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Annual Report
of the
Secretary of the Treasury
on the
State of the Finances
For the Fiscal Year Ended June 30, 1956
TREASURY DEPARTMENT
DOCUMENT NO. 3203
Secretary
U N I T E D STATES GOVERNMENT P R I N T I N G OFFICE, WASHINGTON
For sale by the Superintendent of Documents, U. S. Government Printing OfRce
Washington 25, D. C. - Price 32.50
: 1957
CONTENTS
Page
Transmittal and statement by the Secretary of the Treasury
REVIEW OF FISCAL OPERATIONS
1
Summary of fiscal operations
..
Budget receipts and expenditures
,
.
Budget receipts in 1956
_.
Estimates of receipts in 1957 and 1958
Budget expenditures in 1956
.
..'
Estimates of expenditures in 1957 and 1958.
_._
Trust account and other transactions
Account of the Treasurer of the United States-_
Public debt operations and ownership of Federal securities
Public debt operations
.
Ownership of Federal securities
Corporations and certain other business-type activities of the Government.
.
.
Securities owned by the United States. Government
.
Taxation developments..
.
...
International financial and monetary developments
5
8
8
11
16
18
19
21
22
25
SO
35
37
37
50
ADMINISTRATIVE REPORTS
Management improvement program
.
Comptroller of the Currency, Bureau of the
Customs, Bureau of
Engraving and Printing, Bureau of
Fiscal Service
Internal Revenue Service
^
.
International Finance, Office of
Mint, Bureau ofthe
Narcotics, Bureau of
Production and Defense Lending, Office of
United States Coast Guard
United States Savings Bonds Division
United States Secret Service
'
.
.
^
.
63
66
6985
93
121
129
131
134
137
140
157
159
EXHIBITS
PUBLIC DEBT OPERATIONS
Offerings and Allotments of Treasury Certificates of Indebtedness, Treasury
Notes, and Treasury Bonds, and a Call for Redemption of Treasury Bonds
1.
2.
3.
4.
Treasury certificates of indebtedness
^
.
Treasury notes
:
Treasury bonds
Call, May 14, 1956, for redemption on September 15, 1956, of 2 ^
percent Treasury bonds of 1956-59, dated September 15, 1936
167
173
177
180
Treasury bills
5. Tenders for Treasury bills invited and accepted
180
Guaranteed obligations calls
6. Calls for partial redemption, before maturity, of insurance fund
debentures _ . _ _ . . . . . . . . _ _ . _ . _ _ . , _ _ ^
^^_.^.^_.,
^,^,
186
IV
CONTENTS
TAXATION DEVELOPMENTS
Page
7. Statement by Secretary of the Treasury Humphrey, February 14,
1956, before the House Committee on Ways and Means on the
problem of financing the highway program
8. Statement by Secretary of the Treasury Humphrey, May 17, 1956,
before the Senate Finance Committee in general support of the
highway program
9. Letter of Secretary of the Treasury Humphrey, March 6, 1956, to
the Chairman of the House Committee on Interstate and Foreign
Commerce, concerning the opposition of the Treasury to the tax
deduction under H. R. 9065 for employee contributions to the
railroad retirement fund
.
10. Letter of Secretary of the Treasury Humphrey, AJ^arch 15, 1956, to
the Chairman of the House Committee on Interstate and Foreign
Commerce, urging the committee to act unfavorably on H. R. 9065
to amend the Railroad Retirement Act
11. Statement by Dan T. Smith, Special Assistant to the Secretary of
the Treasury in Charge of Tax PoHcy, July 3, 1956, before the
House Committee on Ways and Means, on H. R. 10578 and H. R.
11764 to amend the Railroad Retirement Act
12. Letter of Secretary of the Treasury Humphrey, March 26, 1956, to the
Chairman of the Senate Finance Committee on H. R. 7225 to
provide important changes in the social security program
13. Statem.ent by Dan T. Smith, Special Assistant to the Secretary of
the Treasury in Charge of Tax Policy, October 4, 1955, before the
Subcommittee on Excise Tax Technical and Administrative Problenis of the House Committee on Ways and Means
14. Announcement by the Treasury Department of an agreement negotiated with the French Ministry of Finance and Econom.ic Affairs
concerning the application of French turnover taxes to license fees received by American owners of patents, copyrights, etc., licensed for
use in France (memorandum to the Press, February 14, 1956)
15. Miscellaneous revenue legislation enacted by the Eighty-fourth Congress, Second Session
190
192
197
197
198
200
201
.205
205
INTERNATIONAL FINANCIAL AND MONETARY DEVELOPMENTS
16. Statement by Secretary of the Treasury Humphrey, March 2, 1956,
before the House Ways and Means Committee
.
209
17. Letter of Secretary of the Treasury Humphrey, July 27, 1956, to the
Chairman of the House Ways and Means Committee on proposed
legislation imposing a processing tax on certain watch movements..
210
18. Remarks by Secretary of the Treasury Humphrey as Governor for the
United States, September 24, 1956, at the opening joint session of the
Boards of Governors of the International Bank for Reconstruction
and Development and the International Monetary Fund, Washington, D. C
..
210
19. Statement by Under Secretary of the Treasury Burgess as Temporary
Alternate Governor for the United States, September 26, 1956, at
the discussion of the Annual Report of the International Monetary
Fund
.
212
20. Remarks by Assistant Secretary of the Treasury Overby as Temporary Alternate Governor for the United States, September 24, 1956,
at the inaugural meeting of the Board of Governors of the Inter-^
national Finance Corporation, Washington, D. C
'.-213
21. Statement by Assistant Secretary of the Treasury Overby as Executive
Director of the International Bank for Reconstruction and Development, June 22, 1956, before the Subcommittee on International
Organizations and Movements of the House Foreign Affairs Committee
214
22. Extract from remarks by Assistant Secretary of the Treasury KendaH, . .
March 7, 1956, at the International Trade Conference, Pittsburgh,
Pa
:
...
216
23. Press release, December 2, 1955, on the signing of a new Stabilization
Agreement between the United States and Mexico^.^._^-^-^.,^^.
220
CONTENTS
V
Page
24. Press release, February 16, 1956, on the signing of an extension of the
Stabilization Agreement between the United States and Peru
25. Press release, April 26, 1956, on the signing of an exchange agreement
between the United States and Chile
220
220
ADDRESSES AND S ATEMENTS ON GENERAL FISCAL AND OTHER
POLICIES
26. Remarks by Secretary of the Treasury Humphrey, November 17, 1955,
before the American Petroleum Institute, San Francisco, Calif
'.
221
27. Remarks by Secretary of the Treasury Humphrey, November 19, 1955,
before the National Grange, Cleveland, Ohio
225
28. Excerpts from remarks by Secretary of the Treasury Humphrey,
December 7, 1955, before the Mercantile Trust Company, St.
Louis, Mo
231
29. Extracts from remarks by Secretary of the Treasury Humphrey,
February 1, 1956, before the Junior Achievement Conference,
Washington, D. C
231
30. Statement by Secretary of the Treasury Humphrey, February 3, 1956,
before the Joint Committee on the Economic Report
232
31. Remarks by Secretary of the Treasury Humphrey, February 22, 1956,
upon receiving an award of the American Good Government Society,
via telephone from New York, N. Y
233
32. Remarks by Secretary of the Treasury Humphrey, February 22, 1956,
upon receiving a certificate of honorary membership in the Institute
of Mining and Metallurgical Engineers, New York, N. Y
^..^_
234
33. Remarks by Secretary of the Treasury Humphrey, April 17, 1956,
before the House Post Office and Civil Service Committee
235
34. Letter and joint statements from Secretary of the Treasury Humphrey
and Budget Director Brundage on budget receipts, expenditures,
and estimates
236
35. Remarks by Secretary of the Treasury Humphrey, May 27, 1956,
before members of the Press Club, Washington, D. C
240
36. Statement by Secretary of the Treasury Humphrey, June 19, 1956,
before the House Ways and Means Committee
245
37. Statement by Under Secretary of the Treasury Burgess, November 28,
1956, before the Subcommittee on Housing of the Senate Banking
and Currency Committee
• 245
38. Statement by Under Secretary of the Treasury Burgess, February 27,
1956, before the House Committee on Banking and Currency
246
39. Remarks by Under Secretary of the Treasury Burgess, April 25, 1956,
in presenting a medal to the American Newspaper Publishers
Association, NewYork, N. Y
.
247
40. Remarks by Under Secretary of the Treasury Burgess, May 8, 1956,
before the National Association of Mutual Savings Banks, Washington, D. C
248
41. Remarks by Under Secretary of the Treasury Burgess, May 10, 1956,
at Rutgers University, New Brunswick, N. J
250
42. Statement by Under Secretary of the Treasury Burgess, June 7, 1956,
before the Subcommittee on Executive and Legislative Reorganization of the House Committee on Government Operations
•.
252
43. Extract from remarks by Assistant Secretary of the Treasury Kendall,
October 27, 1955, before the United States Customs Service, Detroit,
Michigan
>
'...
254
44. Statement by General Counsel of the Treasury Scribner, June 20, 1956,
before the Subcommittee on Government Information of the House
Committee on Government Operations
255
ORGANIZATION AND PROCEDURE
45. Treasury Department orders relating to organization and procedure
257
VI
CONTENTS
REPORTING AND ACCOUNTING CHANGES
Paere
46. Instructions governing the furnishing of information to the Treasury
of estimated collections of foreign currencies and estimated needs
of agencies for the currencies (Department Circular No. 967,
August 24, 1955)..
47. Regulations relating to the submission of business-type financial
statements by Government corporations and certain unincorporated
agencies (Department Circular No. 966, January 30, 1956, and
Supplement No. 1, June 1, 1956)
48. Regulations governing the handling of certificates of deposit for credit
in the general account of the Treasurer of the United States (Department Circular No. 945, Supplement 1, May 3, 1955)
49. Regulations concerning certain procedures for the transition from
funded checking accounts to accounts for cash transactions (Department Circular No. 945, Supplement 2, May 3, 1955)
50. Regulations concerning the establishment of a transfer between appropriations or other accounts including, where applicable, the
funding of checking accounts for the issuance and payment of checks
drawn on the Treasurer of the United States (Department Circular
' No. 945, Supplement 3, May 19, 1955)
51. Regulations governing the fiscal year closing of the Treasury's central
accounts for the Government cash operations (Department Circular
No. 945, Revised, Supplements 4 and 5, March 13, and May 14,1956).
52. Regulations governing the disposition of cash gifts, donations, and
contributions received by the Treasury Department (Department
Circular No. 865, Second Revision April 27, 1956)
53. Compilation of general requirements in various existing regulations
on the integration of Treasury-agency accounting data transmitted
to departments and agencies on June 4, 1956
54. Statement relating to the preparation of the Combined Statement
(Department Circular No. 965, Revised July 3, 1956)
..__
272
273
275
284
288
290
292
293
297
MISCELLANEOUS
55. Regulations covering the purchase of surety bonds to cover civilian
officers and employees and military personnel of the executive
branch of the Government (Department Circular No. 969, Novem. ber 1, 1955)
56. Principal provisions of law relating to the acquisition and use of foreign
currencies by the Uhited States Government since enactment of the
basic control provisions contained in Section 1415 of the Supplemental Appropriation Act, 1953
57. Circular from Secretary of the Treasury Humphrey, October 24, 1955,
to heads of Treasury Department bureaus requesting additional
economies
58. Letter of the Postmaster General to the Secretary of the Treasury
certifying extraordinary expenditures contributing to the deficiencies
of postal revenue for the fiscal year 1956
299
304
306
307
TABLES
Bases of tables
Description of accounts relating to cash operations
311
313
SUMMARY OF FISCAL OPERATIONS
1. Summary of fiscal operations, fiscal years 1932-56 and monthly 1956.
316
RECEIPTS AND EXPENDITURES
2. Receipts and expenditures, fiscal years 1789-1956
3. Budget receipts and expenditures, monthly for fiscal year 1956 and
totals for 1955 and 1956
._._
4. Public enterprise (revolving) funds, fiscal years 1955 and 1956
5. Trust account and other transactions, monthly for the fiscal year
1956 and totals for 1955 and 1956
318
324
350
352
CONTENTS
VII
Page
6. Budget receipts and expenditures by major classifications, fiscal
years 1949-56
7. Trust account and other transactions by major classifications, fiscal
years 1948-56.
8. Budget receipts and expenditures, based on existing and proposed
legislation, actual for the fiscal year 1956 and estimated for 1957
and 1958
.
9. Trust account and other transactions, actual for the fiscal year 1956
and estimated for 1957 and 1958
10. Effect of financial operations on the public debt, actual for the fiscal
year 1956 and estimated for 1957 and 1958
11. Internal revenue collections by ta^ sources, fiscal years 1929-56
12. Customs collections and refunds, fiscal years 1955. and 1956
13. Postal receipts and expenditures, fiscal years 1911-56
14. Deposits by the Federal Reserve Banks representing interest charges
on Federal Reserve notes, fiscal years 1947-56
15. Cash income and outgo, fiscal years 1948-56
364
367
369
372
373
374
380
381
382
383
PUBLIC DEBT. GUARANTEED OBLIGATIONS, ETC.
I.—Outstanding
16.
17.
18.
19.
20.
21.
22.
23.
24.
25.
26.
27.
Principal of the public debt, 1790-1956
Public debt and guaranteed obligations outstanding June 30, 1934r-56_
Public debt outstandihg by security classes, June 30, 1946-56
Guaranteed obligations held outside the Treasury classified by
issuing Government corporations and other business-type activities,
June SO, 1946-56
Maturity distribution of marketable, interest-bearing public debt
and guaranteed obligations, June 30, 1946-56
Summary of public debt and guaranteed obligations by security
classes, June 30, 1956—-.
.
Description of public debt issues outstanding June 30, 1956
Description of guaranteed obligations held outside the Treasury, June
30, 1956
•
^
Postal Savings Systems' deposits and Federal Reserve notes outstanding June 30, 1946-56
Description of Postal Savings Systems' deposits and Federal Reserve
notes outstanding June 30, 1956
.
Statutory limitation on the public debt and guaranteed obligations,
JuneSO, 1956
Debt outstanding subject to statutory debt limitation as of selected
dates
.,
391
393
394
396
397
398
399
414
416
417
418
419
II.—Operations
28. Public debt receipts and expenditures by security classes, monthly
for fiscal year 1956 and totals for 1955 and 1956
.
-._
29. Changes in public debt issues, fiscal year 1956
1
30. Issues, maturities, and redemptions of interest-bearing public debt
securities, excluding special issues, July 1955-June 1956
31. Public debt increases and decreases, and balances in the account of the
Treasurer of the U. S., fiscal years 1916-56
_..
32. Statutory debt retirements, fiscal years 1918-56
,
33. Cumulative sinking fund, fiscal years 1921-56
34. Transactions on account of the cumulative sinking fund, fiscal year
1956
420
428
447
466
467
468
468
III.—United States savings bonds and Treasury savings notes
35. Summary of sales and redemptions of savings bonds by series, fiscal
years 1935-56 and monthly 1956
36. Sales and redemptions of Series E through K savings bonds by series,
fiscal years 1941-56 and monthly 1956
469
470
VIII
CONTENTS
Page
37. Sales of Series E through K savings bonds by denominations, fiscal
years 1941-56 a n d monthly 1956
38. Redemption of Series E through K savings bonds by denominations,
fiscal, years 1941-56 and monthly 1 9 5 6 . . .
39. Sales of Series E a n d H savings bonds b y States, fiscal years 1955,
1956, a n d cumulative
...
40. Percent of savings bonds sold in each year redeemed through each
yearly period thereafter, by denominations
41. Sales and redemptions of Treasurv savings notes, August 1941-June
1956
:
474
477
479
480
486
IV.—Interest
42. Amount of interest-bearing public debt outstanding, t h e computed
annual interest charge, and t h e computed rate of interest, J u n e 30,
1916-56, a n d a t end of each m o n t h during 1956
43. C o m p u t e d annual interest rate a n d computed annual interest charge
on the public debt by security classes, June SO, 1939-56
44. Interest pavable on t h e public debt b y security classes, fiscal years
1953-56.1
_^
45. Interest paid on t h e public debt a n d guaranteed obligations, fiscal
years 1940-56, classified b y t a x status
.
487
488
490
491
V.—Prices a n d yields of securities
46. Average yields of long-term Treasury bonds b y months, J a n u a r y
1930-June 1956
.
47. Prices a n d yields of marketable public debt issues, June 30, 1955 a n d
1956, a n d price range since first t r a d e d .
492
494
VI.—Ownership of governmental securities
48. E s t i m a t e d ownership of interest-bearing governmental securities
outstanding J u n e 30, 1941-56, classified by t y p e of issuer
49. E s t i m a t e d distribution of interest-bearing governmental securities
outstanding J u n e 30, 1941-56, classified b y tax s t a t u s a n d t y p e
of issuer
50. S u m m a r y of Treasury survey of ownership of interest-bearing public
debt a n d guaranteed obligations, J u n e 30, 1955 a n d 1956
496
498
500
ASSETS AND LIABILITIES IN THE ACCOUNT OF] THE TREASURER OF
T H E UNITED ^STATES
51. Assets a n d liabilities in t h e account of t h e Treasurer of t h e United
States, J u n e 30, 1955land 1956
502
TRUST FUNDS AND CERTAIN OTHER ACCOUNTS OF THE
FEDERAL GOVERNMENT
52. Holdings of Federal securities b y Government agencies a n d accounts,
a t p a r value, J u n e 30, 1946-56
.
53. A d j u s t e d service certificate fund, J u n e 30, 1956
54. Ainsworth Library fund, Walter Reed General Hospital, J u n e 30,
1956
55. Civil service retirement a n d disability fund, J u n e 30, 1956
56. District of Columbia teachers' retirement a n d a n n u i t y fund, J u n e
30, 1956
57. District of Columbia funds—Investments as of June SO, 1956
58. Relief a n d rehabilitation. Workmen's Compensation Act, within t h e
District of Columbia, J u n e SO, 1956
.
59. Federal old-age a n d survivors insurance t r u s t fund, J u n e 30, 1956_60. Foreign service retirement a n d disability fund, J u n e 30, 1956
61. Library of Congress t r u s t funds, J u n e 30, 1956
62. Relief a n d rehabilitation. Longshoremen's a n d H a r b o r Workers' Compensation Act, J u n e 30, 1956
..
.^.,..,,,,.
^
504
507
508
509
510
511
512
513
514
515
517
CONTENTS
63.
64.
65.
66.
67.
68.
69.
70.
71.
72.
73.
National Archives trust fund, June 30, 1956
National park trust fund, June 30, 1956
National service life insurance fund, June 30, 1956
'
Pershing HaH Memorial fund, June 30, 1956
_.
Public Health Service gift funds, JuneSO, 1956
Railroad retirement account, June 30, 1956
Unemployment trust fund, June 30, 1956
U. S. Government life insurance fund, June 30, 1956
.
U. S. Naval Academy general gift fund, June 30, 1956
Payment of pre-1934 bonds of the Philippines, June SO, 1956..
Status of the loan program under the Refugee Relief Act of 1953,
through June 30, 1956
.
74. Status of Colorado River Dam fund, Boulder Canyon Project, by operating years ending May 31, 1933 through 1956
IX
Page
518
518
519
520
520
521
522
527
528
528
529
530
SECURITIES OWNED BY THE UNITED STATES GOVERNMENT
75. Securities owned by the United States Government (other than
World War I and World War II foreign government obligations),
June 30, 1956, and changes during 1956
531
STOCK AND CIRCULATION OF MONEY IN THE UNITED STATES
76. Stock of money, money in the Treasury, in the Federal Reserve Banks,
and in circulation, by kinds, June 30, 1956
77. Stock of money, money in the Treasury, in the Federal Reserve
Banks, and in circulation, June 30, 1913-56.
78. Stock of money, by kinds, June SO, 1913-56
79. Money in circulation, by kinds, June 30, .1913-56..
-.
80. Location of gold, silver bullion at monetary value, and coin held by
the Treasury on June 30, 1956
81. Paper currency issued and redeemed during the fiscal year 1956, and
outstanding June SO, 1956, by classes and denominations
.
538
540
542
543
544
544
CUSTOMS STATISTICS
82. Summary of customs collections and expenditures^ fiscal year 1956. _
83. Customs collections and payments, by districts, fiscal year 1956
84. Value of dutiable and taxable imports for consumption and estimated
duties and taxes collected by tariff schedules, fiscal years 1955 and
1956
-_
85. Value of dutiable imports and amounts of duties collected at specific,
ad valorem, and compound rates, fiscal years 1941-56
__.
86. Estimated customs duties, value of imports entered for consumption, and ratio of duties to value of dutiable imports and to value
of all imports, calendar years 1945-55 and monthly January 1955June 1956
87. Estimated customs duties, value of dutiable imports, and ratio of
estimated duties to value of dutiable imports, by tariff schedules,
calendar years 1945-55 and monthly January 1955-June 1956
88. Value of dutiable imports for consumption and estimated duties
collected by countries, fiscal years 1955 and 1956
89. Merchandise entries by number, fiscal years 1955 and 1956
90. Vehicles and persons entering the United States by number, fiscal
years 1955 and 1956
-_-_
.91. Aircraft and aircraft passengers entering the United States by number, fiscal years 1955 and 1956..
92. Drawback transactions, fiscal years 1955 and 1956
93. Principal commodities on which drawback was paid, fiscal years
1955 and 1956
94. Seizures for violations of customs laws, fiscal years 1955 and 1956_»
95. Seizures for violations of customs laws, classified according to agencies
participating, fiscal year 1956
96. Investigative and patrol activities, fiscal years 1955 and 1956__
545
546
548
549
550
551
555
556
557
557
558
558
559
560
560
X
CONTENTS
FEDERAL AID TO STATES
Page
97. Expenditures for Federal aid to States, individuals, etc., fiscal years
1930, 1940, 1950, and 1956
_!
98. Expenditures made by the Government as direct payments to States
under cooperative arrangements and expenditures within States
which provided relief and other aid, fiscal year 1956
561
568
GOVERNMENT LOSSES IN SHIPMENT
99. Government losses in shipment revolving fund
583
INTERNATIONAL CLAIMS
100. Mexican claims fund as of June SO, 1956
101. Awards ofthe Mixed Claims Commission, United States and Germany, certified to the Secretary of the Treasury by the Secretary of
State, through June 30, 1956
.
5.85
586
GOLD AND CURRENCY TRANSACTIONS AND FOREIGN GOLD AND
DOLLAR HOLDINGS
102. United States net gold transactions with foreign countries and international institutions, fiscal years 1952-56
103. Estimated gold reserves and dollar holdings of foreign countries as
of June 30, 1955 and 1956
_._.i
104. Assets and liabilities of the exchange stabilization fund as of June
30, 1955 and 1956.
.
.^
..
105. Summary of receipts, withdrawals, and balances of foreign currencies
acquired by the United States, principally under intergovernmental agreements, without purchase with dollars, fiscal year 1956.
106. Receipts, withdrawals, and balances of foreign currencies acquired by
the United States, principally under intergovernmental agreements, without purchase with dollars, by type of currency and
disposition, fiscal year 1956
107. Receipts, withdrawals, and balances of foreign currencies acquired
by the United States, principally under intergovernmental agreements, without purchase with dollars, by source and disposition of
currency, fiscal year 1956
:
588
589
591
593
594
600
INDEBTEDNESS OF FOREIGN GOVERNMENTS
108. Indebtedness of foreign governments to the United States arising
from World War I, and payments thereon as of June 30, 1956
109. World War I indebtedness of Germany to the United States and
amounts paid and not paid as of June 30, 1956
110. Summary of amounts billed, collected, and balances due the United
States under lend-lease and surplus property agreements (World
War II) as of June SO, 1956_-,_.
.
111. Outstanding indebtedness of foreign countries on United States Government credits as of June 30, 1956, by area, country, and type
604
605
606
609
CORPORATIONS AND CERTAIN OTHER BUSINESS-TYPE ACTIVITIES
OF T H E UNITED STATES GOVERNMENT
112. Borrowing power and outstanding issues of Government corporations
and certain other business-type activities whose obligations are
guaranteed by the United States or issued to the Secretary of the
Treasury, June 30, 1956
113. Comparative statement of obligations of Government corporations
and certain other business-type activities held by the Treasury,
JuneSO, 1946-56
------114. Description of obligations of Government corporations and certain
other business-type activities held by the Treasury, June 30, 1956.
115. Change in Treasury holdings of obligations of Government corporations and certain other business-type activities, fiscal year 19,56-_
611
613
614
618
CONTENTS
XI
Page
116. Comparative statements of the assets, liabilities, and capital of
ks^a &^k Government corporations and certain other business-type activities. .
JuneSO, 1947-56
.
1 620
117. Statements of financial condition of Government corporations and
certain other business-type activities, June SO, 1956
.-622
118. Income and expense of Government corporations and certain other
business-type activities, fiscal year 1956
660
119. Source and application of funds of Government corporations and
certain other business-type activities, fiscal year 1956
690
120. Restoration of amounts of capital impairment of the Commodity
Credit Corporation through June SO, 1956
:
721
121. Reconstruction Finance Corporation notes canceled and cash recoveries made through June 30, 1956. ^
722
122. Dividends, interest, and similar payments received by the Treasury
from Government corporations and certain other business-type
activities, fiscal year 1956
723
PERSONNEL
123. Number of employees in the departmental and field. services of the
Treasury Department quarterly from June 30, 1955, to June SO,
1956
.:
____:_....._-_l'
INDEX
.
.
.
724
725
NOTE
In tables where figures have been rounded to a specified unit and where calculations have been made from unrounded figures, the details may not check to the
totals shown.
\
SECRETARY, UNDER SECRETARIES, AND ASSISTANT SECRETARIES
OF THE TREASURY DEPARTMENT FROM JANUARY 21, 1953, TO
NOVEMBER 15, 1956 i
Term of service
From
Official
To
Secretary of the Treasury
George M. Humphrey, Ohio.
Jan. 21,1953
Under Secretaries 2
Jan. 28, 1953
Aug. Si 1954
-Aug. 3, 1955
July 31, 1955
Jan. 21, 1953
Aug. 2, 1954
Jan. 31, 1956
Marion B. Folsom, New York.
W. Randolph Burgess, Maryland.
H. Chapman Rose, Ohio.
Deputy to ihe Secretary
W. Randolph Burgess, New York.
Assistant Secretaries 2
Jan.
Jan.
Sept
Aug.
24,
28,
20,
3,
1952
1953
1954
1955
Aug. 2, 1955
Andrew N. Overby, District of Columbia.
H. Chapman Rose, Ohio.
Laurence B. Robbins, Illinois.
David W. Kendall, Michigan.
Fiscal Assistant Secretaries
Mar. 16, 1945
June 19. 1955
June 17, 1955
Edward F. Bartelt, Ihinois.
William T. Heffelfinger, District of Columbia.
Administrative Assistant Secretary
Aug. 2, 1950
William W. Parsons, California.
1 For officials from September 11,1789, through January 20,1953, see exhibit 55, p. 314, in the 1953 annual
report.
2 The positions of an additional Under Secretary and an additional Assistant Secretary were established
under the provisions of Public Law 516, 83d Congress, approved July 22,1954.
PRINCIPAL ADMINISTRATIVE AND STAFlF OFFICERS OF THE TREASURY
DEPARTMENT AS OF NOVEMBER 15, 1956
SECRETARY
GEORGE, M. H U M P H R E Y
W. Randolph Burgess
Andrew N. Overby
Laurence B. Robbins
Harold T. Mason
Robert C. Maxwell
William T. Heffelfinger
Martin L. Moore
Hampton A. Rabon, Jr
Boyd A. Evans
Frank F . Dietrich
George F . Stickney
George B. Kneass
.
Frank A. Southard, Jr
Vacancy
.,
David W. Kendall
James P. Hendrick
John D. Lathem
Undersecretary.
Assistant Secretary.
___ Assistant Secretary.
Assistant to the Assistant Secretary.
Assistant to the Assistant Secretary.
Fiscal Assistant Secretary.
Assistant to the liscal Assistant Secretary.
Technical Assistant to the Fiscal Assistant Secretary.
___
_ Technical Assistant to the Fiscal Assistant Secretary.
Technical Assistant to the Fiscal Assistant Secretary.
Head, Fiscal Service Operations and Methods Staff.
Assistant to the Secretary.
Special Assistant to the Secretary.
Under Secretary.
Assistant Secretary.
Assistant to the Secretary.
Technical Assistant to the Secretary for Enforcement
(Acting).
Robert D. Hartshomc, Jr..
Assistant to the Assistant Secretary.
Elmer T. Acken
_.. Assistant to the Assistant Secretary.
Captain Q. R. Walsh, U. S. C. G
Aide to the Assistant Secretary.
William W. Parsons
_.
Administrative Assistant Secretary.
Paul McDonald
Director of Administrative Services.
John D. Larson
Assistant Director of Administrative Services.
Willard L. Johnson
Budget Officer.
Howard M. Nelson
Assistant Budget Officer.
S.T.Adams
Director of Personnel.
Nils A. Lennartson
'.
Assistant to the Secretary (for public affairs).
John .P. Weitzel
Assistant to the Under Secretary.
Fred C. Scribner, Jr
___
General Counsel.
Francis J. Gafford
Assistant to the Secretary and Personnel Security Officer.
Dan Throop Smith.:
Special Assistant to the Secretary.
^ Russell E. Train
._
Assistant to the Secretary and Head, Legal Advisory Staff.
Douglas H. Eldridge
Chief, Tax Division, Analysis Staff (Acting).
Robert P . Mayo
Chief, Debt Division, Analysis Stafl.
Fred C. Scribner, Jr
Elting Arnold
John K. Carlock
Charles R. McNeill.
John Potts Barnes
Russell E. Train
Raphael Sherfy.__
Frederick C. Lusk-_
Edward C. Rustigan.
Hugo A. R a n t a . . .
Lawrence Linville.._
Kenneth S. Harrison
Trevor V. Roberts
.
Robert Chambers
Edwin F . R a i n s . . .
John Potts Barnes
Elting Arnold
Alfred L. Tennyson
Thomas J. Winston, Jr
George F . Reeves
OFFICE OF T H E GENERAL COUNSEL
General Counsel.
Assistant General Counsel.
Assistant General Counsel.
Assistant General Counsel.
Assistant General Coimsel.
_._
_ Head, Legal Advisory Stafl (Assistant to the Secretary).
Associate Head, Legal Advisory Stafl.
Assistant Head, Legal Advisory Stafl.
__
Assistant Head, Legal Advisory Stafl.
Assistant to the General Counsel.
_
_
Special Assistant to the General Counsel.
Chief Counsel, U. S. Coast Guard.
Chief Counsel, Office of the Comptroller of the Currency.
1
Chief Counsel, Bureau of Customs.
Chief Counsel, Foreign Assets Control.
Chief Counsel, Internal Revenue Service.
Chief Counsel, Office of Intemational Finance.
Chief Counsel, Bureau of Narcotics.
Chief Counsel, Bureau of the Public Debt.
Chief Counsel to the Fiscal Assistant Secretary.
OFFICE OF INTERNATIONAL FINANCE
George H. Willis
_
Director.
Charles Dillon Glendinning
Deputy Director and Secretary, National Advisory Council.
Elting Arnold
Acting Director, Foreign Assets Control.
OFFICE OF THE COMPTROLLER OF THE CURRENCY
Ray M. Gidney
L. A. Jennings
W.M.Taylor
G. W. Garwood
H. S. Haggard.
^
Comptroller of the Currency.
First Deputy Comptroller ofthe Currency.
.._ Second Deputy Comptroller of the Currency.
Third Deputy Comptroller ofthe Currency.
Chief National Bank Examiner.
XIII
XrV
PRINCIPAL ADMINISTRATIVE AND STAFF OFFICERS
BUREAU OF CUSTOMS
Commissioner of Customs.
Assistant Commissioiier of Customs.
Special Assistant to the Commissioner.
Deputy Commissioner of Appraisement Administration.
Deputy Commissioner of Investigations.
. . . Deputy Commissioner of Management and Controls.
Chief, Division of Entry, Value and Penalties.
Chief, Division of Classification and Drawbacks.
. . . . Chief, Division of Marine Administration.
.:
Chief, Division'of.Technical Services.
Ralph Kelly...David B. Strubinger
Vacancy
WalterG. Roy
"
C. A. Emerick
Lawton M. King
B . H . Flinn
W. E. Higman
J, W. Gulick
George Vlases, Jr
'
Henry J. Holtzclaw
BUREAU OF ENGRAVING AND P R I N T I N G ,.
Director, Bureau of Engraving and Printing.
BUREAU OF ACCOUNTS (IN T H E FISCAL SERVICE)
Robert W. Maxwell-J
Commissioner of Accounts.
Gilbert L. Cake
Associate Commissioner.
Harold R. Gearhart
Deputy Commissioner—Central Accounts.
Sidney S. Sokol
Deputy Commissioner—Accounting Systems.
Samuel J. Elson
._
Deputy Commissioner—Central Reports.
Edmund C. Nussear.
Deputy Commissioner—Deposits and Investments.
Wallace E, Barker, Jr
Assistant Commissioner for Administration.
Harold A. Ball
Chief Auditor.
Julian F. Cannon
Chief Disbursing Officer.
Charles 0 . Bryant
Assistant Chief Disbursing Officer.
Maurace E. Roebuck
Assistant Chief Disbursing Officer.
George Friedman
Technical Assistant to the Commissioner.
Stephen P. Gerardi
Executive Assistant to the Commissioner.
BUREAU OF T H E PUBLIC D E B T (IN T H E FISCAL SERVICE)
Edwin L. Kilby
Commissioner of the Public Debt.
Donald M. Merritt
.
Assistant Commissioner.
Ross A. Heffelfinger, Jr
Deputy Commissioner in.Charge, Washington Office.
Charles D, Peyton
Deputy Commissioner in Charge, Chicago Office.
OFFICE OF T H E TREASURER OF T H E U N I T E D STATES (IN T H E FISCAL SERVICE)
Ivy Baker Priest
Treasurer ofthe United States.
Edmund Doolan
Deputy and Acting Treasurer.
William T. Howell
_
Assistant Deputy Treasurer.
Russell C. Harrington
0. Gordon Delk
Gray W. Hume, Jr
Harry J. Trainor
Clifford W. Stowe
Richard W. Nelson
Justin F. Winkle
Leo Speer
John Potts Barnes
George C. Lea
William H. Brett
Leland Howard
Harry J. Anslinger
George W. Cunningham...
Hem-y L. Giordano...
I N T E R N A L REVENUE SERVICE
Commissioner of Internal Revenue.
Deputy Commissioner.
Acting Assistant Commissioner (Admmistration).
.
Assistant Commissioner (Inspection).
_
Assistant Commissioner (Operations).
^
Assistant to the Commissioner.
Assistant Commissioner (Technical).
Technical Advisor to the Commissioner.
_ Chief Counsel.
Director of Practice.
BUREAU OF T H E M I N T
:. Director of the Mint.
Assistant Director.
BUREAU OF NARCOTICS
Commissioner of Narcotics.
Deputy Commissioner.
Assistant Deputy Commissioner.
OFFICE OF PRODUCTION AND D E F E N S E L E N D I N G
Lam*ence B. Bobbins.
-Assistant Secretary ofthe Treasury.
Matthias W. Knarr
Secretary of Federal Facilities Corporation and Reconstruction Finance Corporation (liquidating).
Milnor 0 . HoeLDirector of Loans, Defense Lending Division.
U N I T E D STATES COAST GUARD
Vice Admiral Alfred C. Richmond
Commandant, U. S. Coast Guard.
Rear Admiral James A. Hu'shfield
Assistant Commandant and Chief of Staff.
Captain Stephen H. Evans
Deputy Chief of Staff.
Rear Admu-al Kenneth K. Cowart
Engineer in Chief.
Rear Admiral Henry T. Jewell
Chief, Office of Merchant Marine Safety.
Rear Admiral Frank T. Keimer
Chief, Office of Operations.
Rear Admiral William W. Kermer...
Chief, Office of Personnel.
Captain Charles B. Arrington
Comptroller.
PRINCIPAL ADMINISTRATIVE AND STAFF OFFICERS
U N I T E D STATES SAVINGS BONDS DIVISION
National Director.
Assistant National Director.
Assistant to the National Director.
._:.'
.*
Assistant to the National Director.
John R. Buckley
Bill McDonald
James J. Newman
Arthur B. Hill
U. E. Baughman
Russell Daniel
E. A. W i l d y . . . . . . .
Harry E. Neal..
George W. Taylor
.
U N I T E D STATES SECRET SERVICE
Chief, U. S. Secret Service.
Assistant Chief—Investigations.
Assistant Chief—Security.
.
Assistant Chief—Administration.
Administrative Officer.
TREASURY MANACIEMENT C O M M I T T E E
William W. Parsons
Chairman.
Gilbert L. Cake
Member.
John K. Carlock
Member.
George W. Cunningham
Member.
O. Gordon Delk
Member.
Captain Stephen H. Evans, U. S. C. G
Member.
Ross A. Heffelfinger, Jr
Member.
William T. Heffelfinger
Member.
Leland Howard
Member.
William T. Howell
Member.
L. A. Jennings
Member.
Harold T. Mason
Member.
Bill McDonald
Member.
Harry E. Neal
J
Member.
David B. Strubinger
._ Member.
Frank G. Uhler
.
Member.
TREASURY AWARDS C O M M I T T E E
James H. Stover
Chairman.
S. T. Adams
Vice Chairman.
John K. Carlock
Member.
O. Gordon Delk
_•
Member.
Captain Stephen H. Evans, U. S. C. G
Member.
Leland Howard
Member.
Willard L. Johnson
Member.
Lawton M. King
Member.
John D. Lathem
_
Member.
Martin L. Moore.-Member.
Frank G. Uhler
Member.
WAGE BOARD
- Chairman.
Member.
, Member.
S. T. Adams
William T. Heffelfinger
Willard L. Johnson
Ivy Baker Priest
I N T E R D E P A R T M E N T A L SAVINGS BOND C O M M I T T E E
i
Chairman.
E M P L O Y M E N T POLICY OFFICER
Willard E. Scott.
XV
•ORGANIZATION OF THE DEPARTMENT OF THE TREASURY*
November 30.1956
'"-?^i'-'t...^^lrt--yr
UMOCR SeCftCTMY
UNOEB SECRETAHY
-c:
>*n
ASST TO THE
IXlZZHIk^cf-:- '^7-r==r7
rrrr;
r--\'
Wlici ot Bud4i<
FOptrofhtg \
Office of Production
and Defense Le;»ding
U.S. Sovin9s
Bonds Division
Office of the
ComptroUer of
the Carrfincy
Internol Revenue
Service
Office of the
Treosurer
ofthiUS.
Bureou of
ttte Public Debt
Bureou of
Accounts
Bureau of
Engroving and
Printing
U.S.
Coost Guord
Bureou of
ine Mini
US. Secret
Service
Bureauof
Customs
BuNouol
Norcetics
CHART 1.
• 1 The General Counsel serves as legal advisor to the Secretary, his associates, and heads of bureaus.
. r r o ^ *n
^ -o
^r/-. of«rr,o -n^^-oo,, nf TMar/.nf,v<=
2 The Technical Assistant for Enforcement coordinates enforcement activities of the U. S. Secret Service, U. S. Coast Guard, Bureau of Customs, Bureau of Narcotics,
and Internal Revenue Service.
ANNUAL REPORT ON THE FINANCES
TREASURY DEPARTMENT,
Washington, D. C , January 31, 1957.
S I R S : I have the honor to report to you on the finances of the
Federal Government for the fiscal year ended June 30, 1956.
A balanced Federal budget—a major goalof the Eisenhower Administration—is now a reality. The Government not only lived within
its income in fiscal 1956 but there was better than a $ 1 ^ billion budget
surplus for debt reduction. Another balanced budget and further
surplus are in prospect for the current fiscal year and again for fiscal
1958. Their attainment will mean three surpluses in a row—for
the first time in more than 20 years.
This accomplishment was matched by monetary policies designed
and executed to help keep credit expansion within sustainable limits.
Americans are enjoying high peacetime prosperity. We have record
high employment, high wages, and high productipn. I t represents
true prosperity—for there has been little change in the cost of living
during the past four years.
The exceptional vigor of our economy, however, points to the need
for continuing self discipline and national restraint. With the economy operating at a very high rate and with shortages of materials
and manpower in many areas, we cannot do all the things we would
hke to do as fast as we would like to do them without running the
risk of serious price inflation.
On the fiscal front, we must continue to try to reduce Federal
spending and keep the budget in balance. Modest surpluses are
appropriately used for debt reduction. Important as further tax
reduction is, it should wait until the time when we can look ahead and
see a sufficient surplus of Government income over spending to pay
for a tax cut fairly spread among all our people. In this way we can
best maintain the fiscal integrity of our country and help assure the
continued soundness of our currency.
A full report on the Treasury's operations during the 1956 fiscal
year follows.
G.
M.
HUMPHREY,
Secretary oj the Treasury.
To
To
THE
THE
PRESIDENT OF THE SENATE.
SPEAKER OF THE H O U S E OF REPRESENTATIVES.
1
399346—57
2
REVIEW
OF
FISCAL
OPERATIONS
Summary of Fiscal Operations
A balanced budget, with a surplus of $1.6 billion, was achieved in
the fiscal year 1956. Both net budget receipts of $68.2 billion and
expenditures of $66.5 billion were somewhat higher than first anticipated, as was the surplus. The surplus, combined with a rise in
the balance in the accouht of the Treasurer of the United States and
an excess of receipts in trust account and other transactions, resulted
in a decrease in the public debt pf $1.6 billion. The Treasurer's
balance on June 30, 1956, amounted to $6.5 billion, The public debt
outstanding stood at $272.8 billion compared with $274.4 billion a
year earlier.
Net receipts in 1956 were $7.8 billion larger than in 1955 and $3.3
billion above those in 1953, the highest previous record. Expenditures
were $2.0 billion higher than in 1955, but $7.7 billion below those in
fiscal 1953, the largest previous expenditures in the postwar period.
Budget results and the change in the public debt are summarized
for the fiscal years 1955^ and 1956 in the following table.
Budget results:
/ Net receipts. _.
Expenditures..
Budget deficit, or surplus (—)licss:
Account of the Treasurer of the United States, increase In balance, or
decrease (—)
_._
_
_
Trust account and other transactions, excess of receipts (-)i
Equals: Public debt increase, or decrease (—).
*Less than $50 million.
1 Includes net trust account transactions, etc.; net investment by Government agencies in public debt
securities; net sales or redemptions of obligations of Government agencies in the market; changes in clearing
and other accounts necessary to reconcile to Treasury cash; and changes in amount of cash held outside
the Treasury.
Balanced budgets for the fiscal years 1957 and 1958 also are estimated. In the 1958 budget, net budget receipts are estimated at
$70.6 billion for 1957 and $73.6 billion for 1958; expenditures in 1957
and 1958 are estimated at $68.9 billion and $71.8 billion. A summary
of receipts and expenditures for the fiscal years 1956, 1957, and 1958
5
6
1956 REPORT OF THE SECRETARY OF THE TREASURY
is contained in the following section. Table 8 shows budget receipts
and expenditures, actual for the fiscal year 1956 and estimated for
the fiscal years 1957 and 1958 on the basis of existing and proposed
legislation, and table 10 shows the effect of financial operations on
the public debt.
THE BUDGET.
C H A R T 2.
In his message dated January 16, 1956, transmitting the 1957
budget, the President stated that it continued ^'the policy of the two
previous budgets I sent to the Congress, in which I emphasized the
importance of actions to eliminate excessive accumulations of unexpended balances, which so frequently invite comiriitihehts leading to
unnecessary future expenditures.^'
Unexpended balances include not only the appropriations by the
Congress permitting Government agencies to incur financial obligations, but also authorizations to enter into contracts prior to enactment of appropriations, and authorizations to make expenditures
from borrowed money. The progress in reducing these balances is
REVIEW OF FISCAL OPERATIONS
7
evident from the following table. It shows a decline in unexpended
balances of appropriations from $80.2 billion on June 30, 1953, to
$50.6 billion on June 30, 1956. Total unexpended balances, including
all types of authorizations, declined from $102.8 billion on June 30,
1953, to $72.9 billion on June 30, 1956.
Unexpended balances brought forward
From appro.Total,
priated funds, including
including
other
revolving authorizations
funds
JuneSO—
In billions of dollars
1953--.—
1954
1955
1956
-
_-
-
-
---—
80.2
70.6
57.6
50.6
102:8
94 2
79.6
72 9
As in the fiscal year 1955, there was in 1956 a wn:de disparity between
receipts in the first half of the year and in the second. There were,
however, substantial differences in amounts of the deficits in the first
half and. the surpluses in the second, as is shown in the table which
follows. The first half-year deficits in both years necessitated the
usual Treasury borrowing program.
In each year, only 37 percent of receipts came in during July- \
December and 63 percent during January-June. The disparity is
still due in part to the completion in 1955 of the 5-year schedule
initiated by the llevenue Act of 1950 to speed up the timing of
corporate tax payments to relate them more closely to receipts of
income. Under this arrangement, calendar year corporations had
paid all of their 1954 tax liabilities in the January-June period of 1955.
Beginning with; the fiscal year 1956, a new 5-year schedule provided
by the 1954 Code progressively redistributes within each fiscal year
substantial amounts of corporate tax payments. C Thus the calendar
year corporations to which the schedule applies were required to pay
5 percent of the estimated tax on 1955 tax liabilities in September
1955, 5 percent iin December 1955, and 45 percent each in March and
June 1956. While this redistribution as it proceeds wiir tend to
initigate the seasonal borrowing problem of the Treasury, there still
remain larger receipts from individual income taxpayers and other
sources during January-June than during July-December. •
8
1956 EEPORT OF THE SECRETARY OF THE TEEASURY
1955
Net
budget
receipts
Period
1966
Net
budget
expenditures
Budget
surplus,
or deficit ( - )
Net
budget
receipts
Net
budget
expenditures
Budget
surplus,
or deficit ( - )
In billions of dollars
July-September
October-December
.
.
Total first half
January-M arch
April-June
Total second half
Total fisca lyear
.
13.0
12.2
16.9
16.2
-3.9
—3.9
3L6
-4.9
-4.4
-9.3
25.2
33.1
—7.9
15.7
17.3
4.2
LO
22.2
20.7
15.6
17.8
6.6
2.9
33.0
5.1
42.9
33.4
9.5
64.6
-4.2
68.2
66.5
1.6
11.7
10.6
16.6
15.0
22.3
19.8
18.3
38.1
60.4
BUDGET RECEIPTS AND EXPENDITURES
BUDGET RECEIPTS IN 1956
Net budget receipts in the fiscal year 1956 amounted to $68.2
billion and thus surpassed the revenues of any past year. Previously
the fiscal year 1953 total of $64.8 billion had been the largest amount
collected.
The 1956 receipts were $7.8 billion greater than receipts in the
previous fiscal year. A comparison of receipts, by major sources, in
the two years is shown in the following table.
[In billions of dollars]
Source
1955
Increase
1956
Amount
Internal revenue:
Individual income taxes
_—
Corporation income taxes
Excise taxes
_
_
Employment taxes
Estate and gift taxes
Internal revenue not otherwise classified .
3L7
18.3
9.2
6.2
(*)
35.3
2L3
10.0
7.3
1.2
3.73.0
Ll
.2
(*)
(*)
Percent
n.6
16.6
17.3
25.1
Total internal revenue.
Customs
__
Miscellaneous receipts
66.3
.6
2.6
75.1
.7
3.0
13.3
16.2
17.5
Gross budget receipts
_.
Deduct:
k^i Transfer to Federal old-age and survivors insurance
trustfund
f; .Transfer to railroad retirement accoimt
. Refunds of receipts
E\ !
Net budget receipts...
69.5
78.8
13.5
5.0
.6
3.4
6.3
.6
3.7
60.4
(*)
.3
25.7
5.9
7.5
7.8
12.9
L3
•Less than $50 million.
All major revenue sources showed substantial increases for 1956,
reflecting a general rise in incomes, production, and business activity.
REVIEV^ OF FISCAL OPERATIONS
9
Individual income taxes.—Receipts from individual income taxes
amounted to $35,334 miUion in 1956. This is an increase of $3,684
million over 1955 receipts of $31,650 million. A substantial rise in
personal incomes was responsible for the rise in receipts.
Corporation income taxes.—Corporation profits in the calendar year
1955 were much greater than 1954 profits. The rise in receipts in the
fiscal year 1956 of $3,034 million reflected this increase but not completely. Receipts in 1956 did not benefit from the year-to-year
acceleration of corporation installment payments under the Revenue
Act of 1950 which increased receipts in the 1951-55 period. ^A continued advance in installment payments occurred in 1956 through
the declaration and payments of estimated tax required under the
Internal Revenue Code of 1954 but the net increase in fiscal year
receipts is small since the payments of most corporations are merely
advanced to an earlier part of the fiscal year.
A second factor reducing the rise in 1956 receipts was the virtual
absence of any coUections from the excess profits tax of 1950 which
was terminated on December 31, 1953. Some revenue from this
source was received in 1955.
Excise taxes.—Receipts from this source, by major groups, are
listed in the table which follows.
[In millions of dollars]
Source
1955
1956
Increase, or decrease (—)
Amount
Alcohol taxes
.
Tobacco taxes..
__
Taxes on documents, other instruments, and playing
cards
Manufacturers' excise taxes.
Retailers'excise taxes
1
_.
Miscellaneous excise taxes
Total
Undistributed depositary receipts and unclassified
advance payments of excise taxes
Total excise taxes
Percent
2,743
1,571
2,921
1,613
178
42
6.5
2.7
112
r 2,885
292
»• 1, 493
115
3,456
322
1,608
3
571
30
116
2.6
19.8
10.2
7.8
9,096
10,035
940
115
-31
-146
9,211
10,004
794
10.3
0)
8.6
»• Revised.
1 The amount of decrease was so large that a percentage comparison is inappropriate.
All major excise tax categories contributed to the increase of
$794 million in excise tax receipts in 1956 but more than half of the
rise was accounted for by the manufacturers^ excise tax group. Every
tax in this group with one minor exception showed an increase in 1956
For some taxes the relative increases were very large, but more than
half of the absolute increase was provided by the tax on passenger
automobUes which rose $329 mUlion,
10
1956 REPORT OF THE SECRETARY OF THE TREASURY
Receipts from alcohol taxes increased $178 mUlion. Collections of
all principal taxes, those on distilled spirits, wines, and beer, were
larger in 1956. The increase in tobacco taxes is attributable to
higher receipts from the tax on small cigarettes since collections
from cigars and manufactured tobacco dropped by small amounts.
The increase in collections from smaU cigarettes resumed the year-toyear rise characteristic of this tax which had been interrupted in 1954
and 1955.
The increase in the miscellaneous excise tax group was principally
attributable to larger collections from communication taxes and the
tax on transportation of property.
Employment taxes.—Receipts from the various employment taxes
are shown in the following table.
[In millions of dollars]
Source
1955
1956
Increase, or decrease (—)
Amount
Federal Insurance Contributions Act and Self-Employment Contributions Act
Railroad Retirement Tax Act
Federal Unemployrhent Tax Act
-_.
Total employment taxes
_.
-__
Deduct:
Transfer to Federal old-age and survivors insurance
trust fund- ._
Transfer to railroad retirement account.-.
Net employment taxes. _.
Percent
5,340
600
280
6,337
634
325
997
34
45
18.7
5.7
16.0
6,220
7,296
1,076
17.3
5,040
599
6,337
634
1,297
35
25.7
5.9
681
325
-256
—44.1
Increased receipts in the fiscal year 1956 from the Federal
Insurance Contributions Act, Self-Employment Contributions Act,
and the Railroad Retirement Tax Act reflected increased wages. In
addition the first two were augmented by an increase in coverage
and an increase in the maximum amounts taxable from $3,600 to
$4,200 a year. Most of the increase in receipts from the Unemployment Tax Act resulted from the elimination of quarterly installment
payments and a consequent bunching of receipts in 1956.
Estate and gift taxes.—Receipts from estate and gift taxes were
$1,171 mUlion in 1956. This was the first year in which receipts
from these taxes exceeded one bUlion dollars. The percentage increase in 1956, 25.1 percent, was the largest for any major tax classification. The substantial rise in 1956 reflected a sharp rise in property
values.
REVIEW 0$" fISCAL Of>ERATION^
11
Customs.—Customs duties receipts rose from $606 million in 1955
to $705 million in 1956 as a result of the increase in general business
activity. The collections were the largest in history, exceeding the^
previous record in 1951.
Miscellaneous receipts.—Receipts from miscellaneous sources of
income in the fiscal year 1956 totaled $3,006 million, $447 million
more than in the previous year. The largest increase occurred in
receipts from sales of Government property and products.
Refunds of receipts.—Refunds of receipts amounted to $3,684 million
in 1956, an increase of $258 mUlion over 1955. Refunds of overprepayments of individual income taxes was the only tax refund
source showing a significant increase.
ESTIMATES OF RECEIPTS IN 1957 AND 1958
The Secretary of the Treasury is required each year to prepare
and submit in his annual report to Congress estimates of the public
revenue for the current fiscal year and for the fiscal year next ensuing
(act of February 26, 1907 (34 Stat. 949)).
The estimates of receipts from taxes and customs for the current
and ensuing fiscal years are prepared in December of each year by
the Treasury Department. In general, the estimates of miscellaneous
receipts are prepared by the agencies depositing the receipts in the
Treasury.
The receipts estimates reflect the high levels of business activity,
personal income, and corporate profits attained in the calendar year
1956. They assume continued gains in the level of personal income
and a moderate increase in corporate profits. The estimates for the
fiscal years 1957 and 1958 are based on the assumption that legislation wUl be enacted extending tax rates at their current levels for
another year beyond AprU 1, 1957, as recommended by the President.
Net budget receipts in the fiscal year 1957 are estimated to amount
to $70,628 million, an increase of $2,463 mUlion over actual receipts
in 1956. A further rise of $2,992 million to $73,620 mUlion is estunated
for 1958. The amounts to be reported as budget receipts in 1957 and
1958 are reduced by the Highway Revenue Act of 1956. Receipts
from certain previously existing excise taxes which were included as
budget receipts in 1956 and previous years are, in 1957 and 1958,
treated as trust fund receipts.
12
19 56 REPORT OF THE SECRETARY OF THE TREASURY
Fiscal year 1957
Actual receipts in 1956 and estimated receipts in 1957 are compared
by major sources in the following table.
[In millions of dollars]
Source
1956 actual
1957 estimate
Increase, or
decrease (—;
Internal revenue:
Individualincome taxes
Corporation income taxes
_Excise taxes.
Employment taxes
Estate and gift taxes
Internal revenue not otherwise classified.
35,334
21,299
10.004
7,296
1,171
5
38, 500
21, 400
10,691
7,750
1,380
5
3,166
101
687
454
209
Total Internal revenueCustoms
Miscellaneous receipts
75,109
705
3,006
79,726
775
2,986
4,617
70
-20
Gross budget.reoeipts
Deduct:
Transfer to Federal old-age and survivors insurance trust
fund
Transfer to Federal disability insurance trust fimd
._.
Transfer to railroad retirement account
Transfer to highway trust fund
Refunds of receipts
78,820
83, 487
4,667
6,337
3,684
6,445
335
660
1,539
3,880
108
335
26
1,539
196
68,165
70,628
2, 463
Net budget receipts..
"""634"
Greater receipts from the individual income tax are primarUy
responsible for the estimated increase of $2,463 million in net budget
receipts in 1957. Other receipt categories also increase, in some cases
significantly in relative terms but not in absolute amounts. Only
about one-half of the increase in gross receipts is carried through to
net budget receipts. The deduction for the transfer of certain excise
tax receipts to the highway trust fund is much larger than the increase
in gross excise tax receipts and the increase in employment taxes is
eliminated by the deduction for transfers to trust accounts.
Individual income tax.—Receipts from the individual income tax
are estimated to be $38,500 million in 1957, an increase of $3,166
million over actual receipts of $35,334 mUlion in 1956. The increase
results from the rise in incomes which has taken place in the calendar
year 1956 and the expected continuation of rising personal incomes
in the first half of the calendar year 1957.
Corporation income tax.—Corporation income tax receipts in 1957
are estimated to amount to $21,400 mUlion, as compared with receipts
of $21,299 mUlion in 1956. The rise of $101 mUlion reflects a modest
increase in corporate profits as estimated for the calendar year 1956,
the profit level which primarily determines receipts in 1957. Other
factors of a technical nature which affect the 1956-57 comparison of
receipts are largely offsetting.
13
REVIEW . OF FISCAL OPERATIONS
Excise taxes.—Receipts from this source are listed in the table
which follows.
[In miUions of dollars]
1956 a c t u a l
Source
Alcohol taxes _
..
T o b a c c o taxes
:
T a x e s on d o c u m e n t s , other i n s t r u m e n t s , a n d p l a y i n g
M a n u f a c t u r e r s ' excise taxes
R e t a i l e r s ' excise taxes
Miscellaneous excise taxes .
'..
U n d i s t r i b u t e d depositary receipts a n d unclassified
p a y m e n t s ot excise taxes
_
T o t a l excise taxes
D e d u c t transfer to h i g h w a y t r u s t f u n d .
N e t excise taxes . .
..
cards—
_.
..
..
advance
..
. _
2,921
1,613
115
3,456
322
1,608
1957 e s t i m a t e
Increase, o r
decrease ( - >
3,003
1,643
110
3,882
341
1,712
82
30
-5
426
19
104
10,004
10,691
1,539
687
1,539
10,004
9,152
—852
-31
31
The receipts from practically all excise taxes are expected to increase in 1957, the total reaching $10,691 million. Important exceptions are the tax on passenger automobiles, the admissions tax,
and the tax on transportation of persons. A decrease is anticipated
in the tax on passenger automobUes because of the decline of automobile production which occurred in the calendar year 1956. I t is
expected that automobile production will increase in 1957 but will
not achieve the very high levels of the calendar year 1955. The
relatively large decline in receipts estimated for the admissions tax
is attributable to the increase in the admissions exemption from 50
cents to 90 cents. The yield of the tax on transportation of persons
is adversely aft'ected by the exemption of certain travel.
Large relative increases in receipts are estimated only for those
taxes affected by the Highway Revenue Act. This act increased the
tax on gasoline used for highway purposes from 2 cents to 3 cents a
gallon; mcreased the tax on diesel fuel from 2 cents to 3 cents a gallon;
increased the tax on tires for highway-type vehicles from 5 cents a
pound to 8 cents; increased the tax on trucks and buses from 8 percent
to 10 percent of manufacturers' price; imposed a new tax oh rubber
for retreading tires for highway-type vehicles of 3 cents a pound, and
imposed a new tax of $1.50 a thousand pounds on the total weight of
highway vehicles over 26,000 pounds of gross vehicle weight. These
taxes were effective July 1, 1956, but, because of the lag in collections,
a full 12 months of receipts will not be collected in 1957.
The increased revenue from these higher tax rates and new taxes
is responsibile for most of the increase in gross excise tax receipts in
1957. However, the revenues from all of the taxes affected by the
Highway Revenue Act are transferred to the highway trust fund.
The net effect of the act is to reduce excise tax receipts remaining
14
1956 REPORT OF THE SECRETARY OF THE TREASURY
in budget receipts so that net excise taxes in 1957 are estimated to
be $852 million less than in 1956.
Employment taxes.—The yield of the employment taxes is shown in
the following table.
[In millions of doUars]
1956 actual
Som-ce
Federal Insurance Contributions Act and Self-Employment
Contributions Act
•..
Railroad Retirement Tax A c t - . .
_.Federal Unemployment Tax Act . . . .
Total employment taxes
Deduct:
Transfer to Federal old-age and survivors insufance trust
fund...
Transfer to Federal disability insurance trust fund
Transfer to railroad retirement account
Net employment taxes
1957 estimate
Increase, or
decrease (—)
6.337
634
325
6,780
660
310
443
26
—15
7,296
7,750
454
6,337
634
6,445
335
660
108
335
26
325
310
—15
The estimated increase in receipts under the Federal Insurance
Contributions Act and the Self-Employment Contributions Act
results from increased levels of salaries and wages subject to tax
and increased tax rates. The increase in receipts resulting from the
higher rates are to be transferred to the Federal disability insurance
trust fund. Receipts from the Federal Unemployment Tax Act are
estimated to be lower in 1957 than in 1956 because of the bunching
of receipts in 1956 as a result of the elimination of installment payments.
.
Estate and gift taxes.—Receipts from estate and gift taxes are estimated to be $1,380 million in 1957, a rise of $209 million reflecting
recent increases in estate values.
Customs.—Customs receipts are estimated to amount to $775
mUlion in 1957. This increase of $70 million reflects a higher level of
business activity.
Miscellaneous receipts.—Receipts from miscellaneous sources are
estimated to be $2,986 million in 1957 as compared with $3,006
million in 1956.
Eefunds of receipts.—Refunds of receipts are estimated to be $3,880
million in 1957 as compared with actual refunds of $3,684 millionin 1956.
Fiscal year 1958
Estimated receipts in 1957 and 1958 are compared by major sources
in the following table.
REVIEW
OF FISCAL
15
OPERATIONS
[In millions of dollars]
Source
1957 estimate 1958 estimate
Increase
Internal revenue:
Individual income taxes... j
Corporation income taxes
Excise taxes
Employment taxes
Estate and gift taxes.
Internal revenue not otherwise classified.
38, 500
21,400
10,691
7,750
1,380
5
41,000
22,000
11,071
8,420
1,475
5
2,500
600
380
670
95
Total internal revenue.
Customs
Miscellaneous receipts
79, 726
775
2,986
83,971
800
3,278
4,245
25
292
Gross budget receipts
Deduct:
Transfer to Federal old-age and survivors insurance trust
fund
-_-....
Transfer to Federal disabUity insurance trust fund
Transfer to railroad retirement account
Transfer to highway trust fund
Refunds of receipts
83,487
88,049
4,662
6,445
335
660
1,539
3,880
6,609
826
665
2,173
4,156
164
491
5
634
276
70,628
73,620
Net budget receipts..
Net budget receipts in 1958 are estimated to amount to $73,620
mUlion. This is an increase of $2,992 million over estimated receipts
in 1957.
All sources of receipts are expected to increase in 1958, with the
largest absolute rises affecting net budget receipts occurring in individual and corporation income tax collections. The gain in individual
income tax receipts is smaller than in 1957 b u t is augmented by a rise
of $600 million in corporation income tax receipts in 1958. Miscellaneous receipts are also expected to rise in 1958.
Individual income tax.—Reflecting continuing gains in personal
incomes, receipts from the individual income tax are expected to
increase from $38,500 mUlion in 1957 to $41,000 million in 1958.
Corporation income ^ax.---Receipts from the corporation income tax
are estimated to amount to $22,000 million in 1958. This is $600
million above estimated receipts in 1957, reflecting an estimated rise
in profits from the calendar year 1956 to the calendar year 1957.
Excise taxes.—Receipts from this source, by major groups, are listed
in the table which follows.
[In mUlions of doUars]
1957 esthnate 1958 estimate
Source
Alcoholtaxes
_.
-.
..
...
Tobacco taxes
Taxes on documents, other instruments, and playing cards
Manufacturers'excise taxes
. ..
RetaUers'excise taxes
MisceUaneous excise taxes
.
Total excise taxes
Deduct transfer to highway trust fund
Net excise taxes
-.
_ ..
. _
Increase, or
decrease (—)
3,003
1,643
110
3,882
341
1,712
3,028
1,626
110
4,184
357
1,766
25
-17
10,691
1,539
11,071
2,173
380
634
9,152
8,898
-254
302
16
54
16
1956 REPORT OF THE SECRETARY OF THE TREASURY
Total excise taxes are estimated to increase. $380 million to $11,071
mUlion in 1958. This gain reflects a higher level of taxable goods and
services and the full year effect of increased rates and new taxes under
the Highway Revenue Act.
Employment taxes.—The yield of the employment taxes is shown in
the following table.
[In mUlions of doUars]
1957 estimate 1958 estimate
Source
Federal Insurance Contributions Act and Self-Employment
Contributions Act
RaUroad Retirement Tax Act . .
.Federal Unemployment Tax Act._
Total employment taxes
Deduct:
Transfer to Federal old-age and survivors insurance trust
fund
._
Transfer to Federal disabUity insurance trustfund
Transfer to railroad retirftment account.. ^,
.
Net employment taxes
. _
Increase
6,780
660
310
7,435
665
320
655
5
10
7,750
8,420
670
6,445
335
660
6,609
826
665
164
491
5
310
320
10
Receipts from the Federal Insurance Contributions Act and the
Self-Employment Contributions Act are estimated to increase as a
result of higher levels of salaries and wages and the full year effect of
the higher tax rates. The increased receipts resulting from the higher
tax rates are to be transferred to the Federal disabiUty insurance
trust fund.
Estate and gift taxes.—Receipts from estate and gift taxes are
estimated to increase to $1,475 million in 1958, a rise of $95 inillion.
Customs.—^A continued high level of business activity is expected to
increase customs receipts in 1958.
Miscellaneous receipts.—M.ost sources of miscellaneous receipts are
estimated to show some increase in 1958. Tbe total is estimated at
$3,278 milhon, up $292 million from the 1957 estimate.
Refunds of receipts.—Refunds of receipts are estimated to be $4,156
million in 1958, an increase of $276 million over the estimated refunds
of $3,880 million in 1957.
BUDGET EXPENDITURES
Net budget expenditures of $66.5 bUlion in the fiscal year 1956 were
$2.0 billion more than in 1955, but $1.2 bUlion less than in 1954 and
$7.7 billion less than the post-World War I I peak in 1953. Costs of
major national security were held imchanged from 1955 at $40.6
17
REVIEW OF FISCAL OPERATIONS
billion, nearly $10 bUlion less than in 1953. Annual expenditures for
this and related functions are outlined in the foUowing table, begiur
ning with an average of 1949-50, the two fiscal years immediately
preceding the Korean action.
InterMajor
national
Veterans'
national
affairs Interest services
security i
and
and
finance
benefits
Fiscal year
other
Adjustment
to daUy Total
Treasury
statement
basis
In billions of dollars
1949-50 average
1951
1952
1953
1954 1955
1956
.-1
_.. .
13.0
22.4
44.0
50.4
46.9
40.6
40.6
5.4
3.7
2.8
2.2
1.7
2.2
1.8
5.6
5.7.
5.9
6.6
6.5
6.4
6.8
6.7
5.3
4.9
4.3
4.3
4.5
4.8
8.6
7.5
8.7
10.8
8.4
10.9
12.4
+0.3
-.7
-.9
39.6
44.1
65.4
74.3
67.8
64.6
66.5
NOTE.—The classification in this table is taken from the 1958 Budget document. The figures beginning
with 1953 are on the same reporting basis as the Monthly Statement of Receipts and Expenditures of the
United States Oovernment (see "Bases of Tables").
1 Includes principally mUitary functions of the Defense Department, mUitary assistance. Atomic Energy
Commission, acquisition of strategic and critical materials under the General Services Administration, and
defense production expansion.
Not only w^as the magnitude of defense outlays virtuaUy unchanged
from 1955, but also there were relatively small changes in the distribution of the components. The three decreases were $356 million
for stockpiling and defense production expansion, $206 million for
the development and control of atomic energy, and $197 million for
Army defense. The largest increases were $342 million for Air Force
defense and $319 inillion for military assistance.
A decrease for international affairs and finance from $2.2 billion
to $1.8 billion was due mainly to a reduction of $344 million for economic and technical development.
The overall increase in expenditures for other programs was distributed throughout the various categories, except natural resources,
which declined. Continuing the rise in 1955, veterans' services and
benefits increased $0.3 billion. Interest expenditures, all of which
related to public debt obligations except $60 million, rose $0.4 billion
from those in 1955, with the increase reflecting both the general rise
in money rates and the somewhat higher average of interest-bearing
debt outstanding throughout most of the year.
399346—57-
18
1956 REPORT OF THE SECRETARY OF THE TREASURY
The rise of $1.6 bUlion for major domestic programs and the regular
operating expenses of the Government included an increase of $0.5
billion each for agricultural purposes and for commerce and housing.
The first was mainly for stabilization of farm prices and farm income,
with the 1956 total for this purpose amounting to $3.9 billion. For
the Commodity Credit Corporation alone gross expenditures were
$5.6 bUlion and net expenditures $3.6 billion. For commerce and
housing, net recoveries from aids to business other than housing
decreased more than $0.3 bUlion, although partly offset by a decrease
of $0.1 billion in expenditures for housing programs. There were
increases of more than $0.1 bUlion each in expenditures for highways
and for the postal service. Of the increase of $0.4 billion for general
government, one-half consisted of the Federal payment to the civU
service retirement, and disabUity fund as the Government's share of
the benefit payments from the fund in 1956. No Federal payment
had been made to the fund in 1955 except $30 mUlion for increases
in annuities pursuant to the act of August 31, 1954. Annual expenditures for these programs, beginning with a 1949-50 average, are shown
in the table following.
Fiscal year
Labor
and
welfare
Agriculture and Natural
agricul- resources
tural
resources
Commerce
and
housing
General
government
Total
In biUions of doUars
1949-50 average
1951
1952
1953
1954
1955
1956
-
1.8
2.1
2.2
2.4
2.5
2.6
2.8
2.6
.6
1.0
2.9
2.6
4.4
4.9
1.1
1.3
1.4
1.5
1.3
1.2
1.1
1.9
2.2
2.6
2.5
.8
1.5
2.0
1.1
1.3
1.5
1.5
1.2
1.2
1:6
8.6
7.6
8.7
10.8
8.4
10.9
12.4
NOTE.—The classification in this table is taken from the 1958 Budget document. The figures begiiming
with 1953 are on the same reporting basis as the Monthty Statement of Eeceipts and Expenditures ofthe United
States Government (see "Bases of Tables") :
ESTIMATES OF EXPENDITURES IN 1957 AND 1958
Actual expenditures for the fiscal year 1956 and estimates for the
fiscal years 1957 and 1958 are summarized by agencies in the following
table. Further details wUl be found in table 8. The estunates are
based on those submitted to the Congress in the Budget of the United
States Government for the Fiscal Year Ending June SO, 1958.
19
REVIEW OF FISCAL OPERATIONS
Actual budget expendiiures for the fiscal year 1956 and estimated expenditu.res for
1957 and 1958
[In millions of dollars. On basis of 1958 Budget document]
1956
actual
Legislative branch
The Judiciary
Agriculture Department (including Commodity Credit Corporation).
Atomic Energy Commission
._.
Civil Service Commission
Commerce Department-.
Defense Department:
Military functions
Civil functions.Expansion of defense production
Export-Import Bank ofWashington
General Services Administration
Health, Education, and Welfare Department.
Housing and Home Finance Agency
Interior Department
,
Justice Department
Labor Department
Mutual security:
Military assistance
Other mutual security programs
Post Oflice Department.
Small Business Administration
-.
State Department
__-.-.
Treasury Department:
Interest on the public debt
Other
Veterans Administration
Reserve for contingencies..
All other
Net budget expenditures..
1957
estimate
1958
estimate
85
37
109
40
122
44
5,177
1,651
253
1 1,293
5,152
1,940
646
644
5,330
2,340
23
772
35,791
573
237
«90
523
2,071
'
39
512
216
412
36,000
649
397
690
2,361
719
652
214
409
38,000
700
60
243
654
2,831
391
704
226
418
2,611
1,590
463
64
142
2,600
1,602
469
101
184
2,600
1,756
68
61
230
6,787
932
4,731
460
7,200
792
4,857
200
483
7,300
832
5,068
400
654
66,540
68,900
71,807
0 Excess of credits (deduct).
1 Includes $740 mUlion for Federal-aid highways; such expenditures in 1957 and 1968 are charged to the
highway trust fund.
TRUST ACCOUNT AND OTHER TRANSACTIONS
Financial transactions of. Federal agencies which do not affect
budget receipts and expenditures but do affect balances both in the
account of the Treasurer of the United States and those held outside
the Treasurer's account are reported in three classifications. These
are trust and deposit fund transactions, net investment by Government agencies in public debt securities, and net redemption or sale of
obligations of the agencies in the market. Monthly data for each of
these classifications for the fiscal year 1956 and comparative totals for
the fiscal years 1955 and 1956 are shown in table 5. Annual transactions for the fiscal years 1948 through 1956, together with the combined net total of receipts or expenditures for each year, will be found
in table 7, and table 9 shows the estimates for 1957 and 1958. The
relation of these transactions to the budget surplus or deficit and
changes in the public debt, cash balances, and intransit items is indicated in table 1. For the fiscal year 1956, the aggregate of these
transactions resulted in an excess of expenditures amounting to $194
million, as compared with an excess of receipts of $231 million in the
preceding fiscal year.
Trust and deposit fund accounts,—^Trust funds are established to
20
19 56 REPORT OF THE SECRETARY OF THE TREASURY
account for moneys which are held in trust by the Government for use
in carrying out sjDecific purposes and programs in accordance with
:a statute or a trust agreement. Deposit funds are used to account
for moneys held b}^ the Government as banker or agent for others, or
to account for collections held in suspense temporarily and later
refunded or paid into some other account of the Government. For a
further explanation of these nonbudget accounts, see page 315. The
major trust funds consist of those for social secmTty and insurance,
retirement, and veterans' life insurance. Detail by funds appears
in table 5. Receipts and expenditures in most of the trust fund
accounts are reported on a gross basis, although certain accounts
which operate as revolving funds or working funds are reported
net. Payments from general fund appropriations to certain trust
accounts are included as receipts in those accounts. Investment
transactions in public debt securities are shown sepaxately, since they
ure not part of the operating programs of the trust funds but represent
an exchange of assets. Deposit fund transactions also are reported
net. For Government-sponsored enterprises they include net investment transactions. This method of classification became effective
at the beginning of the fiscal year 1956 but data for the preceding
fiscal year have been revised accordingly. During the fiscal year 1956
trust and deposit fund transactions in the aggregate resulted in an
excess of credits, or net receipts, in the amount of $2,250 mUlion, as
coinpared with $991 million during 1955.
Investment hy Government agencies in IJnited States securities {net)}—
These transactions are in the nature of financing operations in that
the temporary investment of excess balances or the sale of securities
to acquire operating cash does not affect the budget program of the
agency, or the operating program in the case of trust accouats. Detail
by agencies appears in table 5, with Government-sponsored enterprises carried as memorandum items. During the fiscal year 1956
net purchases of public debt and guaranteed securities excluding the
net purchases by Government-sponsored enterprises amounted to
$2,617 million, as compared with $1,362 million during 1955.
Redemption or sale of obligations of Government agencies in the
market (net).^—These transactions represent financing operations
between the agencies and the public. The securities are reported at
face amount, with separate classifications for those guaranteed and
those not guaranteed by the United States. The bulk of the transactions are in nonguaranteed securities. Except for debentures issued
by the Federal Housing Administration in exchange for defaulted
mortgages, activity in guaranteed obligations currently consists only
of redemptions of nominal amounts of matured securities. Detail b}^
1 The figures shown here differ from those in thc daily Treasury statement because of differences in the
reporting bases (see "Bases of Tables").
REVIEW OF FISCAL OPERATIONS
21
agencies appears in table 5, with Government-sponsored enterprises
carried as memorandum items. During the fiscal year 1956, net sales
of these agency obligations excluding the net sales by Governmentsponsored enterprises amounted to $173 million, as compared with
net sales of $602 million during 1955.
ACCOUNT OF THE TREASURER OF THE UNITED STATES
The cash assets held in the account of the Treasurer of the United
States consist of gold, silver, paper currency, coin, unclassified collection items, and balances in Federal Reserve Banks and other depositary banks. The liabilities consist of Treasurer's checks outstanding,
balances to the credit of the Board of Trustees of the Postal Savings
Systein, and uncollected items, exchanges, etc. The dift'erence between the cash assets and liabilities constitutes the balance in the
account of the Treasurer of the United States. Items in this balance
represent (1) available operating funds, consisting of the gold balance,
available funds on deposit in the Federal Reserve Banks, and the
balances in Treasury tax and loan accounts in commercial banks; and
(2) funds not immediately available for operating purposes, consisting
of the silver balance, other silver bullion, coin and currency, checks in
process of collection, and deposits in general and other depositaries.
Details of assets and liabilities are shown under the caption ^'Account
of Treasurer of the United States" in the Daily Statement of the United
States Treasury. The balance in the Treasurer's account at the close
of the fiscal year 1956 amounted to $6,546 million, an increase of
$331 million during the fiscal year.
The net change in the balance in the account of the Treasurer of the
United States during the fiscal year, on the basis of the Daily Statement of ihe United States Treasury, is accounted for as follows:
{In millions of dollars)
Balance J u n e 30, 1955
Add:
N e t deposits
.
77, 079
Certain public d e b t redemptions included as cash withdrawals below ^
1,086
. Total
_.
Deduct:
Cash withdrawals
_ 71, 984
I n v e s t m e n t s of Government agencies in public debt
securities, net__
3, 202
Sales of obligations of Government agencies in market,
net
-684
Accrual of discount on savings bonds a n d Treasury
bills
•_ 1, 709
N e t decrease in gross public d e b t .
1, 623
Balance J u n e 30, 1956
._
1 Represents principaUy discount included in savings bond redemptions.
6, 216
78,165
84, 381
77, 834
. 6, 546
22
1956 REPORT OF THE SECRETARY OF THE TREASURY
A comparative analysis of the assets and liabilities in the account
of the Treasurer of the United States as of June 30, 1955, and June 30,
1956, is shown in table 51.
The balance in the Treasurer's account during the fiscal year ranged
from a low of $2,615 million on January 17, 1956, to a high of $7,522
million on March 21, 1956.
PUBLIC DEBT OPERATIONS AND OWNERSHIP OF FEDERAL
SECURITIES
A net decrease of $1.6 billion in the public debt and guaranteed
obligations during the fiscal year brought the total Federal debt
outstanding to $272.8 billion on June 30, 1956. This is the first decline in the amount of the public debt for a fiscal year since 1951.
The public issues in the interest-bearing debt showed an even
greater dechne during fiscal 1956. Nonmarketable public issues
decreased by $3.5 billion and the marketable pubhc issues by $0.3
billion. However, there was a net increase of $1.9 billion in special
issues to Government investment accounts (principally the result of
increased issues to the Federal old-age and survivors insurance trust
fund). This increase, together with a rise in matured debt and debt
bearing no interest, brought the net decline in the total public debt
outstanding down to $1.6 bilhon.
THF PIJRI ir. nFRT
$Bii.
300
200
World Wor EPeak — 280
^^^.^
273
-
100
26
0
1916 '19
'30
'39
Uec. ^1
C H A R T 3.
xcluding Victory Loan proceeds used to repay debt in 1946.
'46 49
Apr.30
'56
June ou
""^
23
REVIEW OF FISCAL OPERATIONS
A summary of changes in the debt during the year is shown in the
accompanying table. Changes in the level of the debt outstanding
during the past four decades is illustrated in chart 3.
[In billions of dollars]
Class of debt
Publicdebt:
Interest-bearing:
Public issues:
Marketable
Nonmarketable
Total public issues
SpeciBl issues to Government investment accounts
Total interest-bearing public debt
Matured debt on which interest has ceased
Debt bearing no interest..
_
Total public debt
.
Guaranteed obligations not held by the Treasury.
Total public debt and guaranteed obligations.._
June 30,1955 June 30,1956
Increase, or
decrease (—)
155.2
73.3
155.0
69.8
-.3
-3.5
228.5
43.3
224.8
45.1.
-3.7
1.9
271.7
.6
2.0
269.9
.7
2.2
-1.9
.1
.2
274.4
272.8
.1
(*)
._
274.4
272.8
(*)
-1.6
-1.6
*Less than $50 mUlion.
Progress toward debt management objectives
Treasury debt management operations continued to be conducted
so as to make a maximum contribution to Government fiscal and
monetary action to promote economic stabUity and growth. Since
January 1953 considerable progress has been made in improving the
maturity structure of the debt as well as in distributing the ownership
of the debt as widely as possible among the various investor groups,
particularly among nonbank investors.
Readjustment of debt maturities has reduced the volume and frequency of Treasury financings. Except for seasonal borrowing in
anticipation of taxes, the Treasury went to the market only four times
during the fiscal year 1956 for major borrowings. In contrast, during
earlier postwar years when heavier reliance was placed on short-term
borrowing, the Treasury engaged in major market financing as often
as twelve times a year. With Treasury financing operations less of
a factor in the market, the Federal Reserve System had more free
time during the fiscal year 1956 in which to exercise an independent
monetary and credit policy. Also, the capital markets have been
freer to absorb a record-breaking volume of new corporate and State
and local government securities and mortgages.
Market conditions have not been favorable for any further extension of the Federal debt into the long-term area since the additional
cash offering in July 1955 of around $% bUlion of the 3 percent bonds of
1995. Nevertheless, this issue, plus optional offerings of intermediate
term notes in connection with the December and March refundings,
helped to offset partially the effect of the passage of time which is
24
19 56 REPORT OF THE SECRETARY OF THE TREASURY
always operating to shorten the average length of the marketable
debt. The average maturity of the marketable debt (callable bonds
to first call date) stood at 4 years and 2 months at the close of .fiscal
1956. WhUe this was five months shorter than at the close of the
previous fiscal year, it is still four mohths longer than it was in December 1952. On June 30, 1956, the amount of marketable under-oneyear debt was $65 bUlion, representing 42 percent of the total marketable debt, as compared with $80 billion, or 52 percent of the total
marketable debt and savings notes at the end of December 1952.
The structure of the debt a t the end of the 1956 fiscal year is shown
in chart 4.
STRUCTURE OF THE PUBLIC DEBT JUNE 30,1956
Total
Nonmarketable
Marketable
$Bil.
Savings Bonds
200
Time fo Maturity:
^
Investment
Bands, etc
...N
' fl fl
!273j
Special Issues
toTrust Funds
100
C H A R T 4.
1 CaUable bonds to earliest call date.
A significant feature of debt ownership changes during the year
was the liquidation of a large amount of Government securities by
the commercial banking system. Under the impact of heavy demands
for private credit, commercial banks reduced their holdings of Governments by around $6K billion, and by the close of the fiscal year their
holdings were down to about $57 bUlion, the lowest year-end figure
since June 1943. Insurance companies and savings banks also continued to liquidate Government securities to help meet the heavy
demands of mortgage and corporate financing. Some of this liquida-
REVIEW OF FISCAL OPERATIONS
25
tion represented debt retirement by the Treasury. The remainder
represented securities which were purchased in the market by other
types of investors. State and local governments and foreign and
international accounts, for example, increased their Federal debt holdings by around $2 bUlion.
The $2 billion increase in investment in Governments by individuals
during the year, added further to the widespread distribution of the
debt. Their holdings of almost $67 bUlion in Federal securities
make them the largest single investor group in the public debt
ownership structure. Sales of Series E and H savings bonds set
another alltime postwar record in fiscal 1956, with sales running well
ahead of redemptions.
An account of the operations in the public debt and changes in the
ownership of Federal securities during the year is given in the pages
immediately following. Further detaU on the debt and its ownership
is given in the exhibits and tables sections of the report.
PUBLIC DEBT OPERATIONS
The unprecedented demand for mortgage, corporate, and municipal
credit that has accompanied our prevailing prosperity has been
exerting a heavy pressure on the supply of savings avaUable for
long-term investment. As a result, the demand for long-term Government bonds since the additional cash oftering in July 1955 of the 3
percent bond maturing in 1995 has not been sufficient to warrant
further long-term offerings. In the August 1955 refunding the
I'reasury oft'ered only securities in the one-year range to holders of
the maturing issue. In the December 1955 and March 1956 refundings, however, holders of maturing securities were offered a choice
between a one-year certificate and a note due in June 1958, with holders
of $4K billion of the maturing issues preferring the longer security.
Optional exchange offerings into a one-year or a longer-term security
have characterized Treasury refundings since the beginning of 1953.
In addition to the major financings (exclusive of Treasury bills)
there was seasonal borrowing through the issuance of tax anticipation
certificates in the Jul\-December deficit period. This borrowing was
repaid out of heavy tax receipts the following spring. As a result of
this seasonal borrowing, the public debt reached a high point in
December and was within $1 biUion of the statutory debt limit of
$281 billion. In June 1955 the Congress extended, for an additional
year, a temporary increase in the limit from $275 billion to $281 billion
to permit the Treasury to meet its seasonal borrowing needs during
the fiscal year 1956. (For further information on the statutory
hmitation on the public debt and guaranteed obligations as of June
30, 1956, see table 26, and for earlier years, see table 27.)
26
1956 REPORT OF THE SECRETARY OF THE TREASURY
The following tables summarize the financing operations during
the fiscal year and show the results of the public offerings ofmarketable
bonds, notes, and certificates of indebtedness.
Public offerings of marketable bonds, notes, and certificates of indebtedness, fiscal
year 1956
[In miUions of dollars]
Date of
issue
Apr.
July
Feb.
Aug.
May
Oct.
Oct.
Dec.
Dec.
Mar.
Dec.
Apr.
Description of security and maturity date
1,1955
18,1955
15,1955
1,1955
17,19554
1,1955
11,1955
1,1955
1.1955
5.1956
1,1955«
1,1956
Issued for
cash
1M% exchange note—Apr. 1,1960 ^
.V/i% certificate (tax anticipation) Mar. 22,1956.
3% bond—Feb. 15, 1995
2% certificate (tax anticipation) June 22,1956
2% note—Aug. 15, 1956
1H% exchange note—Oct. 1,1960 J
2H% certificate (tax anticipation) June 22,1956..
2H% certificate—Dec. 1,1956
2%% note—June 15,1958
2^4% certificate-Feb. 15,1957
2%% note—June 15, 1958
1 ^ % exchange note—Apr. 1,19611.
Issued in
exchange
for other
securities
2,202
821
2,970
Total.
Total
issued
1,486
6,841
278
2 181
2,202
821
1,486
6,841
278
9,083
2,283
7,219
2,109
23
9,083
2,283
7,219
2,109
23
29, 504
35,497
2 181
2,970
' Issued only on demand of owners, in exchange for 2% percent Treasury Bonds, Investment Series B 1975-80.
2 Amount issued subsequent to June 30,1955.
3 Issued July 20,1955, additional amount of the issue dated February 15,1955.
4 Issued August 1,1955, additional amount of the issue dated May 17,1955.
8 Issued March 5,1956, additional amount of the issue dated December 1,1955.
Disposition of matured marketable bonds, notes, and certificates of indebtedness,
fiscal year 1956
[In mUlions of dollars]
Date of
refunding or
retirement
CaUed or maturing security
Description and matm'ity date
Issue date
Redeemed
for cash or Exchanged
carried to
for new
matured
security
debt
Total
Percent
exchanged
1956
Aug. 1
Dec. 1
1
13^% certificate-Aug. 15,1955—. Aug. 15,1954
1K% certificate—Dec. 15,1955.... Dec. 15,1954
1M% note—Dec. 15,1955
Dec. 15,1950
149
387
460
8,327
4,972
6,394
8,477
5,359
6,854
98.2
92.8
93.3
Feb. 15,1955
Apr. 1,1951
July 18,1955
148
2
' 2,202
8,324
1,005
8,472
1,007
2,202
98.3
99.8
1956
Mar. 5
5
22
June 22
22
1H% note—Mar. 15,1956
13^% exchange note—Apr. 1,,1956VA% certificate (tax anticipation)
Mar. 22, 1956.
2% certificate (tax anticipation)
June 22, 1956.
2K% certificate (tax anticipation)
June 22,1956.
Total..
Aug. 1,1955
1,486
1,486
Oct. 11,1955
2,970
2,970
7,804
29,022
36,826
REVIEW OF FISCAL OPERATIONS
27
In handling its regular weekly offering of 91-day Treasury bUls
during the year, the Treasury raised new cash of $1.3 biUion by increasing the weekly offering of Treasury bUls by $100 mUlion a week
during the first 13 weeks of the year. For the balance of the year each
weekly bUl issue was for $1.6 bUlion, the equivalent of the issue
maturing. The 13 issues outstanding at the close of the fiscal year
1956 thus totaled $20.8 bUlion, as compared wdth $19.5 bUlion at the
beginning of the year.
The Treasury also issued 99-day tax anticipation bUls in December
1955 amounting to $1.5 billion, maturing March 23, 1956 and acceptable at par in payment of taxes on March 15. (For additional infermation on all bUl issues see exhibit 5.)
During June 1956, $159 miUion of the 2 percent Treas'ury notes
maturing August 15, 1956, were purchased for the account of the
sinking fund and retired. In addition, $604 million of the regular
cash payments on the unexchanged portions of the December 1955
and March 1956 Treasury note maturities was charged against the
sinking fund. (Tables 33 and 34 give further information on sinking
fund operations.)
The heavy demand for credit during the year in excess of the supply
of savings, together with the Federal Reserve credit restraint policy,
was reflected in rising borrowing costs for the Treasury. The average
rate on Treasury bUls, for example, moved up from around IK percent
at the beginning of the year to a peak of around 2% percent in April
1956. The weeldy average rates on new biU offerings throughout the
year are shown in exhibit 5. The average annual interest rate as
computed on the total interest-bearing public debt was 2.576 percent
on June 30, 1956, as compared with 2.351 percent a year earlier.
(For further detaU on the computed annual interest charge and computed annual interest rate by security classes, see table 43.)
The decline of $3.5 bUlion in nonmarketable debt during the year
was the largest in history, with more than half of the reduction
accounted for by the decrease of $1.9 billion in savings notes. The
sale of these notes was discpntinued in October 1953 and by the close
of the fiscal year 1956 all outstanding savings notes had matured.
(Sales, redemptions, and amounts outstanding of Treasury savings
notes of aU series from August 1941 through June 30, 1956, are shown
in table 41.)
28
1956 REPORT OF THE SECRETARY OF THE TREASURY
The amount of investment bonds outstanding declined by $0.6
billion, principaUy because of the exchange of the 2% percent convertible Series B-1975-80 bonds (mostly issued at the time of the
Federal Reserve-Treasury accord in 1951) for marketable 5-year, Iji
percent Treasury notes. Changes in the nonmarketable interestbearing debt during the year, by type of security, are shown in the
following table.
[In billions of dollars]
J i m e 30, 1955 J u u e 30, 1956
Class of security
U n i t e d States savings b o n d s :
SeriesE- ..
Series F a n d G
S e r i e s H . .._
Series J a n d K
.
. _.
_
.
_.
S u b t o t a l , savings b o n d s
T r e a s u r y savings notes
T r e a s u r y b o n d s , i n v e s t m e n t series
Depositary bonds
T o t a l interest-bearing n o n m a r k e t a b l e issues
'-_-
Increase, or
decrease ( - )
37.2
16.5
2.1
2.6
37.9
13.5
3.0
3.1
0.7
-3.0
.9
.5
58. 4
1.9
12.6
.4
57.5
12.0
.3
-.9
—1.9
-.6
—.1
73.3-
69.8
-3.5
The largest portion of the nonmarketable debt is, of course, in
United States savings bonds. The underlying purpose of the savings
bond program since its inception has been to provide small savers with
a safe, liquid, and attractive investment, and at the same time broaden
the ownership of the Federal debt. The primary intention of the
program has been to encourage thrift as well as to interest citizens
through their participation as bondholders in the fiscal affairs of their
Government.
As alread}^ noted, sales of Series E and H bonds set a new peacetime
record in the fiscal year 1956. These bonds continue to be the best
vehicle the Treasuiy has for achieving a widespread distribution of the
public debt and they are the heart of the Government's effort to promote nationwide thrift. B}^ the end of the fiscal year the amount of
Series E and H bonds outstanding (including accrued interest)
amounted to $40.9 billion—an alltime high record and an increase of
$1.6 billion during the 37'ear. Approximately $15 bUlion of this
amount, more than a third of the total outstanding, represent E bonds
which have now passed their tenth anniversary and are being held
under the Treasuiy's E bond extension program for periods up to
another 10 years.
REVIEW OF FISCAL OPERATIONS
29
E AND H BONDS, FISCAL YEARS l95l-'56
CHART 5
Since May 1953 savings bond redemptions have been dominated by.
the large maturities of Series F and G savings bonds. The peak wartime sales of F and G bonds matured during^ the fiscal year, and as a
result the $3.0 billion decline in the amount of these bonds outstanding
more than offset the increase in all other series. The total of all series
of interest-bearing savings bonds outstanding at the close of the year
was $57K biUion.
The redemptions of savings bonds as a percentage of the total sold,
by 3^early series, are summarized in the accompanying table. Detailed
information on savings bonds from March 1935, when this type of
security was first offered, through June 30, 1956, is given in tables 35
through 40.
30
1956 REPORT OF THE SECRETARY OF THE TREASURY
Percent of Series E, F, G,^H, J, and K savings bonds sold in each year redeemed
through each yearly period thereafter ^
[Onvbasis of P u b l i c D e b t accounts, see " B a s e s of T a b l e s " ]
R e d e e m e d b y e n d of—
OT
Series a n d calendar
year i n w h i c h
issued
1
03
5
CO
52
(53
•^
1
00
CO
1
1
o
1 1 1
CO
Oi
SeriesE 2
E-1941
E-1942
E-1943
E-1944
E-1945
E-1946
E-1947
E-1948
E-1949
E-1950
E-1951
E-1952
E-1953
E-1954
E-1955
3
8
15
19
28
23
21
20
22
26
29
29
28
29
29
.
6
15
24
33
38
34
30
30
34
36
38
39
38
38
10
21
34
41
45
40
37
39
40
41
44
45
44
14
29
41
47
50
45
43
44
44
45
48
49
18
35
47
52
54
51
47
47
47
48
52
23
40
51
56
58
54
50
49
60
61
27
44
55
60
61
56
52
52
53
30
48
58
62
63
58
55
54
34
52
61
64
65
60
57
40
58
65
68
68
64
62
68
71
73
73
67
71
75
76
70
74
78
72
77
75
24
31
36
34
32
36
27
34
39
36
34
68
60
68
72
97
95
95
98
97
99
Series F a n d G
F-1941
F-1942
F-1943
F-1944
F-1945
F-1946
F-1947
F-1948
F-1949
F-1950
F-1951
F-1952
and G-1941...
and G-1942...
and G-1943...
a n d G-1944 .
and G-1945...
a n d G-1946
a n d G-1947. _.
a n d G-1948
and G-1949...
a n d G-1950 .
a n d G-1951_-a n d G-1952 _
1
1
2
2
2
3
3
2
3
3
4
6
3
4
6
6
7
7
8
5
9
9
9
12
5
7
10
10
11
12
12
9
13
11
14
16
15
17
20
10
14
19
18
18
20
21
13
20
16
20
13
18
22
21
21
23
24
16
23
18
15
21
26
25
24
27
28
18
26
18
24
29
28
27
30
31
21
20
28
33
31
30
33
34
Series H
H-1952 . *
H-1953
H-1954
H-1955
3
3
3
4
8
8
7
13
12
17
Series J
V
J-1952
J-1953
J-1954
J-1955
2
3
4
6
8
14
14
14
18
Series K
K-1952...
K-1953
K-1954 .
K-1955
.
2
3
1
2
6
6
6
9
10
12
NOTE.—The percentages shown in this table are 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 calenda
years. Both sales and redemptions are taken at maturity value.
1 Percentages by denominations may be found in table 40.
2 SimUar detail for Series A through E savings bonds may be found in the 1952 annual report, p. 77.
O W N E R S H I P OF FEDERAL SECURITIES
Private nonbank investors held $138.5 bUlion of Federal securities
at the end of the fiscal year 1956, one-half of the total debt outstanding. Private nonbank investors include individuals, insurance com
31
REVIEW OF FISCAL OPERATIONS
panics, savings banks, nonfinancial corporations, pension funds,
foreign accounts. State and local governments, and nonprofit associations. Commercial banks and Federal Eeserve Banks together held
$80.8 billion or 30 percent of the debt. The remaining one-fifth of
the debt, $53.5 billion, was held by Government investment accounts,
primarily social security funds, veterans' insurance funds, and retiremeat funds.
Private nonbank investors continued to increase their holdings
during this fiscal year, as in 1955, but there was a substantial liquidation of holdings by commercial banks. Holdings by private nonbank
investors were up $1.8 billion. Commercial bank portfolios were
down $6.5 billion, while the Federal Reserve Banks increased their
holdings by less than $0.2 bUlion. Holdings by Federal Governmeat
investment accounts increased $3.0 billion during the year.
The following table presents figures on bank and nonbank ownership, together with pertinent details on the holdings of Federal
securities by the various investor classes. Their holdings as of June
30, 1956, are shown in chart 6.
Ownership of Federal securities by investor classes on selected dates, 1941~56 ^
[Amounts in bUlions of dollars]
J u n e 30,
1941
Estimated ownership by:
P r i v a t e n o n b a n k investors:
Individuals 3
I n s u r a n c e companies
M u t u a l savings b a n k s
Corporations *
S t a t e a n d local g o v e r n m e n t s
Miscellaneous investors *
Total private nonbank uivestors.
F e d e r a l G o v e r n m e n t i n v e s t m e n t accounts...
^
Banks:
Commercial banks
...
F e d e r a l Keserve B a n k s „ .
F e b . 28,
1946 2
J u n e 30,
1955
J u n e 30,
1956
Change
during
fiscal y e a r
1956
11.2
7.1
3.4
2.0
.6
.7
64.1
24.4
11.1
19.9
6.7
8.9
'64.8
14.8
8.7
'19.3
14.7
14.4
66.9
13.3
8.4
18.0
15.7
16.2
2.1
-1.6
—.4
-1.3
•
1.0
1.8
25.0
135.1
136.7
138.5
1.8
8.5
28.0
60.5
53.6
3.0
19.7
2.2
93.8
22.9
63.5
23.6
67.1
23.8
-6.5
.2
Total banks
21.8
116.7
87.1
80.8
-6.3
T o t a l gross d e b t o u t s t a n d i n g
55.3
279.8
274.4
272.8
-1.6
P e r c e n t of t o t a l
Percent owned by:
P r i v a t e n o n b a n k investors:
Individuals
other. .
Total
F e d e r a l G o v e r n m e n t i n v e s t m e n t accounts—.
_ _
Commercial banks
Federal Reserve Banks
T o t a l gross d e b t o u t s t a n d i n g
20
25
45
15
36
4
100
23
25
48
24
26
50
26
26
61
10
34
8
100
18
23
9
19
21
9
100
100
' Revised.
1 Gross public debt, and guaranteed obligations of the Federal Government held outside the Treasury.
2 Immediate postwar peak of debt.
3 Includes partnerships and personal trust accounts. Nonprofit institutions and corporate pension trust
funds are included under "Miscellaneous investors."
< Exclusive of banks and insurance companies.
«Includes savings and loan associations, nonprofit institutions, corporate pension trust funds, dealers
and brokers, and investments of foreign balances and intemational accounts in this country.
32
1956 REPORT OF THE SECRETARY OF THE TREASURY
Individuals, as has been true in recent years, are still the largest
single investor group in the Federal debt ownership structure. Their
holdings amounted to $66.9 billion on June 30, 1956. Savings bonds
accounted for over three-fourths of this total, with an increase of $1.6
billion in the amount oustanding of Series E and H savings bonds
during the year. This more than offset the decrease in their holdings
of other series of savings bonds. Individuals' holdings of securities
other than savings bonds, principally marketable securities, after
showing a very small gain in the first half of the year, increased significantly in the second half and were up $2.0 billion for the year as a.
whole.
.OWNERSHIP OF THE PUBUC DEBT JUNE 30,1956.
C H A R T 6.
Federal securities held by insurance companies at the end of the
fiscal year amounted to $13.3 billion, a decrease of $1.5 billion during
the year. Of the amount held, $7.9 billion was held by life insurance
companies. These companies reduced their holdings in 1956 by $1.1
billion, compared with a liquidation of $0.4 billion in the fiscal year
1955. Thus life insurance companies continued the trend of the postwar years to liquidate Federal securities as new investment opportunities appeared in the form of an increased supply of mortgages and
corporate securities.
Federal securities held by fire, casualty, and marine insurance com-
REVIEW OF FISCAL OPERATIONS
33
panics of $5.4 billion on June 30 were $0.4 billion lower than a year
earlier. The securities held h j these companies are primarily concentrated in issues with a maturity of less than 10 years
Mutual savings banks holdings of Federal securities at the end of
the fiscal year were $8.4 billion. Like the life insurance companies,
mutual savings banks have been increasing their mortgage and corporate securities portfolios since the end of World War I I and liquidating some of their holdings of Federal securities to aid in financing
these acquisitions. The decline of $0.4 billion in fiscal 1956 was about
the same as that in 1955.
Although life insurance companies and mutual savings banks
together acquired an additional $0.2 billion of the 3 percent bonds of
February 1995, when they were reoffered in July of 1955, there was
some liquidation later in the fiscal year of their holdings of this issue
to meet the continued pressure for funds. Portfolios of Government
securities of both life insurance companies and mutual savings banks
declined in average maturity during the course of the year and ended
at approximately 9 years to first call or maturity, which was slightly
below their prewar averages.
Federal securities held by corporations other than banks and insurance companies decreased by $1.3 billion during the fiscal year,
bringing their holdings to $18.0 billion. This was a reversal of their
net acquisition of Government securities during 1955. Eather than
funding as much of their tax liabilities in Government securities as in
1955, corporations used more of their available funds to meet current
operating needs, thus holding their borrowing to a minimum under the
tightened credit conditions.
Holdings of Federal securities by State and local governments
amounted to $15.7 billion at the close of the fiscal year, an increase
of $1.0 billion during the year. About one-third of the Federal
security holdings of these governmental units are in State and local
government employee retirement funds.
The holdings of all other private nonbank investors amounted to
$16.2 billion on June 30, 1956, an increase of $1.8 billion. The largest
increase in this category, $1.1 billion, came about as a result of the
increased investments in short-term Federal securities of foreign and
international balances. These investment balances made up about
$7.9 bUlion of the total holdings of miscellaneous investors at the end
of the fiscal year.
There were also increases of about $0.4 billion in the holdings by
savings and loan associations as they built up their secondary reserves
against larger share balances. Corporate pension trusts again increased their holdings of Federal securities by $0.3 billion, and their
holdings amounted to $3.0 billion at the dose of the year. Tbe re399346—57
4
34
1956 REPORT OF THE SECRETARY OF THE TREASURY
maining investor classes in this group include nonprofit associations,
dealers and brokers, and certain smaller institutional groups.
Government investment accounts showed an increase in their holdings of Federal securities by $3.0 billion during the year. This was
significantly larger than the $1.2 biUion increase in the fiscal year 1955,
and primarily reflected a faster rate of accumulation by the Federal
old-age and survivors insurance trust fund and a reversal in the investment trend of the unemployment trust fund, which had declined in
1955. Of the $53.5 billion held by Government investment accounts,
$45.1 billion, or approximately 84 percent, was in the form of special
issues held only by these accounts. DetaUs on the ownership of
securities by these accounts are shown in table 52.
Holdings of Federal securities by commercial banks decreased
sharply by $6.5 billion during the year and stood at $57.1 bUlion on
June 30, 1956. Under the impact of the unprecedented demand for
private credit, commercial banks liquidated some of their holdings of
Government securities. There was only a small change in Federal
Reserve Bank holdings of Federal securities during the year. An
analysis of the estimated changes in bank versus nonbank ownership
of Federal securities, during the fiscal year 1956 is shown by type of
issue in the following table.
Estimated changes in ownership of Federal securities ^ by type ofissue, fiscal year 1956
[In biUions of dollars]
..
Change accounted for b y -
•Total
changes
Banks
Private
nonbank
investors
Govemment
investment
accounts
1.3
2.5
-4.8
.8
1.5
-.1
1.0
2.0
.2
.3
.6
-.4
2.2
-6.3
-1.3
-.4
-.5
-3.8
-1.3
(*) 2.7
-.2
4.4
1.2
-5.8
-6.9
.2
-.9
-1.9
-.6
-1.9
1.9
-.6
.1
-.5
.2
Total nonmarketable, e t c . . .
-1.4
-2.6
1.8
-.5
-.5
Total change..
-1.6
1.8
3.0
-6.3
-6.6
Marketable securities:
Treasury bills
Certificates of'indebtedness
Treasury notes
Treasury bonds, etc
_ ..
Totalmarketable
Nonmarketable securities, etc.:
United States savings bonds
Treasury savings notes
Special issues to Government investment accounts
Treasury bonds, tnvestment series
other
_
(*)
(*)
(')
1.9
-.1
Total
-.4
Commercial
-2.5
-.4
(*)
(*)
(*)
(*)
-.1
Federal
Reserve
-.1
.2
*Less than $50 mUlion.
1 Gross public debt, and guaranteed obligations of the Federal Govemment held outside the Treasury.
REVIEW OF FISCAL OPERATIONS
35
CORPORATIONS AND CERTAIN OTHER BUSINESS-TYPE ACTIVITIES
OF THE UNITED STATES GOVERNMENT
The activities of Government corporations and certain other business-type agencies are financed according to law from-their own receipts,
from capital stock subscriptions or by appropriations, from sale of
obligations to the public, or from borrowings from the United States
Treasury. The Secretary of the Treasury is authorized by law to
purchase the obligations of many of the agencies and is authorized to
approve the terms and conditions of such obligations. In general,
obligations issued by agencies to the public must be approved by the
Secretary of the Treasury in accordance with the Government Corporation Control Act (31 U. S. C. 868); a few agencies are exempt from
this requirement but are required to consult with the Secretary of the
Treasury prior to issuing obligations to the public. .
Advances by the Treasury
Cash advances were made by the Treasury during the fiscal year
1956 to certain Government corporations and agencies, pursuant to
statutory authorizations, amounting to $16,447.5 mUlion; repayments
and refundings by these Government corporations and agencies
amounted to $12,568.5 million, and cancellations to $5.8 million, as.
authorized by law, resulting in net advances by the Treasury during
the fiscal year of $3,873.2 mUlion. The total outstanding advances
as of June 30, 1956, amounted to $20,048:6 million; the detaUed information pertaining to these advances is shown in table 115.
Interest on advances by the Treasury
Interest rates on borrowingst^^from the Treasury, except where such
rates are fixed by statute, are determined by the Treasury from month
to month and take into account the cost which the Treasury must pay
to borrow money in the current market, as reflected by prevaUing
market yields on United States Government obligations with.maturities corresponding to the approximate duration of the advances to
be used by the agencies for their programs. The rates currently
determined are used when new advances are made.
A description of the holduigs by the Treasury of the obligations
issued by the Government corporations and agencies for" advances
outstandiag as of June 30, 1956, together with the applicable rates of
iaterest, is given in table 114.
Borrowing authority and obligations outstanding
The borrowiag authority of agencies authorized to borrow from the
Secretary of the Treasury was increased in the net amount of $2,002.3
mUlion during 1956. There were $3,056.0 in new authorizations and
$1,053.7 of reductions in authorizations. The Commodity Credit
Corporation received the largest increase, amounting to $2,000.0 mU-
36
19 56 REPORT OF THE SECRETARY OF THE TREASURY
lion, pursuant to the act approved August 11, 1955 (15 U. S. C. 714b).
Table 112 shows the status of the borrowing authority of the agencies authorized to borrow from the Secretary of the Treasury. The
unused borrowing authorizations of these agencies amounted to
$15,404.7 million as of June 30, 1956, and $16,705.2 mUlion as of June
30, 1955.
Assets, liabilities, and net investment of the United States in Government corporations, etc.
