part, at par and accrued interest, on any interest
day or days, on four months' notice of redemption given in such
manner as the Secretary of the Treasury shall prescribe. I n case of
partial redemption the bonds to be redeemed will be determined by
such method as may be prescribed by the Secretary of the Treasury. From the date of redemption designated in any such notice,
interest on the bonds called for redemption shall cease. The principal and interest of the bonds will be payable in United States gold
com of the present standard of value.
Bearer bonds with interest coupons attached will be issued in
denominations of $50, $100,^ $500, $1,000, $5,000, $10,000, and $100,000.
Bonds registered as to principal and interest will be issued in denominations of $50, $100, $500, $1,000, $5,000, $10,000, $50,000 and
$100,000. Provision will be made for the interchange of bonds of
different denominations and of coupon and registered bonds and for
the transfer of registered bonds, without charge by the United States,
under rules and regulations prescribed by the Secretary of the
Treasury.
The bonds 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 ta^xes, and (&) graduated
additional income taxes, commonly known as surtaxes, and excessprofits and war-profits taxes, now or hereafter imposed by the United
States, upon the income or profits of individuals, partnerships, associations, or corporations. The interest on an amount of bonds and
certificates authorized by said act approved September 24, 1917, and
282
RliiPORT ON T H E
FINANCES
amendments thereto, the principal of which does not exceed in the
aggregate $5,000, owned by any individual, partnership, association,,
or corporation, shall be exempt from the taxes provided for in clause
{b) above.
The bonds will be acceptable to secure deposits of public moneys,.
but do not bear the circulation privilege and are not entitled to any
privilege of conversion. The bonds will be subject to the general
regulations of the Treasury Department, now or hereafter issued,.
. governing United States bonds.
APPLICATION AND ALLOTMENT
Applications will be received at the Federal reserve banks, as fiscal
agents of the United States. Banking institutions generally will
handle applications for subscribers, but only the Federal reserve
banks are authorized to act as official agencies.
The right is reserved to reject any subscription and to allot less
than the ainount of bonds applied for and to close the subscriptions
at any time without notice, and the act of the Secretary of the
Treasury in these respects will be final. The Secretary of the Treasury also reserves the right to make allotment in full upon applications
for smaller amounts,c:and to make reduced allotments upon, or to
reject, applications for larger amounts, and to make classified allotments and allotments upon a graduated scale; and his action in these
respects will be final.
PAYMENT
Cash subscriptions.—Payment at 100% and accrued interest for any
bonds allotted on cash subscriptions must be made on or before June
15, 1927, or on later allotment. Any qualified depositary will be
permitted to make payment by credit for bonds 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 TJ-i927, maturing June 15, 1927, will be accepted at the Federal reserve banks at par, to be applied in part payment for any
Treasury bonds of 1943-47 now offered which shall be subscribed for
and allotted.
Exchange subscriptions.—Payment for any bonds allotted on
exchange subscriptions may be made only in second 4l^'s or second 4's,
which will be accepted at par with an adjustment of accrued interest
as of June 15, 1927. Payment for bonds subscribed for should be
made when the subscription is tendered. If any subscription is
rejected in whole or in part, any bonds which may have been tendered and not accepted will be returned to the subscriber.
SURRENDER OF BONDS
o
Surrender of coupon bonds.—Second 4%'s or second 4's in coupon
form tendered in exchange for Treasury bonds issued hereunder
should be presented and surrendered to a Federal reserve bank. The
bonds must be delivered at the expense and risk of the holder.
SECRETARY OF THE TREASURY
283
Facilities for transportation of bonds by registered mail insured
may be arranged between incorporated banks and trust companies
^and the Federal reserve banks, and holders may take advantage of
-such arrangements when available, utilizing such incorporated banks
:and trust companies as their agents. Incorporated banks and trust
-companies are not agents of the United States under this circular.
Coupons dated November 15, 1927, and all coupons bearing dates
•subsequent thereto, must be attached to such coupon bonds when presented. At the time of delivery of the Treasury bonds of 1943-47
(or interim certificates) upon allotted subscriptions, Federal reserve
banks will pay to the subscriber or his authorized agent the interest
from May 15, 1927, to June 15, 1927, on the coupon second 4i^'s and
:second 4's surrendered in exchange.
Surrender of registered bonds.—Second 414's or second 4's in registered form, tendered in exchange for Treasury bonds issued hereunder, should be assigned by the registered payee or assigns thereof
to " The Secretary of the Treasury for redemption," in accordance
with the general regulations of the Treasury Department governing
assignments, and thereafter should be presented and surrendered to a
Federal reserve bank. The bonds must be delivered at the expense and
risk of the holder. A t the time of delivery of the Treasury bonds
of 1943-47 (or interim certificates) upon allotted subscriptions. Federal reserve banks will pay to the subscriber or his authorized agent
the interest from May iS, 1927, to June 15, 1927, on the registered
second 4%^'s and second 4's surrendered in exchange.
The Federal reserve banks, as fiscal agents of the United States,
are hereby authorized and requested to receive subscriptions for
Treasury bonds hereunder, to receive second 4i/i's or second 4's tendered in exchange, to make allotments of subscriptions on the basis
and up to the amounts indicated to them by the Secretary of the
Treasury, and to make delivery of Treasury bonds on full-paid subascriptions allotted, and, pending deliverj^ of definitive bonds, to issue
interim certificates.
F U R T H E R DETAILS ^
Any further information which may be desired as to the issue of
Treasury bonds under the provisions of this circular may be obtained
upon application to a Federal reserve bank. The Secretary of the
Treasury may at any time, or from time to time, prescribe supplemental or amendatory rules and regulations governing the exchange,
and may terminate the offer at any time in his discretion.
A. W.. MELLON,
Secretary of the Treasury.
To the investor:
Almost any banking institution in the United States will handle your subscription for you, or you may make subscription direct to the Federal reserve
bank of your district. Your special attention is invited to the terms of subscription and allotment as stated above, and to the fact that second Liberty
loan bonds may be exchanged for the Treasury bonds offered.
284
REPORT ON T H E FINANCES
EXHIBIT 9
Cash subscriptions amd allotments, Treasu/ry bonds of 19Jf8-Jt7 {frompress releases, June 10 and June H , 1927)
Secretary Mellon announced that the allotment of cash subscriptions for the issue of 3 % per cent Treasury bonds of 1943-47, dated.
June 15,1927, maturing June 15,1947, and callable on and after June^
15,1943, has been made on the following basis: All cash subscriptions
in amounts not exceeding $100,000 for any one subscriber were
allotted 50 per cent, but not less than $50 on any one subscription;
cash subscriptions in amounts over $100,000 but not exceeding$1,000,000, were allotted 40 per cent, but not less than $50,000 on any
one subscription; and cash subscriptions in amounts over $1,000,000*
were allotted 30 per cent, but not less than $400,000 on any one subscription. Cash subscriptions for this issue of Treasury bonds were
invited at IOOI/2 and accrued interest.
The total amount of cash subscriptions received for the Treasury
bonds of 1943-47 was $617,604,800, and the total of subscriptions,
allotted was $249,598,300.
The subscriptions and allotments were divided among the several
Federal reserve districts as follows:
Total subscriptions
allotted
Federal reserve district
Total subscriptions
received.
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
$68,536. 500 $29, 535, 750
118,591,050 41, 674,950
92,349,850 39,451,550
64, 557,900 20,985, 700
9,866, 700
22,053,300
19,430, 500
39,361,000
72,014,050 31,439, 700
i
Total subscriptions
allotted
Federal reserve district
Total subscriptions
received
St. Louis
. .
Minneapolis. _
Kansas C i t y . . . . . .
Dallas
San Francisco
$13,539,600
9,178, 700
8,009,100
23,858,100
95. 555, 650
$6,442,850
4, 539,400
4,004, 650
11,318,400
30,908,250
Total
617, 604,800
_ -.
249,698,300
EXHIBIT 10
Time extended for exchange subscriptions for Trea^u/ry bonds of
19JfS-Ji!7 {press release, Jum.e 15,1927)
The Secretary of the Treasury announces that exchange subscriptions for the issue of 3 % per cent Treasury bonds of 1943-47, forwhich second Liberty loan 4 per cent bonds and second Liberty loan,
converted 4 % per cent bonds are exchangeable at par for each, will
not close on June 15, as previously announced, but will remain open,
until the close of business on June 30. * * *
On the basis of reports received to date from Federal reserve
banks exchange subscriptions aggregate approximately $170,000,000.
They have come in steadily at the rate of about $12,000,000 a day
and, with few exceptions, have been received in comparatively small
lots. There has been a marked absence of large blocks, such as were
offered for exchange for notes in March last. This confirms theopinion of the Treasury Department that outstanding second Liberty loan bonds are still widely scattered in the hands of individualinvestors, many of them original subscribers, and many not familiarwith investment securities nor in contact with such matters. In.
SECRETARY OF THE TREASURY
285
March, of approximately $1,360,000,000 bonds offered in exchange,
no less than $1,021,000,000 were of $10,000 denomination and over.
Approximately $751,000,000 exchange subscriptions for the March
offering were received through the New York Federal Eeserve Bank.
I t seems probable, therefore, that the banks, insurance companies,
and other large holders of Government securities, rather than the
individual investor, were those to whom the March offering appealed,
and that most of the large holdings were exchanged at that time.
The process of reaching thousands of individual investors is necessarily a slow one. The bonds were originally sold in many cases by
a house-to-house canvass. To-day the sole means of contact and
communication are the banks, public press, and radio. I t is probable
that many holders of seconds even to-day do not know that their
bonds have been called and will cease to bear interest on November
15 next, and that many more have no knowledge of the fact that their
bonds are exchangeable for new 20-year United States Government
bonds.
The Treasury Department desires that they should know of this
exchange offering. A long-time bond was offered with the needs of
the individual investor particularly in mind. The Secretary believes
that from the public standpoint it is desirable that United States
Government securities should be widely held, as were the original
Liberty loan issues, rather than concentrated in the hands of a comparatively few large banking, insurance, and industrial companies.
This concentration almost inevitably takes place when current Treasury financing and refunding operations are effected by means of
short-term certificates and notes.
I t seems proper to point out to them that with the second Liberty
loan bonds called for redemption in November, the early maturity of
the thirds, the fact that fourths are callable in six years, and with
debt retirement proceeding at the present rate, long-term United
States bonds will no longer be available in such volume as we have
been accustomed to since the war.
Many thousands of holders of second Liberty loan bonds have
already availed themselves of the exchange offering. I t is for the
benefit of those who have not heard of it, or who have failed to act
promptly, that the subscriptions will remain open for another 15
days.
E X H I B I T 11
Exchange subscriptions amd allotments. Treasury bonds of 19Jf3-Ji7
The privilege of exchanging second Liberty loan bonds for the new
3 % per cent Treasury bonds of 1943-47 expired on June 30. Second
Liberty loan bonds offered for exchange aggregated $245,256,450. All
exchange subscriptions were allotted in full.
Allotments were divided among the several Federal reserve districts as follows:
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
.
$11, 764,100
54, 790,150
24,196, 650
31,112,950
5, 096,200
3, 640, 550
34, 603,350
11,682, 350
Minneapolis
K a n s a s City
DaUas
San Francisco
Treasury
$8,760, 750
17,360,450
4, 593, 700
9,825,450
27,829,800
245,256,450
286
REPORT ON THE FINANCES
EXHIBIT
12
Offer to purchctse second Liberty loan bonds {press release, Jum£
16, 1927, with Depa/rtment Circular No. 884)
Secretary Mellon made the following announcement:
Holders of second Liberty loan bonds, both second 4's and second
414's, who may not desire to exchange them for the new 3 % per cent
Treasury bonds of 1943-47, are now given the opportunity, until the
close of business on June 22, to sell their bonds direct to the Government, with the understanding that the lowest offers may be accepted,
if satisfactory to the Secretary of the Treasury.
This procedure will save commission charges to the seller and to
the Treasury.
Accordingly, the Treasury invites all holders of second Liberty
loan bonds to submit proposals for the sale of these bonds. From
the lowest proposals received the Treasury expects to purchase a
limited amount df such bonds. All proposals should be handled
through a bank, trust company, or recognized dealer, who will deal
with the Federal reserve banks, which are the official agencies for
the Treasury in these transactions. Full information with respect
to the tender of bonds may be obtained from such banks, trust companies, or recognized dealers. Proposals should reach a Federal
reserve bank before the close of business on June 22, 1927. In the
event of a proposal being accepted, bonds must be delivered to a
Federal reserve bank on or before June 28. Payment, in the case of
coupon bonds, will be made on June 28, 1927, and in the case of
registered bonds on June 28,1927, or as soon thereafter as registration
may be cleared.
Second Liberty loan bonds have been called for redemption on
November 15 next.
The Treasury reserves the right to reject any or all proposals.
A copy of the official circular is attached.
[Department Circular No. 8841
TREASURY DEPARTMENT,
OFFICE OF THE SECRETARY,
Washington, J u n e 16,1927,
To holders of second Liberty loan bonds and others concerned:
1. I n pursuance of the authority contained in section 2 of the act
approved March 3, 1881, public notice is hereby given that with a
view to the purchase of a limited amount of the bonds of the second
Liberty loan (second 4's and second 4%^'s), proposals for the sale of
such bonds to the Government will be received at the Federal reserve
banks on and after this date and until the close of business June 22,
1927.
2. Purchases of such bonds will be made at the lowest prices offered,
plus accrued interest from May 15, 1927, to date of payment, provided such prices are acceptable to the Secretary of the Treasury,
and may be made from time to time on the basis of the proposals
then in hand. The Secretary of the Treasury reserves the right to
SECRETARY OF T H E TREASURY
287'
reject or to accept in whole or in part any and all proposals, and
his action in this respect shall be final.
3. All transactions in connection with the proposals for sale, the
delivery of bonds, and payment therefor should be handled through
banks, trust coijipanies, or recognized dealers, which wiU act as
agents of the owners of the bonds. The banks, trust companies,
and dealers will deal with Federal reserve banks, which are the only
official agencies of the United States in these transactions.
4. Proposals must be in writing, and should reach a Federal
reserve bank before the close of business on June 22, 1927. Federal
reserve banks will notify the presenting agency of the acceptance or
rejection of proposals.
5. Upon notification of the acceptance of any proposal, the agency
which forwarded such proposal will thereupon transmit the second
Liberty loan bonds described in the ^proposal, at the seller's own
expense and risk, to the Federal reserve bank. All bonds to be
surrendered for purchase should reach the Federal reserve bank as
soon as possible after receipt of such notification, but, in any event,
not later than the close of business on June 28, 1927. For all bonds
delivered in accordance with accepted proposals, payment will be
made, in the case of coupon bonds, on June 28, 1927, and, in the case
of registered bonds, on June 28,1927, or as soon thereafter as registration may be cleared. Payment may also be made in advance of
June 28, 1927, by mutual agreement.
6. Coupon bonds of the second Liberty loan presented hereunder
should have attached coupons bearing date November 15, 1927, and
all subsequent dates. Registered bonds presented hereunder must
be duly assigned to " The Secretary of the Treasury for Purchase,'^
in accordance with the general regulations of the Treasury Department governing assignments. Bonds registered in the names of
minors or incompetents will not be accepted unless accompanied
by a certificate of court of competent jurisdiction showing that the
person assigning such bonds has authority so to assign. Bonds
registered in the names of two or more persons must be assigned by
all of the coowners.
7. The Secretary of the Treasury reserves the right to reject in
whole or in part any and all bonds tendered, and his action in this
respect shall be final.
8. Any further information which may be desired may be obtained
from any Federal reserve bank.
A. W. MELLON,
Secretary of the Treasu/ry.
NOTE.—Second Liberty loan bonds have been called for redemption on November 15, 1927, on which date they will cease to bear interest. The right to
tender such bonds for sale in accordance with the above circular may therefore
be exercised in the discretion of the owners of such bonds.
EXHIBIT 13
Purchase of second Liberty loam bonds {press release, J u n e 28,1927)
Secretary Mellon announced that the privilege of tendering second
Liberty loan 4 per cent and 4% per cent bonds for sale to the United
States expired at the close of business on June 22. Under the terms
288
REPORT ON THE FINANCES
of the Secretary's earlier announcement, the purchases were to be
made at the lowest prices offered, plus accrued interest.
According to reports received from the Federal reserve banks about
$72,000,000 face amount of bonds were tendered, including $324,000
of 4 per cent bonds.
. The Treasury has accepted proposals aggregating $62,966,250 ^ face
amount at an average price for the 414 per cent bonds of par and
fifteen and one-half thirty-seconds. The balance of the proposals
were rejected because the price demanded was considered excessive.
I n the case of offers which have been accepted the bonds should be
in the hands of the Federal reserve banks on or before June 28, 1927.
P^ayment, in the case of coupon bonds, will be made on June 28,
and in the case of registered bonds, on June 28, or as soon thereafter as registration may be cleared.
Financing transactions of September^ 1927
E X H I B I T 14
Offerings of certificates of indebtedness, Series TM2-1928 {8 per
cent), and Treasury/ notes. Series B-1980-82 {8y2 per cent) {Department Circulars Nos. 886 and 887, September 6, 1927)
[Department Circular No. 386]
CERTIFICATES OF INDEBTEDNESS
TREASURY DEPARTMENT,
OFFICE OF THE SECRETARY,
September 6, 1927,
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 of Series TM2-1928, dated and bearing
interest from September 15, 1927, payable March 15, 1928, with
interest at the rate of three per cent per annum, payable on a semiannual basis.
Applications will be received at the Federal reserve banks.
Bearer certificates will be issued in denominations of $500, $1,000,
$5,000, $10,000, and $100,000. The certificates will have one interest
coupon attached, payable March 15, 1928.
The certificates of 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 (&) graduated additional income taxes, commonly
known as surtaxes, and excess-profits and war-profits taxes, now or
hereafter imposed by the United States, upon the income or profits
of individals, partnerships, associations, or corporations. The inter»Final figure.
SECRETARY OF THE TREASURY
289
<est on an amount of bonds and certificates authorized by said act
-approved September 24, 1917, and amendments thereto, the principal of which does not exceed in the aggregate $5,000, owned by
any individual, partnership, association, or corporation, shall be
^exempt from the taxes provided for in clause {b) above.
The certificates of this series will be accepted at par, with an
adjustriient of accrued interest, during such time and under such
rules and regulations as shall be prescribed or approved by the Secretary of the Treasury, in payment of income and profits taxes payable at the maturity of the certificates. The certificates of this series
will be acceptable to secure deposits of public moneys, but will not
t)ear the circulation privilege.
The right is reserved to reject any subscription and to allot less
than the amount of certificates applied for and to close the subscrip-.
tions at any time without notice. The Secretary of the Treasury
.slso reserves the right to make allotment in full upon applications
for smaller amounts, and to make reduced allotments upon, or to
reject, applications for larger amounts, and to make classified allotments and allotments upon a gradua;ted scale; and his action in
these respects will be final. Allotment notices will be sent out
promptly upon allotment, and the basis of the allotment will be
^publicly announced.
Payment at par and accrued interest for certificates allotted must
%e made on or before September 15, 1927, 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 s h a l l b e qualified in excess of existing deposits, when
so notified by the Federal reserve bank of its district. Treasury
.certificates of indebtedness of Series TS-1927 and TS2^1927, both
maturing September 15, 1927, will be accepted at par, in payment
for any certificates.of the series now offered which shall be subscribed
for and allptted, with an adjustment of the interest accrued, if any,
on the certificates of the series so paid for.
As fiscal agents of the United States, Federal reserve banks are
authorized and requested to receive subscriptions and to make allotments on the basis and up to the amounts indicated by the Secretary
of the Treasury to the Federal reserve banks of the respective
districts.
OGDEN L . MILLS,
Acting Secretary of the Treasury,
To the investor:
Almost any banking institution in the United States will handle your subscription for you, or you may make subscription direct to the Federal reserve
• bank of your district. Your special attention is invited to the terms of subscription and allotment as stated above. If you desire to purchase, at the
market price, certificates of the above issue after the subscriptions close, or
-certificates of any outstanding issue, you should apply to your own bank, or,
if it can not obtain them for you, to the Federal reserve bank of your district,
^which will then endeavor to fill your order in the markets
290
REPORT ON THE FINANCES
[Uepartment Circular No. 387]
TREASURY NOTES
TREASURY DEPARTMENT,
OFFICE OF THE SECRETARY,
September 6,1927.
1. The Secretary of the Treasury invites subscriptions, through,
the Federal reserve banks, for three and one-half per cent Treasury
notes of Series B-1930-32, of an issue of gold notes of the United
States authorized by the act of Congress approved September 24,.
1917, as amended.
2. Cash subscriptions are invited, at par and accrued interest. The
amount of the issue for cash will be $250,000,000, oi" thereabouts.
3. Exchange subscriptions, in payment of which only second Liberty loan converted 4%^ per cent bonds of 1927-1942 (hereinafter referred to as second 414's) may be tendered, are invited at IOO14.
Interest on any second 414's so surrendered and accepted will be paid
in full to November 15,1927. The amount of. the issue upon exchange
subscriptions will be limited to the amount of the second 4l^'s
tendered and accepted.
DESCRIPTION/OF NOTES
4. The notes will be dated September 15, 1927, and will bear
interest from that date at the rate of 31/2 per cent per annum payable semiannually on March 15 and September 15 in each year until
the principal amount becomes payable. The notes will mature September 15, 1932, but may be redeemed at the option of the United
States on and after September 15, 1930, in whole or' in part, on any
interest day or days, on six months' notice of redemption given in
such manner as the Secretary of the Treasury may prescribe. I n
case of partial redemption the notes to be redeemed will be determined by such methoa as may be prescribed by the Secretary of the
Treasury. From the date of redemption designated in any such
notice, interest on the notes called for redemption shall cease. The
principal and interest of the notes will be payable in United States
gold coin of the present standard of value.
5. Bearer notes with interest coupons attached will be issued in
denominations of $50, $100, $500, $1,000, $5,000, $10,000, and $100,000.
