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,

ANNUAL REPORT OF THE

Secretary of the Treasury
ON

THE STATE GF THE
:^ FINANCES




FOR THE FISCAL YEAR
ENDED JUNE 30

1943

UNITED STATES
GOVERNMENT PRINTING OFFICE
v, "
WASHINGTON : 1944 ' .




K. ;• '•

ANNUAL REPORT OF THE
SECRETARY OF THE TREASURY
ON ^

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

1943

UNITED STATES
GOVERNMENT PRINTING OFFICE
WASHINGTON: 1944

For sale by the Superintendent of Documents. U. S. Governinent Printing Office, Washington 25, P , G,
Price $1.25 (paper cover)







TREASURY DEPARTMENT
DOCUMENT N O .

Secretary

3125

CONTENTS
Page

^
51
^
\>
'S|,
?K^
^|p^
^'
^
^
^
5^
f\
^\
J
1
K
b
>
^

i^
"^

Introduction:
^...
,
1
Need for additional taxes
:...
.__
3
Principles of wartime borrowing..^......
5
Receipts in general and special accounts
'.
-8
Expenditures from general and special accounts,
^
^
_-20
War expenditures
._-:
24
General expenditures.-29
Deficit in general and special accounts
--29
Receipts and expenditures in trust accounts and checking accounts of
. Governm.ent corporations and credit agencies
30
Financing the net budgetary deficit and other requirements
32
The publicdebt:
Summary of financing operations
^
33
First period^^July 1 through Noveniber 30, 1942
34
Second period—December 1, 1942, through March 31, 1943
36
Third period—April 1 through June 30, 1943
__.
38
' Securities on continuous sale
.
41
United States savings bonds-^
____--i
-41
War savings stamps
"
_
-54
^
Treasury notes, tax series and savings series
•..
55
.
Treasury bills
.
^^
56
'
Adjusted service bonds
^
,
57
Depositary bonds--^
57
Special issues
.
-57
Special short-term certificates of indebtedness
57
\ Cumulative sinking fund
58
• Composition of the pubhc debt
1_.
58
Interest on the public debt:
Expenditures
60
Interest rate structure
.
, 60
Computed interest rate
_--60
Debt limit
..-.
.__
62
The guaranteed debt
....,
63
Sources of funds for Federal borrowing
66
Value of production and corresponding gross money income of the
.
country
67
N.et absorption of Federal securities by investor classes
71
Individuals
73
Insurance companies and mutual savings banks
74
Other corporations and associations
'--75
Governmental accounts
'
--76
Bank sources
'
77
Policy with respect to bank borrowing
77
General Fund
81
Taxation developments '..
82
Treasury proposals submitted in connec'tion with the Revenue Act of
1942:
Introduction-;
•.
-___
i
82
Individual income tax
_
^
:
83
•\
Corporation taxes
.
^...^
_---.:.87
Estate and gift taxes
^
91
Excise and sales taxes
^
,
91
. Spendings t a x .
.__
_
>
93
Social security'.'.
".,
...^
•...
:
94
Renegotiation of war contracts
95,




III

IV •

.

CONTENTS

Taxation developments—Continued.
VHSQ
Major features of t h e Revenue Act of 1942:
^
General s t a t e m e n t - .
„.
95
Individual income tax
.
.
96
Victory t a x
98
Corporation taxes
99
Estate and gift taxes----,..^
,_- .i.
_.
104
Excise taxes
•__•__:_.._
:
104
Social security taxes
105
Administrative procedure
^
106
, '
Renegotiation of war contracts
:
106
Treasury proposalis for current t a x p a y m e n t :
Need for current p a y m e n t
:z:
2_^
-_
106
Attitude t o w a r d c a n c e l a t i o n - - _ - - _ _ _ „ ^
._
___,
107
Suggestions for withholding
^-1-:___'____
108
V; Current Tax P a y i n e n t Act—m'ajor features
_l-_109
Other revenue legislation
_._
111
Securities owned by t h e United States a n d proprietary interest in Governm e n t corporations a n d credit agencies:
Securities owned^_
^_
:__
113
Proprietary interest in Goyernment corporations a n d credit agencies114
M o n e t a r y developments:
International monetarj^ cooperation:
. 7:
Stabilization a g r e e m e n t s : - ------114
Post-war currency stabilization...
^._^
__116
Domestic monetary events
_-._:
-'_-_____-_____
117
Customs Service in t h e warL___l
1
_-_
119
Special procurement activities:
Lend-lease
:_-120
: Renegotiation of war contracts
-,
120
'
Strategic and critical materials122
Scorage and warehousing
.
123
Utilization of Federal supplies a n d equipment_-_ _
-_
124
Foreign Funds Control activities
-•__
125
W a r contributions fund:
. -' Conditional gifts
"_-127
Unconditional donations....:.128
Salary stabihzation a n d limitation
..___
129
Changes in organization and procedure
-132
E s t i m a t e s of receipts
•.132
.;; Fiscal year 1944
.____-___
J-L138
Income taxes
...
----138
Miscellaneous internal revenue
.
'
145
E m p l o y m e n t taxes
...1.
148
Total internal revenue
:_
:^...
-.-J-_
149
Railroad u n e m p l o y m e n t insurance contributions
:__
149
;";,
Customs_
149
,'
Miscellaneous receipts!
_-_'l-_-150
'':... F i s c a l y e a r 1945
.
_---_--____-1_
150
Income taxes
. . - _ : _ - - - - - _ _ - _ - ' 151
Miscellaneous internal revenue
_--_
•
'
153
Employment taxes
156
Total internal revenue
-_
I
_157
Railroad unemployment insurance contributions
'
:__
157
\
Customs
•
157
Miscellaneous receipts_.
^
'---157
E s t i m a t e s of expeAditures_-_-_l-:
'_
'
J
._-_
157
A D M I N I S T R A T I V E R E P O R T S OF BUREAUS AND D I V I S I O N S
^Fiscal Service o f t h e T r e a s u r y D e p a r ^ t m e n t - - .
• ';• W a r activities of t h e Fiscal S e r v i c e - , _
^^_ —
•.
Foreign depositaries
^
^..^
.
";
Currency destruction _ ^ __
V' •
Banking -facilities for t h e W a r a n d N a v y D.epartments iri t h e
• Uhited S t a t e s . ^ - - . - . - - ^ _ —
_L..-..---..--i;-_i-^v^.--_.-^-.




161
161
1.61
162
162

CONTENTS

V

Fiscal Service of t h e T r e a s u r y D e p a r t m e n t — C o n t i n u e d .
' ; ' . ''"'' ] '^^^^
Accounts, Bureau of
______ — - — - _ - - _ _ _ - - l _ _ L _ _ _ : ' 163
Commissioner of Accounts,-Office of:
•
\
B u d g e t a r y administration a n d financial r e p o r t i n g . _ _ i _ _
163
Voting in time of war by members of t h e land a n d naval
forces
-__--_
163
Daily S t a t e m e n t of t h e United States*Treasury
164
Annual appraisal of assets a n d liabilities of t h e Commodity
Credit Corporation
JJ^__J164
Securities a n d funds, Philippine invasion- _ . L ___ J
.
165
Advances t o Federal Reserve B a n k s for industrial loans,
etc
-—:::_-•.__
'.. — _ • : . _ . . . _ _ _
166
Appropriations a n d expenditures under the Social Security
Act
-•_----L:___j_i_:^i
166
Colorado River D a m fund
--_•:.'!
167
Division of Bookkeeping and W a r r a n t s _ - _ _ _ - - _ _ - i _ - _
167
\
Financial reports
.
._.__
..
168
Division of Disbursement...,
:._i'
^_ _ _ . 168
Voluntary payroll allotment plan
_-__^i
169
Victory t a x withheld
_z:
_____r__
-___
169
'
Bonding of certifying o f f i c e r s - - - - L _ _ _ - i - - - - _ _ - - - - :
--_.
169
T a b u l a t i n g card checks
i___i*
___i_____j.
169
Agent cashiers
.
169
Staggered p a y days a n d cash p a y m e n t s to employeesi
170
C o n t i n u a t i o n of accounts of Chief Disbursing'Officer
170
^ Division of Deposits
__--___
.-__._'•_L_:._.• _._.'
170
Depositary functions
...I.J.VL-'--l--'^'i----'
-i
170
Designation of b a n k s as depositaries 'for- withheld taxes in
accordance with t h e provisions of t h e Curreiit Tax P a y m e n t Act of 1943
----^!171
Depositary bonds
._-:•._i._-L__'_'i"_L
.
172
Designation of agencies for t h e issuance of - war savings
b o n d s , Series E . l
.
_-_-._I-LI_V._^__
172
F e d e r a l savings a n d loan associations..' i : . 1 -1 - - _ _ i
173
Social security
-..__
_-_—j___'_;
•___:
173 .
G o v e r n m e n t losses i n - s h i p m e n t _ J 1 1 - _ _ l - i : - - J
° 173
Section of Surety B o n d s - ..-,
175
Treasury B u d g e t a r y Section__
_ii_____^___i_
.-'J^176
Alien p r o p e r t y ; t r u s t fund__^
____i---'--L-j.
-i
'..
176
Philippine funds in t h e United States Treasury J . - - - -'
177
A p p r o p r i a t i o n of funds t o t h e G o v e r n m e n t ' o f t h e Common-.
w e a l t h of t h e Philippines for national defenge:__- L^-L
--178
S u p p l e m e n t a r y sinking fund for t h e payment" of bonds of t h e
Phihppines----^- —--l---i-----__:'___l_i'----^i
179
Foreign check control
_-_
_180
Section of I n v e s t m e n t s
1
-.:--l^
180
Obligations of foreign governments•_ _'i' J - ' _ - - - L
_:.'i
180
Receipts from G e r m a n y
- _ _ ± i _ - _ i - _ - _ ' - _ i - - _ i ^ i _ ^ 182
T r e a s u r y a d m i n i s t r a t i o n of alien a n d mixed claims!.J'
,183
Mixed Clairns Commission a n d -Private Law No. '509:- ' " "Claims against G e r m a n y - _ _':."'i -_ - L.
- - — - _;_•: _ I : _ •;, 183
'
W a r C laims Arbiter. _ . _ _ _ , i __ 1 ___________ i : _
L _' L . 185
Claims of German nationals_ _ _ _ i ' i : - _ r i i - _ _ _ - - - - - ' ' 185
Claims of H u n g a r i a n nationals
i___
:. _
186
G e r m a n special deposit account
^_-_____ • 186
T r i p a r t i t e Claims Commission: Claims against H u n - ^
gary
_L_----_i--.------J:.._i__
187
Claims of American naitionals against Turkey-^ J . . - - - _ i _ ^ I _ _
187
Claims of American nationals against Mexico
'__'__^^L:__
188
Settlement of Mexican Claims Act of 1942___i-_-_i___•::.__
189
Railroad obligations_
.______^__i_i__:__
190
Section 204, T r a n s p o r t a t i o n Act, 1920, as a m e n d e d - 1 __
191
Section 207, T r a n s p o r t a t i o n Act, 1920, as amended
i •' 191
Section 210, T r a n s p o r t a t i o n Act, 1920, as a m e n d e d j l - 192




VI

CONTENTS

Fiscal Service of t h e Treasury. D e p a r t m e n t — C o n t i n u e d .
Accounts, Bureau of—Continued.
^.
Section of Investments—Continued.
....••'•. • \
Federal control of railroads:
Administration
..
_!.-.-.--____-:
Finances
•-^-.
Securities, etc
•...-..^.^.i......
Claims
-_-_
-_-_--_.----___-.
Compensation p a y m e n t s — U n i t e d States railroad employees
:
-_.
Canadian Workmen's Compensation Board__.
...
Tax refunds and other collections
......
Federal F a r m Mortgage Corporation
-^__
Federal land banks:
" .
Capital stock
i
_--.._^._P a y m e n t s on account of reductions in interest rates on
mortgages and subscriptions to paid-in surplus
Federal savings and loan a s s o c i a t i o n s - - - - . ^ - - ---i__.
Trust a n d special funds invested by t h e Treasury Department
,
.--!-..--.
Liquidation of Emergency Relief Accounting Organization
Public Debt, Bureau o f t h e
_----- — .
-i
Oflace of t h e Commissioner
-_
---Chicago Branch—Office of D e p u t y Commissioner (Administ r a t i v e Oflace)---^
—.---..
- - : - . . ^ - —-_Division of Loans a n d C u r r e n c y . 1 . .,
--^
__^____
r
Washington OflSce of t h e Division of Loans and Currency:
Issue a n d retirement of securities
.'-^:
Individual registered a c c o u n t s .
----Claims
---_
.--.-•.
Safekeeping of securities
^___--_----_^Mutilated paper and redeemed currency
---_
Reports
--^
Chicago Branch of t h e Division of Loans a n d Currency:
Savings bond stubs a n d redeemed savings bonds.---___
. .
Individual accounts for Series F a n d G b o n d s - - Claims
--------.-,
---.>Office of t h e Register of t h e T r e a s u r y . . ^ . . . . . . ^
'•...^..^.j..
Washington Office of t h e Register ,of- t h e Treasury -L;
Chicago Branch of t h e Register of t h e Treasury--.L—;
Division of Public D e b t Accounts and Audit
•-'-_-_
Washington Ofiice of t h e Division of Public D e b t .^Accounts
and Audit
---.
..:--_--.---.-i......
.
Chicago Branch of t h e Division of Public D e b t Accounts and
Audit
: - _ - . — - - - - — — --/_
Division of Savings Bonds (Chicago)
__--.
^_-__Division of P a p e r Custody (Washington).-..-..-^.i..i^
.
Destruction Committee
.^
---,-Treasurer of t h e United States
'<...,
-^-.--••.
-4
Budget a n d Improvement C o m m i t t e e - - --_--.-_
..
Comptroller of the Currency, Bureau of t h e - i - - - - Changes in the condition of active national banks .--V
S u m m a r y of changes .in t h e National Banking System
Customs, Bureau of:
, ., .
Collections
---_-_-_
._-.-Volume of business
--- — :
-----w--:
Entries of merchandise
--Vessel, airplane, and highway traffic.
•.
.±.L1..
Drawback transactions
-------Protests and appeals
------s---^.^
Appraisement
-Laboratories
---- - - - Law enforcement activities:
" .
Seizures
Legal proceedings
.
---Fines, penalties, etc
Customs Agency Service




Page
193
193
193
194
194
194
194
194
195
196
197
198
198
199
200
200
200
201
201
203
203
203
204
204
205
205
205
205
208
209
210
210
211
212
213
213
218
218
219
220
220
222
222
223
224
225
226
227
227
230
230
231

CONTENTS

Vn

Customs, Bureau of—Continued.
Page
Miscellaneous
^
^
231
War activities
-232
Training of employees
233
Publications - - - i
1
. _233
Changes in ports and stations
233
Cost of administration
i
233
Engraving and Printing, Bureau of-_
234
Foreign F u n d s Control
236
Internal Revenue, Bureau of:
General:
I n t e r n a l revenue collections
237
Refunds, drawbacks, and s t a m p redemptions. 237
Additional assessments
238
Cost of administratiori
239
Income Tax U n i t :
General functions.
:
239
Returns
filed
240
Examination of income and excess profits tax returns upon receipt
by t h e Washington Oflftce
240
Investigation of tax returns by t h e field ofl&ces
240
Revenue results of investigations of income a n d excess profits
tax r e t u r n s - .
240
Stage at which additional tax was assessed- ^
241
Refunds, abatements, and credits
241
I n v e n t o r y of returns on h a n d in t h e field offices
--241
Miscellaneous Tax Unit
.241
E s t a t e Tax Division
242
Tobacco Division
242
Sales Tax Division
242
Capital Stock Tax Division
'
242
Miscellaneous Division
242
A l c o h o l T a x Unit
.
243
Procedure Division
.
244
Field Inspection Division
244
Laboratory Division
244
Audit Division
'
245
Basic Permit and T r a d e Practice Division
245
Enforcement Division
L..
246
Accounts and Collections Unit
246
Taxes under t h e Federal Insurance Contributions Act
247
T a x under t h e Federal Unemployment T a x A c t - _ - ,
:
. 249
Carriers taxes
:
250
Technical Staff
251
Office of t h e Chief Counsel
252
Chief Counsel's Committee
.
•
.
253
Alcohol T a x Division
--.
253
Appeals Division
253
Civil Division
254
Claims Division
:
^^
__255
Interpretative Division
256
Legislation a n d Regulations Division___
^
256
Penal Division.
257
Review Division
.
.
257
Engineers a n d Auditors Section
.....
257
Intelligence Unit
.258Salary Stabilization Unit__
.
. 258
Legal Division
_-.
259
Taxation
i
259
Customs
--260
Foreign F u n d s Control program
260
Monetary
-___
'260
Public debt
261
Procurement
i
26.1
Accounts
^
261
Legislation
,
261
Legal opinions
262




VIII

CONTENTS

Legal Division—Continued.
Pa8^<^
Claims by and against t h e United States
262
Narcotics_-,-._262
Committee on Practice
___.
^
262
Mint, Bureau of t h e :
Institutions of t h e M i n t Service _
:
:
262
Coinage
:
:
___263
Minor coinage alloys:
>
Five-cent coin
__L-___
263
One-cent coin
263
Metal savings
i
263
Bullion deposit transactions
;
263
Transfer of bulhon
._L
264
Gold operations
264
Silver operations
, 264
Refineries
265
Stock of coin a n d m o n e t a r y bullion in t h e United States
265
Production of gold and s i l v e r . - .
_.
^.
265
Industrial consumption of gold and silver
i.
i
266
General a c t i v i t i e s . . _ .
i._.
._
266
Monetary Research, Division of
^^.
266
Narcotics, Bureau ofi
267
Personnel, Division of
269
Practice, Committee on
._
^
269
Procurement Division
270
Typewriter purchases program
1
270
Blind-made products
.
.
271
Printing and binding
^
271
Lend-lease
• . 271
_
Relief
i_
271
Strategic a n d critical materials
272
Defense housing furniture and e q u i p m e n t . __,-1
272
Wood and steel office furniture
272
P u b h c utilities
272
Deliveries of fuel
i
273
General supply fund
.
273
Storage and warehousing
273
Specifications
^_-_
.
274
Federal S t a n d a r d Stock Catalog
.
274
Inspection service
.
:.
.
274
Purchasing m e t h o d s . - - - - - - - J .
i_
^
274
Renegotiation of c o n t r a c t s . - _ _ _ i
.!_.._
275
Federal business associations
275
Conservation of supplies and materials
275
Research and Statistics, Divisiori of
276
Secret Service Division:
Crime prevention program
277
Protective activities
.
277
Enforcement activities
277
Q.'ax Legislative Counsel, Office of the
280
l.'ax Research, Division of
281
War Finance Division
^
_^_ . 282
• Interdepartmental Committee for the Voluntary Payroll Savings Plan
284
EXHIBITS.
P U B L I C DE.BT

Issues and redemptions of Treasury bonds, Treasury notes, Treasury
certificates of indebtedness, and depositary bonds
Exhibit 1. Offering of 2 percent Treasury bonds of 1 9 4 9 - 5 1 - . Exhibit 2. Subscriptions and allotments. Treasury bonds of 1949-51-_•
Exhibit 3. Offering of 2}^ percent Treasurv bonds of 1962-67 (additional)Exhibit 4. Allotments, Treasury bonds of 19.62-67 (additional)
.- •
Exhibit 5. Offering of % percent Treasury certificates of indebtedness of
Series B-1943
.__
_.




289
290
291
293
293

CONTENTS

IX

Exhibit 6. Subscriptions and allotments, Treasury certificates of indebt- Page
edness of Series B-1943-'
,
.
. 294
Exhibit 7. Offering of 0.65 percent Treasury certificates df indebtedness
of Series C-1943 and 1% percent Treasury notes of Series C - 1 9 4 5 - - 295
. Exhibit 8. Subscriptions and allotments, Treasury certificates of indebtedness of Series C-1943 and Treasury notes of Series C-1945_-__
_:_
297
Exhibit 9. Offering of Treasury tax savings notes of Series A-1945 arid
^ Series C
.___:
:__._
, -298
Exhibit 10. Offering of 2 percent Treasury bonds of 1950-52 and IJ^ percent Treasury notes of Series B-1946 (additional) ___L-^:___
307
Exhibit 11. Allotments, Treasury bonds of. 1950-52 and Treasurv notes of
Series B-1946 (additional)
310
Exhibit 12. Offering of % percent Treasury certificates of indebtedness of
Series D-1943
310
Exhibit 13. Subscriptions, and allotments, Treasury certificates of indebtedness of Series D - 1 9 4 . 3 - - - y _.
_:_.::
.__.
1
311
Exhibit 14. Offering of 2J^ percent Treasury bonds of 1963-68, 1% percent
Treasury bonds of 1948, and % percent Treasurv certificates of indebtedness of Series E - 1 9 4 3
_._
___I..
. 312
Exhibit 15. Subscriptions and allotments. Treasury borids of 1963-68,
Treasury bonds of 1948, and Treasury certificates of indebtedness of
Series E - 1 9 4 3 .
_^--.- -J-.----1
_315
Exhibit 16. Offering of Ys percent Treasury, certificates of indebtedness of
Series A-1944- ._._--:___
316
Exhibit 17. Subscriptions and allotments. Treasury certificates of indebtedness of Series A-1944
.
.,-_-_._._____,
1
/ 318
Exhibit 18. Call for redemption on J u n e 15, 1943, of S% percent Treasury
bonds of 1943-47
__-_
..
_-_
318
Exhibit 19. Offering of 2}^ percent Treasury bonds of 1964-69, 2 percent
Treasurv bonds of 1950-52, and % percent Treasury certificates of in- •
debtedness of Series B-1944
___'
..__
319
Exhibit 20. Subscriptions and allotments, Treasury bonds of 1964-69,
. Treasury bonds of 1950-52, and Treasury certificates of indebtedness of
Series B-1944
..
__.
____.
_.. 322
Exhibit 21. Offering of % percent Treasury certificates of indebtedness of
Series C-1944
i
324
Exhibit 22. Allotments, Treasury certificates of indebtedness of Series
C-1944
-__
325
Exhibit 23. Call for redemption on. October ,15, 1943, of 3K p e r c e n t '
Treasury bonds of 1 9 4 3 - 4 5 - - — . - - . • - - - - _ _ _
325
Exhibit 24. Termination of sale of Treasury tax savings.notes of Series A
and provision for optional cash redemption
_.
__:
326
Exhibit 25. Offering of 1}^ percent Treasury notes of Series A - 1 9 4 7 - - - . . - _ _
327
Exhibit 26. Issue of 2 percent depositary bonds. Second Series
^
328
United States savings bonds
Exhibit 27. First a m e n d m e n t , November 23, 1942, to D e p a r t m e n t Circular '
No. 530, Fifth Revision, prescribing regulations governing United States =
savings bonds.
_
•-.-. ...
Exhibit 28. First a m e n d m e n t , J u n e 17, 1943, to D e p a r t m e n t Circular No.
653, Revised, relative to United States war sayings bonds of Series E__
Exhibit 29. First a m e n d m e n t , November 30; 1942, to D e p a r t m e n t Circular
No. 654, Revised, relative to United States savings bonds of Series F and
Series G
. . . . i . ...i.
Exhibit 30. Second a m e n d m e n t , J u n e 17, 1943, to D e p a r t m e n t Circular
No. 654, Revised, relative to United States savings bonds of Series F and
Series G
---_i_--_--____:__--_Exhibit 31. Third a m e n d m e n t , July 17, 1942, to D e p a r t m e n t Circular No.
657, prescribing regulations governing agencies for the issue of war
savings bonds of Series E-.' - _ i - ..
i
'..
1
Exhibit 32. Regulations, December 29, 1942, relative to obligations of t h e '
United States as credit against t h e Victory Tax
---_-_




329
330
330
331
331
332

X

CONTENTS
Treasury bills
Page

Exhibit 33. Inviting tenders for Treasury bills dated July 1, 1942-.
Exhibit 34. Acceptance of tenders for Treasury bills dated July 1, 1942__
Exhibit 35. Amendments to Department Circular No. 418, as amended,
relative to the issue and sale of Treasury bills
.,
Exhibit 36. Announcement by the Secretary of the Treasury, May 6, 1943,
of the change in procedure with respect to bidding for Treasury bills-_
Exhibit 37. Summary of information contained in press releases issued in
connection with Treasury bills offered during the fiscal year 1943

332
333
334
334
335

Miscellaneous
Exhibit 38. An act to increase the debt limit of the United States, and for
other purposes
-..
Exhibit 39. Amendments, January 21, 1943, to Department Circulars No.
685 and No. 692, changing the date when 2}^ percent Treasury bonds of
1962-67 are available in coupon form
^
Exhibit 40. First amendment, June 22, 1943, to Departnient Circular No.
696, changing the designation of Treasury notes of Tax Series C
Exhibit 41. First amendment, July 28, 1942, to Department Circular No.
660, relative to 2 percent depositary bonds--_
Exhibit 42. Joint statement of the Comptroller of the Currency, the Federal
Deposit Insurance Corporation, the Board of Governors of the Federal
Reserve System, and the Executive Committee of the National Association of Supervisors of State Banks, November 23, 1942, of their examination and supervisory policy with respect to banks

338
339
339
339

340

. SECURITIES G U A R A N T E E D BY T H E UNITED STATES

Exhibit 43. Partial redemption, before maturity, of 2% percent mutual
mortgage insurance fund debentures. Series B (eighth call)
Exhibit 44. Partial redemption, before maturity, of 2% percent mutual
mortgage insurance fund debentures. Series B (ninth call)
Exhibit 45. Partial redemption, before maturity, of 2% percent housing
insurance fund debentures, Series D
-

340
342
345

MONETARY DEVELOPMENTS

Exhibit 46. Announcement, July 6, 1942, of the signing of an agreement
between the United States and Cuba relating to the sale of gold to
Cuba
----Exhibit 47. Announcement, July 1, 1943, of the extension of the agreement between the United States and Cuba relating to the sale of gold to
Cuba
.--^
Exhibit 48. Announcement, July 2, 1942, of the extension for one year of
the agreement of April 1, 1941, between the United States and China
involving the purchase of Chinese yuan
--_Exhibit 49. Announcement, December 31, 1942, of the extension of the
stabilization arrangement of July 14, 1937, between the United States
and,China
1
-'
.
Exhibit 50. Announcement j July 6, 1942, of the extension of the stabilization agreement between the United States and Brazil
-Exhibit 51. Joint statement by the Secretary of the Treasury of the
United States and a representative of the Secretary of the Treasury of
Mexico, June 3, 1943, announcing the extension for two years of the stabilization agreement of 1941
Exhibit 52. Joint statement by the Secretary of the Treasury of the
United States and the Ambassador of Ecuador, July 1, 1943, announcing
the extension for one year of the stabilization agreement of 1942. _:
Exhibit 53. Joint statement by the Secretary of the Treasury of the
United States and the Minister of Iceland, July 1, 1943, announcing
the extension for one year of the stabilization agreement of 1942
Exhibit 54. Treasury proposal for an international stabilization fund of the
United and Associated Nations
^
Exhibit 55. An act to extend the time within which the powers relating
to the stabilization fund may be exercised
.




347
347
347
348
348

348
349
349
349
360

CONTENTS

XI

Exhibit 56. Statement of the Secretary of the Treasury before the Senate
Committee on Banking and Currency, April 16, 1943, relating to the
..extension of the stabilization fund and power to alter the gold content Page
of the dollar-l
----..:.
360
Exhibit 57. Statement of the Secretary of the Treasury, August 31, 1942,
.. relating to .the availability of silver for war uses
--363
Exhibit 58, Announcement, September 17, 1942, of arrangements for the
"
sale by the Treasury of silver to industrial users for war production.-_
364
Exhibit 59. An act to authorize the use for war purposes of silver held or
owned by the United States
'.
__. 364
Exhibit 60. Announcement by. the Secretary of the Treasury, September
12, 1942, Teiating to the new five-cent pieces- ^ 364
Exhibit 61. An act to further the war effort by authorizing the substitution
of other materials for strategic metals used in minor coinage, to authorize
the forming of worn and uncurrent standard silver dollars into bars,.
and for other purposes
--365
Exhibit 62. Press release, December 13, 1942, of the Board of Governors
of the Federal Reserve System relating to the utilization of the existing
. stock of Federal: Reserve Bank notes..
.
367
Exhibit 63. An act to extend the period during which direct obligations ;
of the: United States.may be used as collateral security for Federal .
Reserve notes
.'...
367
GOVERNMENT DEPOSITARIES

Exhibit 64. An act suspending certain provisions of sections 12B and 19 of
the Federal Reserve Act until six months after the cessation of hostilities
in the present war as determined by proclamation of the President or
concurrent resolution of the Congress
Exhibit 65. Regulations governing special deposits of public moneys under
the act approved September 24, 1917, as amended (Second Liberty
' Bond Act, as amended)
_-Exhibit 66. Regulations governing the payment through depositary banks
of funds withheld as taxes in accordance with the provisions of the
Current Tax Paynient Act of 1943—---: .
Exhibit 67. First amendment, July 22, 1943, to Department Circular
No. 714, prescribing regulations governing the payment through depositary banks of funds withheld as taxes in accordance with the provisions of the Current Tax Payment Act of 1943

367
368
371

378

SALARY STABILIZATION AND LIMITATION

Exhibit 68. Portions of the act to amend the Emergency Price Control
Act of 1942j to aid in preventing inflation, and for other purposes (Public Law 729, .October 2, 1 9 4 2 ) . . . . .
__.
. /378
Exhibit 69. Portions of Executive Order No. 9250, October 3, 1942, pro- .
viding for the stabilizing of the national economy..
379
Exhibit 70. Portions of. Executive Order No. 9328, April 8, 1943, the
so-called Hold-the-Line order, further limiting the authority to approve
salary adjustments----'---,
- , .382
Exhibit 71. Statement of the Commissioner of Internal Revenue, July 1,
1943, as to the methods under which payments of additional compensation to salaried personnel may be determined-•..
- - - - - - 383
ORGANIZATION AND PROCEDURE

Exhibit 72. Orders relating to organization and procedure in the Treasury .
Department
-----^ . -- ' 384
Exhibit 73. Executive Order No. 9302, February 9, 1943, transferring to
the Commissioner of Internal Revenue certain functions relating to
taxes and penalties imposed for violations of the National Prohibition
; Act
1
- - - - , 385




XII

CONTENTS

ADDRESSES. AND
.../._. , •

STATEMENTS . O N ' WAR
' ..
^. ^'•'. : D B B T , E T C .

FINANCING, INFLATION,'. PUBLIC '
•...•;,
•:.."..•.
>.
"'•,

!,

Exhibit 74. Message frdm" Secretary Morgenthau to the'Aniericari Bankers Page
Association, September 1. 1942, on war financing - _ - - -1 - - - _ _ ,,386
Exhibit 75. S t a t e m e n t of Secretary Morgenthau contained in t h e press
release of,September 5., 1942, relating, to taxes a n d war
financing.'
388
Exhibit 76., Address by Under • Secre^^^
Bell before the I n v e s t m e n t
Bankers Association, October 19, 1.942, on war
financing...._-___,
. 390
Exhibit 7 7 . Statement of Secretary Morgenthau, December 6, 1942,
' relating to t h e First War Loan_
^
L
393
Exhibit 7 8 . ' S t a t e m e n t of Secretary Morgenthau, March 22, 1943, prepared
, 'at t h e request of t h e United Press for a discussion under t h e caption.''The
Treasury prepares for pdst-war p r o b l e m s " - ^ J
^-__
_- ' 394
'

'

'

"

• TAXATION

DEVELOPMENTS

Exhibit 79; Statehien't of R a n d o l p h E : Paul, Tax Adviser t o t h e Secretary
of t h e Treasury, before t h e House Ways a n d Means Committee,-,March
^3, 1942, discussing in detail t h e methods for raising additional r e v e n u e . .396
Exhibit 80.'Stiatement of Secretary M o r g e n t h a u before t h e Senate Finance
Committee, July 23; 1942, in support of Treasury's program for addiitional revenue
-_:406
Exhibit 81. Statement of Secretary Morgenthau before t h e Senate Finance
Committee, September 3, 1942, proposing a spendings t a x a n d a further
lowering of personal exemptions under t h e individual income tax
410
Exhibit "82. :Si}atement of R a n d o l p h E . - P a u l , General Counsel for ,the
Treasury Departmerit, before t h e Senate Finance Committee, September 3, 1942, in support of t h e spendings tax. a n d other Treasury p r o posals
-- — --- — - z —..__ ^ __-__ _
411
Exhibit 83.' Statement • of Randolph. -E. Paul, General Counsel for t h e
Treasury D e p a r t m e n t , before t h e . H o u s e Ways a n d Means-Committee,
F e b r u a r y 2, 1943, on revision of income tax p a y m e n t methods
420
Exhibit 84. S t a t e m e n t .:of Randolph E.. Paul, General Counsel for the.- •
Treasury D e p a r t m e n t , before t h e Senate Finance Committee, M a y 6,~
• 1943, on current p a y m e n t of t h e individual income tax and tax cancelation f o r i l - 9 4 2 j _ _ _ - ^ ^ — - - - - - - .
---__.i.____--,-___i
_^__J
431
E x h i b i t 85. L e t t e r ' t o t h e President from t h e Secretary of t h e Treasury,'
Secretary of Labor, Director of ;the Budget,.;-Admin istrator of t h e Fed. eral Security Agency, and Chairman of t h e Social Security Board,
October 1, 1942, relative to the freezing of t h e social securit}^ contributions rate
,- - - - --,- - - - . _ - - - ^ _..-•-•
445
. ...

^

. .i

.

..,.

_.. . . M I S C E L L A N E O U S

, ;_

• ..'

;,

Exhibit 86. Section 10 of t h e act to provide'for a m e t h o d of voting,: in'
time of war, by members„ of^the land and naval forces absent from t h e / •
, place df their residence'(Pubhc^ Law 712, September 16, 1942)-_
.,' 446
Fixhibit 87. Letter from t h e Pxe^ixlent to the" Secretary of t h e Treasury, . .
October 15, 1942, relative to staggered p a y dajjs^for Government em, p l o y e e s i : J.. - - - - - - - - -: - _ — — _ — : - . . . i
-____ — _____ — ' 447
E x h i b i t 88. An act to provide for t h e orderly transaction of t h e public
business in t h e event of t h e d e a t h or df t h e resignation "or separation
.fr.om ofl^te of t h e Cliief Disbursing Oflacer'_"
— —'_
447
Exhibit 89. Executive Order No." 9235, August 31, 1942, providing for the
effective utilization of supplies a n d equipment by Government agencies.
448
Exhibit 90. An act to provide for t h e settlement of certain claims of t h e
Government of t h e United States on behalf of American nationals against
t h e Government of Mexico__'_- j - - - - - - - 1
---:.
' 449
Exhibit 9 1 . Regulations governing p a y m e n t s on account of awards and
;•
appraisals in-'favor of •nationals of t h e United-States on claims against
. t h e Goverriment of Mexico p u r s u a n t to t h e act of April 10, 1935, t h e
joint resolution-of August 25, 1937, a n d the settlement of Mexican '
-Claims Act of 1942
1
453
Exhibit 92. Letter of t h e Postmaster General to t h e Secretary of t h e
Treasury, dated November 30, 1943, certifying extraordinary expenditures contributing t o t h e deficiencies of postal revenues for t h e fiscal year
1943, in pursuance of Public No. 316, approved J u n e 9, 1930.__
..
456




CONTENTS

XHI

TABLES
Explanation of bases used in tables
-_ —
Description of accounts t h r o u g h which Treasury operations are/effectedi'_
RECEIPTS AND EXPENDITURES

,

.,

Summary tables on receipts and 'expenditures

'

'

Page
459
. .460
; .••

. .

T a b l e 1. S u m m a r y of receipts a n d expenditures, fiscal years 1932 througH
1943 a n d m o n t h l y J u l y 1942 t h r o u g h J u n e 1943'(daily Treasury s t a t e - '
m e n t basis)
-jL - - _ - _ - - - _ - _ — _ _
: _ _ i::'_ iL .J}.-^'^^'. i_1 - 4 6 2
T a b l e 2. Receipts and expenditures for t h e fiscal j^ears'1789. through' 1943
• (warrants and daily T r e a s u r y s t a t e m e n t b a s e s j i l
_i::_:__ —_::_'1__
466
Detailed tables on receipts 'and expendiiures
T a b l e 3. Classification of m o n t h l y and total'receipts, fiscalyear 1943, a h d • '
comparative totals, fiscal year 1942 (daily T r e a s u r y s t a t e m e n t b a s i s ) - i ' 472
T a b l e 4. Classification of m o n t h l y expenditures, fiscal year 1 9 4 3 . (daily • '
T r e a s u r y s t a t e m e n t basis)i
- - — ' . i ^ i . i n ' . ^ I I L - _ _ - i : i ' . ' — - • - . . i • ^' 478
T a b l e 5. Expenditures from general and "speciahaccounts, by'haajor functions, fiscal years 1932 t h r o u g h 1943 (daily Treasury staterrient basis)J- ' 500
Other receipts and expenditures tables

''

T a b l e 6. Comparison of detailed internal revenue collections, fiscal years .
1942.and 1943 (collections b a s i s ) - - . . - - . - - ' - - i - — --...- — - - i _ — - - - - _ _ . - - w 501
T a b l e 7. I n t e r n a l revenue collections, by tax sources, fiscaL y e a r s ' 1 9 1 6 .
t h r o u g h 1943 (collections basis) _ :
-___-1^___.,
..L_;._.._::.__:L
• 503
T a b l e 8. I n t e r n a l revenue, collections, by States and •Territories,: iiscal
year 1943 (collections basis) _: _
-•_ i _ _ _
11 _ _ _«•_. j _ _____ ^ i'
508
Tiable 9. S u m m a r y of customs collections and: expenditures,^fiscal-year :• ,.
1943 (Customs accounts basis) _ _ • _ . . _ - i - _ i . _ . . - _ _ i - 1 J
.-.I^L_•_.__._J • 510
Table 10. E x p e n d i t u r e s by organizations and b y fiscal years from April S,:. .'
1935, t h r o u g h J u n e 30, 1943, under t h e Emergency Relief Appropriation- :
Acts for t h e fiscal years 1935 t h r o u g h 1943 (checks issued basis)
511
Table 11. Receipts a n d expenditures of the social security program u n d e r
t h e Social Security, Railroad Retirement, and Railroad U n e m p l o y m e n t
Insurance Acts, fiscal years ,1936 t h r o u g h 1941' coiribined, fiscal year
'•/'
1942, and m o n t h l y for t h e fiscal year 1943 (daily T r e a s u r y statement- '
basis)
---___--:, — - - l i
^1
_ - j _ _ i v " ' \ ' 514
T a b l e 12: A m o u n t s appropriated and expended u n d e r authorizations con-f- ' •
tained in the Social Security Act, as a m e r i d e d - i - - ' - - - U , i - L - J - j _ i - - i _ i ; ; - '522
T a b l e 13. P a n a m a Canal receipts and "Expenditures, fiscal years 1903" \' .
t h r o u g h 1943 (warrants basis) ^ - i -.'-_ _ _ - _ _'_ -^ - - -.- - - - - - - - - - -'-'523
T a b l e 14. Postal receipts and expenditures, fiscal'years 1789'through 1943.
"525
Table 15. Selected receipts and expenditures ^'of t h e Government,' fiscal ', .
years 1789 t h r o u g h 1943 (warrants and checks issued b a s e s ) - i - - - - i - - — " 52'8
T a b l e 16. Expenses for administrative activities of t h e Treasury Departm e n t , classified t o t h e extent practicable by States' and Terfitbries,
'
fiscal y e a r T 9 4 3 L - . - - - : - - _ _ _ — - ^ - —— J i - ' - j J - - — - . - - - . l i - — - 530
T a b l e 17. Expenses of . t h e • I n t e r n a l - Revenue Service, fiscal. year 1943 "'
(checks issued basis)
_ _ - - - _ — - • — - - _ - - - - - - 1 - — - - - - i i -• - ^ ^ ' 534:
WAR ACTIVITIES PROGRAM'

"

. .

T a b l e 18. Appropriations a n d n e t contract authorizations for t h e w a r
activities program, as of J u n e 30, 1 9 4 3 . i _ _ _ - _ _ - • - . - 1 T a b l e 19. Appropriations, contract authorizations, and expenditures under
t h e w a r activities p r o g r a m ; J u l y 1, 1940, t h r o u g h J u n e 30, 1 9 4 3 - - ' - ' _ . - l i
T a b l e 20. Expenditures for w a r activities, by departmeiits a n d agencies
• a n d by fiscal years 1933 t h r o u g h 1943 and m o r i t h s ' f r o m J u l y ' 1 9 4 0
t h r o u g h J u n e ' 1 9 4 3 (daily T r e a s u r y s t a t e m e n t b a s i s ) - . - - - - - - ! - - - ' - - - - - Table 21. Commitments, receipts, and disbursemerits of t h e Reconstruction
Finance Corporation and its subsidiaries u n d e r ' t h e w a r activities p r o gram, July 1,1940, t h r o u g h J u n e 30, 1943 (basis of reports t o Treasury) _ .




538
" 542
^
'
" 544
'- •
-^
546

XIV

CONTENTS
PUBLIC DEBT

'

Public debt outstanding
Table 22. Description of the public debt outstanding June 30, 1943'(daily Page
Treasury statement and public debt accounts bases)
^....547
Table 23. Principal of the public debt outstanding at the end of each fiscal
year from .1853 through 1943 (public debt accounts and daily Treasury
statement bases)
1...
562
Table 24. Comparative statement of the public debt outstanding June 30,
1931 through 1943 (daily Treasury statement basis)_;---.-^-- —_
564
Table 25. Composition of the public debt at the end of the fiscal years 1916
through 1943 and by months from July 1942 through June 1943..(public ,;.
debt accounts and daily Treasury staternent bases) - ^ —-----566
Public, debt operations ^ ,
Table 26. Public debt receipts and expenditures, naonthly July 1.942
through Juhe 1943, with totals for the fiscal years 1942 and 1943.-(daily
Treasury statement basis)
--.. _ - . - - - .568
Table 27. Changes in public debt, by issues, fiscal year 1943 (daily Treasury statement and public debt accounts bases)
^--.- ^ ^ -.-1- _ -,_ - - - - - . 576
Table 28. Issues, maturities, and redemptions of interest-bearing secririties,
exclusive of trust account and other special issues, July 1942 through
June 1943
...........
-590
Table 29. Sources of public debt increase or decrease, fiscal years 1915
through 1943 (daily Treasury statement basis)..:
^
__.-597
Table 30. Transactions on account of the-cumulative sinking fund, fiscal •
>
year 1943 (public debt accounts basis)
•..^•..
- - -1 - _ _ _ ^ 599
Table 31. Transactions on account of the cumulative sinking fund, fiscal >
•
years 1921 through 1943 (public debt accounts basis)
^_-----__i „ 599
Table 32. Securities retired through the cumulative • sinking fund,, par- ,
amount and principal cost, to June 30, 1943 (public debt accounts basis) J • 600
Table 33. Comparison of sales of securities during the First and Second: -••
War Loans, by classes of investors and by issues (basis of reports of ;
sales)
-------^
- — - - . — --/ 601
•United States savings bonds^. .

.

.i

Table 34. Analysis of sales and redemptions of United States savings bonds,
by series and,by fiscal years 1935 through 1943 and months for the fiscal. \-l
year 1943 (daily Treasury statement basis)
i---'!'_i * 603
.
Table 35. Summary of sales and redemptions of United States, savings
bonds, by series arid by fiscal years and months, May 1935 through Jurie
1943 (basis of daily Treasury statements and reports of sales).-----^-^^04
Table 36. Sales of United States savings bonds of Series.E, SeriesF,'and. >' '
Series G, by denominations and by fiscal years/and months, MayJ941
through June 1943 (basis of reports of sales)---^i — - - - - - - - - _ i - _ , - _ - _ _ . 611
Table 37! Sales of United States savings bonds of Series E and Series.F. and
G, by States and by calendar years, fiscal years, and months, May 1941 /,;.
through June 1943 (basis of reports of sales)--- —^- — — -_
^4 —-_._' 614
Table 38. Sales of United States savings bonds of SeriesE in selected.large
cities, by calendar years, fiscal years, and months, July. 1941 through i, ,
June 1943 (basis of reports of sales)^
—------^...i-i. J^-^-_V. 622
Table 39. Exterit of participation in payroll savings plan for purchase of
United States savings bonds each month from December 1941 through
June 1943 (basis of reports from companies and governmental units)-.
630
United States war savings stamps

.. •.;

..!.•..

Table 40. Summary of sales and redemptions of United States war sa.yings . . .
stamps, by fiscal years and months, May. 1941 through June 1943 (basis' i ,..
of daily Treasury statements and reports of Post Ofl&ce Department)--- • 631
Table 41. Sales of United States war savings stamps, by denomina.tions .,^and by fiscal years and months, May 1941 through June 1943 (basis o i ' . i ,
reports of Post Oflfice Department)
^ - - - - - - ^ , ^ ^ - - - 1 - - . ——-.^^..i ^.632




CONTENTS

XV

Table 42. Redemptions of United States war savings stamps, by means of
payment and by fiscal years and months, May 1941 through June 1943
(basis of daily Treasury statements and reports of Post OflSce De- Page
partment)
.
:
633
Table 43. Sales of United States war savings stamps, by States and by
calendar years, fiscal years, and months, May 1941 through June 1943
(basis of reports of Post Oflfice Department)--634
Treasury notes—tax series and savings series
Table 44. Analysis of sales and redemptions of Treasury notes, tax series
and savings serieSj by series and by fiscal years and months, August 1941
through June 1943 (daily Treasury statement basis)
638
Table 45. Summary of sales and redemptions of Treasury notes, tax series
and savings series, by series and by fiscal years and months, August 1941
through June 1943 (basis of daily Treasury statements and reports of
sales)
--640
Table 46. Sales of Treasury notes, tax series and savings series, by series,
by denominations, and by fiscal years and months, August 1941 through
June 1943 (basis of reports of sales)
.....
643
Table 47. Sales of Treasury notes, tax series and savings series, by series,
by types of purchasers, and by fiscal years and months, August 1941 ,
through 1943 (basis of reports of sales)
645
Table 48. Redemptions of Treasury notes,, tax series and savings series, by
series, by means of payment, and by fiscal years and months, August
1941 through June 1943 (daily Treasury statement basis)
648
Interest on the public debt
Table 49. Interest on the public debt, payable, paid, and outstanding
unpaid, fiscal year 1943 (pubhc debt accounts basis)
Table 50. Interest paid on the public debt, by issues, fiscal years 1941
through 1943 (public debt accounts basis)
Table 51. Amount of interest-bearing debt outstanding, the computed
annual interest charge, and the computed rate of interest, at the end of
the fiscal years 1916 through 1943, and at the end of each month from
July 1942 to June 1943 (public debt accounts and daily Treasury statement bases)
Table 52. Interest paid *on the securities issued or guaranteed by the
United States Government, classified by tax status, fiscal years 1913
through 1943 (public debt accounts basis)

651
651

653
654

Miscellaneous
Table 53. Contingent liabilities of the United States, June 30, 1943 (daily
Treasury statement basis)
Table 54. Contingent liabilities of the United States as of June 30, 1934,
through 1943 (daily Treasury statement basis)
Table 55. Average yield on long-term Treasury bonds, by months, January 1919 through June 1943
Table 56. Prices and yields of public marketable securities issued or
guaranteed by the United States, June 30, 1942, and June 30, 1943,
and price ranges since dates of issue
'

656
660
662
663

CONDITION OF THE TREASURY EXCLUSIVE OF PUBLIC DEBT
LIABILITIES

Table 57. Current assets and liabilities of the Treasury at the close of
the fiscal years 1942 and 1943 (daily Treasury statement basis)Table 58. Balance in the General Fund of the Treasury at the end of each
month, fiscal year 1943 (daily Treasury statement basis)
Table 59. Assets and liabilities of the exchange stabilization fund as of
June 30, 1942 and 1943
--.
Table 60. Securities other than obligations of foreign governments owned
by the United States Government, June 30, 1943
___-




666
667
668
670

XVI

CONTENTS

Table 6 1 . Principal of t h e funded and unfunded indebtedness of foreign
governments to t h e United States, the accrued and unpaid interest
'thereon, and p a y m e n t s oh account of principal and interest, as of Page
November 15, 1943
--__.___
672
Table 62., Principal of the fiinded and unfunded indebtedness of foreign ^
govermnents to the 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 through 1 9 4 3 - - -------673
TRUST AND SPECIAL FUNDS FOR WHICH INVESTMENTS ARE MADE BY
THE TREASURY DEPARTMENT

Table 63. Adjusted service certificate fund, J u n e 30, 1943 (daily Treasury
s t a t e m e n t . .basis)
^
^— ^.....^.....^
.
-.,
Table 64. Ainsworth Library .fund,; Walter Reed General Hospital, J u n e
30, 19.43----^
.--1------Table 65. Alaska Railroad retirement and disability fund, J u n e 30, 1943
(daily, Treasury s t a t e m e n t basis)
Table 66, Canal Zone retirement and disability fund^ June 3.0, 1943 (daily .
Treasury statement basis)
1-•-,..^..
Table 67. Civil service retirement a n d disability fund, June 30,- 1943
(daily Treasury s t a t e m e n t basis)
j _ _ ^ .......^
—
Table 68. District of Columbia teachers' retirement fund-—Assets held by
t h e Treasury D e p a r t m e n t , J u n e 30, 1943
._
. — ..'.
Table 69. District of. Columbia water fund—Investments held by t h e
Treasury Department, June 30, 1943n
.--Table 70. District of Columbia workmen's compensation fund—Assets
held by the Treasury D e p a r t m e n t , J u n e 30, 1943'
Table 71. Federal old-age and survivors insurance t r u s t fund, J u n e 30,
1943 (daily Treasury statement basis)
..
Table 72. Railroad retirement. account, J u n e 30, 1943 (daily Treasury
statement basis)
;
^--'
---Table 73. Unemployment t r u s t fund, June 30, 1943 (daily T r e a s u r y statem e n t basis)
^----___—'—
_
—•
Table 74. Foreign service retirement and disability fund, J u n e 30, 1943
(daily Treasury.statement b a s i s ) . _ _ _ i . _ ---•_-•T a b l e 75. Library of Congres^ t r u s t fund, J u n e 30, 1 9 4 3 - - —
Table 76. Longshoremen's a n d harbor workers' compensation fund—
Assets held by t h e Treasury D e p a r t m e n t , J u n e 30, 1943___Table 77. National Archives gift fund, J u n e 30, 1943
-._•__--Table 78. National Cancer I n s t i t u t e gift fund, J u n e 30, 1943
__i_-Table 79. National I n s t i t u t e of H e a l t h gift fund, J u n e 30, 1943
Table 80. National p a r k t r u s t fund, Jurie 30, 1943
T a b l e . 8 1 . National service life insurance fund, J u n e 30, 1943- (daily
Treasury s t a t e m e n t basis)----__
•
-__--Table 82. Pershing Hall Memorial fund, J u n e 30, 1943
--_____
Table 83. United States G o v e r n m e n t life insurance fund—In vestriients,
'June 30, 1943
J_____-1 — - - — _- — — _ - .

674
674
675
.
676
677
678
679
679
680
.681
682:
685
686
688
689
689
690
691
692'
692.
693

G O V E R N M E N T CORPORATIONS A N D CREDIT AGENCIES .

Table 84. Combined statenient of assets a n d liabilities of Government
corporations and credit agencies, J u n e 30, 1943 (basis of reports from
corporations, etc.)
_-.
Table 85. Proprietary interest of t h e United States • in Government
corporations and credit agencies, a t t h e end of each of t h e fiscal years
1932 through 1943 (basis of reports from corporations, etc.)
-.----.__
Table 86. Sources of funds of certain Government corporations a n d credit •
agencies, fiscal year 1943 a n d cumulative to J u n e 30, 1943 (basis of
reports from corporations, etc.),-•....
..
Table 87. Uses of funds of certain Government corporations and credit
agencies, fiscal year 1943 a n d cumulative to J u n e 30^ 1943 (basis of ,
reports .from corporations, etc.)
.
.-----___
_. . _




694
704
.,.
706
708

CONTENTS

XVII

STOCK AND CIRCULATION OF MONEY IN THE UNITED STATES

Table 88. Stock of money, money in the Treasury, in the
Banks, and in circulation June 30, 1913 through 1943
Table 89. Stock of money, by kinds, at the end of each
1913 through 1943..
.
Table 90. Money in circulation, by kinds, at the end of
from 1913 through 1943-.
Table 91. Stock of money, money in the Treasury, in the
Banks, and in circulation, by kinds, June 30, 1943

Federal Reserve
fiscal year from

Page
. 710

each fiscal year
Federal Reserve

712
713
714

MISCELLANEOUS

Table 92. Net expenditures for Federal aid to States, individuals, etc.
• (exclusive of emergency appropriations from which grants are made to
States, fiscal years 1920, 1930, 1940, and 1943
Table 93. Expenditures made by the Government as direct pajmients to
States, etc., under cooperative arrangements and expenditures within
States which provided relief and other aid, fiscal year 1943
-Table 94. Number and amount of awards of the Mixed Claims Commission, United States and Germany, certified to the Secretary of the
Treasury by the Secretary of State and the amount paid and balance
due, by classes, as of September 30, 1943
Table 95. Transactions in commodity stamps, fiscal years 1939 through
1943 and monthly from July 1942 through June 1943

715
719

728
730

OWNERSHIP OF GOVERNMENTAL SECURITIES

Table 96. Sumraary data from Treasury survey of the ownership of securities issued or guaranteed by the United States, analyzing the ownership of such securities by classes of holders of each issue outstanding on
quarterly dates from March 31, 1941, through June 30, 1943_
Table 97. Estimated ownership of all interest-bearing governmental securities outstanding, classified by issuer, June 30, 1937 through 1943
Table 98. Estimated*amount of interest-bearing securities issued by all
governmental units in the United States outstanding on June 30, 1943,
classified by tax status and by type of issuer
Table 99. Estimated amount of interest-bearing securities issued by all
governmental units in the United States outstanding on June 30, 1913
through 1943, classified by tax status and by type of issuer
.

731
750
752
754

BUDGET ESTIMATES

Table 100. Receipts and expenditures of general and special accounts,
actual for the fiscal year 1943 and estimated for the fiscal years 1944 and
1945, in detail..^
.
Table 101. Receipts and expenditures of trust accounts, etc., actual for
the fiscal year 1943 and estimated for the fiscal years 1944 and 1945, as
exhibited in the Budget for 1945vTable 102. Summary of cash operations of the United States Treasury
for the fiscal year 1943 and estimated for the fiscal years 1944 and 1945,
as exhibited in the Budget for 1945
Index
.,
1

542890—44


764
786
801
803




SECRETARIES, UNDER SECRETARIES, AND ASSISTANT SECRETARIES
OF THE TREASURY DEPARTMENT FROM MARCH 4, 1933, TO NOVEMBER 15, 1943 1 AND THE PRESIDENT UNDER WHOM THEY SERVED
Term of service
Official
From—:

Secretary of the Treasury-

President

To-

Secretaries ofthe Treasury
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. 15,1938
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...._j.

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

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

Roosevelt.
Roosevelt.
Woodin.
Woodin
Morgenthau-

Roosevelt.
Roosevelt.
Roosevelt.

Morgenthau.
MorgenthauMorgenthau-

Roosevelt.
Roosevelt.
Roosevelt.

Woodin, Morgenthau...
Woodin, Morgenthau...
Woodin
Morgenthau
Morgenthau. __...
Morgenthau...
Morgenthau
Morgenthau

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 York...
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 officials since 1789 see annual report for 1932, pp. xvii to xxi, and corresponding table in annual report
forl933.




XIX

PRINCIPAL ADMINISTRATIVE AND STAFF OFFICERS OF THE
TREASURY DEPARTMENT AS OF NOVEMBER 15, 1943
Henry Morgenthau, .Tr
Daniel W. Bell
Herbert E. Gaston...
John L. Sullivan
. (Vacant)
Harry D. White
.
Theodore R. Gamble
M. Frederik Smith
John W. Pehle-1
.-._
Henrietta S. Klotz
.
W. N. Thompson
Charles S. Bell...
Charles R. Schoeneman^
Theodore F. Wilson
Elmer L. Irey
Charles Schwarz
William T. Heffelfinger
Edward D. Batchelder
Frank F. Dietrich
Francis C. Rose
F. A. Birgfeld
Denzil A. Right...
Gabrielle E..Forbu.sh

OFFICE OF T H E SECRETARY
Secretary of the Treasury.
U/nder Secretary of the Treasury.
Assistant Secretary of the Treasury.
Assistant Secretary of the Treasury.
Fiscal Assistant S,ecretary of the Treasury.
. .
Assistant to the Secretary.
Assistant to the Secretary.
.^
,
Assistant to the Secretary.
Assistant to the Secretary.
•
Special Assistant to the Secretary.
Administrative Assistant to the Secretary.
,._- Technical Assistant to the Secretary.
Technical Assistant to the Secretary.
Director of Personnel.
Chief Coordinator, Treasury Enforcement Agencies.
Director of Public Relations.
Asr^iistant to the Under Secretary.
Executive Assistant to the Fiscal Assistant Secretary.
Executive Assistant to the Fiscal Assistant Secretary.
Executive Assistant to Assistant Secretary.
Chief Clerk.
Superintendent of Treasury Buildings.
Chief, Secretary's Correspondence .Division.

OFFICE OF T H E GENERAL COUNSEL
Randolph E. Paul
General Counsel.
N. O. Tietjens
1
Assistant General Counsel.
Joseph J. O'Connell, .Tr
Assistant General Counsel.
Thomas J. Lynch...
Assistant General Counsel.
Eugene F. Roth..
Assistaiit General Counsel.
Ansel F. Luxford...!
Assistant General Counsel.
Lehman C. Aarons.
Assistant to the General Counsel.
Samuel Klaus.
Special Assistant to the General Counsel.
David J. Speck
:
- Special Assistant to the General Counsel.
Lawrence S. Lesser
.......
..._ Special Assistant to the General Counsel.
John P . Wenchel...
.
.
Chief Counsel, Bureau of Internal Revenue,
Robert Chambers
Chief Counsel, Bureau of Customs.
Theodore W. Cunningham
Chief Counsel, Bureau of the Public Debt.
Josiah E. DuBois.
- - -.
Chief Counsel, Foreign Funds Control.
Alfred L. Tennyson
Chief Counsel, Bureau of Narcotics.
DIVISION OF RESEARCH AND STATISTICS
Director of Research and Statistics.
Assistant Director.
Assistant Director.
Assistant Director (Government Actuary).
Assistant to .the Director.
-.
Administrative Assistant to the Director.
Librarian.

George C. Haas...
Henry C. Murphy...
Al F. O'Donnell
Russell R. Reagh
Anna M. Michener
Eldon B. Smith
Isabella S. Diamond

DIVISION OF M O N E T A R Y RESEARCH
Director of Monetary Research.
Assistant Director.
Assistant Director.
Assistant Director.
--- Assistant Director.

Harry D. White
Harold Glasser.-.
Edward M. Bernstein.
Norman T. Ness...
William H. Taylor

DIVISION OF TAX RESEARCH
Roy Blough.

- Director of Tax Research,

Louis Shere..

-

Assistant Director.

OFFICE OF T H E TAX LEGISLATIVE COUNSEL
Stanley S. Surrey..
Frederick C. Lusk
Robert W. Wales
John W. Pehle
Orvis A. Schmidt
A. U. Fox
.
Ward Stewart
Michael L. Hoffman




Tax Legislative Counsel.
Assistant Tax Legislative Counsel.
Assistant Tax Legislative Counsel,
FOREIGN FUNDS CONTROL
Director of Foreign Funds Control.
Assistant Director (Enforcement),
-- Assistant Director (Licensing).
Assistant Director (Administrative Services).
Assistant Director (Field Operations).

PRINCIPAL ADMINISTRATIVE AND STAFF OFFICERS

XXI

WAR FINANCE DIVISION
Theodore R. Gamble..
John B, McNamara
Edward B. Hall
Robert W. Coyne
Charles W, Adams
Vincent F. Callahan
James L. Houghteling
Harriett W, Elliott

National Director.
Assistant to the National Director.
Assistant to the National Director.
. . . Assistant to the National Director.
Administrative Officer.
.Director, Press, Radio, and Advertising Division.
Director, National Organizations Division.
Women's and Education Divisions.

.

BUREAU OF THE PUBLIC DEBT
William S. Broughton
Edwin L. Kilby.
Ross A. Heft'elfinger
H. F. Ziegenfus-.
Eugene W. Sloan
Edward G. Dolan
Byrd Leavell
Marvin Wesley
Melvin R. Loafman
Maurice A. Emerson
Lemuel W. Owen

Commissioner of the Public Debt.
Assistant Commissioner of the Public Debt.
Deputy Commissioner of the Public Debt.
Assistant-to the Commissioner.
Deputy Commissioner in Charge, Chicago 0ffice.
Register of the Treasury.
Assistant Register of the Treasury.
Chief, Division of Loans and Currency.
Chief, Division of Public Debt Accounts and Audit.
Chief, Division of Paper Custody.
Chief, Division of Savings Bonds.

'.
.

.

.

BUREAU OF ENGRAVING AND P R I N T I N G
Alvin W. Hall
Clark R. Long...
Thomas F, Slattery...

'.

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

Edward F. Bartelt,
Robert W. Maxwell
Joseph Greenberg
Gilbert L. Cake
Stephen P. Gerardi
Guy F. Allen
L. L. Collie
B. M. Mulvihill
Harry R. Schwalm
Eugene P, O'Daniel.*.

. Commissioner of Accounts.
Assistant Commissioner of Accounts.
Assistant Commissioner of Accounts.
Chief Accountant.
Executive Assistant to the Commissioner.
Chief Disbursing Officer, Division of Disbursemen
Chief, Division of Bookkeeping and Warrants.
Chief, Division of Deposits.
Chief Examiner, Section of Surety Bonds.
Chief, Section of luvestments,

BUREAU OF THE COMPTROLLER OF THE CURRENCY
Preston Delano
Cyril B. Upham
R. B. McCandless.:
L. H. Sedlacek
W, P, Folger.

'.
.

Comptroller of the Currency.
Deputy Comptroller.
.Deputy Comptroller.
Deputy Comptroller.
Chief National Bank E.xamincr.

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
Grover C. Emerson
Bernard A. Hayden..

Treasurer of the United States.
Assistant Treasurer.
Assistant to the Treasurer.
Administrative Assistant to the Treasurer.
Staff Assistant to the Treasurer.
Chief, Administrative Division.
BUREAU OF NARCOTICS

Harry J. Anslinger
Will S. Wood
.
Malachi L. Harney.

i

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

BUREAU. OF INTERNAL REVENUE
Robert E. Hannegan
Harold N. Graves
Eldon P. King
Timothy C. Mooney
George J. Schoeneman
D. Spencer Bliss..
Stewart Berkshire.
Archie D. Burford
A. R. Marrs
W. H. Woolf

Commissioner of Internal Revenue.
Assistant Commissioner.
Special Deputy Commissioner.
.Deputy Commissioner,
Deputy Commissioner.
.Deputy Commissioner.
Deputy Commissioner.
.Deputj'^ Commissioner.
._._. Head, Technical Staff.
Chief, Intelligence Unit.
BUREAU OF CUSTOMS

W. R.Johnson...
Fra^k Dow
E. J. Shamhart
A.S.Johnson
Glenn H. Griffith




Commissioner of Customs,
Assistant Commissioner of Customs.
Deputy Commissioner,
Deputy Corami.ssioner.
Acting Deputy Commissioner.

,

XXII

PRINCIPAL ADMINISTRATIVE AND STAFF OFFICERS
BUREAU OF T H E M I N T

Nellie Tayloe Ross
Leland Howard.

Director of the Mint.
Assistant Director.
P R O C U R E M E N T DIVISION

Clifton E. Mack
A.J.Walsh-.
Thomas F, Murphy
Robert LeFevre
George Landick, Jr

Director of Procurement,
Deputy Director,
Dei)uty Director.
Assistant to the Director,
Assistant to the Director,

•-

U N I T E D STATES SECRET SERVICE
Frank J. Wilson.James J. Maloney.--.
Laurence E. Albert
Walter S. Bowen
Michael ^ . Reilly

'.

Chief, United States Secret Service.
Assistant Chief,
Staff Assistant. '
Chief Clerk.
Supervising Agent (White House Detail).

•

•

.

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,
F. A. Birgfeld, Vice Chairman.
M. E. Slindee.
Guy C. Hanna, Chairman.
Hessel E. Yntema.
Frederick H, Hurdman.




Charles S. Bell.
T.F.Wilson.
George H. Jones, Secretary.
C O M M I T T E E ON PRACTICE

.-. .

•

George E. Cleary.
E. B. Van Veen, Attorney for the Government.
•
.




DEPARTMENT November 15. 1943
OF THE

TREASURY

THE SECRETARY
OF THE
TREASURV

HE UNDER SECRETARY

GENERAL COUNSEL
FOR THE
TREASURY




A S S I S T A N T SECRETARy

A S S I S T A N T SECRETARY
I N . C H A R G E OF
I N T E R N A L REVENUE
AND PROCUREMENT

ASSISTANT

ASSISTANT TO
THE
SECRETARY

TO

SECRETARY

OFFICE OF THE
LEGISLATIVE
COU^^SEL

B U R E A U OF
INTERNAL
REVENUE

COORDINATOR
O F TREASURV
LAW ENFORCEMENT

B U R E A U OF

DIRECTOR
OF R E S E A R C H
XND S T A T I S T I C S

OFFICE O F T H E
C O M P T R O L L E R 01
THE CURRENCY

ADMINISTRATIVE
ASSISTANT T O THE
SECRETARY

SECRET
PUBLIC

O F F I C E OF T H E
R E A S U R E R OF T H t
UNITED STATE*

D I V I S I O N OF P U B L I C
DEBT A C C O U N T S
AND AUDIT

D I V I S I O N OF
BOOKKEEPING
AND WARRANTS

n

DIVISION OF
RESEARCH
INO S T A T I S T I C S

OS

CHART

1.

I

TO

SECRETARY

N A T I O N A L DIRECTOR
WAR FINANCE
DIVISION

SERVICE

DEBT

1
D I V I S I O N OF
MONETARY
RESEARCH

ASSISTANT

OF F I C E OF
OF
T HE T R E A SURY

O F F I C E OF •
SUPERINTENDENT OF
TREASURV BUILDINGS

ANNUAL REPORT ON THE FINANCES
TREASURE DEPARTMENT,

WashingtoUj D. C , January 10^ 1944SIR:

I have the honor to make the following report on the finances of the
Federal Government for the fiscalyear;ended June 30, 1943.
This was the first complete fiscal year of our participation in the
war. I t was a year of rapid transition of the economy from a peacetime to a wartime basis. The major phases of this transition were
completed by the end of the fiscal year, so that the accounts of the
Federal Government for the fiscal year 1944 will be the first to reflect
the full impact of the war on our economy.
This seems a fitting time, therefore, to review the finances of the
Federal Government thus, far in the war, to assess their significance
in the whole scheme of the war economy, and to consider what shape
they should take for the remainder of the wartime period.
, The table on page 2 summarizing the Federal finances shows the
receipts and expenditures of the Federal Government for the fiscal
years 1940 thi^ough 1943, and the estimated receipts and expenditures
for the fiscal years 1944 and 1945. The figures on expenditures
•shown in the table include both budgetary expenditures and net outlays made by the Treasury for the operation of Government corporations.
The fiscal year 1940, the first fiscal year included in the table,
was the last before the commencement of the defense program. The
estimates for the fiscal 3^ears 1944 and 1945 included in the table are
from the Budget of the United States Governm.ent for the fiscal year
1945. The Budget estimates of both receipts and expenditures
assume—as a basis for conservative fiscal planning—the continuation
of the war through the fiscal year 1945; and the estimates of receipts
are based on jDresent tax law.
War expenditures, the figures in the table show, will have increased
over 50 times, from $1.7 billions in the fiscalyear 1940 to an estimated
$92.0 billions in the fiscal year 1944; while during the same period
total Federal expenditures w^ill have increased" a little over 10 times,
from $9.3 billions to.$99.3 billions.
The increase in Federal receipts during this period, while lagging
behind the increase in expenditures, is itself phenomenal. Federal
receipts will have increased more than sevenfold, from $5.4 billions to
$41.2 billions, between the fiscal years 1940 and 1944.




1

REPORT OF THE. SEiORETARY OF THE TREASURY
Summary of Federal finances, fiscal years 1940 through 1945^
[In billions of dollars]
Item

1940

1941

1942

1944

1943

Actual
A. E x p e n d i t u r e s :
1, W a r :
a. B u d g e t a r y
b . G o v e r n m e n t corporations 2
0,

Total

Estimated

1,7

6,3

26.0
2.3

72.1
3.0

88.5
3.5

88.2
1.8

1.7

-

2, Other:
a Interest on t h e p u b l i c d e b t
b . Refunds of taxes a n d customs, including excess profits tax refund b o n d s . . .
c. Veterans' pensions a n d benefits
:..
d. Other b u d g e t a r y expenditures
e. G o v e r n m e n t corporations ^
f.

1945

6.7

28.3

75.1

92.0

90 0

1.0

-

3. Total expenditm'es . .
B . Receipts *

.

. .

2.7

3.8

' 4^6

,1
,6
3.6
-1.5

.4
.9
3.5

1,8
1.3
3.0

7.1

5.9

4.6

7.3

9.8

9.3
5,4

C , Excess of expenditures

1.8

.1
.6
4.5
-.4

. 7.6

.-

1.3

13.8
7.6

34.2
12.8

79.7.22.3

99.3
41.2

99.8
40.8

3.9

Total

1.1

.1
.6
5.7
.3

6.2

21.4

57,4'

58,1

59.0

X

- - 2

(*)

NOTE,—Figures are rounded to the nearest tenth of a billion and will not necessarily add to totals,
* Less than $50 millions.
1 Figures ai-e on the basis of classifications appearing in 1945 Budget Message, They include net expenditures of Government corporations and the totals are not, therefore, the same as the figures in other tables
in this report. They exclude statutory debt retirements and trust funds.
2 Includes only Treasury outlays for the war activities of the Reconstruction Finance Corporation and
its subsidiaries. Figures are excess of expenditures over receipts,
3 Comprises principally Treasury outlays for Commodity Credit Corporation, Home Owners' Loan Corporation, and nonwar activities of Reconstruction Finance Corporation and its subsidiaries. Figures are
excess of expenditures over receipts. Negative figures indicate excess of receipts.
4 Net budgetary receipts, i. e,', total receipts less net appropriation to Federal old-age and survivors insurance trust fund

A rough measure of the increasing impact of Federal operations on
the national economy may be made by relating expenditures and
receipts to the total production of goods and services, known as gross
national product. This is done in the following table.
Proportion of gross national product represented by expenditures, receipts, and
excess of expenditures of the Federal Government, fiscal years 1940 through 1945
Gross
national
product
(in billions)

Fiscal year

P r o p o r t i o n represented b y -

^
•
--

--

-

$93
106
133
172
196
198

Federal
receipts

Percent
1940
1941
1942
1943
1944
1945

Federal expenditures

Percent
10
13
26
46"
51
50

Excess of
expenditures
Percent
6
7
10
13
21
21

4
6
16
33
30
30

NOTE.—Gross national product data are estimates by the Department of Commerce for 1940 through
1943 and by the Treasury Department for 1944 and 1945. Other data used in computing percentages are
taken from preceding table. Proportions are rounded to nearest percent. For a more extended analysis
of the gross national product and its relation to Federal operations in the fiscal year 1943, see p. 66.




REPORT OP THE SEORETARY OF THE TREASURY

3

The figures on expenditures, receipts, and excess of expenditures
used in the above table are the same as those used in the table that
precedes it. The figures on gross national product are from the Department of Commerce except the estimates lor the fiscal years 1944
and 1945, which were made by the Treasury.^ These estimates
reflect the Budget estimates for Federal operations and, like the
Budget, assume the continuation of the wuv thi'Ough June 1945.
As shown in the above table, the gross natioaal product will have
doubled between the fiscal years 1940 and 1944. , Most of this change
reflects aa increase in actual physical production, revealing a productivity of the American industrial and agricultural economy which
had hitherto been suspected only by the most optimistic. I t is this
achievement of industrial and agricultural America which has made
possible the record attained to date both in fighting and in financing
the war.
^ The expansion in the fiscal activities of the Federal Government has
been enormous even when expressed in terms of the rapidly increasing
gross national product. As shown in the table, total Federal expenditures will have increased from 10 percent of the gross product in the
fiscal year preceding the commencement of the defense program to an
estimated 51 percent in the fiscal year ending next June; while during
the same period the receipts of the Federal Government will have
increased from 6 to 21 percent of the gross product.
Need for additional taxes
The sevenfold growth in the receipts of the Federal Government
will have been achieved by the expansion of our tax system, under
five successive defense and war revenue measures already passed by
the Congress, each of which has acted upon a rapidly increasing
national product. We have needed much more revenue than even
these increases in taxes have produced but an adequate level of wartime tax Tevenue can be reached only by stages. I t is difficult to
step up taxes from a peacetime level fast enough to keep pace with
wartime financial requirements. The successive adjustments which
taxpayers must make to wartime taxes should be as large and rapSd
as feasible but not so drastic as to endanger the stability and productivity of the economy.
I t is very important, however, that an intermediate stage of increased taxes should not be confused with the final goal for wartime
taxation. We have by no means reached a level of taxation which
can be considered adequate for the remainder of the war period. The
Federal Government is now absorbing, principally for war purposes,
1 Further information on the relationship of the gross national product to Federal fiscal operations is
presented in the section on "Sources of funds for Federal borrowing," which begins on p. 66. Certain minor
adjustments are made to the figures on Federal receipts and expenditures in that section in order to put
them on the same technical basis throughout as the gross national product data, but these adjustments are
orhitted in the present brief statement. The general relationships indicated in the table are valid, however,
since the adjustments are minor in magnitude."




4

REPORT OF T H E SECRETARY OF T H E TREASURY

about one-half of the gross national product; but is receiving less
than one-quarter of the amount of this product in Federal taxes.
This situation can hardly be defended as the final goal of a sound
program of war finance.
It is imprudent not to hold do^vn the growth of the national debt by
levying as large an amount in taxes as possible while this can be done
without risk bf unemployment of men or resources.
I t is dangerous fiscal policy to continue the pressures on price ceilings and the risks of inflation involved in the present excess of Federal spending over Federal taxes, equal to more than one-quarter of
the gross national product.
Finally, it is manifestly unfair to our men in the armed forces that
we should postpone, until their return, the allocation of any larger
proportion of the war cost than is absolutely necessary.
I recognize that the war cannot be wholly, or even nearly, paid for
by current taxation. Economic incentives must be provided for
workers to p u t forth their best efforts in hard gruehng work, and for
businessmen to strain every nerve to operate their businesses efficiently. Within these limits, however, taxes can be advanced. This
should be done as rapidly as possible because the war will not wait
and risks of inflation will not wait.
How far we are from the economic hmit of Federal taxation is
shown by the fact that one of the major economic problems now confronting the country is that of ^^exces$'^ consumer spending power—
i. e., spending power in excess of the available supply of civilian goods
at present prices. This ^ excess^' spending power is created by the
^
excess of Federal expenditures over Federal taxes; and constitutes,
on the one hand, a thi'eat of inflation and, on the other, an evidence
of ability to pay additional taxes.
The taxes needed to round out a sound program of war finance
should be levied in accordance with the principle of ability to pay.
This does not necessarily imply sole reliance on any particular type
of tax. I t is my sincere hope, however, that all of the needed revenue, will be raised by levying taxes upon those best able to bear them
and that none of it will be raised by the imposition of taxes on the
necessities of life.
I am hopeful too that taxpayers can be substantiall}^ relieved from*
the expense and annoyance of complying with an unduly complex
tax law. Our taxes must be made simple and easy to understand.
Next to an adequate tax system, our greatest immediate need is tax
simplification.
,
The tables on page 2, showing Fed.eral receipts and experiditures,
and their relationship to the gross national product, indicate that no
substantial change is to be expected in the proportion of the gross
national product absorbed b}^ Federal taxation in the fiscalyear 194,5,



REPORT OF THE SECRETARY OF THE TREASURY

5

as compared with the fiscal year 1944. The estimates of receipts in
these tables, as previously noted, assume, among other things, a continuation of the tax laws existing on December 31, 1943. These estimates are not likely to be substantially altered by the taxes levied in
the revenue bill now pending before the Congress. I t is my hope,
however, that actual revenues in the fiscal year 1945 will be materially
higher than indicated in the tables because the Congress will see fit
in subsequent legislation to strengthen the record of progress already
made in sound war finance by increasing Federal taxes to a level more
commensurate with the amount of the national product and the
country^s aggregate ability to pay.
Principles oj wartime borrowing
The economic limits on the proportion of the total war cost which
can ultimately be met from current taxation, taken together with the
time which is required even under the most favorable circumstances to
increase the yield of taxation to the amount ultimately feasible, have
combined to produce a huge Federal deficit thus far in our participation in the war. In order to finance this deficit and to increase the
working balance in the Treasury to a level commensurate with the
wartime rate of expenditures, it was necessary to increase the interestbearing public debt (including guaranteed issues) by $92 billions
during the three-year period ended June 30, 1943.
I n devising ways and m.eans of raising this huge sum, the Treasury
has been guided by the underlying principles that (1) the necessary
funds should be raised iri such a manner as to minimize the risk of
inflation, (2) the liquidity of the Nation's financial institutions should
be maintained and increased, thereby placing them in a strong
position to confront the problems of the post-war period, (3) small
investors in Government securities should be protected kgainst loss,
and (4) the cost of financing the war should be kept at a reasonable
level.
In accordance with its objective of conducting its borrowing operations in such a way as to minimize the risk of inflation, the Treasury
Department on May 1, 1941—more than 6 months before Pearl
Harbor—introduced, and mitiated a popular sales campaign for,
three new issues of savings securities-r-Series E, F, and G savings
bonds. In initiating the sales campaign for these securities, the
Treasury was fortunate in being able to build upon the firm foundation
of the popular confidence in and familiarity with United States savings
bonds which had been gradually growing ever since their introduction
in 1935.
Immediately following the entrance of the United States into the
war, the Treasury Department commenced to emphasize the development of the payroll savings plan for tjie pmxhase of Series E savings



b

REPORT OF T H E SE.CRETARY OF THE TREASURY .

bonds. Bonds sold in this manner absorb consumer purchasing power
directly at its source and, consequently, have a maximum impact
upon consumer spending. The payroll savings plan, therefore, has
proved an extremely important weapon m the fight against inflation.
An account of its progress to the close of the fiscal year is given beginning on page 46 of this report.
In addition to the payroll savings plan for the sale of Series E bonds,
the Treasury Department^commencing with the campaign for the
popular sale of all series of savings bonds inaugurated in May 1941,
and already noted—initiated and maintained continuous campaigns
for the sale of other types of Government securities, especially tax and
savings notes. In the fall of 1942, it was decided to supplement
these continuous sales campaigns by special periodic efforts. In
accordance with this decision, the^First and Second War Loan drives
were conducted during the fiscal year, and were notably successful.
A discussion of these drives is given beginning on page 36 of this
report.
About $52 billions of the total increase in the public debt during
the three fiscal years ended June 30, 1943, was absorbed by nonbank
investors. The remaining $40 billions was absorbed by commercial
and Federal Reserve Banks. A large part of the absorption by banks
was necessary to provide for the increase, in circulating medium required by the expanding wartime economy. A large portion of the
remainder was necessary because markets for Government securities
outside of the banking system, in the nature of the case, require time
for their development. The Treasury is working continuously to expand these markets, however, and I hope to report a larger proportion
of nonbank absorption of the increase in the public debt during the
current fiscal year.
In accordance with the principle of maintaining the liquidity of
the banking system, about half of the $40 billions of Government
securities sold, on net balance, to the banking system during the 3
years ended with the fiscal year 1943 consisted of bills and certificates
with a maturity not exceeding 1 year; and, since February 1942, the
Treasury Department has offered to commercial banks, for the investment of their demand deposits, no securities with a maturity on
original issuance longer than 10 years. These measures have preserved and increased the liquidity of the banjdng system, and have
placed it in a strong position to deal with the problems of the postwar period.
The third of the principles which, have governed Treasury wartime
borrowing has been the protection of the interests of the small investor. The Treasury Department has considered itself the, trustee
for the inexperienced investor who purchases Government securities
primarily'to help his country iii its time of stress, and places his
faith in his Government 'that the securities he purchases are sound



REPORT OF THE. SECRETARY OF THE TREASURY

7

investments and are designed with a view to his own requirements.
I t is with this in mind that the Treasury Department's appeal to
small investors has been confined to Series E savings bonds, which
are nonnegotiable and payable on demand 60 days after issue date.
They are, hence, guaranteed against fluctuations in market value.
Their investment yield if held to maturity—2.9 percent—is the highest
obtainable on any United States Government security.
Series E savings bonds are thus especially advantageous to the small
investor, as compared with marketable bonds, since E bonds afford
him absolute protection against fluctuations in market value. I
believe that the view sometimes expressed that the interest of the
Government is otherwise and would be better served by marketable
securities of fixed terms is based upon an incorrect analysis of the real
problem which is presented by securities of either type when held by
small investors. This problem is that the securities may be disposed
of by their owners and the proceeds spent for consumers' goods and
services at a time when such goods and services are scarce. I t does
not matter, as far as the main issue is concerned, whether the securities
so disposed of are presented directly to the Treasury for redemption
or are sold in the market. In either case, the expenditure of the
pioceeds of the securities would increase the aggregate demand for
goods and services and so would tend to increase the price level if it
occurred during a period when goods and services were scarce—or to
increase production and employment if it occurred duiing a time when
goods and services were in supply. In either ^ case also, the effect
of the disposal of the securities by their original owners would be
either to increase the amount of Government securities held by banks
or with bank credit or to offset in whole or in part a reduction in the
amount of securities so held which would otherwise have occurred.
On the broad economic issue, therefore, the advantages and disadvantages of selling nonnegotiable and marketable securities, respectively, to small investors appear to be the same. On two subsidiary
counts, however, the case is decidedly in favor of nonnegotiable
securities. These counts are: (1) Nonnegotiable securities with
guaranteed redemption values are not subject to the panicky liquidation which is likely to occur among small holders of marketable securities in the event of a decline in their market value, and so are not
likely to be disposed of until the holder feels an actual need for the use
of their proceeds, and (2) when nonnegotiable securities are redeemed,
they can be refunded in an orderly manner through the issuance of the
types of new securities best fitted to the market at that time. In
this respect, nonnegotiable securities are much superior from a
technical point of view to marketable securities which, under similar
circumstances, would dribble irito the market in small blocks—in
p^rt tlirough irregular channels where the original holdeis may not
have received full value,



8

REPORT OF THE SEiCRETARY ^ OF THE TREASURY

I t seems to me, therefore, that the contrast sometimes made between the interest of the whole economy and the interest of the
individual investor in this respect is a false one—both interests are
better served by the issuance of nonnegotiable securities, such as the
present savings bonds, than they would be by the issuance of marketable securities of fixed term.
. "
Finally, we have endeavored to finance the war at a reasonable
level of interest rates. We have received in this endeavor the wholehearted-cooperation of the Federal Reserve System, the commercial
banks, and the investing public generally; and I believe thatr the results which have been, obtained are a tribute to the democratic rnethod
of war finance and will contribute immeasurably to the stability of
the economy in the post-war period.
'
.
On June 30, 1940, at the commencement of the period of defiense
finance, the average-rate of interest on the entire public debt. (including guaranteed issues) amounted to 2.51 percent; by June 30.,
1943, this average rate on the entire debt had fallen to 1.98 percent.
The average rate on all new borrowing during this period amounted
to 1.73 percent, despite the fact that over 95 percent of this borrowing—all of it since February 28, 1941^had been accomplished by the
issuance of taxable securities.. This compares with an average rate
of 4.25 percent on borrowing during the last World War, when all of
the securities issued were either wholly or partially tax-exempt.
There follows a detailed-discussion of receipts and expenditures^
public debt operations^ taxation and monetary developments, and
other Treasury operations during the fiscal year.
RECEIPTS IN GiENERAL AND SPECIAL ACCOUNTS

The fiscal year 1943 was the third consecutive year in which receipts
of the Federal Government rose to a level exceeding that of any
previous year in the Nation's history. In the fiscal year 1941, under
the impetus of the national defense program, net receipts reached, a
then unprecedented level. In the fiscal year 1942, which, was marked
by the shift from a defense to a Avar econoniy, net receipts exceeded
those of the preceding fiscal year by 68,2 percent. In 1943, the first
full fiscal year to reflect the economic eft'ect of a period of intensive
war activity, net receipts, again i.ncreased,. this time by 74.1 percent
over those of the preceding fiscal year. The changing trend in these
receipts in. the fiscal years 1937 tlirough 1943 is pictured, by major
sources, in the chart on page 9.
The increase in receipts in the fiscal year 1943 is attributable to the
generally higher incomes of taxpayers, to an attendant increase in
-expenditures for taxable commodities, and to the imposition of,new
taxes and of higher tax rates. The Revenue Act of 1942,increased
the tax on corporation incomes by raising the surtax and the excess



REPORT OF T H E SECRETARY OF T H E TREASURY

RECEIPTS,! CLASSIFJED BY MAJOR

SOURCES

, FISCAL YEARS 1937 T H R O U G H 1943

CHART

2.

1 Excludes trust account receipts and'net appropriation to the Federal old-age and survivors Iiisnrance
trust fund.

542890—44

3




10

REPORT OF THE. SEiCRETARY OF T H E TREASURY

profits tax rates. Individual incomes were subjected to higher taxes
by means of lowered personal exemptions and credits for dependents,
by increased normal and surtax rates, and by the introduction of the
Victory tax. The Revenue Act of 1942 also imposed higher excise
taxes on a number of commodities and brought additional commodities
into the taxable group.
The fuU effect of the provisions of the Revenue Act of 1942 was not
reflected in the 1943 receipts, however. The act was approved on
October 21, 1942, almost 4 months after the opening of the fiscal year.
With respect to a number of the taxes, changes made by the law were
not effective until subsequent dates. In addition, statutory lags in
the collection of taxes, particularly in the case of the income, estate,
and gift taxes, served to reduce the portion of the fiscal year 1943
receipts which was affected by the act. However, an important part
of the increase in receipts, as compared with those of the preceding
fiscal year, was attributable to this legislation.
A comparison of receipts, by major sources, in the fiscal years 1942
and 1943 is presented in the table following, and a more detailed
comparison is contained in table 6 on page 501 of this report.
Receipts by major sources, fiscal years 1942 and 1943^
[Dollars in millioris]

Source

Internal revenue:
Income and excess profits taxes:
Corporation:
Income tax, current
_
Excess profits -Declared value excess profits tax

1942

1943

$2, 764.0 $4,137.0
1, 618. 2 6,063.9
82.4
52.2

Increase or decrease Percent of
(~), 1943 over 1942 total increase in
receipts
from general and
special
Amount Percent accomits,
1943 over
1942

$1,373.0
3,445.7
30.2

49,7
212.9
57.9

14.1
35.5
.3

Total current corporation 2 . .

4, 434,4

9,283.3

4,848.9

109.3

49.9

Individual:.
Income tax, current
Withholding at source on salaries and
wages

3,108.0

5,771.0

2,663,0

85.7

27.4

686.0

686.0

6,457.0

3,349.0

107.8

34.6

383.9
172.9
1.8

78,6
18,1
-2.6

25.7
11.7
-59,1

Total current individual . .
Back taxes:
Corporation income
Individual income
• Unjust enrichment t a x . .
Total back taxes^..

3,108.0
305,3
154.8
4.4

.

7.1

558.6

94,1

20,3

8,006,9

16,298.9

8,292.0

103,6

-46,4

-205. 2

-158,8

Total income and excess profits taxes
(daily Treasury statement basis)._

"^

464.5

Total income and excess profits taxes
• (collection basis)
•_
Adjustment to daily Treasury
statement

7,960,5

16,093.7

8,133.2

Footnotes st end of table.




1.0

[ii
1.0
85.3
-1.6

102.2

83.7

11

REPORT O F . T H E SEORETARY OF T H E TREASURY
Eeceipts by ma jor. sources, fiscal years 1942 and 1943^—^^Continued

1942

Source

Internal revenue—Continued.
Miscellaneous internal revenue:
Capital stock tax
Estate tax
Gift tax
.
Liquor taxes *
Tobacco and products taxes '
Stamp taxes

-

Manufacturers' excise taxes:
Gasoline
_
Automobiles, trucks, tires, tubes, and
parts or accessories
Electricalenergy.
_ _.
Lubricating oils
Another*
Total manufacturers' excise taxes....
' Retailers'excise taxes.-—_1

Increase or decrease Percent of
( - ) , 1943 over 1942
total increase in
receipts
from general and
special
Amount Percent accounts,
1943 over
1942

-

Miscellaneous taxes:
Telephone, telegraph, radio and cable
facilities, etc
Local telephone service
.
Transportation of persons
Transportation of property
Admissions
.
Use of motor vehicles and boats
Sugar t a x '
All other, including repealed taxes * 6_ _
Total miscellaneous taxes..
Total miscellaneous internal revenue
(collection basis)
Adjustment to daily Treasury
statement
Total'miscellaneous internal revenue
(daily Treasury statement basis)..
Employment taxes:
Employment by other than carriers:
Federal Insurance Contributions Act..
Federal Unemployment Tax Act....._
Total
Carriers and their employees
Total employment taxes
_.
Total internal revenue
Railroad unemployment insurance contributions..
Customs
'.
Total internal revenue taxes, railroad unemployment insurance, and customs
Miscellaneous receipts
Total receipts, general and special accounts..
Deduct: Net appropriation for Federal old-age and
survivors insurance. trn.«;t fnnd
Net receipts, general and special accounts . . .

1943

$281.9
340.3
92.2
1,046.9
780.8
41.7

$328. 8
414.5
33.0
1,423.6
923.9
45.2

369,6

288,8

-80.8

-21.9

—.8

180,5
50,0
46,4
121,8

44,4
48.7
43.3
79.0

-136.1
-1.3
-3.1
-42.8

-75.4
-2.6
-6.7
-36.1

—1.4

768.3

•' 504.3

-264.0

-34.4

-2.7

80.2

165.3

85.1

106.1

.9

48.2
26,8
21.4

• 43,0
40,2
65,7
82.6
39.6
73.8
-14,6
-2.6
327.4

89,2
160.0
307.0

115.0
72.9
68.2
52.9
405.4

91.2
67.0
87.1
82.6
154.5
146.7
53.6
50.3
732. 8

101.2
-21.4
-4.9
80.8

,4
4
.7
9
.4
.8
—.2

3,837.7

4, 571.1

733.4

19.1

+9.4

-18.5

-27.9

3,847.1

4, 552. 6

705,6

18.3

7,3

. 895.6
119.9
1,015.6
" 170.0
1,185.6

, 1,130. 5
158. 4
1, 288.9
208.8
1, 497. 7

234.9
38,5
273,3
38.8
312.1

26.2
32.1
26.9
22.8
26.3

2.4
.4
2,8
.4
3,2

12, 993.1 22,144.0
8.5
10.3
388.9
324.3

9,150.9
L8
-64.6

70.4
. 21.2
-16.6

94,2
« - 7

13,390. 5 22, 478. 5
277.4
906.1
13, 667. 9 23,384. 6

9,088. 0
628.7
9,716.7

67.9
226.6
71.1

93. 5
6.5
100,0

1,103.0
868.9
12, 799.1 22, 281. 6

234.1
9, 482. 5

26.9
74.1

$46,9
74.2
-59.2
376.6
143,1
3.5

16,6
21,8
-64.2
36,0
18.3
8,4

(')

5
.8
— 6
3.9
1 5

(8)
(3)

—.4

34.T
(3)

34
7.6
-.3

NOTE,—Dollar figures are rounded to nearest tenth of a million and will not necessarily add to totals.
1 The detail of income taxes and miscellaneous internal revenue taxes is on the basis of internal revenue
collections with totals adjusted to the basis of the daily Treasury statement. Employment taxes, railroad
unemployment insurance contributions, customs, and miscellaneous receipts are shown on the daily Treasury statement basis. General and special accounts are combined,
2 Includes back excess profits and declared value excess profits taxes,
3 Less than 0.05 percent.
4 Excludes back corporation excess profits and declared value excess profits taxes.
« Collections for credit to trust funds are not mcluded.
6 "All other, including repealed taxes" includes tobacco floor stocks taxes (receipts under 1940 and prior
acts); narcotics, including marihuana and special taxes; National Firearms Act; hydraulic mining tax; and
all other repealed taxes not reinstated by the Revenue Act of 1942.




12

REPORT OF TFIE SECRETARY OF THE TREASURY

Total receipts in general and special accounts in the fiscal year 1943
amounted to $23,384.6 millions. Net receipts, after deduction of the
net appropriations for the Federal old-age and survivors insurance
trust fund, amounted to $22,281.6 millions. Corresponding receipts
in the fiscal year 1942 were $13,667.9 millions and $12,799.1 millions.
All major revenue sources except customs contributed to the mcrease of
$9,716.7 millions in total receipts in 1943. Income and excess profits
taxes on corporations provided 49.9 percent of this increase and
income taxes on individuals provided 34.5 percent. In the aggregate,
income and excess profits taxes accounted for an increase of $8,133.2
millions, OT 83.7 percent of the whole increase in total receipts. Other
major sources of revenue contributed to the increase in. these proportions: miscellaneous internal revenue, 7.3 percent; miscellaneous
receipts, 6.5 percent; and employment taxes, 3.2 percent. The
decrease in custoins receipts amounted to $64.6 millions. .
The percentage composition of total receipts by tax sources changed
markedly in the fiscal year'19>43 as compared with that of the^fiscal
year 1942. Income and excess profits taxes, which accounted for 58.^
percent of total receipts in the fiscal year 1942, rose to 68.8 percent of
total receipts in the fiscal year 1943. As a result, the total amount of
revenue derived from all other major tax sources in the fiscal year 1943
represented a smaller percentage of total receipts from all sources than
did the comparable amount in the, fiscal year 1942. Receipts from
miscellaneous internal revenue and employment taxes increased in
absolute amounts but decreased in their ratio to total receipts,from
28.1 and 8.7 percent, respectively, in the fiscal year 1942 to 19.5 and 6.4
percent, respectivel}^, in the fiscal year 1943. The percentage of total
receipts which was derived from miscellaneous receipts rose from 2.0
percent in the fiscal year 1942 to 3.9 percent in the fiscal year 1943
because of the large increase in the absolute amount of revenue from
this source. Eeceipts from customs decreased in amount as well as
in percentage.
In the fiscal year 1943 current corporation income tax receipts from
the corporation normal tax and surtax amounted to $4,137.0 millions.
This is an increase of $1,373.0 millions or 49.7 percent over the $2,764.0
millions received from these sources in the fiscal year 1942. Current
corporation income tax liabilities in respect of incomes of the calendar
year 1941 affected to approximately the same extent the receipts ih
each of the fiscal years 1942 and 1943. Hence, the increase was
attributable principally to higher income levels and increased tax rates
existing in the calendar year 1942 as compared with those in the
calendar year 1940.
Corporation excess profits tax receipts in the fiscal year 1943 aggregated $5,063.9 inillions, an increase of $3,445.7 millions or 212.9 percent; oyei: collections of $1,618.2 millions from this source in the fisc^al



^MORT OF THEI SEIORETARY OF THE TREAStrHY

13

year 1942. The increase was principally attributable to consecutive
increases in corporation incomes (in each of the taxable calendar years
whose incomes contributed to the tax collections in the respective
fiscal years under consideration) and to a higher effective rate of tax
on these incomes. The increase in the eft'ective tax rate resulted from
the broadening of the tax bases and the increasing of the tax rates.
Increases in corporation excess profits tax receipts attributable to
increases in corporation income depend on the relative effects of
changes in liabilities in the calendar years 1940, 1941, and 1942 on
the fiscal year collections.
Receipts of excess profits taxes in the fiscal year 1942 represented
the balance (approximately one-half) of the liability collected in respect of calendar year. 1940 incomes which had not been received in the
fiscal year 1941 and approximately one-half of the liability payable in
respect of calendar year 1941 incomes. The balance of the liabilities
collected in respect of calendar year 1941 incomes appeared in. fiscal
year 1943 receipts which also contained about one-half of the liabilities for excess profits taxes in respect of calendar year 1942 incomes.
Since the calendar year 1942 corporation incomes were very much
larger than those of corporations in the calendar year 1940, and since
an approximately equal portion of the taxes in respect of the iacomes
in the calendar year 1941 appeared in each fiscal yearns receipts, it is
clear that the increase in incomes in the calendar year 1942 as compared with the incomes in the calendar year 1940 was one of the principal factors which augmented the fiscal year 1943 receipts of corporation excess profits taxes.
In addition, a higher effective rate of tax was levied on these
higher incomes. A summary comparison of the pertinent changes in
the law which contribute to this result is as follows: Under the Second
Revenue Act of 1940, which was applicable in general to corporation
incomes earned in the calendar year 1940, the income tax was allowed
as a deduction from adjusted excess profits net income, thus decreasing
the base of the excess profits tax as compared with the law in force in
the succeeding years. Under the Revenue Acts of 1941 and 1942,
which were applicable in calendar years 1941 and 1942, respectively,
the excess profits tax was computed before deduction of the corporation income taxes, thus broadening the excess profits tax base for the
incomes of those years.
Whereas the Second Revenue Act of 1940, under which the liability
for excess profits taxes for incomes in the calendar year 1940 was determined, imposed excess profits tax rates varying from 25 to 50 percent (depending upon the absolute amount of adjusted excess profits
net income), the Revenue Act of 1941 in effect taxed corporations with
respect to 1941 incomes at excess profits tax rates which varied from
35 to 60 percent of their adjusted excess profits net income, depending



14

REPORT OF T H E SEiCRETARY OF T H E TREASURY

upon the absolute amount of such income. The Revenue Act of 1942,
under which the liability for excess profits taxes on corporation incomes
for the calendar year 1942 was determined, imposed a flat excess
profits tax rate of 90 percent, subject to the limitation that the aggregate of the normal tax, surtax, and the excess profits tax could not
exceed 80 percent of the corporation surtax net income, computed
without the credit allowed for the adjusted excess profits net income.
Some alleviation of the impact of the high rates was pr0vi(ied by a
post-war credit, for each taxable year ending after December 31, 1941
(except in the case of a taxable year beginning in 1941 and endhig before July 1, 1942), and not beginning after the date of cessation of hostilities in the present war, of an amount equal to 10 percent of the
excess profits tax. At the election of the taxpayer, the post-war credit
can be taken currently in an amount up to 40 percent of the amount
paid in net reduction of indebtedness, provided this does not exceed
the post-war credit for the taxable year.
The declared value excess profits tax, while classified as an income
tax, is really a companion tax of the capital stock tax which is classified as an excise tax. The declared value excess profits tax applies only
if a corporation fails to declalre its capital stock at a value at least equal
to 10 times the earnings taxable under the declared value excess profits tax. Hence the amount received under this tax depends upon the
accuracy with which corporations predict their earnings.
The time of filing the capital stock declaration, which is used as a
' basis for the declared value excess profits tax receipts m the fiscal year
1943, was postponed from July 31, 1942, to November 28, 1942, by
Public Law 720, approved September 29, 1942. As a result, corporations on a calendar year basis had to estimate their income for only
1 month of the year in the calendar year 1942, whereas in the previous
year, when the timing of the filing of the capital stock tax return was
p()stponed by the Revenue Act of 1941 from July 31, 1941, to October
29, 1941, 2 months' incomes had to be estimated. The 1941 declaration of capital stock valuation which determined the fiscal year 1942
declared value excess profits tax receipts was a 3-year declaration which
could not be revised downward whereas the declaration made in the
calendar year 1942 was for 1 year only.
In spite of the more favorable circumstances prevailing in the declaration of capital stock valuation made in the calendar year 1942,
corporations missed their capital stock valuations which would insure
them against the payment of the declared value excess profits tax by a
wider margin than in the calendar year 1941. Hence, receipts from the
declared value excess profits tax in the fiscal year 1943 totaled $82.4
miUions, an increase of 57.9 percent as compared with receipts of $52.2
millions from this source in the preceding fiscal year.
•.




^ R E P O R T OF T H E SEiCRETARY OF T H E TREASURY

15

Receipts from corporation back income taxes in the fiscal year 1943
amounted to $383.9 millions as against $305.3 miQions in the fiscal year
1942. This represents an increase of $78.6 millions or 25.7 percent.
Current individual income tax receipts of $6,457.0 millions in the
fiscal year 1943 were $3,349.0 millions or 107.8 percent greater than
the $3,108.0 millions received from this tax source in the fiscal year
1942. Included in the fiscal year 1943 receipts from this source, were
some receipts from the withholding at the source of 5 percent of salaries and wages, which were received in the calendar year 1943 at a
payroll period rate in excess of an annual rate of $624. Receipts, in
the fiscal years 1942 and 1943 from income taxes were dependent on
the liabilities in respect of income received during the calendar years
1940 to 1942, inclusive. The tax liability in each of these calendar
years was successively higher. This was due in part to the increased
levels of income in each year over that of the preceding year, and in
part to the higher effective tax rate levied on these incomes as a result of changes in rates and exemptions.
I n the case of the individual income tax the liabilities in respect
of the incomes of a particular calendar year are not collected in equal
proportions in each of the 2 fiscal years affected, more than half of the
calendar year's liability being received in the first six months of the
suc(3eeding calendar year. The portion of receipts based on the liability incurred in respect of the calendar year 1941 incomes which was
collected in the fiscal year 1943 was $1,223.8 millions less than the
portion collected in the fiscal year 1942. The portion of fiscal year
1943 receipts representing liability nicurred in respect of calendar
year 1942 incomes was $3,886.8 millions greater than the fiscal, year
1942 receipts from liability incurred in respect of income of the.calendar
year 1940. Hence, the net increase of ordinary net income tax receipts
in the fiscal year 1943 amounted to $2,663.0 millions. The addition
of withholding tax receipts of $686.0 millions accounted for a total
increase of income tax collections for the fiscal year 1943 of $3,349.0
millions.
Receipts from back taxes on individual incomes amounted to
$172.9 miQions in the fiscal year 1943. This was an increase' of $18.1
millions or 11.7 percent over the $154.8 millions received in the fiscal
year 1942.
Miscellaneous internal revenue receipts were $4,552.6 miUions, an
increase of $705.5 millions or 18.3 percent over receipts of $3,847.1
millions in the fiscal year 1942. Receipts from the taxes in this.categpry, with the exception of the capital stock, estate, and gift taxes,
are excise taxes dependent upon the sale of certain commodities and
services. The net increase in receipts from the excise taxes was, therefore, a further result of the combined effect of higher income levels, inr




16

REPORT OF THE SECRETARY OF THE TREASURY ^

creased tax rates, and the addition of new taxes. As compared with
receipts in the fiscalyear 1942, the receipts from certain taxes such as
gift taxes and manufacturers' excise taxes decreased because of special
circumstances affecting their tax bases. Such decreases, however, were
more than offset by increases in receipts from the other taxes in the
miscellaneous internal revenue classification.
The capital stock tax is in the nature of an insurance payment to
avoid the higher rates of the declared value excess profits tax which
apply when the corporation earnings subject to the declared value
excess profits tax are more than 10 percent of the declared valuation
of the capital stock. Receipts from the capital stock tax totaled
$328.8 mUlions in the fiscal year 1943, an increase of 16.6 percent as
compared with receipts of $281.9 millions in the fiscal year 1942. The
tax rates were the same in both fiscal years so that the increased
collections from this tax represented higher capital stock valuations
on the returns filed on November 28, 1942, as compared with those on
the returns filed on October 29, 1941. This higher declaration resulted
from the estimate, on the part of corporations that their calendar year
1942 incomes would be higher than their 1941 incomes.
Estate tax receipts were $414.5 mUlions in the fiscal year 1943, an
increase of $74.2 mUlions or 21.8 percent over the receipts of $340.3
mUlions in the fiscal year 1942. The increase is attributable in part
to an increase in the general level of property valuation for estate tax
purposes during the periods in which liabUity was incurred, and in part
to the higher rates impbsed by the Revenue Act of 1941 which Were
partially reflected in the fiscal year 1943 receipts. The 15-m6nth
statutory lag permissible in the filing of estate tax returns accounted
for the fact t h a t the higher rates of the Revenue Act of 1941 were lio't
fully effective in the fiscal year 1943 receipts and that rates of the
Revenue Act of 1942 were applicable to only a few of the returns filed
during the fiscal year 1943.
Gift tax receipts of $33.0 mUlions in the fiscal year 1943 were $59.2
mUlions or 64.2 percent less than in the fiscal year 1942. The decrease
may be accounted for by the large number of gifts made in the calendar
year 1941 as compared with the number made m the calendar year
1942. The Revenue Act of 1941, approved September 20,^ 1941, made
the increased estate tax rates efi'ective immediately but provided that
the increased gift tax rates would be effective on gifts made on or after
January 1, 1942. Receipts in the fiscal year 1942, therefore, were
affected by the tax-saving incentive for making gifts in the calendar
year 1941. FoUowing a year of larger gifts because of special incentives, gifts during the calendar year 1942 were lower^ as were the gift,
tax receipts in the fiscal year 1943, even though the higher ^ift tax
rates imposed by the Revenue Act of 1941 were effective.




REPORT OF T H E I S E I C R E T A R Y

OF T H E TREIASURY

17

Receipts from liquor taxes totaled $1,423.5 miUions in the fiscal
year 1943. This amounted to an increase of $376.6 mUlions or 36.0
percent, as compared with the $1,046.9 mUlions received from this
source in the fiscal year 1942, The Revenue Act of 1942 provided for
increases in the rates of tax on sales, beginning November 1, 1942, of
distilled spirits, fermented malt liquors, and wines. These changes,
although they were in effect through only 8 months of the fiscal year
1943, were largely responsible for the increased revenues from these
sources. Receipts from the tax on distUled spirits in the fiscal year
1943 were $781.7 millions.or 36.1 percent greater than the 1942 receipts of $574.3 millions. An increase of 24.4 percent was sho^vn in
the fiscal year 1943 receipts from fermented malt liquors which were
$455.6 mUlions or $89.4 mUlions greater than receipts in the fiscal year
1942. The revenues from wines in the fiscal year 1943, which were
$33.7 mUlions, showed an increase of 40.4 percent over the fiscal year
1942 revenues of $24.0 miUions. Increased consumption of wines as
well as higher Federal excise tax rates contributed to this increase.
Tobacco tax receipts in the fiscal year 1943 were $923.9 mUlions.
This amount was $143.1 millions or 18.3 percent greater than the fiscal
year 1942 receipts of $780.8 millions. The higher tax rates imposed.by
the Revenue Act of 1942 were in effect through only 8 months of the
fiscal year 1943 and therefore did not fully contribute to the fiscal year
receipts. The largest source of these receipts was the tax on cigarettes, which amounted to $835.2 millions in the fiscal year 1943. This
was $130.3 millions or 18.5 percent greater than receipts of $704.9
mUlions in the fiscal year 1942. The receipts from cigar taxes in the
fiscal year 1943, which were $23.1 millions, showed an increase
of 62.7 percent, over the 1942 receipts of $14.2 millions. Both the
higher tax rates and a trend toward smoking higher priced cigars contributed to this increase. Although the tax rates on chewing and
smoking tobacco and snuff have remained the same during the past 2
fiscal years, the. revenue from chewing and smoking tobacco decreased
8.3 percent, showing a decline in the use of these products, while snuff
continued to show a relatively stable demand with an increase of only
$0.1 million over 1942 receipts of $7.4 millions.
In the revenues from manufacturers' excise taxes may be seen the
effect of restrictions on the manufacturers' use, for civUian consumption, of essential materials that are vital to the war effort. The elimination of automobiles, electrical appliances, machines, etc., from the
market all contributed to the decrease of 34.4 percent in the 1943
manufacturers' excise tax collections of $504.3 mUlions as compared
m t h those of $768.3 millions in the fiscal year 1942. Receipts from
the tax on gasoline, which formed the largest source of revenue in this
group, amounted to $288.8 millions in the fiscal year 1943. This was




18

REPORT OF THE SEiCRETARY OF THE TREASURY

a decrease of 21.9 percent below the fiscal year 1942 receipts of $369.6
inillions.: The decrease may be attributed to the effect of restrictions
on the use of gasoline by means of a rationuig system which operated
throughout the fiscaL year in the eastern Seaboard States and on a
Nation-wide basis beginniag December 1, 1942.
Five tax sources within the manufacturers' excise tax group showed
increases in receipts. Receipts from the taxes on sporting goods,
luggage, photographic apparatus, and electric light bulbs represented
collections for 12 months in the fiscal year 1943 as compared with only
8 months in the fiscal year 1942. . In the case of photographic apparatus the tax rate was further increased under the Revenue Act of 1942,
accounting for part of the uicrease ia revenues. The tax on electric
signs, rubber articles, commercial washing machines, and optical equipment was repealed by the Revenue Act of 1942, resulting in a decrease
in the revenues from these sources in the fiscal year 1943 as compared
with the fiscal year 1942.
RetaUers' excise taxes were $165.3 millions in the fiscal year 1943,
amounting to an increase of $85.1 millions or 106.1 percent over the
1942 taxes of $80.2 millions. These taxes on the retail sales of jewelry,
fursy and toilet preparations went into effect on October 1, 1941, and
were unchanged by the Revenue Act of 1942. The increase in
consumer incomes and the ability to buy luxuries, as well as the fact
that collections for an entire year make up the fiscal year 1943 receipts
as compared with collections for only 8 months in the fiscal year 1942,
contributed to the high rate of increase from these taxes.
Miscellaneous taxes were $732.8 millions in the fiscal year 1943.
This was an increase of $327.4 mUlions or 80.8 percent over the $405.4
millions which were received in the fiscal year 1942. The greatest
percent of increase was shown in the revenue from the tax on transportation of persons which rose 307,0 percent in 1943 over the fiscal
year 1942 receipts of $21.4 millions. Two factors which contributed to
this increase were the doubling of the tax rate and the greater volume
of passenger traffic. The effect of these factors was partially offset
by exemptions given to military personnel. A new tax, effective as
of December 1, 1942, was irnposed by the Revenue Act of 1942 on
transportation of property. The revenue from the latter source,
representing collections for the reiriaiaing portion of the fiscal year,
amounted to $82.6 millions and was 25.2 percent of the total increase
in receipts from miscellaneous taxes. Higher tax rates which were
imposed by the Revenue Act of 1942 on the various forms of communication, plus the effect of higher levels of business activity which
resulted in the increased use of these services, increased the revenues
from local telephone service by 150.0 percent and from long distance
telephone, telegraph, radio and other facUities by 89.2 percent. Revenues from local telephone service were $6V.0 mUlions in the fiscal




REPORT OF THB SECRETARY OF THE TREASURY

19

year 1943, an amount which was $40/.2 millions greater than in the
fiscal year 1942; while revenues from aU other taxable types of communications were $91.2 millions in the fiscal year,. 1943 or $43.0
millions greater than in the fiscal year 1942. The effect of higher
incomes can be seen in the revenues from such taxes as those on
admissions, coin-operated amusement and gaming devices, bowling
alleys, billiard and pool tables, all of which increased in the fiscal
year 1943 as compared with the fiscal year 1942.
Total employment tax receipts increased from $1,185.6 millions in
the fiscal year 1942 to $1,497.7 millions in the fiscal year 1943. The
greater portion of the increase may be attributed to the higher level
of taxable pay rolls. Unprecedented wartime activity increased
industrial employment and pay rolls to a record level; longer hours
and intensive use of equipment resulted in a marked increase in raUroad pay rolls. There had been no changes in rates or coverage since
the fiscal year 1942, with the exception of a statutory increase in the
tax on carriers and their employees, which affected receipts in/only
the last 3 months of the fiscal year 1943.
Receipts under the Federal Insurance Contributions Act increased
from $895.6 millions in the fiscal year 1942 to $1,130.5 millions.
Under the Federal Unemployment Tax Act, receipts rose from $119.9
millions to $158.4 millions. Under the Carriers Taxing Act, receipts
in the fiscal year 1943 amounted to $208.8 millions, as compared with
receipts in the fiscal year 1942 of $170.0 raillions. Approximately
$4,5 millions of this $38.8 mUlion increase resulted from an increase
in the tax rate. The tax on employment after December 31, 1942,
was increased to 3]4 percent on both the carriers and their employees
(total 6}4 percent) from the former rate of 3 percent on both employers
and employees.
RaUroad unemployment insurance contributions in the fiscal year
1943 were $10.3 mUlions as compared with $8.5 millions in 1942. This
was an increase of 21.2 percent.
Customs receipts in the fiscal year 1943 were $324.3 millions. This
amount was $64.6 millions less than the receipts of $388.9 millions in
the fiscal year 1942. This decrease was almost entirely accounted for
by operations in the first half of the fiscal year, receipts in the second
6.months being slightly greater than in the corresponding period
of the fiscal year 1942. The dutiable imports on which at least $20
millions of revenue were collected in the fiscal year 1943 were, as in the
fiscal year 1942, wool, agricultural products, sugar and molasses,
metals, spirits and wiaes, and tobacco. Duties on these commodities
varied in the order of importance with respect to revenues, but
accounted for more than 85 percent of total receipts from customs in the
fiscal year 1943 as compared with approximately 79 percent in the fiscal




20

REPORT OF THE SECRETARY OF THE TREASURY

year 1942. The net decrease in receipts in the fiscal year 1943 was
occasioned by wartime restrictions on the use of shipping facilities,
by controls stressing the importation of only those materials necessary
for war production or for supplementing supplies for domestic consumption, and by provisions for importing strategic materials free of
duty. There wais also the effect of a number of trade agreements with
countries which granted reductions in the existing tariff rates.
Miscellaneous receipts in the fiscal year 1943 amounted to $906.1
millions, an increase of $628.7 millions over the fiscal year 1942 receipts. Most of the increase ia receipts represented the cash returned
to the Treasury as a result of renegotiations of war contracts by the
War and Navy Departments and the United States Maritime
Commission.
EXPENDITURES FROM GENERAL AND SPECIAL ACCOUNTS

Total expenditures of the Federal Governinent from general and
special accounts amounted to $78.2 billions during the fiscal year
1943, which was nearly two and one-half times the amount expended
in the year before. A comparison of expenditures in the fiscal year
1943 with those in the two preceding fiscal years classified to show
war and other expenditures separately appears in the table that
follows.
Expenditures, fiscal years .1941 through 1943
[Dollars In billions. • On basis of daily Treasury statements, see p, 459]
1941
Purpose

Total

Total

1943

Percent

Amount

Percent

$6.3

49.3

$26.0

80.0

5.3
1.1
,1

41.5
8.7
.5

5.1
1.3

15.8
3.9
.3

12.8

100. 0

32.5

100.0

Amount
War
.
.
Other:
General
Interest on the public d e b t . .
Statutory debt retirements..