The reporting coverage of Government corporations and certain
other business-type activities was considerabl}^ expanded by Department Circular No. 966 issued Januaiy 30, 1956, and Supplement No. 1
thereto, issued June 1, 1956. The agencies submitting reports to the
United States Treasury as of June 30, 1956, had-combined assets of
$75,582.3 million and liabilities of $4,666.6 million, leaving a net
Government investment in these agencies of $70,915.7 million. The
major assets consisted of $18,113.1 million in net loans receivable;
$21,811.5 million in commodities, supplies, and materials, after
deducting allowances for losses; $17,599.8 million in land, structures,
and equipment, after deducting reserve for accumulated depreciation;
and $4,437.1 million in investments including public debt obligations
of the United States. The major liability items consisted of $1,617.9
million in accounts and other pa^^ables and $1,427.4 million in outstanding obligations issued by certain agencies to the public and not
guaranteed by the United States. Borrowing b}^ agencies of the
Government from the Treasury, formerly shown as bonds, debentures,
and notes pa^^able of the agencies, are .now shown as part of the Government's net investment. This change in classification is the
principal reason, for the showing of a decrease in liabilities outstanding
in 1956 as compared with 1955. These borrowings amounted to
$19,951.1 million on June 30, 1956.
The statements of financial condition submitted by the various
reporting agencies are published q u a r t e r ^ and their statements of
income and expense, and of source and application of funds semiannually in the Treasury Bulletin. The statements of financial condition of each agency as of June 30, 1956, are shown in table 117 of
this report. Table 116 shows a comparison of the combined assets,
liabilities, and net investment of the Government in the reporting
agencies as of June 30 for the years 1947 to 1956 inclusive. The statement of income and expense of each agency for the fiscal year 1956
appear in table 118 and the statement of source and application of
funds of each agency in table 119.
ReT)ayments of capital stock of Government corporations
During the fiscal year 1956, Government corporations made cash
repa3aTLents on capital stock amounting to $14.2 million. The Fed-
REVIEW OF FISCAL OPERATIONS
37
eral Savings and Loan Insurance Corporation deposited $11.9 million
into miscellaneous receipts of the Treasury.
The production credit corporations, through the Farm Credit Administration, deposited $2.2 million into a revolving fund maintained
in the Treasury. Table 75 includes detaUs relating to capital stock
of Government corporations.
Other payniients to the Treasury by Government corporations, etc.
Interest, dividends, and other earnings deposited in the Treasury by
Government corporations and certain other business-type activities
amounted to $618.5 million during the fiscal year 1956 as compared
with $577.7 million during the fiscal year 1955. Detailed information
on such pa37^ments appears in table 122.
Guaranteed obligations of Government corporations, etc.
As of June 30, 1956, outstanding obligations guaranteed by the
United States amounted to $73.9 million, of which $73.1 million were
unmatured outstanding obligations issued by the Federal Housing
Administration. The balance of $0.8 million represents matured
obligations issued by the Federal Farm Mortgage Corporation and the
Home Owners' Loan Corporation. Funds are on deposit with the
Treasurer of the United States for payment of these matured obligations. Detailed information covering these obligations is shown in
table 23.
SECURITIES OWNED BY THE UNITED STATES GOVERNMENT
The United States Government owned securities with a net face
value of $31,636.2 million as of June 30, 1956. These securities
consisted principally of capital stock, bonds, and notes of Government corporations and other business-type activities; mortgages
acquired from sale of real estate, vessels, and other property; securities
evidencing loans to farmers, railroads, home owners, foreign governments, and others; and securities evidencing the United States
subscriptions to the capital of the International Bank for Reconstruction and Development and to the International Monetary Fund. A
statement showing the securities owned as of June 30, 1956, other than
foreign government obligations of World War I and World War I I ,
appears in table 75, with an explanation of each net increase or decrease
during the fiscal year.
:
TAXATION DEVELOPMENTS
In his January 1956 State of the Union Alessage, the President
recognized that our present tax level is very burdensome and, in the
interest of long-term and continuous economic growth, should be
reduced when we prudently can, " I t is essential, in the sound
38
1956 REPORT OF THE SECRETARY OF THE TREASURY
management of the Government's finances," he said, '^that we be
roindful of our enormous national debt and of the obligation we have
toward future Americans to reduce that debt whenever we can ap- .
propriately do so. Under conditions of high peacetime prosperity,
such as now exist, we can never justify going further into debt to
give ourselves a tax cut at the expense of our children. So, in the
present state of our financial affairs, I earnestly believe that a tax
cut can be deemed justifiable only when it will not unbalance the
budget, a budget which makes provision for some reduction, even
though modest, in our national debt. In this way we can best maintain fiscal integrity."
The objectives of tax policy in the fiscal year 1956 were prescribed
by the budgetary situation. During the year a budget surplus, to
which the administration has been pledged from the beginning, was
achieved. Receipts exceeded expenditures by $1,754 million.
The President's objective was to secure and safeguard the budgetary
balance and to achieve a surplus in order that a start might be made
toward debt reduction. In the tax area this meant that it was necessary to hold fast against major tax reductions. In the expenditure
area, it entailed constant care for efficiency in Government operations
and an alert guard against waste and duplication in activities.
Budgetary balance and economic prosperity were recognized to be
interdependent and complementary objectives. The nationwide prosperity was in large part inspired and sustained by confidence in the
administration's determination and success in getting the Government's financial affairs on a sounder basis. I t refiected a public
realization that continued heavy deficit financing contributes to pressures for inflation and that getting and keeping the Government's
budget in balance has a very real, practical bearing upon general
well-being.
Corporate and excise rate extensions
To implement his fiscal policy, the President recommended that
the existing corporation normal tax rate and the existing rate on
certain excises due to be reduced on April 1, 1956, be extended for
another year.
Legislation implementing these recommendations was reported
unanimously by both the House Committee on Ways and Means and
the Senate Finance Committee and passed in-time to be approved by
the President on March 29, 1956 (Pubhc Law 458). Without this
extension, the corporation income tax rate would have reverted to 47
percent on April 1, 1956, through a scheduled reduction in the normal
tax rate from 30 "to 25 percent. The excise tax rates which in the
absence of this extension would also have been decreased in 1956
were those on alcoholic beverages, cigarettes, gasoline, automobiles,
39
REVIEW OF FISCAL OPERATIONS
trucks and buses, automotive parts and accessories, and diesel and
special motor fuels.
Public Law 458 forestalled a revenue loss of $205 million in the
fiscal year 1956 and $2,297 million in the fiscal year 1957. The estimated full year effect of these_rate extensions aggregated $3,218
miUion.
Adjustments in selected excise taxes
In the interest of specific policy objectives, adjustments were made
in several excise taxes.
Estimated revenue gairi from extension of corporate and excise tax rates from April Ij
1956, to April 1, 1957, under Public Law 458 i
Change in rate which
would have occurred
without Public Law
458
' . '
Corporation income tax
Excises:
Alcohol taxes:
T)istilled spirits
Beer
Wine
Total
Tobacco taxes:
Cigarettes (small).
62% to 47%
__
.
Manufacturers' excise taxes:
Gasoline
Passenger cars .
Trucks, buses, and trailers..
Automobile parts and accessories
_.. $4 to $3.50 per thousand.
2 to IVifi per gallon
10% to 7%
8% to 6%
_-. 8% to 6%
-
Total
Miscellaneous excise taxes:
Diesel and special motor fuels
Total excises _
Total corporation income tax and
excises.
2 to 1^^ per gallon
Fiscal
year
1956
.--_
$10.50 to $9 per gaUon..
$9 to $8 per barrel
Various
-
Estimated revenue gain under
Public Law 458 (In mUUons
of dollars)
Fiscal
year.
1957
Full
. year
effect
1,370
2,080
44
22
2
98
50
6
144
72
8
68.
164
224
47
130
180
22
. 50
9
8
228
300
56
62
251
350
65
60
89
636
726
1
205
7
927
8
1,138
206
2,297
3, 218
NOTE.—The extension of existing excise tax rates postponed $191 mUlion of floor stocks refunds from
fiscal year 1967 to fiscal year 1958.
1 Excludes rate increases and extensions made by the Federal-Aid Highway Act of 1956, approved June
29,1956.
In conformity with the_recommendation made by the President
in his agricultural message of January 9, 1956, farmers were relieved
of the burden of excise taxes on gasoline and special fuels used on
their farms for farmiag purposes. This was accomplished by legislation providing for an annual refund of gasoline taxes by the Treasury Department directly to farmers. Comparable relief was provided
from taxes on diesel fuel and special motor fuel, such as liquified
petroleum gas and tractor fuel. On the basis of the 3 cents per
gallon gasoliae tax (as subsequently increased by the Federal-Aid
40
1956 REPORT OF THE SECRETARY OF THE TREASURY
Highway Act of 1956), the enactment of Public Law 466, approved
April 2, 1956, will result in about $90 million of refunds to farmers
per year.
In the interest of international policy. Public Law 796, approved
July 25, 1956, extended the exemption from the 10 percent,tax on
transportation of persons with respect to transportation outside the
United States (except certain parts of Canada and Mexico) and provided for partial exemption for transportation between the continental United States and Alaska and Hawaii. This tax revision wUl
result in an estimated $17 inillion tax saving to travelers per year.
To provide tax relief on commuters' travel and other short trips
and to reduce the work load falling on local mass transportation
companies in collecting tax on numerous small transactions, the
exemption from the 10 percent excise tax on amounts paid for transportation of persons was increased from 35 cents for single fares to
60 cents by Public Law 1015, approved August 7, 1956. The
estimated annual tax saving to travelers is about $6 m.illion.
To provide financial relief to motion picture theaters Public Law
1010, approved August 6, 1956, increased the exemption from the.
general admissions tax from 50 cents to 90 cents. Admissions in
excess of 90 cents continue to be taxed on the full amount of the
admission charge at the rate of 1 cent for each 10 cents. The resulting reduction in annual tax collections is estiihated to be about $60
mUlion.
Technical and administrative aspects of excise taxes
During the fiscal year detailed consideration was given to legislative proposals to improve the technical and administrative provisions
governing excise taxes.
In 1953 in preparation for the comprehensive revenue revision
which culminated in the Revenue Code of 1954, the staffs of the
Treasury Department and the Internal Revenue Service examined
numerous proposals advanced by taxpayers and other groups outside the Government for modification of the administrative and
technical aspects of excise taxes. I t was contemplated that a number of recommendations wiould be developed for presentation to the
Committee on Ways and Means at that time. Under the time pressures which developed, however, it did not prove possible to include
a complete review of excise tax matters in the Department's recommendations for the 1954 tax revision.
In recognition of this situation, the Committee on Ways and
Means, at the close of the first session of the 84th Congress, authorized and directed the appointment of a special subcommittee to
REVIEW OF FISCAL OPERATIONS
41 .
make a study of Federal excise tax technical and administrative
problems. The question of excise tax rates was. excluded from consideration. The subcommittee held public hearings in October 1955,
when it received testimony from Treasury Department and. industry .
witnesses on needed revisions (see exhibit 13).
The Treasury presented proposed revisions of the law with respect
to alcoholic beverages and tobacco and with particular emphasis on
the taxation of distilled spirits.^ The basic internal revenue laws
dealing with distilled spirits had been enacted shortly after the Civil
War, and there had been no general revision of these statutes in over
85 years. The amendments made from time to time to the statutes
relating to distilled spirits had been adopted primarily for the purpose of meeting new conditions as they arose, such as the 18th ahd
21st amendments to the Constitution, or for the purpose of correcting specific defects or inequities. Certain of the provisions originally
designed to meet particular situations or problems no longer served
a useful purpose and were not adaptable to current business operations
or to realistic regulatory controls.
The primary purpose of the proposed legislation was modernization and to provide laws of uniform application to production, warehousing, processing, and removal for use in connection with all
types of distilled spirits. The proposed revisions were designed also
to facilitate utilization of plants and equipment for national emergency purposes, to eliminate artificial statutory distinctions between
similar operations, to repeal archaic, obsolescent, and unnecessary
provisions, and in general to establish a more efficient system of
liquor tax administration.
On the basis of the Treasury and public testimony received b}^ the
subcommittee, the staffs of the Joint Committee on Internal Revenue
Taxation and of the Treasury Department (including the Internal
Revenue Service) submitted a joint report on excise tax technical and
administrative problems on January 9, 1956.^ In view of the President's budgetary objectives, the Treasuiy limited its suggestions for
immediate enactment to revisions involving no revenue loss. With
respect to a number of additional changes, it agreed in principle that
the,y would be logical and reasonable, but because of the revenue loss
involved could not recommend their enactment at this time. These
recommendations were the subject of three days of public hearings
held by the subcommittee. In March 1956 the subcommittee held
1 See "Hearings before the Subcommittee on Excise Tax Technical and Administrative Problems,"
House Committee on Ways and Means, 84th Congress, 2d Session, pp. 171-211.
2 This report appears in "Hearings before the Subcommittee on Excise Tax Technical and Administrative
Problems," House Cojnmlttee on Ways and Means, 84th Congress, 2d Session, Part 2, pp. 3-53.
42
1956 REPORT OF THE SECRETARY OF THE TREASURY
additional public hearings and on April 20, 1956, it submitted 80
specific recommendations for the consideration of the full Committee
on Ways and Means. These recommendations, as amended by the
full committee, were subsequently incorporated in H. R. 11298, and
covered the entire range of excises, involving some increases as well as
some decreases in revenue with an estimated overall net loss of $2.1
million. Action on the legislation was terminated by the adjournment
of the Congress.
Life insurance companies
As described in the Annual Report for 1955, the taxation of hfe
insurance companies has long been governed by special provisions
which in recent years have been on a year-to-year stopgap basis.
Permanent legislation in this area could not be considered at the time
of the 1954 revenue revision and in 1955 legislation on this subject was
deferred to the second session of the 84th Congress after a new temporary formula for the year 1955 had been partially processed. Temporary legislation for 1955 (Public Law 429) was approved March 13,
1956. It provides for the application of the regular corporate tax rates
to the net investment income of these companies after deduction of
87K percent on the first $1 million and 85 percent on the balance of
income above $1 million. The effect of the 85 percent credit is equivalent to imposing a tax rate of 7.8 percent on the entire net investment
income. This legislation also provides significant improvements in
the tax base and deals with a number of abuses under the old law. The
1955 tax liabilities of life insurance companies are estimated to be
about $248 million under Public Law 429. If the stopgap formula for
1954 had been extended to 1955, it would have resulted in about $197
million tax collections.
Public Law 429 also broadens the definition of investment income,
which formerly included specifically only interest, dividends, and rents.
It expressly includes royalty income, income from a noninsurance
business, and certain payments in connection with leases and mortgages which are equivalent to rent or interest. This redefinition of investment income is made applicable also to mutual fire and casualty
companies. The legislation also limits abuses by certain quasi-investment companies which do a small life insurance business in order to
qualify for the favorable tax treatment accorded life insurance companies on their investment income. It also modifies the treatment of
cancellable health and accident business conducted by life insurance
companies and eliminates the 85 percent intercorporate dividends
received credit with respect to the portion of dividend income on which
REVIEW OF FISCAL OPERATIONS
43
the 85 percent insurance credit is claimed. The latter provision removes unjustified duplication of credits where the special insurance
company treatment already substantially eliminates multiple taxation
of the corporate dividends which the intercorporate dividends credit
is designed to prevent.
During the year work continued on developing a broader and more
general program for the taxation of life insurance companies. However, recommendations for a broader and more permanent approach
to taxation were not completed in time to permit in this session of
Congress the extensive study of proposals which had been desired by
the appropriate congressional committees. Therefore, before adjourning, the Congress extended application of the 1955 formula for
taxing life insurance companies to taxable years beginning in 1956
(Public Law 784, approved July 2, 1956).' In the absence of this extension the taxation of life insurance companies would automatically
have reverted to the formula originally adopted in 1942 with certain
modifications adopted under the 1955 legislation.
Highway program
The expanded Federal highway program, proposed by the Presi. dent to the Congress on February 22, 1955, was enacted duriag this
fiscal year. The Treasury participated in the development of the
financing (as distiaguished from the expenditure) aspects of the
legislation.
The Secretary appeared before the House Committee on Ways and
Means on February 14, 1956, on the financing provisions of the
program as embodied ia H. R. 9075 (see exhibit 7). T h a t bill proposed that the program be fiaanced by new and additional taxes
but also contemplated the use of revenues from existing taxes on
motor fuels and tires and inner tubes. The Secretary generaUy
supported the proposed method of financing but poiated out that the
additional revenue provided would not be sufficient and that insofar
as revenues from existing taxes (other than those on motor fuels)
were allocated to the highway program, other revenues would have to
be raised to cover the loss ia general revenues. The Secretary also
suggested that the revenues iatended for highway purposes be placed
in a special fund with expenditures to be withdrawn from the fund.
On May 17, 1956, the Secretary appeared on the same subject
before the Senate Committee on Fiaance (see exhibit 8). He poiated
out that under the bUl passed by the House (H. R. 10660) part of the
revenue for the program would be derived from dedication of revenues
from existing taxes, ia addition to those on motor fuels; and that this
44
19 56 REPORT OF THE SECRETARY OF THE TREASURY
diversion of excise collections from general revenues would require
additional revenues for the general budget or requue contmuation of
old taxes which otherwise might be reduced. He also suggested that
the trust fund embodied in the bill be amended to permit allocation
of funds therefrom to be so timed that estimated expenditures from
the allocations would not exceed the amounts estioiated to be available ia the fund.
The Federal-Aid Highway Act of 1956 was approved by the President
on June 29, 1956 (Public Law 627). I t provides for an additional tax
of 1 cent per gallon on gasoliae and other motor fuels, an iacrease in
the tax on trucks and buses from 8 to 10 percent, and an increase in
the tax on tires of the type used on highway vehicles from 5 to 8 cents a
pound. New taxes are imposed on tread rubber (camelback) at 3
cents a pound and on large, trucks and buses (those having a gross
weight of more than 26,000 pounds) at the rate of $1.50 per year for
each 1,000 pounds of gross weight. The new and iacreased taxes
became effective on July 1, 1956, and contmue through June 30, 1972.
In keeping with the concept of relating the revenues to expenditures
for highway purposes, provision is made for exemption from the new
and additional taxes for certaia nonhighway uses. Exemption from
the new and mcreased taxes on motor fuels and the weight tax on buses
is provided also for privately owned local transit systems because of
the dUficult financial position of many of these companies.
The law creates a '^Highway Trust F u n d " into which are placed
for the next 16 fiscal years all the revenues from the Federal taxes on
motor fuels, the tax on tread rubber, the weight tax on trucks and
buses, and the revenue from the increase of the taxes on tires and
trucks and buses. Between July 1, 1957, and June 30, 1972, the fund
will also receive the yield from 3 percentage points of the existing 8
percent tax on trucks and buses and all the existing taxes on tues (5
cents a pound) and tubes (9 cents a pound).
Anticipated receipts from the several taxes reserved for the highway
program, as estimated when the legislation was under consideration,
are presented in the accompanying table.
Estimated tax receipts allocated to highway trustfund, fiscal years 1957-72
[In mUlions of dollarsj
P r e s e n t law taxes
Gasoline
(2 cents
Fiscal year
gaUon)!
1957
1958
1959
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
-
-
-
Diesel
fuel
(2 cents
per
gallon)
Tires
(5 cents
per
pound)
Inner
tubes
(9 cents
per
pound)
N e w or mcreased taxes
Trucks,
buses,
• and
Total,
trailers
(3 percent p r e s e n t
of m a n u - law taxes
facturers'
price)
Gasoline
(1 cent
per
gallon) 2
Diesel
fuel
(1 cent
gallon)*
8 846
994
1,031
1,064
1,099
1,133
1,169
1,203
1, 237
1,269
1,307
1,341
1.375
1,407
1,436
7 1, 650
S22
27
28
29
30
31
32
33
34
35
36
37
37
38
39
7 47
184
191
197
204
210
217
223
229
235
242
248
255
261
266
273
18
18
9
9
9
9
9
9
9
9
9
9
9
9
9
75
81
78
84
84
87
90
87
96
96
96
99
99
99
105
868
1,298
1,349
1,377
1,426
1,467
1,514
1,558
1,590
1,644
1,690
1,731
1, 775
1,814
1,849
2,034
426
473
490
506
522
539
556
572
589
605
623
638
655
670
634
747
10
13
13
13
14
15
15
15
16
17
17
17
18
18
18
22
19, 561
535
3,435
153
1,356
25,040
9,295
251
Total
1 After deduction of refunds of tax on farm gasoline, estimated at 6 percent.
2 After deduction of all use in other than registered highway-type vehicles, estimated at 10 percent, and. use by transit systems, estimated at $4 mUlion amiually.
3 After deduction for transit use, estimated at $1 mUlion annually and use in nonregistered highway vehicles.
* After deduction of tires for nonhighway-type vehicles, estimated at 12 percent.
Tires
(3 c e n t s
per
pound)*
95
98
100
103
103
111 i
111
116
124
127
129
132
135
135
140
145
1,909
Totali receipts-
Trucks,
; buses,
and
Tread
trailers
rubber
(3 e e n t s (2 p e r c e n t
of m a n u per
p o u n d ) * facturers'
price)
8
9
11
9
11
8
12
11 !
14
11
12
14
11
14
11
14
180
Trucks,
over
Total,
26,000
n e w or
pounds
($1.50 per increased
thousand
taxes
pounds,
annual
tax)
47
50
54
52
56
56
58
60
53
64
64
64
66
66
66
76
45
46
47
43
49
50
52
53
55
56
57
59
60
62
63
64
631
639
715
731
760
779
804
827
856
880
902
924
945
965
932
8 1,063
957
866
13, 458
Annual
; Cumui Ihdve"
1,499
1,987"
2,064;
2,103
2,186 i
2,246
2,318
2,385 .
2, 452'
2, 5242,5922,655
2, 720;
2,779
2,831
3,152
1 499'
3,.486.
5,,550i
7;.658
9,844'12,090)
I4v403
16,793
19,245^
211 769:
24,361
27;.0I6
29,.736.
32,615^
35,346.
38, 499»
38, 498
3 After deduction of rubber for tires for nonhighway-type vehicles, estimated': at
6 percent.
6 Excludes receipts from taxes accrued prior to July 1, 1956.
7 Including receipts after June 30,1972, of taxes accrued on or before t h a t date.
8 Including receipts after June 30, 1972, of taxes accrued on or before that.date>.liess;
floor stocks and other refunds paid in 1973.
a
CT
>
a
>^:
>
a
OQ.
46
1956 REPORT OF THE SECRETARY OF THE TREASURY
• Amounts in the trust fund are avaUable for making expenditures
after June 30, 1956, and before July 1, 1972, to meet the obligations
incurred under the Federal-Aid Road Act as amended and supplemented (23 U. S. C. 48, 16 U. S. C. 503). Whenever the Secretary of
the Treasury determines that the amounts avaUable in the trust fund
will be insufficient to defray the expenditures required as a result of the
amounts authorized to be appropriated to the States for any fiscal
year for the interstate highway system, he is required so to advise the
Secretary of Commerce, who wUl then make corresponding reductions
in the appropriations for the interstate system.
Other taxation developments
During the congressional session several hundred tax bUls were
introduced ranging from proposals for major tax reduction to minor
technical amendments of the Revenue Code. Many of these were considered at length by the committees of Congress and in response to
their requests, the Treasury prepared analyses and formulations of
policy positions on specific legislative items. During the second
session of the 84th Congress alone, departmental reports on more
than a hundred separate bills were prepared. The Department recommended against the enactment of many of these because they involved
retroactive legislation to which the Department is opposed as a matter
of principle. It opposed enactment of others because they would
have involved substantial revenue loss or because they were not
essential to tax fairness.
A number of bills relating to raUroad retirement benefits were of
special interest to the Treasury because one of their provisions would
have allowed employees to exclude contributions to the railroad
retirement program from their taxable income. The Department
strongly opposed such exclusions because they would have represented a fundamental departure from established principles of Federal
income taxation. They would have created a special tax advantage
for a special group of taxpayers and would have involved a very large
loss of revenue, particularly if comparable exclusions were subsequently extended to other taxpayer groups (see exhibits 9, 10, and 11).
The legislation adopted by the Congress (Public Law 1013, approved
August 7, 1956) provided for a 10 percent increase in certain railroad
retirement benefits but did not contain the income tax exclusion for
employees' railroad retirement contributions.
In addition to the legislation previously discussed, the second
session of the 84th Congress enacted a number of other measures containing tax provisions (see exhibit 15). These included bUls which
liberalized income tax deductions for contributions to medical research,
conformed the provisions of the retirement income tax credit to the
liberalized proyisions of the spcial security act, made some changes iu
REVIEW OF FISCAL OPERATIONS
'
47
the provisions of the estate tax, extended application of the Reneg:otiation Act to January 1, 1959, and continued the suspension of duties
and import taxes on metal scrap until June 30, 1957.
Some tax measures were vetoed by the President. One of these,
H. R. 7643, would have allowed retroactively to 1950 to certain firms
receiving royalties in the United Kingdom a credit against the Federal
income tax for taxes imposed by the United Kingdom on the payer of
royalties. Through the combined effect of United States income tax
law and the income tax convention wdth Great Britain, the combination of British and United States taxes paid on the royalties of some
American recipients are now higher than those on the royalties of
others, depending on whether the firm has a permanent establishment
in the United Kingdom. This is a result of the existing tax convention and is not due to the Federal tax law. The Treasury has undertaken to obtain a correction of the situation through appropriate modification of the convention. The retroactive application of the bUl to
1950 would have singled out for special relief a small group of taxpayers
whose need for relief had not been demonstrated.
Another bUl, H. R. 4392, would have provided special tax treatment for certain real estate investment trusts by extending to them,
under certain conditions, the ^'pass-through" method of taxation
which present law provides for regulated investment companies.
This treatment consists of exempting most of the earnings of the
investment company from taxation and taxing the organization only
on its retained earnings and capital gains. Real estate trusts are not
analogous to regulated investment trusts and there is no adequate
basis for exempting their earnings from corporate income tax. Furthermore, it was by no means clear how far the proposed new provision of the law might have been applied; it might well have been
used to secure virtual tax exemption in many real estate activities
going far beyond the apparent intent of the proposal.
The President vetoed also H. R. 10468 and H. R. 10662 which
would have created bridge commissions to construct and operate
bridges at two places between Indiana and Kentucky. Under these
bills, the Federal Government would have taken away from the
States and their highway agencies the responsibility for providing
bridges of concern primarily to the residents of the immediate area
to be served and would have given that authority to a special commission which would be free from State supervision and not subject
to Federal supervision.
Regulations
During the year the Treasury continued its intensive efforts to
promulgate new regulations under all of the provisions of the Internal
Revenue Code of 1954. The complete overhaul of the revenue laws
48
19 56 REPORT OF THE SECRETARY OF THE TREASURY
effected by the 1954 legislation has necessitated an intensive program of assistiance to the taxpaying public in interpreting and explaining the new law. During the year, 62 notices of proposed rule
making were issued inviting taxpayer comment aiid 45 final Treasmy
Decisions were published.
Social security developments
Public Law 880, approved August 1, 1956, amended the financial
features of the old age and survivors insurance program in several
significant respects. It extended coverage to about 600,000 additional farm owners and operators and to about 225,000 self-employed
lawyers, dentists, veterinarians, optometrists, and others. Physicians and osteopaths continue to be excluded. It also lowered the
retirement age for women to the age of 62 and granted employed
women and wives the option to accept reduced benefits at 62 or
obtain full benefits at 65. It provided for the first time disability
benefits payable to permanently and totally disabled persons over
50 years of age beginning in July 1957 and established a separate
trust fund for the disability program to minimize the effects of the
special problems in this field on retirement and survivors' protection.
Effective January 1, 1957, the rates of the employment tax on
both employers and employees were increased from 2 percent to 2%
percent. Effective with respect to taxable years beginning after
December 31, 1956, the tax rate on self-employment income was
increased from 3 percent to 3% percent. Both rate increases are
to be in effect untU 1960. (See exhibit 12.)
On the recommendation of the Board of Trustees of the Federal
old-age and survivors insurance trust fund, of which the Secretary
of the Treasmy is the managing trustee, the method of computing
the interest rate on the investment of the trust fund has been changed.
Under prior law, the interest on special obligations issued directly
to the fund was the average on the total interest-bearing public debt.
In view of the long-term nature of the trust fund, the trustees proposed that the rate on these securities be based on the average interest paid on marketable Treasury bonds (by definition having a maturity of five years or more at the time of issue). This ties the earnings of the fund more closely to'^the market rate of interest and places
the earnings of the fund on a basis more nearly comparable to those
of privately administered trust funds. The change is expected to
increase the interest earnings of the fund, based on its present size,
by about $44 million annually.
International tax developments
The principal developments affecting taxation of business income
from foreign sources took place largely in connection with the bi
REVIEW OF FISCAL OPERATIONS
49
lateral tax treaty program for the avoidance of double taxation and
the elimination of other tax barriers to the flow of international
trade and investment. There were no legislative developments on
H. R. 7725, which had been introduced during the first session of
the 84th Congress and incorporated the Department's recommendations for a 14 percent rate reduction on business income from foreign
sources and the deferral of tax on income derived abroad through a
branch establishment until such income was actually withdrawn from
the foreign country.
The first income tax convention with a Latin-American country
was consummated during the year. A treaty with Honduras was
signed June 25, 1956, and the Senate gave its consent to ratification
on July 19, 1956. The convention is similar in major respects to
those in effect with most European countries. However, several
provisions are innovations, such as the allowance under certain conditions of charitable contributions to a foreign organization as a
deduction in computing taxable income.
I n conjunction with a proposed convention to supplement the
existing income tax convention with France, the Treasury negotiated
an agreement with the French Ministry of Finance by which exemption from French turnover taxes was granted to royalties received by
American licensors of copyrights, patents, designs, etc., to French
licensees.^ (See exhibit 14.) A supplementary income tax convention with France was completed, and the Senate gave its approval and
agreed to ratification of the convention on July 19, 1956. The exemption was made applicable also to liabilities for prior years, running
back in some cases to 1951. The agreement also enabled American
motion picture enterprises in France to reorganize their method of
operation to reduce turnover taxes on film rentals.
An income tax convention with Austria was negotiated, but arrangements for signature of the formal documents had not been completed
by the end of the fiscal year. Similarly, discussions were concluded
with Belgium regarding extension of the existing income tax convention to the Belgian Congo; arrangements for the signature of formal
doc^uments were not completed. Modification of the income tax convention with Canada was agreed to but completion of the necessary
formalities came too late to submit the protocol to the Senate for
consent to ratification. The income tax convention with the Netherlands was made applicable, with certain modifications, to the Netherlands Antilles when ratifications were exchanged on November 10,
1955, of a protocol to the convention. Extensive negotiations were
conducted during the year on double taxation agreements with
1 For text of agreement, see "Senate Report Executive J," 84th Congress, 2d Session, pp. 6-15.
399346—57
5
50
195 6 REPORT OF THE SECRETARY OF THE TREASURY
Mexico, Cuba, and Pakistan, and major progress was made toward
completing draft agreements.
International Financial and Monetary Developments
The fiscal year 1956, was in general a period of prosperity and of
high levels of trade and of production in the free world. Although
some countries still experienced balance-of-payments difficulties and
inflationary pressures, the action taken to remedy such difficulties in
most instances took the form of fiaancial measures rather than increased rehance upon exchange restrictions or direct controls, such as
import quotas. The fiaancial measures included allowing interest
rates to rise in response to the strong demands for funds, and restraint
in availability of bank credit, often followed by fiscal action in the
form of increased taxes, reduced subsidies, and actual or planned
reduction in government expenditures.
Restrictions on trade, iacluding discrimination against the dollar
area, were somewhat reduced and, in some instances the restrictions
that remain are motivated by protectionist rather than financial reasons. Some countries expanded their lists of permitted dollar imports,
and there was a continuance of efforts among the Western European
countries to extend dollar liberalization. Discrimination among nondollar countries was also reduced through wider transferabUity of
curreacies and reduction of bilateral agreements.
The continuance of the improvement in the balance-of-payments
positions of most foreign countries was reflected in substantial increases
in their gold and dollar reserves, with the notable exception of the
United Kingdom. As in previous years, however, part of this increase
was attributable to United States Government programs of military
expenditure and foreign aid. There were some indications at the close
of the year that the pace of industrial expansion was slowing down,
even though inflationary pressures which might caU for vigorous corrective action persisted.
The United States balance of payments and gold movements
In the fiscal year 1956 the United States exported goods and services
to the value of $24.5 billion (including $3.0 biUion under mUitary aid
programs) and imported $19.1 biUion (including $2.9 billion of United
States military expenditures abroad). The surplus of exports, excluding goods exported under military aid programs, amounted to $2.4
billion, slightly larger than in fiscal 1955. The United States Government provided $2.2 billion net to foreign countries through nonmilitary grants, capital transactions, and other payments. Net outflow of United States private capital reached $1.7 bUlion. Total outpayments by the United States in the flscal year amounted to $23.2
REVIEW OF FISCAL OPERATIONS
51
biUion compared with receipts of $21.5 billion (both flgures exclusive
of mUitary aid grants), so that the rest of the world, including international organizations, showed a net gain of $1.7 biUion in gold and
long- and short-term dollar assets. Foreign dollar assets increased by
nearly $1.9 billion, but the increase was partly offset by net gold sales
to the United States of more than $0.1 billion. This year was the flrst
year since 1952 in which the United States made net purchases of gold
from the rest of the world.
As of June 30, 1956, foreign countries held $27.4 billion in gold and
short-term dollar assets (exclusive of U. S. S. R. gold holdings), compared with $25.5 billion held at the close of the preceding flscal year.
Gains in gold holdings accounted for $0.5 bUlion of the $1.9 billion increase and resulted primarily from new foreign gold production. At
the end of the flscal year 1956, foreign countries also held $1.1 billion
in United States Government bonds and notes, the same as at the end
of flscal 1955. (See table 103.)
In addition to holdings of foreign countries, international organizations held $3.8 billion in gold and short-term dollar assets as of June
30, 1956, a gain amounting to almost $0.2 billion for the flscal year.
These organizations also held $0.3 billion of United States Government
bonds and notes, an amount identical with their holdings on June 30,
1955.
Total estimated world gold holdings on June 30, 1956 (exclusive of
the U. S. S. R.) were $38.4 billion of which the United States held $21.9
billion and international organizations held $1.7 bUlion. Thus, the
United States held 57 percent of world gold reserves and 60 percent of
gold reserves held by individual countries.
United States gold policy was unchanged during the year.
Exchange and trade liberalization
Although no countries made their currencies formally convertible
in the course of the year, there was further progress in the direction
of freeing international exchange operations from governmental restrictions. A large measure of de facto convertibUity resulted from the elimination of many restrictions on exchange transactions, arrangements
for transferability of currencies, and the liberalization of trade, particularly by the countries of Western Europe.
Changes in the currency regulations of the Federal Republic of
Germany resulted in a considerable measure of resident convertibility
for the mark by permitting the retention of foreign currencies and the
purchase of foreign securities. The Belgium-Luxembourg Economic
Union, which imposes few exchange restrictions, permitted the purchase and sale of securities and property abroad by Belgian residents,
and permitted foreigners to deal in Belgian securities and to make investments in Belgium. The Netherlands also authorized its residents
52
1956 REPORT OF THE SECRETARY OF THE TREASURY
to purchase and sell securities denominated in dollars or the currencies
of member countries of the European Payments Union, and foreign
holders of capital denominated in guilders were permitted freely to use
these holdings for the purchase of securities. Current account exchange transactions are practically free of restrictions.
By agreement among the countries concerned, authorized banks in
Belgium, Denmark, France, the Federal Republic of Germany, Italy,
the Netherlands, Norway, Sweden, Switzerland, and the United
Kingdom were permitted to engage in foreign exchange arbitrage
transactions, both spot and forward, up to three months. The market
in these currencies is permitted to fluctuate freely within 1 percent of
parity. Moreover, in the Netherlands, forward transactions in dollars
were permitted. These arrangements facilitate transfer transactions
in the currencies of the countries concerned. In February 1955 the
United Kingdom had also authorized the Exchange Equalization
Account to deal in transferable sterling in foreign markets. The effect
of this policy during the period under review was to reduce the spread
between the rate for American account sterling and transferable
account sterling.
A series of agreements between BrazU and Belgium-Luxembourg,
Germany, the Netherlands, and the United Kingdom (later joined by
Austria and Italy), the so-called Hague Club, resulted in giving BrazU
transferability of earnings in transactions with these countries, and
uniform treatment of its exports to them. A somewhat similar arrangement (the Paris Club) was made between the Argentine and the European countries.
As indicated in last year's report, when the extension of the European Payments Union to June 30, 1956, was agreed upon, the basis of
settlements through the Union was established at 75 percent in gold
and 25 percent in credit, and provision was made for the establishment
of a new European Fund in the event of the termination of the European Payments Union. The termination clause was not invoked during
the year, and in June 1956 the Council of the Organization for European Economic Cooperation agreed to renew the European Payments
Union for another year with the termination clause and the settlement
ratio unchanged. In conjunction with this decision, bilateral agreements were concluded by some members for additional amortization
of claims and debts to the Payments Union, and Italy voluntarUy
repaid $12 miUion to the EPU.
In the course of the year a series of international conferences were
held on international flnancial and trade problems. Secretary Humphrey, as United States Governor, headed the United States delegation
to the tenth annual meeting of the Boards of Governors of the International Monetary Fund and of. the International Bank for Recon-
REVIEW OF FISCAL OPERATIONS
53
struction and Development held at Istanbul in September 1955 and
the eleventh annual meeting in Washington in September 1956. The
alternate governor for the United States at these sessions was the
Deputy Under Secretary of State for Economic Affairs then in office
(Samuel C. Waugh and Herbert V. Prochiiow, respectively). Under
Secretary of the Treasury Burgess, Assistant Secretary of the Treasury
Overby (who is also Executive Director of the Bank), and United States
Executive Director of the Fund Frank A. Southard, Jr., served as
Temporary Alternate Governors for the United States at these meetings. (See exhibits 18-21.) The flrst meeting of the Governors of the
International Finance Corporation was held in conjunction with the
1956 meeting of the Bank.
Secretary Humphrey attended the Ministerial Meeting in Paris of
the North Atlantic Treaty Organization in December 1955. Considerable attention was given in this meeting to an examination and
assessment of the international situation following the second Geneva
Conference. There was also discussion of closer cooperation among
the-NATO countries, under Article II of the North Atlantic Treaty
Organization, on nonmilitary matters.
Assistant Secretary of the Treasury Overby with other officials of
the Government represented the United States at the Ministerial
Meeting of the Organization for European Economic Cooperation in
February 1956. The meeting, under the chairmanship of Chancellor
of the Exchequer MacMillan of the United Eangdom, was attended by
Ministers of Foreign Affairs, Finance, and other departments of the
OEEC countries. Resolutions were approved covering payments
and trade policies of European countries, dollar liberahzation, and
cooperation on atomic energy for peaceful uses.
Secretary Humphrey, together with Secretary Dulles, Secretary
Benson, and Secretary Weeks, represented the United States at the
second meeting of the Joint United States-Canadian Committee on
Trade and Economic Affairs held at Ottawa in September 1955.
The Treasury also participated in a number of other meetings of
international groups concerned with flnancial and economic problems
on a global or regional basis, such as the U. N. Economic and Social
Council, the Economic Cominission for Latin America, the Economic
Commission for Asia and the Far East, the Colombo Plan Organization, and the Southeast Asia Treaty Organization.
The Treasury also participated in the meeting of the contracting
parties to the General Agreement on Tariffs and Trade (GATT) in
their tenth regular session. Among the business items were further
consultations looking toward the relaxation of quantitative import
restrictions, including those which are discriminatory with respect to
the United States. Measures such as special compensatory taxes
54
1956 REPORT OF THE SECRETARY OF THE TREASURY
employed against United States exports were also considered and
steps taken to aUeviate their additional burden on United States
goods. The proposal for United States membership in the Organization for Trade Cooperation, referred to in the last annual report,
received a favorable report from the Ways and Means Committee of
the House of Representatives but was not acted upon.
In May 1956, representatives of 22 countries formaUy concluded the
fourth general round of GATT tariff negotiations involving the completion of some 60 intergovernmental negotiations for the stabilization or
reduction of tariff barriers. The United States participated in these
negotiations under the authority granted by the Trade Agreements
Extension Act, and the concessions made by the United States were
within the 15 percent hmitation imposed by that law. These concessions were to be staged in equal parts over a three-year period.
International Monetary Fund and exchange stabilization arrangements
The International Monetary Fund which has been established to
promote international monetary cooperation, and particularly to
encourage exchange stability and freedom of exchange transactions,
continued to consult with its members retaining exchange restrictions
on current transactions. Through these consultations, the Fund has
pressed for exchange simphflcation and the elimination or reduction
of exchange restrictions. Its suggestions have resulted in signiflcant
modiflcations of policy in a number of member countries. Particular
attention was paid to bilateral arrangements in the course of the Fund
consultations. Although there was little change in the total number
of bilateral agreements during the year, the liberalization of the terms
of many of these agreements reduced their restrictive effect on trade.
Few changes in par values occurred during the period. Following
the change in August 1954 in the par value of the Paraguayan guarani
from 15 to 21 guaranies per United States dollar, the Fund, in March
1956, concurred in a further devaluation, from 21 to 60 guaranies to the
United States dollar, accompanied by a simpliflcation of the rate
structure. The Fund also agreed to a change in the par value of the
Pakistan rupee, from 3.31 to 4.76 rupees per United States doUar,
effective July 31, 1955.
Steps toward the uniflcation of exchange rates were taken by ChUe,
Iran, and ThaUand; and other countries, such as Uruguay, modifled
their exchange rate structure in greater or lesser degree. Argentina,
in October 1955, replaced a system which had three basic rates and a
series of mixing rates by two exchange markets, an official market and
a free market.
The PhUippine Republic initiaUy imposed a 17 percent tax on
foreign exchange in March 1951. The fourth extension of this tax,
REVIEW OF FISCAL OPERATIONS
55
to June 30, 1956, was approved by the Fund, and also, under the terms
of the United States-PhUippine Trade Agreement, by the President of
the United States, in June 1955. The revision of the trade agreement
in September 1955, however, resulted in the abolition of the exchange
tax, effective January 1, 1956, and the substitution of a 17 percent
tax on imports. Trade transactions which were exempt from the
exchange tax are exempt from the import tax, and invisibles, previously subject to the exchange tax, are also exempt. The import tax
is scheduled to be reduced in stages, and flnally eliminated at the end
of 10 years, although under certain conditions, the process may be
slowed, or even reversed.
The membership of the Fund (and of the International Bank) stood
at 58 countries on June 30, 1956. The Argentine and Viet Nam were
subsequently admitted to membership in the two institutions. The
quotas of several countries in the Fund and in the Bank have been
revised upward. The increases in most instances have been relatively
smaU.
During the flscal year 1956 the International Monetary Fund sold
$30.2 mUlion in dollars to members in exchange for their own currencies, and members purchased their currencies from the Fund with
gold and dollars to the ainount of $268.0 million. Since its inception,
the Fund has sold the equivalent of $1,244.0 miUion in currencies and
members have made repurchases aggregating $984.9 miUion.
The standby arrangement of the Fund with Belgium, under which
drawings of up to $50 mUlion are perinitted, was continued during the
year but no drawings were made. A standby arrangement, also in the
amount of $50 mUlion, was allowed by Mexico to expire on October
15, 1955. However, the StabUization Agreement between the United
States. Treasury and Mexico was renewed in December 1955. This
agreement extended arrangements to provide up to a maximum of $75
mUlion untU December 1957, for exchange stabUization operations to
aid in preserving Mexico's exchange system free from restrictions on
payments. It will be administered in close coordination with the
activities of the International Monetary Fund. No drawing was made
under this agreement during the year. (See exhibit 23.)
The International Monetary Fund in February 1956, announced
extension of its arrangement with Peru under which that institution
agreed to make avaUable $12.5 mUlion on a standby basis and at the
same time the Treasmy extended for one year existing arrangements
under which the United States Exchange StabUization Fund undertakes to purchase Peruvian soles up to an amount equivalent to $12.5
million shoiUd occasion for such a purchase arise. The agreements
were designed to assist Peru in maintaining external trade and payments free from governmental restrictions and to avoid unnecessary
56
1956 REPORT OF THE SECRETARY OF THE TREASURY
fluctuations in the rate of exchange. No drawing was made by Peru
against either arrangement in the course of the year. (See exhibit 24.)
During the year the Chilean Government undertook important
domestic measures to deal with inflationary problems. As part of
Chile's efforts to stabilize its economy, on April 16, 1956, there was
introduced a system of free exchange rates, a single rate of exchange'
to be applicable to commercial transactions, and a separate and
secondary exchange rate to effect receipts and payments for certain
nontrade transactions. In connection with its new effort for the
attainment of internal stability and international equilibrium, the
Chilean authorities entered into a one-year standby arrangement with
the International Monetary Fund, effective April 16, 1956, under
which the Chilean Government may purchase up to $35 million in
currencies held by the Fund. Other Chilean arrangements provided
for credits of $30 million from private banks in the United States and
an Exchange Agreement with the United States Treasury in the
amount of $10 million. Any Chilean pesos which may be acquired
under the Exchange Agreement are to be repurchased by Chile for
dollars. During the year no drawings were made by Chile under
these agreements. (See exhibit 25.)
Foreign investment, the Export-Import Bank, the International Bank, and the
International Finance Corporation
United States foreign investment has continued to expand. In the
calendar year 1955 the increase in American private investment
abroad was estimated at $2.4 billion (including reinvestment), and
the total of private foreign investment had reached an estimated $29
billion by December 31, 1955. Two-thirds of this amount is represented by direct investment in branches and subsidiaries of United
States corporations, with a book value of more than $19 bilhon at
the end of 1955. Canada and Latin America each had about a third
of this direct investment. On an industry basis, about a third of the
investment was in manufacturing, and somewhat less than a third
was in petroleum. Portfoho investment accounted for about onequarter, and short-term assets for less than ten percent, of total
United States private investment abroad. Balance of payments data
indicate that the expansion of United States private investment
abroad continued at an accelerated rate during the flrst six months
of 1956, when there was more than $1 billion of new dollar investment.
The indebtedness of foreign countries to the United States Government under various loan and credit agreements, concluded principally
since the end of World War I I , amounted to $11.8 biUion as of June
30, 1956. (See table 111.) These agreements included settlement
of lend-lease, surplus property, and similar obligations, the loan under
REVIEW OF FISCAL OPERATIONS
57
the Anglo-American Financial Agreement, loans by the ExportImport Bank, and obligations arising under the mutual security and
foreign aid program.
The Export-Import Bank authorized new credit commitments of
$375.9 million during the flscalyear 1956, including $32.8 miUion for
51 new credit lines to assist United States exporters. Loans were
made to Latin American countries, the Philippines, Ethiopia, and
Japan, and exporter credits assisted the financing of exports to a
number of other countries, including Egypt, France, Greece, India,
Iran, Italy, Spain, and West Germany. Financing was provided for
various types of capital equipment, cotton credits, and economic
development. The Bank disbursed $251.6 million on loan commitments made during the current and previous years, and received $286
million in repayments of principal. The total loans and commitments
outstanding on June 30, 1956, totaled $2.6 biUion.
During the fiscal year 1956, the International Bank made loans to
the equivalent of $396 million, only slightly less than the high point
of $410 miUion reached in the preceding year. Included in the 26
loans made during the year were the largest yet made for a single
project, the Kariba power loan of $80 inillion in the Federation of
Rhodesia and Nyasaland, and the largest yet made for industry, the
Tata iron and steel loan of $75 miUion in India. The bulk of the
lending, as in the preceding year, was for power and transport, which
together accounted for about 70 percent of the total. The balance
took the form of industrial, agricultural, and multipurpose loans. As
of June 30, 1956, the Bank had made 150 loans totaling almost $2.7
billion to 42 countries and territories, and had disbursed nearly $2.0
biUion. Excluding the early reconstruction loans of $497 million to
Europe, 30.1 percent of the Bank's loans have gone to the Western
Heinisphere, 21.8 percent to Europe, 20.2 percent to Asia, 16.0 percent to Africa, and 11.9 percent to Australia.
International Finance Corporation
In accordance with the legislation enacted in August 1955, authorizing United States membership in the IFC, on December 5, 1955,
Secretary Humphrey signed the Articles of Agreement of the International Finance Corporation, and deposited an Instrument of
Acceptance signed by President^Eisenhower on behalf of the United
States Government.
The Articles of Agreement provided that the IFC would come into
existence when a minimum of $75 million had been subscribed by at
least 30 countries. On July 20, 1956, the number of countries accepting membership reached 31, with capital subscriptions totaling
$78,366,000, and the International Finance Corporation came into
58
1956 REPORT OF THE SECRETARY OF THE TREASURY
being. A number of other countries have indicated their intention
of joining the Corporatioa.
The Corporation has an authorized capital of $100 mUlion, with
subscriptions of member countries proportionate to their subscriptions
to the capital of the International Bank. All subscriptions are payable
in full in gold or dollars. The United States subscription of
$35,168,000 was paid in August 1956, through a public debt
transaction.
The Corporation, organized as an affiliate of the International
Bank, is designed to promote the growth of productive private
enterprise, particularly in the less developed areas. Without government guarantee or repayment, the Corporation wUl, in association
with private investors, invest in productive private enterprise when
sufficient private capital is not avaUable on reasonable terms. The
Corporation is designed to bring together investment opportunities,
management and private capital, and to assist in creating conditions
favorable to both domestic and international private investment.
The Corporation may not invest in capital stock, and it will not
assume managerial responsibUity in connection with its investments,
but it may invest in securities which participate in profits, and which
are either convertible into capital stock or carry rights to subscribe
to capital stock which may be exercised by subsequent private purchasers of investments made by the Corporation. In this way the
Corporation through its investments may in effect provide venture
capital. The Corporation wUl endeavor to maintain a revolving fund
by selling its investments when appropriate to private investors on
satisfactory terms.
Foreign assets control
Foreign Assets Control administers regulations issued under authority of Section 5 (b) of the Trading with the Enemy Act. The Foreign
Assets Control Regulations block property in the United States in
which there is any Communist Chinese or North Korean interest and
prohibit all trade or other financial transactions with those countries
or their nationals. Foreign bank accounts in the United States which
had been utUized in financing dollar transactions involving a Communist Chinese interest have also been blocked by the Control to the
extent that such transactions were involved.
For the purpose of preventing Communist China from obtaining
foreign exchange through the exportation of merchandise to the
United States, the Foreign Assets Control RegiUations prohibit the
unhcensed purchase and importation into the United States of Communist Chinese or North Korean merchandise, as weU as numerous
other commodities therein specified which are of types that have
REVIEW OF FISCAL OPERATIONS
59
historically come from China in the past. The Control does not issue
licenses authorizing importation of Chinese-type merchandise unless
satisfactory evidence of their non-Communist Chinese origin is
presented.
Importation under general licenses is authorized with respect to
speciflc shipments of Chinese-type merchandise certifled to be of nonCommunist Chinese origin by the government of a foreign country from
which they were directly exported, provided that the country in question has set up procedures for certification pursuant to standards agreed
to by the Treasury Department. The following Governments now
have such certification procedures: Australia, Formosa, France, Hong
Kong, Israel, Italy, Japan, the Netherlands, and the Repubhc of
Korea. Notices of the avaUability of certificates of origin for particular
commodities and of the governments prepared to issue them are published from time to time in the Federal Register. During the year,
the Government of Italy entered into a certification agreement and a
number of additional individual items became available for certification under existing agreements with other governments. Notably,
the Government of Hong Kong worked out a new procedure, under
which commercial samples may be sent from Hong Kong to the
United States for the purpose of procuring orders.
Certificate of origin procedures under which the Governments of
Japan and of the Federal Republic of Germany had certified to the
origin of dyed hog bristles were terminated when the procedures were
found unworkable. At the same time the Control announced that it
is prepared to consider apphcations for licenses for the importation
from Japan of Japanese natural (undyed) nonblack bristles subject to
physical inspection and other appropriate measures to determine
that they are in fact Japanese natural hog bristles. German natural
hog bristle is similarly authorized for importation under an outstanding general license.
The enforcement measures of the Control resulted in a number of
successful criminal prosecutions involving several jail sentences and
substantial fines. Additional sums were offered and paid in mitigation of civil penalties incurred in a number of cases in which misdescribed merchandise was imported in violation of the Regulations.
As a result of the discovery of evidence of the smuggling of Chinese
bristles into the United States from Canada large quantities of such
bristles were seized.
The Foreign Assets Control also administers the Transaction Control Regulations. Under these regulations, persons in the United
States are prohibited from purchasing or selling or arranging the purchase or sale, outside the United States for ultimate shipment to the
60
1956 REPORT OF THE SECRETARY OF THE TREASURY
Soyiet bloc, of strategic commodities. These regulations supplement
the export control laws administered by the Department of Commerce.
In addition, the Control has responsibilities with respect to blocked
accounts of approximately $9,000,0.00 received from the sale of a
Czechoslovak-owned steel mill pursuant to an order issued by the
Secretary. . .
ADMINISTRATIVE REPORTS
Management Improvement Program
The Treasury management improvement program in the fiscal year
1956 was highlighted by significant accomplishments which are contributing to more effective discharge of the Department's responsibilities.
In a circular to bureau heads dated October 24, 1955, Secretary
Humphrey called for renewed efforts to reduce expenditures further
while maintaining proper standards of service, to the public. The
circular appears as exhibit 57. In compliance, a full-scale search for
economies was carried out by staff officials and supervisory employees
of the organization in Washington and field installations. The search
stimulated management efforts throughout the Department. Reports
from the bureaus and special inspection teams which visited Treasury
offices in 48 cities show that the search has resulted in a down-to-earth
appraisal of all operations and identification of new areas for gains in
economy and efficiency.
In all, over eight million dollars of savings were reported as a result
of management actions effected during the year. Of this amount
over six million dollars represent annual recurring savings. The
remainder is in the category of "one time" savings resulting from the
release of space, land, equipment, and revolving funds. In addition,
there have been a large number of improvements for which dollar
savings could not be measured accurately but which have contributed
to better management and improved service. All of these contributions are dramatic examples of the efforts of personnel at all levels to
do the "Treasury job" more effectively.
The improvements were made in the face of increasing work loads
ia maay of the Departmeat's activities. In spite of the upturn in
work load during the fiscal year, the Treasury was able to reduce the
number of employees by approximately 1,500 (see table 123). At the
same time there has been a constant alertness to insure that the
quality of service was not impaired.
On a broad department-wide basis, a number of significant indications of progress can be noted. For example, the Department as a
whole reduced its total net space requirements. More important, an
active program was carried on to provide certain Treasury activities
with more suitable and efficient space and facUities. A number of
offices moved into new or completely renovated buildings. Others,
for the first time, have been able to put all related activities under one
roof for more efficient operations. In addition, progress made in 1956
has laid the groundwork for better facilities in future years. Plans
are. now on the drawing boards for new buildings authorized by
Congress, and new leases are under negotiation in other cases. All
of these advances hold promise of better service, more efficiency, and
improved employee morale.
Aggressive new programs of recruitment and employee development
are helping to insure that the Treasury has qualified employees to
discharge its work, which is complex and expanding in volume. The
63
64
195 6 REPORT OF THE SECRETARY OF THE TREASURY
Department is selecting new, college-trained personnel who have
qualified under Treasury examinations, such as the internal revenue
accounting and enforcement agent examinations and the Federal
service entrance examination. Special emphasis has been given in
the special recruitment programs to attract badly needed technical
employees for a number of activities.
New and improved training programs are providing employees with
greater technical skills and are increasing their knowledge of general
management. An important part of the employee development program has been directed to the retraining of employees who have been
displaced by installation of new and revised systems.
Significant progress also has been made in the improvement of
Treasury law enforcement training. The basic school which provides
initial training for all seven of the Treasury enforcement services has
been extended in scope and intensified in the various areas of skill
development. A periodic institute has been established for the
training of instructors, and the individual enforcement services have
extended their advanced, specialized, and supervisory training programs.
A great deal of effort has been devoted to improving and modernizing accounting systems within the Treasury Department. Accounting activities have special significance because of the nature of the
Department's responsibilities. Major efforts have been directed to
simplifying and mechanizing these systems. At the same time, there
has been a general strengthening of controls and safeguards, and
special efforts made to insure that accounting information is available
in a timely and usable form. Further details can be found in the
"Report on Accounting Developments in the Treasury Department,"
dated December 31, 1955, and prepared by the Bureau of Accounts.
Related to the advancements made in accounting are the new
developments in mechanization and automation. Conversion has
begun to the new electronic check payment system and new applications of electronic equipment are under study for processing work in
other areas of departmental responsibUity.
In a number of Treasury activities, such as the Philadelphia Mint
and the Bureau of Engraving and Printing, new modern equipment
was installed during the fiscal year 1956. These changes resulted in
increased production at lower unit costs. At the end of the year other
equipment was awaiting installation or was being tested.
In the area bf records, reports, forms, and printing, good progress
was made during the fiscal year. Greater emphasis was placed on
transferring records to low-cost storage centers; old forms, particularly
those used by the general public, were simplified; and the total volume
of records held in Treasury space was reduced. Reporting requirements were reviewed at all levels, and the bureaus are now considering
ways to simplify, combine, and otherwise reduce reporting requirements.
Results of continuous accident prevention efforts throughout the
Department are refiected by the 7.8 percent decrease in the overall
accident frequency rate, a 19.4 percent decrease in the accident
severity rate, and a 23 percent decrease in direct cost. This represents
ADMINISTRATIVE REPORTS
65
a saving to the Government of $150,000 in medical, disability, and
death payments, and the value of leave of absence with pay during
disabUity.
Probably the most heartening factor of the management improvement program in fiscal 1956 was that more Treasury employees
than ever before contributed to its success. For example, in the incentive awards program 6,530 suggestions were received, an increase of
42 percent over the previous year. Adopted suggestions totaled 1,475,
reflecting an 80 percent increase, and $45,202 was paid out in awards,
a 72 percent increase. Superior work performance awards were made
to 436 employees and special act or service awards to 61 employees.
Total award payments in these categories amounted to $55,641. In
addition to the intangible benefits obtained through all types of
awards, identifiable annual savings of $658,770 were realized.
A new Treasury Department award, the Alexander HamUton gold
medal, was established to reward those employees whose leadership in
the Treasury is such as to bring outstanding and unusual service and
benefit to the Government. A certificate signed by the Secretary
accompanies the award.
Illustrations of some of the more signfficant actions taken during the
fiscal year are outlined in the following paragraphs.
The Customs Service modffied the outward foreign manifest requirements to show the entry or withdrawal number of all merchandise
being exported under bond. The replacement of physical supervision
of lading of bonded merchandise by establishing documentary controls
resulted in an annual saving of $75,000.
Customs procedures were revised, makiag possible more extensive
use of carriers' records to control and account for imported merchandise, resulting in manpower savings of $50,000.
The Bureau of Engraving and Printing adopted revised procedures
for the examination of printed products which resulted in improved
quality standards, reduced spoUage, and produced better security
controls, with a reduction in cost of $270,000.
Revisions in the taxpayer assistance program in InternaL Revenue
offices substantially reduced the time that technical employees required to aid taxpayers in completing their returns. This resulted in
better manpower utilization, valued at $2,789,000.
Savings of $108,300 resulted from the further extension of the use of
mechanical and electrical office equipment in the preparation of
Government checks.
Reorganization and consolidation of related operating functions of
the Washington Regional Office of the Division of Disbursement resulted in reductions in personnel and savings in equipment rental costs
totaling $70,700.
Organizational realignments in the Bureau of the Public Debt resulted in the elimination of 11 small units and the functions were either
discontinued or merged in other offices. Annual savings are estimated
at $43,900.
The transfer of Coast Guard supply facilities located at Jersey City,
N . J., and Brooklyn, N. Y., to Navy space in Brooklyn will result in
annual savings of $223,000 in personnel and maintenance costs. The
399346—57-
66
195 6 REPORT OF THE SECRETARY OF THE TREASURY
Jersey City site was disposed of, netting the Government more than
$1,000,000. In addition, 46 parcels of property valued at $370,000
have been turned over to the General Services Administration for
disposal.
Improvements in melting furnaces and related facilities at the
Philadelphia Mint have increased production of ingots by shortening
the melting cycle. The increased output is valued at $47,000 on an
annual basis.
Disposal of surplus vessels by the Coast Guard resulted in receipt of
$172,000. The Coast Guard decommissioned two lightships, thus
saving operating costs amounting to $142,600 annually.
A new cigarette tax stamp of reduced size cut printing and transportation costs by about $250,000 annually. In addition, the continued
printing and issuance of tobacco products tax stamps of Series 125, in
lieu of printing a new stamp series each year, wUl result in savings in
printing costs of $50,000 annually.
Space and equipment utilization surveys in the Bureau of Customs
resulted in the release of approximately 157,000 square feet of space,
valued at $472,000, and the declaration of surplus equipment valued
at $136,000.
Bureau of the Comptroller of the Currency ^
The Bureau of the Comptroller of the Currency is responsible for
the execution of laws relating to the supervision of national banking
associations. Duties of the office include those incident to the formation and chartering of new national banking associations, the
examination of all national banks, the establishment of branch banks,
the consolidation of banks, the conversion of State banks into national
banks, recapitalization programs, and the issuance of Federal Reserve
notes.
Changes in the condition of active national banks
The total assets of the 4,675 active national banks ia the United
States and possessions on June 30, 1956, amounted to $111,036
mUlion, as compared with the total assets of 4,751 banks amounting
to $108,059 million on June 30, 1955, an increase of $2,977 mUlion
during the year. The deposits of the banks in 1956 totaled $101,136
miUion, which was $2,203 miUion more than ia 1955. The loans in
1956 were $45,999 mUlion, exceeding the 1955 figure by $6,456 naUlion.
Securities held totaled $39,719 million, a decrease of $4,303 million
during the year. Capital funds of $8,254 mUlion were $520 miUion
more than in the preceding year.
1 More detailed information concerning tbe Bureau of the Comptroller of the Currency is contained In
the separate annual report of the Comptroller of the Currency.
67
ADMINISTBATIVE REPOETS
Abstract of reports of condition of active national banks on the date of each report
from June SO, 1955, to June SO, 1956
[In thousands of dollars]
June 30,1955 Oct. 5, 1955 Dec. 31.1955 Apr. 10,1956 June 30.1956
(4,721
(4,700
(4,689
(4.675
(4,751
banks)
banks)
banks)
banks)
banks)
ASSETS
Loans and discounts, Including overdrafts
U. S. Government-securities, direct
obligations
.-.
Obligations guaranteed by U. S.
Government
Obligations of States and political
subdi visions.. Other bonds, notes, and deben tures.-..
Corporate stocks, including stocks of
Federal Reserve Banks
Total loans and securities
Cash, balances with other banks, including reserve balances, and cash
items in process of collection
Bank premises owned, furniture and
fixtures
_
Real estate owned other than bank
premises
Investments and other assets indirectly representing bank premises
or other real estate
Customers' liability on acceptances....
Income accrued but not yet collected..
Otherassets
_
Totalassets
39; 643,504
41,083,563
43,559, 726
44, 516, 000
45,999,400
34, 778,270
34,106,314
33,686, 583
31,872,^384
30, 653,137
2,755
4,037
4,223
4,073
4,132
7,026,071
2,002,463
7,145.936
1,986,499
6,993, 984
1,955,466
7,111,377
1,866, 784
7,094, 478
1,736,150
211, 795
212,872
217, 074
228, 840
230,864
83,564,858
84, 539, 221
86, 417,056
85, 599,458
85, 718,161
22, 955, 455
22,776,906
25, 763,440
. 23, 238, 461
23, 609. 546
908,286
928,273
962, 111
1,001,858
1,031, 707
18,249
21,029
23, 709
28,460
67,183
145. 901
232, 001
167, 414
72, 955
144, 791
227. 085
172, 235
78, 839
125. 671
225, 712
153. 749
74, 650
158, 305
222, 831
183,183
108, 059,347
108, 882, 495
79,187
162, 221
229, 972
175. 912
113, 750, 287 110, 507, 206 111,036.295
LUBH-ITIES
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 ofbanks
Otber deposits (certified and cashiers'
checks, etc.)
Total deposits
Demand deposits
Time deposits
Bills payable, rediscounts, and other
liabilities for borrowed money
.-..
Mortgages or other liens on bank
premises and other real estate
Acceptances outstanding
Income collected but not yet earned...
Expenses accrued and unpaid
Otherliabilities
Totaliiabilities
53, 711,457
64, 590,107
68,192,878
54,974, 940
54, 492,378
24,963,347
25,077,012
25,151, 538
25, 322, 058
25,760, 836
3,155, 520
2,366,476
2,364,385
2,454, 930
3,224,359
7, 287,142
8,316,961
6, 699,178
8, 661, 764
7, 341, 424
9,320,515
7, 607,153
8,408, 890
101, 136, 401
1,498,499
1,395. 499
1,847, 249
7, 208. 503
8, 576, 201
1,378,800
98.932,926
98,790,036
104, 217, 989
99, 915, 432
71, 697,623
27,235,303
71,483, 201
27,306,835
76. 894, 569
27,323,420
72, 395, 202
27,520, 230
1, 642, 785
73,103, 910
28,032, 491
71,600
702,719
107,796
891,068
150,884
494
150,628
373,487
327, 572
468, 653
721
151,653
409,889
460, 649
458, 962
1,015
136, 657
424, 991
439, 535
486, 375
876
172. 769
446, 829
440; 280
461, 613
907
170.758
459.943
370. 734
492,868
... 100,325.360
100, 974, 629 105,814,358
102. 328, 867 102, 782, 495
CAPITAL ACCOUNTS
Capitalstock
Surplus
Undivided profits
Reserves and retirement account for
preferred stock
Total capital accounts
Total liabilities
accounts
and
2,423,396
3, 698,464
1,347, 797
2,472,624
2,440,497
3, 709, 659
3, 828, 335
1, 489, 989 •' 1,368,808
264,330
267, 721
7,733,987
7,907,866
108,059,347
108,882,495
266,162
7, 935, 929
2, 555, 492
3, 971, 001
1,392,294
259, 552
8,178,339
2, 575,432
4,006, 626
1,413,837
257,905
8, 253, 800
capital
113,750,287
110,507,206
111, 036,295
68
195 6 REPORT OF THE SECRETARY OF THE TREASURY
Summary of changes in number and capital stock of national banks
The authorized capital stock of the 4,678 national banks in existence on June 30, 1956, consisted of coinmon stock aggregating $2,572
mUlion, an increase during the year of $152 mUlion, and preferred
stock aggregating $3.9 mUlion, a decrease during the year of $100
thousand. The total net increase of capital stock was $152.0 mUlion.
During the year charters were issued to 39 national banks having an
aggregate of $12 mUlion of common stock. There was a net decrease
of 75 in the number of national banks-in the system by reason of
voluntary liquidations, statutory consolidations and mergers, conversions to and mergers or consolidations with State banks under the
provisions of the act of August 17, 1950 (12 U. S. C. 214), and one
receivership.
More detaUed information regarding the changes in the number
and capital stock of national banks in the fiscal year 1956 is showii in
the following table.
Organizations, capital stock changes, and liquidations of national banks, fiscal
year 1956
Number
of banks
Charters in force June 30,1955, and authorized capital stock i
Increases:
Charters issued
_
Capital stock:
240 cases by statutory sale
351 cases by statutory stock dividends
4 cases by stock dividend under articles of association
32 cases by statutory consolidation . .
.
14 cases by statutory merger
1 case by increase in par value of preferred stock
Total increases.Decreases:
Voluntary liquidations ._ .
.
Statutory consolidations
Statutory mergers
. _.
Conversions into State b a n k s . . . . .
Merged or consolidated with State banks.
Receivership
Capital stock:
3 cases by statutory reduction
3 cases by statutory consolidation . .
6 cases by statutory merger
10 cases by retirement
Total decreases
Net change
.
. .
___-
Capital stock
Common
4,753 $2,420, 255, 682
39
11,810,000
500,000
39
172,070.989
512,600
31
28
17
3
34
1
3,422, 500
114
.
Charters in force June 30,1956, and authorized capital stock ^
$3,944,870
67,245.160
83,973,421
197, 500
13,898, 705
4,946,203
12,600
580.000
14,715,000
50,000
271,000
132,500
836,000
^
Preferred
20,007,000
598,300
598,300
-75
152,063, 989
—85,700
4,678
2,572,319,671
3,859,170
1 These figures differ from those in the preceding table. The figures as of June 30,1955, include 1 bank in
the process of going into voluntary liquidation; 2 banks in the process of merging or consolidating with State
banks under the provisions of the act of Aug. 17,1950 (12 U. S. C. 214) and exclude 1 bank consolidated with
another national bank at close of business June 30, 1955, under the provisions of the act of Nov. 7, 1918, as
amended (12 U. S. C. 33, 34). The June 30, 1956, flgures include 2 newly chartered banks not yet open for
business, and 2 banks in the process of merging or consolidating with State banks under the provisions of
the act of Aug. 17, 1950.
ADMINISTRATIVE REPORTS
69
Bureau of Customs
The principal functions of the Bureau of Customs are the assessment
and collection of duties and taxes on imported merchandise and baggage; prevention of smuggling, undervaluations, and frauds on the
customs revenue; apprehension of violators of the customs and navigation laws; entry and clearance of vessels and aircraft; issuance of
documents and signal letters to vessels of the United States; admeasurement of vessels; collection of tonnage taxes on vessels engaged in
foreign commerce; supervision of the discharge of imported cargoes;
inspection of international traffic; control of the customs warehousing
of imports; determination and certffication of the payment for the
amount of drawback due upon the exportation of articles produced
from duty-paid or tax-paid imports; enforcement of the antidumping
and export control acts; regulation of the movement of merchandise
into and out of foreign trade zones; and enforcement of the laws and
regulations of other Government agencies affecting imports and
exports.
Looking forward
WhUe this report is directed primarily to the accomplishments in
the fiscal year 1956, several important actions begun in 1956 should be
mentioned because of their great significance in future years.
With an ever-increasing air traffic, both passenger and freight, new
and complicated problems are arising almost daUy. To meet this
challenge, a Customs Air FacUitation Committee, composed of Treasury and top airline officials, has been organized. This committee is
studying customs procedures and practices and the airport facUities
for clearing passengers and cargo in order to see how they can best be
adapted to meet the tremendous growth in air traffic and the expected
demands of the jet era. Special emphasis is being given in these
studies to improvements in the handling and inspection of baggage at
the Miami Airport and in the new building under construction at the
New York IdlewUd Airport.
Concurrently with these studies, a new form of baggage declaration
has been designed for early issuance which wUl make it easy for passengers to prepare their declarations and facilitate their clearance
through Customs. This declaration will provide a simple form of
questionnaire for passengers to complete with '^Yes^' or "No'' answers.
Most passengers will not have to itemize their purchases abroad.
Mechanical conveyor equipment for the examination of foreign maU
parcels at New York wUl be installed in the latter part of 1957. This
equipment will streamline customs operations and eliminate manpower
losses now experienced in the physical handling of more than 13
million parcels a year. In addition to increased revenue which is
expected from more effective customs examination, the new equipment
wUl enable parcels to be cleared faster and more economically.
The Treasury has actively supported the Customs Simplification
Act of 1956 (Pubhc Law 927, approyed August 2, 1956). This legislation is designed primarily to simplify the procedures for determining
the values of imported goods by substituting the export value for
foreign value on the majority of commodities brought into the United
States. The elimination of foreign value in so many cases wiU curtaU
70
1956 REPORT OF THE SECRETARY OF THE TREASURY
the number of investigations in foreign countries for strictly value purposes and permit more time to be given abroad to the investigation
of alleged dumping of merchandise in United States markets.
The close cooperation long enjoyed with Canadian Customs was
further strengthened by mutually helpful meetings and surveys designed to facUitate the movement of passengers and merchandise
between the two countries and to reduce customs' cost of operating
border stations.
These and many other projects concerned with the expansion of
trade and travel in the future are part of the continuing program of
Customs to perform its essential functions in the most efficient and
economical manner possible.
Collections by Customs Service
T o t a r revenue collected by Customs in the fiscal year 1956 was the
largest in Customs history, amounting to over $983 mUlion compared
with slightly less than $859 million in 1955, an increase of 14.5 percent.
The total includes hot only customs collections but certain internal
revenue taxes for the Internal Revenue Service and some coUections
for the Public Health Service and other governmental agencies.
Customs coUections alone amounted to almost $711 mUlion, an increase of 16.3 percent over the previous year's total of $611 mUlion.
They consisted of collections of duties, tonnage taxes, fees, and fines
and penalties for the violation of customs and navigation laws, etc.
The increase in customs collections in 1956 was accompanied by a
substantial increase in collections by Customs of internal revenue
taxes on imported liquors, wines, perfumes, etc., which amounted to
$272 mUlion in 1956, 10 percent more than the $248 mUlion coUected
in 1955.
Of the customs collections, all but $5.9 mUlion were derived from
duties (including import taxes) levied on imported merchandise. The
source of duty collections by type of entry is shown in table 12 and
by tariff schedule in table 84. Since the data in the latter table are
restricted to commercial importations, the totals shown are somewhat
smaUer than the duties collected on all types of dutiable merchandise
and correspond roughly to duties collected on consumption entries
and on warehouse withdrawals.
In 1956 slightly more than one-half of all imports into the United
States were duty free and included some commodities imported free
for Government stockpUe purposes or authorized by special acts of
Congress for free entry although dutiable under the Tariff Act of 1930,
or taxable under the Internal Revenue Code, such as copper and iron
and steel scrap. The 48 percent which was dutiable constituted the
basis of customs duties on imports.
In only two months of the fiscal year 1956, March and June, were
collections of customs duties at a lower level than for the corresponding months of 1955. The increase in duty collections, however, was
not as great percentagewise as the increase in value of dutiable imports which amounted to $5.8 bUlion in 1956, as compared V i t h
$4.7 bUlion in the previous fiscal year.
Collections by customs districts.—Of the 44 customs districts in which
coUections are covered into the Treasury of the United States, aU but
ADMINISTRATIVE REPORTS
71
8 reported larger customs collections than in 1955, and 4 of these
reported larger total collections than in 1955. The collections for
each customs district are found in table 83.
Collections by commodities.—All but one of the fifteen schedules in
which dutiable commodities are listed in the Tariff Act showed increases in duty collections; only the agricultural schedule showed
slightly diminished returns. As in the four preceding years, imports
of metals and metal products were the largest single source of customs
revenue, amounting to 20 percent of the total duty collections in 1956
and 23 percent in the preceding year. The wool schedule ranked
second, the sundries schedule third, and the agricultural schedule
fourth as sources of revenue in 1956.
Table 84 gives the value of and duties collected on dutiable and
taxable imports for consumption in the fiscal years 1955 and 1956.
Tables 86 and 87 show the value of and the duties collected on imports for consumption in the calendar years 1945 through 1955 and
monthly from January 1955 through June 1956. The trends in value
and duty yield for goods dutiable at specific rates, at ad valorem
rates, and at compound rates are shown in table 85.
Collections by countries of origin.—The increased value of imports
and the greater yield in duties noted in the commodity groups were
noted also for the leading countries sending imports to the United
States. For the first year since World War II, imports from Japan
were the largest source of customs revenue, with the United Kingdom
dropping to second place, while Canada and West Germany ranked
third and fourth, respectively.
Table 88 shows the value of imports for consumption and duties
collected thereon by the principal countries for the fiscal years 1955
and 1956.
Extent of operations
Movement of persons.—More persons entered the United States in
1956 than in any previous year. Aircraft passengers arriving from
abroad totaled almost two and one-half mUlion of which almost onethird arrived at the New York City airports and one-fifth at Miami,
Fla.
Table 90 shows the various types of vehicles and persons entering
the United States during the past two fiscal years, and table 91
shows the number of aircraft and passengers arriving in each of the
customs districts for which this type of travel was important.
Entries of merchandise.—Reflecting the increase in the value of
dutiable imports and in the amount of duties collected, the number of
the various types of merchandise entries was larger in almost all
categories than in the previous year. The number of each type of
entry for the past two fiscal years is shown in table 89.
Drawback transactions.—Drawback, which is allowed on the exportation of merchandise manufactured from imported materials and for
certain other export transactions, usually amounts to 99 percent of
the customs duties paid at the time the goods are entered: More than
97 percent of the drawback allowed in 1956 was due to the export of
products manufactured from imported raw materials. The principal
imported materials used in the manufactured exports in 1956 were
crude petroleum, motor, vehicle and aircraft parts, iron and steel
72
1956 REPORT OF THE SECRETARY OF THE TREASURY
semimanufactures, tobacco, unmanufactured rayon and other synthetic textiles, cotton cloth, and lead ore, matte, pigs, and bars.
Tables 92 and 93 show the drawback transactions for the fiscal
years 1955 and 1956. The amount of drawback allowed, as shown
in table 92, does not correspond exactly with the drawback payments
shown in table 93 since not all drawbacks certified for payment are
paid during the same fiscal year.
Appraisement of merchandise.—The increase in imports of foreign
merchandise was reflected in the number of invoices and packages
examined by appraisers' personnel. There were 1,733 thousand
invoices handled in 1956 and 1,632 thousand in the previous year.
A corresponding increase was noted in the number of packages
examined by appraisers' personnel from 692 thousand to 700 thousand
examined inside the appraisers' stores and from 500 thousand to 596
thousand outside the appraisers' stores, in 1955 and 1956, respectively,
an overall increase in 1956 of 11 percent. In the face of the progressive
upward trend in the volume of business with staffing unchanged,
several drastic changes of procedure were introduced to increase
production rates and prevent insurmountable backlogs. These procedural changes reduced to 471 foreign inquiries to determine conditions of manufacture and sale of certain commodities in the country
of production in order to obtain the technical information required for
tariff classification and appraisement purposes. The reduction does
not, however, reflect a decrease in the problems of classification and
appraisement but merely the securing of the information by other
means.
Customs Information Exchange.—The activities of the Customs
Information Exchange, while greater than in 1955, were considerably
less than in the previous years. These reductions are the result of
changes in procedure to reduce the very large backlog and do not
indicate the relative difficulty of appraisement work. Appraisers'
reports of value and classification, covering a cross section of the
unportations of merchandise received at each port, totaled 45 thousand
in 1956 as compared with 38 thousand in the previous year.
The comparatively small number of these reports was due to the
continued use of a waiver procedure put into operation at the
beginning of the fiscal year 1954. This procedure provides that, if no
importation of one kind of merchandise is reported at any other port,
a waiver is granted making it unnecessary to send in further reports
on this type of merchandise. Seven thousand waivers of this kind
were granted in 1955 and again in 1956 as compared with over 10
thousand in the first year this procedure was adopted. These reports
of value or classification indicate the relative number of commodity
items received at any given port for the first time, as weU as regular
items received at new prices or subject to diflFerent terms of sale from
previous shipments.
Differences in value and classification indicate the number of
instances where entries varied at different ports either in value or
classification and in which additional study and analysis were required
before establishment of a uniform price or rate. There were 4,563
reports of value differences in 1956 as compared with 4,011 in the
previous year.
The number of classification differences, which indicates the relative
ADMINISTRATIVE REPORTS
73
number of new commodities received, totaled 2,568 in 1956 and 2,886
in 1955.
Antidumping and countervailing duty.—Eighteen complaints of
dumping under the Antidumpiag Act were received during the fiscal
year 1956 which compares with 15 received in 1955. Seventeen
complaiQts under the countervailing duty statute were received ia
1956, the same number as during the previous year. Twelve dumping
cases were under iavestigation at the end of the year as compared
with 26 "* at the end of 1955, whUe 16 countervaUing duty cases were
under investigation at the end of 1956 and 18'^ at the end of 1955.
There were three Treasury determinations of sales at less than fair
value, one of which was followed by a Tariff Commission determination of injury. A finding of dumpiag was thereupon made in this
case in accordance with Section 201 (a) of the Antidumping Act
(19 U. S. C. 160). The other 2 cases, and a fourth case ki which
Treasury determiaation of sales at less than fair value had been made
ia the previous fiscal year, were closed following Tariff Commission
determinations of no iajury. In addition, 28 dumpiag cases were
closed on Treasury determinations of no sales at less than fair value.
No grant or bounty was found in 19 countervaUing duty cases disposed of during the year.
Technical services.—This branch of the Customs Service furnishes
chemical, engineering, and other scientffic and technical information;
provides proper weighing and gaugiag equipment; designs and oversees the construction of border iaspection stations; and directs the
field operations of customs laboratories.
The laboratories analyzed over 110 thousand samples ia 1956, a
substantial increase over the approximately 100 thousand during
each of the three precediag fiscal years. About one-half of the samples
analyzed consisted of ores and metals, sugar, and wool. The majority of the samples were ''import" samples of dutiable merchandise
analyzed to develop and report facts needed for tariff purposes.
In addition, the laboratories analyzed 2,631 samples taken from
customs seizures, mostly narcotic drugs and other prohibited articles;
111 samples from merchandise to be exported from the United States
upon which claims for drawback are to be compared or verffied;
1,207 samples from preshipments (new types of merchandise) analyzed to develop facts on which to base the tariff classffication of new
goods iatended for shipment to the United States; and 3,194 samples
tested on behalf of other Government agencies. Of the latter number,
1,697 were samples of critical and strategic materials representing
Government purchases for stockpUe purposes to determine whether
or not the materials met contract specffications.
Statistical quality control of sample weighiag operations by makiag
analyses of the cargo sample weighing data to assure that accuracy
and precision were withio the control limits was continued during
the fiscal year 1956. There were 904 such weighing operations,
consistiag of 557 cargoes of raw sugar, 104 of refined sugar, 21 of
wool, 58 of rayon, 156 of cigarette tobacco, and 8 of other merchandise.
Export control.—Although there were fewer employees in 1956, a
larger number of export declarations was authenticated than in the
' Revised.
74
1956 REPORT OF THE SECRETARY OF THE TREASURY
previous year. The number of shipments examiaed and the number
and value of seizures, however, decliaed rather sharply. The followiag table shows the volume of export control activities duriag the
fiscal years 1955 and 1956.
Activity
Export declarations authenticated.
Shipments examined
.....
Number of seizures
Value of seizures
Export control employees
1955
1956
4,133,365
809,969
438
$467,634
212
4.387,465
563,866
252
$216,934
161
Percentage
increase, or
decrease (—)
6.1
-30.4
-42.5
-53.6
-24.1
Protests and appeals.~The number of protests filed by importers
against the rate and amount of duty assessed and other decisions by
the collectors continued at a high level although less than in 1955.
The further reduction of the backlog of protests not yet acted upon
is indicated by the comparatively large number of protests denied
by the collectors and forwarded to the Customs Court and by protests
allowed by the collectors. Appeals for reappraisement filed by importers who did not agree with appraisers as to the value of merchandise declined sharply after reaching a high level in 1955. The
following table shows the number of protests and appeals filed and
acted on during the fiscal years 1955 and 1956.
Protests and appeals
1955
Protests:
Filed with collectors by importers
Allowed by collectors.
Denied by collectors and forwarded to customs court.
Appeals for reappraisement filed with collectors
31,822
2,279
34,266
18,818
1956
30,074
2.018
31.842
15,003
Percentage
decrease
5.5
11.5
7.1
20.3
Marine activities.—The following table shows the number of entrances and clearances of vessels in 1955 and 1956.
Vessel movements
Entrances:
Direct from foreign ports
Via other domestic ports
Total
Clearances:
Direct to foreign ports
Via other domestic ports
Total
.
1955
1956
Percentage
increase, or
decrease ( - )
47,811
28,233
49,700
28,837
40
21
76,044
78,537
3 3
43,833
28,426
72,259
47,885
27.401
9.2
—3 6
75,286
42
A Marine Committee composed of headquarters and field employees
of the Bureau of Customs has studied the problems relating to the
entry, clearance, and port-to-port movements of vessels and has
recommended several administrative improvements expected to be
made effective shortly. Legislation will be sought also to streamline
further the entry and clearance procedures.
ADMINISTRATIVE REPORTS
75
An application for a cruising license has been adopted which wUl
make it easier for owners of foreign yachts to obtain the license before
arriving in the United States so that the vessel wUl not have to
be entered.
The Bureau of Customs and the United States Coast Guard have
worked as a team in devising more efficient procedures for the enforcement of the Load Line acts (46 U. S. C. 85, 85g), the International
Convention for the Safety of Life at Sea, 1948, and documentation
of small vessels. New regulations relating to the Load Line acts and
the Safety Convention are in the final stages, and both agencies have
issued instructions to field offices for the withholding of certfficates
of awards of motorboat numbers by the Coast Guard to vessels which
may admeasure 5 net tons or more until the vessels are admeasured
by Customs.
H. R. 6025, a bill to prohibit the operation in the coastwise trade
\ of vessels rebuUt outside the United States, was enacted into law on
j July 14, 1956 (Public Law 714). This legislation clarified the effective date of the law, requires that the master report the fact that his
vessel has been rebuilt, and imposes a penalty against the owner and
master and forfeiture of the vessel for faUure to make such report.
As in previous years special legislation authorized the use of Canadian vessels for a limited period in certain portions of the coastwise
trade in Alaska (Public Law 488, approved April 18,1956). Canadian
vessels also were authorized by the Congress to transport coal to
Ogdensburg, N. Y., from points on the Great Lakes untU June 30,
1957 (Public Law 1019, approved August 7, 1956).
A bUl to authorize more'liberal propelling power allowances in computing the net tonnages of certain vessels, was enacted into law on
June 4, 1956 (Pubhc Law 551). This law directly affects the admeasureiiient of all vessels that have an actual propelling machinery
space less than 13 percent of the gross tonnage.
Collectors of customs should now have less difficulty in obtaining
the vessel utilization and performance report from operators of vessels
in the foreign commerce of the United States as the Congress provided
for a penalty of $50 per day for faUure to ffic the report within the time
to be prescribed by the Secretary of Commerce (Public Law 612,
approved June 25, 1956).
The Bureau continued to cooperate with the Department of Justice
in the settlement of pending litigation for forfeiture of several vessels
under statutes administered by the Bureau upon allegations of control
by aliens rather than citizens.
As in 1955, in the interest of national def ense, compliance with Title
46, Section 316 of the United States Code was waived to the extent
necessary to permit Canadian tugs to tow and transport from one point
to another in the United States certain equipment to be used in the
Saint Lawrence Seaway development project. Compliance with
Title 46, Section 292 of the United States Code was waived also to
the extent necessary to permit any Canadian-built dredge to be employed in dredging operations on the United States side of the International Boundary in connection with the Saint Lawrence Seaway
project or the Saint Lawi:ence power project without being documented
as a vessel of the United States.
76
1956 REPORT OF THE SECRETARY OF THE TREASURY
In the United States, Hawaii, Alaska, and Puerto Rico there were
2,552 complete admeasurements and 522 readmeasurements or
adjustments of tonnage. There were 275 more admeasurements and
36 fewer readmeasurements or adjustments of tonnage than in the
fiscal year 1955.
The translation of foreign admeasurement regulations and laws
has been completed. Regulations were received this year from
Japan, Venezuela, and the Union of South Africa. The result of the
comparison between the foreign regulations and the United States
regulations will have an important bearing on the recognition accorded
foreign admeasurement systems by the United States and will also
provide a necessary basis for approaching the problem of international
uniformity.
The task of rewriting the United States admeasurement regulations
is well under way. This rewriting will not include the study or introduction of any new or proposed systems of admeasurement but will
more clearly define the admeasurement procedures as they are being
performed today.
The following table shows the volume of marine documentation
activities during the fiscal years 1955 and 1956.
Activity
1955
Documents issued (registers, enrollments, and licenses)
Licenses renewed and changes of ma^ster endorsed
Mortgages, satisfactions, notices of lien, bills of sale, abstracts of title,
and other instruments of title recorded
._ __
Abstracts of title and certificates of ownership issued .
Navigation fiines imposed..
...
._
Tonnage tax payments
.
.
1956
Percentage
increase
14,211
29,086
14,380
1 45,577
1.2
56.7
11,460
2,594
1,607
12,595
6,400
2,138
1 21, .993
9.9
146.7
33.0
1 Changes of master endorsed and number of tonnage tax payments reported for the first time in 1956.
Changes made during the year in the system of processing various
marine documents wUl shorten the time necessary to compUe the pubhcations Merchant Vessels of the United States and Merchant Marine
Statistics and make them available to the public earlier than in prior
years.
The following tabulation shows the number and gross tonnage of the
vessels of the merchant marine as of January 1, 1955 and 1956.
1955
Vessels
Number
Total documented vessels (including yachts)
Vessels engaged in foreign trade
Vessels by major rigs (excluding yachts):
Steam
Motor
._..._....
Sailing
,
.....
....
Unrigged.<._.
Vessels by six major services:
Ferry
.
Freight
'.
.
Fishing
.,
..
Passenger
Tanker
j
.
._..%
Towing
...L
Gross tons
1966
Number
Gross tons
43,049
6,962
30,090.789
18,162,963
43,379
6,820
29,740,730
17,774,316
3.96i,
27,920
224
7,136
24, 705.913
2,086.334
40.324
3,125,270
3,788
28, 242
213
7,256
24,209. 713
2,040,960
33.820
3,325,622
445
9,998
15,213
4,811
1,641
4,671
229, 662
22, 297,962
636. 222
740. 283
6, 279,349
600,700
441
9,969
16,125
4,941
1,626
4,638
219,951
22, 279, 519
629,756
704,653
4,944,599
500,926
ADMINISTRATIVE REPORTS
/
77
Legal problems and proceedings.—The Office of the Chief Counsel
considered many legal problems relating to such matters as the classification and appraisement of imported merchandise; interpretation of
a,dministrative and enforcement provisions of the customs and navigation laws and othier related laws; issuance of customs regulations;
rights, duties, and'activities of customs officers and employees; delegation of authority to customs officers; and activities of customhouse
brokers.
Special consideration was given to a proposed revision of the Secretary's delegation order as it-relates to the remission or mitigation of
fines, penalties, and forfeitures, and cancellation of liquidated damages
under bonds. A study was made of the matter of redelegation by the
Commissioner to the collectors of customs of authority to remit or
mitigate certain fines, penalties, and forfeitures and claims for liquidated damages. Regulations were drafted to carry out recommendations based on that study.
This office gave considerable assistance in the prosecution of the
pending customs claims in the Office of Alien Property for the forfeiture and forfeiture value of (certain imported property vested by the
Alien Property Custodian, includiag preparation of briefs and representing the Bureau at hearings before the Chief Hearing Examiner.
Law enforcement and investigative activities.—^The number of investigations (Conducted by the Customs Agency Service during the fiscal
year was slightly larger than during the precediag year as shown in
table 96. Very few touring permit violations were recorded (onfy
one-twentieth as many as in 1954) because of the amendment of the
Tariff Act of 1930 made \>j a provision in the Customs Simplffication
Act of 1953 (19 U. S. C. 1798). This permits the admission of automobiles as personal effects of nonresidents when the machines are
used solely for touring purposes in the United States, thus eliminating
technical violations of touring permits. There was a substantial
increase in investigations of narcotic smuggling but most other types
of investigations were at about the same level as in the prevous
year.
Major enforcement problems, as ia 1955, iavolved the smuggling
into the United States of narcotic drugs, diamonds, watch movements,
and psittacine birds; and the smuggling out of the country of arms,
ammunition, and implements of war. The increase of approximately
50 percent in the rates of duty applicable to watch movements provided by the President's Proclamation No. 3062 of July 27, 1954;,
resulted in contiaued attempts, as ia 1955, to introduce this merchandise Ulicitly despite the severe penalties imposed upon offenders.
Attempts to smuggle psittaciae birds continued. The smuggliag of
narcotics also continued but at a somewhat lower tempo, with the increase ia the quantity of smokiag opium and heroin seized due to a
single very large seizure ia each case, one of 203 ounces of smokiag
opium and one of 345 ounces of heroin. The quantity of bulk marihuana seized, on the other hand, iacreased rather sharply.
78
1956 REPORT OF THE SECRETARY OF THE TREASURY
The following table shows the seizures of narcotics during the years
1955 and 1956.
Kind
Rawopium (oxmces)
Smokingopium (ounces)
Heroin (ounces)
O ther drugs (ounces)
Marihuana, bulk (ounces) . . . . - _
Marihuana, cigarettes (numbef)
1955
663
184
264
96
23,615
1956
115
252
554
103
38,350
4,377
Percentage
increase, or
decrease (—)
-82.7
37.0
118.1
8.4
62.4
21.6
Violations of the Mutual Security Act coritinued to be one of the
major problems for enforcement offi(}ers, although the value of
seizures of such articles continued to decline. The liquor smuggling
problem, which during recent years has been at a low ebb, ballooned
during 1956. The quantity of seized liquors was more than four
times as great and the value almost seven times that of the previous
year. A considerable quantity of bristles ^ of Communist Chinese
origin were seized either as the result of direct smuggling or of relabeling to show the origin in some other country.
^
In addition to seizures made for customs violations, 27,164 seizures
were made for other agencies, of which 27,097 were for the Department of Agriculture. There were also 17 persons apprehended and
delivered to the Immigration, Secret Service, military, or municipal
authorities. Of the 671 persons arrested for narcotic violations, 296
convictions were secured-with total penalties of 1,322 years imprisonment and $12,080 in fines.
x^ Seizures for the violation of customs laws are shown in tables 94
and 95.,
^
Foreign trade zones.—^During the nineteenth year of its existence,
operations at Foreign Trade Zone No. 1 on Staten Island continued
at a satisfactory level. Thirty-four vessels used the zone facilities for
discharging or lading of foreign cargoes, and 93 ships berthed in the
zone to lade domestic ship's stores.
Operations in Foreign Trade Zone No. 2 in New Orleans were at a
considerably higher Jevel than in 1955. The number of entries and
amount of duties collected both showed increases of more than 50
percent whUe the tonnage and value of merchandise received and
delivered from the zone were also much greater than in the previous
year. '
Foreign Trade Zone No. 3 in San Francisco also showed a larger
volume of operations than in 1955 as to the number of entries filed
and the amount of duties coUected.; The tonnage and value of
merchandise received in and delivered from the zone remained
approximately the same as in the previous year.
Operations at Foreign Trade Zone No. 4 m Los Angeles were discontinued during 1956, after declining almost continuously since 1951,
the first year of its operation.
The business at Foreign Trade Zone No. 5 in Seattle continued at
a satisfactory level; collections on goods entering customs territory
were more than double Uhat for the previous year.
!'
\
ADMINISTRATIVE
79
REPORTS
The foUowing table contains a brief summary of foreign trade
zone operations.
^^
Number
of entries
Trade zone
New York
New Orleans
San Francisco
Los Angeles
Seattle.
.
—.
5,861
3,748
17,252
340
617
Received in zone
Long tons
Value
$26,073,631
17,403,578
8,602,229
1,001,066
962,013
28,845
42,848
67,497
942
-1,435
Delivered from zone
Long tons
28,622
35,188
69,096
1,983
816,
Value
$26,712,766
12,696,622
9,610,855
1,715,263
812,872
Duties and
intemal revenue taxes
collected
$3,519,430
812 567
1,685,337
65,803
84,833
1 Changes in customs ports and stations.—Eagle and Hyder,' Alaska,
A were abolished as ports of entry and designated as customs stations
.during the fiscal year. The limits of the ports of Anacortes, Wash.;
Charleston, S. C ; Key West and St. Petersburg, Fla.; and San Juan
land Ponce, P. R., were extended to include additional areas. The
/appraiser's headquarters in the St. Lawrence District was trans^ ferred from Ogdensburg, N. Y., to Rouses Point, N. Y.
Cost of administration
Continued management improvements made possible a reduction of
81 in the average number of customs employees during the fiscal year
1956 as shown in the following table.
Operation
"^
1955
1956
Percentage
increase, or
decrease (—)
Regular customs operations:
Nonreimbursable
Reimbursable i
_
7,302
292
7,266
298
-0.5
2.1
Total regular customs employment
Export control
.
. _
7,594
212
7,664
161
-0.4
-24.1
7,806
7,725
-1.0
Total employment
..
_
... .
.
1 Salaries reimbursed to the Govemment by those private firms who received the exclusive services of
these employees.
Customs operating expenses totaled $44,781,853 including, as in
the previous year, export control expenses for which the Bureau was
reimbursed by the Depar-tment of Commerce. Such ; expenses,
together with collections by type are detailed by collection district
in table 83. This table also shows the cost of collecting $100 of
revenue. A summary bf coUections and expenditures by branch
of service is shown in table 82.
Management improvement program
Special search for economies.—'Prohsiblj the most signfficant management activity during the fiscal year 1956, was the special full-scale
search for economies conducted in all customs offices, including those
located in possessions. Territories, and in foreign countries. In each
office, all items of expense were separately reviewed to uncover
possibilities for effective/savings. Procedures, practices, and other
matters directly and indirectly affecting costs were also reviewed.
80
1956 REPORT OF THE SECRETARY OF THE TREASURY
As a result, in June 1956, the Customs Bureau was able to report that
recommendations representing approximately $800,000 in savings
had been adopted and that other recommendations with potential
savings of over $170,000 were under consideration. The principal
savings reported represented reductions in manpower, space, and
equipment.
Entry of merchandise.—^^A major contribution to the facilitation of
international trade was made by the elimination on October 1; 1955,
of all remaining requirements for certffied invoices to support merchandise entries. This action, coupled with the elimination of the
requirements for consular certffications on other documents used
to support the entry of certain types of merchandise, makes it much
easier for foreign exporters and American importers to obtain and
prepare documents used in clearing shipments through United States
Customs.
Two other important improvements concerning invoices were
made also. In the first, crude oU imported by pipeline was exempted \
from commercial invoice requirements. In the second, importations
were exempted from regular customs invoice requirements when
importers who act in good faith are unable to secure complete and
accurate invoices from foreign sellers. This action avoids the imposition of penalties under extenuating circumstances.
Other general improvements affecting the entry of merchandise
include: Simplified regulations to make it easier for brokers and
agents to file customs powers of attorney from their principals; revision
of the entry form to incorporate the consignee's authority to make
entry, making unnecessary in consolidated shipments the obtaining
of separate carrier's certmcates for each portion of the shipment;
a new procedure for entering articles temporarUy exported from the
United* States by duplicate outward registration certfficate instead
of requiring formal entry; elimination of requirements for certffied
extracts of invoices when entering the remaining portions of foreign
trade zone merchandise previously entered at the same port with the
original invoice; the giviog of receipts for duties paid on an extra
copy of the entry document in lieu of a separate form; and permitting
collectors of customs to designate examination packages other than
by marks and numbers, thus saving time and work in locating
and gainiag access to packages on the docks.
Informal entry procedures also have been improved. Forms are
now being issued to customhouse brokers to permit them to prepare
their own informal entries; this saves customs manpower and speeds
up release of the merchandise. Informal entries also may be used for
any number of shipments as long as the value of any one does not
exceed $250 to be used as a manifest, as well as an entry, thus eliminating a separate form for a customs manifest.
Inspectional activities.—Both Customs and carriers are benefiting
from several new practices adopted in 1956. After an extended pUot
test, the Canadian and United States Customs Services have eliminated the need for the customs sealing of rail cars on through trains
moving intransit through Canada between the Niagara frontier and
Detroit and Port Hur()n, Michigan. This materiaUy expedites the
movement of these shipments and saves customs manpower. Other
new procedures concerning merchandise moving under customs
ADMINISTRATIS™;
REPORTS
81
bond include: Elimination of the cording or sealing of baggage
shipped in bond; extended use of outward foreign manifests for
controlling merchandise exported under bond in lieu of actual physical
supervision by Customs; permitting importing carriers to deliver
bonded merchandise to bonded truck carriers for shipment to another
port without customs supervision; and joint procedures worked out
by the Canadian and United States Customs Services which simplify
the intransit movement of commercial travelers' samples through
either country by providing that a customs officer will examine and
cord seal the containers of samples prior to shipment, and no other
examiaation ordinarily wiU be required by customs of either country.
Substantial savings in customs inspectional manpower are also
being realized from a more extended use of carriers' records in controlling and accounting for imported merchandise, and by adopting
statistical methods for checking the disposition of imported merchandise agaiast the related inward foreign manifests.
Air commerce.—New regulations governing air commerce were
adopted which have simplified the movement of aircraft engaged in
international trade by improved procedures and reduced documentation requirements.
Travel and tourist purchases.—Customs also adopted several improvements to facilitate clearance for tourists and their purchases
upon arrival from abroad. For persons who frequently travel
abroad new procedures were devised which permit permanent registration of tourists' articles taken abroad so that they may be identified
readUy or returned by markings or serial numbers. This eliminates
the necessity to register such articles as foreign-made cameras before
each departure and is especially convenient for the many weekend
tourists along the Canadian and Mexican borders. Also, Customs is
permitting tourists to leave the United States for additional periods
to gain duty exemptions when, upon their initial arrival, it is found
they have not stayed abroad a sufficient time to meet the statutory
requirements for exemptions.
With regard to unaccompanied tourist purchases arriving by mail,
arrangements have been made to permit postmasters to accept a
prescribed declaration in lieu of duties for the release of purchases,
subject to duty exemption. This wUl accelerate the receipt of
purchases free of duty by eliminating correspondence.
Liguidation of entries.—As an alltime record volume of importations prevented a reduction in the backlogs of merchandise entries
awaiting final determination of their duty and tax status, liquidation
work continued to receive special consideration. As a result, the
backlogs increased by only 35,000 entries while the entries filed exceeded those in fiscal 1955 by 105,000. In addition to transferring
entries from offices with bacldogs to those that are current, plans are
being made to decentralize liquidating functions partially by allowing
certain entries filed at subports to be liquidated at the port where
they are filed rather than being forwarded to the headquarters port.
Within some offices collectors of customs are being permitted to
proceed with the liquidation of entries on which there is no change
in value without waiting for the expiration of the 60-day period
following appraisement in which appeals for reappraisement may be
fUed. Also, manpower is being saved by incorporating the notice of
399346—57
7
82
195 6 REPORT OF THE SECRETARY OF THE TREASURY
liquidation of informal, mail, and baggage entries in the importers'
receipt for the payment of duties and taxes.
Appraisement activities.—A complete evaluation of appraisers'
staffing requirements was made and manpower was shifted as necessary
to areas of peak workload. This is one of the principal measures
taken to help reduce the backlogs of invoices awaiting appraisement.
Of major interest along the Canadian border are the arrangements
which enable Canadian manufacturers and shippers to obtain value
and classification information through the appraiser of merchandise
at Buffalo, N. Y. As the occasion warrants, the appraiser at Buffalo
is authorized to travel into Canada for conferences and other matters
related to this program. It is expected that this arrangement will
clarify our requirements for Canadian exporters and simplify the
appraisement of Canadian merchandise wherever it is imported.
Plans are being made to extend this practice by assigning appraisers
in other districts to provide similar services at other places on the
border.
Delegations of authority.—The authority of collectors of customs to
settle liquidated damage claims arising from violations of customs
bonds has been increased considerably. Where liquidated damage
claims do not aggregate over $20,000 in any one case, the collector
may now grant relief, if circumstances warrant, for violations of
bonds involving: (1) merchandise released conditionally free of duty
and taxes; (2) improper marking of imported merchandise; (3) irregular
delivery or handling of merchandise transported in bond by common
carrier or bonded cartman; and (4) the inspection and release of meat
and meat-food products.
Previously, collectors' authority to grant relief in such cases was
limited to those involving claims of $1,000 or $1,500, depending upon
the type of violation. In other liquidated damage cases where the
coUectors' authority to take final action is not specifically prescribed
by the regulations, their general authority to settle claims has been
increased to cover cases involving claims up to $200. The previous
limit was $100.
Collectors also were delegated considerable authority to settle
many types of fine, penalty, and forfeiture cases arising from violations of customs and navigation laws. To assure uniformity the
delegation set up for the various derelictions standard penalties
which are to be followed in the handling of the cases. None of these
changes or those described in the preceding paragraph affect the right
of the violators to appeal the collectors' decisions to the Washington
headquarters.
Another delegation gives collectors of customs authority to approve
applications for the extension of the 3-year warehouse bond period
for merchandise covered by general term or blanket smelting and
refining bonds without referral to the Bureau.
In addition to the Customs Sunplffication Act of 1956, previously
mentioned, legislation was obtained to permit the Customs and
Immigration and Naturalization Services to spend up to $30,000 per
project in the construction of needed border inspection facUities. In
connection with this legislation. Customs and Immigration made a
survey of all facUities on both the Canadian and Mexican borders and
in cooperation with the Bureau of the Budget and General Services
ADMINISTRATIVE REPORTS
83
Administration, have developed a plan to obtain the required facUities
as soon as funds are made avaUable for this purpose. The total
expenditures for the required facilities for both services will approximate $6,000,000.
Other management improvements.'—Operating manuals have been
prepared for liquidators and for customs agents who conduct investigations concerning the establishment of drawback rates. The manuals
are of considerable value in training new liquidators and drawback
investigators, and to experienced personnel as sources of technical
information.
There has been a considerable improvement in customs enforcement
work as a result of the reorganization of collectors' enforcement
groups. Under the new organizational arrangement, undercover
squads operating in plain clothes develop and follow up leads on
possible violations. In addition, the enforcement groups have uniformed officers for both fixed post and patrol-car assignments and
specialists for searching vessels. To further strengthen customs
enforcement, approximately 500 employees of other Government
agencies have been designated acting customs officers to give them
legal authority to search and. detain persons when there is cause to
suspect smuggling.
The management consulting firm, McKinsey & Co., was engaged to
survey procedures followed by Customs in handling cases arising
under the Antidumping Act. The purpose of the survey was to
devise ways to simplify and expedite the processing of these cases.
Several recommendations were made and many had been placed in
operation before the end of the fiscal year.
Collectors were authorized to handle as a single batch certain types
of collection documents and schedule their total amount daily in lieu
of scheduling each item individually.
During the fiscal year, several customs laboratories began making
more extensive use of instrumentation methods of analysis, greatly
facUitating analysis work and making it possible to handle the increasing workload. Examples of new instruments being used in analyses
include: Emission spectrophotometer which is especially useful in
making analyses of inorganic materials; X-ray diffraction apparatus
with fluorescent attachment used to make quantitative analyses of
tungsten ore and other inorganic substances; and infra-red recording
spectrophotometer, which wUl be used, among other things, to help
determine the origin of smuggled opium.
Other activities of the laboratories have saved money and improved
operations. In one of these, arrangements were made with the Bureau
of the Mint for the transfer to Customs of crude platinum valued at
$50,000 for marking laboratory instruments which are used in the
analysis of fluospar samples.
During the fiscal year, 12 customs collection districts, 20 offices of
appraisers of merchandise, 2 customs agency districts, and 9 principal
customs laboratories were inspected. Special attention was given to
the methods used in implementing new procedures prescribed by the
Washington headquarters.
A digest of decisions, laws, court rulings, and related information
concerning the marking requirements for imported merchandise has
84
195 6 REPORT OF THE SEGRETARY OF THE TREASURY
been prepared and distributed to all customs field offices and made
available to prospective importers.
A new catalogue of customs forms has been prepared and issued to
customs field offices. This issue reflects all changes in customs forms
as of July 1, 1955.
Changes in procedure which were approved and placed in effect
during the reporting period resulted in the adoption of 12 new form^
the revision of 84 forms, the consolidation of 4 forms, and the abolition
of 10 forms.
Safety committees composed of top customs field officers have been
formed at the ports of Baltimore, New York, Chicago, and PhUadelphia. These committees are serving as the prototypes for other
ports. So far the committees have been very productive of recommendations for improving the safety of customs offices and waterfront
operations, and have been working closely with the General Services
Administration to correct physical hazards in Government occupied
buildings.
In fiscal 1956, customs employee participation in the incentive
awards program again showed a considerable increase over previous
years. The number of suggestions submitted exceeded the fiscal
year 1955 figure by 13 percent and the number adopted increased by
51 percent. Awards totaling $6,110 were paid for suggestions having
a known value of $55,000 annually; in addition, intangible benefits are
being realized in improved procedures and practices. The handling of
suggestions was materially expedited by an increased delegation ofauthority to local incentive awards committees.
