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ANNUAL REPORT OF THE
SECRETARY OF THE TREASURY
ONJ™ STATE OF THE FINANCES
FOR FISCAL YEARENDEDJUNE 30,1938

ERRATA
Annual Report of the Secretary of the Treasury for 193S

The following statement on the fund account of the adjusted service
certificate fund should be substituted for that n6w appearing on page
93:
•
'
Adjusted service certificate fund, June 30, 1938
FUND ACCOUNT
Appropriations:
•.
To June 30, 1936 (including $2,230,157,956.40 appropriated in the Independent Offices
Appropriation Act, 1937, approved Mar. 19, 1936)
.
.
$3,626,157,956.40
Interest on investments:
To June 30, 1937
i $128,176,582.31
J u l y l , 1937, to June 30, 1938
j
1,469,928.77
_
129,646,511.08
Total---3,755,804,467.48
Payments under Adjusted Compensation Payment Act, 1936, enacted
Jan 27, 1936:
Adjusted service bonds
$1,822,090,350.00
Checks for amounts less than $50
_..
82,815,997. 57
Adjusted service bonds (Government life insurance fund series)
500,157, 956. 40
Total
.
2,405,064,303.97
Checks paid by Treasurer of the United States other than in final
settlement of certificates under the Adjusted Conipensation Payment
Act, 1936, less credits on account of repayments of loans and interest
thereon
-.
1,323,896,986.78
Balance in fund June 30,193b

3.728,961,290.75
26,843,176.73

ANNUAL REPORT OF THE
SECRETARY OF THE TREASURY
ON

THE STATE OF THE
FINANCES
FOR THE FISCAL YEAR
ENDED JUNE 30

1938

UNITED STATES
GOVERNMENT PRINTING OFFICE
WASHINGTON : 1939

For sale by the Superintendent of Documents, Washington, D. C. - - - - - - - - - -

Price 60 cents (Paper)

TREASURY DEPARTMENT
DOCUMENT N O .

Secretary

3096

^50

CONTENTS
Page

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Budget results
Receipts
Sources
-Expenditures
Deficit
:.The public debt
^
Treasury bonds and Treasury notes
.
Treasury bills
United States savings bonds
^
Special issues
Adjusted service bonds
Cumulative sinking fund
Amendment to the Second Liberty Bond Act
General Fund
Securities owned by the United States and proprietary interest in governmental corporations and credit agencies
Securities owned
Proprietary interest in governmental corporations and credit agencies,
Securities guaranteed by the United States
Monetary developments
^
Emergency legislation
Revenue legislation._
Revenue Act of 1937
Domestic and foreign personal holding companies
Nonresident aliens
Trusts
. Revenue Act of 1938
Corporation income tax
Capital gains and losses
Other changes
Sugar Actof 1937
Railroad Unemployment Insurance Act
Other revenue legislation
Estimates of receipts
Legislative enactments affecting revenue estimates
Fiscal year 1939
Income taxes
Miscellaneous internal revenue
Payroll taxes
Customs
Miscellaneous revenues and receipts
Fiscal year 1940
.
Income taxes
Miscellaneous internal revenue
Payroll taxes
Railroad Unemployment Insurance Act
Customs
Miscellaneous revenues and receipts
Estimates of expenditures
l
Bureau of Internal Revenue
Income tax
^
Miscellaneous internal revenue
Social security taxes
Alcohol tax administration
^__
Technical Staff decentralization
Customs

oj/^lhci D

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OONTi|N-fS
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Construction activities
Program under the Public Works Administration
Program under the emergency appropriation acts
Program for other departments
Buildings in the District of Columbia
Treasury activities under the provisions of the Social Security Act
Unemployment trust fund
Collection of taxes
Public health work
Old-age reserve account
Treasury activities under the Emergency Relief Appropriation Acts
Nonfiscal activities
Coast Guard
Public Health Service
Bureau of Narcotics
Changes in organization and procedure

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65
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ADMINISTRATIVE REPORTS OF BUREAUS AND DIVISIONS
Accounts and Deposits, Office of the Commissioner of
Daily statement of the United States Treasury
Combined statement of assets and liabilities of governmental corporations and credit agencies
Securities owned by the United States Government
Contingent liabilities of the United States
Accounting and disbursing of emergency relief funds
Federal savings and loan associations.
Federal home loan banks
Federal land banks
Capital stock
Payments on account of reduction in interest rates on mortgages
and subscriptions to paid-in surplus
Advances to Federal Reserve banks for industrial loans, etc
Appropriations and expenditures under the Social Security Act
Obligations of foreign governments
Austria
Hungary
—
Nicaragua
-—
Receipts from Germany
Army costs
Mixed claims, United States and Germany
Annuities under moratorium agreement
Treasury administration of alien and mixed claims
Mixed Claims Commission: Claims against Germany
War Claims Arbiter
Claims of German nationals
Claims of Hungarian nationals
German special deposit account
Tripartite Claims Commission
Claims against Austria
Claims against Hungary
Claims of American nationals against Turkey
__
Claims of American nationals against Mexico
Railroad obligations
Section 207, Transportation Act, 1920, as amended
Section 210, Transportation Act, 1920, as amended
_
Trust and special funds invested by the Treasury
Adjusted service certificate fund
Civil service retirement and disability fund
Canal Zone retirement and disability fund
Foreign service retirement and disability fund. _
:
Alaska Railroad retirement and disability fund
District of Columbia teachers' retirement fund
Longshoremen's and harbor workers' compensation fund
District of Columbia workers' compensation fund
District of Columbia water fund
^

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CONTENTS
Accounts and Deposits, OflSce of t h e Commissioner of—Continued.
T r u s t a n d special funds invested by t h e Treasury—Continued.
United States Government life insurance fund
Old-age reserve account
Unemployment t r u s t fund
Railroad retirement account
Library of Congress t r u s t fund
National I n s t i t u t e of H e a l t h gift fund
_
National park t r u s t fund
Ainsworth library fund, Walter Reed General Hospital
Pershing Hall Memorial fund
Alien property t r u s t fund
Special funds
Colorado River D a m fund
Advances to reclamation fund
Division of Deposits
Depositary functions
Federal savings and loan associations and Federal credit unions __
Government Losses in Shipment Act
Section of Surety Bonds
Division of Bookkeeping a n d W a r r a n t s
Division of Disbursement
Appointments, Division of
N u m b e r of employees in t h e Treasury D e p a r t m e n t
Retirement of employees
Budget a n d I m p r o v e m e n t Committee
Coast Guard
Enforcement of customs and other laws
Protection to marine commerce a n d life and property
Aviation
Communications
Floating equipment
Ordnance activities
Stations, bases, repair depot, etc
Personnel a n d training
Awards of lifesaving medals and decorations
Legislation
F u n d s available, obligations, and balances
Comptroller of t h e Currency, Bureau of the
Changes in t h e condition of active national banks
S u m m a r y of changes in the national banking system
Administration of unlicensed national banks
Customs, Bureau of
Collections
Volume of business
Entries of merchandise
Vessel, airplane, and highway traffic
Drawback transactions
Appraisement of merchandise
Protests and appeals
L a w enforcement activities
Seizures
Legal proceedings
Fines, penalties, etc
Coordination with other agencies
Smuggling
Customs procedure
Customs Agency Service
Undervaluation
D r a w b a c k investigations
P o r t Examination Commission
Enforcement U n i t . __.
Foreign investigations
Miscellaneous
Customs School of Instruction
Appraisement Unit
Quota control

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CONTENTS

C u s t o m s , Bureau of—Continued.
Miscellaneous—Continued.
Division of Laboratories
Changes in ports and stations
Cost of administration
Engraving and Printing, Bureau of
Enrollment and Disbarment, Committee on
Federal Alcohol Administration
.,
Permit Division
'
Label Examination Division
Statistics and Reports Division
Enforcement Division
Legal Division
Internal Revenue, Bureau of
General
^
Internal revenue collections
Refunds, drawbacks, and s t a m p redemptions
Additional assessments
Cost of administration
Income Tax Unit
Returns
Back taxes
._
Claims and overassessments
Final notices of deficiency (90-day letters)
^
Audit in Washington
^_Audit in t h e
field
Changes in organization and procedure
Miscellaneous Tax Unit
E s t a t e Tax Division.
Tobacco Division
Bituminous Coal and Silver Tax Division
Sales Tax Division
__.
Capital Stock Tax Division
___
„
Processing Tax Division
Alcohol Tax Unit
-^-.^
.-_--_
Enforcement Division
_1
Field Inspection Division
i
.
Laboratory Division
.....
Audit Division
_.
Procedure Division
Alcohol Tax Section of the Office of t h e General Counsel
Accounts and Collections Unit
Taxes under title V I I I of t h e Social Security Act
Tax under title I X of t h e Social Security Act
Taxes under t h e Carriers Taxing Act of 1937
Technical Staff
Office of the Chief Counsel
^
Appeals Division
Civil Division
Interpretative Division
Penal Division
^__
Review Division
Legislation a n d Regulations Division
Intelligence Unit
Work relief projects
----Accounts a n d Collections Unit (miscellaneous tax) project
Alcohol Tax Unit (retail liquor stores) project
Legal Division
Mint, Bureau of the
Institutions of t h e M i n t Service
_-_
Coinage
Bullion deposit transactions
_.
_
Gold operations
Silver operations
__^______
Refineries
----____^_ _.___-.-_
Commemorative coins
_.
Stock of coin a n d monetary bullion in t h e United States_-.

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CONTENTS
Mint, Bureau of the—Continued.
Production of gold a n d silver
Industrial consumption of gold a n d silver
Mint buildings
Appropriations, expenses, a n d income
Monetary Research, Division of
J
Narcotics, Bureau of
Enforcement activities
E x t e n t and trend of narcotic traffic
Printing, Division of
Printing a n d binding
Stationery supplies
D e p a r t m e n t advertising
Engraving work
^
Processing Tax Board of Review
Procurement Division
Public Buildings Branch
Office of t h e Supervising Architect
Office of t h e Supervising Engineer
Combined building program
Program under t h e Public Works Administration
Emergency construction program
Program for other departments
Repair a n d equipment of Federal buildings
Administration and cost of Federal buildings under t h e control of
. the Treasury D e p a r t m e n t
Expenditures
Section of Space Control
Section of Painting a n d Sculpture
Treasury relief a r t project. .'
Branch of Supply
J
Public D e b t Service
1
Division of Loans and Currency
Issue and retirement of securities
United States savings bonds
Individual registered accounts
Claims.
.
_.-_
__...
Safekeeping of securities
Mutilated paper and redeemed currency
*
Register of t h e Treasury
Division of Public D e b t Accounts and Audit
Division of Paper Custody
Destruction Committee
Public H e a l t h Service
Public health work under t h e Social Security Act
Section 601
Section 603
.
Division of Sanitary Reports and Statistics
Division of Domestic Quarantine
Public health engineering
:
Cooperation with other Federal agencies
Works Progress Administration projects
Division of Foreign and Insular Quarantine
National I n s t i t u t e of H e a l t h . . _.__
Division of Biologies Control
Division of Chemistry
Division of Industrial Hygiene
Division of Infectious Diseases.
Division of Pathology
.
.
Division of Pharmacology
.
.
Division bf Public H e a l t h M e t h o d s . . : . . . _ _
Division of Zoology
_ _ ^ _ . . _. ^
^ _ _ _ _.
National Cancer I n s t i t u t e . . .
......L'..
_.'
Division of Venereal Diseases
Division of Marine Hospitals and Relief
...•
Division of Mental Hygiene
.

VII
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VIII

CONTENTS

Public Health Service—Continued.
Division of Personnel and Accounts
Personnel
Financial statement
Research and Statistics, Division of___ J
Savings Bonds, Division of
Secret Service Division
Tax Research, Division of
Treasurer of the United States
War Finance Corporation

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237

EXHIBITS
PUBLIC DEBT

Public issues of Treasury notes and Treasury bonds
Exhibit 1. Offering of 1}^ percent Treasury notes of series E-1938 and 2
percent Treasury notes of series B-1942
Exhibit 2. Allotments, Treasury notes of series E-1938 and series B-1942_ _
Exhibit 3. Offering of 2}i percent Treasury bonds of 1945 and 1% percent
Treasury notes of series C-1942
Exhibit 4. Subscriptions and allotments, Treasury bonds of 1945 and
Treasury notes of series C-1942
Exhibit 5. Offering of 2}^ percent Treasury bonds of 1948
Exhibit 6. Allotments, Treasury bonds of 1948
Exhibit 7. Offering of 2% percent Treasury bonds of 1958-63 and 1>^
percent Treasury notes of series A-1943
Exhibit 8. Allotments, Treasury bonds of 1958-63 and Treasurv notes of
series A-1943
,_.
1

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243
246
247
247 >
248
250

Issues of Treasury bills
Exhibit 9. Inviting tenders for Treasury bills dated July 7, 1937
Exhibit 10. Acceptance of tenders for Treasury bills dated July 7, 1937-.
Exhibit 11. Summary of information contained in press releases issued
in connection with Treasury bills offered during the fiscal year 1938

250
251
251

" United States savings bonds
Exhibit 12. Sale of United States savings bonds of series C continued after
December 31, 1937
^

254

Miscellaneous
Exhibit 13. An act to amend the Second Liberty Bond Act, as amended. _
Exhibit 14. First amendment, August 18, 1937, to Department Circular
No. 368, prescribing general regulations governing full-paid interim
certificates
Exhibit 15. Second supplement, August 18, 1937, to Department Circular
No. 300, prescribing regulations with respect to United States bonds
and notes
Exhibit 16. Third supplement, June 27, 1938, to Department Circular
No. 300, prescribing regulations with respect to United States bonds
and notes
Exhibit 17. Order of the Acting Secretary of the Treasury, April 5, 1938,
authorizing additional officers of the Treasury Department to witness
and certify requests for payment of United States savings bonds and
. adjusted service bonds
.
Exhibit 18. Order of the Acting Secretary of the Treasury, April 6, 1938,
revoking the authority, contained in the order of June 10, 1936, for
certain officers of the Treasury Department to witness and certify
requests for payment of adjusted service bonds

254
254
255
256

257

SECURITIES GUARANTEED BY THE UNITED STATES

Exhibit 19. Section 20 of the United States Housing Act of 1937 guaranteeing principal and interest of obligations of the IJnited States Housing
Authoritv

257

CONTENTS

IX
Page

Exhibit 20, Portions of section 3 of the National Housing Act Amendments
of 1938, relative to the guarantee by the United States of debentures
of the mutual mortgage insurance fund and the housing insurance fund.
Exhibit 21. Section 1105 (c) of the Merchant Marine Act, 1936, as amended
June 23, 1938, guaranteeing principal and interest of debentures of the
Federal ship mortgage insurance fund
Exhibit 22. An act to maintain unimpaired the capital of the Commodity
Credit Corporation at $100,000,000, and for other purposes
Exhibit 23. Offering of J^ percent notes of series C of the Commodity
Credit Corporation
Exhibit 24. Subscriptions and allotments, Commodity Credit Corporation
notes of series C
.

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259
260
261
263

MONETARY DEVELOPMENTS

Exhibit 25. Announcement by the Secretary of the Treasury, February 14,
^1938, with respect to acquisitions of gold by the Treasury Department.
Exhibit 26. Announcement by the Secretary of the Treasury, April 19,
^ 1938, of the discontinuance of the inactive gold account
Exhibit 27. Memorandum of the Secretary of the Treasury, approved by
the President September 14, 1937, relative to newly mined domestic
silver minedfprior to midnight of December 31, 1937
Exhibit 28. Proclamation, December 30, 1937, modifying the proclamation
offDecember 21, 1933, as modified, relating to newly mined domestic
silver
Exhibit 29. Proclamation, April 28, 1938, revoking, except as provided
^therein, the proclamation of August 9, 1934, relating to silver
Exhibit 30. Executive Order No. 7877, April 28, 1938, revoking Executive
orders of August 9, 1934, and November 2, 1934, relating to silver
Exhibit 31. Order of the Secretary of the Treasury, April 28, 1938, revoking
the orders of the Secretary of the Treasury of June 28, 1934, and May
20, 1935, relating to silver, and the Silver Regulations of August 17,
1934, as amended
Exhibit 32. Announcement by the Secretary of the Treasury, April 28,
1938, of the revocation of a proclamation and certain orders and regulations relating to silver
.
.
Exhibit 33. Statement by the Secretary of the Treasury and the Minister
of Finance of China, July 9, 1937, announcing further progress in monetary cooperation between the two countries
Exhibit 34. Statement by the Secretary of the Treasury and the Minister
of Finance of Brazil, July 16, 1937, relative to gold and dollar exchange. .
Exhibit 35. Announcement by the Secretary of the Treasury and the
Minister of Finance of Mexico, December 31, 1937, relative to the pesodollar exchange and silver
Exhibit 36. Statement by the Secretary of the Treasury, March 27, 1938,
that the Treasury will defer continuation of the monthly silver purchase
arrangements with Mexico

263
264
264
264
265
266

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266
267
268
268
268

TAXATION
o

Exhibit 37. An act to amend the stamp provisions of the Bottling in
Bond Act
Exhibit 38. An act to amend section 3336 of the Revised Statutes, as
amended, pertaining to brewers' bonds, and for other purposes
Exhibit 39. An act to amend certain provisions of law relative to the production of wines, brandy, and fruit spirits so as to remove therefrom
certain unnecessary restrictions; to facilitate the collection of internal
revenue taxes thereupon; and to provide abatement of certain taxes upon
wines, brandy, and fruit spirits where lost or evaporated while in the
custody and under the control of the Government without any fault of
the owner
Exhibit 40. Joint resolution to provide for a floor stock tax on distilled
spirits, except brandy
—
Exhibit 41. An act to amend the National Firearms Act
Exhibit 42. Portions of the Sugar Act of 1937 imposing excise taxes with
respect to sugar

269
269

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273
273

CONTENTS
Page

Exhibit 43. An act to impose an occupational excise tax upon certain
dealers in marihuana, to impose a transfer tax upon certain dealings in
marihuana, and to safeguard the revenue therefrom by registry and
recording
Exhibit 44. Major tax rate changes made by the Revenue Acts of 1937 and
1938, and the rates which they superseded, with legal citations and
effective dates

275
280

OBLIGATIONS OF FOREIGN GOVERNMENTS

Exhibit 45. Correspondence exchanged between the Government of the
United States and various foreign governments and statements concerning foreign debts owing to the United States
Exhibit 46. Text of notes delivered to the German Foreign Minister by
the American Ambassador at Berlin, relative to the indebtedness of
Austria to the United States
Exhibit 47. Announcement concerning the proposal of the Hungarian
Government to make payments on account of its indebtedness to the
United States
Exhibit 48. Message from the President of the United States to the Congress, March 28, 1938, concerning the desire of the Hungarian Government to repay its relief loan to the United States without interest
Exhibit 49. Announcement concerning the treaty between the United
States and Nicaragua for adjustment of pending financial questions
Exhibit 50. Agreement with Nicaragua providing adjustment of certain
accounts and refund of income taxes, ratified by the Senate on June 13,
1938
_-_

285
292
294
297
300
301

GOVERNMENT LOSSES IN SHIPMENT

Exhibit 51. An act to dispense with the necessity for insurance by the
Government against loss or damage to valuables in shipment, and for
other purposes
Exhibit 52. Regulations, July 16, 1937, governing the shipment of
valuables pursuant to the Government Losses in Shipment Act
Exhibit 53. Regulations, August 13, 1937, governing claims for replacement of valuables, or the value thereof, shipped pursuant to the Government Losses in Shipment Act
Exhibit 54. First supplement, August 20, 1937, to Department Circular
No. 577, prescribing regulations governing claims for replacement of
valuables, or the value thereof, shipped pursuant to the Government
Losses in Shipment Act
Exhibit 55. Regulations and instructions governing the issue of duplicates
of checks of the United States

302
306
307

311
311

ORGANIZATION AND PROCEDURE

Exhibit 56. Department Circular No. 187, Second Revision, March 24,
1938, prescribing time and leave regulations for the departmental
service
Exhibit 57. Department Circular No. 202, Second Revision, March 25,
1938, prescribing time and leave regulations for the field forces
Exhibit 58. Amendments, May 11, 1938, to Department Circular No. 187,
Second Revision, and Department Circular No. 202, Second Revision__
Exhibit 59. Treasury Department Order No. 18, March 25, 1938, establishing in the Office of the Secretary a Division of Monetary Research and
a Division of Tax Research
:

315
325
328
329

MISCELLANEOUS

Exhibit 60. Section 3 of the act to provide aid to the States in wildliferestoration projects, establishing in the Treasury the Federal aid to
wildlife-restoration fund
1__
,

330

CONTENTS
Exhibit 61. An act to authorize the Secretary of the Treasury to cancel
obligations of the Reconstruction Finance Corporation incurred in supplying funds for relief at the authorization or direction of Congress, and
for other purposes
Exhibit 62. Customs Administrative Act of 1938, amending certain
administrative provisions of the Tariff Act of 1930, and for other purposes.
Exhibit 63. An act to regulate commerce in
firearms
Exhibit 64. Joint resolution extending for two years the time within which
American claimants may make application for payment, under the
Settlement of War Claims Act of 1928, of awards of the Mixed Claims
Commission and the Tripartite Claims Commission, and extending until
March 10, 1940, the time within which Hungarian claimants may make
application for payment, under the Settlement of War Claims Act of
1928, of awards of the War Claims Arbiter
.
Exhibit 65. Announcement of change in the daily Treasury stateixient
beginning July 1, 1938, with respect to the financial transactions of the
Reconstruction Finance Corporation, Commodity Credit Corporation,
and Export-Import Bank of Washington
Exhibit 66. Letter of the Postmaster General to the Secretary of the
Treasury, dated November 22, 1938, certifying extraordinary expenditures contributing to the deficiencies of postal revenues for the fiscal
year 1938

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344

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347

348

TABLES
Explanation of bases used in tables
^
Description of accounts through which Treasury operations are effected__

351
352

RECEIPTS AND EXPENDITURES

General tables
Table 1. Details of receipts, by sources and accounts, for the fiscal year
1938 (warrant and daily statement bases)
Table 2. Details of expenditures, by organization units and accounts, for
the fiscal year 1938 (checlis-issued and daily statement bases)
Table 3. Classified receipts and expenditures, monthly July 1937 to June
1938, and annually for the fiscal years 1937 and 1938, arranged to correspond with the classification shown in the daily Treasury statements
beginning July 1, 1938 (daily statement basis)
Table 4. Public debt receipts and expenditures, by classes, fiscal year 1938
(revised daily statement b a s i s ) . . .
.
^
Table 5. Public debt receipts and expenditures, monthly July 1937 to June
1938, and annually for the fiscal years 1934 to 1938 (daily statement
basis)
._
Table 6. Classified receipts and expenditures for the fiscal years 1932 to
1938, arranged to correspond with the classification shown in the daily
Treasury statements beginning July 1, 1938 (daily statement basis)
Table 7. Receipts and expenditures for the fiscal years 1789 to 1938
(warrant and daily statement bases)
Table 8. Expenditures by major functions for the fiscal years 1931 to 1938
(daily statement basis and classifications of the Bureau of the Budget)
Table 9. Expenditures for recovery and relief classified as to provisions
for repayment, fiscal years 1932 to 1937 combined, fiscal year 1938, and
total to June 30, 1938

354
362

379
396
397
401
410
418
419

Specific receipts and expenditures
Table 10. Expenditures of the several activities of the Treasury Department in each of, the States and Territories, fiscal year 1938,
Table 11. Comparison of detailed internal revenue collections for the
fiscal years 1937 and 1938 (collection basis)._:.
^._.
.
Table 12. Internal revenue receipts, by,tax sources, fiscal years 1916 to
1938 (collectionbasis)_.-._.-..^-___
^.__^___
..___
Table 13. Internal revenue receipts, by States and Territories, fiscal year
1938 (collection basis)

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425
427
430

XII

CONTENTS
Page

Table 14. Expenses of t h e Internal Revenue Service, fiscal year 1938
(checks-issued basis)
Table 15. Computed values of dutiable imports for consumption and computed duties collected, by tariff schedules, fiscal years 1937 and 1938
Table 16. Customs duties (estimated), value of imports entered for consumption, and ratio of duties to value of dutiable imports a n d to value
of all imports, for t h e calendar years 1928 to 1937, a n d by m o n t h s from
J a n u a r y 1937 to J u n e 1938
Table 17. Customs duties (estimated), value of dutiable imports, and ratio
'^ of estimated duties to value of dutiable imports, b y tariff schedules,
for the calendar years 1928 to 1937 and by months from J a n u a r y 1937 to
J u n e 1938
Table 18. Customs statistics, by districts, fiscal year 1938
Table 19. Receipts a n d expenditures and s t a t e m e n t of accounts under the
Social Security Act and | R a i l r o a d i R e t i r e m e n t Act (daily s t a t e m e n t
basis)
Table 20. Amounts appropriated and expended to J u n e 30, 1938, under
authorizations contained in t h e Social Security Act
Table 21. P a n a m a Canal receiptsJand expenditures for t h e fiscal years
1903 to 1938 (warrant basis)

431
436

437

438
442
446
454
455

Miscellaneous
Table 22. Actual receipts for t h e fiscal year 1938, and estimated receipts
for the fiscal years 1939 a n d 1940, by sources
Table 23. F u n d s appropriated and allocated for recovery a n d relief and
expenditures therefrom, as of J u n e 30, 1938
Table 24. Financial s t a t u s of appropriations provided in the Emergency
Relief Appropriation Acts of 1935, 1936, and 1937, as of J u n e 30, 1 9 3 8 - .

456
462
465

PUBLIC DEBT

Public debt outstanding
Table 25. Public debt outstanding J u n e 30, 1938, by issues (revised daily
s t a t e m e n t basis)
Table 26. Description of t h e public debt issues outstanding J u n e 30, 1938
(revised daily s t a t e m e n t basis)
^
Table 27. Interest-bearing debt outstanding J u n e 30, 1938, classified according to kind of security and callable period or payable d a t e (revised
daily s t a t e m e n t basis)
Table 28. Principal of t h e public debt outstanding a t t h e end of each fiscal
year from 1853 to 1938 (revised daily s t a t e m e n t basis)
Table 29. Comparative s t a t e m e n t of the public debt outstanding June 30,
1932 to 1938 (daily s t a t e m e n t basis)
Table 30. Composition of t h e public debt a t t h e end of t h e fiscal years
1916 t o 1937 a n d by m o n t h s from July 1937 t o J u n e 1938 (revised daily
s t a t e m e n t basis)

472
476
487
489
491
493

Public debt operations
Table 31. Public debt retirements chargeable against ordinary receipts
during t h e fiscal year 1938, and cumulative totals from July 1, 1917, to
J u n e 30, 1937 a n d 1938, by sources a n d issues (revised daily s t a t e m e n t
basis)
Table 32. S u m m a r y of transactions in interest-bearing and noninterestbearing securities during t h e fiscal year 1938 (revised daily s t a t e m e n t
basis)
Table 33. Summary of transactions in interest-bearing securities, by form
of issue, during the fiscal year 1938 (revised daily s t a t e m e n t basis)
Table 34. Changes in interest-bearing debt, by issues, during t h e fiscal
year 1938 (revised daily s t a t e m e n t basis)
Table 35. Transactions in noninterest-bearing securities, by issues, during
t h e fiscal year 1938 (revised daily s t a t e m e n t basis)

494
496
499
500
505

CONTENTS

XIII
Page

Table 36. Issues, maturities, and redemptions of interest-bearing securities, exclusive of trust account and other special issues, July 1937 through
June 1938
.
Table 37. Sources of public debt increase or decrease for the fiscal years
1915 to 1938 (daily statement basis)
Table 38. Transactions on account of the cumulative sinking fund during
the fiscal year 1938 (revised daily statement basis)
Table 39. Transactions on account of the cumulative sinking fund for the
fiscal years 1921 to 1938 (revised daily statement basis)
Table 40. Securities retired through the cumulative sinking fund, par
amount and principal cost to June 30, 1938 (revised daily statement
basis)

510
514
516
516
517

Interest on the public debt
Table 41. Interest on the public debt, payable, paid, and outstanding
unpaid for the fiscal year 1938 (revised daily statement basis)
Table 42. Interest paid on the public debt, by issues, for the fiscal years
1936 to 1938 (warrant basis)
Table 43. Amount of interest-bearing debt outstanding, the computed
annual interest charge, and the computed rate of interest, for the fiscal
years 1916 to 1938 and by months from July 1937 to June 1938 (revised
daily statement basis)

517
518

519

Miscellaneous
Table 44. Contingent liabilities of the United States, June 30, 1938
Table 45. Average yield on long-term United States Government bonds,
by months, January 1919 to June 1938

520
523

CONDITION OF THE TREASURY EXCLUSIVE OF PUBLIC DEBT
LIABILITIES

Table 46. Current assets and liabilities of the Treasury at the close of
the fiscal years 1937 and 1938 (revised daily statement basis)
Table 47. Balance in the General Fund of the Treasury at the end of each
month, fiscal year 1938 (daily statement basis)
Table 48. Securities owned by the United States Government, June 30,
1938
ASSETS AND LIABILITIES

OF GOVERNMENTAL
AGENCIES

CORPORATIONS

524
526
527

AND

Table 49. Combined statement of assets and liabilities of governmental
corporations and credit agencies of the United States, as of June 30, 1938_
Table 50. Proprietary interest of the United States in governmental
corporations and credit agencies, as of June 30, 1929 to 1938

530
536

STOCK AND CIRCULATION OF MONEY IN THE UNITED STATES

Table 51. Stock of money, money in the Treasury, in the
banks, and in circulation June 30, 1913 to 1938
Table 52. Stock of money, by kinds, at the end of each
1913 to 1938
Table 53. Money in circulation, by kinds, at the end of
from 1913 to 1938
...__
Table 54. Stock of money, money in the Treasury, in the
banks, and in circulation, by kinds, June 30, 1938

Federal Reserve
fiscal year from
each fiscal year
Federal Reserve
'

538
540
541
542 ^

TAX-EXEMPT SECURITIES

Table 55. Estimated amount of securities outstanding, interest
is wholly or partially exempt from the Federal income tax, June
Table 56. Estimated amount of securities outstanding, interest
is wholly or partially exempt from the Federal income tax,
1913 to 1938, by types of borrowers

on which
30, 1938.
on which
June 30,

543
544

XIV

CONTENTS
MISCELLANEOUS

Table 57. Principal of the funded and unfunded indebtedness of foreign
governments to the United States, the accrued and unpaid interest
thereon, and payments on account of principal and interest, as of
November 15, 1938
.._..
.
Table 58. Net expenditures for Federal aid to States, individuals, etc.
(exclusive of funds allocated for recovery and relief), fiscal years 1920,
1937, and 1938, and amounts appropriated for 1939, by appropriations-.
Table 59. Expenditures made by the Government as direct payments to
States, etc., under cooperative arrangements and expenditures within
States which provided relief and other aid during the fiscal year 1938

Page

548
549
553

PERSONNEL

Table 60. Number of employees in the departmental service of the Treasury in Washington, by months, from June 30, 1937, to June 30, 1938.-__
Table 61. Number of employees in the departmental and field services of
the Treasury on June 30, 1937, and June 30, 1938
Table 62. Number of persons retired, departmental and field services of
the Treasury, August 20, 1920, to June 30, 1938, and number of persons
eligible for retirement but retained, as of June 30, 1938
^

562

Index

563

560
561

SECRETARIES, UNDER SECRETARIES, AND ASSISTANT SECRETARIES
OF THE TREASURY DEPARTMENT FROM MARCH 4, 1933, TO NOVEMBER 15, 1938,1 AND THE PRESIDENT UNDER WHOM THEY SERVED
Term of service
Official
From—

Secretary of the Treasury

To-

President ,

Secretaries of the Treasury

•
Mar. 4,1933
Jan. 1,1934

Dec. 31,1933

William H. Woodin, New York....
Henry Morgenthau, Jr., Nevsr York.

May 19,1933
Nov. 17,1933
May 2,1934

Nov. 16,1933
Dee. 31,1933
Feb. 15,1936

Jan. 29,1937
Nov. 1,1938

Sept. 15,1938

Dean.G. Acheson, Maryland
Henry Morgenthau, Jr., New York.
Thomas Jefferson Coolidge, Massachusetts.
Roswell Magill, New York
John W. Hanes, North Carolina...

Apr.
June
June
Dec.
Feb.
July

Feb. 15,1936

Roosevelt.;
Roosevelt: >'

Under Secretaries
Woodin .
Woodin
Morgenthau
Morgenthau
Morgenthau. _

Roosevelt.^
Roosevelt.
Roosevelt.
Roosevelt.
.—. Roosevelt.

Assistant Secretaries
18,1933
6,1933
12,1933
1,1934
19,1936
1,1938

Dec. 12,1933
Nov. 1,1937
Oct. 31,1938

Lawrence W. Robert, Jr., Georgia.. . Woodin, Morgenthau...
Stephen B. Gibbons, New York.i. Woodin, Morgenthau...
:..
Thomas Hewes, Connecticut
: . . Woodin..
.._
Josephine Roche, Colorado......_i_ Morgenthau __
1—..^..
Wayne C. Taylor, Illinois.'.^Jj..;.2. Morgenthau
John W. Hanes, North Carolina. __ Morgenthau
..

Roosevelt.
Roosevelt.
Roosevelt.
Roosevelt. •.
^Roosevelt..'
Roosevelt.

1 For officials since 1789 see Annual Report for 1932, pp. xvii to xxi, and corresponding table in Annual
Report for 1933.

PRINCIPAL ADMINISTRATIVE AND STAFF OFFICERS OF THE
TREASURY DEPARTMENT AS OF NOVEMBER 15, 1938
OFFICE OF T H E SECRETARY
Henry Morgenthau, Jr
John W. Hanes
Wayne C. Taylor
Stephen B. Gibbons
(Vacant)
Herbert E. Gaston.
Daniel W. Bell
LeRoy Barton
Harold N . Graves
Eugene S. Duffield
Henrietta S. Klotz..
John Kieley
Archie Lochhead
William H. McReynolds
W. N. Thompson
Charles R. Schoeneman
Edwin R. Ballinger
Herbert S. W o o d . . . i
Beriah M. Thompson
Thomas Tarleau
Eugene Sloan
James W. Bryan
Herbert J. Wollner
H. R. Sheppard
Francis C. Rose
Mary E. Switzer
F..A. Birgfeld......
John D. Fox
Frank J. Wilson
L. C. Spangler
James E. Harper
Gabrielle E. Forbush

Secretary of the Treasury.
Under Secretary of the Treasury.
Assistant Secretary of the Treasury.
Assistant Secretary of the Treasury.
Assistant Secretary of the Treasury.
Assistant to the Secretary.
Assistant to the Secretary.
Assistant to the Secretary.
Assistant to the Secretary.
Assistant to the Secretary.
Assistant to the Secretary.
Assistant to the Secretary.
Technical Assistant to the Secretary.
Administrative Assistant to the Secretary.
Assistant Administrative Assistant to the Secretary,
Special Staff Assistant.
Technical Assistant.
Consulting Expert.
Consulting Expert.
.
Legislative Counsel.
Chief, Division of Savings Bonds.
...Chief, Information Section, Division of Savings Bonds.
Consulting Chemist.
Assistant to Assistant Secretary.
Assistant to Assistant Secretary.
Assistant to Assistant Secretary.
Chief Clerk.
Superintendent of Treasury Buildings.
Chief, Secret Service Division.
Chief, Division of Printing.
Chief, Division of Appointments.
Chief, Correspondence Division.
OFFICE OF T H E GENERAL COUNSEL

Herman Oliphant
Huntington Cairns
Edward H. Foley, Jr
Lawrence J. Bernard
__
Bernard Bernstein
Oscar S. Cox
Thomas A. Manning, Jr
Joseph J. O'Connell, Jr
John P. Wenchel
W. R; Johnson

General Counsel.
Assistant General Counsel.
Assistant General Counsel.
Assistant General Counsel.
Assistant General Counsel.
Assistant to the General Counsel.
Assistant to the General Counsel.
Special Assistant to the General Counsel.
Chief Counsel, Bureau of Internal Revenue.
Chief Counsel, Bureau of Customs.
DIVISION OF RESEARCH AND STATISTICS

George C. Haas
Al F . O'Donnell...
Russell R. Reagh
Lawrence H. Seltzer
Anna M. Michener
Charles S. Bell

Director of Research and Statistics.
Assistant Director.
Assistant Director (Government Actuary).
Assistant Director.
Assistant to the Director.
Administrative Assistant to the Director.
DIVISION OF MONETARY RESEARCH

Harry D. White

Director of Monetary Research.

Harold Glasser

Assistant Director.
DIVISION OF TAX RESEARCH

Roy Blough

Director of Tax Research.

Joseph S. Zucker

Assistant Director.
PUBLIC D E B T SERVICE

William S. Broughton
Edwin L. Kilby
Rene W. Barr
Edward G. Dolan.
Byrd LeavellMarvin Wesley
Melvin R. Loafman
Maurice A. Emerson
XVI

Commissioner of the Public Debt.
Assistant Commissioner of the Public Debt.
Deputy Commissioner of the Public Debt.
Register of the Treasury.
Assistant Register of the Treasury.
.•--. Chief, Division of Loans and Currency.
Chief, Division of Accounts and Audit.
Chief, Division of Paper Custody.

PRINCIPAL

ADMINISTRATIVE

AND STAFF

GEEICERS

XVII

BUREAU OF ENGRAVING AND P R I N T I N G
Alvin W. Hall
Clark R. Long
Jesse E. Swigart

Director, Bureau of Engraving and Printing.
Assistant Director (Administration).
Assistant Director (Production).

OFFICE OF T H E COMMISSIONER OF ACCOUNTS AND DEPOSITS
Edward F. Bartelt...
William T. Heflelflnger
Joseph Greenberg.
:..
Guy F. Allen
Robert W. Maxwell

Commissioner of Accounts and Deposits.
Assistant Commissioner of Accounts and-Deposits.
Executive Assistant to the Commissioner.
Chief Disbursing Officer, Division of Disbursement.
Chief Accountant and Acting Chief, [Division of Bookkeeping
and Warrants.
Chief, Division of Deposits.
Chief Examiner, Section of Surety Bonds.

Edward D. Batchelder
Harry R. Schwalm

BUREAU OF THE COMPTROLLER OF THE CURRENCY
Preston Delano
Cyril B. Upham
Eugene H. Gough....
(Vacant)
W. P. Folger
George R. Marble_

.-.

Comptroller of the Currency.
Deputy Comptroller.
Deputy Comptroller.
Deputy Comptroller.
Chief National Bank Examiner.
Chief Clerk.

OFFICE OF T H E TREASURER OF T H E UNITED STATES
William A. Julian
Marion Banister
George O. Barnes
M. E. Slindee
Louis P. Allen

Treasurer of the United States.
Assistant Treasurer.
Executive Assistant to the Treasurer.
Administrative Assistant.
Chief Clerk.

BUREAU OF NARCOTICS
Harry J. Anslinger
Will S. Wood
Malachi L. Harney.

Commissioner of Narcotics.
Deputy Commissioner of Narcotics.
Assistant to the Cominissioner.

OFFICE OF T H E COMMISSIONER OF I N T E R N A L REVENUE
Guy T. Helvering
Milton E. Carter
John R. Kirk
George J. Schoeneman
D. Spencer Bliss
•:.
Stewart Berkshire
Eldon P. King..
A. R. Marrs
Elmer L. Irey
Bertha Wetherton..

Commissioner of Internal Revenue.
Assistant to the Commissioner.
Deputy Commissioner.
Deputy,«Commissioner.
Deputy Commissioner.
Deputy Commissioner.
Special Deputy Commissioner.
Head, Technical Stafl.
Chief, Intelligence Unit.
Special Assistant to the Commissioner.

F E D E R A L ALCOHOL ADMINISTRATION
Wilford S. Alexander
John L. Huntington
H. C. Flanery
Philip E. Buck
John E. O'Neill
A . J . Barrett

Federal Alcohol Administrator.
Deputy Administrator.
Deputy Administrator.
General Counsel.
Assistant General Counsel.
Administrative Assistant.
BUREAU OF CUSTOMS

James H. Moyle
Frank Dow...
Thomas J. Gorman
Harvey A. Benner

Commissioner of Customs.
Assistant Commissioner of Customs.
Deputy Commissioner.
Deputy Commissioner.

BUREAU OF T H E M I N T
Nellie Tayloe Ross

Director of the Mint.

(Vacant)

Assistant Director.
PUBLIC HEALTH SERVICE

Thomas Parran, Jr
Lawrence Kolb
Robert Olesen
L. R. Thompson
Paul M. Stewart
C. E. Waller
S. L. Christian
C. L. Williams.
R. A. Vonderlehr
W. F. Draper
D. S. Masterson
104825—39

_..
2

Surgeon General.
Assistant Surgeon General.
Assistant Surgeon General.
Assistant Surgeon General.
Assistant Surgeon General.
Assistant Surgeon General.
Assistant Surgeon General.
Assistant Surgeon General.
Assistant Surgeon General.
Executive Officer.
Chief Clerk and Administrative Officer.

XVIII

PRINCIPAL

ADMINISTRATIVE

AND STAFF

OFFICERS

UNITED STATES COAST GUARD
Rear Admiral Russell R. Waesche
Capt. Leon C. Covell
Capt. Philip W. Lauriat
..'
Capt. Roger C. Weightman...
Capt. Lloyd T. Chalker...
Capt. (E) Harvey F. Johnson
Comdr. P. F. Roach
Comdr. William J. Keester
Comdr. James F. Farley
.
Comdr. G. U. Stewart...
^
Comdr. Frank J. Gorman.
j.......
Lt. Frank E. Pollio

Commandant.
Assistant Commandant and Chief of Operations.
Inspector in Chief.
Chief Personnel Officer.
Chief Aviation Officer.
Engineer in Chief.
Chairman of Permanent Board.
Chief Supply Officer.
Chief Communications Officer.
Chief Ordnance Officer.
Chief Finance Officer.
Acting Chief Intelligence Officer.

P R O C U R E M E N T DIVISION
Rear Admiral C. J. Peoples
W. E. Reynolds
Harry E. Collins
E. R. Witman
N. Max Dunning
Robert LeFevre __
.1...
W. N. Rehlaender
Louis A. Simon
Neal A. Melick...
Edward Bruce...

Director of Procurement.
Assistant Director, Public Buildings Branch.
Assistant Director, Supply Branch.
Executive Officer, Public Buildings Branch.
. . . . Assistant to Assistant Director, Public Buildings Branch.
Assistant to Assistant Director, Supply Branch.
Administrative Assistant, Supply Branch.
Supervising Architect.
Supervising Engineer.
Chief, Section of Fine Arts.

ADVISORY COMMITTEE ON ARCHITECTURAL DESIGN

(Vacant), Chairman.
Aymar Embury II.

Philip B. Maher.
Henry R. Shepley.
Louis A. Simon.. '. - ^BOARD OF A W A R D S , PUBLIC BUILDINGS BRANCH

F. P. Trott, Assistant Executive Officer, Chairman. James D. Head, Acting Chief Counsel, Legal Section.
Neal A. Mehck, Supervising Engineer. • - . . . John H. Schaefer, Office Manager.
W. C. Noll, Superintendent, Architectural Section. John Weber> Secretary.
Nelson S. Thompson, Chief, Mechanical Engineering Section.
. .
BOARD OF AWARDS, SUPPLY BRANCH

Robert LeFevre, Assistant to Assistant iDirector, R.Ji; Queenin, Chief, Finance Division.
Chairman.
; ..=.W. N. Rehlaender, Administrative Assistant.
STANDING DEPARTMENTAL COMMITTEES
BUDGET A N D . m P R O V E M E N T COMMITTEE
C. R. Schoeneman, Chairman.
F. A. Birgfeld, Vice Chairman.
W. N. Thompson.
George O. Barnes.
Charles S. Bell.
R. L. Harlow.

John H. Schaefer.
. . , . Arthur E. Wilson.
M. E. Slindee.
Mary. E. Switzer.
Fred P. Trott.
E. C. Nussear, Secretary.

C O M M I T T E E ON E N R O L L M E N T AND DISBARMENT
Guy C. Hanna, Chairman.

George D. Carrington.

W. W. Cook.

E. B. Van Veen, Attorney for the Government.
C O M M I T T E E ON P E R S O N N E L

F. A. Birgfeld, Chairman.
(Vacant.)
James E. Harper.
C O M M I T T E E ON CIVIL SERVICE R E T I R E M E N T
F. A. Birgfeld, Chairman.
W. N. Thompson.
James E. Harper.
Frank Dow.
BOARD OF liEVIEW
(Refunds of Processing Taxes)
L. S. Cannon, Chairman.
Percy S. Crewe.
(Vacant), Vice Chairman.
Annabel Matthews.
John W: Edwards.
William Schwartz.
H. Stewart McDonald, Jr.
Temple W. Seay.

DEPARTMENT

THE

November 15.

TREASURY

1938

SECRETARY
OF THE
TREASURV

U N M R SECBCTARV

AOMINISTBATIVE

SPECIAL
SCCRETARy

NARCOTICS

BUREAU OF THE
COMPTROLLER OF
THE CURRENCY

FEDERAL ALCOHOL

DIVISION OF
AND STATISTICS
GOVERNMENT ACTUARY

COMMISSIONER

SECHET SERVICE

,U OF ENGRAVING
SAVINGS

OFFICE OF THE

COMMISSIONER
OF ACCOUNTS
AND DEPOSITS

DISBURSEMENT

DIVISION OF

PUBLIC DCBT
ACCOUNTS AND AUO

CpAi^T 1^

BONOS

LEGAL

DIVISION

ANNUAL REPORT ON THE FINANCES
TREASURY DEPARTMENT,

Washington^ D. (7., January 5, 1939.
SIR: I have the honor to make the following report for the fiscal
year ended June 30, 1938:
BUDGET RESULTS

Receipts
Receipts in general and special accounts amounted to $6,241,700,000
<luring the fiscal year 1938, an increase of $947,900,000 over the
previous year.
R E C E I P T S J, F I S C A L Y E A R S 1929 TO 1938, BY PRINCIPAL SOURCES

1929

1930

1931

1932

1933

1934

CHART 2,

^ Excludes trust accounts.

1935

1936

1937

1938

REPORT OF T H E SECRETARY OF THE TREASURY

The trend in receipts by major sources for the
1938, inclusive, is shown in the chart on page 1.
ceipts for 1937 and 1938 is presented in the table
detailed comparison of internal revenue receipts
on page 425 of this report.

fiscal years 1929 to.
A comparison of r e following. A more
appears in table 11

Receipts by major sources for the fiscal years 1937 and 1938 ^
[In millions of dollars]

Source

Internal revenue:
I n c o m e taxes:
C u r r e n t corporation 2 _
C u r r e n t individual
B a c k taxes
_ . . .
Excess-profits tax

1937

1938

Increase
or decrease (—>

894.3
996.0
258.3
25.1

1,145. 6
1,189. 0
251.6
36.6

251.3
193.0
—6.7
11.5-

T o t a l income taxes (collection basis)
A d j u s t m e n t to daily T r e a s u r y s t a t e m e n t (unrevised)

2,173. 7
-16.2

2, 622.8
11.8

449.1
28.0'

T o t a l income taxes (cash basis)

2,157. 5

2, 634. 6

477.1.

137.5
281. 6
23.9
312.2
281.6
551.9
69.9

139.3
382.2
34.7
294. 5
273.2
567.8
46.2

l.fr
100. &
10.8—17. 7
—8.4'
15.9^
—23.7'

196.5
125.2
36.0
31.5
3 60.7

203.6
89.6
38.5
31.6
53.5

7.1
-36.6
2.5.1
-7.2

449.9

416.8

-33.1

24.6
11.2
19.7
11.6

-.6
L3
1.1
1.7
3.2:
30.6
.2

Miscellaneous internal r e v e n u e taxes:
C a p i t a l stock
Estate
-_Gift..
Distilled spirits a n d wines (including special taxes) 2
F e r m e n t e d m a l t liquors (including special taxes) * —
Tobacco 2
Stamp..
_

_
.

.
.

M a n u f a c t u r e r s ' excise taxes:
Gasoline
A u t o m o b i l e s , t r u c k s , tires, t u b e s , a n d p a r t s or accessories
Electrical energy
L u b r i c a t i n g oils
All o t h e r . .
T o t a l m a n u f a c t u r e r s ' excise t a x e s .

3 13.0

24.0
12.5
20.8
13.3
3.2
30.6
13.2

T o t a l miscellaneous i n t e r n a l r e v e n u e taxes (collection basis)
A d j u s t m e n t to daily T r e a s u r y s t a t e m e n t (unrevised)
_

2,188. 7
-7.6

2, 272. 2
7.3

83.6^
14.8-

T o t a l miscellaneous internal r e v e n u e taxes (cash basis)

2,181. 2

2,279. 5

98.3

.3
265.6
6.1

149.5
593.2
6.2

149.2
327.7'
.1

271.8
-13.4

748.9
11.3

477.1
24.7

Telegraph, telephone, cable, a n d radio facilities, etc
T r a n s p o r t a t i o n of oil b y p i p e line
Admissions
._
Coconut, etc., oils processed 2
B i t u m i n o u s Coal Act of 1937
Sugar Act of 1937
All other miscellaneous

O t h e r internal r e v e n u e taxes:
Carriers a n d their emplovees
Social Security .
_
Unjust enrichment
T o t a l other i n t e r n a l r e v e n u e taxes (collection basis)
A d j u s t m e n t to d a i l y T r e a s u r y s t a t e m e n t (unrevised)
T o t a l o t h e r i n t e r n a l r e v e n u e tax^es (cash basis)
T o t a l i n t e r n a l r e v e n u e taxes (collection basis) .
A d j u s t m e n t to daily T r e a s u r y s t a t e m e n t (unrevised)
T o t a l internal r e v e n u e taxes (cash basis)
Customs
T o t a l i n t e r n a l r e v e n u e taxes a n d c u s t o m s (cash b a s i s ) . - . .

Footnotes at end of table.

''...

258.4

760.2

501.8 -

4, 634. 3
-37.2

5, 643. 8
30.5

1,009.567. r

4, 597.1
486.4

5,674. 3
359.2

1,077. 2'
-127.2

5,083. 5

6,033.5

950.0=^'

REPORT OF T H E SECRETARY OF THE TREASURY
Receipts by major sources for the fiscal years 1937 and 1938 ^—Continued
[In millions of dollars]

1937

Source

Miscellaneous receipts;
Proceeds of Government owned securities;
Foreign obligations
All other.
Seigniorage
._._
All other miscellaneous receipts
.

_
...-.

Total miscellaneous receipts (cash basis)
Total receipts, general and special accounts (cash basis)

. .

.6
68.2
48.9
92.6

1938

.6
65.0
35.6
107.0

Increase
or decrease ( - )

-3.2
-13.3
14.4

210. 3

208.2

-2.1

5, 293. 8

6, 241. 7

947.9

' The detail of income taxes, miscellaneous internal revenue taxes, and other internal revenue taxes is on
the basis of internal revenue collections with totals adjusted to basis of daily Treasury statement (unrevised). Customs and miscellaneous receipts are shown on the basis of the daily Treasury statement (unrevised) . General and special accounts are combined. For description of accounts and bases, see p. 351.
2 Collections for credit to trust funds are not included. For details of the collections see note on p. 426.
3 Receipts from jewelry tax, repealed effective June 23, 1936, included in "all other miscellaneous."
NOTE.—Figures are rounded to nearest tenth of a million and will not necessarily add to totals.

A large share of the increase of $947,900,000 in receipts during the
year was accounted for by an increase of $444,300,000 in current corporation and individual income taxes. Receipts from these sources
rose not only because of the high levels of incomes in 1936 and 1937
but also because of the effect of the legislative changes incorporated
in the Revenue Acts of 1936 and 1937. The provisions of the Revenue
Act of 1936 included the undistributed profits tax, the subjection of
dividends to normal taxes, and an increase in surtax rates on individual
incomes; and the Revenue Act of 1937 contained provisions which
concerned mainly the prevention of tax avoidance. The increase of
$476,900,000 in taxes which first became effective during the fiscal
year 1937, viz, social security taxes and taxes upon carriers and their
employees, imposed by the Carriers Taxing Act of 1937, accounted for
more than half of the total increase in receipts. A detailed classification
of receipts from social security taxes appears in table 19 on page 446o
Other significant changes in receipts were the increases of $100,600,000
in the collections from estate taxes and $15,900,000 from tobacco taxes.
The $30,600,000 collections from taxes imposed by the Sugar Act of 1937
and the $3,200,000 collections from taxes imposed by the Bituminous
Coal Act of 1937 constituted new sources of revenue during the fiscal
year 1938.
The largest decrease occurred in customs receipts as a result of a
substantial contraction of imports during the last 6 months of the
fiscal year 1938 compared with the corresponding period during the
previous year. Other sizable decreases occurred in the collections from
excise taxes on automobiles, etc., stamp^taxes, and taxes on distilled
spirits and wines.

REPORT OF T H E SECRETARY OF THE TREASURY

Sources.-r-As is regularly the case, the bulk of ordinary receipts in
1938 was derived from relatively few sources. As shown by data in
the table on page 2, 86 percent of ordinary receipts came from customs
and the following eleven tax sources, arranged in order of magnitude:
Current individual income; current corporation income; social security;
tobacco; estate; distilled spirits and wines; fermented malt liquors;
gasoline; carriers and their employees; capital stock; and automobiles,
trucks, tires, tubes, and parts or accessories. Among primary sources
of revenue, the individual and corporation income taxes, both on
current and back account, and the estate and capital stock taxes
yielded approximately $3,107,700,000 or almost one-half the total
receipts.
The proportion of receipts derived from income and related taxes on
individuals and corporations has increased greatly since 1934, while
the proportion derived from commodity levies in the aggregate, including the customs, has decreased. The commodity levies were, of course,
increased by collections from the processing taxes in 1934 and 1935
but have declined in relative importance even since 1936. These
shifts resulted partly from changes in the general business situation,
which affect income tax receipts more sharply than receipts from
relatively stable consumption sources; and partly from revenue law
changes involving, among other things, heavier direct taxation on
individual incomes and estates.
Individual and corporate income taxes, which constituted from onehalf to three-fifths of total receipts in 1932 and prior years, constituted
41 percent of total receipts in 1938. Social security taxes, which were
first collected during the fiscal year 1937, constituted almost 10 percent
of total receipts in 1938. The estate tax, which constituted 6 percent
of total receipts in 1938, contributed a larger absolute amount than
in any prior year. Miscellaneous receipts, not in the main of tax
origin, which had large significance in the decade or more when the
Government was realizing upon its war investments and loans, have
been comparatively small in the past few years.
Expenditures
Total expenditures of the Federal Government under general and
special accounts amounted to $7,691,000,000 in the fiscal year 1938, a
decrease of $855,000,000 from the previous year.
The table that follows shows in summary form the major changes
in expenditures between the fiscal years 1937 and 1938. The trend
in total expenditures and in the principal classes of expenditures for
recent years is shown in the chart on page 6, and in greater detail
in table 8, page 418. Classifications are on a functional basis and are
directly comparable from year to year.

REPORT OF T H E SECRETARY OF THE TREASURY
Expenditures by major functions, fiscal years 1937 and 1938 ^
[On basis of daily Treasury statements as reclassified on July 1, 1938, and of classifications of the Bureau
of the Budget. In millions of dollars]

1937

Class

1938

Increase or
decrease

(-)
Ordinary:
Legislative, judicial, and civil establishments.
National defense. . .
.
Veterans' pensions and benefits
Interest on the public debt Refunds of receipts
Agricultural adjustment program
Social security
Railroad retirement
Government employees' retirement funds
Other (settlement of war claims. Commodity Credit Corporation
losses, etc.)
Total
Public works:
Public highways
Tennessee Valley Authority
_
Reclamation..
Rivers and harbors, improvement
Flood control
Public buildings
Grants to public bodies, including administration
Other

__
.
.

Total
Unemployment relief:
Direct relief
Work relief
Civilian Conservation Corps

Total

_
„

. . . . . .

Loans and subscriptions to stock, etc. (net)
Debt retirement.
Total expenditures

689
895
1,128
866
56
527
448
6
47

712
980
572
926
100
362
678
145
73

23
85
-556
60
44
—165
230
139
26

4,663

4,646

-17

351
42
52
148
45
76
273
115

237
42
65
98
61
77
190
110

-114

1,102

880

-222

184
1,957
386

154
1,516
326

-30
-441
-60

2,527

1,996

-531

150
104

104
65

-46
-39

8,546

7,691

-855

13
-50
16
1
-83
-5

1 Classification includes both general and emergency funds.

Table 3, page 379, presents a comparison of expenditures on the
basis of the daUy Treasury statement as reclassified on July 1, 1938.
Recovery and relief expenditures are classified as to provisions for
repayment in table 9, page 419.
The decrease of $17,000,000 in the ordinary expenditures of the
Government included a net decrease of $556,000,000 in. the expenditures for veterans^ pensions and benefits, which was due principally
to the completion in 1937 of the transfers to the adjusted service
certificate fund for the veterans' adjusted compensation payment.
Expenditures for national defense increased by $85,000,000, including
expenditures for the construction of naval vessels, aircraft, and subsidiary works to meet provisions of the naval treaties of 1922 and 1930.
The increase in expenditures for refunds of receipts was accounted
for largely by the return, authorized by the act approved August 24^
1937, of $41,000,000 of taxes collected under title I X of the Social
Security Act to the thirteen States which enacted in 1937 an approved
unemployment compensation law.

REPORT OF THE SECRETARY OF THE TREASURY
The increase in social security expenditures of $230,000,000 included
an increase of $122,000,000 in transfers to the old-age reserve account.
Expenditures for railroad retirement, which increased $139,000,000,
consisted mainly of transfers to the railroad retirement account,
which were begun in July 1937 and made monthly thereafter. The
table on page 446 shows the expenditures and also the receipts under
the Social Security and Railroad Retirement Acts for the fiscal
years 1936 to 1938 and monthly durmg 1938.
EXPENDITURES, FISCAL YEARS 1929 TO 1938, BY PRINCIPAL CLASSES
"DOLLARS
Billions

DOLLARS"
Billions
D^bi

]

Ro-tiro-mant

Loans a n d Subscriptions
t o Stock, ate.

y / i Un9.mpl0ymQ.nt Rz.li<2.f
^

Public Works
Bonus Pr<i,paymQ,nt
Ordinary

Expz.nditur^s

''Other" ordinary expenditures increased $97,000,000 over the
previous year. This increase was due mainly to the appropriation of
$94,000,000 to the Commodity Credit Corporation in the Deficiency
Act of June 25, 1938, to restore capital which had become impaired
as a result of its operations, as provided by the act approved March
8, 1938.
The decrease of $222,000,000 in pubhc works expenditures was
accounted fbr by decreased expenditures for pubhc highways, for
improvement of rivers and harbors, and for grants to pubhc bodies.
Expenditures for unemployment relief declined by $531,000,000,
mainly as a result of a decrease in expenditures of the Works Progress
Administration of $424,000,000.

REPORT OF THE SECRETARY OF THE TREASURY

Loans and subscriptions to stock, etc. (net), decreased $46,000,000
^over the previous year. Details with respect to revolving fund payfments and collections are shown in the table on page 464.
Public debt retirements amounted to $65,000,000 in the fiscal year
1938. A detailed discussion of public debt operations and expenditures is presented below.
Deficit
The deficit for the fiscal year 1938, in general and special accounts,
amounted to $1,449,600,000. If pubhc debt retirements are deducted,
the net deficit for the year amounted to $1,384,200,000. This
flGompares with a net deficit of $3,148,600,000 for the previous year.
THE PUBLIC DEBT

The gross public debt outstanding at the close of the fiscal year
1938 ^amounted to $37,164,700,000, an increase of $740,100,000 since
June 30, 1937. This is the smallest annual increase in the gross debt
:since .the fiscal year 1931, and is accounted for as follows:
'Excess'of-expenditures-_
._
$1,524,713,050.28
Less:
Public debt retirements included in expenditures
$65,464,950.00
Excess of receipts over expenditures in trust and other special accounts,
excluding retirements of national bank notes
381,665,532.81
JEleduction in General Fund balance
337,555,984.31
784,586,467.12
increase in gross public debt

740,126,583.16

Although the gross public debt increased during the year, the
.amount of interest-bearing public issues decreased $341,800,000.
^Special issues to Government agencies and trust funds increased
;:$1,117,700,000 during the year.
The net changes during the year in the various classes of securities
which constitute the outstanding debt are shown in the two tables
'Which follow, classified as to public and special issues. The first
stable presents a comparison of the amounts outstanding at the be;giiming and at the end of the year, and the second shows, in summary
:form, the issues and maturities or redemptions of the interest-bearing
debt. The various classes of securities which made up the outstandmg debt during the years 1932 to 1938 are shown in the table on
]page 491 of this report.

REPORT OF THE SECRETARY OF THE TREASURY
Comparison of public debt outstanding June 30, 1937 and 1938, by classes
[On basis of daily Treasury statements (unrevised), see p. 351]
June 30, 1937

June 30, 1938

Increase or decrease ( - )

Interest-bearing:
Public issues:
Bonds:
Pre-war and postal savings bonds..
$197,780,860.00
$196,759,920. 00
-$1,020,940.00'
Treasury bonds
19,935, 749,800.00 21,846,029,950. 00
1, 910,280,150.00
1 799, 648,901. 77 1 1, 237,672,854. 05
United States savings bonds..
438,023,952. 28
388, 574,650.00
318,701, 250.00
-69,873,400.00Adjusted service bonds of 1945
21,321, 754, 211. 77 23, 599,163,974.05
2,277,409, 762.28
Total bonds
10, 617, 241, 250. 00 9,146,922,950.00 -1,470,318,300.00Treasury notes
2,303,094,000.00
1,154,164,000.00 -1,148,930,000.00'
Treasury bills
Total public issues...
Special issues:
Adjusted service bonds, Government
life insurance fund series
Treasury notes
---.-...
Certificates of indebtedness. _
Total special issues
Total interest-bearing debt
Matured debt on which interest has ceased
Debt bearing no interest
Total gross debt
Balance in General F u n d . .

34,242,089,461. 77 33, 900,250,924. 05

-341,838,637.72'

500,157,956.40
1, 277,717,000.00
897,800,000.00

569, 750,000.00'
547,905,000. Oa

500,157,956.40
707,967,000.00
349,895,000.00

2, 675, 674, 956. 40

1,117, 655,000.00^

35,800,109,418.17 36, 575,925, 880.45
118,529,815. 26
141, 362,460. 26
505,974,498.86
447,451, 974. 74

1,558,019,956. 40

775,816,462. 28
22,832,645. Oa
-58, 522, 624.12

36,424,613,732.29
2, 553,473,897.31

37,164,740,315. 45
2,215,917,913.00

740,126, 583.1&
-337, 555,984.31

Gross debt less balance in General Fund_ 33,871,139,834. 98 34, 948,822,402.45

1, 077, 682, 567.47

' Proceeds of sales plus earned accruals less redemptions. For full account of sales, see p. 14.

Issues and maturities and redemptions of interest-bearing debt, fiscal year 1938
[On basis of daily Treasury statements (unrevised), see p. 351]
Interest-bearing debt

Issues

Public issues:
Pre-war and postal savings bonds
Treasury bonds
United States savings bonds...
Adjusted service bonds of 1946
Total bonds
Treasury notes
Treasury bills

$1, 910, 602, 550.00
1 604, 653, 947. 53
12, 760,800.00

1...

Maturities and
redemptions

$1,020,940.00322,400.0066, 629,996. 26
82,624,200.00'

2, 428,007,297. 53
1. 275, 755,000.00
3, 757, 949,000. 00

150, 597, 536. 252, 746,073, 300. OO'
4, 906,879,000. Oa

Total public issues

7,461, 711, 297. 53

7,803, 549,836.25

Special issues:
Treasury notes...
Certificates of indebtedness

702, 616.000. 00
1,465, 870,000. 00

132,865,000.00907, 966,000.00"

Total special issues

2,158, 485,000.00

1,040, 830,000. 00-

Grand total

9, 620,196, 297. 53

8,844,379,835.25-

» Proceeds of sales plus earned accruals.

The composition of the interest-bearing debt outstanding, by types
of obligations, monthly, January 1931 to June 1938, in amounts and
in percent of the total, is shown in chart 4 on page 9. The various
maturities, by calendar years, of the interest-bearing debt outstanding
on June 30, for the years 1933, 1935, 1937, and 1938 are shown in
chart 5 on page 11.

REPORT OF T H E SECRETARY OF T H E TREASURY

COMPOSITION OF THE INTEREST-BEARING PUBLIC DEBT OUTSTANDING, BY TYPES OF
OBLIGATIONS, MONTHLY, JANUARY 1931 TO JUNE 1938
1931
DOLLARS
Billions

1931

1932

1933

1934

1935

936

1937

1938
• DOLLARS
Billions

1936

1937

1938

PERCENTAGE COMPOSITION OF THE INTEREST-BEARING PUBLIC DEBT
OUTSTANDING, MONTHLY, JANUARY 1931 TO JUNE 1938
1931

1932

1933

1934

1935

1936

193 1

1932

1933

1934

1935

1936

1937

1938

19 38

CHART 4,

" NOTE.—United States savings bonds and adjusted service bonds included with Treasury bonds. Securities issued to Government agencies and trust funds include all such special obligations, whether in the
form of bonds, notes, or certificates of indebtedness.

REPORT OF THE SECRETARY OF T H E TREASURY

The computed annual interest charge, on the basis (unrevised) of
the interest-bearing debt outstanding at the beginning and at the end
of the year, increased from $924,275,241 to $947,084,058, and the computed average rate of interest increased from 2.582 to 2.589 percent.
Actual expenditures for interest during 1938 amounted to $926,280,714.
The interest due and payable on the various classes of securities
during 1938 and the amounts paid and outstanding unpaid are shown
in the table on page 517. The interest paid on the public debt, by
issues, for the years 1936 to 1938 are shown in the table on page 518The course of the interest-bearing debt outstanding and of the computed rate of interest thereon is shown from January 1921 throughi
June 1938 in chart 6 on page 13, and from June 1916 through June
1938 in table 43 on page 519.
The open market operations during the year included: (1) Theoffering of three series of Treasury bonds and four series of .Treasuiy
notes, (2) weekly offerings and redemptions of Treasury bills, and.
(3) the sale of United States savings bonds.
Treasury bonds and Treasury notes
The major public debt operations involving Treasury bonds and
Treasury notes were carried out on the four regular tax-payment
dates. All offerings were for refunding purposes except the December offerings of bonds and notes which were for both cash and exchangeFour series of Treasury notes maturing during the year and the series
maturing on September 15, 1938, were refunded. These operationsare summarized in the following table:
Quarterly financing during the fiscal year 1938
Quarterly
date
S e p t . 16,1937

D e c . 16,1937

Issue

Amount

1}4 percent T r e a s u r y notes, series E-1938, d u e D e c . 16, 1938:
I n exchange for Z}4 percent T r e a s u r y notes of series
A-1937, m a t u r i n g Sept. 15,1937
2 percent T r e a s u r y notes, series B-1942, d u e Sept. 15, 1942:
I n exchange for d}4 percent T r e a s u r y notes of series
A-1937, m a t u r i n g Sept. 16,1937
2 H percent T r e a s u r y b o n d s of 1946, d u e D e c . 15, 1945:
I n exchange for 2 % percent T r e a s u r y notes of series A-1938,
m a t u r i n g F e b . 1, 1938
$247, 330, 300
F o r cash
_
_
293, 513,250

$433,460, 900342,143, 30O'

540,843, 550'
1 ^ percent T r e a s u r y notes, series C-1942, d u e D e c , 15,1942:
I n exchange for 2 % percent T r e a s u r y notes of series A-1938,
m a t u r i n g F e b . 1,1938
_
F o r cash
_

13,339, 500
219,035, 700
232,375, 200'

M a r . 15,1938
J u n e 15,1938

2}4 percent T r e a s u r y b o n d s of 1948, d u e Sept. 15, 1948:
I n exchange for 3ipercent T r e a s u r y notes of series C-1938,
m a t u r i n g M a r . 15, 1938.._.
2% percent T r e a s u r y b o n d s of 1958-63, d u e J u n e 16, 1968-63:
I n exchange for 2J4 percent T r e a s u r y notes of series B-1938,
m a t u r i n g J u n e 15,1938
__
I n exchange for 2 H percent T r e a s u r y notes of series D-1938,
m a t u r i n g Sept. 16,1938

450. 978,401>
571, 736,200
347,044,400
918, 780, 60&

I H percent T r e a s u r y notes, series A-1943, d u e J u n e 16, 1943:
I n exchange for 2J4 percent T r e a s u r y notes of series B-1938,
m a t u r i n g J u n e 15, 1938
I n exchange for 2 H percent T r e a s u r y notes of series D-1938,
m a t u r i n g Sept. 15, 1938

36,142, 600
231, 633,000
207, 775, 60O
3, 186, 357, 660

EEPORT OF THE SECRETABY OF THE TREASURY
MATURITY, BY CALENDAR YEARS, OF THE INTEREST-BEARING PUBLIC DEBT
OUTSTANDING »

DOLLARS"
Billions

A s of J u n e

"DOLLARS
Billions

1933

"39

1933

i i I III
49

'53

'55

57 '

'61

'63

'5!

'53

'57

'61

'63

As of June. 30
10-3-7

n0
\ \
1933

'35

kilitiiltl Il

'39

'41

'43

'45

'47

'49

'5!

'53

'55

'59

1 Exclusive of consols, postal savings bonds. United States savings bonds, adjusted service bonds, and
special obligations issued to governmental trust funds and agencies. Certificates of indebtedness are
included with Treasury notes.

REPORT OF T H E

SECRETARY OF T H E

TREASURY

Quarterly financing during the fiscal year 1938—Continued
BECAPITULATION

Treasury bonds Treasury notes

Issued
For cash _
.
In exchange..
Total

Total

$293, 513,250
1, 617,089, 300

$219,035, 700
1,056, 719, 300

$512,648,950
2, 673,808, 600

1,910,602,650

1, 276, 765,000

3,186, 357, 650

All official circulars and statements relating to these transactions
are included in the exhibits beginning on page 241.
Treasury bills
OfiFerings of Treasury bills were made each week during the year,
some to replace maturing issues and some in anticipation of income
tax receipts due on the regular quarterly tax-payment dates.
At the beginning of the year 46 series of Treasury bills aggregating $2,303,094,000 were outstanding. During the year 66 series
aggregating $3,757,949,000 were issued, and 96 series aggregating
$4,906,879,000 matured. At the end of the year 16 series aggregating
$1,154,164,000 were outstanding. Except for those Treasury bills
issued to mature during quarterly tax-payment date periods. Treasury
bills issued during the early part of the year were for a term of 273
days, and those issued after October 20, 1937, were for a term of 91
days. The highest average rate, computed on a bank discount basis,
for 273-day bills was 0.711 percent for those dated September 8,
1937, the lowest average rate for 273-day bills was 0.362 percent for
those dated October 20, 1937. The liighest average rate for 91-day
bills was 0.146 percent for those dated April 13, 1938, the lowest
average rate was 0.011 percent for those dated June 29, 1938. The
average rate on all bills issued during the year was 0.201 percent, and
the average rate on all matured bills was 0.327 percent.
Further information concerning Treasury bills will be found in
exhibits 9 to 11, beginning on page 250, and in table 36 on page 510.
United States savings bonds
The sale of United States savings bonds continued during the year
without any change in terms or conditions of issue. These bonds,
primarily intended for the service of small investors, are sold on a
discount basis, with a 10-year maturity, but are redeemable before
maturity, at the option of owners, at fixed redemption values. They
are sold over-the-counter at post offices, and by mail on application
to the Treasurer of the United States or to any Federal Reserve bank.
They are issued in denominations of $25, $50, $100, $500, and $1,000,
maturity value, at an issue price at the rate of $75 for each $100
maturity value.

REPORT OF THE SECRETARY OF THE TREASURY

During the fiscal year 1938, sayings bonds with a maturity value of
$650,700,000 were sold, for which cash receipts aggregating $488,000,000 were received by the Treasury. Bonds with a maturity
value of $87,700,000 were redeemed, at the request of owners, at
their current redemption value of $66,900,000.
INTEREST-BEARING DEBT OUTSTANDING i AND COMPUTED RATE OF INTEREST
THEREON, BY MONTHS, JANUARY 1921 TO JUNE 1938
D DLLARS
EJ i l l i b n s

OLLAF
illion 3

if-

/ -

•

^ ^

30.

•J

I n t c r e s t - B e a n n g Dz b t '

F
J

:25

• •

—/

-N ^ ^

20 '

PER
CENT

PER
CENT
4.5

4.5

-"•^

• • • - • . . .

4.0

"""'\^...-...^•^••^%.,
'<

w-'\

3.5

Co m p u t z d if i t e r a s t
1

3.0

3.5'

1^
Ratz^
1

2.5

2.0

3.0

1921

1923

1925

= = 1927 =—=1929

193!

1933

—

••-'••..,.
•

1935

— • • .

1937

2.5

2.0

CHA B T 6

Between March 1, 1935, when the issue was inaugurated, and June
30, 1938, bonds aggregating $1,773,100,000 maturity value were sold,
for which cash aggregating $1,329,900,000 was received by the Treasury. Increase in the redemption value of the outstanding bonds over
their issue price aggregated $25,600,000 to June 30, 1938. During
the same period bonds with a maturity value of $151,500,000 were
redeemed at their current redemption value of $115,000)000, and there
» On basis of daily Treasury statements (unrevised).
104825—39

REPORT OF THE SECRETARY OF THE TREASURY

remained outstanding on June 30, 1938, bonds with a maturity value
of $1,621,700,000 and a current redemption value of $1,240,400,000.
The following statement, on the basis of daily Treasury statements,
revised, summarizes the issues and redemptions of savings bonds by
fiscal years from March 1, 1935, when the sale was inaugurated, to
June 30, 1938:
Issued
Fiscal year

1936 (Mar. 1 to June 30)
1936
1937
1938 Accruals to June 30,1938
Total

Redeemed

Maturity
value

Cash receipts

Maturity
value

$83,422, 726
352, 277,425
686,739,175
650, 707,500

$62, 567,043. 76
264, 208, 068. 76
516,054,398.80
488,030,611.85
25,562,309.25

$707,850
14,971,200
48,040,125
87,732,250

$530,887.6&=
11. 252 714 7636,327,912 26>
66,868,862.76'

151,451,425

114,980,377 25'

1, 773,146,825

1,356,412,432.40

Redemption
value

Sales of savings bonds by months and denominations dming the
year are shown in the following table:
Sales of United States savings bonds, by months and denominations, July 1937 to
June 1938
$25

$50

Month

$100

$500

Total

Maturity value

$1,223,375.00 $1,975,050.00 $6,489,800 $9,433,000
1937—July
5, 756,100
7, 081,000
1, 778,200.00
1,170,475.00
August
5, 294,000 6, 480, 500
September... 1, 092,325. 00 1,635, 950.00
1,763,050.00 5, 529, 700 6,810,500
1,174,975. 00
October
6,886,000
1,765,850.00 6,479, 700
November... 1,179,950.00
6, 796, 500 9, 312,000
December-_. 1,523,450. 00 2,136,450.00
1,721,700.00
8,
732,
700
2,
681,
500.00
13,
685, 500
1938—January
1,546,775.00 2, 242, 700.00 7,043, 200 9, 309,000
February
1,
688,425.00
7,262,000
2,390,800.00
9,487,500
March
1,394,750.00 2,039,850.00
6,442, 200 7,976,000
April
1,285,926.00 1,888, 500.00
5,685, 600 6, 592, 000
May
1,179,700. 00 1,782,150.00 5,498,900
6, 690, 500
June Total

$1,000

16,081,826.00

23,980,050.00

76,010,400

99, 743,500

$31,434,000 $50, 555,225. 0024, 697, 000 40,482,775.0^
20,825,000 35,327, 775.00^
21, 868. 000 37,146,225.00
21,907,000
37, 218, 500.00^
42,411,000 62,179. 400. 00104,036,000 130, 757,400.00^
39,398,000 69, 539, 675.0039,162,000 59,890, 726.00'
31, 956, 000 49, 808,800.00'
28,027,000 43,479,025.0a
28,164,000 43,305,250.00^
433, 875,000 649,690, 776.0^

Cash receipts
Total.

12, 061,368.75

17, 985,037.60

67, 007,800

74,807,626

325,406,250

487,268,081.26

The preceding table is compiled on the basis of the Treasury audit
of original registration stubs representing sales by the Postall Service,
the Federal Reserve banks, and the Treasury Department during the
fiscal year 1938. These figures are not in agreement with those presented elsewhere in this report, as certain proceeds of sales of bonds
with issue dates in one fiscal year are not cleared imtil after the close
of that fiscal year.
For other data concerning savings bonds, reference is made to the
administrative report of the Division of Savings Bonds, on page 231,
and to that of the Division of Loans and Currency, on page 206.

REPORT OF THE SECRETARY OF THE TREASURY

Special issues
Special issues of interest-bearing securities, made for the investment
of trust or other fimds deposited in the Treasury or pursuant to
appropriations for specific purposes, increased $1,117,700,000 during
the year. Total issues aggregated $2,158,500,000 and redemptions
amounted to $1,040,800,000. The increase in the amount of these
issues is due for the most part to investments for the old-age reserve
account and the unemployment trust fund, established by the Social
Security Act.
The transactions in the special issues during the_year are summarized in the following table:
Issues and redemptions of special issues, fiscal year 1938
[On basis of daily Treasury statements (unrevised), see p. 361]
Special issues

Issues

Treasury notes:
Old-age reserve account
Railroad retirement account.Civil service retirement fund.
Foreign service retirement fund
Canal Zone retirement fund - . _
_._.
.
Alaska Railroad retirement fund
Postal Savings System series
. .
Federal Deposit Insurance Corporation
OovftrnmeTit life insurance fund^..._
.

. . .

._._
.

.
_.

Total
Certificates of indebtedness:
Adjusted service certificate fund
Unemployment trust fund
Total
Grand total

„
_. _

_•.

. . .

$395,200,000
81,200,000
161,600,000
731,000
609,000
275, 000
25,000,000
25,000,000
23,000,000

Redemptions

$16,000,000^
72,100,000.'
614,000
251,000
10,000,00©
36,000,00©

702,616, 000

132,865, OOO

32,000,000
1,423,870,000

43,800, OOO
864,165, OOO

1,465,870,000

907,965, OOO

2,158,485,000

1,040,830, OOO

The amount of each class of special issues outstanding on June 30,
1938, is shown in the statement on the public debt, appearing on
page 472.
Adjusted service bonds
Adjusted service bonds amounting to $12,800,000 were issued
during the year, making a total of $1,822,100,000 of such bonds issued
since June 15, 1936. Redemptions of $82,600,000 of these bonds
during the year brought the total redemptions since June 15, 1936,
to $1,503,400,000, leaving $318,700,000 outstanding on June 30, 1938,
Cumulative sinking fund
Credits accruing to the cumulative sinking fund during the fiscal
year 1938 amounted to $577,609,381, which with the unexpended
balance of $618,916,809 brought forward from the previous year
made $1,196,526,190 available for the year. Only $65,232,400 of

REPORT OF THE SECRETARY OF THE TREASURY

this amount was applied to the redemption of the public debt—$83,000
for the retirement of Treasury bonds at par and $65,149,400 for the
redemption of Treasury notes maturing during the year and presented
for cash redemption. To have exhausted all available credits would
have required a corresponding increase in cash offerings without any
net change in the public debt. The unexpended balance of $1,131,293,790 was carried forward to the fiscal year 1939.
Tables presenting the transactions pn account of the fund for 1938
•and since its inception on July 1, 1920, will be found on pages 516
and 517 of this report.
Amendment to the Second Liberty Bond Act
The public debt operations are carried on under the authority of the
Second Liberty Bond Act, approved September 24, 1917, as amended.
Under that act the total amount of bonds that could be outstanding at
uny one time was limited to $25,000,000,000 and the amount of
Treasury notes, certificates of indebtedness, and Treasury bills was
limited to $20,000,000,000, an aggregate of $45,000,000,000 for all
obligations. The act approved May 26, 1938 (se6 exhibit 13, p. 254),
combined under one limitation of $45,000,000,000 the amount of bonds,
notes, certificates of indebtedness, and Treasury bills which may be
outstanding at any one time, and at the same time provided that the
•amount of bonds outstanding should not exceed $30,000,000,000.
GENERAL FUND

The General Fund includes all moneys of the Government deposited
with and held by the Treasurer of the United States including the
moneys covered into the Treasury which can be withdrawn only in
pursuance of an appropriation by Congress. Every receipt of the
Treasury, from whatever source, and every expenditure, of whatever
nature, affect either the assets or liabilities, or both, of the General
Fund shown in the daily statement of the Treasury. The total amount
of the assets over and above the total amount of the liabilities represents the balance in the General Fund available to meet Government
•expenditures.
The assets in the General Fund consist of gold, silver, currency, coin,
unclassified collection items, etc., and deposits to the credit of the
Treasurer of the United States and other Government officers, in
Federal Reserve banks, special depositaries account of sales of Government securities, national and other bank depositaries, foreign depositaries, and the treasury of the Philippine Islands.
The liabilities of the General Fund consist of outstanding Treasurer's
•checks, deposits of certain Government officers composed of balances
-to the credit of the Post Office Department, the Board of Trustees,

REPORT OF THE SECRETARY OF THE TREASURY

Postal Savings System, and postmasters, clerks of courts,
officers, etc., and uncollected items, exchanges, etc.
The balance in the General Fund is classified according to
on gold, seigniorage, and working balance.
The net change in the balance of the General Fund
beginning to the close of the fiscal year is accounted for as

disbursing
increment
from the
follows:

Analysis of the change in the General Fund balance between June SO, 1937, and
June SO, 1938
[On basis of daily Treasury statements (unrevised), see p. 351. For a description of accounts through which
Treasury transactions are effected, see p. 352]
Balance, June 30, 1937
Add:
Ordinary receipts:
General and special funds
Trust funds, increment on gold, etc
Net increase in gross pubhc debt

$2,553,473,897.31
_

6,241,661,226.99
1,727,031,693.30
740,126, 583.16

Total funds available
11,262,293,400.76
Deduct:
Expenditures chargeable against ordinary
receipts:
General and special accounts
$7, 766,374, 277.27
Less public debt retirements
65,464,950.00
• $7, 700,909,327. 27
Trust funds, increment on gold, etc
1,396,944,899. \
Less national bank note retirements
61,478,739. 60
1,345,466,160.49
Total expenditures (excluding retirements of public.debt and national
banknotes)
9,046,375,487.76Balance, June 30,1938

2,215,917,913.00

A comparative analysis of the assets and liabilities and the balance
of the General Fund is shown below for the beginning and close of the
fiscal year. Similar information is presented in greater detail, on
the basis of daily Treasury statements (revised), in the table on page524 of this report.
Current cash assets and liabilities of the Treasury, June 30, 1937 and 1938, and
changes during the year
[On basis of daily Treasury statements (unrevised), see p. 351]
June 30, 1937

June 30, 1938

Increase or.
decrease (—>

GOLD

Assets: Gold

$12,318,172,420.10 $12,962,923,999.12

Liabilities:
Gold certificates outstanding (outside of Treasurv)
_
_
2,903,632,809.00 2,894,024,749.00
Gold certificate fund. Board of Governors,
6,020, 442,436. 78 7,820,450,860. 38
Federal Reserve System
_
10,470,461. 75
9,387, 519. 82
Redemption fund, Federal Reserve notes
156,039,430.93
156,039, 430.93
Gold reserve ^
1, 800,000,000.00 1, 800,000,000.00
Exchange stabilization fund
Total

10, 890, 685,138.46 12,679,902, 660.13

Gold in General Fund
Assets:
Silver
Silver dollars

. . .

1,427, 587,281. 64

$644, 761, 579.02:

-9,608,060. OO
1, 800,008,423. 60
-1,082,941.93-

1, 789, 317,421.67

283,021, 438.99 —1,144,565,842.66'

SILVER

Total
Footnotes at end of table.

1,037,163,305.33
603, 647,170.00

201,967,412. 87
-1,955,630.00

1, 340, 798, 692. 46 1, 640, 810, 475.33

200, Oil, 782.87

835,195,892.46
505,602,800.00

REPORT OF THE SECRETARY OF THE TREASURY

Current cash assets and liabilities of the Treasury, June SO, 1937 and 1938, and
changes during the year—Continued
June 30, 1937

June 30, 1938

SILVER—continued
Liabilities:
Silver certificates outstanding (outside of
$1,305,281,987.00 $1, 508, 062, 253.00
Treasury)
_
Treasury notes of 1890 outstanding (outside of
1,172,022.00
Treasury)
_
1,169,422.00
Total
Silver in General Fund

Increase or
decrease (—)

$202, 780,266.00
-2,600.00

1, 306,454, 009.00

1, 609, 231,676.00

202, 777,666.00

34,344, 683. 46

31, 578,800.33

- 2 , 765,883.13

1, 427,587, 281. 64
34,344, 683.46
401,320, 149.97

283, 021,438.99
31, 578,800.33
612, 772,809.31

-1.144,565,842.65
-2,766,883.13
111,452,669.34

843,380, 462.81
2,661, 673.73

1,588, 811,741.36
2, 832,940.23

746,431,278.65
171,366.50

2,709,294, 151. 61 2,419, 017, 730. 22
165,820, 254.30
203, 099,817. 22

-290,276,421.39
47,279, 562.92

GENERAL FUND

Assets:
In Treasury oflSces:
Gold (as above)
Silver (as above)
Other coin, currency, and bullion
In depositary banks, reserve banks, and treasury of Philippine Islands
Unclassified, collections, etc
Total
Liabilities. _

2, 553,473,897. 31 2,215,917,913.00

Balance in the General Fund
Inactive gold
Balance of increment resulting from reduction in
weight of the gold dollar
Seigniorages
Working balance
Balance in the General Fund

1,086, 787, 223.10

(2)

140,965, 030. 63
141, 900,194. 61
355, 687, 781. 26
446, 038, 793. 66
970,033, 862. 32 1, 627,978,924. 73
2, 553,473,897.31

2, 215,917, 913.00

-337,555,984.31
-1,086,787,223.10
935,163.98
90,351,012.40
657,945,062.41
-337,556,984.31

1 Reserve against $346,681,016 of United States notes outstanding in 1937 and 1938 and $1,172,022 of Treasury
notes of 1890 outstanding in 1937 and $1,169,422 outstanding in 1938. Treasury notes of 1890 are also secured
(by silver dollars in the Treasury.
a Inactive gold account discontinued Apr. 14, 1938, see p. 21.
* This item represents the difi'erence between the cost value and the monetary value of silver bullion
revalued and held to secure the silver certificates issued on account of silver acquired under the Silver Purchase Act of 1934 and under the President's proclamation dated Aug. 9, 1934.

SECURITIES OWNED BY THE UNITED STATES AND PROPRIETARY
INTEREST IN GOVERNMENTAL CORPORATIONS AND
CREDIT AGENCIES

Securities owned
The United States owns various securities representing foreign
obligations, capital stock, bonds, etc., of governmental corporations
and agencies, and indebtedness to the Government by railroads,
farmers, ship owners, and others. As of June 30, 1938, the face value
of these securities amounted to $15,566,304,543.85, a net decrease of
$2,039,718,151.72 from June 30, 1937.
This decrease was chiefly the result of adjustments in the amount of
notes of the Eeconstruction Finance Corporation held by the Treasury,
made in accordance with the provisions of the act of February 24,
1938, which authorized the Secretary of the Treasury to cancel obligations of that Corporation incurred in supplying funds for relief at the
authorization or direction of Congress, and for other purposes. A
copy of this act appears as exhibit 61 on page 331 of this report. Up

REPORT OF THE SECRETARY OF THE TREASURY

to June 30, 1938, notes of the Reconstruction Finance Corporation
held by the Treasury were canceled in the amount of $2,691,307,833.72,
representing expenditures previously made by the Corporation for the
following purposes:
rSecretary of the Treasury:
For capital of home loan banks (sec. 2 of Reconstruction Finance Corporation A c t ) . .
For capital of Home Owners' Loan Corporation (sec. 4 of Home Owners' Loan Act of
1933)
—
Land Bank Commissioner:
For loans to joint stock land banks (sec. 30 (a) of Emergency Farm Mortgage Act of
1933)
For loans to farmers (sec. 32 of Emergency Farm Mortgage Act df 1933; sec. 3 of Federal
Farm Mortgage Corporation Act)
Federal Farm Mortgage Corporation—capital (sec. 3 of Federal Farm Mortgage Corporation A c t ) . . .
Federal Housing Administrator (sec. 4 of National Housing Act)
'Governor of the Farm Credit Administration (sec. 6 of Farm Credit Act of 1933) _ . _ _
•Secretary of Agriculture (for crop loans) (sec. 2 of Reconstruction Finance Corporation
Act; act approved Feb. 4 1933)
.
._
Stock of Commodity Credit Corporation (act approved Apr. 10,1936)
•Stock of regional agricultural credit corporations (sec. 201 (e) of Emergency Relief and
Construction Act of 1932; sec. 84 of Farm Credit Act of 1933; sec. 33 of Farm Credit
Act of 1937)
.Stock of Disaster Loan Corporation (act approved Feb. 11, 1937)
.:
Expenses of regional agricultural credit corporations (sec. 201 (e) of Emergency Relief and
Construction Act of 1932; sec. 33 of Farm Credit Act of 1937)
Relief:
1932:
Governors of States
Municipalities, counties, etc. (sec. 1 (a)-(d) of Emergency Relief and Construction
Act of 1932; sec. 1 (e) of Emergency Relief and Construction Act of 1932 and any
amendatory or supplementary legislation)
1933 (Federal Emergency Relief Act of 1933)
1934 (first paragraph of title II of Emergency Appropriation Act, flscal year 1936)
1935 (Emergency Relief Appropriation Act of 1935)
Expense of 1932 relief advances
—
Net interest paid on above
Total

Amount
$124,741,000.00
200,000,00000
2,600,000 00
145,000,000.00
65,000,000 00
61,521,074.56
40,500,000.00
115,000,000 00
97,000,000.00
7,500,000 00
10,000,000.00
16,317,952.69
280,026,143.70
2,800,623.00
499,997,748.11
600,000,000.00
600,000, OOO 00
126,871.85
33,177,419.82
2,691,307,833.72

The evidences of indebtedness and capital stock of various agencies
acquired by the Reconstruction Finance Corporation in connection
with the above disbursements were transferred to the Secretary of
the Treasury as required by section 1 (b) of the act of February 24,
1938.
A statement of ''Securities owned by the United States Government'' is published in conjunction with the monthly Statement of
the Public Debt of the United States. A summary statement of
these securities as of June 30, 1937 and 1938, will be found on page
71, and a detailed statement as of June 30, 1938, on page 527 of this
report.
Proprietary interest in governmental corporations and credit agencies
The statement of securities owned by the United States is based
upon the face or par amount of the securities held by the United
States. In some instances, however, the funds represented by these
securities have been spent by the respective agencies pursuant to
congressional authorization, and in other cases the funds received
from the Treasury have been augmented by earnings from operations
or interest on investments, etc.
In order to reflect the amount of the Government's interest in
governmental corporations and credit agencies, the Treasury com

REPORT OF THE SECRETARY OF TPIE TREASURY

piles a "Combined statement of assets and liabilities of governmental
corporations and credit agencies of the United States," which is
published in the daily Treasury statement a t the end of each month.
This statement shows the amount and classification of the assets and
liabilities of the various agencies, the privately owned proprietary
interest in such agencies, and the proprietary interest of the United
States. The statement as of June 30, 1938, appears on page 530, and
a summary table of the Government's proprietary interest in such
agencies as of June 30, 1929 to 1938, inclusive, is contained on page
536.
SECURITIES GUARANTEED BY THE UNITED STATES
Certain governmental corporations and agencies are authorized to
issue bonds and other obligations which are guaranteed as to the
payment of principal and interest by the United States. These
bonds and obligations are classified as contingent liabilities of the
United States. They are primarily the obligations of the issuing
agencies, and the assets of such agencies are to be used for their
payment.
During the year additional legislation was enacted authorizing the
United States Housing Authority (September 1, 1937), the housing
insurance fund through the Federal Housing Administrator (February
3, 1938), the Commodity Credit Corporation (March 8, 1938), and the
Federal ship mortgage insurance fund through the chairman of the
United States Maritime Commission (June 23, 1938) to issue obligations guaranteed as to principal and interest by the United States,
and amending the authorization for the issuance of guaranteed obligations of the mutual mortgage insurance fund by the Federal Housing
Administrator (February 3, 1938). The pertinent provisions of such
legislation will be found as exhibits 19 to 22, on pages 257 to 261 of this
report.
The Treasury has made available to the governmental corporations
and credit agencies, authorized to issue obligations guaranteed as to
principal and interest by the United States, all of its facilities for the
issuance, redemption, etc., of public debt obligations of the United
States, so that such corporations and agencies desiring to do so can
arrange to have their obligations issued, redeemed, etc., through
Treasury facilities. As a result of this policy, the Secretary of the
Treasury, on April 25, 1938, on behalf of the Commodity Credit Corporation invited subscriptions for $200,000,000, or thereabouts, of
% percent notes of series C of the Corporation. Copies of the
offering circular and the announcement of subscriptions and allotments are attached as exhibits 23 and 24 on pages 261 and 263.
The' Government's contingent liability on this class of obligations
increased from $4,694,588,883.48 on June 30,1937, to $4,878,133,006.88
on June 30, 1938. A summary statement of these obligations and

REPORT OF THE SECRETARY OF THE TREASURY

certain other contingent liabihties of the United States as of June 30,
1937 and 1938, appears on page 72, and a detailed statement of the
contingent liabilities as of June 30, 1938, will be found on page 520.
MONETARY DEVELOPMENTS

On July 9, 1937, a joint statement was made to the press by the
Secretary of the Treasury and the Minister of Finance of China
announcing further progress in monetary cooperation between the
two countries. I t was stated in part that arrangements had been
made through which the Government of China would purchase from
the United States Treasury a substantial amount of gold; that to aid
the Chinese Government to augment its gold reserves, and in accordance with the terms of the United States Silver Purchase Act of 1934,
the United States Treasury would purchase an additional amount of
silver from the Chinese Government; and that the United States
Treasury would also broaden the scope of the arrangements under
which the Central Bank of China had been enabled, under conditions
safeguarding the interests of both countries, to obtain dollar exchange
for currency stabilization purposes.
The Secretary of the Treasury and the Minister of Finance of
Brazil announced on July 16, 1937, an arrangement whereby (1) the
United States undertook to sell gold to Brazil at such times and in
such amounts as the Brazilian Government might request, up to a
total of $60,000,000; and (2) the United States would make dollar
exchange available to Brazil under conditions safeguarding the interests of both countries, for the purpose of promoting exchange
equilibrium.
'
In pursuance of the policy announced by the Secretary in a statement on December 22, 1936, of taking appropriate action with respect
to net additional acquisitions or releases of gold by the Treasury
Department whenever it is deemed advisable and in the public interest
to do so, the Secretary of the Treasury in September 1937 released
$300,000,000 of gold from the Treasury's inactive account, and established gold certificate credits in like amount in favor of the Federal
Reserve banks, thereby increasing the Treasury's cash deposits in
Federal Reserve banks. The procedure which had been followed since
December 22, 1936, was for the Treasury Department to hold new
acquisitions of gold in an inactive gold account, and not to issue
gold certificates or gold certificate credits against the gold, which had
been the procedure prior to December 22, 1936. On February 14,
1938, the Secretary of the Treasury announced that gold acquired by
the mints and assay offices after January 1, 1938, would be included in
the inactive gold account only to the extent that such acquisitions in
any one quarter exceeded $100,000,000. On April 19, 1938, the

REPORT OF THE SECRETARY OF THE TREASURY

Secretary of the Treasury announced that the inactive gold account
had been discontinued.
The Secretary of the Treasury and the Minister of Finance of
Mexico announced on December 31, 1937, that they had reached a
mutually satisfactory understanding on common problems before the
two treasuries; that arrangements bad been made looking to the continued stability of the peso-dollar exchange and that arrangements
had been made with regard to Mexican silver. On March 27, 1938,
the Secretary of the Treasury stated that in view of the decision of the
Government of the United States to reexamine certain of its financial
and commercial relationships with Mexico, the Treasury would defer
continuation of the monthly silver purchase arrangements with Mexico
until further notice.
On December 30, 1937, the President issued a proclamation modifying the proclamation of December 21, 1933, as modified. This
action extended the period for receipt of newly mined domestic silver
and fixed the deduction for seigniorage and services performed by the
Government on silver mined during the calendar year 1938 at 50
percent, thus permitting the return to the depositor of approximately
64.64 cents per troy ounce.
On April 28, 1938, the President issued a proclamation revoking,,
except as provided therein, the proclamation of August 9, 1934,,
relating to silver. On the same date the President revoked the Executive orders of August 9, 1934, and November 2, 1934, relating to
silver. The Secretary of the Treasury annoimced on the same day
that the orders of the Secretary of the Treasury of June 28, 1934, and
May 20, 1935, and the Silver Regulations of August 17, 1934, as
amended, were revoked. The revoked proclamation and Executive
orders required the delivery to, and directed the receipt by, the
United States mints of silver situated in the United States on August
9, 1934. The revocation of the orders of the Secretary of the Treasury eliminated the restrictions imposed by such orders upon the
importation and exportation of silver. The revoked regulations were
issued imder, and implemented, the revoked proclamation and
orders and prescribed the required reports and records relative to
silver holdings and transactions.
The statements, proclamations. Executive order, etc., referred to,
appear as exhibits 25 to 36 on pages 263 to 268.
EMERGENCY LEGISLATION

During the fiscal year 1938, further appropriations and allocations
of funds were made for the purpose of continuing the Federal program
to furnish relief and to aid recovery.
The United States Housing Authority was created in the Department of the Interior by an act approved September 1, 1937, with a

REPORT OF THE SECRETARY OF THE TREASURY

capital stock of $1,000,000 to be paid in by the Secretary of the
Treasury. The act and its subsequent amendments provided for the
issue of $800,000,000 of obhgations of the Authority guaranteed by the
United States and permitted the Authority to make loans to public
housing agencies to assist in the development of low-rent housing and
slum-clearance projects, to aid such agencies by annual contributions
not exceeding $28,000,000 annually, or as an alternative to such contributions to make capital grants not exceeding $10,000,000 prior to
July 1, 1938, with limitations as to succeeding years.
The Disaster Loan Corporation Act was amended by the act
approved March 3, 1938, to permit the Corporation to make loans on
account of floods or other catastrophes occurring in the years 1936
and 1938, as well as those occurring in 1937.
The Federal Crop Insurance Corporation, with an authorized capital
stock of $100,000,000 to be subscribed by the United States, was
created by title V of the Agricultural Adjustment Act of 1938, approved
February 16, 1938. None of the capital stock authorized was to be
made available during the fiscal year 1938.
By the act approved April 13, 1938, the Reconstruction Finance
Corporation was authorized to make loans to public bodies to aid in
financing projects authorized by law, the loans to be made through the
purchase of securities or otherwise. The authority so granted
terminates on June 30, 1939, or on an earlier date if the President
so determines.
The act of February 24, 1938, directed the Secretary of the Treasury to cancel notes of the Reconstruction Finance Corporation in a
principal amount equal to the outstanding funds of the Corporation
then or thereafter disbursed under certain conditions (grants under
rehef acts and for other purposes for which no provision had been
made for repayment to the Corporation), together with certain expenses incurred by the Corporation and certain interest payments.
The act further provided for a corresponding reduction in the amount
of obligations the Corporation was authorized to have outstanding
at any one time. During the year the Secretary of the Treasury,,
under the authority of this act, canceled approximately $2,691,000,000 of the obligations purchased from the Reconstruction Finance
Corporation, details of which will be found on page 19. On June 30^
1938, the amount of capital stock and obligations that the Reconstruction Finance Corporation was authorized to have outstanding
at any one time was $3,358,700,000, exclusive of certain indefinite
authorizations for which there is no statutory limitation. As of that
date, the Reconstruction Finance Corporation had notes outstanding
aggregating $1,162,565,000, of which $863,692,000 were held by the
Treasury. This figure does not include the original $500,000,000 of
the Corporation's capital stock purchased by the Treasury.

REPORT OF THE SECRETARY OF THE TREASURY

Under an act of Congress approved March 8, 1938, provision
was made to maintain unimpaired the capital of the Commodity
Credit Corporation at $100,000,000, by providing that the Secretary
of the Treasury shall make appraisals of the assets and liabilities of
the Corporation as of March 31 in each year, the value of the assets
to be determined in so far as possible on the basis of market prices at
the time of appraisal. The act also authorized annual appropriations
for contributions to the Corporation to restore any capital impairment. In the event an appraisal establishes the net worth of the
Corporation to be in excess of $100,000,000, such excess is to be
•deposited in the Treasury as a miscellaneous receipt and used to
retire an equivalent amount of the public debt. A copy of the act of
March 8, 1938, appears as exhibit 22 on page 260.
The capital impairment of the Commodity Credit Corporation, as
determined by an appraisal as of March 31, 1938, was $94,285,404.73.
An appropriation in an equivalent amount was contained in the
Second Deficiency Appropriation Act, fiscal year 1938, approved
June 25, 1938, and was paid to the Corporation on June 30, 1938.
The act of March 8, 1938, also provided that the Corporation
could issue and have outstanding $500,000,000 of its obligations
guaranteed by the United States.
Under the joint resolution approved March 2, 1938, there was
:appropriated $250,000,000 which was to be added to, and proportionally increase the specified amounts of the limitations prescribed
under, the appropriation made in the Emergency Relief Appropriation Act of 1937 for relief and work relief.
The Emergency Relief Appropriation Act of 1938 (title I of the
Work Relief and Public Works Appropriation Act of 1938, approved
June 21, 1938) provided direct appropriations for relief and for work
relief on useful public projects for the fiscal year 1939. An appropriation of $1,425,000,000 was made to the Works Progress Administration, together with balances of allocations to the Works Progress
Administration under the Emergency Relief Appropriation Act of
1937 and the joint resolution of March 2, 1938, which remained
unobligated on June 30, 1938. These funds were available for the
following types of projects in the amounts indicated:
Highways, roads, and streets
$484,500,000
Public buildings, parks and other recreational facilities, public utilities, rural electric transmission and distribution systems, transportation facilities, flood control, conservation,
etc
655,500,000
Educational, professional, clerical, recreational, and miscellaneous nonconstruction projects. 285,000,000
Total

1,425,000,000

The amount specified for any of the foregoing classes may be increased by not to exceed 15 percent by transfer of amounts from other
classes. The Works Progress Administrator was authorized to use
in the discretion of the President an amount not in excess of $25,000,000
for the purpose of providing direct relief for needy persons.

REPORT OF THE SECRETARY OF TPIE TREASURY

Title I also provided the following direct appropriations, together
with certain unexpended balances:
Works Progress Administration for the National Youth Administration
Secretary of Agriculture
Department of Interior, Puerto Rico Reconstruction Administration
United States Employees' Compensation Commission
other agencies for administrative expenses
Total

$75,000,000*
176,000,000
6,000,000
3,500,000'
28,405,000'
287,905,000

The Public Works Administration Appropriation Act of 1938 (title
II of the act approved June 21, 1938) continued the Federal Emergency Administration of Public Works until June 30, 1941, and provided an appropriation of $965,000,000 to be made available to such
Administration for projects, the completion of which can be substantially accomplished prior to June 30, 1940.
The table on page 462 summarizes all funds appropriated and allocated for recovery and relief, expenditures therefrom, and unexpended
balances on June 30, 1938. As shown in the table, only $15,038,000
of the $8,656,000,000 appropriated or made available under the
Emergency Relief Appropriation Acts of 1935, 1936, and 1937 remained unallocated on June 30, 1938. A subsidiary table shows the
details of revolving funds from previous loans and payments for current
loans made by Federal lending agencies.
REVENUE LEGISLATION

Revenue legislation enacted during the fiscal year 1938 included the'
Revenue Acts of 1937 and 1938; the imposition of a floor stock tax
on distilled spirits, except brandy, to compensate for the increased
tax on such distilled spirits under section 710 of the Revenue Act of
1938; the Sugar Act of 1937; the Railroad Unemployment InsuranceAct; an amendment to the stamp provisions of the Bottling in Bond
Act; the Marihuana Tax Act of 1937; the exemption of persons
traveling between Puerto Rico and the continental United States
from payment of a stamp tax on steamship tickets; an amendment tosection 3336 of the Revised Statutes, as amended, pertaining to^
brewers' bonds; the removal of certain restrictions relative to the
production of wines, brandy, and fruit spirits; an amendment to the
Bankruptcy Act of 1898 providing for the exemption of the issuance
and transfer of certain securities from stamp tax and also for the
nonrecognition of income arising from the cancelation of indebted-^
ness; and an amendment to the National Firearms Act.
The more important tax rate changes made by the Revenue Acts^
of 1937 and 1938 and the rates which they supersede, together with,
legal citations and effective dates, are shown in exhibit 44, page 280o.

REPORT OF THE SECRETARY OF THE TREASURY

Revenue Act of 1937
The Revenue Act of 1937, approved August 26, 1937, provides for
the following major changes in income taxation:
Domestic and joreign personal holding companies.—With respect to
domestic personal holding companies, the rates imposed are 65 percent
on the first, $2,000 of undistributed adjusted net income plus 75 percent on the amount thereof in excess of $2,000. These rates supersede
the rates under the Revenue Act of 1936 which were graduated from
8 percent on the first $2,000 of undistributed adjusted net income to
48 percent on the amount thereof in excess of $1,000,000.
Important changes are also effected in the definition of personal
holding companies and personal holding company income. Under
the Revenue Act of 1937 the definition of a personal holding
.company is broadened {a) by providing that if in any taxable year
80 percent or more of the total gross income is personal holding
company income the minimum percentage for each subsequent taxable
year shall be 70 percent instead of 80 percent imtil (1) a taxable year
during the whole of the last half of which the corporation does not meet
the stock ownership requirement (namely, that more than 50 percent
in the value of its outstanding stock is owned directly or indirectly by
or for not more than five individuals), or (2) for each of three consecutive taxable years less than 70 percent of the gross income is personal
holding company income; and (6) by providing that the concept of
constructive ownership is to include (1) in the case of an individual,
stock owned by or for his partner, and (2) stock on which a person has
an option or an option to acquire such an option.
In addition to the items included in the definition under the 1936
act, the definition of personal holding company income is changed to
include {a) gains from futures transactions in commodities on or subject to the rules of boards of trade and exchanges (except gains on bona
fide hedging transactions), (6) income from estates or trusts, (c) certain
amounts received under contracts for personal service, {d) certain
amounts received for the use of corporation property, (e) rents constituting less than 50 percent of the gross income; and to exclude certain mineral, oil, and gas royalties.
In the determination of undistributed adjusted net income of personal holding companies, certain deductions formerly allowed are
disallowed in whole or in part under the Revenue Act of 1937. The
deductions so disallowed are: (a) Unlimited deduction for losses from
sale or exchanges of capital assets, (6) 20 percent of the excess of the
adjusted net income over the amount of dividends received from other
personal holding companies, (c) unhmited deduction for charitable
contributions, {d) surtaxes paid within the taxable year under section
102 relating to corporations improperly accumulating surplus, and

REPORT OF THE SECRETARY OF THE TREASURY

(e) expenses and depreciation allocable to the operation and maintenance of property owned or operated by the corporation in excess
of the rent or other compensation received for the use or right to use
the property, unless (1) the rent or other compensation is the highest
obtainable, (2) the property is used in business, and (3) there is
reasonable expectation that the use of the property would result in
a profit.
No distinction for tax purposes was made under the 1936 act
between foreign and domestic personal holding companies. The 1937
act, however, distinguishes foreign from domestic personal holding
companies. A foreign personal holding company is defined as a
foreign corporation receiving at least 60 percent of its gross income
for the taxable year (and at least 50 percent for each subsequent
taxable year) from the sources specified for the domestic personal
holding company, if more than 50 percent in value of its outstanding
stock is o,\yned at any time during the taxable year, directly or indirectly, by or for not more than five individuals who are citizens or
residents of the United States, and until a taxable year during the
whole of which the above stock ownership requirement is not met
or until the expiration of three consecutive taxable years in each of
which less than 50 percent of the gross income is foreign personal
holding company income.
Under the Revenue Act of 1937 each United States shareholder is
required to include in his gross income for the taxable year in which
the taxable year of the company ends, as a dividend, his pro rata share
in the undistributed net income (as defined in Supplement P of the
act) of a foreign personal holding company.
Nonresident aliens.—Section 211 of the Revenue Act of 1936 imposed
a 10 percent flat withholding rate upon the amount received, by nonresident alien individuals not engaged in trade or business within the
United States and not having an office or place of business therein,
from sources within the United States as interest (except interest on
deposits with persons carrying on the banking business), dividends,
rents, salaries, and other annual or periodical sources of income. The
Revenue Act of 1937 amended this section so that if the aggregate
amount received from such sources exceeds $21,600 the regular normal
and surtax rates apply to the net income derived from such sources, but
in no case is the tax to be less than 10 percent of the gross income
from such sources. This change does not apply in the case of a resident of a contiguous country so long as there is in effect a treaty with
such country (ratified prior to the enactment of the Revenue Act of
1937) which provides a lower rate than the 10 percent rate of tax
provided under the Revenue Act of 1936.
Trusts.—The $1,000 personal exemption for trusts is disallowed if
the trust instrument requires or permits the accumulation of any

REPORT OF THE SECRETARY OF THE TREASURY

portion of the income of the trust and there is not distributed an
amount equal to the net income less that portion of the income which,
under the law of the jurisdiction under which the trust is administered,
cannot be considered as income and is not distributable. Every such
fiduciary is required to file a taxable return.
The changes made by the Revenue Act of 1937 are effective for
the taxable years beginning after December 31, 1936, except with
respect to the provisions relating to the foreign personal holduig
companies which became effective for taxable years ending after
August 26, 1937. In view, however, of the enactment of the Revenue
Act of 1938, the changes made by the Revenue Act of 1937 are not
applicable to taxable years beginning after December 31,1937, except
where such changes have been reenacted in the Revenue Act of 1938.
Eevenue Act of 1938
The Revenue Act of 1938, which became law on May 28, 1938,
without the President's approval, makes important changes in the
eorporation income tax and in the treatment of capital gains and
.losses. Also it increases the tax on distilled spirits; repeals certain
excise taxes; imposes an excise tax on certain types of tractors;
reduces the tax on imports of certain seeds; provides for a new inventory method in the case of certain industries; provides for a new
declaration of the value of capital stock every three years; extends
the time from January 1 to July 1, 1938, for liquidation of foreign
personal holding companies without penalty, and facilitates the
liquidation of certain domestic companies; reduces the annual gift
tax exemption; amends the provision relating to personal exemptions
of trusts; broadens the exemption from Federal taxes allowable to
certain insolvent banks; reduces the tax on admissions to any spoken
play sold at theaters at reduced rates; removes the limitation on the
Commissioner's power to enter into closing agreements;'and mitigates
the effect of the statute of limitations.
Corporation income tax.—Under the Revenue Act of 1936 corporations (excepting specified classes) were subject to a normal tax graduated from 8 percent to 15 percent and a surtax on undistributed profits
graduated from 7 percent to 27 percent. The provisions of the
Revenue Act of 1938 relating to taxes on corporations are applicable
only for taxable years beginning after December 31, 1937, and before
January 1, 1940. The act retains the principle of the undistributed
profits tax for corporations with net incomes of more than $25,000.
A tentative tax of 19 percent on the adjusted net income is imposed
on such corporations. This tentative tax is reduced by the sum of
(a) 16K percent of the credit for dividends received and (6) 2K percent
of the dividends paid credit, but not to exceed 2}^ percent of the ad-

REPORT OF THE SECRETARY OF THE TREASURY

justed net income. Corporations with net incomes of $25,000 or
less are taxed at rates graduated from 12}^ percent of the ''special
class net income" (adjusted net income minus credit for dividends
received) not in excess of $5,000 to 16 percent of the amount thereof
in excess of $20,000. To bring about a proper transition between
the tax on corporations with net incomes of $25,000 and less and
those with net incomes of more than $25,000 an alternative tax is
provided in section 13 (d), applicable to corporations with net incomes
of slightly more than $25,000.
The dividends paid credit, allowable to corporations with net
incomes of more than $25,000, includes: (1) the basic surtax credit
comprising (a) the dividends paid out during the taxable year increased by the consent dividends credit (for amounts undistributed
by the corporation to its shareholders but which the shareholders
have consented to include in their income) and reduced by interest
received on certain obligations of the United States and (b) a carryforward (for taxable years beginning after December 31, 1938) of net
operating loss of the preceding taxable year, but not in excess of the
adjusted net income for the taxable year; (2) a 2-year dividend carryover limited to the excess of the basic surtax credit over the adjusted
net income; (3) amounts used or irrevocably set aside to retire certain
indebtedness, provided such indebtedness existed at the close of
business on December 31, 1937; and (4) the excess of any deficit in
the accumulated earnings and profits as of the close of the preceding
taxable year over the credit for net operating losses.
. The 1938 act increases the flat rate of tax from 15 percent to 16K
percent applicable to the following corporations: Banks, insurance
companies, China Trade Act corporations, and domestic corporations
deriving a large portion of their gross income from sources within a
possession of the United States (sec. 251); decreases the rate on
resident foreign corporations; imposes a flat 16K percent rate on mutual
investment companies in lieu of the graduated normal tax and graduated surtax on undistributed profits (the 16K percent rate applies to
''Supplement Q net income" defined as adjusted net income minus,
with certain exceptions, the basic surtax credit; in this respect it is
similar to the normal tax under the 1936 act which applied to net
income after deducting dividends paid); and in the case of corporations improperly accumulating surplus, imposes rates of 25 percent of
the undistributed net income not in excess of $100,000 plus 35 percent
on the amount thereof in excess of $100,000.
Capital gains and losses.—Under the Revenue Act of 1936 only
certain percentages of the recognized capital gains and losses of
individuals, varying according to the period for which assets were
held, were taken into account for tax purposes. (See exhibit 44, p.
280.) Net gains thus taken into account were included in net income
104825—39

REPORT OF THE SECRETARY OF THE TREASURY

and taxed at the regular normal tax and surtax rates. The capital
loss deduction was limited to $2,000 plus capital gains. The Revenue
Act of 1938 divides capital gains and losses into short-term capital
gains and losses and long-term capital gains and losses. Short-term
capital gains and losses are those realized from the sale or exchange
of capital assets held 18 months or less. Long-term capital gains
and losses are those realized from the sale or exchange of capital
assets held for over 18 months. The percentages of gain or loss taken
into account in computing net income are: 100 percent if the capital
assets were held 18 months or less; 66% percent if held for over 18
months, but not over 24 months; and 50 percent if held for over
24 months.
After the computation of the amount of gain or loss to be taken into
account according to the above percentages, such gain or loss from
sale or exchange of capital assets is treated as follows: (1) If assets
are held 18 months or less, gains not offset by allowed losses are
included with other income subject to full normal tax and surtax
rates. Losses are allowed only to the extent of gains on such transactions, but losses disallowed in 1 year (to an amount not exceeding
net income) may be carried forward and applied against gains from
such transactions in the succeeding taxable year; and (2) if assets
are held more than 18 months, net gains are included with other
income subject to normal tax and surtax rates or are segregated and
taxed at 30 percent, whichever method results in lesser total tax.
Net losses are deducted from other net income or 30 percent of such
losses is credited against the tax computed on net income before
deducting the net loss, whichever method gives the greater tax.
The Revenue Act of 1938 makes a significant change in the definition of "capital assets" by excluding therefrom depreciable property
used in a trade or business. Further, losses from securities that
become wortliless during the taxable year are generally treated in
the same way as other losses from sale or exchange of capital assets
instead of being fully deductible as was the situation under previous
law.
The capital gain and loss provisions of the Revenue Act of 1938
are effective for taxable years beginning after December 31, 1937.
Other changes.—Other changes made by the Revenue Act of 1938
include: (1) An increase in the tax on distilled spirits, except brandy.
In order to compensate for this increased tax there is imposed by
Public Resolution No. 114, approved June 16, 1938, an equivalent
floor tax of 25 cents on each proof gallon and a proportionate tax on
all fractional parts of such proof gallon upon all distilled spirits,
except brandy, upon which the internal revenue taxes have been
paid and which on July 1, 1938, were held by a retail dealer in liquors
in a quantity in excess of 250 wine gallons or by any other person.