The notes will not be issued in registered form. The notes will be
acceptable to secure deposits of public moneys, but will not bear the
circulation privilege.
6. The notes of this 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 (&) graduated additional income taxes, commonly known as surtaxes, and excess-profits and war-profits taxes,
now or hereafter imposed by the United States, upon the income or
profits of individuals, partnerships, associations, or corporations.
7. The notes of this series will be accepted at par, with an adjustment of accrued interest, during such time and under such rules and
regulations as shall be prescribed or approved by the Secretary of
SECRETARY OF T H E TREASURY
291
the Treasury, in payment of income and profits taxes payable at the
maturity of the notes, and, with respect to any such notes that may '
be called for prior redemption, will be receivable in like manner and
for the same purpose at the redemption date fixed.
APPLICATION AND ALLOTMENT
8. Applications will be received at the Federal reserve banks, as
fiscal agents of the United States. Banking institutions generallywill handle applications for subscribers, but only the Federal reserve
banks are authorized to act as official agencies.
9. The right is reserved to reject any subscription, in whole or in
part, to allot less than the amount o f notes applied for, and to close
either the cash or the exchange subscriptions at any time without
notice, and the act of the Secretary of the Treasury in these respects
will^ be final. Exchange subscriptions will probably remain open
until September 29, 1927. The Secretary of the Treasury also re- o
serves the right to make allotment in full upon applications for
smaller amounts, and to make reduced allotments upon, or to reject,
applications for larger amounts, and to make classified allotments
and allotments upon a graduated scale; and his action in these
respects will be final.
PAYMENT
10. Cash subscriptions.—Payment at par and accrued interest for
any notes allotted on cash subscriptions must be made on or before
September 15, 1927, or on later allotment. Any qualified depositary
will be permitted to make payment by credit for notes allotted to
it for itself and its customers up to any amount for which it shall
be qualified in excess of existing deposits, when so notified by the
Federal reserve bank of its district. Treasury certificates of indebtedness of Series TS-1927 and TS2-1927, both maturing September 15, 1927, will be accepted at the Federal reserve banks at par,
to be applied in payment for any Treasury notes of Series rB-1930-32
now offered which shall be subscribed for and allotted. ^^
11. Exchange subscriptions.—Payment for any notes allotted on
exchange subscriptions may be made only through the surrender of a
like principal amount of second 4%'s which will be acepted at par,
and, at the time of delivery of the notes, interest on any such second
4 ^ ' s so surrendered and accepted will be paid in full to November
15, 1927, less the amount of the premium on the notes. Second
Liberty loan converted 4% per cent bonds tendered in payment for
notes subscribed for should be presented when the subscription is
tendered. If any subscription is rejected in whole or in part, any
bonds which may have been tendered and not accepted will be returned to the subscriber.
SURRENDER OF BONDS ON EXCHANGE SUBSCRIPTIONS
12. Surrender of coupon bonds.—Second 414's in coupon form
tendered in exchange for Treasury notes issued hereunder should be
presented and surrendered to a Federal reserve bank. The bonds
must be delivered at the expense and risk of the holder. Facilities
^
292
REPORT ON THE FINANCES
for transportation of bonds by registered mail insured may be ar^
ranged between incorpoi-ated banks and trust companies and the
Federal reserve banks, and holders may take advantage of such
arrangements when available, utilizing such incorporated banks and
trust companies as their agents. Incorporated banks and trust companies are not agents of the United States under this circular.
13. Coupons dated November 15, 1927, and all coupons bearing
dates subsequent thereto, must be attached to such coupon bonds
when presented. At the time of delivery of the Treasury notes of
Series B-1930-32 (or interim certificates) upon allotted subscriptions,.
Federal reserve banks will pay to the subscriber or his authorized
agent the interest from May 15, 1927, to November 15, 1927, on the
coupon second 414's surrendered in exchange, less the amount of the
premium on the notes issued.
14. Surrender of registered bonds.—Second 4 ^ ' s in registered
form, tendered in exchange for Treasury notes issued hereunder^
O should be assigned by the registered payee or assigns thereof to " The
Secretary of the Treasury for redemption," in accordance with the
general regulations of the Treasury Department governing assignments for transfer or exchange into coupon bonds, and thereafter
should be presented and surrendered to a Federal reserve bank. The
bonds must be delivered at the expense and risk of the holder. At the
time of delivery of the Treasury notes of Series B-1930-32 (or
interim cer^tificates) upon allotted subscriptions. Federal reserve banks
will pay to the subscriber or his authorized agent the interest from
May 15, 1927, to November 15, 1927, on the registered second 4i4's
surrendered in exchange, less the amount of the premium on the
notes issued.
15. The Federal reserve banks, as fiscal agents of the LTnited States,
are hereby authorized and requested to receive subscriptions for
Treasury notes hereunder, to receive second 414's tendered in exchange, to make allotments of subscriptions on the basis and up to the
amounts indicated to them by the Secretary of the Treasury, and to
make delivery of Treasury notes on full-paid subscriptions allotted,
and, pending delivery of definitive notes, to issue interim certificates.
)
F U R T H E R DETAILS
16. Any further information which may be desired as to subscriptions for Treasury notes under the provisions of this circular may be
obtained upon application to a Federal reserve bank. The Secretary
of the Treasury may at any time, or from time to time, prescribe
supplemental or amendatory rules and regulations governing the
exchange, and may terminate the offer at any time in his discretion.
OGDEN L . MILLS,
Actimg Secretary of the Treasury.
To the investor:
Almost any banking institution in the United States will handle your subscription for you, or you may make subscription direct to the Federal reserve
bank of your district. Your special attention is invited to the terms of subscription
and allotment as stated above, and to the fact that second Liberty loan converted
4 ^ per cent bonds may be exchanged for the Treasury notes offered.
293
SECRETARY OF THE TREASURY
EXHIBIT 15
Ca^h subscriptions and allotments, certificates of indebtedness, Series
TM2-1928, and Treasury notes. Series B-1980-82 {from' press
releases, September 9 and September 12,1927)
Secretary Mellon today announced that the subscription books on
the offering of 3 per cent Treasury certificates of indebtedness of
Series T M ^ 1 9 2 8 and the subscription books on the cash offering of
3 % per cent Treasury notes of Series B-1930-32, closed at the close
of business Wednesday, September 7.
T H R E E P E R CENT TREASURY C E R T I F I C A T E S O F INDEBTEDNESS, S E R I E S
TM2-1928
'
Allotment of subscriptions for the certificates has been made on
the following basis: Subscriptions in amounts not exceeding $1,000
for any one subscription were allotted in full; subscriptions in
amounts over $1,000, but not exceeding $10,000 were allotted 60 per
cent, but not less than $1,000 on any one subscription; subscriptions
in amounts over $10,000, but not exceeding $1,000,000 were allotted
50 per cent, but not less than $6,000 on any one subscription, and
subscriptions in amounts over $1,000,000 were allotted 35 per cent,
but not less than $500,000 on any one subscription. The subscriptions and allotments were divided among the several FederaF reserve
districts as follows:
Federal reserve^district
Total subscriptions
received
Boston
New York..
Philadelphia
Cleveland. . .
Richmond—.
Atlanta
Chicago
.
$41,847, 500 $20,167,000
328,868,000 122,188, 500
40, 559.000 22, 460,000
21,411,000
8,958, 500
25,402,000
11,859, 500
21, 557,000
12, 556, 000
33,400,000
17,920,000
..
-
Total subscriptions
allotted
Total subscriptions
allotted
Federal reserve district
Total subscriptions
received
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco
$16,639,500
1, 502. 500
6,362, 500
12,531, 500
32,239,500
$9,708,500
889,000
3,184,500
6,635.000
14,053,000
681,320,000
250,57.7, 500
.
Total
CASH OFFERING OF 3y2 P E R CENT TREASURY NOTES O F S E R I E S B-1930-32
Allotment of the cash subscriptions for the 3i/^ per cent Treasury
notes has been made on the following basis: Cash subscriptions in
amounts not exceeding $1,000 for any one subscription were allotted
40 per cent, but not less than $50 on any one subscription; cash subscriptions in amounts over $1,000 but not exceeding $500,000 were
allotted 25 per cent, but not less than $400 on any one subscription;
and cash subscriptions in amounts over $500,000 were allotted 20 per
cent, but not less than $125,000 on any one subscription. The subscriptions and allotments were divided among the several Federal
yieserve districts as follows:
Federal reserve district
Total subscriptions
received
Boston
New York
Philadelphia
Cleveland
Richmond
Atlnntft
Chicago
$96,507,300 $22,455,750
429, 692, 600 89,194,950
107,195,600 27, 590, 750
74, 743,050 17, 314,200
10,103,500
42,899,050
44,949, 500 12,321,950
117,126,900 29,855,250
Total subscriptions
allotted
Federal reserve district
Total subscriptions
received
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco
$28,828,700
11,997,000
11,778,600
34,883,350
93,096,200
Total
L..
Total subscriptions
allotted
$7,269,550
2,945,300
3, UZ, 400
8,711,100
19,616,900
1,093, 697,750 250,522,600
•
294
REPORT ON T H E FINANCES
EXHIBIT 16
Exchamge subscriptions for Trea^sury notes. Series B-1980-82 {press
release, October 4,1927)
* * * The privilege of exchanging second Liberty loan 4 ^
per cent bonds for the new 3 % per cent Treasury notes of Series
B-1930-32 terminated at the close of business on October i. * * •
According to reports received from the twelve Federal reserve banks
and the Treasurer of the United States, total exchange subscriptions
received aggregate over $368,000,000.
With the closing of this exchange privilege the Treasury Department brought to a successful conclusion the major part of its second
Liberty loan refunding operation. Of the second Liberty loan bonds
still outstanding, some will be retired .from the sinking funds. The
balance can readily be redeemed from cash on hand. and from the
proceeds of the sale of short-term obligations, an operation which
is equivalent to refunding seconds into this class of security.
With the second Liberty loan bonds callable on November 15,
1927, on six months' notice, two alternatives were open to the Treasury Department last winter. I t could proceed to call the second
Liberty loan bonds in blocks of about 600 million, an operation which
would have had to be suspended almost immediately because of the
maturity of the third Liberty loan—unless the Treasury was prepared in advance to forego liberty of action and to refund the major
part of that issue into long-term securities—and which in all probability could not have been concluded by 1933 when the fourth
Liberty loan, which amounts to over six billion dollars, is callable;
or it could call all second Liberty loan bonds, aggregating over three
billion dollars, on the first callable date, to wit, November 15, 1927.
Fully realizing the difficulties in time of peace of an operation which
involved the refunding or retirement of over three billion dollars
of securities during the course of eight months, the Treasury Department elected to adopt the bolder course because of the advantage that
would accrue from its successful completion.
The effect of this program is that a $3,000,000,000 debt, bearing
interest at 4% per cent, only 600 million of which could probably
have been retired prior to 1931—and a large part of which would
either have had to be refunded into long-term bonds in 1932 or 1933
or allowed to remain outstanding until maturity date—will have
been refunded into $245,000,000 of 3 % per cent sixteen-twenty year
bonds callable during the year following the maturity date of the
second Liberty loan bonds, $1,728,000,000 of five-year notes callable
at the end of three years, and the balance into short-term securities
bearing a lower rate of interest and which will be retired periodically
from surplus and foreign repayments. Thus by the full use of the
call privilege, without sacrificing its ability to retire them at an
early date, the Treasury has succeeded in refunding a great mass of
securities bearing a high rate of interest into securities bearing a
low rate of interest.
Exclusive of the second Liberty loan bonds to be retired from the
proceeds of the sale of short-term securities, the interest saving on
which can not be estimated until the operation is brought to a final
conclusion on November 15 next, and exclusive of retirements from
SECRETARY OF THE TREASURY
295
sinking fund and surplus, the annual interest saving on the securities
issued as contrasted with an equivalent amount of seconds amounts
to over $15,000,000.
If interest on second Liberty loan bonds retired from surplus and
sinking fund since the operation was begun in March last also be
taken into consideration, the interest reduction amounts to approximately $28,000,000 per annum.
October and November operations in connection with the retirement of
second Liberty loan bonds
E X H I B I T 17
Offer to purchase second Liberty loan 4-% P^T cent bonds {press
release, October 17,1927)
Secretary Mellon, in again calling attention to the fact that second Liberty loan bonds have been called for redemption on
November 15, 1927, and will cease to bear interest after that date,
announced that for the convenience of holders he has authorized the
Federal reserve banks to purchasCj at the option of holders, second
Liberty loan 414 per cent bonds at 100 3/32 and accrued interest to
date of such optional purchase. Such purchases will be made for
account of the sinking fund. This offer will remain open during the
week beginning Monday, October 17, and ending Saturday, October
'22, and will terminate on the latter date without further notice.
Second Liberty loan 4 per cent bonds are not included in this offer
to purchase.
E X H I B I T 18
,
Offer to purchase second Liberty loan 4'V4t P^'^ ^^^^ bonds {press
release, October 2Jf, 1927)
Secretary Mellon, in again calling attention to the fact that second
Liberty loan bonds have been called for redemption on November
15, 1927, and will cease to bear, interest after that date, announced
that for the convenience of holders he has authorized the Federal
reserve banks to purchase, at the option of holders, second Liberty
loan 4% per cent bonds at 100-^ and accrued interest to date of such
optional purchase. Such purchases will be made for account of the
sinking fund. This offer will remain open during the week beginning
Monda}^, October 24, and ending Saturday, October 29, and will
terminate on the latter date without further notice. Second Liberty
loan 4 per cent bonds are not included in this offer to purchase.
EXHIBIT
19
Offer to purchase second Liberty loan bonds {press release,
October 81,1927)
Secretary Mellon, in again calling attention to the fact that second
Liberty loan bonds have been called for redemption on November 15,
1927, and will cease to bear interest after that date, announced that
64761—FI 1927
21
^
296
REPORT ON T H E FINANCES
for the convenience of holders he has authorized the Federal reserve
banks to purchase, at the option of holders, second Liberty loan 414
per cent coupon bonds at lOOg'^ and accrued interest to date of such
optional purchase. Said purchases will be made for account of the
sinking fund. This offer will remain open during the period beginning Monday^ October 31, and ending Monday, November 7, and
will terminate at the close of business on the latter date without
further notice. I t should be noted that coupon bonds only may be
presented under this offer, registered bonds being excluded because
of the impossibility of discharging registration after October 31 on
any account except for redemption on November 15. Second Liberty
loan 4 per cent bonds are not included in this offer to purchase.
Secretary Mellon further announced that he has authorized the
Federal reserve banks, beginning Tuesday, November 8, to purchase
at the option of holders second Liberty loan 4 per cent and 414 per
cent coupon bonds at par and accrued interest to the date of such
optional purchase. Such purchases will be made for account of the
sinking fund. This offer will remain open until the close of business
Saturday, November 12, and will then terminate without further
notice.
EXHIBIT 20
Offering of certificates of indebtedness. Series TJ-1928 {8ys per cent)
{press o^elease, November 7, 1927^ with Department Circular No.
889)
The Treasury announces an off'ering of seven-month 314 per cent
Treasury certificates of indebtedness, dated and bearing interest
from November 15, 1927, and maturing on June 15, 1928. The certificates are tax certificates, and the amount of the offering is
$400,000,000, or thereabouts.
The Treasury will accept in payment for the new certificates the 4
per cent and 4i/4 per cent bonds of the second Liberty loan. I t will
be remembered that the second Liberty loan bonds are called for
redemption on November 15, 1927, and that interest thereon ceases
on that date.
A copy of the official circular is attached.
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 of Series TJ-1928, dated and bearing
interest from November 15, 1927, payable June 15, 1928, with interest at the rate of 31/3 per cent per annum.
Applications will be received at the Federal reserve banks.
Bearer certificates will be issued in denominations of $100, $500,
$1,000, $5,000, $10,000, and $100,000. The certificates will have one
interest coupon attached, payable June 15, 1928.
The certificates of said series shall be exempt, both as to principal
and interest, from all taxation now or hereafter imposed by the
SECRETARY OF THE TREASURY .
297
United States, any State, or any of .the possessions of the United
States, oi" by any local taxing authority, except {a) estate or inheritance taxes,- and. (&) graduated, additional income taxes, comQionly known as surtaxes, and excess-profits" and war-profits taxes,
now or hereafter imposed by the United States, upon the income or
profits of individuals, partnerships, associations, or corporations.
The interest on an amount of bonds and certificates authorized by
said act approved September 24, 1917, and amendments thereto, the
principal of which does not exceed in the aggregate $5,000, owned by
any individual, partnership, association, or corporation, shall be
exempt from the taxes provided for in clause (&) above.
The certificates of this series will be accepted at par, with an adjustment of accrued interest, during such time and under such rules
and regulations as shall be* prescribed or approved by the Secretary
of the Treasury in payment of income and profits taxes payable at
the maturity of the certificates. The certificates of this series will be
acceptable to secure deposits of public moneys, but will not bear the
circulation privilege.
The right is reserved to reject any subscription and to allot less
than the amount of certificates applied for and to close the subscriptions at any time without notice. The Secretary of the Treasury
also reserves the right to make allotment in full upon applications for
smaller amounts, to make reduced allotments upon, or to reject,
applications for larger amounts, to make preferred allotments upon
applications for which second Liberty loan 4 per cent bonds of 19271942 (hereinafter referred to as second 4's) and second Liberty loan
converted 4% per cent bonds of 1927-1942 (hereinafter referred to
as second 414's) ^fre tendered in payment, and to make classified allotments and allotments upon a graduated scale; and his action in these
respects will be final. Allotment notices will be sent out promptly
upori allotment, and the basis; of the allotment will be publicly
announced.
Payment at par and accrued interest for certificates allotted must
be made on or before November 15, 1927, 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^ except upon subscriptions for :^hich.second. Liberty loan bonds are tendered'iri payment. Bonds of thie second 4's and second'i-^^'s, called 'for tddernption on November 15, 1927, will be accepted at par, in payment for.
any certificates of the series now offered which shall be subscribed
for and allotted, with an adjustment of the interest accrued, if any,
on the certificates of the series so paid for.
Bonds of the second 4's and second 4%'s tendered in payment for
any certificates of the series now offered should be presented when
the subscription is tendered. The bonds 'must be delivered at the
expense and risk of the holder. Coupons dated November 15, 1927,
which will become payable on that date, should be detached from ariy
bonds of the second 4's or second 4^4:'s in coupon form so tendered,
and such coupons should be collected by the holders in regular course.
298
^
REPORT ON THE FINANCES
All coupons bearing dates subsequent to November 15, 1927, must be
attached to such coupon bonds when presented. Second 4's and
second 4%'s in registered form tendered in payment for certificates
subscribed for must be assigned by the registered payee or assigns
thereof, or by their duly constituted representatives, to " The Secretary of the Treasury for redemption," in accordance with the general
regulations of the Treasury Department governing assignments for
transfer or exchange into coupon bonds. Final interest due November 15, 1927, on registered bonds so tendered will not be paid by interest checks in regular course but will be covered by payments to be
made simultaneously with the delivery of the certificates upon
allotted subscriptions. Facilities for transportation ' of bonds by
registered mail insured may be arranged between incorporated banks
and trust companies and the Federal reserve banks, and holders may
take advantage of such arrangements, when availble, utilizing such
incorporated banks and trust companies as their agents. Incorporated banks and trust companies are not agents of the United States
under this circular.
As fiscal agents of the United States, Federal reserve banks are
authorized and requested to receive subscriptions and to make allotments on the basis and up to the amounts indicated by the Secretary
of the Tr.easury to the Federal reserve banks of the respective
districts.
A. W. MELLON,
Secretary of the Treaswy.
TREASURY DEPARTMENT,
OFFICE OF THE SECRETARY,
November 7, 1927.
To the investor:
Almost any banking institution in the United States will handle your subscription for you, or you may make subscription direct to the Federal reserve
bank of your district. Your special attention is invited to the term,s of subscription and allotment as stated above, and to the fact that bonds of the second
4's and second 4^/4's will be accepted at par in payment for any certificates of
the series now offered which shall be subscribed for and allotted.
Miscellaneous
E X H I B I T 21
'^Some Problems in Treasury Financing,^'^ am address by Undersecretary of the Treasury Mills, June 7, 1927, before the New York
State Bankers^ Association, Washington, D. C,
I t is a very great honor indeed to be invited to address this representative gathering of business men and, in addition, from a more
personal standpoint, a great pleasure for me to be with you and to
have the opportunity to say a word of greeting to my friends and
neighbors of the Empire State.
I assume, however, that you have invited me not in my capacity
as a fellow New Yorker but as the Undersecretary of the Treasury to
talk to you about some of our financial and fiscal problems. The outstanding fact to be noted in consideririg them is the magnitude of the
operations conducted by the Treasury Department. We become so
SECRETARY OF THE TREASURY
299
used in this country to doing things in a big way, and on the whole
these operations have been so smoothly conducted, that in spite of
their size they have been almost taken for granted. Yet in any other
period or country they would arouse the most widespread interest.
Consider what happened last March, for instance. As a result of the
various operations of the Treasury Department the total volume of
transactions at the New York Federal Keserve Bank on the single
day of March 15 reached the stupendous total of two billion dollars.
The adjective is hardly necessary, for the figures speak for themselves. The net result of these transactions was to reduce the public,
debt by about 185 million and the annual interest charge by about
25 million.
This was but the first step in what is probably the largest financial
transaction undertaken by this or any other Government in time of
peace. I t was the initial move in a program looking to the conversion or retirement of over three billion dollars of second Liberty
loan 4 per cent and 414 per cent bonds, callable on November 15, next,
and which have since been called.
The second Liberty loan, which was issued in November, 1917, was
the second large loan floated by the Government during the war.