To cover more adequately the administrative costs of processing
applications, regulations were adopted which provide that the fees
submitted with the following applications will no longer be refunded
if the application is denied: (1) Recordation of a trade-mark, tradename, or copyright; (2) designation of a common carrier as a carrier of
customs bonded merchandise; (3) establishment of a customs bonded
warehouse; (4) issuance of a customs cartage or lighterage license;
and (5) issuance of a customhouse broker's license. It is estimated
that this change will increase fee collections by approximately $7,000
annually.
A fee of $100 has been prescribed for furnishing for a period of 60
days the name and address of importers receiving articles appeariag to
infringe on a registered patent. Where this information is requested
and granted for a second period of 60 days, a second fee of $100 is
charged. This fee is expected to produce approximately $2,500
annually.
In the fiscal year 1955 the Bureau of Customs began maintaining
the master records of nonexpendable property with the use of punchedcard electric accounting machines. This new system provides summarized reports more readUy at the Washington headquarters, allows
for the preparation of inventory listings for transmittal to each
property accountable officer for verffication with his annual physical
inventory and for use as a property record in lieu of manually prepared records, and provides more readUy statistics and other information required for effective property utUization and replacement
programs.
<
85
ADMINISTRATIVE REPORTS
Bureau of Engraving and Printing
The Bureau of Engraving and Printing designs, engraves, and
prints currency, securities, postage and revenue stamps. Government
checks, mUitary commissions and certfficates, and other engraved
work for the various Government agencies, the Board of Governors
of the Federal Reserve System, and insular possessions of the United
States.
Production
Deliveries of finished work during the fiscal year 1956 totaled
705,704,754 sheets, a decrease in currency sheets of 12,133,778 or
approximately 12 percent, and a decrease in other work of 4,232,668
sheets or less than 1 percent as compared with the quantities delivered
during the previous fiscal year. A comparative statement of deliveries of finished work in the fiscal years 1955 and 1956 follows.
Comparative statement of deliveries of finished work, fiscal years 1955 and 1956
Sheets
Face value
1956
Class
1955
Currency:
United States notes
Silver certificates
Federal Reserve notes.
TotalBonds, notes, bills, certificates, and debentures:
Bonds:
Panama Canal, registered
Treasury, standard form...
Obsolete stock deUvered to Destruction Committee and destroyed
United States savings
Specimens
Consolidated Federal farm loan for the 12 Federal
intermediate credit banks
specimens...
Depositary, act of September 24,1917, as amended.
Philippine Islands loan of 1929, Metropolitan
Water District
Specimens i
Notes:
Treasury modified new design
^
Specimens
Treasury, 1955 design
Treasury, registered special series
Specimens
Consolidated Federal home loan banks, bearer
Specimens
Federal National Mortgage Association
Specimens ^
Bills:
Treasury, 1940 design
Treasury, 1953 design
Certificates:
Of indebtedness, new design, back.
Specimens
Special series
Specimens
Common stock of the:
Federal National Mortgage Association notes.
Banks for cooperatives
Specimens
Postal savings
Specimens i
Military yen currency
Footnote at end of table.
1956
1,360,667
67,014,000
29,807,777
2,120,000
58,690,889
25,237, 778
$158,400,000. 00
1,336,996,000.00
4,830,960,000.00
98,182,444
86,048,667
6,326,356,000. 00
1,186
829,596
300
202,000
300,000.00
1,478,050,000.00
95,088,000
1,368,833
90,727, 000
404
7,258,400,000.00
10,750.00
81, 930
26
500
931,767,000.00
247,200.00
160,200
3
46,713
600
1
122,750
7,448,500,000.00
3,000.00
8,444,000,000.00
1,029,000
97,715,000,000.00
84,886
458
686,515
'
700'
49,700
20
110,600
593,400
424,050
350'
6.000
93,800
14
3,392,000,000.00
50,000.00
440, 526 37,782,000,000.00
5
6, boo. 00
700
1
5,000
7,500
14
2,624,000
86
1956 REPORT OF THE SECRETARY OF THE TREASURY
Comparative statement of deliveries of finished work, fiscal years 1955 and 1956Continued
Sheets
Face value
1956
Class
1955
Bonds, notes, bills, certificates, and debentures—Con.
Debentures:
Consolidated collateral trust for the:
12 Federal mtermediate credit banks...
13 banks for cooperatives
Federal National Mortgage Association, secondary market operations
Federal Housing Administration:
War housing insurance fund
Title 1 housing insurance fund
Mutual mortgage insurance fund
Housmg insurance fund
Servicemen's mortgage insurance fund..
Military housing insurance fund
Armed services housing mortgage insurance
fund
National defense housing Insurance fund
Specimens 1
Total.
Stamps:
Customs
Delivered for destruction
Internal Revenue:
To oflaces of issue..'
.
Specimens
Puerto Rican revenue
Virgin Islands revenue
Delivered for destruction
War savings
United States savings
Postage, United States:
Ordinary
Specimens
Fifth International Philatelic Exhibition souvenir
sheet
Specimens
Airmail
Certified mail
Commemorative
Specimens
Special delivery
Special handling
Postage due
Canal Zone, ordinary
Canal Zone, air mail
Canal Zone, commemoratives
District of Columbia beverage tax paid
Federal migratory bird hunting
Foreign service fee
Slaight lock seals
Total.
Miscellaneous:
Checks
Certificates
Commissions
Diplomas
Book labels
Government requests for transportationMemoranda copies.
Delivered for destruction
other miscellaneous
Total
Grand total..
1956
49,500
13,100
$880,000,000.00
233, 600,000.00
18,000
375,000,000.00
4,000
31,000,000.00
2,000
6,000
3,500
2,000
3,000
17,050,000. 00
17,210,000.00
2,887,500.00
16,672,600.00
3,000
61
4,000
7,500
24
24,210,000. 00
53,482,500.00
98,000.00
86,150
7,350
8,000
2,000
2,500
2,000
98,082,414
96,928,538 166,101,443,450.00
' 2,334,000
40,254
1,603,000
288,100,866
3,278,552,952.79
181,015
667,895
288,619,686
153
2,053,391
1,320
206
19.200
1,081,140
180,266,306
18
182,802, 591
37
798,294.006.70
2,036,396
620
15,286,928
1,053,700
18,878,581
50
1,199,250
36,346
2,221, 582
18,900
23,900
21,280
929,200
46,725
15,656
94,000
262,833
15
8,171,096
32,000
20,976,264
73
1,102,000
18, 200
1,719, 500
3,400
39, 500
1,028,200
44,800
509,628, 508
8,356,327
1,900,610
481,980
2,767
6,047,519
2, 549, 588
449,423
5,041
30,000
1, 480,042
12.353,876
722,071,201
693,880.00
"64,"508,"964."40
240,000.00
32,502,916.00
11,010,000.00
133,250. 00
15,379,000.00
55,600.00
436,100.00
5,419,160. 00
10,035,200.00
50,000
513,452,467
130,510
1,640
1,827,500.00
16,700,600.00
4,235,789,029.89
169,478
3,847,993
13,099,042
705,704,765 176,663,588,479. i
1 All bond specimens in the various types shown in the 1965 colunm are a composite figure.
I
ADMINISTRATIVE REPORTS
87
Finances
The Bureau operations are financed by reimbursements to a working
capital fund authorized by law. A statement of income and expense
for the fiscal year 1956 and comparative balance sheets as of June 30,
1955 and 1956 follow.
Statement of income and expense for the fiscal year 1956
Income:
From sales of printing...
$24, 571, 327
From operation and maintenance of incinerator
and space utilized by other Treasury activities.
335, 593
From sales of card checks
997,173
From other direct charges for miscellaneous
services
.
167,353
Total income
Expense:
Cost of goods sold:
Purchase of direct materials
Deduct: Increase in inventory of direct
materials
$26, 071, 446
4, 822, 688
126,759
Direct materials used
Directlabor
Manufacturing expenses (excluding depreciation and amortization)
Depreciation and amortization
4, 695, 929
10,417,870
Total manufacturing costs
Deduct: Increase in goods in process inventory.
24, 336, 499
Subtotal
Decrease in finished goods inventory
23, 881, 819
235, 626
Cost of goods sold
Cost of operation and maintenance of incinerator and space utilized by other
Treasury activities
Cost of card checks (purchases and related
costs)
Cost of miscellaneous services
Nonoperating expenses:
Loss on disposal of fixed assets
Accelerated depreciation
24,117,445
Total expense
Net income for the fiscal year 1956
7, 761, 832
1, 460, 868
454, 680
335, 593
997, 126
167, 238
393, 498
35, 825
26,046,725
^ 24, 721
1 In accordance with the act approved August 4,1950 (31 U. S. C. 181-181e), the net profit will be applied
against the deficit which resulted from operations in thefiscalyear 1955.
88
1956 REPORT OF THE SECRETARY OF THE TREASURY
Comparative balance sheets June SO, 1955, and 1956 ^
June 30,1955 June 30,1956
Current assets:
Cash with Treasury. _
Accounts receivable..
Inventories:
Raw materials..Goods in process.
Finished goods...
Stores
Prepaid expenses
ASSETS
Total current assets .
Fixed assets: 2
Plant machinery and equipment.
Motor vehicles
Oflice machines
Furniture and fixtures
Dies, rolls, and plates
Building appurtenances.
Fixed assets under construction..
Less portion charged off as depreciation.
$5,058,138
1,856,484
$5,497,222
1,361,417
821,256
3,398,298
1,244,439
1,225,330
61,906
948,016
3,852,978
1,008,813
1,097,364
73,728
13, 665,851
13,839, 538
16,194,666
66,176
126,116
483,823
3, 955, 961
600, 853
231,894
16,760,178
64,069
138,180
480, 531
3, 955, 961
956.196
123, 718
20,659,489
4, 552,148
21,478,833
5,613, 732
16,107,341
15,865,101
3,284
16,107,341
15,868,385
Excess fixed assets (estimated realizable value)..
Total fixed assets
....
Deferred charges
Totalassets-
^
158,214
197,258
29, 931,406
29, 905,181
. LIABILITIES AND INVESTMENT OF THE UNITED STATES
Liabilities:
Accounts payable
Accrued liabilities:
Payroll..
Accrued leave
Other
Trust and deposit liabilities
Otherliabilities
Total liabilitiesInvestment of the United States Government:
Principal of the fund:
Appropriation from United States Treasury.
Donated assets, net
.
Total principal
Earned surplus, or deficit (—) s
Total tnvestment of the United States Government
Total liabilities and investment of the United States Govemment.
566, 997
636, 905
1,789,259
1, 654, 662
48,643
654.368
1,711
1,662,843
1, 670, 525
52,093
642,327
1
4,715, 640
4,664,694
3,250,000
22,000, 930
3, 250,000
22,000,930
25,250,930
-35,164
25,250,930
3 -10,443
25,215, 766
25,240,487
29,931,406
29,905,181
1 The balance sheets have been adjusted to reflect deposits in transit and deferred vouchers on a basis
consistent with the central control accounts maintained by the Bureau of Accounts, Treasury Department,
2 Fixed assets acquired prior to July 1, 1950, are capitalized at appraised values (estimated replacement
cost as of July 1, 1951, reduced to recognize the depreciated condition of the assets being capitalized); subsequent additions have been capitalized at cost, except that on and after July 1, 1951, all costs of manufacturing dies, rolls, and plates have been charged to current operations.
The act approved August 4,1950 (31 U. S. C. 181-181e), which established the Bureau of Engraving and
Printing Fund, specifically excluded from the assets of the fund the land and buildings occupied by the
Bureau. In accordance with the Comptroller General's decision of October 4, 1951 (B-104492), however,
replacements of building facilities and improvements to buildings made on and after July 1,1951, have been
financed by the fund. Such items of significent dollar amounts have been capitalized at cost and appear
in the balance sheet under the caption "Building appurtenances."
3 Earned surplus or deficit arises through billing for products at unit prices established prior to the development of actual costs. Section 2 (e) of the act of August 4, 1950, requires that any surplus accruing to the
revolving fund during any fiscal year be deposited into the general fund of the Treasury as miscellaneous
receipts during the ensuing fiscal year, provided that such surplus may first be applied to offset any deficit
resulting from operations in prior years. Net earned surplus in the amoimt of $24,721 in the fiscal year
1956 was applied to partially offset the deficit of $36,164 which resulted from operations in the fiscal year 1955.
The remainder of the deficit $10,443 will be offset by the application of a like amount against any surpluses
which accrue in subsequent fiscal years.
ADMINISTRATIVE REPORTS
89
Improvements in organization, operations, and management
Organizational changes.—Kealignment of several of the Bureau's
top oflSices was effected in May 1956, as follows: The Office of Plant
Security Control and the Office of Production Services were abolished,
a new office of Industrial Services was established which was composed of the Iadustrial Engineering Branch, the Security Control
Branch, the Quality Control Branch, and the Productioa Control
and Scheduling Branch, and the Internal Audit Branch of the former
Ofl&ce of Plant Security Control was placed under the jurisdiction of
the Office of the Assistant to the Director.
Note examining operations in the Currency Overprinting Branch
have been placed in self-contained units, each of which includes all
the operating materials needed by the examiners. This organizational
arrangement provides closer security and control of the work.
Under a contract awarded in the fiscal year 1955, the Methods
Engineering Council installed aii industrial engineering function in
the Office of Industries Services. A consultant from the Methods
Engineering Council remained in the Bureau through May 1956, to
conduct training of the personnel engaged in this activity.
Program reductions.—With respect to the production of currency
which from the standpoint of operating costs is the largest single item
manufactured by the Bureau, there was approximately a 33 percent
decrease in the requirements of the reguisitioning agencies during the
fiscal year. This had a marked effect on the manpower situation in
the Bureau. For instance, as a direct result of the reduction in
worldoad requirements for currency, it became necessary to abolish
the positions of 48 plate printers, effective October 31, 1955. These
printers were in addition to those separated through normal attrition.
. Each plate printer whose job was declared surplus was offered reassignment to a permanent status position at lower pay.
The decrease in currency requirements was offset by an increase in
the requirements for postage and revenue items; however, this resulted
in an overall volume work production in 1956 being substantially the
same as in 1955.
•Management improvements.—In order to fulfill its statutory obligation to print securities as cheaply, as perfectly, and as safely as the
work could be done Elsewhere, the Bureau has continued its policy of
simplifying and improving its operations. To date the most significant
improvements have been associated with currency. In this connection, experimental work was continued to develop a press capable of
printing currency with more subjects per sheet than the present 18,
by the dry intaglio process. As part of this program, the Bureau is
evaluating two foreign built rotary sheet-fed presses. Savings to
be realized from improvements associated with currency production,
however, must await further evaluations since the advances made
during fiscal year 1956 were primarily in the area of research and
development.
In the last year's report reference was made to the awarding of a
contract for five new types of presses for the production of postage
stamps. These presses, which embody many new features, were
designed to bring about improvements in quality as well as increased
eflEiciency and economy of operation. At the close of fiscal 1956, four
90
195 6 REPORT OF THE SECRETARY OF THE TREASURY
of the presses were in full production, and one remained in an experimental condition.
A contract was awarded in August 1955 for the design and construction of a prototype coil stamp processing machine for certain types of
postage and revenue stamps. The present procedures entail numerous
hand operations and it is intended that the new equipment wiU,
through automatic controls, eliminate or consolidate a number of these
manual functions. The equipment will be so designed as to be
readily convertible to process work 432-subjects per sheet, as compared with the maximum of 170 subjects which can be processed on
the present coiling equipment. An interim measure is being adopted
to print the stamps for processing into coils 384-subjects to the sheet,
and to slit the web so that the stamps printed in this way can be
processed on the present coil processing equipment.
Conversion of aU four coil perforators to electric eye operation,
which was reported for the fiscal year 1955, was completed on October
28, 1955.
The electronic counting machines in the Mutilated Paper Audit
Unit, which were formerly used for counting the $1 denomination, are
beiag used to count all denominations of mutilated currency. This
made it possible to declare excess five level-5 positions, with savings
on an anaual basis amounting to $18,928.
At the end of fiscal 1956, 81 of the recommendations contained in
the report of the Methods Engineering Council had been accepted,
five were being considered, and 17 were rejected. One of the recommendations which was effected provides for a team consisting of one
bookbinder and two assemblers at each cutting machine in the Currency Overprinting Branch instead of one bookbinder and three
assemblers formerly employed. Seven assemblers were reassigned to
other production areas and one bookbinder was added to the rolls,
with net annual savings of approximately $18,262.
Progress was made during the year on the report of this Bureau's
security procedures, as follows: Of the 165 recommendations made
by the United States Secret Service, 116 have been completed, 42 are
in process, and seven are under consideration. Those under consideration relate to the protection systems on the vaults.
A complete review of the operations in the Examining Division was
made during the year. As a result of this review, written procedures
were developed, quality standards were improved, and better security
controls were put into effect. The reduction of positions which was
effected, principally in the trimming operation, resulting in savings
of $270,000, was offset by increased costs of supervision and operations in other areas relating to sheet examination.
A review of overprinting operations resulted in numerous improvements which were in process of installation or being tested at the
close of the year. To date, the positions of four examiners have been
eliminated and the employees transferred to other jobs for wbich recruitment would have been necessary otherwise. Estimated annual
savings were $14,000.
The printing on pregummed paper of all stamps which were formerly
printed on flatbed presses and gummed in a separate operation made
it possible to reduce the spoilage of this class of work. Savings resulting from this change in procedure amounted to $8,593.
ADMINISTRATIVE REPORTS
91
Other procedural improvements were made in the Surface Printing
office, in the Rotary Printing office, and in the handling of fountain
sheets in the currency printing sections, resulting in estimated annual
savings amounting to $16,654.
Considerable savings will be reflected in the coming fiscal year in
the unit cost rates of Class A cigarette revenue stamps by increasing
the number of subjects printed per sheet from 800 to 1,200 and reducing the width of the stamps by Ke of an inch. The manufacturers
of cigarettes are in the process of converting their machines used to
affix the cigarette stamps on the package so as to accommodate the
smaller size of stamp designed during the latter part of fiscal year 1956.
Until the machines are all converted, some orders will continue to be
received for the larger stamps printed 800-subjects to the sheet.
Industrial relations activities
The total number of employees on the rolls at the beginning of the
year was 4,005. On June 30, 1956, there were 3,568 employees on the
rolls. The reduction in number of employees was due to operational
improvenients, better utilization of manpower, and reduced program
requirements.
Wage increases affecting approximately 2,855 unclassified employees, amounting to approximately $352,040, were made to meet
increases granted by Government Printing Office, American Banknote
Company, etc. for job classifications which have been determined to
be comparable to jobs in this Bureau.
Positive action was taken in connection with the program, initiated
in fiscal 1955, to apply more realistic criteria for satisfactory conduct
of employees who deal with securities. For instance, more intensive
preemployment checks of applicants are being made; security clearance
for guards requires full field investigation during the first year of service,
with completion before the expiration of the employee's probation
period; and the personnel folders of all present employees have been
carefully screened for derogatory information which might bear on
their suitability for work in this Bureau.
The Incentive Awards Program received 378 suggestions during
fiscal year 1956, of which 123 were adopted. Savings from suggestions
which were put into effect during fiscal 1956 amount to an estimated
$4,960. The rate of participation by employees in the program is
100.5 suggestions per 1,000 employees. I t is notable that the rate of
adoption of suggestions from employees increased from 18 percent
during 1955 to 32.5 percent during 1956.
Spoilage standards for plate printers were issued on October 19,
1955, after a four-month period of trial and adjustment. The new
standards have made it possible to give appropriate recognition to
printers with above average records, and to identify those who fall
below the standard for counseling and training to eliminate inefficiency or carelessness.
The Bureau's safety program has constantly emphasized the responsibility of each operating official, each first line supervisor, and
every employee, for the elimination of unsafe conditions and unsafe
practices. The establishment during 1956 of 68 safety committees,
with membership consisting of supervisory and nonsupervisory per-
92
1956 REPORT OF THE SECRETARY OF THE TREASURY
sonnel, including representatives of employee groups and unions, has
brought about an increase in safety awareness, and a continuation of
the downward trend in the accident frequency rate. As of June 30,
1956, the Bureau frequency rate was 9.27,^ which compares favorably
with a frequency rate of 9.3 ^ for the printing and publishing industry
throughout the United States. Through a vigorous inspection and
an educational program, it is hoped to reduce further the accident
frequency rate.
Long range research program
In addition to the improvements associated with currency described
under ^'Management improvements," the Bureau is conclucting developmental studies related to the following machinery and equipment : Automatic equipment for the detection of incorrectly counted
banded assemblies of currency, automatic equipment for the replacement of defective currency notes, automatic equipment for forming,
sealing, and wrapping cartons of postage stamp books, and semiauto-.
matic equipment for examination of sheets of currency. The following
studies are being made of materials associated with the production of
currency and stamps: Remoistenable synthetic adhesives, new formulations of ink for use in the dry intaglio printing process, an improved method of spectrographic analysis for counterfeits, and transparent wrappings for packages of currency. Continued research on
the problem of increasing the life of currency in circulation is being
conducted with the cooperation of Crane & Company, the Bureau's
paper contractor, and the National Bureau of Standards.
New issues of stamps
Orders were received and dies were engraved for new issues of
postage stamps as follows:
Issue
Denomination
(cents)
Fort Ticonderoga, Commemorative, Series 1956..
Andrew W. Mellon, Commemorative, Series 1955
Benjamin Franklin, Commemorative, Series 1956
Fifth International Philatelic Exhibition, Commemorative, Series 1956
Booker T. Washington, Commemorative, Series 1956
Wildlife Conservation (Wild Turkey), Commemorative, Series 1956
....
Wildlife Conservation (Pronghorn Antelope) Commemorative, Series 1956..
Pure Food and Drug Laws, Commemorative, Series 1956
Wheatland, Home of James Buchanan, Commemorative, Series 1956..
New issues of ordinary postage stamps produced during the year,
aU in the 1954 Series, were as follows: Kj^S, iKj?^, H , ^ i , H^ lOjzS, 20^,
30j2S, 40j25, 50jz;, $1.00, and $5.00. Other new issues of stamps include
the $2.00 Federal migratory bird hunting stamp. Series 1956-7, and the
Fifth International Philatelic Exhibition souvenir sheet, Series 1954,
in the H i denomination.
1 The numbers of disabling injuries per mOlion man-hours worked.
ADMINISTRATIVE REPORTS
93
Fiscal Service
The Fiscal Service of the Treasury Department is comprised of the
OflSce of the Fiscal Assistant Secretary, the Bureau of Accounts, the
Bureau of the Public Debt, and the Office of the Treasurer of the
United States. Their operations are under the general supervision
of the Fiscal Assistant Secretary.
The Fiscal Assistant Secretary, under the direction of the Under
Secretary, administers the financing operations of the Treasury; prepares estimates of the future cash position of the Treasury for use of
the Department in its financing; directs the distribution of funds
between the Federal Reserve Banks and other Government depositaries; prepares calls for the withdrawal of funds from the special
depositaries to meet current expenditures; directs fiscal agency functions in general; and administers the Treasury responsibilities with
respect to the purchase, custody, transfer, and sale of foreign exchange
acquired by the United States under various executive agreements
with foreign governments in connection with United States programs
operated abroad.
In carrying out the responsibilities of the Fiscal Assistant Secretary,
liaison has to be maintained with the other departments, agencies, and
branches of the Government with respect to their financial operations
and the coordination of these operations with those of the Treasury.
The Fiscal Assistant Secretary supervises the administration of
accounting functions and related activities of all units of the Treasury
Department through the Commissioner of Accounts; and carries out,
thrpugh the Commissioner of Accounts, the Treasury's role in the
joint accounting improvement program of the Secretary of the Treasury, the Director of the Bureau of the Budget, and the Comptroller
General of the United States in accordance with the Budget and
Accounting Procedures Act of 1950.
The several responsibilities of the Fiscal Assistant Secretary are
indicated more fully in the operations detailed in the following reports
by the Commissioner of Accounts, the Commissioner of the Public
Debt, and the Treasurer of the United States.
BUREAU OF ACCOUNTS
The Bureau of Accounts performs a variety of functions pertaining
to responsibilities of the Secretary of the Treasury. It maintains the
system of central accounts and prepares central financial reports of
the Government required by the act of July 31, 1894 (5 U. S. C. 255),
and the Budget and Accounting Procedures Act of 1950 (31 U. S. C.
66b). It furnishes technical guidance and assistance in accounting
matters to Treasury bureaus and collaborates with^ the General
Accounting Office and the Bureau of the Budget in projects aimed at
simplifying, improving, and strengthening accounting and other fiscal
procedures of the Government as a whole. It makes disbursements
to Government creditors in payment of obligations incurred by the
various executive departments and agencies, with the principal
exceptions of the Post OflEice Department and the Department of
Defense. The Bureau also pays claims under international agreements;
94
1956 REPORT OF THE SECRETARY OF THE TREASURY
makes investments for a number of trust funds; administers loans
authorized to be made by the Treasury to Government corporations
and other Federal agencies; determines the qualifications and underwriting limitations of companies to write Government fidelity and
surety bonds; performs the administrative work in connection with
the designation of Government depositaries; and performs such other
fiscal work as may be required by the Secretary.
Accounting, Reporting, and Related Matters
Central accounting
;
Installation in the Bureau of Accounts of a system of central
accounts, developed pursuant to Section 114 bf the Budget and
Accounting Procedures Act of 1950, was" commenced July 1, 1955,
and virtually completed by the end of the fiscal year. The only
remaining action of major significance to be taken is the application
of certain of the procedure to the Internal Revenue Service and
Bureau of Customs to bring their reporting of receipts in line with
that of other agencies of the Government for purposes of the central
accounting operations. This will be accomplished in the fiscal year
1957. Further evolutionary changes in the system would involve
applying the provisions of Joint Regulation No. 4, Revised, and
Department Circular No. 945, Revised (see pages 92 and 326-331
of the 1955 Annual Report of the Secretary) to the accounting for
public debt principal and interest transactions and extending the
provisionsof paragraph 4 of the joint regulation to those Government
agencies which were initially exempted.
As explained in the Annual Report of the Secretary for the fiscal
year 1954 (coihmencing on page 97), the central accoimts pertain to
the receipts, expenditures, and related cash operations of the entire
Government and provide the accounting basis for central reports in
that area, including determination of the annual surplus or deficit.
An important feature of the system is that an accounting reconciliation is provided between the published reports of receipts and expenditures and the changes in the Treasury's cash balance.
Supplements Nos. 4 and 5 to Department Circular No. 945, Revised, were issued respectively on March 13 and May 14, 1956 (see
exhibit 51) to establish certain requirements concerning year-end
reporting for the closing of the central accounts. This was to achieve
better integration of the central accounting and reporting of the
Treasury Department and the accounting of the administrative
agencies. Supplements Nos. 1, 2, and 3 to Department Circular
No. 945, Revised, mentioned on page 92 of the Annual Report of the
Secretary for the fiscal year 1955 also are published in this report
(see exhibits 48 to 50). To further promote Govemment-wide
efforts toward integration of central accounting and reporting a
compilation of general requirements dated June 4, 1956, was issued
to all departments and agencies (see exhibit 53).
Based on financial data provided by the system of central accounts,
a new table is included in the Combined Statement of Receipts, Expenditures and Balances of the United States Government for the fiscal
year ended June 30, 1956, showing the assets and liabilities which
constitute a reconciliation of such receipts and expenditures with the
ADMINISTRATIVE REPORTS
95
change in the balance of the Treasurer of the United States between
the dates June 30, 1955 and June 30, 1956.
The volume of accounting items (tabulating cards punched, postings, etc.) processed through the central and regional accounting
offices of the Division of Central Accounts of the Bureau during the
fiscal year 1956, compared with the preceding year, follows.
Work volume
Classification
1965
B.eceipts
Expenditures
otheritems
.
_ . _ . . . . _
.
Total
--
1956
2,208,948
2,851,716
8.442
2,211,401
3,153,885
8,950
5,069,106
6,374,236
•
Other staff accounting and procedural matters
Within the Treasury, technical guidance and assistance is given
to individual bureaus on systems' design, and day-to-day accounting,
reporting, and procedural problems. In particular, work was continued during the year in collaboration with: The Internal Revenue
Service in connection with the system of revenue accounting and
related procedures; the Bureau of the Public Debt in the development
of an improved system of accounting for public debt operations; and
the Office of the Treasurer of the United States with regard to the
development and installation of an integrated system for payment
and reconciliation of checks by use of electronic data-processing
equipment. Also, improved accounting procedures, involving all
Fiscal Service bureaus and the Federal Reserve Banks, were developed
with respect to income taxes withheld from interest payments to
nonresident aliens holding United States securities. Regulations
contained in Department Circular No. 865 governing the disposition
of cash gifts, donations, and contributions to the United States
received by the Treasury Department were revised April 27, 1956
(see exhibit 52).
The Bureau's participation in projects of Government-wide scope
involved: Development of proposed legislation to replace existing
law wdth respect to accounting for expired appropriations and payments of old obligations handled as claims for settlement by the
General Accounting Office;^ development of proposed legislation to
put into effect certain recommendations of the Commission on
Organization of the Executive Branch of the Government on accounting and budgeting;2 studying methods to accomplish a staggering in
the issuance of monthly payment checks in order to alleviate peakload operations of the Post Office Department, commercial banks,
the Federal Reserve Banks, and the Treasury Department; development of improved procedure concerning reports of obligation of funds
under Section 1311 of the Supplemental Appropriation Act, 1955,
approved August 26, 1954 (31 U. S. C. 200); and devising plans for
» Public Law 798, approved July 25,1956, "To simplify accounting, facilitate the payment of obligations,
and for other purposes."
2 Public Law 863, approved August 1,1956, "To improve governmental budgeting and accounting methods
and procedures, and for other purposes."
96
195 6 REPORT OF THE SECRETARY OF THE TREASURY
simplif3dng procedures regarding expenditure transfers between
appropriation and fund and receipt accounts affecting the accounts
of Treasury regional offices.
Central reporting
During the fiscal year 1956 further progress was made in improving
financial reports for the Government as a whole and achieving greater
consistency between such central reports and those of the individual
executive agencies.
Two significant changes were made in the Comhined Statement of
Receipts, Expenditures and Balances of the United States Government
for the fiscal year ended June 30, 1955, which was submitted to the
Congress on January 3, 1956. First, the tables showing appropriations and expenditures were expanded to include an analysis of the
unexpended balance of each appropriation or fund in terms of availability for future obligation or expenditure. Second, a new table was
included to provide in one place for each of the nearly 100 wholly
owned Government corporations or other revolving funds, condensed
information concerning financial resources and obligations; namely,
assets, liabilities, net investment of the United States, contractual
commitments, and additional means of financing in the form of unused
borrowing authority.
Budget-Treasury Regulation No. 3, which was originally issued
September 1, 1944, and revised March 15, 1947, pursuant to Executive Orders Nos. 8512 and 9084, was superseded by Treasury Department Circular No. 966 of January 30, 1956, issued under Section
114 of the Budget and Accounting Procedures Act of 1950 (31 U. S.
C. 66b). This circular requires the submission by wholly owned
Government corporations and other revolving funds, of financial
statements relating to assets and liabilities, income and expense, application of funds, commitments, and contingencies necessary to disclose fully the results of their financial operations. On June 1, 1956,
a supplement to the circular was issued requiring all executive agencies to furnish reports on real and personal property as a basis for
developing data to be used by the Committee on Government Operations, House of Representatives, in a continuing study and for committee reports on the assets of the Federal Government. Department
Circular No. 966 provides the framework for ultimately obtaining
data necessary to disclose as completely as may be desirable and
practical the assets, liabilities, and financial operations of the entire
Government. Reports of this character are now being published at
intervals in the Treasury Bulletin.
In connection with the improvement of central reporting in the
fiscal year 1956, reference should be made to Department Circulars
No. 965 Revised, July 3, 1956 (exhibit 54), No. 966 of January 30,
1956, and Supplement No. 1, of June 1, 1956 (exhibit 47).
Control of foreign currencies
Foreign currencies acquired by the United States Government
without purchase with dollars were brought under Treasury control
by regulations of the Secretary of the Treasury issued pursuant to
Executive Order No. 10488 of September 23, 1953 (see page 101 of
the Annual Report for 1954). Since 1953, there have been enacted
numerous provisions of law having to do with acquisition and use of
ADMINISTRATIVE REPORTS
97
such foreign currencies. Exhibit 56 is a compilation of the principal
provisions of law on this subject.
Foreign currency acquisitions during the fiscal year 1956 amounted
to $886.7 million. Seventy-five percent of these currencies were derived from sales of surplus agricultural commodities as authorized by
the Agricultural Trade Development and Assistance Act of 1954,
commonly referred to as P u b l i c L a w 480 (7 U. S. C. 1691, 17011709), and by similar sales as authorized in mutual security acts.
The original sales program under Public Law 480, was more than
doubled in the fiscal year 1956 as a consequence of Public Law 387,
approved August 12, 1955 (7 U. S. C. 1703 (b)). The mutual security program for sales of surplus agricultural commodities svas continued during the fiscal year at a level slightly below that authorized
for 1955, in accordance with Section 8 (b) of the Mutual Security
Act of 1955, approved July 8, 1955 (22 U. S. C. 1922).
The original program, coramencing in the fiscal year 1955, for the
construction or acquisition of family housing abroad by the Department of Defense by the use of foreign currencies acquired under
Public Law 480 or acquired by other commodity transactions of the
Commodity Credit Corporation, was quadrupled for the fiscal year
1956 by provision of Section 507 of Public Law 161, approved July
15, 1955 (5 U. S. C. 171Z-1),
Section 104 of the Mutual Security Appropriation Act, 1956 (31
U. S. C. 724) fixed June 30,1956, as the final date that foreign currencies,
not to exceed tbe equivalent of $25 million, could be used to liquidate
obligations incurred prior to July 1, 1953, witbout requiring reimbursem^ent to the Treasury for use of tbe foreign currencies. This
was m.odified, however, by a provision of the appropriation act for
1957, which continued available until expended the equivalent of a
maximum of $2 million of foreign currencies for this use.
Department Circular No. 967 (exhibit 46) was issued August 24,
1955, requesting all Federal agencies to submit annually estim.ates of
foreign currencies to be acquired without purchase with dollars, and
estimates of their need of foreign currencies to m.ake expenditures
chargeable to their dollar appropriations. These reports are the basis
for estimates compiled by the Treasury Department to be included in
the annual Budget. The estim.ates represent the dollar proceeds to
be derived from sales of currencies that are for credit to ^'miscellaneous
receipt" accounts of the Government. The reports also serve as the
basis for estim.ating the amounts of all currencies which may be available to meet the needs of various Federal agencies for such currencies.
Statements showdng the amounts of collections, withdrawals, and
balances of foreign currencies for the fiscal year 1956, according to
country and source of acquisition, are presented as tables 106 and 107.
Internal auditing
Department-wide.—All Treasury bureaus have made provision for
regular internal auditing and have established an internal audit policy
pursuant to Department Circular No. 924 (see Annual Report for
1953, page 308). During the fiscal year two meetings of Treasury
internal auditors were held in which m.atters of mutual interest were
discussed and ideas exchanged. Reporting techniques were improved
with the result that periodic reports on internal auditing in the De399346—57
8
98
1956 REPORT OF THE SECRETARY OF THE TREASURY
partment as a whole now provide a better measure of progress and
accomplishments. By the close of the year, audit work in the bureaus
showed notable improvement. The audit programs are becoming
more systematized, the scope and coverage is gradually being increased, and results from the audit work are becoming more significant.
Bureau of Accounts.—In the Bureau of Accounts the internal audit
program was expanded somewhat. New audit areas undertaken included certain trust, investment, and miscellaneous accounts, such as
the railroad retirement account and the new Oliver Wendell Holmes
devise fund. Also, a new comprehensive audit program was developed
for the regional disbursing and accounting offices; audits were completed in nine of such offices during the year.
Commodity Credit Corporation appraisal
In accordance with the act of March 8,1938, as amended (15 U. S. C.
713 a-1), the Secretary of the Treasury is required to make an
annual appraisal of the assets and liabilities of the Commodity Credit
Corporation to determine whether there has been an impairment of
capital or a surplus. More information concerning this matter may
be obtained by reference to page 94 of the Annual Report of the
Secretary for the fiscal year 1955.
The appraisal relating to the fiscal year 1955, which included inquiry into the Corporation's accounting policy and practices and the
manner in which certain transactions were handled, disclosed a ''realized net loss" for the year of $929,870,140. Reimbursement to the
Corporation for certain expenditures in the sum of $582,962 was provided for by appropriations contained in Public Law 40, approved
May 23, 1955. Hence, the amount of capital impairment, as of June
30, 1955, to be restored was $929,287,178. This amount was appropriated in Public Law 554, approved June 4, 1956.
Table 120 of this report shows the various eliminations of capital
impairment, by means of appropriations or the cancellation of obligations of the Corporation, and the various payments to the Treasury
on account of surpluses, under the act of March 8, 1938, as amended.
General Operations
Division of Disbursement
The Division of Disbursement is responsible for making payments
for all executive departments and agencies except the Department of
Defense, the Post Ofl&ce Department, the United States marshals, the
Panama Canal, certain corporations, and certain agencies to which
the function of disbursement has been delegated. The functions of
the Division of Disbursement include: Making pajrments from appropriated, trust, and deposit funds; issuing substitute checks for all disbursing officers of the United States Government; and issuing United
States savings bonds under the Government payroll savings plan.
The Division, through the use of its mechanical equipment and facilities which produce checks, also prepares payrolls, vouchers, and record
cards for the agencies for which payments are made.
These services are provided by the Division through its 21 regional
disbursing ofl&ces, 18 of which are located in the continental United
States, two in Territories, and one in the Philippines, for approximately
1,300 United States Government offices. In addition, the Division
of Disbursement arranges with the Department of State to provide
99
ADMINISTRATIVE REPORTS
foreign disbursing service for all agencies of the United States Government requiring such service, except for regular foreign establishments
of the Department of Defense. The Division exercises technical
supervision over the disbursing operations performed under delegation
of authority from the Chief Disbursing Officer in the case of: 227
foreign disbursing offices and branches at embassies and consulates in
all foreign countries; 105 assistant disbursing ofl&cers attached to
agencies in the United States, South and Central America, and other
foi'eign countries; and 1,381 agent and imprest fund cashiers making
on-the-spot cash payments in the United States, the Territories, and
foreign countries.
Appreciable savings were realized in the fiscal year 1956 through
further advances in mechanical processes and improved procedures
developed under the management improvement program; savings to
the Division of Disbursement amounted to $582,473; and the unit cost
for processing the checks was reduced from 4.60 cents in the fiscal
year 1955 to 4.51 cents in 1956, despite the additional cost for salaries
pursuant to the act approved June 28, 1955 (69 Stat. 172). Significant
improvements were made in a number of other areas as folio vvs:
An appraisal was made of all operations in the Washington Regional
Office, resulting in a reduction of personnel; the Field Supervision
Branch strengthened the comprehensive survey of regional disbursing
offices by expanding the scope of its internal audit program; mechanical processes of issuing checks were improved and given wider application; and arrangements were completed in the latter part of the
fiscal year for the installation in fiscal 1957 of electronic equipment for
check-writing operations.
The volume of work during the fiscal year 1956 compared with that
of the preceding fiscal year was as follows:
Number
Classification
1955
Payments made:
SocialSecurity
_.
.
_ _
Veterans' benefits
__
_
Income tax refunds
_
Veterans' national service life insurance dividend program
other
_
Adjustments and transfers effected
.
.. .
Savings bonds issued
Total
_..
._._
1956
79,720,034
59,883,479
33, 447,025
4, 085, 762
32,004,114
844, 805
2, 529, 027
91,748,764
62,333, 759
34,195,231
3,840, 588
30, 897, 368
659,088
2,853, 628
212,514, 246
226, 528,426
Federal depositary system
Designated depositaries provide the varipus Government departments and agencies with banking and financial services besides those
afforded by the Office of the Treasurer of the United States. In
addition to the Ofl&ce of the Treasurer of the United States and the
twelve Federal Reserve Banks and their branches, the depositary
system consists of more than 11,000 commercial banks designated by
the Secretary of the Treasury. The supervision of the depositaries
by the Bureau of Accounts, under the general direction of the Fiscal
Assistant Secretary, is carried out under Department regulations
governing the authority, qualifications, and other requirements
applicable to the depositaries.
100
1956 REPORT OF THE SECRETARY OF THE TREASURY
Government losses in shipment claims
By a self-insur ance plan, the Government assumes the risk on its
shipments of money, bullion, securities, and other valuables while in
transit between the Treasury, other Government departments and
agencies, and depositaries. The plan, which supplanted contracts
with private insurance companies, effective July 1, 1937, was established by the Government Losses in Shipment Act (5 U. S. C. 134—
134h; 31 U. S. C. 528, 738a, 757c(i)), and is administered by the
Treasury Department. The Bureau of Accounts receives from insured
agencies reports of their shipments made under coverage of the act
and' is responsible for the payment of claims for losses.
Shipments reported for tbe fiscal year 1956 were valued at $478.2
bilhon as compared with $591.2 for the fiscal year 1955. During
the fiscal year 1956, claims amounting to $55,549 were paid from
the revolving fund established under the act, while recoveries
amounted to $8,153, making a net expenditure of $47,396 for losses.
The estim.ated insurance premium savings accrued to the Governm.ent for shipments made during the year, based on rates of private
insurance com.panies in effect at the time the fund was established,
were $4,039,000. Detailed statements relating to the operation of
the Government Losses in Shipment Act are given in table 99.
Surety bonds
The Secretary of the Treasury issues certificates of authority to
corporate sureties m.aking application and qualifying under the act
approved July 30, 1947 (6 U. S. C. 8), to execute bonds in favor of
the United States. Form 356, Revised, listing companies holding
such certificates of authority is published annually, on or about
May 1, by the Treasury. The Bureau of Accounts examines the
applications of com.panies requesting authority to write bonds and
currently reviews the qualifications of the companies so authorized.
I t also examines and approves as to corporate surety practically all
fidelity and surety bonds in favor of the United States except certain Post Office Department and Department of Army bonds, and
holds in custody a large portion of the bonds examined with the
exception of contract bonds.
As of June 30, 1956, there were 158 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.
There were also 23 companies holding certificates of authority as
acceptable reinsurers only, issued under Department Circular No.
297, as amended. During the year certificates of authority to write
bonds were issued to 14 companies and were revoked in the case of
6 other com.panies and certificates of authority to reinsure risks only
were issued to 8 companies. For the fiscal year 1956, 44,440 bonds
and consent agreements, including those executed under the new
bonding act, effective January 1, 1956, cleared through the Bureau
for approval as to corporate surety.
Public Law 323, approved August 9, 1955 (6 U. S. C. 14), amends
the act of July 30, 1947, by requiring the head of each department
and independent establishment in the executive branch of the Federal Government to obtain, under regulations promulgated by the
Secretary of the Treasury, blanket, position schedule, or other types
of surety bonds covering civilian officers and employees and military
ADMINISTRATIVE
101
REPORTS
personnel of each department or independent establishment who are
required by law or administrative ruling to be bonded. Also, the
law permits officials of the legislative and judicial branches of the
Federal Government to obtain any or all of such types of surety
bonds, covering officers and employees under their respective jurisdictions as such officials may deem appropriate to be bonded. Previously, most officers and employees required to be bonded had to
obtain individual bonds at their own expense. The law further
provides that bond premiums be paid from any funds available for
administrative expenses of the employing agency, thereby relieving
employees of the payment of premiums.
The Treasury Department developed regulations required by the
act after consultation with representatives of the Committee on
Post Office and CivU Service of the House of Representatives, of
associations of surety companies, and of the major executive departments and the General Accounting Office. The regulations appear
as exhibit 55 in this Report.
Reports to the Treasury Department, as required by Section 14 (c),
Title 6 of the United States Code indicate very substantial dollar
savings under the new system even including certain nonrecurring
costs of setting the system in motion. The accompanying table
compares coverage under the new legislation four m.onths after it
became effective and coverage as of December 31, 1955, before the
act became effective. In the aggregate the table shows greater
coverage, smaller premiums, and very much smaller administrative
expenses. The indicated decrease in administrative expenses almost
offsets the premium costs paid by the Government under the new
act. Subsequent reports will also show claims on surety companies
providing the bonds and the related recoveries.
Status of coverage in force
Under act of
As of December August.9,1955,
as
31,1955
of April 30, 1956
•
Number of oflicers and employees covered
Number in Internal Revenucj Service covered 2
Aggregate penal sums of bonds procured—
_
Penal sums procured by Internal Revenue Service coverage 2
Total premiums paid by:
Employees
FiTTiplnyfifiS, Tntp.rTifl.1 Hp.vfiunp, Sftrvicfi2^
Govermnent
Tnternal Rp.vpnne SpTvicp. 2,. '..
Administrative expenses, fiscal year:
1955
1956
__
900,666
9,142
$2,000, 914, 540
56,040,000
._
1, 678,279
54,469
_ ._ .
-
-- -
507,100
1 930,164
24,859
3 $3,291,163, 250
140,675,000
4 598, 256
30,236
«75,000
Note.—Public Law 323,84th Cong., 1st sess., Sec. 14 (c) requires the Secretary of the Treasury to transmit
to Congress an initial report on or before June 30, 1956, and thereafter on or before October 1 of each year
beginning with 1957, a comprehensive report of operations during the preceding fiscal year. The initial
report was submitted on June 29,1956.
1 Of which 93 percent were included in a blanket bond of the Post Oflace Department.
2 Covered under Internal Revenue Code of 1954 (26 U. S. C. 7803 (c).).
3 The increase in aggregate penal sums of bonds procured under the act as compared with aggregate penal
sums of bonds in force December 31,1955, is due primarily to the coverage of about 700,000 employees of the
Post Oflace Department by a blanket bond in the basic penal sum of $2,500 each as compared with previous
coverage by bonds with the basic penal sum of $1,000 each; and also is due to an increase in the total number
of employees bonded.
4 Of tbe amount of $585,155.52 of premiums paid by the executive branch, $19,876.82 covers premiums
paid for bonds rurming for one year. The balance, $565,278.70, covered premiums on bonds ruiming for
two years. One-half, or $282,639.35, would be comparable to $1,650,711.23 covering premiums paid by
employees in the executive branch for bonds in force December 31,1955, after deducting the premiums of
$19,876.82 paid for bonds running for one year.
«Estimated.
102
1956 REPORT OF THE SECRETARY OF THE TREASURY
Withholding of non-Federal income taxes
The act of July 17, 1952 (5 U. S. C. 84b, 84c) authorizes the
Secretary of the Treasury to enter into agreements with States for
the withholding of State income taxes from the compensation of
Federal employees regularly employed in the State. An agreement
with the State of Alabama was concluded in the fiscal year 1956,
effective January 1, 1956, making a total of 12 agreements that have
been concluded with States and Territories since the act was passed.
The provisions of the District of Columbia Revenue Act of 1956
(Public Law 460, approved March 31, 1956), require the withholding
of District of Columbia income tax from salaries paid employees
on or after October 1, 1956, who reside in the District. Implementing
this provision with respect to withholding from salaries of Federal
employees. Executive Order No. 10672, dated July 9, 1956, authorized
the Commissioners of the District of Columbia to enter into an agreement with the Secretary of the Treasury. The agreement was
executed on July 27, 1956.
The Government Actuary
The Secretary of the Treasury is charged with the duty of handling
the investments for certain Federal trust funds which are maintained
to provide retirement and disability pensions. In addition, for two
of these funds, the District of Columbia teachers' retirement and
annuity fund, and the foreign service retirement and disability fund,
the Secretary is charged with preparing estimates of the annual
appropriations required to maintain the systems on sound financial
bases.
The Government Actuary prepares for the Secretary various
actuarial estimates required in analyses of retirement system costs,
including estimates of annual appropriations for the two funds, as
well as cost estimates in connection with proposed legislation affecting
retirement under the two systems. In addition, the Actuary is a
member of the Board of Actuaries for the civil service retirement and
disability fund and the Uniformed Services Contingency Option Act.
The civfi service retirement and disability fund submitted in 1956 its
34th annual report on the status of the fund along with its recommendations with respect to maintaining the fund on a sound financial
basis. There was submitted in 1956 the first annual report on the
operations of the Uniformed Services Contingency Option Act,
which permits members of the uniformed services to elect annuities
for their survivors.
Investments of trust and other funds
The Investments Branch of the Bureau of Accounts, at the direction
of the Secretary of the Treasury and in accordance with various
provisions of law, has the duty of investing certain trust and other
funds in obligations of the United States. Investment accounts and
records of securities held in safekeeping by the Treasurer of the
United States and Federal Reserve Banks subject to the order of
the Secretary are maintained. The various investment accounts
handled primarily by the Treasury are shown in table 52. Treasury
facilities are used also for investment transactions of other agencies
of the Government, for quasi-governmental funds, and for the Government of the District of Columbia.
ADMINISTRATIVE REPORTS
103
Loans by the Treasury, Interest, Dividends, and SimUar Receipts
The Investments Branch of the Bureau of Accounts develpps
agreements relating to loans to Government corporations and to
other agencies which are authorized to borrow from the Treasury
and receives interest, dividends, and similar special receipts required
to be paid into the Treasury. Records are maintained relating
to such loans and also to subscriptions to the capital of Government corporations paid by the Treasury.
Table 115 shows advances made on loans by the Treasury to other
Government corporations and business-type activities, repayments,
cancellations, and balances for the fiscal year 1956.
Saint Lawrence Seaway Development Corporation
The act of May 13, 1954 (33 U. S. C. 981-990), established the
Saint Lawrence Seaway Development Corporation and authorized
and directed the Secretary of the Treasury to purchase any obligations
issued by the Corporation. During the fiscal year, the Secretary of
the Treasury purchased bonds amounting to $13,300,000; as of June
30, 1956, total purchases amounted to $16,000,000. For further
details see the annual report for 1955, page 99.
District of Columbia
The District of Columbia Appropriation Act of June 2, 1950, as
amended (D. C. Code, Sec. 43-1540, 1951 edition), increased .the
limitation to borrow from the United States Treasury to finance the
expansion and improvement of the water system of the District of
Columbia to $35,000,000. Loans made during the fiscal year amounted to $2,300,000. The total loans made for this purpose through
June 30, 1956, amounted to $4,200,000.
Refugee relief
Section 16 of the Refugee Relief Act of 1953 (50 App. U. S. C. 1971),
authorizes the-Secretary of the Treasury to make loans, not to exceed
$5,000,000 in the aggregate, to public or private agencies of the
IJnited States in order to finance the transportation, from ports of
entry to places of settlement in the United States, of certain persons
receiving immigrant visas under the act who lack resources to. finance
the expense involved. To June 30, 1956, twenty-nine agencies had
been certified by the Department of State to the Treasury as eligible
organizations to make applications for loans. During the fiscal
year, applications for loans aggregating $290,000 were approved by
the Secretary of the Treasury of which $199,000.00 was disbursed.
There is shown in table 73 those agencies which have had loans approved and the amounts received under the agreements made pursuant to the act.
Colorado River Dam fund
The status of the Colorado River Dam fund, which was established
by the act of December 21, 1928 (43 U. S. C. 617) is shown in table 74
of this report. An explanation of the nature of the fund may be
obtained by reference to page 119 of the Annual Report for the fiscal
3^ear 1946.
104
1956 REPORT OF THE SECRETARY OF THE TREASURY
Deposits of interest charged on Federal Reserve notes
Section 16 of the Federal Reserve Act (12 U. S. C. 414). authorizes
the Board of Governors of the Federal Reserve System to charge
Federal Reserve Banks interest on the amount of unredeemed Federal
Reserve notes issued to such banks in excess of gold certificates held
as collateral against such notes. By the exercise of this authority,
annual interest payments equal to approximately 90 percent of the
net earnings of the Federal Reserve Banks have been made to the
United States Treasury beginning in 1947.
The amount deposited in the fiscal year 1956 was $287,280,500 as
contrasted with the deposit of $251,226,266 in 1955. The total deposits since 1947 have amounted to $2,137,441,980 as shown in
table 14.
Donations and contributions
During the fiscal year 1956, the Treasury Department deposited
in the general fund so-called ^^Conscience fund'' contributions totaling $63,239 and other unconditional donations amounting to $19,923.
Other Government agencies deposited ''Conscience fund'' contributions totaling $18,268 and unconditional donations totaling $1,996.
Deposits to the credit of Library of Congress trust funds, permanent
loan account, amounted to $683,502 representing cash donations and
proceeds from the sale of securities belonging to the funds.
No conditional donations were received during the fiscal year 1956.
However, proceeds amounting to $7,099 were received from the sale
of shares of stock donated during the preceding fiscal year and from
dividends relating to the stock. The proceeds were credited to appropriation accounts suitable for carrying out the purposes intended
by the donors. For explanation of the law and regulations pertaining to conditional donations, see the Annual Report of the Secretary
for 1955, page 100.
International Obligations
World War I indebtedness
The Treasury Department received payments aggregating $395,659.36 from the Government of Finland, representing installm.ents of
principal and interest which became due in Decem.ber 1955, and June
1956, under the funding agreement of May 1, 1923, and the moratorium agreements of May 1, 1941, and October 14, 1943, relating to
indebtedness growing out of World War I. This amount was made
available to the Department of State for financing educational and
scientific studies in Finland and the United States in accordance with
provisions of the act of August 24, 1949 (20 U. S. C. 222).
Tables 108 and 109 show the status of World War I indebtedness
of foreign governments to the United States.
Mixed Claims Commission, United States and Germany
In April 1956 the fourth annual installment in the amount of $3,000,000 was received from the Federal Republic of Germany, under
the terms of the agreement signed at London on February 27, 1953, in
partial settlement of German debts arising from World War I. A
ADMINISTRATIVE REPORTS
105
summary of the terms of this agreement is included in the Annual
Report for 1954, page. 109.
This payment enabled a further distribution of 5.15 percent on
account of interest accrued on Class I I I awards (those over $100,000)
of the Mixed Claims Com.mission, United States and Germany.
A statement showing total payments on awards of the Mixed Claims
Commission under the Settlement of War Claims Act of 1928 by
classes, and the status of the accounts as of June 30, 1956, is shown in
table 101.
^ World War II indebtedness
- In the fiscal year 1956, under lend-lease and surplus property agreeinents, the Treasury Department received from debtor governments
piayments in United States dollars am.ounting to $102.5 million, foreign
ctirrencies having an equivalent value in United States dollars of
approximately $48.0 miUion, and real property and improvements to
reail property having an estim.ated value of $100,000. These acquisitions resulted in credits totaling $150.6 million to the debtor governments'accounts.
Payments in foreign currencies and real property and improvements,
from inception of the lend-lease and surplus property programs, represent a total estimated value received of $331.4 million. The aggregate
of Uiiited States dollar receipts and other credits since inception of
the program amounts to $2,595.3 million.
During World War I I a total of 409,782,670.47 fine troy ounces of
T^^reasury free silver (bullion) valued at $291,401,009.67 was transferred to certain foreign goyernments for coinage and industrial use,
pursuant to the Lend-Lease Act of March 11, 1942. Agreements which
vary somewhat in form were executed with each recipient government,
provided that the debtor countries return a like kind and quantity of
sUver ounce for ounce, within five years after termination of the
national emergency as determined by the President. In some instances
the agreements provide that should the conditions of the world supply
of sUver make it advisable, the date of return may be extended by
agreement of both governments for an additional two years. The
termination of the emergency was in April 1952. The due date for
repa3anent of sUver is April i957. During fiscal 1956, a total of 47,337,578.60 fine troy ounces of sUver, having as its dollar value the
sum of $35,156,232.83 was received by the Treasury Department as
repa3nnents on these accounts.
The indebtedness of foreign governments under lend-lease and
surplus property sales agreem.ents is stated in table 110. As of June 30,
1956, the accounts receivable amounted to $2,226 mUlion, including
the sUver transferred under the lend-lease prograin.
Credit to the United Kingdom
The fifth annual payment in the amount of $119,336,250.00 on the
loan of $3,750,000,000.00 under the Anglo-American financial agreement, dated December 6, 1945, was made by the United Kingdom on
December 30, 1955. Of this amount, $71,345,267.14 was applied to
interest, and the balance of $47,990,982.86 applied to principal. As
of June 30, 1956, outstanding indebtedness under this loan was
$3,519,272,374.46.
106
195 6 REPORT OF THE SECRETARY OF THE TREASURY
Agreement with Germany for settlement of postwar (World War II) economic
assistance
Two interest payments, each amounting to $12.5 mUlion, were received from Germany on July 1, 1955, and January 1, 1956, in accordance with the agreement signed February 27, 1953, by the Federal
Republic of Germany and the United States, providing for the settlement of the claim of the United States Government for postwar
(World War II) economic assistance furnished to Germany. No
payinent wiU be due on the $1 biUion of principal indebtedness until
July 1, 1958.
Payment of claims against the Yugoslav Government
The total principal of awards certified to the Treasury Department
by the Foreign Claims Commission of the United States (formerly the
International Claims Commission of the United States) was $18;817,904.89 (see the Annual Report for 1955, page 102). The total
amount which became avaUable for distribution on such awards v^as
$17,000,000, paid by Yugoslavia on August 21, 1948. The total
amount disbursed on awards through June 30,1956, is $14,797,515.52.
It has been necessary to limit payment on awards of $1,000 or over to
approximately 80 percent pending the outcome of litigation brought
by certain claimants. If the litigation does not change the aggregate
amount of awards certified to the Treasury it wUl be possible tb pay
about 90.2 percent of the principal of awards over $1,000.
Organization for^ European Economic Cooperation, European Productivity Agency
In the fiscal year 1956, withdrawals were inade in the amount of
$1,000,000 from thp account maintained by the Secretary of the
Treasury for the Organization for European Economic Cooperation,
European Productivity Agency, as described in the Annual Report
for 1954, page 111. A total of $1,750,000 has been disbursed since
establishment of the account in 1953, leaving a balance of $750,000
on June 30, 1956.
United Nations Relief and Works Agency for Palestine Refugees in the Near
East
During the fiscal year 1956 the Department of State transferred
from available appropriations the sum of $13,850,000 to the Treasury
Department for contributions to the United Nations Relief and Works
Agency for Palestine Refugees in the.Near East; the agency withdrew
$19,000,000 from the account. Total transfers to the Treasury
account since inception amount to $65,550,000 of which $51,000,000
had been withdrawn through June 30, 1956.
Pre-1934 bonds of the Government of the Republic of the Philippines
The Treasury Department is servicing payment of principal and
interest on pre-1934 bonds of the Government of the Republic of the
PhUippines by use of funds in the special trust account established in
the United States Treasury in accordance with the act of March 24,
1934, as amended (22 U. S. C. 1393 (g) (4) (5)). The status of the
special trust account as of June 30, 1956, is shown in table 72.
American-Mexican Claims Commission
In the fiscal year 1956 the Government of the United Mexican
States made a payment of $1,500,000, representing the lastjnstallnient
ADMINISTRATIVE REPORTS
107
due on the $40,000,000 which Mexico, in the Convention of November
19, 1941, agreed to pay in full settlement of the claims of American
nationals as adjudicated by the American-Mexican Claims Commission. The amount enabled a further distribution of 3.9 percent on
the principal amount of each award, making a total distribution of
99.5 percent. A statement of the Mexican claims fund appears as
table 100.
Withheld foreign checks
Prohibition of the delivery of United States Government checks to
payees residing in certain foreign areas continued during 1956 under
Treasury Department Circular No. 655, dated March 19, 1941, as
amended. This restriction applied to the foUowing areas: Albania,
Bulgaria, Communist-con trolled China, Czechoslovakia, Estonia,
Hungary, Latvia, Lithuania, Poland, Rumania, the Union of Soviet
Socialist Republics, the Russian Zone of Occupation of Germany, and
the Russian Sector of Occupation of Berlin. In addition, delivery of
checks to nationals of Communist China and North Korea is pro(^ hibited by Foreign Assets Control regulations issued by the Treasury
i Department on December 17, 1950, except to the extent that delivery
I has been authorized by appropriate license.
,
S
;
'
i
[
;
V
Management Improvement Program
'
'
'
.
•
Savings, on an annual basis, from measures taken under the management improvement program during the fiscal year are estimated
at $615,000, of which $291,000 were savings from changes commenced
in the prior year. " ^ ' ' .
The largest single economy resulted from the reorganization and
consolidation of related operating functions of the Washington Regional Office of the Division of Disbursement. Other substantial
savings resulted from extension of the use of mechanical and electrical
office equipment in the preparation of checks and accounting for disbursements and collections and from revision of certain disbursing
procedures.
Extensive study indicates that electronic equipment, under design
by manufacturers, appears capable of meeting check issuance requirements for repetitive payments, and the concerns have been given
letters of intent for the installation of such equipment.
The procedure for reports control was extended to aU divisions of
the Bureau during the year. A review and appraisal of existing reports during the year resulted in the discontinuance of approximately
52 periodic reports.
Of the 226 suggestions considered during the year under the incentive awards program, 42.4 percent were adopted for, which awards
of $2,075 were made. There were also 20 outstanding and superior
work performance awards.
BUREAU OF THE PUBLIC DEBT
The Bureau of the Public Debt, in connection with the management
of the public debt, perfornis the administrative work which includes
the preparation of offering circulars, the formulation of instructions
108
1956 REPORT OF THE SECRETARY OF THE TREASURY
and regulations pertaining to each security, issue, the direction of the
handling of subscriptions and making of allotments, the issuance of the
securities and the conduct or direction of transactions in the outstanding issues, the final audit and custody of retired securities, the
maintenance of the control accounts covering all public debt issues, the
keeping of individual accounts with owners of registered securities and
the issue of checks in payment of interest thereon, and the handling of
claims on account of lost, stolen, destroyed, or mutUated securities.
Two principal offices are maintained, one in Washington, D . C ,
which issues and conducts the subsequent transactions in outstanding
public debt securities (including governmental agency securities)
other than savings bonds, and audits and maintains custody of these
securities as they are retired; the other in Chicago, 111., where the
functions relate to transactions in savings bonds after thetr issue to the
public. In addition to the two principal offices, three field branch
audit offices, located in New York, Chicago, and Cincinnati, are
maintained for the purpose of auditing retired savings bonds and preparing records reflecting their retirement.
Under Bureau supervision, many transactions in public debt
securities are conducted through nationwide agents, which are,
principally. Federal Reserve Banks, as fiscal agents of the United ;
States, and their branches; selected post offices, financial institutions,
industrial organizations and others, approximately 23,000 in all, which
cooperate in the issuance of savings bonds; and nearly 18,000 financial
institutions that redeem savings bonds.
Bureau administration
Management improvernent.—The continuing aim of management is
the reduction of the cost of any function wherever possible without
impairing service to the public or endangering the integrity of the
records* of the debt. The management program regularly operates
through special studies in selected areas, and through continuing
projects devoted to activities that require day-to-day attention. In
the fiscal year 1956 the scope of the Bureau's management efforts was
expanded to include the participation of supervisory employees at all
levels in the Secretary's special full-scale search for economies. This
involved a broad review of organization, functions, services, and procedures, which was carried out in addition to the regular management
activities. While these activities covered many areas, two projects
with widespread functional implications have received particular
attention. The first of these is directed to the revision of the public
debt accounting system; the second, to the possible application of
electronic data-processing equipment to savings bonds operations.
The accounting study involves the system of accounting for and
reporting public debt security and cash transactions throughout the
three Fiscal Service bureaus and the Federal Reserve Banks and
branches. The study has as its ultimate goals an overhauling of
accounting and reporting procedures and a conversion to punch card
equipment and techniques; A number of peripheral modifications
ADMINISTRATIVE REPORTS
.^
109
have been made in anticipation of the major system changes, and
test runs have been conducted to determine the effectiveness of
certain phases of the proposed plan. Conversion to the new system is
expected to be completed during the fiscal year 1957.
"^
The committee established to studj^ the application of electronic
equipment to the processing of United States savings bonds has been
very active during the year. In July 1955 a complete presentation of
the current procedures used in issuing, servicing, and retiring savings
bonds was made at a symposium attended by representatives of
several producers of electronic equipment w-hich had indicated an
interest in the Bureau's electronics utilization project. Throughout
the balance of the fiscal year the committee continued to work closely
I with representatives of those companies actively engaged in the deI velopment of proposals for furnishing electronics systems. Four
j firms have advised of their intention to submit proposals for electronic
\ systems for processing data relating to savings bonds issue and retirej ment activities. A study and evaluation of these proposals will be
i made by the committee, the Bureau staff and its operating officials^
\ and other Government officials competent in this field.
\ In addition to these two major projects, there are other areas in
: which studies have resulted or will result in worthwhUe improvements,
A * ^Nonexpendable Personal Property Control Manual," prescribing
procedures for utilizing a new punch card system for the control and
management of property, was adopted on January 16, 1956, and
property custodians were designated in the Washington Office of the
Bureau and in the field branch audit offices of the Division of Retired
Securities. Teams of employees organized to conduct a complete and
accurate physical inventory of all nonexpendable personal property
were given comprehensive training in the identffication, numbering,
and classffication of property. An inventory of all such property was
made3and permanent property control records were established. This
same system is being extended to the Chicago departmental office.
Authority has been extended to the Office of the Treasurer of the
United States to conduct a full range of public debt transactions.
All other Federal offices and agencies issuing savings bonds (including
the regional controllers of the Post Office Department which previously had direct accountability with the Treasury Department for
savings bonds stocked for issuance) have been established as issuing
agents of the Federal Reserve Banks having responsibUity for the
fiscal agency activities in their respective areas. This simplifies and
standardizes the accounting and reporting of these agencies, and will
produce some economies, the most significant arising from the discontinuance of a joint audit of savings bonds stubs by the Post Office
and Treasury Departments.
Effectiye AprU 2, 1956, the Reports Control Subunit of the Securities Transaction Unit, Surrenders Section, Division of Loans and
Currency (Washington), w^-as abolished and its functions transferred
to other units in the section. Also, two units in the Claims Section
of the same division were abolished as organizational entities. I n
110
1956 REPORT OF THE SECRETARY OF THE TREASURY
the Chicago departmental office, as a result of a recommendation
approved March 12, 1956, the Security Audit and Custody Section
and the Service Unit of the Adjustment and Correspondence Section,
Office of the Register of the Treasury, were abolished. These changes
resulted in savings through the reduction in supervisory costs and the
consolidation of certain clerical operations.
On M a y 16, 1956, under the authority of Treasury Department
Order No. 177-10, dated M a y 9, 1956 (see exhibit 45), the Division of
Retired Securities was established with the responsibility for the
performance of all functions previously performed by the Washingjion
Office and the three regiona;! offices of the Register of the Treasury.
The regional offices were designated as ''Savings Bond Audit Branches"
of the new division. The Chicago branch of the Office of the Register j
was made a separate division in the Chicago departmental office and j
designated the "Division of Retired Savings Bonds." These changes j
in designation were made to describe more accurately the functions f
of these offices. The history of the Office of the Register dates back (
to the establishment of the Treasury Department in 1789. At t h a t ;
time the office was charged with the maintenance of accounts of /
receipts and expenditures of the public money and of all debts due /
to or from the United States, together with certain other functions;
of the new Department. The duties of the office have changed greatly '
over the years as a result of specialization of activities arising from
increased workloads. Ultimately, its basic responsibUities became
the audit and custody of retired public debt securities and other
securities for which the Department acts as agent.
The public debt.—A. summary of public debt operations handled by
the Bureau appears on pages 25 to 30 of this report, and a series of
statistical tables dealing with the public debt wUl be found in tables
16 to 50.
The public debt of the United States falls into two broad categories:
(1) public issues, and (2) special issues. The public issues are classified as to marketable obligations, consisting chiefly of Treasmy bUls,
certificates of indebtedness. Treasury notes, and Treasury bonds;
and nonmarketable obligations, consisting chiefly of United States
savings bonds and Treasury bonds of the investment series. Special
issues are made by the Treasury directly to various Government
funds and payable only for account of such funds.
During the fiscal year 1956 the gross public debt decreased by
$1,623 mUlion and the guaranteed obligations held outside thie
Treasury increased b y $30 mUlion. The most signfficant change in
the composition of the outstanding debt during the year was the
decrease of $3,468 mUlion in interest-bearing nonmarketable public
issues, more than one-half of which was due to the .maturuig during
the year of all Treasury savings notes outstanding. Total public
debt issues, including issues in exchange for other securities, amounted
to $172,465 mUlion during 1956, and retirements amounted to $174,089
million. The following statement gives a comparison of the changes
during the fiscal years 1956 and 1956 in the various classes of public
debt issues:
111
ADMINISTRATIVE REPORTS
Increase, or decrease (—)
(In millions of dollars)
Classification
1955
Interest-bearing debt:
Treasury bonds, investment series
Treasury savings notes
United States savings bonds..
Marls:etable obligations
Special issues
._.
Other
Total interest-bearing debt
Matured debt and debt bearing no interest.
Total
-186
-3,166
304
4,852
1, 022
6
1956
-579
-1,913
-254
1,864
-107
2,832
283
- 1 , 858
235
3,115
-1,623
United States savings bonds.—In terms of volume of work, the issue
and redemption of United States savings bonds represent the largest
administrative problem of this Bureau. Since these bonds are in
registered form and in the hands of mUlions of people, establishiag and
maintaining alphabetical and numerical records of more than 1.8
? bUlion of these bonds, w-hich have been issued since 1935, replacing
lost, stolen, and destroyed bonds, and handling and recording retired
bonds present administrative tasks of considerable magnitude.
Receipts from the sales of savings bonds during the year were
$5,846 mUlion and accrued discoimt charged to the interest account and
credited to the savings bonds principal account amounted to $1,214
mUlion, a total of $7,060 mUhon. Expenditures for redeeming savings
bonds charged to the Treasurer's account during the year, including
about $4,250 miUion of matured bonds, amounted to $7,846 miUion.
The amoimt of savings bonds of all series outstanding on June 30,1956,
including accrued discount and matured bonds, was $57,857 million,
a decrease of $786 mUlion from the amount outstanding on June 30,
1955. DetaUed information regarding savings bonds wUl be found in
tables 35 to 40, inclusive, of this report.
Durtng the fiscal year 1956, 91.5 mUlion stubs representing issued
bonds of Series E were received for registration, making a total of
1,805.8 mUlion, including reissues, received tkrough June 30, 1956.
These original stubs are first arranged alphabetically in semiannual
blocks, by name of owner, and microfilmed. They are then arranged
in the numerical sequence of their bond serial number in a full calendar
year ffie and microffimed, after which they are destroyed. The
microfilms serve as permanent registration records. Of the 1,805.8
mUlion Series E bond stubs received as of June 30, 1956, 1,457.8
mUlion have been completely processed and destroyed, leaving a
balance of 348.0 mUlion stubs in process at various stages of completion.
112
195 6 REPORT OF THE SECRETARY OF THE TREASURY
The following table shows the processing, by steps, of the registration
stubs of Series E savings bonds.
stubs of issued Series E savings bonds in Chicago ofiice
(In millions of pieces)
Period
stubs
received
Cumulative through June 30,1951
Fiscal year:
1952..
1953
1954
._.
1955
1956..
Total
-
_..
Alphabetically
sorted
Restrict- Fine sort
ed basis •prior to
filming 2
sorti
Alpha- Numeri- Destroyed
betically
cally
after
filmed
filming
filmed
1,380.3
1,361.8
1,341.2
1,318.3
1,265.5
1.254.5
76.0
82.8
88.2
87.0
91.5
72.2
84.0
89.0
88.4
87.2
67.3
59.8
82.0
99.3
85.0
57.1
62.3
82.2
88.1
88.0
27.5
66.4
72.7
25.7
5.8
32.2
67.9
73.3
29.9
1,805.8
1,782.6
1,734. 6
1, 696.0
1,463. 6
1, 457.8
1 Not in complete alphabetical arrangement but sorted to such a degree that individual stubs can be
located. Includes those stubs fine sorted.
2 Completely sorted.
The audit of retired savings bonds is conducted in the Savings Bond
Audit Branch offices of the Division of Retired Securities. There were
97.4 million retired savings bonds of all series received in the branch
audit offices during the year. Retired bonds are audited and then
microfilmed, after which the bonds may be destroyed. The bonds of
all series received in these offices have been audited, microfilmed, and
destroyed to the extent indicated in the following table.
Retired savings bonds of all series in the branch audit offices
(In millions of pieces)
Period
Cumulative through June 30,1951
Fiscal year:
1952
1953 '
1954
_
1955
1956-—
Total
-
Bonds
received
Audited
Micro- Balance Balance Destroyed
filmed unaudited unfilmed i
498. 5
496.2
478.1
2.3
20.4
396.4
82.4
88.4
97.3
99.0
97.4
82.8
88.5
96.0
98.1
96.5
85.2
92.1
95.5
98.7
96.0
1.9
1.8
3.1
4.0
4.9
17.6
13.9
4.6
4.9
6.3
88.6
111.0
81.6
102.0
117.9
2 963.0
958.1
945.6
4.9
6.3
897.5
1 Beginning June 30, 1954, excludes 9.4 million pieces of unfilmed spoiled stock transferred to permanent
storage and 1.7 million pieces of unissued stock to be destroyed without microfilming.
2 Includes 915.0 million pieces of redeemed Series A-E bonds. Does not include approximately 460 million bonds paid and filed prior to establishment of branch audit offices.
After the retired bonds have been audited in the branch audit
offices, a listing of the serial numbers is transmitted to the Chicago
departmental office where the serial numbers are posted to numerical
registers, and the postings are verffied. The foUowing statement
shows the status of the posting of all series of retired savings bonds.
ADMINISTRATIVE
113
REPORTS
R e t i r e d savings b o n d s of all series recorded in Chicago office
(In millions of pieces)
Period
N u m b e r of
retired
bonds
reported
....
Verified
Posted
Unposted
Unverified
956.5
953.6
951.3
2.9
2.3
85.5
87.7
94.6
101.3
98.2
88.1
88.0
89.9
102. 7
96.7
88.2
87.5
88.7
123.7
93.4
.3
4.7
3.3
4.8
2.2
2.7
3.9
1,423.8
1.419.0
1,332. 8
4.8
C u m u l a t i v e t h r o u g h J u n e 30,1951
Fiscal year:
1952
1953
-.
1954
1955
1956
Total
S t a t u s of posting
8.1
8.1
1 During the period October 1954 to June 1955, only a 7 percent test verification was made of the postings.
Of the 89.9 mUlion Series A-E savings bonds redeemed prior to
release of registration and received in the branch audit offices during
the year, 88.1 mUlion, or 98.0 percent, were redeemed by more than
17,900 paying agents. These agents were reimbursed for this service
in each quarter-year at the rate of 15 cents each for the first 1,000
bonds paid and 10 cents each for all over the first 1,000. The total
amount paid to agents on this account during the year was $10,976,906,
which was at the average rate of 12.46 cents per bond.
The following table shows the number of issuing and paying agents
for Series A-E savings bonds, by classes.
J u n e 30
Post
offices
Banks
Building
a n d savings
a n d loan
associations
Credit
unions
Companies
operating
payroll
plans
All
others
Total
. Issuing agents
1945
1950...
1954
.
1955
1956
24,038
25,060
2 3,198
2 2,476
. 2 1,768
15,232
15,225
15,607
15, 692
15,845
3,477
1,557
1,534
1,555
1,606
2,081
522
440
428
411
1 9.605
3.052
2,997
2,942
2,898
550
606
588
626
54,433
45,966
24,382
23, 681
23,154
57
55
56
54
13,466
16,691
17,519
17,652
17, 933
P a y i n g agents
1945..
1950
1954
1955
1956
13,466
15,623
16,220
16,269
16,441
874
1,106
1,188
1,300
137
138
139
138
1 Includes all others.
2 Estimated by the Post Office Department. Sale of Series E savings bonds was discontinued at post
offices at the close of business on December 31, 1953, except in those localities where no other public
facilities for their sale were available.
During the fiscal year 1956, 6,923,486 interest checks were issued
on current income type savings bonds with a value of $398,207,763.
This was a decrease of 683,756 checks from the number issued during
1955, and a decrease of $16,126,320. A total of 368,066 new accounts
was established compared with 331,679 in the previous year. As of
June 30, 1956, there were 2,520,865 active accounts with owners of
this type savings bonds, a decrease of 97,974 accounts from the pre399346-r-57
9
114
1956 REPORT OF THE SECRETARY OF THE TREASURY
vious year. There was a reduction of 443,794 in accounts of Series G
bonds which have been maturing since May 1, 1953, and an increase
of 300,347 in accounts of Series H bonds, which were first sold on
June 1, 1952, and 45,473 in accounts of Series K bonds which were
first sold on May 1, 1952.
There were 49,077 applications during the year for the issue of
duplicates of lost, stolen, or destroyed savings bonds, in addition to
1,351 cases on hand at the beginning of the year, making a total of
50,428 cases. In 28,063 cases the bonds were recovered, and in 20,600
cases the issuance of duplicate securities was authorized. On June 30,
1956, 1,765 cases remained unsettled.
Other United States securities
During the year, 16,320 individual accounts covering publicly held
registered securities were opened and 31,560 were closed. This
reduced the total of open accounts on June 30, 1956, to 208,660
covering registered securities in the principal amount of $20.2 billion.
There were 398,767 interest checks with a value of $570,548,310
issued to owners of record during the year. This was a decrease of
48,698 checks from the number issued during 1955, but an increase
in value of $12,357,790.
Redeemed and canceled securities received for audit included
3,005,000 bearer securities and 175,000 registered secmTties, a total
of 3,180,000, as compared with 4,725,000 in 1955; and 14,000,000
coupons were received, which was 1,900,000 less than in 1955.
OFFICE OF THE TREASURER OF THE UNITED STATES
The Treasurer of the United States is the officer of the Government
charged by law with the receipt, custody, and disbursement upon
proper order of the public moneys. The Treasurer is required to
mairitain records as to the source, location, and disposition of such
funds and to make periodic reports thereof as required by law and
administrative authority.
Although the Treasurer does not maintain branch or field offices,
the Federal Reserve Banks, as fiscal agents of the United States,
perform many fiscal functions for the Treasurer. These include the
verification and destruction of United States paper currency, the
redemption of public debt securities from the Treasurer's funds,
holding on deposit most of the operating cash of the Treasury, charging the Treasurer's account for the majority of the checks drawn on
the Treasurer, and the acceptance of deposits made by Government
officers for credit of the Treasurer.
The Treasurer also utilizes the services of commercial banks within
the United States and its possessions, and in foreign countries, to
provide banking facilities for local activities of the Government.
Information as to the transactions handled in the name of the Treasurer by the Federal Reserve Banks and commercial banks flows into
Washington where it is reflected in the Treasurer's general accounts.
Specifically, the Treasurer maintains current accounts of all receipts
and expenditures; pays the principal and interest on the public
debt; provides checking account facilities for Government disbursing
ADMINISTRATIVE REPORTS
115
officers, corporations, and agencies; pays checks drawn on the Treasurer of the United States; procures, stores, issues, and redeems
United States currency; audits redeemed Federal Reserve cmTency;
examines and determines the value of mutUated currency; acts as
special agent for the payment of principal and interest on certain
obligations of corporations of the United States Government, Puerto
Rico, and the Philippine Islands; and maintains facilities in the
Main Treasury buUding for (a) the deposit of public moneys by
Government officers, (b) the cashing of United States savings bonds
and checks drawn on the Treasurer, (c) the receipt of excess and/or
unfit currency and coins from local concerns and banks, and (d) the
conduct of transactions in both marketable and nonmarketable public
debt securities for banks and for the public. The Office of the Treasurer prepares the Daily Statement of the United States Treasury,
including the monthly ^'Statement of the Public Debt," and the
monthly Circulation Statement of the United States Money.
Under authority delegated by the Comptroller General of the
United States, the Treasurer processes claims arising from the forgery
of endorsements and other irregularities involving checks paid by
the Treasurer and, in the case of unpaid checks which are lost or
destroyed, instructs the claimants as to the manner of obtaining
substitute checks.
The Treasurer of the United States is also Treasurer of the Board
of Trustees of the Postal Savings System, and custodian of bonds
held to secure public deposits in commercial banks, bonds held to
secure postal savings on deposit in such banks, and miscellaneous
securities and trust funds.
Management improvement and internal audit.—In pursuance of its
program of a continuing appraisal and review of operations and
methods, the office has made changes, both organizational and procedural, designed to effect economies, promote efficiency of operations
and raise the standard of the services provided the entire Federal
establishment and the public generally.
Among the more noteworthy improvements accomplished during
fiscal year 1956 were the following:
Disbursing accounts involving an estimated 13 mUhon checks
annually were converted during the fiscal year from the use of paper
checks to punched card checks, which are considerably more economical to process.
The function of issuing savings bonds, except over-the-counter
sales for cash, was transferred to the division that reissues savings
bonds, thereby providing a more economical method of operation.
Procedural changes in handling deposits made with the Treasurer
and in effecting collection of the supporting items have resulted in
earlier crediting to the depositor, more efficient operations, unproved
control, and personnel savings.
A fiscal agency was established in the Securities Division to conduct and report public debt transactions for the local area in essentially the same manner as the fiscal agency departments of the
Federal Reserve Banks, with the exception of the receipt of bids for
new issues of Treasury bUls.
Greater security in the handling of bulk transactions in coin and
currency for local banks and utility companies, involving millions
116
195 6 REPORT OF THE SECRETARY OF THE TREASURY
of dollars daUy, was achieved by renovating space previously used
for storage purposes in the basement of the Main Treasury.
All work relating to the Treasurer's balance with depositary banks
was unified and personnel savings were accomplished by the consolidation of two branches in the General Accounts Division.
Direct and rapid communication between Federal Reserve Banks
and the Securities Division in the handling of securities transactions
was provided by the installation of a teletype machine and teletypewriter.
Internal audits provide management with independent appraisals
of the fiscal activities of the Bureau. Audits of cash, securities, and
other assets aggregating many-millions of dollars were accomplished.
A number of recommendations resulting from the audits were adopted
to improve accountability for and control over the assets for w-hich
the Treasurer is responsible.
Reports control, cost accounting, supervisory training, forms
analysis and control, and records management are all continuing
programs. Under the incentive awards program 54 cash awards
were made for suggestions adopted, 27 were made for outstanding
performance, and 13 were made for sustained superior performance.
A comprehensive study by representatives of the Treasury, the
General Accounting Office, and the Bureau of the Budget covering
operations involved in the issuance, payment, and reconciliation of
Government checks was completed during this fiscal year. Government disbm^sing officers have been issuing in recent years an annual
volume of approximately 350 mUlion checks. Of this total 300
million have been issued in card form payable at designated Federal
Reserve Banks, and about 30 mUlion in paper form which, together
with 20 mUlion card checks issued in the local area, were payable in
Washington. All checks, after payment, were sent to the General
Accounting Office in Washington for reconcUiation. In the early
part of fiscal 1956, approval was obtained for the establishment
in the Office of the Treasurer of an integrated electronic data processing system which would accomplish the centralized pa3mient
and reconciliation of all checks drawn on the Treasurer. The adoption
of the new procedure represents one of the most far-reaching advances in operating efficiency yet attempted in connection with the
day-to-day fiscal operations of the Government. The new system
is being installed in two phases. Under the first phase, complete
conversion from the use of paper checks to card checks will be made
and the checks of accounts payable in Washington will be paid by
the use of the electronic equipment. The second phase wUl embrace
all accounts for checks, now drawn on the Treasurer, payable through
designated Federal Reserve Banks.
In preparation for the conversion to this new system eaii}^ in the
fiscal year 1957, selected employees participated in a training program
in the use of electronic data processing machines; appropriate space
was prepared for the machines; the electronic equipment was installed;
and disbursing officers and others concerned were issued detaUed instructions as to the procedures to be followed under the integrated
electronic operations.
I t is estimated that conversion to the electronic system for the
check operation will reduce personnel requirements in the Office of
ADMINISTRATIVE
117
REPORTS
the Treasurer of the United States by approximately 150 employees.
Action was begun during 1956 to find positions b}^' filling vacancies
elsewhere for as many as possible of those to be affected by the change.
As of June 30, 1956, the Office has been successful in reducing employment in this operation by more than 100 employees without a single
dismissal action, and it is now indicated that the rem.aining employees
who do not resign or retire before the new system is fully installed
may be reassigned by transfer to other divisions, bureaus, or agencies.
The transfer of the reconciliation operation to the Office of the
Treasurer of the United States will also reduce the personnel requirements of the General Accounting Office.
Moneys received and disbursed by the Treasurer.—Moneys collected
by Government officers are deposited with the Treasurer at Washington, in Federal Reserve Banks, and in designated Government depositaries for credit of the account of the Treasurer of the United States,
and all payments are charged against this account. Total moneys
received and disbursed for the fiscal years 1955 and 1956 are shown in
the following table on the basis of the Final Statement of Receipts and
Expenditures of the United States Government for the fiscal 3^ear 1956.
Receipts, expenditures, and Treasurer's account
Receipts:
Budgetary (net) i
Trust accounts, etc.2
Public debt 3
Subtotal.....
Balance in the Treasurer's account beginning of year
$60. 389, 743, 895
9, 536, 495, 512
180, 703. 438.047
$68,165, 329, 582
11, 685, 276, 896
172,465,092, 527
250, 629, 677, 454
6, 766, 455, 061
252, 315, 699, 005
^ 6,215,665,047
257, 396,132, 515
258, 531, 364,052
.
Total
Expenditures:
Budgetary 4
Trust accounts, etc.2 s
Investments of Government agencies in public debt secm-ities
(net) s
Sales and rederaptions of obhgations of Government agencies in
market (net) 5.._
Changes in accounts necessary to reconcile to Treasury cash
Increase, or decrease (—), in balance of cash held outside the
Treasury...
Public debt 3 . . . .
..
.
Subtotal
Balance in the Treasurer's account at close of year..
Total
.
64, 569, 972, 817
8, 545, 414, 947
66, 539, 776,178
9, 435, 321, 817
1, 361, 790, 322
2,616,964,826
-602,006,700
28, 974,896
-173.429,163
-319,822,030
-312,493,165
177, 588, 814, 353
-202,133.123
174, 088, 501, 681
251,180, 467, 470
6, 215, 665,047
251, 985,180,186
6, 546,183, 869
257, 396,132, 517
258, 531, 364,055
1 Total budget receipts less amounts transferred to the Federal old-age and survivors insurance trust fund
and the railroad retirement account and refunds of receipts. For details of receipts for 1956, see table 3.
2 For details for 1956, see table 5.
3 For details for 1956, see table 28.
* See table 1, footnote 3. For details for 1956, see table 3.
6 Under a revised classification, the security transactions of Government-sponsored enterprises are included in trust accounts, etc., and excluded from net sales or investments of Government agencies in public
debt securities and net sales or redemptions of obligations of Government agencies in the market.
Assets and liabilities of the Treasurer's accounts.—The assets of the
Treasurer consist of gold and silver bullion, coin and paper currenc}^,
deposits in Federal Reserve Banks, and deposits in the commercial
banks designated as Government depositaries.
A summary of the assets and liabilities in the Treasurer's accounts
at the close of the fiscal years 1955 and 1956 is shown in table 51.
Gold.—Gold receipts during 1956 amounted to $219.4 mUlion and
disbursements totaled $97.8 mUlion, a net increase of $121.7 mUlion
118
195 6 REPORT OF THE SECRETARY OF THE TREASURY
based on the daily Treasury statement. This increase brought the
total gold assets to $21,799.1 million on June 30, 1956. Liabilities
against these assets were $21,142.3 million of gold certificates and
credits payable in gold certificates and $156.0 million for gold reserve
against currency. The gold balance in the Treasurer's account on
June 30, 1956, was $500.8 mUlion.
Silver.—During the year 11.5 million ounces of silver bullion, which
had been carried in the Treasurer's account at a cost of $10.4 million,
were monetized at a monetary value of $14.9 million. This $14.9
mUlion increase in sUver assets was offset by a decrease of $16.4 m.Ulion
in holdings of silver dollars, making a net decrease of $1.5 mUlion in
assets during the year. As of June 30, 1956, the silver assets of the
Treasurer (exclusive of subsidiary coin and bullion held in the Treasurer's account at cost and recoinage value) amounted to $2,449.6 mUlion.
LiabUities against silver at the end of the year amounted to $2,418.3
mUlion for sUver certificates outstanding and $1.1 mUlion for Treasury
notes of 1890 outstanding, leaving a net balance of $30.1 mUlion in
the Treasurer's account.
The silver bullion held in the Treasurer's account at cost value (exclusive of the $30.1 mUlion at monetary value) increased from $18.8
mUlion on June 30, 1955, to $40.0 mUlion on June 30, 1956. This
increase of $21.2 million is accounted for as follows: $42.0 mUlion net
purchases of sUver less $10.4 mUlion of silver monetized and less $10.4
million of sUver used for coinage.
Paper currency.—Under the laws of the United States the Treasurer
is the agent for the issue and redemption of United States currency.
Table 81 shows by class and denomination the value of paper currency
issued and redeemed during the fiscal year 1956, and the amounts outstanding at the end of the j^-ear.
The Treasurer's Office employs a small group of women who are
experts in identifying any type of United States currency by engraving
designs alone and who, with infinite patience, piece together fragments
of burned and mutilated currency sent in for redemption. Their only
tools are pins, needles, electric lights, and magnifying glasses and
with these the}^- identify the kind, genuineness, and denominations of.
currency that has been mutilated in any manner. This unit annually
gives service to approximately 45,000 individuals whose currency has
suffered mutilation of one form or another.
A comparison of the amounts of paper currency of all classes issued,
redeemed, and outstanding, during the fiscal years 1955 and 1956,
follows.
1955
Pieces.
Outstanding at beginnhig of year
[ssues during year...
__ _
Redemptions during year
_
Outstanding at end of year
1956
Amount
3,174, 787.094 $32,403, 902, 538
1, 735, 912, 346 7, 737, 437.000
1,696,945.906
7, 655, Oil, 268
3, 213, 753, 534 32,486,328,270
Pieces
Amount
3, 213, 753, 534 $32, 486, 328, 270
1,808, 868,363
8,156,080.000
1,712.181,080
7, 625, 364,067
3,310,440,817
33,017,044, 203
For further detaUs on stock and circulation of money in the United
States, see tables 76 through 80.
ADMINISTRATIVE
119
REPORTS
Depositaries.—The following table shows the number of each class
of depositaries and balances as of June 30, 1956.
Number
of depositaries 1
Class
Federal Reserve Banks and branches. _
other banks in continental United States:
General depositaries
Special depositaries. Treasury tax and loan accounts.
Insular and territorial depositaries...
•
Foreign depositaries 2
_
Total
_
. .
Deposits to the
credit of the
Treasurer of the
United States,
June 30,1956
36
$943,838,576.10
1,486
10,889
37
39
313,349,501.06
4.632, 722,195.81
54, 578, 985.73
70, 506,208.09
12, 487
6,014,995,466.79
1 Does not include limited depositaries which have been designated for the sole purpose of receiving deposits made by Government officers for credit in their official checking accounts with such depositaries and
which are not authorized to accept deposits for credit of the Treasurer of the United States.
2 Principally branches of institutions in the United States.
Checking accounts of disbursing officers and agencies.—K^ of June 30*
1956, the Treasurer maintained 2,832 disbursing accounts as compared
with 3,351 accounts on June 30, 1955. This reduction was caused
mainly by consolidation of disbursing accounts, principally in the Post
Office Department. The number of checks paid, by disbursing officers, during the fiscal years 1955 and 1956 follows.
Number of checks paid
Disbursing officers.
1955 r
Treasury. _
Army.
Navy
Air Force.— _
.
_
_
_
other
Total
__
.
.
. _
1956 1
221,106,336
31,260,241
34,042, 591
22, 290,297
20, 790.106
220.808. 649
29,066. 006
33. 530. 207
26,181, 759
36,135.494
329,489, 571
345.722,115
•^ Revised.
1 To be revised when final count is available.
Of the 345,722,115 checks paid in the last fiscal year, 288,983,795
were paid by the Federal Reserve Banks and the Manila branch of
the First National City Bank of New York acting as fiscal agents of
the Treasurer and the remaining 56,738,320 checks were paid by the
Treasurer in Washington.
One out of every four checks issued by the Government and its
agencies in fiscal 1956 was for a payment from the Federal old-age and
survivors insurance trust fund. Also, approximately one out of every
four checks was for the Department of Defense. These two categories
of expenditure accounted for approximately 52 percent of the checks
paid in the fiscal year.
Check claims.—During the fiscal year the Treasurer of the United
States processed 112,325 claims involving paid checks, referring
27,110 such cases to the United States Secret Service for investigation
of the alleged forgery, alteration, counterfeiting, or fraud in the issuance pr negotiation of Treasury checks, The Treasurer effected
120
195 6 REPORT OF THE SECRETARY OF THE TREASURY
reclamation of $2,076,472 from those having liability to the United
States as the result of improperly negotiated checks and made settlements and adjustments in the sum of $2,316,430 from funds recovered
during and prior to the 1956 fiscal year. Disbursements from the
check forgery insurance fund, established by Congress to enable the
Treasurer to expedite settlement of check claims, totaled $140,886.
Claims for the proceeds of 72,616 outstanding checks were processed,
resulting in the issuance of 44,127 substitute checks totaling $29,170,686 by the Chief Disbursing Officer to replace checks which were not
received or were lost, stolen, or destroyed.
The Treasurer adjudicated 932 forgery claims for the proceeds of
Philippine War Damage Commission and Veterans' Administration
United States depositary checks payable to residents of the Philippines in indigenous currency and certified 576 disbursements totaling
254,416 pesos.
Treasurer's Cash Room.—The commercial checks, drafts, mone}^
orders, etc., deposited by Government officers with the Treasurer's
Cash Room in Washington for collection aggregated 5,770,974 items
for the fiscal year 1956, as compared with 5,276,109 items for the fiscal
year 1955.
The Cash Division also prepared and sold to collectors approximately 50,000 sets of uncirculated coins minted in 1955. This service
was rendered at no expense to the Government as, in addition to the
face value of the coins, a fee of 50 cents per set was charged for the
cost of assembling and handling the coins.
Securities held in custody..—The face value of securities held in the
custody of the Treasurer as of June 30, 1955 and 1956, is shown in the
following table.
June SO—
. Purpose for which held
1955
As collateral:
To secure deposits of public moneys in depositary banks
To secure postal savings funds. ^
.,
.,
In lieu of sureties
:
In custody for Government officers and others:
For the Secretary ofthe Treasury i
•..
For the Board of Trustees, Postal Savings System.
For the Comptroller ofthe Currency
For the Federal Deposit Insurance Corporation .
Forthe Rural Electrification Administration
Forthe District ofColumbia
For the Commissioner of Indian Afi'airs
.
Foreign obligations
other 2 .
For servicing outstanding Government issues:
Unissued bearer securities 3.
Total.
1956
$444, 556, 400
30, 714,100
6, 785, 700
$340, 367,400
29,677,800
7,438, 700
19,332,077,467
1, 573, 637,000
11, 615,000
1, 320, 670, 000
37, 756,000
30,033, 620
32, 982,335
12.089, 997,132
185,879,421
23,142,665,041
1,378,937.000
12, 428.000
1,157,709,000
43, 784,810
32,821, 620
33,669, 210
12,086,875,132
192,825,786
35,096, 704,175
38,773,651.799
314,452, 400
1 Includes those securities shown in table 75 as in the custody ofthe Treasury.
2 Includes United States savings bonds in safe keeping for individuals.
3 The Treasurer was authorized to conduct issue, exchange, and transfer transactions in marketable
securities for the local area effective December 1,1955.
ADMINISTRATIVE
121
REPORTS
Servicing of securities for Federal agencies andfor certain other governments.—In accordance with agreements between the Secretary of the
Treasury and various Government corporations and agencies and
Puerto Rico, the Treasurer of the United States acts as special agent
for the payment of principal of and interest on their securities (including pre-1934 bonds of the Philippine Government). The amounts of
such payments during the fiscal year 1956, on the basis of the daily
Treasury statement, were as follows:
Principal
Federal home loan banks....
Federal farm loan bonds
Federal Farm Mortgage Corporation
Federal Housing Administration
Federal National Mortgage Association . _
Home Owners' Loan Corporation..
Philippine Islands
..
Puerto Rico..
Total
Interest paid
in cash
Registered
interest
Coupon
interest
$941,375,000 $12,112,574.32
229. 065,400
179,367. 79 $858, 223.02 $26,918 819.41
38,000
90.26
4,051.57
406, 242.14 2,009,809.14
46,695, 536
14,253, 987. 50
60, 950
60.00
3, 608.87
46, 500
911.25
4. 567. 50
182, 632.50
1, 529, 500
2,140.00
66, 525.00
299.440.00
1.218, 810,886
12, 701.385.76
2,939,124.66
41,662,539.85
Internal Revenue Service^
The Internal Revenue Service is responsible for the collection of the
internal revenue and for the enforcement of the iaternal revenue laws
and certain other statutes. These other statutes include the Federal
Alcohol Admmistration Act (27 U: S. C. 201-212); the Liquor Enforcement Act of 1936 (18 U. S. C. 1261, 1262, 3615); the Federal Fu-earms
Act (15 U. S. C. 901-909), and the National Fu-earms Act (26 U. S. C.
2721).
Review of operations
Collections.—Internal revenue collections for the fiscal year 1956
totaled $75.1 bUlion, an increase of $8.8 billion from the 1955 total.
The increase is largely the result of the impact of higher levels of
personal income, corporate earnings, and business activity on income
taxes, employment taxes, and excises.
Collections by tax sources for the fiscal years 1929-56 are shown in
detaU in table 11 in the tables section of this report. A comparison of
coUections from the principal sources of tax revenue for the fiscal
years 1955 and 1956 follows.
1 More detailed information will be found in the separate annual report of the Commissioner of Internal
Revenue.
122
195 6 REPORT OF THE SECRETARY OF THE TREASURY
1955
1956
Source
In thousands of dollars
Income and profits taxes:
Corporation
Individual:
Withheld by employers i
Other 1
-
18,264,720
21,298,522
21; 253,625
10,396,480
3 24,016,676
11,321,966
Total Individual hicome taxes.
31,650,106
3 35,337.642
Total tncome and profits taxes.
49,914,826
3 56, 636,164
5, 339,573
279,986
600,106
.6,336,805
324, 656
634, 323
6, 219, 665
7, 295, 784
936, 267
2, 742,840
1, 571, 213
4,896, 530
7,352
1,171, 237
2,920. 574
1, 613. 497
5,470.124
5.269
66,288,692
3 75,112, 649
Employment taxes:
Old-age insurance i
Unemployment insurance
Carriers taxes—old-age benefits
Total employment t a x e s —
Estate and gift taxes
Alcohol taxes
Tobacco taxes
Other excise taxes
Taxes not otherwise classified 2
Total collections
.-.
...
1 Estimated. Collections of individual income tax withheld are not reported separately from old-age
insurance taxes on wages and salaries. Similarly, collections of individual income tax not withheld are not
reported separately from old-age insurance tax on self-employment income. The amount of old-age insurance tax collections shown is based on estimates made by the Secretary of the Treasury pursuant to the provisions of Sec. 109 (a) (2) of the Social Security Act Amendments of 1950 and includes both classes of old-age
insurance taxes mentioned above. The estimates shown for the two classes of individual income taxes were
derived by subtracting the old-a.G:e insurance tax estimates from the combined totals reported.
2 Includes amounts of unidentified and excess collections, depositary receipts outstanding six months or
more for which no tax acco.unt can be found, and profit from sale of acquired property. For 1954 and earlier
years such amounts are included in "Miscellaneous excise taxes. All other."
3 Includes $3,566 thousand income tax transferred to Government of Guam (see page 379).
Receipt and recording of returns.—;The total number of tax returns
filed during fiscal 1956 was 90.3 mUlion, representing an increase of
1.6 mUlion in the returns processing workload as compared with 1955.
Income tax returns filed by individuals and fiduciaries accounted for
58.6 mUlion returns or nearly two-thirds of the total number received.
The number of iaformation documents received and processed was in
excess of 200 mUlion.
Statutory changes contributing to the iacrease ia returns filed included: Extension of old-age and survivors' iasurance coverage to include farm operators and farm workers, beginning January 1, 1955;
the income tax declaration requirements applicable to large corporations, begianiag with the tax year 1955; and provisions for the use of
returns iastead of stamps ia the payment of beer and wiae taxes.
The processing operations included the assessment of the taxes
reported, verffication of tax credits, and the issuance of bUls for unpaid
accounts. In addition, the income tax liabUity was computed for
nearly 13 mUlion taxpayers filing iadividual iacome tax returns on
Form 1040A, and income tax credits and refunds were scheduled for
about 33 mUlion individuals whose prepayments exceeded their
liabUities.
Large-scale mechanical processing of iadividual income tax returns
proved successful at the Midwest Service Center established ia 1955
at Kansas City, Mo., to service directors' offices in the Middle West.
The program was extended in 1956 by the establishment of a second
iastallation, designated the "Northeast Service Center" and located
ADMINISTRATIVE REPORTS
123
at Lawrence, Mass., to service directors' offices ia that section of the
country. A further expansion during the comiag year wUl provide a
Western Service Center at Ogden, Utah, to service directors' offices
in the San Francisco region.
Verffication of the mathematical steps shown in the taxpayers' computations on iacome tax returns resulted in tax changes on 1,317,000
returns, with tax increases aggregatiag $76,266,000 and tax decreases
totaling $32,601,000.
Enforcement activities.—Duriag 1956 enforcement efforts were
strengthened through improved procedures designed to provide more
effective utUization of the avaUable manpower in each of the primary
activities.
Of particular signfficance in the audit area were the improvements
made in methods of selecting returns for examination, in the techniques
for auditing low-iacome returns, in the taxpayer assistance program,
and in the organizational and procedural structures relatiag to excise
tax audits. All of these advances, plus numerous behiad-the-lines
unprovements, were factors in effecting an iacrease ia the number of
returns examiaed. The number of income and profits tax returns examined totaled 2,117,000 for the year as compared with 1,790,000 in
1955. A detaUed comparison of the examiaed returns disposed of by
the Audit Divisions ia the two years foUows.
Type of return
1955
1956
In thousands of retums
Income and profits tax:
Corporation.
Individual and fiduciary__
:
147
1,643
166
1,951
Total income and profits tax
Estate and gift taxes
Excise and employment taxes i
1,790
25
220
2,117
27
245
2,035
2,389
Total examined returns disposed of..
1 Excludes examinations in which there were no tax changes and which were completed as part of exammations covering both income and excise and/or employment tax returns.
The additional tax, iaterest, and penalties, resulting from audit,
from obtaining deliaquent returns, and from mathematical verffication
totaled $1,412,823,000 for the fiscal year 1956, representiag a decrease
of about $66 mUlion as compared with the revised 1955 total. The
decrease was due to several factors none of which denoted any slackening of audit activity. The principal ones were: A substantial
decrease in interest assessments as backlogs of older cases were reduced
and both audit and appellate efforts were directed toward cases involving later tax years with correspondingly smaller amounts of
interest accrued; and the kielusion in the 1955 results of a few extremely large additional assessments which were not matched in size
ia the cases closed ia 1956. The amount of tax, interest, and penalty
representing delinquent returns secured by collection officers was iacreased to $86,689,000 in 1956. This was the result of allocating
additional resources to this function in those districts which have
reduced their past-due accounts ia ven tories to manageable proper-
124
1956 REPORT OF THE SECRETARY OF THE TREASURY
tions. A comparison of enforcement revenue results for 1955 and
1956 follows:
Additional tax, interest,
and penalty resulting
from enforcement
Source
1955
1956
In thousands of dollars
Additional tax, interest, and penalty resulting from audit
Increase in income tax resulting from mathematical verification
Tax, interest, and penalty on delinquent returns
Total
..
. .
-.
' 1,336,560
64, 549
' 77,770
1,249,868
76, 266
86, 689
' 1, 478,879
1, 412,823
' Revised.
In contrast to the decrease in dollar volume of cases reaching the
assessment stage during 1956, the amount of additional tax and
penalties recommended at the audit level (including unagreed cases,
referred to the Appellate Divisions for further consideration) has
shown a steady upward trend over the past year. The amount TCcommended in 1956 totaled $1,276,111,000 as compared with
$1,120,823,000 ia 1955.
A policy of concentrated and vigorous action on past-due accounts
was continued during 1956 with gratifyiag results. The amount collected on such deliaquent accounts totaled $824,504,000 as compared
with $636,967,000" for 1955.. Earlier contact with delinquent taxpayers was provided by requiriag all accounts not paid promptly
upon issuance of the first notice to be placed in deliaquent status
immediately, iastead of issuiag the second notice as formerly. By
reason of this change there were placed in deliaquent status during
1956 a substantial number of accounts, which under the earlier procedures, would not have been classed as deliaquent untU after the
close of the fiscal year. Notwithstanding this iacrease in receipts, the
closings of delinquent accounts were stepped up to such an extent that
uiventories showed a reduction compared with last year. As of June
30, 1956, deliaquent accounts on hand numbered 1,505,000 compared
with 1,549,000 a year ago, and the amount involved was $1,588,008,000
compared with $1,649,551,000 on the earlier date.
The investigatioh of tax fraud cases also proceeded at a faster
pace as 282 special agents added to the rolls in the latter part of fiscal
1955 completed their primary training. Full-scale investigations
completed during 1956 totaled 4,650, including 2,379 cases in which
prosecution was recommended. Results for the preceding year show
4,231 cases completed, with 2,253 containing recomm.endations for
prosecution. Indictments were returned against 1,593 defendants
during 1956 compared with 1,422 defendants indicted in 1955. In the
>• Hevised,
ADMINISTRATIVE
125
REPORTS
cases reaching the courtroom, 1,372 defendants pleaded guilty or nolo
contendere, 200 were convicted after trial, 60 were acquitted, and 211
were dismissed. The following table presents the record of convictions
including pleas of guUty or nolo contendere, for the years 1951 through
1956, in cases involving all classes of internal revenue taxes except
alcohol or tobacco taxes.
Numberof
individuals
convicted
Fiscal year
1951
1952
1953
1954 .
1955
1956 . -
.
--
...
--
..
. - - - . .-
324
563
929
1,291
1,339
1,572
In order to improve the administration and enforcement of the
revenue laws applicable to United States taxpayers abroad, an International Operations Division was established in the national office.
Responsibility is centralized in this division for the Service's operations in all areas of the world except the contiaental United States,
Alaska, and Hawaii. Several additional foreign posts of duty were
established in areas where substantial numbers of United States taxpayers are located.
Enforcement activities directed at Federal liquor law violators
were increasingly effective as investigators recently added to the
enforcem.ent staff gained in experience and training. The number of
stills seized in 1956 increased nearly 16 percent over the preceding
year and the number of arrests showed a gain of about 8 percent. The
following table compares 1956 results with those for 1955 and earlier
years.
N u m b e r of
stills
seized
Fiscal year
1940 .
1945
1950
1951
1952
1953
1954 .
1955
1956
-
. . -.-.^
-
.
.
.
.
.
.
.
.
.
--.
.
.
.
.
.
10,663
8,344
10,030
10,177
10, 269
10,699
11,266
12, 509
14,499
W i n e gallons
of m a s h
seized
6,480.200
2,945,000
4,892,600
5, 545,400
5,700, 600
6,151,100
6,722,900
7,375,300
8,643,200
N u m b e r of
arrests
madei
25,638
11,104
10,236
10,384
9,851
9,370
9,344
10, 545
11,380
1 Inciudes arrests for firearms violations and, beginning 1952, tobacco tax violations. Arrests involving
these two classes of violations during 1956 numbered 429 and 18, respectively.