REPORT OF THE SECRETARY OF THE TREASURY

corporation, partnership, or association, in any quantity and which were
intended for sale for beverage purposes or for use in the production of
any article intended for sale for beverage purposes. (A copy of
Public Resolution No. 114 is shown as exhibit 40, on p. 272.) (2)
The repeal of the excise taxes on certain toilet preparations, furs,
phonograph records, sporting goods, cameras, chewing gum, the
production and refining of crude petroleum, brewer's wort, malt
sirup, sales of produce for future delivery, and matches except fancy
wooden matches; the imposition of a tax on certain tractors used in
combination with a trailer or semitrailer; and the reduction of the
tax on imports of hempseed, perilla seed, and sesame seed. (3) Provision for a new inventory method for income tax purposes in the
case of certain industries with respect to certain raw materials. A
taxpayer whose principal business is producing or processing certain
nonferrous metals, or tanning hides or skins may elect in taking his
inventory as of the close of any taxable year beginning after December 31, 1938, to account such raw materials on the basis of the lastin-first-out method instead of the first-in-first-out method as hitherto
prescribed. (4) Provision in connection with the capital stock tax
for a new declaration of the value of capital stock for the year ended
June 30, 1938, and each third year thereafter. (5) Under the Revenue
Act of 1937, irrespective of the length of time the assets were held,
100 percent of the capital gain recognized from distributions in liquidation of a foreign personal holding company was taken into account
in computing net income, unless such liquidation was completed
before January 1, 1938. The Revenue Act of 1938 extends the benefit of treatment as to long-term capital gains to such liquidations if
completed before July 1, 1938. Further, provision is made for the
nonrecognition of gain or loss in the case of the disposition of property
upon certain exchanges and the receipt of property upon certain
distributions ordered by the Securities and Exchange Commission in
furtherance of the policies of section 11 of the Public Utility Holding
Company Act of 1935. (6) The reduction of the annual gift tax
exemption of $5,000 to $4,000 and the exclusion from such exemption
of gifts in trust. (7) In the case of trusts, provision for a credit of
$100 against net income in lieu of the personal exemption of $1,000.
(8) The amendment of section 22 of the act of March 1, 1879 (20
-Stat. 351; U. S. C , title 12, sec. 570), broadening the exemption from
Federal taxes allowable in the case of certain insolvent banks. (9) In
the case of admissions to any spoken play sold at the ticket office of
theaters at reduced rates, the tax is based upon the price for which the
admission is sold in lieu of upon the regular selling price of such
admission. (10) Removal of the limitation on the power of the Commissioner of Internal Revenue to enter into closing agreements. Formerly the Commissioner could enter into such agreements only if the

REPORT OF THE SECRETARY OF THE TREASURY

taxable period to which the agreement related had already terminated.
(11) The mitigation of the effect of the statute of limitations in certain
cases, such as those in which a determination under the income tax
laws requires the inclusion in gross income or allows the deduction
from gross income in one taxable year of an item which was erroneously included or deducted in another taxable year.
Sugar Act of 1937
The Sugar Act of 1937, approved September 1, 1937, imposes upon
manufactured sugar manufactured in the United States after passage
of the act an excise tax, effective September 1, 1937, to be paid by
the, manufacturer at the following rates: (1) On all manufactured
sugar testing by the polariscope ninety-two sugar degrees, 0.465
cent per pound, and for each additional sugar degree shown by such
test, 0.00875 cent per pound additional, and fractions of a degree in
proportion; (2) on all manufactured sugar testing by the polariscope
less than ninety-two sugar degrees, 0.5144 cent per pound of the total
sugars therein. The act also imposes, in addition to any other tax
or duty imposed by law, under such regulations as the Commissioner
of Customs shall prescribe, with the approval of the Secretary of the Treasury, an import compensating tax as follows: (a) On all manufactured sugar a tax equivalent to the excise tax on domestic manufactured sugar; (6) on all articles composed in chief value of manufactured
sugar, 0.5144 cent per pound of the total sugars therein. Such tax
is to be levied, assessed, collected, and paid in the same manner as a
duty imposed by the Tariff Act of 1930.
A copy of pertinent portions of the Sugar Act of 1937 (Public No.
414) is shown as exhibit 42, on page 273.
Railroad Unemployment Insurance Act
The Railroad Unemployment Insurance Act, approved June 25,
1938, provides that effective July 1, 1939, raihoad carriers and certain related and controlled companies shall not be subject to the
employer's tax under title IX of the Social Security Act. In lieu of
these taxes it provides that every employer, with respect to having
employees in his service, shall pay a contribution equal to 3 percent
of so much of the compensation as is not in excess of $300 for any
calendar month, payable by him to any employee with respect to
employment after Jime 30, 1939. Each employee representative is
also required to pay, with respect to his income, a contribution equal
to 3 percent of the compensation not in excess of $300 per month.
The act provides that the enforcement and collection of the contributions shall be administered by the Railroad Retirement Board and

REPORT OF THE SECRETARY OF THE TREASURY

not by the Bureau of Internal Revenue or any other branch of the
Treasury Department.
Other revenue legislation
The Marihuana Tax Act of 1937, approved August 2, 1937, imposes
certain occupational and transfer taxes with respect to marihuana.
The rates of tax are contained in Public No. 238, shown as exhibit
43, on page 275.
Public No. 651, approved June 16, 1938, amends the National
Firearms Act. The tax provisions are contained in Public No. 651,
shown as exhibit 41, on page 273.
Public No. 400, approved August 28, 1937, exempts persons traveling between Puerto Rico and the continental United States from the
payment of a stamp tax on steamship tickets.
Public No. 620, approved June 15, 1938, amends section 3336 of
the Revised Statutes, as amended, with respect to brewers' bonds.
A copy of Public No. 620, is shown as exhibit 38, on page 269.
Public No. 635, approved June 15, 1938, amends certain provisions
of law relative to the production of wines, brandy, and fruit spirits
so as to remove therefrom certain unnecessary restrictions; to facilitate
the collection of internal revenue taxes thereon; and to provide abatement of certain taxes upon wines, brandy, and fruit spirits where
lost or evaporated while in the custody and under the control of the
Oovernment without any fault of the owner. A copy of Public No.
635, is shown as exnibit 39, on page 270.
Public No. 198, approved July 9, 1937, amending the stamp provisions of the Bottling in Bond Act, is shown as exhibit 37, on page 269.
Pubhc No. 696, approved June 22, 1938, amends the Bankruptcy
Act of 1898 to provide for the exemption of the issuance and transfer
of certain securities from Federal and State stamp taxes, and also to
provide for the nonrecognition of income arising from the cancelation
of indebtedness and for the reduction of the basis of the debtor's
property where there has been a cancelation of indebtedness.
ESTIMATES OF RECEIPTS

The Secretary of the Treasury is required each year to prepare and
submit in his annual report to Congress estimates of the public revenue for the current fiscal year and for the fiscal year next ensuing
(Public No. 129, February 26, 1907). These estimates are now made
in December of each year.
Inasmuch as the tax revenue from practically every major source is
directly dependent, although in varying degree, upon business conditions during the period in respect of which the taxes are levied, it is
necessary to forecast the general business situation for a period end

REPORT OF THE SECRETARY OF THE TREASURY

ing approximately 18 months later. This forecast is based upon the
analysis of a wide variety of financial and other economic data and
includes a forecast of the direction and the magnitude of the movements of industrial production, profits, security and commodity
prices, employment, payrolls, and other indicators of business activity. In view of the well-recognized uncertainty involved in forecasting the various phases of business activity, such forecasts, and the
concomitant estimates of future revenues, may be revised from time
to time to take account of changed economic conditions.
Upon these business forecasts depend the estimates of the aggregate
amounts of corporation and individual incomes as well as the distribution of such incomes among various income classes, and the
volume of consumption and importation of commodities upon which
taxes are levied. Consideration has to be given to the fact that
changes in the various indicators of business activity are not reflected
immediately or in direct proportion in the various sources of revenue.
Thus in periods of rising business activity profits and taxable incomes
rise more than proportionately to the increase in the volume of business
because of the relative inflexibility of certain costs. In addition,
consideration is given to the fact that the increase in the amount of
income tax collections which will result from a given increase in
individual incomes is accentuated under a progressive rate schedule
not only because the individual taxpayer's income is more but also
because the taxpayer pays a larger percentage of the higher income
as income tax.
Changes in business conditions, in the amounts of income, and in
the volume of consumption and importation of commodities are reflected more immediately in the receipts from some taxes than from
others because of the variation in the method of collection of the taxes.
For example, many of the miscellaneous internal revenue taxes are
collected each month on the tax liabilities of the previous month.
However, collections from taxes such as the estate and gift taxes and
the tax under title I X of the Social Security Act are made upon
liabihties of a much earlier period and therefore do not rapidly respond
to changes in general business conditions.
The lag between the time income is received by taxpayers and the
time of receipt of uicome taxes based upon such incomes is particularly important in its effect upon total tax receipts. Thus, in general,
the changes in incomes in the calendar year 1938 will not be reflected
in income tax receipts until the income tax returns are filed on or
before March 15, 1939. Because of the privilege of making quarterly
installment payments of these tax liabilities the collections will be
received throughout the calendar year 1939, thus falling into the
receipts of fiscal years 1939 and 1940. Hence the estimated current

REPORT OF THE SECRETARY OF THE TREASURY

income tax receipts, both corporation and individual, for the fiscal
year 1939 are made up partly from payments on calendar year 1937
incomes and partly from payments on calendar year 1938 incomes.
Similarly, fiscal year 1940 estimates of income tax receipts iaclude
some payments based upon the incomes of each bf the 'calendar years
1938 and 1939.
'
An explanation of the estimates of receipts from each of the major
sources of revenue is presented below. Estimated receipts for the
fiscal years 1939 and 1940 and actual receipts for the fiscal year 1938
are presented in summary form in the table on page 36. Detailed
receipts and estimates are shown in table 22 on pages 456 to 461.
Legislative enactments afecting revenue estimates
A number of statutory changes affecting the revenues were enacted
during the fiscal year 1938. Since these new laws have been summarized in a preceding section of this report, only their effect upon
the revenue estimates will be uidicated at this point.
Income tax receipts in the fiscal years 1939 and 1940 will be affected
by the changes in law enacted by the Revenue Acts of 1937 and 1938.
The former act, effective generally beginning with calendar year 1937
incomes, contained a number of important income tax provisions
designed to prevent tax evasion and avoidance, which changes exert
an upward effect upon the revenues by preventing revenue losses which
might otherwise occur. These changes were only partially reflected
in the fiscal year 1938 income tax receipts but, so far as reenacted by
the Revenue Act of 1938, will be fully reflected in the receipts of the
fiscal years 1939 and 1940.
The Revenue Act of 1938, beginning with calendar year 1938
incomes, imposed major changes with respect to corporation tax rates,
including the treatment of undistributed profits, and capital gains
and losses of individuals. The effect of these statutory changes on
income tax liabilities for relatively low income years such as calendar
years 1938 and 1939 is decidedly less important in determining the
income tax receipts than are the changes in the business situation.

REPORT OF T H E SECRETARY OF T H E TREASURY

Actual receipts for the fiscal year 1938 and estimated receipts for the fiscal years 1939
and 1940
[In millions of dollars]
Actual
1938

General and special accounts
1. Internal revenue:
(1) Income taxes:
Corporation, current
Individual, current
Back taxes
Excess-profits tax

Estimated
1939

Estimated
1940

1,145. 6
1,189.0
251.6
36.6

897.1
922.0
240.0
26.9

776.0
857.9
250.0
19.1

2,622. 8
+11.8

2, 086. 0

1,903.0

2, 634. 6

2,086. 0

1,903.0

5.7

6.5

139.3
382.2
34.7
567.7
567.8
46.2
416.8
117.5

127.0
321.2
26.8
563. 0
565.6
52.3
379.3
137.8

123.4
329.2
33.0
607.3
610.1
58.6
427.2
144.6

2,272. 2
+7.3

2,173.0

2, 333. 4

2,279. 5

2,173. 0

2, 333. 4

514.3
90.1

519.5
91.0

597.8
88.5

604.4
150.1

610.5
109.3

686.3
123.7

Total pay-roll taxes (daily Treasury statement
basis)

754.6

719.8

810.0

Total internal revenue (daily Treasury statement
basis)

5, 674. 3

4, 985. 3

5,052.9

:3. Customs (daily Treasury statement basis)

359.2

335.0

403.9

4. Miscellaneous revenues and receipts (daily Treasury statement
basis)

208.2

199.8

207.6

Total receipts, general and special accounts (daily Treasury
statement basis)

6, 241. 7

5, 520.1

5, 669.3

_.
_

Total income taxes (collection basis)
Adjustment to daily Treasury statement basis
Total income taxes (daily Treasury statement
basis)
-(2) Tax on unjust enrichment (daily Treasury statement
basis)
(3) Miscellaneous internal revenue:
Capital stock tax
_
Estate tax
Gift tax - . . . -Alcoholic beverage taxes
Tobacco taxes
.
Stamp taxes
Manufacturers' excise taxes
Miscellaneous taxes

Total miscellaneous internal revenue (collection
basis).
-Adjustment to daily Treasury statement basis. _
Total miscellaneous internal revenue
Treasury statement basis)

(daily

(4) Pay-roll taxes:
Social Security taxes (Public No. 271, Aug. 14,1935):
Taxes with respect to employment (title VIII).
Tax on employers of eight or more (title IX)
Total Social Security taxes
Carriers Taxing Act of 1937

...

:2. Railroad Unemployment Insurance Act (daily Treasury statement basis)
.

4.9

NOTE.—Figures are rounded to nearest tenth of a million and will not necessarily add to totals. For
'Complete details, see table 22 on pp. 456 to 461.

Miscellaneous internal revenue receipts in the fiscal years 1939 and
1940 will be affected by a number of legislative enactments of the
past year. The revenues will be reduced as a result of the provisions
of the Revenue Act of 1938 effecting the outright or partial termination, with respect to sales after June 30, 1938, of the excise taxes on
.sporting goods, cameras, furs, chewing gum, phonograph records, brew-

REPORT OF THE SECRETARY OF THE TREASURY

er's wort and malt, crude petroleum, sales of produce for future delivery,
matches, and toilet preparations, and by the provision allowing a
redeclaration of corporation capital stock values. On the other
hand, the revenues will be iacreased by the higher tax rate on distilled
spirits other than brandy and the accompanying floor tax, changes
imposed by the Revenue Act of 1938 and by Public Resolution No.
114. A new source of revenue was provided by the Sugar Act of
1937, imposing a tax on the manufacture of sugar, effective September
1, 1937.
The Railroad Unemployment Insurance Act, effective July 1,
1939, will have a negligible influence on the revenues, since the
effect of the act is to remove carriers from the coverage of title I X of
the Social Security Act and to require them to pay contributions under
the comparable provisions of the new act. Other changes made by the
Revenue Act of 1938, such as the according of certain additional
exemptions from the stamp taxes and from the taxes on electrical
energy, communication facilities, and admissions, and the lowering
of the annual gift tax exclusion from $5,000 to $4,000, as well as
changes effected by the amendments to the Bankruptcy Act and the
National Firearms Act, will have a relatively small effect on the
revenues.
Fiscal year 1939
Total receipts to general and special accounts in the fiscal year 1939
are estimated at $5,520 millions, a decrease of $722 millions, or 11.6
percent, from receipts of $6,242 millions in the fiscal year 1938.
Practically every major source of revenue contributes to this decrease.
The decrease in income taxes of $549 millions represents 76 percent
of the total decrease while miscellaneous internal revenue shows a
decrease of $106 millions, or 15 percent of the total decrease. Smaller
decreases appear in the pay-roll taxes, customs receipts, and miscellaneous revenues and receipts. The widespread character of the
decline reflects mainly the reduced incomes and the lower levels of
, business activity during the periods in respect of which the taxes
are levied.
Income taxes.—The combined yield of the individual and corporation income taxes, including the excess-profits tax and back taxes, is
estimated at $2,086 millions, as compared with the fiscal year 193S
figure of $2,635 millions. I t is anticipated that this reduction of
$549 millions in income tax receipts will be divided nearly equally
between the corporate and the individual sources.
The decrease in iacome tax receipts is principally a reflection
of a decline in taxable incomes. While the fiscal year 1938 re-

REPORT OF THE SECRETARY OF THE TREASURY

ceipts were based upon incomes received during the calendar years
1936 and 1937, the fiscal year 1939 receipts will be based upon
incomes received during the calendar years 1937 and 1938, and will
show a reduction primarily because taxable incomes in the calendar
year 1938 are estimated at a lower level than taxable incomes in the
calendar year 1936.
Miscellaneous internal revenue.—Receipts from the capital stock
tax are estimated at $127 milhons as compared with receipts of
$139 millions in the fiscal year 1938. Since receipts from this
tax, which is generally payable on July 31, are concentrated largely
in the first quarter of the fiscal year, the fiscal year 1939 estimate
involves a smaller element of prediction than do most of the other
estimates. The Revenue Act of 1938 aUowed a new capital stock
value declaration as of June 30, 1938. As receipts from the capital
stock tax of the past two fiscal years have been dependent on the
valuation declared as of June 30, 1936, the indicated decrease of $12
millions is consistent with the decline of corporate income from the
<jalendar year 1936 to the calendar year 1938.
Estate tax receipts in the fiscal year 1939 are expected to decluie
to $321 millions, a figure between the record total of $382 millions
received in the fiscal year 1938 and the previous high of $282 millions
received in the fiscal year 1937. The expected lower property valuations of estates whose tax returns will be filed during the fiscal year
1939 as compared with those filed in the fiscal year 1938, the lower
tax rates applicable thereto as a result of the graduated rate scale,
and a probable drop in back tax collections from last year's exceptionally high figure account for the indicated substantial shrinkage
in the estate tax total.
The estimate of receipts from the gift tax in the fiscal year 1939 is
$27 millions as compared with $35 millions received in the fiscal year
1938. Practically the entire payment of this tax is received in March
on the gifts of the preceding calendar year. The lower business and
income levels in the calendar year 1938 appear to have been less
favorable to the making of taxable gifts than were those of the calendar.
year 1937.
Receipts from taxes upon liquor in the fiscal year 1939 are estimated
at $563 millions, or somewhat less than the receipts of $568 millions
in the fiscal year 1938. Two counter influences, a decrease in consumption incidental to the decline in business activity and an increase
in certain of the tax rates, cause contrary movements in anticipated
receipts from the individual items in tliis group. Thus because of
restricted consumption with a constant tax rate, the excise tax on beer
is expected to yield $9 millions less in the fiscal year 1939 than it
yielded in the fiscal year 1938. Domestic distilled spirits, however,

REPORT OF THE SECRETARY OF THE TREASURY

despite a probable falling off in tax-paid quantity, are expected to
provide larger receipts than in the fiscal year 1938 as a result of the
advance in the tax rate, effective July 1, 1938, on distilled spirits
other than brandy, from $2.00 to $2.25 per proof gallon. This increased rate, though equally applicable to imported distiQed spirits,
will probably not suflSce to offset the estimated reduction of imports.
After six years of uninterrupted advance in receipts from tobacco
taxes, to the record high of $568 millions in the fiscal year 1938, a small
decrease to $566 millions in the fiscal year 1939 is forecast. Receipts
from the tax on small cigarettes, the largest source of revenue in this
group, are expected to decline slightly to $492 millions.
As a group, stamp tax receipts in the fiscal year 1939 appear likely
to form an exception to the prevailing downward tendency. I t is
estimated that they will aggregate $52 millions as against $46 millions
received in the fiscal year 1938. An anticipated decline of $3 millions
due to the repeal of the tax on sales of produce for future delivery is
expected to be more than offset by a larger volume of receipts from the
tax on stock transfers.
Changes in the law as well as economic factors account for the anticipated decline in receipts from the manufacturers' excise taxes, which
in the aggregate are estimated to yield $379 milhons in the fiscal year
1939, as against $417 millions in the fiscal year 1938, a decrease of
$38 millions. Approximately one-half of the decrease may be
ascribed to the termination of certain manufacturers' excise taxes
with respect to sales after June 30, 1938, as provided for in the Revenue
Act of 1938. The balance of the decrease reflects anticipated lower
levels of business activity.
Receipts from miscellaneous taxes are estimated at $138 millions,
an increase of $20 milhons over the fiscal year 1938 receipts. Expected decreases from most of the taxes in this group are more than
offset by the large increase in estimated receipts from the sugar tax.
The sugar tax shows an increase of $31 millions over receipts in the
fiscal year 1938, since receipts in that year were for less than a 12-month
period, the tax not becoming effective until September 1, 1937, and
not applying to stocks of direct consumption sugar then on hand.
Apart from a small gain in receipts from the bituminous coal tax, all
of the other taxes in this group are expected to produce less revenue
in fiscal year 1939 than in fiscal year 1938. Though traceable partly to
statutory changes, such as termination of the regulatory taxes on
petroleum and the liberalization of certain exemptions for communication facilities, admissions, and palm oil, the decreases mainly reflect
the influence of a lower level of business activity.
Pay-roll taxes.—As the net result of a large decline in receipts from
the carriers tax and only a small rise in receipts from the taxes under

REPORT OF TPIE SECRETARY OF THE TREASURY

the Social Security Act, pay-roll tax receipts in the aggregate are
expected to decrease by some $35 millions. Collection arrangements
and rate changes continue to affect the year-to-year comparisons of
receipts from these taxes. Thus an important cause of the large
decrease in receipts from the carriers tax is that whereas there was
paid in the fiscal year 1938 (under the Carriers Taxing Act of 1937,
approved June 29,1937) the tax liabilities of the five quarters extending
from January 1937 through March 1938, there will become due and
payable in the fiscal year 1939 only the liabilities of the four quarters
ending March 1939.
Conversely, contributing to the estimated increase in receipts under
title VIII of the Social Security Act, from $514 millions in the fiscal
year 1938 to $520 millions in the fiscal year 1939, is the fact that
receipts in the latter year will represent a full year's liability while
receipts in the former year represented less than a full year's liability,,
since the shift from a monthly to a quarterly basis of payment,
effective beginning January 1938, postponed to the fiscal year 1939'
the receipts of April and May 1938 liabilities, part of which would
otherwise have been received in the fiscal year 1938.
Receipts under title I X of the Social Security Act, estimated a t
$91 millions in the fiscal year 1939, as compared with actual receipts
of $90 millions in the fiscal year 1938, refiect two offsetting influences.
The title I X tax rate on pay rolls advanced successively from 1 percent
for the calendar year 1936 to 2 percent for the calendar year 1937 and
to 3 percent for the calendar year 1938, with a tax credit not exceeding
90 percent for employers who have paid their State unemployment
taxes prior to January 31 of the year following the accrual of the
Federal tax liability, in States certified to the Secretary of the
Treasury by the Social Security Board on preceding December 31
as having operated during the year in accordance with approved,
standards. Hence, the fiscal year 1939 receipts, being based in p a r t
pn the 2 percent rate and in part on the 3 percent rate, are expected
to exceed the fiscal year 1938 receipts, based in part on the 1 percent
rate and in part on the 2 percent rate. But although the higher
tax rate tends to increase receipts, this tendency is nearly offset by an
expected decrease in the estimated liabilities of employers who do not
qualify for the 90 percent tax credit.
Customs.—Customs receipts, including any import tax ^levied,,
assessed, collected, and paid in the same manner as a duty imposed by
the Tariff Act of 1930 and . . . treated as a duty," are expected
to decline in the fiscal year 1939 to $335 millions from the total
of $359 millions received in the fiscal year 1938. I t is estimated t h a t
changes in receipts by individual tariff schedules will be for the most
part relatively small. Duties and import taxes from sugar are

REPORT OF THE SECRETARY OF THE TREASURY

expected to be above the fiscal year 1938 level because of relatively
heavy imports in the first half of the current fiscal year. Imports of
wool and woolen products are also expected to increase. Receipts
from agricultural imports, however, are expected to drop because of
the large supplies of agricultural products. A decrease is anticipated
likewise in duties received from spirits.
Miscellaneous revenues and receipts.—Receipts from the many
diverse sources of this group are estimated to yield $200 millions in the
fiscal year 1939, a decrease of $8 millions from the total of $208
millions received in the fiscal year 1938.
Fiscal year 1940
Total receipts to general and special accounts for the fiscal year
1940 are estimated at $5,669 millions, assuming that the temporary
taxes expiring June 30 and July 31, 1939, are extended in their present
form. This amount represents an increase of $149 millions, or 2.7
percent, over estimated receipts for the fiscal year 1939. The increase
is ascribed to an expected rise in receipts from all major sources of
revenue except income taxes. If the temporary taxes are not
extended, estimated receipts for the fiscal year 1940 are reduced by
$490 milhons, to $5,179 millions.
Income taxes.—Receipts from income taxes in the fiscal year 1940
are estimated at $1,903 millions as compared with an estimate of $2,086
millions for the fiscal year 1939. The fiscal year 1940 income tax
receipts represent a portion of the tax liabilities of each of the two
relatively low income years, calendar years 1938 and 1939. Although
higher incomes are expected in the calendar year 1939 than in the
calendar year 1938, it is anticipated that they will not reach the calendar year 1937 level. The result is that income tax receipts in the
last half of the fiscal year 1940, based upon calendar year 1939 incomes, will be somewhat higher than those of the corresponding
period of the previous fiscal year, but that receipts in the first half of
the fiscal year 1940, based upon calendar year 1938 incomes, will be
much lower than those of the first half of the preceding fiscal year.
A similar situation accounts for the expected decline in the excessprofits tax in the fiscal year 1940. Unlike other items in the income
tax group, back tax collections are expected to increase
Miscellaneous internal revenue.—Capital stock tax receipts in the
fiscal year 1940 will depend on the valuation declared as of June 30,
1938, as adjusted on June 30, 1939. The net effect of the various adjustments in the original declared valuation due to the calendar year
.1938 business activity is expected to decrease the fiscal year 1940 receipts to $123 millions from the $127 millions estimated for the fiscal
year 1939.
'

REPORT OF THE SECRETARY OF THE TREASURY

Estate tax receipts are estimated at $329 millions in the fiscal year
1940. This represents only a slight increase over the estimate for the
fiscal year 1939 as the length of time intervening between the valuation
of estates and the payment of the tax prevents estate tax receipts from
being immediately responsive to improving business conditions. Receipts from the gift tax are estimated at $33 milhons, an increase of $6^
millions over estimated receipts in the fiscal year 1939.
The estimated revenues from liquor taxes of $607 millions compare
with an estimated aggregate of $563 millions in the fiscal year 1939.
Receipts from the taxes on domestic distilled spirits and fermented
malt hquors, the leading sources of revenue in this group, are expected
to increase substantially, the former by $25 millions and the latter by
$19 millions. The floor tax, enacted in June 1938 in connection with
an increase in the tax rate on distilled spirits, will be unimportant as a
source of revenue in the fiscal year 1940. Receipts from all other taxes
in this group are expected to show moderate increases.
Tobacco taxes are expected to yield aggregate revenues of $610
millions in the fiscal year 1940 as compared with an estimated total of
$566 millions in the fiscal year 1939. Increased revenues from the tax
on cigarettes account for practically all of this gain as receipts from all
other taxes in this group are expected to show only minor changes.
Stamp tax receipts are expected to total $59 millions in the fiscal year
1940, assuming a continuation of present taxes and rates. This compares with estimated revenues of $52 millions in the fiscal year 1939.
Under the present law, the manufacturers' excise taxes expire with
respect to sales made after June 30 or in some cases after July 31, 1939.
Assuming that these taxes, which form an important part of the present
tax structure, will be extended by new legislation, aggregate receipts
from the group are estimated at $427 millions in the fiscal year 1940.
This amount compares with an estimated total of $379 millions in the
fiscal year 1939. The tax on gasoline, the leading source of revenue in
this group, is expected to yield $211 millions, representing an increase
of $19 millions over the previous fiscal year.
Certain of the taxes in the miscellaneous group will expire or wiU be
automatically modified at the beginning of the fiscal year 1940.
Assuming a continuation of these taxes through new legislation, aggregate revenues from the group in the fiscal year 1940 are estimated at
$145 millions, as compared with estimated revenues of $138 million&
in the fiscal year 1939.
Pay-roll taxes,—Receipts under title VIII of the Social Security Act
are expected to increase to $598 millions in the fiscal year 1940 from
$520 millions in the fiscal year 1939. This gain is due in large part tothe 50 percent increase in the tax rates effective during the calendar
year 1940.

REPORT OF THE SECRETARY OF THE TREASURY

Revenues under title IX of the Social Security Act are expected to
decline slightly to $89 millions from $91 milhons anticipated for the
fiscal year 1939. Two offsetting factors materially affect receipts
from this tax in the fiscal year 1940. On one hand, this wiU be the
first year when all current tax liabilities are collected under the 3 percent tax rate. On the other hand, receipts will be lowered because
of the passage of the Railroad Unemployment Insurance Act which
removes carriers from the coverage of title IX effective July 1, 1939.
The full effect of this change in the law however is not reflected in the
fiscal year 1940 receipts since the tax liabihties of the period January
to June 1939 will enter title IX receipts in calendar year 1940.
Revenues under the Carriers Taxing Act of 1937 are expected to rise
to $124 millions from the $109 millions anticipated in the fiscal year
1939. This increase may be ascribed in part to the increase in the
aggregate of tax rates from 5)^ percent to 6 percent beginning with
calendar year 1940.
Railroad Unemployment Insurance Act.—Beginning July 1, 1939,
carriers will be required to pay contributions under the Railroad
Unemployment Insurance Act (approved June 25, 1938) rather than
to pay taxes under title IX of the Social Security Act, and 10 percent
of the contributions received will be deposited to tbe credit of the
Railroad Unemployment Insurance Administration Fund. It has
been assumed that contributions will be paid on a quarterly basis in
the month following the close of the quarter in which the liabilities
accrue. Thus the fiscal year 1940 receipts, which will include contributions covering only three quarters, are estimated at $5 millions.
Customs.—Receipts from customs duties and import taxes are
expected to increase to $404 millions from the $335 millions anticipated for the fiscal year 1939. It is expected that increases will be
general in the several tariff schedules, although a decline is expected
in imports of sugar from the unusually high level of the fiscal year 1939.
Miscellaneous revenues and receipts.—Receipts from the many
sources in this group are estimated at $208 milhons in the fiscal year
1940 as compared with estimated receipts of $200 millions in the
fiscal year 1939.

REPORT OF THE SECRETARY OF TB.E TREASURY

ESTIMATES OF EXPENDITURES

Actual expenditures for the fiscal year 1938 and estimates for the
fiscal years 1939 and 1940 are shown in the table following. The
estimated expenditures are furnished by the Bureau of the Budget
and are based upon a careful survey of the needs of the various departments and bureaus of the Government.
Expenditures for the fiscal year 1938, on the basis of daily Treasury statements
(unrevised), and estimated expenditures for the fiscal years 1939 and 1940

Actual
1938

Estimated
1939

Estimated
1940

GENERAL AND SPECIAL
ACCOUNTS
•

EXPENDITURES

I . General:
Departmental: i
Legislative e s t a b l i s h m e n t
E x e c u t i v e proper
State D e p a r t m e n t
Treasury Department
.
W a r D e p a r t m e n t (nonmilitary)
D e p a r t m e n t of Justice
P o s t OflBce D e p a r t m e n t _
D e p a r t m e n t of t h e Interior
D e p a r t m e n t of Agriculture
D e p a r t m e n t of C o m m e r c e
D e p a r t m e n t of L a b o r
Shipping B o a r d
U n i t e d States M a r i t i m e C o m mission
.__
R u r a l Electrification A d m i n i s tration:
Loans
Other
Civil Aeronautics A u t h o r i t y . . .
I n d e p e n d e n t oflBces a n d commissions
- -Unclassified i t e m s
A d j u s t m e n t for disbursing oflBcers'
checks o u t s t a n d i n e
Total departmental
P u b l i c buildings •
Public highways i
__ . .
R i v e r a n d h a r b o r w o r k a n d flood
control 1
R e c l a m a t i o n projects i2__
_
P a n a m a Canal
Postal deficiency (current)
Postal deficiency (prior years) 3
Railroad R e t i r e m e n t B o a r d :
A d m i n i s t r a t i v e expenses
Railroad u n e m p l o y m e n t insurance a d m i n i s t r a t i o n fund
Annuity payments
Social S e c u r i t y A c t :
A d m i n i s t r a t i v e expenses:
Social Security B o a r d
D e p a r t m e n t of C o m m e r c e D e p a r t m e n t of L a b o r _
G r a n t s t o States:
Social Security B o a r d
D e p a r t m e n t of L a b o r
TreasuryDepartment
Unclassified
U n i t e d States H o u s i n g A u t h o r i t y »_
D i s t r i c t of C o l u m b i a ( U n i t e d States
share)
.-_
N a t i o n a l defense:»
Army
Navy
. - _ . . .
Veterans' Administration »

Footnotes at end of table.

$25,779,939.60
479,019. 68
19, 327, 280. 05
152,075,169.02
2, 964, 605. 98
42,039, 253. 53
2, 909,134. 52
98,877,813.99
112, 774,127. 32
41,177,583. 75
• 18,102,336. 65
2, 972,975. 36

$22, 721, 050
469, 800
21, 617,000
160, 785,820
3, 419,000
43,019,800

$22, 235, 200
446, 700
20, 244, 200
167, 340,100
1,675,000
60, 652,100

114,515,830
127,427, 600
32,933,000
18,176,900

122, 678,100
128, 546,100
60, 900, 600
21,997,000

» 1,949,424.00

45, 000,000

80, 500,000

9,159, 343. 23
1,468,169.18

45,000,000
2,069, 700
13,000,000

40,000,000
2,486,000
19, 220,000

41, 583, 202. 79
46,884.13

47,854,640

49,155,000

669,787,414. 78

698,009,040

777,876,000

570, 225, 624. 25
60,817, 513. 97
162,036,509. 61

698,009,040
48, 347,000
191, 644,100

777,875,000
67, 711, 600
190, 510.000

164,995,448.61
39,907, 512. 71
11, 361,129. 66
43,407,438. 40 }
851,422.78

204,308,300
59,065,100
11,954, 200
56, 666,000

208,632,300
67,009,000
10, 624,000
53, 331,000

2, 619,000

3, 228,000

2, 300,000

8,400,000

19,613,584.38
8, 513. 70
336,379.18

22, 244, 500
75,000
318,000

22,815,000
95,000
348,000

254,769,184.91
7,833, 235. 95
8,892,079.88
10. 61
165,424.32

291,000,000
8,600,000
8,000,000

318,800,000
8,300,000
8,000,000

5,000,000.00

6, 000,000

6,000,000

404,701,839.33
669,455,393. 71
681,764, 663.30

447,298,400
694, 908,750
549,462,100

450,059,100
687,498,800
546,668.000

438, 209. 47

2,613, 296.73
0 3,985, 323. 28

4, 500,000

REPORT OF T H E SECRETARY OF T H E TREASURY

Expenditures for the fiscal year 1938, on the basis of daily Treasury statements
^ (unrevised), and estimated expenditures for the fiscal years 1939 and 1940—Con.
Actual
1938

Estimated
1939

Estimated
1940

GENERAL AND SPECIAL
ACCOUNTS-Continued
EXPENDITURES—Continued

I. General—Continued.
Agricultural Adjustment program:
Agricultural Adjustment Administration
Agricultural Adjustment Administration <
Agricultural Adjustment Administration (act Aug. 24,1935).
Agricultural contract adj ustments• Soil Conservation and Domestic Allotment Act
Price Adjustment Act of 1938-Federal Crop Insurance Act:
Administrative expenses..._
Subscriptions to capital
stock of Federal Crop Insurance Corporation
Unclassified...
Farm Tenant Act:
Loans
Other
Unclassified
Civilian Conservation Corps > _..;...
Farm Credit Administration: i •
Crop loans
Other..:...
....
Unclassified
Tennessee Valley Authority
....
Interest on the public debt
J...
Refunds:
Customs..--.
Internal revenue
ProceSvSing tax on farm products.
To States of taxes collected
under title IX of the Social
Security Act...
Subtotal
II. Recovery and relief:
Agricultural aid:
Federal Farm Mortgage Corporation—reduction in interest rate on mortgages
Federal land banks:
Capital stock!
Subscriptions to paid-in surplus
-.
Reduction in interest rates
on mortgages.
Commodity Credit Corporation:
Restoration of capital impairment
Others.
..i...
Relief:
•
Federal Emergency Relief Administration: 5.
Reconstruction
Finance
Corporation funds
Other
Civil Works Administration...
Civilian Conservation Corps. _
Department of Agriculture, relief
Public works (including work relief):
Reclamation projects 6
Public highways
River and harbor work and
flood control
Rural Electrification Administration
Works Progress Administratration (including National
Youth Administration)
Footnotes at end of table.
104825—39-

« $334,458. 69
$59, 600,000

$49,000,000

38,156, 532. 69
2, 992,126.87

200,000,000
377,000

90,000,000
310,000

303,852,184.12

400,000,000
40,000,000

400,000,000
150,000,000

3,000,000

6,000,000

17,001,480.91

« 8, 556. 65
2, 275,429.47
776, 319. 23
a 92 08
324,986,035*. 04

5,000,000
20,000,000
6,800,000

22,000,000
8,800,000

290,000,000

285,000,000

12, 705,000
6,372,880

13,000,000
7, 366,100

43,000,000
976,000,000

40,000,000
1,050,000,000

16,000,000
35,008, 500
15,000,000

17, 500,000
38,018,000
15,000,000

40,561,886.43
4, 660, 648, 348.45

5,330, 582, 870

5, 610, 298,800

5,726,516.-05

8,000,000

7, 300,000

4,736,775.00

150,000

4,156, 442.16
4,016, 787. 73
« 18, 293. 78
42,002, 238.16
« 926, 280, 713. 67
16,156,340.00
32, 791, 660. 60
10, 232,689. 76

32,977,497. 53

9, 390,000

32,114,033.21

20,378,000

29, 700,000

2,000,000
210,000

205,000

26, 498, 296. 95
84, 575,923. 50

34, 282, 350
40,420, 400

10, 670,000
22, 280,000

33, 639,018. 24

16,101,100

4, 566, 206.87

1, 692,600

1,472, 499,478. 21

1, 662,933,000

94, 285,404. 73.
66, 965. 57

31, 310. 94
4, 337, 769. 82
222,101.04
1, 396, 512. 67
2, 472. 26

REPORT OF T H E SECRETARY OF T H E TREASURY

Expenditures for the fiscal year 1938, on the basis of daily Treasury statements
(unrevised), and estimated expenditures for the fiscal years 1939 and 1940—Con. ,
Actual
1938

Estimated
1939

Estimated
1940

G E N E R A L AND SPECIAL
ACCOUNTS-Continued
EXPENDITURES—Continued

11. Recovery and relief—Continued.
Public works (including work relief)—Continued.
Public Works Administration,
grants (act June 21, 1938)
Other:
Administrative expenses.
Public Works Administration
Legislative establishment..
State Department
Treasury Department:
Public bufldings
Other...
War Department (nonmilitary).
National defense:
Army
Navy
Department of Justice
Department of the Interior
Department of Agriculture
Department of Commerce
Department of Labor _ . .
Veterans' Administration
Independent oflBces and commissions
District of Columbia._
Unclassified items
Aid to home owners:
Home loan system:
Reconstruction F i n a n c e
Corporation funds:
Home loan bank stock..
Federal savings and loan
associations
Emergency housing
U. S. Housing Authority
Federal Housing Administration:
Reconstruction F i n a n c e
Corporation funds
Other
Farm Security Administration.
Miscellaneous:
Reconstruction Finance Corporation : 8
Disaster Loan Corporation
stock
Loans and grants to States,
municipalities, etc., underact July 21, 1932
Other
Export-Import Bank of Wash
ington 8
Administration for Industrial
Recovery
Subtotal[II. Revolving funds (net):
Agricultural aid:
Farm Credit Administration:
Reconstruction F i n a n c e
Corporation funds:
Crop production loans..
Regional agricultural
credit corporations...
Loans to joint stock
land banks
Farm Credit Administration
Unclassified
Other
F o o t n o t e s a t e n d of t a b l e .

$275,000,000

$340,000,000

$15,109, Oil. 28
516,895.17
. 1,650,879.27

26,000,000
135,000
275,000

16, 5ft0,000

15,889, 790. 32
24, 750, 372.42
316.97

11, 555,000
26,184,180

4, 200,000
4, 364,000

26,863,051. 65
26,822,907.09
1, 210, 708. 29
32, 407,750. 69
27, 342,732.98
569, 617.13
7, 528, 698. 21
213,071. 61

47, 604,000
41, 726, 500
8, 250,000
45, 696, 200
28,332, 400
6, 440,800
1,980,100
6,325,000

30,000,000
9,000,000
5.760,000
7,930,000
1, 241,000
1,150,000

13,065,141.33
9,332. 44
223,839.46

13,358,100

3, 875,000

7,000,000

4,734,900.00
11,797. 85
22,467,695. 22
20,487,826. 32

100,000
8,385,900

11,725,002.46
16.99
180,149,108. 66

13,000,000
179, 889, 200

4,000,000.00

2,000,000

10, 000,000
5,000,000

a 254, 374. 30
3,405,199. 62
2,703. 70
« 4, 522. 24
2, 237, 663, 551. 87

2, 437, 694,830

« 633, 621.71

° 400, 000

o 7,918, 444. 60

»3, 684,000

« 76,487. 51

« 56, 300

201, 387.-21
964. 54
». 4, 220,899.84

»"2,'800^000"

210,000

516,165, 000

° 200,000
» 1, 497, 000

193,000
'"i,"500,"000

REPORT OF THE SECRETARY OF THE TREASURY

Expenditures for the fiscal year 1938, on the basis of daily Treasury statements
(unrevised), and estimated expenditures for the fiscal years 1939 and 1940—Con.
Actual
1938

Estimated
1939

Estimated
1940

G E N E R A L AND SPECIAL
ACCO UNTS—C ontinued
EXPENDITURES—Continued

III. Revolving funds (net)—Continued.
Public works:
Loans and grants to States,
municipalities, etc
Loans to railroads
Loans (act June 21, 1938)
Subtotal
.—
IV. Transfers to trust accounts, etc.:
Old-age reserve account
Railroad retirement account
Government employees' retirement
funds (United States share):
Civil service retirement fund...
Foreign service
retirement
fund
..
Canal Zone retirement fund
Alaska R. R. retirement fund..
Subtotal

$105,676,000

$25,000,000

120,952,670. 86

40,000,000
138.9M, 700

15, 000, 000
36,996. 000

387,000,000.00
146,402, 587.18

503,000, 000
107,000,000

570,000,000
115,000,000

72,392,000. 00

74, 244,000

86,329,000

188,000.00
500,000.00
176,000. 00

187,600
500,000
175,000

199,400
600,000
175,000

606,657,587.18

685,106, 600

772, 203,400

0 65,115, 550.00

100,000,000

8,692, 329,000
900, 000,000

7,035, 663, 200
2,060,000,000

9, 592, 329,000
4,072,259,000

9, 095, 663. 200
3, 426,343, 200

-f 4,072, 259,000
100, 000,000

-f 3, 426, 343, 200
100, OCO, 000

-f 3, 972, 259,000

-f 3, 326, 343,200

+46,461, 758
+4,018, 720, 758
6, 497, 305

- 5 3 , 208,071
-f 3,273.136,129

+4,013,223,453

-f 3, 273,135,129

-46, 461,758

-f 53,208,071

-f3,966,761,695
37,164,740,316
41,131,502,010

-f 3,326, 343,200
41,131,502,010
44,457,845,210

0 322,527,677.06

342,106,258

341, 860,511

1,094, 842.97
90,361,012.40

70,000,000

747, 060,496. 77
15,172,022.11

786,200,000
25,690,000

748 900 000
32,333,500

$136,876, 352. 65
« 3,276, 679.88

V. Debt retirements:
Sinking fund
._
_
Received from foreign governments
under debt settlements
Estate taxes, forfeitures, gifts, etc...

210,000.00
"139,400.00

Subtotal
_
66,464, 950.00
Total expenditures exclusive
of supplemental items
7, 691, 287,108.36
Supplemental items.
Grand total, expenditures,
general or special accounts. . 7,691,287,108.36
1, 449,625,881. 37
Excess of expenditures over receipts
Summary
Excess of expenditures (4-) or receipts ( - ) . . -\-l, 449,625,881.37
Less public debt retirements
'.
_.
65, 464, 950.00
Excess of expenditures (+) or receipts (—)
(excluding public debt retirements)..
-f 1, 384,160, 931. 37
Trust accounts, increment on gold, etc., ex• cess of receipts (—) or expenditures (-}-)-..
-254, 999, 624. 40
4-1,129,161,306.97
Less national bank note retirements
51, 478, 739. 50
Total excess of expenditures (+) or
receipts (—) (excluding public debt
retirements)
+1,077,682, 667. 47
Increase (+) or decrease (—) in General
-337, 555, 984. 31
Fund balance
Increase (+) or decrease (—) in the public
debt
-_
-f740,126,583.16
Public debt at beginning of year
36, 424, 613, 732. 29
Public debt at end of year.
_
37,164,740.315.45
TRUST ACCOUNTS, I N C R E M E N T
ON GOLD, E T C .
RECEIPTS «

Trust accounts..
'
.
Increment resulting from reduction in the
weight of the gold dollar
Seigniorage "^
Unemplo3mient trust fund:
State accounts:
Deposits by States
._
Interest on investments
Railroad
unemplojment
insurance
account:
Contributions
Interest on investments.. _ . _
Old-age reserve account:
Transfers from general fund..
Interest on investments
Footnotes at end of table.

44,560,000
325.000

387,000,000.00
15,412, 232.89

603,000,000
27,029,000

570,000,000
43,883,000

REPORT OF THE SECRETARY OF T H E TREASURY

Expenditures for the fiscal year 1938, on the basis of daily Treasury statements
(unrevised), and estimated expenditures for the fiscal years 1939 and 1940—Con.
.A.ctual
1938

Estimated
1939

Estknated
1940

TRUST ACCOUNTS, I N C R E M E N T
ON GOLD, ETC.—Continued
RECEIPTS—Continued
Raikoad retirement account:
Transfers from general fund
I n t e r e s t on i n v e s t m e n t s
Total

$146,402,587.18
1,410, 821.92

$107,000,000
2, 200,000

$120,150,000
2,600,000

1,727,031,693. 30

1, 863, 225,258

1,974,582,011

327,047,497.83

336,048,339

358,652,440

EXPENDITURES «

T r u s t accounts
.
.
•Transactions in checking accounts of governj n e n t a l agencies (net), etc.:
C o m m o d i t y C r e d i t Corporation
E x p o r t - I m p o r t B a n k of W a s h i n g t o n :
R e c o n s t r u c t i o n F i n a n c e Corporation f u n d s . _
R u r a l Electrification A d m i n i s t r a t i o n
R e c o n s t r u c t i o n F i n a n c e Corporation ^.
Other
Chargeable against i n c r e m e n t on gold:
M e l t i n g losses, etc . .
. ..
P a y m e n t s to Federal Reserve banks
(sec. 13b, Federal Reserve Act, as
amended)
F o r r e t i r e m e n t of n a t i o n a l - b a n k n o t e s . .
U n e m p l o y m e n t t r u s t fund:
State accounts:
In vestments-.W i t h d r a w a l s b y States__
Railroad u n e m p l o y m e n t
insurance
account:
Investments
P a y m e n t of u n e m p l o y m e n t insurance
Old-age reserve account:
Investments
Benefit p a y m e n t s
Railroad r e t i r e m e n t account:
Investments
Benefit p a y m e n t s
Total
Excess of receipts over e x p e n d i t u r e s . .
Excess of exDenditures over receiDts

« "'* 184, 487,067.11

117,020,000

» 1, 206,460.00
33,930,430. 61
° 6 8, 627, 452. 52
" "43,596,417.45
2,372

34,678.99
125,000.00
51, 478, 739.50
559, 705,000.00
190, 975, 000.00

5, 497, 305
336,890,000
475, 000, 000

212, 233, 500
500, 000, 000
58,875,000
55,000,000

395, 200, 000.00
5, 404,062.87

510,029,000
20,000, 000

578, 863.000
35,000,000

66, 200,000.00
79,849,056.18

9, 700,000
99, 500,000

6, 750,000
116,000,000

J, 472,032, 068. 90

1, 909, 687, 016

1, 921, 373, 940'
53, 208,071

254,999, 624. 40
46, 461, 758

o Excess of credits (deduct).
i> Revised to adjust classification.
e Includes $22,507,108.04, representing 1 year's interest at i H percent on $500,157,956.40 face amount of
bonds issued to the United States Government life insurance fund pursuant to sec. 5 of the Adjusted
Compensation Payment Act of Jan. 27, 1936.
<i Includes deposit of proceeds of appropriation for restoration of capital impairment of the Commodity
Credit Corporation provided in act of June 25, 1938. The credit to this account is ofliset by an expenditure
in the same amount under the caption "Recovery and relief: Agricultural aid," above.
« Additional expenditures on these accounts are included under "Recovery and relief," and "Revolving
funds (net)."
2 Expenditures under this caption for the fiscal year 1937 include only Boulder Canyon project, other
reclamation projects being included in "Departmental—Department of the Interior."
3 The figures for the fiscal year 1938 represent payments and repayments of $8,780,085.63 and $7,928,662.85,
respectively, on account of adjustments of grants for prior years. The net adjustment is $851,422.78. The
figures for the fiscal year 1037 represent repayment of funds by Post OflBce Department on account of gi-ants
for fiscal years 1925 to 1933.
< Formerly classified under "Recovery and relief—Agricultural aid."
8 Includes expenditures made by Federal Surplus Commodities Corporation from funds provided for
the Federal Emergency Relief Administration.
8 Expenditures under this caption for the fiscal year 1937 include only Boulder Canyon project, other
reclamation projects being included in "Public works—All other—Department of the Interior."
"< This item of seigniorage represents the difference between the cost value and the monetary value of
silver bullion revalued and held to secure the silver certificates issued on account of silver acquired under
the Silver Purchase Act of 1934 and under the President's proclamation dated Aug. 9, 1934.
8 Beginning Dec. 31,1937, transfers from the General Fund have been treated as receipts instead of offsets
against expenditures. The figures for July 1937 and for the fiscal year 1937, therefore, include adjustments
on this account and in that respect disagree with the figures published prior to Dec. 31, 1937.
B Disagrees with the figures published in the daily Treasury statement due to a revision in classifications
referred to in the announcement accompanying the daily Treasury statement for July 1, 1938 (see p. 347).

REPORT OF THE SECRETARY OF THE TREASURY

BUREAU OF INTERNAL REVENUE

During the fiscal year 1938 total collections of internal revenue in
the amount of $5,658,800,000 ^ exceeded collections in the preceding
fiscal year by $1,005,600,000. The total amount collected included
back income taxes of $251,600,000, which is $6,700,000, or approximately 2.6 percent, less than the total collections of back income
taxes during 1937.
Income tax
To expedite the examination and closing of income tax returns,
several changes in procedure were effected during the latter months
of the fiscal year 1938. Among the more important changes were (1)
the establishing of office audit sections in field divisions of the Income
Tax Unit, where such sections had not previously been operated, and
the expansion of office audit work in those divisions already conducting
office audits; (2) the granting of authority to all internal revenue
agents in charge to issue statutory notices in cases where the deficiencies determined after protest were $300 or less and in cases, regardless
of the amount of deficiencies involved, in which taxpayers failed to
cooperate with the agents in charge; and (3) the more prompt routing
of the larger and more important currently filed returns to the field
offices for examination.
The field forces conducted 429,601 examinations and recommended
changes in tax liability in 258,998 or 60 percent of the cases. Agreements were secured in 229,729 or 89 percent of the returns in which
changes in tax liability were recommended. The deficiency taxes to
which agreements were secured by the field totaled $93,800,000, the
second largest amount in agreed taxes ever secured by the field force
in any fiscal year.
Miscellaneous internal revenue
Estate tax collections for the fiscal year 1938 exceeded such collections for the preceding year by $100,500,000; tobacco tax collections
increased $15,900,000; gift tax collections increased $10,800,000; and
capital stock tax collections increased $1,800,000. The collections of
manufacturers' excise taxes decreased $33,100,000; the collections of
liquor taxes decreased $26,300,000; and the collections of documentary
stamp taxes decreased $23,700,000. An increase of $33,400,000 in
collections from the so-called miscellaneous taxes is accounted for by
collections of $33,800,000 under the taxes imposed by the Sugar Act
of 1937 ($30,600,000) and the Bituminous Coal Act of 1937 ($3,200,000), no collections having been made under either of these acts prior
to the fiscal year 1938.
» On the basis of reports of collections, see p. 352.

REPORT OF THE SECRETARY OF THE TREASURY
Social security taxes

Collections of taxes under title V I I I of the Social Security Act
amounted to $502,900,000 during the year, an increase of $295,600,000 over the preceding year. The tax imposed by title I X of the act
yielded $90,300,000, exceeding the yield from that source during the
preceding year by $32,100,000. The first collections of taxes imposed
by the Carriers Taxing Act of 1937 were made during the year,
amounting to $149,500,000.
During the first 9 months of the year these taxes were administered
by the Social Security Tax Unit. That unit was consolidated with
the Accounts and Collections Unit on April 1, 1938, and from that
date the social security taxes have been administered by the Accounts
and Collections Unit.
Extensive studies were conducted during the year to effect a simplification of collecting the taxes and securing reports of the amounts of
taxable wages paid to each employee under title VIII of the Social
Security Act. For the calendar year 1937 each employer was required to make 12 monthly tax returns and two 6-month information
returns, an aggregate of 14 returns. Effective January 1, 1938, a
quarterly return method was adopted, combining the tax and information features of the old plan. Substantial savings in the costs of
compliance and administration have resulted from the change.
Alcohol tax administration
The program for the enforcement of raw materials control was
continued with more than 6,000 distributors submitting returns showing sales, and over 1,700 distributors of denatured alcohol maldng
similar reports of their sales. The constitutionality of the raw
materials law (U. S . C , 1934 edition, title 26, sec. 1162a) was definitely
established by court decisions during the year. The preventive
effect of this program has been refiected in the reduction of quantities
of materials purchased by illicit distillers. There were more than 300
distillery seizures during the year as a direct result of information
furnished by dealers in raw materials.
Extensive research was conducted in the laboratory of the Alcohol
Tax Unit on various species of marihuana grown on the Arlington
Experimental Farm of the Department of Agriculture. Hundreds of
samples were examined for the purpose of identifying the active
principle, and for determining at what stage during the growth of
the plant the active principle developed. The methods for identifying
marihuana were improved.

REPORT OF THE SECRETARY OF THE TREASURY

Technical Staf decentralization
A definite program looking to the decentralization of the appellate
procedure for the administrative settlement of disputed income,
excess-profits, and estate tax cases was inaugurated on March 1,
1938, by the establishment at Los Angeles of a special branch of the
Commissioner's office, known as the Los Angeles Division of the Technical Staff. The head of the Division, with the advice or concurrence
of counsel (a representative of the Chief Counsel for the Bureau), was
given authority (subject to the general supervision of the Commissioner)
to settle not only cases docketed before the United States Board of
Tax Appeals and placed on a circuit calendar for hearing in that
area, but also cases referred to the Division from the office of the
internal revenue agent in charge at Los Angeles prior to the issuance
of the statutory notice of deficiency.
The results accomplished by the Los Angeles Division of the. Technical Staff during the first few months of its operation demonstrated
the practicability of the plan of handling and disposing of cases pending
before the Board; and although the results were at that time incon-.
clusive as regards the application of an appellate settlement procedure
to cases prior to the issuance of the deficiency notice, they were such
as to warrant an extended and broader trial of the plan. Plans were
perfected for the establishment on July 1, 1938, of the Pacific Division of the Technical Staff with coordinate local offices at Los Angeles,
San Francisco, and Seattle, and branch offices at such points as the
Commissioner may determine. The Pacific Division wiU comprise
the States of Washington, Oregon, California, Idaho, Montana, Utah,
Nevada, and Arizona, and the Territories of Hawaii and Alaska. The
original Los Angeles Division of the Technical Staff was abolished on
June 30, 1938, and became on July 1, 1938, the Los Angeles office of
the Pacific Division. The jurisdiction of the Pacific Division was
enlarged to include within the pre-90-day classification those cases
involving the ad valorem fraud penalty (but not criminal prosecution)
and also estate and gift taxes. With these changes, the jiu-isdiction
of the Pacific Division, both before and after the issuance of a deficiency notice, covers substantially the broad class of cases which are
capable of appeal to the Board of Tax Appeals.
Orders were issued in May and June 1938 directing the establishment of similar divisions at New York on August 1, 1938, and at
Chicago on September 1, 1938. The New York Division will cover
the State of New York and the Chicago Division will include the
States of Illinois, Indiana, Wisconsin, Minnesota, North Dakota,
and South Dakota. Until January 1, 1939, the New York and Chi-

REPORT OF THE SECRETARY OF THE TREASURY

cago Divisions will be concerned primarily with cases which have
been appealed to the United States Board of Tax Appeals; after
that date, they will also have authority, upon request of the taxpayer, to review the determinations of tax made by local agents in
charge, prior to the issuance of a deficiency notice.
The settlement procedure developed by the Technical Staff since its
establishment in 1933 has been found both effective and competent
and a similar procedure is being followed in the Staff field divisions.
The new plan is demonstrating definite advantages. It will
appreciably reduce the repetitious steps and long delays which the
Bureau has been unable to avoid under the centralized procedure. It
will undoubtedly result in greater convenience and economy to taxpayers, and it should bring about a more expeditious disposition of
tax cases.
A detailed description of the work of the Bureau of Internal Revenue
will be found on pages 154 to 181 of this report.
CUSTOMS

" Total customs receipts, on the basis of the daily Treasury statement,
unrevised, amounted to approximately $359,200,000 in the fiscal year
1938, a decrease of $127,200,000 during the year. This decline
reflects the substantial contraction in imports during the last 6 months
of the fiscal year as compared with corresponding imports for the
similar period of 1937, when imports were running at an unusually
high level.
Every tariff schedule participated in the decline in receipts, but
two-thirds of the decrease for the year was in those commodities which
were the most important sources of revenue during 1937, and which in
that year showed the largest increases over 1936. The largest decreases occurred in the receipts from duties on agricultural products,
which were $50,100,000 less than in 1937, and those on wool and wool
manufactures, which were $32,800,000 less, representing decreases of
43 percent and 57 percent, respectively. Every tariff schedule but
one, the tobacco schedule, also declined in the value of dutiable
imports.
The value of dutiable imports entered for consumption during the
year was $908,800,000, a decrease of 27 percent from the preceding
year. The value of imports entered free of duty constituted 61
percent of the total value of all imports entered for consumption in
1938, and 57 percent in 1937. Exports in 1938 were $563,000,000
greater than in 1937, and the excess of exports over imports in 1938
was $1,144,000,000 larger than in 1937.

REPOKT OF T H E SECRETARY OF T H E TREASURY

Foreign trade results and customs receipts are summarized by
fiscal years in the following table:
Merchandise exports and imports and customs receipts, fiscal years 1932 to 1938
[In millions of dollars]

Exports 1

Fiscal year

1932
1933 .
1934
1935
1936
1937
1938 . -

_
-

1,948
1,440
2,042
2,121
2,414
2,838
3,401

General
imports i
1,730
1,168
1,721
1,786
2,218
3 2,942
2,361

Excess of exports over
imports
218
272
321
335
196
3 -104
1,040

Customs
receipts«
328
251
313
343
387
486
359

1 Source: Bureau of Foreign and Domestic Commerce.
2 On basis ot daily Treasury statements (unrevised).
3 Revised. .

A more detailed statement of the activities of the Bureau of Customs
is presented on pages 130 to 146 of this report.
CONSTRUCTION ACTIVITIES

Public building operations during the fiscal year 1938, including
construction work performed for other departments, resulted in the
completion of 486 major projects, with a total limit of cost of
$84,170,333. At the end of the year 193 projects, to cost approximately $63,613,131, were under contract; 84 projects, with a limit of
cost of $16,983,600, were either on the market for construction bids or
were practically ready to be placed on the market; and 366 projects, to
cost approximately $69,880,500, were in preliminary stages.
Program under the Public Works Administration
The number of projects under the allotments made for public
buildings by the Public Works Administration was increased during
the year from 437 to 438, and the total amount of such allotments was
reduced from $76,039,949 to $75,673,885. All projects under this
program were completed by the end of the year, with the exception of
one with a limit of cost of $6,500, which was under contract.
Program under the emergency appropriation acts
The acts of Congress approved June 19, 1934, August 12, 1935,
June 22, 1936, and August 25, 1937, authorized expenditures totaling
$255,000,000 for the emergency construction of public buildings
throughout the country, the projects to be selected by the Secretary
of the Treasury and the Postmaster General. Under this legislation
1,534 projects, with a limit of cost of $252,640,227, were selected to
June 30, 1938. Of these, 897, with a limit of cost of $115,123,768,

REPORT OF THE SECRETARY OF THE TREASURY

were completed; 188, with a limit of cost of $55,352,359, were under
contract; and 449, with a limit of cost of $82,164,100, were in the
preliminary stages.
The act approved August 25, 1937, provided for the expenditure of
$70,000,000 for public buildings over a period of 3 years. The
Federal Public Buildings Appropriation Act, approved June 21, 1938,
provided an additional $60,000,000 for this purpose, making a total of
$130,000,000 for the 3-year program. The selection of projects under
the augmented authorization was in progress at the end of the fiscal
year.
Program for other departments
Funds to the amount of $35,358,668 were made available to the
Procurement Division as of June 30, 1938, by other departments and
by certain specific authorizations by Congress for the construction
of new buildings and the rehabilitation, remodeling, extension, and
repair of old buildings, 45 projects being involved. By June 30, 1938,
40 of these projects costing $22,404,396 were completed; 4 projects to
cost $8,254,272 were under contract; and one project to cost approximately $4,700,000 was being held in abeyance pending definite location
of the site.
Buildings in the District of Columbia
Included under the Public Works Administration program and the
program for other departments are various building projects in the
District of Columbia. During the year the Federal Trade Commission
(Apex) Building, the annex to.the Bureau of Engraving and Printing,
and Warehouse No. 4 for the Government Printing Office were completed. As of June 30, 1938, the addition to the Archives Building
was about 85 percent complete and a contract had been awarded for
the construction of Annex No. 3 to the Government Printing Office.
Detailed information concerning all building programs and other
activities of the Procurement Division will be found on pages 194 to
205 of this report.
TREASURY ACTIVITIES UNDER THE PROVISIONS OF THE SOCIAL
SECURITY ACT

The Social Security Act, approved August 14, 1935, provided for
grants to the States for old-age assistance, for unemployment compensation administration, for aid to dependent children, for maternal
and child welfare, for public health work, and for aid to the dependent
blind. The Secretary of the Treasury makes payments to the States,
from sums appropriated for the various purposes, of amounts certified
by the Social Security Board or other governmental agency responsible
for their determination under the provisions of the act.

REPORT OF THE SECRETARY OF THE TREASURY

Unemployment trust fund
Under section 904 (a) of the act, which established in the Treasiu-y an
unemployment trust fund, the receipts of State unemployment funds
are paid over to the Secretary of the Treasury for credit to the unemployment trust fund. The Secretary of the Treasury is authorized
and directed to pay out of the fund to any State agency such amount
as it may requisition, not exceeding the amount standing to the account
of such State agency at the time of such payment. The status of the
fund as of June 30, 1938, is shown on page 100 of this report, and as of
June 30, 1936 to 1938, and at the end of each month during 1938 in
the table on page 451 of this report. The receipts and expenditures
in connection with the fund for the fiscal years 1936 to 1938 and
monthly during 1938 are also shown in this table.
Collection of taxes
The income tax upon the wages of employees and excise taxes on
employers, imposed under titles VIII and IX of the act, are collected
by the Bureau of Internal Revenue. The amounts of taxes collected
are shown on pages 170 and 171. The procedure involved in connection
with the returns submitted by the taxpayers is explained on pages
170 to 173.
Public health work
Under title VI of the Social Security Act, appropriations were
authorized for assisting the States, counties, and other political subdivisions in maintaining adequate public health services, and for
expenditure by the Public Health Service for investigation of disease
and problems of sanitation. A report of the activities of the Public
Health Service under this title will be found on page 216.
Old-age reserve account
Title II of the Social Security Act estabhshed a system of Federal
old-age benefits. Section 201 (a) of the act established an account in
the Treasury to be known as the **01d-age reserve account.'' The
Secretary of the Treasury is required to submit annually to the Bureau
of the Budget estimates of the appropriations required to be made to
this account. A statement concerning the financial status of the
old-age reserve account is shown on page 99 of this report.
Section 201 (f) of the act requires that "The Secretary of the
Treasury shall include in his annual report the actuarial status of the
account." The term "actuarial status" is interpreted to mean a
comparison of future benefit payments with funds on hand plus future
income of the account. For valuation purposes, future income of the

REPORT OF T H E SECRETARY OF T H E TREASURY

account includes assumed annual appropriations equal to annual tax
receipts under title VIII, less an administrative-expense allowance of
$1 per year per individual covered by the act.
The valuation balance sheet shown below indicates the actuarial
status of the old-age reserve account as of June 30, 1938. The
figures are based upon data tabulated from the individual wage
records maintained by the Social Security Board, and upon certain
valuation assumptions in respect to mortality, future population
growth, etc., as set forth in a statement following the balance sheet.
Some of these assumptions are necessarily arbitrary because the system
has not been in operation long enough to furnish adequate experience. The accuracy of the balance sheet figures depends, of course,
upon how closely future experience may agree with the valuation
assumptions. The absolute amounts shown below are subject to a
considerable margin of error, but it is believed that the figures present
a reasonably conservative approximation of the relationship between
benefits and title VIII taxes.
Valuation balance sheet showing the actuarial status of the old-age reserve account as
of June 30, 1938
[In millions of dollars]
P r e s e n t value J u n e 30, 1938, of—

Future payments on account
of—
Group
td

<
Covered membership on June 30, 1.938;
$21,475
Male
5, 278
Female

o a
.23.2

§1

-I

"3
a

F u t u r e income

h-1
M

1
X

^ 03
O

.2
di

<
$4,190
424

$48 $25, 713 $21,580
5,732
2,746
30

$484 $21, 096
211
2,535

Percent
121.89
226.11

Total covered June 30, 1938
Future entrants into covered group:
Male —
Female
-.
-

26, 753

4,614

31,445

24,326

695

23, 631

133.07

32, 522
14, 386

6,560
1,150

15
108

39, 097
15, 644

43, 746
10,900

1,095
921

42, 651
9,979

91.67
156. 77

Total future entrants..
Total present and future membership:
Male '
Female
.
_.

46,908

7,710

123

54, 741

54,646

2,016

52,630

104.01

53,997
19,664

10, 750
' 1 , 574

63
138

64, 810
21,376

65, 326
13, 646

1,579
1,132

63, 747
12, 514

101.67
170. 82

73,661

12,324

201

86,186

78,972

2,711

76, 261

113.01

Grand total
Balance of old-age reserve account as
of June 30, 1938
Total assets
Excess of future benefit payments over
assets
Ratio of future benefit payments to
total assets (percent)
-

777
77, 038
9,148

===
111.87

REPORT OF T H E SECRETARY OF THE TREASURY

The valuation balance sheet is predicated upon the following
assumptions:
1. Estimated membership as of June 30, 1938.—The member,ship of the insured group as of June 30, 1938, is estimated at
approximately 34,000,000 lives. This figure is based upon the.
aggregate amount of taxable wages during the fiscal yea,r 1938^
and a sample tabulation of wage records prepared by the Social
Security Board. Of the 34,000,000 insured lives, 24,000,000 are
arbitrarily assumed to be regularly employed in covered industries. The remaining group of 10,000,000 lives is assumed to
be primarily employed in noninsured industries and will therefore become eligible for a relatively low average benefit.
2. Distribution of present membership by age and by sex.—On
the basis of the sample tabulations prepared by the Social Security Board, the 34,000,000 insured lives are classified, for
valuation purposes, as follows:
A. Classification of 24,000,000 lives assumed to be regularly employed in
insured industries, by age and by sex
[In thousands of lives]
Age group
U n d e r 20
20 to 24
25 to 29
30 to 34
35 to 39
40 to 44
45 to 49
50 to 54
55 to 59
60 to 64 . . -

Male

---

Total

1, 484.4
2, 972. 7
2, 808. 2
2, 482.1
2,128.5
1,861.8
1, 633. 2 •
1, 233. 9
868.2
535.1
18, 008.1

Female

Total

843.7
1, 485. 5
1,099. 2
784.6
592.5
452.5
332.8
209.7
125.7
65.7

2,328.1
4, 458. 2
3, 907. 4
3, 266. 7
2, 721. 0
2,314. 3
1, 966. 0
1 443 6
993.9
600.8

5, 991. 9

24, 000. 0

B. Classification of 10,000,000 lives assumed to be intermittently employed in
insured industries, by age and by sex
[In thousands of lives]
Male

Age g r o u p
U n d e r 20
20 to 24
25 to 29
30 to 34
35 to 39
40 to 44
45 to 49
50 to 54
65 to 59
60 to 64

._
_
._
.

Total

.
_

Female

Total

528.7
1,058.8
1,000. 4
884.1
758.2
663.2
581.8
. 439. 4
309. 3
190.7

504.8
888.9
657.8
469.4
354.4
270.9
199.1
125.5
75.4
39.2

1,033.6
1, 947. 7
1, 658.2
1, 353. 5
1,112.6
934.1
780.9
664.9
384.7
229.9

6, 414. 6

3, 585. 4

10,000.0

REPORT OF THE SECRETARY OF THE TREASURY

3. Average amount of annuity benefits.—The average amount of
the annuity to be paid in respect to each classification of the
34,000,000 lives insured on June 30, 1938, is estimated on the
basis of sample tabulations by intervals of annual taxable wages
prepared by the Social Security Board. The computations in
respect to those regularly employed in insured industries are
based on the sample distributions of men receiving in taxable
wages $500 or more annually and of women receiving $400 or
more annually. It is further assumed that average taxable wages
will remain constant after age 26 in the case of women and after
age 31 in the case of men. At ages below 27 and 32, respectively,
rates of wage increase are assumed. In the case of the 10,000,000
hves assumed to be intermittently employed in insured industries, the average annuities are based upon the sample distributions of men receiving in taxable wages less than $500 annually
^nd of women receiving less than $400 annually. (In the computation of the average annuities in respect to women, rates of
withdrawal from industry are taken into account—see paragraph
6 below.)
The average annual taxable wage of the entire insured membership (34,000,000 lives) is approximately $867.
4. Growth in membership and average age of new entrants.—On
the basis of studies on future population growth, it is assumed
that the regular membership (exclusive of those in receipt of
annuities) will increase gradually to an ultimate level of about
38,000,000 lives. Of this number, it is assumed that about
30,000,000 will be currently employed in an insured industry and
that the remaining 8,000,000 members below the age of 65 will
have retired from gainful employment.
The average age of new entrants into regular covered employment is assumed to be equivalent, for valuation purposes, to a
imiform entry age of 22 for women and 27 for men. The actual
average age at which individuals first become regularly employed
is probably less than 18. Thus allowance is made for the fact
that many will first become employed in noninsured industries
and later enter regular insured employment at a relatively high
age. Others permanently withdraw from covered employment
and enter agricultural or other uncovered employment prior to
reaching age 65. The use of withdrawal rates in the case of
women makes additional allowance for the fact that many women
withdraw from gaiaful employment long before reaching age 65.
The membership in respect to those intermittently employed
in covered industries is assumed to increase to about 25,000,000
lives during the next 5 years and thereafter to increase gradually
to an ultimate maximum of about 40,000,000 insured individuals.

REPORT OF THE SECRETARY OF THE TREASURY

Of this number, it is assumed that about 30,000,000 will be currently employed in covered industries and that the remaining
10,000,000 members will have permanently retired from covered
employment. The age distribution of new entrants into this
group is assumed to be proportional to the age distribution of
those intermittently employed ia insured industries as shown in
table B under paragraph 2 above.
The total membership, therefore, exclusive of those receiving
annuity benefits, is assumed to reach an ultimate maximum of
about 78,000,000, or approximately 82 percent of the expected
ultimate population between ages 20 and 65.
5. Mortality.—The calculations are based upon the United
States Life Tables for White Males, and for White Females, 1930.
No allowance is made directly for future improvement in
mortality. However, since the tables used reflect lower mortality than the rates for the entire population, some allowance
for future improvement in the mortality is made indirectly. I t
should be noted in this connection that most of the improvement
in mortality during the last 20 years has been at ages below 20.
6. Rate of withdrawal from gainful employment.—By means of
a comparison of the number of gainfully employed women at
each age with-the total number of women in the corresponding
age group according to census figures, it was possible to make
rough estimates of the percentage of insured women in each age
group who may be expected to withdraw each year from insured
employment. A service table was constructed reflecting mortality according to the United States Life Tables for White
Females and the probable annual rate of withdrawal from insured employment. This table was used in the valuation of
benefits and taxes in respect to insured women.
7. Average age of retirement.—AU women having wage credits
of $2,000 or more are assumed to become eligible for annuity
benefits at age 65. Men having $2,000 or more of wage credits
are assumed to become eligible for annuity benefits at an average
age of about 67 years. The effect of these assumptions is a
combined average age of retirement for men and women of about
66 years.
8. Allowance for administrative expense.—An allowance of $1
per year per member, including retired members, is made for
administrative expense.

REPORT OF THE SECRETARY OF THE TREASURY

I t will be seen from the balance sheet figures that in respect to
women the present value of benefits greatly exceeds the present value
of title VIII taxes. This is because women receive relatively low
average taxable wages, and many of them withdraw from gainful
employment long before reaching age 65. The cost of the benefits
expressed as a percentage of annual taxable wages is very high in
respect to all qualified individuals who will reach age 65 with relatively
low aggregate wage credits. This will be true of men who are only
intermittently in covered employment and of all insured employees
who are now near the age of retirement. The system is no doubt fully
self-supporting in respect to those who will be regularly employed in
covered industries until they permanently withdraw from gainful
employment.
On the basis of the valuation assumptions, the total annual cost
of the system as determined on an actuarial reserve basis exceeds the
annual tax receipts under title V I I I of the act by annual amounts
equivalent to about sixty-four hundredths of one percent of theaggregate annual earnings taxable under title VIII. However, as has been
pointed out above, some of the valuation assumptions are necessarily
highly arbitrary and for this reason it is believed that the estimated
discrepancy of about 12 percent between future costs and future income (title VIII taxes plus interest on reserve) may be well within
the margin of error in estimates based upon such assumptions and
extending so far into the future. When the act has been in operation
for several years it will be possible to make much more accurate estimates of the relationship between benefits and title V I I I taxes.
TREASURY ACTIVITIES UNDER THE ElMERGENCY RELIEF
APPROPRIATION ACTS

The Treasury activities begun under the earlier Emergency Relief
Appropriation Acts were continued in somewhat modified form during
the year under allocations received from funds made available by the
Emergency Relief Appropriation Act of 1937. The following table
shows as of June 30, 1938, the amounts of allocations to Treasury
projects under the several acts, and total obligations and voucher
payments for each allocation. Further information on these projects
may be obtained in reports of the various bureaus and divisions included in this report and in previous annual reports of the Secretary
of the Treasury.

REPORT OF T H E

SECRETARY OF T H E TREASURY

Allocations to projects, obligations, and voucher payments to J u n e SO, 1938
Allocations b y
the President
(warrants
issued) •

Description

A d m i n i s t r a t i v e expenses

Subtotal

Obligations

Total
voucher p a y m e n t s (checks
issued)

1935 a c t . . $26, 628, 626. 94
1936 act-_ 30,750,000.00
1937 a c t . . 16,800,000. 00
74,178, 626. 94

$26,623,941.88
30, 509, 246.15
16,315, 514. 09
73, 446, 702.12

$26, 614,865. 47
3C, 441,060. 94
15,072.016. 82
72,127, 943. 23

Coast G u a r d

1935 a c t . .

4.811, 900. 26

4, 809, 341.18

4, 766,942 58

I n t e r n a l revenue t a x s u r v e y *

1935 act__
1936 a c t . 1937 a c t -

4, 424, 231. 50
4,123,350. 58
1, 425,309. 00
9,972,891. 08

4, 397. 458. 22
3,941,063.11
1, 382, 806.13

4, 396,192. 93.
3,915,710.761,355, 562. 98

. 9,721,327.46

9, 667,466. 67
664,519 50
79, 620. 62:
20,836 97

2,831, 521. 44

664,935. 40
89, 494. 92
20, 836. 97
2 £0, 836. 97
843, 627. 57
^843,627.67
754, 430. 32

3 1 608 604 66

875,996. 01
2, 719,985. 67
1, 270,036.02
316,713.00

875,993. 91
2,719,937.31
1, 270,035. 27
315, 275.04

875,044.7a
2,719,207.35
1, 260,343.08
301,071.89-

Subtotal.

P r o c u r e m e n t Division:
Decoration of Federal b u i l d i n g s . -

_ _ .-1635 a c t
1937 a c t . .
.1935 a c t
-1935 a c t . .
.1937 a c t 1937 a c t . .
. - -

W o r k relief s u p p l y fund
R e i m b u r s a b l e from p r o j e c t s . W o r k relief s u p p l y fund, 1938
R e i m b u r s a b l e from projects
Subtotal
- _Public H e a l t h Service:
G r a n t s for services in flood areas
Health-surveys . .
._.

1936 a c t . .
1935act.1936 a c t . .
1937 a c t . .
H o t Springs T r a n s i e n t M e d i c a l C e n t e r I n f i r m a r y
1935 a c t . .
Subtotal
Total

681, 521. 44
90, 000. 00
60, 000.0'J
2,000,000.00

843, 627. 57

163, 266.00

156.022.95

117, 304.04

5, 345,996. 60

6, 337, 264. 48

5,272,971.09

97,140,936. 32

94,069,065. 56

93, 443,928. 2a

Voucher p a y m e n t s (checks issued)
Fiscal years
1935 a n d 1936
1935 act
1936 act
1937 act

A d m i n i s t r a t i v e expenses

Subtotal
Coast G u a r d - I n t e r n a l revenue t a x s u r v e y i

1935
1935
1936
1937

Subtotal
P r o c u r e m e n t Division:
Decoration of Federal buQdings
W o r k relief s u p p l y fund „
W o r k relief s u p p l y fund, 1938
Subtotals
P u b l i c H e a l t h Service:
G r a n t s for services in flood areas . .
H e a l t h surveys

1936
1935
1936
1937

act
actact
act

act
act..
act
act

$22,064, 287. 92

$4, 517,134.14
24, 475, 429. 71

22, 054, 287. 92

28,992, 563.85

1,446, 602. 59
3, 915, 380. 21

2, 739,118 86
475, 903. 15
3,828, 247. 52

3, 915, 380. 21

4, 304,150. 67

581, 221. 13.
4.909. 57
87,463. 24
1, 355, 562.98
1, 447,935. 79'

224,883. 47

421, 870. 33
21,513, 679. h7

17,765 70
79, 620. 62
2 936 03J, 37
843, 627 57

2, 695, 334. 28

U , 091,709.14

4,979. 52

2, 412, 320. 66

414, 309. 50
287,402.82
1,194, 646. 30

460, 735. 2a
19,483. 97
65, 696. 78
301,071.8&

2, 412,320. 56
32, 523,925. 56

1,896, 358. 62
36, 840, 482.86

964,291.91
24,079. 619. 81

117, 304. 04

$43,443.41
6,966,631. 23
15,072.016.82
21,081,091.46

2, 470, 450. 81

M e d i c a l Center
1935 act

H o t Springs T r a n s i e n t
Infirmary
Subtotal...^
Total

1935
1937
1935
1937

actact..
act_act-

Fiscal year 1937 Fiscal y e a r 1938-

J Comprises projects administered by the Bureau of Internal Revenue and the Division of Research and
Statistics.
2 Excess of credits (deduct).
3 Includes net payments made from work relief supply fund amounting to $864,464.64 not yet reimbursed
by governmental agencies for which purchases were made, less unliquidated obligations of the Procurement
Division.
104825—39-

-6

REPORT OF THE SECRETARY OF THE TREASURY
NONFISCAL ACTIVITIES

Coast Guard
The Coast Guard, as the Federal maritime police agency, has carried
out its duties in the interrelated fields of law enforcement; in assisting,
saving, and protecting life and property; and in the maintenance of a
state of preparedness for national defense. The Service, with its shore
units located at strategic points on the coasts of the United States and
its vessels operating upon the high seas and on the coastal and navigable waters of the United States, Alaska, Hawaii, Puerto Eico, and
the Virgin Islands, has been in a position to give effective prosecution
to the duties embraced within its field of public service, and its facilities have been employed in assisting other branches of the Government
in meeting emergencies and in the performance of tasks involving the
services of vessels and aircraft.
Its activities include prevention of the smuggling of liquor, narcotics, and other contraband; patrol of the waters of the North Pacific
Ocean and Bering Sea and southeastern Alaska in the enforcement of
laws and regulations for the protection of the fur seal, sea otter, and
fisheries, and of certain other laws in Alaska; patrol in the enforcement
of the Northern Pacific Halibut Act; enforcement of the Whaling
Treaty Act; supervision of the anchorage and movements of vessels
at ports and other places where Federal regulations are in force; enforcement of the customs, navigation, motorboat, and other related
laws of the United States; International Service of Ice Observation
and Ice Patrol in the North Atlantic Ocean; winter patrol of the coast
to aid vessels and persons in distress; removal of derelicts and other
obstructions to navigation from the paths of marine commerce; patrol
of regattas and marine parades; and the saving and protection of life
and property at sea and along the coasts.
During 1938 the smuggling of liquor and alcohol was not, as in former years, a major problem to the Coast Guard, but the utmost vigilance was demanded. Only 12 instances of the presence of foreign
hovering vessels were noted, largely in the New England area, and
quick action was taken by the Coast Guard to frustrate landing.
In the campaign against the smuggling of narcotics, over 4,430
vessels were kept under surveillance upon entering United States
waters or while within territorial jurisdiction. Special patrols covered Delaware Bay and Delaware River, Chesapeake Bay, and the
Jacksonville and New Orleans areas.
During the year there were 8,643 lives saved or rescued from peril,
the largest number in the history of the Service. In April 1938, men
and equipment were dispatched to the flooded area in Alabama to
assist in the relief work.
A more detailed account of the operations of the Coast Guard will
be found on pages 116 to 126 of this report.

REPORT OF THE SECRETARY OF THE TREASURY

Public Health Service
Health conditions in 1937 and the first half ofljl938 remained
unusually favorable. According to provisional tabulations the death
rate for 1937 was 11.2 per 1,000 population as compared with the final
rate of 11.5 for 1936. A continued decline in infant and maternal
mortality, and a resumption of the decline in tuberculosis mortality
were noted. New low death rates were recorded during 1937 for
typhoid fever, scarlet fever, diphtheria, tuberculosis, malaria, pellagra,
nephritis, and diseases associated with pregnancy and childbirth.
The leading causes of death, according to prehminary data, were
diseases of the heart, cancer, pneumonia, cerebral hemorrhage,
nephritis, accideuts (except automobile), and tuberculosis, in the order
named.
The stimulating effect of Federal aid, under the provisions of title VI
of the Social Security Act, upon State and local health services was
particularly noticeable in the expansion of pubhc health facilities, the
increase in both State and local appropriations for such work, and the
improvement in qualifications of technical and professional personnel
engaged in public health work. Particularly gratifying progress was
made in the extension of rural health services and in the recruiting
and training of additional State and local personnel. The current
appropriation and balances from the preceding appropriation provided
approximately $9,000,000 for allotment to the States for health work
under title VI of the Social Security Act, and practically all of this
was paid to the States on the basis of budgets submitted by the
State health departments and approved by the Surgeon General.
A full accoimt of the public health work conducted under the health
provisions of the Social Security Act is to be found on page 216 of
tliis report.
Under the stimulus given last year by the Public.Health Service, the
fight against the venereal diseases has gone forward with accumulating
momentum. Health authorities, medical groups, educators, and
religious and other organizations have increased their efforts and
employed all educational mediums to acquaint the public with the
serious nature of these diseases and the proper measures for control.
Through increased State and local appropriations and the allotment of
Federal funds under title VI of the Social Security Act, many States
and localities have expanded their facilities for diagnosis and treatment of these diseases. An added impetus in the fight to reduce and
control syphilis and gonorrhea in the United States was given by the
Seventy-fifth Congress when it passed the Venereal Disease Control
Act, appropriating $3,000,000 to carry out the provisions of the act

REPORT OF THE SECRETARY OF THE TREASURY

during the fiscal year 1939, and authorizing increasing future appropriations. This legislation, by providing Federal assistance to the
States and maldng the control of venereal diseases definitely a concern
of the National Government, should give the vast army of health
authorities, physicians, public officials, and the citizens the necessary
encouragement and stimulation to make successful the concerted
attack on these diseases.
Two outstanding events marked material progress in the provision
of facilities for research—the organization of the National Cancer
Institute and the culmination of plans for the erection of a group of
new buildings for the National Institute of Health near Bethesda,
Md., the cornerstone of the first structure having been laid on June 30,
1938.
In the conduct of national quarantine activities especial attention
was directed to air traffic between the Orient and the West Coast
and between South America and the South Atlantic Coast. The
Quarantine Regulations were amended to prevent the importation
of potential disease vectors in bacteria cultures and infected animals
and plants. Unsettled conditions in Europe caused a considerable
increase in applications for immigration visas and necessitated the
detail of additional officers to American consulates abroad.
The United States Public Health Service hospital (narcotic farm)
at Lexington, Ky., operated at full capacity during the year, admitting
950 patients, discharging 955, and having a daily average of 949.
The initial group of buildings for the second institution, at Fort
Worth, Tex., was completed and the medical officer in charge was
assigned to duty, preparatory to opening the institution for the
reception of patients in October 1938.
Many improvements were effected in the facilities for the medical
care of Public Health Service beneficiaries at the marine hospitals
and relief stations, as the result of funds made available for additional
personnel and equipment and the adoption of new methods of treatment, such as the use of sulfanilamide. This splendid service has
been afforded beneficiaries at a per diem cost of $3.56.
With the aid of collaborators from the Children's Bureau and the
Bureau of the Census, the Public Health Service made a comprehensive study of the Health Department and other health agencies of
the District of Columbia, including the municipal hospital, as a
result of which appropriate suggestions were made for correcting the
deficiencies disclosed by the survey.
The activities of the Public Health Service are more fully presented
on pages 216 to 230.

REPORT OF THE SECRETARY OF THE TREASURY

Bureau of Narcotics
The Bureau of Narcotics continued during the JQ^V the policy of
directing its principal enforcement activities against the chief violators of the domestic narcotic laws, cooperating with customs authorities in curbing the smuggling of drugs into the United States,
and of soliciting the cooperation of State and municipal law enforcement agencies in dealing with the peddler and the addict, and in
prosecuting minor infractions of the narcotic laws. The same policy
was adopted with respect to the enforcement of the Marihuana Tax
Act of 1937, which became effective on October 1, 1937.
Diversion of drugs from legitimate to illicit channels through the
robberies of narcotic stocks, the forgery and false execution of narcotic prescriptions, and the improper prescribing and dispensing of
narcotics continued to be an enforcement problem. The cases against
persons registered under the Harrison Narcotic Law, as amended, were
only 14 percent of the total cases reported under the narcotic laws
during the year, compared with 23 percent during 1937. There were
only 2 cases against persons registered under the Marihuana Tax Act
out of a total of 846 cases reported under that act.
The Uniform State Narcotic Law was enacted during the year by the
State of Michigan and the District of Columbia, making a total of 39
States and the District of Columbia in which this law had been enacted,
with little or no amendment, prior to July 1, 1938. This act, when
adopted by a State, complements the Federal laws and renders more
eft'ective the cooperation of State and municipal law enforcement
agencies.
A more complete account of the activities of the Bureau will be
found on pages 187 to 191 of this report.
CHANGES IN ORGANIZATION AND PROCEDURE

During the year a number of changes were made in the organization
of the Bureau of Internal Revenue, looking to the more expeditious
dispatch of its business and the greater convenience of taxpayers.
The audit and disposition of tax returns under title V I I I of the Social
Security Act was transferred from the Bureau to collectors' offices,
the Social Security Tax Unit was abolished as a separate subdivision
of the Bureau, and the administration of the tax provisions under
titles VIII and I X of the Social Security Act and under the Carriers
Taxing Act of 1937 was transferred to the Accounts and Collections
Unit. Plans were perfected also for the complete decentralization of
income, excess-profits, estate, and gift tax collection, which it is expected will be placed fully in effect during the ensuing year. These
plans contemplate the establishment of a number of regional divisions in which tax cases will be given final consideration locally.

REPORT OF THE SECRETARY OF THE TREASURY

instead of requiring their submission to the Bureau at Washington.
Three such regional offices have been established already—one on the
Pacific coast, embracing the States of Washington, Oregon, California,
Idaho, Montana, Utah, Nevada, and Arizona, and the Territories of
Alaska and Hawaii; the second at New York City, covering the State of
New York; and the third at Chicago, including the States of Illinois,
Indiana, Wisconsin, Minnesota, North Dakota, and South Dakota.
Under the provisions of Treasury Department Order No. 18,
March 25, 1938, there were established in the Office of the Secretary
a Division of Monetary Research and a Division of Tax Research, the
functions of the divisions being set forth in the order, which is shown
as exhibit 59 on page 329 of this report. Except with respect to the
functions transferred to the newly established divisions, the Division
of Research and Statistics continues to perform the duties outlined
in Treasury Department Order No. 8 of September 17, 1934.
Attention is invited to the attached reports of bureaus and divisions
of the Treasury Department and to the exhibits and tables accompanying the report on the finances.
H E N R Y MORGENTHAU, J R . ,

Secretary of the Treasury,
To the SPEAKER OF THE H O U S E OF REPRESENTATIVES.

ADMINISTRATIVE REPORTS OF
BUREAUS AND DIVISIONS

OFFICE OF THE COMMISSIONER OF ACCOUNTS AND DEPOSITS

The Office of the Commissioner of Accounts and Deposits has
administrative supervision over the Division of Bookkeeping and
Warrants and its relations to the office of the Treasurer of the United
States, over the Division of Disbursement, the Division of Deposits,
and the Section of Surety Bonds. I t prepares periodic estimates of
the future cash position of the Treasury for use of the Department in
connection with its financing; prepares calls for the withdrawal of
funds from special depositaries to meet current expenditures; directs
the transfer of Government funds between Federal Reserve banks
when necessary; directs fiscal agency functions in general, including
deposits of gold certificates in the gold certificate fund for credit with
Federal Reserve banks; supervises collections of principal and interest
on foreign obligations; keeps the accounts, and handles generally
matters relating to the indebtedness of foreign governments to the
United States, including matters arising under funding agreements;
supervises collections of railroad obligations owned by the Government, and keeps the accounts relating thereto; handles the collection
of other obligations owned by the United States which are turned over
to the Treasury by other departments for collection; and makes payments, keeps accounts, and handles matters generally relating to
awards under the Settlement of War Claims Act of 1928, under the
claims agreement of October 25, 1934, between the United States
and Turkey, and under the act of April 10, 1935, covering claims
against the Republic of Mexico. The Commissioner likewise exercises supervision, under direction of the Secretary of the Treasury,
over the investment accounts of the Government, including investments held in the old-age reserve account, unemployment trust fund,
and railroad retirement account, and is responsible for the proper custody of investments and securities held by the Treasurer of the United
States and the Federal Reserve banks for which the Secretary is
responsible, other than those related to public debt operations. The
Commissioner also has supervision over the emergency accounting organization set-up in the several States under the Emergency Relief
Appropriation Acts of 1935, 1936, 1937, and 1938.
Daily statement of the United States Treasury
During the year important changes were made in the manner in
which the expenditures of the Government are classified in the daily
statement of the Treasury. For a number of years prior to July 1,
1937, expenditures under general and special accounts were classified
as ^^general'' to represent the usual expenditures of the Government,
and as '^recovery and relief' (and as ^'emergency") to represent expenditures beginning in the fiscal year 1932 and continuing thereafter,
identified with governmental activities arising out of the economic
emergency existing during that period. Beginning with the statement of July 1, 1937, expenditures under general and special accounts

REPORT OF THE SECRETARY OF THE TREASURY

were classified as (I) general, (II) recovery and relief, (III) revolving
funds (net), (IV) transfers to trust accounts, etc., and (V) debt
retirements (sinking fund, etc.).
Further important changes in the manner of classifying expenditures
as shown in the daily statement were initiated beginning July 1, 1938.
These changes are .summarized in the following extract from the
announcement accompanying the daily statement for July 1, 1938:
Effective July 1, 1938, the financial transactions of the Reconstruction Finance
Corporation, Commodity Credit Corporation, and Export-Import Bank of
Washington will be reflected on page 3 of daily Treasury statements. Heretofore,
such transactions have been included in the expenditures on page 2 of daily
Treasury statements (commonly associated with the Federal Budget) on a net
basis, i. e., checks paid by the Treasurer of the United States less receipts deposited
by such corporations in their disbursing accounts with the Treasurer. The purpose of this change is to simplify the daily Treasury statement, and to eliminate
confusion and misunderstanding concerning the effect of such corporations* transactions on the Federal Budget, particularly in cases where the Treasury acts only
in the nature of a depositary of funds derived by the Corporations from the sale of
their own obligations on the market.

The complete text of the announcement which accompanied the
statement for July 1, 1938, is shown as exhibit 65 on page 347 of this
report.
Combined statement of assets and liabilities of governmental corporations
and credit agencies
A combined statement of assets and liabilities of governmental
corporations and credit agencies as of June 30, 1938, will be found as
table 49 on page 530 of this report. This statement is published
monthly in the Daily Statement of the United States Treasury, as
required by Executive Order No. 6869 of October 10,^ 1934. A
summary statement of the proprietary interest of the United States
in such corporations and credit agencies as of June 30, 1929 to 1938,
inclusive, appears as table 50 on page 536.
Securities owned by the United States Government
The aggregate amount of securities owned by the Government on
June 30, 1938, based upon the latest reports received, was $15,566,304,543.85, as agamst $17,606,022,695.57 on June 30, 1937, a decrease of
$2,039,718,151.72. A summary comparison of the holdings at the
end of each fiscal year follows. A detailed statement of the securities
held on June 30, 1938, will be found as table 48 on page 527.

REPORT OF THE SECRETARY OF THE TREASURY

Summary of securities owned by the United States on June 30, 1937 and 1938
Security

June 30,1937

June 30,1938

Foreign obligations
$12,014,847, 669.94 $12,016, 711,737. 24
Capital stock of war emergency corporations .
33,614, 594. 86
33, 515, 915. 88
Capital stock, etc., of other governmental
corporations and credit agencies:
Reconstruction Finance Corporation
(Capital stock and notes, less funds
expended for subscriptions to capital stock of other governmental corporations and funds disbursed to
other governmental agencies for
making loans included below.)
Capital stock and paid-in surplus of the
Federal National Mortgage Association
Home Owners' Loan Corporation bonds.
Capital stock of the regional agricultural
credit corporations..
. .
Capital stock of Federal home loan
banks
..
_..
Capital stock of the United States Housing Authority
_. . .
United States Housing Authority notes..
Capital stock of the Disaster Loan Corporation
Capital stock (preferred and full-paid income shares) of Federal savings and
loan associations
Capital stock of the Tennessee Valley
Associated Cooperatives, Inc
Capital stock and paid-in surplus of
Federal land banks
Capital stock of banks for cooperatives..
Another
Total
Other obligations and securities:
Railroad obligations
Obligations acquired by the Federal
Emergency Administration of Public Works
Notes received by the Farm Credit Administration evidencing outstanding
advances made from the revolving
fund created by the Agricultural Marketing Act
Securities received from the Reconstruction Finance Corporation
Securities received by the Secretary of
the Navy
Securities received by the United States
Maritime Commission _
.
Obligations of farmers for seed, feed,
and drought-relief loans
Obligations of farmers for crop-production loans
Obligations of joint stock land banks...
Securities received by the Farm Security Administration
Securities received by the Rural Electrification Administration
Securities received by the Puerto Rico
Reconstruction Administration
Securities received by the Secretary of
the Interior, loans to Indians
Total..
Grand total „
1 See p. 19.

3,303,389,546.17

Increase or decrease (—)
$1,864, 067. 30
-98,678.98

1 1,270,093,240.73 1 -2,033,296,305.44

25,000,000. 00
15,000,000.00

11,000,000. 00
15,000,000.00

11, 000,000.00
-10,000,000.00

5, 000,000. 00

— 10,000,000.00

124, 741, 000.00

4, 227,000.00

1,000, 000.00
4, 000, 000.00

1,000,000. 00
4,000,000.00

6,000,000.00

10,000,000.00

4,000,000. 00

48,183, 700.00

47,802,700.00

-381,000.00

120, 514, 000. 00

1,000.00
262, 225, 213. 78
90,000, 000.00
985,860. 000.00
4,856,172,459. 95

299,939,486. 31
96, 000,000. 00
985,860, 000.00

1,000.00
37, 714, 273. 53
6,000,000.00

2,870,437,427. 04 , —1,985,735,032.91

30, 230, 232.55

128,488,708.59

36,311,879.85

—92,176, 828. 74

94,825,898.95

-16,560,997.40

2,774,400.00

111, 386, 896. 35

4,784, 715.69

4,707,805.83

-76, 909.86

93,470,611.87

66,851,877.41

-26,618, 734.46

156,161, 936. 94

152,060, 950. 52

-4,100,986.42

32,979,456.87
116,996.96

32,470, 932.82
55, 553.78

-508, 524.05
- 6 1 , 443.18

127, 668, 516.45

169, 372, 670.78

41, 704,154.23

11,864,836.86

50,169, 344.17

38,304,507.31

3,700,593.21

3,897,142.09

196,548.88

534,468.48

1,910,774.94

1,376, 306.46

701,387,970.82

645, 639,463.69

-55,748,507.13

17,606,022,695.67

15,566,304,543.85

-2,039,718,151.72

REPORT OF TFIE SECRETARY OF THE TREASURY

Contingent liabilities of the United States
A summary statement of the contingent liabilities of the United
States as of June 30, 1937 and 1938, and the change between the two
dates is shown below. A detailed statement of such liabilities as of
June 30,1938, and a description of them appear as table 44 on page 520.
Total amount of contingent liability
Agency

Increase or
decrease ( - )

Obligation
June 30,1937

Commodity Credit Corporation.
Federal Farm Mortgage
Corporation.
Federal Housing Administration.
Home O w n e r s ' L o a n
Corporation.
Reconstruction Finance
Corporation.
Postal.Savings System...
Federal Reserve System-

Notes
Bonds, various issues

June 30, 1938
$206,428,192. 21 $206, 428,192. 21

-.
$1,431, 256, 530.17

Debentures.

91, 212. 72

Bonds, various issues

3,007,049, 722.33

Notes, various issues

256,191,418. 26

1,418, 740, 648. 56 -12,515,881.61
592, 284.80

501,072.08

2,953, 299,482. 56 -53, 750, 239. 77
299,072, 398. 75

42,880, 980. 49

Funds due depositors... 1, 299, 758, 852.95 11,294,627,336.18
Federal Reserve notes. _. 4,196,006, 653. 25 4,139,147, 770.18

-5,131.516.77
-56,858,783.07

1 On basis of latest figures received as of these dates.

Accounting and disbursing of emergency relief funds
Under section I I (A) of Executive Order No. 7034, dated May 6,
1935, and Department Circular No. 543, approved by the President,
the Commissioner of Accounts and Deposits continued during the year
to maintain accounting and disbursing fa.cilities for handling allocations made by the President under the Emergency Relief Appropriation Acts. The provisions of section I I (A) of Executive Order No.
7034 were extended by Executive Orders Nos. 7396 and 7649, to apply
to funds appropriated in the Emergency Relief Appropriation Acts of
1936 and 1937.
In addition to the 56 Treasury-State accounts offices and bb Treasury-State disbursing offices, there were 28 branch accounts offices and
an equal number of branch disbursing offices at the beginning of the
fiscal year. During the year, through the cooperation of the Works
Progress Administration, the number of Treasury-State accounts
offices was reduced to bb and the number of branch accounts and
disbursing offices was reduced to 6 offices of each class. As a result
of the discontinuance of these branches and the consolidation of the
work in the central State offices and as a result of administrative economies, a reduction in personnel of 2,087 employees was effected in the
Treasury-State accounts and disbursing offices.
At the close of the year, over 238,000 separate project accounts were
maintained on the books of the Treasury-State accounts offices for
various administrative agencies. Of these accounts nearly 63,000
were active. In addition, there were maintained on the books of the
Treasury-State accounts offices over 812,000 individual accounts.of
Farm Security (formerly Resettlement) borrowers, of which approximately 686,000 were active. In connection with the maintenance of
such accounts, the Treasury-State accounts offices prepared over
2,470,000 bills to borrowers for amounts due.
From the beginning of the program in 1935, accounts of disbursing
officers have been rendered to tlie General Accounting Office as of the

REPORT OF TPIE SECRETARY OF THE TREASURY

lOth, 20th, and last day of each month. During the fiscal year 1938,
pursuant to the President's letter of November 20, 1935, nearly 5,000
disbursing and collection accounts (including branch office accounts)
were administratively examined by the Central Treasury Accounts
Office prior to their transmission to the General Accounting Office
for audit and settlement.
The practice inaugurated at the beginning of the program of compiling complete financial reports every 10 days for the President, ad-ministrative agencies, and others concerned, with respect to the financial status of the funds provided in the Emergency Relief Appropriation Acts of 1935, 1936, and 1937, was continued during the year. In
addition to these 10-day reports, there have also been compiled nine
detailed reports showing the status of the funds. A cumulative summary of such reports is given below:
Cumulative summary of data contained in 9 reports on the financial status of funds
provided in the Emergency Relief Appropriation Acts of 1935, 1936, and 1937
D a t e of report

1.
2.
3.
4.
5.
6.
7.
8.
9.

D e c . 31,1935
M a r . 10, 1936
M a r . 31,1936
J u n e 30, 1936
Dec. 31,1936
M:.ar. 31, 1937
J u n e 30, 1937
D e c . 31, 1937
J u n e 30, 1938

Appropriated
b y Congress

Allocated b y
the President

$4,300,000,000 $4, 236,981, 642
4,426, 079,008
4,434,000, 000
4,508,412, 285
4, 576,570,000
4, 668,159,883
4, 679,473,143
6,094,290,585
6,121,472, 550
0, 721,882, 755
6,921,068,922
6,914,991, 471
6,927, Oil, 145
8,422,078, 684 . 7,927, 283, 396
8, 655,121,646
8, 656, 321, 646

Obligations
incurred

Disbursements
(checks issued)

$2, 340,856,001
3, 282,083, 647
3,466,159, 327
4,249,875,094
5, 670, 204,883
6,179, 319, 789
6,721,666.937
7,473,887,801
8,553, 683,922

$1, 672, 394, 306
2, 301,156, 714
2,515,082,158
3,424,564, 516
4,983, 215,447
5, 628,496,826
6, 285, 073,448
7,191,023,323
8, 286, 313,827

T o t a l unexp e n d e d balances
$2, 627,605,694
2,132,843,286
2,061,487,842
1, 254,908,627
1,138,257,103
1,292,572,096
641,937,697
1,231,055,361
1 370 007 819

1 The unobligated balance on June 30, 1938, was $102,637,724.

The reports to the Congress were submitted within 9 days after the
close of the calendar year and contained detailed information with
respect to the operations under the Emergency Relief Appropriation
Acts classified according to act limitations, organization units, States
in which the work was done, types of work, objects of expenditures,
and by fiscal years.
A summary report of the status of the funds under the Emergency
Relief Appropriation Acts of 1935, 1936, anci 1937, as of June 30, 1938,
is contained in table 24, page 465. Similar information as of the close
of each month is published m the daily Treasury statement for .the
15th of the month next following.
Federal savings and loan associations
Under the act of June 13, 1933 (48 Stat. 133), the Secretary of the
Treasury w^as authorized on behalf of the United States to subscribe
for preferred shares in Federal savings and loan associations upon
request of the Federal Home Loan Bank Board. The amendm.ent of
April 27, 1934 (48 Stat. 645), to the Home Owners' Loan Act 9f 1933
further authorized the Secretary to subscribe for full-paid income
shares in these associations. An appropriation of $50,000,000 to
enable the Secretary of the Treasury to purchase the preferred and
full-paid income shares was reduced by an allocation of $700,000 to the
Federal Home Loan Bank Board. The details concerning the provisions of law under which these subscriptions were m.ade and the
appropriations are contained in the annual report for 1936.

REPORT OF T H E SECRETARY OF T H E TREASURY

The Home Owners' Loan Corporation also was authorized to purchase full-paid income shares of Federal savings and loan associations
after the funds available to the Secretary of the Treasury for the
purchase of such shares had been exhausted. The funds available
to the Secretary of the Treasury were exhausted on October 25, 1935.
During the fiscal year 1938, the sum of $381,000 was received on
account of shares repaid, making the total shares repaid to June 30,
1938, $1,497,300.
The following statement shows a summary of the transactions in
connection with the subscriptions by the Secretary of the Treasury to
preferred and fuU-paid income shares in these associations:
Preferred and full-paid income shares of Federal savings and loan associations subscribed by the Secretary of the Treasury to June SO, 1938, and dividends received
[Par value of shares]
Preferred
shares
Total shares subscribed and paid

Full-paid income shares

Total

$637,800

$48, 662, 200

$49,300,000. 00

Shares held on June 30, 1937
Less shares repaid during fiscal year 1938

40,500
22,000

48,143, 200
359,000

48,183,700.00
381,000.00

Shares held on June 30, 1938

18, 500

47,784,200

47, 802, 700 00

Dividends received on preferred and full-paid income shares:
To June 30, 1937
Fiscal year 1938
To June 30. 1938

3,013, 237. 90
1, 738, 675. 64
4,751,913 54

Federal home loan banks
The Federal Home Loan Bank Act, approved July 22, 1932 (47
Stat. 728), provides that the Secretary of the Treasury shall subscribe,
on behalf of the United States, for such part of the minimum capital of
each of the 12 Federal home loan banks as is not subscribed for by
mem.bers^ within 30 days after books have been opened for stock
subscriptions. The.aggregate amount authorized to be expended for
this purpose was $125,000,000, and so much of such sum as was
necessary was made available by the Reconstruction Finance Corporation. Further details concerning the provisions of the act of
July 22, 1932, are contained in the annual report for 1936. Pursuant
to the act approved February 24, 1938, the Secretary of the Treasury
canceled notes of the Reconstruction Finance Corporation aggregating
$126,301,906.17, equivalent to the amount of funds advanced by the
Corporation, plus interest paid to the Treasury on account of such
notes.
The Federal Home Loan Bank Board made calls for payments on
account of subscription aggregating $4,227,000 during the fiscal year.
The dividends received during the year aggregated $1,866,882.25.
The following statement shows a sum.mary of the transactions in
connection with the subscriptions by the Secretary of the Treasury to
stock of Federal home loan banks:

BEPORT OF THE SECEETAKY OF THE TREASURY

Subscriptions by the Secretary of the Treasury to stock of the Federal home loan,
banks to June SO, 1938, and dividends received thereon
[Par value of shares]
Total shares Shares held
subscribed June 30, 1937

Federal home loan bank

Boston
New York
Pittsburgh
Winston-Salem
Cincinnati
Indianapolis...
Chicago..
Des Moines
Little Rock
Topeka
Portland
Los Angeles

$12, 467, 500
18. 963, 200
11, 146, 300
9, 208, 200
12, 775, 700
6, 577,400
14, 173,900
7, 394,900
8, 772, 400
7, 333, 600
5, 960, 000

$11, 450,
16, 000,
10, 900,
9, 208,
12, 775,
6, 577,
14, 173,
7, 394,
8, 772,
7, 333,
5, 960,
967,

124,741,000

120, 514,000

967,900

Total

Federal home loan bank

Boston.-L
New York
Pittsburgh.
Winston-Salem
Cincinnati
Indianapolis...
Chicago
Des Moines
Little Rock
Topeka..
Portland
Los Angeles
Total...,

Shares paid
fiscal year
1938

Shares held
June 30, 1938

$1,017, 500
2,963, 200
246, 300

$12, 467, 500^
18, 963, 20011, 146, 300208, 200
775, 700'
577, 400
173, 900'
394. 900i
772,40a
333,600.
960, 000
967,900-

4, 227,000

124, 741,000<

Dividends
Dividends
Dividends
received to received fiscal received to
June 30, 1937
year 1938
June 30,193&
$295, 234.04
784, 205. 70
613,364.98
419, 777. 71
924, 721. 79
377, 664. 59
811,253.45
338, 631.38
375, 856. 56
166,744.60
188,140.88
153,655.60
5,449, 251.:

$176, 208.07
332,383.05
109, 283.41
91,965.58
255, 514.00
98, 661. GO
283, 478.00
147, 783. 93
87, 724.00
73.171. 96
87,150.00
123, 559. 25
1,866,882.25

$471, 442.11
1,116,588. 75.
722, 648. 39?
511, 743. 29
1,180, 235. 79476, 325.59.
1,094, 731.45
486, 415. 31
463, 580.56
239, 916. 56275, 290.88277, 214.86
7, 316,133.5a

Federal land banks
Capital stock.—Under the act of January 23, 1932, amending the
Federal Farm Loan Act, as amended, it is the duty of the Secretary
of the Treasury on behalf of the United States, upon the request of
the board of directors of any Federal land bank made with the approval of the Farm Credit Administration, to subscribe from time to
time for capital stock of such bank. The act further provides that
such stock may at any time, in the discretion of the directors and with
the approval of the Farm Credit Administration, be paid off at par
and retired in whole or in part and that the Farm Credit Administration may at any time require such stock to be paid off at par and
retired in whole or in part if in its opinion the bank has resources
available for such purpose. The proceeds of all repayments on
account of stock subscribed for by the Secretary of the Treasury are
held in the Treasury and are available for the purpose of paying for
other stock thereafter issued pursuant to said act.
To enable the Secretary of the Treasury to pay for said stock,
$125,000,000 was appropriated under the act approved February 2,
1932. The following statement shows a summary of the transactions
in connection wdth the subscriptions by the Secretary of the Treasury
to stock of Federal land banks:

REPORT OF T H E SECRETARY OF THE TREASURY

Subscriptions by the Secretary of the Treasury to stock of Federal land banks to
June 30, 1938
[Par value of shares]

Federal land banks

Springfield
Baltimore
Columbia
Louisville
New Orleans..
St. Louis
St. Paul
Wichita
Houston
Berkeley
Omaha
Spokane
Total

subShares held Shares fiscal
June 30, 1937 scribed
year 1938
$5, 256, 630
7, 331, 415
15, 667, 695
5, 734, 360
16, 693.650
7,977, 070
21. 552, 830
5, 747, 795
7, 326, 840
5,189,015
6, 203, 735
15, 383, 710
120,004,745

$5. 500, 000

5, 500, 000

Shares repaid fiscal
year 1938
$49, 420
33, 750
15, 770
56,150
20, 775
108, 700
66, 245
67, 235
62,875
61, 310
179,545
41, 450
763, 225

Shares held
June 30. 1938.

$5, 207, 210
7, 297, 665
15, 651, 925
5, 678, 210
16, 672, 875
7,868, 370
26,986, 585
5, 680, 560
7, 263, 965
5,127,705
6, 024,190
15, 342, 260
124,801,520

Payments on account of reduction in interest rates on mortgages and
subscriptions to paid-in surplus.—The Secretary of the Treasury is
directed, under certain conditions, to make payments to Federal land
banks equal to the amount by which interest payments on m.ortgages
held by such banks have been reduced pursuant to the Federal Farm
Loan Act, as amended, and he is also to subscribe, under specified
conditions and in the manner prescribed by the Federal Farm Loan
Act, as amended, to the paid-in surplus of each Federal land bank an
amount equal to the amount of all extensions and deferments of any
obligation that may be or may become unpaid under the terms of any
mortgage. A description of the basis of these payments is given on
page 70 of the annual report for 1936.
The period for which payments to Federal land banks on account
of reduction in interest rates may be made was extended to June 30,
1939, pursuant to Pubhc No. 209, enacted July 22, 1937. Amendments to the law under which subscriptions are made to the paid-in
surplus of the Federal land banks are contained in the Farm Credit
Act of 1937, approved August 19, 1937.
A statement as of June 30, 1938, of the amounts appropriated on
account of reduction in interest rates on mortgages and of payments
to Federal land banks for this purpose is as follows:
Appropriations on account of reduction in interest rates on mortgages, and payments to Federal land banks for this purpose to June 30, 1938
1. Amounts appropriated:
To June 30, 1937
Third Deficiency Appropriation Act, 1937, Aug. 25, 1937
First Deficiency Appropriation Act, 1938, Mar. 5, 1938
Total to June 30., 1938..

$88,950,000.00
15,000,000.00
16,700,000.00
120,650,000.00

REPORT

OF T H E SECRETARY

OF T H E TREASURY.

2. Payments to Federal land banks:
A m o u n t paid A m o u n t paid A m o u n t p a i d
to J u n e 30,1937 flscal y e a r 1938 to J u n e 30,1938

Federal l a n d b a n k

Springfield
Baltimore
Columbia
Louisville
N e w Orleans
St. Louis
St. P a u l
Wichita,
Houston
B e r k e l e y . . __
Omaha.
Spokane

„.. .

. . .
.

Total

$2,970,050.51
3,801. 731. 69
3, 544, 351.73
8,401,246.11
5, 044,824. 29
6,993,136.41
10,996,518. 68
6, 579,082.04
9, 571,687. 30
4,683,874.85
13,374,986.53
5,440, 509.77

$1,179.450.60
1,348,874.10
1,282,988. 69
3,219,878. 27
1,656.030.21
2,829, 543. 98
4,803,977. 20
2, 667,434.86
3, 615,014. 56
1,920.768.99
5, 770,835. 57
1,819, 236.18

$4.149, 501.11
5,150,605. 79
4,827, 340.42
11,621,124. 38
6,700,854.50
9,822,680. 39
15,800,495.88
9,246,516.90
13,186, 701.86
6,604,643.84
19,145,822.10
7,259,745.95

81,401,999.91

32,114,033. 21

113,516.033.12

3. Amount availablevfor expenditure June'30, 1938..

$7,133,966.88

A statement as of June 30, 1938, of the amounts appropriated for
subscriptions to the paid-in surplus of Federal land banks on account
of extensions and deferments, and payments to Federal land banks
for this purpose, follows:
Appropriations for subscriptions to the paid-in surplus of Federal land banks on
account of extensions and deferments, and payments for this purpose to J u n e 30,
1938
1. Amounts appropriated:
To June 30, 1937
$189,000,000.00
189,000,000.00

T o t a l to J u n e 30, 1938
2. P a y m e n t s to F e d e r a l l a n d b a n k s :

A m o u n t paid A m o u n t paid - A m o u n t paid
to J u n e 30,1937 fiscal year 1938 to J u n e 30,1938

Federal l a n d b a n k

Springfield
Baltimore
.
Columbia
Louisville .
..
N e w Orleans
St. Louis
. . .
St. P a u l
Wichita
Houston
Berkeley
Omaha
Spokane

.
_.
-

$8, 313, 734. 30
2,917, 535. 44
6, 672, 387. 06
8, 394, 084. 52
.._..
14, 280, 956. 94
. . 10,858, 658. 28
18, 377, 685. 37
12, 999, 512.80
• 9,209,600.00
15,162, 347.84
. . . . 21, 352, 706.95
13, 621, 259.28

$1,975,015.13
1, 678, 916. 96
1, 794, 568. 27
1, 908,890. 37
1,190, 502. 70
1,831,188. 74
6,991,486.45
2, 021, 493. 00
2, 678,000.00
4, 650, 253. 28
4, 683,197. 36
1, 573,985. 27

$10, 288, 749. 43
4, 596; 452. 40
8, 466, 955. 33
10, 302, 974. 89
15, 471, 459. 64
12, 689,847. 02
25, 369,171. 82
15, 021, 005. 80
11,887, 600.00
19,812, 601.12
26, 035,904. 31
15,195, 244. 55

142,160,468. 78

32, 977, 497. 53

175,137,966. 31

Total

3. Amount available for expenditure June 30, 1938

$13,862,033.69

Advances to Federal Reserve banks for industrial loans, etc.
Advances to the Federal Reserve banks for industrial loans, etc.,
were authorized by the act approved June 19, 1934 (48 Stat. 1105),
which amended the Federal Reserve Act, as amended, by adding
section 13 (b). The provisions under which the Secretary of the
Treasury makes these advances were described on page 73 of the
annual report for 1936.
Advances made to the banks during the fiscal year 1938 amounted
to $125,000. Payments received by the Treasury during the year
aggregated $176,829.66.
The following statement is a summary of the transactions in connection with these advances to Federal Reserve banks:
104825—39

REPORT OF T H E SECRETARY OF T H E TREASURY

Advances to the Federal Reserve banks for industrial loans and payments received by
the Treasury to June 30, 1938

Federal Reserve bank

Atlanta...
Boston.
Chicago
Cleveland
Dallas
Kansas City„
Minneapolis..
New York
Philadelphia.
Richmond
St. Louis
San Francisco
Total...