You will all remember—for doubtless many of you participated—
how a nation-wide campaign was conducted to sell these bonds,
how Liberty loan committees were formed in ever}^ community
throughout the land, and how, spurred on by a great national
crisis, every patriotic impulse was appealed to in order to place these
bonds in every home in the land. Let me give you a brief summary of
the history of this issue. The second Liberty loan was offered for
subscription on October 1, 1917. Subscriptions amounting to $4,617,632,300 were received from 9,400,000 subscribers. A total of $3,807,865,000 was allotted. The bonds issued were dated November 15,
1917, bore interest at 4 per cent, were payable in 25 years, but were
subject to redemption on and after ten ye^rs from the date of issue.
They carried a conversion privilege Avhich might be exercised in the
contingency of the first subsequent issue of bonds carrying a higher
rate. This contingency arose when the third Liberty loan was issued
on May 9, 1918, and thereafter $3,707,933,850 of the 4 per cent bonds
were converted into 4 ^ per cent bonds.
Stated in terms of "pieces, 14,938,073 bonds were originally delivered ; 19,801,102 bonds have since been delivered on conversion,
exchange, eta, against the cancellation of a lil^e amount of other
bonds. Altogether 34,739,175 bonds have been delivered to owners.
These bonds would weigh 222 tons, and if spread out would cover
almost exactly one square mile of the earth's surface. During this
period 31,114,759 bonds have been cancelled on all accounts, leaving
now outstand.ing 3,624,416 bonds. Since 1917 interest aggregating
$1,327,600,885 accrued and became payable on this loan to May 15,
1927, involving the issue and payment of some 7,750,000 interest
checks and the payment of more than 130,000,000 interest coupons.
On March 8, 1927, the Secretary of the Treasury announced an
offering of 3^/^ per cent Treasury notes, maturing in five years, but
callable on six months' notice on and after March 15, 1930. These
notes were offered only to holders of second Liberty loan 4i/4 per
cent bonds, to be exchanged at par for their Libertys, interest on
the bonds surrendered to be paid to May 15, 1927. The offering was
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well received and .exchanges fully, came up to,.our .expectations.
No less than $1,360,456,450 of second Liberty bonds were exchanged
for the new 3 % per cent notes. Of the original issue of this loan,
bonds amounting to $790,461,800 have been redeemed from time to
time on various accounts, and, as just stated, $1,360,456,450 have been
refunded into Treasury notes. There remains outstanding a balance
of $1,656,946,750.
On May 9 last Secretary Mellon called for payment on November
15, 1927, the tenth anniversary of the issue, all outstanding second
Liberty loan bonds. This irieans that interest on these bonds will
cease ori November 15 next and that holders are. definitely confronted
with the decision of what they ought to do. They may, of course,
hold their bonds until maturity and receive cash for them—which
incidentally involves the problem of h o w to invest the proceeds—
or, in view of the announcement made a week ago by the Treasury,
they may, on or before June 15, exchange their second Libertys for
new long-term United States bonds.
On May 31 the Secretary announced an offering of 20-year bonds
callable at the end of 16 years, bearing 3 % per cent interest, to be
issued in exchange at par for second Liberty loan 4 per cent and
414 per cent bonds at par, accrued interest on seconds up to June 15
to be paid in cash.
Two hundred million dollars of the new issue were offered for cash
subscriptions at a premium of one-half of 1 per cent. This cash
offering was largely oversubscribed, subscriptions aggregating over
$610,000,000, though only approximately $200,000,000 of subscriptions
were invited.
The yield of the new bond to the cash subscriber is approximately
3.33 per cent; to the holder of a second Liberty bond who makes the
exchange at par about 3.37 per cent, though the latter, of course,
sacrifices the premium which the second Liberty bonds now command, but which will gradually disappear during the course of the
next five months. The closing market prices of second 414's during
the last two weeks in May was on an average of 100|^, or $1,003,121/2,
per thousand dollar bond. On exchange a holder receives a bond
which has been largely oversubscribed at a premium of $5 per bond,
showing an apparent gain of $1.87% per thousand-dollar bond.
I am going into these details not with a view to advising holders
as to what course they should pursue, but because I know that before
you came here and after you return to your homes you are going to
be asked by your many customers what to do, and it occurred to me
that it would be of interest to analyze the proposal from the standpoint of the boridholder. I recognize, of course, that the decision
must be largely governed by the circumstances in each particular
case, by the character of the investment desired, and by your own
judgment as to the long-time trend of interest rates.
Such a discussion is all the more valuable because I am satisfied
that a great majority of the second Liberty loan bonds still outstanding are in the hands of investors, using that term in the narrowest
sense, and that many of them are held by persons of moderate means having but limited knowledge of security values or investment possibilities. I base that conclusion upon the widespread
distribution of the original issue and upon the facts disclosed by the
SECRETARY OF THE TREASURY
301
results of our March exchange offering. The Treasury Department
feels itself to be under a real obligation to these holders to acquaint
them with all the facts because of the conditions under which the
original subscriptions were made, a feeling which I have no doubt
you gentlemen share.
Of some $59,000,000 of $50 coupon bonds only $1,739,000 were exchanged for 31/^ per cent notes in March; of approximately $116,000,000 of $100 bonds only $4,167,000; of approximately $141,000,000
of $500 bonds only about $11,000,000; of $605,000,000 of $1,000 bonds
only about $115,000,000; while of $1,366,000,000 of $10,000 bonds no
less than $1,026,000,000 were exchanged. The figures relating to the
registered bonds are if anything more conclusive.
I t is not unreasonable to conclude from these figures that the banks,
insurance companies, and other big holders of Government securities
were the ones to whom the March exchange offering appealed and that
the individual investor whose holdings of Governments are of
moderate amount and who generally favors a long-term bond rather
than a security of comparatively short maturity either took no particular notice of the Treasury offering or else decided to hold on to
a bond that did not mature until 1942 and which might conceivably
not be called prior to that date.
As to those who failed to learn of the Treasury program, we.have
made every effort to reach them, both on the occasion of the notice
of the call of the seconds, and, more recently, when the announcement
was made of the new issue of the 1943-47 bonds. And I trust that
you gentlemen will cooperate in the future as you have in the past
with a view to bringing this information to the attention of every
holder of a second Liberty bond.
As to those investors who are loath to part with a security of possibly long maturity for one of comparatively short life, their seconds
are now definitely called and are five months' paper. Moreover,
the Treasury, in reaching the decision to offer a 20-year bond in
exchange, took into consideration their apparent preference for a
long-time security. I do not say that this was the only consideration.
I do say that it was an important one.
May I now, speaking from a limited experience, say a word or
two about the rather simple principles which govern Treasury refunding and retirement operations? There is no reason why they
should be shrouded in mystery, and yet in reading discussions and
prophesies as to our financial transactions, present and future, I
frequently notice a tendenc}?- to surround a necessarily technical
problem with an excessive amount of—shall I say—professional
atmosphere.
The general program is twofold in character. I t contemplates, in
the first place, a steady reduction of debt by retirement, and secondly,
a reduction of the burden by refunding as rapidly as possible securities bearing high rates of interest with those bearing a lower rate. To
date the Treasury has been singularly successful in both operations.
This program of steady debt retirement is in accordance with the
historic policy of the National Government. I t has been steadfastly
adhered to by the administrations of Presidents Harding and
Coolidge, and helped by the large surpluses which have come from
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REPORT ON THE FINANCES
the prosperity of the couritry and the business-like administration
of our National Governnient which has resulted in reducing our gross
national debt from $25,484,000,000 on June 30, 1919, to $18,873,000,000 on May 31, 1927, or a reduction of $6,611,000,000. Last year
the Treasury Department retired $873,000,000 of debt, and in the
fiscal year wnich ends on June 30 debt retirement will aggregate over
one billion dollars. This means, to be sure, fewer Government
securities i^^\ the investor, but it spoils an enormous saving in interest charges and consequent relief to the taxpayer. This is
strikingly illustrated by the fact that interest payments next
year will be less by $63,000,000 than they are during the current
fiscal year, due entirely to debt reduction and refunding operations.
So, when you read; the surplus figures for this present fiscal year,
do not be regretful that Congress might have given you the benefit
of greater tax reduction, but rather realize that this entire surplus
having been applied to the reduction of the national debt the reduced
interest charges will represent a permanent annual saving which will
inure, to your benefit in reduced taxes with just as much certainty
as would the more direct method of tax reduction.
I trust I have not wearied you with this somewhat long and
technical discussion, but the subject of what the investor is to do
with his second Liberty loan bonds is a pertinent, and to him an
important, question at this time, while the magnitute of the operations conducted by the Treasury Department merit the attention of
the many thoughtful citizens who are ever interested in the sound
and efficient administration of their Government and look with
pride upon its accomplishments in the financial as well as in other
fields.
EXHIBIT 22
" United States Treasury Financing^'^ extracts from an address by
Assistant Secretary of the Treasury Dewey, June 8,1927, before the
Pennsylvania Bankers^ Convention, Pittsburgh, Pa.
I t is with considerable trepidation that I attempt to discuss
Treasury finance in the home city of Secretary Mellon, and doubly
so as he himself has talked here within the past fortnight. The
only reason that I have courage to proceed is due to the fact that I
have had the honor for the past three years of serving under
Mr. Mellon and of studying his methods.
When one thinks of the Treasury Department one usually thinks
of taxes, bond issues, and our currency. As a matter of fact, this
department is charged with many other and varied duties, but I
shall endeavor to discuss but two—our financing and the new-sized
currency which the Secretary has recently authorized.
Generally speaking. Treasury borrowings since the beginning of
the war and up to the present time have been made in the first
instance through the sale of short-time paper in the form of Treasury
certificates of indebtedness, with maturities not exceeding one year.
These certificate issues offered to the public have been of two
classes, (1) in anticipation of loans, and (2) in anticipation of tax
receipts.
SECRETARY OF THE TREASURY
303
The needs of the Treasury to meet the expenditures occasioned by
the war were so great that enormous borrowings were necessary. I t
was, of course, obvious that the maturities must be spread over a
considerable period of time, and so four of the five great loans during
the war and post-armistice periods were issued in the form of bonds.
I n order to float a loan of the size of one of the Libertys considerable
preparation was necessary. I n all probability the market could not
have stood an initial issue of several billions of dollars. At the same
time the Treasury needs were urgent, and so in anticipation of a
long-term loan temporary borrowings were resorted to as required
and Treasury certificates of indebtedness were issued. The first
issue of certincates in anticipation of the first Liberty loan was made
on April 25, 1917. Other issues followed at frequent intervals up
to the time of the issue of the first loan. The same procedure was
followed with respect to each of the other Liberty loans. Maturities,
generally, were arranged to coincide with the dates of installirient
payments on the Liberty issues. I t is apparent that an issue of
certificates placed the Treasury iri immediate funds and that the
later Liberty issue, in effect, became a refunding operation. Loan
certificates aggregating $17,018,187,000 were issued in anticipation
of Liberty issues aggregating $21,432,294,700.
A similar procedure was followed in issuing certificates of indebtedness in anticipation of tax receipts. The heaviest tax collections
were made toward the close of the Treasury fiscal year, as it was not
until February, 1919, when the revenue .act of 1918 became effective,
that the principle of quarterly tax payments was established. By use
of short-term borrowings of amounts expected to be received when
taxes became due, the same result was brought about as in the case
of certificates in anticipation of loans—the Treasury was placed in
immediate funds and maturing certificates offset tax payments. The
fixing of quarterly tax payment dates by the revenue act of 1918
brought about the fixing of certificate maturities for the same dates,
and this practice has been followed consistently ever since.
As you are aware, the structure of our debt now consists of three
classes of securities—bonds with a maturity of over five years, notes
with a maturity of from one to five years, and certificates of indebtedness with a maturity of not more than one year. I t is with these
latter two classes we will deal as the bonds present a different
problem.
The Government collects its principal taxes every three months
on the fifteenth days of March, June, September, and December,
respectively. I t is the custom for the Treasury to calculate its operations for this period, and in order not to upset the money market
has spread its short-term indebtedness so that it falls due in more or
less even amounts upon these dates. I n arranging its financing, the
Treasury officials estimate the amount needed for expenditures of all
kinds during the ensuing three-month period, add to this the amount
of notes or certificates maturing, and compare the sum with the estimated receipts from taxes and all other sources. The difference will
be the amount it will be necessary to borrow. This difference is
generally less than the amount of debt maturing so that j as a result
of this refunding for a lesser amount, the public debt is reduced out
of surplus, which is the excess of receipts over expenditures.
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REPORT ON THE FINANCES
The question then arises as to what form the borrowing shall take,
the length of maturity, and the rate of interest. We examine our
list of maturities and discover that, for example, we have a vacant
maturity date 18 months hence. This maturity should be filled or we
will have a large receipt of cash from taxes and no securities to pay
off, thus temporarily upsetting the money market. Having reached
this decision it is obvious that an 18-month note is the proper form of
security to offer.
The matter of rate of interest is a little more difficult. If the new
note, for instance, is to mature on June 15, we will first consider the
yield of our securities maturing three months before and three months
after that date; the mean should be about right for the new offering.
Consideration is given to a number of other factors which will affect
the rate and must be taken into account, which are of too broad a
nature to consider here. This, however, describes briefly our general
method.
To return to the example we are considering, let us assume that we
have decided to issue an 18-month note with a given rate of interest,
this to refund securities maturing December 15. What are the administrative steps to be taken?
The Federal reserve banks act as the fiscal agents of the Government, although, of course, it is perfectly possible to purchase or
exchange Government securities through the Treasurer of the United
States, but such transactions represent a mere fraction of 1 per cent
of the whole. Therefore it. is necessary to notify our fiscal agents
first that we contemplate offering new securities, and, secondly, what
they are to be. This latter information, however, is not given until
the last moment.
Upon receipt of the final advice each Federal reserve bank simultaneously notifies the banks in its district, requesting them to forward
their subscriptions. Upon the same date the Treasury releases a
statement to the press describing all of the details of the issue. In
this way the whole transaction is given the broadest publicity. As a
matter of fact, so accustomed has the public become to the quarterly
financing of the Treasury Department that the financial columns of ^
many leading newspapers frequently hazard guesses as to what form
it will take.
Immediately after the announcemerit subscriptions commence pouring into the Federal reserve banks from banks in their districts which
have received them from their customers and are subscribirig for their
own account. These subscriptions are divided into two classes—first,
exchange subscriptions, which are the offerings of the maturing
security in exchange for the new, and, secondly, offers to purchase the
new security for cash.
I t might be well to mention here that in order not to encumber this
description with too many details, I have purposely omitted mention of many items that we must carefully consider. Among these
is the percentage of exchange subscriptions we will allot. Acceptance of exchange subscriptions reduce in like amount the cash required to pay maturing issues so that the larger the percentage of
this class of subscriptions accepted the more funds received from
taxes and other sources will be available for expenses in this period.
In other words, the :entire matter is largely governed by the cash
position of the Treasury at the time.
SECRETARY OF THE TREASURY
305
Each day the Federal reserve banks notify the Treasury by wire
of the total subscriptions received, classifying them into the two
groups mentioned, and further classifying the cash subscriptions by
principal amounts. That is to say, how many individual subscriptions are received of $1,000, $10,000, $50,000, etc. This information is
necessary in order that the Treasury may make fair allotments. So
popular have the short-term Government securities become as an
investment by banks and corporations that for' the past several years
every issue has been heavily oversubscribed. I t is therefore the duty
of the Treasury to see that what it is offering is equitably allotted
to each class of subscriber.
The period for receiving subscriptions generally lasts for three to
four days, depending somewhat upon the size of the offering and the
condition of the money market. When the Treasury sees from the
daily reports from the Federal reserve banks that its requirements
have been fully met, it sends out a notice terminating the offering as
of a certain hour and date. When all of the banks have made their
final report, allotment is made. This is based, as I have said, upon
as nearly an equitable division among all classes of subscribers as
possible. I t is entirely contrary to Treasury policy to permit any
class or district to receive preference in the matter of allotment.
About three days prior to the date of the offering the Federal
reserve banks are notified as to how to accept subscriptions. For the
sake of an example, those subscribing for a thousand-dollar note will
receive their allotment in full. Those subscribing an amount up to
$10,000 but over $1,000 will receive 80 per cent of their subscriptions
and so on. The total allotment represents the sum the Treasury
requires. Payment must be made on the date of the issue.
Let us now consider this matter of payment. I n the days prior to
the Federal reserve system all Government receipts, either from
taxes or otherwise, were paid into the subtreasuries and became impounded in a relatively few centers. This led to the constant upsetting of the money market, due to the withdrawal of funds from
business, to meet which the Secretary of the Treasury had to redeposit the money in those sections in which he thought it would do
the most good. This method was crude and unreliable and constantly
led to embarrassment.
Under the present methods tax receipts are largely used to pay off
maturing Government obligations, and hence the receipts are to a
great extent paid back immediately into commercial channels, thus
avoiding disturbance to the money and investment markets. The
funds which the Treasury is to retain for Government expenses during the next three months, and which are derived from the sale of
its securities, are largely paid for by credit in the following manner:
Any incorporated bank or trust company desiring to participate
in deposits of public money arising from the sale of bonds, Treasury
notes, or certificates of indebtedness may make application to the
Federal reserve bank of its district to become a " special depositary "
with a "war-loan" account, and qualify by depositing authorized
securities.
Payments for subscriptions to public debt offerings are made in
the form of exchanges of maturing issues or in cash, or in case the
bank niaking the subscription is a special depositary having a "warloan " account, by a credit to that account in favor of the Federal
306
REPORT ON THE FJNAJVJCES
reserve bank of its ctistriictvas fiscal agent of the United States, wki<@h
account, as has already been mentioned, is secured by the pledging
of authorized securities with the Federal reserve bank of the district.
Too great emphasis can not be placed on the importance of the
special depositary system.. Since the new issues of securities are
offered on tax payment dates, if the subscribing banks were required
to make payment therefor in cash, such payment, together with the
heavy withdrawals by depositors for the purpose of meeting quarterly
installment of taxes, would create a serious financial disturbance unless prompt redeposit of the funds was made in the same localities
from which drawn. Under the existing system, whereby the subscribing bank is permitted to make payment for the securities by credit
in its " war-loan " account, the full amount of the subscription is
for the time being retained by the bank. Withdrawals are subsequently made as the Government has need for funds, but such withdrawals are gradual, covering a period of several months following
the deposit, with the resuH that there is complete avoidance of the
shock which would be ine\dtable if these subscriptions, in the first
instance, were required to be paid in cash on the date on which the
securities were issued.^
EXHIBIT 23
" Treasury Financing,^'' an address by Undersecretary of the Treasui^y
Mills, August 10, 1.927, at the Institute of Public Affairs, University of Virginia
The Treasury Department is the central agency through which
the Federal Government conducts its financial affairs. Generally
speaking, it receives and has the custody of all funds paid to the
Government and disburses all moneys in paj^^ment of obligations of
the Government. One of the primary duties, therefore, of the Treasury Department is to see that the Government always has on hand
sufficient funds to meet its obligations, including public debt niaturities, and to do so in such a way as to effect a minimum disturbance
to money and business conditions. If taxes and receipts flowed
uniformly throughout the year and expenditures ran an even course
month by month, there would be no real financing problem, but this
is true neither of receipts nor of expenditures. Tax receipts rise to
a sharp peak four times a year, while heavy debt maturities and
interest j^ayments are not spread out, but come due on single days,
the former at irregular intervals. Speaking in general terms, then,
in so far as current financing is concerned, our problem is to synchronize peak tax payments with the maturing of heavy obligations
and in the intervals to have in bank no more funds than are needed
to meet current expenditures.
Ever since the war. Treasury financing has centered around the
public debt. Whether in thb form of short-term obligations or longterm bonds it is the.all-important factor. I shall deal.later..with the
mechanism of operations affecting public debt, but before doing so
I want to deal briefly with the policy which the Government has
pursued in respect of our war debt.
SECRETARY OF T H E TREASURY
307
The first thing to be noted is that the service of such a debt is
enormously expensive. From April 6, 1917, to June 30, 1927, the
Government expended for interest $8,322,000,000. One of the most
direct methods, therefore, of reducing the cost for the Federal Government is to reduce the sums paid annually in interest charges.
There is this further advantage in this reduction—it is not one of a
temporary character, but constitutes a permanent annual saving.
There are two methods of bringing about the desired result: First,
by debt retirement; secondly, by refunding outstanding securities
bearing a high rate of interest into securities bearing a lower rate.
Since 1921 the Treasury Department has availed itself of both
methods. On June 30, 1921, the interest-bearing debt was $23,738,000,000; on June 30, 1927, it was $18,252,000,000, or a decrease of
$5,486,000,000. For the most part, this debt retirement was effected
by means of the sinking fund, foreign repayments, and such miscellaneous iterns as franchise tax receipts especially assigned to debt
retirement, but approximately $2^000,000,000 is to be assigned to
surplus of receipts over expenditures, which has continued year
after year in spite of three sweeping tax-reduction measures. Due
to this decrease in the debt, the average annual interest payments
have been cut by not less than $200,000,000.
Turning, now, to the second method of reducing the burden of
interest charges, we find that the average rate of interest paid on the
United States Government debt was 4.29 per cent in 1921, whereas
on June 30, 1927, the average rate of interest was 3.96. The difference between 3.96 and 4.29 per cent, on approximately $18,250,000,000
of debt amounts to about $60,000,000 a year. Thus we see that during
the course of the last six years by debt retirement cand by lowering
of the interest rate interest charges have been reduced approximately
$260,000,000 a year. This, as I have already stated, constitutes a
permanent annual saving which, over a 10-year period, amounts to
$2,600,000,000, or almost the equivalent of one year's internal revenue
receipts, including the income tax. The program, then, of the Government in relation to the war debt is twofold in character: I t contemplates, in the first place, a steady reduction of debt by retirement; and, secondly, a reduction of the burden by refunding, as
rapidly as possible, securities bearing high rates of interest into those
bearing a lower rate. As we have seen, to date the Treasury has been
singularly successful iri both operations. Let me now say a word or
two about the rather simple principles which govern Treasury
refunding and retirement operations.