The program tb modernize the alcohol tax structure and simplify
supervision of the legal alcohol industry moved forward as recommendations for statutory changes were developed by the Service with
the assistance of the industry. The recommendations were adopted
126
1956 REPORT OF THE SECRETARY OF THE TREASURY
by the House Committee on Ways and Means and a bUl incorporating
the recommendations with amendm.ents was in the process of drafting
as the fiscal year came to a close. -. Imprpvem.ents in industry operating
procedures were initiated which included siaiplified accounting for
distUled spirits in storage in bonded warehouses and streamlined
procedures for the issuance of and accounting for wholesale liquor
dealer and export stam.ps.
Refunds.—Refunds of internal revenue taxes and the interest
thereon, as required by law, are paid out of an appropriation separate from that covering the Internal Revenue Service administrative
expenses. "The total amount of these payments for the fiscal year
1956 was $3,772,357,000 ^ as compared with $3,513,105,000 ' ^ in
in the preceding year, with individual income tax refunds accounting
for the increase. Interest pa3mient& on refunds (included in these
totals) decreased from $62,127,000 ' in 1955 to $53,746,000 in 1956.
Status of appellate inventories.—Cases which cannot be settled at
the Audit Division level are referred to the Appellate Divisions for
consideration of taxpayers' protests. Following the substantial
reduction in the bacldog of appellate cases which was achieved during
fiscal 1955, a prim.ary objective of the Service has been the maintenance of the current status of the inventory of pending appeals. This
contemplates the prompt granting of a conference following receipt
of the case in the Appellate Division and thereafter moving the case
to a conclusion just as rapidly as the taxpayer's cooperation and the
complexity of the issues will permit. Despite a m.arked increase in
case receipts during the fiscal year 1956, this objective was substantially attained. The inventory of appellate cases not before the
Tax Court totaled 9,839 as of June 30, 1956, representing an 8.0
percent increase as compared with 9,111 cases on hand at the beginning of the year. The inventory of appellate cases pending before
the Tax Court also increased, from 7,961 at the beginning of the
year to 8,422 cases on hand at the close of fiscal 1956.
Rulings and other technical functions.—The technical functions of
the Internal Revenue Service include the preparation and issuance of
rulings and advisory statements to the public and revenue officials,
the preparation of regulations and other tax guide materials, technical
advice and assistance in the preparation and issuance of tax forms,
and the development of program.s for clarification and simplification
of tax rules. Technical assistance also is provided in programs for
legislative revision and in conducting the negotiation of tax treaties.
Development of the regulations implementing the Internal Revenue
Code of 1954 continued to be the primary objective of the regulations
work during 1956. Considerable progress was made on both the
income tax regulations and the emplo3^ment tax regulations, and work
»• Revised.
1 Figures have not been reduced by amounts of $66,000,000 in 1956 and $51,000,000 in 1955, reimbursed
from the Federal old-age and survivors insurance trust fund. These amounts were covered into the Treasury as repayments to the account for refunding internal revenue collections.
ADMINISTRATIVE REPORTS
127
also m.oved forward on those under the procedural and administrative
provisions of the Code. Forty-nine notices of proposed rule m.aking
and twenty-two Treasury Decisions relating to regulations under
the 1954 Code were published during the fiscal year. This compares
with ten notices and five Treasuiy Decisions published in 1955.
Am.ong the important items covered in the regulations completed
were consolidated returns (T. D. 6140), compensation for injuries,
sickness, etc. (T. D. 6169), partners and partnerships (T. D. 6175),
and depreciation (T. D. 6182). To the extent feasible, legislation
enacted during both sessions of the 84th Congress, which am.ended
provisions of the 1954 Code, also was taken into account and given
effect in existing projects for regulations under the 1954 Code. One
notice of proposed rule m.aking and six Treasury Decisions were
. published during the fiscal year 1956 under public laws other than the
1954 Code.
A total of 37,504 requests for tax rulings and technical advice were
processed during the year. The requests included 34,125 from taxpa3^ers and 3,379 from field offices. Tem.porary restrictions were
continued in order to limit rulings under the 1954 Code (in instances
where there had been a change in prior law and new regulations were
3^et to be published) to cases in which it was shown that extreme
hardship would result from the faUure to issue a ruling.
The publication of revenue procedures was announced as a new
policy during fiscal year 1956. This provides for the publication in
the Internal Revenue Bulletin of all statem.ents of practices and procedures issued primarUy for internal use which affect the rights or
duties of taxpayers or other m.em.bers of the public. During the
year, 35 such docum.ents were published. The total number of rulings
and procedures published during the year was 672, compared with
801 in fiscal 1955.
Approxim.ately 200 forms, instructions, and circulars for public use
were revised to give effect to recently enacted laws or to improve the
arrangement of the m.aterial, with few changes in basic contents. The
enactm.ent of legislation also required the initiation of new forms
relating to farm.ers' gasoline tax refunds, excise taxes on certain floor
stocks, and excise tax on the use of certain trucks and buses. The
booklet. Four Federal Income Tax was completely revised to increase
its prim.ary utUity as a quick, comprehensive reference tool. A m.ajor
publication issued for the first time was the Farmer's Tax Guide, a
64-page booldet covering the more difficult income and self-employment tax problem.s of farm.ers, developed in collaboration wdth the
Agricultural Extension Service.
Personnel.—The employees on Internal Revenue Service rolls at
the close of the year numbered 50,682, consisting of 2,583 employees
in the national office and 48,099 in the regional and district offices.
At the close of the preceding year the num.ber of persons employed
totaled 50,890, comprising 2,675 national office employees and 48,215
regional and district office employees.
128
195 6 REPORT OF THE SECRETARY OF THE TREASURY
The num.ber of emplo3^ees in the various branches of the Internal
Revenue Service at the close of the fiscal 3^ears 1955 and 1956 is shown
in the following table.
Number on payroll at
close of fiscal year
Branch of service
1955
National ofiice
...i
._
Regional and district offices:
Supervisory personnel
Enforcement personnel:
Collection ofiicers.
OfRce auditors
Returns examiners.
Revenue agents
..
Special agents
Alcohol tax inspectors
Alcohol tax investigators
Storekeeper-gaugers
_
_
._
..1
.
...
. .
T o t a l p.nforep.mp.Tit pp.rsonnp.l
Other permanent personnel:
Legal
..
Other technical
Clerical (excluding temporary), messengers, and laborers
• Total, other permanent personnel .
Total, permanent personnel, regional and district oflices
Temporary employees
Grand total
_
.
1956
2,675
2,583
477
484
5,585
2,135
1,274
11, 255
1,559
465
891
1,038
5,660
2,127
1,361
10,862
1,549
481
922
894
24, 202
23,856
268
2,657
20,402
277
2,922
20,196
23,327
23,395
48,006
209
47, 735
364
50, 890
50, 682
Cost of administration.—The entire cost of Internal Revenue Service
operations during the year, including all items of expense except
amounts refunded to taxpayers, was $299,894,710. The amount
available for administrative expenses was $300,183,861 leaving an
unobligated balance of $289,151.
Management improvements
Several methods to stimulate management improvement have been
put to effective use duriag fiscal 1956. These included: The Treassury-wide search for economies, concentrated at the first line of supervision; wider use of project control systems to identify. deficiencies
or problems at each level of management and establish formal project
assignments for their solution; visitation programs to promote regional
coordination and evaluation; and expansion of the incentive awards
program. The principal administrative and organizational improvements made dming the year are described in the foUowing paragraphs.
Organizational change.—A major organizational change designed
to improve management placed the line responsibility and authority
for direction and coordination of regional offices in the Assistant
Commissioner, Operations, and his various division directors. This
provides a direct chain of command to the regional offices from the
officials responsible for program planning and replaces the staff or
;advisory type relationship heretofore in effect.
Taxpayer assistance.—The manpower expended on taxpa3^er assistance was reduced substantially by placing more emphasis on selfhelp niethpds, Under this plan the taxpayer is given needed as-
ADMINISTRATIVE REPORTS
129
sistance with a more efficient use of Service personnel, making it
possible to maintain a larger force of examining personnel on audit
work during the filing period.
Executive development.—Management training for executives and
supervisors was given intensive attention. The inauguration of an
executive development program, conducted at the national office to
train outstanding high-grade employees selected on a Service-wide
basis for promotion to key positions, was highly successful. Two
ten-day supervisory development institutes held at the University
of Michigan also proved their worth and resulted in plans for expansion of this type of training during the coming year.
Revenue agent training .—The results achieved during the trial
period of operation of the Advanced Training Center iadicated that
it did not meet fully the training needs for which it was intended.
According^, it was decided not to renew the program at the center
in the coming fiscal year. A special committee was designated to
examine the entire revenue agent training program and make recommendations for its further development.
Simplified accounting for administrative expenses.—The preparation
and posting of obligation documents was greatly simplified by development of a revised procedure for the activity distribution of all
expenses except salaries and travel. Beginning with the fiscal year
1957, this distribution will be done annually in the national office as
a part of the budget operation, rather than on each obligation document.
Printing economies in tobacco tax stamps.—The most significant
individual improvement in printing and publication was the designing
of a new smaller cigarette tax stamp which it is estimated will cut
the annual cost of this item by $250,000. Additional savings will
result from a decision to continue permanently the Series 125 tobacco
products tax stamps in lieu of printing a new series each year.
Returns system adopted for cigar tax.—The returns system for the
collection of alcohol and tobacco excise taxes, previously in effect
for wine and beer, was extended to the tax payment of cigars, with
manufacturers and importers of cigars having the option of paying
taxes on their products by return or by the traditional system of
stamps.
Other improvements.—An extensive program was inaugurated to
recruit trainee revenue agents from college campuses. Improved
procedures were developed for handling and storing income tax returns which will reduce equipment costs, decrease the floor space
required, provide faster reference, and facilitate retirement of returns
to Federal records centers. Continuing progress in the consolidation
and improvement of space was marked by the completion of negotiations for new buildings in Atlanta and Columbia and for larger
consolidations of space in New Haven, Albany, Oklahoma City,
New York City, and Newark.
OflBce of International Finance
The Office of International Finance assists the officers of the
Department in the formulation and execution of policies and programs
in international financial and monetary matters.
399346—57
10
130
1956 REPORT OF THE SECRETARY OF THE TREASURY
By direction of the Secretary, the responsibUities of the Office of
International Finance include the Treasury's activities in relation to
international financial and monetary problems, covering such matters
as the convertibility of currencies, exchange rates and restrictions,
and the extension of stabilization credits; gold and silver policy; the
Bretton Woods Agreements Act, and the operations of the International Monetary Fund, the International Bank for Reconstruction
and Development, and the International Finance Corporation; foreign
lending and assistance; the North Atlantic Treaty Organization; the
activities of the National Advisory Council on International Monetary
and Financial Problems; the Anglo-American Financial Agreement;
the United States Exchange StabUization Fund; and the Foreign
Assets Control.
The Office also acts for the Treasury on the financial aspects of
international treaties, agreements, and organizations in wliich the
United States participates, and it takes part in negotiations with
foreign governments with regard to matters included within its responsibUities. It assists the Secretary on the international financial
aspects of problems arising in connection with his responsibUities
under the Tariff Act. The Office also represents the Treasury in
the work of the subordinate organs of the National Advisory Council
on International Monetary and Financial Problems, of which the
Secretary of the Treasury is chairman.
The Office of International Finance advises Treasury officials and
other departments and agencies of the Government concerning
exchange rates and other financial problems encountered in operations
involving foreign currencies. In particular, it advises the Department of State and the Department of Defense on financial matters
related to their normal operations in foreign countries and on the
special financial problems arising from defense preparation and
military operations. In conjunction with its other activities, the
Office studies the financial policies of foreign countries, exchange
rates, balances of payments, the flow of capital, and other related
problems.
The Division of Foreign Assets Control administers certain regulations and orders issued under Section 5 (b) of the Trading with the
Enemy Act. The Foreign Assets Control Regulations block all
property in the United States in which any Communist Chinese or
North Korean interest exists and prohibit all trade or other financial
transactions with those countries or their nationals. The Control
carries on licensing activities in connection with transactions otherwise prohibited, takes action to enforce the regulations, and has
taken a census of Chinese and Korean assets located in the United
States.
The Control also administers regulations which prohibit persons in
the United States from purchasing, selling, or arranging the purchase
or sale of strategic commodities outside the United States for ultimate
shipment to the Soviet bloc. These latter regulations supplement
the export control laws administered by the Department of Commerce, In addition, the Control has responsibUities with respect to
ADMINISTRATIVE
131
REPORTS
blocked accounts of approximately $9 million received from the sale
to Argentine interests of a Czechoslovak-owned steel mill sold pursuant
to an order issued by the Secretary on March 25, 1954.
Bureau of the Mint ^
The principal functions of the Bureau of the Mint include the
manufacture of coin, both domestic and foreign, medals of a national
character, and special medals for other Government agencies; the
distribution of domestic coin between the mints, the Federal Reserve
Banks and branches, and the Office of the Treasurer of the United
States in Washington, D. C ; the custody, processing, and movement
of gold and silver bullion; the administration of the regulations issued
under the Gold Reserve Act of 1934, as amended (31 U. S. C. 440-446)
and Section 5b of the act of October 6,1917, as amended (12 U. S. C.
95a), including the issuance and denial of licenses, the purchase of
gold, and the sale of gold bullion for industrial use; and the administration of sUver regulations issued under the acts of July 6, 1939
(31 U. S. C. 316c), and July 31, 1946 (31 U. S. C. 316d).
Coinage
The Philadelphia and Denver Mints manufactured a total of 1.4
billion domestic coins during the fiscal y^ear 1956, an increase of 51
percent over the previous year's production. Production of the five
denominations is shown in the following table.
Composition
Denomination
1-cent pieces
5-cent pieces
Dimes
Quarter dollars
Half dollars
Bronze
Cupronickel
Silver
do
do........
_.
Total
i
Number of
coins pro- Face value
duced
Gross
weight»
In millions
Short tons
1, 207. 2
40.9
120.4
42.8
2.4
$12.1
2.0
12.0
10.7
1.2
4,139
225
332
295
33
1,413. 7
38.1
5,024
1 Consists of 594 tons of silver; 4,167 tons of copper; 56 tons of nickel; and 207 tons of zinc and tin.
The PhUadelphia Mint manufactured 6,105,000 foreign coins
during the fiscal year, including 35,000 silver 1-peso coins for the
Dominican Republic, and 4,070,000 cupronickel 5-centavo coins and
2,000,000 bronze 2-centavo coias for Honduras.
During the fiscal year 1956 the mints shipped over 90 percent more
United States coins than in the previous year, reflecting a greatly
1 More detailed information concerning the Bm-eau of the Mint is contained in the separate annual report
of the Director of the Mint.
132
195 6 iREiPORT OF THE SECRETARY OF THE TREASURY
increased demand by the public. Shipments of the six denominations, totaling 1.8 billion pieces, are shown in the following table.
Denomination
I-cent pieces
5-cent pieces
Dimes.Quarter dollars
Half dollars.
Silver dollars
..i
.
.
Totali
Number of
Face value
coins
shipped
Gross
weight
• Inmillions
Short tons
1,327.6
144.0
207.0
86.6
22.2
24.2
$13.3
7.2
20.7
21.6
11.1
24.2
4,551
794
570
597
306
712
1,811.6
98.1
7, 530
I Includes 418,325 sets of proof coins sold by the Philadelphia Mint.
The estimated stock of coins in the United States, including coins
held in the Treasury, in Federal Reserve and commercial banks,
and in the hands of the public, is compared at the beginning and
close of the fiscal year 1956 in the following statement.
Face value (in millions)
stock of coins in the United States
Silver dollars
Subsidiary silver coins
Minoi" coins
Total
June 30,1956
$490.3
1, 296.1
449.6
$488.7
1,317.4
463. 5
-$1.7
21.3
13.8
2, 236.1
2, 269. 5
33.4
„
1
\
Increase, or
decrease (—)
July 1,1955
-
Gold
The amount of gold in the Fort Knox Bullion Depository, the
PhUadelphia, San Francisco, and Denver Mints, and the New York
Assay Oflice totaled 619.4 million fine ounces valued at $21,677.5
mUlion at the beginning of the fiscal year 1956 and 622.8 mUlion
fine ounces valued at $21,799.1 mUlion at the close of the year, a
net increase of 3.5 mUlion ounces valued at $121.6 mUlion. Transactions are summarized in the followine: table.
Ounces
Gold transactions (excludmg intermint transfers)
Value
Inmillions
Gold received:
Newly mined domestic gold
Secondary gold from domestic sources
United States coin, foreign deposits, etc
..
Total...
Gold withdrawn:
Sold for domestic industrv, profession, or art
Gold bar payment for gold deposits
Withdrawn by the Treasury for monetary purposes, etc
Total
.
1.2
.3
4.8
$41.1
9.0
169.4
6.3
219.4
.6
1.6
.6
22.3
55.4
20.1
2.8
97.8
ADMINISTRATIVE REPORTS
133
Silver
SUver bullion held in the West Point Bullion Depository, the
Philadelphia, San Francisco, and Denver Mints, and the New York
Assay Office amounted to 1,569.7 mUlion fine ounces valued at
$2,016.7 mUlion and 1,693.8 mUlion fine ounces valued at $2,158.8
million at the beginning and close of the fiscal year, respectively.
This was a net increase of 124.1 mUlion ounces valued at $142.1
mUlion. Transactions are summarized in the following table.
Silver transactions (excluding intermint transfers)
Silverreceived:
Newly mined domestic silver..
Secondary sUver from domestic sources
Recoinage bullion irom uncurrent United States coins withdrawn from circulation.
Leased Treasury silver returned by other agencies of the Federal Government.
Return of lend-lease silver by foreign governments
Foreign deposits, operative recoveries, etc
Seigniorage on bullion revalued as security for silver certificates 2
Total.
Silver disposed of:
Manufactured into United States subsidiary coins..
SUver bar payment for sUver deposits.
_.."
Sold for industrial use, medals, sweeps, etc
TotaL
1 Includes 31.0 mUlion ounces returned by the Netherlands and 18.4 mUlion ounces returned by the United
Kingdom.
2 Represents the revaluation of 11,500,000 fine ounces of newly mined domestic sUver received under act of
July 31,1946 (31U. S. C. 316d).
Revenue and monetary assets
Revenues deposited by the Bureau of the Mint into the general
fund of the Treasury during the fiscal year 1956 totaled $24.8 miilion,
of which $23.5 mUlion represented seigniorage. Seigniorage on sUver
subsidiary coinage amounted to $9 mUlion, on minor coinage $10
mUlion, and on silver bullion revalued from cost to monetary value
as security for silver certfficates, $4.5 million. Monetary assets of
gold, sUver, coins, and other values in custody of the six field institutions of the Bureau ^of the Mint totaled approximately $24 bffiion
throughout the fiscal year.
United States gold and silver production-and consumption
The estimates of United States gold and sUver production and the
issue of gold and sUver for domestic industrial, professional, and artistic
use, made annually by the Office of the Director, are on a calendar
year basis. During the calendar year 1955 total United States gold
production amounted to 1,876,830 fine oimces, of which 1,220,122 fine
ounces were deposited at mint institutions. Total sUver production
in 1955 amounted to 36,469,610 fine ounces, of which 22,946,271 fine
ounces were deposited at mint institutions.
Gold issued for industrial, professional, and artistic use in the United
States during the calendar year 1955 amounted to 1,300,000 fine ounces
including 706,901 fine ounces issued by mint institutions. SUver issued
for commercial use amounted to 101,400,000 fine ounces, including
10,707,522 fine ounces issued by mint institutions.
134
195 6 REPORT OF THE SECRETARY OF THE TREASURY
Management improvement
The management improvement program of the Bureau of the Mint
progressed during the fiscal year 1956. In response to the Secretary's
request for a full-scale search for economies, all segments of the Mint
organization were reviewed carefully for the purpose of effecting
economies wherever possible. Continuing attention was given to
improving operational efficiency.
Major attention was given to the modernization of melting and
rolling equipment at the PhUadelphia Mint, for the purpose of reducing
manufacturing costs. Changes in the electrical equipment in the
ingot melting operation have already resulted in annual savings of
approximately $47,000. Further improvements to melting and rolling
equipment, now in process, are expected to result in additional annual
savings in excess of $300,000, based upon production of approximately
700 mUlion coins annually.
Since the demand for coins increased greatly during 1956, it was
necessary for the Mint to attain maximum possible production with
avaUable funds. A second shift was employed at the Denver Mint,
and one-cent coin blanks vvhich Denver produced in excess of its.
press capacity were shipped to Philadelphia to be finished into coins
for use in the PhUadelphia area.
An improvement in the handling of stamped com from the presses
at Denver resulted in annual savings of $5,000; revised procedures
for the handling of uncurrent coins returned to the PhUadelphia and
Denver Alints resulted in annual savings of $12,000.
In the past it was necessary for the Mint to use appropriated funds
for the purchase of alloy copper for subsidiary sUver coinage. Substantial increases in the price of copper, as well as increases in the
proportion of sUver coins required, resulted ui unforeseeable drains
on the Mint's appropriation. Accordingly, legislation was requested
and approved (Public Law 677, approved July 9, 1956), which permits the payment for copper required for subsidiary silver coinage
from the gain arising from such coinage. That action wffi facUitate
more effective production planniag.
Bureau of Narcotics ^
The Bureau of Narcotics administers a program designed to deal
with the control of sources of the illicit supply of drugs on international,
national, and local levels.
Nationally, the Bureau is charged with the investigation, detection,
and prevention of violations of the Federal narcotic and marihuana
laws and of the Opium Poppy Control Act of 1942, and related
statutes. The scope of the Bureau's operations is enlarging gradually
as additional drugs are made subject to these laws. Opium and coca
leaves and their derivatives have been under national control since
1915; marihuana has been under control since 1937; isonipecaine was
brought under control in 1944; and under the act of March 8, 1946
(26 U. S. C. 4731 ig)), 24 recently developed S3mthetic narcotics have
been brought under control through findings by the Secretary of the
1 Further Information concerning narcotic drugs is available in the separate annual report of the Commissioner of Narcotics.
ADMINISTRATIVE REPORTS
135
Treasury, proclaimed by the President, that the drugs possess addiction liability similar to morphme. Six of these were added during the
fiscal year 1956.
Internationally, opium, coca leaves, marihuana, and their more
important derivatives have been under control by reason of the Opium
Conventions of 1912, 1925, and 1931. Under Article 11 of the 1931
Convention and the international Protocol of November 19, 1948,
four additional S37^nthetic drugs were found to have addicting qualities
similar to morphine or cocame and were brought under international
control during the fiscal year by a procedure similar to that provided
m our national legislation. The agreement to limit the production of
opium to world medical and scientific needs signed at the United
Nations on June 23, 1953, after forty-four years of effort on the part
of the United States to accomplish such an agreement was approved
by the U. S. Senate August 20, 1954. By Senate Resolution 290 of
June 14, 1956, other governments have been urged also to ratify this
Protocol. When it has been ratified by a sufficient number of governments and becomes effective there should be a large reduction in the
amount of opium available for the illicit traffic, particularly if production in Turkey and Iran is effectively controlled.
In the United States important and effective aid in discouraging the
illicit traffic in narcotics and marihuana continues to be afforded by
the act approved November 2, 1951 (21 U. S. C. 174) which provided
for mandatory minimum penalties for violation of certain narcotic
laws, particularly for second and third offenders. The Narcotics
Control Act of 1956, approved July 18, 1956, provides further increased penalties and more effective measures of control.
The Interdepartmental Committee on Narcotics completed its work
and submitted its report to the President on February 1, 1956. I t
contaiaed a number of important recommendations, all of which are
being carefully studied. Implementing action on some of the recommendations has already taken place.
The Bureau directs its principal activities toward the suppression
of the illicit traffic ia narcotic drugs and marihuana and the control
of the legitimate manufacture and distribution of narcotics through
the customary channels of trade. I t issues permits for import of the
crude narcotic drugs and for export and intriansit movements of
narcotic drugs and preparations. I t also supervises the manufacture
and distribution of narcotic substances within the country and has
authority to issue licenses for the production of opium poppies to
meet the medical needs of the country if and when such production
should become in the public interest. Cooperation is given to States
in local narcotic legislation and enforcement and to the Department
of State in the discharge of the international obligations of the United
States.concerning the abuse of narcotic drugs and marihuana.
During the fiscal year 1956 the total quantity of narcotics seized
amounted to 2,385 ounces as compared with 2,310 ounces in 1955.
Seizures of marihuana during 1956 amounted to 873 pounds bulk and
4,329 cigarettes, as compared with 839 pounds bulk and 5,826
cigarettes in 1955.
Continued progress was made during the j^ear in driving out some
of the bigger racketeers in illicit narcotics. Several of the major
136
1956 REPORT OF THE SECRETARY OF THE TREASURY
dealers in illicit drugs were convicted and heavy prison sentences were
imposed under the act of November 2, 1951.
Thefts of narcotics from persons authorized to handle the drugs
decreased slightly in number during 1956; the quantity stolen was
1,371 ounces as compared with 1,730 ounces in 1955.
During the fiscal year there were approximately 295,000 persons
registered with directors of internal revenue under the Federal narcotic
and marihuana laws to engage in legitimate narcotic and marihuana
activities.
The table following shows the number of violations of the narcotic
and marihuana laws by persons registered to engage in legitimate
narcotic and marihuana activities and by persons who have not
qualified by registration to engage in such activities, as reported by
Federal narcotic enforcement officers.
Number of violations of the narcotic and marihuana laws reported during ihe fiscal
year 1956 wiih iheir disposition and penalties
N a r c o t i c laws
Nonregistered persons
Registered persons
Federal
Court
T o t a l t o be disposed of.
Convicted:
Federal
Joint
Acquitted:
Federal
Joint
Dropped:
Federal
Joint
Compromised: 2
Federal
Joint
Federal
Court
State
Court
P e n d i n g J u l y 1,1955.
R e p o r t e d d u r i n g 1956:
Federal»
Joint 1
_
.-
M a r i h u a n a laws
Nonregistered persons
Federal
Court
State
Court
state
Court
124
962
242
118
11
1,677
110
376
57
253
2,749
675
31
1
1
2
3
121
6
1
2
979
48
264
81
221
23
74
25
32
1
13
6
10
1
2
3
305
24
44
9
72
18
8
3
1
'
T o t a l disposed of. _
P e n d i n g J u n e 30,1956
YTS.
169
1,806
460
84
943
215
Mos.
Yrs. M o s .
YTS.
Mos.
Yrs. M o s .
Yrs. M o s .
Yrs. M o s .
Sentences i m p o s e d :
Federal
Joint
83
3
3
1
3,503
185
2 1,343
3
207
11
2
738
77
5
242
62
5
4
Total...
83
3
4
3,688
5 1,551
1
815
5
304
9
Fines imposed:
Federal
Joint
Total...
.
$33,603
1,000
$5,000
$220,920
9,530
$57, 953
550
$22,933
2,661
34.603
5,000
230.45n
58- b(\%
2'i ."194
\
$1,928
5,600
7. .'S28
'
1 Federal cases are made by Federal officers working independently, whUe joint cases are made by Fed«
eral and State officers working in cooperation.
^Represents 1 case which was compromised in the sum of $4,000.
ADMINISTRATIVE REPORTS
137
In foreign countries, investigation, surveillance, and negotiation are
undertaken to restrict the amount of narcotic drugs entering this
country. Through cooperation with the French, Italian, Turkish,
Greek, and Lebanese Governments several large seizures of crude,
semiprocessed, and finished narcotics destined for the United States
were eff'ected and two large clandestine laboratories closed. The Bureau continues on guard agamst the large supplies of opium and
heroin which are available in Communist China.
The importation, manufacture, and distribution of opium and its
derivatives are subjected to a system of quotas and allocations designed to secure their proper distribution for medical needs. Additional quantities of opium were imported during the year. Coca leaf
imports were sufficient both for medicinal purposes and for the manufacture of nonnarcotic flavoring extracts.
The quantity of narcotic drugs exported in 1956 was slightly lower
than in 1955. The export total is not significant in comparison with
the quantity used domestically. The manufacture of opium derivatives continued high, principally because of the high medical consumption of codeine and papaverine.
National defense operations have mcreased the responsibilities of
the Bureau of Narcotics during recent years. The mobUization of
large numbers of troops has resulted in many special requests from
the military forces for aid by the Bureau of Narcotics in dealing with
the traffic in narcotics in the areas near military installations; in problems incidental to the drafting of addicts; and in cases in which
narcotic addiction has been given falsely as a reason to escape the
draft.
In the field of management improvement the Bureau revised its
system of accounting for personal property, further improved its
internal audit program, and continued its search for economies to accomplish the maximum utilization of available funds. I t also published formal procedures and became fully organized to function in
relocated areas in case of enemy attack.
Office of Production and Defense Lending
The Office of Production and Defense Lending administers the
functions with which the Secretary of the Treasury was charged under
the provisions of the Reconstruction Finance Corporation Liquidation Act (Public Law 163, approved July 30, 1953). Specifically,
these functions are as follows:
1. Liquidation of the Reconstruction Finance Corporation (Section
10 R F C Act, and Section 102, R F C Liquidation Act);
2. Administration of Federal Facilities Corporation (Section 107
(a) (1) R F C Liquidation Act, and Executive Order 10539);
3. Lending activities under Section 302, Defense Production Act
(Section 107 (a) (2) R F C Liquidation Act, and Executive Order
10489); and
4. Lending activities under Section 409, Federal Civil Defense Act
(Section 104, R F C Liquidation Act).
138
1956 REPORT OF THE SECRETARY OF THE TREASURY
Reconstruction Finance Corporation (in liquidation)
The authority of the Reconstruction Finance Corporation to make
new loans was terminated effective September 28, 1953. To assist
the liquidation program which was then undertaken, certain of the
Corporation's lending program assets were transferred to other Government agencies. Under Reorganization Plan No. 2 of 1954,
$18,300,000 in disaster loans were transferred to the Small Business
Administration, $111,800,000 in mortgages to the Federal National
Mortgage Association, and $48,000,000 in a loan to the Republic of
the PhUippines was transferred to the Export-Import Bank of Washington. The production programs administered by the RFC prior
to the effective date of the RFC Liquidation Act also were transferred
to other Government agencies, under the provisions of Executive
Order 10539. The Federal Facilities Corporation received the synthetic rubber and tin programs, and the General Services Administration was named to carry on the abaca fiber program.
After giving effect to assets transferred to other Government agencies under the provisions of the RFC Liquidation Act and Reorganization Plan No. 2 of 1954, there remained for liquidation loans, securities,
and commitments amounting to $592,200,000. By June 30, 1956,
this portfolio had been reduced to $117,800,000. The total reduction
of these assets was $474,400,000, of which $114,300,000 was accomplished during the year.
The proceeds realized from liquidation of the Corporation's assets
are returned to the Treasury. In the fiscal year 1956, there was paid
into the Treasury from cash on hand and amounts realized during the
year a total of $150,000,000.
The Corporation also is continuing the liquidation of assets acquired
under terminated World War II programs. These assets consist of
facUities subject to long-term lease agreements and miscellaneous
receivables which are not marketable. The carrying value of the
unliquidated assets remaining on June 30, 1956, was $13,900,000.
Liquidation of these assets accomplished during fiscal 1956 amounted
to $13,200,000. From cash on hand and proceeds realized, there was
paid into the Treasury during fiscal 1956 a total of $29,200,000.
Federal Facilities Corporation
The Federal Facilities Corporation was created on June 30, 1954,
under the provisions of the Rubber Act of 1948, as amended (50 App.
U. S. C. 1921-1938), and Executive Order 10539. The primary
purpose for which the Corporation was formed was to administer the
operatioo^ of the Government-owned synthetic rubber producing
facUities until disposal of the properties to private interests was
completed as provided by the Rubber Producting Facilities Disposal
Act (50 App. U. S. C. 1941). In addition, the Corporation was
desigaated to conduct the operation of the Government-owned tin
smelter at Texas City, Tex. The facUities and other assets transferred
to the Federal Facilities Corporation from the RFC represented a
net investment on the part of the Government of $268,900,000.
Except for one alcohol butadiene plant at Louisville, Ky., which is
ADMINISTRATIVE REPORTS
139
under lease to a private operator, the program to transfer the synthetic rubber producing facUities to private ownership has been
completed.
During fiscal 1956, the Corporation paid into the Treasury
$45,000,000 from cash on hand, sales proceeds, mortgage collections,
and miscellaneous income. Payments made in the previous year
from the same sources totaled $390,000,000.
Under the tin program, a total of 20,530 long tons of refined tin
was produced at the Texas City smelter during fiscal year 1956. The
value of the tin produced was $44,800,000. All tin produced at the
smelter was delivered to the General Services Administration for
stockpUing purposes.
The adoption of the joint resolution approved June 22, 1956 (Public
Law 608), provides for operation of the smelter by the Federal FacUities Corporation untU January 31, 1957. The same law authorizes
and directs the Corporation to take steps immediately to sell or lease
the tin producing facUities. Should no contract of sale or lease be
effected by January 31, 1957, the smelter wUl be reported as excess
property for transfer and disposal in accordance with the provisions
of the Federal Property and Administrative Services Act of 1949
(40 U. S. C. 471-492).
Defense Lending Division
This division administers the lending programs authorized by
Section 302 of the Defense Production Act (50 App. U. S. C. 2092) and
Section 409 of the Federal CivU Defense Act (50 App. U. S. C. 2261).
Loans authorized under the Defense Production Act must be certffied
as essential by the Office of Defense MobUization, and may be made
only in cases where financial assistance is not otherwise available.
Wherever possible all loans authorized are made by private lending
institutions with deferred participation by the Government.
Following the hurricane and flood disasters which occurred in the
late summer and fall of 1955, the President, in Executive Order 10634,
authorized the use of the Defense Production Act lending authority
to aid in the reconstruction and replacement of national defense
facilities destroyed or damaged in major disasters. In connection
with these disasters, eight loans amounting to $14,316,000 were
authorized during fiscal 1956 under the Defense Production Act
authority. Bank participation in five of these authorizations amounted
to $1,407,426; the Governmeat's share of the authorizations was
$12,908,574, and $9,452,540 of this was on a deferred basis.
On June 30, 1956, direct loans and commitments made under the
Defense Production Act amounted to $210,000,000. In addition,
outstanding commitments to participate in loans on a deferred basis
amounted to $18,100,000.
There were no loans authorized under the civil defense lending
program in fiscal year 1956. At the close of the year, the amount of
loans and commitments outstanding (including deferred participation
commitments) was $4,800,000, a reduction of $1,900,000 from the
previous year.
140
195 6 REPORT OF THE SECRETARY OF THE TREASURY
United States Coast Guard
The basic duties of the United States Coast Guard, as prescribed
in Title 14 of the United States Code, embrace the following: To enforce or assist in the enforcement of all applicable Federal laws on the
high seas and waters over which the United States has jurisdiction,
with particular reference to those laws relating to navigation, shipping,
and other maritime activities; to promote the safety and efficiency of
merchant vessels, with the object of preventing avoidable casualties,
through the approval of plans, materials, and equipment used in their
construction, repair, and alteration, the periodic inspection of merchant vessels ahd the licensing of their crews, and the enforcement of
regulations for operation of motorboats; to develop, establish, maintain, and operate aids to maritime navigation such as lighthouses,
lightships, lights, radiobeacons, loran and radio direction finder stations, buoys and unlighted beacons, as required to serve the needs of
commerce and the armed forces; to p'erform any and all acts necessary
to rescue and aid distressed persons, vessels, and aircraft, and to provide maximum protection to life and property^ on the high seas and
waters over which the United States has jurisdiction, including operation of ocean station vessels and the International Ice Patrol; to maintain a state of readiness to function as a specialized service in the Navy
in time of war; and to maintain and train an adequate reserve force.
A primary objective of the Coast Guard is the prevention of loss of
life and property due to ffiegal or unsafe practices. The maintenance
of safety and order in maritime activity is not limited to the strict
enforcement of laws, but encompasses a program of education for ship
operators and boatmen, and the enlistment of their cooperation and
self-regulation toward prevention of marine casualties.
Search and rescue operations
In discharging its responsibUities for the promotion of marine
safety, the Coast Guard operated search and rescue facilities which
comprised a system of lifeboat stations, radio stations, bases, aircraft,
and floating units located at strategic points along the coasts, inland
waterways, Alaska, Hawaii, Bermuda, San Juan, and Argentia.
It also operated the ocean stations program by locating Coast Guard
cutters at strategic points in the Atlantic and Pacific Oceans to serve
the dual functions oi search and rescue and to gather and disseminate
weather data for air and marine commerce.
The National Search and Rescue Plan, dated March 30, 1956, designated the Coast Guard as the search and rescue coordinator for the
maritime region.
The Coast Guard also operated the International Ice Patrol in the
North Atlantic Ocean and provided ice breaking services in rivers,
harbors, canals, and on the Great Lakes. Communication centers
were maintained and operated in the several districts within the continental United States, Alaska, Puerto Rico, Hawaii, Bermuda, and
Newfoundland.
141
ADMINISTRATIVE REPORTS
UNITED ST.ATES COAST GUARD SHORE UNITS OPERATIONS-FISCAL YEAR 1956
(Percent of Total)
0
20
40
60
i
TYPE OF MISSION
SEARCH AND RESCUE
//////A
7777M
v/////////////////////////////////\
AIDS TO NAVIGATION
• / / / / / / / / / \
=-:z3
CHART 7.
i Includes special operations, regatta patrols, operations with Navy, and assistance to other agencies.
UNITED STATES COAST GUARD AIRCRAFT OPERATIONS-FISCAL YEAR 1956
(Percent of Total)
TYPE OF MISSION
20
40
60
80
SEARCH AND RESCUE
MDS TO NAVIGATION
LOGISTICS (CC)
CHART 8.
1 Includes general duty patrols, special operations, law enforcement patrols, port security patrols, regatta
patrols, operations with Navy, and assistance to other agencies.
142
1956 REPORT OF THE SECRETARY OF THE TREASTTRY
UNITED STATES COAST GUARD FLOATING UNITS OPERATIONS-FISCAL YEAR 1956
(Percent of Total)
0
TYPE OF MISSION
20
40
60
80
SEARCH AND RESCUE
pssss;
K//////V
CHART
MISSIONS
MILES
HOURS
9.
1 Includes general duty patrols, law enforcement patrols, regatta patrols, and operations with Navy.
Assistance rendered during the fiscal year 1956 is summarized as
follows:
Number of calls responded to:
Vessels assisted:
Refloated-_ __
Towed--otherwise.-_
Aircraft assisted:
Escorted
..-_i
otherwise assisted
Miscellaneous assisted.^
Total
_
—
By aircraft
By vessels 1
By other
equipments
15
41
126
176
1,638
683
1,112
6,445
1,117
1,303
8,024
1,926
224
51
60
10
40
125
40
51
915
274
142
1,100
517
2,572
9,680
12, 769
Total
1 Vessels 56 feet and over in length.
2 Small boats, vehicular, and other equipment.
Assistance given by all aircraft, vessels, and other
involved the following.
Number of persons involved:
Lives saved or rescued from peril.
Furnished medical assistance
Otherwise assisted
Total.
Value of property involved (including cargo):
Vessels
Aircraft
Miscellaneous
Total
Miles disabled vessel towed
Miles aircraft escorted
Menaces to navigation removed
equipment
3,769
1,900
45, 450
51, 119
$574,247, 100
255, 319, 400
21, 917, 100
851,483, 600
83, 551
39, 840
1, 644
ADMINISTRATIVE REPORTS
143
Typical examples of assistance rendered by the Coast Guard during
the year are as follows:
New England floods of August and October 1955.—Coast Guard
personnel and equipment saved the lives of pver 300 persons from
positions of immediate peril. Nearly a thousand others were removed
to places of greater safety. More than a thousand personnel trained
in disaster relief work were transported by Coast Guard helicopters,
amphibious aircraft, amphibious trucks, and surf boats in connection
with these floods. The Coast Guard breeches buoys were used effectively in several places to remove stranded persons.
Surf boats with portable pumps sailed the streets of Boston, helping
local agencies. Amphibious DUKWS and surf boats fought fires at
Putnam, Conn., caused by the explosion of a magnesium plant.
Helicopters assisted in evacuating boys in danger of drowning at a
camp in the vicinity of Port Jervis, N . Y. Coast Guard communications trucks capable of transmitting and receiving on all frequencies,
as well as portable transceivers, were effectively used in providing
communications essential in distressed areas.
Coast Guard Auxiliarists joined regular Coast Guard patrol boats
in assisting stranded persons and securing yachts and fishing boats in
areas of high water. Coast Guard buoy-tenders were stationed at the
entrances of the Connecticut and Housatonic Rivers to observe debris
for bodies, valuable property, and menaces to navigation.
Helicopters from the Coast Guard Air Station, Floyd Bennett Field
were the first rescue craft on the scene at Waterbury apid Naugatuck,
Conn. Fifteen lives were saved by these helicopters as they hoisted
stranded people with their hydraulic lift rescue baskets.
California flood incidents.—The Coast Guard assisted Federal, State,
and local agencies in rescue operations in northern California in December 1955 saving over 500 persons by helicopters and boats. The
record established by one Coast Guard helicopter operating around
Yuba City and Marysville was outstanding. This Coast Guard helicopter was the first rescue unit to reach the disaster scene before daylight on December 24 and hoisted 138 persons to safety within the
next 12 hours. The first 58 of these were removed by the light of a
smaU hand-held searchlight from positions of peril among chimneys,
television antennas, and trees.
Aircraft ditching.—On September 30, 1955 a transocean PBY-5A
Catalina enroute from Honolulu to San Francisco feathered one engine
after passing midpoint of flight. A P5M from Coast Guard Air Station, San Francisco, departed for intercept and escort making contact
approximately 600 miles west of San Francisco. The Catalina advised
fuel remaining insufficient to reach the west coast. The Coast Guard
P5M established communications with the surface vessel S. S. Harry
Culbreath, escorted the Catalina 100 mUes to the position of the vessel
where the Catalina was ditched and aU four members of her crew were
removed from the, disabled aircraft by the ship's lifeboat and transferred to the S. S. Harry Culbreath.
On February 17, 1956, C. G. C. Casco proceeded to assist a Navy
seaplane in distress forced to ditch approximately 100 miles south of
Bermuda. Thc Casco removed 21 persons (crew and passengers) from
the aircraft and some 36 hours later turned the disabled aircraft over
144
195 6 REPORT OF THE SECRETARY OF THE TREASURY
to the Naval Air Station at St. George's Harbor, Bermuda, with its
21 survivors.
Lifeboat station assistance.—On September 28, 1955, personnel of the
Grays Harbor Lifeboat Station at Westport, Wash., observed a 32foot pleasure craft explode in the water a short distance from shore.
Two lifeboats immediately went to the assistance of the pleasure boat,
removing all 7 persons who had been aboard from the craft and from
the water. The lifeboats brought a roaring fire under control, extinguished the flames, and towed the boat to shore.
Cutter assistance.—The Coast Guard Cutter Yocona moored in
Astoria, Oreg., on November 11, 1955, received information that tuna
clipper Ocean Pride, some 50 miles off Cape Lookout, Oreg., had developed a leak and assistance was required. The Yocona proceeded to the
Ocean Pride through heavy seas and strong gale winds. By the time
the Yocona was within 5 miles of the Ocean Pride, pounding seas had
loosened its hull which was awash, and a message from the crew stated
that they could remain afloat only a few more minutes. Strong winds
(60 to 70 mph) and heavy seas with 30 foot sweUs made it impossible
for the Yocona to launch lifeboats to effect rescue. The Yocona pulled
up alongside the sinking vessel and between heavy roUing and pitching
of both vessels, crew members of the fishing vessel jumped aboard the
cutter. AU 13 crewmen of the fishing vessel were rescued uninjured
and the Ocean Pride sank about 30 minutes later.
Cooperation with other Federal agencies
During the year the Coast Guard performed services for other
Federal agencies as foUows:
Alcoholic Tax Unit, Treasury (aircraft days)
4
Coast and Geodetic Survey (reconnaissance aerial surveys—aircraft
days)
13
Fish and Wildlife (censuses taken)
13
Weather Bureau (reports furnished)
109, 454
Weather Bureau (warnings disseminated) „
. 16, 755
Rescue and survival program for overseas aircraft
CivU ah' carriers flying over water routes vigorously participated
in a training and indoctrination program conducted by the Coast
Guard designed for training flight crews in making emergency landings of aircraft at sea, operating aircraft emergency survival equipment, and applying survival methods, procedures, and techniques
in rescuing survivors from distressed aircraft.
The program also included instructions for promoting safety in
flight to insure among other things maximum coordination between
distressed aircraft and search and rescue agencies. Considerable
interest was also shown by mUitary personnel of transport au-craft
engaged in overseas air travel. The following tabulation shows the
number of organizations and personnel participating in the program
during fiscal year 1956.
ADMINISTRATIVE
Coast Guard air stations
Brooklyn, N.Y
Miami, Fla
_...
San Diego, Calif
San Francisco, Calif.
Port Angeles, Wash.
REPORTS
145
Number of
personnel
attending
800
208
395
785
480
Marine inspection and safety measures
The duties performed by the Coast Guard in promoting safety of
life and property on vessels subject to navigation and vessel inspection laws of the United States include promulgation and related
enforcement of regulations relating to inspection of vessels and their
equipment, construction and repair of vessels, investigation of marine
casualties, manning and citizenship requirements, mustering and
drilling of crews, protection of merchant seamen, licensing of officers
and pilots and certificating of seamen, load line requirements, pilot
rules, transportation of dangerous cargoes on vessels, outfitting and
operation of motorboats, licensing of motorboat operators, and
patrolling regattas and marine parades.
During the fiscal year an increased number of vessels was inspected.
This upswing would seem to indicate that, whUe no great increase
in shipping activity can be foreseen in the near future, at least the
downward trend has been stopped.
There were 3,045 casualties reported of which 2,459 were the
subject of detailed investigations. Eight of these investigations
were made by marine boards of investigation. Four hundred and
six persons lost their lives in 201 of the casualties reported. Only
one passenger lost his life as a result of a casualty on an inspected
passenger vessel during the year.
The most serious casualty during the year was the explosion and
fire on the S. S. Salem Maritime on January 17, 1956, at Lake Charles,
La., which resulted in the loss of 21 lives. This particular casualty
is one of several in the past few years with somewhat simUar characteristics. Because of this, and at the request of the Coast Guard,
the American Petroleum Institute is studying this matter to see if
there is any possible way of securing greater safety in the loading of
kerosene.
The second most serious casualty, was the foundering and breaking
up of the schooner Levin J . Marvel in Chesapeake Bay on August
12, 1955, during heavy weather. Fourteen passengers on this vessel
were lost. This tragic casualty forcibly dramatized the deficiencies
in the inspection laws which exempted from inspection a vessel of
this type because she was a saUing vessel of less .than 700 gross tons.
Partially as a result of this casualty, Public Law 519, approved May
10, 1956, was enacted which provides for the inspection of many
passenger carrying vessels not previously required to be inspected.
Another serious casualty, although there was no loss of life, was
the breaking in two and foundering of the S. S. Washington Mail
in the North Pacific on March 3, 1956.
399346—57-
-11
146
1956 REPORT OF THE SECRETARY OF THE TREASURY
Regulations governing the inspection of artificial islands and
fixed structures on the Outer Continental Shelf, under the Outer
Continental Shelf Lands Act, became effective on July 1, 1956.
As a result of the passage of Public Law 549, approved June 4,
1956, the Coast Guard was authorized to make biennial inspections
of nonpassenger carrying vessels in lieu of annualjmspections.
During the past fiscal year,!a total of 17,305 plans were approved
relating to vessel construction, machinery, and equipment. Plans
for several hew types of vessels were approved which presented novel
and unique problems of design as well as application of safety regulations.
Considerable activity was directed toward the development of the
so-called ^^roll on—roU off'' types of vessels, and vessels specially
constructed to handle various types of containers. One 500 foot
^*roll on—roll off'' vessel is under contract and several others are in
varying stages of design development.
Considerable study was devoted to the problems of design and
construction of nuclear powered merchant vessels. A committee of
experts from the industry was engaged in studying problems regarding
minimum safety standards for such vessels.
Some progTess was made in developing regulations for the carriage
of liquefied natural gases at extremely low temperatures. Proposals
to carry liquefied methane at its boUing point of minus 258° F. were
actively investigated. A committee from the maritime industry
devoted considerable time in developing safety standards.
Certain failures on C-3 type vessels necessitated modification of
the structure of these vessels. The breaking in two and foundering
of the S. S. Washington Mail in the North Pacific on March 3, 1956,
was a case in point. . The marine board which investigated this case
recommended that consideration be given to the strengthening of
vessels of the C-3 type such as the Washington Mail. Subsequently
an agreement was made between the Coast Guard and the Technical
Committee of the American Bureau of Shipping, whereby modifications wUl be required on existing ships of this type.
A digest of certain phases of marine inspection activities foUows.
Number
of vessels
Vessel inspections completed 12
Drydock examinations.
Reinspections
.
1
Special examinations by traveling inspectors of passenger, tank, and dry cargo
vessels
_
Miscellaneous inspections
_
_..
_.
Undocumented vessels numbered under provisions of the act of June 7, 1918, as
amended (46 U. S. C. 288) 3
Violations of navigation and vessel inspection laws
_
__.
Factory inspections *
Merchant vessel plans reviewed ^
5,886
4,575
2,588
Gross
tonnage
17,897,958
15,187, 509
8,354,833
236
20,292
384,965
9,140
391,386
17,305
1 Includes 294 vessels, totaling 269,066 gross tons, which were conversions or new construction completed
during the year.
2 Previous reports have indicated that these were annual inspections. Since June 28,1956, certificates of
inspection have been granted to most cargo vessels for a period of 2 years as authorized by the act of June
4, 1956 (Public Law 549), so that this total includes a small number of vessels which were issued two-year
certificates.
3 The total of vessels numbered is 26,554 more than that numbered the preceding year.
4 There were factory inspections of 389,222 items of equipment.
5 Refers to number of separate plans reviewed, not number of vessels involved.
ADMINISTRATIVE REPORTS
147
Merchant marine personnel.—The licensing and certificating of
merchant marine personnel included the issuance of 79,956 documents. Of this number 15,906 were issued to persons without prior
sea service and 359 were licenses issued to radio officers under the
provisions of 46 U. S. C. 229c. In the interest of national defense
39 individual waivers of manning requirements for merchant vessels
were issued. Shipping commissioners supervised the execution of
10,729 sets of shipping articles in connection with the shipment and
discharge of seamen.
Merchant marine investigating units in major United States ports
and merchant marine details in certain foreign ports continued
to operate in the administration of discipline in the merchant marine
in accordance with the provisions of Section 4450 of the Revised
Statutes, as amended, (46 U. S. C. 239) and the act, approved July 15,
1954. Merchant marine details in London, Antwerp, Bremerhaven,
Naples, Trieste (disestablished May 11, 1956), Piraeus, and Yokohama
operated throughout the year. During the year a total of 11,703
investigations of cases involving negligence, incompetence, and misconduct were conducted. As a result of these investigations, charges
were preferred and hearings held on 1,196 cases by civilian examiners.
In accordance with Executive Order 10173, as amended by Executive Orders 10277 and 10352, a total of 23,381 persons to be employed
aboard merchant vessels were checked to determine if they were
security risks, and 20,813 merchant mariners' documents bearing
evidence of security clearance were issued to individuals. A total
of 77 security appeal hearings were granted to persons who were
classed as poor security risks.
Aids to navigation
On June 30, 1956, there were 39,335 aids to navigation maintained
in the navigable waters of the United States, its Territories, and
possessions, the Trust Territory of the Pacific Islands, and at overseas
military bases, consisting of loran stations, radarbeacon stations,
light .stations, lightships, lighted and unlighted buoys, minor lights,
and daybeacons.
During the year, 2,715 new aids to navigation were established,
and 1,769 aids were discontinued, an increase of 946. This increase
was required to mark newly completed river and harbor improvements
in areas not previously marked, and to improve the existing system
for maritime commerce.
The world-wide loran system as of June 30, 1956, comprised 59
stations of which 49 were operated by the Coast Guard. No new
stations were placed in service during the fiscal year 1956.
The Coast Guard, in cooperation with the Saint Lawrence Seaway
Development Corporation and the Department of the Arm}^, Corps
of Engineers, has surveyed and completed preliminary design of aids
to navigation for the Saint Lawrence Seaway between St. Regis,
N. Y., and Lake Ontario. The new aids required to mark the section
of the seaway wdll include approximately 108 minor lights, 3 lighted
ranges, 39 lighted buoys, and 34 unlighted buoys.
148
195 6 REPORT OF THE SECRETARY OF THE TREASURY
A summary of all aids to navigation fm-nished during the year,
by type, follows.
Type
Total number,
JuneSO—
Loran transmitter stations
Radiobeacons
Radarbeacons
Fog signals (except sound buoys)
Lights (including lightships)
Daybeacons
Buoys, lighted (including sound)
Buoys, unlighted sound
Buoys, unlighted metal..
Buoys, Mississippi River Type..
Buoys, spar
.Total
39,335
Ocean stations
The Coast Guard maintained four ocean stations in the North
Atlantic Ocean and two in the Pacific throughout the year.
Ocean station vessels provided search and rescue, communications,
air navigation facilities, and m.eteorological services in the ocean
areas regularly traversed by aircraft of the United States and other
cooperating governments. During 1956 Coast Guard vessels transmitted over 109,454 weather reports, rendered assistance in 80 cases,
and cruised approximately 486,713 mUes in connection with this
program.
International Ice Patrol
The postseason activities of the Internationa] Ice Observation and
Ice Patrol Service in the North Atlantic Ocean for the 1955 season
consisted of an oceanographic survey made by the Coast Guard
Cutter Evergreen from jul}^ 7 to July 25, 1955, in the area northerly
from the Grand Banks to Cape Farewell, Greenland. Prelim.inar37
aerial ice reconnaissance for 1956 by aucraft operating from Argentia,
Newfoundland, com.m.enced on January 15, 1956, and routine aerial
ice reconnaissance was begun on March 6, 1956. A light ice ^^^ear was
experienced during 1956 with no menace to ships traveling on effective
United States-European North Atlantic lane routes. I t was not necessary, therefore, to inaugurate a continuous surface patroL The Coast
Guard Cutter Evergreen m.ade three cruises carrying out the program
of oceanographic survej^s in the vicinity of the Grand Banks of Newfoundland. Operations for the 1956 season had not been discontinued
on June 30, 1955.
Bering Sea Patrol
The Bering Sea Patrol was carried out by the Coast Guard Cutter
Klamath from July 1 to Septem.ber 30, 1955. The purpose of the
patrol was to render aid to distressed persons, vessels, and aircraft,
to carry out all law enforcement responsibUities within the purview
of Title 14 of the United States Code and assist other Federal agencies
and the Territorial Government in law enforcement, to provide logistic
service to outlying Coast Guard units, to perform aids to navigation
ADMINISTRATIVE REPORTS
149
duties, to carry out mtelligence functions of the Coast Guard, and to
cooperate with other Government agencies. These included the following: Make a court cruise if required; render medical and dental
assistance to the natives; assist other Government agencies in transportation of personnel, freight, equipment, or supplies; carry out
military or other Government research projects as practicable; and
collect hydrographic, oceanographic, and meteorological data. During the patrol, the Klamath cruised 6,939 miles, carried nine passengers
on missions in the public interest, and rendered medical treatment to
78 persons and dental treatment to 575 persons.
Law enforcement
The port security program conducted under authority of Executive
Order 10173, as amended by Executive Orders 10277 and 10352
implementing provisions in the Espionage Act of June 15, 1917, as
amended (50 U. S. C. 191), continued to consist of the following:
Controlling the entry of merchant vessels into United States ports;
supervising the loading of Class A^^explosives and administering the
regulations relative to dangerous and hazardous cargoes; screening
merchant seamen employed on certain categories of United States
vessels and waterfront workers for admittance to waterfront facUities
under certain specified conditions; protecting selected vessels, and
waterfront facUities in designated port areas from the waterside, and,
by spot checks, from the shoreside.
In the category of longshoremen, warehousemen, pUots, and other
waterfront workers, during the year 20,760 persons w^ere screened,
20,635 port security cards were issued, and 29 hearings were granted
upon appeal by persons who had been found to be poor securit3^ risks.
Fifty were rejected as poor security risks.
Security regulations issued by the Coast Guard have been revised
in line with the decision of the U. S. Court of Appeals, Ninth Circuit,
m the case of Parker vs. Lester. All rejectees, who were denied clear-,
ance under regulations prior thereto, are afforded an opportunity to
have their cases reprocessed if they so desire.
The following statistics reflect the volume of enforcement activity
taken h j the Coast Guard during the year.
Vessels boarded
Waterfront facilities inspected
Violations of.Motorboat Act reported
Violations of port security regulations reported.
Violations of Oil Pollution Act reported
.^Violations of other laws reported
Explosives loading permits issued
Explosives covered by above permits
Explosive loadings supervised
Otlier hazardous cargoes inspected
Anchorage violations
^
.
129, 453
8, 533
11, 245
290
199
526
1, 054
362, 079
793
6, 357
13
The Coast Guard also assisted the Federal agencies having primary
responsibUity for the enforcement of the Oil Pollution Act (33 U. S. C.
431-437), anchorage, regulations, laws relating to internal revenue,
customs, immigration, quarantine, and the conservation and protection of wildlife and the fisheries.
150
1956 REPORT OF THE SECRETARY OF THE TREASURY
Facilities, equipment, construction, and development
Floating units.—The larger ships in active commission at the end
of the year consisted of 179 cutters and buoy tenders of various types,
80 patrol boats, 33 lightships, 39 harbor tugs, and 11 buoy boats.
During the year they cruised 2,842,702 miles as compared with
2,794,710 mUes the previous year. Included in the 179 cutters are
two special units, the Coast Guard Cutter Courier and the Coast
Guard Cutter Eagle. The Courier, a 339-foot vessel equipped with
radio broadcasting facilities, is manned and operated by the Coast
Guard for the United States Information Agency. The Eagle, a
295-foot bark, is used exclusively for training purposes and is placed
in commission each year for the Coast Guard cadet practice cruise.
Six new 95-foot patrol boats were completed and commissioned at
the Coast Guard Yard. One additional boat of this group is still
under construction and will be completed in the near future.
The Owasco was reactivated and recommissioned August 15, 1955.
At the present time the Escanaba is being reactivated with completion
scheduled for October 13, 1956.
Shore establishments.—Shore establishments at the end of the fiscal
year included:
12
2
4
25
23
2
9
3
1
1
1
9
12
1
district offices
area offices
inspection offices
bases
depots
supply centers
supply depots
section offices
receiving center
training station
academy
air stations
air detachments
aircraft repair and suppl}^
base
15 radio stations
141 lifeboat stations
47 loran transmitting stations
46
6
11
33
1
302
57
1
3
1
31
5
10
1
11
marine inspection offices
m e r c h a n t m a r i n e details
located in foreign, ports
examiner offices
group offices
shipyard
manned light stations
light attendant stations
fog signal station
radiobeacon stations
electronic engineering station
recruiting stations
ship training detachments
electronic repair shops
field testing and development unit
moorings
Captain of the Port offices, supplemented by port security units,
continued to be maintained in major shipping centers.
During the year sites were selected for the construction of seven
loran stations in the Caribbean area. The actual construction will
be completed during fiscal 1957.
Aircraft.—The number of fixed and rotary wing aucraft operated
by the Coast Guard was maintained between 122 and 126 during the
year which included those aircraft undergoing overhaul and modification. Two new fixed wing aircraft were acquired for replacement
of overage aircraft. Four fixed wing and one rotary wing aircraft
were lost through crash attrition; two of those lost were replaced with
aircraft obtained on loan from the Navy and Air Force.
Coast Guard aircraft are used primarUy for search and rescue
ADMINISTRATIVE REPORTS
151
purposes. The aircraft were deployed at nine au' stations and twelve
air detachments. Aucr aft were used, also in carrying out the following activities:
International Ice Patrol
Logistic support of isolated Coast Guard units
Port security and law enforcement
Cooperation with the Coast and Geodetic Survey in aerial photography
Cooperation with the Internal Revenue Service in location of illicit
distilleries
WUdlife and fisheries surveys and patrols
Ship based operations for ice reconnaissance
Cooperation with airline and mUitary agencies in training in";search
and rescue overwater emergency procedures
Flood and disaster relief and assistance
Flight training of pUots and crews.
Communications.—During the fiscal year ending June 30, 1955, the
Coast Guard continued its adjustment of radio communication frequencies for long range operations.
Plans have been completed for the installation of V H F - F M 150
Mc/s communication equipment for port security operations in the
New York Harbor and Cape May-Philadelphia area. A survey of
the Norfolk-Newport News and Baltimore Harbor area is now being
made.
Communication facilities for the control of water traffic on the St.
Marys River, Md., have been improved. The installation of V H F F M equipment at selected shore sites and mobile units has resulted
in closer liaison with commercial carriers for traffic control and
possible search and rescue incidents.
A continuing review of Coast Guard-owned pole lines and cables is
resulting in a gradual reduction of such plant property.
New developments.—The program for testing and development is
continuing in technical fields with emphasis on developments which
show long range promise of effecting substantial economies in performing present duties and of increasing safety of operating conditions.
Two prototype winch designs (one electro-mechanical and one
electro-hydraulic) utilizing single wire whip boatfalls show much
promise in providing for increased safety and speed in the handling
of small boats. Nylon rope of a comparatively new type of construction has been accepted for use with multipurchase falls. This will
result in overall increased safety in boat handling by permitting the
use of lighter boatfall blocks and by providing a greater life expectanc}^
in boatfalls.
A program to extend the unattended service period of lighted buoys
is continuing. Separate development projects are in progress to
improve buoy paints to prevent corrosion and fouling, to provide
sufficient battery capacity within present buoys, to increase the reliability of buoy moorings, to increase the reliability of control mechanism
within the buoy, and to m()unt sufficient lamp bulbs in the buoy to
last as long as the battery supply. By extending the reliability and
service of lighted buoys, a considerable savings in material and manpower may be achieved, while providing better servi(3e to the mp,riner,
152
195 6 REPORT OF THE SECRETARY OF THE TREASURY
A program to develop reliable, packaged units for the unattended
operation of light houses and light ships is continuing. Separate
projects are underway to provide reliable, accurate power supphes
for such operation, efficient and reliable fog signals, and dependable
controls, including a fog detector to control the operation of the fog
signal.
A new aluminum antenna has been developed and placed in use at
shore radio stations. This device through use of broadbanding, replaces several separate antennas formerly required. There have been
resultant savings in land area requirements and installation costs.
Communications transmitters and receivers employing the single
sideband technique are being utilized in increasing numbers. This
accomplishes required communications in reduced radio frequency
space.
Continued improvement of loran transmission is being carried out
through the use of cross correlation techniques. The former permits
electronic watchkeeping on the equipment and affords reduction in
personnel and greater accuracy of synchronization in addition to automatic recording of off-air time and magnitude of developed error.
Cross correlation equipment on the other hand, will enable loran
signals to be detected more readily through high noise levels with
resultant increase in usable service time of the signal.
Ship Structure Committee.—The Ship Structure Committee continued its research program to improve the hull structures of ships.
Under the chairmanship of the Engineer-in-Chief of the Coast Guard
the Committee consists of members of the various agencies principally
concerned with ships, i. e., the Navy Department, Maritime Administration, the American Bureau of Shipping, and the Coast Guard.
The National Academy of Sciences—National Research CouncU continues to contribute.important technical assistance and advice.
Personnel
On June 30, 1956, the military personnel strength of the Coast
Guard on active duty was 28,423, consisting of 2,690 commissioned
officers, 577 chief warrant officers, 311 warrant officers, 308 cadets,
and 24,537 enlisted men. The civilian force consisted of 2,117 salaried
personnel, 2,174 wage board emplo^^ees, and 478 lamplighters, exclusive
of vacancies.
On June 1,1956, 87 members of the Class of 1956 were graduated from
the Coast Guard Academy with the degree of Bachelor of Science; 86
were cominissioned as ensigns in the U. S. Coast Guard and one will
be commissioned at a later date upon successful completion of orthopedic surgery. There remained on board in the classes of 1957, 1958,
and 1959 a total of 308 cadets.
Losses of 155 regular officers through retirement and resignation
and 131 reserve officers released at the end of their tour of active duty
were balanced by gains of 86 Academy graduates, 226 graduates of
the Officer Candidate School, 6 merchant marine officers, and 4 inactive
reserve officers.
The first integration program resulted in the permanent appointment in the regular service of 11 reserve officers and 4 temporary,
service officers consisting of 6 lieutenant commanders, 5 lieutenants,
and 4 lieutenants-junior grade.
ADMINISTRATIVE REPORTS ,
153
The provisions of the act of August 9, 1955 (14 U. S. C. 247, 248),
dealing with the attrition of captains and flag officers, resulted in the
retirement of three rear admirals and seven captains. As three
additional rear admirals retired for other reasons, there was an unusually large turnover of flag officers.
Throughout the year enlisted reservists without previous active
duty were voluntarily called to active duty under the provisions of
Section 4 (c) (2) of the Universal MUitary Training and Service Act,
as amended (50 App. U. S. C, 451-473). On June 30, 1956 there
were 1,530 reserves on active duty.
There were 366 enlisted voluntary retirements during the year.
The minimum seryice reached was 20 years. One hundred and twenty
four retirements were effected for statutory reasons, i. e. age, 30 years^
service, and physical disabUity.
The competitive examination for appointment to the Coast Guard
Academy was held on February 27 and 28, 1956, in approximately 100
examining centers in the United States and overseas. A total of 1,300
applicants participated in the examination, and an eligibility list of
413 was established. It is expected that 275 candidates wUl report
to the Academy on. July 2 and 3, 1956. This will be the largest class
to enter the Coast Guard Academy.
The officer procurement programs were conducted in substantially
the same manner as in previous years. The largest program conducted was the officer candidate program in which college graduates
from civUian status and enlisted personnel with certain educational
and active service qualffications were designated as officer candidates
and were assigned to a four months' training and indoctrination program at the Coast Guard Academy to qualify as general duty officers.
Two hundred and twenty-six candidates were appointed to commissioned grade from the officer candidate program and assigned to
active duty. Of this group, 176 received commissions as ensign in
the Coast Guard Reserve and 50 enlisted personnel were appointed
ensigns for temporary service. These officers replaced reserve officers
released from active duty and regular officers who resigned or retired.
The direct commissioning program for procuring officer personnel
for the Coast Guard Reserve for assignment to reserve training units,
produced 36 candidates.
During the fiscal year, 12,762 men applied for enlistment in the
regular Coast Guard; of this number 3,385 were enlisted and assigned
to active duty. This number was approximately 500 less than required to support the enlisted personnel operating plan.
Of the total number of 3,143 applicants for the reserve, 1,598 were
enlisted and assigned to the organized reserve training program.
During the month of June 1956, a new program was instituted to
provide additional enlisted men for an expanded training program
for the Coast Guard Reserve. Under this program young men between the ages of 17-18K years are enlisted with an 8-year obligation
and are required to serve 6 months on active duty for training prior
to assignment to a reserve unit. It is expected that 1,000 enlistments wUl be obtained during fiscal 1957.
During the fiscal year 1956, 2,091 recruits completed training at
the Receiving Center, Cape May, N. J., and 776 recruits completed
training at the Receiving Center, Alameda, Calif., for the regular
154
1956 REPORT OF THE SECRETARY OF THE TREASURY
establishment. In addition 1,042 recruits were trained at Cape May
and 383 recruits were trained at Alameda for assignment to organized
reserve training units.
A program of postgraduate training was continued during the
year. This included training in naval architecture, electronics engineering, nuclear research, command communications, financial administration, and law. Forty-eight officers were assigned to postgraduate training, 52 remained in training.
Basic fiight training and specialized short courses in helicopter
training were continued, with a total of 44 entering flight training, 19
completing it and 53 remaining in training; 25 helicopter pUots took
the 8-week course at Pensacola, Fla. Short courses were provided
in the operation and maintenance of new aircraft and equipment.
Short refresher courses, made available by the Navy and Arm}^,
continued in use to permit the crews of Coast Guard vessels to maintain the state of readiness necessary for mobilization. Other short
courses were arranged in finance, communications, and other technical fields. A total of 108 officers completed such training during
the fiscal year.
The petty officer training program consisted of training nonrated
men in basic petty officer schools of the Coast Guard and Navy, and
training rated men in advanced schools of the Coast Guard, Navy,
other services, and civUian institutions. During the fiscal year, a
total of 1,652 men graduated from basic petty officer schools and 594
graduated from advanced schools. The total graduated from Coast
Guard schools was 1,550 and 696 from Navy and other schools.
This is an increase of 153 over the previous fiscal year.
"Correspondence courses issued by the Coast Guard Institute
totaled 12,880 new enrollments with 4,471 graduates. In addition.
Coast Guard personnel participated in courses offered by the United
States Armed Forces Institute and the Naval Correspondence Course
Center.
During the fiscal year, 23 visitors from foreign countries utilized
training and operational facilities of the Coast Guard. The majority
of the visitors came to the United States under the sponsorship of
the International Cooperation Administration. They included officials, technicians, and militar}^ personnel from Indonesia, the Philippines, Korea, Taiwan, Japan, India, Malaya, Portugal, Spain, and
Greece. Training was provided in the field of aids to navigation,
merchant marine safety, loran, port security, boiler inspection, and
search and rescue.
Public Health Service support.—On June 30, 1956, 45 dental officers,
37 medical officers, 8 nurses, 1 scientist officer, and 1 sanitary engineer
officer were assigned to duty with the Coast Guard. Full-time coverage by medical officers was maintained during the year for ocean
weather station vessels manning stations ^^Bravo'' and ''Coca.'' Four
full-time medical officers were assigned to the Staff of the Commander,
Western Area, for the year for duty on ocean weather stations in the
Pacffic Ocean. Additionally, one full-time medical officer and one
dentalofficer w^ere assigned to the vessel engaged on the Bering Sea
Patrol, and one full-time medical officer to other special cruise vessels.
Coast Guard Reserve.—The purpose of the Coast Guard Reserve is
to provide a trained force of officer and enlisted personnel to augment
ADMINISTRATIVE REPORTS
155
the regular force and enable the Coast Guard to perform its functions
and duties in time of war or national emergency, and at such other
times as the national security may require. Stimulated by the
passage of the Reserve Forces Act of 1955, approved August 9, 1955
(50 U. S. C. 925), the Coast Guard Reserve program progressed
toward the ultimate goal of procuring and training this required
force. As a result of the passage of this act, several new types of
enlisted procurement programs were placed in effect during the
fiscal year which represent the most effective means to date of attaining the enlisted mobUization goal.
As of June 30, 1956, the total strength of the Coast Guard Reserve
was 3,581 officers and 18,891 enlisted personnel. Of this number,
there were 1,287 officers and 5,229 enlisted men in training units on
this date. There were 100 organized reserve training units in commission as of June 30, 1956. An extensive program of active duty for
training was carried out during this fiscal year and approximately
6,275 personnel received training, representing an increase of 43 percent over last fiscal year
In the administration of the reserve program, the Coast Guard
conforms in general with policies outlined in Department of Defense
directives implementing the various laws relative to the reserve components, thus carrying out the intent of Congress as expressed in
Section 251 of the Armed Forces Reserve Act of 1952, as amended
(50 U. S. C. 901), that the administration of all the reserve components
be as uniform as practicable.
Military justice.—A revised set of regiUations was issued by the
Secretary on February 3, 1956, as Amendment No. 8, Coast Guard
Supplement to Manual for Courts-Martial, 1951. The number of
courts-martial cases increased with a total of 736 court-martial
records received during the year as against 695 in the previous year.
The total included 12 general courts-martial and 41 special courtsmartial which required appellate review by the Board of Review
established in the Office of the General Counsel of the Treasury
Department. Petitions for grant of review of Coast Guard Board of
Review decisions were submitted to the United States Court of MUitary Appeals in six cases. In one case, the petition was granted, and
that case. United States v. Huffi, has been argued and reargued before
the Court of MUitary Appeals with a decision stUl pending. One
departmental court-martial order was issued by the Secretary directing the dismissal of a commissioned officer following completion of
appellate review in his general court-martial case. Final action
upon five general court-martial cases and 51 special court-martial
cases was taken by the General Counsel in his capacity as Judge
Advocate General and Supervisory Authority. Seventy-four special
courts-martial and 512 summary courts-martial became final after
review and action by district commanders in the field.
Personnel safety program.—During the fiscal year 1956, 1,399
accidents, including 24 fatalities, were reported. The Coast Guard
had an exposure of approximately 10,637,703 inilitary man-days and
9,830,976 civUian man-hours with 919 disabling injuries. There
were 12,144,764 vehicle mUes reported. There was a reduction in
the number of accidents, including mUitary off-duty accidents from
those reported in 1955.
156
195 6 REPORT OF THE SECRETARY OF THE TREASURY
Administration
Fiscal and supply management.—Some of the more important improvements in fiscal and supply administration in the Coast Guard
during the past year were as follows:
Greater flexibility has been introduced into fund administration b}^
decreasing the number of allotment accounts and amending budgetary
procedures to grant administrators greater authority to transfer funds
between accounts. This further reduces paperwork and permits
more effective utilization of funds.
The internal audit program has been broadened to include audit of
mUitary pay accounts. The assumption of this work wUl permit the
General Accounting Office, at its suggestion, to reduce the scope of
post-audit of these accounts.
The procedure for administering reserve personnel pay records was
revised and simplified. I t is estimated that the required recordkeeping time was reduced by 50 percent.
Following the experience gained in trial installations of a simplified
funding of work orders at bases and depots in the Fifth and Ninth
Coast Guard districts, the new system has been extended to the five
western districts. This development provides management with a
more direct means of associating total industrial costs with job estimates and more useful reports for planning and control of work programs. I t is anticipated that the system wiU be extended to bases
and depots in remaining districts and to the Aircraft Repair and
Supply Base in 1957.
The consolidation of mess financing has been arranged effective
July 1, 1956. Commuted ration messes are to be financed under the
Supply Fund in the same manner as general messes. This change
enabled the Coast Guard to release nearly one-half million dollars of
commuted ration mess funds to the surplus fund of the Treasury.
Transfer of supply center activities located at Jersey City, N. J.,
and the Annex in Brooklyn into Navy space at Brooklyn, N. Y., has
been completed. Annual savings in personnel and maintenance
costs resulted in a reduction of $223,000 in the 1957 budget. The
personnel bUlets saved were reallocated to other activities where the
demand had become critical. The former Coast Guard warehouses
in Jersey City and Brooldyn were released to General Services Administration for disposal. The Brooldyn site was sold in February
1956 and the Jersey City site in May 1956 by General Services Administration. The total sale value was more than $1,000,000.
Arrangements have been completed for extension to three more
districts of direct supply support from the Navy for Navy items of
general stores material. This program permits further reduction in
the number of items carried in Coast Guard inventories and makes
possible the reallocation of some supply depot personnel bUlets to
other activities whose need is critical.
Coast Guard Auxiliary
The primary activity of this voluntary, nonmUitary organization,
which is active in over 400 communities, is the promotion of safety
and efficiency in the operation of small boats. During the fiscal year
the AuxUiary enrolled 22,671 students in boating safety courses, completed examinations of 36,885 motorboats, patrolled 316 regattas, and
ADMINISTRATIVE
157
REPORTS
answered 2,289 calls for assistance. On June 30, 1956, the Auxiliary
had 12,676 members and 7,272 facUities.
Funds available, obligations, and balances
The following table shows the amount of funds avaUable for the
Coast Guard during the fiscal year 1956, and the amounts of obligations and unobligated balances.
A p p r o p r i a t e d funds:
Operatingexpenses
Reserve t r a i n i n g
Retired p a y . .
Acquisition, construction, a n d i m p r o v e m e n t s
T o t a l a p p r o p r i a t e d funds
N e t total
obligations
....-
$161,139,000
4,271,000
23, 511,000
1 7,606,060
$160,957,271
4,188,352
23,436, 513
6,102,672
$181,729
82,648
74,487
1,503,388
—
196, 527,060
194,684,808
1,842,252
18,485, 536
41,367
4,200,000
18,485,536
41,367
1,849,030
2,350,970
22, 726,903
20,375,933
2,350,970
213,150
130,436
733,682
712,901
599, 650
1,889,762
196, 521
124,234
654, 913
707, 901
593,049
1,889,513
16, 629
6,202
78,769
5,000
6, 601
249
4, 279, 581
4,166,131
113, 450
750
4,050
223, 538,344
219,227, 622
4,310, 722
Reimbursements:
Operatingexpenses
:
R e s e r v e training
Acquisition, construction, a n d i m p r o v e m e n t s
Total reimbursements
W o r k i n g funds established b y a d v a n c e s from other agencies;
D e p a r t m e n t of Defense:
D e p a r t m e n t o f t h e Air F o r c e . . D e p a r t m e n t of t h e A r m y
D e p a r t m e n t of t h e N a v y
D e p a r t m e n t of H e a l t h , E d u c a t i o n , a n d Welfare
U n i t e d States Information Agency
E x e c u t i v e Officeof t h e P r e s i d e n t
T o t a l working funds
Trustfund:
U n i t e d States Coast G u a r d gift fund
G r a n d total
___
^
__-.
.
Unobligated
' balances.
Funds
available
1 F u n d s available u n d e r " A c q u i s i t i o n , construction, a n d i m p r o v e m e n t s " include imobligated balances
b r o u g h t forward from prior year a p p r o p r i a t i o n in t h e a m o u n t of $1,474,060.
United States Savings Bonds Division
May 1, 1956 marked an important mUestone in the history of the
United States savings bonds program. It was the fifteenth anniversary
of the first sale of the Series E bond. WhUe savings bonds have been
on continuous sale by the Government since 1935, and some $4 billion
in Series A-D bonds were sold between 1935 and 1941, since 1941 the
E bond has been the heart of the Government's efforts to promote
nationwide thrift by providing small savers with a safe, liquid, and
attractive investment, whUe at the same time broadening the ownership of the Federal debt.
Over the years the E bond, together with its companion issue the
Series H bond (issued since June 1, 1952), has done much to strengthen
the economy. During the war years, E bonds contributed greatly to
the war financing effort. By the end of December 1945 there were
almost $31 bUlion of these bonds outstanding.
Following the war, it was expected that many people would cash
their savings bonds to buy things they had been unable to buy in wartime. Many did. In fact, during the entire postwar period savings
bonds money has been used to buy new cars, new houses, new house-
158
1956 REPORT OF THE SECRETARY OF THE TREASURY
hold appliances, to finance college educations, for retirement, and for
many other purposes. A high level of consumer spending in the postwar period has served to increase our national productivity which, in
turn, generates increasingly higher standards of living.
Most signfficant, however, is that at the same time our people have
been continuing their savings bond investments for an even finer
future. The approximately $41 billion of E and H bonds outstanding
at the end of the fiscal year 1956 was $10 billion above the 1945 wartime mark.
In addition to building up important financial reserves for our citizens, the savings bonds program helps promote economic stability
through a widespread distribution of the public debt. The record
holdings of E and H bonds at the end of fiscal 1956 meant that 15 percent of the public debt is now held in this form by an estimated 40
mUlion Americans, with their E and H bond investments accounting
for almost two-thirds of individuals' total holdings of the debt.
The United States Savings Bonds Division, which serves as a nucleus
Government staff to promote the sale and retention of United States
savings bonds, again concentrated its efforts in fiscal 1956 on Series E
and H savings bonds. These are the two series which may be purchased only by individuals, trustees of employees' savings plans, and
trustees of personal trusts created b}^ individuals for the benefit of
themselves or of other individuals.
In the fiscal year 1956, a new peacetime record was achieved in
gross sales of E and H bonds. Investors purchased $5.3 bUlion of these
two series, the highest amount in an}^ fiscal year since 1946. Sales
surpassed the 1955 peak by around i percent. The gain over 1954
was 13 percent.
Cash sales in fiscal 1956 exceeded total redemptions (including retirements of matured E bonds as well as E and H bonds cashed prior to
maturity) by $530 million. At the close of fiscal 1956, the cash value
of Series E and H bonds outstanding, including interest accruals,
reached the alltime record to date of $40.9 bUlion. The increase
during the year amounted to $1.6 bUlion.
Throughout fiscal 1956, the retention rate on E bonds after their
original maturity continued at approximately 70 percent of original
maturity value. From May 1951, when the first E bonds started
maturing, through June 1956, approximately $21 billion in E bonds
came due. Less than $7 billion of that amount was turned in for cash;
the balance, over $14 billion, is being retained for a longer period under
the automatic extension option, and has earned over $800 million in
additional interest. During the extension period, up to ten additional
37^ears, E bonds maturing in May 1952 and thereafter earn interest at
the rate of approximately 3 percent per annum, compounded semiannually. E bonds which matured in the year prior to M a y 1952
yield only slightly less.
In fiscal 1956, redemptions of Series E and H bonds prior to maturity
were $2.8 billion, about even with unmatured redemptions in 1955.
Total redemptions of unmatured and matured E and of H bonds were
$4.7 billion, only slightly higher than they were in 1955, notwithstanding the growing volume of matured bonds outstanding.
The foundation stone of the E and H bond program over the years
has been the many thousands of patriotic, enthusiastic, public-
ADMINISTRATIVE REPORTS
159
spirited men and women who make up the volunteer sales corps.
Equally important to the success of the program have been the fifteen
years of fine public service by thousands of voluntary issuing agents
for savings bonds, and the generous free advertising donated by the
Nation's advertisers and all publicity and advertising media. Currently, the value of this advertising contribution amounts to around
$50 million a year. As a result of this nationwide volunteer support,
the promotional cost of the program to the Government is only around
$1 for every $1,000 of E and H bond sales.
The payroll savings plan for the purchase of Series E bonds continues to be a most effective means of channeling small savings into
Uaited States savings bonds. Under the operation of this plan, employees may have as small amounts as $3.75 deducted from their pay
checks each payday untU a sufficient amount has accumulated for the
purchase price of a Series E bond. Currently there are around 42,000
separate businesses operating payroll savings plans for the benefit of
their employees. These companies handle the bookkeeping and
manage the plans as a public service without charge. At the close of
fiscal 1956, it was estimated that more than 8 mUlion persons employed
in industry and Government were signed up on the payroll savings
plan and were buying about $160 million in E bonds each month.
Headed by a National Director, the United States Savings Bonds
Division is organized into four principal branches: Sales, Planning,
Advertising and Promotion, and Administration. Together with the
National Director, the heads of these branches comprise the Division's Management Committee to continually improve the effectiveness of the service functions of the Division.
During fiscal 1956, the program of decentralization was continued
by strengthening the newly adopted regional organizations. The
authority of the regional directors was increased and technical assistants added to their staffs by reassignment from other offices.
The regional organizations brought field problems into better focus for
programming and training, revised area boundaries and relocated
personnel where economy could be served without lessening effectiveness, and gave special attention to travel and work patterns that
brought economies of a continuing nature.
Procedural guides were developed for both headquarters and field
use; better control and screening reduced amounts of promotional
material and circular mailings with no apparent loss of eft'ectiveness;
and substantial progress was made in standardizing work methods,
reports, and forms.
Training was directed not only to more effective sales techniques
but also to work methods that would show economies, and would
increase the assistance of volunteers.
United States Secret Service
The major functions of the United States Secret Service, under
direction of the Secretar}^ of the Treasury, are protection of the person
of the President of the United States and members of his immediate
family, of the President-elect, and of the Vice President at his request;
the detection and arrest of persons committing any offenses against the
laws of the United States relating to obligations and securities of the
160
195 6 REPORT OF THE SECRETARY OF THE TREASURY
United States and of foreign governments; and the detection and
arrest of persons violating certain laws relating to the Federal Deposit
Insurance Corporation, Federal land banks, joint-stock land banks,
and national farm loan associations. These and other duties of the
Secret Service are defined in 18 U. S. C. 3056.
Management improvement
The Secret Service intensffied its management improvement and
incentive awards programs as the result of a department-wide directive
from • the Secretary of the Treasury to make an all-out search for
economies.
Secret Service inspectors, making a comprehensive study of the
work of the Statistical Section, changed and combined certain reports
and forms to eliminate 20 monthly reports and 12 annual reports.
This signfficant improvement made it possible for the small force in
the section to avoid backlogs and to keep work virtually current without overtime.
The number of copies of ^The Record," a weeldy administrative
bulletin, was substantially decreased to save some 300,000 sheets of
paper yearly.
Weeldy reports submitted by 56 field offices were simplffied to save
space and to eliminate certain information heretofore reported on a
form which accompanied the report. Personnel rosters which had
previously been submitted by 56 field offices were eliminated and
arrangements were made to produce a personnel roster in the Washington headquarters for agency-wide use.
A nonexpendable-property inventory was revised, eliminating a
semiannual form in favor of 3 x 5 ' ' index cards, so that there is one
card for each piece of nonexpendable property. This eliminates yearly
submission of forms by field offices and simplifies accounting for such
property.
A program was initiated in the Accounts Section for an interchange
of personnel, so that each person in the section wiU learn how to
perform the duties of the others.
To encourage field participation in the management improvement
program, copies of the Treasury Department ^'Management Newsletter" and of a ''Guide for Using Superior Performance Awards to
Improve Government Operations" were sent t o . all field offices.
Articles in "The Record" also urged active field participation in the
program.
Three superior service awards were made during the year to headquarters personnel who contributed time and labor over and above
the requirements of their positions to improve work and working
conditions.
Protective and security activities
Secret Service agents protected President Eisenhower during the
Conference of Heads of Government at Geneva, Switzerland, in July.
During the year the Secret Service received 1,016 cases requiring
investigation in connection with the protection of the President.
By direction of the Secretary, Secret Service inspectors made
security inspections of the United States mints and assay offices
ADMINISTRATIVE REPORTS
161
during the year. Inspections were made also of the White House
Police Force and the Treasury Guard Force.
Enforcement activities
Several plants for the manufacture of counterfeit notes were captured before their operators were able to circulate quantities of the
notes.
The arrest of one man on July 12, 1955, at Camden, N. J., for passing
counterfeit $10 biUs, led to the apprehension of two accomplices, one
of whom confessed that he had thrown several counterfeit plates into
a sewer. Agents recovered 23 of the plates and also arrested the
printer, seizing a quantity of counterfeit $1 and $5 notes as well as
the equipment used in their production.
In an unusual case at Lansing, Mich., agents arrested a man who
ordered a plate bearing 100 impressions of revenue stamps of the
Republic of Ecuador. He claimed the stamps were to be sold by a
civic organization in GuayaquU, Ecuador, to raise funds for a hospital.
The offender had approached several printing firms in Michigan to
have 700,000 sheets of the stamps produced, with a potential value of
more than $171 million. He was ultimately convicted and sentenced.
A teen-age camera enthusiast was arrested August 30 in Wichita,
Kansas, for manufacturing and passing counterfeit $20 Federal
Reserve notes. Engaged as a helper on an offset press, he learned how
to make plates and returned to the shop after hours to experiment in
the production of counterfeit bUls. He printed approximately. $10,000
which he stored in a locker in a bus depot. He attempted to pass one
of the notes which was detected by a grocery clerk. The counterfeiter
reimbm-sed the clerk and retrieved the $20 note but when a second
attempt failed in another store, the boy fled. Evidences in the shop
of his counterfeiting activity led to his arrest and to the seizure of
several plates and negatives for counterfeit $5 and $20 notes at his
home. From a thumbprint found on one of the counterfeits, agents
identified and arrested a teen-age accomplice. Both youths were
convicted and sentenced.
One counterfeiting operation was uncovered in an Alabama prison,
where three inmates conspired to print $5 notes. Plates were hidden
in a metal electric cable box and the negatives were recovered from an
envelope in an old almanac. All three offenders were convicted and
sentenced to serve additional time.
In Las Vegas, Nev., a practicing psychologist was arrested for
grand theft of a camera, and in the process of investigation was found
in addition to have manufactured counterfeit $20 and $50 notes.
A manufacturer of counterfeit five-cent coins who boasted that his
coins were better than those produced in the United States mints was
arrested October 27 in Cleveland, Ohio. This man, who was a wellpaid design engineer, admitted having made approximately $15,000
in counterfeit nickels in PhUadelphia, Pa., $5,000 of which he deposited
in various banks, posing as the owner of vending machines. When he
learned through newspaper publicity that some of his coins had been
detected, he dismantled his equipment, threw his dies and approximately $10,000 in counterfeit coins into a river, and went to Cleveland.
Quantities of the coins were later retrieved from the mud by the
399346—57
12
162
1956 REPORT OF THE SECRETARY OF THE TREASURY
Secret Service with the help of military and police officials. Agents
also seized plates for counterfeit $5 notes which he was preparing to
manufacture. He was convicted and sentenced to three years and to
pay a $5,000 fine.
Two men were arrested at Phoenix, Ariz., in December, for conspiring to produce one mUlion dollars in counterfeit $10 and $20 biUs.
Following the arrest of the pair, agents seized a plate bearing impressions of $20, $500, and $1,000 notes, together with 1,000 sheets of
paper, 25 negatives for $10 and $20 notes, and miscellaneous counterfeiting equipment. Both men were convicted and sentenced to serve
two and one-half years.
A traveling counterfeit plant was seized in January at Mays
Landing, N . J., where police and agents arrested the counterfeiter in
a trailer which housed his offset press, camera, and other equipment.
During the entire year Secret Service agents captured 18 plants
for the manufacture of counterfeit paper money, and $511,760.00 in
counterfeit bills. Of that total, $67,635.50 was successfully passed
on storekeepers and cashiers. The balance of $444,124.50 was
captured before it could be put into circulation. The representative
value of counterfeit coins seized was $6,326.16, of which $5,405.84
w^as successfully passed.
There were 72 new counterfeit note issues and variations thereof
during the year, and 166 persons were arrested for violating the
counterfeiting laws, as compared with 186 arrested the previous
year.
The Chief of the Secret Service attended the annual conference of
the International Criminal Police Organization at Vienna, Austria,
in June, to discuss the suppression of counterfeiting with representatives of other nations. H e was elected a vice president of the
Organization.
The following table summarizes seizures of counterfeit money during
the fiscal years 1955 and 1956.
Counterfeit money seized, fiscal years 1955 and 1956
Counterfeit a n d altered notes:
After being circulated
Before being circulated
Total
Counterfeit coins seized:
After being c i r c u l a t e d . . _
BeforiB being circulated
Total
G r a n d total
_..
'
Percentage
increase, or
decrease (—)
1955
1956
Increase, or
decrease ( - )
$102,482.00
919, 434.31
$67, 635.50
444,124. 50
-$34,846. 50
-475,309.81
-34.0
—51.7
1, 021, 916.31
511, 760.00
-510,156.31
-49.9
4, 975. 32
287.44
5, 405. 84
920.32
430.52
632.88
8.7
220.2
5, 262. 76
6,326.16
1,063.40
20.2
1,027,179. 07
518, 086.16
-509,092. 91
-49.6
The forgery and fraudulent negotiation of Government checks
continued to be a major enforcement problem. The Secret Service
received 27,110 forged Government checks for investigation, and there
were 15,222 on hand at the beginning of the year. Agents completed
investigations of 30,619 forged checks worth $2,631,177.84, but on
June 30 there was still a bacldog of 11,713 forged checks awaiting
ADMINISTRATIVE
163
REPORTS
investigation. Agents arrested 2,881 persons for forgery of Government checks, as compared with 2,825 arrested the previous year.
An ex-convict was arrested in October in Denver, Colo., after he
tried to pass a counterfeit Treasury check in a supermarket. The
arrest was made by Denver police as the result of a warning circular
and request from the Secret Service. He was sought in all 48 States
and in Canada and Mexico by other law enforcement agencies for
passing many t3^pes of bad checks, and he estimated his activities had
netted hirn more than $50,000 in two years. Secret Service agents
searched his apartment at Belle Fourche, S. Dak'., where they seized
89 counterfeit Treasury checks, several hundred commercial checks,
his printing press, and other equipment. He was subsequently
sentenced to 88 years, with at least 20 years to be served.
In one case in Philadelphia, Pa., a real estate operator prepared
income tax returns for fees. He had clients sign blank forms which
he would later prepare, falsifying deductions to show substantial
refunds due. Refund checks were sent to his address, where he
endorsed the payees' names, using his own as the second endorser.
He obtained at least $6,000 in this manner before he was arrested.
Forgers continued to steal and cash United States savings bonds.
There were 4,090 forged bond cases received for investigation, and
2,709 such cases were awaiting investigation at the beginning of the
year. Agents completed investigations of 4,398 forged bonds worth
$490,646.31 and arrested 89 persons for bond forgery.
The following table shows the number of criminal and noncriminal
cases completed during the fiscal years 1955 and 1956.
Number of investigations of criminal and noncriminal activities, fiscal years 1955
and 1956
Criminal cases:
Counterfeiting
Forged Government checks ..
Stolen or forged bonds •
Protective research.._
Miscellaneous
Total
Noncriminal
*..
. .
Grand total..
...
... .
.
...
..
Percentage
Increase,
increase, or
or
decrease (—) decrease (—)
1955
1956
1,245
30,177
4,961
1,905
256
1,474
30, 619
4,398
931
230
229
442
-563
-974
• -26
38, 544
37, 652
-892
-2.3
2,083
1,612
-471
-22.6
40, 627
39, 264
-1,363
-3.4
18.4
1.5
-11.4
-51.1
-10.2
Secret Service agents arrested 176 persons for crimes other than
counterfeiting and forgery, making a total of 3,312 off'enders arrested.
There were 3,050 convictions, representing 98.3 percent of convictions
in all cases prosecuted, spme of which had been pending from the
previous year.
Prison sentences during the year totaled 2,780 years, and additional
sentences of 3,314 years were suspended or probated. Fines in criminal cases totaled $38,584.90.
Cases of all types received for investigation, including counterfeiting
and forgery cases, aggregated 35,458, and 18,585 cases were pending
at the beginning of the year. Although 39,264 cases were closed
164
195 6 REPORT OF THE SECRETARY OF THE TREASURY
during the year, there were 14,779 cases awaiting investigation and
908 pending prosecution as of June 30.
The following table constitutes a statistical summary of Secret
Service arrests and dispositions for the fiscal years 1955 and 1956.
Number of arrests and cases disposed of, fiscal years 1955 and 1956
1955
Arrests for:
Counterfeiting^
,.
Forged Government checks .
Violating Gold Reserve Act
stolen or forged bonds
Protective research .
Miscellaneous. _
Total
, . ... ...
:
Cases disposed of:
Convictions in connection with:
Counterfeiting
.
Forged Government checks
Violating Gold Reserve Act
stolen or forged bonds
Protective research
Miscellaneous
_
Total
Acquittals.
Dismissed, not indicted or died before trial
Total cases disposed of
•
1956
Percentage
Increase,
increase, or
or
decrease (—) decrease (—)
186
2,825
12
86
93
67
166
2,881
6
89
85
86
-20
56
r-7
3
-8
19
-10.8
2.0
-58.3
3.5
-8.6
28.4
3,269
3,312
43
1.3
176
2,533
19
76
97
78
154
2,663
4
80
75
74
-22
130
-15
4
-22
-4
-12. 5
5.1
-78.9
5.3
-22.7
-5.1
2,979
58
205
3,050
54
256
71
-4
51
2.4
-6.9
24.9
3 242
3,360
118
3.6
EXHIBITS
Public Debt Operations
Offerings and Allotments of Treasury Certificates of Indebtedness, Treasury
Notes, and Treasury Bonds, and a Call for Redemption of Treasury Bonds
EXHIBIT 1.—Treasury certificates of indebtedness
Two Treasury circulars containing representative certificate offerings during
the fiscal year 1956 are reproduced in this exhibit. Circulars pertaining to the
other certificate offerings during 1956 are similar in form and therefore are not
reproduced in this report. However, the essential details for each issue are
summarized in the first table following the circulars and the final allotments of
new certificates issued for cash or in exchange for maturing securities are shown
in the second table.
DEPARTMENT CIRCULAR NO. 961. PUBLIC DEBT
TREASURY
DEPARTMENT,
Washington, July 8, 1955.
I. OFFERING OF CERTIFICATES
1. The Secretary of the Treasury, pursuant to the authority of the Second
Liberty Bond Act, as am.ended, invites subscriptions, at par and accrued interest,
from the people of the United States for tax anticipation certificates of indebtedness of the United States, designated 1% percent Treasury certificates of indebtedness of Series A-1956. The amount of the offering is $2,000,000,000, or thereabouts. The books will be open only on July 8 for the receipt of subscriptions.
II. DESCRIPTION OF CERTIFICATES
1. The certificates will be dated July 18, 1955, and will bear interest from that
date at the rate of 1% percent per annum, payable with the principal at maturity
on March 22, 1956. They will not be subject to call for redemption prior to
maturity.
2. The income derived from the certificates is subject to all taxes imposed under
the Internal Revenue Code of 1954. The certificates are subject to estate, inheritance, gift, or other excise taxes, whether Federal or State, but are 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 will be acceptable to secure deposits of public moneys.
They will be accepted at par plus accrued interest to maturity in payment of
incom.e and profits taxes due on March 15, 1956.
4. Bearer certificates 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.
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 Oflftce of the Treasurer of the United States, Washington. Comm,ercial
banks, which for this purpose are defined as banks accepting demand deposits,
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 comm.ercial banks 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, but will be restricted in each case to an
amount not exceeding one-half of the combined capital, surplus, and undivided
profits of the subsbribing bank. Subscriptions from all others must be accom.panied by payment of 5 percent of the amount of certificates applied for, not
subject to withdrawal until after allotment. Following allotm.ent," any portion of
167
168
1956 REPORT OF THE SECRETARY OF THE TREASURY
the 5 percent payment in excess of 5 percent of the amount of certificates allotted
may be released upon the request of the subscribers.
2. The Secretary of the Treasury reserves the right to reject or reduce any
subscription, and to allot less than the amount of certificates applied for; and any
action he may take in these respects shall be final. Allotment notices wUl 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 July IS, 1955, 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 allotted 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 m-.ake 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.
G. M. HUMPHREY,
Secretary of the Treasury.
DEPARTMENT CIRCULAR NO. 971. PUBLIC DEBT
TREASURY
DEPARTMENT,
Washington, November 28, 1955.
I. OFFERING OF CERTIFICATES
1. The Secretary of the Treasury, pursuant to the authority of the Second
Liberty Bond Act, as amended, invites subscriptions from the people of the
United States for certificates of indebtedness of the United States, designated
2 ^ percent Treasury certificates of indebtedness of Series D-1956, in exchange for
lyi percent Treasury certificates of indebtedness of Series E-1955, maturing December 15, 1955, or 1^ percent Treasury notes of Series B-1955, maturing December 15, 1955. Exchanges will be made at par with an adjustment of interest as of
December 1, 1955. The amount of the offering under this circular will be limited
to the amount of maturing certificates and notes tendered in exchange and accepted. The books will be open only on November 28 through November 30
for the receipt of subscriptions for this issue.
2. In addition to the offering under this circular, holders of the maturing securities are offered the privilege of exchanging all or any part of such securities for 2%
percent Treasury notes of Series A-1958, which offering is set forth in Department
Circular No. 972, issued simultaneously with this circular.
II. DESCRIPTION OF CERTIFICATES
1. The certificates will be dated December 1, 1955, and will bear interest from
that date at the rate of 2^^ percent per annum, payable with the principal at
maturity on December 1, 1956. They will not be subject to call for redemption
prior to maturity.
EXHIBITS
169
2. The income derived from the certificates is subject to all taxes imposed
under the Internal Revenue Code of 1954. The certificates are subject to estate,
inheritance, gift, or other excise taxes, whether Federal or State, biit are 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 will be acceptable to secure deposits of public moneys.
They will not be acceptable in payment of taxes.
4. Bearer certificates will be issued in denominations of $1,000, $5,000, $10,000,
$100,000, $1,000,000, $100,000,000, and $500,000,000. 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 Office of the Treasurer of the United States, Washingtor. 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.
2. The Secretary of the Treasury reserves the right to reject or reduce any
subscription, and to allot less than the amount of certificates applied for; 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 for certificates allotted hereunder must be made on or before
December 8, 1955, or on later allotment, and may be made only in Treasury
certificates of indebtedness of Series E-1955 or Treasury notes of Series B-1955,
maturing December 15, 1955, which will be accepted at par, and-should accompany the subscription. Coupons dated December 15, 1955, must be attached to
the certificates and notes when surrendered, and accrued interest from December
15, 1954, to December 1, 1955 ($12.02055 per $1,000) in the case of the certificates,
and accrued interest from June 15, 1955, to December 1, 1955 ($8.0806 per
$1,000) in the case of the notes, will be paid on December 8 following acceptance of
the securities to be exchanged.
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 fuil-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.
W. RANDOLPH BURGESS,
Acting Secretary of the Treasury.
Summary of information pertaining to Treasury ceriificaies of indebtedness issued during ihe fiscal year 1956
O
Department
circular
Date of
preliminary announcement
Date
1955
July 5
July 18
1955
July 8
July 20
961
963
Sept. 29
Nov. 25
Oct. 3
Nov. 28
968
971
1956
Mar. 1
1956
Mar. 5
976
Number
Concurrent
offering,
circular
number
Certificates of indebtedness issueci for cash or in exchange for maturing securities
Dateof
issue
Allotment
Date payment
date
on
Date of subscriporb efore
tion
maturity
(or on
books
later
closed
allotment)
1955
July 18
Aug. 1
1956
Mar. 22
June 22
1955
July 8
July 22
Oct. 11
Dec. 1
June 22
Dec. 1
Oct. 3 Oct. 11
Nov. 30 iDec. 8
1956
Mar. 5
1957
Feb. 15
1956
Mar. 7
CD
an
O
1% percent Series A-1956 (tax anticipation series) issued for cash
2 percent Series B-1956 (tax anticipation series) issued in exchange for13^ percent Series D-1955 certificates maturing Aug. 15, 1955.
23^ percent Series C-1956 (tax anticipation series) issued for cash
"972" 2% percent Series D-1956 issued in exchange for—
IVi percent Series E-1955 certificates maturing Dec. 15, 1955.
IM percent Series B-1955 Treasury notes maturing IDec. 15,1955.
964
977
2% percent Series A-1957 issued in exchange for—
1 ^ percent Series A-1956 Treasury notes maturing Mar. 15, 1956.
IH percent Series EA-1956 Treasury notes maturing Apr. 1, 1956.
1 See Department Circular No. 971, section IV, this exhibit, for provisions for payment of interest.
2 Following acceptance ofthe surrendered notes with final coupons attached, interest
due subscribers was paid as follows: Accrued interest from Sept. 15, 1955, to Mar. 5,
1955
July 18
Aug. 1
O
1956
Mar. 15
1956 ($7.67857 per $1,000), on the Mar. 15,1956, coupons of the Series A-1956 notes, and
accrued interest from Oct. 1, 1955, to Mar. 5, 1956 ($6.39344 per $1,000), on the Apr. 1,
1956, coupons of the Series EA-1956 notes.
o
^o
>
d
CQ
Allotments of Treasury ceriificates of indebtedness issued during thefiscal year 1956, by Federal Reserve districts
[In thousands of dollarsl
Federal Reserve district
.Boston
New York__
Philadelphia...
Cleveland
_•
Cincinnati
Pittsburgh
Richmond
i.
Baltimore
Charlotte
Atlanta
Birmingham
Jacksonville
Nashville
New Orleans
Chicago
Detroit
St. Louis
Little Rock
Louisville
Memphis
Minneapolis
Kansas City
Denver
Oklahoma City
Omaha
,
Dallas
El Paso
Houston
San Antonio
:
...
_'
2 p e r c e n t Series
2 ^ p e r c e n t Series D-1956 certificates 2 H p e r c e n t Series A-195^' certificates
B-1956 certifiissued i n exchange for—
issued i n exchange for—
cates
(tax
2}4
p
e
r
c
e
n
t
114 p e r c e n t
Series 0-1956
Series A-1956 a n t i c i p a t i o n
series) issued
certificates
I H percent
1 ^ percent
13/^ p e r c e n t
certificates
Series A-1956
Series
(tax a n t i c i p a - in exchange for (tax a n t i c i p a - 1}4 p e r c e n t Series B-1955
13^ p e r c e n t
tion series) Series E-1955
Treasury
Treasury
EA-1956
tion series)
Series D-1955
issued for
certificates
notes
T o t a l issued
notes
Treasury
T o t a l issued
issued for
certificates
cash 3
maturing
maturing
maturing
notes
cash 1
maturing
D e c . 15,1955 4 D e c . 15,1955 4
M a r . 15,1956 5 m a t u r i n g
A u g . 15, 1955 2
A p r . 1, 1956
63, 470
909, 547
71,143
91, 356
14, 868
81, 730
28, 742
13, 037
11, 983
24, 497
7,974
19, 736
7, 264
14, 476
291, 710
94, 413
38, 702
1,895
8,413
5,878
47, 364
28, 642
7,961
29, 900
11, 092
50, 246
1,885
12, 918
3,604
36, 764
1, 015,182
14, 722
14, 456
8,871
11, 017
2,596
4,532
641
7,342
1, 655
2,251
1, 559
2,975
106,183
112, 466
7,064
348
14, 040
1,379
9,302
11, 830
5.554
6,940
6,284
1,570
265
1,102
588
104, 663
1,159,847
119, 714
140, 418
21,114
94, 312
56, 626
21,168
25, 388
44, 290
16, 940
27, 174
14, 044
25, 683
346, 308
108,141
49, 445
3,993
11, 769
16, 591
62, 738
39, 849
12, 203
27, 767
14, 662
89, 912
4,234
26, 480
7,354
28,197
3, 394, 382
29, 074
21, 915
4, 956
13, 448
10, 503
13, 058
1,681
22, 795
5, 746
3,952
2, 364
18, 370
170, 445
67, 085
22, 844
2,049
24, 968
2,771
23, 592
15, 743
8,178
4,523
8,354
10, 293
550
8,-293
2,339
62, 281
4, 008, 766
78, 262
70, 905
19, 296
20, 474
18, 424
8,410
3,512
12, 677
4,784
4,555
4,150
14, 739
167, 677
71, 583
42, 731
3,587
23, 023
1.828
55, 784
19, 588
8,084
16, 048
4, 896
10, 529
1,692
9,387
13, 997
90, 478
7, 403,148
107, 336
92, 820
24, 252
33, 922
28, 927
21, 468
5,193
35, 472
10, 530
8,507
6,514
33,109
338,122
138, 668
65, 575
5,636
47, 991
4,599
79, 376
35, 331
16, 262
20, 571
13, 250
20, 822
2, 242
17, 680
16, 336
58, 811
5, 270, 021
22, 559
57, 940
17,190
15, 099
3,779
14, 366
2,284
36, 635
6,624
10, 748
6, 511
24, 321
277, 913
52, 279
34, 522
7,709
32, 671
4,876
46, 808
26, 434
2,400
15,179
6,684
7, 375
110
8,956
7,515
4
1, 003,145
167
133
62
8
10
2
7
603
202
109
7
50
112
3
50
58,815
6, 273,166
22, 726
58, 073
17, 252
15,107
3,789
14, 366
2,284
36, 637
6,624
10, 755
6, 511
24, 321
278, 516
52, 481
34,631
7, 709
32, 678
4,876
46, 858
26, 546
2,403
15, 229
6,684
7, 375
110
8 956
7,515
fef
?/5
Footnotes at end of table."
^
Allotments of Treasury certificates of indebtedness issued during the. fiscal year 1956, by Federal Reserve districts—Continued
bO
[In thousands of dollarsl
F e d e r a l R e s e r v e district
S a n Francisco
L o s Angeles
Portland
Salt L a k e C i t y
Seattle
Treasury
T o t a l certificate a l l o t m e n t s
_. _
M a t u r i n g securities:
E x c h a n g e d i n c o n c u r r e n t offerings
Total exchanged-.
R e d e e m e d for cash or carried t o m a tured debt
T o t a l m a t u r i n g securities.