1942

Amount

Per .
cent

$72.1 . 92.2

$104.4

84.6

5.5
2.3

(*)

14.7
4.2
.2

11 q
3.4
.1

100.0

123.4

100.0

Amount

4.3
1.8

(*)

78.2

Percent

NOTE.—Figures are rounded and will not necessarily add to totals.
*Less than $50 millions or 0.05 percent.

War expenditures, it is noted from the table above, multiplied more
t h a n 11 times between 1941 and 1943. Other expenditures of the
Federal Government declined except for interest on the public debt
which rose from $1.1 billions m 1941 to $1.8 billions in 1943.
Expenditures in each of the past 3 fiscal years are summarized by
general functions in the table on page 22. The trend of expenditures
for recent years is shown m Chart 3.




REPORT OF THE SECRETARY OF THE TREASURY

21

EXPENDITURES,! CLASSIFIED BY MAJOR FUNCTIONS
FISCAL YEARS 1937 THROUGH 1943

1937

1939
!940
1941
1942
1943
FISCAL
YEARS
C H A R T 3.
NOTE.—Expenditures for nonwar activities shown in this chart include some outlays which had the
furtherance of defense or of the war effort as an objective. The expenditures for such activities svere made
from general appropriations and could not accordingly be classified as part of the war program.
i Excludes statutory debt retirements and trust account expenditures.
1938




22

REPORT OF T H E I

SE.giRETARY

OF T H E

TREASURY

Classification of expendiiures, fiscal years 1941 through 1943, by organizations and
functions
[In millions of dollars. On basis of daily Treasury statements, see p. 459]
Organization and function

1941

War expenditures:
War Department-_
_
Navy Department
___
United States Maritime Commisi^ion
War Shipping Administration
Other
-

3,678
2,313
51

1943

Total

259

_

:

-

Publicdebt:
Interest _
statutory retirements
Subtotal
Total expenditures.-

-

_

60,013
31,781
3,756
1,237
7,634

26, Oil

72,109

104,421

563
588
738
1937
1,032
840

556
659
680
1,225
1,133
873

602
735
643
1,163
317
901

1,721
1,983
1,961
3,326
3,082
2,614

6,125

4,262

14,686

1,111
64

'.

42, 265
20,888
2,776
1,105
5,075

5, 299

General expenditures:
Veterans' pensions and benefits
,' Social security program
Public works.
_
Aid to agriculture
Relief and work relief
Other
-

14, 070
. 8,580
929
132
2,300

6,301

__.

Subtotal

SubtotaL

1942

1,260
95

1,808
3

4 179
162

1,175

1,355

1,812

4,341

12, 775

32,491

78,182

123,449

NOTE.—Figures are rounded to nearest million and will not necessarily add to totals.
1 Reduced by $316 millions, representing payments into the Treasm-y of capital and surplus of certain
agricultural corporations, of which $70 millions were resubscribed in 1942 and $59 millions were resubscribed
In 1943. Details are shown in the Annual Report of the Secretary of the Treasury for 1941, p . 50.

Monthly expenditures, as shown in the table on page 24, rose from
$831 milhons in July 1940, at the beginning of the defense program,
to $1.5 bUlions in June 1941, to $4.5 bUlions in June 1942, and to
$8.3 billions in June 1943. Monthly expenditures for war purposes
and' for other purposes exclusive of statutory debt retirements appear
in Chart 4,




REPORT OF T H E ; S E I C R E T A R Y OF T H E TREASURY

23

M O N T H L Y EXPENDITURES,! BY|CLASSES
JULY 1940 THROUGH JUNE 1943
DOLLARS
Billions

DOLLARS
Billions

J S N J M M J S N J M M J S N J M M J S N
1940
1941
i942
1943
CHART

1 Excludes statutory debt retirements.




4.

24

REPORT OF THE SECRETARY OF THE TREASURY
Monthly expenditures, fiscal years 1941 through 1943
tin millions of dollars. On basis of daily Treasury statements, see p, 459.]
Other
Public debt
Federal
W a r ex- expendipendi-. tures 1 exStatutory
tures cept pubhc
retireInterest
ments
debt

Month and fiscal year

1940—July....
August
September
October
November...
December
1941—January
February.....
March
April
May......
June

-

.-

-

July
August-.:
September
October
November.:.
December
1942—January
February
March
April
May
June
-

:

-

-

.-.

.-

Fiscal year 1942

_
-

Fiscal year 1943...

5,299

969
1;131
1,330
1,537
1,448
1,850
2,104
2,208
2,809
3,238
3,560

604
390
375
471
394
459
492
409
407
439
375
311

25
9
169
75
15
232
32
12
205
77
19
390

5,125

1,260

4,498
4,884
5,384
5,481
6,042
6.825
5,947
6,770
6,744
6,974
7,092
7,46Q

-

699
464
369
485
413
458
496
445
480
460
272
357

26,011

-

-

Fiscal year 1941

July
August
September..
October
November
December
1943—January.-...
February
March
April
May
June

20
20
148
73
11
219
25
21
150
73
12

199
223
241
311
393
495
589
610
769
782
857
832
6,301

---

628
324
322
386
293
322
372
314
348
404
301

35
7
224
70
28
353
54
35
262
89
42
609

72,109

Total, flscal years 1941 through 1943.

14,686

831
708
760
870
818
1,187
1,118
1,077
1,401
1^3161,142
1,546

339
64

12,775

1,600
1,564
1,882
2,089
1,860
2, 557
2,631
2,630
3,436
3,755
3,955
4,531
95

(*)
(*)
(*)
(*)
(*)

ii
(*)

4,262

104,421

Total expenditures

32,491
5,162
6,215
5,931
5,937
6,363
6,501
6,372
6,119
7,354
7,466
7,435
8,327
78,182

4,179

162

123,449

NOTE.—Figures are rounded to nearest million and will not necessarily add to totals.
•Less than $500,000.
V Includes operations under revolving funds and transfers to trust accounts.

War expenditures
The figures under the caption '^ War expenditures'' in the preceding
summary tables and in most of the other tables in this report include
the entire expenditures of the following departments and agencies:
War Department (except for rivers and harbors, and flood control).
N a v y Department, United States Maritime Commission, War Shipping Administration, Office for Emerger^y Management and certain




REPORT OF THE SEORETARY OF THE TREA;SURY

25

other agencies in the Executive Ofiice of the President, and Smaller
War Plants Corporation (to extent of appropriation for capital stock).
They also include certain expenditures of the following departments
and agencies which have, in addition to the expenditures for their
regular activities, some expenditures classified under the heads of war
activities: Department of Labor, Department of the Interior, Department of Agriculture (principally lend-lease). Treasury Department
(principally lend-lease), National Housing Agency, Federal Works
Agency, Federal Security Agency, Commerce Department, Selective
Service (administrative expenses), Panama Canal, Department of
Justice, and certain agencies in the Executive Office of the President.
Expenditures of the above agencies include amounts disbursed for
materials, goods, and services transferred to other countries in accordance with the provisions of the Defense Aid Act of 1941 and the MUitary Establishment Appropriation Acts and Naval Appropriation
Acts as amended. No comprehensive breakdown of the figures in
these tables to show the amount expended for lend-lease items is
avaUable in the Treasury records. D a t a on lend-lease aid are set forth
in reports of the Lend-Lease Administration.
The figm^es on war expenditm-es embrace expenses of aU operations
including training of personnel of the armed forces, transportation,
travel, pay, subsistence, maintenance, and m a n y other items.
Excluded from the figures on war expenditures, however, are expenditm-es of the Eeconstruction Finance Corporation and its subsidiaries
(see table on page 28). Excluded also are soine outlays which had the
furtherance of defense or of the war effort as .an objective but were
made from funds which supplemented the regular appropriations of
such civU departments and agencies as the Tennessee-Valley Authority,
the Panama Canal, the Federal Seem ity Agency, and the Federal
Works Agency. Excluded also are expenditures of other agencies
whose activities have been greatly expanded as a direct resiUt of the
war. The expenditures for such activities are made from general
appropriations and they cannot accordingly be classified as a part of
the war program.
The growth in war production in relation to the growth of total
war expenditures is shown roughly by the comparison in Chart 5 of
expenditures by the three agencies listed above whose activities include
the procurement of the principal weapons of war (War and Navy Departments and the Maritime Commission) with the War Production
Board's index of production of airplanes, ships, tanks, guns, ammunition, and all industrial equipment (excluding construction of industrial
facUities). A monthly summary of war expenditures appears in
the foUowiag table.

542890—44-




26

REPORT OF THE SECRETARY OF THE TREASURY

Monthly expenditures for war activities by specified agencies, fiscal years 1941
through 1943
[In millions of dollars. On basis of daily Treasury statements, see p. 459]
War .
Department

Month and fiscal year

1940—July
August
September
October.
November.^
December
1941—January
•-_
February
March
April
_
May
-_-..^
June
-•

U. S,
Navy
Depart- Maritime Subtotal
Commisment
sion

Other

189
214
228
301
381
471
670
681
747
769
826
776

Total

199
223
241
311
393
496
589
610
769
782
857
832

79
91
82
137
206
290
350
408
548
522
465
500

102
111
140
164
173
184
223
181
196
233
362
263

3,678

2,313

6,042

259

6,301

616
698
746
834
771
1,072
1,282
1,369
1,432
1,594
1, 850
2,007

362
441
424
497
493
645
675
681
946
1,101
1,307
1, 309

130
150

919
1,032
1,216
1,376
1,320
1,686
1,942
2,045
2,499
2,793
3,287
3,465

60
99
114
162
128
165
162
163
309
446
272
363

1,131
1,330
1,537
1,448
1,860
2,104
2,208
2,809
3,238
3,560
3,829

14,070

•8,580

929

23,579

2,432

26,011

2,861
2,875
3,519
3,417
3,638
3,770
4,053
3,239
3,985
3,727
3,857
3,424

1,103
1, 376
1,294
1,696
1,478
1,380
1,274
2,002
2,053
2,102
2,251
2,980

184
211
141
46
274
276
331
223
285
248
243
315

350
423
431
421
761
401
289
305
420
898
741
760'

4,498
4,884
6,384
5,481
6,042
5,825
6,947
6,770
6,744
6,974
7,092
7,469

Fiscal year 1943

42, 265

20,888

2,776

65,929

6,180

72,109

Total, fiscal years 1941 through
1943

60,013

31,781

3,756

95,550

8,871

104,421

Fiscal year 1941
July......
August.--.
September..
October..
_
November
December
1942—January.
February
March
-.._
April
May
..---June.
Fiscal year 1942
July
AugustSeptember
October
November
December
1943—January
February
March
April
May
June

.._•_.._

:
•
_

_

10
3
«3
04
•8
3
4

95
121

4,148
4,462
4,953
5,060
6,290
6, 424
6,658
6,465
6,324
6,076
6,350
6,719

NOTE.—Figures are rounded to nearest million and will not necessailly add to totals.
« Excess of credits (deduct).

The expenditures for war purposes shown in the preceding tables
are compared with the appropriations and contract authorizations for
war purposes in the table on page 28. The lag between appropriations
and contract authorizations on the one hand and expenditures on the
other is due to the necessity for planning weU in advance to insure
adequate procurement of supplies and coordination and execution of
production operations.




27

REPORT OF THE SECRETARY OF THE TREASURY

WAR E X P E N D I T U R E S C O M P A R E D M O N T H L Y WITH M U N I T I O N S
P R O D U C T I O N , J U L Y 1940 T H R O U G H J U N E 1943
"PERCENT
(Munitions
Production)

DOLLARS"
Billions
(Expenditures)

800

8

700

rv
War Expenditures y^
(War, Navy, a n d
^ \ ^,
Maritime Commission) \ ^
(Billions of Dollars)
«^

J S N J M M J
1940

1941

SN

J M M J
1942

S N J M M J

SN

1943

C H A K T 5.
NOTE.—War Production Board munitions production index includes airplanes, ships, tanks, guns, ammunition, and all industrial equipment, but not construction of industrial facilities.




28

REPORT OF THE SECRETARY OF THE TREASURY

War expenditures, appropriations, and contract authorizations, July 1, 1940,
through June SO, 1943 ^
.
[In billions of dollars]
Total war ap
War con- propriations'
tract au- and contract
thorizaauthorizations (net) 2 tions approved

Wai- appropriations

Organization

War expenditures

War Department
—
Navy Department
U. S. Maritime Commission...
War Shipping Administration..
Other.......
-

60.0
31.8
3.8
1.2
'7.6

132.6
76.8
9.7
3.1
18.8

104.4

241.0

Total.

132.6
93.6
11.8
3.1
19.5

16.9
2.1

260.7

NOTE.—Figures ai-e rounded and will not necessaiily add to totals.
1 This summary does not include amounts of appropriation bills pending on June 30, 1943, which were
enacted in the fiscal year 1944. Otherwise this table agrees with detailed table of war activities shown on
p. 542 of this report.
2 For which appropriations have not yet been made.

The figures above do not of course include the Reconstruction
Finance Corporation and its subsidiary corporations. According to
reports made by the Corporation, its commitments amounted to
$23.8 billions beti^een J u l y l , 1940, and June 30, 1943, of which $3.3
billions have been withdrawn and canceled.
The following summarj^ shows, by fiscal years, disbursements and
receipts of the Reconstruction Finance Corporation and its subsidiaries
in connection with the war program.
War disbursements and receipts of the Reconstruction Finance Corporation and its
subsidiaries
[In millions of dollai's. On basis of reports received by the Treasury]
1941

1943

1942

Total

DisDisDisDisReReReburse- ceipts 1 burse- ceipts 1 burse- ceipts » bursements
ments
ments
ments
Reconstruction Finance Corporar
tion's subsidiaries:
Defense Plant Corporation
Defense Supplies Corporation...
Metals, Reserve Company
Rubber Reserve Company
U. S. Commercial Company
The RFC Mortgage Company..
Reconstruction Finance Corporation
(direct):
Loan to Great Britain and
Northern Ireland
Loan—Defense Homes Corporation 2-.
Stock—War Damage Corporation.
All other loans
.. . . .
TotaL...

-

147
5
125
61

K

1,211
360
371
258

(*)

390

3,43l' 1,366
956
522
644
386
194 ^ 220
71
11
34
3

4,789
1,321
1,140
503
71
34

14

25

44
1
570

2,728

8,863

146
43
156
83

(*)

11
72

7

158

64

398

45

2,760

506

.5,704

NOTE.—Figures are rounded to nearest million and will not necessarily add to totals.
*Less than $500,000.
* Rents, repayments and sales. Does not include profits on sales.
2 Transferred to the National Housing Agency on Sept. 1, 1942.




Receipts 1

1,512
565
579
303
11
3

390

(*)
33
1
340 ' " " i 9 5 "

.

39

(*)
265
3,278

REPORT OF THE SECRETARY OF THE TREASURY

29

General expenditures
General expenditures during the year represented only a small portion of the total Federal Budget. As has been noted earlier, they
amounted to $4.3.billions. Interest on the public debt, together with
statutory retirements, amounted to an additional $1.8 billions. The
sum of these figures—$6.1 billions—is to be compared with a total
expenditure in 1943 of $78.2 billions.
As was shown in the table on page 22, expenditures for carrying on
the regular operations of the Government, other than interest on
and statutoiy retirements of the public debt, declined $864 millions
from those of 1942. The largest decrease, amounting to $816 millions,
was in expenditures for relief and work relief. The decline in relief
and work relief expenditures reflected liquidation of the Work
Projects Administration and of the Civilian Conservation Corps,
transfer of the National Youth Administration to war activities, and
.abolishment of the food stamp program for supplying surplus foodstuffs to persons on relief.
Expenditures for aid to agriculture decreased from $1,225 millions
in 1942 to $1,163 miUions in 1943.
The decline of $137 millions in the public works expenditures reflected deferment, until after the war, of projects other than those
related to military needs. Expenditures by the Tennessee Valley
Authority, included in the table on page 22 under the classification
'^Other,^' amounted to $127 millions in 1942 and $111 millions in 1943.
Offsetting the foregoing decreases, there was an increase of $47
millions in expenditures for veterans' pensions and benefits. This was
accounted for mainly b}^ a transfer of $30 millions to the national
service life insurance trust fund as a reserve for death claims becomingpayable as a result of mihtary and naval service in the present war
and expenditures for salaries of new employees required in connection
with the administration of the national service life insurance program.
There was also an increase in expenditures for the social security
program in 1943, due principally to an increase in the amount of the
railroad retirement appropriated account transfeiTcd to trust accounts.
DEFICIT IN GENERAL AND SPECIAL ACCOUNTS

In the fiscal year 1943, expenditures exceeded receipts in general
and special accounts by $55,897 millions. This sum represented the
net deficit exclusive of statutory debt retirements. The derivation
of the deficit in 1942 and 1943 follows:




30

REPORT OF THEI SEiCRETARY OF THE TREASURY
Deficit in general and special accounts, fiscal years 1942 and 194S
[In millions of dollars. On basis of daily Treasury statements, see p. 459]
1942

1943

13,668

Receipts, total
Deduct net appropriation to Federal old-age and survivors insurance trust fund.
Netreceipts.
Expenditures excluding statutory debt retirements
Net budgetary deficit.

23,385
1,103
22, 282
78,179
55,897

12, 799
32, 397
19, 598

RECEIPTS AND EXPENDITURES IN TRUST ACCOUNTS AND CHECKING
ACCOUNTS OF GOVERNMENT CORPORATIONS AND CREDIT
AGENCIES

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.'\ 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 principal 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. A summary of receipts and expenditures in trust accounts,
etc., for the fiscal years 1942 and 1943 follows:
Summary of receipts and expenditures in trust accounts, etc., 1942 and 1943
[In millions of dollars. On basis of daily Treasury statements, see p. 459]
1942
Receipts:
Federal old-age and survivors insurance trust fund, unemployment trust fund, and railroad retirement account
Other trustfunds and accounts
Increment resulting from reduction in weight of gold dollar...
Seigniorage
.
Total receipts
,_
^
Cf»
Expenditures:
Federal old-age and survivors insurance trust fund, unemployment trust fund, and railroad retirement account
Other trust funds and accounts...
Charges against increment on gold
Subtotal
Transactions in checking accounts of Government agencies,
etc. (net)i
' Total expenditures.-. .
.
. . .
Excess of expenditures "

2,327
850

(*)

14
3,191
2,318
753

(*)

, 1943

Increase or
decrease ( - )

2,810
1,117

(*)

(*)

482
267

3,926

—14
735

2,806
788

487
34

(*)

3,072
3,625
6,696

-2,194
5,787

3,506

1,861

(*)

3,594

522

-1,431
—909
.

-1,645

NOTE.—Figures are rounded to nearest million and will not necessarily add to totals.
* Less than $500,000.
1 Includes sales and redemptions of market obligations.
' However, net appropriations to the Federal old-age and survivors insurance trust fund appear as deductions from receipts under general and special accounts.




REPORT OF THE SECRETARY OF THE TREASURY

31

. A summary of receipts and expenditures in trust accounts, checking
accounts of Government corporations and credit agencies, increment
on gold, etc., for the years 1932 through 1943 will be found in table 1
on page 464, and details by months for the fiscal year 1943 in tables
3 and 4 on pages 474 and 494.
Because Government corporations and credit agencies maintain
checking accounts with the Treasurer of the United States, the transactions shown m the preceding table and in other tables in this report
represent their net operations. The tables, therefore, do not furnish
sufl&cient 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 records can reflect the operations of these
corporations and agencies. These data have been combined and
appear in the tables beginning on page 706, showing sources and uses
of funds for the fiscal year 1943 and from the date of inception of the
various corporations to June 30, 1943. The figures are not on the
basis of the daily Treasury statement and, therefore, do not agree
exactly with the figures shown in other tables in this report. A comparative summary of these data for the fiscal years 1942 and 1943
appears in the following table.
Sources and uses of funds of certain Government corporations and credit agencies,
fiscal years 194-2 and 1943
[In millions of dollars.

On basis of reports received from corporations and agencies]

SOURCES OF FUNDS

Appropriations from General Fund ofthe Treasury
Allocations, rediscoxmts, and loans from other Government corporations (net)
Sale of obligations to the Treasury (net)
Sale of obligations in the market (net)
.._
Sale of stock to other agencies
.
Sale of property acquired
Repayment of loans
Interest, dividends, assessments, and property income
Other receipts
.

32

179

1,653
3,226
—1,004

2,923
3,555
—635

2
3, 779
1,656

386
244

. 1,575

7, 322

Total, sources of funds

8
1,389
1,387

13,440

406

USES OF FUNDS

Expenses:
Administrative
Nonadministrative
Purchase and improvement of property owned
i
Loans
.:...
Retirement of obligations issued in exchange for mortgages
Investments (net)...
Allocations, rediscounts, and loans to other Government corporations (net)
Interest and dividends paid
Other expenditures
Total, uses of funds

.

53*
27
2,976
1,911

300
45

29
47

1,713

2, 769

152
146

148
700

7,324

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




52
40
6,885
1,398

32

REPORT OF THB SEiORETARY OF THE TREASURY
FINANCING THE NET BUDGETARY DEFICIT AND, OTHER
REQUIREIMENTS

The Treasury's financing program during the fiscal year had to
provide for the net budgetary deficit shown on page 30 and for the.
funds needed to meet the requirements of Government corporations
and credit agencies and to provide for an increase in the General Fund
balance. The table that follows summarizes the total cash requirements, including the General Fund balance increase, and the net
amount of new money raised during the year.
Amount
(in millions
of dollars)
55,897

Requirements:
Net budgetary deficit, excluding statutory debtretirements
Excess of expenditures in—
(a) Checking accounts of Government corporations and credit agencies:
General
_
Sales and redemptions of obligations in the market (net)
(b) Trust and other accounts
.
SubtotaL....
Increase in General Fund balance

1,500
694
"333

.

1,861
6,515

Total requirements

8,376
64,274

Means of financing:
Public debt receipts (net) from—
(a) Public issues:
Treasury bills
.
Treasury certificates of indebtedness
Treasury notes...
Treasury notes, tax series and savings series
Treasury bonds..
.
United States savings bonds
'.
i
Otherissues
(6) Special issues to trustfunds, e t c . . . .

9,340
13,474
2,480.
4.-, 481
19,489
111,068
"956
• 61, 288
2,986

....-

Total
'
;
1
NOTE.—Figures are rounded to nearest million and will not necessarily add to totals.
• Excess of receipts (deduct).
1 Includes accrued discount.

64,274

A distribution of the $64,274 millions net borrowing during the fiscal
year by months and a comparison with the amounts raised in corresponding months of the previous fiscal year appear in the table
that follows.
Net amounts borrowed, fiscal years 1942 and 1943
[In millions of dollars. On basis of daily Treasury statements, see p. 459]
Month
July........
August
September..
October
November..
December..
January

1942

551
1,408

425
2,238
1,456
2,898
2,073

Month

1943

4 714
4,549
4 798
6 420
3 212
12 054
2 899

FebruaryMarch.....
April
May.
June
Total..

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




2,369 '

39
2,542
3,609
3, 852

23,461

2,954
1,483
14, 342
. 6,064

784
64,274

33

REPORT OF THB SEICRETARY OF THE TREASURY
THE PUBLIC DEBT

Summary of Jinancing operations
In the process of borrowing $64,274 milhons, the Treasury issued
during the fiscal year 1943 a gross amount of $122,632 miUions of
pubhc debt securities. This amount was so far in excess of amounts
raised in any previous comparable period in Treasur^'^ operations
t h a t it was necessary to make changes in the mechanics of the financing operations from time to time during the fiscal year.
As a result, the year's operations were divided roughly into three
financing periods. The first period extended from July 1, 1942,
through November 30, 1942, during which time the Treasur}^ made
eight ofl:erings of securities to the market in the usual pre-war manner.
Special selhng efl^brts during the period were confined to continuous
offerings of savings bonds and Treasury notes, tax series. The second
period extended from December 1, 1942, through March 31, 1943.
During this period the Treasury conducted the Victory Fund Drive,
later known as the First War Loan, and made an interim offering of
certificates of indebtedness. The third period covered the remainder
of the fiscal year, during which time the Treasury conducted the
Second War Loan and offered certificates of indebtedness to refund
securities maturing on M a y 1, 1943.
Gross receipts from the sale of public debt obligations during each
of the three periods, gross expenditures for the redemption and
retirement of public debt items, and the net amount of new money
obtained in each period are shown by types of public debt securities in
the table that follows.
Public debt receipts and expendiiures during the three financing periods of the fiscal
year 1943
[In billions of dollars. On basis of daily Treasury statements, see p. 459]
July 1-Nov. 30, 1942
Issues

Public issues:
Cash:
Treasury bills
Certificates of indebtedness
_..
Certificates of indebtedness, special series.
Treasury notes
..
Treasury notes, tax series and savings
series
Treasury bonds..
United States savings bonds (including
accrued discount)
All other
Exchanges
.:
Special issues to trust funds .etc
Total

f

*Less than $50 millions.




Receipts

8.7
5.2
L8
3.7
3.4
5.3
4.1
.3
.1
1.1
33.7

Dec. 1,1942-Mar. 31,1943

Net reExRependi- ceipts or ceipts
expenditures tures (—)

5.5
1.5
1.4
.3

(*)
.2

(*)

.

3.2
3.7
.4
3.4

12.0
6.0
15.3

2.7
5.3

2.7
5.9

3.9
.2

23.7

Net reExpendi- ceipts or
expenditures tures (—)

8.5
1.6
15.7
.3

3.5
4.4
- . 4

-.3

2.0

.6

4.1
.8

.3
.2

3.8
.6

48.2

28.8

19.4

(*)

1-2
10.0

•

34

REPORT OF T H B SEICRETARY OF THE TREASURY

Public debt receipts and expenditures during the three financing periods of the fiscal
year 1943—Continued
[In billions of dollars.]
Apr. 1-June 30, 1943
Issues

Public issues:
Cash:
Treasury bills
Certificates of indebtedness
Certificates of uidebtedness, special series.
Treasury notes
Treasury notes, tax series and savings
series
Treasury bonds...
United States savings bonds (including
accrued discount)..
All other
Exchanges
Special issues to trust funds, etc.
..
Total. -

Receipts

11.9
5.5

Net reExRependi- ceipts or ceipts
expenditures tures (—)

9.2

. .r

3.7
.3
L4
5.9

1.4
.4
.3
.2
1.4
5.0

40.7

19.6

Net reExpendi- ceipts or
expenditures tures (—)

2.6
5.4

32.6
16.7
17.9
3.7

23.3
3.2
17.9
1.3

9.3
13.5

1.1
8.3

8.7
19.9

4.2
.4

4.5
19.5

3.4
.1

11.9
1.4
1.4
8.3

.4
1.4
5.3

122.6

58.4

.8

2.6
8.7

Total fiscal year 1943

11.1
LO
3.0
64.3

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

A discussion of the Treasury's financing operations during each of
the tliree financing periods shown in the foregoing table follows.
First period—July 1 through November 80, 1942.—The Treasury's
principal offerings of marketable securities during the first period of the
year's financing program consisted of three bond issues, two note
issues, and two issues of certificates of indebtedness. All of these
issues were for new money. In addition an offering of certificates of
indebtedness was made primarily to refund a maturing issue of
certificates.
Included among the bond offerings was the second offering in August
1942 of 2K percent Treasury bonds of 1962-67, the so-called ' H a p "
issue which had first been oft'ered in May 1942! This issue was not
open to commercial banks and it was specified that they would not be
permitted to own it until a period of ten years should have elapsed
from the date of its issue. A new provision was introduced with this
oft'ering which, in effect, allowed optional redemption of the bonds at
par and accrued interest upon the death of the owner if the bonds
were used to pay Federal estate taxes. This provision applied retroactively to the bonds of the same description that had been issued in
May 1942 and it has been included in all subsequent issues of 2}^ percent bonds. Additional details with respect to this provision are contained in the official circular covering this issue which appears as
exhibit 3 on page 291. Beginning February 1, 1943, these bonds,
which had previously been issued only in registered form, were made
available in coupon form also.




REPORT OF THE; SECRETARY OF THE TREASURY

35

A summary of public debt issues and retirements during the first
financing period of the fiscal year appears in the table that follows.
Public debt receipts and expenditures during the first financing period, July 1 through
Nov. SO, 1942
[In thousands of dollars. On basis of daily Treasury statements, see p. 459]

Receipts

Issues

Public issues:
Cash:
Treasury bills
Certificates of indebtedness.
..
Certificates of indebtedness, special series.
Treasury notes
Treasury notes, tax series
Cash redemptions
Received for taxes..,
....
Treasury bonds
United States savings bonds:
Issueprice
. x\ccrued discount.
United States savings stamps
.
Depositary bonds
Adjusted service bonds
All other
Total cash.
Exchanges

735, 316
150,313
818,000
748, 028
438, 403
5, 296,164
4,022,3741
43, 538/
1 251,644
31, 695
2349

Net receipts
Expenditures or expenditures (—)

5,535,260
1, 498, 367
1,396,000
343,212

3, 200,056
3, 651.946
422,000
3,405, 416

54,718
695,66I)
1,866

2, 688,024

175,'211
35,840
35
3,967
5,108

3,890, 701
215,805
31, 660
- 3 , 618 •
-5,108

6, 294, 298

32, 53G, 424
68, 313

9,'813, 560
175, 970

22,791,177
.902,128

33, 682,835

Grand total..

22,791,177

32, 604, 737
1,078,098

Total cash and exchanges.
Special issues to trust funds, etc

9, 745, 247
68, 313

9,989, 530

23,693,305

NOTE.—Figures are rounded to nearest thousand and will not necessarily add to totals.
1 Includes $194,010,156.70 deposited by Postal Savings System to cover outstanding postal savings stamps,
liability for which was transferred from the Postal Savings System to the Treasury as a public debt obligation.
'
2 Issued in payment of amounts due on adjusted service certificates.

Further details of the $14 billions of market off'erings of Treasury
honds, notes, and certificates of indebtedness during the first financing
period of the year appear in the table below. Discussions of Treasury
bill off'erings and of sales of United States savings bonds and sales of
Treasury notes, tax series, tlirough which substantial amounts of new
money were raised during the period, appear on pages 41, 55, and 56 of
this report.
Market offerings of Treasury bonds, Treasury notes, and ceriificaies of indebtedness
beiiveen July 1 and Nov. SO, 1942
Date issued

issue

.Tuly 15,1942
Aug. 3,1942

2% Treasury bonds of 1949-51, due Dec. 15, 1951: For cash
2H% Treasury bonds of 1962-67, due June 15, 1967 (additional issue of the
bonds of May 5, 1942): For cash
...
J4% Certificates of indebtedness. Series B-1943, due Aug. 1,1943: For cash.
0.65% Certificates of indebtedness, Series C-1943, due May 1,1943: For cash
1}4% Treasury notes, Series C-1945, due Mar. 15, 1945: For cash
13^% Treasury notes, Series B-1946, due Dec. 15, 1946 (additional issue of
the bonds of June 5, 1942): For cash
.
2%,Treasury bonds of 1950-52, due Mar. 15, 1952: For cash....K% Certificates of indebtedness, Series D-1943, due Nov. 1,1943: For cash.

Aug.
Sept.
Sept.
Oct.

15,1942
21,1942
25,1942
15,1942

Oct. 19,1942
Nov. 2,1942

Total




..

$2, 097, 617,600
1, 235, 966, 600
1, 609,332, 000
1. 505, 727,000
1, 606, 204, 500
2.142, 390,600
1, 962, 688, 300
2, 035, 254,000
14,195,180, 500

36

REPOR'T OF TilE: SfiCRE-TARY OF THE TREAStJEt

Second period—December 1, 1942, through March 81, 1948.—It became apparent during the first part of the fiscal year that in order to
obtain a greater proportion of the necessary funds from, sources other
than commercial banks a change in the method of financing was
necessary. In November 1942, therefore, the Treasury made plans
for a series of major drives for funds. The first of these, the Victory
Fund Drive, later known as the First War Loan, was conducted between November 30 and December 23, 1942. The goal of this campaign was to raise approximately $9 billions through the sale of three
new issues of marketable securities, all dated December 1, 1942, and
through the sale of Treasury bills, three series of savings bonds, and
two series of tax savings notes. A list of the issues offered follows.
(1) % percent certificates of indebtedness due December 1, 1943;
(2) 1% percent Treasury bonds due June 15, 1948;
(3) 2)^ percent Treasury bonds of December 15, 1963-68., which
commercial banks were not permitted to own until ten
years after issue date;
(4) Three-months' Treasury bills;
(5) Series.E savings bonds;
(6) Series F and G savings bonds; and
' (7) Series A and C Treasury notes, tax series.
Commercial banks were permitted to subscribe to the 1% percent
bonds and the % percent certificates of indebtedness, but their subscriptions were limited to approximately $2 billions of each issue.
Sales in the First War Loan to all investors were $12,947 millions.
Sales to investors other than commercial banks amounted to $7,860
millions, compared with the goal of $4,000 miUions for such investors.
A table comparing sales by investor classes with the goals follows.
More detailed data on sales appear in the table on page 601.
Sales of Government securities during ihe First War Loan compared with goals, by
classes of investors
[Dollars in millions.

On basis of reports of sales]

Class of investor

Goal

Nonbank investors:
Individuals, partnerships, and personal trust accounts
Insurance companies
Mutual savings banks .
State and local governments. - .
..
..
Dealers and brokers
Other corporations and associations
U. S. Government agencies and trust funds
Total nonbank investors
Commercial banks
Total all investors

..
._

•

1
.. ..

Sales

(
\

$1.593

$4,000 (

1, 699
620
200
. 1 769
2, 711

I
..

270.

Percentage
distribution
of sales

12.3
13.1
48
. 1.5
5.9
20.9
2.1

4,000
2 5,000

7.860
5,087

60.7
39.3

9,000

12,947

100.0

NOTE.—Figures are rounded and will not necessarily add to totals.
1 Excludes sales earmarked for other nonbank investors; these have been combined with sales to "other
corporations and associations."
2 Amount set aside for commercial banks
,
.




REPORT OF THE SEORETARY OF THE TREASURY

37

The First War Loan Drive was carried on jointly, in each of the
twelve Federal Reserve districts, by the Victory Fund Committees
which promoted sales of securities other than Series E savings bonds,
and by the War Savings Staff' which promoted sales of the E bonds.
Each Victory Fund Committee had as its chairman the President of
the Federal Reserve Bank of its district. An executive committee
and regional subcommittees served under each district Victory Fund
Committee. These committees, established in May 1942, had 44,000
volunteer workers during the drive. They solicited subscriptions
from individuals, corporations, savings banks, insurance companies,
institutions, trusts, and estates throughout the country. The
Secretary of the Treasury acted as chairman of a committee of the
Federal Reserve Bank Presidents, and the Chairman of the Board of,
Governors of the Federal Reserve System acted as liaison officer
between the Treasury and the Federal Reserve Banks. »
The only other new security offered during the remainder of the
second period of the year's financing program was an issue of % percent
Treasury certificates of indebtedness dated February 1, 1943. About
three-fourths of the proceeds of this offering was applied to the
redemption, on February 1, of $1,588 millions of maturing % percent
certificates of indebtedness. The balance of the funds raised constituted new money.
A summary of pablic debt issues and retirements during the second
financing period of the fiscal year appears in the table that follows.
Public debi receipts and expendiiures during the second financing period, Dec. 1, 1942,
through Mar. 31, 1943
[In t h o u s a n d s 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 , see p . 459]

Issues

P u b l i c issues:
Cash:
T r e a s u r y bills
Certificates of i n d e b t e d n e s s . . . , . . :
Certificates of i n d e b t e d n e s s , special series.
T r e a s u r y notes
..
T r e a s u r y notes, t a x series
Cash redemptions
Received for t a x e s .
Treasury bonds...
U n i t e d States savings b o n d s :
Issue price
1
Accrued d i s c o u n t
...
U n i t e d States savings s t a m p s . 1
Depositary bonds.'.
1
Adjusted service b o n d s
.
Another
.
Total cash..
Exchanges...
T o t a l cash a n d e x c h a n g e s .
Special issues to t r u s t funds, etc
G r a n d total

...,.

Receipts

047,341
010,897
288,000

Expenditures

8, 523, 508
1,592,176
15, 710,000
302, 956

N e t receipts
or expendit u r e s (—)

3, 523,833
4,418, 721
- 4 2 2 , 000
- 3 0 2 , 956

2, 668, 596
20,088
2,005,424
4,

643,084
5,891, 828

5,892, 770
325,188

3,811,812

204,821
15
1,872
7,404

10,411
51,448
-1,669
549,843

46,868,750

28,694,395

18,174, 356

46,868,750
1, 336,630

28; 694, 395
120,081

18,174, 356
1,216,^549

48, 205,380

28,814,476

19, 390, 905

50, 914J
215, 233
51,463
2 203
557, 248

N O T E . — F i g u r e s are r o u n d e d to nearest .thousand a n d will n o t necessarily add. to totals.
I I n c l u d e s $748,722.20 deposited b y P o s t a l Savings S y s t e m to cover o u t s t a n d i n g postal savings s t a m p s ,
liability for w h i c h was transferred from t h e P o s t a l Savings S y s t e m . t o t h e T r e a s u r y as a p u b l i c d e b t
obligation.
'2 I s s u e d in-payigient of a m o u n t s d u e og-adjusted service certificates.




38

REPORT OF T H E SEiCRETARY OF T H E

TREASURY

Further details with respect to the market offerings of Treasury
bonds and certificates of indebtedness during the second financing
period of the year appear in the table below. Discussions of Treasury
bill offerings and of the sales of savings bonds and Treasury notes, tax
series, through which substantial amounts of new money were raisedduring this period, appear on pages 41, 55, and 56 of this report.
Market offerings of Treasury bonds and certificates of indebtedness, Dec. 1, 1942
through M a r . S I , 1943
Issue

Date issued
Dec.
Dec.
Dec.
Feb.

1,1942
1,1942
1,1942
1,1943

^ % Certificates of indebtedness, Series E--1943, due Dec. 1,1943: For cash.
] ^ % Treasury bonds of 1948, due June 15,1948: For cash...
2y>% Treasury bonds of 1963-68, due Dec. 15,1968: For cash
't/i% Certificates of indebtedness, Series A-1944, due Feb. 1,1944: For cash.
Total

_
•

Amount
$3,799,736,000
3,061,856,000
2,830,914,000
2,211,161,000
Hi 903,667,000

Third period—April 1 through June SO, 1948.—The third period of
the financiag program was opened by the Second War Loan which was
conducted between April 12 and May 1, 1943. The Second War Loan
was directed by a new marketing organization, the Treasury War
Finance Committee. This Committee, which was set up in March
1943, integrated the efforts of the War Savings Staffs and the Victory
Fund Committees in increasing and broadening the sale'^of Government securities.
The Presidents of the twelve Federal Reserve Banks were in charge
of district War Finance Committees, composed of representatives of
the War Savings Staffs and of the Victory Fund Committees. More
than 1,000,000 volunteers took part in this drive.
The goal fpr the Second War Loan was $13,000 miQions and sales
to investors included in the goal amounted to $17,620 millions. Purchases by dealers and brokers and by United States Government
agencies and trust funds, amounting to $935 millions, were not included
in the goal. However, including these latter purchases, total sales
in the Second. War Loan were $18,555 millions, compared with sales
of $12,947 millions m the First War Loan.
It was the aim of the Second War Loan drive to increase still further
the sale of Government securities to nonbank investors. In this aim
the Second War Loan was successful. Purchases by nonbank ii^vestors (including sales to investors not included in the goal for the Second
War Loan) were $13,476 millions as compared with $7,860 millions in
the First War Loan. Since sales to commercial banks were about the
same in both drives, the entire increase in the amoimt raised ia the
Second War Loan over the amount raised in the First War Loan consisted of sales to nonbank iuvestors.
In general, the financing ia the April drive followed the pattern of
the December program. Three new marketable issues, all dated April
15, 1943, werOi offered and weekly increases in the outstanding amoimt



REPORT OF T H E SEiCRETARY OF T H E

TREASURY

39

of Treasury biUs were continued. The sale of savings bonds, Series
E, F , and G, was vigorously promoted.
A list of the securities offered follows.
(1) % percent certificates of indebtedness due April 1, 1944;
(2) 2 percent Treasury bonds of September 15, 1950-52;
(3) 2}^ percent Treasury bonds of June 15, 1964-69, which commercial banks were not permitted to own until 10 years
after issue date;
(4) Three-months'Treasury bills;
(5) Series E savings bonds;
(6) Series F and G savings bonds; and
(7) Series C Treasury notes, tax series.
For commercial banks, subscriptions to the % percent certificates
were confined to the first three da!ys of the drive, and subscriptions to
the 2 percent bonds to three days toward the end of the drive. I n
each case allotments were limited to approximately $2 billions.
All sales of savings bonds from April 1 through May 8 were credited
toward the drive goal, in order to allow sufficient time for the funds to
pass through the accounts of thousands of issuing agents and into the
Federal Reserve Bank accounts. Sales of Series C tax notes from
April 1 through M a y 1 were counted toward the goal. Sales of the
Series A tax notes, which had been counted in the First War Loan
drive, were excluded.
Total sales of $18,555 millions in the Second War Loan represented
nearly 90 percent as much as was obtained in all of the five bond
drives in the first World War. Sales classified by investor groups are
compared with the Treasury's goals in the following table.
Sales of Government securities during the Second War Loan compared with goals, by
classes of investors
[Dollars in millions. Onbasisof reports of sales]
Class of investor
Included in the goal:
Nonbank investors:
Individuals, partnerships, and personal trust accounts
Insurance companies
Mutual savings banks
State and local governments
Other corporations and associations.
Total nonbank investors included in goal
Commercial banks.. . . . .
Total sales included in goal
Not included in the goal:
Dealers and brokers . . . .and trust funds.
U. S. Government agencies
Total other investors.
:
Total all investors
.•
.
. .

Goal

}
}

$2,500
r
2,000 I
r
3,500 1
8,000
15,000
13,000

Sales

Percentage
distribution
of sales .,

$3,290
2,408
1,195
503
6,146
12, 541
5,079
17,620

17.7
13.0
6.4
2.7
27.7
67.6
27.4
95.0

2544
391
935
18, 555

2.9
2.1
5.0
100.0

NOTE.—Figures are rounded and will not necessarily add to totals.
1 Amount set aside for commercial banks.
2 Excludes sales earmarked for distribution to other nonbank investors. These sales have been distributed .
to the appropriate class of investor in this^table.




40

REPORT OF THE SECRETARY OF THE TREASURY

Sales of securities during the Second War Loan by classes of mvestors and by issues are compared with the results of the First War
Loan on page 601. More than one-half of the securities purchased
by individuals, partnerships, and personal trust accounts in the
Second War Loan consisted of savings bonds of Series E, F , and G.
Purchases of Series E bonds alone accounted for $1,473 inillions of
the total purchases of $3,290 millions of all securities by individuals,
partnerships, and personal trust accounts.. Insurance companies and
mutual savings banks, on the other hand, placed more than one-half
of their total purchases in the 2^ percent bonds. Other corporations
and associations concentrated their investments in the certificates of
indebtedness and the tax notes.
On April 19, 1943, the Treasury announced the offering of one-year
% percent certificates of indebtedness dated May 1, 1943, in exchange
for 0.65 percent Treasuiy certificates of indebtedness and the %
percent Commodity Credit Corporation notes of Series F, both maturing May 1, 1943. Exchanges were made par for par, and cash subscriptions were not received. This exchange operation was not
associated with the Second War Loan campaign.
A summary of public debt issues and retirements during the third
financing period of the fiscal year follows.
Public debt .receipts and expenditures during the third financing period, Apr. 1 through
June 30, 1943
[In thousands of dollars.

On basis of daily Treasury statements, see p. 459]

Issues

Public issues:
Cash:
Treasury bills
..
Certificates of indebtedness
Certificates of indebtedness, special series
Treasury notes
Treasury notes, tax series and savings series..
Cash redemptions
Received for taxes
^
Treasury bonds.
:
United States savings bonds:
Issue price
_
Accrued discount
United States savings stamps
Depositary bonds
Adjusted service bonds
All other
.
Total cash.
Exchanges
.•..
Total cash and exchanges.
Special issues to trust funds, e t c . . . .
Grand total..

Receipts

864, 339
532, 483
805, 000

Expenditures

Net receipts
or expenditures (—)

9,248,123
129, 363
805, 000
622,874

2,616,216
5, 403,120

40, 083
1, 393, 320)
397,869

1,149,818
8,303, 269

347, 925
150, 389
15
1,500
8,543

3,365,466
-12,866
64,104
-1,319
57,187

33,467,125
1, 373, 451

13,145, 001
1, 373,451

20, 322,123

34,840, 576
5, 903, 097

14, 518,452
5, 035, 785

20, 322,123
867, 312

40, 743, 673

19. 554, 237

21,189,435

2, 583, 221
8, 701,138
3, 680, 231\|
33,160/
I 137, 523
64,119
2 182
65, 730

-622,874

NOTE.—Figures are rounded to nearest thousand and will not necessarily add to totals.
1 Includes $114.70 deposited by Postal Savings System to cover outstanding postal savings stamps, liability for which was transferred from the Postal Savings System to the Treasury as a public debt obligatioa
2 Issued in payment of amounts due on adjusted service certificates.




REPORT OF T H E SEiORETARY OF T H E

TREASURY

Further details with respect to the market offerings of Treasuiy
bonds and certificates of indebtedness during the third financing
period of the year appear in the table following. A discussion of
other Treasury securities offered during the period appears below under
the caption ''Securities on continuous sale.''
Market offerings of Treasury bonds and certificates of indebtedness Apr. 1 through
J u n e SO, 1943
Date issued
Apr. 15,1943
Apr. 15,1943
Apr. 15,1943
May 1,1943

Issue

Amount

2% Treasury bonds of 1950-52, due Sept. 15, 1952: For cash.
:,
$4,i939,261,000
2}4% Treasury bonds of 1964-69, due June 15,1969: For cash.
3,'761,904,000
,
H% Certificates of indebtedness. Series B-1944, due Apr. 1,
1944: For cash
5.250,731,000
14% Certificates of indebtedness. Series C-1944, due M a y l ,
1944:
In exchange for 0.65% certificates of indebtedness. Series
C-1943, maturing May 1, 1943...
$1, 373,451, O O
U
In exchange for M% Commodity Credit Corporation
notes, maturing May 1,1943
__
281, 752,000
1,655,203,000
15,607,099,000

TotaL.

All official circulars and statements relating to the transactions in
new securities issued during the year are included in the exhibits
beginning on page 289.
Consolidated security sales organization.—It was announced on June
12, 1943, that a Third War Loan would take place in September.
In planning this drive the Secretary stated that, while substantial
progress in selling securities to individuals had been made in the
Second War Loan, it had been decided that the local Victory Fund
Committees and War Savings Staffs would, be more effective if combined permanently into unified War Finance Committees established
on State lines under the direction of a chairman in each State reporting
to the War Finance Division of the Treasury. The State committees
were placed in charge of future war. loan drives,- and their purpose was
to sell increasing amounts of securities to individuals and to nonbank corporations. They were made responsible also for the continuing sale of war savings bonds through the voluntary payroll
allotment and other regular purchase plans.
Securities ori continuous sale
The discussion of public debt operations in the preceding paragraphs
has been confined to an over-all summary of these operations classified
primarily by the financing periods in which they fell. Some of the
operations discussed therein were actually part of continuous sales
programs. These are discussed in more detail in the paragraphs that
follow.
United States savings bonds.—Total sales of savings bonds during the
fiscal year 1943 amounted to $11,789 millions issue price. On June
542890—44

5




42

REPORT OF T H E SE.CRETARY OF T H E TREASURY

30, 1943, the current redemption value of United States savings bonds
outstanding, including those sold prior to 1943, amounted to $21,256
millions. Sales of these bonds are shown, by series, in the chart on
page 43 and in the table following.
Sales of Series E, F, and G savings bonds, fiscal years 1941 through 1943 and by
months for the fiscal year 194S
[In milhons of dollars. On basis of daily Treasury statements, see p. 459]
Period
By fiscal years:
1941 1...
1942
1943..-

Series E

203
3,526
8,271

...

By months:
1942—July
August
September
October...
November.
December.
1943—January..February..
March
April
May
June.

i

508

454
-

510

665
542
726
815
634
' 720
1,007

995
696

Series F

67
435
758
74
52
61
61
45
16
3

7748
44
110
86
35

Series G

V

Total

2,032
2, 759

664
5,993
11,789

319
191
184
210
148
222
348
205
180
353
254
144

901
697
755
935
735
1,014
1,240
887
944
1,470
1,335
875

395

NOTE.—Figures are rounded to nearest milhon and will not necessarily add to totals. Figures are based
on deposits with the Treasurer of the United States. Accruals are not included.
1,Savings bonds of Series E, F, and G were on sale only during the last two months of the fiscal year 1941.

The dollar volume of sales of each denomination of Series E bonds
and the number of bonds of each denomination sold are show^n in the
table on page 44 for the fiscal years 1941 through 1943 and b}^ months
for the fiscal year 1943. Detailed data from March 1935, when savings bonds first went on sale, through June 30, 1943, by months, are
shown in the tables beginning on page 603. (On November 30, 1942,
the designation of United States war savings bonds was reserved for
Series E bonds. See exhibit 29, page 330,)




REPORT

OF T H E SECRETARY

43

OF T H E TREiASURY

SALES OF SERIES E WAR SAVINGS

BONDS

M O N T H L Y SEPTEMBER 1941 THROUGH JUNE 1943
DOLLARS
Millions

DOLLARS
Millions

1000

Sept.

Nov. J a n Mar t^ety July Sept
1941
1942

SALES

OF

SERIES

Nov Jan. Mar May July
1943

F AND

G

SAVINGS

Sept

BONDS

M O N T H L Y SEPTEMBER 1941 T H R O U G H JUNE 1943
DOLLARS'
Millions

"DOLLARS
Millions

Series G
Series F
400

200

I

i

Iii

il r
il

S ^

i

Nov. Jan. Mar. hKay July
1941
1942




Sept Nov.

C H A R T 6.

^

Jaa

Mar. May July
1943

Seot

44

REPORT OF THE SECRETARY OF T H E TREASURY

Sales of Series E war savings bonds of each denomination, fiscal years 1941, through
1943 and by months for the fiscal year 1943
[Sales by denominations estimated on basis of total deposits as reported by Treasurer of the United States]
Denomination
Period
$25

$50

$100

$500

$1,000

Total

Issue price of bonds sold (in millions)
By fiscal years:
19411
1942
1943
-

._.

By months:
1942—July.--I.August
September.
October.-..
November.
D ecember1943—January __.
February-.
March
April
May
June.

$14
616

$13
342

$41
813

$41
637

5,988

1,081

1, 714

1,007

162
169
189
253
215
265
271
243
293
303
325
299

61
60
67
89
74
99

115
101
112
143
116
157
158
120
135
211
214
133

, 68

. 100

84
99
118
126
103

62
60
77
60
89
101
, 69

76
149
138
67

$93
],119
1,481

102
71
81
103
76
116
185
117
117
226
192
94

$203
3,526
8,271
508
454
510
665
542
726
815
634
720
1,007
995

Number of bonds sold (in thousands)
By fiscal years:
1941
19t2..
1943..
By montlis:
1942—July
August
September.
October
November.
December".
1943—January...
February..
March
April
May
June

•767
32,832
159, 369

363

552

108

125

9,107
2S, 828

10,837
22,851

1,698
2,686

1,493
1,975

1,905
55,967
215, 709

182
138
161
206
161
238
269
184
202
396
369
178

137
95
108
138
102
155
247
167
155
302
265
125

12, 098
12, 228
13, 657
18,098
15,245
19,247
19, 749
17,151
20,462
22,825
24,160
20.789

8,623
1, 527
.1,630
9,038
].,611
1,346
], 494
10,096 ^ ]., 798
2,373..
13, 481
1,900
11,4.57
1,982
1,544
2,630
14,136
2,088
2,661
2,105
14, 467
2,232
1,602
12,976
1,804
2,647
15, 663
3,151 •
2,809
16,168
3, 370
17, 309
2,856
2,743
15, 965
• 1,777

NOTE.—Figures are rounded and will not necessarily add to totals.
I Savings bonds of Series E, F, and G were on sale only during the last two months of the fiscal year 1941.

Further data on sales of savings bonds by denominations are shown
in table 36 on page 611 and in chart 7 on page 45.
"The task of furthering the sale of United States savings bonds
during the fiscal year fell largely to the War Savings Staff which was,
as previous^ mentioned, consolidated into the War Finance Division
toward the end of the fiscal year. The War Savings Staff was a continuation of the Defense Savings Staff* estabhshed in March 1941. I n
the more than two years since its creation, it had set up a Nation-wide
sales, organization, along State lines, for the purpose, primarily, of
selling Series E bonds to millions of individuals who were not normally
investors, in Government securities. These persons had little or no
acquaintance with the investment markets, but the investment of
their savings in Government securities was particularl}^ necessary if
the inflationary potentialities of public borrowing were to be minimized.



45

REPORT OF THE SECRETARY OF THE TREASURY
SALES OF SERIES E SAVINGS BONDS BY DENOMINATIONS
M O N T H L Y SEPTEMBER

1941 T H R O U G H J U N E 1943

A. NUMBER OF PIECES
MfL LIONS

1 ••1 r v i

1 1 1 ' 1 1 1 1

1 1 1 1 1 I 1

1 QL

1MILLIONS

V, 1

A

V
J4
N
/

14

12

I \\
j

10

/
o

j

4

2

^ 0

1

1

6

-j

' • ' 1943 • •
' •'

1942

"

1941

1942

1943

B. DOLLAR VALUE AT ISSUE PRICE
DOL LARS--^
Mill o n s

'

1 1 1 1 1 1 1 1 1 1
•

"

•

"

"

520
480
440
400
360
320
280
240

^\ /

fy\

V

$2

/

200
160

/

120

f^

J

/
80
40

g.

J

^

i f\/^

<S5-

1942




1943

1941

C H A R T 7.

1942

1943

46

REPORT OF THE SECRETARY OF THE TREASURY

During the fiscal year ended June 30, 1943, the activities of the
War Savings Staff, other than its operations during war loan drives,
were directed primarily toward building up the payroll savings plan.
This plan was inaugurated in the latter part of the calendar year 1941,
and under it workers authorized their employers to make regular
deductions from their wages for the purchase of war savings bonds.
The chart on page 47 summarizes the growth of tlie plan. The table
following sets forth summary figures as of June 30, 1942, and June
30, 1943. Further data may be found in the table on page 630 of
this report.
Extent of participation in payroll savings plan, June 30, 1942, and June SO, 1943
[Estimated on basis of reports from companies and governmental agencies]
June 1942
Number of firms with plans (excluding Federal, State, and local governments)
Persons participating in payroll savings plan (including employees of
Federal, State and local governments and members of the armed forces).
Aggregate amount deducted from pay of persons participating (including
employees of Federal, State, and local governments and members of the
armed forces)
_.
Deductions as percentage of actual pay of participants

June 1943

108,099

182,895

16,000, 000

26,800, 000

$163, 000,000
6.8%

$415,000, 000
9. 0%

Sales of Series E savings bonds through the payroll savings plan
grew steadily during the year, as shown in chart 8 on page 47. In
that period the total amount deducted from pay rolls for the purchase
of war savings bonds amounted to more than $4 billions, and these
funds represented about one-half of the total amount of all Series E
bonds sold during the year. Nearly 90 percent of the money deducted
for this purpose is estimated to have cohie from persons earning less
than $5,000 a year.
The aggregate monthly deductions of $415 millions that were accumulating in June 1943 for the purchase of war bonds under the payroll savings plan represented an average deduction of $15 for every
person participating in the plan in that month. .This deduction was
sufficient, on the average, to provide a $25 bond once every five weeks
for each one of the 26.8 million participating persons. This number of
participants included some 3 million civilian employees of Federal,
State, and local governments and nearly 3 million menibers of the
armed forces.
Included among the firms having the payroll savings plan in operation at the end of the fiscal year were more than 99 percent of the
firms with 500 or more employees and 95 percent of those with 100 to
500 employees. The persons employed by these firms represented
about 85 percent of the total employees of business and industry in the
country at the end of the fiscal year.




47

REPORT OF T H E SECRETARY OF T H E TREASURY

PARTICIPATION IN PAYROLL SAVINGS PLAN
MONTHLY DECEMBER 1941 THROUGH JUNE 1943
WORKERS
Miilions

WORKERS
Millions

D J F M A M J
1942

J A S O N D J F M A M J J A S
1943
DOLLARS
Millions
iSOO

DOLLARS
Millions
500




C H A R T 8.

48

REPORT OF THE SECRETARY OF THE TREASURY

Savings bond redernptions.—United States savings bonds of Series
E, upon which principal reliance has been placed for the absorption of
small savings of individuals, differ from the popular issues employed
in previous wars in that they are not negotiable but are redeemable
at the owner's demand after 60 days from issue date, and in that
annual purchases by individuals are limited in amount. Series F
and Series G bonds, which were first offered in 1941 in response to
requests for a savings bond with a higher annual purchase limit and
for one which p^id interest currently instead of only at redemption,
have characteristics similar to Series E bonds, but may be considered
as supplementary issues. United States savings bonds, which were
first offered in 1935, are well adapted to popular war finance. The
purchaser is protected by the feature of nonnegotiability against the
risk of loss from a decline in market price, such as was suft'ered by
holders of Liberty bonds immediately following the first Wprld War.
The liquidity of the investment is assured, however, by the feature of
demand redeemability; but the owner is given a strong incentive to
retain his bonds by the graduated scale of redemption values under
which the rate of interest for the period held increases each half year.
Savings bond redemptions during the fiscal year 1943, at original
purchase price, aggregated $841 millions. Monthly redemptions for
the fiscal year 1943 and totals for the fiscal years 1941 through 1943
are shown in the following table. Detailed data from May 1935
are shown by months in the tables beginning on page 603.
Redemptions of savings bonds, fiscal years 1941 through 1943 and by months for
the fiscal year 1943
[In thousands of dollars at original purchase price. Estimated, except Series G, on basis of redemptions
as reported by Treasurer of United States]
Period

Series A
toD

By fiscal years:
1941
1942....
. 1943
By months:
1942—July--August
; September..
October
November-.
December-1943—January
,February--, March
April...---May-June

Series E

Series F

142,182
126, 233
81,804-

'

22
60,003
688,023

49
2,860
16, 994

• 7,159
8, 44.3
7,789
7, 401
. 5, 872
• G, 256
6,989
6,371
7,004
6,771
5,947
5, 803

14, 799
19, 003
22, 519
28, 090
32, 028
43,756
49, 640
62, 700
116, 540
87, 592
86, 371
124, 985

491
764
645
904
742
921
1, 571
1,695
1,817
1,840
2. 813
2, 791

Series G

542
11,812
54,508
2, 523
3,370
2,757
3,183 •
4,058
3, 216
4,176
4,995
5,180
5,9(11
8,211
6,900

NOTE.—Figures are I'ouiided to nearest thousand and will not necessarily add to totals.




Total'

142,796
200,908
841,329
24,972
31,581
33,709
39, 578
42, 699
54,150
62, 375
75, 760
130, 541
102,143
103,341
140,479

49

REPORT OF THE SECRETARY OF THE TREASURY

In order to obtain a complete picture of the relationship of savings
bond redemptions to sales, the accumulated sales of each series of
savings bonds should be compared with the accumulated redemptions.
Such a comparison for Series E, F, and G savings bonds appears in
the chart below. Between May 1, 1941, and June 30, 1943, cash
receipts from the sales of Series E, F, and G savings bonds amounted
to $18.4 billions. Kedemptions through June 30, .1943, at original
cost, totaled $835 millions or 4.5 percent of sales. More than 95
percent, therefore, of the $18.4 billions taken in by the Treasury from
sales of Series E, F, and G savings bonds since they were first oft'ered
for sale was still invested iri those securities on June 30, 1943.
SALES OF SAVINGS BONDS COMPARED WITH REDEMPTIONS
MONTHLY
DOLLARS

Billions

D E C E M B E R 1 9 4 1 T H R O U G H J U N E 1943

Total-E,Fand G Bonds

18

1942
CHART

1943'

9.

Sales of Series E bonds amounted to, $12 bilhons between May 1,
1941, and June 30, 1943. Kedemptions at original cost amounted to
$748 milhons or 6.2 percent of sales. About 94 percent, therefore,
of the funds received from sales of Series E bonds was still invested in
those securities on June 30, 1943..




50

REPORT OF THE SECRETARY OF THE TREASURY

Further de.taiJs on sales and redemptions of Series E bonds, classified
by denominations, appear in the chart on page 51. Kedemptions,
it is noted, are somewhat greater in proportion in the smaller denominations of Series E bonds than in the larger denominations.
This is accounted for largely by two factors: (1) The lower-income
individuals who buy bonds usually purchase the $25 denomination;
they are generally the first to be affected by financial emergencies that
make it necessary for them to cash the bonds they have acquired;
(2) many persons, making substantial purchases of E bonds and wishing to provide against the possibility of having to redeem their bonds
before maturity, specify delivery in small denominations, either to
aLvoid the necessity of partial redemption of large denominations with
reissue of the remainder in smaller denominations or in ignorance of
the fact that such partial redemption is possible.
The table that follows summarizes accumulated sales and redemptions of Series F and G savings bonds and of Series E bonds by
denominations, for selected months since these seiies were first issued.
Accumulated sales of Series E, F , and G savings bonds compared with accumulated
redemptions, selected months from December 1941 to J u n e 1943
[Sales and redemptions in millions of dollars at issue price estimated on basis of total deposits and
redemptions, respectively, as reported by Treasurer of the United States]
1941
December
Series E:
$26 denomination:
Accumulated sales
Accumulated redemptions
Percent outstanding
$50 denomination:
Accumulated sales..
Accumulated redemptions
Percent outstanding.
$100 denomination:
Accumulated sales
_.
. Accumulated redemptions
Percent outstanding
$500 denomination:
Accumulated sales
Accumulated redemptioiis
Percent outstanding
$1,000 denomination:
Accumulated sales
Accumulated redemptions
Percent outstanding
All denominations:
Accumulated sales
Accumulated redemptions
Percent outstanding
'.
Series F:
All denominations:
Accumulated sales
'viccumulated redemptions.
''^&Tcent outstanding
c^^rieS'Q:"
u^ll denonainations:
.4fCcunmlated sales
Aqcumulated redemptions
Percent outstanding

June

1943

December

June

113.9
1.1
99.0%

630.0
10.7
98. 3%

1, 883.1
90.5
95. 2%

3, 618. 2
. 419.4
88.4%

93.2
0.7
99. 2%

354.8
5.2
98. 5%

806.6
22.2
97. 2%

1, 435.8
91.9
93. 6%

258.4
2.4
99.1%

854.1
13.1
98. 5%

1, 596. 5
36.7
97. 7%

2, 567. 9
96.8
96.2%

229. 4
2.4
99. 0%

677.6
11.0
98. 4%

1,085.0
26.0
97. 6%

1,684.9
53.5
96.8%

449.7
4.5
99.0%

1, 212. 9
20.1

1. 763.2
44.9
97.5%

2, 693.9
86.4

98.3%

1,144.7
11.1
99.0%

3, 729. 4
60.0
98.4%

7.133. 5
220.2
96.9%

12,000. 6
748.0
93.8%

207.7
.4
99.8%

501.6
99. 4%

2 9

859.7
7.4
99.1%

1, 259. 5
19.9
98.4%

1,184. 9
2.1
99.8%

2, 426. 6
12.4
99. 6%

3, 700. 9
31.5
99. 2%

5,186.1
66.9
.98.7%

NpTE.—Figures are rounded and will not necessarily add to .totals.




1942

96.8%

51

REPORT OF THE SECRETARY OF THE TRE>AJSURY

SALES O F SERIES E SAVINGS BONDS COMPARED WITH
REDEMPTIONS, BY DENOMINATIONS
M O N T H L Y D E C E M B E R 1941 T H R O U G H J U N E 1943
DOLLARS ^

Billions

~

DOLLARS

r

$25 Denomination

1942
DOLLARS"
Biilions
1.0

n

$500 Denomination

^

.5
1

1

1943

"

LJ-_L_J,. .L-L-L

^.^fss

-^.^^""""'^

,1 J

Per<.ent
inn

95

1

1

1 1 . 1 • 1.. 1 1

1942

-U..I. 1 .1 L 1 I U ,„

1943

DOLLARS'

1942

1943

1942
CHART 10.

Savings bond redemptions may also be compared with the amount
of the various series outstanding. During the fiscal year redemptions
of savings bonds amounted to 4.0 percent of the amount outstanding
at the end of the fiscal year. For Series E bonds aldne redemptions
amounted to $688.6 millions (current redemption value) or 6.1
percent of the amount outstanding at the end of the fiscal year. The
table that follows compares redemptions with the amount outstanding
for. the past 3 years and monthly during the fiscal year 1943.




52

REPORT OF T H E SECRETARY OF T H E TREASURY

Redemptions of all series of savings bonds as percent of amount outstanding, fiscat
years 1941 through 1943 and by months for the fiscal year 1943
[Dollars i n t h o u s a n d s at c u r r e n t r e d e m p t i o n v a l u e .

O n basis of d a i l y T r e a s u r y s t a t e m e n t s , see p . 459]

Redemptions
during year
or m o n t h

.Period

B y fiscal years:
1941
1942
1943

A m o u n t outstanding at
end of y e a r
or m o n t h

Redemptions
as p e r c e n t of
a m o u n t outstanding

$148,126
207,388
848, 324

3.43
2.04

25, 461
32,176
34, 289
40,126
43,161
54, 652
62,973
76,362
131, 210
102,806
103,972
141,147

By months:
1942—July
August
September.
October.--.
November.
December.
1943—January...
February..
March'.
April
May
i June

$4, 313,953
10,188,188
21, 256,167
11,077,840
11, 761,163
12, 478,811
13, 380,842
14,078,889
15, 049,804
16, 246,122
17,067,472
17,890, 701
19, 267,006
20, 507,383
21, 256,167

.23
.27
.27
.30
.31
.36
.39
.45
.73
.53
.51
.66

N O T E . — D o l l a r figures are r o u n d e d to nearest t h o u s a n d a n d will n o t necessarily a d d to totals.

The table below shows the redemption experience of all series of
United States savings bonds since they were first issued in 1935.
This experience has been different for bonds of Series A to E issued
before our entry into the war, when the chief reasons for their purchase
were their investment characteristics, and for Series E bonds issued
since Pearl Harbor, fpr the purchase of which there has been the
added reason of patriotism. The table separates bonds of Series
A to E issued through December 31, 1941, from Series E bonds issued
since that date in order to show this difference. (The redemption'
experience of Series F and Series G bonds is, of course, not comparable
with the experience of bonds of Series A to E, although they are shown
together in the table for convenience.)
Percent of sales of savings bonds of each denomination redeemed by the end af various
yearly periods through J u n e SO, 1943
[On basis of p u b l i c d e b t a c c o u n t s , see p . 459]
P e r c e n t of b o n d s issued t h r o u g h D e c . 31, 1941, Series A to E . red e e m e d b y t h e e n d of—

Denomination

1 year 2 years 3 years 4 years 5 years 6 years 7 years 8 years
(1935-41 (1936-41 (1935-40 (1935-39 (1935-38'(1936-37 (1935-36. (1936
Series) Series) Series) Series) 'Series) j Series) Series) j Series)
Percent

$26
$50
$100
$500
$1.000
All d e n o m i n a t i o n s .




13
11
11
1)
8
9

24
20
19
16
11
14

30
27
25
22
15
18

36
32
30
26
19
22

40
37
34
29
22
26

42
41)

37
3L
24
28

42
39
37
32
26
•29

REPORT

OF T H E 5 SECRETARY

OF T H E

53

TRElASURY

Percent of sales of savings bonds of each denomination redeemed by the end of various
yearly periods through J u n e SO, 1943—Continuied

Denomination

Percent of
Percent of Series F and G
Series E
bonds issued from May
bonds issued
1, 1941, redeemed by the
from Jan. 1,
end of—
1942, redeemed by
the end of 1 1 year (1941- 2 years (1941
year (1942
42 Series)
Series)
Series)
Percent

$25
$50
:...:.$100
_.
$600
$1,000...
$5.000
$10,000
All denominations

16
9

1 1

(2)

12

(2)

D

4
4
(2)
(2)

8

NOTE.—The percentages shown in this table are the proportions of the value of the bonds sold in any
calendar year which are redeemed before July 1 of the next calendar year, and before July 1 of succeeding
calendar years. The percentages for each aimual series have been calculated separately; the composite
percentages shown above are simple averages of the percentages for each annual series.
1 This denomination offered in Series F only.
2 These denominations not offered.

Eedemptions of United Sawngs bonds before maturity increased ^
sharpl}^ in amount duiing the fiscal year 1942; but the volume of
sales of such obligations also increased markedly. The proportion
of Series E bonds issued during 1942 which had been redeemed at
the end of 1 year was about 8 percent,-or approximately twice that'
of the bonds of the same type issued earlier which had been redeemed
at the end of 1 year. The redemption rate on Series E bonds of $25
denomination issued in 1942 was also about twice the rate for bonds
of that denomination sold before our entry into the war; and the
rate for the $50 denomination was about 50 percent gi'eater than
that for the corresponding denomination issued prior to January 1,
1942. On the other hand, redemptions after 1 year of Series E bonds
of $100 denomination and larger, issued during 1942, were slightly
less than redemptions of similar bonds issued before 1942. The reason
that the proportion of over-all redemptions increased almost as much
as that for $25' bonds alone, despite the much better redemption
experience of the larger denominations, is,-of course, the m^uch higher
proportion of $25 bond sales in 1942 than in previous years.
Redemptions of Series F and G bonds have been negligible, averaging only about 1 percent at the end of 2 years. These bonds, as
noted above, were issued as supplements to Series E bonds, for investment needs of those who had purchased their limits of Series E,
or who had special investment problems to which Series E bonds
were not adapted.




54

REPORT OF THE SECRETARY OF THE TREASURY

Issuing agents for war savings bonds.—As of June 30, 1943, there
were 51,159 agents qualified to issue Series E war savings bonds.
These figures do not include subagents and branches of issuing agencies, which run into considerable numbers. The continued growth
in the number of these outlets for the sale of war savings bonds reflects
the magnitude of the problem of mass distribution of a security such
as Series E, intended for the small investor.
As of June 30, 1943, there had been appointed as issuing agents
9,240 corporations of an industrial, commercial, or retail character,
compared with 2,566 such agents as of June 30, 1942. This marked
increase was the result of the extension of the issuing privilege to
corporations operating large payroll savings plans. The issuing
privilege enabled these corporations to deliver the boncls purchased
by their employees much more quickly than had otherwise been
possible.
. The following table shows the number and types of issuing agents
on June 30, 1943, and various previous dates.
Number of agents qualified to issue Series E war savings bonds as of June SO, 1943,
and various previous dates
[On basis of reports by Federal Reserve Banks]
1941

1942

1943

Type of agent
May 7
Commercial and savings banks
Building arid loan associations _
Credit unions _
Other corporations
Total other than post offices
Post offices
Grand total.-

.!_.

•.

Jan,31

June 30

Dec. 31

June. 30.

7,676
739
8
7

14, 097
2,434
2,080
487

14, 478
2,911
2,907
2,566

16, 353
. 3,629
2,876
7,991

15, 342
3,684
2,763
9, 240

8,430
15,812

19, 098
17,123

22,862
18,868

29, 849
19,841

31,019
20,140

24, 242

36, 221

41, 720

49, 690

51,169

War savings stamps.—Under authority of section 5 of the Public
Debt Act of 1942, approved March 28, 1942, the Treasury Departnient
assumed the liability of the Postal Savings System for postal savings
stamps outstanding at the close of business September 30, 1942. The
Postal Savings System thereupon discontinued the issuance of postal
savings st'amps and thereafter United States savings stamps were
issued by the Treasury as a public debt obligation of the United States.
Total sales of savings stamps during the fiscal year 1943, including
sales reported by the Post Office Department for the first few months
of the year, amounted to $590 millions. Redemptions during the
same period amounted to $545 millions, of which $474 millions, or
87 percent, were exchanged for United States savings bonds. Monthly
data on sales and redemptions of savings stamps from May 1, 1941,
through June 30, 1943, are shown in the tables beginning on page 631.




REIPORT

t F THE SECRETARY OF THE TREASURY
)

55

Treasury notes, tax series and savings series.—Treasury tax series
notes were first offered for sale on August 1, 1941, as noted in my
annual report for the fiscal year 1942. The purpose in offering these
notes was to provide a convenient means of saving against accruing
tax liabilities, and to make available to the Government money due
from taxpayers during the peiiod when the liability accrued. Two
series of notes were issued. Series A notes, which were designed for
the convenience of small taxpayers, were receivable for taxes at par
and accrued interest at a rate of 16 cents per month per $100, or
approximately 1.92 percent per annum. The aggregate amount of
these notes which-one could use in any yeai for the payment of income
tax, estate tax, and gift tax was limited to $1,200 each. Series B
notes, issued for the convenience of large taxpayers, particularly
corporations, were acceptable in payment of taxes at par plus accrued
interest of 4 cents per month per $100, or approximately 0.48 percent
per annum. No limit was placed on the use of these notes for the
payment of taxes. Series A and Series B notes matured at the end of
2 years from issue date. Cash redemptions were permitted at purchase price without interest for the period held.
Effective September 14, 1942, changes were made in the terms of
tax series notes, with a view to increasing their usefulness and attractiveness, and thus increasing the amounts of money brought into the
Treasury as a result of their sale. The increase in individual income
tax rates which had already occurred and the further increases which
were in prospect as a result of the demands of war finance made it
expedient to raise the limit on the amount of Series A notes which
could be used annually in payment of any one of the three taxes named
above, from $1,200 to $5,000. At the same time, in order to allow
purchasers a longer time to correct over-estimates of their tax liabilities and thus to encourage them to purchase a larger volume of notes,
the maturity of these notes was extended to 3 years. Requests for
the issuance of a short-term security with characteristics similar to
those of United States savings bonds, in which corporations could
invest liquid reserves which were accumulating, in part as a result of
priorities and shortages, led to the introduction of a new series of notes
for larger taxpayers in substitution for Series B tax sayings notes.
The new notes, designated Series C, differed from the previous issue of
Series B notes in that Series C notes would be redeemed with accrued
interest either in payment of taxes or for cash. They thus served '
the double purpose of providing for the accumulation of savings for
the payment of taxes and for the temporary or short-term investment
of idle liquid balances. They were redeemable in payment of taxes




56

MPORT OF THE SECRETARY OF THE^ TREASURY

two months after issue date, and for cash 6 months after issue date on
30 days' notice. The interest yield of the notes was based on a
sliding scale; and if held to maturity the notes yield approximately
1.07 percent. Official circulars with respect to Series A and C notes
appear on pages 298, 326, and 339 of this report.
The introduction of the pay-as-you-go system of individual income
tax collection, effective on July 1, 1943, removed the principal occasion for issuing Series A notes and their sale was terminated June 22,
1943. For the convenience of those who had purchased more of the
, notes than necessary to meet their tax liabilities under the new arrangement, provision was made for payment of accrued interest on the cash
redemption of the notes. At the same tune, the designation of Treasury notes of tax Series C was changed to Treasury savings notes of
Series C. The requirement of 30 days' notice for the redemption of
the latter notes, and the $5,000 limit on the use of Series A notes for
tax payment have since been withdrawn.
Sales of Treasury notes, tax series and savings series (excluding
exchanges), amounted to $8,690 rnillions during the year. Redemptions amounted to $4,209 millions, of which $4,094 millions were redeemed for taxes and $115 millions for cash. Sales and redemptions
are shown, by issues, and by months, from August 1941 through June
1943 in the tables beginning on page 638.
Treasury ftiiZs.—Offerings of Treasury bills were made each week
during the 3^ear; 43 issues were for a term of 91 days, 9 issues were
for 92 days, and one issue was for 90 days. The amounts of the weekly
offering increased progressively from $300 millions at the beginning
of the fiscal year to $1,000 millioiis for the last 3 issues of the year.
The 11 series outstanding at the beginning of the year totaled $2,508
millions and the 13 series outstanding at the end of the year, $11,864
millions, an increase of $9,356 millions in the amount outstanding.
The average rate on all bills issued during the year was 0.371
percent. Only a small amount of fiuctuation in the rate occurred.
This was due to the continuing influence of the posted rate of %
of 1 percent for the purchase of such bills which was established at
the Federal Reserve Banks pursuant to directions of the Federal
Open Market Committee on April 30, 1942.
On May 6, 1943, announcement was made that, in the interest of
wider distribution of Treasury bills, offerings beginning with the
issue dated May 12, 1943, and thereafter until further notice, would
include a provision for the receipt and allotment in full of tenders for
$100,000 or less from any one bidder at a fixed price of 99.905 (equivalent to a rate of discount of approximately % of 1 percent per annum),
in addition to the conventional bidding on a competitiv^e basis. At the
same time it was also announced that beginning with the issue dated




REPORT OF T H E SEICRETARY OF T H E TREASURY

57

May 12, 1943, 92-day Treasury bills would be oft'ered for a period
of 13 weeks. With the completion of this cycle, Treasury bills began
to mature on Thursdays, an arrangement which affords an extra
day's time between the opening of bids on Mondays and the, date of
payment, and which thus alleviates the difficulty which was being
. encountered from congestion in communication facilities.
Further information concerning Treasury bills will be fouiid in
the exhibits beginning on page 332 and in the table on page 590.
Adjusted service bonds.—Adjusted service bonds of 1945, amounting
to $733,800, were issued during the year, making a total of $1,841
millions of such bonds issued since June 15, 1936,tin payinent of
amounts due on adjusted service certificates. Redemptions of $7
millions of these bonds during the year brought the total redemptions
since June 15, 1936, to $1,619 millions, leaving $222 millions outstanding on June 30, 1943. Further data on adjusted service bonds
appear in the table on page 552.
Depositary bonds;—The issuance of depositary bonds, as authorized
by Department Circular No. 660, dated May 23, 1941, was continued during the fiscal year to various depositaries and financial
agents in amounts not exceeding the amounts for which the depositary
and financial agency had qualified. These agents had executed
depositary, financial agency, and collateral agreements satisfactory
to the Secretary of the Treasury. The total amount issued during
the year was $147,277,250, bringing the total amount issued to
$226,235,250. Redemptions for the year amounted to $65,000,
bringing total redemptions to $70,000 and leaving $226,165,250
outstanding.
Special issues.—During the 3^ear the Treasury continued to issue
special series of interest-bearing secm-ities for the investment of
trust or other funds deposited in the Treasury. The amount»of
such obligations increased by $2,986 millions dming the year, the
details of which will be found in the table on page 554 of this report.
Special short-term certificates of indebtedness.—Special short-term
certificates of indebtedness, issued for various periods of from 1 to 7
days, were sold during the fiscal year to the Federal Reserve Bank of
New York. These certificates were issued at times when the Treasury, in order to avo.id accumulating funds in excess of its needs and
thus disturbing the money market, permitted its balances with the
Federal Reserve Banks to be exhausted in anticipation of heavy
payments on account of income taxes or the sale of securities in the
war loan drives. . The certificates were issued only to the extent of
the overdrafts thus incurred. The details of such issues will be found
in the table on page 590 of this report.
54.2890—44

6




58

REPORT OF THE SECRETARY OF THE TREASURY
Cumulative sinking fund

• .

Credits accruing to the cumulative sinking fund during the year
amounted to $588 millions which, added to the unexpended balance
of $3,178 millions brought forward from the previous year, made a
total of $3,766 miUions available in the fund. Of this amount, about
$3 millions were applied to the retirement of various issues of bonds
and notes which matured during the fiscal year 1942. The unexpended balance of $3,762-millions was carried forward to the fiscal
year 1944.
Tables presenting the tiansactions on account of the fund for 1943
and since its inception on July 1, 1920, s\''ill be found beginning on
page 599.
Composition of the public debt
The gross public debt on June 30, 1943, amounted to $136,696 millions, an increase of $64,274 millions during the fiscal year. The
chart on page 59 shows the composition of the interest-bearing debt
a;nd also the guaranteed debt outstanding at the end of each month
from June 30, 1936, through June 30, 1943. The following table
shows the amount of the public debt outstanding on June 30, 1942,
and June 30, 1943, classified by character of issues, the percent increase during the year, and the percent distribution of the debt
amone: the various classes of issues.
Public debi outstanding on June SO, 1942, and June SO, 1943, by classes of issues^
[Dollars in millions. On basis of daily Treasury statements, see p. 459]

Class of issue

June 30,
( 1942

Percent
increase
June 30, or decrease
1943
(-),
1943 over
1942

Percent distribution of
amounts
1942

1943

0

Interest-beai'ing:
Public issues:
Marketable issues:
Postal savings bonds, etc., authorized by
$196
$196
acts prior tO Apr. 6, 1917..Treasury bonds. _
38,086
57, 520
6, 689 • 9,168
Treasury notes.- _
3,096 - 16,561
Certificates of indebtedness
2,508
11,864
Treasury bills
Total marketable issues..
60, 573 ^ 95,310
Nonmarketable issues:
21,256
. 10,188
United States savings
Depositary bonds. _ . bonds
79
226
229
Adjusted service bonds
222
Treasury notes, tax series and savings
3,015
7,495
series
Total nonmarketable issues
13, 510
29, 200
124, 509
Total public issues..
L..
64,083
7,885
10,871
Special issues to trust funds, etc
135,380
Total interest-beai'ing debt...
71,968
98
141
Matured debt on which interest has ceased
356
1,175
Debt bearing no interest..
72,422
136, 696
Total gross debt

37.1
435. 0
373.0
88.5

0.3
52.6
9.2
4.3
3.5
69.8

0.1
42.1
67
12.1
8.7
69.7

108.6
186 5
-2.9

14.1
1
.3

15.5
.2
.2

148.6
116.1
94 3
37 9
88 1
42 9
230 4
88 7

42
18 7
88 5
10 9
99 4
1
5
100 0

6.5
21.4
91.1
8.0
99.0
.1
.9
100.0

NOTE.—Figures are rounded and will not necessarily add to totals.
*Less than 0.05 percent.
1 A table covering obligations guaranteed by tho United States for these dates appears on p. 64.




59

REFORT OF THE SECRETARY OF THE TREASURY
COMPOSITION O F THE PUBLIC DEBT,i BY TYPES O F ISSUES
M O N T H L Y J U N E 1936 T H R O U G H J U N E 1943
1936

DOLLAF
Billion 8

1937

1938

1939

t940

1941

S942

1943

DOLLARS
Billions

140

1

130
120

M

•

|l
ji'M
M^^

110

Pub/ic /ssues o f
M
8/7/s and Cert/f/cotes^Mi

IOO
90
80

Guaranteed iObligations ^ p Q ' M j ^ ^ ^ M

70
60

Special /ssuesy.
rrrrTT^'^r^'

50
.^rrr:

'imm^M^A

40
30
20
10
0

js
^

a a ^

l^^^H^
^^^^B

^ ^ ^ ^ ^
^ ^ ^ ^^^^^

,Wr-.-r^J<^^J^^ 5 v < m \ \ < ^

^>i;^//c.^ ^

ta
^fc
B^H
1936

^ .

1937

130
120
IIO
IOO
90
80
70
60
50
40
30
20

1938

1939

1940

^^^
^^B
194

1942

1943

10
0

C H i ' ^RT 1 1 .
Includ n g g u aranteed issues.

The principal changes in the composition of the public debt during
the year were the increase in the proportion of Treasury biljs and certificates of indebtedness and the corresponding decrease in the proportion of Treasury notes and bonds. Weekly off ex ings of 3-month
Treasury bills were increased during the year from $300 millions
to $1 billion. On June 30, 1942, only two public issues of certificates
of indebtedness, amounting to about $1.5 billions each, were outstanding, while on June 30, 1943, there were six issues ranging in
amount from $1.6 billions to $5.3 billions. About 38 percent of the
increase in public issues outstanding consisted of the increased amounts
of Treasury bills and certificates of indebtedness. The decline in.the
relative importance of Treasury bonds during the fiscal year was due
partly to the policy, discussed on page 77 of this report, of placing
restrictions on the purchase of bonds by commercial banl^s.
United States savings bonds outstanding rose from 14.1 to 15.5
percentj of the total debt between June 30, 1942, and June 30, 1943,
reflecting the growth of the payroll savings plan. The ir crease of
outstanding Treasury notes, tax series and savings series, from 4.2
to 5.5 percent of the total debt was the result, in large part, of the
liberalization of the terms of these issues in September 1942.



60

REPORT OF THE SECRETARY OF THE TREASURY

Interest on. the public debt
Expenditures.—Total expenditures during the year for interest on
the public debt amounted to $1,808 millions, an increase of $548 millions over expenditures of the previous year. As shown in table 52,
on page 654, $1,019 millions consisted of interest subject to the
Federal income tax, $515 millions of interest' subject, with minor
exceptions, to the surtax only, and $38 millions of interest wholly
exempt from the Federal income tax. In addition, interest paid on
special securities issued to Federal Government agencies and trust
funds which are not taxable amounted to $241 millions. These
amounts compare with expenditures of $153 millions of taxable, $850
milhons of partially tax-exempt, and $57 millions of wholly taxexempt interest, and $199 millions of interest on^ special issues in the '
previous fiscal year.
Interest rate structure.—Chart 13 compares the term structure of
interest rates on United States Government securities on June 30,
1943, with that of December 6, 1941, just before our entry into the
war, and on June,30, 1942. I t will be noted that the yields of taxable Treasury securities did not change greatly during the fiscal year
1943, but that from December 6, 1941, to June 30, 1942, rates rose
throughout the entire range of maturities. The greatest increases
in rates, however, occurred among short-term Treasury obligations.
Yields of tax-exempt Treasury securities, which also rose between
December 6, 1941, and June 30, 1942, dechned during the fiscal year,
and on June 30, 1943, were close to their levels vjust before Pearl
Harbor.
Computed interest rate.—The computed average rate of interest on
the public debt on June 30, 1943, amounted to 1.979 percent. This
was the lowest which this rate had ever been and compares with 2.285
percent on June 30, 1942, and 2.518 percent on June 30, 1941.
Computed interest rates for each type of public debt issue for each
month from June 1935 through June 1943 are shown in the chart on
page 62. . The reduction in the computed rate during the year reflected
in part a refunding of debt issued at higher rates in earlier years, and in
part a change in the composition of the debt through the issuance of
securities of shorter average maturity than those previously outstanding. As previously noted, the rates of interest paid by the Treasury
Department on securities of various maturities issued during the year
did not change materially from the rates prevailing for securities of
corresponding maturities at the beginning of the year.




61

REPORT OF THE SECRETARY OF THE TREASURY

YIELDS O F OBLIGATIONS O F T H E UNITED STATES ON SELECTED
DATES
[BASED ON CLOSING PRICES]
PERCENT

PERCENT
2.8

2.8

10
15
20
YEARS TO MATURITY OR CALL

2.6

. 1

2.4

30
2.6

1.

2.4

a A - i.yk«iii

2.2

.

2.0
June 3 0 . 1 9 4 2 ^
^ - - - ^

1.8

x

/A

1.6
1.4
/

1.2
/ /

1.0

^

^

.

2.2
...—-'
^ " '

2.0
1.8

«^ if l a ^ i

1.6
1.4

'' / / ^ J u n e 30.1943
RoniHIc^

1.0

Donus

/

• • • ' /

//'/

¥

/

Notes'

, ,
10
15
20
YEARS TO MATURITY OR CALL

•, ; . , 1
25

30

C H A R T 12.
I Notes are all fully tax-exempt, fixed maturity issues. Bonds are all partially tax-exempt, and those
togwhich the curves are drawn are all callable issues.




62

REPORT OF THE SE'CRETARY OF THE TREASURY

COMPUTED ANNUAL INTEREST RATES ON THE PUBLIC

DEBT

B Y T Y P E S O F I S S U E S , M O N T H L Y J U N E 1935 T H R O U G H J U N E 1943
1935

1936

1937

1938

1939

1940

1941

1942

1943
PER

1935

1936

1938

1939

1940

1941

1942

CHAKT 13.

Debt limit
The Pubhc Debt Act of 1943, effective April 11, 1943 (see exhibit
on page 338), further amended section 21 of the Second Liberty Bond
Act to increase the limit on the amount of obligations which might be
issued under authority of the act to $210 billions outstanding at any
one time. The prior limitation was $125 billions. The unused borrowing authorization as of June 30, 1943, under the limitation in
effect on this date is shown below.
Face amount of obligations outstanding and the face amount which can still be issued
under the limitation in effect on June SO, 1943
Total face amount that may be outstanding at any one time
^
$210,000,000,000
Outstanding as of June 30,1943:
Interest-bearing:
Bonds:
Treasury. _..
$57,520,467,900
Savings (maturity value) 1.
26,195,158,650
Depositary.-...
226,165,250
Adjusted service
I
722,060,157
• $84, 663,851,867
Treasury notes
22,758,889,525
Certificates of indebtedness
20,836,685,000
Treasury bills (maturity value)
11.863,911,000
55, 459, 485, 525
140,123, 337, 382
Matured obligations on which interest has ceased
132.396, 425
213, 349,935
Debt bearing no interest (United States war savings stamps).
140, 469,083.742
Face amount of obligations issuable under above authority
.•
69,630,916,268
1 Approximate maturity value. Principal amount (current redemption value) according to daily Treasury statement, $21,256,166,543.

Reconcilement with Daily Statement of the United States Treasury, June SO, 1943
Total face amount of outstanding public debt obligations issued under authority of the
Second Liberty Bond Act, as ainended
$140,469,083,742
Deduct: Unearned discount on savings bonds (difference between current redemption
value and maturity value)...
...•_
4, 938,992,007
Add: Other public debt obligations outstanding but not subject to the
136,630,091,736
statutory limitation:
Interest-bearing (postal savings bonds, etc.)
$195,960,420
^Matured obligations on which interest has ceased
8,103,666
Debt bearing no interest
961,934,610
1,165,998,595
Total gross debt outstanding as of June 30, 1943
_. 136,696,090,330




REPORT OF THE SECRETARY OF THE TREASURY

63

THE GUARANTEED DEBT
The Treasury has made available to certain Government 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, so that those
corporations desiring to do so could arrange to have their obligations
serviced through Treasury facilities.
However, because of the policy of the Treasury, inaugurated in
October 1941, to provide the funds needed by Government corporations and credit agencies issuing guaranteed obligations, there were
no new issues sold in the open market by Government corporations in
1943, although the Commodity Credit Corporation, following approval
by the Treasury, borrowed from commercial banks to finance certain
of that Corporation's programs. The ownership of certain Reconstruction. Finance Corporation obligations was transferred during the
year from the Treasury to other Government corporations, to give
those corporations a temporary medium of investing their idle balances.
The amounts ,of these items outstanding appear in the statement of
the guaranteed debt as obligations of the Reconstruction Finance
Corporation.
The facilities of the Treasury were used during the year to handle
the guaranteed market securities which matured or were called for
redemption. The following table shows the maturities and redemptions of guaranteed market issues during the year.
Guaranteed obligations matured and redeemed during the fiscal year 1943
Description
Commodity Credit Corporation:
94% notes, Series F, matured May 1, 1943...
Home Owners' Loan Corporation:
2H% bonds, Series G, 1942-44, called for redemption on July 1, 1942.3% bonds, Series A, 1944-52, retired by special authority on various dates.
Reconstruction Finance Corporation:
1% notes. Series S, matured July 1,1942
J^% notes, Series U, matured October 15, 1942
i.
Total-

Amount
$289, 458, 000
29, 324, 225
. 425
3, 596,000
319, 895, 000
642, 273, 650

During the year issues of mutual mortgage insurance fund and housing insurance fund debentures amounted to $4,313,850. Instructions
were issued by the Secretary of the Treasury on March 27, 1942, and
September 28, 1942, pursuant to calls of the Commissioner, Federal
Housing Administration, for the partial redemption by seventh and
eighth calls of mutual mortgage insurance fund debentures. Series B,
in aggregate amounts of $1,473,850 and $841,850, payable July 1,
1942, and January 1, 1943, respectively. During the fiscal year the
uncalled debentures redeemed amounted to $3,100.00 for Series B
^nd $19.05 for Series A. The net increase in outstanding Federal




64

REPORT OF THE SECRETARY OF THE TREASURY

Housing Administration debentur,es during the fiscal year was
$1,995,030.95.
Instructions were issued by the Secretary of the Treasury on March
27, 1943, pursuant to call of the Commissioner, Federal Housing Administration, for the partial redemption by ninth call of mutual mort- .
gage insurance fund debentures, Series B,.and for the partial redemption by first call of housing insurance fund debentures. Series D, in
the amounts of $538,400 and $1,618,850, respectively, payable July
1,1943.
'
,
Copies of the instructions issued by the Secretary of the Treasury
during the fiscal year 1943 will be found as exhibits beginning on
page 340.
As a result of the financing policy for Government corporations
and credit agencies, the contingent liabilities of the Government, on
account of outstanding unmatured obligations in the hands of the
public decreased from $4,548 millions on June 30, 1942, to $4,092
millions on June 30, 1943. The net changes during the year in the
various classes of guaranteed securities outstanding 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,
1943, will be found on page 656.
Com,parison of obligations guaranteed by ihe United States outstanding J u n e SO,
1942 and 194s, by agencies ^
[In millions of dollars.

On basis of daily Treasury statements, see p. 459]
J u n e 30,
1942

Corporation or agency
U n m a t u r e d obligations:
C o m m o d i t y C r e d i t Corporation
Federal F a r m M o r t g a g e Corporation .
Federal H o u s i n g A d m i n i s t r a t i o n :
M u t u a l mortgage insurance f u n d . .
H o u s i n g insurance f u n d . .
Federal P u b l i c H o u s i n g A u t h o r i t y 2
H o m e Owners' Loan Corporation
Reconstruction Finance Corporation...
T o t a l u n m a t u r e d obligations
M a t u r e d obligations, all agencies
M a t u r e d interest, all agencies
T o t a l , based on guarantees

._

J u n e 30,
1943

701
930

.....

9
15
114
1,533
1,011

3 4, 548
20
3

3 4,092
8
3

4, 671

4,103

-221

480
930

9
13
114
1,563
1,219

Increase or
decrease ( - )

(*)
^^

.2
-29
—208
-^457
—11

(*)
-468

NOTE.—Figures are rounded to nearest million and will not necessarily add to totals.
*Less than $500,000.
1 Does not include obligations held by the Treasury and refiected in the public "debt.
2 Formerly United States Housing Authority; changed by Executive Order No. 9070, dated Feb. 24,1942.
3 Does not include $8 millions of obligations issued on the credit of the United States by the Tennessee
Valley Authority and held by the Reconstruction Finance Corporation.
•
•

Securities of Government corporations and credit agencies held
directly by the Treasury increased from $4,079 millions as of June 30,
1942, to $7,535 millions as of June 30, 1943.
During the fiscal year the power of the Federal Housing Administration and the Reconstruction Finance Corporation to issue guar


REPORT OF THE SECRETARY OF THE TREASURY

65

anteed obligations was extended by the enactment of further legislation. Under the act of March 23, 1943 (Public Law 15), the authority of the Federal Housing Administration to' insure the principal
amount of mortgages under Title VI of the National Housing Act,
as amended, was increased by $400 millions. The aggregate amount
of principal obligations of all mortgages insured by the Federal
Housing Administration is now limited to $5,200 millions, which
may be increased by an amount not exceeding $1,000 millions with
the approval of the President. In addition, the Commissioner is
authorized to incur total liabilities not exceeding $165, inillions under
Title I of the National Housing Act, as amended, for insured renovation and modernization loans.
As the result of transactions during the fiscal year 1943, under
several existing acts, the borrowing power of the Reconstruction
Finance Corporation changed. The amount of obligations which it
was authorized to issue, as of June 30, 1943, amounted to $17,108
millions, including the amounts outstanding under indefinite authorizations, a net decrease of $124 millions since June 30, 1942. This
net decrease results from the following changes:
INCREASES

.

Statutory authorizations with definite limitations:
.v
I. For loans to Secretary of Agriculture, act of July 22,1942—Public Law 674 (55 Stat. 664): Amoiml
Loans under Title I of The Bankhead-Jones Farm Tenant Act
$32, 500,000
Loans under Title II of The Bankhead-Jones Farm Tenant Act
97,500,000
Loans under section 7 of the Rural Electrification Act
10,000,000
II. For loans to Federal Housing Administrator (48 Stat. 1247; 12 U. S. C. 1705)
•.
3, 500,000
Statutory authorizations with indefinite limitations:
III. For subscriptions to preferred stock in national banks, State banks, or trust companies (48 Stat. 6; 12 U. S. C. 51-d)..
-27,433,386
Total increases-

116,066,614
DECREASES

IV. Obligations of the Reconstruction Finance Corporation canceled by the Secretary of the
Q^'reasury pursuant to act of February 24, 1938, on account of expenditures for: .
Federal Housing Administrator
3,500,000
Regional agricultural credit corporations—capital
'.
37,000,000
Regional agricultural credit corporations—expenses
1,04.6^322
V. Repayment of loans to Secretary of Agriculture for farm tenancy and rural rehabilitation.. 198,213,946
Total decreases
VI. Net decrease in borrowing power

_
•
...'...

239,760.268
123,693,654

The provisions of law authorizing agencies to. issue obligations
guaranteed by the United States have placed certain limits with
respect to the total amounts that can be issued. This legislation
with respect to the limitations established may be placed in three
groups as follows:
(1) Definite limitation.—Provisions stating a specific amount of
obligations which may* be (a) issued, or (b) issued and outstanding
at any specified time. When the legislative authority provides only
for the issue of obligations, the agency may issue obligations in a
definite amount but after they have been retired may not issue new




66

REiPORT OF T H E SEiCRETARY OF T H E TREASURY

obligations in an equal amount. Under the second provision, the
agency may reissue obligations provided the total amount outstanding '
does not exceed the authorized limit.
(2) Indirect limitation.—Provisions not stating a specific amount
of obligations that may be issued and outstanding at any time, but
the amount issued and outstanding is contingent upon. 6ther specific
limiting factors. As a result there is an indirect limit upon the
amount which may be issued and outstanding at any one time.
(3) No specific limitation.—Provisions not stating a specific amount
of obligations which may be issued or issued and outstanding at any
one time, but the amount is contingent upon other specific factors,
the amount of such factors also being indefinite.
The table that follows shows, by agencies, the amounts of obligations authorized to be outstanding as of June 30, 1943, and the
amounts actually outstanding on that date.
Borrowing power and outstanding issues of. Government corporations and credit,
agencies whose obligations are guaranteed b y t h e United States, J u n e SO, 1943
[In millions of dollars]
Outstanding obligations
Agency

I. Agencies issumg obligations for cash or in
exchange for mortgages:
Commodity Credit Corporation
Federal Farm Mortgage Corporation
Federal Public Housing Authority
-.
Home Owners' Loan Corporation..
Reconstruction Finance Corporation
Tennessee Valley Authority
Subtotal
II. Agencies issuing obligations only in payment of defaulted and foreclosed insured
mortgages:
Federal Housing Administration
. ...
U. S. Maritime Commission
Subtotal .
Grand total.-

Borrowing power ' Total

2,650
2,000
3 800
3 4, 750
17,108
62
27.370

4 5, 365
5 200

Held by
Treasury

2, 430
1,950
932
397 """'"283'
1,751
212
6,044
5,033
57
57
11, 612

7,535

Held by others i
Unmatured

480
930
' 114
1,533
1, Oil

5, 565

2
6
(*) 1

8

23

7, 535

(*)

23

23
11, 635

(*)

4,069

23

32,935

Matured 2

(*)

4,092

8

NOTE.—Figures are rounded to nearest million and will not necessarily add to totals.
*Less than $500,000.
• 1 Excludes matured interest, all agencies, in amount of $3 millions.
2 Funds have been deposited with the Treasurer of the United States for payment of all obligations
guaranteed by the United States, representing outstanding matured principal of $8 millions and interest
of $3 millions.
'
3 This amount may be increased only by the amount of issues for refunding purposes.
4 Limit of authority to insure mortgages. This amount may be increased by $1,000 millions upon approval
by the President. Debentures may be issued and tendered only in exchange for insured property acquired
through foreclosure.
* Limit which may be outstanding at any one time with respect to the insuring of mortgages.

SOURCES OF FUNDS FOR FEDERAL BORROWING

Production in general—and war production in particular—creates
the pool of funds which the Treasury must draw on to finance the
war. Production turns out physical goods and services for war and
civilian purposes; it also generates at the same time income equal in
amount to the value of production. What the people of the Nation
receive in the way of income is simply the equivalent of what they



REPORT OF THE SECRETARY OF THE TREASURY

67

produce in the way of goods and services. If the Federal Govern-*
ment, therefore, spends more than it receives in taxes, the people of
the country have more income left than, they can use to purchase
the limited supply of goods and services without an increase in prices.
For the Federal Government, a deficit results; for the rest of the
economy, an identical surplus. I t is precisely this surplus which exercises an inflationary pressure on the price level, and which the Government, therefore, must try to reach through its borrowing program.
There follows an analysis of the value of production during the
fiscal year 1943, and the uses of the gross income generated by this
production. The succeeding section analyzes the uses of new liquid
savings and accumulations made by the various groups of investors,
with particular reference to the amounts which it is estimated were
placed in Federal securities.^
'
.
Value of production and corresponding gross money income of the country
The chart below and the table on page 68 present estimates of the
gross national product and its disposition for the fiscal year 1943,
based mainly on estimates prepared by the Department of Commerce.
The gross national product represents the sum total of the current
production of goods and services in the Nation.
G R O S S NATIONAL PRODUCT AND THE DISPOSITION O F THE
INCOME GENERATED BY PRODUCTION, FISCAL YEAR 1943
DOLLARS"
Billions

.PRODUCTION—£9(/a/*--INCOME.

180

^Federa/ Taxes _

160
140
120

Liquid Savings
\ a n d Accumukstions

federa/
- Goyernment
Purchases

fCounterpprtof
Federa/ d e f i c i t )

IOO
80
60

< Private
Expenditures

Private Purchases^

40
20
State ondloca/^
Qoyt. Purchases

State and Lqcai
*—*- Taxes
CHART

14.

NOTE.—Estimates by Department of Commerce and Treasury Department.
« The statistics available for this analysis are by no means complete. A number of Federal agencies have^
conducted studies which provide valuable information pertaining to many aspects of the problem, and it
is thus possible to analyze the situation in broad outline, even though many details are lacking. It is
obviously impossible in a brief discussion to bring out all of the technical aspects of the data, although the
more important qualifications in the source material will be noted from time to time.




68

REPORT vOF T H E SEICRETARY OF T H E TREASURY

Gross national product and the disposition of the 'income generated by production,
fiscal year 1943
[In billions of dollars. Estimates of Departnient of Commerce and Treasury Department]
A. Production of goods and services, classified ^
by purchaser:
1. Purchases by Federal Government: i
a. War
-..
72.5
b. Other.
4.5
Total

77.0

2. Private purchases:
a. Capital goods
1.5
b. Consumers' goods and services.. 86.6
Total-

.1

3. Purchases by State and local governments '
4.

Gross national-product

B. Disposition of gross money income generated by production:
1. Net Federal taxes received from, income stream 2
20.6
2. Liquid savings and accumulations:
a. Made by individuals 3
32.5
. b. Made by corporations *
16.6
c. Made by governmental accounts 3
6.3
d. Unallocated
2.1
Total

, - _ . . . . 56.5

3. Spent for private goods and services:
a. By businesses
b. By consumers
172.1

.6
87.5

c. TotaL
4. Net State and local taxes received- 88.1
from income stream 2 8
6.9
5. Gross national product
172.1

NOTE.—Figures are rounded to nearest tenth of a billion and will not neces.sarilj' add to totals.
1 Excludes government expenditures not constituting a drain on gross national product. "
>
2 Represents total taxes received, with adjustments to allow for amounts returned to the income stream
through such payments as relief, pensions, and dependency allowances, as well as lor tax payments made to
withholding agents but not yet received by the Treasury.
3 Includes partnerships, personal trust accounts, and unincorporated businesses.
4 Includes small amount of reserves of unincorporated businesses, for which separate data are not available.'^
6 Includes accumulations in Federal trust funds and surpluses of State and local governments.
6 Excludes amounts of State and local surpluses, which are included in accumulations in governmental
accounts.

It should be noted at the outset that the figures for the Federal
Government shown in the chart and table have been adjusted from
figures for total Federal expenditures and receipts appearing elsewhere in this report. Total government expenditures (State and local
as well as Federal) include certain payments which do not absorb
current production of goods and services, and it has been necessary to
exclude these items in arriving at a figure which will represent the
government's draft on current output. Similarly, data on government receipts must be adjusted in order to arrive at a tax figure which
represents only the net amount withdrawn from the sum total of
incomes generated by current production, and which allows also for
amoimts returned to the income stream through such payments as
relief, pensions, and dependents^ allowances, as well as for tax payments made to withholding agents but not yet received by the
Treasuiy.
The left side of the chart presents a striking picture of the extent to
which our economy has been mobilized for war. The gross national
product of $172.1 billions in the fiscal year 1943 was the highest in the
Nation's history. Of this total, $72.5 billions was taken by the
Federal Government for war purposes and another $4.5 billions for
other purposes. State and local government purchases amounted to
$6.9 billions, leaving $88.1 billions for private use.




REPORT OP T H E

69

SEiCSRBTART OF T H E TREIASTTRY

The table shows that the total for private use consisted of $86.6
billions of consumers' goods and services and $1.5 billions of private
capital goods. The small amount shown for purchases of private
capital goods reflects sharply curtailed production of new private
plant, equipment, and housing, as well as the withdrawal from inventories of goods which could not be replaced. The figure for consumers' goods and services, on the other hand, is the highest ever
recorded. 'None of the figures has been adjusted, however, to eliminate the effect of rising prices, since it is the dollar values which are
pertinent in following production through to income.
The following table presents a reconciliation of the Treasury figures
on Federal expenditures for the fiscal year with the Department of
Commerce figures on purchases of goods and services by the Federal
Government.
Reconciliation of Federal expenditures and Federal purchases of goods and services,
fiscal year 1943
[In billions of dollars]
Item

^

A. Federal expenditures:
1. Budgetary expenditures
2. Govp.rnmp.r^j; corporations
3.

Total

_...

.
,

B. Less: Expenditures not constituting a drain on gross national product:
1. Purchase of existing assets, prepayments on contracts, offshore
expenditures, and dependents' allowances
2. Loan transactions of Government corporations
3. Miscellaneous, including relief and veterans' pensions
.4.

Total

C. Federal purchases of goods and services.._

War

Other

Total

72.1
3.0

6.1
-L5

78.2
1.5

75.1

4.6

79.7

-Ll
L2

2.2
—.7
1.2

2.2
.4
2.6

.1

2.6

72.5

4.5

77.0

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

The right side of the chart shows how individuals and businesses
used the incomes which they received in the fiscal year 1943 as a result
of their participation in productive activities. Total private expenditures of $88.1 billions, shown in this part of the chart, are the same as
total private purchases, shown in the left side of the chart. Purchases by individuals of $86.6 billions of consumers' goods and services
and $0.9 billion of private capital goods are added to arrive at consumers' spendings; businesses purchased the remaining $0.6 billion of
private capital goods.
The other uses of income shown in the chart are tax payments to
the Federal, State, and local governments and liquid savings and
accumulations. The amount shown for Federal taxes is $20.6 billions,
but as already noted this represents net Federal taxes received from
the income stream rather than the amount of net budgetary receipts'
reported by the Treasury for the fiscal year. Adjustments of the




70

REPORT OF THE SECRETARY OF THE TREASURY

Treasury figure to reflect net Federal taxes received from the income
stream are shown in the following table.
Reconciliation of Federal receipts and riet Federal taxes received from the income
stream, fiscal year 1943
[In billions of dollars]
Item
Net budget receipts.
.
...
.
•.
Plus: Tax payments made to withholding agents but not yet received by the Treasury

Amount
22.3

Less: Amounts returned to the income stream and amounts received from non-current income-

23.1
2.5

Net Federal taxes received from the income stream.

20.6

- Net State and local taxes received from the income stream are
shown at $6.9 billions in the chart, equivalent to the amount expended
on goods and services by State and local governments. The figures
have been adjusted, however, to exclude State and local surpluses
which are included as part of liquid accumulations made by governmental accounts.
I t is estimated that liquid savings and accumulations amounted to
$56.5 billions in the fiscal 3^ear. This total consisted of $32.5 billions
of liquid savings of individuals, $16.6 billions of liquid accumulations
° of corporations, $5.3 billions of liquid accumulations of governmental
accounts, and $2.1 billions which it was not possible to allocate to
specific investor classes. The term ^'individuals" has been defined
for purposes of this analysis to include partnerships, personal trust
accounts, and unincorporated businesses.
Liquid corporate accumulations include unspent reserves and retained earnings. These business accumulations cannot be spent for
plant, equipment, or new inventories because of wartime controls.
The total for corporations includes also a small amount of imspent
reserves of unincorporated basinesses, since data are not available to
separate these reserves and classify them instead with liquid savings
of individuals.
Liquid accumulations of governmental accounts include accumulations in Federal trust funds, mainly social security fimds, and the
current surpluses of State and local governments. Governmental
accumulations are classified separately, although they derive originally, of course, from gross incomes received by individuals and businesses, part of which is returned to the Government through the
medium of tax or other payments.
A comparison of the two sides of the chart indicates that during
the fiscal year the Federal Government purchased about 45 percent
of the gross national product, although Federal taxes absorbed only
about 12 percent of the total income generated.^ The difference
1 These percentages differ very slightly from those shown in the table on p. 2 to the minor extent that
Federal expenditures differ from Federal purchases of goods and services and that Federal receipts differ
from net Federal taxes received from the income stream.




71

REPORT OF THE SECRETARY OF THE TREASURY

between these two figures, or about one-third of the s^alue of total
output or income, was a deficiency which had to be covered by
Federal borrowing. The chart shows that this deficiency was matched
by the sum total of the liquid savings and accumulations in the rest
of the economy. In other words, private businesses and individuals,
and State and local governments received 55 percent of, current
output but retained 88 percent of total income. The 33 percent
discrepancy represented their liquid savings and accumulations.
The relationship between the Federal deficit and total current liquid
savings and accumulations is a benchmark in the data under discussion. Estimates of total production, national income, and related
data, however well prepared, must remain estimates because of the
difficulty of calculating precisely the amounts involved. The Federal deficit, however, is a laiown figure, so that the size of total private
liquid savings and accumulations being made in the Nation during
any given period can be told with certainty. A number of minor
adjustments are necessary, but the magnitude is firmly established.
NET ABSORPTION OF FEDERAL SECURITIES BY INVESTOR CLASSES

The following table shows the estimated absorption of increases in
the public debt attributable to each of the major classes of investors
during the fiscal year 1943, as well as during the two preceding fiscal
years. Securities guaranteed by the Government are included.
Estimated absorption of the increase in direct and guaranteed interest-bearing debt,
fiscal years 1941, 1942, and 1943
[Estimates of Treasury Department]
t^, Class of investor

1941

1942

1943

X

Billions of dollars
I. Estimated absorption of the increase by:
A.- Nonbank sources:
1. Individuals (including partnerships, personal trust accounts,
and unincorporated businesses)
2. Insurance companies. . .
3. Mutual savings banks.
4. Other corporations and associations _
..
5. Federal agencies and trust funds. _
i...
6. state and local governments
_
7.

Total for nonbank sources.

B. Bank sources:
1. Commercial b a n k s . . .
2. Federal Reservfi Banks
3.

Total for bank sources _

C. Total

- Footnotes at e»d of table.




.

._

1
....j

..

12.3
3.8
1.4
10.6
3.7
.7

4.1

15.1

32.5

3.1
-.3

<

L4
.1

6.9
2.0
.5
3.4
2.1
.2

6.2
.5

25.9
4.6

2.8

6.7

30.5

6.9

21.8

63. 0

L8
.5
.3

(*)

72

REPORT OF THE" SEiCRETARY OF T H E

TREASURY

Esthnated absorption of the increase i n direct a n d guaranteed interest-bearing debt,
fiscal years 1941 y 1942, a n d 194S—Continued
Class of investor

1942

1941

1943

Percent of total
11. Percent of increase absorbed by:
A. Nonbank sources:
1. Individuals (including partnerships, personal trust accounts,
and unincorporated businesses)
2. Insurance companies. ._
_
:.
3. Mutual savings banks.
1
_
4. Other corporations and associations __ . . ._
5. Federal agencies and trust funds
'.
6. state and local governments
7.

20
6
2
17
6
1

69

' 69

52

_

,45
-4

28
2

41
7

41

31

48

.- - —-

100

100

100

Total for nonbank sources

B. Bank sources:
'
1. Commercial banks
2. Federal Reserve Banks
3.

20
1

32
9
2
16
10
1

Total for bank sources

C Total

-

_
_

NOTE.—Figures are rounded and will not necessarily'add to totals.
*Less than $50 millions or 0.5 percent,.