We have to start with a definite amount of outstanding obligations extending over a period of 20 years or more, with varying
maturities, some of which the Treasury controls by means of call
provisions. We know the fixed dates on which certain obligations
have to be met, and there are, in addition, a number of open dates
which may be filled either by making use of the call provision of a
particular issue or by the issue of a new maturity through a refunding operation. I t is these open dates that give the Treasury a very
considerable measure of freedom as to the maturities of Government
obligations.
But there are limitations. For instance, we must be careful, in
preparing our schedule, to see that enough securities either mature
308
REPORT ON T H E FINANCES
or are callable CA^ery year to enable us to effect the retirements from
the sinkirig fund required by law.
Sinking fund retirements must be effected at an average cost not
in excess of par, and the great majority of retirements from this
source from now on must be made at par. This means that unless
there are adequate maturities in each year the Treasury Department
might find itself unable to make any retirements from the sinking
fund, for United States Government securities have a tendency to
mount to a premium. I t is not unreasonable to suppose t h a t history
will repeat itself and that in the future as in the past United States
Government bonds will command a premium. Therefore, even if
Congress should change the sinking fund provisions—which I am
not suggesting Congress either should or would do—so as to require
the Treasury Department to retire bonds at above par, it would
prove to be an expensive proposition. This was done in the case of
our Civil War bonds, which the Government, in pursuance of a policy
of debt retirement, purchased in the open market at a price as high
is 129. As Noyes says in his " Forty Years of American Finance " :
A very extraordinary chapter in American finance now opened. During 1888
the Government 4 per cents ranged on the open market from 123 to 129; yet at
these high prices the Treasury bought, within seven months, upward of $50,000,000. * * * During 1888 and the two ensuing years $45,000,000 was actually
paid out in premiums * * *.
We know, in the second place, though not quite as accurately, what
funds will be available for debt retirement from the sinking fund
and foreign repayments, and we must estimate as best we can what
sums may be expected by way of surplus, for it is obvious that this
last item is susceptible of very great variations.
With this information in hand we are enabled to prepare what
may be called a time table of payments which, in so far as the aggregate amount to be retired over a given number of years is concerned,
is probably fairly accurate. But should it prove otherwise, no
difficulty need be experienced, since it would always be possible,
if necessary in the later years, to extend the life of the debt by
refunding maturing obligations.
Within the limits thus staked out the Treasury, as stated above,
retains considerable liberty of action, having as it has the option of
filling the earlier open dates with short-term maturities or the later
one with securities of a longer life. I n reaching a decision on this
question from time to time and as occasion arises, the Treasury must
be governed, both as to rates and maturities, by current conditions,
and these conditions vary rapidly. They do not permit a detailed
program to be mapped out in advance, but only a general one, ^embodying a number of alternative propositions, the most appropriate
one of which is to be selected when the time for action has come.
The problem of refunding the second Liberty loan bonds illustrates
;as well as anything could the nature of the problem. I t is obvious
that, with its long-term Government bonds selling on a basis to
yield less than 3 % per cent and its short-term maturities on a basis
to yield 3 % per cent and less, the Treasury Department could not
permit over $3,000,000,000 of 4i/4 per cent bonds to remain outstanding once the time arrived when, under the law, they could be retired
by call. Every consideration of sound financial management ,deMnanded that they should be refunded at as early a date as possible.
REPORT ON ' THE FINANCES
309
Such was the situation in the early part of this year. The question
to be answered was what form or forms the refunding operation
should take.
During the first week in March, Treasury short-term certificates
and notes were selling on a basis to yield approximately 3.12 per
cent, whereas long-term Treasury bonds were selling on about a
3.45 per cent basis. At that time it was not unreasonable to conclude that conditions favored a note issue of limited maturity rather
than an offering of long-term bonds. Accordingly, the Treasury
offered a 3-5 year 31/2 per cent note in exchange for second Libertys,
with certain concessions as to interest, intended to compensate for
the premium which the Libertys then commanded. The response
was most gratifying. No less than 44 per cent of the amount
outstanding was exchanged.
Two months later the situation was reversed. United States
Government securities maturing within a year were selling on a
basis to yield from 3.25 to 3.45 per cent, while, on the other hand,
the three long-term Treasury issues were selling on a basis to yield
approximately 3.30 per cent. I t seemed probable that the conversion of about $1,360,000,000 of seconds into five-year notes and the
subsequent calling of $1,700,000,000 of those remaining outstanding
had resulted in an oversupply of short-term issues, accentuated by
the early maturity of the third Liberty bonds. I n addition, we
believed that our appeal should be directed to the many thousands of
small holders who had not been attracted by our note offering and
who rather obviously seemed to prefer a long-term borid to one
with an early maturity with the consequent necessity of early reinvestment. So in June as the second step in this major financial
operation we offered in exchange for seconds still outstanding a
3 % per cent 16-20 year bond and received $245,000,000 of seconds
in exchange.
So much, then, for the conditions which determine the character
and maturity of a new issue. The question of interest rates is one
requiring a greater degree of judgment, but here again current rates
for different maturities offer a fairly reliable guide, always taking
into consideration what the long-time trend is likely to be and never
forgetting that the volume of United States Government securities is
constantly and rapidly diminishing, and that not many more years
will elapse before this most convenient and safe form of investment
which we have become so thoroughly accustomed to during the last
decade will be available only in limited amounts, and that their
scarcity value is a consideration which can not be neglected.
We have been discussing the refunding process. Let us now see
how the actual maturities of these obligations running into billions
are met. I t should be noted that, with the exception of the third
Liberty loan, all of the war loan bond issues are subject to call, in
whole or in part, at a date some years in advance of the final maturity
date. By the use of the call and exchange privilege the Treasury
Department is enabled to extend the period of payment over a number
of years. You have seen that before we called $3,100,000,000 of second Liberty loan bonds in May we had exchanged^ $1,360,000,000 into
3-5 year notes, which notes we will be able to pay off at the rate of
approximately $450,000,000 a year, beginning in 1930, and that after
310
REPORT ON THE FINANCES
the call had been issued we exchanged $245,000,000 seconds into 16-20
year bonds. I n addition to that, through purchases from surplus
moneys, we further reduced the amount outstanding, so that, whereas,
when the operation was begun in March there were $3,104,000,000 of
second Liberty loan bonds in the hands of the public, on June 30 the
amount had been reduced to^ approximately $1,276,000,000, and there
will, of course, be further reductions prior to the maturity date on
November 15 next. The funds necessary to meet those presented for
cash payment on that date will be obtained by the sale of obligations
maturing either on one or several of the future quarterly tax payment
dates. A t the same time these obligations will be offered in exchange
for maturing second Liberty loan bonds, and unquestionably a number of the holders of seconds will avail themselves of the exchange
privilege. When the entire transaction is completed many of the
$3,104,000,000 bf seconds will have been retired for cash; others will
have been exchanged into a long-term bond, bearing a materially
lower rate of interest; others into 3-5 year 31/2 per cent notes; and
others into short-term certificates carrying a low rate of interest.
This brings me to our short-term debt. I n addition to our longterm Liberty loan and Treasury bonds, the United States Government has a short-term floating debt that is constantly retired and
constantly renewed or replenished. This short-term paper is of
war origin, though its use has been continued as a most convenient
part of our current financing mechanism, and it furnishes' the medium
through which major disturbances in the money market, resulting
from Government financing, may be avoided.
*
^
.
:|:
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^
*
^
I t is obvious that, with the annual surpluses which we have enjoyed in recent years, the excess of revenue receipts would rapidly
have extinguished the floating debt Avere it not for the fact that it
was undesirable to permit this jorocess' to take place and had not
the maturity of the Victory notes and of the notes issued in exchange
for Victory notes and more recently the calling of the second Liberty loan bonds, enabled us to keep an adequate supply of shortterm paper outstanding. As it was convenient during the war to
anticipate receipts of Libert}^ loan bonds by the issuance of certificates, so it is convenient and economical to finance the maturities
of these war-time issues, in part at least, by short-term paper that
bears a low rate of interest and which can subsequently be gradually
redeemed at convenient dates.
But, in addition, our short-term debt performs a very important
function. I t furnishes the machinery which enables the Treasury
Department to keep Government cash balances at a minimum and
to carry on its financial operations without major disturbances in
the money market every quarter day.
The Federal reserve banks are the fiscal agents of the Treasury
and its payments are generally made through them. Treasury balances in the Federal reserve banks represent money withdrawn from
the market. I n view of the very heavy income tax payments made
on the 15th of March, June, September, and December, unless some
offset is devised and maintained, cash balances with the Federal re-
SECRETARY OF THE TREASURY
311
serve banks would rise to a peak on the quarterly dates and would
drop to a minimum just before the next quarterly date. So, once
every three months, great sums of money running as high as
$400,000,000 would be taken from the commercial banks by the tax^
payer and paid into the Federal reserve banks to the T r e a s u r ^
accounts, thereby taking that amount of money out of the money
market with all of the consequences to interest rates that must follow. I t would be possible, of course, to meet this situation by redistributing these deposits among the commercial banks upon some
arbitrary basis, but this would inevitably subject the Treasury to
all manner of pressure in favor of particular banks or particular
districts. If, however, on each quarter day, the certificates mature
in an amount approximately equal to tax payments,„ it is obvious
that the two transactions wash. The tax checks drawn upon the
commercial banks are deposited with the Federal reserve banks to
the Treasury's account, but at the same time there is paid to the
commercial banks a like amount in payment of interest and maturing
securities.
This, however, is only part of the picture. We have not taken
into consideration the Government's financial needs between quarter
days and if the entire receipts from income taxes are absorbed by
maturing certificates the Government might well find itself short of
funds. Quarter-day financing, therefore, involves a careful estimate of the amount needed for expenditures of all kinds during the
ensuing three-month period. This must be added to the amount
necessary to meet maturing certificates, and this sum, less receipts,
represents the amount of new certificates that will have to be issued
on the quarter da}^ . Stated a little differently, tax and other receipts, as a rule, are not sufficient to meet maturing certificates as
well as to finance the governmental needs over the next three-month
period. I t is necessary, therefore, to issue new certificates, which in
turn will mature on a future tax date, when the process will be
repeated.
But, you will say, if tax payments and maturing certificates balance, so as to involve no withdrawal of funds from the money market,
then the sale of additional certificates must result in the withdrawal
' of funds. This would be so, of course, if the new certificates were
sold for cash. They are not, however. The banks pay for them by
means of a deposit credit. Any responsible incorporated bank or
trust company upon putting up security with the Federal reserve
banks is permitted to pay for Government securities by the creation
on its books of a credit in favor of the Treasury. Suppose, for
instance, on September 15 next National Bank A subscribes for
$1,000,000 of certificates for itself and its customers. On that day
the certificates are delivered to it and at the same time it credits
the Treasury with $1,000,000 on its books. No money changes hands.
The bank acquires $1,000,000 of additional deposits, which it can
reasonably expect will remain with it for an average of 60 days
and on which it pays 2 per cent interest. From time to time, as
the Government needs cash, a call is made upon the various banks
with which the Treasury has deposit credits. These banks pay the
64761—FI 1927
22
312.
REPORT ON THE FINANCES
inoney to the Federal reserve banks to the account of the Treasury,
and as the money is immediately paid out in the form of Government
expenditures the transaction occasions no withdrawal of funds from
i^e market. This plan accomplishes three purposes: First, it makes
Government deposits depend not upon the discretion of the Secretary
of the Treasury but upon the amount of securities any bank sees fit
to subscribe for. Second, it encourages the banks to buy Government
bonds for the sake of the deposit, thus giving the Government a firstclass primary market, while at the same time the banks furnish the
machinery through which a secondary distribution can be made to
individual investors. This means that, without expense, the Treasury
Department has at its command a nation-wide sales organization,
and third, it permits large fiscal operations to be conducted without
involving a large transfer or withdrawal of funds on a single date,
with all of the consequent disturbance to money conditions and
interest rates.
The point to remember is that the balance carried by the Treasury
with the Federal reserve banks is equivalent to the withdrawal of a
certain amount of funds from circulation. I t is for this reason that
the Treasury maintains two bank accounts—the deposit account with
the regular banks, which it draws on from time to time as the funds
are needed, and the checking balance with the Federal reserve banks,
which is restricted to the normal day-to-day requirements of the
Government. There is no difficulty whatsoever in maintaining a
proper balance except on or about the 15th of tax-payment months.
The difficulty then arises because of the lag of tax payments behind
security payments, though both are due on the same day. Let me
illustrate: Suppose a large corporation has invested in $10,000,000
of Treasury certificates maturing on September 15 next to meet the
income tax payments it will have to make on that date. Some days
before the 15th it delivers the certificates to its bank, and on the
morning of the 15th that bank presents the certificates for payment
to the Federal reserve bank and credits the corporation with
$10,000,000. That same day the corporation mails its check for taxes
to the collector of internal revenue. The collector receives the check
on the 16th, deposits it in the Federal reserve bank on the same day,
and it goes through the clearing house on the 17th. Where checks are °
on banks outside the Federal reserve cities the delay in collection is
longer. The result is that on the night of the 15th the Treasury finds
that it has paid out more than it has taken in and has to' borrow
this amount from the Federal reserve banks for a few days to take
care of the overdraft. So for three or four days every quarter day
the Treasury Department finds it necessary to borrow from the Federal reserve banks. This overdraft represents an additional amount
of money poured into the market, but the period is very brief, and
the Federal reserve banks are in a position largely to offset the effects
of these additional funds. Except for this minor disturbance, the
machinery of Treasury financing is so well devised and adjusted that
it functions with such smoothness as to be almost imperceptible in
its influence on the normal financial conditions of the country. This
is all the more remarkable when you consider the magnitude of the
SECRETARY OF THE TREASURY
313
transactions. Thus, for instance, as a result of the various operations
of the Treasury Department the total volume of transactions at the
New York Federal Reserve Bank on the single day of March 15
reached the stupendous total of $2,000,000,000.
I do not know how well I have succeeded in making the picture
clear to you, but let me briefly summarize the high spots. The public
debt is the governing factor in Treasury financing. I t is the policy
of the Treasury to reduce our war debt at a reasonably rapid rate,
and further to relieve the burden by replacing high interest-bearing
securities with others carrying a lower rate whenever opportunity
offers. This twofold process of exchange and retirement is effected
in the main by calling outstariding issues at convenient dates. The
funds needed to meet obligations actually presented for payment
are obtained through the sale of short-term paper, maturing on taxpayment dates, thus enabling the Treasury further to ease any possible strain resulting from a heavy maturity. This process keeps in
existence a short-term debt, which is of great value in facilitating
current financing and in avoiding the disturbance that might result
from heavy tax payment on quarter days. I t is not a complicated
process, but it is by no means an automatic one. I t implies a definite policy, sound judgment in carrying it out, and a highly competent organization to deal promptly and accurately with the many
details involved in transactions which not only involve huge totals,
but the handling of hundreds of thousands of separate individual
accounts. Being a comparatively recent addition to the Treasury
staff, I think I can say without trespassing on the boundaries of good
taste that I have never seen two more competent business organizations than those of the Federal reserve banks and the United States
Treasury Department.
EXHIBIT 24
Regulations conc&iming United States Treasury savings certificates
{supplement to Departnfient Circula/T. No. l \ 9 , revised February
1, 1927)
TREASURY DEPARTMENT,
OFFICE OF THE SECRETARY,
Washington, February 1, 1927,
To holders of Treasury savings certificates .amd others concerned:
1. Treasury Department Circular No. 149, revised, dated August 1,
1922, prescribing rules and regulations with respect to Treasury savings certificates, is hereby amended by striking out Paragraph I X 2
and Paragraph X 1 and inserting in lieu new paragraphs reading as
follows:
2. If a guardian of the estate has, to the knowledge of the Secretary of the
Treasury, been appointed for an infant owner of a Treasury savings certificate,
payment of the certificate will be made only to such guardian upon presentation
of satisfactory proof of his appointment and qualification. In general, such
proof should consist of a certificate from the proper court or a certified copy
314
REPORT ON THE FINANCES
of the order of the court appointing such guardian, showing the appointment
and qualification of the guardian. In each case, the certificate or the certification should be.under the seal of the court and dated not more.than one year
prior to the date of the presentation of the Treasury .savings certificate for
payment.
X
1. Payment of a Treasury savings certificate held by a person who has been
legally declared to be incompentent to manage his affairs and for whose estate
a conservator or other legally constituted representative has been appointed
by a court of competent jurisdiction, to the knowledge of the Secretary of the
Treasury, will be made only to such conservator or other legal representative,,
upon the presentation of satisfactory proof of his appointment and qualification.
In general, such proof should consist of a certificate from the proper court or a
certified copy of the order of the court appointing such conservator or other
legal representative showing the appointment and qualification of such conservator or other legal representative. In each case the certificate or the
certification should be under the seal of the court and dated not more than
one year prior to the date of the presentation of the Treasury savings certificate for payment.
2. The Secretary of the Treasury may amend at any time or from
time to time any of the provisions of this supplementary circular.
A. W. MELLON,
Secretary of the Treaswy.
EXHIBIT 25
Regulations concerning United States war-savings certificates {supplement to Depan'tment Ch^cular No. 108, revised February 1,1927)
TREASURY DEPARTMENT,
OFFICE OF THE SECRETARY,
WasMngton, February 1, 1927.
To holders of war-savings certificates and others concerned:
1. Treasury Department Circular No. 108, revised, dated August
1, 1923, prescribing rules and regulations with respect to war-savings
certificates, is hereby amended by strildng out P a r a g r a p h I X 3 and
P a r a g r a p h X 1 and inserting in lieu new paragraphs reading as
follows:
IX
3. If a guardian of the estate has, to the knowledge of the Secretary of the
Treasury, or to the knowledge of the postmaster from whom payment is demanded, been appointed for an infant owner of a ^ war-savings certificate, payment of the certificate, whether registered or unregistered, will be made only^
to such guardian upon presentation of satisfactory proof of his appointment
and Qualification. In general, such proof should consist of a certificate from
the proper court or a certified copy of the order of the court appointing such
guardian, showing the appointment and qualification of the guardian. In each
case, the certificate or the certification should be under the seal of the court
and dated not more than one year prior to the date of the presentation of the
war-savings certificate for payment.
SECRETARY OF THE TREASURY
'
315
X
1. Payment of a war-savings certificate held by a person who has been
legally declared to be incompetent to manage his affairs and for whose estate
a conservator or other legally constituted representative has been appointed by
a court of competent jurisdiction, to the knowledge of the Secretary of the
Treasury or of the postmaster from whom payment is demanded, will be made
only to such conservator or other legal representative, upon the presentation
of satisfactory proof of his appointment and qualification. In general, such
proof should consist of a certificate from the proper court or a certified copy
of the order of the court appointing such conservator or other legal representative showing the appointment and qualification of such conservator or
other legal representative. In each case, the certificate or the certification
should be under the seal of the court and dated not more than one year prior
to the date of the presentation of the war-savings certificate for payment.
2. The Secretary of the Treasury may amend at any time or from
time to time any of the provisions of this supplementary circular.
' A. W. MELLON,
Secretary of the Treasury.
OBLIGATIONS OF FOREIGN GOVERNMENTS
E X H I B I T 26
Statement and letters concerning the payment of $10,000,000 to be
made by France on June 15, 1927 {press releases, March 1 amd
Ma/rch 8, 1927)
MARCH 1,
1927.
The Secretary of the Treasury to-day made the following announcement :
Mr. Lacour-Gayet, the French financial attach^, has told me the French
Finance Minister is forwarding to me to-day a letter informing the Treasury
Department that the French Government will pay to the Government of the
United States on June 15 the sum of $10,000,000 on account of the outstanding
French debt, exclusive of the debt arising from the purchase of surplus war
materials. If and when a debt-funding agreement has been ratified by the
French Parliament and by the Congress, it is to be understood that this
^10,000,000 will be credited to the annuities provided for in such agreement.
The French Finance Minister further informs the Treasury Department that
his Government will continue to make payments on account of the war material
purchase debt in accordance with the terms of the obligations now held by the
United States Government.
The payment of the $10,000,000 and the understanding outlined are satisfactory to the Treasury Department.
MARCH 3, 1927.
The Treasury Department yesterday made public the letters exehanged between M. Poincare and Secretary Mellon covering the
payment of $10,000,000 by the French Government to the United
States on June 15, 1927.
PARIS, March 1, 1927.
MY DEAR MR. SECRETARY: I have the honor to inform you that the French
Government has authorized me to deliver to you the inclosed declaration by
which they pledge themselves ;to pay to the Government of the United States
316
REPORT ON T H E FINANCES
on J u n e 15 next t h e sum of $10,000,000 without prejudice to the ratification
by the French P a r l i a m e n t of t h e definitive agreements.
I am personally pleased by this result of our conversations.
Please accept, my d e a r . M r . Secretary, the assurances of my high consideration. .
(Signed)
R. POINCARI^.
Hon. ANDREW W . MELLON,
Secretary of t h e Treasury,
T r e a s u r y Department,
Washington, D. C.
T h e French Government will pay to t h e Government of the United States
on J u n e 15, 1927, t h e sum of $10,000,000 on account of t h e existing debt of
the French Government t o the United States, exclusive of t h e debt arising
from t h e purchase of surplus w a r materials.
After a debt-funding agreement h a s been ratified by t h e Congress of the
United States and t h e French P a r l i a m e n t it is understood t h a t t h e said sum
of $10,000,000 will be credited t o t h e annuities provided for in such agreement.
T h e French Government will continue t o m a k e payments on account of .said
w a r material purchase debt in accordance with t h e t e r m s of the existing
obligations of F r a n c e now held by t h e United States.
I t is understood t h a t t h e foregoing would in no w a y prejudice the ratification of the debt-funding agreement concluded on April 29, 1926.
(Signed)
R. POINCAR^,.
M A R C H 2, 1927.
M Y DEAR MR. PRESIDENT : I h a v e received from the State Department your
communication of March 1, 1927, addressed to me, informing me of t h e intention of t h e French Government t o m a k e a certain payment to t h e United
States Government on J u n e 15, 1927, and outlining t h e understanding t h a t is
to .govern t h e said payment.