Maximum payments authorized

$5, 272,031. 55
10, 230,236.88
19, 748,516. 70
14,146, 863. 66
4,359, 338.10
4,131, 276.30
3, 509,467.65
42, 529,210. 65
14, 620,883.52
5,808, 291. 43
5,093, 112.25
9,850, 328. 30
139,299, 556. 99

Payments made to Federal Reserve banks Payments . •
received by
the TreasFiscal
to June
To June 30,1937 year
To June 30,1938 ury
30,1938
1938
$756, 934. 44
2,875,115.98
1, 417, 701. 33
1,015, 571.33
1, 251, 788. 08
1,145, 717. 73
1,007, 746.96
7, 752,044. 63
4,198, 400. 60
3, 420, 662.05
547, 832.83
2,031,795.01 $125, 000
27, 421, 310. 97

125,000

$756 934.44
$9,065. 91
2,875,115.98
90,147. 75 .
1, 417, 701. 33
74,345. OO
1,015, 571.33
36, 641. 73
1, 251, 788.08
73, 499. 57
1,145, 717. 73
20, 952. 6&
1,007, 746.96
33, 313. 54
7, 752,044. 63
82, 987.08
4,198, 400. 60 209, 920.03
3, 420, 662.05
66, 714. 26
547,. 832. 83
4,356.98
2,156, 795.01
27, 546, 310.97

701, 944. 54

Appropriations and expenditures under the Social Security Act
The Social Security Act, approved August 14, 1935, provided,
among other things, for the establishment of a system of Federal oldage benefits, and for grants-in-aid to the several States to enable
them to make more adequate provision for aged persons, blind persons, dependent and crippled children, m.aternal and child welfare,
public health, and the administration of their unemployment compensation laws.
The amounts appropriated to June 30, 1938, under the various
authorizations contained in the Social Security Act and total expenditures from such appropriations to June 30, 1938, are shown in the
table on page 454.
Obligations of foreign governments
The United States received during the year payments aggregating
$588,070.82 on accoimt of the indebtedness of foreign governments, of
which $69,000 was for account of principal, $481,009.82 was for
account of interest, and $38,061 was for account of annuities under
the moratorium agreements. The Government of Finland, in accordance with the provisions of its funding agreement of May 1, 1923,
made payment of $69,000 for account of principal and $144,112.50 for
account of the semiannual interest due on December 15, 1937, in part
with $210,000 face amount of 2K percent Treasury bonds of 1949-53,
which were accepted at par.
The following statement shows the payments due during the period
July 1 to December 31, 1937, and the am^ounts actually paid on
account by certain governments:

o
REPORT OF TPIE SECRETARY OF T H E TREASURY

AMOUNTS DUE AND PAYABLE, JULY 1 TO D E C E M B E R 31, 1937
F u n d i n g agreements
Moratorium
agreements
Principal
Belfifium
Czechoslovakia
Estonia
Finland
France
Great Britain
Greece . . _ _ .
Hungary
Italy
Latvia . . .
Lithuania
Poland - . . . .
Rumania
Yugoslavia
. - -

$4,158,000.00

_ .
. _ ..

$1,500,000.00
131,000.00
69,000.00

i , 554,000.00

286,265. 00
144,112. 50
19, 261,432. 50
75,950,000. 00
217,920.00
33,185. 08
1,245,437. 50
119,609. 00
107,783.67
3,582,810.00

40,747,730.00

105,145,070.88

._--

37,000,000.00
426,000.00
13,830.00
63,900.00

. . . . . .

$484, 453. 88
182,812. 78
36,585. 29
19, 030. 50
3,046,879.72
9,720,765. 05
67,137. 38
• 4, 225. 58
896,155. 88
15,274. 26
13, 683. 26
456,229. 71
48,750. 08

$4,642,453.88
1,682,812.78
453,850. 29
232,143.00
22,308,312. 22
122,670,765. 05
711,057. 38
51,240.66
2,141, 593. 38
188,783. 26
121,466.93
5,593,039.71
. 48,750.08
38,515. 63

14,991,983.37

160,884,784. 25

38,515. 63

Total

Interest

AMOUNTS ACTUALLY PAID
Finland
Hungary
Total

$69,000.00

$144,112.50
9,828.16

$19,030.50

$232,143 00"
9,828.16

69,000.00

153,940.66

19,030. 50

241,971.16

The following statement shows payments due during the period
January 1 to June 30, 1938, and the amounts actually paid on account:
AMOUNTS DUE AND PAYABLE, JANUARY 1 TO JUNE 30, 1938
Funding agreements
Moratorium
agreements

Country
Principal
Belgium
Czechoslovakia
Estonia
Finland
France
Germany (Austrian indebtedness).
Great Britain
Greece
Hungary..
Italy..
Latvia
."
Lithuania
Poland
Rumania..
Yugoslavia
Total

$4,700,000.00
1,500,000.00
68,634,249.88
1 460,093. 00
432,000.00

'i4,'6oo,"ooo.'oo"
48,155. 00
2,000,000. 00
400,000.00

92,774,497.

Total

Interest
$484,453.88
182,812. 78
36,586.29
19,030. 50
3,046,879. 72
34,767. 23
9,720,765.05
67,137. 38
4,225. 58
896,155. 88
15,274. 26
13, 683. 26
456,229. 71
48,750. 08

$9,342, 453.88
1,682, 812. 78
322, 850. 29
161, 935. 50
90,942, 562.10
494, 860. 23
85,670, 765.05
717, 057. 38
37, 410. 66
16, 741, 593. 38
134, 883. 26
169, 621. 93
4,039, 039. 71
2,048, 750. 08
438, 515. 63

15,026, 750. 60

212,945,111.86

$142,905.00
3174,336. 00
9,828.16

$19,030.50

$161 935 50
174,336. 00
9,828.16

327,069.16

19,030. 60

346,099. 66

$4,158,000. 00
286,265.00
142,905. 00
19,261,432.60
75,960,000.00
217,920.00
33,185. 08
1,245, 437. 50
119,609. 00
107, 783. 67
3,582,810.00
38,515. 63
105,143,863.38

AMOUNTS ACTUALLY PAID
Finland . - . .
Greece.-..
Hungary
Total

1 The German Government has been notified that the Government of the United States will look to the
German Government for the discharge of this indebtedness of the Government of Austria to the Government of the United States.
2 Represents payment of 40 percent of interest due on May 10,1937, and Nov. 10,1937, which was received
on May 25,1938.

REPORT OF THE SECRETARY OF THE TREASURY

Press releases of the Treasury Department and correspondence
exchanged between the Government of the United States and various
foreign governments regarding the amounts due during the fiscal year
will be found as exhibit 45 on page 285 of this report.
A statement showing the prmcipal of the funded and unfunded
indebtedness of foreign governments to the United States, the accrued
and unpaid interest thereon, and payments on account of principal
:and interest as of November 15, 1938, appears as table 57 on page 548.
The total amounts previously due from' foreign governments on
account of their indebtedness to the United States under the funding
and moratorium agreements and not paid as of November 15, 1938,
according to contract terms, are shown in the following statement:
TOTAL AMOUNTS DUE AND NOT PAID, AS OF NOVEMBER 15, 1938
Funding agreements
Country
Principal
Belgium
Czechoslovakia
•Estonia
France.
Germany:
(Austrian indebtedness) i.
Great Britain
Greece
Hungary 2
Italy
Latvia
Lithuania
Poland
Rumania
Yugoslavia
Total

$26, 600,000. 00
16,170,085.83
723, 000. 00
284, 34.5, 738.11
1, 380,279.00
165, 000,000.00
5, 265, 000.00
78, 830. 00
80, 200, 000. 00
289, 900. 00
263, 580. 00
8, 761, 000. 00
9, 000, 000. 00
2, 275, 000. 00
600,352,412.94

Moratorium
• agreements

Total

Interest
9,198,000.00
3, 394, 285. 00
231,137,190.00
817,949, 481. 58
1, 928, 995. 50
364, 342. 45
11, 699, 791. 74
1, 300,168. 84
' 1,122, 437. 02
42, 481,890. 00
77,031. 26
1,150,653, 613.39

$4,844, 538. 80
1, 828,127.80
365, 852. 90
30,468, 797. 20

$70, 642, 538. 80
17,998,213. 63
4, 483,137. 90
545,951, 725. 31

104,301. 69
1, 484, 580. 69
97,207, 650. 50 1,080,157,132. 08
738, 511.18
7, 932, 506. 68
42, 255.80
485,428:25
8, 961, 558.80
100,861, 350. 54
152,742. 60
1, 742, 811.44
136,832. 60
1, 522,849. 62
4, 562, 297.10
55,805,187.10
487,500.80
9,487,500.80
2,352,031.26
149,900,967.77

1,900,906, 994.10

I The German Government has been notified that the Government of the United States will look to the
German Government for the discharge of this indebtedness of the Government of Austria to the Government of the United States.
. 2 The Hungarian Government has deposited with the foreign creditors' account at the Hungarian National Bank an amount of pengo.equivalent to the interest payments due from December 15, 1932, to June
15, 1937. The debt funding and moratorium agreements with Hungary provide for payment in dollars in
•the United States.

Austria.—The Minister of the Republic of Austria informed the
Department of State on March 17, 1938, that, as a result of the (levelopments which have occurred in Austria, that country had ceased to
exist as an independent nation and had been incorporated in the
German Reich. In view of this announcement the German Government was notified that the Government of the United States will look
to it for the discharge of the relief indebtedness of the Government of
Austria to the United States under the debt agreement of May 8, 1930,
and the moratorium agreement of September 14, 1932.
Press releases of the Department of State dated April 6, 1938, and
June 17, 1938, relating to this subject, will be found as exhibit 46 on
page 292.
Hungary.—The Hungarian Government on August 16, 1937, made
a proposal, which was accompanied by a definite acknowledgment of
its indebtedness to the United States, to pay the amount of $19,656.32
per annum in semiannual installments of $9,828.16 over a period of 3
years, the first installment being payable on December 15, 1937, on
account of the amounts due under the Hungarian debt funding agree-

REPORT OF THE SECRETARY OF THE TREASURY

81,

ment of April 25, 1924, and the moratorium agreement of May 27,
1932.
The Hungarian Government was informed that the Treasury will
receive the semiannual payments contemplated under its proposal,
and that the acceptance of such payments for application on account,
of its indebtedness cannot be construed as a concurrence in the proposal of the Hungarian Government as to suspension of payments
previously due, nor in any way alter the provisions of its debt funding
agreement of April 25, 1924, and moratorium agreement of May 27,,
1932, with the United States or prejudice the rights of the United'
States Government. Pursuant to such proposal payments of
$9,828.16 each were received by the Treasury on December 15, 1937,
and June 15, 1938.
A press release of the Department of State accompanied by the
correspondence between Hungary and the United States relating to the
above-mentioned proposal will be found as exhibit 47 on page 294.
On February 7, 1938, a communication was received from the
Minister of Hungary in which the Hungarian Government tentatively.
formulates for the consideration of the Government of the United
States a possible basis for a new debt arrangement between the two,
countries to replace completely the debt agreement of 1924 and accruals thereunder. The President transmitted this communication to
the Congress for its consideration. The President's message of March
28, 1938, and the communication from the Minister of Hungary
appear as exhibit 48 on page 297.
Nicaragua.—The Government of Nicaragua purchased surplus war
material from the Secretary of War and the Secretary of the Navy;
under contracts dated November 14, 1921, February 25, 1927, and.
July 24, 1925, and gave in payment for such material its obligations
bearing interest at 6 percent per annum, payable to the United States
in the aggregate amount of $431,849.14. During the period from 1924
to 1926 Nicaragua paid to the United States $168,575.84 on account
of such obligations, of which $141,950.36 was applied to the principal
of the indebtedness and $26,625.48 was applied to interest.
On April 14, 1938, a treaty between the United States and Nicaragua for the adjustment of pending financial matters was signed in
Washington, under which the United States agrees to pay and
Nicaragua agrees to accept the sum of $72,000 in full settlement of
the claim of Nicaragua for refund of $372,879.06, being the principal
amount of certain income taxes paid by the Ferrocarril del Pacifico
de Nicaragua (a railroad owned and operated by Nicaragua), and
for refund of interest thereon, and in consideration of such agreement
the United States cancels the indebtedness of Nicaragua in the
principal amount of $289,898.78, together with interest thereon.
The Senate, on June 13, 1938, gave its advice and consent to the
ratification by the President of the treaty.
A press release of the Department of State relative to the execution
of the treaty between the United States and Nicaragua and the
agreement as ratified by the Senate will be found as exhibits 49
and 50 on pages 300 and 301.

REPORT OF THE SECRETARY OF THE TREASURY

Receipts from Germany
During the fiscal year 1938 the United States received no payments
from the Government of Germany under the debt-funding agreement
of June 23, 1930, covering the costs of the American Army of Occupation and the awards of the Mixed Claims Commission, United States
and Germany.
Army costs.—Payments of 8,200,000 reichsmarks were due on
September 30, 1937, and March 31, 1938, respectively, from the
Government of Germany on account of army costs under the provisions of the debt agreement of June 23, 1930. Interest amounting
to 3,762,750 reichsmarks was also due on those dates. There has
been no change in the army cost account from that shown in the
statement appearing on page 39 of the annual report of 1932.
Mixed claims, United States and Germany.—Payments of 20,400,000
reichsmarks were due on September 30, 1937, and March 31, 1938,
respectively, from the Government of Germany on account of mixed
claims awards under the provisions of the debt agreement of June 23,
1930. Interest amounting to 12,750,000 reichsmarks was also due
on those dates.
Annuities under moratorium agreement.—The semiannual installments, aggregatmg 3,058,098.90 reichsmarks, of the annuities under
the moratorium agreement with the Government of Germany dated
May 26, 1932, which were due during the fiscal year 1938, were not
paid by Germany.
The status of the indebtedness of Germany to the United States
as of June 30, 1938, under the funding and moratorium agreements
is summarized in the following tables:
AMOUNT OF I N D E B T E D N E S S

Army costs (reichsmarks)
Mixed claims (reichsmarks)

Total (reichsmarks)
._
Total (in dollars, at 40.33 cents to the
reichsmark).

Indebtedness
as funded

Total indebtedness as of June
30.1938

Principal

Interest accrued and
unpaid i

1,048,100,000
2,121,600,000

1, 012, 628,482. 60
2,080,800,000.00

997,-500,000
2,040,000,000

15,128,482.60
40,800,000 00

3,169,700,000 2 3,093,428,482.60

3, 037, 500,000

55,928,482. 60

1, 247, 579, 707.03

1, 225,023,750

22,555,957.03

1,278,340,010

1 Includes interest accrued under unpaid moratorium agreement annuities.
2 Includes 4,027,611.95 reichsmarks deposited by the German Government in the Konversion.skasso fur
Deutsche Auslandsschulden and not paid to the United States in dollars as required by the debt and
moratorium agreements.
PAYMENTS R E C E I V E D
Total payments received
as of June 30,
1938
Army costs (reichsmarks)...
Mixed claims (reichsmarks)
Total (reichsmarks)...
Total (in dollars)

51,456,406. 25
87, 210,000.00

Payments of
principal

50,600,000.00
81,600,000.00

138,666,406. 25 132, 200,000. 00
33, 587,809. 69 31, 539, 595. 84

Payments of
interest

856,406. 26
5,610,000.00
6, 466,406.25
2, 048, 213. 85

REPORT OF T H E SECRETARY OF T H E TREASURY

AMOUNTS NOT PAID ACCORDING TO CONTRACT T E R M S , JUNE 30, 1938
Funding agreement
Date due
Principal
Sept. 30, 1933
Mar. 31, 1934
Sept. 30, 1934
Mar. 31, 1935-_
Sept. 30, 1935
Mar. 31, 1936.
Sept. 30, 1936
Mar. 31, 1937
Sept. 30, 1937
Mar. 31, 1938

'
_

reichsmarks..
do....
do....
...do..-.
".do....
do....
.do....
.do....
.do....
....do....

Total
do....
Total (in dollars, at 40.33 cents.to the
reichsmark)...
_

2,498,562.50

122,400,000
20,400,000
82, 900,000
29, 700, 000
29, 700,000
29, 700,000
29, 700,000
28,600,000
28, 600,000

Moratorium
agreement

Total

Interest

3, 855, 687. 50
4, 534, 250. 00
5, 212,812. 50
5,891, 375. 00
6, 569,937. 50
7, 248, 500. 00
7,927,062. 50
8, 585, 687. 50

1, 529,049.45
1 4,027,611.95
1, 529,049.45 123,929, 049.45
1, 529,049.45
25,784, 736.95
1, 629, 049.45
88,963, 299.45
1, 529,049.45
36,441, 861.95
1, 529, 049. 45 37,120, 424. 45
1, 529,049.45
37, 798, 986.95
1, 529.049.45
38, 477, 549.45
1, 529,049.45
38,056, 111.95
1, 529,049.45
38, 714, 736.95

401,700,000

52,323,875.00

15, 290,494. 50

469, 314, 369. 60

162,005,610

21,102,218. 79

6,166,656.43

189, 274,485. 22

1 Includes 4,027,611.95 reichsmarks deposited by the German Government in the Konversionskasse fur
Deutsche Auslandsschulden and not paid to the United States in dollars as required by the debt and
moratorium agreements.

Treasury administration of alien and mixed claims
The Settlement of War Claims Act of 1928 authorized the Secretary of the Treasury to make payments on account of (1) awards of
the Mixed Claims Commission, United States and Germany, for claims
of American nationals against the Government of Germany; (2)
awards of the War Claims Arbiter for claims of German, Austrian,
and Hungarian nationals against the Government of the United
States; and (3) awards of the Tripartite Claims Commission for claims
of American nationals against the Governments of Austria and
Hungary.
The time within which claimants could file applications for payment of awards from the Mixed Claims Commission, United States
and Germany, and the Tripartite Claims Commission, United States,
Austria, and Hungary, has been extended from time to time, and
was further extended until March 10, 1940, under the joint resolution
of Congress approved May 23, 1938, a copy of which will be found
as exhibit 64 on page 346 of this report.
Executive Order No. 6981, dated March 2, 1935, as amended by
Executive Order No. 7111, dated July 22, 1935, removed in certain
cases the restrictions imposed by Public Resolution No. 53 of June 27,
1934, as to payments, transfers, and deliveries of property under
the Trading with the Enemy Act, as amended, and the Settlement of
War Claims Act of 1928, as amended.
Mixed Claims Commission: Claims against Germany.—No payments were made during the year on account of awards of the Mixed
Claims Commission.
The following summary shows the awards certified to the Treasury
by the Secretary of State, by classes, number, and amount of the
awards, the amount paid on account, and the balance due thereon as of
September 30, 1938:

Number and amount of awards of the Mixed Claims' Commission, United States and Germany, certified to the Secretary of the Treasury by the
Secretary of State and the amount paid and balance due, by classes, as of September 30, 1938
Class I
Total
number of
awards

A w a r d s certified

1. A m o u n t d u e on a c c o u n t :
P r i n c i p a l of a w a r d s :
A g r e e m e n t of A u g . 10, 1922
A g r e e m e n t of D e c . 31. 1928

420 $3, 489,437. 75
115
556, 625. 00

160, 381,008. 29

4,046,062. 76

Number of
awards

Other awards
of $100,000 a n d
less

Number of
awards

Other awards
over $100,000

3,829
2,169

$15,102,155. 76
2, 447,803.92

298
6

$96,058, 757.17
691, 434. 28

4 $42, 034, 794.41

17, 549, 959. 68

96, 750,191. 45

42,034,794. 41

48, 012. 50

139, 214. 35

187, 226. 86

T o t a l p a y a b l e to J a n . 1, 1928
I n t e r e s t t h e r e o n to d a t e of p a y m e n t or, if u n p a i d
Sept. 30, 1938, a t 5 % per a n n u m as specified in
t h e S e t t l e m e n t of W a r C l a i m s A c t of 1928. .
T o t a l dnp. c l a i m a n t s

A w a r d s on
a c c o u n t of
death and
personal
injury

4,551 $156, 685,145. 09
2,290
3,695,863.20

I n t e r e s t to J a n . 1,1928, a t r a t e s specified in a w a r d s :
A g r e e m e n t of A u g . 10, 1922
A g r e e m e n t of D e c . 31, 1928

T o t a l p a y m e n t to Sept. 30, 1938
Less one-half of 1% d e d u c t i o n from each p a y m e n t :
A g r e e m e n t of A u g . 10, 1922

Number of
awards

U n i t e d States
Government

Amount

o
W

Less a m o u n t s p a i d b y Alien P r o p e r t y C u s t o d i a n
and others
.. . ...

2. P a y m e n t s m a d e on a c c o u n t to Sept. 30, 1938:
Principal of a w a r d s :
A g r e e m e n t of A u g . 10, 1922
A g r e e m e n t of D e c . 31, 1928 •
I n t e r e s t to J a n . 1,1928. a t r a t e s specified in a w a r d s :
A g r e e m e n t of A u g 10, 1922
A g r e e m e n t of D e c . 31. 1928
I n t e r e s t at 5% per a n n u m from J a n . 1, 1928, to
d a t e of p a y m e n t as directed b y t h e S e t t l e m e n t of
W a r C l a i m s Act of 1928

Total amount

Class I I I

Class I I

1 4, 236
2,263

160,193, 781. 44

4, 046, 062. 75

17, 501, 947.18

96,610,977.10

42, 034. 794.41

69, 755, 018. 74
1,409, 240.88

732,801. 61
115,976.22

6,851, 202.19
971,159.15

42,961, 689. 72
322,105. 51

19, 209, 325. 22

231, 358,041. 06

4; 894,840. 58

25, 324; 308. 52

139,894, 772. 33

61, 244.119. 63

62,075.871.03

188, 801. 74

1, 375,185. 82

27, 607, 850. 98

32, 904, 032. 49

293, 433,912. 09

5, 083, 642. 32

26, 699, 494. 34

167, 502, 623, 31

94,148,152.12

15, 028,952. 94
2,445,886. 69

1103,221,804.53
789, 280.11

121, 740,195. 22
3, 791, 791. 80
7, 574,058.17
1, 086, 361. 01

420
115

3,489, 437. 75
556, 625. 00
732, 801. 61
115, 976. 22

3,816
2,148

6, 841, 256. 56
970, 384. 79

(2)
(2)

1, 543, 664. 32

188, 801. 74

1, 354,862. 58

(2)

135, 736,070. 52

5, 083, 642. 32

26, 641, 343. 56

104, Oil, 084. 64

3 651, 809. 90

21, 650. 20

114, 050. 28

516,109.42

^^
H

d
Kl

A g r e e m e n t of D e c 31, 1928
N e t p a y m e n t s m a d e to c l a i m a n t s to S e p t . 30,
1938
3. Balance d u e on a c c o u n t :
P r i n c i p a l of a w a r d s :
A g r e e m e n t of A u g . 10, 1922
A g r e e m e n t of D e c . 31, 1928
I n t e r e s t to J a n . 1,1928, at r a t e s specified in a w a r d s :
A g r e e m e n t of A u g . 10 1922
A g r e e m e n t of D e c . 31, 1928
Accrued interest a t 5% per a n n u m from J a n . 1,
1928, on total a m o u n t p a y a b l e as of J a n . 1,1928, to
S e p t . 30, 1938
B a l a n c e d u e c l a i m a n t s as of Sept. 30, 1938

315
27

4 26,871.04

3, 767. 97

19,156.68

3,946.39

135, 057, 389. 58

5,058, 224.15

26, 508,136. 60

103, 491, 028. 83

96, 928, 737. 96
226,176. 91

13
21

9, 945. 63
774. 36
60, 532, 206. 71
157, 697,841. 57

25,190. 32
1, 917. 23

298
6

35, 659, 428. 01
224, 259. 68

61, 244,119. 63

9, 946. 63
774. 36

20, 323. 24

27, 607, 850. 98

32, 904, 032. 49

58,150. 78

63, 491, 538. 67

94,148,152.12

1 Includes payments on account of interest to Jan. 1, 1928, on class III awards. Payments on this class of awards are first applied on account of the total amount payable as of
Jan. 1, 1928, as directed by the Settlement of War Claims Act of 1928, until total of all payments on the three classes equals 80 percent of the amount payable Jan. 1, 1928. Payment
of accrued interest since Jan. 1, 1928, on this class of claims deferred in accordance with act.
'
' See note 1.
3 Of this amount $650,025..04 has been covered into the Treasury as miscellaneous receipts. A further sum of $1,784.36 will be covered into the Treasury at a later date.
* Of this amount $24,160.09 has been paid to the Government of Germany. A further sum of $2,720.95 is payable in connection with the adjudication of late claims under the
agreement of Dec. 31, 1928.

w
Q

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W
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I
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Ki

KEPOKT OF THE SECRETARY OF THE TREASURY

War Claims Arbiter.—Under the Settlement of War Claims Act of
1928, it was the duty of the War Claims Arbiter, within certain limitations, to hear the claims of German, Austrian, and Hungarian
nationals and to determine the fair compensation to be paid by the
United States for ships seized, patents sold or used by the United
States, and a radio station sold to the United States.
War Claims Arbiter: Claims of German nationals.—The Treasury
completed up to June 30, 1935, payment of 50 percent of the amount
of all awards made by the War Claims Arbiter in favor of German
nationals as required by paragraph 7 of section 4 (c) of the Settlement
of War Claims Act of 1928. No payments were made on these awards
subsequent to that date.
The following summary shows the number and amount of awards
in favor of German nationals certified to the Treasury for payment,
the payments made on account, and the balance due thereon as of
September 30, 1938:
Awards of the War Claims Arbiter on account of claims of German nationals for
ships, patents, and radio station, amount paid, and balance due on each, as of
September SO, 1938

1. Amount due on account:
Principal of awards, including interest to Jan. 1,
1929 .
_
Interest at 6% per annum from Jan. 1, 1929, on
total amount payable as of Jan. 1, 1929, or on
the principal amount remaining unpaid to
Sept. 30,1938
Total due claimants
2. Payments made on account to Sept. 30,1938:
Principal of awards
Interest at 6% per annum from Jan. 1, 1929,
total amount payable as of Jan. 1, 1929, or
the principal amount remaining unpaid
Sept. 30, 1938
—

1__
on
on
to

Total pajrments to Sept. 30,1938
3. Balance due on account:
Principal of awards
__..
Interest accrued at 5% per annum from Jan. 1,
1929, on total amount payable as of Jan. 1,1929.
or on the principal amount remaining unpaid
to Sept. 30, 1938
Balance due claimants

Total amount
(315 awards)

Ships, amount
(27 awards)

Patents and
radio station,
amount (288
awards)

$86,738,320.83

1 $74,252,933.00

$12,485,387.83

25,826,438.03

21,959,104.04

3,867,333.99

112,564,758.86

96,212,037.04

16, 352,721.82

43,368,899. 24

37,126,206. 21

6, 242, 694.03

43, 368,899. 24

37,126, 205. 21

6, 242, 694.03

43,369,421. 69 1 37,126,727.79

6, 242.693.80

25,826,438.03

21,969,104.04

3,867,333.99

69,195,859. 62

59,085,831.83

10,110,027.79

i Includes awards amounting to $522.68 to members of former ruling family of Germany (sec. 3 (j). Settlement of War Claims Act of 1928, as amended).

War Claims Arbiter: Claims of Hungarian nationals.—The awards
made by the Arbiter to Hungarian nationals in the sum of $39,125,
with interest at the rate of 5 percent per annum from July 2,1921, to
December 31, 1928, amounting to $14,675, have been paid with the
exception of one award amounting to $137.51, together with interest
thereon at the rate of 5 percent per annum from December 31, 1928.
No payments were made during the year on these awards.
German special deposit account.—The following statement shows the
total amounts deposited in the German special deposit account, the
amounts paid therefrom to September 30, 1938, and the balance held
in the account:

REPORT OF THE SECRETARY OF THE TREASURY

Funds deposited in the German special deposit account and payments made therefrom
to September 30, 1938
RECEIPTS
From investments by Alien Property Custodian under
Trading With the Enemy Act, as amended:
Unallocated interest fund..
$26,000,000.00
Lessrefimds
.„
4,000,000.00
21,000,000.00
17,552,096.91

20% German property retained

From Germany:
2M% of Dawes' annuities available for reparations
(Paris agreement of Jan. 14,1926)
32,183,060.87
Under German-American debt agreement, June 23,1930. 19,469,964.00
Interest on payments postponed under terms of debt
agreement dated June 23,1930.
1,743,738.70
Appropriation for ships, patents, and radio station
86,738,320.83
Expenses of administration, War Claims Arbiter, on account of German nationals
113,624. 20
Earnings and profits on investments by the Secretary of the
Treasury

$38,562,096.91

53,396,763.67

i, 851,945.03
4,872,667.12

Total receipts

$183,673,372.6
PAYMENTS ON ACCOUNT

Awards of the Mixed Claims Commission:
Under agreement of Aug. 10, 1922
Under agreement of Dec. 31, 1928
Awards of War Claims Arbiter:
For ships
For patents and radio station

$129,710,005.62
6,347,383. f"
_

37,126,205.21
6,242,694.03

One-half of 1% deducted from mixed claims payments, covered into Treasury ($1,784.36
. withheld but not paid).
One-half of 1% deducted from mixed claims payments on account of awards entered
under agreement of Dec. 31, 1928 (act of June 21, 1930), and paid to Germany ($2,720.96
withheld but not paid)
Advances to special fund, expenses of administration of the Settlement of War Claims Act
of 1928 (office of the Secretary of the Treasury).
_
Expenses of administration, War Claims Arbiter, on account of German nationals
Total payments

43,368,899. 24
650,026.54
24,160.09
43,176.00
113,624.20
179,267,263.65

Balance in German special deposit account (including investments)
Made up as follows:
$3,847,000 face amount 3%'Treasury bonds of 1961-66
$110,000 face amount 2% Treasury notes, series B-1942
Cash balance

$135,057,389. 68

4,416,108.98
Principal cost
$3,828,053.61
„
110,000.00

3,938.053. 51
478,056.47
4,416,108.98

Tripartite Claims Commission: Claims against Austria.—The"^total
amount of awards, including interest, certified by the Tripartite
Claims Commission to the Treasury for payment was $370,032.14.
All of these awards against Austria have been paid, except one in the
amount of $135.06. Sufficient funds have been retained to pay this
award. No payments were made on these awards during the fiscal
year 1938.
Tripartite Claims Commission: Claims against Hungary.—The
awards entered by the Tripartite Claims Commission against Hungary,
in favor of American nationals, amounted to $199,975.57. During
the fiscal year 1938 no payments were made on account of such awards.
As of June 30, 1938, awards aggregating $7,257.35 had not been paid
because claimants had not filed applications as required by law.

REPORT OF THE SECRETARY OF THE TREASURY
Claims of American nationals against Turkey

Representatives of the United States and Turkey signed at Istanbul
on October 25, 1934, a final agreement for the settlement of the claims
of the nationals of each country against the other, embraced within
the agreement concluded between the United States and Turkey
through an exchange of notes on December 24, 1923, and confirmed
by a further exchange of notes on February 17, 1927. The agreement provides that the Republic of Turkey will pay to the United
States the sum of $1,300,000, without interest, in full settlement of
claims of American citizens which are embrace(l by the agreement of
December 24, 1923, in 13 annual installments of $100,000 each; the
first installment to be paid on June 1, 1936, following ratification of
the agreement by the Great National Assembly of Turkey. The
agreement was approved by the Assembly on December 23, 1934.
Under an exchange of notes in October and November 1937 the United
States consented to a change of the due date for the payment of the
annual installments under the agreement from June 1 to June 20
because June 1 coincides with the beginning of the Turldsh fiscal year
and was therefore an inconvenient time for the Turkish Government
to make payments of an important nature.
Under the joint resolution approved eJune 18, 1934, authorizing an
appropriation to cover the expenses incurred by the United States in
connection with such claims, it was provided that the expenses shall
become a first charge upon any moneys received from the Turkish
Government and the amount of such expenditures shall be deducted
from the first payment b}^ the Turkish Government and deposited in the
Treasury as miscellaneous receipts, and that the Secretary of State in
distributing to the respective claimants the balance of the amounts received from the Turkish Government shall apportion the amount withheld on account of expenses in such manner as to constitute a uniform
percentage of deduction from the amount found to be due each claimant.
The Special Claims Commission, United States and Turkey, established under the agreement of December 24, 1923, made awards in
33 cases aggregating $899,338.09, which were reduced by $70,891.06
on account of expenses incurred by the United States, leaving net
awards amounting to $828,447.03 payable from funds received from
the Republic of Turkey. Under the provisions of the act of February 27, 1896 (29 Stat. 32), these awards were certified on August
19, 1937, by the Secretary of State to the Secretary of the Treasury
for payment. During the fiscal year 1938 a prorata payment was
made to the claimants by the Treasury from funds amounting to
$129,108.94, available for that purpose.
Statement of awards made by Special Claims Commission, United States and Turkey,
as of June 30, 1938
Amount awarded to claimants:
Amount of claims
$539,844.13
Interest allowed
359,493.96
Total.
•
899,338.09
Less deductions on account of expenses incurred by the United States
70,891.06
Amount of awards
$828,447.03
Amount received from Republic of Turkey:
To June 30, 1937
200,000.00
During fiscal year 1938
.
Q)
Total.
200,000.00
Less reimbursement for expenses by the United States
_
70,891.06
Available for payment to claimants
129,108.94
1 Installment of $100,000 due on June 20,1938, received by Treasury on July 1, 1938.

REPORT OF THE SECRETARY OF THE TREASURY

Claims of American nationals against Mexico
The Special Mexican Claims Commission was established pursuant
to the act approved April 10, 1935, with jurisdiction to hear and
determine, conformable to the terms of the convention of September
10, 1923, and justice and equity, all claims against the Republic of
Mexico, notices of which were filed with the Special Claims Commission, United States and Mexico, established by the convention of.
September 10, 1923, in which the said Commission failed to award
compensation, except such claims as may be found by the Commission
provided for in the Special Claims Convention of April 24, 1934, to
be general claims and recognized as such by the General Claims
Commission. Section 4 of the act provides that if, after all claims
have been passed upon and all awards have been entered, the total
amount of such awards is greater than the amount that the Government of Mexico has agreed to pay to the Government of the United
States in satisfaction of the claims, less expenses of the Commission,
it shall reduce the awards on a percentage basis to such amount, and
shall enter final awards in such reduced amounts.
Pursuant to section 9 of the act of April 10, 1935, the Secretary of
State shall transmit to the Secretary of the Treasury a list of all claims
allowed in. whole or ia part, together with the amount of each claim
and the amount awarded by the Commission, and the Secretary of
the Treasury, after making the deduction to cover the expenses of
the United States incurred in connection with such claims, shall
distribute in ratable proportions, among the persons in whose favor
awards shall have been made, or their assignees, heirs, executors, or
administrators of record, accordin.g to the proportions which their
respective awards shall bear to the whole amount then available for
distribution, such moneys as may be received from the Government
of Mexico under the convention of April 24, 1934.
Under the convention between the United States and Mexico dated
April 24, 1934, covering the en bloc settlement of the claims presented
by the Government of the United States to the Commission established by the Special Claims Convention concluded September 10,
1923, the amount to be paid by the Government of Mexico to the
Government of the United States was fixed at $5,448,020.14. This
amount is to be paid at the rate of $500,000 per annum, beginning
January 1, 1935, and continuing until the whole amount shall have
been paid. Deferred payments, that is, payments made after January
2, 1935, shall bear interest at the rate of one-fourth of 1 percent per
annum for the first year countiag from January 1, 1935, and an
additional one-fourth of 1 percent for each additional year until the
maximum of 1 percent is reached, which shall be applied beginning
January 1, 1939. In the event of failure to make annual payments
when due, this rate shall be increased at the rate of one-fourth of 1;
percent per annum on the amount of deferred payments during the
period of any such delay until a maximum additional rate of 3 percent
on such overdue amounts is reached.
On June 20, 1938, the Secretary of State certified to the Secretary
of the Treasury for payment a list of awards entered by the Special
Mexican Claims Commission aggregating $9,137,341.79, which were
subject to reduction on a percentage basis as provided in section 4 of
the act approved April 10, 1935. The final awards aggregated

REPORT OF T H E SECRETARY OF THE TREASURY

$5,208,284.86. The total appropriations to cover the expenses
incurred by the United States amounted to $250,000 and, pending a
final determination as to the actual amount of expenses paid by the
United States, an amount equivalent to the appropriations has been
withheld from the payments made by the Government of Mexico.
As of June 30, 1938, there was available for distribution to claimants
the sum of $1,814,220.30. A distribution of this amount to claimants
was initiated shortly after that date.
Statement of awards made by Special Mexican Claims Commission, United States
and Mexico, as of June SO, 1938
Amount of final awards to claiihants after application of section 4 of the act approved April
10, 1936
$5,208,284.86
Amount received from Government of Mexico:
Jan. 2, 1935, $500,000 principal
' Jan. 2, 1936, $500,000 principal and $12,370.05 interest
Jan. 2, 1937, $500,000 principal and $22,240.10 interest..
Jan. 2,1938, $600,000 principal and $29,610.15 interest._.

$500,000.00
512, 370.05
622, 240.10
629,610.15

Total
Less amount reserved to cover expenses incurred by the United States
Available for payment to claimants

2,064,220.30
250,000.00
1,814,220.30

Railroad obligations
Total receipts during the fiscal year on account of railroad securities
owned by the United States amounted to $66,675.66, of which
$2,600.55 was collected by the Director General of Railroads under
the Federal Control Act, as amended, and $64,075.11 was collected
by the Treasury Department under section 210 of the Transportation
Act, 1920, as amended.
The following statement shows the total amount of railroad obligations, by classes, originally held by the United States Government
(exclusive of certain miscellaneous obligations held by the Director
General of Railroads), the amount held on June 30, 1938, and payments, received on account:
Class

Federal Control Act:
Equipment trust notes.
Sec. 7
Sec. 1 2 . . .
Transportation Act:
Sec. 207
Sec. 210
Total

Principal
Principal amount | amount
held on
originally held
June 30,1938 I

$346, 566, 750.00
98,401, 755.00
62,103,453.28
282, 712,837.36
290,800, 667.00
;0, 576,462. 64

Total payments received
Principal

Interest

$346, 556, 760.00
98,401, 755. 00
62,103,453.28

$45, 338,918. 25
23,100, 562.27
4, 248,171.96

$5,007,000.00
25, 223,232. 55

1 277, 695,167.90
265,677,434.45

54,360,339.70
90,792,070.18

30,230,232.55

1,060,334,560.63

217,840,062. 36

1 Stock of the Kansas, Oklahoma & Gulf Ry. Co., in the face amount of $212,500, was sold on the market
for $201,830.54, resulting in a difference of $10,669.46 between the receipts and the principal originally held.

Section 207^ Transportation Act, 1920, as amended.—The following
statement shows the amount of obligations of carriers acquired under
section 207 and held on June 30, 1938:

KEPOBT OF T H E SECKETARY OF T H E TREASURY

Obligations acquired under the provisions of section 207 of the Transportation Act,
1920, and held as of June SO, 1938
Principal
amount of
promissory Collateral,
note or of
face
directly
amount
held security

Carrier

Chicago, Milwaukee, St. $3, 207,000
0)
Paul & Pacific R. R. Co.
Minneapolis & St. Louis 1,250,000 $1,500,000
R. R. Co.
Washington, Brandywine &
Point Lookout R. R. Co.
Waterloo, Cedar Falls &
Northern Ry. Co.

60,000

75,000

600,000

625,000

Class of collateral or of
directly held security

Interest in
default

6% noncumulative preferred stock of carrier.
Refunding and extension $1,250,000 $1,125,000.00
mortgage, 5% bonds of
carrier.
First mortgage, 6% bonds
19,408.98
50,000
of carrier.
Temporary general mort500,000
514,931. 60
gage, 7% bonds of carrier.

6,007, 000

TotaL..

Principal
in default

1,800,000

1,659,340.48

1 Securities directly held.

Section 210, Transportation Act, 1920, as amended.—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, and also for
paying judgments, decrees, and awards rendered against the Director
General of Railroads. No new loans are being made as the time for
making application has expired. No expenditures under this section
were made by the Director General during the fiscal year. The net
expenditures by him on this account amounted to $33,640,740.24 to
June 30, 1938.
Total loans (including renewal loans and repayments thereof aggregating $59,800,000) to June 30, 1938, amounted to $350,600,667,
repayments amounted to $325,377,434.45, and loans outstanding as
of that date amounted to $25,223,232.55.
The following statement shows the amount of obligations held on
June 30, 1938, on account of loans to carriers under section 210, and
the amount of principal and interest in default:
Obligations held on June 30, 1938, on account of loans to carriers under section 210
of the Transportation Act, 1920, as amended, and the amount of principal and
interest in defaidt
Loans outstanding

Carrier
Alabama, Tennessee & Northern R. R. Corporation
Aransas Harbor Terminal Ry
Des Moines & Central Iowa R. R. Co. (formerly the
Interurban Ry. Co.)
Fort Dodge, Des Moines & Southern R. R. Co
Gainesville & Northwestern R. R. Co
Georgia & Florida Ry. (receiver)
Minneapolis & St. Louis R. R. Co..
Missouri & North Arkansas Ry. Co
Salt Lake & Utah R. R. Co
Seaboard Air Line Ry. Co
Seaboard-Bay Line Co
Virginia Blue Ridge Ry. C o . . .
Virginia Southern R. R. Co
Waterloo, Cedar Falls & Northern Ry. Co..
Wichita, Northwestern Ry. Co
Wilmington, Brunswick & Southern R. R. Co
Total

$151,600.00
44,304.67
633, 600.00
200, 000.00
175, 000.00
792, 000.00
1,382, 000. 00
1 3, 500,000. 00
872, 600.00
14,440, 577.88
1, 266,000.00
106, 000.00
138, 000.00
1, 260,000.00
381, 750.00
90, 000.00
25, 223, 232. 56

Principal in
default

Interest in
default

$151, 500.00
44, 304. 67

$40,905.00
14,699. 29

633, 500.00
200,000.00

395,3n.87
101,164. 91

792,000. 00
1, 382,000. 00

403, 920.00
1,206,449. 73

872, 600. 00
13, 690,577.88
1,256,000.00
106,000.00

706,806.00
6, 227,078.08
489,840.00
76,149. 29

1, 260,000.00
381,750.00
90,000.00

1, 203, 505. 58
332,122. 50
43,200.00

29,860,232. 55

11, 241,162. 25

1 Assets of these carriers have been completely liquidated, and were insuflBcient to meet these claims.

REPORT OF TH:E Si;':RETARY OE THE TREASURY

Trust and special funds invested by the Treasury
Under various provisions of law creating trust and special funds,
the Secretary of the Treasury or the Treasurer is authorized to invest
such portions of the funds as are not required to meet current withdrawals. The following statement shows the amount of Government
and other securities held in these funds:
Securities held as investments in trust and special funds, June SO,
[000 omitted]
Fund

Adjusted service certificate fund
Ainsworth library fund, Walter Reed General
Hospital
Alaska Railroad retirement and disability fund.
Alien property trust fund
Canal Zone retirement and disability fund
Civil service retirement and disability fund
District of Columbia teachers' retirement fundDistrict of Columbia water fund
District of Columbia workers' compensation
fund.. _.
Foreign service retirement and disability fund .
German special deposit account
Library of Congress trust fund
Longshoremen's and harbor workers' compensation fund
National Institute of Health gift fund
National park trust fund
. .
Old-age reserve account
Pershing HaU Memorial fund
Railroad retirement account.
Unemployment trust fund .
U. S. Government life insurance fundi..
Total

Government
securities

Government Other securiguaranteed
ties
securities

Total

$25,800

10
327
30,710
3.662
. 396,406
5,400
736

10
327
30, 710
3,662
396,406
7,460
736

$95

10
3.328
3,957
1

$1,965
11
433

101
83
12
662, 300
198
66, 200
872, 000
760, 842

2,832,083

105

21
3,328
3. 957
434

42, 067

154
83
12
662, 300
198
66,200
872,000
802,909

44,519

2, 876, 707

Adjusted service certificate fund.—Amounts held for the account of
the adjusted service certificate fund, created by the act of M a y 19,
1924, were reinvested during the fiscal year 1938 in special issues of
Treasury certificates of indebtedness bearing interest at the rate of
4 percent per annum, in accordance with the procedure outlined in
the annual report of the Secretary of the Treasury for the fiscal ^^-ear
1925.
.
In accordance with the provisions of the Adjusted Compensation
Payment Act, 1936, enacted January 27, 1936, payments were made
from the fund during the fiscal year 1938 on account of the issuance
of $12,751,850 of adjusted service bonds and on account of checks
for amounts less than $50, totaling $561,666.23.
During the year $11,800,000 net face amount of certificates were
redeemed to meet current payments from the fund.
A statement of the fund as of June 30, 1938 (exclusive of fund
assets held by the Veterans' Administration on account of bank
loans on adjusted service certificates redeemed), is as-follows:

REPORT OF T H E SECRETARY OF T H E TREASURY

Adjusted service certificate fund, J u n e 30, 19S8
FUND ACCOUNT
Appropriations:
To June 30,1936 (including $2,230,167,956.40 appropriated in the Independent Offices
Appropriation Act, 1937, approved Mar. 19, 1936)
$3,526,157,956.40
Interest on investments :
To June 30, 1937..
.
i$128,176, 582. 31
July 1, 1937, to June 30, 1938.
1,469, 928. 77
129,646,511. OS
Total
Payments under Adjusted Compensation Payment Act, 1936, enacted
Jan. 27, 1936:
Adjusted service bonds
Checks for amounts less than $50
Adjusted service bonds (Government life insurance fund series)...

3,655,804,467.48
1,822,090,360.00
82,815,997. 57
500,157,956.40

Total
2,405,064,303.97
Checks paid by Treasurer of the United States other than in final
settlement of certificates under the Adjusted Compensation Payment
Act, 1936, less credits on account of repayments of loans an d interest
thereon
1,223,896,986.78
3,628,961, 290. 75
Balance in fund June 30, 1938...

26,843, 176.73
FUND ASSETS 2

Investments, 4% Treasury certificates of indebtedness
Unexpended balances:
To credit of Chief Disbursing Officer, Division of Disbursement, and disbursing officers
of the Veterans' Administration with the Treasurer of the United States
...
To credit of fund on books of the Division of Bookkeeping and Warrants
Total fund assets June 30, 1938.
1 Includes adjustment of $67,561.64 for interest received in fiscal year 1938.
2 Exclusive of assets held by Veterans' Administration.

25,800,000.00'
1,026,722.19'
16,454.64
26,843,176.73-

Civil service retirement and disability fund.'—In accordance with the
provisions of the act of May 22, 1920 (41 Stat. 614), creating the civil
service retirement and disability fund, the Treasury continued during
the year to make investments for account of the fund in special issues
of Treasury notes bearing interest at the rate of 4 percent per annum,
in accordance with the procedure outlined in the annual report of the
Secretary of the Treasury for 1926. During 1938, $15,189,400 face
amount of various issues of Treasury bonds were sold on the market
and the proceeds reinvested in special Treasury notes.
The following statement shows the status of the fund as of June
30,1938:
Civil service retirement and disability fund, J u n e 30, 1938
Credits:
On account of deductions from basic compensation of employees and
service-credit payments:
From Aug. 1,1920, to June 30,1937
i $416,945,066.53
July Ii 1937, to June 30, 1938.
37,322,049.95
Appropriations:
To June 30, 1937
Available July 1, 1937

231,800,000.00
2 73,234,760.00

Interest and profits on investments:
From Aug. 1. 1920, to June 30, 1937
July 1, 1937, to June 30, 1938i

95, 297,626.16
16, 635, 825 67

$454, 267,116. 48

305,034,760.00

111,933,451.83

Total
.
871,235,328.31
Less checks paid bv Treasurer of the United States on account of annuities arid refunds,
Aug. 1, 1920, to June 30, 1938
471,697,177.48
Balance in fund June 30, 1938...

399,538,150.83

» Exclusive of $1,430,808.84 transferred to the Canal Zone retirement and disability fund pursuant to act of
May 2,1931.
2 Includes $72,392,000 appropriated from the General Fund to cover the liability of the United States and
$842,760 appropriated from the revenues of the District of Columbia to cover its liability in connection with
the financing of the fund.
104825—39
8

REPORT OF THE SECRETARY OF THE TREASURY
Civil service retirement and disability fund, June 30, 1938—Continued

Assets:
Face amovM
$4,884,000
2,621,650
45,200,000
69,200,000
97,900,000
122,300,000
64,300,000

3M% Treasury bonds, 1943-45
3M% Treasury bonds, 1944-46.
4% special Treasury notes payable June 30,1939
4% special Treasury notes payable June 30,1940
4% special Treasury notes payable June 30,1941
4% special Treasury notes payable June 30,1942
4% special Treasury notes payable June 30,1943

396,405. 650
Unexpended balances June 30,1938:
To credit of disbursing officers
On books of Division of Bookkeeping and Warrants

Principal cost
$4,820,387.42
2,587,503.84
46,200,000.00
59,200,000.00
97,900.000.00
122,300,000.00
64,300,000.00
396,307,891.26
2,233,531.14
996,728.43

Total fund assets June 30,1938

3, 230, 259. 57
399,538,150.83

Canal Zone retirement and disability fund.—Under section 10 of the
act of March 2, 1931 (46 Stat. 1477), creating the Canal Zone retirement and disabihty fund, the Secretary of the Treasury makes investments of such portion of the fund as in his judgment is not immediately
required for the payment of the annuities, refunds, and allowances, in
accordance with the procedure outhned in the annual report of the
Secretary of the Treasury for 1931.
The following statement shows the status of the fund as of June
30,1938:
Canal Zone retirement and disability fund, June SO, 1938

Credits:
On account of deductions from basic compensation of employees subject to
retirement act:
From July 1, 1931, to June 30, 1937
$4,632,332.90
July 1,1937, to June 30,1938
508,622.65
Appropriations:
To June30,1937
AvailableJuly 1,1937-...
Interest and profits on investments:
From July 1, 1931, to June 30,1937....
J u l y l , 1937, to June 30, 1938...

1,000,000.00
500,000.00
572,191.11
145,882.53

$5,140,956.45

1,500,000.00

718,073.64

Total
.-.
7,359,029.09
Less checks paid by Treasurer of the United States on account of annuities and refunds,
July 1,1931, to June30,1938-_3,634,944.32
Balance in fund June 30,1938
Assets:
Face amount
$602,000 4% special Treasury notes payable June 30,1940
2,317,000 4% special Treasury notes payable June 30,1941
603,000 4% special Treasury notes payable June 30,1942...
140,000 4% special Treasury notes payable June 30,1943
3,662,000
Unexpended balances June 30,1938:
To credit of disbursing officers^
On books of Division of Bookkfeeping and Warrants
Total fund assets June 30,1938

3,724,084.77
Principal cost
$602,000.00
2,317,000.00
603,000.00
140,000.00

55,016.20
7,068.67

3,662,000.00

62,084.77
3,724,084.77

Foreign service retirement and disability fund.—Under section 18 of
the act of May 24, 1924 (43 Stat. 144), establishing the foreign service
retirement and disability fund, the Secretary of the Treasury invests
such portion of the fund as in his judgment is not immediately required
for authorized payments, in accordance with the procedure outlined
in the annual report of the Secretary of the Treasury for 1927.
The following statement shows the status of the fund as of June
30, 1938:

REPORT OF THE SECRETARY OF THE TREASURY

Foreign service retirement and disability fund, June SO, 1938

•Credits:
On account of deductions from basic compensation and service-credit
payments:
From May 24, 1924, to June 30, 1937
i$2,102,964.69
J u l y l , 1937, to June 30, 1938
190,248.95
Appropriations:
To June 30, 1937
Available July 1, 1937
Interest and profits on investments:
From May 24, 1924, to June 30, 1937....
July 1, 1937, to June 30, 1938

2,075,500.00
188, 000.00
750,007.43
133. 896. 55

Total...Less checks paid by Treasurer of the United States on account of annuities and refunds.
May 24,1924, to June 30,1938
Balance in fund June 30, 1938.
Assets:
Face amount
Principal cost
$657,000 4% special Treasury notes payable June 30,1939
$657,000.00
763,000 4% special Treasury notes payable June 30,1940
763,000.00
659,000 4% special Treasury notes payable June 30,1941
659,000.00
885,000 4% special Treasury notes payable June 30,1942
885,000.00
364,000 4% special Treasury notes payable June 30,1943
364,000. 00
3,328,000
Unexpended balances June 30, 1938:
To credit of disbursing officers
On books of Division of Bookkeeping and Warrants

39,677.14
3,335.77

Total fund assets June 30, 1938
1 Includes adjustment of $175.47 made during. 1938.

$2,353, 213. 54

2, 263, 500. 00

883,903.98
5, 600, 617. 52
2,129, 604.61
3, 371,012. 91

3^ 328,000.00

43,012.91
3,371,012.91

Alaska Railroad retirement and disability fund.—The Alaska RailToad retirement and disability fund was created pursuant to section
9 of the act of June 29, 1936 (49 Stat. 2022), for the retirement of
employees of the Alaska Railroad, Territory of Alaska, who are
citizens of the United States. Under section 10 of the act, the
Secretary of the Treasury invests such portion of the fund as in his
judgment may not be immediately required for the payment of the
.annuities, refunds, and allowances authorized by the act, in accordance with a proceciure similar to that outlined in the annual report of
the Secretary of the Treasury for 1931 covering investments for the
Canal Zone retirement and disability fund.
The foUowing. statement shows the status of the fund as of June
30, 1938:
Alaska Railroad retirement and disability fund, June 30, 1938

Credits:
On account of deductions from basic compensation of employees subject
to retirement act:
From June 29, 1936, to June 30, 1937
July 1, 1937, to June 30, 1938

$108,930.29
149,112.40
$258,042.69

Appropriations:
Available July 1,1937
Interest and profits on investments:
From June 29, 1936, to June 30, 1937
J u l y ] , 1937, to June 30, 1938

175,000.00
490.96
10,972.28

Total
Less checks paid by Treasurer of the United States on account of annuities and refunds
from June 29,1936, to June 30,1938
Balance in fund June 30, 1938
Assets:
Face amount
Principal cost
$62,000 4% special Treasury notes payable June 30,1941
_
$52,000.00
265,000 4% special Treasury notes payable June 30,1942
265,000.00
10,000 4% special Treasury notes payable June 30,1943
10,000.00

11> 4^3. 24
444,506.93
83,795.78
360.710.16

327,000.00

327. OOU

Unexpended balances June 30, 1938:
To credit of disbursing officers
On books of Division of Bookkeeping and Warrants
Total fund assets June 30, 1938

13.770.06
19,940.09

33.710.15
360, 710.15

REPORT OF THE SECRETARY OF THE TREASURY

District of Columbia teachers^ retirement fund.—In accordance with,
the act of January 15, 1920, as amended by the District of Columbia
Appropriation Act of June 5, 1920, the Treasurer of the United States
makes investments of the funds derived from deductions from teachers' compensation. A further amendment of June 11, 1926, created
a reserve fund and provided for annual appropriations to the fund
which are also invested by the Treasurer. During the fiscal year
1938, the Treasurer acquired by purchase for account of the deductions fund $527,000 face amount of 2% percent Treasury bonds of
1955-60 at a principal cost of $534,590.32, and for account of the
Government reserve fund $486,000 face amount of 2% percent Treasury
bonds of 1955-60 at a principal cost of $495,615.95.
The following statement shows the assets of the two funds as of
June 30, 1938:
DEDUCTIONS FUND
Assets:
Face amount
$860,200 4)4% T r e a s u r y b o n d s of 1947-52
122,000 4 % T r e a s u r y b o n d s of 1944-54
87,000 3 ^ % T r e a s u r y b o n d s of 1946-56
48,000 3 ^ % T r e a s u r y b o n d s of 1943-47
142,000 3 H % T r e a s u r y b o n d s of 1941-43
232,000 3 H % T r e a s u r y b o n d s of 1943-45
1,896,850 2>g% T r e a s u r y b o n d s of 1955-60
.
77,000 2 % % T r e a s u r y b o n d s of 1951-54
105,000 2 ^ % T r e a s u r v b o n d s of 1956-59
182,000 4 3 ^ % P h i l i p p i n e Islands b o n d s
16,000 4V^% P u e r t o R i c a n b o n d s
72,000 334% F e d e r a l F a r i h M o r t g a g e Corporation b o n d s of 1944-64.
178,800 434%) F e d e r a l l a n d b a n k b o n d s
385,400 4 % consolid-ated F e d e r a l l a n d b a n k b o n d s of 1944-46
177,000 3%, consolidated Federal land b a n k b o n d s of 1945-55
636, 500 3 % consolidated Federal land b a n k b o n d s of 1946-56
:
5,117,760
GOVERNMENT RESERVE FUND
Assets:
Face am.ount
$282,000 4H%o T r e a s u r y b o n d s of 1947-52...
.
12,000 4 % T r e a s u r y b o n d s of 1944-54
31,000 3^4%) T r e a s u r y b o n d s of 1946-56
199,000 3 H % T r e a s u r y b o n d s of 1943-47
178,000 3M%) T r e a s u r y b o n d s of 1941-43
985,000 2 3 ^ % T r e a s u r y b o n d s of 1955-60
17,000 2 ^ % T r e a s u r y b o n d s of 1951-54...
126,000 2 ^ % , T r e a s u r y b o n d s of 1956-59
5.5,000 43^^% P u e r t o R i c a n b o n d s
23,000 ZM% Federal F a r m M o r t g a g e Corporation b o n d s of 1944-64
92,300 4K%o Federal l a n d b a n k b o n d s
52,100 4%, consolidated Federal land b a n k b o n d s of 1944-46
290,200 3 % consolidated Federal land b a n k b o n d s of 1940-56

Princvoai cost
$956,962.07
123,387.50
87,437.81
49,500.00
137,657.50
232,000.00
1,927,412.21
79,382.19
107,920.63
197,669.56
15,962.57
73,785.00
172,873.10
403,077.40
173,460.00
534,630.00
$5^ 273,117. 54

P r i n c i p a l cost
$313,717.51
12,285.00
31,145.31
204, 701. 25
177,606.56
997,696.29
17,525.94
128,283.76
55,109.56
23, 566.25
' 87,421.77
54,623.75
289,474. 50
^

2, 342, 600
TotaL
Accrued interest paid in 1938 (on i n v e s t m e n t purchases) r e p a y a b l e in 1939
U n e x p e n d e d balance J u n e 30, 1938, on books of Division of Bookkeeping a n d W a r r a n t s . .
T o t a l fund assets J u n e 30, 1938

2,393,157.45
—
7,666,274.99
1, 263.24
199, 589. 23
7,867,127.46

Longshoremen^s and harbor workers^ compensation fund.—This fund
was established under the act of March 4, 1927 (44 Stat. 1444, sec. 44),
to provide for the payment of compensation for disability or death
resulting from injury to employees in certain maritime employments,
and for the maintenance of employees undergoing vocational rehabilitation.
The fund is administered by the United States Employees' Compensation Commission. Moneys not required for immediate disbursement are invested by the Treasurer of the United States. During
the fiscal year 1938, the Treasurer acquired by purchase for account
of the fund $14,800 face amount of 2% percent Treasury bonds of
1955-60 at a principal cost of $14,920.25.
The following statement shows the assets of the fund as of June 30,
1938:

REPORT OF THE SECRETARY OF THE TREASURY

Longshoremen^s and harbor workers^ compensation fund, June 30, 1938
.Assets:
Face amount
$15,600 3 ^ % Treasury bonds of 1944-46
.
34,600 434%) Treasury bonds of 1947-52
:
:
11, 650 3M% Treasury bonds of 1943-45
10,000 3% Treasury bonds of 1961-55
14,800 2J^% Treasury bonds of 1955-60
14,850 23^% Treasury bonds of 1956-59..
9,700 33^% Federal Farm Mortgage Corporation bonds of 1944-64
11,000 3% consolidated Federal land bank bonds of 1946-56
9,700 33^% consolidated Federal land bank bonds of 1945-55
.
22,000 3% consolidated Federal land bank bonds of 1945-55
153, 700
Unexpended balances:
Disbursing officer (check book balances)
Division of Bookkeeping and Warrants

Principal cost
$15,600.00
38, 646. 56
11, 550. 00
9,959. 38
14,920.25
14,976.20
9,953.46
10,972.50
9,901. 74
21,560.00

2, 211. 20
29, 714.80

Total fund assets June 30, 1938

$158,040.09

31,926.00
189,966.09

District of Columbia workers^ compensation fund.—This fund was
•estabhshed under the act of May 17, 1928 (45 Stat. 600), which extended the provisions of the Longshoremen's and Harbor Workers'
Compensation Act, approved March 4, 1927, including all amendments thereto, to apply in respect to the injury or death of an employee of an employer carrying on certain employments in the District
of Columbia, irrespective of the place where the injury or death
occurs. The fund is derived from collections of awards against employers made by the United States Employees' Compensation Commission, as compensation for death of employees resulting from injuries, in each case where no person is found to be entitled to such
compensation. Any portion of the fund which, in the opinion of the
Commission, is not needed for current requirements is invested by
the Treasurer of the United States. There were no changes in the
investments during 1938.
The following statement shows the fund assets as of June 30, 1938:
District of Columbia workers^ compensation fund, June 30, 1938
Assets:
Face amount
•
$10,000 2%% Treasury bonds of 1955-60..
11,000 3%o consolidated Federal land bank bonds of 1946-56
21,000
Unexpended balances:
Disbursing officer (check book balances)
Division of Bookkeeping and Warrants

Principal cost
$10,165. 63
10,972. 50
• $21,138.13
3,741.75
12,103.32
15, 845. 07

Total fund assets June 30, 1938

36,983.20

District of Columbia water fund.—The District of Columbia Appropriation Act of June 29, 1937, authorized the Treasurer of the United
States to invest in United States securities, for account of the water
fund of the District of Columbia, such funds as may be determined
by the Commissioners of the District of Columbia to be available for
that purpose. During the year the Treasurer acquired by purchase
for account of the fund $736,000 face amount of 2 ^ percent Treasury
bonds of 1958-63 at a principal cost of $749,110.01; accrued interest
paid in 1938 and repayable in 1939 amounteci to $505.99.
United States Government life insurance fund.—The United States
Government life insurance fund was established under the World War
Veterans' Act, 1924, approved June 7, 1924 (43 Stat. 607), which,
among other things, consolidated, codified, revised, and reenacted the
laws affecting the administration of the War Risk Insurance Act,

REPORT OF THE SECRETARY OF THE TREASURY

as amended. Under section 17 of the World War Veterans' Act,.
1924, as amended, the Secretary of the Treasury is authorized to invest and reinvest the United States Government life insurance fund,,
or any part thereof, in interest-bearing obligations of the United States
or bonds of the Federal farm loan banks and to sell such investments
for the purposes of the fund. The fund is also available to the Administrator of Veterans' Affairs for making loans upon the security of
Government hfe insurance policies. The act approved March 3,
1927, as amended by the Emergency Adjusted Compensation Act of
February 27, 1931, authorized the Administrator of Veterans' Affairs
to make loans to veterans upon their adjusted service certificates
out of the United States Government life insurance fund. All of
the funds available for investment during the fiscal year 1938 were
used to make loans upon Government life insurance policies or wereinvested in obligations of the United States.
The Administrator of Veterans' Affairs reported outstanding loans
from this fund on June 30, 1938, aggregating $143,858,428.06 to veter^
ans on policies. On June 30, 1938, the prhacipal of outstanding loans
made subsequent to the enactment of the Adjusted Compensation
Payment Act, 1936, upon adjusted service certificates amounted to
$2,663,251.12.
Monthly reports are made by the Treasury to the Veterans^ Administration 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 Administrator by the safekeeping offices.
The investments as of June 30, 1938, were as follows:
United States Government life insurance fund, June SO, 1938
Investment

Par value

Principal cost

4M% Treasury bonds of 1947-62
4% Treasury bonds of 1944-54
3 ^ % Treasury bonds of 1946-56.
3% Treasury bonds of 1951-55 __
33^% Treasury bonds of 1949-52
2%% Treasury bonds of 1955-60.__
_
2 ^ % Treasury bonds of 1945-47-_
2 ^ % Treasury bonds of 1948-51
2M% Treasury bonds of 1951-54.. . _
.
2%% Treasury bonds of 1955-59
_
23^^% Treasury bonds of 1949-53
3% consolidated Federal land bank bonds of 1945-55...
3% consolidated Federal land bank bonds of 1946-56
43^% Federal land bank bonds. _
._
43^% adjusted service bonds. Government life insurance fund series,
1946
2% special Treasury notes. Government life insurance fund series,
payable June 30, 1942

$41,272,000.00
14,106,000.00
2, 200,000. 00
5, 900,000.00
1, 250,000.00
113, 543,260.00
91,300.00
5,300,000. 00
17, 745,000.00
34, 463, 300.00
1,813,060. 00
19, 280,000.00
22,719,000.00
68,000.00

$42,752,867.12"
15,078, 333.48
2,384, 625.00
6,051,109. 38
1, .304,343. 75
116, 256,381. 61
93, 442. 02
5,315,000.01
17,979, 950. 02
34, 749, 736. 35
1, 772,892. 93
18,894,400.00
22 662, 202. 50
67,907.07

600,157, 956. 40

500,167, 956. 40

23,000,000. 00

23,000,000.00

Total investments made by Secretary of the Treasury

802, 908, 866. 40

807, 521,147. 64

143,858, 428.06
2,663,251.12

143,858,428.06
2,663, 251.12

Policy loans outstanding.
Adjusted service certificate loans outstanding

Total outstanding loans made by Administrator of Veterans'
Affairs

146, 521, 679.18

146,521,679.18

Total investments in fund

949,430, 535. 58

954,042,826.82

Old-age reserve account.—Section 201 (a) of the Social Security Act,
approved August 14, 1935, established in the Treasury the old-age
reserve account. The Secretary of the Treasury is required to sub

REPORT OF THE SECRETARY OF THE TREASURY

mit annually to the Bureau of the Budget estimates of the appropriations required to be made to this account. The actuarial status of the
account is shown on page 56 of this report.
The Secretary of the Treasury invests such portions of the amounts
credited to the account as are not, in his judgment, required to meet
current withdrawals, in accordance with the procedure outlined in
the annual report for 1937. The Treasury Department makes all
benefit payments from the account in accordance with the certification by the Social Security Board.
The following statement shows the status of the account as of
June 30, 1938:
Old-age reserve account, June SO, 1938 ^

Credits:
Appropriations:
To June 30, 1937.-.
Available July 1,1937....

Interest on investments:
To June 30, 1937
J u l y l , 1937, to June 30, 1938.
Total
Less payments on account of benefits:
To June 30, 1937
July 1,1937, to June 30, 1938.

$265,000,000.00
500,000,000.00

.':

2,261,810.97
16,412,232.89
-

26,969.36
5,404,062.87

Balance in account June 30, 1938

17, 674,043.86
782,674,043.86

5,431,032. 22
777,243,011.64

Assets:
Face amount
$264,900,000 3% special Treasury notes payable June 30, 1941..
382,000,000 3% special Treasury notes payable June 30, 1942
16,400,000 3% special Treasury notes payable June 30, 1943.
.
662,300.000

Principal cost
$264,900,000.00
382,000,000.00
16,400,000.00

Unexpended balances June 30, 1938:
To credit of Chief Disbursing Officer.
On books of Division of Bookkeeping and Warrants..

1,930,620.20
113,012,391.44

Total assets June 30. 1938
1 On basis of daily Treasury statement (unrevised).

$766,000,000.00

662.300,000.00

114,943,011.64
777,243,011.64

Unemployment trust fund.—The unemployment trust fund was
established pursuant to section 904 (a) of the Social Security Act,
approved August 14, 1935. The Secretary of the Treasury is authorized and directed to receive and hold in the fund all moneys deposited
therein by a State agency from a State unemployment fund, and to
invest such portion of the fund as is not, in his judgment, required to
meet current withdrawals, in accordance with the procedure outlined
in the annual report of the Secretary of the Treasury for 1937.
The act provides that the fund shall be invested as a single fund,
and that the Secretary of the Treasury shall maintain a separate book
account for each State agency and shall credit quarterly on March
31, June 30, September 30, and December 31 of each year to each
account, on the basis of the average daily balance of such account, a
proportionate part of the earnings of the fund for the quarter ending
on such date.

100

REPORT OF THE SECRETARY OF THE TREASURY

The following statement shows the status of the fund as of June
30, 1938:
Unemploy7nent trust fund, June 30, 1938 '
Credits:
On a c c o u n t of deposits b y S t a t e agencies:
T o J u n e 30, 1937
J u l y l , 1937, to J u n e 30, 1 9 3 8 . . .

$310,560,409.78
747,660,496.77
$1,058, 220, 906. 55

Interest on i n v e s t m e n t s :
T o J u n e 30, 1937
J u l y 1, 1937, to J u n e 30, 1938

2,828,882.86
15,172,022.11
18,000,904. 97

Total

1,076,221,811.52

Less w i t h d r a w a l s b y S t a t e agencies

191,975,000. 00

Balance in fund J u n e 30, 1938

884,246,811.52

Assets:
$872,000,000 facie a m o u n t 2 3 ^ % T r e a s u r y certificates of i n d e b t e d n e s s , u n e m p l o y m e n t
t r u s t fund series, m a t u r i n g J u n e 30,1939, principal cost.
Cash balance w i t h T r e a s u r e r of t h e U n i t e d States
T o t a l fund assets J u n e 30, 1938

872,000,000.00
12,246,811.52
884,246,811.52

1 On basis of daily T r e a s u r y s t a t e m e n t ( u n r e v i s e d ) .

The followinsr statement shows the amounts to the credit of State
agencies as of June 30, 1938:
Amounts of unemployment trust fund, June 30, 1938, credited to account of each
State agency
State

Alabama.
Alaska
Arizona
Arkansas
California
Colorado...
Connecticut
Delaware
District of C o l u m b i a .
Florida
Georgia
Hawaii
Idaho
Illinois
-.
Indiana
Iowa
Kansas.
Kentucky
Louisiana
Maine
Maryland
Massachusetts
Michigan
Minnesota
Mississippi
Missouri
Montana.
..Nebraska
Nevada
New Hampshire
N e w Jersey
N e w Mexico
New York
N o r t h Carolina
North Dakota
Ohio
Oklahoma
Oregon
Pennsylvania
R h o d e Island
S o u t h Carolina
South Dakota
Tennessee
Texas

T o t a l deposits
from S t a t e
unemployment
fund
$11, 516, 270.44
498,958. 23
2, 741, 213. 37
3, 575, 206. 47
91, 161,400.00
6, 330,821. 02
20, 553, 000.00
2, 801,683.16
8, 659, 228. 70
6. 995, 820. 77
10, 767,192. 82
2, 148, 537. 76
2, 495, 453. 94
84, 314, 013. 81
29, 051,179.43
' 9, 750, 000. 00
7, 122, 280. 08
13, 182, 000. 00
11, 275, 000. 00
4, 900, 000. 00
12, 800, 000. 00
58, 000, 000. 00
61, 026, 260.15
16, 400,000. 00
241,978. 76
3, 094,
668. 20
24, 050, 697. 20
3, 801,135. 90
4, 028,946. 31
1,
5, 337,488. 27
43, 726. 000. 00
1, 625, 000. 00
146, 800, 000. 00
13, 775, 000. 00
1, 263,116.11
69, 104, 379. 66
9, 585, 000. 00
8, 496. 768. 94
103, 302, 000. 00
11, 675, 006. 71
6, 025, 000. 00
1, 340, 000. 00
10, 420, 000. 00
29, 395. 000. 00

N e t earnings
credited to
account

$207, 820. 90
3, 623. 36
44. 097. 23
40, 550.14
1,713, 025. 52
124, 202. 53
355, 171.28
21, 716.99
188, 405. 79
67, 707.18
91, 905.17
16, 078. 28
49, 642. 92
464, 422. 54
688, 043. 67
169, 722. 75
78, 795. 43
229, 507. 80
201, 118. 52
83, 318. 09
198, 883.10
1, 058, 076. 26
1, 007, 262. 99
261, 419. 34
65, 314. 30
148, 029. 36
33, 037. 21
37, 823. 51
12, 084. 56
103, 985.19
807, 936. 83
32, 860. 92
2, 847, 681. 06
238, 923. 36
13, 135. 64
1, 291, 265. 77
179, 591.86
158, 799. 00
1, 751, 926. 50
192, 816.83
120, 796.97
27, 040. 50
176, 462.15
536, 493. 55

Total withdrawals from
account

$4, 250,000. 00

"i,'26o,'ooo."oo'
12, 200, 000. 00
"8,'250,'000.'00"
"'"825,'600.'60"

2, 500, 000. 00

1, 750, 000. 00
2, 700,000. 00
6, 300,000. 00
15, 000, 000. 00
5, 500, 000. 00
650, 000. 00

2, 070, 000. 00
50, 000, 000. 00
5, 575,000. 00

4,000,000. 00
38, 500. 000. 00
6,800,000. 00
3, 500, 000. 00
4, 200, 000. 00

Balance to
credit of S t a t e
agency J u n e
30, 1938
$7, 474, 091.34
602, 581. 59
1, 585, 310. 60
3, 615, 756. 61
80, 674, 425. 52
6, 455, 023.55
12, 658, 171. 28
2, 823, 400.15
8, 022, 634. 49
7, 053, 527. 95
10, 859, 097.99
2,164, 616. 04
2, 645, 096. 86
84. 778, 436. 35
27, 239, 223.10
9,919, 722. 75
7, 201, 075. 51
13,411, 507. 80
9, 726, US. 52
2, 283, 318. 09
6, 698, 883.10
44, 058, 076. 26
62, 033, 523.14
11,161, 419. 34
.2,657, 293. 06
24, 242, 697. 66
3, 083, 734. 41
4, 838, 959. 41
1,041, 030. 87
3, 371, 473. 46
44, 533, 936. 83
1, 657, 860. 92
99, 647, 681. 06
8, 438, 923. 36
1, 276, 251. 75
70, 395, 646. 43
9, 764t 591. 86
4, 655, 567. 94
66, 553, 926. 50
5, 067, 823. 54
6,145, 796. 97
1,367, 040. 50
7, 096, 452.15
25, 731, 493. 55

BEPOET OF THE SECRETARY OF THE TREASURY

101

Amounts of unemployment trust fund, June SO, 1938, credited to account of each
State agency—Continued
T o t a l deposits
from S t a t e
unemployment
fund
Utah
Vermont
Virginia
Washington
W e s t Virginia..
Wisconsin
Wyoming
Total
Less deposits n o t cleared b y T r e a s urer
Less o u t s t a n d i n g checks
T o t a l , adjusted to daily Treasu r y statement basis(unrevised).

N e t earnings
credited to
account

Balance to
credit of S t a t e
agency J u n e
30, 1938

Total withd r a w a l s from
account

$3, 303, 367. 70
1,930,072.-41
11, 775, 000. 00
12,975, 602. 61
13, 667,467. 76
39,150, 889. 75
1,632,467.75

$57, 520. 73
33, 572. 63
204i 490. 37
134i 744. 43
199, 569.83
1, 222, 724. 69
17, 769. 64

$1, 725, 000. 00
575, 000. 00
2,950,000. 00

1, 060. 587, 574.19

18, 000,904. 97

196, 720, 000. 00

881, 868, 479.10

4, 745, 000. 00

- 2 , 366, 667. 64
+ 4 , 745,000. 00

191, 975,000. 00

884, 246,811. 52

$1, 635, 888. 43
1, 388, 645. 04
9,029,490: 37
13,110,347.04
5, 267,037. 59
33, 273, 614. 34
1, 650, 237. 29

8, 600,000. 00
7,100,000.00

2, 366, 667. 64

1, 058, 220,906. 55

18,000, 904. 97

Railroad retirement account.—The railroad retirement account was
established pursuant to section 15 (a) of the Railroad Retirement
Act of 1937, approved June 24, 1937. The Railroad Retirement
Board is required to submit annually to the Bureau of the Budget an
estimate of the appropriation to be made to the account for each
fiscal year, beginning with the fiscal year 1937, in an amount as an
annual premium sufficient, with a reasonable margin for contingencies,
to provide for the payment of all annuities, pensions, and death
benefits, and all amounts credited to the account are available for
such purposes.
The Secretary of the Treasury, at the request and direction of the
Railroad Retirement Board, invests such portion of the amounts
credited to the account as, in the judgment of the Board, is not
immediately required for the payment of annuities, pensions, and
death benefits, in accordance with the procedure outlined in the
Annual Report of the Secretary of the Treasury for 1937.
The following statement shows the status of the account as of
June 30, 1938:
Railroad retirement account, June SO, 1938 ^

Credits:
Appropriations:
T o J u n e 3 0 , 1937
A v a i l a b l e J u l y 1, 1937

$46,620,000.00
99,880,000.00
$146, 500,000.00

I n t e r e s t on i n v e s t m e n t s :
J u l y 1, 1937, t o J u n e 30, 1938

1,410,821.92

Total
Less p a y m e n t s on a c c o u n t of benefits:
' T o J u n e 30, 1937
J u l y 1, 1937, to J u n e 30, 1938

147,910,821.92
3,985,323.28
75,863,732.90
79,849,056.18

B a l a n c e in a c c o u n t J u n e 30, 1938

68,061,765.74

Assets:
J^dcs diThowYit

$65,000,000 3 % special T r e a s u r y notes p a y a b l e J u n e 30, 1942
1,200,000 3 % special T r e a s u r y notes p a y a b l e J u n e 30, 1943.

JpTiTiciTydL co^t

$65,000,000.00
1,200,000.00
66, 200,000.00

66,200,000
U n e x p e n d e d balances J u n e 30, 1938:
T o credit of Chief D i s b u r s i n g Officer
On books of D i v i s i o n of B o o k k e e p i n g a n d W a r r a n t s

1,627,601. 60
234,164.14
1, 861, 765. 74

T o t a l assets J u n e 30, 1938
1 On basis of d a i l y T r e a s u r y s t a t e m e n t (unrevised).

68,061,765.74

102

REPORT OF THE SECRETARY OF THE TREASURY

Library of Congress trust fund.—Under the act of March 3, 1925, as
amended, the Library of Congress Trust Fund Board, consisting of
the Secretary of the Treasury, the chairman of the Joint Committee
on the Library, the Libralrian of Congress, and two persons appointed
by the President, is authorized 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.
The act approved June 23, 1936, amended section 2 of the act of
March 3, 1925, so as to authorize the Board in its discretion, unless
prevented by the terms of a gift or bequest, to deposit the principal
of any gift or bequest with the Treasurer of the United States as a
permanent loan with interest at the rate of 4 percent per annum,
payable semiannually, provided that such principal sums held by the
Treasurer shall not exceed $5,000,000 at any time. The Board continued during the fiscal year 1938 its authorization to sell from time
to time certain securities held under various donations and to deposit
the principal proceeds of such sales in the permanent loan account.
Total deposits in the permanent loan account from this source during
the year amounted to $419,399.36. All other investments during
the year were made by deposits in the permanent loan fund.
During the year the Board accepted two additional gifts from
Gertrude Clarke Whittall aggregating $75,000 for deposit in the
permanent loan account to augment her previous gift of $100,000 and
to be used for the same purposes, namely, the income to be applied
through the Music Division of the Library to the maintenance of the
collection of Stradivari instruments and Tourte bows given by Mrs.
Whittall to the Library, and to the program of music within the
Library in which those instruments are used.
The property devised and bequeathed to the United States by the
last will and testament of Joseph Pennell, deceased, referred to on
page 98 of the annual report for 1936, was transferred to the Board
during the yeiar.
The following statement shows the earnings credited to each donation as of June 30, 1938:

REPORT OF THE SECRETARY OF THE TREASURY

103

Library of Congress trust fund earnings to June 30, 1938
T o t a l to
J u n e 30.1937

Fiscal year
1938

T o t a l to
J u n e 30.1938

Donation
I n c o m e account, securities
^ Babine
Beethoven.
Benjamin...
Bowker _
•Carnegie
Coolidge . 'Guggenheim
Huntington
Longworth
Pennell
Wilbur

. .

. .
...

Total..

$1,783.08
3.751.96
26, 016.90
1, 000.84
34, 330. 98
83, 402. 92
28. 030.19
64, 351. 25
757. 02
500. 00
99, 890. 67

25,177. 82
6, 672. 20

$1,783 08
4, 251. 96
28, 653. 30
1, 085.04
36, 688. 36
88, 450.80
31, 780.19
64, 351. 25
757.02
25, 677. 82
106, 662. 87

343, 815. 81

46.125.88

389, 941. 69

$500.00
2, 636.40
84.20
2, 257. 38
5, 047. 88
3, 750. 00

I n c o m e account, p e r m a n e n t loan fund
.'Babine
Beethoven
Benjamin
"Bowker
"Carnegie.._
'Coolidge
'Guggenheim
.Huntington
Longworth.
Pennell..
Whittall
'Wilbur

. .
._
.

$0.55

$264. 91
4.36

.$265.46
4.36

.04
11.37
.04

2, 601. 35
2, 429. 65
32.48
4,535.88
302. 58
1, 942. 66
7,805. 48
7, 617. 68

2, 601. 39
2,441.02
32.52
4, 535.88
307.11
1, 942. 66
10, 909. 31
7, 734. 01

4.53
3,103.83
116. 33

Total
G r a n d total

3, 236. 69

27, 537. 03

30, 773. 72

347, 052. 50

73, 662. 91

420, 715. 41

The status of the permanent loan account as of June 30, 1938, is
as follows:
Library of Congress Trust Fund Board, permanent loan account, June 30, 1938
Donation
Babine .
..
Beethoven
•Carnegie
Coolidge
Guffcenheim
Huntington _

Amount

_
...
_ .

. .

$6,627.08
109.13
88, 365. 58
71, 336. 57
812.12
113, 396. 99

Donation
Longworth
Pennell
Whittall
Wilbur
Total

Amount
$7,
91,
175,
252,

564.' 38
272.47
000. 00
907. 65

807, 391.97

The following statement shows the securities held by the Board for
account of each donation as of June 30, 1938. The securities are
held in safekeeping by the Treasurer of the United States and certain
Federal Reserve banks, subject to the order of the Secretary of the
Treasury, for account of the Board.

104

REPORT OF THE SECRETARY OF THE TREASURY

Securities held by the Library of Congress Trust Fund Board, June 30, 1938
Name of security

Face
amount or
par value

Rate of
interest

$10,000.00

Percent
5

Beethoven Association donation
Canadian National Railways
William E. Benjamin donation
Standard Oil Co. of Cahfornia
R. R. Bowker donation i
U. S. Government...
German Government
Japanese Government
American Telephone & Telegraph Co
Carnegie donation
Missouri Pacific R. R. Co
Elizabeth Sprague Coolidge donation
Canadian National Railways..
Chicago Railways Co
Missouri Pacific R. R. Co.
Public Service Co. of Northern Illinois
Utah Power & Light Co
American Ship Building Co
American Telephone & Telegraph Co
Board of Trade Building Trust of Boston.
Comm.onwealth Edison Co
Harrji F. Guggenheim donation
Harbor Commissioners of Montreal
Archer M . Huntington donation
Missouri Pacific R. R. Co
Joseph Pennell donation
Lehigh Valley R. R. Co
Great Northern Railway Co
Lehigh & New England R. R. Co
.:.
National Railways of Mexico
Do
Pennsylvania R. R. Co
Do
Pennsylvania and New York Canal & R. R, Co.
Reading Co.
Electric & Peoples Traction stock trust certificates.

2J^ Treasury bonds of 1955-60.
German external loan.
7
6H Sinking fund gold bonds.
Common stock.
First and refunding mortgagebonds.

13,000.00
10,000.00
6, 000.00
17,100. 00
700.00
12, 400. 00

Guaranteed gold bonds.
First mortgage bonds.
First and refunding mortgagebonds.
Do.
First mortgage bonds.
Common stock.
Do.
Do.
Do.

75, 000.00

Guaranteed gold bonds.

000. 00
750.00
000.00

49,500.00

First and refunding mortgage
bonds.
General consolidated mortgage gold bonds.
General m o r t g a g e g o l d
bonds.
General mortgage bonds.
Secured gold note.
Prior lien gold bonds.
General mortgage bonds.
Do.
Consolidated mortgage bond.
General and refunding mortgage bonds.
Registered certificate of deposit.
Sinking fund gold bonds.
First and refunding mortgage bonds.
First mortgage gold bonds.
First and refunding mortgage bonds.
First mortgage gold bonds.
Do.
First mortgage sinking fund'
bonds.
First mortgage bonds.
Do.
Do.
First mortgage gold bonds.
Sinking fund gold bonds.
Secured bonds.
Sinking fund gold bonds.
Rights to interest in arrears.
Do.
Common stock.
Do.
Do.
Do.
Do.
Do.

5,000.00

2,000.00

3,000.00
45.00
3, 000.00
5,000.00
5,000.00
1,000.00
11,000.00

4
6
4>^
43^
4M
5
4H

500. 00

6,000. 00
7,000.00

5
5

8,000.00
5,000. 00

4H
4H

Penn Central Light & Power Co...
Pennsylvania Power & Light C o . .
Pennsylvania Water & Power Co..

10,000.00
15,000.00
6, 000.00

43/2
4K2
5

Commonwealth Edison Co
Kansas Power & Light Co
Metropolitan Edison Co
Potomac Edison Co
Consolidation Coal Co
Pennsylvania Co
Philadelphia & Reading Coal & Iron Co..
United States of Mexico
Do
Fire Association of Philadelphia
Insurance Company of North America...
Lehigh Valley Coal Corp.
Pennsylvania Railroad Co
Westmoreland Coal Co
Westmoreland Inc.
James B. Wilbur donation
Canadian National Railways.

2,000.00
6,000. 00
3,000.00
10,000.00
3, 000.00
8,000.00
1,000.00
429. 30
810.00
150.00

5
43/2
43^
5
5
4
5

Erie Lighting Co
Georgia Power Co.
New York Power & Light Co.
Ohio Power Co

TotRl

(2)

300.00
6, 700.00
(2)
(2)

44,000. 00

I 433,984.30

1 Life interest in ^^ of income retained under terms of donation.
2 No par.

Guaranteed gold bonds.
Common stock.

33,800.00
000. 00
000.00
000. 00
800. 00

Class of security

Guaranteed gold bonds.

REPORT OF THE SECRETARY OF THE TREASURY

105

National Institute of Health gift fund.—By the act of May 26, 1930
(46 Stat. 379), the Secretary of the Treasury is authorized to accept
unconditional gifts for study, investigation, and research in the
fundamental problems of the diseases of man, and for other pur,poses.
I t is also provided that he may accept conditional gifts upon the
recommendation of the Surgeon General and the National Institute
of Health. Any such gifts are to be held in trusts and invested by the
Secretary of the Treasury in securities of the United States.
The receipts and expenditures of the conditional gift fund during the
year were as follows:
National Institute of Health conditional gift fund, receipts and expenditures, fiscal
year 1938

Unexpended balance June 30, 1937 »
Receipts:
•.Donation, Corn .Industries.Research Foundation
Net earnings collected on investment account of Chemical Foundation...
Principal cost of securities sold during j'^ear, Chemical Foundation account
Total
Expenditures, advances to institute:
Chemical Foundation donation
Rockefeller Foundation donation, dental survey
Corn Industries Research Foundation

$1, 566. 56
5,,000.00
3, 674. 23
2, 231. 36
12,472.15

$5,038. 29
1,040.27
1,000.00

7,078.56

Unexpended balance June 30, 1938
5,393.59
1 After making an adjustment, the correct balances were as follows: Chemical Foundation, $526.29; Rockefeller Foundation, $1,040.27.

The following statement shows the status of the fund as of June
30, 1938:
National Institute of Health conditional gift fund, June 30, 1938

Credits:
Donations:
Chemical Foundation
Rockefeller Foundation
Corn Industries Research Foundation

$100,000.00
22,000.00
5,000. 00

Net earnings on investments. Chemical Foundation
Total
Less advances to meet expenditures on account of the institute:
Chemical Foundation
Rockefeller Foundation, dental survey
Rockefeller Foundation, county health work
Corn Industries Research Foundation

154,727.54
33, 732. 74
15.000.00
7,000.00
1,000.00

Balance in fund June 30, 1938

56, 732. 74
97,994.80

Assets:
$83,000 face amount 4J^% Treasury bonds of 1947-52, principal cost
Unexpended balance on books of Division of Bookkeeping and Warrants:
Chemical Foundation
_
Corn Industries Research Foundation
Total fund assets June 30, 1938

$127,000.00
27, 727. 54

92, 601. 21
1, 393. 59
4,000.00

5, 393. 59
97,994.80

National park trust fund.—Under the act of July 10, 1935 (49 Stat.
477), the National Park Trust Fund Board, consisting of the Secretary of the Treasury, the Secretary of the Interior, the Director of
the National Park Service, and two persons appointed by the President, was created and established and is authorized to accept, receive,
hold, and administer such gifts or bequests of personal property for
the benefit of, or in connection with, the National Park Service, its
activities, or its service, as may be approved by the Board, but no
such gift or bequest which entails any expenditure not to be met out
of the gift, bequest, or the income thereof shall be accepted without
the consent of Congress. The moneys or securities given or be

106

REPORT OF TPIE SECRETARY OF THE TREASURY

queathed to the Board are required to be receipted for by the vSecretary of the Treasury, who is authorized to invest, reinvest, or retain,
investments as the Board may determine. Income from investments,
shall be covered into the national park trust fund.
The Board accepted during the year a donation of $3,000 from the
Metro-Goldwyn-Mayer Corporation. This donation was made in
appreciation of the privileges accorded the company in filming a
motion picture in the national parks.
The following statement shows the status of the fund as of June 30,.
1938:
National park trust fund, June SO, 1938

Credits:
Donations:
Metro-Goldwyn-Mayer Distributing Corporation
Universal Pictures Corporation
Twentieth Century Fox Film Corporation
Metro-Goldwyn-Mayer Corporation
Interest earned on investments.

'
$5,000.00'
3,000.00
1,000.00
3,000.00>
400.94

Total

$11,950 face amount of 2%% Treasury bonds of 1955-60, principal cost
Unexpended balances:
. On books of Division of Bookkeeping and Warrants.
To credit of disbursing oflQcers
Total fund assets June 30, 1938...

12,400.94
12,186.04
$181.29
, 33. 61

214.90
12,400.94

Ainsworth library fund, Walter Reed General Hospital.—Under the
joint resolution of Congress approved May 23, 1935 (49 Stat. 287),
the adjutant, Walter Reed General Hospital, was authorized to
accept the bequest of the late Maj. Gen. Fred C. Ainsw^orth, as contained in his last will and testament, and to receipt therefor on behalf
of the United States, and to deposit the funds so received in the
Treasury of the United States as a special fund dedicated to the purpose of establishing a permanent library at the Walter Reed General
Hospital, to be known as the ' T r e d C. Ainsworth Endowment
Library,'' said fund to be subject to disbursement for such purpose
upon vouchers submitted by the adjutant, Walter Reed General
Hospital, and to be available until expended. The administration,
control, and expenditure of the fund and its application to the purposes intended shall be according to the sole discretion of the adjutant,
Walter Reed General Hospital.
The Treasurer of the United States, upon the written request of the
adjutant, Walter Reed General Hospital, is authorized to invest and
reinvest any part or all of the corpus of the bequest, as well as any
income therefrom, in interest-bearing United States Government
bonds, and to retain custody thereof.
The following statement shows the status of the fund as of June 30,
1938:
Ainsworth library fund, Walter Reed General Hospital, June 30, 1938
Receipts:
Bequest of Maj. Gen. Fred C. Ainsworth..
Net earnings on investments...

Expenditures
Balance in fund June 30,1938

$10,700.00
418. 31
11,138.31
1,046.91
10,071.40

A copf'g*

$9,700 2%% Treasury bonds of 1955-60, principal cost.
Unexpended balance on books of Division of Bookkeeping and Warrants
Total fund assets June 30,1938..

9,972.81
98.69
10,071.40

REPORT OF THE SECRETARY OF THE TREASURY

107

Pershing Hall Memorial fund.—The act of June 28, 1935 (49 Stat.
426), authorized the appropriation of $482,032.92 of the recreation
fund—Army, created by the War Department Appropriation Act,
approved March 4, 1933, for effecting a settlement of any indebtedness
connected with Pershing Hall, a memorial already erected in Paris,
France, under the auspices of the American Legion, Inc., to the
commander-in-chief, officers, men, and auxiliary services of the American Expeditionary Forces. I t provided that this amount would not
be used for the purposes set forth in the act until legal title to Pershing
Hall had been vested in the United States Government for the use
and benefit of aU American oflScers and enlisted men of the World
War. I t further provided that the balance remaining after settlement
of the indebtedness would be retained in a special fund to be known
as the Pershing Hall Memorial fund. Under the terms of the act,
the Secretary of the Treasury is authorized (a) to invest and reinvest
the corpus of this fund in interest-bearing United States Government
bonds, and (b) upon request of the American Legion, Inc., to pay to
the national treasurer of the Legion any part of the earnings upon
the fund for use in the maintenance and/or perpetuation of Pershing
Hall. An appropriation for those purposes was provided by the act
of August 12, 1935 (49 Stat. 594).
On August 3, 1936, the Secretary of the Treasury acting in conjunction with the Attorney General completed acquisition of Pershing
Hall for the United States. Liquidation of the mortgage on Pershing
HaU required an expenditure of $213,643.28. An additional $73,936.42
has been expended for the payment of contractors' and other clain s
constituting indebtedness connected with Pershing Hall.
The status of the fund as of June 30, 1938, was as follows:
Pershing Hall Memorial fund, June SO, 1938
Credits:
Appropriation by Congress
Interest on investment
.

$482,032.92
11,499.60

Total..
Less disbursements on account of current claims and expenses.
' Balance in fund June 30, 1938

$493,532.52
287,579.70
205,952.82

$198,050 2H% Treasury bonds of 1951-54, principal cost.....
201,392.09
Balance to credit of fund on books of Treasury and in the hands of disbursing
officers
4,560.73
Total..

205,962.82

Alien property trust fund.—Under the act of October 6, 1917, as
amended, and the Settlement of War Claims Act of 1928, approved
March 10, 1928 (45 Stat. 254), as amended, the Secretary of the
Treasmy held on June 30, 1938, Government securities in the face
amount of $30,710,200 for account of the Attorney General, Alien
Property Bureau. A statement of the alien property trust fund as
of September 15, 1938, follows:

108

REPORT OF TFIE SECRETARY OF T H E TREASURY
Alien property trust fund, September 15, 1938

Credits:
Trusts..

..:

$37,312,712.61

Earnings on investments, etc
Total
Assets:
Face amount
$9,800,000
5,100,000
10,200
1,100,000
500,000
6,730,000
3,300,000
350,000
200,000
250,000
3,370,000

32,839,264.39
-

70,161,^976.90

4% Treasury bonds of 1944-54.
334% Treasury bonds of 1943-45
23^% Treasury notes payable June 15,1939
3% Treasury bonds of 1951-66
33/g.% Treasury bonds of 1949-52
2K% Treasury bonds of 1955-60
23^% Treasury bonds of 1945-47
2M% Treasury bonds of 1951-54
2% Treasury notes payable September 15, 1942
2y^% Treasury bonds of 1956-59
2M% Treasury bonds of 1958-63

Principal at
amortized cost
$10,210,131.22
.5,100,000.00
10,413.56
1,133,264.55
516,776.47
6,765,150.92
3,300,000.00
350,000.00
200,000.00
249, 765.63
3,372,962.70

30, 710,200
Accrued interest receivable
.
.
Participating'-certificates issued under sec. 25 (e) Of the Trading with the Enemy Act:
Noninterest-bearing
$21,000,000.00
5% interest-bearing..
17,552,096.91
Cash with Treasurer of the United States
Total fund assets Sept. 15, 1938

31,208,465.05
197,521.29

38,5.52,096.91
193,893.65
70,151,976.90

Checks were issued by the Treasury Department during the fiscal
year to the Attorney General, Alien Property Bureau, on account of
the alien property trust fund for the following purposes:
Distribution of income
Distribution of Government earnings
Administrative expenses

$155, 000
170,000
260,000

Total

585,000

Special funds
Colorado River Bam fund.—This fund was established under the
act of December 21, 1928, to provide for the construction of works
commonly referred to as the Boulder Canyon project. All revenues
received in carrying out the provisions of the act are payable into the
fund and expenditures are made out of the fund, under the direction
of the Secretary of the Interior.
The Secretary of the Treasury is authorized to advance to the fund
from time to time, within the appropriations therefor, such amounts
as the Secretary of the Interior deems necessary for carrying out the
provisions of the act, except that the aggregate amount of such advances shall not exceed $165,000,000. Further information with
respect to this fund appears on page 105 of the annual report for 1936.
The status of the advances made to the fund as of June 30, 1938,
was as follows:
Advances to Colorado River Dam fund, J u n e 30, 1938
Advances from General Fund:
Fiscal years 1931-37
Fiscal year 1938
Interest:
Fiscal years 1931-37
Fiscal year 1938
Total
Less amount covered into the Treasury as miscellaneous receipts

$106,784, 734. 51
5,885,000.00

$112, 669, 734. 51

14,928,721.09
4,943,424.75
19,872,145.84
2,825, 631. 58

1 17,046, 514. 26

Total liability to General Fund..
129,716,248.77
1 Payment of interest due June 30, 1938, $17,046,514.26, deferred for 1 year under sec. 2 (d) of the act of
Dec. 21, 1928.

REPORT OF THE SECRETARY OF THE TREASURY

109

Advances to reclamation fund.—Under the act of Congress approved
June 17, 1902 (32 Stat, 388), there was established in the Treasury a
special fund known as the reclamation fund, representing receipts
from the sale of public lands in certain States and Territories to be
used for the construction of irrigation works for the reclamation of
arid lands. Pursuant to the act of June 25, 1910 (36 Stat. 835), the
Secretary of the Treasury advanced to the reclamation fund from the
General Fund of the Treasury $20,000,000. The act of June 12, 1917
(40 Stat. 149), provided for the reimburseinent of the money so
advanced through the transfer of $1,000,000 annually from the reclamation fund to the General Fund of the Treasury beginning July 1,
1920, and continuing until fuU reimbursement is made. Beginning
with the fiscal year 1921 there has been returned to the General Fund
$1,000,000 annually, making a total of $10,000,000 for the 10 years
ended with the fiscal year 1930. The Deficiency Act of February 6,
1931, provided for a suspension of the annual payments for a period
of 2 years; the act of April 1, 1932, as amended by the act of March
3, 1933, and the act of June 22, 1936, provided for a further extension
until the fiscal year beginning July 1, 1938. ;
The Deficiency Act approved March 4, 1931, appropriated an additional advance of $5,000,000 to the reclamation fund from the General
Fund, all of which was advanced between April 28, 1931, and November 30, 1931.
I
The following statement shows the status of the account as of
June 30, 1938:
Charges:
Advances from the General Fund:
Under act of June 25, 1910
Under act of Mar. 4, 1931

Total....
-.
Less repayment of advances to June 30,1930 i
Unreimbursed balance..
1 Installments for 1931-38 suspended.

;
.

$20,000,000
6,000,000
2.5,000,000
10,000,000
15,000,000

Provision for reimbursement of the above-mentioned amount was
made in the Interior Department Appropriation Act, 1939, approved
May 9, 1938.
Division of Deposits
The Division of Deposits is charged with the adm.inistration of all
matters pertaining to the designation and supervision of Government
depositaries and the deposit of Government funds in such depositaries,
as prescribed by regulations incorporated in Department Circulars
Nos. 92 and 176, as amended; the qualification of Federal savings and
loan associations and Federal credit unions as fiscal agents of the
United States under Department Circular No. 568; and the execution
of the duties devolving upon the Secretary of the Treasury as a result
of the enactment of the Government Losses in Shipment Act.

104825—39-

REPORT OF. T H E SECRETARY OF T H E TREASURY

Depositary functions.—The following statement shows the number
and classes of depositaries maintained by the Treasury and the Government deposits held by such depositaries on June 30, 1938:
Number of depositaries and amount of Government deposits held on J u n e SO, 1938,
by class of depositaries
Depositaries

Amount

Federal Reserve banks (including branches)
Federal Reserve member bank depositaries:
To credit of Treasurer of the United States
To credit of other Government oflQcers
Insular and Territorial depositaries (including Philippine Treasury)
To credit of Treasurer of the United States
To credit of other Government oflBcers
Foreign depositaries:
To credit of Treasurer of the United States
To credit of other Government ofiicers
Special depositaries
Total

500.79

1 In addition, 289 branch banks are carried on the depositary list of the Treasury under the designation
of the parent banks.
2 Includes 1,444 national banks and 1,023 State banks and trust companies, of which 1,544 held deposits
on June 30, 1938.

Approximately 1,047 changes and adjustments were effected wdthin
the depositary system during the fiscal year 1938. These adjustments are summarized in the following table:
Special
depositaries
Designated--: Discontinued
Amounts for which qualified increased.
Amounts for which qualified decreased
Miscellaneous changes

205
27

The administrative report of the Division of Deposits, contained in
the annual report of the Secretary of the Treasury for the fiscal year
ended June 30, 1937, outlined in detail certain major changes initiated
during that year in the collection and deposit procedure of the Treasury. This phase of the work continued during the fiscal year 1938
with the result that deposits cleared through general member bank
depositaries increased from approximately $1,000,000,000 in 1937 to
$1,800,000,000 during the fiscal year 1938.
' Federal savings and loan associations and Federal credit unions.—
On June 30, 1938, a total of 542 Federal savings and loan associations
and Federal credit unions were reported to the Treasury as being
eligible to qualify as fiscal agents under Treasury Department Circular No. 568 for the purpose of taking applications from their own
members and forwarding remittances for, and making delivery of,
United States savings bonds, and, of this number, 165 have qualified
either by the pledge of collateral security or the execution of surety
bonds in the amount of $5,000 each. The Federal savings and loan
associations so qualified may be employed also as fiscal agents of the
United States for the purpose of collecting delinquent accounts arising
out of insurance and loan transactions of the Federal Housing Admin

REPORT OF THE SECRETARY OF THE TREASURY

111

istrator under title I of the National Housing Act. In addition, on
account of their limited membership, 923 Federal savings and loan
associations were reported as being ehgible to qualify as fiscal agents,
under Treasury Department Circular No. 568, solely for the purpose
of collecting delinquent accounts arising out of insurance and loan
transactions of the Administrator under title I of the National
Housing Act, and 52 associations of this group qualified for this purpose either by the pledge of collateral security or the execution of
surety bonds in the amount of $1,000 each. I
Government Losses in Shipraent Act.—Undei the Government
Losses in Shipment Act, approved July 8, 1937 (50 Stat. 479), a copy
of which appears as exhibit 51 on page 302 of this report, there was
established in the Treasury a revolving fund known as the fund for
the payment of Government losses in shipment and there was authorized to be appropriated to such fund an initial amount of $500,000;
annual appropriations of $200,000 for each of the fiscal years 1939 to
1948, inclusive, and, from time to time, such! additional sums as may
be necessary for the purposes of the fund. The act made available
two methods of replacement of losses which might result to the executive departments and to various governmental organizations in consequence of ^'shipments'' of 'Valuables" as these terms are defined in
the act.
I
Heretofore, reimbursement of losses was effected by means of
insuring with private insurance companies. The practice of insuring
with private insurance companies resulted from the fact that it was
necessary for the eflacient operation of the administrative machinery
of the Government that, in event of loss, there should be available a
means of prompt duplication or reimbursement, and the existing
appropriation machinery was inadequate to that end.
The enactment of the Government Losses in Shipment Act is calculated to result in a substantial monetary saving to the Government
inasmuch as experience over a period of years reveals that large sums
of money were paid by the United States to private insurance companies in order to obtain the reimbursementi of such losses as might
result during the transportation of such articles as money, bonds, notes,
and the like, whereas the actual losses sustained by the insurance
companies were infinitesimal by comparison. Experience reveals also
that investigations of losses and recoveries were made invariably by
the United States Secret Service or some other governmental investigating bureau.
'
The methods of replacement of valuables, or the value thereof,
provided under the Government Losses in 'Shipment Act, referred
to above, are:
1. That replacement shall be made out^ of the revolving fund under
the control of the Secretary of the Treasury, except:
2. That the Comptroller General of the United States is authorized
and directed to make credit in the settlenient of accounts in the
General Accounting Office in such cases as the Secretary of the Treasury may determine that replacement can be effected, in whole or in
part, without actual or ultimate injury to the United States, by such
credit.
There was issued by the Secretary of the Treasury and the Postmaster General under date of July 16, 1937, to become effective on
and after August 15, 1937, Treasury Departnient Circular No. 576—
Post Office Department Keg. No. 1 (see exhibit 52, p". 306), containing

112

REPORT OF THE SECRETARY OF THE TREASURY

provisional regulations governing the shipment of valuables pursuant
to the Government Losses in Shipment Act.
Under section 4 of the act, the Secretary of the Treasury has
authority, under certain conditions, to grant exemptions to the provision
of the act which prohibits the payment of premiums on insurance
against loss, destruction or damage in the shipment of valuables by
the departments and governmental organizations concerned. An exemption was ordered, under date of August 12, 1937, with respect to
shipments of gold and silver coin or bullion to, from, between, or within
foreign countries under the provisions of the Gold Eeserve Act of
1934, as amended, and the Silver Purchase Act of 1934.
Also, as provided in section 6 of the act, the Secretary of the Treasury has the power, with the approval of the President, to make such
rules and regulations as may be necessary for the execution of the
functions vested in him by the act. Under this section, there was
issued, under date of August 13, 1937, and supplemented under date
of August 20, 1937, Treasury Departm.ent Circular No. 577, copies of
which appear as exhibits 53 and 54 on pages 307 and 311, which prescribes regulations governing claims for replacement of valuables,
or the value thereof, shipped pursuant to the Government Losses
in Shipment Act.
No claims for losses were paid during the fiscal year 1938. The
value of articles reported to have been shipped from August 15, 1937,
to June 30, 1938, under the Government Losses in Shipment Act,
of classes which were insured with private insurance companies against
loss in transit by the Government prior to the enactment of the act,
amounted to $7,828,602,642. The following table shows the estimated
premium savings on such shipments:
Table of estimated premium savings for the period August 15, 1937, to June 30, 1938
On basis of premium rates for:
Estimated premium savings
Fiscal year 1938 1....
$160,000
Fiscal year 1937 2
200,000
Fiscal years 1936-38 3
.
192,000
1 Lowest rates under insurance contract system.
2 Rates in efi'ect at time estimates of premium savings were presented to Congress.
3 Average based on rates effective in last three years.

Other classes of articles, having a total face value of $21,367,216,484,
which are covered under the provisions of the Government Losses in
Shipment Act, have not been included in the calculation of the estimated premium savings in the above table because, as a practice, the
Government did not insure the subject articles prior to the enactment
of the act.
Number and amount of claims presented and settlement and adjustment thereof,
fiscal year 1938
Number
Shipments reported lost
Settled without replacement or credit.
Unadjusted June 30,1938

Amount
1469.11
36.75
432. 36

Section of Surety Bonds
On June 30, 1938, there were 67 domestic companies holding certificates of authofity from the Secretary of the Treasury under the

REPORT OF THE SECRETARY OF THE TREASURY

113

act of Congress approved August 13, 1894, as amended by the act
approved March 23, 1910, qualifying them as sole sureties on recognizances, stipulations, bonds, and undertakings permitted or required
by the laws of the United States, to be given with one or more sureties.
There were also six branches of foreign companies holding certificates
of authority authorizing them to act only as reinsurers on bonds in
favor of the United States. During the year one certificate of authority
of a domestic company, which had voluntarily ceased to write new
business, expired; and one certificate of authority was issued to a
domestic company to qualify as sole surety on bonds in favor of the
United States.
Division of Bookkeeping and Warrants
The Division of Bookkeeping and Warrants, in the name of the
Secretary of the Treasury, issues all warrants on the Treasurer of
the United States, and under section 10 of the act of July 31, 1894
(U. S. C , title 5, sec. 255), keeps the ofl&cial accounts relating to
the receipt, appropriation, and expenditure of the public moneys,
covering all departments and establishments of the Government.
This Division makes analyses of acts of Congress carrying appropriations and maintains the necessary appropriation accounts on its
ledgers; it issues warrants for placing disbursiiig funds to the credit of
disbursing officers, for the payment by the Treasury of claims settled
by the General Accounting Office, and for covering into the Treasury
the revenues and receipts of the Government. I t handles the work
involved in the Secretary's special deposit accounts, including alien
property trusts and offers in compromise, the approval of the issuance
of duplicate checks (see sec. 9 of the Governinent Losses in Shipment
Act printed as exhibit 51, p. 302, and the new regulations based thereon
printed as exhibit 55, p. 311), and outstanding liability claims; compiles, for submission to the Bureau of the Budget, the estimates of
appropriations for the service of the Treasury; maintains budgetary
accounts relating to apportionments and obligations of funds pertaining to all departments and establishments of the Government,
including governmental corporations operating on public funds, pursuant to the provisions of the Executive order of July 27, 1933.
In addition to the above this Division compiles and publishes an
annual digest of the appropriations made by Congress and an annual
combined statement of the receipts, expenditures, and unexpended
balances under each appropriation account.
Statements of the receipts and expenditures of the Government for
the fiscal year 1938, compiled by this Division, are shown as tables 1
and 2, pages 354 to 362 of this report.
Division of. Disbursement
The Division of Disbursement, organized E)ecember 16, 1933, under
the provisions of section 4 of Executive Order No. 6166, has absorbed
the disbursing functions formerly exercised by the departments and
establishments of the Government located in Washington, D. C ,
including the emergency as well as the regular Government activities,
with the exception of the Post Office Department, the Panama Canal,
and that portion of the War and Navy Departments relating to
national defense. In addition, it has absorbed the disbursing activities

114

REPORT OF THE SECRETARY OF THE TREASURY

of the other departments and establishments in the field with the
exception of the United States marshals and the Foreign Service
of the Department of State.
Pursuant to requests made by the corporations, the Chief Disbursing
Officer acts in the capacity of Disbursing Agent for the Federal Surplus
Commodity Corporation, the Federal Crop Insurance Corporation,
and the United States Housing Authority. This arrangement has
proved satisfactory and economical, as it avoided the necessity for the
corporations to establish separate disbursing offices in Washington
and in the field.
On June 30, 1938, the Division maintained 19 regional offices and
55 Treasury-State disbursing offices in the field. There were also 6
branch offices of the Treasury-State disbursing offices.
Payments under the special programs of the Agricultural Adjustment Administration were continued during the year. The total
number of payments under these programs, including the Soil Conservation pa3^ments, was 4,344,347.
On June 30, 1938, the total personnel of the Division, including
regular, temporary, and emergency employees, was 2,955, and in addition there were 149 employees of the Agricultural Adjustment
Administration detailed to offices of the Division to assist in the
disbursing work incident to the special programs of that agency.
The offices of the Division made 92,087,492 payments by check and
made cash payments in 1,007,704 instances. These payments were
supported in the disbursing accounts by 8,049,595 vouchers. The
Division also received, deposited, and accounted for 2,608,326 collection items.
DIVISION OF APPOINTMENTS

Number of employees in the Treasury Department
There were 21,021 employees in the departmental service of the
Treasury on June 30, 1938, a net decrease of 217 for the year. The
largest decreases occurred in the Division of Loans and Currency and
in the Branch of Supply. These were partially offset by large increases in the Bureau of Engraving and Printing and in the Bureau
of Internal Eevenue.
In the field service there were 55,814 employees on June 30, 1938.
This number does not include the assistant collaborating epidemiologists who furnish information to the Public Health Service at a dollar
a year and who are actually State employees. For comparative purposes these persons have also been excluded from the number of field
employees in 1937, which leaves a total of 58,437 employees on the
pay rolls on Jmie 30, 1937. Therefore, the net decrease during the
year was 2,623, which is accounted, for chiefly by the large decrease
in the number of persons employed in the emergency relief program.
The largest increase was in the Bureau of Internal Revenue.
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 30, 1937, through June 30, 1938, is shown in table 60,
page 560 of this report. A comparison of the number of employees in
the departmental and field services of the Treasury on June 30, 1937,
and June 30, 1938, is contained in table 61, page 561.

REPORT OF TFIE SECRETARY OF THE TREASURY

115

Retirement of employees
During the year there w^ere 584 persons retired from the departmental and field services of the Treasury Department. Under the
provisions of the Civil Service Retirement Act, as amended, and of
section 204 of the Economy Act of June 30, 1932, 242 persons were
retired from the departmental service of the Treasury Department,
14 of whom were retired at their own option before the compulsory
retirement age; and 342 were retired from the field service, 29 at their
own option.
As of June 30, 1938, six employees in the departmental service and
one in the field service, who had reached the retirement age, were
retained under the authority of the President provided in section 204
of the Economy Act.
Table 62, page 562, shows the number of persons retired in the departmental and field services of the Treasury from August 20, 1920,
to June 30, 1938, and the number who have passed the compulsory
retirement age but who are retained as of June 30, 1938.
BUDGET AND IMPROVEMENT COMMITTEE

The Budget and Improvement Committee is responsible, under the
direction of the Budget Officer, for the preparation and review of estimates submitted by Treasury bureaus and divisions for annual or
deficiency appropriations. I t is also responsible, under the direction
of the Budget Officer, for the investigation of administrative methods
and procedure in their relation to appropriation estimates and for
other investigations upon assignment by the Administrative Assistant
to the Secretary. To facilitate the investigations, a Sub-Committee
on Investigations was recently created with a view to determining,
through the inspection of field as well as departmental activities, the
justification for proposed increases in appropriation estimates.
The review of appropriation estimates includes a thorough examination of the items by the individual committee members to whom
respective bureaus or divisions are assigned. The entire committee
then conducts formal hearings at which the bureau or division heads,
or their representatives, present oral testimonj^ in further support of
their estimates. The committee, after deliberation, submits its
recommendations to the Budget Officer for his guidance in determining
the items which should be approved for transmittal to the Bureau of
the Budget.
Subsequent to the submission of the regular estimates of appropriations for the fiscal year 1939, supplemental and deficiency estimates aggregating $237,883,845.71 were received. After examination
these estimates were reduced to $235,488,229.61 and submitted to the
Acting Director of the Bureau of the Budget.
Reserves amounting to $17,003,813 had been set aside from ordinary
appropriations for the fiscal year 1938 by the Acting Director of the
Bureau of the Budget. During the year, reserves amounting to
$11,772,063 were released by the Acting Director, after approval of
the committee, and additional reserves of $19,000 were set up, leaving $5,250,750 in reserve at the end of the year. Of the appropriations
made to the Treasury Department for the fiscal year 1939, the Acting
Director set aside $504,518 as reserves.