(*)

26
7
4

-

The figures given in the table show that the increase in debt during
t)h.e fiscal year 1943 was more than nine times that in the fiscal year
1941. Nonbank investors made very sharp increases in the aggregate
amounts of their net acquisitions of Federal securities during the fiscal
years 1942 and 1943, a development which was highly significant in
view of the importance of nonbank financing in the control of inflation.
I t will be noted, hov/ever, that the net absorption of $32.5 billions of
Federalsecurities by nonbank investors in 1943 represented a somewhat smaller percentage of the total increase in the debt than was
attributable to this group in either 1942 or 1941. The smaller proportion accounted for by nonbank investors during 1943, however,
was due largely to the fact that the working balance of the Treasury
was increased during that year through additional borrowing from
commercial banks, in order to bring it up to a level more consistent
with the greater cash requirements of the war program.
The table shows that individuals absorbed $12.3 billioiis or 20 percent of the $63 biUions increase in the debt during the fiscal year 1943.
In the preceding fiscal year, wheji the increase in the debt was only
about one-third as much as in 1943, individuals absorbed $6.9 billions,
tor 32 percent. Net acquisitions by this group during the fiscal year
1941 amounted to $1.8 billions, or 26 percent of the total debt increase
iOf $6.9 bilhons during that year.
Other nonbank investors are shown to have absorbed $20.1 billions
'Of Federal securities during the fiscal year 1943, over twice as much as
the net absorption attributable to these investors in 1942, and about
nine times as much as was absorbed by nonbank investors other than
individuals in the fiscal year 1941. While all of the nonbank investor.
classes .made sufestaintial additions to their holdings of Federal securi


REPORT OF T H E SEICRETARY OF T H E TREASURY

73

ties during 1943, ^^pther corporations and associations" are shown to
have increased their net purchases by the largest amounts. This
development was due mainly to the accumulation of corporate funds
which would normally have been invested in plant, equipment, or
inventories, as noted previously.
/
Despite these large increases in the amount of Government securities absorbed by nonbank investors, however, the magnitude of borrowing operations has increased so sharply that the proportion of
Government securities absorbed by commercial banks went to 41 percent in the fiscal year 1943, from 28 percent in the previous year.
During the same period the absorption by Federal Reserve Banks
increased from 2 to 7 percent, so that bank, sources accounted for
about 48 percent of the increase in the debt during the fiscal year 1943,
as compared with 31 percent the previous year, and 41 percent in the
fiscal year 1941. As has been indicated earlier in this report, however, part of the bank borrowing was for the purpose of increasing
the working balance; and steps were taken during the fiscal year to
effect a progressive increase in the proportion of borrowing from
nonbank investors and a progressive decrease in the proportion from
bank sources.
In the paragraphs which follow, the amounts of liquid savings and
accumulations which have been absorbed by purchases, of Federal
securities during the fiscal year 1943 are analyzed in more detail. The
figures on liquid savings and accumulations are taken from the discussion in the preceding section.
1. Individuals.—Liquid savings of individuals (including partnerships, personal trust accounts, and unincorporated businesses) amounted to $32.5 billions in the fiscal year 1943, as was pointed out previously. The table on page 74 shows the liquid savings which were
made by individuals during the fiscal year, by 6-month periods. The
total was divided between $16.3 billions in the first half of the year
and $16.1 billions in the second half. The table indicates how much
of the available funds went into private life insurance, savings
accounts, and repayment of debt, respectively, in each period. Together, these last mentioned items accounted for $7.9 billions for the
full year, leaving $24.6 billions available for other purposes. A large
part of this sum was available for the purchase of Federal securities,
although a considerable part of it undoubtedly was needed for larger
balances of currency and checking accounts associated with the higher
level of business which developed during the fiscal year.
The lower part of the table shows the amounts whic^h individuals
are estimated to have placed in Federal securities. Gross purchases
of securities from the Treasury are listed first, divided between purchases made in war loan cirives and those made otherwise. Allowance is then niade for replacements to, cover liquidations of securities
by this group of investors. These liquidations include securities which
542890—44
7



74

REPORT OF THE SECRETARY OF THE TREASURY

matured during the period, securities which were redeemed by their
holders, and securities which were sold in the market to other investors. The net absorption of securities is shown at $5.7 biUions for the
first half of the fiscal year and $6.6 billions for the second half, or a
total of $12.3 billions for the full year. It is clear that the sales program for individuals improved in effectiveness as the year progressed.
Most of the available funds which were not invested in Federal
securities were placed in currency and checking accounts.
. Individuals: ^ Liquid savings made and Federal securities absorbed, fiscal year 1943
[ In billions of dollars. Based on'estimates of Commerce Department, Securities and Exchange Commission,
and Treasury Department]
. ^
' • •

'

••

First
half

Item

Liquid savings of individuals.•.- . .
Less:
Private life insurance.._
Mutual savings bank accounts
Time deposits ih'commercial banks ^ . . . . . .
Debt repayment
___..
'Total

16.3

16.1

32.5

__.

...:

L3
.3
.8
1.1

L6
.5
L2
1.1

2.9
.7
2.1
2.2

.

3.5

Arnounts invested in Federal securities:
Purchased directly from the Treasury:
During war loan drives..:--.^
1
Other...
_
_
Total __
. Less: Replacements for cash maturities, redemptions, and market sales_

.

4.4

7.9

12.9

._..

Equals: Net amount invested in Federal securities.

Full
year

__.

_

Equals: Other liquid savings of individuals

'

Second
half

1L7

24.6

L6
4.5

3.3
4.7

4.9
9.2

6.1
.4

8.0
L3

14.0
L7

5.7

6.6

• 12.3

NOTE.—Figures are rounded to nearest tenth of a billion and will not necessarily add to totals.
• ^ Including partnerships, personal trust accoiints, and unincorporated businesses.
2 All increases in the aggregate amount of time deposits assigned to individuals and corporations as a
grdup have been allocated to individuals.

2. Insurance companies and mutual savings banks.—Life insurance
companies received an estimated $2.9 billions net in new hquid savings
ol individuals during the fiscal year, as noted above. This amount
represented the net increase in individual equity in life insurance,
according to estimates of the Securities and Exchange Commission.
Similar figures were not available for property insurance companies,
although the amount involved was neghgible. Mutual savings banks
received $0.7 billion of liquid savings of individuals during the year.
The table on page 75 shows the liquid savings of individuals received
by life insurance, companies and by mutual savings banks during the
fiscal year and presents also estimates of the net absorption j)f Federal
securities by insurance companies and mutual savings banks during
the year.
It will be noted.that the net absorption of Federal securities by all
insurance companies amounted to $3.8 billions, as compared with
$2.9billions of liquid savings of individuals received by life insurance



REIPORT OP T H E SEiCRETARY OF T H E

75

TREIASURY

companies. The difference consisted of purchases made by property
insurance companies, and purchases made by life insurance companies
representing the investment of funds received from the liquidation
of other assets such as securities or loans held.
Net absorption of Federal securities by mutual savings banks is
estimated at $1.4 billions, double the amount of the liquid savings of
individuals received by these organizations. The extra funds represented the conversion of other assets to Federal securities by this
group of investors.
I n s u r a n c e companies and mutual savings banks: Liquid savings received and Federal
»
securities absorbed, fiscal year 1943
[In billions of dollars. Based on estimates of Securities and Exchange Commission and Treasury
Department]
Insurance Mutual
comsavings
panies
banks

Item

Liquid savings of individuals received.

_

Amounts invested in Federal securities:
Purchased directly from the Treasury:
During war loan drives _.
Other

_._

Total..,Less: Replacements for cash maturities, redemptions, and market sales._
Equals: Net amount invested in Federal securities.!

._

0.7

.

-

12.9

4.1
L3

L8
.7

...

5.4
L6

2.5
1.1

3.8

1.4

1 Represents liquid savings of individuals received by life insurance companies only; figures are not available for savings received by property insurance companies, but the amount is neghgible.

3. Other corporations and associations.—The table below shows the
current liquid accunaulations, of corporations and the amount of
Federal securities absorbed by ^'other corporations and associations.''
It is estimated that liquid accumulations of corporations amoimted to
$16.6 billions during the fiscal year. No figures are shown for liquid
accumulations of associations because of lack of data, but the aggregate amount is small.
It will be noted that the net amount invested in^ Federal securities
by ''other corporations and associations^^ is estimated at $10.6 billions,
equivalent to about two-thirds of the total liquid accumulations of
corporations during the period. The difference between total liquid
accumulations and purchases of Federal securities reflects several
factors. First, a small part of the, liquid accumulations of corporations represented unspent reserves of unincorporated businesses, which
have not been classified separately for lack of data. Second, corporations utilized some of their new liquid accumulations to retire'
debt during the year. Third, a part bf new corporate funds was used
to enlarge working capital. These factors were only offset to a minor
degree by the fact that purchases of securities by associations were
included in the figures for Federal securities acquired,




76

REPORT OF T H E SEICRETARY OF T H E

TREASURY

Other corporations and associations: ^ Liquid accumulations and purchases of Federal
secur Hies, fis cal year 194s
[In billions of dollars. Based on estimates of Commerce Department and Treasury Department]
Item
Liquid accumulations of corporations

..

16.6

Amounts invested in Federal securities:
Purchased directly from the Treasury:
• During war loan drives
1
Other...,.

9.2
10.0
19.2
8.6

Total
:
...
Less: Replacements for cash maturities, redemptions, and market sales.
Equals: Net amount invested in Federal securities..

10.6

. I Including dealers and brokers.

4. Governmental accounts.—This group of investors includes Federal
agencies and trust funds and State and local government investment
accounts of various kinds. I t has been previously noted that liquid
accumulations in governmental accounts are estimated at $5.3 biUions
for the fiscal year. As shown in the table below, these consisted of $3.0
billions of accumulations in Federal trust funds, such as social security
funds, and $2.2 billions of liquid surpluses of State and local governments. Federal agencies and trust funds are estimated to have absorbed $3.7 billions of Federal securities during the fiscal year, as
compared with $3.0 billions of accumulations in Federal trust funds.
The extra funds invested represented mainly the investment by Federal agencies of funds made available through the liquidation of other
assets, primarily loans outstanding.
State and local governments acquired $0.7 billion of Federal securities during the fiscal yeax, although their surpluses aggregated $2.2
billions. A large part of the surpluses was used to retire outstanding
State and local securities.
Governmental accoimts: Liquid accumulations and purchases of Federal securities.
' fiscal year 1943
[In billions of dollar's. Estimates of .Commerce Departraent and Treasury Department]

Item

Accumulations in Federal trust funds
Liquid surpluses of State and local governments.
Amounts invested in Federal securities:
Pm-chased directly from the Treasury: i
During war loan drives
Other..

Federal
agencies
and trust
funds

state •
and local
govern- >
ments

3.0

2.2

.7
3.2

(*)

Total
Less: Replacements for cash maturities, redemptions, and market sales

3.9
.2

(*)

Equals: Net amount invested in Federal securities

3.7

.7
.7
.7

*Less than $50 millions./
1 Special issues to Federal agencies ahd trust funds are included with pui'chases on the basis of net changes
in amounts outstanding.




REiPORT OF T H E SECRETARY OF T H E TREASURY

77

5. Bank sources.—During the fiscal year the interest-bearing direct
and guaranteed debt of the Federal Government increased by $63.0
billions. I t is estimated that a total of $32.5 billions of this increase
was absorbed by nonbank investors, as shown in the preceding tables.
This leaves $30.5 billions to be accounted for by bank sources.
The following table shows the amount of securities which were
absorbed by commercial banks and Federal Reserve Banks during the
fiscal year. Commercial banks are estimated to have acquired $25.9
billions of Federal securities, most of which were obtained on direct
purchase from the Treasury. Federal Reserve Banks acquired $4.6
billions, all in the open market. These acquisitions were made
primarily for the purpose of providing currency and bank reserves.
Commercial banks and Federal Reserve Banks: Federal securities absorbed, fiscal
•year 1943
[In billions of dollars. Data from Federal Reserve System and Treasury Department estimates]

Item

Commer- Federal
cial
Reserve
banks
Banks

Amounts invested in Federal secmities: i
Purchased directly from the Treasury:
During war loan drives
Other.
.

10.2
14.4

Total
1
Plus: Excess of market purchases over replacements for cash maturities and
redemptions
.^

24.6

Equals: Net amount invested in Federal securities..^

25.9

L3

4.6

1 Treasury bills are included op the basis of net changes in amounts acquired either directly from the '
Treasury or in the market.

POLICY W I T H R E S P E C T T O BANK B O R R O W I N G

The Treasury's position with respect to borrowing from banks was
stated in an address by the Under Secretary of the Treasury before
the Investment Bankers Association of America on October 19', 1942.
The Under Secretary said in part:
. . . I liave tried to empliasize t h a t it is our firm belief in t h e Treasury t h a t
we should borrow from commercial banks only on a residual basis—that is, to
resort to t h e commercial banks only after every effort has been made to finance
t h e deficit from other sources . . .
We must recognize t h a t t h e commercial banks will be called upon to finance a
large share of t h e deficit—in fact, a share of unprecedented magnitude. I n t h e
months—perhaps years—to come, it is i m p o r t a n t t h a t t h e banks preserve a
maximum of liquidity. To help t h e m to do so, we have decided t h a t securities
sold to t h e banks, should have a range of maturities running from 3 months, in
t h e case of Treasury bills, to 10 years, in t h e case of Treasury bonds . . .
In securities of over 1-year m a t u r i t y , we have continued to oft'er t h e banks
Treasury notes, and Treasury bonds with a t e r m of not over 10 years. This
:means a maximum interest rate of 2 percent on Treasury bonds sold to commercial
ibanks.
I t may seem a t times t h a t banks are being discriminated against in not being
p e r m i t t e d to subscribe for longer-term securities which bear higher interest rates
t h a n 2 percent; b u t this is not t h e case. The Government would certainly be
doing the banks no favor if it permitted t h e m to load themselves with long-term
issues. Y'ou m a y recall t h a t t h e report of the Economic Policy Commission of t h e




78

R&PORT OF THE SECRETARY OF THE TREASURY

American Bankers Association, issued last April, concluded that securities sold to
banks should be limited to a 10-year maturity. I think all of you will agree that a
frozen banking system trying to become unfrozen after the war by selling longterm Government securities might create a bad situation.
It should also be noted that a large part of the securities which will be bought
by banks will be financed by increases in deposits for the banking system as a
whole. It seems reasonable that the interest rate on securities financed in this
manner should be kept down to a maximum of 2 percent—regardless of the
maturities involved—because the costs incurred by the banks in making loans
direct to the Government, and in handling>the increased deposits resulting from
these loans, are small. Furthermore, from the point of view of the cost of financing
the war, interest rates should be kept as low as is compatible with the objective of
financing the war as much as possible outside of commercial banks.
. . . To the extent,, however,' that we must resort to the commercial banks,
it is imperative that interest rates be kept at prevaihng levels and that the maximum of liquidity be preserved . . .

(The full text appears as exhibit 76, p. 390.)
The following is a brief summary of legislation enacted by Congress and steps taken by the Treasury Department and other governmental agencies during the fiscal year in order to define the relationship of the commercial banks to Government financing and to assure
the smooth working of the money market.
1. Congress amended the Federal Reserve Act, by Public Law 656,
approved July 7, 1942, to permit the Board of Governors of the Federal Reserve System to change the reserve requirements for member
banks in central reserve cities, reserve cities, and elsewhere, independently of changes in reserve requirements for banks in the reserve
classifications other than the one affected by the particular regulation. Such changes are limited to the maximum and minimum
reserve requirements for each class of bank as already defined in the
Fed.eral Reserve Act. The same amendment eliminated the provision hitherto contained in the act that no member bank should make
a new loan or pay a dividend while its reserves were deficient. Under
this amendment the Board of Governors ordered three successive
reductions of 2 percent each in the reserve requnements applicable
to banks in central reserve cities, effective August 20, September 14,
and October 3, 1942, thus reducing those reserve requirements to the
level of existing requirements for banks in reserve cities. According
to Federal Reserve estimates this action resulted in the aggregate
release of approximately $1.2 billions of member bank reserves at
the times when reserve requirements were reduced.
2. On August 7, 1942, the Federal Open Market Committee supplemented its directive of April 30, 1942, to the Federal Reserve Banl^s
that they should purchase all Treasury bills offered to them at a discount rate of % of 1 percent per annum, by providing that any such
purchases, if desired by the seller, should be made on the condition that
the iFederal Reserve Bank, upon request of the seller, would sell to
him an equal amount of Treasury bills of the same series at the same
rate of discount. In addition, during October 1942, discount rates on




REPORT OF.THE SECRETARY OF THE TREASURY^

79.

advances by Federal Reserve Banks to member banks, secured by
Government obligations maturing or callable within one year, were
reduced by aU Federal Reserve Banks to K of 1 percent.
3. The Comptroller of the Currency, the Federal Deposit Insurance
Corporation, the Board of Governors of the Federal Reserve System,
a n d ' t h e Executive Committee of the National Association of Supervisors of State Banks issued on November 23, 1942, a joint statement
of policy. I t was announced that banks would not be subject to^
criticism by examiners on account of investments in Government
securities of any type except those made specifically ineligible for
bank investment, and that no deterrents would be placed in the way
of such investments. I t was also stated that banks would not be subject to criticism for availing themselves of the facilities of the Federal
Reserve Banks to borrow or to sell Treasury bills for the purpose of
restoring their reserve positions. The statement, moreover, declared
that examining authorities would have no objection to loans by banks
to investors to enable the borrowers to purchase Government securities
in anticipation of income, provided such loans were on a short-term
or amortized basis and were fully repaid within 6 months. (See
exhibit 42, p. 340.)
4. By an act approved April 13, 1943, United States Governmeat
deposits arisiag out of the purchase of Government securities by or
through commercial banks (commonly known as war loan deposits)
were excluded from the definition of deposits for the purpose of determining the assessment basis for deposit insurance until 6 months after
the termination of the war; and, for the same period of time, the
reserve requirement against such war loan deposits was suspended.
(See exhibit 64, p. 367.) This legislation tends to ease the strain on
bank reserves incident to the transfer of funds on account of subscriptions to Government securities and otherwise to facilitate stich subscriptions. The effect upon bank reserves of the initial payment for
securities purchased through war loan account is, in the case of a banlv's
own subscription, an increase of deposits unaccompanied by an increase
in the amount of reserve required; and, in the case of a subscription
entered for a customer, a transfer of a deposit from an account
requiring a reserve to one a;gainst which no reserve is required, and thus
increas'es excess reserves. Excess reserves are reduced onl}'^ 'ga'adually
as the proceeds of the loan are spent by the Goyernment and returned
to the banks as private deposits.
5. On May 6, 1943, as previously acted, the Treasury Department
announced that beginning with the offering of Treasury bills to be
dated May 12, in addition to the customary corripetitive tenders,
tenders in an amount not exceeding $100,000 from any one subscriber
would be received on a fixed price basis and aUotted in full. ' The




80

REiPORT OF THE SEICRETARY OF THE TRMSURY

purpose of this change in procedure \vas to increase the attractiveness
of short-term Treasury securities to investors, particularly the smaller
commercial banks not acquainted with the competitive tender,
technique.
In addition to the specific measures just outlined, it was the policy
of the Treasury Department during the fiscal year to concentrate the
increase in the debt absorbed by banks in short-term instruments,,
' particularly bills and certificates, and to secure as wide a distribution
of such instruments as possible among banking institutions in order
to increase the fluidity of the short-term money market and to provide
banks with a convenient method of adjusting their reserve positions
promptly to changes in their deposit liabilities. The following table,
showing the estimated holdings of Treasury bills and certificates of
indebtedness on June 30, 1942, and June 30, 1943, indicates the extent
to which this distribution was effected during the fiscal year.
Treasury bills

Certificates of
indebtedness

Class of holder
June 30,
1942

June 30,
1943

June 30,
1942

June 3Q,
1943

Millions of dollars
Commercial banks:
New York City.
• Chicago
All others
Subtotal.
Federal Reserve Banks
Mutual savings banks
Insurance companies
Government agencies and trust funds.
All others
,
Total amount outstanding.

2, 920 •
887
6,662

2,156
532
4,059

203
1,118

1,577

1,747

2,019

10, 469

243
28
91

3,815
21
154
11
1,116

66
74
191
11
735

1,092
184
305
51
4,460

2,508

11,864

3,096

16, 561

433
375
769

NOTE.—The holdings of the various classes of investors are estimates derived from reports of the Federal
Deposit Insurance Corporation, the Board of Governors of the Federal Reserve System, and the Treasury
Department. They differ, therefore, from the holdings by banks and insurance companies, shown in table
^96 of this report, which are from the Treasury Survey of the Holdings of United States Government Securities, because the Survey does not include all the banks and insurance companies in the country.

As a result of the establishment by the Federal Reserve Banks of
the posted buying rate for Treasury bills previously mentioned, commercial banks—especially those m the larger centers—have come
increasingly to regard their holdings of Treasury bills as a type of
excess reserves and to use them for the adjustment of their day-to-day
rjBserve positions. Treasury certificates also, while not as convenient
to use for the day-to-day adjustment of reserve positions as Treasury
bills, constitute a higlily liquid type of secondary reserve. The increase during the year in the outstanding amount of bills and certificates, and of commercial bank holdings of these securities as shown
in the above table, contributed materially, therefore, to the. ease in
the money market which prevailed throughout the fiscal year.




REPORT OF THE SECRETARY OF THE TREASURY

81

GENERAL FUND

The General Fund includes all moneys of the Government deposited
with and held by the Treasurer of the United States, including the
moneys covered into the Treasury which can be withdrawn only in
pursuance of an appropriation by Congress. Every receipt of the
Treasury, from whatever source, and every expenditure, of whatever
nature, affect either the assets or liabilities, or both, of the General
Fund shown in the daily statement of the Treasury. The total amount
of the assets over and above the total amount of the liabilities represents the balance in the General Fund available to meet Government
expenditures for general, special, and trust accounts, etc.
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 in 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 of
the Postal Savings System, and postmasters, clerks of courts, disbursing officers, etc., and uncollected items, exchanges, etc.
The balance in the General Fund is classified according to increment
on gold, seigniorage, and working balance.
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 ihe change in the General Fund balance between June SO, 1942, and June
30, 1943
[On basis of daily Treasury statements, see p. 459. For a description of accounts through which Treasury
transactions are effected, see p. 460]
Balance June 30, 1942
...:.:
$2,991,147,215.77
Add:
Receipts, net i, general and special accounts
-'_..
22,281; 642, 709. 24
Receipts, trust accounts, increment on gold, etc
3,926,252,842. 21
Net increase in gross public debt...
64, 273, 645, 213. 68
Deduct:
Expenditures, general and special ac- •
counts
$78,182,348,640.87
Less statutory debt retirements
(sinking fund, etc.)
3,463,400.00
Expenditures, trust accounts, increment
on gold, etc

93,472,687,980.90
' '
$78,178,885,240.87
5,787,236,813.97

83,966,122,054.84

Balance June 30, 1943
..........
9,506,565,926. 06
1 Exclusive of employment taxes collected and deposited as provided under sec. 201 (a) of the Social Security
Act Amendments of 1939 less reimbursements to the General Fund for administrative expenses. Such net
amount is included in "Trust accounts, increment on gold, etc." on the following line.

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 666 of this report.




82

REPORT OF THE SEICRETARY OF THE TREASURY
TAXATION DEVELOPMENTS

During the fiscal year 1943 two major tax measures became law, the
Revenue Act of 1942, approved October 21, 1942, and the Current Tax
Payment Act of 1943, approved June 9, 1943. Developments relative
to each of these acts are discussed by first indicating the Treasury
proposals and then describing the major features of the act as follows:
(1) Treasury proposals submitted in coniiection with the Revenue Act
of 1942, (2) major features of the Revenue Act of 1942, (3) Treasury
proposals for current tax payment, and (4) major features of the
Current Tax Payment Act. A summary of other revenue laws
enacted during the fiscal year 1943 is'set forth in a fifth subsection
of this section starting on page 111 of this report.
A,. Treasury proposals submitted in connection with the Revenue Act
/, .
, of 1942
I. Introduction.—^Less than one month after Pearl Harbor the
President issued his Budget Message for the fiscal year 1943. The
message estimated expenditures for the year at $59 billions and recommended $7, billions of additional revenue from taxes together with $2
billions from social security contributions. The increase in social
security contributions was recommended to finance the expansion in
coverage and the increase in benefits, which the President had urged
upon Congress in previous budget messages. Methods for raising
the. amounts recommended by the President were outlined by the
Secretary of the Treasury to the Committee on Ways and Means at
public hearings. (The statement appears in the annual report for
1942 on page 362. See also exhibit 79 on page 396 of this report.)
Subsequently it became evident that the demands of war would
exceed the original estimate of $59 billions for the fiscal year 1943
and the estimates were revised by the Bureau of the Budget on
April 24,! 1942, and again on October 7; 1942. The April estimate
revised the figure for Federal expenditures for the fiscal year 1943
upwards from $59 billions to $73 billions and the October estimate
further increased the figure to $80 billions. In connection with each
of these revisions, the Treasury presented recommendations for
further increases iii tax revenues. On May 6, 1942, the Secretary
wrote to the Chairman of the Ways and Means Committee suggesting
that an additional $1.1 billions of revenue should be raised from the
individual income tax by lowering the exemptions. This suggestion
brought the additional revenue of the 1942 tax program to $8.7 billions.
I n a statement to the Senate Finance Committee on September 3,
1942,. the Secretary asked for an additional $6.5 billions from a
spendings tax, coinbihed with a further lowering of personal exemptions under the individual income tax, bringing the total additional
revenue of the tax program to $15.2 billions. (See exhibit 81, p. 410.)



REPORT iOF T H E SEiCRETARY OF T H E TREASURY

83

As the war progressed, it became increasingly evident that the increase in Federal expenditures alone would not constitute a sufficient
guide to Federal revenue needs. The rapid increase in Government
^expenditures and the rapid increase in income payments to individuals
were not accompanied by an increase in the aggregate supply of goods
and services available for civilian consumption. The sharp rise in
production for military purposes caused a reduction in some branches
of civilian supplies and stopped the growth in others. In view of
these trends the Treasury took the position that an expanding revenue
program was needed to help control inflation.
Accompanying the need for greatly increased revenue the Treasury
emphasized a further need governing our wartime fiscal program.
This was the need for holding fast to the basic principle of our tax
system that taxes should be fair and non-discriminatory and imposed
in accordance with ability to pay. The proposed additional taxes
were selected so as to conform as closely as possible to these objectives.
Moreover, the tax laws were carefully reexamined-with a view to
suggesting the removal of inequities which would be considered
intolerable under the burden of wartime revenue requirements.
The revenue recommendations for 1942 by major classes of taxes
are summarized below.
Increase ov'er yield of existing law ^
r
.„.
"
J
^
In millions
I. Original recommendation Mar. 3,1942:
of dollars
Individual income tax
3,200
Corporation taxes
:..
._
_ 3,060
Estate and gift taxes
-.
._
330
Excise taxes
1,340
Removal of special privileges:
Exemption from income and profits taxes with respect to interest from all State
and local governmental obligations
200
Percentage depletion
80
Mandatory joint returns
300
Other, approximately
100
—
680
. Total
8,610
Less allowance for interrelated efifects, approximately
1,000
Approximate increase in revenue from proposed tax program
l
.:__ 7,610
II. Reduction in exemptions under individual income tax suggested May 6, 1942
1,100
IIL Spendings tax and further reduction in individual income tax exemptions recommended Sept.
3,1942
_
6,500
Grand total
1 For a full year of operation.

.

.15,200

I I . Individual income tax.—On March 3, 1942, in presenting initial
recomrnendations for $7.6 billions of additional revenue, it was suggested that $3.2 billions, or approximately 40 percent of the total,
be raised by increasing rates under the individual income tax. Subsequentl}^, when it was recommended that personal exemptions under
the individual income-tax be lowered to raise an additional $1.1
billions, the additional revenue proposed from the individual income
tax was increased to $4.3 billions, or nearly 50 percent of the total of
$8.7 billions.
\
In placing emphasis upon the individual income tax the Treasury
took into consideration both tax equity and the need for taxes to



84

REPORT OF THE SECRETARY OF THE TREASURY

help avert inflation. Together with other agencies it had undertaken
studies of the magnitude of the inflationary problem and the relation
of that problem to the ainount and kind of taxes that should be imposed. The individual income tax appeared to be one of the most
desirable means of withdrawing purchasing power from income recipients without directly increasing prices and the cost of living, and thus
of accomplishing the primary objective of anti-inflationary taxation.
Moreover, tln'ough collection at source, the individual income tax
oft'ered the flexibility necessary for adjustments to changing tax
needs as they are affected by changing economic conditions. The
individual income tax was emphasized as a source of additional
revenue also because it could be adjusted to differences in income
and family responsibility, thus adhering to the principle of ability to
pay in financing the war.
1. R A T E CHANGES.

The Treasury proposed no increase in the n o r m a l t a x rate. Increases in surtax rates were proposed for all brackets. In order to
make the progression in rates more gradual at the lower end of the
income scale^ it was suggested that the first bracket of surtax income,
0-$2,000, be divided into $500 brackets and that the $2,000-$4,000,
bracket be divided into $1,000 brackets. Under this suggestion the
surtax rates on the first $500 of surtax income were to be increased
from 6 percent to 12 percent. Above this point the proposed increases
in surtax rates were larger. The maximum increase was 21 percentage points on surtax net income of $100,000-$150,000.
2. REDUCTION IN EXEMPTIONS.

In making its original recommendations to the Ways and Means
Committee the Treasury indicated that the revenue necessary to
combat inflation should be raised if possible without lowering personal
exemptions under the income tax. I t pointed out that those with
incomes below the existing exemptions were having great difficulty
under the increased cost of living and also were bearing a heavy
burden of indirect taxes. It therefore stressed the desirability of
raising as much revenue as possible from those enjoying higher incomes
before imposing heavier taxes on the great mass of taxpayers.
As a result of increasing revenue needs and the growing inflationary
pressure, the Treasury considered it necessary to broaden the individual income tax and recommended on May 6, 1942, that the personal exemptions be lowered to produce additional revenue of $1.1
billions. I t was estimated that the reduction of exemptions to $600
for single persons, $1,200 for married persons and $300 for each
dependent would increase the number of income recipients subject
to income tax by approximately 20 perceiit and increase the tax base
by more than 25 percent. •




REPORT OF THE SEORETARY .OF THE TREASURY

85

3. COLLECTION AT SOURCE.

In order to -adapt the individual income tax to wartime needs the
Treasury proposed adoption of collection at source. A more convenient method of payment was needed to adapt the income tax to
the weekly and monthly budgets of the millions of wage earners and
other income recipients not accustomed to yearly budgeting and to
liquidate tax liabilities while income was being earned. With the
elimination of the lag of tax collections behind changes in incomes or
tax rates, the income tax could be adjusted to promote economic
stability more eft'ectively both in periods of inflation and in periods
when incomes declined and unemployment increased. Greater assurance of collection woukFbe achieved and there would be less likelihood
of a break-down of the income tax as wartime needs called for greater
reliance on the individual income tax.
In the fall of 1941 the Treasury had developed a program for an
additional tax of 15 percent on individual incomes above exemptions
to be collected at source on wages, salaries, interest, and dividends.
In November 1941, this plan was proposed informally to members
of the Ways and Means Committee with a view to later formal
recommendation, but the reaction was unfavorable. The need for
this step was npt widely recognized at that time and further action
was, deferred until Congress took up the revenue bill of 1942.
In presenting its recommendations for revenue legislation in 1942
to the Ways and Means Committee the Treasuiy strongly urged the
adoption of collection at source-on wages, salaries, corporation bond
interest, and corporation dividends as a part of the regular income
tax. Originally it was recommended that the Secretary have discretion to collect at source at a rate up to 10 percent, since it was not
known how soon, and to what extent it might be necessary to speed
up tax collections to check inflation. Subsequently, it, was suggested
that the rate be fixed at 10 percent. The amount, of wages and
salaries subject to withholding would be the net amount after an
allowance for personal*exemption, credits for dependents, and deductions. I t was hoped that collection at source would begin before the
close of the calendar year 1942 and before the proposed increased
taxes became eft'ective. However, when it became clear that this
would not be possible, a plan was submitted to ease the transition to
collection at source by spreading the impact of the 10 percent over
two transition years, 1943 and 1944.
Under the plan finally developed the withholding rate for 1943 was
set at 5 percent and for subsequent years at 10 percent, the amount
collected at source to be credited against the liability for the year in
which the tax was withheld. In order to advance the payment of
taxes for persons not subject to withholding, it was proposed, that
all taxpayers should pay as a first installment an amount equal to the




86

REPORT OF THE SECRETARY OF THE TREASURY

withholding rate for the preceding year applied to the surtax net
income, plus one-fourth of the remaining liability. The amount
withheld at source was to be applied as a credit on the first installment.
This plan was incorporated in the bill as passed by the House and
with some modifications was tentatively adopted by the Senate
Finance Committee.
When the urgency of current collection became even more apparent
during the summer of 1942 and when the Victory tax was under consideration the Treasury recommended to the Senate Finance Committee inauguration of collection-at-source on January 1, 1943, at a
rate of 15 percent of net taxable income; doubling up was to be avoided
by scaling down the tax rates on 1942 income by 10 percentage points
and raising the rates on 1943 incoine by 5 percentage points. The
Treasury opposed the introduction of the Victory tax on the grounds
that it would complicate unduly the individual income tax and that
the use of a low flat exemption for all taxpayers, regardless of family
status, would result in an inequitable distribution of the tax burden.
However, provision for withholding under the individual income tax
was eliminated from the bill when the Senate Finance Committee
substituted collection at source under the new Victory tax.
During the consideration of collection at source the Treasury
made a special survey of more than 450 employers to ascertain special
problems involved and methods of meeting them. Following this
survey a system was developed for wage-bracket withholding which
was adopted under the Victory tax. .
4. ELIMINATION OF SPECIAL PRIVILEGES.

The Treasury took the position that certain provisions in the law
granting special advantages to relatively few taxpayers were intolerable in time of war. I t felt that such privileges should be eliminated
before imposing additional burdens on the great mass of taxpayers.
The special privileges stressed with respect to the individual income
tax were (1) tax-exempt securities of State andiocal governments and
(2) separate returns by married persons. I t was estimated that the
elimination of these and other special privileges would result in approximately $700 millions in additional revenue. (See exhibit 79, p. 396.)
Included among the special privileges was the favorable treatment
accorded capital gains and losses. I t was proposed that the maximum
rates on long-term gains of individuals should be increased and that
long-term losses should not be permitted as a deduction against ordinary income except (in combination with short-term losses), to the
extent of $1,000. - However, it was suggested that long-term and
short-term losses should be allowed against gains in either class and
that a 5-year carry-over be allowed for both classes of losses.




REPORT OF THE SECRETARY OF THE TREASURY

87

5. R E L I E F FROM S P E C I A L H A R D S H I P S .

The Treasury recognized that some provisions in the tax laws
unduly discriminated against certain taxpayers and that these discriminations as well as special privileges should be removed in order
to achieve a better adjustment of the individual income tax to wartime needs. In this connection it was suggested that the option to
amortize war facilities over a period df 5 years be extended to partnerships and individuals; and that the treatment of recoveries from
bad debts and taxes, expenses incurred in the production of non-trade
qr non-business income, income accrued at decedent's death, alimony
payments, and income for services rendered over a period of 5
years or more, be revised.
I t was also proposed that certain special allowances and exemptions
be granted. These included allowance for extraordinary medical
expenses, credit for dependent children between the ages of 18-21
attending school, and a special credit where the wife or head of family ^
was working outside the home.
6. ELIMINATION OF EARNED INCOME CREDIT.

•

•

As a step toward siiriplification of the individual income tax it was
proposed by the Treasury that the earned income credit be eliminiated..
The Treasury did not oppose the objective of differentiation'in favor
of genuine earned income. However, it took the position that for a
large proportion of taxpayers the credit was not a real earned income
credit since the first $3,000 of net income was considered earned net
income regardless of the source, and that the value of the credit was
out of all proportion to the complexitiies which the credit produced in
the computation of the tax.
7: W A R SUPERTAX.

•

,

To implement the President's proposal that no American citizen be
permitted to retain a net income after taxes of more than $25,000 a
year, set forth in his Message to Congress oil April 27, 1942, the
Treasury prepared a plan for a war supertax. The plan provided for
a 100 percent tax on that part of net income after regular income tax
which exceeded a personal exemption of $25,000. I t was recommended that for the purpose of the supertax joint returns be made
mandatory, that a personal exemption of $25,000 be allowed for'each
spouse, and that net income be defined to include income exempt
under the regular income tax. I t was suggested that certain safeguards be set up to prevent avoidance of the special tax and that
certain relief provisions be included.
I I I . Corporation taxes.—In framing its corporation tax proposals,
the Treasury took into consideration the fact that corporations generally were benefiting greatly from the accelerated rate of war production. The net income of corporations with positive net income had



88

REPORT OF THE SECRETARY OF THE TREASURY

risen from $7.2 billions in 1939, to an estimated» $15.5 billions in
1941, and was expected to reach.a figure of approximately $17 billions
for 1942. Although corporation taxes had been increased both in
1940 and 1941, net income after taxes for these corporations was
expected to amount to $9.6 billions in 1942 as compared with $6.0
billions in 1939. In recommending that additional taxes be raised
from corporations in the amount of $3 billions, the Treasury pointed
out that the adoption of these recommendations would leave incorporated business in the aggregate with the?same aniount of income
after taxes as during the years before 1940.
L

RATES.

Believing that a substantial share of the increased corporation tax
should fall on excess profits, the Treasury recommended that the
excess profits tax rates be increased by 15 percentage points. This ^
would have raised the maximum rate of tax from 60 percent to 75
percent on adjusted excess profits net income in excess of $500,000.
The Treasury suggested that the balance of the $3 billions in additional corporation taxes be provided by a special war surtax which
would be imposed at the rate of 31 percent on corporations y i t h incomes of more than $25,000. Since no change in the normal tax was
recommended, this increase in the surtax rate would have raised the
combined normal and surtax rate to 55 percent.
I t was recognized that a 55 percent rate bf tax might impose some
hardships on corporate taxpayers in those cases where the surtax net
income for the. current year had fallen in comparison with income for
the pre-war period. Hence, a special tax credit was recommended
for corporations which had experienced such reductions in income.
However, following the tentative action of the Ways and Means
Committee in adopting the lower combined normal and surtax rate
of 40 percent, the Treasury withdrew this recommendation.
2. POST-WAR CREDIT.

The Treasury took the position that very high top or '^marginar'
rates of tax might impair the incentive for maintenance of efficient
and economical business operations. Furthermore, it recognized
that funds would be needed.by business enterprise after the war in
making the transition from wartime to peacetime production. For
these reasons, the Treasury suggested that in the case of any dollar
of corporate profits, the receipt of which resulted in an increase of
tax beyond perhaps 80 percent, the additional tax should be held by
the Government to the account of the corporations and be returnable
within a limited period after the war in those cases where it would
be spent for new and additional capital equipment, or otherwise
would be spent in the additional employment of labor.
Following the adoption by the Ways and Means Committee of a




R E P O R T OF THE SEORETARY OF THE TREiASURY

89

flat 90 percent excess profits tax rate, the Treasury recommended an
unrestricted post-war refund equal to 10 percent of the excess profits
tax, and a maximum effective rate limitation equal to 80 percent of
surtax net income.' The primary purpose of the first of these recommendations was to avoid the adverse effects of a 90 percent marginal
rate of tax. In reducing the net marginal rate to 81 percent, the postwar refund was expected to preserve the interest of businessmen in
additional profits. On the other hand, the maximum effective rate
limitation reflected the view that effective rates of tax in excess of 80
percent of net income might constitute a serious threat to the maintenance of a high level of war production, and might deprive firms that
had greatly expanded production since the base period of cash needed
in financing both war production and conversion to peacetime operations.
3. CARRY-BACK OF LOSSES AND UNUSED E X C E S S PROFITS

CREDITS.

The Treasury recognized that high corporate tax rates might work
extreme hardships on taxpayers with fluctuating income. Unless
losses incurred in some years could be offset against income of other
years, capital might actually be taxed as, income. Similarly, it was
believed that if a corporation had excess profits in one year and less
than normal profits in a second year, it might be forced to pay excess
profits taxes even though it had not earned excess profits over the
2-year period. I t was therefore proposed that a carry-back of losses
and unused excess profits credits, be allowed. For 1943, a 1-year
carry-back was suggested, for 1944 and subsequent years a 2-year
carry-back. These carry-backs were recommended by the Treasury
after the Senate Finance Committee had rejected its recommendations
to allow certain special reserves or general reserves as deductions
from current taxable income.
4. R E L I E F

PROVISIONS.

Following the tentative adoption by the Ways and Means Committee of a flat 90 percent excess profits tax rate, the Treasury proposed that the general relief provisions be amended so as to broaden
their application- to cases not falling under the specific provisions of
existing law and to remove certain inequities andcalleviate certain
hardships for which relief could not then be sought.
The relief provisions of the 1941 Revenue Act covered only those "
^
taxpayers whose base periods were unrepresentative because of some
abnormal event which interrupted or diminished production or because the taxpayer had commenced business or changed the character
of its business during the base period. The Treasury proposed that
the right to use a constructive base period net income in lieu of actual
earnings be extended to any taxpayer able to establish t h a t ' i t s
average base period net income did not provide a reasonable base
542890—44

8




\

90

REPORT OF THE SECRETARY OF THE TREASURY

for the measurement of excess profits' credit in the taxable year. In
order to obtain any benefit under the proposed amendment, the taxpayer was expected to meet at least one of four specific tests. However, the inability of any taxpayer to meet these tests was not intended
to exclude it from the benefits of the amendment, if the taxpayer could
satisfy the Commissioner or the Board of^ Tax Appeals (now The
Tax Court of the United States) that its claim for relief was not
inconsistent with the principles underlying the specific tests.
The Treasury further proposed that the relief afforded under section 722 should no longer be confined to the adjustment of abnormal,
base period net income of taxpayers electing the average earnings
credit. Taxpayers currently denied the use of the earnings base
because they did not commence business until after January 1, 1940,
and meeting certain tests also were to be allowed to use a constructive
average base period net income.
The Treasury also suggested that special relief from excess profits
taxes be afforded to certain classes of taxpayers which appeared likely
to be unfairly burdened by this tax. In the case of taxpayers reporting income on the installment basis or on the basis of completed contracts, it was suggested that, for purposes of the excess profits tax,
,incon\e should becomputed on the accrual basis and on the percentage
of completion basis, respectively. These recommendations were made
in order to avoid taxing as excess profits bunched income resulting '
from the use of these special methods of accounting.
Complete exemption from excess profits taxation was recommended
for the producers of a limited number of ^'strategic'' minerals. This
proposal was made with a view to stimulating the wartime discovery
and development of deposits of certain essential minerals which could
not ordinarily be produced in this counjbry in competition with foreign
sources of supply.
, ..
For all industries with depletable resources, it was recognized that
the increase in profits during the war might in part result from steppedup production which would exhaust the available reserves earlier than
under normal conditions. The same aggregate output over a period
of years would result in more profits being taxable as excess profits if
the output were' concentrated in a few years than if spread over a
longer period, since the aggregate excess profits tax credit for the
period would vary with the number of years. I t was, therefore, recommended that, in cases where the life of a mineral property was being
appreciably shortened as a result of accelerated production, full or
partial relief from excess profits taxation should be granted depending
on the ratio of excess production to estimated reserves.
5. REMOVAL OF SPECIAL PRIVILEGES AND OTHER CHANGES.'

In view of the increased tax burden which corporations generally
were being called upon to assume under its proposed revenue program.



REPORT OF THE SEORETARY OF THE TREASURY

91

the, Treasur37- asked for the removal of certain preferred treatment
enjo3^ed by a limited number of taxpayers, chiefly corporations.
Specifically, it was suggested (1) that the avoidance of tax permitted
to the owners and operators of certain mineral properties be eliminated
by discontinuing the allowance for percentage depletion, (2) that the
dou^ble exclusion of tax-exempt interest permitted to life insurance
companies be eliminated by reducing the reserve earnings deduction
by the ratio of tax-exempt interest to investment income after other
deductions, (3) that the outright exemption from taxation of mutual
fire and casualty insurance companies be confined to the small, strictly
mutual companies, and that the remaining fire and casualty mutual
companies be taxed on the sum of their investment income and the additions to their surplus unapportioned to policyholders, and (4) that
the tax avoidance potentialities of pension trusts be removed by requiring such trusts to meet stricter standards in order to be tax exempt.
In order to simplify and improve the corporation tax structure, it
was also recommended that the capital stock tax and declared value
excess profits tax be repealed. Among other proposals were provisions
concerning the deduction for bad debts and extension of the statute of
limitation governing the deduction; provision for corporations to file
consolidated returns for income taxes as well as for excess profits
taxes; provision for curtailment of the deductibility of non-business
bad debts; and provision for the amortization of bond premiums.
IV. Estate and gift taxes.—The Treasury felt that revenues from
estate and gift taxes had not kept pace with other taxes. The ratio
of estate and gift taxes to total revenues had declined steadily since
1938. Accordingly, it was recommended that these taxes be increased
to yield an additional $300 millions annually. The recommendations
included substitution of a single estate tax exeniption of $60,000 for
the exemption of $40,000 and the insurance exclusion of $40,000, and
the strengthening of provisions relating to powers of appointment,
community property, and life insurance.
V. Excise and sales taxes.—The change from a civilian economy
to an all-out war economy rendered uncertain the supply of many
goods and services previously considered suitable for excise taxation.
I t was deemed necessary to coordinate wartime excise tax proposals
insofar as practicable with rationing and price control. To effect this
coordination the Treasury organized an interdepartmental committee
on excise taxes. This committee operated on an informal basis and
included representatives from the Office of Price Administration, the
War Production Board, the Bureau of the Budget, the Staff of the
Joint Committee on Internal Revenue Taxation, the Board of Governors of tbe Federal Reserve System, and various divisions of the
Treasury Department. In addition, other Government agencies were
consulted with respect to commodities and services in which they had a




92

REPORT OF THE SECRETARY OF THE TREASURY

V primary interest. The committee faced the problem of forecasting
actions which might be taken by the war agencies afFectip.g the supply,
rationing, and price control of the articles or services. In many cases,
the forecast indicated decreases in production which were so great
that decreases in consumption and conservation of stocks cojuld be accomplished only by rationing rather than the imposition of relatiyely
high excise taxes. In some cases excise taxes high enough to induce
appreciable deci^eases in consumption in the face of the great increases
in spending power were so great that the committee members believed
that announcement of the taxes would induce forward buying by
dealers and consumers, thus offsetting the purpose of the high tax,
namely, to conserve stocks and obtain additional revenues. Moreover, the rates of tax indicated were so sharply different from those
that existed in the past that the members felt that recommendations
based solely on supply and demand considerations would be impractical.
In forecasting the relationship of excise tax proposals to price con; trol, the committee's general consideration was in terms of selective
price controls rather than the subsequeutly inaugurated policy of
general maximum price control. However, with respect to the relationship between excise taxes aind price coatrol, much consideration
was given in formulating the excise tax recommendations to tbe effect
of the taxes on the cost of production and distribution, on the index
of cost of living, and on the index of prices paid by farmers. The
committee believed it was undesirable to select commodities and services for excise taxation which would place undue pressure on price
ceilings.
The ease of tax administration and of taxpayer compliance was
given considerable weight because of the prospect of an increasing
scarcity of manpow^er and equipment.
This interdepartmental committee considered more than 60 groups
' of commodities and services of which 15 were included in its excise tax
recommendations. All of the 15 excise taxes recommended except
two, carbonated soft drinks and candy aud chewing gum, were already
subject to excise taxe.s. The recommendations of the committee were
accepted by the Treasury and were presented to the Congress. The
new and additional excise taxes recommended were expected to yield
$1,3 billion additional revenue.
In connection with the formulation of its revenue recommendations,
the Treasury gave extensive consideration to the desirability and practicability of a general sales tax. The revenue program presented to
the Ways and Means Committee included a statement strongly opposing the enactment of a sales tax.
However, anticipating the importance of the general.sales tax issue,
the Treasury's tax research stafl* devoted considerable time to the




JIEPORT OF THE SECRETARY OF THIS TREASURY

93

study of general sales tax plans suitable for the Federal Government
during wartime. In addition, consultants familiar with the administration and development of the State sales.taxes were obtained to
assist the Treasury staff.
Some of the results of the Treasury's studies were presented to the
Ways and Means Committee in a memorandum entitled ''Federal
Manufacturers' Wholesale and Retail Sales Taxes." This memorandum covered the three types of single-stage sales taxes and described their most important characteristics, the problems that would
be encountered, the estimated number of taxpayers, and the estim^ated revenues under various tax rates and exemptions.
For the purpose of assisting the House Ways and Means Committee
and the Senate Finance Committee in their consideration of the problems involved, the different types of sales taxes in use in the. States
and in certain foreign countries were examined. Investigations involving field work in seven States and in Canad-a were made and the
results were presented to the Ways and Means Committee in executive
session. A plan for a Federal retail sales tax was formulated which
kept exemptions to a minimum in accordance with the basic objectives
of taxing sales for consumption and not taxing sales for further
production, insofar as it appeared to be administratively practicable.
Subsequently, in accordance with a request of the Senate Finance
Committee, the Treasury presented to this committee in executive
session a memorandum describing a possible Federal retail sales tax.
VI. Spendings tax.—In the late summer of 1942 fiscal and economic
developments were such that stronger steps were considered necessary to help combat inflation, as well as to finance the war. Much
study and many conferences had been devoted to the consideration
of ways and means of doing this. Particular attention had been
given to compulsory saving (as distinguished from mere compulsory
lending to government), expenditure rationing, and a spendings tax.
Under the spendings tax a tax penalty would be applied to expenditures for consumers' goods and services, with sonie possible exceptions, above exempted amounts. The exemption would depend on
the number of m-cmbers of the family.
After consultation and discussion with other agencies and departments regarding the choice of methods, the conclusion was reached
that the spendings tax was more practicable than expenditure rationing or true compulsory savings. The restriction on spending would be
elastic rather than rigid since there would be no prohibition on spending but rather a tax increasing in rate as the spending increased.
This elasticity would make unnecessary many administrative determinations of special justification, for spending which expenditure
rationing, for example, would involve. Moreover, existing tax collection machinery could be used for administering the spendings tax.



94

REPORT OF THE SECRETARY OF THE TREASURY.

With exemptions set at levels recommended for adoption also under
the individual income tax, substantially the same taxpayer^, would be
covered by both taxes. This offered the possibility of using the
income tax return for the spendings tax, and also of collecting part of
the spendings tax in conjunction with collection of the income tax at
the source.
,
'
In addition to discouraging spending, the spendings tax would withdraw substantial amounts of spending power where spending in
excess of exemptions took place and thus raise revenue to help finance
war expenditures.
Since the Finance Committee had under consideration at the time
the revenue bill of 1942, it was decided that the spendings tax should be
recommended for consideration in connection with the pending bill.
Accordingly, the Secretary appeared before the Committee on September 3, 1942, and urged adoption of the spendings tax. (See exhibit
81, p. 410.) The tax recommended by the Treasury consisted of a
flat rate tax plus a graduated surtax. The flat rate tax of 10 percent
was to be levied on total spendings of persons reporting-spendings in
excess of $500 for a single person, $1,000 for a married couple, and
$250.for each dependent. This tax was to be refunded after the war.
The surtax was to be levied on spendings in excess of exemptions of
$1,000 for a single person, $2,000 for a married couple, and $500 for
each dependent. The rates proposed for the spendings surtax were
graduated from 10 percent on the flrst $1,000 of spendings in excess
of exemptions to 75 percent on spendings exceeding exemptions by
more than $10,000. In order to avoid unduly harsh treatment of
large families, the surtax schedule was to be applied on a per capita
basis.
^
The^ proposal for the spendings tax was rejected by the Senate
Finance Committee.
VII. Social security.—In his message of January 5, 1942, transmitting the 1943 Budget to the Congress, the President recommended
additional employee and employer social security contributions
sufficient to increase the social security trust funds during the fiscal
year 1943 by $2 billions above the amount contemplated by the then
existing law. A similar recommendation was made by the Secretary
of the Treasury in his statement before the Ways and Means Committee on March 3, 1942, and again in a letter dated May 6, 1942, to
the Honorable Robert L. Doughton, Chairman of the Committee, but
no action was taken by the Committee. No recommendation with
respect to employment taxes was made in the statement of the Secretary of the Treasury to the Senate Finance Committee on July 23,
1942.
Although the Finance Committee did not consider an increase in
employment taxes, it voted to postpone for one year, until January 1,




REPORT OF THE SEORETARY OF THE TREAS,URY

95

1944, the scheduled increase from one to two percent in the rates of
contributions by employers and employees as provided under the oldage and survivors insurance system. The Secretary stated his opposition to this change and joined with the Secretary of Labor, the Director
ofthe Budget, the Administrator of the Federal Security Agency, and
the Chairman of the Social Security Board, in a letter to the President
expressing the view that the change would jeopardize the financial
stability of the old-age and survivors insurance system and interfere
with the anticipated consideration of a more comprehensive social
security program by the Congress as well as necessitate adjustments in
the Government's plans for war finance and inflation control. (See
exhibit 85, p. 445.) The President subsequently addressed a letter to
the chairman of the Senate Finance Committee indicating the desirability of permitting the scheduled increase in the rates of contribution
to become effective.
V I I I . Renegotiation of war contracts.—At the time that the Revenue
Act of 1942 was under consideration by the Senate Finance Committee, the question was raised as to the renegotiation of war contracts
to recapture excessive proflts received by manufacturers of war materials. A subcommittee of seven Senators, headed by Senator David
I. Walsh, of Massachusetts, was appointed to explore the subject.
-When requested for its views, the Treasury Department took the
position that since the excess profits tax affects only profits, not costs
and prices, there was room for a statutory device enabling the Government to control excessive costs and prices. Such control of prices
of war materials was regarded as a procurement matter rather than a
revenue matter. The Department, therefore, took the position that
the views of the agencies of the Government primarily concerned with
the procurement of war materials should carry great weight. Although
section 403 of the Sixth Supplemental National Defense Appropriations Act directed toward this problem was not believed to be fully
effectiye, it was thought to afford a proper approach to the problem.
In consequence, the Department recommended that, rather than yield
to a substitute lacking effectiveness as a price or cost control measure,
section 403 should be retained with perfecting amendments.
B. Major features of the Revenue Act of 19^2
I. General statement.—The Revenue Act of 1942, which became law
on October 21 of that year, sharply increased most existing taxes and
introduced several new levies. I t thus, continued the upward trend
of taxes which had been initiated during the defense period. The
1942 act also contains extensive provisions designed to distribute tax
burdens equitably and to avoid hardship. Many minor loopholes
were closed.




96

REPORT OF THE SECRETARY OF THE TREASURY

II. Individual income tax.— v
1. RATES.

The normal tax rate on individuals was increased from 4 percent
to 6 percent. Surtax rates, which under prior law ranged from 6
percent on the first $2,000 of surtax net income to 77 percent on the
portion of surtax net income exceeding $5,000,000, were revised to
range from 13 percent on the first $2,000 to 82 percent on the portion
of surtax net income exceeding $200,000. In addition, the Victory
tax was imposed, as noted on page 98.
'. The rate of taxation on non-resident alien individuals not carrying
on a trade or business in the United States was increased from 27%
percent to 30 percent.
2. EXEMPTIONS.

As in 1940 and 1941, the increase in rates was combined with a
reduction of the personal exemptions. Exemptions were reduced
from $1,500 to $1,200 for married persons and heads of families;
from $750 to $500 for single persons; and from $400 to $350 for each
dependent. Members of the armed forces below the rank of commissioned officers were given a special exclusion to oft'set the reduction
in exemptions. They were permitted to exclude from gross income
compensation for active service not to exceed $250 for single persons
and $300 for married persons and family heads.
3. CAPITAL GAINS AND LOSSES. -

The treatment of capital gains and losses underwent a thorough
revision. Gains and losses from the sale of capital assets had previously been classified into three categories according to the length
of the time the asset had been held. The 1942 act consolidated the
three into two categories: (1) short-term gains or losses (those realized on assets held for 6 months or less) and (2) long-term gains or
losses (those realized on assets held for more than 6 months). For
individuals, lOO percent of short-term gains and losses is taken into
account, but only 50 percent of long-term gains and losses is taken
into account; either type of loss taken into account may be offset
against either type of gain, and a net loss may be applied against
ordinary income only up to $1,000. For corporations, both types of
gains and losses are taken irito account in full, but a net capital loss
may not be offset against ordinary income. Bo.th individuals and
corporations are allowed a 5-year, carry-over of capital losses remaining after offsets against gains or ordinary income.' The maximum
rate of tax on the excess of statutory net long-term gain over net
short-term loss is limited to 50 percent for iridividuals and to 25
percent for corporations.
The Revenue Act of 1942 also changed the treatment of gains and
losses on depreciable property and real property held for more than
six months and used in trade or business but not includible in inven


REPORT OF THE SEICRETARY OF THE TREASURY

97

tories nor held for sale to customers. Wherever gains from the sale
of such property plus the gains Tccognized from the involuntary conversion of such property and of capital assets held for more than six
months exceed losses, the gains and losses are treated as long-term
capital gains and losses. However, when the losses exceed the gains,
all are treated as ordinary gains and losses, with the result that the
net losses are fully deductible.
4. SPECIAL DEDUCTIONS.

The 1942 act introduced several new deductions from income for
individuals. Probably the most important was the deduction of
medical and dental expenses; such expenses in excess of 5 percent of
net income (computed without regard to this deduction) were made
deductible, the maximmn deduction being set at $2,500 for married
couples fihng joint returns and $1,250 in other cases. Another provision permits the deduction of alimony payments from the income
of the husband, such payments being included in the income of the
wife. The deduction for State and local retail sales taxes was broadened to cover sales taxes levied on retailers as well as those levied on
consumers, provided the taxes are separately stated by the seller.
5. OTHER CHANGES.

Under prior law it was required that the final return of a decedent
show as income in the year of death all items accrued up to that tim^e
which had not been includible in the income of prior years. This
caused a concentration of income and therefore of taxation which, but
for the death, would have been spread over a period of years. To
relieve this, the act provided that such items should be reported as
income by the person succeeding to such items, be he executor, legatee,
or heir, according to the usual rules for reporting income.
Another provision aUowed a 2-year carry-back of business losses.
This provision applies to both individuals and corporations and is
discussed under.''Corporation taxes" on page 99.
The determination of marital and dependent status for persons filing
on the simplified form (Form 1040A) was changed from the last day of
the taxable year to July 1 of the taxable year.
To encourage investm.ent in the production of equipment for national defense, the Second Revenue Act of 1940 had provided'that corporations might amortize in 5 years the costs incurred after June
10, 1940, for facilities necessary for national defense. The Revenue
Act of 1942 moved the date back to December 31, 1939, and extended
the privilege to individuals and partnerships.
Prior to 1942, the Internal Revenue Code had been interpreted as
preventing the allowance of deductions for ordinary and necessary




98

REPORT OF THE SECRETARY OF THE TREASURY

expenses iacurred in acquiring income or handling property held
for the producltion of income unless the expenses were incurred in a
trade or business of the taxpayer. The 1942 act provided for such
deductions.
I I I . Victory tax,-^
1. G E N E R A L STATEMENT.

As a supplement to the measures increasing the net income tax on
individuals, the Congress enacted the Victory tax. This tax differed
from the net income tax in that its income base was somewhat broader;
a single exemption of $624 per income recipient was provided in place
of varying exemptions; the rate was fixed at 5 percent (before credits);
and a post-war credit, varying with family status and available currently under specified circumstances, was provided.
2. R A T E S .

The Victory tax was imposed at a gross rate of 5 percent for each
taxable year beginning after December 31, 1942, until the close of the
war. Taxpayers were granted an annual post-war credit (available
currently under the conditions noted below) amounting to 40 percent
of the tax or $1,000, whichever is the lesser, in the case of married
persons and heads of families; 25 percent or $500, whichever is the
lesser, in the case of single persons or married persons filing separate
returns; and 2 percent or $100, whichever is the lesser, for each
dependent.
As an option to taking the refund at the end of the war,
taxpayers were allowed to take the credit currently, provided that
during the taxable year they had reduced their indebtedness, paid
life insurance premiums, or increased their holdings of obligations of
the United States in an amount equal to or greater than the allowable
credit. The effect of this provision was to differentiate among taxpayers according to family status by means of a tax credit rather than
by means of varying exemptions.
A limitation clause in the Victory tax law provided that the combined Victory tax, normal tax, and surtax was not to exceed 90 percent
of the taxpayer's net income.
3. EXEMPTIONS.

The exemption for the Victory tax was set at $624 for each income
recipient.
The effect of providing a $624 exemption to each income recipient
regardless of marital status was as foUows: (1) Single persons, heads
of families, and married persons filing separate returns were given.a
$624 exemption; (2) married couples filing joint returns where each
spouse had at least $624 of income were given a $1,248 exemption;
(3) married couples filing joint returns where one spouse had no gross
income were given a $624 exemption; and (4) married couples filing




REPORT OF THE SEORETARY OF THE TREASURY

99

joint returns where both spouses had gross income but one had less
than $624 were given an exemption of $624 plus the smaller of the two
incomes.
4. BASE.

The base of the Victory tax was made somewhat broader than the
base of the regular individual income tax, although capital gains and
losses and partiaUy tax-exempt Government bond interest were
excluded from gross income: Generally speaking, the only deductions
allowed from gross income were expenses incurred in trade or business
or in connection with the production or collection of income. Such
items as ordinary contributions, interest, and taxes 'not incurred in
connection with the production of income, and medical expenses,
were not allowed as deductions.
5. COLLECTION AT SOURCE.

An important feature of the Victory tax was the introduction of
collection at the source. The act required employers to withhold the
tax from wages and salaries at a rate of 5 percent of income above the
Victory tax exemption.' For this purpose the $624 annual exemption
was prorated at the rate of $12 weekly, and corresponding amounts
for other payroll periods. However, withholding was not required
with respect to the remuneration of members of the armed forces,
certain classes of employees not subject to social security taxes,
employees of certain foreign employers, and an employee outside the
United States, unless the major part of his services during the year
was performed within the United States. Employers were given a
choice between two methods of computing the amount to be withheld.
The first method involved an exact computation of 5 percent of wages in
excess of the employee's exemption of $624 a year apportioned to each
payroll period. The second permitted the employer to use tables showing the amount to be \|^ithheld for different payroll periods and varying
wage brackets. From these tables, the employer ascertained the amount
to be withheld for each employee by locating the payroll period for
which the employee was paid and the brackefinto which his wages fell.
IV. Corporation taxes.—
1. R A T E S .

The normal tax on corporations was left unchanged: 15 percent to
19 percent if normal tax net income is $25,000 or less; and 24 percent
if normal tax net income is over $50,000; a notch^provision in the form
of an alternative tax applies on incomes between $25,000 and $50,000,
the income between these amounts being taxed at 31 percent. The
surtax rates of 6 percent on the first $25,000 of surtax net incoine and
7 percent on that part of surtax net income exceeding $25,000 were
revised as follows: The surtax rate was set at 10 percent where the
surtax net income does not exceed $25,000 and at 16 percent where



lOO

REPORT OF THE SECRETART OF THE TREASttRY

surtax net income exceeds $50,000; on incomes between $25,000 and
$50,000 a notch provision was enacted, taxing the first $25,000 at 10
percent and the next $25,000 at 22 percent.
The excess profits tax, previously levied at rates ranging from 35
percent to 60 percent, was increased to a flat rate of 90 percent.
However, a limit was placed on the excess profits tax so that, when
added to the normal tax and surtax, the combined liability, was not to
exceed 80 percent of corporate surtax net incoine (unreduced by the
income subject to the excess profits tax). The stated excess profits
tax rate of 90 percent was reduced by a provision for a post-war refund
equal to 10 percent of the excess profits tax for each taxable year.
Within certain limits the taxpayer was permitted to take his postvyar credit currently where there was a net reduction of the,corporation's debt during the 3^ear. The effect of the credit provisions was
' to reduce the net rate of the excess profits tax to 81 percent where the
80 percent ceiling does not apply and approxunately 72 percent where
the 80 percent ceilii:ig applies.
The rates applicable to personal holding companies were increased
from 71 }^ percent on the first $2,000 of undistributed net income and 82}^
percent on such income in excess of $2,000 to 75 and 85 percent, respectively. The rate on non-resident foreign corporations not engaged in
trade or business in the United States was raised from 27}2 to 30 percent.
2.

BASE.

The income base of the corporate normal tax and surtax was revised.
The act in effect provided separate income compartments for the
excess profits tax and the normal and surtax. Whereas the excess
profits tax was previously deducted from net income to provide the
normal tax and surtax base, the Revenue Act of 1942 provided that
the income subject to the excess profits tax was to be deducted from
net income to provide the normal tax and surtax base.
3. E X C E S S P R O F I T S

CREDIT.

In computing the excess profits credit on the basis of average baseperiod net income, corporations were allowed 95 percent of their
average earnings in the years 1936-39. This percentage was not
changed by the Revenue Act of 1942.
However, certain changes were made in the average earnings method
to provide relief in hardship cases; these are discussed under "Relief,"
on page 101.
For corporations computing their excess profits credit by 1/h.e invested capital method, the allowances were revised as follows:
Invested capital:
First $5,000,000
Next $5,000,000
Next $190,000,000
Over $200,000,000




....J
i.

,
.

1

Revenue Revenue
Act of
Act of
1941
1942
Percent Percent
8
8
7
7
7
6
7
5

R E P O R T O F T H E SEGRETARY OF THE TREASURY

101

4. CARRY-BACK OF LOSSES AND UNUSED EXCESS PROFITS CREDITS.

The Revenue Act of 1942 provided for a 2-year carry-back of net
operating losses. Allowing a taxpayer to use a net loss in 1 year to
offset a profit in another was not a new device, but prior to the 1942
act the only use of this device was to permit losses for 2 preceding
ypars to be carried forward to succeeding years. The 1942 act
allowed the taxpayer to carry back the net losses to the 2 previous
years, securing an adjustment in taxes for those years. Any portion
not so used could be carried over to the 2 succeeding years. This
privilege was extended to unused excess profits credits with respect
to which a 2-year carry-forward previously had been provided.
5. R E L I E F .
(a)

EXCESS PROFITS TAX.

In computing the excess profits credit based on average base-period
net income, it was provided that a corporation might substitute for
the income of any one year in which there was a deficit, .or in which
the excess profits net income was less than 75 percent of the average
for ^the remaining 3 base-period years, an amount equal to 75
percent of that average. The Revenue Act of 1942 extended the
privilege of constructing an adequate base-period net income to any
corporation entitled to use the income credit which can demonstrate
that its excess profits tax is excessive and discriminatory because the
actual earnings during the base period do not supply a proper criterion
of normal earnings. The demonstration may be made by showing
that unusual events such as a fire, fraud, strike, or storm affected the
base period earnings; that the particular business or industry was
temporarily depressed during the base period; that the industr}'^ of
which the taxpayer is a member is subject to an abnormal profits
cycle or sporadic profits; that the corporation began business or
changed the character of its business during or immediately prior to
the base period; or that any other factor occurring during the base
period resulted in making base-period income an inadequate standard
of normal earnings.
A corporation beginning business after December 31, 1939, and
therefore otherwise required to use the invested capital credit was
permitted to construct and use an average base-period earnings credit
under specified conditions. I t could use the earnings credit if it could
demonstrate that its invested capital credit was inadequate because
the corporation had assets important to its business which were not
refiected in invested capital; that the business was of a character in
which invested capital was not an important income producing factor;
or that its invested capital was abnormally low.
Mining companies were given relief by two provisions: the first
restores and expands the exemption from excess profits tax on profits




102

REPORT OF T H E SECIRETARY OF T H E

TREASURY

attributable to the mining of' certain strategic minerals; the second
affords relief to mining and also timber companies which find that
their incomes have been greatly increased since the base period by
reason of accelerated production to meet war demands which will
prematurely deplete their reserves, and to mining and timber companies receiving bonus payments from Federal agencies on account
of over-quota production of certain depletable resources. Relief under
this second provision took the form of a special deduction in computing
excess profits net income.
.
^
Special treatment was accorded ^income received under installment
contracts or other long-term contracts to avoid the bunching of
income in any given year. In the case of instaUment contracts, under
certain conditions the taxpayer was allowed to report income from'
installment sales on the accrual basis. With respect to long-term
contracts, where specified conditions were met the taxpayer was
permitted to compute income from such contracts on the percentageof-completion method of accounting.
(b)

OTHER RELIEF PROVISIONS.

Many taxpayers have lost property and investments in enemy
territories as a result of the war. Among the important sections of
the 1942 act was one stating practical rules for handling this problem,
recognizing the losses and adjusting incomes in the event that any of
the property treated as lost should later be recovered. The avaUability of the provision for exclusion from income of amounts attributable to discharges of indebtedness was increased; domestic corporations deriving income. principally from trade or business in foreign
countries within the Western Hemisphere were exempted from surtax;
and public utilities were given a credit against surtax net income for
dividends paid in preferred stock.
6. TAXATION OF INSURANCE COMPANIES.

The taxation of insurance companies was thoroughly explored
and revised. The exemption of mutual insurance companies other
than life or marine under section 101 pf the Internal Revenue Code ,
was confined to such of these companies as have yearly gross receipts
of dividends, rents, and premiums (including deposits and assessments) not in excess of $75,000. Those not exempt were made
liable to either a tax at ordinary corporate rates on their investment
income or a tax of-1 percent on gross income from interest, dividends,
rents, and net premiums minus dividends to policyholders and wholly
tax-exempt interest, whichever tax is the greater. Companies having
not over $75,000 of gross income and not over $3,000 of net investment income pay no tax. Reciprocal underwriters and inter-insurers
are taxed only on investment income and pay no tax unless such income
exceeds $50,000. Insurance companies other than life or mutual



REPORT OF THE SEORETARY OF THE TREASURY

103

continue to receive substantially the same treatment as under prior
law, but are specifically allowed a deduction for dividends paid to
policyholders, and are allowed full deduction of certain capital losses.
Mutual marine insurance companies are included under section 204.
Life insurance companies, while retaining investment income as their
tax base, substitute a flat percentage of investment income less taxexempt interest as a single deduction for reserve and other policy
liabilities in place of the several deductions previously allowed. The
percentage represents the ratio of the aggregate policy liability deductions to the aggregate net investment income of all companies for the
preceding year.
7. OTHER CHANGES,

(a)

CAPITAL GAINS AND LOSSES.

These changes are discussed under the heading "Individual income
tax" on page 96.
(b)

INVOLUNTARY LIQUIDATION OF INVENTORIES.

Taxpayers using the last-in first-out method of iaventory valuation
"were granted special relief if war conditions made it impossible to
maintain their physical inventories. Involuntary liquidation of inventories results in charging the cost of some of the inventory units
held at the beginning of the year of hquidation against sales made in
that year. Since taxpayers shifted over to the last-in first-out method
of inventory valuation as early as 1938 in some cases, these inventory
units may be considerably below current replacement costs, hence
overstating current profits. To relieve these taxpayers from an overstatement of profits, itowas provided that subsequent replacement of
inventory units involuntarily liquidated would be treated as if made
in the year of liquidation. Therefore, the costs of goods sold in the
year of liquidation would be increased by the excess of replacement
cost over the original cost of the liquidated inventory unit, or, if
replacement cost is less than the original cost of the liquidated inventory unit, decreased by this difference.
(c)

PENSION TRUSTS.

The Revenue Act of 1942 adopted almost completely revised provisions pertaining to the tax exemption and other benefits.available
to employees' trusts and plans. Primarily, the changes were designed
to curb a hitherto growing tendency to use the pension, stock bonus or^
profit-sharing trust or plan as an instrument of tax avoidance. Under
the prior law such trusts or plans were susceptible of being employed
to avoid high surtax rates on incomes of a few highly paid stockholders
or executives of corporations, by means of deferring payment of com-'
pensation to later years. Thus a misapplication was possible of a tax
benefit intended to encourage sharing of profits and provision for the




104

REPORT OF T H E SEICRETARY OF T H E TREASURY

old age t)f employees generally. Accordingly, the 1942 amendments
were addressed chiefly to prohibiting discrimination in such plans in
favor of oflSicers, stockholders, supervisory or highly paid employees.
Other amendments, signiflcant but of somewhat lesser importance,
bore upon the funding provisions of such trusts and dealt also with
adjusting and equalizing the comparative tax advantages as-between
those plans employing annuity contracts and self-insured plans
operating entirely through trusts.
(d)

MISCELLANEOUS.

Other important provisions of the act afl'ecting corporations were
those allowing consolidated returns for both income and excess proflts
taxes and the section permitting annual redeclaration of value of
capital for the purpose of the capital stock and declared value'
excess profits tax.
Y.-Estate and gift taxes.—Under prior law there was a general
exemption of $40,000 for pm'poses of the additional estate tax as well
as a special life insurance exemption of $40,000. This discrimination
in favor of one particular asset was corrected by abolition of the life
insurance exemption and the enactment of a single exemption of
$60,000, applicable to all decedents. The gift tax exemption was
reduced from $40,000 to $30,000, and the gift tax exclusion was
changed from $4,000 per donee to $3,000.
For many years powers of api3ointment had constituted an outstanding means for retaining practical ownership and yet avoiding the
estate tax. The 1942 act severely restricted the tax saving potentialities of this device. I t also amended the law as it applied to community property States so as to eliminate the discriminations in favor
of such States as compared with the tax burden imposed in common
law States, and clarified and strengthened the provisions requiring the
inclusion of life insurance proceeds in the estate tax base. Other
changes liberalized the deduction for charitable pledges and bequests
and the allowance for previously taxed property, increased the benefit
derived from the credit for local death taxes, and disallowed claims
which do not deplete or reduce taxable assets.
VL Excise tjaxes.—Taxes on telephone, telegraph, and cable services
were increased to the following rates: Cable, radio, and telegraph
dispatches or messages, 15 percent; telephone use or radio message
charge exceeding 24 cents, 20 percent; leased wire, teletypewriter or
talking circuit special service, 15 percent; local telephone service,
10 percent.
'
The excise tax on transportation of persons was increased to 10
percent and a new tax of 3 percent levied on amounts paid for the
transportation of property.
' Liquor taxes were increased to the following rates: Distilled spirits,
$6 per gallon; liqueurs, cordials, and the like, 5 cents per half pint;



REPORT OF T H E SEORETARY OF THE TREASURY

105

fermented malt liquors, $7 per barrel; sparkling wines and champagne,
10 cents per half pint; artificially carbonated wine, 5 cents per half
pint; wines, 1^ percent alcohol or less, 10 cents per gallon; wines more
than 14 percent and not exceeding 2.1 percent alcohol, 40 cents per
gallon; wines more than 21 percent and not exceeding 24 percent
alcohol, $1 per gallon.
. - • ^ ' •
The rate on imported perfumes containing alcohol, taxed under the
distilled spirits schedule, was increased to $6 per gallon.
A graduated.annual license fee to qualify manufacturers or producers of non-beverage products for drawback (rebate of part of the
tax on distUled spirits when used in designated non-beverage products)
was enacted at the rate of $25 where withdrawals do not exceed 25
proof gallons per year, $50 for withdrawals not exceeding 50 proof
gallons per year, and $100 for withdrawals of 50 proof gallons or
more per year.
;
The tax on lubricating oils was increased to 6 cents per gallon.
The tax on cameras, lenses, and photographic equipment was increased to 25 percent.. Photographic and motion-picture films,
plates,\and sensitized paper, except X-ray film, were taxed 15 percent.
; Floor stocks taxes on distilled spirits, fermented malt liquors and
wines, cigars, and cigarettes were iniposed in conjunction with the
increase of the excise taxes on these commodities.
Taxes on cigars were revised so that cigars weighing more than
three pounds per thousand and manufactured or imported to retail
at not more than 2)^ cents each were subject to a tax of $2.50 per
thousand; those retailing at more than 2% cents but not more than 4
cents each, $3 per thousand; more than 4 cents and not more than 6
cents, $4 per thousand; more than 6 cents and not more than 8 cents,
$7 per thousand; more than 8 cents and not more than 15 cents, $10
per thousand; more than 15 cents and not more than 20 cents, $15
per thousand; and more than 20 cents, $20 per thousand. The tax
on cigarettes was increased to $8.40 per thousand on cigarettes
weighing more than 3 pounds per thousand and $3.50 per thousand
on cigarettes not weighing more than 3 pounds per thousand.
New stamp taxes were imposed amounting to 4 cents per dollar of
premium on foreign indemnity, fidelity or surety bonds and 1 cent per
dollar of premium on foreign life insurance, sickness and accident
policies, annuity contracts, and policies of reinsurance.
The tax ,on coin-operated amusement and gaming devices was
increased to $100.
.
Excise taxes on electrical signs; optical equipment, rubber articles,
and certain washing machines were discontinued because of the war^diminished production of these articles.
YVL. Social security taxes.—The automatic increases in social
sequrity taxes were postponed for one year.
542890—44^—-9




-

'

,

106

REPORT OF THE SECEETARY OF THE TREASURY

VIII. Administrative procedure:—Wliere individuals are outside the
Americas or in the armed forces or in enemy-controlled territory, the
war has niade impossible the timely perforniance of many acts required imder the revenue laws. This difficulty was recognized and
rules suspending the requirements and the running of the Government's rights were included in the act.
IX. Renegotiation of war contracts.—As enacted, the Revenue Act
of 1942 contained a final section amending section 403 of the Sixth
Supplemental National Defense Appropriations Act. By virtue of
this legislation, the Secretary .t>f the Treasury was for the first time
given the authority to renegotiate war contracts. Deductions and
exclusions of the character allowed under the income tax and excess
profits tax provisions of the Internal Revenue Code are to be recognized in determining the excessiveness of profits; a credit against
excessive profits was likewise required for Federal income and excess
profits taxes,- which the Commissioner of Internal Revenue determines to be attributable to the excessive profits; and renegotiation
was prohibited after one year from the close of the fiscal year of the
contractor within which completion of the contract occurs. A more
detailed discussion of renegotiation of war contracts appears on page
120.
C. Treasury proposals for current tax payment
I. Needfor current payment.—-With the-psiSSSigG of the 1942 Revenue
Act and the great broadening of the individual income tax, the need
for putting taxpayers on a current basis became more pressing than
ever. Despite repeated Treasury recommendations, adoption of a
withholding plan by the House, and growing public sentiment, no
revision of income tax payment methods was provided in the 1942 act.
Collection at the source was, however, introduced under the new
Victory tax as it applied to wages and salaries. .
I t became more and more.apparent that a tax payable in large lump
sums on the income of the preceding year was not attuned to the
needs of.the great body of new taxpayers created by rising incomes
and falling exemptions. The revision of payment methods therefore
became so pressing a matter that Congress made it the subject of a
separate tax bill, independent of the broader 1943 revenue program.
After intensive work on alternative methods of effecting current
collection, the Treasury submitted a comprehensive statement on the
problem to the House Ways and Means Committee. This statement
not only analyzed the payment problem but also set forth the general
principles to be followed in putting the income tax on a current
payment basis. Subsequent statements to this Committee and to the
Senate Finance Committee further analyzed specific plans and*
procedures for current payment.
Several reasons were advanced by the Treasury for urging the



REPORT OF THE .SECRETARY OF THE TREASURY

107

adoption of a current payment system and coUection at source. The
primary purpose was to gear the income tax to the budget habits and
income patterns of taxpayers. The old system of equal quarterly
instalhnents was ill-adapted to the weeldy and monthly budgets of
millions of small income recipients, and the 1-year lag in payments
threatened embarrassment or actual hardship in the case of a drop or
failure in income. In addition to aiding taxpayers, current collection
would protect the Government against defaults and loss of revenue
and would ensure a steady flow of revenue into the Treasury. By
advancing payments 1 year in a period of rising income and by
prompt withdrawal of pur'chasing power before it could be spent,
current payment would bulwark the anti-inflation program. Finally,
the income tax on a current basis would become a more flexible
revenue measure since statutory changes in rates and exemptions
would be translated into current tax payments promptly and without
retroactive application.
The Treasury suggested methods, for putting various taxpayer
groups on a current basis. Withholding of taxes from wages and
salaries designed to put the great bulk of wage, earners on a fully
current basis was the core of the Treasury's suggestions. A system
of quarterly income statements for current payment on incomes not
subject to collection at source was also put forward. However, it
was suggested that, if compliance difficulties in making taxes on
higher incomes fully current were* deemed too great, substantial currency for the great majority of taxpayers could be achieved by* collecting currently the basic liability, that is, the total of the normal
tax, the surtax at the first bracket rate, and the Victory tax.
I I . Attitude toward cancelation.—The problem of transition from a
delayed-payment to a current-payment system, which had been
considered in connection with the collection-at-source proposals during 1942, became much more acute under plans designed to shift all,
or substantially all, liabilities to a current basis. The Treasury
. recognized that concurrent collection of full 1943 and 1942 liabilities
would over-burden large groups of taxpayers. Therefore, it carefully
examined alternative proposals for the transition period.
The Treasury consistently opposed full cancelation of one year's
tax. Its opposition was based on (1) the unfortunate effect of full
forgiveness on the distribution of the tax burden, (2) the excessive
relief it would offer to taxpayers in a year of record national income,
and (3) the addition of forgiven taxes to inflationary pressure.
The Treasury showed that the effect of canceling one year's taxes
would be to confer a gain on every taxpayer equal to his tax.for such
year. Such gain would be reflected in the long run in one year's
less taxes to pay, and in the short run in the wiping out of a debt
owed by the taxpayer and in a corresponding increase in his net worth.



108

REPORT OF THE SEICRETARY OF THE TREASURY

I t was further shown that the gain for taxpayers in the upper bra;ckets
would be disproportionately large and that its effect would be to
offset wartime tax increases for such, persons. Since, under our
steeply progressive tax structure, tax rate increases would necessarily
fall mainly on the middle and lower income groups, the net effect of
full cancelation would be to redistribute the tax burden in direct
violation of the principle of abUity-to-pay.
Moreover, it was felt unwise to forego taxes on the income of a
record income year in the face of mounting inflation dangers and pressing revenue needs. At a time when income and saving were at the
highest levels ever known, and many goods were unavailable, it was
felt that complete forgiveness was excessively generous and fiscally
unsound. By freeing funds which had been saved in advance for tax
payments, such cancelation would also exert upward pressure on prices.
' While opposing full, cancelation, the Treasury recognized that some
cancelation, especially in the lower brackets, would be necessary to
avoid undue hardship. Although no specific plan for cancelation was
presented to the congressional committees by the Treasury, the Secretary endorsed the so-called second Ways and Means Committee bill.
This bill, which was not enacted, provided for the cancelation of the
difference between the tax at 1941 rates and exemptions and the tax
at 1942 rates and exemptions.
The cancelation plan finally adopted by the Congress differed from
full cancelation only in the amountcanceled. I t provided, in general,
for canceling three-quarters of one year's tax and therefore distributed
the gains of tax cancelation much as they would have been distributed
under full cancelation. The so-called anti-windfall provisions did
not remove this defect. In conferring a disproportionate gain on the
upper income groups the system of cancelation embodied in the Current Tax Payment Act of 1943 did not conform to the principles
advocated by the Treasury.
:
I I I . Suggestions for withholding.—Collection at source on wages and
salaries under the Victory tax served as a proving ground for the withholding principle. On the basis of this experience and taking into
account the additionah problems involved in withholding of the individual income tax, the Treasury outlined a suggested withholding
system.
As proposed in the Treasury statement of February 2, 1943, withholding would appty at a rate sufficient to cover the normal tax, the
surtax at the first bracket rate, and the Victory tax. This rate was to
apply to the amount of the wage in excess of allowances representing
prorated personal exemptions and average deductions. Tables indicating the combined tax to be withheld for each wage bracket according
to the exemption status of the employee were developed by the
Treasury to simplify the problem of employers. Amounts withheld




REPORT OF THE; SEICRETARY OF THE TREASURY

109

were to be remitted to the Government and held for application to
the individual's tax liabUity. At the end of the year, the taxpayer
would file a return showing the'final tax liability and either pay any
additional amount due or claim a refund. (See exhibit 83, jp. 420.)
Throughout the consideration of the revision of payment methods
by the Congress, the Treasury continued its investigation of withholding methods, and on May 6, 1943, presented suggestions to the
Senate Finance Committee for improvements in the procedure incorporated in the earlier bills before Congress. (See exhibit 84, p. 431.)
The major proposal was for a revision of the withholding exemptions
and the withholding tables in the bill as it was passed by the House.
By changing the family status withholding exemptions to $312 for
dependents, $624 for single persons, and $1,248 for married persons
(the Victory tax exemption remaining at $624), ratios were established
which made it possible to consolidate the five withholding tables for
each payroll period into one table. Other suggestions were designed
to expedite refunds, to ensure prompt remittance of moneys withheld,
and to facilitate the work of employers in withholding. These changes
were incorporated in the Current. Tax Payment Act of 1943.
D, Current Tax^Payment Act—major features
The Current Tax Payment Act of 1943 approved June 9, 1943,
revolutionized the time and method of payment of individual income
tax liabUities. In this connection it contained three major features:
First, provisions for withholding of income tax at the source on wages
and salaries; second, provisions requiring the filing of declarations and
payment of estimated tax currently by those individual income taxpayers not made current in their tax payments through withholding;
and third, provisions effecting the transition from the delayed system
of income tax payments to the current pa3mient system.
The first of these features, namely, the withholding of income taxes
at the source on wages and salaries, amplified the technique introduced
in the Revenue Act of 1942 with respect to the withholding of Victory
tax. The Victory tax withholding provisions were repealed and for
administrative convenience the new withholding provisions were incorporated in Chapter 9 of the Internal Revenue Code and were coordinated generally with those applicable to the social security tax.
The act provided that where the relationship of employer and employee exists, withholding is required at.the rate of 20 percent of the
amount paid to an employee Over and above the employee's family
status withholding exeniption but at 3 percent where the wages exceed
the Victory tax withholding exemption but do not exceed the family
status withholding exemption. Employers were given the option of
withholding the income tax on an employee's salary either through the
precise calculation method or through the use of wage bracket tables



110

REPORT OF THE SEORETARY OF THE TREASURY

for the various payroll periods which were set forth in the act. The
act provided that withholding under the new provision should be
(effective with respect to aU wages paid after July 1, 1943, except those
wages paid during 1943 with respect to a payroll period beginning
before July 1, 1943.
Certain types of wages were exempted from the requirement of
withholding. The principal exceptions made by the act were:. (1)
Wages paid for agricultural labor as defined under the social security
law; (2) remuneration for domestic service; (3) wages paid for casual
labor; (4) pay for active service of members of the military and naval
forces; (5) remuneration for services performed for a foreign government; (6) remuneration paid for services performed by non-resident
alien individuals except for such individuals who are residents of a
contiguous country and who enter and leave the United States at
frequent intervals; and (7) remuneration paid for services performed
as a minister of the gospel.
The act gave the Commissioner of Internal Revenue the authority
to establish the rules for withholding where extraordinary situations,
like overlapping pay periods, ^pplementary payments in the form of
bonuses, commissions, and so forth, occurred. The act provided rules
for the filing and amending of withholding exemption certificates by
employees and,the furnishing of receipts by the employer with respect
to the wages withheld during any calendar year. Penalties were
provided for furnishing of fraudulent receipt or failure to furnish receipts, for faUure by an employer to return the tax withheld, and for
wUfully supplying false or fraudulent information on the withholding
exemption certificates by an employee.
Payment of income tax currently where withholding is insufficient
to provide full payment of the individual's tax liability was achieved
in the act by the provisions calling for annual declarations from taxpayers falling within certain income requirements. The act provided
that the estimated tax shown on the declarations should be paid
quarterly and that if original estimates of income and consequent tax
liabUity proved during the year to be wrong, declarations could be
amended to reflect the change in income or deductions and corresponding tax liability. Penalties were provided for failure to file declarations where required, failure to pay the estimated tax, and failure to
estimate tax within the range of specified percentages of the actual
tax liability. Special provisions calling for a single year-end declaration and an increased margin for error in estimation were included
for the benefit of farmers. Special provisions for the filing of declarations in the transition year 1943 were made. The privilege of quarterly
payment of income-tax liabilities in the year following receipt of
income was eliminated except in the case of estates, trusts, and non-




REPORT OF THE SEIORETARY OF THE TREASURY

111

resident alien taxpayers not brought under the current-payment
system.
In order to meet the problem of transition to the current-payment
system and to relieve the burden on individual taxpayers of the
payment of two years' taxes in one year, the act provided for cancelation of a part of the aggregate of the two years' tax liabilities of
those individuals who were taxpayers both in 1942 and 1943, and who
became subject to the current payment system. In effect, the provisions of the act canceled 100 percent of the lower of the tax liabilities
for the years 1942 and 1943 where that liability was $50 or less, a
percentage somewhat lower than 100 percent but greater than 75
percent, where the liability for the lower year was between $50 and
$66.67, and 75 percent where the liability for the lower year exceeded
$66.67. In certain cases where the taxpayer had a surtax net income
for both 1942 and 1943 exceeding by more than $20,000 his surtax
net income for the highest of the base years selected by him, 1937 to
1940, inclusive, a smaller percentage of the lower year's liability was
canceled. In order further to relieve the burden on taxpayers, the
act provided that the uncanceled 25 percent could be paid one-half
March 15, 1944, and one-half March 15, 1945; that the portion of the
tax between 75 percent of the lower year and the limit of cancelation
set up in the special provisions applying to persons with greatly
increased incomes in 1942 and 1943, payment could be made over the
course of four years beginning in 1945.
With respect to members of the armed forces of the United States
and the other" United Nations the act granted a $1,500 exclusion from
gross income for service pay received whUe in active service. I t was
further provided that to the extent that the 1942 tax liability was
higher than the 1943 liability by reason of the inclusion of earned
income in the case of a member of the armed forces the cancelation
feature requiring the payment as 1943 tax of the higher of the two
tax liabilities should not apply. The act also provided that the
estate of" a deceased member of the armed forces who died while in
active service was relieved from the liability for the payment of incoine
taxes of the deceased person which were unpaid at the time of his
death.
E. Other revenue legislation
Other laws aft'ecting the revenue were as foUows:
Public Law 676, July 23, 1942, extending exemption from the admissions tax to the military and naval forces of the United Nations; and to
amounts paid for admission to activities operated or controlled by
the War or Navy Department exclusively for the welfare of the
military or naval forces of the United States.
Public Law 706, August 24, 1942, temporarily suspending the
running of existing statutes of limitation applicable, to offenses in vol v


112

REPORT OF THE SECRETARY OF THE TREASURY

ing the defrauding or attempts to defraud the United States or any"
agency thereof.
'
.
Public Law 711, September 16, 1942, temporarily suspending in
part the processing tax on coconut oil.
Public Law 720, September 29, 1942, increasing to 120 days the 90
days limit for which the Commissioner of Internal Revenue could
grant extensions of time for the fihng of returns of capital stock tax in
1942.
Public Law 727, October 2, 1942, exempting from all Federal taxes
gifts or bequests or devises, or the income therefrom, to or for the
benefit of the Library of Congress.
Public Law 747, October 16, 1942, adding Article VI (tax provisions) to Chapter 15 of the National Bankruptcy Act to replace
corresponding provisions added by Public No. 242, approved July 28,
1939.
Public Law 790, December 5, 1942, according entry free from importation charges to gifts from members of the armed forces of the United
States oh duty abroad.
Public Law 797, December 11, 1942, exempting from the narcotics
taxes the production, sale or transfer of opium poppies by those
persons who are duly licensed to produce, sell or transfer opium
poppies.
'
Public Law 809, Deceinber 17, 1942, extending, the period for the
tax-free release of powers of appointment to July 1, 1943.
Public Law 14, March 23, 1943, permitting the tax-free shipment of
certain toba;cco products to territories of the United States for the use
of members of the armed forces of the.United States,
s Public Law 17, March 24, 1943, determining :the extent to wliich
services of oflScers and members of crews employed by the War
Shipping Administration fall within the concept of employment for
the purpose of employment taxes; and the extent to which compensation received by them constitutes wages for the purpose of einployment
taxes.
Public Law 21, March 31, 1943, extending through September 15,
1943, the time for filing claims for relief under section 722 (d) of the
Internal Revenue Code.
Public Law 40, Aprir24, 1943, extending the bituminous coal tax on
sales or other disposals until May 23, 1943.
Public Law 45, AprU 29, 1943, exemp ting, payments to alien farm
labor from withliolding under section 143 (b), Internal Revenue Code.
Public Law 53, May 21, 1943, extending the bituminous coal tax on
sales or other disposalsuntil August 23, 1943.
Public Law 77, June 17, 1943, extending the increase in first class
postage rates to July 1, 1945.
Public Law 78, June 17, 1943, clarifying the provisions relating to




REPORT OF THB SEORETARY OF THE TREIASURY

113

taxpayers entitled to establish ship construction reserve funds under
Title V of the Merchant Marine Act, 1936, as amended, and transferring to the Maritime Commission the authority to grant extensions
of time :for the expenditure of such reserves.
SECURITIES OWNED BY THE UNITED STATES AND PROPRIETARY
INTEREST IN GOVERNMENT CORPORATIONS AND CREDIT
AGENCIES

Securities owned
Oh June 30, 1943, the United States owiied securities consisting of
capital stock, bonds, etc., of Government corporations and agencies
and indebtedness to the Government by railroads, farmers, shipowners, and others, in the face amount of $10,121 millions; and obligations of foreign govermnents in the principal amount of $12,661
mUlions. A statement of the securities owned, exclusive of foreign
obligations, at the end of the fiscal year 1943 is shown in the table on
page 670: A summary of the holdings of securities at the end of the
last two fiscal years is shown in the following table.
Sumrnary of securities o.wned by the United States Government, exclusive of foreign
obligations, June SO, 1942 and 194s
"• "• :

June 30, 1942

'. • • ' ^Security •

Capital stock of Government corporations.,.Paid-in surplus of Gbvernment corporations..
Bonds and notes of Government corporations.
Other securities 1
Total all securities
Less interagency ownership:
Capital stock.
:
Paid-in surplus
_
Other securities
__.
.
•

.

$1,827,391, 580.88
146,861, 238.02
4, 078,690. 945. 91
1, 255, 665, 230. 72
7,308,608,995.53

.

458,741,000.001.000,000.00
380, 995,925.47

..

c! Total interagency ownership
Net securities owned

840, 736, 925. 47
_

6,'467,872.070.06

June 30, 1943

Increase or,
decrease (—)

$2,106,371,183.31
. $278,979,602.43
142, 6i7,869. 23
- 4 , 243, 368.79
7. 535,144,623.79
3,456,453,677.88
1, 271,491, 781.96 "
15,826, 551.24
•11,055. 625, 458. 29

3, 747,016, 462. 76

459,841,000.00
1,000,000.00
473,492, 576.84

92,496,651.37

1,100,000.00

934, 333.576.84

93, 696,651.37

10,121,291,881.45

3,653,419,811.39

» includes loans and advances by Farm Security Administration, Rural Electrification Administration,
and .Public Works Administration.

In accordance with the acts approved February 24, 1938 (52 Stat.
79), and March 28, 1941 (55 Stat. 55), the Secretary of the Treasury
canceled during 1943 obligations of the Reconstruction Finance Corporation amounting to $42 millions, representing expenditures previously inade by the Corporation. This brought the total of the
obligations of the Reconstruction Finance Corporation canceled to
$2,781 mUlions, as shown in the following table.
Reconstruction Finance Corporation:
Amount
, ..Obligations.canceled to June 30,1942
...."
$2,739,895,685.09
• Obligations canceled during 1943 pursuant to the act of Feb. 24,1938, on
account of expenditures for-^
Federal Housing Administrator (sec. 4 of National Housing Act).. $3,500,000.00
Capital stock of regional agricultural credit corporations
37,000,000.00
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)
. . 1.046,322.12
:
.
41,646,322.12
Total to June 30, 1943...




.'

2,781,442,007.21

114

REPORT OF THE SEORETARY OF THE TREASURY

Proprietary interest in Government corporations and credit agencies
In order to refiect. the amount of the Government-s interest in
Government corporations and credit agencies, the Treasury compiles
from reports received from such agencies a '^Combined Statement of
Assets and Liabilities of Government 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 liabUities 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, 1943, appears as table 84 beginning on page 694, and a
summary table of the Government's proprietary interest in such
agencies as of June 30, 1932 through 1943, appears as table 85 on
page 704 of this report.
MONETARY DEVELOPMENTS

International monetary cooperation
Stabilization agreements,—The Treasury's policy, during the fiscal
year 1943, has been one of continuing cooperation with friendly foreign
governments in the stabUization of their currencies. StabUization
agreements previously made with the Governments of China, Brazil,
Mexico, Ecuador, and Iceland were renewed. These agreements provide not only for stabUity of exchanges but also for periodic conferences to discuss monetary, financial, and economic problems of mutual
interest. Monetary agreements were also made with the Government
of the Republic of Cuba and with the Government of Liberia.
On July 6, 1942, the Secretary of the Treasury and the Cuban
Ambassador signed an agreement under which the Government of the
United States undertakes to sell gold to the Government of the Republic of Cuba from time to time with payment to be made in dollars
within 120 days after delivery of the gold, provided that the unpaid-for
amount shall not at any time exceed $5 millions. This agreement was
designed to facUitate the accumulation and maintenance of a gold reserve against Cuban currency as provided by Cuban law, and to enable
the Cuban Treasury to carry out operations for stabilizing the Cuban
peso-United States dollar rate of exchange. On July 1, 1943, the
Secretary of the Treasury and the Charge d'Affaires of Cuba extended
this agreement for 2 years beyond June 30, 1943. (See exhibits 46 and
47, p. 347.)
An agreement was entered into with the Government of Liberia on
September 26, 1942, to facilitate the conversion of the currency system
of that country to one based on dollars. Through use of the United
States stabilization fund, British coins are being withdrawn from circulation and purchased with United States currency. Arrangements



REPORT OF THE SEORETARY OF THE> TREASURY

115

have been made with the British Government to dispose of these coins.
The agreement signed AprU 25, 1941, between the United States and
China, under which the United States stabUization fund undertook to
purchase Chinese yuan to the amount of $50 millions, and under which
the Stabilization Board of China was established, was extended on June
30, 1942, for a period of 1 year. (See exhibit 48, p. 347.) On December 31, 1942, the Secretary of theTreasury announced the extension
to June 30, 1943, of the stabilization arrangement of July 14, 1937.
(See exhibit 49, p. 348.)
In conformity with the policy of monetary cooperation between the
two countries, the Secretary of the Treasury and the Charg6 d'Affaires
of Brazil on July 6, 19412, signed an agreement extending to July 15,
1947, the stabUization agreement entered into between the countries
on July 15, 1937. Under the agreement as extended, the amount of
dollar exchange made avaUable to the Government of Brazil was increased from $60 millions to $100 mUlions, and the amount of gold
made avaUable for sale to Brazil was increased also from $60 mUlions to
$100 millions. (See exhibit 50, p. 348.) On June 4,1943, the agreement
was amended to increase the amount of gold made avaUable for sale to
$200 mUlions.
In furtherance of the policy of the Mexican and the United States
Treasuries of maintaining the stabUity of the rate of exchange between
the currencies of the two countries, the Secretary of the Treasury and
a representative of the Secretary of the Treasury of Mexico, on June 3,
1943, made a joint statement that the stabUization agreement of
November 19, 1941, between the United States and Mexico, had been
extended for 2 years to June 30, 1945. Under the agreement, up to
$40 mUlions of the United States stabUization fund could be used to
purchase Mexican pesos for the purpose of stabUizing the United States
doUar-Mexican peso rate of exchange. (See exhibit 51, p. 348.)
The stabUization agreement signed February 27, 1942, between the
United States and Ecuador, under which the United States stabUization fund undertakes to purchase Ecuadoran sucres to the amount of
$5 mUlions for the purpose of stabUizing the United States dollarEcuadoran Sucre rate, was extended on July 1, 1943, for 1 year to
June 30, 1944. (See exhibit 52, p. 349.)
On July 1, 1943, the stabUization agreement signed May 5,/1942,
between the United States and Iceland, under which the United States
stabUization fund undertakes to purchase Icelandic kronur to the
amount of $2 mUlions, for the purpose of stabilizing the United States
dollar-Icelandic krona rate of exchange, was extended for 1 year to
June 30, 1944. (See exhibit 53, p. 349.)
The balance of the obligations of the Government of the Union of
Soviet Socialist Republics under the three gold purchase agreements,
made during the fiscal year 1942, were fully met in accordance with the



116

REPORT OF THE SEIORETARY OF THE TREASURY

terms of the agreements. The dollars made avaUable by these gold
transactions were used by the U. S. S. R. to pay for purchases of goods
and services in the United States in addition to the materials obtained
under the terms of the lend-lease arrangements.
Post-war currency stabilization.—In. anticipation of the formidable
international monetary problems which are certain to arise after the
war, the Treasury staff' prepared a tentative proposal for international
cooperation to prevent the disruption of foreign exchanges and the
collapse of some monetary systems, and to facUitate the restoration
anid balanced growth of international trade.
On April 5, 1943, the Secretary of the Treasury appeared before a
joint session of three Senate committees and on April 6, 1943, before a
joint session of three House committees to present this tentative proposal. In his statement the Secretary explained that the technical
experts of the Treasury and other agencies of the Government had
been studying methods by which post-war monetary stabUity could be
facUitated. Secretary Morgenthau stated that the tentative proposal
had been made avaUable for exploratory study by the experts of other
interested governments. The Secretary pointed out that the proposal
did not have the official approval either of the Treasury or the Government.
The tentative proposal provides for the establishment of an International StabUization Fund with powers and resources adequate to promote the maintenance of currency stabUity. All the United Nations
and the countries associated with them in this war would be invited to
become members. The fund would be under the manageinent of a
board of directors, consisting of one director appointed by each member government. Voting power would be related to the contribution
by each country to the fund.
The resources of the fund would be subscribed by tbe participating
governments in the form of gold, currencies of member countries, and
public obligations of the member governments. The resources of the
fund could be used to seU foreign exchange to meet the needs of member countries on their current transactions, whUe measures are being
taken to restore equUibrium in the balance of international payments.
The accounts of the fund would be kept in terms of a new international
monetary unit, the Unitas, consisting of 137K grains of fine gold
(equivalent to $10). The fund would deal only with member governments and central banks, and would not enter into the customary
channels of international trade and international finance.
A letter was sent by the Secretary of the Treasury to the Ministers
of Finance of 37 countries inviting them to send technical experts to
Washington to discuss informally the tentative proposals for international monetary cooperation. By the end of the fiscal year, 28 coun-




REPORT OF THE. SEORETARY OF THE TREASURY
tries had participated in these exploratory discussions.
54, p. 349.)
Domestic monetary events

117

(See exhibit

On AprU 29,1943, the President approved an act which (1) extended
until June 30, 1945, the powers relating to the stabUization fund which
were granted to the President and the Secretary of the Treasury in
section 10 of the Gold Reserve Act of 1934, as amended; and (2) provided that the fund should not be used in such manner that direct
control of it would pass from the President and the Secretary of the
Treasury.
The power to alter the gold content of the dollar was given to the
President by Title I I I of the Agricultural Adjustment Act of May 12,
1933,' and reaflBrmed by the Gold Reserve Act of January 30,1934. On
January 31, 1934, the President fixed the dollar at its present gold
content, which has remained unchanged for more than 9 years.
The
President recommended and the Congress enacted extensions of this
power in 1937 and again in 1939 and 1941. In 1943 this power was
permitted to lapse. (See exhibits 55 and 56, p. 360.)
'The assets and liabUities of the exchange stabUization fund as
of June 30, 1942 and 1943, with supporting schediUes, are shown in the
table beginning on page 668.
Every effort was made by the Treasury in the fiscal year 1943 to
continue the policy inaugurated in AprU 1942 of putting all avaUable
silver into urgent war uses. The metal is used extensively in the production of aircraft, ordnance, naval vessels, and for other war purposes.
Approximately 700 mUlion ounces of sUver from the Treasury's free
silver stocks were made available to June 30, 1943, for nonconsumptive use in war plants, under arrangements whereby the sUver wiU be
returned to the Treasury after the war.
No new purchases of foreign silver were made during the year,
and the delivery of newly mined domestic sUver acquired undp^
forward purchase contract was postponed, thus permitting such
silver also to go into industrial uses. (See exhibit 57, p. 363.)
I n addition, approximately 5 mUlion ounces of sUver were sold
to industrial users certified by the War Production Board as in urgent
heed* of sUver for immediate use in war production. This sUver is
classified as ^'sUver ordinary" and is composed in part of silver purchased for coinage prior to the Silver Purchase Act of 1934, in part
of sUver contained in gold deposits, in part of recovered bullion which
was lost in the melting and coining processes, and the balance of
sUver in excess of the amount estimated to be contained in mutUated
coins. This silver was sold at a price of 45 cents an ounce. (See
exhibit 58, p. 364.)
Approximately 3,075,000 ounces of Treasury sUver were lendleased to England during the year with the understanding that an



118

REPORT OF THE. SEORETARY OF THE TREASURY

equivalent amount wiU be returned on an ounce-for-ounce basis
after the war. The sUver was made available to relieve a shortage
in British armament, airplane, and ship repair industries, and to
supply sUver for coinage in Great Britain. The silver was made
available after full discussion with lend-lease ofl&cials, the War
Production Board, the Combined Raw Materials Board, the Senate
Special Silver Committee, and other govermnental agencies.
An act of July 12, 1943, authorized the President, through the
Secretary of the Treasury, upon recommendation of the Chairman
of the War Production Board, to sell or lease domestically for war
purposes any sUver held or owned by the United States, provided
that no sUver should be sold at less than 71.11 cents per fine troy
ounce, and provided further that, at all times the ownership and
the possession or control within the United States of an amount
of sUver of a monetary value equal to the face amount of aU outstanding silver certificates should be maintained by the Treasury.
(See exhibit 59, p. 364.)
On September 12, 1942, the Secretary of the Treasury announced
that the new 5-cent piece, authorized by the act of Congress of March
27, 1942, and designed to save nickel and copper for war uses, wpuld
be composed of 35 percent sUver, 56 percent copper, and 9 perceiit
manganese. Manufacture of the new coin was started at the Philadelphia mint on October 1, 1942. (See exhibit 60, p. 364.)
In a further effojt to conserve vital war metal, production of the
1-cent piece was greatly curtaUed during the first 6 months of the fiscal
year, and its coinage was suspended entirely in December 1942. This
coin as minted since 1909 contained 95 percent copper and 5 percent
tin and zinc. Production of a new, wartime 1-cent coin, provided for
in Public Law 815, approved December 18, 1942, was begun in
February, and the first supplies were delivered to the Treasurer of the
United States on February 27, 1943. The new coin is made of zinccoated steel. (See exhibit 61, p. 365.)
In November 1942, at the request of the United States War Department, the Treasury Department furnished to the War Department a
special series of United States currency for use of the American military forces in North Africa. The currency is so marked that it can be
readily distinguished from ordinary notes. One purpose of the special
series is to prevent the use in North Africa of United States money
which the Axis may have seized in occupied areas.
At his press conference.on December 14, 1942, the Secretary disclosed that the United States obtained gold coins from Canada for use
by the American forces in North Africa. The Secretary explained that
this action was necessary because United States gold coins were melted
do\^ni into gold bars as required by law.




REPORT OF THE SEORETARY OF THE TREASURY

119

In order to conserve labor and materials, the Board of Governors of
the Federal Reserve System, after consultation with the Treasury
Department, in December 1942 authorized the Federal Reserve Banks
to utilize as needed the existing stock, approximately $660 mUlions, of
Federal Reserve Bank notes printed in 1933 and 1934. I t is estimated
that the utilization of this stock of unissued currency saved 225,000
man hours of labor, and 45 tons, of paper, in addition to substantial
savings of nylon and ink. (See exhibit 62, p. 367.)
All act of May 25, 1943, extended until June 30, 1945, the use of
direct obligations of the United States as collaLteral security for
Federal Reserve notes. (See exhibit 63, p. 367.)
A discussion of developments in foreign funds control will be found
on p. 125.
CUSTOMS SERVICE IN THE WAR

In addition to its normal functions the Customs Service is charged
with the physical control of exports, vessels, vehicles, and persons to
insure that no articles are taken from the United States except under
license or simUar authorization; with the physical enforcement of the
provisions of the Foreign Funds Control Act and the regulations
promulgated thereunder as they relate to the exportation and importation of currency, negotiable instruments, securities, and other evidences
of indebtedness; with the control of American citizens leaving the
United States to insure that they hold valid passports; and with the
enforcement of the Trading with the Enemy Act in the censorship of
tangible communications brought into or taken from the United States
otherwise than in the regular course of the maUs.
Active cooperation is given by the Customs Service to the Army and
Navy intelligence services and to the Federal Bureau of Investigation.
The Customs Service is also furnishing substantial assistance to the
Coast Guard in the protection of vessels, harbors, ports, and waterfront
facUities from sabotage.
Customs officers cooperate with the War Production Board and the
Office of Price Administration in the (enforcement of certain regulations
of those organizations. In the case of the War Production Board the
Customs Service assists in controlling the importation of restricted
materials. I t assists the Office of Price Administration in the rationing
of ships' supplies and imports of sugar, processed foods, meats, fats,
fish, cheeses, thes, shoes, and rubber.
A further discussion of the war activities of the Customs Service will
be foimd on page 232;




120

REPORT OF THE SEORETARY OF THE TREASURY
SPECIAL PROCUREMENT ACTIVITIES

• Lend-lease

•

^

.. . ^

During the fiscal year 1943, lend-lease continued to be the largest
activity of the Procurement Diyision. Purchases amounted/ to
$1,500,000,05(}, mvolving 24,643 contracts. Since Peari.Harbor, the
total expenditures on lend-lease, purchases by the Division have
amounted to $2,500,000,000, involving 33,515 contracts. As anticipated, it was found necessary to expand the field expediting and inspection forces. Thirteen lend-lease area offices and eleven suboffices
are giving constant attention to between 12,000 and 14,000 active
contracts.
The fluctuating shipping situation necessitated the establishment of
lend-lease depots in conjunction with the War Department. In addition to the general use of storage facUities, the Procurement Division
is administering space at seven of these depots, totaling 2,000,000
square feet of open space and 2,500,000 square feet of closed space.
Commercial storage facUities are also being used extensively throughout the country.
Owing to ever changing war requirements, substantial quantities of
materials, mostly iron and steel products, purchased by the Division
are made available for. redistribution. AU negotiations for sale of
these materials, to other lend-lease countries* or to domestic manufacturers for war requirements, are handled by the Procurement Division.
Renegotiation of war contracts

.

;

'"

Renegotiation of Government contracts was provided for by Conr
gress in order to prevent the realization of inordinate profi^ts frorn war
production. This w^s accomplished in two ways:.. By.the,retaining
or recapturing of the profits on.war contracts regarded as excessive,
and by the refixing of contract prices on future ;war production.
The policy of renegotiation became necessary because industry, in
starting production of billions of dollars worth of .war equipment with
which it had no previous experience, naturally found itself unable to
present reliable estimates of costs. : As production reached substauT
tial levels it was found that the unit costs included in the original con^
tracts were too high in many cases. ',
.;: .
*Renegotiation of Government contracts was authorized by section
403 of Title IV of the Sixth Supplemental National I)efense Appropriation Act, 1942, approved AprU 28, 1942. This act. referred to contracts with the War and Navy Departments and the Maritime, COUIT
mission. Contracts with the War Shipping Administration were made
subject to renegotiation under this law by Executive Order No. 9244,




REPORT OF THE. SEORETARY OF ^ THE TREASURY

121

dated September 6, 1942. Section 801 of Title VIII of the Revenue
Act of 1942, approved October 21, 1942, which amended the renegotiation law. to meet CBrtain administrative problems, also authorized the
inolusiqn of contracts with the Treasury Department. The law was
amended further by the MUitary Appropriation Act, 1944, approved
July 1,1943, to include within its effect,contracts and.subcpntracts
with the Defense Plant Corporation, Metals Reserve Company, Defense. Supplies Corporation, and the Rubber Reserve. Company. A
later amendment was made by Public Law 149, Seventy-eighth Congress, an act '^To prevent the payment of excessive fees or compensation in connection with the negotiation of war contracts,'- which was
approved July 14, 1943.
.
Renegotiation is generally applicable at present to contracts and
subcontracts with the nine departments and agencies specified, on
which final payment was not made prior to April 28, 1942, provided
that the aggregate sales under such; contracts and subcontracts were
in excess of $100,000 for the fiscal year of a contractor or subcontractor. Renegotiation,is now required also when amounts in excess of
$25,000 are payable in the fiscal year.to a contractor or subcontractor
for services performed or to be performed which consist of the solicitation, procurement or attempted procurement of Government. con. tracts or subcontracts thereunder, or the payment of which is contingent upon the procurement, or determined with reference to the amount
of such contracts.or subcontracts. The law provides that the procedure shall remain in force during the war and for 3 years after its
termination. ; All amounts of money recovered by way of repayment
or quit are covered into the Treasury as miscellaneous receipts.:, . ; -.
With respect to contracts made since passage of the renegotiation
Iaw^^,.the head of each of the nine departments and agencies specified
is authorized aind directed to insert in each contract for an amount
in excess of $100,000, made by his department, or agency^ provisions
for, renegotiation of the contract price and for retention or recapture
by the Gpvernmxent of excessive profits not eliminated through
reductions in contract prices. •
In accordance with the power to delegate authority granted; by
the law, renegotiation is handled by price adjustment boards and
contracting officers of the nine departments and agencies. Procedure
was instituted by which a contracting company iii most instances
renegotiated with only one of the specffied departments and agencies,
that which had the preponderance of interest with the contractor.
In order to make this policy effective, there was a cross-delegation
of authority enabling the department or dgency renegotiating with
a contractor to bind the others to the settlement reached.
Contracts of the Treasury Department subject to reiiegbtiatioh
include: (1) Contracts placed under section 201 of Title II of the
542890—44

-10




122

REPOiRT OF THB SEORETARY OF THE TREASURY

,First War Powers Act, 1941, 55 Stat. 839 (principally lend-lease
contracts); (2) contracts for strategic and critical materials placed
under the authority of the act of June 7, 1939, 63'Stat. 811; and (3)
contracts for supplies for refugee relief under the Red Cross progriam,
placed under the authority contained in section 40 of the Emergency
Relief Appropriation Act, fiscal year 1941, 54 Stat. 627, Title I of
the Second Deficiency Appropriation Act, 1942, approved July 2,
1942, and Title I I I of the Third Supplemental National Defense
Appropriation Act, 1942, 55 Stat. 817.
Other types of contracts regularly entered into by the Procurement
Division of the Treasury Department in the ordinary course of
business prior to the war period, as such, are not subject to renegotiation unless negotiated under authority contained in Title I I of the
Fu-st War Powers Act, 1941.
Purchase orders, however, which are issued by the War and Navy
Departments and the Maritime Commission under General Schedule
of Supplies Contracts, which were entered into by the Procurement
Division of the Treasury Department on behalf of all departments
and establishments of the Government, are considered as being
subject to the provisions of the renegotiation law. JPurchase-orders
issued by the Treasury Department itself under such contracts also
are considered as being subject to its provisions if such purchases
were for lend-lease or for the Red Cross program.
Savings from renegotiated Government war contracts in the 14
months since the procedure was instituted, as reported jointly for
the War and Navy Departments and the Maritime Commission
through the Office of War Inforniation on August 3, 1943, representing
commitments for the elimination of excessive profits through June
30, 1943, amounted to $3,555,174,000. These figures, it was pointed
out in the report, did not include savings secured through lower
prices in successive contracts not susceptible of accurate measurement
or even of estimates, but which doubtless were many times greater
than the measurable recoveries and price reductions in existing
contracts reported. Of the total savings reported, $1,523,748,000
represented the. portion to be covered from excessive profits realized
and $2,031,426,000 represented price reductions for future deliveries
oil existing contracts. Of the former amount almost $546,700,000
had been paid into the Treasury as "Miscellaneous receipts'' by
June 30, 1943.
Strategic and critical materials
Under the program authorized by Public No. 117, June 7, 1939, for
the acquisition of stocks of strategic and critical materials, $12,256,000
was expended duruig the fiscal year 1943, bringing to $59,631,000 the
total expenditures from the inception of the program to June 30, 1943."