I, have examined your letter and would say in reply t h a t the United States
Government will be pleased to receive t h e sum specified in accordance with
t h e understanding outlined in your letter.
Assuring you, sir, of m y highest esteem, believe me.
Very sincerely yours,
(Signed)
A. W. MELLON,
Secretary of the Treasury.
M. RAYMOND POINCAR^,
Th€f F r e n c h P r i m e Minister a n d
Minister of Finance,
Paris, France.
EXHIBIT 27
Paym£nt of Liberia^s indebtedness to the United States {press release,
J u l y 6,1927)
REPUBLIC OF LIBERIA,
OFFICE OF THE CONSUL GENERAL,
Baltimore, Md.
Dr. Ernest Lyon, consul general and special financial representative
of the Eepublic of Liberia in the United States, to-day presented to
Hon. Ogden L. Mills, Acting Secretary of the Treasury, a draft for
$35,610.46, drawn by the National City Bank of New York on the
REPORT ON T H E FINANCES
317
Riggs Natiorial Bank of Washington, D. C , in full payinent of
Liberia's indebtedness to the United States under the Liberty bond
acts. Doctor Lyon, in making the payment, made-a few remarks
appropriate to the occasion and in returning the canceled obligations
of the Republic of Liberia, Mr. Mills handed to Doctor Lyon a letter
of felicitation from Secretary Mellon.
R E M A R K S OF T H E L I B E R I A N CONSUL GENERAL O N , T H E ! OCCASION OF T H E
P A Y M E N T OF LIBERIA'S DEBT TO T H E GOVERNMENT OF T H E U N I T E D
STATES
DISTINGUISHED SIR : This monetary obligation which the Liberian
Government settles to-day with the American Government carries
our memories- back to the great World W a r period. Liberia at the
breaking out of the war had no grievances against the Central Powers
then in war with the rest of Europe. She had elected, for various
reasons, to remain neutral, notwithstanding political and other pressure to force her into taking sides with the allied forces. B u t when
the American Government, after the tragic incident of the sinking of
the Lusitama) severed diplomatic relations with the Imperial German
Government, and war was declared against the Central Powers,
Liberia followed the example of her good and great friend.
I n the struggle she supplied mariners from her seaport population which made maritime communication possible up and down the
West Coast of Africa, after the Europeans had withdrawn in response
to the call of their respective nationalities.
Her men served as links of communication ori the battle field rendering such other service, which brought down upon her national
pate the ire of a German submarine, because the President of the
Republic refused at the bidding of the commander to authorize the
destruction of the wireless stations and other useful institutions in
the service of the Allies.
Liberia as an ally was to share in the loan measure, which authorized the President of the United States to make loans to members of
the allied compact to enable them td carry on the war to a successful
finish.
The armistice, however, was declared before Liberia secured her
full quota allotted. She did, however, secure a portion of the five
million dollar allotment.
I come to-day, under official instructions, to settle that obligation
covered by the face of this draft, issued through one of the most
powerful and reputable financial institutions in the world. I refer
to the National City Bank of New York. By this act Liberia not
only sets a good example to the nations of the earth, but she emphasizes the fact that the respect which one nation entertains for another
nation is based upon the integrity and promptness in the settlement
of obligations monetary and otherwise.
You will be pleased to know that the Republic is entering upon a
prosperous career, that her economic conditions have been wonderfully improved since the close of the war', that the opening u p of the
country to American capitalists marks a new day for the. Govern-^
ment and the people of the Republic.
318
REPORT ON THE FINANCES
I t is with great pleasure, therefore, that I present to you this
thi draft
cancelling Liberia s war obligation, and in doing so I beg to convey
to Hisv-Excellehcy the; Presideht of the United States, through your.
good offices, the distinguished consideration and high appreciation of
His Excellency the President of the Republic of Liberia, and to
express the hope that the relations of comity and good will will not
only continue but will increase as the years of national life are
prolonged.
I have the honor to be, sir.
Your obedient servant,
ERNEST LYON,
Libe7^n Consul Genei^al in the United States of America.
J U N E 28,
1927.
: I n accepting from your hands as
special financial representative of His Excellency C. D. B. King
payment in full of Liberia's indebtedness to the United States, permit me to congratulate your Government on the loyal and prompt
manner in which it has met its engagements.
There is but one other nation among those whose obligations have
been held by this Government that has made payment of its indebtedness without recourse to funding agreements.
The blow dealt to the economic system of Liberia by the war was
severe in the extreme. That Liberia has been able to reestablish and
strengthen her economic system, to regain her financial position, and
to meet her public and private obligations in full constitutes an
achievement that bears glowing tribute to the ability of her statesmen and to the industry of her people as a whole.
I trust that you will convey to His Excellency, President King, and
to your Government an expression of the admiration felt here for a
nation that has been able to accomplish such things, together with the
hope of this Government that a future of peace and prosperity lies
before Liberia in which the traditional friendship between the two
nations may find frequent and cordial reaffirmation.
I am, my dear Doctor Lyon,
Very sincerely yours,
M Y DEAR MR. CONSUL GENERAL
(Signed)
A. W. MELLON,
Secretary of the Treasury.
Dr.
ERNEST LYON,
Consul General amd Special Finamcial Representative
of the Republic of Liberia in the Urdted States^
Baltimore, Md.
E X H I B I T 28
Senator Smoofs reply in the United States Senate, December 22,
1926, to the statement of certain professors at Columbia University
concerning foreign debt settlements
Mr. SMOOT. Mr. President, I ask consent of the Senate just for a few moments
to make, a very, brief statement.
The:^I%ES3!DENT pro •tempdrei ^Without objectiony^the-Senat
SECRETARY OF THE TREASURY
319
Mr. SMOOT. Mr. President, the publicity efforts of the professors of economics
at Columbia in connection with the settlement of the war debts contain
assumptions which should have correction.
First. It is assumed by the Columbia professors that capacity to pay, as
employed by the debt commission, meant the highest amount which could be
collected from the debtor nation by complete exhaustion of the debtor's resources. As a matter of fact, capacity to pay in the conception of the commission represented the ability of the debtor nation to pay, taking into consideration all its external ,and internal obligations and the continued full development
of its national life. Prance's debt agreements with America and England
represent only half of what it expects to receive from Germany. Italy has set
up a fund into which are paid German reparations and out of which can be
paid the British and American debts. The prearmistice Belgian payments are
fixed at less than the receipts from Germany on this same account. The debt
settlements, particularly in the earlier years, do not interfere with the economic
life of the continental nations. It is claimed too heavy a burden was imposed
upon England. The settlement of the American debt was a material factor in
the stabilization of the British currency. It is significant that by bringing
sterling exchange to parity England in paying its adverse international trade
balance saves each year much more than the annuity on the American debt. It
has also been stated that England has lost more through the coal strike than the
entire American debt. These examples simply illustrate the relative financial
importance of the settlements, but for some reason every attack on the debt
commission finds it necessary to exaggerate the actual financial burden imposed
on the debtors.
Second. It is assumed that the debt commission was bound by limitations set
by Congress. The debt commission was given the power, without returning to
Congress, to make settlements on a 4^^ per cent 25-year basis. No settlements
were made on that basis, but in each case the commission negotiated an agreement which it and the representatives of the debtor thought fair, and that
particular agreement was approved by Congress. In no case were the limitations in the statute a restriction on negotiations. There was the utmost
flexibility.
Third. It is assumed that generosity did not enter into the negotiations of
the commission. It certainly was very lenient to Italy, and it can not be condemned as harsh to France when there is imposed no greater burden on that
nation than the collection of the postarmistice indebtedness at 5 per cent interest. The figures show that in the treatment of our half dozen or so relief
debtors England imposed a much heavier relative burden than did America in
settling for loans made by England at the same time to the same debtors and
for the same purposes. French papers admit the Franco-British settlementall things considered, is much more burdensome than the Franco-American
settlement. No test of generosity is set up by the Columbia professors, but it is
just assumed America was ungenerous.
Fourth. The Columbia professors complain because all debtors are not treated
on an equality. They speak of a settlement of 80 per cent present value with
Great Britain and 26 per cent present value with Italy. Do they propose to
correct this want of equality by raising the Italian settlement to that of the
British, which, of course, would impose a burden impossible of performance by
Italy, or do they propose that the British be reduced to 50 per cent and the
Italian raised to 50 per cent, which would make an easy settlement for Great
Britain and still an impossible settlement for Italy; or do they propose that
the British settlement shall be brought down to the Italian 26 per cent, thus
imposing no real burden on England at all? If the last is their proposition,
then why can not Italy say its 26 per cent should be reduced to zero because
we are collecting nothing from another debtor, as, for instance, Armenia? The
whole proposition is an absurdity. If it means anything it means complete
cancellation. It seems disingenuous to state the professors are against cancellation and still urge a method of settlement of the question which inevitably
means cancellation.
Fifth. As their suggestion is understood, it is proposed that the United
States go into a joint conference to fix the amount of these debts upon the
standard of " equality " and " generosity." They do not state at whose expense
generosity is to take place. Of course, not of Columbia University, which
enjoys the privilege of exemption from taxation and therefore would feel not
at all any caiicellatibn of debts. The whole''proposition of the' GOluinbIa
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REPORT ON THE FINANCES
professors amounts to a proposed conference between ourselves, a minority
of one, and our debtors, all the rest of the proposed conferees. The debtors
' a r e to fix"how much, if any, of their debts they wish to pay. The standards of
" equality " and *' generosity " will be applied by the debtors.
Sixth. Like so many good-intentioned people, the Columbia professors, instead
of accomplishing the benefits which they seek to confer, are actually doing harm
to those they say they would help. What Europe needs is certainty. The
French can without, question pay the earlier years of the debt settlement and,
with a return of economic stability, the later years surely also can be met.
What they need is some certainty in their fiscal affairs, which they can only
obtain if they make definite tlie obligations which they have to meet. The
pronouncement of the Columbia professors is, as was to be expected, now being
used to strengthen the opposition in France to a ratification of the MellonBerenger agreement and therefore has become an active factor in the maintenance of this very uncertainty from which all Europe is trying desperately to
rid itself. The Columbia professors permit their idealism to seek publicity just
at this time to the embarrassment of PoincarS in the difficult work which lies
before him.
EXHIBIT 29
Letter of Secretary of the Treasury MeUon to President Hibben.^ of
Princeton University, March 15, 1927
MARCH 15,
1927.
: Your statement and that signed by
116 members of the Princeton University faculty indorsing the statement issued by the faculty of political science at Columbia, and
urging the reconsideration and revision of the debt settlements with
our former associates in the war, have come to my attention. I
recognize, of course, the propriety of a frank expression of opinion
on important public questions on the part of those in responsible
positions, but I am somewhat surprised that before giving the public
the benefits of their conclusions neither the gentlemen of the faculty
of Columbia University nor those of the faculty of Princeton University saw fit to make a thorough and first-hand investigation of data
available at the Treasury or sought b}'' personal interview to ascertain the views of the American officials who negotiated the settlemerits. The training of these gentlemen, their standing as economists, historians, and teachers of government, would have led me to
believe that they would have conceived it to be their first duty to
present a dispassionate analysis of the facts based on original study
rather than to submit their conclusions unsupported by facts.
Moreover, it would not have been amiss for you and your associates to have taken into consideration that one of these agreements has
not been ratified and that the inevitable effect of such a pronouncement would be to encourage and strengthen the opposition in
foreign countries to such ratification, an encouragement entirely
unwarranted by the circumstances in view of the fact that the
American people, expressing themselves through their chosen representatives in the House of Representatives, have approved of this
agreement and that the debate, when the measure was before the
House for consideration, indicated that an overwhelming majority of
the Representatives were opposed to more lenient terms. I t is highly
probable that such expressions of opinion, far from making the
adjustment of these outstanding obligations easier, will simply
M Y DEAR PRESIDENT HIBBEN
SECRETARY OF THE TREASURY
321
increase the difficulties of obtaining a better understanding and a
raitification of fhe agreement.
I n this connection I can not refrain from pointing out in answer
to the plea urging the reopening of all debt settlements, that it is
not so long since that all of our soundest economists claimed and
rightly claimed that the one prerequisite to the restoration of economic prosperity in the world was an early settlement of these debts
^between governments. The adoption of the Dawes plan, the ratification of the various agreements between governments providing for
payment of this vast unfunded obligation, have, in the course of
the last few years, contributed mightily to the progress that has been
accomplished. Reopening all of the settlements would, in my judgment, be a step backward and not forward and one calculated to
produce discord and confusion rather than to contribute to the economic stability and orderly betterment of world prosperity. .
I n your statement you say that to divorce the financial provisions
of the loans from the moral situation in which they were asked
for and given is to invent an unreal economic abstraction. By this
I take it you mean to indorse the argument advanced by the Columbia
faculty that our war advances to our associates were not at the time
they were made regarded as business transactions but rather as joint
contributions to a common cause. Admitting, of course, that the
congressional debates indicate clearly that the Congress was quite
willing to loan this money, even on the assumption that there was a
considerable element of risk in so far as ultimate recovery was concerned, nevertheless the record indicates beyond dispute that these
were loans and not contributions and though not in form in actual
effect loans from individual American citizens rather than contributions from the Treasury of the United States. The act providing
for these loans authorized the United States Government to sell
Liberty bonds to its own people and to invest the proceeds of the
sale in the bonds of these foreign governments, the latter bonds to
bear the same interest as the Liberty bonds sold and to have the same
maturities. What we allowed our associates to do, in effect, was to
borrow money in our investment market, but since their credit was
not as good as ours, to borrow on the credit of the United States
rather.than on their own. Looking at the substance rather than the
form of the transaction, the situation was no different than if they
had actually sold their own bonds in the.American market and our
Government had indorsed them. Had this course been followed
would anyone contend that the sums advanced were intended as contributions to a joint enterprise rather than loans expected to be
repaid?
As a corollary to this first proposition it is urged that if these
advances were not to be considered contributions as an original
measure they ought now to be so considered because our associates
were not fighting their own battle alone but ours as well, and that
for some months we were unable to put many troops into line. I am
not going to attempt a discussion of the military contribution made
by the United States to the winning of the war other than to remark
that when the crucial period was reached in the spring and summer
of 1918 our troops were there. I recognize that there is merit in the
contention that the associated governments might well have joined
322
REPORT ON THEFiNANCiE^
in pooling their resources in a comriion cause and that even riow
an argument can be made in favor of writing off debts incurred after
our entry into the war to the extent that they were incurred for contributions to a common cause, but, and this is an all-important reservation, there is merit to such an argument only if the proposed
adjustment is to be a mutual one and is to be applied to all on a
strictly equal basis. This factor, however, is one that seems to havebeen completely overlooked by the faculties of Columbia and Prince-^
ton Universities and by other advocates of debt cancellation urging'
the common cause contribution argument.
Early in the war, in order to minimize the dislocation of exchanges
and for sound economic reasons, the general principle was established
that goods'and services purchased by one ally in the country of
another ally should be financed by the latter. That is to say, that if
France purchased supplies arid services in England the British
Government would furnish the pounds with which to buy them, and
vice versa, when Great Britain bought goods and services in France
the French Government would undertake to furnish the francs. As
to whether in the latter case the francs were furnished on credit or
for cash I do not know, but in the former case the pounds were
furnished on credit. When we came into the war we readily agreed
to apply this sound principle to our transactions with our associates.
That is to say, we agreed to furnish them the dollars with which
all their purchases in the United States should be consummated, and,
what is more, we agreed to lend them those dollars. This was the
origin of these debts. But here is the fact that is not mentioned and
which you gentlemen have apparently overlooked. We purchased
supplies and services from France and the British Empire by
hundreds of millions. They had to be paid for in francs and in
pounds. We did not get those francs and pounds on credit—we paid
cash for them, except possibly in a few comparatively minor instances. In other words, we paid cash for the goods and services
necessary to enable us to make our joint contribution to the common
cause. Our associates got the goods and services purchased in this
country necessary to enable them to make that part of their joint contribution on credit. Here is the fundamental reason which explains
why we ended the war with every one owing us and our owing no
one. We are now urged to cancel these debts because it is alleged
that they were incurred in a common cause, but neither abroad nor
in this country has it been suggested that if this, is to be done we are
to be reimbursed the dollars actually expended by us in France and
Great Britain so that the goods and services they sold us might constitute their contribution to the common cause.
I n this connection one other fact may well be called to your attention. Among the purposes for which we made dollar advances was
that of maintaining the franc and the pound at somewhere near
their normal values. I n other words, we loaned our associates the
dollars with which to purchase bills on London and Paris and so
permit them to peg the exchanges. When we were obliged to purchase francs and sterling for our own uses in the Paris and Londori
markets, we did so at the artificial prices maintained by the use of
SECRETARY OF THE TREASURY
323
t h e very funds we had loaned. I have no desire to emphasize this
point. I mention it, together with the situation above described,
as factors which had to be considered by those charged with the
responsibility of negotiating the settlements on behalf of the American Government, and which, with other important ones, could have
been readily ascertained by those undertaking to advise our people,
had they availed themselves of the opportunity which would have
been gladly afforded them to ascertain all of the facts.
Before leaving the question of the purposjes for which the debts
were incurred may I remind you that I have already had occasion
to point out that the present value of these debt settlements at 5
per cent, a rate less than most of the debtor nations now have to
pay for money, is, except in the case of Great Britain, either less
than or approximately the same as the amounts borrowed after the
armistice. France's after-war indebtedness with interest amounts
to $1,655,000,000; the Mellon-Berenger settlement has a present
value of $1,680,000,000. Belgium's post-armistice borrowings with
interest were $258,000,000, and the present value of the settlement
is $192,000,000. The post-armistice indebtedness of Italy with interest is $800,000,000, and the present value of its debt settlement is
' $426,000,000. The principal of Serbia's post-armistice indebtedness
aggregates $16,175,000, and the present value of its debt settlement
is $15,919,000. The loans to Finland, Estonia, Latvia, Lithuania,
Poland, Czechoslovakia, Hungary, Austria, and Rumania were all
made after the armistice.
The Columbia professors criticized capacity to pay as a formula
difficult, if not impossible, of just application, a criticism I understand you indorse. But no other formula is suggested. I t is obvious
that in the settlement of these huge debts, the burden of which must
be borne either by foreign taxpayers or by our own, it was essential
that the negotiations must be based on some guiding principle if
justice was to be done between all parties; that is to say, not only
as between creditor and debtor, but as between debtors. Frankly,
I know of no fairer formula than that of capacity to pay generously
applied. To ask a debtor nation to pay substantially less than it is
able to without undue burden on its people is to do an injustice to our
own taxpayers; while to ask a foreign debtor to pay more than its
capacity, is to be guilty of an act of injustice such as I can assure
you can not be charged against us. Apparently you would have all
debtors treated on an equality. Does this mean that the Italian settlement should be raised to a point where it will correspond to the
British, which, of course, would impose a burden impossible of performance by Italy, or do you propose that the British be reduced
to 50 per cent and the Italian raised to 50 per cent, which would
make an easy settlement for Great Britain and a still impossible
settlement for Italy ? Or do you propose that the British settlement
shall be brought down to the Italian 26 per cent, thus imposing no
real burden on England at all?
You say that " We do not desire to impose tremendous burdens of
taxation for the next two generations on friendly countries." Are
you quite sure that this is an accurate statement of the facts? I n
324
REPORT ON T H E FINANCES
estimating the debtor's capacity to pay without inflicting such a sacrifice as would cause a lowering of its standard of living, only
incidentaL consideration was given to the reparatiori payments to be
received by the debtor countries from Germany. Now, the fact is
that all of our principal debtors [except Great Britain] ^ are already
receiving from Germany more than enough to pay their debts to the
United States; and France and Italy, with the exception of this year
in the case of the latter, are receiving from the same source more
than enough to pay their debts to Great Britain also.
France in the year 1926-27 will receive from Germany approximately $176,000,000. Under the agreements with Great Britain and
with the United States, France will pay $30,000,000 to us and some
$71,000,000 to Great Britain, leaving to France a balance of $75,000,000. In 1927-28 that balance will grow to $108,000,000. In 1928-29,
in spite of the fact that the paynient to Great Britain rises to $85,000,000, the balance available to France will amount that year to
$186,000,000; and in 1930, after meeting her obligations to the United
States and to Great Britain, there will be a balance from reparation
payments of $237,000,000. Italy is paying us this year ^$5,000,000
and to Great Britain $19,000,000. They will receive from Germany
$22,000,000, which is just $2,000,000 less than is necessary to meet
their obligations to Great Britain and the United States. But in
1929 German reparations will have risen to $45,000,000, leaving to
Italy a balance, after her payments as debtor, of $21,000,000.. And
even in 1936, when her payments to us will amount to $16,000,000,
and to Great Britain approximately $20,000,000, those two amounts
will still fall short by $15,000,000 of the sums received from Germany.
Belgium this year will receive from Germany $16,000,000 more
than she will pay to other countries; in 1927-28, $18,000,000 more;
in 1929-30, $27,000,000 more. Yugoslavia will receive this year $11,000,000 more than they will have to pay, and next year $13,000,000
more. All of the other powers that owe us money will, in the aggregate, receive this year $3,000,000 less than they have to pay, but by
1929 will be receiving $3,000,000 more than they have to pay.
Finally, we come to Great Britain. Under the agreements Great
Britain will receive from France approximately $71,000,000 this
year; from Italy, approximately $19,000,000; from Germany, approximately $72,000,000; and will pay us $160,000,000. Or, in other words,
Great Britain will receive this year from her debtors $2,000,000 more
than she pays us. Next year Great Britain will receive from France
$69,000^,000; from Italy, $19^000,000; from.Germany^ $87,000,000; or
a total of $175,000,000. Great Britain will pay us $160,000,000,
leaving a balance of $15,000,000. I n 1928-29 Great Britain will
receive from France $85,000,000; from Italy, $19,000,000; from Germany $127,000,000; or a total of $231,000,000. Great Britain will
pay- us $161,000;000, making a credit halance of $70,000,000. I t is
true that in the past two years Great Britain has received about
$100,000,000 from Germany, France, and Italy less than she has
paid to the United States, but it is equally true that from this year on
Great Britain every year will receive from her debtors a substantial
^ Inadvertently omitted in statement as given to the press, March, 15, 1927.