116

REPORT OF THE SECRETARY OF THE TREASURY

For the fiscal year 1.940, heads of Treasury bureaus and offices submitted estimates for annual, permanent, and indefinite appropriations
aggregating $4,103,249,931. After examination by the Budget and
Improvement Committee, items aggregating $6,109,813 were disapproved in estimates for annual appropriations. Of the $4,097,140,118
approved and submitted to the Acting Director of the Bureau of the
Budget, $1,023,525,502 w^as for annual appropriations, including
$600,000,000 for the old-age reserve account; $5,910,241 for permanent and indefinite appropriations and special funds; $1,452,109,375
for trust funds; $1,031,000,000 for interest on (the public debt; and
$584,595,000 for public debt retirements chargeable against ordinary
receipts.
COAST GUARD

„ The following table summarizes the principal operations of the
Coast Guard for the fiscal year 1938, including comparison with the
preceding year:
Activity

Instances of lives saved a n d vessels assisted
Value of vessels assisted (including cargoes)
Persons on board vessels a s s i s t e d —
Lives saved or persons rescued frorn peril
Persons in distress cared for
^J
Instances of miscellaneous assistance.
Vessels boarded a n d papers examined
Vessels seized
Vessels reported
F i n e s a n d penalties incurred b y vessels reported
Vessels w a r n e d for violations of law
Derelicts a n d other obstructions to navigation r e m o v e d
or destroyed
Value of derelicts a n d other obstructions recovered
R e g a t t a s a n d m a r i n e parades patrolled
Persons examined for certificates as lifeboat m e n

1937

8,140
18,004,465
37, 691
7,631
761
6,930
40,645
18
3,124
$522,°915
230
$1,525
386
3,917

1938

8 725
.$69, 766| 039
33,901
8,643
661.
4,638
34,983
9
2,249
$684,330
770
226
$16,848
457
4,641

Increase or
decrease ( - )
685
1,249,426
-3,690
1,012
-200
-1,292
-5,662
-9
-875
$61,415
-215
-4
$15,323
71
624

The number of lives saved or persons rescued from peril during the
year was the largest in the history of the Service, exceeding by 1,012
the previous high record of'1937.
A large portion of the activities of the Coagt Guard, acting as the
Nation's maritime police agency, cannot be presented in statistical
form extending as they do into the broad, related field of law enforcement upoD the sea and navigable waters, protectiag and saving life
and property, maintaining a state of preparedness for national defense,
and assisting other governmental agencies.
Assistance in the development and settlement of the American
island possessions in the South Seas was rendered by regular cruises of
Coast Guard cutters-from Honolulu to Baker, Howland, and Jarvis
Islands, in cooperation with the Department of the Interior.
During the year the Coast Guard towed 22 decommissioned merchant vessels of the Maritime Commission from Stapleton, N. Y., to
Hampton Roads, Va.; and transported United States officials and
material during the tie-up of commercial shipping in the Virgin Islands
and Puerto Rico in January 1938.
During the flood which inundated the region adjacent to the Alabama
and Tombigbee Rivers in Alabama, in April 1938, the Coast Guard
dispatched a relief force of 60 officers and men, 27 boats, mobile communication facilities, and 1 airplane, removing 102 persons to places
of safety and otherwise assisting in rehef measures.

REPORT OF THE SECRETARY OF THE TREASURY

117

In the safeguarding of planes in pioneering and experimental flights
across the Atlantic Ocean, the Coast Guard dispatched cutters to
strategic points to afford radio bearings, weather information, etc.
One cutter acted as plane guard and radio beacon in the Pacific Ocean
for the iU-fated flight of Ameha Earhart.
Coast Guard forces cooperated with tbe Navy in the fleet landing
exercises held ia the region of Puerto Rico in January-March 1938, and
participated with the Army and Navy in other maneuvers along the
United States coast.
From December 14 to February 27, Coast Guard vessels conducted
ice-breaking operations in the Hudson River to assist in keeping the
channel to Albany open to navigation, and assistance of this nature
was also rendered in the Great Lakes area and on the North Atlantic
coast.
Service facilities were employed in the transportation of mail,
GoverDment officials, and supplies to Alaska; also in carrying mail to
isolated Civilian Conservation Corps camps on the Great Lakes and
in other localities during periods of interrupticin to regular commercial
services. One cutter was placed at the disposal of the Federal Court
for the Third Alaskan District in transaction of court business at
various ports. In cooperation with the Bureaii of the Mint, plans were
completed at the end of the fiscal year for the: Coast Guard to furnish
armed protectioQ iu connection with the transfer of silver bullion from
New York City to West Point, N. Y.
|_ ^
Work relief projects comprising the reconditioning, modernization,
and construction of shore facilities at various Coast Guard stations,
the construction of wooden boats, and dredging at Government
Island, Alameda, Calif., authorized under the Emergency Relief
Appropriation Act of 1935, were completed during the year.
Enforcement of customs and other laws
Empowered to enforce the laws of the United States upon the high
seas and navigable waters, the law enforcement activities of the Coast
Guard have embraced all phases of Federal maritime jurisdiction.
Most prominent among these have been tbe customs, navigation,
motorboat, and conservation laws. The Coast Guard stations located
at strategic points along the coast and Service vessels cruising throughout all areas of the coastal waters of the United States have been
instrumental in insuring the fullest measure of security and orderly
conduct of marine activities.
Vessels of the Coast Guard were assigned,; as customary, at. ports
of entry to provide transportation facilities to Customs and Immigration officers. Coast Guard aircraft also assisted the Customs
Service in the patrol of the Mexican border; I and both the Customs
and Narcotics Bureaus have received assistance in making seizures and
arrests for violation of their respective laws. I
The Coast Guard Intelligence Division rendered valuable service
to other Treasury law enforcement agencies as well as to its own
Service and to other departments of the Federal Government.
In law enforcement matters upon the sea contiguous to Canadian
territorial waters, the whole-hearted cooperation of the Royal Canadian
Mounted Police has been enjoyed.

118

REPORT OF T H E SECRETARY OF T H E TREASURY

Smuggling.—Division commanders of the Coast Guard continued,
under the direction of the Secretary of the Treasury, as coordinators of
the Treasury law enforcement agencies in the prevention and detection of the smuggling of liquor and narcotics within the hmits of their
respective divisions. The system was extended during the year to
include the Puerto Rico-Virgin Islands areas, and the special organizations established during 1936 in the Hawaiian Islands were strengthened
and perfected.
Only 12 instances of the presence of foreign hovering vessels within
striking distance of the coast were noted. These sporadic attempts at
smuggling, largely centered in the New England area, were dealt
with quickly by Coast Guard patrols to frustrate any landings.
Although alcohol or liquor smuggling was not, as in former years, a
major problem, the matter continued to be one demanding the utmost
vigilance.
The campaign against the suppression of illegal introduction of narcotic drugs was intensified. Upwards of 4,430 vessels were kept under
surveillance upon entering United States waters or while within territorial jurisdiction. Special law enforcement patrols were established
to cover Delaware Bay and Delaware River, Chesapeake Bay, and
Jacksonville and New Orleans areas.
A summary of seizures, etc., during the year is presented in the
following table:
Summary of Coast Guard seizures, etc., fiscal year 1938

Activity

Vessels seized
Arrests
•.
Vehicles seized
Narcotics seized (ounces)
•.
Illicit distilleries and equipment seized or reported...
Aliens apprehended
Estimated value of seizures:
Contraband
i
Equipment
^
Estimated internal revenue tax on contraband seized

Coast
Guard

Joint seizures
(Coast Guard
and other
Treasury agencies) ,

85
15
7.
23
2

640
98
46
394
1

$743
$18,400
$1, 487

$30, 829
$60,108
$61,658

Total

17
726
113
53
417
$31, 672
$78, 508
$63,146

Anchorage and movements of vessels.—On June 30, 1938, nine Coast
Guard officers were serving as captains of the port in ports where
Federal rules and regulations, promulgated by the Secretary of War
and the Secretary of Commerce, are in effect governing the anchorage
and movements of vessels in the interest of safe navigation, expeditious and orderl}^ movement of marine commerce, and efficient port
administration. At the larger ports, harbor craft were detailed to
this duty and also in connection with the supervision of the loading of
explosives, oin localities where the continual presence of an enforcement officer was not necessary, periodic inspections were made by
Coast Guard vessels regularly operating in the area.
Enforcement of Whaling Treaty Act.—Coast Guard officers were ^
assigned as inspectors aboard two American whaling vessels which
operated in the Indian Ocean and Antarctic waters and at two whaling factories in Alaska. A Coast Guard officer served as American

REPORT OF THE SECRETARY OF THE TREASURY

119

delegate to the whaling conference held at Oslo, Norway, in May 1938,
and at the International Conference on Whding held in London in
June. These conferences had for their purpose the adoption by
interested nations of methods for the conservation of whales.
Patrol in northern waters.—The patrol of the waters of the North
Pacific Ocean, Bering Sea, and southeastern Alaska involves enforcement of the international convention for the protection of the fur seal
and sea otter, law enforcement generally, and assistance to marine
commerce and Alaskan natives. The patrol for the season of 1937, in
progress at the beginning of the fiscal year 1{938, was conducted by
eight Coast Guard vessels, which cruised 5'^,731 miles, assisted 14
vessels, boarded 203 vessels, afforded medical and dental aid to 1,606
persons, and transported 406 persons. Nine vessels were assigned to
the patrol for the season of 1938, which w^as in progress on June
30, 1938.
:
Northern Pacijic halibut fishery.—Nine Coast Guard vessels made
15 cruises to the halibut fishing areas during the year in the enforcement of the Northern Pacific Halibut Fishery Act and the International Convention for the Preservation of the Hahbut Fisheries of
the Northern Pacific Ocean. Six American yessels and one foreign
vessel were seized for violations of the act during the year.
Protection to marine commerce and life and property
In the protection and saving of life and property, service units
are constantly alert and prepared to respond to calls for assistance
from floating craft or persons in peril. Communication facilities,
disposition of forces, and organization plans are designed to meet
not only individual calls for aid, but to put speedily into action
expeditions for relief and assistance in nationail emergencies.
During the year Coast Guard officers were appointed and acted as
members of the marine investigation boards cbnvened by the Department of Commerce to investigate loss of life aboard ship.
International Service of Ice Observation and Ice Patrol.—The international Service of Ice Observation and Ice Patrol, conducted by
the Coast Guard pursuant to the International Convention for the
Safety of Life at Sea, signed at London May 31, 1929, and the act of
Congress approved June 25, 1936, was inaugurated on February 14,
1938, with the arrival of a Coast Guard cutter in the Grand Banks
region. The cutter made two ice observation cruises for the purpose
of locating the most southerly ice and of determining the prevaihng
ice situation. On March 24 the ice patrol was begun, and until its
conclusion on July 22, two cutters, alternating on cruises, maintained
a continuous patrol in the Grand Banks region, keeping in touch
with the southerly, easterly, and westerly limits of the ice. Halifax,
Nova Scotia, was used as their inport base. Throughout the ice
season the practice was followed of transrnitting scheduled radio
broadcasts of the position of all ice sighted or repor,ted, of advising
shipping concerning routes to be followed, and of furnishing information on the ice situation to ships upon request. The 1938 ice observation and ice patrol season was the longest on record.
An oceanographic vessel, which arrived in the Grand Banks region
on March 30, conducted the scientific observations, keeping the patrol
cutters informed of the speed and direction oi currents prevaihng in

120

REPORT OF T H E SECRETARY OF TFIE TREASURY

the Grand Banks region, in furtherance of the most efficient conduct
of this international service. Upon the conclusion of the ice patrol,
the vessel sailed on a post-season oceanographic and ice observation
cruise in the Labrador Sea between Labrador and southwestern
Greenland.
Winter cruising.—During the 1937-38 season of severe weather on
the North Atlantic coast 14 Coast Guard cutters were designated,
pursuant to Executive order, to render aid to marine commerce.
These cutters cruised 44,423 miles; afforded assistance to 116 vessels,
whose value, including cargoes, amounted to $8,731,617; and destroyed
eight derelicts which were a menace to navigation. In the enforcement of Federal maritime laws, 272 vessels were boarded and examined.
Aviation
Durihg the year an air station was established at New York, N. Y.,
and the station at Cape May, N. J., was placed out of commission.
On June 30, 1938, air stations in commission were located at Salem,
Mass.; New York, N. Y.; Charleston, S. C ; Miami and St. Petersburg, Fla.; Biloxi, Miss.; San Diego, Calif.; and Port Angeles, Wash.
Air patrol detachments were maintained at El Paso, Tex., and Cape
May, N. J., and aircraft were operated from the plane-carrying
cutters in Hawaiian and Alaskan waters and on the Atlantic coast.
Aircraft in service at the close of the fiscal year numbered 54 planes
of various types, the largest being the flying boat P H - 2 type, with a
cruising range of 2,000 miles. Funds were provided in the Second
Deficiency Act of June 25, 1938, for the construction of air stations
at Elizabeth City, N. C , and San Francisco, Calif.
The practice of affording flight instruction to Coast Guard officers
at the naval air station, Pensacola, Fla., has been continued.
Aircraft landings were made in the open sea in 33 instances, and
323 flights were made during hours of darkness. Operations during
the past year in law enforcement missions, in saving and protecting
life and property at sea, and in affording assistance to other branches
of the Government have demonstrated the increasing importance of
aircraft in the performance of Service duties. Insofar as operations
can be presented statistically, the following resume gives an idea of
the extent ai-nd importance of Coast Guard aviation during the fiscal
year 1938:.
Number
Flights.
4,383
Miles cruised
934,430
Emergency medical cases transported
148
Persons transported from disabled vessels _ _
'21
Persons otherwise transported and assisted.
681
Vessels warned of impending danger
506
Persons warned of impending danger
2,135

Number
Instances of assistance to other Government
agencies
Obstructions to navigation reported
Smuggling vessels located
Illicit distilleries located
Disabled vessels located

345
19
27
607
63

Communications
Telephone and telegraph lines and cables.—The Coast Guard owns
and operates a coastal telephone system consisting of 1,602 miles of
pole line, 3,000 mUes of open aerial circuits, 50 miles of aerial and
underground cables, and 642 miles of submarine cables. A number
of these lines are connected with central offices of commercial telephone systems, thus affording telephone and telegraph service to all
units of the Coast Guard, to Navy direction finder stations. Weather

REPORT OF TFIE SECRETARY OF T H E TREASURY

121

Bureau offices, and lighthouses in various locations along the coastal
waters of the United States.
i
Installation of telephone repeaters along the Long Island and New
Jersey coasts has materially improved the transmission and the range
of telephonic communication over Coast Guard lines. A study is
now being made of the section from Lewes, Del., to Morehead City,
N. C , with a view to the installation of repeaters in this section.
These installations materially increase the value of Coast Guard telephone lines in law enforcement, national defense, and the saving of
life and property.
.
Approximately 200,000 feet of obsolete telephone submarine cables,
involving 12 important cables along the Atlantic coast. Gulf of Mexico,
and the Great Lakes, were replaced with cable of modern design.
In addition to cable replacements, general cable repairs were effected
in all divisions. Research activities in conneGti()n with the improvement of both the physical and electrical characteristics of rubber
insulated, steel armored, and rubber jacketed cable were carried on
during the year.
Radio.—Research and development work was continued, particularly in connection with transmitting antennae and ground radial
systems and the procurement of satisfactory equipment for lifeboat
installation.
During the year new radio station buildings were constructed and
occupied at Mobile, Ala., San Francisco, Calif., and at the Coast
Guard Air Station, New York, N. Y. ^
Radiotelephone weather and marine information broadcasts,
primarily for the benefit of yachts and small boats, were inaugurated
at strategically located Coast Guard radio stations on the Atlantic,
Pacific, and Gulf coasts, and at Cleveland, Ohio, on the Great Lakes.
This contribution to the safety of small craft was made possible
through the cooperation of the Weather Bureau, Lighthouse Service,
and the Navy Hydrographic Office.
The laboratory and monitoring activities of the Coast Guard radio
station at Fort Hunt, Va., were continued. In addition this station
acted as headquarters' radio station and provided a fixed communication service to several divisions and a mobile service to the International Ice Patrol and vessels cruising in foreign waters.
Cooperation in communication problems with other agencies of the
Treasury Department, notably Bureau of Customs, Alcohol Tax
Unit, and Bureau of the Mint, was continuedi
The Chief Communications Officer continued to represent the
Treasury Department on the Interdepartmental Radio Advisory
Committee. He also acted as chairman of the Committee on
Administration which is preparing for the Cairo International Telecommunication Convention, and served as technical adviser to the
United States delegation at the convention.
Floating eguipment
Cutters, patrol boats, etc.—On June 30, 1938, the following floating
equipment was in commission in the Coast Guard: Cruising cutters,
34; 165-foot patrol boats, 17; 125-foot patrol boats, 27; 100-foot
patrol boats, 4; 80-foot patrol boats, 9;'78-foot patrol boats, 6;
75-foot patrol boats, 50; 72-foot patrol boats, 4; harbor tugs, 11;

122

REPORT OF THE SECRETARY OF THE TREASURY

harbor launches, 39; special craft, 7; picket boats, 8 1 ; and miscellaneous patrol boats exceeding 40 feet in length. This floating
equipment does not include the small boats, designed primarily for
life-saving, assigned to Coast Guard stations and vessels.
During the year a number of cutters and smaller vessels were sold
or transferred to other Government departments.
The work relief projects for the construction of wood patrol boats
and harbor craft with funds allotted from the Emergency Relief Appropriation Act of 1935 were completed, and the following boats were
acquired: Four 80-foot patrol boats, two 65-foot patrol boats, and
two harbor craft.
Two Coast Guard harbor cutters were under construction at the
close of the fiscal year.
Small boats.—Considerable design work has been accomplished on
a proposed new 40-foot motor lifeboat, and improvements have been
made in the existing TR motor lifeboat and in the standard motor
self-bailing surfboat. An experimental fresh water cooling system
with keel condenser and dr}^ exhaust, including provisions for hot air
heating of forward cabin, has been installed in one lifeboat for test
purposes. Experimental investigations and testing in the related
field of special metals, wood, preserving treatments, etc., have been
continued to improve and keep modern the materials and methods ot
construction of standard small boats of the Service.
Ordnance activities
A high standard of gunnery proficiency was maintained, the percentage of vessels holding the prescribed gunnery exercises being
greater than in any previous year. Every ship for which short range
practice is specified fulfflled the requirement, only 12 out of 123 being
unable to hold modified practice. This is a remarkable record in
view of the heavy operating schedules of Coast Guard vessels.
Customary small arms training was carried on throughout the
Service. In the national matches at Camp Perry, Ohio, the Coast
Guard team won 4 trophies and 131 medals. Coast Guard coaches
continued to give instruction in the use of small arms to the armed
civilian personnel of the Treasury Department, totaling 5,214 men
on June 30, 1938.
In ordnance, gunnery, and small arms activities, the Coast Guard
has enjoyed the full cooperation of the Army, Navy, and Marine
Corps in the furnishing of materials and facilities as required.
Stations, bases, repair depot, etc.
Stations and bases.—The plan to reorga,nize the stations for the
purpose of increasing the efficiency of the Coast Guard has resulted
in reducing the number of active stations by 45 during the past 2
years. During 1938, 22 active stations were made inactive, and 3
active and 3 inactive stations were discontinued. On June 30, 1938,
there were 200 active stations and 74 inactive stations, and 3 shore
bases were in commission. A study of the inactive stations is now
being made with the intention of discontinuing those not required
for Coast Guard activities'

REPORT OF THE SECRETARY OF THE TREASURY

123

A number of new boathouses and launchways, several station
dwellings, and miscellaneous projects at shore units were completed.
New station structures were placed at Fort, Pierce, Fla., as a new
location for the former Indian River Inlet House of Refuge, which
has been designated the Fort Pierce Inlet Station.
Repair depot.—The Repair Depot, Curtis Bay, Md., is maintained
for repairing and altering cutters and for building small boats. During the year two 125-foot patrol boats were re-engined and completely overhauled, and three 75-foot patrol boats were reconditioned.
The usual routine maintenance of vessels stationed in the West Indies
and in the vicinity of Baltimore was performed, and alterations and
repairs were made to several cutters. The boat building plant constructed 25 boats of various types, 6 of which were motor lifeboats,
and also built a large number of lifeboat and; surfboat launching carriages. A number of old-type motor lifeboats were modernized.
Engine school and repair base.—The Engine School and Repair
Base, Norfolk, Va., is maintained for instructional purposes and as
an engine repair base. During the year 37; enlisted men completed
courses in the repair, operation, and maintenance of" internal-combustion marine and aviation engines and in lathc; practice. The students
reconditioned gasoline marine engines and their parts for further use
by the Coast Guard, and rebuilt parts of electrical equipment for
engines, including starting motors, generators, magnetos, and distributors. Experimental work with gasoline marine and Diesel
auxiliary engines and with lubricating oil treatment was carried out
in connection with the instruction courses.
Personnel and training
On June 30, 1938, there were on the active list of the Coast Guard
524 commissioned officers, 78 cadets, 389 chief warrant officers, 153
regular warrant officers, 135 temporary warrant officers (of whom
115 were on duty with the War Department, under orders contained
in Executive Order No. 6169), 8,803 enlisted men, 2 civilian instructors (at the academy), and 341 civilian eniployees in the field, of
whom 250 were per diem employees at the Coast Guard Depot,
Curtis Bay, Md. There were also 154 emergency employees.
During the year an officer of the Coast Guard acted as a member
of the Senate Technical Advisory Committee on Safety of Life at
Sea.
Recruiting.—Six main recruiting stations were in operation during
the entire fiscal year. There were 4,167 applicants, of whom 1,063
were enlisted, 1,353 rejected for physical disability, and 1,751 rejected for other causes. Loss in personnel other than through expiration of enlistment was low. Of the discharged men who were
eligible for reenlistment, 80 percent reenlisted.
Training.—Postgraduate instruction for commissioned officers was
provided for 4 in resident law, 20 in extension law, 3 in marine engineering, and 2 in radio engineering. Several other officers were assigned to various universities for summer courses, and 9 officers
completed flight training at the Naval Air Station, Pensacola, Fla.
Resident schools within the Service provided training for enlisted
men in radio, small arms maintenance, and gasoline and Diesel en-

124

REPORT OF THE SECRETARY OF THE TREASURY

gine repairs and operation, and training for yeomen, pharmacist's
mates, cooks, and bakers. From time to time men were assigned to
schools of the Army and Navy for instruction not available within
the Coast Guard.
The Coast Guard Institute at New London, Conn., provided instruction to enlisted men to qualify them for advancement, and has
given them the opportunity to study various professional and educational subjects through correspondence courses.
In order to insure a thorough knowledge of all phases of maritime
and navigation laws, lectures on law enforcement were delivered at
various centers of Service activities, and, in November 1937, correspondence courses iii these subjects were inaugurated, in which
approximately 1,750 students were enrolled. The Treasury law
enforcement course was completed by 232 officers and men.
Coast Guard Academy.—During the year 48 cadets were appointed,
25 resigned, and 23 were graduated and commissioned as ensigns in
the Coast Guard; there were 78 cadets under instruction at the end
of the year. The 1938 cadet practice cruise, which began on June 4,
1938, included Unitied States and South American ports in its
itinerary.
On April 27, 1938, the Congressional Board of Visitors to the
Coast Guard Academy, appointed pursuant to the act of April 16,
1937, made its annual inspection of the academy.
Engineering competition.—Engineering competition, with awards
made to the highest scoring vessels and their engineer forces, was
continued during the year. This competition, which promotes a
spirit of friendly rivalry among the competing units and maintains
personnel and material in a high state of efficiency and readiness, was
participated in by 32 cruising cutters and 45 patrol boats.
Boatmanship competition.—During the year a plan was inaugurated
providing for competition between units in boatmanship, consisting
of rowing races and competitions devised to demonstrate skill in
handling boats under Service conditions. This has increased the
interest in boatmanship.
- .
Awards of lifesaving medals and decorations
The Secretary of the Treasury, under the provisions of law, awarded
during the year 10 gold and 16 silver lifesaving medals of honor in
recognition of heroism or bravery exhibited in the rescue or attempted
rescue of persons from drowning in waters over which the United
States has jurisdiction or upon an American vessel. Also, acting for
the President, the Secretary awarded a distinguished flying cross to
a Coast Guard officer for extraordinary achievement in an official
aerial flight.
Legislation
The following general legislation affecting the Coast Guard was
enacted by the Congress during the fiscal year: .
The Secretary of the Treasury was authorized to establish Coast
Guard stations in the following localities: At or near Beaver Bay,
Minn. (Pubhc No. 230, July 30, 1937); at or near St. Augustine,
Fla. (Public No. 23], July 30, 1937); at or near Dauphin Island,
Ala. (Pubhc No. 285, August 14, 1937); in the vicinity of Fort Myers,

REPORT OF THE SECRETARY OF THE TREASURY

125

Fla. (Pubhc No. 283, August 14, 1937); at or near Panama City,
Fla. (Public No. 443, March 14, 1938); and at or near Shelter Cove,
Calif. (Public No. 699, June 22, 1938).
i
The act of July 30, 1937 (Pubhc No. 234), remedied certain inadequacies in existing law and extended certain privileges to personnel
of the Coast Guard which are now enjoyed by the personnel of the
other military services. The bill relates to enlistment and extensions in the time thereof, medical treatment by the Public Health
Service of dependent members of families of Coast Guard personnel,
naturalization privileges of Filipinos serving in the Coast Guard,
award of the Distinguished Flying Cross to members of the Coast
Guard; advance of clothing funds to newly appointed cadets; and
authority for retired Coast Guard officers to hold public office if
elected thereto or if appointed by the President.
The act of January 12, 1938 (Pubhc No. 419), provided for retirement or resignation of officers placed out of line of promotion and
for involuntary retirement after 30 years' service.
The act of May 13, 1938 (Public No. 513), authorized the payment to the widow or other next of kin of money due the estate of a
deceased officer or enlisted man, where the amount involved is less
than $500.
;
The act of May 26, 1938 (Pubhc No. 553), authorized the continuance of the payment to enlisted men of i allowances for quarters
and subsistence while sick in hospital or absent from their permanent
duty stations in a pay status.
The act of June 23, 1938 (Public No. 705), provided for the estabhshment of the United States Maritime Service, with ranks, grades,
and ratings of personnel similar to those in the Coast Guard, and
gave authority to the United States Maritirne Commission to avail
itself of the services of any agency of the Government in carrying
out the pertinent provisions in the act.
The act of June 30, 1938 (Pubhc No. 787), designated the Coast
Guard as one of the Federal agencies for research and experimental
work with rotary-wing and other aircraft.
Funds available, obligations, and balances
The following table shows the amounts available for the Coast
Guard for the fiscal year 1938, including regular and deficiency appropriations, the balances of appropriations from the previous year,
and additional funds made available from funds appropriated under
the National Industrial Recovery Act. The amounts of obligations
and unobligated balances are also shown.
104825—39

126

REPORT OF THE SECRETARY OF THE TREASURY
Available funds, obligations, and unobligated balances, fiscal year 1938
Source of funds

Available

Appropriations:
Salaries, Office of Coast G u a r d , 1938
P a y a n d allowances, 1938
F u e l a n d w a t e r , 1938
Outfits, 1938 -R e b u i l d i n g a n d repairing stations, etc., 1938..
C o m m u n i c a t i o n lines, 1938
Civilian employees, 1938-_
C o n t i n g e n t expenses, 1938
. ._
R e p a i r s t o vessels, 1938
Repairs t o aircraft, 1938
R e p l a c e m e n t airplanes, 1938-39..
A d d i t i o n a l airplanes, 1937-38..
Repairs t o vessels, 1937-38
_ ..
Outfits, 1937-38
R e b u i l d i n g a n d repairing stations, 1936-39
R e b u i l d i n g a n d repairing stations, 1937-39.. 1.
C o m m u n i c a t i o n lines, 1937-38
. .
Additional vessels, 1938-39
Coast G u a r d A c a d e m y
Total.
O t h e r available funds:
National Industrial Recovery, Treasury,
Coast G u a r d , 1933-39...
.
.
G r a n d total

Obligated

$389,240
18,094,000
1,475,000
1, 565,000
292,600
180,000
192,000
122, 600
1,469,813
615,187
354,000
12,771
30,000
24,160
125,000
147, 614
40, OCO
700,000
1,684

$391,865
17, 940,517
1,449, 719
1, 559,198
288, 642
172,077
191,614
130,732
1,451, 490
611,197

25,720,469

24, 940, 454

Transferred

Unobligated
balance

1 + $ 3 ; 500
1 -3,500
.2-4,800
2 - 2 , 200
2 + 1 3 , 500
2 - 6 , 500
2-1,000

12,751
30,000
23,613
48,677
78,973
39, 900
617,913
1,676

$875
149,983
25, 281
1 002
3,958
5, 723
386
5 368
2,823
2,990
3 354,000
20
547
3 76, 323
3 68, 541
100
3 82,087
8
780,015

47, 352

35,133

i +284,845

3 297, 064

26,767,821

24,975, 587

+284, 845

1 077 079

1 Transferred from "Pay and allowances" to "Salaries."
2 Transferred from "Outfits," "Communication lines," "Repairs to vessels," and "Repairs to aircraft"
to "Contingent expenses."
3 Balances carried forward to fiscal year 1939.
4 Refund of unused funds advanced to Navy for construction of cutters.

BUREAU OF THE COMPTROLLER OF THE CURRENCY i

The Bureau of the Comptroller of the Currency is responsible for
the execution of all laws relating to the supervision of national banking
associations and all banks and building and loan associations in the
District of Columbia. The Bureau is also responsible for the liquidation of suspended national banks placed in charge of receivers.
Under the Emergency Banking Act of March 9, 1933, the Comptroller
of the Currency is required to approve the issuance and retirement of
preferred stock of national banking associations. Other duties
include those incident to the formation and chartering of new national
banking associations, the estabhshment of branch banks, the consolidation of banks, and the conversion of State banks into national
banks.
Changes in the condition of active national banks
The total assets of the 5,248 active national banks on June 30,
1938, amounted to $30,387,082,000, an increase of $50,011,000 since
June 30, 1937, when $30,337,071,000 was reported by 5,299 banks.
The deposits of the active banks in 1938 totaled $26,815,894,000,
which was $49,981,000 more than in 1937. The amount of deposits
in 1938 was exceeded on only one other call date in the history of
the national banking system, namely, December 31, 1936, when they
aggregated $27,608,397,000. The loans and investments totaled
$19,978,900,000, representing a decrease of $956,282,000 during the
year.
1 More detailed information concerning the Bureau of the Comptroller of the Currency is contained in
the annual report of the Comptroller.

REPORT OF THE SECRETARY OF T H E TREASURY

127

The assets and liabilities of active national banks on the date of
each report from June 30, 1937, to June 30, 1938, are shown in the
following statement:
.
Abstract of reports of condition of active national banks on the date of each report
from June 30, 1937, to June SO, 1938
[In thousands of dollars]
June 30,1937 Dec. 31,1937 Mar. 7,1938| June 30,1938
(6,299 banks) (6,266 banks) (6,256 banks) (6,248 banks)
ASSETS

Loans and discounts (including rediscounts)
Overdrafts
U. S. Government securities, direct obligations
Securities guaranteed by U. S. Government as to
interest and principal
Other bonds, stocks, and securities
Customers' hability account of acceptances
Banking house, furniture and fixtures
Real estate owned other than banking house
Reserve with Federal Reserve banks..
Cash in v a u l t . . - .
Balances with other banks and cash items in process
of collection
_
Cash items not in process of collection
_.
Acceptances of other banks and bills of exchange or
drafts sold with endorsement
Securities borrowed
Other assets
•.
Total

8, 807, 782
5,113
6,902, 621

i 8, 809,448
4,099
6,763,895

8,626,386
4,980
6, 771,752

8,330,568
4,056
6, 510,367

1, 316,674
3,903,092
96,441
635,670
162,409
4,162,889
444,698

I 1,308,987
3, 690,122
77,127
• 632,244
155, 625
4,172, 915
422,490

1,320, 410
3,722,727
67,326
633,953
156,534
4, 282, 582
430, 675

1,477,369
3,666, 660
64,621
629,398
163,976
4,618,177
628,305

3,780,382
8,216

3, 955,088
6,163

3,665,499
5,039

4, 304,073
7,219

8,265
229
112,791

9,522
203
102,689

19,965
188
105,839

19,077
178
117,383

30,124,196

29,823,600

• 30,387,082

12, 430,183

12,169,107

11,893,101

12,138,047

7,469,842
2, 203,466
467, 873
3,790, 687

! 7,501,101
: 2,019,628
588,166
! 3,832,898

7,631,168
2,044,926
574,899
3,922,807

7,548,899
2,106,342
467,338
4, 211,101

30, 337,071

LIABILITIES

Demand deposits of individuals, partnerships, and
corporations
..Time deposits of individuals, partnerships, and
corporations
..State, county, and municipal deposits
U. S. Government and postal savings deposits
Deposits of other banks.
Certified and cashiers' checks, cash letters of credit,
and travelers' checks outstanding, etc
-.
Total deposits
Secured by pledge of loans and/or investments
Not secured by pledge of loans and/or investments
Agreements to repurchase U. S. Government or
other securities sold
Bills payable
Rediscounts
_.
Obhgations on industrial advances transferred to
the Federal Reserve banks
Acceptances of other banks and bills of exchange or
drafts sold with endorsement
Acceptances executed for customers
Acceptances executed by other banks for account of
reporting banks
,
Securities borrowed
Interest, taxes, and other expenses accrued and unpaid
Dividends declared but not yet payable and
amounts set aside for dividends not declared
Other liabilities...
Capital stock (see memorandum below)
•Surplus
Undivided profits, net
Reserves for contingencies
Preferred stock retirement fund
Total

—.

403,962

429,894

26,765,913

'26,540,694

2,246, 824

; 2,208,074

271,361.

26,238,242

344,167

26,815,894

2,176,884

2, ISO, 456

24,061,358

24,685,439

996
8,508
1,328

970
12,362
904

660
7,731
1,289

8,265
99,794

19,965
78,378

19,077
67,449

9,522
53,707

13, 616
229

9,786
188

6,960
178

7,248
203

51,221

45, 260

55,817

24,519,089
676
7,968
562
10

27,703
148,949
1, 582,131
1,073,154
389,233
155,623
12,024
30,337,071

49,129

27,403
147,485
1,577,831
1,100,308
399, 969
164,235
11,865

8,278
155,896
1,575,898
1,106, 495
403,706
159, 292
11,970

27,780
140,194
1,572,900
1,118,413
409,167
159,309
14,030

30,124,195

29,823, 500

30,387,082

128

REPORT OF THE SECRETARY OF TFIE TREASURY

Abstract of reports of condition of active national banks on the date of each report
from June SO, 1937, to June 30, 1938—Continued
[In t h o u s a n d s of dollars]
J u n e 30,1937 D e c . 31,1937 M a r . 7,1938 J u n e 30,1938
(6,299 banks) (5,266 banks) (5,256 banks) (5,248 banks)
Memorandum:
P a r value of capital stock:
Class A preferred s t o c k . .
Class B preferred stock
C o m m o n stock
Total

—

.-—

Loans and i n v e s t m e n t s pledged to secure liabilities:
U , S. G o v e r n m e n t obligations, direct a n d fully
guaranteed
-O t h e r b o n d s , stocks, a n d securities
Loans a n d discounts (excluding rediscounts)
Total

Pledged:
Against U . S. G o v e r n m e n t a n d postal
savings deposits
Against State, c o u n t y , a n d m u n i c i p a l
deposits
^--Against deposits of t r u s t d e p a r t m e n t
Against other deposits
Against borrowings
W i t h S t a t e authorities to qualify for t h e
exercise of fiduciary p o w e r s .
F o r other purposes
Total

281,012
17,966
1,288,749

267,361
17, 470
1, 297,882

251,833
17, 210
1,310,987

248,885'
17, 210^
1,311,326.

1,587, 726

1,582,713

1, 580, 030

1,577,421

2,063,196
574, 946
24,768

2,126,393
550, 725
32, 260

2,100,719
• 544,743
31,449

2,028,789"
547, 836
27,341

2, 662,909

2, 709,378

2, 676,911

627,465

642, 388

644,021

522,413

1,366,989
615,425
151,281
9,506

1,404,318
407,789
153,866
10,454

1,388,425
380, 619
157,057
14, 993

1,402, 654
432, 627
144,985
10, 337

76,266
16,977

76,338
14, 225

76,061
15, 736

76,027
14, 923

2,662,909

2,709,378

2, 676, 911

2, 603, 966

Summary of changes in the national banking system
The authorized capital stock of the 5,258 national banks in existence
on June 30, 1938, consisted of common capital stock aggregating
$1,311,877,628, an increase during the year of $21,056,807, and preferred capital stock aggregating $266,826,644, a decrease during the
year of $34,684,398. The total net decrease of capital stock was
$13,627)591. During the year charters were issued to 12 national
banking associations, of which 10 had common capital stock only,
aggregating $2,425,000, and the remaining 2 banks had an aggregate
of $35,000 common capital stock and $65,000 preferred capital stock.
There was a net decrease of 64 in the number of national banks in the
system during the year by reason of receiverships, voluntary liquidations and consolidations under the act of November 7, 1918, as
amended.
Changes in the number and capital stock of national banks during
the fiscal year 1938 are shown in the following summary:

129

BEPOET OF THE SECRETARY OF THE TREASUEY

Organization, capital stock changes, and liquidations of national banks during the
fiscal year 1938
Number of
banks

Charters granted
_._
Increases of preferred capital stock:
19 banks, by issues of new preferred capital stock i
2 banks, by consolidation under act of Nov. 7,1918, as amended.
Increases of common capital stock:
43 banks, by regular increases...
576 banks, by common capital stock dividends
8 banks, by conversion of preferred capital stock
1 bank, by consolidation under act of Nov..7,1918, as amended.
Total increases

Capital stock
Common
$2,425,000
36,000

$65,000
2,133, 050
306, 000

3,636,676
22,015, 807
253, 200
26,000
28,390, 682

2, 504, 060

4, 388, 50a
490,000
650,000

974, 000

Voluntary liquidations
Receiverships
:
_.
Decreases of capital stock:
28 banks, by reduction of common capital stock...
1,424 banks, by retirement of preferred capital stock
9 banks, by decrease of par value of preferred capital stock
1 bank, by reduction of preferred capital stock
Closed under consolidation (act Nov. 7, 1918) and capital stock
decreases incident thereto

1,892, 600

59, 650
34, 524; 158
1,480, 640
150, 000

402,875

Total decreases.

7, 823, 876

Net changes during the year...
Charters in force June 30, 1937.
Charters in force June 30, 1938.

Preferred

37,188,448

3 64 3 -f 21, 056,807 -34, 684, 398
5,322 1, 290, 820, 821 301,511,042
^ 5, 258 1, 311,877, 628 266, 826, 644

1 Includes increases for 7 banks in par value of preferred capital stock aggregating $1,208,050 previously
reported as decreases.
2 Previously reported in voluntary liquidation.
3 After adjustment for 5 banks in receivership, previously reported in voluntary liquidation.
* These figures differ from those shown in the table on p. 127. Banks that have discontinued business
although not in formal liquidation do not submit reports of conditioii but are included in this table.

Administration of unlicensed national banks
Duririg the fiscal year 1938 liquidating dividends amounting to
$68,865,000 were paid by receivers and trustees for waiving creditors
of banks unlicensed on March 16, 1933, the close of the banking
holiday. As of June 30,1938, a total of 84.32 percent of the aggregate
unsecured liabilities of these banks on March 16, 1933, had been
released; 705 banks released 100 percent of imsecured liabilities. A
summary with respect to the administration of all unlicensed national
banks since March 16, 1933, follows:
Summary of administration of unlicensed national banks from March 16, 1933, to
June 30, 1938
\
[Dollars in thousands]
Unsecured liabilities
Number of
banks

Banks reorganized under old or new charters or absorbed by
another national bank..
._
Banks placed in voluntary liquidation or absorbed by a State
bank
_
_ _ ._
Banks placed in receivership for liquidation
_
Total

Outstanding Mar.
16, 1933

Released
to June
30,1938

Unpaid
on June
30, 1938

1,096

$1,772,971

$1,519,303

$253,668

31
290

11,618
138,210

10,783
91,034

735
47,176

1,417

1,922,699

1,621,120

301,579

130

REPORT OF T H E SECRETARY OF T H E TREASURY

BUREAU OF CUSTOMS

Collections
After 4 years of successive increases, customs revenue declined
sharply in 1938 from the total for the preceding year. The collections of $359,600,000 in 1938 were 26 percent smaller than during
1937. Duties on each of the different types of entries, except those
on mail and baggage, yielded smaller returns than during 1937, as
indicated in the following table:
Customs collections ^ and refunds, fiscal years 1937 and 1938
[On basis of accounts of Bureau of Customs]

1937

Collections:
Duties:
C o n s u m p t i o n entries
Warehouse withdrawals.- . _ _
. . .
M a i l entries
L
Baggage entries
Informal e n t r i e s . . .
A p p r a i s e m e n t entries
. .
Increased a n d a d d i t i o n a l d u t i e s
Other duties

T o t a l duties
Miscellaneous:
F i n e s a n d forfeitures
__
L i q u i d a t e d damages
_ .
Sale of seizures
Sale of G o v e r n m e n t p r o p e r t y , u n c l a i m e d a n d
abandoned merchandise
All other customs receipts .
T o t a l miscellaneous
T o t a l customs collections
Refunds:
Excessive d u t i e s . . .
Drawback payments
Total refunds.

1938

Percentage
increase or
decrease (—)

$313, 531,391
162,007,421
3, 290,800
998,406
1,053,812
302, 221
6,062,407
120,007

$221, 790,493
124, 790,621
3, 298,083
1,109, 580
915, 312
208,128
4,690, 070
86,483

-29.3
-23.0
.2
11.1
-13.1
-31.1
-22.6
-27.9

487,366,464

356,888, 770

-26.8

547,936
267,430
68, 587

2. 229,306
149, 319
160, 638

36,023
56, 306

80, 046
65,677

306.9
-44.2
134.1
122.2
16.6

976, 282

2, 684, 884

175.0

488,342,746

359, 673, 654

-26. 4

4, 568, 735
10, 773, 690

6, 220, 303
11, 841, 390

14.3
9.9

15, 342, 425

17, 061, 693

11.2

1 Excludes customs duties of Puerto Rico, which are deposited to the credit of the Government of Puerto
Rico, but includes fines and other minor collections of Puerto Rico.

Each schedule of the Tariff Act of 1930, except the tobacco schedule, recorded a decrease in the value of imports and each schedule,
without exception, showed a decrease in duties collected.
The decline in collections under the sugar schedule was somewhat
unusual, since the total for the fiscal year, $38,342,995, included
$2,766,071 of import compensating taxes collecteci on refined sugar
under the terms of the Sug'ar Act of 1937, which became effective
September 1, 1937, and for which no comparable item was included
in the collections during the previous year. Since the importation
of sugar is controlled by a calendar year quota, most of the reduced
importations from January to June 1938, which were smaller by
920,000,000 pounds than for the corresponding months of 1937,
may have been merely deferred until the first half of the fiscal year
1939.

REPORT OF THE SECRETARY OF THE TREASURY

131

The decreases in the revenue yielded by the agricultural and wool
schedules were greater than those for any other schedules and accounted for two-thirds of the entire decrease in revenue. Agricultural imports continued to exceed every other tariff schedule in the
amount of revenue yielded, but declined in relative importance,
representing only one-fifth of the total collections in 1938, as compared with one-fourth during the previous year.
Imports of dutiable unmanufactured wool declined sharply and,
as a result, collections under the wool schedule dropped from second
to sixth place in importance during 1938.
Items listed in the chemical schedule produced $11,300,000 less
duties in 1938 than during the previous year, a decline of 37 percent.
The computed values of dutiable imports and the computed duties
collected, by tariff schedules, are shown for the fiscal years 1937 and
1938 in table 15 on page 436, and for the calendar years 1928 to 1937
and by months from January 1937 to June 1938 in table 17 on page 438.
I t will be observed that the aggregate of duty coUections as computed by tariff schedules is somewhat less than the actual collections
reported by collectors of customs. This is in part due to the fact
that the computations are necessarily based; upon the data reported
at the time of original entry and do not take into consideration the
increased and additional duties levied as a result of the final determination of the correct quantity by the weighers and gangers, changes
in classification or rates of duty by appraisement officers, or clerical
errors found upon liquidation of the entry. Furthermore, the import
documents, from which the statistics used in the computation of
duties are compiled, do not include many baggage, mail, and informal
entries on which the duties collected amount to a considerable sum.
Almost four-fifths of the total duties collected during 1938 were
reported by eight customs districts, and almost half of the entire
total was reported by New York. A statement of the duties coUected
for each customs district appears in table 18 on page 442.
Volume of business
In order to present statistics of the volume of customs businesswhich are analogous to collections, the data which foUow are limited
to the area in which all collections are turned into the Treasury of
the United' States. Since all customs receipts in the Virgin Islands
and all except fines and other minor collections in Puerto Eico are
deposited to the credit of those respective governments, none of
the data for the former and none except those on seizures for the
latter are included below.
Entries of merchandise.—The total number of entries of merchandise
aggregated 3,121,176 in 1938, an increase of 45,715 over the previous,
year, although the collections in 1937 were at a much higher level
than in 1938. This anomalous condition is due chiefly to the fact
that certain types of commodities imported in 1937 consisted of
bulk shipments which had a marked effect on collections but little
effect on the number of entries. Furtherinore, in 1938 importers
ordered quantities sufficient only for their immediate needs, carrying
little, if any, stocks in warehouses and, therefore, imported with
greater frequency. The type of entry which showed the largest
relative and absolute increase over 1937 was baggage entries, which

132

REPORT OF THE SECRETARY OF THE TREASURY

are heaviest during the late summer and early fall. The increase in
the early months of the fiscal year 1938 was sufficient to more than
offset the decline in the number of baggage entries during the remaining months of the year. ^
The number of entries during the past 2 years is shown in the
following table:
Number of entries of merchandise, fiscal years 1937 and 1938
1937

Type

Consumption entries
Warehouse and rewarehouse entries
Warehouse withdrawals _
_
Mail entries.Baggage entries
Informal entries
Allother_
_
^
Total

_._.

..-

1938

Percentage
increase or
decrease (—)

1 590, 312
1 76,834
382, 383
664, 546
595. 705
244, 283
1 621, 398

619, 262
68,880
382,882
584, 764
714, 586
234,786
616, 016

-12.0
-10.4
.1
3.6
20.0
-3.9
-.9

1 3, 075, 4.61

3,121,176

1.6

1 Revised.

Vessel, airplane, and highway traffic.—The following statement
covers the leading classes of traffic for the last 2 years:
Number of vehicles and persons entering the United States from abroad, fiscal years
1937 and 1938
Cl

1937

Vehicles:
Automobiles and busses
Documented vessels..
Ferries and other vessels
Passenger trains
Aircraft
._
Other vehicles
_
Passengers by:
Automobiles and busses__
Documented vessels
Ferries and other vessels
Passenger trains
Aircraft
_
Other vehicles
Pedestrians

_ _

1..

_._

Total passengers and pedestrians

1938

Percentage
increase or
decrease (—)

11, 217, 262
1 32, 660
1 201,454
34, 607
1 5, 504
408, 710

11,907,125
31,962
195, 309
34, 230
6,219
355,826

6.2
-2.1
-3.1
—1.1
13.0
-12.9

31, 322, 255
1 1, Oil, 387
1 2, 914, 288
1, 208,448
1 37, 488
1,800, 286
10, 944,196

34, 461, 603
1,072,497
3, 020,151
1,197,863
44,107
1, 738,435
11,350,634

10.0
6.0
3.6
-.9
17.7
-3.4
3.7

1 49, 238, 348

62,885,180

7.4

i Revised.

Airplane traffic showed the largest relative increase during the
year. The largest number of planes and of passengers arrived in the
Florida customs district, more than half the total number of passengers reaching the United States by plane at the port of Miami.
Large increases occurred in the Vermont and New York customs
districts due to the establishment of new international air routes.
The following table shows the number of airplanes and of airplane
passengers entering the United States during the past 2 fiscal years:

133

EEPOKT OF THE SECRETARY OF THE TREASURY

Number of airplanes and passengers arriving by air, fiscal years 1937 and 1938
N u m b e r of airplanes
1937
N o r t h e r n border:
Maine.
_.
Vermont
St. L a w r e n c e
New York
Rochester
Buffalo
Michigan
Dakota___
Washington. _
o t h e r districts

.
_

_ .
_
_..

Total
S o u t h e r n border:
Los Angeles
San Diego
Arizona...
E l Paso.__
San A n t o n i o

N u m b e r of airp l a n e passengers
1937

1938

63
111
36
371
38
319
132
368
949
89

52
659
61
627
23
233
161
587
802
151

2,476

1938

Percentage increase
or decrease ( - )
Airplanes

Passengers

1 119
1231
, 61
li696
' 81
i612
il60
1^787
3; 389
485

99
1,615
120
3,790
43
491
171
2,345
2,840
754

-17.5
403.6
41.7
42.0
-39.5
-27.0
22.0
59.5
-15.5
69.7

-10.8
555.8
135.3
123.5
-46.9
-4.1
14.0
31.2
-16.2
55.5

. 3,146

8,601

12,168

27.1

43.1

161
248
24
5
426

142
177
33
31
449

660
,497
62
11
3,138

724
325
56
64
4,601

-1L8
-28.6
37.5
520.0
6.4

11.4
-34. &
-9.7
481. a
43.4

864

832

4,358

6,670

-3.7

30.1

558
49
1,667

580
50
1,611

1^584
184
22,861

1,879
276
24,114

3.9
2.0
3.5

18.6
50.0
5.5

Total

2,164

2,241

2i, 629

26, 269

3.6

6.7

G r a n d total

6,504

6,219

37,488

44,107

13.0

17.7

Total.
-Alaska
Hawaii
Florida

_
__.
_

Drawback transactions.—The number of drawback entries increased
by 1,026 to 23,178 in 1938, and drawback payments increased by
$1,067,700 to $11,841,390 in 1938. The actual payments corresponded very closely to the total allowed under the various provisions of the Tariff Act of 1930. About 98 percent of the drawback
allowed consisted of drawback on exported merchandise manufactured from imported materials, the most important of which were
sugar, flaxseed, and copper. Of the notices of intent to export with
the beneflt of drawback, 3,049 more were filed in 1938 than in 1937.
A comparison of these transactions during the last 2 years is presented
in the following table:
Drawback transactions, fiscal years 1937 and 1938
Transaction

1937

;

1938

Percentage
increase or
decrease ( - )

Number'
22,152

Number
23,178

230,266
104,073
99,748
11,139
19,378
4,618

233,316
113,813
104,093
12,896
22,237
4,706

• Amount
D r a w b a c k allowed:
M a n u f a c t u r e d from i m p o r t e d m e r c h a n d i s e
_. $10,504,935.87
D u t y paid on m e r c h a n d i s e e x p o r t e d from c o n t i n u o u s
customs custody
__
187,179.; 58
M e r c h a n d i s e w h i c h did n o t conform to s a m p l e or
specifications a n d r e t u r n e d to c u s t o m s c u s t o d y a n d
exported
_..
86,118.07
Salt used in curing fish
5,244,29
T o t a l d r a w b a c k allowed
_
10, 783,477. 81
I n t e r n a l r e v e n u e refund on account of domestic alcohol..
169, 731.; 18
Total
10,953,208:99

Amount
$12,013,971.13

14.4

46,466.19

-75.7

138,998.62
6,897. 77
12, 204,332. 71
176,833.11
12,381,166.82

61.4
12.5
13.2
4.2

D r a w b a c k entries r e c e i v e d . .
N o t i c e s of i n t e n t :
Originating in t h e d i s t r i c t . .
Received from o t h e r districts
F o r w a r d e d t o o t h e r districts for disposition
Certificates of m a n u f a c t u r e received
I m p o r t e n t r i e s u s e d in d r a w b a c k liquidation
Certificates of i m p o r t a t i o n issued

4. &
1.3
9.4
4.4
15.8
14.8
4.2

13.0

134

REPORT OF THE SECRETARY OF THE TREASURY

Appraisement of merchandise.—In line with the decreases in the
number of consumption entries, decreases also appeared in the number
of packages examined by appraisement officers, except mail packages.
The follomng is a summary of appraisement activities for the last 2
years:
Examinations by appraisement ofiicers, fiscal years 1937 and 1938
Transaction

1937 1

Number of packaiges examined:
At appraisers' stores
At importers'places of business
.
On wharves, at freight terminals, (m highways, etc..
Mail Additions to value by examiners:
Number
Value
_
_

1938

Percentage
increase or
decrease (—)

1,390,322
586,568
13,138,038
6,495, 941

1,274, 675
432, 362
12,344,163
6, 775,119

-8.3
-26.3
-6.0
4.3

6,975
$1, 506,061

3,045
$811,291

-56.3
-46.1

1 Revised.

The organization and functions of the appraiseraent unit are discussed more fully on page 144.
Protests and appeals.—Fewer protests and appeals were filed during
1938 than during 1937. The following statement shows the progress
of this work during the last 2 years:
Number of protests and appeals, fiscal years 1937 and 1938
1937

Protests:
Filed with collectors by importers....
Allowed by collectors
_
Denied by collectors and forwarded to customs court
Appeals for reappraisement filed with collectors

1 72,787
886
1 84, 539
6,656

1938

50,853
1,353
54,494
6,586

Percentage
increase or
decrease ( - )

—30.1
52 9
-35.5

-LI

1 Revised.

Law enforcement activities
Seizures.—The number of seizures made for violations of customs
laws continued to dechne, although the amount of decrease during
1938 was smaller than during any recent year. The decrease in
1938 was due chiefly to a decline in the number of merchandise
seizures. Lottery seizures, which were of considerable importance
a few years ago, numbered only 141 during the year; practically all
of such seizures are now handled by the post office authorities.
The number of liquor seizures, for the first time since the repeal of
the eighteenth amendment, was larger than during the previous year,
:such seizures showing an increase of 917 during 1938. Almost 50
percent of the liquor seizures were made in the four customs districts
along the Mexican border, where liquor is smuggled only to meet the
demands in the vicinity of the border. The largest seizure of distilled
liquor was one of 1,459 gallons of rum, valued at $10,465, at Newark,
N. J., which represented more than one-third of the total gallonage
seized during the year. The largest single seizure of beer, aggregating
197 gallons, was seized at New York City and constituted almost half
of the total gallonage seized. Most of the alcohol seizures were along

135

REPORT OF THE SECRETARY OF. THE TREASURY

the Mexican border, the largest seizure being one of 115 gallons near
Del Rio, Tex.
Tbe total value of all seizures declined during the year by $544,520,
which was due almost entirely to the smaller value of merchandise
seized. I t should be noted, however, that three seizures in 1937
represented more than half of the total value of all seizures for that
year, whereas no individual seizures of comparable value were made
during 1938. Seizures of cameras, binoculars, and ships^ instruments
in 1938 were almost three times the value of such seizures during the
previous year, and seizures of wearing apparel and of textiles also
showed substantial increases.
The number and principal types of seizures made by the Customs
Service and other governmental agencies during the last 2 years
are shown in the following statement:
Seizures for violations of the customs laws, fiscal years 1937 and 1938
1937

Seizure

Merchandise:
Number
_
.__
__
Value:
Jewelry, precious metals and stones, watches and
parts
Wearing apparel and luggage
:.
.
Toilet articles and medicine
Textiles and raw wool
Furs—skins and manufactured
Edibles and farm produce
House furnishings, including china
Guns and ammunition
Cameras, binoculars, and ships' instruments....'
Hardware and sport goods
Cigars and cigarettes..
Books and stationer's supplies
. .
Prohibited articles...
...
Livestock, etc. (excluding horses)
Miscellaneous
Total value of merchandise
Prohibited articles:
Obscene, number
_
Lottery, number...
. _
•_
Narcotics:
Number
Value
Liquors:
Number
_
_
Quantity (gallons):
Distilled-liquors and wines
_
Malt
AlcohoL
__
Value, all liquors...
Boats, automobiles, and other means of transportation,
value
Grand total:
Number
Value.

Percentage
increase or
decrease (—)

1938

6,994

6,726

-18.1

$338,959
60,327
10, 624
• 25,203
128,045
50,349
21, 241
838
11, 790
11,428
2,636
10,727
5,668
7,662
264, 904

$92,800
74,699
9,343
31, 680
46,249
13, 649
24,843
. 757
33, 756
2,304
2,939
2,080
6,211
9,118
74,308

-72.6
23.8
-1.2.1
25.3
-63.9
-7i2.9
17.0
-9.7
186.3
-79.8
11.6
-80.6
9.6
19.0
-71.9

950, 401

424, 636

-55.3

595
175

638
141

7.2
-19.4

430
$82, 551

683
$46,037

58.8
-44.2

2,430

3,347

37.7

6,627
111
860
$33, 747

3,803
466
787
$37, 767

-32.4
319.8
-8.6
11.9

$193,919

$207, 668

7.1

10, 624
$1, 260, 618

10, 535
$716,098

-0^8
-43.2

136

REPORT OF TB.E SECRETARY OF THE TREASURY

The followmg table presents the record of customs seizures classified
according to the various agencies which were instrumental in apprehending violators of customs laws:
Seizures for violations of customs laws, and number of arrests, classified according to
agencies participating, fiscal year 1938
Seizures
Number of
arrests

Agency

Total

Number 1

Customs Agency Service:
Investigative Unit
Enforcement Unit
Customs Service, exclusive of Agency
Service
_
__.
Total Customs Service
Coast Guard
Immigration Service
Customs Service assisted by other officers
- Other Federal and local oflScers.
Grand total

Value

411 $192,384
642 77, 663

Number

Value

35
45

$3,451
2,774

Number

Lottery
and
obscene,
Value number

9 S10,631
145 6,692

2
8

349,297

410 1 38,022 3,098 1 13,033

764

444 10,152
3
86
41

619, 234
134
11, 295

3,252 30,266
1
120
52 2,578

774

83
211

13,949
71,486

87
256
101

59
31

Liquor

Narcotics

9,099

575 10, 536 716,098

490

44,247

1,765
20

30
12

3,031
1,772

2
3

683

46,037

3,347

37; 757

779

170 1

Seizures— Continued
Merchandise
Agency
Number

Customs Agency Service:
Investigative Unit
Enforcement Unit
.
Customs Service, exclusive of
Agency Service

Value

Boats
Total
value
boats,
automobiles, Num- Value
and
ber
horses

365 $145,746 $32,566
23,432 2 44, 755
444
246,099
52,143
4,827
415, 277 129,464
Total Customs Service...
6,636
14
Coast Guard
7,621
Immigration Service
__
1,091
2
Customs Service assisted by
32
6,655
other oflScers
2,498
30
Other Federal and local officers.
5,766
63,938
26
Grand to tal. .
5,726 424.636 2 207,668

Automobiles

Number

Value

Horses

Num- Value
ber

6 $6,121
28 2 2,096
13 4,000

87 $26,077
124 36,445
48,069

84^

12, 217

343 110,681

241

6,666

2 28 212, 232

132

2
234

$358
6, 214

7,590

24
165

6,300
63,938

355

542 188,409 1 262

7,027

1 Excludes number of boats, automobiles, and horses, as they were seized in connection with narcotics,
etc., seizures.
2 Includes one wrecked plane, salvage valu>e $256.

In addition to the goods which were seized, claims aggregating
$5,496,090 were initiated by the Customs Service against importers in
connection with various irregularities and frauds discovered after the
goods had gone into consumption.
In their campaign to prevent the smuggling of narcotics, customs
and other officers made 503 seizures of narcotic drugs and paraphernalia, valued at $46,037. The total seizures of narcotics during the
year increased in number by 190 and decreased in quantity and value
by 12,172 ounces and $36,514, respectively. Ninety-two seizures of

137

REPORT OF T H E SECRETARY OF T H E TREASURY

marihuana weighing 2,638 ounces accounted for part of the increase in
the number of seizures. Prior to October 1,1937, when the Marihuana
Tax Act of 1937 became effective, seizures of this drug were turned
over to State authorities for disposition.
The following table summarizes the number and value of the boats,
automobiles, etc., seized for violations during the last 2 ^^ears:
Boats, automobiles, airpl anes, and horses seized, fiscal years 1937 and 1938
L i q u o r violations

Narcotic violations

1937

Total

Other violations

Seizure

Boats: .
Number
Value. _
Automobiles:
Number..
Value
Airplanes:
Number
Value
Horses:
Number
Value
T o t a l value

. . .

1938

7
$3, 315

1
$100

63
$7,837

49
$8,637

114
$42, 554

1938

197
$76, 463

1937

1938

1937

21
$10,251

26
$11,976

29
$13,666

27
$11, 976

360
$119,119

296
$103,309

527
$169, 510

542
$188, 409
1
$256

1
$256
6
$95

3
$68

$11, 247

$8, 705

$42, 654

$76,463

1938

386
$10,648

269
$6,959

392
$10, 743

262
$7,027

$140,018

$122, 500

$193,919

$207,668

All automobUes seized by narcotic agents are delivered to the Customs Service for forfeiture under customs laws. There were 164 of
these automobUes valued at $63,128 in 1938, compared with 103 valued
at $37,884 in 1937. During the year, 303 seized automobiles and
trucks were either exported or returned to petitioners because the
violations were not sufficiently flagrant to warrant the forfeiture.
Of the 201 vehicles forfeited, 120 were assigned for official use either to
the Customs Service or to some other governmental agency, and 81
were sold at public auction.
In the course of their regular duties, customs ofRcers often apprehend violators of laws other than those relating to customs. During
the year, 474 seizures were made for other departments and agencies,
which included 450 for the Department of Agriculture. There were
246 persons apprehended, 217 of whom were for the Immigration
Service. In addition, 5,135 violations of Department of Agriculture
laws were detected.
Legal proceedings.—As the result of narcotic seizures, 89 defendants
were presented for prosecution. Including the cases pending from the
previous year, those which were concluded resulted in 100 convictions
and only 19 acquittals. Prison sentences aggregating over 240 years
and fines amounting to $53,000 were imposed by the court on the convicted offenders. In addition, penalties aggregating $151,615 were
assessed against the masters of 64 vessels on which narcotic drugs
were found concealed. Many of these cases have not yet been concluded, ojUy $8,083 having been collected from the masters of vessels
involved in narcotic violations.
In connection with all seizures, there were 575 arrests, a decrease of
49 during the year. Although there were fewer arrests and convictions during 1938, the high ratio of convictions in the cases disposed of
continued. Of the 557 cases disposed of, 360 convictions were se

138

REPORT OF T H E SECRETARY OF T H E TREASURY,

cured, or 65 percent of the total; in 1937, in 711 cases disposed of, 491
convictions were secured, or 69 percent of the total. Only 24 defendants were acquitted after trial and 173 cases dismissed or transferred
before trial, compared with 52 acquittals and 168 dismissals or transfers in 1937. Prison terms to which customs violators were sentenced
aggregated 325 years during 1938, compared with 550 years in 1937,
while the total amount of the fines imposed was $135,586 during 1938
and $146,724 during the previous year.
Fines, penalties, etc.—The total collections from fines, penalties,
liquidated damages, and sales of seizures aggregated $2,539,162 during
1938, an increase of $1,655,209 during the year. This was the largest
total in the history of the customs service, the largest previous total
being $2,472,603 in 1928. Almost three-fifths of these collections in
1938 represented the penalties collected in cases which originated
prior to the repeal of the eighteenth amendment, and which involved
the large scale smuggling of illicit liquors. More than $1,000,000 still
remains to be paid in connection with these cases.
Penalties collected for false invoicing, fraud, and undervaluations
were almost double such collections during 1937, due to the successful
consummation of several important cases, two of which yielded more
than half of the total collected for this type of violation. Penalties for
irregularities in bonded importations, which represented the largest
single item of the 1937 total, decreased sharply during the year. Violations of this sort were technical rather than willfiU, combining a
variety of irregularities, such as failure to produce consular invoices,
shortage in or improper delivery of bonded shipments, failure to
redeliver merchandise subject to export or further customs examination, etc.
The net proceeds of the sale of seized articles by collectors of customs
was more than double that ojf the preceding year, increasing from
$22,151 in 1937 to $50,772 in 1938. The proceeds of articles sold by
court order also increased substantially from $46,436 to $109,766. Of
the total amount realized from the sale of seized merchandise during
the year, gold sold to the Mint aggregated $21,281, and watch movements and parts yielded $48,132. This was the first time in several
years that substantial sales of watch movements were made, although
most of the seizures of these movements were effected in 1936 and
prior years.
Included in the sales were also 99 automobiles for $3,672 and 9 boats
for $480, as compared with 105 automobiles and 14 boats during 1937,
which yielded $3,888 and $3,631, respectively. No sales of seized
liquor were made during the past two years; such seizures, if.of a sufficiently good quality for medicinal use, are delivered to the Federal and
State Governments or to eleemosynary institutions. The following
table presents a summary of the amounts collected for the last 2 years
in fines, penalties, and forfeitures and from the sale of seizures, classified according to the type of violation:

REPORT OF TFIE SECRETARY OF THE TREASURY

139*

Collections for violations of the customs laws, fiscal years 1937 and 1938
Violation

1937

Undeclared articles in baggage of passengers arriving from
abroad...
.
Irregularities in bonded importations (liquidated damages)-.
False invoicing, including undervaluation
Liquor
Smuggling (including conspiracy), mostly criminal cases
Failure of masters of vessels to make complete manifest of
imported merchandise..
Unlading foreign merchandise without customs supervision..
Narcotics:
By masters of vessels on which violations occur
other offenders...
Irregularities in mail importations.
Failure to report arrival in United States
Miscellaneous...
:
Net proceeds from sale of goods seized and forfeited for all
violations
_
_
Total-.-.-

1938

$162, 425. 64 $158,350.19
267, 430.12
149, 318. 60
250, 973. 86
477, 367. 43
27, 247.12 1, 491, 722. 25
36, 731. 01
23, 212.16

Percentage
increase or
decrease (—)

-2.6:
-44.2*
90. 2'
5,374. 8
-36. 8.

14, 744.19
11, 059. 72

17, 668. 04
14,350.14

19.229.8.

13, 634.03
2, 474.84
14, 876.13
8,193. 34
5, 575. 98

8, 082. 60
4,186. 63
16, 482. 40
6, 574. 06
11, 409. 08

-40. 7
69.2'

68, 586.99

160, 538. 37

-19.8
104. 6. 134.1

883,962.97

2, 639,161.95

187. 3;

io.8.

Coordination with other agencies.—The coordination plan adopted in
August 1934, which developed closer cooperation between the Coast
Guard, Alcohol Tax Unit, Bureau of Narcotics, Secret Service, and
Customs Service, remained in operation during the year. The continued eft'ectiveness of the law enforcement branches of these agencies,,
as a result of this coordination, has been most gratifying.
Smuggling
The illicit importation of over 900,000 lottery tickets was prevented
during the year. As a result of information regarding a suspected
vessel at Portland, Maine, in February 1938, customs officers seized
6 bales containing 368,640 lottery tickets. The officer of the ship,,
responsible for the importation, and the person who was to receive
delivery in this country were both arrested, and after trial were fined
$500 and $1,000, respectively. Later, bales containing large numbers
of lottery tickets were picked up at various points on the beach.
Two somewhat unusual seizures in Buffalo during April and June
1938 consisted of platinum concentrate, aggregating 71 ounces and
valued at $1,509. Chemists, to whom this valuable commodity was
offered for sale, became suspicious as to its source, and the subsequent
investigation by customs agents resulted in the arrest not only of the
middlemen who were attempting tojiegotiate the sale but also of their
principal. The concentrate had been stolen from the Canadian
manufacturer by a confederate.
Acting upon information, customs agents discovered in the baggage
of an incoming passenger at New York in November 1937 wearing
apparel and jewelry to the value of $19,819, purchased in Europe at
various times but never included in his previous baggage declarations
upon his return to this country. As a result, $31,743 was paid by the
defendant, which represented the forfeiture value of most of the merchandise, 75 percent of the personal penalty incurred, and a mitigated
penalty on a small portion of the goods seized. This represents the
largest seizure and collection during the year for undeclared merchandise in passengers^ baggage.

140

REPORT OF THE SECRETARY OF THE TREASURY

Smugglers of furs, who met with reversals in northern New York
in 1937, transferred their activities to Maine during the year. In
August 1937 customs patrolmen effected the seizure of 148 silver fox
pelts and arrested, near Monticello, Maine, the two men who were
carrying them over the border. Four others, subsequently arrested
in connection with the conspiracy, have already been sentenced.
The pelts were disposed of at public auction for $10,325.
The prevention of the smugghng of livestock represents one of the
major activities at certain points along the borders. The illicit introduction of uninspected animals into this country is particularly dangerous because the animals coming from the north are frequently infected with tuberculosis and Bangs disease, and those coming from the
south with fever tick. As a result of seizures of Canadian cattle in the
St. Lawrence district, one of the worst offenders in northern New York
has been indicted, and the cattle auction sales which he had held for
years have been discontinued.
As the result of information, an investigation at El Paso resulted in
the seizure of 100 gallons of alcohol in November 1937 and the arrest
of a Mexican liquor dealer and two of his employees, one of whom
received a penitentiary sentence of 20 months. The principal in this
case, who for several years had been known as the source of supply
for non-tax-paid liquor and alcohol, forfeited a $7,500 bail bond and
is now a fugitive from justice.
The largest liquor seizure during the year, consisting of 164 barrels
of Bacardi rum aggregating 1,459 gallons, was effected at Newark,
N. J., in April 1938, and resulted from the previous exportation to
Cuba andothe subsequent fraudulent reimportation of the shipment
at New Orleans in an effort to secure the lower rates of duty on the
products of Cuba. Criminal proceedings will probably be brought
against the principals in this case for their conspiracy to defraud the
Government.
Enforcement officers continued to give special attention to the
smugghng of narcotics and, as a result, important seizures of contraband were made at widely separated points.
Seizures were made of 349 ounces of heroin in August and of 1,012}^
ounces of crude opium in September 1937. The former seizure, which
was concealed in the bulldiead of a locker in a stateroom, was made by
customs guards in the course of their routine search of the vessel. In
the latter case, as a result of information supplied by customs agents,
the carrier was taken into custody on the high seas by the master of
the vessel, and his stateroom sealed until the vessel's arrival in New
York, where the carrier and ffie contraband merchandise were
delivered to customs officers. Five arrests and convictions resulted
from these two seizures, with sentences ranging from 1 to 15 years.
The detection by a customs guard, in New York in September 1937,
of a member of the crew of a trans-Atlantic liner who had three bags of
heroin concealed inside a cloth belt underneath his clothing led to the
subsequent discovery of 14 additional identical bags concealed at
various places on the vessel, the aggregate weight of which was 138
ounces. The carrier is now serving a 5-year sentence for his part in
the smuggling operations, but refused to assist in the detection of the
principals. A penalty of $7,905, equal to $50 per ounce, was imposed
against the master of the vessel in this case.

REPORT OF THE SECRETARY OF THE TREASURY

141

The baggage examination at Rouses Point, N . Y., in July 1937, of a
passenger en route from Europe, revealed 320 ounces of heroin concealed in a secret compartment of his trunk. A confession by the
carrier, who later committed suicide, led to the subsequent detection
of another carrier at New York with 464 ounces of heroin, also concealed in false compartments of his luggage.
Seizures both of crude and smoking opium along the Mexican border
were quite numerous, and the quantity of drugs seized was greatly in
excess of seizures during previous years. The largest narcotic seizure
in this region was made by customs patrolmen near Sasabe, Ariz., and
involved a Mexican customs officer, who had in his possession 512
ounces of crude opium. This officer had abused the courtesy extended
to him by American customs officers in allowing him to pass without
the customary search of his automobile. The offender and his companion pleaded guilty and were sentenced to 5 and 4 years imprisonment and to fines of $1,000 and $600, respectively.
As the result of the suspicious behavior of a narcotic addict and his
companion, both with previous criminal records, customs patrolmen,
in February 1938, arrested these men near Nogales, Ariz., on their
return from Mexico with 192 ounces of crude opium and smaller quantities of other narcotics in their possession. The cases against these
offenders have not yet been tried.
The seizure near Douglas, Ariz., in February 1938, of 294 ounces of
smoking opium was effected when the carrier attempted to deliver the
contraband to a customs patrol officer, who was posing as the purchaser. The carrier in this case, after pleading guilty, was sentenced
to 2 years in prison and fined $400.
The greater number and larger size of narcotic seizures in this region
was brought to the attention of the Mexican Government and, as a
result of cooperation between Mexican and United States authorities,
measures have been taken to suppress the cultivation in Mexico of
opium poppies.
The arrest by customs guards at San Francisco in April 1938, of a
petty officer of a United States Navy transport, in possession of 540
ounces of smoking opium, led to an investigation which culminated in
the successful prosecution of 4 persons. The carrier was sentenced to
18 months imprisonment, and the other persons concerned, including
another enlisted man of the Navy, were sentenced to from 2 to 8 years,
and fined.
In the routine search of a vessel which had arrived at New York in
March 1938, a customs guard discovered two paper packages which
contained 141 ounces of heroin concealed in a sack of sawdust. Although at the time of seizure there was nothing to identify the offender,
subsequent examination of the crew disclosed sufficient information to
cause his arrest and conviction, and he is now serving a 5-year sentence. This case also resulted in the arrest in Belgium of the trafficker
who had supplied the narcotics.
One of the largest seizures of marihuana during the year consisted
of 854 ounces enclosed in a steel drum which was discovered on a Florida beach. Investigation disclosed that the contraband had been
brought from Mexico and had been unladen under cover of darkness
by members of the crew of a vessel. The master, long known as a
notorious narcotic smuggler, and one of the crew members were convicted and sentenced to prison terms.
104825—39

142

REPORT OF THE SECRETARY OF THE TREASURY

The alertness of the acting appraiser at Dayton, Ohio, led to the
discovery that machinery invoiced and entered at a value of $6,500
had a true dutiable value of $18,793; this gross undervaluation necessitated the seizure of the importation. This case is but one of the
many in which attempts to defraud the Government by this means
were detected.
A larger amount of gold illegally brought into this country was
seized during the year than during any year since the. enactment of the
Gold Reserve Act of 1934. In a number of cases, coins or gold dust
were brought in through ignorance of the requirement that it should
be declared upon entry, and the offense was detected upon its presentation to the Mint or to a licensed dealer for the purpose of sale.
In other instances, however, actual smuggling was attempted. An
alien, discovered at San Antonio in July 1937 with Mexican gold coins
valued at approximately $6,000, had smuggled them across the border
wrapped in a bag inside a spare tire in his automobile.
Customs procedure
During the year, the Bureau of Customs participated in the preparation and presentation to Congress of various proposed changes in the
administrative provisions of the Tariff Act and related statutes for the
purpose of moderiiizing existing legislation so as to simplify the interpretation of the law, facilitate its administration, and correct certain
abuses which had grown up in the past years. These suggestions were
incorporated in the Customs Administrative Act of 1938, which was
approved by the President on June 25, 1938. (See exhibit 62, page
332.) The passage of this act necessitated many revisions in the
Customs Regulations of 1937.
Two trade agreements were entered into during the year, maldng
17 trade agreements in effect during a greater part of this period.
These trade agreements continued to require numerous interpretative
decisions by the Bureau. Statutes imposing compensatory taxes on
sugar and sugar products and legislation modifying the import taxes
imposed by previous revenue acts on lumber and certain oils and oil
products also required the issuance of new regulations.
The application of the countervailing duty provisions of the Tariff
Act of 1930 to importations from certain foreign countries continued
to present man}^ difficult legal questions.
An active part was taken in the preliminary work incident to the
issuance of a grant by the Foreign Trade Zone Board under the provisions of the act of June 18, 1934, to operate a foreign trade zone at
Mobile, Ala. The zone, which is the second one established, was
opened shortly after the end of the fiscal year.
. Customs Agency Service
The Customs Agency Service is the investigative unit of the Customs
Service and is charged primarily with the duty of preventing and
detecting frauds in customs revenue. The officers of this Service are
required by the regulations to conduct all investigations involving
fraud or violations of the customs laws, and to investigate and report
upon all matters brought to their attention by the Secretary of the
Treasury, Department officials, the Commissioner of Customs, col

REPORT OF THE SECRETARY OF THE TREASURY

143

lectors, and other customs administrative officers, with respect to
undervaluation, drawback, classification, smuggling, personnel, customs procedure, and other related subjects. At the close of the year
880 persons were in this Service. The foUowing is a partial summary
of the activities of the Customs Agency Service, exclusive of seizures,
arrests, and actions connected therewith:
Investigations.of violations of customs laws:
Undervaluation
Marking violations
Diamond and jewelry smuggling
Narcotic smuggling
Other smuggling
Touring permits
--Other investigations:
Alleged erroneous customs procedure
Drawback
Classification and market value
Customs bonds to determine solvency and suflSciency
Applications for customhouse brokers' hcenses...
Applications for bonded truckmen's licenses
Petitions for relief
Personnel
1
-..
Navigation violations..
_
Pilferage of merchandise
Foreign, by members of domestic service
Examin3.tions:
Financial accounts of collectors
Customhouse brokers' records

Number
2,359
-- 376
v
300
1,842
1,612
872

.
-

193
1,481
646
.- 112
99
114
550
286
450
102
622
315
191

In addition to the law enforcement work, illustrations of wliich
have been cited previously, other important aspects of the duties of
this Service are outlined in the following paragraphs.
Undervaluation.—Customs agents during the year unearthed and
investigated numerous cases of undervaluation and false classification
of imported merchandise, with the result that the customs revenue
has been materially increased by recoveries, and the violators penalized. The number of undervaluation cases of a criminal nature,
involving fraudulent intent, were fewer during the year, due not only
to the vigilance of customs agents, but also to the general knowledge
that all violations of law and/or irregularities disclosed are being
investigated to determine whether or not they may be brought within
the provisions of the penal statutes.
The most important case of this type during the past year was that
of an importer of watch and clock parts from Switzerland who, during
the period from 1934 to 1937, had imported hair springs with collets
attached (the collet being a small brass bushing for attaching hair
springs to the staff of the balance wheel). These were entered and
declared as hair springs without mention of the collets. The examining officers had been requested to be very careful in opening and examining the envelopes containing watch parts so as to avoid as far as
possible any deterioration by exposure of the parts to the atmosphere
and, for this reason, failed to note that these hair springs had the
collets already attached to them. An informer brought this to the
attention of customs agents; and upon investigation the collector's
office decided that the hair springs with collets attached should be
classified as sub-assemblies. The importer paid $173,234 in mitigation of the forfeiture value, which amounted to $259,419.
Drawback investigations.—The importance of the investigation of
the claims of manufacturers desiring to establish a rate of drawback
is indicated by the fact that $11,841,390 was paid as drawback during
the year. In addition to the preliminary investigations, frequent
examinations are made to determine whether fraud or misrepresentation has existed in connection with drawback payments and claims.

144

REPORT OF THE SECRETARY OF THE TREASURY

These investigations resulted in the detection of a number of irregularities and in substantial recoveries by the Government.
Port Examination Commission.—During the year the Port Examination Commission of the Customs Agency Service examined the
accounts and procedure in eight customs collection districts for the
purpose of securing imiformity and greater efficiency in the conduct
of the customs business. In addition, customs agents examined 315
financial accounts of collectors of customs.
Enforcement Unit.—During the first full year of its operation as a
part of the Customs Agency Service, the Enforcement Unit demonstrated the wisdom of such an organization. Customs patrolmen
\yere used at seaports when necessary, their activities no longer being
limited to the land border. In order to make this unit of wider
usefulness, patrolmen received instruction in law enforcement and
methods of investigation, and intensive instruction and competition
in the use of firearms.
Foreign investigations.—The customs agents in the foreign service,
known as Treasury representatives, continued to secure reports
regarding foreign values or export values for the use of appraising
officers in the United States. I n addition, these officers rendered
invaluable service in securing information regarding the attempted
Bmuggling of narcotics, jewelry, and other merchandise, which made
possible many of the seizures in this country.
Miscellaneous
Customs School of Instruction.—The School of Instruction for the
Customs Service, which has now completed the third year of its
existence, has an enrollment of over 10,000,, includiiig the entire
personnel of the Customs Service and officers and employees of about
20 other departments and branches of the Government and of the
Philippine Islands.
The instruction, which is conducted entirely by correspondence, is
supplemented at many ports by discussions or lectures which are
directed or given by expert field officers. I t has been found that such
discussions and lectures materially increase the employees' knowledge
of customs law and procedure.
Appraisement Unit.—In order to promote efficiency and uniformity
in the appraisement and classification of imported merchandise, the
Appraisement Unit was established on September 1, 1937, when
fifteen of the more important appraising officers and the Customs
Information Exchange were transferred to this Unit. Subsequently,
additional appraising officers were separated from the administrative
control of the collectors of customs and placed in the Unit.
The Customs Information Exchange disseminates information of
general interest to customs officers, secures special information in
response to specific inquiries, and acts as a clearing house of information obtained as the result of foreign investigations. The activities
of the exchange during the year are summarized as follows:
^^^
Appraisers* reports of values or classification received
13,846
Appraisement appeals reports received...
__.
•....
6, 305
Changes in value circulated
_
_
2,612
Requests for investigation abroad
__.
_
1, 287
Reports received in response to requests for investigation abroad
_
1,927
Reports of original investigations by Treasury attach6s and price lists from American consuls
received and circulated
5, 510
Diflterences in classification of merchandise between the various field oflBcers reported to the Bureau
of Customs
735

REPORT OF THE SECRETARY OF THE TREASURY

145

Quota control.—Import quotas, established under the terms of the
Canadian trade agreement, PhUippine Independence Act, the Phihppine Cordage Act, and Executive Orders Nos. 7575, 7701, and 7822,
lunit the quantity of certain commodities which may be imported
within quota periods or may affect the dutiable status of certain other
commodities within quota limitations. The control of these quotas
is administered by the Bureau of Customs. Periodic information is
provided through the press regarding the percentage of fulfillment
of each import quota and when the quota on any commodity is
approaching fulfillment. Information regarding each of the quotas
for the quota periods ended in the fiscal years 1937 and 1938 is summarized in the following table:
Commodities imported under quota provisions during quota periods ended in the
fiscal years 1937 and 1938

Unit of
quantity

Commodity

Quota period

Quota

Sawed timber and lumber, n. s. p. f., \ B o a r d I 250,000,000
of Douglas fir or Western hemlock. J foot.
Cattle, weighing
pounds each.

less than

175

JHead...

51,933

Cattle, weighing 700 pounds or more
JHead...
each and n. s. p. f.
Cows, weighing 700 pounds or more
each and imported specially for •Head...
dairy purposes.

155, 799

Cream, fresh or sour

20, 000

Gallon..

1, 500,000

White or Irish certified seed potatoes. Pound..

45,000,000

Square.-

., 048, 262
892,373
916, 246

Coconut oil from the Philippine Is- j p o u n d . .
lands.

448, 000,000

Refined sugar from the Philippine j P o u n d . .
Islands.

112, 000,000

Red cedar shingles from Canada..

Unrefined sugar from the Philippine
Islands.
Yarns, twines, cords, cordage, rope,
and cable, tarred or untarred,
wholly or in chief value of manila
(abaca) or other hard fiber, from
the Philippine Islands.

Pound.. 1,792, 000,000
Pound..

» Quota filled Aug. 7, 1936.
2 Quota filled June 19,1937.
8 Quota filled Nov. 13,1936.
< Quota filled Aug. 14, 1937.

6,000,000

Total imports under
quota limitation

Calendar year:
151,989.903
1936
142,166,488
1937
Calendar year:
51,933
1936
51,933
1937
Calendar year:
155,"799
1936
155, 799
1937
Calendar year:
6, 579
1936.
6,778
1937
Calendar year:
44, 352
1936
137, 695
1937
12 months from—
43, 559, 641
Dec. 1, 1935...
44,992,458
Dec. 1. 1936.__
6 months from—
1,042,163
Jan. 1. 1937....
892, 373
July 1, 1937.-_
Jan. 1, 1938....
916,246
Calendar year:
332,178,968
1936
351, 027, 858
1937
Calendar year:
111, 898,047
1936
111,941,218
1937
Calendar year:
, 791, 313,982
1936
, 791, 328,176
1937
12 months from—
M a y l , 1936...
M a y l , 1937.-

Percentage of
quota
filled

60.80
56.87
» 100.00
2100.00
3 100.00
4 100.00
32.90
33.89
2.96
9.18

99.42
5 100. 00
0 100. OQ
74. IS
78.35.
99.91
99.95,
99.96

6, 000, 000 7100.00
6,894, 502
98.24

5 Quota filled Nov. 1,1937.
6 Quota filled Apr. 25,1938.
7 Quota filled Apr. 22,1937.

Division of Laboratories.—During the year, the 9 customs laboratories, located at Baltimore, Boston, Chicago, Los Angeles, New
Orleans, New York, PhUadelphia, San Francisco, and Savannah,
analyzed 82,264 samples of merchandise, an increase of 1,279 over
last year. These analyses included 35,385 samples of sugar, 13,610
of ores, metals, etc., 5,362 of textUes, 3,796 of fixed oUs, fats, etc., and
3,280 of suspected opium and narcotics, the latter representing an
increase of 1,973 over the previous year.

146

REPORT OF THE SECRETARY OF THE TREASURY

A modern chemical laboratory was completed and equipped at
Savannah, and plans are now being made to enlarge and modernize
the customs laboratory at San Francisco.
Customs chemists assisted in developing a simple '^spot test" set
for morphine, heroin, etc. Hundreds of these test sets have been
distributed to customs officers for their use in determining rapidly
whether suspected materials actuallj^ contain narcotic drugs. Thirtynine different methods of laboratory analysis for as many commodities
were prepared by individual customs chemists for use in the various
laboratories. In order to insure uniformity in analyzing and reporting
samples of merchandise, a plan was instituted for sending identical
prepared samples to each customs laboratory for a comparative test.
Changes in ports and stations.—One port at Nome, Alaska, and two
stations at Lake Linden, Mich., and West Point, Va., were abolished
during the year. A new port of entr}^' was designated at Port St. Joe,
Fla., made necessar}^ by the erection of a pulp mill using imported
materials, and one was designated at Highgate Springs, Vt. The
status of the foUowing 23 stations was changed by Executive order
to that of ports of entry on July 15, 1937 (T. D. 49029): South Haven,
Mich.; Pigeon River Bridge, Pine Creek, and Roseau, Minn.; Dunseith, Fortuna, Maida, and Noonan, N. Dak.; Morgan, Opheim,
Peskan, Piegan, Raymond, RoosvUle, Scobey, Turner, Westby,
WhitetaU, and Whitlash, Mont.; Lynden and Metaline Falls, Wash.;
and Ysleta and Freeport, Tex.
Permanent stations were designated during the year at Port
McNicoll, Ont., Crane Lake, Minn., Antelope Wells, N. Mex., Columbia Falls, Mont., Beebe Plain, Vt., and Morses Line, Vt., and some
seasonal stations were established at other points. At the end of
the year there were 309 ports of entry and 80 permanent stations.
The oversea highway connecting the island of Key West and the
mainland of Florida was formally opened toward the close of the fiscal
year. The reestablishment of daily ferries for passenger service
between Key West and Havana during the coming tourist season is
expected to follow the resumption of automobile traffic with the
mainland, thus causing Key West to recover at least partially the
importance as a port of entry which it possessed before the destruction
of all connecting bridges, viaducts, etc., by the hurricane in 1935.
Cost of administration.—The total revenues collected by the Customs Service during the year, including collections for other departments, etc., amounted to $392,057,97.7, a decrease of $132,213,494
from the previous year. As explained in the preceding pages, the
volume of work performed by the Service, instead of following the
treiid in collections, was even greater than during 1937. The expenses, therefore, increased by $95,010 to $20,610,568 in 1938, causing
an increase from $3.91 in 1937 to $5.26 in 1938 in the cost to collect
$100.
BUREAU OF ENGRAVING AND PRINTING

The deliveries of currency, securities, stamps, and miscellaneous
printings by the Bureau during the year amounted to 420,949,382
sheets, an increase of 5,951,590 sheets over the previous year.
A statement of deliveries of finished work in the fiscal years 1937
and 1938 follows:

REPORT OF T H E SECRETARY OF T H E TREASURY

147

Deliveries of finished work, fiscal years 1937 and 1938
Sheets
Face value,
1938

Class
1938
Ourrency:
United States n o t e s —
Silver certificates
Federal Reserve notes .
Total.
Bonds, notes, certificates, and bills:
Pre-war bonds
Treasury bonds
United States savings bonds
Adjusted service bonds, U. S. Government life insurance
fund series
Treasury notes
—
Treasury bills
Certificates of indebtedness
Insular bonds:
Philippines
i
Puerto Rican
Farm loan bonds
Consolidated farm loan bonds
Consolidated collateral trust debentures for the twelve
Federal intermediate credit banks
Federal Farm Mortgage Corporation bonds
_
Home Owners' Loan Corporation bonds
Commodity Credit Corporation collateral trust notes
Commodity Credit Corporation notes
Federal Housing Administration:
Mutual mortgage insurance fund debentures
Housing insurance fund debentures
Reconstruction Finance Corporation notes
United States Housing Authority notes
Federal home loan banks consolidated debentures
Cuban silver certificates:
Philippine treasury certificates
Philippine national bank circulating notes
_
_.
Interim transfer certificates for postal savings bonds
Interim certificates for Commodity Credit Corporation notes...
Interim certificates for Federal national mortgage association
notes
Interim certificates for Puerto Rican bonds
Specimens:
Treasury bonds
United States savings bonds
Adjusted service bonds, U. S. Government life insurance
fund series
Treasury notes
Insular bonds:
Philippines
_
_
Puerto Rican
_
Farm loan bonds
Consolidated farm loan bonds
Collateral trust debentures.
Federal Farm Mortgage Corporation bonds
.,
Home Owners' Loan Corporation bonds
Commodity Credit Corporation collateral trust notes
Commodity Credit Corporation notes...
._
Federal Housing Administration:
Mutual mortgage insurance fund debentures
Housing insurance fund debentures
United States Housing Authority notes
Federal home loan banks consolidated debentures..
Interim certificates for Commodity Credit Corporation
notes
Interim certificates for Federal national mortgage association notes
...^
Total.

4, 536,000
62, 584,000
12,895,850

4, 753,000
71,955,000
13,823, 600

$231, 640,000
1, 547, 664,000
2,446,620,000

80,015,850

90,531, 600

4, 225,824,000

855
4, 111, 300
1,012H
588,332H1
732,967J/3 6,078,587, 500
2,895,000
2,671,000
722,000,000
60
172,450
17,846
600

211, 979
18, 741
100

6, 848,450,000
4,398, 264,000

19,870
1,830H
47, 697
11, 585

10, 890
3,480}^!
12,691
21, 566

11,500
12,000
9,556
1,260

25,000
6, 580.
22,055
2,340
34,000

480,000,000
72, 300,000
755,000,000
72, 750,000
445,000,000

8,500
6,000

17,900,000
20,300,000

500

100
7,600
71,136
364, 5831^1
2,040,000
• 2, 740,200
72,000
1,000
2,500
20,500
1,000
2H\
1

1,477, 500
1,475,000
8, 281,940
69, 520,500

245,000,000
44,354,000
1, 530,000

16,375
75
31^

1
7
30
2

5
35

2
2
2
12

1
12^1
6,882,67lMo

1,933,372H 18,286,301, 740

148

REPORT OF THE SECRETARY OF T H E TREASURY
Sheets
Class

Stamps:
Customs
Internal revenue:
United States
Philippines
Puerto Rican
Virgin Islands
District of Columbia
_
Federal migratory-bird hunting
Tax-exempt potato (delivered to Procurement
Division, TreasuryDepartment, for destruction)
Specimens, United States
Postage:
United States
_
United States, for testing purposes, Bureau of
Standards. _
Canal Zone.
_
Philippines
Specimens, United States
Postal savings
Total
Miscellaneous:
Checks
Warrants
Commissions
Certificates
Drafts
Transportation requests
Other miscellaneous
Specimens
For experimental purposes..
Blank paper
Total
Grand total

1937

1938

277,450

240,000

141,508,8I87VT 136,683,074^'^
101, 275
88,150
924,056
934,700
350
560
88,108
128,788
12,964
15, 693^
21, 283§||
61^
150, 558,733
205^
10, 500
. 987,909i
155-ffo"s
6,928
294,466,084TW7>-

—

166,761, 275
79,116
485, 448
73-T i O
6, 254^

Number of
stamps, etc.,
1938

7,000,000

12,101, 906,819
12, 288,700
61, 966,000
55,000
26,767, 600 •
1, 746, 500
7,662,239
2,124
15,161,993,404
16,000
6,802,360
48,133,180
3,674
625, 450

295,447, 582x^1^75 27, 435, 948,060

27,824,992
47, 690
183,746
5,998,493-1
600
224,119
362, 2641
230i
1,976
276

22,949,952
53, 500
71, 301
4, 579,1091
.260
•183, 205 •
198, 695^4
167

34, 634, 286T^

28,036,827^-

114,749,760
258, 600
41, 766
19,749, 695
1,000
916,025
> 2,832, 324
697

657
138, 549,767

414,997,.791|4§^ 420,949,38lHflg

The following dies for new postage stamps were engraved during
the year:
DenomiIssue
nation
Commemorative, series 1937:
{cents)
Sesquicentennial of the Constitution
3
Hawaii
_
3
Virgin Islands
3
Puerto Rico
3
Alaska
_
3
Commemorative, series 1938:
Sesquicentennial of the Ratification of the Constitution
_
!3
Delaware Tercentenary
iL....
3
Centennial of Iowa Territory
3
Sesquicentennial of the Northwest Territory
3
United States National Parks, series of 1934
10
(Souvenir sheets issued complimentary to the 43rd Annual Convention of the Society of Philatelic
Americans, held in Asheville, N. C , August 26-28,1937.)
Air mail, series 1938 (bicolor)
6
Ordinary postage, series 1938: H, 1, IH, 2, 3, 4, 4H, 5 to 22, inclusive, 24, 26, 30, 50 cents; $1.00, $2.00, $5.00.

During the year a minor change was made in the plates for United
States currency and Federal Reserve notes. The plate numbers
appearing on the face and back of the notes were enlarged and the
series designation was changed by the addition of a letter following the
series year. On the $1 silver certificates the series was omitted from
the face plates and was overprinted on the notes with the signatures.
All other classes and denominations have the series designation
engraved in the face plates.
The Bureau^s new annex was completed and officially accepted
May 17, 1938, and a number of activities were moved into the building
between that date and June 30, 1938*

REPORT OF THE SECRETARY OF THE TREASURY

149

The personnel and activities of the guard force were transferred to
the Secret Service Division, eft'ective June 30, 1937.
The gradual diminishing of the plate printing force, due to numerous
retirements from that group, occasioned the employment in the latter
part of the year of 32 plate printer apprentices, between the ages of
18 and 20 years, to acquire practical laiowledge of the dift'erent phases
of printing, method of preparing and handling paper, inks, etc. These
were the first apprentice appointinents made since 1918.
Representatives were sent to the philatelic exhibition held at the
Benjamin Franklin Institute in Philadelphia, Pa., from May 18 to 26,
1938, to demonstrate the printing of postage stamps.
A committee was formed to make observations and studies ^ of
hazardous conditions in the Bureau with the view to the protection
of life and property. A fire fighting corps was also organized, which
is composed of over 300 employees under the training and supervision
of an experienced fireman.
At the beginning of the fiscal year there were on the pay roll 5,047
employees, including 107 who were holding temporary appointments.
Increases in the requirements for currency, bonds, and postage stamps
required additional personnel so that at the end of the year there
were 5,500 employees on the pay roll.
There was expended during the year for salaries and expenses
$12,037,336.41, an mcrease of $1,266,271.41 over the previous year.
The following statement shows the appropriations, reimbursements,
and expenditures for the fiscal years 1937 and 1938:
Appropriations, reimbursements, and expenditures, fiscal years 1937 and 1938
1937
Appropriations:
Salaries and expenses
Deficiency for 1937-38
Deficiency for 1938
.
Reimbursements to appropriation from other bureaus
for work completed 2
Total
Expenditures, salaries, and expenses 3
Unexpended balance.-

$6,328,430.00
1,400,000.00

1938

Increase or
decrease (—)

$7,600,000.00 $1,171, 570.00
» 499, 375.12 -900, 624.88
600,000.00
500,000.00

3, 502, 635.00

3,699,037.28

96,402.28

11,231,066.00
10,771,065.00

12,098, 412.40
12,037,336.41

867, 347. 40
1,266, 271, 41

1 460,000.00

61,075.99

—398,924.01

1 Unexpended balance of deficiency appropriation which was available for expenditure to June 30, 1938.
The difference between the amount shown as unexpended balance in the year 1937 and the amount available for expenditure in the year 1938 is due to canceling part of purchase order for intaglio ink paste in the
amount of $29,049.06 and to several other adjustments.
2 An additional amount of $8,568.25 received from sale of byproducts and useless property was deposited
to the credit of the Treasurer of the United States as miscellaneous receipts.
3 Includes $9,000 and $11,300 transferred to Bureau of Standards for research work in 1937 and 1938, re*
spectively, and $323,999.22 and $358,421.89 transferred to retirement fund in 1937 and 1938, respectively.

COMMITTEE ON ENROLLMENT AND DISBARMENT

The Committee on Enrollment and Disbarment is an administrative and judicial body. I t has charge of the enrollment of attorneys
and agents for practice before the Treasury Department and conducts hearings in disbarment proceedings. An attorney, not a
member of the committee, represents the Government before the
committee. All complaints are filed with the attorney for the Government, who institutes proceedings in disbarment or suspension if
the charges warrant such action. The committee also issues hcenses

150

REPORT OF THE SECRETARY OF THE TREASURY

to customhouse brokers and makes findings of fact and recommendations to the Secretary in proceedings for the revocation or suspension
of such licenses.
The following statement summarizes the work of the committee for
the year 1938:
Attorneys and agents:
Apphcations for enrollment approved
Apphcations for enrollment disapproved._.
Formal hearings on applications
Applications withdrawn on advice of committee
Complaints against enrolled persons:
Pending July 1, 1937
Filed during the year

Number
_
_

3,771
44
2
239

Disposed of:
Dismissed
_
Disbarred
Stricken from the rolls in the course of disbarment proceedings
Reprimanded
Complaint stetted
_
_

31
17
48
_
1

13
4
2
3
1

Pending June 30, 1938
Charges made, names stricken from the rolls
Cases of minor infractions of the regulations in which enrollees were given an opportunity to show
cause why proceedings should not be instituted
._
Customhouse brokers:
Applications for licenses approved
Applications for licenses denied
_
Applications withdrawn
Licenses revoked
_
__
Licenses suspended
Licenses canceled
..Reprimanded...
^

23
25
2
17
60
11
9
4
1
10
1

Since the organization in 1921 of the Committee on Enrollment and
Disbarment, 50,874 applications for enrollment have been approved
and 680 disapproved. One hundred ninety-seven practitioners have
been disbarred from further practice before the Treasury Department,
132 have been suspended from practice for various periods, and 172
have been reprimanded.
FEDERAL ALCOHOL ADMINISTRATION i

The Federal Alcohol Administration is charged with preventing
certain trade practices on the part of alcoholic beverage producers,
importers, and wholesalers, with a view to the elimination of *'tied"
retail outlets, commercial bribery, consignment sales, false or misleading labeling and advertising, bulk distribution of distilled spirits,
and interlocking directorates in the distilling and rectifying fields.
The Federal Alcohol Administration Act requires that all producers
(other than brewers), importers, and wholesale distributors of alcoholic beverages secure permits from the Administration which are
conditioned upon compliance with the provisions of the act, the
twenty-first amendment and its enforcing laws, and all other Federal
alcoholic beverage laws.
Applications for permits on the part of persons entering businesses
specified in the act, applications for label approval or exemption to
cover new labels or changes in approved labels, and proposals involving amendments to the regiUations are continually being received
for consideration and appropriate action.
1 More detailed information concerning the activities of the Federal Alcohol Administration is contained
in the annual report of the Federal Alcohol Administrator.

151

REPORT OF THE SECRETARY OF THE TREASURY
Permit Division

Due to changes in the control of plants and businesses operated
under basic permits and to the entry of new members into the industry, the permit functions of the Administration are continually
being exercised. Notwithstanding the termination of 1,693 permits,
the number of outstanding permits increased by 942 during the year.
The following statement summarizes the activities of the Permit
Division for the fiscal year 1938:
Permit activities,.fiscal year 1938

Distillers

Applications for permits:
Pending July 1,1937
Received

Wine WareproImRectiducers housing
and Wholefiers porters and
salers Total
botblend- tling
1
ers

17
94

19
66

45
200

33
208

3
9

301
2,114

418
2,691

111

245

241

2,415

3.109

3
2

5
6

9
1

10
8

211

212

180
28
4
8
2
2,050

209
44
4
9
2
2,633

Total disposed of

221

231

2,272

2,901

Pending June 30,1938

143

208

404
61
86

1,073
211
225

1,467
212
148

48
8
6

10, 786
2,052
1,079

379

1,059

1,621

11,759

14, 267
2,635
1,681
12
15, 209

Total to be disposed of
Withdrawn
.
.
Incomplete, closed
Denials after hearing
Denials in default of request for hearing..
Permits issued after hearing
Permits issued under regular procedure...

Permits:
In effect July 1,1937
Issiied.
..
Canceled. . .
.Revoked
In effect June 30, 1938

499
91
137
12
2 441

1 Warehousing and bottling permits issued to proprietors of bonded warehouses only. Such permits
are held also by all distillers and rectifiers.
2 Of the 441 distillers' basic permits, 87 merely authorize the operation under lease of existing distilleries,
and the remaining 354 permits cover actual authorized distilling plants.

In addition to the above activities, 1,204 basic permits were amended
during the year involving principally changes in corporate or trade
names and changes in the location of plants or businesses covered by
basic permits.
Label Examination Division
For the purpose of providing adequate information and preventing
deception to the consumer with respect to the labeling of alcohohc
beverages, the Federal Alcohol Administration Act provides that all
bottled distilled spirits and wine shipped in interstate commerce, or
imported into the United States, must be covered by certificates of
label approval issued by the Administrator. Similar certificates are
required for labels of malt beverages shipped into a State having
regulations similar to those of the Administration.
Certificates of exemption from label approval may be issued for
labels of wine or distilled spirits bottled within a State for intrastate
sale only. However, if the State in which the product is bottled has
regulations similar to those of the Administration, exemption certificates are not issued as such certificates would serve no useful purpose.

152

REPORT OF THE SECRETARY OF THE TREASURY

Although there was a marked decrease in the label applications
filed during the year for both domestic and imported products, the
filing of applications continued heavy. Competition in the industry
and new private brands were important elements contributing to the
large number of applications. As heretofore, the large majority of
applications covered domestic distilled spirits and wine. During the
year an average of more than 2,400 label applications were acted on
per week.
The following table shows the action of the Administrator on
applications for label approval for distilled spirits, wine, and malt
beverages, both domestic and imported, and certificates of exemption
for label approval during the fiscal year:
Label activities, fiscal year 1938
Distihed
spirits

Wine

Malt beverages

Total

Domestic
Certificates of approval issued
.
.
Applications for certificates of approval disapproved
Certificates of exemption issued
_ .
Total

. .
_

46, 559
5,187
8,981

45, 544
3,863
178

1,020
244

92,123
9,284
9,159

59, 727

49, 575

1,264

110, 566

Imported
Certificates of approval issued . .
Certificates of limited approval issued ^
Applications disapproved __
_
Total
Grand total

..
_

_. -

3,052
389
612

9,449
186
1,188

134
22

12 635
675
1 822

4,053

10,823

156

15 032

63, 780

60, 398

1,420

125,598

1 The regulations do not provide for the issuance of certificates of exemption from label approval for malt
' The certificates of limited approval were issued only for labels of distilled spirits and wine entered into
customs custody prior to the effective dates of the regulations. These certificates were issued for labels
not in exact conformity with the regulations, but only if such labels contained all the mandatory information
required and did not include any information considered false or misleading.

Statistics and Reports Division
This Division supervises the proper filing of the monthly reports
of operations required from importers, distiUers, rectifiers-, and proprietors of internal revenue bonded warehouses holding warehousing
and bottling basic permits; compiles from these reports statistical
releases which are disseminated from time to time by the Administration; prepares special statistical information requested by members
of the liquor industry and others; and assists in the preparation of
data used in connection with proceedings for revocation of basic
permits because of inactivity.
Enforcement Division
During the year the Enforcement Division conducted 3,058 investigations, of which 539 were made at the request of the Permit Division
and involved inquiries into the personnel of permit applicants; 12
were undertaken in connection with cases involving possible annulment of permits which the Administration had reason to believe

REPORT OF THE SECRETARY OF THE TREASURY

153

mi^ht have been issued on the basis of erroneous statements in applications; and 2,507 were investigations of alleged violations of the
restrictive provisions of the act. This situation shows some change
from the previous year, in that fewer permit investigations were
required, some annulment cases were developed, and the number of
violation cases increased.
In connection with the enforcement of the advertising regulations,
the Division reviewed 158,824 advertisements and took action on
2,260 which involved various types of irregularities. In the field
114 investigations were conducted on advertising matters, all other
action being initiated and carried out in the Washington office.
Legal Division
The Legal Division, under the General Counsel for the Federal
Alcohol Administration, acts as legal adviser to the Administrator in
all matters pertaining to the Administration, in the holding of industry hearings, in the drafting of regulations pursuant to the Federal
Alcohol Administration Act, in interpretations relating thereto, and
in advising the industry in respect to compliance therewith; prosecutes, on behalf of the Administration, all complaints issued against
permittees for violations of the conditions of their permits, and
assists in the defense of cases involving litigation brought against the
Administration or in its behalf; reviews all correspondence of a legal
nature; and prepares all rulings and orders of the Administrator.
The Legal Division conducts all proceedings against permittees
in matters relating to applications for basic permits and to violations
of the act and regulations. The Administration's hearing offxers
hold hearings from time to time throughout the country, and make
findings of fact and recommendations to the Administrator in respect
to the cases under consideration. When exceptions to the findings
of fact made by the hearing officers are filed by permittees, such
exceptions are argued and presented to the Administrator on behalf
of the Administration.
The proceedings before the Legal Division during the fiscal year
1938 are summarized as follows:
Proceedings on applications for permits:
Number
Notices of contemplated denial of basic permit applications
34
Orders denying applications for basic permits •
10
Orders granting applications for basic permits i
_
10
Orders dismissing proceedings on applications
13
Proceedings pending
_
9
Proceedings for suspension of permits:
Orders instituting suspension proceedings
34
Orders suspending permit or dismissing proceedings i
88
Proceedings pending..
_
15
Proceedings for revocation of permits:
Orders instituting revocation proceedings
_
122
Orders dismissing proceedings on cancelation of permit or revoking permit
86
Proceedings pending
_.
35
Proceedings for annulment of permits:
Orders instituting annulment proceedings
3
Proceedings pending
._
_
3.
Offers in compromise:
Offers received.
1,608
Offers approved by the Attorney General 2_
_
1^ 211
Offers pending approval of the Attorney General
297
Cases pending before Federal courts:
Cases in United States district courts...
4
Cases in United States Supreme Court
J
1
Cases referred to the Attorney General for prosecution
7
Cases pending
7
Interlocking directorates:
Applications received and acted upon
20'
'Includes orders in a number of proceedings closed during the year but instituted prior thereto.
3 Does not include 507 offers approved by the Attorney General during the year but submitted prior
thereto.

154

REPORT OF THE SECRETARY OF THE TREASURY

The consideration of proposed changes in the Administration's
regulations involved the holding, after due notice, of six public hearings, the study of the evidence received, and the preparation of the
amendments.
BUREAU OF INTERNAL REVENUE i

General
Internal revenue collections.—Total collections of internal revenue
during the fiscal years 1937 and 1938 are shown in the following summary, classified according to the administrative organization responsible for the tax. A detailed statement of collections appears in
table 11, page 425 of this report.
Summary of internal revenue collections, fiscal years 1937 and 1938
fOn basis of reports of collections, see p. 352]
General source

Income Tax Unit >
Alcohol T a x U n i t •
Miscellaneous T a x U n i t
Social Security T a x Division
T o t a l collections

1937

1938

Increase or
decrease (—)

$2,179,877,415. 93 $2, 629,072, 039. 73
594,245,086. 27 ' 667.978,601.53
1, 613, 327, 505. 24 1, 719, 054, 447.10
266, 745,307.84
742, 660, 225.97

$449,194, 623. 80
-26.266,484.74
105,726,941. 86
476,914,918.13

5, 658, 765,314. 33

1,006, 569,999.05

4, 653,195, 316. 28

1 Includes collections from the repealed tax on dividends and the tax on unjust enrichment.

Refunds, drawbacks,^ and stamp redemptions.—During the year
refunds of tax coUections, together with interest, were made from
the following appropriations:
Refunding internal revenue collections, 1937 and prior years
Refunding internal revenue collections, 1938 and prior years
Refunds and payments of processing and related taxes, 1938
Total, interest included

$1,985,205.00
32,088,043.15
10, 200, 359. 64
44,273,607.79

The following is a summary of the refunds, showing the num.ber of
schedules and claims, the amount of refunds and repayments allowed,
and the total amount refunded, including interest, on each class of
tax during the fiscal year 1938, with a comparison of the totals for the
fiscal year 1937:
1 More detailed information concerning the activities of the Bureau of Internal Revenue will be found in the
annual report of the Commissioner of Internal Revenue.

REPOBT OF THE SECRETARY OF THE TREASURY

155

Number of schedules and claims, amount of refunds and repayments, and total refunds,
repayments, and interest, by class of tax, fiscal year 1938, and totals for 1937
Number Number
of
of
schedules claims

Class of tax

A m o u n t of
refunds a n d
repayments

T o t a l refunds,
repayments,
and interest

Bituminous coal-...
Capital stock..!...,,
—
Carriers. AGtl.-...L......
..'
Distilled "spirits....
-•-.
.Distilled spirits stamps redeemed
Distilled spirits drawbacks (270 certificates)
Estate
—
Gift
Income
Miscellaneous
Miscellaneous stamps redeemed
Narcotics
Narcotic stamps redeemed.
Sales..
Silver stamps redeemed
Social security, title VIII
Social security, title IX
Sugar
Tobacco
Tobacco stamps redeemed
:
Tobacco drawbacks.-

23
108
291
173
160
1
926
470
4,937
62
65
32
30
99
2
462
727
1
5
25
8

101
4,199
1,247
5,133
3,436
814
1,413
676
159,233
416
2,667
150
60
1,414
2
1,623
6,409
1
6
1,663
22

$2,684.99
477,644.95
131, 797.18
209,498. 86
129,066. 46
224,126. 86
3,746, 755.47
492, 427. 82
19, 111, 646. 88
170,911.82
171, 781. 60
271. 27
281.44
1,104, 391. 23
2, 346.56
41, 046. 38
401,413.62
1, 070. 00
140.18
1, 297, 271. 27
6, 694. 29

$2,762.18
563. 221. 28
131,806.92
215,884.90
130,748.31
224,126. 86
4, 599,790. 84
643,887.04
24,329, 415. 27
192, 835.04
179, 584. 31
274.46
282.98
1,187,022. 01
2, 346. 66
43, 201. 54
- 420, 877.45
1,070. 00
144. 64
1,297, 271. 27
6, 694. 29

Total income and miscellaneous internal rev
enue...
•.
._
Agricultural adjustment taxes

8,596
2,722

189, 684
18, 968

27, 723,169. 03
9, 8U6, 902. 84

34.073,248.15
10, 200, 359. 64

11,318

208, 652

37. 530, 071. 87

» 44, 273, 607. 79

6,637
2,420

176,607
39,469

26, 301,060. 59
6, 817,458. 32

32, 253,803.06
6, 817,458. 32

8,957

216,066

33,118, 518. 91

1 39, 071, 261. 38

Grand total, fiscal year 1938_._.__.
Fiscal year 1937:
Income and miscellaneous internal revenue....
Agricultural adjustment taxes
_
Grand total, fiscal year 1937

1 Excludes refunds from the trust fund set up for Philippine coconut oil tax collections, $205,613.63 covering
870 claims for 1937 and $484,891.65 covering 759 claims for 1938.
NOTE.—-The figures in this table will not agree with those given in later sections of this report for the reason
that the amounts shown in the later sections relate to claims disposed of by the units, whereas this table
shows the actual payments made.

If the tax refunds made during the fiscal year 1938 on account of
erroneous or illegal collections of internal revenue and agricultural
adjustment taxes and payments for export drawbacks and redemption
of stamps, amounting to $44,758,499.45, were deducted from the gross
collections of $5,658,765,314.33, the net collection for the fiscal year
1938 would be $5,614,006,814.88. Gross coUections, however, are
used for comparative purposes in these reports.
Additional assessments.—The additional assessments resulting from
office audits and field investigations made during the fiscal years 1937
B,nd 1938 were as follows:

156

REPORT OF THE SECRETARY OF THE TREASURY
Additional assessments, fiscal years 1937 and 1938, by class of tax
Class of tax

1937'

.-.

$286,765,138.19

Income ^
Miscellaneoiis internal revenue:
Estate
Gift
Tobacco..
Sales
Capital stock
Liquors
. ..
Miscellaneous
Coal
.
Silver
Sugar

_..
-

Social Security Act and Carriers Acts
Grand total

53,307,904.68
9,438,926.69
254,034. 49
8,170, 923. 22
1,163, 743. 43
5, 371, 753. 30
18,158,429. 45
31,086. 37
124, 950. 87
839. 38

108,959,683.98

96,022, 591. 88

.•4:723,880.36
.

$262,336,901.07

.56, 964,968. 59
7,241, 234. 38
196, 900. 77
14, 776,"58i. 91
1,661,601.08
8,623,742.90
19, 494, 654. 35

'...

Total miscellaneous internal revenue

1938

399,448, 702. 53

26, 344, 576 02
384,703,067 97

1 Includes jeopardy assessments of $32,866,136.42 for 1937 and $45,867,553.42 for 1938.

Cost of administration.—The amount of $58,290,520 was appropriated for the fiscal year 1938 for salaries and expenses in connection
with the assessm.ent and collection of internal revenue taxes and the
administration of the internal revenue laws. The expenditures and
obhgations against this appropriation were $58,204,050, leaving an
unexpended balance of $86,470. The expenditures do not include
amounts expended for refunding taxes illegally or erroneously collected
and for redeeming stam.ps. The cost of coUecting a total of $5,658,765,314 during the year was $1.03 per $100, com.pared with $1.12 per
$100 for 1937.
During the year $7,578,906 was transferred from the Department
of Agriculture for salaries and administrative expenses in connection
with making refunds authorized by titles IV and VII of the Revenue
Act of 1936. The am.ount expended and obligated from this fund
amounted to $3,354,264, leaving an unexpended balance of $4,224,642,
of which $4,200,000 is available for such salaries and expenses for 1939.
During the year $1,127,469 was transferred from, the appropriation of the Social Security Board for salaries and administrative expenses in connection with the verification of social security inform.ation returns. The amount expended and obligated from this fund
amounted to $1,122,410, leaving an unexpended balance of $5,059.
There was allocated during the year to the Bureau of Internal
Revenue, from funds appropriated in the Em.ergency Relief Appropriation Act of 1937, $1,381,309 for work relief projects. Obligations
incurred for these projects am.ounted to $1,337,819.
Income Tax Unit
The work of the Income Tax Unit relates to the administration of
the internal revenue laws with reference to taxes on income, excessprofits of corporations, excess-profits on Navy contracts, unjust
enrichment tax^ and refunds of certain processing taxes. The Unit
also is required to make field examinations, when necessary, of returns
filed under title I X of the Social Security Act.
Returns.—All income tax returns except those filed on Form 1040A
are audited by the Income Tax Unit. Returns filed on Form 1040A

157

REPORT OF THE SECRETARY OF THE TREASURY

(returns of individuals reporting income, chiefly from salaries and
wages, of less than $5,000) are audited in the collectors' offices under
the supervision of the Accounts and Collections Unit.
Summary of work of the Income Tax Unit, fiscal years 1937 and 1938
Nu mber
RGturns
1937
350,097

On hand in Washington and in the field at beginning of year •
Received during year:
Reopened and amended
Original . _
___.

. . .

_ ..

Total
Total to be disposed of

. __.

Closed during year: 2
Additional assessments except jeopardy:
Before final notice of deficiency
After final notice of deficiency: 3
Agreement
Default
Total
Jeopardy assessments (subject to appeal)
Certificates of overassessment
NO change
.
. _ _ . . .
Total closed

... .

Not closed during year:
On hand for audit in Washington and in the field at end of year 4..
Awaiting action of taxpayer after mailing final notice of deficiency
..
Involved in appeals to Board on final 90-day notice of deficiency mailed
during year
Total not closed

1938
536,630

190, 699
2,410,083

135, 737
2, 642, lOS

2, 600, 682

2, 777,845

. 2,950, 779

3 314,476

211, 717

190, 917

2, 633
6, 978

2, 203
6,834

221,328
1,422
46, 668
2,137, 335

198, 954
1,911
48,497
2,464, 762

2,406, 753

2, 714,124

536, 630
2,829

592, 758
1,712

4,567

6,881

544,026

600,351

1 Excludes returns with respect to which final notices of deficiency (90-day letters) were mailed prior to
the beginning of the year.
2 Excludes 4,040 returns closed through decisions of Board of Tax Appeals for 1937 and 4.318 for 1938.
3 Includes some returns with respect to which final notices of deficiency (90-day letters) were mailed prior
to the beginning of the year.
4 Excludes returns in transit.