REPORT OF THB SECRETARY OF THE TREIASURY

123

The acquisitions were made by the Procurement Division at the direction of the Secretary of War and the Secretary of the Navy.
Goods valued at $1,081,000 were sold from the stock pile during the
year and in accordance with an amendment in Public Law 76, May 8,
1941, the proceeds were deposited to the credit of the strategic and
critical materials account, bringing to $1,164,000 the funds deposited
in this account from sales since the inception of the program.
Four Executive orders were issued during the year relating to the
sale or other disposition of certain materials by the Procurement
Division under direction of the Chairman of the War Production
Board. Executive Order No. 9203, July 20, 1942, authorized the sale
of manila fiber to the United States Navy, to the United Kingdom, or
to certain Canadian manufacturers designated by the Government of
Canada. Executive Order No. 9242, September 11, 1942, directed
the sale of optical glass suitable for the manufacture of binoculars.
Executive Order No. 9291, December 29, 1942, directed the transfer
to the Metals Reserve Company of the block mica in stock on November 30, 1942, upon terms of sale agreeable to the Metals Reserve
Company and the Procurement Division, and directed the Metals
Reserve Company to sell or dispose of such mica as the Chahman of
the War Production Board shall dhect. Executive Order No. 9317,
March 20, 1943, directed the sale of 3,634,782.ounces of quinine sulfate
for the use of the Army and 1,283,600 ounces for the use of the Navy.
Storage and warehousing
The war thrust upon the Government new problems of supply and
transportation which denianded more effective utilization of its
material resources and drew attention to the need for improved
Federal procurement, inspection, and warehousing service. A major
contribution by the Procurement Division toward the accomplishment of this objective was the inauguration of a Nation-wide storage and
issue warehousing program under the provisions of Executive Order
No. 9235, dated August 31, 1942. (See exhibit 89, p. 448.)
Merchandising methods successfully practiced by Nation-wide
commercial enterprises indicated the desirability of taking the supply
service to the user rather than requiring the user to look to Washington
to satisfy day by day needs for commonly used items. This service
objective is in course of attainment through the establishment of regional supply centers at points throughout the United States where
there are the greatest concentrations of Federal activities. Each
supply center is being organized to render complete purchasing, contracting, and stores service to the field offices and, in the case of stores,
to serve the user direct without rehandling by intermediary facUities.
The first unit under this program was established at San Francisco on
May 16,1943.



124

REPORT OF THE SEORETARY OF THE TREASURY

. . T h e supply .needs of the FederaL activities in Washington will
continue tq be met by stores carried in the central. warehouse in
Washington. In addition to its. function as a. retail distributer' of
commonly used supplies within an area delineated by economical
shipping distances from Washington, in relation to the several regional
supply centers, this warehouse will also serve as a nation£|.l warehouse
to distribute articles which,, by their nature, source of supply, or quantities ^required, can be more econonaically supplied to the regional
supply centers .in that manner..
: .
.. The increased role of the central, Washington warehouse in meeting
the Federal demand for cohiinpn suppliQS since its establishment in
1935 is readily visualized by comparisoii of sales, from stock of $2,128,759 :in that fiscal year with $7,588^,019 during the fiscal year 1943. .
' •,

Utilization of Federal supplies and equipment

.Executive Order No. 9235, dated August 31-, 1.942, provides'for the
effective utUization of.aU types.of supplies and equipment owned by
the .Federal Government./ The.Bureau Of the Budget is named as the
policy-making body in matters pertaining to transfers of property
between agencies of the Goveniment.aiid the Procurement Division is
designated.as the operating agency. This is a long range program in
which disposition is made of aU property which becomes surplus to the
needs of the Federal Goyernment. Regulations require that agencies,
in need of a type of property on hand in surplus stocks, obtain their
requirements from that source rather than purchase new equipment in
the market. Property no longer required by any Federal agency is
sold to non-Federal tax-supported institutions and other non-Federal
purchasers. The program also includes the repair of certain surplus
property, when advantageous, foi* further Goverhment use.
To carry out thie provisions of this order, the Federal Property
Utilization Branch Was established by the Procurernent Division.
For purposes of. administration, the actual operations were decentralized through the establishment of eleven regional property offices
located near centers of property concefitrations. Plans have been
completed ifor.the establishment of regional repair shops in New York,
Chiciago, and San Francisco to recondition furniture and typewriters.
In Washington, D. .C, the facilities for Tepairing office furniture and
typewriters wei-e expanded. . ,
,
WhUe the Procurement Division was organizing to take orderly
custpdy of inventories of property declared surplus by the Federal
ageiicies, the Work Projects Administration was ordered liquidated.
The handling of property of that aclministration required that the
Procurement Division inspect and appraise the property, determine
further need for the iteins,by other Government agencies, inventory
and list avaUable property in catalogs issued periodically to Federail




REPORT OF THE SEORETARY OF TBEE TREASURY

125

agencies, and transfer property to Federal departments having a need^
for it. •
.
. .
: . .. ;
An important activity is the development of a classffication systern
and standardized nomenclature for property which wUl afford a
standardized control of aU property handled uiider the program.
During the year, Federal surplus property valued at $10,500,000 was
disposed of by transfer and property valued at $521,000 was disposed of
by sale after the regional Offices were established. AU funds derived
from the transfer or sale of Federal surplus property, other than t h a i
purchased origiiiaUy from reimbursable appropriatioiis, are covered
into, the miscellaneous receipts account of the Treasury.
FOREIGN FUNDS CONTROL ACTIVITIES!

During the fiscal year 1943 the Treasury Department, through
its Foreign Funds Control, continued as the financial spearhead in the
Governments economic attack upon the A:xis. Under the authorities
of the Trading with the Enemy Act the Department has aimed to
weaken the economic strength of the Nation's enemies by destroying
their ability to obtain resources and finance their operations throughout the world. The measures, taken were determined in the belief
that in total -war armed might depends upon economic strength.
No Axis war machine is more powerful than the economy and the
finances which back it.
;
_
. . :-•
During 1943 the work of the Treasury Department in^ these-areas
went forward under five main programs, as follows:
1. The first job-of the Treasury's Foreign Funds Control was. to.
prevent the enemy from using the billions in assets in this country^
actually or potentially under his control. I t is known thaLt in World
War I the Germans spent tens of inillions for sabotage, espionage, and
propaganda inside the United States. Today there are in the United
States about $8.5 billions of assets potentially avaflable for enemy use.
Yet, according to the Attorney General, there have beeii no evidences
of foreign-inspired sabotage here in this war. This remarkable recprd
is undoubtedly due in part to the drying up of all Axis sources of
financing within the Nation through the freezing control program.
The Treasury's control was exerted primarily through the continued
blocking of the dalngerous billions and the requirement of Treasury
licenses for transactions involving the blocked assets. During the
fiscal year 1943 over.238,000 applications for specific licenses to effect
transactions in blocked assets were filed with Foreign Funds Control.
These applications involved values of more than $4.8 bUlions. Approximately 20 percent.were denied as beiiig inimical to the interests of
the United States. In addition to those licensed on a specific basis,
hundreds of thousands of relatively safe transactions in blocked funds




126

REPORT OF THEI SEORETARY OF TEIE TREIASURY

were permitted under General Licenses issued to avoid burdening
legitimate business activities.^
.
,
2. The S(econd job was to prevent the enemy from benefiting from
the billions he has looted outside the United States. As the Nazis
built up their war machine ^during the 30's, they grew more and more
desperate for the foreign exchange necessary to buy the goods and
services to feed a mUitary economy. After the invasion of Holland,
Belgium, and France, one of the first programs of the Reichswehr was to
strip those countries of all available dollar securities, American
currency, diamonds, and gold to convert into foreign exchange to pay
the costs of the war. The efforts to realize on the plundered goods
took many different forms. The general pattern was to use black
market operators in neutral countries who were willing to gamble that
they could worm the goods into respectable channels for eventual
redemption in the United States.
Among the functions assigned to Foreign Funds Control was responsibUity for rendering ineffectual any such attempt of the Axis to realize
on its loot. All securities and currency imported into this country
were required to be delivered to a Federal Reserve Bank for examination and were not released unless the Control was satisfied that the
title thereto was free from Axis taint. During the fiscal year 1943,
over three million dollars in currency were caught trying to run the
blockade, while hundreds of mUlions more of looted currency and securities were undoubtedly left outside. By these methods the Treasury, effectively destroyed the value of the loot to the Axis.
There are evidences that the restrictions imposed by Foreign Funds
Control have drastically impeded the enemy in his efforts to ^secure
much-needed foreign exchange. By the close of the year the Axis
powers had accumulated huge adverse balances in neutral countries
and were experiencing increasing difficulty in purchasing supplies frojn
these countries and in competing with buyers from the United Nations
for vital materials.
.
3. A further task was to stop trade and communication with the
enemy both here and abroad. Foreign Funds Control has been assigned responsibility for administering the licensing controls established under section 3 (a) of the Trading with the Enemy Act. To
carry out this responsibility, the Control scrutinized attempted
commercial communications and transactions between the United
States and enemy countries or Proclaimed List nationals ^ in Europe or
Latin America. The Control adheres to a general policy of severing
and eliminating all financial and commercial intercourse, direct or indirect, with the Axis and Axis-dominated countries.
4. A fourth responsibility of the Department was to direct the
weapons of foreign exchange toward winning the war. The United
JJAnalysis of the applications considered appears on p. 236.
' For explanation of Proclaimed List nationals,[see the annual report for 1942, p. 295.




REPORT OF THB SEORETARY OF THE TREASURY

127

States is the largest market for financing international transactions in
the world today. Dollar balances are one of the few media generally
acceptable in transactions between nations. Because of these factors
a substantial part of the world's international business is effected
through the financial fa!bUities of the United States.
Executive Order No. 8389, as amended, under the Trading with the
Enemy Act, made the Secretary of the Treasury responsible for the
regulation of certain transactions in foreign exchange. In implementing this responsibUity during the year. Foreign Funds Control
scrutinized the bUlions worth of international transactions flowing
through the American channels, first, to prevent any transactions that
could be of help to the Axis and, second, to promote transactions
which would aid the Allied cause.
5. A new responsibUity which developed during the year was to
assist the armed forces with financial, economic, and property controls
in the areas which they liberated. As the armed forces moved to the
attack in North Africa, Treasury representatives followed. Experience proved the necessity for applying the same controls over finance,
property, and foreign exchange in the liberated areas as already had
been applied in the United States. This work was essential to maintain firm bases fpr military operations and to further weaken the
enemy's economy.
The Treasury has been assigned continuing responsibility for the
fields of banking, public finance, currency, and financial and property
controls in areas which are liberated in the future. In addition,
Treasury representatives are required to assist in the financial aspects
of other programs. I t is anticipated that this area of responsibUity
wUl increase greatly as the armed forces continue to move forward.
WAR CONTRIBUTIONS

Conditional gifts
Under the provisions of Title X I of the Second War Powers Act,
1942, approved March 27, 1942, the Secretary of the Treasury accepted through June 30, 1943, 766 donations of money toward furtherance of the war effort in the amount of $3,482,260.71, of which all but
$144,230.08 had been covered into the Treasury by warrants as of
June 30,, 1943. The latter amount represents checks which must be
cleared through banking channels before the funds are avaUable for
covering into the Treasury. The donations in most instances were
made by groups of individuals. A summarization of the donations
follows.




128

REPORT OF THE SEORETARY OF THE TREASURY
Donations under the Second War Poioers Act of 1942
Accepted
P u r p o s e for which c o n t r i b u t e d

Total.

J u l y 1, 1942,
through
Jiine 30, 1943

$1,302,995.08

$1,143, 311.11

$2,446,306.17

20,456.00

72,080.09

92,636.09

12,707.65
4,601.00
62,932.85
10.00
5,421.86

• 67,663.18
65,961. 20
54,533.72.
6,215.00
560,891. 32
'1,733. 25
31,747. 42
80,000.00

80,370.83
60,562. 20
.117,466. 57
5,225.00
568,313.18
1,733. 25
31,747.42
' 80,000.00

1, 409,124. 42

Aircraft ^representing b o m b e r s , p u r s u i t planes, balloons,
" "etc.)------'--'---:—'-..---—
Vessels (representing b a t t l e s h i p s , cruisers, destroyers,
s u b m a r i n e s , etc.) - —
'.
G u n s a n d a m m u n i t i o n (representing rifles, c a n n o n , mort a r s , m a c h i n e g u n s , bullets, torpedoes, b o m b s , shells,
etc.) Welfare a n d recreation
.--.
Buildings and a p p u r t e n a n c e s
..
Medical supplies:
Vehicles (representing t a n k s , a m b u l a n c e s , jeeps, e t c . ) .
Miscellaneous e q u i p m e n t . - . .
.
Foreign relief and rehabilitation
W a r financing p r o g r a m

M a r . 27,1942,
through ,
J u n e 30, 1942

2,073,136.29

3, 482, 260. 71

Total

Covered b y w a r r a n t
M a r . 27,1942,
through '
J u n e 30,1942

J u l y 1, 1942,
through
J u n e 30,1943

S u b s e q u e n t to
J u n e 30,1943 •

"Total..

$886,683. 69
20,456.00
11,197.65
4,601.00
62,188.85

$1,558,688.11
71,934.09
64,610.70'
53,059.95
7,286.50
4, 720.00
479,123.42
1,733. 25
31,747.42
80,000.00

. $934.37
146.00
4, 562.48
2,901. 26
47,991. 22
605. 00
87,189.76

985,127.19

Aircraft.
Vessels
:.....
Guns and ammunition..'
-•..,
Welfare a n d r e c r e a t i o n . . . . .
:
Buildings a n d a p p u r t e n a n c e s
M e d i c a l supplies
Vehicles
-......".
Miscellaneous e q u i p m e n t . . . - Foreign relief a n d rehabilitation..
W a r financing p r o g r a m . . . J . . - . - .

2,352,903.44

144, 230.08

Donations of property accepted during the fiscal year 1943 for use
in connection with the various war activities included airplanes, ambulances, automobUes, trucks, racing homing pigeons, fur coats, medical
supplies including iron lungs, rowboats and skiffs, guns and ammunition, bayonets, swords, knives, binoculars, soap, phonograph records,
baseballs and bats, a 7-dog team and harness, a train of 8 coaches, and
various other articles. The property accepted had a total estimated
valuation of $317,615., and.in practically all instances was received
directly-by the war agency to which donated.
.

Unconditional donations

From. December 7, 1941, the day on which Pearl Harbor was
attacked, to June 30, 1943, 14,734 unconditional donations amounting to $927,112.36 were received. The 14,734 donations do not
represent the total number of donors inasmuch as the donations of
approximately 24,000 individuals were grouped and treated as single
donations; for example, 7,000 employees of an aeronautical corporation
sent in individual checks which were recorded as one donation.




REPORT OF THE SECRETARY OF THE TREASURY

129

Donations came from individuals, schools, fraternal organizations,
labor organizations, groups of citizens, and employees in various
corporations.
SALARY STABILIZATION AND LIMITATION

Under the act of October 2, 1942, amending the Emergency Price
Control Act of 1942, the President was authorized and directed to
issue a general order on or before November 1, 1942, stabilizing
prices, wages, salaries and other factors affecting the cost of living
and to prPvide for making such adjustments therein as he found necessary to aid in the effective prosecution of the war or to correct gross
inequities. Except as otherwise provided in the act, such stabilization was to be as far as practicable on the basis of the levels
existing on September 15, 1942.
Pursuant to this authority, the President, on October 3, 1942,
issued Executive Order No. 9250 which, among other things, established
the Office of Economic Stabilization with a Director responsible to
the President, and an Economic Stabilization Board to serve in an
advisory capacity to the Director. The Secretary of the Treasury
is a member of the board. (See exhibits 68 and 69, pp. 378 and
379.)
The Director, with the approval of the President,'was authorized
to formulate and develop a comprehensive national economic policy
relating to the control of civilian purchasing power, prices, rents,
wages, salaries, profits, rationing, and subsidies. Title I I I of the
order outlined a program of wage and salary stabilization to be directed
by the Office of Economic StabUization. The Director was authorized
and directed also "to take the necessary action, and to issue the appropriate regulations, so that, ixlsofar as practicable, liO salary shall be
authorized under section 4 of Title I I I , to. the extent that it exceieds
$25,000 after the payment of taxes allocable to the sum iii excess of
$25,000: Provided, however, that such regulations shall make due
allowance for the payment of life insurance premiums On policies
heretofore issued, and required pajnnents on fixed obligations heretofore incurred, and shall make provision to prevent undue hardship."
On October 27, 1942, the Director of Economic Stabilization, with
the approval of the President, issued regulations formulating the program more specifically. With respect to salary increases, i t was
stipulated that no salary increase might have the effect of resulting
in any substantial increase of the level of cost or furnish the basis
for increasing price ceUings or to resist otherwise justifiable reductions
in such price ceilings. Employers having eight employees or less
were exempted from the provisions for the stabilization (but not the
limitation) of salaries.




130

REPORT OF THE; SEORETARY OF THE TREASURY

. Control by the National War Labor Board over wage adjustments
as specified in Executive Order No. 9250 was reaffirmed by the regulations; jurisdiction over salary adjustments was divided between that
Board and the Commissioner of Internal Revenue. The Commissioner was designated to enforce the limitation on salaries. By an
amendment to these regulations, dated November 30, adjustments in
wages and salaries of $2,400 a year and less paid to agricultural labor
were placed under authority of the Secretary of Agriculture.
With respect to the division of authority in administering the wage
and salary stabUization program, the Commissioner of Internal Revenue was given jurisdiction over all salaries in excess of $5,000 a year
and over salaries of less than $5,000 a year of those executive, administrative, and professional employees who are not represented by a
duly recognized or certified labor organization, and who are not classified as "agricultural labor.'' In the exercise of this authority, the
Commissioner of Internal Revenue, by a regulation promulgated on
October 29, 1942, under Treasury Decision 5176, established a Salary
Stabilization Unit under the supervision of a Deputy Commissioner
of Internal Revenue.
Although the Salary Stabilization Unit was generally responsible
for salary changes, its approval was not required in all cases of requests
for proposed increases. The salary regulations stated that approval
was not required where an increase in salary rate was made in accordance with a salary agreement or salary rate schedule in effect prior to
October 3, 1942, or approved thereafter by the Commissioner, and was
the result of (a) individual promotions or reclassifications; (6) individual merit increases within established salary rate ranges; (c) operation of an established plan of salary increases based on length of
service; {d) increased productivity under incentive plans;, or ie) operation of a trainee system.
,
Decreases in salary to a rate below $5,000 could not be made without
nrior approval of the Commissioner unless the employee had been
(lemoted or given lesser responsibUities. A decrease in salary was
permitted with the approval of the Commissioner only to correct gross
inequities or to aid in the effective prosecution of the war.
The responsibUity of the Commissioner of Internal Revenue in
passing upon the salary adjustments and limitations within his jurisdiction was increased by the fact that under the regulations promulgated by the Director of Economic Stabilization on October 27, 1942,
the Commissioner's determinations that salary payments are made in
contravention of the act are declared to be binding and conclusive
.upon all other agencies of the Government (1) in determining the
costs or expenses of any employer for the purpose of any law or regulation; (2) in calculating deductions under the revenue laws of the
United States; a n d . (3) in determining costs or expenses under any




REPORT OF THE SECRETARY OF THE TREASURY

131

contract made by or On behalf of the United States. In this connection, in section 1002.28 of the regulations promulgated on December 2,
1942, by the Commissioner, it was provided that if any salary payment was made in contravention of the act or of the regulations, the
entire amount of such payment should be disregarded for all of the
three purposes specified above.
Further limitation upon the authority to approve salary adjustments
is provided by Executive Order No. 9328, known as the ^'Hold the
Line" order, issued by the President on AprU 8, 1943. With respect
to wages and salaries, the order directed that no further increases
should be authorized beyond those in accordance with the Little
Steel formula as previously defined to compensate for the rise in the
cost of living between January 1, 1941, and May 1, 1942, except to
correct substandards of living, or to aid in the effective prosecution of
the war. In supplement to section 5 of the order, the Director of
Economic StabUization on May 12, 1943, issued a policy directive
authorizing the National War Labor Board to establish, by occupational groups and labor market areas, wage-rate brackets embracing
the going rates. All rates within those brackets were to be regarded
as stabUized rates, for application to concrete cases, and to serve to
strengthen and reinforce the stabilization line to be held. (See
exhibit 70, p. 382.)
On July 1, 1943, the Commissioner of Internal Revenue issued
instructions as to the methods under which payments of additional
compensation to salaried personnel could be determined, in the case of
employers required to pay increased salaries owing to extension of the
normal work week. (See exhibit 71, p. 383.) Under these instructions the maximum amounts which will be allowed are such amounts
as are necessary to keep the minimum differentials between the interrelated job classifications required for the maintenance of productive
efficiency.
The Public Debt Act of 1943, which became law on April 11, 1943,
without the approval of the President, amended section 4 of the act of
October 2, 1942 (Emergency Price Control Act), to eliminate the proviso of that section which gave to the President the power, without
regard to the clause limiting the purpose to the reducing of the wages
or salaries for any particular work below ihe highest wages or salaries
paid therefor between January 1 and September 15, 1942, to adjust
wages or salaries to the extent that he found necessary in any case to
correct gross inequities and also aid in the effective prosecution of
the war.
The Public Debt Act of 1943 further provided that all provisions
of Part 4001.9 of the regulations promulgated by the Director of
Economic Stabilization on October 27, 1942, which were in conflict
with section 7, Title II of Executive Order No. 9250, were rescinded.



132

REPORT OF THE SECDRETARY OF THE TREASURY

This provision repealed the $25,000 limitation on salaries.
exhibit 38, p. 338.)
;
:

(See

CHANGES IN ORGANIZATION AND PROCEDURE

The Foreign Funds Control was given a separate administrative
status in the Treasury Department under a Director of Foreign Funds
Control by Treasury Department Order No. 47; dated September 22,
1 9 4 2 : ' T h e functions of the Control have increased and developed
since its organization in the Office of the Secretary in April 1940.
Under Treasury Department Order No. 50; dated Juiie 25, 1943,
the designation of the War Savings Staff was changed to War Finance
DiviMon of the Office of the Secretary. The supervision of its functions—promoting the sale of securities offered to the public by the
Treasury Departinent—^was assigned to a Natioiial Director, who is
ah Assistant to the Secretary:
The Processing Tax Board of Review was abolished at the close of
business Decembei* 31,1942^ by section 510 of the Revenue Act of 1942:
Thfe jurisdiction vested in the Board, which was established under
section 906 (b) of the Revenue Act of 1936, was transferred to The
Tax Court of the United States. ' „
Certain functions, duties, and powers of the Attorney GeneraLland
the Department of Justice relating to taxes and penalties imposed
for violations of the National Prohibition Act were transferred by
Executive Order No. 9302, February 9, 1943, to the Commissioner
of Interhal Revenue.
' Copies of Treasury orders issued during the year and of the Executive order referied to will be found as exhibits 72 and 73 beginning on
page 384.
ESTIMATES OF RECEIPTS

The Secretary of the Treasury is required each year to prepare and
submit in his annualreport to Congress estimates of the public revenue
for the current fiscal year and for the fiscal year next ensuing (Public
No. 129, February 26, 1907). These estimates are now made in
December of each year on the basis of legislation existing at the time
of making the estimates. Because of the uncertainty concerning the
future under wartime conditions the possibility of error involved in
estimates of revenue is greater than usual, and there is also the probability of the .early enactment of new tax legislation. Therefore,
these^ estimates will be revised from time to time to take account
of changed conditions.
,
.
The situation apart from the enactment of new legislation has
changed markedly since a forecast of revenues was made a year ago.
At that time huge increases were scheduled in Government expenditures and a rapid expansion in industrial production, employment,




REPORT OF THE SECIRETARY OF THE TREASURY

133

and pay rolls was expected. By now it appears that full employment
of all factors of, production is being approached at the same: time t h a t
the increase of war expenditures is leveliiig off*. Industrial production,
employment, and pay rolls are expected to reach their maximum in
the calendar year 1944. In preparation of the estimates it has been
assumed that there would be some lifting of the limitations oh production for civilian consumption and some increased importation,
although increased tax-free shipments are expected to be made to
our armed forces serving in foreign countries, and. inventory shortages are expected to have a retarding effect on consumption. Basic
assumptions,are that the war will continue and that the expenditures
estimated elsewhere in this report will be realized.
The yield of the tax system is a function of both the tax rates and
the tax base. The base depends upon the distributions of the amounts
and kinds of taxable income received by individuals and by corporate
and noncorporate institutions, upon the valuation and distribution of
ownership and the transfer of property, upon the consumptioii of taxable commodities and services, upon imports, and upon the effect of
action taken by taxpayers to control their liability for tax. In making
estimates of the tax bases a wide variety of financial and other economic data is forecast approximately a year and a half in advance and
then analyzed upon the basis of past experience modified by reasonable
assumptions concerning conditions in the future. The forecast data,
include the direction and magnitude of the movements of industrial
production, profits, security and commodity prices, employment,
pay rolls, and other components of business activity. Past events
affect the receipts because of back taxes and provisions under the
income taxes for carrying forward losses and credits.
The degree to which receipts reflect current economic conditions is
determined by the sensitivity of each tax to fluctuajbions of business
activity and by the length of the period between the time in which
liability for tax is incurred and the time in which payment of tax to
the Government is required. ; '
:
. •;; - '
Consumption taxes are more stable than taxes based on income and
profits, and flat rate taxes are more stable than taxes at progressive rates.
The fact that dividends are not expected-to vary greatly* in the period
covered by these estimates is a stabUizing. influencer upon individual
income tax receipts, because so large a proportion of income taxed at
high rates consists of dividends. The controls of the war economy
over income, profits, and production, despite some small easing of the
controls over production for civilian use, are important stabilizing
factors.
*
.
"
':
The lag in payment of tax liabilities varies as between different
types of taxes. At one extreme, the tax on the sale of certain important commodities such as cigarettes, distilled spirits, and fermented



134

REPORT OF THB SECRETARY OF THE TREASURY

malt liquors is collected in advance of the sale of these commodities.
On the other hand, the payment of an estate tax may be delayed as
long as 15 months after the date of death. Payment of most excise
taxes upon commodities is due in the month following the taxed sale.
Gift tax receipts are due in the calendar year folio wing the year in which
the gift is made. Receipts from employment taxes lag anywhere
from 3 months to a year. The corporation income and excess profits
tax paymeiits are due in the year following the year in which the income is received, whereas the individual income tax payments are
largely made in the same year in which the liability is incurred.
Because the income tax receipts constitute more than 75 percent of
total receipts in each estimated fiscal year's receipts, the lag between
the time income is received by the taxpayer and the time pf payment
of taxes based on such incomes is of particular significance. Current
corporation income and excess profits tax collections continue to be
coUected in the calendar year following the accrual of the liability.
Hence the estimated tax receipts from these sources for the fiscal year
1944 are made up of payments partly on calendar year 1942 incomes
and partly on 1943 incomes. Similarly the fiscal year 1945 estimates
of corporation income tax receipts include payments based upon the
incomes of each of the calendar years 1943 and 1944.
The timing of the collection of the individual income tax liabilities
has been changed during the period under review. The estimated
current individual income tax receipts in the fiscal year 1943 are
based upon the incomes of each of the calendar years 1941 and 1942
plus receipts of certain withholdings (January through March 1943)
under the withholding provisions of the Revenue Act of 1942. However, the effect of the Current Tax Payment Act of 1943 is to make
current individual income tax receipts in the fiscalyear 1944 dependent
upon the incomqs of the calendar years 1943 and 1944 instead of the
calendar years 1942 and 1943. The latter situation prevails in the
case of corporation income tax receipts and would have been the
situation in the case of the individual income tax under the Revenue
Act of 1942 except for the. receipts from the collection at the source of
the 5'percent tax on salaries and wages in excess of an annual rate of
$624. In addition, the Current Tax Payment Act of 1943 requires
large nonrecurring payrnents of individual income tax liabilities in the
fiscal year 1944 and to a lesser extent in the fiscal year 1945.
The estimates are presented to show both total receipts and net
receipts. Total receipts cover all taxes and nontax revenues coming
into the Treasury which are credited to general and special accounts,
whUe net receipts represent total receipts less a deduction for the
amount of the net appropriation to the Federal old-age and survivors
insurance trust fund. The appropriation to this fund represents an
amount equivalent to 100 percent of the taxes received under the




REPORT OF THE SEORETARY OF THE TREASURY

135

Federal Insurance Contributions Act less reimbursement to the
General Fund for administrative expenses as provided in the law.
In this discussion of estimated receipts, the term 'Total receipts"
means 'Total receipts, general and special accounts, on the basis of
daUy Treasury statements." The term ''Net receipts," which allows
for the deduction for the appropriation to the Federal old-age and
survivors insurance trust fund, means "Net receipts, general and
special accounts, on the basis of daily Treasury statements."
Total receipts, general and special accounts, are estimated (on the
daUy Treasury statement basis) in the amounts of $42,578 millions
in the fiscal year 1944 and $43,425 mUlions in the fiscal year 1945.
The estimated total receipts in the fiscal year 1944 exceed by $19,193
millions the actual total receipts of $23,385 mUlions in the fiscal year
1943, while estimated total receipts of $43,425 millions in the fiscal
year 1945 represent an increase of $847 miUions over the estimated
total receipts in the fiscal year 1944.
Although total receipts in the fiscal year 1945 show an increase of
$847 millions as compared with those estimated in the fiscal year 1944,
the net receipts in general and special accounts show a decrease of
$417 mUlions. This result is caused by the effect of the appropriation
to the Federal old-age and survivors insurance trust fund of receipts
under the Federal Insurance Contributions Act which are estimated to
be $1,264 millions greater in the fiscal year 1945 than in the fiscal
year 1944 because of the inclusion of a full year's receipts at the higher
rate as compared with receipts of only one month at the higher rate
in the fiscal year 1944. The outstanding changes are those, relating
to receipts from the individual income tax and miscellaneous receipts.
The increase of $12,412 mUlions in the individual income tax
receipts in the fiscal year 1944 over those of the preceding fiscal year
is attributable not only to the higher levels of incomes during the
period in which the respective liabUities were incurred but also to
certain nonrecurring tax payments made during the fiscal year 1944
in connection with the transition to a pay-as-you-go basis. On the
other hand, a decrease of $1,324 millions is expected in the individual
income tax receipts in the fiscal year 1945 as compared with those in
the fiscal year 1944. The estimated receipts from nonrecurring payments of tax liability in connection with the transition to a pay-asyou-go basis are much smaller in the fiscal year 1945 than in the
fiscal year 1944 and this infiuence is sufficient to offset other influences
to the contrary.
Miscellaneous receipts in the flscal year 1945 originating from
renegotiation of war contracts also are expected to decline by $521
mUlions as the procurement agencies of the Government bring contract prices more closely in line with costs.
The percentage distribution, by sources, of total receipts in the



136

REPORT OF THE' SEORETARY OF T H E

TREASURY

fiscal years 1944 and 1945, as compared with actuahreceipts in the
fiscal year 1943, is shown in the following table:
Percentage distribution of total receipts i n the fiscal years 1943, 194-4y Cirid 1945
Actual,
1943. •

Estimated,
1945

Estimated,
1Q44

Internal revenue:
I n c o m e taxes
_
. Miscellaneous internal r e v e n u e .
Employment taxes.-—-...

75.08
11.89
7.30

76.74
12.12
4.39

68.82
19.46
6.41

T o t a l internal r e v e n u e
.
R a i l r o a d u n e m p l o y m e n t insurance c o n t r i b u t i o n s Customs
^
'_-.Miscellaneous receipts
-..^
•..-.
-•

94.27
.03
1.01
4.69

93.25
.03
•5.74

94.69
. .04
1.39
3.88

100.00

100.00

100.00

Source

T o t a l receipts..

Estimated receipts' in the fiscal years 1944 and 1945 and actual
receipts in the fiscal year 1943 are presented in summary form in the
table following. A more detailed tabulation of receipts and estimates is shown in table 100 beginning on page 764. All year-to-year
differences and percentages appearing in the text are based on this
detailed table.
Actual receipts in the fiscal year 1943 and estimated receipts in ihe fiscal years 1944
' '
' '
and 1946 ^
•• • ••

••

[In millions of dollars]

•

Estimated, Estimated,
1944
1945

Source
1. Internal revenue:
. •' (1) Income and excess profits taxes: ' •
Individual: .
.';• : •
: Current taxes: .
,
,
.
Collections of withholdings:
.• ,' •
Eevenue Act of 1942
..
Current Tax Payment Act of 1943:
• •
'•
•
••
Collections by Bureau of Internal Revenue.
•
Collections through Government depositaries, not yet received by Bureau
of Internal Revenue

• . ^
;•

1, 355.9
8,779.3

686.0

Income tax not withheld:
Collections by Bureau of Internal Revenue. • 8,229.8
•- Adjustment to daily Treasury statement
Dasls 2
__

9,837.8

. 5,771.0

_

8, 229.8
17,287.8
305.0

18,617.1
300.0

6,332.0
172: 9

17,^592.8

18,917.1

6, 505. 0

-. •''•- Total individuaL

.

' .

•; •

•'

Corporation:. - '
Current taxes:
Income.-1-___'--•
__:."...:
...
Excess profits..
.
•
Declared value excess profits ^
.
.
Adjustment to daily Treasury statement basis 2.
Total current corporation

• •

I i

•




4,137.0
4,844.0
82.4
- -80. 2
3
• 8,983.1

.

522.6
717.9
•1.5

464.8
642.7
1.5

383. 9
219.9
1.8

1, 242. 0

1,.109.0

605.6

..

15,012.1

13, 755. 5

9,588.7

32,604.9

32,672.6:

16,093.7

:.

_
•

, Total inconie and excess profits taxes

Footnotes at end of table.

4, 979.9
7, 566. 6.
100.0
12, 646. 5

Total back corporation
Total corporation

5,288.5
8, 377.8
103. 8

5,646.0

13, 770.1

. Back taxes:
. • Income
:...'....
Excess profits. . . _.
Unjust enrichment

••,;.•.

.3 -125.0
9,837.8

....

Total current individual
Back taxes .
_• J .

,

6,642.3

1,335.9

Total collections of withholdings

Total income tax not withheld•;

" 7,722.1

686.0

9,058.0

. . .
• '•

781.1

Actual,
. 1943

REPORT OF T H E SECIRETARY OF T H E TREASURY

137

^Actual receipts in the fiscal year 1943 and estimated receipts in the fiscal years 1944
and 1945^—Continued
[In millions of dollars]
Estimated, Estimated,
1944
1945

Source
1. I n t e r n a l r e v e n u e — C o n t i n u e d .
(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 t a x . .
L i q u o r taxes'^-..
Tobacco taxes '
S t a m p taxes '
M a n u f a c t u r e r s ' excise taxes
Retailers'excise t a x e s . .
Miscellaneous t a x e s ^ e . . .

393.8
474.6
45.7
1,482. 2
973.7
58.6
623.9
184.0
1,027. 7

382.9
460. 7
44.8
1, 509. 2
988.3
55.5
496.6
183.6
1,039. 2

328.8
414. 5
33.0
1,423. 5
915.3
45.2
487.2
165.3
757. 3

5,164.1

• 5,160.7

4, 569. 9
—18.5

5,164.1

5,160. 7

4, 551.4

2,687. 6
203.8

7 1, 422. 5
191.4

1,130. 5
158.4

2, 891.4

1, 613.9

1, 288.9

277.4

256.1

208.8

" 3,168.8

1,870.0

1, 497. 7

_.

40, 937.8

39, 703. 3

22,142.8

. .

12.8
438.0

11.9
420.0

10.3
324.3

'...
. . .
..
...

^

T o t a l miscellaneous internal revenue (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 2 .
T o t a l miscellaneous 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)
...
(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 ( C h . 9, S u b c h . B of
I n t e r n a l R e v e n u e Code)
T o t a l e m p l o y m e n t taxes
T o t a l internal r e v e n u e

Actual,
1943

._ .

2. Railroad u n e m p l o y m e n t insurance contributions
3. C u s t o m s . - 4. Miscellaneous receipts:
Originating from renegotiation of w a r contracts
All other

--.
1

T o t a l miscellaneous receipts
- T o t a l receipts, general a n d special accounts '
D e d u c t : N e t appropria1;.ion for Federal old-age a n d survivors
insurance t r u s t fund representing a n a m o u n t equal 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 Contributions Act, less r e i m b u r s e m e n t s to General F u n d for adm i n i s t r a t i v e expenses .
.
1
N e t receipts, general a n d special accounts '

s 1, 212. 4
824. 4
2,036.8

8 1, 733.1
709.8
2, 442.9 „

C)

(0)

10 907. 3
23,384.6

43,425.4

42,578.1

. 2,656.4

7 1 , 392.1

1,103.0

40, 769.0

41,186.0

22,281.0

NOTE.—Figures are rounded to nearest tenth of a million and will not necessarily add to totals.
1 Details of income taxes and miscellaneous internal revenue on collection basis with adjustments to basis
of the daily Treasury statement. Details of employment taxes, railroad unemployment insurance contributions, customs, and miscellaneous receipts on the basis of the daily Treasury statement.
2 Because of the time required for payments reported as tax collections toward the end of each month to
clear through the banks and become available for expenditures on the daily Treasury statement basis, an
adjustment from the collections to the daily Treasury statement basis is necessary. A positive adjustment
indicates that during the fiscal year more tax receipts on the daily Treasury statement basis have been received than are reported as collections, and a negative adjustment indicates the reverse situation.
3 Estimated break-down of actual adjustment to the daily Treasury statement basis of income and excess
profits tax receipts between individual and corporation income and excess profits taxes. The actual division is not available.
< Includes back declared value excess profits tax collections.
8 Collections for credit to trust funds are not included.
«Includes collections from taxes on narcotics, taxes imposed under the National Firearms Act, and the
tax on hydraulic mining, all of which are effective currently. In addition, includes collections from excise
taxes, repealed prior to and including the Revenue Act of 1942 (consisting primarily of rubber articles,
electric signs,- optical equipment, and washing machines); collections from the tobacco, matches, tires and
tubes floor stocks taxes imposed by the Revenue Acts of 1941 and 1942; and collections from the tax under
the Bituminous Coal Act of 1937, which expired Aug. 24, 1943.
7 Includes the effect of Public Law, 221 approved Dec. 22, 1943, which postpones the automatic increase
in the 1944 tax rate under the Federal Insurance Contributions Act until Mar. 1, 1944.
8 Includes cash refunds which are recoveries of excessive profits from renegotiation of war contracts which
would not have been collected as taxes, plus those amounts which would have been collected as taxes if
the corporation had filed a definitive tax return prior to the determination of the amount of excessive profits,
8 Not available on the basis of the daily Treasury statement.
» Includes collections of the manufacturers' excise taxes on firearms, shells, pistols, and revolvers in
o
accordance with a reclassification of accounts.
542890—44-

-11




138

REPORT OF THE SEORETARY OF THE TREASURY
Fiscal year 1944

Total receipts in general and special accounts in Ihe fiscal year 1944
are estimated at $42,578 millions, an increase of $19,193 millions or
82.1 percent over the actual total receipts of $23,385 millions in the
fiscal year 1943.
Income toes.—Total income and excess profits tax receipts, including back tax collections, in the fiscal year 1944 are estimated to be
$32,673 millions, more than double the previous high record of receipts
of $16,094 millions from this source made in the fiscal year 1943. The
increase of $16,579 miUions in income and excess profits tax receipts
consists of $12,412 millions from the individual income tax and $4,167
millions from the corporation income and excess profits tax receipts.
Total individual income tax receipts in the fiscal year 1944 are
estimated at $18,917 millions, an increase of $12,412 millions or 190.8
percent over the actual receipts in the fiscal year 1943 of $6^505 millions. The increase is caused by the enactment of the Current Tax
Payment Act of 1943, the higher levels of income on which the
liabUities payable in the fiscal year 1944 are based, and the higher tax
rates and lower exemptions of the Revenue Act of 1942.
The effect of the Current Tax Payment Act of 1943 is to increase the
payments of individual income tax liabilities in the fiscal year 1944
during the transition to a pay-as-you-go basis. The act in effect
provides that the calendar year 1943 tax liability of civilians shall be
the larger of the habilities on the calendar year 1943 or 1942 incomes.
The payment of the additional amount in the fiscal year 1944 in instances where the calendar year 1942 liability is the larger results in a
large nonrecurring collection in excess of what might be expected on
the basis of calendar year 1943 incomes. In the converse situation,
where the calendar year 1943 liability is the larger, the taxpayers in
the aggregate made payments in the first half of the calendar year
1943 (based on their lower 1942 liabilities) which amounted to much
less than half of their higher; 1943 habilities. Therefore, after applying
these payments against their 1943 liabilities there was left an unusual
bunching of paynients in the fiscal year 1944. Finally, because of the
unusually large number of partial payments made at the end of the
fiscal year 1943, a large amount of June payments officially were
recorded either as received or collected in. the fiscal year 1944.. This
situation is not expected to recur since under the Current Tax Payment
Act of 1943 only payments of the much smaller number of liabUities
declared to be in excess of current withholdings need to be handled at
the end of the fiscal year. These are the factors special to the: fiscal
year 1944,
There is one other important factor which affects receipts in the
fiscal years 1944 and 1945 approximately in equal amounts, but did not
affect actual receipts in the fiscal year 1943. The Current Tax



REPORT OF THE SEORETARY OF THE TREASURY

139

Payment: Act of 1943, as an offset to complete remission of the lower
of the calendar year 1-942 or 1943 habilities, requires that an additional
paynient of at least one-fourth of whichever liability is the lower must
be added to the calendar year 1943 liabUity and be paid either in full in
March 1944 or in equal installments in March 1944 and ih March 1945.
If the calendar year 1942 or 1943 hability, whichever is lower, is $50
orless, no additional payment is required; if over $50 but not over
$66.67, an additional payment equal to the excess of the liability over
$50 is required:
Of even more importance than these special factors, the income level
affecting the fiscalyear 1944 receipts reflects a two-year increase instead
of merely a one-year increase over thci level affecting the fiscal year
1943 receipts. This is because the.Current Tax Payment Act of 1943
largely eliniinates the former lag of collections behind the period in
which taxable incomes arise. » Current payment for the majority of
taxpayers in the first, suritax bracket is provided for through withholding, at the source on salaries and wages, and for those taxpayers
whose incoine is hot subject to withholding or whose income is taxed
at higher surtax rates, current payment is effected by declarations of
estimated liability; and quarterly payments of the additional liability
estimated^to be in excess of withholdings. Penalties are iniposed on
taxpayers who,are required to make declarations if the amount paid
quarterly; and via withholdings by December is not equal to 80 percent (66^^ percent in the case of farmers) of the full amount of liabUity
determined on March 15 of the following: year, the date full payment
isdue.
Receipts duringithe fiscal year 1944 from the collection at the source
on salaries and wages are determined partly under the Revenue Act
of 1942 and partly under the Current Tax Payment Act of 1943.
Under the Revenue Act of 1942, withholding:is at the rate of 5 percent
on salaries'and wages:in excess of an annual rate of $624. Under the
Current Tax Payment Act of 1943, the amount withheld is the greater
of (a) 20,percent of the excess of salaries and wages over a withholding
exemption which varies according to the family status of the employee
or (b) 3 percent of the excess of salaries and wages over an annual rate
of $624. The family status withholding exemption is at an annual
rate of $624 for a single person; $1,248, $624, or zero for a married
person who claims respectively all) half, or none of the personal exemptionfor withholding purposes, aiid $312 for each dependent other than
the first dependent in the case of the head of a family.
: Under either act the remuneration for domestic service, for casual
labor, for services in the armed forces, and most of that for agricultural
labor is exempt from withholding. Payment by the withholding agent
of the amounts withheld is due under the Revenue Act of 1942 on or
before the last day of the first month following the quarter in whic^h the



140

^ REPORT OF THE SECRETARY OF THE TREASURY

amounts were withheld. Under the Current Tax Payment Act of
1943, amounts withheld by employers who withhold in excess of $100
a month are customarily deposited in a Government depositary by the
tenth of the month following the month in which the amounts were
withheld, but the due date is the same as under the Revenue Act of
1942 for amounts withheld by all other employers.
Withholdings of $781 millions in respect of the calendar year 1943
salaries and wages will be received by the Government in the fiscal
year 1944 under the Revenue Act of 1942. This constitutes amounts
withheld for the period beginning with the month of April 1943 and
ending with the beginning of the first pay period which started in July.
The remainder of the withholdings on July salaries and wages and the
entire amount of withholdings on salaries and wages of the eight
months, August 1943 through March 1944, and in addition the amounts
withheld on April and May salaries and wages by most employers who
withhold more than $100 per month, will be received under the Current
Tax Payment Act of 1943 in the fiscal year 1944. The amount withheld on June salaries and wages by employers who withhold more than
$100 per month and on April-June salaries and wages by all other
employers will be received in the succeeding fiscal year.
Aside from remitting in effect 75 percent of the lower of calendar
year 1942 or 1943 tax liability and placing collections on a current
basis, the only other significant departure from the Revenue Act of
1942 incorporated in the Current Tax Payment Act of 1943 is a change
in the exclusion from base pay of noncommissioned members of thb
armed forces from $250 in the case of single persons and $300 in the
case of married couples to a single exclusion from base pay up to
$1,500 regardless of rank or marital status.
The higher tax rates and lower exemptions of the Revenue Act of
1942 contribute to the increase of fiscal year 1944 receipts inasmuch
as the fiscaL year 1943 receipts are based partly on incomes taxed
under the Revenue Act of 1941.
The 1941 act personal exemptions of $1,500 for married couples and
heads of families and $750 for single persons were reduced to $1,200
and $500,. respectively, in the 1942 act. However, for members of the
armed forces below the grade of commissioned ofl&cer, exclusions of
$300 for married couples and heads of families and $250 for single
persons were granted from gross income of salary received by such
personnel for active service. The base was further broadened by
reducing the dependent credit from $400 to $350. Surtax rates were
increased on the first $2,000 of surtax net income from 6 to 13 percent
and on surtax net income of over $5 millions from 77 to 82 percent with
appropriate increases throughout the intervening schedule. The
normal tax rate was increased from 4 to 6 percent. On the other




REPORT OF THE SECRETARY OF THE TREASURY

141

hand, the base was reduced by the allowance of deductions for certain
medical expenses and certain State retail sales taxes. Nominal
reductions of tax yield result from other minor changes in the regular
tax on net income.
- A large shafe of the increase of receipts in the fiscal year 1944 was
caused by enactment of the Victory tax contained in the Revenue
Act of 1942, effective as of January 1, 1942, The only receipts in the
fiscal year 1943 relating to the Victory tax consist of 3, months'
(January-March 1943) withholdings. The: amounts withheld, together with all other payments made in the first half of the calendar
year 1942, are subtracted from the total calendar year 1943 liabilities
as determined under the Current.Tax Payment Act of 1943 and the
remainder paid in the.flscal year 1944 except as specific provision is
made for payment of some nonrecurring, liabilities in subsequent
fiscalyears.
Individual income back taxes are estimated at $300 millions, an
increase of $127 millions over actual collections in the fiscal year 1943.
The increase is partly the result of an exceptionally large back tax
collection in 1 month of the fiscal year 1944, and is partly associated
with the large individual income tax liabilities incurred in recent years.
Total corporation income and excess profits tax receipts (current)
and declared value excess profits tax receipts (current and back) are
estimated to be $12,647 miUions in the fiscal year 1944, on the daily
Treasury statement basis. This is an increase of $3,663 millions or
40.8 percent over actual receipts of $8,983 millions in the fiscal year
1943. The increase in collections from the excess profits tax provides
76.0 percent of the total increase in collections from current corporatioD
income and excess profits taxes.
:
o
-Collections in the .fiscal, year 1944 represent for the most part the
collection of income tax liabilities incurred in respect of the incomes
of the calendar years 1942 and 1943, whUe the fiscal year 1943 collections reflect liabUities for the calendar years 1941 and 1942. Collections of the calendar yea;r liabilities are not divided evenly between
the 2 flscal years affected, but the proportions are such that, for the
purpose of simplifying the explanation of results, the taxes collected
in respect of the incomes of the calendar year common to both may
be ignored in comparing collections for 2 flscal years. Thus, in comparing the flscal years 1944 and 1943, the effect of the collections in
respect of the-calendar year 1942 liabilities may be disregarded and
the increase in collections in the flscal year 1944 over those in the
flscal year 1943 may be attributed almost entirely to the change in
income levels and methods of-taxation in the calendar year 1943 as
compared with those of the calendar year 1941. . Corporate net income •
in. the calendar year 1943 is estimated to have increased by approximately 50 percent over the calendar year .1941 income, and various



142

REPORT OF THE SEORETARY OF THE TREASURY

changes in the Revenue Act of 1942 also account for increased tax
liabilities in respect of the calendar year ^1943 incomes as; contrasted
with those of the calendar'year: 1941. However, only part of the
full calendar year 1943 increase in liabUities, roughly 50 percent, is
reflected in the flscal year 1944 receipts.
Current corporation collections from the normal tax and surtax are
estimated to be $4,980 miilions in the'flscal year 1944 compared
with actual collections of $4,137 millions in the preceding flscal year,
an increase of $843 mUlions-or 20.4 percent'. As indicated above, -a
part of theincrease is explained by changes made in tax rate^ and
bases by the Revenue Act of 1942 as compared^with the provisions of
the Revenue Act of 1941. With respect to the calendar-year 1941)during which the Revenue Act of 1941 was in effect, corporations
with normal tax net income of $25,000 or less were taxed;at bracket
rates of 15 percent, 17 percent, and 19 percent for the income classes
0 to $5,000, $5,000 to $20,000, and $20,000 to $25,000, respectively.
Corporations with normal tax net income in excess of-$25,000 were
taxed at a rate of 24 percent,:or alternatively the portion of normal
tax net uicome under $25,000 was taxed at- the bra6ket rates that were
applicable to corporations with normal tax net income under $25,000,
and the portion in excess of $25,000 was taxed at a 37 percent rate.
The alternative method resulted in a lower tax; provided that normal
tax net income did not exceed $38,461.54: Above that net income it
was advantageous to the corporation to compute the normal tax at
the flat rate of 24 percent applicable to its entire normal tax net income'
Under the Revenue Act of 1942, applicable to both 1942 and 1943
incomes, only one change was made in the-normal tax rate structure.
In the case of the alternative method of computing the tax for corpor
rations with normal tax net uicome in excess of i$25,000^ the flrst
$25,000 of normal tax net income was taxed at the bracket rates
applicable to corporations having ho more than $25,000. This
involved no change in the tax rates compared with the Revenue Act
of 1941. However, the portion of normal tax net-income in excess
of $25,000 was taxed at a rate of 31 percent rather than-at the 37
percent rate existing under previous law. The alternative method
resulted ia a lower tax than the flat rate method'if normal tax net
income did not exceed $50,000.
Ih addition to the normal tax, corporations were subject to a
surtax on both their 1941 and 1943 incomes. However,' the surtax
rates were higher under the Revenue Act of 1942 than.under* the
preceding law. If surtax net income was not Over $25,000, the rate
was increased to 10 percent from the.6 percent rate prevailing under
the Revenue Act of 1941. On surtax net income over $25,000 but
not over $50,000, the rate on the flrst $25,000 was also iacreased to 10
percent under the Revenue Act of 1942 from 6 percent in the preceding;




• REPORT OF THE SEORETARY OF .THE TREASURY

143

Revenue ^Act, and the rate on the next $25,000 of surtax net income
was increased to 22 percent from 7 percent under the Revenue Act
of: 1941. °0n surtax net income over $50,000, the 1942 act rate was
16 percent oh the flrst $25j000 compared with,6 percent under previous
law, while on surtax net income over $25,000 the rate was increased
to 16 percent from the: 1941 act. rate of-7 percent. The potential
revenue effect of the increase in the corporation surtax rate structure
was reduced by the allowance-in 1943 of income subject to excess
proflts tax as a deduction in computing normal and surtax net income,
whereas under the Revenue Act of 1941 the excess proflts tax and
not the income subject to the excess proflts tax was deducted in
computing normal tax and surtax net income.
Excess proflts tax collections in the flscal year 1944 are estimated at
$7,567 millions, an increase of $2,723 millions or 56.2 percent over
actual collections of $43844 mUlions from this tax .in the flscal year
1943. Inasmuch as excess proflts tax receipts are collected in the
same manner as corporation income taxes,, a comparison of" the
calendar years 194.3 and. 1941 explains, in the main, the increase in
receipts in the flscal year 1944 over the flscal year 1943. In 1941^
corporations using the invested capital .method in computing their
excess proflts credit were allowed a credit of 8 percent on the flrst
$5 mUlions of invested capital and a credit of 7 percent.on invested
capital in excess of $5.millions. In 1943, the credit was still 8 percent
on the .flrst $5 millions and 7 percent on the amount in excess of
$5.millions;but not over $10 mUlions; but on the amount in excess of
$10 millions b u t n o t in excess of $2.00 millions the credit was 6 percent
instead of 7 percent, and on invested capital, over $200 millions the
credit'was 5 percent instead of 7. percent. On the other hand, corporations using the average earnings method had a greater excess
proflts credit in 1943 than, in 1941. In 1941, base period net income
was an average of the net income of the years 1936 to 1939, inclusive,
with an allowance of one deflcit j/car as^zero. Under the Revenue
Act of 1942, which flrst applied to calendar year 1942 incomes, the
net income of: the lowest year of the base period could be set at a
minimum of 75 percent of the average net income of the remainuig
three years in the base period. .
The excess profits tax eftective rate applicable in the calendar year
1943 was substantially higher than the effective rate in the calendar
year 1941. In 1941, excess profits rates varied from 35 percent to 60
percent, depending upon the absolute size of, adjusted excess profits
net income. In .19.43, a flat rate o l 90 percent applied except where
the combined income and excess, profits tax exceeded 80 percent of
surtax net income before deduction of the adjusted excess profits net
income,, in which case, t.be excess profits tax was reduced by the
amount necessary to reduce .the over-all rate to 80 percent. In addi


144

^ REPORT OF THE SEORETARY OF THE TREASURY :

tion, corporations, in 1943, were allowed a post-war credit of 10 percent of the excess profits tax in the form of noninterest-bearing bonds
maturing at specified periods after the cessation of hostilities in the
present war. Part of the gross post-war credit could be deducted
currently from the excess profits tax paid. The amount taken
currently for debt retirement might equal 40 percent of debt retired
during the taxable year, provided it did not exceed the gross post-war
credit. The net post-war refund to corporations is estimated to be
$545 millions in the fiscal year 1944 and is included in estimated receipts. This sum, however, does not represent the amount of bonds
issued in this fiscal year, since there is a statutory lag between the
final payment of their excess profits tax by the corporation and the
issuance of the bonds. No excess profits tax post-war credit was
allowed under the Revenue Act of 1941.
The Revenue Act of 1942, applicable to incomes in the calendar year
1943, made many other changes in corporation income and excess
profits taxes, most of which decreased the yield of these taxes. For
example, (1) the privilege of consolidated returns was extended to
permit the filing of consolidated returns for normal tax and surtax
purposes as well as for excess profits tax calculation, but if the corporation elects to file consolidated returns it must pay an additional
tax of 2 percent of surtax net income, (2) the method of computing
depletion based on a percentage of gross income was extended to
fluorspar, ball and sagger clay, and rock asphalt, (3) a credit, allowed
against the corporation surtax only, equal to the amount of dividends
paid on preferred stock was allowed to public utilities furnishing telephone service or selling electrical energy, gas, or water, and (4) income
derived from the excess output of corporations engaged in the extraction of certain minerals was made nontaxable for excess proflts tax
purposes. The amount of excess output was based on the relation of
production in the taxable year as compared with production in the
base period 1936-39, inclusive.
Certain of the changes which were made in the Revenue Act of 1942
did not affect receipts directly: (1) a 2-year carry-back of net operating losses was allowed in computing net income, (2) in the calculation of the excess proflts credit a 2-year carry-back of unused excess
proflts credit was permitted—both of these were in addition to the
2-year carry-forward of net operating losses and unused excess proflts
credit also permitted, and (3) provision was made to alleviate the
problems of corporations whose basic inventories are depleted because
of war shortages. When these inventories are replaced, the corporation may recalculate its tax using an inventory valuation based on
replacement cost in the year of replacement. The full effect of most
of these changes will never be reflected in Government receipts, since




REPORT OF THE SEORETARY OF THE TREASURY

145

part of the effect will result in an increase in Government expenditures
as refunds are made to taxpayers.
Collections from the declared value excess proflts tax (current and
back) are estimated at $100 millions in the flscal year 1944 compared
with actual receipts of $82 millions in the flscal year 1943. This
represents an increase of $18 millions or 21.3 percent, and is attributable mainly to the materially higher income levels in the calendar
year 1943 as compared with the calendar year 1941.
Collections of corporation back income and excess proflts taxes, and
the unjust enrichment tax, are estimated at $1,109 millions in the
flscal yea;r 1944, an increase of $503 millions or 83.1 percent over
actual receipts of $606 millions in the flscal year 1943.
Miscellaneous internal revenue.—Miscellaneous internal revenue
receipts in the flscal year 1944 are estunated at $5,161 millions, an
increase of $609 millions or 13.4 percent over actual receipts in the
flscal year 1943. The bulk of miscellaneous internal revenue is
derived from levies incident to the sale of goods or services. The
exceptions to this are capital stock, estate, and gift taxes, the revenues
from which are estimated at $888 mUlions in the flscal year 1944. The
estimated collections from miscellaneous internal revenue taxes,
excluding those from capital stock, estate, ahd gift taxes, are $4,272
millions in the flscal year 1944, an increase of $479 millions or 12.6
percent over corresponding collections in the flscal year 1943. Moderate increases are expected in the receipts from the majority of the
principal taxes in this group. The only exceptions among the levies
incident to the sale of goods or services that yield as much as $20
mUlions are the tax on the use of motor vehicles, the manufacturers'
excise tax on gasoline, the tax on manufactured chewing and smoking
tobacco, and nonrecurring liquor floor stocks taxes.
Collections from the capital stock tax are estimated at $383 millions
in the fiscal year 1944 as compared with actual receipts of $329 millions
in the preceding fiscal year. Collections in both years reflect a tax
rate of $1.25 per thousand dollars bf declared valuation of its capital
stock. The capital stock valuation reflected in collections in the
flscal year 1944 is the basis for determining net income subject to the
declared value excess proflts tax in the calendar year 1943. Collections in the flscal year 1943 represent the valuation of capital stock
for declared value excess proflts tax computation in the calendar
year 1942. Inasmuch as the Revenue Act of 1942 allowed corporations a completely new valuation of capital stock every yearinstead of
every three years under previous law, the increase in capital stock
tax collections in the flscal year 1944 over collections of the preceding
flscal year is attributable to the relative income levels in the 2 calendar
years.
Estate tax receipts are estimated to be $461 millions in the flscal year



146

REPORT OF THE SEORETARY OF THE TREIASURY

1944. This is an increase of $46:mUlions or 11.1 percent over ^actual
receipts of $415 millions in the flscal year 1943. The increase is primarily attributable to the higher rates instituted by the Revenue Act
of 1941 which, affected collections for a fuU year in the fiscal year 1944.
In:the fiscal year 1943 the Revenue Act of 1941 rates were effective
only on approximately 50 percent of the returns filed during the year
because of the statutory lag of 15 months, between the date of death
and the date of filing the return. The Revenue Act of 1942, applicable
to a portion of the returns filed im the fiscal year 1944, substitutes one
$60,000 specific exemption for the former specific exemption and
insurance exclusion of $40,000, each resulting in some ioss of revenue,
and changes the powers of appointment and the treatment of community property, resulting in some increase in revenue. The net
effect of these changes results in a small increase in revenue. The
factors mentioned above, together with an increase in the value of
estates for which returns were filed, are responsible for the estimated
increase in receipts. .
.
• • :,
Gift tax receipts ih the fiscal year 1944 are estimated to be $45
millions, an increase of $12 millions or 35.9 percent over the actual
receipts of $33 mUlions in the fiscal year 1943. T h e receipts include
the bulk of the tax liabilities incurred with respect to gifts: made
during the calendar year 1943 subject to the gift tax provisions of the
Revenue Act :of 1942. The. increase is the result of an estimated
increase in-the value of property transferred by gift during the calend.ar
year 1943 and of changes in legislation. Under the Revenue; Act of
1942, the annual exclusion was reduced from $4,000 to $3^000 for each
donee and the specific exemption was reduced from $40,000 to $30,000.
; Collections from theliquor taxes, are estimated at $1,509 millions,
an increase of $86 mUlions or 6.0 percent over actual collections in
the previous fiscal year. If the* nonrecurring floor stocks taxes were
eliminated from the comparison, the increase would be $170 millions or
12.9 percent. The.collections from taxes^pn distUled spirits, $897
mUlions, and oh fermented .malt liquors,, $510 millions, account for
93.2 percent of the estimated total collections of the group.and represent increases of $115 millions and $54 millions, respectively, -The
increase in collections from, the group as a whole reflects a full year's
collections, at the higher tax rates i on distilled spirits, wines, and
fermented malt liquors provided in .the Revenue Act of 1942 as compared with only 8 months' collections: at these rates in. the previous
flscal year. • The effect of the ihcreaiSed rates^ is reinforced ih the case of
fermented malt liquors and, wines by an expected Increase in tax-paid
withdrawals. The tax-paid withdrawals of distilled, spirits are dcr
dining, since current production of alcohol is entirely for war uses; b u t
larger imports of distilled spirits are a sustaining factor.
;, Total tobacco tax collections are,estimated, at $988 milliohs, an




REPORT OF THE SEORETARY OF THE TREASURY

147

increaseof $73 millions 01*8.0 percent more than in the flscal year 1943.
The tax on cigarettes i s estimated to yield $904 millions and to
account for $69 millions or 94.3 percent of the total increase for the
group. The estimated yield from the tax on cigars, $30 millions,
increases by $7 millions or 29.1 percent, .the largest percentage increase
of the group. • This increase is caused principally by a shift to a more
expensive type of cigar subj ect to a higher rate of tax. These increases
reflect the first full year ot collections, at the higher rates imposed by
the Revenue Act of 1942,.greater consumer purchasing power, and
soine shift from the; use of manufactured chewing and smoking tobacco to the smoking;of cigarettes and cigars. A slight decline is
anticipated in the revenue derived from chewing and smoking tobacco,
which is estimated a;t $45 mUlions as compared with $48 millions in
thefiscal year 1943.
.;
/
r
:
Total stamp tax collections are estimated to yield $55. mUlions, an
increase of $10 millions or 22.8 percent ovev the fiscal year 1943. The
effect upon collections of some increases in new security issues and in
real estate and stock transfers is expected to be partly offset by a
smaller amount of playing cards produced for civilians.
The manufacturers' excise taxes are practically unchanged in the
aggregate. They are. estimated to yield $497 millions as compared
with $487 raUlionsin thefiscal year 1943, an increase of 1.9 percent.
Wherever a decrease is effected, it.results from: curtailment in civUian
supply ? because of. rationing, xeduced production for civUians, or a
lower stock of goods on hand. - T h e tax On gasoline, by far the most
productive of? revenue in the entire group, is expected to yield $273
millions or 55..D percent.of the total. This represents a decrease of
$16 millions or 5.4 percent attributable to the imposition of Nationwide rationing on Deceniber 1, .1942, and to cuts inicivilian rations.
The manufacturers' excise taxes on passenger cars, automobUe trucks,
appliances, radio .sets, etc., refrigerators, business and store machines, .^sporting goods, luggage, and light bulbs each yields a small
amount, less than $10 milliohs, and all show declines as compared with
the fiscal year. 1943. ; The apparent increase in the tax on lubricating
oils, $53 mUlions as: compared with $43 mUlions, is explained by the
existence of lower tax rates during 5 months of the fiscalyear 1943.
The taxioh parts and accessories for automobiles yielding $28 millions
is estimated at $8 mUlions more than in the fiscal year 1943. because
of the mounting need for replacement parts to tnaintain operation of
essentiah vehicles, ' The tax on tires, and inner tubes is estimated to
increase from $18 millions to $42 miilions, representing improved
production for essential civilian: requirements following drastic curtaUment in- the previohs fiscal year. The slight increase in the tax
on electrical energy, from $49 miUions to $50 millions, is attributable
chiefly to the lifting of. dimout regulations. Nominal increases are




148

REPORT OF iTtE SECRETARY 0^^ THE TREASURY

expected in the tax On photographic apparatus because of some improvement in the civilian supply situation, and in the tax on matchWs
because of some increase i h production.
^'
•
- .
Total retailers' excise taxes, estimated to. yield $184 mUlionis, are
$18 millions in excess of the receipts in the flscal year 1943. Of this
increase, $14 mUlions result from higher prices and increased demand
for jewelry. Moderate ihcreases in collectiohs are expected from the
tax on furs and from the tax on toilet preparations.
The miscellaneous tax group is estimated to yield $1,039 millions;
an increase of $282 millions or 37.2 percent. The only- substantial
decrease, aside from certain repealed taxes which account for a reduction of approximately $28 millions, is in collections from the tax on
the use of motor vehicles and boats, which is expected to decrease
from $147 millions to $135 millions because of a declihe in registrations. Estimated revenue from each of the other miscellaneous taxes
either holds substantially unchanged or increases significantly. The
taxes on communications and transportation account for the bulk
of the increases. Thus the yield of the tax on telephone and telegraph
facilities, etc., is increased by $43 millions or 47.6 percent, and receipts
from the tax on the telephone bill are increased by $23 millions or
34.7 percent. The tax on transportation of persons is estimated to
produce an increase of $84 millions or 96.3 percent, and the tax on
transportation of property ah increase of $122 millions or 148.3
percent. These increases in revenue from the taxes on communications and transportation reflect the flrst full year of operatiori at thci
higher rates imposed by the Revenue Act of 1942 ns well as increased
incomes and greater use of facilities. The receipts from the t a i on
admissions are estimated to increase by $25 millions or 16.0 percent
as a result of higher price and income levels, and the receipts from
the tax on coin-operated amusement and gaming devices to increase
by $7 millions or 66.9 percent as a result of increased rates on slot
machines. Small increases in the yield of the tax on the processing
of sugar and of the tax on coconut and other vegetable oils result
from an iniproved import situation; of the oleomargarine tax, because
of the butter shortage; of the tax on the transportation of oil by pipe
line, because of expanded pipe line facilities; and of the taxes on club
dues ahd initiation fees and leases of safe deposit boxes,; because of
higher incorhes.^
• <
'
/
•
Employment taxes.—Total employment tax^ receipts in- the flscal
year 1944 are estima^ted to be $372 millions greater than'actualreceipts
of $1,498 millions in the flscal year 1943, an increase of 24.9 percent.^
The increase over the flscal year 1943 receipts is attributed in greater
part to a higher level of taxable pay rolls reflected in the flscal year
1944 receipts, but also results in part fi-om an increase in the tax
rate under the Federal Insurance Contributions Act applicable to the




REPORT OF THE SEORETARY . OF THE TREASURY

149

salaries and wages of the one month, Mare-h 1944. Under Public
Law; 221,.approved December 22, 1943, the rate advances from 1 to
2 percent both on employers and employees, effective on wages paid
beginnihg March 1, 1944. Because of a 3 months' lag in collections,
the rate increase applicable to salaries and wages paid after March
1944 does not affect receipts in the flscal year 1944.
Receipts from the tax imposed by the Federal Insurance Contribu-r
tions Act are estimated at $ 1,423 mUlions in the flscal year 1944. This
iS: an increase of $292 millions or .25.8 percent over actual receipts of
$1,131 millions in the flscal year 1943.
Receipts under the Federal Unemployment Tax Act are estimated
to be $191 mUlions, an amount which exceeds actual receipts in the
flscalyear 1943 by $33 mUlions or.20.9 percent.
. ^
Estimated receipts under the Carriers Taxing Act of ,1937 amount to
$256. millions, an increase of $47 millions or 22.7 percent over actual
receipts in the flscal year 1943. The estimated increase over the
flscal year 1943 receipts is attributable tO; higher taxable raUroad pay
rolls and to an increase in the tax rate from 3 to 3.25 percent both on
the carriers and their employees, eft'ective throughout the. entire
flscal year 1944 as compared with only 3 months of the flscal year
1943.
,. Total internal revenue.-r-Totnl internal revenue, which is the summation of; the estimated receipts discussed m d e t a U above, is estimated at $39,703 mUlions in the flscal year 1944 compared with actual
receipts of $22,143 millions in the flscal year 1943; an mcrease of
$17,561 millions or 79.3 percent. A detailed tabulation of• the foregoing estimates is.in the. table on page 764.
= Railroad unemployment insurance contributions.—'Rsiilvosid unemployment insurance con tributiohs in ; the flscal year 1944 are estimated to be $12 millions, exceeding actual receipts in the flscal year
1943 by $2 mUlions or 15.9 percent. These receipts represent 10
percent of the 3 percent tax on covered pay rolls, the other 90 percent being deposited to the credit of the- railroad" unemployment
insurance account in the unemployment trust fund.
iCus<oms.-7^Receipts:from the collection of customs,^ which include
various import taxes paid and collected in the same manner as. duties.
imposed by the Tariff Act of 1930, are estimated -to .be $420 mUlions
in therflscal year 1944. • This: is. an increase of- $96 milhons or 29.5
percent over aictual ^receipts of $324 millions in the flscal year: 1943.
The marked improvement in the shipping situation,' giving freer,
access to sources of foreign supply, the further relaxing of restrictions
on the types of commodities which are allowed to be imported, and
the continuing need for importing materials which replace or supplement dornestic supplies for war activity or for lend-lease or domestic




150

REPORT OF THE SECRETARY OF THE TREASURY

consumption are factors contributing to the estimated increase in
receipts.
/ •
' .:: . •
=: : ^..
.Miscellaneous receipts.—Miscellaneous receipts- ih the flscal year
1944 are estimated'to be $2,443 millions, an ihcreiase of $1,536 millions
or 169.2 percent over the receipts amounting to $907 mUlionsiin the
flscal year 1943. The increase is due in large part to the recovery of
excessive proflts on renegotiated war contracts-as provided hi'section
403 of Title 4 of the Sixth Supplemental National Defense Appropriation Act (Public Law 528, 77th Cong;, as amended). The amount
of these recoveries for the flscal year 1943 is much smaller than the
amount estimated for the flscal year 1944. The estimated amount of
recoveries on renegotiated war contracts in the flscal year 1944 is
estimated to be $1,733 millions or 70.9 percent of total miscellaneous
receipts. These recoveries include excessive profits, "which would
have been collected as taxes if the corporation had flled a^'deflnitive
tax return prior to the determination of the amount of excessive
proflts, plus the excessive proflts which would not have been collected
as taxes, regardless of when renegotiation took place relative to flling
of the deflnitive return.
'
r
Fiscal year 1945

'

T o t a l receipts in general and special accounts in the flscal year 1945
are estimated at $43,425 millions, an increase of $847 millions or'2.0
percent over the estimated receipts in the flscal year 1944: However;
a decrease of $417 mUlions is anticipated in net receipts in general and
special accounts since net receipts do not reflect the portion of the
increase in employment tax receipts which follows the automatic
increase of the Federal Insurance Contributions Act tax rate'from 2
t.o 4 percent on March 1, 1944. This increase is contained in the
automatic appropriation for Federal old-age and survivors insurance
trust fund.
; ...^
; ^;: ^ : ; ,. :: ;; •
Because of the trend of estimates of Government expenditures;
appearing elsewhere in this report; a peak in production and in the
incomes of individuals and corporatiohs is expected at some time ih the
calendar year 1944, but because b f s t a t u t o r y l a g s - in collections, the
estimated receipts in the'flscalyear'1945 do not fuUy reflect the= expected plateau in business activity: WhUe ne't receipts show a decline as compared with the flscal year 1944, this-is mot due toreduced
production and incomes. The decrease occurs ih-individual income
tax reeceipts because of the larger amount of nonrecurring paymehts
in the flsical year 1944, the flrst year of operation under, the Current
Tax Payment Act of 1943, and in the portiOh of miscellaneous receipts
originating from renegotiation of war contracts. ^^ The'balance of
miscellaneous receipts, the corporation'income and -excess profits tax
receipts, receipts from'employment taxes after deduction of the net




REPORT OF THE SECRETARY OF THE TREASURY

151

appropriation: for the Federal old-age and survivors insurance trust
fund j and customs receipts all show increases.
Since receipts other tha;n from employment taxes in the flscal years
1944 and 1945 are practically all determined under the.Revenue Act
of 1942 and the Current Tax Payment Act of 1943, legislative revision
exerts b u t little additional effect upon the relative tax'yields in the
two flscal-years.
• Incohie taxes.•--EstiniSitedihcom.e and- excess proflts tax receipts,
including back tax collections, are practically the same in. the flscal
year 1945, $32,605 millions, as in the flscal year 1944, $32,673 millions.
Ah estimated" decrease of $1,324 mUlions in individual income tax
receipts is balanced by an estimated increase of $1,257 millions in
corporation income and excess proflts tax receipts.
Total individual income tax receipts are estimated at $17,593
millions in the flscal year 1945. This represents a decrease of $1,324
millions or 7.0 percent under the estimated receipts ih the flscal
year 1944.
Receipts in the flscal year 1945 from withholdings are estimated to
increase by $279 mUlions. because of a higher level of salaries and wages
and the flrst fulhyear effect of the changed withholding provisions
tinder the Current Tax Payment Act of 1943. T h e increase of the
withholding rate under the Current Tax Payment Act of. 1943 and
the fact that the withholdings of employers who withhold $100 or
more now are customarUy received in the subsequent month instead
of after a lag of one quarter result in greater and more current receipts.
The receipts in the flscal year 1945 from withholdings on salaries
and wages earned in the flscal year 1944 approximately balance the
withholdings oh salaries and wages, earned in the flscal year 1945
which will not be received until the fiscal year 1946, so that the flscal
year' 1945 does reflect the full-year effect of the Current Tax Payment
Act of !l943. However, the receipts in the flscal year 1944 from withholdings on salaries and wages earned from AprU 1943 until the flrst
pay period beginning in July 1943 under the Revenue Act of 1942 are
less than the withholdings under the Current Tax Payment Act of
1943 on a portion o£ the salaries and wages earned in the last quarter
of thb flscal year 1944 which are not received until thefiscal y ^ r 1945;
Despite the anticipated increase in receipts -from withholdings,
total individual income-tax receipts in the fiscal year 1945 are estimated to decrease because of the several types of receipts in the fiscal
yea;rl944 which d o n o t r e c u r in the fiscal year 1945, as has been described in- detail under the subheading '^Income taxes" for the fiscal
year 1944. These nohrecurring receipts arise from, tax payments
made in June 1943 which were not officiaUy recorded as receipts until
July 1943 because of the large humber of partial payments made just
prior to the effective date of the Current Tax Payment Act of 1943;



152

REPORT OF THE SEORETARY OF THE TREASURY

payment in the flscal year 1944 of additional liabihties under the
Current Tax Payment Act of 1943 based on the excess of the calendar
year 1942 over the calendar year 1943 liabUities of those taxpayers
whose incomes decreased in the calendar year 1943; ahd the unusual
proportion of the calendar year 1943 liabihties which is paid in the
flscal year 1944 by taxpayers with increased incomes in the calendar
year 1943, characteristic only Of the flrst year of operation of the
Current Tax Payment Act of 1943. Thus, the actual amount of the
calendar year 1944 liabilities received in the flscal year 1945, although
computed on a higher level of income, is less than the amount of the
calendar year 1943 habilities received in the flscal year 1944. The
calendar year 1945 liabilities received in the flscal year 1945 are about
the same as the calendar year 1944 habihties received in the flscal
year 1944.
A payment will be received in the flscal year 1945 but not in the
flscal year 1944 under the provision of the Current Tax Payment Act
of 1943 which imposes an additional increase of tax when there is an
increase amounting to $20,000 or more over surtax net income of a
base year (1940, 1939, 1938, or 1937). A payment of at least 25 percent of this additional tax is required in the flscal year 1945.
The provision in the Current Tax Payment Act of 1943 which
requires payment of 25 percent of the lower of the liabilities of the
calendar year 1942 or 1943, thus effectively remitting only 75 percent,
is expected to affect receipts ih the flscal years 1944 and 1945 in
approximately equal proportions.
Collections of back taxes under the individual income tax are estimated at $305 miUions in the flscal year 1945. This represents an
increase of $5 mUhons over estimated receipts in the flscal year 1944.
The increase, is,caused by the constantly increasing liabUities for
individual income tax in previous years from which back taxes are
derived. The increase is relatively small because of an exceptional
amount of back taxes collected in one month in the flscal year 1944.
Total corporation income, excess proflts, and declared value excess
proflts tax receipts, excluding collections of back income and excess
proflts taxes, are estimated at $13,770 mUlions, an increase,of $1,124
millions^or 8.9 percent over estimated collections of $12,647 millions
in the flscal year 1944. The.increase in collections from the excess
proflts tax provides 72.2 percent of the total increase in collections
from these taxes.
In the comparison of collections in the flscal years 1943 and 1944,
the difference was ascribed partly to the relative income levels of the
calendar years 1943 and 1941 inasmuch as collections of the liability
year 1942 were distributed about evenly between the 2 flscal years,
and partly to changes in the rates and provisions of the Revenue Act
of 1942 as compared with those of the Revenue Act of 1941. Simi-




REPORT OF THE SEORETARY OF THE TREASURY

153

larly, in a comparison of collections in the flscal years 1944 and 1945,
the explanation of results may be limited to a comparison of the tax
liabilities in respect of the incomes for the calendar years 1944 and
1942. Since the bases, rates and other provisions of the Revenue
Act of 1942 (described above in the explanation of comparative coUections in the flscal years 1943 and 1944) were applied in both the calendar years 1942 and 1944, the change in coUections must be attributable to changes in corporation income and to differences in the
various deductions or relief provisions utUized by the corporations in
the 2 years. The income of corporations having net income is estimated as approximately 18 percent higher in the calendar year 1944
than 1942. This increase in income would appear to be the chief
factor accounting for greater coUections.,
:.
Corporation currerit income tax collections in the ^flscal year 1945
are estimated at $5,289 mUlions,. an increase of $309 millions or 6.2
percent over estimated collections of $4,980 mUlions; in the previous
flscal year.
Corporation current excess proflts tax collections in the:flscal year
1945 are estimated at $8,378 mUlions compared with $7,567 miUions
in the flscal year 1944, an increase of $811 mUlions or 10.7 percent.
The increase results almost entirely from the estimated higher income
levels in the calendar year 1944 over those existing in the calendar
year 1942. The fiscal year 1945^ collections include net post-war
credit refunds amounting to $624 mUlions, which does not represent
the amount of bonds issued by the United States to corporations
during this period since there is a statutory lag between the payment
bf the excess profits tax and the issuance of the bonds.
Declared value excess profits tax collections in the fiscal year 1945
are estimated at $104 millions, an increase of $4 miUions or 3.8 percent over estiinated collections of $100 mUlions in the fiscal year 1944.
The increase results principally from the higher income levels estimated for the calendar year 1944 as compared with incomes in the
calendar year 1942. The same law in respect of coriiputaition of the
tax liabUity was applicable to both years.
Collections of corporation back income and excess profits taxes and
the uhjust enrichment tax are estimated at $1,242 mUlions in the
fiscal year 1945, an increase of $133 millions or 12.0 percent over
est^imated coUections of $1,109 mUlions in the previous fiscal year.
Miscellaneous internal revenue.—Total miscellaneous internal revenue receipts in the fiscal years 1945 and 1944 are estiinated to be
almost exactly the same, $5,164 millions and $5,161 millions, respectively. No outstanding increases or decreases in the yield of any of the
major categories of taxes included in this grouping are anticipated.
Some easing in the restrictions on civUian supply and increases in
imports are responsible for the majority of the anticipated increases in
542890—44

12




154

REPORT OF THE SEORETARY OF THE TREASURY

the yield of levies incident to' the sale of commodities, and some
slackening of demand, exhaustion ° of inventories, ahd continued
restriction of production for civUians acccount, for the majority: of
decreases. The larger revenue producers, such as the taxes on distilled spirits and fermented malt liquors, small cigarettes, gasoline,
coihmunications, ahd transportation,' and of course the capital stock
and estate and gift taxes^ are not expected to benefit in any material
degree from increased availabUity of goods and services for civUians.
Capital stock tax. collections in the fiscaryear 1945 are estimated
at $394 millions compared with $383 millions i n the fiscal year 1944,
ah increase of $11 mUlions or 2J8. percei;it. i This increase results for
t h e most p a r t from the increase in income levels estimated for the
calendar year 1944 as compared with the calendar year 1943.
r.s Estate tax .collections are estimated to be $475-mUlions in the fiscal
year 1945," an increase of $14 millions or 3.0 percent over estimated
collections, in the fiscal year 1944. The increase is accounted for
primarily by an estimated increase in the value of estates for which
returns will be filed. The Revenue Act of 1942, applicable to practically all returns filed in the fiscal year 1945, made changes in. the
law which will increase the receipts by a small additional amount.
The gift tax collections in the fiscal year 1945 are estimated to b'e
$46 .millions. This is an increase ^of $1 million or 2.0 percent over
estimated receipts in the fiscal year 1944. The Rev enue'Act of 1942 is
applicable to both the fiscal year 1944 and the fiscal year 1945; and so
the increase is ^ entirely attributable i o an increase in the estimated
value of gifts made in the calendar year 1944, on which the tax will be
collected largely in the fiscal year 1945.
. . .
The liquor taxes as a group are estimated to yield $1,482 millions, a
decrease of $27 rnUlions or 1.8 percent as compared with the,fiscal year
1944^ approximately equal to the $28 mUlion decrease in nonrecurring
liquor floor stocks taxes.. Because of a higher rate of imports, receipts
fromithe tax on distilled spirits-are-estimated^at. $906: milliohs, an
increase^of $9 miUions or 1.0 percent.' The debrease in;the yield of the
tax on fermented malt liquors frpm^ $510 millions to $503 mUliohs or
1.4 percent is^ principally' attributable to larger tax-free overseas shipments, but also -to:transportation, container, and .material.problems
which makeiitiihpossible'to satisfy increased civilian demand. ,No
change is' expected in.the'revenue froin the tax on, wines, estimaited
at $37 millions. --.:-^ • V ,.'•
-^ ^
The tobacco tax group is estimated to yield $974 hiillions in the
flscal year 1945, a decrease of $15 millions or L5,percent as.compared
with the previous flscal year. Collections tfrom the tax. on cigarettes,
estimated to yield $879 millions, are.$26 millions or. 2.8 percent less
than the estimate for the fiscal year 1944. Increased tax-free shipments overseas are expected to result in a supply below the civilian




REPORT OF THE SEiCRETARY OF THE. TREASURY

155

demand. Revenue from the tax on cigars is estimated to increase
sharply by $11 millions or 35.9 percent to $41 mUlions in the fiscal
year 1945, partly as a result of some increase in production with ah
easing of the labor shortage, but primarily because of a shift to higherpriced brands, which are taxed at higher rates. The tax on manufactured tobacco shows no substantia:l change in yield in the 2 years.
The yield of the stamp tax group, estimated at $59 millions, is
$3 mUlions or 5.6 percent greater than ih the fiscal year 4944. The
increase results chiefly from an expectation of some further increases
in issues of new securities and real estate trahsfers, partly offset by a
srnaller volume of stock transfers ahd a reduction in the amount of
playihg cards avaUable for civilians.
The manufacturers' excise tax group is estimated to yield $524
mUlions in the flscal year 1945, an increase of $27 millions Or 5.5
percent over the estimate for the flscal year 1944. The most import a n t single source of revenue in this group, the gasoline tax, is estimated to yield $260 miUions, a decrease of $13 mUlions or 4.7 percent
because of heavy military demandsV Receipts from the tax on lubricating oils, $52 millions, are expected to decrease nominally for the
same reason. Further small decreases in tax yields are expected from
manufacturers' excise taxes on a number of commodities whose production already has been drastically curtailed, and for which a possible improvement in civilian production will be insufficient to offset
a decline in inventories. These include the following: Passenger automobiles arid motorcycles; radio receiving sets, phonographs, phonograph records, and musical instruments; and household refrigerators,
refrigerating apparatus, and self-contaihed air conditioners. A number of taxes whose yields are expected to increase as the result of
enlarged production or allotment for essential civilian needs, or as the
result of ah easing of miaterial shortages, includes automobile trucks,
busses, and trailers; parts and accessories for automobiles; electric^
gas, and'oil appliances; electric light bulbs; business and store machinesi photographic apparatus; sporting gOods; and tires and inner
tubes. The increase in yield of the tax on, tires and inner tubes frorri
$42 ihUlions to $72 millions or 71.4 percent is the greatest for the group,
arid results from aii expected iricrease in production of tires and tubes
for essential civilian uses. No signiflcant change in the yields of the
taxes ori electrical energy and'matches is expected.
' The retailers' excise tax group is esthriated to yield $184 millions
in 1945j alriiost exactly the same as in 1944: An increase of $3 millions from the r e t a i l t a x on jewelry, resulting from higher prices, is
offset by a reduction of $2 milliohs from the tax on toilet preparations;
The bstimated revenue from the retail tax on furs is unchanged from
19441 '
' • ' •'•
•
'• •
•
: •
The miscellaneous tax group is estimated to yield $1,028 mUlions



156

REPORT OF THE SEORETARY OF THE TREASURY

in the fiscal year 1945 as compared with $1,039 millions in the previous year. Receipts from the taxes on cornmunications, transportation, admissions, use of motor vehicles and boats, and the sugar tax
account for $988 miUions or .96.2 percent of the. total. An expected
continuation of the upward trend in the noncommercial use of communication facilities but at a less rapid rate, offset by a falling off in
commercial use, results in no significant change in receipts frorn the
combined tax on telephone and telegraph facilities and local telephone
service, estimated, at $227 mUlions. The yield of the tax on transportation of persons, $184 millions, is estimated to increase by $13
millions or 7.5 percent because of wider railroad travel by civUians
at the same time that the travel by troops levels off, because.of a
larger proportion being overseas. The tax on the transportation of
property, estimated to yield $188 millions, represents a decline of $17
millions or 8.3 percent because of an anticipated lower level of production. The continued rise of admission prices, offset by a decline
in cabaret revenues as a result of manpower and liquor shortages,
results in an estimated yield from the tax on general admissions of
$183 millions, an increase of $4 millions or 2.3 percent. The downward trend in the yield from, the tax on the use of motor vehicles
and boats, because of a decrease in registrations, i s expected to COUT
tinue for another year, the yield being $1?2 millions and the decrease
$12 millions or 9.0 percent. No material change is. expected i n the
remaining taxes. The yield from the tax.on coin-operated amusement
and gaming devices is expected to decrease slightly; but mo change,
or a slight increase, is expected in the. yield:from the taxes pn club
dues and initiation fees, leases, of safe deposit boxes, bowling alleys
and bUliard and pool tables, oleomargarine, coconut and vegetable
oUs, and from the tax on the processing of sugar. .
., >
. Employment taxes,—^Total employment taxes are estimated.to yield
$3,169 millions, which exceeds estimated receipts in the fiscal year 1944
by $1,299 millions or 69.5 percent. The greater portion of t h e increase
results from a doubling of the tax rate under.the Federal Insurance
Contributions Act which will affect receipts; from this source throughout the fiscal year 1945. The remaining portion of the increase in
total employment, taxes represents the. effect of higher taxable pay
rolls,
.
, • . . . ;,.^ . .
.
^ ,•;-.: , : ;;^.,. ,, .
_
Receipts from the tax.imposed by the,Federal Insurance Contributions Act are estimated at $2,688. millions, an increase of $1,265
millions or 88.9 percent over estimated receipts of $.1,423 millions jn
the fiscal year. 1944. Estimated receipts in the fiscal year 1945 represent, a. tax rate of 2 percent both on employers and employees as
cornpared \yith a tax rate of. 1 percent both on employers and employees in effect for eleven months' liability collected in the fiscal
year 1944.




REPORT OF THE SEORETARY OF THE TREASURY

157

Estimated'receipts'under the Federal Unemployment Tax Act in
the fiscal year 1945 amount to $203.8 millions. This is an increase of
$12.4 millions or 6.5 percent oyer estimated receipts in the fiscal year
1944 of $191.4 millions.
Receipts under the Carriers .Taxing Act of 1937 are estimated to be
$277 millions. This amount is $21 millions or 8.3 percent greater
than estimated receipts in the fiscal year 1944. No change in the
rate of taix occurs within the limits of the two fiscal years; hence the
full amount of the increase results from a rise in the level of taxable
railroad pay rolls.
I otal internal revenue.—Total internal revenue, which is the summation of the estimated receipts discussed in detail above, is estimated
at $40,938 millions in the fiscal year 1945 compared with $39,703
millions in the fiscal year 1944, an increase of $1,235 millions or 3.1
percent. A detailed tabulation of the foregoing estimates is contained
in the table on page 764.
Railroad unemployment insurance contributions.—Railroad unemployment insurance contributions are estimated to be $13 millions.
Thb increase of $1 mUlioh or 7.6 percent over estimated receipts in
the fiscal year 1944 is attributable to a greater amouoit of taxable
railroad compensation.
Customs.—Customs receipts are estimated at $438 millioris, an increase over estimated receipts in the fiscal year 1944 of $18 millions
or 4.3 percent.
Miscellaneous receipts.—In the fiscal year 1945 miscellaneous receipts are estimated at $2,037 millions, a decrease of $406 millions or
16.6 percent from the estimated receipts amounting to $2,443 millions
in the fiscal year 1944.
The decrease is due in large part to the smaller amount of recoveries
of excessive profitis on war contracts in the fiscal year 1945 as compared
with the fiscal year 1944. This decrease amohnts to $521 millions or
30.0 percent of the recoveries of excessive profits in the fiscal year 1944.
The decrease in recoveries is expected to be due to several factors.
For example, increased efficiency in procurement results in a smaller
amount of excessive profits, and experience gained in the administration of the renegotiation act results in price reduction and savings in
Federal expenditures rather than in recoveries of excessive profits.
For the fiscal year 1945, estimated recoveries on excessive profits
represent 59.5 percent of the total estimated miscellaneous receipts as
contrasted with 70.9 percent in the fiscal year 1944.
ESTIMATES OF EXPENDITURES

Actual expenditures for the fiscal year 1943 and estimates for the
fiscal years 1944 and 1945 are summarized, in the following table.
Further detaUs will be found in table 100, beginning on page 776. The



158

REPORT OF. THE . SEORETARY OF THE TREASURY

estimates are based upon figures submitted to the Congress in the
Budget for 1945. :
Actual expendiiures for the fiscal year 1943 o,nd estimated' expenditures for the fiscal
years 1944 o,nd 1945, as exhibited in the Budget for 1945
'">'•'••
-,,*•

' .

[In milliohs-bf dollars]

.Generaland special accounts

Estimated,
• 1945

; •• :

War activities
Interest on the public debtJ.—...- — _..-_.l---':
All other ._

. ....

Total expenditures, general and special accounts, excluding statutory debt retirements (daily Treasury
statement basis) -

Estimated,
1944 -

88,200.0
3,750.0
6,004. 2

Actual, .
1943i .
"

88,500.0'
-• • 2,650.0
4,801.0

97, 954. 2

•-:

95,951.0

72,108. 9
" 1,808. 2
4, 261. 9

78,178.9

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

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 AIoRGENTHAu, Jr.,

\

Secretary of theTreasury.

To the SPEAKER OF'THE H O U S E OF REPRESENTATIVES.




o

ADMINISTRATIVE REPORTS OF
BUREAUS AND DIVISIONS




159




FISCAL SERVICE OF THE TREASURY DEPARTMENT
The Fiscal Service of the Treasury Department, at the head of w^hich
is the Fiscal Assistant Secretary, comprises the Bureau of Accounts,
the Bureau of the Public Debt, and the Office of the Treasurer of the
United States. Under an order of the Secretary of the Treasury, the
Under Secretary, in the event of a vacahcy in the office of the Fiscal
Assistant Secretary, acts as Fiscal Assistant Secretary and performs
all duties and functions assigned to that office! The regular activities
of the Fiscal Service are discussed beginning on page 163.]Var activities of the Fiscal Service
The Fiscal Service of the Treasury Department has initiated and
participated in many activities growing out of the entry bf this country
into the war. In this connection, the following activities have been
closely associated with military operations.
Foreigri depositaries.—Shortly after the President's announcement
in 1940, relative to the acquisition of sites for naval bases in certain
parts of the Western Hemisphere, the Treasury received requests
from the War and Navy Departments to designate banks in the
vicinity of such bases as depositaries of Government funds in Order
that Disbursing Officers of the Army and Navy could establish bariking facilities for use in connection with the construction and Operation
of these bases.
After this country's entry into the war, requests for designation of
depositaries in other areas increased, and depositaries were established
in foreign countries where the armed forces of the United States were
in operation.
The widespread activities of the Army and Navy have resulted in
increased sales of checks drawn on the Treasurer of the United States
and use of United States currency to enable officers of this Government to obtain in foreign countries the necessary local currency for
financial operations. Because of disruptionin surface trahsportation,
the high cost of insurance, and the uncertainty of the lehgth of time
that it would take for foreign bariks to receive credit in the United^
States for the amounts of such checks and currency, the rates of
exchange for these transactions threatened to go to a considerable
discount ai,gainst the dollar, and in some cases actually did- so before
corrective methods were undertaken.
To insure that the officers of this Government receive the fullest
value for their sales of ofiicial dollar checks and currency, arrangements
have been effected with foreign banks whereby they deliver to American consular offices currency and checks drawn on the Treasurer of
the United States acquhed by such banks. After receipt of the
checks and currency, the consular officials inform th0 Treasury
accordingly. By telegraiph, and the equivalent dollar amounts are paid
to the foreign banks' correspondents in this country. To reduce tele-




161

162

REPORT OF T H E SECRETARY OF T H E TREASURY

graphic costs to a minimum, accounts in United States dollars have
been established with certain foreign banks against which the amount
of the checks and currency delivered to the consular offices is charged,
obviating the necessity of telegraphic advice each time the deliveries
are made. Under the foregoing procedure, the foreign banks are relieved of the respdnsibility of forwsirding'the checks and currency to the
United States, the insurance charge is eliminated, and reimbursement
in their accounts iri the Uriited States is received much sooner than
would otherwise be possible., As'a result of these arrangements, the
rates pf exchange for checks drawh on. the Treasurer of the United
States and United States clirrency sold by officers of this Goverriment
for official; purposes have been iriaintained a;t' a much higher level thaii
otherwise would have been possible.
"
Currency destmcUon.-^^As £in emergericy measure, the Treasury has,
in cooperation with the military authorities and local governments,
established currency destruction procedmxs in all areas outside of the
continental limits of the Uriited States where such procedures appeared
to be desirable, i n order to. provide for any contingency arising out
of, jbhe. war. Tp date,, no emergency has made it necessary to take adr
vantage of these facilities, but they have been utUized to dispose^ pf
currency in outlying areas to aypid shipment to. the United States. -.
Banking facilities for the War and Navy Departments in the United
. States.r—The entry of the United States into the war created an immediate, need for additional domestic, banking facilities to meet the
enlarged training programs,of the,Army and the Nayy. This has resulted in a substantial expansipn of the Treasury's depositary system
throughout.the United States and in the territories,and insular pos^
sessions,-and has necessitated the establishment of l)anking facilities
at Army posts and naval stations.
/
. The War and Navy Departments determined that during the present
emergency the establishment of banking facilities, within the confines
of Army posts. and naval st^ations would facUitate the prosecution of
the war. Many posts and stations, with personnel running into scores
of thousands, .are located at.points considerably removed from the
nearest banking.houses, necessitating many miles of travel by officers
of the War and Navy* Departments in the conduct of official business.
Furtherrnore, officers and enlisted or civilian persorinel. engaged in
war .activities could, not leave mihtary, reservations during regular
bankihg hours. . [
v
Owing to the nature of the business to be transacted, banks, on their
own initiative, could not afford to establish banking facilities on military reservations, so the Treasury agreed to provide the urgently
needed services. through the extension pf its existing depositary and
financial agency system. The Treasury's program, is limited with
respect to both the scope of .functions to be perfornied and the duration^of the special arrangement. These banking facilities provide for
cashing ^checks, 'acceptingrd.eposits, selling cashiers' checks ahd money
orders, furnishing xash.for .pay rolls, sellirig war bonds and stamps,
and rendering other related services..
:
. As of June 30, 1943;, arrangements had been made with 155 depositaries and, .financial agents of, the_ (jrovernment to establish banking
facilities .at 169 Arnay .posts and naval stations.
^ .; :




RE'PORT OF THE SEORiSTARY OF THE TREASXJRY

163

BUREAU OF ACCOUNTS

The supervision, of the administration of the accounting functions
and activities in the Treasury Department and all its bureaus, divisions, and offices is exercised under the direction pf the Secretary
of the Treasury by the Fiscal Assistant Secretary through the Commissioner of Accounts. The function of authorizing the installation,
maintenance, revision, and elirninaibion of accounting records, reports^
and procedures in the Treasury Department is exercised by the Fiscal
Assistant Secretary through the Commissioner of Accounts.
The Commissioner of Accounts, at the head of the Bureau of
Accounts, has supervision over the activities and functions of the
Division of Bookkeeping and Warrants, Division of Disbursement,
Division of. Deposits, Section of Surety Bonds, Treasury Budgetary
Section, and Section of Investments. The Emergency Relief Accounting Organization, which had been under the supervision of the Commissioner of Accounts, was liquidated during thefiscal year 1943.
The duties and functions of the units under the Bureau of Accounts
are discussed in the following pages.
The Commissioner, in collaboration with the Bureau of the Budget
and General Accounting Office, also supervises work in the Treasury
Department in connection with the development of standards, terminology, classifications, a system of financial reporting, and summary
accounts required by Executive Order No. 8512.
Office of Commissioner of Accounts
Budgetary administration and financial reporting.—Under Executive
Order No. 8512, dated August 13, 1940, prescribing regulations for the
purpose of improving budgetary administration and financial reporting, the Secretary of the Treasury, with the approval of the Director
of the Bureau of the Budget, was directed to establish (a) uniform
accounting terminology, (b) uhiform classifications of assets and
liabilities, and revenues and expenditures, and (c) uniform standards
for the valuation of assets and the determination of liabUities.and the
treatment Of revenues and expenditures in relation thereto f and to
maintain a complete system of summary accounts through which
the financial data pf the various agencies wUl be coordinated and
integrated,
. .
. O n March 3, 1942, the order was am.ended by Executive Order No.
9084, which provides that prior to establishihg uniform terminology,
classiiS.cations, principles and standards, they be referred to the
Comptroller General of the United States for consideration and determination as to whether they are in confiict with the forms, systems,
and procedures prescribed by the.Comptrbller General as required by
section 309 of the Budget and Accounting Act.
Voting in time of war by members of the land and naval forces.—In^
order that the members of the land and naval forces, absent in time
of war from the place of their residence, might be provided a rnethod
of voting, Public Law 712 was enacted, o.n September 16, 1942. Under
the provisions of section 10 of this act (see exhibit 86, page 446) the
Secretary of the Treasury was authorized to pay to.each State the
amount estimated by him to be necessary for the purpose of carryirig
out the provisions ;0f the act, subject to the cohditipns that the use of
such funds be properly accounted for and ariy:uriexpended balance be
returned to the Secretary of the Treasury upon his demand.



164

REPORT OF T H E SECRETARY OF THE TREAiSURY

An appropriation of $1,200>000 was made for the fiscal year 1943,
of which not to exceed $5,820 was to be expended for salaries and
expenses of the Treasury Department in the District of Coluhibia.
The amount of $3,528.49 was expended for such adrhihistrative
expenses of the Treasury Department to Jurie 30, 1943.
The following statement, prepared as of June 30,' 1943, shows the
net payment made to each State and the number of ballots ciast by
States under the provisions of Public Law 712.
> .
•
• V

'state

•

'•

•

A m o u n t of N u m b e r of
, : ' p a y m e n t . .ballots
cast
.(net)
:

Alabama
....$122.38
•315.13
Arizona
.1
_....._
A r k a n s a s . . _.l
.
;
. 920.69
California
.^...
4, 717.89
Colorado.
_...• 568.73
Connecticut
. i . ..1,892.66
386. 21
Delawarel.. .
....
Florida...'.
.............
258.79
(2)
Georgia
Idaho
203. 07
Illinois
. 7,142. 30
Indiana
' .
2,089. 51
Iowa.. — -.
L-_--..--'
1,034,52
Kansas -.
.355.17
Kentucky
1 - -.
5,529.06
Louisiana
- 0)
Maine
l
..1...
0)
Maryland
1,759.32
Massachusetts
.
2, 427. 26
Michigan
1, 609.17
Minnesota
1
300.20
Mississippi
116.00
Missouri
.--1, 393.'46
171.89
Nebraska
•
494.13

!

0). . • .
64

(')
"

60

.

( ! ) •

378
93
0).. •
•

274
4,000
1, 700
•'465
282

747
566
643
^ ^672
99
'432
102
.264

"

" •' s t a t e . '

•

•'

•

'

••

A m o u n t o.f N u m b e r ,
' p a y m e n t of ballots
(net), .' • ca.st.f

Nevada. - - - . , . . _
•
. -.-.-... .. $1,480. 71 .:
357
1,143.74
249
New Hampshire
..'
N e w Jersey
... - . j .
15, '985.19
'(0
552. 37
. ^ ^ 217
N e w Mexico.
4,174. 71
NewYork.....:. .... ....
1,333
2,190.12
250
N o r t h Carolina
1,741.87
'
955
North Dakota.. . . .
...
3,92i; 83 : • •!7,006
Ohio...
_•....— . - - - . . .
276
Oklahoma--.
--..-283. 41
• 645
Oregon. - - - - . - : . . . . . . . . - 1 ^ . .
"209.98
1,172
Pennsylvania........
..'. • 1, 768.16
316
Rhode Island
'561.42
South C a r o l i n a .
- . . • ' , '464.71 ••• (0- •
:
• (3)
South Dakota
655
Tennessee... --• - - . . .
1.
1,122. 77
1,567
194. 48
Texas
73
Utah.:
:..:
. . . . . . - - •.
115.60
-37
204. 67 • •'
V e r m o n t . _ - . - — .."
......
281
265.96
Virginia
477
3, 418. 65
Washington
i
290
716.82
W e s t Virginia - . . . .
.
Wisconsin
. ' * 77
W y o m i n g - . -'..108. 21
Total-..--

1 Information not available.
^ .
2 Estimate submitted, applicatioh for payment not yet received.
3.Expenses paid by state. ;... .• , , .
^ Election held Sept. 14,1942. Expenses paid by State.

-I.-,-.

•27,074

74, 432.. 92

•
*
•

!

•

,. '

•.. • t

Daily Statenient of the United' States. Treasury.—I)\iring. the fiscal
year 1943, there were several changes in classifications shown on the;
daily Treasury statement. Beginning with the daily st'atemehts during July 1942, inf orihation with respect to outstanding Federal Reserve
notes. Federal Reserve Bank notes, nationsil bank riotes, and the circulation of such notes, was eliminated. The Federal contribution to th6
District of Columbia for the fiscal year 1943-was shown on page 2:of the
daUy Treasury statements under the caption ^'Trahsfers to trust accounts, etc.\', instead of Under the caption ^^Generar\ Expenditures'
from /^Emergency Funds for the President''ahd'^Lend-Lease'^ funds
wei^e previously shown under the caption ''War Activities'' according
to'those two classifications. Beginning with the fiscal year 1943 these
expenditures were distributed according tb the agencies which received
allocations of the funds and were included with othei- war expenditures
of such agencies under the caption "Wa!r Activities". Other changes
in classification^ were made as the result of the transfer of fiinctioris
under Executive Orders Nos. 9198, 9247, 9322, and 9330 issued by the
President under the First War Powers Act, 1941.
Annual appraisal of assets ctnd liabilities of the Commodity Credit Corpdfdtion.r^tjiideT the act approved March 8, 1.938 (52 Stat. 107), as
ahieiidedby Public Law 147,'approved July 1, 1941, the Secretary oi
the Treasury is required to make an appraisal as of March 31 bf each



REPORT OF THE SOEORETARY OF THE TREASURY

165

year of the assets and liabilities of the Commodity Credit Corporation
for the purpose of determinirig the net worth of the Corporation. In
the event that any such appraisal shall establish that the net worth of
the Gorporatioh is less than $100,000,000, the Secretary of the Treasury is required to restore the amount of the capital impaiirment, funds
for which are appropriated by the Congress. In the event any appraisal shall establish that the net worth of.the Corporation is iri
excess of $100^000,000, such excess must be deposited by the Corporation in the Treasury as miscellaneous receipts. The appraisal as of
March 31, 1943, had not been completed on June 30, 1943, inasmuch as
Cphgress had under consideration at that time legislation tO change the
date and basis for the annual appraisal.
The following statement shows the results of appraisals to March 31,
1942. • " ' • • • •
Appropriations for restoration of capital impairment:
'
Act of Jime 25,1938 (appraisal as of Mar. 31,1938, H. Doc. 670, 75th Cong.)
- Actof Aug. 9, 1939 (appraisal as of Mar. 31,1939, H. Doc. 317, 76th Cong.)
. Act of July 3, 1941 (appraisal as of Mar. 31, 1941, H. Doc. 248, 77th Gong.)Total appropriations
Less amount returned to Treasury:
Appraisal as of Mar. 31,1940
Appraisal as of Mar. 31,1942

.....

Net payments to Corporation to June 30,1943..._-l

-

Amount
$94,285,404.73
..119,599,918.05
1,637,445.51
---

215, 522, 768. 29

$43,756,731.01
27,815,513.68
-——
71,572,244.69
143,950,523.60

Securities and funds, Philippine invasion.—The Department continued to receive inquiries and claims relating to valuables salvaged
from the PhUippine Islands or destroyed to preclude seizure by the
Japanese. In a limited number of cases, representatives of gold mining
interests established their authority to sell to a United States mint
gold bullion held in safekeeping, and the proceeds of the sales have
been deposited in Hocked accounts in the names of the producers.
Also, records, securities, and other valuables deposited by the ManUa
agencies or branches of American, British, and Dutch banks have been
released to representatives located in the United States. The records,
securities, and other valuables deposited by PhUippine banks and trust
companies remain in custody at the FederarReserve Bank of San
Francisco, subject to the order of the Secretary of the Treasury.
Government bonds, checks, persorial papers, and other valuables
deposited for safekeeping with the United States High Commissioner
have been released by the Department in accordance with instructions
given by the depositor when the valuables were delivered for safe
custody. In the absence of specific instructions, or where the delivery
could not be effected, the bonds, checks, or other valuables have been
delivered t o the Treasurer of the United States for safekeeping.
Considerable effort has been devoted to rebuUding the account of
the Treasurer of the United States with the Treasury of the PhUippines
for the month of December 1941. Ejeposits and other credits to the
Treasurer's account, aggregatihg in excess of $26 mUlions, have been
analyzed and entered into the Department's records. Charges to the
Treasurer's account will be based principally upon a list of 16,528
checks- drawn on the Treasurer, aggregating nearly $38 millions: T h e
original checks were destroyed by incineration, but the accuracy of
items to be paid by the Treasurer on the basis of the list of checks
submitted is being established by verification to check copies, vouchers,
or other papers which are now or may become available. As of June 30,
1943, 9,802 items had been definitely identified and verified. I t is



166

REPORT OF THE SECRETARY OF THE TREiAiSURY

anticipated that.it will be possibl9 to verify the greater .part of the
remaining 6,726 items as additional records are brought to the continental United States,
.:
.
,
.
.'
, :
Advances to FederaVReserve Banks for industrial loans, etc.-—Adysihces to Federal Reserve Banks for industrial loahs, etc., were authorized
by the act approved June 19, 1934 (48 Stat. 1105), which amended the
Federal, Reserye Act, as amended, by adding section 13 (b): The
provisions under,which the Secretary of the Treasury makes these
advances,were described on pages 184 and 185 of the annual report for
1940., .. .
No advances were made to the banks during the fiscal years 1939
to 1943, the latest advance having been made on October 14, 1937.
Amounts received by the Treasury during the year aggregated $197,162.49. The following statement summarizes tbe transactions, in
connection with these advances to Federal Reserve Banks.
Advances to Federal Reserve Banks for industrial loans, and payments received by
the Treasury to June 30, 1943
Advances

. A m o u n t s received

Federal Reserve B a n k
Maximum
authorized
Atlanta
.
Boston. - •
Chicago,.
Cleveland...
Dallas- .
Kansas C i t y - ' - . .
Minneapolis.--..
New. Y o r k . .
Philadelphia!
Richmond-. St. Louis
S a n Francisco :.

.
:

j

1 .:.
."....

..

....

..
. I _•
.'
. : "_•

Total..

..
......
'..
.1.

...
.-.
- -..

--..._..
-.:

T o t a l to .Tune
30, 1943 •

$756,934.44
$5,272,031.55
2,875,115.98
10,230,236.88
1,417,701.33
19, 748, 516. 70
1,015,571.33
14,146,863.66
4,359,338.10 . a,-251,788.08
.1,145, 717. 73
• 4,131,276.30
1,007, 746.96
3, 509,467.65
7,752,044.63
42, 529, 210: 65
4,198,400. 60
14,620,883.52
3, 420, 662.05
• 5,808,291.43
547, 832. 83
.5,093,112.25
2,156,795.01
9,850, 328. 30
139, 299, 556. 99

27, 546, 310.97

D u r i n g fiscal
year 1943

T o t a l to J u n e
30, 1943

$15,138.69
12,982.03
3, 439.;47
6, 847. 76
25,035. 76
• 8, 309.10
76.17
' 34,277:14.
32,097.46
• 58,958.91

$39,014.25
107,881.06
141,757.27
• 74,281.88
• 99,152.26
43, 513.48
34,884^77
117,264.22
' 463,443.11
139, 481.69
5, 947. 94

197,162.49

1,266,621.93

. Appropriations - and expenditures under, the Social Security Act.—The
Social Security. Act, approved August 14, 1935, as amended (42 UvS. C ,
Ch. 7), provides for the establishment of a system of Federal* old-atge
and survivors benefits j , and for= grants to t h e several States to enable
theih- to make adequate provision for aged and blind persons, needy,
dependent, and crippled children; maternal and child welfare; public
health.services; and the administration of State unemployment compensation laws.
"
•
. . ' ,
Section .201 (a) of the Social Security Act Amendments of 1939,
approved August 10, 1939, makes permanent appropriations to the
Federal old-age and jsurvivors irisurance trust fund for the fiscal year
194L and each year thereafter eqiual t o 100 per: centum of theemployment taxes received under the Federal Insurance Contributions Act
arid covered- ihto the General Fund of the Treasury.
. •
The amouhts appropriated to June 30, 1943, under the various
authorizations contained in the Social Security Act) as amended, and
total expenditures from such appropriations to June 30,. 1943, are
shown in table 12 on page 522. Receipts, exp^enditures, and investments of the Federal old-age and survivors insurance trust fund and
the unemployment trust fund arfe shown in tables 71 and 73 on pages
680 and 682.




REPORT OF THE SOECRETARY OiF THE TREASTJRY

167

Colorado River Dam fund.—The Colorado River D a m fund was
established hnder: the act of December 21, 1928, which provided for
the construction of works commonly referred to as the Boulder.Canyon
project. All revenues, and expenditures pertaiaing to the fund are
under the direction of the Secretary of the Interior.
, . ; .-, •
•Under an act of Congress approved July 19, 1940 (54 Stat..77.4),
the Secretary of the Interior was authorized to promulgate and to p u t
into effect charges for electrical energy generated at the dam site.
The act further provides that the receipts from these charges be used
to meet costs of operation and maintenance;,to repay to theTreasury,
with interest, the advances made to the fi^nd for the, project; t o
provide $300,000 annually to each of the States whereim.the project
is located,/namely, Arizona and Nevada, beginning with t h e year of
operation ending May 31, 1938; and to transfer $500,000 annually to
the Colorado River development fund beginning: with ..the year, of
operationendedMay31,1938:.
^^*. ' '; - ,
The.act states that the first $;25,000.,000 of? advances made by: the
Treasury to the Colorado River Dam fund is..an allocation,for;flood
control, and repayment may be deferred for 50 years after date of
receipt by the fund of such advances, that isj to J u n e 1, 1987, and
repaymenJ;S: shall, b e made at that time in the manner Congress shall
determihe. -For this reason; this sum of $25,000,000 is not included
imder the:caption ^'Advances'Vin the statement below..
, /
T h e ' a c t further, stipulates that-interest charges for purposes of
advances and ^reimbursements shall, be computed at, the rate of ,3
percent, in lieu of the 4 percentrate specified in. previous legislation.
The = statement which fpllo.ws is on an operating year basis and reflects
thenecessary.revisions required undcB the act approved July 19,1940.
•

.

•

•

•

•

'

.

•

.

•

-

•

.

.

'

.

.

•

* ^

• Status of Colorado River Dam fund as of close of each operating year, 1933 to 194S
Operating
year end-ing M a y
•31 :>

Advances i

Ad
I n t e r e s t ., a n d v a n c e s
interest
on a d v a n c e s on advances

Interest on
amount
outstanding preceding year

Reimbursements 2

Interest
on reimburse- "
. nients.