2 H p e r c e n t Series A-1957 certificates
2 H p e r c e n t Series D-1956 certificates
2 p e r c e n t Series
issued i n exchange for—
issued in. exch ange for—
B-1956 certificates (tax
V/i p e r c e n t
234 p e r c e n t
a
n
t
i
c
i
p
a
t
i
o
n
Series A-1956
Series C-1956
1^^ p e r c e n t
series) issued
I'^i p e r c e n t
certificates
certifiicates
1% percent
Series
Series A-1956
(tax anticipa- in exchange for (tax anticipa- m p e r c e n t Series B-1955
IJr^ p e r c e n t
• EA-1956
Treasury
t i o n series)
t i o n series) Series-E-1955
Treasury
T o t a l issued
Series D-1955
T
r
easury
issued for
issued for
T
o
t
a
l
issued
n
o
t
e
s
n
o
t
e
s
certificates
certificates
cash 1
cash 3
maturing
notes
maturing
matm-ing
maturing
M a r . 15,1956 s
matm'ing
D e c . 15,19554 D e c . 15,1955 4
A u g . 15, 1955 2
A p r . 1, 1956
98, 298
59, 070
14, 215
7,906
27, 714
65, 359
5,396
1,950
25
644
. 3, 254
148,863
61,179
21, 258
16, 006
30, 087
187, 269
16,144
5,094
253
4,438
2, 584
48,199
75,128
6,430
759
3,576
9,207
235, 468
91, 272
11, 524
1,012
8,014
11,791
39, 783
23, 769
27, 520
5,954
17, 525
21, 935
2, 201, 649
1, 486,106
2, 970, 220
4,158, 250
4, 924, 968
9, 083, 218
6,214,805
6, 841,155
814,158
1, 468, 882
2, 283, 040
2,108, 751
8, 327, 261
4, 972, 408
6, 393, 850
11, 366, 258
8, 323, 556
""
1 Subscriptions, for $100,000 or less were allotted in full, and those for over $100,000
were allotted 19 percent but not less than $100,000.
2 Additional issue of Series B-1956 Treasury 2 percent notes also offered in exchange
for this maturity; see exhibit 2.
3 Subscriptions for $100,000 or less were allotted in full, and those for over $100,000 were
allotted 32 percent but not less than $100,000.
1, 004, 674
7, 219, 479
2,108, 751
1,004,674
9, 328, 230
o
• ^
W
W
H
O
td
>
td
386, 647
459, 942
846. 589
148, 324
2,369
150, 693
5, 359, 055
6, 853, 792
12, 212, 847
8, 471, 880
1, 007, 043
9, 478, 923
O
4 Series A-1958 Treasury 2li percent notes alsb offered in exchange for this maturity;
see exhibit 2.
^Additional issue of Series A-1958 Treasury 2li percent notes also offered in exchange
for this maturity; see exhibit2.
W
149, 384
8, 476, 645
39. 783
23, 769
27, 520
5,954
17, 525
21, 935
O
""
>^
td
>
CQ
d
td
EXHIBITS
173
EXHIBIT 2.—Treasury notes
A Treasury circular containing a representative note offering during the fiscal
year 1956 is reproduced in this exhibit. Since the other offerings during the
year were similar in form to the respective sections of this circular, they are not
reproduced in this report. For each issue, however, the essential details are
summarized in the first table following the circular and the final allotments of
the new notes issued in exchange for maturing securities are shown in the
succeeding table.DEPARTMENT CIRCULAR NO. 972.
PUBLIC DEBT
TREASURY
DEPARTMENT,
Washington, November 28, 1955.
I. OFFERING OF NOTES
1. The Secretary of the Treasury, pursuant to the authority of the Second Liberty Bond Act, as amended, invites subscriptions from the people of the
United States for notes of the United States, designated 2% percent Treasury
notes of Series A-1958, in exchange for 1)^ percent Treasury certificates of indebtedness of Series E-1955, maturing December 15, 1955, or V/i percent Treasury
notes of Series B-1955, maturing December 15, 1955. Exchanges will be made
at par with an adjustment of interest as of December 1, 1955. The amount of
the offering under this-circular will be limited to the amount of maturing certificates and notes tendered in exchange and accepted. The books will be open
only on November 28 through November 30 for the receipt of subscriptions for
this issue.
2. In addition to the offering under this circular, holders of the maturing
securities are offered the privilege of exchanging all or any part of such securities
for 2^i percent Treasury certificates of indebtedness of Series D-1956, which
offering is set forth in Department Circular No. 971, issued simultaneously with
this circular.
II. DESCRIPTION OF NOTES
1. The notes will be dated December 1, 1955, 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, 1956, and thereafter on June 15 and December 15
in each year until the principal amount becomes payable. They will mature
June 15, 1958, and will not be subject to call for redemption prior to maturity.
2. The income derived from the notes is subject to all taxes imposed under
the Internal Revenue Code of 1954. The notes are subject to estate, inheritance,
gift, or other excise taxes, whether Federal or State, but are 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 acceptable to secure deposits of public moneys. They
will not be acceptable in payment of taxes.
4. Bearer notes with interest coupons attached will be issued in denominations
of $1,000, $5,000, $10,000, $100,000, $1,000,000, $100,000,000, and $500,000,000.
The notes will not be issued in registered form.
5. The notes will be subject to the general regulations of the Treasury Department, now or hereafter prescribed, governing United States notes.
I l l , SUBSCRIPTION AND ALLOTMENT
1. Subscriptions will be received at the Federal Reserve Banks and branches
and at the Office of the Treasurer of the United States, Washington. Banking
institutions generally may submit subscriptions for account of customers, but
only the Federal Reserve Banks and the Treasury Department are authorized
to act as official agencies.
2. The Secretary of the Treasury reserves the right to reject or reduce any
subscription, and to allot less than the amount of notes applied for; 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.
174
1956 REPORT OF THE SECRETARY OF THE TREASURY
IV. PAYMENT
1. Payment at par for notes allotted hereunder must be made on or before
December 8, 1955, or on later allotment, and may be made only in Treasury
certificates of indebtedness of Series E-1955 or Treasury notes of Series B-1955,
maturing December 15, 1955, which will be accepted at par, and should accompany
the subscription. Coupons dated December 15, 1955, must be attached to the
certificates and notes when surrendered, and accrued interest from December 15,
1954, to December 1, 1955 ($12.02055 per $1,000) in the case of the certificates,
and accrued interest from June 15, 1955, to December 1, 1955 ($8.0806 per $1,000)
in the case of the notes, will be paid on December 8 following acceptance of the
securities to be exchanged.
V. GENERAL PROVISIONS
1. As fiscal agents of the United States, Federal Reserve Banks are authorized
and requested to receive subscriptions, to make allotments on the basis and up to
the amounts indicated by the Secretary of the Treasury to the Federal Reserve
Banks of the respective districts, to issue allotment notices, to receive payment for
notes allotted, to make delivery of notes on full-paid subscriptions allotted, and
they may issue interim receipts pending delivery of the definitive notes.
2. The Secretary of the Treasury may at any time, or from time to time, prescribe supplemental or amendatory rules and regulations governing the offering,
which will be communicated promptly to the Federal Reserve Banks.
W. RANDOLPH BURGESS,
Acting Secreiary of the Treasury.
Summary of information pertaininS io Treasury notes issued during the fiscal year 1956
Date of Department circular Concurrent
offering,
prelimicii'Cular
nary annumber
nouncement
Date
Number
1955
July 18
1955
July 20
964
963
Nov. 25
Nov. 28
972
971
1956
Mar. 1
1956
Mar. 5
977
Treasury uotes issued in exchange for maturing securities
Date of
maturity
2 percent Series B-1956 (additional issue) issued in exchange for—
13^ percent Series D-1955 certificates maturing Aug. 15, 1955.
2J^ percent Series A-1958 issued in exchange for—
I3i percent Series E-1955 certificates maturing Dec. 15,1955.
i H percent Series B-1955 Treasm-y notes maturing Dec. 15,1955.
1955
May 17
Aug. 15,1956
1955
July 22
1955
' Aug. 1
Dec.
1
June 15,1958
Nov. 30
2 Dec. 8
2J4 percent Series A-1958 (additional issue) issued in exchange for—_.
1 ^ percent Series A-1956 Treasury notes maturing Mar. 15,1956.
Dae. 1
June 15,1958
1956
Mar. 7
1956
Mar.15
1 Accrued interest from May 17 to Aug. 1,1955 ($4.1989 per $1,000), was charged on the
notes allotted, and the final interest on the maturing certificates was paid by payment
of the Aug. 15,1955, coupons.
2 See Circular No. 972, section IV, this exhibit, for provisions for payment of interest.
Date of
issue
Allotment
Date sub- payment
date
on
scription
books or before
(or
on
closed
later allotment)
3 Following acceptance of the surrendered notes with final coupon attached, accrued
interest from Sept. 15, 1955, to Mar. 5, 1956 ($7.67857 per $1,000), was credited, accrued
interest from Dec. 1, 1955, to Mar. 5, 1956 ($7.46243 per $1,000), on the new notes was
charged, and the difference ($0.21614 per $1,000) was paid to the subscribers.
176
19 56 REPORT OF THE SECRETARY OF THE TREASURY
Allotments of Treasury notes issued during the fiscal year 1956, by Federal Reserve
districts
[In thousands of dollars]
Federal Reserve district
Boston.
New York..
.
Philadelphia
Cleveland..,
i
Cinciimati-..
Pittsburgh
Richmond
Baltimore
Charlotte
Atlanta
.
Birmingham
Jacksonville
Nashville...New Orleans
Chicago
Detroit
St. Louis
.
Little RockLouisville.-Memphis
Minneapolis
-_.
Kansas City
Denver
.
Oklahoma City
._.
Omaha
Dallas
El Paso
Houston
San Antonio
-..
San Francisco
Los Angeles
PortlandSalt Lake C i t y . . .
-.
Seattle
Treasury
2 percent Se- 2% percent Series A-1958 notes issued in 2% percent
ries B-1956
exchange for—
Series A-1958
notes (addinotes (additional issue)
tional issue)
issued in exissued in exchange for
change for
IH percent
1% percent
13^ percent Series E-1955 Series B-1955
Total
IH percent
Series D-1955 certificates notes maturissued
Series A-1956
ing Dec. 15,
certificates
maturing
notes matur1955 2
maturing Dec. 15, 1955 2
ing Mar.
Aug. 15,1955 1
15,1956 3
43,219
i, 297,496
30,069
34,896
7,544
12,414
3,967
7,634
2,021
24,195
5,934
4,273
3,076
17,305
107,546
4,492
38, 285
4,660
20, 274
1,656
34, 529
15,747
14,811
8,231
7,488
12, 534
913
4,835
1,846
42, 676
19,371
904
285
4,694
1,435
31,705
464,781
17,092
18,070
12, 589
2,982
1,792
8,634
239
6,549
2,642
825
668
10,123
115,705
4,565
5,558
283
4,165
2,138
15,897
11, 203
9.781
6,808
1,784
8,593
403
9,385
1,357
29,411
4,843
1,430
93
622
1,443
77,339
635,029
26,085
38,009
26, 768
12,801
17,974
15,041
2,782
19,057
3,933
3,136
3,137
13,851
226, 559
11,060
30,956
2,202
13,615
3,454
44, 765
38, 291
5,342
22,308
10,499
27,440
1,764
17,717
8,347
62,865
34,304
2,965
2,505
2,908
4,084
109,044
1,099,810
43,177
56,079
39,347
15,783
19,766
23,675
3,021
25,606
6,575
3,961
3,805
23,974
342,264
15, 625
36, 514
2,485
17,780
6,592
60,662
49,494
16,123
29,116
12,283
36,033
2,167
27,102
9,704
92, 276
39,147
4,395
2,698
3,630
5,527
44,976
1,212,763
34,353
56,108
6,248
20,239
7,963
6,062
914
20.852
2,844
7,897
4,393
31,236
283,588
4.510
33,259
1,253
11,211
2,735
28,991
54,196
8,558
6,299
6,157
13,682
826
3,964
10,941
98,057
81,083
1,195
638
1,180
680
2, 283,040
2,108,761
Total note allotments
Maturmg securities:
Exchanged in concurrent offerings
6,841,155
1,486,106
4,158, 250
4,924,968
Total exchanged
Redeemed for cash or carried
to matured debt
8,327, 261
4,972,408
6,393,850
149,384
386,647
459,942
846, 589
148,324
Total maturing securities....
8,476,645
6,359,065
6,853,792
12, 212,847
8,471,880
814,158
9,083, 218
11,366,258
6,214,805
8,323,656
1 Treasury 2 percent Series B-1956 certificates also offered in exchange for this maturity; see exhibit 1.
2 Treasury 2H percent Series D-1956 certificates also offered in exchange for this maturity; see exhibit 1.
3 Treasiuy 2^i percent Series A-1957 certificates also offered in exchange for this maturity; see exhibit'!.
EXHIBITS
177
EXHIBIT 3.—Treasury bonds
The only offering of Treasury bonds during the fiscal year 1956 is contained in
the circular which is reproduced in this exhibit. The final allotments for this
cash offering of bonds are shown in the table following the circular.
DEPARTMENT CIRCULAR NO. 962.
PUBLIC DEBT
TREASURY DEPARTMENT,
Washington, July 11, 1955.
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
3 percent Treasury bonds of 1995. The amount of the offering is $750,000,000,
or thereabouts. The Secretary of the Treasury reserves the right to allot limited
amounts of these bonds to Government investment accounts. The books will
be open only on July 11, 1955, for the receipt of subscriptions.
2. Deferred payment for bonds allotted hereunder may be made as provided
in section IV hereof by any of the following subscribers, who for this purpose
are defined as savings-type investors:
Pension and retirement funds—public and private
Endowment funds
Insurance companies ,
Mutual savings banks
Fraternal benefit associations and labor unions' insurance funds
Savings and loan associations
Credit unions
Other savings organizations (not including commercial banks)
II. DESCRIPTION OF BONDS
1. The bonds now offered will be an addition to and will form a part of the series
of 3 percent Treasury bonds of 1995 issued pursuant to Department Circular
No. 956, dated February 1, 1955, will be freely interchangeable therewith, are
identical in all respects therewith, and are described in the following quotation
from Department Circular No. 956: ^
''1. The bonds will be dated February 15, 1955, and will bear interest from
that date at the rate of 3 percent per annum, payable semiannually on August
15, 1955, and thereafter on February 15 and August 15 in each year until the
principal amount becomes payable. They will mature February 15, 1995, and
will not be subject to call for redemption prior to maturity.
''2. The income derived from the bonds is subject to all taxes imposed under
the Internal Revenue Code of 1954. The bonds are subject to estate, inheritance,
gift, or other excise taxes, whether Federal or State, but are exempt from all
taxation now or hereaifter 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 to secure deposits of public moneys.
"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 Drescribed by
the Secretary of the Treasury.
I See Annual Report of the Secretary for 1955, page 167.
3993.46^57
13
178
1956 REPORT OF THE SECRETARY OF THE TREASURY
"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,! provided:
(a) that the bonds were actually owned by the decedent at the time of his
death; and
ib) that the Secretary of the Treasury be authorized to apply 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 District Director 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 from the date of payment to the next interest payment date; ^ bonds received during the 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 full 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
accompanied by Form PD 1782,^ properly completed, signed and sworn to, and
by proof of the representatives' authority in the form of a court certificate or
a certified copy of the representatives' letters of appointment issued by the
court. The certificate, or the certification to the letters, must be under the seal
of the court, and except in the case of a corporate representative, must contain
a statement that the appointment is in full force and be dated within six months
prior to the submission of the bonds, unless the certificate or letters show that
the appointment was made within one year immediately prior to such submission.
Upon payment of the bonds appropriate memorandum receipt will be forwarded
to the representatives, which will be followed in due course by formal receipt
from the District Director of Internal Revenue.
^'6. 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 will be received at the Federal Reserve Banks and branches
and at the Ofl&ce of the Treasurer of the United States, Washington. Commercial
banks, which for this purpose are defined as banks accepting demand deposits,
may submit subscriptions for account of customers, but only the Federal Reserve
Banks and the Treasury Department are authorized to act as oflBcial agencies.
Others than commercial banks 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, but will be restricted in each case to an
amount not exceeding 25 percent of the combined capital, surplus and undivided
profits, or 10 percent of the combined amount of time certificates of deposit (but
only those issued in the names of individuals, and of corporations, associations,
and other organizations not operated for profit), and of savings deposits, of the
subscribing bank. Subscriptions from all others must be accompanied by payment of 10 percent of the amount of bonds applied for, not subject to withdrawal
until after allotment. Following allotment, any portion of the 10 percent payment in excess of 10 percent of the amount of bonds allotted may be released upon
the request of the subscribers. Where partial payment for bonds allotted is to
be deferred beyond July 20, 1955, as provided in section IV hereof, delivery of
5 percent of the total par amount of bonds allotted, adjusted to the next higher
$500, will be withheld from all subscribers until payment for the total amount
1 An exact half-year's interest is computed for each full half-year period irrespective of the actual numbei
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.
2 The transfer books are closed from January 16 to February 15, and from July 16 to August 15 (both
dates inclusive) in each year.
3 Copies of Form PD 1782 may be obtained from any Federal Reserve Bank or from the Treasury Department, Washington, D . C .
179
EXHIBITS
allotted has been completed. I n every case where p a y m e n t is not so completed
t h e 5 percent so withheld shall, upon declaration made by the Secretary of t h e
Treasury in his discretion, be forfeited to the United States.
2. The Secretary of t h e Treasury reserves the right to reject or reduce any
subscription, to allot less t h a n the a m o u n t of bonds applied for, and to m a k e
different percentage allotments t o various classes of subscribers; and any action he
m a y t a k e in these respects shall be final. The basis of the allotment will be p u b licly announced, a;nd allotment notices will be sent out promptly upon allotment.
IV.
PAYMENT
1. P a y m e n t at par and accrued interest from F e b r u a r y 15, 1955, to July 20,
1955 ($12.8453 per $1,000) for bonds allotted hereunder must be made or completed on or before July 20, 1955; provided, however, t h a t where a subscriber
eligible to defer p a y m e n t under section I hereof elects to defer p a y m e n t for
p a r t of the bonds allotted, not less t h a n 25 percent of the bonds allotted niust
have been paid for by July 20, 1955, not less t h a n 60 percent must have been paid
for by September. 1, 1955, and full p a y m e n t m u s t be completed by October 3, 1955.
All p a y m e n t s made subsequent to July 20, 1955, m u s t be accompanied by additional accrued interest from t h a t date, at the rate of $0,083 per $1,000 per day.
Any qualified depositary will be p e r m i t t e d to make p a y m e n t by credit for bonds
allotted tp it for itself and its customers up to any a m o u n t 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 B a n k s are authorized
and requested to receive subscriptions, to make allotments on the basis and up
to t h e a m o u n t s indicated by the Secretary of the Treasury to the Federal Reserve
Banks of t h e respective districts, to issue allotment notices, to receive p a y m e n t
for bonds allotted, to make delivery of bonds on full-paid subscriptions allotted,
and they m a y issue interim receipts pending delivery of the definitive bonds.
2. T h e Secretary of t h e Treasury m a y a t any time, or from time to time,
prescribe supplemental or amendatory rules and regulations governing the
offering, which will be communicated p r o m p t l y to the Federal Reserve Banks.
G.
M.
HUMPHREY,
Secretary of ihe Treasury.
Alloimenis of additional issue of 3 % Treasury bonds of 1995
[In thousands of dollarsl
Subscriptions
allotted
Federal Reserve district
Boston
New York
Philadelphia
Cleveland
Cincinnati
Pittsburgh
Richmond _.
Baltimore
Charlotte
Atlanta
Birmingham
Jacksonville
Nashville
New Orleans
Chica2;o
Detroit
St Louis
Little Rock
Louisville
Memphis
-.
..
. .. _
. -
..
82,646
386,870
23,088
25, 522
2,316
5, 240
20, 245
12, 774
351
4,177
4, 684
12,362
4, 286
1,418
73, 824
13,532
10,009
475
2,011
732
Subscriptions
allotted
Federal Reserve district
Mirmeapolis
Kansas City
Denver
Oklahoma Citv
Omaha
_'
-._
Dallas
El Paso
•
Houston
:
San Antonio
San Francisco
LosAngeles
- -.
Portland
Salt Lake Citv
Seattle
"1
Treasury
Government tnvestment accounts
Total bond allotments
_
...
-
12,341
5,720
3,263
4,559
3,712
25, 302
1,364
1, 066
8,847
18,270
11, 824
4.564
4,334
4,613
135
26, 000
821, 474
180
1956 REPORT OF THE SECRETARY OF THE TREASURY
E X H I B I T 4.—Call, May 14, 1956, for redemption on September 15, 1956, of 23^
percent Treasury bonds of 1956-59, dated September 15, 1936 (press release
of May 14, 1956)
T h e Treasury D e p a r t m e n t t o d a y issued t h e official notice of call for redemption
on September 15, 1956, of t h e partially tax-exempt 2% percent Treasury bonds of
1956-59, dated September 15, 1936, due September 15, 1959. There are now
outstanding $981,826,050 of these bonds.
T h e 2H percent bonds of 1956-58 a n d t h e 2)i percent bonds of 1956-59, which are
also callable on September 15, 1956, will not be called for redemption on t h a t d a t e .
T h e text of t h e formal notice of call is as follows:
Two
AND
THREE-QUARTERS
PERCENT
SEPTEMBER
TREASURY
15,
B O N D S OF 1956-59
(DATED
1936)
NOTICE OF CALL FOR REDEMPTION
To Holders of 2% Percent Treasury Bonds of 1956-59, and Others Concerned:
1. Public notice is hereby given t h a t all outstanding 2^^ percent Treasury bonds
of 1956-59, dated September 15, 1936, due September 15, 1959, are hereby called
for redemption on September 15, 1956, on which date interest on such bonds will
cease.
2. Holders of these bonds may, in advance of t h e redemption date, be offered
t h e privilege of exchanging all or any p a r t of their called bonds for other interestbearing obligations of t h e United States, in which event public notice will hereafter be given a n d an official circular governing t h e exchange offering will be
issued.
3. Full information regarding t h e presentation and surrender of t h e bonds for
cash redemption under this call will be found in D e p a r t m e n t Circular N o . 300,
Revised, dated April 30, 1955.
G.
M,
HUMPHREY,
Secretary of ihe Treasury.
Treasury Bills
E X H I B I T 5 . — T e n d e r s for Treasury bills invited and accepted
Press releases pertaining t o t h e weekly series of Treasury bill issues during t h e
fiscal year 1956 were similar in form to t h e releases dated J u n e 28 and July 2, 1955,
which are reproduced in this exhibit. T h e press releases pertaining to t h e only
issue of t h e tax anticipation series of Treasury bills during t h e fiscal year are also
shown in this exhibit. T h e releases for t h e other weekly issues of Treasury bills
are not reproduced in this report b u t t h e essential details regarding each issue
are summarized in t h e table following t h e press releases.
P R E S S R E L E A S E O F J U N E 28, 1955
T h e Treasury D e p a r t m e n t , by this public notice, invites tenders for $1,600,000,000, or thereabouts, of 91-day Treasury bills, for cash and in exchange for
Treasury bills m a t u r i n g July 7, 1955, in t h e a m o u n t of $1,501,001,000, td be
issued on a discount basis under competitive and noncompetitive bidding as
hereinafter provided. T h e bills of this series will be dated July 7, 1955, and
will m a t u r e October 6, 1955, when t h e face a m o u n t will be payable without
interest. T h e y will be issued in bearer form only, and in denominations of
$1,000, $5,000, $10,000, $100,000, $500,000, a n d $1,000,000 (maturity value).
Tenders will be received a t Federal Reserve Banks and branches up to the
closing hour, two o'clock p . m., eastern daylight saving time, Friday, July 1, 1955.
Tenders will not be received at t h e Treasury D e p a r t m e n t , Washington. E a c h
^tender m u s t be for an even multiple of $1,000, a n d in t h e case of competitive
tenders t h e price offered m u s t be expressed on t h e basis of 100, with not more
t h a n three decimals, e. g., 99.925. Fractions m a y not be used. I t is urged t h a t
tenders be made on t h e printed forms and forwarded in t h e special envelopes
which will be supplied by Federal Reserve B^nks or branches on application
therefor.
EXHIBITS
181
Others than banking institutions will not be permitted to submit tenders
except for their own account. Tenders will be received without deposit from
incorporated banks and trust companies and from responsible and recognized
dealers in investment securities. Tenders from others must be accompanied
by payment of 2 percent of the face amount of Treasury bills applied for, unless
the tenders are accompanied by an express guaranty of payment by an incorporated bank or trust company.
Immediately after the closing hour, tenders will be opened at the Federal
Reserve Banks and branches, following which public announcement will be
made by the Treasury Department of the amount and price range of accepted
bids. Those submitting tenders will be advised of the acceptance or rejection
thereof. The Secretary of the Treasury expressly reserves the right to accept or
reject any or all tenders in whole or in part, and his action in any such respect
shall be final. Subject to these reservations, noncompetitive tenders for $200,000
or less without stated price from any one bidder will be accepted in full at the
average price (in three decimals) of accepted competitive bids. Settlement for
accepted tenders in accordance with the bids must be made or completed at the
Federal Reserve Bank on July 7, 1955, in cash or other immediately available
funds or in a like face amount of Treasury bills maturing July 7, 1955. Cash
and exchange tenders will receive equal treatment. Cash adjustments will be
made for differences between the par value of maturing bills accepted in exchange and the issue price of the new bills.
The income derived from Treasury bills, whether interest or gain from the sale
or other disposition of the bills, does not have any exemption, as such, and loss
from the sale or other disposition of Treasury bills does not have any special treatment, as such, under the Internal Revenue Code of 1954. The bills are subject
to estate, inheritance, gift, or other excise taxes, whether Federal or State, but
are 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. For purposes of taxation the amount of discount at which
Treasury bills are originally sold by the United States is considered to be interest.
Under Sections 454 (b) and 1221 (5) of the Internal Revenue Code of 1954 the
amount of discount at which bills issued hereunder are sold is not considered to
accrue until such bills are sold, redeemed or otherwise disposed of, and such
bills are excluded from consideration as capital assets. Accordingly, the owner
of Treasury bills (other than life insurance companies) issued hereunder need
include in his income tax return only the difference between the price paid for
such bills, whether on original issue or on subsequent purchase, and the amount
actually received either upon sale or redemption at maturity during the taxable
year for which the return is made, as ordinary gain or loss.
Treasury Department Circular No. 418, Revised, and this notice, prescribe
the terms of the Treasury bills and govern the conditions of their issue. Copies
of the circular may be obtained from any Federal Reserve Bank or branch.
PRESS RELEASE OF JULY 2, 1955
The Treasury Department announced last evening that the tenders for
$1,600,000,000, or thereabouts, of 91-day Treasury bills to be dated July 7 and to
mature October 6, 1955, which were offered on June 28, were opened at the
•Federal Reserve Banks on July 1.
The details of this issue are as follows:
Total applied for
. $2, 119,089,000
Total accepted (includes $175,868,000 entered on a noncompetitive basis and accepted in full at the average price
shown below)
1,600,029,000
Average price, equivalent rate of discount approximately
1.541% per annum
99. 611
Range of accepted competitive bids:
High, equivalent rate of discount approximately 1.365%
per annum
99. 655
Low, equivalent rate of discount approximately 1.578%
per annum
99. 601
(16 percent of the amount bid for at the low price was accepted)
182
1956 REPORT OF THE SECRETARY OF THE TREASURY
Federal Reserve district
Total applied
for
Total accepted
Boston
-.
New York
PhiladelphiaCleveland
Richmond
Atlanta
Chicago
St. Louis
M inneapolis-Kansas City..
Dallas
San Francisco
$21, 417,000
1, 528, 787,000
31, 545, 000
37, 201, 000
10, 651,000
17, 348, 000
273, 556, 000
15, 665, 000
9,177, 000
41, 717, 000
50, 496, 000
81, 629,000
$15, 997, 000
, 113, 987, 000
16, 546, 000
37, 201,000
10, 651,000
17, 348, COO
224, 716, 000
15, 665, 000
9,177,000
41, 717, 000
40, 496, 000
66, 629, 000
Total..-
2,119, 089, 000
1, 600, 029, 000
PRESS RELEASE OF DECEMBER 6, 1955
The Treasury Department, by this public notice, invites tenders for $1,500,000,000, or thereabouts, of 99-day Treasury bills, to be issued on a discount basis
under competitive and noncompetitive bidding as hereinafter provided. The bills
of this series will be designated tax anticipation series, they will be dated December
15, 1955, and they will mature March 23, 1956. They will be accepted at face
value in payment of income and profits taxes due on March 15, 1956, and to the
extent they are not presented for this purpose the face amount of these bills will
be payable without interest at maturity. Taxpayers desiring to apply these bills
in payment of March 15, 1956, income and profits taxes have the privilege of
surrendering them to any Federal Reserve Bank or branch not more than fifteen
days before March 15, 1956, and receiving receipts therefor showing the face
amount of the bills so surrendered. These receipts may be submitted in lieu of
the bills on or before March 15, 1956, to the District Director of Internal Revenue
for the district in which such taxes are payable. They will be issued in bearer
form only, and in denominations of $1,000, $5,000, $10,000, $100,000, $500,000,
and $1,000,000 (maturity value).
Tenders will be received at Federal Reserve Banks and branches up to the
closing hour, one-thirty o'clock p. m., eastern standard time, Thursday, December 8, 1955. Tenders will not be received at the Treasury Department, Washington. Each tender must be for an even multiple of $1,000, and in the case of
competitive tenders the price offered must be expressed on the basis of 100.. with
not more than three decimals, e. g., 99.925. Fractions may not be used. It is
requested that tenders be made on the printed forms and forwarded in the special
envelopes which will, be supplied by Federal Reserve Banks or branches on application therefor.
Others than banking institutions will not be permitted to submit tenders except
for their own account. Tenders will be received without deposit from incorporated
banks and trust companies and from responsible and recognized dealers in investment securities. Tenders from others must be accompanied by payment of 2
percent of the face amount of Treasury bills applied for, unless the tenders are
accompanied by an express guaranty of payment by an incorporated bank or
trust company.
.
Immediately after the closing hour,' tenders will be opened at the Federal Reserve Banks and branches, following which public announcement will be made by
the Treasury Department of the amount and price range of accepted bids. Those
submitting tenders will be advised of the acceptance or rejection thereof. The
Secretary of the Treasury expressly reserves the right to accept or reject any or
all tenders, in whole or in part, and his action in any such respect shall be final.
Subject to these reservations, noncompetitive tenders for $300,000 or less without
stated price from any one bidder will be accepted in full at the average price (in
three decimals) of accepted competitive bids. Settlement for accepted tenders in
accordance with the bids must be made or completed at the Federal Reserve Bank
on December 15, 1955, in cash or other imniediately available funds, provided,
however, any qualified depositary will be permitted to make payment by credit
in its Treasury tax and loan account for not more than 60 percent of the amount
of Treasury bills allotted to it for itself and its customers (up to the amount for
183
EXHIBITS
which it shall be qualified in excess of existing deposits) when so notified by the
Federal Reserve Bank of its district.
The income derived from Treasury bills, whether interest or gain from the sale
on other disposition of the bills, does not have any exemption, as such, and loss
from the sale or other disposition of Treasury bills does not have any special treatment, as such, under the Internal Revenue Code of 1954. The bills are subject to
estate,, inheritance, gift, or other excise taxes, whether Federal or State, but are
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. For purposes of taxation the amount of discount at which
Treasury bills are originally sold by the United States is considered to be interest-.
Under Sections 454 (b) and 1221 (5) of the Internal Revenue Code of 1954 the
amount of discount at which bills issued hereunder are sold is not considered to
accrue until such bills are sold, redeemed or otherwise disposed of, and such bills
are excluded from consideration as capital assets. Accordingly, the owner of
Treasury bills (other than life insurance companies) issued hereunder need include
in his income tax return only the difference between the price paid for such bills,
whether on original issue or on subsequent purchase, and the amount actually
received either upon sale or redemption at maturity, br the amount of income or
profits taxes paid by means of the bills, during the taxable year for which the
return is made, as ordinary gain or loss.
Treasury Department Circular No. 418, Revised, and this notice, prescribe the
terms of the Treasury bills and govern the conditions of their issue. Copies of
the circular may be obtained from any Federal Reserve Bank or branch.
PRESS RELEASE OF DECEMBER 9, 1955
The Treasury Department announced last evening that the tenders for
$1,500,000,000, or thereabouts, of tax anticipation series 99-day Treasury bills
to be dated December 15, 1955, and to mature March 23, 1956, which were
offered on December 6, were opened at the Federal Reserve Banks on December 8.
The details of this issue are as follows:
Total applied f o r . . .
$4, 129, 518, 000
Total accepted (includes $352, 414, 000 entered on a noncompetitive basis and accepted in full at the average
price shown below)
1, 500, 689,000
Average price, equivalent rate of discount approximately
2.465% per annum
_._.
99. 322-f
Range of accepted competitive bids (excepting four tenders
totaling $486,000):
High, equivalent rate of discount approximately
2.327% per annum
99. 360
Low, equivalent rate of discount approximately
2.498% per annum.
99. 313
(23 percent of the amount bid for at the low price was accepted)
Federal Reserve district
Boston
New York
PhiladelphiaCleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis-Kansas C i t y Dallas
San Francisco
Total—
Total applied
for
Total accepted
$217,965,000
2,133,528,000
134,136,000
181,200,000
118,418,000
127,960,000
616,832,000
110,663, 000
64,541,000
111,414,000
160,727,000
252,145, 000
$167, 748,000
618, 410,000
31,168,000
66, 219, 000
68,183,000
69, 954,000
174,035,000
55,838, 000
38,441,000
66, 625,000
79,067,000
96, 111, 000
4,129, 618, 000
1, 600, 689,000
Sumrnary of information pertaining to Treasury bills ^ issued during ihe fiscal year 1956
00
i4^
[Dollar amounts in thousands]
M a t u r i t y value
Prices a n d rates
Tenders accepted
D a t e of D a t e of
maturity
issue
Days
to
maturity
Total
applied
for
T o t a l b i d s accepted
C o m p e t i t i v e b i d s accepted
High
Total
accepted
On competitive
basis
On noncompetitive
basis 2
F o r cash
I n exchange
Average
price
per
hundred
Equivalent
average
rate 3
(percent)
Price
per
hundred
Amount
maturing
o n issue
d a t e of
newoffering
Low
Equivalent
rates
(percent)
Price
per
hundred
Equivalent
rate 3
(percent)
o
• ^
>^
W
Weekly Series
1956
July 7
14
21
28
Aug. 4
11
18
25
Sept. 1
8
16
22
29
Ct.
6
13
20
27
Nov. 3
10
17
25
Dec. 1
8
15
22
FRASER 29
1955
Oct. 6
13
20
27
Nov. 3
10
17
26
Dec. 1
8
16
22
29
91 $2,119,119 $1, 600,059 $1,424,161 $175, 898 $1, 514, 678
91 2,257, 759 1, 600,459 1, 377,.546. 222, 914 1, 513,433
253,305 1, 613, 610
91 2,390,283 1, 600,431 1,347-, 126
224,904 1,419, 246
91 2,403,499 1, 601,235 1,376,331
231, 579 1,445,804
91 2,328,404 1, 600,714 1', 369,135
230,749 1,552, 621
91 2,291, 544 1, 600, 507 1,369,758
236,782 1, 667,114
91 2,368,822 1, 600,635 1,363,853
203,643 1, 539,005
92 2,177, 793 1, 600,217 1,396, 674
183,616 1,493, 885
91 2, 202,049 1, 600,049 1,416,434
191,845 1, 626, 278
91 2, 282,098 1, 601,993 1, 410,148
267,843 1, 563,819
91 2, 664,083 1, 602,275 1,334,432
269,197 1,455, 593
91 2, 328,197 1, 600,999 1,331,802
203, 703 1,326, 278
91 3, 317,178 1, 600,810 1, 397,107
$85,381
87,026
86,921
181,989
164,910
47,886
33, 621
61,212
106,164
76, 715
38,456
145,406
274, 632
99. 611
99. 594
99. 591
99. 565
99.532
99. 622
99.623
99.521
99.472
99: 460
99.468
99.499
99.464
1.541
1.606
1.619
1.720
1.850
L889
1.888
L875
2.088
2.136
2.104
1.981
2.122
99. 655
99. 621
99. 618
4 99.600
99. 580
5 99. 532
99. 532
99. 534
99. 570
6 99.472
7 99.470
99.507
99. 615
1.365
1.499
1.611
1.682
1.662
L851
1.861
1.823
1.701
2.089
2.097
1.950
1.919
99. 601
99. 588
99. 588
99. 660
99. 526
99. 618
99.618
99. 514
99.464
99.457
99.466
99.494
99.460
1.678 $1, 501,001
1.630
1, 600, 291
1, 500, 709
1.630
1.741
1, 501,086
1.875 1, 501,077
1,907
1, 602, 017
L907 1, 500,393
1.902 1, 500,181
2.120 1, 500, 614
2.148 1, 500,456
2.113 1, 602,834
2.002 1, 503,268
2.136 1, 600,043
1956
Jan.
6
12
19
26
Feb. 2
9
16
23
Mar. 1
8
15
22
29
91
91
91
91
91
91
91
90
91
91
91
91
91
157,851
134, 251
125,182
179, 903
153, 399
68, 520
32,071
62, 693
99, 400
51, 968
39, 693
27,474
216, 305
• 99.440
99.429
99.410
99.436
99.449
99.486
99.432
99.390
99.381
99.375
99.346
99.338
99.321
2,214
2.257
2.333
2.231
2.179
2.034
2.248
2.440
2.450
2.471
2.591
2.618
2.687
8 99.475
9 99.440
8 99. 434
99.443
10 99.452
99. 514
99.507
11 99.400
12 99. 400
13 99.393
99.393
99.350
99.355 1
2.077
2.215
2.239
2.204
2.168
.1.923
1.960
2.400
2.374
2.401
2.401
2.571
2.552
99.430
99.426
99.407
99.434
99.448
99.472
99.422
99.375
99.368
99.3.58
99.342
99.330
99.317
2.256
2.271
2.346
2.239
2.184
2.089
2.287
2.600
2.500
2. 540
2.603
3.651
2.702
Digitized for
2,066,982
2, 256, 639
2,405,835
2,430, 640
2,429,082
2,222,390
2,320,426
2,174, 073
2,213, 665
2,155,028
2, 509,950
2,307,472
2, 406, 660
1, 600,062
1, 600, 691
1, 600,903
1, 601. 680
1, 602,167
1, 599, 740
1, 600,226
1, 600,093
1, 601,218
1, 600,148
1,601,061
1, 600, 947
1, 602,948
1,404,369
1,369,328
1,340,241
1,360, 558
1,359, 852
1,361,683
1,378, 649
1,369,006
1,387,150
1,377,053
1,363,314
1,351,808
1, 407,190
195, 693
231, 363
260, 662
261,122
242,315
238,057
221, 577
231,087
214,068
223,096
237, 747
249,139
195, 758
1,442,211
1,466,440
1,475, 721
1,421, 777
1,448, 768
1, 531,220
1, 568,155
1, 537,400
1, 501,818
1, 648,180
1, 561,368
1, 573,473
1, 386, 643
o
1, 600.059
1,600,459
1, 600. 431
1,601,235
1,600, 714
1, 600, 607
1, 600, 636
1, 600,217
1, 600,049
1, 601,993
1, 602, 276
1, 600, 999
1, 600,810
w
o
o
»^
M
S3
>
ZP
Hi
1956
Jan. 5 Apr. 5
12
12
19
19
26
26
Fefe. 2 May 3
10
9
17
16
24
23
31
Mar. 1
8 June 7
14
15
21
22
28
29
Apr. 5 July 5
12
12
19
19
26
26
May 3 Aug. 2
9
10
16
17
23
24
30
31
June 7 Sept. 6
13
14
20
21
27
28
91
91
91
91
91
91
91
91
91
91
91
91
91
91
91
91
91
91
91
91
91
91
91
91
91
91
2,469,910 1, 601,946 1,387,983
2,492,811 1,600, 601 1, 329, 680
2, 686,128
2, 696,016
2,347,190
2,413,316
2,389,082
2,450,122
2, 592, 669
2,155,908
2,424,396
2, 762, 669
2,566,040
2,178,449
2,471,478
2, 338,433
2, 527,024
2,478,250
2, 444, 757
2, 657,990
2,331, 928
2, 604,882
2,467,234
2, 535, 959
2, 684,298
2,318,428
1, 601, 608
1, 600,766
1, 600, 505
1, 600,805
1, 600,052
1, 601,349
1,604, 441
1, 600,068
1,600,206
1,60(>, 686
1,600,391
1,600,109
1,601,221
1, 699,963
1, 601, 522
1, 599,603
1, 600, 626
1, 600, 678
1, 600,042
1, 600,060
1,601,732
1, 601, 643
1,600,241
1, 600,808
1,316, 596
1,345,319
1,374,412
1,370, 545
1,393,148
1, 359, 925
1,385,941
1,380,816
1,352,941
1,314, 653
1,358,080
1,369,968
1,323,312
1,317, 506
1,333,357
1,364, 728
1,365,381
1, 369, 718
1. 375,904
1,388, 245
1,386, 679
1,353,424
1,311,765
1,363,102
213, 962
270,821
286,012
255,446
226,093
230,260
206, 904
241,424
218, 500
219,253
247,265
286,933
242, 311
240,141
277,909
282,457
268,165
244,875
235,245
230, 960
224,138
211,816
215,063
248,119
288,476
237, 706
1, 575, 049
1, 571,959
1, 669, 494
1, 563,860
1,460, 686
1, 635, 795
1, 571, 678
1, 603, 749
1, 600,106
1, 668,922
1, 555,769
1, 618,177
1,471,960
1, 669,857
1, 565,019
1, 663,066
1, 569,304
1, 519, 496
1,576, 505
1, 570,409
1, 618, 310
1, 481,799
1, 540,250
1, 662,034
1, 667,044
1, 610, 764
26,896
28,642
32,114
36,905
139,919
65,010
28,474
97, 600
104,335
31,146
44,447
82,409
128,431
30,252
36, 202
36,897
32, 218
80,107
24,121
30, 269
81, 732
118,261
61,482
39, 509
33,197
90,054
99.371
99.344
99.370
99.433
99.393
99.426
99.396
99.386
99.391
99.451
99.400
99.388
99.451
99.394
99.369
99.300
99.296
99.307
99.362
99.315
99. 317
99.350
99.352
99.348
99.386
99.359
2.489
2.596
2.493
2.244
2.402
2.271
2.388
2.430
2.409
2.173
2.374
2.422
2.173
2.397
2.497
2.769
2.788
2.741
2. 524.
2.708
2.702
2. 573
2.562
2.581
2.430
2.535
» 99.393
99.393
99.376
99.440
15 99.406
99.429
99.443
16 99.403
17 99.393
18 99.464
19 99.410
99. 415
99.467
20 99.401
99.432
21 99. 320
22 99.300
23 99.317
99.366
24 99.330
99.323
99.352
99.358
99.368
99.391
99.390
2.401
2.401
2.469
2.216
2.350
2.259
2.204
2.362
2.401
2.120
2.334
2.314
2.148
2.370
2.247
2.690
2.769
2.702
2.508
2.651
2.678
2.564
2.540
2.500
2.409
2.413
99.366
99.337
99.368
99.429
99.387
99.424
99.392
99.384
99.390
99.426
99.394
99.386
99.448
99.388
99.363
99.290
99.293
99.305
99.360
99.312
99.314
99.348
99.350
99.346
99.384
99.355
2.508
2.623
2.600
2.269
2.425
2.279
2.405
2.437
2.413
2.271
2.397
2.429
2.184
2.421
2.620
2.809
2.797
2.749
2.532
2.722
2. 714
2.579
2.671
2.587
2.437
2.552
1, 600,062
1, 600, 691
1, 600, 903
1, 601, 680
1, 602,167
1, 699, 740
1, 600, 226
1, 600,093
1,601,218
1,600,148
1, 601,061
1, 600,947
1,602,948
1, 601,945
1, 600, 601
1,601, 608
1, 600, 765
1, 600, 505
1, 600,805
1, 600,062
1, 601,349
1, 604,441
1,600,068
1, 600,206
1,600, 586
1, 600,391
W
H-l
Tax Anticipation Series
1.956
Dec. 15
Mar. 23
4,130,216
1, 601,389
1,148,277
363,112
1, 501,389
1 The usual timing with respect to issues of Treasury bills is: Press release inviting
tenders, 7 days before date of issue; closing date on which tenders are accepted, 3 days
before date of issue; and press release announcing acceptance of tenders, 2 days before
date of issue. Figures are final and differ in many instances from those shown in press
releases announcing details of a particular issue.
2 Noncompetitive tenders from any one bidder for $200,000 or less for the weekly
series and $300,000 or less for the tax anticipation series, without stated price, were
accepted in full at the average price for accepted competitive bids.
3 Bank-discount basis.
4 Except $170,000 at 99.706 and $800,000 at 99.625.
6 Except $100,000 at 99.560 and $650,000 at 99.545.
6 Except $40,000 at 99.494 and $1,000,000 at 99.492.
7 Except $100,000 at 99.600 and $1,000,000 at 99.480.
8 Except $1,000,000 at 99.625 and $500,000 at 99.492.
8 Except $500,000 at 99.468.
10 Except $160,000 at 99.475.
ii'Except $300,000 at 99.486, $330,000 at 99.432, and $150,000 at 99.426.
12 Except $1,100,000 at 99.450.
' 99.322
QQ
2.465
25 99.360
99.313
2.498
13 Except $300,000 at 99.646.
14 Except $1,000,000 at 99.430.
15 Except $100,000 at 99.641.
16 Except $100,000 at 99.926.
17 Except $660,000 at 99.430, $800,000 at 99.429, $200,000 at 99.404, and $716,000 at 99.400.
18 Except $300,000 at 99.487, $200,000 at 99.474, and $400,000 at 99.469.
19 Except $1,000,000 at 99.469, $475,000 at 99.451, $1,400,000 at 99.460, $200,000 at 99.448,
$400,000 at 99.445, a'nd $200,000 at 99.431.
20 Except $200,000 at 99.469, $300,000 at 99.457, $600,000 at 99.456, $702,000 at 99.451,
and $400,000 at 99.448.
21 Except $300,000 at 99.405, $100,000 at 99.380, $350,000 at 99.375, $300,000 a t 99.370,
$300,000 at 99.369, and $50,000 at 99.368.
22 Except $400,000 at 99.400 and $32,000 at 99.342.
23 Except $700,000 at 99.325.
24 Except $500,000 at 99.375, $200,000 at 99.368, $800,000 at 99.366, $175,000 at 99.365,
$560,000 at 99.362, and $60,000 at 99.360.
25 Except $100,000 at 99.510, $100,000 at 99.460, $136,000 at 99.446, and $160,000 at 99.400.
CX)
Or
186
1956 REPORT OF THE SECRETARY OF THE TREASURY
Guaranteed Obligations Calls
E X H I B I T 6.—Calls for partial redemption, before maturity, of insurance fund
debentures
During t h e fiscal year 1956, there were eighteen calls for partial redemption,
before m a t u r i t y , of insurance fund debentures, seven dated September 22, 1955,
and the others dated March 19, 1956. The notices of call were published in the
Federal Registers of September 30, 1955, and March 30, 1956. The notice covering
t h e fourteenth call of t h e 2^^ percent Series E m u t u a l mortgage insurance fund
debentures is shown in this exhibit. Since t h e other notices of call are similar to
this exhibit, they have been omitted b u t t h e essential details are summarized in
t h e table following the notice of call.
N O T I C E O F CALL.
F E D E R A L R E G I S T E R O F S E P T E M B E R 30, 1955
To Holders of 2% Percent Mutual Mortgage Insurance F u n d Debentures, Series E :
NOTICE OF CALL FOR PARTIAL REDEMPTION, BEFORE MATURITY, OF 2% PERCENT
MUTUAL MORTGAGE INSURANCE FUND DEBENTURES, SERIES E
P u r s u a n t to t h e a u t h o r i t y conferred by the National Housing Act (48 Stat.
1246; U. S. C , Title 12, Sec. 1701 et seq.) as amended, public notice is hereby
given t h a t 2% percent m u t u a l mortgage insurance fund debentures. Series E, of
t h e denominations and serial numbers designated below, are hereby called for redemption, a t par and accrued interest, on J a n u a r y 1, 1956, on which date interest
on such debentures shall cease:
2% percent mutual mortgage insurance fund debentures, Series E
Denomination
$50
100..
,.
-
Serial numbers
(All numbers inclusive)
.
1,021 to 1,048
1,888 to 1,998
2, 604 to 2, 731
500...
.
691 to
732
1,000
1, 397 to 1, 500
5,000
-.1
808 to
884
10,000.
.
257 to
278
T h e debentures first issued as determined by the issue dates thereof were
selected for redemption by t h e Commissioner, Federal Housing Administration,
with the approval of t h e Secretary of the Treasur}^
No transfers or denominational exchanges in debentures covered by the foregoing call will be made on the books maintained by the Treasury D e p a r t m e n t on
or after October 1, 1955. This does not affect t h e right of the holder of a debenture
to sell and assign the debenture on or after October 1, 1955, and provision will be
m a d e for t h e p a y m e n t of final interest due on J a n u a r y 1, 1956, with the principal
thereof to t h e actual owner, as shown by t h e assignments thereon.
The Commissioner of the Federal Housing Administration hereby offers t o purchase any debentures included in this call a t any time from October 1, 1955, to
December 31, 1955, inclusive, a t par and accrued interest, to date of pui chase.
Instructions for t h e presentation and surrender of debentures for redemption
on or after J a n u a r y 1, 1956, or for purchase prior to t h a t date'wiU be given by t h e
Secretary of t h e Treasury.
.___
NORMAN P. MASON,
Federal Housing Commissioner.
'
A P P R O V E D : September 28, 1955.
W. R A N D O L P H B U R G E S S ,
Acting Secretary of ihe Treasury.
Final interest will be paid with principal a t t h e r a t e of $13.75 per $1,000 on
debentures redeemed on J a n u a r y 1,1956.
Final interest will be paid with principal a t the r a t e of $0.074728 per $1,000 p e r
day from July 1, 1955, to date of purchase on debentures purchased between
October 1 and December 31, 1955.
«
.
Summary of information contained in the notices of call for partial redemption of insurance fund debentures during ihe fiscal year 1956
2 H percent m u t u a l mortgage insurance
fund d e b e n t u r e s , Series E
F o u r t e e n t h call
N o t i c e of call
Redemption date
S e r i a l n u m b e r s called b y
denominations:
$50
$100
$500
:$1,000
••$6,000
$10,000
JF'inal d a t e for transfers
•or d e n o m i n a t i o n a l ex•changes ( b u t n o t for
sale or a s s i g n m e n t ) .
"Redemption on call d a t e ,
a m o u n t paid at par
w i t h interest in full at
r a t e of.
P r e s e n t a t i o n for p u r chase prior to call d a t e :
Period
Amoxmt paid at par
a n d accrued interest a t r a t e of.
F i f t e e n t h call
2H percent war
housing insurance
fund d e b e n t u r e s ,
Series G, second
call
2M percent w a r h o u s i n g i n s u r a n c e
fund d e b e n t u r e s . Series H
F i f t e e n t h call
Sixteenth call
2M p e r c e n t m u t u a l mortgage m s u r a n c e
fund d e b e n t u r e s . Series K
Sixth call "
S e v e n t h call
S e p t . 22, 1955..
J a n . 1, 1966-._,
M a r . 19, 1956_.
J u l y l , 1956_.-.
M a r . 19, 1956.
J u l y 1, 1956-.
S e p t . 22, 1955
J a n . 1, 1956
M a r . 19, 1956
J u l y 1, 1956
S e p t . 22, 1955.
J a n . 1, 1956...
M a r . 19, 1956.
J u l y 1, 1956.
1021-1048
1888-1998, 2604-2731.
691-732
1397-1500
808-884
257-278
S e p t . 30, 1955
1049-1063-.
2732-2781..
733-740-...
1501-1543..
885-897_._,
M a r . 31, 1956..
559
2243-22481"!^
1059-1060
3355-3357
285
1-13
M a r . 31, 1956.
3622-3640
6863-6960
1421-1466
6282-6338, 8704-8785.
2557-2579,2862
25267-26171
Sept. 30, 1955
3645-3660___._
6962-7032
1468-1483
8786-8825, 8827-8832.
2859-2873
26191-27682
M a r . 31, 1956
73-103
34^622
158-192
379-470
104-145
78-189
Sept. 30, 1955.
104-112.
523-651.
193-198.
471-489.
146-161.
190-207.
M a r . 31, 1956.
$13.75 per $1,000.
$13.75 per $1,000.-
$13.75 per $ 1 , 0 0 0 . . . . $12.50 per $1,000--
$12.50 per $1,000-
$12.50 per $1,000
$12.50 per $1,000.
Oct. 1-Dec. 31,1955
$0.074728 per $1,000
p e r d a y from J u l y
1, 1955, to d a t e
of p u r c h a s e .
Apr. 1-June 30,1956
$0.075549 per $1,000
p e r d a y from J a n .
1, 1956, t o d a t e
of p u r c h a s e .
A p r . 1-June 30,1966
$0.076649 per $1,000
p e r d a y from J a n .
1, 1956, to d a t e
of p u r c h a s e .
A p r . 1-June 30,1956
$0.068681 p e r $1,000
p e r d a y from J a n .
1, 1956, t o d a t e
of p u r c h a s e .
Oct. 1-Dec. "31,1955
$0.067935 per $1,000
p e r d a y from J u l y
1, 1955, to d a t e
of p u r c h a s e .
A p r . 1-June 30,1966.
$0.068681 per $1,000
p e r d a y from J a n .
1, 1966, to d a t e
of p u r c h a s e .
X
OQ
Oct. 1-Dec. 31,1955
$0.067935 per $1,000
per d a y from J u l y
1, 1955, to d a t e
of p u r c h a s e .
00
Summary of information contained in ihe notices of call for partial redemption of insurance fund debentures during the fiscal
year 1956—Continued
2H percent Title I housing insurance
fund debentures. Series L
Fourth call
Notice of call
Redemption date
_ _
Serial numbers called by
denominations:
$50-——1-1 .•---"-:-_ _•.•.-•.•
$100 —
$500
$1,000
$5,000
$10,000
Final date for transfers or
denominational exchanges
(but not for sale or assignment).
Redemption on call, date,
amount paid at par with
interest in full at rate of.
Presentation for purchase
prior to call date:
Period
Amount paid at par and
accrued interest at
rate of.
Sept. 22, 1955—
Jan. 1, 1956
Fifth call
Mar. 19, 1956
July 1, 1956
3 perceiit Title I housuig insurance
fund debentures. Series T
2M percent Title I housing insurance
fund debentures. Series R
Second call
Sept. 22, 1955
Jan. 1, 1966
116.:..:.:-- „ _ . . _ _ . „ . 117-123_-.::_--:-:_-..:-. 6—__-..-.-.-__.---•-:•
10-13
42-48
49-86
4
'
62-64
61
255-260
9-24
263-311
10-12
8
.
Mar. 19, 1966
July 1, 1966
Sept. 22, 1955 Jan. 1, 1956
7-8
14-16
5 __
27-32
10
2-4
1-9
1-2
1-10
1-2
__
Sept. 30, 1955
Mar. 31, 1956
Sept. 30, 1955
Mar. 31, 1966
$12.50 per $1,000
$12.60 per $1,000
$13.75 per $1,000
$13.75 per $1,000
Second call
First call
Third call
- Sept. 30, 1955—.J
Mar. 19, 1966.
July 1, 1956.
- . 7-41.
21-65.
6-19.
CX)
CX)
CO
Cn
05
O
O
6-8.
Mar. 31, 1956.
Ul
$15.00 per $1,000
$15.00 per $1,000.
Oct. 1-Dec. 31, 1955... Apr. 1-June 30, 1966-. Oct. 1-Dec. 31, 1955.-. Apr. 1-June 30,1966— Oct. 1-Dec. 31, 1956--. Apr. 1-June 30, 1966.
$0.067935 per $1,000 $0.068681 per $1,000 $0.074728 per $1,000 $0.075549 per $1,000 $0.081622 per $1,000 $0.082418 per $1,000 per
per day from July
per day from Jan.
per day from July
per day from Jan.
day from Jan. 1,1956,
per day from July
1, 1956, to date of
1, 1955, to date of
1, 1956, to date of.
to date of purchase.
1, 1965, to date of
1, 1966, to date of
purchase.
purchase.
pm-chase.
purchase.
purchase.
O
o
>^
>
Ul
d
3 percent m u t u a l mortgage insurance
fund d e b e n t u r e s . Series U
T h i r d call
N o t i c e of call
Redemption date
Serial n u m b e r s called b y d e n o m inations:
$50
$100
$500
$1,000$5,000
$10,000
.-Final d a t e for transfers or d e n o m i n a t i o n a l exchanges ( b u t n o t
for sale or a s s i g m n e n t ) .
R e d e m p t i o n on call d a t e , a m o u n t
paid at par w i t h interest in
full a t r a t e of.
P r e s e n t a t i o n for p u r c h a s e prior
t o call d a t e :
Period
A m o u n t p a i d a t p a r a n d accrued interest a t r a t e of.
F o u r t h call
M u t u a l m o r t g a g e i n s u r a n c e fund d e b e n t u r e s . Series A A , first call
2 ^ percent
2M p e r c e n t
3 percent
S e p t . 22,1956-.
J a n . 1, 1966-_..
M a r . 19, 1966-.
J u l y 1, 1956—.
M a r . 19, 1956—
J u l y 1, 1956
M a r . 19, 1956
J u l y 1, 1956
M a r . 19, 1956.
J u l y 1, 1956.
10-22..
36-89..
11-24-.
31-74..
18-42..
1.
S e p t . 30, 1955—-
23-30..
93-12926-32...
76-103..
44-68...
M a r . 31, 1966..
1-62
1-237
1-77
1-170
1-104, 1 1 1 . . —
1-69
M a r . 31, 1956...
1-62
1-237
1-77
1-170
1-104,111
1-69
M a r . 31, 1956—
1-62.
1-237.
1-77.
1-170.
1-104, 111.
1-69.
M a r . 31, 1956.
$15.00 per $1,000-
$15.00 per $1,000.
$12.60 p e r $1,000
$13.75 per $1,000,
$15.00 per $1,000.
X
K
Oct. 1-Dec. 31, 1965
$0.081522 per $1,000 p e r
d a y from J u l y 1, 1956,
t o d a t e of p u r c h a s e .
A p r . 1-June 30, 1956
$0.082418 per $1,000 per
d a y from J a n . 1, 1956.
to d a t e of p u r c h a s e .
A p r . 1-June 30, 1956
$0.068681 per $1,000 per
d a y from J a n . 1, 1956,
t o d a t e of p u r c h a s e .
A p r . 1-June 30, 1966
$0.075549 p e r $1,000 per
d a y from J a n . 1, 1956,
t o d a t e of p u r c h a s e .
A p r . 1-June 30, 1956.
$0.082418 per $1,000 per d a y
from J a n . 1, 1956, to d a t e
of p u r c h a s e .
W
H-1
Ul
00
CO.
190
1956 REPORT OF THE SECRETARY OF THE TREASURY
Taxation Developments
EXHIBIT 7.—Statement by Secretary of the Treasury Humphrey, February 14,
1956, before the House Committee on Ways and Means on the problem of
financing the highway program
I am very glad to have the opportunity to appear before you this
morning to discuss the problem of financing the highway program,
which we all agree is so important, from many standpoints in the
national interest.
I t is now proposed that the program will be financed oil a pay-asyou-build basis, rather than on a pay-as-you-ride basis. The only
decision that remains to be made therefore is the selection of the particular taxes which will provide adequate financing.
The decisions on the particular additional or new taxes to be imposed is, of course, a matter for determination for the Congress. In
the hearings over these next several days this committee will receive
testimony which will be. helpful in making this selection and in determining the amounts of the various taxes that will most fairly
raise the necessary totals required.. The Treasury Department will
be glad to continue to work with you and your staffs in preparing the
estimates of receipts from various alternatives and combinations bf
taxes.
We all recognize the importance of having a single, integrated
highway program which will make it possible to plan and carry out
the development of the interstate system as a unit. I will give you
estimates this morning on the basis of a 12-year building and a 12-year
spending program.
Over 12 years, total expenditures for the interstate system and for
the priraary, secondary, and urban programs under 1954 and prior
authorizations and H. R. 8836, come to a total of $35.2 billion. The
existing gasoline and diesel fuel taxes of 2 cents per gallon in a 12year period available for this program will bring in $14.2 billion,
leaving about $21 billion to be provided by new taxes.
We have figures showing the amount of revenue which would be
derived in a 12-year period from an increase of 1 cent or in some
cases of 1 percentage point in the rate of tax on various items which
have been suggested to us as possible sources of additional revenue.
These are:
For each 1 cent:
Gasoline
Diesel fuel____
Lubricating oil
Tires
Camelback
Tubes
For each 1 percent:
Trucks and buses
Parts and accessories
Registration fee at $1 per 1,000 pounds of weight:
Automobiles
Trucks and buses registered for highway use
Billion
$6. 6
.2
.2
.5
. 05
. 02
. 350
.4
3. 0
1. 5
H. R. 9075, which is now before your committee, provides a 1-cent
increase in gasoline and other fuel taxes, an increase from 5 to 8 cents
a pound on tires and a new tax of 3 cents a pound on camelback, and
an increase of 2 percent, from 8 percent to 10 percent, in the excise tax
EXHIBITS
191
on trucks and buses to equal the present tax on passenger cars. These
new taxes proposed under this bill in the 12-year period would bring
in $9.1 billion, which is less than half the total required over the 12year period and indicates the need for an additional $11.9 billion to
finance the program on a pay-as-you-build basis. The calculation
prepared in connection with this bill as used by the committee includes as available for this purpose over a 12-year period $2.6 billion
of existing excise taxes on tires which are now included in our general
revenues and which if diverted to this use will have to be raised in
some other way to replace an equal amount to cover their loss in general
revenue.
Estimates of tax receipts extending over a 12-year period inevitably
involve the use of various underlying estimates in making the calculations and are subject to substantial margins of error. The projections
used in the table which I have just referred to here are the same as
those used by the Fallon committee a year ago and tbey have also been
used in the revenue projections made by your committee in connection
with H. R. 9075.
I want to call attention to one final point. I have referred to a,
$35.2 billion Federal expenditure for roads over a 12-year period.
This, of course, does not indicate the full scale of road construction under the Federal program. A little over $10 billion or nearly one-third
of tbe total goes back to the States for primary, secondary and urban
roads which are financed by a 50-50 Federal matching grant.. There
will, accordingly, be an equivalent amount of State expenditures in this
category. The expenditures on the interstate system would be a total
of $25.i billion on a 90-10 matching system, which means that there
will be State expenditures of almost $3 billion in this category making
total expenditures for roads under this program in 12 years of $48.1
billion. •
Total road expendiiures under Federal-aid progro,m
[Billions of dollars]
Federal grants for:
Primary, secondary, and urban
10. 1
Interstate
Total
25. 1
_-
-
State matching expenditures for:
Primary, secondary, and urban
Grand total
35. 2
10. 1
Interstate
. Total
----
2. 8
-
12. 9
.
48. 1
With these expenditures, we can look forward to making up the
present deficiencies in highway construction and securing a system
of roads which we so badly need.
Everyone wants roads—more and better roads. The problem is
to provide the money to pay for them on a pay-as-you-build basis.
Improved highway transportation is one of the great necessities of
our times. A large part of our commerce and industry depends upon
it. Our farms require it. The jobs of millions of men and women in
this country depend upon it. The further growth of the great auto
industry and all the ramifications in the use of steel, fuel, rubber, and
192
1956 REPORT OF THE SECRETARY OF THE TREASURY
thousands of products from hundreds of sources cannot continue to
develop unless our highway transportation is developed concurrently.
The Treasury is prepared to lend the fullest support to the deliberations of your committee and the Congress to the end that a highway
program which all Americans need and want may be realized.
EXHIBIT 8.—Statement by Secretary of the Treasury Humphrey, May 17, 1956,
before the Senate Finance Committee in general support of the highway program
I am glad to have this opportunity to appear before you this morning in general
support of the highway program and to discuss its financial aspects, which are
now before this committee.
Improved highway transportation is one of the great necessities of our times.
A large part of our commerce and industry depends upon it. Our farms require it.
The jobs of millions of men and women in this country depend upon it. The further growth of the great auto industry and all the ramifications in the use of steel,
fuel, rubber, and thousands of products from hundreds of sources cannot continue
to develop unless our highway transportation is developed concurrently. The
Treasury is prepared to lend the fullest support to the deliberations of your committee and the Congress to the end that a highway program which all Americans
need and want may be realized.
H. R. 10660 has been referred to as a pay-as-you-build program. I heartily
endorse this policy of highway financing. But I want to point out to you two
important respects in which the revenue features of this proposed program falls
far short of the actual pay-as-you-build principle.
The bill as passed by the House showed an estimated balance between expenditures and tax receipts at the end of the 16-year period ending in 1972. However,
after an initial 3 years with excess receipts over expenditures, there would be 10
successive years with an excess of expenditures over receipts, with annual deficiencies of from $500 million to $800 million in most of these years. The cumulative deficiency in the trust fund would begin in the sixth year (1962) and would
exceed $4,700 million by 1969. This would be^made good only in the last 3
years (1970, 1971, 1972). Furthermore, in striking this balance under the
House bill, no provision was made during the^e last 3 years for regular allocation
of funds to the primary, secondary, and urban road programs and expenditures
for them would be limited to the unexpended balance of prior allocations with
some purely arbitrary additions until the last year when any excess over the full
amount required for reimbursement of the interstate deficiency would be available for the primary, secondary, and urban programs. This would leave an
estimated deficiency in this latter program of approximately $1,450 million as
compared with continuing the regular allocations to this program.
For 10 full years these large deficits would be a charge on the general budget.
This discrepancy in timing contradicts an essential part of a real pay-as-you-build
program.
The substitute authorizations for expenditures made by the Senate Public
Works Committee change the total amounts and annual pattern of expenditures
somewhat, but they would produce the same short of interim deficits. You will
note on the first two tables i which you have received the estimates of expenditures,
receipts, and the condition of the trust fund under the House bill and under the
alternative expenditure program of your Senate Public Works Committee. To
maintain comparability, the authorizations for the primary, secondary, and urban
road programs in the alternative plan have been assumed to be continued at $900
million annually beyond 1961, as actually authorized, through 1969, the period of
authorization of increasing annual authorizations under the House bill, thus
providing about the same total amount for this program in each bill. Also, to
maintain comparability, the estimated excess of receipts over the amount needed
to reimburse the deficiency in the trust fund at the end of the entire period has
been allocated to the primary, secondary, and urban program, as was done under
the House bill.
You will note from the two tables that there are very few discrepancies between
the two ^bills; the discrepancies are very minor. The expenditures under the
Senate program are based upon the cost of a 40,000 mile interstate system, and
this is one of the principal differences between the two bills. No provision is made
EXHIBITS
193
in either bill for the cost of the additional 2,500 miles of interstate roads authorized
in the Senate program since the routes have not even been specified. In other
words, the House program is 40,000 miles, and the finances are based on that and
the Senate bill provides the same finances, to all intents and purposes, but adds
on this system 2,500 miles for which no money is provided at all.
If the cost of these additional miles were equal to the average costs of the 40,000
designated miles, the total costs of the interstate system as proposed in the Senate
bill would be increased by about $1.7 bilhon.
To eliminate the prospective deficits under either the House bill or the alternative Senate plan, I urge that the bill be amended to permit allocation of funds to
be so timed that the estimated expenditures from the allocations will not exceed
the estimated available amounts in the trust funds. With this change, the pror
gram could be kept frora being a charge on the regular budget. It could then be
made, from this standpoint, a true pay-as-you-build program, and whenever
annual allocations were desired which would exceed the amount of funds that
would be then currently available in the trust fund, the Congress could promptly
provide adequate additional taxes to cover the estimated deficit.
I am taking it for granted, gentlemen, that you all have in mind that the receipts
go into a trust fund, and the expenditures for the roads are paid out of the trust
fund under both bills. The system is that the taxes will be allocated to the trust
fund as collected, and then the payment will be made out of the trust fund.
Now that is the first departure. Now the second departure from a real pay-asyou-build program comes from the dedication to the highway trust fund of the
existing excise taxes on tires and tubes and three-eighths of the.existing 8 percent
on trucks and buses, beginning in the fiscal year 1958. The estimated annual
amounts start at about $275 million and rise to almost $400 million, with a total
of about $5 billion through 1972. This diversion of excise taxes which have
always been regarded as part of the general revenues means that these amounts
must be made up in the general budget by new taxes or by a continuation of old
taxes which might otherwise be reduced. It thereby would become the equivalent
of a special tax diversion in lieu of a general tax reduction for all taxpayers that
might otherwise be possible.
The dedication of the existing gasoline and diesel fuel taxes is reasonable
because they have come to be regarded as available for highway expenditures,
and in recent years the regular highway program has been based on them. But
the tire, tube, truck, and bus taxes are included in our regular excise tax program
and have always been considered as part of the general revenue, along with all the
other manufacturer's excise taxes. Their diversion to pay for highways is not
really consistent with pay-as-you-build financing, and deflects our general revenue
receipts.
The various taxes to be transferred to the highway trust fund under H. R. 10660
are shown in the third table ^ which you have before you. Estimates of receipts
extending 16 years into the future are inevitably subject to substantial margins of
error; but the projections used in these tables are the best available figures
developed by the various staffs which have worked on the subject.
The Treasury Department did not make any specific tax recommendations to
the House Ways and Means Committee. The new taxes included in H. R. 10660
are thus neither in accord with nor contrary to any recommendations of the
Treasury, but I will take this opportunity to say that we have no objection to any
of the proposed new taxes.
The Treasury Department will be glad to provide such information and other
assistance as we can to this committee in its consideration of highway financing.
In conclusion I repeat my strong endorsement of a national highway program,
financed on a real pay-as-you-build basis. And I especially commend and urge
you to adopt the amendment suggested to balance annual allocations with estimated receipts to be currently available in the fund.
Now, the purpose of that recommendation and my urging you to adopt it is this,
that only in that way will this quickly and adequately become a real pay-as-youbuild program, because if you adopt that amendment then as the allocations are
made you would see immediately where the deficits in the funds are going to come,
and that you want to allocate more than the fund will have money to provide and
pay for, and therefore, the matter will be immediately raised for congressional
consideration as to the imposition as to whatever additional taxes are required to
keep the fund solvent currently all during the period, and you will not run into
these big deficits that appear as the bill is now drawn.
1 See also revised table p. 45.
399346—57
14
T A B L E I.—Highway program, H . R. 10660, as passed by the House of Representatives—Estimated expenditures and tax receipts, and status of
trust fund, under allocations made by bill, and status of trust fund if present taxes on tires, tubes, and 3 percent on trucks, buses, and
trailers are not allocated to trust fund, fiscal years 1957-72
CD
[In millions of dollars]
CO
cn
T a x receipts
Expenditures
T r u s t fund
Fiscal year
Construction
1957
1958
1959
1960...
1961
1962
1963
1964
1965...
1966
1967
1968
1969
1970...
1971
1972
1.
....
.._:..
.
. . .
_
Total
Interest
income
(-),or.
expense
(+)
Annual
1,025
1,480
1,993
2,475
2,700
3,025
3,050
3,075
3,100
3,125
3,250
3,075
2,700
2,025
1,296
505
-5-16
-23
-20
-11
+4
+21
+37
+53
+68
+84
+98
+105
+99
+75
+30
1,020
1,464
1,970
2,455
2,689
3,029
3,071
3,112
3,153
3,193
3,334
3,173
2,805
2,124
1,371
535
37, 899
+599
138,498
Cumulative
1,020
2,484
4,454
6,909
9,598
12, 627
15, 698
18,810
21, 963
25,156
• 28, 490
31, 663
34, 468
36, 592
37, 963
38, 498
Tires,
tubes,
and 3
Gasoline
percent
and
on t r u c k s ,
diesel
fuel . buses,
and
trailers
Total,
present
law
Newtaxes
Annual
Cumulative
Net
annual
credits
( + ) , or
charges
(-)
868
1,021
1,059
1,093
1,129
1,164
1,201
1,236
1,271
1,304
1.343
1,378
1,412
1,445
1,475
1,697
277
290
284
297
303
313
322
325
340
347
353
363
369
374
387
868
1,298
1,349
1,377
1, 426
. 1, 467
1,614
1,658
1, 596
1,644
1,690
1,731
1,775
1,814
1,849
2,084
612
688
714
730
760
778
803
826
856
879
901
924
944
964
981
1,098
1,480
1,986
2,063
2,107
2,186
• 2,245
2,317
2,384
2,452
2.523
2; 501
2,655
2,719
2, 778
2,830
3,182
20, 096
4, 944
25, 040
13, 468
38, 498
1 Excluding $150 million estimated to be paid in fiscal years 1973 and 1974.
T o t a l tax receipts
P r e s e n t taxes
Total expenditures
1,480
3,466
5,629
7,636
9,822
12, 067
14, 384
16,768
19, 220
•21,743
24,334
26, 989
29, 708
32, 486
35, 316
38, 498
+460
+522
+93
-348
-503
-784
-754
-728
-701
-670
-743
-618
-86
+654
+ 1 , 459
+2,647
Trust
fund
without
$4,944,000,000
of p r e s e n t
taxes
and
including
increased
interest
cost
Balance,
credit ( + ) ,
or d e b i t
( - ) at
e n d of
year
Net
annual
credits
(+),or
charges
+460
+982
+ 1 , 075
+727
+224
-560
-1,314
- 2 , 042
- 2 , 743
- 3 , 413
-4,156
- 4 , 674
- 4 , 760
-4,106
- 2 , 647
+460
+242
-207
-648
-824
-1,117
-1,105
-1,096
-1,081
- 1 , 074
-1,162
-953
-541
+183
+972
+2,137
(-)
Balance,
credit ( + ) ,
or d e b i t
( - ) at
e n d of
year
+460
+702
+495
-153
—977
- 2 , 094
-3,199
- 4 , 295
—5, 376
- 6 , 450
- 7 , 612
- 8 , 565
-9,106
- 8 , 923'
- 7 , 951
- 5 , 814
O
O
Ul
O
>
o
"^
W
- 5 , 814
>
d
Ul
T A B L E II.—Highway program, H . R. 10660, as amended by ihe Senate Committee on Public Works—Estimaied expenditures and tax receipts,
and status of trust fund, under allocations made by bill, and status of trust fund if present taxes on tires, tubes, and 3 percent on trucks,
buses, and trailers are not allocated to trust fund, fiscal years 1957-72'
[In millions of dollars}
T a x receipts
Expenditures
T r u s t fund
T o t a l tax receipts
P r e s e n t taxes
Total expenditures
•
Fiscal year
Construction
1957..
1958
1959-. .
1960
1961
1962
1963
1964..
1965
1966...
1967
1968
1969
1970
1971.,
1972
_
.
Total
Interest
income
( - ) , or
expense
(+)
Annual
1, 050
1,600
2,050
2,600
2, 800
2,900
2,900
2,900
2,900
2,900
2,900
2,900
2,900
2,350
1,539
758
-5
-14
-19
-14
-2
+12
+27
+40
+51
+62
+71
+79
+85
• +84
+67
+27
1,045
1,586
2,031
2,586
2,798
2, 912
2,927
2,940
2,951
2,962
2,971
2,979
2,985
2,434
1,606
785
37,947
+551
1 38, 498
Cumulative
1,045
2, 631
4,662
7,248
10, 046
12, 958
15, 885
18. 825
2i; 776
24, 738
27, 709
30, 688
33. 673
36', 107
37, 713
38, 498
Tires,
tubes,
and 3
Gasoline
percent
and
diesel
on t r u c k s ,
fuel
buses,
and
traders
868
1,021
1,059
1,093
1,129
1,164
1,201
1.236
1, 271
1,304
1,343
1,378
1,412
1,445
1,475
1,697
277
290
284
297
303
313
322
325
340
347
353
363
369
374
387
20, 096
4,944
Total,
present
law
New
taxes
Annual
Cumulative
Net
annual
credits
( + ) , or
charges
(-)
868
1,298
1, 349
1,377
1, 426
1, 467/
1, 514
• 1,558
1,596
1,644
1,690
1,731
1,775
1,814
1, 849
2,084
612
688
714
730
760
778
803
826
856
879
901
924
944
964
981
1,098
1,480
1,986
2,063
2,107
2,186
2,245
2,317
2,384
2,452
2,523
2,591
2,655
2, 719
2,778
2,830
3,182
25, 040
13, 458
38, 498
1,480
3,466
6,529
7, 636
9,822
12, 067
14, 384
16, 768
19, 220
21, 743
24, 334
26, 989
29, 708
• 32, 486
35, 316
38, 498
+435
+400
+32
-479
-612
-667
-610
-556
-499
-439
-380
-324
-266
+344
+1,224
+2,397
Trust
fund
without
$4,944,000,000
of p r e s e n t
taxes
and
including
increased
interest
cost
Balance,
credit ( + ) ,
or d e b i t
( - ) at
e n d of
year
Net
annual
credits
(+),oi
charges
+435
+835
+867
+388
-224
-891
- 1 , 501
-2,057
- 2 , 556
- 2 , 995
- 3 , 375
- 3 , 699
- 3 , 965
- 3 , 621
- 2 , 397
+435
+120
-268
-779
-932
- 1 , 001
-961
-924
-879
-842
-799
-758
• -721
-127
+737
+ 1 , 887
Balance,
credit ( + ) ,
or debit
( - ) at
endof
year
+435+555
+287
-492
-1,424
- 2 , 425
- 3 , 386
-4,310
-5,189
- 6 , 031
- 6 , 830
- 7 , 688
-8,309
- 8 , 436
- 7 , 699
- 5 , 812
X
s
Ul
- 5 , 812
' Excluding $150 million estimated to be paid in fiscal years 1973 and 1974.
CO
T A B L E III.—Estimated tax receipts allocated io highway trust fund, fiscal years 1957-
CO
[In millions of dollars]
P r e s e n t l a w taxes
Fiscal year
Gasoline
(2 cents
per
gallon) 1
1967
1958...
1959
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
Total
Diesel
fuel
(2 cents
per
gallon)
Tires
(5 cents
per
pound)
Trucks,
buses,
Inner
and
tubes
trailers
(9 cents (3 p e r c e n t
of m a n u per
p o u n d ) facturer's
price)
Total,
present
law
taxes
Gasoline
(1 cent
per
gallon) 2
Diesel
fuel
(1 cent
Tires
(3 cents
per
pound)4
gallon) 3
Trucks,
buses,
and
Tread
trailers
rubber
(3 cents (2 p e r c e n t
of m a n u per
p o u n d ) s facturer's
price)
Trucks,
over
Total,
26,000
n e w or
pounds
($1.50 per increased
taxes
thousand
pounds.
annual
tax)
Annual
Cumulative
CO
Ox
Oi
o
o
6 846
994
1,031
1,064
1,099
1,133
1,169
1,203
1,237
1,269
1,307
1, 341
1,375
1,407
1,436
71, 650
6 22
27
28
29
30
31
32
33
34
36
36
37
37
38
39
M7
184
191
197
204
210
217
223
229
235
242
248
266
261
266
273
18
18
9
9
9
9
9
9
9
9
9
9
9
9
9
75
81
78
84
84
87
90
87
96
96
96
99
99
99
105
888
1,298
1,349
1,377
1,426
1,467
1,514
1,558
1,596
1,644
1,690
1,731
1,775
1,814
1,849
2,084
407
472
489
505
522
638
655
571
589
604
622
638
654
669
683
777
10
13
13
13
14
15
15
15
16
17
17
17
18
18
18
22
95
98
100
103
108
111
111
116
124
127
129
132
135
135
140
146.
8
9
11
9
11
8
12
11
14
11
12
14
11
14
11
14
47
60
54
52
56
56
58
60
58
64
64
64
66
66
66
76
45
46
47
48
49
60
52
53
55
56
57
59
60
62
63
64
612
688
714
730
760
778
803
826
856
879
901
924
944
964
981
81, 098
1,480
1,986
2,063
2,107
2,186
2, 245
2,317
2,384
2,452
2,523
2,591
2, 655
2,719
2,778
2,830
3,182
19, 561
535
3,435
163
1,356
25, 040
9, 296
251
1, 909
180
957
866
13, 458
38, 498
1 After deduction of refunds of tax on farm gasoline, estimated at 6 percent.
2 After deduction of all use in other than highway-type vehicles, estimated at 10
percent, and use by transit systems, estimated at $4 million aimually.
3 After deduction for transit use, estimated at $1 million annually.
4 After deduction of tires for nonhighway-type vehicles, estimated at 12 percent.
5 After deduction of rubber for tires for nonhighway-type vehicles, estimated at
6 percent.
T o t a l receipts
N e w or increased taxes
1,480
3,466
5,529
7,636
9,822
12, 067
14, 384
16, 768
19, 220
21, 743
24,334
26, 989
29, 708
32, 486
35,316
38,498
6 Excludes receipts from taxes accrued prior to July 1, 1956.
7 Including receipts after June 30, 1972, of taxes accrued on or before that date.
8 Including receipts after June 30, 1972, of taxes accrued on or before that date, less
floor stocks refunds paid in 1973.
Ul
o
td
>
O
>
d
EXHIBITS
197
E X H I B I T 9.—Letter of Secretary of the Treasury H u m p h r e y , M a r c h 6, 1956, to
the Chairman of the H o u s e Committee on Interstate and Foreign Commerce,
concerning the opposition of the Treasury to the tax deduction u n d e r H . R.
9065 for employee contributions to the railroad retirement fund
M Y D E A R M R . CHAIRMAN: This is in reference to a request for the Treasury
D e p a r t m e n t ' s views on H. R. 9065 and other identical bills to amend t h e Railroad
Retirement Act of 1937 to provide increases in benefits and for other purposes.
T h e D e p a r t m e n t is primarily interested in Section 5 of these bills which excludes
employees' contributions to t h e railroad retirement program from both withholding
tax and from taxable income. Such exclusions are not permitted under existing
law. After t h e increase in t h e contribution r a t e provided by t h e bills, such
exclusions would a m o u n t to 7}^ percent of t h e covered employee's wages.
Though t h e bills increase both employee and employer contributions by 1
percent of covered wages to pay for t h e higher benefits, employees would actually
p a y a smaller net a m o u n t t h a n a t present. The income tax reductions resulting
from t h e exclusion would be larger t h a n t h e increase in their contributions. The
bill t h u s would shift t h e employee's share of t h e cost of the proposed increase in
benefits t o t h e Federal Government. I t would also shift to t h e Federal Governm e n t p a r t of the cost of the existing program.
These exclusions would have far-reaching implications for the income tax
system. Employee contributions to t h e railroad retirement program are a form
of savings for retirement and other contingencies. If savings of railroad employees
are excluded from taxable income, other groups could be expected to demand
comparable exclusions for other types of savings for retirement, including contributions to employer pension plans, t h e OASI program, and private annuities.
T h e fact t h a t railroad retirement benefits are already exempt from t a x adds to
t h e problem. If, in addition to t h e present exemption of benefits, employees'
contributions were excluded, no tax would be paid on the income represented by
such contributions a t any time.
, Such exclusions would cause very substantial losses in revenue. T h e exclusion
of railroad retirement contributions alone would involve an annual revenue loss
estimated a t $70 million. If a similar exclusion were given to social security contributions, t h e cost would be increased by another $600 to $700 million annually.
I n view of these considerations, t h e Treasury D e p a r t m e n t strongly opposes t h e
e n a c t m e n t of any bill which contains an income tax exclusion for employee contributions under t h e railroad retirement program.
T h e Director, Bureau of t h e Budget, has advised t h e Treasury D e p a r t m e n t t h a t
there is no objection to t h e presentation of this report.
Sincerely yours,
G.
M.
HUMPHREY,
Secretary of the Treasury.
E X H I B I T 10.—Letter of Secretary of the Treasury H u m p h r e y , March 15,1956, to
the Chairman of the H o u s e Committee on Interstate and Foreign Commerce,
urging the committee to act unfavorably on H . R. 9065, to a m e n d the Railroad
Retirement Act
M Y D E A R M R . CHAIRMAN: On March 6 I wrote you concerning t h e opposition
of t h e Treasury to t h e tax deduction under H. R. 9065 for employee contributions
to t h e railroad retirement fund. I wrote you t h e n t h a t the immediate cost t o the
Treasury would be $70,000,000 a year. We now find t h a t exemption of employee
deductions for social security contributions, which are the same as railroad retirem e n t contributions, would cause a revenue loss of $630,000,000.
Since m y first letter, we have continued to s t u d y t h e possible consequences of
similar exemptions if applied to additional forms of pension plans. We find t h a t
two other groups would involve the following annual revenue loss:
Federal employees under Federal retirement plan
$110, 000, 000
State and local employees under State and local pension plans._ $130, 000, 000
T h u s t h e t o t a l revenue loss would be about
$940, 000, 000
This loss of nearly one billion dollars is t h e crux of t h e situation which makes t h e
action being considered by your committee very serious. Should t h e t a x exemption be given railroad employees it would seem t h a t , out of fairness, similar treatm e n t should properly be given t h e millions of people who contribute to these retirem e n t systems without having such contributions t r e a t e d as t a x deductions.
198
1956 REPORT OF THE SECRETARY OF THE TREASURY
T h e revenue loss could run to another billion dollars or more if this principle led
to dem.ands t h a t all individuals be allowed a deduction of up to 7J4 percent of
incom.e provided such percentage of income was paid out as a social security contribution, as a contribution under private pension plans, or as an individual saving
for retirement.
For these reasons t h e Treasury strongly urges this committee to act unfavorably
on the bill before it.
Very sincerely yours,
G.
M.
HUMPHREY,
Secretary of ihe Treasury.
E X H I B I T 11.—Statement by D a n T. Smith, Special Assistant to the Secretary of
the Treasury in Charge of Tax Policy, July 3,1956, before the H o u s e Committee
on Ways and M e a n s , on H. R. 10578 and H . R. 11764 to a m e n d the Railroad
Retirement Act
The Treasury D e p a r t m e n t appreciates the opportunity^ to present its views on
H . R. 10578 and H . R. 11764. These bills would amend the Railroad Retirement
Tax Act to exclude employees' contributions to the railroad retirement program
from both withholding tax and taxable income. After t h e increase in t h e contribution rate provided by H. R. 10578, the exclusions would a m o u n t to 7.%
percent of covered wages. H. R. 11764, t a k e n b}'' itself, would grant exclusions
of 6% percent of covered wages, the current contribution rate.
However, if adopted together with a number of bills now pending to increase
railroad retirement contributions by 1 percent, H . R. 11764 would provide exclusions amounting to 7}i percent of covered wages. Exclusions for such contributions are not permitted under present law. I t should be made clear, a t the outset,
t h a t while the bill speaks of '^exclusions," and" t h a t is the correct technical term,
the effect is equivalent to allowing the employee a current deduction from gross
income of an a m o u n t equal to the taxes paid. No such tax t r e a t m e n t is given
to social security taxes, of course, or to contributions to any other public or private
retirement systems.
These proposed exclusions would represent a fundamental d e p a r t u r e from established principles of Federal income taxation. T h e y would create a special tax
a d v a n t a g e not available to any other group of employees in the country. E m ployee contributions to the railroad retirement programs are a form of savings for
retirement and other contingencies. If these savings of railroad employees are
excluded from taxable income, other groups could be expected properly to expect
comparable exclusions for other types of savings for retirement, including contributions to the OASI program, private pension plans, and annuities leading to a
total annual revenue loss of more t h a n $2 billion.
Present law already gives considerable benefits to people covered by the railroad retirement system. I t already completely excludes all railroad retirement
benefits from taxable income. Unlike private pension plans and annuities, and
the proposals for special t r e a t m e n t of private retirement plans of the self-employed,
the present law t h u s excludes not only t h e p a r t of t h e railroad retirement benefits
representing the employee's contributions b u t also the p a r t representing the
employer's contribution and accumulated interest. If, in addition to the present
total exemption of benefits, employees' contributions were excluded, no tax would
be paid on t h e income represented by such contributions a t any time. This
would clearly discriminate against other taxpaj^ers including self-employed people
who are not eligible for aii}^ of the tax advantages received by employees under
employer-financed pension plans and who save for retirement out of income t h a t
has been subject to income tax.
The fact t h a t railroads are permitted to deduct their contributions to the railroad retirement fund is not in any sense relevant to the deductibility or nondeductibility of employees' contributions, as is sometimes claimed. The railroads'
contributions are a business expense in the form of indirect compensation to
employees, and are properly deductible by the employer as an ordinary and
necessary business expense, just as are social security taxes paid by the employer,
unemployment taxes, contributions to qualified pension plans, and the like.
However, there is no parallel between the allowance of this deduction of a business
expense and the proposed exclusion of a p a r t of a railroad emploj^ee's own income,
which is used to finance p a r t of his own retirement benefit.
EXHIBITS
199
As a result of the exclusions, the net cost to employees of the increased contributions to the railroad retirement fund proposed by H. R. 10578 would actually
be reduced below the present level. The income tax reductions resulting from
the exclusion generally would be larger than the increase from 6.25 to 7.25. percent
in. employees' contributions. If the contributions were excluded from the first
bracket 20 percent rate, the net cost of employees' contributions to the railroad
retirement program would be 5.8 percent of wages compared with 6.25 percent at
present. If the contributions to the railroad retirement program remained at the
present level of 6.25 percent, the net cost to covered individuals would be cut to
5 percent of. covered wages. The effect of enactment of this bill, therefore, would
be to shift to the Federal Government and to taxpayers generally not only the
employee's share of the cost of any increase in benefits that may be adopted with
the proposed increase in contributions, but also part of the cost of the existing
program.
Despite claims to the contrary, neither British nor Canadian tax practicie offers
a precedent for the tax treatment provided by the bill. In Canada, social security
is financed by additional rates imposed under general taxes on incomes and sales,
and the benefit payments are taxable when received. In Great Britain, employees'
contributions to social security plans are currently excluded but in contrast to the
exempt treatment in this country the full amount of the pension is taxable when
received. Neither country permits both a tax deduction or exclusion of contributions from income and tax exemption of benefits.
I might digress just to interject, here, that this reference to the British and
Canadian experience I have put. in simply because the point has often been
raised when this matter was up for consideration before other committees.
Exclusions for income invested in specified forms of retirement savings M^ould
cause very substantial immediate losses in revenue. The exclusion of railroad
retirement contributions, amounting to 7K percent of covered wages, alone
would involve an annual revenue loss estimated at $70 million. Even if the
railroad retirement contributions remained at 6J4 percent of covered wages, the
annual revenue loss of excluding such contributions would be $60 million. Similar
exclusions for employee contributions to the social security system would cost
$630 million annually, and for employee contributions to both private and
Government pension plans $330 million. The annual cost of all these exclusions
combined would exceed $1 billion.
If all individuals were allowed to exclude up to 7% percent of their incom.es
for savings for retirement, and in fact saved the full amount thus allowed, the
annual revenue loss could run to $2 billion or more. That is a total figure, including the billion in the preceding paragraph.
In conclusion, I should like to quote from the resolution unanimously adopted
by this committee on March 13, 1956, as released to the press on March 14.
The points contained therein seem especially significant. The resolution referred
to H. R. 9065 and other identical bills providing increases in railroad retirement
benefits and giving tax exclusions to employee contributions. The resolution
of this committee stated in part:
"Whereas the said bills provide that the employees' contributions to the railroad retirement program, shall be excluded from gross income for Federal income
tax purposes;
''Whereas such a tax provision represents a com.plete departure from established
principles of Federal income taxation and would create a special tax advantage
not available to an3^ other group of employees in the country;
"Whereas, the provision in question thus involves fundamental principles of tax
policy, including basic questions of fairness and equity in the tax system as a
whole;
"Whereas, such a tax provision, if enacted, would result in shifting to the Federal Government and, thus, to taxpayers generally the employee's share of the
cost of the proposed increase in railroad retirem.ent benefits and a portion of the
cost of the existing program;
"Whereas, such a tax provision, if enacted, would necessitate logically the
extension of a similar tax benefit to the. members of other retirement systems at
a cost to the Federal revenue of several.billion dollars annually;
"Whereas the ultimate revenue effects of the tax provision in question manifestly contain serious implications with regard to the Federal budget and the tax
burden of taxpayers generally; and then, after an omission of something dealing
with the jurisdictional matter,
200
1956 REPORT OF THE SECRETARY OF THE TREASURY
" W h e r e a s if the t a x provision in question were enacted the Com.mittee on Ways
a n d Means necessarily would have to consider further legislation to grant equivalent t r e a t m e n t to other retirem.ent systems."
For t h e foregoing reasons t h e Treasury strongly urges this committee to act
unfavorably on any bill which contains an income-tax exclusion for employee
contributions under the railroad retirement program out of fairness to t h e millions
of people who contribute to retirement systems without having any such advantages.
I might add, Mr. Chairman, t h a t t h e Treasury Departm.ent position as I have
just stated it was stated previously both to t h e House Committee on I n t e r s t a t e
and Foreign Commerce and t h e Senate Committee on I n t e r s t a t e and Foreign
Commerce, when t h e y were dealing with bills combining t h e increase in benefits
and t h e tax exclusion. I reviewed this^subject with t h e Secretary of the Treasury
yesterday afternoon before coming up here. He advised me t h a t our position,
of course, was in no sense changed from t h a t earlier position which had been
taken.
I further have checked with t h e Director of t h e Budget this morning, and
he informs m.e t h a t t h e proposed legislation giving tax exemption is not in accordance with t h e President's general program. So I speak for t h e Director of
t h e Budget as well as t h e Secretary of t h e Treasury this morning.
E X H I B I T 12.—Letter of Secretary of the Treasury H u m p h r e y , M a r c h 26,1956, to
the Chairman of the Senate Finance Committee on H . R. 7225 to provide
important changes in the social security program
M Y D E A R M R . CHAIRMAN: This is in response to your request for the Treasury
D e p a r t m e n t ' s views on H. R. 7225, which would make i m p o r t a n t changes in t h e
social security program and which t h e Senate Finance Committee now has under
consideration.
T h e bill would extend t h e coverage of t h e old-age and survivors insurance
program to include several groups not now covered by t h e program, notably
self-employed professional groups other t h a n physicians. I t would lower the
age a t which women could qualify for retirement benefits from 65 to 62, whether
they qualified in their own right or as widows or wives of insured persons. I n
addition, a new category of cash benefits for total and p e r m a n e n t disability
would be created. To finance t h e proposed changes, H. R. 7225 increases paj^roll taxes on wages by 1 percent (half to be paid by employees, and half to be
paid by emploj^ers), and t h e t a x on self-employment income by % percent.
Extension of t h e old-age and survivors insurance program to noncovered
groups in t h e population is highly desirable. I t is in t h e interest of t h e individuals .
and their families who would come under t h e plan and, insofar as it improves t h e
financing of t h e plan, it is in t h e interest of those already covered. However,
we would urge t h e committee to extend coverage beyond t h a t provided in the
bill, particularly to Federal civilian employees and t h e Armed Forces. T h e
recommendation to cover Federal civilian employees was made in 1954 by t h e
committee established under congressional authorization to study retirement
programs of t h e Federal Government. T h e inclusion of members of t h e Armed
Forces, which would also be desirable, is provided i n H . R. 7089, which is now
pending before your committee.
T h e provisions of t h e bill lowering t h e age a t which women qualify for retirem e n t benefits and for t h e establishment of cash benefits for t o t a l and p e r m a n e n t
disability and t h e necessary increases in payroll taxes to finance these new benefits have been commented on by Secretary Folsom in his testimony before your
committee. T h e Treasury D e p a r t m e n t concurs in t h e recommendations made
b y t h e D e p a r t m e n t of Health, Education, and Welfare, and I have nothing to
add in terms of elaboration or additional comment.
I n t h e light of these considerations, t h e D e p a r t m e n t recommends t h a t your
committee report a bill to expand t h e coverage of t h e old-age and survivors
insurance program and eliminate t h e increased taxes and new benefit features
of H. R. 7225.
T h e Director, Bureau of t h e Budget, has advised t h e Treasury D e p a r t m e n t
t h a t there is no objection to t h e presentation of this report.
Sincerely yours,
G. M.
HUMPHREY,
Secreiary of ihe Treasury.
EXHIBITS
201
EXHIBIT 13.—Statement by Dan T. Smith, Special Assistant to the Secretary of
the Treasury in Charge of Tax Policy, October 4, 1955, before the Subcommittee on Excise Tax Technical and Administrative Problems of the House
Committee on Ways and Means
The Treasury Department welcomes the opportunity afforded by
these hearings of the Subcommittee on Excise Tax Technical and
Administrative Problems of the Ways and Means Committee to secure,
through the testimony which will be presented to you, comprehensive
and up-to-date suggestions of taxpayers on the technical and administrative aspects of excise taxation. We share the committee's interest
in the subject. The extensive material which will be presented in the
hearings will be of great benefit to us in our own continuing review
of problems in this area.
I n 1953, as part of the preparation of recommendations concerning
tax legislation for 1954, the staffs of the Treasury Department and
the Internal Revenue Service examined the proposals which had been
made up to that time by taxpayers and various groups outside the
Government for modifications of the administrative and technical
aspects of excise taxation. Discussions were also carried on with
those responsible for the administration of these taxes in the Internal
Revenue Service to get their suggestions for improvements. Several
joint conferences were held with the staff of the Joint Committee on
Internal Revenue Taxation on the subject. I t was contemplated, for
a time, that it would be possible to develop a number of recommendations to present to the Ways and Means Committee in connection with
the general revision of the Internal Revenue Code in 1954. Under
the time pressures which developed, however, it was not possible to
include excise-tax problems in the Department's tax recommendations.
I n the intervening months, various other suggestions have come in to
the Department, but it has not been feasible to secure a comprehensive
set of proposals by taxpayers on the interrelated aspects of this general problem.
We find it especially important to deal with individual problems
in the excise-tax area only after full consideration of their possible
connections with other problems. So often, a change which might
. appear to solve a problem or relieve an inequity will create more serious new problems or inequities, which with greater foresight might
have been anticipated and avoided.
The testimony which will be presented at the hearings will, we are
sure, be of great value by providing a full and up-to-date coverage of
suggestions by taxpayers. We hope it will be possible to have joint
conierences with your staff in reviewing and examining the material
which will be presented to you here.
After conferences with members of your staff, the Treasury Department has prepared three different items for presentation to the subcommittee. I n the first, embodied in my present statement, I shall
indicate briefly the principal categories into which the complaints
and suggestions which we receive, other than those having to do with
rates, seem to fall. I n doing so, I shall attempt to list some of the
alternative ways in which the problems which give rise to those suggestions may be approached.
After I conclucle my presentation, Mr, Justin Winkle, Assistant
202
1956 REPORT OF THE SECRETARY OF THE TREASURY
Commissioner (Technical), who has had extensive experience in many
aspects of the work of the Internal Revenue Service, will describe
the procedures used in the Service in connection with the preparation
and publication of rulings on excise tax matters, collections, and audits.
The third item in our presentation will be a working draft of a
revision of chapter 51, and certain parts of chapters 52 and 53, of the
Internal Revenue Code. This is being made in accordance with the
direction of the Ways and Means Committee in its report on H . R.
8300 which stated (H. Rept. No. 1337, 83d Cong., 2d sess., p. 95) :
Due to a lack of time the revision of the distilled-spirits provisions was more
limited than in the case of the provisions relating to the other alcoholic beverage
and tobacco taxes. In view of this, at the direction of your committee an Alcohol
Tax Survey Committee of the Treasury Department is now working with a committee of the distilled-spirits industry to consider further changes for submission
to the next Congress.
This will be presented by Mr. Dwight E. Avis, Director of the Alcohol and Tobacco Tax Division of the Internal Revenue Service. I
wish to emphasize that the material which he presents will be a working draft, as developed by the committee in his division working with
a committee of the distilled-spirits industry on technical and administrative matters. This draft was not available in the Treasury Department until the end of last week, and in the intervening days it has
not been possible to have it reviewed by the Treasury staff and the
officials concerned with policy in this area. I t is almost inevitable that
some things which may be deemed appropriate by those who administer the law will have to be modified when they are reviewed from
the standpoint of general policy.
Specifically, and merely as one example, to the extent that there is
any adverse effect on the revenues from the proposed changes, the
Treasury Department will withhold favorable recommendations at
this time. With the understanding that the draft which Mr. Avis
presents does not constitute a recommendation of the Treasury Department, it seems useful to take this occasion to make it available
for examination and comment.
As Mr. Avis will indicate, the proposed revision of chapter 51 does
not deal with five controversial areas. Each of these involves complex administrative problems, has serious competitive and economic
ramifications, and is the basis for intense and conflicting feeling within
the industries affected. Many of them have existed for generations.
I n the belief that the existence of these controversial problems should
not delay consideration of the other noneontroversial improvements,
we have studiously avoided suggesting any change in the law in these
five areas. The draft which will be presented to you simply carries
forward the old law on these issues.
On the technical aspects of the law, the following classifications
have seemed helpful to us in our own analysis of the suggestions which
come to us. First, there are numerous suggestions for exemption for
particular items from one or another of the excise taxes. These invariably have an adverse effect on the revenue and from this standpoint are as serious as reductions in rates.
We have found that there are at least four reasons given for. proposed exemptions. Sometimes they are advanced on the grounds that
EXHIBITS
203
the thing subject to tax is believed to have an important social purpose. Various exemptions now in the law appear to be based on these
grounds, especially the exemptions from admissions tax for activities
which are cultural or educational in purpose, or the proceeds of which
go to charitable activities.
The second reason advanced for giving exem^Dtions is an alleged
need to redress a competitive inequity between competing activities
or industries. This, for example, is the basis for the elimination of
the tax on Sen-Sen, as provided in H . R. 4668, passed by the House
in the last session of the Congress. Inevitably some things taxed will
be more or less competitive with other things which are not taxed.
The third reason for asking for relief is a state of distress in a
particular industry, either temporary or arising from long-term secular changes in the demands for particular products.
The fourth reason sometimes advanced for exemption is simply
that the dollar amount of revenue involved is relatively small, and
the administrative burden on both taxpayers and the Government
is not justified, so it is claimed, by the revenue collected. This argument is usually associated with one of the preceding reasons.
Experience has indicated that any exemptions granted, no matter
how justifiable they may appear at lirst sight to be, are likely to lead
to claims for other exemptions. Exemptions for a particular activity
on the basis of a charitable or social purpose almost inevitably lead
to claims for exemptions by others with somewhat similar activities.
Those who consider that their activities are equally worthy of special
treatment contend that they are being discriminated against if they
do not get an exemption. Also, when exemptions for charitable or
social purposes are granted, charges of unfair competition are likely
to be made by those whose products are subject to tax. The admissions
tax has raised many problems of this sort.
A second set of problems arises in connection with the classification
of a particular item into one or another of two categories which may
be subject to different rates of tax, or one of which may be taxed and
the other untaxed. Examples of this sort of problem occur in connection with the determination whether jewelry of a religious nature
is exempt because it is used for religious purposes or is taxable because
it is ornamental. Also, cigarette lighters may be taxable either as
such at 10 percent of manufacturer's price, or, if they are sufficiently
decorated they may be taxed as jewelry at 10 percent of the retail
price.
The third type of problem arises in developing a line of demarcation between the process of manufacturing and mere repair activity
in the application of a manufacturer's excise tax. I n most cases, no
problems are involved, but there are some borderline situations in
which the amount of new material or the extent of reprocessing really
converts what is asserted to be a repair into a manufacturing operation.
I t is quite understandable that in these borderline situations, some
taxpayers will argue that their activities do not constitute manufacturing, while representatives of competing manufacturers insist that
they would be placed at an unfair competitive disadvantage if those
engaged in extensive processing are not subject to comparable taxes.
While the statute contains specific provisions to deal with trade-in
204
1956 REPORT OF THE SECRETARY OF THE TREASURY
allowances on rebuilt automobile engines, it remains a problem to distinguish between rebuilding and repairing operations.
Another sort of problem in the definition of a manufacturer has to
do with fixing the point of manufacture when a succession of companies handle various stages of production. There is a natural desire
by taxpayers to have a tax imposed at the first possible stage of production because the tax base is thus kept at a minimum. For example,
it may be argued that even though a company advertises, guarantees,
distributes, and puts its own brand name on a product, it should be
taxed to another company which physically produces the product.
Other companies, however, which carry on all these production
processes contend that if the tax is based only on physical processing,
they would be placed at a disadvantage or forced to create artificial
arrangements to secure an equal competitive treatment.
Another type of problem arises in determining the proper excise
tax base for manufacturers who carry on their own distribution up
to the retail level as compared with those who sell finished products
to jobbers and wholesalers. I t is sometimes urged that manufacturing
companies which have extensive distribution systems and costs should
be permitted, instead of paying the tax on their actual sales prices,
to use a lower price which it is presumed they would have charged if
they sold to jobbers and wholesalers in the same manner as their competitors do. Suggestions of this sort often seem well founded because
the greater tax burden on a firm which does carry out its own distribution is very real. However, any attempts to determine proper
presumptive prices would inevitably lead to controversy and would
involve a delegation of a large amount of additional administrative
discretion to the Internal Revenue Service. The rule of basing the
tax on invoice price does assure the important element of certainty.
Another set of problems arises in connection with the treatment of
taxable items which may be incorporated by other manufacturers into
nontaxable products. The question is whether a taxed item in some
sense loses its identity and hence should become nontaxable when
it is used as a component in a larger or more elaborate article. This
problem appears in connection with tires and radios used in the manufacture of automobiles.
The final set of problems deals with the technique of establishing refunds, credits, or exemptions on items destined for tax-exempt uses,
as, for example, sales to States and municipalities and in connection
with exports. This, however, is largely a procedural matter and
hence may be better handled in connection with the consideration of
collections and audits.
Ill all the foregoing areas, it is of course quite natural for taxpayers to advance arguments to justify either administrative treatment or special statutory provisions which will minimize their tax
burdens. They will also be on the alert to arrange their affairs in
such a manner as to take advantage of any special provisions which
may exist.
I n the Treasury Department, we feel it is our responsibility to administer and apply the tax laws, as they are passed by the Congress,
in a way to place a minimum inconvenience on taxpayers, combined
with full protection of the revenues and reasonable administrative
EXHIBITS
205
burdens upon the Government. We recognize a further responsibility
to observe the operation of the laws and to make recommendations
for their improvement, both for the purpose of removing unnecessary
compliance burdens and inequities on taxpayers, and for the purpose
of protecting the revenues.
Our own investigations in these areas are not yet complete, and it
would be premature at this time to make any specific recommendations
to the committee on possible changes in the technical and administrative aspects of the excise-tax laws.
Mr. Winkle and a number of specialists from the Internal Revenue
Service are here and we shall undertake jointly to provide such information as may be desired by the committee on such aspects of the
subject as you may wish information.
EXHIBIT 14.—Announcement by the Treasury Department of an agreement negotiated with the French Ministry of Finance and Economic Affairs concerning
the application of French turnover taxes to license fees received by American
owners of patents, copyrights, etc., licensed for use in France (memorandum
to the Press, February 14, 1956) i
The Treasury Department announced today that an agreement had been
reached with the French Ministry of Finance and Economic Affairs concerning
the application of French turnover taxes to license fees received by American
owners of patents, copyrights, trademarks, and manufacturing processes or
formulas licensed for use in France.
The agreement is effective February 15, 1956, in accordance with an exchange
of letters by the Secretary of the Treasury and the French Minister of Finance.
Under the terms of the agreement an American licensor who qualifies as an
inventor is exempt from the French turnover tax. American firms have six
months within which to establish their status as inventors.
The agreement was reached in connection with a proposed protocol to the
existing Franco-American tax convention which has been negotiated and will
soon be submitted to the Senate.