Of the 2,718,442 returns examined and closed by the Washington,
and field offices during the year, including 4,318 returns closed by
decision of the Board of Tax Appeals, 1,975,358 were filed by indi-.
viduals and partnerships and 743,084 by corporations. In 193,120
cases, deficiencies were listed based upon agreements executed by
taxpaj^ers consenting to the immediate assessment and collection of*
the additional tax determined. This represented 94 percent of the
cases in which deficiency taxes were proposed for assessment.
The following table shows, by tax years, the number of returns
received and closed byHhe Washington and field offices during the
fiscal years 1937 and 1938 and the number pending at the beginning;
and close of each year:

104825—39-

-12

158

REPORT OF T H E SECRETARY OF T H E TREASURY

Number of returns received and closed during the fiscal years 1937 and 1938^
by tax years
T a x year

1917
1918
1919
1920
.
. .
1921
1922
.
1923
1924 ._
_. .
1925
1926
1927
1928
. -.
1929
1930
1931
-.
1932
1933
1934
1935
1936
.
1937
3938
Total

On h a n d
J u l y 1,
1936

Received
during
1937

Closed
during
1937

On hand
J u n e 30,
1937

80
69
84
115
105,
130
149
157
204
226
336
517
1,162
1, 539
2, 096
4,229
14,996
123, 762
200,151

118
104
]33
233
179
201'
323
367
496
634
773
1,031
1,702
2,295
2.452
4,529
11,660
163, 369
1, 213.894
1,192,833

96
103
138
241
170213
334
362
488
584
772
1,109
2.0fl
2,822
3,305
• 6,658
21, 744
261,803
1, 269, 586
838, 204

102
70
79
107
114
118
138
ir2
212
276
337
439
803
1,012
1,243
2,100
4.912
25, 318
144,459
354, 629

350, 097

2, 597, 326

2,410,793

536,630

Received
during
1938

Closed
during
1938

109
126
148
171
147
181
270
275
354
388
508
654
1,060
1,617
1,846
3, 286
5,955
23, 920
94, 716
1, 438, 661
1,199, 926
246
2,774,670

99
125
137
193
172
209
303
314
412
460
592
776
1,247
1,839
2,212
4,101
8,308
38, 397
210, 667
1, 656, 777
891, 042
60
2. 718, 442

On h a n d
J u n e 30,
1938
112
71
90
85
89
90
111
123
154
204
263
317
616
790
877
1,285
2,559
10,841
28, 608
236, 513
308,884
186
592, 758

Back taxes.—The additional revenue made available for coUection
'(exclusive of jeopardy assessments) was $205,862,242.14 for 1938,
-compared with $242,761,873.77 for the previous year. The field forces
of the Income Tax Unit secured agreements to the assessment and
collection of $93,797,011.08, of which $53,877,036.42 was immediately
assessed under the provisions of mimeograph 3552, whUe $151,985,205.72 was assessed after consideration in Washington.
The additional revenues are classified in the foUowing table to show
the amounts involved as additional tax, interest, and penalty, and the
procedure involved in reaching a settlement with the taxpayers.
Additional revenue ^ made available for collection during the fiscal years 1937 and
1938, classified according to source and procedure involved
1937

1938

Source a n d procedure involved
Amount
Tax
Interest
Penalty
Total
Rejected claims for a b a t e m e n t a n d credit
T o t a l additional revenue
...'.
P r o c e d u r e involved in s e t t l e m e n t :
M i m e o g r a p h 3552 2___
Regular procedure:
Agreements executed b y t a x p a y e r w i t h o u t
90-clay letters....
Agreements executed b y t a x p a y e r subseq u e n t to 90-day letters
Appeals n o t filed w i t h i n 90-day period
Assessments listed in appealed cases after
trial on t h e merits a n d decision b y Board
of T a x Appeals, or u p o n stipulation before
t h e B o a r d of cases .settled b y Technical
Staff and/or General Counsel
Total

$194, 523, 3S5. 58
40, 785. 041. 78
3. 432, 667. 50
238, 740, 994. 86
4, 020, 878. 91
242, 761, 873. 77

Percent
of total

Amount

Percent
of t o t a l

80.1 $170, 808.187.10
31,269,736.37
16.8
2, 629.996.18
1.4
98.3 204,607.919.65
1, 254. 322. 49
1.7
100.0 205,862,242.14

57, 279, 977. 26

24.0

53, 877,036. 42

117, 706, 316. 26

49.3

95, 809.169. 46

4, .508, 828. 36
16, 059,923. 51

1.9
6.7

4,982:029. 43
14,945,180.90

83.0
15.2
1.2
99.4
.6
100.0
26.3
46.8
,

2.5
7.3

43,186, 950.47

18.1

34,994, 503.44

17.1

238, 740,994. 86

100.0

204, 607, 919. 65

100.0

i^Exrlusive of additional taxes assessed under the jeopardy provisions.
%ThQ. effect of Mimeograph 3552 is to shorten the interest period when the additional tax is agreed to by the
taxpayer and field force. The above figures cover assessments made during periods June 1, 1936, to May
31,11937, and June 1, 1937, to May 31, 1938.

159

REPORT OF THE SECRETARY OF THE TREASURY

Additional taxes were also assessed under the jeopardy provisions
0 i the several revenue acts, as follows:
Additional taxes assessed under the jeopardy provisions of revenue acts during the
fiscal years 1937 and 1938^
1937
T i n d e r b a n k r u p t c y a n d dissolution p r o c e d u r e
Other j e o p a r d y assessments
.
T o t a l assessed..
Interest
Penalties

.. . .

Grand total

1938

$8,622,704.04
15, 735, 539. 56

$16, 292,236. 71
16, 319, 282. 88

24, 358,'243. 60
4, 442, 362. 31
4,054, 530. 51

31,611,619.59
10, 641,124.18
3, 614,909. 65

32, 855,136. 42

45, 867, 553. 42

1 The. collectors may or may not proceed to immediate collection of these taxes since the majority of jeop
srdy assessments are appealed to the Board of Tax Appeals.

Claims and overassessments.—The following table shows the number
of claims adjusted and certificates of overassessment issued, together
with the amounts of overassessment involved, during the fiscal years
1937 and 1938:
Claims adjusted and overassessments determined during the fiscal years 1937 and 1938
1937
Claims:
P e n d i n g at beginning of year
Filed d u r i n g year
..
Received from other sources

1938

Number
26, 605
36, 742
3,283

Number
24 517
53,050
49

T o t a l to b e adjusted

66, 630

77, 616

.\llowed in full or in p a r t
Rejected

30, 545
11, 568

34,123
11,078

42,113

46, 201

24, 517
33, 706

32 415
35, 934

Amount
$116,024,168.48
17, 918, 052.13
18,014, 843. 26

Amount
$69, 328,034. 60
13 488 159 44
19,111,646.88

161, 967, 063. 87
4, 305, 941.00

101, 927,840. 82
5,217,768.39

156, 263,004. 87

107,145,609. 21

T o t a l adjusted
P e n d i n g at end of i'^ear
'Certificates of overassessment issued w h e n no claims h a d been
Overassessments settled b y Abatement
.^..
Credit
Refund.
Total
Interest

G r a n d total

filed..

The amount involved in claims filed during the year 1938 was
$100,546,057.18, compared with $81,264,584.17 the preceding year.
Of the claims adjusted during the year, the amount rejected totaled
$78,587,465.81, compared with $132,928,177.19 the preceding year.
There were also allowed 17,308 collectors^ claims, final action on
which resulted in 15,407 abatements or credits and 1,901 refunds.
These claims were largely multiple item claims or claims for refund
to numbers of taxpayers, and involved 31,632 items for abatement or
oredit and 126,107 items for refund.
Final notices of deficiency (90-day letters).—During the year 10,241
final notices of deficiency were maUed to taxpayers, .compared with
11,989 the previous year.

160

REPORT OF TFIE SECRETARY OF THE TREASURY

.Petitions were filed with the Board of Tax Appeals in 5,881 cases^^
involving 58 percent of the returns with respect to which 90-day
letters had been issued. The following table shows the number of
returns by tax years involved in petitions filed with the Board of Tax.
Appeals during the fiscal years 1937 and 1938:
Number of petitions filed with the Board of Tax Appeals during the fiscal years^
1937 and 1938, bytax years
T a x year
1917
1918.:
1919.
1920
1921
1922.:
1923
1924
1925
1926
1927
1928

1937

1938

13
7
9
10
10
20
29
37
40
45
59
97

20
22
36
28
28
32
37
41
46
46
51
64

T a x year

1937

1929
1930
1931
1932
1933
1934
1935
1936
1937
Total

1938

166
170
269
584
1,315
1,465
228
5

129=
124
156
238
682'
2,1651 571
360
5-

4,567

5,881

Audit in Washington.—The following table presents an analysis of
the returns, original and reopened, pending in the various divisions
of the Washington office on June 30, 1938:
Number of original and reopened returns under consideration in Washington, June
30, 1938, by tax years
A u d i t divisions

Individual
returns

T a x year

fl
. ft

o
1817
1918
1919
1920
1921
1922
1923
1924
1926...
1926
1927
1928.
1929
.
1930
1931
1932.
1933
1934
1935...
1936 1937
1038

- .

Total

....

1
3
5
24
95
695
5,075
10,461
668
9

Corporation r e t u r n s

fl
• B

fl
05
ft

19
27
31
19
17
12
17
20
• 25
27
27
32
65
83
94
6
186
19
386
71
1,128 1,061
778 3,028
832 4,922
18
529
10

......

Consolidated returns

o
13
7
10
6
9
9
12
11
13
17
21
31
59
86
95
109
232
553
318
235
25

17, 036 3,842 9,649 1,871

......
4
3
8
15
22
21
30
46
13
3
3

169

to
ft

1
2
6
4
6
3
6
7
9
8
11
9
8
9
12
11
23
9
4
1

Conference
division

-3
.9

......
2
4
2
1
8
10
23
54
130
797
969
355
6

149 2,362

fl
ft
o

SpeEngineering cial
a n d valua- adjusttion
ment
division
division

1
1
2
3
3
4
3
4
6
6
7
8
11
22
7
33
22
42
29
7
90.
52
108
133
939
41 1, 595
7 1,961
2
27
1

......

350 4,830

i
ft

2
4
9
9
9
14
11
14
30
77
158
32
6

ift

T o tal

.9
o

35
24
24
30
31
30
36
"37
3
51
75
S
98
9
126
17
227
46
259
71
245
97
298
217
391
450
535 3,505
668 10, 670
' 579 17, 702
46 1,230
20

ift
o

6961
7362:
66
58
74
81
107
142
173
218
380
470
489
640
1.161
2,516
1,841
1,660
91

375 3,845 34,046 10, 432

Audit in the field.—Durmg the fiscal year, 750,714 returns were sent
to the field divisions which, with the 493,146 on han.d at the beginning

REPORT OF THE SECRETARY OF THE TREASURY

161

'of the year, made a total of 1,243,860. Of this number 695,580 were-disposed of, leaving a balance of 548,280 returns pending June 30,
1938. Of the retul-ns disposed of 429,601, or 62 percent, were investi:gated, 233,975 were returned to Washington without examination, and
32,004 were transferred to other divisions or to collectors' offices for
•investigation.
Changes in tax liability were recommended by the field forces in
.258,998, or 60 percent, of the returns audited. In 229,729, or 89
percent, of the changed returns, taxpayers reached agreements with
the field agents, consenting to the immediate assessment and collection
of deficiencies amoimting to $93,797,011.08 and the allowance of
overassessments amounting to $16,053,703.57.
Total deficiencies recommended by the field forces amounted to
$282,322,939.61, and overassessments recommended amounted to
$23,520,556.40, leaving net deficiencies of $258,802,383.21.
Changes in organization and procedure.—In order that the field force
might commence the examination of the larger arjd more important
income tax returns at an early date following filing, agents in charge
were directed to requisition those returns which they deemed of sufficient consequence to justify immediate attention. A total of 17,591
:such returns was requisitioned and facUities were provided in the
collectors^ offices and in the Bureau to expedite the movement of
those returns to the field.
To accelerate the examination and closing of income tax returns in
the field, instructions were issued on April 15, 1938, to establish in
each internal revenue agent's division an office audit section to which
were to be assigned returns susceptible to closing upon the basis of
MX interview in the field office or by correspondence with the taxpayer.
Instructions were released requirhig that 30-day letters advising
taxpayers of proposed changes in tax liability be sent by registered
mail, and that return receipts be demanded in each case. This rule
was established in association with the extension of authority to agents
in charge to release statutory notices of deficiency under certain
conditions.
All internal revenue agents in charge, operating under standard
procedure as distinguished from trial procedure, were authorized to
issue 90-day letters where after protest the deficiency determined is
$300 or less, and where taxpayers, regardless of the amounts of the
•deficiency proposed in preliminary letters, fail to respond or merely
acknowledge receipt of the letters without protesting the determhiations.
A new division was established in the Income Tax Unit on June
1, 1938, to administer, beginning July 1, 1938, those claims for refund
of processing taxes and related floor stock tax claims requiring field
iavestigation, previously administered by the Processing Tax Division
of the Miscellaneous Tax Unit. The new division is also responsible
for the disposition of all unjust enrichment tax returns. Arrangements have been made to appoint a substantial number of general
deputy collectors for assignment in thirteen regional districts to expedite this work.

162

REPORT OF THE SECRETARY OF THE TREASURY
Miscellaneous Tax Unit

The work of the Miscellaneous Tax Unit relates to the administration of all internal revenue taxes except the income and excess-profits
taxes, the taxes applicable to alcoholic beverages, and those imposed
under the Social Security Act and under the Carriers Taxing Act of
1937. The taxes under title VIII of the Social Security Act and those
under the Carriers Taxing Act of 1937, administered in 1937 by the
Miscellaneous Tax Unit and subsequently by the Social Security Tax
Unit, were consolidated on April 1, 1938, with the Accounts and Collections Unit.
The special field force, under the supervision of the Miscellaneous;
Tax Unit, continued to produce excellent results in connection with
investigations of the manufacturers' excise and other miscellaneous
taxes.
The collections of miscellaneous taxes for the fiscal year 1938^
amounted to $1,719,054,447, an increase of $105,726,942 over the
previous year's collections (exclusive of collections under title V I I I
of the Social Security Act and under the Carriers Taxing Act of 1937).
More detailed statements concerning the various miscellaneous taxes
will be found under the titles of the various divisions of the Miscellaneous Tax Unit.
Estate Tax Division.—Collections of estate tax for the year 1938amounted to $382,175,326, exceeding coUections for 1937 by $100,539,343. This increase in collections reflected the higher rates of tax
and the lowered exemption provided in the Revenue Act of 1935, aS;
this was the first full year in which returns were filed under that act..
The collections, however, were adversely affected by the optional
valuation clause contained in the Revenue Act of 1935 which permits
the assets of an estate to be valued either as of the date of death or as
of a date one year subsequent to the date of death. The election to
have the assets of an estate valued on the lower basis was taken in
2,411 returns and operated to reduce the collections of estate tax;
by approximately $27,000,000. Collections of gift tax amounted to
$34,698,739, an increase of $10,786,956 over the previous year. The
collection of approximately $30,000,000 in estate tax and $5,500,000^
in gift tax was withheld pending the adjudication of appeals filed with
the United States Board of Tax Appeals.
The assessments of deficiencies in estate tax for the year amounted,
to $47,222,255, and the assessments of deficiencies in gift tax amounted
to $7,773,128. The number of returns of estate tax increased from
15,244 in 1937 to 17,794 in 1938, whUe the number of returns of gift
tax decreased froni 17,046 in 1937 to 16,601 in 1938.
The administrative work in connection with estate tax and gift tax
returns is summarized in the following table:

163

EEPORT OF THE SECEETAEY OF THE TEEASUEY

Number of estate tax and gifPtax returns investigated and audited during the fiscal
years 1937 and 1938
Gift tax

E s t a t e tax

R e t u r n s i n field:
On h a n d at beginning of year
Received for investigation

T o t a l to be disposed of
Major reports s u b m i t t e d b y field force
On h a n d at e n d of year
R e t u r n s in B u r e a u :
On h a n d a t beginning of y e a r
Received
Reopened
. .
T o t a l to be diposed of
Disposed of

On h a n d at end of year...
P r o t e s t letters of t a x p a y e r s as a result of t a x d e t e r m i n e d b y
audit:
On h a n d at beginning of year
. .
Received
T o t a l to be disposed of
Disposed of

. . .

On h a n d at e n d of y e a r . .

1937

1938

4,454
13,600

6,478
16,203

272
2,664

9451,632-

18,054
11,576

22,681
14,955

2,936
1,991

2,477'
2,179-

6,478

7,726

945

298-

9,290
15,244
309

11,309
17, 794
293

12,732
17,046
862

9,14616,601
93-

24,843
13,534

29, 396
16,518

30, 640
21,494

25,84020,746.

11, 309

1 12,878

9,146

1 5,094

421
2,443

664
2,454

149
1,093

2741,363--

2,864
2,210

3,108
2, 738 .

1, 242
968

1, 627'
1, 245-

274

382'

654

370

1937

1938

1 Included in the returns on hand at the end of the year are 620 estate tax returns and 387 gift tax returnspending before the Board of Tax Appeals.

The refunds of estate tax recommended for payment during theyear, including interest, amounted to $4,591,074, which included
$975,916 of judgment claims. The refunds of gift tax recommended
for payment, including interest, amounted to $544,248.
The table which follows presents a summary of the action taken
in connection with estate and gift tax claims received and disposed of
during the year:
Estate tax and gift tax claims on hand, received, and disposed. of during the fiscal
year 1938
E s t a t e tax claims
Refund
iSi u m ber

Amount

Gift tax claims

Is u m ber

Amount

Claims filed:
264 $3, 367,473. 67
On h a n d J u l y 1,1937
786 5,922, 656. 32
Received.
27
307, 959. 49
Reopened
T o t a l to be dis1,077 9, 598,089. 48
posed of
1,882^088.11
3,802,378. 83

813

6, 684,466. 94

264

3,913, 622. 64

836

1, 858, 240. 06
860, 745. 82

293

T o t a l allowed, including i n t e r e s t . 1,410

4, 591,073. 99

577

9, 609, 032. 49

Allowed
Rejected
T o t a l disposed of.
On h a n d J u n e 30,
1938
N o claims filed, overassessments a l l o w e d . .
I n t e r e s t allowed

675
238

Refund

Abatement
Number

Amount

Abatement
Number

Amount

$15, 826. 94
2, 962, 410. 60

139 $6, 421, 766. 70
589 1, 008,179. 67
21
72, 603. 79

295

2, 978, 237. 54

749

7, 502, 550. 06

164, 617. 47"

284
4

2, 966,466. 48 • 391
162
347. 48

332, 856. 57
1, 436, 974.46

54
1

134,130.48
20, 486.99

288

2, 966, 813. 96

563

1, 769, 831. 03

154, 617. 4.7

11,423. 68

196

5, 732, 719. 03

6, 542, 566.01

286

169, 932. 24
51, 459. 22

100, 942. 46^

676

544, 248. 03

235, 072.94.

7
288

55 $154, 617.47'

164

REPORT OF THE SECRETARY OF THE TREASURY

Tobacco Division.—Collections of tobacco taxes for the year
amounted to $568,181,968, which is the largest annual collection
from this source siace these taxes were first imposed. Of this amount,
$493,432,960 was collected from the taxes on small cigarettes.
A detailed comparison of the tobacco taxes collected during the
fiscal years 1937 and 1938 is shown in table 11, page 425 of this report.
Bituminous Coal and Silver Tax Division.—The Bituminous Coal
and Silver Tax Division is concerned with the administration of the
taxes imposed under the Bituminous Coal Act of 1937 and the SUver
Purchase Act of 1934.
CoUections of the tax imposed under the Bituminous Coal Act
amounted to $3,211,601 for the fiscal year 1938, and the returns filed
by producers in accordance with the provisions of the act totaled
48,765.
The following table summarizes the action taken in connection with
coal tax claims received and disposed of during the year:
Coal tax claims for refund and abatement received and disposed of during the fiscal
year 1938
Abatement

Refund

Total

Uncollectible

Claims
NumNumNumNumAmount
Amount
Amount
Amount
ber
ber
ber
ber
Received

Allowed
Rejected

T o t a l disposed of
O n h a n d J u n e 30,1938

112 $2,991 36

74 $5,345. 79

$131 88

194

$8,469.02

101 . 2,684 99
4
143 78

30
39

874. 56
2,987.71

131 88

139
43

3,691.43
3,131.49

105

2,828. 77

3,862. 27

131 88

182

6,822.92

162. 68

1,483. 52

1,646.10

Tax collections under the Silver Purchase Act of 1934 amounted to
$142,107 for the year as compared with $633,712 for the previous year.
Sales Tax Division.—The collections from taxes administered by the
Sales Tax Division amounted to $560,727,010, a decrease of $56,665,626
as compared with collections for the preceding year. The decrease
in collections is reflected principally in the manufacturers' excise taxes
and the documentary stamp taxes.
A summary of these collections for 1937 and 1938 follows. A detailed comparison for these years is shown in table 11, page 425.
1937

1938

Increase or decrease (—)

: S t a m p taxes

$69,285,623. 73

$46,090,883.29

-$23,194, 740. 44

M a n u f a c t u r e r s ' excise taxes (title I V , R e v e n u e
A c t o f 1932, as a m e n d e d ) . . .
Electrical energy
Pistols a n d revolvers

413,769,897 34
36,974, 552 33"
109,180 05

378,210,451 88
38,455,401 97
87, 662.48

- 3 5 , 559,445. 46
2,480,849. 64
- 2 1 , 617. 57

449,853,629 72

416, 753, 516.33

-33,100,113. 39

97,438, 567 27
814,814 92

97,420,813 67
461,796. 24

-17,763.60
-353,018.68

617,392,636 64

660,727,009. 53

-56,666,626.11

T o t a l m a n u f a c t u r e r s ' excise taxes
Miscellaneous taxes..
' R e p e a l e d taxes
Total

165^

REPORT OF T H E SECRETARY OF T H E TREASURY

^ The claims for refund and abatement of taxes and for the redemption of stamps, received and disposed of in the Sales Tax Division
during 1937 and 1938, are shown in the following table:
Claims for refund and abatement received and disposed of during the fiscal years 1937
and 1938
1937

Claims

Number
7,019
13,919

On h a n d at beginning of year
Received or reopened
T o t a l to be disposed of

Allowed
Rejected
T o t a l d i s p o s e d of

O n h a n d at e n d of year
Allowed

1938

Number
5,251
11,033

20,938

16, 284-

12, 422
3,265

11, 667'
2,836

16, 687

14, 503^

5.251

1,781

Amount
$11, 922, 348. 63

Amount
$7,964, 937. 36

During the year 11,038 field reports and 549,719 sales tax returnswere examined in the Bureau.
The Sales Tax Division completes assessments, schedules claims
and overassessments, and passes on offers in compromise not only for
this Division but also for the Estate, Tobacco, and Capital Stock Tax
Divisions. During the year $1,130,498,554, representing 1,078,104
items, was approved by the Commissioner on the 2,832 miscellaneous
assessment lists, which included original and additional assessmentsof all miscellaneous internal revenue taxes.
The number of offers in compromise submitted in settlement of"
liabilities incurred in connection with sales, tobacco, estate, gift,,
narcotics, capital stock, and miscellaneous stamp and special taxes,,
and the aggregate amounts thereof, received and disposed of, areshown in the following table:
Offers in compromise received and disposed of during the fiscal years 1937 and 1938^
1938

1937
Offers in compromise
Number

Amount

Number

Amount

3,973
10,461

$476, 682. 61
668, 744. 35

1,672
7,011

$383, 829. 763,866, 265.88-

14, 434

1, 045, 426. 96

8,683

4, 260,095. 64

. .

12,076
737
49

265, 335.44
119,058.61
277, 203.16

7,435
489
79

T o t a l disposed of

12,862

661, 697. 20

8,003

802, 771.14

O n h a n d at e n d of year

1,672

383,829. 76

680

3, 447, 324. 50

On h a n d a t beginning of year
Received d u r i n g year
T o t a l to be disposed of.
Accepted ._
Rejected
Withdrawn

405, 937. 70
296,136. 39
100, 697. 05-

Capital Stock Tax Division.—The collections of capital stock tax.
during the year amounted to $139,348,567, which represents thelargest amount ever coUected from this source, exceeding the coUections for 1937 by $1,849,321. Under the provisions of the Revenue-^

166

REPORT OF TFIE SECRETARY OF THE TREASURY

Act of 1935, as amended by the Revenue Act of 1936, corporations
were required to show an adjusted declared value on their 1937
capital stock tax returns based on the original declared value reported
on the return for the previous year. The adjustments provided by
the act reflected only those transactions during the corporations' income-tax taxable years ended on. or prior to June 30, 1937. The fact
that the original declarations reported on the 1936 capital stock tax
returns were comparatively high, together with substantial earnings
and other additional adjustments reported by numerous corporations,
taccounts in part for the increase in capital stock tax collections during
the year. Returns were received as follows: 419,989 taxable and
117,574 nontaxable domestic corporation returns, and 459 taxable
and 255 nontaxable foreign corporation returns, a total of 538,277.
Of the total number of returns received 33,349 were filed by new
corporations incorporated subsequent to June 30, 1936, and 40,197
were delinquent returns covering the years 1933-36, inclusive. There
were 11,872 affiliated groups of corporations which filed 49,801 returns.
'Twelve of the largest of these groups paid in excess of $15,000,000
^during the fiscal year.
The claims for refund and abatement of capital stock taxes, penalties, and interest, received and adjusted in the Capital Stock Tax
Division, are shown in the following table:
"Claims for refund and abatement received and disposed of during the fiscal years
1937 and 1938
Claims

-On hand at beginning of year
Received or reopened

Total to be disposed of
Allowed
Rejected

Total disposed of
•On hand at end of year...
.Allowed _

. . .

1937

1938

Number

960
8,219

632
75,791

9,179

76,423

7,096
1,451

6,410
68,481

8,547

74, 891

632

1,632

. Amount
$567,434. 99

Amount
$689,946. 69

Processing Tax Division.—The Processing Tax Division is concerned principally with the adjustment of claims for refund or payment authorized under sections 601 and 602 of title IV and those
•claims under title VII of the Revenue Act of 1936 not requiring field
investigations by officers under internal revenue agents. Effective
July 1, 1938, the administrative functions relating to the claims under
title VII were transferred to a new division established in the Income
Tax Unit.

167

REPORT OF T H E SECRETARY OF T H E TREASURY

The following table shows the claims on hand at the beginning of the
year, those received and disposed of, and those on hand at the close of
.the year:
Claims for refund received and disposed of during the fiscal year 1938
O n h a n d J u l y 1, 1937

Received

Reopened

Claims
Number
R e v e n u e A c t of 1936:
Sec. 601
Sec. 602
Title V I I
Sugar A c t of 1937
-Cotton G i n n i n g A c t
Tobacco A c t . .
rOther
Total'.

Amount

304
18,248
8,721

$214, 601.88
29, 992, 735.40
42,841,012.46

3
18
3,496
30, 790

Number

Amount

Number

Amount

$186,773.85
4, 591, 913. 61
500, 597, 308.82
316,570.02
38, 611.16
122, 221. 76
333,170. 69

443
1,255
57

$140,049.43
1,031,838. 23
8, 506.10

709.14
8,157. 99
57, 678, 681.86

307
2,513
18,963
295
44
1,558
14

1
2
1

161. 77
431.16
10.99

130, 735,898. 73

23, 694

506,186, 569. 91

1,769

1,180, 987. 68

Allowed

Rejected

O n h a n d J u n e 30, 1938

Claims
Number
R e v e n u e A c t of 1936:
Sec. 601
Sec. 602.
Title V I I
Sugar A c t of 1937
Cotton Ginning Act
Tobacco A c t
Other
Total

Amount

Number

Amount

577
7,467
9,561
1
6
15

$245,899. 30
8, 608, 700. 88
1,491, 702.15
1,070.00
591. 44
921. 34

476
12,907
4,774

$280,146.86
14,935,3.17.23
11,364,030. 99

33
834
3,511

11,482.05
67, 433. 25
58,011,863.54

17, 626

10,348,885.11

22, 535

84, 670, 272.91

Number

Amount

1
1,642
13,406
294
10
729

$15,380.01
12,072, 469.13
530, 691,094. 24
315, 500.02
27,398. 58
62, 456.32

16, 082

543,084, 298. 30

The Processing Tax Division is also responsible for the administration of the tax imposed on the manufacture of sugar under the provisions of title IV of the Sugar Act of 1937. This tax became effective
September 1, 1937, and from, that date to June 30, 1938, 1,283 monthly
returns were filed by manufacturers, and the tax collected amounted
vto $30,569,130.
Alcohol Tax Unit
'Collections of the liquor taxes amounted to $567,978,60r in 1938,
--compared with $594,245,086 in the previous year, a decrease of
$26,266,485. Details of these collections will be found in the table on
page 425.
On June 30, 1938, the following number of legitimate producers and
•distributors of alcohol and alcoholic beverages and users of tax-free
alcohol were under the supervision of the Alcohol Tax Unit:
^Distilleries:
Alcohol
1
Brandy..
Another
Bonded warehouses:
Alcohol
Internal Revenue
Wineries
^
Bonded wine storerooms
Breweries
Rectifying pla.nts
Wholesale liquor dealers
Wholesale malt liquor dealers...
Denaturing plants
Bonded dealers in specially denatured alcohol
Bonded manufacturers using specially denatured alcohol
IHospitals, laboratories, and educational institutions using tax-free alcohol._.

Number
39
142
143
62
276
1,112
88
658
287
5,618
11,463
38
67
4,244
6,281

168

REPORT OF THE SECRETARY OF THE TREASURY

Enforcement Division.—The Enforcement Division is responsible
for the investigation, detection, and prevention of wUlful and fraudulent violations of the internal revenue laws relating to distilled spirits,,
wines, and fermented malt liquors.
During the year, 11,407 stills were seized, having an aggregatemash capacity of 1,917,785 gallons, and in connection therewith
7,553,848 gallons of mash were seized and destroyed. The investi-^
gators also seized 344,668 gallons of spirits and 4,225 automobiles and.
trucks. The total appraised value of the property seized amoufited
to $2,599,999. Arrests were made of 25,867 persons for Federal
liquor law violations. Compared with the previous fiscal year, still
seizures declined 29 percent, mash seizures declined 39 percent, and:
arrests declined 12 percent, which reflects the effectiveness of the
Unit's enforcement program. This is the first year since the enactment of the twenty-first amendment and the repeal of the National
Prohibition Act that there has been a substantial decline in Ulicit
distUler}^ seizures. There were 520 major conspiracy cases investigated, and in 402 conspiracy cases terminated by court action, 2,040^
defendants were convicted, involving some of the most notorious
racketeers engaged in the Ulicit liquor traffic.
Field Inspection Division.—This Division examines applications for
the establishment of industrial alcohol plants, alcohol bonded warehouse and denaturing plants, rectifying plants, distiUeries, and internal:
revenue bonded warehouses; reviews qualifying documents submitted
in connection with the establishment of breweries and wineries, and
inspects producing and processing plants throughout the United States
to determine whether Bureau policy and the technical requirements of
governing law and regulations are being complied with.
The Division is responsible for the planning, coordination, and
supervision of the inspection service of the 15 supervisory districts,,
which are under the jurisdiction of the district supervisors; provides
for the general instruction of the inspectors and storekeeper-gangers;,
and assigns, directs, and supervises a group of technically trained field
inspectors operating directly from the headquarters office.
There were 17,068 examinations of plats, plans, and other documents, and 64,884 inspections of plants and permittees made during
the year.
Laboratory Division.—The Laboratory Division comprises a central
laboratory in Washington, D. C , and 15 branch laboratories located
throughout the country which perform the chemical work for the^
Bureau of Internal Revenue, Bureau of Narcotics, and the Federal
Alcohol Administration. During the year the Division also rendered
substantial aid to the Secret Service, Procurement Division, and the
Bureau of Customs. There were 67,743 samples examined in the
branch laboratories, compared with 75,005 for the previous year.
The Washington laboratory examined 8,526 samples, compared with
8,880 during the previous year.
Audit Division.—This Division conducts the plant operation, tax
accounting, assessment, claim, and compromise work of the Alcohol
Tax Unit.
During the year, 10,372 reports of violations of the internal revenue
laws pertaining to alcoholic liquors by illicit operators were received
from the field offices and audited, and tax liabilities disclosed thereby
were assessed, including ad valorem penalties. There were also cer-

REPORT OF. THE SECRETARY OF THE TREASURY

169

. ttified to the Commissioner for assessment 15,872 items totaling
^•$5,371,653, listed in the Bureau, and 149,695 items aggregating
;$60,126,182, listed by collectors.
On July 1, 1937, there were on hand 728 offers in compromise aggre'gating $43,920, and during the year 18,830 offers in compromise
:amounting to $1,412,518 were received. Of the 19,558 offers in
compromise to be disposed of, 17,441 aggregating $879,901, were
:accepted, 995 totaling $428,468 were rejected, 373 were forwarded to
the Department of Justice, and 243 were returned to the field offices,
leaving 506 on hand at the end of the year.
Procedure Division.—Regulations relating to the bottling in bond of
distilled spirits were revised during the year and the stamp requirements considerably simplified. Bottled-in-bond stamps have heretofore been overprinted at the Bureau of Engraving and Printing with
the name of the producer of the spirits and the age and bottling
.season. This overprint will hereafter be done locally, and the stamps
may now be purchased from the collector without any delay.
Alcohol Tax Section of the Office of the General Counsel.—This section
handles the legal work arising in connection with the administration
and enforcement of the internal revenue liquor laws.
During the year, there were prepared 7,723 memoranda, 287 briefs,
5,370 opinions, 57 parole cases, 318 libels, and 18 indictments. Review work included 7,447 case reports, 130 claims of over $5,000 each,
and 19,262 compromise cases. In addition. 111 revocation cases
were handled, and 655 petitions for remission or mitigation of forfeitures were examined and finally passed upon.
Accounts and Collections Unit
The Accounts and Collections Unit is the central administrative
organization for the 64 internal revenue collection districts and makes
the administrative audit of all expenditures for the Internal Revenue
Service. On April 1, 1938, the Social Security Tax Unit which
administered the taxes under the Social Security Act and under the
Carriers Taxing Act of 1937 from July 1, 1937, to March 31, 1938, was
€onsohdated with this Unit.
There were 25,584,889 tax returns filed in collectors' offices during
the fiscal year, an increase of 10,326,902 over the previous year. Of
the total returns filed, 7,616,196 in 1938 were income tax return's, an
increase of 880,742 during the year. The remainder of the increase
was in the number of returns filed under titles V I I I and I X of the
:Social Security Act.
During the fiscal year 55,882 income tax, 14,056 miscellaneous tax,
and 320,467 social security tax returns were investigated by field
deputy collectors, and 7,683,746 information returns were verified.
At the close of business June 30, 1938, there were outstanding in the
64 collection districts 7,416 income tax returns and 6,658,256 information returns were on hand.
Deputy collectors of internal revenue served 179,090 warrants for
distraint, which resulted in the collection of $40,393,267. An average
of 2,688 deputy collectors made 2,745,923 revenue-producing investigations, including the serving of warrants for distraint, compared with
805,089 investigations made by an average of 1,967 deputy collectors
in the preceding year. The total amount collected and reported for

170

REPORT OF THE SECRETARY OF THE TREASURY

assessment by deputy collectors was $92,709,897, compared with
$77,660,684 in the previous year. The average number of investigations made per deputy and the average amount of tax collected, and.
reported for assessment were 1,022 and $34,490, respectively, compared with 409 and $39,482, respectively, in 1937. There were
123,780 warrants for distraint in the custody of the collectors' field
forces on June 30, 1938, compared with 53,270 on June 30, 1937.
A total of 12,064,313,036 revenue stamps, valued at $1,113,890,080.62 was issued to collectors of internal revenue and the Postmaster
General during the year, compared with 12,345,394,029 stamps, valued
at $1,180,122,453.59, issued during 1937. Revenue stamps returned
by collectors of internal revenue and by the Postmaster General, arid
credited to their accounts, amounted to $30,692,051.01. There were
755 applications allowed for restamping packages from which the
original stamps had been lost, mutilated, or destroyed, compared with
301 applications in the preceding year.
Taxes under title V I I I of the Social Security Act.—Collections for
1938 under title VIII of the Social Security Act amounted to
$502,918,025, an increase of $295,578,934 over the previous year.
Collections include both the employees' tax and the employers' tax,
each of which was imposed at the rate of one percent of taxable wages
paid.
Under Regulations 91, relating to the taxes imposed by title V I I I ,
each employer was required to make a tax return on Form SS-1 for
each month of the calendar year 1937. Those regulations, as amended
by Treasury Decision 4769, approved October 15, 1937, provided for
two six-month information returns from the employer for the calendar
year on Forms SS-2 and SS-2a. A separate Form SS-2a for each
employee was required, showing the amount of taxable wages paid
to him. The employer executed Form SS-2, a summary to accompany
the reports on Form SS-2a. Each information return was checked
in the offices of collectors against copies of the six monthly tax returns
of the employer for the same period. Upon com.pletion of the audit,
the information returns were forwarded to the Social Security Board
in order that the wages as reported for each employee might be
credited to his account, for use by the Board in computing old-age
benefits to which the employee or his estate will later become entitled
under title I I of the Social Security Act.
Treasury Decision 4778, approved November 23, 1937, further
amended Regulations 91 so as to require a combined tax and information return on Form SS-1 a, to be made by employers at quarterly
intervals, payment of the taxes under title VIII falling due at the
same time. The first quarterly return period began on January 1,
1938. The combined return has simplified the reporting from the
standpoint of the employer, and has resulted in a substantial reduction
in the administrative expense entailed in handling and auditing the
returns in collectors' offices. Furthermore, the period from the receipt of the returns until the information portion thereof is forwarded
to the Social Security Board has been materially reduced.
There were 13,604,481 monthly returns on Form SS-1 and 1,728,215
quarterly returns on Form SS-1 a filed during the fiscal year, compared with 5,970,261 monthly returns on Form SS-1 filed during the
preceding year.

BEPORT OF THE SECBETAEY OF THE TEEASUEY

171

Number of title V I I I information returns received and closed in the ofiices of coU
lectors, and the number pending at the beginning and close of the year

On hand
July 1,
1937

Returns

Form
Form
Form
Form

SS-2, 6-month period ended June 30, 1937
SS-2, 6-month period ended Dec. 31, 1937
SS-la, 3 month period ended Mar. 31, 1938 ^.
SS-3 2
_

Received
during year

1,768, 569
1,778,006
1, 728, 215
116,821

1,375

Closed and
forwarded to
Social Security Board
during j'^ear
1, 767,030
1, 773, 734
1, 697,006
117, 662

On hand.
June 30,.
1938

1, 639'
4,272
31, 209^
534

1 Schedule A of Form SS-la.
2 Employer's information return for an employee who attains age 65 or dies.

' I n addition to the above, 36,997,628 Forms SS-2a for the 6-month
period ended June 30, 1937, and 38,101,707 Forms SS-2a for the.
6-month period ended Dec. 31, 1937, were forwarded to the Social
Security Board.
Monthly tax returns on Form SS-1 filed prior to November 1, 1937,
had been transmitted by collectors to the Bureau for audit. As of
November 1, 1937, the audit of these returns was transferred from
the Bureau in Washington to collectors' offices. Returns on Forms
SS-2 and SS-2a and on Form 22-1 a have from their inception been
audited in collectors' offices.
The following table sets forth information relative to claims adjusted under title VIII of the Social Security Act:
Claims under title V I I I of the Social Security Act received and adjusted, fiscal year
1938
Number
.._
21,811
'-..
33;

Claims:
Filed during year...
Received from other sources...
Total to be adjusted
Allowed in full or in part
Rejected
Canceled...

.—

Total adjustedPending at end of year
Overassessments settled by:
Abatement
Refund
.:
TotaL.
Interest
Grand total

21,844

---

---.

8, 772:
1,206.
53.
10,031

_,.

11,813.
Amount
$157,121.4844,723.65.

1
_

201,845.13.
2,381.32204,226.46

—
..:

There were also allowed 98 collectors' claims recommending refunds,
of $1,828.98, plus interest of $76.19. Of the claims adjusted during
the year, the amount rejected totaled $84,202.61.
Tax under title I X of the Social Security Act.—The tax under title
I X of the Social Security Act is imposed on employers of eight o r
more, at the rate of 1 percent of taxable wages payable with respect
to employment for 1936 and 2 percent for 1937. CoUections for
1938 amounted to $90,266,534, an increase of $32,147,220 over the.
previous year. There were 339,651 returns filed during the fiscal
year, as compared with 264,983 filed during the preceding fiscal year.
The return for each calendar year is due on January 31, following
the close of the year, unless an extension is granted under the provisions of section 905 (b) of the act. While a general extension to
AprU 1, 1937, was granted to all taxpayers for 1936, extensions for
1937 were granted only upon application by the employer.

172

REPORT OF T H E SECRETARY OF T H E TREASURY

Against the tax imposed under title I X a taxpayer is entitled to a
-credit (not exceeding 90 percent of the tax) for contributions paid to
unemployment funds under a State law approved and certified by the
"Social Security Board to the Secretary of the Treasury, if such contributions are paid before the date the Federal return is required to be
•filed. An exception to the foregoing was provided by section 810 of
the Revenue Act of 1938, under which credit against the tax for 1936
is allowable for contributions for that year paid on or before July 26,
1938. I n view of this provision of the Revenue Act of 1938 it was
necessary to reaudit the 1936 returns of taxpayers who had paid contributions to the States subsequent to March 31, 1937, and as a result
3,200 certificates of overassessment amounting to $360,720 were issued
:and 7,800 returns for 1936 were accepted as filed that otherwise would
have resulted in tax due the Federal Government in the amount of
$1,066,513.
For the year 1936 there were 35 States and the District of Columbia
having unemployment compensation laws certified by the Board,
and for the year 1937 there were 48 States, the District of Columbia,
and the Territories of Alaska and Hawaii with laws so certified.
The number of title I X returns (annual) received and closed by the
Bureau during the fiscal year 1938 and the number pending at the
beginning and close of the year, by tax years, are shown in the following
table:
T a x year

1936
1937

On hand
J u l y 1, 1937

Received
during year

Closed during year

On hand
J u n e 30,1938

192,657

99,345
278,472

268,276
1,991

23,626
276,481

192,657

377,817

270,267

300,107

-.Total

The Bureau submitted 1,572 returns to the field for investigation
during the year. Independent of these cases, the field force submitted
reports, prepared in connection with income tax invastigations, in
1,874 cases, of which 1,368 were closed in the Bureau.
The following table sets forth information relative to claims adjusted
and certificates of overassessment issued tinder title I X of the Social
Security Act:
Claims under title I X of the Social Security Act received and adjusted and certificates of overassessment issued, fiscal year 1938
Claims:
Pending at beginning of year
Filed during year
Received from other sources

Number
2, 793
8,479
5

Total to be adjusted
Allowed in full or in part
Rejected
Canceled
Total adjusted

11,277

.._

Pending at end of year
Certificates of overassessment issued when no claims were

_
filed

Overassessments settled by:
Abatement
Credit
Refund.• Total
Interest
Grand total

3,776
1,217
51

5,043
6,234
6,287
Amount
$315,846.19
1,459.33
433,578.64

_
_

___

750,883.16
21,238.96
772,122.12

173

REPORT OF THE SECRETARY OF THE TREASURY

There were also allowed 511 collectors' claims recommending refunds
of $23,571.67, plus interest of $1,008.79. Of the claims adjusted
during the year, the amount rejected totaled $221,840.24.
Taxes under the Carriers Taxing Act of 1937.—CoUections of employers' tax and employees' tax under the Carriers Taxing Act of 1937,
approved June 29, 1937, amounted to $149,434,336. Each tax was
imposed at the rate of 2% percent of the taxable compensation. Collections of employee representatives' tax, wliich was imposed at the
rate of 5^ percent of the taxable compensation, amounted to $41,330.
There were 20,558 returns on Form CT-1 filed by employers, and 871
returns on Form CT-2 ffied by employee representatives. The returns due during the year covered the following three return periods,
for each of which a separate return was required: 9-month period
ended September 30, 1937; 3-month period ended December 31," 1937;
and 3-month period ended March 31, 1938. The following table
shows the number of returns received and closed by the Bureau during
the year and the number on hand on June 30, 1938:
Received
during
year

Returns

Employers' returns, Form CT-1
Emplovee representatives' returns, Form CT-2..
Total

-•

Closed
during
year

On hand
June 30,
1938

20,018
669

18,943
596

1,075
73

20,687

19,639

1 148

The following table sets forth information relative to claims adjusted
under the Carriers Taxing Act:
Claims under the Carriers Taxing Act received and adjusted, fiscal year 1938
Claims:
Pending at beginning of year
FUed during year
Received from other sources
Total to be adjusted

Allowed in full or in p a r t - .
Rejected
Canceled
Total adjusted-Pending at end of year
Overassessments settled by:
Abatement
•
Credit
Refund
Total
Interest
Grand total
I

__
_

_
_

82
2,221
.6
2,309
1,616
72
10
1,598

Number

711
Amount
$2,>993,928.80
30,890.99133,030.75
3,157,850.54
.70
. 3,157,851.24

There were. also allowed four collectors' claims recommending
refunds of $325.87, plus interest of $9.04. Of the claims adjusted
during the year, the amount rejected totaled $178,990.33.
Technical Staff
The principal function of the Technical Staff is to settle tax disputes
and thus avoid the uncertainty, expense, and delay incident to the
litigation of complicated tax questions. Accordingly, the Staff considers proposals for settlement of income, estate, and gift tax liabilities
as asserted in deficiency notices issued under the various revenue
104825—39

174

REPORT OF THE SECRETARY OF THE TREASURY

acts. I t cooperates closely with the Office of the Chief Counsel for
the Bureau of Internal Revenue in the consideration and disposition
of the petitions filed by taxpayers with the United States Board of
Tax Appeals for the redetermination of such deficiencies. The Staff
also considers certain classes of compromise cases of income tax and
applications filed for extensions of time within which to pay income
taxes, and reviews in behalf of the Commissioner of Internal Revenue
final closing agreements executed pursuant to section 606 of the
Revenue Act of 1928, as amended.
On July 1, 1937, the Staff in Washington had on hand 4,213 income,
estate, and gift tax dockets pending before the United States Board of
Tax Appeals. During the year it received 3,356 such dockets, and
disposed of 4,717, leaving a balance of 2,852 on June 30, 1938. During
the year it considered to a conclusion 3,159 Board cases, of which
1,570 cases were settled by agreement. In addition, the Los Angeles
Division of the Technical Staff settled 122 docketed cases from March
1 to June 30, 1938. The deficiencies proposed in cases settled by
the Staff, including the Los Angeles Division, totaled $27,677,685.59,
and the recomputed deficiencies amounted to $12,368,890.84.
On July 1, 1937, the Staff had on hand 78 Board dockets involving
personal holding company surtaxes and the accumulation of surplus to
evade surtaxes; during the year 45 were received and 80 were disposed
of, leaving 43 on hand on June 30, 1938. The Staff considered to a
conclusion 68 of these special cases, 40 of which were settled by agreement involving asserted deficiencies of $5,055,177.92 and recomputed
deficiencies of $1,570,140.14.
The figures for the income, estate, and gift tax dockets and for
the dockets involving personal holding company surtaxes and the
accumulation of surplus to evade surtaxes represent the results of
consideration of Board cases by the Staff on its own responsibility
and do not reflect the work of the circuit settlement groups composed
of attorneys of the Office of the Chief Counsel and of members and
field representatives of the Technical Staff. During the year 2,168
Board cases were settled by the joint action of these groups.
The Staff had on hand on July 1, 1937, 249 ninety-day cases; during
the year 959 were received and 1,021 were disposed of, leaving 187 on
hand on June 30, 1938. Of the cases disposed of, 591 were closed
without the filing of appeals with the United States Board of Tax
Appeals and involved proposed deficiencies of $5,965,013.06 ^and
revised deficiencies assessed in the total amount of $3,120,797.23.''
On July 1, 1937, the Staff had on hand 683 compromise cases, and
during the year received 964 cases and disposed of 1,195, leaving a
balance of 452 on June 30, 1938.
There were 27 extension of time cases on hand at the beginning of
the year; during the year 252 were received and 257 were disposed of,
leaving 22 on hand on June 30, 1938.
With respect to closing agreement cases, 27 were on hand for review
July 1, 1937, 146 were received and 165 disposed of during the year,
leaving a balance of 8 cases on June 30, 1938.
During the year the field representatives of the Staff at Cleveland,
Dallas, and San Francisco collaborated with the attorney of the Chief
Counsel's office in the settlement of cases in which deficiency notices
were issued by the internal revenue agents in charge at those points.
A total of 112 income, estate, and gift tax cases, both docketed and in

REPORT OF THE SECRETARY OF THE TREASURY

175

the ^^90-day". status, were considered, and 43 were settled involving
proposed deficiencies of $92,112.62, and agreed settlement deficiencies
of $53,846.78.
The program for the decentralization of the appellate procedure
for the administrative settlement of disputed income, excess-profits,
and estate tax cases was inaugurated on March 1, 1938, by the establishment of the Los Angeles Division of the Technical Staff. A
discussion of this program will be found on page 51.
Office of the Chief Counsel
The activities of the Office of the Chief Counsel for the Bureau of
Internal Revenue embrace the whole field of Federal taxation in connection with the preparation and presentation to the United States
Board of Tax Appeals of defense in all appeals; the review of refunds,
credits, and abatements in excess of $20,000; the deciding and advising
in various administrative and internal revenue tax matters referred
by the-Secretary of the Treasury, the Under Secretary, or an Assistant
Secretary, the General Counsel for the Department of the Treasury,
the Cominissioner or the assistant to the Commissioner, the heads of
the administrative units of the Bureau, collectors of internal revenue,
other branches of the Government, and individual correspondence;
the preparation at the request of the Department of Justice or of the
United States attorneys of data for use in the prosecution or defense
of tax cases (civil and criminal) in suit, and otherwise complying with
their requests for assistance in such cases; and the preparation, revision, and publication of regulations. Treasury decisions, mimeographs, and rulings, for the guidance of the officers and employees of
the Bureau of Internal Revenue and others interested. The office is
divided into six divisions, viz. Appeals, CivU, Interpretative, Penal,
Review, and Legislation and Regulations.
The Chief Counsel's committee, consisting of four members, serves
in an advisory capacity to the Chief Counsel, Assistant Chief Counsel,
general assistants, and special assistants, who refer to the committee
cases from all divisions of the office. The committee considers these
cases and makes written recommendations as to their proper disposition. Since February 1938, the committee has been charged with the
final review of cases involviag compromises, closing agreements, and
extensions of time for payment of tax, previous to their being sent to
the Secretary of the Treasury for his approval. At the beginning of
the year the committee had on hand 13 cases; duriag the year it
received 722 and disposed of 695, leaving 40 cases pending at the
close of the year.
The Reorganization Section is charged with the duty of protecting
the interests and claims of the United States in bankruptcy and
receivership proceedings, iacluding particularly proceedings instituted
under sections 77 and 77B of the Bankruptcy Act.
In the 466 corporate reorganization cases closed under sections 77
and 77B during the year, claims were filed ia the amount of $9,888,402.98 and were settled for $2,455,352.48. In addition to these there
were 854 cases closed in which no tax claims were filed.
In the 1,730 cases closed relatuig to bankruptcy and receivership,
claims were filed in the amount of $5,865,693.25, and $2,490,541.36
was coUected.
Appeals Division.—This Division has immediate charge for the
Commissioner of all cases involving income, excess-profits, unjust

176

REPORT OF THE SECRETARY OF T H E TREASURY

enrichment, estate, and gift taxes filed before the United States Board
of Tax Appeals and all cases iavolving refunds of processing and related taxes pending before the Processing Tax Board of Review, including those appealed to the appellate courts. The Division prepares
all of the pleadings in such cases and appears for and represents the
Commissioner of Internal Revenue at the trial thereof.
Of the appeals taken to the United States Board of Tax Appeals
and the appellate courts there were 5,043 income tax, 1 unjust enrichment tax, 410 estate tax, and 235 gift tax cases closed during the year.
The methods by which such cases were closed are as follows:
Disposition of cases closed before the United States Board of Tax Appeals, fiscal.
year 1938
Number of
cases

Character of closing
Default _
Decision on merits
Agreed settlement

TotaL

Amount in
dispute

Amount
allowed

Percentage
of recovery

221
1,119
4,349

$2,034,372
43, 529, 904
88,955,176

$1,903,026
7,489, 358
27, 221,184

93. 54
17. 21
30.60

5,689

134, 519, 452

36, 613, 568

27.21

Of the appeals taken to the Processing Tax Board of Review 6
cases, involving $57,481, were dismissed during the year.
Civil Division.—This Division, in cooperation with and at the
request of the Department of Justice, assists in the handling and
preparation for trial of civil internal revenue cases arising in the
Federal district courts, the United States Court of Claims, and the
Supreme Court of the District of Columbia, together with a hmited
number of cases originating in State courts. The trials of such cases
and arguments upon appeals are conducted by the Department of
Justice, with the assistance of this Division, pursuant to the President's Executive order of June 10,1933.
The Division's major activities during the year are shown in the
following tables:
Cases received and disposed of, fiscal year 1938 ^
Number
Pending July 1, 1937:
Not involving liens, in court
Not involving liens, not in court.
Lien cases in court
_..
Lien cases not in court
Total

3,010
276
810
44

4,140

Received during the year:
Suits by taxpayers...
For suit by the United States.__
Suits involving liens
Lien cases not in court

877
212
940
358

Total

2,387

Total to be disposed of........

6,627

Closed during the year:
Not involving liens

1,541
1,461

Lien cases
Total

3,002

Pending June 30, 1938
1 Excludes compromise cases.

3,625

REPORT OF THE SECRETARY OF THE TREASURY

177

Number of civil cases pending at the beginning and end of the fiscal year 1938 ^
Pending
June 30,

Pending
July 1,1937
Not involving liens:
In district courts
In circuit courts of appeals
In Court of Claims
__
In Supreme Court
.__
In State and miscellaneous courts.
Pending payment of judgment claims.
Not in court
Involving liens:
In court
Not in court
.Total..

2,364
107
430
2
22
85
276

1.813
82
424
2
2 108
127
278

810
.44

639
52

4.140

1 Excludes compromise cases.
2 Includes 80 suits instituted by taxpayers involving refund of processing tax on sales of tobacco under
the Kerr-Smith Tobacco Act.

The amounts in the cases involving no liens are as follows:
Pending July 1, 1937
Received during year
Total
Closed during year

_._.
__

$353,724,310.39
52,164,283.84
405,888,594.23
190,068,695.05

_
-

Pending June 30, 1938

215,819,899.18

Results obtained in cases closed, fiscal year 1938
Number
of cases

Cases
Not involving liens: i
Suits instituted by taxpayers... .
Suits and claims by the United States
Injunctions, processing taxes
Total
Involving liens:
In court
.
Not in court

1,194
261
86
1,541

Total

Amount
claimed

Amount
refunded

Amount
collected

$117,133,984.24
64,496,139.09 . $6,339,900.23
8,438, 671. 72
190,068,695.05

6,339,900. 23

1,111
350

288, 714.45
346, 636.26

1,461

635,350. 71

$8,496,103. 56

8,496,103.66

1 Excludes compromise cases.

The number of Civil Division cases tried by the Department of
Justice and the number decided by the courts during the year are
shown in the following table:
Number of tax cases tried by Department of Justice and decided by the Federal courts,
fiscal year 1938
Cases decided by courts
Cases
tried

Court

District courts
Circuit courts of appeals
Court of Claims
Supreme Court

Total

For the
Government

Against
the Government

Partly for
and partly
against the
Government

Total

242
77
82
18

227
50
38
10

166
64
16
4

11
0
0
0

403
104
54
14

419

325

239

576

178

REPORT OF T H E SECRETARY OF T H E TREASURY

The Compromise Section is charged with the prosecution of claims
filed by collectors (a) agaiast the estates of deceased taxpayers; (6)
against insolvent banks; and (c) in hquidation proceedings, including
assignments for the benefit of creditors.
The following table shows the cases on hand at the beginning of the
year, those received and disposed of, and those on hand at the close
of the year:
Pending July 1,1937
Received during year

Number
1,935
1,669

Total
Closed or in process of closing
Pending June 30,1938

Tax liability involved
—
Amount finally collected by payment or acceptance of offers

3,504
1,589
1,915

.•_
_

Amount
$21,834,671
4,132,386

The number of cases pending Jime 30, 1938, and the tax liability
involved is shown in the following table:
Number of cases pending and tax liability involved, June SO, 1938
Pending

In process of closing

Cases
Number
Decedent estates
Insolvent banks
Miscellaneous
Cash offers in compromise
.
Installment offers in compromise

. '.

Total

—

Liability

1,226
16
644
90
39

$20, 553,842
24,676
2,398,897
1, 704,127
2,058,868

1,915

26, 740,410

Number

15
7
22

Liability

$380,921
2,152,079
2, 633,000

Interpretative Division.—The function of this Division is to consider
for administrative purposes the various statutes relating to the
internal revenue, and to pass upon questions of law arising thereunder.
The Division also edits the material intended for publication in the
Internal Revenue BuUetin and reviews various material submitted
for consideration.
Penal Division.—The Penal Division considers both income tax
cases and misceUaneous tax cases, prepares opinions construing
criminal and percentage penalty statutes, and deals with particular
cases involving criminal liabUity and percentage penalties for fraud
(and occasionally for negligence or dehnquency), including offers in
compromise of such cases. Whenever requested by the Department
of Justice, an attorney from this Division assists in the prosecution of
criminal cases.
The following tables summarize the work of the Division during the
last 2 years:
Number of cases received and disposed of, fiscal years 1937 and 1938
1937

Cases

1938

Pending at beginning of year
Received during year

1,225
914

1,082
903

Total to be disposed of
Disposed of

2,139
1,057

1,985
946

1,082

1,039

Pending at end of year

. _ . . _ _

REPORT OF THB SECRETARY OF THE TREASURY

179

Number of claims for reward received and disposed of, fiscal year 1938
Formal
claims

Claims
Pending at beginning of year
Received during year

Total to be disposed of
Allowed
Rejected--

Total disposed of.

Pending at end of year.

Informal
claims

269
182

71
112

461

183

46
76

113

122

113

329

Review Division.—This Division reviews overassessments of income,
excess-profits, war-profits, estate, gift, and miscellaneous taxes proposed for allowance (also deficiencies when coupled with overassessments), where the amount of the overassessments in any case exceeds
$20,000, and proposed refunds of any tax in excess of $20,000. It
prepares reports to the Joint Committee on Internal Revenue Taxation required by section 710 of the Revenue Act of 1928, where the
overpayments of income, excess-profits, war-profits, estate, or gift
taxes exceed $75,000; and prepares public decisions where the overassessments exceed $20,000.
The work of the Division is summarized as follows:
Number of cases disposed of and amounts involved, fiscal year 1938

On hand at beginning of year
Received--

Income tax

Total

Number

5
37
42
38

Total to be disposed of
Disposed of _._
On hand atend of year
Claimed by taxpayer
Approved by Review Division

Estate and
other miscellaneous taxes

>
__

68
311
369
326

63
348
411
363

Amount
$2,353,466.61
3,485,478.11

Amount
$22, 964,761.99
12,187,196.19

Amount
$26,318,228.60
15,672, 674.30

Legislation and Regulations Division.—This Division prepares or
reviews regiUations issued under the internal revenue laws, and
makes reports on legislation introduced in Congress affecting the
internal revenue, except as they relate to alcoholic beverage taxes.
There were 55 regulations issued during the year relatiag to income
tax, capital stock tax, excess-profits tax, estate tax, social security tax,
stamp tax, admissions tax, sUver tax, manufacturers' excise taxes,
tobacco tax, sugar tax, tax on marihuana, taxes on narcotics, and
taxes under the Carriers Taxing Act of 1937. In addition, the
Division considers suggestions for amendments of, and additions to,
the various internal revenue laws and prepares reports thereon for
the consideration of the Commissioner and the General Counsel.

180

REPORT OF THE SECRETARY OF THE TREASURY
Intelligence Unit

The Intelligence Unit is principally concerned with the iavestigation
of tax fraud cases in cooperation with internal revenue agents and
deputy collectors. During the year, 794 investigations were made
of alleged evasions of income tax, and of this number 196 cases,
involviag 309 individuals, were recommended for prosecution. On
this charge there were convictions in 50 cases, involving 68 individuals,
and there were acquittals in 4 cases, involving 5 individuals. Investigations of these cases resulted in recommendation for assessment of
additional taxes and penalties amounting to $26,106,013.83.
In addition to collections by the Bureau of Internal Revenue of
taxes, penalties, and interest, amounts are covered into the Treasury
as a result of fines imposed in criminal cases. In some jurisdictions
the courts have imposed an additional penalty by requiring the
defendants to pay the costs of the investigations, that is, the salaries
and expenses of the agents during investigations.
There were 3,988 investigations of applications of attorneys and
agents to practice before the Treasury Department and 85 investigations of charges against enrolled agents and attorneys, resulting in
the disbarment of 6, the reprimand of 3, and the rejection of applications of 44.
The investigations in 145 cases of charges against employees of the
Bureau of Internal Revenue resulted in the separation from the
service of 89 employees and the prosecution of 20. Of the latter
number 18 were convicted and 2 acquitted.
There were 3,429 cases of miscellaneous character investigated,,
includiag iavestigations for the Bureau of Narcotics and the Customs
Service and of persons under consideration for appointment to various
positions in the Treasury Department.
Work relief projects
Duriag the year the Bureau of Internal Revenue continued work
on its two work relief projects financed from funds provided under
the Emergency Relief Appropriation Acts. These projects are under
the supervision of the Accounts and Collections Unit and the Alcohol
Tax Unit. The workers were recruited and employed in accordance
with the regulations of the Works Progress Administration and the
United States Employment Service of the Department of Labor, and
were paid the security wage rates as stipulated in the Executive Order
of May 20, 1935, and its amendments.
Accounts and Collections Unit {miscellaneous tax) project.—This
project comprised a survey of miscellaneous taxes conducted in the
field coUection service of the Bureau. The work was carried on under
the direction of the collectors of Internal Revenue in 21 of the collection districts in the United States and involved an intensive canvass
to effect the collection of delinquent and deficient stamp taxes and
taxes on sportiag goods, cosmetics, capital stock, candy, automobile
parts, admissions and dues, tires and tubes, matches, radios, electric
refrigerators, jewelry, and furs. The number of persons employed
on this project during the year averaged approximately 766 weekly.
Allocations to this project during the year amounted to $926,808,
and obligations were incurred aggregating $906,602. As a result of

REPORT OF THE SECRETARY OF THE TREASURY

181

this work, $7,767,507 of miscellaneous taxes were assessed or recommended for assessment during the year, and $4,153,630 was collected.
Alcohol Tax Unit (retail liguor stores) project.—The project comprising the inspection of retail liquor dealers in various cities of the
United States was contiaued during the fiscal year for the purpose
of seeing that the retail liquor dealers comply with the requirements
of the law as it relates to their busiaess. During the year allocations
to this project amounted to $454,501, and obhgations were incurred
totaling $431,217. As a result of these inspections, 18,586 dealers
were found violating the iatemal revenue liquor statutes during the
year, and revenues of $370,336 were coUected.
LEGAL DIVISION

The General Counsel is the chief law ofl&cer of the Department and
is in charge of all its legal activities. The Legal Division comprises
the Office of the General Counsel and the legal staffs in all branches of
the Department. During the fiscal year 1938 the Legal Division
prepared 64 formal and numerous informal opinions for the guidance
of administrative officers of the Department; and prepared or assisted
in the preparation of more than 20 legislative proposals necessary to
or desirable for efficient operation of the Department. Representatives of the Division frequently appeared before congressional committees to explain the purpose, effect, and legality of legislation affecting the Department and furnished other technical assistance to such
committees. Assistance was rendered in the preparation of over 400
reports on legislation and of numerous executive orders and proclamations. The Division also undertook and completed a codification
of Treasury Department regulations and other documents and fUed
the codification with the Administrative Committee of the Federal
Register.
In connection with monetary, fiscal, and public debt matters, the
Division drafted legislation, regulations, rulings, and opinions covering a broad field of subjects, and made numerous interpretations of
the laws and regulations applicable to Government finance, public
credit, fiscal relationships, bonds of indemnity and official bonds,
insurance of valuables in shipment, issuance and subsequent transactions in public debt obligations and in obligations of Government
corporations and agencies, monetary and industrial transactions in
gold and silver, acquisition by the United States of monetary metals,
protection of the dollar in foreign markets, transactions in gold and
foreign exchange with foreign Governments and foreign central banks,
and counterfeiting. Active assistance was rendered to the Department of Justice in cases in various courts involving questions of
monetary policy, including 11 cases involving gold coin, gold
bullion, and newly mined gold; 36 cases involving various so-called
gold clause obligations; 1 case relating to the illegal possession of
distinctive paper; and in a considerable number of cases involving
civil and criminal penalties in connection with the enforcement of
provisions of the Emergency Banking Act of 1933 relating to gold
and the Gold Reserve Act of 1934, and the various proclamations,
orders, and regulations issued thereunder. Under the Adjusted
Compensation Payment Act the Division recommended approval for
settlement of 2,442 cases. A compilation of Federal laws relating

182

REPORT OF THE SECRETARY OF THE TREASURY

to the public debt was completed and published during the year, and
progress was made in the work on a compilation of Federal laws
relating to money.
With respect to the operations of the Coast Guard, the Division
reviewed the proceedings and prepared the action of the reviewing
authority and pertinent correspondence in 433 court-martial cases,
198 boards of investigation cases, 106 retiring-board cases, 13 lifesaving medal cases, and one distinguished fiying cross case; and prepared the papers and all correspondence in connection with approximately 110 formal contracts and 121 leases and renewals of leases.
A number of unusual legal questions arising ia connection with theenforcement of the Marihuana Tax Act of 1937, which became effective October 1, 1937, and of the Federal narcotic laws were deter-^
miaed during the year; new and amendatory legislation relative tothe traflSc in narcotics was drafted for submission to Congress; regulations under the Marihuana Tax Act of 1937 and a complete revision
of narcotic regulations were prepared; and assistance was extended toseveral of the States and to the District of Columbia in connection
with the adoption and enforcement of the Uniform State Narcotic
Law.
The Division drafted a bill embodying substantial amendments to
administrative provisions of the customs laws. After enactment of
the bill, with some changes, it drafted revisions of the customs regulations to carry out the new law. The export^and currency practices
of several foreign countries were investigated to determine whether
any bases existed for applying countervailing duties to products
of those countries. All outstanding findings of dumping were reviewed and a number of them were revoked, it being found that their
continuance was not justified by present circumstances.
The Division did the legal work necessary to the acquisition of 303^
sites for construction projects; examined approximately 2,920 con^
tracts for the construction of public buildings and the purchase of
supphes and equipment; reviewed and approved approximately 769
leases for office space for Government activities; and prepared con-tracts for the sale of 33 surplus real properties. Leases were prepared
for rental of 21 surplus properties.
With relation to the activities of the Public Health Service, the
Division gave advice ia connection with the admiaistration of the
National Cancer Institute Act of August 5, 1937. Assistance was
given in the drafting of an amendment to the quarantine regulations
relating to the importation of hviag disease organisms and vectors^
amendments to the Service regulations pertaining to medical treatment of Coast Guard personnel and their dependents, and waiting
orders, regulations for the control of the arsphenamines, and regulations governing aUotments and payments to States for the fiscal year
1939 under the Social Security Act and the Venereal Disease Act as
amended M a y 24, 1938.
I n the field of taxation the Division handled 5,689 income, estate^
and gift tax appeals, involviag $134,519,452, and prepared and reviewed 363 cases involving overassessments; prepared data for use by
the Department of Justice in the prosecution or defense of 3,948 tax
cases (civil and criminal) disposed of during the year; handled the
preparation and pubhcation of more than 2,449 regulations. Treasury
decisions, and rulings; and reviewed more than 1,900 cases involving

REPORT OF THE SECRETARY OF THE TREASURY

183

offers in compromise and extension of time to pay tax, in addition to
a large number of closing agreements. The Division closed 854
reorganization cases, arising under sections 77 and 77B of the Bankruptcy Act, in which no tax claims were filed, and 466 reorganization
cases in which claims in the amount of $9,888,402.98 were settled for
$2,455,352.48; and closed 1,730 bankruptcy and receivership cases
mvolving claims of $5,865,693.25, which were settled for $2,490,541.36.
The Division participated in the preparation of the Revenue Act of
1937, the Revenue Act of 1938, the new Bankruptcy Act, and a provision for the refund of taxes paid under the Bankhead Cotton Act
of 1934, the Kerr Tobacco Act, and the Potato Act of 1935. Such
regulations as were required during the year for the foregoing legislation were prepared and issued.
In connection with the work of the Alcohol Tax Unit the Division
prepared or revised 7,723 memoranda, 287 briefs, 5,370 opinions, 4
Treasury decisions, 655 petitions for remission, 130 claims amounting
to over $5,000 each, 19,262 compromises, 7,447 case reports, 57 parole
reports, 318 libels. 111 hearings, revocations, etc., and 18 indictmentSo
BUREAU OF THE MINT i

Institutions of the Mint Service
During the fiscal year 1938, seven mint iastitutions were ia operation: Coinage mints at Philadelphia, San Francisco, and Denver;
assay oflBlce at New York, which handles the major portion of the gold
imported and exported; gold bullion depository at Fort EJIOX, Ky.;
mint at New Orleans, conducted as an assay office; and assay office at
Seattle. The two last-named institutions are, in effect, merely
buUion-purchasing agencies and also serve the public by making assays
of ores and bullion. Electrolytic refineries are maintained at the
New York, Denver, and San Francisco institutions.
Coinage
Domestic coin manufactured during the fiscal year amounted to
540,375,283 pieces, compared with 760,915,737 pieces during the
preceding year when the output was the largest of any fiscal year in
the history of the Government. The production in 1938, valued at
$26,610,910, consisted of 111,754,358 subsidiary sUver coins, valued
at $19,854,941; 61,744,005 nickel coins, valued at $3,087,200; and
366,876,920 bronze coins, valued at $3,668,769.
Coinage for foreign governments amounted to 18,392,444 pieces,
compared with 42,550,000 pieces during the prior year. The foreign
coinage consisted of 8,672,348 silver, nickel, and bronze coins for
Honduras, Nicaragua, and Colombia, made at PhUadelphia, and
9,720,096 silver coins for China, made at San Francisco.
The grand total of domestic and foreign coins made in 1938
amounted to 558,767,727 pieces, a decrease of 244,698,010 pieces from
the prior year.
1 More detailed information concerning the activities of the Bureau of the Mint is contained in the annual
report of the Director of the Mint.

184

REPORT OF THE SECRETARY OF THE TREASURY
Bullion deposit transactions

The number of bullion deposits during the year totaled 56,005,
including 298 inter-mint-service transactions. The deposit transactions required 85,187 assay determinations, compared with 97,293
assay determinations during the prior year.
Gold operations
Gold acquisitions by the mints and assay offices during the year
amounted to $1,129,033,865.49; receipts from other Treasury offices
of domestic and foreign coin melted during the year amounted to
$1,358,071.81; and transfers between M i a t Service Institutions
amounted to $79,970,670.53. These transactions total $1,210,362,607.83, compared with $7,759,425,211.99 for the prior year.
The acquisitions include $1,028,668.49 of gold received at $20.67 +
per fine ounce, which had not been previously surrendered under the
nationalization orders. The increment on this gold, due to the
increase of the monetary value of gold to $35 per fine ounce, amounted
to $713,015.63.
Silver operations
Acquisitions of silver by the mints and assay offices during the
year totaled 406,661,895 fine ounces, at an average cost of 49.8+ cents
per fine ounce or a total cost of $202,740,642. The acquisitions
consist of the following:
Amount (fine
ounces)

Acquisition
Newly mined domestic silver
Nationalized silver
_
_
_
Purchase Act silver
Silver contained in gold bullion deposits, etc
Silver received in exchange for Governrnent stamped bars
Total

Cost

68, 715, 543
17,361
337, 226,185
416,082
288, 734

$51,341,249
8,677
151,082, 730
181,807
126,179

406,661,895

202, 740,642

United States coin received for recoinage totaled 3,641,169 fine
ounces, with a recoinage value of $5,033,584. Silver deposited for
foreign coinage by other governments totaled 725,250 fine ounces.
SUver transfers between Mint Service Institutions totaled 1,325,932
fine ounces. These items plus the silver acquired during the year
brought the^ total transactions in silver to 412,354,246 fine ounces,
compared with the prior year's total of 254,696,986.
During the year 1938, $201,967,413 of sUver certificates were issued
against 156,209,171 fine ounces of silver bullion valued at $1.29 +
per fine ounce, the statutory monetary value of silver. Such silver
had been acquired at an average price of 58.3+ cents per ounce. The
difference between the cost of the silver held to secure such certificates
and the monetary value of such silver is $110,870,809 (including
$20,519,797 arising under the proclamation of December 21, 1933)
and this amount constitutes seigniorage.
The open-market price of sUver in New York (mean of bid and
asked) during the fiscal year 1938 averaged $0.44537. The highest
point was $0.45062, which prevailed from July 1, 1937, to March 25,

REPORT OF THE SECRETARY OF THE TREASURY

185

1938, with lower prices of $0.44062 on March 28 and $0.43062 during
the remainder of the fiscal year.
For newly mined domestic silver a return to the depositor of
$0.7757+ per fine ounce, established by the President's proclamation
of April 24, 1935, prevailed for silver mined prior to the end of December 1937; for silver mined after that date the return was $0.6464+,
established by proclamation of December 30, 1937. The latter rate
prevailed during the remainder of the fiscal year.
Refineries
The electrolytic refineries produced during the year 3,079,343
fine ounces (105.6 tons) of electrolytically refimed gold bullion, and
1,605,294 fine ounces (55.0 tons) of silver bullion. During the prior
year the quantities produced were 3,351,715 fine ounces (114.9 tons)
of gold and 1,641,602 fine ounces (56.3 tons) of silver.
The electrolytic refiaeries at the Denver and San Francisco mints
remained closed most of the year because of other more urgent
activities.
Stocks of unrefiaed gold and silver bullion in mint institutions
increased during the fiscal year 1938 by approximately 274 tons, to
1,589 tons. The increase in 1937 was about 250 tons.
Commemorative coins
Commemorative half dollars, bearing special designs relating to
historic events, were issued during the fiscal year 1938, as follows:
Commemorative coins {half dollars) issued during the fiscal year 1938
Occasion commemorated

Date of law

Antietam, Battle of, seventy-fifth anniversary
_. June 24,1937
Norfolk, Va., three hundredth anniversary of original land grant and two hundredth anniversary of the establishment of the city of Norfolk as a borough
June 28,1937

Pieces
60,000
25,000

Stock of coin and monetary bullion in the United States
On June 30, 1938, the estimated stock of domestic coin ia the United
States was $1,077,724,054, of which $547,079,218 was standard silver
dollars, $373,461,485 subsidiary silver coin, and $157,183,351 minor
coin.
The stock of gold bullion, including coin, held in the Treasury on
the same date was valued at $12,962,953,931, an increase of
$644,682,766 over the previous year; and the stock of silver bullion
was 1,678,532,406 fine ounces, an increase of 395,043,598.
Production of gold and silver
Domestic gold production during the calendar year 1937 was
4,804,540 fine ounces with a value of $168,158,900, compared with
4,357,394 fine ounces with a value of $152,508,800 in 1936. The quantity output was about 98 percent of that for the record year 1915,
when the total was 4,887,604 fine ounces.

186

REPORT OF THE SECRETARY OF THE TREASURY

Domestic silver production during the calendar year 1937 totaled
71,941,794 ounces. This compares with 63,812,176 ounces for 1936,
and with the record production of 74,961,075 fine ounces for 1915.
Industrial consumption of gold and silver
Gold consumption in the industrial arts duriag the calendar year
1937 is estimated at $39,622,338. Gold returned from industrial to
monetary use amounted to $36,407,945, leaving $3,214,393 as net industrial consumption of new gold, which compares with an excess
return from industry of $2,907,833 during the previous year.
SUver used in the arts is estimated at 51,292,270 fine ounces, of
which 27,727,284 fine ounces was new material.
Compared with the prior year, there was an increase in gold consumption of approximately 190,000 ounces, and an increase in silver
consumption in industry of about 15,500,000 ounces.
Mint buildings
The silver bullion depository, constructed on a site formerly inincluded in the military reservation at West Point, was completed
during the fiscal year 1938, and is operated as an auxihary of the New
York assay office. Silver bullion, which had been placed temporarily
in the assay office at New York, the old assay office building at New
York, the subtreasury buildiog, and in rented vaults, will be stored in
the depository.
Additional vaults for silver storage are under construction at the
new San Francisco mint building, which was first occupied duruig the
fiscal year 1937.
Appropriations, expenses, and income
Regular appropriations available for the Mint Service during the
fiscal year 1938 totaled $1,353,560; the appropriation for meeting
emergency expenses amounted to $1,120,000; the deficiency act of
March 5, 1938, provided $110,700 for sUver movements during 1938
and 1939, of which $17,360 was obligated in 1938; and reimbursements
to appropriations for services rendered amounted to $167,837, making
a total of $2,658,757.
Expenses amounted to $2,720,123, of which $2,618,125 was chargeable to appropriations and $101,998 chargeable to income.
The regular income realized by the Treasury from the Mint Service
aggregated $18,676,153, of which $15,216,162 was seigniorage. The
seigniorage on subsidiary silver coin was $9,852,612, and on minor coin
$5,363,550. Extraordinary income aggregated $111,583,825, of which
$110,870,809 was seigniorage on silver bullion revalued to $1.29+ per
ounce, and $713,016 was the increment to $35 per ounce on revalued
gold.
The number and value of gold and sUver deposits and transfers, gross
income, and expenses for the fiscal year 1938, and number of employees on June 30, 1938, at each institution are shown in the following
table:

EEPORT OF THE SECEETAEY OF THE TEEASUEY

187

Gold and silver deposits and transfers, income, expenses, and employees, by
institutions, fiscal year 1938

Institution

PhOadelphia.
San Francisco
Denver-_
New York.New Orleans
Seattle
Fort Knox

Monetary
Num- Number
assay value of gold
ber of ofdeterand silver
bullion minations
receipts,
deincluding
bullion
posits 1 on
transfers i
deposits
8,420
12,564
18, 666 ' 25.311
5,538
10.049
17,027
29,628
2,615
2,617
_., 3,939
6,128

Gross regu- Gross expenses
lar income

Excess of
Emincome
ployees,
or of
June 30,
expenses (—)
1938

$57,000,127 $12, 530,547 $1,043,979 $11,486, 568
664,046, 937 2, 358,476
429,444
1,929,032
110,199,236
412, 229
2,125, 239
1, 713,010
987,058,661
668, 951
1, 680,855
1, Oil, 904
1,025, 619
29, 709
-22, 699
7,010
23, 664,864
43,600
30, 381
73, 981
66, 621
-66, 621

382
184
174
213
13
18
37

Total
. . . 66,006
Bureau of the M i n t . . .

86,187

18, 676,108 2, 594, 533
125, 590
45

16,081, 576
-125,545

1,021
47

Grand total
Prior fiscal year

85,187 1, 742,895,444 18, 676,153 2, 720,123
97, 293 8. 060, 361,493 34.071,761 4,839,386

15, 966,030
29, 232,365

1,068
1,212

66,006
(2)

1, 742,896,444

1 Includes 298 interinstitution transactions Amounting to $81,684,846.
2 Not previously reported.

DIVISION OF MONETARY RESEARCH

The Division of Monetary Research in the Office of the Secretary
was established on March 25, 1938. The Division provides information, economic analyses, and recomrnendations for the use of the Secretary of the Treasury and other Treasury officials to assist in the
formulation and execution of the monetary policies of the Department in connection with the stabUization fund and other operations
under the Gold Reserve and the Silver Purchase Acts. Analyses
are made pertaining to gold and silver, the flow of capital funds into
and out of the United States, the position of the dollar in relation to
foreign currencies, monetary, banking, and fiscal policies of foreign
countries, exchange and trade restrictions abroad, and simUar problems. Analyses are also prepared relating to the customs activities
of the Department and to the duties of the Secretary of the Treasury
under the Tariff Act and on other matters pertaining to international
trade, including the trade agreement program.
BUREAU OF NARCOTICS i

Enforcement activities
The pohcy of the Bureau of Narcotics of giving its attention primarily to the elimination of the sources of supply of illicit narcotic
drugs has resulted in a reduction from year to year in the supply of
narcotics avaUable to the domestic illicit traffic. Prices of drugs in
the ilhcit market continued high; and a high degree of adulteration was
stUl apparent during 1938, especially in heroin, which was found to
contain an average adulteration of 75.21 percent.The decrease ia the supplies of smuggled narcotics avaUable to the
iUicit traffic, which has forced peddlers and addicts to turn to the
channels of legitimate distribution for their supply, continued to be
reflected ia the forgery and false execution of narcotic prescriptions,
the improper prescribing and dispensiag of narcotics, and the robberies of wholesale and retaU stocks. The quantities of drugs stolen
increased greatly duriag the year.
1 Further information concerning narcotics is available in the separate report of the Commissioner of.
Narcotics.

188

REPORT OF THE SECRETARY OF THE TREASURY

The cooperation of State and municipal enforcement agencies with
the Bureau iacreases in effectiveness with the adoption and enforcement of the Uniform State Narcotic Law in the States. This law,
approved by the Conference of Commissioners on Uniform State Laws
and by the American Bar Association nearly 6 years ago, was adopted
with little or no amendment during 1938 by the State of Michigan and
the District of Columbia. Only nine States have not adopted the
law, namely, California, Kansas, Maine, Massachusetts, New Hampshire, North Dakota, Pennsylvania, Vermont, and Washuigton. California and Pennsylvania, however, have adequate narcotic legislation.
The enforcement of the taxing features of the Marihuana Tax Act
of 1937, approved August 2, 1937 (see exhibit 43, p. 275); wiU have the
effect of restrictiag the use of the drug to industrial, medical, and
scientific purposes; and the pubhcizing of the dealings ia marihuana
will prevent distribution for the purpose of maintaining or increasing
narcotic addiction. Under the provisions of the act legitimate
handlers of marihuana are required to pay occupational taxes, to
register with the collector of internal revenue, and to file information
returns. All transfers of the drug must be made in pursuance of
special order forms issued by the Secretary of the Treasury, and a
tax is imposed upon each transfer. A tax of $1 an ounce is imposed
upon t:ransfers to registered persons, and $100 an dunce upon transfers
to nonregistered persons. Heavy penalties are provided for violations of the provisions of the act.
All of the States and the Territory of Hawaii now have laws for the
control and suppression of the traffic in marihuana or cannabis.
Narcotic officers have cooperated with State and municipal authorities
in the enforcement of these laws and of the municipal ordinances for
control of this traffic. The reports received in the Bureau of Narcotics covering seizures of marihuana by State and municipal authorities, ia addition to the seizures by Federal authorities listed below,
clearly establish that the marihuana problem is one of increasing
national significance. Seizures of varying quantities of the drug and
the destruction of considerable areas of the growing plants by State
and municipal authorities were reported during the calendar year 1937
from 26 States, including 4 States from which none had previously been
reported.
The act to increase the punishment of second, third, and subsequent
offenders agaiast the narcotic laws was enacted August 12, 1937, with
a view to deterriag the commission of offenses against the narcotic
laws, and to removing such offenders from contact with society iii order
to prevent the spread of the narcotic habit and reduce the number of
criminal offenses of other lands.
The activities of the Bureau resulted in 3,206 arrests for violations
of the Federal narcotic laws, other than the Marihuana Tax Act, and
the seizure of 4,354 ounces of narcotic drugs and 167 automobiles
during the year, as compared with 3,469 arrests and seizures of 3,962
ounces of narcotic drugs and 115 automobUes during 1937. There was
a noticeable decrease in the number of violations reported under the
narcotic laws, both in the registered and nonregistered classifications,
a total of 4,049 violations haviag been reported for 1938 compared with
4,585 during the previous year. Of the total violations reported
during the year, 14 percent involved persons registered under the law,
as compared with 23 percent during 1937.

189'

REPORT OF T H E SECRETARY OF T H E TREASURY

There were 769 arrests under the Marihuana Tax Act of 1937, and
seizures of 1,106 pounds of bulk marihuana, 155 pounds of marihuana
seeds, 12,561 marihuana cigarettes, 743 growing plants, 1,000 pounds
of growing plants, Sji acres of growing plants, and 9 automobiles. A
total of 846 violations under the act was reported for the period from
October 1, 1937, to June 30, 1938, only 2 of which were by registered
persons.
The following tables show the number of cases of violation, by
registered and nonregistered persons, of the narcotic and marihuana
laws and the cases disposed of duriag the year as reported by Federal
narcotic enforcement officers:
Violations of narcotic laws, excluding the Marihuana Tax Act, and cases disposed of,
fiscal year 1938
Registered persons
Federal court
Pending July 1, 1937
Reported during 1938:
Federal
Joint
_

Federal court

Convicted:
Federal-._
Joint
_
Acquitted:
Federal
Joint
Dropped:
Federal
Joint
Compromised: i
Federal...

553
33

2,724
739

1,059

4,706

301
6

13
2

1,629
523

202
95

61
13

13
2

495
90

64
20

227
12

3,209

Total disposed of...
391

Pending June 30, 1938

Sentences imposed
Federal
Joint

State court

473

Total to be disposed
of-

Joint

State court

Nonregistered persons

1,497

160
10

Total
Fines imposed:
Federal
Joint.
--

$8, 808.01
210.00

$204. 25
1, 097. 00

Total

9,018.01

1,301.25

3,713
1,069

233
105

4,782

339

$129, 228.14
23,451.01

$2, 457. 50
2, 206.05
4, 663. 55

1 Represents 12 cases involving tax liability which were closed on payment of taxes and penalties in the
sum of $94.98; and 233 cases which were compromised in the sum of $22,276.85.
NOTE.—Federal cases are made by Federal officers working independently, while joint cases are made by
Federal and State oflBcers working in cooperation with each other.

104825—39-

-14

190

REPORT OF THE SECRETARY OF THE TREASURY

Violations of the Marihuana Tax Act of 1937 and the cases disposed of, fiscal year 1938
Registered persons
Federal court
Reported during 1938:
Federal
Joint
Total to be disposed
of....
Convicted:
Federal . . - .
Joint
Acquitted:
Federal
Joint
Dropped:
Federal
Joint
Compromised:
Federal
Joint

Nonregistered persons
Federal court

State court

651
293

844

281
169

30
11

4
6

56
38

1
2

601

Total disposed of__.
2

Pending June 30,1938
.a

Sentences imposed:
Federal
Joint

>>
Q

243

1
o

. .

Total
Fines imposed:
Federal
Joint

.—

Total

OT
C3

611
283

9
8

25
24

47
8

10
8

795

$12,818. 00
11,996.00

$550.00

24.814.00

560.00

NOTE.—Federal cases are made by Federal oflScers working independently, while joint cases are made by
Federal and State officers working in cooperation with each other.

Extent and trend of narcotic traffic
On June 30, 1938, registrations under the Harrison law, as amended,
and under the Marihuana Tax Act were as follows:
Registrations under the Federal narcotic laws, June SO, 1938
Harrison
narcotic
law, as
amended

Registrants

Importers, manufacturers, producers, and compounders .
Importers, manufacturers, and compounders
Producers (growers)
Dealers
.
Wholesale
Retail
.
Practitioners
Dealers in and manufacturers of untaxed preparations
Users for purposes of research, instruction, or analysis
Total

176

Marihuana
Tax Act

13
371
1,179

1,286
51, 677
156, 654
i 136, 947
54

2,097

346,693

3,665

i Includes registrations for which payment of occupational tax is not required under the act, because also
registered in some other class.

REPORT OF THE SECRETARY OF T H E TREASURY

191

During the year 215,228 pounds of opium were imported, an increase
of 38,480 pounds over the previous year. Of the quantity imported,
however, 69,332 pounds were retained in customs bond and were not
released to manufacturers. The net quantity made avaUable to
manufacturers showed an increase of 19,391 pounds compared with
1937. Coca leaves imported for medicinal purposes amounted to
256,877 pounds, an increase of 42,170 pounds over the previous year.
Imports of coca leaves for the manufacture of nonnarcotic flavoring
extracts amounted to 167,924 pounds.
Exports of narcotic drugs of all kinds amounted to 1,641 ounces in
1938, a decrease of 227 ounces from 1937, The drugs exported involved 40,598 taxable ounces of products.
The net quantity of pure drugs of aU kinds sold to domestic purchasers by manufacturers amounted to 419,654 ounces, a decrease of
16,444 ounces from the previous year.
DIVISION OF PRINTING

The Division of Printing transacts all of the Treasury Department's
printing and binding busiaess with the Government Printing Office and
outside contractors; approves requisitions for stationery supphes used
by the Department; authorizes engraving work to be done by the
Bureau of Engraving and Printing for all Government departments and
establishments, uiUess money, securities, or postage stamps are involved; and has control over newspaper and periodical advertising
for the Treasury Department, the binding of confidential Department
records, and the warehousing and distribution of blank books and
forms for Washington and field offices of the Department. The Division also edits and prepares copy for weekly issues of ^'Treasury
Decisions'' under customs, internal revenue, narcotics, and other laws;
and prepares semiannual bound volumes thereof and maintains a maUing list for their distribution. Appropriations to the Department for
printing and binding and for purchases of stationery supplies are under
the administrative control of the Division.
Printing and binding
During the year $1,650,663 was made available to the Division for
printing and biadiag. Of this amount $1,649,581 was expended,
leaving an unobligated balance of $1,082. The following table summarizes the appropriations and funds from other sources, the expenditures therefrom, and balances:
Appropriations, additionalfunds, expenditures, andbalances,fiscalyears 1937 and 1938
1937
Appropriation, printing and binding. Treasury Department
Deficiency appropriations, printing and binding, Treasury Department
Receipts from sales of customs forms
,
Transfers from other appropriations
Total
....
Expenditures
.
Unobligated balance
Allotment from funds provided under sec. 916, Revenue Act of 1936 (transfer from
exportation and domestic consumption of agricultural commodities. Department of Agriculture) .
_ .
Allotment from salaries and expenses, Silver Purchase Act of 1934, Bureau of
Internal Revenue, 1938 ._
. » .
Printing and binding, other appropriations
Total
Expenditures
Unobligated balance

1938

$656,000
150,000
31.523
8,676
846,099
846,869
230

$776.000
212,600
29,000
8,163
1,024,753
1,024,533
220

90,000

6,000

773,276
863, 276
834, 333
28,943

600
619,410
625 910
625,048
862

192

REPORT OF T H E SECRETARY OF T H E TREASURY

The details of the expenditures are shown in the following table:
Expenditures for printing and binding, by bureaus, ofiices, and divisions, fiscal years
1937 and 1938 i
E X P E N D I T U R E S FROM APPROPRIATIONS FOR P R I N T I N G AND BINDING
Bureau, office, or division
Secretary and General Counsel...
Division of Appointments...
_
Division of Bookkeeping and Warrants
Bureau of Engraving and Printing.
Division of Research and Statistics
Bureau of Narcotics
Chief Clerk and Superintendent
Chief Clerk
Superintendent of Treasury Buildings
Coast Guard
Office of the Commissioner of Accounts and Deposits..
Bureau of the Comptroller of the Currency.
Bureau of Customs
—
Division of Disbursement
Division of Printing
Federal Alcohol Administration
Procurement Division, Branch of Supply
Procurement Division, Public Buildings Branch
Bureau of Internal Revenue
Bureau of the Mint
National bank depositaries
Public Debt Service
Public Health Service...
Secret Service Division
Treasurer of the United States...
_.
Miscellaneous and department stock..
_
Transportation..
.
Total expenditures from regular printing and binding appropriations..
Customs blank forms
TotaL.

1937
$12,
34,
6,
3;
2,

1938
$13,107
401
34, 308
3.092
2, 366
4,778

24,
64,
17,
1,

161
35.631
409
24, 068
68,472
22,846
1,664

39,
3,
385,
2,

37,292
6,198
543, 398
3,963

1,
2 2L

10.868;
67,900i
1.875
3 20, 241
81, 686 •
* 10; OOO*

814, 346
31, 523

995. 533
29,000

32^,

845,869

E X P E N D I T U R E S REIMBURSED FROM OTHER APPROPRIATIONS
Division of Research and Statistics
Bureau of Engraving and Printing, salaries and expenses
Chief Clerk and Superintendent
Chief Clerk
Superintendent of Treasury Buildings
—
Coast Guard
Office of the Commissioner of Accounts and Deposits
Bureau of the Comptroller of the Currency
Division of Disbursement
Division of Bookkeeping and Warrants, Emergency Relief, administrative expenses..
Bureau of Internal Revenue
Secret Service Division
Bureau of the Mint
Bureau of Narcotics
Procurement Division, Branch of Supply
Procurement Division, Public Buildings Branch.
Public Debt Service
Public Health Service
Treasurer of the United States
Total expenditures reimbursed from other appropriations
Bureau of Internal Revenue:
Allotment from funds provided under sec. 916, Revenue Act of 1936 (transfer
from exportation and domestic consumption of agricultural commodities,
Department of Agriculture)
_.
Allotment from salaries and expenses, Silver Purchase Act, Bureau of Internal
Revenue, 1938
Total expenditures reimbursed.
Grand total expenditures..
Total available funds
Balance.

$37, 286
593
3,724
61
399, 616
8,028
116,649
631
4,030
3,623

$6, 83^
678:
467.
8'
318,151
9,134
83, 812'

142, 417
1,499
27, 568
20,123
7,528

2, 7222, 867
485
2,314
50*.
151,07?
1,170
17,472
18, 666
4,711

773, 276

619,410'

61,057

6, 286

834, 333

625,048.

1, 680, 202
1, 709, 375

1, 649, 581
1, 650, 66?

29,173

1,082-

362-

1 Figures for 1938 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.
2 Includes $8,676 in transfers from other appropriations.
5 Includes $8,153 in transfers from other appropriations.
* Partly estimated.

REPORT OF T H E SECRETARY OF T H E TREASURY

193

Stationery supplies
During the year the Division approved 12,251 requisitions for stationery supplies for the Treasury Department. The available funds
and expenditures for stationery during the last two years and the
balances of available funds are shown in the following table:
Available funds and expenditures for stationery, fiscal years 1937 and 1938
1938
A p p r o p r i a t i o n , stationery. T r e a s u r y D e p a r t m e n t . . .
Deficiency a p p r o p r i a t i o n s , stationery. T r e a s u r y D e p a r t m e n t
R e i m b u r s e m e n t for s t a t i o n e r y furnished other offices
Transfers from other a p p r o p r i a t i o n s
Total
Expenditures

$400,000
76,000
3,869
4,473

$476, 000
133,400
4,716
4,768

483, 342
482, 836

617, 884
617,161

507

723

U n o b l i g a t e d balance

Department advertising
Authorizations for advertising were issued to 3,162 newspapers and
periodicals during the fiscal year 1938, compared with 5,734 in 1937,
a decrease of 2,572. The expenditures authorized were $38,427.64 in
1938 and $61,094.76 in 1937, a decrease of $22,667.12 in 1938.
Engraving work
Certificates, checks, commissions, drafts, transportation requests,
and warrants totaling 135,716,746 were approved by the Division for
execution by the Bureau of Engraving and Printing for the several
departments and establishments of the Government during the fiscal
year 1938, compared with 167,437,503 in the preceding year.
PROCESSING TAX BOARD OF REVIEW

The Board of Review was estabhshed ia the Treasury Department
by the Revenue Act of 1936 to review and decide appeals of claimants
from allowances or disallowances of the Commissioner of Internal
Revenue of claims for refund of processing taxes paid. The Secretary
of the Treasury designates the members of the Board, who are officers
or employees of the Treasury Department, and assigns to i t such
personnel as may be necessary to perform its functions.
The foUowiag table summarizes the work of the Board during the
year:
Number

Claims
On hand July 1, 1937
Received during year

4
1,179

Amount

Total to be disposed of...
Dismissed

1,183
32

$55, 233.93
1,920,018.16
1, 976, 262.08
142, 248. 41

On hand June 30, 1938..

1,151

1,833,003. 67

•

Of the 32 petitions disposed of, the period within which appeal may
be taken to the appellate courts had expired in 7 cases.

194

REPORT OF THE SECRETARY OF THE TREASURY
PROCUREMENT DIVISION

Public Buildings Branch
Office of the Supervising Architect.—The activities of the Office of the
Supervising Architect have continued to be devoted to the design and
preparation of drawings and specifications for the wide variety of buildings required in the public service, and on a reimbursable basis the
Office has furnished architectural service for projects under the control
of other departments and agencies of the Government. D a t a relating
to the progress made in the various building programs involved and
the dollar-value of work accomplished under the jurisdiction of the
Procurement Division appear in subsequent statements.
Type designs for the smaller post office buUdings have been improved
and refined; and designs, developed by the Office of the Supervising
Architect in collaboration with the Advisory Committees on Architectural Design and Structural Engineering and with the Directive
Board of the Public Buildings Branch, compare favorably with the
highest standards of current practice in architectural and structural
features.
I n accordance with a policy adopted to expedite preliminary work
for the emergency construction program, drawings and specifications
for all buildings in that category have been prepared in the Office of
the Supervising Architect. However, with a view to obtaining designs
adaptable to governmental requirements and affording architects in
private practice an opportunity to express their conception of Federal
building design, the Office of the Supervising Architect, at the direction
of the Secretary of the Treasury, conducted 2 architectural competitions, 1 for the designs of 10 small post office buildings open to all
architects in the United States except employees of the Government
and the District of Columbia, and the other for the design of a post
office and courthouse building for Covington, Ky., open to registered
architects and architects furnishing acceptable evidence of their
qualifications. More than 700 designs were passed upon by the Jury of
Award. The Supervising Architect acted in the capacity of architectural adviser.
Continued consideration has been given to appropriate landscaping
around the buUdings.
Under the act of June 25, 1910, as amended, the Secretary of the
Treasury was authorized, upon the request of the head of any executive department or establishment of the Government, to cause plans,
drawuigs, designs, and estimates to be prepared in the Procurement
Division for buUdings which the head of any executive department or
establishment may be authorized to have constructed, reimburseinent
for the cost of such work to be made to the Procurement Division.
In order to permit the most economical and advantageous method of
securing construction for other departments, the act of June 15, 1938
(Public No. 609), amended the act of June 25, 1910, as amended,
so as to extend the permissive authority of the Secretary of the
Treasury, through the Procurement Division, to the acquisition of land
necessary for sites, the execution of contracts, and the supervision of
construction; and provides that funds appropriated to other executive
departments, etc., for buildings shall be avaUable for transfer to and
expenditure by the Procurement Division for carryiag out the construction. In accordance with the act of Jime 15, 1938, a large volume of

REPORT OF THE SECRETARY OF THE TREASURY

195

architectural work was taken up for the Bureau of Prisons, Department of Justice, and simUar but less extensive services were rendered
the Navy Department, the Department of Commerce, the Public
Health Service, and the Coast Guard.
During the year architectural services were also supphed in connection with 12 projects outside the continental United States for the
Foreign Service Buildings Commission of the Department of State.
Office of the Supervising^ Engineer.—-At the end of the fiscal year 1938
the Office of the Supervising Engineer, through its field service, was
supervising the execution in the contiaental United States, Virgia
Islands, Alaska, Puerto Rico, and Hawaiian Islands of approximately
200 construction projects in various stages of completion, ranging in
cost from $20,000 to several million doUars each. These projects
included post office structures, exposition buUdings, auditoriums, a
cement plant in Puerto Rico, Federal jails, public health hospitals at
various points, and a bullion depository at West Point, N. Y. Preparations were being made to supervise the construction of numerous
additional jaU projects and other work for other departments aggregating approximately $16,300,000. Topographical surveys and soU
data necessary for the preparation of working drawings were being
obtained for the above projects.
Under methods adopted by the Pubhc BuUdings Branch, violations
of labor laws on Federal construction work, particularly the 8-hour
law, were reduced to a minimum, and problems pertaiaing to labor
difficulties were handled expeditiously.
In order to obtain centralized control of aU repair work necessary
for the preservation of the constantly increasing number of completed
buUdings, the field service was reorganized during November 1937.
The Repairs Unit now prepares all drawings and specifications for
ordiaary and special repair projects, some of which amount individually
to $100,000 or more. Under this arrangeinent the personnel in the
eight district offices was diminished and the central office personnel was
increased; the inspection personnel remained the same. This change not
only enabled the central office to control expenditures, but allowed the
field inspection service more time for inspection of new projects under
construction.
During the year the Office drafted 518 formal contracts varying in
amount from $2,000 to several milhon dollars each, the total original
amount of these contracts being $39,553,286; issued approximately
15,000 authorizations for items of less than $2,000 each, covering independent minor contracts, and additions to, changes in, or deductions
from major contracts in force; and issued approximately 9,000 individual orders for standard lock boxes, metal vault shelving, models,
title letters, and other materials for buUdings under construction and
repair.
The unit of special inspection engineers submitted a large number of
reports of inspection of newly constructed buildings of all types,
covering, among other things, observations and suggestions relating
to new materials and methods used in construction.
Combined building program.—Operations during the year by the
Public Buildings Branch resulted in the completion or practical com^
pletion of 486 major construction projects, with total limits of cost of
$84,170,333. Funds for these projects were provided by allotments
by the Pubhc Works Administration, by various appropriations for

196

REPORT OF T H E SECRETARY OF T H E TREASURY

emergency construction of public buildings, and by the transfer of
funds to the Division by other departments. The status of work under
the combined program at the end of the fiscal years 1937 and 1938 was
•as follows:
June 30, 1937
status

-Completed
. .
Under contract
"Bids in, on market, or in specification stage.
Tn preliminary stage
Total

Number

June 30, 1938

Limit of cost Number

Limit of cost

888
405
139
169

$129,025, 216
96, 741, 794
29,130, 300
42,068,100

1,374
193
84
366

$213,195, 649
63, 613,131
16,983, 600
69,880, 500

1,601

296,955,410

2,017

363, 672, 780

Program under the Public Works Administration.—The number of
..allotments during the year for pubhc buildings by the Public Works
Administration under the act approved June 16, 1933, and subsequent
legislation was increased by one, and the limits of cost were decreased
by $366,064. Under this program 12 buildiags, with a limit of cost of
$11,317,883, were completed during the year. The status of the work
under this program at the end of the fiscal years 1937 and 1938 was as
iollows:
June 30, 1937
status

•Completed
Under contract...
Tn preliminary stage
Total

June 30, 1938

Number Limit of costi Number Limit of cost»
425
11
1

$64,349, 502
11,683,947
6,600

437
1

$76, 667, 386
6,500

437

76,039, 949

438

75, 673, 885

1 Includes.augmentations from funds provided by Emergency Appropriation Act of June 19, 1934, and
.-subsequent legislation.

Included in this program are two projects for the District of Columbia, one the Federal Trade Commission (Apex) Building, with a limit
•of cost of $3,780,000, which was completed during the year; and the
other the Archives Building addition, with a limit of cost of $3,610,000,
which was 85 percent complete on June 30,1938.
Emergency construction program.—The acts approved June 19, 1934,
August 12, 1935, June 22, 1936, and August 25, 1937, authorized expenditures totaling $255,000,000 for the emergency construction of
public buildings throughout the country, the individual projects to be
selected by the Secretary of the Treasury and the Postrqaster General.
Under these acts 473 projects, with a limit of cost of $66,534,854, were
completed during the year. The status of the work on June 30, 1937
-and 1938, was as follows:

197

KEPOKT OF THE SECKETAKY OF THE TREASURY
June 30, 1938

June 30, 1937
Status

Completed..
Under contract
Bids in, on market, or in specification stage
In drawing stage
^
In preliminary stage...:
Total

Number

Limit of cost

Number

424
392
138
121
46

$48, 588,914
77, 632, 847
24, 345, 300
31,911,000
6, 440, 600

897

1,121

,187,918,661

1,534

Limit of cost
$115,123, 768;
55, 352, 359'
16, 983, 600'
29,047, 500'
36,133,000

172
193

252, 640, 227

The act of August 25, 1937, authorized an appropriation of $70,000,000 for public buildings over a period of 3 years. The act ap~
proved June 21, 1938, authorized an additional $60,000,000 for this
purpose, making a total of $130,000,000 for the 3-year program. Theselection of projects under the augmented authorization was in progress at the end of the year.
The status of work under the various emergency appropriation acts
at the end of the year was as follows:
Completed

U n d e r contract

preliminary
stage

Total

D a t e of a c t
Number
June
Aug.
June
Aug.

19, 1934
12, 1935
22, 1936
25, 1937 .
Total

L i m i t of
cost

Number

L i m i t of
cost

Number

L i m i t of
cost

Number

350 $60, 637,262
329 36,089, 534
214 17, 869,472
4
527, 500

10
30
119
29

$1,504,408
24, 265,448
24,107,153
6,475,350

5
2
69
373

$4,115,000
91, 500
18,114,600
59, 843,000

8 9 7 . 115,123,768

188

55, 352, 359

449

82,164,100. .1,634

L i m i t of
cost

365
361
402.
406

$66, 256,670
60,446, 482*
60,091, 225.
65, 845, 850'
252,640, 227'

Program for other departments.—Funds to the amount of $35,358,668
were made available to the Division as of June 30, 1938, by other
departments and by certain specific authorizations by Congress for
the construction of new buildings and the rehabilitation, remodeling,,
extension, and repair of old buildings,. 45 projects being involved..
The status of this work on June 30, 1937 and 1938, was as follows:
J u n e 30,1937

J u n e 30,1938

status

Completed
Uiider contract
O n t h e m a r k e t for b i d s
H e l d p e n d i n g location of site
Total

Number

L i m i t of cost

Number

39
2
1
1

$16,086,800
7,425,000
4, 785,000
4, 700, 000

40
4
1

4, 700,000-

32, 996, 800

35,358, 668-

L i m i t of cost
$22,404,396^
8, 264, 272;

198

REPORT OF THE SECRETARY OF THE TREASURY

Included ia this program are the foUowing projects for the District
of Columbia, the appropriations for which were made directly to the
•departments:
Project
Bureau of Engraving and Printing (annex)..
Bureau of Economics Building (Department of Agriculture) .
Government Printing OflSce Warehouse...
Government Printing Office Annex^
"General Accounting Office

Limit of cost

$6,325,000

status

Completed.

("Completed.
7,700,000 \0.002 percent complete.
4,700,000 Held pending locating of site.

Repair and equipment of Federal buildings:—During the year
:$2,474,950.48 was expended by the Department for the repair and
'equipment of Federal buildings, throughout the country, in the custody
of the Post Office and Treasury Departments. Included in this expenditure were 6,970 contracts, at a cost of $1,933,611.03, for repair
work, and orders for materials, amounting to $541,339.45, purchased
through the Branch of Supply.
Administration and cost of Federal buildings under the control of the
Treasury Department.—The administration, number, and cost of
completed buUdings (exclusive of land) from 1853 to June 30, 1938,
are shown in the following table. The repairs on these buUdings,
payable from annual appropriations for repairs to public buildings,
.are not included in the cost.
Number and cost of completed buildings {exclusive of land), as of June 30, 1938
Buildings operated b y Post Office Department
:Xnterior Department
Procurement Division
Procurement Division, surt)lus Federal buildings (old) available for sale, vacant
or temporarily occupied
Bureau of the Mint
;Sup^inteAdiBnt of Treasury Buildings...
j.
Public Health Service, marine hospitals
Public Health Service, quarantine stations
Total...

650,457.00
340, 766.46
102,411.21

462,817.44

»Includes 5 buildings used by Post Office Department, 2 buildings used by Bureau of the Mint, 38 vacant
ibuildings, 5 b^uildings used by emergency relief agencies, 28 buildings used by other Government agencies,
12 buildings rented for commercial purposes, and 4 recommissioned buildings.
2 Includes Public Health Building, Cincinnati, Ohio; Public Health Laboratory, Hamilton Mont.;
Public Health Service Hospital, Lexington, Ky.; Public Health Building, Philadelphia, Pa.; and National
Institute of Health, Washington, D . C .

The following table, pursuant to the act approved June 6, 1900
(31 Stat. 592), shows the expenditures for all purposes to June 30,
1938, the outstanding liabilities, and unencumbered balances for
tuUdings constructed by the Treasury Department. Expenditures
from annual appropriations are not included.

REPORT OE THE SECKETARY OF THE TREASURY

199

Cumulative expenditures, by types, on each class of public buildings constructed by
the Treasury Department and outstanding liabilities and unencumbered balances
as of June SO, 1938

P o s t office, courthouse, customhouse
buildings, etc
O o u r t h o u s e buildings
C u s t o m h o u s e buildings
M a r i n e hospital buildings
P o s t office buildings
Q u a r a n t i n e station b u i l d i n g s .
V e t e r a n s ' hospital buildings
Miscellaneous buildings

Total-

Extensions, alterations, a n d
special i t e m s

Construction

Sites

Repairs

$48, 368,891. 37 $190, 269, 664. 95
16,447, 524.28
6, 951, 784. 69
24,117, 978. 49
3, 951, 922. 33
1,143,841.70
14, 636, 969. 69
86,413,731.12 272, 971, 199. 79
4, 290, 217. 73
361,487. 60
493, 355.47
69,878,320. 60 174,079, 201.87

$42,961, 554. 60 $22, 721, 532.09
662, 916.39
1, 621, 714. 35
3,022, 280. 57
4, 428,429. 35
4, 693, 869. 61
9, 279,271. 90
21, 002, 658. 86 16,160, 573.11
2, 026, 456. 30
3, 449, 236. 78
104,010. 20
369,076. 62
7,060,472.17
22, 377,123. 28

205,059,979.41

105, 489,065. 64

696, 296,012. 27

T o t a l expendit u r e s to J u n e
30, 1938

Outstanding
liabilities
chargeable against a p p r o priations or allotted funds

56,352,110. 34

Unencumbered balance

Buildings

Sites
Post
office,
courthouse,
customhouse
$304, 311, 543.01
$117, 380. 00
buildings, etc
23, 683, 939. 71
C o u r t h o u s e buildings
35, 520, 610. 74
C u s t o m h o u s e buildings
29, 652, 952.80
M a r i n e hospital buildings
P o s t office buildings
395, 548,162.88 2, 306,849.85
10,117, 398. 41
•Quarantine station b u i l d i n g s .
966, 442.19
V e t e r a n s ' hospital buildings
263,395,117; 92 "'"'2i,"450.'00'
Miscellaneous b u i l d i n g s . . .
A d m i n i s t r a t i v e expenses:
W o r k i n g fund projects
Public Works Administration projects..
E m e r g e n c y construction projects
E m e r g e n c y repairs projects
Unallotted appropriations
2,444, 679. 85
Total...
1,063,196,167.

$6, 973,164. 27
5, 843, 393.10
202, 211. 28
1, 057, 250.16
14,999,014.03
147, 676. 40

$1, 875, 250. 21
1, 552, 239. 00
22, 969. 76
1,915,168.08
6, 503,157. 77
193, 315. 53

11, 265,173. 67

1,432, 337. 76

40,487, 881. 91

5, 063. 02
174, 704. 43
3,807, 030. 99
162, 426. 70
55, 256,071.43
72,899, 723. 68

1 I n addition, a d m i n i s t r a t i v e expenses totaling $1,621,787.03, include $663.03 for working fund projects,
$46,733.02 for P u b l i c W o r k s A d m i n i s t r a t i o n projects, a n d $1,475,390.08 for construction projects.