Total amount
= due

- $11, 992,062. 57
$11,890,632.62 •$101,.529.96 $11; 992/062. 57
19,033, 833. 75
18,424. 397. 76 249,674.11 18, 674,071. 87 ''^359,"76i."88
24,937, 762.81
930, 776. 89
23,'607,521.-44 399,464:48 24.006,'985. 92
19,976,009:81 319,-761-. 4.5 20,295,771.26 1, 678., 909. 77
, 21,.974, 681.03
9,'895, 865. 34
7;410,641.3d
147,073. 83 ,7,557,715.13 2,338,150.21
5,685,000.00 •• 88.848.90 •5,773,848.90 2,635.026.17 $1.100.000. 00 $30, 221.91 - 7,278.653.16
1938-.^LJ:
5,590,.265. 49 • 74. 926.12 5,665,191. 61 2, 853, 385. 76 4.600.000.00 67,101. 35
3,861,476.02
1939
4,050,000.00
67. 278. 68 4,117 278.68 2," 963, 930.'04 3.500.000-00 56.377.05 • - 3; 629.-831:67'
1940.—:. 868, .919. 53
4,-800,000.00
87.875.34 4,887;.876..34 3.074, 824. 99 7,000,000; G 93, 780. .80
O
1941
1942 3
56,162.98 3. 602, 738. 60 3,100. 892. 58 2.000.000. 00 41. 763. 42
3, 546,685.62
"4,661,877.76
99,139. 68 4,799,139. 68 3, 240, 748. 91 2, 000,000.00 10,849.32
6,029, 038. 27
4, 700.000.00
1943
1933-"-'-..1934-:
1935
1936--.;.1937

T o t a l . - 109, 680, 954.04 1,691, 725. 52 111:372,679.66 23,181, 407. 20 20, 200,000.00 300, 083.85 i 114,054,002. 91
' Excludes $26,000,000 of advances allocated to flood control; repayment of which is deferred to' June 1,1987.
'.Reimbursements have been appliedtoward reduction of "interest on advances;"'
•.•.••.
3 Revised to reflect return bf unexpended balance bf National Industrial Recovery allocation ih the amount
of$3,414,38 and the-interest thereonl -^ ' :r
'
. , ' . •.••.• .' : ^ ' . ; • . , . •
4 Includes $4,373,048.87 representing unpaid.interest.
-,

Division of Bookkeeping and Warrants
The Division of Bookkeeping, and Warrants, in the name of the
Secretary of the Treasury, issues aU warrants on the Treasurer of the
United Stated, and under section 10 of the act of July 31, 1894
(5 U. S. C. 255), maintaihs the ofiicial accounts relating t o the receipt,




168

REPORT OF THE SECRETARY OF THE TREA'SITRY

appropriation, and expenditure of the public moneys, covering all
departments and establishmehts 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 connection with the approval of the issuance of duplicate
checks (sec. 9 of the Government Losses in Shipment Act). The
Division also compUes and publishes an annual digest of the appropriations made by Congress. The volume of work performed in the
Division during the fiscal year 1943 was greatly increased by war
activities.
Donations accepted by the Secretary of the Treasury under the
Second War Powers Act, 1943, which are handled and accounted for
in the Division, showed a decided increase over the fiscal year 1942.
Details concerning these war contributions will be found on page 127
of this report.
Financial reports.-^There is coihpiled and published, in accordance
with U. S. C. Title 5, Sec. 264, an annual Combined Statement of
Receipts, Expenditures, and Balances of the United States Government, designating the amounts of receipts, whenever practicable, by
ports, districts, and States, and, the expenditures by each separate
head of .appropriation. This report is required to be submitted to the
Congress on the first day of the regular session in each year.
Other financial statements pertaihing to the receipts, appropriations, and expenditures of the Government and its various agencies
are prepared periodically during the year for inclusion in the daUy
Treasury statement, the monthly Treasury Bulletin, and the Annual
Report of the Secretary of the Treasury.
A monthly combined statement covering information with respect
to the financial condition of Government corporations and enterprises
is prepared and published in the daily Treasury statement on the last
day of each month, and a statement of contingent liabUities of the
United States is published in the daily Treasury statement on the first
day of each month. These statements as of June 30, 1943, will be
found as tables 84 and 53, beginning on pages 694 and 656 of this report.
/ A complete annual financial report from information submitted by
Government corporations and enterprises under Budget-Treasury
Regulation No. 2 (Executive Order No. 8512) is also compiled.
Division of Disbursement
The Division of Disbursement exercises the disbursing functions, in
Washington and in the field, for all. departments and establishments of
the Government with the exception of the Post Office Department,
United States Marshals, the Panama Canal, special disbursing agents
of the War and Navy Departments, and certain Government corporations.
During the fiscal year 1943, disbursing functions were assumed at 24
points in foreign countries and 1 point in Alaska on account of war
activities. On June 30, 1943, the Division maintaihed the Central
Officein Washington, D. C , 20 regional ofl&ces in the United States,




REPORT OF THE SEORETARY OF THE TREIASURY

169

and 5 regional oflBces in Alaska, Puerto Rico, Hawaii, the Virgin Islands, and Panama.
During the year the Division made 63,312,643 payments by check
and made cash payments in 678,980 instances. These payments were
supported in the disbursing accounts by 8,031,765 vouchers. The
Division also received, deposited, and accounted for 10,935,722 collection items. Included in the foregoing are 12,693,842 items of payments and collections for agencies which have been established in connection with the war effort.
Voluntary payroll allotment plan.—In connection with the voluntary
payroll allotment plan for the pur&hase of war savings bonds, the
Chief Disbursing Oflficer was designated by the Secretary of the Treasury as the Bond Issuing Officer for departments and agencies served by
the Division of Disbursement.
During the year there was collected by the Division of Disbursement, through withholdings from salaries of Federal employees, the
sum of $79,084,582.68 on account of bond allotments, and 2,734,029
war savings bonds were issued by the Division, for which $69,823,009.25 was covered into the Treasury as public debt receipts. The
difference will be applied to the purchase of bonds to be issued when
withheld amounts to the credit of the individual employee equal
the purchase price of a bond of the denomination specified by the
employee.
Victory tax withheld.—In accordance with Public Law 753, approved
October 21, 1942, there was withheld by the Division of Disbursement
from salaries of Federal employees on account of the Victory tax the
sum of $26,544,795.68. These funds were currently deposited into a
special deposit account in the Treasury to the credit of the Chief Disbursing Officer, and were paid over to collectors of internal revenue
quarterly, as provided by regulations, on the basis of vouchers submitted by the administrative agencies concerned.
Bonding of certifying officers.—Under the provisions of Public Law
389, approved December 29, 1941, providing for the bonding of officers
and employees authorized to certify vouchers for payment by disbursing officers in the executive branch of the Government, there were
approximately 10,000 such bonded certifying officers at the close of the
fiscalyear 1943.
^
Tabulating card checks.—The Division of Disbursement is cooperating in the Treasury's program for the decentralization of the payment
of checks drawn on the Treasurer of the United States and the substitution of tabulating card checks for paper in that operation. In May
1943 the Division of Disbursement made, in the regional disbursing
office at Chicago, 111., the first conversion from paper checks to tabulating card checks for its regular disbursements. I t is planned to cohiplete conversion to tabulating card checks by the end of the fiscal year
1944 in all regional disbursing offices of the Division. This wUl result
in removing the payment of approximately 38,000,000 checks a
year from Washington.
.
Agent cashiers.—There are 1,466 employees of other Government
agencies who are bonded and designated as agent cashiers to the Chief
Disbursing Officer of the Treasury Department. The majority of these

542890—44

13




170

REPORT OF THE SEORETARY OF THE TREA'SITRY

agent cashiers arC: located in the United States and make emergency
payments which it has been found impracticable t o make through the
regional disbursing offices of the Division of Disbursement because of
the need for immediate cash payments. The other agent cashiers are
appointed for duty in various parts of the world'in connection with
the war effort.
Staggered pay days and cash payments to employees.—On October 15,
1942, the President addressed a letter to the Secretary of the Treasury
requesting him to inaugurate a system of staggered pay days for
Government employees in the District of Columbia in order to avoid
congestion at check-cashing facilities, to alleviate shopping and banking inconveniences for Government employees and the public generally
land to spread the administrative work load incident to the payment of
Federal salaries. . Under this plan, the semimonthly pay days were
increased from 4 to 20, and were so distributed among the several
departments and establishments in metropolitan Washington as to
approximately equalize the number of checks drawn each day; The
Secretary of the Treasury was also requested to take such steps as may
be necessary to pay salaries of employees in the lower grades in cash
instead of by check. (See exhibit 87, page 447.) Arrangements
have been made with a large number of agencies to extend cash payments to employees in the lower giades, and efforts are being made to
extend the practice to many other agencies.
Continuation of accounts of Chief Disbursing Officer.—Public Law 841^
approved December 24, 1942, provides for the orderly transaction of
the public business in the event of the death or of the resignation or
separation from office of the Chief Disbursing Officer. The law gives
the Secretary of the Treasury authority to designate an Assistant
Chief Disbursing Officer to continue the accounts and make payinents
in the name of the Chief Disbursing Officer for a period of time not to
extend beyond the last day of the second month following the month
in which the death, resignation, or separation of the Chief Disbursing Officer may occur. (See exhibit 88, page 447.)
Division of Deposits
The Division of Deposits is charged with the administration of
matters pertaining to the designatioh and supervision of Government
depositaries and the deposit of Government funds in such depositaries,
as prescribed by the regulations incorporated in Department Circulars Nos. 92 and 176, as amended; the qualification of Federal
savings and loan associations as fiscal agents of the United States
under Circular No. 568; the maintenance of a record of cash collateral
pledged imlieu of securities by issuing agents designated under Circular
No. 657 for the sale and issuance of wa;r savings bonds. Series E ;
<and the execution of the duties devolving upon the Secretary of the
Treasury as a result of the enactment of the Gov ernment. Losses in
Shipment Act, as amended.
Depositary functions.—The following statement shows the number
and classes of depositaries maintained by the Treasury and the
Government deposits held by such depositaries as of June 30, 1943.




REPORT OF THE SECRETARY O'F THE TREIASURY

171

Number of depositaries and amount of Government deposits held on June SO, 1943
by classes of depositaries
Depositaries

Amount

Federal Reserve Banks (including branches)
Insured bank depositaries, deposits-^ .
,
To credit of Treasurer of United States
-..
To credit of other Government officers...:^
.._..-.
Insular and territorial depositaries (including Philippine Treasury)
deposits—
To credit of Treasurer of United States..-1
-.
..
To credit of other Government officers
Foreign depositaries, deposits—
To credit of Treasurer of United States
To credit of other. Government officers
..
.
-...
Special depositaries L"......
.
.-•Total.

•.-

$1,038,065, 669.99
147, 333, 687. 61
104,126,841. 26
81, 263, 317. 58
63, 365, 533.18
61, 209,181. 37
29,445,926. 79
7, 667, 272,000.00
9,182,062,047. 77

1 Includes 4,002 national banks and 5,258 State banks and trust companies.

During the year there were 13,255 changes and adjustments effected
in the depositary system of the Treasury. These changes and adjustments are summarized in the following table.
Adjustments
Designated
, Discontinued
.
Amount for which qualffied:
Increased
Decreased
.
Miscellaneous changes.
Total

Special depositaries
6,319
37
5,126
13
188
11, 683

At no time during the existence of the Division of Deposits has the
number of changes and adjustments in the depositary system approached those which occurred during the fiscal year 1943. Most of
these changes are the result pf the Treasury's part in the war effort.
Public Law 37, approved April 13, 1943, suspended untU six months
after the cessation of hostilities of the present war the provisions of
law (1) requiring the payment of deposit insurance assessments on deposits arising as a result of subscriptions for Government securities
issued under the act of Sept. 24, 1917, as amended, and (2) subjecting
these deposits to the reserve requirements of the Federal Reserve
System.
The regulations of the Treasury governing special deposits of public
moneys were revised on April 14, 1943, in accordance with the chahges
in the law. Copies of the law and of revised Department Circular No.
92 appear as exhibits 64 and 65, on pages 367 and 368.
: Designation of banks as depositaries for withheld taxes in accordance
with the provisions of the Ciirrent Tax Payment Act of 1943.—On June
25, 1943, the Treasury issued Department Circular No. 714, prescribing regulations governing the payment through depositary banks of
fiinds withheld as taxes in accordance with provisions of the Current
Tax Payment Act of 1943. Under the terms of this circular, copy of
which appears as exhibit 66, on page 371, the Secretary of theTreasury
designated all incorporated insured banks, within the meaning of section 10 of the act of June 11,. 1942, as depositaries and financial agents
of the Government for receiving from employers or other persons funds



172

REPORT OF THE SECRETARY OF THE TREAiSURY

.withheld as taxes. Provision was made in the circular for the designation of incorporated banks or trust companies located in territories and
insular possessions of the United States which are not insured banks
within the meaning of section 10 of the act approved June 11, 1942, but
which are otherwise eligible for designation as depositaries and financial agents of the Government. The circular was amended, effective
July 22, 1943, and all incorporated uninsured banks and trust companies designated as special depositaries of public rnoneys under the act
approved September 24, 1917,' as amended (Second Liberty Bond Act,
as amended), have been designated, subject to the provisions of
Department Circular No. 714, as depositaries and financial agents of
the Government for receiving funds withheld as taxes. (See exhibit
67, page 378.)
Designated depositaries are required to comply with the terms of
Department Circular No. 714 before iacting as a depositary for withheld taxes. The circular provides that details governing qualification
of depositaries, the functions of depositaries under such qualification,
and the allotment of Treasury balances and 2 percent depositary bonds
to depositaries be handled by the various Federal Reserve Banks as
fiscal agents of the United States. The arrangement was designed
primarily for the purpose of making the funds avaUable to the Treasury
on a current basis before employers' quarterly tax returns are submitted to collectors of'internal revenue.
The necessary forms and instructions relative to the qualification
of depositaries were not distributed until after June 30, 1943. As of
August 31, 1943 J t h e Treasury had received from Federal Reserve
Banks notification of the qualification of 8,014 depositaries, and remittances of withheld taxes by qualified depositaries totaling approximately $563,000,000 had been credited in the Treasurer's account by
Federal Reserve Banks.
Depositary bonds.—Department Circular No. 660, dated May 23,
1941, as amended, prescribes the regulations of the Treasury governing the issuance of 2 percent depositary bonds. These bonds are
allotted to banks designated as depositaries and financial agents of the
Government and provide an income which offsets the costs incurred by
depositaries in handling the Government's business.
On June 30, 1943, 2 percent depositary bonds in the face amount of
$226,235,250 had been issued and $70,000 had been redeemed. The
amount outstanding on this date \y'as $226,165,250..
Designation of agencies for the issuance of war savings bonds, Series
E.—The Division maintains a record of cash collateral pledged, in lieu
of securities, by designated agents for the sale and issuance of war
savings bonds of Series E, as specffied in Department Circular No. 657,
as. amended. The third amendment, dated July 17, 1942, to this
circular, provides that any issuing agent designated under its terms
may be qualified as such without being required to pledge collateral
security, subject to certain restrictions in specffic instances. As a
result of this provision, the number of issuing agents which now have
on deposit cash collateral as security for consignments of war savings
bond stock has decreased. (See exhibit 31, page 331.)
As of June 30, 1943, there were 291 issuing agents qualified by the
pledging of cash collateral aggregating $1,158,430.25.




REPORT OF THE SECRETARY OF THE TREASURY

173

Federal savings and loan associations.—On June 30, 1943, the Federal
Home Loan Bank System reported to the Treasury that 1,468 Federal savings and loan associations were eligible to qualify as fiscal
agents under Department Circular No. 568, dated September 15, 1936,
for the purpose of collecting delinquent accounts arising out of insurance
and loan transactions of the Federal Housing Coinmissioner. Of
this number 91 had qualified for this purpose either by the pledge
of collateral security or the filing of an acceptable surety bond.
Social security.—Under arrangements entered into between the
Treasury and the Social Security Board, various depositaries of public
moneys, designated by the Secretary of the Treasury, were authorized
to carry balances of Treasury funds as a basis for servicing State
unemployment compensation benefit payhient accounts and clearing
accounts.
As of June 30, 1943, 65 banks were designated for this purpose with
authority to maintain Treasury balances totaling $35,440,000.
Government losses in shipment.—The Government Losses in Shipment Act, approved July 8(, .1937 (50 Stat. 479), as amended by an act
approved August 10, 1939 (53 Stat. 1358), was designed to provide
within the Government an adequate means of prompt replacement of
losses resulting from the shipment by the executive departments,
independent establishments, agencies, wholly owned corporations,
officers and employees of the United States, of certain articles, things,
or representatives of value, thus eliminating the necessity of purchasing insurance from private companies for such replacements. The
articles, things. Or representatives of value declared to be * Valuables"
by the Secretary of the Treasury, within the meaning of that term in
section 7a of the act, include money of the United States and foreign
countries, securities and other instruments or documents, precious
metals and stones, and works or collections of artistic, historical,
scientific, or educational value. The shipment, of ^Valuables'' is
governed by regulations designed to minimize the risks of loss, destruction, or damage, and to facUitate replacement under the provisions of
the act, in the event such procedure becomes necessary.
Under the provisions of section 3, paragraph (i) of the Public Debt
Act of 1943 (Public Law 34>, the fuhd for payment of Government
losses in shipment was made avaUable for replacement of any losses
resulting from payments made in connection with the redemption of
savings bonds, undier regulations to be prescribed by the Secretary of
the Treasury. (See exhibit 38, page 338). No payments were made
out of the fund for this purpose during the year.
The monetary value of shipments, reported to have been made
during 1943 under the Government Losses in Shipment Act, of classes
of valuables which were covered by the Treasury's contracts with
insurance companies prior to the enactment of the act, amounted to
$150,865,426,318. This represents an increase of approxunately
$109,487,000,000 over shipments made during 1942. The table
following indicates the estimated premium savings in connection with
shipihents for 1943 to be over $3,165,000, and savings since the
inception of the act to be over $5,946,000, under each of the three
alternate bases upon which the estimates are made.




174

REPORT O F . T H E

SECRETARY

OF T H E TREAiSTJRY

'

Estimated premium savings during the fiscal years 194^ and 1943 and ihe total
estimated savings to J u n e SO, 194-3
Aug. 15, 1937,
through June
30, 1943

Fiscal year,
1942

Fiscal year 1938 1
Fiscal year 1937 2
Fiscal years 1936-38 3.

Fiscal year
1943

$863,000
1.239,000
1,188,000

On the basis of premium rates for-

$3,166,000
3,947,000
3,800,000

. $5, 946,000
7,621,000
7,318,000

' 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 three years of Government insurance contract system.

Other classes of valuables covered under the provisions of the
Government Losses in Shipment Act were shipped during the year
having an aggregate value of $125,454,452,124; however, these have
not been included in the calculation of estimated premium savings
in the above table because, as a general practice, the Government did
not insure them prior to the effective date of the act.
Following is a table of the loss experience resulting from shipments
of valuables under the act during the^fiscal year 1943:
Number and value of items reported lost, settled, and unadjusted, fiscal year 19.^3
Number

Items reported lost;,'
Unadjusted July 1,1942
Reported lost during year
Total to be settled- ..-.

.. .

Total settled

.._._

Unadjusted June 30,1943

.

...
...i

.

'. .

..

33
123

$12,647.10
646, 720. 96

...

.•...!._

Settled by replacement out of fund
J
Settled without replacement or credit...1.

Value "

166

659,368.05

...

76
17

8,877. 44
1,253. 46

._

92

10,130. 90

...

64

649, 237; 15

Section 3 a of the act provides for payment of losses arising from
agency functions performed by the Po^t Office Department for the
Treasury, hrespective of the manner in which losses occurred. Such
losses may result from fire, theft, robbery of a post office, embezzlement, or similar contingencies. The increase in the number of losses
reported, from 45 in 1942 to 123 in 1943, iiiay be attributed chiefly to
the loss or destruction of motor, vehicle tax stamps and funds and war
saving stamps and funds, while in the custody of the Post Office
Department acting in the capacity of agent for the Treasury in the
sale of such stamps.
Pursuant to section 3b of the act, as amended, there were executed
during 1943 eight agreements of indemnity, in the aggregate amount
of $3,336.68, in connection with which no payments have been required.
The total number of agreements executed to June 30, 1943, was 19,
amountmg to $80,059.67.
'
'




REPORT OF T H E SEORETARY OiF T H E TKElAiSURY

175

F u n d for the payment of.Government losses i n shipment (revolving fund), J u n e SO, 19.^^3
I. RECEIPTS AND EXPENDITURES
Increase or
C u m u l a t i v e t o ', decrease ( - ) ,
J u n e 30, 1942
fiscal year
1943
Receipts:
Appropriations
. . ^ . . . .'.
Transferred from t h e securities t r u s t fund (Sept. 21,
1939) 1
Recoveries of p a y m e n t s for losses
i
_ ...
T o t a l receipts
Expenditures:
P a y m e n t of losses

.

Cumulative to
J u n e 30, 1943

-$602,000.00

$602,000.00

9i, 803.13
262. 50

91,803.13
262.60

.-..•.•, ..__

694,066.63

694,065.63
2 4,011.71

312,889.15

690,053.92

B a l a n c e in fund

$8,877.44
- 8 , 877. 44

681,176.48

II. FUND ASSETS

J u n e 30, 1942

U n e x p e n d e d balances:
T o credit of d i s b u r s i n g oflQcer
O n books of t h e D i v i s i o n of B o o k k e e p i n g a n d
Warrants
^
Total fund assets..

..-

•

$3,428.83

Increase or ' ^
J u n e 30, 1943
decrease (-^)

-$877.44 •

$2,561.39

' 686,625.09
.

-8,000.00

678, 625. 09

690,053.92

-8,877.44

681.176. 48

1 The act of Aug. 10,1939 (53 Stat. 1358), amended the Government Losses in Shipment Act, and in section
1 the Secretary of the Treasury was authorized and directed to transfer the amount standing to the credit
of the securities trust fund to this fund.
2 Includes paynient in the amount of $64.44 representing an excess recovery previously paid into the fund
from the securities trust fund. "

Section of Surety Bonds
The Secretary of the Treasury, under the act of Congress approved
August 13, 1894 (28 Stat. 279), as amended by the act approved
March 23, > 1910 (36 Stat. 241), issues certfficates of authority to
corporate surety companies to qualify as acceptable sureties on bonds
and other obligations in favor of the United States..
On June 30, 1943, there were 80 domestic companies holding certificates of authority, 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.
During the fiscal year 1943 one certificate of authority of a domestic
company, which had voluntarUy ceased to write business, was revoked;
two certificates of authority were issued to domestic companies qualifying them as sole sureties on bonds in. favor of the United States.
There were also 7 branches of foreign companies holding certfficates
of authority authorizing them to act only as reinsurers on bonds in
favor of the United States.
The Section of Surety Bonds checks the financial condition of
surety companies authorized to transact business with the United
States; determines their underwriting limitations; reviews their
quarterly financial statements; makes examinations into their financial condition at their home offices, when necessary; and performs
other duties to determine whether the companies observe the requirements of the law and the regulations of the Secretary of the Treasury
issued pursuant thereto.




176

REPORT OF THE SECRETARY OF THE TREAi&URY

The Section of Surety Bonds has custody of all fideUty bonds in
favor of the United States, except those filed with the Post Office
Department and the Federal courts, and notifies the accounting
officers of the receipt and filing of such bonds. I t examines and
approves as to corporate surety all fidelity and surety'bonds with a
few exceptions as referred to above.
During the year 102,542 bonds and consent agreements cleared
through the Section for approval as to corporate surety. This number
includes official bonds and consent agreements totaling 39,554,
which is an increase in these classes of more than 70 percent over
the preceding year. This total uicrease was largely due to the
continued expansion of the Army and the Navy.
Treasury Budgetary Section
This Section, which is in the Bureau of^^Accounts, constitutes in parthe operating staff of the Budget Officer of the Department, coordit
nating departmental estimates of appropriations, justifications, and
reports and performing related duties in accordance with the requirements of the Budget Officer, Treasury Department. The Section also
performs similar duties for the Commissioner of Accounts and has
administration of special deposit accounts of the Secretary of the
Treasury, which cover alien property trust funds in the Treasury,
offers in compromise under the provisions of section 3469 of the Revised Statutes, Philippine trust funds held in interest-bearing accounts,
cash collateral furnished by issuing agents for the sale of war savings
bonds. Series E, and accounts pertaining to withheld foreign check
payments.
Alien property trust fund.—Under-the act of October 6, 1917, as
amended, and the Settlement of War Claims Act of 1928, approved
March 10, 1928 (45 Stat. 254), as amended, securities previously
held by the Secretary of the Treasury fpr account of the Attorney
General, Alien Property Bureau, were all sold prior t o the fiscal year
1943. A statement of the alien property trust fund as of June 30,
1943, follows:
Alien property trust fund, June 30, 1943
Credits ( n e t ) :

• .

Trusts
Earnings on investments, etc
Total

-

..

.

•>

$38,704,833,39
26.173,290.06

..:_.

^

64,878.123.45

Assets:
Investments:
Participating certificates issued under sec. 25.(e) of the Trading
with the Enemy Act:
Noninterest-bearing..
$20,861,206.97
5% interest-bearing
34,347,476.76
Cash balance with the Treasurer ofthe United States..
Total fund assets June 30, 1943

•

•

66,208,683.73

9,669,439.72

6^878,123.46

Checks issued by the Treasury Department during the year to the
Attorney General, Alien Property Bureau, and to the Alien Property
Custodian on account of the alien property trust fund included certain expenditures for administrative expenses of the Alien Property
Custodian appointed pursuant to the act of October 6, 1917, as




REPORT OF T H E SIECRETARY OF T H E TREIASURY

177

amended by the First War Powers Act, approved December 18,1941.
The amounts of expenditures were as follows:
Distribution of income
Administrative expenses
Total

:.•

$240,000.00
3,800, G O 00
O.
4,040,000.00

.

Philippine funds in the United States Treasury.—Under the 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
treasury 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 1934 to 1943.
Receipts»
appropriated

Fiscal year

1934
1935
1936
1937
1938.
1939
1940
1941..
1942
1943

....
...
.....

.:....
.

...

$627,426.40
491,458.60
645,890.13
766,865. 76
813,862. 30
569,468.06
703,874. 2S
538,089. 63
420,293.47
35,192. 34

P a y m e n t s to
Philippine
Government 2
i;i
'

$813,371.78
502, 651. 53
745, 967. 75
891,726.93
934, 689. 47
626, 347.68
482,106.02
2, 987.84
78. 32
426. 77

U n p a i d balance

$568, 653. 59
557, 560.56
457,492. 94
321,632. 77
200,796. 60
143,915. 9^
365, 684. 24
900,786. 03
1, 321,001.18
1, 352,976. 72

1 Reduced by amounts carried to surplus fund as follows: 1936, $17,540.28:1937. $9,783.75; 1939, $15,151.70;
1940, $957.78; 1941, $36,822.72; 1942, $747.68; and 1943, $2,971.03.
3 Includes certain refunds and adjustments.

Under the act of June 11, 1934 (48 Stat. 929; 48 U..S. C. 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, 1943, was $89,868,089.38.
Section 602/2 of the act of May 10, 1934 (48 Stat. 763), 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




178

REPORT OF T H E

SECRETARY

OF T H E

TREAiSTJRY

under which coconut oil moneys payable to the Philippine treasury
would be transferred on periodic settlements of.the General'Accounting Office 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. Interest at the rate of 2 percent per
annum is paid on the daily balances in this account. A sum^iiiary of
transactions in the account from the time of its establishment to date
follows.
,• .
. . . .
Fiscal year

1938..:...-.
1939
1940
1941
1942
1943

Deposits

..:..!....:.„
• •
-

.

$56,864, 779. 06
20, 355,455. 65
4, 559,016. 46
:
72,850.96

.
:

:

Withdrawals

$32,000,000.00
1 17, 664,016. 41
6, 000,000. 00

.....:_..

Balance a t e n d
• of year
$56,854,'779. 06
'45, 210, 234. 71
32,205,234.76
32, 278,085. 72
27, 278, 085. 72
27, 278,085. 72

1 Includes $7,564,016.41 transferred to account established under act of August 7, 1939.

Section 6 of the act of August 7, 1939 (53 Stat. 1232), 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
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.
An account was established in the fiscal year 1940 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. Interest at the rate of T percent
is paid on the daily balances in this account.
A summary of transactions in the account from t h e time of its
establishment to date follows:
<
Fiscal year

1940
1941
1942
1943

. . . .
:
. . . . .
.....

Deposits

.

.
.:

....

$17,274,092.01
15,258,938.13
.25, 566, 399.12
3,517,267.87

Withdrawals

$20,000,000 00
9,000,000.00

Balance at end
of year .
$17, 274, 092. 01
12, 533, 030.14
29,099, 429. 26
32, 616, 697.13

Appropriation of funds to the Government of the Commonwealth of the
Philippines for national defense.—Public Law 371, approved December
23, 1941, appropriated, in accordance with the provisions of section 503
of the Sugar Act-of 1937 (50 Stat. 915) such moneys as had been collected prior to the passage of the act of December 23, 1941, for the
purpose of enabling the Secretary of War to meet expenses for each
and every purpose necessary to provide for public relief and civilian
defense in the Philippine Islands.
On June 30, 1943, there had been established upon the books of
the Treasury Department approximately $39,000,000 which was



REPORT OF T H E SECIRETARY O F . T H E TRE'ASTJRY

179

avaUable for appropriation, to the Government of the Cpmmonwea,lth
of the PhUippines.
In accordance with provisions of Public Law 371, $35,000,000 was
appropriated for this purpose.
Supplementary sinking fund for the payment of bonds of the Philippines.—Under section 6 of the act of March 24, 1934, entitled *'An
Act to provide for the complete independence of the PhUippine Islands,
to provide for the adoption of a constitution and a form of government
for the Philippine Islands, and. for other purposes,'' as amended by
the act of August 7, 1939, it was provided that on and after January
1, 1941, the Philippine Government shall impose and collect an export
tax on every Philippine article shipped from the PhUippines to the
United States, except as otherwise specffically provided. I t was
further provided that the PhUippine Government shall pay to the
Secretary of the Treasury of the United States, at the end of each
calendar quarter, all of the moneys received during such quarter from
export taxes (less refunds), imposed and collected in accordance with
the provisions of this section, and said moneys shall be deposited in
an. account with the Treasurer of the United States and shall constitute a supplementary sinking fund for the payment of bonds of the
PhUippines, its provinces, cities, and municipalities, issued prior to
M a y 1, 1934, under authority of acts of Congress.
Accordingly, there was established with the Treasurer of the United
States a special deposit account in the name of the Secretary of the
Treasury entitled ' T h e Secretary of the Treasury for Account of the
Philippine Government—Supplementary Sinking Fund for the Payment of Bonds of the PhUippines, its Provinces, Cities, and Municipalities, Issued Prior to May 1, 1934, under Authority of Acts of
Congress (Symbol 891-855)."
The following statement shows the cumulative transactions since
the inception of the fund and its status as of June 30, 1943.
Supplementary sinking fund for the payment of bonds, issued prior to M a y 1, 1934,
of the Philippines, its provinces, cities, and municipalities, J u n e SO, 1943.
I. RECEIPTS AND EXPENDITURES

Receipts:
' Taxes on exports
Interest on investments..._
Total receipts
Expenditures
.
Balance in fund-.

:....:.
-._.,
.......

.

....

._.._.
..I

$1,586,135.92
53,018.68
.

._ ' 1,639,154.60

:

_..-.....

1,639,154.60
, II. FUND ASSETS

Investments:
Philippine Government bonds:
Face amount'ZPTincipal cost
4% due Dec. 1,1946.....
__....
$207,000
$205,242.60
4K%dueDec. 1,1950
33,000
36,416.88
5% due Feb. 1, 1952
.
32,000
35,993.45
4H%due July 1. 1962..
.:........
..._..:_ 258,000 ' 271,776.81
4K%due July l5, 1952
. . „ _ _ 373,000
403,276.10
5%due Apr. 1, 1955
21,000
19,877.50
4 H % d u e M a y 1,1967....
...1.........
j
5,000
5,835.04
4K% due .Tuly 1, 1957
: . 64,000
74,447.49
4M% due Mar. 1, 1958
43,000
60,606.43
4H% due Apr. 1, 1958
i
.-......:......
36,000
42,360.40
4M%due Apr. 1, 1959-:........
-....i
70,000
77,069.74
4H% due Sept. 16, 1959...
41,000
.48,812.56
4H% due Oct. 1, 1959
19,000
22,604.53
4K%due Oct. 15, 1959
6,000
6,912.36
Cash balance with Treasurer of the United States
Total
_




1,208,000
...l
„..:

$1,301,231.79
^'• 337,922.81
1,639,164.60

180

REPORT OF THE SECRETARY OF THE TREAiSTJRY

Foreign check control.—In accordance with the provisions of the
Executive Order No. 8389 of AprU 10, 1940, as amended, and Public
No. 828, approved October 9, 1940 (see annual report for 1941, p. 106),
disbursing officers had withheld as of June 30, 1943, from delivery to
payees residing in occupied territories 411,453 checks aggregating
$17,363,762.74,,of which the proceeds of 318,248 checks aggregating
$12,779,899.33 were deposited in the special deposit account entitled,
^^Secretary of the Treasury, Proceeds Withheld Foreign Checks";
10,135 checks aggregating $609,533.25 were released to payees; and
2,104 checks aggregating $84,062.68 were canceled on advice of administrative agencies which authorized the issue of such checks to the
payees. On June 30, 1943, a balance of 80,966 checks aggregating
$3,890,267.48, the proceeds of which were subject to deposit in the
special deposit account, were held by disbursing officers pending
disposition.
Of the $12,779,899.33 deposited in the special deposit account,
$48,860.12 has been paid to individual claimants; $6,221.31 has been
returned to the appropriations from which payments were made;
and $1,950,853.47 has been covered into the Treasury as miscellaneous
receipts on account of the $1,000 limitation on veterans' payments.
On June 30, 1943, the proceeds of 281,823 checks aggregating
$10,773,964.43 remained in the special deposit account to the credit
of approximately 19,068 individuals.
>

Section of Investments

The Section of Investments supervises the collections of principal
and interest on foreign obligations and on railroad obligations owned
by the United States and held by the Treasury; collects on other
obhgations owned by the United States, which have been turned over
to the Treasury by other departments for collection; handles matters
relating to the investments and securities held in the custody of the
Treasurer of the United States and the Federal Reserve Banks for
which the Secretary is responsible, other than those related to pubhc
debt operations; and makes payments on 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 acts of
April 10,' 1935, and December 18, 1942, covering claims against the
Republic of Mexico. (See exhibits 90 and 91, beginning on page
449.) In connection with these activities, accounts are kept and various related matters are handled by the Section.
Obligations of foreign governments

The United States received during the year a payment from the
Government of Finland in the amount of $168,945.56 on account of
its indebtedness, $6,844.86 of which applied on principal due and
$162,100.70 on interest due.
,
,
The following statement shows the payments due during the periods
July 1 to December 31, 1942, and January 1 to June 30, 1943.




BEPOET OF THE SECRETART OF THE TREIAStTRT

181

Amounts due and payable, July 1 to December 31, 1942, and January 1 to June 30,
1943
Funding agreements
Country
Principal

Moratorium
agreements

Total

Interest
July 1 to Dec. 31,1942

Belgium...
Czechoslovakia..
Estonia
Finland
France
Great Britain...
Greece
Himgary
Italy
Latvia...
Lithuania
Poland
Rumania
Yugoslavia
Total.

$1,500,000.00
156,000.00
82,000.00
42,000,000.00
512,000.00
16,366; 00
63,900.00

'i,'78i,'ooo.'6o"
46, 111, 265.00

$4,158,000.00
286, 266.00
137, 656.00
38,522, 866.00
76,950, 000.00
217, 920.00
33, 185.08
2,490, 875.00
• 119, 609.00
107, 783.67
3, 582, 810.00
907, 569.81
164, 062.50
126, 668,590.06

$484, 463,88
182, 812.78
36, 585.29
32, 725.56
3,046,879.72
9, 720.765.05
67, 137.38
4, 226.68
896, 155.88
15, 274.26
13, 683.26
456, 229.71
48, 750.08

$4, 642, 463.88
1.682, 812.78
478, 860.29
1262, 380.66
41,569, 744.72
127, 670, 765.05
797, 067.38
53, 775.66
3,387, 030.88
783.26
121, 466.93
5,820, 039.71
(
956,309.89
154,062.50

15,005, 678.43

187,786,533.49

Jan. 1 to June 30,1943
Belgium
Czechoslovakia
Estonia
France.
,
Germany (Austrian indebtedness) 2.
Great Britain
Greece..-.
.
,
Hungary
.
Italy
....
Latvia
Lithuania
^
...
Poland
Rumania..
Yugoslavia,
Total.

$5,000.000.00
1,600,000.00
58, 918, 719.03
460,093.00

$4,168,000.00
286,265.00
38,522,865.00

478,000.00
604,000.00

75,950,000.00
217,920.00
33,185.08
2; 490,876.00
119,609.00
107,783. 67
3, 582,810.00
907, 569.81
154,062.50

86,136, 417; 03

126,530,935.06

519,000.00
'i7,'666,'ooo."6o"
66,605.00

$484, 453.88
182, 812.78
36, 585. 29
3,046, 879.72
34, 767.23
9, 720, 765.06
67, 137.38
4, 225. 58
896, 155.88
15, 274.26
13, 683.26
456, 229.71
48, 750.08

$9,642, 453.88
1, 682.
812.78
322, 850.29
100, 488,463.75
494, 860.23
85, 670,765.06
804, 067.38
37. 410.66
20.987, 030.88
134, 883.26
178, 071. 93
4,039, 039.71
1,434.309.89
758, 062. 50

16,007,720.10

226,675,072.19

1 Postponed under authority of Public Law 110, approved June 12,1941.
2 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.

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 15,1943, appears as table 61 on page 672.
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, 1943,
according to contract terms, are shown in the following statement.




182

REPORT OF THE SECRETARY OF THE TREASURY
Total amounts due and not paid as of November IS, 1943
Funding agreements
Country
Principal

Belgium
Czechoslovakia
...
Estonia
France
Germany (Austrian indebtedness) i
Great Britain.
- Greece
^
Hungary 2
_._
Italy...
.....:.
Latvia
Lithuania
Poland..
Rumania 3.
^..
Yugoslavia
.
,.
Total

Interest

Moratorium
agreements
annuities

Total

$50,800, 000. 00
$80,778,000.00 $9,689, 077. 60 $141, 267,077.60
31,170, 086.83
34,826, 341.43
3,656, 256.60
8,441, 640. 80
1,453, 000.00
731, 705. 80
6, 256, 936. 00
607,141, 170.42
60,937, 594.40 1, 207, 398,
874. 82
539, 320,110.00
3, 680,744.00
278, 137.84
3, 958,
881.84
366,000, 000.00 1, 577, 449, 481. 58194, 416,301. 00 2,136,864, 782. 58
747. 60
. 10,228,000. 00
4,021,027.50
1, 342,
15, 591,775.10
165 616.00
84, 511.60
867, 522. 73
627, 396.13
162, 200^000. 00
211, 749,909. 34
31, 626, 791. 74 17, 923,117. 60
590, 100.00
305, 486. 20
3, 391,
844.04
2, 496, 258.84
527, 705.00
273, 665. 20
3,001, 643. 92
2, 200, 273. 72
17,133, 000.00
9,124, 594. 20
104,567, 584. 20
78, 309,990.00
• 13,015,560.43
21, 251,040. 51
7, 260, 478. 48
975, 001.60
4, 903,000.00
1,155,468.78
6, 058,468. 78
1,267,997,980.68 2,331,5 2,211.77 299,737,196.24

3,899,237,387.69

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 bf 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 Dec. 15, 1932, to
June 15,1937. The debt fundiug and moratorium agreements with Hungary provide for payment in dollars
•in the United States.
3 Excludes the amount of $100,000 which the Rumanian Government paid to the United States Treasury
on June 15, 1940, as "a token of its good faith and of its real desire to reach a new agreement" covering
Rumanian indebtedness to the United States.

,.

Receipts frorri Germany

The status of the indebtedness of Germany to the United States as
of June 30, 1943, underthe debt funding agreement of June 23, 19.30,
covering the. costs of the American Army of Occupation and the
awards of the Mixed Clauns Commission, United States and Germany,
is summarized in the following tables.
Amoimt of indebtedness of Germany to ihe United States, June 30, 1943
Indebtedness
as funded

Total
indebtedness,
. J u n e 30, .1943

Principal

I n t e r e s t accrued a n d
unpaid

• 1,048,100,000
"
2,12i; 600,000

1, 042, 958, 676. 50
2,175,150;000.00

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

1 45,458, 676. 50
135 150 000 00

T o t a l (reichsmarks) . .
3,169, 700,000 2 3,218,108,676.50 3, 037, 600, 000
T o t a l (in dollars, a t 40.33 cents to t h e
$1, 278, 340, 010 $1, 297, 863, 229. 23 $1,226,023,760.
reichsmark) ___
__

$72, 839, 479.23

Class

A r m y costs (reichsmarks)
M i x e d claims (reichsmarks) _

180,608,676. 50

1 Includes interest accrued under unpaid moratorium agi'eement annuities.
>• '
•
,
2 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.

Payments received from Germany to June SO, 1943
Class
Army costs (reichsmarks)...
jyiixed claims (reichsmarks)
Total (reichsmarks)...
Total (in dollars)




Total payments
received to
June 30, 1943
51,456,406. 25
87, 210,°000.00

Payments of
principal
50, 600, 000. 00
81, 600,000.00

138. 666,406. 25 132, 200,000.00
$33. 587,809.69 $31,539,595.84

Payments of
iaterest
856, 406. 25 '
5, 610,000.00
6, 466, 406. 25
$2,048, 213.85

183

REPORT OF T H E SECRETART OF T H E TREIASTTRT
Amounts.not paid by Germany according to contract terms, J u n e 30, 1943
Funding agreement
Moratorium
agreement

Date diie
Principal
Sept.
Mar.
Sept.
Mar.
Sept.
Mar.
Sept.
Mar.
Sept.
Mar.
Sept.
Mar.
Sept.
Mar.
Sept.
Mar.
Sept.
Mar.
Sept.Mar.

1933
1934
1934
1935
1935
1936
1936
1937
1937
1938
1938
1939
1939..
1940
1940
1941
1941
1942
1942
1943.

__•
•-

reichsmarks.
do...
do...
--do...
do...
..
do...
do...
do...
do...
..do...
do...
do...
............do...
do...
do...
do...
._......•......do...
do...
J
do.
.do.--.
.

Total.....:
...--do....
Total (in dollars, at 40.33 cents to the
reichsmark)...
..".
..

Total

Interest

2, 498,562. 50
122,400.000
3,856, 687. 50
20,400,000
4, 634,250.00
82,900,000
29, 700,000 . 6,212,812. 50
29,700,000
6,891, 376.00
29, 700,000
6, 669,937. 60
29, 700,000
7, 248,500. 00
28,600,000
7,927, 062. 50
28,600,000
8, 685,687. 50
28, 600,000
9, 244,312. 50
28,600,000
9,902, 937. 50
29,700,000
10, 561,662. 50
29,700,000
11, 240,125.00
11.918, 687. 50
. 29,700,000
12, 697,250. 00
29, 700,000
13.276, 812. 50
33,050,000
14, 016,093. 75
33,050,000
14, 754,376.00
33,050,000
16,493, 656.25
33,050,000

1, 529,049.45
1 4, 027,
611.95
1, 629,049.45
123, 929,049. 45
1, 529,049.45
25, 784,736. 95
1, 629,049. 46
88, 963,299.45
1. 529. 049. 46
36,441, 861. 96
1, 629,049.45
37,120, 424. 45 •
1, 529, 049. 45
37, 798,986.95
1, 529,049.45
38,477, 549. 45
1, 529,049.45
38,056, 111. 95
1, 529,049. 45
38, 714,736. 95
1, 529,049. 45
39, 373,361.95
1. 529,049. 45
40,031, 986. 95
1, 529,049. 46
41, 790,611.95
1, 629,049. 45
42,469, 174. 45
1, 529.049. 45
43,147. 736.95
1, 529,049.45 . 43,826,299. 46
1, 529,049. 46
47,864,< 861. 95
1, 529,049. 45
48, 694,143. 20
1, 529,049. 45
49, 333,424. 45
1, 529,049.46
50,072. 705. 70

709,900,000

175, 327,687. 50

30,580,989.00

915,808, 676. 50

$286, 302, 670

$70,-JOO, 656. 37

$12,333,312.86

$369, 346,639. 23

1 Represents 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 of alien, and mixed claims

The Settlement of War Claims Act of 1928 (45 Stat. 254) 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 clainis of
American nationals against the Governments of Austria and Hungary.
For a more detailed discussion of these awards and payments see
pages 123 to 128 of the annual report for 1941.
Mixed Claims Commission and Private Law No. 509: Claims against
Germany.—During the fiscal year 1943 payments aggregating $81,13 9.92
on account of distributions previously authorized by the;Secretary of
the Treasury were made on account of claims which were certified for
payment prior to October 31, 1939. One Class 2 award has not yet
been paid, as satisfactory evidence as to the persons entitled to receive
payment has not yet been received. This award plus interest to
January 1, 1928, amounts to $3,850.68. The Class 3 claimants received payments aggregating $21^763,576.77, placing them on the
same basis as the Class 3 claimants who received awards prior to
October 31, 1939.




184

REPORT OF T H E SECRETARY OF T H E TREAiSURY

Total payments made on the additional sabotage awards to September 30, 1943, are as follows:
Payments
Awards (plus
interest to
Jan. 1,1928)

Class

1
2
3

^

Awards (plus Interest from
Jan. 1,1928, to
interest to
Jan. 1,1928) date of payment

Total

$72,601.37
2 1,054,154.65
21,763,576.77

$47,394.01
688,239.04

» $119,895.38
1, 742,393. 69
8 21,763,576.77

31,729,164.19

Total

$72,501.37
1,058,005. 23
30,598,657.69

22,890,232.69

736,633.05

23,626,865.74

1 Payments completed prior to Sept. 30,1941.
2 One award (plus interest.to Jan. 1,1928), amounting to $3,860.68, not yet paid.
8 Payments completed during 1942.

After the Class 3 additional sabotage claims were satisfied by payment of the same percentage payments made on this class of awards
certified for payment prior to October 31, 1939, they shared in the
distributions of 5 percent and 4.4358855 percent authorized on March
19, 1941, and September 17, 1941, respectively, to be paid tb all
Class 3 claimants. No segregation of these payments has been
made as the sabotage claimants and the claimants whose awards were
certified prior to October 31, 1939, are receiving payments on an
equal basis.
The payments to American and German nationals on account of the
awards of the Mixed Claims Coinmission and the War Claims Arbiter
are made out of the German specialdeposit account established under
the provisions of section 4 of the Settlement of War Claims Act of
1928. The priorities established in the act and the status as of September 30, 1943, of such priorities up to the seventh priority are as
follows:
Priority
No.
1
2
3
4
5.
6
7

On account of—

Nationals

Administrative expenses
Class 1 awards
American
Class 2 awards
. doPayment $100,000 a/c Class 3 awards..
:....do
Payment of 80 percent of (2), (3), and (4), and
do
interest to Jan. 1, 1928.
German
Tentative awards. War Claims Arbiter..
60 percent of ship and patent claims
do

-

Amount due Sept.
30, 1943
Held in reserve.
Completed.
$49,713.00.1
. . Completed.
$16,222.48.1
Completed.
Do.

1 Applications for payment of these amounts to claimants were not received or approved as of Mar. 11,
1940, or Sept. 30. 1943.
-

Up to September 30, 1943, the Treasury has made payinents in the
aggregate amount of $163,617,416.14 on accoimt of awards of the
Mixed Claims Commission, from which there has been deducted
$818,087.56 representing one-half of 1 percent authorized by the
Settlement of War Claims Act of 1928, making net payments to
claimants of $162,799,328.58. Of the deductions $770,233.47 has
been covered into the Treasury as miscellaneous receipts in accordance
with the provisions of the act as reimbursement to the United States
for expenses incurred, and $9,237.05 of the deductions has been
withheld and not yet covered; and the balance of $38,617.04 is payable




REPORT OF T H E SEORJETARY OF T H E TREtASURY

185

to the German Government for defraying such expenses as may be
incurred by that government for the adjudication of claims.
The foUowing 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, 1943.
Further detaUs by classes of awards may be found in table 94, page 728.
Mixed Claims Commission, United States and Germany—Number and amount of
awards, amounts paid, and balance due, certified to the Secretary of the Treasury by
ihe Secretary of State, as of September SO, 1943 ^
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

107,817,866.18

:..

2. Payment made on account to Sept. 30,1943:
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..

370, 793, 960. 99
6.670

2 152,401,420. 71
8,937,474.29
2, 278, 621.14

Total payments to Sept. 30, 1943
Less one-half of 1 percent deduction from each payment.

163, 617, 416.14
818, 087. 66

Net payments made to claimants to Sept. 30, 1943

162, 799,328. 68

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. 30,1943
.. ..
Balance due claimants as of Sept. 30, 1943-..,

$181, 698, 235.30
187, 226. 85
181,-511,008.45
81. 465,086. 36

Interest to Jan. 1,1928, at rates specified in awards
Interest thereon to date of payment or, if unpaid Sept. 30, 1943,, at 6
percent per annum as specified in th9 Settlement of War Claims
Act of 1928
- - . . -. -.
Total due claimants

Total amount

..

_ . ..

356

101,628, 304.99
8,894.82
106, 539,345.04
207,176, 544.86

1 Includes payments on account of Private Law No. 509, approved July 19, 1940.
2 Includes payments on account of interest to Jan. 1, 1928, on Class 3 awards and Private Law No. 609.
Payments on this class of awards are first applied on account of the total amount payable as of Jan. 1,1928
(which is treated as a principal payment for tnis purpose), as directed by the Settlement of War Claims Act
of 1928 until total of all payments on the three classes equals 80 percent of the amount payable Jan. 1,1928.
Payment of accrued interest since Jan. 1,1928, on this class of claims has been deferred in accordance with
the act.

War Claims Arbiter.—Under the Settlement of War Claims Act of
1928, it was the duty of the War Claims Arbiter, within certain limitations, to hear the claims of German, Austrian, and Hungarian
nationals and to determine the fair compensation to be paid by the
United States for ships seized, patents sold or used by the United
States, and a radio station sold to the United States.
War Claims Arbiter: Claims of German nationals.—^The Treasury
completed up to June 30, 1935, payment of 50 percent of the amount
of all awards made by the War Claims Arbiter in favor of German
nationals as required by paragraph 7 of section 4 (c) of the Settlement
of War Claims Act of 1928. No payments were made on these
awards subsequent to that date.
The following summary shows the number and amount of awards
in favor of German nationals certified to the Treasury for payment,
the payments made on account, and the balance due thereon as of
September 30, 1943.
542890—44-

-14




186

REPORT OF THE • SECRETARY OF T H E TREAiSTJRY

W a r Claims Arbiter—Number of awards, amounts paid, and balance due on account
of claims of German nationals for ships, patents, and a radio station as of September SO, 1943
Total
(315 awards)

Awards certified

1. Amount due on account:
Principal of awards including interest to Jan. 1,
1929
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. 30,1943

Ships
(27 awards) .

Patents and
radio station
(288 awards)

$86,738,320.83 1 $74, 252, 933. 00 $12,485, 387.83

36, 668, 662. 80

2. Payments made on account to Sept. 30, 1943:
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, 1943
—-..

31, 240, 655. 34

5,428, 007. 46

123,406, 983. 63 105, 493, 588. 34

Total due claimants

17, 913, 395. 29

43, 368, 899. 24

6, 242, 694.03

43,368, 899. 24

Total payments to Sept. 30, 1943
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, 1943

37,126, 205. 21

37,126,206.21

6, 242, 694. 03

43,369, 421. 59

37,126, 727. 79

6, 242, 693.80

(

36, 668, 662.80

31,240,655.34.

5, 428, 007. 46

80,038,084.39

Balance due claimants

68,367,383.13

11, 670, 701. 26

1 Includes awards amounting to $522.58 to members of the former ruling family of Germany (sec. 3 (j),
Settlement of War Claims Act of 1928, as amended).

War Claims Arbiter: Claims of Hungarian nationals.—The awards
made by the Arbiter to Hungarian nationals in the sum of $39,125,
with interest at the rate of 5 percent per annum from July 2, 1921,
to December 31, 1928, amounting to $14,675, have been paid with
the exception of one award amounting to $137.51, together with interest thereon at the rate of 5 percent per annum from December 31,
1928. No payments were made during the year on these awards.
German special deposit account.—The following statement shows the
total amounts deposited in the German special deposit account^ the
amounts paid therefrom up to September 30/1943, and the balance
held in the account.
Funds deposited in the German special deposit account and payments made therefrom
to September SO, 1943
RECEIPTS

From investments by Alien Property Custodian under
Trading with the Enemy Act, as amended:
Unallocated interest fund
- Less refunds.--.

'
$25,000,000.00
4,138,793.03
20, 861.; 206.97
34,347, 476.76
5,722,003.96

20 percent German property retained
i
Earnings on 20 percent German property retained
^ • •.•• ••
$60,930,687.69
Froin Germany:
2H percent of Dawes' annuities available for-reparations
(Paris agreement of Jan. 14, 1926)..
32,183,060.87
Under German-American debt agreement, June 23,1930.. 19,469,964.00
Interest on payments postponed under terms of debt
. agreement dated June 23,1930
.
1, 743,738. 70
=
53, 396, 763. 67
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'
86,851,945.03




•

REPORT OF THE SECRETARY OF THE TREAiSTJRY

187

Funds deposited in ihe German special deposit account and payments made therefrom
to September 30, i545—Continued
RECEIPTS—Continued
Deposits by Attorney General of the United States (Alien
Property Bureau) under section 25 (d) of Trading with
the Enemy Act, as amended:
German Government
German nationals
—

$137, 268.13
440,059.92

E arnings and profits on investments by Secretary of the Treasury
Total receipts

$577, 328. 05
5,632,094.28

.-

$207,388,818.62

PAYMENTS ON ACCOUNT

Awards of the Mixed
Under agreement
Under agreement
Private Law No.

Claims Commission:
of Aug. 10, 1922
of Dec. 31, 1928
609
__

Awards of War-Claims Arbiter:
For ships
For patents and one radio station

-

$154,960, 264.84
7,684,836.94
164,227.80
T
:
162,799,328.58 .
-

_

37,126,206.21
6,242,694.03

One-half of 1 percent deducted from Mixed Claims payments covered into
Treasury ($9,029.18 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 ($14,466.95 withheld but not paid)
One-half of 1 percent deducted on account of Private Law No. 609 withheld
and covered into the Treasury
Advances to special fund, expenses of administration of the Settlement of
War Claims Act of 1928 (Office of the Secretary of the Treasury)
.
Expenses of administration. War Claims Arbiter account of German nationals.-^..
J
•
Total payments-

:

43,368,899.24
769,438.12
24,160.09
795.35
58,175.00
113, 624. 20

-

Cash balance in German special deposit account

......
.

.

1..'.

207,134,410.58
264,408.04

Tripartite Claims Commission: Claims against Hungary .—The
awards entered by the Tripartite Claims Commission against Hungary,
in favor of American nationals, amounted to $199,975.57. During
the fiscal year 1943 no payments were made on account of such awards.
As of June 30, 1943, awards aggregating $7,257.35 had not been paid
because claimants had not filed applications as required by law.
Claims of American nationals against Turkey

The Special Claims Commission, United States and Turkey, established under the agreement of December 24, 1923 (see page 196 of the
annual report for 1940 for further details of this agreement), 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 bf State to the Secretary of the
Treasury for payment. During the fiscal year 1943 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 June 23, 1943, but top late
to enable the 'Treasury to make payments to claimants in the fiscal
year 1943.




188

REPORT OF THE SECRETARY OF THE TREASURY

Statements of awards made hy Special Claims Commission, United States and Turkey
as of June 30, 1943
Amount awarded to claimants:
Amount of claims
.Interest allowed
Total

—

$539,844.13
359,493.96
1

: . 899,338.09

Less deductions on account of expenses incurred by the United States.
Amount of awards
Amount received from Republic of Turkey:
To June 30,1942...
- '.
-_
During fiscal year 1943
:
Total
.._--..
Less reimbursement for expenses by the United States
Available for payment to claimants
Amount paid to claimants:
To June 30,1942
During fiscal year, 1943

70,891.06

^

_
-

$828,447,03

700,000.00
- 100,000.00
.
800,000,00
70,891.06
.
. 729,108.94

.-.

Total.-

519,453.10
93,521.50
-- 612,974.60

Balance due claimants for which vouchers have not been received

..:.

116,134.34

Claims of American nationals against Meocico

Under the convention between the United States and Mexico
dated April 24, 1934, covering the settlement of the claims presented
by the Government of the United States to the Commission established by the Special Claims Convention concluded September 10,
1923, the amount to be paid by the Government of Mexico to the
Government of the United States was fixed a t $5,448,020.14. (See
page 129 of the annual report for 1941 for further details.)
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 finah awards as adjusted . aggregated $5,210,108.92.
The expenses of the Commission were determined to be $241,549.31,
and this amount was transferred to miscellaneous receipts on December 4, 1940.
As of June 30, 1943, there had been received and made available
for distribution to claimants the sum of $4,445,071.99. Amounts
aggregating 85.31 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, 1943
Amount of final awards to claimants after application of sec. 4 of the act approved Apr. 10,1935..
-.
$5,210,108. 92
Amount received from Government of Mexico:
To June 30, 1942, $4,000,000 principal and $172,141.10 interest
$4,172,141.10
Jan. 5,1943, $500,000 principal and $14,480.20 interest
-...
514,480.20
Totalto June 30,1943
^
....:....
_.
4,686,621.30
Less amount transferred to miscellaneous receipts to cover the expenses of
the Commission
_241,549.31
Available for payment to claimants
.^
4,445,071.99
Amount paid to claimants:
Fiscal year 1939-2,087,193.47
Fiscal year 1940...
_
678,717.90
Fiscal year 1941.
537,124.56
Fiscal year 1942...
..-.
616,380.29
Fiscal year 1943.606,672.16
Total to June 30,1943
'.....-4,325,088.37
Balance due claimants:
For which vouchers have not been received..
...:.
119,656.56
For subsequent distribution
328.06 .
119,983.62




RE'PORT OF THE SECRETARY OF THE TREIA.SURY

189

Settlement of Mexican Claims Act of 194^

Under the convention between the United States and Mexico dated
November 19, 1941, the Government of the United Mexican States
agreed to pay, and the Government of the United States agreed to
accep't, the sum of $40,000,000 in United States currency as the balance
due from the Government of the United Mexican States in full settlement, liquidation, and satisfaction of the following claims:
(a) All claims filed by the Governments of the United States and the
United Mexican States with the General Claims Commission, established by the two countries pursuant to the convention signed
September 8, 1923. ,
(b) All agrarian claims of nationals of the United States of America
agaiast the Goyernment of the,United Mexican States, which arose
subsecjuent to August 30, 1927, and prior to October 7, 1940, including
those referred to in the agreement effected by the exchange of notes
signed by the Government of the United States and the Goyernment of
the United Mexican States on November 9 and 12, 1938, respectively;
and
(c) All other claims of nationals of either country, which arose
subsequent to January 1, 1927, and prior to October 7, 1940, and
involvuig international responsibility of either Government toward
the other Government as a consequence of damage to or loss or
destruction of or wrongful interference with the property of the
nationals of either country.
Under Article IV of the agreement it is provided that there is
credited against the sum of $40,000,000 the sum of $3,000,000 representing the aggregate payments made, prior to the signing of the
agreement," pursuant to th^ agreement in relation to agrarian clauns,
effected by the exchange,of notes signed November 9 and 12, 1938.
There shaU also be credited the additional sum of $3,000,000 which
will be paid on the date of the exchange of ratification of the agreement
signed November 19,1941.
The balance of $34,000,000 is to be paid in annual instaUments of
$2,500,000 beginning one year after the date of the signing of the
agreement, until the complete liquidation of the debt. The Government of the United Mexican States may, in its discretion, for the purpose of reducing the period for complete liquidation of the balance due,
inprease the amount of any of the annual installments, or pay any such
instaUment or installments in advance.
The agreement was ratified by the Senate of the United States on
January 29, 1942, sighed by the President of the United States on
February 10, 1942, and ratified by the Mexican Government on
February 12, 1942; ratifications were exchanged at Washington
on April 2, 1942, and the agreement was proclaimed by the President
of the United States on AprU 9, 1942.
To provide for the settlement of the claims covered by the agreement of November 19, 1941, Congress passed the ^^Settlement of
Mexican Claims Act of 1942,'' approved December 18, 1942. Under
section 8 of this act there was created in the Treasury a special fimd
known as the Mexican claims fund. The Secretary of the Treasury
is authorized and directed to cover into the fund (1) the sum of
$3,000,000 representiag the total amount of payments heretofore
made by the Government of Mexico under the agrarian claims agreement of 1938, (2) the sum of $3,000,000 which was paid by the Govern


190

REPORT O F . T H E SECRETARY OF T H E TREAiS'URY

ment of Mexico upon exchange of ratifications of the agreement of
November 19, 1941, (3) such other sums as are paid by the Government of Mexico pursuant to.the agreement of November 19, 1941,
and (4) the sum of $533,658.95 representiag the total amount, of
awards and appraisals, plus interest, made with respect to the claims
on behalf of Mexican nationals against the Government of the United
States which were filed with the General Claims Commission.
The amounts covered into the Mexican claims fund as of June 30,
1943, are as follows:
' • ,
Amount
Underthe agrarian claims agreement of 1938...
.
$3,000,000.00
Paid on exchange of ratifications ofthe agreement..
i
3,000,000.00
Annual installment due from Government ol Mexico Nov. 19, 1942
:.
2, 500,000.00
Appropriated by the Govermnent of the United States covering amount of awards and appraisals made oh behalf of Mexican nationals
^...
633, 658. 95
Total

,.

•..

..

.

:

-.J.. 9,033,658.95

The Settlement of Mexican Claims Act of 1942 makes no provisions
for payment to Mexican nationals out of the Mexican claiiris fund
as the Government of Mexico agreed to pay its own nationals the
amount of $533,658.95 on account of awards or appraisals made on
their behalf.
Under date of December 28, 1942, the Secretary of State certified
to the Secretary of the Treasury for payment under section 6 (b) the
awards and appraisals made in favor of American nationals as follows:
Amount
Decisions rendered by the General Claims Commission.
...
. . . $201,461.08
Appraisals agreed upon by the Commissioners designated by Governments of the United
states and Mexico respectively pursuant to the general claims protocol between the United
States and Mexico signed April 24, 1934
..
2,599,166:10
Total....

.-

2,800,627.18

i n accordance with the provisions of section 8 (c) of the Settlement
of Mexican Claims Act of 1942 the Secretary of the Treasury authorized a distribution of 30 percent of the above awards and appraisals
certified for payment.
The following statement shows the status of the Mexican claims
fund as of June 30, 1943.
. .
Credits:
•
,
Amount
Payments received from Government of Mexico under agreement of.Nov. 19, 1941
$8,500, 000. oO
Appropriation made by Government of the United States on account of awards and appraisals made on behalf of Mexican nationals
.533,668.96
Total

:..-

.....1...

9,033,668.95

Amount paid to American claimants during th e fiscal year 1943
Balance in fund June 30, 1943:

637,036. 24

._.....---..-..

Assets—unexpended balances June 30, 1943:
To credit of disbursing officer
.
On books of Division of Bookkeeping and Warrants.
Total fund assets June 30,1943

8,396,622.71
1

-

.....

...

202,963.76
8,193,658.95
8, 396, 622. 71

Railroad obligations

Total receipts. during the fiscal year on account of realization on
railroad securities acquired under section 210 of the Transportation
Act, 1920, as amended^ were $1,883,776.46.
The following statement shows the total amount of raUroad obligations, by classes, originally held by the United States Government
(exclusive of certain miscellaneous obligations acquired by the Director
General of RaUroads), the amount held on June 30, 1943,.and payments received on account.



RE'PORT OF THE SECRETARY OF T'HE TREIASURY

191

Summary of railroad obligations held by ihe Government as of June SO, 1943, by classes
Principal a m o u n t
originally held

T r a n s p o r t a t i o n Act:
Sec. 2 0 7 . . . .
1
Sec. 210
F e d e r a l Control Act:
E q u i p m e n t t r u s t notes
Sec. 7.
Sec. 12
Total....^

:.

$282, 712,837 36
290,800,667.00

Principal
a m o u n t held
J u n e 30, 1943

Principal

Interest

29, 608,177 88

1 $277, 695,167 90
3 265, 688, 986 03

$54, 360, 339. 70
93,406,048. 93

346, 566, 760 00
98,401, 756.00
62,103, 453 28

$6,007,000 00
2 24, 601,177.88

346, 656,750.00
98,401, 765. 00
62,103,453. 28
1, 080, 576, 462 64

T o t a l p a y m e n t s received

45,338, 918. 26
23,100, 562. 27
4, 248,171. 96

1,050, 446,112. 21

'220. 464,041.11

1 stock of the Kansas, Oklahoma & Gulf Ry. Co. in the face amount of $212,500 was sold on the market
for $201,830.54, resulting in a difference of $10,669.46 between the receipts and the principal originally held.
2 Includes loans aggregating $4,485,600 to four carriers, the assets of which have been completely liquidated
and were insufficient to meet such claims.
3 Notes of Wichita Northwestern Ry. Co., Virginia Blue Ridge Ry., and Wilmington,. Brunswick &
Southern R. R. Co. were sold pursuant to the provisions of act of Aug. 13, 1940, for $67,246.91, resulting in a
difference of $510,503.09 between the receipts and the principal originally held.

Section 204, Transportation Act, 1920, as amended.—-On January 7,
1941, section 204 was amended by Public No. 893, to permit the reopening by certain short-line rail carriers of claims against the United
States before the Interstate Commerce Commission. Under the act
the Commission is authorized to ascertain and certify to the Secretary
of the Treasury the amounts payable to carriers under this section as
amended. The act provides that no claim certified shall be for an
amourit in excess of $150,000. No payments were made, during the
fiscal year as no appropriation was available for payment of any
amounts certified for payment.
Under section 204 (g) of the Transportation Act^ 1920 (approved
February 28, 1920), an indefinite appropriation was made to pay
claims of this character. The amount previously paid under section
204 was $10,967,801.80, as reported in the Secretary's annual report
for the fiscal year 1937, page 83. The Permanent Appropriation
Repeal Act of 1934 repealed the indefinite appropriation made for
the payment of this class of claims. However, a specific appropriation
of $800,000, avaUable for the fiscal year 1942, was made in the Second
Deficiency Appropriation Act, 1941, approved July 3, 1941 (Public
Law 150). The Interstate Commerce Commission certified to the
Secretary of the Treasury for payment claims aggregating $184,602.58,
of which claims aggregating $167,529.85 were paid during the fiscal
year 1942. Claims certified to the Secretary of the Treasury during
the fiscal year 1943 aggregating $22,139.11 and one claim amounting to
$17,072.73 which was outstanding in the fiscaL year 1942 were paid
during the fiscal year 1943. In the Treasury anci Post Office Departments Appropriation Act, 1943, approved March 10, 1942 (Public
Law 495), $600,000 of the unexpended balance was made available
until June 30, 1943. The total payments under this section aggregated $11,174,543.49 as of the end of the fiscal year.
Section 207, Transportation Act, 1920, as amended.—The following
statement shows the amount of obligations of carriers acquired under
section 207 and held on June 30, 1943.




192
REPORT OF T H E SECRETARY OF T H E TREAiS'TJRY
Obligations acquired under the provisions of section 207 of the Transportation Act,
1920, and held as of J u n e SO, 1948

Carrier

Principal
amount of
promissory Collateral,
note or of
face
directly
amount
held
security

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

50,000
600,000

75,000

Class of collateral or of
directly held security

Principal
in default

Interest in
default

6% noncumulative preferred
stock of carrier.
Refunding and extension $1, 260,000 $1,350,000.00
mortgage, 5% bonds of
carrier.
First mortgage, 6% bonds
50,000
28, 408.98
of carrier.

625, 000 Temporary general mortgage, 7% bonds of carrier.

604,931. 50

1. 800,000

5,007, 000

500, 000

1,983,340.48

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
raUroads 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 RaUroads. No new loans are being made as the time for
making application has expired. No expenditures under this section
were made during the fiscal year. The net expenditures on this
account amounted to $33,640,740. 24 to June 30, 1943.
Total loans (including renewal' loans and repayments thereof
aggregating $59,800,000) to June 30, 1943, amounted to $350,600,667;
repayments amounted to $325,488,986.03, and losses on sales under
the act of August 13, 1940, aggregating $510,503.09 reduced the loans
outstanding as of that date to $24,601,177. S8.
Pursuant to the act of August 13, 1940 (Pubhc No. 766), and Executive Order No. 8533, dated September 6, 1940, the Secretary of the
Treasury accepted a cash offer of $15,000 to purchase the promissory
note, dated January 15, 1921, of the Wilmington, Brunswick &
Southern R. R. Co. in the principal amount of $90,000, acquired under
the provisions of section 210 of the Transportation Act, 1920.
The foUowiag statement shows the amount of obligations held on
June 30, 1943, on account of loahs to carriers under section 210, and
the amount of principal and interest in default.
Obligations held on J u n e SO, 194S, on account of loans to carriers under sec. 210 of
the Transportation Act, 1920, as amended, and the amount of principal and interest in default
Carrier

Loans outstanding

Principal in.
default

$151, 500.00
Alabama, Tennessee & Northern R. R. Corporation
$161,600.00
Des Moines & Central Iowa R. R. Co. (formerly the Inter633, 500.00
633, 500.00
Urban Ry. Co.)
200, 000.00
200,000.00
Fort Dodge, Des Moines & Southern R. R. Co.
• 176, 000. 00
Gainesville & Northern R. R. Co
792, 000.00
792,000. 00
Georgia & Florida Ry. (receiver)
:
Minneapolis & St. Louis R. R. Co
_
. . . 1,382, 000. 00 1,382,000.00
13, 500, 000.00
Missouri & North Arkansas Ry. Co
1872, 600.00
Salt Lake & Utah R. R. Co
14, 440, 577.88 14,440, 577.88
Seaboard Air Line Ry. Co
1, 256,000.00 1.256,000.00
Seaboard-Bay Line Co..
138, 000.00
Virginia Southern R. R. Co
.-.
1,260, 000.00 1,260,000.00
Waterloo, Cedar Falls & Northern Ry. Co.
Total..

24,601,177.88 20,115,677.88

Interest in
default
$86,355.00
668,651.34
124, 291. 03
641, 620.00
1, 621,049. 73
8, 560, 568. 77
323,146.96
1, 572,855.71
13,488,438.64

» Assets of these carriers have been completely liquidated, and were insufficient to meet these claims.




193

RE'PORT OF T H E SEORiETARY OF T H B TREIASURY
Federal control of railroads

Administration.—The Treasury continued during the fiscal year
1943 the liquidation bf matters growhig 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.
Finances.—Total receipts on account of the Federal control of railroads for the fiscal year 1943 were $3,828.79, and expenditures were
$3,074.97, resulting in net receipts of $753.82, as compared with net
receipts of $290,115.27 for 1942.
At the close of business on June 30, 1943, the cash and appropriation balance aggregated $36,131.80 as compared with $415,377.98 at
the close of 1942.
A statement of receipts and expenditures foUows.
Receipts and expendiiures in connection with Federal control of railroads, fiscal years
1942 and 1943
1942
Balances at beginning of year:
Secretary ofthe Treasury, special deposit account..
Unrequisitioned appropriation balances:
Federal control of transportation systems
Loans to railroads after termination of Federal
controL
Total balances
I.:-..
Receipts:
Collections of principal on obligations of carriers...
Collections of interest on obligations of carriers...'..
Income taxes of Federal carriers repaid by Treasury.
Victory tax withheld from Federal employees.
Treasury Department
. Collection of miscellaneous claims referred to Washington from field, including transportation
charges, undercharges, etc..

1943

$72, 849. 47

$30, 236. 44

452, 413. 24

385,141. 54

$415,377.'

.$525,262.71

287,986.34
38. 48
3, 790. 31

Total receipts..
Total balances and receipts..

3, 828. 79
•.

Expenditures:
Employees' compensation liability awards
Deposit with the Workmen's Compensation Board
of Ontario, account of compensation liability.-I.
Claims for unpaid wages, back-pay awards, and
Liberty bond subscription refunds
Payments to collector of internal revenue of Victory
tax withheld from Federal employees. Treasury
Department
Administrative expenses (pay rolls)
Total expenditures
:....
Transfers from appropriation account to surplus fund
Balances at end of year;
Secretary of the Treasury, special deposit account..
Federal control of transportation systems...

419, 206. 77
767.13

786. 42

138.90
19.28
2,056. 72

1, 765.00
2, 671.03
400,000.00
30,236.44
385,141. 64

3,074.97
380,000.00
30,986.10
5,145. 70

Total balances

416, 377.98

Total expenditures and balances

818,049.01

36,131.80
:....

419,206.77

Pursuant to the provisions of section 12 of the Federal Control Act
and with the approval of the President $380,000 of the balance in the
appropriation account ^'Federal Control of Railroads,'' was transferred to the surplus fund duriag the year.
Securities, etc.—No coUections 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 hsted on page 192



194

REPORT OF T H E

SECRETARY

OF T H E

TREA-SURY

Pursuant to the act of August 13, 1940 (Pubhc No. 766), and
Executive Order No. 8533, dated September.6, 1940, the Secretary of
the Treasury accepted cash offers to purchase the following stock and
promissory note acquired under section 202 of the Transportation Act,
1920, as foUows:
E. F. Drew and Co., Inc., (stock)
Virginia Blue Ridge Ry. Co. (loans and bills receivable)...
Total..........
'....
.............
..

• $630.08
.' 2,600.00
. . ' . . . 3,130.08

Claims.—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. Total
payments on account of allowed claims of this character amounted to
$212.55 during the year.
Compensation payments—United States railroad employees.—Expenditures on account of the compensation award of a railroad employee residing in the United States amounted to $786.42 during the
year.
Canadian Workmen's Compensation Board.—The Canadian "Workmen's Compensation Board, located at Toronto, Canada, has jurisdiction oyer certain cases of disabUity resulting from accidents during
the period of Federal control on those railroads having lines extending
into Canada. Payments under Canadian compensation awards, made
from funds so deposited with the Board, amounted to $2,706.00 during
the calendar year 1942. Interest amounting to $1,269.92 was added
to the fund, leaving a balance of $27,319.70 to cover awards as of
December 31, 1942. The figures showing the balance as of June 30,
1943, are not avaUable inasmuch as the Board's reports are on a
calendar year basis. However, the status of the fund as of December
31, 1942, was as follows:
Balance Dec. 31, 1941
....^
Payments from Treasury
Interest Jan. 1,1942, through Dec. 31, 1942..Total
Payments of awards by Board during 1942
Balance Dec. 31,1942-

1...

:

.

•.

$25,928.91
2,826.87
1,269.92
30,025.70
2, 706.00
27,319.70

Tax refunds and other collections.—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. No adjustments of these claims were made during t h e fiscal year. Further
claims for such paid taxes amounting to $438,770.84 are still pending
before the Board of Tax Appeals (now The Tax Court of the United
States).
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 aniounted to $58 during 1942 and $49
during 1943.
Federal F a r m Mortgage Corporatiori

Under section 32 of the Emergency Farm Mortgage Act of 193^,
approved M a y 12, 1933 (49 Stat. 43), as amended, the Secretary of




REPORT OF T H E

SECRETARY

OF' T H E TREASURY

195

the Treasury is authorized to pay to the Federal Farm Mortgage Cor- ,
poration such amount as the Governor of the Farm Credit Administration certifies to the Secretary of the Treasury is equal to the amount
by which interest payments on mortgages held by such Corporation
have been reduced. Public Law 629, approved June 27, 1942 (56
Stat. 391), extended to June 30, 1944, the period for which payments
are to be made to the Federal Farm Mortgage Corporation on account
of reductions ia interest, and made this provision applicable to interest"
on purchase-money mortgages and on real estate sales contracts
taken by the Federal Farm Mortgage Corporation wliich is payable on
installment dates on or after July 1, 1942, and prior to July 1, 1944.
A statement of the amounts appropriated and payments to the
Federal Farm Mortgage Corporation follows.
Appropriations on account of reductions in interest rate on mortgages, and payments
io the Federal F a r m Mortgage Corporation for this purpose, fiscal years
1938 to 1943
Amounts appropriated:
To June 30, 1942........
....:... —
.
$42,725,000.00
Second Supplemental National Defense Appropriation Act, 1943, approved Oct. 26,1942. 9,000,000.00
Total to June 30, 1943
Payments to Federal Farm Mortgage Corporation: i
To June 30, 1942
Fiscal ye.ar 1943..
Total to June 30, 1943
Transfers from appropriation account to surplus fund.

51,725,000.00
.

.'
.

Unexpended appropriations, June 30, 1943...

. . . . $39,617,997.46
8,815,788.80
.....
..._..

48,433,786.26
1,039,837.94

49,473,624.20
2,251,376.80

1 On basis of daily Treasury statements.
Federal land banks

Capital stock.—Vnder the act of January 23, 1932 (12 U. S. C. 698),
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
tin;e 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 rethed ta whole or ta part and that the Farm Credit Administration may at any time require such stock to be paid off at par
and retired ia whole or in part if, in its opiaion, the bank has resources
avaUable for such purpose. The proceeds of all repayments on account
of stock subscribed for by the Secretary of the Treasury are held ia
the Treasury and are avaUable 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 duriag 1943.




196

REPORT OF T H E

SECRETARY

OF T H E

TREASiURY

Subscriptions by the Secretary of the Treasury to stock of Federal land banks and
repayments thereon, fiscal year 1943
[Par value of shares]
Shares s u b - Shares repaid Shares held
Shares held
J u n e 30,
fiscal year
J u n e 30, 1942 scribed fiscal
1943 2
year 1943 1
1943 1

Federal land bank

Baltimore
Columbia.:
St. P a u l . .
Wichita
Omaha
Spokane.--.
Total

..
,
.

j

.. .

$3,157,935
4,919, 205
40, 220, 520
5, 438,940
5, 661,946
8,083, 420

$75,000,000

$1, 520, 555
3,431,850
44, 465
4,353,845
4,613,095
7,029, 270

$1,637,380
1,487, 355
115,176,055
1,085,095
1,038,850
1,064,150

67,371,965

75,000,000

20,893,080

121, 478,885

1 On basis of daily Treasury statements.
'
.
2 The Federal land banks of Springfield, Louisville, New Orleans, St. Louis, Houston, and Berkeley had
no outstanding capital stock held by the Secretary of the Treasury as of June 30,1943.

Payments on account of 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 also subscribes, under specified conditions and ia the manner prescribed by the Federal Farm Loan Act, as
amended, to the paid-in surplus of each Federal land bank an amount
equal to the amount of all extensions and deferments of any obligation
that may be or may become unpaid uiider 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, 1944, pursuant to Public
Law 629,^ approved June 27, 1942 (56 Stat. 391). This law also made
the provisions relating to the reduction of interest applicable to interest on real estate sales contracts taken by Federal land banks which
is payable on installment dates after June 30, 1942.
A statement as of June 30, 1943, 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.
Appropriations on account of reductions in interest rates on mortgages and payments
to Federal land banks for this purpose to J u n e 30, 1943
1. Amounts appropriated:
To June 30,1942
:...
$236,067,000.00
Second Supplemental National Defense Appropriation Act, 1943, approved Oct. 26,
1942..•
24, 800, OGO. 00
Total to June 30, 1943
.......
260,867,000.00
2. Payments to Federal land banks:
Amount paid
Amount paid
Amount paid
Federal land bank
to June 30, 1942 fiscal year 1943 i to June 30, 1943
$8,363, 266. 56
Springfield....
9,967, 121.36
Baltimore
9, 370,723. 98
Columbia
22, 940,181. 84
Louisville
12,026, 724.45
New Orleans..
20,137, 229. 84
St, Louis
32,741, 657.99
St. Paul
18,417, 966.11
Wichita
25,927, 982. 56
Houston.
13,489, 208. 25
Berkeley
39,912, 116.77
Omaha
13,992, 723.15
Spokane
Total...
227,286,902.85
3. Transfers from appropriation account to surplus fund.
4. Unexpended appropriations, June 30,1943
1 On basis of daily Treasury statements.




$926,055.97
990,607.34
948,146.13
2, 268, 450.02
1,156, 327.94
2,147, 352. 79
3, 713, 316. 26
1,949, 581. 21
2, 695,132. 98
1,485,065.49
4, 564, 709. 24
1, 511, 308. 26
24, 356,053. 63

322. 53
10,957, 728. 69
10,318, 870.11
25,208, 631. 86
13,183, 062. 39
22,284, 582. 63
36,464, 974. 25
20, 367,547. 32
28, 623,115. 64
14,974, 273. 74
44,476, 826.01
031.41
16, 604,
251,642,956.48

$2, 309, 853. 79
6,914,189.73

REPORT

OF T H E

SEiORETARY

OF T H E

TREIASTJRY

197

Appropriations for subscriptions to paid-in surplus to June 30, 1937,
amounted to $189,000,000. No appropriation for th^is purpose has
been made suice that date. A statement as of June 30, 1943, of the
amounts appropriated for subscriptions to the paid-ia surplus of
Federal land banks on account of extensions and deferments, and net
repayments by the Federal land banks follows.
A p p r o p r i a t i o n s for subscriptions to the p a i d - i n s u r p l u s of Federal land banks on
account of extensions a n d deferments, a n d payments for this purpose to J u n e 30,
1943
1. Amounts appropriated:
To June 30, 1943
i
2. Payments to Federal land banks:

$189,000,000.00

A m o u n t paid to
J u n e 30,1942

Federal l a n d b a n k

Springfield
"Rflltimorp,
Columbia
N e w Orleans
St. Louis
St. Paul
Wichita..ft.
Berkeley
Omaha
Spokane

. .
J.

N e t a m o u n t paid
fiscal year 1943 i

,
.
.

.

. . .

Total

2 $1,000,000.00

145,861, 238. 02

1

$8, 317,138. 66
4.190, 251. 29
9,136, 963. 42
11, 675. 686. 41
11, 413, 266. 57
34, 764, 269. 94'
16,860,213.90
4, 550,945. 56
30 740,238.50
14, 222, 384. 78

2 4, 243, 368. 79

2 3,500,000.00
2 600,000.00
1, 466,631. 21
2 600,000.00

Unexpended appropriations, June 30,1943

A m o u n t paid t o
J u n e 30, 1943
$7,317,138.66
4,190, 251. 29
9,136,953. 42
8,175, 685.'41
10, 813, 266. 67
36, 220,901.15
16, 860, 213. 90
3,960,945. 55
30,740, 238. 50
14,222,384.78
141,617,869.23
$47,382,130.77

1 On basis of daily Treasury statements.
2 Excess of repayments (deduct).
Federal savings a n d loan associations

Under the act of June 13, 1933 (48 Stat. 133), as amended AprU 27,
1934 (48 Stat. 645), the Secretary of the Treasury was authorized on
behalf of the United States to subscribe for preferred shares and fullpaid income shares in Federal savings and loan associations upon
request of the Federal Home Loan Bank Board: An appropriation
of $50,000,000 to enable the Secretary of the Treasury t o purchase
such shares was reduced b y an allocation of $700,000 to the Federal
Home Loan Bank Board. The details concerning the provisions of
law under which these subscriptions were made and the appropriations
are contained in the annual report for 1940, pages 176 and 177.
The Home Owners^ Loan Corporation also was authorized to purchase full-paid income shares of Federal savings and loan associations
after the funds available to the Secretary of the Treasury for the
purchase of such shares had been exhausted. T h e funds available
to the Secretary of the Treasury were exhausted on October 25, 1935.
During the fiscal year 1943 the sum of $7,958,600 was received on
account of shares repaid, making the total shares repaid to June 30,
1943, $37,816,000.
The following statement shows the transactions in connection with
the subscriptions b y the Secretary of the Treasury to preferred and
full-paid income shares in these associations during t h e fiscal year
1943.




198

REPORT OF T H E SECRETARY OF T H E TREAiSiFRY

Preferred and fulUpaid income shares of Federal savings and loan associations sub
scribed by the Secretary of the Treasury to J u n e SO, 1943, and dividends received
[Par value of shares]
Preferred
shares
Total shares subscribed and paid
Shares held on June 30, .1942
Less shares repaid during 1943..

$637,800

Full-paid income shares

Total
$49,300,000.00
19, 442, 600.00
7,958, 600.00

11, 484,000

Shares held on June 30, 1943
Dividends received on preferred and full-paid income shares:
To June 30.1942..
During 1943
. . .

$48,662,200
19, 442, 600
7.958, 600

.
.-

11, 484,000. 00
9, 580, 946. 87
540, 310. 60

*
"

To June 30,1943...

10,121, 267. 47

Trust and special funds invested by the Treasury Department

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 at
the close of the fiscal year. Further details on each of these funds
are shown in the tables beginniag on page 674.
Securities held as irivestments in trust and special funds, at par value, J u n e SO, 1943
[In thousands]

Fund
Adjusted service certificate fund
:
Ainsworth Library fund, Walter Reed General Hospital....
:.
Alaska RaOroad retirement and disability fund
Canal Zone retirement and disability fund....
Civil service retirement and disabihty fund
.
District of Columbia teachers' retirement fund
District of Columbia water fund.-...
District of Columbia workmen's compensation fund..
Federal old-age and survivors msurance trust fund...
Foreign service retirement and disability fund.
Library of Congress trust fund
....
Longshoremen's and harbor workers' compensation
furid
.
.'
National Cancer Institute gift fund.,
National. Institute of Health gift fund
.
National park trust fund...
.
National service life insurance fund
..
Pershing Hall Memorial fund
Railroad retirement account
:..
.
Unemployment trust fund..
..1
U. S. Government hfe insurance fund..."
Total.

Government Government
Other
guaranteed securities
securities
securities
$18, 268

Total

$18, 268
10
1,652
7,960
1, 060, 321

1,
7,
1, 060,
$96

$1,257
11
"182"

10, 264

1,773
43
4, 236, 834
6, 115
182

199

251

79

18
351, 725
191
178,000
4, 367, 000
966, 718

79
18
351, 726
191
178, 000
4, 367,000
1, 007, 717

11, 204, 707

11, 248, 303

NOTE.—Figures have been rounded to nearest thousand and will not necessarily add to totals.

Liquidation of Emergency Relief Accounting Organization
The Emergency Relief Accounting Organization, under the Commissioner of Accounts, which was established by authority of Executive
Order No. 7034, dated May 6, 1935, and Department Circular No. 543
approved by the President, was liquidated during the fiscal year 1943.




REPORT OF THE SECRETARY OF THE TREASURY

199

As explained in the Annual Report of the Secretary of the Treasury
for the fiscal year 1942, the recommendation of the Secretary to the
President for the liquidation of this accounting organization was in
line with the policy of reducing nondefense expenditures and making
available the maximum number pf trained personnel for war activities.
On June 30, 1942, there were 382 employees on the pay roll of the
Emergency Relief Accounting Organization, 216 of whom were located
in the Treasury central accounts office and 166 in 19 regional Treasury
accounts oflices. During July 1942 the work in 13 of the regional offices of closing the accounts, submitting final financial reports to the
central office, disposing of records, property, and equipment, and
placing the personnel in employment elsewhere was completed and
the offices were closed. The work of the remaining 6 regional offices
was completed and the offices were closed by August 15, 1942.
The final closing of the Central Office accounts, preparation of the
complete financial report as of June 30, 1942, and administrative
activities in winding up the affairs of the organization necessarUy
proceeded beyond the period of liquidation in the field. The final
financial report as of June 30, 1942, required under the provisions of
the Emergency Relief Appropriation Act, fiscal year 1942, was prepared in the same manner and detail as for previous years. This
report was submitted by the President to the Congress on January
11, 1943. The report disclosed that the Congress had made available
to June 30, 1942, the total sum of $15,243,092,663.15 under the several
emergency relief appropriation acts and that $15,144,839,147.45 of
this sum was obligated and $15,084,249,293.68 expended. For a
summary of the expenditures under the program, by organizations
and years, see table 10, page 511 of this report.
Orderly disposition was made of all records, property, and supplies
under proper authority and it was possible to arrange for the placement of all employees of the accounting organization in suitable positions with other iGrovernment agencies. Some employees, however,
elected to take employment in industry.
The appropriation provided by the Congress for the liquidation
of the emergency relief accounting organization was $300,000. The
liquidation expense, however, amounted to $173,896.70, leaving an
unused balance of $126,103.30.
BUREAU OF THE PUBLIC D E B T

The Bureau of the Public Debt, in the Fiscal Service under the
Commissioner of the Public Debt, is charged with the conduct of
transactions in the public debt issues of the United States. As agent,
the Bureau also conducts transactions in the interest-bearing issues
of the insular governments and of Government corporations, and
credit agencies. The Bureau is also charged with the procurement
of distinctive paper for the currency and public debt issues, with the
verification of United States currency redeemed by the Treasurer of
the United States and of imperfect securities delivered by the Bureau
of Engraving and Printing, and with the destruction of redeemed currency and other securities authorized to be destroyed.
Near the beginning of the fiscal year, the Bureau of the Public
Debt transferred to Chicago all of its operations involving issued
savings bonds, together with the entire Division of Savings Bonds,




200'

REPORT OF THE SEORETARY OF THE TREASURY

now functioning chiefly as a promotional adjunct of the War Finance
Division. With this exception, the functions of the Chicago office,
dealing solely with the United States savings bonds of all series, follow
the general pattern of the regularly assigned duties of the Bureau,
and embrace a branch of the Commissioner's office, under a Deputy
Commissioner, and branches of the Division of Loans and Currency,
the Office of the Register of the Treasury, and the Division of Public
Debt Accounts and Audit.
The Bureau of the Public Debt comprises six major divisions
whose duties and functions are discussed in the following pages.
Office of the Commissioner.
The Ofiice of the Commissioner exercises general cohtrol over the
activities of the Bureau and supervision over the conduct of public
debt transactions by other branches of the Government service and
by the Federal Reserve Banks and branches as fiscal agents of the
United States. The Office prepares official circulars and other documents incident to new and outstanding issues of public debt securities,
and directs transactions in connection therewith; directs the production of securities; and prepares regulations governing transactions in
public debt obligations after their issue.
Chicago Branch—Office of Deputy Commissioner (Administrative
Office).—A total of 1,193 employees moved from Washington to form
the nucleus around which the Chicago Office was built. By the end
of June 1943, 8,052 employees had been recruited from the Chicago
area, but, with the inevitable losses to the military services and with
resignations and terminations, the total was 6,820 at the close of
the fiscal year.
During the year the preparation of pay rolls was changed from a
plate to a punch-card system; a training program for new employees
was established; supervisors conferences were inaugurated; and a
budget and accounts section was created. I t is estimated that
427,000 pieces of mail were received and 643,000 dispatched by the
regular mail subunit. About 1932 purchase orders were released.
Several worthwhUe revisions in the operating procedures were proposed by members of the Administrative Oflice, including one which
changed the routine of processing savings bonds retired by the Federal
Reserve Banks so that the Chicago Branch of the Office of the Treasurer transferred the retired bonds directly to the Oflice of the Register
of the Treasury in Chicago and the bonds were no^ longer processed
by, or entered in the records of, the Division of Loans and Currency.
Division of Loans and Currency
This Division is the agency through which public debt obligations
of the United States are issued and transactions in such obligations
after their issue are conducted, either directly or through the Federal
Reserve Banks. I t is also responsible for the issue of the securities
of various Government corporations and credit agencies; and for the
issue of obligations of the insular governments, for which the Treasury
Department acts as agent. The Division undertakes the safekeeping
of securities for certain Government offices. I t maintains the accounts




201

REPORT OF T H E S'ECRETARY OF T H E TREASURY

of the registered issues, and issues checks in. payment of interest
thereon; it verifies and delivers to the Destruction Committee canceled
currency redeemed by- the Treasurer of the United States and mutilated paper (spoilage, etc.) received from the Division of Paper
Custody and the Bureau of Engraving and Printing.
Washington Ofiice of the Division of Loans and Currency

issue, and retirement of securities.—The following is a summary of
the issue and retirement of securities conducted through the Division
of Loans and Currency in Washington during the fiscal year 1943.
Transactions in public debt and insular securities and in securities of various
Government corporations and credit agencies, fiscal year 194^3
[Principal amount]
Transaction

Bearer

P u b l i c d e b t securities:
O n h a n d J u l y l , 1942
U n i s s u e d stock r e t u r n e d to D i v i s i o n .
Received from B u r e a u of E n g r a v i n g a n d
Printing

$28, 862,166, 700

64, 905, 766, 810 .

278, 563, 766, 810

78,846, 646,-510

321,366,713,210

. 32, 001, 221, 600 •
.13,667,568,715 ,

2, 758, 049,000

• . • 2; 747,872, 700
•^

60, 000

•^

50,000

138; 286, 761, 300 • ' '
•

46, 679, 016, 615'

183, 965, 767, 915

'......

104, 233, 415, 400
• 33,167, 529, 895
416, 749, 285 . " 6, 782,194,;400

137,400,946,295
7,198,'94 3, 685

5, 098, 998, 024'.'

"

• li 159, 748/800

191,100,000

•

5,290,098,024

-4,184,.416„319
9,464,275

1,467,448,800.
,

.

' •

6, 258, 746, 824
498,800, 000
6,757,646,824

••

225,115, 250

. 356, 510, 500
•;" 225, 766, 205

'••-• 349; 445, 500 •• " 1 , 0 9 7 , 965; 750
674, 560, 750

..' • 1,. 105, 681, 705

O n h a n d June.30, 1 9 4 3 . . .
. . . . . . . . . . . . . . . .^
Retired and redeemed
....

307,.700,000.

..

Stock " s h i p m e n t s • t o F e d e r a l R e s e r v e •
Banks and branches:... . . . . . .
•'' ' 356,^510,500
Issued b y Division
•
•. u
650,955 '
. U n i s s u e d stock delivered, to Register pf
theTreasury..:..
.....'.
J
• ^ 748, 520,-250 • :
....

167,416,729.850
13, 7.90, 939, 065

t:10,176;300

135; 415, 508^ 250
123,370,350

T o t a l to .be a c c o u n t e d for

T o t a l disposals...

1 $42, 802, 911, 625
34, 775

.....'

I n s u l a r securities a n d securities of Governm e n t corporations a n d credit agencies: •
O n h a n d J u l y 1, 1942
.....:...,
Received from B u r e a u of E n g r a v i n g a n d
Printing..:'.--------.
.i....;.

'

Total

242,520,166,700

S t o c k . s h i p m e n t s to F e d e r a l R e s e r v e
B a n k s a n d branches,- P o s t Oflace D e p a r t m e n t , a n d issuing agents for U n i t e d
States savings b o n d s . . "
:.
1...
Issued b y D i v i s i o n . : . . : . . . .
•.,....._"...
U n i s s u e d stock delivered to Register of
the T r e a s u r y . . . : . . . . : _ ' . . .
J...
U n i s s u e d stock delivered to B u r e a u of
Engraving and Printing
:_:.'...:

O n h a n d J u n e 30, 1 9 4 3 . . . . . . . . . .
Retired and redeemed

1 $13, 940, 744, 925
34, 775

-•

213, 658,000,000

T o t a l tn be accnnntp.d for... _

T o t a l d i s p o s a l s . . " . . . . ' . . . . .'_. ..'.'

Registered

:

1, 080, 242,455

. 892,888,050. •
710,107, 419'

5, 077, 304, 369
719, 571, 694

1 Excludes $70,148,950 of savings bonds spoiled in issue and sent to the Chicago Branch.

Ivdividual registered accounts.—Individual accounts are maintained
in the Washington Office in connection with registered issues of the
United States (excluding savings bonds) and of securities of various
Government corporations and credit agencies; and interest is paid

542890—44-

-15




202

REPORT OF T H E SECRETARY OF T H E TREA'SiURY

peripdicaUy in the form of checks on the interest-bearing debt,
accounts open June 30, 1943, were as follows:
Number of
accounts

Registered issues
Public debt:
Interest-bearing loans *
.
Matured loans (Liberty, Victory, Treasury, postal savings
bonds, etc.)
Total public debt issues.:
Others:

442,334

The

Principal

$19,076,959,896.40
23,728,970.00

461,172

..I..1

18,838

19,100,688,866.40

, • ' . . ' • •

Interest-bearing loans:
Home Owners' Loan Corporation bonds
Federal Farm Mortgage Corporation bonds . ._
Consolidated Federal farm loan bonds.__
Federal Housing Administration debentures

2, 581
10,856
6,168
572

..

Total interest-bearing loans

...

20,177

328,586,636. 23

31
160
4

87,000.00
264,300.00
16, 250.00

Matured loans:
Home Owners' Loan Corporation bonds..
Federal Farm Mortgage Corporation bonds
Federal Housing Adniinistration debentures
Total matured loans

230,736,000.00
40,293,800.00
34,098, 200.00
23,458,636. 23

196

_

Total other issues

.

..

367,550.00

20, 372

328,944,186. 23

1 Excludes savings bonds and adjusted service bonds.

There were 43,793 individual accounts closed for registered Liberty
bonds. Victory notes, special Treasury notes, certificates of indebtedness, postal savings issues, depositary bonds, and Treasury bonds,
etc.; and 5,590 accounts were decreased, representing retirements of
securities in the amount of $5,581,905,650 par value. In connection
with the same loans, 91,844 new accounts, involving $11,147,645,590
of principal, were opened. During the year 21,495 changes of address
for mailing of interest checks were made.
Interest on registered Treasury bonds was paid on due dates in the
form of 782,764 checks amounting to $172,354,539.93; on registered
securities of the postal savings loans, etc., 59,949 checks for $4,232,692.00 were issued; and on registered Treasury notes and certificates
of indebtedness, interest payable by 15 checks amounting to $45,506,686.07 was paid. Also 1 check was issued in payment of interest
amounting to $22,507,108.04 on the 4 ^ percent adjusted service
bonds—United States Government life insurance fund series; and
2,029 checks were issued in payment of interest amounting to $2,432,639.42 on the 2 percent depositary bonds. There were received
from the Bureau of Engraving and .Printing 933,300 checks as stock




REPORT. OF T H E

SECRETARY

203

OF T H : E TRElASURY

' Claims.—CleLiias for relief, on account of lost, stolen, destroyed,
or mutUated securities, handled by the Division of Loans and Currency in Washington during the year were as follows:
N u m b e r of
claims

. N u m b e r of
securities

P a r a m o u n t of
securities

Claims

P u b l i c d e b t issues '
O n h a n d J u l y 1,19422
Received
.._. .

.

.

10,863
3,122

$5, 363,135. 75
. 7, 472,472. 51

13,985

42,712

12.835, 608. 26

1,167
267
120
96

3,912
766
344
173

• 6, 218,828.96
512,100 00
92, 286. 50
836. 50

1,650

5,196

6,824,061.96

12, 335

T o t a l t o be accounted for

33,373
9,339

37, 517

6.011,550.30

Settled b y :
Reissue or r e d e m p t i o n of securities.
..1
R e c o v e r y of securities
1
Disallowance of claims a n d credit allowed
O t h e r dispositions
...
T o t a l disposals

.....

.

_.

•

O n h a n d J u n e 30,1943

H o m e O w n e r s ' L o a n Corporation, Federal F a r m
M o r t g a g e Corporation a n d consolidated Federal
farm loan bonds
O n h a n d J u l y 1,1942
Received
_

.

282.
64

T o t a l to be accounted for.
.._...-.
Settled b y reissue, r e d e m p t i o n , a n d recovery or no relief.
O n h a n d J u n e 30,1943 . .

....

' •

1,234
464

• $446 850 00
323,800.00

346
71

1...

1, 098
431

770. 650. 00
312, 850. 00

275

1,267

457, 800.00

»Includes adjusted service bonds.
2 Excludes 5,633 claims involving 8,727 savings bonds with a value of $1,180,375.00 charged to the Chicago
Branch.

Safekeeping of securities.—TDuriixg the fiscal year transactions in
securities held in safekeeping were as follows:
Issues'

O n h a n d J u l y 1,
, 1942

Received a n d
receipts issued

Released

O n h a n d J u n e 30,
1943 .

P u b l i c d e b t issues •
$7, 908, 074, 906. 40 $8,462,600,000.00 $6,469,989,000.00 $10, 910,685, 906.40
500.00
A d j u s t e d service b o n d s . . .
2,800.CiO
2, 300.00
I n s u l a r securities
6,464, 500.00
6, 454, 600. CO
H o m e O w n e r s ' L o a n Corporation b o n d s . .
561, 000, 050. CO
209,000,375.00
564, 000, 426. 00
196,000,000.00
Total

8, 465, 632, 266.40

8, 671, 600, 376.00

6, 023, 989, 926.00

11,113,142, 706.40

Mutilated paper and redeemed currency.—MutUated, paper verified
and delivered to the Destruction Committee consisted of 93,895,610
sheets and coupons of which 93,840,103 sheets and coupons were
received from the Bureau of Engraving and Printing and 55,507 sheets
from the Division of Paper Custody.




204:

REPORT OF T H E SECRETARY' OF THE 'TREASURY

> Redeemed currency, uhfit for chculation •'Counted and delivered to
the Destruction Committee'duringthd year'amouiited^to i637v465,479pieces, representing $981,732,268.06=detMedWMlows: v ^ ^ ^ .J ^-.
^^^
i.

.

'

. . \ Currency

United States notes
Silver certificates. .
Gold certificates.
Treasury notes..
Fractional currency

Pieces

. ''

..I..^

..

...

.
..

_

Face value

29, 025, 590
608, 337, 422
100,104
284
2,079
"637,, 466, 479

Total

$112, 237, 305.00
867,149,142.00
.2, 343, 590.00
1, 800.00
* ''- •
431.06

•

. 981,732,268.06

In addition to the securities which were deliv&edto the Jlegister^of
the Treasury, the Division canceled and delivered to'the'Register
1,922,182 coupons amounting to $283,171,545.20. Of these, T,687,301
were public debt coupon's amounting to $256,180,716.58 and 234,881
amounting to $26,990,828.62 were coupons from securities of Government corporations and credit agencies.
:'Rev(>Tts.—Various peripdicar'and special statements, charts, etc.,
were prepared by the Washington Office for use in planning financing
operations. During the year there was incorporated in these statement^ ib formation obtained from 81,177 reports covering holdings of
Government and Government-guaranteed securities submitted, by
banks and insurance companies and from 209,894 reports:'reflecting
sales of United States savings bonds submitted by ./corporations
generally and by other agencies.
Chicago Branch of'the- Division of Loans and- Currency'''.

> •'• .

Savings bond stubs and redeemed savings bonds.—;The Chicago
Branch, which audits the original regi^tratioh stubs of savings' borids
sold, received during the year 202,893j07!^^ Series'E stubs from'post
offices, Federal Reserve Banks and branches, the Treasury, War, and
JNavy Departments, and pther agencies';''and 2,860,766 Series F and
vSeries G stubs from Federal'Reserve Banks and branches and the
Treasury Department. The transactioIls^ in these stubs- during.^thr
year arc summarized in the following table:• • • " ' > ';'.'.'.' •;';
Registration stubs

•

. "..

On hand July 1, 1942

Series E
43,927,101

Series F
370, 852,

Series G
962,629

"Total •'
45,260, 582

Received during year: •: . •, . - ; r •,'
•
,;;. ,. : • •., \
V t. ^
'•'\v'\\
\ - \ •;
- From post offices.
.
•:
... ' ' 43,"092;6'06'
', • 43r092,'600
• From Federal Res(5fve'Bank's',-etc.".'..--..-ll.LL.L'J.. .si59,800,:.471 ' 907; 225 ^. 1,963,. 641,- ;162,,661;\237
TQtal received

J..::!..'..'

'^1

V-.'J •'"

•" 202; 893,071 ' '907, 225 .' 1,'963, 541 ' "205,-753,'837

Total to be processed
'.^'......'..'.V.'.:".T...' ' •'246,820Vi72' 1, 278, 077 • 2, 916,17,0 ' i5i.;'0l4, 419'
Processed during year and
filed
^. i " '•.•90, 884, 422.j>-505;230; '• 1,219,-37.9 ^»92,609„031
On hand June 30,1943, iu various stages of processing. _
155, 935, 750 772, 847 1, 696, 791 158, 405,388

The increase in the total nuiriber of stubs on ha.nd in various stages
of processing resulted from a lack of sufficient space, equipment, and
personnel to handle the increasing volume of receipts.
During the year there were received in the Chicago Branch 202,020
savings bonds of all series, having a maturity value of $117,669,875,
which were turned in for redemption prior to maturity and on which



REPORT: OF. ,THE: SEiGRETARYi OF: THE:.TREASURY

205

registration Was discharged before' payment; and to February 22,
1943, when the work was tra-nsferred to the Chicago Branch of the
Office of the Register, 3,699,609 bonds, having a maturity value of
$352,307,050, which were redeemed by the Federal Reserve Banks and
branches and the Treasury Department and on which registration was
discharged after payirieht.
Individual accounts, for Series F and G bonds.—Individual accounts
are maintained in the Chicago Branch in connection with savings
bonds of Series F .and Series G, and iaterest is paid semiannually in
the form of'checks on..Series G bonds. During the year interest on
these bonds was paid on due^'dates in the form of 1,675)584 checks
aggregating $77,498,229.00.
; .Qlairns.—The number of claims for relief, on account of lost, stolen,
destroyed, or mutilated savings bonds, handled during the year
follows:
-a
O
.; ;;
,

,

:

)

•

•

•

.

•

..

:,-,

. Claims

Onhand July 1, 1942. __._
..
Received during year
.'..j 1'i.^ 1 •.'..'.• _ _ « —1•
: • . Total to be accounted for

....

•

'

Disposals:
Recovery of securities...... • ..•.' .
Sent to Washington for approval... -

.

' •

-

' ' •'. • Number of
claims

•

'

'

•

•

'

....•'..... . - • ' . . . . . . . . . •
._ _ . _

•

.

,

.

.

.

'

•
•

•

•

12, 500
. 46,106
'=

•

48,606
10, 630
14, 030

______-:_

• . ; Total disposals

24,660
"

J Excludes claims transferred to the Chicago Branch.

23 946

• •-

In addition to the 23,946 claims on hand at the end of the year
there were 163 reports of loss on which caveats had not been entered.
The 14,030 claims s.ent to Washington for approval- covered 20,699
bonds with a maturity value of $1,687,575.
Offic^e of the Register of the Treasury-/
This Ofii,ce is charged with the receipt, from any source, of all paid,
redeemed, or exchanged public debt securities, including interest
coupons and war savings .stamps,,canceled and retired on any account,
and with their final audit and subsequent custody. . The Ofiice
performs similar functions with respect to the securities issued by
.various, Goyernment corporations and agencies, and retires bonds of
the' insular possessions which" are exchanged for other securities.
The ^Register renders monthly certifications to the Comptroller General of all public debt securities redeemed by the Treasurer of the
Uiiited States, and establishes credits due the Division ;bf. Loans and
Currency and the Federal Reserve Banks for securities canceled by
them on account of (exchanges, etc.
'
^ ' , .
. . .r

. ' Washington Ofiice O the Register of the X Treasury
J

'"'. The following stateriieht shows the number of pieces and face, value
' of the various classes of securities which were received by the Washington Office during the fiscal year 1943.




206

REPORT

OF T H E

SECRETARY

OF T H E

TREiASURY

Summary oj securities received hy the Washington Office of the Register of the Treasury
on account of transactions, fiscal year 194s
Registered.

Bearer
Security
Amount

Pieces

Pieces

Amo.unt

Redeemed
P u b l i c d e b t securities:
Postal savings b o n d s , e t c . . . .
L i b e r t y loans
.,:...
Treasury bonds
...
..
T r e a s u r y notes
......
T r e a s u r y notes—tax series a n d savings
series
U n i t e d States s a v i n g s b o n d s
Depositary b o n d s . . _ .
A d j u s t e d service b o n d s . . . .
Certificates of i n d e b t e d n e s s
1.....
T r e a s u r y bills
T r e a s u r y (war) savings securities
I n t e r e s t coupons
O t h e r securities:
H o m e O w n e r s ' L o a n Corporation:
Bonds
,
I n t e r e s t coupons
I n t e r e s t checks
Federal F a r m M o r t g a g e Corporation:
Bonds
^.._
I n t e r e s t coupons
I n t e r e s t checks
•..
Consolidated F e d e r a l farm loans of t h e
Federal l a n d b a n k s :
I n t e r e s t coupons
1
I n t e r e s t checks
Federal H o u s i n g A d m i n i s t r a t i o n :
%
Debentures....'.
.
I n t e r e s t checks
Federal h o m e loan b a n k s :
Consolidated d e b e n t u r e s
I n t e r e s t coupons
R e c o n s t r u c t i o n F i n a n c e Corporation:
Notes...
.
I n t e r e s t coupons
^
C o m m o d i t y C r e d i t Corporation:
Notes
..
Interest c o u p o n s . . . . .
:
'..i.l'.
Federal N a t i o n a l M o r t g a g e Association:
Notes.
.1:
,
I n t e r e s t coupons
......
Federal Public Housing Authority:
Notes
Interest coupons..
.
Federal Savings a n d L o a n I n s u r a n c e Corporation b o n d s
Total.

• 23
•6,180
37,272
82,846

$600.00
1,644,360.00
340,544,550.00
1,182, 869,600.00

139,018 22, 503,460, 760.00
240, 773 21, 771,070,000.00
51, 304. 76
41,018
12, 366, 205 21,166,225,060.68

' 108 . $2,183,750.00
1,050
530,400.00
3,227
2,823,100.00
332 1,097,169,000.00
857,404 3,605,664,300.00
378,148
1 79,433, 265. 70 ^
6
65; 000.00
144,883
7,244,150.00
61
43, 667,000.00

27, 517. 225.00
3 33, 637, 797. 31
11,473,400.00
« 25, 357,021.15

17,460.00

425

349,175,006.00

5,284

46, 389
1,093, 575

1,610

1,452,146.25

888, 844

671

483, 300. 00

"22.'054'

25, 598
900,655

'2,'758," 499.'32

' 29, 704, 090. 69
12, 860

16, 716
23, 649

323, 608,000.00
3 10, 789,089. 54

19,370
104,881

289, 313,000.00
* 6, 801, 994. 81

5,841
23, 674

29,677,000.00
1,498,108. 22

5
32, 395

.

2, 315. 269.05
700, 516. 76

126, 990,000. 00
< 816,839. 27

18,182
1:^6, 342

1,113, 691.95

3,231
1,948

5,000.00
5 1, 569, 672. 31

56

11, 880.00

16, 249, 607 47,884,436, 333. 73 i, 433, 302 5,196,795,849.03
R e t i r e d on account'of exchanges for other securities, e t c .

P u b l i c d e b t securities:
P o s t a l savings b o n d s , e t c . . . . . 1
1
L i b e r t y loans
—
Treasury bonds
iI.......
T r e a s u r y notes
....
T r e a s u r y notes—tax series a n d savings
series.
.
.,
...
U n i t e d States savings b o n d s
Depositary bonds
.
A d j u s t e d service b o n d s . .
.
.^..
Certificates of i n d e b t e d n e s s
T r e a s u r y b ills
..........
F i r s t z y i % L i b e r t y loan interim certificates.
O t h e r securities:
I n s u l a r possessions loans
H o m e O w n e r s ' L o a n Corporation b o n d s . . .
F e d e r a l F a r m Mortgiage Corporation b o n d s .
Consolidated F e d e r a l farm loans of t h e
Federal land b a n k s , b o n d s
Federal H o u s i n g A d i n i n i s t r a t i o n debentures
.
F o o t n o t e s a t end of t a b l e .




265
901
436,980
107, 468

. .$89,840.00
68,150.00
2,349,286,600.00
2,422,734, 40'0.00

5,877

$2,776,700.00

•87, 649 1,036,902,700.00
381,553,000.00
.. • 17.
22, 258
21,141
• .7
406
I'

332, 273,'.575.00
8, 668,400.00
635,000.00
.; 20,300.00
100,000.00

77,072
11.613
8

3,602,823,000.00
2,158,946,000.00
400.00

36,402
25,236

56,156,975.00
23,510,000.00

200
1,979
4,966

372,000.00
246,397,000.00
90,978,000.00

17,669

61,259,000.00

2,123

2,794,600.00

383

1,320,050.00

207

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

Summary of securities received by the Washington Office of the Register of the Treasury
on account of transactions, fiscal year 1943—Gontinued
Bearer

Registered

Security
Pieces

Amount

Pieces

Amount

R e t i r e d on a c c o u n t of exchanges for other securities,
etc.—Continued
O t h e r securities—Continued.
Federal home loan b a n k s , consolidated
debentures. 1
. Reconstruction F i n a n c e Corporation n o t e s .
• C o m m o d i t y Credit Corporation notes
F e d e r a l N a t i o n a l Mortgage Association
notes.
.'.
Federal Public Housing Authority n o t e s . . .
Total--

.

.

.

.

4
4,135
2,788

$260,000.00
116,696, 376.00
21,835,000.00

167
564

860,000.00
1, 482,000.00

721, 272 10,813,997,740.00

• 146,907 $2,104,681,225.00

U n i s s u e d stock retired '
P u b l i c d e b t securities:
P o s t a l savings bonds, e t c
T r e a s u r y bonds
T r e a s u r y notes
T r e a s u r y notes—tax series a n d sayings
series
.
U n i t e d States savings b o n d s
D e p o s i t a r y bonds
Adjusted service b o n d s
Certificates of indebtedness
T r e a s u r y bills
.
.
.
I n t e r e s t coupons
O t h e r securities:
H o m e Owners' L o a n Corporation:
Bonds
:
I n t e r e s t coupons
F e d e r a l F a r m Mortgage Corporation:
Bonds
.
Interest coupons.
Consolidated Federal farm loans of t h e
Federal land b a n k s :
•Bonds
Interest coupons.-F e d e r a l Housing A d m i n i s t r a t i o n debentures
F e d e r a l h o m e loan b a n k s :
Consolidated d e b e n t u r e s
I n t e r e s t coupons
R e c o n s t r u c t i o n F i n a n c e Corporation:
Notes
Interest c o u p o n s . . .
C o m m o d i t y C r e d i t Corporation:
Notes
I n t e r e s t coupons
.
F e d e r a l N a t i o n a l M o r t g a g e Association:
Notes
:..
I n t e r e s t coupons
F e d e r a l P u b l i c H o u s i n g A u t h o r i t y interest
coupons...
-Total

.

' .

11
898
1

$4,300.00
9,054, 250.00

29, 619
1,147,725
2
1

143.-220 460 00
101,074 275.00
N o value.
50.00

2,126

349,384,000.00

6

5,100.00

12

30,200.00

26

63,771
83,381

26,200.00

7,032,478,515.75 1,180, 427

602,798,825.00

$714, 412, 400.00
1,280, 702,800.00

173,764
14,069
3,689, 701

1,881,994,000.00
1,566,306,000.00
420,976,271. 76

248,065
137,154

147,660, 650.00
19,440, 564.11

169, 597

9,087,331.27

131,392

5, 663, 476.82

6,646
4,211

65,314,000. 00
317,140.00

11, 680
31,427

207,836,000.00
1,970,706:22

46,168
26,191

687,693,000.00
1,899, 777. 32

1,669
64, 792

19,023,000.00
. 1,686,997.40

8,391
4,901,839

514, 510.85

Recapitulation
P u b l i c d e b t securities:
288
$4,964.750.00
$90,440.00
5,996Postal savings bonds, etc
L i b e r t y loan^s
7,081
530,400.00
1,612,600.00
1,060
Treasury bonds
628,023 3,404,243,650.00
91,674 1,048,780,060.00
Treasury notes.
273,695 4,886,306,800.00
350 1,478,722,000.00
T r e a s u r y notes—tax series a n d s a v i n g s
series
.:
909,281 4,081,158,325^ 00
U n i t e d States savings b o n d s
189,165,940. 70
1, 547,014
Depositary bonds
600,000.00
15
A d j u s t e d service b o n d s . .
7,264, 500.00
145,290
Certificates of i n d e b t e d n e s s
389,844 27,988,277,756.00
43,767,000.00
62
T r e a s u r y bills
266,445 25,496,322,000.00
F i r s t Z H % L i b e r t y loan i n t e r i m certificates.
400.00
8
T r e a s u r y (war) savings securities
17, 460.00
61,304.75
1,610
41,018
I n t e r e s t coupons
_•
16>055,906 1 1,587,201,332.44 1

Footnotes at end of table.