See p. 334..
SECRETARY OF THE TREASURY
325
amount more than she will pay to us, so that her American payments
will not constitute, a drain upon her own economic resources.
I t is true that Great Britairi has agreed not to accept more from
her debtors than the sums which when added to reparation payments
will equal those which she pays the United States. But even taking
this into consideration, it is obvious that your statement that the debt
agreements which we have made impose a tremendous burden of
taxation for the next two gerierations on friendly countries is not
accurate, since the sums paid us will not come from taxation but will
be more than met by the payments to be exacted from Germany.
I t must also be obvious that if the amounts to be paid by all our
debtors are to be reduced and a corresponding reduction is to be made
in the amount of reparations to be paid by Germany the net effect of
this change will be to transfer the burden of reparation payments
from the shoulders of the German taxpayer to those of the American
taxpayer.
Finally, the joint faculties of Columbia and Princeton urge the
American people to reconsider the debt, settlements with allied countries " because of the growing odium with which this country is coming to be regarded by our European associates." . I doubt whether
European nations dislike us as much as some people tell us they do.
But I know this, that if they do, the cancellation of that part of their
debts which has not already been canceled will not of itself change
their dislike into affection. Neither in international relations any
more than in private life is affection a purchasable commodity, while
my observation and reading of history lead me to conclude that a
nation is hardly likely to deserve and maintain the respect of other
nations by sacrificing its own just claims.
No one can insure the future; but given normal conditions, it is
believed a true balance has been held between the duty of the debt
commission to the American taxpayer and fairness toward those
nations to which was extended aid during and after the war. The
debts have not been canceled, but excessive demands have not been
made. Certainly the debt settlements can not become too heavy a
load in the next few years. I n the future, with peace and the
development of trade internally and externally, it is not too much
to expect that this will be equally true of the later years also. The
outstanding fact is that these debts have been settled. A fair trial
can now be had, not on theory, but in practice, and a reopening of
the whole question at the present time would do more to interrupt
the steady progress, achieved since settlement tham mights be gained
from any ultimate minor adjustments that can be effected.
Very sincerely yours,
A. W.
MELLON,
Secretary of the Treas/wry.
Dr. J O H N GRIER HIBBEN,
Presiderit Princeton Univerdty,
Princeton, New Jersey.
326
REPORT O N THE FINANCES
EXHIBIT 30
Note from the British Goverrument, dated May 2, 1927, commenting
on letter of the Secretary of the Treasury to President Hibben.
and reply of the Secretary of State thereto
BRITISH EMBASSY,
Washington, D. C , May 2, 1927.
Hon.
FRANK B . KELLOGG,
Secretary of State of the United States,
Washington, D. C.
S I R : The attention of His Majesty's Government has been drawn
to the letter on allied war .debts addressed to Prof. John Grier
Hibben, president of Princeton University, by Mr. Mellon, Secretary
of the United States Treasury, which was published on March 17.
So far as this letter deals with matters of domestic controversy. His
Majesty's Government have of course no desire to offer any comment
upon it. But the letter also contains certain specific references to the
position of Great Britain; and His Majesty's Government feel bound
to point out that on points of cardinal importance these statements
do not correspond with the facts as known to His Majesty's Government. His Majesty's Government feel that in justice to themselves
and in order that public opinion in both countries should have a fair
opportunity of judging the position, it is essential that they should
frankly bring such points to the attention of the United States
Government.
2. I n the first place, Mr. Mellon states that the United States
" agreed to furnish the Allies dollars with which all their purchases
in the United States should be consummated,, and what is more, we
agreed to lend them these dollars "; but " when the United States
purchased supplies and services from France and the British Empire," they " d i d not get these francs and pounds on credit; they
paid cash." The United States " are now urged to cancel these debts
because it is alleged that they were incurred in the common cause,
but neither abroad nor in the United States has it been suggested
that if this is to be done the United States are to be reimbursed
the dollars actually expended by us in France and Great Britain."
. This statement implies that the United States Government lent
the British Government all the dollars required to purchase supplies
in America and that, over and above these loans, they paid dollars
to Great Britain for the services and supplies they^ required from the
British Empire and that these dollars were retained by His Majesty's
Government for their own purposes. Such, of course, is not the case.
All the dollar payments made by the United States for their sterling
requiremerits in Great Britain—which though considerable were of
course smaller in amount than the war loans to the United Kingdom—
were taken into account in fixing the total amount of the war loans
advanced to Great Britairi and were applied directly to the purchase
.of supplies in America oi* to the repayment of debt. The arrangements made are clearly and concisely stated in an article published in
"Foreign Affairs" (April, 1925) by Mr. Rathbone, who was during
the war Assistant Secretary of the United States Treasury.
SECRETARY OF THE TREASURY
327
Mr. Rathbone's explanation was as follows:
For its own war purposes in Great Britain, France, and Italy, the United
States did not borrow pounds or francs or lire. Our Treasury was obliged to
procure these currencies for the use of our Army abroad. We bought pounds,
francs, and lire from the Governments of Great Britain, France, and Italy,
and made payment therefor in dollars here. The dollars thus obtained bij
Oreat Britam, France, and Italy were appUed by them toward the cost of
their war purchases here, and thus the amount of the dollar loans required by
these countries from our Treasui^y was diminished in a corresponding sum.
I t will be seen that the United States ^Government did not lend the
•whole of the money required for British purchases in America, but
that the dollars received from the United States Treasury in payment
of sterling provided by Great Britairi were used to cover a corresponding part of Great Britain's dollar requirements, and only the net
dollar requirements were covered by loans from the United States
•Goveinnient.
This arrangement was obviously equitable and satisfactory to both
parties, and was in fact originally suggested by the United States
'Government in a letter dated the .3rd of December, 1917, from Mr.
Leffingwell, then Assistant Secretary of the United States Treasury,
t o the British Treasury representative in Washington, which includes
the following paragraph:
I assume that your ^Government will use the dollar fund thus received for
meeting its dollar requirements for purchases here and would therefore reduce,
•correspondingly its requests for dollar advances from the United States Treasury.
The dollar payments to Great Britain were thus regularly applied
to reduce the dollar advances to Great Britain, so long as the latter
•continued. When they ceased in 1919, the dollar payments by the
United States Go^ ernment were utilized to reduce the debt incurred
by Great Britain. The statement made in Mr. Mellon's letter on
this point appears to His Majesty's Government to be likely to give a
very erroneous impression of the facts.
3. His Majesty's Government now j)ass to Mr. Mellon's contention
that the payments made to the United States Government in respect
•of the British war debt impose no burden on the British taxpayer.
Mr. Mellon states that " a l l our principal debtors are already
receiving from Germany more than enough to pay their debts to
t h e United States." So far as Great Britain is concerned this statement is incorrect. The receipts of Great Britain during the financial
year 1926-27 from Germany on account of reparations represent
approximately one-qua;rter of the payments made by His Majesty's
'Government to the United States Government, and their prospective
reparation receipts during the present financial year 1927-28 (assuming that they are trarisferred in full) will fall substantially below
one-half of the paymerits due to be made to the United States. Even
if the receipts from Germany on account of arriiy costs (which
represerit a partial reimbursement of the expenditure incurred by
H i s Majesty's Government on the maintenance of their forces) and
on account of the Belgian war debt (which represents a payment
on behalf of Belgium) are included, the total receipts of Great
Britain froiri Germany in either of these years will not exceed onehalf of her payments to the United States. There can be no dispute
:as to the facts; the figures are published by the agent general for
64761—FI 1927—23
328
REPORT ON THE FINANCES
reparation payments and are fully available to the United States
Treasury.
4. When he comes later to deal with the position of Great Britain,
Mr. Mellon does not in fact compare .British receipts from Germany
alone with British payments to the United States Government; he
compares the total receipts of Great Britain from reparations and
interallied debts, together with the payments due by her to the
United States Government. He gives figures purporting to show
that Great Britain will receive $2,000,000 (£412,000) more this year
than she pays to the United States; $15,000,000 (£3,090,000) more
next year ^nd $70,000,000 (£14,403,000) more in 1928-29. While he
admits that " in the past two years Great Britain has received about
100 million dollars (£20,576,000) from Germany, France, and Italy
less than she has paid to the IJnited States," he adds that " i t is
equally true that, from this year on, Great Britain will, every year,
receive from her debtors a substantial amount more than she will
pay to us, so that her American payments will not constitute a drain
upon her own economic resources."
5. This statement is also inaccurate both as regards the past and
as regards the future.
From the 1st of April, 1919, to the 31st of December, 1926, Great
Britain has paid the sum of $828% millions or £170^^ million in
respect of the debt to the United States Government, whereas the
sums received by Great Britain on account of reparation, Belgian
war debt, and allied war debts up to the same date amount to £41
millions ($200 millions) leaving a deficit of £1291/2 millions ($6281/2
millions).
There seems no special reason to select the past two years only,
as is done in Mr., Mellon's letter, but the position as regards this
period is that during the first two years of the operation of the
Dawes plan (1924-25 and 1925-26) the receipts bf this country from
reparation (including Belgian war debt) and allied war debts
together fell short of British payments to the United States Government by approximately £50,000,000 ($243,000,000).
6. As regards the financial year' 1926-27, the share of the United
Kingdom in the third Dawes plan annuity iri respect of reparation
and Belgian war debt amounts to £12 millions and the receipts from
interallied war debts to £81/4 millions, or a total of £2014 millions,
as against the payment due to the United States Government of
£33 millions. During the following year (1927-28) the share of
the United Kingdom in the fourth Dawes annuity in respect of the
Belgian war debt and reparation should amount to £1414 millions
and the receipts from interallied war debts to £10% millions, or a
total of £24% millions, as against the payment df £33 millions to
the United States. The share of the United Kingdom in the fifth
and subsequent Dawes annuities (i. e., after the 1st of September^
1928) for Belgian war debt and reparation should amount to £22,400,000, and this, together with the payments from interallied war
debts (assuming the French war debt agreement to have been ratified
and neglecting past deficits in British receipts as compared with
payments) would be sufficient to cover the current payments due to
the United States Governinerit, Whether the payments from the
Dawes annuities included in the above calculations will, in fact.
SECRETARY OF THE TREASURY
329
be received depends, of course, upon whether it is found possible to
transfer the full amounts provided for by the Dawes plan.
7. But even if the full Dawes payments continue to be received for
60 years from now onward, the present value of the receipts of
Great Britain from reparation and.allied war debts together would
be less than that of the payments she is obligated to make to the
United States Government on account of the British war debt^
assuming interest at 5 per cent to be added to payments and receipts
in the past, and future payments and receipts to be discounted at
the same rate.
8. I t is quite true that His Majesty's Government have frequently
declared that their policy is to recover such a sum, in respect of
their, war loans to the Allies as, with the reparation receipts of
Great Britain, will suffice to cover the annual payments which they
have to make to the United States, but this situation has not yet
beeri reached, and up to the present the British taxpayer has had
to find the greater part of the payments to the United States from
his own resources, even after applying all receipts from reparations
and interallied debts to this purpose, and using none of these receipts
as a set-off against the interest which has to be paid on the loans
raised in Great Britain out of which advances were made to the
Allies. I n no circumstances will Great Britain receive from reparations and interallied war debts, taken together, more than she pays
to America. The policy, of His Majesty's Government on this subject
has been repeatedly declared. I t is not their desire to retain for
their country anything out of receipts from reparations and interallied war debts. I n the event of their receipts from interallied
war debts and reparations exceeding the payments made by them to
the United States Government, they have undertaken to reduce,
proportionately, the payments due to be made to Great Britain in
respect of interallied war indebtedness and a provision to this effect
appears in the various war-debt funding agreements, which H i s
Majesty's Government have signed.
9. I t is not clear on what basis the calculations cited by Mr. Mellori
have been made, but it appears probable that error has arisen on the
following points:
{a) Receipts from Gerinany.—The figures mentioned by Mr.
Mellon appear to relate to the total receipts of the British Empire
from the Dawes annuities. But these include receipts in respect of
the costs of occupation as well as in respect of Belgian war debt
and reparation. The receipts in respect of costs of occupation repre-^
sent a partial reimbursement of expenditure incurred by G r e a t
Britain; they are thus not available to enable payments to be madeto the United States without imposing a burden on Great Britain^
and must be left out of account for the purpose of the present calculation. Further, the British Empire reparation receipts have to be;
distributed between Great Britain and other parts of the empire,,
the share of Great Britain having been agreed at 86.85 per cent of'
the total. The balance is not received by the British Treasury.
(&) Receipts from France.—^A more important error is contained,
in the figures given by Mr. Mellon of the receipts of Great Britain
from France. These appear to include the sums which were due by
the Bank of France to the Bank of England in repayment of aHi
330
REPORT ON T H E FINANCES
advance made during the war. This loan was a private transaction
arid is not an intergovernmental debt. The payments are made to
the Bank of England and not one penny thereof accrues to the
British Treasury or the British Government. They are thus entirely
irrelevant to the question of the extent to which the British taxpayer
can meet payments to the United States Government out of receipts
from reparation and allied war debts.
I t should be added that while the British taxpayer receives nothing
from this commercial debt of the Bank of France he has to meet
very large ^market debts incurred by the British Treasury - in the
United States before the United States Government entered the
war. Since April 1, 1919, the British taxpayer has paid $680
millions or £140 millions, on this head, over and above the payments
made to the United States Government.
)' 10. These facts and figures appear to His Majesty's Government
sufficiently to controvert the statement put forward by Mr. Mellon
that the payments made to the United States Government in respect
of the British war debt will not constitute a drain on British econ'omic resources. But much more might be said. I t must be remembered that, in addition to paying their own debts to the United
States, the British people are sustaining the full charge for the
advances made by His Majesty's Government to the allied governments to enable them to finance the purchase of necessary commodities during the war not only in Great Britain but also in neutral
countries. The capital sums lent for this purpose amounted to a net
total of about £1,350 millions ($6,600 millions), which, with interest
accrued during the war period, amounted on July 1, 1919, to over
£1,450 millions ($7,000 millions), or nearly double the debt which His
Majesty's Government had themselves contracted at that date with
the United States Government.
This amount was borrowed by the British Government from its
own nationals, and in respect of this debt the British taxpayer has
had to pay interest at over 5 per cent each year since, making a total
annual payment of £72% millions which will continue until the debt
is paid off by further and additional contributions from British taxpayers. No relief from this burden can be looked for from receipts
from reparation and allied war debts, for in no case will these receipts amount to a greater total than that of British debt payments
to the United States Government.
11. Whereas the United States Government is receiving from Gerr
many a share of the Dawes annuities estimated to cover its repara^
tion claims in full, and at the same time obtain from Great Britain
repayment, with interest at 3 per cent, of the full amount of war
loans it advanced to Great Britain, Great Britain will retain for herself nothing of any payments she receives in respect either of reparations or of interallied war debts, but will apply all her receipts
toward part payment of her liabilities to the United States. Any
balance that remains she will pay out of her own resources, and in
any case she will have to support the entire burden of her war
losses and of the war loans she herself made to her Allies.
12. His Majesty's Government have set out these considerations in
no contentious or controversial spirit. On the contrary, their desire
is to maintain and to promote a friendly understanding between the
two great English-speaking nations, on whose cooperation great
SECRETARY OF THE TREASURY
331
issues for the peace and progress of the world depend. They view
with great misgiving the divergence of opinion and the estrangement of sentiment which is growing up in regard to these war
obligations. I t appears to them to be the task of British and of
American statesmen to do what can be done to alleviate this difference of view by setting out frankly and fairly the facts of the case
and the policy adopted on either side. But the controversy can
only be intensified if public opinion in America is guided by statements of facts in regard to their European debtors which to those
debtors appear inaccurate and misleading.
I t is for this reason that His Majesty's Government regret that
there should have been issued, under the authority of the Secretary
of the United States Treasury, a series of statements in regard to
Great Britain which for the reasons set out above appear to them
not to represerit accurately or completely the facts. They trust that
the United States Government will take steps to remove the unfortunate impression that has been created by the issue of this statement. The position and policy of the British Government in regard
to these internationar payments'" is well known and the records are
easily available; but if at any time further information is desired
by the United States Treasury, His Majesty's Government will be
happy to furnish it.
I have the honor to be, with the highest consideration, sir, your
most obedient, humble servant.
(For the Ambassador.)
(Signed)
H. G. CHILTON.
MAY 4, 1927,
His Excellency the Right Honorable
Sir EsME HOWARD, G. C M . G., K. C. B., C. V. O.,
Ambassador of Great Britain.
Excellency: I have the honor to acknowledge the receipt of Mr.
Chilton's note of May 2, 1927, in which he communicates to the
Government of the United States the comments of the British Governnient on certain statements contained in a letter dated March
15, 1927, from Mr. Mellon, the Secretary of the Treasury of the
United States, to Mr. Hibben, the president of Princeton University.
The Government of the United States regards the correspondence
between Mr. Mellon and Mr. Hibben as a purely domestic discussion,
and does not desire to engage in any formal diplomatic exchanges
upon the subject.
Accept, Excellency, the renewed assurances of my highest consideration.
FRANK B. KELLOGG.
EXHIBIT 31
Statement of Secretary of the Treasury Mellon commenting on the
British note to the State Depairtment {press release. May 5,1927)
The Treasury Department has no desire to enter into a controversy with the British Government on the subject of allied war debts,
^32
'
REPORT ON T H E FINANCES
but inasmuch as the British Government, in an official note to the
American State Department, has seen fit to challenge the facts and
figures contained in a letter addressed by the American Secretary
of the Treasury to the president of Princeton University, the
Treasury deems it its duty to present the facts as it knows them, and
to endeavor to explain existing differences.
I t should be noted at the outset that the letter of the Secretary
of the Treasury to President Hibben was in answer to a statement
iput out by members of the faculty of Princeton University urging
a reconsideration of the debt settlements and Avas directed specifically
to their arguments. I t was not intended as a communication, direct
or indirect, to the British Government, and that Government was
referred to only as an incident to the general thesis therein set
forth.
I t should be noted in the second place that the figures in the
British note are apparently used in a technical accounting sense, so
that, for instance, the term " allied war debts " excludes debts for
war stocks. Similarly, payments received from Germany are used in
the most strictly limited sense, anci dp not include such items as
receipts on account of army of occupation.
While not admitting it, the British Government's note does not
deny that the sums specified in my letter were actually paid by the
people of France, Germany, and Italy, but says in substance that
some of the sums paid accrued to the benefit of the Bank of England, others to the dominions, and apparently from our reading of
their figures such items as payment for war stocks are not considered by them as accruing to the benefit of the exchequer on account
of war debts. This is the real cause of the apparent disagreement
as to facts. There is no basis of comparison when, lor instance,
payments on account of war debts, a;§ used by the American Treasury, include the payments on account of war stocks sold, but such an
item is not included by the British under the head of war-debt payments. Again, there is bound to be disagreement when the American Treasury Department, in discussing payments received from
Germany, includes all payments, while the British Government in
answer confines itself to payments strictly on account of reparations
and Belgian war debt. Under such circumstances there is not a
disagreement as to facts; there is simply a failure to join issue.
But even these differences of interpretation are material only in
respect of the period prior to September 1, 1928. The British Government admits that, beginning on that date, assuming that the
French agreement is ratified, it will receive from its own debtors
and from Germany sums "sufficient to cover the current payments
due to the United States Government." This, it should be noted, is
the principal ppint made in the letter of the Secretary of the Treasury to President Hibben, and the accuracy of this point is now''
officially confirmed by the British Government.
The first statement to which the British Government takes exception is one advanced by me in reply to the argument that the loans
made by the American Government during the war should be considered as contributions to a common cause, in which I pointed out
that there was merit in such contention only if the proposed adjustment was a mutual one and to be applied on a strictly equal basis
SECRETARY OF THE TREASURY
between us and our debtor nations.
with which goods and services were
furnished to our associates on credit,
we purchased goods and services in
cash. I then went on to say:
333
I pointed out that the dollars
purchased in this country were
whereas the pounds with which
Great Britain were paid for in
In other words, we paid cash for the goods and services necessary to enable
us to make our joint contribution to the common cause. Our associates got
the goods and services purchased in this country necessary to enable them to
make that part of their joint contribution on credit. Here is the fundamental
reason which explains why we ended the war with everyone owing us and our
owing no one. We are now urged to cancel these debts because it is alleged
that they were incurred in a common cause, but neither abroad nor in this
country has it been suggested that if this is to be done we are to be reimbursed
the dollars actually expended by us in France and Great Britain so that the
goods and services they sold us might constitute their contribution to the
common cause.
This the British Government does not deny; that we paid cash
for goods and services obtained in Great Britain and that for the
most part they received goods and services in this country on credit;
but they say this is misleading because they used the dollars purchased by us in Great Britain for further purchases in this country;
The point seems to me immaterial. The dollars they received from
the American Government increased their available cash resources,
while the promissory notes we received did not increase our available
cash resources.
For the purchases made by Great Britain in the United States
dollars were furnished by the American Government by borrowing
from its own citizens, the British Government giving its obligations
to the American Government for the equivalent. For purchases
made by the American Government in Great Britain the United
States Government did not borrow pounds from the British Government and give its obligation to the British Government, but borrowed dollars from its own citizens with which to purchase the
pounds and actually paid cash to Great Britain. Had the transactions been identical in form the British Government would now hold
obligations of the American Government to cover purchases made
in Great Britain just as the American Government holds obligations
of the British Government for purchases made in America, and
. obviously cancellation could not be urged on a one-sided basis. The
fact that the cash employed in purchasing pounds was borrowed
from American citizens and not from the British Government is the
distinguishing difference, and any program of cancellation which
does not allow for this difference gives the United States no credit
on the amount of its war debt for purchases made in Great Britain
and other countries.
The British note refers to the statement in my letter to President
Hibben that " all our principal debtors are already receiving from
Germany more than enough to pay their debts to the United States."