Expenditures.—Expenditures for all purposes by the Public Buildings Branch diu-ing the year, including expenditures from annual
appropriations, outstanding contract habilities, and unencumbered
balances of appropriations or allotted funds are shown in the following
statement:
Expenditures and contract liabilities charged against appropriations or allotted funds
for the fiscal year 1938, and unencumbered cash balances as of June SO, 1938
Expenditures

Sites a n d a d d i t i o n a l 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
Extension to b u i l d i n g s . .
Miscellaneous special i t e m s
E m e r g e n c y repairs to p u b l i c b u i l d i n g s , etc
A d m i n i s t r a t i v e expenses:
W o r k i n g fund projects
P u b l i c W o r k s A d m i n i s t r a t i o n projects
C o n s t r u c t i o n projects
E m e r g e n c y repairs projects
Unallotted appropriations
F u r n i t u r e for triangle b u i l d i n g s
•Outside professional services
R e p a i r s , preservation, a n d e q u i p m e n t , 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 b u i l d i n g s
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 .
•General a d m i n i s t r a t i v e e x p e n s e s . . .
O p e r a t i n g force for p u b l i c b u i l d i n g s
Total

C o n t r a c t lia- U n e n c u m b e r e d
bilities charged cash balances
against a p p r o J u n e 30, 1938
priations

$3,580, 564.19
61, 982,315. 87
12, 660, 281.47
632, 620. 84
703, 791. 28

$2,444,679.85
26, 520, 209. 95
13, 243, 633. 95
724,138. 01
233, 997. 07

$32, 635.14
12, 552,652. 96
736, 853. 79
173, 296. 22
1, 354, 507.87

2,477. 76
481, 212. 87
5,742, 624. 85
51,923. 30

663. 03
45, 733. 92
1,475,390. 08

946. 08
64, 383. 41
2,474,950. 48
64,094. 61
481, 810.18
881,090. 54
1, 666, 500.18
81,361.487. 91

1,451.40
61,803. 88
932,739.67
13, 355. 93
62,094. 53
58,714.47
11,127.94

5, 053.02
174, 704.43
3, 807,030.99
162,425.70
56, 256,071. 43
47, 663. 48
204, 662. 94
14, 664. 06
44.66
5, 498. 62
1, 271. 53
23, 658. 61
74,561,696.44

45, 829, 633.68

200

. REPORT OF THE SECRETARY OF THE TREASURY

Section of Space Control.—This Section consists of a Space Allotment Unit, Space Assignment Unit, and a Real Estate Unit.
The Space Allotment Unit during the year submitted recommendations for the assignment of space in 289 buildings, all of which on
June 30, 1938, were either completed, under construction, or in the
drawing stage. Excluding the post office buildings^ space, the Unit
has recommended for assignment 852,616 square feet of space, as a
result of which approximately $162,587 will be saved the Government in annual rentals. This allocation was 281,019 square feet less
than that requested, thus enabling the Government to make potential
savings in construction costs.
The Space Assignment Unit cleared 11,830 new leases and renewals of existing leases for the fiscal year 1938 and assigned approximately 166,082 square feet of space to Federal agencies in buildings
operated by the Treasury Department. A saving of $127,855 in
rental was effected through a more efficient utilization of space in
these buildings. Additional savings aggregating $181,977 were
effected through the use of a leased building and four recommissioned
buildings.
Rentals paid for commercial space throughout the United States
showed a decrease of well over a million dollars, compared to therentals for 1937.
The Real Estate Unit sold during the year 30 surplus properties a t
$806,868.76. Under the provisions of Public No. 330, approved
August 26, 1935, which authorize the sale of Federal buUdings and
sites for which there is no further Federal need, 6 of these properties
were sold for $119,725. The other 24 properties were sold for $687,143.76 under the provisions of Public No. 351, approved August 27,
1935, which authorize the sale of real property located outside the
District of Columbia, exclusive of mUitary or naval reservations,,
which is not needed by the Federal agency having control of the
property. There remained to be sold 177 pieces of property valued
at $27,285,561.33.
Properties with an estimated value of $5,755,298 were declared
surplus by the various Government departments; and 28 properties
with an estimated value of $776,732 were reassigned to other Federal
agencies by the Real Estate Unit under the provisions of Public
No. 351.
The Unit also clears the acquisition of real estate by all Government
departments. Duriag the year 172 clearances for the acquisition of
property costing $4,456,324.80 were made.
The Inventory of Federal Real Estate and Improvements has been
continued and compUed as of June 30, 1937. This report consists
of over 15,000 projects supplied by 65 agencies having custody of
real estate and improvements, and takes into account the acquisition
and disposal of holdings during that fiscal year. The inventory is
being continued at the request of the Bureau of the Budget in order
to make avaUable a precise and complete statement of the land and
improvements in possession of the Federal establishment.
^ The liquidation of the assets of the United States Housing Corporation was continued during the year. Collections on outstanding,
balances due on purchasers^ accounts totaled $91,347.08, which was
derived from the following sources:

REPORT OF THE SECRETARY OF THE TREASURY
.Principal payments on contracts of purchase
Interest payments on contracts of purchase...
•Operation of projects (rent)

201
$72,973.09
18,097.82
276.17

In accordance with the provisions of the act approved July 11,
1919 (41 Stat. 55), these collections were deposited in the United
States Treasury as miscellaneous receipts, bringing the total returns
by the Corporation to June 30, 1938, to $73,286,284.56, which is
itemized as foUows:
Disposal of properties
Repayment of loans....
•Operation of projects..
'Unexpended balance of original appropriation

.---

$18,796,341.67
12,848,886.11
9,141,056.78
32,500,000.00

At the close of the year $1,233,964.89, bearing interest at 6 percent
per annum, remained to be collected from 574 purchase contract
holders at 11 existing active housing projects. The appraised value
of 224 parcels of unsold property, situated at 13 housing projects,
was $124,334.66, valued according to the general appraisal of the
Corporation's properties made in 1920. The Corporation is endeavoring to dispose of these at a fair and reasonable market value.
Section of Painting and Sculpture.—This Section was organized in
October 1934 to secure suitable paintings and sculpture for pubhc
buildings and to stimulate the development of art in this country.
Up to June 30, 1938, reservations have been made for mural and
.sculpture decorations in 692 buUdings, and 305 contracts have been
completed with an expenditure of $470,325. On June 30, 1938, there
were 179 contracts in force involving an obligation of $366,005.
During the fiscal year 1938, the number of mural and sculpture
contracts completed and in force increased by 126, which necessitated
an increase in the number of artists employed.
Notable progress has been made by the artists, both in the quality
of the designs submitted and in the significance of the projects executed. Experience in the decoration of Federal buUdings has enabled
the artists to create works more understandable to the public without
the sacrifice of personal aesthetic conviction.
Greater appreciation of the work of the Section has been indicated
h y the increasing number of requests from schools and universities
for lecturers and lecture material and by the inclusion in their fine
arts courses of a study of the work of the Section. The circulation
of the bulletin issued by the Section of Painting and Sculpture also
increased—from 7,000 to 8,500.
The policy of making one large anonymous competition serve as the
basis of a number of appointments has been endorsed whole-heartedly
by the artists and has greatly increased interest in the competitions.
During the year three national competitionsNwpre held—for the Dallas,
Tex., Terminal Annex, the New York Worldis Fair, and the Federal
Trade Commission Building in Washington. In the Dallas competition, 149 painters submitted 447 designs; in the World's Fair competition, 314 sculptors submitted 424 models; and in the Federal
Trade Commission competition, 231 sculptors submitted 494 models.
The models entered in the Federal Trade Commission competition
were exhibited in the gallery of the Section of Painting and Sculpture
and those for the World's Fair competition were exhibited at the
World's Fair.
The Carnegie Foundation of New York ^as instituted two funds,
one to be devoted to a critical study of the \i^ork of the Section and the
other to a volume on the sculpture executed.^

202

REPORT OF THE SECRETARY OF THE TREASURY

Treasury relief art project.—The Treasury relief art project, which
was set up in 1935 for assistance to educational, professional, and
clerical persons, is being liquidated as rapidly as the assignments
are completed. During the year allocations to the Director of
Procurement were increased in the amount of $35,737 to complete
the projects which were pending on June 30, 1937.
Employment decreased from 135 persons on June 30, 1937, to 17
persons on June 30, 1938. Those who had completed their work were
transferred to other Government agencies.
The total amount allocated to the project as of June 30;, 19:3:8., wa&
$771,521, of which $754,430 was obligated. Obligations were liquidated in the amount of $744,140, leaving $10,290 outstanding unpaid.
Of the total amount allocated, $17,091 remained unobligated.
As of June 30, 1938, ^b murals and 39 sculpture projects for Federal
buildings were completed and installed. Of the 10,215 easel paintings
executed, 2,287 were allocated. Four murals were in the filial stages of
completion, and installation of these is expected within the next three
months. Four pieces of sculpture wUl be completed and installed not
later than September 30, 1938. Four or five months' work remained
to be done in the frame shop due to the large number of easel paintings
executed.
No new projects were undertaken during the year, with the exception of the execution of a Naval Reserve medal which was designed
in compliance with a request from the Secretary of the Navy.
Branch of Supply
The centrahzed purchase of supplies and materials through the
consolidation of the requirements of the various departments and
agencies continued to show pronounced economy. An analysis of 79
relatively small purchases and of four term contracts alone showed
savings of $2,916,201.
During the year the Branch of Supply received 54,310 bids for
supplies and materials and awarded 25,583 contracts, including term
contracts. Purchases, exclusive of field purchases, amounted to
$20,089,807, compared with $16,975,876 ^ in 1936 and $27,762,952 ^ in
1937. The term contracts were used by the various departments and
establishments for additional purchases approximating $60,368,065.
The purchase of textiles for the Works Progress Administration
sewing projects continued in importance. In 1938 the Branch of
Supply purchased 126,792,230 yards at a cost of $11,328,200, compared with 113,218,678 yards in 1937 at a cost of $13,112,419.^ The
special procedure to control these purchases has proved economical in
time and funds. The purchases were made with a saving of $2,294,939
in 1938 and $2,104,171 in 1937. Clarity of specifications and advance
inspections at the mills contributed substantially to these savings.
In not a single instance were purchases made agaijnst the account of a
defaiUting contractor.
In a letter dated June 21, 1938, the President directed the Works
Progress Administration to procure not to exceed $10,000,000 worth
of surplus clothing for distribution to needy persons and also directed
the Procurement Division to handle the purchase thereof. Arrangements were made by the Branch of Supply for handling this large
1 Revised.

REPORT OF THE SECRETARY OF THE TREASURY

203^^

transaction in the New York State Procurement Office under t h e
personal direction of oflSicers of the Branch of Supply. Administrative
personnel and purchase experts were assigned to that office to assist
in the work. In a later letter the President directed that the amount
for this program be increased to $15,000,000.
The economy and convenience of consolidated service contracts at
the larger field centers have prompted the extension of such contracts.
As of June 30, 1938, drayage contracts were in effect in five of the
larger centers; electricity contracts in three; gas in two; typewriter
and miscellaneous office machine repairs in two; telephone in one; and
a Nation-wide contract covering repairs to office machines of a prominent make. In addition, consolidated contracts were made for a number of services of less importance for the convenience afforded. Consolidated contracts. Nation-wide in scope, were executed covering tank
car, tank wagon, and steel drum deliveries of motor gasoline. The n e t
saving per gallon on the 146,890,816 gallons required will be $.0142^
establishing a gross saving of $2,085,849.
Under consolidated electric contracts in the New York City area,
the lower rate effective January 1, 1938, resulted in a saving for 1938of $308,858. Arrangements have been made with the New York Edison Company to extend the same low rate to the Federal building in
the New York World's Fair. The electricity contract in Philadelphia
resulted in a saving of $6,000, about a 24 percent saving. A consolidated contract for gas in the New York area saved $4,700, a 33 percent
reduction.
The Procurement Division requirement that all lubricating oil be
purchased from Navy contracts resulted in a saving in 1938 of $1,514,750 to Federal agencies other than the Navy Department. A three
year, study was completed and a new specification developed covering
a compound lubricating oil suitable for "caterpiUar" type Diesel
engines. This should result in a continuing saving, estimated for 1939
to be $37,500.
Fuel issues to the departments and agencies were consistent with a
rather mild season, deliveries being 327,442 tons of coal, 6,927,564
gallons of fuel oil, 250 cords of wood, 1,085 bushels of charcoal, and
230 tons of coke. The 1,176,431 gallon increase in 1938 in fuel oil
reflects the tendency toward a more general use of this fuel.
In connection with the purchases in 1938, 21,875 inspections were
made in Washington, resulting in 1,441 rejections, while inspections at
factories of 128,890 pieces of furniture resulted in the rejection of 882
pieces.
New specifications, revisions, and amendments to Federal specifications, totaling 190, were prepared, bringing the total specifications
in effect on June 30, 1938, to 1,181.
Revision of the Federal Standard Stock Catalog and the checking
and arranging of stock lists of various Federal agencies were continued.
Federal traffic activities required the issuance of 2,789 routing orders
covering 22,650 cars and the routing of 34,771 less-than-carload shipments. Rate quotations were furnished in 285,087 instances. Through
arrangements with carriers in a few specific shipments, over $400,000
was saved, and changes in classification affecting heavy continuing
shipments wiU afford economy of major importance to various agencies.
The traffic night school was inaugurated in February 1938 by the
Branch of Supply to instruct interested Government employees, with

204

REPORT OF THE SECRETARY OF THE TREASURY

out cost to the Government or charge to the participants, in procedure
relating to the handling of Government freight and express traffic.
I n the disposition of surplus property, sales to Government agencies
amounted to $55,920, and sales, including waste materials, to the public
in the District of Columbia amounted to $147,987. About half of
the property sold had been reconditioned. Declarations covering
about 4,400 lots of property declared surplus in the field resulted in
3,359 transfers to Government uses.
There were 847 lists of property, surplus to the emergency relief
activities and determined to be of no further use to the Government,
which were sent to State procurement offices for disposal. Sales of
this property involved 1,015 awards and yielded a return of approximately $125,000.
The disposal of surplus property acquired by and surplus to the
Federal Housing Administration resulted in the transfer of 13,869
items of miscellaneous equipment having a current value of $1,924,158,
and consisting chiefly of domestic appliances such as refrigerators,
washing machines, heaters, etc. About $400,000 worth of similar
equipment is in process of like disposal.
Overhauls and adjustments of typewriters for various agencies
totaled 21,823, with charges aggregating $36,290, which is estimated
to be about $12,000 less than the same work by commercial agencies
would have cost.
In the Procurement Division garage, passenger cars and trucks
of various Federal agencies were serviced 29,872 times, 3,273 repair
jobs were done, and 233,030 gallons of gasoline and 4,747 gallons of oil
were dispensed.
Expert assistance in designing and selecting furnishings was given
in connection with 12 different Federal activities. This involved the
study of special furniture, rugs, curtains, and wall hangings.
Under the cooperative arrangement with the Department of Labor
for the enforcement of the Walsh-Healey Act, which provides conditions for the purchase of supplies and the making of contracts by the
United States, investigations were made of aU requests for exemption
from provisions of the act and information was furnished on various
important commodities.
Various studies have resulted in accomplishments of general importance. Plans were developed for the systematizing of intercommunication between Government agencies in Washington, which should
effect a saving of over $15,000 a year on telephones. A survey for the
Department of Agriculture of all motor vehicles owned by the Government affords the Bureau of Public Roads invaluable data. The
general schedide contract for adding machines was improved through
securing lower rates on quantity purchases. I n cooperation with the
Bureau of Mines a new specification for less sensitive dynamite was
developed, which should afford additional safety.
The 123 Federal business associations, functioning as agencies of the
Procurement Division on special field assignments, assisted in obtaining bids leading to consolidated contracts in the field and in collecting
data for use in telephone service studies. Free use of 2,262 Government-owned trucks was obtained by the associations for the Post
Office Department in handling mail during the Christmas period,
representing a saving of $142,623.

BEPORT OF THE SECRETARY OF THE TREASURY

205

Reimbursements from the $3,000,000 work relief supply fund to the
general supply fund for the purchase and distribution of materials, supplies, and equipment for the work relief program amounted to $843,628
during the year. The work relief fund will be reimbursed by the governmental agencies for which these purchases were made.
In the State procurement office organization, which covered the 48
States, Hawaii, Puerto Rico, and the Virgin Islands, the Honolulu
office was eliminated in 1938 and certain areas were consolidated.
These changes effected appreciable economies in salaries and rentals
without any detriment to the service.
During the year the Branch of Supply and the State procurement
offices acted upon 574,582 requisitions; issued 812,379 purchase orders;
and passed for payment 1,145,327 vouchers, representing purchases of
$148,827,485 against emergency relief funds. This amount includes
the $11,328,200 of purchases of textiles by the Branch of Supply, b u t
does not include clearances for purchase by other agencies. The 1938
volume was nearly 40 percent less than in 1936 and 1937, reflecting the
reduction in emergency relief appropriations.
About 1,834 new leases and 635 renewals of leases for field offices of
various activities operating under emergency relief funds were effected,
and a large number of agreements were concluded for free space for
these offices.
PUBLIC DEBT SERVICE

The Public Debt Service is charged with the conduct of transactions
in public debt securities of the United States, the verification of
United States currency redeemed by the Treasurer of the United
States and of imperfect securities delivered by the Bureau of Engraving
and Printing, the destruction of redeemed currency and other securities authorized to be destroyed, and the procurement of distinctive
paper for currency and public debt securities.
The Public Debt Service comprises the Office of the Commissioner,
the Division of Loans and Currency, the Office of the Register of the
Treasury, the Division of Paper Custody, the Division of Public Debt
Accounts and Audit, and the Destruction Committee, with a small
field force at the miU of the contractor for distinctive paper. The
Federal Reserve banks, as fiscal agents of the United States, function
as a field force for public debt transactions, and the Postal Service
functions in like manner for the sale of United States savings bonds.
The following statements, submitted by the administrative units
of the Public Debt Service, summarize the transactions conducted
during the year:
Division of Loans and Currency
This Division is the active agent of the Secretary of the Treasury
for the issue of aU public debt obligations of the United States and
for conducting transactions in such obligations after issue. I t is also
responsible for the issue of bonds or other obligations of Puerto Rico
and the Philippine Islands, for which the Treasury Department acts as
fiscal agent, and of the securities of various Government corporations
and credit agencies. The Division undertakes the safekeeping of
these securities for certain Government ^offices. I t also counts and
104825—39-—^15

206

REPORT OF THE SECRETARY OF THE TREASURY

delivers to the Destruction Committee the United States currency
canceled as unfit and mutilated paper (spoUage, etc.) received from the
Division of Paper Custody and the Bureau of Engraving and Printing.
Issue and retirement of securities.—The following is a summary of
the issues and retirements of securities conducted through this
Division during the year. Detailed accounts of all transactions in
public debt securities of the United States are presented in format
statements elsewhere in the report.
Transactions in United States and insular securities and in securities of various.
Oovernment corporations and credit agencies, fiscal year 1938
[Par value]
Transaction

Bearer

Registered

Total

Public debt securities: >
$14,090,691,030.00 $2,889,966,820.00 $16, 980 657,850 00^
On hand June 30, 1937
Unissued stock returned to Division..
24,850.00
24,850.00Received from Bureau of Engraving and
14,714,279,000.00 3,738, 777,560.00 18, 463,056, 560.00'
Printing
Total to be accounted for

28,804,970,030.00

Stock shipments to Federal Reserve banks
• and post oflQces
__ . 13, 267, 341, 350.00
Issued by Division
32,669,150.00
Unissued stock delivered to Register of the
Treasury
._
958,174, 500.00
Specimen to Commissioner of the Public
; Debt
.....
. . .
Total disposals—^-' On hand June 30, 1938.-.. Retiied and redeemed
Insular securities and securities of Government
corporations and credit agencies:
On hand June 30, 1937.
Unissued stock returned to the Division .
Received from Bureau of Engraving and
Printing
_

6, 628, 769, 230.00

35,433, 739, 260.00

718,968,750.00
2, 741, 280,330.00

13,986, 310,100 00
2, 773, 949,480.00

40,459,420.00

998,633, 920.00

100.00

100 00

14, 258,185,000.00

3,500,708,600.00

17,758 893 600 00

14, 546, 785,030.00
261, 239, 968.50

3,128,060,630.00
1, 753,800,005.00

17,674,845 660 00
2,015,039, 973. 50

6,320,298,275.00
304,000.00

1,432,621,100.00

6,762,919,375.00
304,000. OO

1,987, 295,000.00

240,937, 513.18

2,228,232, 613.18

7,307,897, 275.00

1,673, 558,613.18

8,981,455,888.1&

Stock shipments to Federal Reserve banks.—
Issued by Division
.
.:
Unissued stock delivered to Register of the
Treasury
.

1,813, 308,100.00
8,148, 325.00

122,372,913.18

1,813, 308,100.00
130, 521,238.18

1,844,841,000.00

99,984,700.00

1,944, 825, 700.00

Total disposals
_
On hand June 30,1938. .

3,666,297,425.00
222,357,613.18
3,888, 655,038.18
3, 641, 599,850. 00 1,451,201,000.00, . 5,092,800,850.00

Total to be accounted for

Retired and redeemed

44,093,950.00.

171,992, 669,61

216,086, 619.61

^ Includes adjusted service bonds and United States savings bonds.

United States savings bonds.—On June 30, 1937, there were 2,785,640
United States savings bonds on hand with a maturity value of $466,850,700. During the year the Division received from the Bureau of
Engraving and Printing 2,895,000 bonds with a maturity value of
$722,000,000, and 106 bonds with a maturity value of $24,850 were
restored to stock. Of these bonds, 2,835,787 with a maturity value
of $731,728,150 were issued and 231,138 bonds amounting to $32,459,950 were delivered to the Register of the Treasury, leaving a balance
on hand of 2,613,821 bonds with a maturity value of $424,687,450
on June 30, 1938.

207

REPORT OF THE SECRETARY OF THE TREASURY

Original registration stubs, representing sales of United States
savings bonds, received and audited, savings bonds redeemed prior
to maturity received and registration discharged before payment,
and savings bonds redeemed prior to maturity received and registration discharged after payment are shown in the following tables:
Original registration stubs, representing sales of. savings bonds, received and audited,
monthly, fiscal year 1938
N u m b e r of pieces
Maturity
value

M o n t h of issue
$26

$60

$100

$600

$1,000

Total

SERIES A—1935
1035—December

$1,000

2
1
-1
1

2,000
100
—100
500

SERIES B—1936
iQQfl—January
SftDtember
November
December

1
-1

.
- -----

T o t a l series B—1936 - .

2,600

100
-4
-10
6
60
23

143

107, 275
- 3 , 725
350
950
52 450
33,875

SERIES C—1937
1937—January
February
March
April.
May.
June 1

.'
.

-3
1
2
' 2

1
----

.- 7

Total
July
August
September
October
November
December .

...

1
1
2
2
7
68

38
2
2
8
11
28

20
-12
2
9

16
6
70
136

165

370

191,175

48,935
46,819
43,693
46, 999
47,198
60, 937

39.603
35, 564
32, 719
36, 261
35,316
42,729

64, 897
67, 561
62,940
66, 297
54,798
67, 965

18,866
14,162
12,961
13, 621
13, 772
18, 624

31,434
24, 697
20. 825
21, 868
21, 907
42, 411

203,635
178,803
163,138
173,046
172, 990
232, 666

50, 665, 225
40,482, 775
35,327, 775
37,146,225
37,218, 600
62,179 375

294,581

221,091

353,458

92,006

163,142 1,124,278

262,909,875

T o t a l series C—1937— 294, 690

221,172

363, 547

92,032

163, 307 1,124, 648

263,101,050

61, 630
44,854
47,816
40, 764
7,655
6,486

87,327
70, 427
72, 620
64,398
8,897
6,960

27,371
18, 618
18, 976
16. 951
1,624
1,078

104,036
39,398
39,162
31, 934
4,284
3,190

130, 757,425
69,639 160
69.891,250
49 781 500
6,665,150
4,807 750

Total

SERIES C—1938
1933—January
February
March
April
May 2
June 2

—

—^-.

68.869
61.870
63, 638
65, 760
11,868
8,338

339,233
236,167
242.112
208, 807
34, 328
24,052

T o t a l series C—1938... 270, 243

198,206

309, 629

83,618

222,004 1,083, 699

311, 442, 225

. 664,824

419, 296

663,087

176, 624

386,146 2,207,977

574, 352,100

G r a n d total

1 Does not include stubs detached from bonds sold by the Treasury and Federal Reserve banks during
June 1937 and reported in July 1937. These stubs were included in the report for thefiscalyear 1937.
2 May and June stubs from the Post Office Department not included.
NOTE: Minusfiguresindicate adjustments due to changes in reports of issuing agents.

208

REPORT OF T H E SECRETARY OF T H E TREASURY

United States savings bonds, redeemed prior to maturity, received and registration
discharged, monthly, fiscal year 1938
N u m b e r of pieces
Maturity
value
Month »

$25

$50

$100

$500

$1,000

Total

Registration discharged before p a y m e n t
SERIES A—1935
1937_july
_
August
.
Septem ber
October
_
.
November
December
. _
1938—January
February
March
April
May
June

.
. . ._
..

T o t a l series A—1935

309
116
103
146
118
121
100
69
114
143
84
111

217
125
94
118
90
108
73
53
97
159
78
94

470
271
255
264
248
248
229
182
261
302
306
240

152
80
91
104
100
96
80
73
78
87
108
96

258
99
139
137
134
138
124
110
97
156
140
71

1,406
691
682
769
690
711
606
487
647
847
716
618

$399, 575
175,250
217, 275
224, 950
216, 250
219, 225
193,050
169,075
169, 800
241, 225
230, 600
151,075

1,534

1,306

3,282

1,145

1,603

8,870

2, 007, 350

597
162
204
178
158
247
182
160
226
218
169
168

531
129
208
201
144
213
130
148
152
269
171
128

1,061
342
374
411
269
436
283
354
309
380
325
261

282
100
119
126
107
105
138
131
149
112
117
145

519
224
218
207
186
272
268
245
233
234
180
312

2,990
957
1,123
1,123
864
1,273
1,001
1,038
1.069
1,213
962
1, 014

807, 575
318, 700
330,400
325, 600
277, 550
384, 925
376, 350
357, 300
351, 650
346,900
283, 775
421, 200

2,669

2,424

4, 805

1,631

3,098

471
126
139
191
209
199
288
228
288
441
341
224

281
75
116
113
111
128
169
174
225
252
171
203

549
180
252
268
279
302
268
347
442
532
340
380

114
51
60
103
74
116
95
100
141
196
108
128

230
144
175
202
180
205
243
351
354
371
226
273

1, 645
576
742
877
853
950
1,063
1,200
1.450
1,792
1,186
1,208

367, 725
194,400
239, 475
290, 725
255, 675
304, 575
332,950
450,100
487,150
545,825
331,075
390, 750

2,018

4,139

1,286

2, 954

13,542

4,190. 425

11
76
101
107

30
59
64
46

33
83
90
114

3
9
28
27

20
18
90
64
76

20
95
317
347
370

20,000
24, 575
107, 650
92, 725
105, 876

296

199

320

268

1,149

350, 825

7,643

6,947

12,546

4,129

7,923

38,188

11,730,525

SERIES B—1936
1937_july
August
Sentember
October
November
December
1938—January
February
March
April
May
June

-- .
.

T o t a l series B—1936
SERIES c-1937
11937—Julv
August
September
October
November
December
1938—January
February
March
April
May
June

.. ..
. .

. -

T o t a l series C-1937

3,145

SERIES c-1938
I'gSS—February
March._
April
May
June
T o t a l series C-1938
T o t a l registrations discharged before p a y m e n t -

14, 627 .

4, 581,926

• '

1 Where registration was discharged before payment, the month is that in which the bonds were redeemed.
Where registration was discharged after payment, the month is that in which the registrations were discharged.

EEPOKT OF THE SECRETARY OF THE TREASURY

209

United States saviyags bonds, redeemed prior ^W^ntatWity, feceived and registration
discharged, monthly, fiscal year T9S8—Continued
Number of pieces
$26

Month

$50

$100

$500

$1,000

Total

Maturity
value

Registration discharged after payment
SERIES A-1935

1937—July
August
September
October
November
December
1938—January..
February
March.-April
May
June

-.-

Total series A^1935
SERIES B-1936

1937—July
August
September.-.
October...
November
December
1938-January...
February
March
April
May
June

Total series B-1936.-

689
652
1,350
1,517
1,464
731
755
728
1,675
1,878
1.105
1,478

512
364
699
1,015
952
651
505
354
1,108
1,459
782
1,163

859
1, 840
2.234
2,264
1,036
1,032
834
2,095
2,753
1,571
2,203

306
349
532
614
696
344
304
275
630
858
492
663

350
305
463
611
732
359
342
227
579
720
434
570

2,823
2,529
4,884
5.991
6,108
3,021
2,938
2, 418
6,087
7,668
4,384
6,077

$642.425
599,900
981, 700
1,230,076
1, 390, 600
680, 425
641, 325
483, 800
1, 200, 775
1, 544, 200
903,825
1, 216, 900

14,022

9,464

19, 687

6,063

6,692

54, 928

11, 515, 960

1,996
1,944
3,311
3,848
3,092
2,543
2,051
1,646
4,474
4,773
2,794
3,734

1,484
1,290
2,806
3,453
2,680
1,760
1,594
1,221
3,516
3,757
2,005
3,314

2.466
1,984
4,279
5,179
4,235
3,054
2,502
1,619
6,086
5,927
3,402
4,564

536
505
1,123
1, 236
1,088
823
610
447
1,447
1,417
922
1,269

796
674
1,288
1,515
1,383
1,215
956
679
1,952
1,872
1,181
1,398

7,278
6,397
12, 807
15,231
12, 478
9,395
7, 713
6,612
16,475
17,746
10, 304
14, 279

1,434, 700
1, 238,000
2, 500,475
2, 919, 750
2, 561, 800
2, 083, 475
1, 642,176
1,166, 600
3,471, 750
3,480, 375
2,152, 300
2, 747. 950

28, 880 44,297

11. 423

14,909

135, 715

27, 399, 350

1,299
695
2, 850
4,453
3,711
457
3,491
5,255
7,527
8,915
6,949
8,823

370
140
792
1,060
861
122
792
1,048
1,735
1,976
1,526
1,918

578
260
970
1,486
1,332
135
1,292
1,375
2,257
2,639
2,139
2. 348

4,322
2,030
9,773
14. 655
11,602
1,639
11, 504
17,618
24,192
29, 663
23,163
28,128

965,175
431,025
1.830, 800
2,727,125
2, 333,450
272, 675
2, 239, 300
2, 769. 650
4, 314, 475
5,087, 600
4, 033, 400
4, 709, 625

36, 919 54,425

12, 340

16, 811

178, 289

31, 714, 300

354
523
963

2,209
4,261
10,224

528,075
868, 375
1, 806, 825

16, 694

3, 203. 275

36,206

SERIES 0-1937

1937-July
August
September
October.
November
December
193&—January
February
March.-...
April.
May
June

....

Total series C-1937

1,259
609
3,130
4,679
3,402
611
3,770
6,074
7,855
9,502
7,638
9,265
57, 794

816
326
2,031
2,977
2,296
314
2,159
3,866
4,818
6,631
4,911
5,774

SERIES c-1938

1938—April
May
June
Total series C-1938.

689
1,371
3,583

395
784
2,039

621
1,299
2,918

150
284
721

5,643

3,218

4,838

1,155

Total registrations discharged after payment

113, 665 78, 481 123, 247 30,981

39,252

385, 626

73,832,876

Total registrations
charged

121, 308

47,175

423, 814

85,663,400

dis35,110

Individual registered accounts.—In connection with registered issues
of the United States and of securities of various Government instrumentalities, individual accounts are maintained; and on the interest-

210

REPORT OF THE SECRETARY OF THE TREASURY

bearing debt, interest is paid periodically in the form of checks.
accounts open on June 30, 1938, were as follows:
N u m b e r of
accounts

Loans

P u b l i c d e b t issues:
Interest-bearing loans
.
.
. .
M a t u r e d loans ( L i b e r t y , Victory, pre-war, a n d postal savings)
T o t a l p u b l i c d e b t issues

O t h e r issues:
H o m e Owners' Loan Corporation bonds
Federal F a r m M o r t g a g e C o r p o r a t i o n b o n d s
Consolidated F e d e r a l farm loan b o n d s - .
M u t u a l mortgage insurance fund
M a t u r e d H o m e Owners' Loan Corporation bonds
T o t a l other issues

...-

G r a n d total

- - - .
-

The

Principal

460,137
18,419

$6 422,960,646. 40
10,439,840.00

478, 556

6,433,400, 486.40

5,647
18,071
9,656
83
1

224,869,000.00
178, 549,000.00
41,684,600.00
669,909. 76
1,000.00

33,458

445,673, 509. 76

612,014

6,879,073,996.16

^ There were 46,538 individual accounts closed for registered Liberty
bonds. Victory notes, special Treasury notes, pre-war and postal savings issues, and Treasury bonds; and 12,206 accounts were decreased,
representing the retirement of securities amoimting to $1,324,998,160
par value. In connection with the same loans, 29,392 new accounts,
involving $1,944,320,580 of principal, were opened. Changes of
address for the mailing of interest checks were made in 23,884 cases.
There were received from the Bureau of Engraving and Printing
928,200 checks as stock and there were canceled and delivered to the
Destruction Committee stock consisting of 3,162 valid checks and
3,349 void 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:
N u m b e r of N u m b e r of
claims
securities

Par amount
of securities

P u b l i c d e b t issues
O n h a n d J u n e 30, 1937
Received
..

T o t a l to b e accounted for
Settled b y :
Reissue or r e d e m p t i o n of securities
R e c o v e r y of securities
.
.
Disallowance of claims a n d credit allowed
S e n t to S u r r e n d e r s Section for s e t t l e m e n t
T o t a l disposals

_..

O n h a n d J u n e 30, 1938

9,996
2,694

30,366
6,682

$4, 727,835. 75
2,070,308. 54

12,689

37,048

6,798,144.29

1,163
576
177
68

2,531
1,380
896
457

470,901.79
1,180,100.00
191,185.00
2,190.00

1,984

6,264

1,844,376.79

10, 706

31, 784

4,953, 767. 60

H o m e Owners' Loan Corporation,
Federal F a r m M o r t g a g e Corporation, a n d consolidated Federal farm
loan b o n d s i
O n h a n d J u n e 30, 1937
Received

T o t a l to be accounted for
Settled b y recovery a n d r e d e m p t i o n , or no relief
O n h a n d J u n e 30, 1938

—

229
103

1,008
392

$333,400.00
181,937.05

332
76

1,400
263

515, 337.05
98,137.05

257

1,137

417, 200. 00

1 Does not include 35 claims,involving 138 pieces amounting to $96,700, which give incomplete description
of securities.

REPORT OF TPIE SECRETARY OF THE TREASURY

211

Safekeeping of securities.—'Durmg the year transactions in securities
held in safekeeping were as follows:
On hand June
30, 1937

Issues

Released

Received

Public debt issues
$1,479, 716,206.40 $2,218,148, 500.00 : $1,128,188,900.00
Insular securities - .
6,720,500.00
2,311, 500.00
2,389,600.00
Home Owners' Loan Corporation bonds
80,066,800.00
70,040,400.001
'25,026,650.00
Total

„ 1, 611,463, 256.40 2,290,600,400.00; 1,210,645,200.00

On hand June
30, 1938
$2,669,676,806.40
6,642,600.00
15,000,150.00
2,591, 318, 466.40

Mutilated paper and redeemed currency.—MutUated paper verified
and delivered to the Destruction Committee consisted of 38,109,267
sheets and coupons of which 37,953,982 sheets and coupons were
received from the Bureau of Engraving and Printing and 155,285
sheets from the Division of Paper Custody.
Eedeemed currency, unfit for circulation, counted and delivered to
the Destruction Committee during the year amounted to 899,371,391
pieces, representing $1,581,116,107.22, detaUed as foUows:
Pieces

Currency
United States notes
Silver certificates
Gold certificates . .
Treasury notes...
Fractional currency

- -._

'
--.->

Total

Face value

58,770,999
840,065,115
531, 224
523
3,630

$243,426,500.00
1,325,419,834.00
12,267, 690.00
2,400.00
783. 22

899, 371,391

1, 681,116,107.22

In addition to the securities which were delivered to the Kegister
of the Treasury, the Division canceled and delivered to the Register
3,640,953 coupons amountmg to $369,474,724.38. Of these, 3,104,074
amounting to $275,419,964.94 were public debt coupons, and 536,879
amounting to $94,054,759.44 were coupons from securities of Government corporations and credit agencies.
Register of the Treasury
The Register of the Treasury conducts the final audit and has
custody of all retired public debt securities, including interest coupons
and checks, and performs a like function with respect to the securities
of the Home Owners' Loan Corporation, Federal Farm Mortgage
Corporation, Federal Housing Administration, Reconstruction Finance
Corporation, Commodity Credit Corporation, and the consolidated
obligations of the Federal home loan banks and the Federal land
banks. The Register also retires bonds of the insular possessions
which are exchanged for other securities.
The Register renders monthly certification to the Comptroller
General of all public debt securities redeemed by the Treasurer of
the Uhited States, and establishes credits due the Federal Reserve
banks and the Division of Loans and Currency for securities forwarded
by them on account of exchanges, replacements, transfers of registration, etc.
The following statement sets forth, by class of security, the total
number and face value of documents which were received by the
Register's Office on account of transactions during the fiscal year 1938:

212

REPORT OF T H E SECRETARY OF T H E TREASURY

Summary.-of securities received by the Register of the Treasury on account of trans'^
actions during the fiscal year 1938
Bearer

Registered

Security
Pieces

Amount

Pieces

Amount

Redeemed
P u b l i c d e b t securities:
76
Pre-war a n d postal savings b o n d s
46,354
L i b e r t y loans
79
Treasury bonds
188,344
T r e a s u r y notes
U n i t e d States savings b o n d s .
Adjusted service b o n d s
419
Certificates of i n d e b t e d n e s s
105, 268
T r e a s u r y bills
.
58,493
T r e a s u r y (war) savings s e c u r i t i e s . . .
8,492, 674
I n t e r e s t coupons
O t h e r securities:
H o m e Owners' Loan Corporation:
6,719
Bonds
2 2,991, 203
I n t e r e s t coupons
I n t e r e s t checks
Federal F a r m M o r t g a g e C o r p o r a t i o n :
Bonds
—
3 1,033,156
I n t e r e s t coupons
I n t e r e s t checks
—
Consolidated Federal farm loans of t h e
Federal l a n d b a n k s :
I n t e r e s t coupons
< 788,371
I n t e r e s t checks. 1 '...
Federal Housing Administration:
M u t u a l mortgage i n s u r a n c e fund
debentures
.
M u t u a l mortgage i n s u r a n c e fund
interest checks
Federal h o m e loan b a n k s :
4,402
Consolidated d e b e n t u r e s
812,334
I n t e r e s t coupons
Total.

13, 727,891

$7.320.00
26,145, 450. 00
322. 400.00
2, 742, 201, 600.00

383
6,716

203
437, 875
1, 652, 734
1,044, 550.00
280
4,856, 487,000. 00
82,101.16
1,990
» 525,867,803. 68
50,088, 625.00
2 53, 774,806. 92

16
11, 280
20

$1, 769,800.00
3, 477,160.00
132, 865,000.00
66. 871, 958. 50
82, 636. 700. 00
907,965,000.00
29, 713. 30

80,000,000.00
6, 460, 637. 50
10,000,000.00

5 20,869;'045.'98
36, 445

6, 712, 470. 60

18, 254

1, 327, 531.39

< 22,181,832. (

121,519.61

139

6,066.10

2,165, 411

1, 299, 243, 547.00

24, 695.000.00
»359, 373. 75
8,324,126,909.17

Retired o n a c c o u n t of exchanges for other securities, etc.
P u b l i c d e b t securities:
Pre-war a n d postal savings b o n d s
Liberty loans.
Treasury bonds
T r e a s u r y notes
U n i t e d States savings b o n d s J
A d j u s t e d service b o n d s .
Certificates of i n d e b t e d n e s s
T r e a s u r y bills
F i r s t 3 H % L i b e r t y L o a n i n t e r i m certificates
Other securities:
I n s u l a r possessions loans
H o m e O w n e r s ' L o a n Corporation b o n d s . .
F e d e r a l F a r m M o r t g a g e Corporation
bonds..
Consolidated Federal farm loans of t h e
Federal l a n d b a n k s , b o n d s .
Federal H o u s i n g A d m i n i s t r a t i o n :
M u t u a l mortgage insurance fund debentures
F e d e r a l h o m e loan b a n k s , consolidated
debentures
C o m m o d i t y C r e d i t Corporation notes
Total.

1,361
1,783
405,711
279,606

$406,100.. 00
159,150. 00
1,644,678,650 00
4,167,021, 500.00

19,816

1,031, 633,000.00

14,437

$7,924,280.00

84, 688
13
19,913
3,453
1

272, 663,150. 00
/237;662,000.-00
7, 562,050. 00
172, 650. 00
2,000,000.00

622
2,136

1, 258, 000.00
14, 876, 000. 00

2, 350.00

52
340, 348

52,000.00
660,383,850.00

90,250

85,458, 700.00

7,528

59,133,700.00

28, 541

64, 313, 300.00

4,000

5, 719, 50O 00

7,313
9,839

11,271,000 00
151,187,000.00

1,184,639

7,806,566,600.00

20,950. 00

136, 798

608, 992, 280.00

1 Represents a u d i t e d figures t h r o u g h October 1937 s e t t l e m e n t a n d u n a u d i t e d figures for N o v e m b e r to
M a r c h . Does n o t include 3,391,966 pieces, $209,536,179, covering April to J u n e , n o t received from Treasurer.
2 R e p r e s e n t s a u d i t e d figures t h r o u g h October 1937 s e t t l e m e n t a n d u n a u d i t e d figures for N o v e m b e r t o
F e b r u a r y . Does n o t include 920,135 pieces, $13,958,378.59, covering M a r c h to J u n e , n o t received from
Treasurer.
3 R e p r e s e n t s a u d i t e d figures t h r o u g h October 1937 s e t t l e m e n t a n d u n a u d i t e d figures for N o v e m b e r to
F e b r u a r y . Does n o t include 598,552 pieces, $14,112,735.13, covering M a r c h to J u n e , n o t received from
Treasurer.
* R e p r e s e n t s a u d i t e d figures t h r o u g h October 1937 s e t t l e m e n t a n d u n a u d i t e d figures for N o v e m b e r to
F e b r u a r y . Does n o t include 188,369 pieces, $5,412,438.98, covering M a r c h to J u n e , n o t received from
Treasurer.
fi R e p r e s e n t s a u d i t e d figures t h r o u g h October 1937 s e t t l e m e n t a n d u n a u d i t e d figures for N o v e m b e r to
F e b r u a r y . Does n o t include 15,272 pieces, $434,883.75, covering M a r c h to J u n e , n o t received from Treasurer.
N O T E . — R e d e e m e d securitie:^, w i t h t h e exception of U n i t e d States savings b o n d s , h a v e been a u d i t e d
t h r o u g h M a r c h 1938 s e t t l e m e n t . U n i t e d States savings b o n d s ha-ve been a u d i t e d t h r o u g h F e b r u a r y 1938
settlement.

213

REPORT OF THE SECRETARY OF THE TREASURY

Summary of securities received by the Register of the Treasury on account of transactions during the fiscal year 1938—Continued
Bearer

Registered

Security
Pieces

Amount

Pieces

Amount

Unissued stock retired
Public debt securities:
Pre-war and postal savings bonds.
Liberty loans
Treasury bonds
Treasury notes
United States savings bonds
Treasury bills
Certificates of indebtedness
Interest coupons
_
Other securities:
Insular possessions loans
Home Owners' Loan Corporation:
Bonds
Interest coupons
Federal Farm Mortgage Corporation:
Bonds
Interest coupons
. . ^..
Consolidated Federal farm loans of the
Federal land baiiks:
Bonds
Interest coupons
Federal home loan banks:
Consolidated debentures
Interest coupons
Reconstruction Finance Corporation:
Notes
Interest coupons
.
_
Commodity Credit Corporation notes
Total

3
1,107, 539
3
90, 269

$1,500.00
768,862, 500.00
201,000. 00
542, 214,100.00

24,110

1,322,117,000.00

4, 538, 585

411,932,467.46

28, 975
504, 750

155,889, 525.00
48, 787, 587.44

1,550
258, 246

31,215

$5,290, 220.00

442
225
342,900

2, 709 250 00
No value
61,934, 475.00

3,709

No value

7,755

38,433,000.00

43,036,000.00

3, 695,000.00
14,893,348. 27

375

18, 511,500.00

4,650
301, 394

4, 650,000.00
9,141,095.53

4,200.00

2,683
10, 769

18, 685,000.00
589,423. 75

20,460
43,096
20,031

1,718,512,500.00
45,457, 758.18
156, 232,000.00

6, 957,113

5,221,861,805.63

386, 669

169,918, 645.00

Recapitulation
Public debt securities:
1,440
Pre-war and postal savings bonds
1,155,676
Liberty loans
.
405, 793
Treasury bonds
Treasury notes
558,118
United States savings bonds
Adjusted service bonds
4i9
Certificates of indebtedness
. . _ _
149,194
Treasury bills
._
Treasury (war) savings securities
58,493
First ^y2% Liberty Loan interim cer20
tificates
13, 031, 259
Interest coupons
Other securities:
52
Insular possessions loans
Home Owners' Loan Corporation:
376,042
Bonds
Interest coupons
3, 495, 953
Interest checks
. . .
Federal Farm Mortgage Corporation:
91,800
Bonds
_
1, 291,401
Interest coupons
. _
Interest checks
Consolidated Federal farm loans of the
Federal land banks:
33,191
Bonds
1,089, 765
Interest coupons
Interest checks
._
.. _
Federal Housing Administration:
Mutual mortgage insurance fund
debentures
Mutual mortgage insurance fund
interest checks
Federal home loan banks:
14,398
Consolidated debentures
23,103
Interest coupons
Reconstruction Finance Corporation:
20,460
Notes
43,096
Interest coupons
29,870
Commodity Credit Corporation notes
Total

$414,920.00
795,167,100.00
1, 645,202,050. 00
7,451,437, 200.00

46,035
5,716
85,130
441
800,688
1, 656,187
1,044, 550. 00
3,990
7, 210, 237,000.00
1,990
82,101.16

$14,984, 300.00
3,477,150.00
275, 372, 400. 00
370, 527,000.00
136, 368,483. 50
82, 809,350.00
909, 965,000.00
29, 713.30

2,350.00
937,800, 271.14
52,000.00

8,377

39, 691,000.00

866,362,000.00
102, 562, 394.36

2,188

137,912,000.00

89,153, 700.00
35, 762,394. 25

58, 963,300.00
31, 322,928. 21

11,280

6,460,637. 50

7,923

87,645,200.00

36, 445

5, 712,470. 60

4,012

5, 723, 700.00

18, 254

1,327, 631.39

142,469. 61

139

6,066.10

21,869, 543 21,352, 555,314.80 2, 688,878

2,078,154,472.00

64, 651,000.00
948, 797. 50
1,718, 512, 500.00
45,457, 758.18
307,419,000.00

214

REPORT OF THE SECRETARY OF THE TREASURY
Division of Public Debt Accounts and Audit

This Division maintains administrative control accounts for all
official transactions in the public debt conducted by the various
Treasury offices and the Federal Reserve banks as fiscal agents of
the United States, and also for transactions involving paper used for
printing public debt and other securities, United States currency,
stamps, etc., and miscellaneous securities and documents in the Bureau
of Engraving and Printing. Also included in the administrative
control accounts of this Division are transactions in bonds of the Home
Owners' Loan Corporation and the Federal Farm Mortgage Corporation, in consolidated Federal farm loan bonds of the Federal land
banks, in notes of the Commodity Credit Corporation, and in debentures of the Federal home loan banks and the Federal Housing Administration, conducted by the Treasury and Federal Reserve banks,
similar to those in public debt securities. Numerous administrative
audit functions are performed in connection with the foregoing. The
Division maintains control accounts for various classes of unissued
currency in reserve stocks of the Treasurer of the United States, and
conducts administrative examinations and physical audits of such
unissued stocks of currency and of cash balances in custody, and of
collateral securities held in trust in the offices of the Treasurer of the
United States.
.
^
^
During the fiscal year 154 physical audits were conducted, involving
securities, currency, paper, mterest checks, etc., amounting to about
$50,000,000,000 in face value and 94,000,000 in number of pieces.
The Division determined and certified credits to the cumulative
sinking fund and amoimts in the sinking fund available for expenditure from time to time, interest on all classes of public debt securities
and securities of various Government corporations and credit agencies
which became due and payable on their respective interest-payment
dates, and the amount of each form of such securities and unpaid
interest outstanding each month. I t prepared estimates of interest
to become payable on public debt securities, in future fiscal years,
and of expenditures to be made on account of retirements for the
sinking fund and other special accounts, and prepared statements
showing the accountability of Federal Reserve banks for public debt
and other securities for the use of Federal Reserve Board examiners
in their periodical examinations of those banks. Numerous data
pertaining to public debt and other transactions for various interested
offices and individuals were also compiled.
Division of Paper Custody
The Division of Paper Custody receives from the contractors all
distinctive paper used in printing public debt obligations, obligations
of Government corporations and agencies, and paper currency of the
United States, Cuba, and the Philippine Islands; issues such paper to
the Bureau of Engraving and Printing against orders to print, and
certifies to public vouchers in payment of the paper. The Division
also maintains records of all receipts and issues of Federal Reserve
notes stored in the Federal Reserve vault.
The following tables summarize the operations of this Division
during the fiscal year 1938:

REPORT OF THE SECRETARY OF THE TREASURY

215

Receipts and issues of distinctive and nondistinctive paper, fiscal year 1938
Sheets
Kind

On hand
July i, 1937

Distinctive paper for United States currency and Federal Reserve notes, 12 subjects
Distinctive paper for United States bonds, etc
Parchment, artificial parchment, and parchment deed
paper
Miscellaneous paper
Distinctive paper for Cuban currencv
Distinctive paper for Philippine Islands currency
Postal card for Philippine Islands
Total

21,628, 221
3,744,347

Receipts

90,469,997 101,441,312
2,439,402
3,211,663

10,666,906
2,972,086

116,939
503,088

111,9/6
304, 311

1,022,000

746, 608
7,600

167,187
612,608
16, 233
838,975
1,344

94,661,426 106,823,369

15,154,339

162,223
313,831
16, 233
663, 683
8,844
26,426,282

On hand
June 30,
1938

Issues

Federal Reserve notes, series 1934y received and issued, fiscal year 1938
On hand June 30, 1937
Received
Total
Issued

$1,980,620,000
2,446,620,000
4,427,140,000
1,430,680,000

•_

On hand June 30,1938

2,996,460,000

There were no transactions during the year in Federal Reserve
notes, series 1928, or in Federal Reserve bank notes, series 1929, of
which $2,813,100,000 and $450,800,000, respectively, were on hand.
Destruction Committee
The following table summarizes the securities (including redeemed
canceled currency) received from the various offices and destroyed
by the Destruction Committee during the year:
Number and face amount of securities destroyed by the Destruction Committee
fiscal year 1938
OflSce making delivery and items
Division of Loans and Currency and Treasurer of the United States:
United States notes..
L..
Silver certificates
Gold certificates
_
.
Treasury notes
Fractional notes_
Total
_
Comptroller of the Currency, national banks, and Federal Reserve bank
agents:
National bank notes Federal Reserve bank notes....
Federal Reserve notes
_
Total.....
Register of the Treasury:
Principal
Coupons. pieces _
Total
Bureau of Internal Revenue: Miscellaneous stamps
Farm Credit Administration: Canceled coupons.
Grand total
Division of Loans and Currency:
For
and Printing—mutilated work
For Bureau
DivisionofofEngraving
Paper Custody—paper
Interest checks
..
.
. . . .
Photostats
Void coupons
Total
i Sheets.

Number of
pieces
58, 779,969
839,919,655
530,903
523
3,530
899,234, 580
3,959,812^

751, m m

122, 832, 291
127, 543, 694
6,385, 570
48,372, 337
53, 757, 907
3,272, 240
1, 083,808,421

»26, 559,533
1 155, 285
6,611
1,472
11,394,450
38,117,251

Face value
$243,430,600.00
1,324,784,234.00
12,260, 550.00
2,400.00
783.22
1, 580,478, 567. 22
52,322, 625. 50
10, 272,600. 60
1,503,115,920.00
1, 565,711, 046.00
6,122,490,842. 67
742,340, 621.20
6,864,831, 463. 77
48,421,600. 20
99,102, 096. 25
10,158,544,773.44

216

REPORT OF THE SECRETARY OF T H E TREASURY
PUBLIC HEALTH vSERVICE '

Public health work under the Social Security Act
Public health activities under the provisions of title VI of the
Social Security Act are directed to the improvement of State and
local health services through grants-in-aid to the States under the
authority of section 601, administered by the Division of Domestic
Quarantine, and to the investigation of disease and problems of
sanitation, under the authority of section 603, administered by the
National Institute of Health.
Section 601.—The outstanding features of the expanding national
public health program under section 601 of the Social Security Act
are the increase in both State and local appropriations stimulated by
the Federal grants-in-aid, the increase in the number of industrial
hygiene units in the State departments of health, the extension of
rural health services, and the increase in the number and the improvement in qualifications of the technical and professional personnel
engaged in State and local health work. Prior to 1936 only 4 States
had estabhshed industrial hygiene units, whereas since that date 20
States have set up such units and 6 have begun limited activities
under the State health departments.
With the sum of $1,116,656, carried over from the preceding year,
added to the appropriation of $8,000,000 for 1938, the total amount
available for allotment among the several States for public health
work under the provisions of section 601 was $9,116,656. The
amount actually paid to the States, on the basis of budgets submitted
by the State health departments and approved by the Surgeon
General, was $8,908,715, which left a balance of $207,941 to be added
to the appropriation for the fiscal year 1939. I t should be noted that
the States were able to utilize a much larger amount of the available
fund than was the case the year before.
The following table shows the amounts allotted to each State, the
District of Columbia, Alaska, and Hawaii for the fiscal year 1938:
Allotments to States under section 601 of the Social Security Act, fiscal year 1938
Total
payment

States, etc.
Alabama
Alaska
_.
Arizona
Arkansas
California
Colorado. Connecticut
Delaware
D i s t r i c t of C o l u m b i a
Florida
Georp"ia
Hawaii
Idaho
Illinois
-Indiana
Iowa - - .
Kansas.Kentucky
Louisiana
Maine
Maryland
Massachusetts
Michigan
Minnesota
MississiDni
Missouri
Montana.

_.
.

$289,941.00
34,848.00
62,408.00
195,324. 00 1
316,836.00
94,951.00
103,040. 00
33,608.00
67, 545.00
128,317.00
303,400.00
64,784.00
71,756.00
346,068.00
169, 840.00
192,952. 00
104,620. 00
248, 501.00
189,446.71
71,166.00
136,086.00
236,471.00
292,142.00
200,054.00
208,433. 00
210,247. 00
44,590. 00

Total
payment

States, etc.
Nebraska
Nevada
New-Hampshire
N e w Jersey
N e w Mexico
New York
N o r t h Carolina
North Dakota
Ohio
Oklahoma
Oregon
.
Pennsylvania
R h o d e Island
South Carolina
South D a k o t a
Tennessee
Texas
Utah
Vermont
Virginia
Washington
W e s t Virginia
Wisconsin
Wyoming
Total

.
--.
..

...

$57, 833. 75
29,065.00
45, 504. 00
205,467.00
87,976.00
661,120.00
335, 542.00
63,133. 25
369,364.00
226, 502.00
87,934.00
432,703.00
60,227.00
208, 776.00
80,170.00
288,391.00
413,763. 42
67,173.00
46,172. 50
232,174.00
126,637.00
157, 816.00
184,197.00
23, 639.00
8,908,714. 63

1 More detailed information concerning the activities of the Public Health Service is contained in a separate
report of the Surgeon General.

REPORT OF T H E SECRETARY OF THE TREASURY

217

The purposes for wliich the States budgeted the allotments during
the fiscal year 1938 are shown in the following table:
Purposes for which allotments under section 601 of the Social Security Act were
budgeted by the States, fiscal year 1938
Pm-pose
Local health services
Preventable disease control:
Venereal diseases _ _
General..
Tuberculosis
Malaria
Pneumonia
Trachoma
Cancer
Training..
Sanitary engineering-_Promotion and supervision of local health servicesLaboratory
Industrial hygiene.-.--General administration
Vital statistics
Public health nursing
Health education...
Food and drugs
Oral hygiene
Rodent plague
Medical aid to transients.Maternal and child health
Survey of health conditions among transients.
Mental hygiene
TotaL

Number
of States

Amount'
:, 022, 735. 30

$868,105.60
337,831.98
278,790. 84
134,-510.86
118,695. 72
34,863.00
30, 313. 72
• 1,803, 111. 72
1, 583,656. 93
563,189. 65
542,438. 45
499,919. 79
430,906. 25

415,403. 73
212,925. 67
157, 596. 25
142, 343. 27
73,185. 28
72,115.00
69, 238. 00
33,017. 50
23,619.16
21,669. 63
15, 380.00
-10,682,451.58

Percent
37.66

16.88
14.82
5.27
5.08
4.68
4.03
3.89
1.99
1.48:
1.3a
.69
.68
.65
.31
.22
.20
.14
:oo.oo

, 1 Includes balances carried forward from preceding year.

During the year special consultant services on dental health work
and laboratory activities were added to the consultant service being
rendered to the States by district medical ofE.cers and public health
nurses of the Public Health Service on problems of general organization
and administration. Steps were taken also to extend the services of
the district engineers of the Public Health Service in the rendering of
expert advice to the State health departments on problems of environmental sanitation.
Seven medical officers were detailed to the States of Mississippi,
Tennessee, West Virginia, and Maryland, to serve temporarily as
county health officers during the year. Officers were also detailed at
the request of State health authorities to serve as special advisers on
problems of organization and administration in Texas, Kentucky,
Iowa, Pennsylvania, Illinois, and Ohio.
The cooperative work of the Division of Venereal Diseases with
State and local health departments was expanded under the provisions
of section 601. A discussion of the activities of this Division will be
found on page 224 of this report.
Section 603.—In order to carry out the provisions of section 603
of the Social Security Act, an appropriation of $1,600,000 was made
to the Public Health Service for investigation of disease and problems
of sanitation and for various administrative expenses. Of this
amount $886,369 was allotted to the National Institute of Health to
be used for studies of infectious diseases, chemistry, pharmacology,
industrial hygiene, public health methods, pathology, cooperative
measures, and activities connected therewith. This work is carried

218

REPORT OF THE SECRETARY OF THE TREASURY

on in connection with the regular work of the Institute, a discussion
of which will be found on page 221.
Division of Sanitary Reports and Statistics
The Public Health Service continued its important function of
collecting and disseminating general information and statistical data
regarding health conditions and the prevalence of communicable
diseases in the United States and foreign countries. This information
was summarized and published weekly in the Public Health Reports.
In accordance with provisions of law, these reports are made available
to public health officers, sanitarians, and libraries throughout the
United States.
Health conditions, as interpreted from the death rate, remained
unusually favorable throughout the calendar year 1937, with a preliminary death rate of 11.2 per 1,000 estimated population compared
with 11.5 in 1936. The downward trend of tuberculosis mortahty
was resumed in 1937, after a break in 1936. Decreases, as compared
with 1936, were recorded in the death rates for typhoid fever, scarlet
fever, diphtheria, malaria, pellagra, diseases of the digestive system,
nephritis, and diseases associated with pregnancy and childbirth.
The maternal mortality rate for 1937 was 13 percent less than that for
1936. On the other hand, httle change was noted in the death rate
for meningitis, diabetes, cerebral hemorrhage, heart disease, pneumonia, and accidents. Mortality from encephalitis, measles, whooping cough, influenza, poliomyelitis, and cancer was higher than in
1936. Owing to epidemics of influenza and poliomyelitis during 1937,^
the death rate for each of these diseases was the highest recorded during
the past 5 years. A total of 11,673 cases of smallpox was reported
in 1937, the largest number since 1931. For the first 6 months of
the calendar year 1938, the number of cases of smallpox exceeded that
for the entire year of 1937.
Through the Office of Health Education, estabhshed in 1935,
considerable progress was made in popularizing health educational
publications. The monthly publication, The Health Officer, first
issued in 1936, continued to serve for the exchange of information of
interest to State and local health officers and health workers in the
field.
Division of Domestic Quarantine
This Division continued its duties in administering section 601 of
title VI of the Social Security Act, details of which are given on page
216,.its work in connection with the enforcement of the interstate
quarantine regulations, and cooperative activities with the States in
sanitation and the prevention of the spread of epidemic diseases.
Public health engineering.—Requests from Federal, State, and other
agencies, interested in water pollution abatement, for consultant and
advisory services from the Office of Stream Sanitation are increasing
materially. Considerable work was carried out in cooperation with
the National Resources Committee in connection with a revision of
the drainage basin project lists compiled following the drainage basin
studies made throughout the United States in the summer of 1936.
In the maintenance of supervision over water supplies used for
drinking and culinary purposes by common carriers in interstate

REPORT OF THE SECRETARY OF THE TREASURY

219

traffic, 2,090 of the 2,225 supphes reported by such carriers were
inspected, with the cooperation.of the State health departments, and
4,048 certificates were issued following these inspections. Upon the
recommendation of the State health officers, 66 supphes were prohibited from use because of the lack of sanitary safeguards against
potential hazards to health involved in the use of these particular
supplies.
General sanitary inspections were made of 268 coach yards, 285
watering points and terminals, and 250 dining cars and commissaries.
During the year the procedure for the certification of water supplies
used for drinking and culinary purposes by common carriers was
extended to provide for inspections by the State health authorities
of the sanitary methods employed by the carrier companies in handling the water on their properties, in addition to inspections of the
water supply systems delivering the water supplies to the carriers.
Following inspections with regard to the sanitation of vessels,
favorable certificates were issued to 1,248 vessels, or 60 percent of the
1,816 vessels coming within the scope of the Interstate Quarantine
Regulations; and ^^not approved'^ certificates were issued to 12 vessels.
On the basis of affidavits from the shipmasters that the vessels were
complying with the regulations, temporary certificates were issued to
422 vessels which could not be reached. Plans for the water supply
systems of 22 new vessels were received for review and approval. A
total of 833 water samples from vessels operating in the Great Lakes
and inland rivers was examined bacteriologically.
During the year, 1,974 certificates of interstate shippers issued by
producing States were endorsed by the Public Health Service and
included in the semimonthly published lists of shellfish growers and
shippers of States where control measures are satisfactory. Inspections were made of 540 shucking and packing plants and 26 growing
areas to determine the efficiency of State control. I t was necessary
to continue withholding endorsement of the certifications of one
State. ^
Reciprocity with Canada was carried on in connection with certification of water supplies of common carriers in international service
and the issuance of certificates to shippers of shellfish.
Cooperation with other Federal agencies.—There was a considerable
increase in cooperative assistance furnished to various Federal agencies
on public health engineering matters by the engineering personnel of
this Division. Federal construction programs and emergency relief
activities have brought about an increase in requests for assistance
of this kind. The National Park Service and the Office of Indian
Affairs of the Interior Department continued to rely upon the Public
Health Service for technical assistance in connection with the sanitation of the National Parks and the Indian reservations. The District
of Columbia and the United States Lighthouse Service of the Department of Commerce received considerable assistance as well as the
Coast Guard Service, particularly in the Great Lakes region.
I t has been estimated that approximately 34.5 percent of the time
of the engineering personnel was devoted to cooperative assistance to
24 Federal bureaus or subdivisions during the year. With this type
of service constantly increasing, the work of the personnel is being
extended so that it is not always possible to furnish without delay the
assistance requested.

22Q

REPORT OF T H E SECR]5TARY OF T H E TREASURY

The detail of medical officers to serve as advisers to the Farm Security Administration and the Public Assistance Division of the Social
Security Board was continued. .
Works Progress Administration projects.—The Public Health Service
continued its assistance to the Works Progress Administration and
the State health departments by providing technical supervision of
projects for the employment of work relief labor on the construction
of sanitary out-door toilets in unsewered areas of small communities.
Projects were operated in 39 States. The work covered an average
of 1,162 counties throughout the year and furnished employment for
an average of 18,624 men.
A total of 470,000 new sanitary units
was constructed and 21,200 old toilets were restored to sanitary
condition. MoreHhan 1,774,600 sanitary units have been installed
in unsewered areas of small communities since this program was
inaugurated.
Technical supervision for the Works Progress Administration
malaria control drainage program was continued. Approximately
2,686 miles of average size ditch were constructed, and an average
of 19,029 men was employed on the projects during the year.
For the purpose of reducing the pollution of streams caused by acid
mine waste waters, the Public Health Service, in cooperation with
several State health departments, continued to provide the technical
supervision on projects for the sealing of abandoned bituminous coal
mines. At the close of the year, work was in progress in 86 counties,
with the employment of an average of 4,800 men. Since the beginning of the program, 3,300 mines have been sealed, involving the
closure of iriore than 100,000 openings. The amount of acid prevented
from reaching streams by this work is estimated at 610,000 tons
annually, and the amount that will be excluded from streams by work
now in progress is estimated to be 317,000 tons annually.
A series of reports covering the inspections of the plumbing facilities
of Federal buildings in New York, N. Y., and Detroit, Mich., which
had been made under a Works Progress Administration project during
the period May 1936 to June 1937, were prepared and transmitted to
the governmental agencies concerned for their information and
guidance. A summary report was issued in multilith form for general
distribution and was reprinted either in whole or in part by a number
of plumbing trade journals.
Division of Foreign and Insular Quarantine
In spite of the widespread prevalence of quarantinable diseases
throughout the world, and the occurrence of several unusually severe
epidemics of such diseases, no cases were imported into the United
States or its insular possessions during the year. Quarantinable
disease arrived at only two ports. New York and Honolulu, one case
of smallpox reaching each place. In both instances effective measures,
instituted at quarantine, prevented the spread of the disease. Strict
precautionary measures were enforced at all United States ports,
especially at those on the West Coast, where it was necessary to
conduct intensive examinations in order to prevent the entrance of
cholera carriers from the Orient.
During the year, 15,873 vessels, carrying 789,591 passengers and
1,196,688 seamen, were inspected by officers of the Service, and 1,004

REPORT OF THE SECRETARY OF THE TREASURY

221

vessels were fumigated. Examinations for plague infection which
were made of 5,399 of the 7,659 rats recovered following fumigation
revealed no infected rats.
The granting of radio pratique to vessels entering the harbors of
New York and Boston produced such satisfactory results, both from
the standpoint of the Service and of the shipping interests involved,
that the system was extended during the latter part of the year to
Los Angeles and San Francisco.
An increase in the prevalence of yellow fever in South America
required the institution of additional control measures to prevent the
introduction of the disease into the United States by aircraft. The
most important of the preventive measures were the establishment of
an Aedes aegypti control unit at Miami, Fla., and the extension of the
program for the immunization of aircraft-operating personnel.
Inspections for quarantine and immigration purposes were made at
United States airports of entry of 1,784 airplanes, carrying 23,172
passengers, of whom 6,730 were aliens.
The United States Quarantine Regulations were amended during
the year to provide that no living disease organism or vector shall be
imported into the United States except under special permit issued by
the Surgeon General.
Examination of 2,447,339 alien passengers and 805,306 alien seamen
by medical officers of the Service at United States ports resulted in
the certification to immigration officials of 20,372 passengers and
1,438 seamen as being afflicted with some mental or physical defect
or disease.
Unsettled conditions in Europe caused an increase of 35.81 percent
in the number of aliens examined there during the year as compared
with the preceding year. PubJic Health Service officers stationed in
American consulates in foreign countries examined 65,261 applicants
for immigration visas, 45,790 in the Eastern Hemisphere and 19,471
in the Western Plemisphere. Certifications for affliction with one or
more of the defects or diseases requiring exclusion were made of 918
of those examined in the Eastern Hemisphere and 119 of those examined in the Western Hemisphere, w^hile 8,438 of those examined in the
Eastern Hemisphere and 2,538 of those examined in the Western
Hemisphere were reported as being afflicted with a disease or condition
which was likely to affect their ability to earn a living. Certification
for affliction with a condition requiring deportation was made of only
one of the aliens arriving in the United States from foreign ports at
which they had undergone preliminary medical examinations.
National Institute of Health
The ultimate purpose of research in the field of public health is to
produce practical results, either in basic epidemiological knowledge or
in methods of prevention and control, useful in the efforts to combat
disease and to improve the health of the people. Summaries of the
more significant activities and accomplishments during the year in
the scientific work of the various divisions are given in the follbwing
paragraphs.
Division of Biologies Control.—It was found that the stability of
neoarsphenamine is affected by the age of the product and by the
amount of moisture retained. When containing not more than 1.5
104825—39

222

REPORT OF THE SECRETARY OF THE TREASURY

percent volatile material, the product may be expected to remain
stable for three years when stored at a temperature slightly less than
•20° C.
The inspection of establishments manufacturing biologic preparations and the routine testing of products, as provided in the act of
July 1, 1902, proceeded without incident. Licenses to engage in
interstate trade in these products are held by 61 concerns, of wliich
14 are foreign establishments. The licenses cover 166 different
preparations.
Division of Chemistry.—In connection with the problem of removing
ifluorides from drinking water, it was found that fluoride can be
removed by treatment with magnesium oxide in a manner which
•gives promise of economical development. Studies on ascorbic acid
i n plants have shown that light has a striking effect on the accumulaition of this acid in the roots, as well as in the leaves of plants. This
finding is viewed as important in connection with nutritional investigations. Other investigations were directed to the chemistry of enzymes
rand carbohydrates.
Division of Industrial Hygiene.—In the first series of investigations
concerniQg lead arsenate, undertaken in view of the large amounts
used as an insecticide spray, 100 milligrams of lead arsenate were
iingested by two research workers over a period of 10 days; it was
found that the greater part of the lead was excreted with the feces and
t h a t the arsenic was excreted in the urine. Further studies of selenium
point to its significance as an industrial hazard in the manufacture of
ceramics, paint pigments, special steel, copper alloys, and rubber
specialties. As a result of extensive observations embracing surveys
•of prevalence and methods of prevention, the conclusion has been
reached that chronic industrial mercuriahsm is preventable with good
^engineering and medical control; sanitary environment of workers
-engaged in the industries using mercury forms the basic means for
prevention.
Other investigations in industry pertained to dust hazards, fatigue,
illumination, sickness among employees, dermatoses, and the dangers
to which workers in lead and manganese products are subjected.
Division of Infectious Diseases.—Epidermologicsl studies have disclosed the fact that rheumatic heart disease is exceeded as a cause of
death only by tuberculosis, pneumonia, and syphilis. I t caused
more deaths in persons under 20 years of age than whooping cough,
measles, meningococcic meningitis, diphtheria, scarlet fever, and
poliomyelitis combined. Data on 104,163 college students showed an
incidence rate of 11.6 per thousand. In this connection the Public
Health Service has pomted out that an unwarranted diagnosis of
heart disease may seriously affect a student's career both in college
€ind in later life.
WeiFs disease, hitherto considered a tropical malady, has been found
to be endemic in the United States. Cases were diagnosed in New
York, Michigan, Pennsylvania, South Carolina, West Virginia, Texas,
Iowa, and Florida. Although the mortality is low, recently acquired
knowledge regarding illness from this infection and its wide prevalence
mark the disease as a new public health problem of considerable importance in this country.
Investigations of leprosy in continental United States have revealed
that only in some parts of certain of the States bordering on the Gulf

REPORT OF THE SECRETARY OF THE TREASURY

223

of Mexico does the disease show any notable tendency to spread, and
•even in individual States there are striking hmitations of areas of communicability. Cases in New York, Philadelphia, and Chicago have
all been traceable, with but a single exception, to infection acquired
elsewhere.
Cases of Rocky Mountain spotted fever have been reported from
a considerable number of new areas. A largely increased amount of
preventive vaccine was distributed duruig the year.
Poison-dusting by airplane for the control of mosquitoes has been
•demonstrated to be practical and economical. Based on experiments
in the central South, investigators estimate the cost, including paris
green, at $0,367 per acre. This item covers the pay of the most
efficient personnel and cost of the best equipment.
Additional research was given to ascertaining new facts concerning
the etiology and control of the rickettsial diseases such as Rocky
Mountain spotted fever and endemic typhus, virus diseases including
encephalitis and choriomeniugitis, relapsing fever, tularaemia, whooping cough, Chagas' disease, hemolytic streptococci, staphylococci,
diseases caused by fungi, conditions influencing the prevalence of
tuberculosis, and fundamental problems of immunity.
Division of Pathology.—During the year 2,377 surgical specimens
were examined for governmental agencies, and material from 287
autopsies was received. In connection with this service studies are
being made on pinworm infestation of the appendix and the incidence
of various types of tumors m man. In experimental pathology studies
were made of material from 1,425 animal autopsies. An investigation
of the pathologic histology of vanadium poisoning was completed.
Division of Pharmacology.—In an effort to obtain some information
on the chemical nature of selenium in foodstuffs, experiments were
made which led to the observation that selenium can be separated
under suitable conditions quantitatively from its protein combination
in grain by certain oxidizing agents. Functional studies in chronic
selenosis indicate lack of consistent evidence as to diminution of
gastric acidity.
Considerable attention was given to bacterial chemotherapy with a
view to evolving methods of treating bacterial diseases by the injection
of chemical compounds into the blood or tissues instead of the usual
administration of drugs by mouth.
Division of Public Health Methods.—Major emphasis has been placed
on the analysis of the information obtained in the national health
survey begun during the fiscal year 1935. This survey included a
study of sickness and medical care among 800,000 families in 19 States
and a study of the personnel and facilities available for the provision
of health and medical services. The quantitative iaformation on
unmet health needs revealed by these studies formed the basis of the
national health program recently submitted to the President by the
Interdepartmental Committee to Coordinate Health and Welfare
Activities. Data from the survey are available ia a series of reports
by the Public Health Service and in the reports of the Interdepartmental Committee.
Dental defects of children, which constitute one of our most serious
health problems, were studied among 4,400 elementary school children
in a small city in Maryland. The inadequacy of dental care among
these children was shown by the fact that caries defects occurred in

224

REPORT OF THE SECRETARY OF THE TREASURY

permanent teeth at about six times the rate at which fillings were
being placed.
Other features of divisional work comprised researches on the health
of transients, health education, child hygiene, pollution of streams,
and milk in relation to public health.
Division of Zoology.—Investigations of trichinosis indicate an incidence of 17 percent iu the United States, that is, an astounding infection rate of one person in every six. Prevalence is low in the South,
high along the North Atlantic coast and the southern part of the
Pacific coast, and intermediate elsewhere. The most feasible plan
for control appears to be State regulation of the garbage-feeding of
swine.
Investigations of oxyuriasis covered approximately 3,300 persons,
of whom 2,250 were in the general population of Washington, D. C ,
and showed an incidence of 40 percent. Studies to date indicate an
incidence in white persons of 3 to 4 times greater than in Negroes.
National Cancer Institute.—Organization of the Institute was completed during the year in accordance with the act approved August
5, 1937, and the Institute functions as a division of the National
Institute of Health. Fifteen grants-in-aid were made, 12 research
fellowships awarded, and 17 young physicians were appointed to
receive training in the diagnosis and treatment of cancer at approved
training centers. Steps were taken to secure 9}^ grams of radium,
to be distributed as loans to responsible centers for the purpose of
giving relief to present day cancer sufferers.
Eight research projects were launched. These relate to cell growth
and differentiation, synthesis of carcinogenic agents, inhibition of
tumor growth, production of malignant cells in vitro, the influence
of anterior pituitary hormones on tumor growth, therapeutic studies,
and an epidemiological study of lung cancer.
Division of Venereal Diseases
The national movement to curb the venereal disease menace gained
momentum during the year. The program for the control of syphilis
and gonorrhea sponsored by the Public Health Service was endorsed
by a number of national organizations and by many clergymen and
churches. A number of State assemblies passed laws requiring blood
tests for syphilis of applicants for marriage licenses and of expectant
mothers. Many States and localities intensified their eft'orts against
syphihs and gonorrhea and requested assistance in developing their
veinereal disease control programs in accordance with the basic principles formulated by the Advisory Committee to the Public Health
Service. In order to meet these many requests for assistance, especially trained commissioned officers were assigned as regional venereal disease control officers. National legislation to aid in the control
of syphilis and gonorrhea was sponsored by health authorities, organized medicine, and leaders in social and political fields. The
Venereal Disease Control Act, enacted May 24, 1938, imposes additional duties on the Public Health Service and provides for Federal
funds to be allotted to the States. The sum of $3,000,000 was appropriated for the fiscal year 1939 to carry out the provisions of this act.
In cooperation with five of the leading clinics in the United States,
studies for the purpose of improving present day methods in the

REPORT OF THE SECRETARY OF THE TREASURY

225

diagnosis, treatment, and control of syphilis were continued. A group
of specialists was organized for the purpose of conducting a cooperative
study looking toward improvement of present day methods in the
diagnosis, treatment, and control of gonorrhea. Surveys on incidence
and prevalence of syphilis and gonorrhea were continued, and a tentative mechanical system for reporting morbidity, treatment-progress,
and control of venereal diseases was devised.
In accordance with the recommendations of the committee on evaluation of serodiagnostic tests for syphilis, a comparative study of the
performance of such tests in State laboratories was conducted. Fortysix laboratories representing forty-four States and the District of
Columbia participated in this study. In order to maintain necessary
standards in the performance of laboratory tests and to provide a
system of periodical checking of State laboratories, the facilities at
the venereal disease research laboratory at Stapleton, N. Y., were
taxed to the utmost. Scientific studies of potential value in further
increasing our knowledge with reference to diagnosis, treatment, and
control of syphilis and gonorrhea were conducted at the Stapleton
laboratory and at the syphilis research center, Johns Hopkins Hospital,
Baltimore, Md.
Studies pertaining to certain phases of the venereal diseases were
conducted in cooperation with a number of medical centers and institutions which had developed special facilities for investigations of
these particular problems.
The Public Health Service Medical Center at Hot Springs, Ark.,
served an important function in preventing the inter-State spread
of venereal diseases by providing treatment for 6,209 indigent persons, 59 percent of whom were infected with a venereal disease in a
commuuicable stage.
In 1935 the Transient Bureau of the Federal Emergency Relief
Administration constructed a camp for transients near Hot Springs
and the Public Health Service cooperated in the treatment of those
transients who were infected with the venereal diseases. When the
transient activities of the Federal Government were discontinued the
Administrator of the Emergency Relief Administration in Arkansas
agreed to make available during the fiscal year 1937 a sufficient
amount from balances remaining from former Federal relief grants
to the State of Arkansas for the continuation of this camp as an infirmary solely for the care of totally indigent patients infected with
syphilis and gonorrhea. Full administrative responsibility for this
service was turned over to the Public Health Service. This arrangement was continued until September 1, 1.937, when under the Third
Deficiency Appropriation Act, approved August 25, 1937, $163,266
was transferred from unobligated balances of funds heretofore allocated to the Federal Emergency Relief Administration to the Treasury
Department, Public Health Service, for the maintenance and operation
of the infirmary for the remaining ten months of the fiscal year 1938.
Division of Marine Hospitals and Relief
The splendid service afforded beneficiaries of the Public Health
Service at its marine hospitals and other relief stations continued to
improve. This was made possible through the addition of more
personnel, the purchase of approximately $300,000 worth of new

226

REPORT OF THE SECRETARY OF THE TREASURY

equipment, the addition of new drugs, notably sulfanilamide, to the
armamentarium, and the initiation of new methods of treatment. As a
result, there was a decrease in the number of hospital days' relief
furnished per patient, even though there was an increase in the number
of inpatients admitted. Seamen still constitute the most numerous
class of patients. By the act of July 30, 1937, dependent members
of families of officers and enlisted men of the Coast Guard, retired list
included, were added to the list of beneficiaries, being granted the
privilege of receiving inpatient treatment at first class stations at a
per diem cost. This necessitated providing additional facilities for the
care of women and children and likewise widened the scope of treatment rendered and of operations performed.
The Public Health Service continued to cooperate with other
Government departments in Washington in furnishing emergency
medical relief to employees and supervising 19 medical relief units in
the Treasury Department and other agencies.
A daily average of 5,491 inpatients and 4,002 outpatients received
treatment at the marine hospitals and other relief stations. A total
of 60,403 inpatients were furnished 2,004,154 days treatment in
hospitals, as compared with 59,722 inpatients and 2,041,114 hospital
days last year. The per diem cost of operation was $3.56.
After nearly three-quarters of a century, the method of admitting
insane beneficiaries of the Public Health Service to St. Elizabeths
Hospital had to be changed. Since 1875 the act of Congress authorizing admission had been construed as not requiring judicial proceedings; but the United States Court of Appeals for the District of
Columbia held that such patients must be adjudicated insane, and,,
therefore, future admissions of Public Health Service beneficiaries
wUl be effected on a commitment basis.
Division of Mental Hygiene
Follow-up studies, at the Public Health Service Hospital at Lexington, Ky., of the mental and physical deviations of patients during the
period subsequent to the Mdthdrawal of the drug of addiction have
served to strengthen previous impressions that addicted patients da
not tend to become normal until 7 months have elapsed following the
withdrawal of narcotics.
The data obtained from the system of recording objective abstinence
symptoms in chronic opium poisoning, inaugurated during the preceding year, were analyzed and the method was applied to evaluate
several systems of treatment for the so-called 'Withdrawal stage.'^
The results thus far indicate that systems of treatment for wliich
specificity is claimed have no real value in reducing the severity of
symptoms. According to the experiences obtained at the Public
Health Service Hospital at Lexington, Ky., the best method for treating the withdrawal state of opium addiction is the application of
palliative measures along with rapid withdrawal of the drug.
Studies of electro-encephalograms recorded on normal nonaddicted
individuals, on addicts stabilized on morphine, and on addicts stabilized on substitute drugs, indicate that significant changes occur in the
electrophysiology of the brain when an individual becomes addicted
to narcotic drugs, and there is evidence of difference in the bio-electric
phenomena with various narcotic drugs used. In the application of a

REPORT OF THE SECRETARY OF THE TREASURY

227

point rating scale used in evaluating certain psychiatric changesoccurring in addicts when stabilized on drugs and during and followingtheir withdrawal, it was found that an individual who appears physio-^
logically stable when receiving certain morphine doses is not necessarily stable from a psychiatric or emotional point of view. T h e
evidence indicates that it requires more than a stabilizing dose t a
produce emotional tranquiUity, and that certain narcotic drugs are
more likely to produce this feeling which the addict desires than are
others.
Studies also included an intensive investigation of the physical^
chemical, psychological, and psychiatric changes resulting from single
therapeutic doses of morphine, from repeated doses of morphine used
when necessary during the course of the routine care of patients when
addiction must be stabilized, and during that period subsequent to
the withdrawal of the drug of addiction. Definite evidence was
obtained that strong dependence is associated with a blood hydration,
that the abstinence syndrome is accompanied by relative blood dehydration, from which the patient recovers by the 8th or 10th day, and
that normal concentration is not regained for many months. A.
valuable contribution to the experimental field was the development,
of a test for morphine in biological materials which is applicable to
excretion studies in human beings.
Psychological evidence suggests that there is degeneration of addictsbut that those addicted for long periods of years do not show a greater
degree of degeneration than those addicted for shorter periods. T h e
correlation and coordination of these studies is thought to be important
and necessary for formulating a more rational form of treatment.
Investigations regarding the habit-forming properties of certain
derivatives of opium as possible substitutes for morphine were continued during the year, and studies were completed on the addiction
liability of several new compounds. A thorough re-examination of
the addiction liability of codeine was undertaken and arrangements
were made to study certain synthetic compounds which, because of
their pharmacological effect, do not lend themselves to the same
methods of substitution previously employed.
Dr. Lyndon F. Small, consultant in alkaloid chemistry to the Pubhc
Health Service, was granted letters patent covering a process for
obtaining '^Ethers of Morphine and Dihydromorphine and their
Respective N-Oxides^' which he evolved in his efforts to obtain a
substitute drug for morphine. This patent was assigned by Dr. Small
to the United States Government, represented by the Secretary of the
Treasury.
The United States Public Health Service Hospital, Lexington, Ky.,
designed to accommodate 1,000 patients, operated at approximately
full capacity during the year, with an average daily patient population of 949, total admissions 950 (225 voluntary), and 955 discharges,
636 of whom were discharged as cured. A follow-up system for
prisoner patients inaugurated during the year revealed that 347 former
patients, representing 15.8 percent of the total number of patients
discharged since the opening of the institution, had relapsed to the
use of narcotics, and that 72 others had been arrested for drug law
violations and other crimes but had not relapsed. Of the combined
total, 316 have been returned to this hospital for further treatment of
drug addiction or as parole or conditionaJ release violators.

228

REPORT OF THE SECRETARY OF THE TREASURY

Construction of the initial group of buildings for the United States
Public Health Service Hospital (second Narcotic Farm), Fort Worth,
Tex., has been completed, and a medical officer has been detailed in
charge of this institution. I t is anticipated that the hospital will be
ready to receive patients in October 1938.
The Public Health Service continued the work of supervising and
furnishing the medical and psychiatric services for the Federal penal
and correctional system, comprising 19 medical units in connection
with the various institutions under the control of the Department of
Justice, an additional medical unit having been provided for the
new Federal jail at Terminal Island, Calif.
Psychiatric diagnostic service for United States courts was continued during the year at the Federal district courts located in Boston,
New York City, Philadelphia, Baltimore, Denver, Detroit, and Kansas
City, Mo., and was extended to the Federal district courts located in
Atlanta, Pittsburgh, and Minneapolis. During the year 107 persons
brought before these Federal courts, charged with crimes against the
United States, were given psychiatric examinations, and 14 of those
examined were hospitalized for further observation.
The study of mental hospital conditions in the several States was
continued during the year by the Mental Hospital Survey Committee,
a cooperative committee composed of one or more representatives of
national medical and psychiatric associations and organizations,
including the Public Health Service, the object being to bring about
improvement in and standardization of facilities and policies for the
care of the mentally ill and to improve facilities for instruction in the
psychiatric field.
A new law governing insanity proceedings in the District of Columbia became effective in June 1938, whereby the mandatory jury trial
required for the commitment of a person to a mental hospital was
abolished. This change in procedure was effected pursuant to
recommendations made after a survey and study by the Public Health
Service of the facilities and procedures for the care of the mentally
ill in the District.
Division of Personnel and Accounts
Personnel.—On June 30, 1938, the regular commissioned corps of
the Public Health Service consisted of 421 commissioned officers and
91 reserve officers on active duty. Other personnel of the Service
totaled 6,950, not including 5,851 collaborating and assistant collaborating epidemiologists, who served at nominal compensation and v/ho
were for the most part officers or employees of State and local health
organizations, and 522 emergency employees appointed under the
Works Progress Administration.
Financial statement.^—Following is a statement of appropriations and
funds made available to the Public Health Service and the expenditures therefrom for the fiscal year 1938:

REPORT OF THE SECRETARY OF THE TREASURY

229

. Statement of funds made available to the Public Health Service and expenditures for'
the fiscal year 1938
Obligations
Source of funds

Amount

Repayments and
transfers

Total
available

Direct

Transfer
to other
appropriations

APPROPRIATIONS

Salaries, Office of Surgeon General
Pay, etc., commissioned officers
Pay of acting assistant surgeons _
Pay of other employees. _
Freight, transportation, etc
Maintenance, National Institute of Health.
Pay of personnel and maintenance of hospitals -.Quarantine service
Preventing the spread of epidemic diseases
Interstate quarantine service
Control of biologic products
Maintenance, National Cancer Institute
Expenses:
Division of Venereal Diseases...
Division of Mental Hygiene
Educational exhibits
.
Grants to States, Social Security Act, sec. 601
Diseases and sanitation investigations,
Social Security Act, sec. 603
Appreciation of foreign currencies
Expenses, Division of Mental Hygiene,
1938-39
Total

$316,000
1,820,000
340, 200
1,000,000
25,450
64,000

$7,153
222, 414

$323,153
2,042, 414
340, 200
1,000,000
25, 450
64,000

$322,915
2,041,832
305, 310
976,855
22,490
63,490

6,150,000
331. 250
280, 000
36, 500
55,000
400,000

1, 051, 500

7, 201, 500
331, 250
280, 000
36, 500
, 55,.000
400,000

7,078,077
300, 268
238, 904
32, 782
..54,533
399,857

80,000
647, 580
1,000
8,000,000

80,000
647, 580
1,000
1,116, 656 1 9,116,656

71,913
642,421
744
8,908, 715

1, 600,000

21,146, 980

22,911
28,000

1,622, 911
28, 000

1, 295,021
27, 700

170,000

11,878

2, 618, 634 23, 765, 614 22, 795, 705

$203,302"

203, 302:

OTHER A V A I L A B I E FUNDS

Medical and hospital service, penal institutions (Department of Justice)
Mosquito control (District of Columbia)
Greater Texas and Pan American Exposition
Emergency Relief (act 1937), health survey.
Emergency Relief (act 1935), Hot Springs,
Ark
TotaL
Grand total

479,092
4,100
2 3, 000
316, 713

479,092
4,100
2 3,000
316, 713

469,918
3,792
1,876
315, 275

7,333^

163, 266

156,023

966,171

946,884

7, 333-

22,113,151

2, 618, 634 24,731, 785

23, 742, 589

210, 635-

1 $207,941 of this amount available for expenditure in 1939.
2 $1,095 of this amount returned to master account January 13,1938,

The status of the working capital fund of the Public Health Service
hospitals for treatment of drug addiction is as follows:
Balance July 1, 1937
Earnings.
Total available
Expenditures..
Balance June 30, 1938

$34,293
69,590
103,883
56,441
47,442

230

EEPORT OF THE SECRETARY OF THE TREASURY

The revenues derived from operations of the Public Health Service
during the year and covered into the Treasury as miscellaneous
receipts were as follows:
Source
General fund receipts:
Quarantine charges
1
Hospital charges and expenses
:Sale of subsistence
Sale of occupational therapy products
Sale of obsolete, condemned, and unserviceable equipment
5lents
Reimbursement for Government property lost or damaged
•Commissions on telephone pay stations installed in Service buildings..
Sale of refuse, garbage, and other byproducts
Sale of livestock and livestock products
Other revenues.
Total
Trust fund receipts:
Sale of effects of deceased patients
Inmates' fund
. Grand total

Amount

$211,713.93
57,989. 65
15, 269.31
579. 59
17, 596. 01
5, 698.80
623.77
2,155.99
3, 297.01
1,138. 40
2, 273.05
318,335. 51
2,402. 55
34,435.14
355,173.20

DIVISION OF RESEARCH AND STATISTICS

The Division of Research and Statistics in the Office of the Secretary
•serves as a research staff for the Secretary and other Treasury officials
on matters relating to fiscal operations and pohcies, the estimated
volume and source of future revenues, actuarial considerations
iinvolved in certain Treasury functions, and various general economic
problems arising in connection with Treasury activities.
Estimates of Federal receipts from internal revenue taxes and from
customs duties under existing laws are prepared for the Bureau of
the Budget for use in all regular and interim Budget reports, and for
such other purposes as may be required. Special revenue estimates
are prepared for Treasury officials and for Congressional committees
working on tax legislation.
The effects of actual and proposed fiscal operations on the credit
structure and general economy of the country are analyzed and longrange trends are appraised. Current and prospective conditions in
t h e money and capital markets are studied in relation to both longerterm programs of Federal financing and to the types of securities, the
coupon rates, and maturities to be employed in particular financing
operations. The investment portfolios of Government trust funds
and of governmental corporations and credit agencies are analyzed
for the purpose of recommending changes which appear advantageous.
Studies are made of existing laws and of legislative proposals in their
relation to Treasury financing and Federal fiscal policies.
Reports are prepared on the actuarial status of the old-age reserve
account established under the Social Security Act and of other pension
^nd trust funds for which the Treasury is responsible. In connection
with retirement legislation, estimates are made of probable cost of
existing and proposed plans. Other actuarial analyses are made as
required. The Government Actuary, who is on the staff of the Division, is a member of the Board of Actuaries, established under the
Civil Service Retirement Act, and serves in a consulting capacity on
actuarial matters for governmental agencies outside the Treasury
Department.

REPORT OF THE SECRETARY OF THE TREASURY

231

In addition to the preparation of memoranda and reports for the
confidential use of Treasury officials, the Division performs research
:services of a general nature, including the preparation of replies to
inquiries from outside the Treasury for information of a more or less
technical nature, the preparation of publications within the field of
its activities, the partial preparation and editing of the Annual Report
oi the Secretary, and the review of other Treasury pubhcations of an
economic or statistical nature.
DIVISION OF SAVINGS BONDS

The main function of the Division of Savings Bonds is to promote
the sale of United States savings bonds. The division creates and
designs its advertising and publicity material and maintains a statistical and mailing unit which distributes all literature and keeps the
records of sales and promotional costs. The promotional cost, including charges for advertising space, descriptive literature, distribution, theoretical cost of postage, rent, light, heat, salaries, equipment,
alterations to buildings, etc., was approximately one-fifth of 1 percent of the total cash value of savings bonds sold up to June 30, 1938.
This ratio has been declining as the volume of sales has risen and
•expenditures have decreased.
From March 1, 1935, when these bonds were first offered for sale,
to June 30, 1938, there were issued 6,451,941 savings bonds with an
aggregate maturity value of $1,777,707,650. The sales are shown in
some detail in the table on page 14.
Answers to questionnaires sent to all owners of savings bonds disclosed that the majority of these bonds had been purchased by small
investors. The tabulation indicates that 26 percent of the bonds
outstanding are held by skilled laborers, 23 percent by clerical employees, 16 percent by domestics, and 20 percent by other individuals.
The remaining 15 percent are held by banks, trust companies, insurance companies, and other corporations and associations.
The Regular Purchase Plan,c under which enrolled purchasers
receive memorandum statements on savings bonds at regular intervals,
had enlisted more than 25,000 regular purchasers by the close of the
fiscal year. In addition, the great majority of the other owners of
isavings bonds are repeat purchasers, although not enrolled under the
Regular Purchase Plan. Many investors are making systematic
purchases for the purpose of old-age retirement and other fixed future
needs.
SECRET SERVICE DIVISION'

During the year 3,075 persons were arrested by agents of the
Service, or by their direction, on charges involving counterfeiting
of the obligations and coins of the United States, forgery, and miscellaneous offenses against the statutes relating to the Treasury
Department. Of this number, 651 were note counterfeiters and
note passers, 31 were note raisers and passers of altered currency,
559 were coin counterfeiters and coin passers, 1,664 were check forgers,
2 were apprehended for negotiating stolen or forged bonds, 25 for
presenting false claims against the Government, 10 for violating the
Gold Reserve Act, 15 for violating the Farm Loan Act, 12 for violating
the Adjusted Compensation Act, 5 for making and possessing counter

232

REPORT OF THE SECRETARY OF THE TREASURY

feit strip stamps, 4 for making and negotiating counterfeit Government checks, 12 for conspiracy, 4 for impersonation, 2 for embezzlement, 6 for parole violation, and 73 for miscellaneous offenses.
Thirty-five new counterfeit note issues were detected, nearly all of
which were photo-mechanical productions. Fifteen of these counterfeits were fairly deceptive and warranted distribution of descriptive
warning circulars.
During the year counterfeit and altered notes having a representative value of $639,780 were captured by or turned over to agents of the
Service, a decrease of $19,589 compared with 1937. Counterfeit coins
in the amount of $55,015 were confiscated or turned over to the Service
in connection with raids and subsequent arrests, a decrease of $17,062.
The loss to the public through the counterfeit money placed in circulation and surrendered to the Service by banks and others was $439,667,
a decrease of $147,213 for the year.
Of the counterfeit money seized, the Service held in evidence in
court prosecutions $250,590 of coun.terfeit and altered notes, an increase of $110,588 compared with 1937, and $4,537 of counterfeit
coins, a decrease of $39. In these cases the guilty persons were
prosecuted.
In connection with arrests and investigations, agents captured or
seized 170 metal plates, 57 film and glass negatives for printing
counterfeit obligations and securities, 54}^ steel dies, 40K metal molds,
and 459K plaster molds for counterfeiting coins, and a large quantity
of miscellaneous materials and counterfeiting paraphernalia.
Of the cases brought to trial, 2,577 were convicted and sentenced,
82 were acquitted, 770 are awaiting the action of the courts, and
others were variously disposed of, some defendants being committed
to insane asylums and others delivered to the military or police
authorities. Convictions were obtained in 96.91 percent of the cases
brought to trial.
Agents conducted investigations in 11,645 check cases, 198 bond
cases, and 532 Gold Reserve' Act cases. In check investigations,
$13,940 was received in restitution and transmitted to the Treasury
Department.
There were referred to the Service for investigation 20,443 cases of
criminal character and 1,566 cases of noncriminal nature.
On April 1, 1938, a special educational campaign was inaugurated
for the purpose of instructing merchants, bank personnel, and money
handlers of all kinds in the detection of counterfeit money. Public
addresses were made by the agents before business organizations,
assemblies of bank and postal employees, police officers, and small
shopkeepers. Radio talks were broadcast; moving picture shorts
were produced; personal canvasses among storekeepers were conducted
by the field agents; and 2,160 meetings were addressed, with 93,909
persons attending. Approximately 900,000 warning notice,s describing
counterfeit notes were distributed through the mails, and more than
100,000 store employees were orally instructed. The campaign is
being continued as a regular feature of the work.

REPORT OF THE SECRETARY OF THE TREASURY

233

DIVISION OF TAX RESEARCH

The Division of Tax Research was established in the Office of the
Secretary on June 1, 1938, under the provisions of Treasury Department order dated March 25, 1938. The Director of Tax Research is
in charge of the Division. The Division analyzes taxes and tax systems and makes recommendations thereon to aid the Secretary of the
Treasury in the formulation and execution of tax programs and
fiscal policies. Surveys and economic analyses in the field of taxation
are made also for other Treasury officials and, on request, for the
Congressional Joint Committee on Internal Revenue Taxation. The
Division is responsible for the assembly and publication of all statistical information pertaining to Federal taxation and in this connection exercises general supervision over the work of the Statistical
Section of the Income Tax Unit of the Bureau of Internal Revenue,
Analyses of the Federal tax structure are made covering both
immediate and contemplated revenue needs and dealing with the
effectiveness and equitableness of the Federal tax system as it exists
and with, the proposed changes in the system. Studies are made of the
distribution of the tax burden both for specific taxes and for the tax
system as a whole. Analyses are made of the specific State and local
taxes that are related to the respective taxes in the Federal tax
structure. The experiences of States and localities in administering
various taxes are studied in connection with problems of Federal tax
administration. Comparative studies are made of selected taxes in
foreign countries and of foreign tax systems as a whole as a further
basis for study of the Federal tax structure.
Estimates of the extent and nature of the Federal, State, and
local tax-exempt debt outstanding are furnished annually to the Secretary of the Treasury. The Division also reviews current developments
in tax theory and practice, makes special janalyses and reports on
economic aspects of tax problems, prepares replies to correspondence,
and performs other functions of similar nature.
TREASURER OF THE UNITED STATES

Public moneys are received and disbursed through the accounts of
the Treasurer of the United States. Deposit accounts are carried
with designated Government depositaries and the Treasury at Vf ashington. Credit accounts with disbursing officers of the Government
are maintained on the books of the Treasurer. Funds appropriated
by Congress for the use of the various departments and establishments of the Government are advanced to disbursing officers as
required through credits to their accounts with the Treasurer, and
disbursements are made by checks drawn by disbursing officers on
their accounts with the Treasurer. The Treasurer also is fiscal agent
for the payment of principal and interest on the public debt, for the
issue and redemption of United States paper currency, for the redemption of national bank notes, Federal Reserve notes, and Federal Reserve
bank notes, and for the payment of the principal of and interest on
bonds and other obligations of the insular governments and of governmental agencies and corporations. He is treasurer of the Board of
Trustees of the Postal Savings System and trustee and custodian of
miscellaneous securities and trust funds.

234

REPORT OF THE SECRETARY OF THE TREASURY

A comparison of receipts, exclusive of postal revenues, and expenditures of the Government for the fiscal years 1937 and 1938 is presented
in the following table. The figures in this table, and throughout theremainder of the report of the Treasurer (pp. 234 to 237, inclusive),
are on the basis of daily Treasury statements (revised). (For a.
description of bases used in the tables in this report and of the accountsthrough which Treasury transactions are effected, see pp. 351 and 352.)
1937
Receipts, exclusive of postal revenues
Expenditures

.-^

Excess of expenditures over receipts

1938

$5,898,518,890.84 $7,355,844,094.65
8,863, 273,165. 28 8, 560,021,917. 01
2,964, 754, 274.44

1, 204,177,822. 36

Increase or
decrease (—)
$1,457,325, 203.81
-303, 251, 248. 27'
-1,760,576,452.08-

The public debt obligations outstanding on June 30, 1937 and 1938,
were $36,427,091,021 and $37,167,487,451, respectively, an increase
during the year of $740,396,430. Total receipts, representing pubhc
debt issues, during the year amounted to $9,621,317,266, and expenditures on account of redemptions or retirements amounted to $8,880,920,836. The details with respect to the receipts and expenditures
are shown in the table on page 396.
Public, debt retirements chargeable against ordinary receipts,,
included in the total public debt expenditures, were as follows:
Cumulative sinking fund
Received from foreign governments under debt settlements
Forfeitures, gifts, etc
Total

$65,232,400'
210,000'
139,90065.582.300-

The number of pieces of public debt principal obligations examined,
verified, and redeemed during the year was 2,476,969, compared with
9,825,366 pieces for the previous year. The difference of 7,348,397
pieces represents a decrease of 7,612,763 in adjusted service bonds
and an increase of 264,366 in other securities. Checks iu payment
of interest on the registered obligations of the United States verified
and paid numbered 940,995, and the matured interest coupons of
Government obhgations examined, verified, and paid numbered
11,884,644.
The amount of interest paid on the public debt during the year is
classified as follows:
Class of interest payment
Interest coupons paid
Registered interest checks paid
Accrued interest paid in cash on obligations at redemption
Discount on Treasury bills sold
Discount accrued on United States savings bonds
Interest paid on obligations, special series (transfer-counter warrant transactions)
Total paid
Less repayments
Net payments

Amount
$735,403,991. 93
115,840,381.18
20,990,016.95
4,122,879. 50
17,144,107.00
33, 546, 507. 55
927,047,884.11
800, 611. 69
926, 247, 272. 42

The gold holdings of the Treasury as of June 30, 1938, valued at
$35 an ounce, were $12,962,953,930.58, an increase of $644,682,765.99
over the previous year. The details of these gold holdings are shown
in table 46, page 524 of this report. The increase in gold holdings

235

REPORT OF T H E SECRETARY OF THE TREASURY

was made up as follows: Net acquisitions by miuts and assay oflSices.
on account of imports, etc. (valued at $35 an ounce), $642,007,649.17;
received imder the order of the Secretary of the Treasury of December
28, 1933 (valued at $20.67-f- an ounce), $1,579,987.93; increment
resulting from reduction in the weight of the gold dollar, $1,095,128.89.
Paper currency of each class issued and redeemed during the year
and the amounts outstanding, includuig Treasury and Federal Reserve
bank holdings, on Jime 30, 1937 and 1938, were as follows:
Outstanding
J u n e 30, 1937

Class

Gold certificates
Silver certificates
U n i t e d States notes
'
. .
T r e a s u r y notes of 1890
Federal Reserve notes
Federal Reserve b a n k notes
N a t i o n a l b a n k notes

$2,907,145,129
1,311,356, 212
346, 681, 016
1,173, 248
4, 508, 972,920
38,471, 632
273,008,240
9, 386,808, 397

Total

Redeemed

Issued;

Outstanding
J u n e 30, 1938

3, .500

$12,353,290
1, 337,832,384
244, 252, 000
2,600
1,696, 657, 920
7,632,101
52,323,810

$2,894, 791,839'
1, 515, 227,828
346,681,016.
1,170, 648
4,420,815,000.
30,839, 531
220, 687,930=

3, 394,459, 500

3,351, 054,105

9,430, 213, 792-

$1, 541, 704,000
244, 252,000
1,608,500,000

The paper currency held by Treasury offices and Federal Reserve
banks on June 30, 1938, was as follows:
Held in Treasury
oflices a n d b y
F e d e r a l Reserve H e l d b y Federal
b a n k s a n d agents Reserve b a n k s
i n c u s t o d y for
t h e Treasurer

Class

Gold certificates
Silver certificates
. .
U n i t e d States notes
T r e a s u r y notes of 1890
Federal Reserve notes
Federal Reserve b a n k notes
N a t i o n a l b a n k notes
.

_.._

.__

Total

$813,440
7,146,453
2,857, 612
1,226
13, 792, 387
379, 340
1, 353,334

$2,815,478,500
277, 925,144
81,668,418
292, 684,155
342,050
1,893, 620

$2,816, 291,940>
285,071, 597
84, 526,030
1 226
306,476, 542'
721,390'
3, 246,954

26,343, 792

3,469,991,887

3,496,335, 679-

United States paper currency shipped during the year from the
Treasury in Washington to Treasury ofl&ces, Federal Reserve banks
and branches, and others, amounted to $1,738,329,981, an increase of
$151,587,385 over the previous year. The Treasurer's OJBBLCC directed
shipments of current silver and ininor coins between the United States
Treasury, the United States mints, and the Federal Reserve banks,
and branches for use in public disbursements, etc., as follows:
S h i p m e n t s from
T r e a s u r y to
F e d e r a l Reserve b a n k s
and branches

Kind

Silver:
S t a n d a r d dollars
Half dollars
Q u a r t e r dollars
Dimes
Minor:
Nickels
Cents...
-

Total

. .

S h i p m e n t s from S h i p m e n t s
mints to
etween FedT r e a s u r y a n d beral
Reserve
Federal Rebanks and
serve b a n k s
b
r
a
nches
and branches

$2,371,100
4, 674, 600
5, 297, 350
5, 947,800

$1,445,000=
1,635,000
190,000
660,000

75,000

2,965, 350
2, 882,410

273,000

95, 000

24,138, 610

4,203,000'

$20,000

:.
..
-

236

REPORT OF THE SECRETARY OF THE TREASURY

Shipments and transfers of gold coin and bullion and of uncurrent
silver and minor coins to the mints from the Treasury and the Federal
Reserve banks and branches were authorized in the amounts of $752,752.59 and $6,469,125.48, respectively.
The proceeds of currency counted into the Treasurer's cash by the
Currency Redemption Division amounted to $248,972,634, of which
$52,365,097 was in national bank notes, $7,445,200 in Federal Reserve
bank notes, $131,125,138 in Federal Reserve notes, and $58,037,199
in United States currency.
Canceled Federal Reserve notes amounting to $1,468,165,800 were
received from Federal Reserve banks and branches for credit of Fed<eral Reserve agents.
Public moneys on deposit in designated Government depositaries
on June 30, 1938, to the credit of the Treasurer of the United States
and to the credit of other Government officers, amounted to $1,486,339,972.20 and $33,124,528.59, respectively, exclusive of items in
transit. The table on page 524 shows the amounts in the various
depositaries on June 30 of the last two years.
The checks issued by the Treasurer of the United States in payment
of interest on the registered obligations of governmental agencies and
insular governments during the year numbered 69,281 and amounted
to $14,234,239.31. Interest coupons of obligations of governmental
a-gencies and insular governments paid numbered 6,687,159 and
amounted to $134,292,948.85.
Funds were advanced to United States disbursing officers by
accountable warrants issued in an aggregate amount of $7,366,574,313.09. Warrants aggregating $10,153,023,564.55 were also issued
covering public debt principal and interest payments by the Treasurer.
Treasurer's checks aggregating $80,051,556.84 were issued on settlement warrants in payment of claims settled by the Comptroller
General.
Checks drawn on the Treasurer of the United States by Government disbursing officers and agencies paid during the year numbered
115,050,872, or 23,211,318 less than during 1937. Of the number
paid in 1938, 61,860,831 were for work rehef payments and were
paid by the Federal Reserve banks acting as agents for the Treasurer.
The aggregate amount of balances to the credit of disbursing
officers and agencies on June 30, 1938, was $1,924,364,522.52 in
6,393 accounts, compared with $1,549,054,184.10 in 5,982 accounts
on June 30, 1937, an increase of $375,310,338.42 in balances and an
increase of 411 in the number of accounts.
Drafts in 56 different kinds of foreign currencies, aggregating 2,476
in number, were purchased during the year by the Treasurer of the
United States ior the Comptroller General and for other departments
and bureaus of the Government at a cost of $180,098.65.
Personal checks, drafts, and postal and express money orders,
aggregating 1,975,699 items and amounting to $57,204,637,73, were
deposited by Government officers with the Treasurer of the United
States for collection.
Securities held in custody by the Treasurer on June 30, 1938,
amounted to $17,004,704,772 (par value), a decrease of $2,519,320,712 ^
from the previous year. The following table shows the amounts of
the securities held in custody on June 30, 1937 and 1938, classified
according to the purpose for which held:
1 See p. 19.

REPOET OF T H E SECRETARY OF THE TREASURY
Purpose for which held
To secure national.bank note circulation
To secure deposits of public moneys in depositary banks
To secure postal savings funds
For special trust accounts
_.
For District of Columbia teachers' retirement fund
For longshoremen's and harbor workers' compensation fund,
For District of Columbia workmen's compensation fund
TotaL

237

June 30, 1937

June 30, 1938

$600,000
46,230,200
137, 661, 393
19, 332, 316,841
7,057,150
138,900
21,000

$42,066,000
114,171,348
16,840,832,374
7,460,350
153, 700
21,000

19, 524,025, 484

17,004, 704,772

WAR FINANCE CORPORATION
(In liquidation)

Under authority of the act approved March 1, 1929, the liquidation
of the assets of the War Finance Corporation and the winding up of
its affairs were continued during the year.
Only $1,000 of the Corporation's original capital stock of
$500,000,000 is outstanding, $499,999,000 of capital stock having
been retired at par. The Corporation has paid into the Treasury
$64,837,271.70 on account of earnings.
The total amount of advances made by the Corporation, from its
creation, not including such part of new applications as represented
proceeds used to retire other advances, aggregated $690,431,100, of
which $688,615,688 has been repaid. The total receipts during the
year amounted to $8,783.49, and the expenditures amounted to
$876.21. In addition, $9,000 was paid into the Treasury on account
of retirement of capital stock, and $16,000 on account of earnings.
The remaining assets still carried on the books of the Corporation
as of June 30, 1938, amounted to $20,553.68, consisting of cash of
$17,240.38 (of which $10,575 is held for the redemption of outstanding
bonds and interest thereon), furniture and fixtures of $1, and agricultural and livestock loans (including expense advances of $372.22)
of $3,312.30.

104825—39-

-17

EXHIBITS

239

PUBLIC DEBT
Public issues of Treasury notes and Treasury bonds
Exhibit 1
Offering of lyi percent Treasury notes of series E-19S8 and 2 percent Treasury notes
of series B-1942
On September 7, 1937, Secretary of the Treasury Morgenthau invited subscriptions for 15 month, 1}^ percent Treasury notes of series E-1938 and 5
year, 2 percent Treasury notes of series B-1942, in payment of which only 3J4
percent Treasury notes of series A-1937, maturing September 15, 1937, were
accepted. In the related press release it was stated that $350,600,000 of special
Treasury bills, which would mature immediately after September 15, and about
$168,400,000 of interest on the public debt, which would become due September
15, would be paid from the Treasury's cash balance.
[Department Circular No. 578. Public Debt]
TREASURY DEPARTMENT,

Washington, September 7, 1937.
I. OFFERING OF NOTES

1. The Secretary of the Treasury, pursuant to the authorit}'' of the Second
Liberty Bond Act, approved September 24, 1917, as amended, invites subscriptions, at par, from the people of the United States for notes of the United States
in two series, designated lyi percent Treasury notes of series E-1938 and 2 percent
Treasury notes of series B-1942, respectively, in payment of which only Treasury
notes of series A-1937, maturing September 15, 1937, may be tendered. The
amount of the offering under this circular will be limited to the amount of Treasury
notes of series A-1937 tendered and accepted.
II. DESCRIPTION OF NOTES

1. The notes of series E-1938 will be dated September 15, 1937, and will bear
interest from that date at the rate of 1J4 percent per annum, payable on a semiannual basis on December 15, 1937, and on June 15 and December 15, 1938.
They will mature December 15, 1938, and will not be subject to call for redemption
prior to maturity.
2. The notes of series B-1942 will be dated September 15, 1937, and will bear
interest from that date at the rate of 2 percent per annum, payable semiannually
on March 15 and September 15 in each year. They will mature September 15,
1942, and will not be subject to call for redemption prior to maturity.
3. The notes shall be exempt, both as to principal and interest, from all taxation (except estate or inheritance taxes, or gift taxes) 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.
4. The notes will be accepted at par 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.
5. The notes will be acceptable to secure deposits of pubhc moneys, but will not
bear the circulation privilege.
6. Bearer notes with interest coupons attached will be issued in denominations
of $100, $500, $1,000, $5,000, $10,000, and $100,000. The notes will not be issued
in registered form.
III. SUBSCRIPTION AND ALLOTMENT

242

REPORT OF T H E SECRETARY OF THE TREASURY

banks and the Treasury Department are authorized to act as official agencies.
The Secretary of the Treasury reserves the right to close the books as to any or
^U subscriptions or classes of subscriptions at any time without notice.
2. The Secretary of the Treasury reserves the right to reject any subscription,
in whole or in part, to allot less than the amount of notes applied for, to make
allotments in full upon applications for smaller amounts and to make reduced
a,llotments upon, or to reject, applications for larger amounts, or to adopt any or
sil of said methods or such other methods of allotment and classification of allotments as shall be deemed by him to be in the public interest; and his action in
any or all of these respects shall be final. Subject to these reservations, all subscriptions will be allotted in full. Allotment notices will be sent out promptly
upon allotment.
IV. PAYMENT

1. Payment at par for notes allotted hereunder must be made or completed on
or before >September 15, 1937, or on later allotment, and may be made only in
Treasury notes of series A-1937, maturing September 15, 1937, which will be
accepted at par, and should accompany the subscription.
V. GENERAL PROVISIONS

1. As fiscal agents of the United States, Federal Reserve banks are authorized
and requested to receive subscriptions, to make allotments on the basis and up to
the amounts indicated by the Secretary of the Treasury to the Federal Reserve
banks of the respective districts, to issue allotment notices, to receive payment
for notes allotted, to make delivery of notes on full-paid subscriptions allotted,
and they may issue interim receipts pending delivery of the definitive notes.
2. The Secretary of the Treasury may at any time, or from time to time, prescribe supplemental or amendatory rules and regulations governing the offering,
which will be communicated promptly to the Federal Reserve banks.
HENRY MORGENTHAU,

Jr.,

Secretary of the Treasury.
Exhibit 2
Allotments, Treasury notes of series E-1938 and series B-1942 (from press releases,
September 8 and 14^)
On September 7, 1937, Secretary of the Treasury Morgenthau announced that
the subscription books for the offering of 1J4 percent Treasury notes of series
E-1938 and 2 percent Treasury notes of series B-1942 would close at the close of
business September 9, 1937. Reports received from the Federal Reserve banks
showed that $775,604,200 of Treasury notes of series A-1937 were exchanged for
the two new series of notes. Subscriptions were allotted in full.
. Allotments were divided among the several Federal Reserve districts and the
Treasury as follows:
Federal Reserve district

Boston.N e w York
Philadelphia
Cleveland
Richmond
_
Atlanta
Chicago S t . Louis
Minneapolis ,
Kansas City
Dallas
S a n Francisco
Treasury
Total

.
.

_
_

_ _ _ _ _
_

•_

1 Revised October 11,^1937.

_
_ _ . _ _ _ - - _ . .
_...

Treasury
notes, series
E-1938

Treasury
notes, series
B-1942

$19,751,700
299,901,900
11,369,900
11,382,200
5, 644,300
2,675,000
48, 713,100
8, 701, 600
2,904, 200
11,098,700
2,180,100
8,161, 700
976, 500

$15,699,900
255,410,800
5, 931,100
15,035,900
10,135,800
2,007, 800
13,002, 300
4, 251,100
10, 220,400
8,163, 900
959, 700
620, 700
703,900

$35,451,600
555,312, 700
17, 301,000
26,418,100
15,780,100
4. 682, 800
61,715,400
12, 952, 700
13,124,600
19,262, 600
3,139,800
8, 782,400
1,680,400

433,460,900

342,143,300

775,604,200

T o t a l allotments

REPORT OF THE SECRETARY OF THE TREASURY

243

Exhibit 3
Offering of 2}^ percent Treasury bonds of 1945 and P/^ percent Treasury notes of
series C-1942
On December 6, 1937, Secretary of the Treasury Morgenthau offered for subscription 8 year, 2}i percent Treasury bonds of 1945 and 5 year, 1% percent
Treasury notes of series C-1942. The bonds and notes were offered for cash and
in exchange for 2 ^ percent Treasury notes of series A-1938, maturing February
1, 1938. In the related press release it was stated that $450,000,000 of special
Treasury bills would mature imm^ediately after December 15, and about
$158,000,000 of interest on the public debt would become payable on December 15.
[Treasury bonds of 1945. Department Circular No. 579. Public Debt]
TREASURY DEPARTMENT,

Washington, December 6, 1937.
I. OFFERING OF BONDS

1. The Secretary of the Treasury, pursuant to the authority of the Second
Liberty Bond Act, approved September 24, 1917, as amended, invites subscriptions,
at par and accrued interest, from the people of the United States for 2}^ percent
bonds of the United States, designated Treasury bonds of 1945. The amount of
the offering is $250,000,000, or thereabouts, with the right reserved to the Secretary of the Treasury to increase the offering by an amount sufficient to accept all
subscriptions for which Treasury notes of series A-1938, maturing February 1,
1938, are tendered in payment and accepted.
II. DESCRIPTION OF BONDS

1. The bonds will be dated December 15, 1937, and will bear interest from that
date at the rate of 2}^ percent per annum, payable semiannually on June 15 and
December 15 in each year. They will mature December 15, 1945, and will not be
subject to call for redemption prior to maturity.
2. 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 taxes, or gift taxes, and (6) graduated additional income taxes, commonly
known as surtaxes, and excess-profits and war-profits taxes, now or hereafter
imposed by the United States, upon the income or profits of individuals, partnerships, associations, or corporations. The interest on an amount of bonds authorized by the Second Liberty Bond Act, approved September 24, 1917, as amended,
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.
3. The bonds will be acceptable to secure deposits of public moneys, but will
not bear the circulation privilege and will not be entitled to any privilege of
conversion.
4. Bearer bonds with interest coupons attached, and bonds registered as to
principal and interest, will be issued in denominations of $50, $100, $500, $1,000,
$5,000, $10,000, 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, under rules and regulations prescribed by the Secretary
of the Treasury.
5. The bonds will be subject to the general regulations of the Treasury Department, now or hereafter prescribed, governing United States bonds.
III. SUBSCRIPTION AND ALLOTMENT

244

REPORT OF THE SECRETARY OF THE TREASURY

case to an amount not exceeding one-half of the combined capital and surplus
of the subscribing bank or trust company. Cash subscriptions from all others
must be accompanied by payment of 10 percent of the amount of bonds applied
for. The Secretary of the Treasury reserves the right to close the books as to
any or all subscriptions or classes of subscriptions at any time without notice.
2. The Secretary of the Treasury reserves the right to reject any subscription, in
whole or in part, to allot less than the amount of bonds applied for, to rnake
allotments in full upon applications for smaller amounts and to make reduced
allotments upon, or to reject applications for larger amounts, or to adopt any or
all of said methods or such other methods of allotment and classification of allotments as shall be deemed by him to be in the public interest; and his action in any
or all of these respects shall be final. Subject to these reservations, subscriptions
in payment of which Treasury notes of series A-1938 are tendered will be allotted
in full. Allotment notices will be sent out promptly upon allotment, and the
basis of the allotment will be publicly announced.
IV. PAYMENT

1. Payment at par and accrued interest, if any, for bonds allotted on cash
subscriptions must be made or completed on or before December 15, 1937, or on
later allotment. In ever}^ case where payment is not so completed, the payment
with application up to 10 percent of the amount of bonds applied for shall, upon
declaration made by the Secretary of the Treasury in his discretion, be forfeited
to the United States. Any qualified depositary will be permitted to make payment by credit for 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 notes of series A-1938, maturing
February 1, 1938, with coupon dated February 1, 1938, aittached, will be accepted
at par in payment for any bonds subscribed for and allotted, and accrued interest
on the maturing notes from August 1, 1937, to December 15, 1937 ($9.701087 per
$1,000), will be paid following acceptance of the notes. Payment through
surrender of Treasury notes of series A-1938 should be made when the subscription
is tendered.
V. GENERAL PROVISIONS

1. As fiscal agents of the United States, Federal Reserve banks are authorized
and requested to receive subscriptions, to make allotments on the basis and up to
the amounts indicated by the Secretary of the Treasury to the Federal Reserve
banks of the respective districts, to issue allotment notices, to receive payment
for bonds allotted, to make delivery of bonds on full-paid subscriptions allotted,
and they may issue interim receipts pending delivery of the definitive bonds.
2. The Secretary of the Treasury may at any time, or from time to time, prescribe supplemental or amendatory rules and regulations governing the offering,
which will be communicated promptly to the Federal Reserve banks.
HENRY MORGENTHAU,

Jr.,

Secretary of the Treasury.
[Treasury notes, series C-1942. Department Circular No. 580. Public Debt]
TREASURY

DEPARTMENT,

Washington, December 6, 1937.
I. OFFERING OF NOTES

1. The Secretary of the Treasury, pursuant to the authority of the Second
Liberty Bond Act, approved September 24, 1917, as amended, invites subscriptions, at par and accrued interest, from the people of the United States for 1%
percent notes of the United States, designated Treasury notes of series C-1942.
The amount of the offering is $200,000,Q.06, or thereabouts, with the right reserved
to the Secretary of the Treasury to increase the offering by an amount sufficient
to accept all subscriptions for which Tieasury notes of series A-1938, maturing
February 1, 1938, are tendered i'n payment and accepted.
II. DESCRIPTION OF NOTES

1. The notes will be dated December 15, 1937, and will bear interest from that
date at the rate of 1^ percent per annum, payable semiannually on June 15 and

REPORT OF THE SECRETARY OF THE TREASURY

245

December 15 in each year. They will mature December 15, 1942, and will not
be subject to call for redemption prior to maturity.
2. The notes shall be exempt, both as to principal and interest, from all taxation (except estate or inheritance taxes, or gift taxes) 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.
3. The notes will be accepted at par 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.
4. The notes will be acceptable to secure deposits of public moneys, but will
not bear the circulation privilege.
5. Bearer notes with interest coupons attached will be issued in denominations
of $100, $500, $1,000, $5,000, $10,000, and $100,000. The notes will not be
issued in registered form.
III. SUBSCRIPTION AND ALLOTMENT

1. Subscriptions will be received at the Federal Reserve banks and branches
and at the Treasury Department, Washington. Banking institutions generally
may submit subscriptions for account of customers, but only the Federal Reserve
banks and the Treas'ury Department are authorized to act as official agencies.
Others than banking institutions will not be permitted to enter subscriptions
except for their own accojunt. Cash subscriptions from banks and trust companies for their own account will be received without deposit but will be restricted
in each case to an amount not exceeding one-half of the combined capital and
surplus of the subscribing bank or trust company. Cash subscriptions from all
others must be accompanied by payment of 10 percent of the amount of notes
applied for. The Secretary of the Treasury reserves the right to close the books
as to any or all subscriptions or classes of subscriptions at any time without notice.
2. The Secretary of the Treasury reserves the right to reject any subscription,
in whole or in part, to allot less than the amount of notes applied for, to make
allotments in full upon applications for smaller amounts and to make reduced
allotments upon, or to reject, applications for larger amounts, or to adopt any or
all of said methods or such other methods of allotment and classification of allotments as shall be deemed by him to be in the public interest; and his action in
any or all of these respects shall be final. Subject to these reservations, subscriptions in payment of which Treasury notes of series A-1938 are tendered will
be allotted in full. Allotment notices will be sent out promptly upon allotment,
and the basis of the allotment will be publicly announced.
IV. PAYMENT

1. Payment at par and accrued interest, if any, for notes allotted on cash subscriptions must be made or completed on or before December 15, 1937, or on
later allotment. In every case where payment is not so completed, the payment
with application up to 10 percent of the amount of notes applied for shall, upon
declaration made by the Secretary of the Treasury in his discretion, be forfeited
to the United States. Any qualified depositary will be permitted to make payment by credit for 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 notes of series A-1938,
maturing February 1, 1938, with coupon dated February 1, 1938, attached, will
be accepted at par in payment for any notes subscribed for and allotted, and •
accrued interest on the maturing notes from August 1, 1937, to December 15,
1937 ($9.701087 per $1,000), will be paid following acceptance of the notes. Payment through surrender of Treasury notes of series A-1938 should be made
when the subscription is tendered.
V. GENERAL PROVISIONS

1. As fiscal agents of the United States, Federal Reserve banks are authorized
and lequested to receive subscriptions, to make allotments on the basis and up
to the amounts indicated by the Secretary of the Treasury to the Federal Reserve
banks of the respective districts, to issue allotment notices, to receive payment
for notes allotted, to make delivery of notes on full-paid subscriptions allotted,
and they may issue interim receipts pending delivery of the definitive notes.