208

REPORT OF T H E SECRETARY OF T H E TREASnCPRY

Summary of securities received by the Washington Ofiice of the Register of the Treasury
on account of transactions,, fiscal year 194s—Continued
Registered

Bearer
Security
Pieces

Amount

Pieces

Amount

Recapitulation—Continued
Other securities:,
Insular possessions loans.
Home Owners' Loan Corporation:
Bonds
330,856
Interest coupons
1, .230,729
Interest checks
L.'.lJ..
Federal Farm Mortgage Corporation:
Bo^ds
50, 834
. Interest coupons
.............. .
1, 070, 252
Interest checks
Consolidated Federal farm loans of the
Federal land banks:
Bonds
17. 669
Interest coupons
1, 020, 236
Interest checks . .
'
Federal Housing Administration:
Debentures
• Interest checks
, Federal home loan banks:.
"
23, 266
Consolidated debentures.
..1
Interest coupons
.
. 27,860
Reconstruction Finance Corporation:
" Notes
:. .
.
33, 997
Interest coupons
.
167, 769
Commodity Credit Corporation:
Notes.
'.68,326
Interest coupons
^:..
!',.'.... ' 131,072
Federal National Mortgage Association:
Notes
7,567
•Interest coupons
88, 466
Federal Public Housing Authority:
Notes
•
'
.
569
Interest coupons
40, 786
Federal Savings and Loan insurance Corporation bonds
56
Total

200

34, 983, 400. 00
34, 444, 352. 42

$372,000.00

4,'530

$230, 324, 750. 00
52,978,361.42

944,966,000.00

• 5, 284

1,452,146.26

5, 643

91,466, 400.00

22, 054

2, 758,499. 32

192, 664, 000. 00
1,133, 979. 27
647,140,375.00
12, 759, 795. 76

2,136

2,824,700.00

12,860

1,.113,691.95

3,640
1,948

61,259, O O 00
G.
35, 357, 567. 51

3,661,519.05
700, 516.76

•

•'

•

! .

' .

998, 841, 000. 00
8, 701, 772.13
49,560,000.00
3,185,105. 62

•

•

,

•

1,487,000.00
2, 084,183.16
11,880.00

21, 872, 618 65, 730, 912, 589. 48 2, 760, 636 7, 904. 276,899. 03

NoTE.-r-Redeemed bonds and notes, except United States savings.bonds, are audited through March
1943 settlement. Receipts for April, May, and June, 1943, settlements are incomplete.
• ':
^ Contains 372,098 pieces-. $75,310,973.20, belonging to January through June 1942 settlements processed in
this office during fiscal year 1943.
2 Audited through February 1943 settlement.
3 Audited through March 1943 settlement.
,
* Audited through April 1943 settlement.
6 Audited through May 1943 settlement.

Chicago Branch of the, Register of the Treasury

In March 1943, the numerical registers were transferred from the
Chicago Branch of the Division of Loans and Currency and the
maintenance of these records became a part of the functions of the
Office of the Register. A revision was made in the operating procedure
simultaneously with the transfer of the registers. Under the revised
procedure the bonds retired by Federal Reserve Banks and their
branches are received directly from the Chicago Branch of the Office
of the. Treasurer. After audit, bonds are assembled in large lots (many
over,200,000 bonds each), the lots sorted in serial number order and in
that sequence are stored in the vaults.
Approximately 18,000,000 bonds with a maturity .value of
$988,000,000 were received and audited during the year. Of these,
11,000,000 bonds were filed in permanent storage and the remainder
were in the process of being interfiled and recorded in the numerical
registers on June 30, 1943.




209

REPORT OF T H E SECRETARY OF TBCE TREA.SITRY

The following table indicates the number ahd value of United States
savings boiids processed by t h e Chicago Brarich of the'Register of the
Treasury during 1943.
. ;'
A u d i t completed
Amount

Pieces

Redeemed:
F i s c a l y e a r 1942...
. Fiscal year 1943
Total

743, 506 .
-......:.....i......
12,118,110
.
:
:

R e t i r e d on account of exchange:
B y t h e Division of L o a n s a n d C u r r e n c y . .
. B y Federal Reserve B a n k s a h d b r a n c h e s .
Total

.

..

'.:.

•

'

-' •

, Grand t o t a l . , . . . . „ . . . . . _ . .

...•

Amount

8,596,094^

247, 628,091. 46

[' 182, 614
165,288

M a t u r i t y value
$74, 714, 825. 00
' -16,847,725.00 ;

10, 751
602, 408

M a t u r i t y value
.$4,487,076.00
-84,243,250.00

347, 902

'•91,562, 550. 66''

487,137,499. 99

5, 226, 610 '

U n i s s u e d stock .

Pieces

Fedemption
Redemption
value
value
$44,233,772.94
•442, 903,727. 05 "'8,'595,'694" "$247," 628^ 091'46

-12,861,616,

•:

A u d i t in process

18; 436,128

. 613,159

88, 730, 325. 00

409, 226, 275. 00 • 1,878,234

160,857,300.00

987; 926,32^ 99 , 11,086, 487

487,215,716.46

A new unit was established in the Chicago Branch to audit the
redeemed war savings stamps. Previously all shipihents .of stamps
were processed by the General Accounting.Office." This uriit.now receives canceled stamps, from" Federal''Reserve Bariks arid approximately 1,500 first class post offices. The stamps are counted under
the joint supervision of this office a^nd representatives of the Office
of the Treasurer of the.Uriited.States. The result of the count of each
shipment is forwarded to the'.Office of the Treasurer where proper
credit is allowed in thie accounts of the postriiasters br the Federal
ReserveBanks.
•
' The following. table indicates the humber of albums and the redemption value of United States sayings stamps Teceived and audited
in the Chicago Brarich of the Office of the Register of the Treasury
during the fiscal year 1.943:
Number

Amount

Albums received'from—
' Post oflSces.-.".
•...•
Federal Reserve Banks v

27,585,822
.744, 562,

$383,649, 485. 45
11,909,181.05

'Total...."..........'....
Unissued stamps.. 1

.•28, 330, 374
' 833,110

395, 658,666. ,50
195, 579. 80

1 Includes 26 pieces in amount of $437.16, in process of audit.

,,'

, Division .of Public ^Debt Accounts and Audit, ,

,.

This Divisiori maintaihs . administratiye controh accounts for all
security transactions in the public debt conducted by the various
Treasui'y offices, by the Federal Reserve Banks arid, branches as fiscal
agents of the tJnited States, and by the post offices, and .War and
Navy iDepartments as issuing agents for war pavings bonds; and for
transactions involving distinctive and nondistinctive paper used in
printing public debt and other securities, currency, stamps, etc., in
the Bureau of Engraving and Printing; conducts administrative examinations and audits of transactions so conducted and the securities



210

REPORT OF THE SECRETARY OF THE TREASrtTRY

involved;.maintains control accounts for various classes of unissued
currency in reserve, and conducts administrative examinations and
physical audits of such unissued stocks and cash balances in custody
and of coUateral securities held in trust in the Office of the Treasurer
of the United States. . Included in the admiaistrative control accounts
are transactions in securities of various Government corporations and
agencies.
Washington Ofiice of the Division of Public Debt Accounts and Audit

The control accounts of transactions in the public debt maintained
by the Washington Office with other branches of the Bureau of the
Public Debt, with the Office of the Treasurer of the United States
and various other branches of the Government, and with the Federal
Reserve Banks as fiscal agents of the United States, greatly increased
during the past year in consequence of the war financing and the
more extended participation of branches of Federal Reserve Banks
in such transactions.
In addition to maintaining the administrative debt accoimts, the
Washington Office conducted 130 audits involving physical counts of
securities, currency, distinctive and nondistinctive paper, interest
checks, etc., amounting to about $844,000,000 in face value and
100,948,000 in number of pieces; an examination and audit of 3,173
individual accounts of holders of registered bonds; and an audit of the
numerical i;egisters involving an examinination of 37,507,000 spaces
representing bonds retired or outstanding. Other special audits under
instructions of the Secretary of the Treasury were also conducted.
The Division determined and certified credits to the cumulative
sinking fund and amounts in the sinking fund available for expenditure from time to time, interest on all classes of public debt securities
and securities of various Government corporations and credit agencies
which became due and payable on their respective interest-payment
dates, and the amourit of each form of such securities and unpaid
interest outstanding each inonth. I t prepared estimates of interest
to become payable on public debt securities in future fiscal years, and
of expenditures to be made on account of retirements for the sinking
fund and other special accounts, and pirepared statements showing
the accountability of Federal Reserve Banks for public debt and other
securities for the use of Federal Reserve Board examiners in their
periodical examinations of those banks. Numerous data pertaining
to public debt and other transactions for various interested offices
and individuals were also compiled.
Chicago Branch of the Division of Public Debt Accounts and Audit

The Chicago Branch maintained control accounts with the Treasr
urer of the United States, Disbursing Office of the Treasury, Federal
Reserve Banks and branches. Post Office Department, Library of
Congress, Navy Department, and War Department in connection
with the audit of original registration stubs which were. received in
support of issue and reissue transactions conducted by those agericies.
The.receipts of original stubs representing the sale of savings bonds




REPORT OF T H E SECRETARY OF T H E TREASURY

211

Steadily mcreased from 12,098,000 pieces in July 1942 to 24,143,896
pieces in June 1943; and the receipts of retired bonds on authorized
transactions such as ^^spoiled in process of issue'\ ^'reissue'^ and
''denominational exchange^' increased from 497,247 in July 1942 to
861,973 in June 1943. This increase developed a proportionate increase in discrepiancies to be reconciled, necessitating increased
research and correspondence.
During the year 40 audits were conducted involving physical
counts of 214,432,044 original savings bond stubs representing a
maturity value of $14,776,993,525; 8,424,473 savings bonds retired
for credit under several transactions; 24,174 unclaimed Series G
interest checks amounting to $991,110.53; 2,174,001 valid checks;
29,325 void checks; and 1,456 bonds in process of retirement in the
Claims Unit of the Chicago Branch of the Division of Loans and
Currency.
.
Control accounts were also maintained on all checks received,
issued, and voided in connection with monthly dividends paid on
Series G savings bonds and the outstanding principal and interest
payable on such dividends were certified monthly to the Office of
the Treasurer from control records reflecting all changes in the individual accounts of registered holders of Series G bonds within an interest
period.
There was also maintained an internal audit ^control of all securities
delivered to, and retired by, units under the Division of Loans and
Currency by means of which the balance of unprocessed securities on
hand in that Division was available. During the year physical bond
audits were made in two sections under the Division of Loans and
Currency and, as a result, some changes in operating procedures were
effected and reports were submitted recommending changes to further
safeguard the movement of securities.
Late in the year the Navy Department and the War Department
both established Chicago offices for the issuance of bonds to their
civilian and mUitary personnel and the direct reporting of war bond
sales. Joint audits were conducted by representatives of this Division
in conjunction with both Departments with the result that monthly
reports of sales by those Departments were being reconciled much
more rapidly than theretofore.
Division of Savings Bonds (Chicago)
The Division of Savings Bonds is responsible for the distribution
of advertising material for the promotion and sale of war savings
bonds and stamps. The Division conducted correspondence with
owners and prospective purchasers of war bonds and sent memorandum
statements, at regular intervals, .to approximately 81,000 participants
in the Regular Purchase Plan. I n May 1943 the files and records of
bond purchasers under the Navy salary allotment plan were moved
from this Division to a branch of the Navy Department in Cleveland,
Ohio. Arrangements were made also for the transfer, to Washington,
D . C , of simUar files of bond purchasers in the Coast Guard.




212^

REPORT OF T H E SECRETARY OF T H E TREA'STJRY

••^•/.^ /

-• Division of Paper'Cu'stddy^Wdshington^^^^^^^

-^iK.ni'j.-r.

; This Division .receives .from ,th^' cdntratctQrs all distinctive; .paper i
used, inipririting: public.;debt .obligations* arid, pamper currency -ofnthe •
United-States, and issues; such.:paper to (the Bureau of Engraving and
Printing against, orders ^to print;.-it .also imaintairis.records of- receipts •
and issues of Federal Reserve notes stored in the Federal,-Reserve
vault.; In connection with the manufacture of paper, < a sinall field
force, is maintained at the: mill of the contractors. •' j ; •, ;:: r - ;' ; ;
The following, tables .summarize• :the -operations- of^; the Division
during .the year..v= i-^^; U - . ' v : .M-IJ-?'; ^- .• * ^ - .• ; •v.,b^':r •-:••,;> -.-r
. Receipts and ^issues of distinctive >and nondistinctive paper,, fiscal, ye.ar. 194,3-:( - ;
:•'••• ••. •
•• - . - ' : .i • ' -.; ! [ l h - s h e e t s ] ' : - • ; - ' : , • > % : • ; 11 • • i :•': i . : : : • : ••
^
•
'..:

• •- .'••: '

. . K ^ i n d ^ ' [ ^ • ' : '' ' ' y , 7 . ' '

. ;^r)iSTiNCTiyE • 1... J-

r.' •;'•:••

•

On h a n d . .
Julyl,
1942- •

•

' } ' . • • >

Received .

; .On h a n d
J u n e 30,
• .1943.-.

, Issued

.•'

U n i t e d States currency a n d Federal Reserve n o t e s . i .i 13/180; 703' • i'64,:0"24; 100 • '154,'311,527 •'22; 8^3,276
U n i t e d States b o n d s _ . . . . . , _ . ' . . , .
...;:... - - - . - - - . . - . . ' >,7,679,891- ,..§^,.681,713, ; ,.87,601,117. ...4,660,487
• "60,'600'
1,629,638
C u b a n c u r r e n c y . . . ' . . _ . ' . . . . . . . . . 1 . . ' . " . * . ' . . . . . _ . . : . ' - 1 . . • 1,090,238'
184,093
184, 003
P h i h p p i n e currency
1
-r-i - : ^ ^ . J . J : . ' . l L . . ^ J j : ^ . . . i i \ ' . - • 22.134,926 • • ^ 248; 605; 813-. 241;973;244

• Total- '
'

'

NdNDiSTINCTlVE '

'

28,767-494

''"

P a r c h m e n t , artificial p a r c h m e n t , , a h d p a r c h m e n t '
d e e d " . J . : . ^ . - . . . . : . L - . . : . I . - . . . . j J ! . ' . . . . . : ^ . . . V . \ : . . . . . • ' 4 9 2 , 3 3 5 • •• - 724,5106 • '' 373, 278^ •:' 743,'162
.
. 49,605.
P h i l i p p i n e I s l a n d s postal card"...•.:ii..,..•_
......
.49,605
Miscellaneous.. ^ . . . 1 . . . . . . . . . . . ' . : . . ' . ._{•..:
^ _ . . . 2,p03,^56l '""2^461,104" ''•^''2,"i99,'2i8' • 2; 268,447
Total' • •
..^
;;•--'••

'

'.;•'••
" ' •
• 2,446,; 501^ ;.
"s""""''""rr:-:--.^-i:-:T-:-:-^

3,188,209 ,^^^ 2,572,496

3, 061, 214

Receipts and issues of Feder ah Reserve riotes-arid Federal-Reserve B a n k riotes, fiscal
• ' ; ,,. ^ ..; •„. .•:'.•:.••%.' •,year.l94S:-\i[(^ /;^_v..^ ; ^ ^ I^'H',-•U^-.^'- r-::,
'
:

.'

. • • : : . •

•/

•'•

•

. : \

;'•.:

:'?v-

: ' • ; . : . • : ' ' . : • : .

/•• [In t h o u s a n d s "of dollars].^ ^ '^ ''t

; ^ . : - . '

• . ^ • ]

O n hand,V
J u l y 1, 1942.

F e d e r a l R e s e r v e notes:
2, 813,100
Series 1928 . :
Series 1934
,...-.-.
.........
2,-188, 700.
F e d e r a l R e s e r v e B a n k notes,'Series'1929.*__--i.l.'.'.. -••V'. 460r800'

"^;^•'^*'^-

Received'

•Issued

1,000
7,206,240. . 6,879,300
• 460,800

••'

• :,k

i-^.

•« Qn.;hand • •
-.June 30, 1943'

2,.812,100
3,516,640

During- the year 252',589;493 sheets of' paper'were'C^urtted prior to
issue to the Bureau of Engravirig and Printing for authorized work:'
• ' " ' " • •^'•^••"-'i' . Destruction CdmniiitW''^'-

-^-^J":. ••;•:

.-^^^ ^-^;'°-'-'•• '••

The followmg tabl6;summarizes' the^securilies' (including:-redeemed.'
canceled currency) and^mifecellaheous itemsjreceivedifrom Ithe variousoffices and destroy ed iby .the 'Destruction,Commit tee during, the year-. ^




RE'PORT -OE STHE SECRETARY OF THE: T-REIASFRY

213

.Number .arid face amount, of-.securities and miscellaneoiis-items destroyed by the '
Destruction Committee, fiscal year J.94S. / .
. •, , . .
• Number of •
... pieces

Offide making delivery, and items
Division of Loans and Currency and Treasurer of the Uiiited States:
*'
United states nb;teisi^.::..l.i.lL'J_.X..j'jjyi>IUcL-:ij_..iijj'j':J.
, :. Silver .certificates.j_:_ — 1.,._._i,
-7-^Gold certifibates. _--.!: i . : J.::t
••,;•. -Treasury notes | L . . . J . .___.: ^:...
Fractional currency.....;^
'_.

Face value

'^29.099,280
,608,651,242
100,104
. 284
2,079

$112, 441, 205.00
868, 215, 392.;00
• 2,343,590:00
• ' c. 1,800.00
431.06

. 637, .852, 989

:, 983,002,418.06

•l\

..Total...
Comptrollei\of the .C.uiTency, national:banks,-^and Federal Reserve
Bank agents:
•• . • ; ..
• "National bank h6tes.^..C.iij.i.-L'.li!;.^_j..J^..'..-'r.l..L-i-i'ldi.-l:i.^
Federal Reserve Bank notes...
,...--'-^_.._..,i. J.,..*..
Federal Reserve notes.:...1 'j..'..::.._".'.:._i 1 _'._t 1:1 _ J..,:^1.1 _...

• '509; 336949, 530
100,'639-, 180

,' '. ' TQtal.ll!...:_.J^l.!.l..l.V.'.Jt^..'.J..^ll.^-L^lL.

102, 098, 046

Register of theTreasury:;.,: ...... .^,.j . , . . . . . > .
•
Prinijipal pieces.. JJ..'.':::..iJ.'....:..,._J.l.V-.'.'-•..1 '.1.1
Total.......

:.
llS.

:

......^l............J.l..".

Bureau of Engravi.ng and Printing, registered pro.of .shee.ts...,
Divisionof Loans ahd'Ciirrency:
' - • ' • ' • - - <; . - —..
•
.
For Bureau of Engraving and Printing—mutilated work (sheets).
For Division of Paper Custody (sheets)
Void coupons
,..._.
Nondistinctive coupons..'.. L'. :..". .*!-: 12.. i ...'..•_:.: J. i _••.•. _...':...
Checks
Division of Printing, c h e c k s . . . . . . . l . _ . - . . : . : . . . : . . ' . . . j . . .
Foreign Funds: Forms T. F . E . L. 2
:
Total:;

', 774,187.00

8,160,277
: ,28, 270, 413

.13,636,087,309.86
•763,, 397,017.83

36, 430. 690

14; 398,'484,327. 69

776^ 381, 726

,17,959,798,228.36

' Bureau 'of Internal Reveniie,*' miscellaneous sMmip's.:..'. 1'... ^ l. i..'...
;• -. Grand to tal-'....'......J. .£...'..._

• 6,-979,'390.00
. 9, 462,, 732. 00
1,073,342,065.00

1, 488, 637, 296. 60

•...;27,159
60, 600,169
55, 507
33,-323. 678
' '16,-266
. 195,170
' : 345,000
2,556
94, 465, 496

V '

T R E A S U R E R OF THE U N I T E D S T A T E S

" Public moneys are received and disbursed through the accounts
of the Treasurer ..of. the United States. Depositary; accounts are
carried with several hundred designated Governnient depositaries.
Checking accounts with disbursing ofiicers of the Government are
maintained on the books of the Treasurer. Funds appropriated by
Congress for the use of the various departments and establishments
of the • Government' are advanced to disbursing officers as required
through credits to their accounts with the Treasurer, and disbursements are made by checks drawn by disbursing officers against such
accounts. The Treasurer is the official custodian of the public money;
he is also fiscal agent for the payment of the principal of and interest
on;thepublic:debt,.for the issue and redemption of:United States paper
'currency, for.;the. redemption., of.;:-Federal: Reserve; notes, Flederal
Reserve Bank notes,. ,and national' bank notes,.^ and is treasurer of
the Board: ol.Trustees of thevPostal Savings;System and trustee and
custodian:* of. ;mi§GeUaneous securities;;and t r u s t , funds.: He.. acts as
;apecial^agenti4(5r:.the payment of, the .principal; of and interest on




214

REPORT OF THE SECRETARY OF T H E TREASTJRY

bonds and other obligations of the insular governments and of Government corporations and agencies!
Owing to the war and its attendant activities, there has been a great
increase in the number of checks drawn on the Treasurer of the
United States. As a result the QjS&ce of the Treasurer has been
faced with a tremendous task in paying all these checks in Washington.
In order to help solve both the manpower and space problems in
Washington, the Treasury Department has undertaken to decentralize
the payment of certain classes of checks by arranghig with the Federal
Reserve Banks to act as fiscal agents for the Treasurer in^payhig
such checks. To accomplish this operation rapidly and economically,
tabulating card checks have been substituted for paper checks in
the case of certain large expenditure programs of the War and Navy
Departments. Also the regular disbursements of the Chicago regional
office of the Division of Disbursement, Treasury Department, were
converted from paper checks to tabulating card checks. During
the fiscal year 1944, it is planned to have the partial use of tabulating
card checks extended to other regional offices of the JDivision of
Disbursement.
A summary of the receipts and expenditures of the Government
for the fiscal years 1942 and 1943, exclusive of postal revenues and
expenditilres payable therefrom, is shown in the foUowiag table. The
details of the receipts and expenditures will be found on pages 462, 472,
and 478.
Summary of receipts and expenditures, fiscal years 1942 and 1943 •
[On basis of daily Treasury statements, see p. 459]
1942

- 1943

Increase or
decrease ( - )

General and special accounts:
Netreceipts.$12,799,061, 62L 02 .$22,281,642,709.24 $9, 482, 581,088. 22
Expenditures, excluding statutory debt
retirements (sinking fund, etc.)
. . . 32,396,585,097.69
78,178,885,240. 87 45, 782,300,143.18
Excess of expenditures, excluding statutory debt retirements..'....
:
Trust accounts, increment on gold, etc.:
Receipts
_..:._.
Expenditures:
Trust account, etc...^
Transactions in checking accounts of
Government agencies, etc. (net)...
Totalexpendituresl.-..
Excess of expenditures. .

56,897,242,531.63

36,299,719,054.96

3:190,884,099. 71' •

3,926,252,842.21

735, 368, 742.50

3,071,664,795.54

3, 593, 561, .348.14

621,886, 652.60

3, 624, 724, 264.36

2,193,685,465.83 -1,431,038,788.52

19,597,523.476.67

. . . . . • 6,696, 389.049.89
3, 605, 504,950.18

5,787,236,813.97

-909,152,236.92

1,860,983,971.76 -1,644,520,978.42

The total public debt obligations outstandhlg on June 30,1942^ were
$72,422,445,116.22 and the receipts and retirements during the fiscal
year 1943 were $122,631,888,023.93 and $58,358,242,810:25, respectively, making $136,696,090,329.90 of obligations outstanding on
June 30, 1943, an mcrease for the year of $64,273,645,213.68.
The statutory debtretirements during the year, included in the total
retirements shown above, amounted to $3,463,400, ofwhich $3,459,850
covered retirements for the cumulative sinking fund and $3,550 covered retirements of securities received as gifts and from miscellaneous
sources.




215

REPORT OF T H E S'ECRETARY OF T H E TREASURY

The amount of interest paid on the public debt during the year is
classified as follows:
Class of interest p a y m e n t

Amount

I n t e r e s t coupons p a i d - .
...i
Registered interest checks p a i d
..1
.
Accrued interest paid in cash o n o bligations at r e d e m p t i o n
:
D i s c o u n t on Treasury bills sold
D i s c o u n t accrued on U n i t e d States savings b o n d s
I n t e r e s t p a i d on obligations, special series (transfer-counter w a r r a n t transactions)
Total p a i d . . .
Less r e p a y m e n t s
-..

.

.
c^

Net payments..--..-__

$1,163, 775, 591. 81
322,887, 248. 38
68, 580,098.16
29, 717,696.40
128,145, 412.15
128, 658, 326. 24
1,841, 764, 372-: 14
33, 603,976. 63
1,808,160,395.51

The number of pieces of public debt principal obligations examined,
verified, and redeemed during the year was 56,433,991 as compared
with 2,550,245 pieces for the previous year. Checks in payment of
interest on the registered obligations of the United States verified and
paid totaled 2,472,962 pieces, and the matured uiterest coupons
of Government obligations examined, verified, and paid totaled
12,366,375 pieces.
The gold holdings of the Treasury as of June 30,1943, were 639,641,593 ounces amountiag to $22,387,455,751.05, valued at $35 an ounce,
a decrease of 9,972,783 ounces and $349,047,409.64 from the previous
year. The details of these holdings are shown in the table on page 666
of this report. The decrease in gold holdiags was due for the most
part to a net reduction of $349,637,893.25 in holdings by. miiits and
assay offices on accouht of transfers to foreign account for earmark,
exports, etc. (valued at $35 an ounce); receipts of gold (paid for at
$20.67+ an ounce) under the order of December 28, 1933, of the
Secretary of the Treasury amounted to $348,753.67, and the increment
resulting from the reduction in the weight of the gold dollar amounted
.to $241,729.94.
Paper currency of each class issued and redeemed during the year
and the amounts outstanding, including Treasury and Federal
Reserve Bank holdings on June 30, 1942, and June 30, 1943, were
as follows:
.
O u t s t a n d i n g J u n e 30, 1943
Class

Outstanding
J u n e 30,1942

Issued

Redeemed
I n Treasury

Gold certificates
..
Silver certificates
U n i t e d States notes
.—
T r e a s u r y notes of 1890
F e d e r a l Reserve notes
Federal Reserve B a n k notes
N a t i o n a l b a n k notes
Total

Outside
Treasury

$2,875, 586,129
$2,363,950
1,980,858,228
$941,844,000
957,547,400
346,681,016
126,016,000
126,016,000
1,159,148
.
3,100
9, 790, 726,865 5,854,625,000' 1,2*41,177, 765
18,975,964
9, 782,232
623, 777, 500
140,337,042
6,979,390

$611,000 $2; 872, 611,179
48,619,126 1,916,535 702
2,721,870
343,959,146
1,226
1,154 822
66, 626,166 14,337,647, 935
1,099,163 - 631,872,069
634,021
132,723 631

15,154, 324,392 7, 546, 262, 500 2,343,869,837

120,212,571 20,236,504 484

/United States paper currency shipped during the year from the
Treasury in Washington to Treasury offices. Federal Reserve Banks
and branches, and others amounted to $1,124,885^780, a decrease of
$486,885,790 from the previous year. The Treasurer's Ofiice directed
shipments of current silver and minor coins between the United States



216

REPORT O F . T H E SECRETARY .OF T H E TREA!S,.U'RY

Treasury, the United States mints, and the Federal Reserve Banks and
branches for use in public disbursements, etc., as follows;

•

Shipments from • Shipments from Shipments berhints to TreasTreasury to.
tween Federal
Federal Reserve ury and Federal Reserve. Banks.
Reserve Banks . aiid'hranches
Banks and
and branches
branches

Kind

SilverStandard dollars
:--____
Half dollars
Quarter dollars
Dimes 1
- .^
Minor:
5-cent coins
._
Cents
'
Total

-

....._..--.--..-...
...
._

. $17,296,400
37,025,700
37, 253, 300
33.967, .500

,

$.100,000
25,000
1,260,000
220,000

388,450
-

' 13,350,250
9,421,560

670,000
218,000

518,450

148, 314,710

2,493,000

Shipments and transfers of gold coin aiid bullipn and of uncurrent
silver and minqr, coins to .the mints from:'the Treasury and the Federal
Reserve Banks !and, branches were authorized in the, amounts of
$542,^45.33. and $2,824,871.68,res^^^^^^
''
:\
The proceeds of currency received into the Treasurer's cash by the
Currency Redemption Diyision during the year amounted to
$425,049,427.16, of •whiGh$307,754,58'7.50 was in Federal Reserve
notes, .$10,729,36'2.5'0" m Federal Reserve .Bank notes, $7,230,933.50 in
natio.nal bank •hptes, and $'99,334,544.66'in United States currency.
\Canceled Fe.deral Reserve notes amounting to $i',021,2^
were
recieived from Federal Reserye Banks ahd branches' for credit,
of Federal Reserye. agents! These notes' are not taken into the
Treasurer/s cash b'ec4use settlement therefor is made between the
FederalReserveBanks and the Federal Reserve agents,
Pubhc moneys oh'deposit ih designatecl Government depositaries on
June 30, 1943, to./the.credit of. the Treasurer and to the credit of
other^ Government ofiicers amounted to $8,985,133,746.55 ahd
$196,928,301.22, respectively, including items in transit. The table on
page, 6616 shows the. amounts in the various depositaries on June 30 of
the last 2 years. ]',/.
.. . \
,
. •
Principal obligations of Gbvernment corporations and agencies and
insular governments redeemed by the Treasurer during the year
amounted to $785,317,274.05; checks issued by the Treasurer in
payment of interest on such registered obligations paid during ^ the
year amounted to $6,630',981.00; interest coupons on such obligations
paid amounted to $111,024,553.86; and interest paid in cash when
such obligations were redeemed amounted to $141,017.55.
Funds were .advanced to United States disbursing ofiicers by accountable warrants issued in. an aggregate amount of $93,901,766,825;63.
Treasurer's checks aggregating $171,650,904.72 were issued on,settlement .warrants in .-payment of claims settled by the Comptroller
General.
Checks drawn on the Treasurer of the United States by Government disbursing officers and agencies were paid during the
year to the estimated numberof 201,^676,720, of which.7,505,452.for
servicemen's dependents and ^lotments and 7,784,807 for,emergency
relief disbursements were paid i o r the. Treasurer by. Federal Reserve




217

RE'PORT OF T H E SE'CRETARY OF THE TREASURY

Banks acting as his agents. The total number of checks paid during
the previous year was 131,600,000, including 28,300,000 checks for
emergency relief disbursements, paid .through the Federal Reserve
Banks.. Thiis,'the number of alhchecks increased during the year by
53 percent while the number, of emergency relief payments at
Federal Reserve Banks decreased by 72 percent.
Balances to the credit of disbursing officers and Government agencies
in 7,54'5 accounts on June 30, 1943, amounted to $18,967,486,717, an
increase of $8,880,204,135 as .coiripared with the total of such .balances
in 5,725 accounts on June 30, 1942.
Payments to correct irregularities in negotiation of checks were
inade in 1943 to the number of 4,906 amountmg to $281,072.69, whUe
in the previous year the number was 5,734 for $207,636.54.
Duplicate checks to the number of 27,578,, were requested by
payees or endorsees during 1943 as compared with 18,245 during the
previous year, the origiaal check in each case having been lost, stolen,
wholly or partly destroyed,' or so mutUated or defaced as to impair
its value to its owner or holder.
Drafts in 32 different kinds of foreign currencies, a'ggregating 4,734
in number, were purchased by. the Treasurer for various agencies of
the Government at a cost of $6,494,494.69. Payments were made
to Goyernment officers located in foreign countries by means of 242
cable transfers aggregating $475,975,327.01.
^Commercial checks, drafts, and postal express money orders,
aggregating 2,442,438 items and amounting to $827,082,540.51 were
deposited by Government officfers with the Treasurer of the United
States for'collection..
The Treasurer is custodian of securities pledged for the safekeeping
arid prompt payment of Government deposits in bank depositaries,
of postal savings funds in depositaries designated to receive such funds,
and, under provisions of law or by.dhection of the Secretary of the
Treasury, of various trust funds comprised of bonds and other obligations and of securities placed in safekeeping by various Goyernment
executive departments and bureaus. The face value of such securities
held on June 30, 1942, and June.30, 1943, classified according to the
purpose for which held, is shown ia the following table:
Purpose for which held

June 30,1942

To secure deposits of public moneys in depositary banks..
To secure deposits of postal savings funds
For District of Columbia:
;
.
Teachers' retirement fund
---"..
:..
Water fund
•
_
s.
• Other:.l:
:
....1.:
:.
United Statessavings bonds held for various depositors..
-...
For the-Board of Trustees, Postal Savings System...
______
For the Secretary of W a n .
...•..._
._•_
For the Secretary of the Treasury:
• 'Foreign Obligations
:
Obligations on account of sales of surplus property
..
-.-,— -Capital stock and obligations of Governnient corporations and agen
'

• cies.—.

.-._---

-.

--_•-•

Total.....
542890—44-

_.-.-....-...-•.:;-.—_

-16




9, 615, 260
1,773,000
398,620
.
16,561,800
1,134,004,640
10,370,330

\

$252, 466,000
14,092,000

10,264,260
1,773,000
398, 6VU
35, 731,600'
1, 357,942,760
12,420,330

12,072, 484,767
. 46, 737,095

12,072,484,757
46,737,095

_,
..-.._
...

4,. 733,763,451
. 2,499,288
213;746, 350
,
98,034,500
689,116, 820
20,856,447
. 122,484,907

; 8, 589, 698,362
4,894,269
316,738,400
34, 500
115,000,000
•••20,861,207
129, 367,382

...._--...-

19,302,615," 055

22,980,804,472

:..

. . Other
..
^
,..^...................
For Fede.ral Deposit Insurance Corporation
:
For.Federal Savings and Loan Insurance Corporation..
For Federal Farm Mortgage Corporation
For Alien Property investment account. _ 1 . . : . ^._.'__.. 1
Miscellaneous
._
._:

$107,106,050
24,061,750

June 30,1943

.--..-

__..J_
._
..

.•_

218

REPORT OF THE SECRETARY OF THE TREA1S.TJRY
BUDGET AND IMPROVEMENT COMMITTEE

=

'

The Budget and Improvement Committee is responsible, under the
direction of the Budget Officer, for the pre|)aration and'review of estimates submitted by Treasury bureaus and divisions for annual or
deficiency appropriations. I t is a!lso responsible, under the direction
of the Budget Officer, for the investigatioh of administrative m^ethods
and procedure iri their relation to appropriation estimates arid for
other investigations upon assignment by the Adniinistrative Assistant
to the Secretary. Tb facilitate the investigations, a Subcommittee
on Investigations is assigned the riesponsibility for deteririining,
through the inspection of field as well as departmental activities, the
justification for proposed increases in appropriations and makes other
surveys upon assignment.
'. The review of ap.propriatiori estimates iricludes a thorouigh examination of the items by the individual committee members to whoiri
respective bureaus or divisions are assigned. The entire committee
then conducts formal hearings at whibh the bureau or division heads, or
their representatives, present oral testimony iri further support of the
estimates. .The committee, after deliberation, submits its recommendations to the Budget Officer for his guidance in determinirig the items
which should be approved for transmittal to the Bureau of the Budget.
In addition to the regular estimates of appropriations for the fiscal
year 1944, supplemental and deficiency estimates aggregating
$94,837,219 were, received during the fiscal year,
Reserves amounting to $15,389,973;were set aside from the ordinary
appropriations for the fiscal year 1943 by the bureaus tad.offices of
the Department. During the year, reserves amounting to $308,850
were released by the Director of the Bureau of the Budget after approval of the committee, leaving a reserve of $15,081,123 at the end of
the year. Of the. appropriations raade to the Treasury Department
for the fiscal year 1944, $9,725,170 has been set aside as reserves, for
savings and contingencies.
/
For thefiscal year 1945, estiiriates aggregating $10,897,039,084 were
approved by the Departmental Biudgejt Officer and submitted to the
Director of the Bureau of the Budget. Such estimates included
$227,339,400 for annual appropriations; $1,911,236,513 for permanent
and indefinite appropriations and special funds; $4,418,723,691 for
trust funds; $3,750,000,000 for interest on t h e . public debt; and
$589,739,480 for public debt retirements chargeable against-ordinary
receipts.
BUREAU OF THE COMPTROLLER OF THE CURRENCY ^
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, approval of the Comptroller of the Currency is required for 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.
1 More detailed information concerning the. Bureau of the Comptroller of the Currency is contained in the
annual report of the Comptroller.




219

REPORT OP THE SECRETARY OF THE TREASURY

Changes- in the condition' of'active' national bank's '
The total assets of the 5,066 active national banks on, Juiie.,30, 1^43,
amounted to $58,972niillions, ari: increase of. $14,2,53 millions since
June 30, 1942, when 5,107 banks.reported, , Theideposits^of the active
banks in 1943, excluding reciprocal riiiterbank deinand balanqes,
totaled $54,769 mUlions, which was $14,110 milhpns mor^ than in 194:2.
The loans and investments, totaled $42,919 millions, Tcpresentiag an
increase of $13,374 mUlipns during the year: Capital funds ;0.f $3,825
millions were-$146 millions more thari in.the. precedirigyear. .. /
The assets and liabUities of active national-banks pn. the, date of
each report frpni June 30, 1942, to June 30', 1943, .are shown in the
following.staternent. ;
; •:
^, • j:- •
Abstract of reports of condition of active 'national banks oh the date of each report
':. '
•
from J u n e 30, 194'^, to J u n e 30^1943 - ^
. ;...,.''
•
[In thousands of "dollars]

'

••

June 30, 1942
(5,107 banks)

•

'.

• '

.

Dec. 31,1942 June 30, 1943
(6,087 banks) (5,066 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, ahd debentures
-..
Corporate stocks, including stock of Federal Reserve Banks.

10,901,796
13, 299, 723
1,629, 269
1,960, 534
1, 558,910
194,962

10,200,798
22, 261,410
1,563,941
2,022,493
1,441,184
193,760

Totalloans and investments
Cash, balances with other banks, including reserve balances,
and cash items in process of collection i . .
Bank premises owned, furniture and jQxtures
•.
Real estate owned other than bank premises
—
Investments and other assets indirectly representing bank
premises or other real estate......
Customers' liability on acceptances outstanding
Interest, commissions, rent, and other income earned or
accrued but not collected
Other assets-.•..--.
_
—

29,6j^5,m

37 ,,683,586^

4^,918,721

14,316,563
588,690
.,72,494

16,250,270
580,476
61,,060

V6, 227, 391
. 566, 697
• 47, 630

"62,'526
32, 316

51,340
23,294

49,285
30,509

63,594
47,599

74,926
56,026

86,079
46,140

44, .718,965

54,780,978

•58,972,352

21,945,397
7,841,032
1,189,410
2,741,720
6,498,697
442,861

26,730,69i
8,307, 5ia
4,842,182
2,695,194
7,401, 534
671,696

30, 618,146
• 8,971,178
4, 589, 354
2,900,361
7,156,360
633,962

Total assets.....-

9,190,143
28, 514,634
1,675,768
2,026, 333
1, 340,099
171,744

LIABILITIES

Demand deposits,of individuals, partnerships, and corporations..
Time deposits of individuals, partnerships, and corporations.
Deposits of U. S. Government and postal savings
Deposits of States and political subdivisions
Deposits of banks i
...J
Other deposits (certified and cashiers' checks, etc.)
Total deposits'

40,659,117

Demand deposits'^.L ^ J : . . . . L
Time deposits...L
:.
L.......
Bills payable, rediscounts, and other liabilities foj borrowed
money
J
Mortgages or other liens on bank-premises and other real
estate......
Acceptances executed by or for account of reporting banks
and outstanding
.....:.:.
Interest, discount, rent, and other income collected but not
earned....., •.:.
Interest, taxes, and other expenses accrued and u n p a i d : . i . . .
Other liabilities. 1:._:.............
:..-...

50,648,816

64, 769, 361

•32,367,109
. 8,20,008

P , 970,78J,
,8,67 8,.032

45,429,851
9,339,510

2,014

3,516

4,231

76

67

37, 232

34,390

...•

42,042
73; 56?
, 226,425
:41,039;473

51; 042,623

25,622
' •• 98,816
214,460
55,146,947

.Capital stock
'._
^.
.
.......
Surplus....
l......:__.l...........
1..1......:..
Undivided profits!._^i
i...
...
.
:...,'..I
R^erves and retirement account for preferred stock.

1, 507,670
1,411,407
; : 516,949
244,466

1,503,682
1,438,646
', :540, 624
, 265, 504

•1,498,008
1,474,673
. 584/469
268, 555

.3,679,492

.3, 738,355

. 3,825,405

44,718,965

54,780,978

58,972, 352

• Total liabilities.-.^..^.._iJ......
' '

CAPITAL ACCOUNTS

Total capital accounts

-r--:--

Total liabilities and capital accounts

...1

30,118
:76,197
258,899

' '

---

---

' Excludes, reciprocal interbank demand balances with banks in the United States.




220

REPORT OF THE SECRETARY OF THE TREASTJRY
Summary- of changes in the National Banking Sy§tem

The authorized capital &tbek of the 5,067 national bariks in existence
ori June 30, 1943 (iricludingonebarik that had yiscphtin^
althdugh n o t in'forriaal hquidation); consisted of common capital
stock'aggregating $1,361 millioris, an increase of $4 riiUlibns-^arid
preferred capita! stock aggregating $138 millions; a decrease duririg
the year of $14 mUlipris. The total net decrease of ^capital stock was
$10 miUioris. Duririg the year charters were'issued to 9 natiorial
banking associations which had'= common- capital stock aggregating
over one million = dollarsV; There was- a net decrease of 42 in the
number of national banks in; the system during the year by reiasdn of
voluntary liquidations, one receivership, and one cohsplidation under
the act of November 7, 1918, asamended.
Changes in the number and capital, stock of national banks during
the fiscal year 1943 are shown in the following summary.
Organization, capital stock'changes, and liquidations of national banks, fiscal year
1943
Number of
'banks"

Charters granted
..J
.......
Increase of preferred capital stock:
6 banks, by issues of new preferred capital stock
....
Increase of common capital stock:
34banks, by regular increases..
459 banks, by common capital stock dividends
' - 6 banks, by conversion of preferred capital stock
,
1 bank, by consolidation (act Nov. 7, 1918, as amended):
Total increases..

Capital stock
Common •
$1,'160,000

Preferried
$75,000
• 610,000

1,,7.64,150
6,'003,'876
^ 44,950
•75,000

".

9,'047,976

686,000

4,027,976
25,000

Voluntary liquidations
Receiverships..... i._
Decreases of capital stock:
12 banks, by reduction of cdmmen capital stock
669 banks, by retirement of preferred capital stock.:.
2 banks, by decrease of par value of preferred capital stock..
Closed under consolidation (act Nov. 7,1918, as amended),
and capital stock decrease incident thereto

. 998,800
. 25,000

810,000

13,329, 619
800,000

42,000-

4,904,976

16,153,419

. -42
6,109

+4,143,001
1,356,513,915

-^14,468,419
-.162,887,267

» 5,067

1,360,656,916

138, 418,

Total decreases..
Net changes during the year...
Charters in force June 30, 1942.
Charters in force June 30, 1943.

' 1. This figure differs from that shown" in the table on p. 219. Banks that have discontinued business
although not ih formal liquidation do not submit reports of condition but are included in this table.

BUREAU OF CUSTOMS

Collections

,

'

' .

!, .

For the second successive year customs collectipns declined, but
whUe the revenue received in 1942 was only slightly less than in 1941,
collections in 1943 receded to $328,123,797, a decline of 15;9 percent
from 1942. The gradual downward trend which prevailed throughout
the fiscal year 1942 was greatly accelerated during the first 3 months
pf the fiscal year 1943; and in September 1942 duties and misceUaneous
cristoms collections aggregated only $20,579,556, the smallest airiourit
collected during any single month in more than 7 years; in fact,




221

REPORT OF T H E SECRETARY O-E T H E TUEIASUTIY

not' since July 1935 had .collections. f o r ' a n y riionth fallen below
22 million dollars. During the 5 months'beginning with October
1942, collections averaged $25,001,862 and exhibited a perceptible
trend upward. Collections increased sharply in March, and went
slightly above, the March level during the subsequent months, averaging $34,104,856 for the l a s t ' ^ m o n t h s of the y'eair. .The types, of
colfections during each of the past 2 yeeirs are shown in the fbUowirig
tabled

^ • ,. '•
.."•

'_ ,..',

.

• ^ • ; - ' ^ * '' ',\ \ , V ' ' ' [ / ' .

Customs collections ^ and refunds,.fiscal years 1942 and 1943
' '

'

•

[On basis of accounts of Bur6au of Customs]

;

Type

1942 •'

,

1943

Collectiohs:
•'. Duties:
'• : r . ; • - ; • •• .; •
^. '
j
Consumption entries
L. $195,296,996 $167,310,457
' Warehouse'withd'rawals •
'
. . '
186,298,749 • 149,417,688
.-;
Mail entries.'........1..^.^,:^^..:..,.-,-.._..
. .889,800
671, 606
252,672
229,662
Baggage entries ^.
• :903,406
Informal entries ^ l . . . . . . . . . . . . . . .
..._..-.....=.-_• >u. ; 655,448
Appraisement en t r i e s . . . : . .
i
......
- 118,237
95, 336
- 5,084,673
6,938,492
* Increased and additional duties.
...
Other duties..^.!.....
:..;.
. L . . . - . —. ,
: 491,366
.204,258
. •' Total d u t i e s . ; J j . . . . ^ . . . . :

:IL^:.........I...

Miscellaneous:'
• ., . •
:•• Fines and forfei tures... l.«.;..'.^...-.,
Liquidated d a m a g e s . . . . . . . . .
• • ' Sale of seizures.l..!....^ . . . . " . .
Sale of Government property, unclaimed
doned merchandise... - - i" ' . '
• Tonnage tax and navigation fees' '
All other customs receipts
' .

. '.

.."'

'
•

.

-14.3
-19.8
-35.8
. -9.1
37.,8
-19.4
36: 6
140.6
^16.2

388,800,833

325,957,912

624,602
110,567
13,236

499,909
99,967
20,987'

-4.7
-^9. 6
• -58. 6

128,986
370,769
110,127

. 125,370
1,316,685'
102,967

-2.8
255.1
-6. 6

.-...-..

1,258,276,,

2,165,885

.72.1

-Total customs c o l l e c t i o n s . . . . - . - - - . . - - . . . . . i . ; . . . . . , -

390,059,109

328,123,797

15.9

. ^ Total miscellaneous..
,
1

.J....^...
1:
and aban.

Percentage
increase or
decrease (—)

.............

Refunds:
•
: . . :
-Excessive duties.
_.•
....-.'...i
Drawback payments!.
- Other.....i.:.-...--..'.-.....-......^:......L-..

•

;
.4,900,037
• 16,295,119
- • , 44,460
3 21;-239,616

3,957,401
10,344,298 ' '
• 19,318

-19.2
—36.6
-56. 6

14,321,017

-^32.6

.1 Excludes customs duties of Puerto Rico, which are deposited to the;credit ofthe Government of Puerto
Rico, but includes fines-and other minor collections of Puerto Rico.
. '
2 Entries of less than $100 in value..
>;" •
•
• : . .'

. Except for increased and additional duties, duties • on informal
entries, and several of the minor types of duties combined as ^'other
duties'^, each of the types of entries yielded less revenue than in 1942.
A part of the decline was due to the importation free of duty after
May'30, 1942, of war materials purchased abroad by the War Department, Treasufy Department, Department of Agriculture, and the
Reconstruction Finance Corporation, to which agencies were accorded,
by.'Executive Order No. 9177, the same privileges of.free entry as'
had previously been exercised only by the Navy Department. During all of the fiscal year 1943, therefore, purchases of war material
by these Government agencies were admitted without assessment of
duty whereas,,duringll months of the previous year they were dutiable. The decline in customs collections, therefore, cannot be interpreted as the result of a decline in imports.
By far the most important source of revenue in 1943 was unmanufactured wool which yielded 8 percent more revenue than during the
previous year and accounted for one-third of the total duties collected



222

REPORT OF T H E

SECTIE!XARY OF T H E

TREiASURY-

in 1^43. Wool, hquors, and tobacco vw:ere the, only; schedules .of the
Tariff Act to show an increase in Tevenue in 1943.
,
, i'''.
••,

. -

[Volume of business >' .' . •
^

;.',.-

;, ],,

- I n .or(ler to present statistics of the ybluine of customs business
which are analogous to collections, the data which follow are liinited
tb the area in which aU 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 district and nOne except those on seizures for the latter
district are included below.
Entries of merchandise.—The downward trend in the number of
entries of: merchandise which began in 1939 continued during the
present year. Under war conditions an increase in the quantity and
value of the .goods included in each individual entry by. governm.ental
or commercial importers has been concomitant with a decline in the
number of such entries.. Consequently there were fewer of each of
the important, types of entries than in the previous year,, .Informal
entries and mail entries were the only types which increased numericaUy. Three of the districts along the Mexican border ..showed an
increase of 32 percent in the number of informal entries, while inmost of
the Canadian border districts and in several widely scattered districts
throughout the remainder of the country increases of smaller magnitude took place. The increase in the nuriiber of mail entries was not
corifined to ariy particular region. The Georgia district had more
than six times as many mail entries as in 1942, while in the districts
of Maryland, Pittsburgh, Galveston, San Diego, Wisconsin, sLnd Indiana the number of mail entries more than doubled. Packages sent to
all parts of this country by members of the over-seas forces caused an
increase in ihail entries in more than half of the customs districts
although a smaller number of maU eutries than in the previous year
was recorded at New York and several other districts which were
formerly much more important channels for importations by mail.
Duties on mail entries declined sharply since practicaUy all packages
from the over-seas forces were admitted duty free. The number of
entries of merchandise during the past two years is shown in the
foUowing table.
"
•
•:
'
;

• •

Number of entrdes of merchandise,'fiscal years 1942 and 1943 .

• .' .

^ , ; - . ^ ' Type ,

.

j _ _

V . J • .._ : ^ 1942.

-

1943 \

•

Percentage
increase or,
decrease (-^)

315,632
Consumption entries..:.-....'...•.:-:.'
l ' . . . . . i . i l . . . 366,216
.'.-^13.6
30;816
Warehouse and rewarehouse e n t r i e s . . . . . . . . . . . . . . , . . i . . . .
.... .
51,059
, -39.6
Warehouse withdriawals'i ..1
._•. - ' ' • - . ' . • .
.
'-34.7
249,996 • 163; 163
300,728 :
Mail; entries-.!'.•.'
.....l-.-..,...-.-^:..'.
,...^.-_'..;..^_
• 16.3
258,482.
370,322
Baggage entries
.......
...1
'.
391,161
-6.3
Informal entries.Ci-.:./..".J......
*J::.....'...^....^.-.
-.-J.
202,600 • '227,, 499 ' a2;3
8,626.
Appraisement en tries.-...;
:...,.
9,925.
^ -13.1
505,124
All other
.i..:-..:...:
:
.--.:..-i....i
:
. . . . ' 603,101'
• -16.2
'''Total.-...'
.::
...1
. . - _ . . . . . - . J . . . . . . . . . . . . . . . . ;' 2,131, 539 1,921,910,.
-9.8




RE'PORT OF THE SE'CTIETARY OF THE TREIA.SITRY

223

Vessel, airplane, and highway traffic-—Contrary to the trend of duty
collections and entries of merchandise, border trafl&c increased for the
second successive year, declines hi automobUe and ferry traflSc being
more than offset by the greater use of other transportation, media.
The most important traffic trend appeared iu the increased use of'
passenger trains by those wishing to cross the border. In the Michir
gan and Montana districts more than three times as many persons
arrived in the United States by passenger trahis in 1943 as in the
previous year, while in the El Paso, San Diego, and Maine districts
the number of such passengers more than doubled and in most other
land border districts the increase was substantial. Pedestrian traffic
also showed a pronounced upward turn, particularly in each of the
districts along the Mexican border where the largest portion of this
, traflSc took place. Gas rationing continued to curtaU both the number
of automobUes and busses crossing the border and the number of
persons using this means of transportation. For the sixth successive
year fewer ferry trips were made than in the year before and, following
an increase in 1942, the number of ferry passengers again resumed the
downward trend which began 5 years ago. Although fewer documented vessels were entered than in the previous year, the number of
passengers brought in by those'vessels increased substantially. 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
1942 ctnd 194s
1942

Kind of entrant

Vehicles:
Automobiles and busses
Documented vessels
Undocumented vessels
Ferries . '
Passenger trains ._
Aircraft
Other vehicles
..

i
'

Passengers by:
Automobiles and busses
Documented vessels
Undocumented vessels.
Ferries
.
Passenger t r a i n s . . .
Aircraft
'
:
Other vehicles..
Pedestrians
... 1
Total passengers and pedestrians

..

.
..

.

•
. ...

.:

.
.

.1 . . .

. . .

.'.

.1

1943

Percentage
increase or
decrease ( - )

9,446,396
•• 33,960
25,279
81, 544
31,945
13,867
419,612

7,789,628
29,797
26,084
69,639
33,680
17,216
422, 247

—17.5
-12.3
—.8"
-26.9
5.4
24.2
.6

25,706,441
305,190
81,182
1,764,037
1,111,863
133,715
1,848,'857
9, 320, 260

23,622,646
388,965
75,700
1,602, 512
2,085,463
197,993
2,264,539
11,971,485

-8.1
27.4
-6.7
—14.3
• 87.6
48.1
21.9
28.4

40, 261, 535

42,099,302

4.6

'Revised. '

Airplane traffic on international lines continued its expansion for the
twelfth consecutive year. The'number of ahplanes arriving from
abroad was 24 percent larger and the nuiriber of passengers 48 percent
larger than during the preceding year. More than one-third of the
planes and practically half of the passengers who reached the United
States on international lines arrived at the Florida customs district,
mostly at the port of Miami. Large gains over the previous year were




224

REPORT OF T H E SECRETARY OF T H E TREiASURY

also recorded at Fort Fairfield, Maine; San Antonio and Brownsville,
Tex.; Baltimore,' Md.; Detroit, Mich.; Los Angeles^ Calif.; Sonoyta,
Ariz.; arid Honolulu. Dallas, Tex., became the terminal ioT international'airlines in September 1942, and handled a substantial volume
of trafiic during the rest of the year. Traffic at Bangor, Maine; Buriington, Vt;; Buffalo and New York City, N.-Y.; Seattle, Wash.; and
Juneau, Alaska, declined. The following table shows the number of
ah^planes and airplane passengers entering the United States during
t h e p a s t 2 fiscal years.
"
.
.
.
' '
Number of airplanes, and airplane passengers entering the United States, fiscal years
/
1942 and 194S
.
'
.
Airp knes
•

1942
Northeirn border:
Maine
I
Vermont
•••..,
. Buffalo
...^....^.........
.NewYork..
1
.
• ;Marvland.......
...-.
Washington
Montiana. .
Dakota. .
Michigan .
O t h e r districts

Percentage increase or
decrease (—)

1943

1942

1943

73.4
-41.0
-49.4
-33.6
. 2i23.1
-45. 9
-4.4
-21.5
22.3
-5.1

Passenger

397.2
-21.9
-40. 3
-25.9
259.6
-41.9
70.2
40.5
50.0
L5

. .'. .

r8,263

6,397

'59,274

61,446

-22.5'

3.7

.. .

1,024
21
13
287
rl2

371
1,686
403
93
348
11

13,487
35
16
2,690
'36

4,096
20,972
2, 299
184
4,151
187

64.9
1,819.0
615.4
21.3
-8.3

65.5
6, 468.6
1, 060.0
64.3
419.4

» 1,357
•

Totall

1,143
899
• 668
1,088
84
730
345
608
784
148

2,812

' 16, 264

31,889

107.2,

,96.1

2,933
1,286.
38

6,638
922
447

51, 307
6,197
673

94,181
4,992
5,486

126. 3 '
-28. 3
1,076.3

'83.6
--19. 4
•. 715. 2

Total...
.-.
J

Total
G r a n d total

.
-.

1,990
13,664
4,436
19, 692
• 652
. ,7, 224
1, 996
3,968
6,399.
••473

•9,896
• 10,588
2,648
14, 593
1,985
4,200
3,397
6,562
8,097
480

Airplanes

659
1,525
. 1,122
1,639 •
.. 2 6 :
1,349
361
775
641
••156

S o u t h e r n border:
Galveston
Laredo
El Paso.
Arizona
L o s Angeles
O t h e r districts

Florida
Alaska
Hawaii

A i r p l a n e passengers

District

•

'

4,257

8, 007

58,177

104, 669

88.1

. 79. 9

13,867

17, 216

133, 716

197, 993

24.2

48.1

••Revised.

Drawback transactions:—All types of drawback transactions declined in 1943, from the preceding year, the total drawback allowed
amounting to $12,014,810, of $2,756,292 less than iri 1942. More
than 99 percent of the drawback allowed was drawback on merchandise manufactured from imported materials of which the most important during 1943 were sugar, copper, lead, raw wool, arid coal-tar
products. The riuniber of drawback notices of iritent and the number
of drawback entries'decreased by 40 and 28 percent, respectively. A
comparison of these .transactions during the past 2 years is presented
in the following, table.' v
^
,»,
r/.




REPORT OF T H E S'ECRETARY OF T H E TREASURY

225

Drawback transactions, fiscal years 1942 and 1943
Transaction

1942

1943

Number
22,112

Number
16,946

-27.9

201, 464
121, 670
114, 437
14, 839
17,286
' - ,6,446

Drawback entries received
Drawback 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
L

120,983
. 96,693
89, 706
7,376
13, 206
.4,270

*-39.9
-20.6
-21.6
-50.3
-23.6
-33.8

Amount
Amount
Drawback allowed:
Manufactures from imported merchandise.:
. . . . $14,739,192.75 $11, 954, 454.18;
Duty paid on merchandise exported from continuous
. 22,763.42
customls custody
. .
...
11,404. 62
Merchandise, which did not conform'to sample or
specifications and returned to customs custody and
- 17,296.71
36,929.86
exported--....
.1
1,662.46
Salt used incuringfish
3, 207. 83
Total drawback allowed
..-.:
Internal revenue refund on account of domestic alcohol
Total

•. L..

'

-.

....

Percentage
increase or
decrease ( - )

-18.9
99. 6
' 107.7
• -48.2

14,771.101.91
285, 733. 26
.

12,014,809.91
267,982.12

-18.6
-9.7

15, 056, 836.17 .

12,272,792.03,

-18.6

The following table shows the principal commodites on which drawback was paid during the past.2 years. •
. Principal commodities on which drawback was paid, fiscal years 1942 and 1943^

Commodity
Sugar.
....
.....
Copper..
.
....
Lead ore, matte, pigs
: Raw wool and mohair...._._
Coal-tar products....:..-'.._.
Aluminum, crude....
...
Petroleum, crude
Zinc ore and blocks..
Tungsten ore
:
Manganese..'.
... ^
Nickel..:...
..i...
Raw cotton
.........
Flaxseed-.... _
....
Tobacco, unmanufactured...
Iron and steel manufactures-.
Bauxite ore
.......
Butter
Tallow, inedible
Burlap
Whale and herring oil
Motion picture films....
Soybean oil

1943
$2,667, 573.87
5, 726, 623. 23
1,033, 201.36
. 377,923. 66
- 25, 685.67
446, 148.10
465. 993.14
855: 047,21
324, 229.70
399, 253.96
445, 628.00
17, 578.05
134, 359.19
202, 301. 68
170. 358. 24
90,120. 79
69, 961. 68
151, 367.91
6, 790. 67
141, 914. 51
105, 750.78

$3,221, 663.16
"2, 397,794.38
• 866,333. 88
656, 360.83
• 64'9;003; 66
479, 006.25
. 416,924. 39
371. 615.98
331, 605.96
264, 490.14
. 218,027.20
196, 412.42
163, 358.42
160, 242. 67
143, 312.63
134. 280.86
122, 708. 21
102, 470.81
95. 730,12
91, 922. 65
91, 200. 43
2. 676.31

Percentage
increase or
decrease (—)
20.8
-58.1
-16.2
73.7
2,436.6
7.4
-10.5
-56.5
2.3
-33.8
-51.1
1,017.4
. , 21.6
-25.7
-21.2
36.2
46.6
-36.8
1,253. 7
-35.7
-97.5

Protests and appeals.—A much sinaller number of protests were
filed during 1943 than during the previous year, continuing the decline
evidenced since the start of the war. The number of appeails for
reappraisment also declined rather sharply as some of the difficulties
encountered during the preceding year by appraising officers in
ascertaining the correct foreign value of imported merchandise were
overcome. The following statement shows the progress of this
work during the past 2 years.




226

REPORT OF THE SECRETARY OF THE TREAS-XTRY
Number of protests and appeals, fiscal years 1942 and 1943
...

.

status'

Protests:
Filed w i t h collectors b y i m p o r t e r s
Allowed b y collectors
'.. D e n i e d b y collectors a n d forwarded to c u s t o m s court
Appeals for r e a p p r a i s e m e n t filed w i t h collectors
-.

1942

...

23, 481
1,342
21, 202
7,783

1943

•

10,876'
666,
14,069
• 4,648

Percentage
decrease

•

63.7
60 4
33.6
41.6

Appraisement.—A quantitative evaluation of appraisement activities is a difficult matter under normal conditions but is far more difficult at the present time. Goods dutiable at ad valorem.rates, which
prior to the present world war accounted for about 30 percent of the
total duty collections, shrank during 1943 to half their former proportions. This was due. to the almost complete elimination from the
American market of Japanese and continental European goods, many
of which had been dutiable at ad valorem rates. The amount of
work done by appraisement officers, however, did nbt decrease proportionately to the diminished quantity of goods dutiable at ad valorem rates. Many new types of imports from the Western Hemisphere
were introduced during the past year to serve as substitutes for commodities previously imported from Eui'ope and the Orient. The additional work due to difficulties in securing accurate valuations for these
new types of imports offset to a considerable extent the reduction in work
resulting from the decluie in the quantity of those imports which were
subject to review by the appraisement officers. The reduction in
appraisement work as a whole, however, made possible a 25 percent
reduction in the personnel assigned to this work.
In order to secure uniformity of appraisal at the various ports of
the United States, notices of valuation and classification of merchandise were interchanged. The differences in valuation between different
ports were adjusted by means of correspondence, foreign investigations, and the cooperation of importers. Differences in classification
were also adjusted by cori^espondence between field officers.
The activities of the Customs Information Exchange at New York
in connection with its work as the clearing house for the dissemhiation
of iaformation, primarUy to appraisers and secondarUy to the entire
Customs Service, were as follows:
Activity
Appraisers' reports of value or classification received
Differences in classification reported
Differences in value reported
Appraisement appeals reports received
...
Changes in value circulated
•Reports and price lists affecting values circulated......-.i^--.
Requests for foreign investigations..
.
.
-.
Copies of foreign reports and price lists forwarded to interested
.appraising oflacers
.
..




. 1942,
number
16,339
991
2,238
2,341
636
1,146
448

1943,
number
11, 261
854
1,637
946
321
667
419
11, 608

Percent
decrease
26.6
13.8
26.9
69.6
49.4
41.8
6.5

REPORT OF T H E SEiCRETARY O F ' THE TREASURY

227

Laboratories.—The number of samples of merchandise tested at the 9
customs laboratories during 1943 was 96,962 compared with 100,562
tested at 10 laboratories duriag the previous year. The volume of work
greatly iacreased duriag the course of the fiscal year 1943; 63 percent of
the year's total of samples were tested during the last 6 months of the
year, the number of samples tested during that period being 72 percent
greater than during the fhst 6 months. The samples tested during
1943 included 5,007 samples analyzed for-the foUowing war agencies:
Uhited .States Maritime Commission, Lend-Lease Administration,
The Panama Canal, Army, Navy, and Marine Corps, Metals Reserve
Company, Food Distribution Administration, Qffice of;Pric6 Administration, and Office of Economic Warfare. The.analysis of many of
these samples was very complicated and in each case .re(iuir.ed much
more time than the analysis of the individual samp>les of imported
merchandise ordinarily received.
. . • . , ' •
Law enforcement activities
Seizures.—For the. second successive year more seizures were made
than during the preceding year, every type exciept lottery -seizures
being more numerous than in 1942. The total value of goods seized
by customs, officers, however, was not so great as ia 1942, owiag to the
fact .that duriag the earlier year vessels of much greater value were
seized than during 1943.
'*
Merchandise seizures were of greater total value in 1943 than during
the previous year partly because of the inclusion in this category of the
cargo of certain vessels seized for technical violations of the navigation
laws and antismuggling acts. The penalties incurred for.most of these
violations were subsequently remitted. The value of seizures of
jewelry and precioris stones was very much smaller than in 1942, a part
of this decline beiag due to the inclusion in the 1942 total of .two
exceptionally large seizures of precious stones the aggregate value
of which was $831,273. Violations of the rationing program in the
United States accounted for the iacreased value of seizures of wearing
apparel ahd edibles. ; ..
Although more liquor seizures were made than during the previous
year, the quantity and value of distUled and malt liquors and alcohol
were less than ia 1942.
Narcotic seizures increased both ih number and value as compared
with .the previous year but these seizures continued to be; confined
to quantities far smaller than in the heyday of narcotic smuggling.
A considerable portion of the narcotic seizures was made along the
Mexican border. The largest seizure of smokiag opium was made at
El Paso in June and consisted of 633 ounces. A single iseizufe of
2,720 ounces at Laredo: in February accounted for two-thirds of the
total quantity of marihuana seized. The quantity of seized narcotics
duruig 1943 was 4,131 ounces of marihuana and 7,507 ounces of other
drugs as compared with 3,161 ounces of marihuana and 923 " ounces
"
of other drugs in 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 in the following table.
» Revised.
•




228
.•

REPORT OF THE SECRETARY OF THE: TREASURY
Seizures for violations ofthe customs, laws, fiscal year's 194^'and 1943

Seizure

Merchandise:
'Number.
• ••' V a l u e :

•

••.•:,

•

,
•"•

^

'

••;''•.•:'

1943

> ?;'r.i
.
' : ' K - ' ' ^ ^' ;.- -^
:..^.i:-.-.; .'-..-^......,..,..•..-.
. « • .'

^• " » .

J i

•

,4,619^

Liquors:
''
- • .•
•
• Number.....---:...^.
.i....-!..!.Ji_."...
Quantity (gallons).^..-.-,.-............^
,_
Value..
:^.i--!!!!..!.:.:!!..-!..:...B o a t s , a u t o m o b i l e s , airplanes, a n d horses; valuer;
Grand total:
Number.
Value....

25.9

$176,163
101,296
. 176,-754
, vl6„224
-• '16; 946'
;, 63;fe37
. 107,864
'
2; 055
12, 703
•
17;644
•••.,.7,:422
;• '4;446
-4,810^
2, 363
3,884
2, .057
6, 300, 582
.100,150
' • 44,114
• 18,896.
' -•9,991; . ; -6;666;
".- .6,643
^"•' % ' m
, .13,898
• ^2; 892
': . 1,.569
2,606

' -86:9
302.,8
^ : 619.-0
.-91-1
-421 7
• 624.:-7
110.7
• 238.6
354.0
92.3
, 234. 0
-6.7
'-35.6
-46.6
-81.0
-96.6
215.5
1;828.9
: , 632.0
34, 351; 7
; 83.:3
1,983.8
2,305.1
. 689: 7
"96; 300.^0
• ;-78.0
270. 7

,3,793,253

7, 232, 679

90.7

568
; 351

684
'•- 279

4.7
-20! 5

2,287
. 2, 990
29
: 3,636.
314
'. 391
. 2,015
•.' ' 3
7,148
703

-------

Prohibited articles:,, ,
; .
;'. -i ^ » - s
Obscene, n u m b e r
.
^.1...'...•...
.Lottery, n u m b e r : - - - . . . . : . . . . ! - . - . : . . . . . . ' - ' .
Narcotics:
. '
. ... , f
- . •' N u m b e r : . ! ' . . . . . ! : . . . - ! - L i : . . - : . . . : . . . ^ : . - . : !

, 5,816,

. ;$1, 340, 769
. 25,145"
•' • :24, 586
182,*365;,
• 29; 588: .
10^ 186:
•. 61,187
..•:,;
607
.. 2, 798
•' " '9,'177
•
2, 222
- ' 4,766*
•
"7,473.
4,429
20, 492
•.,
61,210
1,996, 748

'

, Jewelry, e t c . ,
.....L
..•.i...-^....;.,.. ^ . . . . . i
W e a r i n g apparel a n d l u g g a g e . .
......'.. . 1 . . . . . . . . .
:, ,, Toilet a r t i c l e s . a n d : m e d i c i n e ^ li.= . L . . - ^ : . i L . - - . . • . . J . . .
Textiles a n d r a w wool
..
........
-----^
Furs—skins and m a n u f a c t u r e d - - • - . . . ' . . - . : . . . - - - . . ! . . / E d i b l e s a n d farm . p r o d u c e L . . - i ^ , l i j . - . f . . . l L _ ' . . . . - . ^ - . . . : .
' H o u s e fuirnishings, i n c l u d i n g . r u g s !
J1.........
Guns and a m m u n i t i o n . . . . . .
::..L.:...-.i...::....-.:
Hardware...
.....:-..
.
--:---.
Carheras a n d other sport g o b d ^ . ' i . - . . L : . . . . : . . . . . . ^ : i l l
. S t a t i o n e r y supplies a n d b o o k s . . . . , - _ ; . . . . . . . . . . * . : . . - . . . , i
Cigars, e t c . . . . . : ' . ' . . V . . ' . . . . ' . - I ' . .
P r o h i b i t e d articles
ii:.-.
Livestock (except horses)
--..
Colors, d y e s , etc
L u b r i c a t i n g oil
.Vii.-.r;-------:-----Cargo of seized vessels
..1..S..........I.S.....
Gasoline
'.
Chemicals.*:.!..:^.-..11 J . . i i i . V - - - - r - - ' - ^ - - - - - " - = - - ' - - .. A u t o a c c e s s o r i e s . - . . - - . - . . - - - - . . . . - - - . ^ . . . - ,
.-.-,.• Lumber
i.l..-..
I.A.J:..!...'..^
j.li.:.'!
.- . C o k e a n d oiL-..^---Lj:'.._.Lit.-...---uy".;.'
vJ..i:..:,.
Brick a n d g r a n i t e . . . ! ' . .
.
'...'1.'..'. 1..1.
...
•' M e t a L . . i . . . : . - . ; . ; . . ^ i L . - - . l . i ; i v - : : . j . i - A < ! . . l u ^ . . i - . . Machinery parts
:._.,_:... ^.......—...
.......
R u b b e r , excluding t i r e s . . V . . . ' . . : ! . . : ' . . . ' i . . J . : . . i . 1 . 1 1 ^
M e d i c a l a h d scientific i n s t r u m e n t s
.Miscellaneous
.
........
Total value._.•_......i

, Percentage
increase o r .
decrease (—)

' •'••''.' 5 9 3
- ;. $84,162

. ••'•'• 729'
?;-$137,587

22. 9
.63.6

•

^' ; 3,174
, . 3,.862
$37,826
$14,348,734

• -3,'894
. . , 2,413
' • • $30>823'
: $2; 378, 611

22.7
-37.6
-18.5
-83..4

9,296
$18, 263, 975

v ; 11,302
$9,779. 600

. 21. 6
-46.4

• Revised!

In addition, to the goods .that; were seized^ claims aggregating
$13,246,130 were initiated••b;y^«the Customs Service.against importers
in connection with various irregularities-audi frauds which .did not
necessitate a seizure or were discovered after -the goods had - gone
into consumption.
:•> ..r - ' '--i
: •
v ;: ^ -i , ° The following table presents.the'record.of customs seizures classified
according, to the various agencies which were instrumental :in apprehending violators of customs'laws.^ . :: ^- • : -




229

REPORT, OF THE SEGRETARY.OF THE TREASURY

Seizures and arrests for violatioris of customs lawsi' classified according to agencies
participating, fiscal year ^1943

Seizures
Narcotics 2

Total
Number, 1

:Value

Number

Customs Agency Service:.
659 $285,174
Investigative Unit
369
Enforcement Unit
109, 549
Customs Service, exclusive of Agency Service.. 10,221 9,367, 713
T o t a l Customs,
Service
Immigration
Customs Service assisted
by other services
Other Federal and local
ofiicers
(,

Grand total---.

11,139 9,762,436
9,022
87
4,422
53
3, 720
23
11, 302 9,779,^00
;'

Value

Liquor
Number

19 $37. 459
. 26 20.043

Lottery Merchandise
and obscene,
Value num- Num- Value
ber
ber

$437
7,881

None

535
282

$170,338
28,500

3,792

19,249

863

4,894

7,029,848

136,926 3,848
661 .' 18

27, 567
1,963

863

27

672

6
51

1,270

5, 711 7,228,686
1,744
• 57
577
26
1,572
22
6,816 7, 232. 579

79,424

' 717
,12

1

23

729 ; 137, 587 .3,:894

30;823

>.

: Seizures—'Continued

863
•

•

Boats ,
Total ;
Automobiles
Horses
Numvalue
ber of
boats,',
arrests
automobiles,
Num- Value • Num- Value Num- Value
and
ber
ber.
ber.
•. horses
• '

Customs Agency Service: .
•
'$76,940
Investigative Unit
..
Enforcement Unit
,63,125
Customs Service, exclusive of Agency
Service'
. .
•
"
2, 239,192

3
21

' $61, 500
681

25 2,160,893

33' $15,440
.117 ' 51,851
164 77; 985 '

Total Customs Service._-.!... 2,369,257 . 4 9 2, 223,'074 . 314 145, 276
Immigration...-:!.-!...-..:
..:
. 4, 654 .... J.. ^ - , • • , 4
4,650
Customs Service assisted by other
services.....i..::..:._.'....
. '
2,675
•- '4'
2,575
0 ther Federal and local officers..;.... . . ' ' 2 ; 125
2,125
: 8,
. Grand total. _:".-..:.-....!_.,__ 2,378,611

:50. 2, 223,078 , 334

154, 626

$593

31
208

13

314

218

29

907

457
53

16

49
16
29

907

575

1 Excludes num.ber of boats, automobiles, and horses, as they were seized in connection with narcotics,
etc., seizures. ,
.,
.
,
. . .
.2 Other types of seizures of narcoticsare described in the section under'the Bureau of Narcotics. •

• More automobiles wer.e; seized during 1943 than during the previous
year. \ T h e 1943 total: mcl^ded, 8 automobiles-valued .at $2,125 seized
by: Secret Service officers and delivered to,?the. Custoins Service for
forfeiture as. compared with 19 automobiles valued at $7,970 during
the previous year.
, * • : ,.
:,: • ^ . .
;
The following table summarizes thefiiumber of boats, automobiles^
etc., seized for custoins violations during the past 2 years.




230

REPORT OF THE SECRETARY OF T H E TREiAiSiXJRY

.• Boats, automobiles, airplanes,.aind horses seized,- fiscal years 1942 and 1943
F o r liquor
violations

F o r narcotic
violations

Total

F o r other violations

Seizure
1942
Boats:
Number
Value..-..- . .
Automobiles:
N u m b e r _. . . .
Value
Airplanes:
Number.'
Value
Horses:
Number
Value . '.

1943

1942

1943

" Revised.

4'
$1, 670

36
30
$13,669 . $13,150

•
,

• '

1
.$20

T o t a l v a l u e . . . . $24,891

••1942

1943

1943

67
• 60
50
, , 63
.$14, 218,964 $2,223,078 $14, 234, 768 $2, 223,078

4
$16,814
43
$9,067

'1942

$1,670 '$13,669

•'

204
$84,613

300
, $139.806'

• 1
$2, 300
87
$4, 307

282
. $l"07;339
' . , • •

.•
29
$907--

••

•••-

334
$154,626

i :

$2,300'
88
••$4,327

29
$907

$13,150 $14, 310,174 $2, 363, 791 $14, 348, 734 $2/378,611

•

" . . .

During the year 243 seized automobiles and trucks were returned to
petitioners because the violations were not sufficiently flagrant to
warrant forfeiture. Of the 59 automobiles forfeited, 33 were assigned
for official use either to the Customs Service or to some other governmental agency, and 26 were sold at public, auction.
In the course of their regular duties officers often apprehend
violators of other than customs laws. During the year, 2,266 seizures
were made for other departments and agencies, of which 351 were
made for the Department of. Agriculture and 1,783 for the Post Office
Department. There were 242 persons apprehended, of whom 233
were for the Immigration Service. In addition, 2,669 violations of the
Department of Agriculture laws were detected.
Legal proceedings.—As the result of narcotic seizures, 221 persons
were presented for prosecution. Inclucling. cases pending from the
previous year, those which were concluded resulteci in 147 convictions;
and 38 acquittals. Prison sentences aggregating over 168 years and
fines amounting to $15,354 w;ere imposed by the court oh convicted
offenders. In addition,; penalties aggregating $46,620 were assessed
against the masters of 73 vessels on which narcotic drugs were found
concealed;'many of these cases have hot been concluded, butj including cases initiated prior to 1943, $9^878 was• collected from the
masters of vessels..
In connebtion wnth all seizu'resHhei'e^ were 575 arrests, ah increase of
89 during :the year. • ^^The high ratio of' convictions in. the number of
cases disposed of continued. ' Of the 569 disposed of in 1943,' 372
convictions were secured, or 65 percerit, the same propc)rtioh ^a;s in
1942. Prison terms to which customs violators were sentbnc:ed
aggregated alrnbst 252 years in 1943^^as compared with 189 years' in
1942, while the total amount of fines imposed by the courts was
$58,851 in 1943 and $27,206 in 1942.
Fines, penalties, etc.—Collections from fines, forfeitures, penalties,
and liquidated damages ahd sales of seizures aggregated $620,864 in
1943, a decrease of $27,540 from the previous year. Of the 1943 total,
$20,987 was derived from the sale of seized and forfeited articles
compared with $13,235 derived from the same source in the previous
year.




231

REPORT OF T H E SECRETARY OF T H E TRE'ASITRY

Customs Agency Service.—In order to improve the efficiency of
customs agents' operations, considerable changes were effected in the
coinposition and location of the agency districts of the Customs
Service during the fiscal year. A new agency district was established
with headquarters at New Oiieans, and the districts with headquarters at Detroit and St. Paul were abolished and consolidated with
the Chicago district, suboffices being retained at St. Paul and Detroit
under the headquarters office at Chicago. The headquarters of two
districts were changed: the Houston office was transferred to El Paso,
Tex., and the Jacksonville office, to Miami, Fla. The suboffice at
Savannah was reopened, after having, been closed for about a year.
A Ipartial summary of the activities of the agency service during
the past 2 years is presented in the following table.
Activities of ihe Customs Agericy Service, fiscal years 1942 and 1943
. Number
Activity
1942
I n v e s t i g a t i o n s of violations of c u s t o m s l a w s :
Undervaluation
.!....-. —
....
M a r k i n g violations
!
' ' Baggage v i o l a t i o n s . . . . . - .
....i
._.
D i a m o n d a n d jewelry smuggling
• N a r c o t i c smuggling
..!
Other smuggling.'......-.
.
...
...
Touring permits
!
O t h e r investigations:
'•' •
Alleged erroneous c u s t o m s procedure
.
. Drawback
.-.-:!
.
Classification a n d m a r k e t , value
:---."-.-..
C u s t o m s b o n d s to d e t e r m i n e solvency a n d sufficiency
Applications for customhouse brokers' licenses...
Applications for b o n d e d t r u c k m e n ' s licenses
P e t i t i o n s for relief from a d d i t i o n a l d u t y
!
Personnel
.
\.-,..
.
N a v i g a t i o n violations
...
.
Pilferage of m e r c h a n d i s e
L.-.-.-.-I.
...
Foreign, b y m e m b e r s of domestic service:
:
• Miscellaneous
.'...!.!
1
....!
E x a m i n a t i o n s of c u s t o m h o u s e b r o k e r s ' records
-.-....
Cases of cooperation w i t h other agencies
.

1943

Percentage
increase or
decrease (—)

586
85
716
366
819
'727
269

•674
104
1,104
636
752
1, 726
241

• 15.0.
22.4
54.2
73.8
-8.2
137.4
-10.4

110
1,083

159
863
481
56
86
45
354
1,712
263
202
467
2, 202
K3
7,258

. ,44.5
-20.3
. -23. 8
-43.4
21.4
-49.4
15.7
22.4
8.1
11.6
4.9
-26.9
78.7
-39.3

6a

99
70
89
306
1, 399
2H

. 4^5
in
3,011
1C8
11,965

Miscellaneous
Under the authority contained in section 318 of the Tariff Act of
1930 and at the instigation of the War Production Board, the President issued Proclamation No. 2566, dated August 7\ 1942, declaring
the existence of aii emergency and authorizing the Secretary of the
Treasury to extend for 3 years the time prescribed ih section 313 (b)
of the Tariff Actof 1930, within which sugar must be used in the manufacture or production of air tides, in any case in which the time prescribed, in such subsection had not expired. Under authority of the
proclamation, the Acting Secretary of the Treasury so extended the
time limit in Treasury Decision 50703 (7 F. R. 6441).
This action was taken because the exports of refined sugar and of
manufactured articles containing sugar were not so large as the
volume of full-duty sugar imports. Without the extension of time,
refiners would have to withhold from the domestic market sugar
intended for ultimate exportation in order to protect their drawback
credits based on importations of full-duty sugar. This sugar would
be warehoused and earmarked for subsequent exportation although the



232

REPORT OF THE SECRETARY OF THE TREASURY

actual exportation might not take place for a considerable time.i
By extending the period during which drawback could be claimed
oh exports of sugar and sugar products, refiners are enabled to meet
the demands of the. domes tic market without being penalized to the
extent of the duty on the imported sugar used.
War activities.—Most of the activities of customs officers which
resulted from the prosecution of the war m 1942 continued unabated,
during the past year and in some cases increased! These included
the handhng of communications or correspondence coming ihto or
going out of this country by courier or otherwise than in the regular
course bf the mails; the regulation of imports and exports of merchandise by various .governmental agencies for use in national defense or
belligerent operations; the enforcement of export licensing requirements for strategic materials; the control of shipments to blocked
nationals; and collaboration in the enforcement of export control,
alien property control, trading with the enemy, foreign funds
control, and other war measures.
Among the new war problems which confronted the Customs
Service in 1943 were the disposition of property salvaged from torpedoed or wrecked vessels; the admission into the United States free
of duty during the war of various special categories of merchandise,
such as effects of persons in the Government service or persons evacuated to this country by Government order, articles for members of
the armed forces of the United Nations or for enemy prisoners of war,
and articles sent home as gifts by our soldiers and sailors abroad; the
assumption of temporary custody under authorization of the War
Department and removal of imported merchandise from docks and
warehouses where necessary to keep such transportation facilities
clear for the movement of war materials; the administration of Executive Order No. 9177, dated May 30, 1942, authorizing the free entry
by certain governmental agencies of emergency purchases of war
materials abroad; and the handling of imported merchandise which
remained in customs custody for a longer time than the statutory
provisions permitted where delay was caused by export control,
foreign funds control, or other governmental emergency licensing
requirements, or by other wartime conditions. Customs officers also
gave assistance to various military and civilian governmental agencies
in cases involving war problenis touching, upon the field of customs
jurisdiction. Close cooperation was maintained with the Office of
Price Administration in connection with importation of rationed
articles, such as processed:foods, coffee, sugar, shoes, tires, tubes, and
other rubber products. The surrender of ration stamps or other ration
evidence was required by customs-officers before the delivery of the
rationed articles was permitted. Assistance was also extended to the
Office of Price Administration in connection with the lading of rationed
ships^ stores on outgoing vessels, and to the Office of Economic Warfare in not permitting the lading of excessive amounts of supplies as
ships' stores.
Maritime matters constituted another of the wartime activities of
customs officers. Special procedures were adopted for vessel clearances to facilitate lend-lease shipments. and the transportation of
mihtary personnel and supplies, and to guard against the leakage of
ship-movement information to any unauthorized persons.
T h e Secretary of the Treasury, pursuant to the authority;contained




REPORT OF THE SIECRETARY OF THE TREIASTJRY

233

in the Second War Powers Act, 1942, issued a number of orders waiving compliance with certain provisions of the navigation laws. The
majority of these orders were given a confidential status because of
their close relation to the war effort and the special nature of their
contents, but some, of more general applicability, have been published. Among the more important orders in the latter class were
those (1) permitting Canadian halibut fishing vessels to land their
' catches of halibut in Alaska for a limited time; (2) permitting certain
foreign-flag vessels and vessels of the United States under limited or
restricted registry to transport merchandise between Puerto Rico and
the United States under certain conditions; (3) permitting certain
foreign-flag vessels to transport coal between United States ports in
the range between Norfolk, Va., and Eastport, Maine, for a limited
period; and (4) permitting certain foreign-flag vessels and vessels of
the United States under limited .or restricted registry to transport
merchandise or passengers, or both, in the coastwise trade, and
permitting certain of those vessels to tow any vessel coastwise.
The admeasurement of vessels of the so-called Liberty Ship class
was greatly simplified by the adoption of standardized figures for the
vessels of this class, all of which are nearly identical in design and
arrangement. A tolerance of three-tenths of 1 percent in the gross
and net tonnages was allowed in order t h a t small and unimportant
variations in 4he use of spaces on individual vessels might be disregarded in the interests of speed and economy in measurement.
Training of employees.—Owing to transportation difficulties, reduction of personnel, and concentration of the attention of customs officers
on war-time activities, less attention was given to the training of employees by means of correspondence courses and instruction classes
than during the previous year. Instruction classes were conducted
at 22 ports of entry with an average of 17 customs officers and employees in attendance at each class. Discussion classes were conducted at 23 additional ports of entry and customs stations, where
the number of regularly assigned personnel was too small to warrant
formal classes. A total of 1,185 instruction classes and 394 discussion
classes were conducted duriag the year, an aggregate of 1,579 meetings.
Publications.—The 1943 edition of the Customs Regulations was
completed and issued during the year. This edition is limited to
those regulations which concern the general public, regulations ap.plicable exclusively to customs officers being published in a separate
volume—-The Customs Manual. The two annual marine publications of the Bureau of Customs were issued as usual but because of
the nature of the information contained in them their distribution
was carefully restricted. '^Merchant Marine Statistics'' provides
statistical statements regarding the vessels of the United States, and
"^'Merchant Vessels of the United States" gives a list of such vessels,
describing each one ia detail.
Changes in ports and stations.—During the year the ports at Cordova, Alaska; Mahukona, T. H.; and Gas tenia, N. C.; and the stations
at Depot Harbor, Ontario; Taku, Alaska; Port Crescent, Michigan;
and Louisville Landing, N . Y., were abolished; and a station was
established at Chief Mountain, Mont.
Cost of administration.—^^The total revenue collected by the Customs
Service, including collections for other departments and Puerto Rican
collections other than duties, amounted to $414,191,247 as compared
542890—44

1.7




234

REPORT OF THE SECRETARY OF THE TREASURY

with $428,596,660 in 1942, a decrease of 3.4 percent during the year.
The expenses were $23,381,640, an increase of $2,187,565 over 1942.
This increase, despite reduced personnel, was largely due to the increased salaries paid under Public Law 821, approved December 22,
1942, and the War Overtime Pay Act of 1943 (Public Law 49), approved May 7, 1943; and increases in salaries provided Under the
Mead-Ramspeck Act. The cost to coUect $100 was $5.74 in 1943
as compared with $4.94 in 1942.
BUREAU OF ENGRAVING AND PRINTING

The deliveries of currency, bonds, stamps, and miscellaneous
printings by the Bureau during 1943 amounted to 854,540,520 sheets,
an increase of 241,001,679 sheets over the previous year, or 39.28
percent.
'A comparative statement of deliveries of finished work in the fiscal
years 1942 and 1943 follows.
Deliveries of finished work, fiscal years 1942 and 1943
Sheets
Face v a l u e ,
1943

Class
1942
Currency:
U n i t e d States n o t e s . . .
Silver certificates
Overprinted * 'Hawaii"
Federal Reserve notes
Overprinted " H a w a i i " . . .
Specimens.Total




3,870,''000
96, 464,000
751, 000
49,668,700
543, 333

• $149,940,000
1, 643, 560, 000
9, 012, 000
7,139, 040, 000
67, 200, 000

118. 480, 037

151, 297, 033

8, 908, 752, 000

500
1, 545
1, 595, 506
66, 554, 500
15,187,000

800
2, 492, 622
2, 765, 000
269,179,000

760,000
45,104,493, 000
3, 281, 250, 000
16, 938; 650, 000

'.

B o n d s , notes, bills, certificates, etc.:
Bonds:
P a n a m a Canal
_
P o s t a l saviDgs
. ._
Treasm-y
U n i t e d States s a v i n g s . .
. _
' ' U n i t e d States w a r savings
Consolidated Federal farm loan for t h e Federal l a n d
banks... . . .
F a r m loan
Federal F a r m M o r t g a g e Corporation
H o m e Owners' Loan Corporation..
Insular—Puerto Rican
•Notes:
^
,
Treasur3':
..
Commodity Credit C o r p o r a t i o n . . .
1..
Reconstruction F i n a n c e Corporation
T r e a s u r y bills
Certificates: ,
Indebtedness
. .
.. . .
C u b a n s;ilver
Philippine treasury
. .
. 1
Debentures:
Consolidated collateral t r u s t for t h e Federal i n t e r - '
m e d i a t e credit banks..
Consolidated for Federal h o m e loan b a n k s
N a t i o n a l H o u s i n g Agency, Federal H o u s i n g Administration:
Defense housing insurance fund
H o u s i n g insurance fund
'
M u t u a l mortgage insurance fund
W a r housing insurance fund
I n t e r i m certificates for T r e a s u r y b o n d s
I n t e r i m transfer certificates for postal savings b o n d s
I n t e r i m receipts:
Federal h o m e loan b a n k s
Federal Savings a n d L o a n I n s u r a n c e Corporation
Specimens:
Bonds .
N o t e s a n d bills
Certificates . .
.
V Debentures
I n t e r i m certificates
.
Interim receipts....
_.
:

4, 615,000
89, 370,000
250, 000
24,166,867
179,167
3

_'_..

._

Total

1943

^

'

1,350
1, 700
10, 650
80
5, 314 .

500
2, 476
1,000
2, 668

11, 250, 000
1, 492, 000
90, 050, 000
290, 000. 000
1,969,000

1, 550, 900
64,000
12, 000
33, 900

3, 686, 325
141,850

72, 630,000, 000

69, 300
15, 000
2, 664, 400

248, 650
992, 333

98, 798, 000, 000
18,132, 000

33. 5.50
6,700

405, 750, 000
101, 000, 000

^ 8, ioo

16, 500, 000

37, 500
8i 305
3,375
2, 575
17,100
217, 500
, 2; 000

•

32, 965, 850, 000

13
100
88
7
2
89
4

• 88
^ 3
6
3

87,043,862

279, 674,128

4

>
270, 665,146, 000

REPORT OF THE SECRETARY OF T H E T'REASURY

235

Deliveries of finished work, fiscal years 1942 and 1943—Continued
Sheets

Number of
stamps, etc.
1943

Class

Stamps:
Customs...
Internal revenue
District of Columbia beverage tax-paid
Federal migratory-bird hunting
_.
Puerto Rican revenue
Virgin Islands revenue
Specimens:
Internal revenue
District of Columbia beverage tax-paid.
Postage:
United States..
.
Canal Zone
Philippine
Specimens, United States..
Postal savings
War savings
Specimens..

111

3,070

186, 579,088
220,468
• 187,689
36
17,154,946

189, 706,354
43,610
9,763
25
8,391,168
18,570, 714
62

19,372,437,053
2,228,000
662,424
.- 1,779
966,883,025
1,982, 566,900
5,200

371,418,943

38,966,855,296

29,086,821
85, 414
462, 670
5,727, 213
13,313
1, 266, 442

42,453, 208
52,084
260, 603
4,791,271
27, 250
2, 294,077

212,266,040
247, 442
• 165,742
18, 658,096
65, 600
11,470,386

6, 201,300

. 1,779,600

1 355,900,000

656, 268,
15, 071
21,184

1, 739,126
75,161

43,866,378

G r a n d total..

2, 242,000
16, 503, 490, 545
46,115, 200
2,895, 200
97, 273, 900
62,000

52. 2.50, 416

600, 567, 482

613, 538,841

Total

108, 000
162, 638, 616
230, 576
25, 850
1,693,585
620

364,148, 674

Total.
Miscellaneous:
Checks
Warrants..
...'
Commissions
Certificates
.Drafts
Transportation requests
Nontransferable food order and nontransferable surplusfood order stamps
Nontransferable cotton order and nontransferable surplus-cotton order stamps.
' Other miscellaneous.....:.
Specimens
Blank paper, including experimental

1 E x c l u d e s 4,234,000 b l a n k

176,000
157, 305,191
200,883

854, 540, 520

26,000
2, 300, 270

455, 220
503, 894
3, 451
70, 640

fillers.

Dies were engraved for two new issues of postage stamps, namely
the 1-cent ''Four Freedoms,'^ series 1943," and the 2-cent ''United
Nations,'^ series 1943.
A contract was entered into with the American Bank Note Company, New York, for-the manufacture of postage stamps, in multi
color, designated as the "Overrun Coimtries^' series. The countries
represented in this series included Poland, Czechoslovakia, Norway,
Netherlands, Belgium, Luxembourg, France, Greece, Yugoslavia,
Austria, Albania, and Denmark. New dies and plates were prepared for various classes of bonds
notes, revenue stamps, and other printed work. The production of
United States war savings bonds was increased from 700,000 bonds
per day at the beginning of the year to 1,125,000 per day in May
1943; total deliveries for the year amounted to 271,^944,000 bonds,
with a face value of $20,219,900,000. Another major project was
the printing, by the offset process, of Allied Military currency and
postage stamps for the War Department.
The number of employees, on the pay roll at the beginning of the
fiscal year was 7,803. sDuring the year, 2,226 employees were separated from the service and 2,241 were appointed, making a total
of 7,818 at the end of the year.




236

REPORT OF THE SECRETARY 0F THE TREASURY
;

Expenditures amounted to $21,608,452.16, an increase of $4,259,959.73 over the previous year, or 24.56 percent. The following statement shows the appropriations, reimbursements, and expenditures
for the fiscal years 1942 and 1943.
1943
Appropriations:
Salaries and expenses
Printing and binding:
Reimbursements to appropriations from other bureaus for work completed:
Salaries and expenses 1
Printing and binding
J

Increase

$10,050,000. 00 $10,327,168.00
5, 500. 00

$277,168. 00
5, 600.00

7, 753, 724.13

12, 271, 312.16
3, 444.07

4, 617, 588. 03
3, 444. 07

Total-

17,803,724.13

22,607,424. 23

4, 803, 700.10

•Expenditures:
Salaries and expenses 2.
Printing and -binding.

17,348, 492. 43

21, 599, 660.70
8, 791.46

4, 251,168. 27
8, 791. 46

:

17, 348, 492. 43

21,608,452.16

4, 259,959. 73

Unexpended balance..

456, 231. 70

998,972. 07

543, 740. 37

Total...

1 Additional amounts received from employees for lost identification cards, locker keys, package-booth
checks, and badges—$227.50 for 1942 and- $174.00 for 1943—were deposited to the creciit of the Treasurer
of the United States as miscellaneous receipts; and amounts received from reimbursements for jury service
by employees—$62.50 for 1942 and $100.22 for 1943—were deposited.in the general fund receipt account.
• 2 Includes $11,300 transferred to the Bureau of Standards for research work and .$80,000 transferred to
salaries and expenses, guard force, Treasury Department, for service rendered in connection with the protection of currency, bonds, stamps, and other papers of value, in each of the years 1942 and 1943. The
amounts of $430,965.84 and $719,361.97 were transferred to the retirement and disability fund in 1942 and
1943, respectively; the amounts of $91,853.75 and $1,343,619.75 were deducted from the salaries of employees
through the payroll allotment plan for the purchase of war savings bonds in 1942 and 1943, respectively,
and $360,590 for Victory tax was withheld from salaries of employees from January 1, 1943, through June
30. 1943.
.
,

FOREIGN FUNDS CONTROL

By virtue of the authority given the Secretary of the Treasury by
Executive Order No. 8389, as amended, and by Executive Order No.
9095, as amended, under sections 3 and 5 (b) of the Trading with t h e
Enemy Act (50 U. S. C. (App.) 3, and 50 U. S. C. (Supp. 1941)
5 (b)). Foreign Funds Control has blocked the holdings subject to the
jurisdiction of the United States of 36 countries and their nationals.
During the fiscal year 1943, Foreign Funds Control considered
238,000 applications for licenses to effect specific transactions involving total values of over $4.8 biUions. This total was distributed by
types of transactions approximately as follows:
Ships and shipping
Blocke;d business enterprises in the United States.
Foreign trade
Patents, copyrights, royalties, etc
Securities
other business transactions!
Personal transactions
Miscellaneous transactions
.•
Total-




..-.
-

1

(In millions)
$310
. - - . 2,598- —-•
275
8
--.
843
540
68
-230
^—

-

4,872

237

REPORT OF THE SEiCRETARY OF THE TliEiASURY
BUREAU OF INTERNAL REVENUE«

General
Internal revenue collections.—During the fiscal year 1943 internal
revenue collections, including trust fund collections, totaled $22,371
millions, an increase of $9,324 millions over collections for 1942. The
total amount collected included back income taxes of $557 millions,
which is approximately $97 millions more than back income tax col-.
lections for 1942.
Miscellaneous' internal revenue collections amounted to $4,574
millions, which is an increase of $718 millions over collections for
1942. The largest increases were as follows:. Capital stock tax, $47
miUions; estate tax, $74 millions; liquor taxes, $375 millions; tobacco
taxes, $143 millions; retailers' excise taxes, $85 millions; and miscellaneous taxes, $316 millions.
Employment tax collections totaled $1,499 millions, an increase of
$313 millions over the preceding year. Total collections under the
Federal Insurance Contributions Act were $1^132 millions; collections
under the Federal Unemployment Tax Act, $156 millions; and collections of carriers taxes, $211 millions.
Total collections of internal revenue during the fiscal years 1942
and 1943 are shown in the following summary, classified according
to the administrative organization responsible for the tax. A detailed
statement of collections appears in table 6, page 501 of this report.
Summary of internal revenue collections, fiscal years 1942 and 1943
[On basis of reports of collections, see p. 460]
Admmistrative unit

1942

1943

Increase '

->
Income Tax Uniti
Alcohol Tax Unit
. .
Miscellaneous Tax Unit
.
Accounts and Collections Unit (employment
tax activities)
.
Total collections.

$8,006,883, 543. 68 $16, 298.888,091 66 $8, 292,004, 547.88
1, 423, 646. 466 44
1,048, 516,706. 56
375,129,749.88
3,160,146,914 96
2,807,106, 423.79
343,040,491.17
1,185,361,843. 69

1,498,706,033 69

13,047, 868, 617. 72'

22, 371, 386, 496. 55

313.343,189.90
9,323,617,978.83

1 Includes collections from the tax on unjust enrichment.

Refunds, drawbacks, and stamp redemptions.—Uuimg the yeair
refunds of tax collections, together with interest, were made from the
following appropriations:
Refunding internalTevenUe collections, 1942 and prior years.
Refunding internal revenue collections, 1943 and prior years
.
Refunds and payments of processing and related taxes, 1939-43...
Total, interest included.

$13, 658,803. 61
43, 306, 323.44
6,752,965.69

...:...

63,718,082.74

The following is a summary of the refunds, showing the number of
schedules and claims, the amounts of refunds and repayments allowed,
and the total amount refunded, including interest, on each class of
tax during the fiscal year 1943, with comparison of the totals for 1942.
'

o 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.




238

REPORT OF THE SECRETARY OF THE TREASURY

Number of schedules and claims, amount, of refunds and repayments, and total
. refunds, repayrrients, and interest, by class of tax, fiscal year 1943 and totals for
1942
Class of t a x

B i t u i h i n o u s coal
C a p i t a l stock
_.
. Carriers taxes
Distilled spirits
Distilled spirits s t a m p s r e d e e m e d .
Distilled spirits d r a w b a c k s
Estate
_
_
Gift...
...'
Income...
Miscellaneous
- -...
Miscellaneous s t a m p s r e d e e m e d - . Narcotics
Narcotic stamps redeemed
Federal Insurance Contributions Act..
Federal U n e m p l o y m e n t Tax Act
Sugar.---Tobacco
Tobacco stamps r e d e e m e d - — .
Tobacco drawbacks
._.
T o t a l i n c o m e a n d miscellaneous i n t e r n a l
revenue
_
Agricultural adjustment.
G r a n d t o t a l , fiscal y e a r 1943.
Fiscal y e a r 1942:
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 t o t a l , fiscal y e a r 1942-

N u m b e r of
schedules

N u m b e r of
claims

A m o u n t of
refunds a n d
repayments

Total refunds,
repayments,
and interest

1,244
433
6,823
142
216
24
41
89
1,218
2,620
22
16
. 18
11

71'
1,988
43
10,923
1,564
1,237
1,939
523
158,619
2,841
12, 611
117
66
1,816
44, 572
12, 290
348
180
2, 234
112

$11, 609. 84
834, 862. 47
4, 803.91
735, 650.40
186, 724.19
613, 238. 33
6, 520, 243. 02
488, 676. 68
31,688, 030. 20
898, 233. 57
224, 117. 46
214.18
411. 04
074.18
1,992,
1, 322, 349. 97
1,386, 876. 31
811, 454. 90
6, 543. 87
2,000, 098. 73
28, 446. 90

$11, 545. 39
949, 263. 80
5, 096: 00
742, 946. 44
187, 325. 23
613, 238. 33
6,320, 792. 37
630, 368.45 •
38, 618, 140. 64
976, 956. 45
228, 783.14
214.18
411. 04
2, 111, 900. 63
1,372, 826. 97
1, 448, 249. 96
811, 873. 72
6, 648. 79 .
2,000, 098. 73
28, 446.90

13,420
153

253,993
220

48,754, 550. 06
6, 061, 292. 99

56,965,127. 06
6,762,965.69

13, 573

264, 213

54,815,843. 04

1 63, 718, 082. 74

17,023
270

284, 789
458

46,982,093. 06
19, 838, 630. 41

64,469,008. 53
22, 073, 066.12

17,293

286, 247

66,820,623.47

1 76, 532, 074. 65

75

N O T E . — T h e figures in t h i s t a b l e will n o t agree w i t h those given in later sections of this report 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 the u n i t s , w h e r e a s t h i s
t a b l e shows a c t u a l p a y m e n t s m a d e .
1 E x c l u d i n g refunds from t r u s t funds set u p for P h i l i p p i n e coconut oil, P h i l i p p i n e t r u s t fund, a n d P u e r t o
Rico t r u s t fund.. T h e a m o u n t s refunded from these a c c o u n t s were for 1942, $234,145.39 (coconut oil) a n d
$225.13 ( P u e r t o Rico); a n d for 1943, $135,681.12 (coconut oil), $394.67 ( P h i l i p p i n e ) a n d $1,004.24 ( P u e r t o R i c o ) .

If the tax refunds made during the fiscal year 1943 on account of
erroneous or Ulegal collections of internal revenue and agricultural
adjustment taxes and payments for export drawbacks, redemption
of stamps, and refunds "from trust funds, amountmg to $63,855,063,
were dedubted from the gross collections of $22,371,386,497, the net
coUections for the fiscal year 1943 would be $22,307,531,434. The
gross collections, however, are used for comparative purposes iii
these reports.
Additional assessments.—The additional assessments resulting
from office audits and field investigations made during the fiscal
years 1942 and 1943 were as follows:




REPORT OF T H E SECRETARY OF THE TREIASURY

239

Additional assess7nents, fiscal years 1942 and 1943, by class of tax'
1942

Class of tax
Income i

$300, 539, 626. 00

Miscellaneous internal revenue:
Estate
.
Gift.
:
Capital stock
Sales .
. .
Liquors
-.
Miscellaneous
. Miscellaneous excise
Tobacco
Coal.
Silver
Sugar

.
....

185, 098. 44
401,147.15
4.75
1, 208. 52

$422,438,293. 00
64, 516,795. 73
7,790, 308. 76
804, 500. 44
3,747, 350.11
3, 613, 785. 98
21, 098, 275. 99
1, 669, 334. 07
1,111,399. 61
361, 761. 99
7,811. 38

99, 627, 603. 38
38,273,869.01

Total miscellaneous internal revenue
Employment taxes
.. .
Grand total . . _

71,390,182. 91
5,990, 702. 88
1,177,930.86
4,491, 257. 97
3,609,027.11
•12, 381,042. 79

1943

.

. .

104, 611, 323. 96
39,008, 864. 69

438, 441,098. 39

566,058, 481. 66

1 Includes assessments of $31,864,839 for 1942 and $16,999,136 for 1943 made under the jeopardy provisions of section 279 of the Revenue Act of 1926 and section 273 of subsequent revenue acts.

Cost of administration.—The amount of $103,109,680 was appropriated for the fiscal year 1943 for salaries and expenses in conriection
with the assessment and collection of internal revenue taxes and the
administration of the internal revenue laws. The Bureau transferred
the sum of $525,000 to the Post Office Department for expenses in connection with the sale of motor vehicle use stamps; and the expenditures
and obligations against the Bureau appropriation were $98,568,512,
leaving an unexpended balance of $4,016,168. The expenditures
do not include amounts expended for refunding taxes illegally or
erroneously collected and for redeeming stamps. The,cost of collecting
$22,227,341,482 (excluding $144,045,015 coUected by post offices) during the year was $0.44 per $100, compared with $0.57 per $100 for
1942.
The amount of $500,000 was appropriated for the fiscal year 1943
for salaries and administrative expenses in connection with making
refunds authorized by Titles IV and VII of the Revenue Act of 1936.
The amount expended and obligated from this fund amounted to
$300,426, leaving an unexpended balance of $199,574.
Income Tax Unit
General functions.—The Income Tax Unit is charged with the administration of the internal revenue laws with reference to taxes on income,
excess profits of corporations, and refunds of certain processing taxes,
and the laws limiting profits on certain Army and Navy contracts.
The administration includes the preparation of regulations and interpretative and procedural rulings and instructions regarding such laws
and the examination and adjustment of returns filed thereunder,
through office audits and field investigations, for the purpose of determining the correct tax liability as required by law.




240,

REPORT OF THE SECRETARY OF THE TREASURY

Returns filed.—The number of all types of income and excess profits
tax returns filed during the fiscalyear 1943 on which tax was reported
and assessed was 30,439,764 as compared with 18,164,900 returns filed in
tbe fiscal year 1942^, an increase of 12,274,864. In addition,
10,067,550 returns were filed during the fiscal year 1943 showing no
income subject to tax, compared with 9,608,179 such returns for the
preceding fiscal year. The total number of income tax returns filed
by individuals was 37,075,649, which represents an increase of 40.6
percent over the number received in the preceding year.
Examination of income and excess profits tax returns upon receipt by
the Washington office.—Of ^the 40,507,314 income and excess profits
tax returns filed during the fiscial year, 2,223,172, consisting primarUy
of the more important returns, were forwarded to the Washington
office of the Income Tax Unit. Upon initial review of the returns
forwarded to Washington ^(including those on hand in Washington
on July 1, 1942, relating to previous taxable years), 1,263,817 were
closed and 1,119,139 were found to require further consideration and
investigation by the field offices of the Income Tax Unit.
Investigation of tax returns by the field offices.—The number of income
and excess profits tax returns investigated during the year was 585,243
as compared w^ith 551,861 for the previous year, an increase of 6.0
percent. These figures include all returns for which the examiners'
reports have been submitted, whether or not the cases have been
finally released by reviewing officers.
Estate and gift tax returns investigated by field offices during the
year numbered 18,101 as compared with 18,044 for the previous year.
The total number of income and excess profits tax returns on which
action was completed by the field offices during the year was 1,644,647,
including returns which required investigation as well as returns for
which investigations were deemed unnecessary. The total consisted
of 1,182,595 corporation, individual, and taxable fiduciary income tax
returns, 394,914 partnership and nontaxable fiduciary returns, and
67,138 excess profits tax returns.
. Of the 1,182,595 income tax returns on which action was completed,
deficiency adjustments were recommended in 278,106 returns. This
compares with a total of 939,398 income tax returns for the preceding
fiscal year with deficiency adjustments numbering 272,255. Deficiencies were recommended in 14,019 of the excess profits tax returns acted
upon in 1943 as against4,016 for 1942.
In addition, the field offices completed theh work on 22,255 estate
and gift tax returns during 1943, recommending deficiency adjustments for 11,622 of this number, which compares with 21,701 such returns involving 11,415 deficiency adjustments acted upon in the
preceding year.
Petitions to The Tax Court of the United States filed during 1943 involved 5,283 inconie and excess profits tax returns with proposed tax
deficiencies of $92,887,169. This compares with 5,159 returns and
tax deficiences of $79,435,744 for 1942.
Revenue results of investigations of income and excess profits tax returns.—The total amount of additional tax, interest, and penalty
assessed during 1943 was $392,832,986,^ the largest amount of any
fiscal year on record, of which $311,932,601 applied to income tax
returns and $80,900,385 to excess profits tax returns. Excluding
' Including in each fiscal year the delinquent returns filed during that 3'ear relating to prior years.




REPORT OP THE SECRETARY OF THE TREIASTJRY

241

jeopardy and duplicate items, the amounts for these two classes of
taxes were $293,795,476 and $78,722,864, respectively.
Stage at which additional tax was assessed.—The settlement authority
vested in the field agents was employed even more effectively in 1943
than in the preceding fiscal year, as evidenced by a further increase in
the proportion of cases closed by agreements with taxpayers without
the issuance of formal deficiency notices, which are otherwise required
by law and from which taxpayers may appeal to The Tax Court of the
United States. Of the total number of 296,988 income and excess
profits tax returns on which regular additional assessments (including
duplicate-regular) were made, 284,036 additional assessments, or 95.6
percent, were made by agreement with the taxpayers without the
necessity of a statutory notice, as compared with 95.3*" percent in the
fiscal year 1942-. Of the total regular additional tax assessed (including duplicate-regular), aggregating $325,681,901, the amount
assessed by agreement was $280,919,066 or 86.3 percent as compared
with 81.6 ^ percent for last year.
Refunds, abatements, and credits.—The number of income and excess
prpfits 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 1943 was 93,093 as compared with 77,405 such cases closed
during 1942, an increase of 15,688 or 20.3 percent. Of the 93,093 overassessments during the year, 49,195 were made to taxpayers without
the necessity of filing claims. This compares with 42,361 in 1942.
Of the overassessments settled in 1943 by the Income Tax Unit,
64,297 represented refunds or credits of tax or interest involving
$49,511,101, as compared with 60,149 involving $37,907,010 in 1942.
There were also allowed 41,078 collectors' claims, of which 18,522
recommended abatements or credits and 22,556 recommended refunds.
These claims were largely multiple-item claims, i.e., claims ih
behalf of a number of taxpayers, and involved^46,240 items for abatement or credit and 102,724 items for refund.
The amount involved in overassessments of all types for 1943. represented by refunds, credits, interest, and abatements for income and
excess profits tax cases audited in the collectors' offices as well as by
the Income Tax Unit was $113,777,043, as compared with $99,526,248
the previous year.
Inventory of returns on hand in the Jield offices.—The number of open
income and excess profits tax returns on hand in the field offices as of
June 30,' 1943, was 538,982 compared with 442,057 on the same date
last year (excluding in each year returns tentatively accepted without
investigation). The net increase between the two dates was 96,925,
or 21.9 percent. Returns for 1940 and prior tax years on hand as of
June 30, 1943, numbered 102,010, as compared with 61,766 returns
for 1939 and prior tax years on hand a year.ago; thus the prior-year
returns constituted 19.0 percent of the total number on hand at the
close of the fiscal year 1943, as compared with 14.0 percent for 1942.
Miscellaneous Tax Unit
The Miscellaneous Tax Unit is concerned with 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.
'Revised.




242

REPORT OF THE SECRETARY OF THE TREASURY

• The collections of miscellaneous taxes for th(3 fiscal year 1943
amounted to $3,150,146,915, an increase of $343,040,491 as compared
with collections from these sources for the preceding year.
Estate Tax Division.—There were 18,430 estate tax returns and
23,872 gift tax returns received during the year. Collections of estate tax amounted to $414,530,599, representing an increase of
$74,207,694 over the collections for the preceding year. Collections
of gift tax amounted to $32,965,079, a decrease of $59,252,304 as
compared with collections for the preceding year.
Assessment and collection of additional taxes amounting to
$70,537,026, proposed in 349 estate tax and gift tax cases, were postponed pending the adjudication of appeals filed with The Tax Court
of the United States.
As a result of field investigations and Bureau audits, deficiencies
were assessed amounting to $58,813,947 in estate tax and $6,707,629
in gift tax cases.
Tobacco Division.—The collections of tobacco taxes amounted to
$923,857,284, as compared with coUections of $780,982,216 during
the preceding year. The receipts from the tax on small cigarettes
comprise the major portion of the tobacco taxes and during the fiscal
year 1943 amounted to $835,230,743.
A detailed comparison of the tobacco taxes collected during the
fiscal years 1942 and 1943 is shown in table 6, page 501 of this report.
Sales Tax Division.—Collections of manufacturers' excise taxes and
retailers' excise taxes amounted to $670,014,973, a decrease of
$182,054,410 as compared with collections for the preceding year.
A summary of these collections during the last 2 years follows; and
a more detailed comparison of the collections is shown in table 6,
page 501.
Summary of taxes collected by the Sales Tax Division, fiscal years 1942 and 1943
Source
Manufacturers' excise taxes (Title IV, Revenue^
Act of 1932, as amended, and Subtitle C, Ch. 29,
Internal Revenue Code, asamended). . . . . .
Electrical energy
...
Pistols and revolvers
Repealed manufacturers' excise taxes
Total manufacturers' excise taxes
Retailers' excise taxes (Ch.l9, Internal Revenue
Code)
Tptal

1942

$718, 200, 329. 75
.49, 977, 681.17
84, 494.05
3, 639, 853. 54

1943

Increase or
decrease ( - )

$455, 501,064. 64 -$262,699,275.11
48, 705,138.94
-1,272,442.23
-22,980.79
61, 613. 26
481,396.46
-3,158,457.08

771, 902, 258. 61

504, 749,103. 30

80,167,124.46

165, 266, 869. 35

-267,153,155. 21
86,098, 744. 89

852,069,382.97

670,014, 972. 66

-182,054,410.32

Capital Stock Tax Division.—The collections of capital stock tax during the year amounted to $328,794,971, as compared with $281,900,135
for the preceding year, an increase of $46,894,836.
Domestic and foreign corporations filed a total of 517,045 returns.
As a result of the review and audit of capital stock tax returns, 12,046
assessments were made, involving tax, penalties, and interest in the
amount of $804,500.
Miscellaneous Division.—The Miscellaneous Division is concerned
with the administration of the taxes on admissions, dues, telephone,
telegraph and cable facilities, safe deposit boxes, transportation of
persons, transportation of property, the use of motor vehicles and




REPORT OF THE SIECRETARY OF T H E TREASURY

243

boats, the processing of coconut and other vegetable oils, manufactured sugar, bituminous coal, silver, hydraulic mining, and the transportation of oil by pipeline; the special taxes on the maintenance of
coin-operated amusement and gaming devices for use, and on the ;
operation of bowling alleys, and billiard and pool tables; the documentary stamp taxes, and the taxes on oleomargarine, etc., narcotics,
anci marihuana, and with the administration of the National Firearms
Act and the Federal Firearms Act. This Division is also concerned
with the adjustment of claims for refund of taxes paid under the
Agricultural Adjustment Act and related legislation.
The collections of the taxes administered in the Miscellaneous Division amounted to $779,984,010 in 1943, an increase of $320,371,711
over the previous year. Details of these collections for 1942 and 1943
are shown in table 6, page 501.
Alcohol Tax Unit
Collections of liquor taxes, representing receipts from excise taxes,
rectification tax, floor stocks taxes, bottle or container stamps, and special
or occupational taxes, amounted to $1,423,646,456 during the fiscal year
1943, compared with $1,048,516,707 m the preceding year, an increase
of $375^129,749, or 35.8 percent. Details of these collections will be
found in table 6 on page 501.
Because of war requhements, the demand for industrial alcohol
continued to increase during the year. Under amendments in the
acts of January 24, 1942, and March 27, 1942, beverage distillers
engaged in the production, of high-proof spirits for industrial purposes
and, where necessary, transferred sphits of low proof to other plants
equipped to raise the spirits to the necessary degree of proof. The
Alcohol Tax Unit operated in close coordination with the various war
agencies in bringing about the production of increased supplies of
alcohol.
0
On June 30, 1943, the following premises and proprietors were
qualified to engage: in the production, distribution, or use of alcohol
and alcoholic liquors:
Industrial alcohol:
'
'
'
Number
Industrial alcohol plants
..67
Industrial alcohol denaturing plants
84
Industrial alcohol bonded warehouses
.
.
197.
Bonded dealers in specially denatured alcohol
44
Bonded manufacturers using specially denatured alcohol
4,047
Hospitals, laboratories and educational institutions using tax-free alcohol
6,737
Distilled spirits: i
Registered distilleries.
--.
.-._
131
Fruit distilleries
j_
166
Internal revenue bonded warehouses
!
265
Distillery denaturing bonded warehouses
2
^ Rectifying plants
212
Tax-paid bottling houses--..
101
Wines:
Wineries
1
893
Bonded wine storerooms...
..^
74
Bonded field warehouses.
..
28
Fermented malt liquors: Breweries
467
Beverage dealers:
Retail malt hquor dealers
j
122,880
RetaiUiquor dealers..
-.
.
233,712
Wholesale malt liquor dealers
8,533
Wholesale liquor dealers-.---.-._
-....
.
.6,161_,
Importers
967"
•Others:
Users of distilled spirits in the manufacture of non-beverage products
869
Bottle manufacturers
.
,
61
Vinegar plants using vaporizing process
i
.
14
Carriers
.._:
426
1 Lessees were as follows: Registered distilleries, 3; tax-paid bottling houses, 5; rectifying plants, 7.