The Princeton and Columbia proiessors had stated that " we do not
desire to impose tremendous burdens of taxation for the next two
generations on friendly countries." My letter pointed out that in
reaching the debt settlements based on the debtors' capacity to pay,
only incidental consideration was given to the reparation payments
to be received by the debtor countries from Germany. I n other
334
REPORT ON THE FINANCES
words, I pointed out that we endeavored to make settlements which
the debtors could meet from their own resources without too serious
a burden ori their economic life. We have always claimed and claim
now that the debts due us are in no way connected Avith German
reparations. I then went on to point out t h H it now appears that
all of our principal debtors are already receiving from Germany
more than enough to pay their debts to the United States. There
was no intention to include Great Britain in the statement that
enough was received from Germany alone. The British situation I
covered separately later. That sentence as originally drafted contained the words " except Great Britain," but these words in the final
copy were inadvertently omitted. The error was an obvious one and
was corrected by the text immediately following. I t is not believed
that any injustice to Great Britain has resulted or that the British
Government could have been misled in view of the fact that on the
page next following Great Britain's position is segregated and
treated separately from that of our other debtors, and in the case of
Great Britain we enumerated specifically the payments to be received,
stating that they will be received not only from Germany but from
France and Italy as well. I said:
Finally, we come to Great Britain. Under the agreements Great Britain
will receive from France approximately $71,000,000 this year; from Italy
approximately $19,000,000; from Germany approximately $72,000,000, and wiU
pay us $160,000,000.
I n the light of this very clear and definite statement, it is rather
surprising that the British Government should lay stress on what
the context showed to be a typographical error, immediately corrected, and go to such length to disprove a statement which was
already completely covered.
The British Government also questions certain figures given as
to payments received by Great Britain from France, Germany, and
Italy. These figures were taken from the attached table showing
the estimated payments and receipts of Great Britain during a
12-year period. The figures are inclusive figures and are derived
from the best sources available to the Treasury.
I do not understand that the British Government challenges the
accuracy of these inclusive figures in so far as they represent amounts
paid and to be paid by the peoples of Germany, Italy, and France
to Great Britain, but that it contends that all of these sums will not
inure to the benefit of the British Treasury and therefore can not
be held to relieve the British taxpayer directly, though they unquestionably add materially to British economic resources. Even so, it
is not understood why the British Government apparently fails to
include in its figures the payments made by the French on the debt
incurred in respect of war stocks sold. From our standpoint the
amount paid this year by the French Government on account of the
$400,000,000 of supplies sold the French Government after the war
constitutes a payment on account of war debts beneficial to the
American Treasury.
I n so far as the payments from the Bank of France to the Bank
of England were concerned they were included in the figures set
out in the table, because in the report presented by M. Clementel,
the French Finance Minister, in 1924, known as the " Inventaire de
SECRETARY OF THE TREASURY
335
la Situation Financiere de la France au Debut de la Treizieme Legislature," the statemerit is made that the Bank of Frarice was simply
actirig as an intermediary and that the loan was made to the Bank
of France for the benefit of the Frerich Government. Moreover, the
published report of the Finance Commission of the French Chamber
of Deputies indicates that the 1927 budget of the French Goverriment includes an item of 1,200,000,000 francs to be paid to the Bank
of England under the head of reimbursements of foreign comniercial
debts which the Treasury must meet in 1927. I n this conriectiori,
carrying as it does the implication that no Government was irivolved,
the statement of the British note " t h a t this loan was a private
transaction and is not an intergovernmenal d e b t " is not strictly
accurate. I t was in the light of these facts and in the absence of
any official statement as to the responsibility of the British Goverriment to the Bank of England that these payments were iricluded
in my statement of international payments on account of war debts.
If the British Government was obligated to indemnify the Barik
of England, the payments would serve to reduce a contingent liability which if not paid by France would become an added burden
to the British taxpayer.
But irrespective of the application of the large payments which
Great Britain has received and will receive this year from the Governments of Germany, France, and Italy, I desire to point out that
the Columbia and Princeton professors had claimed that the payments to this country would impose a tremendous burden of taxation on friendly countries for the next two generations. This is the
statement which I challenged. The note of the British Government
makes it entirely clear that I was correct in challenging the accuracy
of that statement, for whatever differences there may be as to the
payments to be received -and made by Great Britain in the years
1926 and 1927, the British Government admits that after the 1st of
September, 1928, it will receive from its debtors enough to cover
current payments due to the United States Government, assuming
the agreement with France is ratified.
The two points most stressed by the advocates of debt cancellation
are that capacity to pay is not a fair basis of settlement and that the
agreements that have been negotiated will impose on those debtors
with whom we were associated in the war a heavy burden over a
very long period of time. What I desired to emphasize in the letter
to President Hibben was that there could be no fairer measuring
stick than capacity to pay liberally interpreted, and then to bring
out the all-important fact, apparently overlooked, that some of our
debtors have already reached the point, and others are about to reach
it, where, taking into consideratiori all payments on account of war
debts and war indemnities, our principal debtors are receiving or will
receive more than they pay us. I n other words, in the near future
balances on international paymerits resulting directly from war debts
or Dawes paymerits will be in favor of our principal debtors. The
purpose of the Hibben letter was to make this clear to the American
people.
I have in this statement confined myself to answering the criticisms of the Hibben letter contained in the British note. I t seems
336
REPORT ON THE FINANCES
to me wholly undesirable to enlarge the field of possible differences
by commenting on other phases of the British note, and the failure
to do so should not .be interpreted as an agreement with all of the
views therein set forth. I t seems to me, however, that the reference
to the share of the Dawes annuities to be received by the United
States, " estimated to coyer its reparation claims in full," is rather
unfortunate in view of the very limited claim presented by the United
States on account of reparations as contrasted with those presented
by our associates in the war. The payments on account of reparations which the British Government is receiving are based in part
on claims, such as pensions and separation allowances, of a character
not included by the United States in its reparation bill.
I have rio desire to comment on the statement of the policy enuneiated in the British note to the effect that Great Britain will retain
for herself nothing of^ any payments she receives in respect of either
reparations fOr interallied war debts, but will apply all of her receipts
toward paynient of her liabilities to the United States. By implication this, means that should the United States further reduce British
obligations to the United States the British Government would
cancel a like amount of obligations due to it from its debtors. I t is
very obvious that the British Government would neither dose nor
gain in such a transaction. The United States Government is, however, in a very different position. The British Government is both
creditor and debtor. The United States Government is a creditor
only, and every dollar,of debt canceled by the United States represents an increase by just that amount of the war burden borne by
the American taxpayer.
Receipts and ,pjayments of Great Britain during 12-year period, 192//-1936
[In thousands of dollars}
Sums to be received from—
Years
Francei
1924-25
1925-26
1920-27
1927-281928-39
1929-20
1930-31. . .
1931-32:
1932-33
1933-34
1934-35..
1935-36
c
Italy»
58,282
50,369
9,733
71,052
19,466
69,348
19,466
85,165
19, 466
32, 363
19,466
60, 832
19, 466
60,832
19, 466
60, 832
20,041
60, 832 ' 20,041
. 60,832
20, 041
60,832
20,041
Germany
45,487
56, 782
72,479'
87,141
127,471
125,142
124,118
125,175
125, 815 '
125, 815
128,912
128, 912
Surplus—
Sums to
be paid
Grand by Great
Britain
total of
AvailOf
able for
receipts
to the
United payments Great
Britain
states
103,769
116,884
162,997
175, 955
232,102
3 76,971
204,416
205,473
206, 688
206, 688
209, 785
209, 785
159,965
160,260
160, 525
159,775
160,995
160,185
160, 360
159, 520
171, 500
183,340
182,220
181,100
56,196
43,376
- — " • " • •
2,472
16,180
71,107
16, 786
44,056
45,953
, 35,188
23,348
27, 565
28,686
1 Includes ipayments by France under Ohurchill-Caillaux agreement, on account of advances of Bank
of England less gold to be returned, and on account of war stocks debt.
a Includes payments by Italy on war debt less gold to be returned.
' Includes all receipts from Germany under Dawes plan.
£1=$4.8665.
SECRETARY OF THE TREASURY
337
PROHIBITION AND CUSTOMS
EXHIBIT 32
Letter of the Secretary of the Treasury to the President of the Senate
concerning the denaturization of industrial alcohol, Janua/ry 11^.
1927
• ..
The PRESIDENT OF THE SENATEI
;;
V
S I R : I n response to Seiiate Eesolution No, 311 of January 4y
1927, I have the honor to forward herewith copies of the laws pertaining to the denaturization of industrial alcohol for the purpose*
of rendering it unfit for beverage purposes, copies of all existing:
regulations issued for the purpose of making these laws (effective^
arid copies of all the fdrriiulse iiow' in effect, wliich have been issued
for the same purpose. These are found in Treasury Dejjartment
Eegulations 61, Appendix to Eegulations 61, and attached Treasury
Decisions, marked " Exhibit A."
'
':
There is also enclosed a copy of the official report made by Doctor
Doran, head of the technical division, on this subject, dated September 3, 1926, marked "-Exhibit B . "
Thorough search of the files and questioning of the entire staff
has failed to find the existence of any correspondence on this subject
between the department arid Wayne B. Wheeler, or any other member of the Anti-Saloon League of America, with the exception of
the attached copy of telegram purporting to come frorii an official
of the Anti-Saloon League, marked' " Exhibit C."
On accourit of the recent publicity regarding deaths accredited to
the use of industrial alcohol as a beverage, particularly, in New York
City, the department has asked for an officiar report from. Commissioner Louis I. Harris, depai-tment of health, 61 ty of New York. His
reply, dated January 6, 1927, was received to-day and is attached
and marked " Exhibit D."
On the subject of denatured alcohol, I might set forth the situation
as it has been presented to the Treasury. I n aid of industry. Congress in 1906 first provided for denatured alcohol rendered unfit for
beverage use by a denaturant consisting of " wood alcohol or other
suitable ingredient." By section 10 of Title I I I of the national prohibition act it is required that the denaturing material shall be such
" as to render the alcohol or any compound in which it is authorized
to be used unfit for use as an intoxicating beverage." Under section
13 of the same title the Commissioner of Internal Eevenue in the
Treasury is required to issue regulations in respect to nonbeverage
alcohol so as to put " industries using such alcohol as a chemical raw
iriaterial or for other lawful purpose upon the highest possible plane
of scientific and commercial efficiency consistent with the interests of
the Government, and which shall insure an ample supply of such
alcohol and promote its use in scientific research and the development
of fuels, dyes, and other lawful products."
. ' I t will be seen from these.two provisions of the law that the
Treasury is charged with the duty of (1) making industrial alcohol
unfit for use as an intoxicating beverage and' (2) making such alcohol
338
REPORT ON I H E FINANCES
available to the freest extent to industry. These two duties require a.
denaturant having these characteristics: (1) That in its original
mixture the denatured alcohol shall be unfit for beverage purposes;
(2) that the denaturant shall be such that it can not be easily removed from the mixture and the treated product made fit for
beverage purposes; (3) that the denaturant shall not interfere with
the use of alcohol for'industrial purposes.
The simplest denaturant meeting these requirements is wood
alcohol as specified in the original law. The denaturing grade of
wood alcohol has a definite and disagreeable taste and odor. I t boils
at a temperature only slightly lower than that at which ethyl alcohol
boils and therefore the denaturant is difficult to remove and the
taste and smell continue in the treated product. Wood alcohol is so
closely allied chemically with ethyl alcohol that it can be used as a
denaturant for alcohol for industrial purposes without interferirig
with chemical processes. I t is for these reasons that wood alcohol
continues to be the common denaturant for industrial alcohol not
only in the United States but throughout the world and for many
years.
Since denatured alcohol for industrial purposes was first authorized
by Congress over twenty years ago, the Treasury has been continuously working towards an improvement in denaturing formulae.
With the passage of the prohibition act and the possibility of illegal
diversion of industrial alcohol into beverage channels, this research
work for less dangerous formulae was increased, but the Treasury
and scientific research in industry have not yet discovered an eft'ective
denaturant less harmful than wood alcohol which both meets the
three requirements mentioned and is available for wide industrial
use.
Wood alcohol of denaturing grade carries with it its characteristic
taste and smell in the original mixture or in the treated product, and
therefore serves as notice and a warning that the product is not a
beverage. In effect, wood alcohol as a denaturant labels the treated
product to anyone attempting to drink it as dangerous, and therefore
constitutes the most effective means of accomplishing the requirements of section 10 of Title J l l of the national prohibition act that
the denatured alcohol shall be unfit for use as an intoxicating
beverage.
The output of industrial alcohol in the United States last year was
105 million gallons. The dye, artificial silk, paint, etc., industries,
as evidenced by their communications to the Treasury (copies of
which are attached marked " Exhibit E " ) , feel that to remove wood
alcohol as a denaturant in the present state of scientific knowledge
would destroy them and would render impossible the duty imposed
on the Treasury by section 13 of Title I I I of the national prohibition
act requiring the Commissioner of Internal Eevenue to promote such
industry.
The Treasury does not wish to use dangerous substances as denaturants, but Congress has imposed upon the Treasury the duty of
specifying an effective denaturant readily available to industry.
An effective denaturant not harmful if used for beverage purposes
has not yet been found, although research is continued. The Treasury
SECRETARY OF THE TREASURY
339
feels, then, that it has not the discretion, under existing law, to abandon an effective denaturant in favor of one not harmful but
ineffective.
Very truly yours,
A. W. MELLON,
Secretary of the Treasury.
[Western Union telegram—Treasury Department telegraph officel
DALLAS TEXAS, J a n .
8,
1927,
A. W. MELLON,
Secretary of the Treasury^ Washington:
Your order removing poison from denatured alcohol can mean
nothing less than to furnish alcohol tax free to bootleggers. I t is
not the function of the Treasury Department to supply bootleggers
with liquors for trampling the Constitution under foot. Those who
buy bootleg stuff drink liquor with the brand of treason on its brew.
I t is not the function of the Treasury to make it safe to heap contempt upon the Constitution.
ATTICUS WEBB,
Superintendent Anti-Saloon League of Texas,
DEPARTMENT OF HEALTH, CITY OF N E W YORK,
OFFICE OF THE COMMISSIONER,
,
January 6, 1927.
Dr. J . M. DORAN,
Head Technical Division, Office of the Prohibition
Administrator, 1 P a r k Averme, New York City:
]
DEAR DOCTOR DORAN : Our figures of the deaths due to alcoholism
in the year 1926 are subject to slight revision after a certain number
of cases, probably not more than thirteen, have been more completely
studied by the medical examiner of this city, who is engaged in making chemical investigations and checking up certain autopsy findings.
As the figures stand at the present moment, there were 750 deaths
reported to the department of health of the city of New York in
the year 1926 as due to alcoholism. The information given in the
death certificates is very meagre with respect to certain important
points; for example, we do not know how many of these deaths were
due to acute alcoholic poisoning and how many were the result of
chronic indulgence in alcohol.
On the basis of clinical and official experience, it is my belief that
some of these 750 deaths were possibly due to methanol or other
substance employed to denature or medicate alcohol. If it were
possible to conduct the study, I would be exceedingly anxious to
find out the previous history of the 750 who were recorded as dying
of alcoholism. I would also like to know the clinical manifestations
upon which the diagnosis was based.
I have found that physicians who are not experienced in observing the effects of wood-alcohol poisoning can not readily diagnose
the condition and may frequently overlook it entirely; but, frankly.
340
REPORT OK THE FINANCES
these are just questions which come to my mind and which I am not
prepared to answer in a scientific, dispassionate spirit.
I n addition to the 750 deaths reported as due to alcoholism, there
were also recorded, during 1926, 7 deaths in which wood alcohol was
•specifically mentioned as the cause of death.
Two days ago I made an inquiry of the chief hospitals in the city
"of New York as to the number of clinical cases of alcoholism which
they had under their care in the period from December 24, 1926,
t o January 4, 1927. I was informed that there were 337 cases of
alcoholism under care in these institutions. Only one was definitely
•attributed to wood-alcohol poisoning.
Aside from the study of mortality returns, which is urgently necessary in this instance, so that the exact measure of the harm which
wood alcohol may be doing is scientifically determined, a study of
the clinical reports of hospitals and private physicians of cases that
do not eventuate in death would also be most desirable.
I have tried to give you as frank and candid a statement of facts
as I can. If I can in any way further assist you, do not hesitate
to call upon me.
Very sincerely yours,
LOUIS I.
HARRIS,
Commissioner.
E X H I B I T 33
Organization of the Bureau of Prohibition {T. D. 1, April 1, 1927)
Order of the Secretary of the Treasury prescribing the duties and powers of the
Commissioner and other oflacers and employees of the Bureau of Prohibition,
including the field service of the Bureau of Prohibition, providing for the
designation of the Acting Commissioner of Prohibition, and transferring
certain personnel, records, and property of the oflSce of the Commissioner of
Internal Revenue to tlie Bureau of Prohibition
TREASURY DEPARTMENT, ^ ^ Z i , j?P^7.
To Commdssioner of Prohibition, Commissioner of Internal Revenue,
prohibition officials, amd other officials and employees of the
Treasury. Department concerned:
The act entitled "An act to create a Bureau of Customs and a
Bureau of Prohibition in the Department of the Treasury," approved
March 3,1927 (Pub. No. 751—69th Congress), provides as follows:
[PUBLIC—No. 751—69TH CONGRESS]
[H. R. 10729]
An Act To create a Bureau of Customs and a Bureau of Probibition in the Department of
the Treasury /
Be it enacted by the Senate and House of Representatives of the United States
of America in Congress assernbled, That there ;shall be in the Department of the
"Treasury a bureau to be known as the Bureau of Customs, a bureau to be known
^ s the Bureau of Prohibition, a Commissioner of Customs, and a Commissioner
of Prohibition. The Commissioner of Customs shall be at the head of the
Bureau of Customs, and the Commissioner of Prohibition shall be at the head
of the Bureau of Prohibition. The Commissioner of Customs and the Comp-
SECRETARY OF THE TREASURY
341
missioner of Prohibition shall be appointed by the Secretary of the Treasury,
without regard to the civil service laws,* and each shall receive a salary at the
rate of $8,000 per annum. .
SEC. 2. (a) The Secretary of the Treasury is authorized to appoint, in each
of the bureaus established by section 1, one assistant commissioner, two deputy
commissioners, one chief clerk, and such attorneys and other oflQcers and
employees as he may deem necessary. One of the deputy commissioners of the
Bureau of Customs shall have charge of investigations. Appointments under
this subdivision shall be subject to the provisions of the civil service laws, and
the salaries shall be fixed in accordance with the classification act of 1923.
(b) The Secretary of the Treasury is authorized to designate an officer of the
Bureau of Customs to act as Commissioner of Customs, during the absence or
disability of the Commissioner of Customs, or in the event that there is no
Commissioner of Customs; and to designate an officer of the Bureau of Prohibition to act as Commissioner of Prohibition during the absence or disability
of the Commissioner of Prohibition, or in the event that there is no Commissioner
of Prohibition.
(c) The personnel of the Bureau of Prohibition shall perform such duties as
the Secretary of the Treasury or the Commissioner of Prohibition may prescribe,
and the personnel of the Bureau of Customs shall perform such duties (other
than duties in connection with the administration of the national prohibition
act, as amended, or any other law relaitng to the enforcement of the eighteenth
amendment), as.the Secretary of the Treasury or the Commissioner of Customs
may prescribe.
SEC. 3. (a) The Secretary of the Treasury,is authorized to confer or impose
upon the Commissioner of Customs or any of the officers of the Btureau of
Customs any of the rights, privileges, powers, or duties, in respect Of the importation or entry of merchandise into or exportation of merchandise from, the
United States, vested in or imposed upon the Secretary of the Treasury by the
tariff act of 1922 or any other law.
(b) The records, property (including office equipment), and personnel of the
Division of Customs are hereby transferred to the Bureau of Customs.
(c) The Division of Customs and the offices of director of customs, assistant
directors of customs, and director and assistant directors, Special Agency Service
of the Customs, are hereby abolished.
SEC. 4. (a) The rights, privileges, powers, and duties conferred or imposed
upon the Commissioner of Internal Revenue and his assistants, agents, and
inspectors, by any law in respect of the taxation, importation, exportation,
transportation, manufacture, production, compounding, sale, exchange, dis-.
pensing, giving away, possession, or use of beverages, intoxicating liquors, or
narcotic drugs, or by the national prohibition act, as amended, or any other law
relating to the enforcement of the eighteenth amendment, are hereby transferred
to, and conferred and imposed upon, the Secretary qf the Treasury.
(b) The Secretary of the Treasury is authorized to confer or impose any of
such rights, privileges, powers, and duties upon the Commissioner of Prohibition
or any of the officers or employees of the Bureau of Prohibition, and to confer or
impose upon the Commissioner of Internal Revenue, or any of the officers or
employees of the Bureau,of Internal Revenue, any of such rights, privileges,
powers, and duties which, in the opinion of the Secretary, may be necessary in
connection with internal-revenue taxes.
.
SEC. 5. (a) The Secretary pf the Treasury is authorized to transfer to the
Bureau of Prohibition such records, property (including office equipment), and
personnel of the office of the Commissioner of Internal Revenue as may be
necessary for the exercise by the Bureau of Prohibition of the functions vested
init.
• ••
(b) The Commissioner of> Prohibition, with the approval, of the Secretary
of the Treasury, is authorized to - appoint in the Bureau of Prohibition such
employees in the field service as he may deem necessary, but all appointments
of such employees shall be made subject to the provisions of the civil service
laws, notwithstanding the provisions of section 38 of the nation 1 prohibition
act, as amended.. The term of office of any person who is transferred, under
this section, to the Blur eau of Prohibition, and who was not appointed subject
to the provisions of the civil service laws, shall expire upon the expiration of
six months from the effective date of this act.