246

REPORT OF T H E SECRETARY OF THE TREASURY

2. T h e Secretary of t h e Treasury may at any time, or from time to time, prescribe supplemental or amendatory rules and regulations governing t h e offering
which will be communicated promptly to the Federal Reserve banks.
HENRY

MORGENTHAU,

Jr.,

Secretary of the Treasury.
Exhibit 4
Subscriptions and allotments. Treasury bonds of 1945 and Treasury notes of series
C-1942 {from press releases, December 7, 10, and I4, 1937 0
On December 6, 1937, Secretary of t h e Treasury Morgenthau announced t h a t
the subscription books for t h e cash offering of 2]4 percent Treasury bonds of 1945
and 1% percent Treasury notes of series C-1942 closed a t t h e close of business
December 6, 1937. Reports received from the Federal Reserve banks showed
t h a t cash subscriptions for the offering of bonds aggregated $4,084,309,500, of
which $293,513,250 was allotted. Subscriptions in a m o u n t s up to and including
$1,000 were allotted in full, a n d those in a m o u n t s over $1,000 were allotted 7
percent, b u t not less t h a n $1,000 on any one subscription.
For t h e offering of Treasury notes cash subscriptions aggregated $2,702,416,300,
of which $219,035,700 was allotted. Subscriptions in a m o u n t s up to and including
$1,000 were allotted in full, and those in a m o u n t s over $1,000 were allotted 8
percent, b u t not less t h a n $1,000 on any one subscription.
T h e subscription books for both issues closed a t t h e close of business December
8, 1937, for t h e receipt of subscriptions in p a y m e n t of which 2 ^ percent Treasury
notes of series A-1938 were tendered. Exchange subscriptions for Treasury
bonds totaled $247,330,300 and for Treasury notes $13,339,500. These subscriptions were allotted in full.
Subscriptions and allotments were divided among t h e several Federal Reserve
districts and t h e Treasury as follows:

F e d e r a l R e s e r v e district

Cash s u b scriptions
received

Exchange subscriptions
received a n d
allotted

Total subscriptions
received

Cash s u b scriptions
allotted

Total subscriptions
allotted

T r e a s u r y b o n d s of 1945
Boston
New York
Pbiladelphia
Cleveland - .
Richmond
Atlanta
Chicago.'
S t . Loiiis
Minneapolis..
Kansas City
Dallas.
San Francisco
Treasury..

_
..

Total

$388, 392, 700
2, 078, 465,700
242, 038. 350
208, 652,800
134,496, 600
102,447, 700
381, 247, 050
97,155, 700
51, 270, 550
68, 324, 750
73. 715, 050
243, 346, 550
14, 756, 000

$6,163,300 $394, 556, 000
196,157,900 2, 274, 623, 600
440, 800
242,479,150
3,431,200
212, 084, 000
1,468, 500
135, 965,100
2,848,^00
105, 296. 600
16, 368, 900
397,615,950
2,039, 700
99,395,400
893. 500
52,164, 050
9, 370.400
77, 695, 150
2, 635,100
76, 350,150
1, 853.100
245,199, 650
18, 415, 000
3, 659, 000

$27, 632, 000
146, 232, 700
17, 346, 000
15, 400, 750
9, 902,150
7, 920,800
27, 937,700
7, 926, 800
4. 001, 200
5, 280, 900
5, 586. 800
17, 310, 950
1,'034, 500

$33, 795, 300
342, 390, 600
17, 786, 800
18,831,950
11,370,650
10, 769, 700
44, 306, 600
9, 966, 500
4,894, 700
14, 651, 300
8, 221, 900
19,164, 050
4. 693, 500

4,084, 309. 500

247, 330, 300 4, 331. 639,800

293, 513, 250

540,843, 550

T r e a s u r y notes of series C-1942
Boston
_
New York
Philadelphia
.
Cleveland
Richmond
Atlanta .
Chicago
St. Louis
...
Minneapolis.
Kansas City. .
Dallas
San Francisco
Treasury

..'_

Total

1 Revised January 5, 1938.

$189. 842. 000
1,265,430,300
186, 337, 500
169, 601,100
99, 027, 200
85, 031, 200
276, 319,100
78, 991, 400
43, 403, 000
55, 226, 200
53, 427, 800
198, 014, 500
1, 765, 000

$646, 700 $190,488, 700
7, 254, 300 1, 272, 684. 600
187,890, 500
1, 553, 000
170,142, 200
541,100
99,635, 500
608, 300
85, 031, 200
1,130, 600
277, 449, 700
987, 700
79, 979,100
25, 000
43, 428, 000
184, 500
55, 410, 700'
82, 000
53, 509. 800
281, 500
198, 296, 000
44, 800
1, 809, 800

$15, 290, 500
101,438, 800
15, 018, 200
13, 763, 700
8,198, 000
7,179, 500
22, 518, 500
6, 956, 700
3, 592, 000
4, 575, 300
4, 446, 500
15, 916, 000
142, 000

$15, 937, 200
108, 693,100
16, 571. 200
14, 304, SOO
8, 806, 300
7,179, 500
23,649,100
7, 944, 400
3, 617.000
4,759, 800
4, 528, 500
16,197, 500
186,800

2, 702, 416, 300

13, 339, 500 2,715, 755,800

219, 035, 700

232, 375, 200

REPORT OF THE SECRETARY OF THE TREASURY

247

Exhibit 5
Offering of 2y% percent Treasury bonds of 1948
On March 7, 1938, Secretary of the Treasury Morgenthau announced the
offering of lOJ^ year, 2}^ percent Treasury bonds of 1948 in exchange for 3 percent
Treasury notes of series C-1938, maturing March 15, 1938. In the related press
release it wa.s stated that special Treasury bills aggregating $400,642,000, which
would mature immediately after March 15, and about $162,000,000 of interest
on the public debt, which would become due on March 15, would be paid from
the Treasury's cash balance.
[Department Circular No. 581. Public Debt]
TREASURY

DEPARTMENT,

Washington, March 7, 1938.
I. OFFERING OF BONDS

1. The Secretary of the Treasury, pursuant to the authority of the Second
Liberty Bond Act, approved September 24, 1917, as amended, invites subscriptions, at par, from the people of i)he United States for 2J^ percent bonds of the
United States, designated Treasury bonds of 1948, in payment of which only
Treasury notes of series C-1938, maturing March 15, 1938, may be tendered.
The amount of the offering under this circular will be limited to the amount of
Treasury notes of series C-1938 tendered and accepted.
II. DESCRIPTION OF BONDS

1. The bonds will be dated March 15, 1938, and will bear interest from that
date at the rate of 2}^ percent per annum, payable semiannually, on September
15, 1938, and thereafter on March 15 and September 15 in each year. They
will mature September 15, 1948, and will not be subject to call for redemption
prior to maturity.^ * * *
III. SUBSCRIPTION AND ALLOTMENT

1. Payment at par for bonds allotted hereunder must be made or completed on
or before March 15, 1938, or on later allotment, and may be made only in Treasury
notes of series C-1938, maturing March 15, 1938, which will be accepted at par,
and should axcompany the subscription.
V. GENERAL PROVISIONS

1. As fiscal agents of the United States, Federal Reserve banks are authorized
and requested to receive subscriptions * * *
HENRY MORGENTHAU, JR.,

Exhibit 6

Secretary of the Treasury.

Allotments, Treasury bonds of 1948 (from press releases, March 8 and 11, 1938^)
On March 7, 1938, Secretary of the Treasury Morgenthau announced that the
subscription books for the exchange offering of 2}^ percent Treasury bonds of 1948
would close at the close of business March 9, 1938. Reports received from the
» Omitted portion similar to corresponding section of Department Circular No.''579, p. 243.
2 Revised March 21, 1938.

248

REPORT OF TPIE SECRETARY OF THE TREASURY

Federal Reserve banks showed that $450,978,400 of Treasury notes of series
C-1938 were exchanged for the bonds, all subscriptions having been allotted in full.
Allotments were divided among the several Federal Reserve districts and the
Treasury as follows:
Subscriptions
received and
allotted

Federal Reserve district
Boston..
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis

$12,354,600
316,408, 700
3,788, 900
7, 735, 400
11, 759,000
6,110,000
53, 678,100
6, 584, 200

Federal Reserve district
Minneapolis. _
Kansas City
Dallas
San Francisco
Treasury

Subscriptions
received and
allotted
$10,288,800
15,377,100
2, 642, 500
3, 642, 600
708, 500

_ .

Total

450,978 400

Exhibit 7
Offering of 2yA percent Treasury bonds of 1958-63 and lYs percent Treasury notes
of series A-1943
On June 6, 1938, Secretary of the Treasury Morgenthau announced the offering
of 20-25 year, 2 ^ percent Treasury bonds of 1958-63 and 5 year, l}i percent
Treasury notes of series A-1943, both in exchange for 2% percent Treasury notes
of series B-1938, maturing June 15, 1938, or 2}i percent Treasury notes of series
D-1938, maturing September 15, 1938. In the related press release it was
stated that $250,306,000 of special Treasury bills, which would mature immediately after June 15, and about $190,000,000 of interest on the public debt,
which would become due on June 15, would be paid from the Treasury's cash
balance.
[Treasury bonds of 1958-63. Department Circular No. 584. Public Debt]
TREASURY

DEPARTMENT,

Washington, June 6, 1938.
I. OFFERING OF BONDS

1. The Secretary of the Treasury, pursuant to the authority of the Second
Liberty Bond Act, approved September 24, 1917, as amended, invites subscriptions, at par, from the people of the United States for 2 ^ percent bonds of the
United States, designated Treasury bonds of 1958-63, in payment of which only
Treasury notes of series B-1938, maturing June 15, 1938, or Treasury notes of
series D-1938, maturing September 15, 1938, may be tendered. The amount
of the offering under this circular will be limited to the amount of Treasury notes
of series B-1938 and of series D-1938 tendered and accepted.
II. D E S C R I P T I O N O F BONDS

1. The bonds will be dated June 15, 1938, and will bear interest from that
date at the rate of 2% percent per annum, payable semiannually on December 15,
1938, and thereafter on June 15 and December 15 in each year until the principal
amount becomes payable. They will mature June 15, 1963, but may be redeemed
at the option of the United States on and after June 15, 1958, in whole or in part,
at par and accrued interest, on any interest day or days, on 4 months' notice of
redemption given in such manner as the Secretary of the Treasury shall prescribe.
In 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.^ * * *
III.

SUBSCRIPTION AND ALLOTMENT

REPORT OF THE SECRETARY OF THE TREASURY

249

all of said methods or such other methods of allotment and classification of
allotments as shall be deemed by him to be in the public interest; and his action
in any or all of these respects shall be final. Subject to these reservations, all
subscriptions will be allotted in full. Allotment notices will be sent out promptly
upon allotment.
IV. PAYMENT

1. Payment at par for bonds allotted hereunder must be made or completed
on or before June 15, 1938, or on later allotment, and may be made only in
Treasury notes of series B-1938, maturing June 15, 1938, or in Treasury notes of
series I)-1938, maturing September 15, 1938, which will be accepted at par, and
should accompany the subscription. In the case of Treasury notes of series
D-1938 tendered in payment, coupons dated September 15, 1938, must be
attached to the notes when surrendered, and accrued interest from March 15,
1938, to June 15, 1938 ($6.25 per $1,000), will be paid following acceptance of
the notes.
V. GENERAL PROVISIONS

1. As fiscal agents of the United States, Federal Reserve banks are authorized
and requested to receive subscriptions * * *_
HENRY MORGENTHAU,

Jr.,

Secretary of the Treasury.
[Treasury notes, series A-1943. Department Circular No. 585. Public Debt]
TREASURY

DEPARTMENT,

Washington, June 6, 1938.
I. OFFERING OF NOTES

1. The Secretary of the Treasury, pursuant to the authority of the Second Liberty Bond Act, approved September 24, 1917, as amended, invites subscriptions,
at par, from the people of the United States for IJ^ percent notes of the United
States, designated Treasury notes of series A-1943, in payment of which only
Treasury notes of series B-1938, maturing June 15, 1938, or Treasury notes of
series D-1938, maturing September 15, 1938, may be tendered. The amount
of the offering under this circular will be limited to the amount of Treasury
notes of series B-193.8 and of series D-1938 tendered and accepted.
II. DESCRIPTION OF NOTES

1. The notes will be dated June 15, 1938, and will bear interest from that date
at the rate of l}i percent per annum, payable semiannually on December 15,
1938, and thereafter on June 15 and December 15 in each year until the principal
amount becomes payable. They will mature June 15, 1943, and will not be subject to call for redemption prior to maturity.^ * * *
III. SUBSCRIPTION AND ALLOTMENT

1. Payment at par for notes allotted hereunder must be made or completed on
or before June 15, 1938, or on later allotment, and may be made only in Treasury
notes of series B-1938, maturing June 15, 1938, or in Treasury notes of series D 1938, maturing September 15, 1938, which will be accepted at par, and should
accompany the subscription. In the case of Treasury notes of series D-1938
1 Omitted portion similar to corresponding section of Department Circular No. 580, p. 244.

250

REPORT OF THE SECRETARY OF THE TREASURY

tendered in payment, coupons dated September 15, 1938, must be attached to the
notes when surrendered. Interest from March 15, 1938, to September 15, 1938,
on the maturing notes wiU be credited to subscribers, and interest from June 15,
1938, to September 15, 1938, on the new notes will be charged to subscribers.
The difference ($9.672131 per $1,000) will be paid following acceptance of the
notes.
V. G E N E R A L

PROVISIONS

1. As fiscal agents of the United States, Federal Reserve banks are authorized
and requested to receive subscriptions * * *.
HENRY MORGENTHAU, Jr.,

Secretary of the Treasury.
Exhibit 8
Allotments, Treasury bonds of 1958-63 and Treasury notes of series A-1943 {from
press releases, June 7 and 13, 1938 ^)
On June 6, 1938, Secretary of the Treasury Morgenthau announced that the
subscription books for the exchange offering of 2 ^ percent Treasury bonds of
1958-63 and 1}^ percent Treasury notes of series A-1943 would close at the close
of business June 8, 1938. Reports received from the Federal Reserve banks showed
that $607,878,800 of Treasury notes of series B-1938, maturing June 15, 1938,
and $578,677,400 of Treasury notes of series D-1938, maturing September 15,
1938, were exchanged for the issues of bonds and notes. Subscriptions were
allotted in full.
Allotments were divided among the several Federal Reserve districts and the
Treasury as follows:
Federal Reserve district

J u n e notes
exchanged

September
notes exchanged

Total
exchanges

T r e a s u r y b o n d s of 1958-63
Boston
N e w York
PhiladelphiaCleveland
Richmond
Atlanta
Chicago
S t . Louis
Minneapolis..
Kansas C i t y . .
Dallas
S a n Francisco.
Treasury
, Total._.

$22, 296,900
405, 885,800
4, 752,100
5,416.300
5, 702,800
3,083, 900
73,070, 800
12,995,200
3, 247,100
7,831,000
5,946,900
18,356, 600
3,150,800
571, 736, 200

Boston
New York
Philadelphia..
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis..
Kansas City..
Dallas
S a n Francisco.
Treasury
Total...

$2, 551,000
21,659,300
1, 262,300
2,423,200
230,000
275. 500
1,833,700
3,810.100
254, 500
280,000
5G9,000
976, .500
17, 500
36,142, 600

$8, 610, 550
250,950, 550
7, 219, 600
15,896, 950
5,160,650
2,711,900
35, 703, 400
2, 741, 650
3,950,150
6,960,950
930,600
5,342,450
865,000
347,044,400

$30,907.450
656,836,350
11,971,700
21, 313, 250
10,863,450
5, 795, 800
108, 774, 200
15,736,850
7,197, 250
14, 791, 950
6, 877, 500
23, 699,050
4,015,800
918,780,600

T r e a s u r y notes of series A-1943
$5, 549,000
212, 617,300
162,900
160,000
379, 400
441, 000
497, 700
922,400
117,700
750, 200
71,000
909, 400
55,000
231,633,000

$8,100,000
234, 276, 600
4,425,200
5, 583,200
609, 400
716, 500
5,331,400
4, 732, 500
372. 200
1,030,200
040,000
1,885, 900
72, 500
267, 775, 600

Issues of Treasury bills
Exhibit 9
Inviting tenders for Treasury bills dated July 7, 1937 {press release, June 30, 1937)
TREASURY DEPARTMENT,

Washington, June SO, 1937.
The Secretary of the Treasury gives notice that tenders are invited for Treasury
bills to the amount of $50,000,000, or thereabouts. They will be 273-day bills
» Revised J u l y 5, 1938.

REPORT OF THE SECRETARY OF THE TREASURY

251

and will be sold on a discount basis to the highest bidders. Tenders will be
received at the Federal Reserve banks, or the branches thereof, up to. 2 p. m.,
eastern standard time, on Friday, July 2, 1937. Tenders will not be received
at the Treasury Department, Washington.
The Treasury bills will be dated July 7, 1937, and will mature on April 6, 1938,
and on the maturity date the face amount will be payable without interest. They
will be issued in bearer form only, and in amounts or denominations of $1,000,
$10,000, $100,000, $500,000, and $1,000,000 (maturity value).
It is urged that tenders be made on the printed forms and forwarded in the
special envelopes which will be supplied by the Federal Reserve banks or branches
upon application therefor.
No tender for an amount less than $1,000 will be considered. Each tender
must be in multiples of $1,000. The price offered must be expressed on the basis
of 100, with not more than three decimal places, e. g., 99.125. Fractions must
not be used.
Tenders will be accepted without cash deposit from, incorporated banks and
trust companies and from responsible and recognized dealers in investment
securities. Tenders from others must be accompanied by a deposit of 10 percent
of the face amount of Treasury bills applied for, unless the tenders are accompanied by an express guaranty of payment by an incorporated bank or trust
company.
Immediately after the closing hour for receipt of tenders on July 2, 1937, all
tenders received at the Federal Reserve banks or branches thereof up to the
closing hour will be opened and public announcement of the acceptable prices
will follow as soon as possible thereafter, probably on the following morning. The
Secretary of the Treasury expressly reserves the right to reject any or all tenders
of parts of tenders, and to allot less than the amount applied for, and his action
in any such respect shall be final. Those submitting tenders will be advised of
the acceptance or rejection thereof. Payment at the price offered for Treasury
bills allotted must be made at the Federal Reserve banks in cash or other immediately available funds on July 7, 1937.
The Treasury bills will be exempt, as to principal and interest, and any gain
from the sale or other disposition thereof will also be exempt, from all taxation,
except estate and inheritance taxes. (Attention is invited to Treasury Decision
4550, ruling that Treasury bills are not exempt from the gift tax.) No loss from
the sale or other disposition of the Treasury biUs shall be allowed as a deduction,
or otherwise recognized, for the purposes of any tax now or hereafter imposed
by the United States or any of its possessions.
Treasury Department Circular No. 418, as amended, and this notice prescribe
the terms of the Treasury bills and govern the conditions of their issue. Copies
of the circular may be obtained from any Federal Reserve bank or branch thereof.

Exhibit 10
Acceptance of tenders for Treasury bills dated July 7, 1937 {press release July 3, 1937)
TREASURY DEPARTMENT,

Washington, July 3, 1937.
Acting Secretary of the Treasury Taylor announced last evening that the
tenders for $50,000,000, or thereabouts, of 273-day bills, dated July 7, 1937, and
maturing April 6, 1938, which were offered on June 30, were opened at the Federal
Reserve banks on July 2.
The total amount applied for was $133,100,000, of which $50,010,000 was
accepted. The accepted bids ranged in price from 99.678, equivalent to a rate
of about 0.425 percent per annum, to 99.607, equivalent to a rate of about 0.518
percent per annum, on a bank discount basis. Only part of the amount bid for
at the latter price was accepted. The average price of Treasury bills to be issued
is 99.628 and the average rate is about 0.490 percent per annum on a bank discount basis.
Exhibit 11
Press releases pertaining to Treasury bill issues during the fiscal year 1938 were
similar in form to the foregoing and are, therefore, not here reproduced. The
essential details regarding each issue are summarized in the following table:

S u m m a r y of information contained i n press releases issued i n connection with Treasury bills offered during the fiscal year 1938
Bids accepted
Total
amount

Date of maturity

Date of issue

Highest
Price
(per
hundred)

Lowest

Equivalent
ratei
(percent)

Price
(per
hundred)

Average

Equivalent
rate»
(percent)

Amount
(in thousands)

Date of press releases
Price
(per
hundred)

Apr. 6, 1938..
Dec. 16, 1937.
Apr. 13, 1938.
Dec. 16, 1937.
Apr. 20, 1938.
Dec. 17, 1937.
Apr. 27, 1938.
Dec. 17, 1937.
May 4, 1938..
Dec. 18, 1937.
May 11, 1938.
Dec. 18, 1937.
May 18, 1938.
Dec. 20, 1937.
May 25, 1938.
Dec. 20, 1937.
June 1, 1938..
Dec. 21, 1937.
June 8, 1938.June 15, 1938.
June 22, 1938.
June 29, 1938.
July 6, 1938...
July 13, 1938.
July 20, 1938.
Mar. 16, 1938.
Mar. 16, 1938.
Mar. 17, 1938.
Mar. 17, 1938.
Mar. 18, 1938.
Mar. 18, 1938.
Mar. 19, 1938.

Date of
closing

Equivalent
ratei
(percent)

1937 and 1938

1937
July 7
July 14
Do
July 21
Do
July 28
Do
Aug. 4
Do
Aug. 11
Do
Aug. 18
Do
.A.ug. 25
Do
Sept. 1
Do
Sept. 8
Do
Sept. 15
Sept. 22
Sept. 29
Oct. 6
Oct. 13
Oct. 20
Oct. 27
Nov. 3
Nov. 10
Nov. 17
Nov. 24
Dec. 1
Dec. 8

Days to applied
for (in
maturity
thousands)

193;
273
155
273
148
273
142
273
135
273
129
273
122
273
117
273
110
273
104

273
273
273
273
273
273
273
140
133
127
120
114
107
101

$133,100
120,248
141, 935
144,990
156,436
137,791
151,608
165,122
133,795
148,448
146,268
79,813
140,846
95,371
118,091
103,158
123,622
160,209
159,174
176,174
159,031
120.959
183,266
134,079
163,285
143,108
173,632
126,458
156,317
137,294
138,479
145,843 1

$99. 678
99.872
2 99.700
99.844
99.700
99.866
99. 650
99. 995
99. 674
100. 000
< 99. 674
100. 000
99.841
100. 000
i 99.651
99. 921
99.621.,
99. 971'
6 99.600
99.630
99.697
99. 750
7 99. 697
99. 704
99. 736
8 99. 903
8 99. 922
99. 937
99. 957
99. 980
99.970
100. 000

0.425
.297
.396
.379
.396
.340
.462
.013
.430
.000
.430
.000
.210
.000
.460
.259
.500
.100
..527
.488
.400
.330
.400
.390
.348
.249
.211
.179
.129
.063
.101
.000

$99. 607
99. 813
99. 597
99. 836
99. 614
99. 850
99.626
99. 899
99. 639
99.918
99.625
99.895
99. 641
99. 883
99. 583
99.860
99. 518
99. 856
99.448
99. 547
99. 651
99. 697
99. 660
99. 666
99. 716
99.896
99. 912
99. 925
99. 951
99. 960
99.961
99. 962

0.518
.434
.531
.399
.509
.380
-493
.269
.476
.229
.495
.310
.473
.360
.550
.458
.636
.498
.728
.597
.460
.400
.448
.440
.375
.267
.238
.213
.147
.126
.131
.135

$50,010
50, 060
50, 000
3 50,137
50, 015
50, 012
50, 032
50, 000
50, 047
50,086
50, 057
50, 018
50, 048
50, 043
50, 001
50,072
50, 028
50, 224
50, 016
50,010
50, 015
50,116
50, 090
50,103
50. 025
50, 065
50,119
50,044
50, 050
50,152
50,040
50,142

99. 819
99. 610
99.837
99. 620
99.853
99, 632
99. 915
99. 646
99. 924
99.638
99. 927
99. 652
99.892
99.603
99. 871
99.534
99.861
99.461
99.557
99. 666
99. 709
99. 669
99.675
99. 725
99. 899
99. 917
99. 929
99. 952
99. 963
99.965
99. 964

0.490
.419
.514
.397
.502
.372
.485
.228
.467
.211
.478
.216
.459
.332
.524
.422
.615
.480
.711
.584
.441
.384
.436
.429
.362
.261
.226
.201
.143
.117
.119
.129

June 30 and July 3.
jjuly 9and 13

July 2
J u l y 12

July 16 and 20

J u l y 19

July 23 and 27

July

I July 30 and Aug. 3.

Aug.

JAug. 6 and 10

Aug.

JAug. 13 and 17

A u g . 16

Aug. 20 and 24

A u g . 23

JAug. 27 and 31

A u g . 30

•Sept. 1 and 4
Sept. 10 and 14
Sept. 17 and 21
Sept. 24 and 28
Oct. 1 and 5
Oct. 8 and 12
Oct. 15 and 19
Oct. 22 and 26
Oct. 27 and 30
Nov. 5 and 9
Nov. 12 and 16
Nov. 19 and 23
Nov. 26 and 30---.
Dec. 3 and 7 . . - , . . .

Sept.
Sept.
Sept.
Sept.
Oct.
Oct.
Oct.
Oct.
Oct.
Nov.
Nov.
Nov.
Nov.

3
13
20
27
4
11
18
25
29
8
15
22
29

Dec.

D e c . 15..
D e c . 22..
D e c . 29..

M a r . 19, 1938.
M a r . 23, 1938.
M a r . 30, 1938.

Jan. 5 . . .
Jan.12..
Jan.19.Jan. 26-Feb. 2—
Feb. 9—
Feb. 1 6 ^ Feb. 2 3 00 M a r . 2 - Do..
Mar. 9.Do..
M a r . 16.
DoM a r . 23Do.M a r . 30.
Do..
Apr. 6...
Apr. 13..
A p r . 20..
Apr. 27..
May 4...
May 11..
M a y 18..
May25_.
J u n e 1..-.
June 8...
June 15..
June 22..
June 29..

Apr. 6,1938-.
A p r . 13, 1938.
A p r . 20, 1938.
A p r . 27, 1938M a y 4 , 1938..
M a y 11, 1938.
M a y 18, 1938.
M a v 25, 1938J u n e 1, 1938-.
J u n e 16, 1938.
J u n e 8, 1938- J u n e 16, 1938J u n e 15, 1938,
J u n e 17, 1938J u n e 17, 1938J u n e 22, 1938J u n e 18, 1938J u n e 29, 1938J u l y 6 , 1938..
J u l y 13, 1938..
J u l y 20, 1938..
J u l y 27, 1938..
A u g . 3. 1938..
A u g . 10, 1938.
A u g . 17, 1938.
A u g . 24, 1938A u g . 31, 1938.
Sept. 7, 1 9 3 8 S e p t . 14, 1938.
S e p t . 21, 1938Sept. 28, 1938.

153, 402
126,308
140, 292

100.000
100. 000

.000
.000
.063

99.963
99. 971
99. 973

153, 977
138, 807
160. 075
176,533
184, 593
150, 294
146,823
141,485
230, 782
160, 894
227, 296
159, 587
204, 681
122, 339
118, 569
242,126
82, 462
233,733
199, 200
197,199
376,161
158. 830
187, 632
211,547
204, 464
169, 687
196, 449
354, 671
415,110
428, 614
281,464

99. 992
99. 987
99. 982
99. 980
99. 981
99.982
99.985
99. 983
99. 982
100. 000
99. 985
99.995
99. 990
99. 996
10 99. 993
99. 993
99.995
99. 987
99. 980
99. 972
11 99. 987
100.000
100.000
5 99.995
12 99. 996
13 99. 996
99. 995
99. 998
100. 000
100.000
100. 000

.032
.051
.071
.079
.075
.071
.059
.067
.071
.000
.059
.018
.040
.015
.029
.028
.023
.051
.079
.111
.051
.000
.000
.020
.016
.016
.020
.008
.000
.000
.000

99.979
99.973
99. 971
99. 973
99. 976
99. 978
99. 977
99. 975
99. 977
99. 977
99. 981
99. 980
99. 982
99. 980
99. 984
99. 982
99. 978
99. 976
99. 963
99. 961
99. 983
99. 987
99. 991
99. 992
99. 993
99. 993
99. 993
99. 989
99. 992
99. 996

.142
.115
.107

50,030
50, 098
50, 077

.107
.115
.107
.095
.087
.091
.099
.091
.078
.075
.073
.071
.077
.067
.071
.099
.095
.146
.154
.067
.051
.036
.032
.028
.028
.028
.044
.032
.016
.016

50,000
50, 027
50,130
50, 035
50, 060
50,144
50, 063
50, 276
50,137
50, 042
50,156
50, 033
50, 208
50, 025
50, 099
100, 282
50,107
100, 097
100, 325
100,188
100, 420
50, 050
50, 021
50,109
50, 269
50, 409
50. 020
lOO; 189
100. 701
101,150
100,095

.124
.102
.101

D e c . 10 a n d 14
D e c . 17 a n d 21
D e c . 24 a n d 28

99. 984
99. 976
99.972
99. 974
99.979

.065
.097
.111
.103

99. 980
99. 977
99. 978
99. 983
99. 982
99. 984
99. 982-f
99. 982
99.986
99. 983
99. 982
99.978
99. 965
99. 963
99. 985

.078
.092
.086
.058
.073
.059
.070
.068
.059
.067
.081
.087
.139
.146
.061
.037
.033
.029
.027
.025
.025
.040
.027
.016
.011

D e c . 31, 1937, a n d J a n . 4
J a n . 7 a n d 11
J a n . 14 a n d 18
J a n . 21 a n d 25
J a n . 28 a n d F e b . 1
F e b . 4 a n d 8.
F e b . 11 a n d 15
F e b . 16 a n d 19

99. 968
99. 974
99. 975

1938
00
^
1
lo
^

1 B a n k d i s c o u n t basis.
2 E x c e p t for 3 b i d s t o t a l i n g $700,000.
3 R e v i s e d , J u l y 30, 1937.
< E x c e p t for 1 b i d of $50,000.
« E x c e p t for 1 b i d of $10,000.

91
91
91
91
91
91
91
91
91
106
91
99
91
93
86
91
80
91
91
91
91
91
91
91
91
91
91
91
91
91
91

6 Except
7 Except
8 Except
9 Except

for
for
for
for

1 bid
1 bid
1 bid
1 bid

of
of
of
of

$100,000.
$25,000.
$29,000.
$2,000.

99. 992
99. 993
99. 993+
99. 994
99. 994
99. 990
99.993
99. 996
99. 997
10 E x c e p t
11 E x c e p t
i2'Except
13 E x c e p t

for
for
for
for

D e c . 13
D e c . 20
D e c . 27
1938
Jan.
Jan.
Jan.
Jan.
Jan.
Feb.
Feb.
Feb.

3
10
17
24
31
7
14
18

J F e b . 25 a n d M a r . 1

F e b . 28

JMar. 4 and 8

Mar.

M a r . 11 a n d 15

M a r . 14

J M a r . 18 a n d 22

M a r . 21 .

J M a r . 25 a n d 2 9 . . .
Apr. 1 and 5
Apr. 8 a n d 12
A p r . 15 a n d 19
A p r . 22 a n d 26
A p r . 29 a n d M a y 3
M a y 6 a n d 10
M a y 13 a n d 17
M a y 20 a n d 24
M a y 25 a n d 28
J u n e 3 and 7
J u n e 10 a n d 14
J u n e 17 a n d 21
J u n e 24 a n d 28

Mar.
Apr.
Apr.
Apr.
Apr.
May
Mav
May
May
May
June
June
June
June

28
4
11
18
25
2
9
16
23
27
6
13
20
27

1 b i d of $39,000.
1 b i d of $20,000.
3 b i d s totaling $29,000.
1 b i d of $18,000.

254

REPORT OF THE SECRETARY OF THE TREASURY
United States savings bonds
Exhibit 12

Sale of United States savings bonds of series C continued after December 3 1 , 1937
[Second amendment to Department Circular No. 571. Public Debt]
TREASURY DEPARTMENT,

Washington, December 1, 1937.
United States savings bonds of series C will continue on sale indefinitely after
December 31, 1937, without interruption. P a r a g r a p h 13 of D e p a r t m e n t Circular
No. 571, dated December 16, 1936, is hereby amended to read as follows:
" 1 3 . United States savings bonds of series C, issued during t h e calendar year
1937, a s evidenced by t h e issue date inscribed thereon a t t h e time of issue, will
form a separate series hereby designated series C-1937, a n d those issued during
the calendar year 1938, will similarly form a separate series designated series
C-1938. Savings bonds of series A, issued during t h e calendar year 1935, a r e
hereby designated series A-1935, a n d those of series B, issued during t h e calendar
year 1936, are hereby designated series B-1936.''
^ T h e right is reserved a t a n y time to terminate t h e sale of savings bonds of series
C b y notice given b y t h e Secretary of t h e Treasury t o t h e P o s t m a s t e r General
and t o others concerned as designated sales agencies.
HENRY

MORGENTHAU,

Jr.,

Secretary of the Treasury.
Miscellaneous
Exhibit 13
An act to amend the Second Liberty Bond Act, as amended
[Public No. 552, 75th Gong., H. R. 10535]

Be it enacted by the Senate and House of Representatives of the United States of
America in Congress assembled, T h a t t h e first p a r a g r a p h of section 1 of t h e Second
Liberty Bond Act, as amended (U. S. C , title 31, sec. 752), is amended by striking
o u t t h e following: ' ' : Provided, T h a t the face a m o u n t of bonds issued under this
section a n d section 22 of this act shall n o t exceed in the aggregate $25,000,000,000
outstanding a t a n y one t i m e . "
S E C . 2. Section 21 of t h e Second Liberty Bond Act, as amended (U. S. C , title
31, sec. 757b), is amended to read as follows:
*'SEC. 2 1 . T h e face a m o u n t of bonds, certificates of indebtedness. Treasury
bills, and notes issued under t h e a u t h o r i t y of this act, and certificates of indebtedness issued under t h e a u t h o r i t y of section 6 of t h e First Liberty Bond Act, shall
not exceed in t h e aggregate $45,000,000,000 outstanding a t a n y one t i m e :
Provided, T h a t t h e face a m o u n t of bonds issued under t h e authority of this a c t
shall n o t exceed in t h e aggregate $30,000,000,000 outstanding a t any one t i m e . "
Approved, M a y 26, 1938.
Exhibit 14
First amendment, August 18, 1937, to Department Circular No. 368, prescribing
general regulations governing full-paid interim certificates
TREASURY DEPARTMENT,

Washington, August 18, 1937.
1. Treasury D e p a r t m e n t Circular No. 368, dated August 16, 1926, prescribing
general regulations governing full-paid interim certificates, is hereby amended by
striking o u t p a r a g r a p h (5) thereof a n d substituting t h e following:
"(5) Relief on account of lost or stolen, wholly or partly destroyed, or mutilated
or defaced interim certificates will hereafter be granted as provided in section 8
of t h e Government Losses in Shipment Act, approved July 8, 1937 (Public 192,
75th Cong., ch. 444, 1st sess.), a n d in accordance with t h e provision of D e p a r t m e n t
Circular 300, as amended or revised."
2. T h e Secretary of t h e Treasury m a y a t a n y time, or from time to time, withdraw or a m e n d a n y or all of t h e provisions of this a m e n d a t o r y circular.

WAYNE C . TAYLOR,

Acting Secretary of the Treasury.

REPORT OF THE SECRETARY OF THE TREASURY

255

Exhibit 15
Second supplement, August 18, 1937, to Department Circular No. 300, prescribing
regulations with respect to United States bonds and notes
TREASURY DEPARTMENT,

Washington, August 18, 1937.
1. Treasury Department Circular No. 300, dated July 31, 1923, prescribing
regulations with respect to United States bonds and notes, is hereby amended by
striking out paragraph 78 and inserting in lieu thereof the following:
"78. Relief on account of loss, theft, destruction, mutilation or defacement of
United States securities may be given under the authority of and subject to the
conditions set forth in section 8 of the 'Government Losses in Shipment Act,'
approved July 8, 1937 (Public 192, 75th Cong., ch. 444, 1st sess.), which reads as
follows:
" 'SEC. 8. {a) Whenever it is clearly proved to the satisfaction of the Secretary
•of the Treasury—
" '(1) That any interest-bearing security of the United States, identified by
number and description, payable to bearer or so assigned as to become, in effect,
payable to bearer, has been wholly or parti3^ destroyed, or so mutilated or defaced
as to impair its value to the owner, or has been lost or stolen under such circumstances, and such a period of time having elapsed after it has matured or has
become redeemable pursuant to a call for redemption, as in the judgment of the
Secretary would indicate that it has been destroyed or irretrievably lost, is not
held by any person as his own property and will never become the basis of a valid
claim against the United States; or
" '(2) That any interest-bearing security of the United States, identified by
number and description, which is not payable to bearer and which has not been
so assigned as to become, in effect, pa5'^able to bearer, has been lost or stolen, so
that it is not held by any person as his own property, or has been wholly or partly
destroyed, or so mutilated or defaced as to impair its value to the owner; the
Secretary, upon receipt and approval by him of a bond of indemnity, if and as
required by subsection {b) hereof, shall, in the case of a security which has not
matured or become redeemable pursuant to a call for redemption, issue a substitute marked "duplicate" and showing the serial number of the original security;
or shall, in the case of a security which has matured or become redeemable pursuant tq a call for redemption, make payment thereof to the owner, with such
interest only as would have been paid had the security been presented when it
became due and payable: Provided, That in the case of an interim certificate
relief may be given by the issue of a definitive security, whether before or after
maturity, rather than by the issue of a substitute or by payment: And provided
further. That no payment shall be made on account of interest coupons claimed
to have been attached to such original security unless the Secretary is satisfied
that such coupons have not been paid, and are in fact destroyed or can never
become the basis of a valid claim against the United States.
" '(6) Except as hereinafter provided, the owner of such lost, stolen, destroyed,
mutilated, or defaced security shall file with the Secretary of the Treasury a bond,
to indemnify the United States, in such form and amount and with such surety,
sureties, or security as the Secretary of the Treasury shall require: Provided,
That in case of securities payable to bearer or so assigned as to become, in effect,
payable to bearer, the destruction of which has not been proved, a corporate
surety, qualified under the provisions of the act of August 13, 1894, as amended
(U. S. C , 1934 edition, title 6, sees. 6-13), shall be required on such bond of
indemnity: And provided further. That a bond of indemnity shall not be required
in any of the following classes of cases, except as hereinafter provided:
" '(1) If the Secretary of the Treasury is satisfied that the loss, theft, destruction, mutilation, or defacement, as the case may be, occurred without fault of the
owner and while the security was in the custody or the control of the United States
(not including the Postal Service when acting solely in its capacity as the public
carrier of the mails), or of a person thereunto duly authorized as lawful agent of
the United States, or while it was in the course of shipment effected pursuant to and
in accordance with the regulations issued under the provisions of this act;
" *(2) If substantially the entire security is presented and surrendered by the
owner and the Secretary of the Treasury is satisfied as to the identity of the security
presented and that any missing portions are not sufficient to form the basis of a
valid claim against the United States;

256

REPORT OF THE SECRETARY OF THE TREASURY

" '(3) If the lost, stolen, destroyed, mutilated, or defaced security is one which,
by the provisions of law or by the terms of its issue is transferable only by operation',
of law;
" '(4) If the owner is a State or political subdivision thereof, a corporation the
whole of whose capital is owned by the United States, a foreign government, or a
Federal Reserve bank:
" ^Provided, however. That in any of the foregoing classes of cases the Secretary
of the Treasury may require a bond of indemnity if he deems it essential to the
public interest.
'* '(c) The term "interest-bearing security of the United States" or "security",
wherever used in this section, means any direct obligation of the United States
issued pursuant to law for valuable consideration, and which by its terms bears
interest, or is issued on a discount basis, and includes (but is not limited to)
bonds, notes, certificates of indebtedness, and Treasury bills, and interim certificates issued for any such security.
" ^{d) The Secretary of the Treasury shall have the power to make such rules
and regulations as he may deem necessary for the administration of this section.
" '(e) Sections 3702, as amended, 3703, 3704, and 3705 of the Revised Statutes
of the United States (U. S. C , title 31, sees. 735, 736, 737, and 738) are hereby
repealed.' "
2. Subject to the provisions of section 8 of the Government Losses in Shipment
Act, quoted above, paragraphs 79 to 88, inclusive, of Treasury Department Circular 300, insofar as applicable, shall continue to govern the granting of relief
on account of lost, stolen, destroyed, mutilated, or defaced securities of the United
States, except that where, under the terms of said section a bond of indemnity
is required, it shall be in a penal sum equal to the face amount of the lost, stolen,
destroyed, mutilated, or defaced security, plus an amount sufficient to protect
the United States from any loss on account of interest which may be payable on
such lost, stolen, destroyed, mutilated, or defaced security.
3. Relief on account of the loss, defacement, or destruction of full-paid interim
certificates of the First Liberty Loan will hereafter be granted as provided in
section 8 of the Government Losses in Shipment Act, quoted above, and in accordance with the applicable provisions of paragraphs 79 to 88, inclusive, of Department Circular 300, as amended. Treasur}^ Department Circular No. 118, dated
July 12, 1918, prescribing regulations concerning full-paid interim certificates.
First Liberty Loan, is hereby superseded, so far as it relates to relief on account
of loss, defacement, or destruction of such interim certificates.
4. The Secretary of the Treasury may at any time, or from time to time, withdraw or amend any or all of the provisions of this supplementary circular.
WAYNE C. TAYLOR,

Acting Secretary of the Treasury.
Exhibit 16
Third supplement, June 27, 1938, to Department Circular No. 300, prescribing
regulations with respect to United States, bonds and notes
TREASURY DEPARTMENT,

Washington, June 27, 1938.
1. Paragraphs 15 and 16 of Department Circular No. 300, dated July 31, 1923,
as amended, prescribing regulations with respect to United States bonds and
notes, are hereby amended to read as follows:
"15. On issues of registered bonds.—Registered bonds to be delivered upon
exchange, transfer, or other transactions, unless delivered in person to the registered owner or his duly authorized representative, will be delivered by registered
mail without expense to, but at the risk of, the registered owner, except that
delivery will be made by express collect at the risk and expense of the owner, if
written instructions to that effect are given.
"16. On issues of coupon bonds and notes.—Coupon bonds or notes to be delivered upon exchange or other transaction, whether the bonds or notes to be
exchanged are presented to the Treasury Department or to a Federal Reserve
bank, unless delivered in person to the owner or his duly authorized representative,
will be delivered in regular course by a Federal Reserve bank, by registered mail
insured at the risk and expense of the owner, except that delivery will be made by
express collect likewise at the risk and expense of the owner, if written instructions
to that effect are given."

REPORT OF THE SECRETARY OF THE TREASURY

257

2. This supplementary circular shall be effective July 1, 1938, and the Secretary of the Treasury may at any time, or from time to time, withdraw or amend
.any or all of the provisions thereof.
STEPHEN B . GIBBONS,

Acting Secretary of the Treasury.
Exhibit 17
Order of the Acting Secretary of the Treasury, April 5, 1938, authorizing additional
officers of the Treasury Department to witness and certify requests for payment of
United States savings bonds and adjusted service bonds
In addition to the officers in the Treasury Department authorized pursuant to
the provisions of Department Circular No. 300, as amended, to witness the assignments of registered issues of the United States, as set forth in order dated June 10,
1936, the following officers are hereby authorized to witness and certify requests
for payment of United States savings bonds and adjusted service bonds only:
Chief, Securities Division, Office of the Treasurer of the United States.
Assistant Chief, Securities Division, Office of the Treasurer of the United
States.
WAYNE C. TAYLOR,

Acting Secretary of the Treasury.
Exhibit 18
Order of the Acting Secretary of the Treasury, April 6, 1938, revoking the authority,
contained in the order of June 10, 1936, for certain ofiicers of the Treasury Department to witness and certify requests for payment of adjusted service bonds
By order dated June 10, 1936, pursuant to the provisions of Department
•Circular No. 560, certain officers of the Treasury Department in Washington, in
addition to those officers generally authorized to witness assignments of United
States registered issues, were authorized to witness and certify requests for payment by the Treasurer of the United States of adjusted service bonds.
The special authority contained in that order is hereby revoked effective on and
after May 1, 1938.
WAYNE C. TAYLOR,

Acting Secretary of the Treasury.
SECURITIES GUARANTEED BY THE UNITED STATES
Exhibit 19
Section 20 of the United. States Housing Act of 1937 {Public No. 412, September 1,
1937), guaranteeing principal and interest of obligations of the United States
Housing Authority
SEC. 20. (a) The [United States Housing] Authority is authorized to issue
obligations in the form of notes, bonds, or otherwise, which it may sell' to obtain
funds for the purposes of this act. [The Authority may issue such obligations
in an amount not to exceed $100,000,000 on or after the date of enactment of
this act, an additional amount not to exceed $200,000,000 on or after July 1,
1938, and an additional amount not to exceed $200,000,000 on or after July
1, 1939.] The Authority may issue such obligations in an amount not to exceed
$800,000,000.^ Such obligations shall be in such forms and denominations,
mature within such periods not exceeding sixty years from date of issue, bear
such rates of interest not exceeding 4 per centum per annum, be subject to such
terms and conditions, and be issued in such manner and sold at such prices as
may be prescribed by the Authority, with the ^approval of the Secretary of the
Treasury.
(b) Such obligations shall be exempt, both as to principal and interest, from
all taxation (except surtaxes, estate, inheritance, and gift taxes) now or hereafter
imposed by the United States or by any State, county, municipality, or local taxing
authority.
1 Amended by sec. 602 of Pub. Res. No. 122, June 21,1938.

258

REPORT OF THE SECRETARY OF THE TREASURY

(c) Such obhgations shall be fully and unconditionally guaranteed upon their
face by the United States as to the payment of both interest and principal, and,
in the event that the Authority shall be unable to make any such payment upon
demand when due, payments shall be made to the holder by the Secretary of the
Treasury with money hereby authorized to be appropriated for such purpose
out of any money in the Treasury not otherwise appropriated. To the extent of
such psbyment the Secretary of the Treasury shall succeed to all the rights of the "
holder.
(d) Such obligations shall be lawful investments and may be accepted as
security for all fiduciary, trust, and public funds, the investment or deposit of
which shall be under the authority or control of the United States or any officer
or agency thereof. The Secretary of the Treasury is likewise authorized to
purchase any such obligations, and for such purchases he may use as a public
debt transaction the proceeds from the sale of any securities hereafter issued
under the Second Liberty Bond Act, as amended, and the purposes for which
securities may be issued under such act, as amended, are extended to include any
such purchases. The Secretary of the Treasury may at any time sell any of the
obligations acquired by him pursuant to this section, and all redemptions, purchases, and sales by him of such obhgations shall be treated as public debt transactions of the United States.
(e) Such obligations may be marketed for the Authority at its request by the
Secretary of the Treasury, utilizing all the facilities of the Treasury Department
now authorized by law for the marketing of obligations of the United States.
Exhibit 20
Portions of section 3 of the National Housing Act Amendments of 1938 {Public
No. 4^4i February 3, 1938), relative to the guarantee by the United States of debentures of the mutual mortgage insurance fund and the housing insurance fund
SEC. 3. Title II of the National Housing Act, as amended, is amended to read
as follows:
"TITLE II-^MORTGAGE INSURANCE
"PAYMENT OF INSURANCE
^

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"[SEC. 204] (d) The debentures issued under this section to any mortgagee with
respect to mortgages insured under section 203 shall be executed in the name of
the mutual mortgage insurance fund as obligor, shall be signed by the [Federal
Housing] Administrator by either his written or engraved signature, and shall be
negotiable and the debentures issued under this section to any mortgagee with
respect to mortgages insured under section 210 shall be executed in the name of
the housing insurance fund as obligor, shall be signed by the Administrator by
either his written or engraved signature, and shall be negotiable. All such
debentures shall be dated as of the date foreclosure proceedings were instituted,.
or the property was otherwise acquired by the mortgagee after default, and shall
bear interest from such date at a rate determined by the Administrator, with the
approval of the Secretary of the Treasury, at the time the mortgage was offered
for insurance, but not to exceed 3 per centum per annum, payable semiannually
on the 1st day of January and the 1st day of July of each year, and shall mature
three years after the 1st day of July following the maturity date of the mortgage
on the property in exchange for which the debentures were issued. Such debentures as are issued in exchange for property covered by mortgages insured under
section 203 or section 207 prior to the date of enactment of the National Housing
Act Amendments of 1938 shall be subject only to such Federal, State, and local
taxes as the mortgages in exchange for which they are issued would be subject to
in the hands of the holder of the debentures and shall be a liability of the [mutual
mortgage insurance] fund, but such debentures shall be fully and unconditionally
guaranteed as to principal and interest by the United States; but any mortgagee
entitled to receive any such debentures may elect to receive in lieu thereof a cash
adjustment and debentures issued as hereinafter provided and bearing the current
rate of interest. Such debentures as are issued in exchange for property covered
by mortgages insured after the date of enactment of the National Housing Act

REPORT OF THE SECRETARY OF THE TREASURY

259

Amendments of 1938 shall be exempt, both as to principal and interest, from all
taxation (except surtaxes, estate, inheritance, and gift taxes) now or hereafter
imposed by the United States, by any Territory, dependency, or possession thereof,
or by any State, county, municipality, or local taxing authority; and such debentures shall be paid out of the [mutual mortgage insurance] fund, or the housing
[insurance] fund, as the case may be, which shall be primarily liable therefor,
and they shall be fully and unconditionally guaranteed as to principal and interest
by the United States, and such guaranty shall be expressed on the face of the
debentures. In the event that the [mutual mortgage insurance] fund or the
housing [insurance] fund fails to pay upon demand, when due, the principal of
or interest on any debentures issued under this section, the Secretary of the
Treasury shall pay to the holders the amount thereof which is hereby authorized
to be appropriated, out of any money in the Treasury not otherwise appropriated,
and thereupon to the extent of the amount so paid the Secretary of the Treasury
shall succeed to all the rights of the holders of such debentures.
RENTAL HOUSING INSURANCE
^

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"[SEC. 207] (i) Debentures issued under this section upon the assignment of
an insured mortgage to the [Federal Housing] Administrator shall be executed in
the name of the housing insurance fund as obligor, shall be signed by the Administrator, by either his written or engraved signature, and shall be negotiable.
They shall bear interest at a rate determined by the Administrator, with the
approval of the Secretary of the Treasury, at the time the mortgage was insured,
but not to exceed 3 per centum per annum payable semiannually on the 1st day
of January and the 1st day of July of each year, and shall mature three years
after the 1st day of July following the maturity date of the mortgage in exchange
for which the debentures were issued. Such debentures as are issued in exchange
for mortgages insured after the date of enactment of the National Housing Act
Amendments of 1938 shall be exempt, both as to principal and interest, from all
taxation (except surtaxes, estate, inheritance, and gift taxes) now or hereafter
imposed by the United States, by any Territory, dependency, or possession thereof,
or by any State, county, municipality, or local taxing authority. They shall be
paid out of the housing [insurance] fund which shall be primarily hable therefor,
and they shall be fully and unconditionally guaranteed as to principal and interest
by the United States, and such guaranty shall be expressed on the face of the
debentures. In the event the housing [insurance] fund fails to pay upon demand,
when due, the principal of or interest on any debentures so guaranteed, the
Secretary of the Treasury shall pay to the holders the amount thereof which is
hereby authorized to be appropriated, out of any money in the Treasury not otherwise appropriated, and thereupon, to the extent of the amounts so paid, the Secretary of the Treasury shall succeed to all the rights of the holders of such debentures.

Exhibit 21
Section 1105 (c) of the Merchant Marine Act, 1936, as amended June 23, 1938
{Public No. 705), guaranteeing principal and interest of debentures of the Federal
ship mortgage insurance fund
(c) The debentures issued under this section shall be executed in the name of
the [Federal ship mortgage insurance] fund as obligor, shall be signed by the Chairman of the United States Maritime Commission by either his written or engraved
signature, and shall be negotiable. All such debentures shall be dated as of the
date foreclosure proceedings were instituted, or the property was otherwise
acquired by the mortgagee after default, and shall bear interest from such date at
a rate determined by the Commission, with the approval of the Secretary of the
Treasury, at the time the mortgage was offered for insurance, but not to exceed 3
per centum per annum, payable semiannually on the 1st day of January and the
1st day of July of each year, and shall mature three years after the 1st day of
July following the maturity date of the mortgage on the property in exchange for
which the debentures were issued. They shall be exempt, both as to principal
and interest, from all taxation (except surtaxes, estate, inheritance, and gift taxes)
now or hereafter imposed by the United States, by any Territory, dependency, or

260

REPORT OF THE SECRETARY OF THE TREASURY

possession thereof, or by any State, county, municipality, or local taxing authority.
They shall be paid out of the fund, which shall be primarily liable therefor, and
they shall be fully and unconditionally guaranteed as to principal and interest
by the United States, and such guaranty shall be expressed on the face of the
debentures. In the event that the fund fails to pay upon demand, when due, the
principal of, or interest on, any debentures so guaranteed, the Secretary of the
Treasury shall pay to the holders the amount thereof, which is hereby authorized
to be appropriated out of any money in the Treasury not otherwise appropriated,
and thereupon to the extent of the amounts so paid the Secretary of the Treasury
shall succeed to all the rights of the holders of such debentures.

Exhibit 22
An act to maintain unimpaired the capital of the Commodity Credit Corporation at
$100,000,000, and for other purposes
[Public No. 442, 75th Cong., H. R. 9361]

Be it enacted by the Senate and House of Representatives of the United States of
America in Congress assembled, That as of the 31st of March in each year and as
soon as possible thereafter, beginning with March 31, 1938, an appraisal of all the
assets and lijabilities of the Commodity Credit Corporation for the purpose of
determining the net worth of the Commodity Credit Corporation shall be made
by the Secretary of the Treasury. The value of assets shall, insofar as possible,
be determined on the basis of market prices at the time of appraisal and a report
of any such appraisal shall be submitted to the President as soon as possible after
it has been made. In the event that any such appraisal shall establish that the
net worth of the Commodity Credit Corporation is less than $100,000,000, the
Secretary of the Treasury, on. behalf of the United States, shall restore the amount
of such capital impairment by a contribution to the Commodity Credit Corporation in the amount of such impairment. To enable the Secretary of the Treasury
to make such payment to the Commodity Credit Corporation, there is hereby
authorized to be appropriated annually, commencing with the fiscal year 1938,
out of any money in the Treasury not otherwise appropriated, an amount equal
to any capital impairment found to exist by virtue of any appraisal as provided
herein.
SEC. 2. In the event that any appraisal pursuant to section 1 of this act shall
establish that the net worth of the Commodity Credit Corporation is in excess of
$100,000,000, such excess shall, as sooii as practicable after such appraisal, be
deposited in the Treasury by the Commodity Credit Corporation and shall be
credited to miscellaneous receipts. The Secretary of the Treasury is directed, as
soon as practicable, to use any amounts so deposited to retire an equivalent
amount of the public debt, which amount shall be in addition to any other amount
required to be used for such purpose.
SEC. 3. The Secretary of Agriculture, the Governor of the Farm Credit Administratioji, and the Reconstruction Finance Corporation are hereby authorized and directed to transfer to the United States all right, title, and interest in
and to the capital stock of the Commodity Credit Corporation which each of them
now holds. All rights of the United States arising out of the ownership of such
capital stock shall be exercised by the President, or by such officer, officers,
agency, or agencies as he shall designate, and in such manner as he shall prescribe.
SEC. 4. With the approval of the Secretary of the Treasury, the Commodity
Credit Corporation is authorized to issue and have outstanding at any one time,
bonds, notes, debentures, and other similar obligations in an aggregate amount
not exceeding $500,000,000. Such obligations shall be in such forms and denominations, shall have such maturities, shall bear such rates of interest, shall be subject
to such terms and conditions, and shall be issued in such manner and sold at such
prices as may be prescribed by the Commodity Credit Corporation, with the
approval of the Secretary of the Treasury. Such obligations shall be fully and
unconditionally guaranteed both as to interest and principal by the United States,
and such guaranty shall be expressed on the face thereof, and such obligations
shall be lawful investments and may be accepted as security for all fiduciary, trust,
and public funds the investment or deposit of which shall be under the authority
or control of the United States or any officer or officers thereof. In the event that
the Commodity Credit Corporation shall be unable to pay upon demand, when
due, the principal of, or interest on, such obligations, the Secretary of the Treasury

REPORT OF THE SECRETARY OF THE TREASURY

261

shall pay to the holder the amount thereof which is hereby authorized to be
appropriated, out of any money in the Treasury not otherwise appropriated, and
thereupon to the extent of the amount so paid the Secretary of the Treasury shall
succeed to all the rights of the holders of such obligations. The Secretary of the
Treasur}^, in his discretion, is authorized to purchase any obligations of the Commodity Credit Corporation issued hereunder, and for such purpose the Secretary
of the Treasury is authorized to use as a public debt transaction the proceeds from
the sale of any securities hereafter issued under the Second Liberty Bond Act, as
amended, and the purposes for which securities may be issued under such act, as
amended, are extended to include any purchases of the Commodity Credit Corporation's obligations hereunder. The Secretary of the Treasury may at any time
sell any of the obligations of the Commodity Credit Corporation acquired by him
under this section. All redemptiojns, purchases, and sales by the Secretary of the
Treasury of the obligations of the Commodity Credit Corporation shall be treated
as public debt transactions of the United States. No such obligations shall be
issued in excess of the assets of the Commodity Credit Corporation, including the
assets to be obtained from the proceeds of such obligations, but a failure to comply
with this provision shall not invalidate the obligations or the guaranty of the same.
The Commodity Credit Corporation shall have power to purchase such obligations
in the open market at any time and at any price.
SEC. 5. Bonds, notes, debentures, and other similar obligations issued by the
Commodity Credit Corporation under the provisions of this act shall be deemed
and held to be instrumentalities of the Government of the United States, and as
such they and the income derived therefrom shall be exempt from Federal, State,
municipal, and local taxation (except surtaxes, estate, inheritance, and gift taxes).
The Commodity Credit Corporation, including its franchise, its capital, reserves,
and surplus, and its income shall be exempt from all taxation now or hereafter
imposed by the United States, by any Territory, dependency, or possession thereof,
or by any State, county, municipality, or local taxing authority; except that any
real property of the Commodity Credit Corporation shall be subject to State,
Territorial, county, municipal, or local taxation to the same extent according to
its value as other real property is taxed.
Approved, March 8, 1938.
Exhibit 23
Offering of YA percent notes of series C of the Commodity Credit Corporation
On April 25, 1938, Secretary of the Treasury Morgenthau, on behalf of the
Commodity Credit Corpoiation, invited subscriptions for ji percent notes of
series C of the Corporation. The notes were offered for cash.and in exchange for
series B collateral trust notes of the Corporation, maturing May 2, 1938.
[Department Circular No. 583. Public Debt]
TREASURY

DEPARTMENT,

Washington, April 25, 1938.
I. OFFERING OF NOTES

1. The Secretary of the Treasury, on behalf of the Commodity Credit Corporation, invites subscriptions, at par and accrued interest, from the people of the
United States for notes of the Commodity Credit Corporation, designated ^
percent notes of series C. The amount of the offering is $200,000,000, or
thereabouts.
II. DESCRIPTION OF NOTES

1. The notes will be dated May 2, 1938, and will bear interest from that date
at the rate of % percent per annum, payable semiannually on November 2, 1938,
and on May 2 and November 2, 1939. They will mature November 2, 1939,
and will not be subject to call for redemption prior to maturity.
2. These notes are issued under the authority of the act approved March 8,
1938 (Pubhc No. 442, 75th Cong.), which provides that these notes shall be fully
and unconditionally guaranteed both as to interest and principal by the United
States; that they shall be deemed and held to be instrumentalities of the Government of the United States, and as such they and the income derived therefrom

'262

REPORT OF THE SECRETARY OF THE TREASURY

shall be exempt from Federal, State, municipal, and local taxation (except surtaxes, estate, inheritance, and gift taxes); and that the notes shall be lawful investments and may be accepted as security for all fiduciary, trust, and public
funds the investment or deposit of which shall be under the authority or control
of the United States or any officer or officers thereof.
3. The authorizing act further provides that in the event the Commodity
Credit Corporation shall be unable to pay upon demand, when due, the principal
of, or interest on, such obligations, the Secretary of the Treasury shall pay to
the holder the amount thereof which is hereby authorized to be appropriated,
out of any money in the Treasury not otherwise appropriated, and thereupon to
the extent of the amount so paid the Secretary of the Treasury shall succeed to
all the rights of the holders of such obligations.
4. The notes will be acceptable to secure deposits of public moneys, but will
not bear the circulation privilege.
5. Bearer notes with interest coupons attached will be issued in denominations
of $1,000, $5,000, $10,000, and $100,000. The notes will not be issued in registered form.
III. SUBSCRIPTION AND ALLOTMENT

1. Subscriptions will be received at the Federal Reserve banks and bra;iches
and at the Treasury Department, Washington. Banking institutions generally
may submit subscriptions for account of customers, but only the Federal Reserve
banks and the Treasury Department are authorized to act as official agencies.
Others than banking institutions will not be permitted to enter subscriptions
except for their own account. Cash subscriptions from banks and trust companies for their own account will be received without deposit but will be restricted
in each case to an amount not exceeding one-half of the combined capital and
surplus of the subscribing bank or trust company. Cash subscriptions from all
others must be accompanied by payments of 10 percent of the amount of notes
apphed for. The Secretar}^ of the Treasury reserves the right to close the books
as to any or all subscriptions or classes of subscriptions at any time without notice.
2. The Secretary of the Treasury reserves the right to reject a,ny subscription,
in whole or in part, to allot less than the amount of notes applied for, to make
allotments in full upon applications for smaller amounts and to make reduced
allotments upon, or to reject, applications for larger amounts, or to adopt any or
all of said methods or such other methods of allotment and classification of allotments as shall be deemed by him to be in the public interest; and his action in
any or all of these respects shall be final. Subject to these reservations, subscriptions in payment of which series B collateral trust notes of the Corporation
are tendered will be allotted in full. Allotment notices will be sent out promptly
upon allotment, and the basis of the allotment will be publicly announced.
IV. PAYMENT

1. Payment at par and accrued interest, if any, for notes allotted on cash subscriptions must be made or completed on or before May 2, 1938, or on later allotment. In every case where payment is not so completed, the payment with
application up to 10 percent of the amount of notes applied for shall, upon declaration made by the Secretary of the Treasury in his discretion, be forfeited to
the United States. Series B collateral trust notes of the Commodity Credit
Corporation, maturing May 2, 1938, will be accepted at par in payment for any
notes subscribed for and allotted and should accompany the subscription.
V. GENERAL PROVISIONS

1. As fiscal agents of the United States, Federal Reserve banks are authorized
and requested to receive subscriptions, to make allotments on the basis and up
to the amounts indicated by the Secretary of the Treasury to the Federal Reserve
banks of the respective districts, to issue allotment notices, to receive payment
for notes allotted, to make delivery of notes on full-paid subscriptions allotted,
and they may issue interim receipts pending delivery of the definitive notes.
2. The Secretary of the Treasury may at any time, or from time to time,
prescribe supplemental or amendatory rules and regulations governing the
offering, which will be communicated promptly to the Federal Reserve banks.

HENRY MORGENTHAU,

JR.,

Secretary of the Treasury.

REPORT OF T H E SECRETARY OF T H E TREASURY

263

Exhibit 24
'Subscriptions and allotments, Commodity Credit Corporation notes of series C
{from press releases, April 26 and 29 and May 2, 1938^)
On April 25, 1938, Secretary of the Treasury Morgenthau announced that the
subscription books for the offering of notes of series C of the Commodity Credit
Corporation closed at the close of business April 25, 1938, for the receipt of cash
subscriptions. Reports from the Federal Reserve banks showed that $1,839,-386,000 of cash subscriptions were received, of which $147,744,000 were accepted.
'Cash subscriptions were allotted 8 percent, but not less than $1,000 on any one
subscription.
The books for the receipt of subscriptions in payment of which series B collateral trust notes of the Corporation were tendered closed at the close of business
April 27, 1938. Exchange subscriptions totaled $58,430,000 and were allotted
dn full.
Subscriptions and allotments were divided among the several Federal Reserve
•districts and the Treasury as follows:

Federal Reserve district

Boston
New York
Philadelphia.
Cleveland
Richmond
Atlanta
Chicago
;St. Louis
1
Minneapolis..
Kansas City..
Dallas
"San Francisco
Treasury
Total...

Cash subscriptions
received --

Exchange
subscriptions received and
allotted

Total subscriptions
received

Cash subscriptions
allotted

Total subscriptions
allotted

$135,107,000 $2, 655,000
1,006,296.000 17, 770.000
78,770,000
70,000
98, 577,000
1, 730,000
61,069,000
1,145,000
47, 355,000
1,100,000
136, 750,000 15, 915, 000
.49,292,000
6, 930,000
19, 429, 000 1.010, 000
28, 541, 000 2, 455, 000
28,809, 000 4,225,000
140,641,000
3, 425,000
8, 750,000

$137, 762,000 $10,856,000 $13,511,000
98,354,000
1,024, 066,000 80, 584,000
6,397,000
78, 840. 000 6,327,000
7,943,000
9, 673,000
100, 307,000
4, 919,000
6, 064,000
62, 214,000
3,916,000
5, 016,000
48, 455,000
27,058,000
152, 665,000 11,143,000
4.046,000
10,976,000
56, 222,000
1. 631,000
2, 641,000
20, 439,000
2,325,000
4, 780,000
30, 996,000
2,360.000
6,585,000
33, 034,000
14.419,000
144, 066.000 10,994,000
750,000
700. 000
700,000

1,839,386,000

1,897,816,000 147, 744, 000 206,174,000

58, 430, 000

MONETARY DEVELOPMENTS 2
Exhibit 25
Announcement by the Secretary of the Treasury, February I4, 1938, with respect to
acquisitions of gold by the Treasury Department
On December 22, 1936, the Secretary of the Treasury stated that, after conferring with the Board of Governors of the Federal Reserve System, he proposed
to take appropriate action with respect to net additional acquisitions or releases
of gold by the Treasury Department whenever it was deemed advisable and in
the public interest to do so.
In pursuance of that policy, the Secretary of the Treasury, after conferring
with the Board of Governors of the Federal Reserve System, today announces
that gold acquired by the mints and assay offices after January 1, 1938, will be
included in the inactive gold account only to the extent that such acquisitions
in any one quarter exceed $100,000,000. No change is being made in the procedure whereby any gold released by the mints and assay offices is taken from the
inactive gold account.
» Revised May 31, ,1938.
2 Newly Mined Domestic Silver Regulations of January 10,1938, are available separately and are not reproduced here.

264

REPORT OF T H E SECRETARY OF T H E TREASURY
Exhibit 26

Announcement by the Secretary of the Treasury, April 19, 1938, of the discontinuance
of the inactive gold account
On December 22, 1936, the Secretary of the Treasury stated t h a t , after conferring with the Board of Governors of t h e Federal Reserve System, he proposed
to t a k e appropriate action with respect to net additional acquisitions or releases
of gold by the Treasury D e p a r t m e n t whenever it was deemed advisable and in
t h e public interest to do so.
In pursuance of t h a t policy, the Secretary of the Treasury, after conferring
with the Board of Governors of the Federal Reserve Sj^stem, today announces
t h a t the inactive gold account has been discontinued.

Exhibit 27
Memorandum of the Secretary of the Treasury, approved by the President September
14) 1937, relative to newly mined domestic silver mined prior to midnight of December 3 1 , 1937
M E M O R A N D U M FOR T H E

PRESIDENT

T h e Silver Proclamation of December 21, 1933, as amended, provides:
''This proclamation shall remain in force and effect until t h e thirty-first day of
December 1937, unless repealed or modified by act of Congress or by s u b s e q u e n t
proclamation."
As you know, in the normal course a considerable period of time elapses between
the date silver is mined and the date when t h e refining of the silver has been completed and t h e silver is delivered to a mint. Accordingly, a question has arisen
as to whether domestic silver mined prior to midnight, December 31, T937, m a y
be received by the mints after t h a t date under said proclamation.
I a m advised by t h e General Counsel of t h e Treasury t h a t in his opinion t h e
mints m a y continue after December 31, 1937, to receive under said proclamation
domestic silver mined prior to midnight, December 31, 1937, and otherwise complying with t h e proclamation. I a m in accord with such opinion. Accordingly,
if you approve, t h e mints will be instructed t h a t they m a y continue after December 31, 1937, to accept under said proclamation newly mined domestic silver
mined prior to midnight of December 31, 1937.
If you approve of the foregoing, I should appreciate it if you would so indicate
below.
H.

MORGENTHAU,

JR.,

Secretary of the Treasury.
Approved:
FRANKLIN D .
THE

WHITE

ROOSEVELT

HOUSE,

September 14, 1937.
Exhibit 28
Proclamation, December 30, 1937, modifying the proclamation of December 2 1 , 193S,
as modified, relating to newly mined domestic silver
Whereas, by proclamation of t h e twenty-first day of December 1933, as modified by proclamations of t h e n i n t h day of August 1934, a n d t h e t e n t h a n d t w e n t y fourth days of April 1935, t h e United States coinage mints are directed to receive
for coinage and addition to t h e monetary stocks of the United States silver mined
subsequent to December 21, 1933, from n a t u r a l deposits in the United States or
a n y place subject to t h e jurisdiction thereof; a n d
Whereas, such proclamation as so modified states in p a r t t h a t :
''This proclamation shall remain in force and effect.until.the. thirty-first day of
December 1937, unless repealed or modified by act of Congress or by subsequent
proclamation.'^ a n d t h a t
"Notice is hereby given t h a t I reserve the right by virtue of the a u t h o r i t y vested
in me to revoke or modify this proclamation as t h e interest of t h e United States
m a y seem to require."

REPORT OF THE SECRETARY OF THE TREASURY

265

Now, therefore, finding that the interests of the United States require further
modification of said proclamation of the twenty-first day of December 1933, as so
modified; by virtue of the power in me vested by the act of Congress cited in said
proclamation, and other legislation designated for national recovery, and by
virtue of all other authority in me vested;
I, Franklin D. Roosevelt, President of the United States of America, do hereby
further modify the said proclamation of the twenty-first day of December 1933,
so that the same shall remain in force and effect until the 31st day of December
1938, and so that the amount of deduction for seigniorage, brassage, coinage, and
other mint charges from the monetary value of silver delivered thereunder which
has been mined on or after January 1, 1938, shall be 50 percent of such monetary
value; and I do proclaim and direct that, with respect to all silver received by a
United States coinage mint under the provisions of the said proclamation of the
twenty-first day of December 1933, which such mint, subject to regulations
prescribed hereunder by the Secretary of the Treasury, is satisfied has been mined
on or after January 1, 1938, from natural deposits in the United States or any
place subject to the jurisdiction thereof, the deduction for seigniorage and services
performed by the Government shall be 50 percent and there shall be returned
therefor, in standard silver dollars, silver certificates, or any other coin or currency
of the United States, the monetary value of the silver so received (that is, $1.2929 +
per fine ounce), less such deduction of 50 percent, and that the said proclamation
of the twenty-first day of December 1933, as heretofore and hereby modified shall
remain in force and effect until the 31st day of December 1938, unless repealed
or further modified by act of Congress or by subsequent proclamation.
Notice is hereby given that I reserve the right by virtue of the authority vested
in me to revoke or modify this proclamation as the interests of the United States
may seem to require.
In witness whereof, I have hereunto set my hand and caused the seal of the United
States to be affixed.
Done at the City of Washington this 30th day of December, in the year of our
Lord nineteen hundred and thirty-seven, and of the Independence of the United
States of America the one hundred and sixty-second.
[SEAL]

FRANKLIN D . ROOSEVELT.

By the President:
CoRDELL H U L L ,

Secretary of State,

Exhibit 29
Proclamation, April 28, 1938, revoking, except as provided therein, the proclamation
of August 9, 1934, relating to silver
Whereas by Proclamation No. 2092.of August 9, 1934,.the United,States mints
were directed to receive for coinage or for addition to the monetary stocks of the
United States silver situated on August 9, 1934, in the continental United States,
including the Territory of Alaska; and
Whereas such proclamation provides, in part:
"Notice is hereby given that I reserve the right by virtue of the authority vested
in me to revoke or modify this proclamation as the interest of the United States
may seem to require."
And whereas I find that the interest of the United States requires the revocation,
except as herein provided, of the said proclamation:
Now, therefore, I, Franklin D. Roosevelt, President of the United States of
America, under and by virtue of the authority vested in me by section 43 (b) (2),
title III of the act of May 12, 1933, 48 Stat. 52, as amended, and the Silver Purchase Act of 1934 (48 Stat. 1178), and by virtue of all other authority in me vested,
do hereby revoke the said Proclamation No. 2092 of August 9, 1934, except as to
the provisions thereof relating to settlement for silver received by the United States
coinage mints pursuant to Proclamation No. 2067 of December 21, 1933, which
provisions shall not be affected by this proclamation.
Notice is hereby given that I reserve the right by virtue of the authority vested
in me to revoke or modify this proclamation as the interest of the United States
may seem to require.
In witness whereof, I have hereunto set my hand arid caused the seal of the
United States to be affixed.

266

REPORT OF TPIE SECRETARY OF T H E TREASURY

Done a t t h e City of Washington this 28th day of April, in t h e year of our Lord
nineteen hundred and thirty-eight, a n d of t h e Independence of the United Statesof America t h e one hundred and sixty-second.
[SEAL]

FRANKLIN D . ROOSEVELT.

B}^ t h e President:
SUMNER

WELLES,

Acting Secretary of State.

Exhibit 30
Executive Order No. 7877, April 28, 1938, revoking Executive orders of August 9,.
1934, and November 2, 1934, relating to silver
By virtue of t h e a u t h o r i t y vested in me b y the Silver Purchase Act of 1934 a n d
of all other a u t h o r i t y vested in me. Executive Order No. 6814, dated August 9,.
1934, a n d Executive Order N o . 6895A, dated November 2, 1934, are hereby
revoked. T h e revocation of said Executive orders shall n o t affect a n y a c t done,
or any right accruing or accrued, or any suit or proceeding had or commenced i n
any civil or criminal cause prior t o this revocation, and all penalties, forfeitures,
a n d liabilities under said Executive orders shall continue and m a y be enforced a s
if said revocation had not been made.
FRANKLIN D . ROOSEVELT.
T H E W H I T E H O U S E , A p r i l 28, 1938.

Exhibit 31
Order of the Secretary of the Treasury, April 28, 1938, revoking the orders of the
Secretary of the Treasury of J u n e 28, 1934, and May 20, 1935, relating to silver,,
and the Silver Regulations of August 17, 1934, <^s amended
T h e order of t h e Secretary of the Treasury of June 28, 1934, relating t o silver,,
t h e order of t h e Secretary of t h e Treasury of M a y 20, 1935, amending t h e said
order of June 28, 1934, a n d t h e Silver Regulations of August 17, 1934, as amended,
are hereby revoked. T h e revocation of such orders a n d regulations shall notaffect any act done, or any right accruing or accrued, or any suit or proceeding h a d
or commenced in any civil or criminal cause prior t o this revocation, a n d all penalties, forfeitures, a n d liabilities under such orders a n d regulations shall continue
a n d m a y be enforced as if said revocation had not been made.
H. M O R G E N T H A U , J R . ,

Secretary of the Treasury.
Approved:
FRANKLIN D . ROOSEVELT,
T H E W H I T E H O U S E , A p r i l 28, 1938.

Exhibit 32
Announcement by the Secretary of the Treasury, April 28, 1938, of the revocation of a
proclamation and certain orders a n d regulations relating to silver
Secretary Morgenthau announced t o d a y t h a t t h e following proclamation,,
orders, a n d regulations relating to silver were revoked today, April 28, 1938:
1. Executive Order No. 6814 dated August 9, 1934, a n d t h e a m e n d m e n t thereto,.
Executive Order No. 6895A, dated November 2, 1934,
2. Proclamation No. 2092 of August 9, 1934 (except certain provisions relative
to settlement for newly mined domestic silver received b y United States coinage
mints under Proclamation No. 2067 of December 21, 1933, as modified),
3. T h e orders of t h e Secretary of t h e Treasury of June 28, 1934, a n d May 20,.
1935,
4. T h e Silver Regulations of August 17, 1934, as amended.
T h e revoked Executive order a n d proclamation required t h e delivery t o , a n d
directed t h e receipt by, t h e United States mints of silver situated in t h e United
States on Aiigust 9, 1934.
T h e revocation of t h e orders of t h e Secretary of t h e Treasury eliminates t h e
restrictions imposed by such orders upon t h e importation a n d exportation of silver.

REPORT OF THE SECRETARY OF THE TREASURY

267

The revoked regulations were issued under, and implemented, the revoked
proclamation and orders and prescribed the required reports and records relative
to silver holdings and transactions.
The revocations in no way affect the application of the tax on silver transfers
under subdivision 10 of schedule A of title VIII of the Revenue Act of 1926, as
added by section 8 of the Silver Purchase Act of 1934.
Likewise, the revocations do not in any way affect the continued receipt of
newly mined domestic 'silver under the proclamation by the President of December 21, 1933, as modified.
Exhibit 33
Statement by the Secretary of the Treasury and the Minister of Finance of China, July
9, 1937, announcing further progress in monetary cooperation between the two
countries
The following joint statement is made by the Secretary of the Treasury and the
Minister of Finance of China:
The monetary cooperation which resulted from the conference of the Secretary
of the Treasury of the United States of America with representatives of the Chinese
Ministry of Finance in May 1936 has contributed to the very successful functioning of the new Chinese monetary system with benefits both to the internal economy of China and to American trade.
We are now able to announce further progress in monetary cooperation between
the two countries in pursuit of the understanding reached a year ago. At that
time the Secretary of the Treasury, in a public statement, said:
"I feel confident that the monetary program being pursued by the National
Government of China is not only along sound lines, but constitutes an important
step toward the desired goal of stability of world currencies.
"To supplement their efforts toward that objective and to cooperate with them
in their program of monetary reform and currency stabilization, and in accordance with our silver purchase policy, we have definitely indicated our willingness,
under conditions mutually acceptable, to make purchases from the Central
Bank of China of substantial amounts of silver, and also to make available to the
Central Bank of China, under conditions which safeguard the interests of both
countries, dollar exchange for currency stabilization purposes."
At the same time, the Minister of Finance of China in a public statement
expressed the firm belief that the new measures of monetary reform which were
then being adopted by the Chinese Government, and the arrangements made with
the United States would insure the stability of the Chinese currency, and this
would inevitably lead to greater economic improvement and prosperity of the
Chinese people.
Arrangements have now been made through which the Government of China
will purchase from the United States Treasury a substantial amount of gold.
To aid the Chinese Government thus to augment its gold reserves, and in accordance with the terms of the United States Silver Purchase Act of 1934, the United
States Treasury will purchase an additional amount of silver from the Chinese
Government.
The United States Treasury will also broaden the scope of the arrangements
under which the Central Bank of China has been enabled, under conditions which
safeguard the interests of both countries, to obtain dollar exchange for currency
stabilization purposes.
Both the Secretary of the Treasury and the Finance Minister of China are
greatly gratified by the beneficial results to both countries which have been the
consequence of their understanding reached last year, and they are equally gratified to be able to announce further progress in their cooperation. It is a source of
satisfaction to them that the program of monetary reforms and currency stabilization in China has been carried out with great success and has been accompanied
by an increase of trade between China and other nations, particularly the IJnited
States, which occupies the first place in China's foreign trade.
Because of his desire to express the appreciation of the Chinese Government and
the people of China, the Chinese Minister of Finance came in person to the United
States to conduct the negotiations which have just been concluded.
The Secretary of the Treasury greatly appreciates having had this opportunity
for personal contact with the Finance Minister of China and of undertaking in
conference with him to further the welfare of both countries.

268

REPORT OF T H E SECRETARY OF TPIE TREASURY
Exhibit 34

Statement by the Secretary of the Treasury and the Minister of Finance of Brazil,
J u l y 16, 1937, relative to gold and dollar exchange
T h e following joint s t a t e m e n t is made by the Secretary of t h e Treasury and t h e
Minister of Finance of Brazil:
T h e Secretary of t h e Treasury of the United States of America and the Minister
of Finance of t h e United States of Brazil are entering into an agreement under
which:
1. T h e United States undertakes to sell gold to Brazil a t such times and in such
a m o u n t s as t h e Brazilian Government m a y request, up to a total of $60,000,000;
2. T h e United States will m a k e dohar exchange available to t h e Government of
Brazil or its fiscal agent, under conditions which safeguard t h e interests of both
countries, for t h e purpose of promoting exchange equilibrium.
T h e agreement is designed to promote t h e development of conditions favorable
to t h e maintenance of monetary equilibrium between t h e two countries and to
facilitate t h e establishment by t h e United States of Brazil of a central reserve
b a n k as a p a r t of the program of the Brazilian Government for improving the
financial structure of t h e Nation to meet t h e needs of its expanding economy.
I n recent years there has occurred a notable improvement of t h e trade and
financial position of Brazil. I t is a m a t t e r of gratification b o t h to t h e Secretary
of t h e Treasury and t h e Finance Minister t h a t this favorable development of
t h e Brazilian economy makes feasible a t this time this i m p o r t a n t step.
Both t h e Secretary of t h e Treasury and t h e Minister of Finance are pleased to
have h a d this opportunity to extend t h e field of cooperation between their countries and, in accordance with their conversations, t h e Secretary of t h e Treasury
stands ready to supply such technical assistance as Brazil m a y care to avail itself
of in connection with the organization of t h e new bank.

Exhibit 35
Announcement by the Secretary of the Treasury and the Minister of Finance of
Mexico, December 31, 1937, relative to the peso-dollar exchange and silver
Secretary Morgenthau and Minister of Finance Suarez announce t h a t t h e y have
reached a m u t u a h y satisfactory understanding on common problems before t h e
two Treasuries.
Arrangements have been m a d e looking to t h e continued stability of peso-dollar
exchange, thereby facilitating orderly exchange transactions.
Likewise, mutually satisfactory arrangements have been m a d e with regard to
Mexican silver.
Exhibit 36
Statement by the Secretary of the Treasury, March 27, 1938, that the Treasury will
defer continuation of the monthly silver purchase arrangements with Mexico
T h e following s t a t e m e n t by Secretary Morgenthau was m a d e public on March
27, 1938:
" I n view of t h e decision of t h e Government of t h e United States to reexamine
certain of its financial a n d commercial relationships with Mexico, t h e Treasury will
defer continuation of the monthly silver purchase arrangements with Mexico
until further notice."

REPORT OF T H E SECRETARY OF T H E TREASURY

269

TAXATION 1
Exhibit 37
An act to amend the stamp provisions of the Bottling in Bond Act
[Public No. 198, 75th Cong., H. R. 6737]

Be it enacted by the, Senate and House of Represeritatives of the United States of
America in Congress assembled, T h a t the first and fourth paragraphs of section 1
of the act entitled " A n act to allow the bottling of distilled spirits in b o n d , "
approved March 3, 1897, as amended (U. S. C , 1934 edition, Supp. I I , title 26,
sec. 1276), are designated " ( 1 ) " and " ( 6 ) , " respectively, and the second and third
paragraphs of said section are amended to read as follows:
"(2) Every bottle when filled shall have affixed thereto a n d passing over t h e
m o u t h of t h e same a s t a m p denoting t h e q u a n t i t y of distilled spirits contained
therein and evidencing t h e bottling in bond of such spirits under the provisions
of this act, and of regulations prescribed hereunder.
"(3) T h e Commissioner of Internal Revenue, with t h e approval of t h e Secretary
of t h e Treasury, shall prescribe (a) regulations with respect to t h e time and
m a n n e r of applying for, issuing, affixing, and destroying stamps required by this
section, the form and denominations of such stamps, applications for purchase of
t h e stamps, proof t h a t applicants are entitled to such stamps, a n d t h e m e t h o d of
accounting for receipts from t h e sale of such stamps, and (b) such other regulations
as the Comniissioner shall deem necessary for t h e enforcement of this act.
"(4) Such stamps shall be issued b}^ t h e Commissioner of I n t e r n a l Revenue to
each collector of internal revenue, upon his requisition in such numbers as m a y be
necessary in his district, and, upon compliance with the provisions of this act a n d
regulations issued hereunder shall be sold by collectors to persons entitled thereto,
a t a price of 1 cent for each s t a m p , except t h a t in the case of s t a m p s for containers
of less t h a n one-half pint, the price shall be one-quarter of 1 cent for each s t a m p .
"(5) And there shall be plainly burned, embossed, or printed on the side of
each case, to be known as t h e Government side, such marks, brands, and s t a m p s to
denote t h e bottling in bond of the whisky packed therein as t h e Commissioner
m a y by regulations prescribe."
Approved, July 9, 1937.
Exhibit 38
An act to amend section 3336 of the Revised Statutes, as amended, pertaining to
brewers^ bonds, and for other purposes
[Public No. 620, 75th Cong., H. R. 8665]

Be it enacted by the Senate and House of Representatives of the United States of
America in Congress assembled, T h a t section 3336 of the Revised Statutes, as
amended (U. S. C , 1934 edition, Supp. I l l , title 26, sec. 1334 (b)), is further
amended to read as follows:
" S E C . 3336. Every brewer, on fifing notice as provided by law of his intention
.to commence or continue business, shall execute a bond to the United States in
a penal sum equal to t h e a m o u n t of the tax on fermented malt liquor which, in
the opinion of the Commissioner of Internal Revenue, said brewer wiU be liable
to pay during any one m o n t h : Provided, T h a t the penal sum of any such bond
shall not exceed $100,000 nor be less t h a n $1,000. T h e bond shall be conditioned
t h a t t h e brewer shall pay, or cause to be paid, as herein provided, the tax required
by law on all beer, lager beer, ale, porter, and other fermented liquors made by
or for him, before the same is sold or removed for consumption or sale, except as
hereinafter provided; and t h a t he shall keep, or cause to be kept, in the manner
1 The following laws which modifj'^ the tax system are not included: Public No. 377, August 26, 1937,
Revenue Act of 1937; Public No. 654, May 28, 1938, Revenue Act of 1938; Public No. 400, August 28,
1937, an act to amend the Revenue Act of 1926, as amended, to exempt persons traveling between Puerto
Rico and the continental United States from the payment of a stamp tax on steamship tickets; Public
No. 696, June 22, 1938, amending the Bankruptcy Act of 1898—sees. 267 to 270, 395, 396, 399 (4), 520 to 522,
526 (4), and 679 relate to exemption of certain transfers from stamp tax and the nom-ecognition of income
arising from and the reduction of the ba.sis of the debtor's property due to the cancelation of indebtedness;
Public No. 721 (see p. 332), sec. 20 provides that in certain cases taxes shall not be construed as customs
duties: Public No. 722, sec. 13 (a), effective July 1, 1939. exempts railroad carriers and certain related and
controlled companies from the employer's tax imposed under title IX of the Social Security Act, and in
lieu thereof section 8 provides for contributions at the same rate to be administered by the Railroad Retirement Board.
104825—39

270

REPORT OF THE SECRETARY OF THE TREASURY

required by law, a book which shall be open to inspection by the proper officers,
as by law required; and that he shall in all respects faithfully comply, without
fraud or evasion, with all requirements of law relating to the manufacture and
sale of any malt liquors aforesaid. Once in every four years, or whenever required
so to do by the Commissioner of Internal Revenue, or such officer as may be
designated by the Commissioner of Internal Revenue, the brewer shall execute a
new bond in the penal sum prescribed in pursuance of this section, and conditioned as above provided, which bond shall be in lieu of any former bond or
bonds of such brewer in respect to all liabilities accruing after its approval."
Approved, June 15, 1938.
Exhibit 39
An act to amend certain provisions of law relative to the production of wines, brandy,
and fruit spirits so as to remove therefrom certain unnecessary restrictions; to facilitate: the collection of internal revenue taxes thereupon; and to provide abatement of
certain taxes upon wines, brandy, and fruit spirits where lost or evaporated while
in the custody and under the control of the Government without any fault of the
owner
[Public No. 635, 75th Cong., H. R. 10459]

Be it enacted by the Senate and House of Representatives of the United States of
America in Congress assembled. That section 618 (a) of the Revenue Act of 1918
(U. S. C , 1934 edition, title 26, sec. 1303) is amended to read as follows:
"SEC. 618. (a) That under such regulations and upon the execution of such
notices, entries, bonds, and other security as the Commissioner, with the approval
of the Secretary, may prescribe, domestic wines subject to the taxes imposed by
sections 611 or 613 as amended, may be removed from the winery where produced,
free of tax, for storage on other bonded winery or bonded storeroom premises,
or from such premises to other such bonded premises, or for exportation from the
United States or for use as distilling material at any regularly registered distillery or industrial alcohol plant: Provided, however. That the distiller using any
such wine as distilling material shall, subject to the provisions of section 3309
of the Revised Statutes, as amended, be held to pay the tax on the product of
such wines as will include both the alcoholic strength therein produced by fermentation and that obtained from the brandy or wine spirits added to such wines
at the time of fortification: Provided further. That suitable samples of brandy
or fruit spirits may be withdrawn under rules and regulations to be prescribed
by the Commissioner of Internal Revenue, subject to the approval of the Secretary of the Treasury, which samples shall be tax-free if for laboratory analysis
and tax-paid if for any other use: Provided further. That the Commissioner of
Internal Revenue, under rules and regulations to be by hina prescribed subject
to the approval of the Secretary of the Treasury, shall remit or refund all fortification taxes assessed or paid upon the quantity of fortifying spirits contained
in wines exported, or which have become unfit for use as wine and are used as
distilling material."
SEC. 2. Section 410 of the Liquor Tax Administration Act (U. S. C , 1934
edition, Supp. I l l , title 26, sec. 1320a) is amended to read as follows:
"SEC. 410. Under rules and regulations to be prescribed by the Commissioner
of Internal Revenue, with the approval of the Secretary of the Treasury, distiUers
may collect, in locked tanks, distillates containing one-half of 1 per centum or
more of aldehydes or 1 per centum or more of fusel oil (heads and tails)
removed in the course of distillation. The distillates so collected may, under
regulations prescribed by the Commissioner, with the approval of the Secretary,
be removed from such distillery for denaturation or be destroyed in the manner
prescribed by the Commissioner, under the supervision of an internal revenue
officer to be designated by the Commissioner, and when so denatured or destroyed
shall not be subject to the tax imposed by law upon distilled spirits. Such
distillates so collected in fruit brandy distilleries may, under regulations to be
prescribed by the Commissioner, with the approval of the Secretary, be drawn
into approved casks, barrels, or other containers and stored in the brandy deposit
room of the fruit brandy distillery where produced pending removal for denaturation or destruction."
SEC. 3. The Commissioner of Internal Revenue, under rules and regulations
to be by hini prescribed with the approval of the Secretary of the Treasury, upon
the presentation of proof to his satisfaction of the loss by leakage, evaporation,
theft, or otjierwise of brandy or fruit spirits, intended for the fortification of wine.

REPORT OF THE SECRETARY OF THE TREASURY

271

from storage tanks in bonded warehouses or from steel drums filled therefrom
while such drums are in such warehouse, and in the fortification room of a bonded
winery, not occurring as the result of any negligence, connivance, collusion, or
fraud on the part of the winemaker or his agents, is hereby authorized to remit
or refund the taxes assessed or paid upon such lost brandy or fruit spirits: Provided, however. That such remission or refund shall be allowed only to the extent
that the distiller or winemaker is not indemnified or recompensed for such loss.
SEC. 4. The first paragrajDh of section 602 of the Revenue Act of 1918, as
amended (U. S. C , 1934 edition, Supp. I l l , title 27, sec. 74b), is amended by
inserting in lieu of the period at the end thereof a colon and the foUowing: ^^Provided, That under the provisions of this section insofar as applicable, the Commissioner of Internal Revenue may, under rules and regulations to be by him prescribed, subject to the approval of the Secretary of the Treasury, permit the
transfer of fortifying spirits containing more than one hundred and fifty-nine
degrees proof up to and including one hundred and ninety-two degrees proof by
pipe line from registered fruit distilleries and receiving cisterns in such distilleries
to storage tanks in the internal revenue bonded warehouse located on the distiUery premises to be warehoused in such storage tanks and transferred by pipe
line to the fortification rooms of contiguous wineries when required."
SEC. 5. Subdivision (g) of paragraph "Fifth" of section 3244 of the Revised
Statutes, as amended (U. S. C , 1934 edition, Supp. I l l , title 26, sec. 1394 (e) (3)),
is amended to read as follows:
" (g) Notwithstanding the foregoing provisions of this section, each person
making sales of fermented malt liquor or wine to the members, guests, or patrons
of bona fide fairs, reunions, picnics, carnivals, or other similar outings, and each
fraternal, civic, church, labor, charitable, benevolent, or ex-service men's organization making sales of fermented malt liquor or wine on the occasion of any kind
of entertainment, dance, picnic, bazaar, or festival held by it, if such person or
organization is not otherwise engaged in business as a wholesale or retail liquor
dealer or as a wholesale or retail malt liquor dealer, shall pay, before any such
sales are made and in lieu of the special taxes imposed by subdivision (a) of this
paragraph and subdivision (a) of paragraph 'Fourth' of this section (U. S. C , 1934
edition, Supp. I l l , title 26, sec. 1934 (b) (1)) a special tax of $2 as a retail dealer in
malt liquors, if fermented malt liquor only is sold, or a special tax of $2 as a retail
dealer in liquors if wine only, or wine and fermented malt liquor only, are sold for
each calendar month in which any such sales are made."
SEC. 6. The fourth paragraph of section 605 of the Revenue Act of 1918,
approved February 24, 1919 (U. S. C , 1934 edition, title 26, sec. 1151 (b)), is
amended to read as foUows:
"The taxes imposed by the first paragraph of this section shaU not attach to
cordials or liqueurs on which a tax is imposed and paid under sections 611 or 613
of this act, as amended, nor to the mixing and blending of wines, where such
blending is for the sole purpose of perfecting such wines according to commercial
standards, nor to blends made exclusively of two or inore pure straight whiskies
aged in wood for a period not less than four years and without the addition of
coloring or flavoring matter or any other substance than pure water and if not
reduced below ninety proof; nor to blends made exclusively of two or more pure
fruit brandies distilled from the same kind of fruit, aged in wood for a period not
less than two years and without the addition of coloring or flavoring matter or
any other substance than pure water and if not reduced below ninety proof:
Provided, That such blended whiskies and blended fruit brandies shaU be exempt
from tax under the first paragraph of this section only when compounded under
the immediate supervision of a revenue officer, in such tanks and under such conditions and supervision as the Commissioner, with the approval of the Secretary,
may prescribe."
SEC. 7. The second paragraph added to section 605 of the Revenue Act of 1918,
as amended, by section 319 (b) of the Liquor Tax Administration Act (U. S. C ,
1934 edition, Supp. I l l , title 26, sec. 1151 (f)) is amended to read as follows:
"The manufacture of vermouth with fortified sweet wine on bonded winery
premises shall not be deemed to be rectification with the meaning of paragraph
*Third' of section 3244 of the Revised Statutes, if distilled spirits other than necessary in the production of approved essences, used in the manufacture of vermouth,
whether or not such essences are produced on the bonded winery premises, are
not added to the fortified sweet wine used in the manufacture thereof or to such
vermouth during or after its manufacture. Such vermouth may be manufactured
on bonded winery premises, but only in a separate department thereof having no
interior communication with any other department or part of such premises, under

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such supervision and in accordance with such regulations as the Commissioner of
Internal Revenue, with the approval of the Secretary of the Treasury, shall
prescribe."
SEC. 8. (a) The last paragraph of section 610 of the Revenue Act of 1918, as
amended (U. S. C , 1934 edition, Supp. I l l , title 26, sec. 1310 (d)), is amended by
inserting after the words "apricot wines" a comma and the following: "prune wines,
plum wines, pear wines"; and by striking out "or (6)" and inserting in lieu thereof
the foUowing: "(6) prunes, (7) plums, (8) pears, (9)."
(b) Section 612 of the Revenue Act of 1918, as amended (U. S. C , 1934 edition,
Supp. I l l , title 26, sec. 1301 (a), (b), (c), and (d)), is amended by inserting after
the words "apricot wines", wherever they appear, a comma and the following:
"prune wines, plum wines, pear wines"; and by inserting after the words "apricot
brandy", wherever they appear, a comma and the following: "prune brandy,
plum brandy, pear brandy."
(c) Section 613 of the Revenue Act of 1918, as amended (U. S. C , 1934 edition,
Supp. I l l , title 26, sec. 1300 (a) (2)), is amended by inserting after the words
"apricot wine", wherever they appear, a comma and the following: "prune wine,
plum wine, pear wine"; and by inserting after the words "apricot brandy",
wherever they appear, a comma and the foUowing: "prune brandy, plum brandy,
pear brandy."
(d) The last paragraph of section 42 of the act entitled "An act to reduce the
revenue and equalize duties on imports, and for other purposes," approved October 1, 1890, as amended (U. S. C , 1934 edition, Supp. I l l , title 26, sec. 1301
(e)), is amended by inserting after the words "apricot brandy", where they first
appear in such paragraph, a comma and the following: "prune brandy, plum
brandy, pear brandy"; by inserting after the words "apricot wines" a comma and
the following: "'prune wines, plum wines, pear wines"; and by striking out "and
(5)" and inserting, in lieu thereof the following: "(5) no brandy other than prune
brandy may be used in the fortification of prune wine and prune brandy may not
be used for the fortification of any wine other than prune wine, (6) no brandy
other than pear brandy may be used in the fortification of pear wine and pear
brandy may not be used for the fortification of any wine other than pear wine,
and (7) no brandy other than plum brandy may be used in the fortification of plum
wine and plum brandy may not be used for the fortification of any wine other than
plum wine and (8)."
(e) The first proviso of section 3255 of the Revised Statutes, as amended
(U. S. C , 1934 edition, Supp. Ill, title 26, sec. 1176), is amended by inserting
after the words "apricot wine", wherever they appear, a comma and the following:
"prune wine, plum wine, pear wine"; and by inserting after the words "apricot
brandv" a comma and the following: "prune brandy, plum brandy, pear brandv."
(f) Section 618 (b) of the Revenue Act of 1918, as amended (U. S. C , 1934
edition, Supp. I l l , sec. 1304), is amended by inserting after the words "apricot
wines" a comma and the following: "prune wines, plum wines, pear wines."
Approved, June 15, 1938.
Exhibit 40
Joint resolution to provide for a fioor stock tax on distilled spirits, except brandy ^
[Pub. Res. No. IU, 75th Cong., H. J. Res. 683]

Resolved by the Senate and House of Representatives of the United States ofAmerica
in Congress assembled. That there shall be levied, assessed, collected, and paid a
floor tax of 25 cents on each proof-gallon and a proportionate tax at a like rate on
all fractional parts of such proof-gallon upon all distilled spirits, except brandy,
produced in or imported into the United States upon which the internal revenue
tax imposed by law has been paid and which, on Julj^ 1, 1938, are held by a retail
dealer in liquors in a quantity in excess of two hundred and fifty wine-gallons in
the aggregate or by any other person, corporation, partnership, or association in
any quantity and which are intended for sale for beverage purposes or for use in the
manufacture or production of any article intended for sale for beverage purposes.
Each retail dealer in liquors and each person required hereunder to pay the
floor tax shall within thirty days after July 1, 1938, make return under oath in
such form and under such regulations as the Commissioner of Internal Revenue,
with the approval of the Secretary of the Treasury, shall prescribe. Payment of
the tax shown to be due may be extended to a date not exceeding seven months
1 Enacted because of the increased rate of tax on distilled spirits provided in sec. 710 of the Revenue Act
of 1938, approved May 28, 1938.

REPORT OF THE SECRETARY OF THE TREASURY

273

after July 1, 1938, upon the fihng of a bond for p a y m e n t in such form and a m o u n t
a n d with such surety or sureties as the Commissioner of Internal Revenue, with
t h e approval of t h e Secretary of t h e Treasury, m a y prescribe.
All provisions of law, including penalties, applicable in respect of internal
revenue taxes on distilled spirits shall, insofar as applicable and not inconsistent
with this section, be applicable in respect of the floor tax imposed hereunder.
Approved, J u n e 16, 1938.
Exhibit 41
A n act to amend the National Firearms Act
[Public No. 651, 75th Cong., H. R. 9610]

Be it enacted by the Senate and House of Representatives of the United States of
America in Congress assembled. T h a t the first sentence of section 2 (a) of t h e
National Firearms Act is amended by striking out t h e period a t t h e end thereof
a n d inserting a colon and the following: ^'Provided, T h a t manufacturers and
dealers in guns with two a t t a c h e d barrels from which only a single discharge can
be made from either barrel without m a n u a l reloading shall pay the following
taxes: Manufacturers, $25 per year; dealers, $1 per 3^ear."
SEC. 2. T h e first sentence of section 3 (a) of such act is amended by striking
out the period a t t h e end thereof and inserting a colon and the following: '^Provided, T h a t t h e transfer tax on any gun with two attached barrels, twelve inches
or more in length, from which only a single discharge can be made from either
barrel without m a n u a l reloading, shall be at t h e rate of $ 1 . "
Approved, J u n e 16, 1938.
Exhibit 42
Portions of the Sugar Act of 1937 {Public No. 414, September 1, 1937) imposing
excise taxes ivith respect to sugar

TITLE IV—EXCISE TAXES WITH KESPECT TO SUGAR
DEFINITIONS''

SEC. 401. For the purposes of this title—
(a) T h e t e r m "person" means an individual, partnership, corporation, or
association.
(b) T h e t e r m "manufactured sugar" means any sugar derived from sugar
beets or sugarcane, which is not to be, and which shall not be, further refined or
otherwise improved in quality; except sugar in liquid form which contains nonsugar solids (excluding any foreign substance t h a t m a y have been added) equal
t o more t h a n 6 per centum of t h e t o t a l soluble solids, and except also sirup of
cane juice produced from sugarcane grown in continental United States.
T h e grades or types of sugar within the meaning of this definition shall include,
b u t shall not be limited to, granulated sugar, l u m p sugar, cube sugar, powdered
sugar, sugar in the form of blocks, cones, or molded shapes, confectioners' sugar,
washed sugar, centrifugal sugar, clarified sugar, turbinado sugar, plantation white
sugar, muscovado sugar, refiners' soft sugar, invert sugar mush, raw sugar, sirups,
molasses, and sugar mixtures.
(c) T h e term " t o t a l sugars" means the total a m o u n t of the sucrose (Clerget)
and of the reducing or invert sugars. T h e total sugars contained in any grade or
t y p e of manufactured sugar shall be ascertained in t h e manner prescribed in
paragraphs 758, 759, 762, a n d 763 of t h e United States Customs Regulations
(1931 edition).
(d) T b e term "United S t a t e s " shall be deemed to include the States, t h e Territories of Hawaii and Alaska, t h e District of Columbia, a n d Puerto Rico.
TAX

T H E M A N U F A C T U R E OF SUGAR

S E C . 402. (a) Upon manufactured sugar manufactured in the United States,
there shall be levied, collected, and paid a tax, to be paid by the manufacturer a t
t h e following r a t e s :
(1) On all manufactured sugar testing by t h e polariscope ninety-two sugar
degrees, 0.465 cent per pound, and for each additional sugar degree shown by t h e

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REPORT OF THE SECRETARY OF TPIE TREASURY

polariscopic test, 0.00875 cent per pound additional, and fractions of a degree in
proportion;
(2) On all manufactured sugar testing by the polariscope less than ninety-two
sugar degrees, 0.5144 cent per pound of the total sugars therein.
(b) Any person who acquires any sugar which is to be manufactured into
manufactured sugar but who, without further refining or otherwise improving
it in quality, sells such sugar as manufactured sugar or uses such sugar as manufactured sugar in th<e production of other articles for sale shall be considered for the
purposes of this section the manufacturer of manufactured sugar and, as such,
liable for the tax hereunder with respect thereto.
(c) The manufacturer shall file dn the last day of each month a return and
pay the tax with respect to manufactured sugar manufactured after the effective
date of this title (1) which has been sold, or used in the production of other articles,
by the manufacturer during the preceding month (if the tax has not already been
paid) and (2) which has not been so sold or used within twelve months ending
during the preceding calendar month, after it was manufactured (if the tax has
not already been paid): Provided, That the first return and payment of the tax
shall not be due untU the last day of the second month foUowitng the month in
which this title takes effect.
For the purpose of determining whether sugar has been sold or used within
twelve months after it was manufactured sugar shall be considered to have been
sold or used in the order in which it was manufactured.
(d) No tax shall be required to be paid upon the manufacture of manufactured
sugar by, or for, the producer of the sugar beets or sugarcane from which such
manufactured sugar was derived, for consumption by the producer's own family,
employees, or household.
I M P O R T COMPENSATING TAX

SEC. 403. (a) In addition to any other tax or duty imposed by law, there shall
be imposed, under such regulations as the Commissioner of Customs shall prescribe, with the approval of the Secretary of the Treasury, a tax upon articles
imported or brought into the United States as follows:
(1) On all manufactured sugar testing by the polariscope ninety-two sugar
degrees, 0.465 cent per pound, and for each additional sugar degree shown by
the polariscopic test, 0.00875 cent per pound additional, and fractions of a degree
in proportion;
(2) On all manufactured sugar testing by the polariscope less than ninety-two
sugar degrees, 0.5144 cent per pound of the total sugars therein;
(3) On all articles composed in chief value of manufactured sugar 0.5144 cent
per pound of the total sugars therein.
(b) Such tax shall be levied, assessed, collected, and paid in the same manner
as a duty imposed by the Tariff Act of 1930, and shall be treated for the purposes
of all provisions of law relating to the customs revenue as a duty imposed by
such act, except that for the purposes of sections 336 and 350 of such act (the
so-called fiexible-tariff and trade-agreements provisions) such tax shall not be
considered a duty or import restriction, and except that no preference with
respect to such tax shall be accorded any articles imported or brought into the
United States.
EXPORTATION, LIVESTOCK FEED, AND DISTILLATION

SEC. 404. (a) Upon the exportation from the United States to a foreign country
or the shipment from the United States to any possession of the United States
except Puerto Rico, of any manufactured sugar, or any article manufactured
wholly or partly from manufactured sugar, with respect to which tax under the
provisions of section 402 has been paid, the amount of such tax shall be paid by
the Commissioner of Internal Revenue to the consignor named in the bill of
lading under which the article was exported or shipped to a possession, or to the
shipper, if the consignor waives any claim thereto in favor of such shipper:
Provided, That no such payment shall be allowed with respect to any manufactured
sugar, or article, upon which, through substitution or otherwise, a drawback of
any tax paid under section 403 has been or is to be claimed under any provisions
of law made applicable by section 403.
(b) Upon the use of any manufactured sugar, or article manufactured therefrom, as livestock feed, or in the production of livestock feed, or for the distillation
of alcohol, there shall be paid by the Commissioner of Internal Revenue to the
person so using such manufactured sugar, or article manufactured therefrom,
the amount of any tax paid under section 402 with respect thereto.

REPORT OF THE SECRETARY OF THE TREASURY

275

(c) No payment shaU be allowed under this section unless within one year
after the right to such payment has accrued a claim therefor is filed by the person
entitled thereto.
COLLECTION OF TAXES

SEC. 405. (a) Except as otherwise provided, the taxes imposed by this title
shall be collected by the Bureau of Internal Revenue under the direction of the
Secretary of the Treasury. Such taxes shall be paid into the Treasury of the
United States.
(b) All provisions of law, including penalties, applicable with respect to the
taxes imposed under title IV of the Revenue Act of 1932, shall, insofar as applicable
and not inconsistent with the provisions of this title, be applicable in respect to
the tax imposed by section 402. If the tax is not paid when due there shall be
added as part of the tax interest at 6 per centum per annum from the date the
tax became due until the date of payment.
(c) The Commissioner of Internal Revenue, with the approval of the Secretary
of the Treasury, shall prescribe such rules and regulations as may be necessary
to carry out all provisions of this title except section 403.
(d) Any person required, pursuant to the provisions of section 402, to file a
return may be required to file such return with and pay the tax shown to be due
thereon to the collector of internal revenue for the district in which the manufacturing was done or the liability incurred.
EFFECTIVE DATE

SEC. 406. The provisions of this title shall become effective on the date of
enactment of this act.

TITLE V—GENERAL PEOVISIONS
sjs

SEC. 503. There is authorized to be appropriated an amount equal to the
amount of the taxes collected or accrued under title IV on sugars produced from
sugarcane grown in the Commonwealth of the Philippine Islands which are
manufactured in or brought into the United States on or prior to June 30, 1941,
minus the costs of collecting such taxes and the estimates of amounts of refunds
required to be made with respect to such taxes, for transfer to the Government of
the Commonwealth of the Philippines for the purpose of financing a program of
economic adjustment in the Philippines, the transfer to be made under such terms
and conditions as the President of the United States may prescribe: Provided,
That no part of the appropriations herein authorized shall be paid directly or
indirectly for the production or processing of sugarcane in the Philippine Islands.
SEC. 513. No tax shaU be imposed on the manufacture, use, or importation of
sugar after June 30, 1941 * * *.
Exhibit 43
An act to impose an occupational excise tax upon certain dealers in marihuana, to
impose a transfer tax upon certain dealings in marihuana, and to safeguard the
revenue therefrom by registry and recording
[Public No. 238, 75th Cong., H. R. 6906]

Be it enacted by the Senate and House of Representatives of the United States of
America in Congress assembled. That when used in this act—
(a) The term "person" means an individual, a partnership, trust, association,
company, or corporation and includes an officer or employee of a trust, association,
company, or corporation, or a member or employee of a partnership, who, as such
officer, employee, or member, is under a duty to perform any act in respect of
which any violation of this act occurs.
(b) The term "marihuana" means all parts of the plant Cannabis sativa L.,
whether growing or not; the seeds thereof; the resin extracted from any part of
such plant; and every compound, manufacture, salt, derivative, mixture, or
preparation of such plant, its seeds, or resin; but shall not include the mature

276

REPORT OF THE SECRETARY OF THE TREASURY

stalks of such plant, fiber produced from such stalks, oil or cake made from t h e
seeds of such plant, a n y other compound, manufacture, salt, derivative, mixture, or
preparation of such m a t u r e stalks (except the resin extracted therefrom), fiber,
oil, or cake, or t h e sterilized seed of such plant which is incapable of germination.
(c) T h e term "producer" means any person who (1) plants, cultivates, or in
any way facilitates the natural growth of m a r i h u a n a ; or (2) harvests a n d transfers
or makes use of marihuana.
(d) T h e t e r m " S e c r e t a r y " means t h e Secretary of the Treasury and t h e term
"collector" means collector of internal revenue.
(e) T h e t e r m ''transfer" or "transferred" means any t y p e of disposition resulting
in a change of possession b u t shall not include a transfer to a common carrier for
the purpose of transporting marihuana.
SEC. 2. (a) Ever}^ person who imports, manufactures, produces, compounds,
sells, deals in, dispenses, prescribes, administers, or gives away m a r i h u a n a shall
(1) within fifteen daj^s after the effective date of this act, or (2) before engaging
after the expiration of such fifteen-day period in any of the above-mentioned
activities, and (3) thereafter, on or before July 1 of each year, p a y t h e following
special taxes respectively:
(1) Importers, manufacturers, and compounders of marihuana, $24 per year.
(2) Producers of marihuana (except those included within subdivision (4) of
this subsection), $1 per year, or fraction thereof, during which they engage in such
activity.
(3) Physicians, dentists, veterinary surgeons, a n d other practitioners who
distribute, dispense, give away, administer, or prescribe m a r i h u a n a to patients
upon whom they in the course of their professional practice are in attendance, $1
per year or fraction thereof during which they engage in any of such activities.
(4) Any person not registered as an importer, manufacturer, producer, or compounder who obtains a n d uses m a r i h u a n a in a laboratory for t h e purpose of
research, instruction, or analysis, or who produces m a r i h u a n a for a n y such purpose, $1 per year, or fraction thereof, during which he engages in such activities.
(5) Any person who is not a physician, dentist, veterinary surgeon, or other
practitioner a n d who deals in, dispenses, or gives away marihuana, $3 per year:
Provided, T h a t any person who has registered and paid t h e special tax as an
importer, manufacturer, compounder, or producer, as required by subdivisions
(1) and (2) of this subsection, m a y deal in, dispense, or give away m a r i h u a n a
imported, manufactured, compounded, or produced by him without further p a y m e n t of the tax imposed by this section.
(b) Where a tax under subdivision (1) or (5) is payable on July 1 of any year
it shall be computed for one year; where a n y such tax is payable on a n y other
day it shall be computed proportionately from t h e first day of t h e m o n t h in
which the liability for the tax accrued to the following July 1.
(c) In the event t h a t any person subject to a tax imposed by this section
engages in a n y of t h e activities enumerated in subsection (a) of this section a t
more t h a n one place, such person shall p a y the tax with respect to each such
place.
(d) Except as otherwise provided, whenever more t h a n one of t h e activities
enumerated in subsection (a) of this section is carried on by t h e same person a t
t h e same time, such person shall p a y t h e tax for each such activity, according to
t h e respective rates prescribed.
(e) Any person subject to t h e t a x imposed by this section shall, upon p a y m e n t
of such tax, register his n a m e or style a n d his place or places of business with t h e
collector of t h e district in which such place or places of business are located.
(f) Collectors are authorized to furnish, upon written request, to any person a
certified copy of t h e names of any or all persons who m a y be listed in their
respective collection districts as special taxpayers under this section, upon p a y m e n t of a fee of $1 for each one hundred of such names or fraction thereof upon
such copy so requested.
SEC. 3. (a) No employee of a n y person who has paid t h e special t a x and registered, as required by section 2 of this act, acting within t h e scope of his employm e n t , shall be required t o register and p a y such special tax.
(b) An officer or employee of t h e United States, any State, Territory, t h e District of Columbia, or insular possession, or political subdivision, who, in t h e
exercise of his official duties, engages in any of t h e activities enumerated in section
2 of this act shall not be required to register or p a y t h e special tax, b u t his right
to t h e exemption shall be evidenced in such manner as the Secretary m a y by
regulations prescribe.

