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ANNUAL REPORT OF THE ,
SECRETARY OF THE TREASURY
oN^li STATE OF THE FINANCES
FOR FISCAL YEAR ENDEDJUNE 30,1940

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Federal Reserve Bank of St. Louis

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ANNUAL REPORT OF THE
SECRETARY OF THE TREASURY
ON

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

1940

UNITED STATES
GOVERNMENT PRINTING OFFICE
WASHINGTON : 1941

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




-

Price $1.00 (Paper)




TREASURY DEPARTMENT
DOCUMENT N O .

Secretary

3111

4^

CONTENTS
Page

. Introduction
^
1
Budget results:
Receipts in general and special accounts:
Fiscal years 1933 to 1940_____
1
Revenue Act of 1932
7
Fiscal year 1933
8
Fiscal year 1934
9
Fiscalyear 1935
11
Fiscalyear 1936
12
Fiscalyear 1937
15
Fiscal year 1938
16
Fiscalyear 1939
18
Fiscal year 1940
_.
i
19
Expenditures from general and special accounts:
Fiscal year 1940
22
Fiscal years 1933 to 1940
24
Relief and work relief25
Grants to States under the Social Security Act_
27
Public works
28
Aid to agriculture
29
National defense-32
Veterans'pensions and benefits
33
Other departmental expenditures
---34
Interest on the public debt
_^
34
Other expenditures
35
Deficit
.
__36
Receipts and expenditures in trust accounts and checking accounts of
corporations and credit agencies, fiscal years 1933 to 1940
37
Trust accounts
37
Government corporations and credit agencies maintaining checking
accounts with the Treasurer of the United States
39
The public debt:
Fiscal year 1940
43
Treasury bonds and Treasury notes
44
Treasury bills
..
45
United States savings bonds
46
Adjusted service bonds
48
Special issues
. 48
Cumulative sinking fund
49
Amendment to the Second Liberty Bond Act
49
Fiscal years 1933-to 1940:
Financing the deficit
49
Changes in the composition of the debt, by classes of securities_50
Public issues:
Bonds and notes
53
Certificates of indebtedness and Treasury bills
58
United States savings bonds
60
Adjusted service bonds
^
. 64
Special issues
64
Matured debt and debt bearing no interest
66
Interest charge on the public debt
66
Debt retirements
68
Statutory debt limitation
-_
69
Securities guaranteed by the United States:
Fiscal year 1940
72
Fiscal years 1932 to 1940- —
74
Reconstruction Finance Corporation
77
Federal land banks.
80




III

'3) C -p^
IV

OON'TgN'SS

Securities guaranteed by the United States—'Continued.
Fiscal years 1932 to 1940—Continued.
Home Owners' Loan Corporation
Federal Farm Mortgage Corporation
Federal Housing Administration
Commodity Credit Corporation
:
•United States Housing AuthorityUnited States Maritime Commission
Tennessee Valley Authority
Estimated absorption, by classes of holders, of the increase in the public
debt and obligations guaranteed by the United States during the period
June 30, 1932, to June 30, 1940
Market movements in Government securities, 1932 to 1940:
Major movements
.
Relationship between yields on long- and short-term securities
-Negative yields on short notes and bonds
Premiums on Treasury bills
Movements of Treasury bond yields compared with movements of
yields of other high grade securities
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 agenciesMonetary developments:
Fiscal year 1940_.
i
Fiscal years 1933 to 1940
:
Banking crisis of 1933
Gold policy
:
Increment on gold- Silver policy
Seigniorage on silver
International monetary cooperation
Revenue legislation:
Fiscal year 1940
Social Security Act Amendments of 1939
Revenue Act of 1940
•--.-..
Government contraJcts for naval vessels and aircraft
Other revenue legislation
Fiscal years 1933 to 1940
Estimates of receipts
Fiscal year 1941
Income taxes
Miscellaneous internal revenue
Employment taxes
-_
Railroad Unemployment Insurance Act
Customs
Miscellaneous revenues and receipts
.
^
Fiscal year 1942
-_
Income taxes
__Miscellaneous internal revenue.
Employment taxes
Railroad Unemployment Insurance Act
Customs
Miscellaneous revenues and receipts
Estimates of expenditures
.
Treasury activities under the old-age provisions of the Social Security Act,
fiscal years 1936 to 1940
Neutrality and national defense activities Strategic and critical materials
Coordination of foreign and domestic military purchases
Munitions control
Regulation and control of vessels
Credits to belligerents
Foreign funds control
.
.
Fiscal matters
Changes in organization and procedure



Page
81
83
85
87
88
89
90
92
108
109
110
110
112
112
114
115
116
117
117
119
128
130
134
135
137
137
139
141
142
143
143
146
146
149
150
151
151
151
151
151
152
152
153
153
153
154
154
157
157
158
159
159
161
161
162
163

CiONTEINTS

V

A D M I N I S T R A T I V E R E P O R T S O F BUREAUS AND D I V I S I O N S
Page

Accounts and Deposits, Office of t h e Commissioner of
, 169
Daily S t a t e m e n t of t h e United States Treasury
169
Combined s t a t e m e n t of assets and liabilities of governmental corporations a n d credit agencies
...
170
Special financial s t a t e m e n t s of Government corporations and agencies171
Annual appraisal of assets a n d liabilities of t h e Commodity Credit
Corporation
171
Securities owned by t h e United States Government
172
Contingent liabilities of t h e United States
172
Accounting and disbursing of emergency relief funds
172
F e d e r a l savings and loan associations
176
Federal home loan banks
178
Federal land b a n k s :
Capital stock 180
P a y m e n t s on account of reductions in interest rate on mortgages and subscriptions to paid-in surplus
181
Federal F a r m Mortgage Corporation
183
Advances to Federal Reserve Banks for industrial loans
184
Appropriations and expenditures under t h e Social Security Act
186
Obligations of foreign governments
187
Finland
_._
190
Hungary
,
190
Nicaragua
190
Rumania
^
190
Receipts from Germany
191
Army costs
191
Mixed claims, United States and Germany
191
Annuities under moratorium agreement
191
Treasury administriation of alien and mixed claims
^
192
Mixed Claims Commission and Private Act No. 509: Claims against
Germany
192
W a r Claims Arbiter
194
Claims of German nationals
194
Claims of Hungarian n a t i o n a l s . 194
German special deposit account
194
Tripartite Claims Commission:
Claims against Austria
195
Claims against H u n g a r y
_195
Claims of American nationals against T u r k e y _ - _
196
Claims of American nationals against Mexico
197
Railroad obligations
198
Section 207, Transportation Act, 1920, as a;mended
199
Section 210, Transportation Act, 1920, as amended
199
Federal control of railroads
'
200
Administration _
200
Finances
201
Securities, etc
202
Claims against t h e Director General
203
Compensation p a y m e n t s — U n i t e d States railroad employees
203
Canadian Workmen's Compensation Board
203
Claims in favor of t h e Director General
203
T r u s t and special funds invested by t h e Treasury
204
Adjusted service certificate fund
204
Civil service retirement and disability fund
205
Canal Zone retirement and disability fund
206
Foreign service retirement and disability fund
207
Alaska Railroad retirement and disability fund
207
District of Columbia teachers' retirement fund
208
Longshoremen's a n d harbor workers' compensation fund___
209
District of Columbia workers' compensation fund
210
District of Columbia water fund
210
United States Government life insurance fund
211
Federal old-age and survivors insurance t r u s t fund
212
Unemployment t r u s t fund
214
Railroad unemployment insurance account
214




VI

.OONTEIKTIS

Accounts and Deposits, OflSce of the Commissioner of—'Continued.
Trust and special funds invested by the Treasury—Continued.
Pag-e
Railroad retirement account-217
Library of Congress trust fund
218
National Cancer Institute gift fund
220
National Institute of Health gift fund
221
National park trust fund
222
Ainsworth Library fund, Walter Reed General Hospital
222
Pershing Hah Memorial fund
223
Alien property trust fund
224
Philippine funds in the United States Treasury
224
Special fund:
Colorado River Dam fund
226
Division of Deposits
. 226
Depositary functions
i
226
Federal savings and loan associations and Federal credit unions-_
228
Social security
229
Government Losses in Shipment Act
229
Section of Surety Bonds
231
Division of Bookkeeping and Warrants
231
Division of Disbursement
232
Suspension of delivery of foreign checks'..
234
Appointments, Division of
234
Number of employees in the Treasury Department
234
Retirement of employees
235
Budget and Improvement Committee
235
Coast Guard:
Activities during the fiscal year 1940
236
Administrative organization
238
National defense
239
Promoting safety of marine commerce and of life and property
at sea
--__
239
Maritime law enforcement
243
Aviation
246
Communications
'
246
Personnel and training
247
Floating equipment
250
Stations, bases, repair depot, etc
_250
Awards of lifesaving medals
251
Legislation and Executive authorizations
251
Funds available, obligations, and balances
252
Review of activities since 1933:
Administrative organization
253
National defense
254
Promoting safety of marine commerce and of life and property
at sea
254
Maritime law enforcement
255
Aviation
256
Personnel and training
:
256
Coast Guard facilities
258
Comptroller of the Currency, Bureau of:
Activities during the fiscal year 1940
259
Changes in the condition of active national banks
259
Summary of changes in the National Banking System
261
Administration of unlicensed national banks
262
Review of activities since 1933
262
Bank holiday
262
Reopening of banks
263
Reorganization of banks that did not reopen after the bank
holiday
-___
264
National bank receiverships
.
265
Strengthening the capital structure of the banks
268
Changes in the condition of all active banks
'.
271




CIONTEINTSCustoms, Bureau of:
Activities during t h e fiscal year 1940:
Collections
Volume of business
:
Entries of merchandise
Vessel, airplane, and highway traffic
Neutrality activities
Drawback t r a n s a c t i o n s .
Protests and appeals
Law enforcement activities:
Seizures
Legal proceedings
.
Fines, penalties, etc
Coordination with other agencies
_Tariff administration
Customs Agency Service
.
Undervaluation
•..,
D r a w b a c k investigations
;
Foreign investigations
Enforcement Unit
Miscellaneous:
Appraisement Unit
Customs School of Instruction
Division of Laboratories
Customs liaison officers
Traveling auditors
Division of Engineering and Weighing
Changes in ports and stations-;
Cost of administration
Review of activities since 1933:
Collections
Volume of business:
Entries of merchandise
Vessel, airplane, and highway traffic
Law enforcement activities
Fines, penalties, etc
Tariff administration:
Trade agreements. .
Antidumping
.
Countervailing d u t y
Trade-marks
Anti-Smuggling Act
Customs Administrative Act of 1938
Changes in organization and procedure
Cost of a d m i n i s t r a t i o n . ;
Engraving and Printing, Bureau of:
Activities during t h e fiscal year 1940
Review of activities since 1933
Enrollment and Disbarment, Committee on
Federal Alcohol Administration:
Activities during t h e fiscal year 1940
P e r m i t Division
^
Label Examination Division
Statistics and Reports Division
Enforcement Division
-j
Legal Division
Review of activities since September 24, 1935
Foreign. F u n d s Control
I n t e r n a l Revenue, Bureau of:
Activities during the fiscal year 1940:
General:
Internal revenue collections
Refunds, drawbacks, and s t a m p redemptions
Additional assessments
,
Cost of administration




VII

Page
279
281
281
282
283
283
284
284
287
288
289
289
291
292
292
292
292
293
293
293
294
294
294
294
295

_
^

295
296
.297
297
299
300
300
300
301
301
301
302
302
303
306
310

___-

311
312
312
313
313
314
315
318

319
320
321
321

VIII

lOQNTEINTS

I n t e r n a l Revenue, Bureau of—Continued.
Activities during t h e fiscal year 1940—Continued.
Income T a x Unit:
General functions---:
N u m b e r of returns
filed
Examination of income tax returns by t h e Washington
office
Investigations a n d adjustments of returns by t h e field officesI n v e n t o r y of returns in t h e field offices
Unagreed adjustments pending
Revenue results of audit a n d investigations
Stage a t which additional tax was assessed
Refunds, a b a t e m e n t s , and credits
Miscellaneous T a x Unit
_.
E s t a t e T a x Division
Tobacco Division
Sales Tax Division
.
Capital Stock Tax Division
Processing T a x Division
1
Alcohol Tax Unit
Enforcement Division
Field Inspection Division
Laboratory Division
Audit Division
Procedure Division
Alcohol Tax Division of the Office of the General Counsel
Accounts and Collections Unit
Taxes under the Federal Insurance Contributions Act
T a x under t h e Federal Unemployment Tax Act
Carriers taxes
.
Technical Staff
Operations of field divisions
Office of the Chief Counsel
Appeals Division
Civil Division
I n t e r p r e t a t i v e Division
Penal Division
Review Division
Legislation and Regulations Division
Intelligence Unit
Review of activities since 1933:
Progress in income, estate, and gift tax administration:
Accomplishments in adjustment of income tax liabilities
Reasons for increased accomplishments
Verification of income tax returns
Settlement of cases not before t h e Board of Tax Appeals
Settlement and trial of cases before the United States Board
of T a x Appeals
Alcohol tax administration
T a x collections and cost of collecting
Office of t h e Chief Counsel
Intelligence Unit
Legal Division
.
Legislative Counsel, Office of t h e
Mint, Bureau of t h e :
Activities during t h e fiscal year 1940:
Institutions of t h e M i n t Service
Coinage
.
Bullion deposit transactions a n d t r a n s f e r s . .
Gold operations
.
Silver operations
Refineries
New design coins
..
Stock of coin and monetary bullion in t h e United States
Production of gold and silver
Industrial consumption of gold and s i l v e r . .
_.




Page
321
322
322
322
322
322
323
323
324
325
325
326
327
328
328
329
330
330
331
331
332
332
332
333
334
336
337
338
339
340
341
344
344
345
345
346
346
347
349
349
352
354
359
360
361
362
364
365
365
366
366
366
367
367
367
368
368

O0NTE[NTSMint, Bureau of the—Continued.
Activities during the fiscal year 1940—Continued.
Appropriations, expenses, and income
General activities
^
Review of activities since 1933
.
Monetary Research, Division of
Narcotics, Bureau of:
Activities during the fiscal year 1940
Review of activities since 1933
.
Printing, Division of
.
Printing and binding
Stationery supplies
Engraving work
Processing Tax Board of Review
Procurement Division:
Activities during the fiscal year 1940
Review of activities since 1934
Procurement activities
Emergency relief activity
Public Debt Service
Division of Loans and Currency
Issue and retirement of securitiesUnited States savings bonds
Individual registered accounts
Claims
Safekeeping of securities
Mutilated paper and redeemed currency
Register of the Treasury
Division of Public Debt Accounts and Audit
Division of Paper Custody
Destruction Committee
Research and Statistics, Division of
Savings Bonds, Division of
Secret Service Division:
Activities during the fiscal year 1940
Review of activities since 1933
Tax Research, Division of
Treasurer of the United States
War Finance Corporation (In Liquidation)

IX
Page
368
368
369
372

..•

_.

-

—

372
375
376
376
378
378
379
379
381
381
383
385
385
385
386
387
388
389
389
389
392
393
394
394
395
396
397
399
399
403

EXHIBITS
PUBLIC DEBT

Public issues and redemptions of Treasury bonds and Treasury notes
Exhibit 1. Offering of 1 percent Treasury notes of series B-1944
___
Exhibit 2. Allotments, Treasury notes of series B-1944
Exhibit 3. Offering of 2 percent Treasury bonds of 1948-50
Exhibit 4. Subscriptions and allotments, Treasury bonds of 1948-50
Exhibit 5. Offering of 2J4 percent Treasury bonds of 1951-53 and 1 percent Treasury notes of series C-1944
Exhibit 6. Allotments, Treasury bonds of 1951-53 and Treasury notes of
series C-1944
;
Exhibit 7. Offering of % percent Treasury notes of series A-1945
Exhibit 8. Allotments, Treasury notes of series A-1945
Exhibit 9. Redemption of 3% percent Treasury bonds of 1940-43. _
Exhibit 10. Offering of 1 percent Treasury notes of series C-1943
Exhibit 11. Allotments, Treasury notes of series C-1943

407
408
408
410
411
412
413
414
414
418
419

Issues of Treasury bills
Exhibit 12. Inviting tenders for Treasury bills dated July 5, 1939
Exhibit 13. Acceptance of tenders for Treasury bills dated July 5, 1939..
Exhibit 14. Summary of information contained in press releases issued in
connection with Treasury bills offered during the fiscal year 1940




420
421
422

X-'

lOCNTENTS
United States savings bonds
Page

Exhibit 15. First amendment to Department Circular No. 596, restricting
the sale of United States savings bonds series D to individuals
Exhibit 16. Regulations governing United States savings bonds
Exhibit 17. Announcement, by the Secretary of the Treasury, March 22,
1940, relative to the registration and sale of United States savings bonds.

424
425
441

Miscellaneous
Exhibit 18. An act to amend the Second Liberty Bond Act,
Exhibit 19. Title III of the act to provide for the expenses of
paredness by raising revenue and issuing bonds, to provide
paying for such bonds, and for other purposes
Exhibit 20. Regulations governing adjusted service bonds of

as amended.
national prea method for
1945

442
442
442

SECURITIES GUARANTEED BY THE UNITED STATES

Exhibit 21. Offering of % percent notes of series D of the Commodity
Credit Corporation
Exhibit 22. Subscriptions and allotments, Commodity Credit Corporation notes of series D
Exhibit 23. Offering of 1 percent notes of series E of the Commodity
Credit Corporation
Exhibit 24. Allotments, Commodity Credit Corporation notes of series E._
Exhjibit 25. Offering of 1 percent notes of series S of the Reconstruction
Finance Corporation
Exh^ibit 26. Subscriptions and allotments, Reconstruction Finance Corporation notes of series S
.
•..
Exhibit 27. Partial redemption, before maturity, of 2 ^ percent mutual
mortgage insurance fund debentures, series B (second call)
"._
Exhibit 28. Partial redemption, before maturity, of 2% percent mutual
mortgage insurance fund debentures, series B (third call)
Exhibit 29. Portion of the act to amend the Tennessee Valley Authority
Act of 1933, relative to the issue of bonds by the Tennessee Valley
Authority

443
444
.445
446
446
448
448
451
454

MONETARY DEVELOPMENTS

Exhibit 30. An act to extend the time within which the powers relating
to the stabilization fund and alteration of the weight of the dollar may
be exercised
Exhibit 31. Proclamation, July 25, 1939, modifying the proclamation of
December 21, 1933, as modified, relating to newly mined domestic
silver
Exhibit 32. Statement by the Secretary of the Treasury, September 11,
1939, that the tripartite declaration relative to France continued in
effect
Exhibit 33. Announcement of the Treasury Department, April 16, 1940,
relative to the official rate for certain foreign currencies

455
456
456
457

TAXATION

Exhibit 34. Tax rate changes made by the Revenue Act of 1940 and the
rates which they superseded
457
Exhibit 35. Title I of the act to expedite national defense, and for other
purposes, relating to Army, Navy, and Coast Guard contracts
458
Exhibit 36. An act to eliminate the tax on brandy and wine spirits used
in the fortification of wine; to increase the tax on wine; to compensate
for the loss of revenue occasioned by the elimination of the tax on
brandy and wine spirits used in the fortification of wine; and for other
purposes
. . 463
Exhibit 37. Taxes of the United States, 1913 to 1940
466




CiONTEiNTS

XI

GOVERNMENT LOSSES IN SHIPMENT
Page

Exhibit 38. An act to amend the Government Losses in Shipment Act
Exhibit 39. Declaration of valuables, August 28, 1939, under the Government Losses in Shipment Act, July 8, 1937, amended August 10, 1939. _

535
536

FOREIGN FUNDS CONTROL

Exhibit 40. Joint resolution to amend section 5 (b) of the act of October
6, 1917, as amended, and for other purposes
Exhibit 41. Executive orders relating to foreign funds control
Exhibit 42. Regulations of the Secretary of the Treasury relating to foreign
funds controL

538
538
542

OBLIGATIONS OF FOREIGN GOVERNMENTS

Exhibit 43. Correspondence exchanged between the Government of the
United States and various foreign governments, legislation, statements,
etc., concerning foreign debts owing to the United States

544

ORGANIZATION AND PROCEDURE

Exhibit 44. Orders relating to organization and procedure in the Treasury
Department
ExhijDit 45. Extracts from Reorganization Plans Nos. I l l and IV submitted
by the President to the Congress, pursuant to the provisions of the
Reorganization Act of 1939, approved April 3, 1939
J
Exhibit 46. Joint resolution providing for the taking effect of Reorganization Plans Nos. I l l , IV, and V
j
Exhibit 47. Supervision of bureaus, oflices, and divisions of the Treasury
Department
-_
Exhibit 48. An act to amend the Annual and Sick Leave Acts of March
14, 1936
Exhibit 49. Time and leave regulations, departmental service
Exhibit 50. Time and leave regulations, field forces
.
Exhibit 51. Amendment, July 28, 1939, to Department Circular No. 591,
dated August 15, 1938, prescribing regulations governing the disclosure
of official information

555
558
560
561
562
562
573
577

MISCELLANEOUS

Exhibit 52. Letter of the Postmaster General to the Secretary of the
Treasury, dated November 5, 1940, certifying extraordinary expenditures contributing to the deficiencies of postal revenues for the fiscal year
1940, in pursuance of Public No. 316, Seventy-first Congress, approved
June 9, 1930
Exhibit 53. Section 201 of the act to amend the Social Security Act, and for
other purposes, creating the Federal old-age and survivors insurance
trust fund
Ex:hibit 54. Proclamation, June 27, 1940, relating to the control of vessels
in the territorial waters of the United States
Exhibit 55. An act for the relief of Katherine M. Drier
^

577
578
579
5B0

TABLES
Explanation of bases used in tables
Description of accounts through which Treasury operations are effected. _

583
584

RECEIPTS AND EXPENDITURES

General tables
Table 1. Details of receipts, by sources and accounts, fiscal year 1940
(warrant and daily statement bases)
.
Table 2. Details of expenditures, by organization units and accounts,
fiscal year 1940 (checks-issued and daily statement bases)
^,-^




586
596

•.XII

CIONTEINTS

Table 3. Classified receipts and expenditures, monthly July 1939 to June
1940, with totals for the fiscal years 1939 and 1940 (daily statement
basis)
Table 4. Classified receipts and expenditures of the Government for the
fiscal years 1932 to 1940 (daily statement basis)
.
Table 5. Public debt receipts and expenditures, monthly July 1939 to
June 1940, with totals for the fiscal years 1936 to 1940 (daily statement
basis)
Table 6. Receipts and expenditures for the fiscal years 1789 to 1940 (warrant and daily statement bases)
.
Table 7. Receipts in general and special accounts, by major sources, for
the fiscal years 1933 to 1940
_._
Table 8. Expenditures by major functions, fiscal years 1933 to 1940
(daily statement basis)
.
Table 9. Tax collections, excluding miscellaneous receipts, ahocated by
specific sources to estimated year of incurrence of the tax liability,
calendar years 1933 to 1939 (collection basis)

Page
612
628
638
642
650
652
654

Specific receipts and expenditures
Table 10. Expenditures of the several activities of the Treasury Department in each of the States and Territories, fiscal year 1940
Table 11. Comparison of detailed internal revenue collections, fiscal years
1939 and 1940 (collection basis)
.
Table 12. Internal revenue receipts, by tax sources, fiscal years 1916 to
1940 (collection basis)..
Table 13. Internal revenue receipts, by States and Territories, fiscal year
1940 (collection basis)..
Table 14. Expenses of the Internal Revenue Service, fiscal year 1940
(checks-issued basis)
Table 15. Values of dutiable and taxable imports for consumption and
estitnated duties and taxes collected, by tariff schedules, fiscal years
1939 and 1940
.
.
Table 16. Estimated customs duties, value of imports entered for consumption, and ratio of duties to value of dutiable imports and to value
of all imports, for the calendar years 1930 to 1939 and by months from
January 1939 to June 1 9 4 0 . . .
Table 17. Estimated customs duties, value of dutiable imports, and ratio of
estimated duties to value of dutiable imports, by tariff schedules, for
the calendar years 1930 to 1939 and by months from January 1939 to
June 1940
Table 18. Values of dutiable imports for consumption and estimated duties
collected, by countries, fiscal years 1939 and 1940
Table 19. Customs statistics, by districts, fiscal year 1940
Table 20. Receipts and expenditures and statement of account under the
Social Security, Railroad Retirement, and Railroad Unemployment Insurance Acts (daily statement basis)
.
Table 21. Amounts appropriated and expended to June 30, 1940, under
authorizations contained in the Social Security Act
Table 22. Panama Canal receipts and expenditures for the fiscal years
1903 to 1940 (warrant basis)
.
.

658
662
664
667
668
672

673

674
677
678
683
694
695

Miscellaneous
Table 23. Receipts and expenditures in general and special accounts,
actual for 1940 and estimated for 1941 and 1942, in detail, as exhibited
in the Budget for 1942
1
Table 24. Receipts and expenditures, trust accounts, increment on gold,
etc., actual for 1940 and estimated for 1941 and 1942, as exhibited in
the Budget for 1942
Table 25. General Fund balance and effect on the public debt of financing
the deficit, as exhibited in the Budget for 1942
Table 26. Financial status of appropriations provided in the Emergency
Relief Appropriation Acts of 1935, 1936, 1937, 1938, and 1939, as of
June 30, 1 9 4 0 . - . - . . , . , . - , - - . , , ^ .
---




696
710
712
714

OONTEQiq'TS

XIII
Page

T a b l e 27. Expenditures by organizations and by fiscal years from April 8,
1935, to J u n e 30, 1940, under t h e Emergency Relief Appropriation Acts
of 1935, 1936, 1937, 1938, and 1939 (checks-issued basis)
Table 28. Expenditures by States and by fiscal years from April 8. 1935,
to J u n e 30, 1940, under t h e Emergency Relief Appropriation Acts of
1935, 1936, 1937, 1938, and 1939 (checks-issued basis)
..

723
725

PUBLIC DEBT

Public debt outstanding
Table 29. P u b h c d e b t outstanding J u n e 30, 1940, by issues (revised daily
s t a t e m e n t basis)
Table 30. Description of t h e public d e b t issues outstanding June 30, 1940
(revised daily s t a t e m e n t basis)
Table 31. Principal of t h e public debt outstanding a t t h e end of each
fiscal year from 1853 t o 1940 (revised daily s t a t e m e n t basis)
Table 32. Comparative s t a t e m e n t of t h e public debt outstanding June 30,
1933 to 1940 (revised daily s t a t e m e n t basis)
Table 33. Composition of t h e public debt a t the end of the fiscal years
1916 to 1939 and by mo'nths from July 1939 to June 1940 (revised daily
s t a t e m e n t basis)

726
730
742
744
746

Public debt operations
Table 34. Public debt retirements chargeable against ordinary receipts
during t h e fiscal year 1940, and cumulative totals from July 1, 1917, to
J u n e 30, 1939 and 1940, by sources and issues (revised daily s t a t e m e n t
basis)
.
Table 35. S u m m a r y of transactions in interest-bearing and noninterestbearing securities, fiscal year 1940 (revised daily s t a t e m e n t basis)
Table 36. S u m m a r y of transactions in interest-bearing securities, by form of
issue, fiscal year 1940 (revised daily s t a t e m e n t basis)
Table 37. Changes in interest-bearing debt, by issues, fiscal year 1940
(revised daily s t a t e m e n t basis)
.
Table 38. Transactions in noninterest-bearing securities, by issues, fiscal
year 1940 (revised daily s t a t e m e n t basis)
Table 39. Issues, maturities, and redemptions of interest-bearing securities, exclusive of t r u s t account and other special issues, July 1939 through
J u n e 1940
.
Table 40. Sources of public debt increase or decrease, fiscal years 1915
to 1940 (daily s t a t e m e n t basis)
Table 4 1 . Transactions on account of the cumulative sinking fund, fiscal
year 1940 (revised daily statement basis)
Table 42. Transactions on account of t h e cumulative sinking fund, fiscal
years 1921 to 1940 (revised daily s t a t e m e n t basis)
Table 43. Securities retired through t h e cumulative sinking fund, par
a m o u n t a n d principal cost, to June 30, 1940 (revised daily s t a t e m e n t
basis)
.

748.
750
753
754
758
765
768
770
770
771

Interest on the public debt
Table 44. Interest on t h e public debt, payable, paid, and outstanding
unpaid, fiscal year 1940 (revised daily s t a t e m e n t basis) __
Table 45. Interest paid on t h e public debt, by issues, fiscal years 1938 to
1940 (warrant basis)
._
Table 46. Amount of interest-bearing debt outstanding, the computed
a n n u a l interest charge, and t h e computed r a t e of interest, for the fiscal
years 1916 to 1940, a n d by m o n t h s from July 1939 to J u n e 1940 (revised daily s t a t e m e n t basis)

772
772

774

MiscellaneousTable 47. Contingent liabihties of t h e United States, J u n e 30, 1940
Table 48. Contingent habilities of t h e United States as of J u n e 30, 1933
to 1940
_Table 49. Average yield on long-term United States Government bonds,
by months, J a n u a r y 1919 to June 1940



775
780
781

XIV

OONTEINTS

Table 50. Prices and yields of Treasury bonds and notes and of securities
guaranteed by t h e United States

782

CONDITION OF THE TREASURY EXCLUSIVE OF PUBLIC DEBT LIABILITIES

Table 51. Current assets and liabilities of t h e Treasury a t the close of t h e
fiscal years 1939 and 1940 (daily s t a t e m e n t basis)
Table 52. Balance in t h e General F u n d of t h e Treasury a t t h e end of each
m o n t h , fiscal year 1940 (dailj^ s t a t e m e n t basis)
Table 53. Assets and liabilities of t h e exchange stabilization fund as of
J u n e 30, 1939 and 1940
Table 54. Assets a n d Liabilities of the exchange stabilization fund a t the
close of t h e fiscal years 1934 to 1940
Table 55. Securities owned by the United States Government as of J u n e
30, 1933 to 1940
Table 56. Principal of t h e f.unded and unfunded indebtedness of foreign
governments to t h e United States, t h e accrued and unpaid interest
thereon, a n d p a y m e n t s on account of principal and interest, as of Nov.
15, 1940
Table 57. Principal of t h e funded and unfunded indebtedness of foreign
governments to t h e United States, t h e accrued and unpaid interest
thereon, and p a y m e n t s on account of principal and interest, as of
November 15 of each year from 1928 to 1940
_-.

784
786
786
789
790

795

796

ASSETS AND LIABILITIES OF GOVERNMENTAL CORPORATIONS AND AGENCIES

Table 58. Combined s t a t e m e n t of assets and liabilities of governmental
corporations a n d credit agencies of the United States, as of J u n e 30,
1940...-Table 59. Proprietary interest of t h e United States in governmental
corporations and credit agencies, as of J u n e 30, 1929 to 1940

797
805

STOCK AND CIRCULATION OF MONEY IN THE UNITED STATES

Table 60. Stock of money, money in the Treasury, in the
Banks, and in circulation J u n e 30, 1913 to 1940
Table 61. Stock of money, by kinds, a t t h e end of each
1913 to 1940
Table 62. Monev in circulation, by kinds, a t t h e end of
from 1913 to 1940
Table 63. Stock of money, money in the Treasury, in t h e
Banks, and in circulation, by kinds, J u n e 30, 1940

Federal Reserve
807
fiscal year from
___each fiscal year

809
810

Federal Reserve
811

TAX-EXEMPT SECURITIES

Table 64. E s t i m a t e d a m o u n t of securities outstanding, interest
is wholly or partially exempt from t h e Federal income tax, J u n e
Table 65. E s t i m a t e d a m o u n t of securities outstanding, interest
is wholly or partially exempt from the Federal income tax,
1913 to 1940, by types of borrowers--

on which
30, 1940on which
June 30,

812
814

MISCELLANEOUS

Table 66. N e t expenditures for Federal aid to States, individuals, etc.
(exclusive of funds allocated for recovery and relief), fiscal years 1920,
1939, a n d 1940, a n d a m o u n t s appropriated for 1941, by a p p r o p r i a t i o n s - .
Table 67. Expenditures made by t h e Government as direct p a y m e n t s to
States, etc., under cooperative arrangements and expenditures within
States which provided relief and other aid during t h e fiscal year 1940
Table 68. N u m b e r and a m o u n t of awards of t h e Mixed Claims Commission, United States and Germany, certified to the Secretary of t h e Treasury by t h e Secretary of State and t h e a m o u n t paid and balance due, by
classes, as of September 30, 1940
Table 69. Food order stamps issued for the Federal Surplus Commodities
Corporation from May 16, 1939, to J u n e 30, 1940




818
822

830
832

CONTENTS

i^V

PERSONNEL
Pag«

Table 7!0. Number of employees in the departmental service of the Treasury
in Washington, quarterly from June 30, 1939, to June 30, 1940
Table 71. Number of employees in the departmental and field services
of the Treasury on June 3,0, 1939, and June 30., 1940_
Table 72. Number of persons retired, departmental and field services of the
Treasury, August 20, 1920, to June 30, 1940, and number of persons
eligible for retirement but retained, as of June 30, 1940
Index




834
834
835
837




SECRETARIES, UNDER SECRETARIES, AND ASSISTANT SECRETARIES
OF THE TREASURY DEPARTMENT FROM MARCH 4, 1933, TO NOVEMBER 15, 1940,1 AND THE PRESIDENT UNDER WHOM THEY SERVED
Term of service
Official
From-

Mar. 4,1933
Jan. 1,1934

Dec. 31,1933

William H. Woodin, New York
Henry Morgenthau, Jr., New York.
Under Secretaries

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

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

Jan. 29,1937
Nov. 1,1938
Jan. 18,1940

Sept. 16,1938
Dec. 31,1939

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

Apr.
June
June
Dec.
Feb.
July
June
Jan.

Feb.
Sept.
Dec.
Nov.
Feb.
Oct.

Secretary of theTreasury

President

ToSecretaries of the Treasury
Roosevelt.
Roosevelt.
Woodin
Woodin
Morgenthau..

Roosevelt.
Roosevelt.
Roosevelt.

Morgenthau..
MorgenthauMorgenthau..

Roosevelt.
Roosevelt.
Roosevelt.

Woodin, Morgenthau...
Woodin, Morgenthau...
Woodin
Morgenthau
Morgenthau
Morgenthau
Morgenthau
Morgenthau. _L

Roosevelt.
Roosevelt.
Roosevelt.
Roosevelt.
Roosevelt.
Roosevelt.
Roosevelt.
Roosevelt.

Assistant Secretaries
18,1933
6,1933
12,1933
1,1934
19,1936
1,1938
23,1939
18,1940

15,1936
30,1939
12,1933
1,1937
28,1939
31,1938

Lawrence W. Robert, Jr., Georgia.,
Stephen B. Gibbons, New Y o r k . . .
Thomas Hewes, Connecticut
Josephine Roche, Colorado
Wayne C. Taylor, Illinois
John W. Hanes, North Carolina. _.
Herbert E. Gaston, New York
John L. Sullivan, New Hampshire.

1 For oflficials since 1789 see annual report for 1932, pp. xvii to xxi, and corresponding table in annual report
for 1933.
XVII




PRINCIPAL ADMINISTRATIVE AND STAFF OFFICERS OF THE
TREASURY DEPARTMENT AS OF NOVEMBER 15, 1940
OFFICE OF T H E SECRETARY
Henry Morgenthau, Jr.—
Daniel W. Bell
Herbert E. Gaston
John L. Sullivan...
(Vacant)..
Harold N. Graves
Philip Young
John W.Pehle
Henrietta S. Klotz
H. Merle Cochran
W. N. Thompson
Charles S. Bell
Charles R. Schoeneman
Edwin R. Ballinger
Elmer L. Irey
Beriah M. Thompson
Thomas Tarleau
Charles Schwarz
Herbert J. Wollner
William T. Heffelfinger
H. R. Sheppard
..
Francis C. Rose
F. A. Birgfeld
John D. Fox
Frank J. Wilson...
L. C. Spangler...
Gabrielle E. Forbush

Secretary of the Treasury.
Under Secretary of the Treasury.
_. Assistant Secretary of the Treasury.
Assistant Secretary of the Treasury.
Fiscal Assistant Secretary of the Treasury.
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.
Director of Personnel.
Coordinator of Treasury Agency Services.
Consulting Expert.
Legislative Counsel.
Director of Press Relations.
Consulting Chemist.
Executive Assistant to the Fiscal 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, Correspondence Division.
OFFICE OF T H E GENERAL COUNSEL

Edward H. Foley, Jr
Huntington Cairns
Lawrence J. Bernard..
Bernard Bernstein
N. O. Tietjens
Charles L. Kades
Oscar S. Cox
Joseph J. O'Connell, J r . .
Samuel Klaus
John P. Wenchel
Ralph H. Dwan

General Counsel.
Assistant General Counsel.
Assistant General Counsel.
Assistant General Counsel.
Assistant General Couosel.
Assistant General Counsel.
Assistant to the General Counsel.
Special 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.
Henry C. Murphy
Al F. O'Donnell...
Russell R. Reagh.Anna M. Michener..
Isabella S. Diamond

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

Harry D. White
V. Frank Coe

Director of Monetary Research.
Assistant Director.
DIVISION OF TAX RESEARCH

Roy Blough
Louis Shere

Director of Tax Research.
Assistant Director.

BUREAU OF THE PUBLIC DEBT
William S. Broughton
Edwin L. Kilby
Rene W. Barr
Edward G. Dolan
Byrd Leavell
Eugene Sloan
James W. Bryan
Marvin Wesley
Melvin R. Loafman
Maurice A. Emerson
XVIII




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 Savings Bonds.
Chief, Information Section, Division of Savings Bonds.
Chief, Division of Loans and Currency.
Chief. Division of Public Debt Accounts and Audit.
Chief, Division of Paper Custody.

PRIINOIIPAL. ADM'I(N:ilS<TRA'TaVE AND STAFF OFFiIOElRS"
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).

.

BUREAU OF ACCOUNTS
Edward F . Bartelt
Robert W. Maxwell
A. L. Peterson
Paul D. Banning..
Joseph Greenberg
Guy F . Allen
L. L. Collie
B. M . MulvihUl
Harry R. Sch\valm
Eugene P . 0'Daniel

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

.

-

BUREAU OF THE COMPTROLLER OF THE CURRENCY
Preston Delano
CyrilB. Upham
Eugene H. Gough
A. J. Mulroney
W. P . Folger

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

.

OFFICE OF T H E TREASURER OF T H E U N I T E D STATES
William A. Julian
Marion Banister
George 0 . Barnes
M . E. Slindee
Louis P . Allen

1

Treasurer of the United States.
Assistant Treasurer.
Assistant to the Treasurer.
Administrative Assistant.
Chief Clerk.
BUREAU OF NARCOTICS

Harry J. Anslinger
W i l i s . Wood
Malachi L. Harney

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

BUREAU OF INTERNAL REVENUE
Guy T. Helvering
Jonas W. Graber
Timothy C. Mooney
George J. Schoeneman
D. Spencer Bliss
Steward.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.
H(iad, Technical Staff.
Chief, Intelligence Unit,
Special Assistant to the'Commissioner.

.

BUREAU OF CUSTOMS
W.R.Johnson
Frank Dow
Thoirias J. Gorman
A.S.Johnson.—
(Vacant)

Commissioner of Customs.
Assistant Commissioner of Customs.
Deputy Commissioner.
Deputy Commissioner.
Deputy Commissioner.
BUREAU OF T H E M I N T

Nellie Tayloe Ross
Leland Howard

.

Director of the Mint.
Assistant Director.

U N I T E D STATES COAST GUARD
Rear Admiral Russell R. Waesche
Rear Admiral Leon C. Covell..
.._..
Rear Admiral Harvey F . Johnson
Capt. N . B. Hall
Capt. C. H.Jones
Capt. P. F, Roach
Commander Frank J. Gorman
Kenneth S. Harrison




Commandant.
Assistant Commandant and Chief of Operations,
Engineer in Chief and Chief, Material Division.
Inspector in Chief.
Chief, Personnel Division.
Chairman of Permanent Board.
Chief, Finance Division.
Chief, Legal Division.

XIX

XX"

PRINCIPAL ADIMINIST'RAT'IVE. AND' STAFF OFFIiCERS
P R O C U R E M E N T DIVISION

Clifton E, Mack
Robert LeFevre
George Landick, Jr
W. N. Rehlaender

.
.'

L

Director of Procurement.
Assistant Director.
Assistant to the Director.
Administrative Assistant to the Director.
BOARD OF AWARDS

George Landick, Jr., Assistant to the Director,
Chairman.

Harry B. Dyche, Special Assistant to the Director.
Thomas A. Manning, Jr., Chief Counsel.

STANDING DEPARTMENTAL COMMITTEES
BUDGET AND I M P R O V E M E N T C O M M I T T E E
C. R. Schoeneman, Chairman.
E. R. Ballinger.
F. A. Birgfeld, Vice Chairman.
L. C. Spangler.
George 0 . Barnes.
Arthur E. Wilson.
M". E. Slindee.
E. C. Nussear, Secretary.
Charles S. Bell.
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.
W. W. Cook.

George D. Carrington.
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.
James E. Harper.

(Vacant.)
BOARD OF REVIEW
(Refunds of Processing Taxes)

William Schwartz, Chairman.
(Vacant), Vice Chairman.
John W. Edwards.
H. Stewart McDonald.




Percy S. Crewe.
Annabel Matthews.
Temple W. Seay.
Bernard D. Hathcock.




DEPARTMENT

OF

THE

TREASURY

N o v e m b e r 15. 1940

THE SECRETARY
OF THE
TREASURY

THE UMOER lECRETARy

GENERAL COUNSEL

ASSISTANT
CHARSEOF COAST 6UAR0,
CUSTOMS, NARCOTICS AND

ASSISTANT SECRETARY
INTERNALREVENUE

ASSISTANT TO
THE
SECRETARV

OrriCE Of THE
LEGISLATIVE
COUNSEL

BUREAU OF ENGRAVING

LEGAL

DIVISION

DIVISION




DIRECTOR
DF RESEARCH
NO STATISTICS

COAST GUARD

O f F I C E OF THE
TRtASURSR OF TMI
UNITED STATES

OC
DEPARTMENT

ACCOUNTS AND AUDIT

SAVINGS

BONOS

ADMINISTRATIVE
ASSISTANT TO THE
SECRETARV

ANNUAL REPORT ON THE FINANCES
TREASURY D EPARTMENT,

WashingtoUj D. C , January ff, 1941.
SIR : I have the honor to make the following report on the finances
of the United States for the fiscal year ended June 30, 1940.
The fiscal year 1940 marked the transition from a period of about
eight years during which the fiscal policy was concerned primarily
with the problems arising out of the depression to a period in which it
appears that the emphasis is likely to be placed upon fiscal problems
connected with the country's rearmament program. I t seems appropriate, therefore, to review at this time developments relating to
the Treasury and the fiscal operations of the Government for the
entire eight-year period, as well as those for the fiscal year just closed.
BUDGET RESULTS
Receipts in general and special accounts

Fiscal years 1933 to 194-0

!

Total receipts in general and special accounts amounted to $5,925
millions in the fiscal year 1940, and net receipts, i. e., total receipts
less net appropriations to the Federal old-age and survivors insurance
trust fund, totaled $5,387 millions. This level of total receipts represents a resumption, after a reversal in the fiscal year 1939, of the rise
in total receipts from the low level of $2,080 millions in the fiscal year
1933 and comes within $317 millions of equaling the 1938 total
receipts which were next to the highest (1920) of any year of our
history. The table below shows total and net receipts in the fiscal
year 1940 and the trend of receipts during the eight fiscal years, 1933
to 1940.
Total receipts and net receipts under general and special accounts, fiscal years 1933
to 1940
[In millions of dollars. On basis of daily Treasury statements (unrevised), see p. 583]

. Year

1933
1934
1935
1936

Net appropriations to
Total Federal oldage and
receipts - survivors
insurance
trust fund *

2,080
3,116
3,800
4,116

1 Formerly old-age reserve account.



Net receipts—total
receipts less
net appropriations to
Federal oldage and
survivors
insurance
trust fund
2,080
3,116
3,800
4,116

Net reNet appro- ceipts—total
receipts less
priations to
net approTotal Federal old- priations to
age and
receipts
Federal oldsurvivors
age and
insurance
survivors .
trust fund >
insurance •
trust fund

Year

1937
1938
1939
1940

..-.

5,294
6,242
6,668
5,925

265
387
503
538

5,029
5,855
5,165
5,387

REPORT OF THE SECRETARY OF THE TREASURY

The following chart shows total receipts including employment
taxes, by principal sources, for the fiscal years 1933 to 1940. Figures
on which the chart is based appear in the table on page 650. The
1940 receipts are discussed on pages 19 to 22.
TOTAL RECEIPTS.! FISCAL YEARS 1933 TO 1940, BY PRINCIPAL SOURCES

1935

1936
F I S C A L

1937
Y E A R S

1938

CHART 2.

Total revenue has increased $3,845 millions between the fiscal years
1933 and 1940. Of this amount, $3,801 millions is represented by
increased internal revenue taxes, contributions under the Railroad
Unemployment Insurance Act, and customs. If the taxes based on
employment including contributions under the Railroad Unemployment Insurance Act are deducted, the increase is $2,963 millions.
Both legislative changes and improvement in business conditions
have contributed to the revenue increases. The relative effects of the
legislation itself can be separated approximately from the effects of
business conditions by computing estimated tax liabihties under the
same business conditions imder revenue laws which existed at the
beginning and end of this period.
In this manner there has been prepared a comparison of the relative
strength of the tax structure now (December 1940) with the laws
^Excludes trust accounts.




REPORT OF THE SECRETARY OF THE TREASURY

6

which prevailed immediately prior to the fiscal year 1933, i. e., just
before the passage of the Revenue Act of 1932 and also under the
Revenue Act of 1932. The table below presents forecasts of the
estimated tax liabilities (excluding miscellaneous receipts) for the
calendar year 1941 (which will, in many cases, represent tax collections in the fiscal year 1942 or subsequent years) on three bases: (1)
The laws in effect immediately prior to June 6, 1932—immediately
prior, that is, to the first major revision of revenue legislation after the
onset of the depression, (2) the laws in effect immediately after the
passage of the Revenue Act of 1932, and (3) existing legislation as of
December 31, 1940. The estimates in this table are based upon a
classification which groups Federal receipts from related sources.
Estimated Federal tax liabilities^ for calendar year 1941,^ based on the tax structures
of (1) May 1932, (2) immediately following the passage of the Revenue Act of 1932,
and (3) December 1940
[In millions of dollars]
Under laws-

Tax group

Individual income, estates, and
gifts.
Corporate income and profits
Liquor
_
Tobacco
Other miscellaneous i n t e r n a l
revenue...
.Employment *.
Customs
^
Total tax liabilities.

Of May
1932, immediately preceding the
passage of
the Revenue Act
of 1932

Increase (+) or
Increase (+) decrease ( - )
or decrease
laws in exist(—) laws in ence December
Of July 1932.
existence
31,1940, over
immediately Of Decem- December 31, laws immedifollowing
ber 31,
1940, over ately following
passage of
laws of May
1940
passage of
Revenue Act
1932
Revenue Act
of 1932
of 1932

594
1,277

1,308
1,594
39
654

2.230
3.723
825
704

-f-2,446

+922
+2,129
+816
+50

39

777

879
957
295

+840
+957

+6

+102
+957
+6

9,613

+6,751

+4,982

289
2,862

4.631

-\-l, 636
-1-816
+60

1 Excluding miscellaneous receipts. In preparing this table the tax base was assumed to be independent
of the tax structure.
* These estimates are based upon the same estimated levels of business activity for calendar year 1941
as those used in making the revenue estimates contained in the 1942 Budget Message of the President.
3 This estimate assumes the eighteenth amendment in effect. Application of the 1932 liquor tax rates
to the present volume of liquor consumption would yield a much higher amount.
< Includes collections under Railroad Unemployment Insurance Act.

The tax structure of May 1932, as shown in the table, would have
provided $2,862 millions of tax liability, based on business conditions
similar to those estimated to affect liabilities during the calendar year
1941. Under the tax structure after the passage of the Revenue Act
of 1932j it is estimated that tax liabilities would amount to $4,631
millions, indicating that the Revenue Act of 1932 strengthened the
tax structure by $1,769 millions at the indicated business levels.
The strengthening of the tax structure since the passage of the
Revenue Act of 1932 has been principally attributable to taxes
collected from liquor largely as a result of the repeal of prohibition




4

REPORT OF THE SECRETARY OF THE TREASURY

and others levied for special purposes—namely, those collected in
conjunction with the insurance features of the Social Security program, and those levied under the two revenue acts of 1940, which were
passed in connection with financing the defense preparedness program.
These three items account for nearly $4,000 millions of the $4,982
millions increased revenue yield of the present tax structure over the
tax structure existing immediately after the passage of the Revenue
Act of 1932. The balance of the strengthening came about principally
by increasing the progressive taxes levied upon incomes, estates, and
gifts. Under taxes existing on December 31, 1940, the total tax
liability is estimated at $9,613 millions.
The table on page 654 is in terms of tax collections (excluding miscellaneous receipts) allocated to estimated calendar years of incurrence
of tax liability. In studying changes in taxes the movement of
liabilities accrued in a particular year is often more illuminating than
is the movement of receipts. Tax statutes frequently result in
receipts being reflected in the Treasury's receipts months after the
corresponding liabilities accrue to the taxpayer. Tax liabilities reflect
earlier and more clearly the effects of legislative and economic changes,
and probably give a truer picture of underlying conditions. For
example, tax receipts in the fiscal year 1930 were higher thaii in 1929,
and in the fiscal year 1938 were higher than in 1937, chiefly because
of the long lags involved between the incurrence of tax liability and
payments to the Treasury. The summary table below shows for
the calendar years 1933 to 1939 the total tax collections (excluding
miscellaneous receipts) allocated to the estimated years of incurrence
of the tax liability. The classes are indicated-in the table itself, and
details as to the classification of any particular tax may be found in
the table on page 654.
Tax collections allocated by groups to estimated year of incurrence of the tax liability,^
calendar years 1933 to 1939
[In millions of dollars. On basis of reports of collections , see p. 584]
Tax group
I. Individual income, estates, and gifts _
II. Corporate income and profits
III. Liquors
IV. Tobacco.
_
V. Other miscellaneous internal revenue
VI. Employment 2..
VII. Agricultural adjustment
V i n . Customs
Total tax liabilities

1933

1934

612.7
574.1
138.5
409.3
514.7

858.4 1, 206. 3 1, 741.7 1, 605. 5 1, 248. 5 1, 389.4
783.3 960.4 1,469. 8 1, 507. 0 1,090.4 1, 440. 5
366.9
566.8
459.8
588.0
561.3
601; 4
451.9
535.8
566.7
477.9
562.8
592.8
560.7
488.2
569.1 613.2
498.6
614.0
734.1
81.3
790.1
809.5
508.0
277. 5
414.0
332.8
308.1
363.8
482.7
309.0

183.9
288.2

1935

1936

1937

1938

1939

2, 721.4 3,764.8 4, 244. 3 5, 378. 5 6,149. 3 5,070. 7 5,780.4

1 These estimates, which exclude miscellaneous receipts, are not to be confused with data of actual flscal
or calendar year collections in the indicated years.
2 Includes collections under Railroad Unemployment Insurance Act.
SOURCE.—Table on p. 654.




REPORT OF THE SECRETARY OF* THE TREASURY
. The table that follows shows Federal tax liabilities and national
income produced for calendar years 1933 to 1939. National income
'^produced'' is defined by the Department of Commerce as '^the net
value of all goods and services produced within a given period.'^
I t differs from the concept of national income *^paid out'' in that it
includes * ^business savings"—i. e., the undistributed net profits of
business enterprises—but excludes unearned interest and dividend
payments as well as business losses before such payments.
I t should, of course, be stressed that Federal tax liabilities should
not properly be subtracted from national income, either produced or
paid out. They are not a burden or drain upon the sum total of
national income. They contribute materially to national income
produced when, after being collected as taxes, they are spent by the
Government. Any list of the forms in which Federal expenditure
increases national income would include such items as salaries, educational services, streets and highways, conservation of natural resources,
public works, furnishing of national defense, public health, and
emergency relief.
National income and Federal tax liabilities, calendar years 1933 to 1939, and at
assumed higher levels of national income
[In millions of dollars]

Calendar year

1933
1934
1935
1936
1937
1938
1939

-

National
income
produced
42,430
50,347
55,870
65,165
71,172
63, 610
69, 378
90,000
100,000

Federal tax
liabilities
2,721
3,765
4,244
5,379
6,149
5,071
5, 780
1 11, 200
1 13,400

1 These estimates, which are based on the law existing in December 1940, including the temporary tax
rates of the Revenue Act of 1940, are rough and may vary somewhat either way. They are presented as
an indicator and not a gauge. The $90,000 million and $100,000 million levels of national income are not
predictions for any particular year. In addition to the tax liabilities the Federal Government collects
miscellaneous revenues and receipts which are not estimated at the $90,000 million and $100,000 million
levels of national income produced. In the fiscal year 1942 these are estimated at $169 millions.
SOURCES.—Table on page 654 for tax liabilities. Survey of Current Business, U. S. Department of Commerce, June 1940, table I, page 7, for national income produced.

The last two lines in the table above have been included in order to
present some idea of the strength of the tax structure as of December
31, 1940, at higher levels of national income than now exist. These
estimates are of a different type than those appearing elsewhere in the
table. They are not predictions of the indicated levels of national
income for any particular year but are rough indications of the level
of receipts under certain assumed conditions. I t is not meant to imply that Federal tax liabilities correlate merely with national
income produced or t h a t they may be estimated merely by reference
to it. There is no one answer as to the amount of revenue at a giveii



6

REPORT OF THE SECRETARY OF THE TREASURY

level of national income. The course of the national income—upward,
downward, irregularly fluctuating, or lateral—has a great influence
upon tax liabilities. The composition of the income—i. e., its division
between types of income and classes of income receivers—also has a
great influence. The assumption in connection with the estimates
at the $90 billion and $100 billion national income levels is that the
income remain constant at each level for some years. The assumptions with respect to composition have been made with special reference to the existing international situation. Under these assumptions,
if the national income were to achieve an annual level of $90 billions
for several years, it is estimated that the existing tax structure would
produce approximately $11,200 millions in annual tax liabilities.
Under comparable circumstances an annual $100 billions national income would provide annual Federal tax liabilities of $13,400 millions.
This tax yield would be unprecedented in our national history.
The table below shows these estimates of total tax receipts at
national income levels of $90 billions and $100 billions by principal
sources. Employment taxes in each of these estimates are computed
at calendar year 1940 rates.
Estimated total Federal tax receipts,^ in general and special accounts, by principal
sources, at assumed levels of national income
[In billions of dollars]
National income produced
Source

Income taxes
_
Miscellaneous internal revenue
Customs
Employment taxes 'Total tax receipts s

$90 billion
level

__

$100 billion
level

6.6
3.3
.3
1.0

8.5
3.5
.3
1.1

11.2

13.4

» Based upon the law existing in December 1940, including the temporary tax ratas of the Revenue Act of
1940. These estimates of receipts assume continuation of the present international situation.
» At 1940 rates; includes collections under Railroad Unemployment Insurance Act.
3 Miscellaneous receipts have not been estimated at the mdicated national income levels. In the fiscal
year 1942 they are estimated at $169 millions.

The Federal tax structure as it exists in 1940 and as it existed after
the passage of previous revenue laws is shown in summary form in
the exhibit beginning on page 466. The discussion that follows
summarizes legislation and developments that affected revenues
during the eight fiscal years between July 1, 1932, and June 30, 1940.
This discussion, except for fiscal year 1940, excludes discussion of
miscellaneous revenues and receipts and is therefore confined to other
tax receipts and customs and to the changes therein. Miscellaneous
revenues and receipts constitute a very small proportion of the total
Federal receipts. Although a few small tax items are included in
this group, the bulk of it is nontax revenues, such as fees, fines, tolls.



REPORT OF THE SECRETARY OF THE TREASURY

7

interest on obligations held by the Government, seigniorage charges,
gifts, etc. These revenues amounted to from $162 millions to $268
millions annually in the period under review.
Revenue Act oj 1932.—The Revenue Act of 1932, approved June 6,
1932, was the first major revenue law passed after the onset of the
depression. I t was passed in the face of the necessity of increased
revenues at a time when there had been a drastic decline in the
existing tax base. Though the date of its passage would include it
in the events of the fiscal year -1932, its provisions did not affect
Federal revenues or liabilities until the fiscal year 1933.
The principal provisions of the Revenue Act of 1932 were the following:
(1) Increase in the corporation income tax rate from 12 percent to
13% percent, with an additional tax of % of 1 percent for consolidated
returns and the removal of a specific credit of $3,000.
(2) Increase in the normal rates on individual incomes from 1}^,
3, and 5 percent to 4 and 8 percent; elimination of any tax credit for
earned income; reduction in personal exemptions from $3,500 and
$1,500 to $2,500 and $1,000 for married persons or heads of families
and single individuals, respectively; surtaxes graduated from 1 percent on net income in excess of $6,000 (as compared with $10,000
under the previous revenue act), up to 55 percent on net income in
excess of $1,000,000 (as compared with a maximum surtax of 20 percent on net income in excess of $100,000 under the previous act);
changes in the capital gains provision of the law to limit losses from
the sale or exchange of stocks and bonds held two years or less to the
amount of gains from similar transactions, with a one-year carryover
of the disallowed losses.
(3) An additional tax at graduated rates on estates, with an exemption of only $50,000 (it had been $100,000 under the Revenue Act of
1926), the additional tax to be paid to the Federal Government without tax credit for payment of State inheritance taxes.
(4) A gift tax at rates graduated up to 33K percent on net gifts in
excess of $10,000,000, with an exemption of $50,000 plus an annual
exemption for each donee of $5,000. This tax was included to assist
in the collection of the income and estate taxes and partially prevent
their avoidance through the splitting up of estates during the lifetime
of the taxpayer.
(5) Special manufacturers' excises on specific articles. The list
included lubricating oil and gasoline, automobiles, trucks, parts and
accessories, tires and inner tubes, brewer's wort, candy, chewing gum,
soft drinks, jewelry, toilet preparations, furs, domestic and commercial
consumption of electricity, radios, mechanical refrigerators, sporting
goods, cameras, malt and grape concentrates, matches, firearms, shells




8

REPORT OF THE SECRETARY OF THE TREASURY

and cartridges. Of these taxes, that on gasoline proved the most
productive as a source of revenue. These taxes, in general enacted
for a 2-year period, were originally intended to be temporary. The
majority remained in effect until 1938 and certain ones are now
scheduled to expire in 1945.
(6) Other miscellaneous taxes, including new and increased stamp
taxes, increased taxes on admissions, and new taxes on telephone,
telegraph, cable, and radio messages, checks, leases of safe deposit
boxes, transportation of oil by pipe line, and the use of yachts and
boats.
Fiscal year 1933.—The fiscal year 1933 saw the first effects of the
revenue act of the preceding year and the creation of a tax base in the
liquor industry.
The tax revenues decreased from the level of the previous year but
the decrease was only slight—approximately $34 millions. Revenues
other than those from income taxes and customs actually increased.
Income tax revenues declined by $311 millions—the decline in incomes
between 1930 and 1932 (1931 being common to both years) more than
offsetting the increase in rates. Customs declined by $77 millions,
reaching their lowest level since 1919, as the quantity of imports fell
and depreciation of foreign currencies lowered ad valorem duties.
The new manufacturers' excises of the Revenue Act of 1932 brought
in $248 millions the first year, half from gasoline, and the other new
taxes accounted for another $68 millions.
The Volstead Act was amended to permit the sale of beer and light
wines, and the act which legalized them (approved March 22, 1933)
also provided for taxes upon fermented liquor which yielded $35 millions before the close of the fiscal year. This act was the only significant new item of revenue legislation m the fiscal year 1933 to affect
the revenues in that year.
The Agricultural Adjustment Act, approved May 12, 1933, and the
National Industrial Recover}^ Act, approved June 16, 1933, included
new taxes which added to the revenues of subsequent fiscal years.
These taxes did not affect the revenues during the fiscal year 1933.
The Agricultural Adjustment Act of 1933 imposed taxes upon processors of selected farm products at rates to be determined by the
Secretary of Agriculture to equal ^Hhe difference between the current
average farm price for the commodity and the fair exchange value of
the commodity . . ." Corresponding taxes were also placed on
floor stocks and imports of the commodities taxed, and on rival products
competing with these basic agricultural commodities. The tax was
designed primarily to finance the activities of the Agricultural Adjustment Administration, in its program to raise the prices of farm products to ''parity" by crop reductions and otherwise. The processing
tax provisions of this act, together with its amendments of later fiscal



REPORT OF THE SECRETARY OF THE TREASURY

9

years, were held unconstitutional on January 6, 1936, by the United
States Supreme Court.
The main tax provisions of the National Industrial Recovery Act
were four in number: (1) A capital stock tax at the rate of $1 for each
$1,000 of the declared value of a corporation's capital stock. (2) An
excess-profits tax on corporations at the rate of 5 percent on the
portion of the net income in excess of 12}^ percent of the adjusted
declared value of the stock of each corporation. (3) A tax of 5
percent upon all dividends paid by corporations to individuals and to
foreign corporations, to be withheld by the dividend-paying corporation. (4) The manufacturers' excise and other taxes imposed by
titles IV and V of the Revenue Act of 1932 were extended for one
year after June 30, 1934. The rate of the gasoline tax was increased
from 1 cent to Iji cents a gallon, and Public No. 73, approved the
same day, placed the expiration date of the gasoline tax on the same
basis as the other temporary manufacturers' excise taxes imposed by
the Revenue Act of 1932. I t was provided that the new and increased
taxes imposed under the National Industrial Recovery Act should
cease to be effective at stated periods after the President proclaimed
the date of (1) the close of the fiscal year ending June 30 of any year
after 1933, during which the total receipts of the Government exceeded its total expenditures, or (2) the repeal of the eighteenth
amendment to the Constitution, whichever was the earlier.
Fiscal year 1934-—The first fiscal year to reflect approximately a
full year's collections under the income and estate tax provisions of the
Revenue Act of 1932 was 1934, as 1933 had been the flrst to reflect the
manufacturers' excise and other miscellaneous provisions of this act.
Total tax revenues amounted to $2,954 millions, a gain of $1,099 millions over revenues in the fiscal year 1933.
Both personal and corporate income' tax receipts rose during this
year despite the fact that their base was now the two low income years,
1932 and 1933. The increase in current corporation income tax was
$2 millions, the increase in current individual income tax receipts was
$60 millions, and the increase in estate tax receipts was $74 millions
over the levels of the previous fiscal year. The other outstanding
increases in revenue came in the gasoline excise which yielded $78
millions more due to the increase to 1 ji cents a gallon by the National
Industrial Recovery Act, and in fermented malt liquors where, following the repeal of prohibition, there was an increase of $134 millions in
tax revenue. The new taxes imposed under the National Industrial
Recovery Act yielded $133 miUions (capital stock tax $80 millions,
dividends tax $50 millions, excess-profits tax $3 millions), and the
Agricultural Adjustment Act processing taxes yielded $371 millions.
In addition, the eighteenth amendment had been repealed, and the
sale of distilled spirits was now legal in many States. Federal



10

REPORT OF THE SECRETARY OF THB TREASURY

revenues from the taxation of distilled liquors in the fiscal year
1934 amounted to $90 millions. This amount included the small
receipts from the taxation of liquor sold for medicinal and other
legal purposes during the period from the beginning of the fiscal year
to the repeal of prohibition on December 5, 1933, the receipts from the
application of the pre-prohibition rates on liquor sales from December
5, 1933, until the effective date of the Liquor Taxing Act on January
.11, 1934, and the receipts at rates levied by this act for the remainder
of the fiscal year. All other major taxes showed increasing returns,
with the upturn in business. Even customs, with a $63 millions increase, reversed a downward trend which had covered the previous
four years.
Important changes in Federal taxes occurred during this fiscal
year. The Liquor Taxing Act, approved January 11, 1934, raised
the excise rates on distilled spirits and still wines and lowered the
license taxes on brewers and the excises on beer. When the eighteenth amendment was formally repealed (December 5, 1933), the
President, acting in accord with the National Industrial Recovery
Act, issued a proclamation which had the effect of repealing certain
of the National Industrial Recovery Act taxes as of the following
dates: The dividends tax was repealed as of December 31, 1933,
and the rate of the gasoline tax reverted to its 1 cent a gallon rate
after that date, the capital stock tax was not to apply to any year
except the year ending June 30, 1933, and the excess-profits tax was
not to apply to any taxable year ending after June 30, 1934.
The Revenue Act of 1934 was approved May 10, 1934. This act
provided for four principal changes from the 1932 rates:
(1) The corporate income tax was amended to allow consolidated
returns only in the case of railroads. This meant that under this act
two corporations under the same ownership, other than railroad corporations, could not cancel the losses of one against the profits of
another for the purpose of diminishing or avoiding the payment of the
income tax. The consolidated return rate was increased to 15% percent while the regular rate remained at 13% percent.
A further change in the corporate income tax was designed to discourage a method of personal income tax avoidance. Individuals and
groups of individuals had been arranging to have their incomes
received by closely held corporations which would then invest such
incomes but make little or no distribution of such incomes to shareholders. These corporations carried on no business other than the
investment of their income, and were known as ''personal holding
companies." The 1934 act placed special taxes on these corporations.
^ The taxes on capital stock and excess profits of corporations, originally imposed under the National Industrial Recovery Act and repealed
upon the adoption of the twenty-first amendment to the Constitution,
were again imposed.



REPORT OF THE SECRETARY OF THE TREASURY

11

(2) The personal income tax was made more sharply progressive
by lowering the normal tax rate to a flat 4 percent, raising surtax
rates, and restoring a 10 percent earned income credit against the
normal tax. However, this was partially offset by permitting the
personal exemption and credit for dependents as a credit in determining surtax net income. The entire method of taxing capital gains—
previously taxed as ordinary income or subject to a flat rate of 12)^
percent, at the option of the taxpayer—was altered. Depending on
the length of time the assets had been held, the taxpayer was to include
a varying proportion of the capital gain as net income. Deduction
of capital losses was limited to capital gains plus $2,000, regardless
of the time for which such assets had been held. For corporations no
distinction was made for the length of time for which the assets were
held but capital losses were limited to capital gains plus $2,000.
(3) Tax rates on both estates and gifts were raised. The increase
in the gift tax was not to take effect until the calendar year 1935,
although the estate tax rates were effective immediately upon the
signing of the law by the President. Donors took advantage of the
period between the effective date of the act on May 10, 1934, and the
end of the year to make a large amount of gifts at the 1932 act rates.
(4) Manufacturers' excise taxes were altered somewhat. Imports
of various marine animal and fish oils which competed with domestic
products were tax.ed, and processing taxes on vegetable and coconut
oils, either domestic or imported, were imposed. Taxes collected on
Philippine coconut oil were to be held as a separate fund and paid to
the treasury of the Philippine Islands. On the other hand, certain
of the excises of the 1932 act were modified. The taxes on soft drinks,
candy, and checks were repealed, increased exemptions were added to
the taxes on furs and jewelry, and the stamp tax on the sale of produce
for future delivery was reduced.
(5) A special tax, to apply to contracts and subcontracts for the
construction of naval vessels and aircraft, was included in the VinsonTrammell Act, approved March 27, 1934. This act limited all such
profits.to 10 percent of the contract price.
(6) The Reciprocal Trade Agreements Act was approved on June
12, 1934. This act authorized the President for three years to enter
into reciprocal trade agreements with foreign governments wherein,
among other things, existing duties might be modified by not more
than 50 percent of the duty imposed under the Tariff Act of 1930.
This act w^s renewed in 1937 and again in 1940.
Fiscal year 1935.—Continued improvement in business conditions
combined with the higher rates of the 1934 Revenue Act to make for
continued increase in Federal revenues during the fiscal year 1935.
Current corporation income taxes rose $144 millions and current individual income taxes rose $93 millions. Aside from these, the largest
269677—41

3




12

REPORT OF THE SECRETARY OF THE TREASURY

increase came in the liquor schedule. Liquor production and consumption were mounting steadily, and liquor tax receipts rose from
$259 millions m 1934 to $411 millions m 1935, the first full fiscal year
after repeal of prohibition. Additions to the list of commodities covered by the Agricultural Adjustment Act probably were responsible
for the greater part of the $155 million increase recorded in these
taxes. The very great increase in gift tax receipts to $72 millions
from $9 millions probably was caused by gifts made because of immediately higher estate and prospectively liigher gift tax rates imposed
under the Revenue Act of 1934. Receipts from the tax on gasoline
totaled $162 millions as compared with $203 millions in 1934. This
decrease was more than accounted for by the reduction in rate from
IK cents in the first half of the fiscal year 1934 to 1 cent in subsequent
periods. A rise of $30 millions in customs receipts reflected increased
liquor and agricultural imports, the latter brought about by the
drought of 1934. Total receipts from taxation rose from $2,954
millions to $3,621 millions.
The principal revenue legislation of the flscal year 1935 was the
extension for two years of the special taxes imposed by the Revenue
Act of 1932, except for the tax on checks which was repealed as of
January 1, 1935. These taxes had been originally designed to expire
on Jime 30 or July 31, 1934, and the National Industrial Recovery
Act had postponed the expiration date for one year.
There were also enacted a considerable number of additions to and
modifications of the Agricultural Adjustment Act, chiefly concerned
with extending the list of commodities covered and extending temporary provisions in time.
Fiscal year 1936.—The bulk of revenue changes during the flscal
year 1936 represented the effects of continued business improvement.
However, a portion of the $145 millions increase in current corporation tax returns may be ascribed to altered Treasury regulations
regarding deductions for depreciation. Income tax collections, current and back, continued to increase as did all major sources of
revenue with the exception of agricultural adjustment taxes.
Almost immediately following the beginning of the flscal year,
cases attacking the constitutionality of the processing taxes began to
be supported by the courts, so that tax funds were impounded and taxpayers delayed filing their returns. The taxes were declared unconstitutional in January 1936 and returns ceased, leaving the total
collections for the year at $68 millions, a decrease of $459 millions from
the previous year. The rising level of industrial activity and a 50
percent reduction in the rates on imported distilled spirits more than
offset the drop in agricultural imports foUowing normal domestic crop
production so t h a t receipts from customs duties increased, and total
tax revenues rose $279 miUions to $3,900 miUions.



REPORT OF THE SECRETARY OF THE TREASURY

13

Two revenue acts were passed during the fiscal year 1936, neither
of which was to affect revenue materially until the following fiscal
year. The Revenue Act of 1935 was approved August 30, 1935. All
individual income surtax rates were raised for surtax net incomes
above $50,000 and the maximum of 59 percent (on incomes above
$1,000,000) increased to 75 percent (on incomes above $5,000,000).
(The 75 percent rate compares with the previous top rate of 65 percent levied on incomes above $1,000,000 in 1918-1921.) All estate
and gift tax rates were raised also; the maximum estate tax rate was
revised from 60 percent on net estates over $10,000,000 to 70 percent
on net estates over $50,000,000; the maximum gift tax rate was increased from 45 percent on net gifts over $10,000,000 to 52^ percent
on net gifts over $50,000,000. The date of filing estate tax returns
was extended to 15 months after decedent's death, and optional
valuation of estates either at the time of death or 1 year later was
permitted. The specific exemptions for both estate and gift taxes
were reduced from $50,000 to $40,000.
Two new features were introduced into the corporation income tax
by the Revenue Act of 1935. The first was a progressive tax. Instead of the flat rate of 13% percent the rate scale was graduated
from 12}^ percent on the first $2,000 of net income to. 15 percent on
net incomes of over $40,000. The second required 10 percent of the
dividends received from domestic corporations to be included as
ordinary income by the receiving corporation. These dividends had
previously been tax-exempt except in the calendar years 1913 to 1916
when the tax rate was only 1 percent and 2 percent.
The corporation income tax provisions did not, however, go into
effect, but were superseded by those of the Revenue Act of 1936, approved June 22, 1936. The 1936 act retained the progressive principle
of the previous legislation as applied to corporate income, but lowered
the rates in all but the highest bracket, and in addition imposed graduated surtaxes of from 7 to 27 percent upon undistributed corporate net
income arising in taxable years beginning after December 31, 1935.
The applicable rate was based upon the percentage of corporate net
income remaining undistributed.
The Revenue Act of 1936 also made 15 percent of intercorporate
dividends (instead of 10 percent as in the act of 1935) subject to the
normal tax, and all corporate dividends received by individuals were
made subject to the normal tax as weU as the surtax.
Aside from the above income tax provisions, the Revenue Acts of
1935 and 1936 made further changes in the revenue structure, the
principal ones being:
(1) The 1935 act increased the rate of tax on the declared value of
capital stock and also permitted a redeclaration of the value. The



14

REPORT OF THE SECRETARY OF THE TREASURY

higher rate, which was to become effective June 30, 1936, did not
become effective as it was superseded by the Revenue Act of 1936,
which was passed prior to that date, and contained rates the same as
had been in effect.
(2) The excess-profits rates of the 1935 act were increased from
5 percent of all income in excess of 12}^ percent of the declared value
of capital stock to 6 percent of the excess above 10 percent and less
than 15 percent, and 12 percent on all other excess income.
(3) After the Agricultural Adjustment Act processing taxes were
declared unconstitutional, the Revenue Act of 1936 imposed an 80
percent tax on Federal excise taxes shifted but unpaid and on refunds
of such taxes as had been shifted to others, in order to avoid an unfair
competitive advantage being given processors who had not paid
processing taxes over those who had.
(4) The 1935 act reduced the tax on producers of crude petroleum.
The 1936 act eliminated the jewelry tax, lowered the rate on furs while
removing exemptions, and imposed taxes on the importation of certain
additional types of seeds and oils.
Further legislation included the Social Security Act, approved
August 14, 1935. This act imposed two taxes in connection with the
old-age insurance provisions of the act: (1) An income tax on employees (with certain occupational exceptions) starting at 1 percent in 1937
and rising gradually to 3 percent after 1948, based on wages received
not in excess of $3,000 per annum; and (2) an excise tax on employers
(with certain occupational exceptions) starting at 1 percent in 1937
and rising gradually to 3 percent after 1948, based on wages paid, not
in excess of $3,000 per annum, to each individual in his employ. In
addition, the act imposed in connection with the unemployment insurance features of the social security program an excise tax on employers of eight or more (with certain occupational exceptions) equal
to 1 percent of the total wages payable in the calendar year 1936, 2
percent in 1937, and 3 percent in 1938 and thereafter. The act allowed a credit of 90 percent of the tax imposed for contributions paid
into an unemployment fund under a State law.
Shortly after the passage of the Social Security Act the Carriers
Taxing Act of 1935 was approved (August 29, 1935). After August
29, 1935, it provided for a tax upon the income of carriers' employees
equivalent to 3K percent of the compensation received up to $300 a
month, and an excise tax upon carriers equivalent to 3K percent of the
compensation not in excess of $300 a month paid to their employees.
The Bituminous Coal Conservation Act of 1935, approved August
30, 1935, imposed an excise tax of 15 percent of the sale price of
bituminous coal produced after November 1, 1935. Of this tax, 90
percent was to be refunded to producers complying with the Bituminous Coal Code. The Supreme Court held this act unconstitutional



EEPOiR'T OF T H E SE:CIlJETAEiY OF T H E TREASURY

15

before the end of the fiscal year. Two acts pertaining to liquor, the
Federal Alcohol Administration Act of 1935 and the Liquor Tax Administration Act of 1936, made improvements in liquor tax administration. The latter act reduced by 50 percent the rates on wines.
These rate decreases did not, however, become effective until the
following fiscal year.
Fiscal year 1937.—The fiscal year 1937 covers the period of the
highest business activity during the recovery period. Income tax
receipts reflected the business conditions and tax structure of the two
previous years, but all other revenue items changed chiefly due to the
tide of business advance.
Tax receipts rose by $1,184 millions during the year. The rise in
income taxes was especially marked—$407 millions in individual and
$284 millions in corporation. The provisions of the Revenue Act of
1936 as well as the business upturn were having their effect. Receipts
of $253 millions from social security taxes constituted a new source of
income. Customs receipts accelerated a rise which had begun in 1934,
increasing by $100 millions to $486 miUions. While imports of all
classes of merchandise increased and the value of imports exceeded the
value of exports for the first time since 1893, the excess amounting to
$104 millions, much of the increase in customs duties was due to the
drought in 1936. The only drastic decreases in receipts were in
processing taxes, which ceased following invalidation of the Agricultural
Adjustment Act, and gift taxes, where there was a fall from $72 milhons in 1935 and $160 miUions in 1936 to $24 miUions. This decline
may be ascribed to the gifts made in the earlier years in anticipation
of the higher rates of the 1934 and 1935 Revenue Acts and the removal
of any comparable incentive to make gifts in 1937.
Revenue legislation enacted during the fiscal year was confined to
three measures:
(1) The temporary taxes of the Revenue Act of 1932, originally
designed to expire on June 30 or July 31, 1934, had been previously
extended (with slight modifications) to 1937. On June 29, 1937, these
taxes were further extended for two years.
(2) The old-age insurance provisions of the Social Security Act had
excepted carriers and their employees from its provisions and this
class of workers had been covered by a special act of August 29, 1935.
This act was repealed by the Carriers Taxing Act of 1937, approved
June 29, 1937, which lowered the rates of the 1935 act retroactively
to January 1, 1937, but no coUections were due under it until the fiscal
year 1938.
(3) Following the invalidation of the Bituminous Coal Conservation
Act of 1935, the Bituminous Coal Act of 1937 was enacted on April
26, 1937, and became effective on June 21, 1937. This act imposed




16

REPORT OF THE SECRETARY OF THE TREASURY

an excise tax of 1 cent a ton on coal sold by the producer who conformed with the code. In addition a tax of 19K percent on the market
value of coal sold by producers not members of the code was imposed
if its sale was in interstate commerce or if the National Bituminous
Coal Commission held that such transactions in intrastate commerce
imposed an undue disadvantage on interstate commerce. This act is
scheduled to expire on April 26, 1941.
Fiscal year 1938.—A business recession which began in the spring
and summer of 1937 continued into the fiscal year 1938. Income
taxes, both individual and corporate, estate taxes, and gift taxes
continued to reflect conditions of the prosperous calendar years 1936
and 1937 and the tax increases of the Revenue Act of 1936. Most
other sources of revenue showed small changes, or resulted from new
laws.
The total receipts from taxation increased $950 millions to $6,034
millions. Half the increase ($477 mUlions) was in income taxes,
another $101 millions in estate taxes, and there was a $502 millions
increase in employment taxes, which reflected for the flrst time receipts of a full year's liabilities and the collection of an additional
quarter's liability in the case of the Carriers Taxing Act of 1937.
New taxes on bituminous coal and sugar yielded $34 mUlions. The
largest decreases came in liquors, $26 millions, and in customs, where
a decline of $127 mUlions was due to a substantial contraction in
imports, especially in the agricultural schedule.
The Revenue Act of 1937 was approved on August 26, 1937. This
act was concerned chiefly with an effort to check income tax avoidance.
The principal speciflc provisions were:
(1) Broadening of the concepts of personal holding companies and
personal holding company net income. In addition, the surtax rates
were sharply increased on the income of such companies.
(2) Nonresident aliens, previously subject'only to a flat 10-percent
tax on income received from the United States, were made subject
to full surtax rates if these would be over 10 percent.
(3) "Personal" exemptions were removed from trusts which allowed
their income to accumulate.
The Revenue Act of 1937 affected only taxable year incomes of
1937, except insofar as its provisions were re-enacted by the Revenue
Act of 1938, which became law on May 28, 1938, of that year without
the President's signature. The principal provisions of the Revenue
Act of 1938 were the following:
(1) One corporation income tax was substituted for the normal
income and undistributed profits taxes of the Revenue Act of 1936.
For corporations with incomes in excess of $25,000, the rate of tax
varied from 16K percent to 19 percent depending upon the percentage
of net income distributed as dividends. For small corporations the



REPORT OF THB SECRETARY OF THE TREASURY

17

progressive feature of corporation taxation, instituted by the Revenue
Act of 1935, was retained, with rates substantially higher. Corporations improperly accumulating surplus were taxed at increased rates.
The corporate income tax provisions of this act were applicable only
for taxable years beginning after December 31, 1937, and before
January 1, 1940.
(2) The provisions of the 1936 act regarding capital gains and losses
of individuals were simplified and time categories into which different
percentages of capital gains and losses were to be included in net
income were established. The flat rate method of taxing long-term
capital gains and losses in effect prior to 1934 was reinstated. Individuals were now to compute their tax liabilities on two bases. Under the flrst method the stated percentages of long-term gains and
losses were included as ordinary income. Under the second they were
subject to a flat rate of 30 percent. If capital assets transactions
resulted in a net gain, the method giving the lower tax was allowed.
If a net loss, the higher tax had to be paid.
(3) Increased taxes were placed on distilled spirits other than
brandy.
(4) A number of the excises of the Revenue Act of 1932 were
repealed; namely, those on certain toilet preparations, furs, phonograph records, sporting goods, cameras, chewing gum, the production
and reflning of crude petroleum, brewer's wort, malt syrup, sales of
produce for future delivery, and matches except fancy wooden ones.
The tax on imports of hemp seed, periUa seed, and sesame seed was
reduced. New taxes were also placed on certain tractors used in
combination with a trailer or semi-trailer. The net effect of these
changes was a decline in Federal revenue from miscellaneous nonregulatory taxes. However, the principal revenue-yielding excises
of the 1932 act, the taxes on gasoline, lubricating oil, automobiles,
and automotive equipment, were all retained.
(5) The capital stock tax was amended to permit corporations to
revalue their capital stock every three years.
(6) The annual gift tax exemption was reduced from $5,000 per
person to $4,000 per person and gifts in trust were excluded from this
exemption.
(7) The option of applying the last-in flrst-out method of inventory
valuation with respect to raw materials was granted certain industries,
namely those processing certain nonferrous metals or tanning hides
or skins.
Aside from the two revenue acts, there were other legislative enactments of this fiscal year which led to revenue increases.
The Sugar Act of 1937 (approved [September 1, 1937) imposed excises on the manufacture of sugar and also on imports of manufactured
sugar and articles composed in chief value of manufactured sugar.



18

REPORT OF THE SECRETARY OF THE TREASURY

The Railroad Unemployment Insurance Act, approved June 25,
1938, provides for contributions from carriers and their employees to
cover costs of unemployment insurance.
Various other miscellaneous internal revenue taxes were also
amended.
Fiscal year 1939.—For the first time since 1933, tax revenues fell as
business recovery during the fiscal year 1939 was not entirely reflected
in the revenues for that year owing to the lag in income, estate, gift,
and capital stock taxes, receipts from which reflected 1938 recession
levels of business. The total decrease amounted to $554 millions
(from $6,034 millions to $5,480 millions). I t was chiefly accounted
for by a decline of $434 millions in current corporation and individual
income taxes. Customs revenue, reflecting a further decline in imports, fell by $40 millions. The repeal of certain of the 1932 Revenue
Act excise taxes was largely responsible for a decline of $20 millions
in manufacturers' excise tax receipts. The $50 million decline in
estate tax receipts was at least partially due to taxpayers taking
advantage of the lower levels of security prices by valuing estates a
year after death, and a $12 million decline in the capital stock tax
indicated the lower cajpital stock declarations made in accordance
with the Revenue Act of 1938, by corporations anticipating lower
income levels. The principal tax increases were in distilled spirits
(upon which rates had been raised) and wines ($30 millions), tobacco
($12 millions), and the Sugar Act of 1937, now effective for a full fiscal
year ($35 millions). Employment taxes declined by $14 millions.
Rising collections from other employment taxes were more than offset
because receipts under the Carriers Taxing Act of 1937 reflected
liabilities of only four quarters as compared to five quarters in the
previous fiscal year. In the case of the tax on employers of 8 or more,
the basic rate rose from 1 percent in 1936 and 2 percent in 1937 to
the maximum of 3 percent in 1938 and thereafter.
A general revenue act was approved on June 29, 1939. I t made a
number of administrative changes, but altered the substantive tax
law only in scattered particulars, the most important being:
(1) Extended for two more years the unrepealed excise taxes of the
Revenue Act of 1932.
(2) Eliminated completely the undistributed profits tax which originated in the 1936 act and was continued to a minor extent by the Revenue Act of 1938. Instead of the rates of the 1938 act, which varied
between 16)^ percent and 19 percent, depending upon the percentage
of net income distributed in dividends, a flat rate of 18 percent was
substituted for corporations with net incomes in excess of $25,000.
The 1938 act rates for smaller corporations remained unchanged.
Certain types of corporations such as banks and insurance companies




REPORT OF THE SECRETARY OF THE TREASURY

19

had never been subject to the undistributed profits tax and had been
taxable at flat rates, 15 percent under the 1936 act and 16K percent
under the 1938 act. These corporations now became taxable under
the rates applying to other corporations.
(3) Except for the period during which the Revenue Act of 1932
was in effect, no distinction had been made in the tax treatment of
long-term and short-term capital losses of corporations. Prior to
1932, all capital losses were allowed in full against other income.
During the period covered by the 1934 to 1938 acts, capital losses
were limited to capital gains plus $2,000. Under the 1932 act, losses
in sales of stocks and bonds held less than two years were limited to
gains from similar transactions with a provision that the losses thus
disallowed could be carried forward one year. Under the 1939 act,
losses on capital assets held 18 months or less were limited to gains
from simUar transactions with a one-year carryover of disaUowed losses
permitted. Losses on assets held more than 18 months were allowed
in full as deductions from other income.
(4) The act provided for a two-year carryover of business losses.
(5) Many corporations, which had established low capital stock
valuations in 1938, were made subject to high excess-profits taxes
by the unanticipated rapidity of the subsequent recovery. The 1939
act permitted them to raise (but not decrease) capital stock valuations.
In addition to the Revenue Act of 1939, the Public Salary Tax Act
of 1939, approved April 12, 1939, added the salaries of previously
exempt State and local employees to the personal income tax base for
taxable years beginning after December 31, 1938.
Fiscal year 1940.—Total receipts in general and special accounts
amounted to $5,925 millions during the fiscal year 1940, an increase
of $257 millions from the previous fiscal year. The increase was
spread throughout the major sources of receipts with the one exception of income taxes.
The decrease of $51 millions in current income tax collections was
a result of the fact that income levels in the calendar year 1939, upon
which part of the fiscal year 1940 receipts are based, were lower than
those existing in the calendar year 1937 which were partially reflected
in the fiscal year 1939 revenues—the calendar year 1938 being common
to both fiscal years. As corporation income tax rates had been
generally increased by the Revenue Act of 1938 whereas individual
rates remained unchanged, current corporation income taxes decreased only $5 mUlions as compared to a decrease of $46 millions in
current individual income taxes.
Excess-profits tax collections are subject to the same statutory lag
as income taxes and decreased $9 miUions, but this was partially
offset by an increase of $6 millions in collections of the capital stock




20

REPORT OF THE SECRETARY OF THE TREASURY

tax which is complementary to the excess-profits tax. The increase
in the capital stock tax was due to higher income levels anticipated
by corporations for calendar year 1939 as compared to calendar
year 1938.
The remainder of the internal revenue schedule shows increases
under almost every tax group. The upward movement of business
was the principal cause, unobscured by the statutory lag which affects
income tax collections. The largest increase was of $32 millions in
distilled spirits and wines. Here an additional factor was increased
purchases of European liquors following the outbreak of war in September 1939. Tobacco tax receipts rose $28 miUions because of
increased consumption of tobacco products, chiefly cigarettes. Rising
business activity was also reflected in increased receipts from the bulk
of manufacturers' excises, particularly in gasoline with an increase of
$19 miUions and in the automotive group where collections rose
$28 mUUons.
Receipts under the Federal Insurance Contributions Act, formerly
title V I I I of the Social Security Act, were affected by the Social Security Act Amendments of 1939, approved August 10, 1939. The
major changes in coverage under this act were the inclusion of service
on American vessels, employees of member banks of the Federal Reserve System, individuals aged 65 and over, and the exclusion of certain groups of farm workers. Inasmuch as the inclusion of individuals aged 65 and over was made retroactive to January 1, 1939, taxes
for five quarters' liabilities were coUected in the fiscal year 1940.
The other major changes in coverage became effective January 1,
1940, so that the revenues from such coverage were included in fiscal
year 1940 receipts to the extent of only one quarter's liabUity. I t
should be noted that the Social Security Act Amendments of 1939 prevented the increase in rates on January 1, 1940, which would have
applied to wages in the calendar years 1940, 1941, and 1942 in accordance with the original Social Security Act. The bulk of the $74
million increase in receipts was due to increased employment, and the
remainder to increased coverage provided by the amendments.
The revenue effects of the Social Security Act Amendments of 1939
will not be refiected in receipts under the Federal Unemployment Tax
Act, formerly Title I X of the Social Security Act, until January 1941.
The fiscal year 1940 was the first full fiscal year that all receipts were
based upon the maximum 3 percent rate of tax, a factor which,
together with a rise in taxable wages, effected an increase of $7 millions
in receipts. The Railroad Unemployment Insurance Act, placing
employees of railroads under a separate unemployment compensation
system, became effective July 1, 1939, thus excluding revenues
hitherto derived from railroads, from the Federal Unemployment Tax
Act. Employment taxes on carriers and their employees were



REPORT OF THE SECRETARY OF THE TREASURY

21

unaffected by the amendments. An increase of $12 millions in
revenue from these taxes reflects one quarter's receipts under increased
tax rates as well as increased employment. Ten percent of the contributions required by the Railroad Unemployment Insurance Act,
which are deposited with the Secretary of the Treasury for the credit of
the railroad unemployment insurance administration fund, amounted
to $5 mUlions, representing liabilities for three quarters of the year.
The increase of $30 millions in customs duties was due to heavier
imports of sugar, wool, liquors, and metals which offset declines in
the remaining tariff schedules except the free list. Duties collected
on imports from each continent except Europe increased sharply.
An increase of $80 millions in miscellaneous receipts from nontax
sources was concentrated in the "other miscellaneous" item. Here
the bulk of the $47 millions increase included $44 millions on account
of repayment of capital funds by the Commodity Credit Corporation.
An increase of $21 millions in seigniorage arose principally from the
coinage of a large amount of silver and minor coins which were necessary to meet the needs of business.
As in other years, the bulk of receipts in the fiscal year 1940 was
derived from a relatively few sources. As shown by the data in
the table on page 650, 86 percent of the receipts came from customs and
the following 11 taxes arranged in order of magnitude: Current corporate income, current individual income, employment by others than
carriers, tobacco, distilled spirits and wines, estate, fermented malt
liquors, gasoline, capital stock, taxes on employment by carriers and
their employees, and automobiles, trucks, tires, tubes, and parts or
accessories.
The Revenue Act of 1940, approved June 25, 1940, increased taxes
generally. The basic income tax law was changed by increasing the
corporation rate 1 percent, raising individual surtax rates on surtax
net income between $6,000 and $100,000, and decreasing personal
exemptions 20 percent.
Certain temporary changes to last five years were also made, and
the proceeds were to be used for retiring obligations of the "National
Defense Series" which were to be issued in connection with financing
the national defense program. Income, capital stock, declared value
excess-profits, estate, and gift tax rates were increased 10 percent.
In the individual income tax, the defense tax was 10 percent of the
basic tax or of net income after tax, whichever was less. With
the principal exceptions of regulatory taxes and taxes on tobacco
(other than cigarettes) and communication facilities, increases were
also made in other internal revenue taxes. The rate of increase,
generally 10 percent, varied from S% percent in the case of the cigarette
tax to 50 percent in the case of the gasoline tax. The exemption on
the tax on admissions was lowered from 40 cents to 20 cents.



22

REPORT OF THE SECRETARY OF THE TREASURY

Receipts in the fiscal year 1940 were not affected by the Revenue
Act of 1940 except indirectly as taxable activity was advanced in
anticipation of the higher rates effective in the next fiscal year.
Expenditures from general and special accounts

Fiscal year 1940
Total expenditures of the Federal Government from general and
special accounts excluding debt retirement amounted to $8,998
mUlions in the fiscal year 1940, an increase of $291 millions over the
preceding year. Included in the expenditures for 1940 was $120
millions applicable to the fiscal year 1939 to restore the capital of the
Commodity Credit Corporation, a payment made in accordance with
the act of August 9, 1939. If this is taken into account, the actual
increase in expenditures for 1940 is $51 millions. The distribution
of the total expenditures by major functions is shown in table 8 on
page 652, and in chart 3. The distribution of the actual increase of
$51 millions is shown below.
Items showing increase:
National defense
:
Departmental
Interest on public debt
Aid to agriculture
.
Grants to States under the Social Security Act
Other
Items showing decrease:
Relief and work relief
Public works

._.
.._

Amount
(in miUions of doUars)
396
106
:__ 100
' 92
36
60
790

.
.

695
44

739

Net increase
_
51
1 After adjustment of payment to restore capital of Commodity Credit Corporation applicable to the
flscal year 1939.

I t should be noted that in this review of expenditures for 1940,
and also in the review of expenditures for the years 1933 to 1940,
which follows, the basis used is the classification shown in the table
on page 652, wherein expenditures are grouped by major objects of
expenditures, such as national defense, veterans' pensions and benefits, aid to agriculture, relief and work relief, public works, etc.
Where reference is made to departmental expenditures, the amounts
classified under these major objects of expenditure are excluded.
Reflected in the increase of $396 millions in the cost of national
defense are payments on account of the War Department (military),
which rose 36 percent; and payments on account of the Navy Department, which increased 32 percent.
The increase of $106 millions in departmental expenses was due
principally to the large expenditures of the United States Maritime
Commission for the construction of merchant vessels, passenger and
cargo; payments for this agency were $55 millions greater than in




REPORT OF THE SECRETARY OF THE TREASURY

23

1939. Other departments showing increases were Commerce, $17
millions (due primarily to the cost of the 1940 census); Justice, $12
millions; Treasury, $7 miUions; State, $5 millions; Civil Aeronautics
Authority, $5 millions. The Department of the Interior showed a
decrease of $7 millions.
Expenditures for aid to agriculture increased $92 mUlions in the
aggregate. Payments on account of the agricultural adjustment
program were $234 millions more in 1940 than in 1939, mainly because
of increased parity payments and increased pajonents under the SoU
Conservation and Domestic Allotment Act. Offsetting this increase
were decreases in cotton-price adjustment pa3rments, payments
under the Sugar Act of 1937, payments on account of the Agricultural
Adjustment Administration, and payments (for capital stock) to
the Federal Crop Insurance Corporation. Payments under the Farm
Tenant Act increased $15 mUlions; and net payments of the Farm
Credit Administration (payments in excess of credits) increased $2
mUlions, largely because of diminishing repajnnents by the regional
agricultural credit corporations in liquidation. On the other hand,
there were decreases of $25 miUions in the expenditures of the Farm
Security Administration, other than under the Farm Tenant Act, of
$11 millions in subscriptions to paid-in surplus of the Federal land
banks, and of $3 miUions in payments to the Federal land banlis and
the Federal Farm Mortgage Corporation as reimbursement for the
statutory reduction in interest on farm mortgages, making a total
decrease of $39 mUlions. After making adjustment in the fiscal year
1940 expenditures for the $120 millions in payment to the Commodity Credit Corporation for restoration of capital which was
appropriated for the fiscal year 1939, the net increase in expenditures
for agricultural aid was $92 millions. Details concerning the repayments made by the Commodity Credit Corporation during 1940
(which were included in miscellaneous receipts) appear on page 171
of this report.
The increase of $36 millions in grants to States under the Social
Security Act is explained by the normal growth of the several programs of the Social Security Board, exclusive of the old-age and
survivors insurance benefits program, the receipts and expenditures
of wliich are handled as trust funds.
The increase of $60 millions in "other" payments is accounted for
chiefly by an increase of $26 millions for transfers to trust accounts;
of $23 millions for Treasury refunds of taxes and duties; and of $15
millions for expenditures for the Panama Canal.
The decrease of $695 millions in the cost of relief and work relief
was due almost entirely to a decline of $684 millions in payments on
account of the Work Projects Administration. Decreases in the




24

REPORT OF T H E SECRETARY OF T H E TREASURY

expenditures of the Civilian Conservation Corps and the regular
departments (work relief) were almost wholly offset by an increase
of $17 millions in the expenditures of the National Youth Administration.
The decrease of $44 millions in the cost of public works was due
primarily to decreases in the grants and net loans of the Public Works
Administration and in the expenditures of the Public Roads Administration. These more than overbalanced increases in the expenditures
for public buildings, reclamation, river and harbor work, and flood
control.
Fiscal years 1933 to 1940
The total expenditures of the Federal Government from general
and special accounts for the eight fiscal years from July 1, 1932,
through June 30, 1940, amounted to approximately $60,827 millions,
or if debt retirements be excluded, to approximately $58,672 millions.
The following table exhibits the trend of expenditures during these
eight fiscal years and the course of debt retirements chargeable against
ordinary receipts.
Total expenditures from general and special accounts, fiscal years 1933 to 1940
[In millions of dollars.

Total
expenditures

Year

1933
1934
1935.
1936
1937

On basis of daily Treasury statements (unrevised), see p. 683]

_.

Public debt
retirements
chargeable
against
ordinary
receipts

T o t a l expenditures less
public debt
retirements

4,325
6,371
7,583
9,069
8,281

462
360
574
403
104

3,864
6,011
7,010
8,666
8,177

Year

1938
1939...
1940
Total....

Total
expenditures

Public debt
r e t i r e m e n t s T o t a l expenditures less
chargeable
public debt
against
retirements
ordinary
receipts

7,304
8,765
9,127

65
58
129

7,239
8,707
8,998

60,827

2,155

58,672

NOTE.—Figures are rounded to nearest million and will not necessarily add to totals.

The largest single object of expenditure during the past eight years,
it will be observed from the table that follows and chart 3, has been
relief and work relief. The figures in this table and in the discussion
that follows have been classified by function and are on the basis of
the daily Treasury statement as it appeared on July 1, 1940 (see table
4 on page 628). They differ in total, therefore, from the daily Treasury
statement figures presented in the years 1936 to 1940 in that receipts
from taxes under the Federal Insurance Contributions Act, formerly
title VIII of the Social Security Act, have been excluded from total
receipts and amounts transferred to the Federal old-age and survivors
insurance trust fund, formerly the old-age reserve account, have been
excluded from expenditures.




25

REPORT OF THE SECRETARY OF THE TREASURY

Expenditures in general and special accounts, July 1, 1932, to June SO, 1940,
classified by functions
[In millions of dollars. On basis of daily Treasury statements reclassified as shown in the table on p. 628]
Amount

Function
Relief and work relief
.
Grants to States under Social Security Act.
Public works
--•
Aid to agriculture
-.
National defense
Veterans' pensions and benefits
0ther departmental
Interest on the public debt..
Other (see table on page 35)
.

15,507
1,143
6,500
7, 643
7,497
7,212
3,188
6,790
3,193

Total ordinary expenditures..
Debt retirements

58,672
2,155

Total expenditures chargeable against ordinary receipts.

60,827

NOTE—Figures are rounded to nearest million and will not necessarily add to totals.
EXPENDITURES,! FISCAL YEARS 1933 TO 1940, BY PRINCIPAL CLASSES

1935

1936
F I S C A L

1937
1938
Y E A R S

CHAET 3.

Reliej and work reliej.—The relief and work rehef programs of the
Federal Government have been carried on during the last eight years
mainly by the Work Projects Administration (WPA) and its predecessors, the Works Progress Administration, the Federal Emergency
1 Excludes debt retirements.




26

REPORT OF T H E SECRETARY OF T H E TREASURY

Relief Administration (FERA) and Civil Works Administration
(CWA), and by the Civilian Conservation Corps (CCC) and the
National Youth Administration (NYA). Funds for the initial program were provided by the Reconstruction Finance Corporation
(RFC). Expenditures for relief and work relief, classified by agency,
appear in the table that follows.
Expenditures for relief and work relief, classified by agencies, fiscal years 1933 to 1940
[In millions of dollars. On basis of daily Treasury statements reclassified as shown in the table on p. 628]

Year

1933
1934
1935
1936
1937...
1938. .
1939...
1940..
Total

RFC

298.1
.5
^13.3
K3

282.8

FERA

CWA

137.9
1 707. 4
11,821.0
1 495. 6
112.4
4.4
1.7
.5

805.1
11.3
.7
.3
.2
.2

3, 080. 9

817. 8

WPA

NYA

Executive de. partmt;nts

CCC

1, 228. ]
1, 830. 8
1.421.3
2,161. 5
1, 477. 5

35.5
65.6
51.2
78.1
94.6

46.8
94.3
65.7
69.8
50.4

14.2
331.9
435. 5
486.3
385.8
326.4
290.4
283. 2

8,119. 3

325.0

326.9

2, 553. 8

Total

350.2
. 1,844. 9
2, 267. 0
2, 291. 7
2, 375. 9
1,869. 0
2,601. 6
1,906.4
15, 506. 7

1 Includes Federal Surplus Relief Corporation.
2 Credit, deduct.
NOTE.—Figures are rounded to nearest tenth of a million and will not necessarily add to totals.

The Emergency Relief and Construction Act of July 21, 1932,
authorized the Reconstruction Finance Corporation to make loans to
States, municipalities, and other public bodies for use by them in
furnishing relief and work relief to needy and distressed persons and
in alleviating the hardships resulting from unemployment. Loans to
States and to the Territory of Hawaii were to be repaid by annual
deductions from future highway grants; other loans were to be repaid
by agreement. This program came to an end shortlj'^ after the passage
of the Federal Emergency Relief Act of May 12, 1933, which created
the Federal Emergency Relief Administration. This latter act was
grounded on a principle different from that which underlay the
Emergency Relief and Construction Act of 1932, in that it authorized
the Administrator to make outright grants to States instead of making
them loans repayable out of highway grants. To June 30, 1936,
approximately $3,062 millions have been expended for relief by this
agency.
While the Federal Emergency Relief Administration program was
getting under way, a work program was begun under the Civil Works
Administration, an agency created to substitute work for direct relief
by furnishing employment on local improvement projects. This program reached its peak during the fiscal year 1934.




REPORT OF THE SECRETARY OF THE TREASURY

27

The Works Progress Administration, created by Executive order
of May 6, 1935, pursuant to authority contained in the Emergency
Relief Appropriation Act of 1935, was established to substitute work
relief for direct relief. Its program superseded the Federal Emergency
Relief Administration. The Works Progress Administration, which
on July 1, 1939, was renamed the Work Projects Administration, had
expended over $8,119 millions by June 30, 1940.
The National Youth Administration was established under Executive order of June 26, 1935, to initiate and administer a program of
approved pro j ects to provide relief, work relief, and employment for
persons between the ages of 16 and 25 years. During 1940 its program
was greatly enlarged and extended.
The regular executive departments also undertook work projects
under the various Emergency Relief Appropriation Acts. These
projects are of the same general type as those operated by the Work
Projects Administration. For purposes of this summary, it should
be noted that some of these expenditures have been classified in the
same categories as expenditures for the executive departments, e. g.,
national defense or aid to agriculture.
There is an additional work relief program which differs substantially from the relief and work relief programs described above.
The Civilian Conservation Corps, originally established by an Executive order of April 5, 1933, was made a statutory establishment under
the act of June 28, 1938. The primary purpose of the Civilian Conservation Corps has been to provide youths with employment on
public works relating to the conservation and development of the
national resources. By June 30, 1940, expenditures aggregated
approximately $2,554 millions.
Grants to States under the Social Security ^c^.—Certain relief activities of the Government are carried on as grants to States under the
Social Security Act, approved August 14, 1935. These grants are
administered by three agencies of the Government: Social Security
Board, Public Health Service, and Children's Bureau. Upon certification of these agencies, payments are made by the Secretary of the
Treasury for (a) the administration of unemployment compensation
programs, (b) old-age assistance (not to be confused with old-age and
survivors insurance benefits paid from trust accounts), (c) aid to
dependent children, and (d) aid to the needy blind, public health
work, maternal and child-health services, services for crippled children,
and child-welfare services. Payments made during the fiscal years
1936 to 1940 are shown in the following table.

269677—41-




28

REPORT OF THE SECRETARY OF THE TREASURY
Grants to States under the Social Security Act, fiscal years 1936 to 1940

[In millions of dollars.

On basis of daily Treasury statements reclassified as shown in the table on p. 628]

1936

Federal S e c u r i t y Agency:
Social Security B o a r d :
Old-age assistance (title I)
.. .
Aid to d e p e n d e n t children (title I V ) .
Aid t o t h e blind (title X )
Unemployment Compensation Administration (title I I I )
--. . .

19.7
2.0
1.0

1937

1938

1939

1940

124. 8
14.3
4.7

182. 2
25.5
. 5.2

208.8
31.0
5.3

T o t a l to
J u n e 30,
1940

227.6
45.4
6.2

763.2
118.1
22.3

.9

9.1

41.9

58.9

58.3

169.2

23.6

T o t a l , Social Security B o a r d .
P u b l i c H e a l t h Service:
Public health work

152.9

254.8

304.0

337.5

1, 072. 8

. .

2.4

7.8

8.9

8.0

9.4

36.5

- -

T o t a l , F e d e r a l Security Agency

26.0

160.7

263.7

312.0

346.9

1,109. 3

1.0
.6
.2

3.1
2.1
1.0

3.8
2.7
1.3

3.7
3.1
1.5

4.8
3.3
1.5

16.5
11.7
5.5

D e p a r t m e n t of L a b o r :
M a t e r n a l a n d child h e a l t h services (title V ) . .
Servicesfor crippled children (title V)
C h i l d welfare services (title V)

.

1..8

T o t a l , g r a n t s to States

6.2

7.8

8.3

9.6

33.7

27.8

T o t a l , D e p a r t m e n t of Labor

166. 9

271.5

320.3

356.5

1,143.0

NOTE.—Figures are rounded to nearest tenth of a million and will not necessarily add to totals.

Public works.—The public works expenditures made during the
fiscal years 1933 to 1940 may be classified into six broad categories:
(1) Expenditures for the improvement and maintenance of rivers and
harbors for navigation (including flood control); (2) those for the
construction of public roads in cooperation with the States; (3) those
for the construction of new public buildings; (4) those for the construction of irrigation and reclamation projects; (5) those of the
Tennessee Valley Authority (TVA), a Government corporation created
by act of Congress on M a y 18, 1933; and (6) those of the Federal
Emergency Administration of Public Works (PWA), established pursuant to title I I of the National Industrial Recovery Act, approved
June 16, 1933, to promote the construction of useful projects by
means of loans and grants to public bodies. Expenditures for public
works, classified by these types, are shown in the table that follows.
Expenditures for public works, classified by types, fiscal years 1933 to 1940
[In millions of dollars.

On basis of daily Treasury statements reclassified as shown in the table on p. 628]
Rivers
and
harbors

Year

1933
1934
1935
1936
1937
1938
1939
1940.

- Total

Public
roads i

Public
buildings

Reclamation 2

PWA 3

TVA

118.4
150.7
203.0
223.7
235.0
198.6
193.0
212.9

171.3
267.9
317.4
243.9
350.6
236.6
204.5
176.4

127.4
87.8
67.4
79.7
88.9
91.5
66.3
75.0

25.2
24.7
40.9
64.0
58.7
65.4
79.3
96.4

155.9
218.5
69.5
248.8
148.7
407.9
347.7

11.0
36.1
48.8
42.0
42.0
40.8
39.1

442.4
698.0
883.4
729.7
1,023.9
782.9
991.8
947.5

1, 535. 3

1, 968. 6

684.1

454.5

1, 597.0

260.0

6, 499.6

1 Includes forest roads and trails. Department of Agriculture.
2 Greater part of expenditures is reimbursable.
3 Net figures; the repayments of loans are treated as deductions from expenditures.
NOTE.—Figures are rounded to nearest tenth of a million and will not necessarily add to totals.




Total

29

REPORT OF THE SECRETARY OF THE TREASURY

Aid to agriculture.—During tbe past eight years the Federal Government has furnished financial aid to agriculture in a number of dift'erent
forms and through a number of different agencies for the purpose of
giving relief to the financially distressed farmers and improving their
economic position. This aid includes the expenditures relating to
farm credit, agricultural adjustment, farm security, rural electrification, and other expenditures by the Department of Agriculture.^
They are shown, classified by programs, in the table that follows.
Expenditures for aid to agriculture, classified by programs, fiscal years 1933 to 1940
[In millions of dollars. On basis of daily Treasury statements reclassified as shown in the table on p. 628]
Farm
credit

Year

1933
.
1934
1935.
1936
1937 .
1938
1939
1940-...

-.

_-

-

Total

Agricultural adjustment
program

Farm
security

131.1
415.6
202.4
38.8
73.6
71.1
46,5
35.0

291.9
792.8
632.0
527.5
456.0
786.7
1,139. 7

2.4
5.4
138.0
209.7
183.2
210.3
200. 3

1,014.1

4, 626. 7

949.3

Rural
electrification

Department of
Agriculture

Total

1.4
8.9
15.2
37.8
38.0

77.9
70.0
75.5
127.8
, 156.6
135.0
154.2
154. 3 .

209.0
779.9
1,076. 3
938.0
976.4
860. 5
1, 235.4
1. 567.4

101.3

951.4

7,642. 7

(*)

•Less than $50,000.
NOTE.—Net figures; repayments to revolving funds are treated as deductions from expenditures, Figures are rounded to nearest tenth of a million and will not necessarily add to totals.

Federal aid to agriculture, through the medium of farm credit,
consisted of three principaPclasses: Direct loans, interest subsidies,
and subscriptions to capital stock and surplus of agricultural credit
corporations. More important than making direct loans or granting
interest reductions to farmers out of appropriations made by Congress,
however, has been the financial aid extended farmers by Government
corporations engaged in supplying farmers with credit. Among these
corporations are the Federal land banks, the Federal Farm Mortgage
Corporation, the Federal intermediate credit banks, the regional agricultural credit corporations, the production credit corporations, and
the banks for cooperatives. The expenditures in the table above
refiect the operations of these agencies only to the extent of capital
stock and paid-in surplus provided these agencies pursuant to appropriations. Further details with respect to the operations of these
agencies appear in the article beginning on page 39.
Expenditures under the agricultural adjustment program shown in
the table above" include not only expenditures made under the
various agricultural adjustment acts but also under related acts,
such as the Sugar Act of 1937, approved September 1, 1937, the Soil
Conservation and Domestic Allotments Act of February 29, 1936,
1 Although it is convenient to classify all the expenditures of this department as aid to agriculture, many
of them are primarily of general benefit, e. g., those for meat inspection, for tuberculosis eradication, for the
Weather Bureau, for the Forest Service, for the Bureau of Biological Survey, and for the Food and Drug
Administration.




30

REPORT OF THE SECRETARY OF THE TREASURY

and payments made to the Federal Crop Insurance Corporation and
to the Commodity Credit Corporation for capital stock or restoration
of capital. The agricultural adjustment program was initiated by
the Agricultural Adjustment Act of 1933, enacted May 12, 1933.
The program was supplemented by the provisions of the Bankhead
Cotton Act, the Kerr-Smith Tobacco Act, and the Potato Act,
approved April 21, 1934, June 28, 1934, and August 24, 1935, respectively. The rentals and benefits contracted to be paid to farmers
under these acts constitute the bulk of the expenditures of the Agricultural Adjustment Administration, and in the peak year, 1935,
such payments approached $712 millions. On January 6, 1936, the
Supreme Court of the United States in the case of United States v.
Butler (297 U. S. 1) invalidated the production control and processing
tax provisions of the Agricultural Adjustment Act. Payments of
obligations and commitments existing as of the date of the Supreme
Court decision were made in considerable volume until the end of
the fiscal year 1937.
On February 29, 1936, the Soil Conservation and Domestic Allotment Act was approved. This act replaced the program invalidated
by the Supreme Court with a program of agricultural land conservation.
Unaffected by the Supreme Court decision of January 6, 1936, was
a program authorized by section 32 of the Agricultural Adjustment
Act of 1935, approved August 24 of that year. Under this section
Congress appropriated for each fiscal year beginning with 1936 an
amount equal to 30 percent of the gross customs receipts for~ the
preceding calendar year, these sums to be used for the disposition of
crop surpluses, especially through the exportation and domestic consumption thereof. In addition to this permanent appropriation.
Congress appropriated for the same purposes an additional $113 millions. The principal expenditures from this fund have been incurred
in connection with the cotton-price adjustment program of 1935 and
1937 and the activities (since July 1, 1937) of the Federal Surplus
Commodities Corporation.
The Sugar Act of 1937, approved September 1, 1937, authorizes the
Secretary of Agriculture, among other things, to make conditional
payments of 60 cents per one-hundred poxmds, raw value, of commercially recoverable sugar to domestic sugar-cane and sugar-beet
producers, with downward graduations in the case of large producers,
provided that the growers meet certain conditions incorporated in the
act. Expenditures under this act were $6 millions in 1938, $62 millions in 1939, and $49 millions in 1940.
By section 303 of the Agricultural Adjustment Act of 1938, approved
February 16, 1938, the Secretary of Agriculture was authorized and




REPORT OF THE SECRETARY OF THE TREASURY

31

directed, if and when funds should be appropriated by Congress for
this purpose, to make payments to producers of corn, wheat, cotton,
rice, or tobacco, on their normal production of such commodities in
amounts sufficient to provide a return to such producers as nearly
equal to parity prices as the available funds would permit. The
Price Adjustment Act of 1938, approved June 21, 1938, made an
appropriation of $212 millions, to be available until expended, for
parity payments on the 1939 crops. A further appropriation of $225
millions was made for payments on the 1940 crops. Expenditures
in 1940 amounted to more than $215 millions.
The Commodity Credit Corporation, chartered under the laws of
Delaware on October 17, 1933, was created primarily to make loans to
farmers on agricultural commodities with respect to which programs
for agricultural adjustment were in effect. The original capital stock
of the Corporation, in the amount of $3 millions, was subscribed for
on behalf of the United States by the Secretary of Agriculture and the
Governor of the Farm Credit Administration. In 1936, however, at
the direction of Congress, $97 miUions of additional stock were issued
and subscribed for by the Reconstruction Finance Corporation. The
act of March 8, 1938, provided for maintaining the capital of the
Corporation at $100 millions. Further details with respect to operations under this act appear on page 171 of this report.
The Resettlement Administration, as the Farm Security Administration was denominated prior to September 1, 1937, was created
by Executive Order No. 7027 of April 30, 1935. Until the passage
of the Farm Tenant Act of 1937, its payments were chiefly of an
emergency character, such as rural rehabilitation and loans and
grants in stricken agricultural areas. On July 22, 1937, the President approved the Bankhead-Jones Farm Tenant Act and the
Secretary of Agriculture assigned the duties under this act to the
Resettlement Administration, that agency having been transferred
to his jurisdiction by Executive Order No. 7530, signed December
31, 1936. Payments of the Farm Security Administration since
1936 have ranged from about $150 millions to $200 millions a year.
The Rural Electrification Administration, . established by an
Executive order of May 11, 1935, was made a statutory agency about
a year later by the Rural Electrification Act of May 20, 1936. This
agency makes no grants but finances, through loans of public funds
at low rates of interest on a self-liquidating basis, the extension of
electrification facilities to persons in rural areas.
Prior to the fiscal year 1936, expenditures of the Department of
Agriculture (exclusive of those discussed above) averaged about $75
millions a year; in 1936 they were $128 millions; after 1936 they
averaged $150 millions. The explanation of the increase is to be




32

REPORT OF THE SECRETARY OF THE TREASURY

found in the addition to the Department of a new bureau, the Soil
Conservation Service, charged with the conduct of soil conservation
and land utilization projects; in the passage of the Bankhead-Jones
Act of June 29, 1935, authorizing additional expenditures for agricultural researches including grants to State experiment stations,
and additional grants to States for agricultural extension work and
for the support of land-grant colleges; in legislation authorizing
the payment of indemnities to owners of cattle destroyed by the
Government as being tuberculous or afflicted with Bang's disease;
and finally in large expenditures by the Forest Service and the Bureau
of Entomology and Plant Quarantine for forests, plant disease, and
insect eradication programs conducted as work relief projects and
financed from relief funds.
National dejense.—During the past eight years the annual expenditures of the Departments of War and of the Navy for military and
naval purposes have more than doubled, this being true even if
proper allowance be made for the effect during 1933 of the economy
provisions of the Legislative Appropriation Act of June 30, 1932.
For this fact six principal causes may be assigned: First, the gradual
restoration of the pay cuts imposed by the act of June 30, 1932, and
the removal of the prohibitions against automatic increases in compensation; second, the increase in the average enlisted strength of the
Army from 118,750 to 165,000 men; third, the policy declared in the
Vinson-Trammell Act of 1934 of building up the Navy to the strength
permitted by the naval treaties of 1922 and 1930; fourth, the program for building up the air forces of both Army aiid Navy; fifth, the
program for mechanizing and motorizing the Army; sixth (this applies
only to 1940), the provisions of Executive orders dated September 8,
1939, directing that the enlisted strength of the Army, Navy, and
Marine Corps and of the National Guard be increased and authorizing,
under certain conditions, the ordering to active duty of such officers
and men of the Reserves as might be deemed necessary.
During this period, the Treasury has classified in the daily Treasury
statement as ''national defense'' only the military expenditures made
by the War Department and all expenditures by the Navy Department. Expenditures by other departments and agencies which relate
in some respects to national defense have been classified under the
respective agencies making such expenditure. National defense expenditures of this latter class have grown in importance, especially
with the advent of the enlarged defense program initiated by the
Government in the latter part of 1940.
The trend of expenditures is shown in the table that follows and in
chart 4.