342
REPORT ON THE FINANCES
SEC. 6. Any action or decision of the Secretary of the Treasury under the
national prohibition act, as amended, or of any officer upon whom the power
to take such action or make such decision is conferred, shall be subject to the
same review l^y a court of equity as the action or decision of the Commissioner
of Internal Revenue under such act, as amended, prior to the effective date of
this act.
SEC. 7. This act shall take effect on April 1, 1927.
Approved, March 3., 1927.
I n pursuance of the authority conferred upon the Secretary of the
Treasury by the above act, it is hereby ordered as follows:
I . DESIGNATION OF ACTING COMMISSIONER OF P R O H I B I T I O N
The Assistant Commissioner of the Bureau of Prohibition shall
act as the Commissioner of Prohibition during the absence or disability of the Commissioner of Prohibition, or in the event there is
QO Commissioner of Prohibition. In case of the absence or disability
of the assistant commissioner, or in the event there is no assistant
commissioner, an officer of the Bureau of Prohibition will be designated by the Secretary at the time to act as Commissioner of
Prohibition during the absence or disability of the Commissioner
of Prohibition, or in the event that there is no Commissioner of
Prohibition,
I I . TRANSFEjR OF
PERSONNEL
There is hereby transferred to the Bureau of Prohibition at their
present grades and salaries, and in their present status, the following
personnel:.
All officers, attorneys, assistants, agents, inspectors, deputy collectors, gaugers, storekeepers, storekeeper-gaugers, auditors, accountants, clerks, chemists, and other employees of the Internal Revenue
Service, whether locate,d in the Bureau of Internal Revenue at
Washington, D. C , or in the offices of collectors of internal revenue,
or elsewhere, now engaged in the performance of functions conferred
or. imposed by this order upon the officers and employees of the
Bureau of Prohibition, including the field service of the Bureau of
Prohibition.
I I I . TRANSFER OF RECORDS A N D PROPERTY
There are hereby transferred from the office of the Commissioner
of Internal Revenue to the Bureau of Prohibition all documents,
files, forms, blanks, and other records, and all property (including
office equipment) and space, necessary for the performance of functions conferred or imposed by this order upon the Commissioner of
Prohibition or upon the officers and employees of the Bureau of
Prohibition, including the field service of the Bureau of Prohibition^
as determined by the Commissioner of Internal Revenue and the
Commissioner of Prohibition.
IV. R I G H T S , PRIVILEGES, POWERS, AND DUTIES CONFERRED OR IMPOSED U P O N
T H E COMMISSIONER OF P R O H I B I T I O N RELATING TO P R O H I B I T I O N
(1) There are hereby conferred and imposed upon the Commissioner of Prohibition, subject to the general supervision and direction
SECRETARY OF THE TREASURY
343
of the Secretary of the Treasury, all the rights, privileges, powers,
and duties conferred or imposed upon the Commissioner of Internal
Revenue (and which are transferred to and conferred and imposed
upon the Secretary of the Treasury by subdivision (a) of section 4
of the above act of March 3, 1927), by the national prohibition act
as amended, or by the act entitled "An act supplemental to the
national prohibition act," approved November 23, 1921, and the
power conferred upon the Commissioner of Internal Revenue to
remove distilled spirits from any internal-revenue bonded warehouse
to any other such warehouse, for the purpose of concentration, and
to prescribe the form and penal sum of bonds covering distilled
spirits in any such warehouse and in transit between such warehouses,
except that all moneys shall be received and accounted for by the
collectors of internal revenue, under the direction of the Commissioner of Internal Revenue;
(2) There are also hereby conferred and imposed upon the Commissioner of Prohibition, subject to the general supervision and
direction of the Secretary of the Treasury, all the rights, privileges,
powers, and duties conferred or imposed upon the Commissioner of
Internal Revenue (and which are transferred to and conferred and
imposed upon the Secretary of the Treasury by subdivision (a) bf
section 4 of the above act of March 3, 1927) by any law, in so far as
such rights, privileges, powers, and duties relate to—
(a). The production, custody, and supervision of distilled spirits,
alcohol, wines, fermented liquors, cereal beverages, denatured alcohol,
and other such liquors and liquids;
{b) The establishment, construction, operation, custody, and supervision of distilleries, industrial alcohol plants, bonded warehouses,
denaturing plants, wineries, bonded wine storerooms, breweries, rectifying houses, dealcoholizing plants, cereal-beverage plants, and other
places at which such spirits, liquors, or liquids are produced or stored;
(c) The determination, assertion, and compromise of liability for,
and the institution and compromise of suits for the recovery of
internal-revenue taxes and penalties, but only in case a violation of
law relating to the enforcement of the eighteenth amendment is
involved, except that all moneys shall be received and accounted for
by the collectors of internal revenue, under the direction of the Commissioner of InternaLRevenue;
{d) Inquiries and investigations relating to the filing of returns
for occupational and .commodity taxes and penalties in respect of
intoxicating liquors, cereal beverages, and denatured alcohol;
{e) The seizure, for violation of the internal revenue laws relating
to intoxicating liquors, cereal beverages, and denatured alcohol, of
property, whether real or personal (except seizure under distraint
warrant), and the custody, control, sale, and disposition of property
so seized;
(/) The discharge of liens, under section 902 of the revenue act
of 1926.
(3) All regulations shall be prescribed by the Commissioner of
Prohibition, with the approval of the Secretary of the Treasury.
64761—FI 1927
24
344
REPORT ON THE FINANCES
V. R I G H T S , PRIVILEGES, P O W E R S , A N D D U T I E S CONFERRED AND IMPOSED
U P O N T H E OFFICERS AND E M P L O Y E E S OF T H E B U R E A U OF P R O F I I B I T I O N ,
I N C L U D I N G T H E F I E L D SERVICE OF T H E BUREAU OF P R O H I B I T I O N , RELATI N G TO P R O H I B I T I O N
There are hereby conferred and, imposed upon the officers and
employees of the Bureau of Prohibition, including agents, inspectors
and other emplo^^ees in the field service of the Bureau of Prohibition,
all the rights, privileges, powers, and duties conferred or imposed
upon the assistants, agents, and inspectors of the Commissioner of
InternaLRevenue (and which are transferred to and conferred and
imposed upon the Secretary of the Treasury by subdivision (a) of
section 4 of the above act of March 3, 1927), (1) by any law in so
far as such rights, privileges, powers, and duties relate to any of
the matters referred to in paragraph (2) of Section I V of this order,
or (2) by any law referrecl to in paragraph (1) of Section I V of this
order.
VI. R I G H T S , PRIVILEGES, POWERS j AND DUTIES CONFERRED AND IMPOSED
U P O N T H E COMMISSIONER OF P R O H I B I T I O N R E L A T I N G TO NARCOTIC
DRUGS
(1) There are hereby conferred and imposed upon the Commissioner of Prohibition, subject to the general supervision and direction
of the Secretary of the Treasury, all the rights, privileges, powers,
and duties conferred or imposed upon the Commissioner of Internal
Revenue (and which are transferred to and conferred and imposed
upon the Secretary of the Treasury by subdivision (a) of section 4
of the above act of March 3,1927) by the Harrison Narcotic Act, as
amended, or by the act entitled " An act regulating the manufacture
of smoking opium within the United States and for other purposes,"
approved January 17, 1914, in so far as such rights, privileges,
powers, and duties relate to-^
{a) T h e investigation and the detection and punishment of violations of either of the above laws, or any regulations issued thereunder;
{b) Exemptions from any of the provisions of the above laws;
(c) The books, records, and returns required to be kept or rendered,
under any of the above laws;
{d) The prescribing of forms and order forms under any of the
above acts;
{e) The manner in which the record of sales, exchanges, and gifts
of tax-exempt preparations and remedies containing narcotic drugs
shall be kept;
, (/) The manner in which application shall be made for confiscated
narcotic drugs;
{g) The appointment of a committee for the certification and
disposition of confiscated narcotic drugs;
(h) The compromise of any civil or criminal case under either of
the above laws in accordance with section 3229 of the Revised
Statutes, except that all moneys shall be received and accounted for
by the collectors of internal revenue, under the direction of the
Commissioner of InternaLRevenue;
SECRETARY OF THE TREASURY
345
{i) Seizures, for violation of either of the above laws, of property,
whether real or personal (except under distraint warrant), and the
custody, control, sale, and disposition of property so seized;
{j) The appointment of such officers, and employees as may be
necessary for the execution of the functions imposed upon the Bureau of Prohibition relating to narcotic drugs.
(2) Power is hereby conferred upon the Commissioner of Prohibition to prescribe such regulations as he may deem necessary for the
execution of the functions imposed upon him or upon the officers
or employees of the Bureau of Prohibition relating to narcotic drugs,
but all regulations and changes in regulations shall be subject to the
approval of the Secretary of the Treasury.
V I I . R I G H T S , PRIVILEGES, POWERS, AND DUTIES CONFERRED AKD IMPOSED
U P O N T H E OFFICERS AND E M P L O Y E E S OF T H E B U R E A U OF P R O H I B I T I O N ,
I N C L U D I N G T H E F I E L D SERVICE OF T H E BUREAU OF P R O H I B I T I O N , RELATI N G TO NARCOTIC DRUGS
There are hereby conferred and imposed upon the officers and
employees of the Bureau of Prohibition, including the agents, inspectors, and other employees in the field service of the Bureau of
Prohibition, all the rights, privileges, powers, and duties conferred
or imposed upon the assistants, agents, and inspectors of the Commissioner of Internal Revenue (and which are transferred to and
conferred and imposed upon the Secretary of the Treasury by subdivision (a) of section 4 of the above act of March 3, 1927) by either
of the laws referred to in Section V I of this order, in so far as such
rights, privileges, powers, and duties relate to any of the matters
reierred to in paragraphs {a) to {j), inclusive, of such section. All
such officers and employees of the Bureau of Prohibition, including
the agents, inspectors, and other employees in the field service of the
Bureau of Prohibition, shall have, in the performance of their
functions under the narcotic drug laws, all the rights, privileges, and
powers of internal-revenue officers.
V I I I . R I G H T S , PRIVILEGES, POWERS, A N D DUTIES CONFERRED AND IMPOSED
U P O N T H E COMMISSIONER OF I N T E R N A L R E V E N U E
There are hereby conferred and imposed upon the Commissioner
of Internal Revenue all the rights, privileges, powers, and duties
conferred or imposed upon such officer (and which are transferred to
and conferred and imposed upon the Secretary of the Treasury by
subdivision (a) of section 4 of the above act of March 3, 1927) by
any law, except the rights, privileges, powers, and duties conferred
or imposed upon any other person by Sections IV, V, VI, or V I I of
this order, but not excepting rights, privileges, powers, and duties
relating to internal-revenue taxes where no violation of a law relating
to the enforcement of the eighteenth amendment is involved. All
regulations and changes in regulations shall be subject to the approval of the Secretary of the Treasury.
346
[IKPORT ON T H E
FINANCES
I X . R I G H T S , PRIVILEGES, POWERS, A N D DUTIES CONFERRED AND IMPOSED^
U P O N T H E OFFICERS A N D E M P L O Y E E S OF T H E BUREAU OF I N T E R N A L .
REVENUE
There are hereby conferred and imposed upon the assistants,^
agents, and inspectors of the Commissioner of Internal Revenue all
the rights, privileges, powers, and duties conferred or imposed upon,
such assistants, agents, and inspectors (and which are transferred tOcand conferred and imposed upon the Secretary of the Treasury by
subdivision (a) of section 4 of the above act of March 3, 1927) by
any law, except the rights, privileges, powers, and duties conferred
or imposed upon any other person by Sections I V , V, V I , or V I I ofthis order, but not excepting rights, privileges, powers, and duties
relating to internal-revenue taxes where no violation of a law relating to the enforcement of the eighteenth amendment is involved.
X. GENERAL
PROVISIONS
Any proceeding pending on the effective date of this order may be
maintained, prosecuted, or defended by the officer or employee on
whom this order confers or imposes the function of maintaining,,
prosecuting, or defending a similar proceeding begun after the effective date of this order. Nothing in this order shall be construed t o
affect the validit}^ of any act done, power exercised, or order, decision,,
or finding made, or to relieve any person from any liability incurredv
before the effective date of. this order.
Advances to be made by special disbursing agents heretofore
authorized by the Commissioner of Internal Revenue, and approved
by the Secretary of the Treasury, may be made after the effective
date of this order upon such authority, and the Commissioner of
Prohibition, with the approval of the Secretary of the Treasury,,
may, after the effective date of this order, authorize advances to be
made by special disbursing agents in accordance with the law.
The order of March 18, 1927 (T. D. 3999), is hereby revoked.
X I . EFFECTIVE DATE OF ORDER
This order shall take effect 12.01 a. m., April 1, 1927. The right
to amend or supplement this order or any provision thereof, from
time to time, or to revoke this order or any provision thereof at any
time, is hereby reserved.
OGDEN L . M I L L S ,
Acting Secretary of the Treasury.
SECRETARY OF T H E TREASURY
347
(T.D.-2)
Prohibition
\
Adopting certain regulations, orders, and instructions
TREASURY D E P A R T M E N T ,
O F F I C E OF T H E COMMISSIONER OF P R O H I B I T I O N ,
Washington, D. C.
To officers and employees of the Bureau of Prohibition, including the
field service:
(1) All regulations prescribed by the Commissioner of Internal
Revenue, with the approval of the Secretary of the Treasury, in
force on March 31,1927, in so far as such regulations relate to any of
the rights, privileges, powers, or duties conferred or imposed upon
t h e Commissioner of Prohibition or the officers or employees of the
Bureau of Prohibition, including the officers or employees of the field
-service of the Bureau of Prohibition by the order of the Secretary
'of the Treasury (Bur. Pro. T. D. 1), effective April 1, 1927, or to any
'Of the property or records transferred to the Bureau of Prohibition
!by such order, or to any of the functions of the Bureau of Internal
Revenue vested in the Bureau of Prohibitionj. are hereby adopted,,
:and shall have the same effect hereafter as though prescribed by the
Commissioner of Prohibition, with the approval of the Secretary of
the Treasury.
E X H I B I T 34
O r g a n i z a t i o n of the B u r e a u of Customs {T._ D . k2102, A p r i l 12^ 1027)
Order of the Secretary of the Treasury conferring and imposing upon the Commissioner of Customs certain rights, privileges, powers, and duties, providing
for tlie designation of an Acting Commissioner of Customs, and prescribing
the duties of the personnel of the Bureau of Customs
TREASURY DEPARTMENT, April 12, 1927.
T o the Commissioner of Customs, customs officials, and other officials
amd. employ ees ,of the Treasury Department conceimed:
The act entitled "An Act to create a Bureau of Customs and a
^Bureau of Prohibition in the Department of the Treasury," approved
March 3, 1927 (Public, No. 751, 69th Cong.), provides as follows:
[PUBLIC—No. 751—69TH CONGRESS]
fH. R. 10729]
An Act to create a Bureau of Customs and a Bureau of Prohibition in the Department of
the Treasury
Be it enacted by the Senate and House of Representatives of the United States
of America in Congress assembled, That there shall be in the Department of the
Treasury a bureau to be known as the Bureau of Customs, a bureau to be
known as the Bureau of Prohibition, a Commissioner of Customs, and a Commissioner of' Prohibition. The Commissioner of Customs shall be at the head
of the Bureau of Customs, and the Commissioner of Prohibition shall be at
348
REPORT ON THE FINANCES
the head of the Bureau of Prohibition. The Commissioner of Customs and theCommissioner of Prohibition shall be appointed by the Secretary of the Treasury, without regard to the civil service laws, and each shall receive a salary at
the rate of $8,000 per annum.
SEC. 2. (a) The Secretary of the Treasury is authorized to appoint, in each of"
the bureaus established by section 1, one assistant commissioner, two deputy
commissioners, one chief clerk, and such attorneys and other officers and employees as he may deein necessary. One of the deputy commissioners of theBureau of Customs shall have charge, of investigations. Appointments under
this subdivision shall be subject to the provisions of the civil service laws, and
the salaries shall be fixed in accordance with the classification act of 1923.
(b) The Secretary of the Treasury is authorized to designate an officer of theBureau of Customs to act as Commissioner of Customs, during the absence or
disability of the Commissioner of Customs, or in the event that there is no Commissioner of Customs; and to designate an officer of the Bureau of Prohibition
to act as Commissioner of Prohibition during the absence or disability of the
Commissioner of Prohibition, or in the event that there is no Commissioner of
Prohibition.
(c) The personnel of the Bureau of Prohibition shall perform such duties as
the Secretary of the Treasury or the Commissioner of Prohibition may prescribe, and the personnel of the Bureau of Customs shall perform such duties
(other than duties in connection with the administration of the national prohibition act, as amended, or any other law relating to the enforcement of the
eighteenth amendment), as the Secretary of the Treasury or the Commissioner
of Customs may prescribe.
SEC. 3. (a) The Secretary of the Treasury is authorized to confer or impos>
upon the commissioner of customs or any of the officers of the Bureau of
Customs any of the rights, privileges, powers, or duties, in respect of the
importation or entry of merchandise into, or exportation of merchandise from,
the United States, vested in or imposed upon the Secretary of the Treasury
by, the tariff act of 1922 or any other law.
(b) The records, property (including office equipment), and personnel of the
Division of Customs are hereby transferred to the Bureau of Customs.
(c) The Division of Customs and the offices of director of customs, assistant,
directors of customs, and director and assistant directors, Special Agency Service of the Customs, are hereby abolished.
SEC. 4. (a) The rights, privileges, powers, and duties conferred or imposed
upon the Commissioner of Internal Revenue and his assistants, agents, and
inspectors, by any law in respect of the taxation, importation, exportation,
transportation, manufacture, production, compounding, sale, exchange, dispensing, giving away, possession, or use of beverages, intoxicating liquors, o r
narcotic drugs, by the national prohibition act, as amended, or any other law
relating to the enforcement of the.eighteenth amendment, are hereby transferred
to, and conferred and imposed upon, the Secretary of the Treasury.
(b) The Secretary of the Treasury is; authorized to confer or impose any of
such rights, privileges, powers, and duties upon the Commissioner of Prohibition,
or any of the officers or employees of the Bureau of Prohibition, and to confer
or impose upon the Commissioner of Internal Revenue, or any of the officers
or employees of the Bureau of Internal Revenue, any of such rights, privileges,
powers, and duties which, in the opinion of the Secretary, may be necessary in
•connection with internal revenue taxes. ^
iSEC. 5. (a) The Secretary of the Treasury is authorized to transfer to theBureau of Prohibition such records, property (including office equipment), and
personnel of the office of the Commissioner of Internal Revenue as may be
necessary for the exercise by the Bureau of Prohibition of the functions vested
in it.
'
(b) The Commissioner of Prohibition, with the approval of the Secretary of
the Treasury, is authorized to appoint in the Bureau of Prohibition such
employees iit the field service as he may deem necessary, but aU appointments
•of such employees shall be m.-ule subject to the provisions of the civil service
laws, notwithstanding the provisions of section 38 of the na:tional prohibition
act, as amended. The term of office of any person who is transferred, under
this section, to the Bureau of Prohibition, and who was not appointed subject
to the provisions of the civil service law.s, shall expire upon the expiration of
six months from the effective date of this act.
SECRETARY OF THE TREASURY
349"
SEC. 6. Any action or decision of the Secretary of the Treasury under the
national prohibition act, as amended, or of any officer upon whom the power
to take such action or make such decision is conferred, shall be subject to the
same review by a court of equity as the action or decision of the Commissioner
of Internal Revenue under such act, as) amended, prior to the effective date, of
this act.
SEC. 7. This act shaU take effect on April 1, 1927.
Approved, March 3, 1927.
I n pursuance of the authority conferred upon the Secretary of the
Treasury by the above act, it is hereby ordered as follows:
I . R I G H T S , PRIVILEGES, POWERS, AND DUTIES CONFERRED OR IMPOSED U P O N
T H E COMMISSIONER OF CUSTOMS
Thiere are hereby conferred and imposed upon the commissioner
of customs, subject to t h e g e n e r a l supervision and direction of the
Secretary of the Treasury, all the rights, privileges, powers, and
duties, in respect of the importation or entry of merchandise into,,
or the exportation of merchandise from, the United States, vested
in or imposed upon the Secretary of the Treasury by the tariff act of
1922, subject to the folio wing, exceptions and conditions:
(1) All regulations shall be prescribed by the commissioner of
customs, with the approval of the Secretary of the Treasury;
(2) Regulations may be waived by the commissioner of customs,,
but only with the approval of the Secretary of the Treasury;
(3) Whenever in the opinion of the commissioner of customs
any question pending for decision is of exceptional importance, he
shall submit the question to the Secretary of the Treasury, and the
decision thereon shall be made by the Secretary of the Treasury and
not by the commissioner of customs;
(4) The ascertainment, determination, and declaration of bounties
or grants under section 303 shall be made by the commissioner of
customs, with the approval of the Secretary of the Treasury;
(5) Any order under section 510 or 511 prohibiting the importation of mer chandise, or instructing a collector to withhold delivery of
merchandise shall be made by the commissioner of customs, with
the approval of the Secretary of the Treasury;
(6) Any decision or instruction,under paragraph (1), (2), or (4)
of subdivision (a) of section 520 shall be made or given by the commissioner of customs, with the approval of the Secretary of the
Treasury;
(7) No claim, fine, or penalty in excess of $10,000 shall be compromised, remitted, or mitigated without the approval of the Secretary of the Treasury;
(8) The authority of the Secretary of the Treasury under section
622, to extend during the continuance of an emergency the time prescribed for the perfoi?mance of any act, shall be exercised only by the
Secretary of the Treasury.
I I . DUTIES OF T H E COMMISSIONER AND ASSISTANT
COMMISSIONER
(1) The commissioner of customs, in addition to the duties imposed upon him under Section I of this order, shall supervise the
360
REPORT ON THE FINANCES
personnel of the Bureau of Customs, including the custoriis field
service and the special agency service.
(2) The Assistant Commissioner of Customs shall assist the Commissioner of Customs in supervising the personnel of the Bureau of
Customs, including the field services, and shall perform such other
duties as the co
@FedFRASER