REPORT OF THE SECRETARY OF THE TREASURY

277

SEC. 4. (a) I t shall be unlawful for any person required to register and p a y
t h e special tax under t h e provisions of section 2 to import, manufacture, produce,
compound, sell, deal in, dispense, distribute, prescribe, administer, or give away
m a r i h u a n a without having so registered and paid such tax.
(b) I n any suit or proceeding to enforce t h e liability imposed by this section or
section 2, if proof is made t h a t m a r i h u a n a was a t any time growing upon land
under the control of t h e defendant, such proof shall be presumptive evidence
t h a t a t such time the defendant was a producer and liable under this section as
well as under section 2.
SEC. 5. I t shall be unlawful for any person who shall not have paid the special
tax and registered, as required by section 2, to send, ship, carry, transport, or
deliver any marihuana within any Territory, t h e District of Columbia, or any
insular possession, or from any State, Territory, t h e District of Columbia, any
insular possession of the United States, or the Canal Zone, into any other State,
Territory, the District of Columbia, or insular possession of the United States:
Provided, T h a t nothing contained in this section shall apply to any common carrier
engaged in transporting m a r i h u a n a ; or to any employee of any person who shall
have registered and paid the special tax as required by section 2 while acting
within the scope of his employment; or to any person who shall deliver m a r i h u a n a
which has been prescribed or dispensed by a physician, dentist, veterinary surgeon,
or other practitioner registered under section 2, who has been employed to prescribe for the particular patient receiving such m a r i h u a n a ; or to any United States,
State, county, municipal, District, Territorial, or insular oflScer or official acting
within the scope of his official duties.
SEC. 6. (a) I t shall be unlawful for any person, whether or not required to pay
a special tax and register under section 2, to transfer marihuana, except in pursuance of a written order of t h e person to whom such m a r i h u a n a is transferred,
on a form to be issued in blank for t h a t purpose by t h e Secretary.
(b) Subject to such regulations as the Secretary m a y prescribe, nothing contained in this section shall apply—
(1) To a transfer of m a r i h u a n a to a patient by a physician, dentist, veterinary
surgeon, or other practitioner registered under section 2, in the course of his
professional practice only: Provided, T h a t such physician, dentist, veterinary
surgeon, or other practitioner shall keep a record of all such m a r i h u a n a transferred,
showing t h e a m o u n t transferred and t h e name a n d address of t h e patient to whom
such marihuana is transferred, and such record shall be k e p t for a period of two
years from t h e date of t h e transfer of such marihuana, and subject to inspection
as provided in section 11.
(2) To a transfer of marihuana, m a d e in good faith by a deafer to a consumer
under a n d in pursuance of a written prescription issued by a physician, dentist,
veterinary surgeoji, or other practitioner registered under section 2: Provided,
T h a t such prescription shaU be dated as of t h e day on which signed a n d shall
be signed by the physician, denti'st, veterinary surgeon, or other practitioner who
issues t h e same: Provided further, T h a t such dealer shall preserve such prescription
for a period of two years from t h e day on which such prescription is filled so as
to be readily accessible for inspection by t h e officers, agents, employees, and
officials mentioned in section 11.
(3) To the sale, exportation, shipment, or delivery of m a r i h u a n a by any person
within the United States, any Territory, the District of Columbia, or any of t h e
insular possessions of t h e United States, to any person in any foreign country
regulating t h e entry of marihuana, if such sale, shipment, or delivery of m a r i h u a n a
is made in accordance with such regulations for importation into such foreign
country as are prescribed by such foreign country, such regulations to be promulgated from time to time by t h e Secretary of State of t h e United States.
(4) To a transfer of marihuana to any officer or employee of the United States
Government or of any State, Territorial, District, county, or municipal or insular
government lawfully engaged in making purchases thereof for t h e various departments of the Army and N a v y , t h e Public H e a l t h Service, and for Government,
State, Territorial, District, county, or municipal or insular hospitals or prisons.
(5) To a transfer of any seeds of the plant Cannabis sativa L. to any person
registered under section 2.
(c) T h e Secretary shall cause suitable forms to be prepared for t h e purposes
before mentioned and shall cause t h e m to be distributed to collectors for sale.
T h e price a t which such forms shall be sold by said collectors shall be fixed by
t h e Secretary, b u t shall not exceed 2 cents each. Whenever any collector shall
sell any of such forms he shall cause the date of sale, the name a n d address of

278

REPORT OF THE SECRETARY OF THE TREASURY

the proposed vendor, the name and address of the purchaser, and the amount of
marihuana ordered to be plainly written or stamped thereon before delivering
the same.
(d) Each such order form sold by a collector shall be prepared by him and
shall include an original and two copies, any one of which shall be admissible in
evidence as an original. The original and one copy shall be given by the collector
to the purchaser thereof. The original shall in turn be given by the purchaser
thereof to any person who shall, in pursuance thereof, transfer marihuana to him
and shall be preserved by such person for a period of two years so as to be readily
accessible for inspection by any officer, agent, or employee mentioned in section 11.
The copy given to the purchaser by the collector shall be retained by the purchaser and preserved for a period of two j^^ears so as to be readily accessible to
inspection by any officer, agent, or employee mentioned in section 11. The
second copy shall be preserved in the records of the collector.
SEC. 7. (a) There shall be levied, collected, and paid upon all transfers of
marihuana which are required by section 6 to be carried out in pursuance of
written order forms taxes at the following rates:
(1) Upon each transfer to any person who has paid the special tax and registered
under section 2 of this act, $1 per ounce of marihuana or fraction thereof.
(2) Upon each transfer to any person who has not paid the special tax and
registered under section 2 of this act, $100 per ounce of marihuana or fraction
thereof.
(b) Such tax shall be paid by the transferee at the time of securing each order
form and shall be in addition to the price of such form. Such transferee shall be
liable for the tax imposed by this section but in the event that the transfer is
made in violation of section 6 without an order form and without payment of
the transfer tax imposed by this section, the transferor shall also be liable for
such tax.
(c) Payment of the tax herein provided shall be represented by appropriate
stamps to be provided by the Secretary and said stamps shall be affixed by the
collector or his representative to the original order form.
(d) All provisions of law relating to the engraving, issuance, sale, accountability, cancelation, and destruction of tax-paid stamps provided for in the internal
revenue laws shall, insofar as applicable and not inconsistent with this act, be
extended and made to apply to stamps provided for in this section.
(e) All provisions of law (including penalties) applicable in respect of the taxes
imposed by the act of December 17, 1914 (38 Stat. 785; U. S. C , 1934 edition,
title 26, sees. 1040-1061, 1383-1391), as amended, shall, insofar as not inconsistent with this act, be applicable in respect of the taxes imposed by this act.
SEC. 8. (a) It shall be unlawful for any person who is a transferee required to
pay the transfer tax imposed by section 7 to acquire or otherwise obtain any
marihuana without having paid such tax; and proof that any person shall have
had in his possession any marihuana and shall have failed, after reasonable
notice and demand by the collector, to produce the order form required by section 6 to be retained by him, shall be presumptive evidence of guilt under this
section and of liability for the tax imposed by section 7.
(b) No liability shall be imposed by virtue of this section upon any duly
authorized officer of the Treasury Department engaged in the enforcement of this
act or upon any duly authorized officer of any State, or Territory, or of any
political subdivision thereof, or the District of Columbia, or of any insular possession of the United States, who shall be engaged in the enforcement of any law
or municipal ordinance dealing with the production, sale, prescribing, dispensing,
dealing in, or distributing of marihuana.
SEC. 9. (a) Any marihuana which has been imported, manufactured, compounded, transferred, or produced in violation of any of the provisions of this
act shall be subject to seizure and forfeiture and, except as inconsistent with the
provisions of this act, all the provisions of internal revenue laws relating to
searches, seizures, and forfeitures are extended to include marihuana.
(b) Any marihuana which may be seized by the United States Government
from any person or persons charged with any violation of this act shall upon
conviction of the person or persons from whom seized be confiscated by and forfeited to the United States.
(c) Any marihuana seized or coming into the possession of the United States
in the enforcement of this act, the owner or owners of which are unknown, shall
be confiscated by and forfeited to the United States.
(d) The Secretary is hereby directed to destroy any marihuana confiscated
by and forfeited to the United States under this section or to deliver such mari-

REPORT OF THE SECRETARY OF THE TREASURY

279

huana to any department, bureau, or other agency of the United States Government, upon proper application therefor under such regulations as may be prescribed by the Secretary.
SEC. 10. (a) Every person liable to any tax imposed by this act shall keep such
books and records, render under oath such statements, make such returns, and
comply v/ith such rules and regulations as the Secretary may from time to time
prescribe.
(b) Any person who shall be registered under the provisions of section 2 in any
internal revenue district shall, whenever required so to do by the collector of the
district, render to the collector a true and correct statement or return, verified
by affidavits, setting forth the quantity of marihuana received or harvested by
him during such period immediately preceding the demand of the collector, not
exceeding three months, as the said collector may fix and determine. If such
person is not solely a producer, he shall set forth in such statement or return the
names of the persons from whom said marihuana was received, the quantity in
each instance received from such persons, and the date when received.
SEC. 11. The order forms and copies thereof and the prescriptions and records
required to be preserved under the provisions of section 6, and the statements
or returns filed in the office of the collector of the district under the provisions of
section 10 (b) shall be open to inspection by officers, agents, and employees of
the Treasury Department duly authorized for that purpose, and such officers of
any State or Territory, or of any political subdivision tihereof, or the District of
Columbia, or of any insular possession of the United States as shall be charged
with the enforcement of any law or municipal ordinance regulating the production,
sale, prescribing, dispensing, dealing in, or distributing of marihuana. Each
collector shall be authorized to furnish, upon written request, copies of any of
the said statements or returns filed in his office to any of such officials of any
State or Territory, or political subdivision thereof, or the District of Columbia, or
any insular possession of the United States as shall be entitled to inspect the said
statements or returns filed in the office of the said collector, upon the payment of a
fee of $1 for each 100 words or fraction thereof in the copy or copies so requested.
SEC. 12. Any person who is convicted of a violation of any provision of this
act shall be fined not more than $2,000 or imprisoned not more than five years,
or both, in the discretion of the court.
SEC. 13. It shall not be necessary to negative any exemptions set forth in this
act in any complaint, information, indictment, or other writ or proceeding laid
or brought under this act and the burden of proof of any such exemption shall be
upon the defendant. In the absence of the production of evidence by the defendant that he has complied with the provisions of section 2 relating to registration
or that he has complied with the provisions of section 6 relating to order forms,
he shall be presumed not to have complied with such provisions of such sections,
as the case may be.
SEC. 14. The Secretary is authorized to make, prescribe, and publish all necessary rules and regulations for carrying out the provisions of this act and to confer
or impose any of the rights, privileges, powers, and duties conferred or imposed
upon him by this act upon such officers or employees of the Treasury Department
as he shall designate or appoint.
SEC. 15. The provisions of this act shall apply to the several States, the District of Columbia, the Territory of Alaska, the Territory of Hawaii, and the insular
possessions of the United States, except the Philippine Islands. In Puerto Rico
the administration of this act, the collection of the special taxes and transfer taxes,
and the issuance of the order forms provided for in section 6 shall be performed by
the appropriate internal revenue officers of that government, and all revenues
collected under this act in Puerto Rico shall accrue intact to the general government thereof. The President is hereby authorized and directed to issue such
Executive orders as will carry into effect in the Virgin Islands the intent and
purpose of this act by providing for the registration with appropriate officers and
the imposition of the special and transfer taxes upon all persons in the Virgin
Islands who import, manufacture, produce, compound, sell, deal in, dispense,
prescribe, administer, or give away marihuana.
SEC. 16. If any provision of this act or the application thereof to any person or
circumstances is held invalid, the remainder of the act and the application of
such provision to other persons or circumstances shall not be affected thereby.
SEC. 17. This act shall take effect on the first day of the second month after
the month during which it is enacted.
SEC. 18. This act may be cited as the "Marihuana Tax Act of 1937.".
Approved, August 2, 1937.

Exhibit 44

Major tax rate changes made by the Revenue Acts of 1937 and 1938, and the rates which they superseded, with legal citations and effectivejdates
Revenue Act of 1937
Legal citation
Nonresident ahen individual
with no United States business or office and gross income of more than $21,600.

Surtax on personal holding
companies.

Foreign personal
companies.

holding

Sec. 501(b).. Taxable years
beginning after
Dee. 31, 1930.

Sec. 1

Sec. 201

Superseded
. Rate

Rate

Effective period

Legal citation

Normal and surtax rates o.n fixed
or determinable annual or periodical income (as defined in sec.
211 (a), Revenue Act of 1936) from
sources within the United States,
but the total normal and surtax
shall, in no case, be less than
10% of the gross income.^

10% withheld at source on fixed
or determinable annual or periodical income (as defined in
sec. 211 (a)) from sources within the United States except
that such rate shall be reduced
in the case of a resident of a
contiguous country to such
rate (not less than 5%) as may
be provided by treaty with
such country.
Graduated from 8% of the undistributed adjusted net income not in excess of $2,000, to
48% of the amount thereof in
excess of $1,000,000.
do

Taxable years beginning after Dec. 31,
1935, and before Jan.
1, 1937.

Revenue Act of 1936,
sec. 211 (a).

Effective date

65% of the undistributed adjusted
net income not in excess of
$2,000; plus 75% of the amount
thereof in excess of $2,000.

Taxable years
ending after
Aug. 26, 1937,
if a United
States group
existed after
that date.

Income tax rates applicable to net
income of United States shareholders. (Net income includes
pro rata shares of the undistributed net income of foreign personal holding company.)

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Revenue Act of 1930,
sec. 351.

Taxable year begining after Dec 31,
1935, and ending on
or before Aug. 26,
1937.

Do.

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S
H

Superseded

Revenue Act of 1938

Tax
Legal citation

Effective date

Rate

Effective period

Legal citation
K!

Capital gains and losses,
with respect to individuals.

Sec.117.

Taxable years beginning a f t e r
Dec. 31,1937.

Gains and losses taken into account are computed on basis of certain Taxable years beginpercentages which vary according to period capital assets were held
ning after Dec. 31,
as follows:
1933, and before Jan.
Percent- j
Percent1, 1938.
Period assets were held:
ages Period assets were held:
ages
18 months or less
100 1
1 year or less
100

Revenue Act of 1934,
sec. 117; Revenue
Act of 1936, sec. 117.

Over 18 months but not 66%
over 24 months.
Over 24 months
50

After computation of amount of
gain or loss to be taken into account according to the above
percentages, such gain or loss
from sale or exchange of capital
assets is treated as follows:
Assets held 18 months or less:
Gains not offset by allowed
losses are included with
other income subject to full
normal tax and surtax rates.
Losses are allowed only to
the extent of gains on such
transactions, but losses disallowed in 1 year (to an
amount not exceeding net
income) may be carried
forward and applied against
gains from such transactions
in the succeeding taxable
year.
Assets held more than 18
months: Net gains are included with other income
subject to normal tax and
surtax rates or are segregated
and taxed at 30%, whichever method results in lesser
total tax.
Net losses are deducted from
other income or 30% of such
losses is credited against the
tax, computed on net income before deducting the
net loss, whichever method
gives the greater tax.

Over 1 year but not over 80
2 years.
Over 2 years but not 60
over 5 years.
Over 5 years but not 40
over 10 years.
Over 10 years
30
Net gains computed on the basis
of foregoing percentages are
included in net income and are
subject to normal and surtax
rates. Losses so computed are
allowed in determining net income to the amount of the
capital gains taken into account plus $2,000.

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Footnotes at end of table.

Major tax rate changes made by the Revenue Acts of 1937 and 1938, and the rates which they superseded, with legal citations and effective dates—
Continued

fcO
00

Superseded

Revenue Act of 1938
Tax •
Legal citation
Corporation income tax:
Corporations with net
income of not more
than $25,000.

Corporations with net
income of more than
$25,000.2 3

Sec. 14 (c)— Taxable year beginning after
Dec. .31, 1937,
and before Jan.
1, 1940.

Sec. 13 (c)-.-

Banks

Sec. 14 (d)
(1).

Corporations organized
under
the
China
Trade Act, 1922.
Domestic corporations
deriving a large portion of their gross income from sources
within a possession of
the United States
(sec. 251.)
Foreign corporations,
resident.
Insurance companies

Sec. 14 (d)
(2).

Sec. 14 (d)
(3).

Rate

Effective date

Graduated from 12^% of the special class net incomes not in excess of $5,000 to 16% on that part
of the special class net incomes in
excess of $20,000.

Normal tax:
Graduated from 8% on
normal-tax net income
not in excess of $2,000 to
15% on the excess of net
incomes over $40,000.
Surtax on undistributed profits:
Graduated from 7% of the
undistributed net income
not in excess of 10% of the
adjuted net income to 27%
on the portion of the undistributed net income in
excess of 60% of the adjusted net income.
do

19% of the adjusted net income
reduced by the sum of: (a) 16H%
of the credit for dividends received: and (b) 2H% of the dividends paid credit, but not to
exceed 2H% of the adjusted net
income.3
16H% of the special class net in- 15% of normal-tax net income..come, regardless of the amount
thereof.
do
.do
do

do-.-

Effective period

Legal citation

Taxable years beginning after Dec. 31,
1935, and before Jan.
1, 1938.

Revenue Act of 1936,
sec. 13.

Revenue Act of 1936,
sec. 14.

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Revenue Act of 1936,
sec. 104.

Revenue Act of 1936,
sec. 261.

do . . .

Revenue Act of 1936,
sec. 251.

d
.Kl

Sec. 14 (e) __. do
(1).
do
Sees. 201,
204, 207.

19% of the special class net income, 22% of normal-tax net income
regardless of the amount thereof.
16% of the special class net income- 15% of normal-tax net income

do-...
do

Revenue Act of 1936,
sec. 231.
Revenue Act of 1936,
sees. 201, 204, 207.

Mutual i n v e s t m e n t
companies.

Sec. 362..

Surtax on corporations
improperly accumulating surplus.

Sec. 102.

Excise taxes:
Certain toilet preparations — tooth and
mouth washes, dentifrices, tooth pastes,
and toilet soaps.
Furs
--_

.doTaxable years
beginning after Dec. 31,
1937.

Sec. 701(a).- July 1, 1938..

16H% of the Supplement Q net
income.
25% of the undistributed section
102 net income not in excess of
$100,000; plus 35% of the amount
thereof in excess of $100,000.

Terminated-

Normal tax and surtax on undistributed profits as stated
above.
Corporations subject to surtaxon
undistributed profits: 15%
of retained net income not in
excess of $100,000; plus 25% of
the amount thereof in excess
of $100,000.
Corporations not subject to
surtax on undistributed profits: 25% of retained net income
not in excess of $100,000; plus
35% of the amount thereof in
excess of $100,000.

Revenue Act of 1936,
sees. 13, 14.

Revenue Act of 1936,
sec. 102.

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5% of manufacturer's or importer's selling price.

June 21,1932, through
June 30, 1938.

Revenue Act of 1932,
sec. 603.

3% of manufacturer's or importer's selling price.

June 23,1936, through
June 30, 1938.

Revenue Act of 1932,
sec. 604; Revenue
Act of 1934, sec.
608; Revenue Act
of 1936, sec. 810.
Revenue Act of 1932,
sec. 607.
Revenue Act of 1932,
sec. 609.
Revenue Act of 1932,
sec. 611.
Revenue Act of 1932,
sec. 614.

Revenue Act of 1934,
sec. 604; Revenue
Act of 1935, sec.
407.
Revenue Act of 1934,
sec. 605; Revenue
Act of 1935, sec.
407.

w
Sec. 701(b).

-do..

-do-.

5% of manufacturer's or import- June 21, 1932, through
June 30, 1938.
er's selling price.
10% of manufacturer's or importdo...er's selling price.
do
-—
-do..

Phonograph records.

Sec. 701 (c)_

.do-.

-do-,

Sporting goods

Sec. 701(d)-

-do-.

.do.,

Cameras.--

Sec. 701(e).

_do..

.do..

Chewing gum

Sec. 701(f) „

.do-.

_do_.

Crude petrolemn:
Producers' tax..

2% of manufacturer's or importer's selling price.

Sec. 701(g) _

-do..

-do-.

Hs of 1 cent per barrel

Refined or processed, Sec. 701(h).
or gasoline produced or recovered
from natural gas.
Footnotes at end of table.

.do..

-do-.

do.

-do..

.do-.
Sept. 1, 1935, through
June 30, 1938.
-do..

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to
00
CO

Major tax rate changes made by the Revenue Acts of 1937 and 1938, and the rates which they superseded, with legal citations and effective datesContinued

Superseded

Revenue Act of 1938
Tax
Legal citation
Excise taxes—Continued.
Brewer's wort, malt
sirup, etc.

Sales of produce for future delivery.

Tax on imports of:
Hempseed
Perilla seed
Sesame seed
Matches:
Wooden, plain.
Paper, in books
Tractors, used in combination with a.trailer
or semitrailer for highway transportation.
Distilled spirits (except
brandy).

Rate

Effective period

Legal citation

Brewer's-wort and liquid malt
containing less than 15% of
solids by weight—15 cents per
gallon. Liquid malt, malt
sirup, etc.—3 cents per pound.
3 cents per $100 or fraction thereof.

June 21, 1932, through
June 30, 1938.

Revenue Act of 1932,
sec. 601 (c) (2);
Pub. No. 396, 73d
Cong.

May 11, 1934, through
June 30, 1938.

Revenue Act of 1926,
title VIII, schedule A, 4; Revenue
Act of 1932, sec.
726; Revenue Act
of 1934, sec. 612.

.- Aug. 21, 1936, through
June 30, 1938.
do..
do

Revenue Act of 1936,
sec. 701.
Do.
Do

Rate

Effective date

o
Sec. 701 (i)... -.July 1,1938

Sec. 701 (j)

Sec. 702(a).do
do
Sec. 707
do. . .
Sec. 709

Sec. 710

. do

Terminated

1.24 cents per pound

do
do

1.38 cents per pound
1.18 cents per pound
. . _ .-

2 cents per pound
do
do

Terminated

do
do

do
2% of selling price

y2 of 1 cent per 1,000

$2.25 per proof gallon or wine gallon
if below proof.

$2 per proof gallon or wine gallon
if below proof.

2 cents per 1,000

June 21, 1932, through
June 30, 1938.
do

Jan. 12, 1934,: through
June 30, 1938.

Revenue Act of 1932,
sec. 612; Revenue
Act of 1934, sec.
611.
Do.

Revenue Act of 1926.
sec. 900; Liquor
Taxing Act of 1934,
sec. 2.

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1 Not applicable in the case of a resident of a contiguous country so long as there is in effect a treaty with such country (ratified prior to the date of enactment of the Revenue
Act of 1937) providing for a reduction (to not less than 5%) in the rate imposed by the Revenue Act of 1936.
2 For corporations with net income slightly over $25,000, the tax is to be computed under the alternative tax methods provided in sec. 13 (d). Revenue Act of 1938, if the tax
so computed is less than the tax would be if computed under sec. 13 (c).
3 In the case of corporations in bankruptcy and receivership, joint stock land banks, and rental housing corporations the tax shall be reduced by 2H% of the adjusted net income,
instead of by 2y2% of the dividends paid credit (sees. 13 (e), (f), and (g)).

EEPORT OF T H E SECRETARY OF T H E TREASURY
OBLIGATIONS OF FOREIGN

285

GOVERNMENTS

Exhibit 45
Correspondence-,exchanged between,the Government,of the.United States and,various
foreign governments and statements concerning foreign debts owing to the United
States
BELGIUM

To the Secretary of State from the Belgian Ambassador, December I4, 1937
[Translation]
EXCELLENCY:

I had the.honor to receive the note of November 20 last by,.-which.Your,Excellency" was good enough to traiismit-to me a sMtem6nt of. the p a y m e n t s envisaged
by t h e Belgian-American debt agreement of August 18, 1925, and by t h e ' m o r a torium agreement of J u n e 10, 1932.
I did not fail to t r a n s m i t this communication to m y Government, which has
now instructed me to inform t h e Government of t h e United States t h a t t h e Royal
Government keenly regrets to find t h a t the reasons which have forced it to sus-„
pend, since December 15, 1932, t h e service of its debt to the United States, have
lost none of their validity.
No new element having arisen which would permit Belgium to modify its
a t t i t u d e , my country finds it impossible to effect, on December 15, 1937, next,
the p a y m e n t in question.
I avail myself [etc.].
VAN

DER S T R A T E N .

To the Secretary of State from the Belgian Ambassador, J u n e 13, 1938
EXCELLENCY:

I h a d t h e honor to receive the note of May 31 last by which Y^our Excellency
was good enough to t r a n s m i t to me a s t a t e m e n t of t h e p a y m e n t envisaged by t h e
Belgian-American debt agreement of August 18, 1925, and by t h e moratorium
agreement of June 10, 1932.
I did not fail to t r a n s m i t this communication to m y Government which has
now instructed me to inform the Government of t h e United States t h a t the Royal
Government keenly regrets to find t h a t the reasons which have forced it to suspend,
since December 15, 1932, t h e service of its d e b t to t h e United States, have lost
none of their validity.
No new element having arisen which would permit Belgium to modify its a t t i tude, m y country finds it impossible to effect, on J u n e 15, 1938, next, t h e p a y m e n t
in question.
I avail myself [etc.].
VAN

DER S T R A T E N .

CZECHOSLOVAKIA

To the Secretary of State from the Minister of Czechoslovakia, December 13, 1937
EXCELLENCY:

I have the honor to acknowledge t h e receipt of Your Excellency's note of
November 20, 1937, t r a n s m i t t i n g a s t a t e m e n t of the Secretary of Treasury which
indicates t h e a m o u n t due from, the Czechoslovak Government under t h e provisions
of t h e debt agreement of October 13, 1925, a n d t h e m o r a t o r i u m agreement of
J u n e 10, 1932.
T h e Czechoslovak Government appreciates t h e reiterated assurance of t h e
G o v e r n m e n t of t h e United States t h a t a n y proposals which t h e Czechoslovak
Government ma}^ desire to present in regard to t h e p a y m e n t of this indebtedness
would receive careful consideration with a view to eventual submission to the
American Congress.
I have been instructed to inform Y^our Excellency t h a t m y Government regrets
t h a t prevailing conditions do not warrant, a t this time, the resumption of discussions which would result in a mutually satisfactory settlement of this question.
Accept [etc.].
V . I . HURBAN.
104825—39

286

REPORT OF THE SECRETARY OF THE TREASURY

To the Secretary of State from the Minister of Czechoslovakia, June 15, 1938
EXCELLENCY:

I have the honor to acknowledge the receipt of Your Excellency's note of IVIay
31, 1938, transmitting a statement of the Secretary of Treasury which indicates
the amount due from the Czechoslovak Government under the provisions of the
debt agreement of October 13, 1925, and the moratorium agreement of June 10,
1932.
The Czechoslovak Government appreciates the reiterated assurance of the
Government of the United States that any proposals which the Czechoslovak
Government may desire to present in regard to the payment of this indebtedness
would receive careful consideration with a view to eventual submission to the
American Congress.
I have been instructed to inform Your Excellency that my Government regrets
that prevailing conditions do not warrant, at this time, the resumption of discussions which would result in a mutually satisfactory settlement of this question.
Accept [etc.].
V. I. HURBAN.
ESTONIA

To the Secretary of State from the Acting Consul General of Estonia, June 2, 1938
EXCELLENCY:

Acknowledging receipt of your note of May 31, 1938,1 have the honor to inform
you that the'^ Government of Estonia regret to be unable, for reasons stated in
their previous notes, to effect under terms of the debt funding agreement of
October 28, 1925, and the moratorium agreement of June 11, 1932, between
Estonia and the United States the payment of installments falling due on June 15,
1938.
I avail myself [etc.].
KARL KXJUSIK.

Announcing the receipt of payments due from Finland {Treasury Department press
releases, December 15, 1937, and June 15, 1938)
DECEMBER 15,

1937.

The Treasury received today the sum of $232,143 from the Government of
Finland, representing a payment of principal in the amount of $69,000 and the
semiannual payment of interest in the amount of $144,112.50 under the funding
agreement of May 1, 1923, and $19,030.50 as the ninth semiannual annuity due
under the moratorium agreement of May 23, 1932. This payment represents the
entire amount due from the Government of Finland. The payment of principal
and interest consisted of $210,000 face amount of 2}i percent Treasury bonds of
1949-53, which were accepted at par, $2,625 accrued interest thereon, and cash
for $487.50. The annuity of $19,030.50 due under the moratorium agreement
was paid in cash.
JUNE 15,

1938.

The Treasury received today the sum of $161,935.50 from the Government of
Finland, representing the semiannual payment of interest in the amount of
$142,905 under the funding agreement of May 1, 1923, and $19,030.50 as the
tenth semiannual annuity due under the moratorium agreement of May 23, 1932.
This payment represents the entire amount due from the Government of Finland.

PRANCE

To the Secretary of State from the French Charg^ d'Affaires, December 6, 1937
[Translation]
EXCELLENCY:

I have the honor to acknowledge the receipt of Your Excellency's note, dated
November 20, 1937, transmitting a statement of the amounts due by France to
the United States on December 15 next, under the terms of the agreements
signed by the French Government.

REPORT OF THE SECRETARY OF THE TREASURY

287

In presenting this statement, you took occasion to reiterate that the Government of the United States is fiilly disposed to discuss, through diplomatic channels,
any proposals which the French Government may desire to put forward in regard
to the settlement of this indebtedness and to give them careful consideration with
a view to their eventual submission to the American Congress.
The French Government thanks the Government of the United States for having been so kind as to renew these assurances and desires on its part to emphasize
again its sincere desire tp seek the bases for a settlement of this debt acceptable
to both countries.
As soon as a satisfactory development of the situation will permit, the French
Government will not fail to seize the opportunity, which it hopes will be soon,
to enter into conversations for the negotiation of an agreement to the conclusion
of which, like the Government of the United States, it attaches great importance.
Please accept [etc.].
' JULES HENRY.

To the Secretary of State from the French Ambassador, June 10, 1938
EXCELLENCY:

I have the honor to acknowledge the receipt of Your Excellency's note, dated
May 31, 1938, transmitting a statement of the amounts due by France to the
United States on June 15 next, under the terms of the agreements signed by the
French Government.
In presenting this statement, you took occasion to reiterate that the Government of the United States is fully disposed to discuss, through diplomatic channels,
any proposals which the French Government may desire to put forward in regard
to the settlement of this indebtedness and to give them careful consideration
with a view to their eventual submission to the American Congress.
The French Government thanks the Government of the United States for having been so kind as to renew these assurances and desires on its part to emphasize
again its sincere desire to seek the bases for a settlement of this debt acceptable
to both countries.
As soon as a satisfactory development of the situation will permit, the French
Government will not fail to seize the opportunity, which it hopes will be soon,
to enter into conversations for the negotiation of an agreement to the conclusion
of which, like the Government of the United States, it attaches great importance.
Please accept [etc.].
R. DE SAINT-QUENTIN.

GREAT BRITAIN

To the Secretary of State from the British Ambassador, December 9, 1937
SIR:

In accordance with instructions from His Majesty's Principal Secretary of State
for Foreign Affairs, I have the honor to acknowledge the receipt of your note of
the 20th November enclosing a statement of the amounts due from His Majesty's
Government in the United Kingdom under the provisions of the debt agreement
of the 19th June, 1923, and the moratorium agreement of the 4th June, 1932.
I am directed to express the appreciation of His Majesty's Government of the
assurance that the Government of the United States is fully disposed to discuss
any proposals which His Majesty's Government may desire to put forward in
regard to the payment of this indebtedness; and in return I am to assure you that
His Majesty's Government will be willing to reopen discussions on the subject
whenever circumstances are such as to warrant the hope that a satisfactory
result might be reached.
I have the honor [etc.].
R. C. LINDSAY.

To the Secretary of State from the British Ambassador, June 13, 1938
SIR:

In accordance with instructions from His Majesty's Principal Secretary of State
for Foreign Affairs, I have the honor to acknowledge the receipt of your note- of
the 31st May enclosing a statement of the amounts due from His Majesty's

288

REPORT OF THE SECRETARY OF THE TREASURY

Government in t h e United Kingdom under t h e provisions of t h e debt agreement
of t h e 19th June, 1923, a n d t h e moratorium agreement of t h e 4th June, 1932.
I a m directed to express t h e appreciation of His Majesty's Government of t h e
assurance t h a t t h e Government of t h e United States is fully disposed to discuss
any proposals v/hich His-Majesty's Government m a y desire t o - p u t - f o r w a r d in
regard to t h e p a y m e n t of this indebtedness; a n d in r e t u r n I a m to assure you t h a t
His Majesty's Government will be willing to reopen discussions on t h e subject
whenever circumstances are such as to w a r r a n t t h e hope t h a t a satisfactory
result might be reached,
I have t h e honor [etc.].
R. C. LINDSAY.

GREECE

Announcing the receipt of interest payments due from Greece {Treasury Department
press release. M a y 23, 1938)
T h e Secretar}^ of t h e Treasury today announced t h a t His Excellency, Mr. D .
Sicilianos, Minister of Greece, delivered check No. 35606 drawn by t h e Federal
Reserve Bank of New Y^ork a t t h e direction of t h e Bank of Greece for account of
t h e Greek Ministry of Finance, to t h e order of t h e Secretary of t h e Treasury in
t h e a m o u n t of $174,336 representing p a y m e n t by t h e Greek Government to t h e
Government of t h e United States of 40 percent of t h e semiannual interest a m o u n t ing to $217,920 due on M a y 10 a n d $217,920 due on November 10, 1937, on t h e
4 percent loan of 1929 m a d e to t h e Greek Government by t h e United States
under t h e agreement of M a y 10, 1929.
This a m o u n t has been received by t h e Treasury in t h e same m a n n e r as t h e
p a y m e n t s made b y t h e Greek Government to t h e United States on account of
t h e a m o u n t s due during t h e period from 1932 to 1936, inclusive, were received
by t h e United States, namely, without prejudice to t h e contractual rights of t h e
United States which are set forth in p a r t I I of t h e debt agreement of M a y 10,
1929, a n d in accordance with t h e position of t h e United States as stated in t h e
note addressed by t h e Secretary of State to t h e Greek Minister a t Washington
on F e b r u a r y 8, 1936.

HUNGARY

To the Secretary of State from the H u n g a r i a n Minister, December 15, 1937
SIR:

I have t h e honor to inform you t h a t in conformity with t h e proposal contained
in t h e note of this Legation of August 16, 1937, t h e Royal H u n g a r i a n Governm e n t is making a p a y m e n t t o d a y in t h e a m o u n t of $9,828.16 to t h e Federal Reserve
Bank of New York in favor of t h e Treasury of t h e United States.
I n this connection I have t h e honor to inform you t h a t m y Government in its
progressive regularization of its foreign debt service confidently expects to avail
itself a t an early date of t h e assurance of your Government t h a t it will give careful consideration to a n y proposals which m y Government m a y p u t forward in
regard to t h e p a y m e n t of its indebtedness to t h e Government of t h e United
States.
Accept [etc.].
JOHN PELENYI.

To the Secretary of State from the H u n g a r i a n Minister, J u n e 15, 1938
SIR:

By order of m y | G o v e r n m e n t , I b e g to inform you t h a t the a m o u n t of $9,828.16
has been deposited t o d a y in t h e Federal Reserve Bank in New York on account
of H u n g a r y ' s indebtedness to t h e American Government.
I t is t h e earnest hope of m y Government t h a t t h e Congress of t h e United
States will give favorable consideration a t an early date to t h e offer of m y Governm e n t submitted in^the Aide Memoire of F e b r u a r y 7, 1938.
Accept [etc.].

J O H N PELISNYI.

REPORT OF THE SECRETARY OF THE TREASURY

289

ITALY

To the Secretary of State from the Italian Ambassador, December 10, 1937
HONORABLE

SIR:

I have t h e honor to acknowledge the receipt of your note of November 20,
whereby you have sent me a s t a t e m e n t of t h e a m o u n t s due from t h e Italian
Government up to December 15, 1937, under t h e provision of t h e debt agreement
of November 14, 1925, and the moratorium agreement of J u n e 3, 1932.
My Government has taken note with appreciation of t h e renewed assurance
t h a t the United States Government is fully disposed to discuss, through diplomatic channels, any proposals which t h e Italian Government m a y desire to p u t
forward in regard to the p a y m e n t of its indebtedness a n d t h a t such proposals
would receive careful consideration with a view to eventual submission to t h e
American Congress.
While thanking you for t h e above communication, my Government regrets
to be still unable, a t the present moment, to submit any proposals and wishes to
refer to the considerations previously brought to t h e a t t e n t i o n of t h e Federal
Government.
Accept [etc.].
SuvicH.
To the Secretary of State from the Italian Ambassador, J u n e 8, 1938
HONORABLE

SIR:

I have t h e honor to acknowledge t h e receipt of your note of M a y 31, 1938,
whereby you have sent me a s t a t e m e n t of t h e a m o u n t s due from t h e Italian
Government up to J u n e 15, 1938, under the provision of t h e d e b t agreement of
November 14, 1925, and t h e moratorium agreement of J u n e 3, 1932.
My Government has t a k e n note with appreciation of t h e renewed assurance
t h a t the United States Government is fully disposed to discuss, through diplomatic channels, any proposals which t h e Italian Government m a y desire to p u t
forward in regard to t h e p a y m e n t of its indebtedness a n d t h a t such proposals
would receive careful consideration with a view to eventual submission to t h e
American Congress.
While thanking you for t h e above communication, m y Government regrets to
be still unable, a t t h e present moment, to submit any proposals and wishes to refer
to the considerations previously brought to the a t t e n t i o n of t h e Federal Government.
Accept [etc.].
SuvicH.

To the Secretary of State from the Latvian Minister, December 13, 1937
SIR:

I n reply to your note of November 20 and referring to m y note No. 410.63/651
of J u n e 2, I have t h e honor to inform you t h a t in t h e interval which has elapsed
since t h e despatch of t h e note referred to above no changes h a v e been observed
in t h e general position a n d . i n t h e circumstances of a n a t u r e t h a t could have
altered the a t t i t u d e of t h e Latvian Government in regard to t h e settlement of t h e
Latvian indebtedness to t h e United States.
I n view of t h e above a n d maintaining their present view a n d their a t t i t u d e in
regard to t h e subject as expressed in t h e relevant correspondence, I h a v e t h e honor
to inform you t h a t to their regret t h e L a t v i a n Government find it impossible to
effect t h e p a y m e n t of t h e installment of their debt to t h e United States which
becomes due on December 15.
Accept [etc.].
ALFRED BILMANIS.

To the Secretary of State fro7n the Latvian Minister, J u n e 14, 1938
SIR:

I n reply to your note of May 31 and referring to m y note N o . 410.63/1472 of
December 13, 1937, I have t h e honor to inform you t h a t in t h e interval which
has elapsed since t h e despatch of the note referred to above no* changes have been
observed in t h e general position a n d in t h e circumstances of a n a t u r e t h a t could

290

REPORT OF THE SECRETARY OF THE TREASURY

have altered the attitude of the Latvian Government in regard to the settlement
of the Latvian indebtedness to the United States.
In view of the above and maintaining their present view and their attitude in
regard to the subject as expressed in the relevant correspondence, I have the
honor to inform you that to their regret the Latvian Government find it impossible
to effect the payment of the installment of their debt to the United States which
becomes due on June 15.
Accept [etc.].
ALFRED BILMANIS.
LITHUANIA

To the Secretary of State from the Lithuanian Minister, December I4, 1937
SIR:

I have the honor to acknowledge the receipt of your note of November 20, 1937,
transmitting a statement showing the amounts due and payable, June 15, 1933,
to June 15, 1937, inclusive, and December 15, 1937, from my Government pursuant to the terms of the debt agreement of September 22, 1924, and the moratorium agreement of June 9, 1932.
In accordance with my Government's instructions, I have the honor to inform
you that the Lithuanian Government, acknowledging its indebtedness to the
United States of America, regrets exceedingly its continued inability to effect the
payments due to the United States Government on December 15, 1937.
My Government has taken note of your reiteration that the United States
Government is fully disposed to discuss, through diplomatic channels, any proposals which the Lithuanian Government may desire to put forward in regard to
the payment of this indebtedness, and that such proposals would receive careful
consideration with a view to eventual submission to the American Congress.
The Lithuanian Government will avail itself of this opportunity when it will be
found that discussions in this matter will be likely to produce mutually agreeable
results.
Accept [etc.].
P. ZADEIKIS.

To the Secretary of State from the Lithuanian Minister, June 10, 1938
SIR:

I have the honor to acknowledge the receipt of your note of May 31, 1938,
transmitting a statement showing the amounts due and payable June 15, 1933,
to December 15, 1937, inclusive, and June 15, 1938, from my Government pursuant to the terms of tbe debt agreement of September 22, 1924, and the moratorium agreement of June 9, 1932.
In accordance with my Government's instructions, I have the honor to inform
you that the Lithuanian Government, acknowledging its indebtedness to the
United States of America, regrets exceedingly its continued inability to effect the
payments due to the United States Government on June 15, 1938.
My Government has taken note of your reiteration that the United States
Government is fully disposed to discuss, through diplomatic channels, any proposals which the Lithuanian Government may desire to put forward in regard to
the payment of this indebtedness, and that such proposals would receive careful
consideration with a view to eventual submission to the American Congress. The
Lithuanian Government will avail itself of this opportunity when it will be found
that discussions in this matter will be likely to produce mutually agreeable results.
Accept [etc.].
P. ZADEIKIS. ,
POLAND

To the Secretary of State from the Polish Ambassador, December 8, 1937
SIR:

Acting upon instructions of my Government, and in answer to your note of
November 20, 1937, I beg to thank you for the assurance that the United States
Government is fully disposed to discuss, through diplomatic channels, any
proposal which my Government desire to put forward in regard to payments
resulting from the'terms of the debt agreement of November 14, 1924, and the
moratorium agreement of June 10, 1932.

REPORT OF THE SECRETARY OF THE TREASURY

291

I n connection with t h e above I have t h e honor t o inform you t h a t , for reasons
analogous t o those contained in t h e note of December 8, 1932, a n d confirmed by
later declarations, t h e Polish Government are obliged to request similarly a
deferment of p a y m e n t of t h e installment payable on December 15, 1937, t h e
Polish Government, to their great regret, still not being in a position to resume
t h e service of the debt towards the United States.
Accept [etc.],
JERZY POTOCKI.

To the Secretary of State from the Polish Ambassador, J u n e 14, 1938
SIR:

Acting upon instructions of my Government, and in answer to your note of
M a y 31, 1938,1 beg to t h a n k you for t h e assurance t h a t t h e United States Governm e n t is fully disposed to discuss, through diplomatic channels, any proposal
which my Government desire t o p u t forward in regard to p a y m e n t s resulting
from the terms of t h e debt agreement of November 14, 1924, a n d t h e moratorium
agreement of June 10, 1932.
I n connection with t h e above I h a v e t h e honor to inform you t h a t , for reasons
analogous to those contained in t h e note of December 8, 1932, and confirmed by
later declarations, the Polish Government are obliged to request similarly a
deferment of p a y m e n t of .the installment payable on J u n e 15, 1938, t h e Polish
Government, t o their great regret, still not being in a position to resume t h e
service of t h e debt towards t h e United States.
Accept [etc.].
JERZY POTOCKI.

To the Secretary of State from the Rumanian Minister, December 14, 1937
SIR:

I have the honor to acknowledge receipt of your note of November 20, 1937,
enclosing t h e s t a t e m e n t showing t h e a m o u n t s due from t h e R u m a n i a n Governm e n t up to December 15, 1937, p u r s u a n t to t h e terms of the debt agreement of
Deceinber 4, 1925, and the moratorium agreement of J u n e 11, 1932.
I n t h e note of J u n e 12, 1937, and in m y previous communications, I have
referred to t h e reasons why m y Government was obliged to suspend p a y m e n t
under t h e above-mentioned agreements. T h e R u m a n i a n Government feels t h a t
t h e considerations which governed their decision six m o n t h s ago apply with equal
force today, as no changes have occurred in t h e general situation which would
permit to expect a favorable result by initiating negotiations a t t h e present time.
Please accept [etc.].
DAVILA.

To the Secretary of State from the R u m a n i a n Minister, J u n e 11, 1938
SIR:

I have t h e honor to acknowledge receipt of your note of M a y 3 1 , 1938, enclosing
t h e s t a t e m e n t showing t h e a m o u n t due from t h e R u m a n i a n Government up to
J u n e 15, 1938, p u r s u a n t to the terms of the debt agreement of December 4, 1925,
and the moratorium agreement of J u n e 11, 1932.
I n reply, I wish to s t a t e t h a t t h e causes which forced m y Government to suspend
p a y m e n t under the above-mentioned agreements stiU obtain. As a consequence,
t h e R u m a n i a n Government, while deeply appreciating t h e desire of t h e Governm e n t of t h e United States to discuss any proposals for t h e resumption of t h e paym e n t of this indebtedness, feels obliged to postpone t h e beginning of negotiations
until such time as economic conditions throughout t h e world permit t h e expectation of a favorable solution of this problem.
Please accept [etc.].

IRIMESCU.

292

REPORT OF THE SECRETARY OF THE TREASURY
YUGOSLAVIA

To the Secretary of State from the Minister of Yugoslavia, December 11, 1937
SIR:

I have the honor to acknowledge t h e receipt of your note of November 20, 1937,
with which you were good enough to t r a n s m i t a s t a t e m e n t showing t h e a m o u n t s
due and payable on December 15, 1937, and p u r s u a n t to the debt agreement of
May 3, 1926.
The Royal Governrnent, while appreciating t h e readiness of the United States
Government to discuss, through diplomatic channels, any proposals which m a y be
p u t forward in regard to t h e p a y m e n t of the a m o u n t s due, are unable to p u t a t
this moment any such proposals forward or to resume p a y m e n t s according to the
aforesaid debt agreement, for the same reasons as those exposed in m y previous
notes.
A^ccept [etc.].
CONSTANTIN FOTITCH.

To the Secretary of State.from the Minister of Yugoslavia, J u n e 10, 1938
SIR:

I have the honor to acknowledge t h e receipt of your letter of M a y 31, 1938,
with which you were good enough to t r a n s m i t a s t a t e m e n t showing t h e a m o u n t s
due and payable on J u n e 15, 1938, by t h e Yugoslav Government, p u r s u a n t to t h e
terms of the debt agreement of May 3, 1926. For the same reasons as those which I had the honor to expose in m y previous
letters, the Royal Government, while appreciating the willingness of t h e United
States Government to discuss, through diplomatic channels, any proposals concerning this indebtedness, are still unable, to their sincere regret, to resume p a y m e n t under t h e said agreement or to present, under t h e present circumstances,
and in the present moment, any proposal to this effect.
Accept [etc.].
CONSTANTIN FOTITCH.

Exhibit 46
Text of notes delivered to the German Foreign Minister by the American Ambassador
at Berlin, relative to the indebtedness of Austria to the United States {State Department press releases, April 6, 1938, and J u n e 17, 1938)
A P R I L 6,

1938.

I am directed by m y Government to inform Your Excellency as follows:
On March 17, 1938, t h e Minister of tbe RepubHc of Austria, IVIr. Edgar Prochnik,
informed the D e p a r t m e n t of State t h a t , as a result of the developments which had
occurred in Austria, t h a t country had ceased to exist as an independent nation
and had been incorporated in the German Reich; t h a t therefore the Austrian mission to this country, of which he had been the head, had been abolished; and t h a t
the affairs of the mission had been taken over by the Embassy of Germany. T h e
German Ambassador has informed t h e D e p a r t m e n t of State t h a t he has assumed
t h e functions hitherto performed by the Minister of Austria.
T h e Government of t h e United States finds itself under the necessity as a
practical measure of closing its Legation a t Vienna and of establishing a Consulate
General. In t h e circumstances I a m directed by m y Government to request provisional consular status for Mr. John C. Wiley, Consul General; Mr. John H .
Morgan and Mr. John H. Lord, consuls; and Mr. G. Frederick Reinhardt and
Mr. Thomas R. Flack, vice consuls.
A P R I L 6,

1938.

In view of t h e announcement made to t h e Government of the United States
by t h e Austrian Minister on March 17, 1938, m y Government is under the necessity for all practical purposes of accepting w h a t he says as a fact and accordingly
consideration is being given to the adjustments in its own practices and procedure
in various regard which will be necessitated by t h e change of status of Austria.
In this connection I have to notify t h e German Government t h a t t h e Governm e n t of t h e United States will look to it for t h e discharge of t h e relief indebtedness of t h e Government of Austria to t h e Government of t h e United States
under t h e debt agreement signed May 8, 1930, and the moratorium agreement

REPORT OF THE SECRETARY OF THE TREASURY

293

signed September 14, 1932, between the Government of the United States and
the Government of Austria.
This debt was incurred by the Government of Austria for value received through
the purchase of flour under the authorit}^ of the act of Congress approved March
30, 1920, which authorized the United States Grain Corporation to sell flour on
credit to relieve populations in countries of Europe or countries contiguous
thereto, suffering for the want of food. It was first represented by an obligation
of the Government of Austria dated September 4, 1920, in the amount of
$24,055,708.92, which with other obligations of a similar tenor issued at the
same time in favor of several other governments was by the express terms thereof
a first charge on all the assets and revenues of Austria. On June 9, 1923, the
Secretary of the Treasury of the United States, under special authority conferred
by joint resolution of Congress approved April 6, 1922, subordinated.'the lien of
this obligation upon the assets and revenues of Austria to the lien of the Austrian
reconstruction loan of 1923, which has since been redeemed, and of the so-called
Czechoslovakian conversion loan, upon certain revenues of the Government of
Austria. On July 2, 1930, the Secretary of the Treasury, under special authority
of an act of Congress approved February 4, 1929, subordinated the lien of the
Austrian relief bonds held by the United States to the lien of the Austrian Government international loan of 1930. Except as thus subordinated to prior liens
pursuant to the acts of Congress of April 6, 1922, and February 4, 1929, the
Austrian relief obligations held by the United States are expressly secured by a
first lien on all the assets and revenues of Austria,.
In addition to the sums owed this Government from the Austrian Government,
consideration is required for the various dollar obligations of Austrian borrowers
which are in private hands. The Austrian Government itself borrowed in the
American market in 1930, the issue being part of the Austrian Government
international loan of 1930 and being secured by a first charge upon the gross
receipts of the Austrian customs and tobacco monopoly, subject at the present
time only to the charge on these revenues in respect of the Czechoslovakian conversion loan. Furthermore, substantial amounts of bonds publicly issued in the
American market by several Austrian political subdivisions and corporations,
payable in dollars, are owned by citizens and residents of the United States.
On these dollar bonds in private hands, the Austrian Government and the
other Austrian debtors have been making regular payments pursuant to the
terms of the obligations. This Government will expect that these obligations
will continue to be fully recognized and that service will be continued by the
German authorities which have succeeded in control of the means and machinery
of payment in Austria. The welfare of numerous American citizens is directly
affected and this Government will appreciate prompt assurances on the subject.
JUNE 17,

1938.

In pursuance to instructions received from my Government, I have the honor
to bring to Your Excellency's attention that according to advices received from
the Foreign Bondholders Protective Council, the June 1, 1938, monthly service
installment on the Austrian Government international loan of 1930 has not
been paid. In this connection I have the honor to refer to my note of April 6
notifying Your Excellency that the Government of the United States will look
to the German Government for the discharge of the relief indebtedness of the
Government of Austria to the Government of the United States and pointing
out that the lien of this relief indebtedness upon the assets and revenues of
Austria has been subordinated by the United States to the lien of the Austrian
international loan of 1930 upon the same assets and revenues.
While no reply to this note has been received, indications were given on the
occasion of the presentation of the Embassy's Aide Memoire of May 16 that
Your Excellency's Government was taking the position that having regard to
former precedents of international law and to the principles applied therein it
was not under a legal obligation to take over the external debts of the Austrian
Federal Government.
The Government of the United States does not wish to omit, on the occasion
of the failure of the German Government to make the contractual monthly payment due June 1 on the Austrian loan of 1930, in spite of the express charge
which it enjoys on the assets and revenues of Austria taken over by the German
Government, to state its dissent from the indicated position of the German
Government as to its legal responsibilities in the premises, and to express the
hope that Germany may yet undertake the payments incumbent on it both under
international law and under equity.

294

REPORT OF THE SECRETARY OF THE TREASURY

It is believed that the weight of authority clearly supports the general doctrine
of international law founded upon obvious principles of justice that in case of
absorption of a state, the substituted sovereignty assumes the debts and obligations of the absorbed state, and takes the burdens with the benefits. A few
exceptions to this general proposition have sometimes been asserted, but these
exceptions appear to find no application to the circumstances of the instant case.
Both the 1930 loan and the relief loans were made in time of peace, for constructive
works and the relief of human suffering. There appears no reason why American
creditors of Austria should be placed in any worse position by reason of the
absorption of Austria by Germany than they would have been in had such absorption not taken place. The United States Government therefore, while
recognizing that the German Government is at present engaged in negotiations
with numerous governments covering this and related questions, regrets that
the service of the loan, affecting many American holders, should have been interrupted, reasserts its own position, and requests that as early reply as possible
may be made to the note of April 6, 1938.

Exhibit 47
Announcement concerning the proposal of the Hungarian Government to make
payments on account of its indebtedness to the United States (State Department
press release, August 26, 1937)
The Hungarian Government has made a proposal to pay the Government of the
United States the amount of $19,656.32 per annum in semiannual installments of
$9,828.16 over a period of three years, the first installment being paid December
15, 1937, on account of the amounts due under the Hungarian.debt funding agreement of April 25, 1924, and the moratorium agreement of May 27, 1932. The
payments are to be made without prejudice to the obligations of the Hungarian
Government under these agreements, which the Hungarian Government continues to acknowledge.
The Government of the United States has agreed to receive these payments
and to credit them on account of the amounts due and has expressed to the
Hungarian Government its gratification for the partial resumption of effective
payment on the debt, transfer of which has been interrupted since the general
transfer moratorium on Hungarian foreign debts proclaimed by the Hungarian
Government December 23, 1931.
The regular payments due from Hungary under the funding and moratorium
agreements from December 15, 1937, to June 15, 1940, inclusive, are as follows:
Funding agreement

Dec.
June
Dec.
June
Dec.
June

15,1937
15, 1938
15,1938
15, 1939
15, 1939
16, 1940 ..-

Total

$13,830.00

$32, 047. 57
31,805. 55
31,805.55
31,554. 52
31, 554. 51
31,294. 64

$4,225.58
4, 225. 58
4, 225. 58
4, 225. 58
4, 225. 58
4, 225. 58

$50.103.15
36,031.13
50,376.13
35,780.10
50,630.09
35,520. 22

190,062.34

25.353.48

258,440.82

14,345.00

14,850.00

Total

Interest

Moratorium
agreement

Principal

.-43,025.00

-- -

The partial payments proposed by H ungary are as follows

Amount

Dec. 15, 1937
June 15, 1938
Tie^o 1^ 10*^8

June 15,1939

$9,828.16
9,828.16
9,828.16
9,828.16

Percentage
of amount
due on
respective
date
19.6
27.3
19.5
27.5

Amount

Dec. 15, 1939
June 15, 1940
Total

Percentage
of amount
due on
respective
date

9,828.16
9,828.16

19.4
27.7

58,968. 96

22.8

REPORT OF THE SECRETARY OF THE TREASURY

295

The Hungarian Government has made no payment to the United States
Treasury under the debt agreement and the moratorium agreement since the
Hoover moratorium year July 1, 1931, to June 30, 1932. It has, however, regularly included in its budget the amounts payable under the agreements and has
deposited in the Hungarian National Bank on the respective due dates Hungarian
Treasury bills in favor of the United States in respect of the amounts payable
semiannually. .During this time, since December 23, 1931, the Hungarian
Oovernment has suspended transfer into foreign currencies of payments on all
Hungarian governmental and nongovernmental long-term and short-term foreign
debts with the exception of the Hungarian Government reconstruction loan of
1924. Since 1933 transfer on the reconstruction loan has also been partially
suspended, the Government paying in foreign exchange 55 percent in 1934 and
thereafter 50 percent of the face value of the bond coupons.
The Hungarian bonds held by the Government of the United States under the
debt agreement and the moratorium agreement have been subordinated to the
reconstruction loan pursuant to a provision in the debt agreement and in the act
of Congress approved May 23, 1924, which provided that all or any part of the
security for the bonds issued under the debt agreement "may be released by the
Secretary of the Treasury on such terms and conditions as he may deem necessary
or appropriate in order that the United States may cooperate in any program
whereby Hungary may be able to finance its immediate needs by the flotation of a
loan for reconstruction purposes." On May 29, 1924, acting under the authority
conferred by the act of Congress above referred to, the Secretary of the Treasury,
Mr. Andrew W. Mellon, on behalf of the United Stales, consented to subordinate
the lien of the bonds issued under the debt agreement upon the assets and revenues
of Hungary to that of the Hungarian reconstruction loan which was then in contemplation under a plan approved by the Reparation Commission on February
21, 1925.
The Hungarian Government's proposals for partial resumption of service on its
indebtedness to the United States Government are made in connection with arrangements recently undertaken by the Hungarian Government for a general
liquidation of the transfer moratorium. The Hungarian Government has negotiated with bondholders protective committees for a permanent readjustment of
the reconstruction loan of 1924, on the basis of paying 60 percent of the original
bond interest, canceling the unpaid arrears of interest. This proposal has been
recommended to bondholders by the respective bondholders protective committees.
The Hungarian authorities have also proposed to holders of other Hungarian
long-term bonds a partial resumption of payment of interest in foreign currencies
during the years August 1, 1937, to July 31, 1940. The Foreign Bondholders
Protective Council has recommended these proposals to American bondholders,
stating that the offer made by the Hungarian Government is the best that could
be obtained, is in line with its present exchange position, and with the reasonable
expectations for the future, and as indicating a genuine effort upon the part of the
Hungarian Government to resume dollar remittances to the holders of its foreign
dollar bonds.
The indebtedness of the Government of Hungary to the United States originated from the sale of flour to the Hungarian Government under the act of Congress approved March 30, 1920, which authorized the United States Grain Corporation, with the approval of the Secretary of the Treasury, to sell or dispose of
flour in its possession for cash or on credit for such prices or upon such terms and
conditions as might be necessary to relieve the populations in the countries of
Europe or countries contiguous thereto suffering for the want of food. The debt
agreement of May 25, 1924, funded the Hungarian indebtedness with interest
accrued thereon from May 29, 1920, to December 15, 1923, at the rate of 4}^
percent per annum, into $1,939,000 par amount of bonds of Hungary maturing
s,erially on each December 15, from December 15, 1924, to December 15, 1985,
and bearing interest at the rate of 3 percent per annum from December 15, 1923,
to December 15, 1933, and thereafter at the rate of 3}^ percent per annum until
the principal thereof shall have been paid.
The payments to be received under the Hungarian proposals represent the first
resumption of payment or partial payment by any government which has entirely
suspended payment of its funded indebtedness to the United States. The
Government of Greece has from time to time made partial payments on its especially secured indebtedness under part II of the Greek debt agreement of May
10, 1929, but has made no payments since July 1, 1931, on its indebtedness under
part I of that agreement, or under the Greek moratorium agreement of May 24,
1932. The Government of Finland has made all payments due from it on their

296

REPORT OF THE SECRETARY OF THE TREASURY

due dates. No other debtor government has ih-ade any p a y m e n t since December
15, 1933. .
T h e correspondence between t h e two governments is a t t a c h e d .
Text of note from the Honorable Anthony de Baldsy, Charge d^ Affaires ad interim of
Hungary, to the Secretary of State of the United States, August 16, 19S7
SIR:

Referring to your note of M a y 28, 1937, with regard to the indebtedness of t h e
Government of H u n g a r y to the Government of the United States in which you
reiterate your Government's disposition to discuss through diplomatic channels
any proposals which mj^ Government maj;^ desire to p u t forward concerning the
p a y m e n t of this indebtedness, I have t h e honor to inform you of the receipt of
instructions from the Royal Hungarian Foreign Office to submit t h e following
proposals with respect to t h e a m o u n t s due under the debt funding agreement of
April 25, 1924, and t h e moratorium agreement of May 27, 1932.
Before setting forth t h e proposals in detail, I have been instructed to point out
t h a t although financial and economic conditions in H u n g a r y have undergone a
slight improvement, t h e a m o u n t of foreign exchange for meeting t h e services on
t h e aforementioned indebtedness is available only in a limited amount. T h u s t h e
pajanents m u s t of necessit}^ be small b u t nevertheless they will entail considerable
sacrifice a n d therefore m y Government begs to express t h e hope t h a t t h e Governm e n t of the United States will consider t h e m with proper understanding.
T h e Ro3^al H u n g a r i a n Government proposes to pa}^ to t h e Government of t h e
United States t h e a m o u n t of $19,656.32, representing one per centum of t h e
principal of $1,965,632.75 due under the above-mentioned agreements, in semiannual installments of $9,828.16 over a period of 3 j^ears, t h e first p a y m e n t to be
m a d e on December 15, 1937, a n d the last to be made on June 15, 1940.
T h e settlement of interests which have accrued from the 16th of June 1932 t o
t h e 15th of June 1937 would be held in suspense for the time being.
T h e H u n g a r i a n Government would leave to the discretion of the American
Government w h a t portion of the proposed pa3aiient should be applied to t h e interests and w h a t portion to the principal. However, if it is in any way possible,
the H u n g a r i a n Government would like to have 25 per centum, i. e., $4,914.08, of
t h e proposed paj^ment applied on account of the interest due in the respective
period, a n d the remaining 75 per centum to t h e amortization of t h e principal,
with t h e understanding t h a t t h e whole question of t h e application of p a y m e n t s to
principal a n d interest will be considered in an}^ eventual subsequent negotiations
for the settlement of t h e debt.
In connection with the above, the H u n g a r i a n Government begs to refer to t h e
treasury certificates (bearing interest a t 4 and 2 per centum per a n n u m ) , which
have been s u b s t i t u t e d for the interest p a y m e n t s on t h e rehef loan a n d which h a v e
been deposited to the Foreign Creditors Account a t t h e H u n g a r i a n National
Bank during t h e entire period of the transfer moratorium, a n d to advise t h a t in
their place would be deposited one noninterest-bearing treasury certificate a n d
t h a t the interests which have accrued on t h e above certificates a n d have been paid
into the Foreign Creditors Account would be refunded to the H u n g a r i a n Government. I n view of t h e fact t h a t the proposed p a y m e n t s , which in case of their
acceptance would cover a period of 3 years, have been calculated on t h e basis of
t h e original principal, which principal is hereby acknowledged again by m y Government, the H u n g a r i a n Government feels t h a t those treasury certificates which
have been deposited during t h e period of the transfer m o r a t o r i u m a n d applied
against the installments of t h e sinking fund should be canceled and the interests
which have accrued thereon should be refunded to t h e H u n g a r i a n Government.
I have the honor to request t h a t the foregoing be b r o u g h t to t h e a t t e n t i o n of t h e
competent American authorities and t h a t I m a y be informed of their reply in
order t h a t I m a y advise m y Government accordingly.
Accept [etc.].
ANTHONY

BALASY.

Text of note from the Secretary of State of the United States to the Charge d^ Affaires
ad interim of Hungary, August 26, 1937
SIR:

I duly t r a n s m i t t e d for the consideration of the Acting Secretary of t h e Treasury
your note No. 704/R, dated August 16, 1937, through which t h e H u n g a r i a n Gove r n m e n t proposed to p a y to t h e United States t h e a m o u n t of $19,656.32 annually

REPORT OF THE SECRETARY OF THE TREASURY

297

over a period of three years in semiannual installments of $9,828.16, the first payment to be made on December 15, 1937, and the last to be made on June 15, 1940.
I have now received a communication from the Acting Secretary of the Treasury
in which, after reciting the various statements and requests in your note, including the fact that the proposal of your Government is accompanied by a definite
acknowledgment by your Government of its indebtedness to the United States,
the Acting Secretary requests that I transmit to you a notification in the following
sense:
''The Hungarian Government should be informed that the Treasury Department will receive the semiannual payments contemplated under its proposal.
The Hungarian Government states that it will leave to the discretion of the
American Government what portion of the proposed payments should be applied
to interest and what portion to principal. Under all the circumstances the
Treasury Department feels that the proposed payments should be applied entirely
to interest, and, therefore, pursuant to the offer of the Hungarian Government
will apply such payments accordingly. The Hungarian Government should,
however, be informed that the acceptance of such payments by the Treasury for
application on account of its indebtedness to the United States cannot be construed as a concurrence in the proposal of the Hungarian Government as to suspension of payments previously due, nor in any way alter the provisions of its
debt funding agreement of April 25, 1924, and moratorium agreement of May
27, 1932, with the United States or prejudice the rights of the United States
Government.
"With respect to that part of the proposal of the Hungarian Government relative to the substitution of a noninterest-bearing treasury certificate to the Foreign
Creditors Account at the Hungarian National Bank for treasury certificates
previously deposited in such account, the Treasury has taken due note of the
action contemplated to be taken by the Hungarian Government in this connection.
However, the attention of that Government should again be directed to the provisions of its debt funding and moratorium agreements and it should be notified
that the issuance and deposit of the treasury certificate as indicated above cannot,
in any way, alter the provisions of its agreements with the United States or
prejudice the rights of the United States Government."
In transmitting this notification from the Secretary of the Treasury, I desire to
express the gratification with which this Government learns that the Hungarian
Government will resume pajmient in dollars of a substantial part of current installments falling due on its indebtedness to the Government of the United States,
which it has continued to acknowledge but on which payment in dollars has been
interrupted as part of a general transfer moratorium. The ability of Hungary
at the present time to adjust part of its foreign indebtedness on a permanent
basis and to resume partial payment on the rest on a temporary and provisional
basis is an encouraging evidence of improved economic conditions. The promptness with which the Hungarian Government, after negotiating a settlement of
prior ranking indebtedness, has offered to make partial current payments on its
indebtedness to the United States Government, while continuing to acknowledge
the obligation to pay in full, is a heartening sign of recognition of the importance
of conserving the sanctity of intergovernmental contractual obligations.
Accept [etc.].
CoRDELL H U L L .

Exhibit 48
Message from the President of the United States to the Congress, March 28, 1938, concerning the desire of the Hungarian Government to repay its relief loan to the United
States without interest
T H E WHITE HOUSE, March 28,

1938.

To the Congress of the United States:
I transmit herewith, for the consideration of the Congress, a communication from
the Minister of Hungary on the relief indebtedness of Hungary to the United
States, in which the Hungarian Government tentatively formulates for the consideration of the American Government a possible basis for a new debt arrangement between the two countries to replace completely the debt agreement of 1924
and accruals thereunder.
The indebtedness of the Government of Hungary to the Government of the
United States is not a war debt but is properly designated as a relief debt, having
been contracted in May 1920 under the authority of the act of March 30, 1920,

298

REPORT OF THE SECRETARY OF THE TREASURY

which authorized t h e United States Grain Corporation, with t h e approval of t h e
Secretary of t h e Treasury, to sell or dispose of flour in its possession for cash or on
credit a t such prices and on such t e r m s or conditions as considered necessary t o
relieve the populations in t h e countries of Europe or countries contiguous thereto
suffering for t h e w a n t of food. T h e American Relief Administration acted as t h e
fiscal agent of t h e United States Grain Corporation in dispensing this relief.
T h e original indebtedness, t h e principal a m o u n t of which was $1,685,835.61, with
interest accrued thereon from M a y 1920 t o December 1923, a t t h e r a t e of 4}i
percent per a n n u m , was funded as of t h e latter date, by agreement m a d e in April
1924, into bonds of H u n g a r y in t h e aggregate principal a m o u n t of $1,939,000,
maturing serially in the succeeding years for 62 years, bearing 3 percent for t h e
first 10 years a n d thereafter a t t h e r a t e of 3J^ percent per a n n u m . In approving
this d e b t settlement, t h e Congress authorized t h e Secretary of the Treasury t o
subordinate the lien of t h e bonds t a k e n under it t o t h e lien of t h e Hungarian
reconstruction loan, which was a b o u t t o be issued and sold in numerous countries,
including t h e United States. I n M a y 1924 t h e Secretary, acting upon this authorization, formally, subordinated t h e American Government's lien t o t h e lien of t h e
reconstruction bond issue.
On December 23, 1931, t h e Hungarian Government proclaimed a transfer
m o i a t o r i u m suspending p a y m e n t in foreign currencies of all Hungarian foreign
obligations, public and private, except the aforesaid reconstruction loan of 1924.
P a y m e n t s on t h e l a t t e r loan were subsequently suspended in p a r t . During 1937
t h e Hungarian Government began liquidating t h e transfer moratorium by negotiating agreements with t h e foreign holders of H u n g a r i a n obligations for t h e acceptance of reduced p a y m e n t s in full satisfaction of existing indebtedness. I t is in
this connection t h a t t h e H u n g a r i a n Government has now come forward of its own
initiative in an effort t o reach an agreement with t h e United States Government
under which t h e relief indebtedness can also be discharged in full.
No readjustment of t h e terms of p a y m e n t of t h e Hungarian indebtedness t o
t h e United States can be made except p u r s u a n t to act of Congress. T h e H u n g a r i a n
Government is seeking a definitive readjustment of t h e t e r m s of p a y m e n t of t h i s
indebtedness on t h e basis of full p a y m e n t over a period of years of t h e t o t a l
original a m o u n t borrowed, without interest.
T h e Hungarian Government calls attention to t h e similarity between its suggested basis for p a y m e n t and t h a t accepted by t h e United States in t h e Austrian
d e b t agreement of May 8, 1930, which provided t h a t a sum very slightly in excess
of t h e original Austrian indebtedness incurred in 1920 should be repaid, without
interest, in 40 annuities. T h e Congress of t h e United States, after full consideration of t h e n a t u r e of t h e Austrian indebtedness, voted by a large majority in
t h e House of Representatives a n d by a unanimous procedure in t h e Senate t o
authorize t h e signature of t h e draft agreement which had been prepared by t h e
Treasury D e p a r t m e n t and t h e representatives of t h e Austrian Government.
T h e Hungarian debt is a relief debt like t h e Austrian one.
T h e Hungarian Minister also suggests t h a t the terms compare favorably with
those in several other debt settlements, and t h a t in announcing the signature of
t h e debt agreement with Austria in 1930, t h e Secretary of t h e Treasury said:
" T h e settlement compares favorably with t h e settlement made by t h e United
States with t h e Governments of Greece, Italy, and Yugoslavia."
I t has, of course, been t h e consistent policy of t h e IJnited States t o consider
each debt in t h e light of t h e circumstances of the debtor government, and it is
with this in view t h a t t h e Hungarian communication is t r a n s m i t t e d to the Congress.
I believe t h e proposals of t h e Hungarian Government should receive t h e most
careful consideration of t h e Congress. They represent a noteworthy wish and
effort of t h e Hungarian Government to meet its obligations to this Government.
I n its simplest terms, t h e offer of t h e Hungarian Government is to repay t o
t h e United States the whole of t h e relief loan b u t without p a y m e n t of any interest
thereon.
FRANKLIN D . ROOSEVELT.

(Enclosure: Aide Memoire on H u n g a r y ' s relief debt to the United States,
F e b r u a r y 7, 1938.)
AIDE MEMOIRE ON HUNGARY'S R E L I E F DEBT TO T H E UNITED STATES

1. Hungary, normally a wheat- a n d flour-exporting country, was faced in 1920
with a threatening famine. I t became necessary therefore to purchase on credit
from t h e United States Grain Corporation 13,890 tons of flour a t a price of $121.37

REPORT OF THE SECRETARY OF THE TREASURY

299

per ton and the Hungarian Government became indebted to the American
Government for the cost of this purchase in the amount of $1,685,835.
This debt was funded into interest-bearing bonds in 1924. The funded principal amount of these bonds was $1,939,000 since there was included in the total
an amount of $253,000 which had accrued as interest between 1920 and 1924.
The Hungarian-American debt settlement was worked out on the same basis
as the British American debt funding settlement, containing none of the concessions which were later granted from those terms to other countries. The total
principal to be repaid included, as has already been remarked, a large element
of accrued interest. Furthermore, the annual payments becoming due on the
new principal from the very beginning of the agreement contained a large element
of interest payment.
This is in contrast to the settlements reached with other Danubian countries
which had likewise incurred relief debts to the American Government at about
the same time and for similar purposes. In these other funding arrangements
the annuities provided for the years between 1924 and 1931 were all on account
of the principal amount of indebtedness.
On the other hand, as a result of this difference in terms, of the $468,466.32
which the Hungarian Government paid during these years, only $73,995.50 was
apphed to reduction of principal, the other $393,717.78 being charged as interest.
Thus the nominal unpaid principal of the Hungarian debt now stands at a substantially higher total than it would, had Hungary enjoyed the terms later granted
to other Danubian countries.
The failure of Hungary to effect payments to the United States under the
terms of its debt contract had no relation whatsoever with the defaults of other
debtors of the United States. In December 1931, 6 months before the Hoover
moratorium expired, the sudden withdrawal of foreign short-term credits completely exhausted the gold and foreign exchange reserve of the National Bank of
Hungary and forced the Government, in order to safeguard the financial stability
of the country, to decree a transfer moratorium on all foreign debts.
The annuities due under the funding agreement of 1924 were included, however, by the Hungarian Government in every budget passed by Parliament from
1932 to 1937, and on each payment date the United States Government was
informed that in lieu of transfer, treasury bills in the national currency were
deposited in its favor.
Since the summer of 1937 the Hungarian Government has been emerging from
the moratorium which for several years has interrupted payments on all kinds of
Hungarian foreign debts to all classes of creditors in all parts of the world. Arrangements on a provisional and temporary basis have been worked out with
various groups of creditors. Concurrently a payment of $9,828.16 was made to
the American Government on December 15, 1937.
2. Responsive to the repeated indications given by the American Government
to the effect "that this Government is fully disposed to discuss, through diplomatic
channels, any proposals which your Government may desire to put forward in
regard to the payment of this indebtedness, and to assure you that such proposals
would receive careful consideration with a view to eventual submission to the
American Congress," the Hungarian Government is now prepared to offer to the
United States Government to pay in full the total original amount borrowed.
It therefore tentatively formulates for the consideration of the American
Government a possible basis of a new debt arrangement between the two countries
to replace completely the debt agreement of 1924 and accruals thereunder.
The forms and terms for effecting this new settlement which are under consideration as the basis of a possible offer to the American Government are as follows:
{a) That all payments hitherto made by the Hungarian Government under the
debt settlement of 1924 to the United States (approximate amount $478,000)
should be recalculated as credited against original principal ($1,685,000).
(b) That the original principal ($1,685,000) of the amount borrowed less the
preceding amount paid ($478,000), or $1,207,000, be paid in full in a series of
annuities.
(c) The sum total of these annuities shall be equal to this reduced principal
and shall be in the form of dated noninterest-bearing notes faUing due at specified
dates. These annuities shall run for a period of approximately 30 years (and
h^nce each would be approximately in the amount of $39,000).
3. The Hungarian Government wishes to point out that the sum total of these
annuities, taken together with amounts previously paid by the Hungarian
Government under the debt agreement of 1924, would be identical with the whole

300

REPORT OF THE SECRETARY OF THE TREASURY

original amount borrowed, and thus represent an exact and full discharge of the
debt.
The Hungarian Government hopes all the more that this offer will prove acceptable to the American Government as it very closely approximates the basis
for payment annuities already accepted in the Austrian settlement of May 8, 1930,
for the discharge of a relief indebtedness of the same character and referring to a
country whose capacity to pay can hardly be considered inferior to that of Hungary.
In announcing the signature of said agreement with Austria, the Treasury
Department stated that "The settlement compares favorably with the settlements
made by the United States with the Governments of Greece, Italy, and Yugoslavia."
The Hungarian offer would be even more favorable to the United States
Government as, in contrast to the terms of the Austrian settlement, the Hungarian Government offers complete repayment of its relief obligation within
the present generation.
JOHN PELENYI.
WASHINGTON, D . C .

February 7, 1938.

Exhibit 49
Announcement concerning the treaty between the United States and Nicaragua for
adjustment of pending financial questions {State Department press release, April
14,1938)
The Government of Nicaragua is indebted to the Government of the United
States in the amount of approximately $484,000 for the purchase of surplus
arms, ammunition, and other military equipment. The principal transactions
were concluded on November 14, 1921, and February 25, 1927. The amount
of the principal is $289,898.78. Interest charges had increased this amount to
approximately $484,000 as of August 30, 1937.
The Nicaraguan Government on the other hand has been endeavoring for a
number of years to obtain settlement of its claim for refund of income taxes paid
to the Government of the United States by the Ferrocarril del Pacifico de Nicaragua
(Pacific Railway of Nicaragua), which was incorporated in 1912 under the laws
of the State of Maine. The railroad is owned and operated by the Government
of Nicaragua and functions solely within the territory of that country. The
amount of taxes for which refund is claimed is $372,879.06. Interest charges as
of August 30, 1937, had increased this amount to the sum of $641,115.91.
Beginning in 1922 the Nicaraguan Government sought to have the railroad
declared exempt, as an agency of that Government, from taxation by the United
States, and to obtain refund of income taxes previously paid. Pending consideration of the matter, however, the taxes continued to be paid. The Commissioner
of Internal Revenue, in Decision No. 2076, of April 17, 1931, stated that—
"The entire overassessments are due to the fact that, after a thorough consideration of the taxpayer's manner of organization and mode of operation, it is determined that the corporation is an agency of a foreign government and is exempt
from the operation of the Federal revenue laws and the regulations promulgated
thereunder, sections 213 (b) (5) and/or 231(12), Revenue Acts of 1918 and 1921."
Refund of taxes for the years 1921 and 1922 was made. Claims for the remaining years (1919, 1920, and 1923 to 1928, inclusive) were rejected on the ground
that they had not been filed within the period prescribed by statute for the filing
of claims for the refund of income taxes although the corporation was held to be
exempt from tax for all years involved.
Following further consideration of the matter by the various Government
agencies concerned, it was decided that the most desirable manner of effecting
a settlement would be through the conclusion of a treaty. The treaty signed
today offsets the two items and provides for the payment of $72,000 by the
Government of the United States to the Government of Nicaragua.

REPORT OF THE SECRETARY OF THE TREASURY

301

Exhibit 50
Agreement with Nicaragua providing adjustment of certain accounts and refund of
income taxes, ratified by the Senate on June 13, 1938
The United States of America and the Republic of Nicaragua:
Considering that the Government of the Republic of Nicaragua is indebted to
the Government of the United States of America in the amount of $289,898.78,
representing unpaid balance of the principal amount of indebtedness incurred
for the purchase from the Government of the United States of America of certain
arms and ammunition;
Considering that the Government of the Republic of Nicaragua makes a claim
to refund of income taxes from the Government of the United States of America
in the principal amount of $372,879.06, representing payment of income taxes to
the Government of the United States of America by the Ferrocarril del Pacifico
de Nicaragua; and
Being desirous of adjusting in a mutually satisfactory manner the aforesaid
accounts and of strengthening still further the friendly relations which happily
exist between the two Governments;
Have decided to enter into an agreement for that purpose and to that end have
appointed their plenipotentiaries:
The President of the United States of America; Cor dell Hull, Secretary of
State of the United States of America; and
The President of the Republic of Nicaragua; Senor Doctor Don Leon De Bayle,
Envoy Extraordinary and Minister Plenipotentiary of Nicaragua in Washington,
who, having communicated their respective full powers to each other, which
have been found to be in good and due form, have agreed upon the following:
ARTICLE I

The Government of the United States of America shall pay to the Government
of the Republic of Nicaragua the sum of $72,000 in fuU settlement of the claim
of the. Government of the Republic of Nicaragua for refund of $372,879.06,
being the principal amount of certain income taxes paid by the Ferrocarril del
Pacifico de Nicaragua, and for refund of interest thereon.
ARTICLE II

The Government of the Republic of Nicaragua agrees to accept the payment
of $72,000 in full settlement of its aforesaid claim, and in consideration of such
agreement the Government of the United States of America hereby cancels the
present indebtedness of the Government of the Republic of Nicaragua to it for
arms and ammunition sold to the Government of the Republic of Nicaragua, in
the principal amount of $289,898.78, together with interest thereon.
ARTICLE III

The present agreement shall be ratified in accordance with the constitutional
methods of the High Contracting Parties and shall take effect immediately on
the exchange of ratifications, which shall take place as soon as possible at
Washington.
In witness whereof, the plenipotentaries have signed this agreement in duplicate, in the English and Spanish languages, both texts being authentic, and
have hereunto affixed their seals.
Done at the city of Washington, the 14th day of April, 1938.
For the President of the United States of America:
[SEAL]

CORDELL HULL.

For the President of the Republic of Nicaragua:
[SEAL]

104825—39

L E 6 N DE BAYLE.

302

REPORT OF THE SECRETARY OF THE TREASURY
GOVERNMENT LOSSES IN SHIPMENT
Exhibit 51

An act io dispense with the necessity for insurance by the Government against loss or
damage to valuables in shipment, and for other purposes
[Public No. 192, 75th Cong., H. R. 6635]

Be it enacted by the Senate and House of Representatives of the United States of
America in Congress assembled. That as soon as practicable after the approval of
this act the Secretary of the Treasury and the Postmaster General shall, jointly,,
with the approval of the President, prescribe regulations governing the shipment
of valuables by the executive departments, independent establishments, agencies,
wholly owned corporations, officers, and employees of the United States, with a.
view to minimizing risks of loss and destruction of, and damage to, such valuables
in shipment. After the effective date of such regulations, which shall be not more
than thirty days after their issuance, it shall be the duty of every such executive
department, independent establishment, agency, wholly owned corporation, officer, and employee, and of every person acting for him or it, or at his or its direction, to comply with such regulations in making any shipment of valuables.
SEC. 2. There is hereby authorized to be appropriated, out of any money in the
Treasury not otherwise appropriated, the sum of $500,000 to be used, under the
direction of the Secretary of the Treasury, for the replacement of valuables, or
the value thereof, lost, destroyed, or damaged in the course of shipment effected
pursuant to the regulations prescribed under section 1. There is hereby further
authorized to be appropriated annually, beginning with the fiscal year 1939 and
ending with the fiscal year 1948, inclusive, the sum of $200,000 for the said purposes, and from time to time such additional sums as may be necessary for the
said purposes. There shall be in the Treasury of the United States a revolving
fund, to be known as "the fund for the payment of Government losses in shipment" (hereinafter referred to as "the fund"), to be constituted of the said sum
of $500,000 and the sums hereafter appropriated for the said purposes, together
with all recoveries and repayments credited to the fund as hereinafter provided.
There is hereby further authorized to be appropriated, out of any money in the
Treasury not otherwise appropriated, the sum of $10,000, for expenditures under
the direction of the Secretary of the Treasury, to be used for the payment of
administrative expenses, including personal services, necessary to carry out the
provisions of this act for the fiscal year 1938.
SEC. 3. In the event of loss or destruction of, or damage to, valuables of which
shipment shall have been made pursuant to the regulations prescribed under
section 1, a claim in writing for replacement shall be made upon the Secretary of
the Treasury who, if he shall be satisfied that such loss, destruction, or damage
has occurred and that shipment was made substantially in accordance with such
regulations, shall cause replacement to be made out of the fund through such
officers as he may designate. Notwithstanding any provision of law to the contrary, the decision of the Secretary of the Treasury that such loss, destruction,
or damage has occurred or that such shipment was made substantially in accordance with such regulations shall be final and conclusive and shall not be subject to
review by any other officer of the United States: Provided, however. That where
the Secretary of the Treasury determines that such replacement can be effected,
in whole or in part, without actual or ultimate injury to the United States, by a
credit in the accounts of the executive department, independent establishment,
agency, officer, employee, or other accountable person making the claim, he shall
not resort to the fund, except to the extent that such replacement cannot be so
effected by such credit, but shall certify such determination to the Comptroller
General and, upon receipt of such certification, the Comptroller General is authorized and directed to make such credit in the settlement of accounts in the General
Accounting Office: Provided further. That the fund shall not be available with
respect to any loss, destruction, or damage affecting valuables of which shipment
shall have been made by or on behalf of the Public Debt Service of the Treasury
Department, insofar as such loss, destruction or damage is chargeable against
the indefinite appropriation "Expenses of loans, act of September 24, 1917, as
amended and extended" (U. S. C , 1934 edition, title 31, sees. 760, 761): And
provided further. That the fund shall not be available with respect to any loss,
destruction, or damage affecting valuables, insofar as such loss, destruction, or
damage may be adjusted by the Postmaster General under the provisions of the

REPORT OF THE SECRETARY OF THE TREASURY

303

a c t of March 17, 1882, as amended (U. S. C , 1934 edition, title 39, sec. 49); nor
shall it be available with respect to any loss, destruction, or damage affecting
valuables of which shipment shall have been m a d e a t the risk of persons other
t h a n t h e United States, its executive departments, independent establishments,
agencies, wholly owned corporations, officers, and employees. All recoveries
a n d repayments on account of loss, destruction, or damage to valuables of which
replacement shall have been made out of t h e fund shall be credited to it and shall
be available for t h e purposes thereof.
SEC. 4. On and after the effective date of the regulations prescribed under
section 1, no executive department, independent establishment, agency, wholly
owned corporation, officer, or employee shall expend any money, or incur a n y
obligation, for insurance, or for the p a y m e n t of premiums on insurance, against
loss, destruction, or damage in the shipment of valuables except as specifically
authorized by the Secretary of the Treasury. T h e Secretary of the Treasury m a y
give such authorization if he shall find t h a t the risk of loss, destruction, or damagein such shipment cannot be adequately guarded against by the facilities of t h e
United States or t h a t t h e circumstances are such t h a t a d e q u a t e replacement
cannot be provided u n d e r this act.
SEC. 5. Every officer and employee of t h e United States a n d every person^
acting on behalf of a wholly owned corporation who makes a shipment of valuables in good faith p u r s u a n t to a n d substantially in accordance with the regulations prescribed under section 1 shall be deemed, insofar as there m a y be concerned the propriety with respect to such shipment of any act or omission
governed by such regulations, to be acting in faithful execution of his duties of
office and in full performance of t h e conditions of his bond a n d oath of office, if an3^.
SEC. 6. T h e Secretary of t h e Treasury shall have power, with t h e approval of
t h e President, to make such rules a n d regulations as m a y be necessary for t h e
execution of the functions vested in him by this act, a n d m a y for such purpose
require persons making shipment of valuables or making claims for replacement
to m a k e such declarations or to furnish him with such other information as he
m a y deem necessary.
SEC. 7. For the purposes of this act—
(a) T h e t e r m " v a l u a b l e s " means a n y article or thing or representative of
value in which the United States has a n y interest, or in connection with which
it has any obligation or responsibility, direct or indirect, a n d which is of, or is
similar to, a class or kind of article or thing or representative of value which it
has been t h e practice heretofore of t h e United States to insure as t h e insured
p a r t y , against loss, destruction, or damage in shipment, a n d includes, b u t is n o t
limited to, coin, specie, bullion, currency, bonds, coupons, debentures, billsy
notes, certificates of indebtedness, certificates of deposit, mortgages, assignments,
certificates of stock, warehouse receipts, checks, t r u s t receipts, warrants, s t a m p s ,
a n d a n y other securities, papers, or materials of value, whether complete, incomplete, mutilated, in definitive form, or represented by interim documents; t h e
t e r m "United S t a t e s " as used in this subsection means t h e United States or a n y
of its executive departments, independent establishments, agencies, wholly
owned corporations, officers, or employees;
(b) T h e t e r m " s h i p m e n t " means t h e transportation, or t h e effecting of t r a n s portation, of valuables, without limitation as to t h e means or facilities used or
by which t h e transportation, is effected or t h e person to whom it is made, a n d
includes, b u t is not limited to, shipments m a d e to any executive d e p a r t m e n t ,
independent establishment, agency, wholly or partly owned corporation, officer,
or employee of the United States, or any person acting on his or its behalf or a t
his or its direction;
(c) T h e t e r m "wholly owned corporation" means any corporation, regardless
of the law or laws under which it is incorporated, t h e capital of which is entirely
owned, directly or indirectly, by the United States, and includes t h e duly a u thorized officers, employees, and agents thereof;
(d) T h e term "replacement" means payment, reimbursement, replacement, or
duplication or t h e expenses incident thereto.
SEC. 8. (a) Whenever it is clearly proved to t h e satisfaction of the Secretary
of t h e Treasury—
(1) T h a t a n y interest-bearing security of t h e United States, identified by
n u m b e r a n d description, payable to bearer or so assigned as to become, in effect,
payable to bearer, has been wholly or p a r t l y destroyed, or so mutilated or defaced
as t o impair its value to the owner, or has been lost or stolen under such circumstances, and such a period of time having elapsed after it has m a t u r e d or has
become redeemable p u r s u a n t to a call for redemption, as in t h e j u d g m e n t of t h e

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REPORT OF THE SECRETARY OF THE TREASURY

Secretary would indicate that it has been destroyed or irretrievabl}^ lost, is not
held by any person as his own property and will never become the basis of a valid
claim against the United States; or
(2) That any interest-bearing security of the United States, identified by number and description, which is not payable to bearer and which has not been so
assigned as to become, in effect, payable to bearer, has been lost or stolen, so that
it is not held by any person as his own property, or has been wholly or partly
destroyed, or so mutilated or defaced as to impair its value to the owner;
the Secretary, upon receipt and approval by him of a bond of indemnity, if and
as required by subsection (b) hereof, shall, in the case of a security which has not
matured or become redeemable pursuant to a call for redemption, issue a substitute marked "duplicate" and showing the serial number of the original security;
or shall, in the case of a security which has matured or become redeemable pursuant to a call for redemption, make payment thereof to the owner, with such
interest only as would have been paid had the security been presented when it
became due and payable: Provided, That in the case of an interim certificate
relief may be given by the issue of a definitive security, whether before or after
maturity, rather than by the issue of ,a substitute or by payment: And provided
further. That no payment shall be made on account of interest coupons claimed
to have been attached to such original security unless the Secretary is satisfied
that such coupons have not been paid, and are in fact destroyed or can never become the basis of a valid claim against the United States.
(b) Except as hereinafter provided, the owner of such lost, stolen, destroj^ed,
mutilated, or defaced security shall file with the Secretary of the Treasury a bond,
to indemnify the United States, in such form and amount and with such surety,
sureties, or security as the Secretary of the Treasury shall require: Provided,
That in case of securities payable to bearer or so assigned as to become, in effect,
payable to bearer, the destruction of which has not been proved, a corporate
surety, qualified under the provisions of the act of August 13, 1894, as amended
(U. S. C , 1934 edition, title 6, sees. 6-13), shall be required on such bond of
indemnity: And provided further, That a bond of indemnity shall not be required
in any of the following classes of cases, except as hereinafter provided:
(1) If the Secretary of the Treasury is satisfied that the loss, theft, destruction,
mutilation, or defacement, as the case may be, occurred without fault of the
owner and while the security was in the custody or the control of the United
States (not including the Postal Service when acting solely in its capacity as the
pubhc carrier of the mails), or of a person thereunto duly authorized as lawful
agent of the United States, or while it was in the course of shipment effected
pursuant to and in accordance with the regulations issued under the provisions
of this act:
(2) If substantially the entire security is presented and surrendered by the
owner and the Secretary of the Treasury is satisfied as to the identity of the security presented and that any missing portions are not sufficient to form the basis of
a va,lid claim against the United States;
(3) If the lost, stolen, destroyed, mutilated, or defaced security is one which
by the provisions of law or by the terms of its issue is transferable only by operation of law;
(4) If the owner is a State or political subdivision thereof, a corporation the
whole of whose capital is owned by the United States, a foreign government, or a
Federal Reserve bank:
Provided, however. That in any of the foregoing classes of cases the Secretary of the
Treasury may require a bond of indemnity if he deems it essential to the public
interest.
(c) The term "interest-bearing security of the United States" or "security,'^
wherever used in this section, means any direct obligation of the United States
issued pursuant to law for valuable consideration and which by its terms bears
interest, or is issued on a discount basis, and includes (but is not limited to) bonds,
notes, certificates of indebtedness, and Treasury bills, and interim certificates
issued for any such security.
(d) The Secretary of the Treasury shall have the power to make such rules
and regulations as he may deem necessary for the administration of this section.
(e) Sections 3702, as amended, 3703, 3704, and 3705 of the Revised Statutes of
the United States (U. S. C , title 31, sees. 735, 736, 737, and 738) are hereby
repealed.

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SEC. 9. Section-3646 of the Revised Statutes of the United States (U. S. C ,
1934 edition, title 31, sec. 528), as amended, is further amended to read as follows:
"(a) Except as hereinafter provided, whenever it is clearly proved to the satisfaction of the Secretary of the Treasury that any.original check of the United
States is lost, stolen, or wholly or partly destroyed, or is so mutilated or defaced
as to impair its value to its owner or holder, persons authorized to issue such checks
on behalf of the United States are authorized, before the close of the fiscal year
following the fiscal year in which the original check was issued, to issue to the
owner or holder thereof a substitute, marked 'duplicate' and showing the number,
date, and payee of the original check, upon the receipt and approval by the Secretary of the Treasurj^ of a bond, to indemnify the United States, in such form and
amount and with such surety, sureties, or security as the Secretary of the Treasury shall require; but no such substitute shall be payable if the original check shall
first have been paid: Provided, however. That the authority herein conferred to
issue substitute checks may, in the case of checks issued on account of public debt
obligations and transactions regarding the administration of banking and currency laws, be issued without limitation of time.
"(b) A bond of indemnity shall not be required under subsection (a) of this
section in any of the following classes of cases except as hereinafter provided:
(1) If the Secretary of the Treasury is satisfied that the loss, theft, destruction,
mutilation, or defacement, as the case may be, occurred without fault of the owner
or holder and while the check was in the custody or control of the United States
(not including the Postal Service when acting solely in its capacity as the public
carrier of the mails), or of a person thereunto duly authorized as lawful agent of
the United States, or while it was in the course of shipment effected pursuant to
a,nd in accordance with the regulations issued under the provisions of the Government Losses in Shipment Act; (2) if substantially the entire check is presented and
surrendered by the owner or holder and the Secretary of the Treasury is satisfied
as to the identity of the check presented and that any missing portions are not
sufficient to form the basis of a valid claim against the United States; (3) if the
Secretary of the Treasury is satisfied that the original check is not negotiable and
cannot be made the basis of a valid claim against the United States; (4) if the
amount of the check is^ less than $50 and the Secretary of the Treasury is satisfied
that the giving of a bond of indenmity would be an undue hardship to the owner
or holder; (5) if the owner or holder is a State or political subdivision thereof, a
corporation the whole of whose capital is owned by the United States, a foreign
government, or a Federal Reserve bank: Provided, however. That in any of the
foregoing classes of cases the Secretary of the Treasury may require a bond of
indemnity if he deems it essential to the public interest.
"(c) The Secretary of the Treasury shall have the power to make such rules
and regulations as he may deem necessary for the administration of the provisions
of this section.
"(d) Notwithstanding the provisions of subsections (a), (b), and (c) of this
section, whenever any original check of the Post Office Department has been lost,
stolen, or destroyed, the Postmaster General may authorize the issuance of a
substitute, marked 'duplicate' and showing the number, date, and payee of the
original check, before the close of the fiscal year following the fiscal year in which
the original check was issued, upon the execution by the owner thereof of such
bond of indemnity as the Postmaster General may prescribe: Provided, That
when such original check does not exceed in amount the sum of $50 and the payee
or owner is, at the date of the application, an officer or employee in the service of
the Post Office Department, whether by contract, designation, or appointment,
the Postmaster General may, in lieu of an indemnity bond, authorize the issuance
of a substitute check or warrant upon such an affidavit as he may prescribe, to be
made before any postmaster by the payee or owner of an original check.
"(e) Substitutes, marked as hereinabove provided, drawn on the Treasurer of
the United States, shall, after the lapse of the period fixed by section 21 of the
Permanent Appropriation Repeal Act, 1934 (48 Stat. 1235; U. S. C , 1934 edition,
title 31, sec. 725 (t)), for the payment of the original checks, be payable only as
the original checks would be payable thereunder.
"(f) The term 'original check' wherever used in this section means any check,
warrant, or other order for the payment of money, payable upon demand and not
bearing interest, drawn by a duly authorized officer or agent of the United States
on its behalf against an account or funds of the United States, whether upon a

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REPORT OF THE SECRETARY OF THE TREASURY

bank or upon t h e Treasurer or other paying officer of t h e United States, b u t does
not include money, coins, or currency of the United States nor instruments issued
by any corporation or other entity owned or controlled by t h e United States,
whether in whole or in part, against such corporation's or e n t i t y ' s own funds;
as used in subsection (d) of this section it means such an instrument drawn by a
duly authorized officer or employee of t h e Post Office D e p a r t m e n t . "
S E C . 10. This act m a y be cited as t h e " G o v e r n m e n t Losses in Shipment Act.'*
S E C . 11. This act shall become effective on J u l y 1, 1937.
Approved, July 8, 1937.
Exhibit 52
Regulations, J u l y 16, 1937, governing the shipment of valuables pursuant to the
Government Losses in Shipment Act
[Treasury Department Circular No. 576. Post Office Department Circular No. Reg. 1]
TREASURY DEPARTMENT,
O F F I C E OF T H E S E C R E T A R Y ,
POST OFFICE DEPARTMENT,
O F F I C E OF T H E P O S T M A S T E R G E N E R A L ,

Washington, J u l y 16, 1937.
To the Heads of the Executive Departments, Independent Establishments, Agencies,
Wholly Owned Corporations, Officers and Employees of the United States:
T h e following provisional regulations are prescribed p u r s u a n t to section 1 of
t h e Government Losses in Shipment Act, Public N o . 192, Seventy-fifth Congress,
first session, relative to shipments of valuables made p u r s u a n t to t h a t a c t :
1. All t e r m s used in these regulations have t h e same meaning as when used in
said act. Section 7 of said act defines in p a r t t h e t e r m " v a l u a b l e s " as " a n y
article or thing * * * which is of or is similar to a class or kind of article
or thing or representative of value which it has been t h e practice heretofore of
t h e United States t o insure, as t h e insured p a r t y * * *," a n d t h e t e r m "shipm e n t " as " t h e transportation or the effecting of transportation of valuables without limitation as to t h e means or facilities used * * */>
2. After t h e effective d a t e and hour of these regulations, as hereinafter provided,
shipments of valuables shall be made (1) in t h e same m a n n e r and at such time as
those of t h e same class or kind were made, when insured, immediately preceding
t h e effective date of these regulations, or (2) in such other m a n n e r and a t such
other time consonant with the greatest possible protection against risk of loss and
destruction of a n d damage to such valuables as t h e respective heads of t h e various
executive departments, independent establishments, 'agencies and wholly owned
corporations of the United States m a y from time to time direct, after notice t o
t h e Secretary of the Treasury.
3. These regulations shall become effective a t 12:01 a. m., August 15, 1937,
eastern standard time, a n d as to all shipments as above defined which have n o t
left the offi.ce of the sender prior thereto.
4. T h e Secretary of the Treasury a n d the Postmaster General, with t h e approval
of t h e President may, a t any time, or from time to time, revoke or a m e n d these
regulations or prescribe and issue supplemental or a m e n d a t o r y rules a n d regulations p u r s u a n t to section 1 of t h e said Government Losses in Shipment Act.
JOSEPHINE

ROCHE,

Acting Secretary of the Treasury.
W.

HOWES,

Acting Postmaster General.
Approved:
FRANKLIN D .

ROOSEVELT,

The White House.

REPORT OF THE SECRETARY OF THE TREASURY

307

Exhibit 53
Regulations, August 13, 1937, governing claims for replacement of valuables, or the
value thereof, shipped pursuant to the Government Losses in Shipment Act
[Department Circular No. 577. Accounts and Deposits]
TREASURY

DEPARTMENT,

Washington, August 13, 1937.
To the Heads of the Executive Departments, Independent Establishments, Agencies,
Wholly Owned Corporations, Ofiicers and Employees of the United States, Federal
Reserve Banks when acting on behalf of the United States or Agencies thereof, and
Others Concerned:
The following regulations are prescribed pursuant to section 6 of the Government Losses in Shipment Act, Public No. 192, Seventy-fifth Congress, first session, approved July 8, 1937, hereinafter referred to as the "act." All terms used
in these regulations shall have the same meaning as when used in said act, unless
otherwise indicated.
1. General instructions.—To facilitate the reporting of loss or destruction of, or
damage to valuables and submission of proofs of claim for relief, under the provisions of section 3 of the act, in the event of loss or destruction of, or damage to
valuables shipped pursuant to the regulations prescribed under section 1 of said
act, executive departments, independent establishments, agencies, wholly owned
eorporations, officers, employees. Federal Reserve banks when acting on behalf
of the United States or agencies thereof, and others concerned, hereinafter sometimes referred to as "consignors," should observe strictly the following instructions. Failure on the part of any consignor or agent or employee thereof to comply with these instructions may retard recoveries and may under the circumstances
preclude reimbursement from the fund or other relief under the act, and render
the consignor responsible for any loss occurring through such negligence.
2. Method of shipment.—All shipments shall be made ih accordance with the
terms of Treasury Department Circular No. 576-Post Office Department Circular No. Reg. 1, dated July 16, 1937, and such amendments and supplements
thereto as may, from time to time, be promulgated.
3. Preparation of shipment.—Each shipment must be inspected and verified by
two responsible employees before final preparation for delivery to the carrier
(to wit, before sealing, locking, etc.) and must be finally prepared for such delivery
in their presence and before leaving their immediate control. In the case of any
class of shipments with respect to which it is not possible or practicable to comply
strictly with the foregoing requirement, it shall be the duty of administrative
officers to make adequate provision, through the establishment of accounting
controls, or otherwise, for the maintenance of basic records from which they wiU
be in a position to prove to the satisfaction of the Secretary of the Treasury the
exact extent of loss, destruction, or damage, in the event that claim for replacement out of the fund, or otherwise, shall be made. The foregoing requirements
will apply irrespective of the carrier or method of transportation employed in
making shipments.
4. Record of shipment.—A permanent record of each shipment must be maintained by the consignor which record must include: (1) The name and address of
the consignee; (2) a complete description of the contents (if the shipment comprises securities, the record must be maintained by issue, series, denomination,
and serial number, and a description of the coupons, if any, attached to such
securities at the time of shipment); (3) face or par value of shipment in the case
of securities, currency, etc., or replacement value in the case of other valuables;
(4) the registry number or the lock and rotary numbers, if any, under which
shipped; (5) the number of the registry receipt or other receipt of carrier; (6) the
date and hour of delivery to the carrier; (7) a record of the signatures of the employees who verified the contents of the package and witnessed sealing; (8) a
record of the signatures of the employee or employees who thereafter had custody
thereof, until delivered at the post office for registration or deposited with the post
office or other carrier for shipment; and (9) the name of the carrier. In addition
the consignor must preserve for a reasonable time all registry receipts or other
carriers' receipts, and such other documents as may be incidental to the shipments.
. 5 . Adtiice of shipment.—In the event the value of any one shipment to one consignee at dhe-time, by one consignor, except in the case of an intracity shipment,
equals or exceeds $10,000, immediate notice thereof must be forwarded by the

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REPORT OF THE SECRETARY OF THE TREASURY

consignor to the consignee by separate mail. There should be included in such
notice: (1) A complete record of the contents of the shipment; (2) the method of
transportation employed and the name of the carrier; (3) the date of delivery to
such carrier. The consignee should be requested to arrange: (1) That the shipment, when received, be opened-and inspected by one or more responsible employees of the consignee; (2) that immediate advice of any difference between the
amounts or quantity indicated in such notice and in the shipment when opened
be forwarded to the consignor; (3) that the consignor and the post office, or office
of other carrier through which delivery would be made, be notified immediately
in the event of the failure of the shipment to arrive in due course; (4) that consignor be advised immediately concerning any damage to the shipment; and (5)
that all findings of the consignee in such cases be made a matter of record which
may be subject to the call or inspection of the Secretary of the Treasury or other
duly authorized Government oflficer in connection with any investigation which
may be necessary in connection therewith.
6. Report of shipment.—As promptly as possible after the close of each month,
detailed reports of shipments made during the preceding month must be forwarded by the consignors to the Secretary of the Treasury, for attention of the
Division of Deposits, substantially in the form attached hereto, marked as exhibits
Nos. 1, 2, and 3.
7. Report of loss, destruction, or damage.—As soon as it shall come to the attention of the consignor that loss or destruction of, or damage to valuables shipped
in accordance with the act has occurred, an immediate report thereof shall be
forwarded in writing by the consignor to the Secretary of the Treasury, for attention of the Division of Deposits. If the loss, destruction, or damage represents
a value equal to or in excess of $10,000, or if delay is likely to retard the Government in its effort to recover such valuables, such report'should be transmitted
by wire and promptly confirmed in writing.
Such report should indicate: (1) Date of shipment; (2) the amount and character of the valuables lost, destroyed, or damaged; (3) the name and address of consignee; (4) the method of transportation, name of carrier and location of office
of carrier from which shipment was made; (5) the registry receipt or other receipt
number; and (6) a statement of the cause of the loss, destruction, or damage, if
known.
An immediate report of the loss, destruction, or damage should also be made
by the consignor to the agent in charge of the nearest United States Secret Service
office and to the local post office or local office of other carrier. Government
officers reporting losses to such agencies will be expected to cooperate therewith
to the fullest extent in facilitating investigations and recovery.
As expeditiously as possible and without further instructions from the Secretary of the Treasury, the consignor should proceed to place a tracer on the shipment and to take such other action as may be deemed necessary or advisable to
facilitate recovery.
8. Claim for replacement.—Claim for replacement shall be made in writing to
the Secretary of the Treasury and shall be supported by proof of claim pursuant
to paragraph 9 hereof. Such claim accompanied by a recommendation with
respect to the manner of replacement thereof shall be submitted through the head
of the executive department, independent establishment, agency, or wholly owned
corporation concerned, or, in the case of officers or employees under the Treasury
Department, through their respective administrative heads. The manner of
replacement shall be subject to the determination of the Secretary of the Treasury
in accordance with the provisions of section 3 of the act.
9. Proof of claim.—The Secretary of the Treasury may require proof of claim
in such form and in such manner as may from time to time be deemed necessary.
In general, the requirements of the Secretary bf the Treasury will be as follows:
(1) Satisfactory proof of shipment as claimed, which should be supported by
the original "Record of shipment" required to be maintained pursuant to paragraph 4 hereof. The original record will be returned after adjustment of the
claim.
(2) Satisfactory proof of loss, destruction, or damage. The consignor will be
required to submit a statement concerning the loss or destruction of, or damage
to shipment or any part thereof; and, if received by the consignee with contents
not intact, all the circumstances must be set forth with respect to the condition
in which such shipment was received and the manner of the inspection and verification of its contents. Whenever possible to do so, affidavits covering the loss,

REPORT OF THE SECRETARY OF THE TREASURY

309

destruction, or damage should be obtained from the consignee and the carrier.
Such proof of claim must be accompanied by the recommendation of the head of
the executive department, independent establishment, agency, or wholly owned
corporation concerned, or in the case of officers or employees under the Treasury
Department of their respective administrative heads.
(3) Statement and recommendation of investigating officer or officers.
10. Recoveries.—In the. event of loss or destruction of, or damage to valuables,
for which relief shall have been granted, under section 3 of the act, the consignors
are required to take such steps as are necessary and reasonable for the defense,
safeguard, or recovery of the valuables or the value thereof, as the case may be,
and the Secretary of the Treasury will take such further steps to that end as he
may deem necessary in the particular circumstances.
All recoveries and repayments on account of loss, destruction, or damage to
valuables of which replacement shall have been made out of the fund shall be
forwarded to the Secretary of the Treasury and shall be credited to the fund.
The Secretary of the Treasury may at any time, or from time to time, with the
approval of the President, prescribe supplemental or amendatory rules and regulations governing claims for replacement of valuables shipped pursuant to the
Government Losses in Shipment Act.
WAYNE C. TAYLOR,

Acting Secretary of the Treasury.
Approved:
FRANKLIN D .

ROOSEVELT,

The White House.
TREASURY DEPARTMENT

EXHIBIT NO. i

Division of Deposits
Form 10 DD

Sheet No

CONSOLIDATED REPORT OF SHIPMENTS OF VALUABLES EFFECTED UNDER THE
GOVERNMENT LOSSES IN SHIPMENT ACT

Agency
Location
T H E SECRETARY OF THE TREASURY,

Washington, D. C.
(Attention: Division of Deposits.)
Month ending
1.
2.
3.
4.

, 19.-

Currency, coin, bullion, specie
Securities, coupons, negotiable instruments, etc
Canceled coupons and/or securities shipped in rotary locked pouches_.
Another

The above recapitulation of the schedules attached hereto is a true and complete statement of valuables, as defined in the Government Losses in Shipment
Act, shipped by this agency during the period specified, which shipments have
been effected in accordance with the act and regulations issued pursuant thereto.

(Signature)
"(Oflaclaititier

310

REPORT OF T H E SECRETARY OF T H E TREASURY

TREASURY DEPARTMENT

EXHIBIT NO. 2

Division of Deposits
Form 8 DD

Sheet No.

S C H E D U L E OF V A L U A B L E S S H I P P E D U N D E R G O V E R N M E N T L O S S E S I N S H I P M E N T A C T
R E G I S T E R E D AND O T H E R M A I L S H I P M E N T S

M o n t h ending

Date

Hour

Registry
or lock and
rotary or
other receipt No.

, 19.

Consignee
Description i

Value

Address

Name

Total
1 Short title, i. e., bonds, notes, currency, etc. Complete record as required in sec. 4, subsec. 2 of Treasury
Department Circular No. 577, must be on file in office of the consignor subject to call by the Secretary of
the Treasury.
NOTE.—-Only shipments made under the provisions of the Government Losses in Shipment Act shall be
Included on this schedule.
TREASURY

DEPARTMENT

EXHIBIT

NO. 3

Division of Deposits
Form 9 D D

Sheet N o . .

S C H E D U L E O F V A L U A B L E S S H I P P E D UNDER G O V E R N M E N T L O S S E S I N S H I P M E N T
A C T S H I P M E N T S O T H E R THAN BY U N I T E D S T A T E S M A I L

By._.
Date

Month ending
Hour

Receipt
number

Name of carrier

,19—.

Consignee
Description i
Name

ValuB

Address

Total-J Short title, i. e., bonds, notes, currency, etc. Complete record as required in sec. 4, subsec. 2 of Treasury
Department Circular No. 577, must be on file in office of the consignor subject to call by the Secretary of the
Treasury.
NOTE.—Only shipments made under the provisions of the Government Losses in Shipment Act shall be
included on this schedule.

REPORT OF T H E SECRETARY OF T H E TREASURY

311

Exhibit 54
First supplement, August 20, 1937, to Department Circular No. 577, prescribing
regulations governing claims for replacement of valuables, or the value thereof,
shipped pursuant to the Government Losses in Shipment Act
TREASURY

DEPARTMENT,

Washington, August 20, 1937,
To the Heads of the Executive Departments, Independent Establishments, Agencies,
Wholly Owned Corporations, Officers and Employees of the United States, Federal
Reserve Banks when acting on behalf of the United States or Agencies thereof, and
Others Concerned:
P a r a g r a p h 1 of D e p a r t m e n t Circular N o . 577 (Accounts and Deposits) d a t e d
August 13, 1937, is hereby amended to read as follows:
**1. General instructions.—To facilitate t h e reporting of loss or destruction of, or
d a m a g e to valuables and submission of proofs of claim for relief, under the provisions of section 3 of t h e act, in t h e event of loss or destruction of, or d a m a g e
t o valuables shipped p u r s u a n t to t h e regulations prescribed under section 1 of
said act, executive depa.rtments, independent establishments, agencies, wholly
owned corporations, officers, employees. Federal Reserve banks when acting on
behalf of t h e United States or agencies thereof, a n d others concerned, hereinafter
sometimes referred to as '^consignors," should observe strictly t h e following requirements, except as the Secretary of t h e Treasury, being satisfied t h a t observance
thereof is not necessary to carry out t h e purposes of t h e act a n d of these regulations,
m a y waive or modify any such requirement. Failure on t h e p a r t of any consignor
or agent or employee thereof to comply with these requirements m a y r e t a r d
recoveries a n d m a y under t h e circumstances preclude reimbursement from t h e
fund or other relief under the act, and render t h e consignor responsible for a n y
loss occurring through such negligence."
WAYNE C.

TAYLOR,

Acting Secretary of the Treasury.
Approved:
FRANKLIN D .

ROOSEVELT,

The White House.

Exhibit 55
Regulations and instructions governing the issue of duplicates ^ of checks of the
United States
[Department Circular No. 327, Revised.

Bookkeeping and Warrants]
TREASURY

DEPARTMENT,

Washington, D. C , October 16, 1937.
T h e following regulations and instructions governing t h e issue of duplicates of
checks drawn by officers or agents of t h e United States are hereby established purs u a n t to section 3646 of the Revised Statutes of t h e United States as amended
b y the act approved July 8, 1937, known as t h e Government Losses in Shipment
Act, and section 3647 of t h e Revised Statutes of t h e United States, as amended.
T h e requirements contained herein m u s t be strictly observed except as t h e
Secretary of the Treasury, being satisfied t h a t observance thereof is not necessary
to carry out t h e purposes of the law a n d these regulations, m a y waive or modify
a n y such requirement.
GENERAL REGULATIONS

1. Advice of nonreceipt or loss.—In t h e event of t h e nonreceipt or loss of a check
issued by an officer or agent of t h e United States, t h e owner, better to protect
his interest, should immediately notify t h e Treasurer of t h e United States or other
drawee, describing t h e check, stating t h e name of the officer or agent of the United
States by whom t h e check was drawn, giving, if possible, its date, number, and
a m o u n t , and requesting t h a t p a y m e n t be stopped.
. > The word "duplicate" as used herein means a "substitute, marked 'duplicate' " as provided in sec. 9 of
the Government Losses in Shipment Act (Public No. 192, 75th Cong., approved July 8,1937).

Full text of Annual Report of the Secretary of the Treasury on the State of the Finances : Annual Report of the Secretary of the Treasury on the State of the Finances for the Fiscal Year Ended June 30, 1938

FRASER