33

REPORT OF THB SECEETAKY OF THE TREASURY

Expenditures of the War and. Navy Departments for national defense, fiscal years
19S3 to 1940
fin millions of dollars.
Year
1933-.-.
1934 .1935
1936
1937

On basis of daily Treasury statements reclassified as shown in the table on p. 628]

War Department

Navy Department

301.6
243.3
273.4
382.6
378.2

349. 6
297.0
436.4
529.0
556.9

Total
651.2
540.3
709.9
911.6
935.1

Year
1938
1939
1940

War Department

Navy Department

Total

431.5
489. 5
667.1
Total...-

596.3
673.0
891.6

1,027.8
1 162 5
1, 558.8

3,167. 2

4, 329. 8

7,497. 2

NOTE.—Figures are rounded to nearest tenth of a million and will not necessarily add to totals.
NATIONAL DEFENSE EXPENDITURES BY THE NAVY AND WAR DEPARTMENTS, FISCAL
YEARS 1933 TO 1940
"DOLLARS.
M i l lions

DOLLARS"
Millions

Noyy Deportment
War

Department

800
600

600

,400
200

1936
S C A L

1937
1938
Y E A R S

CHART 4.

Veterans' pensions and benefits.—Expenditures for veterans^ pensions and benefits may be divided into two parts: the payment of the
soldiers^ bonus (adjusted service certificates) and ^'other pensions and
benefits.^' In regard to the soldiers' bonus the figures for 1933, 1934,
and 1935 in the table that follows represent payments to the adjusted
service certificate fund based on estimates of the current requirements
of that fund during each year. The figures for^;1936land ,1937;iireflect
the transfers from the General Fund to the adjusted service certificate
fund necessitated by the passage of the act of January 27, 1936,
declaring the certificates to be immediately payable. These transfers
were completed in 1937.
In regard to other veterans' expenditures the decrease in payments
in 1934 is accounted for primarily by the legislation of March 20,
1933, authorizing the President to reduce veterans' benefits and pen-




34

REPORT OF THE SECRETARY OF THE TREASURY

sions. The rise in 1935 is due to the subsequent reestablishment of
these benefits.
The expenditures in each of the past eight years for veterans'
pensions and benefits were as follows:
Expenditures for veterans^ pensions and benefits, fiscal years 1933 to 1940
Iln millions of dollars.

Year
1933
1934...
1935
IQ^fi

1937

On basis of daily Treasury statements reclassified as shown in the table on p. 628)

Adjusted
service
certificates
100.0
50.0
50.0
1, 773. 5
556. 7

Other
763.2
507.0
557.1
577.9
580. 6

Total

Adjusted
service
certificates

Year

863.2
557.0
607.1
2. 351. 4
1,137. 3

1938
1939...
1940

Other

Total

582.0
557.1
556.7

Total...

2, 530. 2

582.0
557.1
556.7

4, 681. 4

7, 211. 6

NOTE.—Figures are rounded to nearest tenth of a million and will not necessarily add to totals.

Other departmental expenditures.—The expenditures of the Department of Agriculture have been discussed under the caption '^aid to
agriculture"; those of the War Department (military) and of the Navy
Department under ^'national defense"; those of the Army engineers
for river and harbor work and flood control under ^^public works."
The remaining expenditures of the Federal Government for ordinary
departmental activities aggregated $3,188 millions. These are shown
in the table that follows:
Expenditures of certain departments and agencies {exclusive of expenditures for relief
and work relief), fiscal years 1933 to 1940
[In millions of dollars.

On basis of daily T r e a s u r y s t a t e m e n t s reclassified as s h o w n in t h e t a b l e on p . 628J

Treasury
Department

Interior
Department

Justice
Department 1

Legislative
Establishment

112.8
113.8
124.6
142.0
143.8
144.8
155.8
162.4

50.9
53.2
77.4
56.8
73.4
76.9
103.8
96.9

44.1
31.7
33.1
36.9
38.9
41.4
46.9
55.1

21.5
17.8
20.1
22.9
23.8
25.8
21.9
23.0

T o t a l . . . . 1,099. 9

589.3

328.1

176.7

Year

1933
1934
1935
1936
1937
1938
1939
1940

Commerce
Department

U n i t e d Civil
States AeroMarit i m e nautics Other
Com- A u t h o r mission2 i t y 3

State
Department

Labor
Department

22.5
16.1
21.6
19.4
• 17.5
18.3
19.9
36.9

15.2
11.9
18.5
17.7
17.8
20.8
19.2
24.3

12.9
11.0
12.2
12.7
12.7
14.3
14.9
17.9

28.5
^9.5
^21.3
il2.1
*6.1
1.0
43.6
98.7

9.3
5.3
6.9
7.1
6.7
10.1
18.4
23.6

172.2

145.4

108.8

122.7

87.5 6 357.0 3,187. 6

5
6
8
6
8
6
6

38.3
51.5
42.6
39.0
37.4
47. 8
44.3
56.1

Total

356 0
302.8
335 7
342 4
365 9
401 2
488 7
594 9

1 Includes the Judiciary.
• 2 Includes expenditures classified prior to July 1, 1939, as U. S. Shipping Board.
8 Includes expenditures classified prior to July 1, 1938, under Department of Commerce.
* Credit, deduct.
* Includes about $12 millions paid for in 1933 by other agencies and in later years from postal revenues.
6 Includes adjustments for disbursing officers' checks outstanding.
NOTE.—Figures are rounded to nearest tenth of a million and will not necessarily add to totals.

Interest on the public debt.—Expenditures for interest on the public
debt have risen over the past eight years though not as rapidly in
proportion as the interest-bearing debt itself. D a t a on interest
payments appear in the table that follows. D a t a on the computed
annual interest charge and computed annual interest rate appear on
page 68 and in table 46.



35

KEPORT OF THE SECRETARY OF THE TREASURY

Expenditures for interest on the public debt and premiums received and credited to
interest, fiscal years 1933 to 1940
[In millions of dollars.

Gross
interest

Year

1933
1934
1935..
1936
1937

On basis of daily Treasury statements reclassified as shown in the table on p. 628]

..
. ..

Premiums
o b t a i n e d on
N e t insecurities
offered a t
terest
prices
above p a r

689.4
764 1
824 3
757.5
866.4

689 4
756 6

7 5
3 4
8.1

926.3
970.3
1,040. 9

1938.
1939-

820 9 1 1940.
749 4"
866 4

Premiums
obtained on
securities N e t interest
offered a t
prices
above p a r

Gross
interest

Year

Total

...

29 8 .

926.3
940.5
1.040.9

6,839.2

48 8

6, 790.4

Other expenditures.—Other expenditures totaled $3,193 millions
during the eight years ended June 30, 1940, as shown below.
Expenditures for transfers to trust accounts, refunds of taxes, etc., fiscal years 1933 to
1940
[In millions of dollars. O n basis of daily T r e a s u r y s t a t e m e n t s reclassified as shown in t h e table on p . 628]
Transfers Refunds
to t r u s t of taxes
and
accounts i
duties

Year

/933
1934
1935
1936
1937
1938
1939
1940

..
...
. .

Total

21 3
21 1
21 0
40.7
46.7
219.7
182.2
207.9

70.3
63.9
76.5
54.3
55.9
99.7
67.9
91.1

760 5

579.6

U.S.
PanaFederal
Federal
Security H o u s i n g Postal dema
Loan
ficiency
AuthorCanal
Agency 2 Agency 3
ity
49
206
96
57
48
25
18
14

7
8
4
0
2
1
3
2

515 7

Other

Total

2
3
4
4
7
9
8
6

4 0.4
4 6.5
4 24.9
"50.7
443.1
8.6
1.9

117 4
52 0
64 0
86 0
41 9
44 3
41 2
40.9

12 7
9 9
9.0
11.5
11.9
11.4
9.8
25.0

77
5 155 3
4 9
5 9
10 5
3 6
8 3
13 5

302.3
531.7
309.7
323.7
329.5
517.8
409.1
469.1

402 1

136.1

487 7

101 1

210.2

3,193.0

23
22
31
43
63
70
72
74

1 Excludes transfers to Federal old-age and survivors insurance trust fund, formerly the old-age reserve,
account as explained on p. 24, and transfers to adjusted service certicate fund.
2 Excludes Reconstruction Finance Corporation loans and grants to States, municipalities, etc.
3 Excludes Civilian Conservation Corps, National Youth Administration, and grants to States under
Social Security Act.
4 Includes emergency housing.
5 Includes $150 millions paid by the Treasury for capital stock of the Federal Deposit Insurance Corporation.
NOTE.—Figures are rounded to nearest tenth of a million and will not necessarily add to totals.

Part of the increase in transfers to trust accounts shown in the table
above was due to larger appropriations to Governrnent employees'
retirement funds. A major portion of the increase, however, was due
to the operation of the Railroad Retirement Act of 1937. This act
created the railroad retirement account in the Treasury of the United
States and authorized the appropriation to the account in each fiscal
year of an amount actuarially determined by the Railroad Retirement
Board to be sufficient as a premium to provide for the payment of all
annuities, pensions, and death benefits under the Railroad Retirement
Acts of 1935 a n d 1937. Transfers to the account in 1938, 1939, and
1940, were $146 millions, $107 millions, and $121 millions, respectively.
'The column headed Federal Loan Agency in the foregoing table
shows net payments from general and special accounts pertaining



36

REPORT OF THE SECRETARY OF THE TREASURY

to the constituent corporations and administrations of that establishment. The larger expenditures include nearly $125 millions for the
capital stock of the Federal home loan banks, $200 millions for the
capital stock of the Home Owners' Loan Corporation, $49 millions
for the purchase of shares in Federal savings and loan associations,
$24 millions for capital stock in the Disaster Loan Corporation, approximately $1 million for capital stock in the Electric Home and
Farm Authority, $1 million for capital stock in the Export-Import
Bank of Washington, $75 millions for meeting the expenses of the
Federal Housing Administration not covered by current income, and
$33 millions for interest on notes of the Reconstruction Finance Corporation held by the Treasury but canceled pursuant to the provisions of the act of February 24, 1938. Some of these expenditures
provided capital stock for corporations which carried out programs
of vast magnitude, the payments for which are not reflected in the
general and special accounts of the Treasury Department. Further
details concerning these expenditures appear on pages 41 and 42.
The expenditures classified under the heading Federal Security
Agency are principally those of the Office of Education, the Public
Health Service, the United States Employment Service, and the
administrative expenses of the Social Security Board. They exclude
payments for grants to States, shown on page 28 of this report. The
expenditures of the United States Housing Authority exhibit the net
payments from general and special accounts pertaining to the low-reiit
housing projects and slum clearance programs administered, first, by
the Public Works Administration Housing Division, and after October
27, 1937, by the United States Housing Authority.
Deficit
The deficit (excess of expenditures over receipts) for the fiscal year
1940 in general and special accounts, amounted to $3,740 millions.
If public debt retirements are deducted, the net deficit for the year
amounted to $3,611 millions. The table that follows shows the
deficit, the public debt retirements, and the net deficit for the fiscal
years 1933 to'1940.
Deficit, public debt retirements, and net deficit, fiscal years 1933 to 1940
[In millions of dollars. On basis of daily Treasury statements (unrevised), see p. 683.]
Year
1933
1934
1935..
19.36

Deficit
2, 245.5
3, 255.4
3,783.0
4, 952. 9

Public debt
retirements
46L6
359.9
573.6
403. 2

Net
deficit
1,783.8
2,895. 5
3, 209. 4
4, 549..7

Year
1937
1938
1939
1940-...

Deficit

-

3, 252.5
1,449.6
3, 600. 5
3. 740. 2

Public debt
retirements
104.0
65:5
58.2
129.2

NOTE.—Figures are rounded to nearest tenth of a million and will not necessarily add to totals.




Net
deficit
3,148.6
1, 384. 2
3, 542. 3
3, 611.1

REPORT OF THE SECRETARY OF THE TREASURY

37

RECEIPTS AND EXPENDITURES IN TRUST ACCOUNTS AND CHECKING
ACCOUNTS OF CORPORATIONS AND CREDIT AGENCIES, FISCAL
V YEARS 1933 TO 1940

In addition to receipts and expenditures under general and special
accounts, discussed above, certain receipts and expenditures of the
Government are reported on the Daily Statement of the United States
Treasury under the title of ^*Trust accounts, increment on gold, etc.'^
There are four main classes of receipts and expenditures reported
under this title, two of which, increment on gold and seigniorage on
silver, are discussed on pages 128 and 134 of this report. The operations
of the other two classes of accounts, namely, trust accounts and checking accounts of governmental corporations and credit agencies, are
summarized below. Neither the receipts nor the expenditures of
these accounts affect the Federal Budget except to the extent that
appropriations are made to these accounts from the General Fund.
Such appropriations appear as expenditures under general and special
accounts, and as receipts under trust accounts, increment on gold, etc.
The trust accounts dispose of the excess of their receipts over expenditures by investing such excess in Government securities, as provided
by statute. The corporations and credit agencies maintaining checking accounts with the Treasurer of the United States generally apply
the cash balances not needed for operations to the purchase of Government securities for investment or to debt or capital stock retirement.
Trust accounts
The trust accounts maintained by the Treasury may be classified
into four groups: (1) The veterans' funds established after the war,
(2) the Government employees' retirement funds, (3) the retirement
and unemployment insurance accounts established by the Social
Security, Railroad Retirement, and Railroad Unemployment Insurance Acts, and (4) the miscellaneous trust accounts, including accounts
of the District of Columbia.
The first group consists of the adjusted service certificate fund and
the United States Government life insurance fund.
The United States Government life insurance fund was established
pursuant to the provisions of an act approved December 14, 1919, as
a trust fund to be administered by the Government for the sole benefit
of the policyholders. The act directed that all converted insurance
premiums ^ should be credited to the fund and that the fund should
be available for the payment of converted insurance claims and for
investment. The receipts side of the account comprises premiums,
interest, considerations for supplementary installment contracts
under claims, receipts from the United States on account of extra
hazard of the military and naval service, and other income. The
1 United States Government life insurance policies are conversions of war-risk term insurance policies
issued to persons in the service of the War and Navy Departments during the first World War.




38

REPORT OF THE SECRETARY OF THE TREASURY

expenditures side consists of claims, payments of surrender values,
payments on supplementary installment contracts under claims, and
dividends. The balance in the fund consists of obligations of the
United States, policy loans, adjusted service certificate loans,^ and
cash on hand.
During the 8-year period from 1933 to 1940, the receipts amounted
to $657.5 miUions and the expenditures amounted to $653.6 millions,
the latter figure including net investments of $524.4 millions, i. e.,
investments less redemptions.
The adjusted service certificate fund was established pursuant to
an act of May 19, 1924, to provide a means for paying, over an extended period, the bonus voted by Congress to men who had served during the War in the Army, Navy, and Marine Corps. The receipts of
the fund consist of transfers from the General Fund of the Treasury
and interest on investments; its expenditures consist of certificate
payments and the purchase of $500 millions of adjusted service bonds
to reimburse the United States Government life insurance fund on
account of the loans made from that fund under the provisions of
the World War Adjusted Compensation Act, as amended, and the
Adjusted Compensation Payment Act, 1936. The receipts of this
fund during the 8-year period, 1933 to 1940, amounted to $2,564.5
millions, of which $2,530.2 millions represented transfers from the
General Fund. Disbursements from the fund amounted to $2,570.7
millions, including expenditures from amounts transferred from the
General Fund.
Under group two there are the civil service, foreign service. Canal
Zone, and Alaska Railroad retirement funds. Total receipts and
disbursements of these funds over the period, 1933 to 1940, follow:
RECEIPTS
[In millions of dollars]
Transfers
from
General
Fund

Fund

Civil service retirement fund
Foreign service retirement fund
Canal Zone retirement fund
Alaska Railroad retirement fund

381.6
1.8
2.5
.5

Deductions
from
salaries

Interest
on
investments

279.2
1.7
4.0
.5

113.2
1.0
1.0
.1

Total

774.0
4.5
7.5
1.1

EXPENDITURES
Fund
Civil service retirement fund
Foreign service retirement fund
Canal Zone retirement fund
Alaska Railroad retirement fund

Annuities,
etc.
444.1
2.1
5.2
.2

Investments
(net)
327.5
2.3
2.2
.8

Total
771 6
4.5

74
1.0

NOTE.—Figures are rounded to nearest tenth of a million and will not necessarily add to totals.
1 An act of March 3, 1927, authorized the Director of the United States Veterans' Bureau (now the Administrator of Veterans' Affairs) to make loans to veterans from the life insurance fund on the security of
their adjusted service certificates. When the prepayment of the bonus was authorized (January 26, 1936)
the Secretary of the Treasury was directed to issue to the fund $500 millions of bonds to payoff the liens
against the certificates. The cost of the bonds was charged to the adjusted service certificate fund.




REPORT OF THE SECRETARY OF THE TREASURY

39

The civil service retirement and disability fund was created by the
Civil Service Retirement Act, approved May 22, 1920, to provide,
among other things, for the payment of annuities to qualified permanent civil servants in the event of retirement for age or total disability. The costs of the system are borne partly by the employees
subject to the provisions of the act and partly by the Government.
The third group includes the unemployment trust fund, the railroad retirement account, and the Federal old-age and survivors insurance trust fund. For information concerning the operations of
these accounts for the fiscal year 1940, see pages 212 and 218, and
also tables 20 and 21.
In group four are included the District of Columbia accounts and
Indian tribal funds and other miscellaneous accounts. The total
receipts of the District of Columbia for the 8-year period, excluding
amounts transferred from the General Fund, were $346.7 millions;
and the total disbursements, excluding amounts paid from the General
Fund of the Treasury, were $347.4 millions.
Government corporations and credit agencies maintaining checking
accounts with the Treasurer oj the United States
Certain corporations and credit agencies of the Government have
been established as self-financing organizations. Their cash operations are conducted through checking accounts maintained with the
Treasurer of the United States and the net balances of the transactions in these accounts are shown under the title ^'Trust funds, increment on gold, etc." The operations of these Government corporations and credit agencies are reflected in the general and special
accounts of the Treasury only to the extent that appropriations are
made from the General Fund.
Under the act of January 22, 1932, creating the Reconstruction
Finance Corporation, it was contemplated that the Corporation's
funds would be used only^for loans and administrative expenses, and
it was assumed that the latter would be taken care of through receipts
from earnings. An appropriation from the General Fund of the Treasury in the amount of $500 millions was made for the purchase of
capital stock of the Corporation. Expenditures from funds provided
through such appropriation were reflected in the expenditures of the
Government, as and when the Corporation's checks were paid by the
Treasurer of the United States. I t was assumed that the amount so
charged in the Budget would more than take care of losses, if any,
sustained by the Corporation in connection with its lending activities.
Pursuant to section 9 of the act, expenditures made by the Corporation
from funds derived from the sale of its obligations to the Secretary of
the Treasury were treated as public debt transactions and, therefore,
were not included as expenditures in the Budget. This provision was



40

REPORT OF THE SECRETARY OF THE TREASURY

based upon the assumption that the money loaned by the Recon
struction Finance Corporation from the proceeds of such obligations,
when repaid, would be available for the retirement of the Corporation's
obligations held by the Treasury and used by the Treasury to retire an
equivalent amount of public debt obligations.
Effective July 1, 1933, this procedure was changed so that all
operations of the Reconstruction Finance Corporation, including
expenditures from funds derived through the sale of its obligations to
the Treasury, were included in the Budget, in the same manner as
if the money had been appropriated by the Congress directly to the
Reconstruction Finance Corporation, in accordance with customary
procedure, for specified purposes. Although the change involved a
departure from the previous practice of basing expenditures of the
Federal Government upon direct appropriations made by the Congress
for specified objects of expenditure, the change was justified because
of the fact that under several laws enacted by the Congress subsequent
to January 22, 1932, large sums of money were paid out by the
Reconstruction Finance Corporation for grants under relief acts and
for other purposes for which no provision had been made for repayment
to the Corporation.
Between 1932 and July 1, 1938, the financial transactions of the
Reconstruction Finance Corporation, Commodity Credit Corporation, and Export-Import Banl^ of Washington were included in the
general and special accounts of the Treasury 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. Beginning July 1, 1938, the financial transactions of these
corporations were reflected in the trust accounts, increment on gold,
etc., section of the daily Treasury statements. The purpose of this
change was to simplify the daily Treasury statement, and to eliminate the confusion and misunderstanding concerning the effect of
such corporations' transactions on the Federal Budget, particularly
in cases where the Treasury acts only in tKe nature of a depositary of
funds derived by the corporations from the sale of their own obligations on the market. The figures on expenditures in this report have
been revised retroactively, however, on the basis of the new procedure.
Under authority of the act of February 24, 1938, the Secretary of
the Treasury canceled approximately $2,726 millions of the obligations
purchased from the Reconstruction Finance Corporation pursuant to
the act of January 22, 1932, as amended, with respect to which the
Reconstruction Finance Corporation had no means of making repayment to the Treasury.
In the reclassification of expenditures in comparative statements
covering the fiscal years 1932 to 1940, amounts aggregating the foregoing sum of $2,726 millions are reflected as a charge against the



41

REPORT OF T H E SECRETARY OF T H E TREASURY

Budget during the fiscal yeai's in which such expenditures were made.
Beginning with the fiscal year 1939, expenditures of all Federal agencies
from funds allocated by the Reconstruction Finance Corporation, for
which there is no provision made for repayment, have been included
as charges against the Budget, and notes of the Corporation, in
amounts equivalent to such allocations, have been canceled by the
Secretary of the Treasury.
Because the Government corporations mentioned above and certain
other Government corporations and credit agencies maintain only
checking accounts with the Treasurer of the United States, the
transactions shown under ^'Trust accounts, increment on gold, etc."
represent only the net balance of their operations, and, therefore,
do not furnish sufficient data for a detailed analysis of the financial
transactions of these agencies. Arrangements have been made with
these corporations, however, whereby certain data are submitted to
the Treasury so that the Treasury's books can reflect the operations
of these corporations and agencies. These data have been combined
and appear below in a table showing sources and uses of funds from
the date of inception of the various corporations to June 30, 1940.
These data are not on the basis of the daily Treasury statement and
the figures, therefore, do not tie in exactly with the figures shown in
other tables in this report.
Sources and uses of funds of certain governmental corporations and agencies from
inception of organization to June 30, 1940
[In millions of dollars. Compiled from latest reports received by the Treasury]

Central
Bank
for Cooperatives

Sources of funds:
Appropriations from General
Fund of the Treasury i
Sale of stock to other agencies . .
Allocations, rediscounts, and
loans from other agencies (net).
Sale of obligations (net):
To the Treasury
. _.
In the market
Sale of other property acquired .
Repayment of loans *
Income from interest, dividends, assessments, and property.
Other receipts
_. _ ._
Total

—

Uses of funds:
Loans
Investments (net):
In Government securities
In other securities
. .
Allocations, rediscounts, and
loans to other agencies
Purchase and improvement of
property owned

Footnotes at end of table.



Elec- ExportCom- Disastric
modity
ter'
Home Import
Bank
Credit Loan
and
of
Corpo- Corpo- Farm Washration ration Author- ington
ity

50.0 2 270.1
.5

24.0

1.0

Federal
Deposit
Insurance
Corporation

1.0
74.0

150.0
139.3

Federal
Farm Federal
Mort- home
gage
loan
Corpo- banks
ration

200.0

124.7

1.4

190.4

25.0
406.8
31.7
663.4

4.3

15.0

35.9

46.0

1, 269.4
9.2
246.4

473.6

9.7
2.3

15.4
2.0

.6
.1

2.6
.2

243.1
3.9

369.8
9.2

35.0
35.0

254.4 1, 414.4

29.0

30.0

6.3
.7
117.9

582.4 2,103.9

759.5

204.3 1, 310.1

26.0

27.3

87.7

153.5

993.1

631.0

275.0
73.5 "'76i.'9'

35.4
19.5

11.2

24.1
14.8
10.8
50.4

.6

26.2
10.2

91.1

42

REPORT OF THE SECRETARY OF THE TREASURY

Sources and uses of funds of certain governmental corporations and agencies from
inception of organization to June 30, 1940—Continued
C o m p i l e d from latest reports received b y t h e T r e a s u r y ]

[In millions of dollars.

ElecCentral Comtric
DisasBank modity . ter
Home
for Co- C r e d i t
Loan
and
opera- Corpo- Corpo- F a r m
ration A u t h o r tives
ration
ity
Uses of f u n d s — C o n t i n u e d .
A d m i n i s t r a t i v e expenses .
N o n - a d m i n i s t r a t i v e expenses
Interest and dividends p a i d . . . . .
Other expenditures

0.7

8.9

.5
3.2

19.3
13.6

2.2
.1

Net balance..

6.8

29.0

(.')

1.2

1.4
.6
.2
.2

0.4

29.7

117.0

.3

— --y-

247.6 1,413.2

Total

Export- Federal Federal
I m p o r t D e p o s i t F a r m Federal
Insur- MortBank
home
ance
gage
of
loan
W a s h - Corpo- Corpo- b a n k s
ration
ington ration

20.0

62.4
3.4
230.8
14.1

17.8
.2

.9

564.2 2,075.9

712.4

2.3 "6"4i.'4"
.8
.5

18.2

Home
Federal
Federal
OwnN a t i o n a l aSavings
ers'
n d Loan
Mortgage Insurance Loan
Associa- CorporaCorporation
tion
tion
Sources of funds:
A p p r o p r i a t i o n s from General
F u n d of t h e T r e a s u r y 1
Sale of stock t o other a g e n c i e s . . .
Allocations, rediscounts, a n d
loans from other agencies
(net)
Sale of obligations (net):
To t h e Treasury
In the market
Sale of other p r o p e r t y a c q u i r e d .
R e p a y m e n t of loans *
I n c o m e from interest, divi• d e n d s , assessments, a n d property O t h e r receipts
Total

200:0

500.0

63,114.5
87.0
776.8

7.0
1,096. 4
18.6
4, 985. 4

763. 5
15.1

553.6
68.1

9.5
2.8

129.3 4, 956. 9

7, 229. 2

3,243. 3

6, 600. 2

3.6
303.0

Total.

47.1

110.0

15.2
29.2
.1

179.3
14.7
108.2

Rural
Electrification
Administration

United
States
Housing
Authority

108.5

33.0

85.2

10.7
3.2

RFC
Mortgage
Company

32.7

"'"25.'6"

100.0

60.0

. 128.3

1.6

20 0
114 2
.8
178 2

5.7

12.4
2

168.2

244.1

358 3

157.7

221.3

255.3

(3)

3.8
187.3

479.6
1.5
1.4
3.2
.1
185.4

.

28.0

.4
97.5

11.0

185.4

Uses of funds:
Loans. .
Investments (net):
In Government securities...
I n other securities
Allocations, rediscounts, a n d
loans t o other agencies.
R e t i r e m e n t of obligations issued i n exchange for m o r t gages
.
P u r c h a s e a n d i m p r o v e m e n t of
p r o p e r t y owned
Admmistrative expenses..
Non-administrative expenses...
I n t e r e s t a n d d i v i d e n d s paid
Other e x p e n d i t u r e s .

N e t balance

Reconstruction
Finance
Corporation

8 4

123.9
197.8
93.3
421.9
8.0

74.1
6.5
232.3
14.4

128. 7 4, 874. 4

7, 224. 8

i.6
(3)

5 4.1
.6

.6

82.5

4.4

1.8
.4

26.1
10.2
4.3
1.7
.1

168.2

231.7

301.5

(')

12.4

56.8

3.6
3.2
3.7
(3)

8.3

1 These are the only items on this statement which constitute a charge against the Federal Budget (general
and special accounts). Included are funds furnished by the Reconstruction Finance Corporation frqm the
proceeds of notes sold to and subsequently canceled by the Secretary of the Treasury, (see p. 114).
2 Includes $170.1 millions appropriated to restore impairment of capital in 1938 and 1939. Excludes repayment of $43.8 millions which are reported as miscellaneous receipts representing surplus on basis of the March
31,1940, appraisal of the Corporation's assets.
3 Less than $50,000.
4 Receipts from the sale of property acquired in liquidation of loans are shown as "sale of other property
acquired."
«Includes expenditures for contributions and subrogated shares or claims in insured financial institutio ns
8 Retirement of these obligations is shown as "retirement of obligations issued in exchange for mortgag es.'
NOTE.—Figures are rounded to nearest tenth of a million and will not necessarily add to totals.




REPORT OF THE SECRETARY OF THE TREASURY

43

Further data on the operations of^governmental corporations and
credit agencies maintaining checking accounts with the Treasurer of
the United States appear for the period ended June 30, 1939, in a
letter from the Secretary of the Treasury transmitted in response to
Senate Resolution No. 150, agreed to June 27, 1939, further details
concerning which appear on page 171 of this report.
THE PUBLIC DEBT
Fiscal year 1940

The gross pubhc debt outstanding at the close of the fiscal year
1940 amounted to $42,968 millions, an increase of $2,528 millions
since June 30, 1939. This increase is reconciled with the deficit incurred in general and special accounts as shown on page 36 as follows:
Amount
(in miUions
of dollars)
3,740.2
.
129.2

Excess of expenditures in general and special accounts
Less public debt retirements included in expenditures
Net deficit to be

financed

'.

Means of financing:
Excess of receipts over expenditures in trust and miscellaneous accounts
Reduction in the balance in the General F u n d . . .
__
Increase in the gross public debt:
Public issues:
Marketable issues
Nonmarketable issues
Special issues
Matured debt and debt bearing no interest

3,611.1

.._
.

470.8
1,014.7
1,005.0
37.5

Total means of
financing..
NOTE.—Figures are rounded to nearest tenth of a million and will not necessarUy add to totals.

135.6
947.6

2, 528.0
3,611.1

The net changes during the year in the various classes of securities
which constitute the outstanding debt are shown in the table which
follows. Further details on the classes of securities which make up
the public debt are shown in the table on page 726 of this report.

269677—41-




44

REPORT OF THE SECRETARY OF THE TREASURY

Comparison of public debt outstanding June 30,1939 and 1940, by classes of securities
[In millions of dollars.

On basis of daily Treasury statements (unrevised), see p. 683]

Class

J u n e 30,1939 J u n e 30, 1940

Interest-bearing;
P u b l i c issues:
M a r k e t a b l e issues:
P r e - w a r a n d postal savings b o n d s
Treasury bonds
T r e a s u r y notes
T r e a s u r y bills

Increase or
decrease (—)

196.5
25,218. 3
7, 242. 7
1, 307. 6

196.3
26, 654. 8
6, 382. 6
1,302.2

-0 2
1,336. 5
—860 1
—5.4

T o t a l m a r k e t a b l e issues

33, 965.1

34,435. 9

470.8

N o n m a r k e t a b l e issues:
U n i t e d States savings b o n d s
A d j u s t e d service b o n d s of 1946.

1 1. 868.1
282.9

1 2, 904. 7
26L0

T o t a l n o n m a r k e t a b l e issues.

2,151. 0

Special issues:
A d j u s t e d service b o n d s , G o v e r n m e n t life insurance
fund series.__
T r e a s u r y notes
_
Certificates of i n d e b t e d n e s s .
•...
T o t a l special issues

1, 014. 7

37. 601. 6

1,485. 6

500.2
1, 983. 2
1, 286. 5

600.2
2, 553.4
1, 721.3

570 2
434.8

3, 769. 9

T o t a l interest-bearing d e b t
M a t u r e d d e b t o n which interest h a s ceased
D e b t bearing n o interest
_
_.
. . .._

3,165. 7

36,116.1

T o t a l p u b l i c issues

T o t a l gross d e b t

1,036.6
—21.9

.

I

4, 774. 9

1,005. 0

39,886. 0
142.3
411.3

42, 376. 5
204.6
386.4

2, 490.5
62.3
—24.8

40, 439. 5

42, 967. 6

2, 528.0

» Current redemption value (cash receipts plus earned accruals less redemptions).
NOTE.—Figures are rounded to nearest tenth of a million and will not necessarily add to totals.

During the year the computed average rate of interest on the
interest-bearing debt outstanding decreased from 2.600 percent to
2.583 percent. The computed annual interest charge on the debt increased from $1,037 millions at the beginning of the year to $1,095
millions at the end of the year. The actual expenditures for interest
during the fiscal year 1940 amounted to $1,041 millions. The interest
due and payable on the various classes of securities during 1940 and
the amounts paid and outstanding unpaid are shown in table 44 on
page 772. The interest paid on the public debt by issues for the years
1938 to 1940 is shown in table 45 on page 772.
The major public debt operations during the year included: (1)
Two offerings of Treasury bonds, (2) four offerings of Treasury notes,
(3) weeldy offerings and redemptions of Treasury bills, and (4) the
continued 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 various dates from November 1,
1939, to June 15, 1940. Tbe issues of bonds and notes aggregated
$3,485 millions, of which $671 millions were issued for cash, and $2,814




45

REPORT OF THE SECRETARY OF THE TREASURY

millions for the refunding of three series of Treasury notes maturing
during the year and one issue of Treasury bonds which was called for
redemption on June 15, 1940, the aggregate maturities amounting to
$2,996 millions. These operations are summarized in the following
table:
Bond and note financing, fiscal year 1940
Issue

Date
Nov. 1,1939
Dec.

8,1939

Dec. 22,1939

Dec. 22,1939
Mar. 15,1940
June 15,1940

Amount

1% Treasury notes, series B-1944, due Mar. 15, 1944 (at par):
In exchange for 1%% Treasury notes of series B-1939,
maturing Dec. 15, 1939
2% Treasury bonds of 1948-50, due Dec. 15, 1960 (at par):
For cash
.
Government investment accounts

$521,431,150
50,000,000

2H% Treasury bonds of 1951-53, due Dec. 15, 1953 (at par):
In exchange for 1H% Treasury notes, series A-1940,
maturing Mar. 15,1940
Government investment accounts

1,018,051,100
100,000,000

$515, 210,900

1% Treasury notes, series C-1944, due Sept. 15, 1944 (at par):
In exchange for 1H% Treasury notes of series A-1940,
maturing Mar. 15, 1940
%% Treasury notes, series A-1945, due Mar. 15, 1945 (at par):
In exchange for 1 ^ % Treasury notes, series B-1940,.
maturing June 15, 1940...
1% Treasury notes, series C-1943, due Sept. 15, 1943 (at par):
In exchange for 3%% Treasury bonds of 1940-43, called for
redemption on June 15, 1940

571, 431,150

1,118,051,100
283,006,000
718,024,200
279,473,800
3,485,197,150

RECAPITULATION

Treasury
bonds

Issued
For cash
In exchange.

_

Total

.,

_.

Treasury
notes

Total

$671,431,150
1,018,051,100

$i, 795, 714,900

$671,431,150
2,813, 766,000

1,689,482,250

1, 795, 714,900 3,485,197,150

All ofl&cial circulars and statements relating to these transactions
are included in the exhibits beginning on page 407.
Treasury bills
Offerings of Treasury bills were made each week during the year
and all issues were for a term of 91 days. All weeldy offerings were
for amounts of approximately $100 millions except three issues offered
in October and November 1939 which were for approximately $150
millions each. The 13 series outstanding at the beginning of the year
totaled $1,308 millions and the 13 series outstanding at the end of the
year $1,302 millions. Of the 52 series offered during the year, 45 series
were sold at a positive average rate of discount, the highest average
rate computed on a bank discount basis having been 0.159 percent for
the bills dated September 13, 1939, and the lowest average rate having
been 0.0003 percent for bills dated April 10, 1940. For 6 series sold
the buyers paid the Treasury a slight premium for the privilege of
holding the bills offered on those dates. One series was sold exactly



46

REPORT OF THE SECRETARY OF THE TREASURY

at par. Including bills sold at premiums, the average rate on all bills
issued during the year was 0.029 percent.
Further information concerning Treasury biUs will be found in
exhibits 12 to 14, beginning on page 420, and in table 39 on page 765.
United States savings bonds
The sale of United States savings bonds continued during the year
without any change in the terms of the bonds as fixed by Department
Circular No. 596, dated December 15, 1938. Regulations governing
the bonds, as set forth in Department Circular No. 530, Second Revision, dated December 15, 1938, were amended on September 14,
1939, effective September 15, 1939, so as to provide additional facilities for the execution of requests for payment, and were again
amended on January 18, 1940, effective January 23, 1940, so as to
provide that each duly constituted trust estate would be considered
as an entity, without regard to beneficial interests. The regulations
were revised and further amended on March 27, 1940, and reissued as
the Third Revision of Department Circular No. 530, the principal
change being provision that the registration of savings bonds sold on
and after April 1, 1940, would be restricted to natural persons, that is
individuals, in their own right, who are residents of the continental
United States, the Territories and insular possessions of the United
States, the Canal Zone, and the Philippine Islands, or citizens of the
United States temporarily residing abroad. At the same time the
offering circular. No. 596, was amended to conform with these changes.
The amendments above referred to, and the Third Revision of
Department Circular No. 530, together with the press release of
March 22, 1940, explaining the changes in regulations effective April
1, 1940, will be found on pages 424 to 441 of this report.
Sales of savings bonds by months and denominations during the
year are shown in the following table:




47

EEPOiRT OF T H E SECKETATOY O F T H E TKEiASURY

Sales of United States savings bonds, by months and denominations, fiscal year 1940
[On basis of Treasury audit]
$25

$50

$100

$500

$1,000

Total

M a t u r i t y value
1939—July
August
September
OctoberNovember
December
1940—January
February
March
April
May
June
Total

$2,211,025
2,209,100
2,000,450
2,096,375
2,067,800
2,540,650
3,058,925
2, 748,175
2,756,900
2,600,726
2,409,350
2,171,525

$3,145,350
3,027,800
2,634,700
2,834,400
2, 816,900
3,350,850
4, 413,200
3,866,400
3,935,700
3, 658, 550
3,284,500
3,021,850

$10, 534,200
9,828,800
7,765,200
8,707,100
8, 752,000
10,959,600
15,662,200
12,339, 700
13, 665,800
11, 667,900
10,007,000
9,205,900

$14,872,000
12,219,000
8,472,000
9,919,500
10,049,500
15,616, 000
28,309,000
16,295,000
18, 753,000
14,582,000
11,387,500
10,301,000

$79,409,000
61,462,000
34, 662,000
41,682,000
56,243, 000
121,499,000
320,919,000
96,173,000
141,162, 000
63,920,000
46, 569,000
38,762,000

$110,171,575
88, 746, 700
65,534,350
65,239,375
78,929,200
153,966,100
372,362,325
131, 422,275
180,273,400
96, 329,175
73,667,360
63,462,275

28,871,000

39,990,200

128,995,400

170,776,600 1,101,462,000

1,470,094,100

Sal B price
Total

$21,653,250

$29,992,650

$96,746,650

$128,081,625

$826,096,500

$1,102,670,675

The preceding table is compiled from the standpoint of the effective
issue date of the bonds upon the basis of the Treasury audit of original
registration stubs representing sales by the Postal Service, the Federal
Reserve Banks, and the Treasury Department during the year, after
all items in transit have been cleared, and does not exactly correspond
and agree with other totals appearing in this report made up on the
basis of the actual cash credits in the Treasurer's account within the
fiscal year.
For other data concerning savings bonds, reference is made to the
article beginning on page 60, and to the administrative reports of the
Division of Savings Bonds on page 395 and of the Division of Loans
and Currency on page 385.




48

REPORT OF THE SECRETARY OF THB TREASURY
Adjusted service bonds

Adjusted service bonds of 1945 amounting to $8 millions were
issued during the year, making a total of $1,837 millions of such
bonds issued since June 15, 1936, in payment of amounts due on
adjusted service certificates, Redemptions of $30 millions of these
bonds during the year brought the total redemptions since June
15, 1936, to $l'',576 millions, leaving $261 millions outstanding on
June 30, 1940. Further data on adjusted service bonds appear on
page 64, and in the table on page 726.
Special issues
During the year the Treasury continued to issue special series of
interest-bearing securities for the investment of trust or other funds
deposited in the Treasury or pursuant to appropriations for specific
purposes. The amount of such obligations increased by $1,005
millions during the year, due primarily to investments for trust funds
and accounts established by the Social Security Act, as shown in the
following table:
Comparison of special issues of Treasury obligations outstanding June 30,1939 and
1940
[In millions .of dollars. On basis of daily Treasury statements (unrevised), see p. 683]
June 30,
1939

Special issues

Increase or
decrease ( - )

600.2

Total

.
.

1

1,177.2

1, 413. 2

236 0

324.9
79.4

324.9
12.2

3.5
3.9
.6
128.0
1010
36.4

650.0
.2
3.9
4.3
.8
96.6
56.0
24.3

84.6
.2
.4
3
.2
— 31 5
—45.0
— 12.1

2, 663. 4

670.2

19.5
1,267.0

Total
Certificates of indebtedness:
4% Adjusted service certificate fund
2}Wo Unemployment trust fund

500.2

1,983. 2

Adjusted service bonds, Government life insurance fund
Treasury notes:
Federal old-age and survivors insurance trust fund notes:
3% Old-age reserve account
2^i% Federal old-age and survivors insurance trust
fund
3% Railroad retirement account
Civil service retirement fund:
4% Series
._
3% Series
.
4% Foreign service retirement fund
.
4% Canal Zone retirement fund
4% Alaska Railroad retirement fund
2% Postal Savings System
2% Federal Deposit Insurance Corporation
2% Government life insurance fund

Grand total

June 30,
1940

11.3
1, 710.0

-8.2
443.0

67.2
466. 4

1,286.5

1, 721. 3

434,8

3, 769.9

4,774.9

1, 005. 0

Further details of the special issues outstanding on June 30, 1940,
are shown in the statement of the public debt appearing on page 726.
Other data on special issues appear in the article beginning on page 64.




REPORT OF THE SECRETARY OF THE TREASURY

49

Cumulative sinking jund
Credits accruing to the cumulative sinking fund during the year
amounted to $582 millions which with the unexpended balance of
$)1,664 millions brought forward from the previous year made $2,246
millions available for the year. Of this amount, $128 millions were
applied to the retirement at par of Treasury notes and Treasury bonds
maturing during the year and presented for cash redemption. The
unexpended balance of $2,117 millions was carried forward to the
fiscal year 1941.
Tables presenting the transactions on account of the fund for 1940
and since its inception on July 1, 1920, will be found on pages 770 and
771 of this report.
Amendment to the Second Liberty Bond Act
During the fiscal year 1940 there were two amendments to the
Second Liberty Bond Act, as amended, the law under which public
debt operations are now carried on. The act of July 20,1939, amended
section 21 to remove the limitation on the amount of bonds that could
be issued. It made no change, however, in the total amount of bonds,
Treasury notes, certificates of indebtedness, and Treasury bills—$45
billions—which may be outstanding at any one time. Title III of
the Revenue Act of 1940, approved June 25,^ 1940 (see exhibit 19,
page 442), further amended the Second Liberty Bond Act to provide
for ^'National Defense Series'' of Treasury notes, certificates of indebtedness, and Treasury bills. These new obligations may be issued
to provide funds to meet expenditures made after June 30, 1940, for the
national defense or to reimburse the General Fund of the Treasury
therefor. The aggregate amount of these obligations that may be
outstanding at any one time may not exceed $4 billions less any
retirements from the special fund made available under section 301
of the Revenue Act of 1940.
Fiscal years 1933 to 1940

Financing the deficit
During the period from June 30, 1932, to June 30, 1940, the gross
deficit, that is, the excess of expenditures over receipts in general and
special accounts, amounted to $26,280 millions. During this period,
expenditures in general and special accounts for debt retirement
amounted to $2,155 millions. Excluding these expenditures from the
gross deficit, the net deficit between June 30, 1932, and June 30, 1940,
aggregated $24,125 millions. During the same eight years the




50

REPORT OF THE SECRETARY OF THE TREASURY

balance in the General Fund increased by $1,474 millions. The total
amount required to be financed for the account of the regular Budget
during this eight-year period thus amounted to $25,599 miUions.
The financing of $18,489 millions, or a little more than 72 percent of
this amount, is indicated by the net increase in the outstanding public
debt obligations issued to the public for cash. These figures are
shown in the table below.
Means of financing the deficit and the increase in the General Fund, June 30, 1932
to 1940
[In millions of dollars.

On basis of daily Treasury statements (unrevised), see p.583]

Amount to be financed:
Gross deficit in general and special accounts
Less public debt retirements

_

Net deficit in general and special accounts..
Increase in balance in the General Fund:
Increment on gold
Seigniorage on silver
,
Working balance
.

26,280
2,155

.
^

24,125
'.

143
585
746

Total increase in balance in the General Fund
Total to be

financed

.

1,474
_.

Means of financing:
Increase in public.debt:
Public issues:
For cash
.
Adjusted service bonds of 1945
Special issues to Government agencies and trust funds
Matured and noninterest-bearing debt
Total increase in public debt.
Increment on gold
Seigniorage on silver
Excess of receipts in trust accounts
Excess of receipts in checking accounts of governmental agencies

25,599

18,489
261

—^
_

_

18,750
4,466
265

.

23,481
i 816
685
196
521

Total means of
financing
.
25,699
1 Of this amount, $27.6 millions were used for payments to Federal ReserveBanks for industrial loans and
$645.4 millions were used for retirement of national bank notes. These amounts are reflected in the "increase
in the working balance," referred to above. Further details appear in the table on p. 130.
NOTE.—Figures are rounded to nearest million and will not necessarily add to totals.

The increase in the public debt shown in the table above is discussed
by classes of issues in the paragraphs that follow. Further data with
respect to other items in the table appear on the following pages:
Deficit, page 36; increment on gold, page 128; seigniorage on silver,
page 134; trust accounts, page 37; and checking accounts, page 39.
Changes in the composition oj the debt, by classes oj securities
The composition of the public debt outstanding at the end of each
fiscal year since June 30, 1932, by classes of securities, is shown in the
table that follows and in chart 5 on page 52.
I t can be seen from the table that since June 30, 1932, there have
been major alterations in the composition of the public debt. The
Liberty bonds, which totaled $8,201 millions on that date, have been
refunded and have disappeared entirely. Most of the pre-war issues




51

REPORT OF THE SECRETARY OF THE TREASURY

have also^been retired. On the other hand, there were included in the
public debt on June 30, 1940, approximately $2,905 millions in United
States savings bonds, a new type of Government obligation issued on a
discount basis. Included also were $261 millions of adjusted service
bonds of 1945. These bonds, dated June 15, 1936, were issued to
veterans in the amount of approximately $1,837 millions in payment
of their adjusted service certificates. The bonds were redeemable at
the option of the holder, and a large proportion of the issue was
presented for redemption immediately after issue.
Comparison of public debt outstanding on June 30,1932 to 1940, by classes of securities
[In millions of dollars. On basis of daily Treasury statements (unrevised), see p. 683]
Class

1935

1932

1933

1934

790
8,201
5,259
1,261
616

806
8,201
6,216
4,548
954

831
855
200
6,346
1,336
9,333 12, 684 17,168
6,653 . 10,023 11,381
1,404
2,063
2,354

2,726

2,108

1,517

Total marketable issues- 18,852

21,835

26,084

Interest-bearing:
Public issues:
Marketable issues:
Pre-war and postal savings
bonds . . . .
Liberty bonds...
Treasury bonds..
Treasury n o t e s . .
Treasury bills....
Certificates of indebtedness..-

26,950

Nonmarketable issues:
United
States
savings bonds ^.
Adjusted service
bonds of 1946.

62

Total nonmarketable issues..

62

1937

1938

1939

1940

198

197

19,936
10,617
2,303

21,846
9,147
1,154

25, 218 26,665
7,243 6,383
1,308
1,302

31,102

33,054

32,344

33,965

34,436

196

196

Special issues:
A d j u s t e d service
bonds,
Government life insurance
fund series
Treasury notes
Certificates of indebtedness

204

21,835

26,084

27,012

231

278

478

316

800

1,238

1,868

2,905

945

Total public issues.- - . 18,852

389

319

283

261

1,261

1,188

1,556

2,161

3,166

32, 363 34,242

33,900

36,116

37,602

500
708

500
1,278

500
1,983

600
2,653

480

105

92

118

156

146

350

898

1,287

1,721

309

Total special issues.

323

396

633

626

1,558

2,676

3,770

4,775

22,168

26,480

27,646

32,989

35,800

36,576

39,886

42,376

66
316

54
618

231
826

' 169
620

119
506

141
448

142
411

205
386

22,539

27,063

28,701

33,779

36,425

37,165

40,440

42,968

Total interest-bearing debt
-_. 19,161
Matured debt on which interest has ceased
60
Debt bearing no interest
266
Total gross debt

1936

19,487

1 Current redemption value (cash receipts plus earned accruals less redemptions). For full account, see
p. 62.
NOTE.—Figures are rounded to nearest million and will not necessarily add to totals.

A part of the public debt which has become of growing importance
since 1932 is that represented by special obligations issued to Government corporations and trust accounts. Such obligations totaled only




52

REPORT OF THE SECRETARY OF THE TREASURY

COMPOSITION OF THE INTEREST-BEARING PUBLIC DEBT OUTSTANDING, BY TYPES
OF OBLIGATIONS, MONTHLY, JULY 1932 TO JUNE 1940
1932

1933

1932

1933

1934

1935

1936

1935
1936
C A L E N D A R

1937

1938

1939

1940
DOLLARS

1937
1938
Y E A R S

PERCENTAGE COMPOSITION OF THE INTEREST-BEARING PUBLIC DEBT
OUTSTANDING, MONTHLY, JULY 1932 TO JUNE 1940
1932

1933

1932

1933

1935
1936
C A L E N D A R

1937
1938
V E A R S

CHART 5.

NOTE.—Pre-war and postal savings bonds included with Treasury bonds. Special issues include all
such securities issued to Government agencies and trust funds whether in the form of bonds, notes, or
certificates of indebtedness.




53

REPORT OF THE SECRETARY OF THE TREASURY

$309 millions on June 30, 1932, and amounted to less than 2 percent of
the gross public debt. By June 30, 1940, the total of such obligations
had increased to $4,775 millions, or 11 percent of the public debt.
The large increase was due principally to fiscal operations under the
Social Security Act. Under various titles of that act, certain trust
funds were established in the Treasury, and the Secretary of the
Treasury invested the receipts of these funds, to the extent that they
were not needed for current expenditures, in special obligations of the
Government. Further details with respect to these special issues
appear on page 64 and in table 30.
Public issues
Bonds and notes.—The major public debt operations involving
Treasury bonds and notes that were carried out on various dates from
August 1, 1932, to June 15, 1940, are itemized in the table below.
During this period the issues of bonds and notes aggregated $41.7
billions. Of this amount $16.6 billions were issued for cash, $6.9
billions for the refunding of Liberty bonds called for redemption during
the period, and $18.2 billions for the refunding of Treasury bonds,
notes, and certificates of indebtedness.
Offerings of marketable issues of Treasury bonds and Treasury notes, July 1, 1932,
to June 30, 1940
[In millions of dollars!
Amount issued

Issued
In exchange for-

Date of iwssue

Rate

Call and maturity dates
Bonds

1932
Aug. 1...
Do..
Sept. 15Oct. 15..
Dec. 15..
1933
Feb. 1...
May 2 . .
June 15..
Aug. 15DoOct. 15..

Percent

Notes

For
cash

Treasury
bonds, Liberty
notes,
and cer- bonds
tificates

Aug. 1, 1934...
3K Aug. 1, 1936...
3J€ Sept. 15, 1937..
Apr. 16, 1937-.
3
Dec. 16,1936..

345
365
834
508
361

307
226
426
190
148

38
139
408
318
213

Feb. 1,1938
23^ Apr. 15, 1936....
June 16, 1938....
Aug. 1, 1935
3K Aug. 1, 1941
131^ Oct. 15, 1943-46..

278
572
624
354

201
429
445
240
479
500

77
143
179
114
356

m

1934

835
1,401

66
Apr. 16,1934....
56
Jan. 16.
528
528
Jan. 29..
2 ^ Mar. 15,1935.—
418
Dec. 15,1935....
418
Feb. 19..
2H
429
429
Feb. 15, 1937
: . Do..
3
455
455
Mar. 15,1938....
Mar. 15.
3
234
1,062
Apr. 15, 1944-46-.
Apr. 16..
336
825
June 15, 1946-48June 15..
629
Junel5, 1939
Do..
629
1 Interest at 414 percent paid during the first year after issuance of the bonds.
2 Treasury bonds of the series of Apr. 16,1934, were offered for payment in gold. All bonds of this
were redeemed before maturity.
NOTE.—Figures are rounded to nearest]million and will not necessarily add to totals.

m




901

54

REPORT OF THE SECRETARY OF THE TREASURY

Offerings of marketable issues of Treasury bonds and Treasury notes, July 1, 1932,
to June 30, 1940—Continued
[In millions of dollars]
Issued

Amount issued

In exchange for—
Date of issue

Rate

Call and maturity dates
Bonds

Percent
IH Sept. 15, 1936
2H Sept. 15, 1938
3H Apr. 15, 1944-46
IH June 16, 1936
2H June 16, 1939
3H Dec. 15, 1949-52

1934
Sent 15
Do
Do
Dec. 15 Do
Do
Mar 16
Do
June 3
June 15
Do
Do
July 1
July 15
July 22
Aug. 5
Aug. 19
Sept. 16
Do
Dec. 16
Do
Mar. 16
Do
Jnne 15
Do
Sept. 16.
Dec. 15
Do
Mar. 15June 15
Do
Sept. 15
Do
Dec. 15
Do

1935

491

2H Mar. 15, 1965-60
Mar. 16, 1940
3 ^ June 16, 1946-48
IH Mar. 15, 1940

?^
3

m
. 1936

in

1,658
99

Mar. 15, 1955-60.. 1 . . . .
June 16,1940
June 16,1946-48.
Dec. 15,1939
Mar. 16,1956-60
.- do
... ..
do
..
Sept. 15,1946-47
Mar. 15, 1939..
Sept. 15, 1945-47 .
. . .
Dec. 16, 1940

IH

,. .
....

Mar. 15, 1948-61
Mar. 16, 1941
2H June 15, 1951-54
June 16, 1941..
2H Sept. 15, 1956-69
Dec. 15, 1949-53
2H Dec. 16, 1941

1937
2H
IH
IH
IH
2
2H
IH

1938
Mar. 15
June 15. .
Do.
Sept. 15.
Do
Dec. 15
Do
Do

467

.

.
„-.

1939

Mar. 15
Do
- Do
June 16 . _ _
Nov. 1
Dec. 8
Dec. 22
Do..
1940
Mar. 16-.
June 15
Total

Sept. 15,1948
June 15, 1958-63...
June 15,1943
Sept. 15, 1960-52
June 15,1943
Dec. 15,1960-65
Dec. 16, 1947
Dec. 15, 1943

646

1,627
982
1,303

. .

484

641

461
919
..-

..

866
591
701
894
319

2H Dec. 16,1960-65
2H Sept, 15, 1950-62
Dec. 15, 1943
June 15, 1944.
1 * Mar. 15, 1944
2 Dec. 16, 1948-50
Dec. 15,1951-53
2H Sept. 15, 1944
1
Mar. 16,1945 . . .
Sept. 15, 1943

113
102
107
98
669

1,223

_

Dec. 16,1949-63
Sept. 15, 1939
Mar. 15, 1942
Dec. 15, 1938
Sept. 15, 1942
Dec. 16, 1945
Dec. 15, 1942 . -

2H
2H
IH
2H
2H
2
IH

746

571
1,118
. . . .

Notes

For
cash

614
596
687
766

514
"""864"
738
""""526"

942
""""737"
"•"677"
"•"604"
"""'204"
427
426
433
342

514
477
""'"491'

99'

""•"m"
526
102
107
98

427
426

368

329

19,990

'""'57i"
100

1,658
864
746

669
429

484
433
342
247
13
451
919
268
405
19
188
701
39
894
319
63
416
515
1,018
283
718
279

16,638

NOTE.—Figures are rounded to nearest million and will not necessarily add to totals.




596
457

496
.48
956
69
512
561
204

718
279
21,754

738

727
629
671
435
470
762

"""".461"
342
403

"•'283'

514

161
249

"""361"

53
416
615

210
765

513
485
488

""""294"
""""232"
219

268

Treasury
bonds, Liberty
notes,
and cer- bonds
tificates

18,158

6,948

55

REPORT OF THE SECRETARY OF THE TREASURY

The sale of. Treasury bonds and notes was carried on by means of
public offerings by the Secretary of the Treasury pursuant to the
authority of the Second Liberty Bond Act, as amended. In general,
applications were received at the Federal Reserve Banks and their
branches, and at the Treasury Department. Banking institutions
were auchorized to submit subscriptions for customers as well as subscriptions for their own account. Since 1935, subscriptions for their
own account have been restricted, at each offering of securities for
cash, to an amount not exceeding one-half of the combined capital
and surplus of the subscribing institution.
Until 1935, cash subscriptions for amounts up to and including
$10,000 were given preferred allotments and aU other cash subscriptions were aUotted on an equal percentage basis. In 1935, preferred
allotments to small subscribers were limited to subscriptions of $5,000
or less. Further reductions in the limit up to which preferred allotments would be made occurred subsequently, and in December 1938
no preferred aUotments were made at aU. A new preferred aUotment
system was established in December 1939 by which subscriptions up
to $5,000 were allotted in fuU provided that the subscriber agreed to
accept delayed delivery in registered bonds and entered no other
subscription.
Subscriptions were usuaUy invited at par and accrued interest for
both cash and exchange offerings, but on a number of occasions other
practices were foUowed. In 1935, for example, five small cash offerings of Treasury bonds were made at prices which were determined
by competitive bidding. On a few occasions, issues of Treasury bonds
and notes were offered at specified prices above par. D a t a with respect to these issues appear in the table that follows.
Treasury bonds and notes issued at prices above par, June 30, 1932, to June 30, 1940
Price
Description

Date of issue

For cash
Oct. 16,1933
June 15,1935
June 3,1935
July 1,1936
July 22,1936
Aug. 5,1935
Aug. 19,1936
Mar. 15,1939
Do
Do

3H% 1 bonds of 1943^5
2H% bonds of 1965-60
..
3% bonds of 1946-48
do
2H% bonds of 1956-60
do
do2H% bonds of 1960-52
2H% bonds of 1960-65
iyi% notes of Dec. 15, 1943..

lOlH
3
3
3
3
3

103.125
103. 5625
101.69375
101. 6626
100.78125

For exchange
100
'lOOH

102H
102^^
101

1 Interest at 4H percent paid during first year after issuance.
2 Offered in exchange for First Liberty bonds at par on Apr. 22,1935; price increased to lOOH on May 8,
1935.
3 Average price of bids accepted.

I n the bond and note refunding operations carried out by the
Treasury between July 1, 1932, and June 30, 1940, the holders of
maturing securities were offered the right to exchange the entire



56

REPORT OF THE SECRETARY OF THE TREASURY

amount of their holdings for new obligations of the Government and
were generally assured of an allotment equal to the amount of securities turned in. On many occasions, moreover, more than one issue
was offered in exchange and the holder of the maturing security was
allowed to select the issues and the amounts desired.
Most of the major refunding operations engaged in between 1932 and
1940 involved the refunding of Treasury note maturities into new
notes or bonds. The largest individual refunding operations undertaken, however, were those which concerned the Liberty bonds, two
issues of which, the Fourth Liberty Loan and the First Liberty Loan,
were called for redemption and refunded between 1933 and 1935.
The refunding of the Fourth Liberty Loan, the final maturity date
of which was October 15, 1938, was announced in October 1933 and
concluded in October 1935. The issues refunded amounted to $6,268
millions of 04 percent obligations, in connection with which there
were four calls for redemption and seven offerings of securities for
exchange—each call treating a particular fraction of the entire series
of Fourth Liberty Loan bonds by specifying in the call the last
digit of the serial number of the bonds called. Thus, the first call for
redemption specified that only those outstanding bonds whose final
digit numbers ended in 9, 0, or 1 were subject to the call. The table
that foUows shows the portions called and the securities into which
the holders exchanged the bonds.
Refunding of the Fourth Liberty Loan
[Dollars in millions]
Amount

Issue
Issue of Fourth Liberty Loan 4H% bonds called:
First call—redemption on Apr. 15, 1934 (numbers ending in 9, 0, or 1).
Second call—redemption on Oct. 15, 1934 (numbers ending in 8 or 2)..
Third call—redemption on Apr. 15,1936 (numbers ending in 5, 6, or 7).
Fourth call—redemption on Oct. 16,1935 (numbers ending in 3 or 4)..
Total outstanding at time of fiirst call
Securities issued in exchange:
3H% ^ Treasury bonds of 1943-45
3H% Treasury bonds of 1944-46
2jl% Treasury bonds of 1956-60
2%% Treasury bonds of 1945-47
2H% Treasury notes due Sept. 15,1938
1H% Treasury notes due Mar. 15,1939
Total issued in exchange

...
...

.

Approximately
Approximately
Approximately
Approximately

. .
._

Balance for cash redemption by the Treasury

three-tenths.
two-tenths.
three-tenths.
two-tenths.
$6,268.1
900.7
1, 284.4
1,558.0
568: 7
596.4
429.2
6,337.4
930.6

1 Interest at 4)^ percent paid during the first year after issuance of the bonds.

Of the Fourth Liberty Loan bonds outstanding prior to the announcement on October 12,1933, of the first call for redemption, about
S5 percent were exchanged for new issues. On the exchanged portion
of the bonds, the annual interest charge to the Government was reduced $74 mUlions and the saving of interest to the maturity date



REPORT OF THE SECRETARY OF THE TREASURY

57

originally fixed for the bonds (October 15, 1938) was estimated at
$267 mUlions.
The First Liberty Loan bonds, which were outstanding in the
amount of $1,933 millions, were called for redemption on June 15,
1935. At the time of the call, the First Liberty Loan was divided
into four issues as a result of conversion privileges that had arisen
subsequent to the original issuance of the obligations. The table that
follows shows the amounts outstanding and the amounts exchanged
as a result of the refunding offering.
Refunding of the First Liberty Loan
[In millions of dollars]
Issue
Issues of First Liberty Loan bonds called:
First 3H's (fully tax-exempt)
First converted 4's (partially tax-exempt).
First converted 4H's (partially tax-exempt)
First-second converted 4H's (partially tax-exempt).
Total called.
Securities issued in exchange:
2%% Treasury bonds of 1966-60
1H% Treasury notes due Mar. 15, 1940.
Total issued in exchange

Amount.
1,392.2
5.0
532.6
3.5
1,933.2
746.4
864.5
1,610.9

Balance for cash redemption by the Treasury.

Full accounts of the refunding of the Fourth and First Liberty Loan
bonds will be found in the Annual Reports of the Secretary of the
Treasury for the fiscal years 1934 to 1936.
About the same time the First Liberty Loan bonds were called,
three issues of the 2 percent circulation privilege bonds were called
for redemption. The 2 percent perpetual consols callable at any time
after April 1, 1930, outstanding in the amount of $600 millions, had
been issued between 1900 and 1907 to refund higher coupon issues.
The 2 percent Panama Canal bonds of 1916-36 and 1918-38, outstanding in the amounts of $49 millions and $26 millions, had been
issued in 1906 and 1908, respectively, to provide funds for the construction of the Panama Canal. These three bond issues had, for
some years prior to 1932, been the only outstanding bonds avaUable
for deposit as security for the issue of circulating notes of national
banks. However, a provision of the Federal Home Loan Bank Act,
approved July 22, 1932, attached the circulation privUege as an
emergency measure to all bonds of the United States bearing interest
at a rate not exceeding 3% percent per annum, but this privUege terminated July 22, 1935. The call for the redemption of the 2 percent
bonds in July and August 1935, therefore, provided for the ultimate
elimination of the national bank notes as a medium of circulation.




58

REPORT OF THE SECRETARY OF THE TREASURY

(See page 66 of this report for further data on the retirement of
national bank notes outstanding.)
At the time the calls were issued it was announced that in retiring
the 2 percent bonds the Treasury would make use of part of the
balance of gold in the General Fund resulting from the reduction in
the weight of the gold dollar, and that gold certificates and gold certificate credits would be issued to the Federal Reserve Banks in an
amount about equal to that of the bonds retired, a like amount of gold
being withdrawn from the General Fund and held as security for the
gold certificates and gold certificate credits issued. Such gold certificates and gold certificate credits were issued to the Federal Reserve
Banks as rapidly as the national bank currency in circulation was
actually retired up to a total amount of $645 mUlions, the amount
of the increment on gold available to be set aside for this purpose.
Certificates oj indebtedness and Treasury bills.—One of the major
alterations in the composition of the public debt that has taken place
since 1932 has been the complete elimination from the outstandingdebt of public issues of certificates of indebtedness. The displacement
of these certificates by Treasury bills issued on a discount basis as
the Treasury's principal instrument for short-term financing occurred
in 1933 and 1934. No public issues of certificates of indebtedness
have been made since January 1934.
Certificates of indebtedness were, in the period prior to the Thirties,
the only instrument available to the Treasury for loans maturing in
less than one year. Treasury bills not having been authorized until
June 17, 1929. Between 1917 and 1934, inclusive, the Treasury issued
substantial amounts of certificates in every year. The issues during
those years were largely in anticipation of income taxes, with maturities arranged on quarterly tax-payment dates when the maturing
certificates were. receivable in payment of taxes. However, during
the first World War and early post-war years, and again in 1932, certificates were also used as ordinary short-term loan instruments and
in anticipation of longer-term issues.
While certificates of indebtedness constituted an extremely useful
instrument of short-term Treasury financing, they have been displaced by Treasury bills since 1934 for a number of reasons, among
which are the following: (1) The sale of discount obligations through
competitive bidding enabled the Treasury to take full advantage of
the extremely low rates of interest on short-term securities obtaining




REPORT OF THE SECRETARY OF THE TREASURY

59

in the market—a level that made the use of fractional coupon rates
inconvenient. (2) The ready market in the financial centers for
short-term discount obligations permitted bill offerings to be timed
to coincide very accurately with the Treasury's needs for funds. Certificates of indebtedness, on the other hand, when issued to mature at
quarterly tax dates in amounts sufficient to provide for the entire
excess of ordinary expenditures over receipts during a quarter, naturally provided a larger volume of funds than could be used immediately. (3) The availability of weekly issues of Treasury bills permitted the Treasury to undertake large scale borrowings at its own
convenience and to postpone such operations for temporary periods
during unfavorable market conditions. Flexibility in its financing
program through this means was maintained by the Treasury throughout the 1932-40 period. (4) The relatively small amount of each individual bill offering permitted the Treasury to schedule its tax date
maturities so as to provide the greatest assistance to the money markets. Thus in March 1938 the maturities of approximately $450
miUions of Treasury bills coming due in the middle of the month were
spread over four days, $150 millions maturing on March 16, and
$100 millions maturing on each of the three days, March 17, 18, and
19. When certificates were used for short-term financing, however,
they were.scheduled to mature on one day—the 15th of the month.
The Treasury, therefore, borrowed temporarily from the Federal
Reserve Banks on one-day certificates of indebtedness which were
renewed in part for several days until aU tax coUections were finally
cleared. The staggered bill maturities, however, provided a better
method for obtaining the same results at each quarterly tax date.
The Banking Act of 1935, moreover, provided that the FederaL
Reserve Banks could purchase Government securities only in the
open market.
Between June 30, 1932, and June 30, 1935, the volume of Treasury
bills outstanding was increased from $616 millions to $2,053 millions.
At the same time, the entire volume of market issues of certificates of
indebtedness outstanding on June 30, 1932—$2,726 millions—was
retired. Since 1935 the bill volume outstanding has varied in amount
and on June 30, 1940, it stood at $1,302 millions. Further data with
respect to the amount of biUs and public issues of certificates of
indebtedness outstanding semiannuaUy between June 1932 and June
1940 are shown in the following table.

269677—41-




60

REPORT OF THE SECRETARY OF THE TREASURY

Public issues of certificates of indebtedness and Treasury bills outstanding at the end
of J u n e and December 1932 to 1939, and J u n e 1940
[In millions of dollars]
Certificates
of
indebtedness

Date

1932—June
December
1933—June...
December
1934—June
December
1935^ June
December..
1936—June..
December
1937—June .
December. _
1938—June.
December
1939—June
. . . _
December._
1940—June

Treasury
biUs

2,726
2.158
2,108
1,628
1,-517

.
. .
.
.. .

.^
.

.....

...

616
642
954
. 1,003
1,404
1,954
2,053
2,404
2,354
2,203
2,303
1,962
1,164
1,306
1,308
1,455
1,302

Total

3,341
2,799
3,063
2,630
2,921
1,964
2,053
2,404
2,354
2,203
2,303
1,962
1,154
1,306
1,308
1,455
1,302

NOTE.—Figures are rounded to nearest million and will not necessarily add to totals.

Until February 1934 and again after the beginning of December
1937 practically all Treasury bill issues were for a term of approximately 91 days. From February 1934 to February 1935, however,
bills were usually for a term of 182 days and between 1935 and 1937
were, except for issues scheduled to mature at income tax periods, for
a term of 273 days. Further details with respect to bill offerings, including the amounts of the issues and the average prices of the bids
accepted, appear among the exhibits in the Annual Reports of the
Secretary of the Treasury for each year during the period.
United States savings bonds.—United States savings bonds, to be
issued on a discount basis with maturities not less than 10 nor more
than 20 years, were authorized by the act of February 4, 1935, amending the Second Liberty Bond Act, as amended. They were first placed
on sale on March 1, 1935, and have been on continuous sale since,
over-the-counter sales for cash being conducted at about 16,000 post
oJS&ces, including all those of the first, second, and third classes and
selected post offices of the fourth class, and maU order transactions
being conducted by the Treasurer of the United States and the Federal Reserve Banks.
Between 1935 and 1940 four series of savings bonds have been issued,
constituting six calendar year series. The general terms of all the
bonds issued have been identical. The bonds are issued on a discount
basis at a price of $75 for each $100 maturity value; they are fully
registered and nontransferable. The bonds are dated on the first day
of the month in which sold, and mature ten years from such date.
They are redeemable before maturity at the option of the owner (but
not within 60 days from issue date) at fixed redemption values, which
increase at the end of the first year and each six months thereafter
to maturity. If bonds are held to maturity the investment yield is



REPORT OF THE SECRETARY OF THE TREASURY

61

about 2.9 percent per annum, compounded semiannually. If redeenied
before maturity at the owner's option, the investment yield is less.
The following table shows the issue price, the redemption value at
the end of the first year and at the end of successive half-year periods
following issue, and approximate investment yields for each of the
denominations in which the bonds are issued.
Issue prices of United States savings bonds, redemption values during successive
half-year periods following issue, and the approximate investment yields
Maturity value.
Issue price

$26.00
$18.76

$1,000 Approximate
$750 investment
yield at beginning of
each halfyear period
(rate percent|
per annum,
Redemption values during each period
compounded
semiannually)

Period after issue date

First 3^ y e a r . . .
K to 1 year
1 to IH years..IK to 2 years...
2 to 2K years...
2}/^ to 3 years...
3 to 3H years...
Z}4 to 4 years...
4 to 43^ years..i}4 to 5 years.5 to 5H years...
6H to 6 years...
6 to &}4 y e a r s . . .
63^ to 7 y e a r s . . .
7 to 73^ y e a r s . . .
73^ to 8 y e a r s . - .
8 to 83^ y e a r s . . .
83^ t o 9 y e a r s . . .

9 to 93^ years.._
93^ to 10 years..
Maturity value

$18.76
18.75
19.00
19.25
19.50
19.75
20.00
20.25
20.50
20.75
21.00
. 21.25
21.50
21.75
22.00
22.60
23.00
23.50
24.00
24.60
25.00

$50.00
$37. 50

$37.60
37.60.
38.00
38.50
39.00
39. 50
40.0(1
40.50
41.0CI
41. 5(1
42.0(1
42. 5(1
43.0(1
43.60
44.00
46.00
46.00
47.00
48.00
49.00
60.00

$100
$76

$500
$376

$75
75
76
77
78
79
80
81
82

$375

8i
c

8:
^
85
86
87
8;
J
91
(
92
94

96
98
100

376
380
385
. 39(
, 395

40(
405
41(
416
42(
425
43(
435
440
450
460
470
480
490 1
600

$760
750
760
770
780
790
800
810
820
830
840
850
860
870
880
900
920
940
960
980
1,000

Percent
O.OOl
0.00
1.33
1.76
1.97]
2.
2.16|
2.21
2.241
2.26
2. 281
2.29
2.29
2.30|
2.
2.46|
2.67
2.671
2.76
2.84
2.90

Yield
during
remainder
of 10-year
period if
held to
maturity

Percent

2.90
3.05
3.07
3.10
3.13
3.17
3.21
3.27
3.34
3.42
3.52
3.64
3.81
4.02
4.31
4.26
4.21
4.17
4.12
4.08

The statute provides that a single ownership of bonds issued in any
one calendar year be limited to $10,000 maturity value. In addition
to the statutory limitations imposed on the purchase of savings bonds,
other limitations on their purchase have been provided by administrative action. A regulations amendment dated January 18, 1940,
sharply limited further sales to pension funds, retirement funds, etc.
A regulations amendment dated March 27, 1940, and effective April
1, 1940, restricted registrations of savings bonds sold after that date
to natural persons (individuals) in their own right, who are residents
of the continental United States, the Territories and insular possessions
of the United States, the Canal Zone, and the Philippine Islands, or
citizens of the United States temporarUy residing abroad.
The table that follows summarizes the issues and redemptions of
United States savings bonds from March 1, 1935, through June 30,
1940, by years.




62

REPORT OF T H E SECRETARY OF T H E TREASURY

Issues and redemptions of United States savings bonds, by years. Mar. 1, 1935,
to June 30, 1940
[In millions of dollars. O n basis of daily T r e a s u r y s t a t e m e n t s (unrevised), see p . 583]

Fiscal year

1936 ( M a r . 1 t o J u n e 3 0 ) . . .
1936
1937
1938
1939. .
.
1940
Total

Issued
(issue
price)

Outstanding
T o t a l issue R e d e e m e d
at end of
price p l u s
(redemp- year ( c u r r e n t
. accruals
tion value) r e d e m p t i o n
value)

Accruals
certified

62.6
264.0
512.6
487. 5
684.5
1,108. 7

1.2
7.2
17.1
28.0
42.1

62.6
265.2
619.7
504.7
712.6
1,160.8

0.5
11.2
36.2
66.6
82.0
114.3

3,119. 8

96.6

3,215. 5

310.8

- 62.0
316.1
799.6
1,237.7
1,868.1
2,904. 7

NOTE.—Figures are rounded to nearest tenth of a million and will not necessarily add to totals.

Sales of savings bonds have been tabulated in some detail of classification by type of purchaser and by denomination. Redemptions
have not been so tabulated but these have not been large enough to
invalidate the usefulness of the figures based on sales. The sales data
by purchaser appear in the table that follows. These data are on a
calendar year basis rather than on the fiscal year basis used in other
savings bonds tables.
Issues of United States savings bonds, classified by type of purchaser
[Maturity value]

T y p e of purchaser

M a r . 1D e c . 31,
1935

Calendar year
1936

1937

1938

1939

JanuaryJune
19401

Total
M a r . 1,
1935, to
J u n e 30,
1940

A m o u n t i n millions of dollars
Individuals
.
Fiduciaries
B a n k s a n d t r u s t companies
O t h e r corporations a n d associations
Unclassified (purchasers in Territories,
possessions, a n d abroad)
Total

205.6
15.1
34.8
13.2

379.1
20.9
34.6
23.7

523.0
32.1
60.8
32.8

.3

1.0

2.5

269.0

459.3

661.2

657.9
43.1
66.8
44.0

837.7
109.1
94.8
73.1

2.8

5.2

2.5

14.3

714.6 1,119. 9

939.4

4,153. 3

67.7
14.3
10.7
7.0

75 6
8.5
9 4
6.1

636.0
134.7
100.1
66.0

3,139.2
356.0
391.9
252.9

P e r c e n t of total
Individuals
Fiduciaries
B a n k s a n d t r u s t companies
O t h e r corporations a n d associations
Unclassified (purchasers in Territories,
possessions, a n d abroad)
. Total

76.6
5.6
12.9
4.9

82.5
4.6
7.5
6.2

80.4
4.9
9.3
6.0

78.1
6.0
9.3
6.2

74.8
9.7
8.5
6.5

.1

•2

.4

.4

.5

.3

.4

100.0

100.0

100.0

100.0

100.0

100.0

100 0

1 Regulations amendments dated Jan. 18, 1940, and Mar. .27, 1940, limited future sales to individuals.
Further details with respect to these amendments appear on p. 46 of this report.
NOTE.—Dollar figures are rounded to nearest tenth of a million and will not necessarily add to totals.

Details on issues of savings bonds, by denominations, appear in
the table that follows. This table is compiled from the standpoint
of the effective issue date of the bonds on the basis of the Treasury
audit of original registration stubs representing sales by the Postal



63

REPORT OF T H E SECRETARY OF T H E TREASURY

Service, the Federal Reserve Banks, and the Treasury Department.
Accordingly, the figures do not agree exactly with those set forth in
the second preceding table which was compiled from the standpoint of
actual cash transactions.
Issues of United States savings bonds, by denominations, fiscal years 1935 to 1940
[Dollars in millions. On basis of Treasury audit]
$25

Fiscal year

$50

$100

$500

. $1,000

Total

Aggregate maturity value
1935 (4 months).
1936
1937..
1938...
1939...
1940

$3.8
10.6
19.2
24.1
29.8
40.0

$17.8
42.9
66.0
76.2
92.3
129.0

$32.4
74.5
106.3
99.9
123.8
170.8

$72.1
235.6
426.0
435.1
660.6
1,101. 6

$128.8
370.0
629.3
651.5
928.3
1, 470.1

87.7

.

Total

$2.7
6.4
11.7
16.2
21.8
28.9

127.6

424.3

607.6

2, 930.8

4,178.0

Aggregate sale price
$2.0
4.8
8.8
12.1
16.3
21.7

• Total

$2.8
8.0
14.4
18.1
22.4
30.0

$13.3
32.2
49.5
67.2
69.3
96.7.

$24.3
55.9
79.7
75.0
92.8
128.1

$64.1
176.7
319.5
326.3
495.5
826.1

$96.6
277.5
471.9
488.6
696.2
1,102.6

65.8

1935 (4 months)...
1936
1937
1938
1939...
1940

95.7

318.2

466.7

2,198.1

3,133. 5

Percentage distribution of sales
Percent
2.1
1.7
1.9
2.5
2.3
2.0
. . . .

Total

Percent
2.9
2.9
3.0
3.7
3.2
2.7

Percent
13.8
11.6
10.5
11.7
9.9
8.8

Percent
25.2
20.1
16.9
15.3
13.4
11.6

Percent
66.0
63.7
67.7
66.8
71.2
74.9

Percent
100
100
100
100
100
100

2.1

1935 (4 months) .
1936...
1937
1938-.
1939
1940

3.1

10.2

14.5

70.1

100

NOTE.—Dollar figures are rounded to nearest tenth of a million and will not necessarily add to totals.

Additional information on redemptions up to June 30, 1940, of
the various series of savings bonds appears in the table below.
Proportion of savings bonds redeemed by the end of various selected periods, by
denomination
Redeemed by the end of—
Denomination

$26
$50
$100
$500
$1,000

.
.

All denominations . . . .

lyear
(1935-39
series)

2 years
(1935-38
series)

3 years
(1935-37
series)

4 years
(1936-36
series)

5 years
(1935
series)

Percent
11
9
8
6
4

Percent
21
18
16
13
10

Percent
29
26
23
19
14

Percent
34
31
28
23
17

Percent

8

16

23

27

35
32
30
25
20
29

NOTE.—In preparing this table the redemptions of each series of savings bonds were taken at the end of
1, 2, 3, 4, and 5 years, respectively, from the date of issuance and were expressed as a percentage of the total
amount of that series. The percentages for similar periods were then averaged. The time periods are only
approximate because it was assumed that June 30 was the average date of all savings bonds issued during
each calendar year.




64

REPORT OF THE SECRETARY OF THE TREASURY

Adjusted service bonds.—^The Adjusted Compensation Payment
Act of January 27, 1936, provided for the immediate payment of the
face amount of adjusted service certificates issued under the World
War Adjusted Compensation Act, less outstanding loans and unpaid
accrued interest thereon to September 30,1931. All unpaid loan interest which accrued subsequently to September 30, 1931, was canceled
insofar as the veteran was concerned. Payment was to be made by
the issuance of bonds, in the denomination of $50, registered in the
name of the veteran only, any odd amount to be paid by check. The
bonds are dated June 15, 1936, mature June 15, 1945, and are redeemable at any time at the option of the veteran. Interest accrues at
the rate of 3 percent per annum from June 15, 1936, payable with
the principal sum, except that if the veteran chose to redeem his
bonds before June 15, 1937, no interest was payable.
During the period immediately following the issuance of adjusted
service bonds, their redemption was handled through the post offices.
Beginning January 16, 1937, however, the Federal Reserve Banks
were designated as the places of redemption.
Of the $1,837 millions of adjusted service bonds issued to veterans,
$261 millions remained outstanding on June 30, 1940. Issues and
redemptions by fiscal years and amounts outstanding at the end of
each fiscal year are shown in the table following.
Adjusted service bonds issued, redeemed, and outstanding, fiscal years 1936 to 1940
[In millions of dollars. On basis of daily Treasury statements (unrevised), see p. 683]
Issued

Fiscal year

Redeemed

1936 (June 15-30)
1937
1938
1939
1940

1,668.8
140.6
12.8
6.6
8.4

724.2
696.5
82.6
42.4
30.2

Total

1,837.0

Outstanding
June 30

1, 576.0

944.5
388.6
. 318.7
282.9
261.0

NOTE.—Figures are rounded to nearest_tenth of a million and will not necessarily add to totals.

In addition to the adjusted service bonds issued to veterans, a
special series of 4K percent bonds in the amount of $500 millions was
issued to the Government life insurance fund in accordance with
section 5 of the Adjusted Service Compensation Payment Act.
Further details with respect to this issue appear in the 1936 and 1937
Annual Reports of the Secretary of the Treasury.
Special issues
For many years the Secretary of the Treasury has made special
issues of Government interest-bearing securities authorized by the




65

REPORT OF THE SECRETARY OF THE TREASURY

Second Liberty Bond Act available for the investment of trust and
other funds deposited in the Treasury, or available pursuant to appropriations for specific purposes.
The practice of issuing special obligations to Government trust
funds, instead of permitting them to satisfy their investment requirements through open market purchases of Government obligations, has
been followed because of certain important advantages that have
become apparent. Among these have been the following: (1) The
bond market is not disturbed periodically by purchases and sales of
large blocks of securities; (2) the trust funds are provided with a ready
avenue of investment and no attention need be given to short-term
.fluctuations in market prices; (3) in the case of retirement and social
security funds, the funds can always earn the interest return specified
by Congress when it fixed the appropriations for the funds; and (4)
savings can be effected because of the smaller number of securities
to administer, and commissions to brokers on purchases and sales
are eliminated.
Until the end of 1934 the issuance of special obligations was confined largely to Government employees^ retirement funds and the
adjusted service certificate fund. The Social Security Act, enacted
August 14, 1935, however, established new trust funds in the Treasury
to which large sums were soon appropriated or deposited and to which
large amounts of special obligations have been issued. This is shown
in the following table which summarizes, for the period since 1932, the
amounts of special issues outstanding.
Special issues of public debt securities outstanding June-SO, 1932 to 1940
[In millions of dollars.

Face amount.

Fund or account

On basis of daily Treasury statements (unrevised), see p. 683]
1932 1933 1934 1935 1936

Retirement funds:
Civil service retirement and disability fund.. 200
Foreign service retirement and disability
2
fund
2
Canal Zone retirement and disability fund..
Alaska Railroad retirement and disabOity
fund
- _- _
Veterans:
106
Adjusted service certificate fund. ._
Government life insurance fund
Social security and railroad retirement:
Unemployment trust fund...
Old-age reserve account *
Federal old-age and survivors insurance.
trust fund i
Railroad retirement account...
Other:
Postal Savings System
Federal Deposit Insurance Corporation
Total

309

1937

1938

1939

1940

227

239

248

275

309

389

465

650

2
2

2
2

3
2

3
3

3
3

3
4

4
4

4
4

1

1

92

118

166

127

38
500

26
523

• 20
637

11
524

19

312
267

872
662

1,267
1,177

1,710

66

67

1,738
79

(*)

(*)

35
323

126
100

100
100

30
95

45
86

128
101

97
56

396

633

626

1,658

2,676

3,770

4,775

•Less than $500,000.
1 On Jan. 1,1940, the Federal old-age and survivors insurance trust fund took over the assets of the old-age
reserve account.
NOTE.—Figures are rounded to nearest million and will not necessarily add to totals.




66

REPORT OF THE SECRETARY OF THE TREASURY

In connection with the issue of bonds dated December 8, 1939, the
Secretary of the Treasury made an additional provision for some of
the investment needs of Government agencies and trust funds. He
announced that in addition to the $500 miUions of 2 percent bonds
of 1948-50 being offered to the public he would sell $50 miUions of
this series to these agencies and trust funds. A similar allotment in
the amount of $100 millions was made in connection with the sale of
>'
2}i^ percent bonds of 1951-53, dated December 22, 1939.
Matured debt and debt bearing no interest
In addition to its interest-bearing obligations, the United States
carries in its outstanding public debt certain noninterest-bearing
obligations. These include the matured debt on which interest has
ceased and debt bearing no interest—mainly the liabihty on account of
United States notes, and that for national bank notes and Federal
Reserve Bank notes assumed by the United States on deposit of lawful
money for their retirement. The law provides that, upon deposit of
lawful money with the Treasury to meet the redemption of these notes
when presented, the outstanding notes shall be treated as public debt
obligations.
The transfer to the United States of the liability for the major
portion of the national bank notes outstanding occurred in 1935 following the call for redemption of the consols and Panamas bearing
the circulation privilege and the expiration of the circulation privilege
on certain Treasury bonds, as described on page 57 of this report.
The amount of this liabUity at the end of each fiscal year since 1932
and the total amount of national bank notes outstanding on those
dates are shown in the table below.
National bank notes outstanding at the end of the fiscal years 1932 to 1940
[In millions of dollars]
United
Amount
States liaoutstanding bility for redemption

End of year

1932
1933
1934
1935
1936

--

.

741
976
962
773
372

•

67
117
223
645
371

End of year

1937
1938
1939
1940

United
States liaAmount
outstanding bility for redemption
273
221
189
167

272
221
189
167

Interest charge on the public debt
Chart 6 on page 67 and the table that follows show the computed
annual interest charge and interest rate on |public debt obhgations
by classes of securities, quarterly from June 30, 1932, to June 30,
1940. Summary data, by fiscal years from 1916 to 1940, appear in



REPORT OF T H E SECRETARY OF T H E

67

TREASURY

COMPOSITION OF THE COMPUTED INTEREST CHARGE ON AN ANNUAL BASIS.
MONTHLY, FROM JUNE 1932 TO JUNE 1940
1933

1932

1934

1935

1936

1937

1935
1936
C A L E N
D A R

1933

1938

1937
Y E A R S

m9

1939

1938

1940

1940

COMPUTED INTEREST RATES ON AN ANNUAL BASIS, MONTHLY, FROM JUNE 1932 TO
JUNE 1940
1932

1933

1934

1935

1936

1937

1938

1939

1940

PER
CENT

PER
CENT

^
3.0

y

^^^^^^I^

• \ ^ " .

•

^.-..

% "
^
_

^Special Is.-u<is

a.::
r

•-..A
- — ^ '^^''^^"C.

3.5

3.5

^

Qor)ds

^

•

• ^

3.0

y

^ ^ - N ^

2.5

2.5

^^'^--...

\

s

J\

TOTAL^
•"•>^

— X

-.-,

T r e a s u r y Al o t z s ^

V

1.0

Tr<zos u r y B i l l s
a n d Ca> r t i f i c a t z s

.5

^

-«»_„
1932

1933




- ^

1935
1936
C A L E N D A R
CHAET 6.

'"

N^'-^^^'-^
1937
1938
Y E A R S

,
1939

1940

68

REPORT OF THE SECRETARY OF THE TREASURY

table 46 on page 774. Data on the net expenditures for interest
during the various fiscal years appear in table 6 on page 642.
Computed annual interest charge and interest rate for bonds, notes, certificates of indebtedness, and bills, and special issues, quarterly, from June 1932 to June 1940
FDollars in millions. O n basis of daily Treasury statements (unrevised), see p .5831
Public issues
Special issues
Month

Bonds

Charge

Rate

Notes

Charge

•Percent
1932: June
Sept
Dec
1933: M a r
June
Sept
Dec
1934: M a r
June
Sept
Dec
1935: M a r
June
Sept..
Dec
1936: Mar_
June
S(3pt._
Dec.
1937: M a r
June
Sept
Dec
1938: M a r
June...
SeptDec
1939: M a r
June
Sept

Dec.
1940: Mar
June

i
__.
_.__
:__
.- -

_
_-_

$542
542
541
542
641
569
590
590
609
581
573
553
494
470
473
609
.584
600
633
652
653
655
670
686
714
738
771
811
815
820
861
876
869

3.8053
3.8047
3.8066
3.8068
3.8062
3. 7740
3. 7895
3. 7888
3. 6881
3. 6514
3. 6294
3. 4041
3.3087
3. 2867
3. 2219
3.1840
3.1357
3.1180
3. 0785
3.0634
3. 0629
3.0623
3.0480
3.0359
3.0242
3. 0053
2.9718
2.9584
2.9581
2. 9577
2.9127
2.9119
2.9063

Rate

Charge

Percent
$39
86
91
99
133
139
138
188
185
206
231
226
233
254
255
249
237
228
209
194
207
192
189
175
146
144
135
108
105
105
84
78
80

3.1190
3.0527
2.9700
2. 9414
2.9239
2. 8302
2.8296
2.8045
2. 7767
2. 6724
2. 5109
2.4619
2. 3246
2. 2146
2.1596
2.0895
2. 0798
2.1053
2. 0305
1.9804
1.9450
1.8175
1.7960
1. 7403
1. 5976
1. 5932
1.6836
1. 4860
1.4477
1.4478
1. 3592
1. 2679
1. 2555

Tot l
a

Certificates and
bills

$78
60
60
66
56
28
30
39
34
25
4
3
3
2
3
2
3
3
3
6
10
12
9
5
1
1

R
(*)

Rate

Percent
2.3248
2.0922
1.7814
2.1394
1. 7928
1.2218
1.1433
1. 2661
1.1603
.9819
.1878
.1656
.1304
.1274
.1355
.1228
.1455
.1487
.1462
.2519
.4241
.5032
.4638
.2666
.1006
.0640
.0199
.0027
.0101
.0576
.0224
. 0016
.0378

Charge

Rate

Percent
$12
15
14
13
13
15
15
15
15
18
19
19
21
25
25
25
21
21
20
25
55
65
74
82
86
94
100
108
117
126
131
137
145

4. OOOO
4. OOOO
4. OOOO
4. OOOO
4. OOOO
4. OOOO
4. OOOO
4.0000
3.8233
3. 8470
3. 4800
3.4759
3. 2894
3. 6202
3. 4509
3.4412
3. 3169
3. 2803
3. 2158
3.1612
3.5279
3.4295
3. 3218
3.2528
3. 2180
3. 2135
3.1726
3.1235
3. 0913
3.0981
3.0979
3.0623
3.0266

Charge

Rate

Percent
$672
3.6052
703
3.4630
3.4069
697
719
3. 4266
3. 3497
742
751
3.3132
3. 2964
773
831
3. 2345
3.1810
842
830
3.1180
827
2.9601
801
2.8574
751 . 2. 7156
2. 6432
751
756
2. 6537
786
2. 5683
2. 5617
845
853
2. 5780
2. 5696
866
2. 5731
876
2. 5822
924
2. 5495
924
2. 5678
942
2. 5631
948
2. 5894
947
2. 5820
977
2.6858
1,006
2 6032
1,027
1, 037 2. 5998
1,052
2.6073
1,077
2. 5977
2. 5974
1.090
1,095
2. 5831

*Less than $500,000.
NOTE.—Figures are rounded to nearest million and will not necessarily add to totals.

Debt retirements
The cumulative sinking fund, provided for by section (6) of the
Victory Liberty Loan Act, as amended, was affected by the passage
of three acts in 1932 and thereafter. Section 308 of the Emergency
Relief and Construction Act of 1932, approved July 21, 1932, as
amended, provided for annual additions to the sinking fund appropriations in amounts equal to 2^ percent of the aggregate expenditures
under title I I I (public works) of that act. Section 210 (b) of the
National Industrial Recovery Act, approved June 16, 1933, as
amended, provided annual additions to the sinking fund appropriation in amounts equal to 2]^ percent of the aggregate expenditures
under title I I (public works and construction projects) of that act.
Section 20 (b) of the Gold Reserve Act of 1934, approved January
30, 1934, provided that the appropriations to the sinking fund.



REPORT OF THE SECRETARY OF THE TREASURY

69

which had previously been restricted to the retirement of issues
outstanding on July 1, 1920, and to issues subsequently made for
refunding purposes, be extended to cover the retirements of any
bonds and notes issued under the Second Liberty Bond Act, as
amended.
Between 1932 and 1940, the operations of the cumulative sinking
fund were confined largely to the payment of maturing bonds and
notes presented to the Treasury for cash redemption. Inasmuch as
most bonds and notes maturing during the period were refunded into
new securities, the sinking fund appropriations were allowed to accumulate, since to have exhausted the full credit available by redeeming
maturing securities for cash would have required a corresponding
increase in the cash offerings of securities without changing the net
amount of the public debt outstanding. Tables covering transactions
on account of the fund for each fiscal year, together with accumulation
figures since 1920, will be found in the tables in this and previous
Annual Reports of the Secretary of the Treasury.
In addition to the requirements for the sinking fund, the statutes
require that certain other funds received by the Treasury be applied
to debt retirement. The amounts of such funds so applied during each
fiscal year since 1915 and the amount of the public debt retirements
chargeable against the sinking fund are shown in the table on page 768.
Title I I I of the Revenue Act of 1940, approved June 25, 1940,
established a special fund for the retirement of the national defense
series of Treasury obligations issued pursuant to the authority of that
act amending the Second Liberty Bond Act, as amended. The
statutory provisions with respect to this fund appear in exhibit 19
on page 442.
Statutory debt limitation
The Second Liberty Bond Act of September 24, 1917, as amended,
under which public debt operations are now conducted, authorizes:
(1) In section 1, the issuance of bonds of the United States, bearing
interest, and in section 22, the issuance of United States savings bonds
on a discount basis, both adapted for long-term financing; (2) in
section 5, the issuance of interest-bearing certificates of indebtedness
and Treasury bills sold on a discount basis for maturities not exceeding
one year; and (3) in section 18, the issuance of interest-bearing notes of
the United States for maturities from one to five years. The total
amount of these classes authorized to be issued and outstanding at any
one time is limited by section 21 of the act (as added February 4, 1935,
and amended May 26, 1938, July 20, 1939, and June 25, 1940), which
provides as follows:
"(a) The face ainount of bonds, certificates of indebtedness, Treasury bills,
and notes issued under the authority of this act, and certificates of indebtedness
issued under the authority of section 6 of the First Liberty Bond Act, shall not
exceed in the aggregate $45,000,000,000 outstanding at any one time.



70

REPORT OF THE SECRETARY OF THE TREASURY

*'(b) In addition to the araount authorized by the preceding paragraph of this
section, any obligations authorized by sections 5 and 18 of this act, as amended,
not to exceed in the aggregate $4,000,000,000 outstanding at any one time, less
any retirements made from the special fund made available under section 301 of
the Revenue Act of 1940, may be issued under said sections to provide the Treasury
with funds to meet any expenditures made, after June 30, 1940, for the national
defense, or to reimburse the General Fund of the Treasury therefor. Any such
obligations so issued shall be designated 'National Defense Series'."

An historical summary of the debt limitation now fixed by section 21
of the Second Liberty Bond Act, as amended, follows.
Summary of the history of the debt limitation under section 21 of the Second Liberty
Bond Act, as amended
Provision

Act
Sept. 24,1917
Do
A p r . 4,1918
Do
July
Mar.

9,1918
3,1919

Do
N o v . 23,1921
J u n e 17,1929
Mar. 3,1931
Jan. 30,1934
Feb.

4,1935

Do
Do
M a y 26,1938
July

20,1939

J u n e 25,1940

Sec. 1 (40 Stat. 288) authorized b o n d s in t h e a m o u n t of
Sec. 6 (40 Stat. 290) authorized certificates of indebtedness o u t s t a n d i n g at
a n y one t i m e (revolving a u t h o r i t y )
....
(40 Stat. 302) a m e n d i n g sec. 1, increased authorized a m o u n t of b o n d s to
(40 Stat. 604) a m e n d i n g sec. 5, increased authorized a m o u n t of certificates
o u t s t a n d i n g to
(40 S t a t . 844) a m e n d i n g sec. 1, increased authorized a m o u n t of b o n d s to
(40 S t a t . 1311) a m e n d i n g sec. 5, increased authorized a m o u n t of certificates
outstanding t o . .
(40 S t a t . 1309) sec. 18 a d d e d , authorized issue of n o t e s ^ n t h e a m o u n t of
(42 Stat. 321) a m e n d i n g sec. 18, created revolving a u t h o r i t y for issue of notes.
a n d limited a m o u n t o u t s t a n d i n g a t a n y one t i m e to
(46 S t a t . 19) a m e n d i n g sec. 5, authorized issue of T r e a s u r y bills as well as
certificates, limiting a m o u n t of b o t h o u t s t a n d i n g a t a n y one t i m e to
(46 S t a t . 1506) a m e n d i n g sec. 1, increased authorized a m o u n t of b o n d s to
(48 S t a t . 343) a m e n d i n g sec. 18, increased authorized a m o u n t of notes outs t a n d i n g to
(49 S t a t . 20) a m e n d i n g sec. 1, created a revolving a u t h o r i t y for t h e issue of
b o n d s , limiting t h e a m o u n t o u t s t a n d i n g a t a n y one t i m e to
(49 Stat. 21) sec. 21 a d d e d , consolidating t h e limitation on issue of certificates a n d bills (sec. 5) a n d limitation on issue of notes (sec. 18). Aggregate a m o u n t o u t s t a n d i n g of securities u n d e r b o t h sections
(49 S t a t . 21) sec. 22 a d d e d , authorizing issue of U n i t e d States savings b o n d s ,
a m o u n t issued to b e included in t h e limitation in sec. 1.
(52 Stat. 447) a m e n d i n g sees. 1 a n d 21, consolidated in sec. 21 all limitations
on issue of b o n d s , certificates, T r e a s u r y bills, a n d notes ( o u t s t a n d i n g
b o n d s limited to $30,000,000,000). S a m e aggregate total o u t s t a n d i n g
(53 S t a t . 1071) a m e n d i n g sec. 21, r e m o v e d limitation on bonds w i t h o u t
change in total authorized o u t s t a n d i n g of b o n d s , certificates, T r e a s u r y
bills, a n d notes
( P u b l i c N o . 656, 76th Cong.) a m e n d i n g sec. 21, authorized additional issues of certificates. T r e a s u r y bills, a n d notes " n o t to exceed in t h e aggregate $4,000,000,000 o u t s t a n d i n g a t a n y one t i m e , less a n y r e t i r e m e n t s
m a d e from t h e special f u n d " arising from specified defense taxes, a n y
such issue to be designated " N a t i o n a l Defense Series"

> L i m i t a t i o n on issue.
> L i m i t a t i o n on a m o u n t o u t s t a n d i n g .
» L i m i t a t i o n on issue less r e t i r e m e n t s .




Amount
» $7, 538,945,460
3 4,000, 000,000
1 12,000, 000,000
2 8,000, 000,000
1 20,000, 000,000
210,000, 000,000
1 7,000, 000,000
2 7, 500,000,000
210,000, 000,000
000,000
1 28,000,
000, 000
210,000,
000,000
2 25,000,
2 20,000,000,000

2 45,000,000,000
2 45,000,000,000

3 4,000,000,000

REPORT OF THE SECRETARY OF THE TREASURY

71

The two tables t h a t follow show the debt position of the United
States Government on June 30, 1940, under limitations imposed by
section 21 of the Second Liberty Bond Act, as amended.
Statement of the debt position of the Government under limitations imposed by section
21 of ihe Second Liberty Bond Act, as amended, as of June SO, 1940
General limitation under sec. 21 (a):
Total face amount which may be outstanding at any one time
Face amount outstanding as of June 30,1940:
Interest-bearing securities:
Bonds:
Treasury
$26,554,797,450
United States savings (maturity value)
13,754,222,850
Adjusted service...
761,187,775
Total bonds
Treasury notes
Certificates of indebtedness
Treasury bills (maturity value)

$46,000,000,000

$31,070,208,075
8,936,036,100
1,721,300,000
1,302,194,000

Total interest-bearing securities
Matured obligations on which interest has ceased

$43,029,738,175
189,385,200

Total face amount of securities outstanding

43,219,123,375

Total amount of authorization unused as of June 30,1940

1,780,876,625

National defense limitation under sec. 21 (b): 2
Total face amount which may be outstanding at any one time
Less: Eetirements under sec. 301, Revenue Act of 1940.
...
Net face amount which may be outstanding at any one time
Total face amount of securities outstanding as of June 30,1940
Total amount of authorization unused as of June 30, 1940
1 Approximate miaturity value; current redemption value, $2,904,699,343.
2 These securities may consist of notes, certificates of indebtedness, and Treasury bills.

4,000,000,000
None
4,000,000,000
None
4,000,000,000

Reconciliation of the debt position under section 21 of the Second Liberty Bond Act,
as amended, with the gross public debt of the Government as shown in the daily
Treasury statement as of June SO, 1940
Total face amount of securities outstanding limited by
sec. 21 of the Second Liberty Bond Act, as amended:
Under limitation imposed by sec. 21 (a)
$43,219,123,375
Less: Unearned discounton savings bonds (difference between current redemption value and
maturity value)
849,523,607
Under limitation imposed by sec. 21 (b)
Total
Add: Securities outstanding not subject to limitation under sec. 21:
Interest-bearing
Matured obligations on which interest has ceased
Debt bearing no interest
Gross public debt outstanding




$42,369,599,868
None
$42,369,699,868
196,281,260
15,205,990
386,443,919

597,931,169
42,967,531,037

72

REPORT OF THE SECRETARY OF THE TREASURY
SECURITIES GUARANTEED BY THE UNITED STATES
Fiscal year 1940

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.
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 those corporations and agencies desiring to do so can
arrange to have their obligations serviced through Treasury facilities.
As a result of this policy the Secretary of the Treasury during the
fiscal year 1940 made available the facilities of the Department
to handle the issuance to the public of obligations of the Commodity
Credit Corporation and Reconstruction Finance Corporation, and
the redemption of obligations of the Home Owners' Loan Corporation,
the Commodity Credit Corporation, and the Federal Farm Mortgage
Corporation. Major financing operations conducted during the
year are shown below.
Major financing operations conducted by the Treasury during the fiscal year 1940
for agencies issuing securities guaranteed by the United States
Date

Issue

Aug. 1,1939

H% Commodity Credit Corporation notes of series D, due Aug. 1,1941:
For cash (at par)
1% Commodity Credit Corporation notes of series E, due Nov. 15,1941:
In exchange (at par) for %% Commodity Credit Corporation notes of
series C, maturing Nov. 2, 1939
1% Reconstruction Finance Corporation notes of series S, due July 1, 1942:
For cash (at par)

Amount

New offerings

Nov. 2,1939
Nov. 10,1939

Maturities
Aug. 1,1939
Sept. 3,1939
Nov. 1,1939
Nov. 2,1939
May 15,1940

2^4% Home Owners' Loan Corporation bonds' of series B, maturing Aug. 1,
1949, called for redemption Aug. 1, 1939, which did not accept exchange
offering dated June 1,1939
...
IH% Federal Farm Mortgage Corporation bonds, maturing Sept. 3,1939...
1H% Federal Farm Mortgage Corporation bonds, maturing Nov. 1,1939.-.
H% Commodity Credit Corporation notes of series C, maturing Nov. 2,
1939. Of the amount maturing, $204,241,000 were exchanged for series E,
issued Nov. 2, 1939.
%% Home Owners' Loan Corporation bonds of series K, maturing May 16,
1940
....




$202, 653,000
204,241,000
275,868,000
682,662,000

217,494,150
100,122,000
9, 900,000
206,174,000
127,867, 400
661, 557, 550

EEPORT OF THE SECRETARY OF THE TREASURY

73

Copies of offering circulars, announcements of subscriptions and
allotments, etc., relating to the foregoing operations will be found as
exhibits 21 to 29 on pages 443 to 455.
The information above does not include small amounts of 2% percent
mutual mortgage insurance fund debentures, series B, called on March
24, 1939, and October 6, 1939, for redemption on July 1, 1939, and
January 1, 1940, respectively. The instructions issued by the Secretary of the Treasury for the redemption of the second-called debentures and also of the third-called debentures are included in the
exhibits on pages 448 and 451.
The net changes during the year of the various classes of securities
guaranteed by the United States are shown in the table that follows. A
detailed statement of these obligations and of certain other contingent
liabilities of the United States as of June 30, 1940, will be found on
page 775.
Comparison of the obligations guaranteed by the United States outstanding June 30,
1939 and 1940, by agencies ^
[In millions of dollars]
Increase or
June 30, 1939 June 30, 1940 decrease (—)

Corporation or agency
Unmatured obligations:
Commodity Credit Corporation
Federal Farm Mortgage Corporation
Federal Housing Administration:
Mutual mortgage insurance fund
Housing insurance fund
Home Owners' Loan Corporation
Reconstruction Finance Corporation
United States Housing Authority

206.2
1,379.4

406.8
1,269.4

200.6
-110.0

2.6
2, 927. 9
819.7
114.2

5.5
2.0
2, 603.4
1,096. 4
114.2

2.8
2.0
-324. 6
276.7

Total unmatured obligations.
Matured obligations, all agencies
Matured interest, all agencies

5,450. 0
.8
19.6

5,497.6
31.3
3.3

47.5
30.4
-16.3

Total, based on guarantees...

2 6,470. 4

3 5, 532.1

_ .
..

_.

61.7

1 Does not include obligations held by the Treasury and reflected in the public debt.
2 Does not include $8.3 millions of obligations issued on the credit of the United States by the Tennessee
Valley Authority.
NOTE.—Figures are rounded to nearest tenth of a million and will not necessarily add to totals.




74

REPORT OF THE SECRETARY OF THE TREASURY

The table that foUows compares, by agencies, the amounts authorized to be outstanding as of June 30, 1940, with the amount actually
outstanding on that date.
Borrowing power and outstanding issues of governmental corporations and credit
agencies whose obligations are guaranteed by the United States,^ June 30, 1940
[In millions of dollars]

Corporation or agency

Borrowing
power

Agencies issuing obligations for cash or in exchange for mortgages:
Commodity Credit Corporation
.
900.0
Federal Farm Mortgage Corporation
2,000.0
Home Owners' Loan Corporation
2 4,750.0
Reconstruction Finance Corporation
3 3.988.2
Tennessee Valley Authority .
_
__
_ ...
70.1
United States Housing Authority
800.0
Subtotal

12,508. 3

Agencies issuing obligations only in payment of defaulted and
foreclosed insured mortgages:
Federal Housing Administration
United States Maritime Commission
Subtotal
Grand total

Outstanding obligations
Held by Held by
Treasury others

7.0
52.3
20.0

406.8
1,269.7
2, 634. 3
1, 096. 4
8.3
114.2

431.8
1,269.7
2,634. ?
1,103.4
60.6
134.2

104.3

5, 529. 7

6,634.0

25.0

7.5

3,000.0
200.0
3, 200.0
15,708.3

Total

7.5
104.3

4 5, 637.2

7.5
7.5
6,64L6

1 Includes Home Owners' Loan Corporation obligations guaranteed as to interest only the issue of which
is included under the Corporation's debt authorization. Includes bonds issued on the credit of the United
States by the Tennessee Valley Authority and held by the Reconstruction Finance Corporation.
2 This is an authorization for the total amount to be issued. The act of May 28,1936, provided that the
$4,750,000,000 may be increased for the purpose of retiring outstanding bonds. This would not affect the
net amount outstanding after June 13,1936, since the Corporation's authority to make loans expired on that
date.
3 Including, to the extent availed of, certain indefinite authorizations for which there is no statutory limitation.
4 Excludes matured interest, all agencies, in amount of $3.3 millions.

Fiscal years 1932 to 1940

Since 1932, certain governmental corporations and agencies have
been authorized to issue bonds, notes, and debentures which are
guaranteed by the United States. These securities are classified as
contingent liabilities of the United States since they are primarily
the obligations of the issuing agencies and the assets of such agencies
are to be used for their payment. These obligations have been of
three types: (1) Those guaranteed as to payment of both principal
and interest, (2) those guaranteed as to the payment of interest only,
and (3) those issued on the credit of the United States.
D a t a as of Jime 30, 1940, on the aggregate amount of these obligations authorized to be outstanding (exclusive of certain indefinite
authorizations for which there is no statutory limitation) appear in
the table above. The tables below show the amounts of these
obligations outstanding at the end of each fiscal year from 1934 to
1940, excluding issues sold directly to the United States Treasury
since the funds for their purchase were obtained by the Treasury by
issues of public debt securities. (Excluding such issues, no guaranteed
obligations were outstanding at the end of the fiscal years 1932 and



75

REPORT OF T H E SECRETARY OF T H E TREASURY

1933.) The chart on page 76 shows the composition of the debt
guaranteed as to payment of both principal and interest, monthly,
December 1933 to June 1940, by agency.
Obligations guaranteed by the United States as to both principal and interest,^ outstanding June 30, 1934 to 1940
[In millions of dollars]
Issuing agency and type of security
U n m a t u r e d obligations (principal
amount):
Reconstruction Finance Corporation, notes
.;
..
Home Owners' Loan Corporation,
bonds
Federal Farm Mortgage Corporation, bonds
Federal Housing Administration:
Mutual mortgage insurance
fund, debentures.
Housing insurance fund, debentures.. J__ _ _
_ _
Commodity Credit Corporation,
notes. _United States Housing Authority,
notes Total unmatured obligations
Matured obligations (principal amount) _
Interest on matured and unmatured
obligations 3
Total

1934

1935

1936

249.8

1937

1938

1939

1940

261.6

255.2

298.9

819.7

1,096. 4

134.3

2,647. 3 3,044.2

2,987.1

2,937.2

2,927.9

2,603 4

311.6

1, 225. 6

1,422. 2 1,409.8

1,379.4

1, 269. 4

.6

2.6

6.5

206.2

206.2

406.8

234.8

1, 422. 2

.1

2.0

114.2
680.8

4,122. 7 4, 718.0

4, 664. 6
(2)

3.5
684.3

28.0

31.6

114.2

4,852. 6 6,450.0
.2
.8

5,497.6
31.3

30.0

4,150. 7 4,749. 6 4, 694. 6

25.6

19.6

3.3

4,878. 4 6,470. 4

5,532.1

1 Exclusive of obligations sold directly to the Treasury because funds for the purchase of these obligations
were obtained by the Treasury by the issue of public debt securities.
2 Data not available.
3 From 1934 to 1939 amounts represent matured interest plus interest accrued but not due, after deducting
amounts of funds deposited with the Treasury to meet interest payments; for 1940 amount represents
matured interest only, for the payment of which funds have been deposited with the Treasury.
NOTE.—Figures are rounded to nearest tenth of a million and will not necessarily add to totals.

Obligations guaranteed by the United States as to interest only, outstanding June 30,
1934 to 1936
[In millions of dollars]
1934

Issuing agency and type of security
Unmatured obligations (principal amount):
Federal land banks, bonds
Home Owners' Loan Corporation, bonds

1935

Matured obligations (principal amount):
Home Owners' Loan Corporation, bonds
Interest on matured and unmatured obligations L

79.1

....