EXHIBIT 15.—Miscellaneous revenue legislation enacted by the Eighty-fourth
Congress, Second Session
Public Law 396, January 28, 1956, adds a new paragraph to Section 381 (c) of
the Internal Revenue Code of 1954 to m.ake available to a successor corporation
as a deduction in years beginning after Decem.ber 31, 1953, and ending after
August 16, 1954, the carryover of unused excess contributions made by a former
subsidiary corporation to a pension plan in cases where (1) the corporate laws of
the State of incorporation of the subsidiary required the surviving corporation in
the case of a merger to be incorporated under the laws of the State of incorporation of the subsidiary, and (2) the properties were acquired in a tax-free liquidation
of the subsidiary under Section 112 (b) (6) of the 1939 Code.
Public Law 397, January 28, 1956, am.ends Section 311 (b) (4) of the 1939 Code
to permit an extension of time for claiming credit or refund of income tax by
transferees or fiduciaries where an agreem.ent has been entered into extending the
period of limitation for assessments. This amendment is effective in all circum.stances in which it M^ould have been effective if it had been enacted on August 17,
1954.
Public Law 398, January 28, 1956, amends Section 37 of the Internal Revenue
Code of 1954 to lower from 75 to 72 the age at which the m.aximum credit for
retirement income will not be reduced as the result of the earned income of the
individual, and to increase to $1,200 the amount of incom.e which may be earned
by a person be^Aveen 65 and 72 years of age without reduction of the credit. The
For text of agreement, see Senate report "Executive J,," 84th Cong., 2d Session, pp. 6-15
206
1956 REPORT OF THE SECRETARY OF THE TREASURY
rule with respect to persons under 65 years of age remains unchanged. These
changes are applicable to taxable years beginning after December 31, 1955.
Public Law 399, J a n u a r y 28, 1956, amends Section 117 (c) (1) (A) of the 1939
Code to provide t h a t in tifie computation of corporate credits for intercorporate
dividends received, for dividends paid on certain preferred stock, and for Western
Hemisphere trade corporations, a corporation's net income for taxable years
beginning after December 31, 1951, and before J a n u a r y 1, 1954, is to be determined without reduction for t h e excess of the long-term capital gain over t h e shortterm capital loss.
Public Law 400, J a n u a r y 28, 1956, am.ends Section 4332 of t h e Internal Revenue
Code of 1954, relating to t h e exemption from tax on sales or transfers of certificates of indebtedness, by inserting a new subsection (b) to provide t h a t the tax
imposed by Section 4331 shall not apply to any instrument under the term.s of
which t h e obligee is required to make p a y m e n t therefor in installments and is not
permitted to m a k e in any year a p a y m e n t of more t h a n 20 percent of t h e cash
a m o u n t to which entitled upon m a t u r i t y of the instrument.
Public Law 408, February 15, 1956, amends Section 120 of t h e 1939 Code
relating to unlimited deductions for charitable contributions to provide t h a t t h e
90 percent test need be m e t in only 8 out of 10 of the preceding taxable years
instead of in each of t h e prior 10 years. Any refund attributable to an overpaym.ent of tax resulting from this am.endment is to be permitted only if the a m o u n t
of t h e refund is paid immediately as a charitable contribution.
Public Law 414, February 20, 1956, am.ends Section 2011 of t h e Internal
Revenue' Code of 1954, by adding a new subsection (e) which provides t h a t no
credit shall be allowed for any State d e a t h tax for which a deduction is allowed
under Section 2053 (d), and t h a t t h e a m o u n t allowable as a credit for State death
taxes shall nbt exceed the lesser of (A) t h e am.ount t h a t is allowable for a taxable
estate determined by allowing t h e deduction provided in Section 2053 (d), or (B)
the a m o u n t of t h e credit computed without regard to Section 2053 (d) which is
attributable to the State death tax on transfers other t h a n those described in
Section 2055, or in t h e case of nonresident aliens. Section 2106 (a) (2). The act
also adds a new subsection to Section 2053 which provides t h a t , if the executor
elects within the period provided, a deduction m.ay be taken, subject to certain
conditions, for t h e a m o u n t of any estate, succession, legacy, or inheritance tax
im.posed by a State upon a transfer by t h e decedent for public, charitable, or religious uses as described in Section 2055 or, in the case of nonresident aliens. Section
2106 (a) (2). This provision is applicable to the estates of decedents dying after
August 16, 1954. These a m e n d m e n t s to t h e 1954 Code are m.ade applicable to
Chapter 3 of t h e 1939 Code with respect to estates of decedents dying after
December 31, 1953.
Section 1 of Public Law 414 am.ends Section 208 (b) of the Technical Changes
Act of 1953, which grants relief from the estate tax in certain disability cases, by
extending its application to estates of decedents dying after December 31, 1947,
instead of December 31, 1950.
Public Law 417, F e b r u a r y 20, 1956, adds a new Section 814 to t h e Internal
Revenue Code of 1939 which provides t h a t an executor of an estate m a y elect,
with respect to estates of decedents dying after December 31, 1951, to t a k e a
credit against t h e estate tax for t h e a m o u n t of t a x paid on property passing to t h e
decedent from a person who was t h e spouse of t h e decedent at t h e time of such
person's d e a t h and who died within two years prior to t h e decedent's death.
If t h e executor claims t h e credit provided by the new Section 814, he m a y not
t a k e a deduction under Section 812 (c) for propertv previously taxed.
Public Law 495, April 27, 1956, amends Section 1237 (a) of t h e Internal Revenue
Code of 1954, to extend t h e capital gains t r e a t m e n t to corporations in t h e case
of certain property acquired through t h e foreclosure of a lien thereon, b u t only
if no stockholder directly or indirectly holds real property for sale to customers
in the ordinary course of t r a d e or business. Subsection (b) (3) of Section 1237
is amended to a d d ''drainage facilities" to t h e improvements which a taxpayer
m a y install, and to provide t h a t in determining whether an improvement is to be
considered a si bstantial improvement in the case of property acquired through
the foreclosure of certain liens t h e requirements of subparagraphs (B) and (C)
are not to apply.
P u b h c Law 511, May 9, 1956, " B a n k Holding Company Act of 1956," amends
subchapter 0 of Chapter 1 of the Internal Revenue Code of 1954 by adding a
new p a r t V I I I . This p a r t specifies t h e extent to which gain will not be recognized
upon receipt of property by a shareholder of a bank holding company if such
EXHIBITS
207
distribution is made pursuant to a certification b}- the Board of Governors of the
Federal Reserve System that such a distribution is necessary or appropriate to
effectuate the act. The new provisions are applicable only to gain directly
attributable to the receipt of property in such distributions. Special rules for
determining the basis of property so distributed are also provided.
Public Law 545, May 29, 1956, extends to June 30, 1961, the period during
which the excise and import compensating tax is applicable to sugar. Sections
4505 and 6418 (a) of the Internal Revenue Code of 1954 are am.ended by Section 19
of the act to provide that either the excise tax or the import compensating tax,
whichever is applicable, may be refunded on sugar used for livestock feed or for
the distillation of alcohol.
Public Law 628, June 29, 1956, amends Section 373 cf the Internal Revenue
Code of 1954 and adds a new Section 374. Under Section 373 of the 1954 Code
no loss is recognized where property of a railroad corporation is transferred pursuant to a court order in a receivership proceeding or in a proceeding under
Section 77 of the Bankruptcy Act to another railroad corporation organized for
purposes of effectuating a plan of reorganization approved by the court. The
amendment to this section limits it to transfers before August 1, 1955. The new
Section 374, applicable to transfers after July 31, 1955, provides for nonrecognition
of gain or loss in such receivership or bankruptcy reorganizations except in the
case of certain transfers resulting in gain where ''boot" is received but is not
distributed in pursuance of the plan of reorganization. The basis of the property
acquired after July 31, 1955, is the sam.e as it would be in the hands of the transferor, increased by the amount of gain recognized. The act is applicable to
taxable years beginning before December 31, 1957.
Pubhc Law 629, June 29, 1956, amends the Internal Revenue Codes of 1939
and 1954 as follows:
The first section of this act adds a new subsection (q) to Section 117 of the 1939
Code providing capital gains treatment for royalties received after May 31, 1950,
from the sale or exchange of patent rights, in the same manner as under the
1954 Code.
Section 2 of the act amends Section 106 of the 1939 Code. Section 106 limits
the surtax on individuals to 30 percent in the case of amounts received from the
United States on claims involving acquisition of property. This amendment
extends the application of Section 106 to payments received from the United
States arising under a contract for the construction of installations or facilities
for any branch of the armed services of the United States and remaining unpaid
for more than 5 years from the date the claim first accrued and paid prior to
January 1, 1950. The am:endments are applicable to taxable years eriding after
December 31, 1948, notwithstanding the operation of an}^ law or rule of law other
than provisions relating to closing agreem.ents and conipromises. The period
of limitation for allowance of an overpayment in no case expires before June 29,
195'-/.
Section 3 of Public Law 629 adds a new subsection (n) to Section 115 of the 1939
Code relating to distributions by corporations. Under certain court decisions,
corporate distributions of property are taxed as dividends to shareholders in
amounts greater than the earnings and profits of the corporation available for
dividend distribution. This amendment provides that corporate distributions
of propertv be treated as dividends only to the extent they represent distributions
of earnings and profits of the corporation. The general effect ot the amendment
is to overrule such court decisions. The amendment is effective as if it were a
part of Section 115 on the date of enactment of the 1939 Code but there is no
provision for reopening barred cases.
Section 4 of the act adds a new Section 177 to the Internal Revenue Code of
1954 which permits, at the election of the taxpayer, amortization of the cost of
acquiring, protecting, expanding, registering, or defending trademarks and trade
names over a period of not less than 60 months. Such costs must not be part of
the consideration paid for the purchase of an existing trademark, trade name, or
business. This amendment applies only to expenditures paid or incurred during
a taxable year beginning after December 31, 1955.
Section 5 of the act adds a new subsection (f) to Section 1033 of the 1954 Code.
This new subsection permits farmers to treat as an involuntary conversion the
sales of draft, breeding, or dairy livestock in excess of the usual business practice,
if sold solely because of drought. The amendment applies only to sales and exchanges of livestock after December 31, 1955.
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1956 REPORT OF THE SECRETARY OF THE TREASURY
Public Law 700, July 11, 1956, extends until July 11, 1958, the existing authority
of the Secretary of the Treasury in respect to transfers of distilled spirits for purposes deemed necessary to meet the requirements of the national defense.
This act also adds a new subparagraph (D) to Section 852 (b) (3) of the 1954
Code which requires the shareholders of a regulated investment company, for
taxable.years beginning after December 31, 1956, to include in their income as
long-term capital gains their shares of undistributed long-term capital gains as
designated by the company. The shareholder is deemed to have paid his share of
the 25 percent capital gains tax paid by the company on such gains, which is to
be credited or refunded to him. The basis of his shares is increased by 75 percent
of the amount of the undistributed long-term capital gains.
Public Law 723, July 16, 1956, continues until June 30, 1957, the suspension of
duties and import taxes on metal scrap, with additional exclusions therefrom; and
permits under certain conditions the abatement or refund of taxes on distilled
spirits lost by theft from a customs bonded warehouse after January 1, 1945.
PubHc Law 726, July 18, 1956, adds a new paragraph to Section 1441(c) of the
1954 Code to remove any requirement for the deduction or withholding of tax on
the per diem payments by the United States Government to trainees brought to
the United States under the mutual security program.
Pubhc Law 728, July 18, 1956, "Narcotic Control Act of 1956," amends Sections 4744 (a), 4755 (b), 7237, and 7607 of the Internal Revenue Code of 1954 to
make it unlawful to transport or conceal, or in any manner to facilitate the transportation or concealment of any marihuana acquired or obtained without having
paid the transfer tax, to provide a specific penalty in any case where a person sells
or transfers narcotic drugs or marihuana without a written order, and to permit
personnel of the Bureau of Narcotics to carry firearms, execute search warrants,
and make arrests without warrants in certain situations. The act also adds a new
sentence to Section 4774 of the 1954 Code, relative to territorial extent of the law,
which makes the provisions inapplicable to Puerto Rico unless the Legislative
Assembly there expressly consents to their application. The effective date of
these amendments is July 19, 1956.
Public Law 870, August 1, 1956, "Renegotiation Amendments Act of 1956,"
amends the Renegotiation Act of 1951 and extends it for two years to December
31, 1958.
Public Law 881, August 1, 1956, "Servicemen's and Veterans' Survivors Benefits Act," amends Sections 3121 and 3122 of the 1954 Code to provide that in the
case of individuals serving after 1956 in the uniformed services, only the first.
$4,200 of basic pay in any calendar year will count as wages for purposes of the
Federal Insurance Contributions Act tax. New subsections define the term
"member of a uniformed service" and provide that service performed after 1956
by a member of a uniformed service on active duty will constitute employment for
FICA purposes. Section 3122 is amended to make it clear that payments of the
employer's Federal Insurance Contributions Act tax with respect to service performed by members of the uniformed services after 1956, will be made from appropriations available for the pay of such members.
Public Law 896, August 1, 1956, adds a new subsection (d) to Section 4735 of
the 1954 Code which authorizes enforcement in Guam of Code provisions relating
to narcotic drugs (except opium for smoking) by territorial officers, and covering
of all taxes collected in Guam into the territorial treasury, effective November 1,
1956. A new Section 4716 is inserted in the 1954 Code which makes the provisions relating to opium for smoking applicable to Guam, and provides that
administration of the provisions shall be performed by officers of Guam, with all
revenues accruing to that government. Section 4774 of the 1954 Code is amended
to make Code provisions relating to marihuana inapplicable to Guam.
Public Law 901, August 1, 1956, permits in the case of persons who died after
February 10, 1939, refund or credit of estate tax overpayments resulting from
application of subsections (a) and (b) of Section 7 of the act. of October 25, 1949
(63 Stat. 891; Public Law 378, Eighty-first Congress), if refund or credit was prevented on October 25, 1949, by any law or rule of law other than by a closing
agreement or a compromise. Claim for refund of the overpayment must be filed
by August 1, 1957. In determining the amount of refund, the overpayment of
estate tax must be reduced by any gift tax refund rerulting from the inclusion in
the gross estate of the property causing the overpayment of estate tax. No
interest is to be allowed on the overpayment.
Public Law 1011, August 6, 1956, adds a new paragraph (2) to Section 2055 (b)
of the Internal Reve.nue Code of 1954, to allow a deduction for estate tax purposes
EXHIBITS
209
in the case of certain bequests in trust with respect to which no deduction has been
allowable. Under this act, a deduction is allowed to the extent that the donee
of a testamentary power of appointment over the corpus of the trust declares by
affidavit within one year of the decedent's death his intention to exercise the
power in favor of specified charitable organizations and the power is exercised in
the manner stated in the affidavit. The donee of the power must be over 80
years of age at the time of the decedent's death. The act also adds a new subsection to Section 6503 under which the running of the period of limitations for
assessment or collection of the estate tax in respect of the estate of a decedent
claiming a deduction under Section 2055 (b) (2) is suspended until 30 days after
the expiration of the period for assessment or collection of the tax imposed on the
estate of the surviving spouse. These amendments apply in the case of decedents
dying after August 16, 1954.
Public Law 1022, August 7, 1956, amends Section 170 (b) (1) (A) (iii) of the
1954 Code to extend the additional ten percent deduction for charitable contributions to medical research organizations which are directly engaged in the continuous active conduct of medical research in conjunction with a hospital. This
amendment applies only to taxable years beginning after December 31, 1955.
International Financial and Monetary Developments
EXHIBIT 16.—Statement by Secretary ofthe Treasury Humphrey, March 2,1956,
before the House Ways and Means Committee
I appear before you in support of H. R. 5550. This bill is designed to carry out
the President's recommendation that Congress authorize United States membership in the Organization for Trade Cooperation. The President in his message
on the State of the Union explained why this is-highly desirable.
While the United States is not as dependent on foreign trade as many other
countries, our prosperity is greatly infiuenced by the flow of goods out of and into
the country. The policies which other countries follow in their trade have serious
impact on us. Our trade policies in turn have a great effect on others because our
commercial trade is 17.5 percent of world trade.
Our membership in the OTC will indicate our desire to deal with matters of
trade in the same cooperative way we do with, military matters in the North
Atlantic Treaty Organization, and with financial matters in the International
Monetary Fund and in the International Bank for Reconstruction and Development. Our acceptance of membership would give practical evidence to our free
world partners that our desire for sound working relationships extends to the
field of trade.
The purpose of the OTC is to provide a continuing international body for the
discussion of international trade problems and to administer the General Agreement on Tariffs and Trade. Up to now there has been no such continuing body
and mutual trade arrangements have depended on occasional international meetings or negotiations between individual countries.
We can expect concrete advantage to the United States if there is such an organization through which our chosen representatives can press for action beneficial
to us, such as reduction of trade restrictions which discriminate against American
goods. This organization would provide a more effective forum to which our
representatives could promptly take complaints and press our point of view.
We in the Treasury Department are primarily concerned with the relationship
of the OTC to balance of payments questions, currency convertibility, and customs
administration.
One of the major problems of international trade since the war has been the
widespread use of quotas or quantitative restrictions on imports as the principal
means of dealing with balance of payments difliiculties. Progress toward removing these quotas has been made during the past few years. But it has not been
easy, and it is not going to be easy, to reach the point where countries will substantially reduce use of import restrictions as a means of protecting their currencies, and instead rely on firm monetary policies and competitive enterprise to keep
themselves financially strong. American exporters, in particular, have felt the
adverse effects of quota restrictions since the war, because these restrictions have
generally discriminated against our products as compared with those of other
countries.
399346—57
15
210
195 6 REPORT OF THE SECRETARY OF THE TREASURY
I n considering t h e use of such import restrictions b y a member country, t h e
O T C will consult t h e International Monetary F u n d regarding t h e balance of
p a y m e n t s situation of t h e country a n d its level of reserves. Such consultation,
among other things, will serve t o prevent t h e use of import restrictions as a s u b stitute for foreign exchange restrictions which are n o t justifiable.
I n t h e customs field we in t h e Treasury are concerned with such m a t t e r s as t h e
internal taxation of goods we import, t h e imposition of antidumping a n d countervailing duties, t h e valuation of imported merchandise for customs purposes, a n d
other customs requirements. One of t h e duties of t h e O T C will be t o administer
a fair a n d reasonable code of practice relating t o such matters, which substantially
conforms t o t h e customs practices a n d procedures which we have been following
for m a n y years. Membership in O T C should help t o protect our exporters from
discriminatory, unfair, or capricious t r e a t m e n t in foreign markets.. I t should
help t o obtain for t h e m t r e a t m e n t comparable in general t o t h a t which we are
giving foreign exporters to t h e United States.
Creation of t h e O T C would require no change in our t r a d e a n d tariff laws.
T h e President has explained in his State of t h e Union Message t h a t t h e O T C
cannot alter t h e control of Congress over t h e tariff, import, a n d customs policies
of t h e United States. I t has no power itself t o change a n y of t h e rules.
For these reasons I recommend t h a t Congress authorize United States.membership in t h e O T C .
E X H I B I T 17.—Letter of Secretary o f t h e Treasury H u m p h r e y , July 27,1956, to t h e
Chairman of the H o u s e Ways and M e a n s Committee on proposed legislation
imposing a processing tax on certain watch m o v e m e n t s
M y D E A R M R . C H A I R M A N : I a m writing in reference t o H . R . 11436 a n d H . R .
11437, identical bills imposing a processing t a x on certain watch movements
which were introduced b y Mr. Mills a n d Mr. Reed, respectively, a t t h e Second
Session of t h e 84th Congress, a n d referred t o t h e Ways a n d Means Committee.
T h e purpose of this legislation, which is supported b y t h e Treasury D e p a r t m e n t
a n d other interested agencies in t h e executive branch, is t o correct a recently
developed deficiency in t h e provisions of t h e Tariff Act of 1930 relating t o watch
movements.
We understand t h a t you a n d a n u m b e r of other members of your committee
felt t h a t a d e q u a t e consideration of t h e bills would require public hearings a n d
extensive consideration b y t h e committee.
As you know, t h e Treasury D e p a r t m e n t and other interested executive agencies
believe this deficiency .which presently exists in t h e tariff law is a quite serious
one a n d can be satisfactorily corrected only through legislation.
Now t h a t Congress is about t o adjourn, it will, of course, n o t be possible for
this m a t t e r t o be rectified before next year. However, we plan t o propose legislation early in t h e next session of Congress when there will be ample time t o give
it thorough consideration. I hope t h a t this can t a k e place as shortly after t h e
Congress convenes as you find it practicable.
Sincerely yours,
G. M.
HUMPHREY,
Secretary of the Treasury.
E X H I B I T 18.—Remarks by Secretary o f t h e Treasury H u m p h r e y a s Governor for
the United States, September 24, 1956, at t h e opening joint session of t h e
Boards of Governors of the International Bank for Reconstruction and Development and the International Monetary Fund, Washington, D . C.
Washington is a long way from t h e romantic scenes along t h e Bosporus a n d t h e
Golden Horn, where last we met. I t is hard for us here t o rival t h e scenery a n d
t h e warm hospitality which we all enjoyed there, b u t I again welcome you m o s t
cordially t o Washington. I hope you will all have a pleasant visit. We look
forward t o participating with you in these meetings a n d t o t h e opportunity of
meeting t o discuss our m u t u a l problems with you personally.
At this opening meeting we should like t o express our appreciation of t h e work
of t h e International M o n e t a r y F u n d a n d of t h e Tnternational Bank during t h e
past year. And we are pleased t o welcome Argentina a n d Viet N a m as new
members.
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211
The F u n d has continued its valuable work with its member countries in quietly
and effectively reviewing with t h e m their m o n e t a r y and financial pohcies and
working with t h e m to remove unnecessary governmental restrictions. I t has
provided valuable technical advice and assistance, as well as temporary financial
aid where t h a t was required.
T h e Bank has recorded another outstanding year of constructive help to its
members in financing economic development a n d in encouraging t h e participation of private capital in its activities. We join with others in welcoming t h e
establishment of t h e International Finance Corporation, which we beheve is a
very hopeful experiment in getting private investors to join as partners in pro-,
viding an enlarged flow of venture capital to private enterprises in the member
countries.
' We congratulate Mr. Rooth, Mr. Black, and Mr. Garner for their leadership
and we particularly would like to express t o Mr. Rooth, who is ending his t e r m as
managing director, our warm appreciation for his devoted and distinguished service to t h e Fund, and our very best wishes to him for t h e future.
T h e basic problems which confront us in m.ost of our countries are t h e economic
a n d financial problems arising—happily—out of high prosperity in a world a t
.peace.
I t might seem surprising t h a t peace and prosperity should cause trouble for
finance ministers and central bank governors. These present troubles of ours
are m u c h more bearable t h a n those of depression or war. They are, nevertheless, very real.
These problems arise from the insistent and conflicting demands on available
resources in each country. T h e question, in a few words, is how to finance both
needed defense and high prosperity without inflation.
I t is our task to balance t h e demands for defense, high consumption, and for
further economic development, against available resources. We have to steer as
best we can t h e difficult and often u n m a r k e d channel between t h e whirlpool of
inflation and t h e rocks of deflation.
We who are gathered here, ministers of finance and central bank governors,
have a very special responsibility to t h e people of our countries. We are t h e
trustees of t h e value of our people's work and skill which is to say, t h e value of
their money. W e are responsible for the value of their wages and salaries, their
savings accounts, their pensions a n d insurance policies, and t h e other investments
they m a k e to provide for t h e future. This is a sobering responsibility and trusteeship. T h e average citizen cannot defend himself against the terrible hardships
of inflation.
Inflation brings with it grave social injustices and instability. I t destroys not
only t h e value of savings b u t also confidence, and security, and social values.
' Inflation is t h e c r u d e s t form of theft, a theft with greatest harm to those least able
t o protect themselves. Inflation results in t h e destruction of t h e value of money.
I t is a t t r a c t i v e only to those unwise politicians and others who are willing to
sacrifice long-term good for unreal b u t falsely a p p a r e n t immediate gain.
We here have a special trusteeship, additionally, because inflation destroys t h e
incentive to save and to invest funds. W i t h o u t such saving and investment in
productive enterprise we cannot have t h e growing and dynamic economies from
which can come more and better jobs, a n d higher standards of living for our growing populations.
I t is far too little realized w h a t an i m p o r t a n t contribution good money—money
which people can t r u s t — m a k e s to t h e soundness of a Nation. Confidence in t h e
value of money is one of t h e greatest spurs to economic progress because it is an
incentive to save, and it is our peoples' savings over the years—large and small
savings alike—which have built up pur countries.
This is t h e trusteeship which we h a v e — t o avoid inflation. I n this we are t h e
trustees of t h e people and t h e future of our countries. We are t h e trustees for
continued growth and continued peace and prosperit}^ of our people.
We in t h e United States responsible for t h e Government's financial and economic policies have tried t o continue t o discharge wisely this trusteeship a n d this
responsibility. We have brought t h e budget into balance. We have freed t h e
economy from artificial restraints and allowed m o n e t a r y policy to operate for t h e
public good. We can fairly report t h a t although we are not free from problems,
we have h a d substantial success. E m p l o y m e n t is at t h e highest level in our
history. National production is establishing new records. T h e cost of living
has moved within a very narrow range. Confidence is high and savings are
growing, This job of nourishing a dynamic Uniteci gtates economy, whije ^l^Q
212
195 6 REPORT OF THE SECRETARY OF TliE TREASURY
maintaining the United States dollar as a strong and reliable currency in the
world must be carried forward. This is not only a dut}^ to ourselves; it is an
important contribution to all of you, our friends from abroad.
Many of you have similar problems. We have been pleased to see so many
of the free world economies grow and strengthen during the past year. It is our
hope and belief that the interchange of views in these meetings will give us all
greater courage and inspiration, in our essential tasks, and that the Fund and
Bank will continue to render effective aid at many key points.
EXHIBIT 19.—Statement by Under Secretary of the Treasury Burgess as Temporary
Alternate Governor for the United States, September 26, 1956, at the discussion
of the Annual Report of the International Monetary Fund
Let me begin my remarks by paying tribute to Ivar Rooth, who is completing
five years of fine service to the Fund. During his term of leadership, the Fund
has grown in prestige and influence. More than ever it is looked to for support
and guidance by the member countries.
There seem to me three important elements in the progress which the Fund has
made. The first is the annual consultations with members respecting their exchange restrictions. Quietly and effectively the Fund has worked with its member countries for the reduction of government barriers to financial and trade transactions. As individual countries continue to gain strength, further progress
should be anticipated.
The second element in the Fund's progress is the providing, more generally, of
financial advice to the member countries. For many reasons, member countries
increasingly call on the Fund for on-the-spot analysis and recommendations.
They know that Fund missions will be sent promptly and quietly and that the
advice will be impartial and expert.
The third important development relates to policy and practice in the use of the
Fund's resources. As a result of vigorous discussion and added experience, there
is now widespread understanding and agreement along the lines set forth in last
year's annual report.
As to events of the past year, I should like to emphasize a point made by
Secretary Humphrey at the opening session. Most of our countries are encountering the problems of prosperity. With large increases in production and employment, and with investment running ahead of savings, there is scarcely a country
in which inflationary pressures are not strong.
The most encouraging feature is that the dangers of inflation have been recognized, and a continuous battle for financial stability has been waged, with considerable success, in nearly all countries of the free world.
A second gratifying point, noted in this and other Fund annual reports, is that
monetary and fiscal policy has superseded direct controls as the main reliance of
governments and central banks.
In connection with this second point, we may note with interest the comment ori
page 67 of the Report that during the past 3^ear more attention has been turned to
budgetary measures to fortify the effects of monetary policy. Monetary policy
alone can't be expected to hold the line if government spending is feeding the fires
of inflation.
We in the United States are particularly sensitive to this broad problem. Employment has reached the highest point in our history; unemployment is at a
minimum. Production and spending and personal incomes are at levels which,
only a few years ago, would have been thought unrealizable. New investment
continues to be made and planned on a massive scale. This all means that inflationary pressures are unrelenting and powerful.
It is, therefore, not surprising that some critics insist that monetary controls
are too severe, while others are pointing to a rise in the cost of living as evidence
that inflation is slipping out from under restraint. What has to be said in reply
to the critics on both sides is that the search for balance is continuous but, by the
very nature of things, cannot be one hundred percent successful. There are dangers on both sides. The danger of inflation is too well known to this group to
need definition. There are dangers on the other side" as well. Restraints must
not be applied with such a heavy hand that they imperil progress. So, along with
others, we walk this narrow path—not without care and anxiety—but with the
assurance that this is the proved path to national growth and well-being.
EXHIBITS
213
It has been encouraging to observe the increased public understanding of the
value of sound fiscal and monetary measures, compared with the restrictive and
artificial effects of direct government intervention in establishing and maintaining
a prosperous economy. We are, however, learning every day how much more
needs to be done to increase the public support which those of us assembled here
must have if we are to discharge successfully the trusteeship to which Secretary
Humphrey referred at the opening session: our trusteeship to the average citizen
in preserving the value of his wages and salary and his savings.
I cannot conclude these remarks without a word on behalf of the United States
Delegation to welcome to our midst and to the leadership of the Fund in the
future our old friend. Per Jacobsson. He has had a uniquely distinguished career
and has established a position of great personal prestige and influence in the economic and monetary field. We have all enjoyed, over the years, his vigor and his
good spirits. It is gratifying that our good friend, Ivar Rooth, who leaves us
after a distinguished career and service to the Fund, will be succeeded by his old
friend and compatriot, Per Jacobsson, who will, I am sure, continue to provide the
Fund with the devoted and able leadership from which it has benefited under
Ivar Rooth.
EXHIBIT 20.—Remarks by Assistant Secretary of the Treasury Overby as Temporary Alternate Governor for the United States, September 24, 1956, at the
inaugural meeting of the Board of Governors of the International Finance
Corporation, Washington, D. C.
We all take pleasure and pride in participating in this inaugural meeting of the
Board of Governors of the International Finance Corporation. As Secretary
Humphrey has said, we believe the International Finance Corporation is a very
hopeful experiment in getting private investors to join as partners in providing an
enlarged flow of venture capital to private enterprises in the member countries.
In creating the International Finance Corporation, we have jointly fashioned an
instrument that promises to fill a useful role, we have placed it in skilled hands,
and we are all looking forward to its performance. The auspices are favorable
and if the Corporation has the success we expect, this new instrument of international cooperation may have a far-reaching impact on the economic life of its
members.
Private investment capital has played an increasing role in the development of
the less-developed areas in recent years, but it has certainly not nearly attained its
full potential. We believe there are untapped resources not only in capital, but
in technology, initiative, and skill that must be activated for the further constructive development of our member countries. These resources are to be found both
in the less-developed countries themselves and in the more highly developed
areas. The International Finance Corporation can render a great service in
bringing these resources together, supplying the missing elements, and stimulating
the growth of private investment for productive private enterprise.
As we see the International Finance Corporation, speaking in broad terms, its
job is to find partners to provide investment and management for productive
private enterprises. After getting private companies established or running more
efficiently and profitably, the International Finance Corporation can then dispose
of its investments in those companies as rapidly as possible to private investors so
that it revolves its funds. Acting as a catalyst, the International Finance Corporation may be expected to get a multiplier effect out of its own capital by initially
getting the largest possible amount of private capital participation from its
partners; secondly, through the sale of its portfolio to private investors; and
perhaps ultimately through borrowing on its own obligations.
The International Finance Corporation has as one of its purposes to help create
conditions conducive to productive investment of private capital. With its
membership drawn from many countries, it should be able to exercise a favorable
influence on the policies of its member countries.
My Government has taken an active part in the creation of the International
Finance Corporation and intends to give it its continued vigorous support. We
fully approve the operating policies which the Corporation has adopted. As
members and hosts, we shall extend to the International Finance Corporation our
full cooperation in the accomplishment of its task.
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1956 REPOBT OF THE SECRETARY OF THE TREAStTRy
EXHIBIT 21.—Statement by Assistant Secretary ofthe Treasury Overby as Executive Director of the International Bank for Reconstruction and Development,
June 22, 1956, before the Subcommittee on International Organizations and
Movements of the House Foreign Affairs Committee
The International Bank for Reconstruction and Development, someumes
called the World Bank for short, was organized to assist in the reconstruction
and development of the territories of its members by facilitating the investment
of capital for productive purposes. For this purpose it makes loans out of its
own paid-in capital and from the proceeds of the sale of its bonds to private investors, and promotes private foreign investment by means of guarantees or
participations in loans and other investments made by private investors; all with
the view to raising the productivity and standard of living of its member countries.
The Bank began operations in 1946 and now has 58 countries as members.
At the present time, the principal free world countries not members of the Bank
are Argentina, New Zealand, Portugal, Spain, and Switzerland; and Argentina
has just applied for membership. No Soviet-bloc countries are members of the
Bank.
The Bank is fully independent in carrying on its operations. The agreement
entered into between the United Nations and the Bank stipulates that the Bank
shall function as "an independent international organization" and recognizes
that action taken by the Bank on any loan is a matter to be determined by the
independent exercise of the Bank's own judgment in accordance with the Bank's
Articles of Agreement. The Bank has its own funds with which to carry on its
operations and is therefore not dependent on annual appropriations of the legislatures of various countries as are the United Nations and most of its specialized
agencies. Furthermore, the Bank operates on the basis of weighted voting—
that is, the voting power of a member country is proportional to the amount
that country has subscribed to the Bank's capital. The United States has slightly
over 30 percent of the votes to be cast.
The basic governing bod}^ of the Bank is a Board of Governors consisting of a
governor and alternate governor appointed by each member country. The
governors are generally the minister of finance or the head of the central bank of
the member country. In the case of the United States, the Secretary of the
Treasury, George M. Humphrey, is the Governor. The Board of Governors
meets once a year to review the operations of the Bank. During the year the
general operations of the Bank are under the direction of a Board of sixteen
executive directors. Five directors are appointed by the five members having
the largest subscriptions to the Bank's capital; namely, the United States, the
United Kingdom, Nationalist China, France, and India. The other eleven
directors are elected by the governors of the remaining members and serve for
two-year terms. Some of the elected directors represent only one country—
others as many as twelve countries. The Board of Executive Directors is continuously available at the headquarters of the Bank in Washington, D. C ,
meeting two or three times a month or more often as business requires.
The charter of the Bank has enabled it to follow a flexible loan policy in carrying
out its main objective, which is to assist in the reconstruction and development of
the territories of its members by facilitating the investment of capital for productive purposes. The principal limitatioris on Bank lending may be listed
as follows:
1. Projects to be financed must be located in territories of members.
2. Loans must be made to or guaranteed by the government of the borrowing
country.
3. There must be reasonable prospects of repayment.
4. Only in exceptional circumstances may the Bank finance other than
foreign exchange^costs of a project.
5. The Bank must determine that private financing is not available on reasonable terms.
The present capital subscriptions by members to the Bank total $9,050,500,000.
This does not mean that the Bank has $9 billion in cash to lend out, as only part
of this capital is required to be paid in by member countries and the Bank must
rely primarily on the sale of its bonds to private investors as the source of its funds.
IJpon joining the Bank each member pays in 2 percent of its subscribed capital
in gold or dollars. This has provided the Bank with $180 million. An additional
18 percent of the subscribed capital is to be paid to the Bank in the currency of
EXHIBITS
215
the country making the subscription. The local currency capital subscriptions
may be used by the Bank only with the consent of the member concerned. Both
the United States and Canada have given the Bank permission to use their entire
18 percent subscriptions. These releases by the United States and Canada gave
the Bank an additional $630 million to lend. As their financial condition has improved over the years, other countries have been gradually permitting the Bank
to use some of their 18 percent subscriptions for lending purposes; about $130
million has come from the other members of the Bank. To sum up, the Bank has
had available for its lending operations $940 million frdm capital subscribed by
members. Of this total the IJnited States has subscribed $635 million. The
remaining 80 percent of the subscriptions of members, or $7,240,400,000 is payable
by the members only if needed to meet the obligations of the Bank.
Although the availability of this government-contributed capital is important,
the major source of the Bank's funds is the private capital market. The Bank
obtains private capital both through sales of its own bonds and through sales of,
and participations in, its loans.
The Bank has been able to raise over $850 million by sales of its own bonds
in large measure to insurance companies, banks, and trust funds. These bonds
are not guaranteed by any member government of the Bank. However, purchasers of the bonds recognize that there is ample security behind the bonds; not
only the loans which the Bank has made to member countries, but the undertakings of the member countries of the Bank to pay in their 80 percent subscriptions to the Bank's capital if needed by the Bank to meet its obligations. In
the case of the United States alone, the 80 percent subscription amounts to
$2,540 million. Of the $850 million bonds marketed by the Bank and outstanding
on March 31, 1956, $695 million are payable in United States dollars, $70 million
equivalent are payable in Swiss francs, $36 million equivalent in Canadian
dollars, $28 million equivalent in pounds sterling, and $21 million equivalent in
Netherlands guilders.
In recent years there has been a conspicuous gi'owth both of participations
by private investors in Bank loans and of sales of loans held by the Bank to such
investors, indicating more readiness on the part of private capital to enter the
field of international investment in a direct way. During the fiscal year 1955,
participations in, and sales of Bank loans out of its portfolio amounted to $99
million, as compared with $34 million in the previous year. Up to March 31,
1956, the Bank had sold $258 million in obligations of its borrowers, of which
$189 million was without the Bank's guarantee. Of the $69 million loans sold
with its guarantee, $42 million had been retired so that the Bank had a contingent lialDility of $27 million on March 31, 1956.
Other sources of Bank funds for lending have been the profits from operations
since the inception of the Bank, which have totaled in excess of $140 million, and
repayment and prepayment of Bank loans amounting to $159 million.
Through May 1956, the Bank has made 147 loans, totaling more than $2.5
billion, to 43 countries. In the early postwar period, the Bank made $497 million
of reconstruction loans in Europe. Increasingly, however, the Bank in later
years has been able to turn to its long-term task of assisting in the economic
development of its member countries. This lending has been aimed chiefly at
improving basic services which form the essential foundation for economic development.
In less-developed countries, lack of dependable and economical transportation
and deficiencies in electric power supply have put substantial limitations on
productivity, on income, and on the willingness to invest. The Bank has made
more loans for electric power than for any other purpose, but it has lent nearly
as much for highways, railways, ports, and other means of transportation. Taken
together, power and transportation account for about two-thirds of the Bank's
development lending. About one-eighth of the Bank's development lending
has been directly for agriculture and another one-eighth for industry, both of
which, of course, have also greatly benefited from the loans for power and transportation.
The Bank's activities in economic development have not been confined to
loans. A wide range of advisory assistance has, of course, been necessary in
connection with the Bank's loan projects. JHowever, an increasing number of
countries now seek the technical assistance of the Bank apart from financing, and
it has been the policy of the Bank to give advice upon request on general development problems, even when this has not been directly related to Bank loans.
The method by which technical assistance is extended to a member country
216
1956 REPORT OF THE SECRETARY OF THE TREASURY
by the Bank depends upon the need and the type of problem. In some cases,
one or two Bank representatives are sent to the member country to work with
the government on specific problems. The most comprehensive instrument used
by the Bank in advising member countries on economic deveiopment is the General
Survey Mission. These missions are organized to assess the economic resources
and potential of member countries and to assist governments in drawing up and
carrying out development plans. Fourteen of such missions have been organized
by the Bank; their reports are made public. Smaller missions have also been
sent to countries requesting advice on specific problems, such as transportation.
In further recognition of the need in less-developed countries for personnel who
are experienced in planning, administration, and management .of development
programs, an Economic Development Institute has now been organized to serve
as a staff college for senior officials from less-developed countries. The Institute
offers six-month seminar courses in which these officials can participate with
the Bank staff in an intensive study of development, problems.
Another recent development which I should also like to mention is the International Finance Corporation. In order to increase its ability to foster private
international investment and productive private enterprise, especially in the
less-developed areas, the Bank has taken the lead in formulating the proposal
for the International Finance Corporation, which will operate as an affiliate of
the Bank. It will loan only in association with private investors for productive
private enterprise, without any government guarantee; making, in effect, venture
capital loans. Membership in the Corporation is open to Bank members, and it
will come into being when at least thirty governments have subscribed at least
$75 million of its authorized $100 million capital. The United States membership,
which was authorized by the Congress last year, provides for a capital subscription
of $35 million. Up to date, a total of twenty-seven countries have subscribed
about $68,000,000. It is expected that sufficient additional countries will soon
complete membership formalities and that the Corporation will come into being
this summer.
The Bank has played an important part in the postwar development of the free
world by making loans and affording technical assistance with respect to development problems. It has served as an important instrument in creating renewed
confidence in the international private capital market. In all these respects, the
record of the Bank merits full support by the United States and by its other
member countries.
EXHIBIT 22.—Extract from remarks by Assistant Secretary of the Treasury
Kendall, March 7, 1956, at the International Trade Conference, Pittsburgh,
Pa.
This International Trade Conference is a very splendid and commendable
activity on the part of the Pittsburgh Chamber of Commerce. It goes without
saying that I appreciate very much the opportunity of beirig here, meeting with
you, and discussing some of the international trade problems in which you and
the Treasury Department are mutually interested.
Our trade relations with the people of other lands are of direct concern to
every section of the United States and every segment of the American people.
The problems growing out of these relations are as pervasive as they are complex, and the time is long past when an alert awareness of them was to be
expected only in coastal areas with teeming harbors and loaded docks. Giving
attention to these problems at a meeting of this sort is helpful not only to people
interested in international trade as a business, but also to the departments of
Government charged with various world trade responsibilities.
That we are living in times of great stress and in the midst of great change
makes the task of each of us not only more interesting and challenging, but
also more difficult. We are doing a new sort of pioneering in some respects,
and for a great country like the United States the issues we find ourselves facing
must be met with extreme care so that the economic welfare of our own Nation
may best be served and, at the same time, the great purposes of international
cooperation may be advanced.
Our objectives so far as international trade is concerned are better understanding, smoother-working relationships, and greater trade volume. In the
background of these objectives are the efforts of the administration to create
a domestic business atmosphere in which our free economy is allowed to grow
EXHIBITS
217
and flourish and prosper to the fullest extent. These efforts toward a maximum
of economic freedom in the United States mesh closely with our search for the
best international trade policies and methods.
The story of American trade and business is certainly as significant, if not
as well known, as that of the military and the political side of our history.
Certainly one here sees the swings of the pendulum as the decades pass by.
In early days the ties of the seaboard colonists reached eastward across the
ocean, and only the most venturesome had the pioneering courage to explore
and to trade even as far as the confluence of the Allegheny and the Monongahela. Then traders pushed westward to Detroit, St. Louis, and Michelmackinac
and the other trading posts where the white men dealt with the Indians for
furs and sought new homes.
Wars in Europe, impressment of seamen, and the dangers of the sea were
only partly re^onsible for the change which took place. There beckoned westward across the mountains an enormous expanse of woods, of prairies, and of
rivers containing wealth far beyond the expectation of the ambitious and courageous second generation of those who signed the Declaration of Independence.
In short, in the second and third decades of the last century we generally
quit the sea and maritime trade, leaving that to the few who carried on business
in far-off places, and turned to the prairie schooner, the plow, and the enthralling task of conquering the continent and solidifying the areas between the
Appalachians and the Sierras—indeed, from ocean to ocean.
But instead of dwelling on those far-away days, I want to return to the present and to the subject of an international trade greatly affected by today's
swifter transportation and. better communication methods.
An important role in world trade is played, as you know, by the Treasury's
Bureau of Customs. This role is of particular interest to me because my
supervisory responsibilities in the Department extend to it.
The Customs operations have become increasingly more vital and complex
in these days of swifter means of transportation and of greater facilities for
communication.
In our view the Bureau of Customs has a dual function. On the one hand
Customs sees to it that the laws levying tariff duties on imports are administered
as written. For we believe that tariff protection should be provided only in
the tariff schedules and authorized quota limitations, and that administrative
procedures should not be used either to add to or detract from that protection.
While seeing to the full enforcement of such laws, we are trying in every practical way to eliminate procedural difficulties and handicaps to international
trade. To the extent we are successful, our efforts may serve as an example
for more efficient and simple procedures in other countries, which will contribute
to the expansion of world trade and encourage American exports to all parts
of the world.
Our efforts, indeed, go further than the march of trade and are entwined with
the overall objectives so often announced by President Eisenhower, who has said:
"The United States continuously seeks to strengthen the spiritual, political,
military, and economic bonds of the free nations. By cementing these ties we
help preserve our way of life, improve the living standards of free peoples, and
make possible the higher levels of production required for the security of the
free world."
The President said this in transmitting last year the proposed agreement for
the Organization for Trade Cooperation. This proposal is being currently debated in Washington and hearings are in progress before the Ways and Means
Committee of the House. The proposal is another step indicative of our desire
to deal with trade matters in the same way we do with military matters in such
regional pacts as the North Atlantic Treaty Organization and with financial
matters in the International Monetary Fund and the International Bank.
At the same time, and I can't emphasize this too strongly, if membership in
the OTC is authorized, that membership and the participation of the United
States in the General Agreement on Tariffs and Trade will in no way infringe on
congressional prerogatives. We have been careful from the very beginning to
make certain, while pushing forward in tbe cooperative field of international
trade and multilateral agreements on tariffs, that we did not relinquish control
over our own trade affairs,—our own sovereignty.
As you know, all pertinent American statutes and especially, of course, those
having to do with trade and tariffs, in effect in 1948 when we first commenced
participation in GATT remain in full effect.
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1956 REPORT OF THE SECRETARY OF THE TREASURY
It is much to the point that under the aegis of OTC and of GATT we are hopeful
that we shall be able to persuade other nations with whom we deal to adopt some
of the simplifying measures as to Customs procedures and classification and the
like on which we have been working in our own customs activities.
This can be done by negotiation through the OTC, should this become the
formal mechanism, without any loss of our own safeguards, and without forcing
others to forego their safeguards. We would approach on a mutually advantageous basis those steps which we think are so highly important if trade is to be
benefited to the extent we hope for.
In Washington, we are trying to move toward this goal by constant improvement
in our management program, through legislation when necessary, and by amendment of the Customs regulations to introduce further improvements which will
contribute to the speedy and equitable handling of customs business. It is an
important contribution of this administration and one which hag constantly held
the interest and had the support of President Eisenhower.
I do not need to review the accomplishments which were made possible by the
Customs Simplification Acts of 1953 and 1954. You are familiar also with the
proposals for revision of the Customs valuation standards contained in H. R. 6040,
which is now before the Senate Finance Committee. We had hoped that enactment of the bill as originally proposed could be completed at the last session of
Congress. However, to meet the sincere concern of some legislators that the
immediate introduction of the revised valuation standards might result in a severe
impact on the business of some domestic industries, there was proposed an amendment which would defer the application of the valuation principle in those cases
in which there might be more than a small decrease in valuation.
This amendment aims at a more gradual revision of the valuation test so that
fears may be avoided and American business may accept change as gradually as
the facts may warrant or dictate in varying instances. The overall objective will
go far toward further sensible, businesslike customs simplification and improvement of procedure.
The amendment was introduced at our request by Senator Byrd last month.
We understand that the Senate Finance Committee will resume its consideration
of H. R. 6040 with the proposed amendment in the near future, and I confidently
hope that it will receive the favorable consideration of the Senate and of the
House, as amended.^
One of the principal needs for improving our operations is to obtain greater
certainty in customs transactions. Most businessmen are more willing to
decide whether to enter an operation where the costs and other significant factors
are known. Conversely, uncertainty as to the amount of an item such as duties
may be a significant deterrent to new business. We believe that the enactment of
H. R. 6040 will enable international traders to be more cerxain of the valuation
that will be placed upon imported commodities since it will conform Customs
valuation more closely to the values actually applicable to current international
wholesale trade. Also it will remove many of the eccentricities and aberrations
in the Customs valuation law which have developed over the years, and all of this
without the concomitant reduction of tariff which is the subject of some announced
fears; and which most obviously had no part in the inauguration of this needed
law.
Our efforts to obtain greater certainty are not limited to legislation. One of
the most important successful developments has been in the classification of imported merchandise.
One aspect of this program has been the development of the procedure which
enables an exporter to the United States, or importer, to get a classification and
rate of duty on adequately described merchandise before it is imported. Some of
the most troublesome cases presented to my office are those in which an importer
has figured his selling price on a low duty and then discovers months after his
goods have gone into consumption that hq must pay duty at a much higher rate.
Up until recent years there was no remedy for this situation because definite decisions were not made until the merchandise was imported.
Now, with the aid of the appraiser's staff and classification experts in the
collectors' offices throughout the country, we give classifications in advance of
importation. By circulating those decisions to all ports we make certain that
the merchandise will be classified in accordance with that decision when entered
at any port.
1 H. R. 6040, with the amendment proposed and with.further minor modifications, was enacted as Public
Law 927 on August 2, 1956. See page 69.
EXHIBITS
219
This advance classification procedure is being used to an ever increasing extent
and the many comments received from, shippers and im.porters establish that this
procedure is m,aking a significant contribution to better customs administration.
More and m.ore people are becom.ing aware that if they receive an advance decision
on the classification of their merchandise they have a rate that will stick and that
they will not later be taken by surprise.
We also contribute to the goal of certainty to the extent that we are able to
m.aintain continuity and stability in our classification practices. Once a classification decision has been m,ade and a rate of duty determined, whether by the
advance classification procedure or by the developm.ent of a uniform practice with
respect to actual importations, that rate should not be changed administratively
without very convincing reasons. Consequently, it is our firm belief that unless
the Congress or the courts decide otherwise, changes in classification should not
be made unless the established procedure is clearly wrong.
At the sam,e time, people at Customs must ever be alert not to becom.e too
fettered to established practice, riot to becom.e too inelastic (som.e people use the
humble word "bureaucratic"), realizing that if there should be impelling reasons
for changes in classification, then they should be m.ade, but only after great care
and a thorough opportunity to examine.
While we are proud of the advances and achievem.ents that have been m.ade
in this field, I also recognize that there is much which rem.ains to be done. There
will always be a conflict between the desire to be as helpful as possible in prom.ptly
giving the best inform.ation available in response to any inquiry and the desire
that Customs advice should be binding on the Governm,ent. Sometimes speedy
answers can be given only if certainty is sacrificed. Undoubtedly, some clarification of our procedures will be necessary so that a person dealing with the
Custom.s Service knows the extent to which any particular advice is binding on
the Governm.ent.
Most customs transactions are com.pleted without a hitch, but it is impossible
to handle hundreds of thousands of entries and not run into an occasional com.edy
of errors. We had a case where a dutiable billfold for a gentlem.an and a nondutiable cake for a lady cam.e in the mails at the same time. The billfold mail
entry somehow got attached to the parcel containing the cake and the lady paid
$2 duty. She wrote in objecting, but som.ehow her letter was overlooked and the
liquidation becam,e final. Fortunately, after a struggle,- a legal basis for relief
was found. But this is one of the types of cases which showed the need for
expanded statutory authority to correct such errors. It could be m.ultiplied
m.any fold.
When relief from various unavoidable errors not covered by a protest in classifying, appraising, and ascertaining the quantity of imported merchandise was
lim.ited to clerical errors, such as the transposition of figures, we were powerless
to permit the correction of many kinds of innocent m.istakes w-hich should in
equity and fairness have been corrected with imm,ediate dispatch. The answer
that the only means of correction was through a private relief bill in the Congress
(always cumbersome, som,etim.es im.possible) engendered much ill will and frequently resulted in a prolonged and fruitless correspondence with the importer
and his representatives.
We are now able to correct mistakes of fact and inadvertences not amounting
to an error in the construction of the law when brought to our attentio.Q within
one year. We are able to authorize the correction of some errors in appraisement.
All this has improved our relations with the public which naturally believes that
the Governm.ent should not make them, suffer because of an innocent slip-up.
These are only a few exam.ples of the m,any ways in which an alert and cooperative Customs Service has been able to im.prove its service functions and its relations
with the public. But the program for Customs management improvem.ent and
better service is not a matter.of one or two new pieces of legislation or of one year's
survey. It requires a continuing day-by-day concentration by every one of us
who is concerned with customs m.atters.
It requires a constant awareness of the problem areas and a willingness to
suggest new and better methods of operation. It requires a steadfast attention
to the importance of courteous and efficient relations with the public. And it
requires a willingness to adjust and revise views to accom.modate the changes
which are put into effect. All of these factors I have found present in m.y dealings
with Customs and I am sure that their presence will lead to a further record of
putstanding accomplishments.
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1956 REPORT OF THE SECRETARY OF THE TREASURY
It is, of course, as it should be that such improvements should come along
hand in hand with America's increasing interest in international trade, the
narrowing of the world by faster means of transportation and communication
and the tremendous increase in the business of world trade.
EXHIBIT 23.—Press release, December 2, 1955, on the signing of a new
Stabilization Agreement between the United States and Mexico
Under Secretary of the Treasury W. Randolph Burgess, Mexican Ambassador
Senor Don Manuel Tello, and Senor Don Rodrigo Gomez, Director General of
the Banco de Mexico, today signed a new Stabilization Agreement between the
United States and Mexico.
The agreem.ent is designed to assist Mexico by providing up to a m.axim.um
amount of $75 m.illion, if the occasion for use should arise, for exchange stabilization operations to aid in preserving Mexico's exchange system free from restrictions on payments. The agreement continues for another two year period, until
December 31, 1957, arrangements that have been in effect since 1941 and will,
as in the past, be operated in close coordination with the activities of the International Monetary Fund.
Under Secretary Burgess noted that Mexico's gold and foreign exchange reserves
have increased substantially and that Mexico's national output continues to increase whfle it maintains its traditional freedom of exchange transactions.
EXHIBIT 24.—Press release, February 16, 1956, on the signing of an extension of
the Stabilization Agreement between the United States and Peru
Under Secretary of the Treasury W. Randolph Burgess and Am.bassador Fernando Berckemeyer of Peru today signed an agreement extending for a period of
one year the Stabilization Agreement between the United States and Peru.
The agreement extends until February 17, 1957, existing arrangem.ents under
which the United States Exchange Stabilization Fund undertakes to purchase
Peruvian soles up to an amount equivalent to $12.5 million should occasion for
such a purchase arise. The agreement is designed to assist Peru in maintaining
external trade and payments substantially free from governmental restrictions
and avoiding unnecessary fluctuations in the rate of exchange.
The International Monetary Fund has also announced extension of its standby
arrangement with Peru under which that institution agrees to m.ake available up
to $12.5 m.illion for the same purpose. The two agreements therefore provide a
total of $25 million in standby resources for Peru.
EXHIBIT 25.—Press release, April 26, 1956, on the signing of an exchange
agreement between the United States and Chile
Treasury Under Secretary W. Randolph Burgess and the Chilean Ambassador,
Sr. Mario Rodriguez, have signed an exchange agreement designed to assist Chile
in its efforts towards achieving increased economic stabflity and freedom for trade
and exchange transactions.
The Chilean Governm.ent has undertaken im.portant dom,estic measures to deal
with inflationary problems. As part of Chile's efforts to stabilize its economy,
it proposes to introduce a single peso rate of exchange to be applicable to commercial transactions. This rate would be allowed to find a realistic level in response
to basic supply and dem.and forces. The Chileari authorities will operate a stabilization fund to minimize exchage rate fluctuations arising from purely temporary
or erratic influences.
A separate and secondary exchange market in Chile will continue to exist
through which receipts and payments for certain nontrade transactions will be
cleared.
In connection with this new effort for the attainm.ent of internal stability and
international equilibrium the Chilean authorities have entered into a standby
arrangement with the International Monetary Fund and are receiving credits from
private banks in the United States. The Treasury agreement, which supplements these arrangements, provides that the Chilean authorities may request the
EXHIBITS
221
United States Exchange Stabflization Fund to purchase Chilean pesos up to an
amount equivalent to $10 million, should occasion for such purchases arise.
Chilean pesos so acquired would be repurchased by Chile for dollars.
Addresses and Statements on General Fiscal and Otlier Policies
EXHIBIT 26.—Remarks by Secretary of the Treasury Humphrey, November 17,
1955, before the American Petroleum Institute, San Francisco, Calif.
It is an often-neglected fact that within the last half century this Nation has
gone through an economic evolution that makes pale any other in the long history
of man's efforts to achieve a better life.
The result is that this Nation is today a Nation made up of small to medium
savers and investors.
This means that today this is a Nation of "haves,'* and not a Nation of "have
nots."
We have been in a tremendous and beneficial evolution, peacefully bettering
the lives of most of us.
We in this administration have hitched our wagon to this rising star of a "have"
nation to make sure of its continued rise—to keep making "have nots" into
"haves."
We are admirers of, and believers in this uniquely American growth and
progress.
But on coming into office we found that this great day-to-day American evolution from the bottom up was in danger. In fact, we found that it had not even
been properly recognized by economic policymakers of the past two decades.
They were too busy fighting the ghosts of a "have not" nation, a nation that had
even then already ceased to exist.
As a result, we found the economy blown up with the hot air of inflation, to a
point where there was real danger that it might burst, letting us all down with
a crash that would have maimed us as a Nation and dropped the free world's
defenses invitingly low.
We found the economy's growth hampered and hobbled by a tangle of successive
layers of regulations, controls, subsidies, and taxes imposed in past emergencies.
The economy was being twisted into the shape of things past, when it should
have been reaching freely for its rightful future.
In addition, we found defense spending being used partly to buy defense, and
partly as a crutch to support an unsound economy, thereby endangering both
defense and the econoriiy.
In other words, we found an economy in danger of going stale, out of step with
the times and out of step with the Nation it had to serve, an economy fearful of
the ghosts of bygone crises, living precariously on the treacherous dodges of
inflation,* subsidy, and excessive crash-and-crisis Government spending.
We have been reshaping this Government's economic policies into the policies
required for a strong and forward-looking nation, its economy firmly footed and
self-supporting; an economy that will pump a continuous new flow of nourishment
into the day-to-day American evolution of self-betterment; an economy that will
constantly generate new and better paying jobs for an evergrowing population.
At the same time our economy must provide an ever-higher standard of living,
plus the social services the people want and need, as well as the men and the
weapons the Nation must have for its defense.
Now, let's look at what you millions of American citizens have been making of
our economy, how you have been creating the world's most successful and beneficial economy, and what we in the Government are now doing to see that you
have every possible opportunity to press forward and continue making a better
life for all.
All hands in our Nation: Labor unions and the employer, the rich and the
poor, both major parties, the farmer and the city man, the woman at home,
and the man at his job—all have had a part in making our new productive way
of life.
The point now is that the peaceful evolution has resulted in a tremendous
upheaval of this Nation's whole economy that really has created a different kind
of Nation, a unique Nation of "haves" that needs an up-to-date way of thinking
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1956 REPORT 01^ THE SECRETARY OF THE TREASURY
about itself, and up-to-date policies, in keeping with its strength and growth
potential.
Let's look back to the turn of the century and see what has been happening,
economically, since then. Only by making such a comparison can you realize
how outmoded a line of thought can be, even if only a few years old, when applied
to our dynamic economy, and how alert we must be not to let out-of-date thought
and practices tie us down while opportunity passes us by.
Our total national production of goods and services now approaches 400 bilhon
dollars. That is just 20 times as much as our national output in 1900. When
you make allowance for price rises since the turn of the century, today's national
production is still about seven times what it was in 1900. Our population has
more than doubled since 1900, but our national output per capita—production
per man, woman, and child in the Nation—is three times what it was then.
Our national income is now over 320 billion dollars. After allowance again for
price changes, this is seven times what it was in 1900. And our income per man,
woman, and child in the whole population is, like production, three times as much
as in 1900.
Here is the important thing about that inclDme change since 1900. The lower
and middle income groups have received the greatest share of our increased
income. Early in the century, only 1 out of every 10 American families earned
as much as $4,000 a year in terms of today's prices. Now almost half of our families earn more than $4,000 a year. Those with inadequate incomes for a decent
living are becoming fewer and fewer, and more and more of them are becoming
"haves", people who have enough money not only to live adequatelj^, but to save
besides. That is the basic economic development in this country which we are
trying most fervently to keep going, and to continually improve.
Let's see just how widespread and important this flow of purchasing power
to the broad base of our economy has been and will continue to be.
One of the most common methods of savings is the purchase of insurance. At
the turn of the century, people in this country had taken out 14 million life insurance policies. Today, with the population only slightly more than doubled,
and with many people owning several policies, the number of life insurance
policies has increased nearly 18 times, to about 250 million.
Ownership of individuals in their life insurance has increased from under
2 billion dollars in 1900 to more than 85 billion dollars today.
Small investors' holdings in United States savings bonds, total the huge amount
of 50 billion dollars. No such investment existed in 1900.
Let's see some other ways in which the average man on the street in this
Nation has been making himself over into an investor, a man with a real financial
stake in the future such as no other average citizen anywhere ever had before.
Nearly 10 percent of all American families today own stock in American corporations. At the turn of the century, this was just getting under way.
In 1900, individuals had liquid savings of all types amounting to less than 10
billion dollars. Now such savings of individuals in this country total more than
235 biflion dollars.
Last year alone, Americans bought equipment for themselves and their homes
of almost 30 billion dollars. This included things unknown to the homeowner
of 1900, like 7 million radios, 7 niillion television sets, nearly 3J^ million washing
machines, and a million air conditioners. These are mass investments in a
better life only a nation of "haves" could make.
About 25 million, families own their own homes today, compared with only 7
miflion homeowners half a century ago, while population has only a little more
than doubled in that time. About 55 percent of our families now live in homes
of their own.. Nearly all the others want to. And ways and means of helping
them to do so are of greatest concern in present Government polic3^
Labor unions to which many American workmen pay dues, are also investors.
Not so many years ago, union treasuries were low. Today many of them bulge
with huge sums. They own banks and buildings, bonds and stocks, and investments of many kinds. These are investments belonging to, and benefiting, the
man in overalls.
Today more than 15 million Americans have more than 30 billion dollars
invested in pension and retirement trust funds. This represents an investment
of almost $2,000 per worker. Such retirement plans were practically unknown
in 1900.
You can see from these few examples what has been happening to the ordinary
individual and the ordinary family in our wonderland economy. We need a
EXHIBITS
223
completely new^ set of standards in thinking about ourselves. We are a Nation
of "haves," not of "have-nots." This Nation's economy has grown right over,
and has left ,behind in the dust, both socialism and communism.
The consequence of this brilliant human achievement in our Nation is that the
basic interests of the man in the overalls are today the same as the basic interests
of the man in the business suit.
Business long a^go recognized this fact, and centered its attention on the wants
and needs of the far greater number of men who at times wear overalls. It is
time that we all caught up with the facts of life in this Nation.
Let's see how the man in the overalls and the man in the business suit today
have the same basic interests and what that revolutionary fact means to the
whole economy:
In the first place these clothes are interchangeable and great masses of our
people wear both depending upon the day of the week, the time of day, and their
occupation at the moment. This fact in itself illustrates the virtual rempva,l of"
any gap between them. But there are many other illustrations of similarity ,of
purpose, thought, and situation..
Both men have current earnings and probably savings in one form or another.
That means that both are interested in seeing the dollar keep its purchasing power.
To the extent that inflation develops, both men are robbed.
If you had $1,000 saved up in 1939, which you did not draw out to use until
1953, you really took a beating. Inflation had sneaked into your savings during
those years and made off with $478. How? Because inflationary price rises
during that time cut the purchasing value of the dollars you were saving, every
minute of every day. When you drew out your $1,000 savings, inflation had
stolen away with all but $522 of the purchasing power your dollars had when
you put them aside in 1939.
This is a terrible thing to happen to a Nation of people who are working and
sweating and scrimping to put aside money for the education of their children, the
purchase of a home, or to provide for their old age.
The man in the overalls and the man in the business suit often try, by purchasing insurance, to build up some security to leave to their wives and children
in the event of untimely death. It is a terrible thing to have the purchasing
power of his insurance, the time that it will pay the rent and set the table or
help with the education for those that are left, cut nearly in half in the short
period of just 15 years.
It is a heartbreaking thing for a man and woman who put. aside savings in a
pension or retirement trust fund as they work during their lifetime to find on retirement that inflation has robbed them of nearly half of what they had invested
to live on in their declining years.
We in the Eisenhower Administration have made halting inflation one of the
principal goals of our administration. In the last 2% years, the value of the
dollar has changed only one-half of one cent. This means that we have kept
inflation's hand out of your savings almost entirely. We want to keep inflation
locked out, so that when you save by putting money in the bank, by buying a
savings bond, by buying insurance, by contributing either work or money to a
pension fund or fraternal order or in any other way, you will get from your
investment the same value that you toil now to put into it.
The man in the overalls and the man in the business suit have at least an equal
interest in this fight. But, if there is any difference between them, it is the man
in the overalls who most needs protection. He can less afford to lose.
Now, it is growing more and more to be that it is the vast sum of the many
smaller savings of the man in the overalls on which our industrial and commercial System depends for its financing. The sum of all the little savings is funneled mainly into big investments by the savings banks, the building and loan
associations,- the insurance companies, investment trusts, pension funds, union
and fraternal organizations, and others handling the savings of the man in the
overalls.
Business in this country is pouring nearly 28 billion dollars of new investment
into its plants and equipment this year. That tremendous amount must come
from somebody's savings. Without it, the future's new jobs will never be born,
nor will we get tomorrow's increase in productivity, as the result of new and
better tools of production, bought by new investment.
Saving is important to the Nation, and must be encouraged, not discouraged,
because it strongly influences the security of the job you have, and your hopes
for ever-better pay through continued increase in your productivity. Thus you
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1956 REPORT OF THE SECRETARY OF THE TREASURY
can see how inflation can rob you not only of your personal savings but, in addition, steal away your pay increases and perhaps even your jobs.
We must have policies that put solid ground under our day-to-day evolution
of continual betterment from the bottom up. Such pohcies must aim at everyone, spreading the riches throughout the land. There is only one way to have
everyone have more and that is to produce more. The Nation's treasures of
goods and services must constantly increase, by continually increasing individual
productivity, so that they can be spread ever deeper and broader throughout the
whole economy.
Our policies must result in giving the man in the overafls ever more and more
of the same things which the man in the business suit also wants to have. And
that can only be accomplished by an economy that constantly produces more of
the comforts," conveniences, and necessities of life. Such an economy will not
only be of direct benefit here at home, but will also be a beacon of progress in
the whole free world.
Our strong economy must and can carry the costs of fully adequate defense,
and of indispensable pubhc services, and at the same time continue its healthy
growth. But it will only be able to do so if we balance the load correctly, so
that it can be carried, and carried indefinitely, without a breakdown.
We have devised policies to fit our new situation and we are balancing the load.
We are not the slave of any particular aspect of our flexible policies. We regard inflation as a public enemy of the worst type. But we have not hesitated,
either, to ease or restrict the basis of credit when need was indicated. Under
the new cooperation that exists in this administration between the Treasury and
the Federal Reserve, the full force of monetary policy has been made effective
more promptly than ever before in the. Nation's history to better respond to
natural demands.
We found when we came to office an overblown economy. It was hobbled
with all sorts of artificial controls, dangerously dependent upon the uncertainties
of defense spending, and inflationary pressures. It was borrowing from tomorrow's production and income at a prodigious rate, with unsound confiscatory
taxation that still failed to provide for the profligate spending. This resulted in
huge deficits that were passing the heavy burden of our excesses on for our children
and grandchildren to bear. And sooner or later it was sure to result in complete
downfall.
Under the Eisenhower Administration, the whole economy, the livelihood of
all the people, has been made more safe. This has been done by the-timely use of
monetary policy and credit in response to actual demand; by the return to the
Dubhc of purchasing power through the biggest tax cut in the history of the Nation,
Dy cutting unjustified Government spending; and at the same time by timely
encouragement to construction, home building, and needed improvements. By
the prompt and vigorous use of all these measures we have made the difficult and
dehcate change from a dangerously artificial economy to a healthy one, with
every effort exerted to the utmost to involve the very minimum of cost in terms of
unemployment.
In turning our faces resolutely from inflation, and unrealistic spending, what
have we turned toward?
We have turned to you, to the 166 million people of America.
We have turned with full confidence to a people that have demonstrated that
you are industrious, saving, inventive, daring, progressive, and self-reliant to an
unprecedented degree. We believe in your capacity to go on providing yourselves
with an ever better life, if we in Government support your efforts where the
general welfare calls for such support, and do not load you with unnecessary burdens, or take from you by excessive taxation the increase in your income that you
might otherwise earn and save, or allow you to be robbed by inflation.
Realistic economic policies that take account of the true nature of our economy
and the burdens it must bear, will bear big fruit.
We wifl not be rising on the hot, uncertain air of inflation. Nor wfll we be wearing the false, rose-colored glasses of a prosperity based on unwise and dangerous
Government deficit spending, treacherous alike to the Nation's security and its
economic health.
We wifl be rising on the sohd ground of these things:
Savings protected against shrinkage by a stable dollar;
Increased production and increased wages and earnings made possible by the
investment of those savings in more, new, and better tools of production;
Wide use, by Americans who are both workers and investors, of these tools of
EXHIBITS
225
production for the creation of more jobs and new, better, and cheaper goods, with
everwidening distribution among an evergrowing number of consumers as their
earning power increases and the cost of the goods decline;
Use of the increased income from this increased production of the things you
want; not to pay the bill for unneeded or unwise Government spending, or as
tribute to inflation, but for the creation pf a better life for all.
We have turned our backs on artificial stimulants. We have turned our faces
confidently to practical, natural methods for the creation of a better life for all of
us—firm in the belief that continuation of the processes of the American evolution
of self-betterment from the bottom, up is second nature to our whole people.
The United States is now enjoying plenty in peace. Americans are breaking all
records in the number of people with jobs, the high wages they are receiving, and
in the production of goods for people to enjoy. And they are enjoying this high
prosperity while successfully resisting pressures toward inflation.
Whether this high prosperity will continue without getting into the excesses of
inflation or deflation depends in very large part upon what 166 million Americans
do. It depends upon you in this room this morning, and your associates in the
economic life of America.
We hope for continued prosperity based, not on war scares or artificial Government stimulants, but on steady spending by consumers, and investment by business. It has a broad and solid base. We have laid to rest the myth that a free
enterprise system can thrive only in war. We have shown that free men in a free
world can provide an abundance, can provide plenty in peace, far above the capacity of the government-run economies of the world.
The best that government can do to strengthen our economy is to provide a
fertile field in which raillions of Americans can work. The continued success of
our economy depends, not upon government, but upon the efforts of all the people
trying to do a little more for themselves and their loved ones. It is the sum total
of all these individual efforts that makes our system superior to anything known
in this world before. It is what makes America.
The continued prosperity of America is peculiarly a responsibility of a group
such as the petroleum industry of America. For it is from such industries as
yours that we constantly get the new products, and new uses for products which
lead to the new jobs, higher income, and better living, which is the progress of
America. From the seemingly inexhaustible spring of American research flows a
stream of new ideas and new products resulting in new opportunities and new
wealth for everyone. Your industry is one which must continue to be a frontrunner in nurturing progress from the spring of research.
The continuance of good and even better times in America is up to you. It is
up to you and all the rest of the American people.
If all Americans, workers, producers, businessmen, consumers, and investors
go ahead and buy and build and improve with confidence tempered with prudence,
this Nation will continue to be even more a Nation of "haves" enjoying new
peaks of prosperity in business, production, and wages, and constantly higher
standards of living for all the people.
EXHIBIT 27.—Remarks by Secretary of the Treasury Humphrey, November 19,
1955, before the National Grange, Cleveland, Ohio
I am honored and pleased to be able to talk for a few minutes today to this
session of the National Grange. I am honored because of the great influence
your farm family fraternity has in the rural life of America. And I am pleased
because it affords the opportunity to try to explain some of the fiscal and economic
principles this administration is attempting to follow in the best interests of our
farm people and all of our 166 million Americans. After outlining some of the
general principles we have been following as they affect the whole Nation, I wifl
describe how they apply to the best interests of the farm people who make up
American agriculture and who are such an important part of our whole economy.
On a bright afternoon just short of three years ago today I boarded by helicopter the heavy cruiser Helena off Wake Island in the mid-Pacific. Already
aboard were President-elect Eisenhower, just returned from Korea, and several
other appointees to the new cabinet. Mr. Eisenhower had just finished one of
the missions which he had laid out in his campaign for the presidency. He had
been to Korea to see for himself what, if anything, should or could be done about
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1956 REPORT OF THE SECRETARY OF THE TREASURY
bringing an end to death and suffering in the war of stalemate that was dragging
on and on and taking the lives of American boys month after month.
Let's go back to those days for a few minutes to look at the situation then
confronting this country and recall the objectives toward which we then set our ^
sights.
We on the Helena nearly three years ago. were determ.ined to restore the fullest
measure of freedom and the good things that go with it to the American people.
We were determined to work to^vard freedoiri from war and the cruel strains and
stresses throughout the world that threatened its very destruction, freedom from
communism and corruption, and freedom from inflation and the artificial controls
which throttled our economy.
A mom.ent's reflection will recall the situation both domestic and around the
world which obtained as we talked .on the Helena three years ago. The most
pressing problem., of course, was Korea, where 33,000 Am.erican boys were killed
arid nearly 104,000 wounded, and where there was no end to war in sight.
The war in Indo-China had been going for six years and there were no plans to
bring it to an end. .
Although we were spending record amounts for our defense and for foreign aid,
we found as we tried to be strong everywhere at once that we were diffusing our
efforts to such an extent that we weren't really strong enough anywhere to be as
effective as we should be.
President Eisenhower on the Helena then was as determined as he is today
that "mankind longs for freedom from. M^ar and from rum.ors of war"; and that
working toward peace, and thus toward freedom from_ war, must be the primary
goal df the new administration.
As we surveyed the scene three years ago, there were other things that also
concerned us.
We saw that for many years we had been following unhealthy financial policies
that induced inflation, depreciated our currency, and threatened to exhaust our
credit. Our dollar had shrunk in purchasing power from 100 cents to 52 cents in
13 short years. Savings of the people had been half destroyed by cruel inflation.
We found ourselves with more than $267 billion of debt. We found obligations to spend some $80 billion, with no provision for payment.
We found a proposed budget left for us to spend $78 billion in our very first
fiscal year with a deficit of $10 billion over anticipated revenues.
We found a tax structure so high that it threatened to destroy the incentives
to work and to save and to invest.
We found controls needlessly strangling the economy.
, We found corruption' and communism in too m.any places.
A constructive program was designed to bring about peace in Korea, and
pressures were applied to accomplish it. These pressures were successful, and in
July the arm.istice in Korea was achieved, to end the killing and wounding of our
American youth as M^ell as to bring welcom.e relief from worry and heartbreak to
thousands of fam.ilies back home. Freedom from war in Korea had so soon become an established fact.
But there remained the greater problem, of establishing better relations throughout the world. We sought to establish relations which might eventually lead to
peace, a just and honorable peace for all nations. To keep strong meanwhile
was prerequisite to everything else. Plans and programs for ourselves and our
allies have progressed far since then with improved relations in many directions.
On the fiscal and economic side, we determined early in 1953 to adopt a fiscal
program which would help to make more jobs and better living for every citizen.
This program involved the restoration of freedom in many fields.
One of the most severe restrictions on freedom which we inherited was that of
wage and price controls and allocations of materials. A difficult but prompt
decision was made to lift those controls very early in 1953. As soon as it was
announced, the voices of the timid cried out that it could never be done without
runaAvay prices and further inflation wrecking the economy. You all remember
the public hue and cry. Yet within a matter of weeks the hue and cry was as
dead as the controls. This was the actual result rather than the disaster which
bur critics had prophesied.
In the spring of i953, as the prospects for a Korean armistice appeared brighter,
we were faced with a new problem. Fear was voiced bj?- some that the coming of
peace and the reductions in Government spending which our program of economy
was producing might lead to an upset in business and a depression.
It was in peace that America grew great and accumulated the homes, industries.
EXHIBITS
227
farms, and mines t h a t saw us through two M^ars. I t was wars t h a t brought us
d e b t a n d taxes, and inflation. There was no reason why we should fear peace,
even t h o u g h there might have to be adjustments in t h e economy as there were
swings in Government spending.
We did get peace.
We did not have a depression.
I n only about six m o n t h s we h a d obtained freedom from war in Korea. We
h a d obtained freedom from controls on the private lives and busiriesses of our
citizens. Progress along t h e lines of t h e framework of t h e freedoms we had
determined on the Helena to r e t u r n to the people of America began to take real
shape.
Who wants to go back?
I n the spring of 1954, progress toward greater freedom for the American people
was jeopardized b y t h e prophets of doom and gloom. There appeared ill-advised
spokesmen who proclaimed t h a t our economy was in a bad way. These prophets
loudly predicted t h a t t h e economy was headed for serious trouble unless t h e executive branch should greatly increase deficit spending and embark on large emergency public-works expenditures to "stimulate t h e economy."
The administration resisted the pressure t o move in and t r y to run the economy
from Washington. We retained the new freedoms which we had won, with confidence in our position. We had then made tremendous savings in Government
expenditures over the p a s t two years by big reductions in both Government
payrolls and purchasing. We were in t h e transition of absorbing t h e people who
had previously been working for the Government directly or making wartime
goods which t h e Government had been buying by helping t h e m get jobs making
peacetime goods for all the people to buy to improve the general scale of living.
One reason it was so certain t h a t the private economy would make the jobs to
hire people previously employed by the Government or by the Government's
spending was the tax program. Tax cuts p u t into effect in 1954 totaled $7.4 billion,
t h e largest t o t a l dollar t a x cut in any year in history. This tax cut left this huge
sum in the hands of all of the people to buy the goods which they wanted to b u y
r a t h e r t h a n in paying it in taxes to t h e Government. Returning this huge sum of
money to t h e people to spend for themselves was certain to result in greater
purchasing and in the creation of more and better jobs for t h e people who used
to make their living from Government spending.
Millions of individuals were also assisted by these great tax cuts. Every single
t a x p a y e r in this country received a tax saving, and millions of cases of hardship
existing under t h e previous laws were corrected so t h a t individuals were encouraged to expand their purchases and all their activities.
The great bulk of the tax savings went directly to individuals.
T h e Government can help best to strengthen t h e economy by helping to provide a fertile field and sound basic conditions in which 166 million Americans
can work.
The success of our economy depends not upon Government b u t upon the efforts
of all the people all trying to do a little more for themselves,. trying to better
themselves and their loved ones.
I t is the cumulative effect of all this individual effort, each for himself, thinking,
planning, and wbrking to improve his own position in his own way, t h a t makes
our system superior to anything ever known in this world before. T h a t ' s w h a t
makes America.
Prosperity in America cannot be had just by stimulating consumption, essential as t h a t certainly is. Unemployment in the heavy industries can be just as
real a problem. To solve this, t h e people m u s t b u y the productiori of heavy
industries. This means more investment because it is the investors who buy
the heavy goods. T h a t is w h a t makes t h e jobs in t h e heavy goods industries of
America, and t h a t is w h a t creates new plants and new tools and new jobs for
t h e ever-growing work force of this expanding country. T h a t is w h a t control of
inflation and the tax revision bill helped to accomplish.
More i m p o r t a n t perhaps t h a n any other single thing in developing a healthy
economy with high purchasing power, high employment, and good times is widespread general confidence in t h e integrity of the Government, in its security, in
its plans and programs, and in the stability of its money.
The cost of living which had doubled during the preceding thirteen years has
increased less t h a n one percent in t h e p a s t three years. The dollar has been
stable and is the most prized currency in all the world. Pensions and savings
have been protected. I n v e s t m e n t is encouraged and we a t long last are on t h e
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1956 REPORT OF THE SECRETARY OF THE TREASURY
way to a balanced budget for the Government. It is this course of Government
conduct, so carefully planned and so rigidly adhered to, that inspires the great
confidence of the people and which has brought us so far from the predictions of
doom and gloom into the greatest volume of business and highest employment
of people in the long history of this country.
Of great importance is our consistent program of' economy in Government
spending. Since the 1953 fiscal year Government spending has been cut by
$10H billion. Reductions have been made in spending in many places. In defense, while reductions have been made, we are at the same time developing a
better, more efficient defense structure.
Today, at less cost, we have an armed strength more efficient and better organized than ever before. We have the great advantage of guidance from the
foremost mflitary leader in this world and under President Eisenhower's great
leadership, the defense of America is today stronger in peacetime than at any
previous moment in our history.
The unequaled present prosperity of America, except in agriculture, is well
known to us* all. We have set new records in almost every way in which good
times can be judged and measured. Employment reached 65.5 million for the
first time in history. Unemployment has declined to 2.1 million. And at the
same time there has been an Eisenhower "extra" for the benefit of all Americans.
This Eisenhower "extra" has been created in this sound way. The fact that
there has been practically no change in the cost of living since this administration
has been in office means that the wage-earners of America have now been getting
real wage increases instead of the "cost of living" wage increases which had
previously been the order of the day. So they have more money to spend for
food, for better living, for the products of both farm and factory than ever before
in history.
Who wants to go back?
.Now what about more freedom for the farmer?
The other day I received a letter from a midwestern farmer's wife in which
she said: "I see by the papers that you made a speech asking, 'who wants to go
back?' If you talked to some of the farmers, as well as the farm machinery
people, in this area you would very soon find out who wants to go back."
I have thought a great deal about what that good farm lady wrote. I sense
in it all the concern and anxiety of a farm famfly that is experiencing the squeeze
of declining selling prices and the rise in some prices of the things they buy. I
think I can understand a little of the puzzlement and concern that beset her.
Why shouldn't she and her famfly be sharing more equitably in the country's
unprecedented good times?
Yet I wonder if she and her famfly, and the farm famflies of America generally,
really want to go back. •
The peak of farm prices was in February 1951. That was during the war
in Korea. I doubt very much that anyone wants to go back to those high prices
based on war. I do not believe that this farmer's wife nor anyone else v^ants that
with all its heartache and suffering and fear for every famfly. Yet substantially
less than half of the decline in farm prices has occurred since the end of that war.
What she wants, and what this administration wants for her, is to share more
equally with other Americans in the abundance we as a Nation are enjoying.
She is proud of the work that she and her faniily do to help provide the food
and fiber needs of our country. She feels that somehow this basic part of the
economy is not in step with prospering America.
She is right. But does she want to go back to the discredited program that
buflt up the huge price-depressing surpluses which today deny our farmers
better returns for what they produce? Does she want to go back to a program
from which today a majority of our farmers are reaping not benefits but injury?
Does she want to go back to a program that can only perpetuate and make worse
all her present difficulties? Does she want to go down that deadend road of
Government regimentation of our independent farm folk which is the sure end
result of that old program? I doubt she wants to go back to that old road.
These price-depressing surpluses operate in agriculture as they would in any
other industry. Imagine the situation if a whole year's production of automobiles
was in storage around the country in Government stockpfles. Or if there were
millions of Government-owned radio or TV sets or refrigerators in Government
storage. These surpluses overhanging the markets would certainly demoralize
them, and it is impossible to imagine our present prosperity in those lines under
EXHIBITS
229
such conditions. So, too, today our agricultural surpluses plague the path
ahead to a fair break for our farmers. We must stop adding to those surpluses
and we must work at cutting them down.
After Korea and subsequent cutbacks in defense spending, the industrial
side of our economy went through a readjustment. Reduced production, particularly in heavy industry, began in 1953 and continued during a considerable part
of 1954 as the inventory of excess goods stimulated by the Korean war was being
absorbed by sales in excess of production. It was during this period that the
false prophets of doom and gloom cried loudest of coming depression and despair.
But as the excess supplies were used up, production and employment began to
pick up and the industrial side of our economy began the movement toward
its present record prosperity.
America's agriculture is still in its postwar adjustment, slowed down by wartime rigid supports and ever-increasing Government surplus stockpfles which
have made the process even riiore difficult and drawn out because of the restricted
ability of agriculture to bring production into line with changing demands.
There is no easy solution, but there is only one objective that will ever wholly
succeed. Production must ultimately become reasonably balanced with demand
and those overhanging price-depressing, increasing surpluses must be absorbed
and ultimately disposed of.
Surely continuation of the plan that got us into all this trouble is not the answer.
While we still press forward to gain our place in world markets, it is obvious
that wholesale dumping indiscriminately abroad is no answer. That would be
not only distressing to our foreign relations with friendly nations with whom we
are joined for our common.defense, but it would surely result in retaliation by
other countries and price wars with the prospect of ruinous prices and competition
that would greatly hmit our sales. So the whole thing would be worse than useless
in moving the surplus crops.
The middle way is the solution. Price supports that recognize th6 natural laws
of supply and demand and do not try futilely to repeal them. Carefully planned
restriction of production. Expanded programs of research to find new crops and
new uses to aid agriculture. Cautious selling of surpluses both at home and abroad
with strenuous efforts continuously made to increase consumption everywhere.
All coupled with a dynamic program of sofl conservation and improvement of our
farm lands for future generations.
The growth of our population will be of tremendous help. Three million more
mouths to feed each year wfll eat into both limited current production and surplus
at an amazing rate as time goes on. Our increasing scale of living means that 166
million of us will all eat more and better as each year passes by. Our growing
industry with its continuously increasing jobs to be filled wifl continue to offer
good opportunities for farm boys and girls to work in industry if they choose to do
so rather than raising more cotton and wheat than can be consumed. The farmer
is equally interested with all the rest of us in prosperity for industry. Its workers
are his customers. The more they earn, the more of his crops they can buy.
And the more industry advances in its techniques and inventions the better and
more effective tools for farming will be available for him to have. We are all
bound together. It is not always evenly balanced, but that is the objective we
must always strive to attain.
One fact we should never forget: This transition has been helped because the
industrial economy has been operating at high levels. We must keep it so.
Meanwhile we must continuously adopt and apply the most effective means to
cushion the hardships and ease the strains of the transition for the people on the
farms. We must do this while we continue to make progress toward our true
objective of a balanced farm economy, unhampered by excessive stocks of crops
which destroy the very markets they were created in false hope to help.
President Eisenhower said after his recent meeting in Denver with Secretary
Benson that "no problem on the domestic front is more demanding of our understanding and best ideas" than that facing our farniers. The President's great
concern is illustrated by the fact that this agricultural statement was his first
personal statement on a domestic matter issued from his hospital bed in Denver.
In it the President cited the need for "new steps" to deal with the farm problem
so as "to speed the time when farm production and markets are in balance at
prices that return to our farmers a fair share of the national income." I can
assure you tha£ there is the fullest realization at the highest levels of the administration" not only of the trernendous importance of our farm people to the welfare
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1956 REPORT OF THE SEGRETARY OF THE TREASURY
of the whole Nation and national policies but also of the need to help farm people
share more fufly in the expanding prosperity which the rest of the economy enjoys.
To do this we must avoid going back to the policies that have failed in the past,
policies which were bailed out before only by two ghastly wars and a terrible
drought. We must go forward, building on the foundation already laid, to hasten
the transition to a better day for farming and better returns for farmers. This
means a many-sided program designed to cut down the surpluses, adjust production to markets, expand markets at home and abroad, and spur research into new
uses of farm products.
There are two related matters to which the administration has been giving a
great deal of earnest attention recently which are of interest to you.
First, I should like to mention the Treasury's position in regard to taxation of
cooperatives. We made a written suggestion to the Congress on this subject
last July which I recommend you read. It has been charged by some critics that
we desire to tax accumulated savings first at the corporate rate in the hands of
the cooperative and later to retax the same savings in the hands .of the patrons
of cooperatives as income to the individual. This is not true. The Treasury
does not favor double taxation. We are interested only in obtaining a means of
taxing the income of a cooperative as income either to the cooperative or to the
individual wherever the income is held but not to tax at bothdevels. That is
only fair and proper. It is to the end only of effectively providing that single tax,
such as we envisioned by the act of Congress in 1951, that we have suggested to the
Congress that action might properly be considered.
Second, I should like to touch upon the Cabinet report on transportation which
I know is of interest to you because of the Grange's role in getting the Interstate
Commerce Commission originally established to check transportation monopoly
many years ago. The main point of the Cabinet report was that all forms of
transportation be allowed more freedom to voluntarily compete so that all the
American public riiight have the best transportation as cheaply as possible.
Needed safeguards would not be relinquished as freedom increased.
I am no expert on agriculture and I am conscious of being in the presence of
experts. But I am sure that Secretary Benson is a true and devoted friend of the
farmer, with, the wisdom and the courage to do whatever is soundly required.
And I know that in his intensive scrutiny of new ideas for strengthening the
present program, Ezra Benson is seeking help from every farmer and every true
friend of farmers. In that search he has the full support and interest of the whole
administration. Onlj'^ the best efforts and the best ideas of all of us will be good
enough.
I am confident that we Americans have the resourcefulness and the character
to work our wa-y o^^t of this problem as we have out of others. To do so we must
think clearly with steadfast adherence to American ideals. There is no trick way
to do it, but there is a right way to do it, consistent with our values and traditions.
I know that working together we will find that way.
And so we return to a review of our objectives as we outlined them three years
ago for the benefit of all Americans.
We now have a sound and stable dollar.
We have reduced deficit spending until now we can hope that a balanced budget
this year is within our grasp.
Our credit has improved by the manner in which we have handled the debts we
already owe.
Taxes have been reduced for every single taxpayer in this country.
Free markets in America have been reestablished without price controls.
Inflation and its cruel theft of savings is halted and the savings of the old, their
pensions and insurance, are now being protected.
America is again becoming the land of unbounded opportunity for the young
where only your own ambition and ability can limit your rise to any height in
this fair land.
Progress, you' must admit, is well on its way. There is plenty yet to do but
much has already been accomplished.
The turn has been completely made. America now faces in a new improved
direction.
There is no reason to go back.
Let's all go forward.
EXHIBITS
231
EXHIBIT 2S.—Excerpts from remarks by Secretary of the Treasury Humphrey,
December 7, 1955, before the Mercantile Trust Company, St. Louis, Mo.
The future is promising if we pull together.
For three j^ears, we have been reshaping this Government's economic policies
into the policies required for a strong and forward-looking nation, its economy
firmly rooted and self-supporting; an economy that will pump a continuous.new
flow of nourishment into the day-to-day American evolution of self-betterment;
an economy that will constantly generate new and better-paying jobs for an evergrowing population.
At the same time our economy must provide an ever-higher standard of living,
plus the social services the people want and need as well as the men and the
weapons we must have for our defense.
All hands in our Nation: labor unions and employers, the rich and the poor,
both major parties, the farmer and the city man, the woman at home, and the
man at his job—all have a part in making our new productive way of life.
The peaceful evolution has resulted in a tremendous upheaval of this Nation's
whole economy that has really created a different kind of a nation, a unique
nation of "haves" that needs an up-to-date way of thinking about itself and
up-to-date policies in keeping with its strength and growth potential.
We have curbed inflation, avoided deflation, and encouraged initiative and
expansion which have developed into the greatest period of prosperity that our
fast growing, now unhobbled economy has ever known.
Barring unforseen developments, we will have a balanced Federal budget in
the present fiscal year. The anticipated deficit of the Government for fiscal
1956 was $1.7 billion at the time of the midyear review last July. If present
estimates are realized, we will have a balanced budget for this fiscal year ending
June 30, 1956.
Our prosperity didn't just happen. It was brought about by the confidence
of the American people in the Eisenhower Administi ation and the favorable
climate which has been created for 166 million free Americans to exercise their
own initiatives and endeavors to the full limit of their abilities to improve and
better the lives of their loved ones and themselves.
The administration's program promised a new, a better day, not for any particular segment of the population but for afl the people. We have seen that day
dawn. It is just the beginning if we can continue to achieve national unity and
improve the lot of the farmer, about the only large segment of our population still
suffering from the overhanging effects of past unrealisti-c governmental programs.
We have the greatest productive machine the world has ever seen. It is expanding rapidly. From the appa.rently unfafling spring we call research flows a
stream of new ideas and new products, resulting in new opportunities and new
wealth for everyone.
.
We have set new records in almost every way in which good times can be judged
and measured. Employment last summer reached 65.5 million for the first time
in history. Unemployment declined in October to 2.1 million. The dollar has been
stable for three years; wage earners have been getting real wage increases instead
of "the cost of living" wage increases of the previous several years.
How long this high prosperity will continue without getting into the excesses of
either inflation or deflation depends upon what 166 million Americans do.
EXHIBIT 29.—Extracts from remarks by Secretary of the Treasury Humphrey,
February 1, 1956, before the Junior Achievement Conference, Washington, D. C.
This is a fine representation from business, from Government, and from the
educational world gathered here under the sponsorship of Junior Achievement to .
study ways and means of familiarizing more of America's young people with the
principles and the practice of free incentive competition.
Few organizations give more direct and more effective support to what we call
the American way of life than does Junior Achievement; the organization today
holding its first national conference in its thirty-year history.
When young people, generally those of high school age, sign up with Junior
Achievement, they agree to "learn by doing." One writer called Junior Achievernent "a kind of 4-H club of business." That's an excellent description. The 4-H
young folks learn the agricultural arts by first-hand experience. The youngsters
of Junior Achievement, organized in their own local "companies," under the
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1956 REPORT OF THE SECRETARY OF THE TREASURY
sponsorship of a local business concern or some civic, service, or professional group,
learn the operation of business enterprises in just the same way—^by first-hand
experience.
First they learn about raising capital by selling stock at half a dollar a share or
thereabouts. They learn about setting up managements, about obtaining production equipment and materials, about selling—in brief, about all the ordinary procedures in setting up a business under our free enterprise economy, and making
it work.
Certainly every participant in the program learns a great deal about the way
our free enterprise economy works: why it has proved far and away the sort of
economy most productive of higher living standards; why it can be depended on
to generate new and better paying jobs for an ever growing population; why it is
such a powerful force for the defense of our country.
Your purpose here today is to consult on means of extending the Junior Achievement program so it will reach many more young Americans than now. That
purpose is a challenge to every one of us who wants to see our country grow and
prosper and its people share more and more generously in the rewards of economic
freedom. It is a challenge because the Junior Achievement way is so effective
a way of helping equip the boys and girls of today to conduct economic affairs
of our country in the future.
Today we have the greatest productive machine the world has ever seen. It
is expanding rapidly. From the apparently unfailing spring we call research
flows a stream of new ideas and new products, resulting in new opportunities and
new wealth for everyone.
The success of our economy has. depended not upon government but upon the
efforts of all the people all trying to do a little more for themselves, trying to
better themselves and their loved ones.
It is the cumulative effect of all this individual effort, each for himself, thinking,
planning, and working to improve his own position in his own way, that makes
our system superior to anything ever known in this world before. That's what
makes America.
Such a sound, prosperous economy based upon free competition and free choice
is the real difference between a free country and a slave state. A free nation
stems from the freedom of choice of the individual, in religion, in government,
and in the freedom of individual opportunity that permits a man or woman to
go out and work for an incentive of their own choosing—not because they are
told to "do it or else." In America that incentive is for better homes and living
conditions, better education, and better opportunities for our children.
As you take part in the Junior Achievement program, giving supervision and
guidance to the boys and girls in the ways of operating a business, you have a
woriderful opportunity to impress on them the story of how our free enterpiise
system has helped make our country strong and prosperous. Remind them that
nowhere in the world is there greater freedom of initiative and enterprise than
we know right here. Remind them of their responsibilities as citizens of the
future to make sure that this continues.
If all Americans: workers, farmers and other producers, businessmen, consumers, and investors all go ahead and work and buy and build and improve
with confidence tempered with prudence, we will make more and more jobs and
this Nation can enjoy new peaks of prosperity in business, production, and
wages and constantly higher standards of living for all the people. If the boys
and girls pf Junior Achievement can help to lead all their contemporaries in this
path the future of America is unlimited.
EXHIBIT 30.—Statement by Secretary of the Treasury Humphrey, February 3,
1956, before the Joint Committee on the Economic Report
I am pleased to appear before your committee this morning to discuss with
you various matters in connection with your study of the President's Economic
Report.
The United States today is enjoying plenty—in peace. Americans have
broken all records in the numbers of people with jobs, the high wages they are
receiving, and in the production of goods and services for the people to enjoy.
They are benefiting from this high prosperity while reasonably resisting pressures
toward inflation.
EXHIBITS
233
Whether this high prosperity will continue without involving the excesses of
either inflation or deflation depends in very large part upon what 167 million
Americans do.
Continued high activity in our economy depends not so much upon Government as upon the efforts of all the people, all in their own ways trying to do a
little more for themselves and their loved ones. It is the sum total of all these
individual efforts that makes our system so superior to anything ever known in
this world before. That is what makes free America.
This Government has helped in several specific ways to provide a more fertile
field in which free Americans can work to better themselves.
Total Government spending is now $10 billion below that of three years ago,
and $14 billion below what had been previously planned.
We, at long last, have proposed a balanced budget, the surest index to thrifty
management in a home, in a business, or in the Federal Government.
We have made the largest dollar tax cut of any year in the history of this country. This tax reduction of nearly $7J4 bfllion was a strong assist in the transition
from a wartime to a peacetime economy.
And the long trend of inflation that dropped the value of the dollar from one
hundred cents in 1939 to fifty-two cents thirteen years later has been halted, with
no significant loss in the buying power of the dollar now for over three full years.
We have been assisted to this high level of prosperity by the confidence of the
American people in the policies of their Government and by their confidence in
themselves to exercise their own initiative and endeavors to improve and better
the lives of their loved ones and themselves.
If all Americans: workers, farmers and others producers, businessmen, consumers, and investors all go ahead and work, and buy, and build, and improve
with confidence tempered with prudence, this Nation ^ifl continue to enjoy new
peaks of prosperity in business, production, and wages, and constantly higher
standards of living for all the people.
EXHIBIT 31.—Remarks by Secretary of the Treasury Humphrey, February 22,
1956, upon receiving an award of the American Good Government Society,
via telephone from New York, N. Y.
By telephone from New York I am glad to say that I am deeply honored in
being selected as one of those to receive the American Good Government Society's
George Washington award.
And I feel doubly honored to be associated in receiving it with that distinguished
and widely admired American, my friend. Senator George.
It has been a great privilege for me to serve my country in public office. And
if in your opinion I have been able to contribute in some small measure toward
furthering good government, then it will have brought great personal reward.
With real humflity, I deeply appreciate Mr. Hamilton's overgenerous remarks
and the impressive citation which your Society has seen fit to bestow upon me.
I shafl continue to endeavor to merit this honor, recognizing the distinguished
company in which you have placed me. I speak, of course, of the outstanding
contributors to American gopd government who have been previous recipients of
your George Washington awards.
As your Society honors again tonight the enduring contributions of George
Washington to good government iri the United States, I should like personally
to do honor to his close friend and stalwart associate in good government, Alexander Hamilton, our first Secretary of the Treasury and the first cabinet officer
appointed by George Washington.
It was Hamilton who was the architect of sound money policies which are the
foundation stones of good government. His principles were simple but vital:
(1) That the country must balance its budget by collecting enough taxes to
pay its bills;
(2) That we must have a banking system to manage the country's currency
flexibly and in the public interest;
(3) That the public debt is a sacred obligation that must bei honored completely.
There have been times in our Nation's history when some voices have been
raised to question these old principles. But in the long run, the American people
have clung to Hamilton's concepts of sound money. The dollar is now so secure
that the flow of trade and business can go unimpeded by worry about its value.
234
1956 REPORT OF THE SECRETARY OF THE TREASURY
Which, of course, is one of the reasons for the great prosperity and economic
growth of this country.
The policies we are following in the Treasury today, while, of course, adjusted
to-current needs, are nevertheless aimed at the same basic objectives as those of
Washington and Hamilton. Our philosophy of sound governmental financial
principles can be stated no better than in the words of Hamilton himself 161
years ago:
"It is wisdom in every case, to cherish whatever is useful, and guard against its
abuse. It will be the truest policy of the United States to give all possible energy
to public credit, by a firm adherence to its strictest maxims; and yet to avoid the
ills of an excessive employriient of it, by true economy and system in the public
expenditures, by steadily cultivating peace, and by using sincere, efficient, and
persevering endeavors to diminish present debts, prevent the accumulation of
new, and secure the discharge, within a reasonable period, of such as it may be
at any time matter of necessity to contract."
Alexander Hamilton's great success in putting into effect these principles of
fiscal integrity was due in large measure to the unfailing support of President
George Washington, whose birthday we celebrate today.
Again, my sincere thanks to all of you for the honor you have paid me.
While I deeply regret that it was impossible for me to be with you in person
tonight, I am happy that Under Secretary of the Treasury W. Randolph Burgess
is with you to receive for me this George Washington Award.
EXHIBIT 32.—^Remarks by Secretary of the Treasury Humphrey, February 22,
1956, upon receiving a certificate of honorary membership in the Institute of
Mining and Metallurgical Engineers, New York, N. Y.
It is truly an understatement to say that I am highly honored and pleased to
be here tonight.
The honorary membership which you have conferred upon me ranks high indeed
among the distinctions to which I personally could hope to aspire. My warmest
thanks to all who had a hand in bringing this presentation about.
'' I haye long had a genuine admiration for followers of the engineering professions,
and particularly for mining and metallurgical engineers, with whose talents many
of my activities in private life have been closely identified for so many years.
Engineers, including many of you in this room, have been key contributors over
the years to the daring developments which have made America great.
Nearly everyone these days seems to be tremendously interested in the engineer- .
ing professions. The national administration is seeking ways to stimulate education particularly in that field as a contribution to our national defense program.
It must be a matter of real satisfaction, and practical reward, to engineers of whatever persuasion for their profession to be held in such universally high esteem.
To a certain extent my endeavors in public life, over the last three years, also
have had to do with engineering. The present administration has been trying
to engineer some sound policies and practices into government. Possibly that
fact supplies a small measure of justification for your action in readmitting me
to membership. I say "readmitting" because I was an Institute member of the
ordinary or garden variety for a good many years.
Much of the engineering of government done under President Eisenhower's
leadership has had to do with freeing the Nation's economy. Specifically, we
have been trying to set the economy free from an accumulation of unhealthy
influences that had almost engulfed it. There were such bad influences as unchecked Government deficits, a tax structure so high that it threatened to destroy
the incentives to work and save and invest, and a hampering network of regulations and controls.
Since I promised that my remarks would be brief, it is not possible to describe
fully what we have done about the governmental situation we found. But I can
summarize. We worked to curtail Government spending and reduced it ten
billion dollars. We reduced taxes. We removed artificial and unnecessary
controls. We installed sound monetary policies. We checked inflation. And
we have balanced the budget.
Our objective is simple. It is to provide a more fertile economic field in which
free Americans can work to better themselves; in which free enterprise can generate new and better paying jobs for an ever-growing population, while supporting
adequately our needs for defense.
EXHIBITS
235
The effectiveness of these moves toward greater economic freedom is apparent.
The country has broken all records in the number of people employed, the high
wages being paid, and the Nation's production levels. The productive machine
continues to expand, and the research in which so many engineers participate
continues to provide an ever flowing stream of new ideas for new products, with
its promise of still further expansion and of new opportunities and new wealth..
A sound, prosperous economy based upon free competition and free choice is
the real difference between a free couritry and a slave state.
The Government can contribute to economic strength by taking steps, the
sort of steps taken in the last three years, to provide a healthy climate for the
free competitive activity of its citizens. But the long-run success of our economy
depends not so much upon government as upon the efforts of all the people each
trying to seize the opportunity to improve his own position, and his lot in life.
It is the cumulative effect of all this individual thinking, planning, and working
that makes our system superior to anything ever known in this world before.
This is the sort of free economy in. which every engineer and every good American wants to work out his future.
I am deeply appreciative of the honor you have given me and I will look forward
to enjoying attendance at your meetings in this new capacity for years to come.
EXHIBIT 33.—Remarks by Secretary of the Treasury Humphrey, April 17, 1956,
before the House Post Office and Civil Service Committee
I am.glad to appear before this committee in support of H. R. 9228 which
carries out the proposal of the President and the Postmaster General designed
to reduce the deficit of the postal service for the fiscal year 1957 and make the
department as self-supporting as possible in future years.
The chairman's letter inviting me to appear today indicated that the committee would like comment on how this bill will affect the Government's budget
situation. The bill before you would increase postal revenue by about $400
million a year. Failure to enact this bill, ori the basis of simple arithmetic, would
to all practical purposes eliminate the very thin $400 million surplus which the
President's January budget envisioned for fiscal 1957.
Balancing the Government's budget is not academic or simply a bookkeeping
exercise. It is the very keystone of financial responsibility. In a home you
can't spend continually more than you earn and not get in trouble. The same is
true in a business. And, the same is even more true in Government. With
the enormous debt that our Government now has it becomes a matter of extreme
importance.
The prosperity which is widely shared in this country today is in large part
inspired and sustained by confidence in the Administration's determination and.
success in getting the Government's financial affairs on a sounder basis. Americans realize that continued heavy deficit financing by the Government contributes
to the pressures for inflation. And inflation robs people of the value of their
earnings and savings. Getting and keeping the (]rovernment's budget in balance
has a very real, practical bearing upon the jobs and earnings and well-being of
every citizen in America.
That is why we all must work to accomplish the things which will help balance
the budget and keep it in balance. The proposal to increase the revenue of the
Post Office Department, and so cut its annual operating deficit, is one of those
things which should be done to help put the Government's financial house in
better order.
We all appreciate the basic importance of efficient mail service in this Nation.
It is vital to communications between nearly all of the people in America.. It
is also vital to the mass suppliers of publications which provide the wealth of
information read by Americans every day.
But there is no reason which justifies our postal service pfling up more heavy
deficits as each year goes by which must be paid from general revenues. In the
past ten years the cost of the Post Office Department exceeded its income by
nearly $5 billion. This means that $5 billion of additional deficits have been added
to our public debt with the result that the taxpayers not only have the debt to
pay but also the extra intei'est on that additional amount of an already too huge
public debt.
We cannot justify, particularly in this period of high prosperity, this dodging
of the cost of mail deliveries and passing it on to our chfldren and children's
236
19 56 REPORT OF THE SECRETARY OF THE TREASURY
children. That is exactly what we do when we fail to put the Post Office Department on a pay-as-you-go basis. It seems right and proper to me that those who
use the mails should pay whatever equitable rates are required to make the postal
service self-supporting.
I see no logic in the arguments of those who suggest that the Post Office Department should properly have its deficit made up from general tax funds because it is
a public service institution. The important point is that Public Law 137 of the
82d Congress established the policy that measurable service "when performed
for identifiable individuals" should be "self-sustaining to the fullest extent possible." Persons who use the mail do so only because they wish to with the full
knowledge of what the cost will be. The user of the mail is" in no way comparable
to the individual who suddenly needs police or firemen in an emergency over which
he has no control.
It is only consistent with fair play, as well as with the intent of Congress, that
the Post Office Department should be maintained on a self-supporting basis.
Under the direction of Postmaster General Surnmerfield a persistent, determined, and effective search for possible economies has been made throughout
the past three years. That search is being continued, but it cannot realistically
be expected to solve the deficit problem which has been running at nearly half a
billion dollars a year.
^It would not be realistic because the Department's great service to all of us
makes it necessary that it be maintained at a very high standard. It would be
poor economy to so reduce expenses that these high standards were lowered.
When we realize that our population (and thus the number of our post office
patrons) is increasing by more than a million people yearly, it becomes perfectly
clear that the problem of putting the Department on a self-supporting basis
becomes more and more important as each year passes and can only be done by
equitable increases in rates and not alone by reducing costs.
I am not qualified to discuss the specific rate increases by which this yearly
deficit problem should be met. But, I do know that it is of basic importance to the
fiscal integrity of our Government that the problem should be met.
The suggestion that any substantial part of increased postal rates would be
offset by reduced corporate income tax receipts is not realistic. Postage paid
by business concerns is an element of their costs, and an increase in costs is ordinarily reflected in prices or absorbed in some other way.
There is no more reason to refrain from charging adequate postal rates because
of its effect upon taxes than to fail to try to make money in any other enterprise
because over half of it will go to the Government.