244

REPORT OF THE SECRETARY OF THE TREASURY

Procedure Division.—This Division, is responsible for planning and
developing procedure for the headquarters and field offices of the
Alcohol Tax Unit; assists in drafting regulations^ Treasury decisions,
. mimeographs, and circulars; reviews for revision all forms prescribed
by the Alcohol Tax Unit; and is charged with the administration of
regulations relating to traffic in containers of distilled spirits, and with
the supervision of the Statistical Section. In addition to the preparation of procedure and -=^tatistics concerned dhectly with the Alcohol
Tax Unit, the Unit furnished war agencies current statistical data
concerning industrial- alcohol and other liquors. Special reports covering such items were also prepared for the information of such
agencies.
Field Inspection Division.—This Division was organized to coordinate and supervise the various permissive and administrative activities in the 15 supervisory districts. Owing to emergency law and regulations to insure a sufficient supply of alcohol for war purposes, the
duties of the Field Inspection Division have been considerably incre^ased.
A group of specially trained field inspectors, operating directly from
the Washington office, make frequent inspections of the field offices
for the purpose of improving efficiency in the determination and collection of liquor taxes. During the year the inspection divisions of the
various field offices were reorganized in the interest of efficiency in
performing the additional work resulting from the war.
Administrative examination of applications, notices, bonds, consents of surety, plats, plans, and other documents filed in connection
with new establishments, changes in premises and equipment, and
discontinuances totaled 22,045. During the year 300 establishments
were discontinued and 264 new establishments were approved.
Laboratory Division.—-The Laboratory Division comprises a central
laboratory in Washington, D. C , with 13 branch laboratories located
throughout the country, and 1 branch in San Juan, P. R.
This Division performg, all the chemical work for the Burealu of
Internal Revenue and analyzes samples of narcotics submitted
by officers of the Bureau of Narcotics. I n the past year the Laboratory Division has been closely associated with the Defense Supplies
Corporation, War Production Board, and the War Department relative to the specifications for alcohol used in war material, especially
synthetic rubber.
. During the year a shortage of denaturants for completely denatured
alcohol was threatened because some of the compounds used are critical war materials. However, the War Production Board appreciated
the necessity for protecting industrial alcohol from diversion to beverage purposes and made allocations which, assure a sufficient supply
of denaturants. One new denaturant, a byproduct from the manufacture of synthetic rubber, has been authorized.
Pursuant to a request from the Defense Supplies Corporation,
samples are taken monthly from all tanks in which alcohol for the
manufacture of synthetic rubber, explosives, etc., is stored and these
samples are submitted to the nearest field laboratory for analysis.
The reports of analyses are sent to the Washington Laboratory where
a record of every tank is kept. After review, copies of the reports
are sent to the Defense Supplies Corporation and the War Production
Board.. The information thus obtained is yielding valuable data con-




245

REPORT OF THE SECRETARY OF THE TREASURY

cerning the quality of alcohol produced by difi^erent processes and the
effects of storage.
Audit Division.—The Audit Division has general supervision over
the work relating to the operation of registered distilleries, internal
revenue bonded warehouses, rectifying plants, industrial alcohol
plants, industrial alcohol bonded warehouses, denaturing plants,
breweries, wineries, bonded wine storerooms, dealers in specially
denatured alcohol, and users of tax-free alcohol. I t conducts the tax
accounting, assessment, claim and compromise,functions of the Unit.
This Division also determines and lists assessments against persons
engaging in illicit liquor traffic. I t examines for allowance or rejection all claims for abatement or refund of taxes, and for the redemption of tax stamps and strip stamps, and recommends acceptance or
rejection of offers in compromise of tax, forfeiture of seized property,
or criminal liability.
At the beginning of the fiscal year there were on hand 265 offers
in compromise aggregating $6,492 submitted in settlement of liabilities
incurred in connection with internal revenue laws. During the year
5,573 offers amounting to $351,613 were received. Of the number to
be disposed of, 103 were forwarded to the Department of Justice,
336 were returned to the district supervisors for further investigation,
4,351 offers aggregating $196,759 were allowed, and 363 offers totaling
$42,389 were rejected, leaving 685 offers in the amount of $73,205 oii
hand at the end of the fiscal year.
At the beginning of the year no offers in compromise were on hand
submitted in settlement of liabUities incurred in connection with the
Federal Alcohol Administration Act. During the year, 97 offers
amounting to $34,751 were received, 72 offers aggregating $12,371 .
were accepted, 11 offers in the amount of $5,830 were rejected, leaving
14 offers totaling $16,550 on hand at the end of the fiscal year.
Basic Permit and Trade Practice Division.—This Division is charged
with administering the provisions of the Federal Alcohol Administration Act and regulations whrch have, been issued thereunder. The
broad purpose of the statute is the regulation of the conduct of the
legitimate liquor industry.
' The numxber of outstanding basic permits of all classes has continued to decrease, dropping from 14,796'' in effect on July 1, 1942, to
13,547 on Jun,e 30, 1943.
The followip.g table reflects the permit activities under the Federal
Alcohol Administration Act during the year and the number of perrdits
"of each class in effect on June 30, 1943.
Permit activities, fiscal year 1943
Wine
proWine
Whole- ducers blendsalers • and
ers
blenders
11,461
In effect June 30,1942
1,083
Issued during year
Terminated:
2,000
Canceled
.
^
296
Automatically terminated.---...
Revoked
1
Annulled.10, 247
In effect June 30,1943
913
Amended during year

WareRecti- housing Import- Total'
and
fiers
ers
botthng

1,085
89

101
13

334
66

281
64

539
93

103
17
1

15
2

41
13

44
13
1

86
27

147
33

2,43ft
401

1,053
24

97
2

345
7

. .277
29

619
34

1,009
83

13,547
1,092'

1 Includes 101 wine blender's permits, not previously reported.
»Revised:




Distillers

996 114,79ft
194
1,691

a

246

REPORT OF THE SECRETARY OF THE TREASURY

Because of war conditions and general merchandise shortages, the
volume of label applications received during the year declined to 76
percent of the volume received during the preceding year.
In the enforcement of the advertising regulations • promulgated
under, the Federal Alcohol Administration Act, the Division reviewed
94,928 advertisements appearing in 21,091 periodicals, representing
an increase over similar activities for the preceding year, and took
appropriate regulatory action in 1,849 cases involving various types
of irregularities. Four cases involving violations of the advertising
provisions of the statute were closed by the acceptance of appropriate
offers in compromise. Radio continuities, numbering 21,150, and
3,162 pieces of point-of-sale advertising material were also reviewed.
Enforcement Division.—The primary function pf the Enforcement
Division is the protection of the revenue. Its activities 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 5,654 Ulicit stUls having an aggregate cubic capacity
uf 753,714 gallons ^ were seized, and in connection therewith 1,700,406
gaUons of mash were seized and destroyed. There were 10,061 persons
arrested for Federal liquor law violations. Investigators also seized
46,380 gallons of Ulicit spirits and 1,086 automobUes and trucks.
The total appraised value of the property seized was $922,303. I n
addition, 261,590 gallons of liquors valued at $2,190,961 were seized
for evasion of the floor stocks tax under the Revenue Act of 1942.
There were 4,062'floor stocks tax cases completed and the sum of
$2,589,757 in taxes and penalties was recommended for assessment
in these cases.
In the enforcement of the Liquor Enforcement Act of 1936, relating
to the introduction of tax-paid spirits into dry States, 153 vehicles
and 5,619 gallons of tax-paid liquor were seized, and 234 persons were
arrested. During the year, 197 persons were indicted and 193 defendants were convicted in cases under the act.,
'
During the fiscal year 10,148 persons were recommended for prosecution in Federal courts in Alcohol Tax Unit cases, a decrease of
10,071 as compared with the previous year; 8,161 persons were in-»
dieted, 7,736 defendants were convicted, and, as of June 30, 1943,
there were 6,402 persons awaiting grand jury or trial action for liquor
violations, a decrease of 3,375 from June 30,1942.
There were fewer seizures and arrests during the year than in the
previous year. The decrease can be attributed largely to wartime
restrictions including rationing of sugar, gasoline, tires, and other
strategic materials.
'
During the year 156 applications for pardon and 1,709 applications
for parole were examineci and reports submitted.
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
v-;!.Represents, the cubic capacity of still pots and cookers. Column stills which operate without a still
pot or cooker are^not reflected in this total. The size of illicit stills is reflected more properly by the rnash
facilities; The cubic measurement of the mash fermenters of all the illicit stills seized during the fiscal year
was 2,949,400 gallons.




REPORT OF THE SECRETARY OF THE T'REAlSURY

247

Service. The Unit also administers the employment taxes imposed
under Chapter 9 of the Internal Revenue Code, .the taxes under
Subchapter A (Federal Insurance Contributions Act) being with
respect to employment by others than carriers. Subchapter B with
respect to employment by carriers, and Subchapter C (Federal Unemployment Tax Act) with respect to the tax on employers of eight or
more.
There were 57,298,994 tax returns filed in collectors' offices during
the fiscal year 1943, an increase of 12,547,248 ovfer the previous year.
Of the total returns filed, 40,507,314 were income and excess profits
tax returns, an increase of 12,734,235 during the year. ,
During the fiscal year 209,846 income tax, 145,447 miscellaneous tax,
and 684,715 employment tax returns were investigated by field deputy
collectors, and 5,224,500 information return? were verified. At the
close of business June 30, 1943, there were outstanding in the 64n
collection districts 60,284 income tax returns, and 6,313,407 information returns were on hand.
Deputy collectors of internal revenue served 618,739 warrants for
distraint, which resulted in the collection of $73,127,375. An average
of 6,395 deputy collectors made 3,301,745 revenue-producing mvestigations, including the serving of warrants for distraint, compared with
2,873,404 revenue-producing investigations made by an average of
4,720 deputy collectors in the preceding year. The total amount
collected and reported for assessment by deputy collectors was
$150,643,949, compared with $113,794,106 m the previous year. The
average number of investigations made per deputy and the average
' amount of tax collected and reported for assessment were 516 and
$23,557, respectively, compared with 609 and $24,109, respectively, in
1942. There were 250,477 warrants for distraint in custody in the
collectors' field forces on June 30, 1943, as compared with 174,840 on
hand June 30, 1942.
A total of 16,529,206,905 revenue stamps, valued at $3,122,024,388,
was issued to collectors of internal revenue and the Postmaster
General during the year, compared with 15,642,869,033 stamps valued
at $3,107,143,869 issued during 1942. . Revenue stamps returned, by
collectors of internal revenue and by the Postmaster General, and
credited to their account, amounted to $757,855,563. There were 191
applications allowed for restamping packages on which the original
stamps had been lost, mutilated, or destroyed, compared with 231
applications in the preceding year.
The Disbursement Accounting Division administratively examined
and recorded 1,548 monthly accounts, comprising 154,691 vouchers,
of collector's of internal revenue, internal revenue agents in charge,
technical staff divisions, and district supervisors, including the San
Juan, P. R., branch of the District of Maryland, and the Honolulu,
T. H., branch of the San Francisco Alcohol Tax, District No. 14. In
addition, 4,932 expense vouchers of employees and 25,412 vouchers
covering passenger and freight transportation and miscellaneous expenses were audited and passed to the Chief Disbursing Officer',
Treasury Department, or the General Accounting Office for payment.
Taxes under the Federal Insurance Contributions Act.—Collections
of taxes imposed under the Federal Insurance Contributions Act
amounted to $1,131,546,129 for 1943, as compared with $895,335,861
for 1942, an increase of $236,210,268. These amounts include both



248

REPORT OF THE SECRETARY OF THE TREASURY

the emplo3^ees' tax and the employers' tax each of which was imposed
at the rate of 1 percent of taxable wages paid. Returns under the act
are required on a quarterly basis, 8,939,225 being filed during the fiscal
year 1943, as compared with 9,470,856 filed in the preceding year.
The following table sets forth information relative to claims disposed
of under the Federal Insurance Contributions Act and/or Title VIII
of the Social Security Act.
Claims under the Federal Insurance Contributions Act and/or Title V N I of ihe
Social Security Act received and disposed of, fiscal year 1943
Under section
1401(d) ofthe
Federal Insurance Contributions Act

. Claims

All other

Number
Pending July 1, 1942
Received during year

. _.

6,463
50,758

...

.-

4,159
14,446

57, 221

. ...

.

.-.

._

Total disposed of
Pending June 30, 1943
.
i...
Certificates of allowance issued when no claims were filed

18, 604
11,479
2,775
152
14,406

17,411

...
•

39, 291
487
32
39, 810

Total to be disposed ofAllowed in full or in part
Rejected
Canceled

4,198
1,316

.Amount
Overassessments settled b y Abatement
Credit
Refund
i

,1
$863, 505

Total
Interest _
Grand total . . . ' .

$1,070, 939
492, 520
493,132
2,056, 591
• 48,309

:

:

....'

863, 505

2,104, 900

Under the provisions of section 1401(d) of the Federal Insurance
Contributions Act and subject to the conclitions therein specified, an
employee performing services for more than one employer during a
calendar year may obtain a refund of the amount of employee's tax
deducted from his wages and paid to the collector which is in excess
of the tax on the first $3,000 of such wages.
The following table shows the status of the offers in compromise
submitted in settlement of liabilities incurred under the Federal
Insurance Contributions Act and/or Title VIII of the Social Security

Act.




REPORT OP T H E

SECRET.4RY

O'F T H E

TREiAiSURY

249

Offers i n compromise under ihe Federal Insurance Contributions Act andj or Title
V I I I of the Social Security Act received and disposed of, fiscal year 1943

Number of
offers

Offers in compromise
Pending July 1, 1942

Amount
offered
$113,194
214,135

1,235

Received during year

Liability
involved
$329,822
568, 662

327,329

898,484

926
.208
46
26

132,081
32,896
6,079
1,349

285,187
160, 311
21, 702
13,360

1,205

172,404

470, 650

694

154,925

427, 934

Total to be disposed of.
Accepted
Rejected..
.
Withdrawn...
1...
Terminated by default
Total disposed of
Pending June 30, 1943

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 1942 with
respect to employment. Collections during 1943 amounted to $156,007,662, an increase of $36,390,694 over 1942. Returns are required
on an amiual basis, 397,595 being filed during 1943, as compared with
417,647 filed during the preceding year.
Data on the returns, revenue agents' reports, claims, and offers in
compromise in connection with>the tax under the Federal Unemployment Tax Act are shown in the following tables.
Number of Federal unemployment tax returns received, reopened, and disposed of.
fiscal year 1943
Returns:
Pending July 1, 1942'.
Received during year...
Reopened during year..

.:

1

'

Number
411,133
397,595
25,966

'.

' Total to be disposed of-.
Closed
Pending June 30, 1943
.

.

834,694
415,694
419,000

Number of revenue agents' reports received and disposed of, fiscal year 1943
Reports:
Pending July 1, 1942.

Number
695

Received during year

.

J

3, 427

Total to be disposed of..
Closed:
No change in tax liabihty..
Deficiencies in tax
Overassessments
Total
'.
Pending June 30,194.3

§42890—44-

-18




4,122

.
....:....
.

793"
2, 521
523
3,837
2^5

250

REPORT OF THE SECRETARY OF THE TREASURY

Claims under ihe Federal Unemployment Tax Act and/or Title I X of ihe Social
Security Act received and disposed of, fiscal year 1943
Claims:
Pending July 1, 1942

Number
10,191

.

Received during year

17,853

Total to be disposed of

:.i

Allowed in full or in part
Rejected

_

Canceled

..-

Total-

^ 28,044

:

:

.

.
._.-

-

15,820
6,428
116

:

, 21,363

• Pending June 30, 1943
_
6, 681
Certificates of overassessment and certificates of allowance issued when no claims were
filed
4, 304
Overassessments settled by—
Amount
Abatement
:
1
$3,215,118
Credit...
:.
.
73,749
Refund
1,434,933
Total
.-— 4,723,800
Interest
--57,989
Grand total
.-—
-. 4, 781, 789
Offers in compromise under the Federal Unemployment Tax Act and/or Title I X of
dhe Social Security Act received and disposed of, fiscal year 1943
Number
of offers

Offers in compromise

Liabihty
involved

1, 352

$72, 382
194, 367

$576, 951
1,236,872

1,850

266, 749

1,812,823

731
373
34

83, 319
72, 571
5,057
269

639,491
430, 858
19, 903
4,545

1,147

161, 216

994, 797

703

105, 533

818,026

Pending J^uly 1,1942
Received during year

-

Total to be disposed of
Accepted
Rejected
Withdrawn.
Terminated by default
Total disposed of_
Pendmg June 30,1943

Amount
offered

l-i

!..---

^

\

Carriers taxes.—Collections of carriers taxes under Chapter 9, Subchapter B, of the Internal Revenue Code aggregated $211,151,243
for the fiscalyear 1943, an increase of $40,742,229 over 1942. ' The
amount for 1943 inclucies $211,103,522 of collections from the employers' tax and the employees' tax, both of which were imposed at
the rate of 3 percent of the taxable compensation earned during 1942,
and at the rate of 3K percent for 1943; collection of the employee
representatives' tax for 1943, which was imposed at the rate of 6 percent of the taxable compensation earned during 1942, and at the rate
of 6K percent for 1943, amounted to $47,721, as compared with
$13,767 for the previous year, an increase of $33,954. Returns are
required on a quarterly basis, 31,261 being filed by employers, an
increase of 307, and 1,773 being filed by employee representatives,
an increase of 190 over the previous year.
The following table sets forth information relative to claims disposed of under Chapter 9, Subchapter B, Internal Revenue Code,
and/or the Carriers Taxing Act of 1937.




REPORT OF T H E

SECRETARY • OF T H E

251

TREIASITRY

Claims under Chapter 9, Subchapter B, Internal Revenue Code, andj or the Carriers
Taxing Act of 1937 received and disposed of, fiscal year 1943
Claims:
. Pending July 1,1942

•

Number
49

.--;..--•

Received during year-

235

Total to be disposed of.

--

284

Allowed in full or in part
Rejected
Canceled

^

.-

92
72
-

--

Total disposed of-

--

26

-

Pendmg June 30, 1943..Certificates of allowance issued when no claims were
Overassessments settled by—
Abatement
•-.Credit
Refund
Total
---:Interest
-.-Grand total
---

190
94
2
Amount
l - . . $546,893
26,454
_
4,804
-678,15193
578,244

filed
•
----.-

--.,

Technical Staff
The Technical Staff is the appellate agency within the Bureau of
Internal Revenue for the determination of income, profits, estate,
and gift tax liabUity in contested cases. The Staff organization comprises an administrative office in Washington and 10 field divisions
with 36 local offices. The heads of these divisions have exclusive
authority to act as representatives of the Commissioner of Internal
Revenue within their territorial jurisdiction (a) to determine tax
liability in contested cases not before The Tax Court of the United
States, and (6) to settle by stipulation," with the concurrence of division counsel, cases docketed by The Tax Court. The Staff' considers
certain offers in compromise of tax liability and applications for
extensions of time for payment of income taxes, and also reviews for
the Commissioner final closing agreements under section 3760 of the
Internal Revenue Code,
^
A brief analysis of the work of the Staff field divisions is shown in
the following table.
Analysis of the work of all field divisions of the Technical Staff, fiscal year 1943
Docketed
cases

Cases
O n h a n d J u l y 1,1942
_
Received (transfers, etc., d e d u c t e d ) d u r i n g year

. .

4,128
3,432

-

T o t a l to b e disposed of

T o t a l disposed of

-

:.--

---

-

9, 950

2, 780
163
1,138

3,661
630

-

1,390
249

•
--

---_-..-

4,081

6, 930

3,479

2 4^ 020

> Includes 620 cases awaiting taxpayers' action on statutory notices directed or siistained.
2 Includes 588 cases awaiting taxpayers' action on statutory notices directed or sustained.




1 3,220
6,730

7,660

Closed b y stipulation or agreement
Dismissals a n d defaults
:
-_.
U n a g r e e d cases s u b m i t t e d to T h e T a x C o u r t
Cases appealed t o T h e T a x C o u r t
U n a g r e e d action on overassessment a n d claims cases

On h a n d J u n e 30,1943

Nondocketed
cases

252

REPORT OF T H E SECRETARY OF THE TREASURY

The nondocketed cases disposed of by agreement, by default, and
by unagreed action on claims, involved proposed deficiencies in tax
and penalties aggregating $63,794,088, and tentatively determined
overassessments of $3,230,645. T h e deficiencies and penalties agreed
to amounted to $21,696,405, and overassessments of $2,476,829 were
allowed. Defaults totaled $5,163,267 i n ' t a x and penalties, with
$223^239 in overassessments. In addition, overassessments were
allowed in unagreed clauns cases aggregating $233,13-9. The increase
in inventory of nondocketed cases is due to delay brought about by
the retroactive provisions of the Revenue Act of 1942, and to an
unusual increase in receipts during the last four m.onths of the fiscal
year. .,
'
The docketed cases closed by stipulation involved asserted deficiencies in tax and^ penalties amounting to $76,245,539 and overassessments of $785,535 for other years or in associated cases. The
amount agreed to consisted of $28,123,112 iri tax and penalties and
$920,880 in overassessments.
An analysis of the work of the Staff on compromise, extension of
time, and closing agreement cases is shown in the following table.
Analysis of the work of the Technical Staff on compromise, extension of time, and
final closing agreement cases, fiscal year 194S
Cases

26
280

568
947

Onhand July 1, 1942
Received (net) during year

101

Total to be disposed of....
Accepted, granted, or approved.
Rejected
•.
Withdrawn
.
Transferred
/
. Total disposed of
On hand June 30, 1943
-.

Final closing
agreement
• cases

Compromise Extension of
cases
time cases

306

543
361
142
26
1,062

265
36

95

301

453

Office of the Chief Counsel

5

'

<.

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 Tax Court of the United States; the review, of refunds, credits,
and abatements in excess of $20,000; consideration of various administrative and internal revenue tax matters referred to that office by
the Secretary, the Under Secretary, an Assistant Secretary of the
Treasury, the General Counsel for the Department of the Treasury,
the Commissioner, the Assistant Commissioners, the heads of 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 compliance with requests for assistance in such
cases; and the preparation, revision, and review of regulations. Treasury decisions, mimeographs, and rulings for^the guidance of the officers
and employees of the Bureau of Internal Revenue and others con-




REPORT OF THE SIECRETARY OF THE TREIASUHY

253

cerned. The office is made up of the Chief Counsel's Committee,
the Engiaeers and Auditors Section, and eight divisions, viz: Alcohol
Tax, Appeals, Civil, Claims, Interpretative, Legislation and Regulations, Penal, and Review.
Chief CounseVs Committee.—The Committee, consisting ol three
members, serves in an advisory capacity to the Chief Counsel and to
menibers of his immediate staff, who refer to the Committee cases
from all divisions of the Office. The Committee considers these cases
and makes written recommendations as to their proper disposition.
The Committee is also charged with the final review of cases iavolving
compromises and closing agreements, previous to their being sent to
the Secretary of the Treasury for his approval, and with the consideration of claims for reward under section 3463 of the Revised Statutes
and section 3792 of the Internal Revenue Code. The reward claims
work and personnel were transferred from the Penal Division to the
Chief Counsel's Committee on July 1, 1942. A t the beginning of the
fiscal year 1943 the Committee had on hand (exclusive of reward
claims) 16 cases; during the year it received 3,379 and closed 3,354,
leaving 41 cases pending at the close of the year. On July 1, 1942,
there were on hand 547 claims for reward for information relative ^to
violations of uiternal revenue laws; 219 clahns were presented or
reopened during the year; 233 were disposed of, leaving 533 pending on
June 30, 1943. Of the claims disposed of, 72 were allowed and paid
in a total sum of $78,012. The claims pending at the end of the year
are awaiting the closing of the tax cases to which they relate, the
receipt of recommendations of the field officers of the Bureau, or
administrative action in Washington.
Alcohol Tax Division.—This Division performs the legal work arising in connection with the administration and enforcement of the
internal revenue liquor laws. The work includes the preparation of
opinions and briefs relating to .assessment, collection; abatement, and
refund of liquor taxes and penalties; compromise of civil and criminal
liabUities; and the remission or mitigation of forfeitures. The Division
prepares citations to revoke iadustrial and denatured alcohol permits,
conducts permit hearings, and reviews revocation records, and^performs similar work in connection with the issuance, suspension, and
reyocation of permits under the Federal Alcohol Administration Act.
I t assists the Department of Justice in connection with civil and
criminal cases arising under the internal revenue lic^uor laws and the
Federal Alcohol Administration Act; gives legal advice to the Deputy
Commissioner of Internal Revenue in charge of the Alcohol Tax Unit,
district supervisors, and other officials on questions involving interpretation or construction of said laws; and reviews all correspondence
prepared in the Alcohol Tax Unit involving legal questions.
Work performed by this Division, in Washington and in the field,
during the fiscal year included preparation of 5,911 memoranda, 262
briefs, 5,335 opinions,. 98 libels, and 21 indictments. Review work
included 2,923 case reports, 84 claims of over $5,000 each, and 5,025
compromise cases. In addition, 211 petitions for remission or mitigation of forfeiture were examined and finally passed upon.
Appeals Division.—-This Division has charge of all cases involving
income, excess profits, unjust enrichment, estate, and gift taxes pending before The Tax Court of the United States. Counsel assigned to
the various field offices, which were created under the decentralization



254

REPORT OF THE SECRETARY OF THE TREASURY

program of the Bureau of Internal Revenue, prepare answers to petitions filed with The Tax Court of the United States and advise the
various Staff divisions upon legal questions, arising in the determination of income, profits, estate, and gift tax liability. All proposed
settlements are concurred in by counsel. Counsel also have exclusive
authority to represent the Commissioner of Internal Revenue in the
defense of all cases set for hearing before The Tax Court of the United
States.
'"
This Division also has a general supervision of the preparation of
the contents of the records on review in all cases wherein are filed
petitions for review by the United States Chcuit Courts of Appeals of
final decisions of The Tax Court of the United States. In such proceedings, where the Commissioner of Internal Revenue is petitioner,
this duty is performed in the Division subject to approval by the
Department of Justice; in cases where a taxpayer is petitioner, the
Division has sole charge of the preparation of the record.
Of the appeals taken to The Tax Court of the United States, 4,730
were closed during the year. The methods by which such cases w^ere
closed are as follows:
Character .of closing

Number of
cases

Amount in
dispute

Amount won Percentage of
recovery

Washington office
Default .
Decision on merits '---Agreed settlement-—

1
549
8

-Total, Washington oflice

' .

$1,476
37,316,619
10, 408, 657

$20
17, 994, 685
1, 267, 379

1. 4
48.2
12.2

558

47,725, 752

19, 262,084

40.4

Field offices
Default
Decision on merits
Agreed settlement

$2,133,361
11,471,841
31,440,207

99.7
42.7
39.4

108,916,656

45,045,409

' 41.4

156, 641, 407

64,307, 493

41.1

163
1,229
2,780

$2,139,842
26,894, 767
79,881,046

Total, field oflSces

4,172

Grand total

4,730

'^

...1

-

Civil Division.—The work of this Division includes the preparation
of statements of fact for the Department of Justice in all actions
brought by taxpayers to recover taxes and for injunctions in the Federal courts, which statements set forth the position of the Bureau on
the issues involved and contain references to applicable sections of
the revenue acts, regulations, and decisions of the courts. The. Division also assfjmbles the eviclence, obtains witnesses, and assists at
the trial of cases when requested by the Department of Justice; prepares recommendations for or agaiast the institution of suits in connection with claims of the Government against taxpayers, transferees,
bonding companies, and others; and, when suits axe recommended,
prepares statements for the Department of Justice simUar to those in
actions brought by taxpayers. Stipulations of facts for the use of the
Department of Justice and for^submission to the courts in actions in
the district courts and in the Court of Clauns are examined and
approved, modified, disapproved, or new stipulations prepared; and
the Division makes recommendations for or agaiast an appeal from^




REPORT OF T H E SECRETARY OF T H E TREASURY

.

255

adverse judgments of district courts and for or against applications to
the Supreme Court for writs of certiorari in cases of adverse decisions
rendered by the circuit courts of appeals and the Court of Claims.
The Division makes recommendations for or against acceptance of
offers submitted for settlement or compromise of cases pending in
court. I t also handles all cases in which liens for taxes are involved
in mortgage foreclosure actions pending in Federal and Statcxcourts,
and considers all applications for the release of Federal tax liens and
the discharge of property from such liens which is permissible under
sections 3673, 3674, 3675, 3676, and 3677 of the Internal Revenue
Code.
During the year the Division closed 900 civU cases in which the
amount claimed was $16,658,613; refunds aggregating $6,139,434 and
collections amounting to $3,751,840 were made. There were also
closed 1,093 cases involving liens in which $321,321 was collected.
Claims Division.—This Division is comprised of four sections, viz:
Processing Tax, Reorganization, Bankruptcy and Receivership, and
Compromise.
The Processing Tax Section has jurisdiction over all matters involviag processing, floor stocks, compensating, and custom processing
taxes, as well as over unjust enrichment tax matters not within the
jurisdiction of any decentralized office. I t represented the Commissioner of Internal Revenue in all cases, before the United States
Processing Tax Board of Review iavolving refunds of amounts collected under the Agricultural Adjustment Act, as amended, until
December 31, 1942, when the Board was abolished and its jurisdiction
and functions were transferred to The Tax Court of the-United States
in accordance with the provisions of section 510 of the Revenue Act
of ^ 1942. Since the Board's abolition the Processing Tax Section
represents the Commissioner in all cases before The Tax Court of
the United States involving-refunds of amounts collected under the
Agricultural Adjustment Act, as amended. The Section has the
same jurisdiction and duties in matters involving Titles I I I , IV, and
VII of the Revenue Act of 1936 as have the Civil, Interpretative,
Legislation and Regulations, and Review Divisions, and the Reorganization Section and Bankruptcy and Receivership Section of the
Claims Division with respect to questions involving income, excess
profits, capital stock, estate, and miscellaneous taxes. The Section
prepares records on review in all cases wherein the Commissioner files
petitions for review by the United States Circuit Courts of Appeals of
final decisions of The Tax Court of the United States involving refunds of amounts collected under the Agricultural Adjustment Act,
as amended. In cases involving such refunds, in which petitions for
review are filed by taxpayers, the records are subject to the approval
of this Section. During the year the Section closed 32 processing tax
appeals involving $3,782,081, of which $369,814 was recovered by
claimants; and reviewed cases involving 158 claims for refund of
amounts paid as processing and floor stocks taxes and unjust enrichment tax deficiencies ia the aggregate amount of $55,019,347. ^
The Reorganization Section is charged with the duty of protecting.
the interests and claims of the United States in proceedings instituted
under sections 77, 77B, Chapters X and XV of the National Bankruptcy Act, as amended, and arrangement proceedings under Chapters
X I , X I I , and X I I I of the act. In 1,117 corporate reorganization and




256

REPORT OF THE SECRETARY OF THE TREASURY

arrangement cases closed by the Section during the year. Government
claims in the amount of $5,252,673 were settled for $1,436,338.
The Bankruptcy and Receivership Section performs all legal work
incident to the protection of the interests and claims of the United
States in bankruptcy and receivership proceedings. In 4,367 bankruptcy and receivership cases disposed of by the Section in 1943, the
sum of $1,779,715 was realized on revenue claims amounting to
$5,592,099.
The Compromise Section is charged with,the prosecution of claims
filed by collectors against the estates of deceased taxpayers, against
insolvent banl^s, and in liquidation proceedings, including assignments
for the benefit of creditors. At the request of the Department of
Justice, the Section assists in trials involving the aforementioned
types of claims. The Section - disposed of 2,558 cases against estates
of deceased taxpayers, insolvent banks, and in liquidation proceedings, the total payments received being $3,772,072.
Interpretative Division.—The functions of this Division consist of
the preparation of letters and memoranda, for the signature of the
Head of the Division, the Chief Counsel, the Commissioner, or the
Secretary, interpreting internal revenue statutes; the review of all
correspondence, for the signature of the Commissioner or of the
Secretary or of an official of his office, containing a ruling or opinion
regarding internal revenue laws prepared in the administrative units
of the Bureau and routed thi^ough the Chief Counsel's office for ap^
proval; assisting in the preparation and review of briefs to be filed
with The Tax Court of the United States in key cases; reviewing actions
on decisions in special cases; reviewing closing agreements covering
proposed transactions; editing the material submitted for publication
in the Internal Revenue Bulletin; and the preparation of opinions and
rulings in special cases assigned by the Chief Counsel. Members of
this Division also participate in conferences with taxpayers when so
requested by the administrative branches and units of the Bureau
of Internal Revenue or by other divisions of the Chief Counsel's office.
Included in this Division is the Digest Section, the functions of
which are to pres.erve, digest, and make readily available to the members of the Chief Counsel's staff all opinions, rulings, and other documents which have been prepared or reviewed by the Chief Counsel's
Office.
The Division began the year with 278 cases on hand, received^2,346,
and disposed of 2,299, leaving 325 cases on hand at the close of the year.
Legislation and Regulations Division.— The regulations issued under
the internal revenue laws, including tax conventions with foreign
countries, and the reports ori legislation introduced in the Congress
affecting the internal.revenue, except such as relate to taxes on alcoholic
beverages, are prepared or reviewed in this Division. In addition, the .
Division assisted in the preparation of regulations relating to the
stabilization and limitation of salaries, authority over which was lodged
in the Commissioner of Internal Revenue by the Economic Stabilization
Dhector under the general regulations relating to wages and salalries
promulgated on October 27^ 1942, by the Director with the approval
of the President.- The Division also considers suggestions for amendments of and additions to the various internal revenue laws, and prepares reports thereon for the consideration of the Commissioner and




257

REPORT OF T H E SECRETARY OF T H E TREASURY

the General Counsel. I t participates in the preparation of income ta,x
forms and assists in the drafting of tax conventions.
Penal Division.—The Penal Division deals with practically all
classes of internal revenue tax cases when crirriinal liability is alleged,
including among others income and profits, miscellaneous, and social
security tax cases; considers offers in compromise of liability where
criminar proceedings have been instituted or recommendations for
prosecution have been made to the Bureau or by the Bureau to the
Department of Justice, and prepares opinions construing the criminal
and percentage penalty statutes. I t also prepares opinions as to
whether cases closed by agreement under section 606 of the Revenue
Act of 1928, and similar provisions of other revenue acts and the Internal Reveriue'Code, should be reopened because of ^'fraud or malfeasance, or misrepresentation of a material fact." Whenever requested
by the Department of Justice, assistance is rendered by this Division
in the prosecution of criminal cases.
At the beginning of the fiscalyear, 1,484 cases were pending in the
Penal Division; during the year 535 new cases were received, 859 cases
were closed, and 545 claims for reward were transferred to the Chief
Counsel's Committee, leaving 615 cases pending on June 30, 1943.
Review Division.—This Division reviews overassessments of income,
excess profits, war profits, estate, gift, and miscellaneous taxes proposed
for allowance (also deficiencies when coupled with overassessments),
where the amount of the overassessments in any case exceeds $20,000,
and proposed refunds or credits of any tax in excess of $20,000. I t pre' pares the reports to the Joint Committee on Internal Revenue Taxation
required by section 3777 of the Internal Revenue Code, where the
overpayments of income, excess profits, war profits, estate, or gift
taxes exceed $75,000, and prepares public decisions where the overassessments exceed $20,000. I t also examines and reviews special
cases referred to it by the Chief Counsel for the Bureau.
Duriag the year the Division received and disposed of cases as
follows:
Estate and
other miscellaneous taxes

Cases

Total

67

72
626

91
693

Total
.
Disposed of during year...

86
71

698
495

784
666

Onhand June 30, 1943...

15

203

218

$5, 917, 753. 30
3, 762, 243. 48

$44, 668,821. 63
31, 386,422. 46

$50, 586, 574. 93
35,148, 665. 94

On hand July 1, 1942 .
Received during year

"

Amounts involved:
Claimed by taxpayers
Approved by Review Division

19

Income
tax

•

.

Engineers and Auditors Section.—The Engineers and Auditors.
Section, consistiag of a group of engineers, accountants and auditors,
operating directly under the Chief Counsel, furnishes technical advice
and assistance to the respective divisions, particularly in litigated
cases, and to the Department of Justice, in connection with cases
involving engineering and auditing problems, principally in the field
of valuation.' During the year the Section rendered such assistance
in 173 cases.



258

REPORT OF THE SECRETARY OF THE TREASURY

In addition to the above work, the office also gave legal advice and
assistance to the Deputy Commissioner of the Salary StabUization
Unit, Regional Office Heads, and other officials on questions involving
the interpretation and construction of the act of October 2, 1942
(P,ublic Law No. 729), as amended, and the Wages and Salaries Regulations of the Director of Economic Stabilization, promulgated with
the approval of the President October .27, 1942, which regulations
conferred authority upon the Commissioner of Internal Revenue to
administer the provisions thereof relating to the stabilization of certain salaries. '^ The legal work performed in connection with the
administration arid enforcement of the act and regulations included
the preparation of memoranda and opinions relating-tb the act,
the review of letters involving legal questions, and the preparation of
letters for the signature of the Commissioner and the Deputy Commissioner. Of the 4,669 cases received since adoption of the act, 4,225
were disposed of, leaving 444 cases pending at the close of the year.
Intelligence Unit
• The Intelligence Unit is principally concerned with the investigation
of tax fraud cases in cooperation with internal revenue agents and
deputy collectors. During the year, 984 investigations were made
of alleged evasion of income and misceUaneous taxes, and of this
number, '255 cases, involving 446 individuals, were recommended for
prosecution. On this charge there were convictions of 92 individuals
and 3 acquittals. Investigations of these cases resulted in recommendation for assessment of additional taxes and penalties amounting
to $56,444,955.
In addition to collections by the Bureau of Internal Revenue of
taxes, penalties, and iaterest, amounts are covered into the Treasury
as a result of fines imposed in criminal cases. In some jurisdictions the
courts have imposed an additional penalty by requiring the defendants to pay the costs of the investigations, that is, the salaries and
expenses of the agents during investigations.
There were 2,404 investigations of applications of attorneys and
agents to practice before the Treasury Department and 75 investigations of charges against enrolled agents and attorneys, resulting in the
disbarment of 9, the reprimand of 1, and the rejection of applications
of 5.
.
The investigations in 95 cases of charges against employees of the
Bureau of Internal Revenue resulted in the separation from the
Service of 70 employees. Criminal proceedings were instituted against
23, and of the 17 brought to trial during the fiscal year, 15 were convicted. There were also 5,688 cases of a miscellaneous character
investigated.
.*
' Salary Stabilization Unit
The Salary Stabilization Unit, under the supervision of a deputy
commissioner, was created by Treasury Decision 5176, dated October
29, 1942, to admiriister the provisions of the regulations prescribed by
the Economic Stabilization Director under the act of October 2, 1942
(Public Law 729), and Executive Order No. 9250, dated October
3, 1942, relatingHo all salaries in excess of $5,000 per annum, and of
executive, administrative, and professional salaries where the rates
were in excess of $30 a week and $200 a month, respectively, and the



REPORT OF T H E

SECR^ETARY OF T H E

TREASURY

259

positions were not represented by a certified labor organization. The
regulations directed that levels of compensation were to be stabUized
as of the level existing on September 15, 1942, except in cases where
gross inequities existed, and increases were to be approved only in the
case of merit, promotion, length of service, increased productivity
under incentive plans, or the operation of a trainee system, all in
accordance with the terms of a salary rate schedule or a policy in
effect prior to October 3, 1942.
In keeping with the decentralization plan ofthe Bureau of Internal
Revenue, the United States was divided into thirteen regional districts, each in charge of a regional head with authority to make rulings
subject to review b y t h e office of the deputy commissioner. The Unit
is charged with the issuance of rulings with reference to increases in
compensation, which generally are salary adjustments or bonus or
commission payments.
The requests for decisions and the actions taken from the inception
of the Unit on October 29, 1942, through June 30,1943, were as follow^s:

Requests
received

Subject

Salary adjustments
Bonus payments-Salary rate schedules
Total

-

-

-

Requests on
hand' June
30, 1943

72, 626
17,996
5,384

_
-. - .

Rulings issued

. -

66,045
16, 579
4, 459

16,481
1,416
925,

95,905

77,083

18,822

a o^

A detailed discussion of the stabilization and limitation of salaries
appears on pages 129 to 132 of this report.
LEGAL D I V I S I O N

The General Counsel, chief law officer of the Department and ia
charge of all legal activities thereof, -heads a Legal Division composed
of the Office of the General Counsel and the legal staffs in all branches
of the Department. Wartime problems have caused a further expansion in the work of this Division over that of last year.
Taxation.—The Division handled 4,730 iacome, excess profits,
unjust enrichment, estate, and gift tax appeals involving $156,641,407
and recoveries of $64,307,493; closed 32 processing tax appeals iavolving $3,782,081, of which $369,814 was recovered by claimants; disposed of 2,558 cases against estates of deceased taxpayers, insolvent
banks, and in liquidation proceedings, the total payments received
being $3,772,072; disposed of 900 civU, 1,093 hen, and 859 criminal
cases; handled 233 claims for reward under section 3792 of the Internal
Revenue Code, reviewed 566 claimed overassessments of iacome,
excess profits, war profits, gift, and other taxes, approving refunds in
, the amount of $35,148,666, and reviewed cases involving 158 claims for
refund of amounts paid as processing and floor stocks taxes and unjust
enrichment tax deficiencies in the aggregate amount of $55,019,847; and
disposed of 3,329 cases involviag compromises and closing agreements.
In 1,117 corporate reorganization and arrangement cases closed
under sections 77 and 77B and Chapters X, X I , X I I , X I I I , and XV
of the National Bankruptcy Act, as amended, claims in the amourit




260

REPORT OF THE SECRETARY OF THE TREASURY

of $5,252,673 were settled for $1,436,338. I n 4,367 bankruptcy and
receivership cases disposed of during the year the sum of $1,779,715
was collected on claims amounting to $5,592,099. In connection
with the administration and enforcement of the internal revenue
liquor laws, the Division prepared or reviewed ,5,911 memoranda,
262 briefs, 5,335 opinions, 98 libels, 29 indictments, 2,923 case reports,
84 claims of over $5,000 each, 5,025 compromise cases, and 785 petitions for remission and mitigation of forfeiture. The Division drafted
riumerous regulations under the internal revenue laws, and assisted
in drafting tax conventions with foreign countries and a large number
of reports on legislation introduced ia the Congress affecting the
-internal revenue. Legal opinions on interpretative questions arising
under the_ internal revenue laws were rendered. In addition, 4,225
cases arising under the salary stabilization regulations received
attention.
Customs.—The Division considered the disposition of property
salvaged from torpedoed or wrecked vessels, and the admission into
the United States free of duty during the war of merchandise such as
that certified to be classified as purchases of emergency war material,
the effects of. persons in the Government service or persons evacuated
to this country by Government order, and articles for members of the
armed forces of the United Nations or for enemy prisoners of war. The
• Division has cooperated with the Assistant Attorney General in charge
of customs litigation by preparing legal material for use in the trials
of customs cases and by conducting research and making recommendations regarding the taking of appeals. The Division participated in
the consideration by the Foreign-Trade Zones Board of applications
for the establishment of new zones, and in war-time changes in location of existing foreign-trade zone territory. A considerable amount
of work was done during the year on a complete revision of the customs regulations, issued as the Customs Regulations of 1943, and the
Customs Manual.
Foreign Funds Control program.—In connection with the Allied
invasion of Africa, the Division, 'both here and in the field, handled
legal problems relating to money, banking, finance, and financial and
property controls in that area, participated in interdepartmental discussions on matters of policy and evolved fiscal and monetary procedures and economic measures, based on exhaustive studies of local conditions, which might be put into eft'ect in other Allied-occupied areas.
The Division prepared many public documents and interpretations
and assisted generally in developing programs of action to prevent
the Axis from deriving gain through the financial and commercial
facilities of the United States. The Division also prepared numerous
criminal reports with respect to violations of the freezing order and
regulations and assisted the Department of Justice in preparing briefs
in civil and criminal cases involving freezing control. The Division
cooperated with the Treasury admiaistrative staff, the Department
of State, and the Board of Economic Warfare in studying.methods of
fulfilling and implementing the resolutions adopted at the Inter-American Conference on Economic and Financial Controls, 1942, and in
consulting with the other participating governments in financial con°trol problems of mutual concern.
Monetary.—The Division prepared contracts leasing free silver for
use in war projects, studied proposed legislation through which silver




REPORT OF THE SIECRETARY OF THE TREASURY

261

stocks would be made available for war purposes, prepared opinions
relative to coinage, and handled legal questions involving monetary
and industrial transactions in gold and silver, the acquisition by the
United States of monetary metals, and transactions in gold and foreign
exchange with foreign governments and foreign central banks. The
Division also drafted a number of stabilization agreements and other
international monetary arrangements, and did other legal work in
connection with the stabUization of the exchange value of the dollar.
Public debt.—The transfer of the bulk of the administrative work
on savings bonds to Chicago in June, 1942, necessitated the establishment of a branch of the Legal Division in Chicago. That office handled
upwards of 13,000 cases during the past fiscal year, and the volume of
work has sharply increased in the past few months. The issue of sfeveral
new types of securities has presented questions of complexity in connection with the drafting of regulations, issue circulars, texts and
forms. ^ Litigation, particularly in regard to savings bonds, was
active, and the Division worked in close cooperation with the Department of Justice on those cases.
Procurement.—Vnder the lend-lease program, 'the Division passed
upon the legality of, or upon legal questions arising under, lend-lease
contracts involving the purchase of $1,590,501,536 worth of supplies
covering 24,643 contracts. Some of the legal problems arising out of
that enormous number of contracts concern the preparation and interpretation of advance payment bonds and special contract provisions
connected therewith; negotiation and preparation of license agreements for the use of patents; preparation of special contracts, amendments to contracts, and orders of the Director of Procurement; the
handling of cases involving readjustment of patent royalties under the
, act of October 31, 1942 (56 Stat. 1013); and, passing upon issuance of
tax exemption certificates and claims for drawback of customs duties.
The Division took an active part, together with the Army, Navy,
and Maritime Commission, in renegotiating war contracts and brokers'
fees. Assistance was given in the preparation of the joint statement of
principles governing procjedure for the renegotiation of contracts.
The Division furnished advice in connection with the award, execution, and performance of contracts for general Government procurement; approved performance and advance payment borids in connection with such contracts; prepared regulations requhing use of
standard contract forms and standardization of purchase order forms
by all departments and establishments of the Government; and rendered services in connection with the approval of deviations from
various standard contract forms.
Accounts.—Problems relating to the acceptance, under Title X I of
the Second War Powers Act, 1942, of conditional gifts to the United
States for the furtherance of the war program and to the handling of
securities and gold bullion taken from the Philippine Islands were of
importance in the Division's activities. The Division assisted in the
drafting of regulations issued pursuant to the Current Tax Payment
Act of 1943, which provide for the payment by employers through
depositary banks of funds withheld as taxes.
Legislation.—Twenty-four legislative proposals considered desirable
for the efficient functioning of the Department were prepared. Representatives of the Division frequently appeared before Congressional
committees to furnish technical assistance and to explain the purpose,



262

REPORT OF THE SECRETARY OF THE TREASURY

effect, and legality of legislation affecting the Department and furnished other technical assistance to such committees. Assistance was
rendered in the preparation of approximately 292 reports on legislation
and in drafting numerous Executive orders and proclamations.
Legal opinions.—-The Division prepared 31 formal opinions, and
many informal opinions, studies, and memoranda for the guidance of
the administrative officers of the Department. An exhaustive com.pilation of Federal statutes and Executive orders relating to Government contracts, comprehensively indexed, was prepared.
Claims by and against the United States.—The Division handled 200
petitions for remission or mitigation of penalties and forfeitures
under the customs and narcotics laws, and 300 offers in compromise
involving registrants under the^ narcotic laws. Action was taken on
approximately 54. miscellaneous oft'ers to compromise claims of the
United States, and on about 32 suits filed agamst officers of the Department and of the United States and on patent cases. The Division
passed upon the legal sufficiency of 629 assignments executed pursuant
to the Assignment of Claims Act of 1940, involving contracts entered
into by the Department; rendered assistance to the Department of
Justice in connection with numerous check reclamation cases; and
examined 15,432 indemnity or official surety bonds. The Division
continued to represent the Department in connection with the hquidation of indebtedness of certain carriers under the Transportation Act
of 1920, as amended, and to render legal advice regarding payments
to short-line carriers under section 204 of that act.
The Division performed legal services with respect to payments to
American nationals of awards made pursuant to the provisions of
the Settlement of Mexican Claims Act of 1942, and to claims of
American nationals against Germany and Turkey.
Narcotics.—A number of unusual legal questions arising in connection with the Federal narcotic drug and marihuana laws were determined during the year; new legislation was drafted for the purpose of
controlling the growth of the opium poppy,, and, upon its submission
to Congress, was enacted as the Opium Poppy Control Act of 1942;
regulations for the enforcement of that act were drawn; a general
conservation order relating to the establishment of manufacturing
and purchase quotas for narcotic drugs was prepiired; and assistance
was extended to a number of the States in connection with the adoption or amendment of the Uniform State Narcotic Drug Law.
Comrriittee on Practice. —Surveillance is maintained b}^ the Committee
over a bar of approximately 70,000 enrollees, (lawyers and accountants) licensed to practice before the Treasury Department. A representative of the Division acts as counsel for the Committee, investigates complaints, and when necessary files charges which may result
in disciplinary action by the Committee. The Division's representative handled approximately 180 reports of misconduct by enrollees,
and presented 27 cases to the Committee on formal charges.
BUREAU^OF THE MINT^

Institutions of the Mint Service
During the fiscal year 1943, six mint institutions were m operation:
Coinage mints at Philadelphia, San Francisco, and Denver; assay
1 More detailed information concerning the activities of the Bureau of the Mint is contained in the annual
report of the Director of the Mint.




REPORT OF T H E 'SIECRETARY OF THE TREASURY

263

office at New York, which handles the major portion of the gold
imported and exported, and its auxUiary sUver buillion depository at
West Poirit; gold bullion depository at Fort Knox; and assay office
at Seattle. Electrolytic refineries are maintained at the New York,
Denver, and San Francisco institutions.
Coinage
Domestic coin manufactured during the fiscal year 1943, amounted
to 1,472,098,762 pieces, as compared with the record production of
2,114,890,662 pieces during the preceding year. As in previous years,
the coin most largely produced was the 1-cent piece. The production
in 1943, in amount $153,474,479, consisted of 683,103,362 subsidiary
silver corns, $133,341,141; 306,084,600 5-cent coins, $15,304,230; and
482,910,800 1-cent pieces, $4,829,108, of which 287,758,800 pieces
were bronze and 195,152,000 were of zinc-coated steel.
Coinage for foreign governments amounted to 173,023,000 pieces,
compared with 281,050,000 pieces during the prior year.
The grand total of domestic and foreign coins made in 1943 amounted to 1,645,121,762 pieces, a decrease of 750,818,900 over the prior
year. The decrease was largely due to interrupted production resulting from changes in the alloy of minor coins.
Minor coinage alloys
Five-cent coin.—Production of the new 5-cent coin, urider authority
of the Second War Powers Act, approved March 27, 1942, was started
on October 1, 1942. The alloy for the new coins, adopted after considerable experimentation with different materials and alloy proportions, was finally determined as 35 percent silver, 56 percent copper,
and 9 percent manganese. The adoption of this alloy effects a saving
for war uses of all the nickel and about one-fourth of the copper
formerly used in the 5-cent coin. Manufacture of the old 5'-cent coin,
containing '25 percent nickel and 75 percent copper, was discontinued in May 1942. (See exhibit 60, page 364.)
One-cent coin—Production of 1-cerit coins containing 95 percent
copper and 5 percent tin and zinc was sharply curtailed beginning in
July 1942 and entirely discontinued in December 1942, because of the
necessity of saving copper for war industries. During the interim
extensive experhnentation was made with various substitute materials
in an effort to determine a nonstrategic material which would be
satisfactory for coinage purposes and suitable for coin-operated devices.
A zinc-coated steel coin was finally devised, production of which was
commenced on February 23, 1943, pursuant to Public Law 815, approved December 18, 1942. (See exhibit 61, page 365.)
Metal savings.— Based upon the production of 5-ceut and 1-cent
coins during the fiscal year 1942 it is estimated that over 4,900 tons
of copper and 300 tons of nickel will be freed annually for use in furtherance of the war effort, as a result of the changes in minor coinage
alloys.
Bullion deposit transactions
The number of bullion deposit transactions during the year totaled
15,406, including 99 inter-mint service transactions, as compared
with 35,521 and 83, respectively, during the prior year. The deposit



264

REPORT OF THE SECRETARY OF THE TREASURY

transactions, required 23,019 assay determinations, which compares
with 52,406 assay determinations in 1942.
Transfer of bullion
There were no transfers of buUion, for long-term storage, during the
fiscaL year 1943. However, bars containing 30,044,617 fine ounces
of silver, resulting from melting foreign silver coin of an alloy closely
approximating that of United States silver coins, were transferred
from the New York Assay Office to the Philadelphia Mint for use in
domestic subsidiary silver coinage. The New York Assay Office also
manufactured and shipped to the PhUadelphia Mint silver coinage
ingots containing 466,960 fine ounces of silver.
The sUver bullion in the bullion depository at West Point was
decreased during the year by 646,073,488 fine ounces and stood at
896,624,303 fine ounces on June 30, 1943! The decrease was d u e t o
the transfer from West Point of part of the silver delivered to the
Defense Plant Corporation, etc.
Silver bullion, in quantity 695,001,504 fine ounces, was delivered
to the Defense Plant Corporation, etc., during the fiscal year under
terms of a contract dated May 6, 1942, providing, in effect, for loan of
about ojie billion ounces of silver to be used as a substitute for copper
or other stragetic materials in plants that are engaged iri, or are essential to, the war effort. Its principal use is understood to be in bus
bars, for transmission of electric current. The total silver loaned in
this manner, 699,819,332 fine ounces as of June 30, 1943, is to be
returned to Treasury custody under terms of the contract, after it has
performed its function.
Gold operations
Gold acquisitions by the mints and assay offices during the year,
on the basis of classified melted receipts, amounted to $188,134,966,
and transfers between mint-service institutions amounted to $19,871,516. These transactions total $208,006,482, compared with $2,891,495,955 for the prior year which iricluded $2,226,584,768 in inter-mint
transfers.
The acquisitions include $17,347 of gold received at $20.67+ per
fine ounce. The increment on this gold amounted to $12,022.
Silver operations
The Treasury's acquisitions of silver during the year totaled
20,594,564 fine ounces, at an average cost of $0,691 per fine ounce and
a total cost of $14,229,936. The acquisitions consist of the following:
Amount (fine
ounces)

Item
Newly mined domestic silver
Purchase Act silver Silver contained in gold bullion deposits, etc.^
Silver received in exchange for Government-stamped bars
Total

-

19, 568, 621. 34
--

Cost

167,483. 57
858,458.62

$13,870, 638. 45
1 5,141. 14
60,190.14
293 965 98

20, 594, 563. 63

14 229 936 71

» Delayed expense item.
2 Includes 42,002.70 fine ounces, cost I 8,481.19, acquired for account of the Metals Reserve Co. at
10.44 per fine ounce. •




REPORT OF THE SEORETARY OF THE TREASURY

265

United States silver coin received for recoinage totaled 1,673,579
fine ounces, with a recoinage value of $2,313,571; and additional
unfit silver dollars of a face value of $8,080,739, which were melted
during the year under authority of the act of December 18, 1942
(Public Law 815), produced 5,981,42rfine ounces of silver. Silver
deposited by other governments, for foreign coinage, totaled 12,579,986
fine ounces. Silver transfers between mint-service institutions totaled
30,751,458 fine ounces. These items plus the silver acquired during
the year brought the total transactions in silver to 71,581,008 fine
ounces, compared with the prior year's total of 136,512,543.
Duriag the year $13,963,636 bf sUver certificates were issued agaiast
10,800,000 fine ounces of silver bullion valued at $1.29-f- per fine ounce,
the statutory monetary value bf sUver. Such sUver had been acquired
at an average price of $0.7111 + per fine ounce. The difference between
the cost of the silver held to secure such certificates and the monetary value of such sUver is $6,283,636, and this amount constitutes
seigniorage.
The open-market price of sUver in New York (mean of bid and asked)
during the fiscal year 1943 averaged $0.43458. The price from July 1,
1942, untU September 1, 1942, was $0.35437, when it advanced to
$0.45062, which price prevaUed, without change, through June 30,
1943.
^
'
;
For newly mined domestic sUver a return to the depositor of $0.7111 -f
per fine ounce, established by the act of July 6, 1939, prevaUed during
the fiscal year 1943.
Rejineries
The electrolytic refineries produced during the year 6,225,508 fine
ounces (213 tons) of electrolytically refined gold bullion and 6,679,864
fine ounces (229 tons) of silver bullion. During the prior year the quantities produced were 7,749,270 fine ounces (265.7 tons) of gold and
6,272,610 fine ounces (215.1 tons) of silver.^
Stocks of unrefined gold and sUver bullion in mint institutions decreased during the year by approximately 294.6 tons, leaving a total
of 1,757 tons. There was a decrease in 1942 of about 99.5 tons.
Stock of coin and monetary bullion in the United States
On June 30, 1943, the estimated stock of domestic coin in the United
States was $1,443,813,694, of which $538,996,271 was standard sUver
dollars, $659,967,847 subsidiary sUver coin, and $244,849,576 mmor
coin.
The stock of gold bullion, including coia, held by the Treasury on
the same.date was valued at $22,387,522,108, a decrease of $349,182,444; and the stock of silver bullion was 2,430,270,022 fine ounces, a
decrease of 94,058,793.
Production of gold and silver
Domestic gold production during the calendar year 1942 was 3,741,806 fine ounces, with a monetary value of $130,963,210, compared with
5,976,419 fine ounces with a value of $209,174,600 in 1941. The largest
gold production, 6,003,105 fine ounces with a monetary value of $210,108,700, occurred in 1940.
542890—44

19




266

REPORT OF THE SECRETARY OF THE TREASURY

Domestic sUver production during the calendar year 1942 totaled
56,090,855 fine ounces, representing a.decrease of 16,245,174 ounces
from the 1941 production of 72,336,029. The recordlproduction of
74,961,075 ounces was in 1915.
Industrial consumption of gold and silver
Gold consumption in the industrial arts during the calendar year
1942 is estunated at $75,742,495. Gold returned from industrial use
amounted to $28,447,685. These items give a net industrial consumption of new gold during the year of $47,294,810, compared with $37,001,620 duriag the calendar year 1941.
SUver used in the arts is estimated at 131,419,224 fine ounces, of
which 101,398,695 fine ounces were new material.
Compared with the prior year, there was a decrease in gold consumption of approximately 590,900 ounces and ah increase in sUver consumption ia industry of about 38,600,000 ounces.
General activities
The regular income realized by the Treasury from the Mint Service
aggregated $74,278,461, of which $71,678,751 was seigniorage. The
seigniorage on subsidiary silver coin was $60,591,139, and on minor
coin $11,087,612. Extraordinary income was $6,295,658, of which
$6,283,636 was seigniorage on silver bullion revalued to $1.29+ per
ounce, and $12,022 was increment to $35 per ounce on revalued gold.
The number and value of deposits, transfers, gross income, and
expenses for the fiscal year 1943, and the number of employees on
June 30, 1943, at each iastitution are shown in the following table.
Gold and silver deposits, income. expenses, and employees , by institutions. fiscal
year 1943
NumNum- ber of Monetary
assay
value of
ber of detergold and
bullion minasilver redeposit tions
ceipts, intranscluding
actions on bul- transfers ^
lion deposits

Institution

Philadelphia
San Francisco
Denver
New York
Seattle
Fort "RTnov

-

15,406

--

.--

Total
Bureau of the Mint
Grand total.Prior fiscal year

23,019

Excess of Emincome ployees,
expenses or of ex- June
penses 30,1943
(-)

Gross

$65,477, 271 $49,291,866 $3,382,770 $45,909,086
42,099,186 11,459,974 1, 294, 762 10,166, 222
43. 343, 525 12,173,965 1, 071, 656 11,102,299
128,106, 722 1,307,143
609,106
698,037
15.948,894
45, 534
37,204
8,330
86, 608 -86, 608

1,201
420
305
173
9
36

284,975. 697 74,278,461

6,480,996 67,797,466
150,438 -150,438

2,144
44

23, 019 284,976,597 74,278,461

6,631,434 67,647,027

2,188

35, 621 52,406 3,056,135,406 69.025, 697 6, 294, 713 62, 730,884

--

4,668
6,692
2,995
6,936
1,828

16,406

- -

2,592
4,477
1, 795
6.113
1,429

Gross
regular
income

2,112

»Includes 99 inter-institution transactions amounting to $68,630,977.

DIVISION OF MONETARY RESEARCH

The Division of Monetary Research in the OflSce of the Secretary
provides information, economic analyses, and recommendations for
the use of the Secretary of the Treasury and other Treasury officials




267

REPORT OF THE SECQRJETARY OF THE TREAiSUHY

to assist in the formulation and execution of the monetary policies of
the Department in connection with the stabilization fund, gold and
silver, the flow of capital funds into and out of the United States, the
position of the doUar in relation to foreign currencies, international
monetary cooperation, monetary, banking, and fiscal policies of/
foreign countries, exchange and trade restrictions abroad, and similar
problems. I n addition, the Division provides economic analyses in
coimection with the Treasury's Foreign Funds Control, and monetary
and financial problems in occupied areas.
Analyses are also prepared relating to the customs activities of the
Departinent and the duties of the Secretary of the Treasury under
the Tariff Act and on other matters pertaining to international trade,
including the trade agreement program.
The Division also is responsible for the economic and financial
work in connection with the negotiation of exchange stabilization
agreements made by the United States with foreign governments and
central banks for the purpose of promoting international exchange
stability. The Treasury's operations under these agreements are
performed under the stabilization fund, which is administered by the
Division.
BUREAU OF NARCOTICS!

The activities of the Bureau of Narcotics are directed toward the
suppression and elimination of the Ulicit traffic in narcotic drugs and
toward an effective control of the legitimate manufacture and distribution of such drugs for necessary medical uses.
During the fiscal year the activities of the Bureau resulted in an
increased number of arrests for violations of the narcotic laws and
increased quantities of drugs confiscated from the Ulicit traffic. There
were slight reductions in the number of arrests under the marihuana
laws, in the number of vehicles seized for violations of the marihuana
and narcotic laws, and in the quantities of marihuana seized and
eradicated.
'
A comparison of these statistics for the years 1942 and 1943 is
shown in the following table.
1942
Narcotic
laws
Violations reported,.
.number..
Arrests,.---.-.
do....
Drugs confiscated:
Narcotics,
ounces-Marihuana:
Bulk,
pounds. do
Seeds,
Cigarettes,
--- ---—number.do Growing plants,
-- acres-Wild marihuana growth eradicated,
Vehicles seized,--_
number-.

2,617
1,777

1943

Marihuana
laws
1,159
1,090

' 1, 622

171

Narcotic
laws
2,431
1,794

Marihuana
laws
796
777

2,289
'722
'12
' 31,342
1,693
9,742

132

638
18
24.903
108
4, 747

' Revised.

The tables following show in detail the number of violations reported
under the narcotic and marihuana laws during the fiscal year 1943
and their disposition and the penalties, as reported by Federal narcotic
enforcement officers.
1 Further uiformation concerning narcotics is available in the separate report of the Commissioner of
Narcotics.




268'

REPORT OF THE SECRETARY OE THE TREASURY

Number of violations of the narcotic and marihuana laws reported and their disposition
and the penalties, fiscal year 1943.
Narcotic laws
Registered persons
Federal
court
Pending July 1,1942
Reported during 1943:
Federal
:
Joint
-.
Total to be disposed
of
—..
Convicted:
Federal
Joint
Acquitted:
Federal
Joint
Dropped:
Federal
Joint
Coihpromised:
Federal
Joint

Marihuana laws

Nonregistered persons
Federal
court

state court

State court

Nonregistered persons
Federal
court,

State court

521

1,099

. 678
62

1,392
309

467
329

1,261

2,800

1,144

759
113

117
16

298
96

12
9

26
6

312
71

263
11

19
12

371
261

49
39

195
54

287
20

Total disposed of-.

741

1,793

844

Pending June 30,1943-.

610

1,007

"300

Sentences imposed:
Federal
--.
Joint
.--.

241
15

Total-.--.

256

Fines imposed:
Federal
Joint

1,370
239

$26, 634
1,975

Total.

28, 609 •

647
376

301

—

193
108

923

24

$750

$66, 778
634

1,462

$2,400
2,873

$11
79

750

'67,412

2,258

6,273

90

NOTE.—Federal oases are made by Federal officers working independently while joint cases are made by
Federal and State officers working in cooperation with each other.
1 Includes one violation by a registered person but this was dropped during the year. No registered
, persons were reported for violation during the year.
* Represents 309 cases which were compromised in the sum of $39,565.60.

Registrations under the Federal narcotic and marihuana laws, June SO, 1943

y

•

•

.

•

Importers, manufacturers, producers, and compounders
Importers, manufacturers, and compounders
---_
Producers (growers) .
Dealers
Wholesale
Retail- -Practitioners
-..
Dealers in and manufacturers of untaxed preparations
\Jsers for purposes of research, instruction, or analysis
. Total

. -

Narcotic
laws .'• •

••

.

..

..

.

147

1,167
47,784
144,559
1 136, 735
126
330, 518

Marihuana
laws

7
14,913
199
. 621
43
16 783

1 Includes registrations for which payment of occupational tax is not required under the act, because also
registered in some other class.




REPORT OF THE SECRETARY OF THE TRiEASURY

269

Opium supplies continued to be avaUable for import and additional
quantities were imported duriog the year. Coca,leaves simUarly
continued to be imported, both for inediciaal purposes and the
manufacture of nonnarcotic flavoring extracts.
^
Exports of narco.tic drugs have generally increased owing to demands
of countries which formerly procured their supplies from European
sources. Manufacture of such drugs has increased considerably because of these unusual export requhements and of the needs of the
military and naval forces.
DIVISION OF PERSONNEL

The DiA^ision of Personnel is charged with the supervision of the
personnel activities of the enthe Department, and its general functions
iaclude initiating, planning, and formulating personnel policies, procedures, practices, and programs, and coordinatiag and exercising
control over the Department's personnel operations so that they will
conform to approved policies and procedures. The functions of the
Division are principally in the nature of advisory and control activities,
with the personnel operations of the Department being actually
carried out in the personnel units of the several branches, bureaus, and
offices. This decentralization of personnel work, with control being
retained ia the central personnel officC; is in liae with the Department's
policy of facUitating and strengthening the functioning of the operating
organizations.
The activities of the Division include those relating to positionclassification, salary administration, recruitment, placement, appointment, promotion, separation, retirement, discipliae, iovestigation,
efficiency rating, employee relations, leave, forms and records, training, and civil service rules and regulations.
Throughout the fiscal year 1943 the Division was engaged in fostering, developing, and maintaining a comprehensive program of personnel management, in the interests of bettering employee-employer
relations, attaining higher standards of performance, and increasing
the over-all efficiency and effectiveness of admioistration for the
entire Department.
Duriag the year the Division considered and acted upon 170,024
personnel recommendations relating to the appoiatment, promotion,
reassignment, retiremerit, suspension, and separation of employees.
The table following shows for the fiscal years 1942 and 1943 the number of employees and the personnel actions processed.
Fiscal year
1942

Field employees
Departmental employees.-Tbtal employees
Personnel actions processed.

Fiscal year
1943

43, 686
24,610

50,397
31,696

6,811
7,086

68,196
116,696

82,093
170,024

13,897
54, 428

Increiase

Note.—The figures for number of employees show the actual number of names appearing on pay rolls for
the period covering the last half of June 1942 and June 1943.

COMMITTEE ON PRACTICE

The Committee on Practice is an administrative and judicial body.
It has charge of the enrollment of attorneys and agents for practice
before the Treasury Department and conducts hearings ia disbarment
proceedings. An attorney, not a member of the committee, represents



270

REPORT OF THE SECRETARY OF THE TREASURY

the Government before the committee. All complaints are filed with
the attorney for the Government, who institutes proceedhigs ia disbarment or suspension if the charges warrant siich action. The committee also issues licenses to customhouse brokers and makes findings
of fact and recommendations to the Secretary in proceedings for the
revocation or suspension of such licenses.
The following statement summarizes the work of the committee for
the year 1943.
Attorneys and agents:
Applications for enrollment approved
Applications for enrollment disapproved
^
Applications withdrawn on advice of committee..
Formal hearings on applications
--Complaints against enrolled persons:
Pending July 1, 1942
Filed during the year--

-

_

-.

--.

..-------

-

—-.-

--.

33
8
—

-

Disposed of:
Disbarred
Stricken from the rolls in the course of disbarment proceedings
Suspensions
-----Reprimands
---.Dismissed- — . .
--

Number
2,276
5
125
4

^...
-

-

--.-

9
1
0
1
3
—

Pending June 30,1943
—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
--.-_
-----Custonihouse brokers:
Applications for licenses approved-Applications withdrawn
Licenses canceled
^
, Licenses revoked—1.Suspensions
Reprimands

_

-

_
---__..

41

14
27
5
6
48
11
23
1
0
0

-

Since the organization in 1921 of the Committee on Practice, 64,037
applications for enrollment have been approved and 762 disapproved.
Two hundred and forty-six practitioners have been disbarred from
further practice before the Treasury Department, 137 have been suspended from practice for various periods, and 180 have been
reprimanded.
PROCUREMENT DIVISION

The following table summarizes the amounts of purchases made by
the Procurement Division under its various activities during the fiscal
years 1942 and 1943.
1942
Regular activities..
Printing and binding
--_.
Lend-lease activities..
Emergency relief
Foreign war relief
strategic and critical materials-—
—-Defense housing furniture and equipment
Total purchases

-

--•_

$21,648, 645
. 6,061,395
1,126, 438, 327
171,711,188
17,053,849
6,544, 303
15,433,708

1943
$39, 269,734
7,040, 264
1,469,859,966
41,096,883
2, 568,832
12,256,419
15,906, 289

1,364,891, 316 ' 1.687.987,377

Typewriter purchases program.—The conversion of the typewriter
manufacturiag industry to war work and the consequent cessation of
the manufacture of typewriting machines necessitated the purchase
of used typewriters to meet the needs of the mUitary services and other
Government agencies. To accomplish this a program was initiated,
in cooperation with the War Production Board, under which contracts



REPORT OF THE SECRETARY OF THE TREASURY

271

were entered into with typewriter dealers and manufacturers throughout the United States for the purchase of typewriting machiaes from
the public. Under these contracts, machines have been purchased,
cleaned, reconditioned, and delivered to the Government. By June
30, 1943, 275,298 machiaes had been purchased.
Blind-made products.—-'RequiTeiaenis of the military services have
materially increased the purchases made from institutions for the blind
under the Wagner-O'Day Act. ; During the year, purchases from the
fifty-three institutions participating in the program amounted to
$10,380,000. The largest purchases were pUlowcases, of which
19,316,000 were made by the bliud. This work gave employment to
2,519 blind persons, who received over a mUlion dollars in wages.
Printing and binding.—To meet the printing and binding requhements of the Treasury Department during the fiscal year, 5,101
requisitions were placed with the Public Printer at an estimated cost
of $6,928,182, an increase over 1942 of $866,787. Appropriations made
to Treasury bureaus and offices specifically for printing and binding
totaled $2,085,243. Additional funds amounting to $844,061 were
made available by increases in the limitation for the Bureau of Internal
Revenue and by transf ers to the several activities of the Department,
making a total of $2,929,304. Of this sum the Bureau of Internal
Revenue expended $2,005,902 (largely in connection with tax opera. tions), and other bureaus $544,663, a total of $2,550,565. The remaining cost, $4,377,617, was defrayed from other funds, and covered for
the most part $2,347,558 for the "War Finance Division (formerly the
War Savings Staff) for printing and binding incident to the promotion
and sale of savings bonds and stamps, and $1,848,193 for the Bureau
of the Public Debt, principally for printing in connection with the
issue and retirement of obligations of the United States Government
and promulgation of regulations pertaining thereto.
There was also an increase in the volume of engraving and plate
printing authorized at the Bureau of Engraviag and Printing. Seven
thousand and seven requisitions were placed with the Bureau for a
total of 242,853,205 disbursing officers' checks, commissions, certificates, drafts, transportation requests, and warrants, as compared
with 5,627 requisitions and 172,155,245 such checks, commissions,
etc., during the fiscal year 1942.
Lend-lease.—The Procurement Division's activities under the LendLease Act continued to be its most important task in the war effort.
During the year purchases amounted to $1,500,000,000. A discussion
of these activities appears on page 120.
Relief.—Purchases for emergency relief, dropped from $172 millions
in 1942 to $4i;000,000 in 1943. Consohdation of the field procure-,
ment offices was completed during the year; there are now 8 regional
offices with purchasing officers in each State.
The unexpended balance of the appropriation for relief of refugees,
made available by the Emergency Relief Appropriation Act, 1941, and
the appropriation for foreign war relief, contained in the Third Supplemental National Defense Appropriation Act, 1942, were consolidated
and made avaUable until June 30, 1943, for both purposes by the
Second Deficiency Appropriation Act, 1942, approved July 2, 1942.
From the beginning of the relief program in September 1940 to the end
of June 1943, obligations for the purchase of supplies and material have
amounted to $37,491,000, and for transportation, warehousing, etc.,



272

REPORT OF THE SECBETARY OF THE TREASURY

$3,239,000, or a total of $40,730,000. Obligations incurred during the
fiscal year 1943 were materially smaller than during the previous
years. I n 1941 the sum of $19,653,000 was obhgated; in 1942, $18,467,000; and in 1943, $2,610,000. The reduction is accounted for by
,the extension of enemy occupation, making it impossible to distribute
relief, and the diminution of bombing of England, lessening the need
for relief.
Strategic and critical materials.—Purchases of strategic and critical
materials amounted to over $12,000,000 during the year. The
activities of the Procurement Division in this connection are more
fully discussed ori page 122.
Defense housing furniture and equipment.—During the year purchases of household and quarters equipment for the account of other
services of the Government amounted to $15,905,000, an iacrease
of $472,000 over the previous year. Preliminary work was completed
and there was iacorporated in the General Schedule of Supplies the
erithe class of household and quarters furniture except items prohibited
by wartime restrictions. DetaUed specifications and drawings now
in use cover approximately 400 items of furniture needed by various
services of the Government for living quarters. There are avaUable,
to bidders and contractors, drawings giving dimensions and construction details, and, to ordering offices, Ulustrations of completed
pieces for use in selecting articles. For the first time there has been
brought together in one place the preparation of specifications and
the making of contracts for household and quarters furniture, providing adequate control over standards of quality, and effective inspection, with the price advantage of coordinated purchasing.
Wood and steel office furniture.—The restrictions placed on the
manufacture of steel office furniture and the limitations imposed
by the War Production Board on the use of metal parts in the assembly
of wood office furniture necessitated the redesigning and modification
of detaUs of construction for numerous items. Specifications were
revised, limiting the use of metal in the assembly of various types
of wood office files and chairs requiring rotary and tUting mechanism,
resulting in the saving of large quantities of steel used iri the manufacture of castings, springs, and other metal components. The less
expensive table type desks and other wood desks, minus all nonessential metal parts, were made readily available to the Federal
agencies under Special Purchase Program contracts with a number
of manufacturers.
Public utilities.—The Procurement Division performs the technical
work requhed to achieve the most efficient and economical means
whereby telephone and other whe communication" service, electric
light and power, and gas are furnished to activities of the Federal
Government. Research is carried on to develop bases for negotiatirig
consolidated contracts, or by other means to decrease the cost and
to provide more effective public utUity service supplied to Federal
agencies. Technical supervision is maintained over the consolidated
contracts covering telephone service, electric power, and gas in the
Washington area, and electric power and gas contracts under which
Federal agencies are served in Baltimore, PhUadelphia, and New York.
The Division's efforts have effected considerable savings, much of it
in small, scattered amounts, and improved service and more efficient
operation.. However, after negotiations were concluded with the




273

REPORT OF T H E SECRETARY OF T H E TREASURY

Chesapeake & Potomac Telephone Co. looking toward a more equitable
scale of charges for certain elements of telephone service in the Washington area, the reductions in charges aggregated about $200,000 a year.
After analyzing electricity data for the Washington area the Procurement Division intervened before the Public Utilities Commission as a
party to an action looking toward reduction in rates; reductions were
ordered, of which the Government's share is approximately $100,000
a year. In addition, the matter of electric power for the Pentagon
Building was also under consideration, and, if the rates being charged
are brought into line with applicable rates in adjacent territory, there
wUl be a saving of about $165,000 annually.
Deliveries o//iieZ.^Despite interrupted coal production and transportation difficulties, adequajbe supplies of anthracite and bituminous
coal, coke, charcoal, firewood, heavy industrial oU, and light domestic
oil were delivered to more than 2,000 locations in or adjacent to the
District of Columbia, comprising office buUdings occupied by Government agencies; Federal public housing projects and institutions;
District of Columbia municipal institutions,. hospitals, schools, and
police and fire stations; and mUitary and naval posts. Fuel deliveries
to these departnients and agencies amounted to 470,000 tons of coal, of
which 308,000 tons were delivered by dhect raUcar and 162,000 tons
by Procurement Division trucks, and approximately 2,900,000 gallons
of light domestic oil and 13,700,000 gallons of heavy industrial oU.
General supply fund.—This special fund was established pursuant
to the act of February 27, 1929 (45 Stat. 1341), and is avaUable to finance the stock, consolidated purchases, and services authorized under
Executive Order No. 6166, dated June 10,1933. I t is a revolving fund
from which payments are iriade for commodities purchased and services performed for other agencies and to which collections made dhect
from the applicable appropriations are credited by transfer and
counter-warrant. These collections include a mark-up sufficient to
cover actual handling expenses.
A statement of the assets and liabilities of the general supply fund
as of June 30, 1943, follows:
Amount

Assets • •
Current assets:
Cash
Accounts receivable
Total..-.

:

:
--...-

$2,953,431. 32
3,975,684.08
6,929,015.40

Inventories and deferred charges:
Inventories (at cost)-Deferred charges
_

3,711,823.66
6,886.66

Total
Fixed assets—equipment

3,718,710.32
71,115.66

Total assets

^

10,718, 841.38

Liabihties and capital
Current habilities:
Accounts payable
Unearned income

-

Amount .

$5,452,367.60
30,272.06

.

5,482,639.66

Total
Appropriations and capital:
Capital
Donated capitalTotal

---

6,020,196:07
162,477. 88
. 53, 527.77

--

5,236, 201. 72

Total liabilities and capital—. 10,718,841.38

Storage and warehousing.—The Warehouse, in which are stocked
commodities in common use in the Government, filled 48,473 requisitions received from the various departmental and field agencies for
supplies amounting to $7,588,019. This represented 16,300 tons of
material delivered by Warehouse trucks in the District of Columbia
and vicinity and 10,400 tons shipped to field activities. Executive
Order No. 9235, dated August 31, 1.942, directed the Procurement



274

REPORT OF THE SECRETARY OF THE TREASURY

Division to undertake such warehousing and distribution of supplies
and equipment for Government agencies as the Director of the Bureau
of the Budget approves. To carry out the provisions of this order a
Natiori-wide storage and issue warehousing program was inaugurated,
the detaUs of which are discussed on"^age 123.
Specifications.—New specifications to meet the needs of the Army,
Navy, and other Government departments for war purposes and for
lend-lease purchases were prepared during the year as follows: 77
Federal Specifications, 115 Emergency Alternate Federal Specifications, and 57 Procurement Division Specifications.
These specifications have coordinated, standardized, and simplffied
technical requirements for machines, equipment, and supplies so t h a t
products suitable for war needs could be obtained more readily. The
specifications covered commodities such as foods, blankets, medical
and surgical supplies, sterilizers, laundry equipment, cooking equipment, trucks, tools for the Army and Navy, and portable Diesel electric
power stations.
In order to meet rapidly changing war conditions and to conserve
strategic and critical materials such as rubber, aluminum, brass,
copper, nickel, and various chemical compounds, old specifications
were revised as follows: 255 revisions to Federal Specifications, 190
revisions to Emergency Alternate Federal Specifications, and 57
revisions to Procurement Division Specifications.
On June 30, 1943, there were in effect 1,511 Federal Specifications,
442 Emergency Alternate Federal Specifications, and 305 Procurement
Division Specifications.
Federal Standard Stock Catalog.—The greater part of the cataloging
work of the Division was performed for the Service Branches of the
War and Navy Departments. The most important was the cataloging
of all standard items of hardware, tools, and equipment used by the
Ordnance Department. About 50,000 items of equipment have been
identified from ordnance parts lists or from drawings and arranged
in Standard Stock Catalog form. The Office of the Chief of Ordnance
regularly sends to the Division lists of additional commodities to be
added to stock for the Motor Transport Service.
The Division prepared for the Bureau of Yards and Docks, Navy
Department, detailed listings in classified form, with Federal Standard
Stock numbers and nomenclature, covering equipment and supplies
needed for construction and maintenance of shore installations at
advance bases. This list involved approximately 18,000 items.
Emergency conditions have increased the volume of orders received
from the various departments and establishments for additional stock
of portions of the Federal Standard Stock Catalog. I t was necessary
to reprint the Quartermaster Supplement in its entirety owing to
the greatly expanded demands from War Department activities.
Inspection service,—The Procurement Division maintains an inspection service which is equipped to perform visual, physical, analytical,
and utUity examinations and tests. As an auxihary inspection
facility, a sample room is maintained wherein are'displayed, during
the life of the contract to which they ,pertaia, the standard samples
of the article's covered by each contract. These samples are available
at all times for examination by prospective purchasers.
' /^,
^ Purchasing methods,—The methods of purchasing instituted by
the Procurement Division during the fiscal year 1942 were further




REPORT OF THE SOECRETARY OF THE TREIASURY

275

improved to effect simplification in handling documents by the use
of *^Contract Terms." These terms are a coriipilation of the
numerous conditions, terms and citations which must be included
in all supply contracts. The ''Contract Terms" were distributed
to every contractor on the Procurement Division mailing list and
are incorporated by reference in all War Powers Contracts, thereby
saving six pages of duplicated material on each copy of every contract. •
This has resulted in a tremendous saving of paper as well as facilitating
the preparation and handling of documents.
The Procurement Division participated in the assignment of procurement of all lend-lease requhements by joining with a subcommittee
of the Procurement Policy Board of the War Production Board, in an
arrangement to avoid overlapping among procurement agencies. The
Army, Navy, Maritime Commission, Department of Agriculture, and
the Office of Lend-Lease also participated in this arrangement. The
assignment of classes for purchase was based on the Federal Standard
Stock Catalog. This catalog provided the basis for 93 classes of procurement classification, and reference thereto has facUitated determination of the proper procurement agency for any particular article or
material, thereby increasing the efficiency of lend-lease purchasing
operations. This also has enabled foreign missions participating in
the lend-lease program to know in advance which procurement officer
would handle theh requirements.
Constant liaison has been riiaintained with the Smaller War Plants
Corporation in making all war purchases in accordance with the intent of Congress that business might be distributed to the extent
possible among the smaller manufacturers. The Smaller War Plants
Corporation has maiatained an office in the Procurement Division
for this purpose.
Renegotiation of contracts.—A discussion of the contracts of the
Treasury Department subject to renegotiation is included in the
article on ''Renegotiation of war contracts" on page 120.
Federal business associations.—^The Procurement Divisiori dhects
the general activities of over 100 FederalBusiness Associations. These
organizations, composed of the heads of Federal agencies in each of
the large concentrations of Government field work, promote efficiency
and economy in Government procedures and perform special assignments in connection with Washiagton programs.
These associations during the past year obtained Federal trucks
for the Post Office Department needs at Christmas time and assisted
new offices in securing temporary space, equipment, and supplies.
They also organized rallies, parades, meetings, etc., in furtherance of
war bond sales, the Blood Bank, and other war projects.
Conservation of supplies and materials.-^The Procurement Division
is the operating agency to carry out the provisions in Executive Order
No. 9235, August 31, 1942, for the effective conservation and utilization of all types of property owned by the Federal Government. A
discussion of the activities in this connection wUl be found on page 124.
Many common office supplies are made of materials which are now
critically needed in winning the war. The present stocks of these
items are irreplaceable. To preserve these vital supplies and materials,
the Division accepted the responsibility, by mutual agreement with
other Government agencies, for initiating a national conservation
program for the executive establishments. The Division stresses



276

REPORT OF THE SECRETARY OF THE TREASURY

periodically the importance of conserving these critical supplies and
materials, to insure their full utilization, and its purchasing officers are
Using Emergency Alterriate Federal Specifications wherever possible.
The limitation and conservation orders issued by.the War Production
Board are reviewed for the purpose of elhninating arid conserving
critical materials.
• DIVISION OF RESEARCH AND STATISTICS

The Division of Research and Statistics in the Office of the Secretary
serves as a research staff for the Secretary and other Treasury officials
on matters relating to fiscal operations and policies, the estimated
volume and source of future revenues, actuarial considerations involved in certain Treasury functions, and various general economic
problenas arising in connection with Treasury activities.
In connection with Treasury borrowing operations, the Division
prepares reports for the use of officials concerned with the management
of the public debt.
^
The sources of funds available for Government financing are.
analyzed so as to show where and in what volume income is being
generated and savings are being accurriulated. These findings are'
adapted and interpreted for use in setting goals for borrowing and in
planning the programs to reach these goals,, and for the use of the
bond sales organization in connection with drives for war loans and
other sales activities.
The suitability of various types of securities for different classes of
investors and for specific operations and programs are analyzed and
recommendations are made with respect thereto, taking into account
. both the adaptability of the securities for attaining the goals set for
each particular operation and the long-run effects of the issuance of
each type of security on the economy and on the cost of financing the
war. Studies are made of the level and structure of interest rates
and of the factors affecting them. Analyses and recommendations
are prepared with respect to legislation having a present or prospective
effect upon, the market for Government securities.
Detailed information on sales of Government securities, received
through a statistical reporting system set up in the Federal Reserve
Banks and in the Bureau of the Public Debt in the Treasury Department, are analyzed in the Division so thsLt the Secretary and other
Treasury officials can have at all times a complete picture of the volume
and distribution of sales; can measure progress towards the long-range
goals set for Government borrowing; can gauge the suitability of
various kinds of securities for the classes of investors for which they
were designed; and can determine the effectiveness of various methods
of offering.
Estimates of tax reveriues under existing tax laws are prepared in
the Division for use iri planning financing operations in the Treasury
and for incorporation iri the President's Budget messages to Congress.
In connection with proposals for new tax legislation, estimates are
prepared by the Division at the request of Treasury officials and committees of Congress, to show what increases or decreases in revenue
may be expected to result froin various suggestions for changes iri or
additions to the existing tax structure.
The Government Actuary, who is on the staff of the Division, is
a member of the Board of Actuaries established under the Civil Service



REPORT OF THE SECRETARY OF THE TREA.SURY

277

Retirement Act, and is the Treasury Department's representative on
the Actuarial Advisory Committee of the Railroad Retirement Board.
He is responsible for the estimates which have to be prepared each
year, in accordance with statutory provisions, to show the amount of
the annual appropriations required to be made to the foreign service
retirement and disability fund and to the District of Columbia
teachers' retirement fund.
SECRET SERVICE DIVISION

Crime prevention program.—^Because counterfeiting losses have been
reduced 97 percent in the 6 years since its "Know Your Money"
campaign was inaugurated, the Secret Service applied the same
principles to a ''Know Your Endorsers" campaign, designed to prevent thefts and forgeries of Government checks by exposing the methods of check thieves and forgers to their potential victims. Seeking
to protect recipients of nearly 200 mUlion checks issued during the.
year, representing Army and Navy aUowances and allotments. Social
Security benefits, and other Government payments. Secret Service
agents arranged for pubhcation of news stories and warnings against
check forgers in thousands of newspapers and. magazines having a
combined circulation of about 205 mUlions, and effected the production and distribution of nearly 600 miUion copies of pamphlets,
placards, and other material printed by banks and private business
establishments. The inscription "Know Your Endorser^Require
Identification," now being printed on millions of Government checks,
has been widely adopted by States, banks, and corporations for use on
private checks, at the suggestion of the Secret Service.
The Secret Service booklet, "Know Your Money," was adopted as
a unit of study by 11,922 high schools throughout the United States.
The "Know Your Money" study course was endorsed by The Americanism Commission of The American Legion, arid a group of educators of
that Commission compiled a standard and comprehensive course of
study which they sent to 6,000 high school teachers and Post Commanders with the request that "Know Your Money" be made a part
of the curricula of high schools in their communities. The "Know
Your Money" film was shown to 2,103,918 persons, including 1,265,925
high school students.
Protective activities.—In their duty of protecting the President of the
United States, Secret Service agents were faced with new problems
during his unprecedented journey to Casablanca in January. Great
care was also taken to insure the President's security during his April
conference with President AvUa Camacho of Mexico at Monterrey, and
his utipublicized inspection tours of the war plants of the Nation, one
of which took him to the Pacffic Coast and through more than 20 States.
The personnel and duties of the Secret Service Uniformed Force were
increased by the requirement'of guarding the space occupied by the
Bureau of the Public Debt in the Merchandise M a r t and Nash Building, Chicago, 111. In Washington, the securities produced at the
Bureau of Engraving and Printing and valued at $294 billions were
protected in production, storage, and transit.
Enforcement activities.—Tn PhUadelphia, Pa., Secret Service agents
and police seized a plant for the manufacture bf bogus $10 bills and
captured the manufacturer. He was identffied with 51 previous
offenses and was sentenced to serve 20 to 40 years in prison.



278

REPORT OF THE SECRETARY OF THE TREASURY

A new variety of counterfeiting was discovered in the activities of
two dealers in philatelic supphes in Pittsburgh, Pa., who offered for sale
privately printed stamps bearing the wording "U. S. Postage-Free-For
the Armed Forces," printed on a red, white, and blue design of the
American eagle arid a shield. Secret Service agents seized 670,300
completed stamps, together with plates, and found that the offenders
had printed several thousand of the stamps with the eagle design
inverted, to make them appear as misprints and unusual philatelic
items. Both men were sentenced to one year and one day, placed on
probation for three years, and fined $500.
Secret Service agents and post-office inspectors in New York, N. Y.,
arrested 6 men for counterfeitiag overprints on more than 15,000
postage and internal revenue stamps, and for falsely perforating the
stamps. The 6 are awaiting trial.
Cooperating with Cuban authorities in Havana, Secret Service
agents assisted in locating and capturing a plant for the manufacture
of counterfeit $50 notes on the Federal Reserve Bank of New York and
arrested seven operators of the plant, including the engraver and
printer.
Agents also cooperated with the Agricultural Adjustment Administration in investigating irregularities in the handling of $400,000 in
Government funds by a county agent and four accomphces ia Chickasaw County, Miss. Sentences imposed upon all offenders ranged from
10 months to 4 years. Most of the losses wUl be recovered through
civil action.
There were 11 new counterfeit note issues detected during the year,
9 of which were described in the Counterfeit Note Index supplied to
aU banks. In addition, there were 5 crude attempts at the manufacture of spurious notes, none of which warranted issuance of an index
card to banks. Counterfeiting plants for the production of bogus $1,
$10, and $50 notes were captured by agents, who also seized 8 metal
plates for the printing of spurious obligations; 30^ metal molds and
137}^ plaster molds for aU denominations of counterfeit coins; 36 film
negatives for bogus notes; 1 glass negative for counterfeit Canadian
gasoline ration stamps; 2 power presses and 1 hand press; 16 zinc
plates for the manufacture of counterfeit " B " gasoline ration stamps;
6 plates for stamps similar to postage stamps; 1 copper cut for counterfeit internal revenue strip stamps; 20,859 counterfeit sugar ration
stamps; 27,102 counterfeit " T " gasoline ration stamps; 14,180 counterfeit internal revenue stamps; and 1,110 counterfeit Cariadian excise
^stamps.
Agents seized counterfeit and altered notes with a total representative value of $44,909. Of this amount, $13,572 was captured before it
reached circulation, and of the balance, only $22,079 represented losses
suffered by victims of counterfeit note passers.
Counterfeit coins seized had a representative, value of $20,783., of
which $1,340 was seized before it reached chculation. Of the balance,
$16,310 represented losses to the pubhc.




279

REPORT OF THE SECRETARY OF THE TREiASURY

Duriag the year there were 26,892 investigations disposed of. A
total of 1,789 offenders were arrested, and convictions were obtained
in 98.0 percent of the 1,515 criminal cases brought to trial, as compared to 97.6 percent m convictions during the previous year. Fines
in, criminal cases totaled $56,574 and imprisonments totaled 1,142
years, 9 months, 27 days, and 6 hours. Additional sentences totaling
1,548 years, 2 months, and 2 days were suspended or probated.
The Secret Service investigated 10,364 cases relating to forged Government checks.
The following tables present data relating to the seizure of counterfeit money and other work of the Secret Service during the year.
Number of arrests and cases disposed of, fiscal years 194^ and 1943
1942

Arrests for:
Making or passing:
Counterfeit notes
Counterfeit coins .
Altered obligations
Forgery of Government checks
Violation of Gold Reserve Act
Violation of Farm Loan Act
Miscellaneous offenses
Total...

-

Percentage
Increase or
increase or
decrease ( - ) decrease ( - )

Total
-•
Acquittals.
Dismissed, not indicted, or died before trial...^
.

-

-

. -72
-86
17
-167
0
-4
216

- 6 1 . 53
—43.00
30.91
—14.26

1,789

-96

-5.09

30
93
74
881
43
5
358

-89
-118
28-292
32
1
69

-74.79
—65. 92
60.87
-24.89
290.91
26.00
23. 88

1,853
46
185

1,484
31
169

-369
-14
-16

—19. 91
—31.11
-8.65

2,083

-

46
114
72
1,004
27
3
624

119
211
46
1,173
11
4
289

•

117
200
55
1,171
27
7
308
1,886

-..

Cases disposed of:
Convictions in connection with: .
Counterfeit notes
--.
Counterfeit coins
-.
Altered obligations
Forgery bf Government checks
Violation of Gold Reserve Act
Violation of Farm Loan Act
Miscellaneous offenses

Total cases disposed of

1943

' 1, 684

-399

— 19.16

—57.14
70.13

Counterfeit money seized, fiscal years 1942 and 1943
Percentage
Increase or
increase or
decrease ( - ) decrease (—)

1942

. Total

-...-....

Counterfeit coins seized:
After being circulated .•_..
Before being circulated
Total...
Grand total

....

/?
•..
—.

'




$62,510
10,441

$31,337
13, 572

-$31,173
3,131

72, 961

Counterfeit and altered notes seized:
After being circulated..
Before being circulated . - .

1943

44,909

-28,042

. 34,618
5,289

19,443
1,340

-15,075
-3,949

—43.67
-74.66

39,807

•. 20,783.

-19,024

-47.79

112, 768

66,692

-47,066

—41 74

-49.87
29. 99
.

—38.44

280

REPORT OF THE SECRETARY OF THE .TREASURY

Number of investigations of criminal and noncriminal activities, fiscal years 1942
and 1943
1942

Criminal cases:
Making or passing:
Counterfeit notes
..-.
Counterfeit coins
Altered currency
Forgery of GovernTfient checks .^
Stolen or altered bonds
Violation of Gold Reserve Act
Violation of Farm Loan Act
Mi.^cellarienus offenses

1943

Percentage'
Increase or
increase or
decrease (—) decrease (—)

Noncriminal cases:
Personnel (applicants)
Miscellaneous

_. _.

Total
Grand total

.. .

'

-364
-390
10
-1,621
74
-20
-6
4,045

—58. 52
—62. 60
5.78
—13. 63
104.23
— 15.15
-26. 32
72.05

19,240

20,969

1, 729

8 99

5,786
1,796

J.

258
234
183
10, 364
145
112
14
9,659

6,531
392.

-254
-1,404

- 4 . 39
—78.17

^ 7,581

Total

,
..

622
624
173
11,986
71
132
19
5, 614.

6,923

-1,658

—21.87

26,821

26, 892

71

.26

OFFICE OF THE TAX LEGISLATIVE COUNSEL

The Office of the Tax Legislative Counsel aids in planning and
' coordinating the recommendations of the Treasury D epar tmen tlf or
internal revenue legislation. I t represents the Department before
congressional committees considering tax legislation and assists in
. drafting such legislation.
During the fiscal year 1943, the major efforts of the Office were
applied to the Revenue Act of 1942 and the Current Tax Payment
Act of 1943. These measures represent both the largest revenue act
in the country's history and a complete change in the method of
coUecting individual income taxes. With respect to the Revenue
Act of 1942, attention was directed, as a result of studies begun by
, the Office in prior years, to the correction of many inequities and
loopholes in the tax structure as well as to the raising of needed,
additional revenue. In the case of the Current Tax Payment Act,
the Office also took part'in devising forms and regulations necessary
to the adininistration of the new system of coUecting individual
income taxes. .
The Office also supervised the preparation of Department reports
on over 50 bills concerning internal revenue laws; conducted conferences with individuals, private organizations, and other governmental agencies on taxation, renegotiation of war contracts, and
salary stabilization; assisted in.the preparation of revised regulations,
relating to the capital stock tax, the gift tax, and the transportation
of property tax; participated in the preparation of regulations relating
to the StabUization of salaries issued under the act of October 2, 1942,
amending the Emergency Price Control Act of 1942, and under
Executive Order No. 9250 dated October 3, 1942; reviewed approximately 120 Treasury .decisions revising existing internal revenue
regulations; and handled a large volume of correspondence containing
recommendations for revenue legislation and inquiries about existing legislation.




REPORT OF THE SEORETARY OF THE TREASURY

281

DIVISION OF TAX RESEARCH

The Division of Tax Research conducts research in the economic
aspects of taxation essential to the formulation of Treasury tax policy.
I n this connection the Division prepares reports and studies and conducts surveys for the use of the Secretary of the Treasury and other
designated officials of the Treasury Department. When requested,
it also provides information on various aspects of taxation and tax
policy for the use of the Committee on Ways and Means of the House
of Representatives, the Committee on Finance of the Senate, the
Joint Committee on Internal Revenue Taxation, and the several
Federal executive and administrative agencies.
The principal work of the Division is to assemble, the facts and prepare analyses (other than legal) relative to tax problems of the
, Federal Government and devise alternative methods of meeting the
Government's revenue requirements. Comprehensive analyses are
made of the relationship of revenue yields to prospective revenue
requirements, the desired economic objectives of the tax system, and
the economic effects of taxation. Individual taxes are studied with
relation to their effects on the particular groups of taxpayers involved,
the equitable treatment of taxpayers within a particular group, the
administrative and compliance problems inherent in the tax, and the
-integration of the particular tax with the tax system as a whole.
Studies are made of the distribution of the tax burden of specific taxes,
the total Federal tax load, and the combined Federal, State, and local
burden. The inter-relationships of Federal, State, and local taxes
are studied from the broader view of intergovernmental fiscal relations.
Specific State and local taxes are also studied to determine the joint
effect of such taxes and Federal taxes and also with a view to giving
the Federal Government the benefit of State and local tax experience.
Similar studies are made of foreign tax systems and selected taxes in
foreign countries for the purpose of comparing tax policies and obtaining the benefit of foreign experience. In a limited number of cases
field surveys are made for the purpose of supplementing office research/
The Dhector and members of the Division assist in the presentation
of the Treasury's tax programs to the congressional committees and
upon request confer with members of these committees and the staff' of
the Joint Committee on Internal Revenue Taxation for the purpose of
explaining various tax matters and supplyiug information deshed.
Members of the Division also participate in conferences with taxpayers
who desire to call special problems to the attention of the Treasury
Department.
T h e Division also is responsible for the assembly and publication
of all statistical information issued by the Treasury pertaining to
Federal taxation, and in this connection exercises general supervision
over the work of the Statistical Section of the Income Tax Unit iri the
Bureau of Internal Revenue. . Correspondence relating to taxation is
handled by the Division.
During the past year the Division continued intensive study of the
problems involved in raising the additional revenue requhed to
fhiance the war and combat inflation. After concluding work on the
Revenue Act of 1942, which was enacted on October 21, 1942, attention was devoted to two major problems: (1) Revision of the method
of payment for the individual iacome tax to place taxpayers on a
542890—44

20




282

REPORT OF TOEIE SECRETARY OF THE TREASURY

current basis;.and (2) the raising of additional revenue. In connection
with each of these problenis numerous studies were made to determine the effects of alternative proposals. Increasing attention has
also been given to the basic problems of simplification and improvement of the tax structure in view of the accentuation of such problems
under high tax rates and low exemptions.
Duriag the year the Division continued to work in cooperation with
the Committee on Intergovernmental Fiscal Relations of the Treasury.
The investigation of this Committee was completed late in 1942 and
its report was presented to the Secretary of the Treasury on January 1,
1943. The report of the Committee is being priated as Senate
Document No. 69, entitled ^^Federal, State and Local Government
Fiscal Relations." This study examiaes the problems of coordinating
Federal, State, and local fiscal systems, surveys the avaUable coordination devices and both foreign and domestic experience in theh use; and
recommends specific steps which might be taken to improve Federal,
State, and local ^scal relationships.
WAR FINANCE DIVISION

By Treasury Department Order No. 50, dated June 25, 1943, the
designation of the War Savings Staff was changed to the War Finance
Division of the Office of the Secretary, and its function of promoting
the sale of United States savings bonds and stamps was expanded to
include the sale of all securities offered to the public by the Treasury
Department.
The War Savings Staff, designated in AprU 1942 and iu operation
during the greater part of the fiscal year, devoted much of its activity
to an educational and informational program embracing three major
objectives: (1) to increase public interest in the war bond program.,
(2) to siphon off into savings the increased worker earnings resulting
from constantly expanding war production, and (3) to provide the
people with a reservoir of personal savings for the post-war period.
The Nation-wide bond selling orgariization, established by the
original Defense Savings Staff and manned almost enthely by volunteers, was continued during the year. In each State, a War Savings
Staff under a State Chairman stressed the importance of saving instead
of spending. Working with the State Admiaistrator were county and
local volunteer committees. A small staff in Washington supplied the
pamphlets, posters, and other publicity media.
Cooperating in the task of financing the war were the Victory
Fund Committee, attached to the Office of the Secretary, and the
Victory Fund Committees iri each Federal Reserve District. The
members of the district committees were volunteers drawn largely from
the securities and banking fields, and their task was to promote the
sale of Government securities other than savings bonds by soliciting
individuals and institutions with accumulated balances and idle funds.
The difference between the Victory Fund Committees and the War
Savings Committees was a functional one. In the first special War
Loan Drive, of December 1942, the Victory Fund Committees had
the job of raising the preponderance of money needed by tapping
large reserves of accumulated funds; the Wa;r Savings Committees
had the responsibUity of canvassing the mass market. With these
different yet closely related objectives the two organizations continued
their work as separate entities until they were united for the Second
Wiar Loan Drive in April 1943.
,



REPORT OF THE SOEORETARY OF THE TREWuSURY

283

Preparatory-to the Second War Loan, there was created in the
Treasury Department, on March 2, 1943, a Treasury War Finance
Committee which was designed to integrate the work of the Victory
Fund Committees and the War Savings Staffs in the sale of all Government securities. A War Finance Committee set up in each Federal
Reserve district iacluded representatives of the War Savings Staff
and Victory Fund Committee of each State in the district, and acted
in an advisory capacity to the President of the Federal Reserve Bank,
who was chairman of the district Committee.
The AprU drive iutensified the growing belief of Treasuiy officials
and the Presidents of the Federal Reserve Banlis t h a t the sale of
securities to all individuals and institutions should be concentrated in
a single organization. As a result the War Savings Staff in Washington
became, on June 25, 1943, the War Finance Division of the Ofl&ce of
the Secretary, charged with the promotion of the sale of all Government
securities. About the same time the War Savings Staff and the
Victory Fimd Committee in each State were consolidated into a single
State organization known as the War Finance Committee, functioning
under the direction of a State Chairman who reports to the National
Director. These State organizations are responsible for the contiauing
sale of savings bonds and also for all offerings to nonbanking investors
duriag the special war loan drives.
The War Finance organization is divided into three major divisions
workiag dhectly under the National Director, who is an Assistant to
the Secretary, and who is responsible for the entire war financing program. The Publicity and Promotion Division formulates publicity
and promotion campaigns for recommendation to the State committees
and for use at the national level. This division is responsible for
securmg the cooperation of all publicity sources, stimulating national
advertisiug by radio, newspapers, magaziaes, billboards, motion pictures, VetaU stores, and other media, and is responsible for the creation
of posters, albums, pamphlets, etc., used in promoting the sale of
Government securities.
The Field Division operates under the supervision of an Assistant
National Dhector who is responsible for the organization and supervision of the operation of the various field offices in the several States,
as well as for the formulation of policies and the preparation of iustructions for the guidance of the State oflBces in promotiag the sale of
Government securities. In this division are a number of sections with
more or less specialized spheres of activity. , The National Organizations Section is responsible for contacting national labor organizations,
patriotic and civic groups, business and fraternal organizations. The
PayroU Savings Section is concerned with the important task of promotiag at the national level, and assisting State organizations to promote, the payroU savings plan for the installment purchase of war
savings bonds from wages or current income. The Women's Section
is concerned with the integration of women's orga,nizations in all
phases of sales promotion. Other sections of the Field Division deal
with schools, agricultural organizations, and other special activities.
The Administrative Division, under an Assistant to the National
Director, is charged with the procurement of supplies, personnel
voucher audits, budget preparation, and other administrative functions.
An Assistant National Dhector maintains liaison with the banking
and investment industries.



284

REPORT OF THE SECRETARY OF THE TREASURY

Duriag the fiscal year, sales of savings bonds of series E, Fj and G
amounted to $11,789 millions, an increase of $5,796 mUlions over the
previous year. Sales of savings stamps aggregated $590 mUlions, an
increase of $282 mUlions over the previous year.
The. number of persons participating in payroU savings plans
increased from 16 millions on June 30, 1942, to 27 miUions on June 30,
1943, and the allotment from pay envelopes increased from $153 mUlions to $415 miUions. The allotments on June 30, 1942, were 5.8 percent of the total pay of those participating, while on June 30, 1943, the
aUotments were 9.0 percent. At the conclusion of the Second War
Loan, 50 mUlion people owned war bonds—-a number representing
almost 40 percent of the population of the entire country and almost
80 percent of the number of persons employed in all occupations and
in the armed forces.
Further detaUs on savings bonds and stamps and the payroll savings
plans wUl be found on pages 41 to 55.
INTERDEPARTMENTAL COMMITTEE FOR THE VOLUNTARY
PAYROLL SAVINGS PLAN .

By Executive Order No. 9135, dated April 16, 1942, the President
established the Interdepartmental Committee for the Voluntary Payroll Savings Plan for the purchase of war savings bonds by the civUian
employees, in the executive branch of the Government. The Committee continued its work during the year in furthering the purpose
of the Executive order, and cooperated with the War and Navy
Departments in extendiag the plan to the armed forces.
The Postmaster General authorized the installation of the payroll savings plan in the Washington, D. C , and Baltimore, Md., post
ofl&ces on an experimental basis. If the plan proves to be satisfactory
in operation, it is expected that the Post Ofl&ce Department wUl extend it to other post ofl&ces throughout the country. The Board of
Commissioners of the District of Columbia has also authorized the
installation of. the plan.
During the year there was a steady increase in the number of Federal employees participating in the voluntary payroll savings plan.
In August 1942, 989,352 employees invested $15,100,000 in war savings bonds, and in June 1943, 1,953,333 employees invested $40,463,370, the latter amount representing 9 percent of the gross payroll. In addition to the purchases under the plan, employees continued to make substantial purchases for cash.
The following table shows the trend of the participation in the payroll savings plan by civilian employees in the departmental and field
services of the Federal Government for the period from January to
June 1943.
Total amount of
Number of
monthly investemployees par- ments through
ticipating
payroll allotments

Month

January
February
-..
March
_
April....^-..May.i
-.-....
June..
-

1943




.._*
:..

,1.

1,^527,168
1,604,069
1,669,866
1, 794,080
1,880,071
1,953, 333

$28,981,367
29,405,153
32,181, 640
36,608,175
37,211,869
40,463,370

Average
monthly investments per
employee

$18.98
18.33
19.27
20.40
19.79
20. 63

REPORT OF T H E SOECRETARY OF T H E TREAlSURY

285

During June 1943 the civUian and military personnel of the Federal
Government purchased $75,630,664 of war savings bonds under the
payroll savings plan and for cash, bringing to $666,866,060 the total
purchases from the beginning of the program through June 30, 1943.
June 1943
. Number of
employees par- Amount of investments
ticipating
Under payroll savings plan:
Military personnel:
Army...
Navy

.

•_.
-.

.

Cash purchases in—
Post OflSce Department
Navy Department (civilian and military)
War Department (civilian)
:
.

Total
Grand total

' Partly estimated.
8 Incomplete.




2,206,409
1 126,452

$23,176, 607
3,134,153

. $175, 643,618
13,646,085

2, 331,861

'

Total
Civilian personnel:
War Department
Navy Department
Other
Total

Total investments from beginning of program through
June 30,1943

26,310,660

189,189,703

964,611
645, 686
453,036

15, 592,837
14, 581, 360
10, 289,183

106, 724,448
136, 724,627
83,992,139

1,953, 333

40,463,370

326, 441, 214

338,408

3,916, 996
3,385,913
1, 553, 726

68,540,627
62, 254, 261
2 30,440, 255

338,408

8,856,634

161, 235,143

4,623,602

75,630,664

666,866,069







EXHIBITS

287




PUBLIC DEBT
Issues and redemptions of Treasury bonds, Treasury notes, Treasury certificates
of indebtedness, and depositary bonds
Exhibit 1
Offering of 2 percent Treasury bonds of 1949-51
On July 8, 1942, Secretary of the Treasury Morgenthau offered for cash subscription $2,000,000,000, or thereabouts, of 2 percent Treasury bonds of 1949-51.
[Department Circular No. 689. Public Debt]
TREASURY DEPARTMENT,

Washington, July 8, 1942,
I. OFFERING OF BONDS

1. The Secretary of the Treasury, pursuant to the authority of the Second
Liberty Bond Act, as ainended, invites subscriptions, at par and accrued interest,
from the people of the United States for bonds of the United States, designated
2 percent Treasury bonds of 1949-51. The amount of the offering is $2,000,000,000,
or thereabouts. •
II. DESCRIPTION OF BONDS

1. The bonds will be dated July 15, 1942, and v^ill bear interest from that date
at the rate of 2 percent per annum, payable on a semiannual basis on December 15,
1942, and thereafter on June 15 and December 15 in each year until the principal
amount becomes payable. They will mature December 15, 1951, but may be
redeemiBd at the option of the United States on and after December 15, 1949, in
whole or in part, at par and accrued interest, on any interest day or days, on 4
months' notice of redemption given in such manner as the Secretary of
the Treasury shall prescribe. In case of partial redemption the bonds to be
redeemed will be determined by such method as may be prescribed by the Secretary of the Treasury. From the date of redemption designated in any such notice,
interest on the bonds called for redemption shall cease.
2. The income derived from the bonds shall be subject to all Federal taxes, now
or hereafter imposed. The.bonds shall be subject to estate, inheritance, gift, or
other excise taxes, whether Federal or State, but shall be exempt from all taxation
now or hereafter imposed on the principal or interest thereof by any State, or any
of the possessions of the United States, or by any local taxing authority.
3. The bonds will be acceptable tb secure deposits of public moneys, but will
not bear the circulation privilege and will not be entitled to any privilege of
Conversion.
4. Bearer bonds with interest coupons attached, and bonds registered as to
principal and interest, will be issued in denominations of $100, $500, $1,000,
$5,000, $10,000 and $100,000. Provision wiU be made for the interchange of
bonds of different denominations and of coupon and registered bonds, and for the
transfer of registered bonds, under rules and regulations prescribed by the Secretary of the Treasury.
5. The bonds will be subject to the general regulations of the Treasury Department, now or hereafter prescribed, governing tlnited States bonds.
III. SUBSCRIPTION AND ALLOTMENT

1. Subscriptions will be received at the Federal Reserve Banks and branches
and at the Treasury Department, Washington. Subscribers must agree not to
sell or otherwise dispose of their subscriptions, or of the securities which may be
allotted thereon,, prior to the closing of the subscription books. Banking institutions generally may submit subscriptions for account of customers, but only
the Federal Reserve Banks and the TreasuryN Department are authorized to act
as official agencies. Others than banking institutions will not be permitted to
289



290

REPORT OF THE SECRETARY OF THE TREASURY

enter subscriptions except for their own account. Subscriptions from banks and
trust companies for their own account will be received without deposit. Subscriptions from all others must be accompanied by payment of 10 percent of the
amount of bonds applied for.
2. The Secretary of the Treasury reserves the right to reject any subscription,
in whole or in part, tp allot less than the amount of bonds applied for, and to close
the books as to any or all subscriptions at any time without notice; and any
action he may take in these respects shall be final. Subject to these reservations,
subscriptions for amounts up to and including $25,000 will be allotted in full.
The basis of the allotment on all other subscriptions will be publicly announced,
and allotment notices will be sent out promptly upon allotment.
IV. PAYMENT

1. Payment at par and accrued interest, if any, for bonds allotted hereunder
must be made or completed on or before July 15, 1942, or on later allotment.
In every case where payment is not so completed, the payment with application
up to 10 percent of the amount of bonds applied for shall, upon declaration made
by the Secretary of the Treasury in his discretion, be forfeited to the United States.
Any qualified depositary will be permitted to make payment by credit for bonds
allotted to i t for itself and its customers up to any amount for which it shall be
qualified in excess of existing deposits, when so notified by the Federal Reserve
Bank of its district.
^
v . GENERAL PROVISIONS

1. As fiscal agents of the United States, Federal Reserve Banks are authorized
and requested to receive subscriptions, to make allotments on the basis and up
to the amounts indicated by the Secretary of the Treasury to the Federal Reserve
Banks of the respective districts, to issue allotment notices, to receive payment
for bonds aUotted, to make delivery of bonds on full-paid subscriptions allotted,
and they may issue interim receipts pending delivery of the definitive bonds.
2. The Secretary of the Treasury may at any time, or from time to time, prescribe supplemental or amendatory rules and regulations governing the offering,
which will be communicated promptly to the Federal Reserve Banks.
HENRY MORGENTHAU,

Jr.,

Secretary of the Treasury.
Exhibit 2
Subscriptions and allotments. Treasury bonds of 1949-51 {froin press releases, July 9,
11, and 15, 1942^)
On July 8, 1942, Secretary of the Treasury Morgenthau announced that the
subscription books for the offering of 2 percent Treasury bonds of 1949-51 would
close at the close of business July 9. Subscriptions aggregated $3,849,495,500, of
which $2,097,617,600 were allotted. Subscriptions in amounts up to and including
$25,000, totaling about $196,000,000, were allotted in full; and subscriptions in
amounts over $25,000 were allotted 52 percent, on a straight percentage basis,
but not less than $25,000 on any one subscription, with adjustments, where
necessary, to the $100 denomination. Subscriptions and allotments were divided
among the Federal Reserve districts and the Treasury as follows:
Federal Reserve district
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis.-—Minneapolis..
Kansas City
Dallas..'.
San Francisco
Treasury.-...
Total

Subscriptions
received

^

$218,046,000
1, 587,258,700
198,864,900
231,751,200
199,092,100
227,408.000
511,216,200
102,418,600
64,403,300
97,357,200
115,066,800
287,277,600
9,346,000

$117,699,300
834,234,600
108,454,800
128,173,100
109,087,800
136,643,400
280, 754,000
62,345,200
39,372,700
68,817,600
66,587,800
152,566, 500
4,881,000

3,849,496,600

2,097,617,600

.