Total unmatured obligations

331.1
611.7
942.8

79.1

.

6.6

1936

3.4
(?)

(2)

1 Matured interest plus interest accrued but not due after deducting amounts of funds deposited with
the Treasury to meet interest payments.
2 Less than $50,000.

Securities issued on the credit of the United States, outstanding June 30, 1939 to 1940
[In millions of dollars]
Issuing agency and type of security
Unmatured obligations:
Tennessee Valley Authority, bonds
269677—41-




1939

8.3

1940

8.3

76

REPORT OF T H E SECRETARY OF T H E TREASURY

The legislative provisions dealing with the issuance of obligations
guaranteed in whole or in part by the United States appear, in general, as parts of the acts establishing the various corporations and
agencies. As a result thereof, the provisions covering the obligations
of the different agencies vary considerably from each other. There
are important differences between agencies, for example, in (1) the
limitations on the amounts and types of guaranteed obligations
INTEREST-BEARING DEBT GUARANTEED AS TO BOTH PRINCIPAL AND INTEREST,
OUTSTANDING MONTHLY FROM DECEMBER 1933 TO JUNE 1940, CLASSIFIED BY
ISSUING AGENCY
1938

1936

1936

1937

C A L E N D A R

1938
Y E A R S

CHART 7.

authorized to be issued; and (2) the requirements set forth with
respect to the manner of issuance, terms, and conditions of the obligations authorized to be issued.
The limitations on the amount of obligations authorized for each
agency or corporation are stated in a number of ways in the statutes.
Thus, in the case of the Federal Farm Mortgage Corporation this
limitation is set at an aggregate amount authorized to be outstanding
at aiiy one time. In the case of the Home Owners' Loan Corporation,
however, the limitation is set at an aggregate amount of obligations
authorized to be issued. In the case of the Eeconstruction Finance
Corporation, the limitation was originally expressed as a multiple of
the Corporation's capital stock, but since 1933 this provision has
been amended from time to time for specific purposes.




REPORT OF THE SECRETARY OF THE TREASURY

77

The statutes relating to guaranteed obligations all provide that the
terms and conditions of such obligations must be approved by the
Secretary of the Treasury. This coordination of operations has
prevented the issuance of guaranteed obhgations from conflicting with
the issuance of Treasury obligations. Further details with respect to
types of obligations authorized to be issued and data with respect
to the statutory requirements covering their terms and conditions
and exemptions from taxation appear in the paragraphs that follow.
Reconstruction Finance Corporation
The first guaranteed obligations authorized by Congress were
those authorized to be issued by the Reconstruction Finance Corporation. Section 9 of the Reconstruction Finance Corporation Act,
approved January 22, 1932, as amended, provides in part as follows:
"The corporation is autliorized and empowered, witli tlie approval of tlie
Secretary of the Treasury, to issue, and to have outstanding . . . its notes, debentures, bonds, or other such obligations; such obligations to mature not more than
five years from their respective dates of issue, to be redeemable at the option of
the corporation before maturity in such manner as may be stipulated in such
obhgations, and to bear such rate or rates of interest as may be determined by
the corporation: Provided, That the corporation, with the approval of the Secretary of the Treasury, may sell on a discount basis short-term obligations payable
at maturity without interest . . . Such obligations may mature subsequent
to the period of succession of the corporation as provided by Section 4 hereof . . .
The said 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. In the event that the corporation shall be unable to pay
upon demand, when due, the principal of or interest on notes, debentures, bonds,
or other such obligations issued by it, the Secretary of the Treasury shall pay
the amount thereof, which is hereby authorized to be appropriated, out of any
moneys 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 notes, debentures, bonds, or other obligations . . ."

Section 10 provides as follows:
''Any and all notes, debentures, bonds, or other such obligations issued by the
corporation 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."

The first series of obligations issued by the Reconstruction Finance
Corporation under the authority of the foregoing statute—a series
which was sold to the Secretary of the Treasury—was dated April
27, 1932. The first series offered to the public, however, was dated
October 31, 1933. The amounts of these series and of all other
series issued by the Corporation, the redemptions to June 30, 1940,
• and the balance outstanding on June 30, 1940, are shown in the
table that follows. The second following table gives the detail of
the issues and redemptions. Further data covering the individual
issues outstanding on June 30, 1940, appear in table 47, page 775.




78

REPORT OF T H E SECRETARY OF T H E TREASURY

Reconstruction Finance Corporation notes—Issues and retirements, fiscal years
1932 to 1940, and amounts outstanding June 30, 1940
[In millions of dollars]

Date of issue

Series and
coupon rate

Apr. 27,1932
Various, June 30,1932, to Aug. 3,1932..
Various, Aug. 11,1932, to Oct. 22,1932..
Various, Oct. 27,1932, to Feb. 23,1933..
Various, Feb. 23,1933, to Apr. 29,1933..
Various, May 1,1933, to Oct. 30,1933..
Various, Oct. 31,1933, to Jan. 17,1934..

First, 3M%
Second, 3>i%._
Third, 3H%—A,3H%
B,3M%
C,3^%
"Feb. 1, 1934,"
discount.
C-2, 3M%
D-1, H%
D-2, 2%
D-3, H%
D-4, 3%
E,2M%
F,2%
G,3%..:.
H,2%.
DA-1, H % . . . . .
DA-2, 3%
J-l,y8%
J-2,23^%
J-3,H%
J-4,2M%
K, 1H%
—
L-l, H % L-2, 2 H % . . . —
L-3, 3^%L-4,2M%
M-1, 2%
M-2, 2%
N, K%
0-1, 1H%
0-2, 1M%
P,3^%
—Q,l%
R, y8%
—S,l%
-—

Various, Nov. 1,1933, to Dec. 19,1933..
Nov. 1,1933
Nov. 1,1933
Various, Dec. 20,1933, to Oct. 26,1934..
Various, Dec. 20,1933, to Oct. 31,1934..
Dec. 15, 1933
_..
Jan. 10, 1934
Jan. 10, 1934
July 1, 1934-.__
Various, Nov. 26,1934, to Apr. 30,1935.
Various, Nov. 28,1934, to July 1,1935..
Nov. 1, 1934
_.
Nov. 1,1934.._
Various, Nov. 26,1934, to Mar. 16,1936.
Various, Mar. 29,1935, to June 3,1936..
Dec. 16, 1935
July 1,1936
July 1,1936
Various, Nov. 10,1936, to July 7,1937..
Various, Aug. 29,1936, to Apr. 11,1938.
Jan. 1, 1938.
Various, Jan. 3,1938, to July 5,1938...
July 20, 1938
July 1, 1938
Various, July 5,1938, to Nov. 2,1938...
Nov. 1, 1938
July 1, 1938
Feb. 15, 1939
Nov. 10,1939
TotaL.

Maturity date Amount
issued

Amount
retired
to June
30, 1940

Oct. 27, 1932..
Oct. 27, 1932..
Oct. 27, 1932..
Apr. 30, 1933.
Apr. 30, 1933.
Nov. 1, 1933..
Feb. 1,1934..

250
250
175
1,000
335
1,765
134

250
250
175
1,000
335
1,765
134

Demand
Nov. 1, 1934..
Nov. 1,1934..
Nov. 1, 1934..
Nov. 1, 1934..
Dec. 15, 1935.
Jan. 10,1935-.
June 10,1936.
July 1,1937.Demand
Demand
Demand
Demand
Demand
Demand
Dec. 15, 1938Demand
Demand
Demand
Demand
Demand
Demand
July 20, 1941.
Demand-.-..
Demand
Nov. 1, 1941-.
Jan. 1, 1942—
Jan. 15, 1942._
July 1,1942. _

460
475
1, 290
960
860
155
64
16
90
305
260
1,715
1,525
835
445

Amount
outstanding
June 30,
19401

460
475
1,290
960
860
155
64
16
90
305
260
1,715
1,525
835
445
300
2,640
1,340
25
320
916
116

2,640
1,340
25
320
916
116
211
720
168
299
1,027
310
276

720
168
1,020

22,032

7
310
276
1,103

1 Includes issues sold to the Treasury.
NOTE.—Figures are rounded to nearest million and will not necessarily add to totals.

Reconstruction Finance Corporation notes—Details.of issues and retirements, fiscal
years 1932 to 1940
[In millions of dollars]
Issues
To the Treasury To the public

Series and coupon rate
Total

First, 3H%
Second, 3 ^ %
Third, 33^%
A, 3H%
B, 33^%
C, 3H%
'"Feb. 1, 1934," discount
C-2, 3H%
D-1, ^ %
D-2, 2%
n - 3 , H%
-D-4, 3%
1 In accordance with the act




Retirements

For
cash

For refunding

For
cash

For refunding

250
250
250
250
175
175
325
1,000
675
335
335
430
1,765
1,335
134
134
460
460
475
475
1,290
1,290
960 "'"765"
195
860
595
265
of February 24,1938, see page 114.

Total

cash

250
250
175
1,000
335
1,765
134 """i34"
460
475
1,290
960
860 """"345'

By
Byre- cancelfunding ation »

250
250
175
1,000
335
1,765
460
475
1,290
960
515

79

REPORT OP THE SECRETARY OF THE TREASURY

Reconstruction Finance Corporation notes—Details of issues and retirements, fiscal
years 1932 to IP^^—Continued
[In millions of dollars]
Issues
To the Treasury

Series a n d coupon r a t e

Retirements
To t h e public

Total

Total
For
cash

E, 2M%
F, 2%
G, 3%_
H, 2%
DA-1, K %
DA-2, 3%
J - 1 , Ysfo
T 2 2V^
—
J-3, 3^%
J-4, 23^%
K , 11/^%
L - l , y8%
L-2, 2 H %
L-3, H %
L-4, 23^%
M - 1 , 2%
M-2, 2%
N, ^ %
.
. .
0-1, 13^%--0 - 2 . 13^%
P, %%
Q, 1%
R , 74%
s,i%
Total

-

-

-._.

155
64
16
90
305
•305
260
260
1,715
1,525
835 "'""530"
265
445
300
2,640
1,340
25'
25
320
320
916
4i"
116
211
720
168 " " " ' i 6 3 "
299
354
1,027
310
276

. . . . 22, 032

5,848

F o r refunding

For
cash

F o r refunding

155
64
16
26

64'

1,715
1,525
305
180
51

248

2,640
1,340
916
75

By
B y refunding cancelation 1

cash

155
6
64
16
90
305
8O"
260
1,715
1, 525 " " " 9 5 '
835
445 " " " 4 4 5 '
3
300
2,640
1,340
625
25
120
320
207
916
97
116

_.

149
64
16
83
305
180
1,715
1,430
835
297
791

2,640
24
25

200
706
19

3

505
168

5

211
720
5

720
168

210

1,020

2

991

20,929

3,265

297

673

29

310
276
14, 328

1,246

610

14,938

2,726

1 In accordance with the act of February 24^ 1938, see page 114.
NOTE.—Figures are rounded to nearest million and will not necessarily add to totals.

The tables above include all of the issues made by the Reconstruction Finance Corporation. In the table on page 75, however, the
amount of Eeconstruction Finance Corporation securities which were
issued to the Secretary of the Treasury has not been included, because
the funds for their purchase were obtained by the Treasury by issues
of public debt securities.
The Reconstruction Finance Corporation issues offered to the
public for cash and exchange in 1938 and 1939 were general offerings
for which public subscriptions were invited. The Reconstruction
Finance Corporation issues offered to the public from 1933 to 1935
were special purpose obligations, however, and public subscriptions
were not invited. Thus the issue dated October 31, 1933, was offered
in payment for gold. The other public issues during these years aggregated $325 millions. Of this amount $261 millions was issued for cash
and $64 milhons was issued upon refunding. These public issues were
offered to banks and insurance companies from which the Corporation
purchased preferred stock, capital notes, and debentures.
By June 30, 1940, all b u t $7 millions of the issues sold to the Secretary of the Treasury had been retired by the Corporation from proceeds of collections from its outstanding loans and investments, or
from funds derived by the sale of its issues to the public, or by reason



80

REPORT OF THE SECRETARY OF THE TREASURY

of the cancelation of notes provided by the act of February 24, 1938.
Under that act the Secretary of the Treasury was authorized to cancel
obligations of the Reconstruction Finance Corporation incurred in
supplying funds for relief at the authority or direction of Congress
or allocated to other Government agencies. Accordingly, the Secretary canceled $2,726 millions of the Corporation's notes. Further
details concerning this operation appear on page 114 of this report.
In authorizing the Reconstruction Finance Corporation to issue
guaranteed obligations, Congress originally limited the total amount
of such obligations to be outstanding at any one time to a multiple
of the Corporation's capital stock (which at that time amounted to
$500 millions). Thus, under the act of January 22, 1932, the Corporation was authorized to have bonds, notes, and debentures outstanding
in an amount aggregating not more than 3 times its subscribed capital
stock. Under the act of July 21, 1932, the basic limitation was
increased to 6% times the subscribed capital stock. Further amendments subsequently adjusted the basic limitation by adding or subtracting fixed amounts (as the Emergency Appropriation Act of 1935)
or by adding indefinite amounts depending on actual expenditures
made under specific legislation (as the authorization in the Emergency Banking Act of 1933 for the purchase of preferred stock in
banks). The act of June 25, 1940, authorized the Corporation to
retire a portion of its capital stock and provided that this retirement
would not reduce the aggregate amount of obligations authorized
to be outstanding. On June 30, 1940, the total amount of Reconstruction Finance Corporation obligations authorized to be outstanding was $3,988 millions, exclusive of indefinite authorizations for
which there was no limitation. To the extent that further expendir
tures are made for specific purposes, this limitation would be increased
by such amounts without further act of Congress, in accordance
with the terms of the indefinite limitations.
Federal land banks
The Emergency Farm Mortgage Act of 1933, approved May 12,
1933, provided for a series of Federal farm loan obligations which
were to be guaranteed as to interest only by the United States. Section 21 of that act provided in part as follows:
"Until such time as the Farm Loan Commissioner determines that Federal farm
loan bonds (other than those issued under this paragraph) are readilj^ salable in
the open market at a yield not in excess of 4 per centum per annum, but in no
case more than two years after this paragraph takes effect, Federal land banks
may issue farm loan bonds as authorized under this act . . . The aggregate
amount of the bonds issued under this paragraph shall not exceed $2,000,000,000,
and such bonds shall be issued in such denominations as the Farm Loan Commissioner shall prescribe, shall bear interest at a rate not in excess of 4 per centum
per annum, and shall be fully and unconditionally guaranteed as to interest by
the United States, and such guaranty shall be expressed on the face thereof. In



REPORT OF THE SECRETARY OF THE TREASURY

81

the event that it shall appear to the Farm Loan Commissioner that the issuing
bank or banks will be unable to pay upon demand, when due, the interest on
any such bonds, the Secretary of the Treasury shall, upon the request of the
Commissioner, pay the amount thereof, which is hereby authorized to be appropriated out of any money in the Treasury not otherwise appropriated."

Under the provisions of the foregoing section, the Federal land
banks issued approximately $333 millions, par value, of consolidated
Federal farm loan bonds guaranteed by the United States as to interest
only. All these obligations were issued during the fiscal year 1934
and retired during the following fiscal year. They were all issued to
other Farm Credit Administration institutions, or pledged as security
with the Reconstruction Finance Corporation for notes payable or
with the United States for deposits of public money. The statutory
authority for further new issues of these obligations was canceled by
the Federal Farm Mortgage Corporation Act, approved January 31,
1934, section 5 of which provided that after 90 days after the enactment of the act no Federal land bank should issue any new consolidated farm loan bonds carrying the interest guaranty, except for
the purpose of refinancing bonds issued subject to this guaranty.
Home Owners^ Loan Corporation
The Home Owners' Loan Corporation, created under the act approved June 13, 1933, was established for the purpose of refinancing
home mortgages and other obligations and liens secured by home
property. The Corporation obtained its capital funds by the sale of
$200 millions of capital stock to the Secretary of the Treasury.
Funds for this subscription were allocated to the Secretary by the
Reconstruction Finance Corporation as provided by Congress. The
major portion of the funds for the Corporation's refinancing operations was not derived from capital, however, but was obtained by the
sale of the Corporation's bonds for cash or by the issue of its bonds
in exchange for mortgages.
Under the 1933 act, the Home Owners' Loan Corporation was
authorized to issue obligations guaranteed as to interest only by the
United States. During the fiscal years 1934 and 1935 approximately
$635 millions of such obligations carrying an interest rate of 4 percent
were issued. By the act of April 27, 1934, however, the Corporation
was empowered to issue obligations guaranteed by the United States
both as to interest and as to principal. In accordance with the provisions of this act, the Corporation discontinued issuing obligations
guaranteed only as to interest and offered to refund such outstanding
obligations with obligations at a lower rate, which were guaranteed
both as to interest and principal. On July 1, 1935, the remaining
outstanding 4 percent obligations were called for redemption. The
table that follows shows the issues and retirements of these obligations
to Jime 30, 1940.



82

REPORT OF THE SECRETARY OF THE TREASURY

Home Owners^ Loan Corporation--Issues and retirements of bonds guaranteed as to
interest only, and amount outstanding June 30, 1940
[In millions of dollars]
Bonds

Amount

Issued.

635.4

Retired:
By exchange into other issues.
By exchange for cash
By purchase before maturity..
By cash retirements

554.7
40.0
2.6
37.8

Total
Outstanding June 30,1940-.-

635.1
.

Under the 1933 act the total volume of obligations that the Corporation was authorized to issue cumulatively was set at $2,000 millions.
By the act of June 27, 1934, this total was increased to $3,000 millions
and by the act of M a y 28, 1935, was further increased to $4,750
millions, with an additional amount on the account of debt retirement. The statute, as amended, covering the issuance of obligations
by the Corporation guaranteed as to both principal and interest by
the United States appears in part below.
" . . . the Corporation is authorized to issue bonds in an aggregate amount
not to exceed $4,750,000,000, which may be' exchanged as hereinafter provided,
or which may be sold by the Corporation to obtain funds for carrying out the
purposes of this section or for the redemption of any of its outstanding bonds;
and the Corporation is further authorized to increase its total bond issue for the
purpose of retiring its outstanding bonds by an amount equal to the amount of
the bonds to be so retired (except bonds retired from payments of principal on
loans), such retirement to be at maturity or by call or purchase or exchange or
any method prescribed by the Board with the approval of the Secretary of the
Treasury: Provided, That no bonds issued under this subsection, as amended, shall
have a maturity date later than 1952. Such bonds shall be in such forms and
denominations, shall mature within such periods of not more than eighteen years
from the date of their issue, shall bear such rates of interest not exceeding 4 per
centum per annum, 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 Corporation, with the approval of the Secretary of the Treasury. Such bonds 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, . . . In
the event that the Corporation shall be unable to pay upon demand, when due,
the principal of, or interest on, such bonds, the Secretary of the Treasury shall
pay to the holder the amount thereof which is hereby authorized to be appropriated out of any moneys 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 bonds . . . The bonds issued by
the Corporation under this subsection 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 any District, Territory, dependency, or possession thereof, or by any State, county, municipality, or local taxing
authority."
The table t h a t follows summarizes the issues and redemptions of
Home Owners' Loan Corporation bonds guaranteed as to both principal and interest from 1934 to 1940 and shows the amount outstanding on June 30, 1940. The second following table gives the detail of
the issues and redemptions. Further data covering the individual
issues outstanding on June 30, 1940, appear in table 47, page 775.



REPORT OF T H E

SECRETARY OF T H E

83

TREASURY

Home Owners^ Loan Corporation bonds guaranteed as to both principal and interest—
Issues and retirements, fiscal years 1934 to 1940, and amounts outstanding J u n e SO,
1940
[In millions of dollars]

Date of issue

May 1, 1934
Aug. 1, 1934
Aug. 15, 1934
Aug. 15, 1934
Aug. 15,1934
June 1, 1935
July 1-. 1935
Oct. 15, 1936
Oct. 15, 1937
Oct. 15, 1938
May 15, 1939
May 15, 1939
June 1, 1939
Oct. 15, 1939

Series and coupon rates

Call and maturity dates

M a y l , 1944-52.
Aug. 1, 1939-49.
Aug. 15, 1936...
Aag. 15, 1937...
Aug. 15, 1938...
J u n e l , 1939
July 1, 1942^4..
Oct. 15, 1937.....
Oct. 15,1938.—
Oct. 15, 1939....
May 15, 1940....
May 15, 1941....
J u n e l , 1945-47-.
Oct. 15, 1940.....

A,3%..-.
B,2%%..
C,1H%--

n, m%..
E, 2 % . . . .
F, 1>^%.G,2^%..
H, K%—
I, M%-—
J,K%—-

t, %%...

L,H%...
M, 1H%..

Amount
issued

Amount Amount
retired outstandto June ing June
30, 1940 30, 1940 1

1,116
1,340
50
50
50
325
879
132
60
94
128
192
764
69

Total..

1,316
60
50
49
325

779
24
0)
(2)

879

(2)

132
60
94
121
1

5,248

2,614

7
191
755
2,634

1 Includes matured issues on which interest has ceased.
2 Less than $500,000.
NOTE.—Figures are rounded to nearest million and will not necessarily add to totals.
Home Owners' Loan Corporation bonds guaranteed as to both principal and interest—
Detailsof issues and retirements, fiscal years 1934 to 1940
[In millions of dollars]
Issues
Series and coupon
rates

A, 3%
B, 2H%
c,iy2%
D, IH%
E, 2%
F, 13^%
Q,2H%H, }4%.
I/K%
J, }4%
:....
K,||%
L, ^ %
M, 13^%......
N, K % Total

Total

1,116
1,340
50
50
50
325
879
132
60
94
128
192
764
69
5,248

For cash

98
50
50
50
40
50
2 132
2 60
2 94

2 69
692

Retirements

For refunding

In exchange
for home
mortgages

309

709
1,340

285
736

93

128
192
764
2,414

2,142

Total

By cash

338
1,316
50
50
49
325
0)
132
60
94
121
1
9
69
2,614

Byrefunding

117
50
50
49
5

2
35

336
1,164

320
0)

132
60
94
121

1
9

69
748

By purchase
prior to
maturity

1,819

47

1 Less than $500,000.
2 Issued to the Treasury.
NOTE.—Figures are rounded to nearest million and will not necessarily add to totals.

Federal Farm Mortgage Corporation
The Federal Farm 'Mortgage Corporation, created under the act
approved January 31, 1934, was established to facilitate the financing
of loans to farmers by the Land Bank Commissioner, and to aid in
financing the Federal land banks. The authorized capital of the
Corporation was subscribed by the Governor of the Farm Credit



84

REPORT OF THE SECRETARY OF THE TREASURY

Administration on behalf of the United States. For the purpose of
such capital subscription, a $200 million fund which had been previously made available to the Land Bank Commissioner, together
with the proceeds thereof, and the notes and mortgages which had
aheady been taken by the Commissioner, were by the act expressly
transferred to the Corporation.
The act authorized the Federal Farm Mortgage Corporation to
obtain such additional funds for its operations as were necessary by
the issuance of obligations guaranteed by the United States both as
to interest and as to principal. Section 4 (a) of that act as amended
provides in part as follows:
"With the approval of the Secretary of the Treasury, the corporation is authorized to issue and have outstanding at any one time bonds in an aggregate amount
not exceeding $2,000,000,000. Such bonds 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 corporation, with the approval of the •
Secretary of the Treasury. Such bonds 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, . . .
In the event that the
corporation shall be unable to pay upon demand, when due, the principal of, or
interest on, such bonds, the Secretary of the Treasury shall pay to the holder
the amount thereof, which is hereby authorized to be appropriated out of any
moneys iri 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 bonds . . . On such terms and conditions as may be agreed
upon, the corporation may exchange such bonds, upon application of any Federal
land banli for consolidated farm loan bonds of equal face vaiue issued under the
Federal Farm Loan Act, as amended, and may exchange such consolidated farm
loan bonds held by it for bonds of the corporation of equal face value."

Section 12 (b) as amended provides as follows:
"IVIortgages executed to the Land Bank Commissioner and mortgages held by
the Corporation, and the credit instruments secured thereby, and bonds issued
by the 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)."

Within two years after it was organized, the Corporation had
approximately $1,400 millions of guaranteed bonds outstanding, of
which approximately $1,000 millions had reached the public as the
proceeds of loans made either by the Land Bank Commissioner, as
agent for the Corporation, or by the Federal land banks. In the
latter case the land banks had obtained Federal Farm Mortgage
Corporation bonds from the Corporation in exchange for their own
obligations, and disbursed these bonds as loan proceeds instead of
cash.
.
The table that follows summarizes the issues and redemptions of
Federal Farm Mortgage Corporation bonds from 1934 to 1940, and
shows the amount outstanding on June 30, 1940. The second following table gives the detail of the issues and redemptions. Further
data covering the individual issues outstanding on June 30, 1940,
appear in table 47, page 775.



85

REPORT OF THB SECRETARY OF THE TREASURY

Federal Farm Mortgage Corporation bonds—Issues and retirements, fiscal years 1934
to.1940, and amounts outstanding June.30,1940
[In millions of dollars]

Date of issue

Mar. 1, 1934
Mar. 15, 1934
May 15, 1934
Jan. 15, 1935
Feb. 15, 1935
Mar. 1, 1935
Sept. 3, 1935
Aug. 16, 1937
Nov. 1, 1937
Sept. 1, 1939
Sept. 1, 1939

Call and maturity dates

Series and coupon rate

1935,2%
1944-64, 3 ^ % . .
1944-49, 3%.._.
1942-47,3%...
1937, 1K%
1942-47, 2M%-.
1939, 13^%. — .
1938,^8%- — .
1939, l y % . . . . .
1940, H%
1940,^%
TotaL.

Amount
Amount retired to
issued
June 3
1940

Mar. 1 1935
Mar. 15, 1944-64..
May 15,, 1944-49..
Jan. 15, 1942-47...
Aug. 15,
,1937
Mar. 1, 1942-47...
Sept. 3, 1939
Feb. 16,
Nov. 1, 1939..
Mar. 1, 1940Sept. 1, 1940..

77
106
984
238
22
105
100
10
10
15
10

77
12
149
1
22
2
100
10
10
15
10
407

Amount
outstanding June
30, 19401

95
835
236
103
(2)

1, 270

1 Includes matured issues on which interest has ceased.
2 Less than $500,000.
NOTE.—Figures are rounded to nearest million and will not necessarily add to totals.

Federal Farm Mortgage Corporation bonds—Details of issues and retirements, fiscal
years 1934 to 1940
[In millions of dollars]
Issues

Retirements

In exchange for—
Series and
coupon rates

1935, 2%
1944-64, 3}4%
1944-49, 3%
1942-47, 3%
1937. iy.%
1942-47, 2 ^ %
1939,1M%
1938,5^%
1939, 1M%
1940, y %
1940. M%
Total

Total

77
106
984
238
22
105
100
10
10
15
10
• 1, 677

In exchange for—

For Mortgages Federal FOther
FMC
(Land
cash
bonds
Bank
farm
issued
Commisloan
for resioner
bonds
funding
loans)
177
1
278
21
22
77
100
3 10
10
3 15
3 10
621

44
255
103

61
407
103

12

15

414

587

43
11
(2)

54

Total

cash

By purchase
prior to Federal Other
FFMC
maturity farrn
loan
bonds
bonds

77
30
12
149
1
22 " " 2 6 '
2
100 "ioo"
10
5
10
10
15
10
407

164

12
3
101
1
2
1

35
8
10

37
(2)

(2)

1

5
(2)

15
10
151

37

54

1 $35 millions of this amount issued to the Treasury.
2 Less than $500,000.
3 Issued to the Treasury.
NOTE.—Figures are rounded to nearest million and will not necessarily add to totals.

Federal Housing Administration
The Federal Housing Administration was created by the National
Housing. Act, approved June 27, 1934, which was subsequently
amended from time to time. The principal purpose of the Federal
Housing Administration is to provide long-term insurance for real
estate mortgages on small homes and on large scale rental housing
projects. In event of default by the mortgagor, the property secur


86

REPORT OF THE SECRETARY OF THE TREASURY

ing the mortgage may be conveyed after foreclosure by the mortgagee
to the Federal Housing Administrator in exchange for which the Federal Housing Administration issues debentures guaranteed as to principal and interest by the United States. The debentures are obligations of either the mutual mortgage insurance fund, which provides
protection for insured mortgages on small homes, or the housing insurance fund, which provides protection for insured mortgages on rental
housing projects.
Section 204 of the National Housing Act, as amended, provides in
part as follows:
''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 IVIutual
Mortgage Insurance Fund as obligor, shall be signed by the 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 Adniinistrator, 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 yeiar, 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 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 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,
countj^ municipality, or local taxing authority; and such debentures shall be paid
out of the Fund, or the Housing 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 Fund or the Housing Fund
fails to pay upon demand, when due, the principal of or interest on any debentures
issued under this section, the Secretary of the Treasurj^" 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."
The table t h a t follows summarizes the issues and redemptions of
Federal Housing Administration debentures from 1936 to 1940 and
shows the amount outstanding on June 30, 1940.




87

EEiPORT OF T H E SECHETARY OF T.HE: TE.EASURY

Federal Housing Administration debentures—Issues and retirements, fiscal years 1936
to 1940, and amounts outstanding June SO, 1940
[In millions of dollars]

Date of issue and fund

Series and
coupon rate

Maturity date

Amount retired
Amount
issued in
to June 30,1940
exchange
for propAmount
erties
outstandacquired By pur- By cash ing June
chase
under
30, 1940
terms of prior to redempmatution
insurrity
ance
•

Mutual mortgage insurance fund:
Various from Apr.
18, 1936.
Various from July
2, 1936.
Housing insurance
fund:
Nov. 13, 1939

A, 3%

Various from July 1,
1944.

B , 2 3 / 4 % . . . . . Various from July 1,

1943.

D , 23^%

J u l y l , 1969

3.8

0.3

3.5

.2

1.3

3.5
2.0

.5

1.3

7.5

2.0

2.0
9.4

NOTE.—Figures are rounded to nearest tenth of a million and do not necessarily add to totals.

Commodity Credit Corporation
The Commodity Credit Corporation was created as an agency of
the United States under the laws of the State of Delaware on October
17, 1933, pursuant to Executive Order No. 6340, dated October 16,
1933. Its functions as an agency of the Government have been
extended from time to time, and pursuant to the act of March 4,
1939, its functions were extended to June 30, 1941, or such earlier
date as may be determined by the President. The Corporation
makes loans principally to producers to finance the carrying and
orderly marketing of agricultural commodities. Funds for these
operations have been obtained by the sale of $100 millions of capital
stock ($3 millions of which was subscribed by the Secretary of Agriculture and the Governor of the Farm Credit Administration in 1933,
and $97 millions of which was subscribed by the Reconstruction
Finance Corporation in 1936), and by the sale of obligations to the
Reconstruction Finance Corporation, the Treasury, and the public.
Sales of the Corporation's obligations in the market have been
carried on under the act of March 8, 1938, as amended, which authorizes the Corporation to issue obligations guaranteed by the United
States both as to interest and as to principal. The statutory provisions with respect to these obligations are in part as follows:
"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




88

REPORT OF THE SECRETARY OF THE TREASURY

exceeding $900,000,000. 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, . . .
In the event that the Cominodity 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.
*'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 table that follows summarizes the issues and retirements of
Commodity Credit Corporation notes from 1936 to 1940.
Commodity Credit Corporation notes—Issues and retirements, fiscal years 1936 to
1940, and amounts outstanding June 30, 1940
[In millions of dollars]
A i n o u n t issued
D a t e of issue

Maturity
date

Series a n d
coupon r a t e

Total

J u l y 15,1936
A u g . 2,1937
M a y 2,1938
Jan.
6,1939.
J u l y 31,1939
A u g . 1,1939
N o v . 2,1939
J u n e 29,1940

A,H%--

-

B , 1%
C,H%
First, H %
First, 3 ^ % .
D,^%
E , 1%
Second, y %
Total

-

J a n . 15,1937
M a y 2,1938
N o v . 2,1939
A u g . 1,1939
D e c . 31.. 1939
A u g . 1,1941
Nov.-15,1941
D e c . 29,1940

For
cash

72
72
60
60
206
148
10
110
190
1190
. 203
203
204
25 " • • T 2 5 '
970

707

F o r refunding

58

A m o u n t retired
to J u n e 30, 1940 A m o u n t
outstanding J u n e
By
Byre30,1940
cash
funding
72
2
2
10
190

58
204
203
204
1 25

204

... _
263

275

263

432

I Issued to the Treasury.
NOTE.—Figures are rounded to nearest million and will not necessarily add to totals.

United States Housing Authority
The United States Housing Authority was created by the act
approved September 1, 1937, which provided for financial assistance
to States and political subdivisions thereof, for the elimination of
unsafe and insanitary housing conditions, for the eradication of slums,
and for the provision of decent, safe, and sanitary dwellings for families
of low income. The assistance may take the form of capital grants
to public housing agencies or of long-term loans to such agencies
accompanied by annual contributions designed to permit the charging
of low rentals. Funds for the purpose of making loans to these agencies are raised by the Authority through the issuance of corporate
obligations guaranteed both as to interest and principal by the




89

REPORT OF T H E SECRETARY OF T H E TREASURY

United States. The statutory provisions with respect to these obligations are in part as follows:
''The 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 $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.
"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.
''Such obligations 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 payment the Secretary of the Treasury shall succeed to all the rights of the
holder."
Under the foregoing authority, the United States Housing Authority
had offered one issue of $114 millions for public subscription by June
30, 1940. Issues were also made to the Secretary of the Treasury
to provide temporary funds pending the sale of obligations in the
market. The table that follows summarizes issues and redemptions
of United States Housing Authority notes to June 30, 1940.
United States Housing Authority notes—Issues and retirements, fiscal years 1938 to
1940, and amounts outstanding June 30, 1940
[In millions of dollars]

Date of issue

Various May 3, 1938, to
Jan. 19, 1939.
Feb. 1, 1939
Various Nov, 4, 1939, to
Apr. 2, 1940.
May 8, 1940

Amount issued for cash
Series and
Maturity date
coupon
rate
To the
To the
Total
public Treasury
A, M%.... June 30,1939

25

B, 1 ^ % - . . Feb. 1,1944
C, M%—- June 30,1940
D, M%—- Dec, 31,1940

114
25

25

25

20
114

Amount
outstanding June
30,1940 1

25

25

114

20
184

Total

Retired
by cash
to June
30, 1940

. 70

114
20

50

134

1 Includes issues sold to the Treasury.

United States Maritime Commission
The Merchant Marine Act, approved June 29, 1936, as amended,
created the Federal ship mortgage insurance fund, administered by
the United States Maritime Commission, to insure preferred mortgages on vessels of the United States merchant marine, which had secured new loans or advances to aid in financing the construction, reconstruction, or reconditioning of such vessels subsequent to June 23,




90

REPORT OF THE SECRETARY OF THE TREASURY

1938. The act provided that, in event of default of the mortgage, the
fund issue debentures to mortgagees of such vessels in exchange for tbe
mortgaged property. The statutory provisions with respect to the
debentures are, in part, as follows:
"Debentures issued under this section shall be in such form and denominations
in multiples of $50, shall be subject to such terms and conditions, and shall include
such provisions for redemption, if smy, as may be prescribed by the Commission
with the approval of the Secretary of the Treasury, and may be in coupon or
registered form. Any difference between the value of the mortgage determined
as herein provided and the aggregate face value of the debentures issued, not to
exceed $50, shall be adjusted by the payment of cash by the Commission to the
mortgagee from the fund.
"The debentures issued under this section shall be executed in the name of the
fund as obligor, shall be signed by the Chairman of the 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 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 amount so paid the
Secretary of the Treasury shall succeed to all the rights of the holders of such
debentures."
By June 30, 1940, there had been no issues of debentures by the
fund.
Tennessee Valley Authority
The Tennessee Valley Authority, a corporation owned entirely by
the Federal Government, was created by the act of M a y 18, 1933.
The Corporation has no capital stock and its operations are financed
(1) by congressional appropriations, (2) by income from the sale of
power and fertilizer, and (3) by issuance of bonds for specific purposes.
By June 30, 1940, the Tennessee Valley Authority had been authorized to issue bonds by three separate acts—the acts of M a y 18,1933,
August 31, 1935, and July 26, 1939. The act of July 26, 1939, however, canceled the authorization of further issues of obligations under
the 1933 and 1935 acts. The statutory provisions under the various
acts are in part as follows:
Act of May 18, 1933, section 15:
"In the construction of any future dam, steam plant, or other facility, to be
used in whole or in part for the generation or transmission of electric power the




REPORT OF THE SECRETARY OF THE TREASURY

91

board is hereby authorized and empowered to issue on the credit of the United
States and to sell serial bonds not exceeding $50,000,000 in amount, having a
maturity not more than fifty years from the date of issue thereof, and bearing
interest not exceeding 3}i per centum per annum. Said bonds shall be issued and
sold in amounts and prices approved by the Secretary of the Treasury, but all
such bonds as may be so issued and sold shall have equal rank . . . All of such
bonds so issued and sold shall have all the rights and privileges accorded by law
to Panama Canal bonds. . . . "

Act of August 31, 1935, section 15 (a):
"With the approval of the Secretary of the Treasury, the Corporation is authorized to issue bonds not to exceed in the aggregate $50,000,000 outstanding at any
one time, which bonds may be sold by the Corporation to obtain funds to carry out
the provisions of section 7 of this amendatory Act. Such bonds shall be in such
forms and denominations, shall mature within such periods not more than fifty
years from the date of their issue, may be redeemable at the option of the Corporation before maturity in such manner as may be stipulated therein, shall bear such
rates of interest not exceeding 3)4 per centum per annum, shall be subject to such
terms and conditions, shall be issued in such manner and amount, and sold at such
prices, as may be prescribed by the Corporation, with the approval of the Secretary
of the Treasury: Provided, That such bonds shall not be sold at such prices or on
such terms as to afford an investment yield to the holders in excess of 3J^ per
centum per annum. Such bonds 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, . . .
In the event that the Corporation should
not pay upon demand, when due, the principal of, or interest on, such bonds, the
Secretary of the Treasury shall pay to the holder the amount thereof, which is
hereby authorized to be appropriated out of any moneys 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
bonds."

Act of July 26, 1939, section 15 (c):
"With the approval of the Secretary of the Treasury the Corporation is authorized, after the date of enactment of this section, to issue bonds not to exceed in
the aggregate $61,500,000. . . . Such bonds shall be in such forms and denominations, shall mature within such periods not more than fifty years from the date of
their issue, may be redeemable at the option of the Corporation before maturity
in such manner as may be stipulated therein, shall bear such rates of interest not
exceeding 3J^ per centum per annum, shall be subject to such terms and conditions, shall be issued in such manner and amount, and sold at such prices, as may
be prescribed by the Corporation with the approval of the Secretary of the .
Treasury: Provided, That such bonds shall not be sold at such prices or on such
terms as to afford an investment yield to the holders in excess of 3J^ per centum
per annum. Such bonds 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, . . . In the event that the Corporation should not
pay upon demand when due, the principal of, or interest on, such bonds, the
Secretary of the Treasury shall pay to the holder the amount thereof, which is
hereby authorized to be appropriated out of any moneys 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
bonds."

Bonds issued under the 1933 authorization provided the Authority
with funds to finance the purchase of electric transmission properties
in and about Knoxville and Memphis, Tenn., and western Kentucky,
and the construction of lines connecting these properties with the
Tennessee Valley Authority system. These obligations were issued
on the credit of the United States and are held in their entire amount
by the Reconstruction Finance Corporation. They bear interest at
269677—41

8




92

REPORT OF T H E SECRETARY OF T H E TREASURY

the rate of 2 ^ percent per annum. Details concerning the amount
issued appear in the following table:
Bonds issued under the 1933 authorization of the Tennessee Valley Authority Act
and sold to the Reconstruction Finance Corporation
Issue
Series A, Bond No. 1..
Series A, Bond No. 2..
Series B, Bond No. 1..
Series B, Bond No. 2.
Series B, Bond No. 3.
Total

Date of
issue
Sept.
Sept.
June
June
June

1,1938
1,1938
15,1939
15,1939
15,1939

Maturity
date
Sept.
Sept.
June
June
June

1,1943
1,1945
15,1959
15,1960
15,1961

Principal
amount
$2,000, 000
1,000,000
1,300,000
2,000,000
2, 000, 000
8, 300, 000

The bonds shown above are accorded all the privileges of Panama
Canal bonds, including the circulation privilege. The circulation
privilege, however, is no longer accorded other outstanding issues of
United States obligations and at the time that bonds were issued
under section 15 of the Tennessee Valley Authority Act, the Reconstruction Finance Corporation agreed to hold the bonds until their
maturity. As a result of this agreement, these bonds can never
become collateral for circulating notes. By the act of July 26, 1939,
no further issues of obligations can be made under section 15.
Bonds issued under section 15 (a) of the act, as amended, provided
the Authority with funds to finance loans to municipalities and cooperatives made in connection with the disposal of the Authority's
surplus power. These obligations were issued in the amount of
$272,500 and have been sold to the Secretary of the Treasury. By
the act of June 26, 1939, no further issues of these obligations can be
made.
Under section 15 (c) of the act $52 millions have been advanced to
the Tennessee Valley Authority by June 30, 1940, by the Secretary
of the Treasury. These amounts were to finance the acquisition of
certain electric utility properties of the Tennessee Electric Power
Company and the Southern Tennessee Power Company.
ESTIMATED ABSORPTION, BY CLASSES OF HOLDERS, OF THE INCREASE IN THE PUBLIC DEBT AND OBLIGATIONS GUARANTEED BY
THE UNITED STATES DURING THE PERIOD JUNE 30, 1932, TO JUNE
30, 1940

. In the eight fiscal years between June 30, 1932, and June 30, 1940,
the total interest-bearing public debt and obligations guaranteed by
the United States increased by $28.7 billions. Approximately $13.1
billions, or about 46 percent of this increase, was absorbed by commercial and savings banks; $5.3 billions, or 18 percent, by insurance




REPORT OF THE SECRETARY OF THE TREASURY

93

companies; $6.5 billions, or 23 percent, by Federal agencies and trust
funds; and $0.7 billion, or 2 percent, by the Federal Reserve Banks.
Other holders—individuals and corporations other than banks and
insurance companies—absorbed the remaining $3.2 billions of these
obligations, $2.9 billions of which occurred through their acquisition
of United States savings and adjusted service bonds. The figures are
shown in greater detail in the table that follows.
Estimated absorption, by classes of holders, of the increase in the public debt and
obligations guaranteed by the United States, fiscal years 1933 to 1940
[In billions of dollars]
Estimated
amount
Increase in the public debt and obligations guaranteed by the United States:
Public issues:
Marketable:
Public debt obligations
_ __
Obligations guaranteed by the United States
..Total marketable issues
Nonmarketable:
United States savings and adjusted service bonds
Special issues
.---'
Total

___

Absorption i of the debt b y Commercial and savings banks
Insurance companies
Federal agencies and trust funds
Federal Reserve Banks
Other holders:
i
Marketable issues
Nonmarketable iissues

_.-

15.6
5.5
21.1
3.2
4.5

_

-

_

28.7
13.1
5.3
6.5
.7

.

0.3
2.9

Total absorption of public debt and guaranteed securities

3.2
28.7

1 The figures on the commercial and savings bank holdings of Government securities used in arriving at
the increases are taken at book value rather than at par value. As a result, the absorption of Government
securities by these institutions tends to be overstated and the absorption by "other holders" to be understated when Government bonds are selling generally at a premium, as has been the case during most of the
period. The errors so involved are not sufficiently large, however, to invalidate the general conclusions
stated here. The figures for insurance companies. Federal agencies and trust funds, and the Federal
Reserve Banks are reported at par value.
NOTE.—Figures are rounded to nearest tenth of a billion and will not necessarily add to totals.

I t is apparent from the figures in the table above that, since 1932,
individuals and corporations other than banks and insurance companies—classed in the table as ^^other holders'^—have absorbed, on
net balance, a very small proportion of the total increase in the public
debt and guaranteed securities outstanding. In recent years these
individuals and corporations, in the aggregate, have been important
sellers of marketable issues of Government securities. On the other
hand, however, they have been increasing their holdings of United
States savings bonds. Data on the amount of the Government
security holdings of these and of other classes of purchasers, and
the changes, by years, since 1932 appear in the table that follows.
Data on annual and cumulative absorption of such securities are also
shown in the charts on pages 94 and 96.




CO
ESTIMATED ANNUAL ABSORPTION OF THE INCREASE IN THE PUBLIC DEBT AND OBLIGATIONS GUARANTEED BY THE UNITED STATES, BY
CLASSES OF HOLDERS, FISCAL YEARS 1933 TO 1940
DOLLARS"

DOLLARS"
Billions

C o m m e r c i a l and
Savings Banks

Insurance Companies

2.0
1.5
I Q
.5
0

1933

1.5

1934

1936

1937

1938

1939

1940

O t h e r Holders
(Marketable issues)"

1.0
.5

=r?3

0
- .5

-1.0

1935

1933

2.0

1934

1935

1936

1937

1938

1939

1940

1937 1938 1939
V E A R S

1940

Other Holders
-(Non-Marketable Issucs9-

1.5
1.0
.5
0
1933

1934

1935 1936
F I S C A L

1937 1938 1939
Y E A R S

1940

^ United States savings bonds and adjusted service bonds.




1933

1934

1935 1936
F I S C A L
CHART 8.

1937 1938 1939
Y E A R S

1940

- .5

1933

1934

1935 1936
F I S C A L

95

REPORT OF THE SECRETARY OF THE TREASURY

Estimated distribution, by classes of holders, of the public debt and obligations guaranteed 1 by the United States outstanding at the end of each fiscal year 1932 to 1940
[In billions of dollars]

June 30

Commercial and
savings
banks 2

O t h e r holders
Insurance
companies

Federal
agencies
and trust
funds 3

Federal
Reserve
Banks

Total securities

Marketable
issues

N o n m a r - • outstanding
ketable
issues 4

Amount held
1932.
1933.
1934.
1935.
1936.
1937.
1938.
1939.
1940.

6.6
7.9
11.7
14.3
17.4
17.0
16.8
18.8
19.7

0.6
.7
1.5
2.0
2.3
3.6
4.8
5.9
7.1

0.8
1.0
1.6
2.6
3.9
0 5.0
6.2
6.8
6.1

1.8
2.0
2.4
2.4
2.4
2.5
2.6
2.6
2.6

9.3
10.5
10.7
10.5
10.5
11.3
10.7
10.4
9.7

.1
1.2
1.1
1.4
1.9
2.9

19.2
22.2
27.8
31.8
37.7
40.5
41.4
46.3
47.9

0.1
1.2
-.1
.3
.5
.9

3.0
5.6
4.1
6.9
2.8
1.0
3.9
2.6

0.1
1.2
1.1
1.4
1.9
2.9

3.0
8.6
12.7
18.6
21.3
22.3
26.2
28.7

Annual increase or decrease (—) in amount held
1933.
1934.
1935.
1936.
1937.
1938.
1939.
1940.

1.3
3.7
2.6
3.1
-.4.
-.2
2.0

0.2
.5
1.1
1.3
1.1
.2
.6
.3

'

0.1
.8
.6
.3
1.3
1.2
1.1
1.2

0.2
.4

0)

(') . 1
(«)
(')- . 1

1.2
.2
-.3

(«)

.8
-.6
-.3
-.7

Cumulative increase in amount held
1933.
1934.
1935.
1936.
1937.
1938.
1939.
1940.

1.3
5.0
7.7
10.7
10.3
10.1
12.2
13.1

0.2
.7'
1.8
3.1
4.2
4.4
6.0
6.3

0.1
.9
1.4
1.7
3.0
4.2
6.3
6.6

0.2
.6
.6
.6
.7
.8
.8
.7

1.2
1.4
1.1
1.1
2.0
1.3
1.0
.3

1 Includes Home Owners' Loan Corporation issue guaranteed as to interest only.
2 Figures for 1932 and 1933 do not correspond to those published by the Comptroller of the Currency because of the inclusion of data on certain private banks which were not reported to the Comptroller in those
years.
3 Includes exchange stabihzation fund.
4 Excludes United States savings bonds held by banks and insurance companies.
6 Less than $50 millions.
NOTE.—Figures are rounded to nearest tenth of a billion and will not necessarily add to totals.

The foregoing table shows that in nearly every year during the
period covered commercial and savings banks and insurance companies absorbed substantial amounts of Government securities. In
1935, as a matter of fact, this absorption was nearly equal to the total
increase in public issues. This institutionalization of investment has
been one of the significant phenomena that has been noted in the
capital markets. Individuals and nonfinancial corporations appear
to have preferred to place their funds available for investment in bank
accounts and insurance policies, instead of undertaking directly the
investment of these funds in securities.




CUMULATIVE ABSORPTION OF THE INCREASE IN THE PUBLIC DEBT AND OBLIGATIONS GUARANTEED BY THE UNITED STATES, BY
CLASSES OF HOLDERS, SINCE JUNE 30, 1932
DOLL>
Billio ns

»

DOLLARS
^'"'°"^
1 1

1

In :re<asc in To t a l Dc b t

I

i^x

2

32

i

28

1
1

8

1 i
i

24

4

n

20

16

12

8

4

n

1
I
I
C o m m e r c i a l <and
Savings B.ankfl,.,

A

i
•
1
i

1934
1935
C A L E N D A R

i

1
1

1938
V E A R S

1
1

^




S3
O

%
O

W
O t h e r Holders '
( M a r k e t a b l e Issues)

w
O

Federal Reserve Banks

1932

1934

1936

1938

O
I
1 III HI ii.i'iHi'l*v'x"x'^^vr
1932
1934

1936

\

I

I

'
Other Holders
( N o n - M a r k e t a b l e Issues')]

1938

W
S3

1934
1936
C A L E N D A R
CHART 9.

1 United States savings bonds and adjusted service bonds.

CO

1932

1934
1936
C A L EN D A R

1938
Y E A R S

1940

97

REPORT OF THE SECRETARY OF THE TREASURY

The importance of bank and insurance company investment operations in absorbing additions to the amount of Government securities
outstanding is shown in greater perspective in the table below. This
table relates the absorption of public debt and guaranteed securities
by each of the major classes of holders to (1) the total increase in
such securities, (2) the increase in the ^ privately held d e W and
^
(3) the increase in the '^privately held marketable supply'^ of Government securities. The concept of the ''privately held debt^^—i. e., the
amount of obligations that are available for purchase by individuals
and corporations—excludes from the total of the public debt and the
obligations guaranteed by the United States the amount of securities
owned by Federal agencies and trust funds and by the Federal Reserve
Banks, since obligations held by these agencies are not available to
private purchasers. The concept of the ''privately held marketable
supply/' takes into account only those issues traded in the market
and excludes the nonmarketable issues (United States savings and
adjusted service bonds) from the "privately held debt.''
Increase in {1) the total public debt and obligations guaranteed by the United States,
(2) the privately held public debt and obligations guaranteed by the United States,
and (3) the privately held marketable supply of Government securities, fiscal years
1933 to 1940; and the estimated absorption of each by the various classes of holders
[Dollars in billions]
Privately
Privately
held
Total debt held debt i
marketable
supply 2

^
Increase in the public debt and obligations guaranteed by the
United States during the fiscal years 1933-40:
Marketable issues
Nonmarketable issues
. ..
Special issues
-..
Total

_
,

..

. .

Total...
Percent absorbed by:
Commercial and savings banks
Insurance companies
Federal agencies and trust funds
Federal Reserve Banks
Other holders:
Marketable issues..
Nonmarketable issues ^ Total

$18.4

21.6

18.4

13.1
5.3
6.5
.7

13.1
5.3

12.8
5.3

.3
2.9

...
..

$18.4
3.2

28.7

-

Amount.absorbed by:
Commercial and savings banks
Insurance companies . _ - _
Federal agencies and trust funds
Federal Reserve Banks
Other holders:
Marketable issues
Nonmarketable issues ^ . . .

$21.1
3.2
4.5

.3
2.9

.3
18.4

28.7

....

21.6

Percent
46
18
23
2

Percent
61
25

1
10

1
13

2

100

100

100

Percent
69
29

1 Comprises total debt less holdings of Federal agencies and trust funds and Federal Reserve Banks.
2 Comprises privately held debt less nonmarketable issues.
3 Excludes United States savings bonds absorbed by banks and insurance companies.
NOTE.—Figures are rounded to nearest tenth of a billion dollars and to nearest even percent and do not
necessarily add to totals.




98

REPORT OF THE SECRETARY OF THE TREASURY

The trends in the absorption of the increase in the public debt and
obhgations guaranteed by the United States, described in the paragraphs above, have been reflected by marked changes in the distribution of such obligations among the various classes of holders. Banks
and insurance companies, for example, held 72 percent of the privately
held marketable supply of Government securities on June 30, 1940,
compared with approximately 45 percent on June 30, 1932. Data on
the distribution of holdings of the total public debt and guaranteed
securities outstanding on June 30, 1932, and June 30, 1940, by classes
of holders, and a comparison of these holdings with (1) the total debt,
(2) the privately held debt, and (3) the privately held marketable
supply of Government securities appear in the table that follows.
Distribution of (1) the total public debt and obligations guaranteed by the United
States, {2) the privately held public debt and obligations guaranteed by the United
States, and {3) the privately held marketable supply of Government securities
on June 30, 1932, and June SO, 1940, by classes of holders
Amount
(billions of dollars)

Percent of total

Class of holder
June 30,
1932

June 30,
1940

Increase

June 30,
1932

June 30,
1940

Total debt
Commercial and savings banks
Insurance companies
Federal agencies and trust funds
Federal ReserveBanks
Other holders:
Marketable issues
Nonmarketable issues

6.6
.8
.6
1.8

13.1
5.3
6.5
.7

35
4
3
9

41
13
15
5

9.3

9.7
2.9

.3
2.9

49

20
6

19.2

Total debt.

19.7
6.1
7.1
2.5

47.9

28.7

100

100

Privately held debt
6.6
.8
._

Total privately held debt

19.7
6.1

13.1
5.3

40
5

51
16

9.3

9.7
2.9

.3
2.9

56

25
7

16.8

Commercial and savings banks
Insurance companies
Other holders:
Marketable issues
Nonmarketable issues

38.3

21.6

100

100

Privately held marketable supply
Commercial and savings banks
Insurance companies.__
Other holders: Marketable issues.-

.
_

Total privately held marketable supply

6.6
.8
9.3

19.4
6.1
9.7

12.8
5.3
.3

40
5
56

65
17
27

16.8

35.2

18.4

100

100

NOTE.—Figures are rounded to nearest tenth of a billion dollars and to nearest even percent and do not
necessarily add to totals.

In addition to the foregoing data, there is certain other information
available on the holdings of Government securities by the various
classes of investors. Data on the holdings of commercial and savings



REPORT OF THE SECRETARY OF THE TREASURY

99

banks, by classes of banks and by classes of securities; of the Federal
Reserve Banks, by classes of securities; and of Federal agencies and
trust funds, by funds and by classes of securities are presented in the
tables and paragraphs that follow.
The first table that follows and the charts on pages 100 and 104
show the absorption of public debt and guaranteed securities during
the eight fiscal years 1933 to 1940, by various classes of banks.
The principal market among banks for these securities, it is shown,
was among banks in the larger cities.
Distribution of the public debt and guaranteed ^ securities held at the end of each
fiscal year 1932 to 1940, by classes of banks
[In millions of dollars. Book values]

June 30

Weekly
reporting
Weekly
member
reporting
banks in
member
cities outbanks in
side of
New York
New York
City
City

Other
member
banks

Mutual
savings
banks

Other com- All commercial
mercial
and savand savings banks ings banks

Amount held
1932.
1933.
1934.
1935.
1936.
1937.
1938.
1939.
1940.

1,921
2,438
2,926
3,640
4,582
3,447
3,563
4,259
5,238

2,333
3,055
4,213
5, 294
6,217
6,006
5,695
6,312
6,372

1,374.
1,394
2,506
2,496
2,873
3,236
3,085
3,206
3,112

531
550
1,061
1,571
2,082
2,391
2,685
3,043
3,113

467
499
957
1,296
1,604
1,888
1,746
1,971
1,876

2 6,626
2 7,936
111,663
114, 297
17, 358
16, 968
16, 774
18, 791
19,711

Annual increase or decrease (—) in the amount held
1933.
1934
1935.
1936.
1937.
1938.
1939.
1940.

517
488
714
942
-1,135
116
696
979

722
1,158
1,081
923
-211
-311
617

20
1,112
-10
377
363
-151
121
-94

19
511
510
511
309
294
358
70

32
458
339
308
284
-142
225
-95

1,310
3,727
2,634
3,061
-390
-194
2,017
920

32
490
829
1,137
1,421
1,279
1,504
1,409

1,310
6,037
7,671
10,732
10, 342
10,148
12,165
13,085

Cumulative increase in amount held
1933.
1934.
1935.
1936.
1937.
1938.
1939.
1940.

517
1,005
1,719
2,661
1,526
1,642
2,338
3,317

722
1,880
2,961
3,884
3,673
3,362
3,979
4,039

20
1,132
1,122
1,499
1,862
1,711
1,832
1,738

19
530
1,040
1,651
1,860
2,164
2,512
2,582

1 Includes Home Owners' Loan Corporation obligations guaranteed as to interest only.
2 These figures exceed those appearing on page 272 of this report and in the Annual Reports of the
Comptroller of the Currency, 1932 and 1933, by amounts estimated to be held by certain private banks which
were not included in the tabulations made by the Comptroller of the Currency in 1932 and 1933.
SOURCE.—Data for member banks from Federal Reserve Bulletins, JL932 to 1940; for mutual savings banks
and for "all commercial and savings banks," from Annual Reports of the Comptroller of the Currency, 1932
to 1940; figures for "other commercial and savings banks" are residual items.




ESTIMATED ANNUAL ABSORPTION BY BANKS OFj THE INCREASE IN THE PUBLIC DEBT AND OBLIGATIONS GUARANTEED BY THE
STATES, BY CLASSES OF BANKS, FISCAL YEARS 1933 TO 1940
DOLLARS"
Billions

1933

1934

1935 1936
F I S C A L




1937 1938 1939
V E A R S

1940

1933

DOLLARS
Billions

Weekly R e p o r t i n g M e m b e r Banks
in New York C i t y

1934

1935 1936
F I S C A L
CHART 10

1937 1938 1939
Y E A R S

1940

1933

UNITED

O t h e r M e m b e r Banks

1934

1935 1936
F I S C A L

1937 1938 1939
V E A R S

1940

O
O

HE'POBT O'F THE: SEiClilETAIlY OF T H E

TOEASUEY

101

Data on the types of public debt and guaranteed securities absorbed
by banks can be derived, to a limited extent, from an analysis of
investment information contained in reports made at periodic intervals
to the various supervisory agencies. The table that follows shows
the holdings by member banks of the Federal Keserve System of public
debt and guaranteed securities at the end of each fiscal year since
1932, classified by type of security. On June 30, 1940, these banks
owned 75 percent of the public debt and guarinteed securities held by
all the commercial and savings banks in the country.
Holdings of public debt securities and obligations guaranteed by the United States by
member banks, J u n e 30, 1932 to 1940, by classes of bdnks and by types of security
[In millions of dollars. Book valuesl
Public debt securities
June 30

Bills and
certificates

Notes

Bonds

Total

Obligations
guaranteed
by the
United
states

Total

Holdings of member banks in New York City
1932.
1933.
1934.
1935.
1936.
1937
1938.
1939.
1940.

615
638
954
898
1,096
543
222
168
421

185
987
1,084
1,623
1,760
1,426
1,358
908
1,092

1,208
926
i, 015
941
1,340
1,207
1,451
2,284
2,650

•

2,008
2, 551
3,053
3,462
4,196
3,176
3,031
3, 360
4.162

1157
348
567
454
709
1,123
1,324

2,008
2,551
3,210
3,809
4,763
3,630
3,740
. 4, 484
5,486

Holdings of member banks in Chicago
1932.
1933.
1934.
1935.
1936.
1937.
1938.
1939.
1940

106
206
123
63
29
30
12
185
254

57
82
194
373
584
366
313
2? 4

161

72
97
268
330
401
511
535
621
710

234
384
585
766
1,014
907
859
1,040
1,125

176
87
92
U
122
135
134

234
384
661
853
1,106
1,001
981
1,175
1,258

119
571
651
635
718
889
969

1,953
2,483
3,535
4,283
5,000
4.902
4,658
4,991
4,947

125
553
640
635
579
683
695

1,432
1,469
2,007
2,484
2,802
3,155
2,964
3,127
3,030

Holdings of reserve city banks
1932.
1933.
1934,
1935.
1936.
1937.
1938.
1939.
1940.

189
205
281
120
115
li5
69
78
87,

124
681
1,1^8
1,774
2,081
1,777
1,26S
1,014
839

1,639
1,597
2,088
1,818
2,153
2,295
2,603
3,010
3,052

1,953
2,483
3,516
3,712
4,349
4,267
3,940
4,102
3,978

Holdings of country banks
1932.
1933.
1934.
1935.
1936.
1937.
1938
1939.
1940,

Footnote at end of table.




51
64
69
19
26
52
13
].l
36

136
299
446
543
735
792
715
563
451

1,244
1,106
1,467
1, 370
1,402
1, 676
1,657
1,870
1,849'
1

1,432
1,469
1,982
1,931
2,163
2,520
2,385
2,444
2,335

102

KEiPORT GE T H E

SEiQRETARY

OF T H E

TREASURY

Holdings of public debt securities and obligations guaranteed by the United States by
member banks, J u r i e 3 0 , 1 9 3 2 to 1940, by classes of banks a n d by types of security-—
Continued
[In millions of dollars. Book values]
P u b l i c d e b t securities
J u n e 30
Bills a n d
certificates

Notes

Bonds:

Total

Obligations
guaranteed
by the
United
states

Total

T o t a l holdings—All m e m b e r b a n k s
1932
1933
1934
1935
1936
1937
19381939
1940

.
.

962
1,113
1,427
1,099
1,266
821
316
441
797

.

_-.
..

.

503
2,049
2,871
4,314
5,161
4,361
3,653
2,720
2,543

4,163
3,725
4,838
4,458
5, 295
5,689
6,246
7,786
8,261

6,628
6,887
9,137
9,871
11, 721
10, 870
10, 215
10,946
11, 601

1276
1,558
1,950
1,819
2,128
2,831
3,121

5,628
6,887
9,413
11, 430
13,672
12,689
12, 343
13, 777
14, 722

1 A small amount of Home Owners' Loan Corporation bonds guaranteed by the United States as to both
interest and principal are excluded from these figures.
SOURCE.—Board of Governors of the Federal Reserve System, Member Bank Call Reports and Federal
Reserve Bulletins.
NOTE.—Figures are rounded to nearest million and will not necessarily add to totals.

Further data on bank absorption of public debt and guaranteed
securities can be derived from the data on the investments of all commercial and savings banks contained in the reports made to the Comptroller of the Currency, the Federal Deposit Insurance Corporation,
and the Board of Governors of the Federal Reserve System. The
table that follows summarizes these data for December 31, 1938, June
30, 1939, and June 30, 1940. Similar data in the same detail are not
available for previous years.
B a n k holdings of public debt securities and of obligations guaranteed by the United
States, Dec. 3 1 , 1938, J u n e 30, 1939, and J u n e 30, 1940
[In millions of dollars.

Book values]

I n s u r e d commercial b a n k s
Member banks
T y p e of security
New
York
City

Chicago

Reserve C o u n city
try
banks banks

Nonmember
banks

Total
insured
commercial
banks

Other
banks

Totalall commercial
and
savings
banks i

Dec. 31,1938
T'reasury bills
_ __ .
T r e a s u r y notes
Treasury bonds:
M a t u r i n g w i t h i n 5 years
M a t u r i n g in 5 to 10 years
M a t u r i n g in 10 to 20 years
M a t u r i n g after 20 years
T o t a l p u b h c d e b t securities
R F C notes
H O L C bonds
F F M C bonds
Other g u a r a n t e e d obligations.
Total guaranteed obligations...
Total
Footnotes at end of table.




158
1,142

59
291

57
1,224

11
732

4
259

290
3,648

(2)
(2)

(2)
(2)

348
581
534
199
2,963
235
505
98
56
894
3,857

36
134
353
133
1,005
80
11
5
13
109
1,114.

217
1.117
1.185
479
4,278
65
451
166
58
740
5,018

126
622
816
329
2,636
47
358
164
28
597
3,233

53
241
319
181
1,057
9
136
69
14

780
2,694
3,206
1,321
11,939
436
1,460
503
170
2,568
14, 507

(2)

(2)

228
1,284

(2)
(2)

3,132
(2)
(2)
(2)
(2)

364
3,495

8
(2)

15, 070
(2)
(2)
(2)
(2)

2,932
18, 002

I

103

REPORT OF T H E SECRETARY OF TH;E TREASURY

I

Bank holdings of United States Government securities and of securities guaranteed
by the United States, Dec. 3 1 , 1938, J u n e 30, 1939, 'and J u n e 30,1940—Con.
[In millions of dollars.

Book values]

I n s u r e d commercial b a n k s
Member banks
T y p e of security
New
York
City

Chicago

CounReserve
try
city
banks
banks

Total
Nonm e m - insured
comber
b a n k s mercial
banks

Totalall comO t h e r mercial
banks
and
savings
banks i

J u n e 30,1939
T r e a s u r y bills
• 168
T r e a s u r y notes
. ..
908
Treasury bonds:
328
M a t u r i n g w i t h i n 5 years
_
M a t u r i n g i n 5 to 10 years
827
M a t u r i n g in 10 to 20 y e a r s . . - - - . .
756
M a t u r i n g after 20 years
373
Total pubhc debt securities....
R F C notes
H O L C bonds
FFMC bonds.O t h e r g u a r a n t e e d obligations

185
234

78
1,014

11
563

5
206

446
2,925

(2)
(2)

36
119
301
164

273
1,224
1,091
422

144
655
741
329

55
294
262
180

837
3,120
3,152
1,468

(2)
(2) .

3,360

1,040

4,102

2,444

1,002

11,948

3,275

15,223

362
504
165
92

94
18
6
17

112
541
154
82

75
395
161
52

17
158
64
21

659
1,616
551
264

65
293
75
45

724
1,909
625
309

(2)
(2)
(2)
(2)
(2)
(2)

Total guaranteed obligations...

1,123

135

889

683

259

3,090

477

3,568

Total

4,484

1,175

4,991

3,127

1,261

15,038

3,753

18, 791

J u n e 30,1940
T r e a s u r y bills
Treasury notes.
Treasury bonds:
M a t u r i n g w i t h i n 5 years.._
M a t u r i n g in 5 t o 10 years
M a t u r i n g i n 10 t o 20 years
M a t u r i n g after 20 years
T o t a l p u b h c d e b t securities
R F C notes
H O L C bonds
F F M C bonds...
Other g u a r a n t e e d obligations

421
1,092

254
161

87
. 839

36
451

8
156

805
2,699

(2)
(2)

281
1,200
1,036
133

25
137
448
100

239
1,179
1,417
217

138
686
875
150

68
287
334
77

750
3,489
4,110
677

(2)
(2)
(2)
(2)

4,162

1,125

3,978

2,335

931

12, 531

3,204

15, 735

473
590
142
119

97
10
4
23

158
513
159
139

111
345
140
99

31
132
53
32

870
1,589
498
412

135
292
86
92

1,006
1,881
584
505

8
(2)
(2)

Total guaranteed obligations...

1,324

134

969

695

249

3,370

•606

3,976

Total

5,486

1,258

4,947

3,030

1,179

15, 901

3,810

19, 711

1 Includes trust companies, stock savings banks, mutual savings banks, and private banks in United States
and possessions.
2 Detail not available.
NOTE.—Figures are rounded to nearest million and will not necessarily add to totals.
SOURCE.—Board of Governors of the Federal Reserve System, Member Bank Call Reports; Federal Deposit
Insurance Corporation, Statements of Assets and Liabilities of Operating Insured Banks; Annual Reports of
the Comptroller of the Currency; and press release of the Comptroller of the Currency dated October 31,1940.




CUMULATIVE ABSORPTION BY BANKS OF T H E INCREASE IN THE PUBLIC DEBT AND OBLIGATIONS GUARANTEED BY THE UNITED
STATES, BY CLASSES OF BANKS, SINCE JUNE 30, 1932
DOLLARS

t

Billions

i

l

DOLLARS
Billions 1
e l l

l

T o t a l - A l l Commercial and
Savings Banks

13

M
^m\

'

10

^ ^
^ ^ ^ ^
. ^^^^
^

9

i ^ ^ ^ ^ ^

^^^^^M
^^^^^M

8

^^^^^M
^^^^^^^

7

- ^

6

m

5

^^M

^^^^^^S

^^fc

m
m ^^H
^ ^

4

3

^^^^^^M

2

-

0

A

^M
1934
CAL




1936
ENDAR

]

1

1

4

DOLLARS
Billions

1
1
1
1
O t h e r M e m b e r Ban ts
1
1
1

3

1

12

1
1
1
1
1
v^^^^i^iy R e p o r t i n g Member Banks
in New York Citv

A

.„J^^^ip^^!^^

^^M 1

2

^^S
^m\
^m\
^m\

0

^

^

M.B

^^^^

2

0

m^B1

B B HM

M
I

l

l

l

•
K

1938
Y E A R S

HB^H1

J
1

1

1

1

1

M u t u a l Savini^ s Banks

1

,-,»«

1

^

^fc ^^P
M^ H ^^H
B ^ M ^^B
um B ^fc ^^B

. ^

PB

A

1934
1936
C A L E N D A R
. CHART 11.

1

l

Weekly Reportmj^ M e m b e r Banks
O u t s i d e New York C i t v
1

^^R
^^M

M B ^B I

1938
Y E A R S

1934
1936
C A L E N D A R

i-

^B 1

^H1

O

RET*ORT OF T H E SElCiRE'TARY OF T H E

105

TREASURY

With respect to the absorption of pubhc debt and guaranteed
securities by the Federal Reserve Banks during the period June 30,
1932, to June 30, 1940, there are presented in the table that follows
summary data on the amount of such securities held by the Federal
Reserve Banks at the end of each fiscal year since 1932, by classes
of securities, and the changes by years in the amount held. Further
details concerning securities held by the twelve Federal Reserve
Banks appear in the Annual Reports of the Board of Governors of
the Federal Reserve System.
Holdings of public debt securities and obligations guaranteed by the United States
by the twelve Federal Reserve Banks, June 30, 1932 to 1940
[In millions of dollars. Par values]
Liberty
bonds and
Treasury
bonds

June 30

Treasury
notes

Certificates of
indebtedness Guaranteed
and Treasury obligations
bills

Total

Amount held
1932
1933
1934
1935
1936
1937
1938
1939
1940

_-

_.

_

438
441
468
317
316
733
744
911
1,330

_-

_-.

. . .

270
708
1,222
1,511
1,494
1,171
1,165
1,176
1,128

1,076
848
742
605
620
623
655
463

9

1,784
1,998
2,432
2,433
2,430
2,526
2,564
2,551
2,466

An nual increase or decrease ( - ) in amount helc1
1933
1934
1935
1936 . . - - . . .
1937
1938... • :
1939.....
1940

....

.;._.

'

i

3
27
-151
-1
417
° 11
167
419 ;

438
514
289
-17
-323
-6
11
-48

-228
-106
-137
15
3
32
-192
-463

NOTE.—Figures are rounded to nearest million and will not necessarily add to totals.




9

214
434
1
—3
96
38
-13
-85

106

KEIPORT OF T H E

SE!CRETA'R.Y OF T H E

TREASURY

With respect to the absorption, of the public debt and guaranteed
securities by Federal agencies and trust funds, there are presented
in the table that follows data on the amount of such securities held
by agencies and in funds at the end of each fiscal year since 1932, by
class of security, and the changes by years in the amount held.
Holdings of public debt securities and obligations guaranteed by the United States
by Federal agencies and trust funds, J u n e 30, 1932 to 1940
[In millions of dollars. Par values]
Obligations guaranteed by the
United States
held b y -

Public debt securities
Public issues held b y June 30
Other
Federal GovernPostal
Deposit ment life agencies
Savings Insurance insurance and trust
System
fund
funds 1
Corp.

Special
issues 2

Postal
Savings
System

Other
agencies
and trust
funds

Total
securities
held

Amount held
1932
1933
1934
1935
1936
1937
1938
1939
1940

74
132
380
500
693
894
883
876
975

226
213
208
245
264
239
290

28
28
42

197
212
272

61
140
211
238
275
304

239
290
334
406
445
460

309
323
396

633
626
1,558
2,676
3, 770
. 4,775

608
696
35
147
167
167
167
147
147

115
215
209
196
158
139
130

1,466
2,007
2.332
3,604
4,791
5,890
7,080

115
100
-6
-13
-38
-19

771
541
325
1,272
1,187
1,099
1,189

Annual increase or decrease (—) in amount held
1933
1934
1935
1936
1937
1938
1939
1940

58
248
120
193
201
-11
-7

226
-13
-5
37
19
-25
60

14
73
237
-7
932
1,118
1,094
1,005

35
112
20

-20

1 Includes exchange stabilization fund.
2 Detailed information on special issues held by Government agencies and trust funds appears on p. 64.
NOTE.—Figures are rounded to nearest million and will not necessarily add to totals.




107

RE'PORT OF T H E SEiORETARY OF T H E TREASURY

As indicated in the table above, the details on special issues held
by GovernmcDt agencies and trust funds at the end of each fiscal
year from 1932 to 1940, and a discussion of such issues appear on
page 64. Further details on Federal agency and trust fund holdings
of public debt and guaranteed securities as of June 30, 1940, appear in
the table that follows.
Holdings, ofjpublic debt securities and obligations guaranteed by the United States by
Gover^imX^'ust funds and agencies, J u n e 30, 1940
[In millions of dollars^ Par values]
P u b l i c d e b t securities
Treasury bonds
T r u s t fund or agency
Special Issues Issues Issues Issues
issues m a t u r - m a t u r - m a t u r - m a t u r ing
ing
ing
ing
w i t h i n in 5 to in 10 to
after
5 years 10 years 20 years 20 years
Adjusted service certificate f u n d .
)Civil service r e t i r e m e n t a n d disability fund
Federal old-age a n d survivors insurance t r u s t fund
Individual I n d i a n t r u s t funds
M u t u a l mortgage insurance fund a n d
housing insurance fund
P o s t a l Savings S y s t e m .
.
Railroad R e t i r e m e n t A c c o u n t
Unemployment trust fund..
U. S. G o v e r n m e n t life insurance fund
B a n k s for cooperatives .
F e d e r a l D e p o s i t I n s u r a n c e Corporation .
- F e d e r a l h o m e loan b a n k s
Federal i n t e r m e d i a t e credit b a n k s
Federal l a n d b a n k s
-..
F e d e r a l Savings a n d L o a n I n s u r a n c e
Corporation
P r o d u c t i o n credit corporations
Reconstruction F i n a n c e Corporation
O t h e r t r u s t funds a n d c o r p o r a t i o n s . . .

11

11
550




1,738
42

1,738
14
20
650

4
22

0)

1

270

97
79
1,710
524

26
273

1

34

i47

11

85

13'

346
54
75
84

12
56
""(})"

40

6

16

86
8

182
21
53
48

5
5
11
29

17
6
11
4

1
12

2

3
3
9

........

(0

11
7
48
17

0)

105
1

6

1

413

1,392

122
20
49
33
10

10
4,775

24
1,218
79
1,710
828

29

135

86

1 Less than $500,000.
NTOTE.—Figures are rounded to nearest million and will not necessarily add to totals.

269677—41-

Total
public
debt
and
guaranteed
securities .

550

E xchange stabilization fund
T o t a l , t r u s t funds a n d corporai,,.^-tions
•

Obligations
guarOther
public anteed
by the
debt
securi- U n i t e d
States
ties

277

7,080

108

REfPORT OF THE SECRETARY OF THE TREASURY

IMARKET MOVEMENTS IN GOVERNMENT SECURITIES, 1932 TO 1940

Major movements
On January 11, 1932, the yields of Treasury securities stood at the
highest level of the preceding eight years. Since that date, there has
been a more or less continuous decline in the yields of Treasury (and
other high grade) securities. The declining trend of yields of
Treasury securities in the period January 1932 to June 1940 was
interrupted by five major upswings (see chart 12).
COMPARATIVE YIELDS OF AVERAGE OF ALL LONG-TERM TREASURY BONDS AND
AVERAGE OF 3-5 YEAR TREASURY NOTES, MONTHLY, JULY 1931 TO JUNE 1940
l l | M | l l

NTT-"-

III

" l l l | l " l ' l

"'

IPE

4.5

\

/
/

K >v/ • ]
1 i

long-Tzr m Treas ur Y Bonds
r mora y<z ors to ear// est coll da ta

M

... 1

i

\ ^

v..v^

v\

f^

-^^->v

\ ^
.

[\

\r

yzar rrzos jry Notzs

/3-5

Kj:

\.'y'^y\i

rV^

V.

.k
\A*

1931

1932

"^

i.liilnlM
1934
1935
1936
C A L E N D A R

•

-...•

' • • ' • •

1937
E A R S

CHART 12.

The first of these upswings was in March 1933, on the occasion of
the bank holiday. Another upswing in yields of almost equal magnitude ^ occurred during the period of monetary uncertainty at the
end of 1933. A third upswing occurred in the summer of 1934 and
appears to have been precipitated by the unsettlement in European
conditions following the assassination of Chancellor Engelbert Dollfuss
of Austria in July of that year. The yields of Treasury securities then
continued to decline until March 1937, when a sharp rise in yields
occurred immediately following the announcement of the second increase in member bank reserve requirements made in accordance with
1 The monthly averages in the chart show higher yields for December 1933 than for the bank holiday month,
March 1933, although the daily figures for March 3, 1933, were appreciably higher than the yields on any
day in December 1933. The reasons for this condition were the short duration of the bank holiday crisis
and the fact that there were no quotations for the period March 4 to 14, inclusive. When trading was
resumed on March 15, yields had decreased considerably.




'RE'PORT OF T H E SEiCRETARY OF T H E

109

TREASURY

the discretionary power given to the Board of Governors of the Federal
Reserve System by the Banking Act of 1935. The fifth major upward
movement of yields occurred at the time of the outbreak of war in
September 1939, carrying yields up sharply from the all-time low
levels of June 1939. Since September 1939, however, the trend of
declining yields has continued.
Comparisons in the discussion above have been based on the yields
rather than on the dollar prices of the securities. Prices move inversely to yields, i. e., the higher the price the lower the yield and conversely, so that during this period, 1932 to 1940, the decline'in yields
has been reflected in a substantial rise in prices of outstanding securities.
Factors such as the amortization of price premiums on outstanding
issues as their maturity date approaches and the fact that new issues
are generally offered at par tend to distort data on prices. However,
by basing the discussion on yields, the influence of such technical
features is removed and does not cloud the discussion. Price data for
all Treasury bonds and notes outstanding on June 30, 1940, and for all
guaranteed securities outstanding on that date appear in the table on
page 782.
As a result of the declining trends in yields, the Treasury has been
able to issue securities with lower and lower coupon rates. The extent
of this lowering of rates is brought out in the table below which compares the coupon rates carried h j 10-12 year bonds, 12-14 year bonds,
and 5-year notes offered on successive dates since March 1931.
Coupon rates on new issues of Treasury bonds and notes of comparable maturities,
1931 to 1940
Bonds
Date of issue
10-12 years 12-14 years
Mar. 16, 1931
Sept. 15, 1932
Apr. 16, 1934
June 15, 1934
Sept. 16, 1935
Dec. 16, 1935
Dec. 15, 1936
Dec. 15, 1937
Sept. 15, 1938
Dec. 15, 1938 .
Dec. 22,1939
Mar. 15, 1940

Notes, 5
years

33^
.....
'

3J^
234

3K
3

2H
•

JT/
• n /

.

.

IH
2M
_

2M

iKs

H

Relationship between yields on long- and short-term securities
While the yields of all classes of United States Government obligations have been decreasing, as noted above, there has also been a
decline of short-term yields relative to long-term yields. This movement, which has been markedly accelerated within the past few years,
appears to have been in progress since the first World War. The



110

RE'PORT OF T H E SEiCRETARY OF T H E TREASU'RY.

resulting changes in the relationship betwieen yields on short-term
obligations and those on long-term securities are shown, as of selected
dates, in chart 13 on page 111.
An important influence contributing to the present low level of
short-term yields, as compared with the yields of longer maturities, is
the extreme demand for short maturities which has existed during the
greater part of the period since 1932. This demand has come mainly
from banks and is very largely the result of the rapid growth in the
volume of excess reserves pressing for investment. This is shown by
the fact that the principal holders of short maturities in recent years
have been commercial banks. As of June 30,1940, insured commercial
banks held about 54 percent of the privately held marketable supply
of the public debt obligations maturing within five years.
Negative yields on short notes and bonds
Since 1932, prices in the market giving a negative yield to maturity
to the purchaser have become fairly common on Treasury notes and
bonds with short periods left to run. The reason for such negative
yields on the issues nearing their first call or maturity dates arises from
the value which the market has placed on these issues as potential
^ ^rights" to subscribe to new securities which might be offered in exchange for the called or maturing issue. . On June 5, 1939, when prices
of Treasury bonds and notes were at all-time high levels, the seven
shortest issues of Treasury notes and two shortest issues of Treasury
bonds were selling at prices giving negative yields.
On June 29,
-1940, when prices were below their 1939 highs, there were five issues of
notes and two issues of bonds with prices giving negative yields to call
or maturity date. (See table 50, p. 782.)
Premiums on Treasury bills
At various times in 1939 and 1940, the weekly offerings of threemonth Treasury bills were allotted at prices in excess of par. Since
these bills are awarded on a discount basis and carry no coupon, there
was no return to the purchasers of these securities.- The principal
reason for bids in excess of par on Treasury bills appears to arise
from the increasingly large amount of uninvested funds of a short-term
nature seeking placement coupled with the fact that Treasury bills
like all other United States securities are fully exempt from property
taxes, and thus offer an inexpensive medium for the holding of liquid
funds that would otherwise be taxable. During the period under
review Treasury bills were granted no preferential rights of subscription to new issues. .




ill

REPOKT OF THE SECRETARY OF THE TREASURY
YIELDS OF OBLIGATIONS OF THE UNITED STATES ON SELECTED DATES
Based on closing prices of bonds, notes, and certificates of indebtedness
PER
CENT

PER
CENT

^^..^

6.0

6.0
MAY 20,1920
5.5

Notes and Bom
. r/^artially Tax-Exerr^pt)'^

1

^ ^ Certificate
(Par tially Tax. -Ex emp t)

'

^.

5.5

5.0

5.0

4.5

4.5
4.0

4.0
3.5
3.0

JANUARY
1

7 , l 9 2 i3
3.5

——.
4

— \ — Certific<
(Partially Tax-L'xempt)

Notes and Bonds ^
(Partially Tax-EKempt)

2.5
2.0
1.5

1.5

10
YEARS

IS
TO MATURITY

OR

20
CALL

10
15
YEARS TO M A T U R I T Y

OR

20
CALL

CHART 13.

NOTE.—For callable issues, yields are computed to, and issues plotted as of, the earliest call date if the
issue is selling above par, and as of the final maturity date if the issue is selling below par.




112

RE'PORT OF T H E SECRETARY

OF T H E

TREASURY

Movements of Treasury bond yields compared with movements oj yields
oj other high grade securities
From their high level in January 1932, the movement of the yields
of long-term Treasury bonds has been similar to that of other high
grade bonds. The average yield of Treasury bonds with twelve years
or more to earliest call date is compared with the average yield of high
grade corporate bonds and the average yield of municipal bonds in
the chart that follows.
COMPARATIVE YIELDS OF AVERAGE OF ALL LONG-TERM TREASURY BONDS, AVERAGE OF HIGH GRADE CORPORATE BONDS, AND AVERAGE OF MUNICIPAL BONDS,
MONTHLY, JULY 1931 TO JUNE 1940
1931
PERCENT

1932

1935

1936

1937

1939

1940

CHART 14.

During the period since the beginning of 1932, the spread between
the yields of high grade corporate bonds and Treasury bonds and that
between the yields of municipal bonds and Treasury bonds have
tended to diminish. The lowest yield of Treasury bonds during the
period January 1932 to June 1940 was recorded in June 1939. High
grade corporate bonds yields reached a low in April 1940 and municipal
bonds in May 1940.
GENERAL FUND

The General Fund includes all moneys of the Government deposited
with and held by the Treasurer of the United States including the




RE'PORT OF T H E SECRETARY OF T H E TREASURY

113

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 for general, special, and trust accounts.
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, Postal Savings System, and postmasters, clerks of courts,
. disbursing officers, etc., and uncollected items, exchanges, etc.
During the fiscal year 1940 the Department has modified the policy
heretofore followed by it of including on page 1 of the daily Treasury
statement, as liabilities under the General Fund, balances in accounts
carried on the books of the Treasurer of the United States representing
funds deposited with him for the payment of the principal of and
interest on obligations sold by governmental corporations and agencies.
Balances in these accounts amounting to $82,545,606.54 were transferred to the General Fund balance as of September 30, 1939, to be
held by the Treasurer of the United States for the redemption of
obligations of governmental corporations and agencies. Receipts and
expenditures in these accounts were thereafter included in the caption
'*Transactions in checking accounts of governmental agencies (net),
etc.'' on page 3 of the daily Treasury statement.
There was also transferred to the General Fund balance as of
September 30, 1939, an amount of $255,615.16, representing the
balance in the account previously shown as a liability against the
General Fund under the caption ^'Redemption of national bank notes
(5 percent fund, lawful money)." This is also included in the caption
'^Transactions in checking accounts of governmental agencies (net),
etc."
The effect of these transfers was to increase the working balance
and the balance in the General Fund by $82,801,221.70 on the date
of transfer.
The balance in the General Fund is classified according to increment
on gold, seigniorage, and working balance.




114

REPORT OF THE SEiCRETARY OF THE TREASURY

The net'change in the balance of the General Fund from the beginning to the close of the fiscal year is accounted for as follows:
Analysis of the change in the General Fund balance between June 30, 1939, and
June 30, 1940
[On basis of daily Treasury statements (unrevised), see p. 583. For a description of accounts through which
Treasury transactions are effected, see p. 584]
Balance June 30, 1939
$2,838,225,532.52
Add:
Ordinary receipts:
General and special accounts
._
5,387,124,669.76
Trust accounts, increment on gold, etc
2,076,537,744.59
Net increase in gross public debt...
2,527,998, 626.57
Total funds available.
:..
12,829,886,573.44
Deduct:
Expenditures chargeable against ordinary receipts:
General and special accounts
$9,127,373,806.47
Less public debt retirementsi
129,184,100. 00
•
$8,998,189,706.47
Trust accounts, increment on gold, etc
_.' 1,940,953,725.63
Total expenditures (excluding retirements of public debt)
Balance June 30, 1940..J.

- 10,939,143,432.10
1,890,743,141.34

A comparative analysis of the assets and liabilities and the balance
of the General Fund is shown for the beginning and close of the
fiscal year in the table on page 784 of this report.
SECURITIES OWNED BY THE UNITED STATES AND PROPRIETARY
INTEREST IN GOVERNMENTAL CORPORATIONS AND CREDIT
AGENCIES

Securities owned
On June 30, 1940, the United States owned securities consisting of
capital stock, bonds, etc., of governmental corporations and agencies
and indebtedness to the Government by railroads, farmers, shipowners, and others, in the face amount of $3,031 millions; and obligations of foreign governments in the principal amount of $12,661 millions. A statement of the securities owned at the end of the fiscal
years 1933 to 1940 is shown in the table on page 790.
In accordance with the act approved February 24, 1938, the Secretary of the Treasury canceled obligations of the Reconstruction Finance Corporation during the fiscal year amounting to $14,105,200.46,
representing expenditures previously made by the Corporation as
shown in the following table:
Reconstruction Finance Corporatio;n:
Obligations canceled to June 30, 1939
$2,711,952,372.57
Obligations canceled during the fiscal year 1940 on account of expenditures for—
Federal Housing Administrator (sec. 4 of National Housing Act).. $7,640,306.25
Stock of Disaster Loan Corporation (act approved Feb. 11,1937)... 6,000,000.00
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)
464,839.71
Relief (Federal Emergency Relief Act of 1933). _ _
54.50
•
14,105,200.46
Total to June 30, 1940

.—

2,726,057,573.03

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



REPORT OF THE SECRETARY OF THE TREASURY

115

Treasury as required by section 1 (b) of the act of February 24, 1938.
However, the Secretary of the Treasury assigned to the Secretary of
Agriculture on August 21, 1939, the capital stock of the Commodity
Credit Corporation under Executive Order No. 8219, dated Aug. 7,
1939.
The obligations canceled under the authority of the act of February
24, 1938, represent expenditures previously made by the Reconstruction Finance Corporation for the following purposes:
Secretary of the Treasury:
.
'
Amount
For capital of home loan banks (sec. 2 of Reconstruction Finance Corporation A c t ) . . $124, 741,000.00
For capital of Home Owners' Loan Corporation (sec. 4 of Home Owners' Loan Act
of 1933)
200,000,000.00
Land Bank Commissioner:
For loans to joint stock land banks (sec. 30 (a) of Emergency Farm Mortgage Act
of 1933)
:
.
2,600,000.00
For loans to farmers (sec. 32 of Emergency Farm Mortgage Act of 1933; sec. 3 of Federal
Farm Mortgage Corporation Act)
145,000,000.00
Federal Farm Mortgage Corporation—capital (sec. 3 of Federal Farm Mortgage Corporation Act)
.
55,000,000.00
Federal Housing Administrator (sec. 4 of National Housing Act)
81,186,380.80
Governor of the Farm Credit Administration (sec. 5 of Farm Credit Act of 1933).
40,500,000.00
Secretary of Agriculture (for crop loans) (sec. 2 of Reconstruction Finance Corporation
Act; act approved Feb. 4, 1933).
115,000,000.00
Stock of Commodity Credit Corporation (act approved Apr. 10, 1936)..
97,000,000.00
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)
17,500,000.00
Stock of Disaster Loan Corporation (act approved Feb. 11, 1937)
24,000,000.00
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)
17,401,068.14
Relief:
1932:
Governors of States
1
280,025,143.70
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)
•
2 2,800,623.00
1933 (FederalEmergency Relief Actof 1933)
.
499,999,06,5.72
1934 (first paragraph of title II of Emergency Appropriation Act, fiscal year 1935)
• 500,000,000.00
1935 (Emergency Relief Appropriation Act of 1935)
500,000,000.0,0
Expense of 1932 relief advances
.
126,87L85
Net interest paid on above
33,177,419.82
Total
2,726,057,573.03
1 $426,660.21 has been repaid to the Treasury.
2 $2,500,000.00 has been repaid to the Treasury.

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. The amounts of assets behind the securities, however, may
be either greater or smaller than the face or par amount of the securities, as losses or gains from operation of the agencies have taken place
or as assets have been spent pursuant to congressional authorization.
In order to reflect the amount of the Government's interest in
governmental corporations and credit agencies, the Treasury compiles
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 at 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, 1940, appears on page 797, and



116

REPORT OF T H E SEiCRETARY OF T H E TREASURY

a summary table of the Government's proprietary interest in such
agencies as of June 30, 1929 to 1940, is contained on page 805 of this
report.
MONETARY

DEVELOPMENTS

Fiscal year 1940

On July 6, 1939, the President approved an act of Congress which
contained the following provisions:
(1) Extended until June 30, 1941, the powers relating to the
stabilization fund, which were granted to the Secretary of the Treasury
in section 10 of the Gold Reserve Act of 1934, as amended;
(2) Extended until Jun|e 30, 1941, certain powers of the President
with respect to gold and silver, which were granted to him in section
43, title III, of the act approved May 12, 1933, as amended by section
12 of the Gold Reserve Act of 1934, as amended;
(3) Directed the United States Mints to receive silver mined subsequently to July 1, 1939, from natural deposits in the United States
or any place subject to the jurisdiction thereof, subject to regulations
prescribed by the Secretary of the Treasury, and requiring the Director
of the Mint to deduct and retain 45 per centum of such silver as
seigniorage and to deliver to the owner or depositor of such silver 55
per centum in standard silver dollars.
The effect of this last provision was to require the Treasury to
settle for domestic silver, mined after July 1, 1939, at a return to the
depositor of 71.11+ cents per ounce.
On July 25, 1939, the President issued a proclamation modifying
his proclamation of December 21, 1933, as modified. This action
extended until December 31, 1939, the period during which domestic
silver mined after December 21, 1933, and on or before July 1, 1939,
might be delivered to United States Mints.
On September 11, 1939, the Secretary of the Treasury stated that
the United States Government recognized the emergency conditions
that necessitated the setting up of a system of exchange control in
France, and in French territories overseas, and that the Tripartite
declaration continued in effect.
On April 16, 1940, the Treasury Department instructed collectors
of customs and others concerned that the ^'official" rates for the
British pound sterling, the Canadian dollar, the Newfoundland
dollar, and the Australian pound were to be used in the collection of
estimated duties, the appraisement of merchandise, and the final
liquidation of duties, wherever the conversion of suc^h currencies into
United States dollars was necessary for such purposes.
Copies of the act, proclamation, statement, and announcement
referred to above appear as exhibits beginning on page 445.




REPORT OF T H E SEiCRETARY OF T H E TREASURY

117

The progress of conflict in Europe has led this Government to regulate certain transactions, in areas under its jurisdiction, involving
property in which certain foreign countries or their nationals have an
interest. On April 10, 1940, an Executive order and implementing
Treasury regulations were issued providing that payments, transfers of
credit, foreign exchange transactions, the export or earmarking of
coin, bullion, or currency and other similar operations involving Danish
or Norwegian property would be subject to license by the Secretary of
the Treasury. On May 10, 1940, these provisions were extended to
include similar transactions involving the Netherlands, Belgium, and
Luxembourg; on June 17, they were extended to France.
Fiscal years 1933 to 1940

The profound economic.disturbances of the years 1933 to 1940 had
their counterpart in the sphere of money. The United States had
to cope not only with the domestic monetary problems which arose
out of the depression, but also with monetary problems which grew
out of the developments in Europe and Asia.
At the beginning of this period, the dominating influence on monetary affairs was the world-wide economic and financial collapse. In
the industrial nations of the world, unemployment rose to an all
time high; and in the raw materials countries, exports and prices of
staple commodities fell at an unprecedented rate. In many parts of
the world domestic and international tensions mutually aggravated
each other.
At the end of this period, the dominant infiuence on monetary and
general economic affairs was war. In the intervening period, the
governments of all the industrial countries increased the scope of
their economic activities. These measures differed in the various
countries but in general they were differentiated between recovery
based upon armament programs and recovery based upon reform and
an improved standard of living. Throughout the period the economic
and monetary policies of the Government of the United States were
dominated by its effort to increase the employment and raise the
general standard of living of the people. In contrast to the economic
pattern established in Europe, the United States defense program
became a major factor in economic policy only toward the end of
this period.
Banking crisis oj 1938
The decline in economic activity which the United States began to
experience in the late summer of 1929 had, by March 1933, become an
economic collapse unparalleled in the history of this country. Between 1929 and 1932 the national income produced declined by more




118

REPORT OF T H E SEiCRETARY OF T H E

TREASURY

than 50 percent in terms of money, and by nearly 40° percent in terms
of goods and services. Industrial production as measured by the
revised index of the Board of Governors of the Federal Reserve
System (1935-39 = 100) fell from 110 for the year 1929 to 54 in March
1933. The Bureau of Labor Statistics index of wholesale prices
(1926 = 100) fell from 95 in 1929 to 60 in March 1933, and wholesale
prices of agricultural products fell from 105 to 43. Numerous bank
failures and suspensions in the months prior to March 1933, together
with widespread fear and distrust of the banking system, resulted in
hoarding which accentuated the crisis. By March 4, 1933, banks in
nearly all States were either closed or operating under restrictions.
To meet the unprecedented banking crisis confronting the country,
the President, on March 6, proclaimed a bank holiday for all banking
institutions located in the United States, its Territories and insular
possessions. All banking transactions were suspended except those
authorized under regulations issued by the Secretary of the Treasury
with the approval of the President. The Secretary of the Treasury,
during the period of suspended banking activity, issued regulations
allowing the more essential banking services to be performed, such as
making change and carrying on transactions necessary to meet tKe
needs of the community for food, relief of distress, and payment of
salaries and wages.
I t was recognized that it was necessary not merely to reopen the
banks but also to strengthen the whole financial system of the country.
The Emergency Banking Act of March 9 was passed, allowing the
Federal Reserve Banks to issue additional currency and to make loans
to member banks on additional types of assets, making it possible for
the banks which reopened to meet every legitimate call. The Federal
Reserve Banks were further empowered to make direct loans to corporations, firms, and individuals on their notes secured by direct
obligations of the United States Government.
To aid in the rehabilitation of the banks. Congress authorized the
Reconstruction Finance Corporation to purchase preferred stock or
capital notes of banks upon the request of the Secretary of the Treasury.
As a result of this Government aid, further details of which appear on
page 268 of this report, many banks whose capital had previously been
inadequate or whose assets were frozen were enabled to survive and
become sound financial institutions.
On March 10 an Executive order was issued authorizing the Secretary of the Treasury to permit any member of the Federal Reserve
System and any other banking institution organized under the laws
of the United States to perform all of their usual banking functions,
except the making of gold payments and gold exports, currency withdrawals for hoarding, and certain foreign exchange transactions
In




REPORT OF THE SECRETARY OF THE TREASURY

119

order to insure the reopening of only those banks that were in a sound
condition, it. was ordered that all banks obtain licenses to reopen.
These licenses were issued by the Federal Reserve Banks, with the
approval of the Secretary of the Treasury, in the case of member banks
and by the State supervisory authorities in the case of non-member
banks. A discussion of the reopening of the banks appears on pages
263 to 264 of this report.
Soon after the reopening of the licensed banks a rapid return flow
of currency to the Federal Reserve Banks took place. With the return
of currency to the banks after their reopening and the later establishment of the deposit insurance system, the banking crisis disappeared
and confidence in the financial institutions of the country was gradually restored.
In order further to strengthen the banking system and to safeguard
the interests of depositors, the Banking Act of 1933, approved June
16, 1933, created a Federal Deposit Insurance Corporation to provide
a deposit insurance fund. Depositors' accounts were insured up to
$2,500 under the provisions of this act. The insurance afforded to
each account was increased to $5,000 by the act of June 16, 1934.
The Banking Act of 1935 amended the original authority of the Corporation and strengthened its supervisory powers. Participants in
the insurance plan included all members of the Federal Reserve
System and approved non-member banks.
Other important changes by the two banking acts included the
liberalization of the provisions for rediscounting by the Federal
Reserve Banks. The responsibilities of the Federal Reserve Board
were more clearly defined and more firmly fixed, and the operations
of the Federal Reserve Banks and the member banks were freed from
restrictions which formerly prevented them from rendering effective
services during critical times.
In addition to the banking powers of licensing and supervision
granted the Treasury during the bank crisis, some new and important
monetary powers were given by Congress to the President and to the
Secretary of the Treasury. Several of these, such as powers to issue
new United States notes and to provide for the unlimited coinage of
silver, have never been exercised.
Gold policy
One of the characteristics of the crisis of February-March 1933
was the drain of gold, both internal and external. The internal drain
was for hoarding; and the desire to hoard was in turn a product of the
fears and uncertainties generated by the severity of the depression
and the questions regarding the banking system. The external drain,
which appeared at the end of February, was in part a repatriation of



120

REPORT OF T H E SEiCRETARY OF T H E TREASURY

foreign deposits and in part a flight of domestic capital. Decisive
action to prevent further depletion of the gold reserve was taken on
March 6, 1933, when the President ordered that no banking institution should, during the period of the bank holiday, pay out, export,
earmark, or permit the withdrawal or transfer in any manner, of any
gold or silver coin or bullion or currency, or take any action which
might facilitate the hoarding thereof. By Executive order of March
10, these restrictions on gold payments and exports were continued;
no gold was to be paid out except under license from the Secretary of
the Treasury.
The termination of the immediate crisis which led to the bank
holiday, and the vigorous steps taken to restore and improve the
banking system, produced a return flow of gold and gold certificates
from the public to the Federal Reserve Banks. Between March 4
and March 31, $260 millions of gold coin and $370 millions of gold
certificates were returned to the Federal Reserve Banks and the
Treasury. By March 31, the total amount of gold and gold certificates outside the Treasury and the Federal Reserve Banks was
reduced to $760 millions, the lowest figure since 1923. Thereafter,
by Executive order issued on April 5, the President forbade the hoarding of gold and gold certificates and all. persons were required to
deliver to a Federal Reserve Bank or branch all gold, with certain
limitations, among which were included reasonable amounts for use
in industry and the arts and a maximum of $100 per person in gold
coin and certificates.
On April 19, 1933, the Secretary of the Treasury advised that until
further notice no further licenses would be granted for the export of
gold for the purpose of supporting the dollar in foreign exchange.
This was followed, on April 20, by an Executive order definitely prohibiting the export of gold, with specified exceptions, including gold
previously earmarked for the account of foreign governments, foreign
central banks, and the Bank for International Settlements. With
these exceptions, the authority of the Secretary of the Treasury to
issue licenses for the export of gold was limited to such transactions as
he might deem necessary to promote the public interest and in respect
to these he was authorized to issue licenses only with the approval of
the President. The general objective of this order was, while keeping
control of our domestic monetary policy, to facilitate the adjustment
of international payments, to prevent speculation in the exchange
value of the dollar, and to prohibit transfers of funds which were not
the result of legitimate international business transactions.
The Executive orders of April 5 and April 20 were revoked on
August 28, 1933, when the President issued a new order containing




REPORT OF T H E SEICRETARY OF T H E TREASURY

121

more complete provisions with respect to the hoarding, export, and
earmarking of gold and to transactions in foreign exchange.
In the act of May 12, 1933, the President was authorized to reduce
the weight of the gold dollar by as much as 50 percent of its then
existing weight.
On June 5, 1933, in a resolution to assure uniform value to the coins
and currencies of the United States, gold clauses generally in both
public and private obligations were declared by Congress to be no
longer binding; dollar contracts, thereby, were made independent of
gold, and payment of the dollar amount of contract obligations rather
than the payment in gold was enforced.
On August 29, 1933, an Executive order was issued in effect permitting producers of gold newly mined from natural deposits in the
United States to sell such gold on the world market by consigning it
for the purpose to the Secretary of the Treasury, the sales to be made
through the Federal Reserve Banks or other agents designated by the
Secretary. Transactions under this order continued for about 2
months. On October 25 the President issued an Executive order
revoking the order of August 29 and authorizing the Reconstruction
Finance Corporation to acquire gold and to dispose thereof. The
Corporation accordingly offered to take at an announced price, in
exchange for its own 90-day debentures, all gold newly mined in the
United States. The price of gold was raised daily, almost without
interruption, until the middle of November. From the middle of
November to the first of December there were five changes and only
one change thereafter until the weight of the gold dollar was reduced
on January 31, 1934. The Reconstruction Finance Corporation also
engaged in purchases of gold abroad. In all these transactions the
Federal Reserve Bank of New York acted as agent.
The Executive order of August 28, 1933, was supplemented by an
order of the Secretary of the Treasury, dated December 28, 1933,
which required all domestically held gold, with certain exceptions,
to be delivered for the account of the Treasurer of the United States.
This order did not contain the exception of the earlier order with
respect to holdings of gold in amounts of less than $100.
The President issued an Executive order on January 15, 1934,
authorizing the mints and assay offices to receive gold on consignment
provided the gold had not been withheld unlawfully; and on the same
day the Secretary of the Treasury directed the mints and assay ofl[ices
to receive gold newly mined in the United States on consignment for
the Federal Reserve Bank of New York. The daily authorized prices
for which newly mined domestic gold was acquired under the above
orders are shown in the following table.




122

REPORT OF T'HE SEICRETARY OF T H E

T'REASURY

Daily price quotations for newly mined domestic gold in the United States from
Sept. 8, 1933, to J a n . 3 1 , 1934 ^
[Per fine ounce]
D a y of
month

September
1933

October
1933

NoDevember cember
1933
1933

January
1934

D a y of

month

1
$32. 26 $34.01
1 17
2- - . 32. 36
.$31.88
18
34.01 "'$34'06
332.12
32.57
34. 06
19
4
31.79
34.06
32.67 ""34'oi"
20
5
31.55
34.06
21
34.01
6
31.72 " 3 2 " 84'
34.06
22.
34.01
31.20
7
..-.
23
34.01
$29. 62
8
"33" 65' 34.01 " " 3 4 ' 0 6
24
33.15
9
29.12
34. 06
25
34.01
34.06
26......
33. 20
10
31.26
34.06
11
29.10
33.32 "'34"oi'
2730.91
34.06
29.21
34.01
28
12
34. 06
29.48
34.01
30. 62
13
33. 45
29
29.77
34.01
29.83
14
33.56
30
30.41
34.01 " " 3 4 ' 0 6
15-....33. 56
31
30.49 ""29;00'
34. 01
34.45
16
33.56

"si'ii"

September
1933

October
1933

DeNov e m b e r cember
1933
1933

$29.86 $33.56
30.33
$31.44
33.56 '$34'06"
29.18
34.06
31.64
29.13 " 3 3 ' 6 6 '
34.06
32. 28
29.01
34.06
31.33
33.76
34.06
31.75
33.76
34.06
31.86 " ' 2 9 ' 5 9 '
33.76
29.80
33.76
31.36
33.76
31.30
31.54
"34'06'
31.49
31.76 " ' 3 3 ' 7 6 '
34.06
31.35
31.82
34.06
31.05
33.85
34.06
31.33
33.93
34.06
31.46 ""31"96'
32.12

Janu1934
$34.45
34.45
34.45
34.45
34.45
34.45
34.45
34.45
34.45
34.45
• 34.45
34.45
34.45

1 Prices shown from Sept. 8 through Oct. 24,1933, represent the price at which the Secretary of the Treasury was authorized to sell newly mined domestic gold received on consignment under authority of Executive order of Aug. 29, 1933. Quotations from Oct. 25, 1933, through Jan. 15, 1934, represent the price fixed
for newly mined domestic gold by the Reconstruction Finance Corporation in consultation with the Secretary of the Treasury and the President, which was offered in payment for notes of the Reconstruction
Finance Corporation, under authority of Executive order of Oct. 25,1933. (This order revoked the Executive
order of Aug. 29.) Quotations from Jan. 15 to Jan. 31,1934, represent the price at which the Federal Reserve
Bank of New York as fiscal agent purchased newly mined domestic gold consigned to the mints and assay
oflices. Payment for this gold when coined was made by the Treasury with a special issue of Treasury
bonds, series of Apr. 16, 1934. Under regulations issued by the Treasury Department on Jan, 31,1934, the
mints are authorized to purchase newly mined domestic gold, unmelted scrap gold, and gold imported
into the United States after Jan. 30, 1934, at $35 less one-fourth of 1 percent and less mint charges.

The gold policy which was developed in 1933 was given more permanent form in the Gold Reserve Act, approved January 30, 1934.
By this act, title to all gold coin and gold bullion held by the Federal
Reserve Board, the Federal Reserve Banks, and Federal Reserve
Agents was vested in the United States Government. In exchange
for this gold, credits in equivalent dollar amounts payable in gold certificates were established in the United States Treasury and it was
provided that gold could be dealt with only as permitted by the Secretary of the Treasury with the approval of the President. All gold
coins were to be withdrawn from circulation and, together with all
other gold owned by the United States, formed into bars. The Secretary of the Treasury was authorized to buy or sell gold, as an operation of the General Fund of the Treasury, at such rates and upon
such terms and conditions as he deemed most advantageous to the
public interest. The authority contained in the act of May 12, 1933,
permitting the President to fix the weight of the gold dollar at not
less than 50 percent of its then legal weight, was made more specific
by the provision that the weight of the gold dollar should be fixed at
not more than 60 percent and not less than 50 percent of its previous
weight.
The Gold Reserve Act also authorized the Secretary of the Treasury
to deal in gold and foreign exchange and such other instruments of
credit and securities as he might deem necessary for the purpose of



REPORT OF T H E SE'CRETARY OF T H E TREASURY

123

stabilizing the exchange value of the dollar. A stabilization fund of
two billion dollars was established for this purpose out of the increment resulting from the reduction in weight of the gold dollar.
On January 31, 1934, the President issued a proclamation fixing
the weight of the gold dollar at 15^^i grains of gold, 0.900 fine. This
action constituted a reduction of the gold in the dollar to 59.06 percent of the former content, and gave to gold a monetary value of $35
a fine ounce. The price of gold in foreign markets had gradually risen
to this level in relation to the dollar by January 31, 1934. On the
same day, the Secretary of the Treasury issued a statement providing
for the sale of gold for export whenever the United States exchange
rates with gold standard countries reached the gold export point.
Provision was thus made for gold to perform its essential function, in
the settlement of international balances.
The departure from the traditional gold standard in the spring of
1933 made it possible to protect the domestic price structure from the
influence of depreciated foreign currencies. I t tended to increase
the prices of internationally traded commodities, including the major
farm exports, and to facilitate industrial exports. For these reasons,
the decrease in the gold content of the dollar was an adjunct to a
domestic policy of economic expansion.
Under the Gold Reserve Act of 1934 and its implementing Treasury
regulations, all imported gold and gold from domestic sources are, with
certain exceptions, sold to the Government. Payment for gold purchased by the Government is usually made by check drawn upon the
Treasurer of the United States and paid out of the General Fund of
the Treasury, specifically out of the Treasurer's deposit account with
a Federal Reserve Bank. The current procedure is to replenish the
cash assets in the General Fund by the issuance of gold certificates or
gold certificate credits to the Federal Reserve Banks against the gold
acquired, the amount of which is credited to the Treasurer's deposit
account with those banks. As a result, current purchases of gold
involve neither an addition to the interest-bearing public debt nor any
use of tax receipts. Thus, gold acquisitions are financed solely by
the issuance of gold certificates or gold certificate credits to the full
monetary value of gold acquired.
Current acquisitions of gold have tended to increase the supply of
money and have augmented the reserves of commercial banks. Except to the extent that the proceeds from the sale of gold to the United
States by foreign central banks and governments are held iri the form
of balances at the Federal Reserve Banks, the deposit liabilities of
commercial banks are increased by an amount approximately equal to
the value of the gold acquired by the Government. The increase in
deposits held by the public resulting from the sale of gold to the Gov269677—41

10




124

REPORT OF T H E SEiCRETARY OF T H E THEAiSURY

ernment is accompanied by an almost equal increase in the reserves of
commercial banks held in the form of deposits with the Federal Reserve Banks. Inasmuch as only a part of such additional reserves are
required by law to be held against their additional deposit liabilities,
the remainder serves to increase their ^'excess reserves."
For a period of 16 months, between December 1936 and April 1938,
a different procedure was followed with regard to gold acquisitions.
On December 22, 1936, the Secretary of the Treasury announced that
gold acquisitions would thereafter be segregated in an inactive account
and that gold certificates or gold certificate credits would not be
issued. Insofar as the Treasury needed to replenish its balances at
the Federal Reserve Banks, drawn upon in the purchase of gold,
additional Treasury public debt obligations would be sold. Therefore, gold acquisitions under this arrangement did not expand total
bank reserves but did add to the public debt. This was the so-called
'^sterilization" policy.
The sterilization policy was undertaken in conjunction with the
Federal Reserve Board's actions to reduce the volume of excess
reserves. In December 1936 the total reserves of member banks of
the Federal Reserve System had reached a new high of $6.8 billions,
of which $2.2 billions constituted excess reserves. As matters
developed, the banking system still retained a substantial amount
of excess reserves throughout the period of the inactive gold account.
On February 14, 1938, the Secretary of the Treasury announced
that gold acquired by the mints and assay ofl&ces 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
millions. On April 19, 1938, the Secretary of the Treasury announced
that the inactive gold account had been discontinued. During this
period approximately $1,391 millions had accumulated in the account,
which was credited to the Treasurer's deposit account with the
Federal Reserve Banks through the issuance of gold certificates or
gold certificate credits. As the funds so credited were paid out by
the Treasury, bank reserves were increased accordingly.
By June 30, 1940, the gold stock of the United States had amounted
to almost $20 billions. About two-thirds of this gold had been
imported into the United States in the 6K years since the adoption
of the Gold Reserve Act.
Of the causes of this enormous gold inflow since the beginning of
1934, capital inflow has been the most important. The whole world
has preferred to hold capital in dollars; the uncertainty prevailing
abroad and the comparative security and profitability of American
investments and the strength of the dollar are sufficient explanations
of this preference. In addition to the capital inflow, the United
States had had a favorable current balance of payments for goods



REPORT OF THE SECRETARY OF THE TREASUiRY

125

and services, and this has been especially important since the last
quarter of 1937.
For reasons which have been given at some length in a letter of
March 22, 1939, from the Secretary of the Treasury to Senator
Robert F. Wagner, the Treasury has judged that it would be unwise
to take drastic steps to reduce the gold inflow. In answer to the
question, ^Why doesn't the Treasury stop buying gold?", the Secretary stated:
^*A simple way of stopping gold from coming into the United States
would be for the Treasury to announce to the world that we will not
buy any more gold for the time being. But, such a step, taken unilaterally, would have disastrous effects on our economy. I t would
disrupt the foreign exchanges and gold bullion markets and would
very soon cause such drastic disturbances in international trade and
even in the domestic sphere as seriously to impede the recovery of
business.
^Tresent relationships among the various leading currencies would
be upset. The dollar probably would appreciate immediately in terms
of other leading currencies. At present, when the demand for dollar
exchange increases, foreigners need only obtain gold (either at home
or on the London market), ship it here and obtain dollars in exchange.
Thus an increased demand for dollar exchange relative to the supply
is met. If, however, this means of securing dollar exchange were
removed, dollars would rise in value indefinitely in terms of other
currencies. While it is impossible to know in advance what rates of
exchange would finally emerge, we can be certain of at least one thing—
that no country would benefit from the ensuing international monetary disruption.
^'Were the United States, moreover, to declare a complete embargo
on gold imports, it might deal a serious blow to the value of gold as
a monetary medium. (Such action coming at a period when there
was discussion of the possibility of world over-abundance of gold
might have repercussions which would disturb the public's confidence
in the value of gold.) The leading gold producing areas would be
hard hit and some might even be involved in a major economic crisis.
'^A closely related question that has frequently been asked is:
^Should not the price of gold be reduced? Is not $35 an ounce too
high a price for gold?' Possibly the simplest way to answer this
question is to examine the consequences that would ensue from an
increase in the gold content of the dollar (or, to phrase it another way,
from a decrease in the monetary value of gold).
^*A reduction by Congress in the monetary value of gold would
probably not be as calamitous as a complete embargo. I t would
limit the extent of possible depreciation of gold (or appreciation of the
dollar in terms of foreign currencies) and the psychological disturbance



126

REPORT OF T H E SEiCRETARY OF T H E

TREASURY

caused by the change would not be as potent, yet it would have disadvantages serious enough to render resort to any such action most
unwise. If the reduction made in the price of gold were small, our
trade and service balance would not be much affected over the next
year or so, nor would the inflow of capital cease. Once the drop in
the price of gold was regarded by the rest of the world as definitive,
the subsequent effect on capital imports would be virtually nil. Our
securities would continue to be bought for the same reasons that they
are bought now and dollar balances cn foreign account would also
continue to increase for the same reasons that they are increasing
now. But, were a small decline in the price of gold to be regarded by
numerous domestic and foreign investors and exchange speculators
as being but the first of a series of drops, the result might well be to
attract more, not less, funds to the United States, and to intensify the
inflow of gold—the very thing it is designed to check. Speculators
would rush to buy dollars and hold them here in anticipation of the
next appreciation. Thus the effect on capital movements, both
long-term and short-term, might more than offset the effect on trade
and service items; instead of getting less gold we would find ourselves
getting more.
^'On the other hand, were the monetary value of gold to be cut with
one stroke substantially, and definitely—say, for example, to $25 an
ounce—the effect would be quite different from that described above.
Such a step might reduce the volume of gold imports and perhaps give
rise to an outflow of large dimensions; but, the economic effects on
our economy of the change in the foreign exchange value of the dollar
would be little short of disastrous. The 40 percent increase in the
price of American currencies to foreigners would constitute a severe
handicap upon our exports. Our exports play a role in the level of
business activity much in excess of the magnitudes involved and so
great an appreciation of our currency in terms of other currencies
would be bound to curtail our exports seriously. In the past 6 months
the dollar has appreciated in terms of other leading currencies by
some 5 percent and price movements in the various countries have
not been such as to offset this competitive disadvantage to us. The
appreciation of the dollar has not been due to a change in the dollar
price for gold but rather to a depreciation of foreign currencies in
terms of gold. You will note that our exports during January 1939
were more than 40 percent less than they were in January 1938.
Although it is too soon to evaluate the full significance of the decline,
it is not unreasonable to assume that the less favorable position of
the dollar in terms of other currency (i. e., higher prices of foreign
currencies in terms of gold) contributed to the drop in exports.