Even if the Post Office is considered as a service arm of the Government its
rates should be considered to be a user tax paid in proportion by those who use the
service and adequate to pay for it in full without deflecting general revenues in the
same manner as toll highways.
I urge you to pass this bill to protect the Government's revenues, to reduce its
losses, help to balance its budget, strengthen its financial position and let the
users of the service fairly and equitably pay for its use in proportion to their
respective benefits.
EXHIBIT 34.—Letter and joint statements from Secretary of the Treasury Humphrey and Budget Director Brundage on budget receipts, expenditures,
and estimates
LETTER, May 17, 1956, TO SENATORS HAYDEN AND BYRD AND REPRESENTATIVES
C A N N O N AND C O O P E R
MY DEAR MR. CHAIRMEN: For some weeks it has been evident that the upsurge
of prosperity in the Nation has increased current Federal budget receipts, and
that current economic factors have also played an important part in increasing
expenditures over earlier estimates for the fiscal year 1956.
Tabulations of the receipts and expenditures of the United States Government
for the month of April and for the first ten months of the current fiscal year have
just been completed. The Treasury Department and the Bureau of the Budget
have reviewed these financial results and have revised the budget estimates for
the fiscal year 1956.
A balanced budget, for which the President has been striving for three years,
now appears assured for the 1956 fiscal year.
237
EXHIBITS
On t h e basis of our new estimates it is expected t h a t b u d g e t receipts will t o t a !
$67.7 billion, b u d g e t expenditures $65.9 billion, resulting in a n e s t i m a t e d b u d g e t
surplus for 1956 of $1.8 billion, which will m a k e a m o s t welcome r e d u c t i o n in o u r
huge n a t i o n a l d e b t .
A copy of these revised estimates is a t t a c h e d .
T h e revisions are based on t h e b u d g e t results t h r o u g h April 30, 1956, w i t h
e s t i m a t e s for t h e last t w o m o n t h s .
T h e c u r r e n t l y revised estimates are, therefore^
subject to change, b u t t h e y r e p r e s e n t our best j u d g m e n t s on t h e basis of t h e d a t a
now available.
Y o u r s very truly,
PERCIVAL F . BRUNDAGE,
G.
Director, B u r e a u of the Budget.
M.
HUMPHREY,
Secretary of the Treasury.
Budget receipts and expenditures, fiscal years 1953-56
[In millions]
1956
Actual
1953
Actual
1954
Actual
1955 January May 17
]956
estimat©
budget
BUDGET RECEIPTS ( N E T )
Individual income taxes
_
Corporation income taxes
Excise taxes
_
All otlier receipts and customs (net)
Total
_
Refunds of receipts (—).
_
Net budget receipts
32, 768
21,595
9,934
3,646
32,383
21,523
10,014
4,112
31,650
IS, 265
9,211
4,690
33,555
20,300
9,894
4,540
35,000
21,500
10, 000
5,000
67, 943
-3,118
68,032
-3, 377
63, 816
-3,426
68, 289
-3,789
71.500
-3, 800
64,825
64,655
60,390
64,500
43, 610
40,335
35, 534
34,575
35, 600
3,954
1,702
1,791
1,008
3,629
1,253
1,895
1,045
2,291
1,927
1,857
944
2,464
1,726
1,715
713
2,239
1,550
1,650
000
52,065
48,157
42,553
41,193
41,639
3,383
1,943
3,297
1,526
3,519
3,414
3,770
2,211
3,770
3,550
1,718
740
771
1,718
740
876
BUDGET EVPENDITURES ( N E T )
National security:
Department of Defense—Military
Mutual security program:
Mutual military program, including direct forces
support
_
Other
Atomic Energy Commission.
_
Stockpiling and defense production expansion
Total national security
Special legislative:
Veterans' compensation, pension and benefit programs.
Commodity Credit Corporation (net)
Agricultural conservation program and removal of
sm-plus agricultural commodities
Grants to States for public assistance and employment
security
__.
Federal-aid highway grants.
Allother
_.._
Total special legislative
Departmental;
Veterans Administration (other)
Housing and Home Finance Agency
Agriculture Department (other).
_
Commerce Department (other)
Department of Defense, civil
_
Department of Health, Education, and Welfare (other)..
Department of the Interior
__
Post Office Department
._
Treasury Department:
Interest on the public debt and on refunds of taxes.
Other
Allother
L
Total departmental
Net budget expenditures
Surplus ( + ) , or deficit ( - )
._
355
349
294
1,532
509
597
1,641
531
448
1,621
595
457
;,319
7,792
950
403
919
554
813
590
587
659
952
-593
1,040
469
605
543
535
312
153
928
482
548
666
515
356
962
19
997
558
574
644
557
483
950
19
1,040
540
560
610
557
6,583
614
1,218
6,470
656
834
6,438
156
1,089
6,875
509
1,244
6,875
475
1,025
13, 890
11,823
12,117
13,422
13,134
74, 274
67, 772
64,570
64,270
65,872
-3,117
-4,180
+230
-1-1,828
9,655
238
1956 REPORT OF THE SECRETARY OF THE TREAStJRY
JOINT STATEMENT, JULY 19,
1956
A balanced budget, to which this administration has been pledged from the
beginning, has now been achieved.
This gratifying outcome is shown in the budget statement for June 30th,
issued today, which reports a surplus of one billion, seven hundred and "fifty-four
million dollars ($1 billion, 754 million) for the fiscal year 1956.
We have also proposed a balanced iD^dget for the fiscal year 1957.
This means a great deal to the people of this country.
With such financial stability and sound fiscal conditions, the American people
can go forward with their constructive individual plans looking toward better
living and more and better jobs.
The actual results for 1956, as compared with the May estimates and prior
years, are shown in the following table:
Budget totals, fiscal years 1953-55
[In billions of dollars]
Description
1954
1953
Budgetreceipts
. . .
B u d g e t expenditm'es
M a y 17
estimate
J u n e 30
closing
64.8
74.3
64.7
6718
-60.4
64.6
67.7
65.9
68.1
66.4
-9.4
-3.1
-4.2
+1.828
+ 1 . 754
__
B u d g e t deficit (—), or s u r p l u s ( + )
1955
A breakdown of receipts and expenditures by major categories as compared
with the May estimates and actual figures for previous years follows.
Budget receipts and expenditures, fiscal years 1953-56
[In millions of dollars]
1956
Actual
1953
Actual
1954
Actual
1955
M a y 17
estimate
BUDGET RECEIPTS
(NET)
I n d i v i d u a l income t a x e s .
_
Corporation income taxes _
Excise taxes
All other receipts and customs (net)
Total
B e f i m d s of receipts (—)
. . .
.
N e t b u d g e t receipts _ . _ .
BUDGET EVPENDITURES
_
32,768
21,595
9,934
3,646
32,383
21,523
10, 014
4,112
31,650
18, 265
9,211
4,690
35,000
21,500
10,000
5,000
35,337
21, 297
10, 004
5,187
67, 943
-3,118
68,032
-3,377
63, 816
-3,426
71, 500
- 3 , 800
71, 825
—3, 684
64, 825
64,655
.60,390 . 67,700
68,141
43, 610
40,335
35,534
35, 600
35, 686
3,954
1,702
1,791
1, 008
3,629
1,253
1,895
1,045
2,291
1,927
1,857
944
2, 239
1,550
1,650
600
2,551
1,588
1,654
587
52, 065
48,157
42, 553
41, 639
42, 066
3,383
1,943
3,297
1,526
3, 519
3,414
3,770
3,550
3,780
3,784
(NET)
N a t i o n a l security:
D e p a r t m e n t of Defense—Military
_
M u t u a l security p r o g r a m :
M u t u a l m i l i t a r y program", including direct forces
support-_
Other
A t o m i c E n e r g y Commission
;.
Stockpiling a n d defense p r o d u c t i o n e x p a n s i o n . . . :
T o t a l n a t i o n a l security
Special legislative:
V e t e r a n s ' compensation, pension a n d benefit p r o g r a m s .
C o m m o d i t y C r e d i t Corporation (net)
Agricultural conservation p r o g r a m a n d r e m o v a l of
s u r p l u s agricultnral commodities
, G r a n t s to States for p u b l i c assistance a n d e m p l o y m e n t security
_
.. ..
Federal-aid h i g h w a y g r a n t s
_.
Allother
.
T o t a l special l e g i s l a t i v e . . . . . - . _ - - - - - - . . - . — -
Actual
355
349
294
445
394
1,532
509
597
1,641
531
448
1,621
595
457
1,718
740
876
1,686
740
851
8,319
7.792
9, 900
11,099
11,235
239
EXHIBITS
Budget receipts and expenditures, fiscal years 1953-56—Continued
[In millions of dollars]
1 9 5 6 • •••
Actual
1953
Actual
1954
Actual
1955
M a y 17
estimate
•
BUDGET EXPENDITURES (NET)—Continued
Departmental:
V e t e r a n s ' A d m i n i s t r a t i o n (other)
Housing and H o m e Finance Agency
_ . __
A g r i c u l t u r e D e p a r t m e n t (other)
C o m m e r c e D e p a r t m e n t (other)
D e p a r t m e n t of Defense, civil
_ ....
D e p a r t m e n t of H e a l t h , E d u c a t i o n , a n d WeKare
(other)
.
D e p a r t m e n t ofthe Interior
:
P o s t Office D e p a r t m e n t . _
.
_.
Treasury Department:
Interest, o n t h e p u b l i c d e b t a n d on refunds of
. taxes
Other
.
.
.-_
.
Allother
Total departmental
S u r p l u s ( + ) , or deficit (—)
.
.
.
.
.
952
-593
1,040
469
605
886
153
928
482
548
950
19.
1,040
540
560
951
37
1,013
540
571
543
535
312
566
515
356
610
557
483
615
526
457
6,470
656
834
6,438
156
1,089
6,875
•475
1,025
6,851
477
1,046
13,084
950
403
919
554
813
590
587
659
6,583
614
1,218
.
13, 890
11,823
12,117
13,134
74, 274
67, 772
64, 570
65, 872
66.386
. -9,449
-3,117
-4,180
+ 1 , 828
+ 1 , 754
_.
N e t budget expenditures
Actual
•.
JOINT STATEMENT, AUGUST 28, 1956
It is gratifying to report that our midyear review indicates that we will have
a balanced budget for a second successive year. The surplus for the fiscal year
1956 amounted to $1,800 million. The surplus for the fiscal year 1957 is estimated at $700 million as against an estimated surplus of $400 million last January.
Since this estimate is made before two full months of the current year have passed, we
will know much better as the year progresses what our actual surplus and future
prospects may be. We will continue to exert every effort, as we have in the past,
to improve the efficiency of operations, eliminate waste, and obtain a full dollar
value for every dollar spent by every department of the Government.
A comparison between the fiscal year 1953 and the current estimates for 1957,
in millions, is as follows:
Estimated
1953
1957
Change
Receipts
. $64, 800 $69, 800 +$5, 000
Expenditures
74,300
69,100
-5,200
Net hnprovement, 1957 over 1953
Deduct 1953 deficit
10, 200
9, 500
Net surplus, estimated for 1957
--700
It is clear that even with higher tax receipts from a prosperous economy the
present favorable budget position would not have been possible without a very
substantial cut of over $5 billion in Government spending between 1953 and 1957,
as estimated. This has been accomplished while we have continually strengthened
our Nation^s defenses and improved our civilian services.
No family can continue to live largely beyond its means. It was even worse
for the Government to do so. The turn has now been made and we believe that
our Government is firmly on a pay-as-you-go basis, provided our policies receive
real congressional and public support.
240
1956 REPORT OF THE SECRETARY OF THE TREASURY
EXHIBIT 35.—Remarks by Secretary of the Treasury Humphrey, May 27, 1956,
before members of the Press Club, Washington, D. C.
With your permission, I will just ask myself a few questions. Then, if there
is time left, I will do the best I can to answer your questions.
The first question I have here is this: How close can we come to the new
estimate for a budget surplus of $1 billion, 800 million?
The answer to that is that we hope we will be pretty close. In trying to say
how close we can come, I just want you to have in mind a few things as to how
difficult it is to make these estimates.
A billion dollars is an awful lot of money. I do not know how much it is, and
I do not believe there is anybody in this audience who knows how much it is.
It is a terrific amount of money in the things it will buy and the things it will do.
However, a billion dollars in national finances is a relatively small amount of
money, when you are collecting and spending 65, 66, or 67 billion a year.
About all we can hope for, to be perfectly frank with you about it, is that in
making up our estimates we will make so many mistakes on both sides that they
will cancel each other off.
By and large it works about that way. With the efforts that we put out, I
have reason to believe that we will come pretty close to the $1 billion, 800 million
that we have estimated.
We have about three-quarters of it behind us oh the income side, and about
ten months of it on the defense side. But we will have the income for the last
quarter of the fiscal year, which are the June tax payments, to come in and we
can very easily have $1 billion variation from our estimate.
On the other hand, we have the expenditures coming in for the end of the year
and, as you all know, there is a great tendency toward the end of the year when
there is money not spent to at least commit it so there is no chance of having an
appropriation lapse. The last quarter of the year is a difficult time on both the
expense and income side to estimate, but I still believe we will be fairly close to a
budget surplus of $1 billion, 800 million.
The next question: On the basis of this estimated surplus, will you recommend
a tax cut?
The answer to that one is no. I will not. For one thing, it is high time to start
reducing our huge debt. Another reason is this: As I said a minute ago $1 billion,
800 million is a lot of money, but again it is a very small percentage of our total
collections and our total disbursements. We have nearly 80 million taxpayers
in this country. We have over 50 million tax returns. Some of them are made
for husbands and wives jointly, so that we have more actual taxpayers than we
have tax returns. That is a lot of people.
When you start dividing up some money among as many people as that, you
have to have a lot of money or nobody gets anything that amounts to anything.
In order to have a tax reduction of any proper size, you have to know first,
which we do not know, about what we are going to have. We have to be sure how
much is available. Then we have to have enough so that we can make proper
adjustments among all the people who are entitled to consideration.
I believe very definitely that our taxes are too high. I believe that our taxes
have got to come down, and that we ought to reduce our taxes just as soon as we
possibly can. Real tax reductions can be made in just one way. That is by
having a combination of more income and less expense continuously so that ypu
have a surplus that you can count on that is available to hand back to the people.
That is the sort of a program that we have in mind. That is what we are working
toward. We had it once and we gave the largest tax cut that has ever been given.
We will work, and are working, toward it, I hope, in this country regardless of
who is the Secretary of the Treasury, or regardless of what the administration is.
We will work toward having surpluses, and having surpluses of sufficient size to
count on and to make proper reductions in taxes, in a fair and proper manner,
among all the people so that the cut is spread and the benefits are spread, to get
the best results for the forward progress of this country. That is what we are all
interested in. That is what we must have. We must have, with a growing population, more employment, more jobs, more goods, and more activity all of the time.
In all of our financial activities, and all we do in our financial policies, we should
always have in mind the development of the country and the fair spread among
all of the people of the burdens that go with taxation.
The third question: What are the prospects for more reductions in Government
spending?
EXHIBITS
241
Of course, the big amount of money that we spend in this country is spent for
security. About two-thirds of all that we collect is spent for security. So long
as we have the conditions that face us in the world today, so long as we are in
this period, we must be sure that we are dealing from strength and never from
weakness in all of the negotiations that go on throughout the world, and all the
changing conditions that have to be met throughout the world. This country
must be in a position to deal with strength. As long as it is necessary to be in
that position, we must make sure that we are there and we must spend whatever
is necessary to be there.
That does not mean, however, that we should not take account of waste that
creeps into every home, every business, into every situation in life, where all the
corners have to be watched, whereever reasonable and proper economy should be
enforced all the time. That means just continual vigilance. It means watching
every single corner, watching every single dollar all the time. No item is too
small to watch.
It is a lot of those little ones building up that make the big ones that make the
real difference in the amount of money we have to raise.
We also have to have this in mind; and perhaps more so all the time: that is,
that we are in a very rapidly developing era in research; that we are in a very
rapidly developing and very rapidly changing period in this country. I do not.
think that we have ever been in an era where research and development, new
things, and new ways of doing things are coming on as rapidly as they are today.
That is markedly true in our security requirements. It is markedly true in.
weapons. It is markedly true in the ways in which we protect and preserve our
strength, the way in which we will defend ourselves, and the way in which our
military people will handle their affairs.
As this rapid development goes on the tendency, of course, always is, as the
new things appear, to say that is fine, let us take that one on, that is something
we must have and we must have it at once. We must spend a lot of money for
research, wbich is proper. Then, because we have done that, and as new things
come on, we want to have them. That is a very proper thing to do and we must
have new things just as soon as we are sure they are practical and they are workable.
But, if we just keep adding on, if all we do is keep adding on the new and, at the
same time, maintaining in the same way all of the old, we very soon will find ourselves in a lot of difficulty.
It is true throughout our whole life, it is true in your home and your business,
that when you move forward in one front you must be selective. You must pick
out the things that will give you the most strength. You cannot have everything.
You take the things that develop the most strength and you drop off some of the
things that previously were effective, but which are of less concern because of the
new developments.
That is why we must be continually vigilant, to see that as we add on we also
recognize the worth of what we put on, and do not keep things that may otherwise,
or could otherwise, be supplanted by the new that we have taken.
With that in mind, and I think that we must always approach it from the point
of view that we can maintain and increase our strength, we will be able to increase
our military strength, our military position, and concurrently we will be able to
reduce our expenditures.
That is the history of all business. It is the history of your own situations.
As you get these new and more effective things, you can drop off the less effective
things that cost a lot of money. As you progress in a business what happens?
You add new machines. You add new ways of doing things, new organizations,
and you reduce your cost. You improve your product. You have a better
product and it costs you less money.
I think that same general principle must be sought for and attempted to be
applied in every way that we can in our governmental expenditures.
Now let's look at the remaining one-third of spending, which covers the Government services. It is going to be very difficult to continually reduce those
expenditures because, with our growing population, with our growing enterprise,
with our growing commerce, and with the growth of the amount of things we do,
we have a growing workload for Government. The workload of the various
departments keeps increasing. The workload that you people demand that
your Government do for you, those things are all increasing. It is pretty difficult
to keep having both an increasing workload and a decreasing cost of doing the
work.
399346—57
17
242
195 6 REPORT OF THE SECRETARY OF THE TREASURY
Your unit cost can go down, but your total costs are pretty hard to control
under those circumstances. I think that there is some room for some reductions
in the normal functions of the Government, but that is not where the real savings
of the future will come from.
Of course, when you get right down to it, the real savings and real reductions
that we have to look forward to wfll come about through a different atmosphere,
a different situation in the Avorld. The time will come, I believe—and must
come—when the tensions in the world will not be as great as they are today.
Some way or other we will have a better understanding in the world, when this
hope for a more surely peaceful situation that we all are striving for will actually
develop. When that time comes then the real savings, the real reductions, in
governmental expenditures can be realized.
The next question: Has militarj^ security been weakened to balance the budget?
The answer to that is positively no.
Regardless of the comments of various citizens, columnists, members of Congress, and even some of our military people, there never has been a single denial
of expenditure of a dollar for defense that has been based purel}^ on saving money
or balancing the budget. That has never occurred.
That, of course, does not mean that we have not at all times, and that we will
not in the future at all times, watch every expenditure with the greatest of care.
It is basic that the strength of this countrj^ be maintained at whatever the cost
may be. The people of the country will gladly paj^ whatever the cost maj^ be to
be sure that we do maintain ourselves in a position of real strength.
But we must have this in mind, and it is often overlooked. Strength does not
come just from spending money. You do not get things done just by spending,
money. Just because you spend a lot of money does not mean that you have a
good operation of a newspaper, or a good operation of your plant. As a matter
of fact, it may mean that you are having a careless one, that you are having one
that is not as tightly managed as it should be.
It is the effectiveness of your expenditure that you must be interested in. It
is how well is your money being spent, how carefully is it being spent, how intelligently is it being spent. That is what we must question. You must question it.
You as citizens, we as officers of the Government, must question our expenditures,
every expenditure, to see that it is being intelligently made, that it is a necessary
expenditure, and that we are not just piling one expenditure on another.
I do not think anyone has a right to say, or a right to feel or believe, that
because expenditures are questioned, that because various plans or programs are
questioned and discussed, that somebody is denying the right to the security of
this country for the sake of balancing the budget. That has nothing to do with it.
It is simply a matter of trying to be sure that we have the most efficient expenditure of whatever it is that we have to spend.
There is one other point. Strength does not come just in the military either.
The strength of America is just as much economic as it is military. There is no
way that this country could be defeated quicker, no way that we could lose our
way of life quicker, than by so conducting ourselves in one way that we ruined
ourselves in another.
It is the economic strength, the industrial power of America, that is the great
power in this world. It is our tremendous economic power that is so far ahead
of anj^ other country in the world. .
That balance between the maintenance of a sound and progressive, virile
economy which is essential to our welfare and our military expenditures, our
expenditures for all forms of governmental operations—that balance should be
carefully maintained. It must be carefully balanced to be sure that we are just
as strong as possible economicallj^, so that great force, that great economic position
of strength is maintained, as well as our military and other positions in the world.
This is my last question: Is there a controversy between the Federal Reserve
System and the Treasury?
You must admit that I have tried to ask questions that are at least subjects of
discussion.
The Federal Reserve System as a whole spreads out all over the United States.
It is made up of boards of our best citizens, a majority of whom are businessmen
in the various comniunities, and these communities cover the entire United
States.
When you are talking about the action of the Federal Reserve System, j^ou are
talking about a widespread system of information, of opinion, of examination of
what is going on, and of knowledge of conditions in this country.
EXHIBITS
243
T h e Federal Reserve System, under our laws, is an independent system and is
responsible for certain areas of action. At some previous times in our history t h e
question of its independence has come into discussion. There have been times
when perhaps it has been subservient to other judgment.
Before we came here there was such a situation. I t was resolved before we
came here in t h e reestablishment of the independence of t h e Federal Reserve
System in its field. M a r k you, in its field.
When. I assumed t h e responsibility of m y office, I realized t h e close association
t h a t would have to exist between t h e Federal Reserve System and t h e Treasury,
because our fields are so interlocked. Bill M a r t i n was then t h e Chairman of t h e
Federal Reserve Board. One of t h e very first things t h a t I did was to ask Bill
M a r t i n if he would continue. He had tendered a resignation. I asked him if he
would continue as t h e chairman. I did it for one reason. I did it because I
t h o u g h t then, and I think now, t h a t Bill M a r t i n is t h e best qualified m a n in t h e
United States for his job.
/
H e consented and took t h e job. We arranged at t h a t time t h a t we would have
t h e closest cooperation between t h e Federal Reserve Board and t h e Treasury,
each recognizing t h e other's field of operation and t h e other's independence in his
particular field.
We set up a lot of mechanics, such as meetings back and forth, weekly meetings,
biweekly or triweekly meetings. We have gone along in a very close association,
each presenting to t h e other his views, hearing his views, giving consideration to
t h e other's views, and finally deciding w h a t he was going to do in t h e field of which
he was responsible and going ahead with his job. AVe have had t h a t close association, as I t h i n k you m u s t in any situation where you are trying to balance.
T h e most difficult situation is where you are trying to balance t h e effect of
pressures, b o t h inflationary and deflationary pressures, not only as to w h a t t h e
effects of those pressures are t o d a y b u t what t h e effect of those pressures is going
to be three months, six months, or even some longer period hence.
You are in a field of tremendous difficulty. You are in a field where nobody
can really be very sure t h a t he is right. Worse t h a n t h a t , you never can know
afterwards who. is right because this is a moving business. When you t a k e
action one way you never will know, and nobody else will ever know, w h a t would
have happened if you had t a k e n the action t h e other way. There is no way to
ever check up.
All during this period we had continual discussions, continual questions back
and forth amongst our staffs, as to w h a t action should be t a k e n to resist both
inflationary and deflationary pressures.
By and large we have been fairly lucky in having a p r e t t y close balance during
most of t h e period between these pressures. T h a t is t h e finest position t h a t t h e
people of t h e United States can be in. And it is t h e most difficult position for
the people who are tr3dng to balance t h e pressures in any way t h a t they can.
I will just cite for a m o m e n t w h a t t h e pressures are.
We h a v e for a period of a good m a n y m o n t h s had t h e highest employment in t h e
history of this country, t h e highest earnings in t h e history of t h e country, t h e
greatest volume of business in t h e history of t h e country. We have been going
along at this extremely high level a large p a r t of this period, and p r e t t y well
balanced with very little change, either deflationary or inflationary, during this
period—very, very little change.
When you are in a period of very high employment, very high business activity,
if 5^ou t r y to move up to any great extent from t h a t extremely high level, you soon
reach t h e place where there are not enough more materials, and there are not
enough more people, to m a k e m a n y more goods. If t h e pressure is pushed too
high under those circumstances, you get a scramble for materials and a scramble
for people and you raise costs to the general public, t h e cost t h a t t h e public has t o
pay, without giving t h e public anything more or better for it.
T h a t is an inflationary pressure t h a t should, a n d must, be avoided, if it can be,
because you are not getting better goods and you are not getting more goods.
You are simply parang more for t h e m because j^ou already are at about as high
as you can go.
If during such a period there are pressures and scrambles to increase inventories,
or to build inventories, or to gamble with goods against price rises, or against
material shortages, you very soon get yourselves into a position where you have
more t h a n your normal requirements need. Under those circumstances as
inventories accumulate they, in a n d of themselves, soon become a burden a n d have
t o be liquidated. As you liquidate t h e inventory you curtail your purchase of
244
1956 REPORT OF THE SECRETARY OF THE TREASURY
new products. Then you begin to have deflationary pressures and you begin
to lose employment and begin to get in trouble on the down side.
The Federal Reserve System, with its combined judgment of all of these people,
has been leaning, as they say, against the wind during this high period, to prevent
inflationary pressures. We have had discussions as to when they should move, or
how they should move. We very frankly always stated our opinions to them,
and they to us. We talked about it at length. Included in those discussions
are the President's economic advisers who worked with us continually, Arthur
Burns and his people, and we all expressed ourselves, and a great deal of the time
there is a difference of opinion in shades of timing and in shades of what the
pressures will be.
We work this out to a point where the Federal Reserve System exercises its
final judgment in its field and the Treasury exercises its final judgment in its
field.
This last time when the discussion was up as to whether we would make this
additional move, we had to balance not only the conditions that obtained at the
time, but the question of what those conditions are going to be sometim.e hence.
Very frankly I differed with Bill, and our people differed with his people, as to
the force of the pressures sometime hence—not as to the conditions of today,
but as to the force of pressures sometime hence.
It seemed to us that we could already see some natural conditions that were
coming. We could see some excessive inventory in the automobile business.
We could see some excessive inventory here and there. We could see a steel
wage negotiation coining up. We could see some accumulation in that field.
We felt that the natural conditions would exert some downward pressures that
would offset these jDressures upward, and that there was no further action required
at that time, that it was better to go without it.
My general feeling about our economy is that the best interests of America
are served when the great majority of people in America have confidence in the
situation, when they believe that things are sound and strong, that their jobs
are reasonably secure, and that good times, which we are in, are going to continue.
Not necessarily peak times. I think we must distinguish that.
I think we are often apt to exaggerate when in some particular place there is
some relatively small readjustment, and think that is bad times, or that when
som.ebody is not breaking records all the time, that that is bad times. It is not.
When you have very high levels, you have to expect small adjustments in the
economy, and you thank the Lord that they are small and come here, there, and
the other place. When they are coming here and there and the other place, it
means they are not all going to come at once. When they do not all come at
once they correct themselves relatively soon and with relatively little damage.
When you have a high degree of confidence that that is the situation, you can
feel that you have pretty sound ground under your feet.
The reason I put so much stress on confidence is this: The majority of people
in America have more money to spend than just what they have to spend every
day to live on—for clothes and food and shelter. They can spend a little more,
or a little less, depending on how they feel, depending on how secure they feel—
depending on their confidence.
They can buy a washing machine or not buy. They can trade automobiles, or
go along with the one they have. They can buy a house or they can still pay
rent. With confidence you have the peojDle going along on an even keel and
buying not just the things they need, but other things they want, the things that
are availabie for them to have, to keep increasing their scale of living, and to
keep a strong economy and widespread "activity..
If people begin to lose that confidence and they begin to curtail their activities,
why you can very soon find yourself in a position where, when that fellow decides
not to buy that washing machine, it is only a little while before either there is
another washing machine in the inventory, and later there is a man out of a job.
The most important thing in America is a job. Don't ever forget it. If you
you do not have the jobs, you do not have any America. The problem for all of
us is to see, in every way that we can, that we do have jobs in America. It is
jobs in America that makes everything that we have. It makes all the goods we
have. It m.akes all the material things. I am not talking spiritually. I am
talking materially. Jobs make all the material things that we have. Jobs are
the most important thing in this country.
Confidence in our financial situation and our financial management, in our
prudence, in our financial integrity, is essential to the maintenance of jobs and
EXHIBITS
245
lots of jobs. Therefore, I think that what we want to do is so conduct ourselves
in every way so we do not shake that confidence, so that the people feel that we
are working in the best interests of leaning against both inflation and deflation,
but letting the judgment of 160 million people determine what they wfll buy,
when they wfll buy it, and what they will pay for it; and have the confidence to
go ahead and do it.
EXHIBIT 36.—Statement by Secretary of the Treasury Humphrey, June 19,1956,
before the House Ways and Means Committee
I am appearing before you today to ask for a temporary increase in the public
debt limit from $275 billion to $278 billion for the fiscal year 1957. Because of our
improved fiscal position, we are following the suggestion that the temporary increase granted by Congress for two years past be cut in half.
We succeeded in living within the $281 billion limit set a year ago, but by a
narrow margin. On several days, we were within $700 million of the debt ceiling,
and, at times, our operating cash balance was less than enough to cover 10 days'
expenditures. This is closer than is prudent in handling the Government's huge
operations efficiently.
However, I am in full sympathy with the desire of the Congress to keep a limit
on Government spending.
We hope to finish this fiscal year with a budget surplus of about $1.8 billion
and the debt under $273 bfllion. We still face, however, a heavy seasonal swing
in receipts, which means borrowing in the first half of the fiscal year for repayment
from heavy tax receipts in the second half.
This swing is gradually being reduced |by the shift in time of payment of corporation taxes, provided by 1954 legislation.
Taking these facts into account, I believe we can operate under a $278 billion
ceiling, though it will take careful management. If this becomes impossible, we
shall advise the Congress promptly.
Our success in living within this ceiling will depend on great restraint by both
the Congress and the administration in expenditures. On the basis of present
estimates, there is no leeway for any reduction in tax rates. The program calls
for applying any surplus to debt reduction in accordance with the recommendations made by the President.
I hope that this year we are setting a precedent which may be faithfully followed
year after year, and that from now on we will so handle our financial affairs that
we can make each year a modest payment in reduction of our huge indebtedness
as a matter of standard practice.
This program is one more step in maintaining fiscal soundness and ensuring the
integrity of our money, so that our people can count upon its value and go forward with all their undertakings with full confidence. This is the basis of continuing and growing prosperity and constantly more and better jobs.
Let me thank the members of this Committee for their continued understanding
and cooperation in working toward these objectives.
EXHIBIT 37.—Statement by Under Secretary of the Treasury Burgess, November
28, 1955, before the Subcommittee on Housing of the Senate Banking and
Currency Committee
The Treasury is vitally interested in any development that affects the value of
the dollar. Debt management operations are also influenced by any large demand
for funds such as arises from building.
This year there has been mounting evidence that the volume of residential
building has been exceeding not only the volume of money available from, normal
sources for mortgage lending, but also the availability of labor and building
materials.
Building material costs since mid-1954 have moved up by about 10 percent
under the impact of the tremendous increase in new housing starts. If materials
and labor are available only at increasing prices, the inevitable result is a higherpriced house. In the final analysis, it is the home buyer who suffers. Continued
increase in the cost of homes could sharply limit the future market for houses,
and limit our progress toward improved housing standards for our people.
246
195 6 REPORT OF THE SECRETARY OF THE TREASURY
Accordingly, the Treasury has been sympathetic to the various actions taken
by the Federal .Housing Administration, the Veterans' Administration, the
Federal Home Loan Banks, and the Federal Reserve System which have been
designed to protect the dollars of the home builders and home owners and others.
Money for home mortgages must come largely from the savings of the people.
In times like these, with business activity straining at capacity, we cannot run the
inflationary risks of manufacturing money through bank credit to encourage a
level of housing starts that probably could not be sustained because of shortages
of labor and materials. That would only result in further, price increases.
EXHIBIT 38.—Statement by Under Secretary of the Treasury Burgess, February 27,
1956, before the House Committee on Banking and Currency
I am glad to appear before you today to present the views of the Treasury
Department in support of H. R. 9285. This bill would extend until June 30,
1958, the present authority of the Federal Reserve Banks to purchase securities
directly from the Treasury in amounts not to exceed $5 billion outstanding at
any one time.
The Treasury Department requested the enactment of this, measure in its letter
to the Speaker of the House of Representatives on January 24, 1956. It has been
endorsed by the Board of Governors of the Federal Reserve System.
Prior to 1935, Federal Reserve Banks could purchase Government obhgations
either in the market or directly from the Treasury. From 1935 until 1942, however, this authorit}^ was restricted to open market" transactions under the Banking
Act of 1935. In 1942 the authorit3^of the Federal Reserve Banks to purchase
securities directly from the Treasury was restored, but a limit of $5.biflion was
placed on the amount outstanding at any one time. The $5 billion authority
was granted initially only through 1944, but the Congress has extended it from
time to time. The present authority was granted for two years and expires
June 30, 1956. .
The primar}^ purpose of this direct borrowing authority has been to help the
Treasury and the Fed.eral Reserve System work together in minimizing the disturbing effects on the economy of short-run peaks in Treasury cash receipts and
disbursements, particularly around the time of quarterly income tax pajanents.
These short-run movements of funds are large, and precise estimates of their
day-to-day patterns are often difficult. This direct borrowing authority is a
useful mechanism for the Treasur}^ and the Federal Reserve and its use has avoided
unnecessary strains on the money market on a number of occasions.
Treasury borrowing from the Federal Reserve Banks under this authority has
been used infrequently and then only for short periods. The last time it was used
was on March 17, 1954. Borrowing has exceeded $1 billion only rarely. A table
showing the use of the direct borrowing authority since 1942 is attached.
The Treasur}^ and the Federal Reserve have used the direct borrowing authority
only to meet temporary requirements of this nature. The authority is also,
however, a safeguard that-could be used in the event of any sudden nationwide
emergency requiring heavy cash payments from the Treasuiy before securities
could be sold.
While it has never been necessary to use as miich as $5 billion, we recommend
continuation .of the present $5 bfllion authority to give the Federal Reserve and
the Treasury sufficient flexibility to cover emergency situations if they should
arise. Any borrowing under the authority is, of course, subject to the statutory
debt limit.
Direct borrowing from Federal Reserve • Banks
Year
1942
1943
]944-..
1945
1946
1947
1948
Days
used .
:
.
19
48
8
-
Maximum
amount at
any tirae
(inmillions)
$4221,320
484
Year
1949
1950
1951
1952
1953
1954
1955
Days
used
.•
'2
2
4
30
29
15
Maximum
amount at
any time
(in m.illions)
$220
108
320
811
1,172
424
EXHIBITS
247
EXHIBIT 39.—Remarks by Under Secretary of the Treasury Burgess, April 25,
1956, in presenting a medal to the American Newspaper Publishers Association,
New York, N. Y.
This year, throughout America, we are commemorating the 250th Anniversary
of the birth of Benjamin Franklin.
In that connection, the Congress of the United States has authorized and
directed the Secretary of the Treasury to have struck 71 bronze commemorative
medals and arrange for their presentation to the societies or enterprises of which
Franklin was a member, founder, or which he helped in their early development.
When we in the Treasury sought to carry out this responsibility, we were again'
impressed by the enormous range of Franklin's interests and achievements.
Without Franklin's skillful diplomacy, which brought to the colonies the aid of
France, the Revolution would probably have foundered.
The Constitution of the country reflects his wisdom.
He made great contributions to science and education.
But he began at the age of 15 and continued throughout his life as a newspaper
pubhsher.
Of his work as a publisher and editor, we might well say in the words of Kipling
that he painted on a ''ten league canvas with brushes of comet's hair."
Those who work in the newspaper field are thought to be primarily recorders of
happenings of things that have already occurred. Yet, strictly among ourselves,
would not every newspaper publisher admit that, to be truly successful in his
chosen field, to make a really great newspaper, there must be a good deal of the
prophet in his makeup? The best reporters are those who look ahead as well as
behind.
Franklin symbolized that ability, that necessity, to look ahead which we have
come to associate with your great organizations. Few of us can claim a crystal
ball of such enormous power as his, yet I think it may prove inspiring to each of
us if we remind ourselves today that, in the infancy of our Nation, these were the
three steps which Benjamin Franklin believed could eventually bring lasting peace
to the world:
The first step was to develop the threat of massive retaliation by air to deter
aggressors from making waT. Amazingly, he wrote this suggestion to the Royal
Societj^ at the time of the first balloon flight in France.
The second step was to develop a council of nations to try and adjust their
differences without ''first cutting each other's throats."
The third, and to Franklin perhaps the most important step, was the free and
open communication between the peoples of all countries.
This third step is the basic theme of the international celebration of the 250th
anniversary of Franklin's birth. More than 1,000 organizations and associations
in 51 countries are cooperating this year in a free and voluntary exchange of ideas. .
Each country, each group, plans its own program. Their ideas are shared through
the generous cooperation of many thousands of publishers and broadcasters.
Benjamin Franklin's entire life was lived in the belief that the communication of
ideas was, perhaps, man's greatest service to man. In an age when the civil authorities of Boston said that one newspaper was all that New England, perhaps
America, would ever need, Franklin set about helping to organize or publish 8
newspapers himself in Massachusetts, Pennsylvania, South Carolina, New York,
Connecticut, Rhode Island, Antigua, and in Montreal, Canada, where the
Montreal Gazette is generally considered the oldest English-language newspaper
in continuous circulation in the British Empire.
He published the first foreign-language newspaper in America, the second
monthly magazine, and his almanack and autobiography w^ere the first of all our
publications to enjoy world-wide circulation. He created the American newspaper
cartoon, started the idea of illustration news stories, and. developed advertising
from brief, uninspired notices to the warm and persuasive voice of free enterprise.
In fact, we might call Benjamin Franklin and his associates the original "Newspaper Publishers Association."
You ladies and gentlemen have received from him' a rich legacy. You have
guarded it well. Nowhere else on earth is freedom of the press a more vital and
effective principle. You have taught people to understand both sides of a question
and to know the citizens of other countries better. When our viewpoints disagree,
it is necessary that we at least understand why, and that Ave try to appreciate
the other person's ideas. In this way, as Franklin predicted, we can slowly but
surety bring peace one step nearer to all mankind.
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1956 REPORT OF THE SECRETARY OF THE TREASURY
In the Franklin tradition, the newspaper men and women of America have
been looking ahead in other ways, too. You are lending your talents and industry
to furthering the principles of good government and encouraging the initiative
and enterprise of our citizens.
In our times, as in Franklin's, one of the first principles of good government
is sound money, and sound money depends, in turn, on the national habit of thrift,
which is almost a synonym for Franklin's name.
One of your contributions to the cause of sound money has been your active
sponsorship of the United States savings bonds program. As a public service,
you have donated millions of dollars in advertising space, plus many thousands
of man-hours, to bring the merits of this program to the attention of the American
people.
America has benefited in countless ways from the new meanings you have
given to Franklin's conception of the publishing business as a great medium of
public service.
But let me be more personal. The Franklin Medal, which I have the honor
to present to you today, carries these words taken from Franklin himself:
"Wise and Good Men are the Strength of a Nation."
The complete quotation adds the words "Far More Than Riches or Arms."
I am proud to present this medal to the American Newspaper Publishers.
Association. During the years, you have numbered among j^^our members many
of the "wise and good men" of their age. You who publish newspapers hold in
your hands a large part of the hope that free communications among peoples
may yet bring the understanding that can achieve peace and new standards of
thinking and living for the people of this world.
EXHIBIT 40.—Remarks by Under Secretary of the Treasury Burgess, May 8,1956,
before the National Association of Mutual Savings Banks, Washington, D. C.
Economic events in the United States in the past year have made the business
of your association even more important than it was a year ago. For these
events give evidence that for its long-term growth the country needs a higher
rate of saving.
What has happened is that the demand for capital has shown itself to be
greater than the supply of capital. The amount of money sought to bufld houses,
to build factories, roads, and public facilities has been greater than even the
large amount, of savings available for these purposes. As a result, some of the
demands for this money have been met from bank credit instead of by savings,
and the price of money has risen.
This is, in fact, one of the principal reasons why a threat of inflation has developed and why the Federal Reserve System has raised its discount rates from 1%
percent a little over a year ago to 2% and 3 percent today.
For some years it was popular in this country to talk about our "mature
economy." The economists who used this language said that the growth of our
country was slowing down, and that we did not need as much capital as in the
past. They emphasized the importance of spending rather than saving.
In recent months we have been demonstrating.the very great capacity of this
country for growth. We are building a better America at an exceptionally rapid
rate: new houses, new production facilities, new public services. We have disproved the old theory of stagnation because of maturity.
This great progress is based on confidence in our country and in ourselves.
It is based on sound Government policies. It means more jobs for more people
at bette.r pay than ever before.
This prosperity of ours is shared in Western Europe and in many other parts
of the world. The great recovery in these countries from the dislocations and
distress of war partly reflects generous cooperative action by the United States.
One reason our own and other countries have gone forward confidently in
economic progress is that we feel we have held our own in the cold war. We
have increased our striking power to a point where it is a strong deterrent to
aggression.
So we have good cause for satisfaction. But history teaches one lesson we must
never forget: the seeds of future trouble are often sown in times of prosperity.
This is the time to examine ourselves to see how we may bufld better and more
firmly for the future, to see how we can avoid trouble.
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249
One major problem, as indicated, is the danger of inflation.
Other countries have the same problem. The Bank of England has raised its
rate to 5H percent; Canada has gone to 3 percent; Germany to 4}^ percent. At
the Istanbul meeting last autumn of the 58 countries which are members of the
International Monetary Fund and the International Bank, there was agreement
by afl present that inflation was a threat. Inflationary pressures have increased
since then.
In this country, steps that the Government has taken, with the cooperation
of people like the savings bankers here today, have been and are being reasonably
successful in keeping things on an even keel.
The great increase that is going on in productive capacity—to turn out more
goods by more efficient methods—will, in the long run, help to keep prices stable
and, at the same time, pay higher wages.
The large savings of the American people are providing money to bufld this
larger capacity, along with more and better homes and public facflities. It is
when we rush the spending faster than the rate of savings, and do it too heavily
with borrowed money, that we run the risk of inflation. We have tended to do
this in the past year. Home building was a good illustration. We tried to build
more homes in early 1955 than we had building materials, building workers, or
money available. Therefore, the cost of building rose 4 or 5 percent. The
steps that were taken have brought that particular situation into balance.
Some people have said that we are going into debt faster than we are saving.
That is not true. Americans set aside about $17 billion of their income last year, .
rather than spending it. As you know, almost $2 bfllion of this total represents
increased deposits in your own institutions. Savings and loan shares rose by
$5 bfllion, and almost $4 billion went into checking and savings accounts in commercial banks. Another $2 bfllion went into United States Government securities and over twice that amount into corporate stocks and bonds and the obligations of State and local governments. "
In addition, individuals added $6 biflion to the value of their insurance last
year. They put close to $30 biUion into the purchase of homes and the plant,
equipment, and inventories of unincorporated businesses and farms. Even
when you aflow for the increases in mortgages, consumer and business debt that
individuals incurred during the year, and for property depreciation which is
constantly taking place, individuals' savings still added up to about $17 billion
in 1955.
In spite of this remarkable record of savings last year, however, individuals
saved a little less than in 1954, which in turn was a little lower than 1953. Personal savings are accounting for only about 6J^ percent of our income after taxes
now, as against an average of about 8 percent in other recent years. This is
disturbing and is a further indication that we are not saving today quite enough
to finance the rapid rate of growth of which we are otherwise capable. We need
to develop thrift and encourage it by attractive rewards. This is one of the objectives of the Treasury savings bonds program, which is celebrating the 15th
anniversary of the E bond this month. Your institutions are enlisted in this
same endeavor.
One of the ways your Government is trying to keep the economy in balance,
to assure the continued vigorous growth of the country without setbacks, is to
bring the budget into balance.
In late 1952, Mr. Eisenhower said that his goal was to bring the budget into
balance within four years. We are doing it a little faster than that. This year
we shall have a balanced budget as against an inherited $9]^ bfllion deficit in the
year we took over. We shall have a balance again next year, if the citizens
keep on the pressure against unnecessary spending and the world situation continues to improve.
Taxes have, as you know, already been reduced by $7^ billion as an incentive
for increased enterprise and increased savings.
In the long run, if we can keep Government spending under control, can keep
on giving the people confidence and incentives, the continuing growth of the country should make our mflitary burdens, easier to carry and we should be able both
to make reductions in the public debt and gradually to reduce taxes further.
The other proved mechanism which we have for helping to keep our economy in
balance is the Federal Reserve System. This administration is opposed to trying
to manage the country by direct controls over wages and prices and commodities.
One of the first things the administration did in 1953 was to abolish the remaining
wartime price and wage controls.
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But we do believe in the traditional and more general influence of central banks
over the supply and price of money. In 1953 we pledged that the Federal Reserve
System would be free to exercise the functions given them by law to influence the
credit supply in the public interest. The success of the System depends, of course,
on the understanding and cooperation of the Nation's financial institutions.
I know from long personal experience the problems in running a bank, whether
it is a commercial bank or a savings bank, when money is as tight as it is today.
It is most gratifying to see the wisdom with which the banks are working in
harmony with Federal Reserve policy to see that all sound and legitimate needs
for credit are met whfle less essential demands are deferred or reduced.
It gives us grounds for confidence that we can weather this period of adjustment
without serious difficulty.
We are looking to the savings institutions of America to help further the dynamic
growth of our Nation through the encouragement of greater individuals' savings.
If individual investors in savings bonds and in all other forms of saving respond
as we hope, we may look forward to financing without inflation the steady, sure,
and rapid advance in the economic well-being of our people.
EXHIBIT 41.—Remarks by Under Secretary of the Treasury Burgess, May 10,
1956, at Rutgers University, New Brunswick, N. J.
The great surge in capital expenditures of business this year, following a big year
in 1955, naturally raises the question of where the money is coming from.
There are two sorts of evidence that the demands for capital, both for business
and personal use,.are running ahead of the country's savings.
One evidence is in the capital markets themselves, where, in spite of the largest
volume of new issues of all time, the market has been staggering under the impact
of additional demands for funds. With the price of money substantially increased,
a number of new issues have had heavy going, and some have been deferred.
The second evidence is to be found in the increase in bank loans. Loans to
business by commercial banks are about 20 percent higher than they were a year
ago, showing that some of the demand for capital has been absorbed by the commercial banks.
The mortgage market has provided a particularly interesting piece of evidence.
In the middle of last year, the volume of mortgages created to build homes could
not be fully absorbed by the accumulation of savings in the regular savings
institutions and spilled over into the commei cial banks, largely through a substantial increase in mortgages warehoused by the banks.
So here is evidence that savings have not been keeping pace with the demands
for funds.
Several questions are naturally raised: Is this a temporary burst of demand, or
is this a long-term trend? How serious is the shortage of savings, and what
ought we to do about it?
One thing, at least, is certain: We have definitely disproved the theory of the
"mature economy," which was held by many economists a few years ago. Instead
of stagnating, we are building a better America at an exceptionally rapid rate:
New houses, new production facilities, new public services. This great progress is
based on confidence in our country and in ourselves. It is based on sound Government policies. It means more jobs for more people at better pay than ever before.
This prosperity in America is part of a larger prosperity throughout the Western
World.
I am sure, however, that this audience of businessmen would all agree that it is
in times of prosperity like this that the seeds of future trouble often start to grow.
It is time to examine ourselves and take every possible precaution to avoid the
twin evils of either inflation or deflation.
In judging the balance between savings and spending, we now fortunately have
many more figures available than we had a few years ago. I shall avoid getting
enmeshed in expounding these figures to you, but I should rather try to give you
certain broad conclusions from my examination of the figures.
The first conclusion is that this country is doing a tremendous job of saving
money and applying it to increasing our wealth and wealth-producing assets.
•Business corporations in 1955 increased their assets by about $39 billion. Of
this, $14/^ billion was covered by current depreciation, and $14/4 biflion was
EXHIBITS
.251
raised by increasing debt or sefling capital stock. The other $10 bfllion came
from retained earnings.
While corporations went into debt by about $9 biflion (outside of income tax
liabflity), on the other side of their ledgers, thCy increased their receivables and
inventories by almost as much.
So the record for last year is a pretty good one but does seem to suggest that a
further substantial increase in plant and equipment expenditures this year, such
as is now projected, will mean a further large increase in debt.
Looking further ahead, the number of variables is so great as to baffle firm conclusions. George Terborgh has made a careful analysis and estimates for the
coming decade that depreciation and retained earnings are likely to provide the
major part of future expansion; so that requirements from the public would be
well within the expected amount of funds available.
That raises the question of the trend of individual savings from which capital
may be drawn for business growth.
A number of articles in recent, weeks have implied that the people of this
country were borrowing more money than they saved and were thus on the road
to insolvency. This is not so. While individuals have been increasing their debt
rapidly, particularly their mortgage debt and consumer debt, they have been
saving more than they borrow. So that, in the aggregate, net personal savings
are running better than 6 percent of individual disposable income. This, however, compares with 8 percent savings a few years ago, and the amount and percent have been declining for three years.
Thus the figures show that the American people are a saving people both as
individuals and in the operation of business. A huge amount of funds is being
made available each year for the progress of the country in satisfying human
needs more fully and meeting our national obligations.
"
Based on these figures and on what is actually happening in the money markets
and with respect to bank credit, my conclusion is that we are doing pretty well,
but not quite well enough.
To be sure that our rate of progress will continue without interruption by inflation or lack of accumulation of capital, I believe the time has come when we must
all consciously follow policies which will encourage the accumulation of the needed
capital.
in the background, we must remember that we are engaged in a great international struggle to demonstrate to the people of the world the quality of our economic system and its capacity to satisfy human needs. I believe we have the
best economic system and the most efficient one, but we must give the broad
principles of its operation the same careful attention that we give to the details
of the operation of our businesses. What then are the things that we need to do
to assure the continued flow of savings in the amounts needed to keep our economic
machine moving ahead in high gear?
The first thing we must do is resist inflation. When you have inflation, the
cost of building new plants increases faster than the rate of savings.
Inflation is a product of many influences and policies, both governmental and
private.
The Government today recognizes its responsibility for maintaining a stable
dollar. The first necessity is a balanced budget, and we are promising you that
for this fiscal year and, with good fortune and cooperation, for the next fiscal year
also.
Perhaps the most potent arm of Government for assuring stable money is the
Federal Reserve System. This administration has assured the Federal Reserve
Board and the Federal Reserve Banks that they will be free to exercise their
judgment in the determination of their policies in the public interest. The broad
program of the Reserve System in the past year for holding in check a tendency
toward overexpansion of credit has, I believe, been most helpful in keeping the
pressure toward inflation within bounds.
There are other governmental actions which impinge on economic stability
which I shall not attempt to describe, except to assure you that those of us who
are working for you in Washington are doing our best to steer these forces in the
direction of sustained economic growth.
Let me suggest, also, that business itself and the policies it follows with respect
to wages and the pricing of its products exercise a very important influence on the
economic trend.
The other area in which I believe we can all make a contribution toward assuring
an adequate supply of funds for progress is the direct encouragement of savings.
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1956 REPORT OF THE SECRETARY OF THE TREASURY
In the Treasury we are celebratinglbhis year the 15th anniversary of the Series E
savings bond. This bond has proved itself a unique mechanism for teaching
regular savings by millions of people. There are now $40 billion worth of these
bonds outstanding in the hands of approximately 40 million people in the United
States.
The best method of selling savings bonds is through the payroll savings plan,
which, I am sure, most of the businesses represented here have in effect in their
establishments. The vigorous promotion of this form of savings is one of the
best ways of teaching thrift. To the extent that more of the Federal debt can
be put into the hands of individuals who would not otherwise have saved, that will
tend to release other funds for the use of business.
We have developed in this country, also, a unique system of institutions for
savings, including insurance companies, pension funds, savings and loan associations, savings banks, commercial banks, and others. These institutions we
need to foster and encourage.
We are today going through a period of uncertainty as to rates of interest. In
a free market the balance between the volume of savings and the demand for
money is influenced by rates of interest. We are just emerging from a period of
twenty years during which interest rates were held artificially low as a matter of
Government policy—a great handicap to sound economic progress. Just where
the rates should be cannot be determined arbitrarily. The important thing is
that rates should have reasonable freedom of movement to reflect the economic
forces of supply and demand.
What I believe is that we have escaped from a period of economic regimentation
and doctrinaire solutions into a freer atmosphere. In this period, we should be
able to make vigorous economic growth toward new standards of satisfaction
for the lives of all the people.
If this growth is to go forward with power and assurance, we must somehow
learn to combine freedom with restraint to avoid the twin dangers of inflation or
deflation which threaten us in every period when we tend to grow overconfident.
The opportunity ahead is very great, indeed.
EXHIBIT 42.—Statement by Under Secretary of the Treasury Burgess, June 7,
1956, before the Subcommittee on Executive and Legislative Reorganization
of the House Committee on Government Operations
In reviewing the material already placed in your hands, there seemed to me
three or four points that need clarification for your records as to the purposes
and the results of the Treasury's consultation with these committees.
The first point I want to be sure is clear is the enormous importance to the
American people of sound management of the debt. The $275 billion national
debt is a major influence in our economic life. If handled improperly, it could be
inflationary or deflationary. The failure, for example, of one of our large financing
operations involving $10 biflion or $12 billion could have a serious effect on our
whole money market and on the financing of business in this country. It is
therefore essential that the Treasury should take every precaution to get information from every useful source before making decisions about any of these
operations.
These four advisory committees are representative of an important part of the
huge market for Government securities. In the course of exploring the facts for
a new Government issue, we consult, however, a great many other people. In
particular, we get a great deal of help from the Federal Reserve Board and the
twelve Federal Reserve Banks, with their offices throughout the country, who are
in contact with a great many people and with the market. We maintain contact,
also, with the people who handle investment of pension funds (State, municipal,
labor union, and other private), with trust companies which have money to
invest, and a great many individuals.
Our exploration of the market for Government securities is continuous and not
something that is related solely to the periods when we put out new issues.
The bankers and dealers, whose representatives we consult, are not simply
important markets for our securities, but they are also the principal salesmen.
We rely upon the banks to keep their customers informed about our offerings of
securities and they do this as a service, not only to the Treasury, but to the public.
After a new issue is announced the bankers and dealers do an enormous amount of
EXHIBITS
253
writiug and telephoning to their customers to tell them about the new issues.
You always get the best cooperation from people when they know your problem;
so that our consultations are one of the methods of assuring the successful sale of
our bonds.
One point not commonly understood is that the rates of interest which our
securities carry are determined by the Government security market, and when
we sit down with the advisory committees there is seldom any important question
about the rate of interest which a security of any given maturity should carry.
Hundreds of mfllions of dollars of Government securities are bought and sold
every day in the free market and the price d.etermined in this way dictates the
rates that we have to pay on new issues.
Every week the Treasury sells $1,600,000,000 Treasury bills at free public
auction and the rate at which these bflls sell, together with the rates on purchases
and sales in the open market, build up a curve of rates which makes it fairly
obvious at any time what rate a new issue of securities has to carry to be sold
successfully.
Therefore, our consultations with these advisory committees are not so much
concerned with the rates of interest, but more largely the question of what kind
of security the public wants: a bond issue, an issue of 1 to 5-year notes, or only a
1-year certificate. The market itself writes the interest rate.
The essential point is that the Treasury, for its guidance in very important
operations, must have just as complete information as possible as to what maturities the public wfll buy. On this point, the consultation with these committees
is invaluable.
Let me emphasize again that we do not tell these committees our decisions;
we often receive conflicting advice. The Secretary makes up his own mind only
at the last minute before the public announcement and after all the facts are on
hand.
The Treasury is most appreciative of the large amount of time and attention
that the members of these committees have been willing, patriotically, to give
both in advising with us and in assisting in the sale of securities when they are
issued. We are fortunate in this country to have a spirit of public service which
enables us to call upon our citizens in this way. It would be an unhappy day
when citizens felt that services of this sort were no longer welcome.
In your letter inviting representatives of the Treasury Department to appear
at this hearing, you asked the Department to give information on the applicabflity
of Departmerit of Justice standards for the organization and functioning of
advisory committees to the various committees which are consulted, from tim a
to time, by the Treasury on matters having to do with debt management policy
and have been so consulted since the early 1940's.
Insofar as I am informed, consultations by the Treasury with the advisory
committees which are the subject of the hearing this morning have not been
considered to raise problems in the antitrust field. The suggested standards,
and they are only suggested standards, of the Justice Department have dealt
primarily with steps to be taken in order to minimize the possibflity of violation
of the antitrust laws. The suggested standards were, I believe, first called to
the attention of certain departments of the Government in October of 1950. It
is interesting to note, however, that the Justice Department did not at that time
write to the Treasury Department concerning such standards.
From time to time thereafter, these standards have been pointed out to various
departments of the Government by the Justice Department in connection with the
functioning of various committees. I do not understand, however, that it has
been suggested that they should be formalized and put into effect insofar as the
committees which we are discussing today are concerned.
While no formalized regulations have been issued by the Treasury covering
conferences with these committees, the operation of these committees do follow,
in the main, the requirements which have been suggested from time to time.
The committees which are your present concern are, in fact, set up as an integral
part of the committee system in "their respective parent organizations. Responsibflity for membership selection rests solely with the sponsoring organizations.
Meetings with the Government are called by the Treasury, which fixes the
time and place of the meetings and determines the phases of public debt management to be discussed. Whenever the committees meet with representatives of
the Government, the direction of the meetings is in the hands of a representative
of the Government. The value of the meetings to the Government comes from the
open, full, and complete discussion of the problem submitted. While minutes
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1956 REPORT OF THE SECRETARY OF THE TREASURY
are not kept of all meetings, the Government representatives secure from such
discussions the information which, with other information received from many
sources, responsible Government officials use in reaching conclusions in the
financing field.
The functions of all of the committees with which we are here concerned are
purely advisory and afl determinations of action to be taken in the field of debt
manageinent are made solely by Treasury representatives and such decisions
are not imparted to the committees,, or any members thereof, these committees
learning of the Government's decision when a general public announcement
concerning debt financing is issued by the Treasury.
Thus, in their purposes and operating procedures, I believe these committees
conform to sound principles for the relationship of such committees to a Government department.
EXHIBIT 43.—Extract from remarks by Assistant Secretary ofthe Treasury Kendall,
October 27, 1955, before the United States Customs Service, Detroit, Mich.
We have heard a great deal lately about team play in Government. This team
play goes from top to bottom in the Government itself. No one who has been
privileged to serve with the present administration could fail but to be deeply
impressed by this spirit of enthusiasm, of coordination, and cooperation. One of
the most striking and refreshing discoveries I made, and which I think anj'-one new
to Washington makes quite quickly, is the realization of what a fine and devoted
public service exists among the career employees of the Government. I have not
only been deeply impressed but fervently thankful that such is the case.
In practically every problem which arises one can count on the cooperation of at
least two or three, or a larger number when necessary, of informed and keenly
intelligent associates who make sure that policy and action do not overlook any
relevant consideration or point of view.
In an organization as intricate as a national government this is by no means an
automatic or built-in safeguard. It necessarily requires a desire as well as a
capacity, for imaginative and resourceful thinking, based upon past spadework in
getting the facts in order; in getting the ducks in a row.
This is equally true in the field, and the thoughtful cooperation and coordination
of each bureau and branch of service, and of the people within its. bureaus and
departments, goes a long, long way towards the accomplishment of the ideal in
government.
I can speak perhaps with greater knowledge and a greater ring of knowing what
I am talking about if I could digress for a moment and discuss public service from
the standpoint of the Department with which I have the honor to be associated.
Each of the bureaus and services of the United States Treasury has achieved a
record of distinction as part of our Federal Government. You are clearly entitled to take pride in the high tradition which has grown up within each of your
units, as well as within the Treasury Department as a whole.
Tradition is a fine thing, and every man who has ever been conscious of a
standard of performance and loyalty to duty, built up by his predecessors and his
colleagues over a period of j^ears, knows what a constructive force it can be. In a
very practical way, tradition can be a guide both as to what should be done, and
what should be avoided. Few men possess such infallible judgment, and such
sureness of perception that they are not helped by a consideration of the courses of
action chosen by other men of high principle in comparable situations.
We in the service of the Treasury Department can justifiably take a special
pride in the fact that ours is almost the oldest of our Federal executive departments, and that its high reputation was well established more than a century-anda-half ago. Yet no tradition, however proud, can stand upon its length alone.
It is important that it develop and retain qualities which help its devotees to meet
the problems of each new year with the kind of wisdom which deserves fresh
approbation. Allowances must be made, too, for the well established propensitj^
of our fellow Americans to challenge every pretension which is based only upon
antiquity. During the early part of World War II one of our four-star generals
shocked some of the high Navy brass by saying, "when you fellows talk about
tradition, what you usually mean is bad habits". What I suppose he meant was
that certain aspects of an organizational sense of fitness are as commendable in the
first 15 minutes as in the second century of its existence; but that any precepts
which do not clearly meet the chaflenge of the present day should be reexamined.
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255
We in t h e Treasury are also fortunate in another respect.. T h e laws which we
are charged with enforcing are concerned, in t h e main, with very tangible and
practical m a t t e r s . T h e y are not necessarily popular ones, b u t the need for t h e m is
clearly understood and accepted, and thej^ are all basic to t h e successful operation
of this or any representative government. They have to do with protecting not
only t h e totals of our national revenues, b u t also the individual rights of our citizens as active partners in t h e great cooperative effort which modern democracy
has become. We are helped in this task by many factors, b u t mainly by t h e
underlying soundness of our national concept of w h a t government must, and m u s t
not, u n d e r t a k e in its relations with t h e individuaL T h e intelligence and loyalty
of t h e average m a n on t h e street, in every community, helps to make t h e orderly
processes of law enforcement possible. We can go about our work with confidence
in t h e fact t h a t we have been trained for our tasks in t h e special functions assigned
to each of our separate Treasury agencies. Beyond this is the priceless accumulation of experience which so m a n y of you have gained through your years of service.
F r o m t h e Treasury point of view, t h a t experience, m u c h of it highly specialized,
becomes even more valuable when applied through interagency means, of which
your meeting here t o d a y is a good example. We are, to use a t e r m which our
President has often employed, a " t e a m , " to again refer to t h a t great aspect of his
administration.
E X H I B I T 44.—Statement by General Counsel of the Treasury Scribner, J u n e 20,
1956, before the Subcommittee on Government Information of the H o u s e
Committee on Government Operations
I t is t h e established policy of t h e Treasury t o make available t o Congress a n d
its committees, a n d to all who are entitled t o know, all requested information with
t h e very minimum of restriction. Secretary H u m p h r e y has heretofore written
this committee t h a t he has no reservation about t h e Government's business being
t h e public's business, and t h a t t h e public is certainly entitled to know, with a
minimum of restriction, exactly w h a t its Government is doing.
I n dealing with t h e right of t h e Executive, acting in t h e public interest, to hold
in confidence material which has come to t h e executive branch of t h e Government,
your committee considers a problem which is as i m p o r t a n t as it is old. I n t h e
hearings you have heretofore conducted committee members a n d witnesses have
spoken with candor on t h e rights a n d privileges of t h e legislative a n d executive
branches of Government. I t r u s t t h a t I will be permitted t h e same privilege.
I t is categorically stated in t h e s t u d y issued by t h e staff of this committee under
date of M a y 3, 1956, t h a t : ,
" I t should be stated a t t h e outset t h a t judicial precedents do not recognize any
inherent right in any officer of t h e United States t o withhold testimony or docum e n t s either from t h e judiciary or from t h e Congress of t h e United S t a t e s . "
While I do not believe t h a t there is any judicial holding which asserts or denies
t h e right of t h e Executive t o withhold testimony or documents from Congress,
there is ample a u t h o r i t y in t h e reported decisions for t h e withholding by t h e
Executive of material from t h e courts.
I n Marbury v. Madison (1803) 1 Cranch 137, 144, t h e Attorney General, who
h a d responded t o a summons, was a witness. T h e Court, speaking of testimony
he was t o give, said:
" T h e r e was nothing confidential required to be disclosed. If there h a d been,
he was not obliged t o answer it; a n d if he t h o u g h t t h a t a n y t h i n g was communicated to him in confidence, he was not bound to disclose it * * *."
I n t h e report of t h e trial for seditious libel of T h o m a s Cooper, 1800, in a circuit
court of t h e United States, t h e report states:
" T h e court a t t h e same time refused t o permit a subpoena t o issue directed t o
t h e President of t h e United S t a t e s . " Wharton, State Trials of the United States,
659, 662.
I n t h e trial of Aaron Burr, 1807, Chief Justice Marshall presiding, t h e court
issued a subpoena duces tecum to President Jefferson. I n long passages which are
somewhat equivocal as to whether t h e existence of t h e privilege is t o be determined
by t h e officer or by t h e court, t h e court said:
" T h e President,*^ although subject t o t h e general rules which apply t o others,
m a y h a v e sufficient motives for declining t o produce a particular paper, a n d those
motives m a y be such as t o restrain t h e court from enforcing its production. . I
do not think preciselj^ with t h e gentlemen on either side. I can readily conceive
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1956 REPORT OF THE SECRETARY OF THE TREASURY
that the President might receive a letter which it would be improper to exhibit in
public, because of the manifest inconvenience of its exposure. The occasion for
demanding it ought, in such a case, to be very strong, and to be fully shown to the
court before its production could be insisted on. I admit, that in such a case,
much reliance must be placed on the declaration of the President; and I do think
that a privilege does exist to withhold private letters of a certain description.
The reason is this: letters to the President in his private character, are often
written to him in consequence of his public character, and may relate to public
concerns. Such a letter, though it be a private one, seems to partake of the
character of an official paper, and to be such as ought not on light ground to be
forced into public view." Robertson, Burr Trials, V. 2. pp. 535, 536.
President Jefferson did not obey the subpoena.
In a letter of June 17, 1807, to the United States Attorney in the case, George
Hay, the President, referred to the public and private sides of the Presidency,
and said:
"All nations have found it necessary, that for the advantageous conduct of
their affairs, some of these proceedings, at least, should remain known to their
executive functionary only. He, of course, from the nature of the case, must be
the sole judge of which of them the public interests will permit publication.
Hence, under our Constitution, in requests of papers, from the legislative to the
executive branch, an exception is carefully expressed, as to those which he may
deem the public welfare may require not to be disclosed; as you will see in the
enclosed resolution of the House of Representatives, which produced the message
of January 22d, respecting this case." Writings of Thomas J eferson edited by
H. A. Washington (1853) Vol. V, pp. 97, 98.
In Totten, Administrator, v. United Staies (1875) 92 U. S. 105, 107, involving
an alleged contract between President Lincoln and the claimant for secret war
services, the Court said:
"It may be stated as a general principle, the public policy forbids the maintenance of any suit in a court of justice, the trial of which would inevitably lead
to the disclosure of matters which the law itself regards as confidential, and
respecting which it will not allow the confidence to be violated. On this principle, suits cannot be maintained which would require a disclosure of the confidences of the confessional, or those between husband and wife, or of communications by a client to his counsel for professional advice, or of a patient to his
physician for a similar purpose. Much greater reason exists for the application
of the principle to cases of contract for secret services with the government, as
the existence of a contract of that kind is itself a fact not to be disclosed."
In United States v. Reynolds (1953) 345 U. S. 1, a case discussed in the committee print, the Court referred at pp. 6, 7, to
"the privilege against revealing mflitary secrets, a privilege which is well
established in the law of evidence."
While no cases can be cited either for or against the right to withhold, there
are ample precedents for the authority of the Chief Executive of the United
States to withhold testimony or documents from the Congress. One reads little
of these precedents in. the material presented to this committee to, date. In
the transcripts one also reads little of the repeated, reasoned, and firm refusals
of Presidents from Washington to Eisenhower to agree that the Congress can
compel production of records held confidential by the Executive in the public
interest, as that interest is determined by the Executive.
The JExecutive position in this controversy has been accepted explicitly by
representatives of Congress on more than one occasion over the years. Perhaps
the most explicit statement on the subject was made by the House Committee
of the Judiciary in 1879. Among other things the comniittee then stated:
"And whenever the President has returned (as sometimes he has) that, in
his judgment, it was not consistent with the public interest to give the House
such information, no further proceedings have ever been taken to compel the
production of such information. Indeed, upon principle, it would seem that
this must be so." Page 3 of 1873 House Report 141, 45th Cong.
The Executive's assertion, of its privilege has prevailed through 150 years.
It has been suggested in material heretofore presented to this committee that
the time has come for "some kind of a showdown"; that the Executive is not
really convinced of its position and would "retreat" if pressed. I think this
view is erroneous. I do not beheve that the Executive would, or should, yield
on a basic position which seems to the Executive to be correct in principle and
EXHIBITS
257
which has been asserted successfully and with explicitness b y m a n y Presidents
from Washington a n d Jefferson to Eisenhower.
T h e position t h a t there is no Executive privilege and t h a t t h e assertion of t h e
same is a violation of t h e provisions of our Constitution, or a t least of certain
of its amendments, appears to be contrary to t h e understanding of certain of
our early Presidents, Avho participated in t h e drafting of t h e Constitution a n d
of t h e first 10 amendments, and who, thereafter, adopted and supported t h e
right of t h e Executive to withhold information when t h e Executive believed it
was in t h e public interest so to do.
I n m y opinion there is no basis for suggesting t h e Executive should concede
controlling rights to Congress as to every document in t h e possession of t h e
Executive.
I do wish to make it clear, however, t h a t it is m y understanding t h a t while
there is a privilege t o withhold, it is nevertheless t h e general and basic right of
Congress and its committees to secure testimony and documents from t h e Executive. I agree t h a t it is generally in t h e public interest t h a t Congress' should
have t h e m . T h e right to refuse is, however, possessed by t h e Executive.
Organization and Procedure
E X H I B I T 45.—Treasury Department orders relating to organization and procedure
No.
82 ( R E V I S E D ) , R E V I S I O N AND A M E N D M E N T . — R E G U L A T I O N S U N D E R E X ECUTIVE O R D E R N O . 10450, As A M E N D E D , R E L A T I N G TO T H E P E R S O N N E L
S E C U R I T Y P R O G R A M OF T H E T R E A S U R Y D E P A R T M E N T
No. 82 (Revised), Revision, August 15, 1955.—Supersedes t h e revision dated
October 12, 1954
P u r s u a n t t o t h e a u t h o r i t y contained in t h e act of August 26, 1950, 64 Stat.
476; Executive Orders Nos. 10450, Aprfl 27, 1953, 10491, October 13, 1953, a n d
10548, August 2, 1954, a n d Reorganization Plan No. 26 of 1950, 64 Stat. 1280,
t h e following regulations relating t o t h e security program of t h e D e p a r t m e n t
of t h e Treasury are hereby prescribed:
Section 1.
Definitions
T h e following terms, as used herein, shall have t h e meanings specified:
(a) " D e p a r t m e n t " means t h e D e p a r t m e n t of t h e Treasury.
(b) " S e c r e t a r y " means t h e Secretary of t h e Treasury.
(c) "Security Officer" means t h e person designated as Personnel Security
Officer of t h e D e p a r t m e n t , or t h e person designated as Alternate Personnel
Security Officer, by t h e Secretary.
(d) "Legal Officer" means t h e person designated as Legal Officer, or any
person designated as Alternate Legal Officer, b y t h e Secretary.
(e) " H e a d of t h e B u r e a u " means, t h e head of t h e bureau, independent office,
or division of t h e D e p a r t m e n t , in which t h e employee is employed.
(f) " E m p l o y e e " means a civilian officer or employee of t h e D e p a r t m e n t .
(g) " N a t i o n a l security" means t h e protection a n d preservation of t h e military,
economic, a n d productive strength of t h e United States, including t h e security
of t h e Government in domestic a n d foreign affairs, against or from espionage,
sabotage, a n d subversion, and any a n d all other fllegal acts designed to weaken
or destroy t h e United States.
(h) "Suspension" means t h e t e m p o r a r y removal of an employee without pay,
in t h e interests of t h e national security, pending final determination of his case
under t h e provisions of this order.
(i) " R e a s s i g n m e n t " means t h e t e m p o r a r y alteration in, or limitation of, t h e
duties of an employee, in t h e interests of t h e national security, pending final
determination of his case under t h e provisions of this order. Although reassignm e n t does not necessarfly entafl physical relocation, appropriate steps m u s t be
t a k e n to prevent t h e employee's having access to all categories of classified information or material, pending final determination. No termination following
reassignment shall be effected without prior suspension a n d full compliance
thereafter with t h e procedures applicable to suspension set forth in this order.
399346—57
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1956 REPORT OF THE SECRETARY OF THE TREASURY
(j) "Sensitive position" means a n y position in t h e D e p a r t m e n t , t h e occupant
of which could bring about, because of t h e n a t u r e of t h e position, a material
adverse effect on t h e national security. Such positions shall include, b u t shall
not be limited to, a n y position t h e occupant of which m a y have access t o information or material classified as "secret" or " t o p secret" or a n y other inform a t i o n or material having a direct bearing on t h e national security, a n d m a y
have opportunity t o commit acts directl}'- or indirectly adversely affecting t h e
national security.
Section 2. Policy
(a) I t shall be t h e policy of t h e D e p a r t m e n t , based on t h e act of August 26,
1950, a n d Executive Order No. 10450, as amended, to employ a n d retain in
employment only those persons whose employment or retention in e m p l o y m e n t
is found t o be clearly consistent with t h e interests of t h e national security.
(b) T h e use of t h e suspension and termination procedures authorized by t h e
act of August 26, 1950, and Executive Order No. 10450, as amended, will be
limited t o cases i n . which t h e interests of t h e national security are involved.
These procedures will be used t o supplement, not to substitute for, normal
civil service removal procedures, which will be used when national security is
not a consideration and such procedures are adequate a n d appropriate.
(c) Prior to t h e reassignment or suspension of any employee p u r s u a n t t o t h e
provisions of this order, t h e Security Officer or his designee m a y interrogate t h e
employee under oath, orally or in writing, concerning t h e derogatory information
against him. T h e results of such interrogation shall be considered in determining
ohe action to be taken.
Section 3. Security s t a n d a r d s
(a) No person shall be employed, or retained as an employee, in t h e D e p a r t m e n t .
unless t h e employment of such person is clearly consistent with t h e interests of
t h e national security.
(b) Information regarding an applicant for employment, or an employee, in
t h e D e p a r t m e n t which m a y preclude a finding t h a t his emplpyment or retention
in employment is clearly consistent with t h e interests of t h e national security
shall relate, b u t shall not be limited, to t h e following:
(1) Depending on t h e relation of t h e Government employment t o t h e
national security:
(i) Any behavior, activities, or associations which t e n d to show t h a t t h e
individual is not reliable or t r u s t w o r t h y .
(ii) Any deliberate misrepresentations, falsifications, or omissions of
material facts.
(iii) Any criminal, infamous, dishonest, immoral, or notoriously disgraceful conduct, habitual use of intoxicants to excess, drug addiction, or sexual
perversion.
(iv) Any illness, including any mental condition, of a n a t u r e which in
t h e opinion of competent m.edical a u t h o r i t y m a y cause significant defect in t h e .
j u d g m e n t or reliability of t h e employee, with due regard to t h e transient or
continuing effect of t h e illness and t h e medical findings in such case.
(v) Any facts which furnish reason to believe thiat t h e individual ma}^
be subjected to coercion, influence, or pressure which m a y cause him to act
contrary to t h e best interests of t h e national security.
(2) Commission of any act of sabotage, espionage, treason, or sedition, or
a t t e m p t s t h e r e a t or preparation therefor, or conspiring with, or aiding or abetting,
another t o commit or a t t e m p t to commit any act of sabotage, espionage, treason,
or sedition.
(3) Establishing or continuing a sympathetic association with a saboteur,
spy, traitor, seditionist, anarchist, or revolutionist, or with an espionage or other
secret agent or representative of a foreign nation, or any representative of a foreign
nation whose interests msiy be inimical t o t h e interests of t h e United States, or
with any person who advocates t h e use of force or violence co overthrow t h e
Government of t h e United States or t h e alteration of t h e form of government of
t h e United States b}^ unconstitutional means.
(4) Advocacy of use of force or violence t o overthrow t h e Government of
t h e United States, or of t h e alteration of t h e form of governnient of t h e United
States b y unconstitutional means.
(5) Membership in, or affiliation or sympathetic association with, any foreign
or domestic organization, association, movement, group, or combination of persons
EXHIBITS
259
which is totalitarian. Fascist, Communist, or subversive, or which has adopted,
or shows, a policy of advocating or approving the commission of acts of force
or violence to deny other persons their rights under the Constitution of the United
States, or which seeks to alter the form of government of the United States by
unconstitutional means.
(6) Intentional, unauthorized disclosure to any person of classified information, or of other information disclosure of which is prohibited by law, or
willful violation or disregard of securitj^ regulations.
(7) Performing or attempting to perform his duties, or otherwise acting, so
as to serve the interests of another government in preference to the interests of
the United States. •
(8) Refusal by the individual, upon the ground of constitutional privilege
against self-incrimination, to testify before a congressional committee regarding
charges of his alleged disloyalty or other misconduct.
Section 4. Security investigations
(a) Purpose.—Security investigations conducted pursuant to this order shall be
designed to develop informatioi^ as to whether employment or retention in emploj^'ment by the Department of the person being investigated is clearly consistent
with the interests of the national security.
(b) Scope of investigations.—Ever}^ appointment made within the Department
shall be made subject to investigation. The scope of the investigation shall be
determined in the first instance according to the degree of adverse effect the occupant of the position sought to be filled could bring about, by virtue of the nature
of the position, on the national security, but in no event shall the investigation
include less than a national ageric}^ check, including a check of the fingerprint files
of the Federal Bureau of Investigation, and written inquiries to appropriate local
law-enforcement agencies, former employers and supervisors, references, and
schools and colleges attended by the person under investigation: Provided, That
to the extent authorized by the Civil Service Commission a less investigation may
suffice with respect to per diem, intermittent, temporary, or seasonal emploj^ees,
or aliens employed outside the United States. Should information develop at
any stage of investigation indicating that the employment of any such person
may not be clearl)' consistent with the interests of the national security, there
, shall be conducted with respect to such person a full field investigation, or such
less investigation as shall be sufficient to enable the Secretary to determine whether
retention of such person is clearly consistent with the interests of the national
security.
(c) Requirements for sensitive position.—No sensitive position in the Department shafl be filled or occupied by any person with respect to whom a full field
investigation has not been conducted: Provided, That a person occupying a sensitive position at the time it is designated as such may continue to occupy such
position pending the completion of a full field investigation, subject to the other
provisions of this order: And provided further. That in case of emergency a sensitive
position may be filled for a limited period of time by a person with respect to
whom a full field preappointment investigation has not been completed if the
Secretary finds that such action is necessary in the national interest. Such
finding shall be made a part of the personnel record of the person concerned.
(d) Reinvestigation of former Government employees.—(1) Nonsensitive positions.—No reinvestigation is required for appointments of employees of another
Federal agency or for reappointments when there has been no break in service in
excess of one year since the last employment in the Government.
If the break in service is in excess of one j^ear, the case shall be processed
the same as a new appointee to a nonsensitive position in accordance with
section 4 (b).
A National agency check or an additional investigation may be required
by the Security Officer or the head of the bureau in any case wherein it is deemed
appropriate.
(2) Sensitive positions.—No reinvestigation is required for appointments of
employees of another Federal agency or for reappointments when the break in
service does not exceed 90 daj^s AND an investigation has been made in connection
with previous Federal employment which meets the Treasury Department's
current standards for a full field investigation.
If the break in service exceeds 90 days, but is not in excess of one 3^ear, a
current national agency check shall be made.
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1956 REPORT OF THE SECRETARY OF THE TREASURY
If the break in service exceeds one year the case shall be processed the
same as that of a new appointee to a sensitive position in accordance with section
4(c).
Further investigation may be prescribed by the Security Officer or the
head of the bureau in any case wherein it is deemed appropriate.
(3) Use of reports of prior investigation.—Investigation reports made in
connection with previous Federal employment shall be used as a basis for making
security determinations; provided however, that the Security Officer or the head
of the bureau may require such additional investigation as may be necessary to
bring any previous investigation report up to date.
. (e) Cases requiring investigation by Federal Bureau of Investigation.—Whenever
a security investigation being conducted with respect to an employee of the
Department develops information relating to any of the matters described in
subdivisions 2 through 8 of subsection (b) of section 3 of this order, or indicates
that an employee has been subject to coercion, influence, or pressure to act contrary to the interests of the national security, the matter shall be referred to the
Federal Bureau of Investigation for a full field investigation.
(f) Submission of certain investigation reports io security officer.—The reports of
all full field investigations conducted for sensitive positions and all other investigations developing unfavorable information of a nature outlined in section 3 of
this order shall be forwarded to the Security Officer for processing and retention.
Section 5. Suspension, reassignment, and termination
(a) Authority io suspend.—The authority conferred by the act of August 26,
1950, 64 Stat. 476, upon the heads of departments and agencies to which such act
is applicable to suspend civilian employees, without pay, when deemed necessary
in the interests of the national security, is hereby delegated with respect to the
employees of this Department to an Assistant Secretary or the General Counsel
who shall order the suspension after consultation with the head of the bureau
concerned.
(b) Evaluation of invesiigation reports.—Upon receipt of an investigative report
containing derogatory information, the Security Officer shall evaluate the same
and make a determination as to what action may be required in the interests of
the national security. Factors to be taken into consideration in making this
determination shall include, but shall not be limited to: (1) The seriousness of
the derogatory information contained in the report; (2) the quality and quantity
of the classified information or mateiial to which the employee may have access^
authorized or unauthorized; (3) the opportunity, by reason of the nature of the
position, for committing acts adversely affecting the national security; and (4)
the recency and duration of membership in, affiliation or sympathetic association
with, any organization, association, or combination of persons of the type within
the scope of section 3 (b) (5) where such matters are the subject of evaluation.
(c) Types of action on investigation reports.—One of the four following actions
shall be taken in each case:
(1) A written determination that the employment or retention in employment of the subject of the report is clearly consistent with the interests of the
national security;
(2) A written determination that suspension of an incumbent is necessary
in the interests of the national security;
(3) A written determination that reassignment of an incumbent is necessary
in the interests of the national security; or
(4) A written determination that the employment of an applicant is not
clearly consistent with the interests of the national security.
(d) Reassignment and suspension cases.—(1) Bill of particulars.—In cases where
the reassignment or suspension of an employee is deemed necessary in the interests
of the national security, there shall be prepared a bill of particulars which shall
be signed by the Security Officer. The bill of particulars shall be as specific and
detailed as security considerations permit, and normally shall contain all the
derogatory information relating to the employee except that which will reveal
the source of the information, or the identity of confidential informants, or
information affecting the national security. It shall be subject to amendment
at any time prior to final action in the case.
(2) Action on bill of particulars.—The bill of particulars, together with the
entire file and the written recommendation of the Security Officer and the Legal
Officer, shall be submitted to an Assistant Secretary or the General Counsel. If
EXHIBITS
261
such official approves the recommendation, he shall order the immedia-te reassignment or suspension of the employee by the head of the bureau.
(3) Notice to employee.—In every case where the reassignment or suspension
of an employee by the head of the bureau has been ordered, the head of the
bureau shall notify the employee in writing of his reassignment or suspension,
attaching to such notice a copy of the bill of particulars, and a copy of this order.
Such notice shall be sent by registered mail with return receipt required or personnally served upon the employee with a written return to the Security Office
showing the date, time, and place of service.
(4) Procedure in reassignment cases.—An employee who has been reassigned
may submit to the Security Officer within 30 days after the receipt of the notice of
reassignment and the bill of particulars, or within 30 days after any amendment
thereof, a sworn answer and supporting affidavits, if any, refuting or explaining the
allegations in the bill of particulars. If the Security Officer and the Legal Officer
are of the opinion that the case should be resolved favorably to the employee, they
shall so recommend to the Secretary. If the case is resolved unfavorably to the
employee, an Assistant Secretary or the General Counsel shall order the immediate suspension of the employee by the head of the bureau. Thereafter, the
procedure applicable to suspensions hereinafter set forth shall be followed.
(5) Procedure in suspension cases.—(i) Employee's answer.—An employee
who has been suspended may submit to the Security Officer, within 30 days after
the receipt of the notice of suspension and the bill of particulars, or within 30 days
after any amendment thereof, a sworn answer and supporting affidavits, if any,
refuting or explaining the allegations in the bill of particulars. If such answer is
found insufficient, the employee shall be given 15 days to file an amended sworn
answer.
(ii) Disposition without hearhig.—If, upon the submission of a sworn
answer by the employee, the Security Officer and the Legal Officer are of the
opinion that the case should be resolved favorably to the employee without a
hearing, they shall so recommend to the Secretary, and the Secretary, an ^Assistant
Secretary or the Administrative Assistant Secretary, shall reinstate or transfer
the employee in accordance with the provisions of subsection (6) of this section, or,
if the Secretary deems appropriate, he may direct a hearing to be held in accordance with the provisions of sections 6 and 7 of this order.
If the suspended employee does not submit a sworn answer within the
required period, or does not request a hearing, or does request a hearing and is
hot entitled thereto, the Security Officer and the Legal Officer shall consider the
case on the basis of the record as then constituted and submit to the Secretary their
recommendations for its disposition, together with the reasons therefor.
(iii) Requirements for hearing.—If the case is resolved unfavorably to
the suspended employee, AND he is (a) a citizen of the United States, AND (6) a
permanent or indefinite appointee, AND (c) an employee who has completed his
probationary or trial period, AND (d) ,the said employee requests a hearing, then
the same shall be held before a board composed of at least three impartial, disinterested persons selected in accordance with the provisions of section 6 and conducted in accordance with the provisions of section 7 of this order.
(iv) Action after hearing.—After a hearing has been held, the entire
case shall be reviewed by the board and its written determination and a separate
memorandum of reasons therefor, shall be submitted to the Secretary through the
Security Officer, who, together with the Legal Officer, shall review the entire case
and make appropriate recommendations to the Secretary for its final disposition.
(6) Final action.—Upon the receipt of the complete file containing the record,
the board's determination, the recommendations of the Security Officer and the
Legal Officer, and all confidential information, the Secretary, an Assistant Secretary, the General Counsel, or the Administrative Assistant Secretary, shall review
the case and take one of the following actions:
(i) If he finds that reinstatement of the employee in the ppsition from
which the employee has been suspended or reassigned is clearly consistent with the
interests of the national security, he shall order the employee to be restored to
duty in such position and the employee shall be compensated for any period of
suspension to the extent permitted by law: Provided, That the employee shall not
be compensated for any extension of the period of suspension caused by his voluntary action.
(ii) If he does not find reinstatement of the employee in the position from
which the employee has been suspended or reassigned will be clearly consistent
with the interests of the national security, but that the transfer of the employee
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1956 REPORT OF THE SECRETARY OF THE TREASURY
to another position in the Department is clearly consistent with the interests of
the national security, he may order the employee to be transferred to duty in
such other position, and to be compensated for any period of suspension to the
extent permitted by law: Provided, That the employee shall not be compensated
for any extension of the period of suspension caused by his voluntary action.
(iii) If he does not find that the reinstatement or transfer of the employee
to any position in the Department is clearly consistent with the interests of the
national security, he shall order the employment of the employee terminated:
Provided, however, That only the Secretary is authorized to take this action, which
is final. The head of the bureau shall furnish to the employee a written notice
of such action.
Section 6. Security hearing boards
(a) Security hearing boards of the Department shall be composed of not less
than three civilian officers or employees of the Federal Government, selected by
the Secretary from rosters maintained for that purpose by the Civil Service Commission in Washington, D. C , and at the regional offices of the Commission.
(b) No officer or emplo3^ee of the Department shall serve as a member of a
hearing board hearing the case of an employee of the Department.
(c) No person shall serve as a member of a hearing board hearing a case of an
employee with whom he is acquainted.
(d) The Security Officer shall be responsible for the preparation and presentation of the charges against the employee before the hearing board.
(e) The Legal Officer shall be present in every case in order to protect the
interests of the Government and the interests of the employee. He shall not act
as prosecutor, but shall aid the board in its determination as to procedure, and
shall advise the employee of his rights before the board upon request of the
employee.
(f) The time and place of hearings before hearing boards shall be determined
by the Secretary, with due regard to the availability and convenience of the
employee and the members of the board. The Security Officer shall make all
necessary arrangements for hearings including availability of stenographic
assistance.
(g) Competent stenographic assistance will be supplied to the hearing boards
by the Office of the Secretary at the request of the Security Officer.
Section 7. Hearing procedure
(a) Nature of hearing.—All hearings shall be held in. closed session at which
only the following will be present: Members of the board, the employee and his
counsel. Department employees concerned, and the stenographer. Witnesses
shall be present in the hearing room only when actually testifying. Testimony
shall be given under oath or affirmation administered by the Legal Officer. The
member of the board designated by tha Secretary as chairman shall preside at
the hearing.
(b) Conduct of hearing.—(1) The hearing board shall take whatever action is
necessary to insure the employee a full and fair consideration of his case. The
employee shall be informed by the board of his right (i) to participate in the
hearing, (ii) to be represented by counsel of his choice, (iii) to present witnesses
and offer other evidence in his own behalf and in refutation of the charges brought
against him, and (iv) to cross-examine any witness offered in support of the
charges.
(2) The employee shall have the privilege, for good cause shown, of challenging any member of the board. Challenges for cause shall be determined by the
-Legal Officer.
(3) Hearings shall be opened by the reading of the order convening the
board, the notice of suspension and the bill of particulars setting forth the
charges against the employee and the sworn answer submitted by the (employee,
unless such reading is waived by the mutual consent of the Security Officer and the
employee or his counsel. All such documents shall be made part of the transscript.
(4) The board is not authorized to pass upon legal or constitutional objections
to the procedure under the security program.
(5) Both the Department and the employee may introduce such evidence as
the hearing board may deem proper in the particular case. Rules of evidence
shall not be binding on the board, but, reasonable restrictions shall be imposed as
to the relevancy, competency, and materiality of matters considered, so that the
EXHIBITS
263
hearings shall not be unduly prolonged. If the employee is, or may be handicapped by the nondisclosure to him of confidential information or by lack of
opportunity to cross-examine confidential informants, the hearing board shall
take that fact into consideration. If a person who has made charges against the
employee and who is not a confidential informant is called as a witness but does
not appear, his failure to appear shall be considered by the board in evaluating
such charges, as well as the fact that there can be no payment for travel of
witnesses.
(6) The employee or his counsel shall have the right to control the sequence
of witnesses called by him. The employee or his counsel shall be permitted
reasonable cross-examination of witnesses called by the ^Government or the
hearing board. The board and the Security Officer shall be permitted reasonable
cross-examination of witnesses called by the employee.
(7) The hearing board shall give due consideration to documentary evidence
developed by investigation, including party membership cards, petitions bearing
the employee's signature, books, treatises or articles written by the employee, and
testimony by the employee before duly constituted authorities. The fact that
such evidence has been considered shall be made a part of the transcript of the
hearing.
(8) The hearing board may, in its discretion, invite any person to appear at
the hearing and testify. However, the board shall not be bound by the testimony
of such witness by reason of having called him, and shall have full right to crossexamine him.
(9) The hearing board shall conduct the hearing proceedings in such manner
as to^protect from disclosure information affecting the national security or tending
to disclose or compromise investigative sources or methods.
(10) If, after due notice of the time and place of hearing, the employee without request for delay or other explanation, fails to appear for such hearing, the
hearing board may consider the case and make its recommendation on the basis of
information before it.
(11) A complete verbatim stenographic transcript shall be made of the hearing by a qualified reporter, and the transcript shall constitute a permanent part
of the record. Upon request, the employee or his counsel shall be furnished a copy
of the transcript of the hearing.
(12) The board shall reach its conclusions and base its determination on the
transcript of the hearing, together with such confidential information as it may
have in its possession. The board, in making its determination, shall take into
consideration the inability of the employee to meet charges of which he has not
been advised, because of security reasons, specifically or in detail, or to attack the
credibility of witnesses who do not appear. The determination of the board shall
be in writing, and shall be signed by all members of the board. The determination
will not contain the reasons upon which the board based its conclusion. A
separate memorandum of reasons will be prepared, signed by all members of the
board, setting forth the findings of the board, its recommendation as to the disposition of the case, and the reasons therefor. The board shafl submit its written
determination and the memorandum of reasons to the Secretary without further
dissemination.
Section 8. Readjudication of certain cases
The Security Officer shall review all cases of employees of the Department with
respect to whom there has been conducted a full field investigation under Executive
Order 9835, approved March 21, 1947. After such further investigation as the
Security Officer may deem appropriate, all such cases shall be readjudicated in
accordance with the act of August 26, 1950, and this order.
Section 9. Reemployment of employees whose employment has been terminated
No person whose employment has been terminated by the Treasury Department under or pursuant to the provisions of the act of August 26, 1950, or pursuant
to Executive Order No. 9835, or any other security or loyalty program, shall be
employed in the Treasury Department; and no person whose employment has
been so terminated by any other department or agency shall be employed in the
Treasury Department, unless the Secretary finds that such employment is clearly
consistent with the interests of the national security and unless the Civfl' Service
Commission determines that such person is eligible for such employment. The
finding of the Secretary and the determination of the Civfl Service Commission
shall be made a part o.f the personnel record of the person concerned.
264
1956 REPORT OF THE SECRETARY OF THE TREASURY
Section 10. Nominations to security hearing board roster
(a) The Security Officer, after such consultation with bureau officials as he may
deem necessary, shall name five employees, of the Department to the security
hearing board roster maintained in Washington, D. C , by the Civfl Service
Commission.
(b) The head of each field office outside the metropolitan area of Washington,
D. C , upon the request of the Security Officer, shall nominate one employee for
each 500 employees in such field office to security hearing board rosters maintained at regional offices of the Civil Service Commission. The Security Officer
shall name employees to such rosters from the persons so nominated.
(c) All employees nominated to security hearing board rosters shall be persons
of responsibility, unquestioned integrity, and sound judgment. Each such
nominee shall have been the subject of a full field investigation, and his nomination
shall be deterinined by the Security Officer to be clearly consistent with the
interests of the national security. No security officer or person who conducts
personnel investigations, shall be nominated to security hearing board rosters.
Section 11. Roster of sensitive positions
A list of all positions designated as "Sensitive" in the Department, including
the names of the persons occupying the same, shall be maintained on a current
basis in the Personnel Security Office. All changes affecting such positions or the
occupants thereof shall be reported to the Personnel Security Officer by the
Bureau concerned.
Section 12. Revocation of previous actions and determinations
Any action or favorable determination previously made pursuant to the provisions of this order may be revoked whenever derogatory information is received
on the basis of which it is determined that the employment or retention in employment of the individual concerned is not clearly consistent with the interests
of the national security.
Section 13. Procedural instructions
The Security Officer is authorized to issue such procedural instructions as may
be necessary to carry out the provisions of this order.
G. M. HUMPHREY,
Secretary of the Treasury.
No, 82 (REVISED), AMENDMENT N O . 1, NOVEMBER 21,
1955
Pursuant to the authority contained in the act of August 26, 1950, 64 Stat;
476; Executive Order No. 10450, Aprfl 27, 1953, as amended; and Reorganization
Plan No. 26 of 1950, 64 Stat. 1280; Treasury Department Order No. 82, Revised,
dated August 15, 1955, is amended as follows:
Section 2 is amended by deleting subsection (b) and the following is substituted
therefor:
"(b) The provisions of this order shall not be utflized to the exclusion of
normal personnel procedures for the selection and retention df employees."
Section 5 (d) is amended by deleting subparagraph (1) and by substituting the
following therefor:
"(1) Bfll of particulars.—In cases where the reassignment or suspension of
an employee is deemed necessary in the interests of the national security, there
shall be prepared a bfll of particulars which shall be signed by the Security Officer.
The bill of particulars shall be as specific and detailed as security considerations
permit, and normally shall contain all the derogatory information relating to the
employee except that which will reveal the source of the information, or the
identity of confidential -informants, or information affecting the national security.
It shall be subject tQ amendment within 30 days of issuance."
Section 5 (d) is further amended by adding thereto a new subparagraph (7)
reading as follows:
"(7) Reports of action taken.—Copies of ail notices of personnel action taken
in security cases shall be supplied at once by the Personnel Security Officer to
the Civfl Service Commission."
EXHIBITS
265
Section 7 is amended by deleting subsection (a) a n d t h e following is substituted
therefor:
"(a) Nature of hearing.—All hearings shall be held in closed session a t which
only t h e following wfll be present: Members of t h e board, t h e employee a n d his
counsel. D e p a r t m e n t employees concerned, a n d t h e stenographer. Witnesses
shall be present in t h e hearing room only when actually testifying.
Testimony
shall be given under oath or affirmation administered b y t h e Legal Officer who is
hereby designated for this purpose p u r s u a n t to Section 16(a) of Title 5 U. S.
Code. T h e member of t h e board designated b y t h e Secretary as chairman shall
preside a t t h e hearing."
Section 7 (b) is amended b y deleting subparagraph (1) a n d by substituting t h e
following therefor:
"(1) T h e hearing board shall t a k e whatever action is necessary to insure t h e
employee a full a n d fair consideration of his case. T h e employee shall be informed
b y t h e board of his right (i) to participate in t h e hearing, (ii) to be represented
b y counsel of his choice, (iii) to present witnesses a n d offer other evidence in his
own behalf a n d in refutation of t h e charges brought against him, a n d (iv) t o crossexamine any witness offered in support of t h e charges a n d testifying in his
presence."
G.
M.
HUMPHREY,
Secretary of the Treasury.
No.
83 ( R E V I S E D ) , R E V I S I O N , J A N U A R Y 17, 1 9 5 6 . — D E S I G N A T I O N S R E L A T I N G TO
T H E S E C U R I T Y O F F I C E R AND P E R S O N N E L S E C U R I T Y O F F I C E R
P u r s u a n t to t h e provisions of Executive Orders No. 10450 and 10501 and of
Treasury D e p a r t m e n t Orders No. 82, Revised, and 160, Revised, Mr. Clarence
0 . Tormoen, Assistant to t h e Secretary, is hereby designated as Security Officer
a n d Personnel Security Officer for t h e Treasury D e p a r t m e n t . Mr. Francis J.
Gafford is designated as Legal Officer for t h e Security a n d Personnel Security
Programs, and as Alternate Personnel Security Officer. Mr. Charles P . R y a n
shall serve as Alternate Legal Officer.
I n any case in which Mr. Gafford acts as Alternate Personnel Security Officer,
he shall not act as Legal Officer.
All officers a n d employees of t h e Treasury D e p a r t m e n t are directed t o comply
with requests for information received from t h e persons designated above and to
cooperate with t h e m to t h e fullest possible extent.
This order supersedes Treasury D e p a r t m e n t Order No. 83 (Revised), dated
M a y 17, 1955.
G. M. H U M P H R E Y ,
Secreiary of the Treasury.
N o . 95, R E V I S I O N N o . 1, J U L Y 20, 1 9 5 5 . — T R A N S F E R OF THE R E S P O N S I B I L I T Y FOR
THE CUSTODY OF U N I S S U E D F E D E R A L R E S E R V E N O T E S
T h e Comptroller of t h e Currency and t h e Treasurer of t h e United States shall,
t h r o u g h such employees as they m a y designate, jointly maintain physical custody
of unissued Federal Reserve notes delivered by t h e Bureau of Engraving and
Printing a n d held for shipment to Federal Reserve agents.
Personnel now assigned by t h e Bureau of t h e Public D e b t to t h e performance
of functions relating to t h e custody of unissued Federal Reserve notes, together
with all records and property used by them, shall be transferred to t h e Office of
t h e Treasurer of t h e United States.
This order shall be effective on August 1, 1955.
W. R A N D O L P H B U R G E S S ,
Acting Secretary of the Treasury.
266
NO. 107
1956 REPORT OF THE SECRETARY OF THE TREASURY
(REVISED), TWO REVISIONS.—DESIGNATION OF OFFICERS TO AFFIX
THE SEAL OF THE TREASURY DEPARTMENT
Revision No. 3, November 30, 1955
By virtue of the authority vested in me as Secretary of the Treasury, including
the authority conferred by Section 161 of the Revised Statutes, it is hereby ordered
that:
1. Except as provided for in paragraph 2, the following officers are authorized
to affix the Seal of the Treasury Department in the authentication of originals
and copies of books, records, papers, writings, and documents of the Department,
for all purposes, including the purposes authorized by 28 U. S. C. 1733 (b):
(a) In the Office of Administrative Services:
(1) Director of Administrative Services
(2) Chief, Office Services Division
(3) Records Administration Officer
(4) Chief, Document Distribution Section
(b) In the Internal Revenue Service:
(1) Commissioner of Internal Revenue
(2) Director, and Assistant Director, Audit Division
(3) Chief, and Assistant Chief, Audit Operations Branch, Audit Division
(4) Chief, and Assistant Chief, Miscellaneous Services Section, Audit
Operations Branch, Audit Division
(c) In the Bureau of Customs:
(1) Commissioner of Customs
(2) Assistant Commissioner of Customs
(3) Deputy Commissioner, Division of Investigations
(4) Deputy Commissioner, Division of Appraisement Administration
(5) Deputy Commissioner, Division of Management and Controls.
2. Copies of documents which are to be published in the Federal Register may be
certified only by the officers named in paragraph 1 (a) of this order.
, 3. The Director of Administrative Services and the Commissioner of Internal
Revenue Service are authorized to retain custody of the dies of the Treasury Seal
now in their possession.
The officers authorized in paragraph No. 1 (c) may make use of such dies.
DAVID W . KENDALL,
Acting Secreiary of the Treasury.
Revision No. 4, June 8, 1956
_
By virtue of the authority vested in me as Secretary of the Treasury, including
the authority conferred by Section 161 of the Revised Statutes, it is hereby
ordered, that:
1. Except as provided for in paragraph 2, the following officers are authorized
to affix the Seal of the Treasury Department in the authentication of originals
and copies of books, records, papers, writings, and documents of the Department,
for all purposes, including the purposes authorized by 28 U. S. C. 1733 (b):
(a) In the Office of Administrative Services:
(1) Director of Administrative Services
(2) Chief, Office Services Division
(3) Records Administration Officer
(4) Chief, Document Distribution Section
(b) In the Internal Revenue Service:
. . (1) Commissioner of.internal Revenue
(2) Director, and Assistant Director, Audit Division
(3) Chief, and Assistant Chief, Audit Operations Branch, Audit Division
(4) Chief, and Assistant Chief, Miscellaneous Services Section, Audit
Operations Branch, Audit Division
(c) In the Bureau of Customs:
(1) Commissioner of Customs
(2) Assistant Commissioner of Customs
(3) Deputy Commissioner, Division of Investigations
(4) Deputy Commissiorier, Division of Appraisement Administration
(5) Deputy Commissioner, Division of Management and Controls
EXHIBITS
267
(d) I n t h e Bureau of t h e Public D e b t :
(1) Commissioner of t h e Public D e b t
(2) D e p u t y Commissioner in Charge of t h e Chicago Office
(3) Assistant D e p u t y Commissioner in Charge of t h e Chicago Office
2. Copies of documents which are to be published in t h e Federal Register may
be certified only by t h e officers n a m e d in. paragraph. 1 (a) ofthis order.
3. T h e Director of Administrative Services, t h e Commissioner of I n t e r n a l
R e v e n u e Service, a n d t h e Commissioner of t h e Public D e b t are authorized t o .
procure a n d m a i n t a i n custody of t h e dies of t h e Treasury Seal.
T h e officers authorized in p a r a g r a p h No. 1 (c) m a y m a k e use of such dies.
DAVID W . KENDALL,
Acting Secretary of the Treasury.
No.
120 ( A M E N D E D ) , A M E N D M E N T N o . 9, J U L Y 27, 1 9 5 5 . — T R A N S F E R OF C E R T A I N
F U N C T I O N S W I T H I N T H E M I N T AT SAN F R A N C I S C O , C A L I F .
By virtue of t h e a u t h o r i t y vested in me by Reorganization Plan No. 26 of 1950,
as an a m e n d m e n t of T r e a s u r y D e p a r t m e n t Order No. 120, d a t e d J u l y 31, 1950, I
hereby transfer all of t h e functions of t h e Assayer of t h e United States M i n t at
San Francisco, California t o t h e Superintendent of t h e United States Mint, San
Francisco, California.
This a m e n d m e n t of T r e a s u r y D e p a r t m e n t Order No. 120 shall be effective
August 1, 1955, a n d shall remain in effect until t e r m i n a t e d by subsequent order.
H . CHAPMAN R O S E ,
Acting Secretary of ihe Treasury.
No.
140
( R E V I S E D ) , R E V I S I O N N o . 3, D E C E M B E R 19, 1 9 5 5 . — D E L E G A T I O N
A U T H O R I T Y TO D E S I G N A T E C E R T I F Y I N G O F F I C E R S
OF
By virtue of t h e a u t h o r i t y vested in me by Reorganization Plan No. 26 of 1950,
there are delegated t o t h e head of each bureau, t o be exercised with respect to his
bureau, t h e functions of t h e Secretary of t h e Treasury (1) of authorizing officers
and employees t o certify vouchers to disbursing officers and fixing t h e penal sums
of their bonds under Sections 1 and 2 of t h e act of December 29, 1941, as amended
(31 U. S. C. 82b and 82c), and (2) of making certifications and giving notices under
regulations of t h e Treasury D e p a r t m e n t governing t h e documentation required
for certifying vouchers t o t h e Division of Disbursement.
T h e head of each bureau m a y m a k e provision for t h e performance by subordinates of anjT- of these functions.
W. R A N D O L P H B U R G E S S ,
Acting Secreiary of ihe Treasury.
N o . 148 ( R E V I S E D ) , R E V I S I O N N o . 2, A U G U S T 3, 1 9 5 5 . — S U P E R V I S I O N OF T R E A S U R Y
DEPARTMENT BUREAUS
T h e following assignments of bureaus of t h e Treasury D e p a r t m e n t are hereby
ordered:
Under Secretary (Mr. W. R a n d o l p h Burgess):
Office of t h e Comptroller of t h e Currency
United States Savings Bonds Division
Assistant t o t h e Secretary (Mr. Robert B. Blyth)
Mr. Burgess shall h a v e general supervision over t h e functions assigned t o
Assistant Secretary Overby, Assistant Secretary Robbins, and Fiscal Assistant
Secretary Heffelfinger, who shall supervise t h e following b u r e a u s :
Assistant Secretary (Mr. Andrew N . Overby):
Office of I n t e r n a t i o n a l Finance (including Foreign. Assets Control)
Assistant Secretary (Mr. Laurence B. R o b b i n s ) :
Office of Production a n d Defense Lending
Defense Lending Division
Federal Facilities Corporation
Reconstruction Finance Corporation (In Liquidation)
Fiscal Assistant Secretary (Mr. Wifliam T. Heffelfinger)
Bureau of Accounts
Office of t h e Treasurer
Bureau of t h e Public D e b t
268
1956 REPORT OF THE SECRETARY OF THE TREASURY
Under Secretary (Mr. H . C h a p m a n Rose):
I n t e r n a l Revenue Service
Assistant t o t h e Secretary (Mr. Nils A. Lennartson)
Information Service
Assistant t o t h e Secretary (National Security Council)
Mr. Rose shall have general supervision over t h e functions assigned t o
Assistant Secretary Kendall a n d Administrative Assistant Secretary Parsons,
who shall supervise t h e following b u r e a u s :
Assistant Secretary (Mr. D a v i d W. Kendall):
United States Coast G u a r d
United States Secret Service
Bureau of Customs
Bureau of t h e M i n t
Bureau of Narcotics
Assistant, t o t h e Secretary (Mr. D a v i d P . Page)
Technical Assistant t o t h e Secretary for Enforcement ( M r . M . L.