._

_

_.

_
..
_

-

1 Revised Sept. 26,1942.




_.

..

..

Subscriptions
allotted

REPORT OF THE SEORETARY OF THE TREAi^^>URY
Exhibit 3

.
Offering of 2^2 percent Treasury bonds.of 1962-67 {additional)

291
/

On August 3, 1942, Secretary of the Treasury Morgenthau offered for cash
subscription an unspecified amount of 2)4 percent Treasury bonds of 1962-67.
These bonds were not available for subscription, for their own account, by commercial banks which accepted demand deposits. The bonds were an addition to ,
the series issued pursuant to Department Circular No. 685, dated May 4, 1942,
but additional rights were attached to the bonds offered August 3, 1942, through
provision for their optional redemption, upon the death of the owner, for the
purpose of satisfying Federal estate taxes.
[Department Circular No. 692. Public Debt]
TREASURY

DEPARTMENT,

Washington, .August S, 1942.
•

\

•

I.

OFFERING

•

O F BONDS

1. The Secretary of the Treasury, pursuant to the authority of the Second
Liberty Bond Act, as amended, invites subscriptions, at par and accrued interest,
from the people of the United States for bonds of the United States, designated
2>^ percent Treasury bonds of 1962-67. These bonds will not be available for
subscription, for their own account, by commercial banks which accept demand
deposits. The amount of the offering is not specifically limited.
II. DESCRIPTION OF BONDS

1. The bonds now offered will be an addition to and will form a part of the
series of 2 ^ percent Treasury bonds of 1962-67 issued pursuant to Department
Circular No. 685, dated May 4, 1942, will be freely interchangeable therewith,
and are identical in aU respects therewith.
2. The bonds will be dated May 5, 1942, and will bear interest from that date
at the rate of 2]^ percent per annum, payable on a semiannual basis on June 15
and December 15 in each year until the principal amount becomes payable, the
first payment being made December 15, 1942. They will mature June 15, 1967,
but may be redeemed at the option of the United States on and after June 15,
1962, in whole or in part, at par and accrued interest, on any interest day or days,
on 4 months' notice of redemption given in such manner as the Secretary of the
Treasury shall prescribe. In case of partial redemption the bonds to be redeemed
will be determined by such method as may be prescribed by the Secretary of the
Treasury. From the date of redemption designated in any such notice, interest
on the bonds called for redemption shall cease.
3. The income derived from the bonds shall be subject to all Federal taxes, now
or hereafter imposed. The bonds shall be subject to estate, inheritance, gift or
other excise taxes, whether Federal or State, but shall be exempt from all taxation
now or hereafter imposed on the principal or interest thereof by any State, or
any of the possessions of the United States, or by any local taxing authority.
4. The bonds will not be acceptable to secure deposits of public moneys before
May 5, 1952, they will not bear the circulation privilege, and' they will not be
entitled to any priyilege of conversion.
5. Bonds registered as to principal and interest will be issued in denominations
of $100, $500, $1,000, $5,000, $10,000 and $100,000. The bonds will not be issued
in coupon form prior to May 5, 1952,^ but will be available in coupon form
after that date, in the same denominations as, and freely interchangeable with,
the registered bonds of this ^ssue. Under rules and regulations prescribed by
the Secretary of the Treasury, provision will be made for the transfer of the
bonds, other than to commercial banks which accept demand deposits, and for exchanges of denominations. They will not be eligible for transfer to commercial
banks which accept demand deposits before May 5, 1952. However, the bonds
may be pledged as collateral for loans, including loans by commercial banks which
accept demand deposits, but any such bank acquiring such bonds before May 5,
1952, because of the failure of such loans to be paid at maturity wiU be required
to dispose of them in the same manner as they dispose of other assets not eligible
to be owned by banks.
^ Changed to February 1,1943, see amendment on p. 339.




292

REPORT OF THE SECRETARY OiF THE TREAUSURY

6. Any bonds issued hereunder, or under the provisions of Department Circular No. 685, dated May 4, 1942, which upon the death of the owner constitute
part of his estate, will be redeemed at the option of the duly constituted representatives of the deceased owner's estate, at par and accrued interest to date
of payment: ^ Provided, (a) That the bonds were actually owned by the decedent at
the time of his death; and (b) that the Secretary of the Treasury be authorized
to api^ly the entire proceeds of redemption to the payment of Federal estate
taxes. Registered bonds submitted for redemption hereunder must be duly assigned
to *'The Secretary of the Treasury for redemption, the proceeds to be paid to the
Collector of Internal Revenue at
for credit on Federal estate
taxes due from estate of
" Owing to the periodic closing of
the transfer books and the impossibility of stopping payment of interest to the
registered owner during the closed period, registered bonds received after the
closing of the books for payment during such closed period will be paid only at
par with a deduction of interest froin the date, of payment to the next interest
payment date; -bonds received during tjhe closed period for payment at a date
after the books reopen will be paid at par plus accrued interest from the reopening of the books to the date of payment. In either case - checks for the
fuU six months interest due on the last day of the closed period will be forwarded
to the owner in due course. All bonds submitted must be a,ccompanied by
Form PD 1782,/ properly completed, signed and sworn to, and by a certificate
of the appointment of the personal representatives, under seal of the court,
dated not more than six months prior to the submission of the bonds, which shall
show that at the date thereof the appointment was still in force and effect. Upon
payment of the bonds appropriate memorandum receipt wOl be forwarded to the
representatives, which will be followed in due course by formal receipt from the
Collector of Internal Revenue.
• 7. Except as provided in the preceding paragraphs, the bonds will be subject
to the general regulations of the Treasury Department, now or hereafter prescribed governing United States bonds.
III. SUBSCRIPTION AND ALLOTMENT

1. Subscriptions wdll be received at the Federal Reserve Banks and branches
and at the Treasury Department, Washington. Banking institutions and security
dealers generally may submit subscriptions for account of customers, but only
the Federal Reserve Banks and the Treasury Department are authorized to act as
official agencies. Subscriptions must be accompanied by payment in full for the
amount, of bonds applied for.
2. The Secretary of the Treasury reserves the right to reject any subscription,
in whole or in part, to allot less than the amount of bonds applied for, and to close
the books as to any or all subscriptions at any time without notice; and any
action he may take in these respects shall be final. Subject to these reservations,
all subscriptions will be allotted in full. Allotment notices will be sent out
promptly upon allotment.
IV. PAYMENT

1. Payment at par and accrued interest from May 5, 1942, for bonds allotted
hereunder must be made on August 3, 1942, or on later allotment. Accrued
interest from May 5, 1942, to August 3, 1942, inclusive is $6.16293 per $1,000.
Each day's accrued interest thereafter is $0.0683 per $1,000. Any qualified depositary will be permitted to make payment by credit for bdnds allotted to its
customers up to any amount for which it shall be qualified in excess of existing
deposits, when so notified by the Federal Reserve Bank of its district.
V. GENERAL PROVISIONS

1. As fiscal agents of the United States, Federal Reserve Banks are authorized
and requested to receive subscriptions, to make allotmients up to the amounts
indicated by the Secretary of the Treasury to the Federal Reserve Banks of the
2 An exact half-year's interest is computed for each full half-year period irrespective of the actual number
of'days, in the half year. For a fractional part of any half year, computation is on the basis of the actual
number of days in such half year.
* The transfer books are closed from May 16 to June 16, and from November 16 to December 15 (both dates
inclusive) in each year.
* Copies of Form PD 1782 may be.obtained from any Federal Reserve Bank or from theTreasury Department, Washington, D . C .




293

REPORT OF THE SECRETARY OF THE TREIASITRY

respective districts, to issue allotment notices, to receive payment for bonds
allotted, to make delivery of bonds on full-paid subscriptions allotted, and they
may issue interim receipts pending delivery of the definitive bonds.
2. The Secretary of the Treasury may at any time, or from time to time, prescribe supplemental or amendatory rules and regulations governing the offering,
which will be communicated promptly to the Federal Reserve Banks.
HENRY MORGENTHAU,

^

Jr.,

Secretary of the Treasury.

Exhibit 4

Allotments, Treasury bonds of 1962-67 {additional) {from press releases, August 14
and 18, 1942 i)
On August 14, 1942, Secretary of the Treasury Morgenthau announced that the
subscription books for the additional issue of 2J^ percent Treasury bonds of 1962-67
would close at the close of business August 15. Subscriptions totaling $1,235,966,500 were allotted in full and were divided among the Federal Reserve districts
and the Treasury as follows:
Subscriptions
received and
allotted

Federal Reserve district
Boston..
NewYork
Philadelphia.
Cleveland
Richmond
Atlanta . •-.
Chicaco
St. Louis -

.._.

_ ..

._

Minnftapnlis

$84,280,400
752, 020, 300
77, 614, 200
32,928,100
21,138, 700
5,997,300
50,668,400
6,803,300
22, 583, 000

Subscriptions
. received and
allotted

Federal Reserve district
Kansas City
Dallas...
1 . San Francisco
Treasury __ .
Government investment
counts ,
Total

ac-

$10,843, 500
14, 522,800
22, 476, 200
9,421, 000
125,869, 300
1,235,966,600

Exhibit 5
Offering of % percent Treasury certificates of indebtedness of Series B-1943
On August 6, 1942, Secretary of the Treasury Morgenthau invited cash subscriptions for Y percent Treasury certificates of indebtedness of Series B-1943, in
s
the amount of $1,500,000,000, or thereabouts.
[Department Circular No. 693. Public Debt]
TREASURY

DEPARTMENT,

Washington, August 6, 1942.
I. OFFERING OF CERTIFICATES

1. The Secretary of the Treasury, pursuant to the authority of'the Second
Liberty Bond Act, as amended, invites subscriptions, at par and accrued interest,
from the people of the United States for certificates of indebtedness of the tJnited
States, designated % percent Treasury certificates of indebtedness of Series B-1943.
The amount of the offering is $1,500,000,000, or thereabouts.
II. DESCRIPTION OF CERTIFICATES

1. The certificates will be dated August 15, 1942, and. will bear interest from
that date at the rate of Y percent per annum, payable on a semiannual basis on
s
February 1 and August 1, 1943. They will mature August 1, 1943, and wiU not
, be subject to call for redemption prior to maturity.
2.^ The income derived from the certificates shall be subject to all Federal
taxes, now or hereafter imposed. The certificates shall be subject to estate,
inheritance, gift or other excise taxes, whether Federal or State, but shall be
exempt from all taxation now or hereafter imposed on the principal or interest
thereof by any State, or any of the possessions of the United States, or by any
local taxing authority.
3. The certificates wiU be acceptable to secure deposits of public moneys.
• They will not be acceptable in payment of taxes and will not bear the circulation
privilege.
> Revised Nov. 4,1942.




294

REPORT OF THE SECRETARY OF THE TREAiSUIlY

4. Bearer certificates wdth two coupons attached will be issued in denominations
of $1,000, $5,000, $10,000 and $100,000. The certificates will not be issued in
registered form.
5. The certificates will be subject to the general regulations of the Treasury
Department, now or hereafter prescribed, governing United States certificates.
III. SUBSCRIPTION AND ALLOTMENT

1. Subscriptions will be received at the Federal Reserve Banks and branches
and at the Treasury Department, Washington. Subscribers must agree not to
sell or otherwise dispose of their subscriptions, or of the securities which may be
allotted thereon, prior to the closing of the subscription books. Banking institutions and security dealers generally may submit subscriptions for account of
customers, but only the Federal Reserve Banks and the Treasury Department
are authorized to act as ofl5cial agencies. Others than banking institutions and
security dealers will not be permitted to enter subscriptions except for their own
account. Subscriptions from banks and trust companies for their own account
will be received without deposit. Subscriptions from all others must be accompanied by payment of 5 percent of the amount of certificates applied for.'
, 2. The Secretary of the Treasury reserves the right to reject any subscription,
in whole or in part, to allot less than the amount of certificates applied for, and
to close the books as to any or all subscriptions at any time without notice; and
any action he may take in these respects shall be final. Subject to these reservations, subscriptions for amounts up to and including $25,000 will be allotted in
full. The basis of the allotment on all other subscriptions will be publicly announced, and allotment notices will be sent out promptly upon allotment.
IV. PAYMENT

1. Payment at par and accrued interest, if any, for certificates allotted hereunder must be made or completed on or before August 15, 1942, or on later allotment.' In every case where payment is not so completed, the payment with
application up to 5 percent of the amount bf certificates applied for shall, upon
declaration made by the Secretary of the Treasury in his discretion, be forfeited
to the United States. Any qualified depositary will be permitted to make payment by credit for certificates allotted to it for itself and its customers up to any
amount for which it shall be qualified in excess of existing deposits, when so
notified by the Federal Reserve Bank of its district.
V. GENERAL PROVISIONS

1. As fiscal agents of the United States, Federal Reserve Banks are authorized
and requested to receive subscriptions, to make allotments on the basis and up
to the amounts indicated by the Secretary of the Treasury to the Federal Reserve Banks of the respective districts, to issue allotment notices, to receive
payment for certificates allotted, to make delivery of certificates on full-paid
subscriptions allotted, and they may issue interim receipts pending delivery of
the definitive certificates.
.2. The Secretary of the Treasury may at any time, or from time to time,
prescribe supplemental or amendatory rules and regulations governing the
offering, which will be communicated promptly to the Federal Reserve Banks.
HENRY MORGENTHAU,

Jr.,

Secretary of the Treasury.
Exhibit 6
Subscriptions and allotments. Treasury certificates of indebtedness of Series B-1943
{from press releases, August 7, 11, and 15, 1942 0
On August 6, 1942, Secretary of the Treasury 'Morgenthau announced that
the subscription books for the offering of Y percent Treasury certificates of ins
debtedness would close at the close of business August 7. Subscriptions aggregated $3,272,818,000, of which $1,609,332,000 were allotted. Subscriptions up
to and including $25,000, totaling about $71,000,000, were allotted in full; and
subscriptions over $25,000 were allotted 48 percent, on a straight percentage
basis, but not less than $25,000 on any one subscription, with adjustments, where
necessary, to the $1,000 denomination.
1 Revised Sept. 26,1942.




295

REPORT OP THE SECIRETARY OF THE TREIASiTTRY

Subscriptions and allotments were divided among the Federal Reserve districts
and the Treasury as follows:
Subscriptions
received

Federal Reserve district
Boston
NewYork
Philadelphia
Cleveland
Richmond
Atlanta
Chicago.
St. Louis
Minneapolis
Kansas City
Dallas......
San Francisco
Treasury
Total

.

..
...-

.

_
_

..^

.

...^

.-

1...:
.
.:

.

.

•

$159,515,000
1, 448,236,000
142,119,000
168,627,000
100,147,000
117,730,000
559,485,000
109,993,000
48,294,000
. 94,237,000
84,357,000
260,062,000
16,000

$78,464,000
698,629,000
70,408,000
80,633,000
49,922,000
69,006,000
278,194,000
66,309,000
26,385,000
47,999,000
41,872,000
121,606,000
16,000

3,272,818,000

.

- ..

Subscriptions
allotted

1,609,332,000

Exhibit 7
Offering of 0.65 percent Treasury certificates of indebtedness of Series C-194S and
lyi percent Treasury notes of Series C-1945
On September 10, 1942, Secretary of the Treasury Morgenthau invited cash
subscriptions for 0.65 percent Treasury certificates of indebtedness of Series
C-1943 and 1}^ percent Treasury notes of Series G-1945, each in the amount of
$1,500,000,000, or thereabouts.
[Certificates of indebtedness. - Department Circular No. 691. Public Debt]
TREASURY DEPARTMENT,

Washington, September 10, 1942,
I. OFFERING OF CERTIFICATES

1. The Secretary of the Treasury, pursuant to the authority of the Second
Liberty Bond Act, as amended, invites subscriptions, at par and accrued interest, from the people of the United States for certificates of indebtedness of the
United States, designated 0.65 percent Treasury certificates of indebtedness of
Series C-1943. The amount of the offering is $1,500,000,000, or thereabouts.
II. DESCRIPTION OF CERTIFICATES

1. The. certificates will be dated September 21, 1942, and will bear interest
from that date at the rate of 0.65 percent per annum, payable on an annual basis
at the maturity of the certificates. They will mature May 1, 1943, and will not
be subject to call for redemption prior to maturity.^ * * *
4. Bearer certificates with one interest coupon attached will be issued in
denominations of $1,000, $5,000, $10,000, and $100,000. The certificates will
not be issued in registered form. 1 * * *
III, SUBSCRIPTION AND ALLOTMENT

1. Subscriptions will be received at the Federal Reserve Banks and branches
and at the Treasury.Department, Washington. Subscribers must agree not to
sell or otherwise dispose of their subscriptions, or of the securities which may be
allotted thereon, prior to the closing of the subscription books. Banking institutions generally may submit subscriptions for account of customers, but only
the Federal Reserve Banks and the Treasury Department are authorized to act
as official agencies. Others than banking institutions will not be permitted to
enter subscriptions except fpr their own account. Subscriptions from banks ahd
trust companies for their own account will be received without deposit. Subscriptions from all others must be accompanied by payment of 5 percent of the
amount of certificates applied for * * * i..
i Omitted portion similar to corresponding section of Department Circular No. 693, p. 293.




296

REPORT OF THE SECRETARY OF THE TREASURY
IV. PAYMENT

1. Payment at par and accrued interest, if any/ for certificates allotted hereunder must be made or completed on or before September 21, 1942, or on later
allotment. In every case where payment is not so completed, the payment with
application up to 5 percent of the amount of certificates applied for shall, upon
declaration made by the Secretary of the Treasury in his discretion, be forfeited
to the United States. Any qualified depositary will be permitted to make payment by credit for certificates allotted to it for itself and its customers up to any
amount for which it shall be qualified in excess of existing deposits, when so
notified by the Federal Reserve Bank of its district.
V. GENERAL PROVISIONS

1. As fiscal agents of the United States, Federal Reserve Banks are^authorized and requested to receive subscriptions * * * i.
HENRY MORGENTHAU,

Jr.,

Secretary of the Treasury.
[Treasury notes. Department Circular No. 694. Public Debt]
TREASURY

DEPARTMENT,

Washington, September 10, 1942.
I. OFFERING O F NOTES

1. The Secretary of the Treasury, pursuant to the authority of the Second
Liberty Bond Act, as amended, invites subscriptions, at par and accrued interest,
from the people of the United States for notes of the United States, designated
lYi percent Treasury notes of Series C-1945. The amount ,of the offering is
$1,500,000,000, or thereabouts.
II., DESCRIPTION OF NOTES

1. The notes will be dated September 25, 1942, and will bear interest from that
date at the rate of 1^ percent per annum, payable on a semiannual iDasis on
March 15 and September 15 in each year until the principal becomes payable.
They will mature March 15, 1945, and will not be subject to call for redemption
prior, to maturity.
2. The income derived from the notes shall be subject to all Federal taxes, now
or hereafter imposed. The notes shkll be subject to estate, inheritance,, gift or
other excise taxes, whether Federal or State, but shall be exempt from all taxation
now or hereafter imposed on the principal or interest thereof by any State, or
any of the possessions of the United States, or by any local taxing authority.
3. The notes,will be accepted at par during such time and under such rules and
regulations as shall be prescribed or approved by the Secretary of the Treasury
in payment of income and profits taxes payable at the maturity of the notes.
4. The notes will be acceptable to secure deposits of public moneys, but will
not bear the. circulation privilege.
5. Bearer notes with interest coupons attached will be issued in denominations
of $100, $500, $1,000, $5,000, $10,000, and $100,000. The notes will not be
issued in registered form.
6. The notes will be subject to the general regulations of the Treasury Department, now or hereafter prescribed, governing United States notes,
III. SUBSCRIPTION AND ALLOTMENT "

1. Subscriptions will be received at the Federal Reserve Banks and branches
and at the Treasury Department, Washington. Subscribers must agree not to
sell or otherwise dispose of their subscriptions, or of the securities which may be
allotted thereon, prior to the closing of the subscription books. Banking institutions generally may submit subscriptions for account of customers, but only the
Federal Reserve Banks and the Treasury Department are authorized to act as
official agencies. Others than banking institutions will not be permitted to enter
subscriptions except for their own account. Subscriptions from banks and trust
companies for their own account will be received without deposit. Subscriptions
1 Omitted portion similar to corresponding section of Department Circular No. 693, p. 293.




REPORT OF T H E SEORETARY OF T H E TREA.SURY .

297

from all others m u s t be accompanied by p a y m e n t of 5 percent of t h e a m o u n t of
notes applied for.
2. T h e Secretary of t h e T r e a s u r y reserves t h e right t o reject a n y subscription,
in whole or in p a r t , to allot less t h a n t h e a m o u n t of notes applied for, a n d t o
close t h e .books as to any or all subscriptions a t a n y time without notice; a n d
a n y action he m a y t a k e in these respects shall be final. Subject to these.reservations, subscriptions for a m o u n t s u p to a n d including $25,000 will be-allotted in
full. T h e basis of t h e allotment on all other subscriptions will be publicly a n nounced, and allotment notices will be sent out p r o m p t l y upon allotment.
IV. PAYMENT

1. P a y m e n t a t p a r a n d accrued interest, if any, for notes allotted hereunder
m u s t be m a d e orv coi^pleted on or before September 25, 1942, or on later allotm e n t . I n every case where p a y m e n t is n o t so completed, t h e p a y m e n t with
application ujp to 5 percent of t h e a m o u n t of notes applied for shall, upon declar a t i o n m a d e by t h e Secretary of t h e T r e a s u r y in his discretion, be forfeited t o
t h e United States. Any qualified depositary will be p e r m i t t e d to m a k e payment~
b y credit for notes allotted to it for itself a n d its customers up to a n y a m o u n t for
which it shall be qualified in excess of existing deposits, when so notified by tlie
F e d e r a l Reserve B a n k of its district.
V. GENERAL PROVISIONS

1. As fiscal agents of t h e United States, Federal Reserve Banks are authorized
a n d requested to receive subscriptions, to m a k e allotments on t h e basis a n d u p
t o t h e a m o u n t s indicated by t h e Secretary of t h e T r e a s u r y to t h e Federal Reserve
B a n k s of t h e respective districts, to issue allotment notices, to receive p a y m e n t
. for notes allotted, to m a k e delivery of notes on full-paid subscriptions allotted,
a n d they m a y issue interim receipts pending delivery of t h e definitive notes.
2. T h e Secretary of t h e Treasury m a y a t any time, or from time to time, p r e scribe supplemental or a m e n d a t o r y rules a n d regulations governing t h e offering,
which will be communicated p r o m p t l y to t h e Federal Reserve Banks.
H E N R Y MORGENTHAU,

Jr.,

Secretary of the Treasury.

Exhibit 8
Subscriptions and allotments, Treasury certificates of indebtedness of Series C-1943
and Treasury notes of Series C-'1945 {from press releases, September 11, 16, and
19,1942^)
'
.
On September 10, 1942, Secretary of t h e Treasury Morgenthau announced t h a t
t h e subscription books for t h e offering of 0.65 percent certificates of indebtedness
of Series C-1943 and 1J4 percent Treasury notes of Series C-1945 would close a t
t h e close of business September 11.
Subscriptions for t h e certificates of indebtedness aggregated $1,992,483,000, of
which $1,505,727,000 were allotted. Subscriptions u p t o a n d including $25,.000,
totaling about $44,000,000, were allotted in full; a n d subscriptions over $25,000
were allotted 75 percent, on a straight percentage basis, b u t not less t h a n $25,000
on any one subscription, with adjustments, where necessary, t o t h e $1,000
denomination.
Subscriptions for t h e Treasury notes totaled $3,636,638,900, of which $1,606,204,500 were allotted. Subscriptions up t o and including $25,000, totaling a b o u t
$134,000,000, were allotted in full; and subscriptions over $25,000 were allotted
42 percent, on a straiglit percentage basis, b u t not less t h a n $25,000 on any one
subscription, with adjustments, where necessary, t o t h e $500 denomination.
' Revised Nov. 4 and 12, 1942.
542890—44

21




298

REPORT OF THE SECRETARY OF THE TREA'SURY

Subscriptions- and allotments were divided among the Federal Reserve districts
and the Treasury as follows:
T r e a s u r y certiflcates of
i n d e b t e d n e s s . Series C-1943
Federal Reserve
district.

Boston
NewYork..
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. L o u i s . .
Minneapolis
K a n s a s City
Dallas
San Francisco
Treasury....

-

Subscriptions
allotted

Subscriptions
received

Subscriptions
allotted ,

Total
subscriptions
allotted
,

$76 828.000
796 913.000
68 165,000
91 586.000
70, 631, 000
56,161.000
607. 208.000
73. 301, 000
41, 878.000
67, 960,000
40,831, 000
111,132,000

-

Total •

Subscriptions
-received

T r e a s u r y notes, Series C-1945

:
-

$58 265.000 .
598 866,000
61 767,000
69 792,000
53 606.000
42, 791.000
382, 903.000
66,026.000
32. 466.000
44, 248.000
31, .181,000
83, 827, 000

$205,103, 500
1, 395 075, 400
147,486,000
174, 296, 200
198,923, 800
262, 202; 500
532, 806, 300
98, 781, 900
66 357,100
107 355. 300
107,966, 800
347, 384,100
3, 900,000

$89,810,000
591,894,900
66 798,000
79 256, 200
87, 804, 800
123 290,000
237, 891. 800
48 189,300
32 978.100
49 976,000
49, 430, 300
148 247,100
1, 638, COO

$148,075,000
1,190.750,900
117, 565,000
149,048, 200
r41,410, 80O
166,081, OOO
620, 794, 800
104, 214, 300
65, 444.100
94. 224, COO
80,611,300
232,074,100
1,638,000

1,992,483,000

1, 605, 727, 000

3, 636, 638,900

1, 606, 204,500

3, 111, 931, 50O

Exhibit 9
Offering of Treasury tax savings notes of Series A-1945 and Series C ^
Ori September 12, 1942, Secretary of the Treasury Morgenthau offered for sale
two issues of Treasury tax savings notes of Series A-1945 and Series C, both receivable at par and accrued interest in payment of Federal income, estate, and gift
taxes. The notes were placed on sale on September 14, 1942. The sale of notes
of Tax Series A-1944 and B-1944 was terminated on September 12, 1942.
For the notes of Tax Series A-1945, as well as for Series A-1943, and A-1944,
the limitation on the principal amount-that-may be presented for taxes was raised
from $1,200 to $5,000.
The new notes of Series C, which are not presented in payment of taxes and
except for those in the names of banks that accept demand deposits, will be redeemable at par and accrued interest either at maturity or, on 30 days' advance
notice, during and after the sixth calendar month after the month of issue. The
notes may be pledged with banking institutions as collateral loans.
Both Series A-1945 and Series C notes will.mature in three years.
[Tax Series A-1945. Department Circular No. 695. Public Debt]
TREASURY

DEPARTMENT,

Washington, September 12^ 1942.
I. OFFERING OF NOTES

1. The Secretary of the Treasury, pursuant to the authority of the Second
Liberty Bond Act, as amended, offers for sale, to the people of the United States,
at par and accrued interest, an issue of nontransferable notes of the United States,
designated Treasury notes of Tax Series A-1945, which notes, as hereinafter
provided, will be receivable, at par and accrued interest, in payment of Federal
income, estate, and gift taxes.
2. The notes will be placed on sale September 14, 1942, and the sale will continue
until terminated by the Secretary of the Treasury.
3. The sale of Treasury notes of Tax Series A-1944, pursuant to Treasury
Department Circular No. 674, dated December 15, 1941, will terminate at the close
of business on September 12, 1942.
4. Any holder of a Treasury note. Tax Series A-1944, purchased and bearing a
date of issue in September 1942, maj^ surrender such note on or before October
31, 1942, to the agency which issued the note and receive in exchange therefor a
Treasury note. Tax Series A-1945, of like face amount inscribed in the same name
and bearing the same date of issue, together with a refund of the accrued interest
included in the price paid for the surrendered note.
» Designation changed June 22,1943, to Treasury savings notes, Series C; see exhilit 40, p. 339.




REPORT OF THE SECRETARY OF THE TREIASURY

299

II. DESCRIPTION OF NOTES

1. General.—The notes will be dated September 1, 1942; they will mature
September 1, 1945, and may not be called by the Secretary of the Treasury for
redemption before maturity. Subject to the limitations and conditions set forth
in section IV of this circular, the notes will be receivable, at par and accrued
interest, in payment of Federal income, estate, and gift taxes. If the notes are
not presented in payment of taxes, they will be payable at maturity, or, at the
owner's option and request, they will be redeemable before maturity, as provided
in section V of this circular, but in either case payment will be made only at the
price paid for the notes.
• 2. Forrn, inscription, dating.—The owner's name and address will be entered
on each note at the time of its issue by an authorized issuing agent, and the date
of issue will be shown by an imprint of the agent's dating stamp. The.month in
which payment is received and credited by a Federal Reserve Bank or branch,
or by the Treasurer of the United States, will determine the purchase price and
issue date of each. note. The^ notes may not be transferred, except, that if notes
are held by a corporation owning more than 50 percent of the stock, with voting
power, of another corporation, such notes may be transferred to the subsidiary
upon request of the corporation and surrender of the notes to the agent ^that issued
them. No hypothecation of the notes oh any account will be recognized by the
Treasury Department and they will not be accepted to secure deposits of .public
money.
. 3. Denominations and interest.—The notes will be issued in denominations of
'$25, $50, $100, $500, $1,000, and $5,000, and interest thereon will accrue from
September 1942, in the amount of 16 cents each month on each $100 principal
amount of note. In no case, however, shall interest accrue beyond the month
in which the note is presented in payment of taxes, or beyond its maturity.
Exchanges of authorized denominations from higher to lower, but not from lower
to higher, may be arranged at the office of the agent that issued, the note.
4. Purchase price and tax-payment value.—A table is appended to this circular
showing the principal amount with accrued interest added, for notes of each
denomination, for each month from September 1942 to September 1945, inclusive.
The total shown for any denomination for any month, while the notes remain on
sale, is the purchase price, or cost, of the note during that month. Also, the
total shown for any denomination for any. month is the tax-payment value of
the note if receivable during that month in payment of taxes, subject to the ,
provisions of section IV of this circular.
5. Taxation.—Income derived from the notes shall be subject to all Federal
taxes, now or hereafter imposed. The notQS shall be subject to estate, inheritance,
gift 'or other excise taxes, whether Federal or State, but shall be exempt from all
taxation now or hereafter imposed on the principal or interest thereof by any
State, or any of the possessions of- the United States, or by any local taxing
authority.
III. PURCHASE OF NOTES

1. Applications and payment.—Applications will be received by the Federal
Reserve Banks and branches, and by the Treasurer of the United States, Washington, D. C. Banking institutions and security dealers generally may submit
apphcations for account of customers, but only the Federal Reserve Banks and
the Treasury Department are authorized to act as official agencies. Every application must be accompanied by payment in full, at par and. accrued interest
from September 1942 to the month in which payment in immediately available
funds is received by a Federal Reserve Bank or branch, or the Treasurer of the
United States. Any form of exchange, including personal checks, will be accepted
subject to collection, and should be drawn to the order of the Federal Reserve
Bank or of the Treasurer of the United States, as payee, as the case may be;
war savings stamps will be accepted at their face value in lieu of cash. The date
funds are made available on collection of exchange will govern the issue price
and issue date of the notes. Any depositary, quahfied pursuant to the provisions
of Treasury Department Circular No. 92 (revised February 23, 1932, as supplemented) will be permitted to make payment by credit for notes appliied for on
behalf of itself or its customers up to any amount for which it shall be qualified
in excess of existing deposits.
2. Reservations.—The Secretary of the Treasury reserves the right to reject
any applicatiph in whole or in part, and to refuse to issue or permit to be issued
hereunder any notes in any case or in any class or classes of cases if he deems




300

REPORT OF THE SECRETARY OF THE TREA'SURY
•

/ .

such action to be in the pubhc interest, and his action in any such respect shall
be final. If an application is rejected, in whote or in part, any payment received
therefor will be refunded. The Secretary, of the Treasury, in his discretion, may
designate agencies other than those herein provided for the sale of, or for the
handling of applications for. Treasury notes to be issued hereunder.
3. Delivery of notes.—Upon acceptance of full-paid applications, notes will be
duly issued and, unless delivered in person, will be; delivered within the Continental United States, the Territories and Insular Possessions of the IJnited States,"
and the Canal Zone. No deliveries elsewhere will be made.
4. Form of application.—In applying for notes under this circular, care should
be exercised to specify that notes of Tax Series A-1945 are desired, and there,
must be furnished the name and address of the individual, corporation, or other
entity in which the notes are to be issued; and if address for the delivery of the'
notes is different, appropriate instructions should be given. The name should be
in the same form as that used in the Federal tax return of the purchaser, except
that in the case of joint tax returns of individuals, the notes should be inscribed
individualljy—the notes will not be issued in the names of two or more petsons
jointly. The application should be accompanied by remittance to cover the
purchase price—that is, par—together . with accrued interest from September
1942 to the month in which the apphcation will be received and the remittance'
•collected by an authorized issuing agent. The use of an official iapplication form
is desirable, but not necessary. Appropriate forms may be obtained on apphcation to any Federal Reserve Bank or branch, or the Treasurer of the United
iStates, Washington, D. C ; banking institutions and security dealers generally^^
-will be supplied with forms for the use of their customers.
IV. PRESENTATION IN P A Y M E N T OF TAXES

1. During and after the second calendar month after the month of purchase
(as shown by the issuing agent's dating stamp on each note), during such time>'
and under such rules and regulations as the Commissioner of Internal Revenue,
with the approval of the Secretary of the Treasury, shall prescribe, notes issued
hereunder in the name of a taxpayer (individual, corporation,.or other^.e.ntity)
may be presented and surrendered, to the extent hereinafter set forth, by such
taxpayer, his agent, or his estate, to the Collector of Internal Revenue to whom
the tax return is made, and will be receivable by the Collector at par and accrued
interest from September 1942, to the month, inclusive. (but no accrual beyond:
September 1945), in which presented in payment of any Federal income taxes
(current and back personal and corporation taxes, and excess-profits taxes),
or any Federal estate or gift taxes (current and back), assessed against the original
purchaser or his estate. Notwithstanding the provisions of, Department Circular
No. 667, as amended, and of. Department Circular No. 674, the Collector will
accept (a) not more than $5,000 principal amount of notes of Tax Series A-1945,
or of Tax Series A-1943, or of Tax Series A-1944, or of any of them in coinbination,
and (b) the amount of the 'accrued interest thereon, on account of, any one taxpayer's liability for each class of taxes (income, estate, or gift) for each taxable
period: Provided, That this limitation shall apply separately to husband and
wife on a joint return, and shall apply separately to an owner before death and
to his estate for the balance of the same year. The notes must be forwarded to
the Collector at the risk and expense of the owner, and, for the owner's protection,
should be forwarded by registered mail, if not presented in person.
v . CASH REDEMPTION AT OR PRIOR TO MATURITY

1. General.—Any Treasury note of Tax Series A-1945, bearing a properly,
executed request for payment, will be redeemed for cash at the purchase price 2
at or before maturity, without advance notice, following presentation to the agent
^ that issued the note.
2. Execution of request for payment.—The owner in whose name the note is
inscribed must appear before one of the officers authorized by the Secretary of
the Treasury to witness and certify requests for payment, establish his identity,
and in the presence of such officer sign the request for payment appearing on the
back of the note, adding the address to which check is to be mailed. After the '
2'Amended; see exhibit 24, p. 326.




REPORT OF THE SECOEIETARY OF THE TREASURY

301

re<3tMest for payment has been so signed, the witnessing officer should complete•and-signithe.certificate provided for his use.
3. Officers authorized to witness and certify requests for payment.—All officers
authorized to witness and certify requests for payment of United States savings
bonds, as set forth in Treasury Department Circular No. 530, Fifth Revision,
are hereby authorized to witness and certify requests for cash redemption of
Treasury notes issued under this circular. Such officers include, among others,
United States postmasters, certain other post office officials,, and the officers of
all banks and trust companies incorporated in the United States or its organized
territories, including officers at branches thereof.
4. Presentation and surrender.—Notes bearing properly executed requests for
paj^ment must be presented and surrendered to the agent that issued the notes
(as shown by the agent's dating stamp), at the expense and risk of the-owner.
For the owner's protection, notes should be forwarded by registered mail, if not
presented in person.
5. Disability or deaih.—In case of the disability or death of the owner, and the
notes are not to.be presented in payment of Federal income, estate or gift taxes
due from him or from his estate, instructions should be obtained from the issuing
agent before the request for payment is executed, or the notes^ presented.
6. Partial redemption.—rPartial cash redemption of notes corresponding to an
authorized denomination, may be made in the same manner as for full cash
redemption, appropriate changes being made in the request for payment. In
case of partial redemption of a note, the remainder will be reissued in the same
name and with the same date of issue as the note surrendered.
7. Payment.—Payment of any note, either at maturity or on redemption before
maturity, will be made only by the Federal Reserve' Bank or branch, or the
Treasury Department, as the case may be, that issued the note, and will be made
by check drawn to the order of the owner, and mailed to the address given in his
request for paynient. In any case, payment will be made at the purchase price
of the note, that is, at par and accrued interest (if any) paid at the time of purchase.
VI.

GENERAL PROVISIONS

1. Except as provided in this circular, the notes issued hereunder will be
subject to the general regulations of the Treasury Department, now or hereafter prescribed, governing bonds and notes of the United States.
2. Federal Reserve Banks and their branches, as fiscal agents of the United
State,s,j,are..,authorized, to perform, such services or acts as may be appropriate
and necessiary under the provisions of this circular, and under any instructions
:given by the Secretary of the Treasury.
3. The Secretary of the Treasury may at any time or from time to time supplement of amend the terms of this circular, or of any amendments or supplements
thereto, and may at any time or from time to time prescribe amendatory rules
and regulations governing the offering of the notes, information as to which will
promptly be furnished to the Federal Reserve Banks.




HENRY MORGENTHAU,

Jr.,

Secretary of the Treasury.

302

REPORT OF T H E SECRETARY OF T H E TREASURY
TREASURY NOTES

T A X S E R I E S A-1945

^ •

. Purchase price a n d t a x - p a y m e n t value during successive m o n t h s
The table below shows the principal amount with accrued interest added, for notes of
each denomination, for each month from September 1942 to September 1945, inclusive. The total shown for any denomination for any month while the notes remain
on sale is the purchase price, or cost of the note during that month. Also the total
shown for any denomination for ariy month is the tax-payment value of the note if
receivable during that month in payment of taxes.
$25
1942:
September,
October...
November.
December1943:
J a n u a r y . _,
February..
March
April
May
June
,
July
August
September,
October....
November.
December.
1944:
January...
February..
March
April
May
June...
July
August
September.
October....
November.
December.
1945:
January..-.
February..
''
March
April
May
1..
• June..
July
August
September.

$100

$500

$1,000

$5,000

$25.00
26.04
25.08
25.12

$100. 00
IOO 16
100. 32
100.48

$500.00
50O 80
501.60
502. 40

$1, OOO 00
1, 001. 60
1. 003. 20
1, 004.80

$5.000
5,008
5,016
6,024

25.16
26.20
25.24
26.28
25. 32
25.36
25.40
25.44
25. 48
25.52
26. 56
25.60

50 32
50.40
50 48
50.56
50 64
50 72
50 80
60.88
50 96
51. 04
61.12
61.20

IOO 64
100. 80
100.96
101.12
101.28
101.44
101. 60
101.76
101.92
102. 08
102.24
102. 40

503. 20
604. 00
604. 80
505. 60
506. 40
507. 20
508. 00
508.80
509. 60
510.40
511.20
512. 00

1,006.40
1,008. 00
1, 009. 60
1.011.20
1,012.80
1, 014. 40
1,016.00
1,017.60
1.019.20
1, 020. 80
1, 022. 40
1.024. 00

5,032
5,040
5,048
5, 056.
5,064
6,072
5,080
5,088
5,098
6,104
5,112
5,120

25.64
25.68
25.72
25.76
25.80
26.84
25.88
25. 92
25. 96
26.00
26.04
26.08

51.28
51.36
51. 44
51.62
51. 60
51.68
51.76
51.84
51.92
52.00
52.08
62.16

102. 66
102.72
102.88
103.04
103.20
103.36
103. 52
103. 68
103.84
104. 00
104.16
104.32,

512.80
613.60
614. 40
. 515.20
516. 00
516.80
517.60
518.40
519.20
520.00
520.80
521. 60

1.025. 60
1, 027. 20
1, 028. 80
1, 03O 40
1, 032. 00
1, 033. 60
1, 035.20
1, 036. 80
1.038. 40
1, 040. 00
1, 041. 60
1,043. 20

6,128
6.136
5,144
5,152
.5,160
5,168
5.176
6,184
5.192
5,200
5,208
6,216

26.12
26.16
26.20
26.24
26.28
26.32
26.36
26.40
26.44

[ T a x Series C,

$50. 00
60.08
5016
60.24

52.24
52.32
52.40
52.48
62. 56
52.64
52.72
62.80
52.88

104.48
104. 64
104.80
101.96
105.12
106. 28
105. 44
105. 60
105. 76

522. 40
623. 20
524.00
624. 80
625. 60
526. 40
627.20
628. 00
628.80

1, 044. 80
1, 046. 40
1, 048.00
1.049.60
1,051.20
1, 052.80
1,054.40
1, 056. 00
1, 057. 60

D e p a r t m e n t Circular N o . 696.

6.224
5,232
6,240
5,248
5,266
6,264
5, 272
5.280
6,288

Public Debt]

TREASURY

DEPARTMENT,

W a s h i n g t o n , S e p t e m b e r 1 2 , 1942'I. OFFERING

OF

NOTES

1. T h e Secretary of t h e Treasury, p u r s u a n t to t h e a u t h o r i t y of t h e Second
Liberty Bond Act, as amended, offers for sale, to the people of t h e United States,
a t par, an issue of notes of the United ^States, designated Treasury notes of Tax
Series C,* which notes, as hereinafter provided, will be receivable, a t p a r a n d
accrued interest, in p a y m e n t of Federal income, estate, a n d gift taxes.
2. T h e notes will be placed on sale September 14, 1942, a n d the sale will continue
until terminated by the Secretary of t h e Treasury.
3. T h e sale of Treasury notes of Tax Series B-1944, p u r s u a n t t o Treasury Dep a r t m e n t Circular No. 674, dated December 15, 1941, will t e r m i n a t e a t the, close
of business on September 12, 1942.
4. Any holder of Treasury notes. Tax Series B-1944, purchased a n d bearing a
d a t e of issue in September 1942, m a y surrender such notes on or before September
30, 1942, to the agency which issued the notes a n d receive in exchange therefor
1 D e s i g n a t i o n changed J u n e 22,1943, to T r e a s u r y savings notes, Series 0 ; see exhibit 40, p . 339.




V

REPORT OF THE SEORETARY OF THE TREIASURY

303

Treasury notes. Tax Series C-1945, of like face amount inscribed in the same name
and issued as of the first day of September 1942, together with a refund of the
accrued interest included in the price paid for the surrendered notes: Provided,
That where less than $1,000 of such Series B-1944 notes are so held, they may be
surrendered with the cash difference to be exchanged for a $1,000 Series C-1945
note.
'

II. DESCRIPTION OF NOTES

1. General.—The notes of Tax Series C will, in each instance, be dated as of
the first day of the month in which payment, at par, is received and ci^edited
by an agent authorized to issue the notes. They will mature 3 years from such
date, and may not be called by the Secretary of the Treasury for redemption
before maturity. All notes issued during any one calendar year shall constitute
a separate series indicated by the letter " C " followed by the year of maturity.
Subject to the provisions of section IV of this circular, the notes will be receivable,
at par and accrued interest, in payment of Federal income, estate, and gift taxes.
If not presented in payment of taxes, the notes will be payable at maturity, or,
a t the owner's option and request, they will be redeemable before maturity, subject
to the provisions of section V of this circular. •
2. At the time> of issue, the authorized issuing agent will inscribe on the face
of each note the name and address of the owner, will enter the date as of which
the note is issued, and will imprint his dating stamp (with current date). The
notes willbe issued in denominations of $1,000, $5,000, $10,000, $100,000, $500,000,
and $1,000,000. Exchanges of authorized denominations from higher to lower,
but not from lower to higher may be arranged at the office of the agent that issued
the note.
3. The notes may not be transferred in ordinary course; they may be pledged
as collateral for loans from banking institutions, but no other hypothecation will
be recognized by the Treasury Department: Provided, if held by a corporation
owning more than 50 percent of the stock, with voting power, of another corpora. tion, the notes may be transferred to the subsidiary, upon request of the corporation and surrender of the notes to the agfent that issued them: And provided
' further, if notes pledged as collateral for a loan are acquired because of the failure
of a loan to be paid, the notes will be redeemed at par and accrued interest to
the month in which acquired on surrender of the notes to the agent that issued
them, accompanied by proof of the date of acquisition and by request of the pledgee
under power of attorney given by the pledgor in whose name the notes are inscribed, and in any such cases the limitations on redemption before maturity
provided in paragraph 1 (a) of section V of this circular shall not apply; thenotes
will not be transferred to the pledgee. The notes will not be acceptable to secure
deposits of public money.
4. Interest.—Interest on each $1,000 principal amount of notes of Tax Series
C will accrue each month from the month of issue, on a graduated scale, as follows:
Each month

First to sixth months, inclusive
$0.50
Seventh to twelfth months, inclusive
.80
Thirteenth to eighteenth, months, inclusive
.90
Nineteenth to twenty-fourth months, inclusive
1.00
Twenty-fifth to thirty-sixth months, inclusive
1.10
5. The table appended to this circular shows for notes of each denomination,
for each consecutive calendar month from month of issue to month of maturity,
(a) the amount of interest accrual, (b) the principal amount of the note with
accrued interest (cuiriulative) added, and (c) the approximate investment yields.
In no case shall interest accrue beyond the month in which the note is presented in
payment of taxes, or for redemption before maturity as provided in section V. of
this circular, or beyond its maturity. Interest will be paid only with the principal
amount.
6. Taxation.—Income derived from the notes shall be subject to all Federal
taxes, now or hereafter imposed. The notes shall be subject to estate, inheritance,
gift or other excise taxes, whether Federal or State, but shall be exempt from all
taxation now or hereafter imposed on the principal or interest thereof by any State,
or any of the possessions of the United States, or by any local taxing authority.




304

REPORT OF T H E SECRETARY OF T H E TREASURY
III. PURCHASE OF N O T E S

1. Applications^ and payment.—Applications will be received by t h e Federal
Reserve Banks and. branches, a n d b y t h e Treasurer of t h e United States, W a s h - ington, D . C. Banking institutions a n d security dealers generally m a y submit "
applications for account of customers, b u t only t h e Federal Reserve Banks a n d
t h e Treasury D e p a r t m e n t are authorized t o act as official agencies. E v e r y
application m u s t be accompanied by p a y m e n t in full, a t par. Any form of
exchange, including personal checks, will be accepted subject t o collection, a n d
should be drawn t o t h e order of t h e Federal Reserve Bank or of t h e Treasurer of
t h e United States, as payee, as t h e case m a y be. T h e date funds are m a d e available on collection of exchange will govern t h e issue d a t e of t h e notes. Any
depositary, qualified p u r s u a n t t o t h e provisions of Treasury D e p a r t m e n t Circular
N o . 92 (revised F e b r u a r y 23, 1932, as supplemented) will be p e r m i t t e d t o m a k e
p a y m e n t by credit for notes applied for on behalf of itself or its customers u p to a n y
a m o u n t for which it shall be qualified in excess of existing deposits.
2. Reservations.—The Secretary of t h e Treasury reserves t h e right t o reject
any application in whole or in part, a n d t o refuse t o issue or permit t o be issued
hereunder a n y notes in a n y case or in a n y class or classes of cases if he deems such
action t o be in t h e public interest, a n d his action in a n y such respect shall be final. '
If an application is rejected, in whole or in part, a n y p a y m e n t received therefor
will be refunded. T h e Secretary of t h e Treasury, in his discretion, may-designate
agencies other t h a n those herein provided for t h e sale of, or for t h e handling of
applications for, Treasury notes t o be issued hereunder.
3. Delivery of notes.—Upon acceptance of full-paid applications, notes will be
duly issued and, unless delivered in person, will be delivered within t h e C o n t i n e n t a l
United States, t h e Territories a n d Insular Possessions of t h e United States, a n d t h e
Canal Zone. N o deliveries elsewhere will be m a d e .
4. Form of application.—^^In applying for notes under this circular, care should
be exercised t o specify t h a t notes of T a x Series C are desired, a n d there must be
furnished t h e n a m e a n d address of t h e individual, corporation, or other e n t i t y
in which t h e notes are to be issued; a n d if address for delivery of t h e notes is different, a p p r o p r i a t e instructions shoulcf be given. T h e n a m e should be in t h e same
form as t h a t used in t h e Federal t a x r e t u r n of t h e purchaser, except t h a t in t h e case
of joint t a x r e t u r n s of individuals, t h e notes should be inscribed i r i d i v i d u a l l y ^ t h e
notes will n o t be issued in t h e names of two or more persons jointly. T h e application should be accompanied by remittance t o cover t h e purchase price—that is,
par. T h e use of an official application form is desirable, b u t n o t necessary.
Appropriate forms m a y be obtained on application t o a n y Federal Reserve B a n k
or branch, or t h e Treasurer of t h e United States, Washington, D . C ; b a n k i n g s
institutions a n d security dealers generally will be supplied with forms for t h e us6
of their customers.
IV. P R E S E N T A T I O N I N PAYMENT O F T A X E S

1. During a n d after t h e second calendar m o n t h after t h e . m o n t h of purchase
(as shown b y t h e issue date on each note), during such time, a n d under such
rules a n d regulations as t h e Commissioner of I n t e r n a l Revenue, with t h e approval
of t h e Secretary of t h e Treasury, shall prescribe, notes issued hereunder in t h e
n a m e of a t a x p a y e r (individual, corporation, or other entity) m a y be presented
and surrendered by such taxpayer, his agent, or his estate, t o t h e Collector of
I n t e r n a l Revenue t o whom t h e t a x r e t u r n is made, a n d will be receivable by t h e
Collector a t p a r a n d accrued interest from t h e month' of issue t o t h e m o n t h ,
inclusive (but no accrual beyond m a t u r i t y ) , in which presented, in p a y m e n t of
a n y Federal income taxes (current a n d back personal arid 'corporation taxes, a n d
excess-profits taxes), or a n y Federal estate or gift taxes (current a n d b a c k ) ,
assessed against t h e original purchaser or his estate. T h e notes m u s t be forwarded t o t h e Collector a t t h e risk a n d expense of t h e owner, and, for t h e ow^ner's
protection, should be forwarded by registered mail, if not presented in person.
V. CASH REDEMPTION AT OR PRIOR TO MATURITY

1. General.—(a) Any Treasury note of T a x Series C not presented in p a y m e n t of taxes will be paid a t m a t u r i t y , or, a t t h e option a n d request of t h e owner,
will be redeemed before m a t u r i t y , b u t t h e notes m a y be redeemed before m a t u r i t y
only during and after t h e sixth calendar.month after t h e m o n t h of issue (as shown
on t h e face of each note), on 30 daj^s' advance notice. T h e timely surrender of




REPORT OF THE 'SECRETARY OF THE TREASURY

305

a note, bearing a properly executed request for payment, will be accepted as
constituting the advance notice required hereunder.
(b) Payment at maturity or on redemption before inaturity will be made at
par and accrued interest to the month of payment, except, if a note is inscribed
in the name of a bank that accepts demand deposits, payment.at maturity or on
^redemption before maturity will be rnade only at the issue price, or par, of the
note. However, if a note is acquired by any such bank through forfeiture of a
loan, payment will be made at the redemption value for the month in which so
acquired. ^
2. Execution of request for payment.—The owner in whose name the note is
inscribed must appear before one of the officers authorized by the Secretary of
the Treasury to witness and certify requests for payment, establish his identity,
and in the presence of such officer sign the request for payment appearing, on the
back of the note, adding the address to which check is to be mailed. After
the request for payment has been so signed, the witnessing officer should complete
and sign the certificate provided for his use.
3.. Officers authorized to witness and certify requests for payment.—All officers
authorized to witness and certify requests for payment of United States savings
bonds, as set forth in Treasury Department Circular No. 530, Fifth Revision,
are hereby authorized to witness and certify requests for cash redemption of
Treasury notes issued under this circular. Such officers include, among others.
United States postmasters, certain other post office officials, and the officers of "
all banks and trust companies incorporated in the United States or its organized
territories, including officers at branches thereof.
4. Presentation and surrender.—Notes bearing properly executed requests for'
payment must be presented and surrendered to the agent that issued the notes
(as shown by the agent's dating stamp), at the expense and risk of the owner.
For the owner's protection, notes should be forwarded by registered mail, if not =
presented in person.
5. Disability or death.—In case of the disability or death of the owner, and the
notes are not to be presented in payment of Federal income, estate or gift taxes
due from him or from his estate, instructions should be obtained from the issuing
agent before the request for payment is executed, or the notes presented.
6. Partial redemption.—Partial cash redemption of a note, corresponding to an
authorized denomination, may be made in the same manner as for full cash redemption, appropriate changes being made in the request for payment. In case of
partial redemption of a note, the remainder will be reissued in the same name
and with the same date .of issue as the note surrendered.
7. Payment.—Payment of any note, either at maturity or on redemption before
maturity, will be made only by the Federal Reserve Bank or branch, or the
Treasury Department, as the case may be, that issued the note, and will be made
by check drawn to the order of the owner, and mailed to the address given in his
request for payment.
VI. GENERAL PROVISIONS

1. Except as provided in this circular, the notes issued hereunder will be subject
to the general regulations of the Treasury Department, now or hereafter prescribed, governing bonds and notes of the United States.
2. Federal Reserve Banks and their branches, as fiscal agents of the United
States, are authorized to perform such services or acts as may be appropriate and
necessary under the provisions of this circular, and under any instructions given
by the Secretary of the Treasury.
3. The Secretary of the Treasury may at any time or from, time to time supplement or amend the terms of this circular, or of any amendments or supplements
thereto, and niay at any time or from time to time prescribe amendatory rules
and regulations governing the offering of the notes, information as to which will
promptly be furnished to the Federal Reserve Banks.




HENRY MORGENTHAU,

Jr.,

Secretary of the Treasury.

306

REPORT OF THE SECRETARY OF'THE TREASURY

i ^/

TREASURY NOTES—TAX SERIES C

.'

T a b l e of t a x - p a y m e n t or r e d e m p t i o n values a n d i n v e s t m e n t yields
The table .below shows for each month from date of issue to date of maturity the amount_
df interest accrual; ihe p r i n c i p a l amount with- accrued interest added, for notes of
each denomination; ihe approximate investment yield on the p a r amount from
issue date io the beginning of each month following the month of issue; and ihe
approximate investment yield on ihe current redemption value from the beginning
of the month indicated io ihe rnonih of maturity.

$1,000

\

A m o u n t of interest
accrual each m o n t h
after m o n t h of issue

$5,0001

$io,poo

,$100,000

$500,000

$1,000,000

T a x - p a y m e n t or r e d e m p t i o n values d u r i n g each m o n t h l y
period after m o n t h of issue i

-^.^^

imate investment yiel
imount from issue da
ning of each monthly p
affer
prox imate investment
urreint tax-payment or
ion values from begi
ach:monthly period to

P a r v a l u e (issue price
d u r i n g m o n t h of issue)
.;_
J

'^'S'-tS
>-^BB

Cce « ^
Q . O-Xi * J

<J

ao+^ o

<'

I n t e r e s t accrues a t
r a t e of $0.50 p e r
m o n t h p e r $1,000
Percent
'paramount:
2 1.07
Percent
• First month
U, 000. 50 $5,002. 50 $10,005.00 $100,050.00 $500, 250. 00 $1, 000, 500.00
0.60
1.08
Second m o n t h . . . 1,001.00 5, 005. 00 10,010.00 100,100.00 500, 500. 00 1,001,000.00
.60
1.09
T h i r d m o n t h . . . . 1,001.50 5, 007. 50 10,015.00 100, 150. 00 500, 750. 00 1,001, 500.00
.60
1.11
F o u r t h m o n t h . . . . 1, 002. 00 5,010. 00 10,020. 00 100, 200.00 501, OOd. 00 1,002, 000.00
1.12
.60
Fifth m o n t h
1,002. 50 5,012.50 10,025.00 100, 250. 00 501,250.00 1, 002. 500. 00
.60
1.14
Sixth m o n t h
1,003.00 5,015. 00 10,030. 00 100, 300.00 501, 500. 00 1,003,000.00
.60
1.16
I n t e r e s t accrues a t
r a t e of $0.80 p e r
m o n t h > p e r $1,000
i)ar a m o u n t :
1.17
Seventh m o n t h . . . 1, 003. 80 5, 019.00 10,038.00 100,380.00 501, 900.00 1,003, 800. 00
.65
Eiehth month
1, 004. 60 5, 023. 00 10,046. 00 100,460.00 502. 300. 00 1, 004, 600. 00
.69 - 1.17
Ninth month
.1.18
1,005. 40 •5,027.00 10, 054. 00 100,540.00 502, 700. 00 1, 005, 400. 00
.72
Tenth month
1.19
1, 006. 20 5, 031. 00 10. 062. 00 100, 620.00 503,100. 00 1,006,200.00
.74
E l e v e n t h m o n t h . 1, 007. 00 5, 035.00 10, 070. 00 100,700.00 503, 500.00 1,007,000.00
• ;.76
1.20
Twelfth m o n t h . . 1, 007. 80 5, 039. 00 10,078. 00 100,780.00 503, 900. 00 1,007, 800. 00
.78
1.21
I n t e r e s t accrues a t
r a t e of $0.90 p e r
m o n t h p e r $1,000
par amount:
T h i r t e e n t h
month
.80
1.22
1,008. 70 5,043. 50 10,087.00 100,870.00 504, 350.00 1,008,700.00
F o u r t e e n t h
month
1,009. 60 5, 048. 00 10, 096. 00 100,960.00 504, 800. 00 1,009.600.00 j
.82
1.22
.84
1.23
Fifteenth m o n t h 1,010.50 5, 052. 50 10,105. 00 101,050.00 505, 250. 00 1,010,500.00
Sixteenth m o n t h . 1,011.40 5,057.00 10,114. 00 101,140.00 505,700. on 1,011,400.00
.85
1.24'
Seventeenth
month
.86
1.25
1,012.30 5,061. 50 10,123.00 101,230.00 506,150.00 1,012,300.00
E i g h t e e n t h
month
1,013.20 5,066.00 10,132.00 101,320.00 506, 600.00 1,013,200.00
.88
1.26
I n t e r e s t accrues - a t
r a t e of $1.00 p e r
m o n t h p e r $1,000
par amount:
•Nineteenth
.89
1.26
C
month
. 1,014.20 1 5,071.00 10,142. O 101,420.00 507,100.00 1,014,200.00
T w e n t i e t h
month
1. 26
1,015. 20 5,076.00 10,152.0C 101,520.00 507, 600.00 1,015, 200.00
.91
Twenty-first
1.27
1,016.20 5,081.00 10,162.0( 101,620.00 508,100.00 1,016,200.00
:92
month.'
Twenty-second
month
1,017.20 5,086.00 10,172.0( ) 101,720.00 508, 600.00 1,017,200.00
.93 . 1.28
Twenty-third
1.28
.94
C
1,018.20 5,091.00 10,182.0( ) 101,820.00 509,100. O 1,018,200.00
month.
Twenty-fourth
1
1.29
1 1.019.20 1 5.096. 001 10,192. 0( 101,920.00 1 509, 600. O1 1,019,200.00 1
.96
)l
C
' month.

\

* Not acceptable in payment of taxes until during and after the second calendar month after the month
of issue, and not redeemable for cash until during and after the sixth calendar month after the month of
issue, on 30 days* advance notice.
a Approximate investment yield for entire period from issuance to maturity.




307

EEPORT OF THE. SECRETARY OF' THE TREASTJRY
TREASURY

NOTES—TAX

SERIES C

COntinUCd

Table of tax-payment or redemption values and investment yields
P a r v a l u e (issue price
d u r i n g m o n t h of isiise).
I....

0 ori
o .2
$1,000

$10,000

$5,000

$100,000

$500,000

$1,000,000

T3 .Si O
" 3 C D.
C
•>>'^>?

03x3 .St?
T "^ a 2

CSc
t;: a P M
> 2S
^
A m o u n t of interest
accrual each m o n t h
after m o n t h of issue.

T a x - p a y m e n t or r e d e m p t i o n values d u r i n g each m o n t h l y
period after m o n t h of issue K

> >>2 a
^

0 bc fcO C Oi

•See's

0 3 *-•• ^

rt

a^.^ C o
O

Iriterest accrues a t
r a t e of $1.10 per
m o n t h per $1,000
par amount:
,
Twenty-fifth
month
Twenty-sixth
month
•..
Twenty-seventh
month
Twenty-eighth
• month...
• Twenty-ninth
month
. Thirtieth month
Thirty-first
• month
Thirty-second
month
Thirty-third
month
Thirty-fourth
month
Thirty-fifth
month
Thirty-sixth
month, (maturity)

1,020.30 5,101. 50 10, 203.00 102,030.00 510,150. 00 1.020, 300. 00
1.021. 40 5,107.00

Percent Percent
1.29
0.97

10, 214. 00 102,140.00 510, 700.00 1.021, 400.00

1.022. 50 5,112. 50 10, 225. 00 102, 250.00 511,250.00 1.022, 500. 00

.99

1.023. 60 5,118. 00 10, 236. 00 102, 360.00 511,800.00 1.023, 600.00

1.00

1.024, 700.00
800.00
1.025,
900.00
1.026,
000. 00
1.028,
100.00
1.029,
200. 00
1.030,
300.00
1,031,

1.01
1.02

1.024. 70 5,123. 50 10, 247.00 102. 470. 00 512, 350. 00
1, 025. 80 5,129. 00 10, 258.00 102,580.00
512, 900. 00
1,026.90 5,134. 50 10, 269. 00 102, 690.00
513, 450.-00
1,028.00 5,140. 00 10; 280. 00 102, 800. 00
514,000.00
1,029.10 5,145. 50 10, 291.00 102,910. 00
514, 550.00
1.030. 20 5,151. 00 10, 302.00 103,020.00
515,100.00
1.031. 30 5,156. 50 10, 313.00 103,130.00
515, 650.00
1.032. 40 5,162.00

10, 324.00 103, 240.00 516, 200.00 1,032, 400.00

1.03
1.04
1.06
1.05
1.06
1.07

Exhibit 10
Offering of 2 percent Treasury bonds of 1950-52 and 1% percent Treasury notes of
Series B-1946 {additional)
On October 8, 1942,, Secretary of the Treasury Morgenthau. invited cash subscriptions for 2 percent Treasury bonds of 1950-52 arid IJ^ percent Treasury'notes
of Series B-1946, the notes being an addition to the series issued pursuant to
Department Circular No. 686, dated May 25, 1942. The aggregate amount of
both issues was $4,000,000,000, or thereabouts.
[Treasury bonds.

D e p a r t m e n t Circular N o . 698. P u b l i c D e b t ]

TREASURY DEPARTMENT,

Washington, October 8, 1942,
I. OFFERING

OF

BONDS

1. The Secretary of the Treasury, pursuant to the authority of the Second
Liberty Bond Act, as amended, invites subscriptions, at par and accrued interest,
from the people of the United States for bonds of the United States, designated
2 percent Treasury bonds of 1950-52. At the same time the Secretary of the Treasury is inviting subscriptions for an additional amount of Treasury notes of Series
B-1946 under Department Circular No. 699. The aggregate amount of both
issues will be $4,000,000,000, or thereabouts. The amount of bonds to be issued
hereunder will be determined by the relation which the total subscriptions for 'the
bonds bear to the total subscriptions received for both the bonds and the notes.



•

308

REPORT OF THE SECRETARY OF THE TREASURY
II. DESCRIPTION OF BONDS

1. The bonds will be dated October 19, 1942, and will bear interest from that
date at the rate of 2 percent per annum, payable on a semiannual basis on March
15 and • September 15 in each year until the pTincipal amount becomes paya^ble.
They will mature March 15, 1952, but may be redeemed at the option of the United
States on and after March 15, 1950, in whole or in part, at par and accrued
interest, on any interest day or days, on 4 months' notice of redemption given in
such manner as the Secretary of the Treasury shall prescribe. In case of partial
redemption the bonds to be redeemed will be determined by such method as may
be prescribed by the Secretary of the Treasury. From the date of redemption
desigri-ated in any such notice, iriterest on 'the bonds called for redeniption shall
cease.i * * *
^
III. SUBSCRIPTION AND ALLOTMENT

1. Subscriptions will be received at the Federal Reserve Banks and branches
and at the Treasury Department, Washington. Subscribers must agree not to
sell or otherwise dispose of their subscriptions, or of the securities which may be
allotted thereon, prior to the closing of the subscription books. Banking institutions generally may submit subscriptions for account of customers, but only the
Federal Reserve Banks and the Treasury Department are authorized to act as
official agencies. Others than banking institutions will not be permitted to
enter subscriptions except for their own account. Subscriptions from banks and
trust companies for their own account will be received without deposit. Subscriptions from all others must be accompanied by payment of 5 percent of the
arnount of bonds applied for.
2. The Secretary of the Treasury reserves the right to reject any subscription,
in whole or in part, to allot less than the amount of bonds applied for, and to close
the books as to any or all subscriptions at any time without notice; and any
action he may take in these respects shall be final. Subject to these reservations,
and within the amount, of the offering, subscriptions for amounts up to and including $25,000 from banks which accept demand deposits, and subscriptions
in any amount from all other subscribers, will be allotted in. full; subscriptions
for' amounts over $25,000 from banks which accept demand deposits will be
allotted on an equal percentage basis, to be publicly announced. Allotment
notices will be sent out promptly upon allotment.
IV. PAYMENT

1. Payment at par and accrued interest, if any, for bonds allotted hereunder
must be made or completed on or before October 19, 1942, or on, later allotmerit.
IJQ (gvery case where payment is not so completed, the payment with application
up to 5 percent of the amount of bonds applied for shall, upon declaration made
by the Secretary of the Treasury in his discretion, be forfeited to the United
States. Any qualified depositary will be permitted to make payment by credit
for bonds allotted to it for itself and its customers up to any amount for which
it shall be qualified in excess of existing deposits, when so notified by the Federal
Reserve Bank of its district.
V. GENERAL PROVISIONS

1. As fiscal agents of the United States, Federal Reserve Banks are authorized
arid requested to receive subscriptions i * * *.
HENRY MORGENTHAU,

Jr.,

Secretary of the Treasury.
[Treasury notes. Department Circular No. 699. Public Debt]
TREASURY

DEPARTMENT,

Washington, October 8, 1942.
I. OFFERING OF NOTES

1. The Secretary of the Treasury, pursuant to the authority of the Second
Liberty Bond Act, as amended, invites subscriptions, at par and accrued interestj^
* Omitted portion similar to corresponding section of Department Circular No. 689, p. 289.




REPORt OF THE SECifJETARY; OF THE TREASURY^

309

rom the people of the United States for notes of the United States, designated
IK percent Treasury notes of Series B-1946. At the same time the Secretary of
the Treasury is inviting subscriptions for 2 percent Treasury bonds of 1950-52
under Department Circular No. 698. The aggregate amount of both issues will
be $4,000,000,000, or thereabouts. The amount of notes to be issued hereunder
will be, determined by the relation which the total subscriptions for the notes
bear to the total subscriptions received for both the notes and the bonds.
II. DESCRIPTION OF NOTES

1. The notes now offered will be an addition to and will form a part of the
series of IJ^ percent Treasury notes of Series B-1946 issued pursuant to Department Circular No. 686, dated May 25, 1942, will be freely interchangeable therewith, are identical, in all respects therewith, and are described, in the following
quotation from Department Circular No. 686: .
" 1 . The notes will be dated June 5, 1942, and will bear interest from that
date at'"'M^"^^otate. of 1^ percent per annum, payable, on a semiannual basis-Qn
December 15, 1942, and thereafter on June 15 and December 15 in each year
until the principal amount becomes payable. They will mature December. 15,
1946, and will not be subject to call for redemption prior to maturity.^ * * *
>
III. SUBSCRIPTION AND ALLOTMENT

1. Subscriptions will be received at the Federal Reserve Banks and branches
and at the Treasury Department, Washington. Subscribers must agree not to
sell or otherwise dispose of their subscriptions, or of the securities which may be
allotted thereon, prior to the closing of the sulDSCription books. Banking institutions generally may submit subscriptions for account of customers, but only the
Federal Reserve Banks and the Treasury Department are authorized to act as
official agencies. Others than banking institutions will not be permitted to enter
subscriptions except for their own account. Subscriptions from banks and trust
companies for their own account will be received without deposit. Subscriptions
from all others must be accompanied by. payment of 5 percent of the amount of
notes applied for.
2. The Secretary, of the Treasury reserves the right to reject any subscription,
in whole or in part, to allot less than the amount of notes applied for, and to
close the books as to any or all subscriptions at any time without notice; and
any action he may take in these respects shall be final. Subject to these reservations, and within the amount of the offering, subscriptions for amounts up to and
including $25,000 from banks which accept demand deposits, and subscriptions
in any amount from all other subscribers, will be allotted in full; subscriptions
for amounts over $25,000 from banks which accept demand deposits will be
allotted on an equal percentage basis, to be publicly announced. Allotment
notices will be sent out promptly upon allotment.
IV. PAYMENT

1. Payment at par and accrued interest from June 5, 1942, for notes allotted
hereunder must be made or completed on or before October 15, 1942, or on later
allotment. In every case where payment is not so completed, the payment with
application up to 5 percent of the amount of notes applied for shall, upon declaration made by the Secretary of the Treasury in his discretion, be forfeited to the
United States. Any qualified depositary will be permitted to make payment
by credit for notes allotted to it for itself and its customers up to any amount
for which it shall be qualified in excess of existing deposits, when so notified by
the Federal Reserve Bank of its district. Accrued interest at 1^ percent from
June 5, 1942, to October 15, 1942, on $1,000 face amount is $5.41209.
V. GENERAL PROVISIONS

'

1. As fiscal agents of the United States, Federal Reserve Banks are authorized
and requested to receive subscriptions i * * *.
HENRY MORGENTHAU,

Jr.,

Secretary of the Treasury, .
1 Omitted pdr'tion similar to cbrrest)'6ndirig section of Departinent Circular No. 694, p. 296.




310

REPORT OF THE SECRETARY OF THE TREASURY

Exhibit 11
Allotments, Treasury bonds of 1950-52 and Treasury notes of Series B-1946
{additional) {from press releases, October 9, 12, and 15, 1942 0
' <
On October 8, 1942, Secretary of the Treasury Morgenthau announced that the.
subscription books for the 2 percent Treasury bonds of 1950-52 and the !%•
percent Treasury notes of Series B-1946 (additional) would close at the close of
business October 9. Subscriptions for both issues aggregated $4,105,078,900, of
which about 25 percent came from sources other than banks which accept demand
deposits, All subscriptions were allotted in full. Allotments were divided among
the Federal Reserve districts and the Treasury as follows:
Subscriptions received and allotted
rederalReserve district

Boston
'
New York ._
Philadelphia—
Cleveland
Richmond
'Atlanta.:.-_
...:.
'Chicasio
^St TiOui''
Minneapolis -_
Kansas Qity
Dallas
San Francisco
Treasury-_
Total

Treasury "boiids Treasury notes,
Series B-1946
of 1950.-52
(additional)

I

--

..

..-.
.--.

-•--

._
-

$80,284, fiOO $109,568,800
876. 261, 600 • 862,56^,700
101,933,200
93,138,000
97,842, 900
108,141,800
80,838, 300
75,482,500
67, 752, 500
88,697; 600
402,408.800
247,393,100
59.203, 700
94, 349,900
34,583, 200
67,090, 200
70,184.300
74,834,100
61, 317. 200
"59,994.300
143, 636,000
159,130. 700
2, 203,100
6, 341,000

-

.

-

_ _

-

-

1,962,688,300

Total

'

2,142,390,600

$189,853,400
1,738, 829, 200
195,071.200
- 205.984,700
156,320.800
. 156,450.000
649.801, 900
153. 553, G O
O
91,673. 400
145,018. 400
111,311.500
302,666,700
8,544,100
4,105,078,900

Exhibit 12
Offering of Ys percent Treasury certificates of indebtedness of Series D-194S
On October 26, 1942, Secretary of the Treasury Morgenthau invited cash
subscriptions for % percent Treasury certificates of indebtedness of Series D-1943,
in the amount of $2,000,000,000, or thereabouts.
[Department Circular No. 700. Public Debt]
TREASURY DEPARTMENT,

Washington, October 26, 1942.
I. OFFERING OF CERTIFICATES

1. The Secretary of the Treasury, pursuant to the authority of the Second
Liberty Bond Act, as amended, invites subscriptions, at par and accrued interest,
from the people of the United States for certificates of indebtedness of the United
States, designated % percent Treasury certificates of indebtedness of Series
D-1943. The amount of.the offering is $2,000,000,000, or thereabouts.
II. DESCRIPTION OF CERTIFICATES

1. The certificates will be dated November 2, 1942, and will bear interest'
from that date at the rate of Y percent per annum, payable on a semiannual
s
basis on May 1 and November 1, 1943. They will mature November 1, 1943,
and will not be subject to call for redemption prior to maturity.2 * * *
III. SUBSCRIPTION AND ALLOTMENT

1. Subscriptions will be received at the Federal Reserve Banks and branches
and at the Treasury Department, Washington.. Subscribers must agree not to
sell or otherwise dispose of their subscriptions, or of the securities which may
be allotted, therepn, prior- to the closing of the subscription books. Banking
institutions and securities dealers generally may submit subscriptions for account
D customers, but only the Federal Reserve Banks and the Treasury Department
f
» Revised Nov. 25,1942.
Omitted portion similar to corresponding section of Department Circular No. 693, p. 293.




'.

311

KEPOET- O F . T H E SECRETARY OF T H E TKEASUBY

are authorized t o act as official agencies. . Others t h a n banking institutions a n d
securities dealers will not be permitted to enter subscriptions except for their
own account. Subscriptions from banks a n d t r u s t companies for their own account will be received without deposit. Subscriptions from all others m u s t be
accompanied b y p a y m e n t of 2 percent of t h e a m o u n t of. certificates applied for.
2. T h e Secretary of t h e Treasury reserves t h e right to reject any subscription,
in whole or in part, to allot less thain t h e amourit of certificates applied for,^and
t o close the books as-to any or all subscriptions at any time without notice; and
a n y action.he m a y t a k e in these respects shall be final. Subject to these reservations, and within t h e a m o u n t of the^ offering, subscriptions for a m o u n t s up to
and including $25,000 from banks which accept demand depdsits a n d subscrip-"
tions in any a m o u n t from all other subscribers, will be allotted in full; subscriptions for a m o u n t s over $25,000' from banks which accept demand deposits will
be allotted on an equal percentage basis, t o be pubhcly announced. Allotment
notices will be sent out p r o m p t l y upon allotment.
IV.

PAYMENT

1. P a y m e n t a t par a n d accrued interest, if any, for certificates allotted hereunder must be m a d e or Completed on or before November 2, 1942, or on later
allotment. In every case where p a y m e n t is not so completed, t h e p a y m e n t
with application up to 2 percent of t h e a m o u n t of certificates applied for shall,
upon cdeclaration m a d e by t h e Secretary of t h e Treasury in his discretion, be
forfeited to t h e United States. " Treasury certificates of indebtedness of Series
A-1942, m a t u r i n g November 1, 1942, will be accepted a t par in p a y m e n t for
any certificates of t h e series now offered which shall be allotted.
V. GENERAL PROVISIONS

1. As fiscal agents of t h e United States, Federal Reserve Banks are authorized
a n d requested to receive subscriptions.^ * * *
D.

W.

BELL,

Acting Secretary of the Treasury,
Exhibit 13
Subscriptions and allotments. Treasury certificates of indebtedness of Series D-194S
{from press releases October 27, 29, and 3 1 , 1942 2)
On October 26, 1942, Secretary of t h e T r e a s u r y Morgenthau-^announced t h a t
t h e subscription books for t h e offering of Ys percent Treasury certificates of
indebtedness of Series D - 1 9 4 3 would close a t t h e close of business October 27.
Subscriptions aggregated $3,105,014,000, of which $2,035,254,000 were allotted.
Of t h e subscriptions received, $667,000,000 were allotted in full to all subscribers
o t h e r t h a n banks accepting d e m a n d deposits; $64,000,000 were allotted in full t o
b a n k s entering subscriptions for not more t h a n $25,000; a n d t h e remainder,
representing subscriptions from banks for more t h a n $25,000, were allotted 55
percent, b u t not less t h a n $25,000 on a n y one subscription, with a d j u s t m e n t s ,
where necessary, t o t h e $1,000 denomination. Subscriptions a n d allotments
were divided a m o n g t h e Federal Reserve districts as follows:
Subscriptions
received

Federal Reserve district
Boston
._
New York
Philadelphia..
Cleveland
Richmond
Atla'nta
Chicago.
St. Louis
Minneapolis...
Kansas City...
Dallas
San Francisco.
Total

Subscriptions
allotted

$170, 228,000
1,615, 675.000
96, 511,000
166, 145,000
105, 041,000
81, 277,000
405, 158-, 000
92, 122,000
41, 366,000
85, 157,000
36, 409,000
210, 925,000

-

$111. 994,000
1,095, 747,000
57, 868,000
104, 399,000
66, 746,000
48, 196,000
256, 430,000
54, 810,000
26, 300,000
61, 311,000
21, 709,000
139, 744,000 ,

3,105,014,000

2,035, 254,000

1 Omitted portion similar to corresponding section of Department .Circular No. 693, p. 293.
2 Revised Nov. 25, 1942.




312

REPORT OF THE SECRETARY QF THE TREASURY
Exhibit 14

Offering of 2}^'percent Treasury bonds of 1963-68, ly^ percent Treasury bonds of
1948, and Y percent Treasury certificates of indebtedness of Series E-194S
s
On November 30, 1942, Secretary of the Treasury Morgenthau invited cash
subscriptions for unspecified amounts of 2}^ percent Treasury bonds of 1963-68,
iy4 percent Treasury bonds of 1948, and % percent Treasury certificates of indebtedness of Series E-1943. The Treasury bonds of 1963-68 carried the provision
for their optional redemption, upon the- death of the owner, for the purpose of
satisfying Federal estate taxes; these bonds were not available for subscription,
for their own account, by commercial banks which accepted demand deposits.
The Treasury bonds of 1948 and Treasury certificates of indebtedness were
intended for the banks as well as for other investors, sales to the commercial banks
having been limited to $2,000,000,000, or thereabouts, for each series.
[Treasury bonds of 1963-68. Department Circular No. 701. Public Debt]
TREASURY

. .

DEPARTMENT,

Washington, November SO, 1942,
I. OFFERING OF BONDS

1. The Secretary of the Treasury, pursuant to the authority of the Second Liberty Bond Act, a» amended, invites subscriptions, at par and accrued interest,
from the people of the United States for bonds pf the United States, designated
2}^ percent'Treasury bonds of 1963-68. These bonds will not be available for
subscription, for their own account, by commercial banks, which are defined for
this purpose as banks accepting demand deposits. The amount of the offering is
not sjpecifically limited.
II. DESCRIPTION OF BONDS

1. The bonds will be dated December 1, 1942, and will bear interest from that
date at the rate of 2J^ percent per annum, payable on a semiannual basis on June,:,;
15 and December 15, 1943, and thereafter on June 15 and December 15 in eacfr '
year until the principal amount becomes payable. They will mature December
15, 1968, but may be redeemed at the option of the United States on and after
December 15, 1963, in whole or in part, at par and accrued interest, on any interest
day or days, on 4 months' notice of redemption given in such manner as the Secretary of the Treasury shall prescribe. In case of partial redemption the bonds to
be redeemed will be determined by such method as may be prescribed by the Secretary of the Treasury. From the date of redemption designated in any such notice,
interest on the bonds called for redemption shall cease.
2. The income derived from the bonds,shall be subject to all Federal taxes, now
or hereafter imposed. The bonds shall be subject to estate, inheritance, gift or
other excise taxes, whether Federal or State, but shall be exempt from all taxation
now or hereafter imposed on the principal or interest thereof by any State, or any
of the possessions of the United States, or by any local taxing authority.
3. The bonds will not be acceptable to secure deposits of public moneys before
December 1, 1952; they will not bear the circulation privilege, and they will not be
entitled to any privilege of conversion.
4. Bearer bonds with interest coupons attached will be issued in denominations
of $500, $1,000, $5,000, $10,000 and $100,000. Bonds registered as to principal
and interest will be issued in denominations of $500, $1,000, $5,000, $10,000,
$100,000 and $1,000,000. Provision will be made for the interchange of bonds of
different denominations and of coupon and registered bonds, and for the transfer
of registered bonds, under rules and regulations prescribed by the Secretary of the
Treasury, except that they may not, before December 1, 1952, be transferred to or
be held by commercial banks, which are defined, for this purpose, as banks accepting demand deposits. However, the bonds may be pledged as collateral for loans,
. including loans by, commercial banks, but any such bank acquiring such bonds
before December 1, 1952, because of the failure of such loans to be paid at maturity,
will be required to dispose of them in the same manner as they dispose of other
assets not eligible to be owned by banks.
5. Any bonds issued hereunder which upon the death .of the owner constitute
part of his estate, will be redeemed at the option of the duly constituted representa?
tives of the deceased owner's estate, at par and accrued interest to date of payment,^ * * *^
i Omitted portion similar to corresponding .section of Department Circular No. 692, p. 291.




REPORT OF THE SiE'ORETARY OF THE TREIASURY

313

IV. PAYMENT

1. Payment at par and accrued interest, if any, for bonds allotted hereunder
must be made on or before December 1, 1942, or on later allotment. One day's
accrued' interest is $0,068 per $1,000. Any qualified depositary will be permitted
to make payment by credit for bonds allotted to its customers up to any amount
for which it shall be qualified in excess of existing deposits, when so notified by the
Federal Reserve Bank of its district.^ * * *
HENRY MORGENTHAU,

Jr.,

Secretary of the Treasury,
'

[Treasury bonds of 1948. Department Circular No. 702. Public Debt]
TREASURY

DEPARTMENT,

Washington, November SO, 1942.
I. OFFERING OF BONDS

1. The Secretary of the • Treasury, pursuant to the authority of the Second
Liberty Bond Act, as amended, invites subscriptions, at par and accrued interest,
from the.people of the United States for bonds of the United States, designated
1% percent Treasury bonds of 1948. The amount of the offering is not specifically
limited, although allotments to commercial banks, which are defined for this
purpose as banks accepting demand deposits, for their own account will be limited
to $2,000,000,000, or thereabouts. The books will be open today and until further
notice for the receipt of subscriptions from others than commercial banks for their
own account, and today, December 1, and December 2 for the receipt of subscriptions from commercial banks for their own account.
II. DESCRIPTION OF BONDS

1. The bonds will be dated December 1, 1942, and will bear interest from that
date at the rate of 1^4 percent per annum, payable on a semiannual basis on June
15 and December 15, 1943, and thereafter oh June 15 and'Deceihber i5"in each
year until the principal amount becomes payable. They will mature June 15,
1948, and will not be subject to call for redemption prior to maturity.^ * * *.
4. Bearer bonds with interest coupons attached will be issued in denominations
of $500, $1,000, $5,000, $10,000 and $100,000. Bonds registered as to principal
and interest will be issued in denominations of $500, $1,000, $5,000, $10,000,
$100,000 and $1,000,00,0. Provision will be made for the interchange of bonds
of different denominations and of coupon and registered bonds, and for the
transfer of registered bonds, under rules and regulations ]3rescribed by the Secretary of the Treasury.2 * * *
III.

SUBSCRIPTION

AND ALLOTMENT

.

'

1. Subscriptions will be received at the Federal Reserve Banks and branches
and at the Treasury Department, Washington." Subscribers must,agree not to
sell or otherwise dispose of their subscriptions, or of the securities which may be
allotted thereon, prior to December 3, 1942. Banking institutions and securities
dealers generally may submit subscriptions for account of customers, but only the
Federal Reserve Banks and the Treasury Department are authorized to act as
official agencies. Others than banking institutions and securities dealers will not
be permitted to enter subscriptions except for. their own account. Subscriptions
from commercial banks for their own account will be received without deposit.
All other subscriptions must be accompanied by payment in full for the amount
of bonds applied for.
2. The Secretary of the Treasury reserves the right to reject any subscription,
in whole or in part, to allot less than the amount of bonds applied for, and to close
the books as to any or all subscriptions at any time without notice; and any
action he may take in these respects shall be final. Subject to these reservations,
subscriptions for amounts up to and including $100,000 from commercial banks,
and subscriptions in any amount from all other subscribers, will be allotted in
full; subscriptions for amounts over $100,000 from commercial banks will be .
allotted on an equal percentage basis, to be publicly announced. Allotment notices
will be sent out promptly upon allotment.
» Omitted portion similar to corresponding section of Department Circular No. 692, p. 291.
3 Omitted portion similar to corresponding section of Department Circular No. 689, p. 289.
542890—44
22




,314

pEI^ORT OF ,THE-SEeRETARY OF'THE TREASURY
IV. PAYMENT

, I . Payment at par and accrued-interest, if any,,for bonds allotted hereunder to
or for the account of others than commercial banks must be made on or before
December 1- 1942, or. on later alio tment., Payment at par and accrued interest
to December 11, 1942, for bonds allotted hereunder to commercial banks must be
made on that date. One day's accrued interest is $0,048 per $1,000. Any qualified'
depositary will be permitted to make payment by credit for bonds allotted to it
for itself and its customers up to any amount for which it shall be qualified in
excess of existing deposits, when so notified by the Federal Reserve Bank of its
district.
V. GENERAL PROVISIONS

1. Asfiscalagents of the United States, Federal Reserve Banks are authorized
and requested to receive subscriptions.^ * * *
.

• ^

.

HENRY MORGENTHAU, Jr.,

Secretary of the Treasury.
[Certificates of.indebtedness. Department Circular No. 703. Public Debt]
• *

,

,

TREASURY

DEPARTMENT,

Washington, November SO, 1942,
I. OFFERING o r CERTIFICATES

1. The Secretary of the Treasury, pursuant to the authority of the Second
Liberty Bond Act, as amended, invites subscriptions, at par and accrued interest,
from the people of the United States for certificates of indebtedness of the United
States, designated % percent Treasury certificates of indebtedness of Series
E-1943. The amount of the offering is not specifically limited, although allotments tp cornmercial .banks, which are defined for this purpose as banks accepting demand depositsrfor their own account will be limited to $2,000,000,000, or
thereabouts. The books will be open today and until further notice for the receipt
of subscriptions from others than commercial banks for their own account, and
on December 16, December 17, and DecemberT8 for the receipt of subscriptions
from commercial banks for their own account.
II. DESCRIPTION OF CERTIFICATES

1. The certificates will be dated December 1, 1942, and will bear interest from
that date at the rate of Y percent per annum, payable semiannually on June 1
s
and December 1, 1943. They will mature December 1, 1943, and will not be
subject to call for redemption prior to maturity.^ * * *
III. SUBSCRIPTION AND ALLOTMENT

1. Subscriptions will be received at the Federal Reserve Banks and branches
and at the Treasury Department, Washington. Subscribers must agree not to
sell or otherwise dispose of their subscriptions, or of the securities which may be
allotted thereon, prior to December 19, 1942. Banking institutions and securities
dealers generally may submit subscriptions for account of customers, but only
the Federal Reserve Banks and the Treasury Departinent are authorized to act
as official agencies. Others than banking institutions and securities dealers will
not be permitted to enter subscriptions except for their own account. Subscriptions from commercial banks for their own .account will be received without
deposit. All qther subscriptions must be accompanied by payment in full for
the amount of certificates applied for.
1 Omitted portion similar to corresponding section of Department Circular No. 689, p. 289.
2 Omitted portion similar to corresponding section of Department Circular No. 693, p. 293.




REPORT OF' THE SECRETARY OF THE TREASURY

315

' 2. The Secretary of the Treasury reserves th6 right to reject any subscription,
in whole or in part, to allot less than the amount of certificates applied for, and
to close the books as to any or all subscriptions at any time without-notice; and
any action he may take in these respects shall be final. Subject to these reservations, subscriptions for amounts up to and incjluding $100,000 from commercial
banks, and subscriptions in any amount from all other subscribers, will be allotted
in full; subscriptions for amounts over $100,000 from commercial banks will be
allotted on an equal percentage basis, to be publicly iannounced. Allotment
notices will be sent out promptly upon allotment.
i
IV. PAYMENT

. 1. Payment at par and accrued interest, if.any, for certificates allotted hercr
under to or for the account of others than comrnercial banks must be made on
or before December 1, 1942, or on later allotrnent.. Paynient at par and accrued
interest to December 28, 1942, for certificates allotted hereunder to commercial
banks must be made on that date. One day's accrued interest is $0,024 per
$1,000. Any qualified depositary will be permitted to make payment by credit
for certificates allotted to it for itself and its customers up to any amount for
which it shall be qualified in excess of existing deposits, when so notified by the
Federal Reserve Bank of its District.
V. G E N E R A L PROVISIONS

1. As fiscal agents of the United States, Federal Reserye Banks are authorized
and requested to receive subscriptions i * * *.
'
HENRY MORGENTHAU,

Jr.,

Secretary of the Treasury,

Exhibit 15
Subscriptions and allotments, Treasury bonds of 1963-68, Treasury bonds of 1948,
and Treasury certificates of indebtedness of Series E-194S {from press releases,
December 5, 11, 12, 21, and 26, 1942^)
"j
On December 5, 1942, Secretary of the Treasury Morgenthau announced that
the subscriptions from commercial banks for their own account for 1% percent
Treasury bonds of 1948, for which the subscription books were open to these banks
for three days, from November 30 to December 2, aggregated $2,360,369,000.
These subscriptions were allotted in full to banks entering subscriptions for not
more than $100,000, and the remainder were allottted 85 percent, but not less than
$100,000 on any one subscription, with adjustments,. where necessary, to the
$1,0.00 denomination.
• On Decernber 12. 1942, Secretary Morgenthau announced that the subscription
books for the 2)4 percent Treasury bonds of 1963-68, 1% percent Treasury
bonds of 1948, and Y percent certificates of indebtedness of Series E-1943 would
s
close at the close of businessoDecember 23 for subscriptions from others than the
commercial banks.
For the commercial banks,, for their own account, the issue of certificates of
indebtedness was open for subscriptions for three days, from December 16 to 18;
these subscriptions by the banks aggregated $3,502,690,000. Subscriptions up to
and including $100,000, totaling about $277,000,000, were allotted in full; and
subscriptions over $100,000 were allotted 57 percent, but not less than $100,000
on any one subscription, with adjustments, where necessary, to the $1,000 denomination.
Subscriptions to the three issues from others than commercial banks were
allotted in full.
' Omitted portion similar to corresponding section of Department Circular No. 693, p. 293.
.> Revised Mar. 17 and Apr. 20, 1943.




316

REPORT OF THE SECRETARY OF THE TREASURY

The subscriptions and allo.tments for the three issues were divided among the
Federal Reserve districts and the Treasury as follows:
2 H % Treasury bonds
of 1963-68 1

m % T r e a s u r y b o n d s of 1948

Commercial banks

F e d e r a l R e s e r v e district
Subscript i o n s received a n d
allotted

Subscriptions

Allotments

Others
Subscriptions a n d
allotments

Total

Subscriptions

Allotments

I n t h o u s a n d s of dollars
Boston
NewYork
Philadelphia--.
Cleveland
Richmond
Atlanta..
Chicago
St. Louis
Minneapolis...
Kansas C i t y . . .
E)allas
S a n Francisco..
Treasury
Total

252»-768;
1,664, 503
. 132,164
109,802
65,256
' 21,986
155,076
23,094
30, 914
49,559
26,098
. 67,. 700
241,996
2,830,914

103,:9Z6.i
760;328
117,624
162.613
106,343
103,866
409,034
93,616
80,737
104, 289
87, 708
230,067

90,756
651-, 366
104,226
143,872
94,396
91,943
369,034
•84,202
73, 052
92,426
77,529
197,689

83,745641, 266
17,420
44,780
37,669
31,770
56,400
13,517
8,342
14, 523
9,939
38, 692
2,886

. 187,721
1,401,594
135,044
207,392
144,002
135,636
465,434
107,133
89,078
118,812
97,647
268,769
2,886

;• 474,601,,,
•a, 292,622
121.646
188,652
132,065
123, 712
416,972
97,719
81, 394
106,949
87,468
236, 281
2,886

2,360,200

2,060,919

1,000,937

3,361,137

3,061,856

N O T E . — F i g u r e s are r o u n d e d to nearest t h o u s a n d a n d will n o t necessarily a d d t o t o t a l s .
1 N o t available for s u b s c r i p t i o n , for their o w n a c c o u n t , b y commercial b a n k s w h i c h accept d e m a n d
deposits.
% % certificates of i n d e b t e d n e s s of Series E-1943
Commercial banks

Others

Total

F e d e r a l R e s e r v e district
Subscriptions

Allotments

Subscriptions a n d
allotments

Subscriptions

Allotments

I n t h o u s a n d s of dollars
Boston...
N e w York
Philadelphia. _
Cleveland
Richmond
Atlanta
Chicago-.^.
St. Louis.
Minneapolis...
Kansas City...
Dallas
San Francisco.
Treasury.
Total

199,
1,293,
128,
•:257,
149,
173,
500,
147,"
106,
107,
• 117,
315,
3,496,303

118,958
747, 662
81, 667
159,612
93,095
108,336
311,406
• 100, 284'
71,023 <
70, 307
74,040
184, 441
2,120,621

78,513
,060,596
48,691
•78, 208
61,164
34, 206
226, 363
• 22,598
8,817
13,989
17,965
37, 95461

277,812
2,354,051
176, 930
335, 420
200,559
208,040
727,190
-. 170,034
115,594
121, 227
. 135,304
363,196
61

197.471
1,808,158 ,
130, 248
237,820
144,249
142, 542
537,769
, 122,852
79,840
84.296
92,005
222,395
61

1,679,115

5,175, 418

3,799, 7,36

N O T E . — F i g u r e s are r o u n d e d t o n e a r e s t t h o u s a n d a n d will n o t necessarily a d d to totals.

*

Exhibit 16
Offering of Y percent Treasury certificates of indebtedness of Series A-1944
s
On January 21, 1943, Secretary of the,Treasury Morgenthau invited; cash
subscriptions for % pierc^rit'Treasury certificates of indebtedness of Series A-1.944j
in the amount of $2,000,000,000, or thereabouts.




REPORT OF THE SECRETARY OF THE TREASURY

317

[Department Circular No. 705. Public Debtl
TREASURY

DEPARTMENT,

Washington, January 21, 1943,
I. OFFERING OF CERTIFICATES

1. The Secretary of the Treasury, pursuant to the authority of the Second
Liberty Bond Act, as amended, invites subscriptions, at par and accrued interest,
from the people of the United States for certificates of indebtedness of the United
States, designated % percent Treasury certificates of indebtedness of Series
A-1944. The amount of the offering is $2,000,000,000, or thereabouts.
;"

II. DESCRIPTION OF CERTIFICATES

1. The certificates will be dated February 1, 1943, and will bear interest from
.that date at the rate of % percent per annum, payable semiannually on August 1,
1943, and February 1, 1944. They will mature February 1, 1944, and will not
be subject to call for redemption prior to maturity.^ * * *
4. Bearer certificates with two interest coupons attached will be issued in
denominations of $1,000, $5,000, $10,000, $100,000 and $1,000,000. The certificates will not be issued in registered form.i * * *
III. SUBSCRIPTION AND ALLOTMENT

1. Subscriptions will be received at the Federal Reserve Banks and branches
and at the Treasury Department, Washington. Subscribers must agree not to
sell or otherwise dispose of their subscriptions, or of the securities which may be
allotted thereon, prior to the closing of the subscription books. Banking institutions and securities dealers generally may submit subscriptions for account of
customers, but only the Federal Reserve Banks and the Treasury Departnient
are authorized to act as official agencies. Others than banking institutions and
securities dealers will not be permitted to enter subscriptions except for their
own account. Subscriptions from banks and trust companies for their own
account will be received without deposit. Subscriptions from all others must be
accompanied by payment of 2 percent of the amount of certificates applied for.
2. The Secretary of the Treasury reserves the right to reject any subscription,
in whole or in part, to allot less than the amount of certificates applied for, and
to close the books as to any or all subscriptions at any time without notice; and
any action he may take in these respects shall be final. Subject to these reservations, subscriptions for amounts up to and including $100,000 from banks
.which accept demand deposits, and subscriptiohsvin^ any amount from all other
subscribers, will be allotted in full; subscriptions for amounts over $100,000 from
banks which accept demand deposits will be allotted on an equal percentage
basis, to be publicly announced. Allotment notices will be sent out promptly
upon allotment.
IV. PAYMENT

1. Payment at par and accrued interest, if any, for certificates allotted hereunder must be made or completed on or before February 1, 1943, or on later
allotment. In every case where payment is not so completed, the payment with
application up to 2 percent of the amount of certificates applied for shall, upon
declaration made by the Secretary of the Treasury in his discretion, be forfeited
.to the United States. Treasury certificates of indebtedness of Series A-1943,
maturing February 1, 1943, will be accepted at par in payment for any certificates
of the series now offered which shall be allotted.
V. GENERAL PROVISIONS

1. As fiscal agents of the United States, Federal Reserve Banks are authorized
and requested to receive subscriptions^ * * *, "
.
D. W. BELL,

Acting Secretary of the Treasury,
1 Omitted portion similar to corresponding section of Department Circular No. 693, p. 293.




318

REPORT OF T H E .SECRETARY OF T H E TREASURY
Exhibit 17

Subscriptions and allotments, Treasury ceriificaies of indebtedness of Series A-1944
>
{from ^press releases, J a n u a r y 22,, 26, and SO, 194s ^)
On J a n u a r y 21, 1943, Secretary of t h e Treasury Morgenthau announced t h a t t h e
subscription .books for t h e offering of J-.s percent Treasury certificates of indebtedness of Series A-1944 would close a t the close of business J a n u a r y 23. Subscriptions aggregated $6,402,093,000, of which $2,211,161,000 were allotted. Of t h e
subscriptions received, $1,163,000,000 were allotted in full to subscribers other t h a n
b a n k s accepting d e m a n d deposits, $309,000,000 were allotted in full to b a n k s
entering subscriptions for n o t more t h a n $100,000; and t h e remainder, representing subscriptions from banks for more t h a n $100,000, were allotted 14 percent,
b u t not less t h a n $100,000 on any one subscription, * with adjustments, where
necessary, to t h e $1,000 denomination. Subscriptions a n d allotments w e r e
divided among t h e Federal Reserve districts and t h e Treasury as follows:
Federal Reserve district
Boston.
New York
Philadelphia.• Cleveland
Richmond
Atlanta..
Chicago
St. Louis
Minneapolis...
Kansas City...
Dallas...
San Francisco.
Treasury.

Subscriptions
received
$333, 798. 000
2,839, 741,000
220, 076, 000
324, 876, 000
247, 490, 000
287, 316,000
921, 018, 000
242, 691,000
109, 775, 000
283,
. 196, 000
150, 963,000
628, 061.000
15,000

Total

6,402,093,000

Subscriptions
allotted
' $103. 061. noft
1,090, 810,000
72. 815.000
114, 020, 000
87, 062, 000
79, 951,000
302, 905, ooa
72, 541.000
41. 222.000'
65, 077. 00046, 659,000
135. 123. 000
15.'000
2,211,161,000

Exhibit 18
Call for redemption on J u n e 15, 1943, of SYs percent Treasury bonds of 194S-47
TREASURY DEPARTMENT,

Washington, February 13, 1943.
Secretary of t h e Treasiiry; M o r g e n t h a u announced t o d a y t h a t all o u t s t a n d i n g
3% percent Treasury bdiKis of 1943-47 are called for redemption on J u n e 15,
1943. Approximately $454,000,000 of these bonds are now outstanding.
T h e Secretary stated t h a t t h e bonds will be paid off in cash, a n d holders will
n o t be offered other obligations of t h e United States in exchange for their called
bonds.
T h e text of t h e formal notice of call is as follows:
THREE AND THREE-EIGHTHS PERCENT TREASURY BONDS OF 1943-47
FOR REDEMPTION

NOTICE OF CALL

,To Holders of Sy% Percent Treasury Bonds of 1943-47y and Others Concerned:
1. Public notice is hereby given t h a t all o u t s t a n d i n g 3Ji percent T r e a s u r y bonds
of 1943-47, d a t e d J u n e 15, 1927, are hereby called for redemption on J u n e 15,
1943, on which d a t e interest on such bonds will cease.
2. Full information regarding t h e presentation a n d surrender of the. bonds for
redemption under this call will be found in D e p a r t m e n t Circular N o . 666^ d a t e d
J u l y 2 1 , 1941.
3. These bonds will be redeemed a t par, a n d holders will not be offered o t h e r
obligations of t h e United States in exchange for their called bonds.
HENRY MORGENTHAU,

Jr.,

Secretary of the Treasury,
» Revised Mar. 17,1943!




\
REPORT OF THE SECRETARY OF THE TREASURY

'

319°

Exhibit 19
Offering of 2V2 percent Treasury bonds of 1964-69, 2 percent Treasury bonds of
1950-52, and Y percent Treasury ceriificaies • of indebtedriess of Series B-1944. '
s
On April 12, 1943, Secretary of the Treasury Morgenthau invited cash subscriptions for unspecified amounts of 2)^ percent Treasury bonds of 1964-69, 2 percent
Treasury bonds of 1950-52, and Y percent Treasury certificates of indebtedness
s
of Series B-1944. The bonds of 1964-6,9 were not available for subscription, for .
their own account, by commercial banks accepting dem'and deposits. Sales of
Treasury bonds of 1950-52 and the Treasury, certificates of indebtedness to these
banks were limited to $2,000,000,000, or thereabouts, for each series.
[Treasury bones of 1964-69. Department Circular No. 708. Public DebtlTREASURY DEPARTMENT,

Washington, April 12, 1943,
1. OFFERING OF BONDS

1. The Secretary of the Treasury, pursuant to the authority of the Second
Liberty Bond Act, as amended, invites subscriptions, at par and accrued interest,
from the people of the United States for bonds of the United States, designated
2y2 percent Treasury bonds of 1964-69. These bonds will not be available for
subscription, for their owp account, by commercial banks, which are defined for
this purpose as banks accepting demand deposits. The amount of the offering
is not specifically limited.
•
II. DESCRIPTION OF BONDS

1. The bonds will be dated April 15, 1943, and will bear interest from that date
at the rate of 2}^ percent per annum, payable on a semiannual basis on June 15
and December 15 in each year until the principal amount becomes payable.
They will mature June 15, 1969, but may be redeemed at the option of the United
States on and after June 15, 1964, in whole or in part, at par and accrued interest,
on any interest day or days, on 4 months' notice of redemption given in such manner as the Secretary of the Treasury shall prescribe. In case of partial redemption the bonds to be redeemed will be determined by such method as may be prescribed by the Secretary of the Treasury. From the date of redemption designated
in any such notice, interest on the bonds called for redemption shall cease.
2. The income derived from the bonds shall be subject to all Federal taxes, how
or hereafter imposed. The bonds shall be subject to estate, inheritance, gift or
other excise taxes, whether Federal or State, but shall be exempt from all taxation
now or hereafter imposed on the principal or interest thereof by any State, or any
of the possessions of the United States, or by any local taxing authority.
3. The bonds will"not be acceptable to secure deposits of public moneys before
April 15, 1953; they will not bear the circulation privilege, and they will not be
entitled to any privilege of conversion.
4. Bearer bonds with interest coupons attached, and bonds registered as to
principal and interest, will be issued in denominations of $500, $1,000, $5,000,
$10,000, $100,000 and $1,000,000. Provision will be made for the interchange of
bonds of different denominations and of coupon and registered bonds, and for the
transfer of registered bonds, under rules and regulations prescribed by the Secretary
of the Treasury, except that they may not, before April 15, 1953, be transferred to
or be held by commercial banks, which are defined for this purpose as banks accepting demand deposits. However, the bonds may be pledged as collateral for loans,
including loans by commercial banks, but any such bank acquiring such bonds
before April 15, 1953, because of the failure of such loans to be paid at maturity
will be required .to dispose of them in the same manner as they dispose of other
assets not eligible to be owned by banks.
"
5. Any bonds issued hereunder which upon the death of the owner constitute
part of his estate, will be redeemed at the option of the duly constituted representatives of the deceased owner's estate, at par and accrued interest to date of
payment 1 * * *
1 Omitted portion similar to corresponding section of Department Circular No. 692, p. 291.




o320

REPORT OF THE SECRETARY OF THE TREASURY
III. SUBSCRIPTION AND ALLOTMENT

1. Subscriptions will be received at the Federal Reserve Banks and branches
and at the Treasury Department, Washington. Banking institutions generally
may submit subscriptions for account of customers, but only the Federal Reserve
Banks and the Treasury Departrnent are authorized to act as official agencies.
Subscriptions must be accomj^anied by payment in full for the amount of bonds
applied for. i * * *
\N. PAYMENT

. 1. Payment at par and accrued interest, if any, for bonds allotted hereunder
must be made on or before April 15, 1943, or on later allotment. One day's
accrued interest is $0.06868 per $1,000. Any qualified depositary will be permitted to'make payment by credit for bonds allotted to its customers up-^to any
amount for which it shall be qualified in excess of existing deposits, when so notified by^he Federal Reserve Bank of its district.
V. GENERAL PROVISIONS

. 1. As fiscal agents of the United States, Federal Reserve Banks are authorized
and requested to receive subscriptions i * * *.
HENRY MORGENTHAU,

Jr.,

Secretary of ihe Treasury.
[Treasury bonds of 1950-52. Department Circular No. 709. Public Debt!
TREASURY

DEPARTMENT,

Washington, April 12, 1943.
I. OFFERING OF BONDS

1. The Secretary of the Treasury, pursuant to the authority of the Second
Liberty Bond Act, as amended, invites subscriptions, at par and accrued interest,
from the people of the United States for bonds of the United States, designated
2 percent Treasury bonds of 1950-52. The amount of tlie offering is not specifically limited, although allotments to commercial banks, which are defined for
this purpose as banks accepting demand deposits, for their own account will be
limited to $2,000,000,000, or thereabouts. The books will be open today and
until further notice for the receipt of subscriptions from others than commercial
banks for their own account, and on April 28, April29, and April'30 for the receipt
of subscriptions from commercial banks for their own account.
II. DESCRIPTION OF BONDS

1. The bonds will be dated April 15, 1943, and will bear interest from that
date at the rate of 2 per cent, per annum, payable on a semiannual basis on September 15, 1943, and thereafter on March 15 and September 15 in each year until
the principal amount becomes payable. They will mature September 15, 1952,
but may be redeemed at the option of the United States on and after September
15, 1950, in whole or in part, at par and accrued interest, on any interest day or
days, on 4 months' notice of redemption given in such manner as the Secretary of
the Treasury shall prescribe. In case of partial redemption the bonds to be
redeemed will be determined by such method as may be prescribed by the Secretary of the Treasury. From the date of redemption designated in any such notice,
interest on the bonds called for redemption shall cease.2 * * *
4. Bearer bonds with interest coupons attached, and bonds registered as to
principal and interest, will be issued in denominations of $500, $1,000, $5,000,
$10,000, $100,000 and $1,000,000. Provision will be made for the interchange
of .bonds of different denominations and of coupon and registered bonds, and
for the transfer of registered bonds, under rules and regulations prescribed by the
Secretary of the Treasury.^ .* * *
.'
r.
1 Orhitted portion similar to corresponding section of Department Circular No. 692, p. 291.
2 Omitted portion similar to corresponding section of Department Circular No. 689, p. 289.




REPORT OF THE SECRETARY OF THE TREASURY

321

III. SUBSCRIPTION AND ALLOTMENT

1. Subscriptions will be received at.the Federal.Reserye Banks,and-^brancheS'
and at the Treasury Departm'ent, Washington. Commercial banks are requested
not to buy the securities which may be allotted hereunder to others during the
period the subscription books remain open. Banking institutions generally may
submit subscriptions for account of customers, but only the Federal Reserve
Banks and the Treasury Department are authorized to act as official agencies.
Securities dealers and brokers will not be permitted to enter subscriptions for their
customers except through banking institutions. Subscriptions from commercial
banks for their own account will be received without deposit. All other sub.scriptions must be accompanied by payment in, full for the amount of bonds
applied for.
2. The Secretary of the Treasury reserves the right to reject any subscription, in
whole or in part, to allot less than the amount of bonds applied for, and to close
the books as to any or all subscriptions at any time without notice; and any action
he may take in these respects shall be final. Subject to these reservations, subscriptions for amounts up to and including $100,000 from commercial banks, and
subscriptions in any amount from all other subscribers, will be allotted in full;
subscriptions for amounts over $100,000 from commercial banks vwiU be allotted
.on an equal*percentage basis, to be publicly announced. Allotment notices will
be sent out promptly upon allotment.
IV. PAYMENT

1. Payment at par and accrued.interest, if any, for bonds allotted, hereunder to
or for the account of others than commercial banks must be made on or before
April 15, 1943, or on later allotment. Payment at par and accrued interest to
May 10, 1943, for bonds allotted hereunder to commercial banks must be made
on that date. One day's accrued interest is $0.05435 per $1,000. Any qualified
depositary will be permitted to make payment by credit for bonds allotted to it
for itself and its customers up to any amount for which it shall be qualified in
excess of existing deposits, when so notified by the Federal Reserve Bank of its
district.
,,
° V. GENERAL.PROVISIONS

1. As fiscal agents of the United States, Federal Reserve Banks are authorized
and requested to receive subscriptions 1 * * *.
HENRY MORGENTHAU,

Jr.^

Secretary.,of. the Treasjury.
[Certificates of indebtedness. Department Circular No. 710. Public Debt]
TREASURY

DEPARTMENT,

Washington, April 12, 1943.'
I. OFFERING OF CERTIFICATES.

1. The Secretary of the Treasury, pursuant to the authority of the Second
Liberty Bond Act, as amended, invites subscriptions, at par and accrued interest,
from" the people of the United States for certificates of indebtedness of the United
States, designated % percent Treasury certificates of indebtedness of Series B-1944.
The amount of the offering is not specifically limited, although allotments to
commercial banks, which are defined for this purpose as banks accepting demand
deposits, for their own account will be limited to $2,000,000,000, or thereabouts.
The books will be open today and until further notice for the receipt of subscriptions from others than commercial banks for their own account, and today,
April 13, and April 14 for the receipt of subscriptions from commercial banks for
their own account.
II. DESCRIPTION OF CERTIFICATES

'

1. The certificates will be dated April 15, 1943, and will bear interest from that
date at the rate of Y percent per annum, payable on a semiannual basis on October
s
1, 1943, and April 1, 1944. They will mature April 1, 1944, and.will not be
subject to call for redemption prior to maturity.^ * * *
4. Bearer certificates with two interest coupons attached will be issued in
denominations of $1,000, $5,000, $10,000, $100,000 and $1,000,000. The certificates will not be issued in registered form.^ * *. * .
1 Omitted portion similar to corresponding section of Department Circular No. 689, p. 289.
3 Omitted portion similar to corresponding section of Department Circular No. 693, p. 293.




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REPORT OF.THE SECRETARY OF THE TREASURY

' J

III. SUBSCRIPTION AND ALLOTMENT

1. Subscriptions will be received at the Federal Reserve Banks and branches
and at the Treasury Department, Washington. . Commercial banks are requested
not to buy the securities which may be allotted hereunder to