REPORT OF T H E SEiCRETARY OF T H E TREASURY

127

'^Our imports on the other hand would, in the event of a reduction
in the price of gold t!o $25 an ounce, be 30 percent cheaper. Our
domestic producers would then be exposed to greatly sharpened competition in the American market from foreign producers both because
the prices in dollars of imports would be less, and also because the
numerous ad valorem .duties would constitute smaller protection.
^ Foreigners would have a greater advantage in this market but
^
unfortunately even this would be of dubious value to them. The
ability of Americans to buy goods, whether imports or domestic goods,
depends chiefly upon llhe state of business activity here. I t is chiefly
for that reason that our imports during the recession of 1938 dropped
to almost one-half and that our imports began to increase in the fall
of 1938. Thus, though the sharp appreciation of the dollar would
make foreign goods cheaper in this country, our imports might
actually be less than during the previous period and instead of benefiting the rest of the world we would be hurting world business as well
as our own.
,
^'Judging from past experience we could not expect the prices of
domestic commodities and services to move either at home or abroad
with sufl&cient rapidity to adjust quickly and fully to any substantial
alteration in exchange rates. For many months, perhaps for years,
the economic position of large groups of American producers, including
farmers, would be worsened and there would be widespread unemployment. The combined effect on our domestic economy of a sharp
drop in exports and of increasing competition in the domestic market
would be keenly felt. Domestic prices would begin to fall. Many
corporations would suffer loss of business and profits. In times such
as the present these short-run effects—and by short-run we mean
from a few months to several years—are of paramount importance.
To brush aside, as some are prone to do, these short-run effects on the
ground that in the long-run appropriate adjustments will take place
is to ignore the unstable world in which we live and the real problems
which confront us from day to day.
'^Moreover, were we to reduce the price of gold and were it to result
in an outflow of gold there is no reason to believe that the countries
who most need gold would get it. On the contrary, were gold to leave
the United States it would probably find a resting place in the very
countries whose currencies would for the moment appear most secure.
Certainly no gold would flow to Latin American countries in any substantial amount, nor would the Far East or the Balkans obtain more
gold. The loss of gold by the United States would not correct the
serious maldistribution.. I t would rather operate only to take away
some from the United States which has too much and to add it to the
holdings of other countries which likewise have too much.




128

REPORT OF T H E SEiCRETARY OF T H E TTIEASURY

'^Thus we are confronted with the fact that though we should like
to receive less gold and even to get rid of substantial amounts of the
gold we, already have, there is, under the existing circumstances, no
acceptable alternative to the policy we have been pursuing. In the
case of all the proposals we have examined, the remedy has always
been worse than the disease. The best way to reduce our gold inflow
on commodity and service account is for us to have full recovery so
that our imports will rise more rapidly than our exports."
At the present time, the only satisfactory way in which the inflow
of gold can be reversed is through the return of peace and the removal
of severe and arbitrary restrictions that impede the expansion of
international trade and the restoration of world-wide economic
recovery.
Increment on gold
Under the provisions of the President's proclamation of January 31,
1934, issued pursuant to section 43, title I I I of the act approved May
12, 1933, as amended by section 12 of the Gold Reserve Act of 1934,
approved January 30, 1934, the weight of the gold dollar was reduced
from 25.8 grains of gold 0.900 fine to 15^i grains 0.900 fine. Thus,
the value of 1 ounce of pure gold (480 grains) was increased from
$20.671834+ to $35.
The amount of gold held in the gold account when the books were
closed at 3 o'clock January 31, 1934, on the basis of daily Treasury
statements was $4,034,867,780.67. The Treasury also held in the
General Fund on that date $30,623,145 in gold coin which had been
purchased under the provisions of section 734 of title 31, United States
Code, at a cost of $49,502,356.94. The gold held at the close of business January 31, 1934, together with certain other gold acquired on
February 1, 1934, was revalued at $35 an ounce and is reflected in the
daily Treasury statement of February 1, 1934, at $7,018,263,925.70,
resulting in an increment of $2,805,512,060.87. Increment subsequently arising from acquisitions of gold up to June 30,1940, amounted
to $12,040,968.68, making the total to that date $2,817,553,029.55.
Five allocations or appropriations have been made from the increment on gold. The act of January 30, 1934, authorized the establishment in the Treasury of a stabilization fund to be operated under the
exclusive control of the Secretary of the Treasury with the approval
of the President, and appropriated the sum of $2,000,000,000 out of
the increment resulting from the reduction in the weight of the gold
dollar. This fund was established as of April 27, 1934, by a deposit
of $2,000,000,000 with the Treasurer of the United States, which
deposit was reflected on the daily Treasury statement as a charge




REPORT OF T H E SEiCRETARY OF T H E TREASURY

129

against the increment on gold. A statement of the assets and liabilities of this fund is contained in the table on page 789.
Under the provisions of the act of June 19, 1934, the Secretary of
the Treasury was authorized to make payments to each of the Federal Reserve Banks not to exceed such portion of the sum of $139,299,557 as was represented by the amount paid by each Federal
Reserve Bank for stock of the Federal Deposit Insurance Corporation. The payments thus made to the Federal Reserve Banks were
to enable them to make industrial loans and advances. The act
provided that the amounts thus expended by the Secretary of the
Treasury should be paid out of the miscellaneous receipts created by
the increinent resulting from the reduction of the weight of the gold
dollar.
In another act of Congress also dated June 19, 1934, the Secretary
of the Treasury was authorized and directed "when the funds therefor
are made available, to establish on the books of the Treasury a credit
in favor of the Treasury of the Philippine Islands for $23,862,750.78,
being an amount equal to the increase in value (resulting from the
reduction of the weight of the gold doUar) of the gold equivalent at
the opening of business on January 31, 1934, of the balances maintained at that time in banks in the continental United States by the
Government of the Philippine Islands for its gold standard fund and
its Treasury certificate fund less the interest received by it on such
balances." The act authorized the appropriation of the amounts
necessary for this purpose out of the receipts covered into the
Treasury by virtue of the reduction in the weight of the gold dollar.
However, no money has been appropriated by Congress for carrying
this act of June 19, 1934, into effect.
Another act of June 19, 1934, appropriated out of the amount
covered into the Treasury as a result of the reduction in the weight of
the gold dollar an amount "sufiicient to cover the difference between
the value of gold as carried in the general account of the Treasurer of
the United States and the value of such gold after melting and refining
thereof pursuant to the provisions of the Gold Reserve Act of 1934."
There has been reserved for this purpose the sum of $2,175,121.93,
of which $1,841,763.29 had been expended up to June 30, 1940.
On June 28, 1935, the Secretary of the Treasury directed that the
balance of the increment as of that date resulting from the reduction
in the weight of the gold dollar, not appropriated or authorized to be
appropriated, be used m connection with the redemption of national
bank notes as they are presented for redemption and retirement.
The following statement shows the allocations of the gold increment, charges, and balatices of allocations as of June 30, 1940.




130

REPORT

OF T H E

SEiCRETARY

OF T H E

TREASURY

Allocation of and charges against increment resulting from the reduction i n the weight
of the gold dollar, and unexpended balances, as of J u n e 30, 1940

Allocation of increment

Charges against
increment

12,000,000,000. 00

$2, 000, 000, 000. 00

139, 299, 556.99
23,862, 750. 78
2,175,121.93
645,387,965.45
6,827, 634. 40

27, 546, 310.97
1,841,763. 29
645, 387,965. 45

2, 817, 553, 029. 55

Exchange stabilization fund..
Payments tp Federal Reserve Banks for industrial loans
Philippine currency reserve
Melting losses on gold coin
Retirement of national bank notes
Unassigned.

Unexpended balance of allocated increment

2, 674, 776,039. 71

• $111, 753, 246. 02
23,862, 750. 78
333, 358. 64
6,827,634. 40
142, 776,989. 84

The unexpended balance of the increment on gold amounting to
$142, 776, 989. 84 is segregated in the balance in the General Fund of
the Treasury, as shown on the Daily Statement of the United States
Treasury.
A summary by years of the transactions in allocations from the
gold increment to June 30, 1940, follows.
Gold increment and charges against such increment, fiscal years 1934 to 1940
Disposition of i n c r e m e n t

Gold
increment

Year

Stabilization
fund

Payments
to Federal M e l t i n g R e t i r e m e n t
Reserve
losses o n of n a t i o n a l
B a n k s for gold coin b a n k notes
industrial
loans

$2,811, 375, 757 $2,000,000,000
1, 738,020
$20,931,857
784,465
5,614,454
1,676,188
875,000
1,094,843
125,000
481,399
402,359

1934
1935
1936
1937
1938
1939
1940
Total..

2,817, 553,029 2,000,000,000

$675,122 $91,415,650
791, 846 397,422,480
333,154 99, 573, 791
34, 679 61,478, 740
2,388
5,497,305
4,575

Total

Balance
a t close of
year

$2,000,000, 000
113,022, 629
403,828, 780
100,781,944
61,638, 418
5,499,694
4,574

$811,375, 757
700,091,147
297,046, 832
197, 941,076
147,397, 500
142,379,205
142, 776, 990

27, 546,311 1,841,763 645,387,965 2,674,776,040

NOTE.—Figures are rounded to nearest dollar and will not necessarily add to totals.

Silver policy
In December 1932 the price of silver fell to the lowest point in history, 24.6 cents per ounce. The annual average price over the preceding two decades had shown the following movement:
Average price of silver during selected years, 1911 to 1932
Price (cents
per ounce)

C a l e n d a r year

1911
1914
1917
1920

__ .
-

.-




54
56
84
101

0
3
0
9

Price (cents
per ounce)

C a l e n d a r year
1923
1926
1929
1932

. .

65 2
62 4
53 3
28. 2

REPORT OF T H E SE'CRETARY OF T H E TREASURY

. 131

Many factors contributed to this drastic fall in the price of silver.
In the first place, the high price of silver and the depreciation of some
currencies during the war years and immediately thereafter made the
bullion in many silver coins more valuable than the coins themselves.
To prevent the unauthorized melting down of their silver coins for
use as bullion, and also to provide additional seigniorage, many countries diminished the silver content of their coins, thus reducing their
demand for silver and adding substantially to the supplies on the
market. Between 1914 and 1929, more than 30 countries—including
Great Britain, France, and Germany—decreased the fine metal content
of their silver coins. Paper money and metals other than silver (particularly nickel, bronze, and copper) were substituted extensively for
silver coins. In the 5 years following 1926, the Indian Government
disposed of over 130 million ounces, and this in turn led to extensive
sales by other Asiatic countries.
During the post-war decade, the output of newly mined silver was
increased by almost 40 percent from an average of 185 million ounces
for the years 1916 to 1920, to an average of 255 million ounces for the
years 1926 to 1930. One of the reasons for this increased supply was
the increases in the production of those metals—copper, lead, and
zinc—of which silver is a byproduct. With the onset of depression,
the price of silver was further depressed by the declining industrial
demand for silver.
Action to raise the price of silver was taken in the early months of
1933. Title I I I of the act of May 12, 1933, authorized the acceptance, during the ensuing 6 months, of silver tendered by foreign
governments in payment of indebtedness due to the United States
Government, the silver to be valued at not in excess of 50 cents per
ounce. The title also authorized the President to fix the weight of
the silver dollar as well as the gold dollar and to provide for the
unlimited coinage of silver.
Further, the United States delegation at the London Monetary and
Economic Conference secured the passage (on July 20, 1933) of a resolution pledging the 66 governments represented at the conference to
refrain from further debasement of silver coins and to encourage the
substitution of silver coins for currency of small denominations and
an agreement among certain governments to purchase specified
amounts of silver from the mine production of such countries.
I n compliance with this agreement the President, on December 21,
1933, issued a proclamation directing the mints of the United States
to receive for coinage into silver dollars all silver mined from natural
deposits in the United States subsequent to the issuance of that
proclamation. Fifty percent of the monetary value of the silver so
received was to be deducted as seigniorage and the remainder to be




132

REPORT OF T H E SEiORETARY OF T H E TTIEA.SURY

returned in standard silver dollars. The monetary value of silver
being $1.29+ per fine ounce, newly mined domestic silver was bought
by the mints under this proclamation at 64.64+ cents per fine ounce.
Under subsequent amendments to that proclamation, newly mined
domestic silver was bought at 71.11+ cents from April 9, 1935,
to April 23,1935, at 77.57+ cents from April 23,1935, to December 31,
1937, at 64.64+ cents from December 31, 1937, to July 1, 1939.
Since July 1, 1939, such silver has been bought at 71.11+ cents, as
directed by the act of July 6, 1939. Section 12 of the Gold Reserve
Act of 1934 made it possible for the Treasury to pay for its domestic
silver acquisitions with silver certificates instead of silver dollars.
Silver certificates or silver dollars have been issued in an amount
equal to the cost of such acquisitions.
Further steps to carry forward .the silver policy were authorized by
the Silver Purchase Act, approved June 19, 1934. In this act it was
declared to be the policy of the United States that the proportion of
silver to gold in the monetary stocks of the Uhited States be increased
with the ultimate objective of having and maintaining one-fourth of
the monetary value of such stocks in silver. So long as the proportion
of silver in the stock of gold and silver is less than one-fourth, the Secretary of the Treasury is directed to purchase silver, at such times and
upon such terms and conditions as he may deem reasonable and in the
public interest, but at a price not to exceed its monetary value. The
Secretary of the Treasury is required to issue silver certificates in a
face amount of not less than the cost of all silver purchased under the
act, but it is left to his discretion whether further silver certificates
shall be issued against the difference between the cost of silver purchased and its monetary value. Foreign silver has been purchased in
the market under the authority of this act at prices which have averaged approximately 51 cents per ounce.
Domestic silver stocks other than newly mined were dealt with in
the Executive order of August 9, 1934, issued under powers contained'
in the Silver Purchase Act of 1934. The order required that all
silver situated in the continental United States, with certain stipulated exemptions, be delivered to the United States mints within 90
days. For silver so received the United States mints were instructed
to return to the depositor an amount equal to 50.01 cents per fine
ounce. This order was revoked on April 28, 1938, together with other
Executive and Treasury orders regulating the holding, import, and
export of silver.
Under these legislative authorizations, the Treasury has purchased
over 2,350 million ounces of silver from the beginning of 1934 to the




133

RJE'PORT O F T H E SEORETAEY O F T H E TREASURY

end of June 1940. However, in spite of these extensive purchases,
the objective stated in the Silver Purchase Act of 1934 has not been
reached. At the time of the enactment of the Silver Purchase Act,
additional purchases of about 1,400 million ounces would have sufliced
to achieve the desired ratio. Since then, almost 1 billion ounces more
than this have been acquired without getting much closer to this
ratio because of the increase in the gold stock.
The table that follows shows the silver acquired from January 1,
1934, to June 30, 1940, by specified classifications. The second following table shows the composition of the silver monetary stock.
Silver acquired January 1, 1934, to June 30, 1940, by calendar years and by specified
classifications
[In millions of ounces or dollars]
Newly mined
domestic i

Foreign 3

Nationalized 2

Total

C a l e n d a r year
Ounces

Ounces

Dollars

21.8
38.0
61.1
70.6
61.6
60.7
31.6

1934
1935...
1936
1937
1938
1939
1940 (6 m o n t h s )

Dollars
14.1
27.3
47.3
54.6
42.2
39.9
22.5

110.6
2.0
.4

Ounces

55.3
1.0
.2

172.5
494.4
271.9
241.5
355. 4
282.8
83.1

Dollars
.86.5
318. 2
150.3
108. 7
156.9
120.5
30.9

Ounces
304.9
534.3
333.4
312.2
417.1
343.3
114.7

Dollars
165.9
346.5
197.9
163.4
199.1
160.4
53.4

1 Acquired at 64.64+ cents per fine ounce until Apr. 9, 1935; at 71.11-f cents from Apr. 10 until Apr. 23,
1935; at 77.57+ cents from Apr. 24, 1935, to Dec. 31, 1937; at 64.64+ cents from Jan. 1, 1938, to July 1, 1939;
and at 71.11+ cents since July 1, 1939.
* Acquired at 50.01 cents per fine ounce. Executive proclamation of Aug. 9,1934, revoked Apr. 28,1938.
3 Acquired at various prices averaging approximately 51 cents per fine ounce.

Components of the silver monetary stock, Dec. 31, 1934 to 1939, and June ^ 0,1940
[In millions of dollars]
Silver held in T r e a s u r y

E n d of calendar y e a r

Securing silver certificates 1

Silver,
bullion

1934
1935
1936
1937
1938
1939
1940 (June)

_.

211.6
576.9
775.9
938.8
1,137.6
1, 298. 2
1.353.2

'Valued at $1.29+ per ounce.
2 Valued at $1.38+ per ounce.




Silver
dollars

508.4
508.7
505.7
503.7
502.7
499.0
498.1

Silver outside
Treasury
I n General F u n d

Subsidia r y coin 2

4.2
4.2
5.7
5.4
3.5
5.3
3.6

Bullion
for recoinage 2

Bullion
a t cost

Silver
dollars 1

8.8.
.2
.3

89.3
262.7
347.7
428.6
535.3
616.0
643.3

35.2
38.4
41.3
43.3
44.4
48.1
49.0

.2
.8

Total
silver a t
$1.29 per
ounce

Subsidia r y coin 2

305.3
323.5
350.4
366.9
372.8
394.1
398.6

1,279.7
1,970.1
2,402.3
2,806.5
3,346.8
3,790. 2
3,939.6

134

REPORT OF T H E SEICRETARY OF T H E

TREASURY

Seigniorage on silver
Seigniorage arises from three principal sources: (1) As a result of
the revaluation of silver bullion from its cost value to its monetary
value ($1.29+ per fine troy ounce) when such silver is set aside and
held as security for silver certificates; (2) as a result of the coinage of
silver dollars and subsidiary silver coin; and (3) as the result of the
coinage of minor coins (nickels and cents).«
The Silver Purchase Act authorized and directed the Secretary to
issue silver certificates to a face amount of not less than the cost of the
silver purchased under the act and provided for a reserve in silver
bullion or standard silver dollars to be maintained of a monetary
value equal to the face amount of silver certificates outstanding.
Following the passage of this act the procedure in connection with
revaluing silver bullion to be held as security for silver certificates
has been to revalue a sufiicient number of ounces thereof at the monetary value of $1.29+ per fine ounce to equal the total cost of the silver
acquired, and to issue silver certificates in like face amount against
the revalued silver. The difference between the cost of the actual
number of ounces of silver revalued and its value at the monetary
rate represents seigniorage. The silver that remains and is not used
to secure silver certificates is carried at cost in the General Fund.
Beginning with October 16, 1934, the amount of seigniorage resulting from the revaluation of silver acquired under the Silver Purchase
Act of June 19, 1934, and under the proclamation of August 9, 1934,
was reported by the Treasury in its daily statement under the heading '
of ^'Trust funds, increment on gold, etc.,'' and the accumulated balance was segregated in the General Fund of the Treasury... By this
procedure the seigniorage profit has been set apart from other funds
available for current expenditures of the Government. The amount
of seigniorage profits accumulated and segregated in the General Fund
was $585 millions.
The amount of the seigniorage profits resulting from the revaluation
of silver bullion, other than that acquired under the Silver Purchase
Act of 1934 and under the proclamation of August 9, 1934, is covered
into the Treasury as miscellaneous receipts and is reflected in the
working balance of the General Fund.
The amounts of seigniorage received from all sources from July 1,
1932, to June 30, 1940, are shown by years in the table that follows.




REPORT

OF T H E

SEORETARY

OF T H E

135

TREASURY

Seigniorage on silver, by sources, fiscal years 1933 to 1940
[In millions of dollars.

On basis of daily Treasury statements (unrevised), see p. 583]

N e w l y m i n e d silver
Year

1933
1934
1935
1936
1937
1938
1939
1940

---

ProclaraationDec.
21, 1933

0.4
25.6
19.8
20.5
16.6
4.7
87.6

- -

„
Total

Actof
J u l y 6,
1939

NationalSilver
ized silver,
P u r c h a s e proclamaActof
tion A u g .
1934
9, 1934

Miscellaneous
silver

28.5
6.1
(0
(0

48.7

14.3

111.6
169.7
39.8
90.3
90.3
48.9

14.3

550.5

34.7

48.7

Subsidiary
silver
and
minor
coins

Total

0.9
.5
9.0
13.6
29.1
15.1
6.2
25.0

0.9
.5
198.]
215.1
88.7
126.0
113.0
92.8

99.3

835.1

1 Under $50,000.
NOTE.—Figures are rounded to nearest tenth of a million and will not necessarily add to totals.

International monetary cooperation
The social and economic difficulties of the World War and the
succeeding decade imposed tremendous strains on the international
g()ld standard. After the war the problem of transfer arising from
reparations and war debts, and the reestablishment of numerous
currencies on a gold basis, entailed many difficulties. The increasing
rigidity of price structures, and the unemployment which accompanied the uneven deflation of prices, made it hard for some countries
to adhere to the gold parities which they had selected for their currencies. After 1928, international long-term investments tended to
decline and short-term capital tended to move in increasing volume
from country to country in search of security. The depression which
began in 1929 increased the strains on the system of international
exchange and during the depression most countries either had to, oi
chose to, depart from the fixed gold parities of their currencies. When
the United Kingdom abandoned the fixed gold value for sterling in
September 1931, there was inaugurated a period of changing international exchange rates.
Since March 1933, the policy of the United States with respect to
the international monetary situation has rested upon two basic
premises: First, that the calamitous depression which the country
was experiencing a t t h a t time demanded, before all else, vigorous
and independent domestic monetary action; and, second, that after
this country was well on the way to domestic recovery the United
States would be in a better position to promote monetary stability
and the expansion of international trade and investment, through
cooperation with other nations.
The preceding sections have described the monetary measures which
were taken principally in recognition of the first premise, insofar as




136

REPORT OF THE SEIORETARY OF THE TREASURY

the Treasury Department was directly concerned in them. The
measures taken in recognition of the second follow.
In June 1933, a World Monetary and Economic Conference met
in London, with the purpose of reaching an agreement on the stabilization of currencies. I t was at this time that the United States
Government was trying to stimulate recovery by bringing about a
rise in the domestic price level. Accordingly, President Koosevelt
in his message to the Conference defined the monetary aims as follows:
''Let me be frank in saying that the United States seeks the kind of
dollar which a generation hence will have the same purchasing and
debt-paying power as the dollar value we hope to attain in the near
future. That objective means more to the good of other nations than
a fixed ratio for a month or two in terms of the pound or franc.V The
independent determination of the monetary policy of the United
States was upheld, not in a spirit of national selfishness, but rather
with the judgment that the reconstruction of the national monetary
system and the further progress of recovery were indispensable prerequisites for the success of international cooperation.
The period of active and continuous international monetary cooperation began with the Tripartite Accord of September 1936. For some
time, the French Government had experienced great diflSculty in
maintaining the gold value of the franc, and France was now determined to restore equilibrium in her balance of payments and to
relieve the downward pressure on the French price level through
devaluation.
I t seemed then of the, highest importance to the future of orderly
international exchange relationships that this French devaluation
should not set oflF a chain of competitive depreciations on the part of
other countries. Accordingly, the Government of the United States
and the British Government expressed their concurrence in the decision of the French Government to readjust its currency, and the three
governments joined in a Tripartite Accord to promote order in international monetary relationships. This accord was announced on
September 25, 1936.
To implement this policy of exchange cooperation, the Secretary of
the Trciasury announced on October 13, 1936, that the United States
would henceforth sell gold to the exchange stabilization funds of those
countries which agreed to reciprocate. On the same day, the French
and British Governments announced that they had taken the necessary
measures for providing the monetary authorities of the other members
of the Tripartite Accord with similar facilities. These arrangements
were necessary because stabilization operations would result in accumulation of foreign exchange by the participating funds and the several
governments desired to be able to convert this foreign exchange into
gold at agreed-upon prices rather than continue to bear exchange risks.



REPORT OF THE SEORETARY OF THE TREASURY

137

On November 24, 1936, Belgium, the Netherlands, and Switzerland
indicated their adherence to the principles of the Tripartite Accord,
and these countries were added to the list of those to which the
United States would sell gold.
The hope that the Tripartite Accord would lead to a more satisfactory and permanent organization of international monetary relationships has not been realized because of the subsequent political
and economic developments. In the years before the outbreak of
war, however, the accord proved that cooperation among stabilization
funds can have definite value. The stabilization funds, working together, can iron out short-term fluctuations and prevent speculative
drives from producing erratic exchange movements. The funds can
also, in cooperation, facilitate orderly readjustment of a currency to a
lower level and prevent explosive movements from carrying exchange
rates below the level deliberately sought. But nothing in exchange
cooperation, as conceived in this agreement, can prevent fundamental
economic changes from exerting their full force on exchange relationships; such cooperation is no substitute for the correction of fundamental maladjustments.
The progress of the conflict in Europe has led this Government to
regulate certain transactions in areas under our jurisdiction involving
property in which certain foreign countries or their nationals have an
interest. A discussion of foreign funds control will be found on pages
161 and 318. The exigencies of war have led to the extension of economic and monetary restrictions in many neutral as well as belligerent
countries. The complete disruption of normal international relations
will add greatly to the difficult problem of monetary reconstruction
after the war.
REVENUE LEGISLATION
Fiscal year 1940

Revenue legislation enacted in the flscal year 1940 included the
Social Security Act Amendments of 1939, the Revenue Act of 1940,
the act altering the profits-limitation provisions with respect to naval
vessels and Army and Navy aircraft, and other acts enumerated below.
A brief resume of the major laws follows.
Social Security Act Amendments oj 1939
Title VI of the Social Security Act Amendments of 1939 (hereinafter referred to as ''the Amendments") approved August 10, 1939,
contains amendments to the Internal Revenue Code; and Title I X ,
Miscellaneous Provisions, includes further amendments to the Code
and changes in those parts of the social security laws which became
codified.




138

REPORT OF T H E SEORETARY OF T H E TREASURY

Before the enactment of the Amendments, the Code jjrovided that
the rates of the taxes on employees and employers (under sections
1400 and 1410 of the Code) were to increase on January 1, 1940, from
I percent of the wages to 1}^ percent, with a further increase of ji
percent at the end of each 3-year period thereafter, until the maximum
rate of 3 percent was reached in 1949. Under the Amendments the
increase scheduled for January 1, 1940, was eliminated and it was
provided that there should be no increase in the rates until 1943.
Then the rates are to be 2 percent for the years 1943, 1944, and 1945,
2}^ percent for the years 1946, 1947, and 1948, and 3 percent for the
years 1949 and thereafter.
The definitions applicable in the case of both the old-age insurance
and the unemployment compensation taxes are amended in certain
respects. Among the changes the services of fishermen, in general,
are excluded from "employment'' for the purposes of the old-age
insurance taxes; and service on an American vessel is included in
"employment" for the purposes of the old-age insurance tax. "Agricultural labor" is defined in detail. In the case of the old-age insurance taxes, the term "employment" was revised to include service by
individuals attaining the age of 65, beginning January 1, 1939.
There is an amendment making it clear that an employer engaged
in foreign commerce is on the same basis, as respects the authority
of a State to require payments into an unemployment fund, as
employers engaged in interstate commerce. Authority is conferred
on State legislatures to require instrumentalities of the United States,
such as national banks, to comply with State unemployment compensation laws. Instrumentalities wholly owned by the United
States or exempt from the Federal unemployment compensation tax
are excepted. This authority is made conditional on nondiscriminatory treatment of such instrumentalities by the State and certification
of the State law under section 1603, Internal Revenue Code.
The Amendments contain provisions designed to facilitate adjustments of overpayment and underpayment of employees' and employers' tax and to allow refunds in cases where an employee has
been taxed on wages in excess of $3,000 by reason of having served
two or more employers during the ta,xable years and receiving
aggregate wages of more than $3,000. In addition, wages under the
unemployment tax provisions were to include remuneration only up
to $3,000, effective January 1, 1940, whereas all remuneration was
covered hitherto.
Employers are required to furnish each employee with a written
statement or receipt showing the wages paid to the employee and the
tax imposed by section 1400 of the Code with respect to such wages,
s'uch receipt to cover one or more quarters of the calendar year.




REPORT OF THE SECRETARY OF THE TREASURY

139

The conditions of granting a credit against the Federal imemployment compensation tax for contributions paid by a taxpayer to an
unemployment fund under a State law are considerably liberalizeo
Extensions of time of as much as 90 days, instead of 60 days, for
filing returns of the unemployment compensation taxes are authorized.
There are miscellaneous provisions clearing up problems of interpretation which had arisen under the Social Security Act and affording relief in various cases of hardship.
Revenue Act oj 1940
The Revenue Act of 1940, approved June 25, 1940, consists of four
titles. Title I changes the income tax rates for taxable years beginning after December 31, 1939, as follows: (1) Surtaxes on surtax net
incomes in excess of $6,000 and not in excess of $100,000, are increased (see exhibit 34A on page 457); (2) the rate of tax on incomes
of domestic corporations is increased 1 percent above the prior existing rates; (3) a non-resident alien is taxed on dividends, interest, and
other fixed or determinable periodical income at 15 percent instead
of 10 percent, except where treaty provisions fix a lower rate; if his
gross income amounts to more than $24,000, he is subject to full normal tax and surtax at the increased rates on income of the type
described; (4) foreign corporations having an office or place of business in the United States are subject to a rate of 19 percent in lieu
of 18 percent under prior existing law; (5) the rate of tax on the fixed
or determinable periodical income from United States sources of
foreign corporations not engaged in a trade or business in the United
States, or not having an office or place of busiaess therein, remains at
15 percent, but dividends, which were formerly taxed at 10 percent,
are now taxed at 15 percent, except where treaty obligations require
otherwise.
The personal exemptions for income tax purposes are reduced from
$2,500 to $2,000 in the case of married persons and heads of families
and from $1,000 to $800 in the case of single persons. Returns are
required of every individual taxpayer having a gross income equal to
his personal exemption; of every estate having a gross income of $800
or over; and of every trust having a gross income of $800 or more or
a net income $100 or more.
Title I I makes certain temporary changes which are to be effective
for five years. All Federal taxes are increased, generally by 10 percent, except (1) those of a regulatory nature, (2) excise taxes on imports, (3) taxes levied under the social security program, (4) taxes on
communication facilities, and (5) taxes on tobacco and tobacco, products, other than on cigarettes. The increased taxes made under title
269677—41

rll




140

REPORT OF T H E SECRETARY OF T H E TREASUIRY

I I are designated as "defense taxes" and the revenue raised thereby
will be applied to retirement of the National Defense Series of obligations authorized by title I I I .
The income tax payable by individuals or corporations including
the surtax on personal holding companies is increased by 10 percent
for taxable years beginning after December 31, 1939, and before January 1, 1945. In the case of an individual taxpayer whose income
tax, computed without regard to the defense tax provisions, amounts
to more than 50 percent of his net income, it is provided that his
defense tax will not amount to more than 10 percent of his net income
remaining after deduction of his income tax computed without regard
to the defense tax provisions.
The rates of the excess-profits, capital stock, estate, and gift taxes
and of the excise tax on transfers to avoid income tax are increased
by 10 percent, effective for the following periods: In the case of the
excess-profits tax, for any taxable year ending after June 30, 1940,
and before July 1, 1945; capital stock tax, for the year ending June
30, 1940, and for the 4 succeeding years ending June 30; estate tax,
from the date of enactment of the Revenue Act of 1940 to the expiration of 5 years thereafter; gift tax, for the calendar years 1940 to
1945, both inclusive, the increase to affect only gifts made after the
date of enactment of the act; transfers to avoid income tax, from the
date of enactment of the act up to July 1, 1945.
The rates of tax on cigarettes, distilled spirits, beer, and wines are
increased, and floor stocks taxes equal to the difference between the
old and new rate are imposed with respect to all of those products
except wines. The floor stocks taxes on distilled spirits and cigarettes
are applicable to retailers as well as to manufacturers and wholesalers,
except that stocks of spirits of 100 gallons or less held on exclusively
retail premises are exempt; the floor stocks tax on beer is not applicable to retailers.
The act provides that the temporary import and excise duties which
were to expire or have their rates reduced in 1941 are not to expire
or have their rates reduced until 1945. The rates of miscellaneous
excise taxes are increased, in amounts indicated by the table included
as exhibit 34 B on page 458. The exemption from the admissions tax
is reduced to 20 cents for the period from July 1, 1940, to June 30,
1945, after which time admissions of $3 or less will be exempt.
Provision is made for increasing the amount of credit against the
automobile tax on account of taxes previously paid on tires and tubes.
The credit is increased to 2^ and 3)^ percent with respect to vehicles
sold after June 30, 1940, and before July 1, 1945.
Title I I I amended the Second Liberty Bond Act, as amended, to
authorize the issuance of $4 billions of public debt obligations with
maturities not exceeding 5 years, to be designated "National Defense



REPORT OF THE SECRETARY OF T H E TREASURY

141

Series." I t also provides for the creation of a special fund into which
is to be paid revenue estimated to be attributable to the increases in
taxes made, and to the floor stocks taxes imposed, ,by title I I . Such
fund is to be available only for the retirement of the National Defense
Series obligations.
Title IV amends the Public Salary Tax Act of 1939 with respect to
income taxes on compensation received prior to January 1, 1939, for
personal service as a State officer or employee, which compensation
was paid directly or indirectly by the Federal Government. The
amendment provides that if the tax on such compensation is paid with
interest on or before March 15, 1941, no criminal penalty shall be imposed, and no addition to tax under sections 291 or 293 of the Internal
Revenue Code shall be made, on account of the failure to make a return of such income or to pay the tax on it at the time when such
return or payment was due.
Government contracts jor naval vessels and aircrajt
Public No. 671, " A n act to expedite national defense, and for other
purposes," was approved June 28, 1940. Under the provisions of
title I of this act contractors for the construction of naval vessels and
Army or Navy aircraft are required to agree to pay into the Treasury
proflt on such contracts in excess of 8 percent of the contract prices.
Proflts in excess of 8.7 percent of the cost of performing such contracts
are deemed to be profits in excess of 8 percent of the contract price.
Formerly profits of 10 percent were allowed in the case of naval vessels
and 12 percent in the case of Army and Navy aircraft. The contractor must further agree to make no subcontract in connection with
construction of such vessels and aircraft unless the subcontractor
agrees to the same profit-limiting conditions. The new profit-limiting
provisions apply after the date of the enactment of the act and for the
duration of the emergency proclaimed by the President on September
8, 1939. The act also exempts contracts or subcontracts where the
award is less than $25,000 from any profit-limiting provisions. Formerly contracts and subcontracts where the award was less than
$10,000 were exempt from the provisions limiting profits.
I t is also provided that the cost of additional equipment and facilities necessary to the performance of contracts for the construction of
naval vessels and Army and Navy aircraft during the emergency may
be charged against the contracts. Any part of the cost thus charged
against the contract goes to reduce the contract price for the purposes
of the profit-limiting provisions. The Secretary of the Navy or Secretary of War, as the case may be, is to certify to the Commissioner of
Internal Revenue the necessity and cost of such additional plant and
equipment and the part of such cost to be charged against the contract.



142

REPORT OF THE SBGRETARY OF THE TREASURY

Such certification is subject to regulations prescribed by the President,
but is binding on the Commissioner unless he makes formal objection
to the Secretary who made the certification within 5 days after receipt
of the certification. A copy of title I of this act appears as exhibit 35
on page 458.
Other revenue legislation
Other laws affecting the internal revenue are as follows:
Public No. 165, July 6, 1939, to extend the time within which the
powers relating to the stabilization fund atid the alteration of
the weight of the gold dollar may be exercised. Section 4 (b)
exempts from tax the transfers of silver delivered to mints for
coinage; see p. 455.
Public No. 242, July 28, 1939, to amend the Bankruptcy Act
with respect to railroads. Chapter XV, article VI, protects
the Government's claims for taxes and customs duties from
railroads whose aft'airs are adjusted under chapter XV, exempts
from stamp tax the issuance and transfer of securities in carrying out a plan of adjustment, and provides that no income
taxable under a Federal or State law shall be deemed to have
been realized by reason of cancelation of a petitioner's indebtedness.
Public No. 259, Aug. 4, 1939, amending the Merchant Marine
and Shipping Acts to provide, among other things, for the
nonrecognition of gain, for income tax purposes, on the transfer
of an obsolete vessel to the Maritime Commission in return
for an allowance for the construction of a new vessel, and to
provide for the basis of such new vessel.
Public No. 264, Aug. 4, 1939, to authorize the Commissioner of
Internal Revenue to make certain allowances, for losses by
leakage and evaporation upon withdrawal of packages of
brandy or fruit spirits under certain conditions.
Public No. 300, Aug. 7, 1939, to amend the act providing for the
complete independence of the Philippine Islands, etc., relative
to the export tax on articles shipped from the Philippines to
the United States.
Public No. 334, Aug. 7, 1939, amending section 2857 of the
Internal Revenue Code, relative to books of rectifiers and wholesale'jdealers.
PublicJ No. 400, Aug. 11, 1939, to provide for the refund or credit
of the internal revenue tax paid on spirits, lost or rendered
unmarketable by reason of the floods of 1936 and 1937, where
such spirits were in the possession of the original taxpayer or
rectifier for bottling or use in rectification under Government
supervision as provided by law and regulations.



REPORT OF T H E SECRETARY OF T H E TREASURY

143

Public Res. No. 61, April 12, 1940, extending the foreign trade
agreement program for a further period of 3 years from June
12, 1940.
Public Res. No. 81, June 11, 1940, providing for a more uniform
coverage under the Railroad Retirement Acts of 1935 and 1937,
the Carriers Taxing Act of 1937, and subsection B of chapter
9 of the Internal Revenue Code.
Public No. 654, June 24, 1940, to amend sections 2803 (c) and
2903 of the Internal Revenue Code, relative to unused stamps,
etc.
Public No. 655, approved June 24, 1940, amends section 3030 (a)
of the Internal Revenue Code, eliminating the tax on brandy
and wine spirits used in the fortification of wine and substituting therefor an increase in the rates of tax on fortified wines.
(See exhibit 36 on page 463.)
Fiscal years 1933 to 1940

Important revenue legislation was enacted during each of the
fiscal years 1933 through 1940. The first important revenue measure
enacted during this period was contaiued in the National Industrial
Recovery Act, approved June 16, 1933. This was followed by the
Revenue Acts of 1934, 1935, 1936, 1937, 1938, 1939, and 1940. Taxes
were also levied for special purposes under more than twenty other
acts, some of which were subsequently amended. A discussion of the
revenue acts and of the major laws enacted from 1933 to 1939 which
affect Federal revenues will be found in the article beginniag on page
7. The details of the taxes imposed by these acts and other laws
enacted since 1933, together with similar data for the period 1913
through 1932, appear in the exhibit beginniag on page 466.
The general laws of the United States and parts of such laws relating
exclusively to internal revenue in force on January 2, 1939, were
codified and enacted into the Internal Revenue Code, approved February 10,1939. Thisisthefirst codification as absolute law of the Federal
statutes relating to the internal revenue since the Revised Statutes
of the United States approved June 22, 1874. I t supersedes, by
repealing effective February 11, 1939, all laws codified thereia to the
extent that they related to internal revenue, with appropriate savings
clauses to preserve accrued liabilities and necessary enforcement
machinery.
ESTIMATES OF RECEIPTS

The Secretary of the Treasury is required each year to prepare and
submit ia his annual report to Congress estimates of the public revenue for the current fiscal year and for the fiscal year next ensuing




144

REPORT OF T H E SEiORETARY OF T H E

TREASURY

(Public No. 129, February 26, 1907) .jj 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
ending 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, pay rolls, and other components of business
activity. In view of the well-recognized uncertainty involved in
forecasting the various phases of business activity, accentuated this
year by the international situation, 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 of commodities upon which taxes are levied.
Consideration must be given to the fact that changes in the various
indicators of business activity are not refiected 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 because not only is
the individual taxpayer's income greater but also 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 coUection 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 the Federal Unemployment Tax Act, formerly
title I X of the Social Security Act, are made upon liabilities of a much
earlier period and therefore do not respond as promptly to changes in
general business conditions.
The lag between the time income is received by taxpayers and the
time of receipt of income taxes based upon such incomes is particularly important in its effect upon total tax receipts in any given year.



REPORT OF THE SEORETARY OF THE TREASURY

145

Thus, in general, the changes in incomes in the calendar year 1940
will not be reflected in income tax receipts until the income tax
returns are flled on or before March 15, 1941. Because of the privilege of making quarterly installment payments of these tax liabilities,
the collections will be received throughout the calendar year 1941,
thus falling into the receipts of the flscal years 1941 and 1942. Hence
the estimated current income tax receipts, both corporation and individual, for the flscal year 1941 are made up partly from payments on
calendar year 1939 incomes and partly from payments on calendar
year 1940 incomes. Similarly, flscal year 1942 estimates of income
tax receipts include payments based upon the incomes of each of the
calendar years 1940 and 1941.
The revenue estimates in the table on page 147 contain an
adjustment which has been made ia total receipts to reflect the
changes brought about by the recent amendments to the Social
Security Act. There has been created on the books of the Treasury
the "Federal old-age and survivors insurance trust fund," to which
was transferred on January 1, 1940, the amounts standing to the
credit of the old-age reserve account. For the fiscal year 1941 and
each subsequent fiscal year there is appropriated to the fund an amount
equivalent to 100 percent of the taxes received under the Federal
Insurance Contributions Act, with the proviso that the estimated
administrative expenses of the Treasury and the Social Security Board
with respect to the collection of taxes and the payments from the fund
shall be repaid to the Treasury. In order to show the amount of
revenue applicable to the general expenditures of the Government
there has been deducted from total receipts a sum equivalent to the
net appropriation to the Federal old-age and survivors insurance trust
fund. For comparable purposes there has been deducted from total
receipts in the fiscal year 1940 the amounts transferred to the old-age
reserve account and to the Federal old-age and survivors insurance
trust fund. The detailed analysis set forth below is based on total
revenues and receipts and not on the net amount after adjustment.
Total revenues and receipts, general and special accounts, are estimated (on daily Treasury statement basis, unrevised) in the amounts
of $7,653 millions for the fiscal year 1941 and $8,972 millions for the
fiscal year 1942. The estimated amoimt of total receipts in the fiscal
year 1941 represents an increase of $1,728 millions over total receipts
of $5,925 millions in the fiscal year 1940, while the estimated amount
of total receipts in the fiscal year 1942 represents an increase of $1,319
millions over the estimated total receipts for the fiscal year 1941.
Estimated receipts in the fiscal years 1941 and 1942 and actual
receipts in the fiscal year 1940 are presented in summary form in the
table on page 147. A more detailed tabulation of receipts and
estimates is shown in table 23 beginning on page 696.



146

REPORT OF T H E SEiGRETARY OF T H E

TOR-EASTJRY

Fiscal year 19^.1
Total receipts in general and special accounts in the fiscal year 1941
are estimated at $7,653 millions. This total is $1,728 millions above
actual total receipts of $5,925 millions in the fiscal year 1940. Net
receipts—total receipts less the net appropriation for the Federal
old-age and survivors insurance trust fund—are estimated at $7,013
millions, an increase of $1,626 millions over the comparable figure for
the fiscal year 1940. The percentage distribution of total receipts is
shown in the following table:
Percentage distribution of total revenues and receipts i n the fiscal years 1940 and 1941
Actual
1940

Source
Internal revenue:
Income taxes
Miscellaneous internal revenue taxes
Employment taxes
Total internal revenue
Railroad Unemployment Insurance Act
Customs
Miscellaneous revenues and receipts
Total

..

- -.--

35.9
39.6
14.0

39.9
37.5
11.7

89.5
.1
5.9
4.5

•

.

Estimated
1941

89.1
.1

100.0

100.0

3.9
6.9

Each broad class of revenue with the exception of customs contributes to the estimated increase in the fiscal year 1941 over the
fiscal year 1940. The principal increases come in income taxes and
miscellaneous internal revenue. The increases are due both to increasing business activity and new tax legislation. The customs
estimate is lowered because of the effect of the war on international
trade.
Income #axes.—Receipts from income taxes are estimated at $3,055
millions, an increase of $930 millions over actual receipts in the fiscal
year 1940. Collections of current corporation and current individual
income taxes in the fiscal year 1941 are derived from tax liabilities
established in the calendar years 1939 and 1940, whereas fiscal year
1940 receipts depend upon the income levels of the calendar years
1938 and 1939. As the calendar year 1939 is common to both fiscal
years, the increase in fiscal year 1941 receipts is attributable to a
combination of (1) higher income levels estimated for the calendar
year 1940 as compared to the calendar year 1938, and (2) the increased rates applicable to calendar year 1940 incomes because of
changes in the Jaw.




KEPORT O'F T H E SEiORETARY

OF T H E

TREAiSURY

147

Actual receipts in the fiscal year 1940 and estimated receipts in the fiscal years 1941
and 1942
[In millions of dollars]
Actual
1940

General a n d special accounts

1. I n t e r n a l r e v e n u e :
(1) I n c o m e taxes:
Corporation, c u r r e n t . . .
Individual, current
B a c k income
Excess-profits tax
Declared value excess-profits
U n j u s t e n r i c h m e n t tax

958.3
891.8
252.6

Estimated
1941

Estimated
1942

1,443.0
1, 222. 0
255.0
106.0
24.0
5.0

2,092.0
1, 604.0
260 0
522 0
29 0
2 5

2,129. 6
-4.3

3,055. 0

4,509.5

2,125. 3

3,055. 0

4, 509. 5

132.7
330.9
29.2
624.1
608.1
38.7
446.7
149.3

166.8
317.3
31.3
810.5
691.9
36.2
623.5
193.4

193 4
341 7
32 8
839.5
716 6
40 0
666 4
198 9

T o t a l miscellaneous internal r e v e n u e (collection b a s i s ) . . .
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 basis (unrevised)

2, 359. 6
-15.0

2,871.0

3, 029. 3

T o t a l miscellaneous i n t e r n a l r e v e n u e (daily T r e a s u r y
s t a t e m e n t basis (unrevised))

2, 344. 6

2,871.0

3, 029. 3

604. 7
107.5

667.5
88.4

725.3
91 1

712. 2

755.9

816 4

121.0

135. 3

144.9

T o t a l e m p l o y m e n t taxes (daily T r e a s u r y s t a t e m e n t basis
(unrevised))
. . _

833.2

891.2

961.3

T o t a l internal r e v e n u e (daily T r e a s u r y s t a t e m e n t basis
(unrevised))

5, 303.1

6, 817. 2

8, 500.1

4.9
348.6

6.8
302. 0

7.2
295.0

268. 2

527.2

169.4

1
.
..._

18. 5
8.5

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 basis ( u n r e v i s e d ) .
T o t a l income taxes (daily T r e a s u r y staternent basis (unrevised))
(2) Miscellaneous internal r e v e n u e :
C a p i t a l stock tax
E s t a t e tax
Gift tax
.
L i q u o r taxes
-.Tobacco t a x e s .
S t a m p taxes
M a n u f a c t u r e r s ' excise taxes
Miscellaneous taxes

,

(3) E m p l o y m e n t taxes:
Taxes on e m p l o y m e n t b y other t h a n carriers:
Federal I n s u r a n c e C o n t r i b u t i o n s A c t
Federal U n e m p l o y m e n t T a x A c t
^

Total
Taxes on carriers a n d their employees (chap. 9, s u b c h a p . B
of t h e I n t e r n a l E e v e n u e Code)

2. Railroad U n e m p l o y m e n t I n s u r a n c e Act (daily T r e a s u r y s t a t e m e n t
basis (unrevised))
3 C u s t o m s (daily T r e a s u r y s t a t e m e n t basis (unrevised))
4. Miscellaneous revenues a n d receipts (daily T r e a s u r y s t a t e m e n t basis
(unrevised))
T o t a l receipts, general a n d special accounts (daily T r e a s u r y s t a t e m e n t
basis (unrevised)) .

5, 924. 8

7, 653. 2

8, 971. 7

Deduct:
N e t a p p r o p r i a t i o n for Federal old-age a n d sm-vivors insurance
t r u s t fund 1 representing an a m o u n t e q u a l to taxes collected
a n d deposited u n d e r t h e Federal I n s u r a n c e C o n t r i b u t i o n s Act,
less r e i m b u r s e m e n t to General F u n d for a d m i n i s t r a t i v e expenses.

537. 7

640. 3

696.3

N e t receipts, general a n d special accounts (daily T r e a s u r y
s t a t e m e n t basis (unrevised))
. ._

5, 387.1

7, 012. 9

8, 275. 4

1 Formerly old-age reserve account.
NOTE.—Figures are rounded to nearest tenth of a million and will not necessarily add to totals.




148

RETORT OE THE SEiCRETARY OF T H E TREAStFR-Y

Current corporation income taxes are estimated to be $1,443 millions, an increase of $485 millions, or 51 percent over actual receipts
in the fiscal year 1940. The two revenue acts passed in 1940 increased
the corporation rate from the prevailing 16K-19 percent rates of
the 1938 act to 22.1 percent plus a defense tax of 1.9 percent of net
income for corporations with net incomes in excess of $25,000. The
graduated rates of small corporations were increased 1 percent plus a
defense tax of 10 percent of the basic tax by the Revenue Act of 1940,
approved June 25, 1940. The increase due to these tax increases is
offset to a minor extent by the allowance of a two-year loss carryover
(only one year of which is effective in the calendar year 1940) and the
full deduction against ordinary income of long-term capital losses, both
provisions being part of the Revenue Act of 1939, but effective for the
first time in the calendar year 1940.
Current individual income tax collections are estimated at $1,222
millions, an increase of $330 millions, or 37 percent over the actual
collections of the previous fiscal year. The Revenue Act of 1940 decreased personal exemptions by 20 percent, increased surtax rates on
incomes from $6,000 to $100,000 and added a defense tax of 10 percent
of the basic tax or net income after the basic tax, whichever is less.
The Public Salary Tax Act which eliminated exemption of State and
local governmental employees' salaries from Federal taxation was
effective for years beginning after December 31, 1938. The fiscal
year 1941 is the first year in which a full year's collections from this
additional tax base will be received.
^
Back corporation and individual income taxes which reflect collections of delinquent liabilities of past years are estimated at $255
millions, an increase of $2 millions over the fiscal year 1940.
Initial collections of the corporation excess-profits tax to be received
in the fiscal year 1941, representing only partial collections of calendar
year 1940 liabilities, are estimated to be $106 millions.
The excess-profits tax, part of the Second Revenue Act of 1940,
levies graduated rates from 25 percent on adjusted excess-profits net
incomes of less than $20,000, to. 50 percent on adjusted excess-profits
net incomes in excess of $500,000. Adjusted excess-profits net income
is the difference between the excess-profits net income of the taxable
year and the excess-profits credit plus $5,000. The excess-profits
credit may be either (a) 8 percent of invested capital of the taxable
year, or (b) 95 percent of the average base period (1936-1939) net
income plus 8 percent of net capital additions or minus 6 percent of
net capital reductions in the taxable year. In determining the average
base period income, one deficit year may be treated as zero.
Declared value excess-profits tax collections are estimated to amount
to $24 millions, an increase of $6 millions over the preceding year.
As in the case of the income tax, the increase is due to higher business



RE'PORT OE T H E SECRETARY OF T H E TREASURY

149

levels estimated in the calendar year 1940 as compared to the calendar
year 1938. The defense tax of 10 percent of the tax rate formerly in
effect also contributes to the increase.
Unjust enrichment taxes, which are currently back taxes principally
based on liabilities incurred in the calendar year 1936, are estimated to
decrease from $9 millions in the fiscal year 1940 to $5 millions, as the
outstanding claims for these taxes have been decreased by collections.
Miscellaneous internal revenue.—Total miscellaneous internal revenue receipts are estimated at $2,871 millions, a total of $526 millions
above actual receipts in the fiscal year 1940. Most of the major
sources of revenue in this group contribute tp the estimated increase.
Capital stock tax receipts are estimated at $167 millions, an increase
of $34 millions over the previous fiscal year. The increase represents
a higher declaration of capital stock value because of increased earnings
anticipated by corporations in the calendar year 1940 as compared with
the calendar year 1939 and the defense rate increase of 10 percent.
Estate tax collections in the fiscal year 1941 are estimated at $317
millions as compared with $331 millions in the fiscal year 1940. The
1940 collections included a large payment from one estate and allowance for the nonrecurrence of this item more than offset the
estimated rising value of the property composing the estates on which
taxes will be paid in the fiscal year 1941. The defense taxes on
estates in the fiscal year 1941 are small for two reasons: First, because
the act was approved June 25, 1940, just prior to the beginning of the
fiscal year 1941, and second, because there is a fifteen-month interval
between the date of death of a decedent and the due date for payment
of the tax.
Gift tax collections are estimated to be $31 millions, an increase
of $2 miUions over collections of $29 millions in the fiscal year 1940.
Liquor taxes are expected to produce $811 millions or $186 millions
above actual receipts in the fiscal year 1940.
Tobacco tax receipts are estimated at $692 millions, or $84 millions
above actual receipts of $608 millions in the fiscal year 1940. The tax
on cigarettes, including the fioor stocks tax, estimated to provide
$614 millions, will bring most of the total revenues under this group as
well as $81 millions of the increase.
Stamp taxes are expected to bring $36 millions, or a decrease of
$2 millions from actual receipts in the fiscal year 1940.
Manufacturers' excise tax collections are estimated at $624 millions. Defense taxes are estimated to bring a large part of the estimated gain of $177 millions over actual collections in the fiscal year
1940. Each tax source within this group is estimated to show a gain
over 1940, with gasoline showing the largest part of the rise.
Miscellaneous tax collections are estimated at $193 millions, or $44
millions aboye fiscal year 1940 collections.



150

RE'PORT OF T H E SECRETAR;Y OF T H E TIIEASTJIRY

Employment taxes.—Total employment taxes for the fiscal year
1941 are estimated at $891 millions, an increase of $58 millions over
actual receipts of $833 millions in the fiscal year 1940.
Receipts.under the Federal Insurance Contributions Act, formerly
title VIII of the Social Security Act, are estimated at $668 millions.
This is an increase of $63-millions over actual receipts of $605 millions in the fiscal year 1940, which, to date, is the highest fiscal year
figure attained since taxes were first received under this act in 1937.
Since the rates of tax are the same, the increase is the result of estimated higher levels of business activity plus the inclusion for the first
full fiscal year of the net addition to the legal tax base resulting from
the Social Security Act Amendments of 1939, approved August 10,
1939. The major changes in coverage under this act were the inclusions of service on American vessels, employees of member banks of
the Federal Reserve System, individuals aged 65 and over, and the
exclusion of certain groups of farm workers. Inasmuch as the
inclusion of individuals aged 65 and over was made retroactive to
January 1, 1939, taxes for five quarters were collected on this base
in the fiscal year 1940. The other major changes in coverage became
effective January 1, 1940, so that revenues from such coverage were
included in the fiscal year 1940 receipts to the extent of only one
quarter's liability. I t should be noted that the Social Security Act
Amendments of 1939 prevented the 50 percent increase in rates on
January 1, 1940, which would have applied to wages in the calendar
years 1940, 1941, and 1942.
Receipts from the Federal Unemployment Tax Act, formerly title
I X of the Social Security Act, are expected to decline to $88 millions
from actual receipts of $108 millions in the fiscal year 1940. The
drop will be the first since taxes under this act and its predecessor
were first received in 1936. The passage of the Social Security Act
Amendments of 1939 is primarily responsible for the decline in revenues because it effected a decrease in coverage of individuals' wages,
i. e., wages in excess of $3,000 a year, which more than offset an
increase in coverage of employees. Another reason for the decline
is the fact that railroad employees were removed from coverage under
this act by the Railroad Unemployment Insurance Act which became
effective July 1, 1939. The decline in the tax base is partly offset
by an increase in the taxable compensation which has been forecast
for the remainder of the base.
Receipts from the Carriers Taxing Act of 1937 are estimated at.
$135 millions. The increase, as compared to fiscal year 1940 receipts
of $121 millions, is attributable only in. part to the higher level of
railroad pay rolls in April 1940-March 1941, the period for. which
liabilities are paid in the fiscal year 1941, as compared with pay rolls
in the corresponding period^ of the previous year. The larger portion



REPORT OF T H E SEiCRETARY OF T H E TREASURY

151

of the increase is due to the rise in the rate bf tax from 2% percent on
both employees and employers to 3 percent on both employees and
employers, effective January 1, 1940. Only one quarter's tax liabilities
were collected at the 3 percent rate in the fiscal year 1940 as against
the four quarters of the fiscal year 1941.
Railroad Unemployment Insurance Act.—Receipts under this act
are estimated at $7 millions, an increase of $2 millions over receipts
in the fiscal year 1940. This act, which became effective July 1, 1939,
was in effect throughout the fiscal year 1940, but because of the lag of
one quarter in making payments of liabilities, receipts in 1940 included
contributions covering only three quarters' liabilities as compared to
four quarters' liabilities in the fiscal year 1941. The Railroad Unemployment Insurance Act requires carriers to pay contributions under
'it rather than under the Federal Insurance Contributions Act, as was
the case prior to July 1, 1939.
Customs.—Customs duties are expected to fall to $302 millions in
the fiscal year 1941. This total represents a drop of $47 millions, or
13 percent, from the fiscal year 1940 level, which was unusually high,
in the light of the state of foreign affairs, principally because of
large imports of sugar, liquors, and wool.
Miscellaneous revenues and receipts.—These are estimated at $527
millions in 1941. The increase of $259 millions over 1940 is accounted
for principally by the repayment of $300 millions of capital funds by
Government corporations.
Fiscal year 191^2
Total receipts in general and special accounts in 1942 are estimated
at $8,972 millions which is $1,319 millions above the estimated
receipts of $7,653 millions in 1941.
Income taxes.—Total income taxes, which wiU refiect for the first
time the full effect of the revenue acts passed in 1940, are estimated to
amount to $4,510 millions. This total represents an increase of
$1,455 millions or 48 percent over the estimated collections in 1941
and $2,384 millions or 112 percent over actual receipts of $2,125
millions in 1940. The same factors responsible for the increase in
receipts in 1941 as compared to 1940, increases in both business levels
and tax rates, are accountable for the continuation of the increase in
1942. Current corporation income taxes are estimated to be $2,092
millions, an increase of 45 percent over 1941 estimated receipts, while
current individual income tax collections are estimated to increase 31
percent to $1,604 millions. Back income tax;es are estimated to be
$260 millions. Fiscal year 1942 collections of corporation excessprofits taxes, representing a full year's collections, are estimated at
$522 millions, an increase of $416 millions over the estimate of 1941.




152

REPORT OF THE SEiORETA'RY OF THE TREASURY

As a result of the estimated higher incomes, the declared value
excess-profits tax collections are estimated at $29 millions, an increase
of $5 millions over the preceding year.
Unjust enrichment taxes are estimated to decline to $3 millions as
the collections still further reduce the remaining claims for this
back tax.
Miscellaneous internal revenue.—Miscellaneous internal revenue
receipts are estimated at $3,029 millions, an increase of $158 millions
over estimated receipts in the fiscal year 1941. Each major classification of receipts shows an increase over the 1941 estimates.
Estimated fiscal year 1942 receipts from the capital stock tax
amounting to $193 millions reflect the effect of higher business levels
estimated for the calendar year 1941 as compared to the calendar
year 1940.
Estate tax collections of $342 millions are expected in the fiscal
year 1942, an increase over the fiscal year 1941, principally because a
larger percentage of the estate taxes paid will have been subject to the
defense tax as compared with those of the previous fiscal year;
Collections from the gift tax are expected to be $33 millions as compared to $31 millions in the fiscal year 1941.
Liquor tax collections are estimated at $840 millions, an increase
of $29 millions over the fiscal year 1941 estimate. The gain takes
place in spite of the nonrecurrence of $23 millions in floor stocks
taxes applicable only in the fiscal year 1941.
I t is estimated that collections from tobacco taxes will rise to $717
millions or $25 millions above the fiscal year 1941 estimates. While
the floor stocks taxes on cigarettes are a nonrecurring item, this is the
only item of this group which shows a decrease.
Collections from stamp taxes are estimated at $40 millions, a gain
of $4 millions over the estimate for the fiscal year 1941.
Manufacturers' excise taxes are expected to advance to $666
millions. This is a gain of $43 millions over estimated 1941 collections. Each of the taxes in this group shows an increase over the
estimates for 1941.
Miscellaneous taxes are estimated at $199 millions, a figure $5
millions over the 1941 estimate. The only significant decrease in this
group is in the tax on bituminous coal, which is scheduled to expire
April 26, 1941.
Employment taxes.—Employment taxes receipts are estimated at
$961 millions, an increase of $70 millions over estimated receipts in the
fiscal year 1941.
Receipts under the f'ederal Insurance Contributions Act, formerly
title VIII of the Social Security Act, are estimated at $725 millions.




REPORT OF THE SEiORETARY OF T H E TREASURY

153

The increases of $121 millions over actual receipts of $605 milllions iu
the fiscal year 1940, and of $58 millions over estimated receipts of
$668 millions in the fiscal year 1941 are largely the result of substantial
increases in the forecast of taxable pay rolls. The increase over the
fiscal year 1940 is accounted for by the fact that the latter year
included receipts of only one quarter's liabilities from the groups
brought under the act by the Social Security Act Amendments of
1939. The fiscal year 1940 did, however, include receipts from five
quarters' liabilities from individuals aged 65 and over as compared to
four quarters in later years, but the net effect is a large increase in the
tax base since the fiscal year 1940.
Receipts from the Federal Unemployment Tax Act, formerly title
I X of the Social Security Act, are expected to increase slightly from
$88 millions in the fiscal year 1941 to $91 millions. Prior to July 1,
1939, when the Railroad Unemployment Insurance Act placed employees of railroads under a separate unemployment compensation
system, such tax liabilities of railroads were included under the Federal Unemployment Tax Act. Tax liabilities occurring in the calendar
year 1939 were payable in the calendar year 1940, and therefore the
receipts in the first six months of the fiscal year 1941, July through
December 1940, refiect some of the tax liability now transferred
entirely to the Railroad Unemployment Insurance Act. This
decrease in the legal tax base in the fiscal year 1942 as compared to
1941 has been more than compensated by a forecast rise in income
taxable under this act.
. Receipts under the Carriers Taxing Act of 1937 are estimated at
$145 millions as. compared to $135 millions in the fiscal year 1941.
The entire increase is attributable to the increased railroad pay rolls
which are expected to follow the forecast expansion of industrial
activity since there have been no changes in the act.
Railroad Unemployment Insurance Act.—The receipts under the
Railroad Unemployment Insurance Act are expected to increase
slightly from $6.8 millions in the fiscal year 1941 to $7.2 millions.
Customs.—Receipts from customs duties are estimated to decrease
slightly from the level of 1941, to $295 millions. The decline is small
because larger imports from areas not affected by hostilities are
expected to somewhat offset further decline in imports from countries
whence imports are cut off.
Miscellaneous revenues and receipts.—Miscellaneous revenues and
receipts are estimated at $169 millions, a decrease of $358 millions from
estimated receipts in the fiscal year 1941. This decrease is accounted
for principally by the fact that the 1941 receipts included $300
millions of repayments of capital funds by Government corporations.




154

REPORT OF T H E

SEGRETARY

ESTIMATES OF

OF T H E

TREASURY

EXPENDITURES

Actual expenditures for the fiscal year 1940 and estimates for the
fiscal years 1941 and 1942 are summarized in the following table.
Further details will be found in table 23 beginning on page 696. The
estimates are based upon figures submitted to the Congress in the
Budget for 1942.
Actual expenditures for the fiscal year 1940 and estimated expenditures for the fiscal
years 1941 and

1942

[In millions of dollars]
General and special accounts

Actual
1940

Estimated
1941

Estimated
1942

General (including recovery and relief).
Revolving funds (net) •.
Transfer to trust accounts, etc
Debt retirements

, 736.4
53.9
207.9
129.2

12, 526. 6
216.2
100.0

15,111.5
9.5
274.6
100.0

Total, exclusive of special items.
Supplemental items:
Regular
National defense
Work relief

, 127.4

12, 702.4

15, 495. 5

150.0
100.0
350.0

100.0
1, 000. 0
990.0

13,302.4

17,585. 5

Grand total, general and special accounts.

a Excess of credits, deduct.
NOTE.—Figures are rounded to nearest tenth of a million and will not necessarily add to totals.
TREASURY ACTIVITIES UNDER T H E OLD-AGE P R O V I S I O N S OF
SOCIAL S E C U R I T Y ACT, FISCAL YEARS 1936 T O 1940

THE

Title I I of the Social Security Act, approved August 14, 1935,
established a system of Federal old-age benefits payable after December 31, 1941, to employees in covered industries who thereafter
attained the age of 65. Death benefits and lump sum payments to
employees attaining age 65, but not eligible for annuity benefits,
were payable from January 1, 1937. Title VIII of the act levied an
income tax upon the wages of employees and an excise tax on employers. These taxes were collected b y the Bureau of Internal
Revenue under the direction of the Secretary of the Treasury.
Section 201 (a) of the act established an account in the Treasury
to be known as the ^^Old-Age Reserve Account," and there was
authorized to be appropriated to the account for each fiscal year
beginning with 1937 '^an amount sufficient as an annual premium
to provide for the payments required under this title," and ^*to be
determined on a reserve basis in accordance with accepted actuarial
principles, and based upon such tables of mortality as the Secretary
of the Treasury shall from time to time adopt, and upon an interest
rate of 3 per centum per annum compounded annually." The
Secretary of the Treasury was required to submit annually to the
Bureau of the Budget estimates of the appropriations to be made
to this account.



REPORT OF THE SEORETARY OF THE TREASURY

155

Under these provisions of the law, appropriations to the old-age
reserve account were not required to equal the amount of taxes levied
and collected under title VIII, though in practice these appropriations were approximately equivalent to taxes collected less an allowance for administrative expenses. This procedure was predicated
upon the approximate correspondence, on a 3 percent reserve basis,
between taxes levied under title VIII and benefits specified under
title I I , as determined in accordance with section 201 (f) of the act.
This section required that ^^The Secretary of the Treasury shall
include in his annual report the actuarial status of the Account."
The term ''actuarial status" was interpreted to mean a comparison of
future benefit payments with funds on hand plus future income of the
account. The annual reports of the Secretary of the Treasury for the
the fiscal years 1937 (page 49) and 1938 (page 55) describe the methods
and results of this comparison. These reports point out the considerable margin of error inherent in calculations of this nature, since
they must necessarily involve assumptions as to future mortality
rates, wage levels, population growth, coverage under insured employment, and rates of retirement.
I t was also the duty of the Secretary of the Treasury to invest such
portions of the amounts credited to the account as were not, in his
judgment, required to meet current benefit payments. These investments were made solely in 3 percent special Treasury notes, authorized
under an extension of the purposes for which obligations of the United
States may be issued under the Second Liberty Bond Act, as amended.
Interest on investments was credited to and formed a part of the
account.
All amounts credited to the account were available for making payments required under title I I of the act. The Secretary of the Treasury made all benefit payments from the account in accordance with
certifications by the Social Security Board.
The Social Security Act was amended by an act approved August
10, 1939, the amendments to become effective on January 1, 1940
(see exhibit 53 on page 578, and the discussion on page 212). During
the first 6 months of the fiscal year 1940, the financing of the program
continued to operate under the provisions of the original act. On
January 1, 1940, the balance to the credit of the old-age reserve account
was transferred to the Federal old-age and survivors insurance, trust
fund, created by the amending act. Operations under the old-age
reserve account have been shown in the annual reports for 1937 to
1939, and are summarized in the following table.
269677—41——12




156

REPORT OF T H E SEiCRETARY

OF T H E TREASUORY

Receipts, expenditures, and assets of the old-age reserve account for specified periods,
J a n . 1, 1937, to Dec. 3 1 , 1939 i
[In thousands of dollars]
J a n . 1,
1937, to
D e c . 31,
1939

Item

J a n . 1,
1937, t o
J u n e 30,
19.37

J u l y 1,
1937, to
J u n e 30,
1938

J u l y 1,
1938 to,
J u n e 30,
1939

J u l y 1,
1939, t o
D e c . 31,
1939

Receipts:
A p p r o p r i a t i o n s b y Congress
I n t e r e s t on i n v e s t m e n t s

1,705,000
44, 625

265,000
2,262

2 500,000
15, 412

390,000
26,951

T o t a l receipts
E x p e n d i t u r e s : Benefit p a y m e n t s

1, 749, 625
25, 228

267, 262
27

515,412
5,404

416, 951
13,892

.

N e t a d d i t i o n to a c c o u n t - Balance a t beginning of period

1, 724, 397

267, 235

510,008
267, 235

403,059
777, 243

544,095
1,180, 302

1, 724, 397

267, 235

777, 243

1,180, 302

1, 724,397

Assets (at e n d of period):
I n vestments—3 % special T r e a s u r y notes m a t u r i n g J u n e 30, 1941
J u n e 30, 1942..
J u n e 30,1943..
J u n e 30, 1944

264,900
2,200

264,900
382,000
15, 400

264,900
382,000
497, 400
32,900

264, 900
382,000
497, 400
290,900

267,100

662, 300

1,177, 200

1, 435, 200

62
73

113,012
1,931

66
3,036

282,068
7,129

267, 235

777, 243

1,180, 302

1, 724, 397

B a l a n c e a t e n d of period

U n e x p e n d e d balances:
T o credit of fund account
T o credit of disbursing oflBcer .

_.

T o t a l assets (at e n d of period)

3 550,000
550,000
5,905

1 On basis of daily Treasury statements (unrevised), see p. 683.
2 $113,000,000 of this amount was not transferred until the fiscal year 1939.
3 $282,000,000 of this amount was not transferred until the second half of the fiscal year 1940.

Under the amended act, the Secretary of the Treasury is no longer
required to report on the actuarial status of the trust fund. This is
now a function of the Board of Trustees, whose first annual report
to the Congress is to be made on the first day of the regular session in
1941. A statement of the operations under the trust fund for the
second half of the fiscal year 1940 is shown in the following table.
Operations for the complete fiscal year 1940, which were conducted
under both the old-age reserve account and the trust fund, are given
on page 212 of this report.
Receipts, expenditures, and assets of the old-age and survivors insurance trust fund,
J a n . 1, 1940, to J u n e 30, 1940 ^
[In thousands of dollars]
Receipts:
Transfers from the old-age reserve account (Jan. 1, 1940):
Investments
To credit of fund account
To credit of disbursing oflScer
_.
Interest on investments..
Total receipts
_
Expenditures:
Benefit payments
Reimbursement for administrative expenses

1,435,200
282,068
7,129
1,724,397
42,489
1,766,886

"..
9,900
12,288

22,188
Balance on June 30, 1940
Assets on June 30, 1940:
3 % special Treasury notes.
2J^% special Treasury notes
Unexpended balances
Total assets on June 30,1940....:
» On basis of daily Treasury statements (unrevised), see p. 583.




1,744,698
1,413,200
324,900
6,598
1,744,698"

RE'PORT OF THE SEORETARY OF THE TREASURY

157

NEUTRALITY AND NATIONAL DEFENSE ACTIVITIES

After the outbreak of European hostilities on September 3, 1939,
existing activities of the Treasury Department concerned with the
preservation of our neutrality and the strengthening of the national
defense were augmented by provisions of the President's neutrality
proclamation and Executive Order No. 8233 of September 5 and of the
proclamations of September 5 and 8. From time to time related
duties were imposed. All the activities derive from basic statutory
functions of the Secretary of the Treasury for the administration and
enforcement of certain laws, performance of other public services, and
for the management of the national finances. The responsibilities
relate to the acquiring of supplies, equipment, and materials required
for preparation of the national defense, the guarding of our coastal,
boundaries, the prevention of various kinds of unneutral acts, and
supervision of certain fiscal matters.
Strategic and critical materials
Strategic and critical materials were purchased during the year,
to supply the industrial, military, and naval needs of the country
for defense. Acquisitions are made at the direction of the Secretary
of War and the Secretary of the Navy, by the Secretary of the Treasury through the medium of the Procurement Division, in accordance
with specifications prepared by that Division and approved by
the Secretary of War and the Secretary of the Navy. Determination of which materials are strategic and critical and the quality and
quantities which shall be purchased is made by the Secretary of
War, the Secretary of the Navy, and the Secretary of the Interior
acting jointly through the Army and Navy Munitions Board. In
accordance with the. law the Secretary of the Treasury designated
as his representative the Director of Procurement to cooperate in
making such determination.
Authority for procurement of these materials by the Treasury
Department is contained in the act of June 7, 1939 (Public No. 117),
an act to provide for the common defense by acquiring stocks of
strategic and critical materials essential to the needs of industry for
the manufacture of supplies for the armed forces and the civilian
population in time of a national emergency, and to encourage further
development of the materials within the United States.
Under the date of August 9, 1939, Congress appropriated
$10,000,000 for this purpose. On March 25, 1940, an additional
sum of $12,500,000 was appropriated, of which $3,000,000 was made
immediately available, thus making a total of $13,000,000 available
for expenditure during the fiscal year 1940.
A statement of the obligations incurred as of June 30, 1940,
follows.



158

RE'POKT OF T'HE SBCRETA'EY OF T H E TREASTJIEY
Status of the strategic and critical materials program as of J u n e 30, 1940
Material

Quantity
ordered

Source

64, 500 L. T.

Total
Cuba -Philippines.-.
United States
South Africa and British India.

Manganese ore

Total-Manila
fiber.
.
Optical glass
Quartz crystals..-.
Quinine sulphate...

.Philippines
United States .
Brazil
Dutch East Indies
—. Bolivia (refined
United States).
China.
Straits Settlements

Tin (pig)

86, 500 L. T.

._ 14,800 bales
11,400 pounds
14,800 pounds
700,000 ounces
in

China

$2,168, 668. 24 20,^07 L. T.

27,500 L. T.
31, 500 L. T.
7, 500 L. T.
20,000L. T.
2,889,000.00

46,350 L. T.

245,921. 20 10,200 bales.
1 6, 200.00
99, 580.00 4,179 pounds.
409,000. 00 700,000 ounces.

100 S. T.
100 S. T.
5,924 S.T.
6,124 S.T.

Total
Tungsten ore

Quantity delivered

20, 000 L. T.
25,000L. T.
19, 500 L. T.

Turkey
Alaska
Rhodesia

Chrome ore

Amount obligated

425 S. T.

6,081, 328. 00 3,630 S. T.
500, 444. 56 448 S. T.

Total obligated for
material.
Administrative expenses
Contingent expenses (advances and transfers to
other agencies).

12, 400,142. 00

Total amount obligated.
Unobligated balance of allotment.

12, 578, 728. 00

Total allotment

9,066. 00
169, 520. 00

421, 272. 00
13, 000, 000. 00

1 In addition to $73,800 advanced to Bureau of Standards for manufacturing.

The materials acquired under this program are stored on Army
and Navy bases, as provided in the act. Rotation of the materials,
in order to prevent deterioration, as provided for in the act, was
unnecessary in the first year of the program.
Coordination oj joreign and domestic military purchases
By direction of the President, the Secretary of the Treasury is the
President's personal representative in matters relating to purchases
of war materials by foreign sources. An Assistant to the Secretary is a
member, by appointment of the President, of the Interdepartmental
Committee for Coordination of Foreign and Domestic Military
Purchases, which was appointed on December 6, 1939. Liaison between the President and the Committee is effected through the
Secretary of the Treasury.
The Committee serves as the exclusive liaison with reference to
procurement matters between the United States Government and
interested foreign governments. The requirements of such foreign
governments with regard to war supplies, equipment, and materials



REPORT OF T H E SEIORETARY OF T H E TREASURY

159

are considered by the Committee in relation to availability, priority,
and prices of the desired articles. An important part of the Committee's function is to prevent confiict in United States markets
between such foreign requirements and the requirements of the
United States Government and its citizens.
Munitions control
The Secretary of the Treasury serves as a member of the National
Munitions Control Board, which supervises and controls, tlirough a
system of registration and licenses, the manufacture of, and international traffic in, arms, ammunition, and implements of war. The
Board was established by the joint resolution approved August 31,
1935, and continued by the Neutrality Act of November 4, 1939
(Public Resolution No. 54), which repealed the joint resolution of
August 31, 1935, as amended. During the fiscal year 1940 the Coast
Guard and the Customs Service continued to cooperate in assisting
the Department of State, in whose administration the licensing
system is vested, in the control of international trafl&c in arms.
Regulation and control oj vessels
The Customs Service in cooperation with the Coast Guard assisted
other departments in preventing outgoing merchant vessels from
carrying passengers or cargo contrary to the provisions of the Neutrality Act and regulations. Cooperation was given also by both
agencies in preventing unauthorized travel by United States citizens
on United States ships and on vessels of belligerents, and in the
detection of espionage and sabotage.
i
The Customs Service assisted the Department of State in the
enforcement of passport regulations. Upon an order of the State
Department declaring all passports issued by the United States
Government invalid unless first validated by the State Department on
or after September 4, 1939, Customs officers were stationed at departing vessels to examine passports of travelers going to Europe and
to take from such travelers United States passports not so validated.
Merchandise being exported, and documents relating thereto, were
examined to insure compliance with the requirements of the Neutrality
Act regarding transfer of title. In certain circumstances, depending
upon the nature and destination of the merchandise and the nationality
of the vessel transporting it, merchandise cannot be exported until
all right, title, and interest therein has been transferred to the foreign
purchaser. The use of United States vessels for certain types of
exportations is forbidden. The enforcement of these and other provisions of the Neutrality Act and regulations has increased and mad§




160

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

more complex the work of the Customs Service in connection with the
exportation of merchandise.
The Customs Service and the Coast Guard cooperated in determining whether armament borne by merchant vessels was for defensive
or for offensive purposes.
Following passage of the Neutrality Act of May 1, 1937 (Public
Res. No. 27), since superseded by the Neutrality Act of November 4,
1939, the Coast Guard conducted continuous vessel and aircraft
patrols of the coasts and harbors of the United States, its Territories
and possessions, and maintained surveillance over certain merchant
shipping, both foreign and domestic, off the coasts and within the
territorial waters of the United States. This involved primarily the
identification and maintenance of a daily record of all foreign merchant
vessels adjacent to the coasts of the United States as well as within
its territorial waters and harbors; the sealing of the radio apparatus
on merchant vessels of belligerent countries while within the jurisdiction of the United States to prevent unauthorized transmissions,
and the responsibility for the security of the seals placed on such
apparatus; supervision through formally designated captains of the
ports over vessels lading and discharging explosives and other dangerous cargo and control of the movement and anchorage of such vessels
within the harbors and waters of the United States.
Any control necessary with respect to vessels of war in territorial
waters or ports of the United States was exercised by the United
States Navy, to which the full cooperation of the Coast Guard and
the Customs Service was extended.
The exercise of statutory powers with respect to control of foreign
and domestic vessels in United States harbors and waters, vested in the
Secretary of the Treasury and the Governor of the Panama Canal by
section 1 of title I I of the so-called Espionage Act, approved June 15,
1917, was made possible by the proclamation of the President on
June 27, 1940. A copy of this proclamation is shown on page 579.
Regulations to carry out the provisions of the proclamation were
issued by the Secretary of the Treasury, with the approval of the
President on June 27, 1940 (5 Fed. Reg. 2442, D. I.), and an Oflace
of Merchant Ship Control was established as an integral part of the
OflSce of Operations, Coast Guard Headquarters, under the Commandant of the Coast Guard. Cooperation is given by the Customs
Service. Those regulations were supplemented in considerable detail
on October 29, 1940.
The function of the OflB.ce of Merchant Ship Control is twofold.
First, departure of vessels from any port or place in the United
States, or subject to the jurisdiction of the United States, on voyages
on which clearance by a customs oflScer is required, must be authorized
by the Secretary of the Treasury through the principal customs officer



RE'POBT OF THE SEICHETARY OF THE: TREASURY

161

in charge of the port of departure. Second, control is strengthened
over the anchorage and movement of vessels in the United States
harbors.
Movement of any vessels within the area of a port and the movement, lading, and discharging of explosives and other dangerous cargo
are under the supervision and control of the captain of the port or,
where the port has no such officer, of an officer of the Coast Guard or
of the Customs Service designated by the Secretary. The captain
of the port or other officer designated is authorized to have inspected
and searched any vessel within the territorial waters of the United
States, or any person or package thereon, to place guards upon such
vessels, and to remove any or all persons not authorized to go or to
remain on board. The collector of customs, through the captain of
the port or other agency acting for the collector, subject to the approval
of the Secretary, is directed to take full possession and control of any
vessel in such waters to secure such vessels from damage or injury,
or to prevent damage or injury to any harbors or waters of the United
States. Licensing of small craft operating in the harbors or waters
of any ports of entry may be required by the Secretary, such licenses
to be granted by the collector of customs.
Credits to belligerents
On September 6, 1939, the President issued a regulation excepting
from the operation of the section of the Neutrality Act relating to
financial transactions (sec. 3 of the joint resolution approved May 1,
1937), as made applicable to the various belligerents by the proclamation of September 5, 1939, '^ordinary commercial credits and shorttime obligations in aid of legal transactions and of a character customarily used in normal peacetime commercial transactions." That
regulation authorized the Secretary of the Treasury to administer
the provisions thereof and to promulgate any necessary rules and
regulations. A number of questions arising in connection with the
provisions of the regulation of the President were handled by the
Treasury Department. The regulation expired on November 4, 1939,
with the enactment of the Neutrality Act of 1939.
Foreign junds control
The foreign funds control was established in April 1940. Pursuant
to section 5 (b) of the act of October 6, 1917 (40 Stat. 411), as amended.
Executive Order No. 8389 was issued by the President on April 10,
1940. This order so amended a previous order. Executive Order No.
6560 of January 15, 1934, as to prohibit, except under license, certain
transactions involving property in which Norway or Denmark, or any
national thereof, has any interest. The prohibited transactions con


162

RE'POKT OF T H E SEiCRETARY OF T H E T'REASUiRY

sist of transfers of credit between banking institutions within the
United States and transfers of credit between banking institutions
within the United States and banking institutions outside the United
States; payments by or to banking institutions within the United
States; transactions in foreign exchange by any person within the
United States; the export or withdrawal from the United States or
the earmarking of gold or silver coin or bullion or currency by any
person within the United States; transfers, withdrawals, or exportations of, or dealings in, any evidences of indebtedness or evidences of
ownership of property by any person within the United States; and
transactions for the purpose, or which have the effect, of evading or
avoiding the foregoing prohibitions.
Public Resolution No. 69, approved May 7, 1940, amending section
5 (b) of the act of October 6, 1917, appears as exhibit 40 on page 538.
On May 10 and June 17, 1940, the Executive order of April 10 was
amended to extend the provisions thereof to and with respect to
property in which the Netherlands, Belgium, Luxembourg, and France,
or any national thereof, have any interest. The Executive orders of
April 10, May 10, and June 17, 1940, appear as exhibit 41 on page 538.
Pursuant to the Executive order of April 10, 1940, as amended, and
the regulations issued thereunder, reports are required with respect to
all property situated in the United States in which any of the countries
named in the Executive order, or nationals thereof, had an interest on
the indicated date. The regulations set up a procedure for the filing
of applications for licenses to engage in transactions covered by the
Executive order. Such applications are filed with the Treasury Department through the various Federal Reserve Banks and the Governors and High Commissioners of the Territories and possessions
of the United States. The Regulations of May 10, 1940, appear as
exhibit 42 on page 542.
Fiscal matters
In connection with fiscal matters relating to the national defense,
the Treasury has certain additional duties under the Revenue Act of
1940, an act to provide for the expenses of national preparedness by
raising revenue and issuing bonds. That act, approved June 25, 1940
(Public No. 656), amending the Second Liberty Bond Act, as amended,
authorized the Secretary of the Treasury to issue, subject to certain
requirements, obligations not to exceed in the aggregate $4 billions
outstanding at any one time, less any retirements made from the
special fund made available under section 301 of the act, in order to
provide the Treasury with funds to meet any expenditures for the
national defense made after June 30, 1940, or to reimburse the General
Fund of the Treasury therefor.
;




REPORT OF THE SEiCRETARY OF THE TREASURY

163

By the terms of title I I I of the Revenue Act of 1940, the Secretary
of the Treasury is directed, at the end of each quarter, to determine
the additional amount of taxes collected attributable to the increases
in taxes, with certain exceptions, and to set aside the amounts so determined as a special fund for retiring any obligations issued pursuant
to the authority contained in section 21 (b) of the Second Liberty Bond
Act, as amended. If at any time the amounts in the fund are not
sufficient for such purpose, the Secretary of the Treasury is directed
to transfer to the fund moneys out of the General Fund of the Treasury. Any amounts in the special fund not necessary for the retirement of such obligations shall be deposited in the General Fund of the
Treasury.
CHANGES IN ORGANIZATION AND PROCEDURE

Reorganization Plans Nos. I l l and IV, which became effective
June 30, 1940, in accordance with Public Resolution No. 75, approved
June 4, 1940, made various changes in the organization of the Treasury
Department.
Reorganization Plan No. I l l consolidated into a Fiscal Service, under the direction of a permanent Fiscal Assistant Secretary, the functions of the Treasury Department pertaining to financing and fiscal
activities. There were brought together in the Fiscal Service the
OflBce of the Commissioner of Accounts and Deposits and the Office of
the Commissioner of the Public Debt, including their various subdivisions, the Division of Savings Bonds, and the Office of the Treasurer
of the United States. These activities, together with the Office of the
Comptroller of the Currency, were at the time of transfer under the
supervision of the Under Secretary, such assignment having been made
effective January 18, 1940, by Treasury Department Order No. 28.
Reorganization Plan No. I l l also made some adjustments in the
assignment of functions of the units comprising the Fiscal Service
and certain changes in titles, the net effect of which was to establish
within the Fiscal Service the Office of the Fiscal Assistant Secretary,
the Office of the Treasurer of the United States, a Bureau of Accounts
under the Commissioner of Accounts, and a Bureau of the Public
Debt under the Commissioner of the Public Debt. In addition to
responsibility for the administration of these four segments of the
Department's operations, the Fiscal Assistant Secretary was vested
with the former financing functions of the Under Secretary of the
Treasury and the Assistant Secretaries. The Fiscal Assistant Secretary will be appointed by the Secretary of the Treasury in accordance
with civil service laws and will perform his duties under the general
direction of the Secretary. One of the three existing positions of
Assistant Secretary was abolished by the plan.




164

REPORT OF T H E SEICRETARY OF T H E TR.EASUIRY

Reorganization Plan No. I l l also abolished the Federal Alcohol
Administration and provided that its functions be administered under
the direction and supervision of the Secretary of the Treasury through
the Bureau of Internal Revenue. Under Treasury Department
Order No. 30, June 12, 1940, the Basic Permit and Trade Practice
Division, in charge of an Assistant Deputy Commissioner of Internal
Revenue, was established on June 30, 1940, and derived the personnel,
records, and property by transfer from the Federal Alcohol Administration. All functions of the Federal Alcohol Administration, except
as provided in Treasury Department Order No. 31, were delegated to
the Deputy Commissioner of Internal Revenue in charge of the Alcohol Tax Unit, to be exercised by him through the Basic Permit and
Trade Practice Division or any other division of the Unit. All regulations, orders, instructions, and forms formerly issued by the Federal
Alcohol Administration for the enforcement of the laws theretofore
administered by the Administration were effective as if issued by the
Alcohol Tax Unit. The legal functions, personnel, and property connected with the legal activities of the Federal Alcohol Administration
were transferred to the Legal Division of the Treasury Department,
effective on June 30, 1940, by Treasury Department Order No. 31,
June 12, 1940.
Reorganization Plan No. IV, effective June 30, 1940, transferred to
the Secretary of the Treasury the functions of the Attorney General
relating to the approval of compromises made in accordance with the
provisions of section 7 of the Federal Alcohol Administration Act (with
the exception of compromise cases pending in the courts or which had
been or may be referred to the Department of Justice for action).
The functions of foreign funds control under the provisions of
Executive Order No. 8389 of April 10, 1940, as amended, were placed
in the Office of the Secretary under the supervision of an Assistant
to the Secretary.
A Division of Personnel, under the Director of Personnel, was established in the Office of the Secretary on July 1, 1940, by Treasury Department Order No. 32, June 25, 1940, in accordance with Executive
Order No. 7916, June 24, 1938, and the 1941 Treasury Department
Appropriation Act. The general functions of the Division are to give
effect to the Department's responsibility for personnel supervision
under the provisions of the Executive order. The Division of Appointments and the office of Classification Officer, Treasury Department, were consolidated with the Division of Personnel, and their
respective functions, personnel, etc., were transferred to the Personnel
Division.
During the year various changes were made by Treasury Department orders in assignments for purposes of general supervision of




REPORT OF T H E SECRETARY OF T H E TREASURY

165

Treasury activities. The Coast Guard, Bureau of Narcotics, and
Secret Service Division were assigned to an Assistant Secretary, to
whom were also to report the coordinator of the enforcement branches
of the Treasury and the Committee on Enrollment and Disbarment.
The Bureau of Customs was assigned to an Assistant to the Secretary
but this assignment was transferred at the beginning of the fiscal year
1941 to the Assistant Secretary in charge of Coast Guard, Narcotics,
and Secret Service.
The Procurement Division, Bureau of Engraving and Printing, and
the Bureau of the Mint were assigned to an Assistant to the Secretary.
The Administrative Assistant to the Secretary was charged with
the direction and control of the activities of departmental and bureau
officers in all matters relating to obtaining or releasing quarters
for agencies of the Treasury Department in the District of Columbia
and in the field, whether in Federal or privately owned buildings.
The assignments in effect on June 30, 1940, are shown in Department
Circular No. 244, June 28, 1940. Copies of the extracts from the reorganization plans, legislation. Treasury orders, department circular,
etc., referred to above, will be found as exhibits 44 to 51, beginning on
page 555 of this report.
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,

Jr.,

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







REPORTS OF
BUREAUS AND DIVISIONS

ADMINISTRATIVE




167




OFFICE OF THE COMMISSIONER OF ACCOUNTS AND DEPOSITS

Under the provisions of the President's Reorganization Plan No.
I l l , which became effective on June 30, 1940, the Bureau of Accounts,
headed by the Commissioner of Accounts, was established as a part
of the new Fiscal Service of the Treasury Department. The Bureau
oi Accounts replaced the Office of the Commissioner of Accounts and
Deposits. The plan provides that the supervision of the administration of the accounting functions and activities in the Treasury Department and all its bureaus, divisions, and offices shall be exercised
under the direction of the Secretary of the Treasury by the Fiscal
Assistant Secretary through the Commissioner of Accounts. The
plan further provides that the function of authorizing the installation,
maintenance, revision, and elimination of accounting records, reports,
and procedures in the Treasury Department (except the Coast Guard)
shall be exercised by the Fiscal Assistant Secretary through the
Commissioner of Accounts.
During 1940 the Office of the Commissioner of Accounts and
Deposits had administrative supervision over the Division of Bookkeeping and Warrants and its relation 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 supervised collections
of principal and interest on foreign obligations; kept the accounts, and
handled generally matters relating to the indebtedness of foreign governments to the United States, including matters arising under
funding agreements; supervised collections of railroad obligations
owned by the Government, and kept the accounts relating thereto;
handled the collection of other obligations owned by the United
States which were turned over to the Treasury by other departments
for collection; and made payments, kept accounts, and handled
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 was 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 was responsible, other than those related to public debt operations. The Commissioner also had supervision over the emergency accounting organization in the several States under the several Emergency Relief
Appropriation Acts.
Daily Statement oj the United States Treasury
In addition to the changes in the classification of expenditures
shown on the Daily Statement of the United States Treasury, effective July 1, 1939, as explained on page 60 of the annual report for 1939,
a change was made beginning September 30, 1939. The preliminary
public debt statement shown on the daily Treasury statement for
the last day of each month includes a memorandum with respect to
obligations of governmental agencies guaranteed by the United States,
showing unmatured principal and matured principal and interest for
which cash has been deposited with, or held by, the Treasurer of the
United States.



169

170

REPORT OF T H E ; SIECRETARY OF T H E TREASURY

Arrangements were made, effective July 1, 1940, to show trust
account receipts and expenditures and transactions in checking
accounts of govermental agencies in more detail. Sales and redemptions of their obligations in the market are now segregated from other
transactions of governmental agencies. Other changes, beginning
July 1, 1940, in the manner of showing receipts on account of social
security taxes (employment taxes) and the appropriation of an equivalent amount of such receipts to the Federal old-age and survivors
insurance trust fund were made necessary by section 2D1 of the Social
Security Act Amendments of 1939 (see exiiibit 53, page 578).
Combined statement oj assets and liabilities oj governmental corporations
and credit agencies
A combined statement of assets and liabilities of governmental
corporations and credit agencies as of June 30, 1940, will be found as
table 58 on page 797 of this report. This statement is published
in the Daily Statement of the United States Treasury, for the last
day of each month, as required by Executive Order No. 6869 of
J
October 10, 1934.* The following is a summary of assets and liabilities of these corporations and agencies as of the close of each fiscal
year, 1933 to 1940, inclusive:
S u m m a r y of assets and liabilities of governmental corporations and credit agencies
of the United States as of J u n e 30, 1933 to 1940
[In millions O dollars.
f

On basis of daily Treasury statements (unrevised), see p. 583.]
1934

1935

1936

1937

1938

1939

Loans
3.603
Preferred capital stock, e t c
31
Cash 2
74
Investments:
115
U n i ted S t a t e s securities .
Securities g u a r a n t e e d b y U n i t e d S t a t e s . .
"••"56'
Another
147
A c c o u n t s a n d o t h e r receivables
106
R e a l e s t a t e a n d o t h e r business p r o p e r t y
88
Other 3

5,764
780
302

8.019
873
453

8,312
799
279

7,785
765
288

7,645
793
444

7,600
790
585

7,687
708
412

362
79
269
97
97
106

444
220
840
175
156
194

486
211
884
264
183
373

551
196
907
287
222
595

651
158
889
287
430
853

713
140
893
377
481
889

748
131
911
404
562
1,219

4. 220

7,856

11,374 11, 791 11, 596 12,150 12, 468

12. 782

G u a r a n t e e d b y U n i t e d States (includes
accrued interest)
__
N o t guaranteed b y United States..
. . 1,357

692
2,636

4,191
2,407

3,328

1933

1940

ASSETS i

Total
LIABILITIES AND R E S E R V E S i

4. 751 4,744
2, 470 '2, 553

4,889
2,814

6,483
2,909

5,561
3,177

6,598

7,221

7,297

7,703

8,392

8,738

4,528 . 4, 776

4,570

4.299

4,447

4,076

4,044

4,008
244

6,144
177
2,072

6,930
324
2,831

6,673
361
2,811

6,628 6.475 3.228
328'
585 • 641
S,01S 2,982
181

3.291
558
210

T o t a l G o v e r n m e n t owned
P r i v a t e l y owned __

2,774
89

4,249
279

4.423
353

4,223
347

3,943
356

4,078
369

3,688
388

3,639
405

T o t a l p r o p r i e t a r y interest

_. 2,863

4,528

4,776

4.570

4.299

4,447

4,076

4,044

1,357

Total-.
Excess of assets over liabilities '

- 2,863

PROPRIETARY INTEREST

Owned b y United States:
C a p i t a l stock 4
Surplus
. I n t e r a g e n c y interests ^

^--

1 Exclusive of interagency assets and liabilities (except bond investments and deposits with Reconstruction Finance Corporation).
2 Excludes unexpended balances of appropriated funds, but includes cash deposited with the Treasurer
ofthe United States.
3 Also includes real estate and other property held for sale.
4 Includes nonstock proprietary interest.
5 Excess interagency assets (deduct).
•Superseded by Executive Order No. 8512, August 19, 1940.




REPORT OF THiE SEORETARY OF T H E TREA^SURY

171

A summary statement of the proprietary interest of the United
States in such corporations and credit agencies as of June 30, 1939
and 1940, appears as table 59 on page 805.
The investment holdings of certain governmental corporations and
other organizations which handle their own investment transactions
are presented as of June 30, 1940, in table 58, page 797 and a summary
statement for the fiscal years 1933 to 1940 may be found in the table
on page 170.
Special jinancial statements oj Government corporations and agencies
Under the provisions of Senate Resolution No. 150, agreed to
June 27, 1939, the Secretary of the Treasury was authorized and
directed to prepare and transmit to the Senate a complete financial
statement of each Government corporation or agency listed therein.
The list included practically all Government corporations and credit
agencies in active operation and involved 1,476^ separate organizations. The major part of the information requested by the resolution
was not contained in the accounting records of the Treasury Department so that it was necessary for the corporations and agencies to
furnish the detailed statements.
The financial statements of each corporation or agency covered the
period from date of its organization to June 30, 1939, and refiected
the amount of recoverable assets based upon the latest appraisals or
available information, the proprietary interest of the United States
Government, the accounting and other procedures followed, the financial aid received from the United States Treasury and the extent to
which the corporation or agency was self-supporting, the authority
for incurring liabilities, inter-agency relationships, information on
loans, and other related data. In addition to these financial statements, narratives for each corporation or agency were prepared covering its history and development, the circumstances leading up to its
creation, its functions and operations, and similar information. Both
the narratives and financial statements were summarized by the
Treasury Department and made a part of the Secretary's report consisting of 32 volumes. The entire report was printed as Senate Document No. 172 (76th Cong., 3d sess,).
The Secretary of the Treasury was authorized and directed by
Senate Resolution No. 292, agreed to July 29, 1940, to prepare and
transmit to the Senate a similar report covering the fiscal year 1940.
Annual appraisal oj assets and liabilities oj the Commodity Credit
Corporation
Under an act of Congress, approved March 8, 1938, the Secretary
of the Treasury is required to make an appraisal as of March 31 of each
year of the assets and liabilities of the Commodity Credit Corporation
for the purpose of determining the net worth of the Corporation. In
the event any such appraisal shall establish that the net worth of the
Corporation is less than $100,000,000, the Secretary of the Treasuryis required to restore the amount of the capital impairment, appropriations for which are authorized in the act.. In the event that any
appraisal shaU establish that the net worth of the Corporation is in
^ Includes 1,383 Federal savings and loan associations.
269677—41
13



172

REPORT OF T H E ; SIEiCRETARY OF THF, TREASURY

excess of $100,000,000, such excess must be deposited in the Treasury
as miscellaneous receipts.
The following statement shows the results of such appraisals:
Appropriations for restoration of capital impairment:
Act of June 25, 1938 (appraisal as of Mar. 31, 1938)
Act of Aug. 9, 1939 (appraisal as of Mar. 31, 1939)
Total
.
Less amountreturnedtoTreasury (appraisal as of Mar. 31,1940).
Net payments to corporation to June 30,1940, as a result of capital impairment

Amount
$94, 285,404.73
119, 599,918.05
213,885,322.78
___ 43,756,731.01
170,128, 591. 77

Securities owned by the United States Government
Exclusive of foreign obligations, the aggregate amount of securities
owned by the Government on June 30, 1940, based on the latest
reports received, was $3,031,219,470.25. A detailed statement of the
securities held at the end of the fiscal years 1933 to 1940 will be found
as table 55 on page 790. A summary comparison of the holdings at
the end of the fiscal years 1933 to 1940 follows:
Summary of securities owned by the United States Government, exclusive of foreign
obligations, J u n e 30, 1933 to 1940

June 30—

1933
1934
1935
1936
1937
1938
1939
1910

-

Paid-in surplus Bonds and notes
Capital stock
governmental of governmental
of governmental of corporations corporations and Other securities i
corporations
agencies
and agencies
$799, 867, 962. 40
1, 260, 612, 675. 00
1, 747,418, 795. 43
1, 882,428, 329. 93
1, 857, 737, 480. 82
1, 877, 277, 538. 36
1,919,560,698.18
1, 704, 373, 919. 86

$55, 863,477.16
104,493, 662. 75
136, 961, 657. 38
172,160, 468. 78
206,137, 966. 31
217, 728, 901. 53
218, 296, 764. 50

$1,486,107, 803. 00 $807,805,124.14
574, 712,142. 01
2, 991,165,147. 98
2, 986, 215, 554. 93 791, 501, 654.14
3, 262, 734, 653. 76 657,072, 480. 91
701, 384, 098.18
2,824, 389, 546.17
2 789, 537, 591. 74 655,459,486.13
812,035, 569. 28
128,472,552.89
104, 272, 500. 00 1, 004, 276, 285. 89

Total

$3,093, 780, 889. 54
4, 882, 353, 442.15
5, 629, 629, 667. 25
5, 939,197,121. 98
5, 555, 671, 693.95
2 3,528,412,582.64
3,077, 797, 721. 88
3,031, 219,470. 25

1 Includes loans and advances by Farm Security Administration, Eural Electrification Administration
and Public Works Administration.
2 Reflects cancelation of Reconstruction Finance Corporation notes held by the Treasury under authority
of the act of February 24,1938, see p. 114.

Contingent liabilities oj the United States
The contingent liabilities of the United States are discussed on page
72 of this report; and a detailed statement of such liabilities as of
June 30, 1940, and a comparative statement as of June 30, 1933 to
1940, appear as tables 47 and 48 on pages 775 and 780, respectively.
Accounting and disbursing oj emergency reliej junds
Under authority of 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 facilities for
handling appropriations made by the Congress for the emergency
relief program. The provisions of this Executive order were extended
by Executive Orders Nos. 7396 and 7649, and by Department Circulars Nos. 592 and 616, approved by the President, to apply to funds
appropriated in the Emergency Relief Appropriation Acts of 1936,
1937, 1938, and 1939.
At the beginning of the fiscal j^ear 1940 there were 55 TreasuryState accounts offices and an equal number of Treasury-State dis


REIPORT OF T H E ISECRETARY OF T H E TREASURY

173

bursing offices, together with two branch offices of each class. During
the year, due to consolidation of work in other Treasury-State accounts
and disbursing offices, a reduction of two Treasury-State accounts
oflBces and one Treasury-State disbursing office was made. Also 10
Treasury-State disbursing ofl&ces were consolidated with regional
disbursing offices. The Treasury-State accounts and disbursing
ofl&ces had 3,676 employees on June 30, 1940, which is a reduction of
1,004 employees, or 21 percent, since June 30, 1939.
The Treasury-State accounts ofl&ces have handled more than 275,000
emergency relief project accounts for approximately 80 administrative
agencies. Of these accounts about 40,000 are now active. The
disbursing ofl&ces during the 3^ear issued 66,000,000 checks payable
from emergency relief funds, which were verified for accuracy in the
accounts offices.
The procedure established at the inception of the program for the
purpose of handling the emergency relief appropriations was designed
to throw every protection around the allocation and use of the funds.
In setting up the accounting and disbursing procedures under the
Executive order of May 6, 1935, the Treasury recognized the following
as fundamental requirements:
1. Making payments promptly.
2. Maintaining effective accounting control of appropriated funds
by Congressional limitations. Presidential limitations, appropriation
warrants and limitations established by administrative agencies.
3. Determining administratively, in advance of payment, the
legality of vouchers and pay rolls and seeing that funds are used only
for authorized purposes.
4. Providing internal accounting check upon the operations of
disbursing officers.
5. Rendering to the General Accounting Ofl&ce detailed accounts
for independent post audit.
6. Informing administrative agencies currently concerning the
financial status of funds under each ofl&cial project.
7. Compiling for administrative purposes periodic reports showing
the financial status of all funds.
8. Making a complete annual accounting by the Executive to the
Congress, as required by the Emergency Relief Appropriation Acts.
The Secretary of the Treasury issued Regulation No. 1 on June
18, 1935, covering the administrative and fiscal procedures for the
maintenance of a system of accounts under the Emergency Relief
Appropriation Acts. The regulation, approved by the President,
prescribed the principles upon which the accounting system is based.
Pursuant to Regulation No. 1 there were established Treasury central
accounts and disbursing ofl&ces in Washington, D . C , and Treasury accounts and disbursing offices in the various States, Territories, and
insular possessions. The operations of the central ofl&ces and the
field offices are so correlated that an enormous volume of accounting
and disbursing transactions can be handled expeditiously involving
a minimum of expense.
Funds are made available for work relief projects in the several
States, Territories, and insular possessions, through the use of governmental radio and telegraphic facilities upon approval of the Treasury
warrant and the issuance of appropriate authorization documents
by the administrative agencies. In this manner, projects can be
started promptly upon fulfillment of all legislative, executive, and



174

REPORT OF THE SEORETARY OF THE TREASrURY

administrative requirements involving the allocation of money under
the Emergency Relief Appropriation Acts.
The Treasury-State accounts ofl&ces, in their respective accounts
divisions, maintain control on ofl&cial project limitations, allotments,
encumbrances, and expenditures. In these ofl&ces the general ledgers
are supported by project ledgers in wliich are recorded detailed
accounting transactions. The accounts division ascertains that all
payments are kept within the limitations fixed by the President or
the administrative agency, with respect to each project. Through
a system of correlated accounts, the records of Treasury-State accounts
ofl&ces are controlled by summary records in the Treasury central
accounts ofl&ce. From the detailed accounts maintained in the State
ofl&ces, financial statements are produced which are transmitted to
the central office in Washington for verification and subsequent
compilation into consolidated financial reports. The field offices
also prepare reports which are utilized in making the administrative
examination of disbursing officers' accounts.
The examination divisions of the Treasury-State accounts ofl&ces
conduct the executive preaudit of vouchers with respect to expenditures made from emergency relief funds. These divisions examine
authorizations for setting up projects according to limitations fixed by
the President, or the administrative agencies, and all obligation
documents such as requisitions, purchase orders, contracts, leases, etc.
They also examine all pay rolls and vouchers prior to payment
to insure that the expenditure is made within the purview of all
Federal laws and regulations. They further maintain control over
the disbursing officers' blank checks and conduct quarterly audits of
their stock of checks. The Treasury emergency organization from
April 8, 1935, to June 30, 1940, has transmitted to the General
Accounting Ofl&ce accounts covering expenditures totaling $11,290,716,206.23. Against this amount, the General Accounting Office has
issued formal certificates of settlement of account for $7,833,412,361.59
or 69 percent of the expenditures. Disallowances by the General
Accounting Ofl&ce now outstanding against the amount settled are
$205,820.39, or twenty-six ten-thousandths of 1 percent of the amount
settled. Of the remaining $3,457,303,844.64 awaiting settlement, the
tentative disallowances reported amount to $96,565.99, or about
twenty-nine ten-thousandths of 1 percent of the total unsettled
accounts. These latter disallowances are subject to further examination and possible clearance.
An important function of the Treasury-State accounts ofl&ces is to
prepare periodic financial reports from the accounts maintained in the
field. These reports are verified and tabulated in the central ofl&ce
and comprise the basic data from which statements are compiled
according to act limitations, organization units. States, administrative
programs, types of work, and periods and objects of expenditure. The
form of statement shows the amounts made available by Congress,
amounts allocated, amounts obligated, amounts expended, unobligated allocations (available and not available for obligation) and
unliquidated obligations. In addition, a consolidated balance sheet
is prepared covering activities of the work relief program.
Reports of operations, obligations, and expenditures, as required
by law, have been submitted by the President to the Congress before
January 15 of each calendar year. Such reports set forth the status of



EEiPOET OF THE SECKETAEY OP THE TBEASTJRY

175

funds as of the close of the previous calendar year. The following
comparative financial statements show summary information relative
to expenditures under the emergency relief and work relief program
from its inception to June 30, 1940:
Expenditures (checks issued) under the emergency relief program, by types of work,
April 8, 1935, to June SO, 1940
Type of work

Fiscal years
1935 and
19361

Highways, roads, streets,
$541,183,252
etc..
194, 840,353
Public buildings
22, 800,498
Housing projects
Public recreational facil272,765,142
ities .
Conservation work
593,980, 694
Electric utilities, water
and sewage systems,
144,576,283
etc
.
89, 762,989
Transportation facilitiesEducational,
professional, and clerical
178,124,273
projects..
206,465,030
Miscellaneous
Administrative expenses. 154, 476, 341
Rural
rehabilitation,
suburban
projects,
loans, relief
105, 864,160
Grants to States for con919, 725, 501
tinuing relief
Total.-

Fiscal year
1937

Fiscal year
1938

Fiscalyear
1939

Fiscal year
1940

Cumulative
to June 30,
1940

$852,404,727 $595,153, 732 $916,225, 657 $580,101,448 $3,485,068,716
265,756, 541 171,174,235 218,240, 793 145,967, 569 995, 979,481
37, 471, 980
2,146, 721 121,446, 689
51,435,854
7, 590,536
215, 539, 910 144, 889, 687 189,937,965
271,262,585 140,181,-442 128,194, 981

96,972,490 920,105,194
80,107, 267 1, 213, 726, 969

198,921,467 158,269,725 200, 512,028
91,731,109 . 40, 325, 249 61, 245,093

144,277, 531 846,567,034
27, 530,131 300, 694, 671

344,200, 582 263,458,275 359, 680,885
234,154,709 190,466,983 259,144,153
159,176,315 127,953, 761 129, 336,701

336, 503,098 1,481,967,113
176,225,420 1,066, 456,295
110,909,466 681, 852, 574

173, 330, 674 131,872,081
2, 594, 459

157, 766, 679 134,546,635

703,380,229

2,732

922,446,328

23, 239

99,397

3,424,564,516 2,860,508,932 2,001,240,379 2,617,974,768 1,835,290,498 12,739,679,093

1 Includes $625,848,046 for fiscal year 1936 (April 8 to June 30,1936).

Expenditures {checks issued) under the emergency relief program, by objects of expenditure, April 8,1935, to June SO, 1940
Object of expenditure

Fiscal years Fiscal year
1935 and
1937

Fiscal year
1938

Fiscal year

Fiscal year
1940

Cumulative
to June 30,
1940

Personal services (Federal pay roll only)
$1,604,281,923 $1,828,362,831 $1,488,419,503 $2,139,113,369 $1,523,498,796 8,583,676,421
Supplies and materials.. 288,068,807 206,899, 665 104, 603, 552 140, 668, 640 87,149,310 827,189, 874
65, 354, 382 29, 753, 511 346,927,967
56,604,849
Rent
..,_..
65,681, 781 129,633,434
Construction, m a i n t e nance and repair con76,311,6
.100,476,945
16,858,149
tracts
69,620,275
7,670,
260, 837, 728
1, 821,940, 212
Grants
1,152,846,3
399,223,723 157,623, 806 68,739,705
43,606,
Contractual services:
4,276, c
5,176,993
3,190, 964
2,405,
Communications. -.
3,- 307, 881
18,357,079
Travel, including
28, 294,
26,126, 633 16,116,872
17,275, 359 16, 669,
subsistence
104,471,465
Printing and bind3,043,
2, 971, 247
2, 510, 585
2,468,471
. 12, 824,125
ing....
1,830,
Other contractual
32,601,
13, 899,262
6,973,287
67, 095, 508
services—
7,980,937
5,640,
45,190,
24, 394, 871 11, 368,128
16,659, 697 11,123,
108, 726,264
Equipment purchased-.
23,068,
37,124, 710 16,014, 713 10, 738, 782
86, 231,329
Land acquisition
.284,
73,411,060 122,401,135
99,337,
80,497,366
473,175,031
Loans
97,528,
Employees' (accident)
5, 822,262
7, 632,938
4, 768, 218
28,126,110
compensation
1, 562,808
8,339,884
TotaL

3,424, 664,616

2,860,608,932 2,001,240,379 2, 617,974, 768 1, 836, 290,498 12,739,579,093

1 Includes $525,848,046 for fiscal year 1935 (April 8 to June 30, 1936).




176

EEPOET OP T H E SiEiCRETARY OF T H E TR-EASiUHY

Expenditures {checks issued) under the emergency relief program, by months,
April 8, 1935, to J u n e 30, 1940
A M O U N T OF E X P E N D I T U R E S

Month

July
August
SeptemberOctober
November..
December..
January
February.-.
March
April
May
June
Total
expenditures

Fiscal year
1935

Fiscal year
1936

Fiscal year
1937 •

Fiscal year
1938

$106. 632, 659 $276,016, 564 $162, 435,989
179, 816,164 239, 770,852 164, 717,469
176, 928,452 253, 646, 760 145, 631, 306
181, 866, 668 272,496,416
144,663, 339
215.809, 361 248, 667, 849 142, 266,451
285, 644, 848 268,052,490
156,255, 321
279,132,026
219, 274,826 144,977,983
258, 633, 293 180,812, 792 149, 559, 258
304,870, 366 246,193, 761 193, 367,450
320,898, 997 212, 766,163 186, 392, 214
$127,008,358
165, 755,118 290,809, 753 203, 883, 798 197,038,008
233,084, 570 297, 773,883 239,926, 671 223,955,691.