Harney)
Administrative Assistant Secretary (Mr. William W. Parsons):
Office.of Budget
Office of Personnel
Office of Administrative Services
Bureau of Engraving a n d Printing
General Counsel:
Legal Division
Assistant t o t h e Secretary (Mr. Clarence 0 . Tormoen)
Personnel Security Office
Special Assistant t o t h e Secretary in Charge of T a x Policy ( M r . D a n T h r o o p
Smith):
Analysis Staff
Assistant t o t h e Secretary (Mr. Laurens Williams)
Legal Advisory Staff
G. M . H U M P H R E Y ,
Secretary of the Treasury.
No.
150-40,
A U G U S T 16, 1 9 5 5 . — D E L E G A T I O N O F F U N C T I O N S R E L A T I N G TO
BONDING INTERNAL R E V E N U E SERVICE PERSONNEL
By virtue of t h e authority vested in me b y Reorganization Plan N o . 26 of
1950, there are transf e n ed t o t h e Commissioner of I n t e r n a l Revenue t h e functions of t h e Secretary of t h e Treasury under Section 7803 (c) of t h e Inxernal
Revenue Code of 1954, relating t o t h e bonding of personnel of t h e I n t e r n a l
Revenue Service.
Whenever a n y officer or employee of t h e I n t e r n a l Revenue Service is covered
by a bond obtained b y t h e I n t e r n a l Revenue Service p u r s u a n t t o Section 7803 (c)
of t h e I n t e r n a l Revenue Code of 1954, t h e Commissioner of I n t e r n a l Revenue
is authorized t o t e r m i n a t e t h e coverage of a n y existing bond of a n y such officer
or employee in respect t o acts or defaults occurring subsequent t o t h e effective
date of t h e new coverage: Provided, T h a t nothing herein contained shall apply
to t h e coverage of a n y bond required b y s t a t u t e or b y a regulation which is
applicable t o officers or employees of t h e I n t e r n a l Revenue Service a n d t o other
officers a n d employees of t h e Executive Branch of t h e Government.
A. N . O V E R B Y ,
Acting Secreiary of the Treasury.
No.
1 5 0 - 4 1 , F E B R U A R Y 13, 1 9 5 6 . — D E L E G A T I O N OP F U N C T I O N S R E L A T I N G TO
APPROVING INTERNAL R E V E N U E REGULATIONS
By virtue of t h e authority vested in m e b y Reorganization Plan N o . 26 of
1950, t h e Special Assistant t o t h e Secretary in Charge of T a x Policy is authorized t o approve' such regulations prescribed b y t h e Commissioner of I n t e r n a l
Revenue (or t h e Acting Commissioner of I n t e r n a l Revenue) as are required t o
be approved b y t h e Secretary of t h e Treasury or his delegate.
G. M . H U M P H R E Y ,
Secreiary of the Treasury.
EXHIBITS
No.
269
151, R E V I S I O N N o . 1, S E P T E M B E R 9, 1 9 5 5 . — D E L E G A T I O N O F A U T H O R I T Y
P E R T A I N I N G TO T H E U S E OF O F F I C I A L A U T O M O B I L E S
By virtue of t h e a u t h o r i t y vested in m e b y Reorganization Plan N o . 26 of
1950, there are transferred t o t h e Commissioner of I n t e r n a l Revenue, Commissioner of Customs, Commissioner of Narcotics, C o m m a n d a n t of t h e Coast Guard,
and Chief of t h e Secret Service, with respect t o employees of their respective
organizations, t h e functions of t h e Secretary of t h e Treasury under Section 5
of t h e act of July 16, 1914, as amended (5 U. S. C. 78), relating t o t h e designation of employees authorized t o use official automobiles for transportation between
their domiciles a n d places of employment.
Any of these officials m a y redelegate t h e functions transferred t o him t o a n y
principal assistant, including t h e head of a division, in his headquarters office
who has primary administrative control over t h e field organization. T h e Commissioner of I n t e r n a l Revenue m a y also redelegate t h e functions transferred t o
him t o Regional Commissioners for exercise b y each within his Region, a n d he
m a y authorize each Regional Commissioner t o redelegate his functions t o a n y
one or several of his Assistant Regional Commissioners.
H. CHAPMAN ROSE,
Acting Secretary of the Treasury.
N o . 165 ( R E V I S E D ) , A M E N D M E N T N O . 1, D E C E M B E R 5, 1 9 5 5 . — D E L E G A T I O N O F
A U T H O R I T Y TO T H E C O M M I S S I O N E R O F C U S T O M S TO TAK:E F I N A L A C T I O N I N
CERTAIN PENALTY CASES
By virtue of t h e authority vested in m e b y Reorganization Plan N o . 26 cf
1950 (3 C F R , 1950 Supp. Ch. I l l ) , it is hereby ordered t h a t s u b p a r a g r a p h (h)
of p a r a g r a p h 1 of Treasury D e p a r t m e n t Order N o . 165, Revised, issued on
November 2, 1954 (T. D . 53654; 19 F . R. 7241), is amended b y substituting a
comma for t h e period a t t h e end thereof a n d adding—
"except t h a t such approval shall n o t be required with Tcspect t o a n y forfeiture
incurred under section 27, Merchant Marine Act, 1920, as amended (46 U. S. C.
883), if it is determined b y t h e Commissioner of Customs or a subordinate in
t h e Bureau of Customs designated b y t h e said Commissioner t h a t t h e violation
occurred as a direct result of a n arrival of t h e transporting vessel in distress."
DAVID W . KENDALL,
Acting Secretary of ihe Treasury.
N o . 165-4, J U N E 29, 1 9 5 6 . — D E L E G A T I O N O F A U T H O R I T Y TO T H E C O M M I S S I O N E R
OF C U S T O M S TO N E G O T I A T E A F I N A L CONTRACT
By virtue of t h e a u t h o r i t y vested in m e as Secretary of t h e Treasury a n d b y
Delegation of Authority N o . 262, dated June 15, 1956, from t h e Administrator
of General Services, there is hereby delegated t o t h e Commissioner of Customs
t h e a u t h o r i t y t o negotiate, without advertising, under Section 302 (c) (9) of t h e
Federal Property and Administrative Services Act of 1949, 63 Stat. 377, as amended, a contract for t h e purchase a n d installation of a mechanical conveyor system
a t t h e Morgan Annex Post Office Building, N e w York, for t h e use of t h e Bureau
of Customs. T h e a u t h o r i t y herein delegated m a y be redelegated t o a n y official
or employee of t h e Bureau of Customs as t h e Commissioner m a y determine.
A. N . O V E R B Y ,
Acting Secretary of the Treasury.
N o s . 167-18 T H R O U G H 1 6 7 - 2 1 . — D E L E G A T I O N O F C E R T A I N F U N C T I O N S TO T H E
COMMANDANT, U . S . C O A S T G U A R D
N o . 167-18, December 8, 1955
By virtue of t h e a u t h o r i t y vested in m e b y Reorganization Plan No. 26 of 1950,
and b y 14 U. S. C. 631 a n d 633, there are transferred t o t h e C o m m a n d a n t , U. S.
Coast Guard, t h e functions of t h e Secretary of t h e Treasury under:
1. Section 182 of Title 14, U. S. Code, b u t a cadet shall have t h e right t o appeal
t o t h e Secretary from a determination of t h e C o m m a n d a n t t h a t he shall be
270
1956 REPORT OF THE SECRETARY OF THE TREASURY
separated from t h e i^cademy and t h e Service for misconduct, inaptitude, or physical disability.
2. Section 303 of t h e Career Compensation Act of 1949, as amended.
3. T h e Armed Forces Leave Act of 1946, as amended, except t h e functions
pertaining to Armed Forces leave bonds.
This order supersedes Treasury D e p a r t m e n t Order No. 167, d a t e d December
30, 1952, and Treasury D e p a r t m e n t Order No. 167-2, dated M a y 6, 1953.
DAVID W . KENDALL,
Acting Secretary of ihe Treasury.
No. 167-19, J a n u a r y 6, 1956
By virtue of t h e a u t h o r i t y vested in me by Reorganization Plan No. 26 of 1950,
and by 14 U. S. C. 631 and 633, there are transferred to t h e C o m m a n d a n t , U. S.
Coast Guard, t h e functions of t h e Secretary of t h e Treasury under 14 U. S. C.
370, 14 U. S. C. 511, and t h e act of July 12, 1955 (Public Law 147, 84th Congress).
DAVID W . KENDALL,
Acting Secretary of the Treasuiy.
No. 167-20, J u n e 18, 1956
B y virtue of t h e a u t h o r i t y vested in me by Reorganization Plan No. 26 of 1950
and 14 U. S. C. 631, there are transferred to t h e C o m m a n d a n t , U. S. Coast Guard,
t h e functions of t h e Secretary of t h e Treasury under t h e act of M a y 10, 1956
(Public Law 519, 84th Congress), an act which relates to t h e inspection of certain
vessels carrying passengers.
T h e C o m m a n d a n t m a y m a k e provision for t h e performance by subordinates in
t h e Coast Guard of any of t h e functions transferred except t h e functions of prescribing fees, charges, rules, and regulations.
DAVID W . KENDALL,
Acting Secreiary of ihe Treasury.
No. 167-21, J u n e 18, 1956
By virtue of t h e a u t h o r i t y vested in m e as Secretary of t h e Treasury and t h e
a u t h o r i t y in Reorganization Plan No. 26 of 1950 (15 F . R. 4935), there is hereby
delegated to t h e C o m m a n d a n t , U. S. Coast Guard, t h e function vested in t h e
Secretary of the Treasury by Section 207 of t h e Reserve Officer Personnel Act,
as amended, of ordering Reserve officers to active d u t y or active d u t y for training
in a n y t e m p o r a r y grade in which serving above t h a t of their p e r m a n e n t grades.
All action t a k e n by t h e C o m m a n d a n t prior to t h e eff'ective date of this order is
hereby ratified.
T h e C o m m a n d a n t is authorized t o redelegate t h e function
herein delegated.
DAVID W . KENDALL,
Acting Secretary of the Treasury.
No.
177-7, N O V E M B E R 1, 1955.-—DELEGATION OF A U T H O R I T Y P E R T A I N I N G TO
BONDING TREASURY DEPARTMENT PERSONNEL
By virtue of t h e a u t h o r i t y vested in t h e Secretary of t h e Treasury by Reorganization Plan No. 26 of 1950, there are hereby transferred t o t h e head of each
Treasury bureau, t o be exercised by him in accordance with regulations promulgated by t h e Secretary of t h e Treasury p u r s u a n t t o t h e act of August 9, 1955,
Public Law 323, 84th Congress, t h e functions of t h e Secretary of t h e Treasury
u n d e r such act a n d t h e regulations issued p u r s u a n t thereto in respect t o t h e
obtaining of blanket, position schedule, or other types of surety bonds covering
t h e civilian officers and employees and military personnel of his bureau who are
required by law or administrative ruling to be bonded.
G.
M.
HUMPHREY,
Secretary of the Treasury.
•EXHIBITS
No.
177-8,
271
J A N U A R Y 4, 1 9 5 6 . — D E L E G A T I O N
OF FUNCTIONS
RECIPROCAL F I R E PROTECTION AGREEMENTS
R E L A T I N G TO
By virtue of the a u t h o r i t y vested in m e b y Reorganizatipn Plan No. 26 of 1950,
the functions of t h e Secretary of t h e Treasury under t h e a c t of M a y 27, 1955
(Public Law 46, 84th Congress), are transferred t o t h e head of each bureau charged
with t h e d u t y of providing fire protection for a n y property of t h e United States,
to be exercised b y each \yith respect t o his bureau.
E a c h bureau head m a y m a k e provision for t h e performance of a n y of these
functions b y subordinates.
DAVID W . KENDALL,
Acting Secretary of the Treasury.
N o . 177-9, A P R I L 18, 1 9 5 6 . — D E L E G A T I O N O F A U T H O R I T Y TO T H E C O M P T R O L L E R
OF THE C U R R E N C Y TO P U B L I S H A D V E R T I S E M E N T S TO R E C R U I T E X A M I N I N G
PERSONNEL
By virtue of t h e a u t h o r i t y vested in m e as Secretary of t h e Treasury a n d purs u a n t t o t h e provisions of Section 12 of t h e a c t of August 2, 1946, 60 Stat. 809
(5 U. S. C. 22a), I hereby delegate t o t h e Comptroller of t h e Currency a u t h o r i t y
t o authorize t h e publication of advertisements pertaining t o t h e recruitment of
examining personnel t o serve in t h e Bureau of t h e Comptroller of t h e Currency,
in newspapers, periodicals, a n d other media of commercial publicity. This authority m a y be exercised until further notice.
W. R A N D O L P H B U R G E S S ,
Acting Secretaiy of the Treasury.
N o . 177-10, M A Y 9, 1 9 5 6 . — T R A N S F E R O F F U N C T I O N S O F T H E R E G I S T E R O F T H E
T R E A S U R Y TO T H E C O M M I S S I O N E R O F T H E P U B L I C D E B T
By virtue of t h e a u t h o r i t y vested in m e b y Reorganization Plan No. 26 of 1950,
t h e functions of t h e Register of t h e Treasury a n d of t h e Office of t h e Register of
t h e Treasury are transferred t o t h e Commissioner of t h e Public Debt.
The Commissioner of t h e Public D e b t m a y m a k e such provisions as he deems
appropriate authorizing t h e performance of any of these functions b y subordinates
in t h e Bureau of t h e Public Debt.
This order shafl be effective M a y 16, 1956.
W. RANDOLPH BURGESS,
Acting Secretary of the Treasury.
N O . 180-3, A U G U S T 22, 1 9 5 5 . — D E L E G A T I O N O F F U N C T I O N S P U R S U A N T TO P U B L I C
L A W 362, A P P R O V E D A U G U S T 11, 1955, TO T H E C O M M I S S I O N E R O F N A R C O T I C S
By virtue of t h e a u t h o r i t y vested in m e b y Reorganization Plan No. 26 of 1950,
there are hereby transferred t o t h e Commissioner of Narcotics all t h e functions
of t h e Secretary of t h e Treasury under Public L a w N o . 362, 84th Congress, 1st
Session.
T h e functions herein transferred m a y be delegated b y t h e Commissioner of
Narcotics t o subordinates a s he deems necessary.
DAVID W . KENDALL,
Acting Secretary of the Treasury.
272
1956 REPORT OF THE SECRETARY OF THE TREASURY
Reporting and Accounting Changes
EXHIBIT 46.—Instructions governing the furnishing of information to the Treasury
of estimated collections of foreign currencies and estimated needs of agencies
for the currencies
[Department Circular No. 967. Accountsl
TREASURY DEPARTMENT,
Washington, August 24, 1955.
To Heads of Executive Departments and Agencies and Others Concerned:
This circular contains revised instructions, pursuant to Section 281.8 of Treasury Department Circular No. 930, dated October 19, 1953, with regard to the
furnishing of information to the Treasury of estimated collections of foreign
currencies and estimated needs of agencies for the currencies.
For purposes of the President's Budget, the Treasury must compile overall
estimates relating to receipts to be derived from the sale of foreign currencies to
be used for the expenditures of executive agencies abroad. Hence, the Treasury
must obtain on an annual basis from the various departments and agencies concerned, estimates regarding:
(1) The amounts of foreign currencies to be acquired in behalf of the United
States Government by executive departments and agencies, without purchase
with dollars, under agreements with foreign governments and from other sources;
and
(2) The amounts of foreign currencies needed for expenditures of executive
departments and agencies which must be purchased with appropriated funds,
regardless of whether such currencies are available with the Treasury or must be
procured in the market.
The foregoing information shall be reported annually to the Treasury by executive departments and agencies which: Collect such foreign currencies incident to
their operations; administer agreements with foreign governments involving the
acquisition of such currencies; collect such currencies as the result of loans or
other credits; or require foreign currencies for expenditures in connection with
their programs or for other authorized purposes. Agencies having relatively
nominal amounts of expenditures in local currencies abroad need not submit
reports unless such expenditures with respect to any particular currency exceed
$5,000 annually, in which case reports on all currencies should be submitted.
The estimates required to be submitted each year will consist of two separate
reports, one covering the fiscal year in progress at the time of submission and the
other the next succeeding year. The latter will include only data based on existing laws or agreements with foreign governments, or other transactions that can
be projected from experience or other considerations. The data on foreign
currencies reported to the Treasury should, so far as applicable, be consistent
with the regular budget estimates of the reporting agencies which are submitted
to the Bureau of the Budget for the fiscal years involved.
The reports will be submitted by the departments and agencies to the Treasury
by October 15 each year. All reports are to be furnished in an original and one
copy and directed to the Division of Central Reports, Bureau of Accounts,
Treasury Department. The first report under this instruction will cover the
fiscal years 1956 and 1957.
Agencies should report estimated collections, stated in dollars, of foreign currencies (except repayments to appropriations) according to (1) source (i. e., provisions of law or agreements with foreign governments) and (2) country. Collections should include currencies which, by law, are available for use of the agencies without reimbursement to the Treasury. Collections of a miscellaneous
character (fees, services, etc.) which are for credit to miscellaneous receipt accounts
of the Treasury, should be lumped together ur.der the caption, "Miscellaneous."
Agencies should report, according to countrjr, their dollar needs for foreign
currencies which must be purchased with appropriated funds, regardless of whether
or not the Treasury has the currencies available for sale. Needs for currencies
under programs which, by law, permit the use ojr the currencies without reimbursement to the Treasury, should not be reported
EXHIBITS
273
Instructions contained in circular letter d a t e d September 24, 1954, on t h e above
subject are rescinded. Any questions concerning t h e reporting instructions
herein should be discussed with t h e Accounting Systems Division of t h e JBureau
of Accounts.
°
A.
N.
OVERBY,
Acting Secretary of the Treasury,
E X H I B I T 47.—Regulations relating to t h e submission of business-type financial
s t a t e m e n t s by Government corporations and certam unincorporated agencies
[Department Circular No. 966. Accounts.]
TREASURY
DEPARTMENT,
Washington, J a n u a r y 30, 1956.
To Heads of Departments and Agencies and Others Concerned:
P U R P O S E OF R E G U L A T I O N
1. T h e financial s t a t e m e n t s and related information to be submitted under these
regulations are required to furnish financial information for use by t h e Treasury
D e p a r t m e n t in discharging its responsibility under the Budget and Accounting
Procedures Act of 1950 for compilation of overall financial reports of the Government, and for use by t h e Bureau of t h e Budget in following through with t h e
b u d g e t a r y programs of t h e reporting agencies.
A U T H O R I T Y FOR R E G U L A T I O N
2. This regulation is issued p u r s u a n t to Section 114 of t h e Budget and Accounting Procedures Act of 1950 (31 U. S. C. 66b) which authorizes the Secretary of
t h e Treasury to require from agencies reports and information for t h e effective
performance of his responsibility for preparing such reports for t h e information
of t h e President, t h e Congress, and t h e public as will present the results of t h e
financial operations of the Government. As authorized by said section, t h e regulation provides for the furnishing of such financial d a t a as are required by the D i rector of t h e Bureau of the Budget.
S C O P E OF R E G U L A T I O N
3. This regulation requires t h e submission of financial s t a t e m e n t s by corporate
and noncorporate Government agencies of the following character:
(a) AU wholly owned and mixed ownership Government corporations specifically included in t h e Government Corporation Control Act and a m e n d m e n t s
thereto, or subsequently brought under t h e provisions of t h a t act.
(b) All other activities of t h e Government operating as revolving funds
(accounts symbolized 4000-4999 and 8400-8499 by t h e Treasury D e p a r t m e n t ) ,
for which business-type public enterprise or intragovernmental fund budgets are
required by t h e Bureau of t h e Budget.
(c) Other activities or agencies (1) which are of a business-type n a t u r e ; or
(2) whose operations, services, or functions are largely self-liquidating or primarily of a revenue producing n a t u r e ; or (3) whose operations result in t h e accumulation of substantial inventories, investments or other recoverable assets. Agencies
and other activities to report under this category will be designated by t h e Fiscal
Assistant Secretary of t h e Treasury.
I S S U A N C E OF I N S T R U C T I O N S
4. Financial s t a t e m e n t s and related information under this regulation shall be
prepared and submitted by t h e agencies concerned, in t h e form and the manner
prescribed in t h e procedural instructions issued by t h e Fiscal Assistant Secretary
of t h e Treasury.
WAIVERS
5. The Fiscal Assistant Secretary of t h e Treasury is authorized t o waive t h e
provisions of this regulation in whole or in p a r t as to any agency or activity when
it is determined t h a t full compliance by such agency or activity is not necessary
to accomplish t h e overall objective to obtain information required for t h e preparation of financial reports or for t h e purposes of t h e Bureau of t h e Budget.
399346—57
19
274
1956 REPORT OF THE SECRETARY OF THE TREASURY
PERIODIC REPORTS
REQUIRED
6. Agencies responsible for t h e administration of corporate or noncorporate
activities of t h e t y p e specified in p a r a g r a p h 3 shall furnish for each such activity
periodic financial statements, as follows:
(a) A statement of financial condition showing t h e assets, liabilities, and investments of t h e United States Government in t h e enterprise.
(b) A statement of income and expense and changes in accumulated net iiicome
{or deficit) showing in condensed form t h e earnings or losses arising from operations
a n d changes in accumulated net income (or deficit) for t h e fiscal year to t h e end of
t h e reporting period.
(c) A statement of sources and application of funds showing t h e manner in
which funds have been applied to t h e acquisition of assets, to expenses, and to
retirement of borrowings and capital; t h e m a n n e r in which funds have been
provided by t h e realization of assets, by income, by borrowings and capital contributions; and from which the net effect of such operations on t h e budget for the
Government as a whole can be determined.
(d) A statement of long-range commitments arid contingencies containing a
short description of t h e program a n d a s t a t e m e n t showing t h e gross a m o u n t
outstanding of loans guaranteed or insured by t h e reporting agency, insurance
programs, obligations issued on credit of or guaranteed by t h e United States,
long-range commitments a n d other contingent liabilities, a n d assets held as
offsets t o such liabilities.
ACCOUNTING S U P P O R T FOR R E P O R T S
7. One of t h e principles upon which t h e Treasury D e p a r t m e n t is proceeding
in connection with t h e responsibility for preparing central financial reports is
t h a t such reports should present fairly t h e financial condition a n d results of
operations of t h e agencies as shown by their books a n d records. Hence, agencies
shall furnish t h e Treasury D e p a r t m e n t with such information regarding t h e
accounting basis for their reports submitted under this regulation, as m a y be
required for proper evaluation of such reports.
EFFECTIVE DATE
8. This regulation, with t h e concurrence of t h e Director of t h e Bureau of t h e
Budget, supersedes Budget-Treasury Regulation No. 3, dated September 1, 1944,
a n d revised March 15, 1947, issued p u r s u a n t t o Executive Order No. 8512 of
August 13, 1940, as amended by Executive Order No. 9084 of March 3, 1942,
a n d shall be effective with t h e period ending March 31, 1956.
W. R A N D O L P H B U R G E S S ,
Acting Secretary of the Treasury.
[Department Circular 966, Supplement No. 1. Accounts]
TREASURY DEPARTMENT,
Washington, J u n e 1, 1956.
To Heads of Departments and Agencies and Others Concerned:
T h e Treasury D e p a r t m e n t has been requested t o furnish t h e Committee on
Government Operations, House of Representatives, with information on properties a n d assets of t h e United States Government in connection with t h e committee's responsibilities for conducting a continuing study of t h e assets of t h e
Government.
Accordingly, D e p a r t m e n t Circular No. 966, dated J a n u a r y 30, 1956, is amended
as follows:
SCOPE
1. P a r a g r a p h 3 is amerided by adding t h e following sub-paragraph " d " :
" d . E a c h executive agency a n d activity not included in t h e preceding subparagraphs."
PERIODIC REPORTS REQUIRED
2. T h e first sentence in p a r a g r a p h 6 is amended t o read as follows:
"Agencies responsible for t h e administration of corporate or noncorporate
activities of t h e t y p e specified in subparagraphs a, b, a n d c of p a r a g r a p h 3 shaU
furnish all of t h e following periodic financial s t a t e m e n t s for each such activity
EXHIBITS
275
whereas agencies referred to in subparagraph 'd' of paragraph 3 are requested to
furnish only the statement of financial condition referred to in subparagraph 'a'
of this paragraph."
EFFECTIVE DATE
3. This supplement is effective immediately.
W. RANDOLPH BURGESS,
Acting Secretary of the Treasury.
EXHIBIT 48.—Regulations governing the handling of certificates of deposit for
credit in the general account of the Treasurer of the United States
[Department Circular No. 945, Revised, Supplement 1. Accounts]
TREASURY D E P A R T M E N T ,
Washington, May 3, 1955.
To Heads of Government Departments and Agencies and Others Concerned:
I. Purpose of these regulations
1. These regulations are issued to establish revised procedures, effective Jul}'I, 1955, for handling certificates of deposit and related charges for uncollectible
items in the general account of the Treasurer of the United States, within the
framework of Department Circular No. 945, Revised, dated April 29, 1955.
(a) Applicability to agencies operating without funded checking accounts for
the issuance and payment of checks drawn on the Treasurer of the United States.
Pursuant to Treasury Department and General Accounting Office Joint Regulation No. 4, Revised, dated April 29, 1955, the use of fimded checking accounts
in the issuance and payment of checks drawn on the Treasurer of the United States
will be discontinued with respect to certain designated agencies. Accordingly,
deposits made by or for such agencies in the general account of the Treasurer of
the United States will no longer be for credit to disbursing officers' checking accounts. These regulations apply in their entirety to all such agencies that are
presently directed by Joint Regulation No. 4, Revised, or hereafter directed by
supplement to such joint regulation, to discontinue the use of funded checking
accounts.
(b) Applicability to all other agencies. Until specifically authorized to discontinue the use of funded checking accounts, by supplement to Joint Regulation
No. 4, Revised, all other agencies shall continue to make deposits in the Treasurer's
gerieral account, distinguishing between (1) deposits of collections available for
disbursement, for credit to checking accounts; and (2) deposits of unavailable
receipts, for covering into the Treasury with credit to receipt accounts. Such
agencies shall observe only the provisions of section II of these regulations, with
particular regard for revised requirements for sorting items in deposits.
II. General requirements applicable to all agencies
2. Department Circular No. 176. Procedures herein established are consistent
with the technical requirements for making deposits as set forth in Department
Circular No. 176, Revised December 21, 1945, and amendments thereto. Part
II of that circular and related amendments are for special attention of all Government agencies making deposits for credit to the Treasurer of the United States.
3. Preparation of certificates of deposit and record of items deposited. The
depositing agency shall:
(a) Prepare a certificate of deposit, using the prescribed form;
(b) Endeavor to" hmit the number of transmittals to a depositary to one each
day; and
(c) Maintain a record of all items deposited, in such form as to enable identification of each item with the related certificate of deposit.
4. Deposits ivith Federal Reserve Banks and branches will be credited in the
Treasurer's account for all items on the date the deposit is received, if received
early enough in the day to be processed that same day. The following general
requirenients for the sorting of items deposited with Federal Reserve Banks and
branches supersede the provisions of Department Circular No. 772, dated August
14, 1945, which circular is hereby rescinded:
(a) As a general rule, only one certificate of deposit shall be prepared for each
276
1956 REPORT OF THE SECRETARY OF THE TREASURY
deposit transmitted. Exceptions to this rule will be observed by depositing
agencies under the following conditions only:
(1) Where separate certificates of deposit are necessary for accounting
purposes as authorized in Treasury regulations; or
(2) Where a Federal Reserve Bank or branch requires (a) separate certificates of deposit for currency and coin; and (b) separate certificates of deposit
for noncash items.
(b) Certificates of deposit shall be accompanied by adding machine tapes or
other listings showing the amount of each item deposited and a total in agreement
with the amount of the certificate, in accordance with the instructions outlined
below. Since depositors are required to maintain a record of all items deposited
so as to enable identification of each item and the related certificate of deposit,
identifications of amounts of individual items are not required to be shown on the
tapes or other listings.
(c) Where the number of checks and postal money orders comprising a certificate exceeds twenty-five, the items shall be sorted into the following groups:
(1) Currency and coin (except where required to be included in a separate
certificate of deposit).
(2) Checks dcawn on the Treasurer of the United States.
(3) Postal money orders.
(4) Items drawn on banks and trust companies located in the same city
as the Federal Reserve Bank or branch with which the deposit is made.
(5) Items drawn on other banks and trust companies.
(6) Noncash items (except where required to be included in a separate
certificate of deposit).
(d) A separate adding machine tape or onher listing shall accompany each
of the foregoing groups of items. The several group totals shall be recapitulated
on a separate tape or other form, to show the total amount of the certificate of
deposit. Each group total listed shall be identified by the numeral designating
that group as indicated above.
(e) Where the number of checks and postal money orders for a certificate do
not exceed twenty-five, no sorting of items is required and a single listing of unarranged items, with a separate listing for currency and coin if included, shall
accompany the certificate.
(f) The foregoing provisions represent maximum requirements, except in
special circumstances. Federal Reserve Banks and branches may continue to
accept deposits, with less rigid sorting requirements, at their election. Additional
sorting requirements may be established, where warranted by large volumes of
items deposited, on an individual agency or agency location basis. Arrangements
to this end will be made by the Treasury Department upon request of the Federal
Reserve Bank concerned. Existing special sorting arrangements with certain
agencies, such as Veterans Administration and Internal Revenue Service, may
be continued.
5. Deposits with other Federal depositaries.—(a) General depositaries will give
credit in Treasurer's account for all items on the date the deposit is received.
Sorting requirements for these deposits are not standardized. Therefore, all
agencies should observe the requirements of the individual depositaries.
(b) Cash Division, Office of the Treasurer of the United States will give credit
in the Treasurer's account in accordance with established procedure. Sorting
requirements for these deposits are the same as those outlined for deposits with
Federal Reserve Banks and branches (paragraph 4).
6. Symbols identifying accountable officers.—(a) Agencies which continue to
operate with funded checking accounts shall continue to identify certificates of
deposit and related debit vouchers for uncollectible checks according to the disbursing symbol of the checking account affected. Such agencies shall continue
to use the same symbols, to identify accountable officers, on certificates of deposit,
Standard Form No. 201, for the covering of receipts into the Treasury.
(b) Agencies not operating with funded checking accounts shall show on certifi- .
cates of deposit and related debit vouchers for uncollectible checks the symbol which
identifies the disbursing officer rendering the account current which incorporates
such deposits. Such symbols, as provided by paragraphs 13 and 17 of these regulations, will determine the levels of the Treasury's central accounts for deposits
in transit, which are to be charged with amounts of confirmed deposits reported
in accounts current of disbursing and collecting officers and credited with amounts
of deposits ^reported by the Treasurer of the United States.
EXHIBITS
277
(c) Department Circular No. 831, dated June 18, 1948, is accordingly
rescinded.
III. General requirements applicable only to agencies operating without funded
checking accounts
The provisions of this section and all further sections of these regulations apply
to (1) disbursing officers operating without funded checking accounts in the issuance and payment of checks drawn on the Tieasurer of the United States; and
(2) administrative agencies whose collections affect accounts of Treasury regional
offices and who deposit such collections directly in Federal depositaries.
7. Deposit forms to be discontinued are as follows: (a) Standard Form No. 207.
Changes in the system of central accounts in the Treasury Department provide
for recording vouchers which effect nonexpenditure transfers between appropriations, as counter-checks and deposits, directly in the central accounts, without
the drawing of Treasury checks by disbursing officers and the deposit of such
checks on Standard Form No. 207. Department Circular No, 12, Second Supplement, dated June 30, 1950, is hereby rescinded.
(b) Standard Form No. 208. Collections for credit to special fund and trust
fund appropriations, as available receipts, heretofore required to be deposited by
certain agencies on this special form shall be included in the regular deposit form
authorized for the use of such agency. Department Circular No. 12, Third
Supplement, dated June 12, 1951, is hereby rescinded.
8. All other deposit forms to be continued. All other existing certificate of deposit
and debit voucher forms shall continue to be used. With certain exceptions
specified in paragraphs 9 and 10, however, agencies which heretofore used both
the Standard Form No. 201 type of certificate (for credits to receipt accounts)
and the Standard Form No. 209 type of certificate (for credits to checking accounts) shall now use only one of these forms as hereinafter outlined, regardless
of the classes of collections involved. A single form to replace the Form 201 and
209 wfll be established at a later date. In the meantime, either form will serve
the same general purpose so far as the accounts of the Treasurer of the United
States are concerned, since no deposits will be for credit to checking accounts.
The basic distinction between the two forms will rest on the fact that the space
provided on the Form 201 for classification of the collections, where required to be
shown on the certificate of deposit, is more adequate than on the Form 209.
Accordingly, the following general rules will govern:
(a) Deposits by disbursing officers. Standard Form No. 209 shall be used by
all disbursing offices to deposit all classes of collections, since the collections are
classified in their accounts on the basis of collections received. In these cases, a
classification of the collections is not to be shown on the certificate of deposit
since such information is obtained for the Treasury's central accounts directly
from the official accounts rendered by the accountable officers. This does not
apply to "courtesy" deposits of public debt receipts.
(b) Deposits by administrative agencies. Standard Form No. 201 shall be
used for the deposit of all classes of collections by administrative agencies whose
collections affect accounts of Treasury regional offices. In these cases, the showing of a classification of the collections on the certificate is required, so as to
provide the information for the Treasury regional offices concerned (such information, prior to the adoption of the existing direct deposit procedure, was furnished on separate collection schedules). Accordingly, except for certain special
circumstances outlined in paragraphs 9 and 10 below, the use of Standard Form
No. 201 is confined to the administrative agencies under the Treasury's central
disbursing system, all of which have been operating under the direct deposit
procedures established in Department Circular No. 937, dated January 18, 1954.
Agencies required to use Standard Form No. 201 should observe that:
(1) Procedures established in these regulations for the preparation and
routing of Forms 201 and related debit vouchers for uncollectible checks supersede
the provisions of Department Circular No. 937, which circular is hereby rescinded;
and
(2) Supplement No. 1 of Department Circular No. 937, dated August
31, 1954, is likewise rescinded, since the applicable requirements for handling
foreign currency collections are incorporated in these regulations.
(c) Under the foregoing arrangements, it should be observed that:
_
(1) Standard Form No. 201 certificates of deposit are the basis,for
picking up classified amounts of collections and corresponding amounts of con-
278
1956 REPORT OF THE SECRETARY OF THE TREASURY
firmed deposits in the accounts of Treasury regional offices. These entries have
no net effect on the accountability of the Treasury disbursing officers; whereas
(2) Standard Form No. 209 certificates]of|deposit are the basis for recording amounts of confirmed deposits in the accounts of all Government disbursing offices, including Treasury regional offices, with corresponding reductions in
the cas-h assets for which the disbursing officers became accountable upon receipt.
9. Trust fund receipts for which ihe Treasury is required to determine balances
available for investment or interest credit will be accounted for officially through the
Treasury regional office, Washington, D. C. Accordingly: (a) Admiriistrative
agencies under the Treasuryis central disbursing system which receive collections of
this type shall deposit same on Forrii 201, symbolized for recordation in the
Washington regional office, in accordance with paragraph 17 below.
(b) All other agencies, which will regularly use Form 209, shall also deposit
this type of receipt on a Form 201 for attention of the Treasury regional office,
Washington, D. C. This is not intended to preclude a disbursing officer from
depositing the collection initially by Form 209 in relation to his own account
and then dra,wing a check which is to be deposited on Form 201 to the credit
of the Treasury regional office, Washington, D. C , as indicated in paragraph 17
below.
(c) Effect of failure to observe foregoing procedure. Any trust receipts of the
foregoing type which, inadvertently, are not haridled in accordance with the
above requirements, and which, therefore, are brought into the central receipt
accounts from a monthly statement of classified transactions of other than the
Treasury's Washington regional office, will be treated as available for investment
or interest credit when such monthly statement is recorded centrally.
(d) Exceptions. The foregoing does not apply to amounts deducted from
payrolls paid by Treasury disbursing officers for credit to the civil service retirement and disability fund, since such credits will continue to be handled without
check and deposit action.
10. Miscellaneous and other unavailable receipts of certain agencies whose accountable officers do not render monthly accounts current classifying • such receipts
will also be accounted for officially through the Treasury regional office, Washington, D. C , on the basis of Form 201 deposits for credit to that regional office.
This applies also to miscellaneous receipts collected by Federal Reserve Banks
and branches. A disbursing officer is not precluded from depositing such collections initially on a Form 209 for his own account, then drawing a check for
deposit on Form 201 to the credit of the Treasury regional office, Washington,
D. C , as indicated in paragraph 17 below.
11. Deductions from paid vouchers. In all cases of amounts withheld from paid
vouchers, whether they represent (a) repayments for credit to appropriations or
deposit funds, (b) available receipts for credits to special or trust fund appropriations, or (c) unavailable receipts for credit to miscellaneous, special or trust
receipt accounts, the paying officer will account for the credit without drawing
a check on the Treasurer, hence without making a deposit, provided that (1) the
monthly classified statements furnished by the paying officer, or his agency, are
authorized as the basis for recording the particular credits in the central appropriation, fund and receipt accounts of the Treasury; and (2) the paying officer
has an accounting relationship with the administrative agency fiscal office whose
accounts are affected by the credit.
IV. Preparation and distribution of certificates of deposit, Standard Form No. 209
and related debit vouchers, Treasury Form 5504
12. General. The procedures outlined in this section apply only to deposits of
disbursing officers, as stated in paragraph 8 (a) above.
13. Information to be shown on Standard Form No. 209 will be essentially the
same as heretofore (see exhibit on Attachment No. 1 i).
(a) Symbol number to be shown in the designated block shall be the symbol
identifying the disbursing office. Unless otherwise requested by the Treasury
Department, each disbursing office shall use only one symbol to identify all of its
deposits. Such symbol shall be the regular or general symbol assigned for checks
of the disbursing office, regardless of the number of additional special check
symbols with which such office operates. Treasury regional disbursing officers
shafl use the same office symbols for Form 209 deposits that are prescribed for the
identification of Form 201 deposits (see Attachment No. 4 i).
» Attachments omitted from this exhibit.
EXHIBITS
279
(b) Printed references to checking accounts on the Form 209 are to be disregarded, as indicated on Attachment No. 1.^ Depositors are not required to
actually cross out the printed matter.
14. Information to be shown on Form 5504 debit vouchers for uncollectible checks
relating to Form 209 deposits will be essentially the same as heretofore (see exhibit
on Attachment No. 2 i).
(a) Symbol number appearing on the related Forin 209 certificate shall be shown
on the Form 5504 in the second column under "Classification of Deposit." The
colurrin immediately to the left shall be left blank.
(b) Printed references to checking accounts on the Form 5504 are to be disregarded, as indicated on Attachment No. 2.^
(c) Form 5504 debit vouchers may be prepared by either the depositary or
the depositor (see paragraph 20).
15. Distribution of originals and copies of Form 209 and Form 5504 will be the
same as heretofore. The originals of these documents will be received in the
Office of the Treasurer of the United States, as heretofore, with the transcripts of
Federal Reserve Banks and all other Federal depositaries.
V. Preparation and distribution of certificates of deposit, Standard Form No. 201
and related debit vouchers. Treasury Form 5504
16. General. The procedures outlined in this section apply only to deposits
which affect accounts of Treasury regional offices, which deposits are made by
(a) administrative agencies under the Treasury's central disbursing system, as
stated in paragraph 8 b above; and (b) all other agencies or disbursing officers who
are required to make Form 201 deposits to the credit of the Treasury's Washington
regional office as specified in paragraphs 9 and 10 above.
/
17. Information io be shown on Standard Form No. 201 will be as outlined below
(see exhibit on Attachment No. 3 ^). Strict observance of these requirements is
essential for integration of the accounting of the administrative agencies and the
accounting of the Treasury Department as well as for synchronization of the
Government's cash transactions in the general account of the Treasurer of the
United States with the accounts of the respective disbursing officers.
(a) Identification of ihe Treasury regional office which is required to account for
the classified collections and the total amount of deposit confirmed shall be shown
on the line captioned "For credit of."' This shall consist of the Treasury regional
office symbol, followed by "Treasury Regional Office (City and State)." Symbols
assigned to identify Treasury regional offices, and the related locations are shown
on Attachment No. 4.^ These symbols correspond to the general check symbols
at the respective regional offices and, unless otherwise advised by the Treasury
Department, shall be used to identify all deposits affecting such offices. All
deposits required to be made pursuant to paragraphs 9 and 10 of these regulations
shall be ideritified as follows: "300 Treasury Regional Office, Washington, D. C."
(b) Ciiy location of Treasury regional office shall also be shown in the extreme
upper right corner of the form, immediately above the "Deposit Number" block,
with respect to all deposits made in any depositaries within continental United
States affecting Treasury regional offices within the continental limits. For
deposits made pursuant to paragraphs 9 and 10, "Washington, D. C." should be
shown in this space. (As will be seen in paragraph 23 of these regulations, the
city location will be the basis on which the original Form 201 certificates, as well
as any original Form 5504 debit vouchers, will be transmitted by Federal Reserve Banks and branches to Treasury regional offices in the forty-eight States. This
eliminates the transmission of copies of these documents from depositing agencies
to the Treasury regional offices affected.)
(c) Classification of collections deposited shall be shown in the space provided,
according to individual appropriation, deposit fund, or receipt symbol, as follows:
(1) Show appropriation, deposit fund or receipt symbol in the column
headed "Account Symbol" and the respective amounts immediately to the right,
in the next column, disregarding the heading of such column. This provides
space for five account classifications. If more classifications are involved, the
additional symbols and amounts should be shown to the right of the foregoing, as
illustrated on Attachment No. 3.^
(2) Credits to special fund or trust fund appropriations which represent
available receipts, as distinguished from repayments, must be identified by the
letters "A/R" to the right of the appropriation symbol, as illustrated. All credits
1 Attachments omitted from this exhibit.
280
1956 REPORT OF THE SECRETARY OF THE TREASURY
to appropriations not so identified will be treated as repayments in the Treasury's
accounts and in the overall reports of the Government.
(d) Total amount of deposit shall be shown in the designated block. The
depositor shall verify that this agrees with the aggregate of the classified amounts
shown on the certificate and also agrees with the aggregate of the checks and other
remittances being deposited. -Remittances in foreign currencies are required to
be handled under special procedures outlined in paragraph 26 of these regulations.
(e) Depositing agency identification shall be inserted in the block designated
exclusively for this purpose. If a deposit is made by one agency for account of
another administrative agency, the latter agency shall be identified in available
space above this block, as indicated on Attachment No. 3.^ In such case the
depositing agency should exercise care to identify the Treasury regional office
related to the latter administrative agency since this is not necessarily the same
as the Treasury regional office related to the depositing agency. With respect
to collections received by the General Accounting Office which are for deposit
by that office for credit to appropriations and other accounts of other administrative agencies, it is essential that the administrative agencies concerned furnish
the General Accounting Office with all information needed to prepare the Form
201 certificate in the same manner as it would be prepared by the administrative
agency, including identification of the appropriate Treasury regional office.
(f) A fifth copy of the Form 201 should be attached to the blank set of the
form at the time it is prepared. This may be any copy from a blank set of forms,
but should be marked "quintuplicate." The quintuplicate will serve as the
temporary copy held by the depositor at the time the deposit is made. In
certain cases, however, it will also serve as the official retained copy, as will be
seen on Attachment No. 6 relating to paragraph 19.^
18. Information to be shown on Form 5504 debit vouchers for uncollectible checks
relating to Form 201 deposits will be consistent with the information shown on
the related Form 201 certificate, as outlined below (see exhibit on Attachment
No. 5 1).
(a) Identification of the Treasury regional office as shown on the Form 201
(i. e., the office symbol followed by "Treasury Regional Office (City and State)")
shall be inserted in the second column under "Classification of Deposit," disregarding the reference to "official checking account" in the printed caption of that
column.
(b) City location of Treasury regional office shall also be shown in the extreme
upper right corner of the form. This will serve as the guide to the Federal
Reserve Banks and branches for the transmission of the original Forms 5504 to
the Treasury regional offices affected.
(c) Classification of the charge according to appropriation, deposit fund or
receipt account symbol, consistent with the related Form 201, shall be shown in
the first column under "Classification of Deposit" and the respective amounts
shown in the designated column. If the uncollectible item had been classified
as an available receipt on the Form 201, the letters "A/R" should likewise be
inserted to the right of the appropriation symbol on the Form 5504.
(d) Identification of depositor, as shown on the Form 201, shall be inserted
in the space provided. If the Form 201 indicates that the deposit is made for
account of another administrative agency, such agency should also be identified
in this space on the Form 5504.
(e) Form 5504 debit vouchers may be prepared by either the depositary or
depositor (see paragraph 20).
19. Distribution of confirmed copies of Form 201 certificates and related Form
5504 debit vouchers received by depositing agencies under the Treasuryis central
disbursing system will be as outlined in Attachment No. 6.^ In all cases, the administrative agency shall use (a) the confirmed triplicate of Form 201, and (b) the
duplicate Form 5504 executed by the depositary, as the document supporting the
collection transactions stated on the monthly statement of classified transactions
furnished by the Treasury regional office. By reason that the originals of these
documents wfll flow into Treasury regional offices located within continental
United States only with respect to deposits made within continental United
States, depositing agencies will continue to send to Treasury regional offices the
confirmed copies of documents specified in Attachment No. 6^ in the following
cases:
(a) Deposits made with depositaries located outside continental United
1 Attachments omlttedYrom this>xhibit.
EXHIBITS
281
States, whether they affect Treasury regional offices located within or outside
continental United States; and
(b) Deposits made with depositaries located within continental United
States which may affect Treasury regional offices located outside continental
United States.
VI. Alternatives regarding the preparation of debit vouchers for uncollectible
checks
20. General. Certain alternatives are available to all Federal depositaries as
to when and where. Form 5504 debit vouchers for uncollectible checks shall be
prepared for their processing of the charges in their general account with the
Treasurer of the United States. The contents of this section, therefore, are for
the attention of Federal Reserve Banks and branches, general depositaries and
all depositing agencies.
(a) Preparation by depositor. As a general rule, depositaries will hold in
suspense the charge for an uncollectible item and transmit the returned check
or other instrument to the agency which made the deposit, together with a partially prepared set of the Form 5504. The depositing agency shall complete
the Form 5504, including the information outlined in these regulations (see paragraph 14 regarding Form 209 items and paragraph 18 regarding Form 201 items)
and shall return the full set of the form to the depositary. Under this method
the depositor, rather than the depositary, correlates the uncollectible item with
the certificate of deposit. Upon return of the completed form, the charge is
processed by the depositary in the Treasurer's general account, supported by
the original Form 5504, and the executed duplicate is returned to the depositing
agency. Where the depositary elects to request the depositor to prepare the
debit voucher, it should be observed that:
(1) The depositor must return the completed set of the form promptly
to the depositary; and
(2) If there is undue delay in this regard, the depositary is authorized to
charge the item directly in the Treasurer's account, even if such charge has to be
supported by an incomplete Form 5504; theieby requiring
(3) Further action on the part of the Treasurer's office, depositing agency,
and where applicable, the Treasury regional office, for coordination with respect
to proper identification or classification of the charge.
(b) Preparation by depositary. The depositary may elect to correlate the
uncollectible item with the certificate of deposit in which it had been included and
prepaic the Form 5504, charging same directly in the Treasurer's general account.
In such case the depositary is required to show on the Form 5504 the necessary
identification of disbursing office or Treasury regional office, by symbol and otherwise, as indicated on the related Form 209 or 201 (see paragraph 14 and 18).
With respect to uncollectible items in Form 201 deposits and the matter of classifying the Form 5504 according to appropriation, deposit fund or receipt symbol,
the depositary will show the classification on the Form 5504 only if the related
Form 201 shows a single account classification. If two or more classifications are
involved, the depositary will not be in a position to determine which classification
is to be charged and such information will be left blank. Accordingly, the depositing agency shall furnish this classification information directly to the Treasury
regional office promptly upon receipt of the executed duplicate Form 5504.
(c) Cash Division of Treasurer's Office follows the method outlined in subparagraph (b) above. In this case, however, the results are the same as described
in subparagraph (a), insofar as classification is concerned, since the Cash Division
obtains this information from the local depositing agency, by telephone,
21. Other alternative. Nothing in the foregoing is intended to preclude a depositary from exercising the option of holding an uncollectible item in suspense, for
such period as it may elect, under an arrangement with the depositor whereby
the uncollectible check is reprocessed for collection or replaced by a new check,
without having to function a debit voucher charge in the Treasurer's account.
VII. Handling of original Form 201 certificates of deposit and related Form 5504
debit vouchers received by Federal Reserve Banks and branches and
Treasurer's Cash Division which aflfect Treasury regional offices within
continental United States
22. General.—This section establishes new procedures for handling the originals
of Form 201 certificates of deposit and related Form 5504 debit vouchers, and is
for particular attention of Federal Reserve Banks and branches, Treasury regional
282
195 6 REPORT OF THE SECRETARY OF THE TREASURY
offices, and the Office of the Treasurer of the United States. The. new routing
procedures apply to all such original documents that affect Treasury regional
offices within continental United States which are received in Federal Reserve
Banks and branches and the Treasurer's Cash Division. Deposits made with
general depositaries within continental United States are included jin [the"^'documentation handled by the Federal Reserve Banks and branches since the originals
of these Forms 201 and Forms 5504 flow from the general depositary to the Federal
Reserve Bank or branch of the district in which the depositary is located.
23. Preparation of consolidated abstract of deposits. For each daily transcript
of the Treasurer's general account, as well as for each consolidated transcript for
documents received by Federal Reserve Banks from general depositaries, the
Federal Reserve Banks and branches and Treasurer's Cash Division will:
(a) Arrange the original Form 201 certificates and Form 5504 debit vouchers
according to Treasury regional office within the forty-eight States, using as a primary guide the city identifications in the upper right corner of the forms;
(b) Prepare, in original and two copies, a separate abstract of receipts
(Treasury Form 17c) for each Treasury regional office group of documents (see
exhibit on Attachment No. 7). This is hereinafter referred to as a consolidated
abstract of deposits;
(c) In the heading of each consolidated abstract of deposits, identify (1) the
Federal Reserve Bank, by code, or the Treasurer's Cash Division; (2) the Treasury
regional office affected; and (3) the daily transcript date. With respect to item
(1), the separate consolidated abstract pertaining to the special transciipt for
general depositaries will be identified as "General depositaries" following the
Federal Reserve Bank code. In those cases where the transcript covers transactions confirmed by general depositaries in the prior month, the word "Prior"
should be shown after "General depositaries." The four columns of the Form 17c
may be used for the listing of documents, as indicated below, without regard to
the columnar captions;
(d) List each Form 201 on the consolidated abstract, showing only deposit
number and total amount, followed by a total of all deposits applicable to the
Treasury regional office; and
(e) List each Form 5504 on the consolidated abstract, showing the certificate
of deposit number (s) identified on the Form 5504 and total amount, followed by
(1) the total of all debit vouchers for the Treasury regional office, and (2) the
net total of the consolidated abstract representing deposits less debit vouchers.
The net total of each consolidated abstract (representing the net increase of
cash in the Treasurer's general account for transactions affecting the accounts
of a Treasury regional office) will be included in the amount of receipts shown on
the related daily transcript.
^
24. Distribution of consolidated abstract of deposits will be made by Federal
Reserve Banks and branches and the Treasurer's Cash Division, as follows:
(a) Original will accompany the daily transcript to the Treasurer's office,
in support of the total receipts stated thereon, along with the originals of all
other individual certificates and debit vouchers which are not stated on consolidated abstracts.
(b) First copy, together with each original Form 201 and Form 5504 listed
thereon, wifl be forwarded to the Treasury regional office affected. The consolidated abstracts and supporting documents pertaining to Treasury regional
offices located outside the Federal Reserve Bank city should be mailed as soon
as the abstract is completed. Treasury regional offices located in the same cities
as Federal Reserve Banks should make arrangements to pick up their consolidated
abstracts and supporting documents at the banks not later than the morning of
the first working day following the date of the transcript, particularly with
respect to the last few days of each month. Treasury regional offices will hold
their accounts open at the end of each month for a period of not less than oije
working day nor more than two working days to give maximum effect to transactions confirmed by depositaries during the month.
(c) Second copy will be retained by the Federal Reserve Bank or Treasurer's
Cash Division together with (1) the designated copy of each Form 201 or Form
5504 listed, or (2) the copy of the transmittal form received from general depositaries on which are listed such documents as may be included in the consolidated
abstracts, the copies of which documents are retained by the general depositaries.
EXHIBITS
283
VIII. other matters
25. Special certificates of deposit initiated by the General Accounting Office or
Office of the Treasurer of the United States. This paragraph, which is for attention
of all agencies, concerns special sets of forms prepared by the General Accounting
Office and the O.ffice of the Treasurer of the United States for certain types of
intra-Government transactions representing charges on the Treasurer's books,
in the same manner as paid checks, with credit of the proceeds to appropriation,
deposit fund or receipt accounts. In all such cases those copies of each form
which deal with the credit side of the transaction will be routed in the same manner
as a certificate of deposit under these regulations. The copy of the credit document heretofore included in the daily transcript of the Treasurer's office will
continue to be so handled where it serves in lieu of a certificate of deposit on
Standard Form No. 209. Those documents, however, which are in lieu of
Standard Form No. 201 affecting Treasury regional offices within continental
United States will be included in the appropriate consolidated abstract in the
same manner as a Form 201.
(a) The General Accounting Office or the Treasurer's office, whichever
initiated the document, will forward two copies of the confirmed credit document
to the administrative agency office affected. If a Treasury regional office outside
continental United States is involved, a confirmed copy will also be sent to that
office. There follows a general description of the several types of intra-Government transactions concerned.
(b) General Accounting Office Form 5055 is used for such transactions as:
(1) Checks canceled by the General Accounting Office, the checks being treated as paid and the proceeds credited to an appropriation, deposit fund
or receipt account; and
(2) Adjustments of small overdrafts or underdrafts in disbursing officers'
accounts, requiring payment charges or credits on the Treasurer's books, with
corresponding credit or charge to the G. A. 0. deposit fund established therefor,
through the Treasury's Washington regional office. Where the debit side of the
Form 5055 is for charge to the deposit fund it will serve as a disbursement document.
(c) Certain Treasury forms are used to effect disposition of the collected
proceeds of forged checks held in the Reclamation Suspense Account on the
books of the Treasurer of the United States. Where the payees of the forged
checks are not entitled to the proceeds, the amounts held in the Reclamation
Suspense Account are transferred to the appropriation or other account involved
on the basis of: (1) Treasury Form 6743, used only for credits to the Federal
old-age and survivors insurance trust fund, through the Treasury's Washington regional office.
(2) Treasury Form 6741, for credit to any other accounts, through the
Washington regional office.
(3) Treasury Form 6742, for credit to any accounts other than those
relating to the Treasury's Washington regional office.
26. Disposition of foreign currency collections by certain agencies within the
forty-eight Staies. The provisions of this paragraph regarding foreign currency
collections apply only to agencies whose collections affect the accounts of Treasury
regional offices within the forty-eight States, consistent with the established
procedures for transmission of collections of such agencies directly to Federal
depositaries. The requirements do not apply to operations outside the forty-eight
States where foreign currencies are handled through the accounts of disbursing
officers in accordance with the provisions of Treasury Department Circular No.
930, dated October 13, 1953.
(a) Except where specifically authorized to schedule foreign currency collections to a Treasury disbursing officer, the collecting agency will transmit such,
items, by letter, addressed to the Federal Reserve Bank of New York, Foreign
Department, New York 45, New York, accompanied by a certificate of deposit.
Standard Form No. 201.
(b) The letter will contain (1) specific instructions to sell the enclosed items
and credit the dollar proceeds in the Treasurei's account; and (2) a description
of each item as to name of foreign country, medium of exchange, type of remittance (coin, currency, draft, etc.) and foreign currency amount. Foreign drafts
or other commercial paper should be fully described as to drawer, drawee, date,
and amount, and should be endorsed by the sending agency in the usual manner.
(c) The accompanying certificate of deposit will be completed by the collecting agency in the usual manner, except that the United States dollar amount^will
284
1956 REPORT OF THE SECRETARY OF THE TREASURY
be left blank. The net dollar proceeds will be filled in by the Federal Reserve
Bank of New York, upon sale. The following rules concerning the preparation
of individual certificates of deposit for separate classes of items wifl be observed:
(1) No more than one foreign currency may be included in the same
certificate.
(2) Checks drawn on foreign banks and foreign currencies may not be
included in the same certificate.
• (3) Each certificate should pertain to only one appropriation, fund or
receipt symbol.
(d) Upon sale and dollar credit in the Treasurer's account, the Federal
Reserve Bank of New York will distribute the confirmed certificate of deposit
copies under the established procedures. Items found to have no marketable
value will be returned to the depositing agency with the unexecuted Form 201.
A debit voucher will be processed, under established procedure, for any item sold
which is returned as uncollectible after the dollar proceeds have been credited in
the Treasurer's account.
27. Central accounting for deposits and related debit vouchers. Certain aspects
of the central accounting with respect to deposits and related charges for uncollectible items are discussed in Attachment No. 8 ^ for general information.
Treasury regional offices should observe that the interlocking relationship between
their accounts and the accounts of the Treasurer of the United States regarding
confirmed deposits, through the central accounts in the Treasury, will be based
on (a) the consolidated abstracts of deposits for direct deposits of administrative
agencies; (b) individual Forms 209 with respect to deposits made by the Treasury
regional offices; and (c) individual Forras 201 and 5504 for direct deposits made
outside continental United States or affecting regional offices outside continental
United States. Accordingly, the consolidated abstracts of deposits rather than
the individual Forms 201 and 5504 involved in (a), will support the Treasury
regional offices' accounts for confirmed deposits; whereas the underlying Forms
201 and 5504 will in effect be the collection documents supporting the receipts
and repayment transactions classified in their accounts. All other Forms 201
and 5504 handled outside consolidated abstracts will, as heretofore, support the
entries for both the confirmed deposits and the receipts and repayments.
E. F. BARTELT,
Fiscal Assistant Secretary.
EXHIBIT 49.— Regulations concerning certain procedures for the transition from
funded checking accounts to accounts for cash transactions
[Depiartment Circular No. 945, Revised, Supplement 2. Accounts]
TREASURY DEPARTMENT,
Washington, May S, 1955.
To Heads of Government Departments and Agencies and Others Concerned:
I. Purpose of these regulations
1. These regulations are issued to establish onetime special procedures to be
observed as of July 1, 1955, for the transition from the system involving the use
of funded checking accounts in the issuance and payment of checks drawn on the
Treasurer of the United States to the system of central accounts which will
include accounts for checks outstanding, deposits in transit and other cash accounts based on cash transactions reported by disbursing officers and the Treasurer
of the United States. Specified portions of these regulations are applicable to
(a) only those disbursing agencies for which funded checking accounts with the
Treasurer of the United States are to be discontinued pursuant to Joint Regulation No. 4, Revised; and (b) administrative agencies which make direct deposits
in relation to accounts current of the Division of Disbursement, Treasury Department. All agencies concerned are requested to give special attention to these
regulations which are designed to effect an orderly changeover and to keep the
transitional problems to a minimum.
2. Requirements for the establishment of opening balances of certain central
cash accounts as of July 1, 1955, are directly related to the closing of certain
accounts on the books of disbursing officers. References to these account closing
Attachments omitted from this exhibit.
EXHIBITS
'•
285
actions are consistent with applicable regulations of the General Accounting Office.
Separate instructions wfll be issued in connection with balances of checking accounts and other accounts on the books of the Treasurer of the United States as
of June 30, 1955.
II. Accounts of disbursing offices discontinuing the use of funded checking
accounts
3. Under the new system of accounts, all disbursing officers drawing checks
directly on the general account of the Treasurer of the United States are to render
official accounts (accounts current) in terms of (a) certain real accounts for the
Government's cash and other related assets in their custody, representing accountability to the United States; and (b) certain transaction accounts which are
nominal, in the sense that their balances representing monthly totals of transactions are to be closed out by the disbursing officer. The new account current
form is designed to present the results on this basis. The nominal transactions
wfll be closed into the Accountability Account, the balance of which wfll be equal
to the aggregate of the cash and other related assets accounted for at the disbursing office.
(a) To fllustrate the foregoing, assume that the opening balances of a disbursing officer's accounts for the first month of the new system are:
Debit
Credit
Cash assets (disbursing cash on hand, deposits in
designated depositaries, cash with agents, etc.)
$20, 000 _ _..
Disbursing officers' Accountability Account'
$20, 000
20, 000
(b) Assume further that during July 1955 the disbursing officer
transactions resulting in the following preclosing balances:
Debit
Cash assets (various)
$35,000
Disbursing officers' accountability
Nominal accounts:
Checks issued (on Treasurer, U. S.)
Gross disbursements
40, 000
Collections (receipts and repayments)
Confirmed deposits (with Treasurer, U. S.)
10, 000
85,000
20, 000
handles
Credit
$20, 000
50,000
15,000
__»
85,000
(c) The net aggregate of the transactions for the period in the nominal
accounts reflects an increase of $15,000 in the disbursing officer's accountability,
represented by the fact that the cash assets increased by that amount. Thus,
upon closing out the four nominal accounts illustrated, the excess of credits is
carried to the accountability account, resulting in the following balances brought
forward to the next month:
Debit
Credit
Cash assets (various)»_
$35, 000
Disbursing officers' accountability
$35, 000
35, 000
35, 000
4. The manner in which opening balances of the disbursing officer's accounts
on July 1, 1955, are to be established is, in principle, on the same basis as the regular monthly closing entries outlined above. This is illustrated by the following:
(a) The account current for June 30, 1955, will show the balances under the
former accounting procedure. Assume:
Debit
Credit
Cash assets (various)
$20,000
Disbursing officer's checking account(s)
80, 000
Undisbursed appropriations and funds
$100,000
100, 000
100, 000
JThe manner in which this account balance is to be established on July 1,1955, Is discussed in paragraph 4.
286
1956 REPORT OF THE SECRETARY OF THE TREASURY
(b) The following requirements should be observed with respect to the
stating of balances in the account current for June 30, 1955:
(1) To preclude certain problems in the transition, all disbursing officers
who have been operating under procedures whereby the account current might
reflect a credit balance for undeposited misceflaneous collections (unavailable
receipts),, sometimes referred to as Account 03.32, should avoid such balances as
of June 30, 1955. The amounts of all of these unavailable receipt credits during
June 1955, whether carried in the balance of cash assets or the checking account,
should be deposited currently during June to the end that all such items will be
represented by Form 201 certificates of deposit confirmed by depositaries not
later than June 30. Accordingly, a credit balance for unavailable receipts has not
been included in the above illustration.
(2) Some disbursing agencies have had their disbursing officers follow
the practice of increasing their checking account balance with the Treasurer
anci correspondingly reducing their balance of disbursing cash or other cash account
at the time they transmit a deposit (Form 209) to the depositary, even though the
deposit may be confirmed by the depositary in the succeeding month. Under the
new system, the cash asset is to be reduced and the corresponding charge for the
deposit shown on the basis of the accounting month in which the deposit is confirmed by the depositary. To preclude certain problems in the transition, afl
such disbursing agencies are requested to observe the confirmed deposit basis
with respect to Form 209 deposits made in June 1955, to the end that all increases
in the disbursing officers' checking account balances by reason of such deposits
in June will be represented by certificates confirmed by depositaries as credited in
the Treasurer's account in June. Any related debit vouchers for uncollectible
items charged by a depositary in the Treasurer's general account through June
should likewise be reflected as reductions of the disbursing officers' checking account balances. This will have the effect of retaining in the disbursing officer's
accounts as of June 30, 1955, the cash assets for any deposits made during the
last few days of June which may not have been confirmed by a depositary as a
June credit. Such items, therefore, will be dropped from the disbursing officer's
accountability in July on the basis of the certificate of deposit confirmed in July.
(c) As at the beginning of business on July 1, 1955, the disbursing officer
will close out the balance of his checking account(s) and the balance of the control
account for undisbursed appropriations and funds illustrated in 4 (a) above,
establishing the excess of credits as the opening balance of the Accountability
Account. This creates the following illustrated opening balances, consistent with
the initial balances illustrated in paragraph 3 (a) above. To obtain these results
it is essential that a balance of undeposited miscellaneous collections (Account
03.32) as of June 30, 1955, be avoided, as indicated in paragraph 4 (b) above.
Debit
Credit
Cash assets (various)
$20,000
Disbursing officers' accountability account
$20, 000
20,000
20,000
5. The above-discussed balances on the June 30, 1955, accounts current of all
disbursing officers are essential for the establishment of the opening balances of
certain accounts in the new system of central accounts of the Treasury. The copies
of accounts current regularly furnished by certain disbursing agencies to the
Treasury Department, Bureau of Accounts, will be used for this purpose. Special
arrangements will be made with those disbursing agencies which have not heretofore furnished copies of individual disbursing officers' accounts current, sucb as
the Department df Defense, to obtain the balances as of June 30, 1955. These
arrangements may provide for the submission of a report by the disbursing agency,
consolidating the June 30 closing balances as shown on the accounts current of all
the disbursing officers of the agency, provided that the aggregate of the agency's
checking account balances with the Treasurer of the United States is supported
by a listing of balances according to individual check symbol.
6. Procedures concerning the submission of Standard Form 1151 vouchers
directly to the Treasury Department, Bureau of Accounts, Division of Central
Accounts, Washington, D. C , without passing through the operations of disbursing offices, will become operative July 1, 1955, in accordance with regulations of
the General Accounting Office. This wifl include all Forms 1151 for transfer of
undisbursed balances from appropriations which lapse for experiditure on June 30,
EXHIBITS
287
1955, to the certified claims appropriation, which could not be processed in disbursirig accounts under former procedures prior to July 1, 1955.
III. Additional matters applicable to Treasury regional disbursing offices and
related administrative agencies
7. In addition to the foregoing, certain factors affecting the transition, which are
outlined below, apply only to Treasury regional disbursing offices and related
administrative agencies, by reason of the direct deposit procedures pursuant to
. which administrative agencies deposit collections directly in FederaPdepositaries
for credit to accounts at Treasury regional offices.
(a) All Treasury regional offices will hold their June 1955 accounts open for
two working days in July. This will give maximum effect in the June 30 accounts
current to the collection and deposit transactions represented by certificates of
deposit and debit vouchers functioned by depositaries in the Treasurer's general
account through June 30, 1955, on the basis of the confirmed copies of the documents received from the depositing agencies. All administrative agencies concerned should promptly transmit the copies of these documents to the related
Treasury regional offices for transactions consummated by depositaries through
June 30, with a view to (1) minimizing differences between their accounts and the
account current and classified statements of transactions; and (2) otherwise
facilitating the transition. The use of air mail for this purpose is desirable, particularly with respect to deposits made by certain agencies in depositaries throughout
the IJnited States, for which, by reason of centralized-administrative accounting
operations, the agencies forward copies to the Treasury's Washington regional
office. Any consolidated abstracts received from Federal Reserve Banks during
those two working days in July, supported by original certificates of deposit and
Form 5504 debit vouchers confirmed in July, should be handled under the new
procedures in relation'to the accounts for July.
(b) Treasury regional offices mayTreceiye from the depositing agencies,
after the accounts fbr June 1955 have been closed, some copies of certificates of
deposit and debit vouchers which were functioned by the depositaries in the
Treasurer's general account during June. Such documents will be handled as
follows:
(1) Any Form 209 deposits or related Form 5504 debit vouchers will be
recorded as collection and deposit transactions in the accounts for July under the
new procedures. The analysis furnished with respect to confirmed deposits in
the account current for July will identify such items as applicable to June under
the regular procedures. Every effort should be made, however, as previously
indicated, to avoid such items or to keep them to a minimum.
(2) Any Form 201 deposits or related Form 5504 debit vouchers confirmed in June but received after the June accounts have been closed will not be
recorded in any accounts of the Treasury regional office. This is by reason that
such transactions will be recorded in the Treasury's central receipt accounts as of
June 30, 1955, on the basis of the original certificates of deposit and debit vouchers
cleared in Washington and covered into the Treasury. The inclusion of the same
transactions in the accounts current for the first month under the new system
would create a duplication of the receipts.
(c) There may be instances where, by reason of the mailing of deposits to
depositaries or otherwise, a deposit transmitted by an administrative agency on
the last day or two of June under the former system is not confirmed by the
depositary until July- Such items are required to be handled by the Federal
Reserve Banks, the Treasurer's office, and the Treasury regional offices as July
transactions under the new procedures. To facilitate the transition, the depositing agency should, in every case where it is certain that the deposit will be confirmed in July, prepare the certificate of deposit under the new procedures outlined in Supplement No. 1 of this circular. This includes the matter of using
only Forms 201 for all classes of collections and identifying the Treasury regional
office in the upper right corner of the certificate. In the event the depositing
agency fails to do the foregoing, it is possible that some original certificates of
deposit confirmed at the beginning of July will be forwarded to the Treasurer's
office with the Federal Reserve Bank's transcript rather than being forwarded to
the Treasury regional office affected. In such event only, the depositing agency
should forward to the Treasury regional office a copy of the Form 201 or 209
confirmed in July, for entry in the new accounts, treating a Form 209 as if it were
a Form ^201. Failure to take this action will cause a difference between the
accounts'of^the'administrative agency a n d t h e Treasury.
288
1956 REPORT OF THE SECRETARY OF THE TREASURY
IV. Additional matters applicable to the Department of Defense
8. Funding officers of the Department of the Army, Navy, and Air Force will
draw checks in June 1955,, as usual, for the purpose of depositing on Form 201
the amounts of unavailable receipts held in checking accounts or cash accounts
of the respective departments. Such action will not be taken in July 1955 or
thereafter with respect to any unavailable receipts accumulated in checking
accounts or cash accounts up to July 1, 1955. In lieu thereof, the monthly statement of classified transactions furnished to the Treasury Department by each
department, applicable to June 1955 and thereafter, will include a classification
of the receipts which otherwise would have been represented by Form 201 deposits in the next month's business.
9. Matters pertaining to balances of military payment certificates in the accounts of Defense disbursing officers as of June 30, 1955, and the balance of the
related reserve account will be the subject of special arrangement.
E.
F.
BARTELT,
Fiscal Assistant Secretary.
EXHIBIT 50.—Regulations concerning the establishment of or transfer between
appropriations or other accounts including, where applicable, the funding of
checking accounts for the issuance and payment of checks drawn on the
Treasurer of the United States
[Department Circular No. 945, Revised, Supplement 3. Accounts]
TREASURY DEPARTMENT,
Washington, May 19, 1955.
To Heads of Government Departnients and Others Concerned:
I. Purpose of the regulations
1. These regulations are issued to establish revised procedures applicable to
all Government agencies, including Government corporations, effective July 1,
1955, for recording all uonexpenditure transactions involving (a) the establishing
of or effecting transfers between appropriations or other accounts, and (b) the
funding of such checking accounts as are maintained for the issuance and payment of checks drawn on the Treasurer of the United States.
2. The term "nonexpenditure transaction," as used herein, refers generally
to the same type of transaction for which Form 1151 is prescribed in Accounting
Systems Memorandum No. 9, as amended, and to capital transfers defined in
Accounting Systems Memorandum No. 29. More specifically, this regulation
applies to the establishment or modification of (a) appropriations, on the basis
of appropriation warrants, including increases and decreases of such appropriations pursuant to authorized nonexpenditure transfers between the appropriations
and funds, (b) borrowings from the Treasury and repayments of such borrowings,
and (c) credits to miscellaneous receipts representing either the repayment of
the Government's investment in a revolving fund or the distribution of earnings
of a revolving fund. Nonexpenditure transactions referred to herein will not
appear in Treasury reports or in the Budget document as receipts or expenditures,
and will not affect the budget surplus or deficit for any year.
3. The term "funding of checking accounts," as used herein, refers to all
transactions based upon appropriations or other authorizations which are required
to establish or remove credits in funded checking accounts maintained for the
issuance and payment of checks drawn on the Treasurer of the United States.
Funded checking accounts comprise (a) the accounts on the books of the Treasurer
of the United States which are credited with amounts of deposits representing
appropriations and other authorizations and collections creating balances available for the payment of checks drawn on the Treasurer of the United States, and
(b) the related accounts on the books of disbursing officers with balances available
for drawing of such checks.
II. Operating procedure
4. Documentation for nonexpenditure transactions.—The documentation used by
all agencies for the various actions incident to the establishment of appropriation
and^certain other accounts and for transfers between such accounts is as follows:
(a) Appropriations. The Bureau of Accounts, Treasury Department, will
issue appropriation warrants as heretofore.
EXHIBITS
289
(b) Authorizations to borrow from the Treasury. The Bureau of Accounts,
Treasury Department, will issue a "Loan Authorization Journal" for any new
amount or for any change in the amount which a Government corporation or
agency is authorized by law to borrow from the Treasury.
(c) Nonexpenditure transfers between appropriations or funds. Administrative
agencies making nonexpenditure transfers authorized by law to other appropriations or funds will initiate Standard Form 1151 as heretofore. Pursuant to revised regulations of the General Accounting Office, an original and two copies of
such Forms 1151 will be transmitted directly to the Division of Central Accounts,
Bureau of Accounts, Treasury Department, Washington 25, D. C , without passing
through the accounts of disbursing officers.
(d) For other nonexpenditure transfers. Forms 1151, in an original and three
copi^es, will be transmitted by all Government corporations and agencies to the
Investments Branch, Bureau of Accounts, Treasury Department, Washington
25, D. C , for the following nonexpenditure transactions:
(1) Amounts to be advanced currently to an agency's revolving fund
under loan agreements with the Secretary of the Treasury pursuant to authority
to borrow from the Treasury.
(2) Principal on loans (under 1 above) in the amount which the agency
determines to repay to the Treasury. (Interest on such loans wfll continue to be
paid by check and deposit.)
(3) The amount of dividends, earnings, or interest on the outstanding
capital investment of the United States in a Government corporation or enterprise
required to be paid into the Treasury periodically.
(4) The amount of outstanding capital investment of the United States
required to be repaid into the Treasury.
The Forms 1151 will be used by the Division of Central Accounts as a basis for
debiting or crediting, as the case may be, the appropriate agency's revolving fund,
5. Distribution and recording of documents.—
(a) Appropriation warrants. Copies of appropriation warrants will be forwarded by the Bureau of Accounts, as heretofore, to the administrative agencies
affected, to be recorded in the administrative accounts, for the same accounting
period recorded in the central accounts, as noted in the "Accounting Month" stamp
on the warrant. This generally will be the month in which the warrant is signed
by the Comptroller General.
(b) ''Loan Authorization JournaV^ for authorizations to borrow from the
Treasury. Copies of the "Loan Authorization Journal" will be forwarded by the
Bureau of Accounts for the information of the Government corporations or agencies concerned.
(c) Appropriation transfer authorizations {Standard Form 1151) for nonexpenditure transfers between appropriations and funds. The Bureau of Accounts
wfll forward an acknowledged copy of Form 1151 to the administrative agency
making the transfer and to the administrative agency receiving the transfer.
Both the transferring and the receiving administrative agencies involved should
reflect the transfer in the same accounting month identified by the Bureau of
Accounts as recorded in the central appropriation accounts. Generally, the
accounting month will be the month in which the transferring agency issues the
document.
(d) Standard Form 1151, for all other financing transactions. The Investments
Branch, Bureau of Accounts, will indicate on the Form 1151 the official date of
credit for the advance made under a borrowing authorization, and the official
date of the charge for repayments of borrowings and other financing transactions
referred to in paragraph "4 (d)" above, which dates will be used for interest
computation purposes. With respect to charges to Government corporations
and agencies maintaining checking accounts with the Treasurer of the United
States, the official date will be affixed after the Investments Branch has determined that sufficient balance is available in the applicable checking account on
the books of the Treasurer of the United States. In this connection, the Treasurer's Office will at this time place a reservation agai-nst the balance of the checking account pending receipt of the charge document referred to in " 6 " below.
An acknowledged copy of the Form 1151 will be forwarded by the Investments
Branch to the Division of Securities, Treasurer's Office, to the Division of Central
Accounts, Bureau of Accounts (original), and tb the Government corporation or
agency affected, to be entered in the accounts for the same accounting period
399346—57,
20
290
1956 REPORT OF THE SECRETARY OF THE TRIEASURY
indicated by the official date of the document as established by the Investments
Branch.
6. Documentation for funding of checking accounts.—The provisions of this
paragraph apply only to those transactions relating to appropriations and other
fund accounts for which advances are credited in checking accounts with the
Treasurer of the United States. Accordingly, such actions apply only to agencies
excluded from the provisions of Joint Regulation No. 4, Revised.
(a) Form for funding authorization for checking account. Treasury Form
593 "Funding Authorization for Checking Account," will be used as the document
to establish credit or reduce credits in checking accounts for the amounts of all
appropriation warrants and Form 1151 transfers affecting agencies maintaining
checking accounts with the Treasurer of the United States. This form, which
will replace the use of checks, debit vouchers and certificates of deposit with
respect to funding transactions, will be prepared by the Division of Central Accounts, Bureau of Accounts, with identification of the disbursing agency, station,
and checking account symbol, and a reference to the underlying appropriation
warrant or Form 1151. Each form will be assigned a docuriient number in consecutive sequence for each fiscal year.
(b) Distribution and recording of funding authorizations for checking account
form. The Division of Central Accounts wifl deliver to the Treasurer's Office
the original and three copies of each "Funding Authorization for Checking Account" (Form 593).
(1) The Treasurer's Office wifl (a) enter the transactions in the accounts
for the month indicated by the date of the document and retain the original and
third copy; (b) forward the acknowledged first copy to the disbursing office
affected; and (c) forward the acknowledged second copy to the Division of Central
Accounts, Bureau of Accounts.
(2) The Division of Central Accounts, Burea,u pf Accounts, will maintain
the controls necessary to verify that every transaction for the funding of appropriation and other accounts which has an effect on checking accounts has been
consummated.
(3) The disbursing office will record the increase or decrease in the
balance of the checking account in the same accounting period represented by
the date ofthe Form 593 "Funding Authorization for Checking Accounts."
E. F. BARTELT,
Fiscal Assistant Secretary.
EXHIBIT 51.—Regulations governing the fiscal year closing of the Treasury's
central accounts for the Government cash operations
[Department Circular No. 945, Revised, Supplement No. 4. Accounts]
TREASURY DEPARTMENT,
Washington, March 13, 1956..
To Heads of Government Departments and Agencies Whose Accounts are Required
to be Reconciled wiih Accounts Current of the Division of Disbursement, Treasury
Department, and Others Concerned
1. Purpose. These regulations are for the information of departments and
agencies which receive monthly statements of transactions according to appropriations, funds, and receipt accounts. Standard Form No. 1220, from Treasury
regional accounting and disbursing offices and concern procedures which are to
be observed in the preparation of such statements as of the close of each fiscal
year. The objective is (a) to achieve complete integration as of the close of each
fiscal year with respect to deposits made by or for administrative agencies and the
related receipts and repayments in the central accounts and financial reports of
the Treasury, and (b) to record in the same fiscal year both the payment and
receipt side of intragovernmental transfers in those cases where a check is drawn
by one Treasury office and deposited by that office for credit of another Treasury
office.
2. General provisions. Under existing regulations. Treasury regional offices
hold their accounts open for not less than one nor more than two working days
after the last day of each month in order to reflect in the accounts and financial
reports for the applicable month the amounts of receipts and repayments for
deposits Confirmed by depositaries in that month, to the maximum extent practi-
EXHIBITS
291
cable. This practice will also be observed for the last month of each fiscal year
in connection with the submission of the twelfth n i n t h l y statement of transactions (Standard Form No. 1220) for the year. In addition, each Treasury regional office hereafter will render a thirteenth, supplementary statement of
transactions for the year, as of June 30.
3. Supplementary statement as of June 30. The supplementary statement of
transactions will embrace all certificates of deposit and debit vouchers for uncollectible items which were confirmed by Federal depositaries as credited and
charged, respectively, in the account of the Treasurer of the United States through
June 30, which documents are received in the Treasury regional offices during
the period between the preliminary June 30 closing for the rendition of the twelfth
monthly statements and July 25. The Treasury regional offices will transmit
the supplementary statements to the administrative agencies in the same manner
provided by General Regulations No. 122, not later than July 31 of each year.
Agencies should reconcile these supplementary statements as of June 30 in the
same manner as the regular monthly statements.
The first supplementary statements will be furnished to the agencies to which
this regulation is applicable for the fiscal year ending June 30, 1956.
W. T. HEFFELFINGER,
Fiscal Assistant Secretary.
[Department Circular No. 945, Revised, Supplement No. 5. Accounts]
TREASURY DEPARTMENT,
Washington, May 14, 1956.
To Heads of Government Departments and. Agencies whose Accounts are Required
to be Reconciled wiih Accounts Current of the Division of Disbursement, Treasury
Department, and Others Concerned
1. Purpose. These regulations extend the provisions of Supplement JSlo. 4 of
Department Circular No. 945—Revised, dated March 13, 1956, regarding supplementary statements of transactions according to appropriations, funds, and receipt accounts (Standard Form No. 1220) furnished as of June 30 of each fiscal
year by Treasury regional accounting and disbursing offices to administrative
agencies for reconciliation.
2. Extension of provisions. In addition to the amounts of receipts and repayments for deposits confirmed by depositaries through June 30, as provided for
in Supplement No. 4, the supplementary statements of transactions (Standard
Form 1220) prepared by the Treasury regional offices will include other transactions affecting the June accounts which are received by such Treasury regional
offices during the period between the preliminary June 30 closing and July 25.
These other transactions, which are normally included in statements of transactions prepared by Treasury regional offices for a subsequent month, are:
(a) adjustment documentation initiated by administrative agencies to effect
a correction in classification of June or prior transactions;
(b) similar adjustment documentation initiated by Treasury regional offices;
and
(c) disbursements made abroad in foreign currency by United States disbursing officers of the Department of State, and disbursements made in Canadian
currency through the chief disbursing officer in behalf of administrative agencies.
3. General. To facilitate inclusion of adjustment documentation in the supplementary statements of transactions, administrative agencies should verify the
regular June statements with their records promptly upon receipt, in order that
necessary adjustments may be received and processed by Treasury regional offices
prior to the close of business on July 25. Administrative agencies should stamp,
or otherwise indicate, the legend "Prior Fiscal Year Adjustment" on documentation initiated to effect correction of prior transactions. Documentation initiated
by Treasury regional offices to effect such correction will be simflarly identified.
Prompt examination of the regular June accounts and initiation of adjustments
as indicated should minimize the problem of year-end adjustments heretofore
handled centrally by the administrative agencies and the Treasury Department.
After July 25, necessary adjustments, if any, will be made centrally, as heretofore,
prior to closing of Treasury accounts for preparation of the annual Combined
Statement of Receipts, Expenditures and Balances.
W. T. HEFFELFINGER,
Fiscal Assistant Secretary.
292
1956 REPORT OF THE SECRETARY OF THE TREASURY
EXHIBIT 52.—Regulations gc^erning the disposition of cash gifts, donations, and
contributions received by the Treasury Department
[Department Circular No. 865, Second Revision. Accounts]
TREASURY
DEPARTMENT,
Washington, April 27, 1956.
To Heads of Bureaus, Treasury Department:
I.
PURPOSE
1. This circular establishes regulations for the guidance of all bureaus of the
Treasury Department with respect to the receipt and deposit of funds relating
to (a) all unconditional cash gifts and donations to the United States; (h) certain
conditional cash gifts and donations to the United States; and (c) all cash contributions to the United States to relieve conscience.
II.
DEFINITIONS
2. The term "remittance" includes currency and negotiable instruments
such as checks and drafts, as well as money orders, bonds, shares of stock, or
similar evidences of value. Gifts, donations, and contributions received in a
form other than such remittances should be turned over to the General Services
Administration for disposal with instructions as to disposition of the proceeds.
Government securities received as a gift, donation, or contribution, as defined
by these regulations, will be forwarded directly to the Budget and Administrative
Accounts Branch, Bureau of Accounts, Washington 25, D. C. for disposition.
3. The term "unconditional cash gifts and donations" applies to remittances
specifically designated by the remittor as a gift or donation to the United States
where acceptance is not subject to any specified condition by the donor. This
includes remittances having general designations, such as "to balance the budget,"
"to reduce the public debt," and "to maintain defense."
4. The term "conditional cash gifts and donations" applies to remittances
specifically designated by the remittor as a gift or donation to the United States
but acceptance is stipulated by the donor as conditioned on its use for a specified
purpose. Gifts made on condition that they be used for a particular defense
purpose pursuant to the provisions of the act of July 27, 1954, are not covered
by this circular. See Treasury Department Circular No. 957, dated February
24, 1955.
5. The term "contributions to reheve conscience" applies to remittances specifically designated by a remittor, either known or unknown, as a contribution
evidently in remission of some past action bearing on the remittor's conscience,
such as the evasion of an obligation, theft, etc. This category includes remittances received from persons who do not give their name or indicate the purpose
of the remittance.
III.
PROCEDURE APPLICABLE TO ALL TREASURY BUREAUS
6. Each bureau receiving remittances constituting gifts, donations, or contributions, as previously defined, will make direct deposits with a designated
depositary, authorized to accept deposits for credit to the account of the Treasurer
of the United States, on Certificate of Deposit, Standard Form-No. 201, to the
credit of "300 Treasury Regional Office, Washington, D. C." showing credit to
deposit fund account 20X6875 (18)—Suspense, Bureau of Accounts, Treasury.
The deposits will be made in accordance with Treasury Department Circular
No. 945, Revised, Supplement No. 1, and any revision thereof.
7. The depositing bureau will forward immediately to the Bureau of Accourits,
Budget and Administrative Accounts Branch, Washington 25, D. C , the confirmed triplicate and quadruplicate copies of the certificate of deposit and all
original correspondence, including the envelope received from the remittor.
The depositing bureau, if other than the Bureau of Accounts, will not be required
to keep the administrative deposit fund accounts for these collections or deposits.
8. Remittances which cannot be identified or determined to be a gift, donation,
or contribution, as defined herein, should be deposited to the appropriate deposit fund suspense account of the collecting bureau (not the suspense account
of the Bureau of Accounts) until a determination can be made as to the purpose
of the remittance by further investigation or inquiry of the remittor. If it is
EXHIBITS
293
determined from t h e investigation or inquiry t h a t t h e remittance is a gift, donation, or contribution as defined herein, t h e a m o u n t should be transferred to
deposit fund account 20X6875 (18)—Suspense, Bureau of Accounts, Treasury,
by t h e use of Standard Form No. 1081. All original correspondence, including
t h e envelope received from t h e remittor, should be attached to t h e copy of Standard F o r m No. 1081 forwarded to t h e Bureau of Accounts, Budget and Administ r a t i v e Accounts Branch, Washington 25, D . C.
9. Transfers t o t h e deposit fund suspense account of t h e Bureau of Accounts
shall not include a m o u n t s of remittances received from a known remittor who
did not specificaUy indicate t h e purpose of t h e remittance, and further inquiry
and investigation failed to disclose additional information aa to t h e whereabouts
of t h e remittor. These items should be transferred t o account 208881 ( )
"Unclaimed Moneys of Individuals Whose Whereabouts are U n k n o w n , " for which
account t h e collecting office is administratively responsible. (See Accounting
Systems M e m o r a n d u m No. 28 of t h e General Accounting Office.) Under no
circumstance should items of this n a t u r e be credited to accounts 1110 a n d l l l l
established to record contributions t o "Conscience F u n d " as listed in t h e s t a t e m e n t of receipt, appropriation, and other fund account symbols and titles issued
by t h e Bureau of Accounts.
IV.
ADDITIONAL P R O C E D U R E FOR B U R E A U OF ACCOUNTS
10. T h e Bureau of Accounts shall have t h e responsibflity t o :
(a) Maintain t h e administrative accounts for all deposits m a d e by Treasury
bureaus for credit to t h e deposit fund account 20X6875 (18) of t h e Bureau of
Accounts.
(b) Investigate and determine t h e purposes of all remittances credited t o t h e
above account, including a m o u n t s transferred t o such account from suspense
accounts of other bureaus, and effect final disposition of funds held in its suspense
account by transfer t o t h e appropriate miscellaneous receipt account or accounts
or by refund t o t h e remittor.
(c) Officially acknowledge t o t h e remittor receipt of all funds accepted as
gifts, donations, and contributions when t h e name and address of t h e remittor
is known.
(d) Maintain files of all original correspondence a n d acknowledgments of
gifts, donations, and contributions.
V.
GENERAL
I L E a c h bureau shall establish appropriate internal control procedures to insure
t h e proper handling of cash gifts, donations, and contributions.
12. Any questions regarding t h e provisions of this circular should be referred
t o t h e Bureau of Accounts, Treasury D e p a r t m e n t .
13. This circular shall become effective M a y 1, 1956.
W.
RANDOLPH
BURGESS,
Acting Secretary of the Treasury.
E X H I B I T 53.—Compilation of general requirements in various existing regulations
on the integration of Treasury-agency accounting data, transmitted to departm e n t s and agencies
TREASURY
DEPARTMENT,
Washington, J u n e 4i 1956.
To Heads of Government Departments and Agencies and Others Concerned:
Subject: Integration of Treasury-agency accounting d a t a
There is t r a n s m i t t e d herewith, for convenient reference of all d e p a r t m e n t s
a n d agencies, a compilation of general requirements set forth in various existing
regulations designed t o achieve integration of accounting of administrative agencies with central accounting and financial reporting of the Treasury D e p a r t m e n t
regarding t h e Government's receipts and expenditures and related cash operations.
T h e integration of Treasury-agency accounting d a t a is a key factor in t h e program looking t o unified financial reporting of receipts, expenditures, a n d appropriations under t h e principles announced on February 17, 1954, in a joint s t a t e m e n t of t h e Secretary of t h e Treasury, Director of t h e Bureau of t h e Budget, and
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1956 REPORT OF THE SECRETARY OF THE TREASURY
Comptroller General of the United States. This program, which depends largely
on the mutual efforts of all departments and agencies, has as one of its basic objectives consistency between such Government-wide financial statements as:
The monthly Treasury statement, which discloses currently receipts, expenditures, and the budget results;
The Combined Statement, of Receipts, Expenditures and Balances, which
furnishes annually greater detail than the monthly Treasury statement and deals
also with appropriations and funds and their status; and
The Budget. document, which embraces data contained in both documents
mentioned, coordinate with other data derived from the administrative accounts
of the departments and agencies.
Another basic objective is the central compflation of the Government's cash
transactions in a manner providing the link or reconciliation between receipts and
expenditures on one hand and the changes in the balance of the account of. the
Treasurer of the United States on the other hand.
While the cooperation of all departments and agencies has made possible considerable progress during the past two fiscal years under the program referred to
above, the Secretary, Budget Director, and Comptroller General are confident
that the heads of all departments and agencies wfll join in the view that continued
cooperation in this mutual endeavor is essential. Moreover, continuing emphasis should be placed on those integrating steps which need to be taken during
the entire fiscal year, as outlined in the attachment, all of which have a direct
bearing on proper year-end closing of accounts and the compilation of timely
central financial reports on a practical basis.
A revision of Department Circular No. 965, concerning certain central reporting
requirements of the Treasury, will be issued at an early date. The circular will
also set forth target dates developed jointly by the Treasury Department, Bureau
of the Budget, and General Accounting Office for completion of the various operations centrally in the Bureau of Accounts to culminate in the issuance, for the
fiscal year 1956, of the final Treasury statement of receipts and expenditures and
the annual Combined Statement, coordinate with the Budget document.
W.
T.
HEFFELFINGER,
Fiscal Assistant Secretary.
INTEGRATION OF TREASURY-AGENCY ACCOUNTING DATA
1. Accounts current rendered by accountable officers.
(a) Use of accounts current in central operations. The official accounts
current rendered for audit and settlement by the accountable officers who collect
and disburse the Government's funds, including statements of transactions
classified by type of transaction according to appropriation, fund, and receipt
accounts and, where applicable, according to the individual fiscal offices of the
departments and agencies affected, are the primary basis for the receipts and
expenditures in the central accounts of the Treasury. Therefore such accounts
current constitute the basis for the monthly Treasury statement and the annual
Combined Statement.
(b) Administrative reconciliation of monthly statements of transactions. As
part of the administrative examination of accounts current, all departments and
agencies, through their fiscal offices, are required to reconcile their administrative
accounts with the monthly staternents of transactions furnished by the accountable officers.^ Such reconciliations currentlj'- during the year, at the points where
the agency's operating accounts are maintained, are a basic requisite for the
integration of accounting.
(c) Prompt processing of necessary adjustments is essential. The primary .
purpose of the monthly reconciliations is to disclose any discrepancies in the
monthly statements furnished by the accountable officers or in the administrative
accounts, so that necessary adjustments will be processed promptly.2 To the
extent that a transaction in an accountable officer's statement is erroneous, the
central accounts and monthly Treasury statement requires adjustment. Accordingly, prompt handling of such adjustments is essential for accuracy of central
1 See General Regulations No. 122 issued by the Comptroller General of the United States on May 5,
1955, and General Accounting Office Accounting Systems Memorandum No. 18, Revised, dated August
25,1955.,
2 See General Regulations'N0/U6 issued by the'Comptroller General of the United States on March 17,
1952.
EXHIBITS
295
reports pubhshed nionthly. Moreover, when discrepancies in either the central
or administrative accounts are allowed-to accumulate during the year, peakload
problems are created in the fiscal year closing and it becomes extremely difficult
to meet deadlines for the Treasury's final central reports and the Budget document. If the accountable officer's monthly statement of transactions needs
correction by reason of:
(1) An error in a voucher schedule or collection document (or certificate
of deposit) prepared by the adniinistrative agenc}'', it is the responsibility of the
agency fiscal office concerned to submit the necesEiary adjusting document to the
accountable officer.
(2) A recording error in the compilation of the accountable officer's
statement, it is the responsibihty of the agency fiscal office to report the facts to
the accountable officer for the prompt preparation and processing of the necessary
adjusting document.
2. Consolidated monthly statements made available. In additipn to the use of
accountable officers' monthly statements for integration of Treasury-agency
accounting at the decentralized operating levels, th(i Bureau of Accounts, Treasury
Department, furnishes to the central offices of afl agencies concerned monthly
consolidated summaries of receipt and disbursem(3nt transactions compiled centrally from the accountable officers' statements. These summary statements
with respect to individual appropriation, fund, and receipt accounts also provide
information as to (a) transactions recorded dir^jctly in the central accounts,
including appropriation warrants and other authorizations and nonexpenditure
transfers between appropriations; and (b) the balances of the individual accounts
after giving effect to the receipts and disbursements compiled from the accountable officers' statements.
(a) Purpose of statements. The monthly consolidated statements are
designed to provide each department arid agency with the facility for accomphshing month-to-month integration of its own consolidated data, such as shown in its
Form 133 statements, with the data contained in the Treasury's central accounts
and overall financial reports. Much can be accomplished toward expediting
year-end closing operations by taking these synchronizing steps monthly, particularly when such actions affect both the accounting and budgeting operations of
the agency, as in the case of reports on Form 133. There have been a number of
instances in the past when it was evident that last minute adjustments of receipt
and expenditure data after the close of the fiscal year could have been effected
much earlier during the fiscal year through closer coordination of accounting and
budget work within the agency.
3. Procedures recently established to promote integration of accounting. One of
the basic objectives in the design of the system of central accounts in the Treasury
regarding the Government's cash operations,^ was to enable.the recording of
transactions in Treasury accounts in a manner which enhances integration of
Treasury-agency data. Thus, for example:
(a) Receipts now recorded centrally from monthly statements rendered by accountable officers. Many classes of receipts collected by agencies operating under
the provisions of Joint Regulation No. 4, Revised, which formerly were picked up
in the Treasury accounts in the month when certificates of deposit were received
by mail in Washington, are now being picked up centrally through the statements
rendered by accountable officers. Whether shown in the accountable officers'
accounts on the basis of (1) collections received, in instances where the accountable
officer handles the coUection; or (2) confirmed deposits, in instances where the
collecting administrative agencies make the deposits directly in Federal depositaries, the effect is to bring the Treasury-agency accounting closer into line
according to the applicable accounting period.
(b) Monthly closing of Treasury regional office accounts. In furtherance of the
foregoing, provision was made for holding open the accounts in Treasury regional
disbursing offices for one additional working day after the last day of each month
and two additiorial working days after the last day of a fiscal year to pick up to
the maximum degree possible the coUection credits and corresponding deposits
confirmed for the period, with respect to direct deposits made by the administrative agencies.
(c) Fiscal year closing of Treasury regional office accounts with respect to direct
deposits by administrative agencies. It was recognized that the flow of documentation into Treasury regional disbursing offices is such that two additional working
8 Installed effective July 1,1955, pursuant to Department Circular No. 945, Revised, dated April 29,1955.
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1956 REPORT OF THE SECRETARY OF THE TREASURY
days after June 30 are not always adequate to bring into the accounts the documents for deposits made by administrative agencies during the last few days of
June in Federal depositaries distant from the Treasury regional^offices affected.
Accordingly, beginning with the first fiscal year closing June 30, 1956, under
the new system of central accounts, provision has been made for having Treasury
regional disbursing offices render supplementary statements as of each June 30
embracing all documentation received after the closing for the regular June statements and before July 25.^ This has the effect of holding open the Treasury
accounts for twenty-five days as of the close of each fiscal year to accommodate
the transactions in transit as of the close of the fiscal year, in the interest of yearend timeliness of financial reports and integration. The same will be true with
respect to any necessary expenditure adjustments as will be seen in the following
paragraphs. These supplementary statements will serve to firm up year-end
balances without impeding the work of the administrative agencies and the Bureau
of Accounts centrally with respect to the regular June statements based on the
prehminary June 30 closing on the second working day bf July. Hence, all administrative agencies affected may proceed in their fiscal year closings with assurance that all certificates of deposit and related debit vouchers for uncollectible
items which are consummated by Federal depositaries through June 30 wiU be
incorporated in the Treasury accounts for that fiscal year. And this should preclude a good deal of the year-end closing problem heretofore requiring centralized
adjustment action with respect to transactions taken up in the disbursing officers'
accounts for July or thereafter which belong in the prior fiscal year.
{d) Fiscal year closing of Treasury regional office accounts wiih respect to other
iransactions. Other transactions applicable to the fiscal year will be incorporated
in the supplementary June 30 statements rendered by Treasury regional disbursing
offices, as follows: ^
(lj Payments made overseas in foreign currency in behalf of agencies
located within continental United States. Agencies associated with Treasury
regional disbursing offices sometimes require payments to be made in foreign
currency overseas through United States disbursing officers of the Departriient of
State. Under existing procedures, because of the time required by a flow of documentation from the Treasury regional disbursing office through the central office
of the Division of Disbursement to the United States disbursing officer, and a
return flow upon payment by the latter officer, the expenditure is shown in the
statement issued by the Treasury regional disbursing office in a month following
the month in which the expenditure was initially reported by the United States
disbursing officer. For the June 30, 1956, closing, any such payments made by
Uriited States disbursing officers through June 30, if not reflected in the regular
monthly statements of Treasury regional disbursing offices for the fiscal year, will
be picked up in the supplementary statements as of June 30 if received in the
regional disbursing office by July 25. If received too late for this purpose the
adjustment will be made directly in the central accounts. Future plans in this
connection contemplate an arrangement for recording such expenditures against
the appropriation or fund directly on the basis of the accounts rendered by the
United States disbursing officers for the period in which the payments were actually made, with provision for furnishing the administrative agency concerned the
information needed for tieing in with its accounts.
(2) Year-end adjustment of discrepancies. The supplementary statements of disbursing officers as of June 30 will also be used to bring into the Treasury central accounts for the fiscal year adjustments of discrepancies relating to
either expenditures or receipts. The extent to which this is accomplished will
preclude the problem of centralized year-end adjusting actions. This depends on
the exercise of the responsibilities by all administrative agency fiscal offices in
the manner outlined herein. Following each monthly reconciliation with the
disbursing officer's statement, every effort should be made by the administrative
agency fiscal office to initiate any necessary adjusting action in time to be incorporated in the disbursing officer's statement for the month next following the
month in which the erroneous transaction occurred. Thus, any discrepancies
occurring through May 31 should be adjusted in the disbursing officers' accounts
rendered through the preliminary June 30 statements. With respect to any discrepancies in transactions recorded during the month of June and refiected in the
preliminary June 30 statements of disbursing officers, the administrative agency
1 See Department Circular No. 945, Revised, Supplement No. 4, dated March 13,1956.
2 See Department Circular No. 945, Revised, Supplement No. 6, dated May 14,1956.
EXHIBITS
297
fiscal office should initiate the adjusting action in time to be documented and
recorded in the disbursing office by not later than July 25, as of June 30, and
therefore reflected in the supplementary June 30 statements.
(e) Complete coverage of accounts current rendered by overseas accountable
officers through June 30. Year-end reports, except last year, have been deficient in
some respects by reason that the fiscal year closings did not incorporate fully the
accounts current for June of some overseas disbursing officers, such as those of
the Department of Defense and United States disbursing officers of the Department of State. As was done for the first time in the closing for June 30, 1955, the
central accounts and reports will include all transactions of United States disbursing officers as shown in their accounts rendered through June 30. Moreover,
it is the responsibflity of the Departments of the Army, Navy, and Air Force each
to furnish the Treasury Department with supplementary consolidated statements
of accountability and of transactions classified according to appropriation, fund,
and receipt accounts, for the fiscal year (sometimes referred to as "thirteenth''
monthly statements for the year). Such supplementary statements, to be recorded
centrally as of June 30, are required to incorporate the cash transactions and the
classifications of receipts and expenditures as shown in all accounts rendered by
individual disbursing officers through June 30 which, by reason of geographic
limitations or otherwise, were not available early enough to be included in the
regular consolidated statements prepared by the respective departments for the
preliminary June 30 closing.
EXHIBIT 54.—Statement relating to the preparation of the Combined Statement
[Department Circular No. 965, Revised. Accounts]
TREASURY DEPARTMENT,
Washington, July 3, 1956.
To Heads of Government Departments and Agencies and Others Concerned:
Three years ago the reporting of the Government's receipts and expenditures
during a fiscal year was changed from a daily to a monthly basis. The object was
to provide more informative current reports and better figures for stating the
budget surplus or deficit.
With the cooperation of agencies responsible for the collection or disbursement
of funds, the Treasury Department has been able to obtain the necessary data in
time to publish the statement within two to three weeks after the close of each
month. However, the initial June 30 statement each year, including a tentative
figure for the budget surplus or deficit, is regarded as preliminary and a final
statement is prepared, and published, as soon as practicable, for the purpose of
having year-end preciseness in the President's Budget and the Treasury's annual
Combined Statement of Receipts, Expendiiures and Balances of the United States
Government.
Two of the most fundamental principles, which underlie the new system of
reporting, are:
(1) The various reports on receipts and expenditures which are published
(including figures for the last completed fiscal year as shown in the Budget) should
be in agreement as to basic classifications and totals; and
(2) The receipts and expenditures (and budget results) shown in such reports
should be anchored tb changes in the Treasury's cash balance, by means of such
reconciling factors as cash held outside the Treasurer's account, deposits in transit,
and checks drawn on the Treasurer which have not yet been paid.
In this connection, the Treasury has been installing, during the fiscal year 1956,
a revised system of central accounts under the Budget and Accounting Procedures
Act of 1950. The purpose of such accounts, as a basis for reliable central reports
in the area of the Government's cash operations, is to disclose complete and
current (monthly as well as fiscal year) information on:
(1) The Government's receipts, by principal sources, and its expenditures
according to the different appropriations and other funds involved; and
(2) The cash transactions, classified by types, together with certain directly
related assets and liabilities, which involve such receipts and expenditures.
The structure of these central accounts and the related procedures comprehend
a reconciliation, on a firm accounting basis, between the published reports of
receipts and expenditures (and budget results) and changes in the cash balance,
of the Treasury.
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1956 REPORT OF THE SECRETARY OF THE TREASURY
Law requires the Secretary of the Treasury to submit the Combined Statement
of Receipts, Expenditures and Balances to the Congress on the first day of each
regular session and requires the President to transmit the Budget during the
first fifteen days of each regular session. If a mutual closing date for preparation
of the Treasury's report and the Budget is not observed, it is virtually impossible
for the accounting and reporting system to operate successfully from the standpoint of the two fundamental principles stated;.namely, the agreement of the
various published reports on receipts and expenditures and the anchoring of such
reports to the Treasury's cash balance.
Both the Bureau of the Budget and the Treasury Department believe that a
realistic schedule should be established to facilitate the work of preparing consistent and timely overall reports for publication. The Bureau of the Budget recognizes that the schedule should afford a reasonable opportunity for executive
agencies to work out with the Treasury Department any necessary corrections
or adjustments before accounts are finally closed for the year—particularly as
agencies are required by the Bureau's Circular No. A-11 to make their budget
schedule agree with data to be published in the Treasury's Combined Statement
of Receipts, Expenditures and Balances.
The Bureau of the Budget and the Treasury Department have agreed that
rather than one fixed closing date, there will be a closing date for each chapter
of the Combined Statement of Receipts, Expenditures and Balances; to be the
fifth working day after the copy of a complete chapter (including footnotes) has
been released by the Treasury Department for the review of the agency or
agencies concerned. Hence, tJfie mutual closing dates each year for Treasury
reports and the Budget will be on a sliding scale, beginning about the middle of
October and continuing for several weeks.
After a chapter of the Combined Statement of Receipts, Expenditures and
Balances has been closed, any adjustments will be taken up as transactions of the
next fiscal year. In order that such adjustments will not be of consequence, it is
essential that all agencies coordinate the data they furnish for the Budget with
the results of checking their accounts with Treasury figures.
The Treasury Department intends to continue to include in the tables of the
Combined Statement of Receipts, Expenditures and Balances an analysis of the
unexpended balances of appropriations and other authorizations according to
availability. For the fiscal year ended June 30, 1956, and subsequent years, the
Treasury plans, if possible, to use as the source material for this purpose copies
of reports prepared by agencies pursuant to Section 1311 of the Supplemental
Appropriations Act, 1955, Pubflc Law 663, approved August 26, 1954. To the
extent this can be done, special reporting requirements will be unnecessary.
For the information and guidance of the executive agencies, there is attached
to this circular.a copy of the work schedule which has been adopted with respect
to the preparation of the Combined Statement of Receipts, Expenditures and
Balances for the fiscal year ended June 30, 1956.
W. T. HEFFELFINGER,
Fiscal Assistant Secretary.
SCHEDULE WITH RESPECT TO THE PREPARA.TION OF THE COMBINED STATEMENT
OF RECEIPTS, EXPENDITURES AND BALANCES OF THE UNITED STATES GOVERNMENT FOR THE FISCAL YEAR ENDED JUNE 30, 1956
1. Treasury will supply agencies with a preliminary statement,
with respect to each appropriation or fund, showing the balance brought forward, current-year appropriations, nonexpenditure transfers, net disbursements, and closing balance by
2. Treasury will deliver to agencies a similar statement which will
include late accounts of collecting and disbursing officers, and
other transactions or adjustments not received in time for incorporation in the preliminary statement, by
3. Agency budget and fiscal officers shoul
@FedFRASER