Fiscal year
1939
$200, 601, 723
224, 398,400
228, 648, 380
229,881,972
218,820, 722
243,806,203
211,720,732
194,921,460
252, 689,052
207,154, 675
199,075, 346
206,466,113

525,848,046 2,898, 716,470 2,860, 608,932 2,001, 240, 379 2, 617,974, 768

Fiscal year
1940
$166, 842, 701
166, 267,880
123, 634,080
135,993, 389
142, 722, 271
157, 752, 654
148, 328, 283
160, 327,963
183,834, 339
173,864, 722
161,474,123
146, 258,093

1,835, 290,498

N U M B E R OF P A Y M E N T S

Month

Fiscal
years 1935
a n d 1936

July.. - .
August
September
.
October... . .
Novembei:
December... .
January
: _ . . _ - . . . ._
February
March
April
_
•
__
May-. .- June
-- _--

177, 277
1, 520, 298
2,010, 599
3,102, 294
4, 535, 332
7, 567,162
8, 256, 096
7, 872, 717
9,186, 386
8, 419, 048
7, 689, 746
7,424,215

T o t a l n u m b e r of p a y ments
_ --_ 67, 761,170

Fiscal y e a r Fiscal y e a r
1937
1938

Fiscal year
1939

Fiscal year
1940

6,853, 559
6,454,427
6,814, 540
7, 613, 028
7, 032, 860
7, 989,478
6, 632, 353
6, 218, 368
7, 565, 657
6, 653, 540
6, 392,445
6, 553, 932

5, 002,874
4, 273, 789
4, 095,828
4, 271, 291
4, 272, 730
5, 003,810
4,847, 958
4, 941, 351
6, 784, 986
6, 475, 557
6,844, 258
7, 521, 659

6, 976, 666
7, 687, 508
7, 601,271
8,214,831
8,195, 920
8, 934, 048
7, 810, 869
6, 915, 252
8, 663, 956
7, 080, 200
6, 792, 201
6, 665, 297

5, 751, 752
5,378, 951
4,480, 420
4, 913, 273
5,112,827
5,870,892
5, 843,135
5, 710, 956
6, 521, 372
5, 990, 224
5, 719,132
6,171, 977

24, 762,128
25, 314, 973
25, 002, 658
28,114, 717
29,149, 669
35, 365, 390
33,390,411
31, 658, 644
38, 722, 357
34, 618, 569
33, 437, 782
33, 337, 080

82, 774,187

64, 336, 091

91, 538, 019

66,464, 911

372,874, 378

Total

Additional tables showing t h e status of emergency relief appropriation funds by organizations and by States may be found in tables
on pages 723 and 725 of this report.
Federal savings and loan associations
The Federal Home Loan Bank Board was authorized under the
Home Owners^ Loan Act of 1933, approved June 13, 1933 (48 Stat.
133), to provide for the organization, incorporation, examination,
operation, and regulation of Federal savings and loan associations, and
to issue charters therefor, in order to provide local mutual thrift
institutions in which people might invest their funds and in order to
provide for the financing of homes.
Under section 5 (g) of the act, the Secretary of the Treasury was
authorized on behalf of the United States to subscribe for preferred
shares in such associations, upon request of the Federal Home Loan
Bank Board, but the subscription was not to exceed $100,000 in
shares of any one association. The Home Owners' Loan Act of 1933,
as amended by an act approved April 27, 1934 (48 Stat. 645), provided under section 5 (j) that, in addition to the authority to subscribe
for preferred shares in these associations, the Secretary of the Treasury



REiPO'RT OF T H E SEOKETARY OF T H E TREASlUGRY

177

was authorized, on behalf of the United States, to subscribe for any
amount of full-paid income shares in such associations, upon request of
the Federal Home Loan Bank Board, but the amount paid in by the
Secretary of the.Treasury for full-paid income and preferred shares
together shall at no time exceed 7 5 percent of the total investment in
the shares of such association by the Secretary of the Treasury and
other shareholders.
An appropriation of $50,000,000 to enable the Secretary of the
Treasury to purchase preferred shares in Federal savings and loan
associations was provided by the Fourth Deficiency Act, fiscal year
1933, approved June 16, 1933. This appropriation was extended by
the act approved April 27, 1934, to cover the purchase of full-paid
income shares.
Pursuant to amendments in the acts of April 27, 1934, and May 28,
1935, $700,000 of the $50,000,000 appropriation was allocated and
made available to the Federal Home Loan Bank Board to enable the
Board to encourage local tln-ift and local home financing and to
promote, organize, and develop these associations. The amount
available to the Secretary of the Treasury for subscription to shares in
Federal savings and loan associations was $49,300,000.
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 Secret ary 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 1940, the sum of $9,8 54,600 was received on
account of shares i-epaid, making the total shares repaid to June 30,
1940, $15,162,900.
The following statements show the transactions in connection with
the subscriptions by the Secretary of the Treasury to preferred and
full-paid income shares in these associations during the fiscal year
1940, and for the 8-year period 1933 to 1940:
Preferred and full-paid income shares of Federal savings and loan associations
subscribed by the Secretary of the Treasury to June 30, 1940, and dividends received
[Par value of shares]
Preferred
shares
Total shares sub.scribed and paid

$637,800

-...

Shares held on June 30, 1939
Less shares repaid during 1940
Shares held on June 30, 1940....
Dividends received on preferred and full-paid income shares:
To June 30, 1939
..„
During 1940
To June 30,1940




Full-paid
income shares

Total

$48, 662, 200 $49, 300,000.00
43,991,700 43,991, 700.00
9, 854, 600 9,854, 600.00

..-

34,137,100

34,137,100.00
6,440,907. 73
1, 438, 861. 29
7,879,769.02

178

REPORT OF T H E SEiORETARY OF T H E TREASURY

Par value of preferred and full-paid income shares of Federal savings and loan
associations subscribed. by the Secretary of the Treasury, and dividends received,
by fiscal years 1934 to 1940
[In thousands of dollars]
1934
Preferred shares:
Subscriptions
Repaid
Full-paid income shares:
Subscriptions
Repaid
Shares held June 30 _.
Dividends received

1935

511
_

127

575

31, 251

1,086

32,464
77

1936

12

1937

1938

1939

585

22
359
47,803
1,739

3,792
43,992
1,689

Total

638
638

19

16,836
454
65
49, 223 48,184
1,146
1,790

1940

9,856
34,137
1,439

48,662
14, 625
34,137
7,880

Federal home loan banks
Twelve Federal home loan banks were established pursuant to the
Federal Home Loan Bank Act, approved July 22, 1932 (47 Stat. 728).
These banks are supervised by the Federal Home Loan Bank Board.
The act provides that the Board, with the approval of the Secretary
of the Treasury, shall determine the minimum capital of each bank,
which shall be not less than $5,000,000. I t further provides t h a t the
Secretary of the Treasury shall subscribe, on behalf of the United
States, for such part of the minimum capital of each Federal home
loan bank as is not subscribed for by members within 30 days after
books had been opened for stock subscriptions. Payments for stock
subscriptions by the Secretary of the Treasury are subject to call in
whole or in part by the Board, with the approval of the Secretary of
the Treasury, at such time or times as may be deemed advisable.
To enable the Secretary of the Treasury to make payments upon
stock of Federal home loan banks subscribed for by him, the sum of
$125,000,000, or so much thereof as may be necessary for such purpose,
was allocated and made available to the Secretary of the Treasury out
of the capital of the Reconstruction Finance Corporation and the
proceeds of notes, debentures, bonds, and other obligations issued by
the Corporation.
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 for capital of the Federal home loan
banks, plus interest paid to the Treasury on account of such notes.
The act of July 22, 1932, provided that the capital subscribed for by
the United States was entitled to receive dividends at a rate of 2 percent per annum cumulative from the date of investment, but in any
case in which the rate of dividend is in excess of 2 percent the stock
subscribed for by the United States shall be entitled to dividends
at a rate not in excess of that paid on other stock. The act of May 28,
1935, amending the act of July 22, 1932, provides, however, that all
stock of any Federal home loan bank shall share in dividend
distributions without preference.
Under the provisions of the act of June 25, 1940, the Reconstruction
Finance Corporation is authorized to purchase at par any part of
the stock of any Federal home loan bank owned by the United States,
and the Secretary of the Treasury is authorized on behalf of the
United States to sell such stock to the Corporation. No sales were
made during the fiscal year 1940.



REiPORT OF T H E

ISQECQRETARY OF T H E

179

TRiEA.SiUa:iY

During the fiscal year 1940, there were no transactions affecting the
shares of stock subscribed for and held by the Secretary of the Treasury. T h e dividends received during the year aggregated $1,490,391.27. The following statement shows the shares of stock subscribed
for and held by the Secretary of the Treasury and the dividends
received and covered into the Treasury as miscellaneous receipts to
June 30, 1940:
Subscriptions by the Secretary of the Treasury to stock of the Federal home loan banks
to J u n e 30, 1940, a n d dividends received

Federal home loan bank

Shares subscribed and
held June 30,
1940 (par
value)

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

Dividends received
To June 30,
1939

$12,467,600
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
9,967,900
124, 741,000

$658,464. 61
1,401,036. 75
834, 111. 39
603,825. 29
1,435,749. 79
574,986. 59
1, 378, 209.45
634,313. 31
551,304. 66
313, 262. 66
349, 790. 88
426, 733. 36
9,161, 768. 53

Fiscal year
1940
$124, 676.00
189, 632.00
111, 463.00
92,082.00
223, 574. 75
98, 661.00
212,608.60
92, 436. 26
87, 724.00
73, 336. 00
59, 600.00
124, 598. 76
1,490, 391. 27

Total to June
30, 1940
$783,129. 61
1, 690, 668. 76
945, 574. 39
696,907. 29
1,659,324. 64
•673, 647. 59
1, 590,817.96
726,749. 57
639,028.66
386,688. 66
409, 390.88
551, 332.11
10, 652,159.1

The following statement shows subscriptions to capital stock of the
Federal home loan banks by the Secretary of the Treasury and
dividends received for the fiscal years 1933 to 1940:
Subscriptions by the Secretary of the Treasury to stock of the Federal home loan
banks a n d dividends received, fiscal years 1933 to 1940
[In thousands of dollars]
F e d e r a l h o m e loan b a n k

1933

1934

1936

1936

1937

1938

1939

1940

Total

Subscriptions t o stock (par value)
Boston
New York
Pittsburgh
Winston-Salem
Cincinnati
Indianapolis
Chicago
- Des Moines
Little Rock
Topeka
Portland
_ _Los Angeles

—

-

Total

2,500
3,000
4,300
4,100
9,000
4,400
6,100
2,200
3,800
1,500
1,110
960
42,970

2,600
8, 500
4,200
1,600
3,776
1,600
3,900
2,300
2,100 " " 2 0 6 '
3,200
2,200
2,600

4,174
2,000
2, 672
600
2,350
1,700

6,150
3, 500
1,300
1,708

200

17, 696

21,172

1,018
2,963
246

12,468
18,963
11,146
9, 208
12, 776
6,577
14,174
7,395
8,772
7,334
6,960
9,968

4,227

124, 741

2,034
300
4,708

38,476

300
1,000
1,100
1,800

577
896

D i v i d e n d s received
Boston
New York
Pittsburgh
Winston-Salem
Cincinnati
Indianapolis
Chicago
Des Moines
L i t t l e Rock
Topeka
Portland
Los Angeles—

96
•77
119
68
77

146
287
128
184
319
119
199
68
119
23

63
233
174
122
255
89
212
72
93
109
118
72

653

1,691

1,612

116
-

-

Total




87
264
196
114
254
. 92
281
131
86
68
71
69

176
332
109
92
256
99
284
148
88
73
87
123

187
285
111
92
256
99
283
148
88
73
74
150

125
190
111
92
223
99
213
92
88
74
69
124

783
1,691
945
696
1,669
674
1,591
727
639
387
409
651

1,693

1,867

1,846

1,490

10, 652

180

(REPOKT OF T H E SEORETARY

OF T H E

TREAStURY

Federal land banks
Capital stock.—UndiQT the act of January 23, 1932, amending the
Federal Farm Loan Act, 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 statements show the transactions in connection
with subscriptions to stock of Federal land banks during the fiscal
year 1940, and a summary of such transactions for the fiscal years
1933 to 1940.
Subscriptions by the Secretary of the Treasury to stock of Federal land banks and
repayments thereon, fiscal year 194-0
[Par value of shares]

Federal land bank

subrepaid Shares held
Shares held Shares fiscal Shares year
fiscal
June 30,1940
June 30,1939 scribed 1940
year
1940

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

$38, 715

, 146,310

-




124,952,320

1, 620, 655
1,023,380
69,340
2, 035, 016
83, 080
34, 700
65, 695
59,145
36,145
108, 915
1, 043, 845

128, 590
750, 315
610, 635
064,145
603, 555
691, 435
816,845
569, 600
156, 235
536, 955
816, 370
256,420

6,146, 310

6, 098, 630

126, 000,000

EEPOKT O F THiE SEdRETAEY

OF T H E

181

TKiEASiUKY

Subscriptions by the Secretary of the Treasury to stock of Federal land banks, and
repayments thereon, fiscal years 1933 to 1940
[In thousands of dollars]
Shares
subscribed
a n d held
J u n e 30,
1933

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
Total

-

6,665
6,729
13,188
8,210
12,879
9,638
19,103
7,134
9,475
7,212
9,662
14,883
2 124, 758

Repayments

1934

29
63
90
168
20
182
323
59
196
102
443
63
1,738

1936

1936

1937

1938

1939

1940

82
1,059
228
49
1,040
39
68
44
34
27
1,621
1778
44
21
16
18
1,023
1 2, 635
214
1,082
56
1,012
1,665
69
21
2,013
21
1 5, 869
34
2,036
452
109
812
215
94
83
1,902 1 1, 376 1 3, 299 1 5, 434 1 6, 718 ' 6, 111
363
67
818
146
65
56
157 ' 1,097
63
699
2,048
69
164
61
690
1,067
1,566
36
764
1,881
360
180
99
109
93
41
42
43
1,044
1699
1 1, 939

1,046

3,848

1 4, 737

1 151

147

N e t subscriptions
J u n e 30,
1940

4,129
6,750
14,611
4,064
14, 604
7,691
39, 816
5,670
5,156
3,637
5,816
14, 256
125,000

1 Excess of subscriptions over repayments.
2 Excludes capital stock amounting to $114,274.25 subscribed for under the Federal Farm Loan Act of
July 17, 1916, as amended, which amount was repaid during the fiscal year 1934 and credited as a miscellaneous receipt.

Payments on account oj reductions 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 mortgages
held by such banks have been reduced pursuant to the Federal Farm
Loan Act, as amended, and he is also to subscribe, imder 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 iloapaid under the terms of any
mortgage.
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. The period for which
payments to Federal land banks on account of reductions in interest
rates may be made was extended to June 30, 1942, pursuant to Public
No. 672, enacted June 29, 1940.




182

'REPOIRT OF THE; SEORETAR-Y OE T H E TIREAS'URY

A statement as of June 30, 1940, of the amounts appropriated on
account of reductions in interest rates on mortgages and of payments
to Federal land banks for this purpose is here set forth, followed by a
summary of such transactions for the fiscal years 1934 to 1940:
Appropriations on account of reductions in interest rates on mortgages, and payments
to Federal land banks for this purpose to June 30, 1940
1. Amounts appropriated:
To June 30, 1939
Treasury Department Appropriation Act, 1940, May 6, 1939

$151,400,000.00
29,700,000.00

Total to June 30, 1940
2. Payments to Federal land banks:

181,100,000.00

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 30,1939 fiscal year 1940 to J u n e 30,1940

Federal land bank

Springfield
Baltimore
Columbia
LouisvilleN e w Orleans
St. Louis
St. Paul
Wichita
Houston
Berkeley .
Omaha.
Spokane

$5, 287, 407. 92
6,448,138.46
6,047, 376. 27
14, 693,406. 23
8,084, 716. 89
12,557,058.91
20, 367, 663.96
11,760,127.21
16, 626, 239.98
8, 467, 313.45
24, 762,057.98
9,064, 311. 82

$1,068,808.17
1,230, 509.12
1,124,129. 97
2, 889, 830. 76
1,191,874.15
2, 599, 312.83
4, 293,049.11
2,314,117.75
3, 233,361. 88
1, 746, 631.05
5, 289,159. 78
1, 720, 540.15

. 144,156, 819.08

28, 700, 224. 72

-.--.._

.-

-

-- -

Total-.3. Amount available for expenditure, June 30,1940...

$6,356, 216.09
7, 678, 647. 68
7,171, 506. 24
17, 583, 236.99
9, 276, 591.04
15,156, 371. 74
24, 660, 713.07
14,074, 244. 96
19, 859, 601. 86
10,212,844.50
30,051,217.76
10, 774, 851. 97
172, 856,043.80
$8,243,956.20

Payments to Federal land banks on account of reductions in interest rates on mortgages,
fiscal years 1934 to 1940^
[In t h o u s a n d s of dollars]
Federalland bank
Springfield
Baltimore
Columbia
Louisville..
.
N e w Orleans
St. Louis
. . .
St. P a u l
Wichita
Houston
Berkeley
Omaha
Spokane

1934

- - -_

Total
1 No transactions prior to 1934.




267
413
314
709'
848.642
656
679
890
306
876
630
7,029

1935

1936

1937

1938

1939

1940

499
701
'690
1,285
922
1,014
1,403
996
1,621
687
1,792
969

1,018
1,277
1,299
3,061
1,769
2,637
4,061
2,324
3,296
1,715
4,860
1,858

1,186
1,410
1,342
3,347
1,615
2,900
4,878
2, 681
3,765
1,976
5,847
1,983

1,179
1,349
1,283
3,220
1,656
2,830
4,804
2,667
3,615
1,921
6,771
. 1,819

1,138
1,298
1,220
3,072
1,384
2,734
4,667
2,514
3,440
1,862
5,616
1,795

1,069
1,231
1,124
2,889
1,192
2,599
4,293
2,314
3,233
1,746
6,289
1,721

6,356
7,679
7,172
17, 683
9,276
16,156
24, 661
14, 074
19,860
10, 213
30, 051
10, 776

12, 478

29, 065

32, 830

32,114

30, 640

28, 700

172,856

Total

I^'PORT

OF THE. SECRETARY

OF T H E

183

TREA^lURY

A statement as of June 30, 1940, 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, is here set forth, together with a summary of such
subscriptions for the fiscal years 1934 to 1940:
A p p r o p r i a t i o n s for subscriptions to the p a i d - i n surplus of Federal land banks on
account of extensions a n d deferments, and payments for this purpose to J u n e 30,
1940
1. Amounts appropriated:
To June 30, 1939

- -

T o t a l to J u n e 30. 1940
2. P a y m e n t s t o Federal l a n d b a n k s :
A m o u n t paid
to J u n e 30,
1939

Federal land bank

Springfield
-_
Baltimore
Columbia
Louisville
N e w Orleans
St. L o u i s
St. P a u l
Wichita
HoustonBerkeley
Omaha.Spokane
-

.

A m o u n t paid
to J u n e 30,
1940

$10, 816, 876. 33
4, 717. 604. 53
9. 601, 364. 43
. . 10, 206, 602. 36
16, 306, 254. 39
13, 035, 530. 96
28, 642, 491. 25
15, 538,166. 70
- - 13, 326,869. 71
20, 747, 843. 93
27, 827, 009. 59
15, 963, 287. 35

^
. - -

---•

-

.-

Total

Net amount
p a i d fiscal year
1940

- '.

' $863,327. 67
' 182. 353. 24
52, 688. 99
' 372, 084. 43
' 1, 454. 223. 98
' 441, 709. 39
2, 042, 074. 79
967,053. 51
' 446, 621. 02
' 1,175.000.00
2, 456, 367.98
' 14,902. 57

$9, 953, 548. 66
4, 535, 251. 29
9, 663, 953. 42
9,833, 517. 93
14,852, 030. 41
12, 593, 821. 57
30, 684, 566. 04
16, 505, 220. 21
12, 880, 248. 69
19, 672,843. 93
30, 283, 377. 57
15. 948. 384. 78

186, 728,901. 53

.

-

19,000,000.00
189, 000, 000 00

667, 862.97

187, 296, 764. 50

3. Amount available for expenditure, June 30,1940-

$1,703,235.50

' Excess of credits (deduct).
Subscriptions by the Secretary of the Treasury to p a i d - i n surplus of the Federal land
banks, fiscal years 1934 to 1940^
[In thousands of dollars]
1934

Federal land bank
Springfield
Baltimore
Columbia
Louisville
N e w Orleans
St. Louis
St. Paul
Wichita.
HoustonBerkeley
Omaha
Spokane

1935

1936

1937

1,626
1,710
2,463
2,137
6,726
3,442
6, 297
3,351
_. _ 2,758
1,761
3,663
4,932

1,949
680
952
2,118
4,053
2,036
3,984
2,238
2,422
4,623
4,206
4,371

2,400
447
1,036
1,727
1,901
3,039
2,412
3,468
1,675
4,730
6,930
2,703

2,340
1,975
80 . 1,679
2,220
1,795
2,412
1,909
1,602.
1,190
2,343
1, 831
5,685
6,992
3,943
2,021
2,366
2,678
4,049
4,650
6,666
4,683
1,615
1,674

40,864

33, 630

32,468

.-.
. .

_
_

Total

36,199

1938

32,977

1939

1940

2 863
628
2 182
121
63
1,135
2 372
2 97
835 2 1,454
2 442
346
2,042
3,273
967
517
2 447
1,439
935 2 1,176
2,466
1,791
2 15
768
11, 591

568

Total
9,964
4,636
9,664
9,834
14,852
12, 594
30, 686
16, 605
12,880
19, 673
30,283
16, 948
187, 297

1 No transactions prior to 1934.
2 Decrease (deduct).

Federal Farm Mortgage Corporation
Under the Emergency Farm Mortgage Act of 1933, approved May
12, 1933, as amended, the Secretary of the Treasury is authorized
to pay to the Federal Farm Mortgage Corporation such amount as
the Governor of the Farm Credit Administration certifies to the
Secretary of the Treasury is equal to the amoimt by which interest
payments on mortgages held by such Corporation have been reduced.



184

'REPOiRT OE T H E SEORETARY

OF T H E

TREASiURY

A statement of the amounts appropriated and payments to the
Federal Farm Mortgage Corporation follows.
Appropriations on account of reductions i n interest rate on mortgages, and payments
to the Federal F a r m Mortgage Corporation for this purpose, fiscal years 1938 to
1940
1. Amounts appropriated:
Third Deficiency Appropriation Act, 1937, Aug. 26, 1937
$5,000,000.00
First Deficiency Appropriation Act, 1938, Mar. 6, 1938
2,600,000.00
Treasury Department Appropriation Act, 1939, March 28, 1938
8,200,000.00
Treasury Department Appropriation Act, 1940, May 6, 1939
7,425,000.00
Total to June 30, 1940
2. Payments to Federal Farm Mortgage Corporation:
Fiscal year 1938
Fiscal year 1939.
Fiscal year 1940
Total to June 30, 1940 (deduct)
3. Amount available for expenditure, June 30, 1940

23,125,000.00
$5,726,515.05
7,818,547.62
7,126,168.14
.

.

20,670,220.81

_

2,464,779.19

Advances to Federal Reserve Banks jor industrial loans
Under section 1 of the act approved June 19, 1934 (48 Stat. 1105),
amending the Federal Reserve Act by adding section 13 (b), the
Secretary of the Treasury was authorized to pay Federal Reserve
Banks for industrial loans an amount not to exceed the par value of
the holdings of each Federal Reserve Bank of Federal Deposit Insurance Corporation stock. ^ The maximum amount payable to each
bank, based upon its holdings of such Federal Deposit Insurance
Corporation stock, is shown in the table on page 185.
Section 13 (b) provides that in exceptional circumstances, when it
appears to the satisfaction of a Federal Reserve Bank that an established industrial or commercial business located in its district is unable
to obtain requisite financial assistance on a reasonable basis from the
usual sources, the Federal Reserve Bank, pursuant to authority
granted by the Board of Governors of the Federal Reserve System,
may make loans to, or purchase obligations of, such business, or make
commitments with respect thereto, on a reasonable and sound basis,
for the purpose of providing it with working capital. The section also
provides that each Federal Reserve Bank, under certain conditions,
shall have power to discount for, or purchase from, any bank, trust
company, mortgage company, credit corporation for industry, or other
financing institution operating in its district, obligations having
maturities not to exceed 5 years, entered into for the purpose of
obtaining working capital for any such established industrial or commercial business; to make loans or advances direct to any such financing institution on the security of such obligations; and to make
commitments with regard to such discount or purchase of obligations
or with respect to such loans or advances on the security thereof,
including commitments made in advance of the actual undertaking of
such obligations.
Before any advances were made, each Federal Reserve Bank was
required to file with the Secretary of the Treasury an agreement to
hold its stock in the Federal Deposit Insurance Corporation unencumbered and to pay to the United States all dividends, all payments
on liquidation, and all other proceeds of such stock for which dividends,
payments, and proceeds the United States is secured by such stock
up to the total amount paid each Federal Reserve Bank by the
1 The amount of stock held was $139,299,557.




GRIEPOOEIT OF T H E SEORETARY OF T H E TREAStURY

185

Secretary of the Treasury. Each Federal Reserve Bank, in addition,
was required to agree that, in the event such dividends, payments,
and other proceeds in any calendar year did not aggregate 2 percent
of the total payment made by the Secretary of the Treasury, it would
pay to the United States in such year such further amount, if any,
up to 2 percent of the said total payment, as would be covered by the
net earnings of the bank for that year derived from the use of the sum
so paid by the Secretary of the Treasury, and that for the amount so
due, the United States would have a first claim against such earnings
and stock; and further, that it would continue such payments until
the final liquidation of such stock by the Federal Deposit Insurance
Corporation.
All amounts required to be expended by the Secretary of the Treasury, in order to carry out the provisions of this section, were appropriated and authorized to be paid out of moneys derived from the
increment resulting from the reduction of the weight of the gold dollar
under the President's proclamation of January 31, 1934.^
No advances were requested by the Federal Reserve Banks during
the fiscal years 1939 and 1940. The maximum amount of advances
authorized for each Federal Reserve Bank, and the total amount
advanced to June 30, 1940, are shown in the following table:
Maximum
payments
authorized

Federal Reserve Bank

Atlanta
Boston
Chicago
Cleveland
Dallas
_
Kansas City
Minneapolis-New York
Philadelphia
Richmond
St. LouiSSan Francisco

-

-

-

-

__

_

.
.

Total—

.

.
_ _.

.

-

-

.-

Tbtal
amount
advanced

$5, 272,031. 55
10, 230,236.88
19, 748, 616. 70
14,146,863. 66
4,359,338.10
4,131, 276.30
3, 509,467.66
42, 629,210.65
14,620, 883.62
6,808, 291.43
6,093,112.25
9, 850,328. 30

$756,934.44
2,875,116.98
1,417,701.33
1,016, 571.33
1,261,788.08
1,146,717.73
1,007,746.96
7,752,044.63
4,198,400.60
3,420,662.05
647,832.83
2,156,796.01

139, 299, 656.99

27, 546,310.97

The Uniteci States has received no payments from dividends, payments on liquidation, or other proceeds from the Federal Deposit
Insurance Corporation stock held by the Federal Reserve Banks.
The total amount of advances to the Federal Reserve Banks and the
amounts paid by such banks to the Treasury Department are shown
below:
Excess
Advances
advances
Payto Federal ments to over payReserve
Treasury ments (cuBanks
mulative)

Year

1935 1936
1937
1938
1939
1940 -

^

Total1 See p. 129.




-

. $20,931,857
6, 614,454
876,000
125,000
-27, 546, 311

$297, 667
227, 517
176, 760
119, 319
24,579

$20,931,867
26, 248, 644
26,896,127
26,844, 367
26,725,048
26,700,469

845, 842

26, 700,469

186

TilEPORT OE T H E SECRETARY OF T H E THEASURY

The following statements summarize the transactions in connection
with advances to Federal Reserve Banks under section 13 (b) of
the Federal Reserve Act, by years:
Advances to the Federal Reserve Banks for industrial loans, by fiscal years 1935 to
1938^
1935

Federal Reserve B a n k
Atlanta
...:
Boston
__
Chicago-Cleveland
Dallas
Kansas City
Minneapolis
New York
Philadelphia
Richmond
_._
St. LouiS- __
San Francisco

_.--

_--

_-

.-

.-

-.

Total

1936

$766,934
2,166,638
1,417, 701
1,016,671
938,841
778,791
1,007, 747
6, 686,067
2,099,200
2,918,649
547,833
697,895
20,931,857

1937

1938

Total

459,000

$875,000

$125,000

$766,934
2,875,116
1,417,701
1,015, 571
1, 251,788
1,145, 718
1,007,747
7, 752,045
4,198,401
3,420, 662
547, 833
2,156, 795

6,614,464

875,000

125,000

27, 646,311

$708,478
312,947
366,927
1,165,988
2,099, 201
601,913

1 No advances made during the fiscal years 1939 and 1940. .

Payments received by the Treasury from the Federal Reserve Banks, by fiscal years
1936 to 1940
1936

F e d e r a l Reserve B a n k
Atlanta
..
Boston
.
Chicago
C l e v e l a n d - - ___
•Dallas
Kansas City
Minneapolis.-New York
Philadelphia
Richmond
St. L o u i s - S a n Francisco

$9,066
49,012
17,637
8,734
23,428
_
_

Total.

:
_

16,854
64,238
41,984
.66, 714

1937

$34,488
28,354
14,431
26,036
11,028
16,460
13,762
83,968

1938

1939

$6,647
28, 354
13,476
25,036
9,925

$1, 544
20, 714
227
10,270
1,005

227, 517

119,319

617
3,981

24,579

845,842

1,591

176,760

Total
$23,876
91,742
100,179
36,868
74,117
35,204
34,319
82,987
293,888
66,714
5,948

$14,810
61
6,120

83,968

4,357
297,667

4,997
83,968

1940

Appropriations and expenditures under the Social Security Act
The Social Security Act, approved August 14, 1935, as amended,
provided, among other things, for the establishment of a system of
Federal old-age 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, maternal and child
welfare, public health, and the administration of their unemployment
compensation laws.
Under the provisions of section 201 (a) of the Social Security Act
and amendments of 1939, approved August 10, 1939 (see exhibit on
page 578), appropriations to the Federal old-age and survivors insurance
trust fund for the fiscal year 1941 and each year thereafter are equal
to 100 percent of the taxes received under the Federal Insurance
Contributions Act and covered into the Treasury.
The amounts appropriated to June 30, 1940, under the various
authorizations contained in the Social Security Act and total expenditures from such appropriations to June 30, 1940, are shown in the




187

TiEPODElT OF THE. SEORETARY OF THE TREASfURY

table on page 683. The responsibilities of the Treasury Department
and its activities in connection with the Federal old-age and survivors
insurance trust fund and the unemployment trust fund are described
under ^^Trust funds" beginning on page 212.
Obligations oj joreign governments
The United States received, during the year, payments aggregating
$413,747.32 on account of the indebtedness of foreign governments,
of which $74,000 was for account of principal, $301,686.32 was for
account of interest, and $38,061 was for account of annuities under
the moratorium agreements. This does not include a payment of
$100,000 by the Rumanian Government on June 15, 1940, made as
''a token of its good faith and of its real desire to reach a new agreement covering" Rumanian indebtedness to the United States.
The following statement shows the payments due during the
period July 1 to December 31, 1939, and the amounts actually paid on
account by certain governments:
AMOUNTS DUE AND PAYABLE, JULY 1 TO D E C E M B E R 31. 1939
Funding agreements
Country
Principal
Belgium
Czechoslovakia.
Estonia
Finland
France
Great Britain.-Greece--.
Hungary
-.
Italy
Latvia
Lithuania-Poland
Rumania
Yugoslavia

$1,500,000.00
141,000.00
74.000.00
37,000,000.00
475, 000. 00
14, 850.00

$4,168,000.00

19,
75,
1,

67, 600.00

'i,'623,"6oo."oo'

Total-

40,885,450.00

Moratorium
agreements

Total

Interest

3,

286. 265.00
141, 662. 50
261. 432. 50
950, 000.00
217, 920.00
33, 185. 08
245. 437. 50
119, 609. 00
107, 783. 67
582, 810.00
907, 559. 81
515. 63

106,060,180. 69

$484,463.88
182, 812. 78
36, 586. 29
19,030.60
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, 463. 88
1, 682, 812. 78
463. 850. 29
284, 693.00
22, 308, 312. 22
122, 670, 766.05
760, 067. 38
52, 260. 66
2,141, 593. 38
192. 483. 26
121, 466. 93
5, 662, 039. 71
966, 309.89
38, 615. 63

14, 991,983. 37

161,927,614. 06

AMOUNTS ACTUALLY PAID
Finland
Hungary

. $74,000.00

Total

269677—41-

-14




$141,662.50
9, 828.16

$19,030. 50

$234, 693.00
9,828.16

74,000.00

-

161,490. 66

19,030. 50

244, 521.16

188

TIEPORT OF T H E SEORETAllY

OF T H E

TREASURY

The following statement shows payments due during the period
January 1 to June 30, 1940, and the amounts actually paid on account:
AMOUNTS DUE AND PAYABLE, JANUARY 1 TO JUNE 30, 1940
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

$4,800,000.00
1, 500,000.00

. $4,158,000.00

$484.453.88
182, 812. 78
36, 585. 29
19,030. 60
3,046,879.72
34, 767. 23
9, 720, 765.06
67,137. 38

286, 266.00
140, 367. 60

80,063, 798. 30
1 460,093.00
480,000.00

"is," 800," OOO." 65"
61, 336.00

430, 560. 43
488,000.00
104,073,786.73

19,261, 432. 50
76,950,000.00
217,920.00
33,185.08
1, 245,437. 50
119, 609.00
107, 783.67
3, 582,810.00
907, 559. 81
38, 515. 63
106,048,886.

AMOUNTS ACTUALLY
Finland
Hungary
Rumania ^

Total

Interest

4, 225. 68

896,155.88
16, 274. 26

13,683. 26
456, 229.71
48,750.08
15,026, 750. 60

Total

225,149,423.02

PAID

$140,367.50
9,828.16

------

$9, 442, 463.88
1, 682, 812. 78
322, 850. 29
169, 398.00
102, 372, 110. 52
494, 860. 23
85, 670, 766.06
765, 057.38
37, 410.66
17,941, 593.38
134, 883. 26
172, 801.93
4,039, 039. 71
1, 386, 870.32
526, 616. 63

150,195.66

$19,030.60

19,030. 50

$169, 398.00
9,828.16
169, 226.16

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 Payment of $100,000 made by Rumanian Government on June 15, 1940, which was made as "a token
of its good faith and of its real desire to reach a new agreement covering" Rumania's indebtedness to the
United States.

The following statement summarizes the payments made on account
of the indebtedness of foreign governments during the fiscal years
1933 to 1940, classified by countries and also by the application of
the payments to principal, interest, and annuities under the moratorium agreements:
Payments made on account of indebtedness of foreign governments to the United States,
fiscal years 1933 to 1940, classified by countries and also as to principal, interest,
and annuities under the moratorium agreements
1933

1934

1935

1936

$1, 500,318.98
186, 355. 59
95, 550. 000. 00
66, 376.00

$329, 595.19
544, 632.91
17, 500, 518.42

$393, 991.00

$394, 768. 50

272,400.00

152, 544.00

1, 245,437. 50
117, 862.12
92, 386.01

2,000, 020. 76
9, 530.16
16, 990. 36
29,061. 46

98, 757, 726. 20

20, 430, 349. 25

666, 391.00

547, 312. 60

31, 567, 618.98
67,190,207.22

391, 595.19
20,000, 693.06
38,061.00

62,000.00
1 566, 330.00
38,061.00

65,000.00
444, 251. 50
38,061.00

98, 757, 726.20

20,430,349.25

666,391.00

547, 312. 50

COUNTRY

Czechoslovakia
Finland--Great Britain
Greece
Hungary
Italy
Latvia
Lithuania
Rumania

-.

--

--

-

Total
ACCOUNT

F u n d i n g agreerc e n t s :
Principal
Interest
M o r a t o r i u m agreements
Total

1 Does not include $1,433.01 received and credited to interest on unfunded indebtedness of Russia.




189

BE'POiRT OF T H E SBORETAUY OF T H E TEEASUEY

Payments made on account of indebtedness of foreign governments to the United States,
fiscal years 1933 to 1940, classified by countries and also as to principal, interest,
and annuities under the moratorium agreements—Continued
1937

1938

1939

1940

Total

.

$394, 458. 60

$394,078.50

$393,628.50

$394,091.00

196,128. 00

174,336.00
19, 656. 32

87,168.00
19,656.32

19,656.32

0)

$1,829,914.17
3,096,004. 50
113,060,618.42
947,952.00
68,968.96
3, 246,458. 26
127, 382. 28
109, 376. 36
29,061.46

690,586. 60

588,070.82

500, 462,82

3 413,747.32

122,494, 636. 41

67.000.00
485, 525. 60
38,061.00

69, 000. 00
481,009. 82
38,061. 00

71, 000.00
391, 391.82
38,061.00

74,000.00
301, 686. 32
38,061. 00

32,367,114.17
89,861,096. 24
266,427.00

690, 586.50

688,070.82

600,452.82

2 413,747.32

122,494, 636.41

COUNTRY

Czechoslovakia
Finland
Great Britain
GreeceHungary
Italy
Latvia
Lithuania
Rumania

•
_

Total-..

-

ACCOUNT

Funding agreements:
Principal
Interest
Moratorium agreementsTotal

2 Does not include payment of $100,000 by Rumanian Government on June 16, 1940, which was made as
"a token of its good faith and of its real desire to reach a new agreement covering" Rumania's indebtedness
to the United States.

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 43 on page 544 of this report.
A statement showing the 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, 1940, appears as table 56 on page 795.
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, 1940,
according to contract terms, are shown in the following statement:
TOTAL AMOUNTS DUE AND NOT PAID, AS OF N O V E M B E R 15, 1940
F u n d i n g agreements
Country
Principal

Interest

Belgium - - $36,100,000.00 $55,830,000.00
22,170.085. 83
Czechoslovakia
4, 539,345.00
Estonia
.
- -1, 000.000. 00
438, 730,128. 79 308,182, 920.00
France
2, 300,466. 00
G e r m a n y (Austrian indebtedness)!
Great Britain
- 239, 000,000.00 1,121,749,481. 58
2, 713, 607. 50
6,863, 000. 00
Greece
Hungary 2
457,770.13
108, 026. 00
16. 681, 541. 74
111, 200, 000.00
Italy
.
1, 778,604. 84
Latvia
- .
403, 700.00
1, 553, 571. 70
364,160. 00
Lithuania
. . . .
66,813,130.00
Poland
. .
. . . . - 11, 973, 000.00
Rumania 3
11, 630, 560. 43
1,815,119. 62
231, 093. 78
3, 213. 000. 00
Yugoslavia
- . . . . _
Total
886, 056.125. 05 1,572,346,086. 89

Moratorium
agreements

Total

$98, 712, 364. 32
$6, 782, 364. 32
24, 729,464. 76
2, 559, 378.92
512,194.06
6, 051, 539.06
789, 569, 364.87
42, 656, 316. 08
2 474,301.15
173, 836.15
136,090, 710. 70 1,496, 840,192. 28
10, 583, 568. 20
1,007,060.70
624, 953. 25
59,158.12
140,427,724. 06
12, 646,182. 32
2, 396,144.48
213, 839. 64
2,109, 297. 34
191, 565. 64
75,173, 345. 94
6, 387, 216. 94
14,128,181.17
682, 501.12
3,444. 093. 78
209.862, 313. 71 2, 667, 264, 624. 65

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 The Hungarian Government has deposited with the foreign creditors' account at the Hungarian National
Bank an amount of Hungarian currency 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.
3 The Rumanian Government paid to the Treasury on June 16, 1940, the amount of $100,000 as "a token
of its good faith and of its real desire to reach a new agreement covering" Rumania's indebtedness to the
United States.




190

iREPOiRT OF THOE S E 0 R E ; T A R Y 0 ^ T H E TfREAStTBY

Finland.—Finland continued during the year to make full payment
of amounts due on its indebtedness to the United States. The amount
of the December 1939 payment, $234,693, at the direction of the President was held in suspense ^^pending such action, if any, as the Congress
might desire to take with respect to it.'' (See the copy of a communication from the President to the Congress on page 545.)
On March 2, 1940, legislation was enacted ^'To provide for increasing the lending authority of the Export-Import Bank of Washington,
and for other purposes.'' Thereafter the Export-Import Bank established certain credits to the Finnish-American Trading Corporation,
an American Corporation organized by the Finnish minister with a
paid-in capital stock of $1,000,000, and guaranteed by the Finnish
Government, for commodity and supply purchases in this country.
Later Congress passed a joint resolution ^'To authorize the postponement of payment of amounts payable to the United States by the
Republic of Finland on its indebtedness under agreements between
that Republic and the United States dated May 1, 1923, and May 23,
1932." (See exhibit 43, page 546.) This joint resolution authorized
postponement of amounts payable during the period January 1 to
December 31, 1940. Following approval of the joint resolution on
June 15, 1940, the December 1939 payment was covered into the
Treasury. On June 15, 1940, Finland made a payment of $159,398
due on that date without exercising its option under the joint resolution.
Hungary.—In accordance with its proposal of August 16, 1937, the
Hungarian Government made semiannual payments of $9,828.16 on
December 14, 1939, and June 14, 1940, for application on account of
the funded indebtedness of the Hungarian Government to the United
States.
When making such payments the Hungarian Minister expressed
the hope of his government that the Congress would give favorable
consideration to its offer, made in February 1938, seeking a new debt
arrangement on a permanent basis providing for payment of the
original debt, without interest, in equal installments covering approximately 30 years. This proposal (see exhibit 48 on page 297 of the
annual report for 1938) was recommended to the consideration of the
Congress by the President on March 28, 1938, with an expression of
the belief that it represented a noteworthy wish and effort of the
Hungarian Government to meet its obligations to the United States.
Nicaragua.—In pursuance of Article I I of the Treaty of April 14,
1938, covering the adjustment of certain accounts and refund of income taxes, which was ratified by the Senate on June 13, 1938, 59
obligations against the Republic of Nicaragua in the principal amount
of $289,898.78 were marked canceled and returned to the Government
of Nicaragua through the Department of State on October 6, 1939.
Rumania.—On June 15, 1940, the Rumanian minister addressed a
communication to the Secretary of State referring to the note of May
3, 1939, containing a notice that he had been designated by his
government to negotiate with the United States Government for the
purpose of reaching a new agreement in respect to the debt owed by
the Rumanian Government to the United States (see page 294 of the
annual report of the Secretary of the Treasury for 1939). The
minister's letter informed the Secretary of State that as a token of its
good faith and of its real desire to reach a new agreement concerning



TREiPOtRT OP T'HE, SEiQREiTARY OF T H E TRE'ASfURY

191

its indebtedness to the Government of the United States the Rumanian
Government was paying the sum of $100,000 to the American Government, this sum to be held in a special account and 'Ho be used if, as
and when the new agreement to be negotiated by our two governments
will have entered in force * * * ?
?
Press releases of the Department of State dated June 15, 1940, with
respect to the indebtedness of the Government of Rumania will be
found on page 553 of this report.
Receipts jrom Germany
During the fiscal year 1940 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 9,300,000 reichsmarks were due on
September 30, 1939, and March 31, 1940, 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 4,971,687.50 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, 1939, and March 31, 1940,
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 16,830,000 reichsmarks was also due
on those dates.
Annuities under moratorium agreement.—The semiannual installments, aggregating 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 1940, were not
paid by Germany.
The status of the indebtedness of Germany to the United States as
of June 30, 1940, under the funding and moratorium agreements is
summarized in the foUowing tables:
AMOUNT OF I N D E B T E D N E S S
Indebtedness
as funded

Class

Army costs (reichsmarks)
Mixed claims (reichsmarks)

__

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

Total indebtedness, June 30,
1940

Principal

Interest accrued and
unpaid i

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

1, 022,946,007. 78
2,112,420,000. 00

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

26,446,007. 78
72,420,000.00

3,037, 500,000

97,866,007. 78

3.169, 700,000 2 3.136,366,007.78
$1, 278, 340,010 $1, 264,493, no. 94

$1, 225,023, 750 $39,469,360.94

1 Includes interest accrued under unpaid moratorium agreement annuities.
3 Includes 4,027,611.95 reichsmarks deposited by the German Government in the Konversionskasse fiir
Deutsche Auslandsschulden and not paid to the United States in dollars as required by the debt and moratorium agreements.




192

REPOiRT OF T H E SEORET'AR-Y O'F T H E TREASIURY
PAYMENTS RECEIVED
Total payments
received to June
30,1940

Class

Payments of
principal

Army costs (reichsmarks)...
Mixed claims (reichsmarks)

51,466,406.25
87,210,000.00

60,600.000.00
81, 600,000.00

Total (reichsmarks)-Total (in dollars)

138, 666,406. 25
$33, 587,809. 69

132, 200, 000. 00
$31. 639, 595. 84

Payments of
interest

'

856,406. 25
5,610.000.00

6,466,406. 25
$2,048, 213.86

AMOUNTS NOT PAID ACCORDING TO CONTRACT T E R M S , J U N E 30, 1940
F u n d i n g agreement
Moratorium
agreement

Date due
Principal
Sept.
Mar.
Sept.
Mar.
Sept.
Mar.
Sept.
Mar.
Sept.
Mar.
Sept.
Mar.
Sept.
Mar.

30, 1933
--- -.
31, 1934
30, 1934
31,1935
30, 1935
31, 1936
30, 1936
31, 1 9 3 7 . . . .
30, 1937
:
31, 1938
30, 1938
31, 1939
30,1939—31, 1940

reichsmarks.do
dO—---.do.--.
do....
do....
do....
do....
..do....
...do....
do—do--do.-..
do....

TotaL.
T o t a l (in dollars, a t 40.33 cents t o t h e
reichsmark)
.

2,498, 562. 60
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
28, 600,000
28, 600,000
29, 700,000
29, 700, 000

Total

Interest

3,855, 687. 50
4, 534, 250.00
6, 212,812. 50
6, 891, 375.00
6, 669,937. 50
7, 248, 500.00
7, 927,062. 50
8, 586, 687. 50
9, 244, 312. 50
9,902, 937. 50
10, 561, 562. 50
11, 240,125.00

1, 529,049.45
1, 529,049.45
1, 529,049.45
1, 529,049.45
1, 529,049.45
1, 629,049.45
1, 629,049.45
1, 529,049.45
1, 529,049.45
1, 529,049.45
1, 529,049.45
1, 529,049. 45
1, 529,049.46
1, 629,049.45

1 4,027,611. 95
123, 929,049.45
26, 784,736.95
88,963,299.45
36,441,861. 95
37,120, 424.45
37, 798,986.96
38,477, 549.45
38,056,111.95
38, 714,736.96
39, 373, 361. 96
40,031,986. 95
41, 790, 611. 95
42,469,174.45

518, 300, 000

93, 272, 812. 50

21,406,692.30

632, 979, 504.80

$209,030,390

$37, 616, 925. 28

$8,633,319.00

$255, 280, 634. 28

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

Treasury administration oj 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 M a y 23, 1938, a copy of which wiU be found as
exhibit 64 on page 346 of the annual report for 1938.
Executive Order No. 6981, dated March 2, 1935, as amended by
Executive Order No. 7111, dated July 22, 1935, removed in certain
cases the re,strictions 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 and Private Act No. 509: Claims against
Germany.—On October 31, 1939, the Secretary of State certified to



RjE*P0iRT OF T H E SE'OREiTARY OF T H E TREASfUIRY

193

the Secretary of the Treasury for payment additional awards of the
Commission on account of sabotage claims aggregating $21,157,227.01. The interest on these awards from various dates to January
1, 1928, aggregates $10,236,826.74, making the total as of January 1,
1928, $31,394,053.75. No payments have as yet been made on
account of these awards. There is still pending in the courts a suit
filed in the District Court of the United States for the District of
Columbia by the Z. & F. Assets Realization Corporation, plaintiff, v.
Secretary of State and Secretary of the Treasury, defendants.
On July 19, 1940, Private Act No. 509 for the relief of Katherine
M. Drier was approved. Under the provisions of this law the Secretary of the Treasury was authorized to make payments from the German special deposit account as if an additional award had been entered
by the Mixed Claims Commission, United States and Germany, on
behalf of Katherine M. Drier. Private Act No. 509 is set forth in
detail in exhibit 55, page 580.
No payments were made during the year on account of awards of
the Mixed Claims Commission. On August 15, 1940, the sum of
$159,070.39 was payable under the provisions of Private Act No. 509,
of which $119,501.63 was paid and there was withheld for future disposition the sum of $39,568.76.
The following summary shows the number and amount of awards
certified to the Treasury by the Secretary of State, the amount paid
on account, and the balance due thereon as of September 30, 1940.
Further details by classes of awards may be found in table 68, page 830.
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, as of September 30, 1940 ^
Total
number of
awards

Awards certified

1. Amount due on account: Principal of awards
Less amounts paid by Alien Property Custodian and others

_

7,026

Total payments to Sept. 30,1940
Less one-half of 1 percent deduction from each payment .

91, 938, 763.08
354 914 857 89

•

2. Payment made on account to Sept. 30,1940:
Principal of awards
' _.
__
Interest to Jan. 1,1928, at rates specified in awards
Interest at 5 percent per annum from Jan. 1, 1928, to date of payment
as directed by the Settlement of War Claims Act of 1928

6,600 2125, 771, 505. 69
8, 558,952. 60
1, 542,888. 09
136,873, 346. 38
679, 566.16

_

Net payments made to claimants to Sept. 30,1940
3. Balance due on account:
Principal of awards
.
:
Interest to Jan. 1,1928, at rates specified in awards _
-Accrued interest at 5 percent per annum from Jan. 1,1928, on total amount
payable as of Jan. 1,1928, to Sept. 30,1940
-..
Balance due claimants as of Sept. 30,1940

$181, 698, 235. 30
187, 226 86
181,511,008.45
81,466,086.36

Interest to Jan. 1,1928, at rates specified in awards
Interest thereon to date of payinent or, if unpaid Sept. 30, 1940, at 5
percent per annum as specified in the Settlement of War Claims
Actof 1928
._
Total due claimants

Total amount

136,193, 781. 22
626

128,258, 220.01
387, 416. 51
90,395,874.99
219,041, 511. 61

' Includes payments on account of Private Act No. 609, approved July 19,1940.
2 Includes payments on account of interest to .Jan. 1, 1928, on Class III awards and Private Act
No. 509. 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. Payinent of accrued interest
since Jan. 1, 1928, on this class of claims deferred in accordance with act.




194

•REPOUT OF T H E SEORETARY OF T H E 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 oj 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 subsec[uent 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, 1940:
Number of awards of the War Claims Arbiter on account of claims of German
nationals for ships and patents andaradio station and the aniount paid and balance
due on each, September SO, 1940
Total amount
(315 awards)

Awards certified

Ships, amount
(27 awards)

1. Amount due on account:
Principal of awards, including interest to Jan. 1,
1929
-..
$86,738,320.83 ' $74, 252,933.00
Interest at 6 percent per annum from Jan. 1,1929,
on total amount payable as of Jan. 1,1929, or on
the principal amount remaining unpaid to
Sept. 30,1940
30,163,155.74
25,671,570.29
Total due claimants

-

__

$12,485,387.83

4,491, 685. 45

Total payments to Sept. 30,1940
3. Balance due on account:
Principal of awards---- _
..
Interest accrued at 5 percent per annum from
Jan. 1, 1929, on total amount payable as of
Jan. 1,1929, or on the principal amount remaining unpaid to Sept. 30,1940
.__.

116,901,476. 57

99,924, 503.29

16,976,973. 28

43,368,899.24

37,126,205.21

6, 242, 694.03

43,368,899.24

2. Payments made on account to Sept. 30, 1940:
Principal of awards
Interest at 5 percent per annum from Jan. 1,1929,
on total amount payable as of Jan. 1,1929, or on
the principal amount remaining unpaid to
Sept. 30,1940

Balance due claimants..

Patents and
radio station,
amount
(288 awards)

37,126,205.21

6,242,694.03

43, 369, 421. 59

37,126, 727. 79

6,242, 693.80

30,163,156. 74

25, 671, 570. 29

4,491, 585. 45

73,632, 577.33

62,798,298.08

10, 734, 279.25

1 Includes awards amounting to $522.58 to members of former ruling family of Germany (sec. 3 (j), Settlement of War Claims Act of 1928, as amended).

War Claims Arbiter: Claims oj 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




R.E'P0QEIT OF THE SEORETARY OF THE TREASIURY

195

amounts paid therefrom up to September 30, 1940, and the balance
held in the account:
Funds deposited in the German special deposit account and payments made therefrom
up to September SO, 1940
RECEIPTS

From investments by Alien Property Custodian under Trading with the Enemy Act, as amended:
Unallocated interest fund
__ $25,000,000.00
Less refunds
6,167,944.37
19,832,055.63
17,552,096.91

20 percent German property retained

$37, 384,152. 54

From Germany:
2H percent of Dawes' annuities available for reparations
(ParisagreementofJan. 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
Deposits by Attorney General of the United States (Alien
Property Bureau) under sec. 25 (d) of Trading with the
Enemy Act, as amended:
German Government
--.
German nationals

137,268.13
856.401.72

Earnings and profits on investments by Secretary of the
Treasury
.--.
' Total receipts

53,396,763. 67

86,851,945.03

993,669. 85
5,446,763.85

—

$184,073,294.5

PAYMENTS ON ACCOUNT

Awards of the Mixed Claims Commission:
Under agreement of Aug. 10,1922
_
Under agreement of Dec. 31,1928

.-

Private Act No. 509-Awards of War Claims Arbiter:
For ships
For patents and radio station

.-.

$129,727,690.98
5,347,383.96

37,126,205.21
6,242,694.03

One-half of 1 percent deducted from mixed claims payments covered into Treasury ($88.87 withheld but not
paid)
:.One-half of 1 percent 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
($2,720.95 withheld but not paid)
One-half of 1 percent deducted on account of Private Law
No. 509 ($795.35 withheld but not paid)
Advances to special fund, expenses of administration of the
settlement of War Claims Act of 1928 (OflQce of the Secretary of the Treasury)...
-...
Expenses of administration. War Claims Arbiter account
of German nationals
_
Total payments

--

$135,075,074. 94
118,706.28

43,368,899.24
651,809.90

24,150.09

47,175.00
113,624.20

-,

179,399,439.65

Balance in German special deposit account (including investments)
Made up as follows: ,
$4,500,000 face amount 2 ^ percent Treasury bonds,
1954-66
Accrued interest paid on investment
Cash b a l a n c e - - - —

4,673,856.19

-—

--

""•
4,500,000.00
8,.575. 82
165,279.37
4, 673,855. 19

Tripartite Claims Commission: Claims against Austria.—The total
amount of awards, including interest, certified by the Tripartite Claims
Commission to the Treasury for paynient was $370,032.14. Payments
on these awards were completed during the fiscal year 1939.
Tripartite Claims Commission: Claims against Hungary.—The
awards entered by the Tripartite Claims Commission against Hungary,



196

REPORT OF THE; SEORETARY OF THE TREASURY

in favor of American nationals, amounted to $199,975.57. During
the fiscal year 1940 no payments were made on account of such awards.
As of June 30, 1940, awards aggregating $7,257.35 had not been paid
because claimants had not filed applications as required by law.
Claims oj 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 Uniteci States the sum of
$1,300,000, without interest, in full settlement of claims of American
citizens which are embraced 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 Turkish fiscal year and was therefore an
inconvenient time for the Turkish Government to make payments of
an important nature.
Under the joint resolution approved June 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 by 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 1940 a pro rata payment was authorized to be
made to the claimants by the Treasury from funds amounting to
$100,000, available for that purpose. An additional sum of $100,000
was received on June 20, 1940, but too late to enable the Treasury to
make payments to claimants prior to June 30, 1940.




'RE^POORiT OF T H E SEOREiTARY OF T H E TREAuSURY

197

Statement of awards made by Special Claims Commission, United States and Turkey,
as of J u n e 30, 1940
Amount awarded to claimants:
Amount of claims
Interest allowed
Total

$539,844.13
359,493.96

.

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 June30, 1939
:
-.During fiscal year 1940 1
Total
-Less reimbursement for expenses by the United States
Available for payment to claimants
Amount paid to claimants:
To June30, 1939.
During fiscal year 1940
-.
Total

:.-

-

300,000.00
200,000.00
500,000.00
70,891.06
429,108. 94
-..
-

229,057.95 •
99, 977. 75

-

Balance due claimants for which vouchers have not been received,-

329,036.70
.

100,073. 24

1 Installment of $100,000 due on June 20,1940, received by Treasury on June 20,1940.

Claims oj 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 in 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, according 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



198

'REPORT OF THE SEORETARY OF THE TREASURY

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 counting from January 1, 1935, and an adciitional 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, subsequently
adjusted to $9,140,541.89, which were subject to reduction on a percentage basis as provided in section 4 of the act approved April 10,
1935. The final awards as adjusted aggregated $5,210,108.92. 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, $250,000
of the appropriations has been withheld from the payments made by
the Government of Mexico.
As of June 30, 1940, there had been received and made available
for distribution to claimants the sum of $2,878,180.70. Amounts
aggregating 55.24 percent of the final awards of $5,210,108.92 have
been authorized to be distributed to the claimants.
Statement of awards made by Special Mexican Claims Commission, United States
and Mexico, as of June 30, 1940
Amount of final awards to claimants after application of sec. 4 of the act approved Apr. 10,
1935
-$6,210,108.92
Amount received from Government of Mexico:
To June 30, 1939, $2,500,000 principal and $98,700. 50 interest
Jan. 2, 1940, $500,000 principal and $29,480.20 interest
-

-

-.-

-— $2, 698,700. 60
529,480.20

Total to June 30, 1940
.....
Less amount reserved to cover expenses incurred by the United States
Available for payment to claimants
•:.
.
..Amount paid to claimants during fiscal year 1939
--Amount paid to claimants during fiscal year 1940
."
Total to June 30, 1940

-

Balance due claimants:
For which vouchers have not been received
For subsequent distribution

2, 087,193.47
678,717.90

.
-

-

_

3,128.180. 70
250,000.00
2,878,180.70

2,765,911.37
112,162,80
116.53
:

112,269.33

Railroad obligations
Total receipts during the fiscal year on account of railroad securities
amounted to $103,509.14, of which $1,075.99 was collected by the
Director General of Railroads under the Federal Control Act, as
amended, and $102,433.15 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



RE'PORT OF THE. SECRETARY OF T H E TRE'ASURY

199

General of Railroads), the amount held on June 30, 1940, and payments received on account:
Summary of railroad obligations held by the Government as of J u n e 30, 1940, by
classes
Principal
araount
originally

Class

Federal Control Act:
Equipment trust notes
Sec. 7
Sec. 12
Transportation Act:
Sec. 207
Sec. 210Total

Principal
amount
held on
June 30, 1940

$346, 556,750. 00
98,401,755. 00
62,103,463. 28

Total payments received
Principal

Interest

$346, 656, 750. 00
98,401,766. 00
62,103,463. 28

$45,338,918.25
23,100, 562. 27
4, 248,171. 96
54, 360, 339. 70
90,904, 943. 95

282,712,837.36
290,800,667. 00

1 277,695,167.90
265, 621, 739.12

1, 080, 575,462. 64

-

$5,007,000.00
25,178, 927. 88
30,186,927.88

1, 050,378,865. 30

217, 952,936.13

1 stock of the Kansas, Oklahoma & Gulf Ry. Co. in the face amount of $212,500 was sold on the market
for $201,830.64, resulting in a difference of $10,669.46 between the receipts and the principal originally held.

Section 207j Transportation Act, 1920, as amended.—The following
statement shows the amount of obligations of carriers acquired under
section 207 and held on June 30, 1940:
Obligations acquired under the provisions of sec. 207 of the Transportation Act, 1920,
and held as of J u n e SO, 1940

Carrier

Principal
amount of
promissory Collateral,
note or of
face
directly
amount
held security

Class of collateral or of
directly held security

Chicago, Milwaukee, St.
Paul & Pacific R. R.
Co.
Minneapolis & St. Louis
R. R. Co.

$3,207,000

(0

5% noncumulative preferred stock of carrier.

1,260,000

$1, 500,000

Wa.<?hington, Brandywine
& Point Lookout R. R.
Co.
Waterloo, Cedar Falls &
Northern Ry. Co.

50,000

76,000

Refunding and extension
mortgage, 5% bonds of
carrier.
First mortgage, 6% bonds
of carrier.

500,000

626,000

Principal in Interest in
default
default

Total

5,007,000

Temporary general mortgage, 7% bonds of carrier.

$1,250,000. $1,275,000.00
60,000

25,408.98

500,000

574,931. 50

1,800,000

1,875,340.48

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 apphcation has expired. No expenditures under this section
were made by the Director General during the fiscal year. The net
ex:penditures by him on this account amounted to $33,640,740.24 to
June 30, 1940.
Total loans (including renewal loans and repayments thereof aggregating $59,800,000) to June 30, 1940, amounted to $350,600,667, repayments amounted to $325,421,739.12, and loans outstanding as of
that date amounted to $25,178,927.88.



200

REPORT

OF T H E SECRETARY

OF T H E TrREASnCJRY

In an opinion dated February 7, 1939, the Attorney General of the
United States advised the Secretary of the Treasury that the Treasury
Department had authority under section 3469 of the Revised Statutes
of 1873 to accept a cash offer in compromise on account of a loan to
a railroad company under section 210 of the Transportation Act, 1920,
as amended, provided that the facts are such as to warrant a compromise under the principles commonly applied and having due regard to
the question of collectibility. I n view of this opinion the Secretary
of the Treasury accepted $44,304.67, representing the unpaid principal of a loan of $50,000.00 made to the Aransas Harbor Terminal
Railway, in full satisfaction and settlement of the unpaid principal
and interest amounting to $17,357.57, accrued to February 1, 1939.
The total payments by the carrier on this loan aggregate $81,613.09 of
which $50,000.00 represented principal and $31,613.09 represented
interest.
The following statement shows the amount of obligations held on
June 30, 1940, on account of loans to carriers under section 210, and
the amount of principal and interest in default:
Obligations held on J u n e SO, 1940, on account of loans to carriers under sec. 210 of
the Transportation Act, 1920, as amended, and the amount of principal and interest
i n default
Loans outstanding

Carrier
Alabama, Tennessee & Northern R. R. Corporation
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
--1
Missouri & North Arkansas Ry. Co
Salt Lake & Utah R. R. Co
Seaboard Air Line Ry. Co
Seaboard-Bay Line Co
Virginia Blue Ridge Ry. Co
Virginia Southern R. R. Co
Waterloo, Cedar Falls & Northern Ry. Co
Wichita, Northwestern Ry. Co
Wilmington, Brunswick & Southern R. R. CoTotal

'.

Principal in
default

Interest in
default

$161,500.00

$151,500. 00

9,085.00

633, 600.00
200, 000.00
1 76,000. 00
792, 000.00
1,382, 000.00
1 3, 600,000. 00
1872, 600.00
14,440, 677. 88
1, 256, 000.00
106, 000.00
138, 000.00
1, 260, 000.00
381, 760. 00
90, 000.00

633, 500.00
200,000.00

460,178.14
125,164. 91

792,000.00
1, 382,000. 00

498, 960. 00
1,372,289. 73

14,440, 577. 88
1, 266,000. 00
106,000. 00

7,866,049. 73
640, 560.00
88,827. 86

1, 260,000.00
381, 750. 00
90,000. 00

1,346, 461. 97
377, 932. 40

20, 693,327. 88

12,889, 509. 74

26,178,927.88

54,000.00

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

Federal control oj railroads
Effective July 1, 1939, under Reorganization Plan No. I I dated
May 9, 1939, the office of the Director General of Railroads was
abolished and the functions and duties previously performed by the
Secretary of the Treasury as Director General of Railroads were
transferred to the Secretary of the Treasury. T h e last report covering operations of the former United States Railroad Administration
was for the calendar year 1937. This report covers the period of
thirty months from January 1, 1938, to June 30, 1940.
Administration.—Considerable progress has been made in closing
out and liquidating matters growing out of the control of the American
transportation system, which was exercised through the United States
Railroad Administration during the period from December 28, 1917,
to February 29, 1920. Under the general supervision of the Secretary



RiEPORT OF THE. SEORETARY OF T H E

201

TRE^fURY

of the Treasury as Director General of Railroads the task of winding
up the affairs of the Railroad Administration subsequent to March
1, 1937, was carried on by employees of the Treasury Department
as an incident to the performance of their regular duties. Total
administrative expenses for the calendar years 1937 and 1938 and
for eighteen months from January 1, 1939, to June 30, 1940, are
shown in the. following table. The expenses for the last period cover
eighteen months' salary of one clerk at $1,740 per annum whose time
is devoted to the searching of files in connection with the handling
of inquiries.
Calendar
year 1937

Class

Personal services (pay roll)__
Rent
Electricity
Printing supplies and services
Telephone and telegraph
Total--

$5,867.00
1,500.00
82.24
63.93
27.89

„

January 1,
1939, to June
30,1940

$1. 740.00

7, 641. 06

-_

—

Calendar
year 1938

1,778. 21

$2, 610.00

38.21
2, 610.00

Finances.—Total receipts for the calendar year 1938 were $9,391.63,
and expenditures were $4,948.67, resulting in net receipts of $4,442.96,
as compared with net receipts of $130,984.98 for 1937. During the
eighteen months from January 1, 1939, to June 30, 1940, total receipts were $221,124.73, and expenditures were $4,692.27, resulting
in net receipts of $216,432.46.
At the close of business on June 30, 1940, the cash and appropriation
balances aggregated $344,646.69 as compared with $2,385,158.16 at
the close of 1937, and with $128,214.23 at the close of 1938.
A statement of receipts and expenditures follows:
Receipts and expenditures, calendar year 1938 and for eighteen months from J a n u a r y
1, 1939, to J u n e 30, 1940
Calendar year 1938
Balances at beginning of period:
Director General of Railroads
Unrequisitioned appropriation balances:
Federal control of transportation systems.
Loans to railroads after termination of
Federal control
-.
Total balances
Receipts:
Collections of principal on obligations of carriers
Collection of interest on obligations of carriers.
Income taxes of Federal carriers repaid by
Treasury
Collection of miscellaneous claims referred to
Washington from field, including transportation charges, undercharges, e t c . - - . . -

$783,868. 72

$80, 680. 38

939,902. 66

47, 533.85

661,386.89

1,535.81

1,000. 00
3, 587.97

6, 095. 49

215,971. 03

1, 760. 33

565.73
221,124. 73

9, 391.63

Total balances and receipts-




$128,214. 23

85,158.16

Total receipts

Expenditures:
Employees, compensation liability awards
Deposit with the Workmen's Compensation
Board of Ontario, account of compensation
liability--Claims for unpaid wages, back pay awards
and Liberty bond subscription refunds

Jan. 1, 1939, to June 30,
1940

349,338.96

2, 394, 549. 79
782.13

1,172.12

1,116.10
1,272.23

910.15

202

REPORT OF T H E SEORETARY OF T H E TREASTJRY

Receipts and expenditures, calendar year 1938 and for eighteen months from J a n u a r y
1, 1939, to J u n e 30, 1940—Continued
Jan. 1,1939, to June 30,
1940

Calendar year 1938
Expenditures—Continued
Administrative expenses:
Payrolls
Other, material and supplies, etc
Total expenditures
-.
. -- -Transferred to surplus fund of the Treasury:
Federal control of transportation systems
Loans to railroads after termination of Federal control
-

$1, 740.00
38.21

$2, 610.00
$4,948. 67

$4 692 27

1,600,000.00
661,386.89

Total transferred.--

2,261,386.89

Total expenditures and transfers
Balances at end of period:
Director General of Railroads. _
Federal control of transportation systems

2,266, 335. 56
80,680.38
47, 533.85

Total

128, 214. 23

4,692 27
76, 233.01
- 268,413.68

2,394,649.79

344,646.69
349,338.96

During 1938, pursuant to section 12 of the Federal Control Act
$700,000 realized from operation of carriers during Federal centre
was paid into the revolving fund created by that act. This sum,
together with $900,000 of unexpended appropriation balances, or a
total of $1,600,000, was transferred to the surplus fund of the Treasury.
There was also transferred to the surplus fund from the revolving
fund for loans to railroads after termination of Federal control the
sum of $661,386.89.
Securities, etc.—No collections were made since November 24, 1936,
on account of the obligations of carriers acquired under section 207 of
the Transportation Act, 1920, as amended, which are listed on page 199.
The misceUaneous securities acquired under section 202 of the
Transportation Act, 1920, as amended, were obtained from nonFederal controlled railroads and others for indebtedness, such as
isuterline balances, freight charges, undercharges, etc. From January 1, 1938, to June 30, 1940, $6,123.78 was collected from this source.
A statement of these items, showing the amounts carried on December 31, 1937, the changes from that date to June 30, 1940, and the
amounts carried on June 30, 1940, is as follows:

Carrier

Indebtedness Dec.
31,1937

A m o u n t collected A m o u n t collected
Jan. 1,1939, to June
Jan. 1, to Dec. 31,
30,1940
1938
Principal

Wichita, Northwestern Ry. Co.
(receivers' certificates)
E. F. Drew & Co.,Inc. (stock).Virginia Blue Ridge Ry. Co. (loans
and bills receivable)
Total

—-

$44,000.00
4,065.00

Interest

Principal

$1,535.81 $1,000.00

Interest

$3,587.97 $43,000.00
4,065.00

16,592.36
64, 657.36

Indebtedness
June 30,
1940

i6,692.36
1,535.81

1,000.00

3, 687.97

63,657. 36

There were held in the custody of the Division of Loans and Currency on June 30, 1940, for account of employees of carriers formerly
under Federal control, $600 principal amount of Fourth Liberty Loan
bonds of 1933-38.



REPOKT OF THE SECRETARY OF THE TREASrCTRY

203

Land comprising 160 acres in Bingham County, Idaho, was transferred to the United States on September 24, 1938, by quitclaim deed.
This land has been transferred to the Federal Works Agency for disposition under the act of August 27, 1935 (49 Stat. 885; U. S. C ,
Supp. v., title 40, sec. 304a).
Claims against the Director General.—The principal claims presented .
during the period were on account of refunds of installments paid on
subscriptions for Liberty Loan bonds by employees of carriers during
Federal control and for unclaimed wages and back pay earned by
employees. Total payments on account of allowed claims of this
character amounted to $1,272.23 during the calendar year 1938, and
$910.15 for eighteen months from January 1, 1939, to June 30, 1940.
Compensation payments— United States railroad employees.—Expenditures on account of the compensation award of a railroad employee
residing in the United States amounteci to $782.13 for 1938. From
January 1, 1939, to June 30, 1940, such expenditures amounted to
$1,172.12.
Canadian Workmen's Compensation Board.—The Canadian Workmen's Compensation Board, located at Toronto, Canada, has jurisdiction over certain cases of disability resulting from accidents during
the period of Federal control on those railroads having lines extending
into Canada. Pursuant to the demand of the Michigan Central
Railroad Company a further payment of $1,116.10 was made during
the calendar year 1938 to the carrier to reimburse it for a deposit made
with the Board to complete pajmaent on certain compensation awards.
Payments under Canadian compensation awards, made from funds so
deposited with the Board, amounted to $2,691.00 during the calendar
year 1938. Interest amounting to $1,375.10 was added to the fund,
leaving a balance of $29,086.92 to cover awards as of December 31,
1938. The figures showing the balance as of June 30, 1940, are not
available inasmuch as the Board's reports to the Director General of
Railroads are on a calendar year basis. However, the status of the
fund as of December 31, 1939, was as follows:
Balance Dec. 31, 1938...
Payments from Director General of Railroads during 1939
Interest Jan. 1, 1939, through Dec. 31, 1939
Payment of awards by Board during 1939
Balance Dec. 31,1939...-

-

$29,086.92
1,366.32
30, 452. 24
2, 721.00
27, 731. 24

Claims in javor oj the Director General.—Under the terms of the
Federal Control Act and the standard contract with the carriers,
the Director General paid 2 percent of all Federal income taxes
assessed against carriers formerly under Federal control. Subsequently, the United States Board of Tax Appeals held that such
taxes should not have been assessed against either the carriers or the
Director General. As a result of further tax adjustments during
1938, there was received $6,095.49 on account of these items, and
for eighteen months from January 1, 1939, to June 30, 1940, there
was received $215,971.03. The Commissioner of Internal Revenue
advised under date of March 14, 1938, that no adjustment was due
the Director General on such income taxes amounting to $10,306.93
and paid by him on account of one carrier. The amount of the claims
pending has, therefore, been reduced by $232,373.45. Further claims
for such paid taxes amoimting to $908,130.55 are still pending before
269677—41

15




204

HEPOTIT OF T H E SEORETARY OF T H E TREASURY

the Board of Tax Appeals and it is anticipated that substantial sums
will be received when such cases are finally adjusted by the Bureau
of Internal Revenue.
All unpaid judgments which have not expired by reason of the
statute of limitations, and other claims are being reviewed from time
to time to determine whether any amounts can be collected thereon.
Collections from this source amounted to $1,760.33 during 1938, and
$565.73 from January 1, 1939, to June 30, 1940.
Trust and special junds invested by the Treasury
Under various provisions of law creating trust and special funds,
the Secretary of the Treasury or the Treasurer of the United States
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, J u n e 30, 1940
(000 omitted)
Government
securities

Fund

Adjusted service certificate fund..
Ainsworth Library fund,. Walter Reed General
Hospital
Alaska Railroad retirement and disability fund
Canal Zone retirement and disability fund..-'.
Civil, service retirement and disability fund
1Civil service retirement and disability voluntary
contributions fund--- . .
District of Columbia teachers' retirement fund
District of Columbia water fund.
. .
District of Columbia workers' compensation fund..
Foreign service retirement and disability fund
Library of Congress trust fund
Longshoremen's and harbor workers' compensation
fund
National Institute of Health gift fund
National park trust fundFederal old-age and survivors insurance trust fundPershing Hall Memorial fund
Railroad retirement account
--Unemployment trust fund -.
U. S. Goviernment life insurance fund
Total

---

Government
guaranteed
securities

Other securities

Total

$11,300

$11,300

10
767
4,284
560, 200

10
767
4,284
560,200

200
6,772
1,673
22
3,926
1

$95

$1,694
11
218

140
81
14
1, 738,100
191
79,400
1,710,000
828,342

10

4, 935, 423

105

200
8,661
1,673
33
3,926
219

41,999

193
81
14
1,738,100
191
79,400
1,710,000
870,341

43,965

4,979,493

43

Adjusted service certificate jund:—^Amounts held for the account of
the adjusted service certificate fund, created by the act of May 19,
1924, were reinvested during the fiscal year 1940 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
year 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 1940 on account of the issuance
of $8,356,800 of adjusted service bonds and on account of checks for
amounts less than $50, totaling $337,140.59.
During the year, $8,200,000 net face amount of certificates were
redeemed to meet current payments from the fund.



REPORT OF THE SECRETARY OF THE TREASIURY

205

A statement of the fimd as of June 30, 1940 (exclusive of fund
assets held by the Veterans' Administration on account of bank loans
on adjusted service certificates redeemed), follows:
Adjusted service certificate fund, June 30, 1940
FUND ACCOUNT
Appropriations:
To June 30, 1936 (including $2,230,157,966.40 appropriated in the Independent Offices
Appropriation Act, 1937, approved Mar. 19,1936)
$3,626,167,966.40
Interest on investments:
To June 30, 1939
$130,669,020.68
July 1, 1939, to June 30, 1940
---.
767,299.23
131, 436, 319. 81
Total
3, 757, 594, 276. 21
Payments under Adjusted Compensation Payment Act, 1936, enacted
Jan. 27, 1936:
Adjusted service bonds
$1,837,007,950.00
Checks for amounts less than $50
83,430,787.72
Adjusted service bonds (Government life insurance fund series)-.
600,167,956.40
Total
2,420,596,694.12
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 and
interest thereon
1,325,142,869.10
3,745,739,563.22
Balance in fund June 30, 1940

-..

11,854,712.99
FUND ASSETS i

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 30,1940
1 Exclusive of assets held by Veterans' Administration.

'•
11,300,000.00
529,947.22
24,766.77
11,864,712.99

Civil service retirement and disability jund.—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 nbtes bearing interest at the rate of 4 percent per annum,
in accordance with the procedure outhned in the Annual Report of the
Secretary of the Treasury for 1926.
^ The act of August 4, 1939 (53 Stat. 1202, sec. 4), made provision for
the acceptance of voluntary contributions from employees in multiples
of $25. Such contributions which bear interest at the rate of 3 percent
per annum, compounded annually, will be available at date of retirement for the purchasing of additional annuity. The voluntary contributions to June 30, 1940, amounted to $246,075; of this amount
$200,000 has been invested in 3 percent special Treasury notes
payable June 30, 1944. Investments are made at 3 percent per
annum, which corresponas to the earning requirements of the act.
The foUowing statement shows the status of the fund as of June 30,
1940, as reflected by the accounts of the Treasury Department:




206

REPORT OF THE SECRETARY OF THE TREASURY
Civil service retirement and disability fund, June 30, 1940 "
^

Credits:
On account of deductions from basic compensation of employees
and service-credit payments:
From Aug. 1, 1920, to June 30, 1939
- $493,132,698.91
2
J u l y l , 1939, to June 30, 1940
.43,022,562.15
$636,155,261.06

On account of voluntary contributions
Appropriations:
To June 30, 1939----Available July 1,1939
Interest and profits on investments: .
From Aug. 1, 1920, to June 30, 1939July 1, 1939, to June 30, 1940

-

246, 075.00

-

380,121,620.00
3 87,171,760.00

--

131,153,942.40
21,564.999.99

, Total
—
Less checks paid by Treasurer of the United States on account of annuities and
refunds, Aug. 1, 1920, to June 30,1940
—
-

467, 293, 280. 00
152, 718, 942. 39
1,156,413,558.46

Balance in fund June 30,1940
Assets:
Face amount
$97,900,000 4% special
122,300,000 4% special
146,400,000 4% special
125,400,000 4% special
69,000,000 4% special
200,000 3% special

Treasury
Treasury
Treasury
Treasury
Treasury
Treasury

602,659,043.54
663,764,514.91

notes payable
notes payable
notes payable
notes payable
notes payable
notes payable

June
June
June
June
June
June

Principal cost
$97,900,000.00
122, 300,000.00
145,400,000.00
125,400,000.00
69,000,000.00
200,000.00.

30, 1941
30,1942...
30, 1943
30, 1944
30, 1946
30, 1944

560,200,000
Unexpended balances June 30, 1940:
To credit of disbursing officers
.-_
On books of Division of Bookkeeping and Warrants

--.

2,451,845.66
* 1,102,669.35
•

550,200,000.00

3,664,614.91

Total fund assets June 30, 1940
_
.-553,754, 514.91
1 On basis of daily Treasury statement (unrevised).
2 Exclusive of $1,430,808.84 transferred to the Canal Zone retirement and disability fund pursuant to
act of May 2, 1931. Adjusted by $323,807.73 for amounts received in the fiscal year 1939 but not classified
on the daily Treasury statement until the fiscal year 1940.
3 Includes $86,329,000 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. .
< Exclusive of $161,305.25 deposits in transits

Canal Zone retirement and disability jund.—Under section 10 of the
act of March 2, 1931 (46 Stat. 1477), creating the Canal Zone retirement and disability 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 annuities, refunds, and allowances, in
accordance with the procedure outlined 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, 1940:
Canal Zone retirement and disability fund, June 30, 1940 ^
Credits:
On account of deductions from basic compensation of employees subject to
retirement act:
From July 1, 1931, to June 30, 1939
„ - - $6,650,128.11
J u l y l , 1939, to June 30, 1940
600,181.34
—
:
$6, 250, 309.45
Appropriations:
To June 30, 1939
..2,000,000.00
Available July 1, 1939
600,000.00
Interest and profits on investments:
From July 1, 1931, to June 30, 1939
July 1, 1939, to June 30, 1940

2,600,000.00

.

877,076.49
170,131.47

1,047,207.96

Total9,797,617.41
Less checks paid by Treasurer of the United States on account of annuities and refunds,
July 1,1931, to June 30, 1940
_
5,418,019.67
Balance in fund June 30,1940
1 On basis of daily Treasury statement (unrevised).




.

4,379,497.74

'REPORT OF THE. SEORETARY 01^' THE TREASOGTRY

207

Canal Zone retirement and disability fund, June 30 1940—Continued

Assets:
Face amount
$2, 294,000 4% special
603,000 4% special
599,000 4% special
624,000 4% special
164,000 4% special

Treasury
Treasury
Treasury
Treasury
Treasury

notes
notes
notes
notes
notes

payable June
payable June
payable June
payable June
payable June

30, 194130, 1942.—'
30, 1943
30, 1944
30, 1945

4, 284,000
Unexpended balances June 30, 1940:
To credit of disbursing officers
On books of Division of Bookkeeping and Warrants
Total fund assets June 30, 1940
2 Exclusive of $134.27 deposits in transit.

Principal cost
$2, 294,000. 00
603, 000.00
-_
699,000.00
624,000.00
164,000.00

--_
--

86,366.31
29,131.43
•

-

$4,284,000.00

95, 497. 74
4,379, 497.74

Foreign service retirement and disability jund.—Under section 18 of
the act of May 24, 1924 (43 Stat. 144), estabhshing 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, 1940:
Foreign service retirement and disability fund, June 30, 1940^

Credits:
On account of deductions from basic compensation and service-credit payments:
From May 24, 1924, to June 30, 1939
2$2, 642,939.19
July 1, 1939, to June 30, 1940
433,425.85
Appropriations:
To June 30, 1939
Available July 1, 1939Interest and profits on investments:
From May 24, 1924, to June 30, 1939
J u l y l , 1939, to June 30, 1940__

—

.-

-

$2,976,365.04

2,461,100.00
199,400.00
2,660,600.00

.

1,025, 236. 70
162,333.66

1,177,570. 26
Total
—
6,804,436.30
Less checks paid by Treasurer of the United States on account of annuities and refunds.
May 24, 1924, to June 30, 1940
.
2,780,636.43
Balance in fund June 30, 1940
- 4,023, 898.87
Assets:
Face amount
Principal cost
$659,000 4% special Treasury notes payable June 30, 1941
- - $659,000.00
886,000 4% special Treasury notes payable June 30, 1942..
885,000.00
738,000 4% special Treasury notes payable June 30,1943
738,000.00
872,000 4% special Treasury notes payable June 30, 1944
.
872,000.00
772,000 4% special Treasury notes payable June 30, 1945
772,000.00
—
3,926,000.00
3,926,000
Unexpended balances June 30,1940:
To credit of disbursing officers
_..
48,746.32
On books of Division of Bookkeeping and Warrants
3 49,163.55
"
— 97,898.87
Total fund assets June 30, 1940
..^
4,023,898.87
1 On basis of daily Treasury statement (unrevised).
2 Adjusted by $238.92 for amount received in the fiscal year 1939 but not classified on the daily Treasury
statement until the fiscal year 1940.
3 Adjusted by $3,774.82 sent to surplus in the fiscal year 1940, but added back to balance here for the reason
that the same amount was not refiected in the daily Treasury statement as a debit against receipts until
the fiscal year 1941.

Alaska Railroad retirement and disability jund.—ThQ Alaska Railroad 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 annuities, refunds,
and allowances authorized by the act, in accordance with a procedure
similar to that outlined in the Annual Report of the Secretary of the



208

'REP0R:T O F T H E : SEORETARY OF THE TREASfURY

Treasury for 1931 covering investments for the Canal Zone retirement
and disability fund:
The following statement shows the status of the fund as of June 30,
1940:
Alaska Railroad retirement and disability fund, June 30, 1940^

Credits:
On account of deductions from basic compensation of employees subject to
retirement act:
To June 30, 1939-.
21359,861.40
J u l y l , 1939, to June 30, 1940
____
106,873.23
:
Appropriations:
To June 30, 1939
350,000.00
Available July 1,1939
176,000.00
Interest and profits on investments:
From June 29, 1936, to June 30, 1939
J u l y l , 1939, to June 30, 1940

32,563.11
29,500,87

$466, 734.63
625,000.00
62,053.98

Total
1,063, 788.61
Less checks paid by Treasurer of the United States on account of annuities and refunds
to June 30, 1940
245,308.41
Balance in fund June 30,1940

____

Assets:
Face amount
$62,000 4% special Treasury notes payable June 30, 1941
266,000 4% special Treasury notes payable June 30,1942
225,000 4% special Treasury notes payable June 30, 1943
196,000 4% special Treasury notes payable June 30,1944
29,000 4% special Treasury notes payable June 30,1945
767,000
Unexpended balances June 30,1940:
To credit of disbursing officers
On books of Division of Bookkeeping and Warrants

808,480.20

^

Principal cost
$52,000.00
265,000.00
225,000.00
196,000.00
29,000.00
24,682.98
3 le, 797.22
:

767,000.00

41,480.20

Total fund assets June 30,1940
808, 480. 20
1 On basis of daily Treasury statement (unrevised).
2 Adjusted by $6,442.24 for amount received in the fiscal year 1939 but not classified on daily Treasury
statement until the fiscal year 1940.
3 Exclusive of $7,418.78 deposits in transit.

District oj Columbia teachers' retirement jund.—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 1940, the Treasurer acquired by purchase on
the market and by subscription to new issues for account of the deductions fund $40,000 face amount of 2 percent Treasury bonds of 1948-50
and $215,000 face amount of 2% percent Treasury bonds of 1960-65,
at a total principal cost of $266,913.45; and for the Government
reserve fund $25,000 face amount of 2 percent Treasury bonds of
1948-50, $100,000 face amount of 2% percent Treasury bonds of 195560, and $85,000 face amount of 2% percent Treasury bonds of 1960-65,
at a total principal cost of $214,194.70.




REPORT OF THE SE'ORETARY OF THE TRE^fQRY

209

The following statement shows the assets of the two funds as of
June 30, 1940:
District of Columbia teachers' retirement fund, June 30, 1940
DEDUCTIONS FUND
Assets:
Face amount
$860,200 4M% Treasury bonds of 1947-52
122,000 4% Treasury bonds of 1944-54
87,000 3 ^ % Treasury bonds of 1946-66
48,000 3 ^ % Treasury bonds of 1943-47
142,000 3M% Treasury bonds of 1941-43
232,000 3M% Treasury bonds of 1943-45
.-.•
1,896,850 27^% Treasury bonds of 1955-60
77,000 2 ^ % Treasury bonds of 1951-54
106,000 2M% Treasury bonds of 1966-59
293,000 23^% Treasury bonds of 1958-63
468,000 2%% Treasury bonds of 1960-65
182,000 43^% Philippine Islands bonds
16,000 4M% Puerto Rican bonds
.
•
72,000 33^% Federal Farm Mortgage Corporation bonds of 1944-64
385,400 4% consolidated Federal land bank bonds of 1944-46
177,000 3% consolidated Federal land bank bonds of 1945-56
.:
536,500 3% consolidated Federal land bank bonds of 1946-56
40,000 2% Treasury bonds of 1948-50.--

Principal cost
_ $956,962.07
123, 387.50
87,437.81
49,600.00
137,657.50
232,000.00
1,927,412. 21
79,382.19
. 107,920.63
300,245.94
._ 483, 302.82
197,669. 56
.
16,962.67
73, 786.00
403,077.40
173,460.00.
534,630.00
40,000.00

5,729,950

$5,923,793.20

GOVERNMENT RESERVE FUND

Assets:
Face amount
Principal cost
$282,000 4M% Treasury bonds of 1947-62.
$313,717.51
12,000 4% Treasury bonds of 1944-54
.-12,285.00
31,000 3M% Treasury bonds of 1946-56---..31,145.31
199,000 3M% Treasury bonds of 1943-47
204,701.25
178,000 3K% Treasury bonds of 1941-43..177,606.66
1,085,000 2K% Treasury bonds of 1955-60
1,097,915.04
17,000 2H% Treasury bonds of 1951-54....
17, 525.94
126,000 2H% Treasury bonds of 1956-59
128, 283. 76
313,000 2M% Treasury bonds of 1958-63.
318,227.20
143,000 2 ^ % Treasury bonds of 1960-66--150,467.82
55, 000 4H% Puerto Rican bonds
--.
55,109. 56
23,000 3M% Federal Farm Mortgage Corporation bonds of 1944-64
23, 566.26
62,100 4% consolidated Federal land bank bonds of 1944-46
54, 623.76
290.200 3% consolidated Federal land bank bonds of 1946-56
289,474. 50
25,000 2% Treasury bonds of 1948-50.-'26,000.00

$2, 899, 649. 46
2,831,300
•
Total
--8,823,442.65
Unexpended balance June 30, 1940, on books of Division of Bookkeeping and Warrants.
232, 205.19
Total fund assets June 30, 1940

-

.

9,055, 647.84

Longshoremen's and harbor workers' compensation jund.—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 1940, the Treasurer acquired by subscription to new
issues for account of the fund $10,000 face amount of 2 percent Treasury bonds of 1948-50.




210

REPORT OF THE SEORETARY OF THE TREASrCJRY

The following statement shows the assets of the fund as of June
30, 1940:
Longshoremen's and harbor workers' compensation fund, June 30, 1940
Assets:
Face amount
$10,000 2%^Treasury bonds of 1948-50—
.15,600 3 ^ % Treasury bonds of 1944-46
34,500 4 ^ % Treasury bonds of 1947-62
11,550 3 ^ % Treasury bonds of 1943-45
10,000 3% Treasury bonds of 1951-55
14,800 2>g% Treasury bonds of 1955-60
14,860 2M% Treasury bonds of 1956-59
15,600 23^% Treasury bonds of 1958-63
13,900 2 ^ % Treasury bonds of 1960-65.
9,700 33^% Federal Farm Mortgage Corporation bonds of 1944-64
11,000 3% consolidated Federal land bank bonds of 1946-56
9,700 3}4% consolidated Federal land bank bonds of 1945-56
22,000 3% consolidated Federal land bank bonds of 1945-56
193,200
Unexpended balances:
Disbursing officer (checkbook balances)
Division of Bookkeeping and Warrants

-

$198,962. 41

1,423.40
16, 371. 32

_

Total fund assets June 30, 1940

Principal cost
$10,000.00
15,600.00
38,646. 56
-.11, 650.00
9,969. 38
14,920.26
14,976. 20
15,936.38
14,985.94
9,953.46
...10,972.60
9,901. 74
21, 560.00
-.-

-

17,794.72

-- 216,757.13

District oj Columbia workers' compensation jund.—This fund was
established 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, inciluding 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.
During the fiscal year 1940, the Treasurer acquired by subscription to
new issues $12,000 face amount of 2 percent Treasury bonds of 1948-50
at a principal cost of $12,000.
The following statement shows the fund assets as of June 30, 1940:
District of Columbia workers' compensation fund, June 30, 1940
Assets:
Face amount
$10, 000 2%% Treasury bonds of 1955-60
11,000 3% consolidated Federal land bank bonds of 1946-5612,000 2% Treasury bonds of 1948-50
33,000
Unexpended balances:
Disbursing officer (check book balances)
Division of Bookkeeping and Warrants
Total fund assets June 30,1940

-

-

Principal cost
$10,165. 63
10,972.60
12,000.00
$33,138.13
2,113. 25
4,852.91

6,966.16

-- 40,104.29

District oj Columbia water jund.—The District of Columbia Appropriation Act of July 15, 1939, authorized the Secretary of the Treasury




REPODRT OF THE SEORETARY OF THE TREiASfURY

211

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 fiscal year 1940. This was in addition to previous
authorizations under winch securities were acquired for the water
fund. During the year the Secretary acquired by purchase for
account of the fund $476,000 face amount of 2% percent Treasury
bonds of 1960-65 at a principal cost of $493,521.25.
The following statement shows the securities held for account of
the District of Columbia water fimd as of June 30, 1940:
Face amount
$736,000 2%% Treasury bonds of 1968-63—
937,000 2%% Treasury bonds of 1960-66
1, 673,000

Principal cost
$749,110.01
987,511.66
1,736,621.57

United States Government lije 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, 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 life 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 1939 were invested in obligations of the United States.
The amount of policy loans outstanding decreased $763,608.88 during
the year.
The Administrator of Veterans' Affairs reported outstanding loaus
from this fund on June 30, 1940, aggregating $150,159,944.58 to
veterans on policies. On June 30, 1940, the principal of and accrued
interest on outstanding loans made subsequent to the enactment of
the Adjusted Compensation Payment Act, 1936, upon adjusted service
certificates amounted to $2,905,460.92.
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




212

HEPOUT OF THE. SEORETARY OF T H E TREASrURY

reports rendered to the Administrator by the safekeeping offices.
The investments as of June 30, 1940, were as follows:
United States Government life insurance fund, June 30, 1940
Investment
43^% Treasury bonds of 1947-52
.
4% Treasury bonds of 1944-54
3%% Treasury bonds of 1946-56-—_
3% Treasury bonds of 1961-55
--.-2%% Treasury bonds of 1956-60
2%% Treasury bonds of 1948-51--_
_
23|% Treasury bonds of 1951-54
23|% Treasury bonds of 1956-59
.
2%% Treasury bonds of 1958-632M% Treasury bonds of 1960-65
23^% Treasury bonds of 1960-52
3% consolidated Federal land bank bonds of 1945-55
3% consolidated Federal land bank bonds of 1946-66
43^% adjusted service bonds. Government life insurance fund
series, 1946—^
.
2% special Treasury notes. Government life insurance fund series,
payable June 30, 1943-44
-_-_
'

Par value

Principal cost

$40, 772,000. 00
14,106, 000.00
2, 200,000. 00
5,900, 000. 00
122, 559,250. 00
5, 300,000.00
17, 745,000. 00
36, 824,300.00
8,840, 000. 00
26, 078,000.00
24, 600,000. 00
19, 280,000. 00
22, 719,000. 00

$42, 234,926. 78
15,078, 333. 48
2, 384,625.00
6, 051,109. 38
124, 639,945. 36
000.01
5, 315,
17,979, 950.02
37,173, 874.80
9, 017,525.05
26,161, 381. 34
24, 710,950. 54
18,894, 400.00
22, 662,202. 50

500,157, 956. 40

600,157, 966. 40

24, 259,000.00

24, 259,000.00

Total investments made by Secretary of the Treasury.

870, 340, 506. 40

876, 711,180. 66

Policy loans outstanding i
-_
Adjusted service certificate loans outstanding i
Total outstanding loans made by Administrator of Veterans'
Affairs

150,159,944. 58
2,905,460.92

150,159,944. 68
2, 905,460.92

153,065,405. 50

153,065,405. 50

1,023,405, 911.90

1,029, 776, 586.16

Total investments in fund..
^ Includes interest accrued to anniversary dates of loans.

Federal old-age and survivors insurance trust jund.—Under section
201 (a) of the Social Security Act Amendments of 1939, approved
August 10, 1939 (53 Stat. 1362) (see exhibit on page 578), there was
created the 'Tederal Old-Age and Survivors Insurance Trust F u n d "
consisting of the securities held by the Secretary of the Treasury for
the old-age reserve account and the amount standing to the credit
of the old-age reserve account on the books of the Treasury on January
1, 1940 (see page 156). This section also appropriates to the trust
fund for the fiscal year 1941, and for each fiscal year thereafter,
amounts equivalent to 100 percent of the taxes (including interest,
penalties, and additions to the taxes) received under the Federal
Insurance Contributions Act and covered into the Treasury. Under
paragraph (b) of this section, the Board of Trustees of the Federal
old-age and survivors insurance trust fund was created, composed of
the Secretary of the Treasury, the Secretary of Labor, and the Chairman of the Social Security Board, all ex officio. The Secretary of the
Treasury is designated as the Managing Trustee of the Board of
Trustees and is required under section 201 (c) to invest such portion
of the trust fund as is not, in his judgment, required to meet current
withdrawals. Such investments may be made only in interest-bearing
obligations of the United States or in obligations guaranteed as to
both principal and interest by the United States. Special issues of
obligations under the Second Liberty Bond Act, as amended, are
authorized at a rate equal to the average rate of interest, computed
as to the end of the calendar month next preceding the date of such
issue, borne by all interest-bearing obligations of the United States
then forming a part of the public debt, except that where such average
rate is not a multiple of one-eighth of 1 percent, the rate of such special
obligation shaU be the multiple of one-eighth of 1 percent next lower
than such average rate. All such special obligations issued from



REPOiRT OF THE SEORETARY OF THE TREASfURY

213

January 1 to June 30, 1940, have borne an interest rate of 2K percent.
Such special obligations are to be issued only if the Managing Trustee
determines that the purchase of other interest-bearing obligations of
the United States, or of obligations guaranteed as to both principal
and interest by the United States on original issue or at the market
price, is not in the public interest. All amounts credited to the fund
are made available for payments to individuals entitled to Federal
old-age and survivors insurance benefits.
Under paragraph (f) of section 201, the Managing Trustee is
directed to pay from the trust fund into the Treasury the amount
estimated by him and the Chairman of the Social Security Board
which will be expended during a three-month period by the Social
Security Board and the Treasury Department for the administration
of title I I and title V I I I of the Social Security Act and the Federal .
Insurance Contributions Act. Such payments are required to be
covered into the Treasury as repayments to the account for reimbursement of expenses incurred. These repayments are not available for expenditure, but are required to be carried to the surplus fund
of the Treasury. If estimates for any particular three-month period
are too high or too low, the Managing Trustee is required to make
appropriate adjustment in future payments.
In accordance with section 201 (a), the balances in the old-age
reserve account were transferred as of January 1, 1940, to the Federal
old-age and survivors insurance trust fund, and investments were
made in obligations as authorized by section 201 (c).
The following statement shows the cumulative transactions (including the former old-age reserve account) to June 30, 1939, and
for the fiscal year 1940, and the status of the fund as of June 30, 1940 „
Federal old-age and survivors insurance trust fund, June 30, 1940 ^
Credits:
Appropriations:
To June 30, 1939
Fiscal year 1940-•
Interest on investments:
To June 30, 1939
Fiscal year 1940

$1,165,000,000.00
650,000,000.00
-..

—

Total
Less payments on account of benefits:
To June 30, 1939
Fiscal year 1940

44,625,098.67
42,488,827:85

.-

Balance in account June 30,1940

-

$264,900,000.00
382,000,000.00
497,400,000.00
268,900,000.00 •

--

23^% special Treasury notes p a y a b l e June 30, 1944-.
June 30, 1945

---

Unexpended balances June 30, 1940:
To credit of Chief Disbursing Officer
On books of Division of Bookkeeping and Warrants
Total assets June 30, 1940
1 On basis of daily Treasury statement (unrevised).
2 Purchased at par value.




36,127,704.00
12, 288,267.00

.

---.

87,113,926. 52
1,792,113,926.52

19,322,615.46
15,805,088.55

:

Reimbursements in fiscal year 1940 for administrative expenses
under sec. 201 (f) of. the Social Security Act, 1939

Assets: 2
.
3% special Treasury notes p a y a b l e June 30, 1941
June 30, 1942
June 30, 1943
June 30, 1944-----.-

$1,705,000,000.00

.

.-'

283,000,000.00
41,900,000.00

6,097,713.19
600,242.33
—

47, 416,971.00
,1,744,697,955.62

1,413,200,000.00

324,900,000.00.
1,738,100,000.00

6, 597,955.52
1,744,697,955.52

214.

REPORT OF T H E SEORETARY OF T H E TREASIURY

Unemployment trust jund.—The unemployment trust fund was
established pursuant to section 904 (a) of the Social Security Act,
approved August 14, 1935, as amended. 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 90 percent of the contributions collected pursuant to
section 8 of the Railroad Unemployment Insurance Act, approved
June 25, 1938 (railroad unemployment insurance account), 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 Social Security Act, as amended, provides that the fund shall
be invested as a single fund, but the Secretary of the Treasury shall
maintain a separate book account for each State agency and the railroad unemployment insurance account 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.
The Railroad Unemployment Insurance Act, approved June 25,
1938, established, effective July 1, 1939, an unemployment insurance
system for individuals employed by c'ertain employers engaged in
interstate commerce. Under this act the Secretary of the Treasury is
required to maintain in the unemployment trust fund an account
known as the railroad unemployment insurance account. This
account shall consist of 90 per centum of all contributions collected
pursuant to section 8 of the act, all amounts transferred to the
account from State unemployment compensation funds, and funds
from certain other sources. Moneys in the account are to be used
solely for the payment of benefits and refunds.
In order to provide for the payment of benefits beginning July 1,
1939, before the collection of contributions or the receipt of funds to
be transferred from the State unemployment compensation funds, the
act provides that the Secretary of the Treasury advance to the credit
of the account such sums, but not more than $25,000,000, as the
Railroad Retirement Board requests for the purpose of paying benefits. Such sums are to be repaid from the account on January 1, 1941,
or at such earlier time as the Board may, by agreement with the
Secretary, determine. An appropriation of $23,750,000 for advance
to the account was contained in the Treasury Department Appropriation Act, 1940, approved May 6, 1939.
Under the provision of the act of June 25, 1938, the Social Security
Board is directed to determine for each State, after agreement with the
Railroad Retirement Board, and after consultation with such State,
the amount in the State unemployment compensation fund representing the balance collected from employers and employees who
come within the purview of the Railroad Unemployment Insurance
Act. These amounts are to be transferred to the railroad uneniployment insurance account in the unemployment trust fund. During
the fiscal year, $1,800,818.02 was transferred to the railroad unemployment insurance account under this provision.
Under section 13 (d) of the act, it is provided that the Social Security
Board shall withhold from certification to the Secretary of the Treasury
griants to States for administrative expenses under section 302 (a) of



REPOiRT OF T H E SEiORETARY OF THE, TRE^ASfCTRY

215

the Social Security J^ct from States which failed to pass laws authorizing the Secretary of the Treasury to make transfers to the railroad
unemployment insurance account. Section 13 (f) directs the Social
Security Board to certify to the Secretary of the Treasury for payment
into the railroad unemployment insurance account the amounts
withheld from any State. The State of Connecticut failed to amend
its law authorizing the Secretary of the Treasury to make these
transfers. The Board accordingly withheld from Connecticut and
deposited in the railroad unemployment insurance account during the
fiscal year grants for administrative expenses aggregating $783,000,
which is included in the amount of $1,800,818.02.
The foUowing statements show the status of the account as of June
30, 1940, and a summary of receipts and expenditures for the fiscal
years 1936 to 1940:
Unemployment trust fund, J u n e SO, 1940 ^

Credits:
On account of deposits by State agencies:
To June 30. 1939
J u l y l , 1939, to June 30, 1940__
--

- $1,869,471,414.37
..
859,863,884.26

J

Pro rata share of earnings to June 30, 1939
$44,837, 507.14
Pro rata share of earnings July 1,1939, to June 30,
1940
37,523,953.28
On account railroad unemployment insurance account:
Deposits made by Railroad Retirement Board on account of
contributions July 1, 1939, to June 30, 1940...
Transfers froin States on account of railroad unemployment insurance account July 1, 1939, to June 30,1940.
Advances from appropriation to the railroad unemployment
insurance account...
'

82, 361,460. 42
• $2,811,696,759.05
44,248, 661.68
1,800,818.02
46, 049,479. 70
16, 000, 000.00
61,049,479.70
201,845.56

Pro rata share of earnings July 1,1939, to June 30,1940
Total
:
Less withdrawals by State agencies:
To June 30, 1939
J u l y l , 1939, to June 30, 1940
Transfers to railroad unemployment insurance account July 1,
1939, to June 30, 1940..
Total

2, 729, 335, 298. 63

—

633,770,000.00
482,963,000.00
1,800,818.02
1,118,533,818.02

Less withdrawals from railroad unemployment insurance account:
Repayment of advances from appropriations to railroad unemployment insurance account
Railroad unemployment benefit payments..
Total...

15,000,000.00
14,552,455.95
29,562,456.95

Balance June 30, 1940




1,148,086,273.97
1,724,861,810.34

Assets:
$1,710,000,000 face amount 2J.^% Treasury certificates of indebtedness, unemployment trust fund series, maturing June 30, 1941
Unexpended balances June 30, 1940:
Unemployment trust fund
Chief Disbursing Officer
Total fund assets June 30, 1940
1 On basis of daily Treasury statement.

61, 261, 325. 26
2,872,948,084.31

-

1,710,000,000.00
13,414,266.29
1,447,544.05
—

14,861,810.341,724,861,810.34

216

REPORT OF THE. SEORETARY OF T H E TREASURY
Summary of receipts and expenditures for the period 1936 to 1940

Deposits by States and pro rata share of earnings
$2,811,696,759.05
Less withdrawals and transfers to railroad unemployment insurance account
1,118,633,818.02
Balance to credit of States in the unemployment trust fund
Deposits in railroad unemployment insurance account, transfers from
States, and pro rata share of earnings
Advance from appropriation
-Less repayment of advance from appropriation

---

$1,693,162,941.03
46,261,325.26
15,000,000.00
61, 251, 326: 26
15,000,000.00
46, 251, 326. 26
il4,562,456.95

Less railroad unemployment benefit payments

31,698,869.31

Total fund liabilities June 30, 1940
>.
-1,724,861,810.34
1 Net transfers to Chief Disbursing Officer for benefit payments amounted to $16,000,000.00; railroad
unemployment benefit payments amounted to $14,552,456.95; leaving a balance of $1,447,544.06.

The following statement shows the amounts deposited, earnings,
and withdrawals from the inception of the fund to June 30, 1940, and
the amounts to the credit of State agencies and of the railroad unemployment insurance account as of June 30, 1940:
Amounts of unemployment trust fund, cumulative to June 30, 1940, credited to
account of each State agency and of the railroad unemployment insurance account
Total deposits

Alabama
Alaska
Arizona
Arkansas
California
Colorado
Connecticut
Delaware
District of Columbia.
Florida
--.
Georgia
Hawaii
Idaho
Illinois
Indiana
Iowa
Kansas
Kentucky
Louisiana^
Maine
Maryland
Massachusetts
Michigan
Minnesota
Mississippi
Missouri.
Montana
Nebraska
Nevada
New Hampshire
New Jersey...
New Mexico
New York..
North Carolina
North Dakota
Ohio
Oklahoma..
Oregon.--Pennsylvania Rhode Island
South Carolina
South Dakota
Tennessee
Texas
Utah
Vermont
Virginia
Washington




469,843.42
1, 587,618.04
7, 001, 767.41
10, 350,393.49
243, 521, 266. 67
16, 164, 283. 22
64, 083,000. 00
7, 479, 314. 47
22, 486, 421.48
19, 595,820. 77
27, 217,192. 82
5,970, 369. 75
6, 416, 767.06
220, 239,013. 81
69, 603,112. 61
26, 791,000. 00
17, 734, 797. 78
34, 910,000.00
30, 742, 000.00
13, 015,000. 00
37, 576, 000.00
134, 780,000.00
146, 494, 592. 91
44, 667, 299. 69
8, 094, 978. 76
62, 719, 668. 20
8, 575, 697. 20
12. 434,135. 90
2, 892, 320.17
11, 456, 068. 01
136, 026,000.00
4, 535, 000. 00
402, 676, 673. 85
36, 699, 000. 00
3, 248, 257. 84
180, 861, 574. 72
21, 726, 000.00
20, 617, 567. 48
261, 278, 000. 00
29, 197, 727. 95
14, 325, 000. 00
3, 590, 000. 00
27, 390, 000. 00
74, 667, 000.00
8, 588, 367. 70
4, 894, 206. 40
31, 645,000.00
32, 770, 602. 61

Net earnings
credited to
account

Total withdrawals from
account

445. 97
46, 194. 34
153, 604. 39
334, 248. 43
7, 891,015.15
594, 012. 65
1, 453,306. 86
255, 038. 33
847, 841.18
624, 373. 62
941, 876.85
213, 620. 88
183, 940.02
7, 732,878. 45
2,139, 201.16
783, 170. 43
656, 666. 79
1, 306,616.43
893, 488.01
224, 347. 55
812, 951. 72
4,105, 762.43
3, 317,
707. 60
1,170, 709. 96
238, 144. 27
2, 205,372. 39
301, 377. 89
443, 727. 67
779. 02
334, 036. 49
4,816, 974. 71
167, 653.30
10, 466,588. 43
929, 469. 78
111, 906. 82
6,902, 537. 63
841, 797. 36
482, 397. 63
6,808, 551.34
578, 326. 84
547, 151.13
142, 166. 64
702, 463. 36
2, 433,956. 90
191, 840.39
145, 590. 05
893, 453. 69
1,088, 709.17

$14,880, 000. 00
650, 000.00
4,170, 000.00
3, 586,000.00
97, 660,000.00
5,970, 000. 00
21, 733,000. 00
i, 270,000. 00
4,160, 000.00
6,125, 000.00
5,800, 000.00
610, 000.00
4,050, 000.00
42,000, 000.00
32, 260,000.00
10,385, 000.00
3, 580,000.00
7,465, 000. 00
13, 225,000.00
000.00
9, 500,
19, 876,000.00
62, 700,000.00
89, 850,000.00
22,175, 000.00
4,066, 000.00
000.00
9, 360,
3,136, 000.00
2, 486,000.00
1, 506,000.00
6, 280,000.00
24, 726,000.00
1,865, 000.00
218, 660,000.00
16,000, 000. 00
976, 000.00
38, 708,000. 00
6, 463,000.00
12, 925,000.00
154,000, 000.00
20, 600,000.00
4, 740,743.96
623, 000. 00
14,124, 000.00
25, 600,000.00
4,990, 000.00
2,357, 074.06
13, 290,000. 00
12, 216,000.00

Balance, June 30,
1940
$14, 281,289. 39
983, 812. 38
2, 986,371. 80
7,099, 641.92
153, 752,281. 82
10, 788.295.87
33, 803,305.86
6, 464,362. 80
19,174, 262. 66
14,095, 194. 39
22, 359,069. 67
5,673, 990. 63
2, 660,697.07
185,971, 892. 26
39,492, 313. 77
16,189, 170. 43
14,811,363. 67 .
28, 750,515.43
18,410, 488.01
3, 739,347. 55
18, 513,961.72
76,186, 762. 43
59,962, 300. 51
23, 663,009. 55
4, 268,123. 03
55, 576,040. 59
6, 742,076.09
10, 392,863. 57
1,474, 099.19
5, 610,104. 50
115,116,974. 71
2,837,653. 30
194, 392,162.28
21,628, 459. 78
2,384, 163. 66
149,066, 112. 35
16,104, 797.36
8,174. 965. 01
113,086, 561.34
9,176,064.79
10,131, 407.17
3,109, 166. 64
13,968, 463. 36
51,490, 966. 90
3, 790,208.09
2, 682, 722. 39
19, 248,453. 69
21, 644.311. 78

BEPOET OF THE. SEOEBTAUY OF THE TKEiASrUKY

217

Amounts of unemployment trust fund, cumulative to June 30, 1940, credited to account of each State agency and of the railroad unemployment insurance account—
Continued
Total deposits

$33, 343,467. 76
67, 705, 760. 26
4,298, 655. 32

West Virginia-..
Wisconsin
Wyoming

Total
2, 731, 043, 495.41
Deposits not cleared by the
- 1 , 708,196. 78
Treasurer of the United States
Outstanding checks
...
Total

. . . 2, 729, 335, 298. 63

Railroad unemployment insurance account:
Deposits and transfers..
Appropriation: Advance and
repayment
Unexpended balance in Disbursing Office account available for railroad unemployment benefits.Total railroad unemployment insurance account.
Total adjusted to daily
Treasury s t a t e m e n t
basis (unrevised)-

46,049, 479. 70

Net earnings
credited to
account
$649,901.50
3, 356. 423.32
133, 387. 61

Total withdrawals from
account

Balance, June 30,
1940

$18,210,000.00
17,700,000.00
2,055,000. 00

$15,783, 369. 26
63,362,183. 57
2, 377,042.93

1,121,194,818.02

1,692,210,137.81

-2,661,000.00

—1,708,196.78
-f 2, 661,000.00

82, 361, 460. 42 1,118, 633, 818.02

1, 693,162,941.03

82,361,460.42

201, 845. 56

15,000, 000. 00

16,000,000.00

30, 251, 325. 26

16,000,000.00

-1,447,544.05
61, 049, 479. 70

2,790,384,778.33

+1, 447. 544. 05

201,845. 66

29, 552,456.96

31,698,869.31

82, 563, 305.98

1,148,086,273.97

1,724,861,810.34

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 sufiicient, 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.
I t is the duty of the Secretary of the Treasury, at the request and
direction of the Railroad Retirement Board, to invest 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 interest-bearing obligations of the United
States or in obligations guaranteed as to both principal and interest
by the United States. Investments may be made in the following
manner: (1) Purchase of original issues at par; (2) purchase of outstanding obligations at the market price; and (3) the issuance at par
of special public debt obligations exclusively to the account. Such
special obligations shall bear interest at the rate of 3 per centum per
annum and obligations other than special obligations may be acquired
only on such terms as to provide an investment yield of not less than
3 per centum per annum.




218

REPORT OF THE. SEORETARY OF T H E TREAS'URY

The following statement shows the status of the account as of June
3.0, 1940:
Railroad retirement account, J u n e 30, 1940 ^

Credits:
Appropriations:
To June 30, 1939
J u l y l , 1939, to June 30, 1940-

,

.

$263,600,000.00
120,650,000.00
$374,150,000.00

Interest on investments:
To June30, 1939
-J u l y l , 1939, to June 30, 1940

---_

3,612,698.64
2,282,516.39
—

Total
Less payments on account of benefits:
To June 30, 1939
J u l y l , 1939, to June 30, 1940
Balance in account June 30, 1940

._.
186,623,133.49
113,099,073.50

-

Assets:
Face amount
$56,000,000 3% special Treasury notes payable June 30, 1942
12,200,000 3% special Treasury notes payable June 30, 1943
10,000,000 3% special Treasury notes payable June 30, 1944
2,200,000 3% special Treasury notes payable June 30,1945
,
79,400,000
Unexpended balances June 30, 1940:
To credit of Chief Disbursing Officer
On books of the Division of Bookkeeping and Warrants

-

_

6,895,215.03
380,045,216.03

-

Principal cost
$55,000,000.00
12, 200,000.00
10, 000,000.00
2, 200,000.00

1,825,954.30
97,053. 74

298, 722, 206.99
2 81, 323,008.04

79,400,000.00

1,923,008.04

Total assets June 30,1940
81,323,008.04
1 On basis of daily Treasury statement (unrevised).
2 Excludes $10,750,000 unexpended balance of General Fund appropriation on booksof Treasury not yet
transferred in the daily Treasury statement to trust fund receipts.

Library oj Congress trust jund.—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 Librarian 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 h j 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. Additional gifts
amounting to $110,000 were received during the year and deposited
in the permanent loan account. The Board continued during the
fiscal year 1940 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 $65,509.83. The Board also authorized the transfer to
the permanent loan account of such balances of funds remaining to
the credit of the investment (principal) account of any endowment
held by the Board after all securities contained in the endowment



219

REPORT OF T H E SEORETARY OF THE, TRE^Snj!RY

shall have been sold or otherwise disposed of and the proceeds therefrom deposited in the said permanent loan account. Such transfers
during the year amounted to $434.39 and placed the full value of the
endowments on an interest-earning basis. Total deposits in the permanent loan account from these sources during the year amounted
to $175,944.22. All investments during the year were made by
deposits in the permanent loan fund.
The following statement shows the earnings credited to each donation as of June 30, 1940:
Library of Congress trust fund earnings to June 30, 1940
T o t a l to
J u n e 30, 1939

Donation

Fiscal year
1940

T o t a l to
J u n e 30, 1940

I n c o m e > c c o u n t , securities
B a b i n e . <.
Beethoven
Benjamin
Bowker
Carnegie
Coolidge
G u g g e n h e i m . _ ._
Huntington
Longworth
Pennell
--Wilbur Total

.-

-----

---

-.

-

$1,783.08
4,429.73
30,410.90
1,169.38
36, 688. 36
92,386. 70
32,759.36
71,613.75
767.02
34,191.40
107,346.09
413,434. 77

-

$1,352.00
84.41
126.00
3,318. 68
I 25,677. 50
7,597.37
38,154.96

$1,783.08
4,429.73
31,762. 90
1, 253. 79
36, 713.36
• 95,706. 38
32,759.36
97,291.25
757.02
41,788. 77
107,345.09
451,689.73

I n c o m e account, p e r m a n e n t loan fund
Babine
Beethoven
Carnegie
Coolidge
Guggenheim
Huntington
Longworth
Pennell..
Whittall-1
Wilbur
Total

- -.

. '

$796.72
916.70
9,670.63
10,001.65
6,894. 26
13,607. 64
914.69
12,265.21
26,379. 26
31,946.32

$530. 54
433. 26
6,136.01
6,026.05
3,268. 72
9,071.76
609. 69
6, 259. 27
17,909.31
19, 718. 30

$266.18
483.44
3,634.62
3,975.60
3,625. 54
4,536.88
306.00
6,005. 94
8,469. 96
12,228.02

69,962.91

43,430.17

113,393.08

483,397.68

81,685.13

664,982.81

--

... -

.

-.

-

.

.
.

.

G r a n d total

' Includes income under deed of trust dated Nov. 17,1936, administered by designated trustees, including
Bank of New York.

The status of the permanent loan account as of June 30, 1940, is as
follows:
Library of Congress Trust Fund Board, permanent loan account, June 30, 1940
Donation
Babine
Beethoven
Carnegie-Coohdge
Guggenheim

Amount
.-

. .

. .
•
.--

$6,684.74
12,088.13
88,365.58
108, 080. 32
90, 654. 22

Donation
Huntington
Longworth.
Pennell
Whittall...
Wilbur
Total

Amount

.
.
...--

$113,396.99
7,691.69
174,257.51
285,000. 00
306,813. 57
1,192,032. 65

The following statement shows the securities held by the Board for
account of each donation as of June 30, 1940. The securities are held
in safekeeping by the Treasurer of the United States and certain
269677—41-

16




220

REPOKT OF THE. SEORETARY OF T H E TREASOJRY

Federal Reserve Banks, subject to the order of the Secretary of the
Treasury, for account of the Board.
Securities held by the Library of Congress Trust Fund Board, June 30, 1940
Face
amount
or par
value

Name of security

William E. Benjamin donation
standard Oil Co. of Cahfornia--

Rate of
interest

Percent

-

---- $33,800.00

Class of security

Common stock, 1,352 shares.

R. R. Bowker donation i
U. S. Government
German Government
Japanese Government
American Telephone & Telegraph Co

1,000.00
2,000.00
2,000. 00
4,800. 00

2 ^ Treasury bonds of 1955-60.
German external loan.
7
Sinking fund gold bonds.
Common stock, 48 shares.

5, 000. 00

6

First and refunding mortgage bonds.

5
5

First mortgage bonds.
First and refunding mortgage bonds.
Common stock, 100 shares.
Common stock, 171 shares.
Common stock, 7 shares.
Common stock, 496 shares.

49, 500. 00

6

First and refunding mortgage bonds.

5,000.00

-

-

4

Carnegie donation
Missouri Pacific R. R. Co
Elizabeth Sprague Coolidge donation
Chicago Railways Co
_-Missouri Pacific R. R. Co
--—
American Ship Building Co
1
American Telephone & Telegraph Co
Board of Trade Building Trust of Boston
Commonwealth Edison Co
Archer M. Huntington'donation
Missouri Pacific R. R. Co
Joseph Pennell donation
Lehigh Valley R. R. Co

3, 750. 00
2, 000. 00
6, 000. 00
17,100. 00
700. 00
12,400. 00

Great Northern Railway Co

2,000. 00

Lehigh & New England R. R. Co
National Railways of Mexico
Do
Pennsylvania R. R. Co
Do
Pennsylvania and New York Canal & Railroad Co_ _

3, 000.00
45.00
3, 000. 00
5, 000. 00
6,000.00
1,000. 00

Reading Co
Erie Lighting Co
Georgia Power Co
Penn Central Light & Power Co..Potomac Edison C o . .
Consolidation Coal Co
Do
—
—
Do
Philadelphia & Reading Coal & Iron Co
United States of Mexico
Do
Lehigh Valley Coal Corp
..-..
Pennsylvania Railroad Co
Westmoreland Coal Co
Westmoreland, Inc
--Total

•

11, 000. 00
5, 000. 00
7,000.00
-

.
.--

10,000.00
10, 000.00
900.00
900. 00
1, 200. 00
1, 000.00
429. 30
810. 00
300.00
6, 700.00
(3)

0)

General consohdated mortgage gold bonds.
mortgage
gold
63^ General
bonds.
4
General mortgage bonds.
6
Secured gold note.
4M Prior lien gold bonds.
4 ^ General mortgage bonds.
Do.
4M
Consolidated mortgage
5
bond.
4>^ General and refunding mortgage bonds.
5
Sinking fund gold bonds.
5
First and refunding mortgage bonds.
4M First mortgage gold bonds.
5
Do.
Preferred stock,^ 9 shares.
Common stock,2 36 shares.
5 Sinking fund bonds.
5 Sinking fund gold bonds.
Rights to interest in arrears.
Do.
Common stock, 6 shares.
Common stock, 134 shares.
Common stock, 105 shares.
Common stock, 105 shares.

219, 334. 30

1 Life interest in ^ of income retained under terms of donation.
2 Voting trust certificates.
3 No par. Exchanged for $20 par value stock in July 1940.
4 No par. Exchanged for $10 par value stock in July 1940.

National Cancer Institute gijtjund.—Under section 6 of the National
Cancer Institute Act of August 5, 1937 (50 Stat. 559), the Secretary
of the Treasury may accept unconditional gifts for study, investigation or research into the cause, prevention, and methods of diagnosis
and treatment of cancer, or for the acquisition of grounds or for the
erection, equipment, and maintenance of premises, buildings, and
equipment for the National Cancer Institute. Conditional gifts may



REPOIRT OF THE. SEORETARY OF THE TREiASURY

221

be accepted if recommended by the Surgeon General of the Public
Health Service and the National Cancer Advisory Council. Any
such gifts, if in money, shall be held in trust and shall be invested
by the Secretary of the Treasury in securities of the United States.
There was received from the American Society for the Control of
Cancer, on March 31, 1938, a conditional gift of $120 for the preparation of educational posters on cancer. In April 1940 an unconditional gift of $100 was received from Lt. Col. Stanley C. Ramsden.
To June 30, 1940, no expenditures from these gift funds have been
made.
National Institute oj Health gijt jund.—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 purposes.
I t is also provided that he may accept conditional gifts upon the recc)mmendation of the Surgeon General of the Public Health Service 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 1940
Unexpended balance June 30,1939
Receipts:
Donations:
Corn Industries Research Foundation.-Josiah Macy, Jr., Foundation
_

-.
•.

$10,764.49
:

$6,000.00
3,200.00

Proceeds of sale of $2,000 4^4% Treasury bonds of 1947-62, Chemical Foundation
Net earnings collected on investment account of Chemical Foundation
Total
Expenditures, advances to institute:
Chemical Foundation donation
Corn Industries Research Foundation
Infantile paralysis fund
Unexpended balance June 30,1940

__

8,200.00
2,231.36
3,687.04
24,872.88

6,416.58
6,000.00
5,936.00
.

16,351.58
8,621.30

The following statement shows the status of the fund as of June 30,
1940.
National Institute of Health conditional gift fund, June 30, 1940

Credits:
Donations:
Chemical Foundation
.
Rockefeller Foundation
J
Corn Industries Research Foundation
The National Foundation for Infantile Paralysis, Inc.
Josiah Macy, Jr., Foundation

.:

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
Infantile paralysis fund
Balance in fund June 30, 1940




43,316.92
15,000.00
7,000.00
10,000.00
6,935.00

.

$81,000 face amount 4H% Treasury bonds of 1947-52, principal cost
Unexpended balance on books of Division of Bookkeeping and Warrants:
Chemical Foundation
The National Foundation for Infantile Paralysis, Inc
Josiah Macy, Jr., Foundation
Total fund assets June 30,1940..

$100,000.00
22,000.00
10,000.00'
10,000.00
3,200.00
•
$145,200.00
34,942.08
180,142.08

81,250.92
98,891.16
90,369.86

1,256.30
4,066.00
3,200.00
•
'

8,521.30
98,89L16

222

REPORT OF THE SEORETARY OF T H E TREASIURY

National park trust jund.—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 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. Income from investments shall be covered into the national park trust fund. No expenditures have been
made from this fund except for investments.
The following statement shows the status of the fund as of June
30, 1940:
National park trust fund, J u n e 30, 1940

Credits:
Donations:
Metro-Goldwyn-Mayer Distributing Corporation
Universal Pictures Corporation
Twentieth Century Fox Film Corporation....
Metro-Goldwyn-Mayer Corporation
^
Paramount Pictures, Inc
Loew's, Inc
Interest earned on investments. _Total

-

.
'.

-

14,567.06

Assets:
$14,200 face amount of 2%% Treasury bonds of 1955-60, principal cost
Accrued interest paid on investments
Unexpended balances: To credit of disbursing officers
Totalfund assets June 30, 1940

$6,000.00
3,000.00
--- 1,175.00
3,000.00
304.00
- 1,000.00
1,088.05

--_

14,548.64
12.94
5.57
14,567.05

Ainsworth Library jund, 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. Ainsworth, 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.




REPORT OF T H E SEORETARY OF T H E TREi^fURY

223

The following statement shows the status of the fund:
Ainsworth Library fund, Walter Reed General Hospital, J u n e SO, 1940
Receipts:
Bequest of Maj. Gen. Fred C. Ainsworth
Net earnings on investments
Expenditures

$10,700.00
959.02
-

Balance in fund June 30, 1940
$9,700 2%% Treasury bonds of 1966-60, principal cost
Unexpended balance on books of Division of Bookkeeping and Warrants
Total fund assets June 30,1940....

11,659.02
1,629.17
10,129.85
9,972.81
157.04
10,129.85

Pershing Hall Memorial jund.—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. It 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 all American officers and enlisted men of the
World War. It further provided that the balance remaining after
settlement of the indebteciness would be retained in a special fund to
be loiown 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 (6) 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
Hall required an expenditure of $213,643.28. An additional $74,986.42
has been expended for the payment of contractors' and other claims
constituting indebtedness connected with Pershing Hall.
During the fiscal year 1939 the American Legion took over the
maintenance and perpetuation of Pershing Hall. Accumulated earnings on investments amounting to $18,742.04 were paid during 1940
to the national treasurer of the American Legion for that purpose.




224

REPORT OF THE SECRETARY OF THE TREASURY

The following statement shows the status of the fund as of June 30,
1940:
Pershing Hall Memorial fund, June 30, 1940

Credits:
Appropriation by Congress
Profits on investments
Interest earned on investments
Total
Less:
Disbursements on account of current claims and expenses
Disbursements on account of National Treasurer, American Legion
Total

$482,032.92
573. 20
21,263.41
$503,869.63
288,629.70
18,74.2.04

-.

Balance in fund June 30, 1940

--

--

307,371.74

---

---

Assets:
$191,300 2H% Treasury bonds of 1951-54, amortizedBalance to credit of fund on books of Treasury and in the hands of disbursing
officers
Total

196,497.79

193,698.50
2,799.29

:

:

196,497.79

Alien property trust jund.—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, securities previously held
by the Secretary of the Treasury for account of the Attorney General,
Alien Property Bureau, were all sold during the fiscal year. A statement of the alien property trust fund as of September 15, 1940, follows:
Alien property trust fund, September 15, 1940
Credits:
Trusts
Earnings on investments, etc
Total

---

-

.

$37,491,563.64
35,404,039.51

--

72,895,603.15

Assets:
Participating certificates issued under sec. 25 (e) of the Trading with the
Enemy Act:
Noninterest-bearing
$19,832,065.63
5% interest-bearing17,652,096.91
37,384,162.54
36,511,460.61

Cash balance with Treasurer of the United States
• Total fund assets Sept. 16, 1940.-..

_ 72,896,603.15

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
Total

.

$315,000
__ 105,000
220,000

--

-

640.000

Philippine junds in the United States Treasury.—Under an act of
March 8, 1902 (32 Stat. 54), reenacted in section 3343 (b) of the Internal Revenue Code, approved February 10, 1939, it was provided
that all duties and taxes collected in the United States upon articles
coming from the Philippine Archipelago and upon foreign vessels
coming therefrom were to be held as a separate fund and paid into the
treas'ury of the Philippine Islands to be expended for the government
and benefit of the Islands.
A summary follows showing customs duties, tonnage taxes, and
internal revenue taxes, exclusive of taxes with respect to coconut oil,
appropriated to Philippine accounts and payments therefrom during
the fiscal years 1933 to 1940,




225

EiE'POiRT OF THE. SBORBTAKY OF T H E TKEiAiSrUEY

Receipts i
appropriated

Fiscalyear

1933
1934
1935 1936
1937
1938...1939
1940

-

-

-

--

---

-

--

$381, 500.46
627,426.40
491,458. 50
645,890.13
756,866. 76
813,862. 30
669,468. 06
703,874. 28

Payments to
Philippine
Government 2

Unpaid balance

$59.67
813,371. 78
602, 551. 53
746,967. 75
891,726.93
934,689.47
626, 347. 68
482,106. 02

3 $864, 598.97
568,663. 59
657, 660. 56
457,492. 94
321, 632. 77
200, 795. 60
143,915 98
366,684.24

• 1 Reduced by amounts carried to surplus fund under act of June 20, 1874, as follows: 1936, $17,540.28; 1937,
$9,783.76; 1939, $16,151.70; and 1940, $957.78.
2 Includes certain refunds and adjustments.
'Includes balances of $473,168.18 in Philippine accounts as of July 1, 1932.

Under an act of June 11, 1934 (48 Stat. 929; U. S. C. title 48, sec.
1157), the Secretary of the Treasury was authorized to accept, upon
such conditions as he might prescribe, deposits of public moneys of the
Philippine Government. The act provided an indefinite appropriation for the payment of interest on such deposits other than demand
deposits at such rates not in excess of 2 percent per annum as the
Secretary might prescribe.
Thereafter, the Secretary of the Treasury agreed to accept not to
exceed $55,000,000 of Philippine moneys in a time deposit account,
amounts deposited with the Treasury by the Philippine Government
in excess of that sum to be maintained in a demand deposit account.
Since December 10, 1934, the balance in the time deposit account has
been maintained at $55,000,000. The balance in the demand deposit
account as of June 30, 1940, was $49,655,001.15.
Section 602^ of the. act of May 10, 1934 (U. S. C. title 26, sec. 999),
provided that taxes collected with respect to coconut oil wholly of
Philippine production or produced from materials wholly of Philippine
growth or production should be paid to the treasury of the Philippine
Islands subject to certain conditions. An agreement was consummated between the Secretary of the Treasury and the Philippine
Government under which coconut oil moneys payable to the Philippine treasury would be transferred on periodic settlements of the
General Accounting Ofiice to a special deposit account in the name of
the Secretary of the Treasury subject to withdrawal by the Philippine Government on ninety days' notice in writing. A summary of
transactions in the account from the time of its establishment to
date follows.
Fiscal year
1938 .
1939
1940

Deposits
$56,864, 779. 06
20,366,455.66
4, 559, 016.46

Withdrawals

$32,000,000.00
I 17, 564, 016.41

Balance at end
of year
$56,854, 779. 06
45,210, 234. 71
32,205,234. 76

1 Includes $7,564,016.41 transferred to new account established under act of August 7, 1939.

Section 6 of an act of August 7, 1939 (53 Stat. 1232-33), provided
that collections on or after January 1, 1939, on account of the excise
taxes imposed by section 2470 of the Internal Revenue Code, and the
import taxes imposed by sections 2490 and 2491 of the Internal
Revenue Code and any moneys hereafter appropriated in accordance
with the authorization contained in section 503 of the Sugar Act of



226

'REPOIRT

OF THE. SEORETARY

OF T H E

TREASfURY

1937 (50 Stat. 915) shall be held as separate funds and paid into the
treasury of the Philippines to be used for the purpose of meeting new
or additional expenditures which will be necessary in adjusting Philippine economy to a position independent of trade preferences in the
United States and in preparing the Philippines for the assumption of
the responsibilities of an independent state.
A new account was established for the deposit of the funds referred
to in section 6 of the act of August 7, 1939. Withdrawals by the
Philippine Government from this account are subject to ninety days'
notice in writing. During the fiscal year 1940 a total of $17,274,092.01,
including the amount of $7,564,016.41 transferred from the old
account, was deposited in the account, b u t there were no withdrawals.
Special j u n d
Colorado River Dam jund.—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 was as follows:
Advances to Colorado River Dam Fund, J u n e SO, 1940
Advances from General Fund:
Fiscal years 1931-39
Fiscalyear 1940
Interest:
Fiscal years 1931-39
Fiscalyear 1940

_-.- $117,810,000.00
4,050,000.00
$121,860,000.00
25,115,492.69
5,494,266.74

--

Total--..
-.-Less amount covered into the Treasury as miscellaneous receipts
Total liability to General Fund

-.
—

30,609,749.43
10,225,631. 58

1 20,384,117.85
142,244,117.86

1 Payment of interest due June 30, 1940, $20,384,117.86, deferred for 1 year under sec. 2 (d) of the act of
Dec. 21, 1928.

Division oj Deposits
The Division of Deposits is charged with the administration 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, as
amended.
Depositary junctions.—The following statement shows the number
and classes of depositaries maintained by the Treasury and the
Government deposits held by such depositaries:



227

RBPOtRT OF THE. SBOKETABY OF T H E TBEiA^SfaKY

Number of depositaries and amount of Government deposits held on June 30, 1940,
by class of depositaries
Depositaries

Amount
$263,934,903. 21

Federal Reserve Banks (including branches)
Federal Reserve member bank depositaries:
To credit of Treasurer of the United States
.
To credit of other Government officers
Insular and Territorial depositaries (including Philippine treasury)
To credit of Treasurer of the United States
To credit of other Government officers
Foreign depositaries: To credit of other Government officers
Special depositaries
.
—

52,173, 223.11
25,996, 265.49
3,208,353.69
6, 325. 726. 63
189, 214.44
805, 379, 000. 00

Total-

1,147,206, 686. 47

1 In addition 296 branch banks are carried on the depositary list of the Treasury under the designation of
the parent banks.
2 Includes 1,198 national banks and 892 State banks and trust companies, of which 1,684 held deposits on
June 30, 1940.

During the fiscal year 1940, there were 2,348 changes and adjustments effected in the depositary system of the Treasury. These
changes and adjustments are summarized in the following table:
Member
bank depositaries

Adjustments

Designated
Discontinued
Amounts for which qualified:
Increased
Decreased
Miscellaneous changes ._
Total

--

-

.

_.

-

- -

600
787
229
70
285
1.871

Special depositaries
93
361
. 30
3
477

The unusually large number of designations and discontinuances
among member bank depositaries during the fiscal year was accounted
for by the discontinuance of 768 limited depositaries and the redesignation of 484 such banks as depositaries of public moneys and financial
agents of the Government. This major revision in the depositary
system was effected pursuant to the general survey initiated in 1936
for the purpose of determining the possibility of improving the procedure of depositing the revenues of the Government and the desirability of modernizing the depositary system of the Treasury to meet
current conditions.
As the activities of the Government expanded, it became increasingly
evident that the depositary machinery of the Treasury should be
modernized to keep pace with other developments. The principal
objectives of the Treasury were: (1) To eliminate all unnecessary
expense to the Government and to the depositaries, and to provide
for the transaction of the essential fiscal business of the Government
through banking institutions in a manner corresponding with customary banking practices; and (2) to provide a more fiexible system,
i. e., a system which would permit the use of banking facilities to the
fullest extent required and at the same time be adapted to changes or
modifications currently to meet changing conditions. To that end,
the Treasury canceled the existing designations of limited depositaries
and redesignated such banks as depositaries of public moneys and
financial agents of the Government in conformity with the language



228

^REPOORT OF T H E SECrRETARY OF T H E TREASfURY

and apparent intent of the statutes under which such banks were
designated. The new designation eliminates all unnecessary costs,
facilitates the transaction of the Government's business, and, subject
to mutual agreements between the banks and the Treasury, makes
possible a wider use of the banking system in connection with the
collection and transmission of the revenues of the Government. I t
has already been demonstrated that, in addition to other benefits
derived from this procedure, the savings, both to the Treasury and
to depositary banks, will be substantial. A detailed statement of the
circumstances creating the necessity for such revision is contained
in the Annual Report of the Secretary of the Treasury for the fiscal
year 1937, pages 105 to 107.
I t is anticipated that the modernization of the depositary procedure
will be continued during the ensuing fiscal year.
Limited depositaries were first designated in 1919 and 1920 in conjunction with the adoption of certain new policies resulting from the
establishment of the Federal Reserve System and the discontinuance
of the subtreasuries, as outlined in the Annual Report of the Secretary of theTreasury for the fiscal year 1920, pages 167 to 177. The
primary reason for the establishment of this class of depositaries was
for the purpose of safeguarding deposits maintained on the books of
banks to the official credit of postmasters or other duly authorized
Government officers. With the development and growth of the system of Federal insurance of deposits administered by the Federal
Deposit Insurance Corporation, the necessity for the designation and
continuance of this class of depositaries, solely for the purpose of safeguarding the funds through the hypothecation of collateral security
by such depositaries, was eliminated in many cases.
The survey indicated that at 284 points, postmasters were able to
secure adequate protection under the guaranty of the Federal Deposit
Insurance Corporation; therefore, the Treasury proceeded during the
current fiscal year to discontinue limited depositaries at those points,
thus substantially reducing the expense involved in the designation
and supervision of such depositaries.
Federal savings and loan associations and Federal credit unions.—
On June 30, 1940, a total of 909 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, 144 have qualifieci
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 Administrator under title I of the National Housing Act. In addition, on
account of their limited membership, 886 Federal savings and loan
associations were reported as being eligible 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 45 associations of this group qualified for this purpose




RlE'POIRT OF T H E SE'OREiTARY OF THE, TREASIURY

229

either by the pledge of collateral security or the execution of surety
bonds in the amount of $1,000 each.
Social security.—Under agreements entered into between the Treasury and the Social Security Board, arrangements were made to maintain balances of Treasury funds with various depositaries of public
moneys, designated by the Secretary of the Treasury, in such cases
where it is desirable in order to provide appropriate banking and
depositary facilities for handling benefit payment accounts under the
unemployment compensation provisions of the Social Security Act.
During the year these banking arrangements were extended to provide similar facilities for the handling of clearance accounts. Up to
June 30, 1940, 44 banks were designated for either or both of these
purposes with authority to carry fixed balances totaling $35,390,000.
Government Losses in Shipment Act.—The Government Losses in
Shipment Act, approved July 8, 1937 (50 Stat. 479), was designed to
provide within the Government an adequate means of prompt replacement of losses resulting from the shipment of certain articles, things,
or representatives of value, thus eliminating the necessity of the
Government's purchasing insurance for this purpose. That act was
amended by an act approved August 10, 1939 (53 Stat. 1358), a copy
of which appears as exhibit 38 on page 535 of this report. In general,
the amending act served to extend the scope of the insurance features
of the act and to clarify certain details relating to administration.
The amendments to the act extended the provisions of section 3 of
the original act in two principal respects. First, in the case of the
agency functions performed by the Post Office Department for the
Treasury, the fund is made available irrespective of the manner in
which losses may occur. Second, the fund is made available with
respect to claims arising out of the payment of any obligations incurred by reason of the execution of agreements of indemnity by the
Secretary of the Treasury. These agreements may be issued in connection with instruments or documents lost in transit or otherwise,
providing, of course, that the instruments or documents were first
received by the United States or any agent of the United States
acting in his official capacity.
Section 7a of the original act was amended to give the Secretary of
the Treasury authority to declare the articles or things which qualify
under the provisions of that section as ^ valuables'' under the act. A
^
list of such valuables declared during the fiscal year appears as
exhibit 39 on page 536 of this report.
The amendments added a further provision to the original act
authorizing and directing the Secretary of the Treasury to transfer
to the revolving fund established under the Government Losses in
Shipment Act the amount standing to the credit of the securities
trust fund established under authority of the indefinite appropriation
'^Expenses of Loans, Act of September 24,. 1917, as amended and
extended." In pursuance to this provision there was transferred
during the fiscal year the sum of $91,803.13.
The value of the declared articles or things reported to have been
shipped under the act during the fiscal year 1940, of classes which
were covered by the Treasury's contracts with insurance companies
prior to the enactment of the Government Losses in Shipment Act,
amounted to $14,604,374,635. The table following indicates the
premium savings resulting from such shipments to be over a half a



230

REPORT OF T H E SEGRETARY OF T H E TREASIURY

million dollars for the fiscal year 1940 and a savings since the inception
of the act of over $1,100,000 under each of the three alternate bases
upon which the estimates are made:
Estimated premium savings during the fiscal years 1938, 1939, and 1940, and the
total estimated savings to June 30, 1940
Aug. 16,1937,
to June 30,
1938

On basis of premium rates forFiscal year 1938 1-Fiscalyear 1937 2.Fiscal year 1936-38

$160,000
200,000
192,000

Fiscal year
1939
$456,000
615,000
503,000

Aug. 16, 1937,
to June 30,
1940

Fiscal year
1940

$1,120, 000
1,290,000
1, 232,000

$504,000
575,000
537,000

1 Lowest rates under insurance contract system.
2 Rates in effect at time estimates of premium savings were presented to Congress.
3 Average based on rates effective in last 3 years of Government insurance contract system.

Other classes of articles shipped during 1940, having a total face
value of $26,530,922,383, 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.
Following is a table of the loss experience resulting from shipments
of valuables eff'ected under the act:
Number and value of shipments reported lost, settled, and unadjusted, fiscal year 1940
Number

Shipments reported lost
Unadjusted July 1, 1939
Reported lost during year

-

Value

1
19

$66.88
29, 545.25

.-

20

29, 611.13

Settled by replacement out of fund
.-.
Settled without replacement or credit

4
6

93.75
837. 88

Total to be settled

Total settled
Unadjusted June 30, 1940

-

-.
-

-

10
-

931. 63

10

28,679.60

There were no recoveries of the shipments reported lost and settled
by replacement out of the fund; therefore, the total payments on
account of losses under the act from August 15, 1937, to June 30,
1940, amounted to $469.85. In addition, a refund of $64.44, representing an excess recovery included in funds transferred to the fund
for the payment of Government losses in shipment, was authorized
during the year; consequently, the total payments out of the fund
from August 15, 1937, to June 30, 1940, amounted to $534.29.
During 1940, pursuant to section 3b of the act as amended, there
were three agreements of indemnity executed, amounting to $15,347.04
on which no payments were made.




REPORT OF THE SE'CRETARY OF THE TREASURY

231

Statement of balance of fund for payment of Government losses in shipment (revolving
fund) at beginning of fiscal year, additions thereto, payments therefrom, and
balance at close of fiscal year 1940
Balance July 1,1939
Appropriated to fund during year
Transfer from securities trust fund, act of Aug. 10,1930 (net of refund)
Total available to fund during year
Losses paid during year
Balance June 30, 1940

:

_-

_-

_-_-

-.-

$599,623.90
1,000.00
91, 738. 69
692,362.59
93.76
692,268.84

Section oj Surety.Bonds
On June 30, 1940, there were 76 domestic companies holding certificates of authority from the Secretary of the Treasury under the
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 seven 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 business, was revoked; one certificate of authority was issued
to a branch of a foreign company authorizing it to act as a reinsurer
on Federal bonds; and eight certificates of authority were issued to
domestic companies to qualify as sole sureties on bonds in favor of the
United States.
Division oj 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 official accounts relating to the receipt,
appropriation, and expenditure of the public moneys, covering all
departments and establishments of the Government. The Division
makes analyses of acts of Congress carrying appropriations and maintains the necessary appropriation accounts on its ledgers; it issues
warrants for placing disbursing 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 ahen
property trusts and offers in compromise, the approval of the issuance
of duplicate checks (sec. 9 of the Government Losses in Shipment
Act), and outstanding liability claims; compiles, for submission to
the Bureau of the Budget, the estimates of appropriations for the
service of the Treasury; and 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, there is compiled and published an annual
digest of the appropriations made by Congress and an annual com-




232

RIEPO'RIT OF T H E ,SE;CRETAiRY OF T H E TREASUR^Y

bined statement of the receipts, expenditures, and unexpended
balances under each appropriation account, by fiscal years.
Statements of the receipts and expenditures of the Government for
the fiscal year 1940, compiled by this Division, are shown in tables 1
and 2, pages 586 to 611 of this report.
Division oj Disbursement
The Division of Disbursement, organized December 16, 1933,
under the provisions of section 4 of Executive Order No. 6166, has
absorbed disbursing functions formerly exercised by 584 separate
disbursing offices of the departments and establishments of the
Government located in Washington and in the field. This includes
disbursements for all departments and establishments with the exception of the Post Office Department, United States marshals, the
Panama Canal, and that portion of the War and Navy Departments
relating to national defense. I t has also assumed the disbursing
functions which would have been performed by 94 separate disbursing offices for new:agencies created since the Executive order of
June 10, 1933. These functions of disbursement are now performed
through the Central Office of the Division of Disbursement in Washington, D. C , and regional offices. Treasury-State disbursing offices
were established for making disbursements under the Emergency
Relief Acts.
Pursuant to requests made by some of the corporations, the Chief
Disbursing Officer acts in the capacity of Disbursing- Agent for the
Federal Surplus Comniodities Corporation (the Surplus Marketing
Administration under Reorganization Plan No. Ill," effective June
30, 1940), 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 the field.
During the latter part of the fiscal year 1939 the Federal Surplus
Commodities Corporation started its experimental program of distributing surplus agricultural food products by the issue of food order
stamps to relief clients. The Chief Disbursing Officer was selected
by the Corporation as its agent for the purpose of issuing and redeeming these stamps. The plan was started in Rochester, N. Y., and
Dayton, Ohio, during] the fiscal year 1939, and during 1940 there
were selected 116 other cities for the installation of the plan, in 80 of
which operations were actually begun prior to June 30, 1940.
Generally, the plan provides that cities which cooperate with the
Corporation purchase 'books containing a number of orange colored
25-cent stamps and one-half as many blue 25-cent stamps, paying for
the orange colored stalmps and receiving the blue stamps without
cost. The cities sell the books for the price of the orange colored
stamps to persons who are eligible under certain regulations of the
Federal Surplus Commodities Corporation. The orange colored
stamps are exchangeable at stores for any class of groceries but the
blue stamps are exchangeable only for foods which have been declared
surplus by the Secretary of Agriculture. Moneys received by the
Division of Disbursement from the cities are held for the redemption
of the orange colored stamps and the blue stamps are redeemed from
funds placed with the Division of Disbursement by the Corporation.



•REPOiRT

OF T H E

SEORETARY

OF T H E

TREASIURY

233

The following table shows the total money value of orange colored and
blue stamps issued, redeemed, and outstanding.
Transactions i n food order stamps for the Federal S u r p l u s Commodities Corporation,
M a y 1939 to J u n e 1940
[Money'value]

Date

Cumulative
amount outstanding

Issued

Redeemed

$67,419.00
329,910.00
428,759.00
702,447.00
691,290.00
903,491.00
1,364,127.00
1,866,358.00

$37, 230.75
219,704.00
324,116.75
534,601. 25
656,712.60
728,663.60
869,362.00
1,430,568.00

3,109,716.00
4,648, 288.00
6,590,672.00
7,397,729.00
7,978,287. 50
8,728,796.00

2, 383,562. 50 2,280,104.75
3,332,144.00
3,496, 248.75
5,266,717.75
4,830,103.00
6,156,109. 25 6,072,722.76
7,196,776.00
6,854, 234. 25
7,638,003.25
7,945,027. 00

1939
May
June
July
August
September
October
November
December

—

$30,188. 25
140,394. 25
246,036. 50
412,982.25
448,569. 75
623,387. 25
1,118,162. 25
1,563,942.25

1940
January
February.—
March
April
May
June

^
_
-_

Total

-

44,707,188.50 36,762,161. 60

The $36,762,161.50 of redeemed stamps represents 147,048,646
stamps which were presented for redemption to the several offices of
the Division of Disbursement, where they were examined, canceled,
and forwarded to the General Accounting Office as vouchers supporting the payments made therefor. The money value of orange and
blue stamps issued and redeemed for each city in which the plan is in
operation is shown in table 69, page 832.
During the latter part of 1940 a similar program for the issuance
and redemption of stamps exchangeable for cotton and cotton surpluseswas established in Memphis, Tenn., Springfield, Mass., and
Minneapolis and St. Paul, Minn. Green stamps are used for the
purchase of cotton products and brown stamps are exchangeable for
cotton products declared surplus by the Secretary of Agriculture.
The present indications are that many more cities will participate
in these programs during the coming fiscal year.
Of the 55 Treasury-State disbursing offices maintained during the
fiscal year 1939, 1 was consolidated with another Treasury-State disbursing office and 10 were consolidated with regional offices during
the fiscal year 1940. On June 30, 1940, the Division maintained one
central and 19 regional offices where all regular payments and some
payments from relief appropriations were made, and 44 TreasuryState disbursing offices in the field disbursing only emergency appropriations.
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 payments, was 12,728,067.
On June 30, 1940, the total personnel of the Division, including
regular, temporary, and emergency employees, was 2,226, and in
addition there were 115 employees of the Agricultural Adjustment
Administration assigned to offices of the Division to assist in the disbursing work incident to the special programs of that agency.



234

iREPOeT OF THE SEORETARY OF THE TREASURY

During the year the regular and emergency offices of the Division
made 105,778,977 payments by check and raade cash payments in
964,948 instances. These payments were supported in the disbursing
accounts by 8,818,448 vouchers. The Division also received, deposited, and accounted for 5,118,985 collections items.
Suspension oj delivery oj joreign checks
During the year it was necessary under Executive Order No. 8389,
dated April 10, 1940, as amended (see exhibit 41 on page 538), to suspend delivery of Government checks to Norway, Denmark, Belgium,
Luxembourg, the Netherlands, and France. The order was extended
on July 15, 1940, to include Latvia, Estonia, and Lithuania. Due to
the war, difficulty has also been experienced in effecting delivery of
Government checks to other European countries.
DIVISION OF APPOINTMENTS

In accordance with Treasury Department Order No. 32 of June 25,
1940, the Division of Appointments was transferred and consolidated
with the Personnel Division, which was established on July 1, 1940,
pursuant to Executive Order No. 7916 of June 24, 1938, and Treasury
Department Appropriation Act, 1941.
Number oj employees in the Treasury Department
On June 30, 1940, there were 18,859 employees in the departmental
service and 54,312 employees in the field service of the Treasury, as
compared with 19,529 employees in the departmental service and
48,211 in the field service on June 30, 1939. The figures for June 30,
1939, exclude 2,063 employees in the departmental service of the
Public Buildings Branch of the Procurement Division, the Public
Health Service, and the Bureau of the Budget, and 8,502 employees
in the field service of the Public Buildings Branch and the Public
Health Service, all of which agencies were transferred from the Treasury Department on July 1, 1939; and include 362 employees in the
departmental service and 815 in the field service of the Bureau of the
Comptroller of the Currency, which employees are paid from assessments against national banks and were not included in previous
reports.
During the year there was a decrease of 670 in the departmental
service and an increase of 6,101 in the field service. The principal
decrease resulted from the reduction in the force of employees paid
from emergency relief funds. The largest increase was in the Coast
Guard due to the transfer to that Service on July 1, 1939, of the Lighthouse Service from the! Department of Commerce and to the increase
in the military personnel.
The number of employees in the departmental service of the
Treasury, classified according to bureaus and offices, at the end of each
quarter from June 30,1939, through Jime 30, 1940, is shown in table 70,
page 834 of this report. A comparison of the number of employees in
the departmental and field services of the Treasury on June 30, 1939,
and June 30, 1940, is contained in table 71, page 834.




REPOIRT OF T H E SECRETARY OF T H E TRIEASIURY

235

Retirement oj employees
During the year there were 546 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, 272 persons were
retired from the departmental service of the Treasury Department,
18 of whom were retired at their own option before the compulsory
retirement age; and 274 were retired from the field service, 20 at their
own option before the compulsory retirement age.
As of June 30, 1940, four employees in the departmental service
and five 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 72, page 835, shows the number of persons retired in the
departmental and field services of the Treasury from August 20,
1920, to June 30, 1940, and the number who have passed the compulsory retirement age but who are retained as of June 30, 1940.
B U D G E T AND I M P R O V E M E N T . C O M M I T T E E

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 assignrnent by the Administrative Assistant
to the Secretary. To facilitate the investigations, a Subcommittee
on Investigations is assigned the responsibility for determining,
through the inspection of field as well as departmental activities, the
justification for proposed increases in appropriations.
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 testimony in further support of the
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 1941, supplemental and deficiency estimates
aggregating $262,356,354 were received. After examination, these
estimates were reduced to $262,342,094 and submitted to the Director
of the Bureau of the Budget.
Reserves amounting to $469,704 were set aside from the ordinary
appropriations for the fiscal year 1940 by the bureaus and offices of
the Department. During the year, reserves amounting to $270,534
were released by the Director of the Bureau of the Budget after
approval of the committee, leaving a reserve of $199,170 at the end
of the year. Of the appropriations made to the Treasury Department for the fiscal year 1941, $84,000 has been set aside as reserves.

269677—41

17




236

TElEPOfRT OF THE. SECRETARY OF T H E TREASIURY

For the fiscal year 1942, heads of Treasury bureaus and offices submitted estimates for annual, permanent, and indefinite appropriations
aggregating $3,882,414,092. After examination by the Budget and
Improvement Committee, items aggregating $720,814 were disapproved in estimates for annual appropriations. Of the $3,881,693,278
approved and submitted to the Director of the Bureau of the Budget,
$341,686,000 was for annual appropriations; $6,266,433 for permanent
and indefinite appropriations and special funds; $1,743,875,845 for trust
funds; $1,200,000,000 for interest on the public debt; and $589,865,000
for public debt retirements chargeable against ordinary receipts.
COAST GUARD
Activities during the fiscal year 1940

The Coast Guard, as the Federal maritime police agency, has
carried on the interrelated duties, embraced within such function,
of law enforcement, promotion of safety of life at sea and protection
of life and property, and the maintenance of a state of preparedness
for national defense. With its shore units forming a coordinated
network of protective and marine observation stations along all the
coasts of the United States, Hawaii, Alaska, Puerto Rico, and Virgin
Islands, and with its vessels patrolling the entire length of our coastal
and navigable waters, the services of the Coast Guard, involving use
of vessels, aircraft, and coastal units, have been utilized in various
cooperative measures with other branches of the Government, in
addition to carrying on the regular duties of the Service.
The regular activities of the Coast Guard 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 North Pacific Halibut
Act; enforcement of the Whaling Treaty Act and Oil Pollution Act;
supervision of the anchorage and movements of vessels and of the
handling of explosives, infiammable material, and other dangerous
cargo aboard vessels; 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 Atlantic 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; administration of the United States Maritime Service; and
the saving and protection of life and property at sea and along the
coasts.
Application of the neutrality laws in the existing international
situation has resulted in the Coast Guard assuming an important role
in their enforcement.
The following table summarizes several of the principal operations
of the Coast Guard for the fiscal year 1940, including comparison with
the preceding year:




BiDPOIRT OP T H E SEOKETABY OF THE. TREASraKY

Activity
Instances of lives saved and vessels assisted
Value of vessels assisted (including cargoes).-.
Persons on board vessels assisted
Lives saved or persons rescued from peril. _
Persons in distress cared for...
Instances of miscellaneous assistance
Vessels boarded and papers examined
Vessels seized
.:
•
Vessels reported
Fines and penalties incurred by vessels reported.
Derelicts and other obstructions to navigation removed or destroyed
Value of derelicts and other obstructions recovered
Regattas and marine parades patrolled
Persons examined for certificates as lifeboat men

1939

Increase or

1940

9, 3S3
$63, 723, 566
32, 645
10, 615

9,330
$88, 016, 268
32, 084
9,249

412

410

4,858
32, 656

4.056
39, 450

6

1,854
$470.081

237

21
1, 300
$235,459

-63

$24, 292, 702
-561
-1,366
-2
-803
6,796
16
-554
-$234, 622

266

193

$117, 390

$82,945

-73
-$34,446

443

481

38

3,496

2,527

While the number of lives saved or persons rescued from peril shows
a decrease in 1940, when considered in the light of the absence during
the year of any extensive hurricane and fiood assistance and the fact
that the 1940 figure is higher than any other year except 1939, the
record indicates no downward trend in the general activities of this
character. The number of vessels boarded and papers examined was
the largest since the prohibition era of 1924-33. The major portion
of these boardings was to insure that the safety requirements of the
navigation laws and regulations were being complied with by shipping
and motorboats. Regattas and marine parades patrolled, in the
interest of safety to life, exceeded all previous records.
No additional funds were allotted to the Coast Guard by the Public
Works Administration during the year, projects previously provided
for being carried to a conclusion. Approximately $70,000 was allotted
by the Works Progress Administration which was expended upon
miscellaneous undertakings at stations.
Cooperation continued with other departments embracing activities
in which the vessel and aircraft facilities of the Coast Guard could be
used advantageously, including waterfowl surveys for the Biological
Survey, transportation of mail where commercial shipping was disrupted, particularly between Miami, Fla., and Habana, Cuba, and
from Seattle, Wash., to Alaskan ports; transporting the Federal Court
in Alaskan waters on its annual visit to ports west of Valdez; towing
vessels of the Maritime Commission between various Atlantic and
Gulf ports; and detailing vessels to assist in the conduct of target
practice drills by the Coast Artillery.
At the request of the State Department, two cutters were operating
during June 1940 in West Greenland waters making a survey of conditions in Greenland ports. This duty showed promise of being
extended to the east coast of Greenland.
Also at the request of the State Department, a good will cruise of
two Coast Guard cutters to ports of Mexico, Guatemala, El Salvador,
Honduras, Nicaragua, and Costa Rica was made during J a n u a r y March 1940. At ports visited the Coast Guard gave drills in the
various methods used in saving life and in demonstrating to the
people the peace-time functions of the Coast Guard; visits were exchanged between the officers of the vessels and representatives of the
foreign governments; and sports competition were engaged in between
the vessels' teams and those of the local governments.




238

!REP0tRT OF THE. SEORETARY OF T H E TREASURY

Upon the request of the Director of the Bureau of the Census, small
vessels were detailed to transport census enumerators to sparsely
settled coastal sections of the United States and Alaska.
Arrangements were made for the assignment during July and
August 1940 of one cutter, in cooperation with the Bureau of Fisheries, to carry out a program of fishery observations and oceanographic studies in the Bristol Bay, Alaska, region.
The Coast Guard cutter stationed at Honolulu continued its
quarterly cruises to the South Pacific Islands, including Fanning,
Baker, Howland, Jarvis, and Enderbury Islands, servicing the settlements of those islands for the Department of the Interior.
The New York District of the Coast Guard provided an armed
detail from April 16 to June 6,1940, for guarding approximately 9,299
tons of silver bullion valued at $90,297,200 during transportation by
the Treasury Department from New York, N. Y., to the depository
at West Point, N. Y.
Coast Guard relief forces, consisting of aircraft, boats, and mobile
radio stations, were dispatched to the aid of communities stricken by
the flood of the Susquehanna River, during April 1940; and a relief
expedition was sent into the southern Alabama region during the
flood there in August 1939. Considerable survey work and planning
concerning Coast Guard activities in future floods in the Ohio and
Mississippi Valleys were undertaken during the year.
I n conformity with the duty of the Coast Guard to assist in keeping
channels and harbors open to navigation by means of icebreaking
operations in accordance with the reasonable demands of commerce,
service was rendered upon numerous occasions on the North Atlantic
Seaboard and Great Lakes during the winter season of 1939-40. The
demands along the New England coast were less than usual, due to
comparatively mild ice conditions in that region, but an increasing
number of calls arose in the Delaware and Chesapeake Bays section.
Administrative organization
Consolidation of the Lighthouse Service and other considerations
making for economy and efficiency have led to substantial changes in
the administrative organization of the Coast Guard. In the field the
former 9 divisions and 13 districts of the Coast Guard and 17 districts
of the Lighthouse Service have been combined into 13 districts, whichinclude districts embracing Puerto Rico and nearby United States
possessions and waters, Hawaiian Islands, and other Pacific possessions and waters of the United States, Alaska, and the interior rivers
area. The separate field organization of former life-saving activities
has been integrated with other functions of the Coast Guard. A
grouping of shore stations (including lifeboat and light stations and
certain bases) has been studied and is being put into effect as rapidly
as practicable. Greater correlation of cutters and other vessels of the
Service and a more systematic nomenclature for the several types
have been worked out. The district headquarters staffs have been
much systematized and placed on as uniform a basis as practicable in
relation to the scope and volume of their respective activities. At
Washington headquarters, material changes in organization have
been made in the direction of more effective utilization of the staff
principle.



REPOIRT OF THE. SEORETARY OF T H E TREASfURY

239

National dejense
Under the act of January 28, 1915, the Coast Guard constitutes a
part of the military forces of the United States, operating under the
Treasury Department in time of peace and as a part of the Navy
in time of war or when the President directs. While the Service is
constantly prepared for national defense operations, the existing international situation has led to preparations especially to fit and augment
the resources and capacity of the Coast Guard for national defense.
Appropriations were provided by the First Supplemental National
Defense Appropriation Act of June 26, 1940, for increasing the
armament of vessels, and plans have been made, in collaboration with
the Navy, to provide for the most effective utilization of the Coast
Guard organization.
Promoting safety oj marine commerce and]oj lije']and property at sea
The duty of promoting safety of life at sea has been carried forward
through both protective and preventive measures, the former through
such means as the maintenance of a cordon of Coast Guard lifeboat
stations, equipped with life-saving boats and apparatus along our
coasts; aircraft and vessel patrols to warn of danger and to assist
in case of peril; aids to navigation marking the shoals and channels
and to guide the mariner along safe courses during fog and storm;
and the International Ice Patrol in the North Atlantic. The training
of merchant marine personnel, the operations of the Coast Guard
Reserve, and enforcement of those navigation laws pertaining to
safety requirements are part of the preventive phase of reducing
marine casualties and protecting life and property from loss at sea
and upon our navigable waters.
Aids to navigation.—With the integration of the former Lighthouse
Service into the Coast Guard on July 1, 1939, the duty of establishing and maintaining aids to navigation became one of the principal
activities of the Coast Guard. For many years there has been a
continuing demand for new establishments due in major part to the
improvement and extension of navigable channels by the Corps of
Engineers, United States Army, and in part to the constantly increasing activity in navigation by small craft requiring aids for their protection in waters not heretofore marked. During the past year 1,581
new aids were established consisting largely of daymarks, buoys, and
minor lights; 767 aids were discontinued; leaving a net increase of
814 aids, and bringing the total at the close of the year to 30,420.
The number of lightship stations has been reduced by one through
the replacement of Lake St. Clair Lightship by a fixed structure.
Radio navigational aids continued to be more widely used by marine
craft, necessitating the establishment of additional ''marker'' radiobeacons and one intermediate power radiobeacon. An important
extension of the system of minor aids has been made in the Tennessee
River with the completion of the Chickamauga Dam and the extension of navigable water resulting therefrom.




240

T:IEP0QRT O F T H E SECRETARY O F T H E TREAS'URY

The following table gives general information as to the status of
the system of aids in various categories at the close of the fiscal years
1939 and 1940:
Number of aids to navigation and changes during the fiscal year 1940
D u r i n g 1940
Types

J u n e 30,
1939

Established

Discontinued

Increase
or
decrease

J u n e 30,
1940

(-)
L i g h t e d aids:
Lights, 200 c a n d l e p o w e r a n d above
Lights, below 200 c a n d l e p o w e r
L i g h t s h i p stations 1
L i g h t e d b u o y s (including float lights)
Lighted t r u m p e t buoys
L i g h t e d whistle b u o y s
..-.
L i g h t e d bell b u o y s
L i g h t e d gong buoy's
.
._._.._.

T o t a l fog signals.

._

Silent a n d u n l i g h t e d aids:
Buoys
:_._
Daymarks

29
199
—1
83
2
9
6
7

1,830
6,379
29
1,288
8
172
480
39

9,862

T o t a l lighted aids
F o g signals:
R a d i o b e a c o n s 2. __
__
S o u n d fog signals (in air)
S u b m a r i n e fog signals . ,
.__
..
L i g h t e d b u o y s w i t h whistles, bells, gongs, or
trumpets 3
_
U n l i g h t e d b u o y s w i t h whistles, bells, gongs, or
trumpets.
..
_.

116
3
11
18
8

21
306
1
33
1
2
13
1

710

376

334

10,196

141
570
9

1
16

1
12
1

4
—1

141
574
8

23

699

1,801
6,180
30
1,206
6
163
476
32

50
504

676

40

17

368

9

9

1,764

66

40

26

1,790

13, 468
5,188

329
516

196
172

133
344

13, 601
5,532

368

T o t a l silent a n d u n l i g h t e d aids

18, 656

846

368

477.

19,133

G r a n d total

29, 606

1,581

767

814

30,420

1 Lightship stations not counted in totals. Signals maintained thereon are counted.
2 Includes auxiliary warning radiobeacon on Nantucket Shoals Lightship.
3 Lighted sound buoys counted only once in grand total.

The service of information with respect to aids to navigation for
the guidance of mariners was continued during the year. Six light
lists, covering the North Atlantic coast. South Atlantic coast, Intracoastal Waterway, Mississippi and Ohio Rivers, Pacific coast, and
Great Lakes, were published as in previous years and sold to mariners
and others.
A weeldy Notice to Mariners, relative to aids to navigation in all
navigable waters of the United States except the Great Lakes, is
printed in Washington and distributed to mariners; and a similar
notice is published by the District Commander, United States Coast
Guard, at Cleveland, Ohio, for the Great Lakes area. Local notices
in mimeograph form are prepared from time to time in the district
offices of the Coast Guard and distributed when the safety of navigation warrants immediate information. I n addition three radiobeacon
charts, covering the Great Lakes and Atlantic and Gulf and Pacific
coasts, are prepared annually and distributed to vessels equipped with
radio direction finders.
The unusually severe ice conditions which prevailed during January
and February of this year resulted in about $170,000 of damage to
aids to navigation, particularly in the Chesapeake Bay area. Funds



REPOORT OF T H E SECRETARY OF T H E TRE^S^URY

241

are now available for the complete restoration and the work is proceeding rapidly.
In addition to establishment of new aids, attention has been given
to the improvement of existing aids through modernization and the
application of scientific developments to the technical work of sound,
radio, and light signalling, with resultant improvement of the aids
and in many cases marked economies in their operation.
International Service oj Ice Observation and Ice Patrol.—Although
the European War affected the movement and customary routes
followed by shipping in the North Atlantic, the Coast Guard carried
out during the season of 1940 its usual ice observation and ice patrol
service, pursuant to the International Convention for the Safety of Life
at Sea, signed at London on May 31, 1929, and the act of Congress
of June 25, 1936. Four cutters were designated for this duty, but it
was necessary to assign only two of them to the task. The oceanographic cutter based at St. John's, Newfoundland, and the ice patrol
cutter based at Boston, Mass., instead of at the normal base at
Halifax, Nova Scotia.
The oceanographic cutter sailed from Woods Hole, Mass., on March
21, 1940, to carry out not only a program of scientific investigations
bearing upon the location, rate of drift, and direction of fiow of ocean
currents, but also to determine the extent and location of the ice
which might be approaching the lanes of North Atlantic shipping.
In peace time, the cooperation of merchant shipping in radioing reports
of ice sighted in the North Atlantic permitted the Coast Guard to
obtain a fairly accurate indication of conditions prevaihng, but this
year the ships refrained from using their radio, and the absence of such
reports contributed to the difficulty in obtaining an accurate estimate
of prevailing ice conditions. However, the oceanographic vessel on
its cruises throughout the Grand Banks region gave particular attention to ice scouting, and because of the few bergs drifting into the
ice-menace region, together with the laiowledge developed of existing
ocean currents and water temperatures, the Commander of the
International Ice Patrol was in a position to determine the general
ice situation. After completion of four oceanographic cruises from
March 21 to June 19, the oceanographic cutter sailed from St. John's
on June 22 for the purpose of continuing the investigation of ocean
currents in the area between South Wolf Island, Labrador, and Cape
Farewell, Greenland. This cruise extended for 1,872 miles and was
completed on June 29.
On M a y 12, 1940, the ice patrol cutter sailed from Boston, Mass.,
to devote its entire time to observation of ice conditions, extending its
cruise far to the northward of the customary ice-menace region. The
1940 season was found to be practically an ice-free year, insofar as
constituting a menace to North Atlantic commerce. I t thus became
unnecessary for the ice patrol cutter to make subsequent cruises, and
she returned to Boston on June 3. Throughout this brief season, the
ice patrol cutter s^nt out scheduled radio broadcasts of existing ice
conditions, insuring to shipping advice and information affecting its
safe navigation. Also, a program of weather observations through
the use of radio-sonde apparatus, was carried out in cooperation with
the United States Weather Bureau, 18 observations being made between May 15 and June 2. Throughout the ice observation cruise




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only one berg was sighted south of latitude 48°, and none was observed
or reported south of the forty-fifth parallel.
Weather and marine injormation.—Due to the marked decrease and
almost total lack of weather data normally furnished the United States
Weather Bureau by ships of all nationalities, the means of making
weather forecasts adequate to the needs of marine and air commerce
was endangered. Consequently, an Atlantic weather patrol was established in February 1940, with two weather observation stations
located between Bermuda and the Azores, maintained at all times by
Coast Guard cutters especially equipped for such service and to which
technical employees of the Weather Bureau were assigned. In addition to the data furnished the Weather Bureau, the cutters on this
duty furnished weather information to trans-Atlantic planes and gave
added security to such aircraft operations.
At a conference held by the Civil Aeronautics Authority on January
17, 1940, it was tentatively agreed by the representatives of the
various Government departments and agencies that the Coast Guard
mobilize assistance and coordinate efforts to locate and relieve aircraft in distress at sea. A safety operation plan is now in effect for
the protection of aircraft making trans-Atlantic flights, and a ship's
position office was established in the New York district for the assistance of shipping and aircraft. The number of storm warning display
stations operated in cooperation with the Weather Bureau increased
to 92 on June 30, 1940. The reporting by radio, of weather observations in the Hurricane Warning Service of the Weather Bureau was
expanded, communication trucks being added to the reporting system.
At favorably located Coast Guard stations along the coasts of the
United States, daily broadcasts of weather and marine information,
furnished by the Weather Bureau and the Hydrographic Office, were
made by radio-telephone. These broadcasts were primarily for the
benefit of small craft of which increasing numbers are being radioequipped.
Grand Banks Patrol.—Incident to the breaking out of war in Europe
early in September 1939 and the distress caused to maritime commerce
in the North Atlantic, six Coast Guard cutters were employed, in
cooperation with the United States Navy, on what was known as the
Grand Banks Patrol during the fall of 1939 and early months of 1940.
Winter cruising.—DiiTing the period December 1, 1939, to March
31, 1940, 15 cutters were designated as a special patrol, pursuant to
Executive order, to assist distressed vessels during the season of
severe weather on the North Atlantic coast. These cutters cruised
865,556 miles; afforded assistance to 125 vessels; and destroyed 11
derelicts which were a menace to navigation. In the enforcement of
Federal maritime laws, 51 vessels were boarded and examined.
Maritime training.—The Coast Guard has continued since September 1, 1938, to administer the United States Maritime Service for the
United States Maritime Commission. The purpose of the Maritime
Service is to assist in the maintenance of a trained and efficient
merchant marine personnel by providing an adequate training system
for seamen who serve aboard American merchant vessels on the Great
Lakes or the high seas.
For licensed officers and experienced men of the merchant marine,
an original 3 months' training.period with pay is provided, and, after
satisfactory completion of this probationary training, the regular en


•REPOtRT OF THE SEiORETARY OF THE TRE'ASTJRY

243

rollees who continue to go to sea in the merchant marine become
eligible for one month's annual active duty training with pay in addition to 1 month's retainer pay each year. For men without previous
seagoing experience, the original probationary period is 9 to 12 months,
after which those men who satisfactorily complete the course become
eligible for the same benefits in annual active duty training and retainer pay offered other regular enrollees.
The Maritime Service maintained training stations for merchant
marine officers at Fort Trumbull, New London, Conn., and Government Island, Alameda, Calif.; and training stations for unlicensed
seamen were maintained at Hoffman Island, New York Harbor, and
at Alameda. Apprentice seamen without previous sea experience
underwent instruction on the training ship American Seaman and at
training stations established at St. Petersburg, Fla., on November 30,
1939, and at Gallups Island, Boston, Mass., on June 1, 1940.
These facilities , have a capacity for approximately 600 licensed
officers and 2,400 unlicensed men each year for a 3 months' training
course, and for approximately 800 inexperienced unlicensed men for
a 9 to 12 months' course.
During the year 6,145 applications for enrollment were received,
and from these 3,368 men were enroUed; 2,185 licensed officers and
unlicensed men were regularly enrolled after completing the training
courses in a satisfactory manner; and from September 1, 1938, to
June 30, 1940, a total of 2,868 licensed officers and unlicensed men
have been regularly enrolled in the Maritime Service.
On June 30, 1940, 801 enrollees were under training as follows:
licensed, deck, 73, engineering 73; unlicensed, deck 127; engineering
148, stewards 106, apprentice seamen 274.
There were on detail from the Coast Guard in the Maritime Service
on June 30, 1940, 31 commissioned officers, 42 chief warrant and warrant officers, and 222 enlisted men. Thirty-two licensed enrollees
and 282 unlicensed enrollees of the Maritime Service were on active
duty in connection with the administration of the Service.
Coast Guard Reserve.—The organization of the Coast Guard Reserve—a voluntary, nonmilitary organization of motorboat and yacht
owners—established by the act of June 23, 1939, was effected during
the year, units being established in 10 of the 13 Coast Guard districts
(the Juneau, Honolulu, and San Juan districts being excepted) with
an approximate enrollment as of June 30, 1940, of 2,600 Reservists
and 2,300 Reserve boats.
The operation of the Reserve has proven a distinct contribution to
the promotion of safety of life at sea, to competency in boat operation
and safe navigation among vessels of all sizes upon the navigable
waters of the United States. Reservists have acted in collaboration
with the Coast Guard in safety patrols of regattas, in saving life and
property, and, in general, bringing into daily use more modern seagoing knowledge. They were also active in distributing information
and giving advice to others relative to safety equipment and operation
of boats.
Maritime law enjorcement
The Coast Guard, with its broad authority under the act of June
22, 1936, to make inquiries, examinations, inspections, searches,
seizures, and arrests upon the high seas and the navigable waters of the



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iREPOUT OF T H E SEORETARY OF T H E TREASIURY

United States in enforcement of any law of the United States, acts as
the maritime law enforcement agency of the Government.
Customs and antismuggling laws.—At the principal ports the vessel
facilities of the Service are used by the customs and immigration
authorities in contacting foreign vessels upon arrival, and in otherwise
cooperating with those officials in the conduct of their duties. While
during the year there was a complete absence of organized smuggling
of alcoholic liquors, it has been necessary to maintain a vigilant surveillance over- coastal activities to act as a deterrent against any
resumption of such practice. The prevention of the smuggling of
narcotics presents a current problem. Coast Guard patrol vessels
have continued the practice of contacting well out to sea and trailing
vessels suspected of having on board narcotics intended for unlawful
traffic. This surveillance, prior to the arrival of a vessel at port for
search by the customs officers, prevents the disposition of narcotics
off harbor entrances by means of prearranged delivery to speed boats,
fishing craft, and aircraft, or by dumping overboard in buoyed packages to be picked up by accoraplices. During the year there were
4,199 instances of vessels trailed or kept under surveillance.
In cooperation with the Alcohol Tax Unit of the Internal Revenue
Bureau, Coast Guard aircraft located 725 illicit distilleries and assisted
in the seizure of 79.
Navigation laws.—In the enforcement of the navigation laws
481 regattas were patrolled and 39,450 vessels, including motorboats,
were boarded and examined. Of the latter number, 1,300 were
reported for penalties and 21 were seized for violations. Although
6,795 more vessels were boarded than during the previous year,
the total number of vessels on which violations were found was 554
less. This situation is attributed in a degree to the systematic boarding methods of the Service as well as to the cooperation of yachtsmen
and small boat operators in increasing the standard of safety in
equipping and operating small craft.
Neutrality.—Upon the proclamation of the President of the neutrality of the United States in the European war under date of September 5,1939, and pursuant to Executive Order No. 8233 of the same date,
the Coast Guard assumed a wide field of responsibility with respect to
preventing unneutral acts by merchant vessels of the United States
or other neutral countries and against the commission of belligerent
action by merchant vessels of warring nations within the United States.
To give full effectiveness to the strict enforcement of neutrality by
the Coast Guard, a systematic and extensive patrol by aircraft, vessels,
and coastal stations has been carried out along all the coasts of the
United States.
As a part of this control exercised over merchant vessels, the radio
apparatus aboard such craft belonging to belligerent nations was
inspected and sealed in 4,397 instances up to June 30, 1940, to prevent
unneutral communications while within territorial waters of the
United States. Also, 613 defensively armed merchant vessels were
inspected to insure that they were not operating as auxiliary merchant
cruisers or commerce raiders and basing in United States ports in
violation of the neutrality law.
In maintaining a strict surveillance over maritime activities in
territorial waters and adjacent coastal regions, in protection of neutrality and to provide interested governmental agencies intelligence



•REPOIRT OF T H E SEORETARY OF T H E TREIASrURY

245

concerning shipping, there were 41,611 instances of merchant vessels
identified at sea or in ports of the United States, 26,535 vessels sighted
or identified at sea, and 94,055 instances of foreign vessels identified
in ports of the United States by Coast Guard units.
Anchorage and movements oj vessels.—Throughout the year Coast
Guard officers were detailed as captains of the port at nine ports of
the United States in enforcement of the rules and regulations issued
by the Secretary of War and the Secretary of Commerce governing
the anchorage and movements of vessels, and Coast Guard officers
also were enforcing regulations of similar nature in several localities
beyond the confines of ports.
Pursuant to the Espionage Act of June 15, 1917, the proclamation
of the President of June 27, 1940, and Treasury Department anchorage
regulations of June 27, 1940, Coast Guard officers were designated
captains of the port at 28 ports throughout the United States, its
Territories and possessions to enforce the rules and regulations promulgated by the Secretary of the Treasury and approved by the
President governing the anchorage and movements of vessels and to
supervise and control the movement, lading, and discharge of explosive or infiammable material or other dangerous cargo.
The control is being exercised at all ports where there is an appreciable amount of marine activity to insure an orderly and well-regulated
movement of marine commerce, a systematic arrangement of anchorages for its accommodation, and particularly, through rigid supervision
over the movement and handling of explosives, inflammable material,
and other dangerous cargoes, to see that every safeguard is provided.
Rules and regulations issued by other agencies of the Government
and in effect where captaias of the port had been assigned previously
were reaffirmed. At the close of the year a study was beiug made
by the Coast Guard for the adoption of uniform rules and regulations
applicable to all ports where captains of the port were assigned.
Whaling Treaty Act enjorcement.—In enforcement of the provisions
of the Whaling Treaty Act, giving effect to the convention between
the United States and certain other countries for the regulation of
whaling, two Coast Guard officers were assigned as inspectors aboard
one American factory vessel which operates in the Indian Ocean and
Antarctic waters, and officers were assigned also to two land stations,
one in Alaska and one on the California coast. Various violations
of the act and of other Federal statutes were reported by the inspectors.
Oil Pollution Act.—Coast Guard units reported 47 violations by
vessels and shore plants of the Oil Pollution Act, which has for its
purpose the prevention of contamination of our navigable waters in
the interest of conservation of fish life and wild fowl and the prevention of damage to marine property and beaches by oil.
Patrol in North Pacijic waters and Bering Sea.—The patrol of the
North Pacific Ocean, Bering Sea, and waters of southeastern Alaska
has for its mission the assistance to persons and vessels in distress;
protection of the seal herd, sea otter, walrus, and sea lions; assistance
to Alaskan natives; law enforcement generally; and cooperation and
assistance to other Government departments. The patrol for the
1939 season, which was in progress at the beginning of the fiscal year
1940, was carried on by 8 vessels, which cruised over a radius of 64,032
miles, assisted 13 vessels, boarded 53 craft, afforded medical and




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IREPOUT OF THE. SEORETARY OF T H E TREASIURY

dental aid to 1,028 persons, and transported 297 persons. The patrol
for the season of 1940, in progress on June 30, 1940, comprised 8 vessels.
Aviation
On June 30, 1940, 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.; and
an air patrol detachment was located at Cape May, N. J. Fifty-five
aircraft were in commission on that date, delivery having been accepted on seven twin-engine long range patrol planes and seven twinengine intermediate range amphibian planes during the fiscal year.
A contract for one twin-engine flying boat was awarded, delivery to
be made during the fiscal year 1941.
Construction has progressed satisfactorily on the new air stations at
Elizabeth City, N. C., and San Francisco, Calif., which will be placed
in operation during the early part of the fiscal year 1941.
Aircraft was employed in law enforcement work on both sea and
land in cooperation with other Federal departments, in rescue missions,
in promoting safety of life at sea, and in the enforcement of the
neutrality laws.
The following statistics for the fiscal year indicate certain phases of
such activities:
Number
Number
Flights
4,801 Persons warned of impending danger
1,466
Miles cruised
_
1, 2.')8, 344 Obstructions to navigation reported
9
..
Area searched (square miles)
9, 307, 065 Smuggling vessels located...
2
Time in flight (hours)
13,231 Illicit distilleries located
725
Emergency medical cases transported
113 Disabled vessels located
76
Persons transported from disabled vessels.
12 Instances of assistance to other Govern192
ment departments
.
Persons assisted
223
29, 322
Vessels warned of impending danger
259 Vessels identified

Communications
The Coast Guard owns and operates a coastal telephone system,
consisting of 1,662 miles of pole lines, 3,152 miles of open wire, metallic
circuits, 58 miles of aerial and underground cables, and 690 miles of
submarine cables, consisting of 200 separate telephone lines. Most
of these lines are connected with central office exchanges of commercial telephone systems, thus affording telephone and telegraph
service to units of the Coast Guard and to certain Navy direction
finder stations. Weather Bureau offices, and units of other Government agencies in various localities along the coastal waters of the
United States.
Coordination of the former Lighthouse Service communications
with those of the Coast Guard into a unified system is being carried
out as rapidly as possible. Radiotelephone facilities have been
installed in additional surfboats, light stations, tenders, and miscellaneous picket boats, materially increasing the efficiency of the emergency radio communication system in the interests of national defense
and in the safety of life and property at sea.
The Coast Guard communication system was extended to the San
Juan district by the establishment of a primary radio station at San
Juan, P. R., and 12 radiotelephone radio stations on the island of
Puerto Rico. In the Juneau district, a temporary radio station was
established at Ketchikan to improve communication with vessels of
the Bering Sea patrol.



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247

Radio engineering.—Research and development work was carried
on especially with filtering electrical machinery noises; telescopic
type antenna masts for installation in small craft, trucks, and other
mobile units; and a new intermediate frequency receiver for improving communications on the lower frequencies.
Equipment was modernized by the installation of radio-direction
finders in the larger cutters; by the procurement of compact radiotelephone transmitters and of receiving equipment for installation in
picket boats and other small craft; and by installation of a completely
new and modernized radio equipment in all existing Coast Guard aircraft with the exception of two planes of the P J - 1 and two of the
CO-1 types. The predominating requirements and accomplishments were to provide equipment which would satisfy the military
needs for the various aircraft, so that they might readily be capable
of joint operation with Army and Navy planes, and to provide suitable communication facilities in connection with fiight activity over
the civil airways. The radio laboratory facilities of the Coast Guard
at Fort Hunt, Va., and at Lazaretto Base, Baltimore, Md., have been
jointly used throughout the year for both communication and navigational work.
There were in commission on June 30, 1940, 23 shore^adio stations
and 10 aeronautical radio stations. The Chief Communications
Officer continued to represent the Treasury Department on the
Interdepartmental Radio Advisory Committee.
Personnel and training
Personnel strength.—There were on the active list of the Coast Guard
on June 30, 1940, 606 commissioned officers, 427 chief warrant
officers, 315 warrant officers, 12,261 enlisted men, 144 cadets, 3
civilian instructors at the Academy, 4,499 civilian field employees,
119 civilians employed on Coast Guard projects for which funds had
been provided by the Public Works Administration, 374 civilian
employees at Coast Guard headquarters, and 58 Public Works
Administration employees engaged on miscellaneous projects. Of the
4,499 civilian field employees, 491 were per diem employees at the
Coast Guard Depot, Curtis Bay, Md.
The appreciable increase in personnel during the year is attributable
to the consolidation of the former Lighthouse Service with the Coast
Guard, an authorized increase in personnel for the enforcement of
neutrality, for which appropriations were provided by the Emergency
Supplemental Appropriation Act of February 12, 1940, and an increase
to meet demands by the Maritime Service.
The First Supplemental National Defense Act of June 26, 1940,
authorized and provided funds for 2,500 additional men, who are to be
enlisted during the fiscal year 1941, for the purpose of strengthening
the Service in national defense requirements.
In accordance with the act of August 5, 1939, providing for the
induction of certain civilian employees of the former Lighthouse
Service into the Coast Guard in a military status, 665 were inducted
as follows: 59 as commissioned officers, 44 as chief warrant officers,
96 as warrant officers, and 466 in enlisted ratings.
Cadet instruction and Academy activities.—There were 85 cadets
under instruction at the Coast Guard Academy, New London, Conn.,
on July 1, 1939. During the year 124 cadets were appointed, 45



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REPOIRT OF T H E SECTR.ETARY OF T H E THEASTIRY

resigned, and 20 were graduated. On June 30, 1940, 145 cadets were
under instruction, including 1 graduate who was not commissioned.
The annual practice cruise of the first and third classes, made during
June-August 1939 aboard one cutter, included visits to the Cana]
Zone and ports in the countries of Colombia, Ecuador, Peru, and Chile.
Cadets of the second class had a summer cruise and also short cruises
on several cutters.
The Congressional Board of Visitors met at the Academy on May
4, 1940. They reported an excellent state of affairs in the academic
instruction, commended the unusually high standard of the curriculum,
and recommended improvements in the way of additional buildings to
accommodate a larger number of cadets; to provide enlarged facilities
for their instruction, better dock facilities, and a replacement for the
training schooner Chase. The Advisory Committee of the Academy,
consisting of distinguished educators appointed by the Secretary of
the Treasury to afford advice and counsel upon the curriculum and
other academic matters, held meetings at various times throughout
the year.
Recruiting.—In order to meet the expansion of enlisted personnel
and to prepare for future increases which might occur, new recruiting
offices were opened at Chicago, 111.; Detroit, Mich.; St. Louis, Mo.;
Mobile, Ala.; Omaha, Nebr.; and Salt Lake City, Utah. Those at
San Francisco, Calif., and Boston, Mass., were closed. Twelve
recruiting trucks were obtained for traveling recruiting parties in
^siting rural districts and small towns and cities in the various recruiting areas. In order to expedite the securing of 2,000 men for neutrality duty for a short period, units of the Coast Guard other than
recruiting offices effected original enlistments. No difficulty was
experienced in securing desirable applicants for enlistment. Of the
17,077 applicants at recruiting offices during the year, 5,528 were
rejected for physical defects, 8,609 for other causes, and 2,940 were
enlisted or reenlisted. A total of 4,262 original enlistments were
effected, 2,876 at recruiting offices and 1,386 at other units.
Recruit training.—The expansion of enlisted personnel and the
demand for trained men to perform the increased duties in the enforcement of neutrality and strengthening of national defense necessitated
enlarged training facilities. Two temporary training stations were
established, one at Port Townsend, Wash., and one at Ellis Island,
N. Y. Recruits were also sent to the Coast Guard Depot at Curtis
Bay, Md., and the Coast Guard Base at Fort Lauderdale, Fla., for
outfitting and training before assignment to duty afloat.
Specialty training.—Facilities for training radiomen, yeomen,
machinist's mates, gunner's mates, and other specialists were expanded
and additional enlisted personnel assigned to trade and service
schools operated by the Army, Navy, and Marine Corps. Three
enlisted men qualified as aviation pilots after completing the course in
flight training at the N a v a l Air Station, Pensacola, Fla., and seven
men were undergoing similar training at the close of the year. The
staff of instructors at the Coast Guard Institute at Fort Trumbull,
New London, Conn., which provides educational and specialist courses
for enlisted men to assist them in preparing for acivancement, for
employment in civilian life upon separation from the Service, anci for
more proficiency in their duties, was increased to meet the added
demands. Ninety-six enrollees of the Institute were awarded diplomas



REPORT OF THE SEORETARY OF THE TRE'ASfURY

249

from the International Correspondence School, while 31 were awarded
diplomas from the Capitol Radio Engineering Institute.
Courses in gasoline, Diesel, and aviation engines and also lathe
practice were afforded to groups of enlisted men at the Engine School
and Repair Base, Norfolk, Va., where, in addition to receiving instruction, the men reconditioned engines for further use by Coast Guard
units.
Retirement under 20-year act.—In accordance with the provisions of
the act of May 24, 1939, which provided for the retirement annually of
a limited number of enlisted men, voluntarily or involuntarily, upon
completion of 20 or more years service, 77 men were retired. The
operation of this law has had a beneficial effect upon morale, and has
contributed to efficiency in the elimination of those lacking the required physical stamina to meet the many arduous duties of the
Service.
Postgraduate instruction.—Commissioned officer personnel during
the year pursued post-graduate courses in marine aeronautical and
radio engineering, naval architecture, law, oceanography, meteorology,
business administration, and certain other academic subjects in order
that the efficiency of the commissioned corps might be increased and
at the same time kept abreast of the constant changes in equipment and
procedure. During the year 9 commissioned officers completed the
flight training course at the Naval Air Station, Pensacola, Fla., and
were designated aviators, and 10 were undergoing instruction on June
30, 1940.
Gunnery and small arms instruction.—Pursuant to the established
practice of maintaining ordnance equipment and gunnery personnel
aboard cutters in a state of preparedness and efficiency, there was
carried out, in addition to regular maintenance and instruction, a
program of short range practice among the larger cutters and a modified target practice among the smaller classes. Long range battle
practice was held by 5 cutters, and of 27 cutters equipped for short
range practice, 20 participated, 7 being prevented from competing
because of the duty missions upon which they were engaged. Of the
108 ordnance-equipped cutters of the 75- to 165-foot class, 102 held
target practice. Among the gunnery personnel on vessels carrying
3-inch 50-caliber to 5-inch 51-caliber guns, 50 men qualified as gun
pointers, first class, and 22 as gun pointers, second class.
In small arms practice, which is a part of the general training program, 1,064 men qualified as expert riflemen, 1,337 as sharpshooters,
1,294 as marksmen, and 962 as pistol experts. The Coast Guard rifle
and pistol team won 3 major matches in national competitions at
Camp Perry and many medals in team and individual competitions.
The training of armed civilian personnel of the Treasury Department by Coast Guard instructors was continued throughout the year.
Qualifications totaled 6,846 for an average armed force of 5,046, about
68 percent of what might be expected if every man qualified twice a
year according to plan.
A gunners' mates school for enlisted men has been established at
the Coast Guard Depot, Curtis Bay, Md., augmenting the training
facilities already in operation at that place. Modern guns and fire
control equipment have been provided so that the men assigned to
ordnance duty may be trained in the care and use of this equipment.
Cooperative activities with the Army, Navy, and Marine Corps



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REPOIRT OF T H E SEORETARY OF T H E TREAStTRY

have been carried on with the mutual satisfaction and good will which
have always characterized such relations.
Engineering competition.—Participating in the engineering competition were 32 cutters in class A, and 48 cutters in class B. The performance of the vessels in respect to efficient and economical machinery
maintenance and operation is the basis for the award of highest efficiency. The competition promotes a spirit of friendly rivalry and
contributes to high standards among the engineering personnel and
in the operation of machinery.
Floating equipment
Cutters, picketboats, etc.—On March 25, 1940, the practice was
inaugurated of classifying Coast Guard vessels by two groups—cutters
and picketboats—excluding auxiliar}^^ craft, lightships, and ship and
station boats. On June 30, 1940, vessels of the following types were
in commission: Cutters, 267, viz: 327-foot class, 7; 250-foot class, 10;
240-foot class, 4; 165-foot class, 23; miscellaneous class, 9; 125-foot
class, 32; 100-foot class, 1; tug class, 13; tender class, 66; harbor class,
39; 80-foot class, 9; 78-foot class, 6; 75-foot class, 46; 72-foot class, 2;
picketboats, 34-foot to 65-foot class, 199; auxiliary craft, which
includes maritime training, repair, freight, and cable-laying vessels,
11; lightships, including 9 relief lightships, 39; and ship and station
boats, 2,888, embracing craft assigned to ships, Coast Guard stations,
and Maritime Service training stations, and including 161 motor
lifeboats, 196 motor surfboats, and 479 pulling surfboats designed and
maintained especially for rescue missions.
Two 110-foot class cutters, of all-welded construction and especially
designed for icebreaking, and one tender class cutter were placed
in commission. One tender class cutter, designed for deep sea service,
was under construction at the close of the year, and a contract was
awarded for the construction of two additional tender class cutters
for duty on the western rivers.
In addition to the small boat building program at the Coast Guard
Depot, the following boats were under construction on outside
contracts: 6 38-foot cabin picket-boats; 12 30-foot rescue boats, 3 of
which are of special design for aviation crash boat service; 2 26-foot
motorboats; 2 24-foot motor launches, and 2 whaleboats. There
were constructed under contract for the Maritime Service 16 26-foot
drill boats and 10 19-foot sailboats; and a contract for 20 additional
drill boats was awarded.
Stations, bases, repair depot, etc.
On June 30, 1940, there were 195 fully manned lifeboat stations,
including three houses of refuge in a reduced complement status; 63
inactive lifeboat stations having no crews but being used as boathouses, lookouts, and for other miscellaneous purposes; 33 bases,
30 of which were former Lighthouse Service depots; 16 servicing
bases for maintenance of aids to navigation; and 6,379 minor light
structures and 1,830 major light structures, 508 of which were resident
keeper light stations. A reorganization of lifeboat, and light stations,
bases, etc., was in progress on June 30, with the purpose of effecting
consolidations. Numerous projects were completed in the station
rebuilding program.



EJEPOIRT OF T H E SEiORETAIlY OF T H E TRE'ASHJRY

251

Repair depot.—The Repair Depot at Curtis Bay, Md., is maintained for repairing and altering cufters, constructing the small
standard life-saving boats of the Service, and manufacturing parts
and small items of equipment for the Service in general. There were
constructed during the year 18 motor lifeboats, 16 motor surfboats,
33 pulling surfboats, 19 motor launches, and 15 dinghies. In addition
to the above, a 40-foot steel lifeboat of all-welded construction was
completed for experimental purposes. Two patrol boats were reengined and reconditioned, and several cutters were extensively
overhauled.
Awards oj lijesaving medals
The Secretary of the Treasury, under the provisions of law, awarded
during the year 1 gold and 39 silver medals of honor, and 1 silver bar,
in recognition of heroism or bravery exhibited in rescue or attempted
rescue of persons from drowning in waters over which the United
States has jurisdiction, or upon an American vessel.
Legislation and Executive authorizations
Various laws affecting the administration and organization of the
Coast Guard were enacted by the Congress during the fiscal year:
Public No. 167, July 12, 1939, authorized the Secretary of the
Treasury to establish a Coast Guard station at or near Monterey,
Calif.
Public No. 183, July 15, 1939, provided for an increase in the
membership of the Congressional Board of Visitors to the Coast
Guard Academy, and for the appointment of members vice those
unable to attend.
Public No. 239, July 27, 1939, authorized the acquisition of land
for a depot at or in the vicinity of St. Louis, Mo.; the purchase of a
site for a servicing base at Atlantic City, N. J.; and the transfer of
land from the War Department for enlargement of the depot reservation on Yerba Buena Island, Calif.
Public No. 247, July 31, 1939, permits retired officers and enlisted
men to hold civil office in any Territory of the United States.
Public No. 258, August 4, 1939, authorized the Commandant to
detail personnel for duty in connection with maritime instruction and
training by the several States, Territories, District of Columbia, and
Puerto Rico, and by the United States when requested by the United
States Maritime Commission.
Public No. 291, August 5, 1939, perfected the consolidation of the
former Lighthouse Service with the Coast Guard by authorizing the
commissioning, appointment, and enlistment in the Coast Guard of
certain officers and employees of the Lighthouse Service.
Public No. 292, August 5, 1939, abolished the grades of district
commander and constructor and provided for the transfer of officers in
such grades to the line of the Coast Guard.
Public No. 329, August 7, 1939, authorized the establishment of a
Coast Guard station at or near Wrightsville Beach, N. C.
Public No. 370, August 10, 1939, provided for the retirement, under
certain conditions, prior to July 1, 1940, of certain personnel of the
former Lighthouse Service upon reaching the age of 64, or whose
positions were abolished.
269677—41

18




o

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TEEASfURY

Public No. 556, June 6', 1940, provided for the procedure to govern
the selection of officers for voluntary retirement, who have had 30
or more years service and the retirement of those who have been
placed out of line of promotion; and also for recommending lieutenant
commanders to be placed out of line of promotion.
Public No. 557, June 6, 1940, authorized the acquisition of land
to enlarge the depot at Seattle, Wash., and the establishment of a
servicing base at or near Chattanooga, Tenn.
Public No. 564, June 6, 1940, amended and clarified certain acts
pertaining to the Coast Guard in relation to rank upon retirement
of Commandant, Assistant Commandant, and Engineer-in-Chief; to
the duties of the Assistant Commandant; to the discontinuance and
re-establishment of stations, light stations, and houses of refuge; to
the reimbursement for operating expenses and for damage repairs to
motorboats and yachts of the Coast Guard Reserve while in the
service of the Coast Guard; and provided for extension of correspondence courses to members of the Coast Guard Reserve, for ration
allowances and commutation thereof, and for the disposition of
remains of deceased officers, enlisted men, and civilian personnel.
Public No. 671, June 28, 1940, applicable alike to the Navy and
Coast Guard, provided for expediting contracts in the interest of
national defense, prescribed working hours for civilian employees,
provided overtime compensation under certain conditions, and provided for removal from office of civil service employees when warranted
in the interest of national security.
Executive Order No. 8254, of September 18, 1939, authorized increases in the personnel and facilities of the Coast Guard to meet
conditions arising with respect to enforcement of neutrality and the
strengthening of national defense.
Proclamation No. 2412, of June 27, 1940, authorized the Secretary
of the Treasury to exercise control of vessels in territorial waters of
the United States.
Funds available, obligations, and balances
The following table shows the amounts available for the Coast
Guard for the fiscal year 1940. The amounts of obligations and unoblierated balances are also shown.
Available funds, obligations, and unobligated balances, fiscal year 1940
Source of funds
Appropriations:
Salaries, Office of Coast Guard, 1940
Pay and allowances, 1940..
Fuel and water, 1940.
1
Outfits, 1940
Rebuilding and repairing stations, etc., 1940
Communication lines, 1940
Civilian employees, 1940...
Contingent expenses, 1940..
Repairs to vessels. 1940
Repairs to aircraft, 1940
Additional airplanes, 1939-40
Additional airplanes, 1940-41
Coast Guard air station, Elizabeth City, N. C , 1939-40..
Coast Guard air station, San Francisco, 1939-40
Repairs to vessels, 1939-40
i.
Outfits, 1939-40
Rebuilding and repairing stations, etc., 1939-40
Communication lines, 1939-40




Appropriated
or aliotted

$572, 701
21, 076,937
1, 520, 000
2, 362,188
694, 000
259, 400
206, 750
135, 800
2, 240, 000
613, 000
17,187
477, 000
33, 500
34, 521

Obligated

$565, 058
21, 028, 578
1, 514, 291
2, 352, 541
687, 529
257, 841
199, 788
131, 298
2, 236, 216
606, 086
12, 422
453, 754
32, 389
32, 705

184

130

98, 329
1, 287, 060
63,400

97, 586
1,106, 533
63, 400

Unobligated
balance

$7, 643
47,369
5,709
9,647
6,471
1,559
6,962
4,502
3,784
6,914
4,765
23,246
1,111
1,816
54
743
180, 527

BlEPOtRT OF T H E SEOEBTASY OF T H E TEEEAS>U!EY

253

Available funds, obligations, unobligated balances, fiscal year 1940—Continued
Source of funds

Appropriations—Continued.
General expenses, L . H . S., Coast G u a r d , 1940
Salaries, keepers of L . H . , Coast G u a r d , 1940
Salaries, L . H . vessels, Coast G u a r d , 1940
Salaries, L . H . , Coast G u a r d , 1940
R e t i r e d p a y , L . H . S., Coast G u a r d , 1940
A i d s to n a v i g a t i o n , L . H . S., Coast G u a r d , 1940
Vessels for L . H . S., Coast G u a r d E m e r g e n c y C o n s t r u c tion Act, J u l y 21, 1932
A i d s to n a v i g a t i o n , L . H . S., Coast G u a r d E m e r g e n c y
C o n s t r u c t i o n A c t , J u l y 21, 1932
. Special projects, vessels, L . H . S., Coast G u a r d _
Vessels for L . H . S., Coast G u a r d
Special projects, L . H . S., Coast G u a r d . .
.
Special projects, aid to n a v i g a t i o n , L . H . S., Coast G u a r d .

Grand total...

$4,441,960
1,890, 000
2, 432, 000
754, 600
830, 000
1, 314

Obligated

$4,407, 382
1,817, 270
2, 336, 911
723, 443
802, 540
1,008

Unobligated
balance

$34, 578
72. 730
95, 089
31,167
27, 460
306

11, 745

9,824

1,921

26,149
1,587,350
15, 615
42, 838
2, 328, 740

16, 595
855, 736
361
28, 466
740, 559

9,554
731, 614
15, 254
14, 372
1, 588,181

45, 953, 268

Total...
O t h e r available funds:
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 , act of 1938 (allotment to
T r e a s u r y , lighthouses)
Foreign service p a y a d j u s t m e n t , appreciation of foreign
currencies ( T r e a s u r y ) , 1940
....
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 , act of 1938 (allotment to
T r e a s u r y , Coast G u a r d )
N a t i o n a l I n d u s t r i a l Recovery, T r e a s u r y , lighthouses
W o r k i n g fund, T r e a s u r y , Coast G u a r d , 1940
W o r k i n g fund, T r e a s u r y , Coast G u a r d , t r a i n i n g of personnel ( c o n s t r u c t i o n f u n d , U . S. M a r i t i m e C o m m i s s i o n ) .
Golden G a t e I n t e r n a t i o n a l Exposition (transfer to T r e a s u r y , Coast G u a r d )
W o r k i n g fund, T r e a s u r y , Coast G u a r d .
E m e r g e n c y relief, T r e a s u r y , Coast G u a r d , Federal nonconstruction projects (transfer from W . P . A.)
E m e r g e n c y relief. T r e a s u r y , Coast G u a r d , general adm i n i s t r a t i v e expenses (transfer from W . P . A) .
E m e r g e n c y relief, Treasm-y, Coast G u a r d , (transfer from
W . P . A . 1938-40) - .
Total

Appropriated
or allotted

43, 018, 240

2, 935, 028

453, 950

378, 735

75, 215

500

31

469

1, 312, 924
17, 805
27, 500

1, 268, 252
17. 737
25, 500

44, 672
68
2,000

3, 814, 249

3, 405, 051

409,198

4,739
963

3,389
963

1,350

70, 712

57, 879

12, 833

2.489

2, 485

4

51, 290

48, 372

4,918

6, 757,121

5, 206, 394

550, 727

51, 710, 389

48, 224, 634

3, 485, 756

Review of activities since 1933

Administrative organization
The repeal of the eighteenth amendment in 1933 changed conditions
with regard to the smuggling of liquor into the United States, which
resulted in drastic reductions in the appropriations for the Coast
Guard, with consequent reduction in vessels, bases, and personnel.
The Service, which had been expanded from 1926 to 1932, was faced
with the problem of reorganization and readjustment to carry on
within its limited funds.
A reorganization of the Service was completed in 1933, providing
for a rearrangement of Coast Guard districts and divisions and making
other changes so as to definitely fix authority and responsibihty in
any section along the coast and to permit greater flexibility and coordination of the forces of the Coast Guard. As a result of this reorganization the efficiency of the Service was markedly increased, and the
estimates for the fiscal year 1934 were reduced by over a million dollars.
Later, in 1937, the efficiency of the Coast Guard stations was increased
through the consolidation and elimination of certain units and by the
improvement and modernization of the remaining units. The overlapping areas of field work of the civil engineering force were made to
conform with those of the general administrative units in which they
were stationed, effecting coordination and better administration in



254

^REPORT OF TELE. SECRETARY OE T H E TR;EASIURY

the prosecution of the construction and repair projects throughout the
Service.
The consolidation of the former Lighthouse Service with the Coast
Guard on July 1, 1939, brought together two of the oldest agencies of
the Government, both contributing to safety of life at sea. This
development made necessary a further reorganization in the Coast
Guard to embrace all combined activities in a coordinated and efficient
system of administrative control and direction.
National dejense
Constituting a part of the military forces of the United States, the.
Coast Guard since 1933 has been giving constant attention to preparedness plans, in collaboration with the Navy under which it
operates in time of war. Improvements in armament and fire control
equipment of the vessels have been made simultaneously with latest
developments, and a carefully planned system of small-arms training
for personnel, gunnery exercises by vessels, and participation in Army
and Navy maneuvers and problems have been attended by increased
efficiency of the Service.
Promoting sajety oj marine commerce and oj lije and property at sea
While the Coast Guard carries on the duty of rendering assistance
to persons and property in peril at sea, it is equally concerned in
measures and policies designed to prevent disasters occurring at sea.
Therefore, when the United States Maritime Service was established
pursuant to the Merchant Marine Act of June 23, 1938 (52 Stat. 953),
the Coast Guard was selected by the Maritime Commission as the
organization best fitted for the administration of the Maritime Service,
the function of which is to assist in the maintenance of a trained and
efficient personnel by providing an adequate training system, making
available facilities for instruction, and contributing other benefits to
the seamen who serve the seagoing merchant fleet. This represents
the first time in our history that the Federal Government embarked
upon the duty of carrying out a systematic program of training for the
hcensed and unlicensed personnel of the merchant marine, and never
before has such adequate consideration been given to the welfare of the
men of the merchant fleet. Since undertaking the administration of
the Maritime Service in September 1938 more than 900 licensed and
3,800 unlicensed personnel of the merchant marine have been enrolled,
instruction being given at the training stations at Boston, Mass.;
New London, Conn.; New York, N. Y.; San Francisco, Calif.; and
aboard the 10,000-ton training ship American Seaman and the sail
vessel Joseph Conrad stationed at St. Petersburg, Fla. While originally the training was confined to men who had previous service in
the merchant marine, the program has been broadened recently to
provide training for men without previous sea experience, selected
from the membership of the Civilian Conservation Corps.
The act of Congress approved June 23, 1939 (53 Stat. 854), creating
the Coast Guard Reserve, a voluntary nonmilitary organization, was
designed to increase safety at sea and on navigable waters through
training and instruction and by securing cooperation of yachtsmen
and other small boat owners.



ROEiPOIRT OF THE, SEORETARY OF T H E TREASIURY

255

During the past few years the facilities of the Coast Guard, employed in cooperation with the Interior Department, have served in
the colonization by the United States of Canton, Baker, Howland,
Enderbury, and Jarvis Islands in the mid-Pacific. The progress made
by the Service in the modernization of its cutters and their equipment
especially fitted them for the extended cruises involved in this undertaking, particularly in connection with trans-oceanic air commerce.
While the problem of icebreaking in channels and harbors during
the winter season, especially along the North Atlantic coast, has been
one of long standing, present-day dependence upon the uninterrupted
flow of commodities transported by water, especially fuel oil, has
necessitated the Coast Guard giving particular attention to alleviating
the economic loss and hardship attendant upon ice-locked channels
and ports. As a result, a number of cutters and harbor craft constructed since 1933 have embodied structural features making them
adapted for icebreaking and permitting a widening field of service
by the Coast Guard in such type of operations. Under an Executive
order dated December 21, 1936, the Coast Guard was directed to
assist in keeping open to navigation by means of icebreaking operations, insofar as practicable and as the exigencies may require, channels and harbors in accordance with the reasonable demands of
commerce, thus making such assistance a duty of the Coast Guard.
The inauguration of radiotelephone broadcasts of weather forecasts,
storm warnings, hydrographic information, and notices to mariners
has aided materially in the promotion of safety of life at sea. These
broadcasts are made by Coast Guard stations advantageously located
along the Atlantic, Gulf, and Pacific coasts and on the Great Lakes.
With trans-oceanic air commerce dependent for its safety, in a measure, upon reliable weather data, increasing responsibility has been
assumed by the Service in furnishing meteorological data to the
Weather Bureau from Coast Guard vessels at sea. In 1940 the Coast
Guard, in cooperation with the Weather Bureau, established an
Atlantic Weather'Observation Service, the cutters occupying certain
stations between Bermuda and the Azores, particularly for the protection of United States-Europe air commerce.
A new 30-caliber shoulder line-throwing gun and equipment was
perfected in 1935, and has been supplied to all Service units which
would be called upon for rescue or assistance work.
Maritime law enforcement
Since 1933 several laws have been enacted which have resulted in a
great strengthening and broadening of the legal powers of the Coast
Guard and extended its jurisdiction and scope of operations to keep
pace with the growing interest and concern of the Federal Government
in all phases of maritime law enforcement and safety of life at sea
Among these are the Antismuggling Act of August 5, 1935 (49 Stat.
517); the act of June 22, 1936, to define the jurisdiction of the Coast
Guard (49 Stat. 1820); the Safety of Sea Act of June 25, 1936 (49
Stat. 1922), which provides for the establishment of a patrol service
in the North Atlantic in the neighborhood of ice and derelicts; the
Whaling Treaty Act of May 1, 1936 (49 Stat. 1246), under which the
Coast Guard is specifically designated as one of the enforcement
agencies in connection with the conservation of whales; and the North



256

IREPOIRT OF. T H E SEORETARY OF T H E TREASIURY

Pacific Halibut Act of June 28, 1937 (50 Stat. 325), which provides for
the protection of the North Pacific halibut fishery.
Armed with the powers derived from the Antismuggling Act of
August 5, 1935, the Coast Guard was able to cope so effectively against
the liquor smuggling fieet that by June 1936 organized smuggling by
sea was practically completely dispersed.
Prior to the enactment of the act of June 22, 1936, to define the
jurisdiction of the Coast Guard, the Service carried out several aspects
of Federal law enforcement functions without specific statutory
authority, acting according to custom, by inference, or by request of
some other Federal agency lacking facilities to undertake the task
itself. Passage of this act definitely made the Coast Guard the
Federal maritime police force charged with the enforcement of all
Federal laws on board any vessel, subject to the jurisdiction, or to the
operation of any law, of the United States, upon the high seas and the
navigable waters of the United States, its Territories and possessions,
except the Philippine Islands, and as such it is deemed to be acting
as agents of the particular executive department or independent
establishment charged with the administration of the particular law.
By intensifying and fostering coordination with otherlFederal and
State law enforcement agencies and particularly Treasury agencies,
much progress has been made in checking and detecting violations of
law. Special courses of instruction, to meet developments of new
legislation and the complex law enforcement problems, were instituted
for the benefit of Coast Guard personnel to fit them better to act as
enforcement officers while acting independently or in cooperation with
agencies of other departments or bureaus.
Aviation
In 1933 Coast Guard aviation was limited to three air stations and
12 pilots. At present there are eight air stations and one air patrol
detachment in commission; 2 new air stations are nearing completion;
the number of aviators and aviation pilots totals 66; and 52 aircraft
were in commission on June 30, 1940. The Service has given particular
attention to the development and perfection of fiying boats, the present
craft being capable of flying to sea for a distance of approximately
800 miles on rescue and patrol missions and of transporting 6 persons
upon stretchers. The use of aircraft has grown from its experimental
stage in Service operations to a point where it is now an established
facility in carrying forward the Service law enforcement work both
at sea and upon land,, in rescue missions, and in promoting safety of
life at sea in dissemination of hurricane warnings to vessels not
equipped with radio, in searching for overdue craft, in observing
menaces to navigation, and locating distressed mariners following
storms. Aircraft facilities are also provided aboard the latest type
of Coast Guard cutters. In 1934 all flying activities under the jurisdiction of the Treasury Departinent were consolidated with and placed
under the supervision of the Coast Guard.
Personnel and training
Since 1933 the Coast Guard has taken advantage of every opportunity to improve the standards of Service personnel. This has been
brought about by affording additional opportunities to personnel to
pursue certain courses of instruction in academic and professional



RjEPOET OF THE. SEORETARY OF T H E TREASURY

257

subjects; by the enactment of the act of May 24, 1939 (53 Stat. 755),
permitting retirement of certain groups of enlisted men upon the completion of 20 or more years service; by the enactment of the act of
June 6, 1940 (Public No. 556), permitting the selective retirement of
commissioned officers; by new or renovated barracks and living quarters for personnel; and by certain improvements in administration.
Of far-reaching eff'ect in promoting efficient administration was the
merging into the line of the Coast Guard, pursuant to the act of
August 5, 1939 (53 Stat. 1217), those officers who had been carried
previously in the military grades of district commander and constructor. This had the effect of eliminating two separate divisions in grades
of the commissioned corps and bringing the officers formerly in such
status into united grade relationship with the officers of the line.
Certain advancements have been made at the Coast Guard
Academy, New London, Conn., the source from which commissioned
officers of the Service are obtained. Five professors and one additional civilian instructor have been added to the instruction staff,
and additional courses of instruction have been instituted in order to
cover the additional duties assumed by the Coast Guard in the enforcement of maritime laws, training of merchant marine personnel,
and maintenance of aids to navigation. An Academy Advisory Committee, composed of distinguished educators who are members of the
faculties of outstanding universities, appointed pursuant to the act
of April 16, 1937 (50 Stat. 66), is giving its constant attention to
the adequacy and improvement of the Academy curriculum, and
annually since 1938 a Board of Visitors, composed of Members of
Congress, has visited the Academy for inspection and recommendations.
The facilities of the Coast Guard Institute at New London have
been extended so as to afford officers and men of the Coast Guard,
Maritime Service, and Coast Guard Reserve an opportunity to pursue
courses of study in academic aud professional subjects. Trade schools
have been established for the training of enlisted men in various
specialties, and officers are now afforded the opportunity to pursue
postgraduate courses at various colleges and universities in the
advancement of their professional training.
Medical facilities for the officers and men and their families have
been broadened through the enactment of the act of July 30, 1937
(50 Stat. 548), and motorized clinics have been provided by the Public
Health Service for affording dental care and treatment to enlisted men
at isolated stations. A welfare section has been established at headquarters, the primary duty of which is to look after the well-being of
the personnel, provide recreational facilities, and to conduct a continuous study in order to improve conditions insofar as personnel are
concerned.
The Coast Guard, with its disciplined and military trained personnel,
was designated by the Secretary of the Treasury in 1934 to conduct a
program of training in small arms for the civilian personnel of the
Treasury Department who carry firearms in the performance of their
official duties. Instruction has been given annually to more than 5,000
men serving the various bureaus of the Treasury Department throughout the United States. This training assures adequate service from
those who are entrusted with the guarding of Federal property and
personnel.



258

iREPORT OF T H E SEORETARY OF T H E TTlEAuSUR-Y

Coast Guard jacilities
The facilities of the Service have been improved, augmented, and
modernized to efficiently meet the wide field of public service within
the sphere of Coast Guard operations and cognizance. Major improvements were made to 147 Coast Guard lifeboat stations and four
new stations were constructed. Ten new air stations and six new
radio stations greatly contribute to the high efficiency of these branches
of the Service. New buildings were constructed at the Coast Guard
Academy and Fort Trumbull Training Station, New London, Conn.,
and at the Coast Guard Depot, Curtis Bay, Md., where Service
vessels are repaired.
New communication facilities have been provided for ship, shore,
and aircraft use which include over 600 new radio transmitters, 900
radio receivers, and 146 radio direction finders. Over 200 miles of
additional telephone lines and cables were constructed and over 350
miles of new circuits were added to existing pole lines. A radio loud
speaker system has been developed for use on aircraft to warn small
vessels of approaching hurricanes.
Since 1933 the Coast Guard fleet has been strengthened by the
construction of 12 cruising cutters, 18 harbor cutters especially
constructed for ice-breaking, 21 patrol cutters, and 20 tenders for
servicing lightships and isolated light stations. The 1,698 small boats
which were constructed consisted of 91 lifeboats, 224 rescue boats, and
1,383 miscellaneous craft. Major repairs and alterations were made
to 127 vessels which consisted of improved living facilities, the replacement of gasoline engines with approximately 15,000 horsepower of
Diesel engines to effect economy of operation and reduce fire hazard,
the installation of more efficient electric generating sets, and the
provision of fresh water for cooling internal combustion engines in
place of salt water to prevent rapid deterioration of engines. Modernization of small boats has required the purchase of approximately
60,000 horsepower of light-weight high speed gasoline engines.
Aids to navigation have been improved by the construction of new
light stations and buoys and by major repairs and alterations to
existing facilities. One new lightship was constructed and 7 new
major light stations were constructed on the Great Lakes; 4 of these
light stations replaced lightships, thus providing stationary aids to
navigation at a much less maintenance cost; also 37 new radio beacons
were constructed. A large number of lights using acetylene gas were
changed to be lighted by electricity, and arranged to be controlled by
light beam and sound operated mechanism. River and harbor improvements during this period have required a large part of the 6,286
new aids to navigation to mark new and improved channels. Improvements have been made to existing facilities by the installation of 160
fog signal air compressors, 240 electric generator sets, 175 improvedtype fog signal units, and 240 main power electric batteries. Iniproved
signal timing equipment, radio remote control units, radiophone calling
devices, visual direction finder indicators, and radio beam transmitters
have been improved and developed and installed in the larger buoys.
New buildings were constructed at 8 repair bases for servicing aids
to navigation and 6 new servicing bases were constructed on the
Mississippi River and its tributaries. A new radio laboratory was constructed at Baltimore, Md., where radio equipment and automatic
control devices are developed and repaired. Six major light stations



REPOtRT OF THE. SEOREiTARY OF THE. TREASURY

259

in Alaska were completely rebuilt and new dwellings to accommodate
the families of 30 lighthouse keepers were constructed at other light
stations.
BUREAU O F T H E C O M P T R O L L E R OF T H E CURRENCY i
Activities during the fiscal year 1940

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 establishment of branch banks, the consolidation of
banks, and the conversion of State banks into national banks.
Changes in the condition oj active national banks
The total assets of the 5,170 active national banks on June 29, 1940,
amounted to $36,885 millions, an increase of $3,704 millions since June
30, 1939, when $33,181 miUions was reported by 5,209 banks. The
deposits of the active banks in 1940 totaled $33,074 millions, which
was $3,605 millions more than in 1939. The total assets and total
deposits in 1940 were greater than on any previous call date in the
history of the National Banking System. The loans and investments
totaled $22,085 miUions, representing an increase of $958 millions
during the year.
The assets and liabilities of active national banks on the date of
each report from June 30, 1939, to June 29, 1940, are shown in the
following statement:
Abstract of reports of condition of active national banks on the date of each report from
J u n e 30, 1939, to J u n e 29, 1940
[In thousands of dollars]
June 30,
Oct. 2,
Mar. 26,
June 29,
Dec. 30,
1939 (5,209 1939 (5,202 1939 (5,193 1940 (5,184 1940 (5,170
banks)
banks)
banks)
banks)
banks)
ASSETS

Loans and discounts, including overdrafts._
U. S. Government securities, direct obligations
Obligations guaranteed by U. S. Government-._
_
Obligations of States and political subdivisions
Other bonds, notes, and debentures
Corporate stocks, including stock of Federal
Reserve Banks

8,673,7031

764,196

9, 043, 632

9,060, 292

9,179, 227

6,899,885

828,512

7,117,420

7, 079, 569

7,219, 890

1,869,844

921,999

1, 956, 515

1,891, 697

1,891,336

1,693, 684
1,864, 354

793, 798
801, 936

1, 784,899
1, 731,837

1, 920,115
1, 678,163

1,928, 352
1, 648, 245

225,119

224, 704

220, 905

217,894

217,452

. Total loans and investments
21.126,589 21,335,145 21,856,208
•,730
.,602
Cash, balances with other banks, including
reserve balances, and cash items in
process of collection
11,074,806 12, 374, 891 12,503,613 12,935,818 13,877,104
Bank premises owned, furniture and fix599,694
697. 251
607, 716
600,296
tures
-_
609,146
131,691
127,671
119, 515
141.239
137, 591
Real estate owned other than bank premises.
' More detailed information concerning the Bureau of the Comptroller of the Currency is contained in
the annual report of the Comptroller.




260

'REPOIRT OF T H E SECIRETARY OF T H E TREASnjRY

Abstract of reports of condition of active national banks on the date of each report from
J u n e 30, 1939, to J u n e 29, i^^O—Continued
[In thousands of dollars]
M a r . 26,
1940 (6,184
banks)

J u n e 29,
1940 (5,170
banks)

J u n e 30,
1939 (5,209
banks)

Oct. 2,
1939 (5,202
banks)

D e c . 30,
1939 (5,193
banks)

70,417

69, 218

65,561

66,980

65,392

51, 656

42, 291

56,845

52,121

42,339

60, 652
46,173

65,496
52,329

58,033
49,020

63,699
42,944

58, 672
40,305

33,180, 578

34. 684, 676

35, 319, 257

35, 736, 667

36,885,080

14,633,038

14, 940, 600

15,136,162

15, 976, 786

7, 717,408

7, 792,009

7,875,792

589,190
2, 080,992
5,899, 785

572, 253
2,138, 403
6,031,089

564, 997
2,270,866
6, 084,051

ASSETS—C ontinued
I n v e s t m e n t s a n d other assets i n d i r e c t l y representing b a n k premises or o t h e r real estate
C u s t o m e r s ' liability on acceptances outs t a n d i n g _.
I n t e r e s t , commissions, r e n t , a n d other income earned or accrued b u t n o t c o l l e c t e d . .
O t h e r assets
..
Total assets:

__

LIABILITIES

D e m a n d deposits of i n d i v i d u a l s , p a r t n e r . ships, a n d corporations
13, 643,678
T i m e deposits of i n d i v i d u a l s , p a r t n e r s h i p s ,
a n d corporations
_
7,665,426
D e p o s i t s of U . S. G o v e r n m e n t , i n c l u d i n g
postal savings
543, 258
D e p o s i t s of States and political s u b d i v i s i o n s . 2,290, 992
D e p o s i t s of b a n k s
4,882. 437
O t h e r deposits (certified a n d cashiers'
443, 678
checks, etc.)
Total deposits-..
._
Bills p a y a b l e , rediscounts, a n d other liabilities for borrowed m o n e y
M o r t g a g e s or o t h e r liens on b a n k premises
a n d o t h e r real e s t a t e . - _
Acceptances executed b y or for account of
, reporting banks and outstanding
I n t e r e s t , discount, r e n t , a n d o t h e r income
collected b u t n o t e a r n e d
I n t e r e s t , taxes, a n d other expenses accrued
and unpaid
_.
_
Other liabilities--

531,902
2,095,159
5, 681,162
366,062

385,017

326,352

301,925

29,469,469

SO, 980, 693

31,612,992

31,996,268

33,074,407

3,540

2,997

2,882

1,794

2,910
117

279

140

120

124

67.636

51,812

64,175

58, 328

60, 641

35, 273

37,084

.37,709

40, 775

41,376

45, 978
178,891

65. 557
136, 620

41,031
165, 230

54,143
147, 734

49, 741
189,447

29, 791,066

T o t a l liabilities
CAPITAL

7, 673,370

31, 264,903

31,914,139

32, 299,166

33,408,639

1, 562, 956
1,170,822
449, 352
206, 382

1, 559.411
1,181,016
467, 404
211, 942

1, 532, 903
1, 216, 222
445, 403
210, 590

1, 524, 973
1,225, 648
475,013
211,857

1, 534, 649
1, 249,961
468,203
223. 628

ACCOUNTS

C a p i t a l stock (see m e m o r a n d a below)
Surplus
_
U n d i v i d e d profits
Reserves (see m e m o r a n d a below)

3, 389, 512

3,419, 773

3,405,118

3,437,491

3, 476,441

T o t a l liabilities a n d capital a c c o u n t s . . 33,180, 578

34, 684, 676

36, 319, 257

35, 736, 667

36, 885,080

1 228, 309
1 18, 264
1, 319,430

221, 249
17, 777
1,322, 897

194, 001
17, 732
1,323, 694

185, 651
15, 273
1,326, 593

193, 904
14,859
1,328,180

1, 566,003

1, 561, 923

1, 536, 427

1. 527, 417

1, 636,943

1 259, 738
1 20, 255

253, 989
19, 780

226, 662
19, 755

218,174
17,343

245,165
17,144

279, 993

273, 769

246,417

236, 517

262, 309

5,649
9,687
15,935
175, 211

f
1
211, 942 1
I

6,037
9,006
17,228 [
178,319

f
1
211,857 1
I

. 5,456
9,116
19,581
189,475

206. 382

211, 942

210, 590

211,857

223. 628

T o t a l capital accounts

MEMORANDA

P a r v a l u e of capital stock:
Class A preferred stock
Class B preferred stock
Common stock...

..

TotaL
R e t i r a b l e v a l u e of preferred capital stock:
Class A preferred stock
Class B preferred stock
Total
Reserves:
R e s e r v e for d i v i d e n d s p a y a b l e in commonstock--.
- ..
Reserve for other u n d e c l a r e d d i v i d e n d s R e t i r e m e n t account for preferred s t o c k Reserves for contingencies, e t c . . .
Total

1 Revised.



261

BBPORT OF T H E SEOKEiTAKY OF T H E TKEiASIUKY

Abstract of reports of condition of active national banks on the date of each report from
J u n e 30, 1939, to J u n e 29, 1940—Continued
[In thousands of dollars]
June 30,
1939 (6,209
banks)

Oct. 2,
1939 (5,202
banks)

Dec. 30,
1939 (5,193
banks)

Mar. 26,
June 29,
1940 (5,184 1940 (5,170
banks)
banks)

2,192,832

2,110,911

2, 297,683

2,311,063

2,397, 702

679,147

608,678

605,760

615, 722

593.605

93i 378
5,998

94,183
13,177

93,789
22, 794

94,538
7,290

93,990
7,929

2,871. 355

2,826,849

3,020, 026

3,028, 613

3,093,186

2,321,687

2, 226, 906

2,406, 791

2,448,056

2, 522, 681

2,915

2,465

2.373

1,560

2,653

967

950

976

219

492

2, 325, 569

2,230,321

2,409,139

2,449,825

2, 525, 726

MEMORANDA—Continued
Pledged assets and securities loaned:
U. S. Government obligations, direct
and guaranteed, pledged to secure deposits and other liabilitiesOther assets pledged to secure deposits
and other liabilities, including notes
and bills rediscounted and securities
sold under repurchase agreement
Assets pledged to qualify for exercise of
fiduciary or corporate powers, and for
purposes other than to secure liabilities
..
Securities loaned
Total
Secured liabilities:
Deposits secured by pledged assets pursuant to requirements of law
Borrowings secured by pledged assets,
including rediscounts and repurchase
agreements.
.
__..
Other liabihties secured by pledged
assets
Total

•

Summary oj changes in the National Banking System
The authorized capital stock of the 5,174 national banks in existence on June 30, 1940, consisted of common capital stock aggregating
$1,329 millions, an increase during the year of $8 miUions, and preferred capital stock aggregating $210 miUions, a decrease (luring the
year of $37 millions. The total net decrease of capital stock was $29
millions. During the year charters were issued to 13 national banking associations, which had common capital stock aggregating $2 millions and preferred capital stock of over half a million dollars. There
was a net decrease of 43 in the number of national banks in the system during the year by reason of 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 1940 are shown in the following summary:




262

IBE'POIET OF TH© SEORETABY OF T H E TKEASIUEY

Organization, capital stock changes, and liquidations of national banks,
fiscal year 1940
Number
of
banks

Charters granted .
_
.
Increase of preferred capital stock:
23 banks, by issues of new preferred capital stock
2 banks, by consolidation under act of Nov. 7, 1918, as
amended
Increase of common capital stock:
45 banks, by regular increases
739 banks, by common capital stock dividends
.
1 bank, by conversion of preferred capital stock
3 banks, by consolidation under act of Nov. 7, 1918, as
amended

{

I

Capital stock
Common
$1,800,000
420,000

Preferred

$637,000
13,745,000
150,000

3,731,250
10, 396,484
75, 000
110,000
13

Total increases
Voluntary liquidations
Decreases of capital stock:
36 banks, by reduction of common capital stock
__
1,081 banks, by retirement of preferred capital stock..
6 banks, by decrease of par value of preferred capital stock..
1 bank, by reduction of preferred capital stock..
Closed under consolidation under act of Nov. 7,1918, as amended,
and capital stock decreases incident thereto

16, 632, 734

14, 532,000

51

3, 481.450

1, 630,800

4, 966, 650

49,057,971
561, 760
100, 000

Net changes during the year
Charters in force June 30, 1939
Charters in force June 30, 1940

5

332, 600

250,000

8, 779, 500

61, 600, 621

-f 7, 753,234
1, 320, 790, 569

-37, 068, 521
247,161, 045

1 6,174

...--

66
-43
5,217

Total decreases

1,328, 543, 803

210,092, 624

» This figure differs from that shown in the table on p. 259. Banks that have discontinued business
although not in formal liquidation do not submit reports of condition but are included in this table.

Administration oj unlicensed national banks
During the fiscal year 1940, liquidating dividends amounting to
$19 millions 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, 1940, a total of 87 percent of the aggregate unsecured
liabilities of these banks on March 16, 1933, had been released; 750
banks released 100 percent of unsecured liabilities. A summary with
respect to the administration of all unlicensed national banks since
March 16,'il933, is shown on page 265.
Review of activities since 1933

During the period from March 6, 1933, to June 30, 1940, the Office
of the Comptroller of the Currency, in addition to its regular work of
examining and supervising approximately 5,000 active national banks,
was concerned with (1) the reopening of the banks following the bank
holiday; (2) the reorganization of those banks that were unable to reopen and continue business after the bank holiday; (3) the liquidation
of national banks placed in receivership; and (4) the strengthening of
the capital structure of the open national banks.
Bank holiday
During February and the first days of March 1933, banking difficulties had become acute in many parts of the country. On February 14,
the Governor of Michigan issued a proclamation which closed all banks



RiE'POR^T OF T H E SB'QlREiTARY OY T H E TRE'ASfURY

263

in that State. By March 4, banks in practically all States were either
closed or were operating uncier restrictions as a result of proclamations
made by the Governors. In the Nation's financial centers. New York
City and Chicago, banks and such financial institutions as the New
York Stock Exchange and the Chicago Board of Trade were closed.
In order to place all banks on a uniform basis of restricted operations,
the President proclaimed a four-day bank holiday on the morning of
March 6, 1933.
Reopening oj banks
On March 9, 1933, the President recjuested Congress to enact immediately legislation giving the Executive branch of the Government
control over the banks for the protection of depositors and further authority necessary for the reorganization and reopening of banks.
In accordance with this request. Congress passed, without a dissenting vote, an act known as the Emergency Banking Act, which was approved on March 9. On the same day, immediately subsequent to the
passage of this act, and in accordance with authority extended thereby,
the President issued a proclamation continuing in fuU force and effect
the regulations and orders incorporated in his proclamation of March 6.
The bank holiday was thereby extended indefinitely.
On March 11, 1933, the President announced that a definite program
had been adopted for the reopening of banks, and that in accordance
therewith banks throughout the country would be reopened progressively on March 13, 14, and 15. The plan of reopening provided
that the Federal Reserve Banks would issue licenses for the Secretary
of the Treasury to eligible national and State bank members of the
Federal Reserve System located in each of the twelve Federal Reserve
Bank cities to open on Monday, March 13; to eligible banks located
in the 250 cities having active, recognized clearing-house associations
to open Tuesday, March 14; and to all eligible banks located elsewhere
to open Wednesday, March 15. State banks which were not members
of the Federal Reserve System were to be reopened by the appropriate
State supervisory authorities.
Under this plan for reopening the banks, 5,077 member banks with
deposits of more than $25 billions as of December 31, 1932 (nearly 90
percent of the deposits of all member banks on that date according to
the call reports of their condition), were licensed to reopen during the
three days, March 13, 14, and 15. Of these, 4,510 were national banks
with deposits (as of December 31, 1932) of approximately $16 billions.
The number of non-member banks (exclusive of mutual savings banks)
authorized by March 29 to resume operations on an unrestricted basis
was about 6,800, and by April 12 this number had grown to 7,394 and
their deposits of about $5 billions (as of December 31, 1932) represented about 75 percent of the deposits of all such non-member.banks.
Of the 1,632 member banks which were not licensed to reopen by
March 15, 1933, 1,407,were national banks. Of these, 292 national
banks were subsequently licensed and were reopened after capital
corrections had been made. The remaining 1,115 national banks
were either reorganized, placed in voluntary liquidation, or placed
in receivership. The relative position of these banks in the national
banking system can be drawn from the following table which compares
selected balance sheet items for the 4,902 licensed banks operating
on June 30, 1933 (the first date after the bank holiday for which asset



264

'RE'POORT OF T H E SECIRETARY OF T H E

TREASfURY

and liability figures are available), with similar items for the unlicensed
national banks on March 16, 1933.
Balance sheet items for licensed and unlicensed national banks
[Dollars in millions]
Licensed
Unlicensed
banks, June banks, March
30, 1933
16,1933
Number of banks..
Total assets
Total deposits
Borrowed money..
Capital stock

4,902

1,116
$2, 273
1,653
194
169

Reorganization oj banks that did not reopen ajter the bank holiday
By March 16, 1933, it was found that 1,407 national banks throughout the country and 10 non-national banks located in the District
of Columbia (under the supervision of the Comptroller of the Currency), with deposits aggregating $1,972 millions, could not be licensed
until further corrective action had been taken. In order to administer
these banks in a manner to avoid giving any depositor preference the
Comptroller, imder authority granted by title I I (Bank Conservation
A.ct) of the Emergency Banking Act, placed 1,105 of these banks in
conservatorship; the remaining 312 banks were reorganized or otherwise disposed of without the appointment of a conservator.
Under the conservatorships, the assets of the banks were held
intact untU such time as the Comptroller deemed it possible to reopen
the bank under a plan of reorganization, or found it advisable to
appoint a receiver for the bank. The statutory authority for these
reorganizations and the procedure followed was provided in the Bank
Conservation Act. Under this statute the Comptroller was empowered to p u t into effect reorganization plans when assented to by
shareholders owning two-thirds of the outstanding capital stock or
depositors and other creditors owning 75 percent of the liabilities, or
both, provided he was satisfied in each case that the plan of reorganization was fair and equitable as to all concerned and was in the
public interest.
The records showing the administration of the 1,417 banks have
been segregated into five major groups: First, banks licensed after
capital corrections; second, banks placed in voluntary liquidation;
third, banks reorganized by a waiver of claims by depositors or
creditors and the cooperation of stockholders; fourth, banks reorganized by a court order sale; and fifth, banks placed in receivership
because plans for reorganization were disapproved. I n the first and
second groups the depositors and creditors obtained 100 percent of
their claims. I n the third group the bank was enabled to make all
or a portion of its deposits and claims available through the cooperation of all or some of the depositors or stockholders. I n none
of these cases was the appointment of a receiver necessary.
In the fourth and fifth groups the Comptroller appointed a receiver
to administer the affairs of the closed bank.
The banks in the fourth group were reorganized under a court order
sale plan whereby another bank took over a portion of the good



265

RE'POiRT OF THE. SEORETARY OF T H E TREAiSfURY

assets of the bank and the remaining assets were liquidated by a
receiver appointed by the Comptroller of the Currency.
The banks in the fifth group were placed in receivership following
disapproval of plans submitted for reorganization.
The. following table summarizes data with respect to these 1,417
banks under the jurisdiction of the Comptroller of the Currency which
were not opened by March 16, 1933. These data are classified by
the foregoing groups in accordance with the final disposition of the
bank. Further data with respect to these banks can be found in the
appendix to the annual report of the Comptroller of the Currency.
Final disposition of national banks {and of non-national banks in the District of
Columbia) which were unlicensed on March 16, 1933
[Dollars in millions]

Final disposition of bank

Number
of
banks

Capital 1

Unsecured liabilities
Total Total
Total
bordeAmount Percent
assets 1 posits 1 rowed
Total
money i amount i released
to June of total
30, 1940 released

292

$28.6

$395.6

$306.8

$15.0

$306. 6

$306.6

100.0

13

.5

2.7

1.3

.4

1.3

1.3

100.0

665

64.1

830.5

594.4

77.4

694.6

632.4

89.5

257
290

82.3 1, 219. 8
238.9
22.9

917.0
152.4

84.0
35.8

882.9
138.2

730.2
99.4

82.7
71.9

198.5 2, 687. 4 1,972.0

212.6

1, 922. 7

1, 668. 9

86.8

Licensed after capital correction
Placed in voluntary liquidation
Reorganized without appointment of a receiver
Reorganized by court order
sale plan
Placed in receivership

1,417

Total

1 As of December 31,1932, or as reported in conservators' first reports.
NOTE.—Figures have been rounded to nearest tenth of a million and will not necessarily add to totals.

National bank receiverships
During the period November 1, 1932, to June 30, 1940, a total of
1,779 national bank receiverships were administered by the Bureau
of the Comptroller of the Currency. The greatest number of insolvent
national banks in process of liquidation at any time during the
period (and since the establishment of the Bureau in 1863) was 1,568,
on July 19, 1934. On June 30, 1940, receiverships numbered 297.
D a t a with respect to the number of receiverships appear in the following statement:
Receiverships in process November 1,1932
^
Receiverships established November 1,1932, to June 30,1940:
As a result of bank holiday (fourth and fifth groups mentioned on page 204)
Prior to bank holiday or to collect stock assessments
Subsequent to bank holiday
.
Total administered during period
Receiverships completely liquidated and finally closed
Banks restored to solvency
Receiverships in process June 30,1940

...

Number
975
647
240
17
1,433
49

804
1,779
1,482
297

In the 1,779 receiverships administered during the period, total
collections from assets between November 1, 1932, and October 31,
1939, amounted to $1,722 millions. Total payments to all creditors
amounted to $1,558 millions, of which dividends to secured and
unsecured creditors amounted to $1,020 millions. The remaining
payments consisted of payments of preferred claims and offsets.



266

REPORT OF THE. SECRETARY OF T H E TREASIURY

Liquidation expenses amounted to $114 millions or less than 7 percentx
of the total collections including offsets. Further data with respect to \
these receiverships are shown in the following table:
^
Results of liquidation of 1,779 receiverships between November 1, 1932, and October
31, 1939
[DollarsIin|millions]
Amount
Collections:
Cash balances in hands of Comptroller and receivers at beginning of period
Collections from assets
Collections from stock assessments
Earnings collected (interest, premiums, rents, etc.)
Offsets allowed and settled (against assets)
Increase in unpaid balance of Reconstruction Finance Corporation loans
Increase in unpaid balance of bank loans

$48.9
1,416.9
95.6
81.2
128.5
117.7
37.1

"

Total
Disposition of collections:
Dividends paid by receivers to unsecured creditors
Dividends paid by receivers to secured creditors
.
Distributions by conservators to unsecured creditors
Distributions by conservators to secured creditors
.
Payments to secured and preferred creditors
.
Offsets allowed and settled (against liabilities)
Disbursements for the protection of assets..
Payments of receivers' salaries, legal and other expenses...
Payments of conservators' salaries, legal and other expenses
Amounts returned to shareholders in cash
. Decrease in unpaid balance of Reconstruction Finance Corporation loans
Decrease in unpaid balance of bank loans
Cash balances in hands of Comptroller and receivers at end of period

1, 926.0

_

Total
Losses on assets compounded or sold under order of court
.
Book value of assets returned to shareholders' agents
Amount of assessments upon shareholders
Average percentage of total expenses of liquidation to total collections including offsets allowed

787.9
21.4
208.9
L3
410.2
128.5
46.7
102.6
11.5
1.8
127.4
36.8
41.9
1,926.0
529.3
18.2
142.8
6.6%

NOTE.—Figures have been rounded to nearest tenth of a million and will not necessarily add to totals.

Of the 1,433 receiverships finally liquidated and closed between
November 1, 1932, and June 30, 1940, 1,363 cases had been closed by
October 31, 1939. Total payments to all creditors in these cases
amounted to $647 millions. Other data with respect to these receiverships are shown in the following table:




\

REPORT OF T H E SEORETARY OF T H E TREASURY

267

Results of liquidation of 1,363 receiverships finally closed between November 1, 1932,
and October 3 1 , 1939
[Dollars in millions]
Amount
Total assets taken charge of by receivers
Disposition of assets:
Collections from assets
Offsets allowed and settled (against assets)
Losses on assets compounded or sold under order of court.
Book value of assets returned to shareholders' agents
Book value of remaining assets
Total.
Collections:
Collections from assets as above
Collections from stock assessments
^..
Earnings collected (interest, premiums, rents, etc.)
Offsets allowed and settled (against assets)
Unpaid balance Reconstruction Finance Corporation loansTotal.
Disposition of collections:
Dividends paid by receivers to unsecured creditors.Dividends paid by receivers to secured creditors
Distributions by conservators to unsecured creditors
Distributions by conservators to secured creditors
Payments to secured and preferred creditors
Offsets allowed and settled (against liabilities)
Unrecovered disbursements for the protection of assets
Payments of receivers' salaries, legal and other expenses
Payments of conservators' salaries, legal and other expenses..
Amounts returned to shareholders in cash
.
Total.
Capital stock at date of failure
United States bonds held at failure to secure.circulating notes
.
United States bonds held to secure circulation, sold and circulation redeemed
Circulation outstanding at date of failure
__
Amount of assessments upon shareholders
Total deposits at date of failure
Borrowed money (bills payable, rediscounts, etc., at date of failure)...
Additional liabilities established subsequent to date of failure
Claims proved (secured and unsecured)

I
Average percentage of dividends paid to claims proved
Average percentage of deposits paid
;
Average percentage of total payments to total liabilities
|
Average percentage of total expenses of liquidation to total collections including offsets allowed..
Average period required to complete liquidation (exclusive of stock assessment and restored
to solvency banks)..
i._.

$976.3
650.5
67.7

348.8
18.4
0
975.3
650. 6
66.3
36.6

57.7
0
701.0
319.5
21.1
61.6
.6

197.1
57.7
3.7
45.2
3.1
1.7
701.0
109.-2
52.4
52.4
61.2
10L8
609.0
164.3
22.7
566.3
69. 3%
78.3%
31. 3%
7.4%
6 years 6
months

NOTE.—Figures have been rounded to nearest tenth of a million and will not necessarily add to totals.

The earnings of the 1,363 receiverships terminated between 1932
and 1939 are not available. With respect to the jl,294 receiverships
terminated between October 31, 1933, and October 31, 1939, however,
total earnings amounted to $37 millions, or 74 percent of the total
cost of liquidation of such receiverships.
|
Under legislation making it possible for receivers to borrow from
the Reconstruction Finance Corporation and other sources upon the
security of trust assets, receivers had obtained byi October 31, 1939,
a total of 2,321 loans from the Reconstruction Finance Corporation
in the amount of $395 miUions for the benefit of 1,125 receiverships.
On that date, however, only 13 of these loans remained unpaid and
the balances due amounted to $1,786,000. Siihilar loans in the
amount of $95 millions had been obtained from 45 lending banks for
the benefit of 94 receiverships, and on October 31, 1939, only 6 of
these loans remained unpaid and the balances totalled $856,000.
I
2 6 9 6 7 7 — 4 1 - -19



268

'REPOOEIT OF T H E SECIRETARY OF THE^ TREASfURY

Strengthening the capital structure oj the banks
The rehabilitation of the national banking system following the
bank holiday laid considerable emphasis on the strengthening of the
capital structure of the various banks. This program was carried
out in the first instance through the subscription to preferred stock
of the banks by the Reconstruction Finance Corporation in accordance
with section 304 of the Emergency Banking Act of 1933. This
section provides, in part, that if in the opinion of the Secretary of the
Treasury any bank or trust company is in need of funds for capital
purposes either in connection with the organization or reorganization
of such bank or trust company, he may, with the approval of the
President, request the Reconstruction Finance Corporation to subscribe for preferred stock in such bank or trust company, or make
loans secured by such stock as collateral, and the Reconstruction
Finance Corporation may comply with such request. Between
March 9, 1933, and June 30, 1940, in pursuance of this program, the
Reconstruction Finance Corporation, at the request of the Secretary
of the Treasury, disbursed approximately $573 millions in loans on
and purchases of preferred stock of national banks. Of this total
disbursement, $450 millions was made prior to June 30, 1935.
Local stockholders also assisted in the capital strengthening program through purchases of both preferred and common stock. In
the aggregate the Bureau of the Comptroller of the Currency authorized preferred stock increases in capital in 1,870 banks and preferred
stock issuance in 420 newly organized banks. As of June 30, 1940,
preferred stock was still outstanding in 1,517 banks as is shown in the
following table:




Preferred capital stock authorized for national banks under the act of March 9, 1933, as amended, during the period from March 9,1933, to June
30, 1940; and outstanding in associations in existence as of June 30, 1940
Authorized
Increases of capital

Outstanding in banks in existence,
June 30, 1940

Newly organized banks

Total

States
Number
of banks

Amount

Number
of banks

Amount

Number
of banks

Amount

Number Amount (par
value)
of banks

Amount (retirable
value)

o
O

Alabama
Alaska
Arizona
._.Arkansas
California.
Colorado—
Connecticut
_.
Delaware
District of Columbia.
Florida.--.
Georgia
Idaho
nimois
Indiana.-..
Iowa.Kansas
__..-..
Kentucky
Louisiana
Maine
--.
Maryland
-.
Massachusetts
Michigan
_ .Minnesota - _.
Mississippi
Missouri
Montana
Nebraska
Nevada
-.
New Hampshire
New Jersey.
New Mexico
New York
North Carolina
North Dakota
Ohio
Oklahoma
Oregon




23
1
2
18
66
25
21
5
2
11
12
9
114
47
31
42
28
4
17
26
49
24
—92
13
29
19
42
3
12
147
6
272
11
28
71
31
15

$11,086,000
37, 500
300,000
1, 562, 250
41,776,000
3,697, 500
5,636,900
195,000
1,660,000
1,260,000
1,617, 500
1,095,000
84,577, 750
6,212,900
5,970,000
2,174, 600
2,995,000
600,000
3,410,000
3,244,000
13,993,700
3,816,600
- 43,-536,-500
2, 525,000
7,377, 500
1,606,000
6,460,000
175,000
1,563,000
35,900,000
170,000
142,493, 600
1,100,000
2,237,500
31,420,500
6,650,000
776,000

$225,000
, 240,000
200,000
780,000
660,000
200,000
200,000
206,000
1,670,000
3, 620,000
775,000
270,000
1,365,000
3,900,000
625,000
1,076,000
260,000
17,034,000
226,-000230,000
1,792, 500
25,000
410,000
50,000
395,000
300,000
740,000
955,000
203,000
1,247,000
4,380,000
150,000

27
1
3
24
64
34
22
5
2
16
18
9
149
63
52
47
36
15
24
28
53
65
—99
15
34
20
51
3
14
156
8
279
20
31
94
40
20

$11, 310,000
37,500
1,540,000
1, 762,250
42, 665,000
4, 247, 500
6; 836,900
196,000
1,650,000
1,450,000
1; 722, 500
1,095,000
247, 750
832, 900
746,000
2, 444,600
4, 350,000
4,400,000
4,036,000
4, 319,000
14, 253, 700
20, 849, 600
-13i 761,500
2, 766,000
9, 170,000
1,631,000
5,870,000
175,000
1,613,000
296,000
36,
470,000
233,500
143, 055,000
2, 440, 500
2, 667, 600
32, 930,000
10, 925,000

$4,404,800
1
13
36
20
17
4
1
9
12
7
107
39
32
31
16
13
16
19
30
42
—5113
23
10
31
1
10
126
6
195
11
17
66
21
6

$4, 604,800

1,196,600
896, 636
31,269,208
1,223,800
4,281,132
86,000
1,000,000
349,000
826,250
764,100
5,979, 746
4,426,620
2, 566,450
. 1,308, 000
2,247,050
3,216, 500
1,364,105
2, 506,000
4,981, 300
14,126, 601
—47-326,-097
1,621,940
2,352,800
282,980
1,541,950
12, 500
866, 600
22,477,645
293,400
20, 548,861
387, 500
736,900
14,299,236
1,333,794
140,300

1,196, 600
934,600
61,149,208
1,223,800
4,776,632
136,000
1,000,000
349,000
826,250
764,100
6,029,746
4,426,620
2, 556,450
1, 308,000
2,269, 660
3,216, 600
1,488,280
2,785,666
5,736,800
14,136,601
--5,11470971,621,940
2,414,451
282,980
1, 541,960
12, 600
875, 500
31,109,292
293,400
27,375, 390
387, 500
735, 900
18,161,236
1,333, 794
140,300

m

i

i
o

W

zn

to
CO

Preferred capital stock authorized for national banks under the act of March 9, 1933, as amended, during the period from March 9, 1933, to J u n e
30, 1940; and outstanding in associations in existence as of J u n e 30, 1940—Continued

bO
O

Authorized
Outstan ding in b a n k s in existence,
J u n e 30, 1940
Increases of capital

Total

N e w l y organized b a n k s

States
•

Number
of b a n k s

Amount

Number
of b a n k s

Amount

Number
of b a n k s

Amount

N u m b e r A m o u n t (par
value)
of b a n k s

A m o u n t (retirable
value)

O

I

o
Pennsylvania
R h o d e Island
S o u t h Carolina
South Dakota
Tennessee
Texas
Utah
Vermont
Virginia
Virgin I s l a n d s .
Washington
West VirginiaWisconsin
Wyoming

_
.-

.

- -

.
---

:

..

Total




-

_

...

.--

-

_
... ...
---

—

160,000
675,000
125,000
95,000
620,000
710,000
25,000

238
3
7
34
27
149
9
16
40
1
25
41
61
10

$26,314,550
900,000
1, 560,000
3,063,000
8,062, 500
23,438, 750
1, 575,000
1, 570,000
4,438,000
126,000
3,465,000
4,435,000
15,982, 500
840,000

187
3
3
18
20
98
6
11
22
1
13
29
42
6

$15,440,627
396,065
934,500
1,446,850
6, 626,825
9,652,626
750,000
678,808
1,201, 775
120,000
2,063, 200
1, 317, 250
9,839,900
405,000

$15,736,152
396,066
934,600
1,445,850
5,626,825
10, 307,916
750,000
783,108
1, 201, 775
120,000
2,063, 200
1,831, 350
9,839,900
406,000

55,886,300

2,290

590, 540,400

1,617

210,092, 524

263, 647,072

61
1
3
2
3
47

$4,347,300
100,000
170,000
80,000
475,000
3,227, 600

3, 370,000
3, 915,000
15, 272, 600
816,000

5
7
1
3
11
14
1

534,654,100

420

187
2
4
32
24
102
9
11
33

$21,967,250
800,000
1,390,000
2,983,000
7, 587, 600
20, 211, 250
1, 575,000
1,420,000
3,863,000

22
30
47
9
1,870

H
M

m
>
Q

^^
H

\^

d

HEPORT OF T H E SiEiORETA'EY OF T H E TEEASU'RY

271

The improvement in the total capital position, of national banks
since 1933 is shown in the table below, which presents for selected
dates the aggregate capital funds of all national banks. To allow the
figures to be compared directly, the capital funds as of December 31,
1932, are shown for only those 4,510 national banks which reopenecl
at the end of the bank holiday. During the period covered, the capital funds of national banks (starting with only those banks which
reopened at the end of the holiday) increased by $600 millions.
Capital funds of national banks
[Dollars in millions]

End of month

December 1932
June 1933 . .
June 1934
June 1935
June 1936

Number of
banks

1 4, 510
4,902
5,422
5,431
5,374

Total capital,
surplus, undivided
profits, and
reserves
$2,876
2,857
3,001
3,086
3,166

Number of
banks

Endof month

June
June
June
June

1937
1938 .
1939
1940

. . ..
.

Total capital,
surplus, undivided
profits, and
reserves

5,299
5,248
5,209
5,170

$3, 212
3,274
3,390
3,476

<
L ...
L
' _
1

1 Includes only those banks that reopened at the end- of the bank holiday. |

Changes in the condition oj all active banks
The Federal law requires that the Comptroller of the Currency assemble and publish annual figures on the assets and liabilities of all
banks in the United States. On June 30, 1940, there were 5,170
national banks, 9,239 State commercial banks, 5^1 mutual savings
banks, and 57 private banks, for which figures were assembled by the
Comptroller. The tables that follow show the assets and liabilities of
all active banks in the United States, by classes of banks, on each
June 30 between 1932 and 1940.
Although earnings figures for all active banks in the country are not
available, such figures are available for all national banks. These appear in the table on page 278, which shows earnings, expenses, and
dividends of national banks for the years ended June 30, 1933 to 1940.




Assets and liabilities of all active banks in the United States and possessions, June 30, 1932 to 1940
bO

[Dollars in millions]
1932

1934

1 14,624

1 15, 894

16,053

15, 803

$22, 387.8

$21,431.1
10, 995. 7
667.6
9, 626. 2
714.0

$20, 419. 2
12, 201. 6
2, 082. 5
9, 933.1
784.6

$20,839. 2
14, 840. 2
2, 518.0
10, 501. 3
1, 018.9

7, 092.2
3, 210. 7

9, 501. 8
3, 221. 2

11,613.0
3, 352. 9

57,190.1

51, 293. 9

66,157. 6

14,876. 3
23, 704. 6
1,077. 6
1, 901. 8
3, 236. 9
595.3

14,001.8
20, 245. 6
1, 637. 9
1, 603; 6
3, 364. 9
679.7

45,390. 3
652.2
1, 297.3
1,311.8
48, 651. 6

NUTTibe^ of b a n k s

1933

19,163

1935

1936

1937

1938

1939

1940

16, 580.

16, 341

15,146

15, 017

$22, 698. 2
14, 569. 0
2, 399. 5
10, 305. 6
958.3

$21, 311.1
14,083.1
2,691.2
9,571.2
1,044. 3

$21, 516. 3
15, 223.3
3, 567. 5
9, 595.0
1,042. 4

$22, 657. 6
15, 734. 7
3,975. 8
9, 364.4
1,148.6

14,103. 4
3, 367. 2

14, 670. 3
3, 323.9

16, 426.4
3,160.4

19, 584.1
3,072. 7

60, 386. 9

67,188. 2

68, 924. 8

68,277. 7

73, 601. 3

80, 213. 6

15, 638.1
21,397. 3
2,407. 7
2, 379. 2
4, 618. 4
384.3

iS, 910.1
22, 418. 9
1,198. 8
3, 001. 5
5, 563. 4
493.4

. 22, 464. 6
23, 446. 7
1, 346.1
3, 342. 8
6, 905.8
833.8

23, 698. 6
24, 571. 7
806.8
3, 579. 3
6, 361. 3
814.7

22, 911.4
24, 658.1
717.2
3, 534. 5
6,838.2
720.2

25,688. 9
25,137. 6
867.0
3, 784.2
8, 242. 6
856.6

29,982. 0
25,826. 4
883.4
3, 713. 6
10, 213. 2
634. 8

41,533.5
730.4
530.7
1,114.0

46,625. 0
698.3
203.0
778. 5

61,586.1
222.1
71.8
67L2

68, 339.8

69,822.4

59,379.6

64,576.7

71,163. 4

47.4
829.9

55.8
810.1

42.5
673.7

26.7
703. 7

27.0
708.1

43, 908.6

48, 304.8

52, 551. 2

69, 217.1

60, 688. 3

60,095.8

66, 307.1

71,888.5

322.5
641.3
2,695.1.
3,174. 7
1,119. 2

274.7
711.1
2, 619. 6
3, 093. 6
1,136. 7

244.7
633.7
2, 542.8
3,408.4
1,141. 5

185.0
472.2
2, 593.5
3, 700. 6
1, 285. 3

164.1
447.1
2, 693. 5
3,611.6
1,365. 6

160.5
420.6
2, 589.0
3, 551. 7
1, 582.4

128.2
367.9
2, 595. 7
3, 492. 3
1, 741.0

I

24, 535. 3
2, 897. 2

ASSETS
•

$28, 089. 9
L o a n s a n d discounts, including overdrafts
U . S. G o v e r n m e n t securities, direct obligations...'
;
}
6,456. 6
Securities fully g u a r a n t e e d b y U . S. G o v e r n m e n t
11, 767. 6
O t h e r b o n d s , stocks, a n d securities
.
.
791.6
C a s h i n vault .
B a l a n c e s w i t h other b a n k s , i n c l u d i n g reserve balances a n d cash
6, 576.1
i t e m s i n process of collection
3, 509. 3
O t h e r assets
>
.
. T o t a l assets

.

-.. -

_ .

7, 796.0 /
\
10,134. 7
672.6

.

D e p o s i t s of i n d i v i d u a l s , p a r t n e r s h i p s , a n d corporations:
Demand
..
-.
Time
..TJ, R. G o v e r n r n e n t a n d postal savings deposits ,
D e p o s i t s of States a n d political s u b d i v i s i o n s .
D e p o s i t s of b a n k s
.
.
O t h e r deposits (certified a n d cashiers' checks, etc.)
Total deposits
N a t i o n a l b a n k circulation
Bills p a y a b l e a n d rediscounts
Other liabilities—

.

Total liabmties
CAPITAL ACCOUNTS

T o t a l liabilities a n d capital accounts




3, 317.9 1
4, 058.0
1,162. 6

....

T o t a l capital a c c o u n t s . . .

m
O

LIABILITIES

C a p i t a l notes a n d d e b e n t u r e s 2
Preferred stock
- ._
Commonstock.
Surplus
U n d i v i d e d proflts a n d reserves

o

_ .

f
2,899. 6 I
3, 371. 3
1,114.4

8, 538. 5

7, 386. 3

7,862. 8

7, 835. 7

7, 971.1

8, 236. 6

8,181.9

8, 294.2

8, 325.1

57,190.1

51, 293.9

56,157. 6

60, 386. 9

67,188. 2

68, 924.8

68, 277. 7

73, 601. 3

80. 213. 6

1 Licensed banks; i. e., those operating on an unrestricted basis.

2 For banks other than national.

i
O

I

I
n

Assets and liabilities of active national banks, June 30, 1932 to 1940
[Dollars in millions]
1932

Number of banks

6,160

1933
1 4, 902

1934
1 5, 422

1935
6,431

1936

1937

1938

1939

1940

5,374

5,299

5,248

5, 209

5,170

$7, 763.4
7,073. 0
1, 374.4
4, 035. 2
531.6

$8, 812. 9
6, 902. 5
1, 316. 7
3, 903.1
444.6

$8, 334. 6
6, 510.4
1, 477.4
3, 656. 6
528.3

$8, 573. 7
6, 899. 9
1,869. 8
3, 783. 2
530.6

$9,179. 2
7, 219. 9
1,891.3
3, 794.1
582. 3

n
a

ASSETS

o

$10, 286.4
L o a n s a n d d i s c o u n t s , i n c l u d i n g overdrafts
.
U . S. G o v e r n m e n t securities, direct obligations
}
3, 352. 7
Securities fully g u a r a n t e e d b y U . S. G o v e r n m e n t
. - _
3,843. 9
O t h e r b o n d s , stocks, a n d securities
338.4
Cash in vault
- _
_ Balances w i t h o t h e r b a n k s , including reserve balances a n d cash
3,147. 5
i t e m s in process of collection „
. _. - _
1, 391. 6
O t h e r assets
T o t a l assets

-

$8,119.7
$7, 697. 7
f
5, 845. 8
4, 031. 6 1
357.9
3, 340.1
3, 344. 9
352.4
288.5

$7, 368. 7
6, 077. 7
1, 095. 3 .
3, 543.4
405.5

5, 344.6
1,156. 9

6,462. 7
1,103. 2

7, 849. 7
1,069. 4

7, 933. 2
1, 015. 8

8, 922. 3
948.1

10, 544. 2
979. 2

13, 294.8
923.5

22, 360. 5

20, 855. 6

23, 900. 2

26, 056. 5

29, 696. 7

30, 328.8

30, 377. 6

33,180. 6

6,934.-7
6, 623. 6
663.6
1, 253. 9
1,814. 7
270.5

7, 035. 7
5, 354. 0
1, 024. 4
1, 089.4
2, 000. 7
269.9

8,041.6
6,075. 6
1, 330. 5
1,499.0
2, 767.8
218.1

9, 674. 9
6, 646. 9
679.7
1,845. 3
3, 410. 7
260.7

11, 665. 9
7, 074. 6
829.9
2,108. 5
4,168. 0
353.6

12,430.2
7, 469.8
467.8
2, 203. 6
3, 790. 6
404.0

12,138.1
7, 548. 9
467.3
2,106.3
4, 211.1
344.2

13, 643. 7
7,666. 4
543.3
2,291.0
4,882. 4
443.7

15, 976. 8
7, 875. 8
665.0
2, 270. 9
6, 084. 0
301.9

16, 774.1
730.4
127.1
367.4

19, 932.6
698.3
20.1
248.1

22,518.2
222.1
8.9
220.9

26, 200.5

26, 766.9

26, 815. 9

29, 469.5

S3, 074. 4

3.7
326.8

9.2
341.6

9.6
278. 3

3.5.
318.1

2.9
331.3

LIABILITIES

D e p o s i t s of i n d i v i d u a l s , p a r t n e r s h i p s , a n d corporations:
Demand . .
Time
U . S. G o v e r n m e n t a n d postal savings deposits
D e p o s i t s of States a n d political subdivisions
D e p o s i t s of b a n k s . .
_
O t h e r deposits (certified a n d cashiers' checks, etc.)
Total deposits
N a t i o n a l b a n k circulation
Bills p a y a b l e a n d rediscounts
O t h e r liabilities

-

-

^.

36, 886.1

17, 460.9
652.2
546.4
421.2

-

3,830. 4
1, 245. 3

o

„ „ .-r.. /^

—l-7r999r0-

— 2 7 r l l 6 r 6 - - —27,-103r8- —29,-79lT-l- -

i
o
M

33, 408.6-

CAPITAL ACCOUNTS

Preferred stock—. . - Commonstock
Surplus.
. . . .
U n d i v i d e d profits a n d reserves
T o t a l capital accounts

...
_.
-

--

-.

T o t a l liabilities a n d capital accounts..
R e t i r a b l e v a l u e of preferred stock

I Licensed banks; i. e., those operating on an unrestricted basis.




1, 569. 0
1, 259. 4
451.4

53.8
1, 461. 9
940.6
. 400.3

412.1
1,325.8
854.1
409.1

625.1
1, 284. 4
831.9
445.0

443.6
1, 247. 8
973.4
601.0

299.0
1, 283.1
1, 073. 2
556. 9

266.1
1, 306. 8
1,118. 4
582.5

246.5
1, 316.4
1,170. 8
655.8

208.8
1, 325. 9
1, 250.0
691.8

3, 279. 8

2,856. 6

3,001.1

3, 086. 4

3,165.7

3, 212. 2

3, 273. 8

3, 389. 6

3, 476. 5

22, 360. 6

20, 855. 6
61.3

23, 900. 2
426. 9

26, 056. 5
634.2

29, 696. 7
457.4

30, 328.8
318.9

30, 377.6
286.0

33,180. 6
280.0

36, 885.1
262.3

to
oo

Assets and liabilities of all active banks other than national, June 30, 1932 to 1940^

IN:)

[Dollars in millions]
1934
13, 013

N u m b e r of b a n k s .

1938

1939

1940

210,472

10, 622

. 10, 429

10, 281

10, 093

9, 937

9,847

ASSETS

$17,803. 5
L o a n s a n d discounts, including o v e r d r a f t s . .
U . S. G o v e r n m e n t securities, direct obligations
| . 3,102.9
Securities fully g u a r a n t e e d by U . S. G o v e r n m e n t
7, 923. 7
Other b o n d s , stocks, a n d securities
453.2
C a s h in v a u l t
.
Balances w i t h other b a n k s , i n c l u d i n g reserve balances a n d cash
3, 428. 6
i t e m s in process of collection
.
2,117. 7
Other assets
..

$14, 268.1
3, 764. 4
6, 794. 6
384.0

$13, 733. 4
5,349. 9
309. 7
6. 281. 3
361.6

$13, 050. 5
6,123. 9
987.2
6, 389. 7
379.1

$13, 075. 8
7, 767. 2
1,143.6
6, 466.1
487.3

$13,885. 3
7,666. 5
1,082. 8
6,402. 5
613.7

$12, 976. 6
7, 572. 7
1,213.8
5,914. 7
616.0

$12,942. 6
8, 323. 4
1, 697. 7
5,811.8
611.8

$13, 378. 4
8, 514. 8
2,084. 5
6, 570.3
566.3

3, 261. 8
1, 965. 4

4,167. 2
2, 064. 3

5,150. 3
2, 249. 7

6, 253. 7
2, 297.8

6, 737.1
2,308.1

7, 504.1
2, 202. 3

9,039. 9
2, 093. 5

11, 240. 5
1, 973. 7

34, 829. 6

30, 438. 3

34, 330.4

37, 491. 5

38, 596. 0

37, 900.1

40.420. 7

n

43, 328. 5

Total assets.

o
o

Q

LIABILITIES

D e p o s i t s of i n d i v i d u a l s , p a r t n e r s h i p s , a n d corporations:
Demand
Time
U. S. G o v e r n m e n t a n d postal savings deposits
-...
D e p o s i t s of States a n d political subdivisions
D e p o s i t s of b a n k s
Other deposits (certified a n d cashiers' checks, etc.)

7, 940. 6
17,181. 0
413.9
647.9
1,421. 2
324.8

6, 966.1
14, 891. 6
613. 5
514.2
1, 364. 2
409.8

7, 496. 5
15, 321. 7
1,077.2
880.2
1, 750. 6
166.2

9, 236. 2
15, 772. 0
519.1
1,156. 2
2,152. 7
232.7

10, 798. 7
16, 372.1
516.2
1, 234. 3
2, 737. 8
480.2

11,268.4
17,101. 9
. 339.0
1, 375. 8
2, 560. 7
410.7

10, 773. 3
17,109. 2
249. 9
1,428. 2
2.627.1
376. 0

12, 045. 2
17,472.1
323.7
1,493. 2
3, 360.1
412.9

14, 005. 2
17, 950. 6
318.4
1,442. 7
4,129. 2
232.9

Total deposits
Bills p a y a b l e a n d rediscounts '.
O t h e r liabilities

27, 929. 4
750. 9
890.6

24, 759. 4
403.6
746.6

26, 692. 4
182.9
530.4

'9,067. 9
62.9
450.3

32,139.3
43.7
503.1

33,056. 5
46.6
468.6

?, 563. 7
32.9
395.4

35,107.2
23.2
385.6

38,079. 0
24.1
376.8

29, 570. 9

25, 909. 6

27, 405. 7

32, 992. 0

35, 516. 0

38,479. 9

1, 748. 9
2, 798. 6
711.2

1.383. 9
2, 430. 7
714.1

322.5
129.2
1, 369. 3
2,320. 6
710.1

164.1
181.0
1, 286. 7
2,493. 2
783.1

160.5
174.1
1, 272. 6
2,380. 9
926.6

128.2
159.1
1, 269. 8
2, 242. 3
1, 049. 2

5, 258. 7

4, 528. 7

4,851. 7

34, 829. 6

30,438. 3

.

T o t a l liabilities.
CAPITAL

ACCOUNTS

C a p i t a l notes a n d d e b e n t u r e s . . .
Preferred stock
C o m m o n stock
Surplus
U n d i v i d e d profits a n d reserves..
T o t a l capital accounts
T o t a l liabilities a n d capital a c c o u n t s .
1 Includes S t a t e (commercial), m u t u a l savings, a n d p r i v a t e b a n k s .




274.7
186.0
1,335. 2
2, 261. 7
691.7

244. 7
190.2
1, 295.0
2,435. 0
640.5

185.0
173.2
1, 310. 4
2,627. 3
728.4

4, 749. 3

4, 805. 4

6,024. 3

4, 908.1

4,904. 7

34, 330. 4

37,491. 5

38, 596. 0

37,900.1

40,420. 7

2 Licensed b a n k s ; i. e., those operating on a n unrestricted basis.

4,8
43, 328. 5

1^

Kl

o

i

Assets and liabilities of active State (commercial) banks, J u n e 30, 1932 to 1940 ^
[Dollars in millions]
1932

1934

1933
2 8, 962

1935

1936

1937

1938

1939

1940

2 9, 658

9, 808

9, 732

9, 632

9; 458

9,321

9,239

$7, 953. 6
$8, 304. 2
f
4,176. 6
3, 212. 6 \
239.6
3,008.8
3, 233. 2
306.9
320.0

$7, 686.8
4,476.6
791.0
3, 322. 5
330.4

$7,854. 3
5, 676. 7
908.3
3, 607. 9
433.2

$8, 766.1
6,166. 0
832. 7
3,50L6
456.6

$7, 958. 4
4, 890. 6
913.3
3, 352.8
455.6

$7,975.8
5, 288.8
1, 257.0
3, 391. 3
443.5

$8, 403. 5
5.869. 6
1, 567. 7
3, 394. 3
490. 4

§

2,888.8
1, 465. 6

3, 607.8
1, 367. 3

4, 584. 7
1, 349. 2

6, 620. 5
1, 350.4

6,108.8
1, 325. 3

6,859. 4
1, 269. 9

8, 274. 0
1, 216. 3

10. 291. 6
1, 176. 8

g

23,640.0

19, 424. 3

20, 659. 6

22, 441.1

25, 351. 3

26,146.1

25, 700.0

27, 846.7

31; 193. 9

7,919. 5
7,125. 9
413.7
646.1
1, 420. 9
324.6

6, 942. 3
5,171.1
613.5
512.8
1, 364.0
409.6

7, "300. 9
5, 461. 9
1, 077. 2
876.9
1, 662.8
165.9

8,911.9
5, 799. 7
519.1
1,144. 6
2,071.9
189.3

10, 359. 7
6, 278. 7
516.2
1, 228. 9
2, 633.4
479.4

10, 745.1
6, 856.8
339.0
1, 372. 6
2,469. 7
409.7

10, 372. 0
6,879. 5
249.9
1, 425. 3
2, 552. 3
374.6

11, 545. 0
7,013. 2
323.7
1, 490. 4
3, 224. 5
412.1

13. 912. 9
7, 309.1
318.4
1, 439.9
4, 089. 8
232.0

17,849.7
732.2
861.3

15,013.3
386.5
715. 6

16,544.6
163.0
478.6

18,636. 5
51.2
386. 9

21, 496.3
35.2
438.8

22,192.8
38.0
393.8

21,853.6
28.0
338.9

24,008.9
21.2
345.7

27,302.1
23.7
340.3

19, 443. 2

16,115. 3

17,186. 2

19, 074. 6

21, 970. 3

22, 624. 6

22, 220. 5

24, 375.8

"27, 666.1

12,192

N u m b e r of b a n k s

s

ASSETS

$11,634.4
L o a n s anfl discounts, including overdrafts
U . S. G o v e r n m e n t securities, direct obligations
1 2,570.7
Securities fully g u a r a n t e e d b y U . S. G o v e r n m e n t
.
4, 248.8
O t h e r b o n d s , stocks, a n d securities
• 396.0
Cash in v a u l t
..
.
Balances w i t h other b a n k s , including reserve balances a n d cash
3, 034.8 •
i t e m s in process of collection
.
1, 755. 3
O t h e r assets
T o t a l assets

.

H

i^

1

LLA.BILITIES
D e p o s i t s of individuals, p a r t n e r s h i p s , a n d corporations:
Demand
Time
U . S. G o v e r n m e n t a n d postal savings deposits
D e p o s i t s of States a n d political s u b d i v i s i o n s . . .
D e p o s i t s of b a n k s
O t h e r deposits (certified a n d cashiers' checks, etc.)
Total deposits
Bills p a y a b l e a n d rediscounts .
O t h e r liabilities

.
. - .

.

Total liabilities....

.

£

s
>
^
Kj

§

1
•

CAPITAL ACCOUNTS

C a p i t a l notes a n d d e b e n t u r e s
Preferred stock
Commonstock
Surplus
U n d i v i d e d profits a n d reserves

.

..
1, 743. 4 }
1, 904. 6
548.8

. . .
-.
_

.-

1 Includes loan a n d t r u s t companies a n d stock savings b a n k s .




249.1
186. 0
1, 266. 2
1, 235. 2
430.0

226.1
190.2
1, 248. 6
1, 270.9
445. 2

168.0
173.2
1, 266.8
1, 394. 6
518.9

151.7
181.0
1, 242. 6
1, 424.1
480.1

140.6
174.1
1, 231.1
1,318.2
606.9

120.2
159.1
1, 260. 9
1, 360. 0
627.6

4,196.8

T o t a l capital accounts
T o t a l liabilities a n d capital a c c o u n t s .

r
1, 379. 0 \
1, 373.1
556.9

293.8
129.2
1. 313. 7
1,197. 9
538.8

3,309.0

3, 473.4

3, 366. 5

3, 381.0

3, 621. 5

3,479. 5

3,470. 9

19,424.3

20, 659. 6

22, 441.1

25, 361. 3

26,146.1

25, 700. 0

27, 846. 7

31,193.9

d

^
Kj

3, 527. 8

23, 640.0

^

^

2 Licensed b a n k s ; i. e., those operating on an u n r e s t r i c t e d basis

tsO
07

-

Assets and liabilities of active mutual savings banks, June 30, 1932 to 1940

to

[Dollars in millions]
1932
N u m b e r of b a n k s _

......,,.--

594

1933

1934

1676

1578

1935
571

1936

1937
566

1938

564

1940

1939
562

552

651

ASSETS

T o t a l assets

.3,562.9
62.8

$5,647.3
991.9
69.3
3,195.4
53.4

$5,342. 6
1,379. 5
189.4
2, 942. 5
46.6

$5,113.6
1,851.1
230.9
2,771.4
52.2

$5,010.9
2,145. 5
245.6
2, 787.0
55.6

$4,927.0
2,394.8
289.7
2,491.9
59.1

$4,896.4
2, 653. 7
389.7
2, 310.1
63.7

• $4,926. 5
2, 697.0
516.0
2,148. 6
74.3

387.2
366.8

365.7
494.4

461.0
646.8

476.3
796.8

492.4
897.4

473.5
926.8

516.0
893.6

636.1
850.1

905.1
784.8

11,134.2

L o a n s a n d discounts, including overdrafts
_ - .
_
U . S. G o v e r n m e n t securities, direct obligations
}
Securities fully g u a r a n t e e d b y U . S. G o v e r n m e n t
O t h e r b o n d s , stocks, a n d securities
Cash in v a u l t - .
Balances w i t h other b a n k s , including reserve balances a n d cash
i t e m s in process of collection
.
O t h e r assets
.
__

10,967.1

11,065.1

11,172. 5

11,409.6

11,644.8

11, 572.0

11,798.8

11, 952. 2. •

2.2
10,429. 2
.001
1.1
.2
.1

2.6
10, 627. 5
.001
1.1
o
.1

$6,140.6
530.7
3,663.9
66.0

$5,941.0
550.3

.

/
\

H

i
m

D e p o s i t s of i n d i v i d u a l s , p a r t n e r s h i p s , a n d corporations:
Demand
Time
U . S . G o v e r n m e n t a n d postal savings deposits
.-D e p o s i t s of States a n d political subdivisions
D e p o s i t s nf b a n k s
.
O t h e r deposits (certified a n d cashiers* checks, etc.)

T o t a l liabilities

H
.O

Ul
LIABILITIES

Total deposits
Bills p a y a b l e a n d r e d i s c o u n t s
O t h e r liabilities

%
o

.

2.4
9,777.0
.03
.4
.3
.01

1.8
9,917. 3
.01
.6
.2
.04

3.6
10,065.3

3.7
10,208.3

10.6
10,197. 3

.7
.2
.1

1.1
.2
.1

1.2
.2
.1

9,713. S
16.3
27.8

9,780.1
6.4
15.4

9,919.9
4.9
23.0

10,059.9
3.6
25.0

10,213.4
2.8
24.8

10,209. 4
3.2
20.2

10,432.8
.5
20.3

9,757.4

9, 801.9

9,947.8

10,088.4

10, 241.0

10,232.8

10,463.6

10,656 1

890.0
161.4

1,064.3
156.4

28.7
1,073.1
161.4

25.6
977.2
221.9

18.6
1,131.7
170.3

17.0
1, 200.3
186.5

12.4
1,042.3
284.6

9.9
1, 034.9
300.4

8.0
868.0
420.1

i

W, 631.4
.003
24.7

10,082.8

-

3.1
9,709.7
.02
.3
.1
.1

10,039.0
17.5
26.3

--

3.2
10,033.8
.2
1.6
.1
.1

o

CAPITAL ACCOUNTS

C a p i t a l notes a n d d e b e n t u r e s
Surplus...
U n d i v i d e d profits a n d reserves

--

-.

T o t a l capital accounts
T o t a l liabilities a n d capital a c c o u n t s

1 Licensed banks; i. e., those operating on an unrestricted basis.




1,061.4

1,209.7

1,263. 2

1, 224.7

1, 320. 6

1,403.8

1,339.2

1, 345. 2

1, 296.1

11,134. 2

10, 967.1

11,066.1

11,172. 5

11,409.0

11,644.8

11,572.0

11, 798.8

11, 952.2

d

Assets and liabilities of active private banks, June 30, 1932 to 1940
[Dollars in millions]
1932
N u m b e r of b a n k s

1934

1933
227

1 184

1236

1935

1937

1936
243

1939

1938

1940

131

85

73

64

57

_

_

$121. 2
267.9
6.8
124.7
2.2

$107.9
339.4
4.4
86.8
L9

$108.3
366.0
4.6
113.9
1.5

$91.1
287.3
10.8
70.0
L3

• $71.4
380.9
61.0
110. 4
4.6

$48. 4
48.2
.8
27.5
1.6

8.5
1.2

6.6
6.6

7.3
5.5

88.4
60.2

89.3
104.7

140.8
60.0

164.8
66.0

128.7
38.9

129.8
27.1

43.8
12.1

^

46.9

532. 7

716.8

731.2

805.1

628.1

775.2

182.4

cn

17.9
21.3

20.7
10.8
.002
1.1
.1
.1

193.2
82.8
.02
3.9
87.5
.3

32L5
56.0
.006
11.0
80.6
43.4

435.4
38.1

619.6
36.8

390.7
32.4

498.0
29.7

89.8
14.0

4.7
104.2
.7

2.2
90.8
.9

1.7
74.6
1.3

L7
135.4
.7

1.7
39.2
.8

40.7
1.2
3.0

32.8
.8
3.3

367.7
13.5
36.4

511.6
6.8
40.4

583.1
5.0
39.3

650. S
6.8
50.0

500.7
1.7
36.3

666.5
1.6
19.6

145.6
.4
11.8

H

44.9

36.9

417.6

658.7

627.4

706.1

538.7

686.6

157.7

H3

6.5
4.0
1.0

_

11.0
1.2

$132. 6
181.4
.8
77.1
2.3

65.4

L o a n s a n d discounts, including overdrafts
U . S. G o v e r n m e n t securities, direct obligations
.
Securities fully g u a r a n t e e d b y U . S. G o v e r n m e n t
O t h e r b o n d s , stocks, a n d securities
C a s h in v a u l t
Balances w i t h other b a n k s , including cash i t e m s in process of collection
1
.
O t h e r assets
Total assets.

^

t?^

S

• ASSETS

4.9
3.3
L8

56.6
49.6
9.9

69.0
49.3
39.8

46.4
32.4
26.0

43.6
32.4
23.0

44.1
26.8
18.5

41.5
27.8
19.3

8.9
14.3
1.5

d

10.5

10.0

116.1

158.1

103.8

99.0

89.4

88.6

24.7

s

55.4

46.9

532.7

716.8

73L2

806.1

628.1

776.2

182.4

$28.5

}

-

$22.9
1.5

/
I

§
g

LIABILITIES

D e p o s i t s of i n d i v i d u a l s , p a r t n e r s h i p s , a n d corporations:
Demand
-Time
U . S. G o v e r n m e n t a n d postal savings deposits
D e p o s i t s of States a n d political subdivisions
D e p o s i t s of b a n k s
-_O t h e r deposits (certified a n d cashiers' checks, etc.)
Total deposits...
Bills p a y a b l e and rediscounts
O t h e r liabilities

.

L2
.2
.1

,,,

T o t a l liabilities

- .

.

_.-

T o t a l capital accounts

^..^

- ,-

- ,.

T o t a l liabilities a n d capital a c c o u n t s
1 Licensed b a n k s ; i. e., those operating on a n u n r e s t r i c t e d basis.




o

^
W
H
§

CAPITAL ACCOUNTS

C a p i t a l stock
Surplus.
U n d i v i d e d profits a n d reserves

1
f>

K!

bO

Earnings, expenses, and dividends of national banks, fiscal years 1933 to 1940

to

[Dollars in millions]
1933
N u m b e r of b a n k s 1
Average capital funds 3 *

-_.

.

---

...

Gross earnings:
I n t e r e s t a n d discount o n loans
Interest a n d d i v i d e n d s o n b o n d s , stocks, a n d other securities
..
O t h e r earnings
Total
Expenses:
Salaries, wages, a n d fees 5. . .
.
. . . _ _ .
I n t e r e s t on deposits a n d borrowed m o n e y
Taxes
Other expenses
Total
N e t operating earnings
Recoveries, profits on securities sold, etc.:
Recoveries on loans
Recoveries on b o n d s , stocks, a n d other s e c u r i t i e s }
Profits on securities sold
...
All o t h e r .
Total
T o t a l n e t operating earnings, recoveries, etc
Losses a n d depreciation:
O n loans
_._ _ _- O n b o n d s , stocks, a n d other securities
._
On b a n k i n g house, furniture a n d fixtures
Other losses a n d d e p r e c i a t i o n . - ..
Total
._
N e t additions to profits...
Dividends 7 .
..
. . .
N e t a d d i t i o n s t o profits t o average capital f u n d s .
N e t a d d i t i o n s t o profits to n e t earnings
Expenses t o gross earnings
.. .

... .

1936

1936

1937

1938

1939

1940
5,170

2 4,902
$3,156.2

2 5,422
$2,920.8

6,431
$3, 048. 5

5,374

6,299

$3,123. 5

$3,186. 6

5,248
$3, 246. 9

5,209
$3,331.7

$3,425. 7

473. 7
283:6
125.1
882.4

388.1
291.9
126.5
806.5

347.0
323.5
132.6
803.1

342.7
313.7
141.7
798.1

356.7
331.7
158.8
847.2

377.1
313.4
160.1
850.6

377.1
303.7
158. 3
839.1

400.0
289.4
169.0
858.4

202.2
182. 5
43.6
128.7

209.2
166.1
42.0
135.9

657.0
249.5

653.2

233.3
131.4
54.4
158.7
577.8

249.9

216.5
139.6
46.0
160.7
551.7
246.4

269. 4

244.6
127.4
53.8
100.1
585.9
264.7

249.4
118.4
52.9
156.0
576.7
262.4

255.7
109.1
59.2
163.7
587.7
270.7

26.3
93.6
15.4

64.1
143.1
6 78.8
12.9
298.9
545. 3

64.2
73.2
124.9
17.3

38.7
29.4
76.6
17.0

135.3
384.8

32.3
f
156.7 1
9.3
. 198.3
448. 2

279.6
549.0

161.7
426.4

33.4
35.2
129.8
13.5
211.9
474.3

40.2
33 4
93.6
15 6
182.8
453.5

204.6
271.5
41.0.
149.0
666.0
216.4

.

17.1
51.6
9.9
.78.5
294.9
231.4
236. 6
15.9
29.4
513.3
-218. 4
99.1

379.3
241.8
29.8
37.5

188.2
136.8
22.3
29.5

165.0
93.3
24.4
30.9

111.0
94.1
26.4
30.9

66.2
103.0
24.6
24.2

84.9
116.3
27.4
20.7

65 3
105 6
28 8
28.2

688. 4
-303. 6
76.8

376.8
71.4
103.4

303.6
241.7
125.6

262.4
286.6
153.6

218.0
208.4
143.8

249.3
225.0
137.8

227.8
225 7
137 5

Percent
-6.92
-100.92
75.48

Percent
-10.39
-121.68
69.06

Percent
2.34
28.57
68.88

Percent
7.74
98.09
69.13

Percent
8.99
106.38
68.20

Percent
6.42
78.73
68.88

Percent
6.75
85.75
68.73

Percent
6.59
83 37
68.47

1 At end of period.
2 Licensed banks; i. e., those operating on an unrestricted basis.
3 Figures for capital funds are averages of amounts from reports of condition for all calls
made in each year and the last call made in the preceding year, i. e., from June to
June, inclusive.




1934

00

4 Represents aggregate of capital stock, surplus, undivided profits, and reserves.
5 Fees included with other expenses prior to June 30, 1936.
6 6 months ended June 30, 1936.
7 Includes stock dividends of $50,000 in 1933, $710,000 in 1934, $2,243,000 in 1935, $7,342,000
in 1936. $30,141,000 in 1937, $21,863,000 in 1938, $10,109,000 in 1939, and $10,716,000 in 1940.

O
H
O

Ui

O

Kj

o
H
W

i

I
n

ElE'POiRT OF T H E SEOKEiTABY OF THE, TREiASIUIlY

279

BUREAU O F CUSTOlViS
Activities during t h e fiscal year 1940

Collections
Customs collections in the fiscal year 1940 turned sharply upward,
after two successive years of declining revenues. [The total of $350,851,561 was 9.2 percent larger than in 1939. Warehouse withdrawals

snowed tne largest mcrease m auties collected, as mdicat ed m tne
following table:
Customs collections ^ and refunds, fiscal years 1939 and 1940
[On basis of accounts of B u r e a u of C u s t o m s ]

Collections:
Duties:
C o n s u m p t i o n entries
Warehouse withdrawals
M a i l entries
Baggage entries . .
Informal entries
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 duties
O t h e r duties
T o t a l duties

Percentage
increase or
decrease (—)

1939

Type

...

..

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 a b a n doned m e r c h a n d i s e
.
....
All other c u s t o m s receipts

1940

$185, 652, 884
124, 612, 662
2, 890, 832
1, 009, 063
794, 930
272,446
3, 858, 272
150,057

$190, 974, 994
151,029,141
2, 098, 094
537, 533
689, 326
143, 788
4,187,897
150, 333

2.9
21.2
-27.4
-46.7
-13.3
—47.2
8.5
.2

319, 241,136

349,811,106

9.6

1, 704,458
93,120
233,297

722, 658
105, 873
49, 856

—57.6
13.7
—78.6

56, 992
80, 992

70, 792
91, 276

24.2
12.7

2,168, 869

1,040,456

—52.0

321, 409, 995

350, 851, 561

9.2

Refunds:
Excessive duties
Drawback payments

4,122, 800
11, 342, 265

4, 954, 275
14,041,580

20.2
23.8

T o t a l refunds

15, 465,065

18,995,855

22.8

T o t a l miscellaneous
T o t a l c u s t o m s collections

1 Excludes c u s t o m s duties of P u e r t o Rico, w h i c h are deposited to t h e credit of t h e Governin e n t of P u e r t o
Rico, b u t includes fines a n d other m i n o r collections of P u e r t o 1Rico.
.^n^^^:
11
^£
.\. ^
Despite the total increase in customs collections in 1940, 11 of ithe
15 schedules of the Tariff Act yielded smaller revenues than during
1939. The four dutiable schedules in which increases occurred were
sugar, wool, metals, and beverages. The increasefi collections under
the sugar schedule were due to the suspension from September 13 to
December 26, 1939, of the quotas established under the Sugar Act of
1937, and to the assessment of duties at rates in effect prior to the
trade agreement with Cuba. The substantial importations at higher
duties during this period caused total collections on sugar,and its
products to be more than 50 percent larger than during 1939.
As the result of increased demand in the United States for foreign
wool, revenue collected on wool imports exceeded ilhat for 1939 by 66
percent. Duties collected on sugar and wool were also larger|than
in 1938. Collections from imports of metals and beverages, on the
other hand, although substantially larger than during the previous
year, fell below the 1938 total.




280

'JRJE'POiRT OF THE; SECRETARY OF T H E TREASUEY

Taxes specified in the various revenue acts on imported merchandisCj
which was free under the Tariff Act of 1930, also yielded slightly
larger returns than in 1939, due to increased collections from crude
petroleum and copper which more than offset smaller receipts from
expressed and extracted oils.
The European war adversely affected customs revenues in the latter
part of the fiscal year, causing a decline of almost $18,000,000 in
duties collected on imports from Europe. Particularly large decreases
occurred in revenue on merchandise from Germany, Czechoslovakia,
and Poland, while smaller declines were recorded in duties on imports
from Italy, Greece, the Netherlands, Hungary, Bulgaria, and Denmark. Increased collections on imports from some European countries during the earlier months of the fiscal year, on the other hand,
were sufficient to offset the subsequently diminished collections on
their merchandise after their export market was curtailed as a result
of their involvement in or shipping difficulties resulting from the conflict. This condition explains increases in duties collected on imports
from Belgium, Norway, Sweden, and Yugoslavia, in each of which
exports to the United States were greatly reduced toward the end of
the year.
Although revenues on imports from Europe declined, larger revenues
were derived from imports from other areas. By far the largest
increase in customs revenue during 1940 came from the products of
Cuba, and was due to the suspension of the quota and the consequent
increase in the rates of duty on Cuban sugar. Greatly increased
revenue also was received from imports from the Union of South
Africa, the Netherlands East Indies, Chile, and Uruguay. Heavy
receipts of wool from Uruguay and the Union of South Africa accounted
for the increased revenues on imports from those regions, and a large
increase in direct importations from the Netherlands East Indies
offset decreased importations from the mother country and resulted in
augmented collections on merchandise from the colonial area.
The majority of the tariff schedules also exhibited the effects of the
European conflict. The importance of Germany as the source of
imports of chemicals, of Czechoslovakia as the source of leather footwear and gloves, linen goods, earthenware and glassware, and of
Poland as the chief source of pork products, accounted to a considerable degree for the reduced revenue from imports of chemicals, earthenware and glassware, agricultural products, and sundries. The
decrease in revenues on these and other products, from countries
from which direct importations could no longer be received, would
have been even greater' than they were if warehouse stocks in this
country had not been built up prior to the beginning of hostilities, in
anticipation of later import difficulties.
The value of dutiable imports and the estimated duties collected
are shown for the principal countries for the fiscal years 1939 and 1940
in table 18 on page 677.
I t will be observed that the aggregate of duty collections as estimated 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



EIE'POET O F T H E

S^'C>RETARY

O F T H E . TRlEAJSnCTRY

281

classification or rates of duty, 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 baggage, mail, and informal entries on which the duties
collected amount to a considerable sum.
Four-fifths of the total duties collected during 1940 were reported
by 9 customs districts, and 45 percent of the total by New York alone.
A statement of the duties collected for each customs district appears
in table .19 on page 678.
Volume oj business
In order to present statistics of the volume of custoins business
which are analogous to collections, the data which follow 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 Rico 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.
I
Entries oj merchandise.-—There were fewer entries of merchandise in
1940 than during the previous year; the only type of entry which was
more numerous than in 1939 was warehouse and rewarehouse entries.
The decline in the number of warehouse withdrawals and consumption
entries during the year, when there was a substantial increase in the
amount of duties collected, was due to the fact that sugar and wool,
which were largely responsible for the increased jrevenues in 1940,
were entered in large lots, the revenues per entry being much greater
than for most other merchandise. The decline in the number of those
types of entries covering commercial importations, therefore, was quite
closely parallel to the decline for those tariff schedules under which the
individual importations were comparatively small in quantity and in
revenue yield. The reduction in tourist travel accounts for the sharp
reduction in the number of baggage entries; and th^ break in communications with many European countries, for the even sharper decline
in the number of mail entries. Appraisement entries, which were
numerous in 1938 and 1939 as the result of the receipt of a large quantity of the personal effects of European refugees,j returned to their
normal number. The increase in the number of miscellaneous entries
was largely due to the inclusion of drawback notic|es of intent, which
were more numerous in 1940 as the result of the expansion of exports.
The number of entries during the past 2 years is shown in the
following table:
Number of entries of merchandise, fiscal years 1939 and 1940
Type
Consumption entries
Warehouse and rewarehouse entries..
Warehouse withdrawals
Mail entries..
_
__
Baggage entries
Informal entries
Appraisement entries
Another.-..
Total
1 Revised.




1939

514,028
64,118
372, 93g
690, 976'
710,005;
206,322
1 26,307
1 584,104

13,067,798

1940

Percentage
increase or
decrease (—)

465,988
68,469
360,039
423,000
636,468
191,167
16,721
620,648

-9.3
6.8
-3.5
-28.4
-24.6
-7.3
-33.9

2,681,500

-12.6

282

'RE'POOEIT OF THE. SECRET ARY OF T H E TREASIUUY

Vessel, airplane, and highway traffic.—Most of the different types
of vehicles used to transport merchandise and passengers to the
United States increased in number. Fewer persons arrived in this
country from abroad, however, the number arriving by documented
vessels being the smallest since 1932.
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
1939 and 1940
Kind of entrant

Vehicles:
Automobiles and busses _ . _
Documented vessels
Undocumented vessels
Ferries
Passenger trains
Aircraft-Other vehicles
Passengers by:
Automobiles and busses
Documented vessels
Undocumented vessels
Ferries
.
Passenger trains .
Aircraft
Other vehicles
Pedestrians

1939

... . .

. . .
. . . . .

Total passengers and pedestrians

_

....

.

Percentage
increase or
decrease ( - )

11, 643, 237
1 32, 220
25, 621
132, 328
33, 427
7,193
337, 686

.

. _. .

1940

.

11, 508,907
34, 331
29, 946
114, 041
33, 502
8,359
438, 964

-1.2
6.6
16.9
-13.8
.2
16.2
30.0

33, 519, 803
1, 019, 313
104,166
2, 209, 600
1, 080, 970
52, 786
1, 524, 621
10, 578, 528

32, 266, 533
733, 338
116, 628
2, 042, 528
1, 094, 023
78, 542
1, 633, 277
10, 597, 458

-3.8
-28.1
12.0
-7.6
1.2
48.8
7.1
.2

50, 089, 787

48, 662, 327

-3.1

1 Revised.

Airplane traffic on international lines continued its expansion, showing for the ninth consecutive year an increase in the number of planes
used. The number of passengers arriving by air from abroad was
almost 50 percent greater than during the previous year, and was
more than four times as large as in 1932. More than one-half of the
airplane passengers who reached the country on international lines
arrived in the Florida customs district, most of these at the port of
Miami. Large gains over the previous year were also recorded at
Seattle, Wash., Burlington, Vt., Newark, N. J., and Brownsville, Tex.
The following table shows the number of airplanes and airplane passengers entering the United States during the past 2 fiscal years:




283

KlE'POtRT OF T H E S^E'CKEiTAIlY OF THE. TBEiA-StUBY

Number of airplanes and airplane passengers entering the United States, fiscal years
1939 and 1940
Airplane passengers Percentage increase
or decrease ( - )

Airplanes

District
1939

Northern border:
Maine
Vermont...
St. Lawrence
New York
Rochester
Buffalo
Michigan
Dakota
Washington
Other districts
Total

.

.

. .

1940

1939

1940

Airplanes

Passengers

61
745
53
805
19
226
164
746
1,077
67

63
1,107
47
890
24
203
96
742
1,254
88

109
1,889
129
6,591
35
433
233
3,186
3,287
275

131
6,253
104
11,890
45
444
158
3,642
4,617
684

3.3
48.6
-1L3
10.6
26.3
-10.2
-42.1
-.6
16.4
31.3

20.2
231.0
-19.4
80.4
28.6
2.6
—32.2
14.3
40.6
112.4

3,963

4,513

16,167

27, 868

13.9

72.4

Southern border:
Los Angeles
San Diego
Arizona
El Paso
Laredo

156
127
41
9
428

185
105
33
11
603

1,091
295
53
14
3,991

1,811
187
70
18
6,517

18.6
-17.3
-19.6
22.2
17.5

66.0
—36.6
32.1
28.6
63.3

Total

761

837

6,444

8,603

10.0

58.0

611
38
1,820

672
52
2,285

2,107
224
28, 844

2,212
340
39, 619

10.0
36.8
25.5

5.0
51.8
37.0

Alaska
Hawaii
Florida.
Total

2,469

3,009

31,175

42, 071

2L9

35.0

Grand total

7,193

8,359

62, 786

78, 542

16.2

48.8

Neutrality activities.—The European war caused a large increase
in the amount of work performed by customs officers. The export
declarations increased sharply as a result of shipments of war supplies
to belligerent nations. The number of export declarations reached a
total of 4,280,109, compared with 3,816,673 in 1939, an increase of
12 percent, and the value of exports totaled $3,829,000,000 in 1940,
compared with $2,919,000,000 in the previous year, an increase of
31 percent. Under the Neutrality Act and regulations, customs
examination of both the documents and the actual shipments was
frequently required in order to prevent the exportation of prohibited
commodities. In addition to the increased activity due to the greater
volume of exports, outgoing passenger traffic was carefully checked to
insure conformance with passport regulations; clearance papers of
vessels were examined to insure that all additional requirements were
met; and outgoing vessels were frequently searched to prevent them
from involving this country in a violation of its neutrality.
Drawback transactions.—The number of drawback entries was only
slightly smaller than in 1939, while, as a result of the expansion in
exports, the amount of drawback paid increased by $2,699,315. The
actual payments corresponded very closely to the total allowed under
the various provisions of the Tariff Act of 1930. About 99 percent of
the drawback allowed consisted of drawback on exported merchandise
manufactured from imported materials, the most important of which
were sugar, fiaxseed, and copper. The number of notices of intent
to export with benefit of drawback during 1940 was 4,378 larger than
269677—41-

-20




284

RE'PODRT OF T H E SEGRETARY OF T H E TEEAuSnCJKY

during the previous year. A comparison of these transactions during
the last 2 years is presented in the table following:
Drawback transactions, fiscal years 1939 and 1940
Transaction

Drawback entries received
Notices of intent:
Originating in the district.
Received from other districts
Forwarded to other districts for disposition.
Certificates of manufacture received
Import entries used in drawback liquidation
Certificates of importation issued

1940

1939
Number
20,063
._..

Number
19,974

-0.4

244,428
119,400
114, 309
12, 212
22, 318
5,029

1.8
1L3
12.7
-8.1
-1.6
-3.0

240,050
107, 286
101, 406
13, 287
22,676
5,182

Amount
Amount
Drawback allowed:
Manufactures from imported merchandise
$n, 263,013.78 $13,886,813.71
Duty paid on merchandise exported from continuous
customs custody
31,180. 70
22,151. 37
Merchandise which did not conform to sample or specifications and returned to customs custody and exported
.
:
84,628.14
102,696.80
Imported materials used in construction and equip817. 58
ment of vessels built for foreigners
11,080. 25
Salt used in curing fish._
4,708. 31
Total drawback allowed
Internal revenue refund on account of domestic alcohol
Total
-

Percentage
increase or
decrease (—)

11, 398, 788.11
163, 738. 73

13,998, 301. 53
183,149. 73

11, 562, 526.84

23.4
-29.0
-17.6

14,181,451. 26

22.8
11.9

Protests and appeals.—A larger number of protests was filed during
1940 than during 1939, but there were fewer appeals for reappraisement. The following statement shows the progress of this work
during the past 2 years:
Number of protests and appeals, fiscal years 1939 and 1940
status

Protests:
Filed with collectors by importers _ .•
Allowed by collectors
.
Denied by collectors and forwarded to customs court
Appeals for reappraisement filed with collectors

19391

1940

38, 650
1,470
35, 578
5,779

41, 647
1,828
40, 807
5,332

Percentage
increase or
decrease ( - )

7.8
24.4
14.7
—7.7

1 Revised.

Law enjorcement activities
Seizures.—Seizures for violations of the customs laws declined
during the year. Most of the important classes of customs seizures
contributed to this decline. The reduced passenger traffic was partially reflected in the reduction in the number and value of merchandise seizures, the value of seizures of those types of goods usually
brought by tourists being in most cases much smaller than in 1939.
However, the value of wearing apparel and luggage, amounting to
$106,149, and the value of jewelry, precious metals and stones,
watches and parts, amounting to $284,569, were greater than during
1939, and represented 10.6 and 28.5 percent, respectively, of the total
value of all seized merchandise. More than one-third of the total
value of the seized merchandise consisted of colors and dyes seized
from commercial importations for failure to comply with the require


285

RiE'PO[RT OF T H E SEiCORETARY OF THE, TRIEiASfURY

ments of the Tariff Act of 1930 that a plain and complete description
of their contents appear on the immediate container and on the
invoice. Two unusually large commercial seizures in 1939, one of
unmanufactured tobacco valued at $250,000 and the other of oriental
rugs valued at $123,600, were each sufficient to account for the entire
decrease in value of seized merchandise.
The influx of refugees in 1939, many of whom were ignorant of the
customs requirements of this country, resulted in a considerable
number of seizures of goods which could be readily converted into
cash, such as cameras and surgical instruments. The smaller number
of such refugees during the past year and a better knowledge of the
customs requirements of the United States caused a reduction in the
number and value of seizures of this sort.
Narcotic seizures were much fewer in number and smaller in value
than in 1939, during which year a number of unusually large narcotic
shipments were seized. The quantity of narcotics seized during 1940
was smaller than fbr any year in the past decade. Customs officers
during 1940 seized 1,956 ounces of marihuana and 2,775 ounces of
other narcotic drugs, as compared with 1,518 ounces of marihuana and
28,660 ounces of other drugs during the previous year.
The number and principal types of seizures made by the Customs
Service and other governmental agencies during the past 2 years are
shown on the following table:
Seizures for violations of the customs laws, fiscal years 1939 and 1940
1939

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
Whale oil
.
:
House furnishings, excluding rugs
Rugs
Guns and ammunition
Cameras, binoculars, and ship's instruments.
Hardware and sport goods..T
Cigars, cigarettes, and tobacco
. . . .
Books and stationer's supplies
:
Prohibited articles
Livestock, etc. (excluding horses).. _._
Colors, dyes, etc
Miscellaneous
. ' .

Grand total:
Number
Value




Percentage
increase or
decrease (—)

5,433
$284, 669
106,149
8,064
16, 245
56,411
24, 771
20, 629
52,190
. 1, 971
747
21,842
12, 616
5,444
1,991
8,628
6,234
356,631
12, 784

35.4
58.1
-10.7
-36.4
-33.7
413.1
-79.2
-22.4
-98.6
-30.9
-75.8
171.2
-97.9
-53.7
73.7
-3.2
16, 360. 3
-72.1

997, 706

-11.7

640
148

788
194

23.1
31.1

1,008
$495, 940

.

5,878
$210,186
67,156
9,023
25, 541
85,147
4,828
99, 311
67, 283
143,931
1,081
90, 406
4,615
257, 419
4,304
4,968
6,441
2,166
45, 788
1,129, 594

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....i
Boats, automobUes, airplanes, and horses, value

1940

859
$20, 867

-14.8
-95.8

-7.6

3, 773
...

3,114

— 17.5

4,024
157
647
$43, 935
$203, 661

2,673
299
660
$26,922
$208,849

-33. 6
90.4
2.0
-38.7
2.5

11, 447
10,388
$1, 873,130 $1, 254, 334

-9.3
-33.0

286

REPOIRT OF THE. SEGRETARY OF T H E TREIASIUBY

In addition to the goods which were seized, claims aggregating
$8,467,828 were initiated by the Customs Service against importers
in connection with various irregularities and frauds, which either
did not necessitate a seizure or were discovered after the goods had
gone into consumption.
The following table presents the record of customs seizures classified
according to the various agencies which were instrumental in apprehending violators of customs laws:
Seizures and arrests for violations of customs laws, classified according to agencies
participating, fiscal year 1940
Seizures
Total

Agency
Number 1
C u s t o m s A g e n c y Service:
Investigative Unit
Enforcement Unit
C u s t o m s Service, exclusive
. of Agency Service

662
588

Narcotics
Number

Value

Lottery Merchandise
a n d obscene,
n u m - N u m - Value
Value
ber
ber

Liquor

Value

Number

43
46

$4,917
2,270

3
139

$539,231
75, 228

$233
10, 327

6
2

610 $445, 732
21, 951
401

683

8.789

2,905

13, 825

971

4,278

528, 902

T o t a l C u s t o m s Service. 10,087 1, 211,691
I m m i g r a t i o n Service
93
2,430
c u s t o m s Service assisted b y
9,202
71
o t h e r officers - .
O t h e r F e d e r a l a n d local of137
31, Oil
ficers

772
4

16, 976
25

3,047
47

24, 385
1,569

979
1

5,289
41

996, 585
304

18

4,680

18

923

2

33

• 756

65

176

2

45

10, 388 1, 254, 334

859

20,867

3,114

26,922

G r a n d total

8,837

597,232.

70
982

61

5,433

997, 706

Seizures—Continued

Agency

Total
Boats
value
boats,
automobiles,
airNumValue
planes,
ber
and
horses

C u s t o m s A g e n c y Service:
Investigative Unit
$88,349
Enforcement Unit
40,680
C u s t o m s Service, exclusive of A g e n c y Service
45, 716
. T o t a l C u s t o m s Serv»
174, 745
ice
I m m i g r a t i o n Service
532
C u s t o m s Service assisted
b y other officers .
2,843
O t h e r F e d e r a l a n d local
30, 729
officers
G r a n d total

208, 849

5 $67,850
1,112
17

Automobiles

Airplanes

Arrests,
number
Number

Value

62 $16, 830
119 32,085

6

525

137

27

69, 487

318

93,951
495

Value

Num-.
Value
ber

3 $1,300

4 $3,663
319 6,183

62
256

161

88

334 10,007
2
37

405
38

Number

45,030

7
4

333

1

26

32

69, 845

Horses

14

11
3

1,300

2,449

6

61

18

30, 684

2

20

38

343 10,125

499

93
432 127, 579

3

1, .300

1 Excludes number of boats, automobiles, airplanes, and horses, as they were seized in connection with
narcotics, etc., seizures.

In accordance with an order of the Secretary of the Treasury of
August 31, 1939, issued under authority of the act approved August 9,
1939, relating to the seizure and forfeiture of vessels, vehicles, and
aircraft used to transport narcotic drugs, firearms, and counterfeit



287

RlE'POiRT OF T'FIE SEiCOEtEiTARY OF THE. TRlEAiSrQRY

coins, obligations, securities, and paraphernalia, officers engaged in
the enforcement of the narcotic and internal revenue laws were
authorized to seize such vessels, etc., and to perform such duties with
respect to seizures and forfeitures as are imposed upon collectors of
customs and appraisers with respect to similar seizures under the
customs laws. As the result of this order, only 58 automobiles seized
by narcotic agents, valued at $18,539, were adopted for forfeiture
during 1940 by the Customs Service,' compared with 188 such automobiles valueci at $66,769 in 1939. Regulations also were issued on
September 12, 1939, authorizing Secret Service officers to make
seizures in connection with violations of counterfeiting laws; and
authorizing collectors of customs to adopt such seizures and to institute forfeiture proceedings; and when forfeitures are perfected otherwise than by court decrees, such seizures shall be either returned to
the Secret Service Division for official use or shall be held subject to
instructions of the Director of Procurement, After September 12,
1939, 31 automobiles valued at $10,245, seized by Secret Service
officers, were delivered to the Customs Service for forfeiture.
The following table summarizes the number of boats, automobiles,
etc., seized for customs violations during the past 2 years:
Boats, automobiles, airplanes, and horses seized, fiscal years 1939 and 1940
For liquor
violations

Seizure

1939
Boats:
Number
Value
.
Automobiles:
Number
Value
Airplanes:
Number.
Value
Horses:
Number
Value
Total value

_.

1940

For narcotic
violations
1939

1940

1
3
1
. $10
$500
$1, 317
82
67
229
93
$9, 706 $18,031 $79, 599 $25,939

4
$61
$11,083

2
$68
$18,109

$80,099

$25,939

For other
violations
1939

18
$678
224
.$79,411

1940

Total
1939

31
22
$69,835
$2,495
257
510
$83,609 $168, 716

3
6
6
$1, 300 $23,900
$23,900
341
237
233
$10,067
$8, 551
$8,490
$112, 479 $164,801 $203,661

1940

32
$69,845
432
$127, 579
3
$1, 300
343
$10,126
$208,849

During the year 257 seized automobiles and trucks were either exported or returned to petitioners because the violations were not sufficiently flagrant to warrant forfeiture. Of the 222 automobiles forfeited, 101 were assigned for oflicial use either to the Customs Service
or to some other Government agency, and 121 were sold at public
auction.
In the course of their regular duties, customs officers often apprehend
violators of laws other than those relating to customs. During the
year, 770 seizures were made for other departments and agencies, all
but 10 of which were for the Department of Agriculture. There were
299 persons apprehended, of whom 223 were for the Immigration
Service. I n addition, 6,842 violations of the Department of Agriculture laws were detected.
Legal proceedings.—As the result of narcotic seizures, 157 defendants
were presented for prosecution. Including the cases pending from




288

EE'POIRT OF T H E SEORETARY OF T H E TREASIUEY

the previous year, those which were concluded resulted in 82 convictions and only 25 acquittals. Prison sentences aggregating over 91
years and fines amounting to $2,492 were imposed by the court on
convicted offenders. In addition, penalties aggregating $77,416 were
assessed against the masters of 77 vessels on which narcotic drugs
were found concealed; many of these cases have not yet been concluded, only $11,561 having been collected from the masters of vessels.
In connection with all seizures, there were 499 arrests, a decrease of
19 during the year. Although there were fewer arrests, there were
almost as many convictions as during 1939, and the high ratio of
convictions in the number of cases disposed of continued. Of the
577 cases disposed of, 352 convictions were secured, or 61 percent of
the total; of the 626 cases disposed of in 1939, 356 convictions were
secured, or 57 percent of the total. Prison terms to which customs
violators were sentenced aggregated more than 155 years in 1940,
compared with 339 years in 1939, while the total amount of fines
imposed by the courts was $51^035 in 1940 and $72,167 during the
previous year.
Fines, penalties, e/c—Collections from fines, penalties, liquidated
damages, and sales of seizures aggregated $878,387 in 1940, a decrease
of $1,152,488 from the previous year. Of the 1939 total, however,
$974,572 represented penalties collected in cases which involved the
large scale smuggling of illicit liquors prior to the repeal of the eighteenth amendment, while in 1940 there was a single collection of $7,917
of this type.
Penalties collected for the failure of incoming passengers to declare
goods purchased abroad aggregated $311,630 during the year, a slightly
larger amount than in 1939. More than half ($172,000) of the 1940
total, however, was collected from a single offender. Conspiracy
cases, most of which resulted in court fines, irregularities in connection
with bonded importations and violations by the masters of vessels,
either by failure to manifest imported merchandise or by unlading it
without customs supervision, also yielded larger collections than in
1939.
The net proceeds from the sale of, seized and forfeited articles was
much smaller than in 1939 due to the inclusion in the total for the
previous year of the proceeds of a sale of forfeited diamonds by the
court, which yielded $192,479. The net proceeds of seizures sold by
the collectors amounted to $20,944 in 1940 and $13,751 in 1939, whfle
the proceeds of sales by court order aggregated $28,912 in 1940 and
$219,546 in 1939.
Included in the sales were 123 automobiles for $5,534 and 1 boat for
$275, compared with 95 automobiles, 3 boats, and 1 airplane in 1939,
which yielded $4,018, $141, and $125, respectively. 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:




REPOiRT OF THE SEORETARY OF THE TRJEiA'SajRY

289

Collections for violations of the customs laws, fiscal years 1939 and 1940
Violation

1939

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 im' ported merchandise .
—_
Unlading foreign merchandise without customs supervision.__
Narcotic:
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.

i_

-

1940

$299, 574. 75 $311, 629.84
93,119. 83
106,872.46
262,279.90
237, 631.30
987, 772. 75
16, 742. 61
39, 549. 86 .
44,414. 77

Percentage
increase or
decrease ( - )

4.0
13.7
—9.4
-98 4
12.3

13,137. 68
16, 628. 22

13,491.73
26, 774.09

2.7
62.0

52,600. 86
9,175. 25
10,638.30
7,847. 57
6,363.42

46,128.06
4, 256. 81
2,800.67
5, 209.14
14, 578. 97

-12.3
—63.6
-73.7
—33.6
172.3

233,297.00

49,856.38

-78.6

2,030,875. 28

878,386.73

-56.7

Coordination with other agencies.—The coordination plan adopted
in August 1934, which developed closer cooperation between the
Coast Guard, Alcohol Tax and Intelligence Units of the Bureau of
Internal Revenue, Bureau of Narcotics, Secret Service, and Customs
Service, remained in operation. The continued effectiveness of the
law enforcement branches of these agencies, as a result of this coordination, has been most gratifying.
Tariff administration
During the year five findings of dumping were issued, seven findings
partially revoked, and one finding revoked as of date of issuance.
The findings issued applied to wool knitted berets from France (T. D.
50034) and to ribbon fly catchers from the United Kingdom, Japan,
Belgium, and Germany (T. D.'s 50035 to .50038). The seven findings
partially revoked appliecl to importations on and after May 11, 1934,
but not to importations prior to that date, of safety matches from
Finland, Austria, Latvia, the Netherlands, Norway, Poland, and
Estonia (T. D. 50169). The finding that was revoked as of date of
issuance applied to phosphate rock from Morocco (T. D. 49964).
One order was issued imposing countervailing duty on 93-94 score
Cheddar cheese from Canada (T. D. 50093). Several other countervailing duty orders previously issued were supplemented or modified
but none was revoked.
Public No. 450, approved April 11, 1940, an act to amend section
33 of the Copyright Act of March 4, 1909, gave the Treasury Department the machinery for discharging its administrative responsibility
of preventing the importation of articles prohibited under the Copyright Act. The Bureau of Customs participated in the preparation
and presentation to Congress of these amendments.
The quotas provided under the trade agreements with Canada and
the United Kingdom were supplemented during the year by provisions
in three trade agreements: That with Venezuela set up a quota on
crude petroleum and certain petroleum products, effective December
16, 1939; the supplementary trade agreement with Cuba provided a
quota on Cuban filler and scrap tobacco, effective January 1, 1940;



290

'REPORT OF THE. SEiORETARY OF THE. TREASIURY

and the supplementary trade agreement with Canada provided a
quota on black and silver foxes and furs, effective December 1, 1939.
An amendment to the Philippine Independence Act established, in
addition to the quotas previously in effect, quotas on imports from
that country of cigars, scrap and filler tobacco, and pearl or shell
buttons, effective January 1, 1940. A proclamation by the President
on Septeniber 5, 1939, also provided quotas on certain types of unmanufactured cotton and cotton waste, effective for one year after September 20, 1939. A statement of the commodities imported under quota
provisions during the quota periods ended in the fiscal years 1939 and
1940 foUows:
Commodities imported under quota provisions during quota periods ended i n the
fiscal years 1939 and 1940

Commodity

Q u o t a period

Sawed timber and lumber, n. s. p. f., of
Douglas fir or Western hemlock.
Cattle, weighing less
tha^n 175 pounds each.
Cattle, weighing 700
pounds or more each
and h. s. p. f.

Cal. year 1 9 3 8 . . - -

Cows
weighing 700
p o u n d s or more each.
i m p o r t e d specially for
d a i r y purposes.
C a t t l e weighing less
t h a n 200 p o u n d s each.
C a t t l e weighing 700
p o u n d s or m o r e each,
other t h a n cows i m ported specially for
d a i r y purposes.

W h o l e m i l k , fresh or
sour.
C r e a m , fresh or sour
F i s h , fresh or frozen,
filleted, etc., n . s. p . f.,
cod, h a d d o c k , h a k e ,
pollock, cusk, a n d
rosefish.
W h i t e or Irish potatoes.
certified seed.
Other
R e d cedar shingles




do-

Established

quota
250, 000,000

Unit of
quantity
Board
foot.

Total imPerports within cent of
quota
quota
limitation
filled
172,301,698

Date quota
filled

68.92

Head..

40,943

78.84

do

155,799 . . . d o . . . .

124,920

80.18

do

20,000 . . . d o . . . .

7,431

37.16

Cal. year 1 9 3 9 . . . .

100,000 . . . d o - . . .

100,000

100.00

Cal. year
1st q u a r . 1939
2d q u a r . 1939:
Canada
Other countries.
3d q u a r . 1939:
Canada
O t h e r countries.
4th quar. 1939:
Canada
O t h e r countries.
1st q u a r . 1940:
Canada
O t h e r countries.
2d q u a r . 1940:
Canada
O t h e r countries.
Cal. year 1 9 3 9 . . . .

225, 000
do
60,000 . . . d o . . . .

51,^33

Sept. 12,1939

65,"ooo' 'io5."oo' Feb.

2,1939

51, 720 . . . d o . . . .
8,280 ..-do-—

50,971
8,280

98.55
100.00

61, 720 — d o . . . .
8,280 — d o - . -

60. 909
7, 827

98.43
94.53

40, 350 — d o . . . .
6,663 -.-do.—

35, 663
6,663

88.38
100.00

Oct.

2,1939

51, 720 ...do—8,280 . . . d o . . . .

19, 705
8,280

38.10
100.00

Jan.

2,1940

51. 720 . . . d o —
8,280 . . . d o . . . .

37, 512
8,280

72.63
100.00

Apr.

1,1940

Gallon.

7,124

.24

Cal. year
1, 600, 000 _._do
1938
1939.-Cal. year 1 9 3 9 . . - . '""is," 000," ooo' Pound.

1.527
9, 892,197

""".'34'
.10
65.95

45, 000, 000 . . . d o - . . .
90, 000, 000 . . . d o . - . .
60, 000, 000 .__do

44, 726,194
69, 768, 730
1, 284, 909

99.39
66.40
2.14

Square.

864,881
1,051,168

100.00
100.00

12 m o s . from—
D e c . 1,1937-_
Sept. 15,193812 m o s . f r o m
Sept. 16, 1938.
6 m o s . from—
J u l y 1, 1938....
J a n . 1, 1939...

3,000, 000

864,881
1,051,168

------

Apr. 13,1939

Sept. 28,1938
Apr. 14,1939

EiBPOtRT OF T H E SBOREiTAIlY OF T H E TItEE!A:SiU'RY

291

Commodities imported under quota provisions during quota periods ended in the
fiscal years 1939 and 1940—Continued

Commodity

Quota period

Black and silver foxes
and furs.

12 mos. from Dec.
1, 1939:
Canada
Other countries.
Cal. year 1939

Molasses and sugar sirups, n. s. p. f., containing soluble nonsugar solids equal to
more than 6% of total
soluble solids.
Crude petroleum, topped crude petroleum,
and fuel oil derived
from petroleum including fuel oil known
as gas oil.

Coconut oil from Philippine Islands.
Refined sugar from
Philippine Islands.
Unrefined sugar, from
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 Philippine
Islands.

Established
quota

Unit of
quantity

PerTotal imports within cent of
quota
quota
limitation
filled

1 58,300 U n i t . . .
1 41,700 . . . d o . . . .

68,300
41,700

100.00
100.00

Gallon.

1, 500,000

100.00

...do....

56, 773, 649
38, 650, 762

Date quota
filled

38.74
93.40

1,500,000

Dec. 16 to 31,
1939:
Venezuela
146, 588,007
Netherlands
41, 387,156
(including
overseas
territories).
Colombia
8,155,105
Other coun7, 747, 360
tries.
Cal. year
448,000,000
1938
1939
Cal. year
112,000,000
1938
1939 . .
Cal. year
1,792,000,000
1938
1939
12 mos. from—
May 1, 1938..
M a y l , 1939.. } 6,000,000

7, 747, 350 100.00
Pound.

363, 632,137
332, 855, 240
111, 998, 645
111, 914, 438

Dec. 22,1939

99.99
99.92

1,791,772,550
1,784,340,281

May 31,1939

81.17
74.30

99.99
99.57

Pound.
Pound.

(2)
(2)

r
Pound 1

5, 818, 532
6,889,193

96.98
98.15

1 Not to exceed 25% of annual quota during any month.
2 The annual quotas were filled during first 4 months of 1940.

Customs Agency Service
The investigative unit of the Customs Service, the Customs Agency
Service, is charged primarily with the duty of preventing and detecting
frauds in customs revenue. This Service conducts all investigations
involving fraud or violations of the customs laws, and investigates and
reports upon all matters brought to its attention by the Secretary of
the Treasury, Department officials, the Commissioner of Customs,
collectors, and other customs administrative officers, with respect to
-undervaluation, drawback, classification, smuggling, personnel,
customs procedure, and other related subjects. All seizures of any
consequence and all reported or suspected violations, except those of
minor importance, come ultimately within its purview, irrespective of
who made the seizure or originally discovered the violation. The
value and accomplishments of the Agency Service, therefore, cannot
be measured satisfactorily by the number of arrests made by its
officers or by the number or value of seizures ascribed to them as
contrasted with the accomplishments of the other branches of the
service. At the close of the year 700 persons were in this Service, a
reduction of 141 from the previous year. Following is a partial sum-




292

REPORT OF T H E SECRETARY OF T H E TREA^SiURY

mary of its activities during the year, 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
-.
Classiflcation and market value...
Customs bonds to determine solvency and sufficiency
Applications for customhouse brokers' licenses
Applications for bonded truckmen's licenses
Petitions for relief
• Personnel
Navigation violations
Pilferage of merchandise
Foreign, by members of domestic service
Examinations of customhouse brokers'records...

Number
967
214
314
1,248
1,988
863

.
^
.

147
1,464
1,212
. . . 146
88
107
534
280
351
.
163
657
224

In addition to the law-enforcement work in which customs agents
and patrolmen, as well as other customs officers, participate, other
important aspects of the duties of this Service are outlined in the
following paragraphs.
Undervaluation.—In the investigations of the use of false invoices,
false descriptions or valuations of the merchandise, and other practices designed to deprive the Governm cut of its lawful revenue, many
violations were discovered and substantial recoveries were effected,
but the number of such cases in 1940 was smaller than during the
preceding year.
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 $14,041,580 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, to determine whether the company's records are kept in such
a manner as to insure that imported materials were actually used in
exported products, and to determine whether the products exported
with the benefit of drawback were correctly described by the exporter.
Several penalties were imposed during the year for the filing of false
drawback claims, and several claims for drawback were denied as the
result of such investigations.
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 and, in addition, rendered invaluable
service in securing advance information regarding the attempted
smuggling of narcotics, jewelry, and other merchandise, which made
possible some of the important seizures in this country. Many of
the officers stationed in ' the European area were returned to the
United States as the result of the spread of hostilities.
Enjorcement Unit.—The Enforcement Unit of the Customs Agency
Service, established in 1937 to assist in supervising the operations of
the customs patrol force, continued to direct and coordinate its
activities to insure the maximum of efficiency in light of the everchanging smugglers' technique. The Enforcement Unit also supervised investigations relating to smuggling matters, including all
narcotic investigations abroad and in the United States.



RE'POiRT OF T H E SECR-ETARY OF THE, TRiEAiSURY

293

The Unit continued its educational program of familiarizing the
personnel of the Customs Service with all aspects of the illicit traffic
in narcotic drugs. In line with this program, there was prepared and
disseminated each week during the year a Weekly Narcotics Intel. ligence Bulletin touching on all phases of the illicit traffic in narcotic
drugs coming to the notice of the Customs Agency Service during the
preceding week. This bulletin was distributed throughout the field
services of the Bureau of Customs and the Bureau of Narcotics;
additional copies were forwarded each week to certain European
narcotic investigative agencies.
The southeastern patrol unit, with headquarters at Jacksonville
and officers stationed from North Carolina to New Orleans, was
discontinued on December 31, 1939, some of the officers being transferred to other patrol units, and the remainder assigned to the staffs
of various collectors of customs.
Miscellaneous
Appraisement Unit.—Due to world conditions, particularly in
Europe, appraisement officers experienced greater difficulty in determining the value of imported merchandise than at any time since the
formation of this Unit in September 1937. Wide fluctuations in the
valuation of merchandise and the unavailability of foreign records
rendered the determination of values unusually difficult. Efforts
were continued, however, to create uniformity in the classification
and valuation of imported merchandise.
The activities of the Customs Information Exchange, which acts
as a clearing house for the Appraisement Unit, are summarized as
follows:
Number
Appraisers' reports of values or classification received.
22,049
Appraisement appeals reports received
_.
3,636
Changes in value circulated
1,200
Requests for investigation abroad
751
Reports received in response to requests for investigation abroad
1,225
Reports of original investigations by Treasury attaches and price lists from American consuls received
and circulated
.
3,942
Difference in classification of merchandise between the various field officers reported to the Bureau
of Customs
1,105
Difference in value of merchandise between the various field officers reported to the Bureau of
Customs
•
407

Customs School oj Instruction.—The enrollment in the Customs
School of Instruction continued to increase, all customs employees
being enrolled in some subject, and two-thirds of them being enrolled
for the entire course. Representatives from Chile, Siam, and the
Philippines were assisted by the school in their study of the customs
law and procedure of the United States.
Division oj Laboratories.—This Division maintained throughout
the year 9 customs laboratories, at which 91,977 samples of merchandise were tested and analyzed, an increase of 7,011 over the previous
year. These analyses included 42,035 samples of sugar, 14,970 of
ores, metals, etc., 4,75,1 of textiles, 3,180 of chemicals, 3,137 of fixed
oils, fats, etc., and 3,871 of suspected opium and narcotics. The
Division prepared and distributed for the use of the chemists new
methods of laboratory analysis for 14 commodities and a book containing the approved customs laboratory methods for use in analyzing
certain specified commodities. A gauging manual for the information and guidance of all customs officers was prepared and will shortly



294

REPOIRT OF THE. SEORETARY OF THE. TREASIURY .

be printed. A wool testing laboratory was set up at Boston to determine the clean content of wool by the use of representative samples
taken from greasy wool.
Customs liaison officers.—This group was established on July 28,
1939, to take over the duties of the Port Examination Commission
with respect to securing greater uniformity in the procedure followed
by customs officers. The liaison officers, functioning under the
immediate direction of the Commissioner of Customs, follow largely
the methods used by the Port Examination Commission, but their
decisions become effective immediately unless their recommendations
are opposed by the collectors of customs, in which case the procedure
in question is submitted to the Bureau for decision.
Traveling auditors.—There was established on January 8, 1940, in
each of the offices of the Comptrollers of Customs a staff of field auditors, authorized to make periodic physical audits of the fiscal activities
of the various customs districts. The work of these auditors has
already resulted in a marked improvement in the handling of customs
funds, especially in speeding up the collection of outstanding accounts
and in the payment of refunds. The auditors also make physical
inventories of the property in the custody of customs officers and apply
to government accounting the auditing principles widely recognized
in private business.
Division oj Engineering and Weighing.—The most important function of this Division is the supervision of weighing and gauging
practice and the maintenance of the weighing equipment, since the
slightest inaccuracy in the weight determination of such commodities
as sugar, wool, metals, tobacco, and cattle results in enormous loss.
During the past year provision was made for the installation of cattle
weighing scales at Pembina, N. Dak., Noyes, Minn., Laredo and
Brownsville, Tex., and Antelope Wells, N. Mex., and contracts
awarded for the reconditioning of 46 special Treasury automatic
weighing and recording scales which have been in constant use in
weighing raw sugars and wool for periods in excess of 14 years. The
division collaborated in the preparation of plans for new customhouses
and appraisers' stores at San Francisco, Los Angeles, New Orleans,
Tampa, Port Everglades, and Houston, and for border stations at
Laredo and El Paso, Tex., and assisted in the determination of
suitability and in the acquisition of building sites for border stations
to be erected in the States of Maine, New Hampshire, Vermont, New
York, Minnesota, North Dakota, Montana, Washington, California,
Arizona, New Mexico, and Texas,
Changes in ports and stations.—During the year a port .'was established at Muskegon, Mich., which had previously been a customs station,
and 3 new stations were established at Winton, Minn., Fargo, N. Dak.,
and Port Hueneme, Calif. On the other hand, two customs districts,
6 ports of entry, and 3 customs stations were abolished. The district
of Iowa was abohshed and included in the Chicago district after
September 23, 1939; and the Utah-Nevada district was abolished and
included in the San Francisco district after February 21, 1940. The
ports of entry abolished were those at Des Moines, Iowa, Fort Worth,
Tex., Oklahoma City, Okla., Tulsa, Okla., Grand Haven, Mich., and
Salt Lake City, Utah, anci the stations"!abolished were those at
Muskegon, Mich, (which was made a port). Sparrows Point, Md.
(which was consolidated with the port of Baltimore), and Ottawa,



295

RE'POIRT OF T H E SEORETARY OF T H E TRE-A^SnCPRY

Canada. I n addition to these changes, the customs district of Laredo
was created to include all of the former customs district of San
Antonio, except the port of Corpus Christi, which was transferred to
the Galveston customs district.
Cost oj administration.—The total revenues collected by the Customs
Service during the year, including collections for other departments
and Puerto Rican collections other than duties, amounted to
$383,279,575 as compared with $350,422,281 for 1939, or an increase
of $32,857,294 during the year. The expenses increased by $343,510
to $21,127,673 in 1940, but, as a result of the increased collections, the
cost to collect $100 was only $5.51 in 1940 as compared with $5.93
in 1939.
Review of activities since 1933

Collections
Customs coUections, after increasing in each successive year from a
low of $251,301,000 in 1933 to a peak of $488,343,000 in 1937, declined
to $321,410,000 in 1939, b u t took an upturn in 1940, reaching a total
of $350,852,000. A detailed statement of collections for each of the
past eight fiscal years, together with the amounts refunded, follows:
Customs collections ^ and refunds, fiscal years 1933 to 1940
[On basis of accounts of Bureau of Customs.
1933

Type

1934

1936

In thousands of dollars]
1936

1937

1938

1939

1940

Collections:
Duties:
$151,002 $171,378 $192,105 $234, 568 $313, 531 $221, 790 $185,663 $190, 975
Consumption entries.
92,094 134,103 ^45,273 H3,379 162,007 124,791 124,613 151,029
Warehouse withdrawals
2,633
2,514
3,291
2,891
M a i l entries
2,669
3,088
3,298
2,098
1,009
683
752
Baggage entries
673
775
998
1,110
538
642
915
795
701
897
1,054
689
915
Informal e n t r i e s . - .
185
312
302
272
A p p r a i s e m e n t entries
..
215
231
144
208
Increased a n d a d d i t i o n a l
6,062
duties
3,137
3,164
3,035
4,690
4,188
3,858
3,888
125
120
150
Other duties
170
86
150
98
75
250, 502 313,095 344, 942 386, 941 487,366 356,889 319, 241 349,811

Total duties.
Miscellaneous:
F i n e s a n d forfeitures
Liquidated damages.
Sale of seizures . .
. Sale of G o v e r n m e n t p r o p erty, unclaimed a n d abandoned m e r c h a n d i s e
l...
All other c u s t o m s r e c e i p t s . . .
T o t a l miscellaneous

..

625
24
45

486
202
89

1,037
239
170

1,309
285
170

548
267
69

2,229
149
161

1,704
93
233

723
106
50

60
47

133
53

86
48

33
46

36
56

80
66

57
81

71
91

799

963

1,580

1,844

976

2,685

2,169

1,040

T o t a l c u s t o m s collections.. 251,301 314, 058 346, 522 388, 786 488, 343 359, 674 321,410 360,852
Refunds:
Excessive d u t i e s . .
Drawback payments

4,923
7,591

T o t a l refunds

12, 514

.

5,849 • 7,062
8,077 13, 727
13, 926

20, 790

4,669
5,718
10,023 . 10,774

5,220
11,841

4,123
11,342

4,954
14,042

15,342

17,062

15,465

18,996

15, 741

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.

Duties on consumption entries reached the largest proportion of the
total duties collected (64 percent) in 1937 due, in part, to heavy
importations of those agricultural commodities of which a shortage
existed in this country as a result of the drought.
A large portion of the duties on warehouse withdrawals were derived
from sugar, alcoholic beverages, tobacco, and wool. Duties collected



296

OEIEPORT OF T H E SEORETARY OF THE, TREAuSURY

on sugar were limited during most of the period by a quota and declined
successively during each year from 1933 to 1939, the increase in 1940
being due chiefly to the temporary removal of the quota and to the
return during a portion of 1940 to higher rates of duty. The revenue
from duties on tobacco remained at quite a constant level, decreases
in rates of duty under the terms of the Cuban and Turkish trade
agreements being offset by sufficiently increased importations. Duties
on imports of alcoholic beverages increased sharply in 1934 and 1935,
the latter being the first full year in which any considerable amount of
duties was collected on imported liquors and wines as a result of the
repeal of the eighteenth amendment. The increased importations
which resulted from reductions in the rates of duty on alcoholic beverages under the terms of the Canadian, Haitian, Cuban, and the United
Kingdom trade agreements were sufficient to maintain collections after
1935 at quite a constant level. The variable element in duties on
warehouse withdrawals during the past 8 years was largely the result
of tbe fluctuation in imports of wool. All four of these commodities
were subject to specific rates of duty and were, therefore, not influenced
by price changes.
The following table shows the duties collected on the individual items
which were most important as customs sources of revenue:
Duties collected on leading dutiable commodities, fiscal years 1933 to 1940
[In thousands of dollars. On basis of reports of collectors]

Fiscal year

Sugar
$65,019
55,668
53,123
44, 321
39,187
36,880
36,085
66,108

1933
1934
1935.
1936.
1937.
1938
1939
1940.

Agricultural
products

Distilled
liquors
and wines

0)
0)

$74,121
81, 462
117,294
67, 079
56,009
53,063

Tobacco

$262
24,023
40, 943
37, 990
44, 487
39,433
31, 814
36.859

Unmanufactured
wool

fli

$21, 636
23, 437
25, 529
22, 859
25, 709
22, 634

$2,390
10,931
5,319
19, 762
35,118
8, 382
. 12,449
28, 501

Duties on
other
products
$182,831
222, 482
149, 800
179, 969
225, 761
182,256
167,175
153, 646

Total
duties
$260, 502
313,094
344, 942
386, 941
487, 366
356,889
319, 241
349,811

1 Included in duties on other products.

Volume oj business
Entries oj merchandise.—The total number of entries of merchandise
increased continuously from 1933 to 1938, but decreased during 1939
and 1940. The number of entries for each year from 1933 to 1940
is shown in the following table:
Number of entries of merchandise, fiscal years 1933 to 1940
WareFree
Dutiable
house
conconsumption sumption withdrawals
entries
entries

Fiscal year

1933
1934 .
1936
1936
1937
1938
1939...
1940

_

__

261,265
264,365
284,405
324,014
_ _ 394,838
342, 784
328, 963
284,120




142,155
158,948
164, 660
183,417
196, 474
176, 478
185, 065
181,868

199, 260
257, 506
323,473
379,124
382,383
382, 882
372, 938
360,039

Mail
entries

618,429
447,462
475,445
627, 261
564, 646
584, 764
590,976
423,000

Baggage
entries
367,009
393,977
418,403
480,048
595, 705
714, 586
710,005
535, 468

Informal
entries

All
other

135,479
146, 451
188,136
206, 436
244, 283
234, 786
206,322
191,167

371,988
471, 726
538.528
612,654
698, 232
684, 896
673.529
705,838

Total

1,995, 575
2,140,414
2, 393,049
2, 712,964
3,075, 461
3,121,176
3,067, 798
2, 681, 500

REPORT OF T H E SEiCR-ETARY OF THE, TRE'AlSlURY

297

Vessel, airplane, and highway traffic.—The volume of traffic taken as
a whole exhibited somewhat smaller variations during the past 8 years
than appeared in the number of entries of merchandise. The following table shows the number of each type of vehicle and the number of
passengers entering the United States by such vehicles for the fiscal
years 1933 to 1940:
Number of vehicles and persons entering United States from abroad, fiscal years 1933
to 1940
Fiscal year

Automobiles and
busses

Documented
vessels

Undocumented
vessels

Ferries

Passenger trains

Aircraft

Other
vehicles

Total 1

Vehicles and vessels1933
1934
1936
1936
1937
1938
1939
1940

'8,929,186
9,293, 535
9,992,312
11, 217, 252
11, 907,126
11, 643,237
11, 508,907

27,731
27, 308
28, 524
29, 601
32,660
31, 856
32,220
34, 331

(')
(')
(2)
(2)
(2)

25,805
25, 621
29, 946

195,925
188,402
189,918
191, 548
201,454
172, 575
132, 328
114,041

39,284
38, 420
35,836
34,086
34, 607
34, 230
33,427
33, 502

4,801
4,347
4,816
4,688
5,504
6,219
7,193
8,359

315, 545
308,363
323, 952
328, 752
408,710
353,464
337, 585
438, 964

18, 798
19, 624
27,001
27, 111
37,488
44,107
52, 786
78,542

1,863, 934
1, 502,368
1, 548,867
1,874,050
1, 800,286
1,732, 503
1, 524, 621
1,633,277

Persons entering b y 1933
1934
1936
1936
1937.
1938
1939
1940

25,097,067
795,380
24,052,731
764,190
25, 604,405 811, 547
27,209, 538 898,267
31, 322,255 1, Oil, 387
34,461,603 1,071,896
33, 519, 803 1,019, 313
32,256, 533 733, 338

(2)
(2)
(2)
(2)
(2)

93, 972
104,166
116, 628

2,852,397
2,809, 658
2, 627,032
2,685, 795
2, 914,288
2,934,550
2,209,600
2,042, 528

811, 301
905,021
936,538
991,351
1, 208,448
1,211,822
1, 080, 970
1, 094,023

40,822,539
39,679,462
41,730, 336
44,288,079
49, 238,348
52,887,018
50,089, 787
48, 652,327

1 Includes pedestrians, not shown separately.
2 Included with ferries or with other vehicles.

Law enjorcement activities
Decided changes took place during the period from 1933 to 1940
in the number and types of seizures made for the violations of customs laws. Until the repeal of the eighteenth amendment in December 1933, a large number of seizures of liquor were made each year.
Attempts to smuggle liquor and alcohol continued during the first 2
years following repeal, but several important seizures of large quantities of distilled liquors and alcohol during 1935 and 1936, together
with the extension of the territory into which alcoholic beverages
could be legally imported resulted in the almost complete discontinuance of attempts to smuggle this commodity on a commercial scale.
The repeal of the eighteenth amendment also exerted a pronounced
effect on the number and value of vehicles and vessels seized for liquor
violations.
Partly as a result of the greater cooperation between the enforcement branches of the various bureaus of the Treasury, the number of
seizures of narcotics increased for each year from 1933 to 1939, with
the exception of 1935. The sharper increase during the latter years
was due to the classification of seizures of marihuana as narcotic
seizures after the Marihuana Tax Act became effective on October
1, 1937. The quantity of narcotics seized since 1933, however, varied
considerably from year to year, and in 1940 was less than during any
year since 1933.



298

'REPOOEIT OF T H E SEORETARY OF T H E TREASIURY

The smuggling of watch movements gave customs officers considerable difficulty. Two circumtances, however, caused the almost
complete discontinuance of this type of smuggling, the repeated
seizures of large quantities of smuggled watch movements and the
provision in the trade agreement with Switzerland for the symbol
marking of legitimate shipments of watch movements. The following
table shows the number and value of the various types of seizures
during the last 8 years:
Seizures for violations of the custoins laws, fiscal years 1933 to 1940
Seizure
Merchandise:
Number of seizures.

1933

4, 580

Value:
Jewelry and watch parts.. $301, 918
Wearing apparel and
Toilet articles and medicine
Textiles
Raw wool
Furs
•
Edibles and whale oil—
F u r n i t u r e , including
china and rugs
Guns and ammunition..
Hardware and sport
goods..-.
Cigars and cigarettes
Books
Prohibited articles
Livestock
Miscellaneous
Total value of merchandise

1934

1935

6,378

1937

$52, 821 $129, 395 $154, 301 $338, 9591 $92, 800 $210,186

$284, 669

33, 4581

42, 0861

33, 4581

29, 9801

60, 327

12,017
7,942
1,711
24,186
7,381

6, 313
7, 0671
24,101
14,1471
27, 6871

13, 299
10, 230
8,159 \ 29,440
5, 4721
9,273
30, 297
16,013
15, 827

10, 024
25, 203
128, 045
50, 349

80,200
1,006

5, 607
3781

6,406
1,257

68, 813
401

21,241
838

10, 667
1,675

4, 044

13,6991
5,891
2,410
5,996
4,559
1,134

26, 275
4, 6151
1,865
6,884
7,988
24, 654

6,774
3,426
5,337
5,731
13,964
64,188

23, 218
2, 636
10,7271
5, 668
7,662
264,904

496, 315

213, 896

290, 758

431, 964

2, 8551

^') 2551
,
6,

Total value of liquors.
893, 7571
Boats:
Liquor violations:
Number
297
Value
$654, 786
Narcotic violations:
Number
(3)
Value
(3)
Other violations:
Number
Value
$73, 040
Automobiles:
Liquor violations:
Number
945
Value
$191,961
Narcotic violations:
Number
(3)
Value
(3)
Other violations:
Number
215
Value
•
_
$48, 235
1 Included in miscellaneous.
* Not available.
8 Included in liquor violations.

345, 443 1,640.187

748
3,953
310
$110,129

106,149
8,054
16, 245.

9,343
9,023]
26, 541
31,680
85,147]
46,249
13, 649j 104,1391

56, 411
46, 400

211, 214
1,081

54,161
747

36, 0701 95,021
2,9391 257,419
4,304
2,080
4,968
6,211
6,441
9,118
74, 3081 47, 954

34,358
5,444
1, 991
8,628
6,234
369, 316

950,401 424, 646 1,129, 594

997, 706

640
148

788
194

4301
684
1,008
$82, 551 $46, 037 $495, 940

$20. 867

595
.1751

24,8431
757

638
141

3,773

3,114

5,627
111

3,803
466
787

4,024
157
647

2, 673
299
660

$227, 017
426, 236

$29, 692 $31, 605
4,055
6,252

$39,428
4,507

$22, 557
4,365

653, 253

37, 7.571

$1, 317

1
$10

23, 837
231
101,604

8601

7
$3, 315|
1
$100

37|
$21, 691

622
$109, 836

303
$63,134

$22, 7281

(3)
(3)

91
$27, 304

264
$54,964

67,156

3,347

2
.$410

59
45
$36, 6201 $94, 459

74, 699

2, 4301

3, 252

37
52
102
$287, 668 $121, 526 $174,966|
(3)
(3)

6,725

1940

1939

5,433

5,448

6,994

1938

5,878

3,057

Prohibited articles:
Obscene, number
1,107
672
924
Lottery, number
17, 346
22, 883
9,313
Narcotics:
Number
215|
239
256
Value
_
-. $68, 284 $40, 8671 $65,664
Liquors:
Number
21, 013
11, 721
5, 224
Quantity (gallons):
Distilled liquors and
wines—
_.
182, 643 148,173 . 23,273
Malt
61, 641
9,8651
668
Alcohol
173. 810] 44, 924 138, 040
Value:
Distilled liquors, beer,
and wines
$222, 214
(2)
(2)
Alcohol
$893, 757 $345.443 1, 417, 973




1936

139

1
$200

1

$5001

21
25
$10, 251 $11, 776
57!
$9, 705

93
$18, 031

$40, 2361 $42, 564 $76, 453

197

229
$79, 599

82
$25, 939

32]
363
3501
296
$74, 6951 $113, 624 $119,119 $103, 309

224
1,411

257
$83, 609

121

63

49

31
$69, 835

$7,8371 $8, 637
114

RE'POiRT OF T H E SEORETARY OF THE, TRE'ASIIPRY

299

Seizures for violations of the customs laws, fiscal years 1933 to 1940—Continued
1933

Seizure

1934

1935

1936

1937

1938

1939

1940

Airplanes:
L i q u o r violations:
Number
2
1
14
6
$32,135
Value
$500
$5, 700
$2, 850
O t h e r violations:
2
Number
8
3
4
1
16
6
$2,400
$7, 300
$13,161
$6, 450
Value
$1, 300
$256 $23, 900
Horses:
L i q u o r violations:
Number.
.
2
23
26
1
30
6
3
4
$10
$793
Value
$623
$61
. $68
$818
$95
$68
Other violations:
281
493
605
259
Number
386
341
233
0)
$12, 415 $15, 455 $19, 477 $10, 648 $6. 959
Value
$10, 057
0)
$8, 490
Total value boats,
$1,013,931 $515, 286 $407,101 $395, 622 $193, 919 $207, 658 $203. 661 $208,849
autos, etc
Grand total:
Numbers
.
14. 641
44, 261
38, 841
10, 624 10, 535
11,447
20, 896
10, 388
Val u e
$2,471,287 $1,115,492 $2,403,710 $1,690,968 $1,260,618 $716, 098 $1,873,130 $1. 254,334
* I n c l u d e d in livestock.
5 Excludes n u m b e r of b o a t s , a u t o m o b i l e s , airplanes, a n d horses, as t h e y were seized in connection w i t h
narcotic seizures, etc.

Fines, penalties, etc.—Penalties collected for customs violations
varied considerably during the past 8 years. The large collections
for liquor violations in 1936, 1938, and 1939 resulted from violations
which originated prior to the repeal of the eighteenth amendment.
Aside from these, collections for liquor violations decreased sharply
with the repeal of the eighteenth amendment and have remained at a
low level during the subsequent years. The largest sources of fines,
penalties, and forfeitures were undeclared articles in the baggage of
passengers arriving from abroad, fraud, undervaluation or false invoicing in connection with commercial importations, and irregularities in connection with bonded importations, each of which rem.ained
rather constant. Collections in the form of fines, penalties, and forfeitures in 1940 were lower than for any other year except 1934.
The following table presents a summary of the amounts collected
during the fiscal years 1933 to 1940, inclusive, in fines, penalties, and
forfeitures, and from the sale of seizures, classified according to the
type of violation:
Collections for violations of the customs laws, fiscal years 1933 to 1940
1933

Violations

1934

1936

1936

U n d e c l a r e d articles in baggage
of passengers arriving from
abroad
.
$159, 078 $34, 381 $42. 706 $49,446
Irregularities in b o n d e d import a t i o n s (liquidated d a m a g e s ) . . 23, 858 202, 268 239,124 285, 368
Fraudulent undervaluation and
false invoicing..
93,186 211, 994 334, 221 272,139
F a i l u r e of m a s t e r s of vessels t o
m a k e complete manifest of
26, 271
20,237
imported merchandise
36,114 17,154
U n l a d i n g foreign m e r c h a n d i s e
11, 065
7,102
7,853
without customs supervision..
4,776
Irregularities in m a i l i m p o r t a 14, 387
14, 807
tions
19, 963 15, 594
Smuggling (including conspir8,164
31, 769
acy)
13, 089 10, 068
Liquor
23, 314 876, 610
137. 795 72,411
2,253
Narcotics
746
9,521
2,011
F a i l u r e to r e p o r t a r r i v a l in
4,334
9,126
5,713
7,117
U n i t e d States
8,314
5,691 218, 824
49, 607
Miscellaneous....
N e t proceeds from sale of goods
seized a n d forfeited for all
101, 895 104, 043 361, 565 170, 329
violations
Total
648, 389 688,044 1,276,103 1, 764, 766
269677—41-

-21




1937

1938

1940

$162, 426 $158, 350 $299, 575 $311, 630
267, 430

149, 319

93,120 105. 872

250, 974

481, 384

262,280 237, 631

14, 744

17, 531

13,138

13, 492

11, 060

14. 350

16, 528

26, 774

14, 876

16, 482

10, 638

2, 801

36, 731
27,116
27, 247 1, 491, 722
16,109
12,306

39, 550
987, 773
61, 776

44, 415
15, 743
50, 385

6,574
3,490

7,848
5,353

5,209
14, 579

8,193
5,576

68. 587 160, 538 .233, 297 49, 856
883, 953 2, 539,160 2, 030,875 878, 387

300

'REPOiRT OF T H E SEC!RETARY OF T H E TREAS'URY

Tariff administration
Trade agreements.—The negotiation by the State Department of
trade agreements with 21 other nations resulted in a considerable
increase in the volume of work performed by customs officers, both
in the Bureau and in the field. Representatives of the Bureau actively
participated in an advisory capacity throughout the negotiation of
each trade agreement concluded. Changes in rates of duty and in
classification under the provisions of the various trade agreements
necessitated the careful consideration of each item involved by
technically qualified officers.
Antidumping.—During the past eight years, 14 findings of dumping
were issued under the provisions of the Antidumping Act covering
various types of commodities imported from several countries, 4 of
these findings being issued during 1933, 5 during 1934, and 5 during
1940. During the same period 23 of the existing findings of dumping
were revoked, 17 of these on May 31, 1938, as the result of a study
conducted by the Bureau of Customs which indicated that these
findings, many of which were issued within a few years after the inception of the Antidumping Act, 1921, were no longer effective. In
addition to the revocations just mentioned, 7 findings of dumping
originally issued in 1931 were revoked on June 13, 1940, with respect
to merchandise, covered thereby, entered for consumption or withdrawn from warehouse for consumption on and after May 11, 1934.
Of the 61 findings of dumping issued since the statute was promulgated,
only 17 findings remained in effect on June 30, 1940, and 7 of these
were effective only with respect to merchandise entered for consumption or withdrawn from warehouse for consumption prior to May 11,
1934.
Most of the cases which arose under the provisions of the Antidumping Act were disposed of without definitive action, either as the
result of investigations showing that no domestic industry was being
injured by reason of the importation of the foreign merchandise in
question or as the result of decisions of customs appraising officers
that such merchandise was not being imported at so-called dumping
prices. These cases arose either through the filing of complaints by
interested domestic manufacturers or producers or through the receipt
from customs appraising officers of reports indicating the existence of
so-called dumping prices.
Countervailing duty.—During the past 8 years, 59 declarations imposing countervailing duties and decisions amending, modifying or
otherwise affecting such declarations were issued under the authority
of section 303 of the Tariff Act of 1930, which provides for the imposition of countervailing duties equal to the amounts of bounties or
grants paid or bestowed upon the manufacture or production or export
to the United States of foreign merchandise which is dutiable under
the Tariff' Act. During the same period 37 existing bounty declarations were revoked.
One declaration of bounty, issued on June 4, 1936, covered a small
group of German commodities; this was subsequently amended and
modified to apply to some of the products included within its terms
only if contracts were entered into before July 25, 1936, and to the
remaining products only if covered by contracts entered into before
August 2, 1936. Another declaration, issued on March 18, 1939,



REPORT OF T H E SEORETARY OF T H E TREiASlURY

301

imposed countervailing duties on and after April 23, 1939, on all
dutiable imports from Germany of merchandise which had been
acquired through barter transactions; this decision was later amended
to embrace merchandise exported from those areas of Europe which
came under the control of Germany. Several thousand cases arose
under the provisions, of the order issued on March 18, 1939, and
amendments and extensions thereof, and a large number of these
cases were handled by the various collectors of customs under authority
given by the Secretary of the Treasury, without reference to the
Commissioner of Customs.
Trade-marks.—Prior to 1936, trade-marks which could not be recorded under the provisions of section 526 of the Tariff Act of 1930 were
not denied entry even though the foreign merchandise bore a trademark identical with or similar to a trade-mark owned in the United
States and registered under the Trade-Mark Acts of February 20,
1905, and March 19, 1920. In 1936 a radical change was made
through an amendment of the trade-mark regulations. The amended
regulations accorded substantially the same protection to owners of
trade-marks registered under the Trade-Mark Acts of 1905 and 1920
as had been given owners of those trade-marks falling within the
scope of section 526 of the Tariff Act. Since 1936 all imported
merchandise bearing names or marks which are identical with United
States registered and recorded trade-marks (except merchandise
produced or sponsored by the owners of the registered United States
trade-marks appearing thereon) and imported merchandise bearing
names or marks which counterfeit, or are confusingly similar to protected trade-marks, has been denied entry unless imported by or for
the account of, or with the written consent of, the trade-mark owners.
Anti-Smuggling Act.—Among the provisions of this act, which was
approved on August 5, 1935, the following have proved particularly
beneficial in the enforcement of the customs laws.
The amendment of section 584 of the Tariff Act of 1930 provided
a penalty of $50 per ounce for unmanifested heroin, morphine, and
cocaine, whereas previously the penalty was equal merely to the value
of this merchandise. The higher penalty has resulted in the master
of a steamship exercising greater diligence in preventing the illicit
importation of narcotic drugs.
The amendment of section 3062 of the Revised Statutes permitted
the Government to seize automobiles which had been used in connection with the transportation of smuggled merchandise. Prior to the
amendment it was necessary for the Government to seize the vehicle
at the time it actually contained the smuggled merchandise before
forfeiture could be obtained.
The amendment of section 619 of the Tariff Act of 1930 permitted
the payment of awards of compensation to informers, who gave information which led to recovery, of violations of the customs statutes as
well as the navigation statutes, and also permitted the payment of
awards of compensation of one-quarter of the net value of merchandise
seized and destroyed. These provisions have enabled the Customs
Service to obtain a great deal of information from informers who in
the past were aware of the fact that they would obtain no benefits
from such information.
Customs Administrative Act oj 1938.—This act became effective
July 25, 1938, and has resulted in the improvement of customs admin


302

'JIEPORT OF T H E SEORETARY OF T H E TREASURY

istrative problems. Among its provisions was that modifying the
provisions of the Tariff Act oif 1930 regarding the marking of imported
merchandise to show the country of origin. Previously, any goods
not properly marked were subject to an additional duty of 10 percent
unless exported, and had to be marked before leaving customs custody.
The amendment discontinued the hnposition of additional duty if tlie
merchandise was subsequently marked under customs supervision
prior to the liquidation of the entry and also permitted the marking
to be accomplished after the articles had been released from continuous customs custody.
Changes in organization and procedure
Several important changes were effected during the past 8 years in
customs organization and procedure.
The Customs School of Instruction was established on July 5, 1935,
as an aid to a more thorough knowledge of all branches of the Customs
Service. The entire course, consisting of 41 subjects, was made
available to all officers and employees of the Customs Service and to
the personnel of those departments and branches of other services
who cooperate with the Customs Service in the discharge of their
duties.
The Division of Laboratories, established on April 1, 1936, consolidated under a single head the supervision of all the chemists and
analysts in the 9 customs laboratories. The number of samples received and analyzed by the laboratories has increased each succeeding
year and, by means of the interchange of information and the standardizing of improved m.ethods of analysis, considerable improvements
have been effected in the procedure employed. Laboratory manuals
and sampling guides have been prepared and disseminated, and conferences held for the discussion of laboratory problems.
Customs border patrolmen, numbering about 500, were transferred
on September 1, 1936, from the jurisdiction of the several collectors
of customs to the Customs Agency Service. These patrolmen, most of
whom are deployed at strategic seaport and border stations, are engaged in the prevention or detection of smuggling activities. The
assembling of all patrolm.en under a single authority permitted greater
mobility in the personnel of the force and resulted in a marked improvement in its efficiency.
The Appraisement Unit, was established on September 1, 1937, in
order to promote efficiency and uniformity in the appraisement and
classification of imported merchandise. At its inception, 15 of the
more important appraising officers were transferred to the new unit,
and additional appraising officers were subsequently severed from the
administrative control of the collectors of customs and placed under
the new unit. In addition, the Customs Information Exchange, which
disseminates information of general interest both to appraising officers
and to other customs officials, was transferred from the Customs
Agency Service to the Appraisement Unit.
Cost oj administration
In addition to collections under the customs revenue laws, customs
officers collect a substantial amount of revenue for other departments.
A statement for each of the past 8 years of the total collections by



303

B.E'POiE.T OF T H E SECIEE.TAB.T OF T H E TREASIUKY

customs officers, total expenses of the Customs Service, and of the
cost to collect $100 is listed below:
Customs collections and expenditures, fiscal years 1933 to 1940

Customs
receipts i

Fiscal year

1933
1934
1935
1936
1937.
1938
19391940

.

$251, 300, 560
314, 058, 464
346, 522, 111
388,784, 948
488, 342, 746
359, 573, 654
321, 409, 995
350, 851, 561

Collections
for other
departments,
b u r e a u s , etc.
$2, 765, 948
9, 456, 491
17. 932, 339
23,023,542
35, 928, 725
32, 521, 810
29, 012, 286
32, 428, 014

Total
collections

Cost to
collect
$100

Expenditures

$254, 066, 508
323, 514, 955
364,454,450
411,808,490
524, 271, 471
392, 095, 464
350, 422, 281
383, 279, 575

$19,135,901
17, 636, 495
19. 516, 708
20, 311, 751
20, 515, 558
20, 610, 568
20,784,163
21,127,673

$7.53
5.46
5.36
4.93
3.91
5. 26
5.93
5.61

1 Excludes duties for Puerto Rico but includes other Puerto Rican collections.

BUREAU OF ENGRAVING AND P R I N T I N G
Activities during the fiscal year 1940

The deliveries of currency, securities, stamps, and. miscellaneous
printings by the Bureau during the year amounted to 446,846,250
sheets, an increase of 3,199,163 sheets over the previous year.
A comparative statement of deliveries of finished work in the fiscal
years 1939 and 1940 follows:
Deliveries of finished work, fiscal years 1939 and 1940
Sheets

Face value.
1940

Class
1940
Currency:
United States notes
Silver certificates
Federal Reserve notes .
specimens

5, 547,000
95,113,000
10. 366, 050

88, 983, 990 3, 761,160,000

Total.
Bonds, notes, bills, certificates, etc:
Bonds:
Pre-war
Treasury
United States savings
Consolidated Federal farm loan for the Federal land
banks
Farm loan
1
_.
Federal Farm Mortgage Corporation
Home Owners' Loan Corporation
Insular:
Philippine
Puerto Rican
_^
Notes:
Treasury
Commodity Credit Corporation
Federal National Mortgage Association
Reconstruction Finance Corporation
United States Housing Authority
Treasury bills
_
Certificates:
Cuban silver.
—
Philippine treasury..
Debentures:
Consolidated collateral trust for the Federal intermediate credit banks
Federal home loan banks consolidated
Federal Housing Administration, mutual mortgage
insurance fund.




4,025,000
$193, 260, 000
75, 975,000 1, 666,620,000
8, 983, 950 1, 901, 280, 000
40

2,085
665, 948
4,077, 000

1,340
1, 002,400
530,163 4, 350, 626, 000
5, 514, 000 1, 750, 725,000

31, 000
16, 700
6,500
1, 443,055

13, 700
25,996
3, 5.50
62,155

41,880,000
21, 797,000
60,000, 000
230, 850,000

9,000

1,075
2,841

637, 500
1,091, 500

159, 625

159,195
65,000

4, 895,000,000
992,000,000

48, 000

801,000,000

56,150
120,000

34, 500
19. 570

'20," 482' 7,0.58,172, 000

578,333
2,195,600
17, 000
200
5, 000

14, 962, 000

16, 000

260, 000, 000

304

IREPORT OF THJE. SEiORETARY OF T H E TREAS'URY
Deliveries of finished work, fiscal years 1939 and 1 9 4 0 ^ C o n t m n e d
Class

Bonds, notes, bills, certificates, etc.—Continued
Interim certificates
Interim transfer certificates for postal savings bonds
Specimens:
Bonds
Notes
Debenture.s
Interim certificates
...
Total

Sheets

37, 675
2,000

Face value,
1940

1,000
571
12

135
44
32
6

8,660^680 $20,479,643,400

7, 287, 756

Sheets

Stamps:
Customs..
Internal revenue:
United States
.....
District of Columbia
Federal migratory- bird hunting..
Philippine
Puerto Rican
Virgin Islands
Specimens, United States
Postage:
United States
.
United States postage surcharged "Canal Zone"
Canal Zone
1
Philippine
Specimens, United States
Postal savings
Specimens
'.
.
Total.
Miscellaneous:
Checks
Warrants
Commissions
.
Certificates
Drafts
Transportation requests
Nontransferable food order and nontransferable surplus
food order stamps
Nontransferable cotton order and nontransferable surplus
cotton order stamps
Other miscellaneous
Specimens...
Blank paper
Total.
Grand total..

Number of
stamps, etc.,
1940

250, 000
141, 594, 373
131, 750
37, 764
217, 460
1, 031, 685
20

3,182,960
147, 226,135 13,280,660,070
142, 686
28, 637, 200
55, 226
1, 244,096
650
18

4, 638, 900
75, 076, 660
65,000
1,481

67, 456
747, 276
195
5,649

164,912,027 16, 576, 284, 287
12, 200
1, 220, 000
10, 040,890
164, 851
85, 580, 508
1, 024, 592
6,211
95
1, 962, 830
19, 628
400
4

291, 316, 715

314, 938, 806 30, 067, 257, 297

147, 233, 097

29, 313, 261
51,100
132, 386
3, 878, 493
7, 088
293, 254

27, 501, 995
44,104
193,869
4, 202, 281
6,500
327, 299

137, 509, 975
205, Oil
108, 419
17, 222,107
13, 000
1, 636, 495

38, 229

1, 635, 721

1 259, 388, 592

299, 248
3,105
.402

17, 090
319, 932
11, 508
2,475

3, 418, 000
6,460, 087
57, 640

34, 016, 566

34, 262, 774

426, 019, 226

443, 647, 087

446, 846.. 250

' Excludes .395,000 fillers.

Dies were engraved for new issues of postage stamps as follows:
jssug
Denomination
Commemorative, series 1939:
(cents)
Three-hundredth Anniversary of the Introduction of Printing in Colonial America
3
Fiftieth Anniversary of the Statehood for North and South Dakota, Montana, and Washington.
3
Commemorative, series 1940:
Fiftieth Anniversary of the Pan American Union
3
Eightieth Anniversary ofthe Pony Express
3
Fiftieth Anniversary of Wyoming Statehood
.
3
Fiftieth Anniversary of Idaho Statehood
.
3
Four-hundredth Anniversary of the Coronado Expedition
,
3
Famous Americans series, 7 groups of 5 denominations each
.
1, 2,3,5,10
Authors: Irving, Cooper, Emerson, Alcott, Clemens.
Poets: Longfellow, Whittier, Lowell, Whitman, Riley.
Educators: Mann, Hopkins, Eliot, Willard, Washington.
Scientists: Audubon, Long, Burbank, Reed, Adams.
Composers: Foster, Sousa, Herbert, MacDowell, Nevin.
Artists: Stuart, Whistler, Saint-Gaudens, French, Remington.
Inventors: Whitney, Morse, McCormick, Howe, Bell.




REPORT or THE SEORETARY OF THE. TREASURY

305

Plates were prepared for a number of new issues of securities and
miscellaneous jobs, the principal items being Commodity Credit
Corporation notes, series D and E ; Reconstruction Finance Corporation notes, series S; Home Owners' Loan Corporation bonds, series
N ; strip stamps for export distilled spirits bottled in bond; reimported
American distilled spirits stamps; cotton order and surplus cotton
order stamps; and Puerto Rican cigar and cigarette stamps.
New designs and models were made for Tennessee Valley Authority
bonds of four denominations; postal savings stamps; documentary,
stock transfer, and silver tax stamps, in denominations from 1 cent to
$1,000; and various Puerto Rican bonds and revenue stamps.
Printing orders for revenue stamps for 1940 were abnormally heavy,
due to some extent to recent legislation increasing the Federal taxes
on cigarettes, tobacco, and other products. Also several large
tobacco manufacturers reduced the contents of their packages, and
stamps of new denominations were required.
During the year, representatives of this bureau gave demonstrations of the printing of postage stamps at four exhibitions, two of
which were held in Washington, D. C , October 10 to 12, 1939, and
May 2 to 4, 1940; one at the New York World's Fair, May 11 to 23,
1940; and one at the Golden Gate International Exposition in San
Francisco, Calif., May 25, 1940, to continue until the close of the
exposition.
At the beginning of the fiscal year there were 5,802 employees on
the pay roll, while at the end of the year the number of employees
was 5,649, or a decrease of 153 persons, including 68 who were holding
indefinite appointments. This decrease was occasioned by the reduction in the printing requirements, particularly with respect to
United States currency and Federal Reserve notes.
There was expended during the year for salaries and expenses
$12,142,741.25, a decrease of 10.91 percent under the previous year.
The following statement shows the appropriations, reimbursements,
and expenditures for the fiscal years 1939 and 1940, respectively:
Appropriations, reimbursements, and expenditxires, fiscal years 1939 and 1940
1940
Appropriations:
Salaries and expenses
$9, 200,000.00 $8,450,000.00
1,000,000.00
Deficiency
Reimbursements to appropriation from other bureaus for
3, 475, 520.83 3, 718,888.91
work completed '
'
Total
Expenditures, salaries and expenses 2
Unexpended balance

Increase or
decrease (—)

-$750,000.00
-1,000,000.00
243, 368. 08

13, 675, 520. 83 12,168, 888. 91 -1,506,631.92
13, 628, 942. 37 12,142, 741. 25 -1,486,201.12
46, 578. 46

-20,430.80

1 An additional amount of $69.75, received from employees for lost identification cards, locker keys, package-booth checks, and badges, was deposited to the credit of the Treasurer of the United States as miscellaneous receipts.
2 Includes $11,300 transferred to Bureau of Standards for research work, $40,000 transferred to salaries and
expenses, guard force. Treasury Department, for service rendered in connection with the protection of cur-.
rency, bonds, stamps, and other papers of value, in each of the fiscal years 1939 and 1940, and $388,529.46 and
$374,718.79 transferred to retirement fund in the fiscal years 1939 and 1940, respectively.




306

'REPORT OF THE. SEORETARY OF T H E TREASURY
Review of activities since 1933

The following statement shows the deliveries of finished work by
the Bureau for the fiscal years 1933 to 1940:
Deliveries of finished work, fiscal years 1933 to 1940
[Expressed in single subjects]
Fiscal year

1933
1934
1935 1936
1937 .
1938.
1939
1940

957, 999, 426
653, 528, 652
659, 692, 308
930, 376,800
960,190,200
1, 086, 379, 200
1, 332. 312, 600
1, 067, 807, 880

.

Total

.-

..

Fiscal year

1933 . .
1934
1935
1936
1937 1
1938
1939
1940

Currency

._

- - -

Total

7, 648. 287, 066

Postage a n d postal
savings s t a m p s

B o n d s , notes, a n d
certificates

,

10, 625, 580
11,628.656
29, 584, 512.
58, 960, 794
18, 322,176
18.589,383
13, 975, 546
17, 738, 392
179,425,039

Checks, w a r r a n t s ,
etc.

Internal revenue and
customs s t a m p s
8,374, 390. 793
9, 562. 435. 380
10,675,415,410
11, 208, 847,190
12, 601. 944, 730
12, 218, 374, 982
12, 791, 225, 362
13, 392,162,171
90, 824, 796,018

Total

12, 507, 917, 806
11, 855,830, 740
13, 924, 561, 459
14,011,892,997
15, 332, 942, 626
15, 217, 573, 068
15, 286, 239, 831
16, 675, 095,126

72, 767,041
144, 753, 745
105, 553,853
186, 356, 656
173, 278, 939
138. 549. 767
171, 762. Oil
426, 414, 226

21, 923, 700, 646
22, 228,177,173
25. 394,807, 542
26, 396, 434, 437
29, 086, 678, 671
28, 679, 466, 400
29, 595, 515. 350
31, 579. 217. 795

114, 812, 053. 653

1, 419,436. 238

214, 883, 998. 014

On March 9, 1933, the date of the enactment of legislation to provide relief in the banking emergency, this Bureau was directed to
proceed with the production of 15,524,000 sheets of new Federal
Reserve Bank notes. As there was not sufficient time to engrave
new dies and make plates for the printing of this new currency, the
national bank currency stock already in production was used. A
stock of notes for each Federal Reserve Bank was prepared by overprinting the name of the bank, the bank symbol letters, and the
facsimile signatures of two of its officers. Rush orders were also
received for over 5,000,000 sheets of the standard Federal Reserve
notes. Additional storage vaults had to be provided and numerous
changes had to be made in operating methods to expedite the handling
and processing of the work.
The first shipment of the new notes was delivered at the Federal
Reserve Bank of New York on March 11, 1933. From that date to
June 30, 1933, deliveries of currency to all Federal Reserve Banks
amounted to $2,547,480,000 in Federal Reserve notes and $319,340,000 in Federal Reserve Bank notes. The urgent demand subsided
in a short time, and deliveries of Federal Reserve Bank notes were
soon discontinued.
In 1934 designs were prepared and approved for a new issue of
Federal Reserve notes. These notes, designated as series 1934, differed
from the previous issue in that the gold redemption clause was eliminated. Deliveries of the new notes, in denominations from $5 to
$1,000, were made during the succeeding year.



RE'PORT OF T H E SEiORETARY OF T H E TRIEASIURY

307

A new issue of silver certificates, in denominations of $1, $5, $10,
$20, and $100, was authorized in 1934. These certificates differed
from those previously issued in that a change was made in the certification as to the security back of these notes and in the text appearing on the face, the seal which formerly appeared to the left of the
portrait was placed on the right side, and a large numeral designating
the denomination was printed where the seal was formerly located.
In the latter part of 1935 a new design for the $1 silver certificate
was adopted. Production of these certificates, designated as series
1935, was begun in the following year. The design of the back of this
certificate presents the obverse and reverse of the Great Seal of the
United States. The face shows only minor changes, but its production embodies a new process whereby the signatures of certifying
officers and the number and seal are overprinted oil the certificates
in one operation. Formerly, the signatures were engraved in the
faceplate, thereby necessitating the making of new plates and causing
considerable delay in the production of the certificates whenever there
was a change in certifying officers. To conform to the established
color scheme providing for the printing of signatures in black and the
seal and serial number in blue, it was necessary to convert the numbering and sealing presses from single color to bi-color machines. This
task was accomplished gradually, and at the present time all $1
silver certificates are completed in this manner.
The first forei,gn currency ever produced in this Bureau wais printed
during 1935 for the Republic of Cuba. This order, printed under
authority of the State Department, amounted to approximately 500,000 sheets. The paper, manufactured by the same contractor who
furnishes paper to the United States Government, dift'ers from the
paper for United States currency in that it contains red silk fibers
only, whereas the paper for United States currency contains red and
blue silk fibers. The Cuban certificates involve S T additional printing
LL
operation—a plate printed tint on the face. Further orders for Cuban
currency were printed from time to time, as were numerous orders
for currency for the Philippine Islands.
The financing operations of the Treasury Department and of
many of the newly created Federal agencies and other activities
ocJcasioned by the passage of legislation by the Congress required
the preparation of various types of bonds and other forms of securities.
The most outstanding issues included Treasury bonds and notes,
United States savings bonds, registered adjusted service bonds.
Home Owners' Loan Corporation bonds, and Federal Farm Mortgage Corporation bonds. Practically all,of these security issues were
rush jobs and, in most instances, it was necessary to make new
designs and models and prepare engraved dies and plates before
actual printing could be begun.
Printing orders were received during 1934 for 6,000,000 Home
Owners' Loan Corporation bonds and 4,000,000 Federal Farm
Mortgage Corporation bonds. In order to meet the delivery schedules
submitted by the issuing offices, at certain periods of the year 75
percent of the presses were used for printing these bonds.
A new type of security, the United States savings bonds, was ordered
by the Department in 1935 in denominations of $25, $50, $100, $500, and
$1,000. A great amount of original engraving was necessary in connection with the manufacture of the dies and plates for these bonds.



308

REPOIRT OF THE, SECRETARY OF T H E TREASOTRY

but deliveries commenced within a month after the initial order was
received. Provision was made on the face of the bond for the insertion of the name and address of the purchaser and the date of sale.
A perforated original stub was attached to each bond and a duplicate
stub was affixed for record purposes. There have been four issues
of these bonds, and the total number delivered to June 30, 1940,
aggregated over 20,000,000 bonds.
In 1933, following the passage of legislation modifying the Prohibition Act, large orders were received requiring the engraving and
printing of special tax stamps for breweries and dealers. Twentyone varieties of stamps for fermented liquor and wine were prepared.
The repeal of the eighteenth amendment to the Constitution revived
the issue of a number of liquor stamps which had been discontinued
during the prohibition period. In some cases it was found expedient
to change the size of the stamps, which made it impossible to use
the old rolls and dies still held in storage.
In 1934 a rush order was received for 16,000,000 sheets of distilled
spirits bottle strip stamps for the collection districts. These stamps
were plate printed in sheets of 50 subjects, ranging in denominations
from K pint to 1 gallon. The following year, as a protection against
illegal use, a serial number was overprinted on each stamp. To accommodate this additional printing the size of the stamp was enlarged
and arranged in sheets of 42 subjects. Later, a less than K-pint denomination was printed without numbers.
The printing requirements for bottle strip stamps continued to increase each year until the quantity ordered for the fiscal year 1940 was
1,326,144,000 stamps. In addition to the liquor stamps printed for
the United States Government, a special issue was ordered by the
District of Columbia for local tax purposes.
One of the largest emergency jobs undertaken by this Bureau was
the Civil Works Administration checks. The printing of these
checks was started in the latter part of November 1933, and deliveries
were rushed to all disbursing officers in the country for use during
the first week in December. Delivery requirements continued at
the rate of approximately 4,000,000 checks a week until the spring
of 1934, when a gradual decline in orders took place. After May 1,
1934, no further shipments were made.
In 1935, orders were received for the printing of checks for the
Emergency Relief Administration. Although the quantity required
per week was approximately one-half of the number required for the
Civil Works Administration during the preceding year, the job was
more complicated due to the fact that emergency relief checks were
drawn on the Treasurer of the United States, through the Federal
Reserve Banks in the respective districts, and it was, therefore,
necessary to make plates and prepare a stock of checks for each of
the 12 Federal Reserve districts. The quantity ordered increased
each year until in 1940 the total requirements aggregated 60,000,000
checks.
During the years 1933 to 1940, 145 new designs and models for
various denominations of United States postage stamps were prepared and approved. A great number of these were commemorative
issues, while others were new series of regular postage stamps superseding certain previous designs. Among the large issues of stamps



REPOET OF THE. SECEETARY OF T H E TRIEAS'URY

309

were the National Park series of 1934, the Army and Navy series
of 1937, and the Famous Americans stamps of 1940.
Deliveries of stamps to meet the requirements of the Post Office
Department have increased steadily each year. The quantity of
postage stamps printed and delivered in 1940 amounted to approximately 17,000,000,000 stamps.
The initial schedule for food order stamps (orange) and surplus
food order stamps (blue) was received in 1939. During that year
orders were received for over 6(),000,000 stamps, or nearly 2,000,000
books, and required that the stamps be gummed, perforated, and
assembled in 13 different series of books, according to the quantity
or combination of stamps per book. These stamps were first printed
from 96-subject plates on flatbed power presses. Later on, 200SLibject plates were made for power presses and finally, with the
avalanche of orders, 200-subject curved plates were prepared for use
on rotary presses. Orders for these stamps increased in 1940, when
the food stamp program spread to a greater number of cities. Deliveries for that fiscal year aggregated 259,783,592 stamps, comprising
8,313,403 books.
In the latter part of January 1940, the first order was received for
the production of cotton order stamps (green) and surplus cotton
order stamps (brown). These stamps were required to be gummed,
perforated, and assembled in 9 different combinations of books.
Production was begun as soon as engraved plates could be prepared
and the amount delivered to June 30, 1940, was 3,418,000 stamps, or
134,002 books. The stamps were printed on rotary presses, 200
subjects on each plate.
Numerous developments and improvements were accomplished in
connection with the processing methods and in the design and construction of machinery and equipment employed in the production
of currency securities, etc. The most important items include the
following: The designing and installation of photo electric cell equipment on rotary postage stamp perforators; the redesigning and rebuilding of currency wetting machines, and the development of a
new method for the wetting of currency paper; the designing and
construction of new machines for sizing currency, providing for
automatic temperature control of the sizing solution and of the drying
units; the installation of new presses for platering securities, and the
relocation of the platering activities within the sizing room; the
conversion of numbering, sealing, and separating presses from single
color to two-color machines, to permit the printing of signatures of
certifying officers; the installation of sound and vibration absorption
material to isolate the machines from their foundations; the designing
of new semiautomatic banding machines for welding the steel tapes
encircling the packages of currency; the designing and installation
of a research laboratory for testing materials used in the manufacture
of the various classes of work; the installation of improved lighting
and ventilating facilities in all work rooms; and the construction of
a new power substation.
The new annex building, authorized by Congress on August 12,
1935, was ready for occupancy in the early part of 1938. The annex
contains 840,967 square feet of floor space, of which approximately
two-thirds is occupied by Bureau activities and the remainder by
other divisions of the Treasury Department.



310

:REP0RT

OF T H E SECRETARY

O F T H E TREASnjRY

To facilitate the travel of employees and the transportation of
materials, tunnels connect the main building with the annex and the
annex with a receiving platform adjoining the railroad yards.
The passage in 1934 of the 40-hour week law for mechanics reduced
the working hours of 769 employees of this Bureau from 44 to 40
hours a week. The remainder of the employees, 3,289, were not
affected by the act. This presented a confusing situation with one
group of employees engaged on a basis of 40 hours a week, while
another group employed upon the same job was required to work
44 hours a week. This condition, however, was remedied on July 1,
1936, by legislation which placed all employees on the basis of a
40-hour week.
Eft'ective May 1, 1937, the mechanics and their helpers, employees
not under the Classiflcation Act, were granted a 15 percent increase
in compensation for night work to conform with the practice established in another Government organization.
The gradual diminishing of the plate printing force because of retirements made it advisable to appoint a limited number of young
men to learn the art of plate printing. During the latter part of 1938,
32 apprentices were appointed, the flrst group since. 1918. Three
additional apprentices were taken on in the flscal year 1939, making
a total of 35 serving in this capacity.
At the beginning of the flscal year 1933, when the printing program
was small in volume, the problem of overemployment confronted the
Bureau, as was the case during the previous 5 years. A system of
furlough was then in effect, and continued until March 1, 1935.
Beginning in the last quarter of the flscal year 1935, the work steadily
increased and kept the entire force operating on a full time basis. In
this period the personnel was increased from 4,139 employees in 1935
to 5,649 at the close of the flscal year 1940.
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 flled with the attorney for the Government, who
institutes proceedings in disbarment or suspension if the charges
warrant such action. The committee also issues licenses to customhouse brokers and makes flndings of fact and recommendations to
the Secretary in proceedings for the revocation or suspension of such
licenses.




REPORT OF THE. SEORETARY OF THE TREASURY

311

The following statement summarizes the work of the committee
for the year 1940:
Attorneys and agents:
i
Applications for enrollment approved
Applications for enrollment disapproved
Applications withdrawn on advice of committee
Formal hearings on applications

Number
2,638
• 28
127
2

:..
*...

Complaints against enrolled persons:
Pending July 1. 1939
Filed during the year

.

Disposed of:
Disbarred
Stricken from the rolls in the course of disbarment proceedings
Suspension
Reprimands
D ismissed

40
26
10
4
1
2
8

Pending June 30, 1940
.
....
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 withdrawn....:
Licenses canceled..
Reprimands

....

66

25
41
8
15
44
6
17
2

Since the organization in 1921 of the Committee on Enrollment
and Disbarment, 56,885 applications for enrollment have been
approved and 740 disapproved. Two hundred and twelve practitioners have been disbarred from further practice before the Treasury Department, 134 have been suspended from practice for various
periods, and 174 have been reprimanded,
FEDERAL ALCOHOL ADMINISTRATION
Activities during the fiscal year 1940

The Federal Alcohol Administration was abolished effective June
30, 1940, in accordance with the terms of Reorganization Plan No.
I l l , and its functions were transferred to the Bureau of Internal
Revenue to be administered by the Alcohol Tax Unit.
• The Administration was charged with administering the provisions
of the Federal Alcohol Administration Act. Its activities involved the
prevention of certain unfair trade practices on the part of alcoholic
beverage producers, importers, and wholesalers, such as exclusive
retail outlets, so-called tied-house relationships, commercial bribery,
cdnsignment sales, false and misleading labeling and advertising, bulk
disposition of distilled spirits, and interlocking directorates in the
distilhng and rectifying fields. The Federal Alcohol Administration
Act requires that all producers (other than brewers), importers, and
wholesale distributors of alcoholic beverages secure permits, issued
by the Administration, which are conditioned upon compliance with
the provisions of the act, the twenty-first amendment and its enabling
statutes, 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 existing labels, and proposals involving
amendments to the regulations were received in substantial number
and, after consideration, appropriate action was taken.




312

REPORT OF THiE SEORETARY OF THE. TREASTJRY

Permit Division
The number of basic permits outstanding increased from 15,290
to 15,539 during the year, 1,916 permits having been granted and 1,667
having been terminated. I n addition to the activities involved in
connection with issuance and termination, 1,197 basic permits were
amended during the year, involving principally changes in corporate
and trade names and changes in location of plants of businesses covered by basic permits.
The activities of the Permit Division for the year are summarized
in the following statement:
Permit activities, fiscal year 1940
Importers

Wine
producers a n d
blenders

9
63.

6
62

20
153

16
144

1
5

168
1,605

220
2,032

72

Applications for p e r m i t s :
P e n d i n g J u l y 1, 1939
Received
T o t a l t o b e disposed of
Withdrawn
I n c o m p l e t e , closed
Denials after hearing .
Denials i n default of r e q u e s t for
hearing- _.
P e r m i t s issued after hearing
P e r m i t s issued u n d e r regular procedure
T o t a l disposed of
P e n d i n g J u n e 30, 1940
Permits:
I n effect J u l y 1, 1939
Issued
Canceled
Automatically terminated
Revoked
I n effect J u n e 30, 1940

Warehousing Wholeand
salers
bottling 1

Rectifiers

68

173

160

6

1,773

2,252

4
5
0

6
3
0

8
0
0

16
2
0

1
0
0

91
26
6

126
36
6

0
0

0
0

0
1

2
0

6

6
3

8
4

Distillers

0

Total

65

51

147

129

4

1,526

1,912

64

60

156

149

5

1,658

2,092

8

8

17

11

1

115

160

416
55
52
28
3
2 388

352
51
41
18
2
342

1,032
148
127
51
8
994

1,346
129
118
47
32
1,278

49
4
9
0
0
44

12, 096
1,529
611
511
9
12,493

16, 290
1,916
958
655
64
15, 539

1 Warehousing and bottling perrnits issued to proprietors of bonded warehouses only. Such permits are
held also by all distillers and rectifiers.
2 Of the 388 distillers' basic permits, 88 merely authorize the operation under lease of existing distilleries,
and the remaining 300 permits cover actual authorized distilling plants.

Label Examination Division
The Federal Alcohol Administration Act provides that no bottler
or importer shall bottle or remove from customs custody for beverage
consumption distilled spirits, wine, or malt beverages, unless the
bottler or importer, upon application to the Administrator, has
obtained and has in his possession a certificate of label approval, or a
certificate of exemption which may be issued upon a satisfactory
showing that the distilled spirits, wine, and malt beverages are not
to be introduced in interstate and foreign commerce.
As compared with the preceding year, there was a slight decrease
in the number of both domestic and imported label applications
filed. However, the label work in general continued heavy and a
total of 82,812 applications were acted upon. This figure does not
include many thousands of labels submitted in unfinished form for
informal comment in advance of actual printing and filing for final
approval.



313

REPORT OF THE SEORETARY OF THE TREASURY

The following table shows the activities of the Label Examination
Division for the year:
Label activities, fiscal year 1940
Distilled
spirits

Wine

Malt beverages

Total

Domestic
Certificates of approval issued
_
Applications for certificates of approval disapproved
Certificates of exemption issued
Total

34,466
2,594
4,832

26, 758
3,944
67

41, 882

29, 769

0)

803
73

61,017
6.611
4,899

876

72, 527

64

8, 652
431
1, 302

Imported
Certificates of approval issued
Certificates of limited approval issued 2
Applications disapproved.

. .

2,072
103
421

6,416
328
874

7

2,596

Total
Grand total-

.

7,618

71

10, 286

44,478

37, 387

947

82, 812

1 The regulations do not provide for the issuance of certificates of exemption from label approval for malt
2 The certificates of limited approval were issued 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
Monthly reports of operations were required from distillers, rectifiers,
and importers, and from proprietors of internal revenue and customs
bonded warehouses holding warehousing and bottling basic permits.
The Statistics and Reports Division supervised the proper filing of
these reports and compiled the information contained therein, which
was disseminated from time to time in the form of releases to members
of the industry and others.
Enjorcement Division
During the year the Enforcement Division conducted 2,486 investigations, of which 615 were made at the request of the Permit
Division and involved inquiries into the personnel of permit applicants ; 26 were undertaken in connection with cases involving possible
annulment of permits which the Administration had reason to believe
might have been issued on the basis of erroneous statements in applications, representing a substantial increase in this line of activity
over the previous year; and 1,845 were investigations of alleged
violations of the restrictive provisions of the act.
In connection with the enforcement of the advertising regulations,
the Division reviewed 72,502 advertisements appearing in 24,219
publications, representing a slight increase over similar activities for
the preceding year, and took appropriate action on 4,755 which
involved various types of irregularities. There were 1,077 calls made
by advertising field men on members of the industry for the purpose
of reviewing local advertising media, and 3,970 advertisements were
reviewed during these calls. In addition, 1,084 conferences were held



314

REPOIRT OF T H E SEORETARY OF T H E TREASURY

with industry members, attorneys, or advertising agents for the
purpose of reviewing and commenting on proposed advertising copy,
and 3,288 proposed advertisements or advertising campaigns were
reviewed at these conferences.
Legal Division
The Legal Division acted as legal adviser to the Administrator in all
matters pertaining to the Administration's activities, in the holding of
industry hearings, in the drafting of regulations under the Federal
Alcohol Administration Act, and in rendering interpretations thereof
and of the statute. The Division prosecuted on behalf of the Administration all-charges against permittees involving violations of the
conditions of their permits and assisted in the defense of cases involving
litigation brought against the Administration or in its behalf. I t
prepared or reviewed all correspondence of a legal nature and prepared
all rulings and orders of the Administrator.
The Legal Division conducted all proceedings against permittees in
matters relating to applications for basic permits and to violations of
the act or regulations. The Administration's hearing officers held
hearings from time to time throughout the country and made findings
of fact and recommendations to the Administrator on the cases under
consideration. When exceptions to these findings of fact were filed,
such exceptions were argued and presented to the Administrator on
behalf of the Administration.
The proceedings before the Legal Division during the fiscal year
are summarized as follows:
Proceedings on applications for permits:
Number
Notices of contemplated denial of basic permit applications....
,
21
Orders denying applications for basic permits L..
13
Orders granting applications for basic permits i
3
Orders dismissing proceedings on applications i
10
Proceedings pending
8
Proceedings for suspension of permits:
Orders instituting suspension proceedings.
_
21
Orders suspending permit or dismissing proceedings i
18
Proceedings pending
•
9
Proceedings for revocation of permits:
Orders instituting revocation proceedings
61
Orders dismissing proceedings on cancelation of permit or revoking permit i
77
Proceedings pending
.
6
Proceedings for annulment of permits:
Orders instituting annulment proceedings
.'
7
Orders dismissing proceedings on cancelation of permit or annulling permit i
4
Proceedings pending
4
Proceeding to show cause: Order to show cause why permit should not be adjudicated as having
terminated as a matter of law..
1
Offers in compromise:
Offers received
854
Offers approved by the Attorney General 2
742
Offers pending approval ofthe Attorney General.
.
112
Cases before Federal courts:
Cases in United States District Courts
^
1
Cases in United States Courts of Appeal
4
Cases in United States Supreme Court (petition for certiorari)
...
1
Cases referred to the Attorney General for prosecution
.
7
Cases pending
.
...6
Interlocking directorates: Applications received and acted upon..
49
1 Includes orders in a number of proceedings closed during the fiscal year but instituted prior thereto.
2 Does not include 257 offers approved by the Attorney General during the fiscal year but submitted
prior thereto.

During the year three public hearings were held for the consideration of proposed amendments to the Administration's labeling and
advertising regulations. In view of the fact that the consideration
of wine and brandy problems is of primary interest to producers in
California, it was necessary to hold sessions of two of these hearings




REPORT OF THE. SEIORETARY OF T H E TREASURY

315

both in San Francisco and in Washington. The Legal Division
assisted in the conduct of these hearings, in addition to studying the
proposals considered thereat, drafting the notices of hearing, analyzing
and summarizing the testimony, and preparing proposed changes in
the regulations.
Review of activities since September 24, 1935

The Federal Alcohol Administration was created as a division of the
Treasury Department under the Federal Alcohol Administration Act,
approved August 29, 1935. This act abolished the Federal Alcohol
Control Administration, which had been established by Executive
order under the provisions of title I of the National Industrial Recovery Act, and transferred all papers, records, and property to the
Administrator of the Federal Alcohol Administration, effective on
the date the Administrator first appointed took office. The Administrator took office on September 24, 1935.
The broad purpose for which the Federal Alcohol Administration
Act was passed was the regulation of the conduct of the legitimate
liquor industry in such manner that the abuses traditionally associated
with the liquor traffic might be minimized and the interests of the
consuming public adequately protected.
On June 26, 1936, the President approved the Liquor Tax Administration Act, title V of which made the Federal Alcohol Administration
an independent. agency, abolished the ofl5.ce of Administrator, and
provided that the Administration should be composed of three members to be appointed by the President by and with the advice and
consent of the Senate, these provisions to be effective when a majority
of the members took office. This requirement was not complied with
prior to the transfer of the Administration to the Bureau of Internal
Revcenue.
Between September 24, 1935, and the end of the calendar year 1936,
the work of the Federal Alcohol Administration was chiefly of a
preparatory nature. During this period permits required by the
statute were issued, effective November 23, 1935, to the various
classes of industry members, except the alcoholic beverage wholesalers, for whom the effective date of the permits was extended from
March 1, 1936, to July 1, 1936, in accordance with the public resolution approved February 29, 1936.
In addition, all labels used by bottlers of distilled spirits, wine, and
malt beverages were required to be submitted for examination and
approval by the Administration, or exemption from approval in the
case of labels intended solely for intrastate use. The act of August
29, 1935, provided that a certificate of label approval should be required covering each label used after March 1, 1936. This date was
later extended to August 15, 1936, for distilled spirits, and to December 15, 1936, for wine and malt beverages. The last of this work was
completed by December 15, 1936.
During this time the Administration was also working on the drafting of regulations required to give effect to the statute. Seven sets of
regulations, the most important of which were those governing the
labeling and advertising of distilled spirits, wines, and malt beverages
269677—41

-22




316

REPORT OF T H E SEORETARY OF T H E TREASURY

in accordance with the standards established in section 5, subsections
(e) and (f), of the act, were promulgated and made effective. Only
one set of regulations, that required to give effect to section 5 (b) (6)
governing the extension of credit to retailers, was not issued until
later, November 9, 1938.
At the beginning of the calendar year 1937 attention was given
primarily to the administration of the restrictive provisions of the act.
While the inspection of labels and the issuance of certificates of
approval and exemption and the issuance and amendment of basic
permits continued on a substantial scale, the Administration's attention was devoted largely to the enforcement of the trade practice provisions of the act, the control of labeling and advertising, the protection of dry and monopoly States in accordance with the purposes of
the second clause of the twenty-first amendment, the examination of
interlocking directorates in the distilling and rectifying fields, the
annulment of permits fraudulently obtained, and various other activities required by the statute. While the Administration was handicapped by the lack of an adequate staff of field investigators, substantial progress was made.
A number of the cases resulting from the Administration's enforcement activities were taken to court and the constitutionality of the
statute received judicial confirmation. In the case of the Atlanta
Beer Distributing Co., Inc., the Supreme Court refused to review the
decision of the lower court, upholding the Administrator in. the exercise of his discretion in refusing a permit to an applicant who had not
been convicted within the statutory period, but who had a record indicating that he might not conduct operations in conformity with the
law. The Supreme Court of the United States also refused to review
the decision of the Circuit Court of Appeals in the Arrow Distilleries
case, upholding the constitutionality of the Federal Alcohol Administration Act in requiring a permit system applicable to all interstate^producers and shippers of alcoholic beverages. In the case of William
Jameson and Co., Inc., against the Secretary of the Treasury and the
Administrator of the Federal Alcohol Administration, the Supreme
Court of the United States upheld the right of the Federal Government to regulate the importation of alcoholic beverages into the United
States since the twenty-first amendment.
The following statistics reflect the activities of the Administration
for the fiscal years 1936 through 1940:




REPORT OF T H E SEORETARY OF T H E TREASIURY

317

Permit activities of the Federal Alcohol Administration, fiscal years 1936 to 1940
1936

19371

19381

1939

1940

Applications for p e r m i t s :
P e n d i n g at beginning of y e a r . .
Received

13,421

(*)

409
3,310

418
2,691

208
2,223

220
2,032

T o t a l to b e disposed of

13,421

3,719

3,109

2,431

2,252

163
2
.
33
12
12, 802

308
8
22
47
61
2,855

209
44
4
9
2
2,633

114
45
4
10
6
2,032

126
36
6
8
4
1,912

13, 012

3,301

2,901

2,211

2,092

409

418

208

220

160

12, 726
195

12, 531
2,916
1,180

14,267
2,635
1,681
12

15,209
2,038
1,504
382
71

15, 290
1,916
958
655
54

12, 531

14, 267

15, 209

15, 290

15, 539

402
376
88
97
435
404
987 ' 1,073
1,332
1,457
45
48
9,268 10, 786

354
87
379
1,059
1,521
50
11, 759

321
95
352
1,032
1,346
•49
12,095

300
88
342
994
1,278
44
12,493

14, 267

15, 209

15, 290

15, 539

.

Withdrawn
I n c o m p l e t e , closed
Denials after hearing
Denials in default of request for hearing
P e r m i t s issued after hearing
P e r m i t s issued u n d e r regular p r o c e d u r e . . .
T o t a l disposed of

1

P e n d i n g at e n d of y e a r
Permits:
I n effect at beginning of year
Issued
Canceled
_.
.
Automatically terminated.
Revoked

..

I n effect at e n d of year
Distillers:
Plants
Lessees
Rectifiers
Importers
W i n e producers a n d blenders
W a r e h o u s i n g a n d bottling 2
Wholesalers...

•

. Total

12, 531

(*)
(*)

(*)

*No record.
1 Does not include 1,000 applications received in 1937 for amendment of permits, and 1,208 amendments
made for permits in 1938.
2 Warehousing and bottling permits issued to proprietors of bonded warehouses only. Such permits are
held also by distillers and rectifiers.

Label activities of the Federal Alcohol Administration, fiscal years 1936 to 1940
1936 1
Certificates of a p p r o v a l issued:
Domestic:
Distilledspirits
Wine
M a l t beverages

•.

Total.

11,065

Imported-.
Distilledspirits
Wine
M a l t beverages.

(*)
(*)
(*)

Total
Grand total.
Applications d i s a p p r o v e d
Certificates of exemption issued 2. . . .
Certificates of limited a p p r o v a l issued 3

(*)
(*)
(*)

1937

1938

1939

70, 632
47, 038
1,701

45, 559
45, 544
1,020

43, 824
26, 324
796

34,456
25, 758
803

119,371

92,123

70,944

61,017

9,056
9,660
178

3,052
9,449
134

3,336
8,848
210

2,072
6,416
64

1940

1,465

.

.

18, 894

12, 635

12, 394

8, 552

12, 530
15, 307

138,265
52,108
18, 677
8,096

104, 758
11,106
9,159
575

83,338
10, 200
5,749
685

69, 569
7,913
4,899
431

(*)
1,268

*No record.
1 There were filed 39,470 applications for approval of labels for domestically bottled distilled spirits, 4,981
applications for approval of labels for distilled spirits imported in bottles, and 1,898 applications for
exemption from label approvals for distilled spirits. No action was taken on 16,543 applications for certificates of label approval received for wine, inasmuch as the effective date of the provisions respecting labels
for wine was extended to December 15,1936.
2 Regulations do not provide for issuance of certificates of exemption for malt beverages.
3 Issued only for labels of distilled spirits and wine entered into customs custody prior to the effective
dates of the regulations. The labels so exempted, however, contained all the mandatory information
required and did not include any information considered false or misleading.




318

REPORT

OF T H : E S E C R - E T \ A R Y

OF T H E

TREASIURY

Enforcement activities of the Federal Alcohol Administration, fiscal years 1936 to
1940
1937

1936
Investigations:
Permit applicants
Alleged violations

774
179

' Total
Advertising:
• Advertisements reviewed
Proposed advertising copy reviewed
Radio advertising reviewed
Field investigations on advertising irregul^irities
Action taken on violations or irregularities
Offers in compromise secured and referred to Legal Division

1939

1,040
2,459

551
2,507

706
1,985

3,499

3,058

2,691

2,460

200, 000 158, 824 77,862
3,068
(*)
(*)

79, 760

953

(*)
(*)
(*)
(*)

(*)

(*)

114
2,260
1,508

74
2,937
1,080

178
2

(*)
(*)

5,811
997

(*)

1,400

(*)

1,214
854

*No record.
1 There were 6,987 proposed advertisements reviewed in Washington and 1,889 in the field, resulting in
the revisidn of 1,353 advertisements which did not comply with the regulations.

Legal activities of the Federal Alcohol Administration, fiscal years 1937 to 1940
1937 1

Proceedings on applications for permits:
Notice of contemplated denial of permit
Orders denying permit
Orders granting permit
.
Orders dismissing proceedings on applications
Proceedings pending
Proceedings on suspension of permits:
Orders instituting suspension proceedings
Orders suspending permit or dismissing proceedings..
Proceedings pending
.
Proceedings on revocation of permits:
Orders instituting revocation proceedings
Orders dismissing proceedings on cancelation or revocation
of permit
Proceedings pending
Proceedings on annulment of permits:
Orders instituting annulment proceedings
Orders dismissing proceedings on cancelation of permit
Proceedings pending
Orders to show cause:
Why permit should not be terminated as a matter of l a w . .
Why certificate of labels approved should not be canceled.
Offers in compromise:
Received
Approved ^by Attorney General
Pending approval by Attorney General
.
Cases pending before Federal Courts:
In United States District Courts
In United States Supreme Court
Referred to Attorney General for prosecution
:
In Circuit Court of Appeals
In United States Court of Appeals
Pending
.
Cases on interlocking directorates received and acted upon

1940

1939

1938

58
69
67
28
4

34
10
10
13
9

30
18
10
6
6

2.1
13
3
10

96

34
88
15

31
44
5

21
18
9

()
*68
()
*
()
*
()
*

122
86
36

()
*
()
*
()
*
1,080

878
202
3

()5
*
1

()
*
()
*
()
*

77
6

3

()3
*

2
3
1

7
4
4

()
*
()
*

3
3

104
122
17

1
1

297
4
1
7

3
2
5

()
*
()7
*

()
*
()6
*

20

42

(*)
854
742
112°

997
739
173

1, 508
1, 211

1
2 1

7

(*)

4
6
49

*No record.
1 No record prior to 1937.
2 Petition for certiorari.

FOREIGN FUNDS CONTROL
The Foreign Funds Control was established in the Office of the
Secretary to administer the functions prescribed in Executive Order
No. 8389, of April 10, 1940, as amended. Applications to engage in
any of the transactions designated in the Executive order are executed
under oath before an officer authorized to administer oaths and are
filed in duplicate with the Federal Reserve Bank of the district or the




REPOaRT OF THE SEORETARY OF THE. TREASfURY

319

Governor or High Commissioner of the Territory or possession of the
United States in which the applicant resides or has his principal place
of business or principal office or agency. If the applicant has no legal
residence or principal place of business or principal office or agency in a
Federal Reserve district or a Territory or possession of the United
States, applications may be filed with the Federal Reserve Bank of
New York. Such applications are forwarded to the Treasury Department by the Federal Reserve Bank or other agency with which they
are filed, and the applicant receives tlirough the same channel the
license as granted, or is informed of the denial thereof.
Pursuant to Executive Order No. 8389, as amended, general rulings
and genera] licenses (of which general licenses several have been subsequently revoked) were issued by the Secretary of the Treasury.
Between April 11 and June 30, 1940, the Control acted upon 16,088
applications, approving 15,152, denying 719, and taking other action
on 217.
A discussion of foreign funds control will be found on page 161.
BUREAU OF INTERNAL REVENUEi
Activities during the fiscal year 1940

General
Internal revenue collections.—During the fiscal year 1940 internal
revenue collections totaled $5,340 millions, an increase over collections for the fiscal year 1939 of $159 millions. The total amount
collected included back income taxes of $253 millions, which is approximately $2 millions more than hack income tax collections for 1939.
The increase in total collections is attributable chiefiy to increases in
miscellaneous internal revenue collections and employment taxes.
Miscellaneous internal revenue collections amounted to $2,377
millions, which is an increase of $121 millions over collections for
1939. The largest increases were as follows: Capital stock tax, $6
millions; liquor taxes, $36 millions; tobacco taxes, $28 millions; and
manufacturers' excise taxes, $50 millions. There was a decrease of
floor stocks tax on liquor of $5 millions; a decrease in tax from the
sale of documentary stamps of $2 millions, and relatively small decreases on other miscellaneous taxes.
Employment tax collections totaled $834 millions, an increase of
$93 millions over the preceding year. Total collections under the.
Federal Insurance Contributions Act (formerly title V I I I of the
Social Security Act) were $605 millions; collections under the Federal
Unemployment Tax Act (formerly title I X of the Social Security
Act), $106 millions, and collections of carriers taxes, $122 millions.
Total collections of internal revenue during the fiscal years 1939
and 1940 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 662 of this report.
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.




320

•REPORT OF T H E SECRETARY OF T H E TREAS'URY
Summary of internal revenue collections, fiscal years 1939 and 1940
[On basis ol r e p o r t s of collections, see p . 584]

1939

Administrative Unit

1940

Increase or
decrease (—)

Income Tax Unit ^
$2,185,115, 599. 09 $2,129, 609, 307. 07 - $ 5 5 , 506, 292. 02
Alcohol T a x U n i t .
..
...
624, 253,156.11
36,453, 455. 43
587,799,700.68
84, 839,120. 34
Miscellaneous T a x U n i t
J.
.
1, 668, 229, 7S7. 75 1, 753. 068,908. 09
A c c o u n t s a n d Collections U n i t ( e m p l o y m e n t tax
93, 092,110. 45
activities).
740,428, 865. 06
833, 520, 975. 51
T o t a l collections

5,181, 573, 952. 58

5, 340, 452, 346. 78

158, 878, 394. 20

1 I n c l u d e s collections from t h e repealed tax on d i v i d e n d s a n d t h e tax on u n j u s t e n r i c h m e n t .

Rejunds, drawbacks, and stamp redemptions.—During the year
refunds of tax collections, together with interest, were made from the
following appropriations:
R e f u n d i n g i n t e r n a l r e v e n u e collections, 1939 a n d prior years
R e f u n d i n g i n t e r n a l r e v e n u e collections, 1940 a n d prior y e a r s
R e f u n d s a n d p a y m e n t s of processing a n d related taxes,* 1939 a n d 1940...
T o t a l , interest included

$133, 674.07
65, 093,064.16
11,503,970.56

.'

..

76,730,708.79

The following is a summary of the refunds, showing the number 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 1940, with a comparison of the totals for the
fiscal year 1939:
Number of schedules and claims, amount of refunds and repayments, and total refunds, repayments, and interest, by class of tax, fiscal year 1940, and totals for
1939
Number Number
of
of
schedules
claims

Class of tax

B i t u m i n o u s coal
C a p i t a l stock
Carriers
Distilled spirits
Distilled s p i r i t s s t a m p s r e d e e m e d . :
Dist'Oled spirits d r a w b a c k s (244 certificates).
Estate
GiftIncome
!
Miscellaneous
;
Miscellaneous stamps redeemed...'
Narcotics
Narcotic stamps redeemed
Sales
Silver s t a m p s r e d e e m e d
..;
Federa:i I n s u r a n c e C o n t r i b u t i o n s A c t . .
Federal U n e m p l o y m e n t Tax Act
Sugar
Tobacco..
Tobacco stamps redeemed
Tobacco drawbacks
T o t a l income a n d
revenue.
Agricultural adjustment

miscellaneous
.J

T o t a l refunds,
repayments,
a n d interest

1,070
346
6,667
56
60
26
29
110
2
1,587
1,976
71
7
24

103
2,131
131
5,902
2,112
640
1,582
4^1
132, 532
• 462
1,984
127
57
1,105
2
5,665
14, 972
1, 537
9
1,985

168. 42
336, 420.15
746. 88
9,
640, 092.80
53, 634.88
177. 189.48
4,611, 167. 33
2,957, 361. 63
36,866, 443.92
524, 765. 77
196, 695.73
205. 31
218. 43
1,968, 721.19
55.00
493, 647. 64
1,853, 150. 20
1,683, 115.97
546.91
1, 832, 670. 38
3, 823.77

$6, 567. 92
381,857. 55
10, 216.61
641, 275. 23
54, 232. 68
177.189.48
5, 491,476.11
3, 498, 569. 60
46, 022,031.85
585, 298. 30
•215,588.17
205.31
218.43
2,165, 637.45
55.00
546, 219. 77
1,909, 393. 72
1, 683, 636.96
573.94
1,832.670. 38
. 3,823.77

12, 527
3,177

173, 476
49, 027

54, 215, 841. 79
10, 085, 660. 54

65, 226, 738. 23
11, 503, 970. 56

15, 704

222, 503

64, 301, 502. 33

1 76, 730, 708. 79

9,877
5,427

180, 518
84,773

33,114, 948.10
11, 760, 220. 81

39, 078, 264. 45
12, 293, 817. 96

15, 304

265, 291

44,875,168.91

t 51, 372, 082. 41

15
76
100
187
110

internal
i

G r a n d t o t a l , fiscal y e a r 1940
Fiscal year 1939:
'
I n c o m e a n d miscellaneous i n t e r n a l r e v e n u e . .
Agricultural adjustment
.
G r a n d total, fiscal year 1939:.

A m o u n t of
refunds a n d
repayments

1 E x c l u d e s refunds from t h e t r u s t fund set u p for P h i l i p p i n e coconut oil tax collections, $91,359.66 covering
700 claims for 1939 a n d $175,292.66 covering 451 claims for 1940.
N O T E . — T h e figures in this t a b l e will n o t agree w i t h those given in later sections of t h i s r e p o r t for t h e
reason t h a t t h e a m o u n t s s h o w n in t h e later sections relate t o claims disposed of b y t h e u n i t s , w h e r e a s t h i s
t a b l e shows t h e a c t u a l p a y m e n t s m a d e .




321

REPORT OF T H E SEORETARY. OF T H E TREASIURY

If the tax refunds made during the fiscal year 1940 on account of
erroneous or illegal collections of internal revenue and agricultural
adjustment taxes and payments for export drawbacks and redemption
of stamps, amoimting to $76,906,001, were deducted from the gross
collections of $5,340,452,346, the net collection for the fiscal year
1940 would be $5,263,546,345. The gross collections, 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 1939 and 1940 were as follows:
Additional assessments, fiscal years 1939 and 1940, by class of tax
1939

Class of tax

$279, 487, 977. 51

.

.

-

. . .

. .

-

.

.
j

T o t a l miscellaneous internal r e v e n u e

59, 014, 649. 49
5, 247, 767. 42
1, 302, 784. 84
8, 479, 047. 99
3, 519, 941.10
19,183, 519. 80
344, 588.19
312, 564. 31
18, 947. 86
4, 935. 83

52, 350, 045. 30
6, 354, 319. 72
1, 732, 327.10
4, 561, 0S2. 62
3, 854, 693. 05
7, 943, 709. 74
122, 703. 57
424, 504. 29
26, 925. 90
197, 251. 35
77, 567, 562. 64

26,902,431.93

E m p l o y m e n t taxes
G r a n d total

$291,198, 664. 00

97, 428, 746. 83

Income '
Miscellaneous i n t e r n a l r e v e n u e :
Estate
- .
Gift
.
C a p i t a l stock
.
Sales
Liquors
Miscellaneous
.
.
Tobacco
Coal
Silver
Sugar

1940

.. ...

.

25,143, 458. 86

403, 819,156. 27

393, 909, 685. 50

J Includes assessments of $28,929,903.37 for 1939 and $28,727,135.00 for 1940 made under the jeopardy
provisions of section 279 of the Revenue Act of 1926 and section 273 ot subsequent revenue acts.

Cost oj administration.—For the fiscal year 1940, $59,877,500 was
appropriated for salaries and expenses in connection with the assessment and collection of internal revenue taxes and the administration
of the internal revenue laws. The expenditures and obligations
against this appropriation were $59,675,518, leaving an unexpended
balance of $201,982. The expenditures do not include amounts
expended for refunding taxes illegally or erroneously collected and
for redeeming stamps. The cost of collecting a total of $5,340,452,347
during the year was $1.12 per $100, compared with $1.13 for 1939.
The amount of $4,250,000 was appropriated for the fiscal year
1940 for salaries and administrative expenses in connection with
making refunds authorized by titles IV and V I I of the Revenue Act
of 1936. The amount expended and obligated from this fund
amounted to $3,635,549, leaving an unexpended balance of $614,451.
Income Tax Unit
General junctions.—The Income Tax Unit is charged with the administration of the internal revenue laws with reference to taxes on income,
excess profits of corporations, excess profits on Army, Navy, and
National Defense Act contracts, unjust enrichment tax, and refunds
of certain processing taxes. The administration includes interpretative instructions and rulings regarding the provisions of the revenue
laws relating to such taxes and the verification and adjustment of the
returns through audits and field investigations for the purpose of



322

'REPORT OF T H E SEORETARY OF T H E TREASURY

securing the correct determination of tax liabilities as required by
law.^
Number oj returns jiled.—The number of all types of income tax
returns filed during the fiscal year 1940 on which tax was assessed was
4,324,275, compared with 3,439,041 returns filed in 1939,^ an increase
of 885,234, or nearly 26 percent. In addition, 4,664,137 taxpayers
filed returns during the fiscal year 1940, showing no income subject to
tax, compared with 4,132,642 such returns for the preceding fiscal
year. The total number of income tax returns filed by individuals was
7,840,079, which is larger than the number filed in any previous
fiscal year in which substantially similar filing requirements existed.
Included for the first time were returns of many employees of State
and local governments who, under the Public Salary Act of 1939,
filed Federal income returns in 1940.
Examination oj income tax returns by the Washington offux.—As oi
June 30, 1940, substantially all the returns filed within the fiscal
year by taxpayers had been transmitted to the Washington office of
the Income Tax Unit, and all except 747,198 of these returns were
accepted as filed. The returns not accepted as filed are transmitted
to the field offices of the Income Tax Unit for further consideration,
and, in the main, this represents the work load of the field offices for
the fiscal year 1941. Prior to shipment of these returns to the field
offices various information-at-the-source forms and other documents
bearing upon the audit, of these returns are attached for use in the
investigation work of these offices: There were filed during the
fiscal year approximately 21,350,000 information-at-the-source forms
showing income payments.
Investigations and adjustments oj returns by the jield offices.—The
number of income tax returns, including partnership and fiduciary
returns, investigated during the year was 424,072, as compared with
490,673 for the previous year.^ The decrease in the number of
investigations resulted in part from the reassignment of some of the
examining personnel to other duties, particularly to the conduct of
conferences with taxpayers for the purpose of reducing the pending
balance of old cases transferred from the Bureau to field offices in
the previous fiscal.year. The resulting reduction in disputed tax
adjustments pending and the increase in assessments of deficiency
taxes are discussed below.
Inventory oj returns in the jield offices.—The number of open income
tax returns on hand in the field offices as of June 30, 1940, was 406,616
compared with 455,256 for June 30, 1939, a net reduction during the
year of 48,640, or over 10 percent. Of the total number pending June
30, 1940, only 55,429 represented prior years' work (1937 and prior
tax years), a reduction of over 15 percent from the corresponding
number pending at the end of the previous fiscal year. The ratio
of prior year's work to,current year's work declined from 17 percent
on June 30, 1939, to 16 percent on June 30, 1940.
Unagreed adjustments pending.—The number of returns involving
unassessed back taxes was materially reduced during the year, continuing the progress made in the preceding year. The number of
1 Returns on Form 1040-A, individual income tax returns for net incomes of not more than $5,000 derived
chiefly from salaries, wages, dividends, interest, and annuities, and Form 1040-C, individual income tax
returns of departing aliens, are audited by collectors of internal revenue and not by the Income Tax Unit.
5 Includes in each fiscal year the delinquent returns filed during that year relating to prior years.
3 These figures include all returns for which the examiner's report has been submitted.




REPORT OF THE iSiEiORETARY OF T H E TTllEuASURY

323

examined income tax returns involving adjustments not agreed to by
the taxpayers and pending action by the Bureau and its field offices
on June 30,1940, was 31,507,* compared with 45,033* adjusted returns
pending without taxpayers' agreement on June 30, 1939, a decrease
of 13,526.
• Revenue results oj audit and investigations.—The total additional
assessments made during the fiscal year was $284,442,733. Excluding
jeopardy and duplicate items, the amount was $242,856,510, which
was the largest for any fiscal year since 1929.
Stage at which additional tax was assessed.—During the year further
progress was made in settling cases of proposed additional tax liabilit}^
by agreements with taxpayers, without issuing formaL notices of
deficiency which are otherwise required by law as a basis for assessment, and from which taxpayers may appeal to the Board of Tax
Appeals. Of the total number of 213,339 returns on which regular
additional assessments (including duplicate-regular) were made,
199,044, or over 93 percent were by agreement with the taxpayers
without the necessity of a statutory notice. Of the total regular additional tax (including duplicate-regular) assessed aggregating $211,475,370, the amount assessed by agreement was $165,810,823, or over
78 percent.
The stages at which the additional assessments were made in the
fiscal years 1939 and 1940 follow:
Number and amount of additional income tax assessments made during the fiscal years
1939 and 1940, by stages at which assessment was made
Returns

Stage at which additional assessment Number
was made

Percent
of
total

Additional tax
Percent
of
total

Amount

Interest

Penalty

Total

Fiscal year 1940
On agreements executed prior to mailing of 90-day letter
199,044
Default or agreement after issuance of
90-day letter
10,522
I n appealed cases after trial on t h e
m e r i t s a n d decision b y t h e Board of
T a x A p p e a l s , or u p o n stipulation
before t h e B o a r d of cases settled b y
Technical Staff a n d / o r
Chief
Counsel
Total!
J e o p a r d y provisions of t h e Code
Grand total

$165,810,823
12, 714, 788

32,949, 759

213,339
1,568

2 n , 475, 370
19, 676,342|

214,907

231,151,712

$25, 386, 376 $1, 259,158 $192,456, 357
2, 500, 731

821,881

16,037,400

13,314,964

900,490

47,165, 213

100 41,202,071 2,981,529 255,658,970
4,307,076 4,800,345 28,783, 763
45,509,147 7,781,874 284,442,733

1 I n c l u d i n g duplicate assessments involving 542 r e t u r n s , $11,132,9 ) of additional tax, $1,570,829 of interest,
a n d $98,632 of penalties.
*Includes 5,273 income tax r e t u r n s , on which s t a t u t o r y notices h a d n o t been issued, which were p e n d i n g
before t h e field oflQces of t h e Technical Staff as of J u n e 30, 1940, a n d 4,950 such r e t u r n s as of J u n e 30. 1939.




324

OREPODRT OF T H E SEiORETARY OF T H E TREASURY

Number and amount of additional income tax assessments made during the fiscal years
1939 and 1940, by stages at which assessment was made—Continued
Additional tax

Returns
stage at which additional assessment
PerNum- cent
was made
ber
of.
total

Percent
of
total

Amount

Interest

Penalty

Total

Fiscal year 1939
On agreements executed prior to mailing of 90-day letter
_
226, 216
Default or agreement after issuance of
90-day letter
10,840
In appealed cases after trial on the
merits and decision by the Board of
Tax Appeals, or upon stipulation
before the Board of cases settled by
Technical Staff a n d / o r Chief
Counsel
4,115
241,171
Total 2
1,904
Jeopardy provisions of the Code
Grand total
243.075

73 $20,443,922

94 $144,506,648
4

17,767,854

9

2 35,381, 557
100 197,656,059
20, 301,347
217,957,406

$643,655 $165, 594, 225

3,738,315 1,063,206

22,569,375

368,692 51, 679,549
18 15,929,300
100 40, 111, 537 2,075,553 239,843,149
5,059, 731 3, 568,826 28,929,904
45,171, 268 5, 644,379 268,773,053

2 Including duplicate assessments involving 854 returns, $2,377,633 of additional tax, $1,009,318 of interest,
and $191,960 of penalties.

Refunds, abatements, and credits.—The number of income tax cases
which involved refunds or credits of tax or interest to taxpayers or
abatement of tax, audited and closed by the Income Tax Unit during
1940 was 81,711, compared with 76,834 during 1939, an increase of
4,877, or over 6 percent. Of the total of 81,711 overassessments for
1940, 38,771 were made to taxpayers without the necessity for filing
claims. This compares with 41,930 in the previous year.
Of the overassessments settled by the Income Tax Unit in 1940,
71,648 represented refunds or credits of tax or interest involving
$55,810,102, compared with 58,442 involving $38,020,839 in 1939.
The amount involved in overassessments of all types for 1940
represented by refunds, credits, interest, and abatements for income
tax cases audited in the collectors' offices as well as by the Income
Tax Unit was $185,936,641, compared with $90,601,200 the previous
year.
The following table shows the number of certificates of overassessment issued and claims disposed of during the fiscal years 1939 and
1940 by the Income Tax Unit.
Number of certificates of overassessment issued and claims disposed of, fiscal years
1939 and 1940
1939
Allowances:
Certificates of overassessment issued when no claims had been filed
Claim allowed in full or in part . .
Total allowances

..

Total disposed of




. .
.
.

.

.

32,415
51,925

40,140
53,080
93, 220
42,940
16, 775

44,200

-

-

Allowed in full or in part
Rejected

Pending at end of year

._

81,711

34,904
9,296

.

38,771
42,940

84,340

.

41,930
34,904
76,834

.

Status of claims:
Pending at beginning of year
Filed during year (new claims) Total to be disposed of

1940

59,715

40,140

33, 505

REPORT OF T H E SEiCRETARY OF T H E TRIEASURY

325

There were also allowed 30,950 collectors' claims, of which 14,364
recommended abatements or credits and 16,586 recommended refunds.
These claims were largely multiple item claims or claims for refund to
numbers of taxpayers, and involved 27,648 items for abatement or
credit and 72,777 items for refund.
The following table shows the amount involved in tax overassessments settled during the years 1939 and 1940 resulting from audit of
income tax returns, including cases settled by the collectors' offices as
well as the Income Tax Unit.
Amounts of overassessment by method of settlement, and interest allowed on all income
tax cases closed, fiscal years 1939 and 1940
1939
Overassessments settled b y Abatement:
Regular
.. ...
Duplicate
Credit
Refund.. . .
_
...
Total
Interest

1940

..

.

$33,909,690
16,663,843
12, 347, 755
22, 772,014

...

_ - - 1 - ._ -. -

-

-

Grand total. . .

$98, 764, 513
29, 627, 955
11,711,124
36, 824,426

85,693, 302
4, 907,898

176, 828,018
9,108,623

90, 601,200

.

185, 936, 641

The amount involved in claims filed during 1940 was $156,272,676
compared with $117,408,145 the preceding year. Of the claims disposed of during the year, the amount rejected totaled $143,847,884,
compared with $85,236,575 the preceding year.
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 relating
to employment. Detailed statements concerning the particular taxes
administered in the several divisions of the Miscellaneous Tax Unit
are set forth below under the appropriate caption.
The collections of miscellaneous taxes for the fiscal year 1940
amounted to $1,753,068,908, an increase of $84,839,120 as compared
with collections for the preceding year.
Estate Tax Division.—Collections of estate tax during 1940 amounted
to $330,886,049, which is a decrease of $1,393,564 as compared with
the collections for the preceding year. Collections of gift tax amounted
to $29,185,118, representing an increase of $749,521 over the collections
for the preceding year.
The assessment and collection of additional taxes amounting to
$14,410,452 proposed in 321 estate tax and gift tax cases were deferred
pending the adjudication of appeals filed with the United States
Board of Tax Appeals.
There were 18,908 estate tax returns and 14,435 gift tax returns
filed during the year.
As a result of Bureau and field investigations and audits deficiencies
in tax amounting to $47,874,115 were assessed in estate tax cases and
$5,693,999 in gift tax cases.




326

REPORT OF THE. SEiOKETARY OF T H : E TREASIURY

The following table presents a summary of the estate tax and gift
tax cases received and audited in the Bureau:
Number of estate tax and gift tax returns received and audited, fiscal years 1939
and 1940
Estate tax

Gift t a x

R e t u r n s in B u r e a u
1939

T o t a l t o be disposed of
Disposed of

.

12, 878
18, 265

. .

'

On h a n d a t e n d of year

14,173
18, 908

5,094
13, 614

4,814
14. 435

31,143
16, 970

.

1939

33,081
20,174

18, 708
13, 894

19, 249
> 13, 657

14,173

On h a n d a t beginning of year
Received.- . .

1940

. 1940

12, 907

4,814

5, 592

. I Does not include any cases in which field investigations were made. There were filed with the Bureau
801 reports reflecting the field settlement of gift tax cases; post-audit reviews were made in 804 cases, and on
June 30, 1940,-there remained 26 cases on hand awaiting the Bureau post-audit review.

Refunds of $8,997,204, including interest, were made in 2,003
estate tax and gift tax cases. This amount includes $3,612,654
refunded as a result of court decisions.
The following table sets forth a summary of the action taken in
connection with estate tax and gift tax claims received and disposed
of during the year:
Estate tax and gift tax claims received and disposed of, fiscal year 1940
Gift tax claims

E s t a t e t a x claims
Refund

Claims
Number
Claims filed:
On h a n d J u l y 1,1939 .
Received
Reopened
T o t a l to b e disposed Of-.-

Amount

Refund

Abatement
Number

Amount

Number

Araount

Abatement
Num- Amount
ber

435 $6, 718,066.46
793 11, 516, 535. 55
49 1,064, 795.12

6
320

$2,456. 38
4,018,176. 34

177 $13, 712, 713. 40
393 3, 649,078.91
34
190,725.11

68 $57,521.55

1,277

19,299, 397.13

326

4,020, 632. 72

604 17, 552, 517.42

68 57, 521. 55

.

565
275

2, 597,980. 63
4, 632,863. 79

294
4

3,976,938. 54
1, 541. 47

219 2, 698,000. 60
20.8 11, 010, 562. 41

63 18, 622.49

T o t a l disposed of..

840

7, 230,844. 42

298

3,978, 480. 01

427 13. 708, 563. 01

63 18, 622. 49

Allowed_ .
Rejected

On h a n d J u n e 30,
1940
N o claims filed, overassessments allowed
Interest allowed

4.37 12,068, 552. 71

28

42,152.71

177

3, 843,954.41

5 38, 899. 06

1,017

2, 015, 380. 08
880, 308. 78

346

3,879,125. 51

202

264, 325.96
541, 207.97

44 112, 783.16

T o t a l allowed, including interest. . 1,582

5,493, 669.4|9

640

7,856,064.05

421

3, 503, 534. 53

107 131,405. 65

NOTE.—Tax of $98,723 was abated as uncollectible in 17 estate tax cases in addition to the figures shown
above.

Tobacco Division.—Collections of tobacco taxes for 1940 amounted
to $608,518,444, the largest annual collections from this source since
these taxes were first imposed, and an increase of $28,359,238 over the
collections for the preceding year. Of the total, $533,042,544 was
collected on small cigarettes.




327

REPORT OF T H E .SECRETARY OF T H E TREAStTRY

A detailed comparison of the tobacco taxes collected during the
fiscal years 1939 and 1940 is shown in table 11, page 662 of this report.
Sales Tax Division.—Collections of taxes administered by the Sales
Tax Division amounted to $583,595,403, an increase of $48,855,804
as compared with collections for the preceding year. The increase in
collections is reflected principally in the manufacturers' excise taxes,
the taxes on electrical energy, telegraph, telephone, cable, and radio
communications and facilities, and admissions.
A summary of the collections of the taxes administered by the
Sales Tax Division for the years 1939 and 1940 follows. A more
detailed comparison of the collections is shown in table 11, page 662.
Summary of taxes collected by the Sales Tax Division, fiscal years 1939 and 1940

Stamps

.

.

- -

1940

1 $41,082,839. 42

$38,681, 345. 32

356, 965,318. 61
39,859.173. 55
66, 511. 36

- -

M a n u f a c t u r e r s ' excise (title I V , R e v e n u e A c t of
1932, as a m e n d e d , a n d s u b t i t l e C , c h a p t e r 29,
I n t e r n a l R e v e n u e Code, as a m e n d e d )
Electricalenergy
. .
.
Pistols a n d revolvers

404, 298, 499. 35
42, 338, 501. 94
89, 508. 54

47,333,180. 74
2, 479, 328. 39
22,997.18

-$2,401,494.10

396,891,003. 52

Total

49,835, 506. 31

97,685, 225. 57
502, 322.11

1,015, 763. 94
406,027. 56

534, 739, 599.12

.

446, 726, 509. 83

2 96,669,461.63
96, 294. 55

T o t a l m a n u f a c t u r e r s ' excise
Miscellaneous
Repealed

Increase or
decrease ( - )

1939

Source of taxes

583, 595, 402.83

48, 855,803. 71

> Includes $261,772.52 tax on silver bullion, sales and transfers.
2 Includes $3,317,259.01 tax on bituminous coal.

The claims for refund and abatement of the taxes and for the
redemption of stamps, received and disposed of in the Sales Tax
Division during the years 1939 and 1940, are shown in the following
table.
Claims for refund and abatement of taxes and for redemption of stamps received and
disposed of, fiscal years 1939 and 1940
1939

Claims

Number
1,781
10, 574

Number
1 2,664
9,821

12, 355

12, 485

. -

8,357
1,467

8 466
1,996

9,824

O n h a n d a t beginning of y e a r . Received or reopened

10, 462

.

2,531

.
. _ ._

T o t a l to b e disposed of
Allowed
Rejected
T o t a l disposed of
O n h a n d a t e n d of year
Allowed

1940

_

__.

-.

Amount
$5, 228, 940. 35

2,023
Amount
$8,164, 587. 56

1 Includes 133 claims which were transferred from Bituminous Coal and Silver Tax Division to Sales Tax
Division on July 1, 1939.

During the current year 8,643 field reports and 439,292 sales tax
returns were examined in the Bureau. Assessments totaling $1,109,316,701, representing 990,074 items, were approved on the 2,503
miscellaneous assessment lists, which included original and additional
assessments of all miscellaneous taxes.



328

KEPORT OF THE. SECRETARY OF T:HE TREASURY

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 Tax, Tobacco, and Capital Stock
Tax Divisions, as well as for the Processing Tax Division with respect to the tax on manufactured sugar.
The number and amount of offers in compromise submitted in
settlement of liabilities incurred in connection with the various miscellaneous taxes and the number and amount disposed of during the
year are shown in the following table:
O f ers in compromise received and disposed of by the Sales Tax Division, fiscal years
1939 and 1940
1939

1940

Offers in compromise
Number
O n liand beginning of y e a r .
Received d u r i n g year

Number

Amount

Amount

580
6,610

$3,447, 324. 50
924, 779.82

553
6,206

$463,036. 24
994, 286. 59

7,190

4, 372,104. 32

6,759

1, 457,322.83

6,334
262
41

390,072. 74
3,496,508. 72
22,486. 62

5,971
234
36

744,904. 53
89,397.31
12,158.17

T o t a l disposed of

6,637

3,909,068.08

6, 241

846, 460.01

On h a n d a t e n d of year

553

463, 036. 24

518

610,862.82

T o t a l to be disposed of
Accepted
Rejected...
Withdrawn...

Capital Stock Tax Division.—Collections from the capital stock tax
during the year amounted to $132,738,537, an increase of $5,535,528
as compared with collections for the preceding year.
A total of 530,584 returns were filed by domestic and foreign corporations during the year. As a result of the review and audit of capital
stock tax returns during the year, 16,457 assessments were made,
involving tax in the amount of $1,732,327.
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 by the Capital Stock Tax
Division, fiscal years 1939 and 1940
1939

Claims

1940

O n h a n d a t beginning of year
Received a n d reopened

Number
1,532
40, 249

T o t a l to b e disposed of

41, 781

22,943

5,049
36,028

4,129
17, 573

41,077

21, 702

Allowed
Rejected.-

-.. .

-

T o t a l disposed of
On h a n d at e n d of year .
Allowed

.

-.

.

-_

_- . .

Number
704
22, 239

704

. .
..

1,241

Amount
$690, 335.96

Amount
$604, 737.93

Processing Tax Division.—The Processing Tax Division is concerned
with the administration of the tax imposed on manufactured sugar
under Chapter 32 of the Internal Revenue Code, and the adjustment



329

REPORT OF T H E SEiCRETARY OF T H E TREASURY

of the several types of claims arising as the result of the invalidation
of the Agricultural Adjustment Act and the repeal of related legislation.
There were 1,927 returns filed during the year by manufacturers
subject to the tax on manufactured sugar, and the total collections of
tax from this source amounted to $68,145,358, an increase of $2,731,300
over collections for the prior year.
The following tables show the claims received and disposed of during
the year:
Claims for refund of processing and related taxes received and disposed of by the
Processing Tax Division, fiscal year 1940
R e v e n u e Act of 1936
Sections 601 a n d
.602

Claims

Number

Amount

Cotton Ginning,
Tobacco, and
Potato Acts

Title V I I

Number

Amount

Number

Amount

Total

Number

Araount

104 $2, 927, 961. 46 2,708 $14, 924, 283. 73 8,023 $323,024. 24 10,835 $18,175, 269. 43
O n h a n d J u l y 1,19391,029 2, 216, 763.13 10, 678 185, 383, 354.87 34, 287 1, 427, 683. 42 45, 994 189, 027, 801; 42
Received
3. 067, 586. 24
1,419 1, 573, 788. 72 1,856
23, 928. 79 3, 935
4, 665, 303. 75
660
Reopened
T o t a l to be disposed of

2,552 6, 718, 513. 31 15, 242 203, 375, 224. 84 42, 970 1, 774, 636. 45 60, 764 211, 868, 374. 60

1,267 2, 264, 647. 20 9,035
2, 838, 529. 94 34, 652
Allowed
943 2, 850, 582. 87 3,165 19, 540, 742.18 7,307
Rejected
Transferred to I n 723 171,479,840.89
come T a x U n i t _.
T o t a l disposed
of

865, 670. 61 44, 954
881, 488.82 11,415
723

2,210 5,115,230.07 12, 923 193, 859,113. 01 41, 959 1, 747,159. 43

On hand J u n e 30,1940-

342 1, 603, 283. 24 2,319

9, 516, 111. 83 1,011

57,092

27, 477.02 3,672

5, 968,847. 75
23, 272,813. 87
171,479,840.89
200,721,502.51
11,146, 872. 09

Sugar tax claims received and disposed of by the Processing Tax Division, fiscal year
1940
Overpayment
a n d livestock
feed

Export

Abatement

Total

Claims
Number
O n h a n d July 1,1939...
96
Received
1,614
Reopened. 1
7

Amount

Number

Amount

Number

Amount

Number

Amount

$67,773.40
2,048, 262. 77
249.43

3
38

$37.48
150, 268. 59

1
22
4

$280.07
83,367.71
31,413.55

100
1,674
11

$68,090.95
2, 281,899. 07
31, 662.98

1,717

2,116, 285. 60

41

150,306.07

27

115,061.33

1,785

2, 381,653.00

1,621
54

2,080,087.79
25, 531.17

22
14

14, 392. 57
129,431.59

22
5

112, 692. 29
2,369. 04

1,665
73

2, 207,172.65
157,331.80

T o t a l disposed of. 1,675

2,105,618.96

36

143,824.16

. 27

115,061.33

1,738

2,364,504.45

10, 666. 64

5

6,481.91

47

17,148.55

T o t a l to b e disposed of..
Allowed
Rejected

On h a n d J u n e 30, 1940..

42

Alcohol Tax Unit
Collections from the liquor taxes amounted to $624,253,156 in
1940, an increase of $36,453,455 over the previous year. Collections
during 1940 were 29.2 percent greater than 1919, the peak pre


330

REPaRT OF T'K^E SECRETARY OF T H E TREASnQRY

prohibition year for liquor collections, and were 5 percent greater
than 1937, the year wliich heretofore had marked the peak of collections since prohibition. Details of these collections will be found
in the table on page 662.
On June 30, 1940, the following 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
..
Brandy
.
Another
Bonded warehouses:
Alcohol
Internal revenue...
Wineries
Bonded wine storerooms
...,,
Breweries.:
.
Rectifying plants
Wholesale liquor dealers
Wholesale malt liquor dealers
Denaturing plants
-.
Bonded dealers in specially denatured alcohol
.
Bonded manufacturers using specially denatured alcohol
Hospitals, laboratories, and educational institutions using tax-free alcohol.

-

Number
38
127
124
61
283
. . . . ,1,036
98
580
250
5,531
10,597
37
52
4,193
6,482

During the year a number of regulations were revised and several
new regulations issued. No general revision of regulations of this
Unit had been made since the repeal of the eighteenth amendment.
Enjorcement Division.—The activities of the Enforcement Division
include the investigation, detection, and prevention of willful and
fraudulent violations of the internal revenue laws relating to distilled
spirits, wines, and fermented malt liquors.
During the year, 10,663 stills were seized, having an aggregate mash
capacity ^ of 1,653,775 gallons, and in connection therewith 6,480,240
gallons of mash were seized and destroyed. Investigators also seized
264,594 gallons of spirits and 4,523 automobiles and trucks. The
total appraised value of the property seized amounted to $2,042,851.
A total of 25,638 persons was arrested for Federal liquor law violations.
Compared with the previous fiscal year, still seizures decreased 11.6
percent, mash seizures decreased 19.8 percent, and arrests decreased
11.1 percent. These decreases applied generally throughout the
country and are in contrast to the increases reported in the previous
year.
Many arrests and seizures were made in combating the introduction
of tax-paid liquors into the dry States of Kansas and Oldahoma in
violation of the Liquor Enforcement Act of 1936. The Unit's participation followed the passage of enabling legislation by these States.
Field Inspection Division.—This Division plans, coordinates, and
supervises the permissive functions in the field offices of the fifteen
field districts. Technically trained field inspectors, directed by this
Division, make frequent examinations of the field offices to determine
whether the law, regulations, established policy, and procedure are
being followed properly; recommend methods for greater efficiency and
economy in the conduct of the work; determine the adequacy and
efficiency of the personnel and suitability of space and equipment;
make recommendations relative to the judicious expenditure of public
funds; and confer with District Supervisors on problems of organization, nianagement, and service.
1 Represents the cubic capacity of still pots and cookers! Column stills which operate without a still
not or cooker are not reflected in this total. The size of iflicit stills is reflected more properly by the mash
facilities. The cubic measurement of the mash fermenters of all the illicit stills seized during the fiscal year
was 9,252,833 gallons.




REPORT OF T B : E SECRETARY OF THE. TRIEASU.RY

331

The Division maintains general supervision over the activities of inspectors and storekeeper-gangers in the field districts and provides for
the general instruction of these groups. A total of 64,197 inspections
of plants and permittees was made during the year by general inspectors in the supervisory districts. All inspections of retail dealers
were conducted by junior inspectors, due to the fact that the W. P. A.
inspection projects were discontinued prior to the beginning of the
fiscal year. The following comparative statement shows the, results
accomplished by junior inspectors during the fiscal years 1939 and
1940:
1939
N u m b e r of inspections m a d e
N u m b e r of dealers violating
N u m b e r of violations found
P e r c e n t of dealers found v i o l a t i n g .
A m o u n t s collected
•.

204, 362
21, 750
23, 776
10. 64%
;6, 577. 81

1940
284, 081
28, 057
31, 618
9. 88%
$542,453. 40

The Division is also responsible for the final determination of applications for original establishment and subsequent changes of industrial
alcohol plants, alcohol bonded warehouses, and denaturing plants;
distilleries; fruit distilleries; distillery denaturing bonded warehouses;
internal revenue bonded warehouses and rectifying plants. Final
review of qualifying documents submitted in. connection with original
establishment and subsequent changes of bonded wineries, bonded
wine storerooms, bonded field warehouses, and breweries is handled
by the Division.
During 1940 there were 18,970 such examinations, including those
covering 117 new plants and 218 plants discontinued.
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 and the Bureau of Narcotics. During
the year the Division also rendered material aid to the Secret Service,
Procurement Division, and the Post Office Department. There were
80,006 samples examined in the branch laboratories compared with
77,879 for the previous year. The Washington laboratory examined
8,893 samples compared with 7,030 during the preceding year.
The marihuana investigation, started in 1937, has been continued.
Resin extracted from the marihuana plant has been separated into
fractions having different physical properties. From those fractions found to be physiologically active, several of their chemical
constituents have been isolated and identified.
Research was conducted on problems pertaining to distilled spirits,
fermented beverages, narcotic drugs, and the development of fingerprints. Fourteen reports were made, of which eleven were published
in technical journals.
Audit Division.—This Division is responsible for the tax accounting,
assessment, claim, and compromise work of the Alcohol Tax Unit.
I t administers the provisions of internal revenue laws and regulations
pertaining to the manufacture, storage, tax payment, exportation,
sale, and use of alcohol, denatured alcohol, distilled spirits, wines,
and malt liquors.
269677—41

23




332

REPORT OF THE. SECRETARY OF THE TREASURY

During the year, 18,886 reports of violations of the internal revenue
laws pertaining to alcoholic liquors were received from the field offices,
reviewed, and audited, and tax liabilities disclosed thereby were
assessed, including ad valorem penalties. There were certified to the
Commissioner for assessment 13,808 items totaling $3,854,693, listed
in the Bureau, and 155,793 items aggregating $92,691,905, listed by
collectors.
At the beginning of the fiscal year there were on hand 580 offers
aggregating $40,487.21. During the year 11,010 offers amounting to
$344,765.42 were received, of which 226 were forwarded to the Department of Justice and 319 were returned to the field offices. Of the
11,045 offers to be disposed of by the Division, 9,461 oft'ers aggregating
$239,806.54 were accepted, and 1,001 offers totaling $37,310.39 were
rejected, leaving 583 oft'ers on hand at the end of the year.
Procedure Division.—This Division plans and develops procedure
for the headquarters and field offices of the Alcohol Tax Unit; assists
in drafting regulations. Treasury decisions, mimeographs, and circulars;
and reviews the revision of all forms prescribed by the Alcohol Tax
Unit. I t is charged with the administration of regulations relating
to traffic in containers of distilled spirits and the supervision of the
Statistical Section.
During the year special statistical studies were made on matters
relating to proposed legislation and inquiries from officials and the
public.
Alcohol Tax Division oj the Office oj the General Counsel.—This
Division handles the legal work arising in connection with the administration and enforcement of the internal revenue liquor laws.
During the year there were prepared 6,818 memoranda, 413 briefs,
5,242 opinions, 27 parole cases, 247 libels, and 48 indictments. Review
work included 7,450 case reports, 73 claims of over $5,000 each, and
10,684 compromise cases. In addition, 6 revocation cases were
handled, and 912 petitions for remission or mitigation of forfeiture
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. The Unit also administers the taxes imposed under Chapter
9 of the Internal Revenue Code, Subchapter A relating to employment by others than carriers, Subchapter B relating to employment
by carriers, and Subchapter C covering the tax on employers of eight
or more. Since enactment of the Social Security Act Amendments of
1939 (Public No. 379, approved August 10, 1939), Subchapter A of
Chapter 9 of the Code has been known as the Federal Insurance Contributions Act, and Subchapter C as the Federal Unemployment Tax
Act. Prior to enactment of the Internal Revenue Code, the provisions
of Subchapters A, C, and B of chapter 9 were contained in titles VIII
and I X of the Social Security Act and in the Carriers Taxing Act of
1937, respectively, and the taxes imposed thereunder are now generally
designated as ^^employment taxes." .




REPORT OF T H E SaSiCRETARY OF T H E

TRIEASURY

. 333

There were 19,199,932 tax returns filed in collectors' offices during
the fiscal year, an increase of 1,491,075 over the previous year. Of the
total returns filed, 8,988,412 were income tax returns, an increase of
1,416,729 during the year.^
During the fiscal year 34,774 income tax,^ 4,700 miscellaneous tax,
and 77,472 employment tax returns were investigated by field deputy
collectors. In the verification of income tax returns 10,505,875 information returns showing income at a source were compared with the
income reported on returns filed. At the close of business June 30,
1940, there were outstanding in the 64 collection districts 3,212
income tax returns, and 5,315,926 information returns were on hand.
Deputy collectors of internal revenue served 379,228 warrants for
distraint, which resulted in the collection of $52,220,175. An average
of 2,718 .deputy collecfiors made 1,622,104 revenue-producing investigations, including the serving of warrants for distraintj compared with
1,889,579 investigations made by an average of 2,704 deputy collectors
in the preceding year. The total amourit collected and reported for
assessment by deputy collectors was $84,566,072 compared with
$97,826,243 in the previous year. The average number of investigations made per deputy and the average amount of tax collected and
reported for assessment were 597 and $31,113, respectively, compared
with 699 and $36,178, respectively, in 1939. There were 212,701 warrants for distraint in custody in the collectors' field forces on June 30,
1940, compared with 205,980 on hand June 30, 1939.
A total of 13,351,512,052 revenue stamps, valued at $1,188,107,282,
was issued to collectors of internal revenue and the Postmaster General during the year, compared with 12,594,476,279 stamps, valued at
$1,144,003,042, issued during 1939. Revenue stamps returned by collectors of internal revenue and by the Postmaster General, and credited to their accounts, amounted to $31,206,229. There were 390
applications allowed for restamping packages from wliich the original
stamps had been lost, mutilated, or destroyed, compared with 431
apphcations in the preceding year.
The Disbursement Accounting Division administratively examined
and recorded 1,553 monthly accounts, or 127,646 vouchers, of collectors
of internal revenue, internal revenue agents in charge, district supervisors, etc. I n addition, 8,351 expense vouchers of employees and
14,015 vouchers covering passenger and freight transportation and
miscellaneous expenses were audited and passed for payment.
Taxes under the Federal Insurance Contributions Act.—Collections
of taxes imposed under the Federal Insurance Contributions Act
amounted to $605,350,175 for the year, compared with $529,835,533
for 1939, an increase of $75,514,642. These amounts include both
the employees' tax and the employers' tax, each of which was imposed
at the rate of 1 percent of taxable wages paid. There were 7,868,402
quarterly returns ffied during the fiscal year, compared with 7,520,711
filed in the preceding year. The complete and final audit of returns
is conducted in the ofiices of collectors of internal revenue.
1 See p. 322 for an analysis of the increase.
2 See p. 322 for information on returns investigated by the Income Tax Unit.




334

TIEPORT OF T H E SEORETARY

OF T H E

TREASURY

The following table sets forth information relative to claims disposed
of under the Federal Insurance Contributions Act and title V I I I of
the Social Security Act:
Claims under the Federal Insurance Contributions Act and title V I I I of the Social
Security Act received and disposed of, fiscal year 1940
Claims:
Number
Pending at beginning of year
5,180
Filed during year (new claims)
15,307
Received from other sources
342
Total to be disposed of....

'.

Allowed in full or in part
Rejected
Canceled--

20,829

._..

Total disposed bf

14,391
3,597
197

-.

.

Pending at end of j^ear
Certificates of allowance issued when no claims were
Overassessments settled by—
Abatement
Credit
Refund
Total
Interest
Grand total

2,644
5,321
Amount
$810,583.44
70,554.57
467,614.03

filed
.

.

.
.

1,348,752.04
49,556.04
1,398,308.08

.'
.

18,185

.

The amount involved in claims filed during the year was $1,364,682.99. Included in the allowed claims shown above were 6,206
collectors' claims for abatement, of which 160 were multiple-item
claims involving 3,953 items. There were also allowed 372 collectors'
claims recommending refunds of $7,963.14 plus interest of $298.05.
The amount involved in the claims rejected during the year totaled
$295,138.17.
,
The following table shows the status of the offers in compromise submitted in settlement of tax liabilities incurred under title VIII of the
Social Security Act and the Federal Insurance Contributions Act:
Offers in compromise under title V I I I of the Social Security Act and the Federal
I n s u r a n c e Contributions Act received and disposed of, fiscal year 1940

Offers in compromise

P e n d i n g a t beginning of year
Received duririg year
T o t a l to b e disposed of
Accepted
Rejected
T o t a l disposed of.
P e n d i n g a t e n d of year

N u m b e r of
offers

Amount
offered

T a x liability
involved

51
267
.

_

$4,876
39,626

$14,458
118,465

318

44,502

132,923

121
68

9,931
7,744

27,010
34,449

189

17, 675

61,459

129

26,827

71,464

Tax under the Federal Unemployment Tax Act.—The tax under the
Federal Unemployment Tax Act is imposed on employers of eight or
more. The rate is 3 percent on taxable wages paid during 1939 with
respect to employment. Collections amounted to $106,123,156, compared with $101,166,704 for the fiscal year 1939, an increase of $4,956,452. There were 367,670 returns filed during the fiscal year, compared with 367,235 filed during the preceding fiscal year. The return



REPORT OF T H E S0iORETA.RY OF T H E TRTiiASURY

335

for each calendar year is due on January 31, following the close of the
year, unless ^n extension of time for filing is granted.
The number of returns under the Federal Unemployment Tax Act
received and disposed of by the Accounts and Collections Unit are as
follows:
Number of Federal unemployment tax returns {annual) received and disposed of,
fiscal year 1940, by tax years
On h a n d
J u l y 1,
1939

T a x year

1936
1937 . .
1938
1939

.

Received
during
year

Reopened
during
year

Total

Disposed
of d u r i n g
year

On h a n d
J u n e 30,
1940

.

.. .

Total...

2,984
39,378
308,789-

5,424
15, 241
20, 248
326, 757

9,999
19,479
19,512

18, 407
74,098
348, 549
326, 757

16, 846
61,829
323,906

1, 561
12, 269
24, 643
326,757

351,151

...

367, 670

48,990

767,811

402, 581

365, 230

The Unit forwarded 249 returns to the field for investigation
during the fiscal year. Independent of these cases, the field force
submitted reports on unemployment tax liability made in connection
with income tax investigations. The status of these reports in the
Unit is shown in the following table:
Revenue agents' reports received and disposed of, fiscal year 1940, by tax year
On h a n d
J u l y 1,
1939

T a x year

1936
1937
1938

.

Total

.

_-

.

Received
during
year

Total

Disposed
of d u r i n g
year

On h a n d
J u n e 30,
1940

304
1,101

2,272
4,141
4,382

2,576
5,242
4,382

2,506
4,845
3,542

70
397
840

1,405

10,795

12, 200

10,893

1,307

Of the 10,893 revenue agents' reports disposed of, 1,904 showed
no change in tax liability, 7,777 showed deficiencies in tax amounting
to $1,158,859.36, and 1,212 showed overassessments of $216,204.90.
The following table sets forth information relative to claims adjusted and certificates of overassessment or of allowance issued under
the Federal Unemployment Tax Act and title I X of the Soci^,l
Security Act:
Claims under the Federal Unemployment Tax Act and title I X of the Social Security
Act received and disposed of, fiscal year 1940
Claims:
Pending at beginning of year
Filed during year (new claims)
Received from other sources
Total to be disposed of
.
Allowed in full or in part
Rejected
Canceled..
^
Total disposed of
Pending at end of year
Certificates of overassessment and certificates of allowance issued when no claims were
Overassessments settled by—
Abatement
Credit
Refund
.
Total
Interest...
Grand total
.--..
_




Number
8,439
22,984
53
31, 476
18,074
4,534
250
22,85"8
8,618
filed
7,829
Amount
$2,338,112.84
65,235.65
1,833, 301.74
4,236.650.23
..
54,178.86
„ - 4,290,829.09

336

REPOiRT OF T H E SECRETARY OF T H E TREASURY

The amount involved in claims filed during the year was $4,891,260.46. Included in the allowed claims shown above were 3,051
collectors' claims for abatement, of which 38 were multiple-item
claims involving 613 items. There were also allowed 4,665 collectors'
claims recommending refunds of $65,866.79 plus interest of $1,715.59.
The amount involved in the claims rejected during the year totaled
$527,414.21. ^
The following table shows the status of the offers in compromise
submitted in settlement of tax liabilities incurred under title I X of the
Social Security Act and the Federal Unemployment Tax Act:
Offers in compromise under title I X of the Social Security Act and the Federal Unemployment Tax Act received and disposed of, fiscal year 1940
N u m b e r of
offers

Offers in compromise

P e n d i n g at beginning of year
Received d u r i n g year

...

T o t a l disposed of

..

. . . . . . . . . . .

P e n d i n g at end of year

$46,454
191,992

. 37,121

238, 446

74
127

6,364
14, 249

36, 731
96, 232

201

20, 613

132,963

102

. . .

$8, 226
28,895

303
.

.

T a x liability
involved

81
222

i

T o t a l to be disposed of
Accepted __
Rejected...

Amount
offered

16, 508

105,483

Carriers taxes {Chapter 9, Subchapter B, Internal Revenue Code).—
Collections of employers' tax and employees' tax under Chapter 9,
Subchapter B, of the Internal Revenue Code aggregated $122,037,661,
compared with $109,419,458 for the previous year, an increase of
$12,618,203. Each tax was imposed at the rate of 2% percent of the
taxable compensation earned during 1939 and at the rate of 3 percent
earned during 1940. Collections of employee representatives' tax,
which was imposed at the rate of 5^ percent of the taxable compensation earned during 1939, and' at the rate of 6 percent earned during
1940, amounted to $9,982, compared with $7,169 for the previous
year, an increase of $2,813. There were 31,915 quarterly returns
filed by employers and 1,698 by employee representatives, an increase
of 1,294 and 291, respectively, over the previous year. The complete
and final audit of these returns is conducted in the offices of collectors
of internal revenue.
The following table sets forth information relative to claims disposed of under Chapter 9, S u b c h a p t e r s , Internal Revenue Code, and
the Carriers Taxing Act of 1937:
Claims under Chapter 9, Subchapter B, Internal Revenue Code, and the Carriers
Taxing Act of 1937 received and disposed of, fiscal year 1940
Claims:
Pending at beginning of year
Filed during year (new claims)
Received from other sources
Total to be disposed of
Allowed in full or in part
Rejected
Canceled

Number
92
273
9

.
.

1

257
56
17

.

Total disposed of
Pending at end of year
.
Certificates of allowance issued when no claims were




374

330
filed

44
21

REPORT OF THE SEiCRETARY OF THE TRIEASURY

337

Claims under Chapter 9, Subchapter B, Internal Revenue Code, and the Carriers
Taxing Act of 1937 received and disposed of, fiscal year 1940—Continued
Overassessments settled by—
Abatement
Credit
Refund
Total
Interest
Grand total

1

Amount
$104,737.36
115,095.14
8,794.11
'.
:..

228,626.61
405.57
229,032.18

The amount involved in claims filed during the year was $168,245.00.
Included in the allowed claims shown above were 50 collectors' claims
for abatement. There were also allowed 4 collectors' claims recommending refunds of $940.27 plus interest of $63.72. The amount
involved in the claims rejected during the year totaled $56,279.07.
Technical Staffi
Under the present decentralized procedure for handling disagreements with taxpayers over income, profits, estate, and gift tax liabilities, the Technical Staff is the appellate agency through which the
Commissioner of Internal Revenue takes final administrative action
in determining the amounts due the United States. I t is attached to
the office of the Commissioner and is directly responsible to him. I t
consists of an administrative office in Washington and 10 field divisions comprising 37 local offices distributed throughout the United
States at points chosen with a view to taxpayers' convenience.
Representatives of the Chief Counsel for the Bureau of Internal
Revenue serve as counsel to the heads of the field divisions.
Within the territory of each field division, its officers represent the
Commissioner (a) in reaching agreements with taxpayers for the settlement of disputed liabilities not before the Board of Tax Appeals and,
in cases not so settled, determining the liability to be asserted in statutory notices of deficiency, and (b) in settling by stipulation disputed
liabilities that have been appealed to the Board and, in cases in which
efforts at settlement are unsuccessful, defending the Commissioner's
determinations in trials before the Board. In cases not before the
Board, the head of the division has exclusive authority to act, but
must obtain the advice of counsel before making a statutory determination in an unagreed case, and may obtain such advice in other
cases. In Board cases counsel's concurrence in settlements is required,
and counsel has exclusive authority to represent the Commissioner in
trials.
The Staff also considers certain classes of compromise cases and
applications for extensions of time within which to pay deficiencies in
income and estate taxes, and reviews proposals for final closing agreements under section 3760 of the Internal Revenue Code.
The operations of the Staff divisions under the decentralized procedure progressed satisfactorily during the fiscal year 1940. Dispositions exceeded receipts both of Board cases and of cases riot before the
Board. At the end of the year the number of Board cases awaiting
settlement or trial was smaller than at the end of any fiscal year since
the one in which the Board was established, and was equivalent to
less than one year's work at the rate maintained in 1940. The number
of non-Board cases awaiting action by the Staff divisions at the end
of the year was equivalent to about 4 months' work. The results of



338

'RE'POiR:c OF :rB;E SEORE^TARY

O F T H E . TREASIURY

the year's work were particularly gratifying in the Staff" divisions
where the decentralized procedure was first put into effect and where,
as a consequence, the fullest opportunity had been afforded for bringing the work up to date and adjusting output to receipts.
To a degree unprecedented since the enactment of the World War
incoine and profits tax laws, taxpayers and the Government are now
enjoying the benefits of prompt determination of liabilities in the
localities where they arise. Disputes can be most readily resolved,
with least inconvenience and expense, in their initial stages and at the
point of origin, where the persons involved are located and where the
evidence is normally to be found. In addition, a sounder basis is
afforded for business planning if tax obligations are definitely fixed at
the earliest possible moment. The Federal treasury also benefits
by prompt collection of moneys due.
If the taxpayer is dissatisfied with the decision of the head of a Staff
division he has an ample remedy in a petition, to the Board, of Tax
Appeals, which was established by Congress for the express purpose
of settling disagreements between administrative officers and taxpayers.
Operations oj field divisions.—The year 1940 is the first complete
fiscal period in which the plan of decentralization has been in operation
in all respects. The 10 field divisions of the Staff were all functioning,
with jurisdiction of cases docketed by the United States Board of Tax
Appeals and cases not before the Board.
An analysis of the work of the Staff field divisions during the year
is presented in the two tables which follow:
Analysis of the work of all field divisions of the Technical Staff, fiscal year 1940
Docketed
cases

Cases

Nondocketed
cases

4,982
4,256

13. 668

3,315
267
1, 301

Closed by stipulation or agreement
.
Dismissals and defaults
Unagreed cases submitted to Board
Statutory notices directed or sustained
Unagreed action on overassessment and claims cases..

3,772

9,238

On hand July 1,1939
Received (transfers, etc., deducted).
Total to be disposed of

5,852
3,572
757

Total disposed of.

10,181

On hand June 30,1940..,

3,487

Taxpayers' action on statutory notices directed or sustained by the field divisions of the
Technical Staff, fiscal year 1940
Onhand July 1, 1939

380

Statutory notices directed or sustained during year
Total to be disposed of

'.

..

Closed by agreement without filing of petition with Board
Closed by taxpayer failing to file petition with Board
.
Closed by filing of petition with Board
Transfers and adjustments.
Total closed out of statutory notice status
On hand June 30,1940, awaiting issuance of notices or taxpayers' action on notices issued




3, 572
3,952

-.

82
761
1, 549
4
2,396
1,556

REPORT

OF T H E

SEiCRETARY

OF

THE

339

TREASURY

The nondocketed cases closed by agreement and by default involved
asserted deficiencies iri tax aggregating $55,087,482 and tentatively
determined overassessments of $4,040,973. The amount agreed to
consisted of $19,912,167 in deficiencies in tax and $1,596,071 in overassessments allowed, together with defaults aggregating $2,409,465 in
deficiencies in tax and $40,058 in overassessments.
The docketed cases closed by stipulated agreement involved asserted deficiencies aggregating $90,240,891 and overassessments of
$39,343 determined for other years in the same statutory notices.
The amount agreed to consisted of $25,729,088 in deficiencies in tax
and $884,506 in overassessments.
An analysis of the work of the Staff on compromise, extension of
time, and final closing agreement cases follows:
Analysis of work of the Staff on compromise, extension of time, and
agreement cases, fiscal year 1940

closing

F i n a l closing
agreement
cases

Compromise
cases

Extension of
t i m e cases

452
946

24
148

62
261

1,398

172

323

235
374
104
76

14
157

262
1

789

171

263

609

Cases

1

60

On h a n d J u l y 1, 1939
Received (transfers, etc., d e d u c t e d ) .
T o t a r t o be disposed of
Accepted, granted, or a p p r o v e d
Rejected
Withdrawn
Transferred.
..
'
T o t a l disposed of

final

.
.
:.
.

... , .

.'
.

On h a n d J u n e 30, 1940

Office oj the Chiej Counsel
The activities of the Office of the Chief Counsel for the Bureau of
Internal Revenue include the defense of all Federal tax cases appealed
to the United States Board of Tax Appeals; the review of refunds,
credits, and abatements in excess of $20,000; considering various
administrative and internal revenue tax matters referred to this office
by the Secretary of the Treasury, the Under Secretary, or an Assistant
Secretary, the General Counsel for the Department of the Treasury,
the Commissioner, or the assistant to the Commissioner, the heads
of.the administrative units of the Bureau, collectors of internal revenue, and other branches of the Department. They include also 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, when requested, assistance
in such cases; and the preparation, revision, and review of regulations,
Treasury decisions, mimeographs, and ruling